28th Mar 2024 09:40
(Alliance News) - AO World PLC on Thursday upped its yearly profit outlook, cementing the electricals retailer's return to form after a tough start to post-pandemic life.
Shares traded 8.0% higher at 97.00 pence each in London, among the best FTSE 250 performers. The stock has jumped more than 50% over the past 12 months.
The electricals retailer expects adjusted pretax profit to be "at least" at the top end of a GBP28 million to GBP33 million range for the year ending March 31. It raised its outlook to that guidance range in November.
AO World expects revenue for the year to be around GBP1.04 billion, which would represent an 8.7% decline from GBP1.14 billion a year prior.
"Our core business continues to trade positively through Q4, and AO.com has returned to revenue growth during the quarter as expected," AO said.
The company reports its annual results on June 26.
Chief Executive Officer John Roberts said: "I'm pleased with the clear progress that we're making after pivoting our focus to profit and cash generation during the 2023 financial year. As we expected at our half year results, we returned to revenue growth in our core business during Q4 and, as a result, we're entering the new financial year with good momentum. With net funds on our balance sheet and a clear plan, we remain confident in our ability to deliver on our ambition for 10-20% revenue growth in the year ahead and medium-term profit guidance of 5% adjusted [pretax profit] margin."
Profit cautions, tumbling consumer confidence, inflationary pressures, a Germany exit and credit cover worries at suppliers meant post-pandemic life for the company got off to a difficult start.
AO turned to self-help measures. In a set of annual results issued back in August 2022, it planned a "period of realignment for the business", focusing on cash a profit generation.
Since then, it has issued a number of guidance lifts, and market confidence in the stock is returning.
It made a return to the FTSE 250 index in December, after being dumped out two years prior.
AJ Bell analyst Russ Mould commented: "Online white goods seller AO World's life as a public company has had more ups and downs than a rollercoaster and investors will hope today's ascent for the share price does not presage a rapid descent to come. Like many online-based retail businesses, AO was well-placed during lockdown but subsequently its fortunes took a turn for the worse. Having returned to a more sustainable path towards profit and cash flow in its financial year to the end of March 2023 the company has now confirmed revenue guidance for the current year and flagged profit at the top end of what was previously guided.
"For the year about to start, the group still hopes to see strong revenue growth and is sticking with its medium-term margin target. The basics of retail are fairly simple – have the right amount and the right kind of stock, sell it a price customers will stomach but which still allows you to make a decent profit, and make sure the customer experience is such that they will buy from you again. AO World seems to be getting more of this right and that's coming through in its financial performance."
By Eric Cunha, Alliance News news editor
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