UK's AO World upbeat on earnings outlook after tough year

A truck is pictured outside the AO distribution centre in Crewe, Cheshire, Britain November 24, 2020. REUTERS/Carl Recine/File Photo
  • Shares rise as much as 15%
  • AO expects FY23 adj core profit in 20-30 mln pound range
  • Targets avg revenue growth above 10% per annum medium term

Aug 18 (Reuters) - British online electrical retailer AO World (AO.L) on Thursday forecast profit for fiscal 2023 above market expectations as it focuses on its home turf after closing its German business, sending its shares surging.

The group, which reported a sharp drop in profit for the year ended March 31, said it expects adjusted core profit for 2022/23 to be in the range of 20 million pounds to 30 million pounds ($24.5 million - $36.1 million). Analysts on average had expected profit of 18 million pounds.

Shares of the London-listed group, which have lost nearly 60% of their value so far this year, rose as much as 15% in early trade.

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UK electrical retailers have been struggling as a worsening cost of living crisis hit consumer spending, clouding their sales outlook as they try to generate cash and contain rising costs and supply chain snags.

AO reported an 87% drop in adjusted core profit to 8.5 million pounds for the year to end-March. Revenue dipped 6% to 1.56 billion pounds.

"Looking ahead, we certainly have more volatility to navigate, but the core fundamentals of our business remain strong," founder and Chief Executive Officer John Roberts said, adding that AO's focus now was on cash and profit generation.

The company, which sells washing machines, refrigerators, cookers and televisions, has raised new capital and announced plans in June to close its German operations, marking a sharp pivot in its focus. read more

AO estimates cash costs from the closure of its German business, which accounted for more than 10% of its revenue last year, would be no more than 5 million pounds, having flagged they could be as high as 15 million pounds.

It will now focus on Britain after closing its Dutch business in 2019.

The group said it would continue to "rationalise, simplify and refocus" its UK operations, including exiting lines of business that do not fit its strategy.

($1 = 0.8315 pounds)

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Reporting by Muhammed Husain in Bengaluru; Editing by Subhranshu Sahu and Emelia Sithole-Matarise

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