AO swings back into profit

AO nudged up 0.2% after showing that efficiency and cost-cutting measures were having a positive impact on profits.

Despite recording a 17% decline in full-year revenue, AO swung from an £11 million loss to an £8 million pre-tax profit.

AJ Bell’s Russ Mould said: “Mike Ashley will be happy, given that Frasers recently took a 22% stake in the business, saying the investment will help it benefit from AO’s expertise in the electricals market and two-man delivery. Frasers will no doubt be looking at ways to improve the efficiency of delivering bulky goods like fitness bikes from Sports Direct and three-piece suites from Sofa.com, two of its many brands. It also seems to be interested in dipping its toes into the electricals sector given an additional investment in Currys in recent weeks.

“AO’s decision to streamline its business has so far paid off, given the shift back to profit. It has closed operations in Germany, ended a trial with Tesco and ceased working with housebuilders, effectively saying it wasn’t worth the time and effort. An internal rejig of teams and a simplified product range are some of the other initiatives undertaken to right-size AO into a more profitable entity.

“It’s a good start, but the proof in the pudding will be sustained profit growth, and the market won’t be able to judge its success until well into next year.”