AO shares fall again amid credit insurance crunch

Shares of Bolton-based online electrical retailer AO World plc fell another 12% on Monday as the firm confirmed news reports that one of the third-party credit insurers who provide credit insurance to some of its suppliers “rebased their cover in May 2022 with respect to AO, reflecting post-Covid sales levels.”

AO shares have fallen 74% over the past 12 months.

In a stock exchange statement, the Bolton company said: “AO World plc … notes today’s share price movement following press reports over the weekend. 

“The company’s current financial performance and financial position remain in line with the board’s expectations and the guidance set out in its trading update on 29 April 2022.  

“AO confirms that it is aware that one of the third-party credit insurers who provide credit insurance to some of its suppliers rebased their cover in May 2022 with respect to AO, reflecting post-Covid sales levels.  

“This was a reduction from the heightened levels that had been in place and required through the period of the pandemic. 

“To date this rebased cover has had no effect on AO’s liquidity position which remains in-line with the board’s expectations for FY23.

“On 9 June 2022, AO announced the decision to close its German operations. 

“Progress to date has been encouraging with total cash costs of closure now expected to be towards the lower end of the company’s original estimates of nil to £15m. 

“The higher end of that range assumes the company would be unable to exit certain asset leases, of which c. £10m of cash outflow would be due in future years.

“AO continues to have full access to its £80m revolving credit facility, the term of which runs until April 2024. 

“In addition, the company continues to consider and implement a number of ongoing initiatives and further actions to strengthen its balance sheet while optimising  its focus on profit and cash generation against the uncertain macroeconomic conditions in the UK and the continuing global supply chain challenges.”

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