Shares in AO World (LSE: AO) jumped over 7% in early trade today after the online electricals retailer reported a return to profitability in its latest half-year results.
The company said revenue declined 12% to £481.7m in the six months to September, as it removed “unprofitable sales”. However, it swung to a pre-tax profit of £13m from a £12m loss last year.
AO attributed the improved performance to a “strategic pivot” focusing on profitability and cash generation. It reduced costs by 16% and expanded gross margins.
CEO John Roberts said service levels have “never been better”, citing high customer satisfaction scores. AO’s transacted customer base now stands at 11.6 million.
Looking ahead, AO World expects full-year pre-tax profit of £28-33m, a significant jump from £8m last year. It forecasts a 10% revenue decline to around £1.14bn.
The company has faced a difficult period, with the share price falling to 33p in August. However, the stock has since rebounded by 59% year-to-date and 70% year-over-year.
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Since hitting this low the stock price has been rising steadily. However, gains have stalled between 77-92p since September. Breaking out of this range is key for bulls after recent improvements.
The return to profitability suggests AO’s strategy to remove unprofitable business is paying off. Investors are regaining confidence after previous setbacks.