AO swings to £37m loss in FY amid rising costs
Group EBITDA plummeted 87% to £8.5m over the period, attributed to increased staff costs and higher marketing and logistics costs across the group
AO has fallen to a pre-tax loss of £37m in the full-year ended 31 March 2022, down from a profit of £20m the prior year, as the electrical retailer contended with rising costs and warned of “more volatility” to come.
Group EBITDA plummeted 87% to £8.5m over the period, attributed to increased staff costs added during the pandemic, as well as higher marketing and logistics costs across the group.
Meanwhile, UK revenue dipped by 5% to £1.4bn, which reportedly showed resilience against an “extraordinary” comparative performance in FY21, and was 52% up on a two-year basis.
Its German business fared worse, however, with revenue down by 16% against the prior year. In light of this, and following a strategic review, the group announced in June that it would close its German operations.
In its latest update, it noted an “orderly” closure of the business is now in progress, with the aim to simplify its business model and cost base to focus on the UK market. It estimates the closure costs of the move will be no more than £5m, at the lower end of its original estimate of up to £15m.
As part of its aim to focus more on the UK market, AO also said it would “rationalise, simplify and refocus” its UK operations, which will mean exiting some lines of business that “do not fit our model”, hoping to generate “significant economic benefits” by FY25.
Looking ahead, trading through the first quarter of FY23 has remained broadly in-line with its expectations, with revenues in the range of £1bn to £1.25bn and group adjusted EBITDA for the full year in the range of £20m to £30m.
AO founder and CEO, John Roberts, said: “AO was founded on the belief that online is a better way to buy electricals. That belief is as strong as ever, even – and especially – as we go through one of the most challenging operating environments we’ve weathered as a company.
“The past 12 months has been a turbulent time for business and for retail in particular, and AO hasn’t been immune to those effects. Looking ahead, we certainly have more volatility to navigate, but the core fundamentals of our business remain strong. We entered the new financial year with a period of strategic realignment, and a focus on cash and profit generation.”
He added: “AO has become the destination for electricals for millions of customers through our absolute obsession with amazing service, and that will remain our guiding star. I’d like to thank the AO team, our Chair and the Board, as well as our committed investors and stakeholders, for their continued support and passion in helping us deliver for our customers.”
