AO: 'Resilient Performance Against Challenging Backdrop'

• Resilient revenue performance against challenging backdrop
• Confidence in long-term growth opportunities for AO in the UK
• Over 4 million new customers added in the past two years
• Addressable market in the UK now £23.4bn as a result of extension into new categories 

AO World plc ("the Group" or "AO"), a leading online electrical retailer, today announces its audited financial results for the year ended 31 March 2022 ("FY22"). 

Given the exceptional operating environment over the past 24 months, our performance in the comparable period in FY20 provides a more meaningful overview of our business performance than a simple comparison with FY21.  Financial results for both the one-year and the two-year results are presented below. 

Financial highlights                                                                                                              

• Group revenue growth of 52% over two-year period since FY20; resilient performance in our UK business with a one YoY decline of 5% against an extraordinary comparative performance during Covid in FY21
  
  
• Group EBITDA of £8.5m impacted by increased staff costs added during Covid in H2 FY21as well as increased marketing and logistics costs 
  
  

• Statutory loss before tax of £37m (FY21: profit of £20m)

• Overall liquidity of £50m (FY21: £143m) at 31 March 2022 with net debt³ of £33m (31 March 2021: £58m net funds)

• Capital-raising post year-end successfully secured additional liquidity of £40m with £80m revolving credit facility extended until April 2024

Operational highlights

• Over four million new customers⁶ experienced AO's brilliant customer service (FY20-FY22), with repeat purchase rates continuing to outperform pre-Covid levels
  
  
• Over 350,000 Trustpilot ratings, averaging an "Excellent" 4.6/5 stars and Net Promoter  Scores averaging a market-leading 86⁷
  
  
• New agreement with Homebase to supply appliances and installation and recycling services to Homebase's customers where Homebase agrees to purchase exclusively from AO their MDA and audio-visual appliances over an initial five-year term
  
  
• Following a strategic review, decision taken post year-end to close German business; orderly closure of the business in progress; simplification of business model and cost base to focus on the UK market in progress
  
  
• Over five million appliances, including two million fridges, have now been recycled at our AO Recycling facility. With overall Recycling revenues growing 36% year-on-year, we are now working with manufacturers to use our recycled plastic in new products
  
  
• AO remains a UK market leader in MDA with an 18% market share and 32% overall online market share

 Outlook

The new financial year marks a period of realignment for the business as we execute a strategic pivot to focus on cash and profit generation. Our plans and outlook, which were set out in July alongside the equity placing are as follows:

-     We now estimate the closure cash costs of our German business will be no more than £5m, at the lower end of our original estimate of nil to £15m.

-   The £40m of equity raised in July strengthens our balance sheet and provides the flexibility to capitalise on significant long term growth opportunities in the UK

-     Our addressable market in the UK has grown to £23.4bn as it extends into new categories such as televisions, laptops, audio visual and small domestic appliances ("SDA").  The online segment of the market in those categories remains AO's key opportunity as the long-term structural migration to online retailing continues. 

-     We are successfully leveraging our logistics and recycling platform and have signed a new five-year contract with Homebase to supply appliances and installation and recycling service to its customers, including, on an exclusive basis, MDA and audio-visual appliances.  We are discussing similar partnerships with other kitchen retailers.

-     We continue to rationalise, simplify and refocus our UK operations which entails exiting some lines of business that do not fit our model. This, combined with driving operational efficiencies and overhead reduction, is estimated to generate significant economic  benefits by FY25 to help underpin margin expansion

-    Trading through the first quarter of FY23 has remained broadly in-line with the Board's expectations for FY23, with revenues in the approximate range of £1bn to £1.25bn and Group adjusted EBITDA for the full year in the range of £20m - £30m, with the usual weighting towards the second half of the year. 

-     In the short term, we expect our strategic pivot and business realignment will reduce both sales and costs, but in the medium term our ambition is to deliver average revenue growth of 10+% per annum with an EBITDA margin of 5+% and improved cash generation. 

AO's Founder and Chief Executive, John Roberts, said:

 "AO was founded on the belief that online is a better way to buy electricals. That belief is as strong as ever, even - and especially - as we go through one of the most challenging operating environments we've weathered as a company.

 "The past 12 months has been a turbulent time for business and for retail in particular, and AO hasn't been immune to those effects. Looking ahead, we certainly have more volatility to navigate, but the core fundamentals of our business remain strong. We entered the new financial year with a period of strategic realignment, and a focus on cash and profit generation.

 "AO has become the destination for electricals for millions of  customers through our absolute obsession with amazing service, and that will remain our guiding star. I'd like to thank the AO team, our Chair and the Board, as well as our committed investors and stakeholders, for their continued support and passion in helping us deliver for our customers."

Source : AO

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