AO World sees FY revenue up 17%; announces £50m placing

Online electrical goods retailer AO World said on Thursday that it full-year trading is anticipated to be in line with its range of expectations, as it announced a placing to raise up to £50m.

In a pre-close trading update for the 12 months to 31 March, the company said it expects group revenue of around £700m, up approximately 17% year-on-year.

Meanwhile, its existing adjusted earnings before interest, taxes, depreciation and amortisation guidance range was tightened to between flat and a loss of £2.4m, with group cash as at the end of March expected to be at least £27m.

AO said that revenue in the UK business is expected to be around £629m, with anticipated own-brand revenue growth of circa 16% year on year, and own-brand revenue growth of 10% in the third quarter and expected growth of around 13% in the fourth quarter.

It said brand awareness has continued to improve, and it reckons this will be further underpinned by becoming headline sponsor to ITV's "Britain's Got Talent" this year.

In Europe, revenue is expected to be around £71m, with expected fourth quarter growth of circa 58% in local currency. In the first half, AO consolidated its operations in Bergheim, giving it a solid base for the business to grow, and allowing the anticipated acceleration of growth during the second half.

Looking ahead, AO said it expects the patterns of trading seen in the second half of FY2017 to continue into the year ahead, with UK business profits largely being reinvested in our European operations.

“The UK business will continue to benefit from positive operational leverage as we scale and grow, increase brand awareness and deliver our 4C's strategy. The board continues to be cautious given the uncertain UK economic outlook, currency impacts on supplier pricing and the possible effect on consumer demand.

“In our Europe business, we are on track to achieve a positive adjusted EBITDA run-rate and revenue run-rate of circa €250m by FY2021 (in existing territories of Germany and Netherlands) with operational leverage, which is expected to be generated largely from warehousing and delivery, weighted largely to the latter period. We expect limited further capex to realise plans in existing territories.”

AO announced in a separate statement that it has placed just under 37.8m shares representing around 9% of the company, at 132.5p each, raising proceeds of £50m before expenses.

Chief executive Steve Caunce said: “This is our first capital raising since our IPO and the proceeds will support our continued growth and increasing scale as we pursue our proven strategy. We have seen another year of strong growth - in the UK and in Europe - as we continue to deliver on our 4C's strategy and opened our European distribution centre in Bergheim.

“The strength in our UK business and our investment in mainland Europe have positioned us well for the future, and this will be further strengthened by the capital raising."