REG - AO World plc - FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2023
05/07/2023 07:00
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RNS Number : 9818E AO World plc 05 July 2023
5 July 2023
AO WORLD PLC
FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2023
DELIVERING A STEP CHANGE IN FINANCIAL PERFORMANCE, DRIVEN BY STRATEGIC PIVOT
TO PROFIT & CASH GENERATION
CONTINUING AS THE UK'S MOST TRUSTED ELECTRICALS RETAILER
AO World plc ("the Group" or "AO"), the UK's most trusted electrical retailer,
today announces its audited financial results for the financial year ended 31
March 2023 ("FY23").
The strong performance over the year illustrates the excellent progress
against the Group's plan to pivot the business to focus on profit and cash
generation.
£(m) (1) FY23 FY22 % Mvmt
Revenue 1,139 1,368 (17%)
Adjusted EBITDA(2) 45 23 102%
Operating profit/(loss) 13 (8) NM%(4)
Profit / (Loss) before tax 8 (11) NM%
Basic earnings/ (loss) per share 1.13 (0.75) NM%
Net funds / (debt) (3) 4 (33) NM%
Financial highlights
· Step change in profitability YoY as we rationalise, simplify and
refocus our operations
· Statutory profit before tax of £7.6m (2022: loss of £10.5m)
· Adjusted EBITDA of £45m, achieving an adjusted EBITDA margin of
4.0%
· Overall liquidity(5) of £89m (2022: £50m) at 31 March 2023 with
net funds of £4m (2022: £33m net debt); balance sheet position strengthened
with £40m share placing
· £80m Revolving Credit Facility renewed now expires in April 2026
· Revenue performance in line with our pivot plan, driven by actions
taken to remove non-core channels and loss-making sales, also reflecting weak
consumer sentiment attributed to cost of living pressures
Operational highlights
· Strategic pivot delivered: exited some business lines and delivered
operational efficiencies and overhead reductions ahead of original plans
· AO remains a UK market leader in Major Domestic Appliances ("MDA")
with a 16% total market share and a 30% online share
· Over 800,000 new customers(6) experienced the AO Way during the
year, with repeat customers taking an increasing share of overall business
· Customer satisfaction scores remain outstanding, with Net Promoter
Scores averaging c85(7) and over 400,000 Trustpilot ratings, averaging an
"Excellent" 4.6/5 stars - as we continue to be the UK's most trusted
electrical retailer
· Simplified the UK operations focusing on more profitable lines of
business that fit our core model
· Ceased trading in Germany and completed its closure in all
material respects with minimal cash impact to the Group
· Recycled or given new life to our six millionth appliance at our
AO Recycling facility and we are continuing to work with manufacturers to use
our recycled plastic in new products
· Cultural improvements as we bring AOers back together at our sites,
enabling the business to benefit from better cohesion across the group
Outlook
Looking forward to FY24 we are confident in our ability to deliver on our 5%
EBITDA ambition in the short term and returning to top line growth in the
medium term. Our strategy now is to invest prudently in the business, seize
the significant market opportunities that we see in front of us, leveraging
our growing and loyal customer base.
AO's Founder and Chief Executive, John Roberts, said:
"We are delighted with the demonstrable progress that we've made with the
strategic realignment of AO towards profitability and cash generation. The
significant improvement in our profit performance speaks for itself and has
been achieved by focusing on our core strengths and simplifying our
operations, while still delivering the outstanding customer service for which
we're famous.
"Looking ahead, we intend to continue with this focus whilst also retaining
the flexibility to drive growth through disciplined investment at the right
pace and at the right time.
"Over five million new customers experienced the AO Way over the last three
years, during which time we've maintained our "excellent" Trustpilot rating
from more than 400,000 Trustpilot reviews, making AO the most trusted
electricals retailer in the UK.
"I'd also like to thank all AOers for their support and commitment over the
last 12 months I'm always very proud of the way in which they rise to the
challenges and maintain our fantastic culture, which is ultimately how we
deliver for customers. I'm also grateful to our manufacturer partners for
their continued support as we navigate this hugely unpredictable trading
period together."
Enquiries
AO World plc Tel: +44(0)7525 147 877
John Roberts, Founder & CEO ir@ao.com (mailto:ir@ao.com)
Mark Higgins, CFO
Powerscourt Tel: +44(0) 20 7250 1446
Rob Greening ao@powerscourt-group.com (mailto:ao@powerscourt-group.com)
Nick Hayns
Elizabeth Kittle
Webcast details
An in-person results presentation and Q&A will be held for analysts and
investors at 09:00 with registration opening at 08.30 BST today, 5 July 2023
at our London Creative Hub. Advance registration prior to arrival is required
via Powerscourt. A playback of the presentation will be available on AO
World's investor website at www.ao-world.com (http://www.ao-world.com) in the
afternoon.
About AO
AO World plc, headquartered in Bolton and listed on the London Stock
Exchange, is the UK's most trusted online electricals retailer, with a mission
to be the destination for electricals. 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. We offer major and small domestic appliances and a
range of mobile phones, AV, consumer electricals and laptops. We also provide
ancillary services such as the installation of new and collection of old
products and offer 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 WEEE processing facility, ensuring customers'
electronic waste is dealt with responsibly.
(1)Unless otherwise stated all numbers, including any restated comparatives,
relate to the continuing operations of the Group and therefore exclude the
impact of Germany. Refer to note 12 for further details.
(2) Adjusted EBITDA is defined as profit/(Loss) before tax, depreciation,
amortisation, net finance costs, loss on disposal of fixed assets, and other
adjusting items.
(3)Net funds/ (debt) is defined as cash and cash equivalents less borrowings
less owned asset lease liabilities but excluding right of use asset lease
liabilities.
(4)Where comparison change is a swing from negative to positive, this is
judged to be a non-meaningful ("NM") comparison.
(5) Liquidity is the total of cash and cash equivalents and the remaining
availability on the revolving credit facility
(6)A customer is defined as an individual customer who has purchased via
ao.com.
(7)Net Promoter Score or "NPS" is an industry measure of customer loyalty and
satisfaction. UK NPS comprises ao.com and mobilephonesdirect.com and is
calculated on a revenue weighted average basis. Trustpilot scores sourced from
their website, June 2023.
Cautionary statement
This announcement may contain 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.
STRATEGIC REVIEW
As we began the 2023 financial year, it was abundantly clear that a further
period of economic uncertainty lay ahead. Our number one priority was to
prepare AO to trade its way successfully and resiliently through whatever
economic climate prevailed, and so we began the process of pivoting the focus
of the business towards cash and profit generation.
The team's deep understanding of the dynamics and drivers of the business made
it relatively straightforward to identify both the opportunities and the
challenges that we needed to tackle, and also enabled us to move quickly and
decisively.
Our core UK business has always been a strong, profitable, cash generative
operation. As part of our plan, we also undertook a successful capital raise
to strengthen our balance sheet. Our cash position continued to improve
through the second half of the year as our actions to improve profitability
gained traction.
With those economic clouds on the horizon, we decided to only continue with
operations or initiatives where we had line of sight to profitability or cash
generation.
Our decision-making process took us back to our fundamentals and made us
carefully consider what drives our flywheel and what adds grit to the AO
machine.
Specifically, the output of our strategic review resulted in the closure of
our operations in Germany, our housebuilders contracts and our
store-within-a-store trial with Tesco. While each had good long-term
potential, their complexity, short and medium term cash consumption and
opportunity cost meant that they were no longer compatible with the pressing
priorities of 2023.
We have also simplified aspects of our operations, consolidated several teams
and realised more of the value we deliver for customers. We've rationalised
relevant ranges and raised the bar of what we're willing to accept in our
supply chains. Inevitably these actions have cumulatively reduced sales, but
we believe the best businesses are often defined by what they decide not to
do, rather than always just chasing every opportunity.
Rationalisation and simplification also meant that we needed fewer people. We
had to say goodbye to a number of AOers which is never an easy decision, but
nonetheless a necessary one. While the economic element of those choices may
have been relatively straightforward, the human element was, of course, much
harder.
Our priority now is to cement the progress that we've made with our pivot to
profitable growth and cash generation by focusing on brilliant execution and
investing to deepen our relationships, while growing our brand and share of
wallet.
During the last three years, over five million new customers experienced the
AO Way and we now have over 400,000 Trustpilot reviews and counting. We are
looking forward to building on that fantastic foundation in the years ahead to
maintain our position as the most trusted electricals retailer in the UK.
Our strategy will always be centred around our obsession with customers and
treating them like our grans. This obsession is a moat around our business and
makes repeating what we do - and the way that we do it - ever more difficult
for competitors to replicate, meaning that its value to our customers will
only increase.
This is true across a whole host of areas from culture, customer service,
loyalty, brand relationships and our B2B partnerships.
During FY24, having embedded the changes from our pivot year, our focus will
move back to profitable and cash generative growth through disciplined
investment at the right pace and at the right time.
We'll drive our structural advantage of having an extremely well invested,
more efficient model with better unit economics, built for the future not the
past, leveraging our scale centred around trust and excellence.
We expect the output of this to be that we will deliver over 5% EBITDA margin
for the current year and that we will be back to driving profitable, top line
growth by the end of this financial year.
