AO World losses not as bad as feared

White goods e-retailer AO World reported annual losses that were not as bad as had been feared and management said the new financial year has “started well" in both the UK and Europe, but caution remains given the unsure economic outlook and competitive pressures.

The company said revenue grew 13.6% to £797m in the 12 months to 31 March, with UK revenues up 8% to £681m and European revenues up 55% on a constant currency basis.

Group adjusted losses before interest, tax, depreciation and amortisation of £3.4m was slightly ahead of the Bloomberg consensus loss of £4.4m.

The UK delivered positive EBITDA of £22.6m, but this was down 7.3% due to higher marketing costs and a competitive electricals pricing environment. European losses of £26.0m were modestly improved from £26.5m delivered.

Group operating losses of £16.2m was increased from £12m a year before. Net cash was £52.9m at the year end, following the £50m fundraising in April last year.

Chief executive Steve Caunce said it was a year of "good progress", continuing to "evolve our purpose to ensure it is suitable for the AO of today", namely pleasing customers.

"We have continued to successfully launch new categories across our territories, and our UK recycling facility became fully operational, building upon our vertically integrated infrastructure. In the UK we have maintained market share in our core UK MDA business in a very competitive market and have performed well in the second half of the year with limited marketing expenditure demonstrating the asset of our customer base as it repeats and recommends AO."

New categories in the UK including mobile phones, games consoles and cameras with small kitchen appliances in Germany and audio-visual in Netherlands.

He said the group was on track to achieve the target of a profitable run-rate by 2021.

"The new financial year has started well in both the UK and Europe, with UK revenue growth returning to double-digit levels against prior year. Whilst we remain cautious on outlook given economic and competitive pressures on the UK electricals market we are confident of achieving our stated goals of future growth in the years ahead," Caunce said.

Broker Shore Capital said it was overall a set of broadly in line numbers and overall it felt a cautious outlook statement.

"Given the sustained losses across the group investors look like they need to be remain patient for now. Given our concerns about the scale of the losses across the European footprint, where the business remains sub scale for the foreseeable future, we continue to believe that the current valuation is more than up with events."