AO World (AO) H2 2024 earnings summary

Executive summary

• Achieved record adjusted PBT of £34m, up £22m year-over-year, representing 3.3% of revenue, with strong gross margins at 23.4% and net funds increasing to £34m from £4m in FY23.

• EPS rose to 4.29p from 1.13p in FY23, indicating improved profitability of over 380% year-over-year.

• AO.com returned to revenue growth in the final quarter, despite a 9% net revenue decrease year-over-year to £1,039m, reflecting a strategic pivot to profitability.

• Strategic pivot to profitability completed, with focus now shifting to sustainable, profitable growth and operational efficiency.

Financial highlights

• Gross margin improved to 23.4%, up from 19.3% in FY23, with H2 margins similar to H1, driven by range rationalisation, removal of discount codes, and delivery charging.

• SG&A costs reduced by £19m year-over-year and £65m over two years, with marketing focused on brand and warehousing efficiency.

• Product revenue fell 9% to £798m, while services revenue grew 12% to £63m year-over-year; commission revenue dropped 18% to £128m.

• Adjusted EBITDA and cash flow benefited from efficient working capital management; closing cash increased to £40m.

• CapEx was £8m, including £3.5m for a recycling site and £2.4m for acquisitions, with investment in recycling operations and mobile IP.

Outlook and guidance

• FY25 guidance targets group adjusted PBT of £36m–£41m and double-digit revenue growth.

• Medium-term targets: PBT margin towards 5%, double-digit revenue growth, and EPS growth faster than revenue.

• CapEx expected to rise to £11m, mainly for vehicle purchases.

• Continued focus on leveraging fixed costs, managing inflationary pressures, and operational efficiency.