OPERATIONAL AND FINANCIAL REVIEW
Operational highlights
Over the last 12 months we have executed a significant reorganisation and
simplification of the business. The closure of our Germany business in the
year has enabled us to focus on the UK business and really drive the
efficiencies from our vertically integrated model.
UK Retail
Our UK retail business is one of the market leaders in MDA retailing and
generates strong and sustainable cashflows. We serve customers through both
B2B and B2C channels. Established over 20 years ago we offer customers a full
range of MDA products complemented by a range of smaller domestic
appliances, computing, AV, mobile phones, consumer electronics, gaming and
smart home products.
Our UK website, ao.com, is the main business in UK retail and is usually the
first introduction that customers have to our brilliant customer service,
range of products and competitive pricing. We continually seek to improve our
customer experience through enhanced product information, payment options,
flexible delivery and installation options, and recycling services. By
sweeping the market several times a day we keep our prices appropriately
competitive.
Over 800,000 new customers experienced the AO Way this year, bringing the
total historical number of customers who have shopped on ao.com in the UK to
11.3 million. Of the customers who shopped with us during FY23, over 58% were
repeat. In line with our profit plan we continue to drive growth in product
categories in which we can leverage our whole ecosystem and deliver a desired
level of profit from the sale of these goods. Accordingly, we expected our
pivot to profitability and cash generation to impact our market share and it
has. Our share of the MDA online market fell 2ppt to 30% for FY23 with our
overall market share falling slightly year on year to 16%. We once again
reported market-leading, outstanding customer satisfaction scores averaging
c85 on NPS and 4.6/5 on Trustpilot, based on over 400,000 reviews. This is a
clear demonstration that our laser focus on outstanding service and customer
satisfaction remains excellent, notwithstanding our pivot to profit and cash.
The first half of the year was impacted by supply chain issues and customer
demand also weakened as a result of political uncertainty in Ukraine, rising
inflation and increasing cost of living pressures. The business invested
heavily in chasing market share in the first quarter of the year in order to
combat these issues, which was not sustainable in the long term.
The strategic realignment saw us removing parts of the business that didn't
fit our priorities. We ended the trial of a store-in-store format with Tesco
and have also terminated our business in the housebuilder sector.
We introduced delivery charges for all orders to offset the growing costs of
delivering for our logistics business. We have accelerated our pricing
structure development, particularly in non MDA categories that have been in an
investment and growth phase over the last few years. As a result, very few
products are now incrementally loss making and the corresponding margin drag
has been removed. We expected that this would impact our overall sales volumes
in the second half of the year, but it has delivered the planned step change
in profitability and cash generation.
We have completed a major staffing restructure, which has seen a significant
reduction in headcount and subsequent saving in the cost of senior and middle
management layers. A detailed review of our office footprint was completed in
the year which has seen the business close three offices across the Group.
Our Financial Services business performed resiliently as our customers
continue to recognise the value and peace of mind that our warranties offer.
Our long-term successful partnership with Domestic & General (AO Care) and
NewDay (AO Finance) helped us ensure high customer service levels, and we
continue to work closely with both partners to enhance our customer
proposition.
There has been no material impact to warranty cancellation rates as a result
of the underlying macroeconomic conditions.
Mobile
AO Mobile (Mobile Phones Direct) continues to focus its customer proposition
on traditional network contract connections through our network partners, O2,
Vodafone and Three. Our focus is on being affordable, providing value for
money offers, connecting through robust eligibility gateways, and appealing to
a genuine customer grouping/base.
Rising inflation costs have impacted the market, with the margins being
squeezed as consumers become more cost conscious. The business has
concentrated on the quality of its connections that it makes rather than
choosing to compete purely on price. In doing so it has given up some market
share, however the value of customer tenures has improved in the year which
has served to offset some of this decline.
Logistics
Our market leading in house logistics infrastructure enables the delivery of
millions of products a year nationwide, seven days a week, to customers on
behalf of AO's retail business and a number of third-party logistics clients.
Our delivery network operates from our hub in Crewe, comprising our warehouses
and distribution centres with a total of over 1.2 million square foot of space
and via a network of 17 delivery depots across the UK.
As the business pivoted to profit and cash, the logistics operation was able
to flex the driver resource down, rationalise our warehouse and outbase
requirements and leverage our operational gearing through third party
logistics. We are able to leverage our expertise in complex two-person
delivery, which is highly valued in our industry, to deliver incremental
profitability. We will continue to leverage this opportunity without it
distracting from our core business.
A new logistics routing system was introduced in the year to develop our
delivery routing process which has enabled the operation to further its
efficiencies and expand our capacity, to continue to provide our customers
with brilliant service.
Recycling
Our recycling plant in Telford is one of the largest fridge recycling plants
in Europe, and it operates to the highest UK and European standards. This
ensures that gases and oils that are harmful to the environment are safely and
efficiently captured. Refrigeration products including large American style
fridges are our speciality, but we collect all old fridges and other white
goods (also known as "WEEE" - waste electrical and electronic equipment). We
have our own highly skilled repairs team which refurbishes appliances
delivered to the plant that still have a useful life. These are then sold with
a warranty through our established base of trade customers.
During the year we achieved a key milestone of recycling or reusing our six
millionth appliance. Even though overall volumes processed in the year were
lower due to the slowing of the overall market for MDA, strong pricing across
all key metals and plastic outputs compensated for the lower recycling
volumes.
Over the past few years, our Recycling operations have been working to perfect
the recycling of plastics into new white goods components to complete true
circularity of recycling. During FY23 the throughput of plastic to our
recycling plant grew by 20%, with the output quality of materials continuously
improving. We were able to demonstrate REACH and RoHS compliance, and
progressed external laboratory testing for mechanical specifications, taking
us a step closer to our strategic objective of 'Closing the Loop' partnership
with key manufacturers to supply recycled products to make electrical
appliances.
This quality in plastics recycling has been recognised by the Awards in
Excellence in Recycling and Waste Management 2023, where the business was
awarded Recycled Product of the Year. In partnership with Volution Group our
high-quality plastics output has been used to manufacturer over 330,000
ventilation fan units (domestic and commercial). This again brings us closer
to our goal of seeing our recycled plastics back into products for sale on
AO.com.
We continue to collect third-party volumes using our own logistics network,
again providing efficient service from council amenity sites, whilst reducing
the amount of miles driven.
Closure of International Operations
As we reported in last year's annual report we made the decision to close our
German business and ceased trading there in early July 2022. During the
remainder of the year we then closed down our operations, terminated leases
and agreements and concluded other arrangements. As expected the total cash
impact from the closure of our operations was minimal in FY23. As we move in
to FY24 there remains only one outbase lease to exit.
Financial performance
We started the 2023 financial year facing a difficult market as a result of
inflation pressures on both our customers and our cost base and saw a
continued post covid drag of customers returning to offline purchasing.
Initially we reacted by discounting sales prices to maintain market share
through the short term volatility. In Q1 our strategic pivot towards cash and
profit generation fundamentally realigned the business during the rest of the
year. This has entailed a rigorous and wide-reaching programme aimed at
simplifying our operations and optimising our cost base, completed through the
following key steps:
1. Improving Gross Margin
Delivery charges were introduced for all orders to offset the growing costs of
delivering for our logistics business, and pleasingly the customer response
was good, as customers accepted that delivery has a cost. In addition, we also
accelerated our pricing structure development, particularly in non MDA
categories that have been in an investment and growth phase over the last few
years, which served to reduce margin drag.
2. Simplifying our operation
We closed our operations in Germany, brought an end to our trial with Tesco
and terminated our activities in the housebuilding sector, as those
initiatives were non-core, loss making, cash consumptive and no longer fit
with our focused priorities.
3. Optimising our cost base and overhead reduction
Throughout the year we identified and implemented a wide range of
opportunities to increase operational efficiencies, particularly in light of
our simplified operations. These have included removing 158,000 sq ft of
warehouse and outbases, rationalising vehicles, reducing our office footprint
and lowering our stock holding. We also undertook an organisational
restructure, which resulted in a reduction in headcount particularly in senior
and middle management roles.
Our cashflow strengthened in the year as a result of the impact of operational
changes and further supported by the capital raising with gross proceeds of
approximately £40m. Subsequent to the 2023 year-end we also renewed our £80m
Revolving Credit Facility, which is now due to expire in April 2026.
Our priorities for the current financial year are to leverage our cost base
and strong balance sheet for profitable growth. AO remains a market leader in
MDA in the UK with a 16% share of the total market and a 30% share of the
online market, which provides us with a strong and resilient base from which
to grow. Our strategy is to invest prudently in the business, seize the
significant market opportunities that we see in front of us, and leverage our
growing and loyal customer base.
The following commentary, unless stated otherwise, covers our UK business
only.
Revenue
Table 1
Year ended 31 March 2023 31 March 2022 %
£m Change
Product revenue 874.8 1,114.4 (21.5%)
Services revenue 56.2 50.3 11.7%
Commission revenue 156.4 156.8 (0.2%)
Third-party logistics revenue 27.6 22.7 21.2%
Recycling revenue 23.6 24.1 (2.1%)
1,138.5 1,368.3 (16.8%)
For the 12 months ended 31 March 2023, revenue decreased by 16.8% to
£1,138.5m (2022: £1,368.3m).
