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Supply Chain

AO warns of profit hit amid supply chain issues

UK growth has been impacted by the nationwide shortage of delivery drivers, while shipping costs, material input prices and consumer price inflation remain ‘challenging uncertainties’

AO has warned that its full-year revenue could be hit by ongoing supply chain disruptions, with revenue now expected to be flat to minus 5% against FY21. 

It comes as “meaningful” supply chain challenges in its second half of trading have led to poor availability in certain categories, particularly in newer products where AO warns it has “less scale, experience and leverage”. 

In addition, it warned that UK growth has been impacted by the nationwide shortage of delivery drivers, while shipping costs, material input prices and consumer price inflation remain “challenging uncertainties”.

As a result of all of the above factors, AO said its “all-important” current peak trading period is “significantly softer” than it anticipated just eight weeks ago. 

Despite a “substantial” amount of short-term uncertainty remaining, the group said it is taking “decisive action” to address and mitigate the supply chain issues, and it remains “confident” about AO’s future prospects.

The profit warning comes alongside its latest half-year results, where the group reported an operating loss of £11m, down from a profit of £16m in HY21. 

However, it reported a revenue growth of 67% over a two-year period, while group EBITDA rose by 24% over a two-year period. EBITDA was however impacted by investments in systems and people as well as increased marketing costs in HY22. 

AO’s founder and CEO, John Roberts, said: “Our results over this period have inevitably been affected by the constraints and uncertainty seen across our industry. We’ve materially cemented the progress of last year, with a step change in scale and consumer behaviour – and the fundamentals of the business are in place for sustained growth. 

“We’re seeing more customers making repeat purchases more frequently across categories. Once they experience the AO Way, they keep coming back.  Our outstanding operational capabilities are also being recognised by more and more companies who are now outsourcing their delivery services to us.”

He added: “We’re working hard to solve some of the current challenges that our industry is facing. We’ve recruited c.500 new drivers and are working closely with our manufacturer partners so that customers can get what they need. 

“While the short-term challenges are clear, I remain hugely optimistic about AO’s long-term growth prospects.”

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