TIDMAO.
RNS Number : 1328H
AO World plc
22 November 2022
22 November 2022
AO WORLD PLC
INTERIM RESULTS FOR THE 6 MONTHSED 30 SEPTEMBER 2022
FOCUS ON CASH AND PROFIT RESULTING IN SOLID PROGRESS IN A TOUGH
ENVIRONMENT
Sales on track, profit for FY23 now expected to be around the
top end of guidance, and issuing FY24 profit guidance above current
consensus
AO World PLC ("the Group" or "AO"), a leading online electrical
retailer in the UK, today announces its unaudited financial results
for the six months ended 30 September 2022 ("HY23").
The six months to September 2022 represented solid progress in
the plan to pivot the business to focus on profit and cash
generation. As a result, FY23 sales are forecast to be within the
range guided, FY23 profit is now expected to be around the top end
of previous guidance, and guidance for FY24 has been set above
current consensus.
Operational highlights
-- Over 410,000 new customers(5) experienced the AO Way, with
an increase in the repeat customer purchase rates
-- Closing the Germany operation quickly and efficiently with
minimal cash impact to the Group total cash costs for the
closure now expected to be around zero against original
estimate of up to GBP15m
-- Simplified the UK business focusing on more profitable lines
of business that fit our core model
-- Customer satisfaction scores remain outstanding, with Net
Promoter Scores(6) averaging c. 86, and over 370,000 Trustpilot
reviews averaging 4.6 out of 5 stars - continuing to position
AO as the UK's most trusted electrical retailer
-- AO remains a UK market leader in major domestic appliances
("MDA") with an 18%(8) market share and 34%(8) overall online
market share
Financial highlights
We are rationalising, simplifying and refocusing our operations,
exiting some lines of business that do not fit our model, and
driving operational efficiencies and overhead reduction.
-- A reduction in the overall electricals market, as well as
actions we have taken to remove non-core channels and loss-making
sales, has resulted in a revenue decline YoY of 17%
-- SG&A costs reduced significantly by GBP17m. Detailed overhead
review and property rationalisation expected to lead to
annual cost savings of at least GBP30m FY24 vs FY22
-- Adjusted EBITDA margin was maintained at 1.6%
-- Statutory loss before tax of GBP12m (HY22: GBP4m)
-- Overall liquidity(4) of GBP68m (31 March 2022: GBP50m; 30
September 2021: GBP66m). Net debt at 30 September 2022 reduced
to GBP19m (31 March 2022: GBP33m)
GBPm(1) HY23 HY22 Mvmt
Revenue 546 661 (17%)
======= ======= =======
Adjusted EBITDA(2) 9 10 (11%)
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Operating loss (9) (3) (215%)
======= ======= =======
Loss before tax (12) (4) (168%)
======= ======= =======
Basic loss per share (2.14) (0.45) (377%)
======= ======= =======
Net debt (3) (19) (18) (5%)
======= ======= =======
Outlook
The plan focused on cash generation and profitability that we
set out at the full year results remains on track and our execution
of the strategic pivot is accelerating. However, we are of course
not immune to the challenging and uncertain consumer environment,
and we expect to continue to be impacted by both the cost of living
crisis affecting consumer spending, as well as by ongoing supply
chain issues.
The whole of the electricals market, is down year on year and in
light of this we continue to have a laser focus on profit and cash
which will see us driving only profitable sales and channels. We
have initiated a number of cost reduction initiatives during the
first half of the year which will see the cost base of the business
reduce, giving an annualised run rate saving of at least GBP30m in
FY24 vs FY22. We will continue to ' right size ' our cost base to
market conditions and outlook.
At the full year results we guided to Adjusted EBITDA in the
range of GBP20-30m. Whilst mindful of the current economic
challenges we expect to be around the top end of the range.
Our medium-term ambitions, as set out in our full year results
(i.e. to deliver average revenue growth of 10+% per annum, with an
EBITDA margin of 5+% and improved cash generation), remain
unchanged; we expect to achieve the first ambition (5% EBITDA) in
the next financial year.
In the longer-term, our addressable market in the UK stands at
cGBP23.4bn (7) as we look to deepen our presence in categories such
as televisions, laptops, audio visual and small domestic appliances
("SDA"). The online segment of the market in those categories
remains a key opportunity for us as the long-term structural
migration to online retailing continues.
