AO World PLC (LON:AO.) confirmed an improvement in annual sales, but losses increased due to difficulties in Europe and one-off costs after a change of management.
The electricals and white goods retailer lifted revenue 10.1% in the UK and 32.2% in Europe during the 12 months to 31 March, resulting in total revenue rising 13.3% to £902.5mln, as it had flagged up in a year-end statement.
READ: AO World warns founder’s return will hit profits this year
Group underlying earnings (adjusted EBITDA) remained in the red at £0.4mln, but this was an improvement on the £3.4mln losses from the prior year.
UK adjusted EBITDA increased 21% to £27.4mln, or up 14.3% on a like-for-like basis , which would exclude December’s £38.1mln acquisition of Mobile Phones Direct (MPD).
Over in Europe losses increased 6% to €31.3mln as AO struggled to make progress on product margins and saw cost pressures from re-configuring driver scheduling arrangements in Germany, both which the company is “working to address”.
Statutory losses swell
Along with restructuring the management team of the international operations and increased finance charges, statutory losses before tax swelled to £18.9mln from £13.5mln.
John Roberts, AO’s founder who returned to the chief executive role in January, pointed out that UK double-digit sales growth and increased profit was achieved against an ongoing tough trading environment and was helped by a contribution from MPD, where the integration was going to plan.
Roberts was increasingly positive about trading performance and his ambition to be run-rate profitable in Europe during the 2021 financial year, saying the AO "eco-system" of retail, mobile, recycling, logistics, financial services and business-to-business trade was operating in more "harmony" in the past few months and "will be an important driver for the year ahead”.
Zoe Mills, retail analyst at GlobalData, said the results look better because of the MBD acquisition as the core electricals division saw sales growth slow to 5.7% from 8.1% the year before, while the new addition contributed £1.5m of profits, which remain an issue for the core AO brand.
With AO trialling a potentially disruptive rental proposition, where a washing machine can be rented for £2 a week, in partnership with two housing associations and an online B2C trial through AO.com, "it remains to be seen if the pilot will work and how this will translate into improved profitability".
AO shares, which have rallied since sinking to an all-time low in April, were down 8% to 101.2p by mid-morning on Tuesday.
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