LONDON (Reuters) - AO World, the British online electricals retailer, on Thursday forecast core annual earnings at the lower end of market expectations, which analysts said reflected margin pressure in its German business, sending its shares lower.
Shares in the seller of washing machines, fridges, cookers and televisions were down 9.2 percent at 0834 GMT, taking losses so far this year to 31 percent and valuing the group at 415 million pounds ($547 million).
In January AO founder John Roberts was re-appointed chief executive. He said he would update investors in June on his plans for the group which trades in Britain, Germany and the Netherlands.
AO forecast year-to-March 31 2019 revenue growth in Europe of 32.3 percent. Analysts at Jefferies said that was short of its 35 percent estimate, reflecting softer consumer demand for electricals in Germany and a step-up in price competition, meaning AO did not get all the margin gains it was hoping for.
Prior to AO’s update, analysts on average forecasted group adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), excluding one off costs, of 0.7 million pounds ($0.9 million) for the 2018-19 year.
Forecasts were in a range of a 0.4 million pounds loss to earnings of 2.0 million pounds.
AO’s trading update forecast group revenue of about 900 million pounds, an increase of 13 percent year-on-year, or 9 percent excluding the Mobile Phones Direct (MPD) business it purchased for 33 million pounds last year. AO said the integration of MPD had progressed to plan, driving UK revenue growth of 9.8 percent.
“With UK consumer confidence, UK online sales growth and John Lewis electrical sales all under pressure, we consider this a robust result in a tough market,” the Jefferies analysts said.
As part of its Brexit contingency planning, during the last quarter of its financial year AO increased its inventory levels for fast-moving products by about 15 million pounds, with a corresponding impact on its cash position.
($1 = 0.7586 pounds)
Reporting by James Davey; Editing by David Holmes and David Evans