Product revenue
Product revenue, comprising sales generated from ao.com, marketplaces and
third-party websites, decreased by 21.5% as the impact of our actions to
improve profitability took hold combined with the impacts of the cost of
living crisis on consumer spending, and the market normalised post Covid. H1
was also impacted by supply chain issues, which were subsequently materially
resolved by H2.
Our revenues reduced in line with our change in strategy and pivot to
prioritise profit over revenue as set out above. Our MDA revenue decreased YoY
by 18.2%, with the total UK MDA market value falling 6.3% and the online MDA
market value falling by 11.7%. Our non MDA revenues, comprising SDA, computing
and gaming but excluding AV, declined by 14.7%. Our AV revenue, which includes
televisions and audio visual, saw a decline YoY of 35.6%.
Services revenue
Services revenues, which includes fees for delivery, recycling, installation
and related services, was impacted by the reduction in product revenue.
However, this was offset by the introduction of delivery charges on all orders
to counteract the growing costs of delivery for our logistics business. The
net result was that services revenue increased by 11.7%.
Commission revenue
Commission revenue, which includes commissions generated by network
connections in our Mobile business and from AO Care warranties remained
broadly flat against prior year revenues.
In Mobile, the number of connections increased in FY23 which, coupled with
further RPI increases imposed by the networks resulted in an increase in
Mobile commission revenue in the year.
In AO Care, the number of plans sold in FY23 reduced from FY22 in line with
the drop in product revenue and consequently commissions from the sale of
warranties reduced against the prior year. This was partly offset by an
increase in certain plan prices in the period in order to counter the
increased costs incurred by Domestic & General in running the scheme.
Third-party logistics revenue
Third-party logistics performed well, with YoY revenue growth of 21.2%, albeit
off a modest base. Our expertise in complex two-person delivery is highly
valued in our industry, and we undertake a number of deliveries and other
services on behalf of third-party clients in the UK including Hisense and
Simba. This revenue delivers incremental profitability. The business will
continue to maximise this revenue opportunity to leverage our operational
gearing, without it distracting from the core business.
Recycling revenue
Recycling revenues decreased 2.1% over the year, which again was a pleasing
performance when taking into account the wider trading environment. Processed
volumes decreased overall year on year, although this was offset by an
increased output from the plastics plant, as well as improvements in output
prices for recycled materials.
Gross margin
Table 2
Year ended 31 March 2023 31 March 2022
£m %
Change
Gross profit 238.2 263.4 (9.6%)
Gross margin 20.9% 19.3% + 1.6 ppts
Gross profit, including product margins, services and delivery costs,
decreased by 9.6% to £238.2m (2022: £263.4m), against a sales decrease of
16.8%. Gross margin increased by 1.6ppts to 20.9%. This increase reflects the
significant steps taken by the business to offset inflationary increases in
operational costs through pricing actions and the focus on profitable sales.
Selling, General & Administrative Expenses ("SG&A")
Table 3
Year ended 31 March 2023 31 March 2022 %
£m Change
Advertising and marketing 38.0 46.1 (17.5%)
% of revenue 3.3% 3.4%
Warehousing 59.8 69.6 (14.1%)
% of revenue 5.2% 5.1%
Other admin 124.1 156.1 (20.5%)
% of revenue 10.9% 11.4%
Adjustments 4.5 0.9 395.7%
% of revenue 0.4% 0.1%
Administrative expenses 226.4 272.7 (17.1%)
% of revenue 19.9% 19.9%
SG&A costs decreased during the period to £226.4m (2022: £272.7m), but
as a percent of revenues remained flat at 19.9%. The largest cost decreases
were seen in warehousing and other admin.
Warehousing costs which include the costs of running our central warehouses
for both our customers and for our third-party customers as well as the
outbase infrastructure and our recycling operation came under focus during the
period. Savings were made through both third-party leasing and efficiency
improvements at the sites themselves. This resulted in a reduction to
warehousing costs in cash terms to £59.8m (2022: £69.6m). However,
warehousing as a percentage of sales increased slightly year on year, given
the drop in sales volume.
Other admin costs decreased to £124.1m (2022: £156.1m), or from 11.4% to
10.9% as a percentage of revenues. This primarily reflects the actions that
the business has taken as part of the detailed overhead review and property
rationalisation. The headcount of the business entering into FY23 was aligned
with expected international growth. Therefore, following the decision to focus
exclusively on the UK operation, a rightsizing of headcount was necessary
during the year. With reduced headcount and a move to remote working for some
areas of the group, the need for office space has also reduced. As we move
into FY24, the annualisation of savings is expected to offset inflationary
pressures and should see the business deliver a like for like cost base.
Advertising and marketing costs in the UK decreased to £38.0m (2022: £46.1m)
and remained relatively flat as a percent of revenues. Spend decreased as the
business focussed on the efficiency of acquisition spend.
Operating profit and Adjusted EBITDA
As a result of the above actions and dynamics, our operating profit for the
period was £12.5m (2022: £7.5m loss).
Alternative Performance Measures
The Group tracks a number of alternative performance measures in managing its
business. These are not defined or specified under the requirements of IFRS
because they exclude amounts that are included in, or include amounts that are
excluded from, the most directly comparable measure calculated and presented
in accordance with IFRS or are calculated using financial measures that are
not calculated in accordance with IFRS. The Group believes that these
alternative performance measures, which are not considered to be a substitute
for, or superior to IFRS measures, provide stakeholders with additional
helpful information on the performance of the business. These alternative
performance measures are consistent with how the business performance is
planned and reported within the internal management reporting to the Board.
Some of these alternative performance measures are also used for the purpose
of setting remuneration targets. These alternative performance measures should
be viewed as supplemental to, but not as a substitute for, measures presented
in the consolidated financial statements relating to the Group, which are
prepared in accordance with IFRS. The Group believes that these alternative
performance measures are useful indicators of its performance.
EBITDA
EBITDA is defined by the Group as Profit/(Loss) from continuing activities
before interest, tax, depreciation, amortisation, loss on the disposal of
fixed assets and impairment of assets.
Adjusted EBITDA
Adjusted EBITDA is calculated by adding back or deducting Adjusting Items to
EBITDA. Adjusting Items are those items which the Group excludes in order to
present a further measure of the Group's performance. Each of these items,
costs or incomes, is considered to be significant in nature and/or quantum or
are consistent with items treated as adjusting in prior periods.
Excluding these items from profit metrics provides readers with helpful
additional information on the performance of the business across periods
because it is consistent with how the business performance is planned by, and
reported to, the Board and the Chief Operating Decision Maker.
The reconciliation of statutory operating profit/ (loss) to Adjusted EBITDA is
as follows:
Table 4
Year ended 31 March 2023 31 March 2022 %
£m Change
Operating profit / (loss) 12.5 (7.5) NM%
Depreciation 25.6 24.9 2.9%
Amortisation 2.6 3.8 (31.9%)
Loss on disposal of non-current assets 0.2 0.4 (49.0%)
EBITDA 40.9 21.6 89.6%
Adjusting items 4.5 0.9 395.7%
Adjusted EBITDA 45.4 22.5 101.9%
Adjusted EBITDA as % of Revenue 4.0% 1.6%
The Adjusting Items for the current year are:
· Following the Group's change of strategy to focus on the UK
business, the Group started a simplification of its operations which has
included removing areas of the business that didn't fit our priorities,
including the trial with Tesco and housebuilder contracts; simplifying the
organisational structure and associated contracts and exiting surplus
properties. As a consequence, the Group has recognised an expense of £4.5m
relating to the restructuring which, due to its size and nature, has been
added back in arriving at Adjusted EBITDA.
The Adjusting Items for the prior year were as follows:
· Due to the continued losses in the German business, the Group
undertook a strategic review during the prior year. Legal advice and other
costs of the review totalled £0.9m during the year and given the nature of
these costs, they were added back in arriving at Adjusted EBITDA. All other
charges arising as a result of the review, principally relating to the
impairment of assets in the German business, were included in the result for
that business which is shown as a discontinued operation in these financial
statements.
Taxation
The tax charge for the year was £1.2m (2022: tax credit of £7.2m) resulting
in an effective rate of tax for the year of 16.4% in continued operations.
The Group is subject to taxes in the UK and Germany. The Group continued to be
able to offset a proportion of its German losses against profits arising
within the UK in the relevant overlapping period through its registered branch
structure in Germany. No overseas tax is attributable to Germany in the year
due to its trading results.
Our tax strategy can be found at ao-world.com/
responsibility/group-tax-strategy.
Retained loss and earnings/ (loss) per share
The calculations for earnings/ (loss) per share are shown in the table below
Table 5
2 months ended 31 March 2023 31 March 2022
£m
Profit / (Loss)
Profit/ (Loss) attributable to Owners of the Parent Company from Continuing 6.2 (3.6)
operations
Loss attributable to Owners of the Parent Company from Discontinued operations (8.8) (26.8)
(2.6) (30.4)
Number of shares
Weighted average shares in issue for the purposes of basic earnings/ (loss) 548,947,969 478,558,948
per share
Potentially dilutive share options 15,509,762 7,028,898
Diluted weighted average number of shares 564,457,731 465,587,847
Earnings / (loss) per share from continuing operations (pence per share)
Basic earnings / (loss) per share 1.13 (0.75)
Diluted earnings / (loss) per share 1.10 (0.75)
Loss per share from continuing and discontinued operations (pence per share)
Basic loss per share (0.48) (6.33)
Diluted loss per share (0.47) (6.33)
In the prior year, the diluted loss per share has been restricted to the basic
loss per share to prevent having an anti-dilutive effect.
