AO World FY profits, revenues surge thanks to online shift

Online electricals retailer AO World reported a jump in full-year profits and revenue on Thursday as it continues to benefit from a shift to online shopping since the pandemic.

In the year to the end of March 2021, pre-tax profit surged to £20m from just £1m the year before, with total group revenue up 62% at £1.6bn. UK revenues increased 59% to £1.4bn, with sales of major domestic appliances up 61%, driven by demand for larger fridges, chest freezers and other home appliances. In Germany, revenues rose 81% to £226m.

AO said group adjusted earnings before interest, tax, depreciation and amortisation were 191% higher at £64m, driven by strong product sales.

The company said: "This has been an exceptional year for our businesses. We remain firmly focused on growing our revenues and taking market share, responsibly reinvesting the benefits of operational leverage in growth and broadly maintaining the current level of profits.

"Our scale and cash generation will support this acceleration of our ambitions. In the UK, we will manage investment opportunities within a tolerance of 1% of revenue. In Germany, we will continue to grow our business as quickly as we can at roughly EBITDA break even, plus or minus 2%."

At 0822 BST, the shares were down 2.8% at 245.88p.

Keith Bowman, equity analyst at Interactive Investor, said: "These latest results follow what has been a meteoric rise in AO’s share price since pandemic market lows. Despite falling significantly in 2021, AO shares are still up by more than 400% since March 2020 compared to a gain of just over 70% for the broader FTSE 250 index. Shares for fellow electrical retailers Carphone Dixons and Amazon are by 89% and 81% respectively over that time.

"In all, uncertainties relating to both the pandemic and the economic outlook cannot be forgotten. Unlike rival Dixons, AO is also yet to pay a dividend, while the significant rise in AO’s share price compared to current estimated future earnings leaves its valuation comfortably above that of Dixons Carphone.

"But a move to break even for its German business is clearly good news. The tailwind from the pandemic is strong, and potential to expand further overseas still beckons, with an additional three European countries now in management’s sights over the next five years. In all, and while the shares are not obviously cheap compared to rivals, ongoing long-term growth potential continues to steer analyst consensus opinion towards a buy."