AO's Founder and Chief Executive, John Roberts, said :
" During the first six months of the year, we ' ve made good
progress with our strategic realignment as we focus on
profitability and cash generation, all of which is yielding the
results we expected.
" We ' ve now closed the loss making and cash consumptive parts
of our operations meaning the remaining UK business is cash
generative, and are successfully closing our German business with a
minimal cash impact to the wider Group.
" I ' m pleased with this progress, particularly against the
backdrop of an extraordinarily difficult macro-economic
climate.
" As ever, I ' m hugely grateful for the hard work of all our
AOers over the last six months. It hasn ' t been easy and I ' m
extremely proud of their commitment to delivering our plan
particularly during this peak trading period. Our collective
obsession with amazing our customers through outstanding service
never falters, however tough the external trading conditions
become.
"Over the last 22 years, the team has built and nurtured trusted
relationships with some of the world's leading electrical
manufacturers and I'm also grateful to them for their continued
support.
While the short-term outlook remains challenging, I ' m
confident that our strategy is the right one, and as we position
ourselves to be the UK ' s most trusted electrical retailer we look
to the future with cautious optimism. "
Enquiries
AO World PLC Tel: +44(0)7525 147 877
John Roberts, Founder & CEO ir@ao.com
Mark Higgins, CFO
Powerscourt
Rob Greening Tel: +44(0) 20 7250 1446
Nick Hayns ao@powerscourt-group.com
Elizabeth Kittle
Webcast details
A results presentation will be held for analysts and investors
at 08.30 GMT, today, 22 November 2022 at AO's London office. A
playback of the presentation will be available on AO's investor
website at www.ao-world.com later today. If you wish to attend
please email AO@powerscourt-group.com.
About AO
AO World PLC, headquartered in Bolton and listed on the London
Stock Exchange, is an online electrical retailer, with a mission to
be the destination for electricals. Our strategy is to create value
by offering our customers brilliant customer service and making AO
the destination for everything they need, in the simplest and
easiest way, when buying electricals. We offer major and small
domestic appliances and a growing range of mobile phones, AV,
consumer electricals and laptops. We also provide ancillary
services such as the installation of new and collection of old
products and offer product protection plans and customer finance.
AO Business serves the B2B market in the UK, providing electricals
and installation services at scale. AO also has a WEEE processing
facility, ensuring customers' electronic waste is dealt with
responsibly.
______________________________
(1) Unless otherwise stated all numbers, including any restated
comparatives, relate to the continuing operations of the
Group and therefore exclude the impact of Germany. Refer to note
11 for further details.
(2) Adjusted EBITDA is defined as profit/(loss) before tax,
depreciation, amortisation, net finance costs, profit/loss on
disposal of fixed assets, and other adjusting items (including
restructuring costs).
(3) Net debt is defined as cash less borrowings less owned asset
lease Liabilities but excluding right of use asset lease
liabilities.
Net debt also includes any cash overdrafts and owned asset lease
Liabilities in Germany.
(4) Liquidity is the total of cash and cash equivalents and the
remaining availability on the revolving credit facility.
(5) A customer is defined as an individual customer who has
purchased via ao.com.
(6) Net Promoter Score or "NPS" is an industry measure of
customer loyalty and satisfaction. NPS comprises ao.com and
mobilephonesdirect.com and is calculated on a revenue weighted
average basis.
(7) Total electricals market data from GfK, for the 12 months to
2 April 2022. AO's value is from company data, net value.
(8) H1, FY23 GfK data. AO's value is from company data.
Cautionary statement
This announcement may contain certain forward-looking statements
(including beliefs or opinions) with respect to the operations,
performance and financial condition of the Group. These statements
are made in good faith and are based on current expectations or
beliefs, as well as assumptions about future events. By their
nature, future events and circumstances can cause results and
developments to differ materially from those anticipated. Except as
is required by the Listing Rules, Disclosure Guidance and
Transparency Rules and applicable laws, no undertaking is given to
update the forward-looking statements contained in this document,
whether as a result of new information, future events or otherwise.
Nothing in this document should be construed as a profit forecast
or an invitation to deal in the securities of the Company. This
announcement has been prepared for the Group as a whole and
therefore gives greater emphasis to those matters which are
significant to AO World PLC and its subsidiary undertakings when
viewed as a whole .
