AO World warns over sharp UK business slowdown after Brexit vote
Electricals retailer AO World has warned over a sharp slowdown in its UK business amid "challenging" trading since the Brexit vote as it saw annual losses widen.
The group fell deeper into the red with pre-tax losses of £7 million for the year to March 31 against £6.7 million the previous year and said it remained under-pressure in the UK so far in the new financial year.
AO World, which is set to be relegated from the FTSE 250 Index later this month after seeing shares plunge, said its UK growth rate would slow "significantly" in the first quarter.
Steve Caunce, chief executive of AO World, said: " Trading this year has been mixed, particularly for our UK business."
"In the second half of the year, trading in the UK became more challenging as we began to feel the impacts of dampening consumer confidence following the UK's vote to leave the EU, subsequent price inflation and a slow-down in the UK housing market," he added.
The group said with no let up in the difficult UK conditions and tough comparatives from a year earlier, "we expect our UK first quarter growth rate to slow significantly year on year".
AO World saw an improvement in group-wide operating losses on an underlying basis, narrowing by 46.2% to £2.1 million, t hanks to a better first half performance from the UK.
The group has since been grappling with a jump in import costs following sterling's slump, while rising inflation has put the squeeze on consumer spending.
Shares in the company have plunged 62% since its listing in 2014, resulting in it being demoted from the second tier to the small cap index in the latest FTSE reshuffle, which takes effect on June 19.
But despite this, UK website sales rose 14.5% over the year as a whole and total UK revenues lifted 12.7% to £629.7 million.
AO World said trading across Europe - where AO has been investing heavily in Germany and the Netherlands - had "started well" in the new financial year so far.
Mr Caunce said the group's focus on customer service had also helped the firm "gain market share in our categories and countries, notwithstanding the challenging trading environment in the UK".
Shares in AO World sunk 6% after the losses and gloomy outlook, with the stock having already plunged by nearly two thirds since its flotation in 2014.
Neil Wilson, senior market analyst at ETX Capital, said AO World is "burning cash on a European expansion" and cautioned it "may also not be able to rely on the UK to prop up the business as consumer spending is showing signs of flagging, while inflation rises faster than wages".
But he added: "Rising revenues and a push into Europe offers hope that profits may be forthcoming."