AO World to exit Dutch market as losses widen
Online electrical goods retailer AO World said on Tuesday that it was closing its loss-making operations in the Netherlands to focus on the German business, as it reported a widening of its interim losses.
For the six months to the end of September, group adjusted earnings before interest, taxes, depreciation and amortisation losses pre IFRS16 widened to £6.2m from £5.4m in the same period a year ago.
Pre IFRS 16 adjusted earnings in the UK grew to £7.8m from £6.9m, but in Europe, adjusted losses widened to £14m from £12.2m.
Group revenue for the half was up 16.3% to £470.1m, with total UK revenue up 20.3% to £402.7m but Europe revenue down 3.4% to €75.7m.
Founder and chief executive officer John Roberts said: "These results were achieved during a period of significant change for the business where we were focused on laying the foundation for disciplined, long-term growth. There are encouraging green shoots of profitable growth across our UK business, including within our core MDA (major domestic appliances) offer and we will continue to invest to drive this further.
"Our relentless focus to accelerate profitability in Europe continues and as part of this, we have today announced the closure of our Netherlands operation. This will enable us to concentrate on the transformation of our German business, where we have increased confidence in, and visibility of, the three core drivers of the business model that will put us on the path to profitability."
At 1110 GMT, the shares were up 19% at 64.44p.
Russ Mould, investment director at AJ Bell, said: "If AO was only a UK-only business everyone would be applauding its growth and saying how it was doing well in a difficult environment, by finding new sources of customers via Amazon and Ebay as well as directly through its own website.
"Sentiment has been poor towards AO because of its desire to obtain greater scale through having a Continental Europe presence which means group profit continues to be an aspiration rather than a reality.
"However today’s share price rally suggest there are the beginnings of a potential change in sentiment. AO now needs to deliver the goods to truly win the market’s favour."