CHIEF EXECUTIVE'S REVIEW
Trading overview
The first half of the year represented a period of significant
strategic realignment as we adopt a UK focus and pivot to focus on
profitability and cash generation. Global economies continue to be
challenging and UK inflation is running at its highest level in 40
years.
Against that backdrop, during the first six months of the year
the total major domestic appliance ( " MDA " ) market declined 11%
(8) YoY and the online market witnessed an 18% (8) decline YoY.
As we head into H2, we continue to drive our profit actions
further, focusing our efforts on improving our acquisition cost
efficiencies. We are pleased with the profit improvements this has
delivered so far.
Strategic overview
As part of the strategic realignment that we set out at our full
year results, we have removed parts of the business because they no
longer fit with our priorities. For example, we chose to cease the
trial with Tesco and have also ended our business in the
housebuilding sector.
We have also introduced delivery charges for all orders to
offset the growing costs of delivering for our logistics business.
We have been pleased with the reaction from our customers, who
continue to see the value in the exceptional quality of the
delivery service we provide.
We have accelerated our pricing structure development,
particularly in non MDA categories that have been in an investment
and growth phase over the last few years.
As a result, very few products are now loss making and the
corresponding margin drag has been removed. We expect and are
planning for this to affect overall sales volumes over the
remainder of this year.
Following these strategic decisions we have both deliberately
removed sales that are loss making or making low contributions, and
also indirectly reduced sales by implementing delivery charging and
reducing cashback incentives. Despite these changes, we still
delivered three year growth of c36% in the UK against the
comparable period before Covid.
Throughout this period, we have continued to identify and drive
increased operational efficiencies. This has included removing
c158,000 sq ft of warehousing and outbases, rationalising vehicles,
reducing our office footprint and lowering our stock holding.
We have also reduced our overheads including the completion of a
major restructuring, which has reduced headcount particularly in
the senior and middle management layers. Combined, these actions
have significantly reduced our cost base by at least GBP30m of
overhead cost in FY24 vs FY22 with a one off cash cost of
GBP2.6m.
We will start to realise the full benefit of all these actions
during the second half and fully into the next financial year.
Germany
Since we announced the closure of our operations in Germany in
June, we have been managing an orderly closure of the business.
Trading ceased on 1 July and physical operations largely ceased
a month later.
The main warehouse in Bergheim is now fully vacated and sublet
to a new tenant. There is a strong level of interest in the two
remaining owned properties. By March 2023, we expect to have
materially exited Germany, and the remaining small number of
property leases and contracts will wind down throughout FY24.
We now expect total cash costs for the closure to be negligible
against our original estimate of up to GBP15m.
FINANCIAL REVIEW
Unless otherwise stated, the below relates to continuing
operations in the UK only.
Revenue
6 months 6 months
ended ended
30 September 30 September
GBPm 2022 2021 % change
------------------------------ ------------- ------------- --------
Product revenue 432.5 538.3 (19.7%)
Services revenue 23.3 25.1 (7.3%)
Commission revenue 65.9 75.6 (12.9%)
Third-party logistics revenue 12.9 9.7 32.4%
Recycling revenue 11.7 11.8 (1.1%)
------------------------------ ------------- ------------- --------
546.3 660.6 (17.3%)
------------------------------ ------------- ------------- --------
For the six months ended 30 September 2022, UK revenue decreased
17.3% to GBP546.3m (2021: GBP660.6m).
Product revenue
Total Product revenue, comprising sales generated from ao.com,
marketplaces and third-party websites, decreased 19.7%. The change
in strategy with a pivot to prioritise profit over revenue
accompanied by supply chain issues and a decline in the online MDA
market value of 18% (11% in the total market) have contributed to
the decline in revenue. We continue to work closely with our
suppliers to ensure that our customers are able to shop the widest
range possible on our websites although reduced ranges remain an
industry-wide problem.
Services
Services revenues, which includes delivery and customer
installation services, reduced less than product revenue at 7.3%,
as there was a partial offset with charging for MDA deliveries
since August 2022.
Commission
Commission revenue includes commissions generated by network
connections in our Mobile business and from the promotion of AO
Care warranties for Domestic and General. Commissions from the sale
of warranties decreased in line with product sales. In our Mobile
business, the number of new contract connections has fallen as the
business looks to maximise margins; this has been partly offset
with improvements in the average life of new contracts and the
impact of some RPI increases.