Cash resources and cash flow
At 31 March 2023, the Group's available liquidity, being Cash and cash
equivalents plus amounts undrawn on its revolving credit facility, was £88.9m
(2022: £49.6m). Group liquidity was strengthened via a successful share
placing in July 2022 which raised net proceeds of £39.1m.
Net funds, which comprise cash balances less borrowings and owned asset lease
liabilities, were £3.6m (2022: £32.8m net debt). Cash balances at 31 March
2023 were £19.1m (2022: £19.5m). The movement in net funds represents a cash
inflow from operations generated by the improved profitability partly offset
by a working capital outflow (see below), the inflow from the proceeds of the
share placing offset by the repayment of borrowings, interest and lease
liabilities. Borrowings of £10.0m (2022: £45.0m) relate to short term
funding drawn from the Group's revolving credit facility.
At 31 March 2023, the Group's Total net debt, being net funds less all right
of use asset lease liabilities, was £76.1m (2022: £134.1m)
Lease liabilities decreased by £23.3m to £85.3m (2022: £108.6m) principally
reflecting capital repayments of £26.1m and the early exit or reassessment of
leases of £8.2m offset by new lease liabilities of £11.0m. New leases in the
year principally relate to the replenishment of the delivery fleet with newer
vehicles replacing older obsolete models. As expected, following the decision
to close its business in Germany, almost all of the Group's liabilities in
Europe have either been settled or terminated early.
On 5 April 2023, the Group renewed its £80m revolving credit facility and
this now expires in April 2026. At 31 March 2023, the Group had £69.8m
available on its old facility. The amount utilised represents £10.0m of cash
borrowings (see above) and £0.2m of guarantees.
Working Capital
As at 31 March 2023 31 March 2022
£m
UK Germany Total UK Germany Total
Inventories 73.1 - 73.1 82.0 15.0 97.0
Trade and other receivables 230.9 0.2 231.1 243.9 18.2 262.1
Trade and other payables (253.5) (0.8) (254.3) (296.9) (23.3) (320.3)
Net working capital 50.5 (0.6) 49.9 29.0 9.8 38.8
Change in net working capital 21.5 (10.4) 11.1 75.2 (8.0) 67.2
At 31 March 2023, the Group had net current liabilities of £47.9m (2022:
£91.5m).
At 31 March 2023, UK inventories were £73.1m (2022: £82.0m) and UK stock
days were 40 days (2022: 34 days). Overall inventory levels reduced in line
with the reduction in sales albeit the Group continues to run an efficient
stock holding model ensuring that a sufficient and efficient level of
inventory is held to maintain customer availability. Inventory days at the end
of March were however higher than the previous year as a consequence of the
timing of purchasing in our Mobile business to maintain availability across
the range.
UK trade and other receivables (both non-current and current) were £230.9m as
at 31 March 2023 (2022: £243.9m) reflecting a reduction in trade with B2B
customers as we exited loss making business in addition the lower level of
sales activity reducing the amount of supplier marketing commissions.
UK trade and other payables were £253.5m at 31 March 2023 (2022: £296.9m).
Again, this is reflective of the lower level of activity in the year across
the business. Trade payables days at 31 March 2023 were 51 days (2022: 47
days).
The changes in working capital in Germany are all reflective of the decision
to close operations in June 2022.
Capital Expenditure
UK cash capital expenditure for the 12-month period was £2.2m (2022: £7.5m),
largely related to ongoing investment in IT equipment, company vehicles and
leasehold improvements.
Acquisition of Non Controlling Interest
In November 2022, the Company acquired the remaining 18.4% of issued share
capital in AO Recycling Limited for consideration of £2.5m. AO Recycling is
now a wholly owned subsidiary.
CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2023
Note 2023 2022
£m £m
Restated
(See
note 12)
Revenue 2,3 1,138.5 1,368.3
Cost of sales (900.3) (1,104.9)
Gross profit 238.2 263.4
Administrative expenses (226.4) (272.7)
Other operating income 0.7 1.8
Operating profit/ (loss) 12.5 (7.5)
Finance income 4 2.9 2.6
Finance costs 5 (7.8) (5.6)
Profit/ (loss) before tax 7.6 (10.5)
Tax (charge)/ credit 6 (1.2) 7.2
Profit/ (loss) after tax for the period from continuing operations 6.4 (3.3)
Loss for the period from discontinued operations 12 (8.8) (26.8)
Loss after tax for the year (2.4) (30.1)
Profit/ (loss) for the year attributable to:
Owners of the Company (2.6) (30.4)
Non-controlling interests 0.2 0.3
(2.4) (30.1)
Earnings/ (loss) per share from continuing operations (pence)
Basic earnings/ (loss) per share 7 1.13 (0.75)
Diluted earnings/ (loss) per share 7 1.10 (0.75)
Loss per share from continuing and discontinued operations (pence)
Basic loss per share 7 (0.48) (6.33)
Diluted loss per share 7 (0.47) (6.33)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2023
2023 2022
£m £m
Loss for the year (2.4) (30.1)
Items that may subsequently be recycled to income statement
Exchange differences on translation of foreign operations (6.4) 1.0
Total comprehensive loss for the year (8.8) (29.1)
Total comprehensive (loss)/ profit for the year attributable to:
Owners of the Company (9.0) (29.4)
Non-controlling interests 0.2 0.3
(8.8) (29.1)
Total comprehensive profit/ (loss) attributable to owners of the company
arising from:
Continuing operations 6.2 (3.6)
Discontinued operations (15.2) (25.8)
(9.0) (29.4)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 23
Note 2023 2022
£m £m
Non-current assets
Goodwill 8 28.2 28.2
Other intangible assets 9.6 12.2
Property, plant and equipment 20.9 32.7
Right of use assets 69.4 86.6
Trade and other receivables 9 93.3 92.4
Deferred tax 8.3 9.0
229.7 261.1
Current assets
Inventories 73.1 97.0
Trade and other receivables 9 137.8 169.7
Corporation tax receivable 0.6 1.9
Cash and cash equivalents 19.1 19.5
230.6 288.1
Total assets 460.3 549.2
Current liabilities
Trade and other payables 10 (249.5) (313.9)
Borrowings 11 (10.0) (45.0)
Lease liabilities 11 (17.8) (20.3)
Provisions (1.2) (0.4)
(278.5) (379.6)
Net current liabilities (47.9) (91.5)
Non-current liabilities
Trade and other payables 10 (4.8) (6.4)
Lease liabilities 11 (67.5) (88.3)
Provisions (3.8) (2.5)
(76.1) (97.2)
Total liabilities (354.6) (476.8)
Net assets 105.7 72.4
Equity attributable to owners of the parent
Share capital 1.4 1.2
Share premium account 108.2 104.4
Other reserves 59.4 28.5
Retained losses (63.3) (60.7)
Total 105.7 73.4
Non-controlling interest - (1.0)
Total equity 105.7 72.4
CONDENSED CONSOLIDATED STATEMENT OF CHANGE IN EQUITY
As at 31 March 2023
Other reserves
Share capital Investment in own shares Share premium account Merger reserve Capital redemption reserve Share-based payment reserve Translation reserve Other reserve Retained losses Total Non-controlling interest Total
£m £m £m £m £m £m £m £m £m £m £m £m
Balance at 31 March 2021 1.2 - 104.3 22.2 0.5 9.6 (4.0) (3.0) (33.1) 97.7 (1.3) 96.4
(Loss) / Profit for the period - - - - - - - - (30.4) (30.4) 0.3 (30.1)
Share-based payment charge (net of tax) - - - - - 5.0 - - - 5.0 - 5.0
Issue of shares (net of expenses) - - 0.1 - - - - - - 0.1 - 0.1
Foreign currency gain arising on consolidation - - - - - - 1.0 - - 1.0 - 1.0
Movement between reserves - - - - - (2.7) - - 2.7 - - -
Balance at 31 March 2022 1.2 - 104.4 22.2 0.5 11.8 (3.0) (3.0) (60.7) 73.4 (1.0) 72.4
(Loss) / Profit for the period - - - - - - - - (2.6) (2.6) 0.2 (2.4)
Share-based payment charge (net of tax) - - - - - 5.5 - - - 5.5 - 5.5
Issue of shares (net of expenses) 0.2 - 3.8 37.0 - - - - (2.0) 39.1 - 39.1
Foreign currency loss arising on consolidation - - - - - - (6.4) - - (6.4) - (6.4)
Acquisition of minority interest - - - - - - - (3.3) - (3.3) 0.8 (2.5)
Movement between reserves - - - - - (1.9) - - 1.9 - - -
Balance at 31 March 2023 1.4 - 108.2 59.2 0.5 15.5 (9.4) (6.3) (63.3) 105.7 - 105.7
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the 12 months ended 31 March 2023
2023 2022
£m £m
Restated (See note 12)
Cash flows from operating activities
Profit/ (loss) for the year in continuing operations 6.4 (3.3)
Net cash used in operating activities in discontinued operations (8.8) (7.3)
Adjustments for:
Depreciation and amortisation 29.0 28.5
Loss on disposal of property, plant and equipment 0.9 0.4
Finance income (2.9) (2.6)
Finance costs 7.8 5.6
Taxation charge / (credit) 1.2 (7.2)
Share-based payment charge 5.3 5.8
Increase in provisions 2.7 0.5
Operating cash flows before movement in working capital 41.6 20.4
Decrease in inventories 9.0 33.0
Decrease/ (increase) in trade and other receivables 14.7 (10.8)
Decrease in trade and other payables (43.0) (96.7)
Total movement in working capital (19.4) (74.5)
Taxation refunded 2.2 1.7
Cash generated from/ (used in) operating activities 24.4 (52.4)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 0.1 -
Acquisition costs relating to right of use assets - (1.0)
Acquisition of property, plant and equipment (2.1) (7.5)
Acquisition of intangible assets (0.1) (1.0)
Net cash generated from/ (used in) investing 9.8 (0.1)
activities by discontinued operations
Cash generated from/ (used) in investing activities 7.7 (9.6)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 41.1 0.1
Share issue costs (2.0) -
Acquisition of non-controlling interest (2.5) -
(Repayment of)/ New borrowings (35.0) 45.0
Interest paid on borrowings (3.5) (1.6)
Interest paid on lease liabilities (4.2) (4.3)
Repayment of lease liabilities (17.7) (21.2)
Net cash used in financing activities by discontinued operations (8.6) (3.6)
Net cash (used in)/ generated from financing activities (32.3) 14.4
Net decrease in cash (0.3) (47.6)
Exchange loss on cash and cash equivalents (0.1) -
Cash and cash equivalents at beginning of year 19.5 67.1
Cash and cash equivalents at end of year 19.1 19.5
NOTES TO THE FINANCIAL INFORMATION
1. Basis of preparation
This financial information has been prepared and approved by the Directors in
accordance with UK adopted International Accounting Standards ("UK adopted
IFRS").
