AO World posts mixed final results as Germany impresses but UK challenges remain

Final results from online white good retailer AO World revealed a £2.9m loss before tax that was largely expected and said the although the UK market remained challenging it was taking market share.

For the year to 31 March, the FTSE 250 company lifted revenues 24% to £476.7m, with website sales in the UK up 32.9% and total UK revenue up 22.3%.

UK earnings before interest, tax, depreciation and amortisation (EBITDA) was up 47.3% to £16.5bn, in line with the small profit warning in February.

The launch of German operations six months ago led to a £8m EBITDA loss from that new division, and, combined with £4.2m of investment in Europe start-up operations and £2.5m costs from management's long term incentive plan, led to the group operating loss down by more than two thirds to £2.2m.

Chief executive John Roberts was bullish on prospects in Germany, saying that although still building scale, he was encouraged by progress and the run rate of revenues exiting the year of an annualised £19.8m.

"This gave us a good base to start from for the current financial year and the sales momentum is gathering pace."

On the UK he was slightly more cautious, following the revelation earlier in the year that the company's sales expectations had been over-inflated due to the fanfare around its London stock market flotation in March last year.

"Although the current trading environment in the UK remains challenging, we are well positioned to compete successfully given the flexibility and efficiency of our business model," Roberts said.

He added: "Our long-term plan is on track and, despite missing our financial expectations for the year, we have continued to take market share in the UK MDA [major domestic appliances] market delivering significant growth in UK sales and Adjusted EBITDA."

Analysts at Peel Hunt said their forecasts for the new financal year are likely to remain unchanged and noted the encouraging start in Germany but that, as the European unit currently makes at loss at a gross profit level, "we are keen to see how this is expected to develop over the year ahead".

They added: "Overall, nothing in the statement is likely to shift bull or bear arguments, although management has more to prove when it comes to demonstrating the long term profitability of the business model. "

Shore Capital said sales were below its estimates but group EBITDA was better thanks to losses in Germany being not as severe as anticipated.