Third Party Logistics
Our expertise in complex two-person delivery is highly valued in
our industry, and we undertake a number of deliveries on behalf of
Third Party clients i n the UK. This revenue delivers incremental
profitability. We will continue to maximise this revenue
opportunity to leverage our operational gearing, without it
distracting from our core business.
Recycling
Recycling revenue has stayed flat. Processed volumes have
decreased overall year on year which have been offset by the
business benefitting from a strong improvement in output material
prices.
Gross margin
6 months ended 6 months ended
30 September 30 September
GBPm 2022 2021 % change
Gross profit 106.5 130.3 (18.3%)
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Gross margin 19.5% 19.7% (2 ppts)
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Gross profit, including product margins, services and delivery
costs, decreased by 18.3% to GBP106.5m (2021: GBP130.3m). Gross
margin was broadly consistent despite significantly lower sales,
showing the benefit from pricing actions and the focus on
profitable sales.
Selling, General & Administrative Expenses ("SG&A")
6 months ended 6 months
30 September ended 30 September
GBPm 2022 2021 % change
-------------------------- -------------- ------------------- --------
Advertising and marketing 17.7 22.5 (21.3 %)
-------------------------- -------------- ------------------- --------
% of revenue 3.2% 3.4%
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Warehousing 31.3 32.7 (4.3 %)
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% of revenue 5.7% 4.9%
-------------------------- -------------- ------------------- --------
Research and development 4.2 10.2 (58.9 %)
-------------------------- -------------- ------------------- --------
% of revenue 0.8% 1.5%
-------------------------- -------------- ------------------- --------
Other admin 61.2 69.6 (12.1 %)
-------------------------- -------------- ------------------- --------
% of revenue 11.2% 10.5%
-------------------------- -------------- ------------------- --------
Adjusting items 3.6 - 100.0 %
-------------------------- -------------- ------------------- --------
% of revenue 0.7%
-------------------------- -------------- ------------------- --------
Administrative expenses 118.0 13 5.0 (12.6 %)
-------------------------- -------------- ------------------- --------
% of revenue 21.6% 20.4%
-------------------------- -------------- ------------------- --------
Group SG&A costs have decreased YoY by 12.6%; as a
percentage of revenue there has been a small increase during the
period from 20.4% to 21.6% as we continue to adjust the cost base
to be appropriate relative to the current level of sales.
Advertising and marketing costs decreased as we improved the
efficiency of acquisition spend and reduced tv advertising.
Warehousing costs were materially flat in cash terms but
increased as a percentage of sales and remains a key area of cost
focus for us.
Research and development costs decreased by GBP6.0m compared to
the prior period which included ERP and transformation costs not in
the current year. The business continues to invest in the
capability development.
Other admin costs, which includes staff costs, decreased by
GBP8.4m to GBP61.2m as we look to reduce complexity and right size
overheads. Further savings will be seen in the second half of the
year.
Operating loss
Our operating loss for the period was GBP9.3m (2021: GBP3.0m),
for the reasons explained above.
Alternative Performance Measures
The Group tracks a number of alternative performance measures in
managing its business. These are not defined or specified under the
requirements of IFRS because they exclude amounts that are included
in, or include amounts that are excluded from, the most directly
comparable measure calculated and presented in accordance with IFRS
or are calculated using financial measures that are not calculated
in accordance with IFRS. The Group believes that these alternative
performance measures, which are not considered to be a substitute
for or superior to IFRS measures, provide stakeholders with
additional helpful information on the performance of the business.
These alternative performance measures are consistent with how the
business performance is planned and reported within the internal
management reporting to the Board. Some of these alternative
performance measures are also used for the purpose of setting
remuneration targets. These alternative performance measures should
be viewed as supplemental to, but not as a substitute for, measures
presented in the consolidated financial statements relating to the
Group, which are prepared in accordance with IFRS. The Group
believes that these alternative performance measures are useful
indicators of its performance.
EBITDA
EBITDA is defined by the Group as profit/(loss) from continuing
activities before interest, tax, depreciation, amortisation,
profit/loss on the disposal of fixed assets and impairment of
assets.
Adjusted EBITDA
Adjusted EBITDA is calculated by adding back or deducting
Adjusting items to EBITDA. Adjusting items are those items that the
Group excludes in order to present a further measure of the Group's
performance. Each of these items, costs or incomes is considered to
be significant in nature and/or quantum or are consistent with
items treated as adjusting in prior periods.
