Wednesday 21 August 2019

AO World remains in the red amid UK sales pressure and European woes

Shares in the electricals retailer sank after it posted an underlying loss of £400,000 for the year to March 31.

Electricals retailer AO World has revealed another annual loss after an ill-fated TV advertising campaign failed to boost flagging website sales and amid woes in its European arm (AO.com/PA)
Electricals retailer AO World has revealed another annual loss after an ill-fated TV advertising campaign failed to boost flagging website sales and amid woes in its European arm (AO.com/PA)

By Holly Williams, Press Association Deputy City Editor

Electricals retailer AO World has revealed another annual loss after an ill-fated TV advertising campaign failed to boost flagging website sales and amid woes in its European arm.

Shares in the group sank 8% after it posted an underlying loss of £400,000 for the year to March 31 – wiping close to £9 million off founder John Roberts’ personal stake in the group.

It marked an improvement on an underlying basis from £3.4 million losses the previous year, but came in at the bottom end of expectations.

In the first full set of figures since Mr Roberts returned to the helm as chief executive after a two-year hiatus, Bolton-headquartered AO World revealed that UK website sales fell year on year after a TV advertising campaign flopped.

It has recently abandoned TV advertising in the short term to focus instead on using social media for marketing.

Despite the pressure on website sales, AO World said overall UK revenues rose 5.7% on a like-for-like basis “against a backdrop of ongoing weak consumer confidence in a continuingly competitive market, particularly in the UK”.

The group also bemoaned a “disappointing” performance in Europe, where it recently overhauled the management team, parachuting in staff from the UK operations to help turn trading around in the division.

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AO founder chief executive John Roberts (AO/PA)

Speaking to the Press Association, Mr Roberts said the UK website sales had already returned to growth in the first two months of the new financial year.

He added that he was “delighted” with the progress being made by UK staff in steadying the ship in Europe.

But he warned that Brexit uncertainty was hitting consumer confidence, with shoppers in “wait-and-see” mode.

Mr Roberts, who still holds a 23% stake in AO World, also cautioned that the new October 31 Brexit deadline could spell bad news for the retail sector, coming just before the peak selling season of Black Friday and Christmas.

“From a retail point of view to have such a major consumer-impacting decision at that time is about as far from ideal as anybody could possibly write,” he told reporters.

The group’s full-year figures showed underlying earnings in the UK lifted by 20.9% to £27.4 million, boosted by its recent acquisition of Mobile Phones Direct, or by 14.3% with this stripped out.

UK figures were also helped by its recent decision to cut advertising and marketing spend, as well as stronger business-to-business sales, which have helped offset the lower ao.com revenues.

Its European division saw underlying losses widen to £27.8 million, against £26 million the previous year, due to driver issues in Germany, as well as higher but less profitable sales.

On a statutory basis, pre-tax losses widened to £18.9 million from £13.5 million the previous year.

The group also said its bottom line was affected by costs of the Mobile Phones Direct business, as well as an onerous contract it was unable to exit in Germany.

Mr Roberts admitted the group “can do better” and is focused on returning to growth and profits.

But he denied he had any regrets about his 2017 decision to step down from the day-to-day running, which saw Steve Caunce take the reins for a short spell.

“Life’s too short to regret things – our journey over the last 20 years has been about moving forwards,” he said.

With the potential expansion of its logistics business and an eye on the company’s green credentials in the shape of its very own plastics recycling plant, times could be changing for AO Emma-Lou Montgomery, Fidelity Personal Investing

The group is putting faith in its turnaround efforts as well as its recent Mobile Phones Direct acquisition and efforts to diversify, for example into plastics recycling.

Emma-Lou Montgomery, associate director at Fidelity Personal Investing’s share dealing service, said: “Delivering the goods is proving hard for AO, with business hampered by a tough UK retail scene as well as a real struggle to gain traction in Europe.

“But, with the potential expansion of its logistics business and an eye on the company’s green credentials in the shape of its very own plastics recycling plant, times could be changing for AO.”

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