Proactive Investors - AO World PLC (LON:AO) swung back into profit in the first half of the financial year, despite a drop in sales, reflecting improved margins and tight cost control.
As a result, the UK electrical retailer has increased profit guidance for the full year, forecasting pre-tax profits between £28 million to £33 million compared to the £28 million predicted in July.
Chief executive John Roberts said: “We have generated more profit in the first half of this year than we did in the whole of last year and are also upgrading our profit expectations for the remainder of FY24.”
AO World expects annual sales to decline by 10% from last year, after reporting a 12% drop in the first half to 30 September 2023 to £482 million from £546 million a year ago.
The firm said the drop reflected actions taken to remove non-core channels, unprofitable sales and increase gross margins.
Pre-tax profit of £13 million in the first six months compared to a pre-tax loss of £12 million last time while gross margin improved to 23.5% from 19.5% a year ago.
AO said this reflected removing unprofitable sales, the introduction of delivery charges on all deliveries, tight control of advertising and marketing costs plus a fall in warehousing and other admin costs.
The company said the overall mobile market has declined in the year, which has negatively impacted the group's ability to hit network volume targets set for the 2023.
This will have an overall single-digit millions profit drag in financial 2024 and this is absorbed within the upgrade today, AO stressed.