Whilst the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRSs), this announcement does
not itself contain sufficient information to comply with IFRSs.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 March 2023 or 2022 but is derived
from those accounts. Statutory accounts for 2022 have been delivered to the
Registrar of Companies and those for 2023 will be delivered following the
Company's Annual General Meeting. The auditor has reported on those accounts;
the report was unqualified, did not draw attention to any matters by way of
emphasis and did not contain statements under section 498(2) or (3) Companies
Act 2006.
During the year, the Group made the decision to close its German business
which has been treated and presented as a discontinued operation in the year
ended 31 March 2023 which includes restating comparatives (see note 12).
Certain financial data have been rounded. As a result of this rounding, the
totals of data presented in this document may vary slightly from the actual
arithmetic totals of such data.
Adoption of new and revised standards
The accounting policies set out in Note 3 of the Group financial statements
have been applied in preparing this financial information.
New accounting standards in issue but not yet effective
New standards and interpretations that are in issue but not yet effective are
listed below:
• IFRS 17 Insurance Contracts, Amendments to IFRS 17 and Initial
Application of IFRS 17 and IFRS 9 - Comparative Information (effective date 1
January 2023).
• Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current and Classification of
Liabilities as Current or Non-current (effective date to be confirmed).
• Amendments to IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors to introduce a new definition for accounting estimates
(effective date 1 January 2023).
• Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statements 2 Making Materiality Judgements (effective date 1 January
2023).
• Amendments to IAS 12 Income Taxes - Deferred Tax Related to Assets
and Liabilities Arising from a Single Transaction (effective date 1 January
2023).
The Group continues to monitor the potential impact of other new standards and
interpretations which may be endorsed and require adoption by the Group in
future reporting periods. The Group does not consider that any other
standards, amendments or interpretations issued by the IASB, but not yet
applicable, will have a significant impact on the financial statements.
Going concern
Notwithstanding net current liabilities of £47.9 m as at 31 March 2023 and a
cash outflow of £0.3m in the year ended 31 March 2023, the financial
statements have been prepared on a going concern basis which the Directors
consider to be appropriate for the following reasons:
The Group meets its day-to-day working capital requirements from its cash
balances and the availability of its £80m revolving credit facility (which
was renewed in April 2023 to now expire in April 2026). At 30 June 2023 total
liquidity amounted to £62.8m.
The Directors have prepared base and sensitised cash flow forecasts for the
Group covering the period to 31 March 2025 ("the going concern period") which
indicate that the Group will remain compliant with its covenants and will have
sufficient funds through its existing cash balances and availability of funds
from its revolving credit facility to meet its liabilities as they fall due
for that period. The forecasts take account of current trading, management's
view on future performance and their assessment of the impact of market
uncertainty and volatility.
In assessing the going concern basis, the Directors have taken into account
severe but plausible downsides to sensitise its base case and have also run
these in combination. These primarily include:
• Negative growth in FY24 and in the subsequent periods to account for
how the overall electrical online market could be impacted by the continuing
macro-economic factors such as inflation, consumer confidence, interest rate
increases;
• Changes in margin including the impact of any changes in the Group's
policy with regard to charging;
• The impact of a change in product protection plan cancellations as a
result of a macroeconomic event e.g., continued interest rate increases,
utilising data seen where other events have happened (e.g., Covid outbreak,
initial cost of living crisis); and
• Changes in other revenue including the impact of a reduction in
logistics third-party income.
Under these severe but plausible downside scenarios the Group continues to
demonstrate headroom on its banking facilities and remains compliant with its
quarterly covenants which are interest cover (Adjusted EBITDA being at least
4x net finance costs) and leverage (Net debt to be no more than 2.5x EBITDA).
The likelihood of a breach of covenants is considered remote and hence
headroom against its covenants has not been disclosed.
In addition, the Directors have considered mitigating actions including
limiting discretionary spend and managing working capital should there be any
pressure on headroom. These would provide additional headroom but have not
been built into the going concern forecast. Consequently, the Directors are
confident that the Group and Company will have sufficient funds to continue to
meet its liabilities as they fall due for at least 12 months from the date of
approval of the financial statements and therefore have prepared the financial
statements on a going concern basis.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are set out in
Note 3 of the Group financial statements, the Directors are required to make
judgements, estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The estimates
and associated assumptions are based on historical experience and other
factors that are considered to be relevant and are reviewed on an ongoing
basis.
Actual results could differ from these estimates and any subsequent changes
are accounted for with an effect on income at the time such updated
information becomes available.
Accounting standards require the Directors to disclose those areas of critical
accounting judgement and key sources of estimation uncertainty that carry a
significant risk of causing material adjustment to the carrying value of
assets and liabilities within the next 12 months.
As a result of macro-economic factors in recent years, the Directors consider
that the revenue recognition in respect of commission for product protection
plans and network connections include significant areas of accounting
estimation. The Directors have applied the variable consideration guidance in
IFRS 15 and as a result of revenue restrictions do not believe there is a
significant risk of a material downward adjustment. Revenue has been
restricted to ensure that it is only recognised when it is highly probable and
therefore subsequently, there could be a material reversal of restrictions.
The information below sets out the estimates and judgements used in
recognising revenue in these two areas.
Revenue recognition and recoverability of income from product protection plans
Revenue recognised in respect of commissions receivable over the lifetime of
the plan for the sale of product protection plans is recognised in line with
the principles of IFRS 15, when the Group obtains the right to consideration
as a result of performance of its contractual obligations (acting as an agent
for a third party).
Revenue in any one year therefore represents an estimate of the commission due
on the plans sold, which management estimate reliably based upon a number of
key inputs, including:
• the contractual agreed margins;
• the number of live plans;
• the discount rate;
• the estimated length of the plan;
• the estimated historic rate of attrition; and
• the estimated overall performance of the scheme.
Commission receivable also depends for certain transactions on customer
behaviour after the point of sale. Assumptions are therefore required,
particularly in relation to levels of customer attrition within the contract
period, expected levels of customer spend, and customer behaviour beyond the
initial contract period. Such assumptions are based on extensive historical
evidence, and adjustment to the amount of revenue recognised is made for the
risk of potential changes in customer behaviour, but they are nonetheless
inherently uncertain e.g., changes seen in FY21 as a result of Covid-19.
Reliance on historical data assumes that current and future experience will
follow past trends. The Directors believe that the quantity and quality of
historical data available provides an appropriate proxy for current and future
trends. Any information about future market trends, or economic conditions
that we believe suggests historical experience would need to be adjusted, is
taken into account when finalising our assumptions each year. Our experience
over the last decade, which has been a turbulent period for the UK economy as
a whole, is that variations in economic conditions have not had a material
impact on consumer behaviour and, therefore, no adjustment to commissions is
made for future market trends and economic conditions.
In assessing how consistent our observations have been, we compare cash
received in a period versus the forecast expectation for that period as we
believe this is the most appropriate check on revenue recognised. Small
variations in this measure support the assumptions made.
For plans sold prior to 1 December 2016, the commission rates receivable are
based on pre-determined rates. For plans sold after that date, base-assumed
commissions will continue to be earned on pre-determined rates but overall
commissions now include a variable element based on the future overall
performance of the scheme.
Changes in estimates recognised as an increase or decrease to revenue may be
made, where for example, more reliable information is available, and any such
changes are required to be recognised in the income statement. During the
year, management have refined estimations in relation to plan cancellations
which has resulted in a £1.7m reversal of previously recognised revenue. As
with all years, other small refinements have been made but have had an
immaterial impact on the revenue recognised.