Excluding these items from profit metrics provides readers with
helpful additional information on the performance of the business
across periods because it is consistent with how the business
performance is planned by, and reported to, the Board and the Chief
Operating Decision Maker.
The reconciliation of statutory operating loss to Adjusted
EBITDA is as follows:
6 months 6 months
ended 30 ended 30
September September
GBPm 2022 2021 % change
Operating loss from continuing activities (9.3) (3.0) (217.4%)
Depreciation 12.5 11.7 (7.0%)
Amortisation 1.3 1.7 22.1%
Loss on disposal 0.7 0.3 (144.0%)
EBITDA 5.2 10.6 (51.6%)
------------------------------------------ ---------- ---------- --------
Adjusting items 3.6 - (100.0%)
Adjusted EBITDA 8.8 10.6 (17.7%)
------------------------------------------ ---------- ---------- --------
Adjusted EBITDA as % of Revenue 1.6% 1.5%
------------------------------------------ ---------- ---------- --------
Adjusting items
In the six months ended 30 September 2022, following the Group's
change of strategy to focus on the UK business, the Group has
started a simplification of its operations which has included
exiting various loss-making parts of the business including the
trial with Tesco, simplifying the organisational structure and
associated contracts. As a consequence, the Group has recognised an
expense of GBP3.6m relating to the restructuring which, due to its
size and nature, has been added back in arriving at Adjusted
EBITDA.
Taxation
The tax credit is recognised based on management's best estimate
of the weighted-average annual corporation tax rate expected for
the full financial year multiplied by the pre-tax results of the
interim reporting period. The Group's tax credit for the period is
GBP1.1m (2021: GBP2.2m credit) as a result of the expected
effective tax rate for the year of (4.47%) relating to continuing
activities in entities taxable in the UK.
After discrete tax adjustments relating to the period ended 30
September 2022 only, which include non-taxable foreign exchange
gains arising on intercompany balances, the closure of the German
business, the utilisation of losses brought forward and the net
disallowable in relation to share options the combined effective
tax rate for the period ended 30 September 2022 is 5.65% (2021:
22.26%).
The effective tax rate of 5.65% is lower than the UK corporation
tax rate for the period of 19% due to discrete items noted
above.
Discontinued Operations
In June 2022, the Group announced the closure of its German
operations. The website was closed on 1 July and in August AO
Deutschland completed the final deliveries on behalf of its third
party customers. Post closure, the majority of German employees
have now left the business and we are in the process of exiting
from the company's property portfolio which we anticipate to have
materially exited by the end of the financial year.
The German business is clearly distinguishable from the rest of
the Group and its numbers have been reported separately as an
operating segment in the FY22 Annual Report and Accounts.
Therefore, it meets the definition of a component of an entity and
as the plan is to dispose of all its assets via sale rather than
recovery through future use it meets the definition of a
discontinued operation. As a consequence the German business has
been classified as a discontinued operation in the income statement
and cashflow and the comparatives have been restated
accordingly.
Management continue to expect that the overall cash cost of
closure will be materially around zero.
Retained loss and loss per share
Retained loss for the period, including the loss from
discontinued operations, was GBP18.9m (2021: GBP8.2m).
Basic loss per share from continuing operations was 2.14p (2021:
0.45p) and diluted loss per share from continuing operations was
2.14p (2021: 0.45p).
Basic loss per share from continuing and discontinued operations
was 3.65p (2021: 1.72p) and diluted loss per share from continuing
and discontinued operations was 3.65p (2021: 1.72p).
The calculations for loss per share are shown in the table
below:
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
GBPm 2022 2021 2022
---------------------------------------------- -------------- -------------- ------------
Loss attributable to owners of the
parent company from continuing operations (11.1) (2.1) (3.6)
Loss attributable to owners of the
parent company from discontinued operations (7.9) (6.1) (26.8)
---------------------------------------------- -------------- -------------- ------------
Loss attributable to owners of the
parent company (19.0) (8.2) (30.4)
---------------------------------------------- -------------- -------------- ------------
Number of shares
Basic weighted average number of ordinary
shares 521,677,418 478,307,791 478,558,948
Potentially dilutive shares options 12,865,785 6,659,994 7,028,898
---------------------------------------------- -------------- -------------- ------------
Diluted weighted average number of
ordinary shares 534,543,203 484,967,785 485,587,846
---------------------------------------------- -------------- -------------- ------------
Loss per share (in pence) from continuing
operations
---------------------------------------------- -------------- -------------- ------------
Basic loss per share (2.14) (0.45) (0.75)
Diluted loss per share (2.14) (0.45) (0.75)
Loss per share (in pence) from continuing and discontinued
operations
------------------------------------------------------------------------------ ------------
Basic loss per share (3.65) (1.72) (6.33)
Diluted loss per share (3.65) (1.72) (6.33)
The diluted loss per share has been restricted to the basic loss
per share to prevent having an anti-dilutive effect.
