- Operating profits almost treble
- Focus on margins paying off
- Double-digit sales growth in view
Electrical retailer AO World (AO.) published a pleasing set of results for the full year to the end of March showing the benefit of its decision to shift its focus from market share gains towards profitable growth.
The shares added 5p or 4.5% to 118p, taking them to a new 12-month high and bringing gains to 37% since June last year.
NEW STRATEGY A SUCCESS
After removing non-core channels and loss-making sales, revenue for the year to March declined 9% to £1.04 billion, but the firm noted it returned to growth in the final quarter and said it expected to move back to double-digit growth in the current financial year.
Operating profit soared 192% from £12.5 million to £36.2 million, above the top end of forecasts, thanks to the ‘strategic pivot’ towards profit and cash generation as well as tight cost control.
With a 15% market share in major domestic appliances, the firm counted more than 600,000 customers last year of whom more than half were repeat buyers.
The company also continues to burnish its ‘green’ credentials, having recycled or refurbished more than seven million appliances at its in-house facility, and is working with other firms to use its recycled plastic in new products.
RETURN TO TOP-LINE GROWTH
‘We have made good progress on our profit performance in FY24, which is a testament to the success of our strategic pivot to focusing on profit and cash generation’, commented founder and chief executive John Roberts.
‘We are now a much simpler, more efficient business and are performing better than ever for customers, with excellent and sustainable unit economics.
‘Our focus now is on delivering profitable top line growth with an ambition for double digit revenue growth in FY25’, concluded Roberts.
Jefferies analyst Andrew Wade took a positive view of the results and the outlook: ‘After an exceptional FY24 for AO, we are encouraged that, now a quarter into the new year, management has reiterated its double-digit FY25 growth aspiration. We raise our revenue forecast to reflect this, see scope for upgrades to continue, and retain our positive stance.’