The commission receivable balance as at 31 March 2023 was £93.1m (2022:
£90.7m). The rate used to discount the revenue for the FY23 cohort is 5.45%
(2022: 3.54%). The weighted average of discount rates used in the years prior
to FY23 was 3.91% (2022: 4.12%).
Revenue recognition and recoverability of income in relation to network
commissions
Revenue in respect of commissions receivable from the Mobile Network Operators
("MNOs") for the brokerage of network contracts is recognised in line with the
principles of IFRS 15, when the Group obtains the right to consideration as a
result of performance of its contractual obligations (acting as an agent for a
third party).
Revenue in any one year therefore represents an estimate of the commission due
on the contracts sold, which management estimates reliably based upon a number
of key inputs, including:
• The contractually agreed revenue share percentage - the percentage of
the consumer's spend (to MNOs) to which the Group is entitled;
• The discount rate using external market data (including risk free
rate and counter party credit risk) 2.86% (2022: 0.53%);
• The length of contract entered into by the consumer (12 - 24 months)
and the resulting estimated consumer average tenure which takes account of
both the default rate during the contract period and the expectations that
some customers will continue beyond the initial contract period and generate
out of contract ("OOC") revenue (c2%).
The commission receivable on mobile phone connections can therefore depend on
customer behaviour after the point of sale. The revenue recognised and
associated receivable in the month of connection is estimated based on all
future cash flows that will be received from the MNO and these are discounted
based on the timing of receipt. This also takes into account the potential
clawback of commission by the MNOs and any additional churn expected as a
result of recent price increases announced and applied by the MNOs, for which
a reduction to revenue is made based on historical experience.
The Directors consider that the quality and quantity of the data available
from the MNOs is appropriate for making these estimates and, as the contracts
are primarily for 24 months, the period over which the amounts are estimated
is relatively short. As with commissions recognised on the sale of product
protection plans, the Directors compare the cash received to the initial
amount recognised in assessing the appropriateness of the assumptions used.
Changes in estimates recognised as an increase or decrease to revenue may be
made where, for example, more reliable information is available, and any such
changes are required to be recognised in the income statement. During the
year, management have refined the estimations in relation to the assumed
collection of commissions once customers reach out-of-contract periods. This
has resulted in a restriction of revenue in FY23, compared to the prior
methodology, of £2.9m. In addition, as a result of the increase in commission
rates driven by the significant increase in inflation, previously restricted
revenue of £4.4m has been recognised in FY23.
Other small refinements have been made which have had an immaterial impact on
the revenue recognised. The total revenue restricted at 31 March 2023 is
£8.7m.
The commission receivable balance as at 31 March 2023 was £81.3m (2022:
£83.4m). The rate used to discount the current year revenue is 2.83% (2022:
0.53%).
Impairment of intangible assets and goodwill
As part of the acquisition of Mobile Phones Direct Limited in 2018, the Group
recognised amounts totalling £16.3m in relation to the valuation of the
intangible assets and £14.7m in relation to residual goodwill. At 31 March
2023 these amounted to £23.5m.
Intangible assets are reviewed for impairment if events or changes in
circumstances indicate that the carrying amount may not be recoverable.
Goodwill is reviewed for impairment on an annual basis. When a review for
impairment is conducted, the recoverable amount is determined based on the
higher of value in use and fair value less costs to sell. The value in use
method requires the Group to determine appropriate assumptions (which are
sources of estimation uncertainty) in relation to the cash flow projections
over the three-year strategic plan period and the long-term growth rate to be
applied beyond this three-year period.
Whilst at 31 March 2023 the Directors have concluded that the carrying value
of the intangibles and goodwill is appropriate, significant changes in any of
these assumptions, which could be driven by the end customer behaviour with
the Mobile Network Operators, could give rise to an impairment in the carrying
value.
Recoverability of deferred tax asset
At 31 March 2023, the Group has UK tax losses of £26.1m and accordingly has
recognised a deferred tax asset of £6.5m in respect of these losses.
In recognising the asset, management have taken account of the historic
profitability of the UK business together with its forecasts (utilising the
same information as in the going concern and viability statement). In recent
years, other than FY22, the UK business has been profitable. The unprecedented
circumstances which affected the post Covid trading period had been the prime
reason for the result in FY22. Since then, and following the closure of the
German business, the Group has changed its strategy to focus on profit and
cash generation. The results in the second half of FY23 reflect the measures
taken to reduce costs and improve margin despite the ongoing impacts of the
cost of living squeeze and difficult macro-economic conditions which have
restricted growth. The business therefore expects this profitability to
continue in the future and therefore has assessed that utilising the losses is
probable and as such the asset has been recognised.
Management acknowledge that the economic environment is providing a difficult
backdrop on which to forecast but believes that its forecasts reflect the
impact of the current challenges. However, as a consequence of the
significance of the asset, this is disclosed as an area of accounting
judgement.
2. Revenue
The table below shows the Group's revenue by major business area. All revenue
is accounted for at a point in time as the Group has satisfied its performance
obligations on the sale of its products/ services.
Major product/services lines 2023 2022
£m £m
Restated
(See note 12)
Product revenue 874.8 1,114.4
Service revenue 56.2 50.3
Commission revenue 156.4 156.8
Third-party logistics revenue 27.6 22.7
Recycling revenue 23.6 24.1
1,138.5 1,368.3
3. Segmental analysis
In the periods prior to the current period, the Group had two reportable
segments; online retailing of domestic appliances and ancillary services to
customers in the UK, and online retailing of domestic appliances and ancillary
services to customers in Germany. Following the decision in June 2022 to close
the German operations (which are now treated as discontinued (see note 12)),
the UK operation is now the only reportable segment.
Operating segments are determined by the internal reporting regularly provided
to the Group's Chief Operating Decision Maker. The Chief Operating Decision
Maker, who is responsible for allocating resources and assessing performance
of the operating segments, has been identified as the Executive Directors and
has determined that the UK operations now form three reportable segments after
considering the threshold guidance in IFRS 8, being retail, logistics and
recycling.
However, having consideration for the economic characteristics of each of
these segments including the nature of products and services, the type of
customer and methods used to distribute product, the Chief Operating Decision
Maker has concluded that the majority of the Group's business is retail
related and has determined it is appropriate to aggregate these segments into
one reportable segment.
4. Finance income
2023 2022
£m £m
Unwind of discounting on non-current contract assets 2.9 2.6
2.9 2.6
5. Finance costs
2023 2022
£m £m (Restated see note 12)
Interest on lease liabilities 4.2 4.3
Interest on bank loans 2.3 0.6
Other finance costs 1.2 0.7
7.8 5.6
6. Taxation
2022
2023 £m
£m (Restated
see note 12)
Corporation tax on continuing operations
Current year 0.3 (0.6)
Adjustments in respect of prior years 0.2 -
0.5 (0.6)
Deferred tax on continuing operations
Current year 0.1 (5.9)
Adjustments in respect of prior years 0.6 (0.6)
0.7 (6.5)
Total tax charge/ (credit) on continuing operations 1.2 (7.2)
The expected corporation tax charge for the year is calculated at the UK
corporation tax rate of 19% (2022: 19%) on the profit/ (loss) before tax for
the year.
The charge/ (credit) for the year can be reconciled to the profit/ (loss) in
the statement of comprehensive income as follows:
2023 2022
£m £m
Profit/ (loss) before tax on continuing operations 7.6 (10.5)
Tax at the UK corporation tax rate of 19% (2022: 19%) 1.5 (2.0)
Ineligible expenses 0.2 0.2
Impact of difference in current and deferred tax rates (0.7) (1.2)
Income not taxable - (0.1)
Group relief claimed from discontinued operations (see below) (1.6) (4.7)
Share-based payments 1.0 1.7
Prior period adjustments 0.8 (0.9)
Tax charge/ (credit) for the year 1.2 (7.2)
An increase in the UK corporation rate from 19% to 25% (effective 1 April
2023) was substantively enacted on 24 May 2021. The impact of the rate change
is reflected in the deferred tax asset as at 31 March 2023.
The Group have offset a proportion of its German losses against profits
arising within the UK continuing operations, in the relevant overlapping
period, through its registered branch structure in Germany.
7. Earnings/ (loss) per share
The calculation of the basic and diluted earnings/ (loss) per share is based
on the following data:
2023 2022
£m £m
(Restated
See note 12)
Profit/ (Loss) attributable to Owners of the Parent Company from continuing 6.2 (3.6)
operations
Loss attributable to Owners of the Parent Company from discontinued operations (8.8) (26.8)
(2.6) (30.4)
Number of shares
Weighted average shares in issue for the purposes of basic 548,947,969 478,558,948
earnings/ (loss) per share
Potentially dilutive shares 15,509,762 7,028,898
Weighted average number of diluted ordinary shares 564,457,731 485,587,846
Earnings/ (loss) per share from continuing operations (pence per share)
Basic earnings/ (loss) per share 1.13 (0.75)
Diluted earnings/ (loss) per share 1.10 (0.75)
Loss per share from continuing and discontinued operations (pence per share)
Basic loss per share (0.48) (6.33)
Diluted loss per share (0.47) (6.33)
In the prior year, the diluted loss per share has been restricted to the basic
loss per share to prevent having an anti-dilutive effect.
