The Illuminator – May 2024

This month we profile new entrant AO World:

AO World’s March FY24 trading update showed how the company successfully refocused on profitability and cash generation. Despite revenues falling 8% to £1.04bn (FY23: £1.14bn), management expects to deliver adjusted PBT at the top end of the £28–33m guided range (FY23: £7.6m), implying growth of 268–334%. The core business saw good momentum as Q4 delivered the first quarter of revenue growth for the year.

The business has repositioned itself since 2022 as it has sought to improve profitability, having exited its unprofitable German business in August 2022 to focus on its core UK business. Other operational efficiencies have been realised while management has maintained strong discipline on costs throughout the year. At end-FY24, AO World had net funds of £30m on a pre-IFRS 16 basis and an £80m rolling credit facility that was extended to April 2027.

With resources for disciplined investment in the business and improving momentum in both revenues and margins, management is confident in achieving FY25 revenue growth of 10–20% and a medium-term adjusted PBT margin of 5%.