Business

AO World shares plunge following profit warning

washing machines Image copyright Reuters

AO World, the online domestic appliance retailer, has seen its shares fall by almost a third after warning that profits and sales for the full year will be "slightly lower" than expected.

AO, which floated a year ago, said it had been "difficult" to meet expected sales growth in the current quarter.

It said sales in its same quarter last year had benefited from extra publicity surrounding the float.

This made it hard to meet its trading targets, it said.

Shares in the company fell nearly 30% to 202.2p in morning trade.

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"It is now apparent that some of the revenue growth in the second half of 2014 and going into 2015 was due to extra publicity surrounding the company at the time," it said.

The firm stunned the City when it floated last February with a market capitalisation of £1.2bn, despite pre-tax profits of less than £8m in 2013.

It said its revenue for the year to the end of March would now be £470m-£475m, about 2% lower than expected, with adjusted core earnings of about £16.5m compared with an earlier forecast of £18.6m.

Despite the lowered forecast, AO World said it was confident its "fundamental business model remains strong".

"We are confident of our ability to continue to deliver for our customers and to further drive the success of AO," added AO World chief executive John Roberts.

Analysts at investment bank Jefferies said pride had undoubtedly been dented in the AO management team.

"Though revenue guidance has been missed and confidence in management's ability to guide undermined, a 2% revenue downgrade is perhaps not a sign of terminal ill-health," it added.

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