LONDON (ShareCast) - (ShareCast News) - Online electrical goods retailer AO World said on Friday that its full-year results should fall within the range of current market forecasts.
In a post-close update for the year to 31 March 2018, the group said revenue is expected to be up around 14% on the year to £796m, versus company-compiled revenue consensus of £794.7m. Meanwhile, the group adjusted earnings before interest, tax, depreciation and amortisation loss is expected to be around the middle of the range of between £9.7m and £1.4m.

UK revenue for the year is expected to come in at around £680m, up 8% on the year, with revenue from AO.com of £606m, up 9%.

The company said growth in the fourth quarter was achieved "in what remains a competitive market with limited advertising spend". It said that compared to the same period a year ago, it undertook less promotional activity, which has supported gross margin.

AO achieved revenue growth of circa 55% for the year in local currency and its European operations are on track to achieve its targets in these existing territories in FY21.

"As a result of our strong momentum we have now reached an inflection point in the financial performance in these existing Europe operations and expect to see further progress as we move forward," it said.

Clive Black at Shore Capital said this is a "relatively reassuring" statement overall, that provides comfort to its FY2018 forecasts ahead of the preliminary results on 5 June.

"As we have previously highlighted management needed to develop a stronger track record of delivering City forecasts year-in year-out, and this statement is a step in that direction, having updated the market in late November."

Still, Black said he continues to have concerns around the cash burn of the business and reiterated Shore's 'sell' rating on the stock, saying the valuation looks "more than up with events".

Numis, which rates the stock at 'buy', said that while it is disappointing to see the tough UK trading conditions impacting FY profits, it shouldn't come as any surprise given a string of weaker updates recently from the likes of Carpetright, Topps Tiles Safestyle, ScS and DFS.

"We continue to believe that AO's UK operation is a very good business that is a victim of cyclical pressures. Meanwhile, the European operation is building clear momentum. Despite the tough UK trading conditions, we continue to see a significant opportunity in the shares and retain our positive stance."

At 0850 BST, the shares were up 0.5% to 115.40p.

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