AO World PLC (LON:AO.) announced investment plans to boost online operations and gain market share.
The online electricals retailer added it started the new financial year well and remains “prudently optimistic” it will be able to deliver “double-digit growth”, even against strong comparatives last year.
It has allocated £30mln for marketing and digital content and another £30mln for support systems.
In the UK, 1% of revenue will go for investment opportunities, while in Germany AO World is looking to grow the business “as quickly as we can” keeping earnings break even.
The FTSE 250 group has ambitions to operate in in five countries within the next five years, including the existing markets of the UK and Germany.
In the year ended 31 March, revenue climbed 62% to £1.6bn, with group adjusted underlying earnings (EBITDA) up 191% to £64mln. Net debt shrank 71% to £28mln.
In the UK there was strong demand for larger fridges, chest freezers and home entertainment categories, including consumer electronics and gaming.
Gross margin in Germany improved from negative 2% in 2019 to 9% with increased scale in logistics.
“We had expected some downside pressure on EBITDA for the year ahead, maybe around £10mln if the outcome was to be broadly flat; in the event, we are looking at EBITDA in the region of £50-55mln, versus our current around £75mln forecast,” analysts at Peel Hunt said.
“We still see a business with scope to double revenue over 3-4 years, with wider expansion across Europe… We would see any share price weakness as a buying opportunity.”
Shares shed 3% to 245p on Thursday at the opening bell.