AO World Share Price Dropped Despite Upbeat H1 Results, Later Recovered

The AO World PLC (LON: AO) share price dropped  5.51% after releasing its unaudited financial results for the six months ended 30 September 2023. The company noted that it had continued delivering profit and cash generation and, as such, was upping its profit before tax guidance for the 2024 fiscal year to between £28-33 million.

Update: AO World shares had recovered all their earlier losses and were trading up 3.36% as of 12:48 hrs.

Still, the upbeat full-year profit guidance did not trigger buying pressure on AO World shares, which fell after the announcement. Investors were more focused on the electrical retailer’s revenues, which fell 12% to £482 million compared to last year’s £546 million. 

The retailer’s adjusted pretax profits soared 205% to £27 million from the £9 million recorded in a similar period last year. The company reported a statutory profit before tax of £13 million, a substantial improvement compared to the previous year's loss of £12 million. 

AO World's gross margin has risen to 23.5% from 19.5% in the previous year. This improvement is the result of several measures, including the removal of unprofitable sales and the introduction of delivery charges on all deliveries.

The company has tightly controlled its Advertising and Marketing costs, shifting focus from acquisition to brand investment. Warehousing costs have also decreased to £25.5 million, with operational efficiencies and property rationalisation offsetting inflationary wage increases.

AO World has demonstrated improved cash generation, leading to an overall liquidity of £99 million, with net funds of £16 million. The retailer noted that the revenue decline was expected after it took actions to remove non-core channels and unprofitable sales while increasing gross margins.

AO's Founder and CEO, John Roberts, said: “I am very pleased with the clear progress that we are making as a result of our strategic pivot to focusing on profit and cash. We have generated more profit in the first half of this year than we did in the whole of last year and are also upgrading our profit expectations for the remainder of FY24. As we anticipated, sales have reduced year on year as we continue to annualise the actions that we've taken to remove non-core channels and unprofitable sales from the business. However, we expect to end the year having returned to run rate revenue growth.”

AO World share price. 

The AO World share price dropped 5.52% to trade at 79.08p from Monday’s closing price of 83.70p.