Interactive Investor

ii view: AO World needs transformation to pay dividends

19th December 2022 15:18

Keith Bowman from interactive investor

This electricals retailer has halved in value during 2022. We assess prospects. 

First-half results to 30 September

  • Revenues down 17% to £546 million
  • Adjusted profit (EBITDA) down 11% to £9 million
  • Pre-tax loss of £12 million, up from a loss of £4 million
  • Net debt of £19 million, down from £33 million on 31 March


  • Now expects full-year adjusted profit to be at the top end of its £20-30 million prior estimate

Chief executive John Roberts said:

"During the first six months of the year, we've made good progress with our strategic realignment as we focus on profitability and cash generation, all of which is yielding the results we expected. We've now closed the loss making and cash consumptive parts of our operations meaning the remaining UK business is cash generative and are successfully closing our German business with a minimal cash impact to the wider Group.

“While the short-term outlook remains challenging, I'm confident that our strategy is the right one, and as we position ourselves to be the UK's most trusted electrical retailer we look to the future with cautious optimism.”

ii round-up:

Online electrical retailer AO World (LSE:AO.) sells items ranging from kitchen white goods to TVs and toasters.

It employs around 3,000 staff.

For a round-up of these latest results announced on 22 November, please click here

ii view:

Founded in 2000, AO World today has a stock market value of around £320 million. It competes with rival retailers such as Currys (LSE:CURY), John Lewis and Inc (NASDAQ:AMZN). Alongside electrical goods, it also sells ancillary services such as the installation of new products and the recycling of old ones. 

Product sales generate its biggest slug of revenues at close to four-fifths, followed by commissions for warranties at around 12%, service sales at just under 5%, and third-party deliveries and recycling at around 2% each. 

For investors, the tough economic backdrop including rising interest rates and a cost-of-living crisis for consumers cannot be overlooked. Costs generally for businesses have been rising, supply chain challenges have not completely disappeared while unlike rivals such as Currys, AO World does not currently pay a dividend. 

On the upside, a broad business improvement programme has been undertaken. This has included exiting its German business to focus on the UK, along with cutting costs to the tune of £30 million. An online business model clearly comes without the costs of a store portfolio, while the share price-to-net asset value is now comfortably below the three-year average.  

For now, and while management initiatives continue to be executed, investors may wish to await evidence of sales and profit recovery.


  • Without the costs of a store portfolio
  • Refocused on its UK business


  • Not yet paying a dividend
  • Uncertain economic outlook

The average rating of stock market analysts:


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