AO has hailed “solid progress” in its plan to focus on profitability over growth, despite suffering widening half-year losses. 


AO is looking to the future with ‘cautious optimism’

The online electricals business posted a statutory pre-tax loss of £12m during the six months to September 30, up from £4m during the same period a year ago. Its operating loss trebled to £9m. 

AO remained in the black on an adjusted EBITDA basis although that slipped 11% to £9m.

The etailer had previously guided that full-year adjusted EBITDA would be in the region of £20-30m. It now expects earnings to come in at the top end of that range, despite what boss John Roberts described as a “challenging and uncertain consumer environment”. 

Consumers have been reining in spending during the cost-of-living crisis and AO said this drove “a reduction in the overall electricals market” during the period. 

As a result, AO suffered a 17% drop in sales to £546m across the first six months of its fiscal year, despite serving 410,000 new customers. 

AO said it had “simplified” its UK business to focus on “more profitable lines of business” such as white goods. Its rival Marks Electrical has grown rapidly by focusing on distressed purchases and offering free next-day delivery during the cost-of-living crunch. 

AO added that it had closed its German business “quickly and efficiently” and said cash costs for the closure were now expected to be around zero, having previously estimated that it could hit the bottom line by as much as £15m.    

The etailer said its plan to focus on profit and cash generation “remains on track” and was “accelerating”. But it cautioned it was “not immune to the challenging and uncertain consumer environment” and said it would “continue to be impacted” by the cost-of-living crisis and “ongoing supply chain issues”.

It has kicked off “a number” of cost-saving programmes, which will save the business at least £30m in its 2023/24 financial year. 

AO founder and chief executive 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.

“I’m pleased with this progress, particularly against the backdrop of an extraordinarily difficult macro-economic climate.”

He added: “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.”