8. Goodwill
£m
Carrying value at 31 March 2022 and 31 March 2023 28.2
Goodwill relates to purchase of Expert Logistics Limited, the purchase by DRL
Holdings Limited (now AO World PLC) of DRL Limited (now AO Retail Limited),
the acquisition of AO Recycling Limited (formerly The Recycling Group Limited)
and the acquisition of Mobile Phones Direct Limited (now AO Mobile Limited) by
AO Limited.
Impairment of goodwill
UK CGU - £13.5m
At 31 March 2023, goodwill acquired through UK business combinations
(excluding Mobile Phones Direct Limited) was allocated to the UK
cash-generating unit ("CGU") which is part of the UK operating segment.
This represents the lowest level within the Group at which goodwill is
monitored for internal management purposes.
The Group performed its annual impairment test as at 31 March 2023. The
recoverable amount of the CGU has been determined based on the value in use
calculations. The Group prepares cash flow forecasts derived from the most
recent financial budget and financial plan for three years. The final year
cash flow is used to calculate a terminal value and is based on an estimated
growth rate of 1%. This rate does not exceed the average long term growth rate
for the market.
Management estimates discount rates using pre-tax rates that reflect current
market assessments of the time value of money and the risks specific to this
CGU. In arriving at the appropriate discount rate to use, we adjust the CGU's
post-tax weighted average cost of capital to reflect the impact of risks and
tax effects specific to the cash flows. The weighted average pre-tax discount
rate we used was approximately 13.1% (2022: 9.7%).
The key assumptions, which take account of historic trends, upon which
management has based their cash flow projections are sales growth rates,
selling prices and product margin.
Management do not believe that any reasonable possible sensitivity would
result in any impairment to this goodwill.
Mobile Phones Direct Limited - £14.7m
The Group has assessed the goodwill arising on the acquisition of Mobile
Phones Direct Limited ("MPD") in December 2018. This was performed based on a
value in use calculation in the same way as for the UK business noted
previously, but using a pre- tax weighted average cost of capital appropriate
for MPD as a standalone business of 19.2% (2022: 14.8%).
The total recoverable amount for this CGU group is greater than its carrying
value by £11.9m in management's base case.
The main assumptions underlying the value in use calculation is revenue where
growth is forecast at c3% per annum and EBITDA margin, which has been impacted
by higher levels of inflation for recent cohorts, and is assumed to be c5%.
The Directors have performed sensitivity analysis on the numbers included in
the three-year strategic plan for the business in assessing the value in use.
The final year cash flow is used to calculate a terminal value and includes an
estimated long term growth rate of 3% per annum which does not exceed the
average long term growth rate for the market. Management believes that the key
assumptions are revenue and EBITDA margin. If there was no revenue growth post
FY26 (i.e. the period beyond the three-year strategic plan), then this would
have an impact of (£6.9m) on the amount of headroom.
The sensitivities analysed demonstrate that it would require a total reduction
in revenue over the three year strategic plan of £68.8m (c15% of total
revenue over the three years), or a total reduction in EBITDA over the three
year strategic plan of £4.2m (c19% of total EBITDA over the three years)
with, in both cases, a continued reduction into perpetuity to eliminate the
headroom on the recoverable amount. This is without considering any mitigating
actions.
Management believes that based on the range of possible outcomes noted above
and given the value in use is significantly higher than the carrying value,
there is no current impairment.
9. Trade and other receivables
2023 2022
£m £m
Trade receivables 21.6 25.8
Contract assets 174.4 174.1
Prepayments and accrued income 34.9 50.0
Other receivables 0.2 12.2
231.1 262.1
The trade and other receivables are classified as:
2023 2022
£m £m
Non-current assets 93.3 92.4
Current assets 137.8 169.7
231.1 262.1
All of the amounts classified as non-current assets relate to contract assets.
Contract assets
Contract assets represent the expected future commissions receivable in
respect of product protection plans and mobile phone connections. The Group
recognises revenue in relation to these plans and connections when it obtains
the right to consideration as a result of performance of its contractual
obligations (acting as an agent for a third party). Revenue in any one year
therefore represents the estimate of the commission due on the plans sold or
connections made.
The reconciliation of opening and closing balances for contract assets is
shown below:
2023 2022
£m £m
Balance brought forward 174.1 172.2
Revenue recognised* 148.7 145.9
Cash received (154.0) (151.0)
Revisions to estimates 2.7 4.4
Unwind of discounting 2.9 2.6
Balance carried forward 174.4 174.1
* Revenue recognised is gross, that is, excluding the deduction of cashback
payments, which are deducted from revenue in the Income statement but are
shown as contract liabilities in the Statement of Financial Position.
Included in the contract asset balance in relation to product protection plans
at 31 March 2022 was an amount of £1.7m in relation to variable consideration
recognised as revenue up to that date which has reversed in the year ended 31
March 2023. This is included in the revisions to estimates above.
Included in the contract asset balance in relation to Network Commissions at
31 March 2022 was an amount of £4.4m in relation to previously constrained
revenue which has now been recognised in the year ended 31 March 2023. This is
included in the revisions to estimates above.
The Group still recognises that there is inherent risk in the amount of
revenue recognised as it is dependent on future customer behaviour which is
outside of the Group's control and therefore at 31 March 2023 an amount of
£8.7m has been constrained in relation to revenue recognised in relation to
Network commissions.
Product protection plans
Under our arrangement with Domestic & General ("D&G"), the Group
receives commission in relation to its role as agent for introducing its
customers to D&G and recognises revenue at the point of sale as it has no
future obligations following this introduction. A discounted cash flow
methodology is used to measure the estimated value of the revenue and contract
assets in the month of sale of the relevant plan, by estimating all future
cash flows that will be received from D&G and discounting these based on
the expected timing of receipt. Subsequently, the contract asset is measured
at the present value of the estimated future cash flows. The key inputs into
the model which forms the base case for management's considerations are:
· the contractually agreed margins, which differ for each individual
product covered by the plan as is included in the agreement with D&G;
· the number of live plans based on information provided by D&G;
· the discount rate for plans sold in the year using external market
data - 5.45% (2022: 3.54%);
· the estimate of profit share relating to the scheme as a whole
based on information provided by D&G;
· historic rate of customer attrition that uses actual cancellation
data for each month for the previous 8 years to form an estimate of the
cancellation rates to use by month going forward (range of 0% to 9.0% weighted
average cancellation by month); and
· the estimated length of the plan based on historical data plus
external assessments of the potential life of products (5 to 16 years).
The last two inputs are estimated based on extensive historical evidence
obtained from our own records and from D&G. The Group has accumulated
historical empirical data over the last 14 years from c.3.1m plans that have
been sold. Of these, c.1.08m are live. Applying all the information above,
management calculates their initial estimate of commission receivable.
Consideration is then given to other factors outside of the historical data
noted above that could impact the valuation. This primarily considers the
reliance on historical data as this assumes that current and future experience
will follow past trends. There is, therefore, a risk that changes in consumer
behaviour could reduce or increase the total cash flows ultimately realised
over the forecast period. Management makes a regular assessment of the data
and assumptions with a detailed review at half year and full year to ensure
this continues to reflect the best estimate of expected future trends. As set
out in Note 1, the Directors do not believe there is a significant risk of a
downward material adjustment to the revenue recognised in relation to these
plans over the next 12 months. The sensitivity analysis below is disclosed as
we believe it provides useful insight to the users of the financial statements
into the factors taken into account when calculating the revenue to be
recognised.
The table shows the sensitivity of the carrying value of the commission
receivables and revenue to a reasonably possible change in inputs to the
discounted cash flow model over the next 12 months.
Sensitivity Impact on contract asset and revenue
£m
Cancellations increase by 2% (1.8)
Cancellation rate reduces by 2% 2.0
Profit share entitlement (increase) or decrease by 10% (2.0)/2.0
Cancellations
The number of cancellations and therefore the cancellation rate can fluctuate
based on a number of factors. These include macroeconomic changes e.g.,
unemployment, but will also reflect the change in nature of the plan itself
(insurance plan vs service plan). The impact of reasonable potential changes
is shown in the sensitivities above.
Profit share
The profit share attaching to the overall scheme is dependent on factors such
as the price of the plan, the cost of claims and the administration of the
scheme itself. Given changes in macro-economic conditions, there is an
increased risk that claims cost could increase but also the possibility that
to counter any increase in cost that D&G could further increase the price
per plan. The above sensitivity considers what any reasonable change in either
of these could mean to the overall profit share.
Network commissions
The Group operates under contracts with a number of Mobile Network Operators
("MNOs"). Over the life of these contracts, the service provided by the Group
to each MNO is the procurement of connections to the MNO's networks. The
individual consumer enters into a contract with the MNO for the MNO to supply
the ongoing airtime over that contract period. The Group earns a commission
for the service provided to each MNO. Revenue is recognised at the point the
individual consumer signs a contract and is connected with the MNO.
Consideration from the MNO becomes receivable over the course of the contract
between the MNO and the consumer. The Group has determined that the number and
value of consumers provided to each MNO in any given month represents the
measure of satisfaction of each performance obligation under the contract. A
discounted cash flow methodology is used to measure the estimated value of the
revenue and contract assets in the month of connection, by estimating all
future cash flows that will be received from the MNOs and discounting these
based on the expected timing of receipt. Subsequently, the contract asset is
measured at the present value of the estimated future cash flows.
