AO raises guidance as half-year profits hit £17m

Electrical retailer AO has raised its full-year forecast to between £39m and £44m, as profits before tax rose 30% year-on-year to £17m for the six months to 30 September. 

Group revenues are now expected to hit between £1.09bn and £1.13bn, as AO saw half-year revenue growth of 13% in its B2C Retail category despite a tough market over the summer. 

According to AO, summer trading was impacted by lower product pricing and weaker demand for cooling products, thanks to excessive summer showers. 

During the first half, the retailer’s gross margin grew to 24.4% from 23.5% in the same period last year. This was attributed to continued efficiency savings, which have “more than offset” inflationary pressures and the impact of reduced basket value in the retail business. 

Following the October Budget, AO now estimates that it will be impacted by an additional £4m of direct costs. When including direct costs “where the impact remains to be seen”, the retailer expects the figure to be closer to £8m. 

However, AO maintains that it “will work hard to mitigate the impact of this to overall profitability”.

John Roberts, founder and CEO of AO, 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.

“We also made good progress beyond our core MDA category, and I’m very encouraged with how our customers and members are responding to our improved range and value proposition in newer categories.”

He added: “None of this has happened by accident and I’m grateful to the entire AO team, our suppliers and partners for their continued support and hard work. We’re now well into peak trading with customers responding positively to the thousands of unbeatable deals we’re offering for the Black Friday period.”