Cash resources and cash flow
At 30 September 2022, the Group's net debt was GBP18.6m (31
March 2022: GBP32.8m; 30 September 2021: GBP17.7m). Net debt
comprises cash balances less borrowings and owned asset lease
liabilities. At 30 September 2022, the Group's total net debt,
being net debt less right of use lease liabilities, was GBP102.3m
(31 March 2022: GBP134.1m; 30 September 2021: GBP102.2m).
Cash balances at 30 September 2022 were GBP42.9m (31 March 2022:
GBP19.5m; 30 September 2021: GBP11.1m). The increase was largely
driven by the successful share placing in July 2022 which more than
offset the repayment of lease liabilities and the operating cash
outflow in the period.
Borrowings of GBP55.0m (31 March 2022: GBP45.0m; 30 September
2021: GBP20.0m) relate to short term funding drawn from the Group '
s revolving credit facility.
Lease liabilities of GBP90.2m (31 March 2022: GBP108.6m, 30
September 2021: GBP93.3m) with the reduction in the period due to
cash repayments in both the UK and Germany (the latter including
settlement of some leases following the closure of operations and
the reassessment of remaining lease terms for those properties
still held by the German business at 30 September 2022).
At 30 September 2022 the Group had GBP24.8m available on its
revolving credit facility. The amount utilised represents GBP55.0m
of cash borrowings (see above) and GBP0.2m of letters of
credit/guarantees.
Working Capital
30 September 2022 31 March 2022 30 September 2021
GBPm UK Germany Total UK Germany Total UK Germany Total
----------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Inventories 69.9 - 69.9 82.0 15.0 97.0 93.7 22.6 116.3
----------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Trade and other
receivables 236.2 2.3 238.5 243.9 18.2 262.1 240.7 17.0 257.7
----------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Trade and other
payables (261.7) (4.5) (266.2) (296.9) (23.4) (320.3) (314.9) (22.5) (337.4)
----------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net working
capital 44.4 (2.2) 42.2 29.0 9.8 38.8 19.4 17.1 36.5
----------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Change in net
working capital 15.4 (12.0) 3.4 9.6 (7.3) 2.3 65.7 (0.7) 65.0
----------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
At 30 September 2022, UK inventories were GBP69.9m (31 March
2022: GBP82.0m) and UK stock days were 33 days (31 March 2022: 34
days). We continue to run an efficient stock holding model
balancing a sensible level of inventory to maintain customer
availability, with continuing challenges in supply chain
availability.
UK trade and other receivables (both non-current and current)
were GBP236.2m as at 30 September 2022 (31 March 2022: GBP243.9m).
The decrease is reflective of the reduction in revenue and the
resultant impact on manufacturer rebates as well as accrued income
for mobile commissions and product protection plans.
UK trade and other payables were GBP261.7m at 30 September 2022
(31 March 2022: GBP296.9m). Trade payables days at 30 September
2022 were 50 days (31 March 2022: 47 days). As with inventories,
the reduction in trade payables since year end is primarily as a
result of the lower trading levels seen in the period.
The changes in working capital in Germany are all reflective of
the decision to close operations in June 2022 and any remaining
balances are expected to be settled in the second half of the
year.
Capital expenditure
Cash capex was relatively low in the first half of the financial
year at GBP1m (30 September 2021: GBP4.4m) and mainly related to
costs for our London Creative Studio. In the second half of the
financial year we expect to finalise an agreement to purchase the
leased land and property from which our Recycling business
operates, funded mainly through a commercial mortgage. Apart from
this, other capex will be at a similar level to the first half of
the financial year.
Post balance sheet event
Since the period end the Company has exercised its final call
option to acquire the remaining shares in AO Recycling Limited from
its founders for consideration of GBP2.4m. Accordingly, AO
Recycling is now a wholly owned subsidiary.