The key inputs to management's base case model are:
• revenue share percentage, i.e. the percentage of the consumer's spend
(to the MNO) to which the Group is entitled;
• the discount rate using external market data - 2.83% (2022: 0.53%);
• the length of contract entered into by the consumer (12 - 24 months)
and the resulting estimated consumer average tenure that takes account of both
the default rate during the contract period and the expectations that some
customers will continue beyond the initial contract period and generate out of
contract revenue.
The input is estimated based on extensive historical evidence obtained from
the networks, and adjustment is made for the risk of potential changes in
consumer behaviour. Applying all the information above, management calculates
their initial estimate of commission receivable. Consideration is then given
to other factors outside of the historical data noted above which could impact
the valuation. This primarily considers the reliance on historical data as
this assumes that current and future experience will follow past trends.
The risk remains that changes in consumer behaviour could reduce or increase
the total cash flows ultimately realised over the forecast period. Management
make a regular assessment of the data and assumptions with a detailed review
at half year and full year to ensure this continues to reflect the best
estimate of expected future trends and appropriate revisions are made to the
estimates. As set out in Note 1, the Directors do not believe there is a
significant risk of a downward material adjustment to the revenue recognised
in relation to these plans over the next 12 months given the variable revenue
constraints applied albeit there could be a material upward adjustment.
The sensitivity analysis below is disclosed as we believe it provides useful
insight to the users of the financial statements by giving insight into the
factors taken into account when calculating the revenue to be recognised. The
table shows the sensitivity of the carrying value of the commission
receivables and revenue to a reasonably possible change in inputs to the
discounted cash flow model over the next 12 months, having taken account of
the changes in behaviour experienced in the period.
Sensitivity Impact on contract asset and revenue
£m
2% decrease/ (increase) in expected cancellations - in contract 2.0/ (2.0)
20% decrease/ (increase) in expected cancellations at month 24 - OOC 1.4/ (1.4)
Cancellations - in contract
The number of cancellations, and therefore the cancellation rate, can
fluctuate based on a number of factors. These include macroeconomic changes
e.g., unemployment, interest rates and inflation. The impact of reasonable
potential changes is shown in the sensitivities above for customers with exit
barriers in place.
Cancellations - out of contract ("OOC")
This sensitivity focuses on the period beyond month 24 when customers can exit
contracts without penalty. During the year, management restricted £2.9m in
revenue related to the assumed collection of commissions once customers reach
out of contract periods due to heightened uncertainty of future cancellation
rates in the recent inflationary economic environment. This equates to c40% of
customers exiting their contract at month 24. The sensitivity reflects what
may happen if more or fewer consumers cancel at month 24.
Prepayments and accrued income
At 31 March 2023, there is £14.4m (2022: £19.0m) included in prepayments and
accrued income in relation to volume rebates receivable. The amounts are
largely coterminous and are mainly agreed in the month after recognition.
At 31 May 2023, the balance outstanding was £2.7m (30 June 2022: £3.3m).
10. Trade and other payables
2023 2022
£m £m
Trade payables 163.4 205.0
Accruals 19.4 28.9
Contract liabilities 37.2 44.1
Deferred income 14.2 18.1
Other payables 20.1 24.2
254.3 320.3
Trade payables and accruals principally comprise amounts outstanding for trade
purchases and ongoing costs. The average credit period taken for trade
purchases is 51 days (2022: 47 days).
Contract liabilities includes payments on account from Mobile Network
Operators where there is no right of set off with the contract asset within
the mobile business.
Trade and other payables are classified as:
2023 2022
£m £m
Current liabilities 249.5 313.9
Non-current liabilities 4.8 6.4
254.3 320.3
11. Net debt and movement in financial liabilities
2023 2022
£m £m
Cash and cash equivalents at year end 19.1 19.5
Borrowings - Repayable within one year (10.0) (45.0)
Owned asset lease liabilities - Repayable within one year (1.9) (2.0)
Owned asset lease liabilities - Repayable after one year (3.6) (5.3)
Net funds/ (debt) excluding leases relating to right of use assets 3.6 (32.8)
Right of use asset lease liabilities - Repayable within one year (15.8) (18.3)
Right of use asset lease liabilities - Repayable after one year (63.9) (83.0)
Net debt (76.1) (134.1)
Whilst not required by IAS 1 Presentation of Financial Statements, the Group
has elected to disclose its lease liabilities split by those which ownership
transfers to the Group at the end of the lease ("Owned asset lease
liabilities") and are disclosed within the Property Plant and Equipment table
in note 18 of the Group financial statements, and those leases which are
rental agreements and where ownership does not transfer to the Group at the
end of the lease as Right of use asset lease liabilities which are disclosed
within the Right of use assets table in the Group financial statements. This
is to give additional information that the Directors feel will be useful to
the understanding of the business.
Movement in financial liabilities in the year was as follows:
Borrowings Lease
£m Liabilities
£m
Balance at 1 April 2022 45.0 108.6
Changes from financing cash flows
Payment of interest (2.3) (4.2)
Repayment of lease liabilities - (17.7)
Repayment of borrowings (35.0) -
Repayment of lease liabilities by discontinued operations - (8.3)
Total changes from financing cash flows (37.3) (30.2)
Other changes
New lease liabilities - 11.0
Reassessment of lease term - (8.2)
Interest expense 2.3 4.2
Exchange differences - (0.1)
Total other changes 2.3 6.9
Balance at 31 March 2023 10.0 85.3
Reassessment of lease terms relate to leases the Group have exited during the
period.
Borrowings Lease
£m Liabilities
£m
Balance at 1 April 2021 - 95.3
Changes from financing cash flows
Payment of interest (0.6) (4.3)
Repayment of lease liabilities - (21.2)
New borrowings* 45.0 -
Repayment of lease liabilities by discontinued operations - (3.1)
Total changes from financing cash flows 44.4 (28.6)
Other changes
New lease liabilities - 45.4
Reassessment of lease terms - (7.8)
Interest expense 0.6 4.3
Total other changes 0.6 41.8
Balance at 31 March 2022 45.0 108.6
* In the prior period, the movement arising from new borrowings was presented
within "Other changes". This should have been presented as a change in
financing cash flows and as such the comparative analysis has been restated.
There is no impact of this to the overall movement or closing balance of
financial liabilities or cash flow presentation.
12. Discontinued Operations
On 9 June 2022, it was announced that the Group had taken the decision to
close its German business as a result of its continued losses. The website was
closed on 1 July 2022 and in August, AO Deutschland completed the final
deliveries on behalf of its third party customers. The majority of German
employees have now left the business and we have now materially exited from
the Company's property portfolio.
The German business is clearly distinguishable from the rest of the Group and
its numbers have been reported separately as an operating segment in previous
periods. Therefore, it meets the definition of a component of an entity and in
line with IFRS 5 "Non-current assets held for sale and discontinued
operations", the business has been treated and presented as a discontinued
operation in the year ended 31 March 2023 which includes restating
comparatives to present Germany as such. The tables below show the results of
the German operation for the relevant reporting periods:
2023 2022
£m £m
Revenue 36.2 189.0
Cost of sales (40.4) (183.0)
Gross (loss)/ profit (4.2) 6.0
Administrative expenses and other operating income (13.5) (23.5)
Operating loss (17.7) (17.5)
Finance income 6.4 -
Finance costs - (1.9)
Loss before tax (11.3) (19.4)
Taxation charge (0.1) (0.1)
Loss after tax (11.4) (19.5)
Gain/ (loss) on remeasurement of assets 2.6 (7.3)
Loss after tax of discontinued operations (8.8) (26.8)
The gain/ (loss) on remeasurement of assets arose following the decision to
close the business in June 2022. The balance sheet at 31 March 2022 reflected
the Director's initial view of the impact on assets held based on information
available at that date. As the closure proceeded during the year, and leases
were exited, this gave rise to a £2.6m reversal of previous impairments
during the period.
Basic loss per share from discontinued operations was 1.61p (2022: 5.58p loss
per share). Diluted loss per share from discontinued operations is 1.56p
(2022: restricted to basic loss per share of 5.58p to prevent having an
anti-dilutive effect).
The table below summarises the cashflows of the German operation for the
relevant reporting periods:
2023 2022
£m £m
Cash flows from operating activities in discontinued operations
Loss for the year (8.8) (26.8)
Adjustments for:
Depreciation and amortisation 0.9 3.6
Gain on disposal of property, plant and equipment (4.5) (0.1)
Impairment of assets - 7.2
Finance (income)/ costs (6.4) 1.8
Taxation charge 0.1 0.1
(Decrease)/ increase in provisions (0.7) 0.1
Operating cash flows before movement in working capital (19.4) (14.0)
Movement in working capital balances 10.6 6.7
Cash used in operating activities (8.8) (7.3)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 9.8 -
Acquisition of property, plant and equipment - (0.1)
Cash generated from/ (used in) investing activities 9.8 (0.1)
Cash flows from financing activities
Interest paid on borrowings (0.3) (0.6)
Repayment of lease liabilities (8.3) (3.1)
Net cash used in financing activities (8.6) (3.6)
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