- AO World now expects to make £39m-£44m in adjusted pre-tax profits this year
- The firm’s sales grew by just 6% to £512m in the six months to September
AO World has upgraded its profit outlook despite poor weather leading to a ‘Morecambe and Wise summer’ for the group’s sales.
The white goods retailer now expects to make between £39million and £44million in adjusted pre-tax profits this financial year, having previously guided for £36million to £41million.
The Bolton-based business saw pre-tax profits jumped by 30 per cent to £17million during the six months ending September, boosted by a focus on costs and efficiency.
This was despite its turnover growing by just 6 per cent to £512million due partly to lower mobile revenues and subdued demand for cooling products in its consumer retail division.
John Roberts, who founded AO World in 2000, said: ;We’ve had a Morecambe and Wise summer sales period; all the right volumes just not in the right categories.
‘The wet summer weather meant we sold fewer fridges and air conditioning units and more tumble driers than we had planned.
‘Overall, our team did a fantastic job to play this out as a satisfying score draw.’
Roberts added: ‘Our laser focus on costs and efficiency remains, which ensures, as planned, that profit grew faster than sales on the growth we’ve delivered.’
AO World’s results come as it waits to receive approval for its £10million acquisition of secondhand electronics seller MusicMagpie.
The Financial Conduct Authority and MusicMagpie’s shareholders have given their consent, but AO World still needs the court’s authorisation before finalising the takeover.
MusicMagpie sells everything from textbooks to laptops, smartwatches, mobile phones, and Xbox consoles and provides subscription services allowing Britons to rent electronics.
It listed with a valuation exceeding £200million in London three years ago, but this has since plunged by over 90 per cent following the end of Covid-related curbs, cost-of-living pressures and massive competition in the used products market.
Telecoms giant BT Group and Footasylum owner Aurelius both considered buying the firm last year before walking away without explanation.
AO World believes that acquiring MusicMagpie will enhance trade-in options for its customers and mitigate the risks derived from the shift towards ‘sustainability and repair’ in the consumer technology market.
Dan Coatsworth, investment analyst at AJ Bell, said: ‘The market will be watching closely if [the takeover] is a step too far outside its comfort zone – or an opportunity to bring its logistics capabilities to the table to help make this business a real asset.’
Roberts set up AO World a few months after a close friend bet him £1 in a pub that he could start a business.
The company enjoyed considerable growth during the early part of the pandemic thanks to strict trading curbs driving more people to obtain their electricals and household appliances online.
However, it struggled when sales started declining due to stores opening up again and surging inflation made customers more wary of purchasing big-ticket items.
AO World has since rebounded to profitability after embarking on a turnaround plan, which included axing senior and middle management jobs, closing its business in Germany, and launching a £40million fundraising round.
AO World shares were 1.5 per cent down at 108p at midday on Tuesday, although they have still risen by about 29 per cent over the past 12 months.
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