REG - AO World plc - Trading Statement

AO WorldAnnouncement

29/04/2022 07:00

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RNS Number : 7864J  AO World plc  29 April 2022

29 April 2022

 

AO WORLD PLC

Full Year Trading Update for the Year ended 31 March 2022

A resilient UK revenue performance against a challenging backdrop

1.5m new customers experienced The AO Way over the year, with online market
share in major domestic appliances 54% vs 43% pre-Covid

 

AO World plc ("the Group"), a leading online electricals retailer, today
issues the following update on trading for the 12 months to 31 March 2022.

Trading update

 Revenue growth(1)     2yoy(2) to    1yoy(3) to

                       31 March 22   31 March 22

 Group revenues        +52%          (6)%
 UK revenues           +52%          (5)%
 Germany revenues(5)   +54%          (12)%

Estimated Group revenues for the full year to 31 March 2022 are expected to be
£1,557m.  On a year-on-year basis, Group revenues declined c. 6% against the
exceptionally strong prior year comparatives resulting from the robust growth
in online purchasing during the Covid-related government restrictions in
2020/21. On a two-year basis Group revenues increased 52%, reflecting the
ongoing structural shift to online retailing.

Our online market share in major domestic appliances ("MDA") continued to
grow,  increasing to 54% vs 43% pre-Covid(4) . Over 1.5m(5) new customers
experienced The AO Way during the year, with a notable step up in post Covid
repeat purchase rates.  We again achieved exceptionally strong customer Net
Promotor Scores(6) in line with last year, demonstrating our outstanding
levels of customer satisfaction.

UK revenues remained resilient in H1 despite the constraints of driver
challenges and ongoing supply chain shortages. During H2, while driver issues
had eased, customer demand progressively weakened across the sector,
compounded by global supply chain disruption which affected product
availability in certain categories.  On a two-year comparative basis, UK
revenues grew strongly, increasing 52%.

In Germany, revenue growth was constrained by post-Covid shifts in consumer
behaviour and an increase in online competition, as customers returned to
stores to a greater degree than anticipated.  This was compounded by our
decisive actions to minimise cash losses in this business.  Revenues declined
12%(7) versus FY21 but grew 54% on a two-year comparative basis.

Group Adjusted EBITDA(8) is expected to be c. £8m, reflecting the impact of
lower sales volumes and higher costs incurred in our UK logistics operations;
driver shortages across the industry in H1; and significantly higher marketing
costs in Germany.  In March, we were notified of higher warranty
cancellations than average historical trends as customers responded to the
escalating cost of living. We experienced a similar reaction following the
first Covid lockdown period, which proved to be a temporary consumer
adjustment. While the picture has subsequently improved, data received
subsequent to this trading update and prior to the Full Year Results
announcement scheduled for later this summer could result in a reassessment of
the carrying value of the contract asset, which could lead to a material
impact on FY22 profits.

Available liquidity as at 31 March 2022 was c. £50m and, given the factors
cited above and the seasonality of our cash flows, our liquidity has since
reduced.  However, we expect that this situation will improve as we move into
Q2 driven by a range of actions that we are implementing.  The Group's
revolving credit facility of £80m was extended and now expires in April 2024.
Net debt at the end of the financial year was £32.8m(9).

Update on strategic review of the German business

On 27 January 2022, the Group announced a strategic review of its German
business, following a number of material changes to the local trading
environment post-Covid.  Competition in the German online market has remained
intense, with digital marketing costs increasing significantly as a result,
despite online penetration returning to pre-pandemic levels.

The strategic review is continuing, and a number of options remain under
consideration by the Board.  We hope to announce a more detailed update on
this process in the near future.

Outlook

In view of the volatile market conditions, inflationary cost pressures and
logistical challenges in the supply chain, together with the escalating cost
of living for consumers, we remain cautious about our revenue and profit
outlook in the near term.  In the coming year, we will focus on cash
generation to strengthen the balance sheet whilst optimising our cost base to
align with the expected lower levels of revenues.

Despite the current market challenges, we remain confident in AO's long-term
prospects given the inherent resilience of our business model, the quality of
our customer proposition and the ongoing structural shift to online.

Announcement of Full Year Results

Due to the expected timetable for the ongoing strategic review in Germany,
together with the resulting complexity in the year end close process, the
Group now expects to announce its Full Year Results to 31 March 2022 six to
eight weeks later than planned.  The expected date will be communicated in
due course.

CEO Share Disposal Arrangements

Since the Group's IPO in 2014, our Founder and Chief Executive, John Roberts,
has maintained his shareholding and increased it with selected share
purchases.  John has now decided that he will dispose of a small proportion
of his equity holding on an annual basis.  Whilst there will be no certainty
on any disposal, it is expected that John will dispose of c. £5m in shares
during this financial year, representing c. 5% of his total shareholding of
107m shares.

