Profits are up but AO spends out preparing for Brexit

AO.com’s profits were up in 2018, according to its latest announcement, but the retailer made further investments in order to prepare for Brexit.

However, full year performance for AO’s financial year, the 12 months to 31 March 2019, is expected to fall within the range of current market forecasts and Group Adjusted EBITDA (excluding exceptional costs) is expected to be at the lower end of market expectations.

In addition, the company reported that Group revenue is expected to be around £900m, which represents an increase of around 13 per cent year on year (up around nine per cent, excluding Mobile Phones Direct Limited).

UK revenue for is expected to be up by 5.4 per cent year on year (excluding Mobile Phones Direct Limited), at around £748m. 

The retailer reported that as part of its Brexit contingency planning, during the last quarter of its financial year it increased its usual core fast moving inventory levels by approximately £15m, with a corresponding impact on its cash position.

“This will help ensure we can continue to deliver our market-leading proposition to our customers,” it said.

Following the re-appointment of John Roberts as CEO in January, AO has restructured its management team and, as a result of this together with charges for a loss making contract, which we are unable to terminate in Germany, the retailer is incurring exceptional costs in the region of £2.5m.

John Roberts, Founder and CEO of AO.com, commented: “Over the last eight weeks we have created a mindset shift from the numbers delivered in FY19; we are setting about realising our opportunities with pace and energy.

“I am delighted by the reaction of AO’ers and their passion for our future. We have already announced that we are testing a genuinely disruptive rental proposition. We have also expanded categories further into garden and DIY ready for the season and we are accelerating AO Mobile to launch later this year in readiness for peak trading.

“I am delighted to once again have the privilege to lead the business and excited by the scale of value creation that lies ahead of us for the benefit of all stakeholders. I look forward to updating more fully in early June on how we are accelerating our plans to grow while leveraging the infrastructure we have invested in.”