Bolton-based online electrical retailer, AO World’s, focus on generating profit and cash has paid off with pre-tax profits almost double those for the whole of last year.
The group also raised profit expectations for the full year and revealed it will focus more on the small domestic appliances sector.
Publishing its interim results for the six months to September 30, 2023, today, the group revealed a profit before tax of £13m, compared with a £12m pre-tax loss in the same period last year, and a £7.6m annual pre-tax profit for the year to March 31, 2023.
Mirroring the annual results last year, the group saw a decline in revenues, which dropped 12% to £482m, due to the removal of unprofitable sales. Last year’s annual results showed a 17% fall in revenues of £1.139bn.
However, founder and chief executive, John Roberts, is confident the group will end the current year having returned to run rate revenue growth.
Today’s figures also showed the group has net funds of £16m, compared with a £19m net debt at the same point a year ago.
The group attributes the removal of unprofitable sales, as well as the introduction of delivery charges on all deliveries, for the profits turnround.
Warehousing costs also fell to £25.5m, against £31.3m in the same period last year, representing 5.3% of sales (HY23: 5.7%).
Other admin costs have decreased by £9.4m to £56m, while tight control over ongoing spend has helped offset inflationary pressures.
AO World added 290,000 new customers during the reporting period, together with an increase in the repeat customer purchase percentage rate.
It said its customer satisfaction scores remain outstanding. Trustpilot reviews have grown to more than 440,000 averaging 4.7 out of 5 stars – continuing to position AO as the UK’s most trusted electrical retailer.
The group has increased its full year revenue guidance for 2024. In July it said it expected to achieve pre-tax profits of £28m. Today, the group said that, while mindful of the ongoing cost of living crisis and geopolitical events that give rise to uncertainty and volatility, it continues to optimise for profit outturn and is increasing its profit before tax expectations to between £28m and £33m for the full year. It also expects 2024 revenues to be around -10% year on year.
AO said its medium-term ambitions remain unchanged: Annual revenue growth in a corridor of 10-20%; profit before tax margin of 3-5%; and profit converting to cash.
Longer term, its addressable market in the UK is significant as it currently stands at around £27.6bn, and in order to take advantage of this it will look to deepen its presence in categories such as televisions, laptops, audio visual and small domestic appliances (SDA). It said the online segment of the market in those categories remains a key opportunity as the long term structural migration to online retailing continues.
John Roberts said: “I am very pleased with the clear progress that we are making as a result of our strategic pivot to focusing on profit and cash.
“We have generated more profit in the first half of this year than we did in the whole of last year, and are also upgrading our profit expectations for the remainder of FY24.
“As we anticipated, sales have reduced year on year as we continue to annualise the actions that we’ve taken to remove non-core channels and unprofitable sales from the business. However, we expect to end the year having returned to run rate revenue growth.”
He added: “Our core fundamentals are in great shape and our service to customers has never been better. Our Trustpilot scores continue to be the best in the market, our spontaneous brand awareness is at record levels, and our transacted customer base now stands at 11.6m people.
“As ever, I’m grateful to our manufacturer partners for their continued support and of course to the fantastic AO team who continue to be magical in the moments that matter for customers while maintaining the discipline and focus needed to deliver our plan.
“We look forward with cautious optimism, given the macro challenges, as we turn our attention back to delivering profitable revenue growth to drive our operational gearing.”