 Enquiries

 AO World plc                                          +44 (0)7525 147 877
 John Roberts, Founder and Chief Executive             IR@AO.com (mailto:IR@AO.com)
 Mark Higgins, Group CFO
 Cynthia Alers, Investor Relations Director

 Powerscourt                                           Tel: +44 (0)20 7250 1446
 Rob Greening                                          ao@powerscourt-group.com (mailto:ao@powerscourt-group.com)

 Nick Hayns

 Elizabeth Kittle

 Notes

 (1)Based on unaudited management accounts. AO World's financial year FY22 runs
 from 1 April 2021 to 31 March 2022.

 (2) Covers the 12 months 1 April to 31 March 2022 compared to the equivalent
 period in FY20.

 (3) Covers the 12 months 1 April to 31 March 2022 compared to the equivalent
 period in FY21.

 (4) Based on GfK data reflecting market share data as at February 2022 vs
 January 2020.

 (5) A customer is defined as an individual customer who has purchased via
 ao.com in the UK and ao.de in Germany.

 (6) Net Promoter Score or "NPS" is an industry measure of customer loyalty and
 satisfaction.

 (7) Based on euros constant currency.  On a sterling basis, revenue was:

                   12 mths 2yoy  12 mths 1yoy
 Germany revenues   +51%          (16)%

(8 )Group adjusted EBITDA is defined by the Group as profit/(loss) before
 interest, tax, depreciation, amortisation, and profit/loss on the disposal of
 fixed assets and adjusting items which are costs relating to the strategic
 review.

 (9) Net debt is defined as cash less cash borrowings less finance leases. It
 excludes right of use lease liabilities of c. £101m.

 About AO

 AO World plc, headquartered in Bolton and a constituent of the FTSE Small
 Cap index, is a leading online electrical retailer.  Our strategy is to
 create value by offering our customers brilliant customer service and making
 AO the destination for everything they need, in the simplest and easiest way,
 when buying electricals.

 In the UK, we sell major and small domestic appliances and a growing range of
 mobile phones, AV, consumer electricals and laptops, delivering them via our
 in-house logistics business and carefully selected third parties. We also
 provide ancillary services such as the installation of new products and
 recycling of old products as well as offering product protection plans and
 customer finance.  AO Business serves the B2B market in the UK, providing
 electricals and installation services at scale. AO also has a majority equity
 stake in AO Recycling, a WEEE processing facility, allowing AO to ensure its
 customers' electronic waste is dealt with responsibly in the UK.

 Cautionary statement

 This announcement contains certain forward-looking statements (including
 beliefs or opinions) with respect to the operations, performance and financial
 condition of the Group. These statements are made in good faith and are based
 on current expectations or beliefs, as well as assumptions about future
 events. By their nature, future events and circumstances can cause results and
 developments to differ materially from those anticipated. Except as is
 required by the Listing Rules, Disclosure Guidance and Transparency Rules and
 applicable laws, no undertaking is given to update the forward-looking
 statements contained in this document, whether as a result of new information,
 future events or otherwise. Nothing in this document should be construed as a
 profit forecast or an invitation to deal in the securities of the Company.
 This announcement has been prepared for the Group as a whole and therefore
 gives greater emphasis to those matters which are significant to AO World plc
 and its subsidiary undertakings when viewed as a whole.

(8 )Group adjusted EBITDA is defined by the Group as profit/(loss) before
interest, tax, depreciation, amortisation, and profit/loss on the disposal of
fixed assets and adjusting items which are costs relating to the strategic
review.

(9) Net debt is defined as cash less cash borrowings less finance leases. It
excludes right of use lease liabilities of c. £101m.

 

About AO

AO World plc, headquartered in Bolton and a constituent of the FTSE Small
Cap index, is a leading online electrical retailer.  Our strategy is to
create value by offering our customers brilliant customer service and making
AO the destination for everything they need, in the simplest and easiest way,
when buying electricals.

 

In the UK, we sell major and small domestic appliances and a growing range of
mobile phones, AV, consumer electricals and laptops, delivering them via our
in-house logistics business and carefully selected third parties. We also
provide ancillary services such as the installation of new products and
recycling of old products as well as offering product protection plans and
customer finance.  AO Business serves the B2B market in the UK, providing
electricals and installation services at scale. AO also has a majority equity
stake in AO Recycling, a WEEE processing facility, allowing AO to ensure its
customers' electronic waste is dealt with responsibly in the UK.

 

 

Cautionary statement

This announcement contains certain forward-looking statements (including
beliefs or opinions) with respect to the operations, performance and financial
condition of the Group. These statements are made in good faith and are based
on current expectations or beliefs, as well as assumptions about future
events. By their nature, future events and circumstances can cause results and
developments to differ materially from those anticipated. Except as is
required by the Listing Rules, Disclosure Guidance and Transparency Rules and
applicable laws, no undertaking is given to update the forward-looking
statements contained in this document, whether as a result of new information,
future events or otherwise. Nothing in this document should be construed as a
profit forecast or an invitation to deal in the securities of the Company.
This announcement has been prepared for the Group as a whole and therefore
gives greater emphasis to those matters which are significant to AO World plc
and its subsidiary undertakings when viewed as a whole.

 
 
 
 
 
 
 
 
 
 

 

 

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