AO World, the online electrical retailer, plans to start selling computers this year, as it made an operating loss after investment in its European business.
It reported full year operating losses of £10.6m after trading losses in Germany and start-up costs in other European countries. But EBITDA moved from £16.5m to £17.2m.
The company said it expected European losses of between €26m and €30m for the current year, but overall revenues were expected to be ahead of expectations, and trading in the new financial year had started well. On the computing move, chief executive John Roberts said:
You’ll see us take a different approach to the traditional ‘feature-led’ way of selling this category, to the benefit of all customers. Computing is a natural extension of our current categories and there is good potential for cross-selling to our existing customer base, making it an exciting opportunity for the business.
The news has seen AO’s share fall 1.6% to 164.4p, but analysts were still positive. David Reynolds at Jefferies said:
A good set of results to finish the year, very pleased with the format of the 2017 guide. A revenue range and EBITDA positioning. Something for the bulls and the bears. Reduced revenues in Europe as the company focuses on operational efficiencies. But what falls out is an in-line or slightly improved adjusted EBITDA for the group, along with a solid cash position, bolstered with the £30m RCF, and the launch of computing in the UK and floor care in [Germany].
[The] key risk continues to be operational execution.
At Numis, Andrew Wade said:
AO has reported full year results consistent with its March update, including UK EBITDA up 31% in the second half, and given clear guidance for 2017. As a result, we raise our 2017 UK EBITDA forecast by 13% but, with the group choosing to slow growth while it builds product margin and capacity, lower our estimates for Europe. We retain our positive stance, confident that AO’s leading customer proposition can support long term profitable growth in the UK and internationally.
