Shares of Bolton-based online electrical retailer AO World plc rose about 11% on Friday after it published a trading update for the 12 months to March 31, 2023, in which it raised its profit guidance.
AO said it now expects adjusted EBITDA to be at the upper end of its forecast range of £37.5 million to £45 million.
“Consistent with the themes set out in the trading statement issued on 28 February 2023, we continue to see positive traction from our initiatives to reduce costs and improve margins,” said AO World.
“The potential adverse effects from trading risks, continuing macroeconomic uncertainty and tough consumer environment that we anticipated at 28 February have not materialised to the extent envisaged and as such we are updating our profit guidance to around the top end of profit guidance issued at that date.
“Estimated UK revenues for the full year to 31 March 2023 are expected to be £1.13bn, in line with our plans. AO’s resulting online UK MDA market share is 32.1%.
“The company’s £80m revolving credit facility has been renewed with HSBC, NatWest, and Barclays, extending to April 2026.
“At the period end we expect to be holding a modest net funds position on a pre IFRS16 basis, reflecting an improvement of circa £20m from our interim position at September 2022.”
AO World CEO John Roberts said: “We are encouraged by the work undertaken to pivot the business during the financial year 2023.
“AO enters the new financial year with net funds on the balance sheet, a robust trajectory, and full confidence in our ability to deliver on our medium-term profit guidance of 5% adjusted EBITDA.
“We anticipate that our progress in improving both operational cost efficiencies and margin in FY23 will continue through the next 12 months and beyond.”
Victoria Scholar, Head of Investment, Interactive Investor said: “The electrical retailer said it sees progress in improving both operational cost efficiencies and margins which will continue through the next 12 months and beyond. This morning Jefferies has raised its target price on the stock from 85p to 90p.
“In February AO World raised its profit guidance for the third time since November despite pressures from the consumer slowdown and cost inflation. The company has been focusing on cutting costs and finding other efficiencies since last year.
“AO World shares fared extremely well at the height of the pandemic during 2020 amid the boom in e-commerce and DIY. However as the covid-era glow faded, the stock plunged from its January 2021 high to a trough last summer when the stock was worth less than a tenth of its peak valuation. The past six months have seen a return to more positive price action with shares up over 50%.”