29 April 2022

Correction: Full Year Trading Update for the Year ended 31 March 2022

The following correction has been made to AO World's "Full Year Trading Update for the Year ended 31 March 2022", which was released on 29 April 2022 at 07:00am under RNS no. 7864J.  In the headline of the original announcement it stated that AO's online market share in major domestic appliances ("MDA") was currently 54% vs 43% pre-Covid. However, this statistic refers to the online share of the UK MDA market.  This was further repeated in the second paragraph of the announcement which stated: "Our online market share in major domestic appliances ("MDA") continued to grow, increasing to 54% vs 43% pre-Covid".  This has now been amended to state: "The online share of the UK major domestic appliances ("MDA") market continued to grow, increasing to 54% vs 43% pre-Covid".

AO WORLD PLC

Full Year Trading Update for the Year ended 31 March 2022

A resilient UK revenue performance against a challenging backdrop

1.5m new customers experienced The AO Way over the year

AO World plc ("the Group"), a leading online electricals retailer, today issues the following update on trading for the 12 months to 31 March 2022. 

Trading update

Estimated Group revenues for the full year to 31 March 2022 are expected to be £1,557m.  On a year-on-year basis, Group revenues declined c. 6% against the exceptionally strong prior year comparatives resulting from the robust growth in online purchasing during the Covid-related government restrictions in 2020/21. On a two-year basis Group revenues increased 52%, reflecting the ongoing structural shift to online retailing.

The online share of the UK major domestic appliances ("MDA") market continued to grow, increasing to 54% vs 43% pre-Covid.⁴ Over 1.5m⁵ new customers experienced The AO Way during the year, with a notable step up in post Covid repeat purchase rates.  We again achieved exceptionally strong customer Net Promotor Scores⁶ in line with last year, demonstrating our outstanding levels of customer satisfaction. 

UK revenues remained resilient in H1 despite the constraints of driver challenges and ongoing supply chain shortages. During H2, while driver issues had eased, customer demand progressively weakened across the sector, compounded by global supply chain disruption which affected product availability in certain categories.  On a two-year comparative basis, UK revenues grew strongly, increasing 52%.

In Germany, revenue growth was constrained by post-Covid shifts in consumer behaviour and an increase in online competition, as customers returned to stores to a greater degree than anticipated.  This was compounded by our decisive actions to minimise cash losses in this business.  Revenues declined 12%⁷ versus FY21 but grew 54% on a two-year comparative basis.

Group Adjusted EBITDA⁸ is expected to be c. £8m, reflecting the impact of lower sales volumes and higher costs incurred in our UK logistics operations; driver shortages across the industry in H1; and significantly higher marketing costs in Germany.  In March, we were notified of higher warranty cancellations than average historical trends as customers responded to the escalating cost of living. We experienced a similar reaction following the first Covid lockdown period, which proved to be a temporary consumer adjustment. While the picture has subsequently improved, data received subsequent to this trading update and prior to the Full Year Results announcement scheduled for later this summer could result in a reassessment of the carrying value of the contract asset, which could lead to a material impact on FY22 profits.

Available liquidity as at 31 March 2022 was c. £50m and, given the factors cited above and the seasonality of our cash flows, our liquidity has since reduced.  However, we expect that this situation will improve as we move into Q2 driven by a range of actions that we are implementing.  The Group's revolving credit facility of £80m was extended and now expires in April 2024. Net debt at the end of the financial year was £32.8m⁹.

Update on strategic review of the German business

On 27 January 2022, the Group announced a strategic review of its German business, following a number of material changes to the local trading environment post-Covid.  Competition in the German online market has remained intense, with digital marketing costs increasing significantly as a result, despite online penetration returning to pre-pandemic levels.

The strategic review is continuing, and a number of options remain under consideration by the Board.  We hope to announce a more detailed update on this process in the near future. 

Outlook

In view of the volatile market conditions, inflationary cost pressures and logistical challenges in the supply chain, together with the escalating cost of living for consumers, we remain cautious about our revenue and profit outlook in the near term.  In the coming year, we will focus on cash generation to strengthen the balance sheet whilst optimising our cost base to align with the expected lower levels of revenues.   

Despite the current market challenges, we remain confident in AO's long-term prospects given the inherent resilience of our business model, the quality of our customer proposition and the ongoing structural shift to online. 

Announcement of Full Year Results

Due to the expected timetable for the ongoing strategic review in Germany, together with the resulting complexity in the year end close process, the Group now expects to announce its Full Year Results to 31 March 2022 six to eight weeks later than planned.  The expected date will be communicated in due course.

CEO Share Disposal Arrangements

Since the Group's IPO in 2014, our Founder and Chief Executive, John Roberts, has maintained his shareholding and increased it with selected share purchases.  John has now decided that he will dispose of a small proportion of his equity holding on an annual basis.  Whilst there will be no certainty on any disposal, it is expected that John will dispose of c. £5m in shares during this financial year, representing c. 5% of his total shareholding of 107m shares.