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AO World enjoys profits boost but warns over 'risks and uncertainties' of Brexit

Published 22/11/2016

AO is now gearing up for Black Friday, which will see retailers offer special deals to customers on November 25.
AO is now gearing up for Black Friday, which will see retailers offer special deals to customers on November 25.

Online electronics retailer AO World saw first-half profits swing out of the red, but warned customer demand could wane as a result of rising prices in the wake of the Brexit vote.

The company reported a 22.9% rise in total revenue to £324.7 million for the six months to September 30, as European and UK sales jumped 66.9% and 18.7% over the period respectively.

Adjusted underlying profit rose to £1.5 million, up from a £4.5 million loss last year.

Chief executive John Roberts said: "AO has made a great start to the year, with group revenue and profits growing well as we continue to deliver on our long-term strategy. We have made progress in our mission to become the best electrical retailer in Europe."

But the company said it was monitoring "the risks and uncertainties associated with Brexit and the potential impact these may have on the group's result and financial position".

It said economic uncertainty could knock consumer confidence, while a subdued housing market could hit demand for major domestic appliances, which includes items such as refrigerators and washing machines.

There is a risk that price hikes - meant to cover rising supplier costs in light of the weaker pound - could also impact demand.

"We also would expect that price increases would be passed on to all our competitors and that ultimately these will be passed on to consumers (at the risk of reduced demand) and our trading teams are engaging with suppliers to understand and manage any such repercussions.

"Importantly, given our growth model and flexible cost base we are able to adjust quickly to downturns in demand should this be required," AO World said in its half-year earnings report.

The pound has fallen more than 17% against the US dollar and 11% against the euro since the Brexit vote.

"While the economy clearly faces some uncertainty and the sterling softening during the year is likely to provide some pricing pressure, our strong first-half performance sets us up well for the rest of the year," the company said.

AO is now gearing up for Black Friday, which will see retailers offer special deals to customers on November 25.

"We have been planning for Black Friday since last November; we have some great deals for customers and our teams are ready to deliver to our unwavering high standards," AO said.

AO's FTSE 250-listed shares were up by 0.3% in afternoon trading.

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