AO World reports profit growth driven by cost reduction and margin improvement

AO World (LSE: AO), the online electricals retailer, has reported a significant rise in profit for the 2022-23 fiscal year. The company’s success can be attributed to its strategic plan aimed at reducing costs and improving profit margins.

According to AO World, its adjusted core earnings, or EBITDA (earnings before interest, taxes, depreciation, and amortisation), reached £45 million during the year ending on March 31. This figure is in line with the company’s guidance and marks a substantial increase from the £23 million recorded in the previous fiscal year. However, the company did experience a decline in revenue, which fell by 17% to £1.14 billion.

Despite the drop in revenue, AO World managed to achieve an EBITDA margin of 4%. Looking ahead to the new financial year, the company expressed confidence in achieving its short-term goal of a 5% EBITDA margin and returning to top-line growth in the medium term.

In a statement, AO World outlined its strategic direction, stating, “Our strategy now is to invest prudently in the business, seize the significant market opportunities that we see in front of us, leveraging our growing and loyal customer base.” This approach reflects the company’s commitment to capitalising on the potential for expansion in the online electrical market.

AO World’s impressive performance has positioned it as a key player in the online electrical market. Recognising the company’s potential for growth and success, Frasers, a prominent sportswear and fashion retailer, has recently acquired a 22.2% stake in AO World. This strategic move by Frasers demonstrates their confidence in AO World’s future prospects. Additionally, Frasers has also taken a 10.4% stake in Currys, further solidifying its position within the electricals retail sector.