John Roberts Mark Higgins
Founder and Chief Chief Financial Officer
Executive Officer
CONDENSED CONSOLIDATED INCOME STATEMENT
For the 6 months ended 30 September 2022
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
GBPm Note 2022 2021 ([1]) 2022 ([1])
-------------------------------------- ---- -------------- ------------- -----------
Revenue 2 546.3 660.6 1,368.3
Cost of sales 3 (439.8) (530.3) (1,104.9)
-------------------------------------- ---- -------------- ------------- -----------
Gross profit 106.5 130.3 263.5
Administrative expenses 3 (118.0) (135.0) (272.7)
Other operating income 3 2.2 1.7 1.8
-------------------------------------- ---- -------------- ------------- -----------
Operating loss (9.3) (3.0) (7.5)
Finance income 4 1.5 1.3 2.6
Finance costs 5 (3.8) (2.6) (5.6)
-------------------------------------- ---- -------------- ------------- -----------
Loss before tax (11.6) (4.3) (10.5)
Taxation 0.6 2.2 7.2
-------------------------------------- ---- -------------- ------------- -----------
Loss after tax for the period from
continuing operations (11.0) (2.1) (3.3)
Loss for the period from discontinued
operations 11 (7.9) (6.1) (26.8)
-------------------------------------- ---- -------------- ------------- -----------
Loss for the period (18.9) (8.2) (30.1)
-------------------------------------- ---- -------------- ------------- -----------
Loss for the period attributable to:
Owners of the parent company (19.0) (8.2) (30.4)
Non-controlling interest 0.1 - 0.3
-------------------------------------- ---- -------------- ------------- -----------
(18.9) (8.2) (30.1)
-------------------------------------- ---- -------------- ------------- -----------
Loss per share (pence) from continuing operations
Basic loss per share (2.14) (0.45) (0.75)
Diluted loss per share (2.14) (0.45) (0.75)
Loss per share (pence) from continuing and discontinued
operations
Basic loss per share 6 (3.65) (1.72) (6.33)
Diluted loss per share 6 (3.65) (1.72) (6.33)
-------------------------------------- ---- -------------- ------------- -----------
[1] Comparatives have been restated to present Germany as
discontinued operations. Refer to note 11 for further details.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 6 months ended 30 September 2022
6 months 6 months Year ended
ended 30 September ended 30 September 31 March
GBPm 2022 2021 2022
---------------------------------------- -------------------- -------------------- ----------
Loss for the period (18.9) (8.2) (30.1)
Items that may be subsequently recycled to Income
Statement
Exchange differences on translation
of foreign operations (8.3) (1.6) 1.0
----------------------------------------- -------------------- -------------------- ------------
Total comprehensive loss for the period (27.2) (9.8) (29.1)
----------------------------------------- -------------------- -------------------- ------------
Total comprehensive loss for the period attributable
to:
Owners of the Company (27.3) (9.8) (29.4)
Non-controlling interests 0.1 - 0.3
----------------------------------------- -------------------- -------------------- ------------
(27.2) (9.8) (29.1)
---------------------------------------- -------------------- -------------------- ------------
Total comprehensive loss attributable to owners of the parent
arising from:
Continuing operations (11.1) (2.1) (3.6)
Discontinued operations (16.2) (7.7) (25.8)
----------------------------------------- -------------------- -------------------- ------------
(27.3) (9.8) (29.4)
---------------------------------------- -------------------- -------------------- ------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2022
30 September 30 September 31 March
GBPm Note 2022 2021 2022
------------------------------ ---- -------------- ------------ --------
Non-current assets
Goodwill 6 28.2 28.2 28.2
Other intangible assets 10.8 14.6 12.2
Property, plant and equipment 24.4 33.4 32.7
Right of use assets 73.1 75.3 86.6
Trade and other receivables 7 89.1 84.6 92.4
Deferred tax asset 10.1 5.7 9.0
------------------------------ ---- -------------- ------------ --------
235.7 241.8 261.1
------------------------------ ---- -------------- ------------ --------
Current assets
Inventories 69.9 116.3 97.0
Trade and other receivables 7 149.4 173.1 169.7
Corporation tax receivable 1.8 3.7 1.9
Cash and cash equivalents 42.9 11.1 19.5
264.0 304.2 288.1
------------------------------ ---- -------------- ------------ --------
Assets held for sale 11 3.9 - -
------------------------------ ---- -------------- ------------ --------
267.9 304.2 288.1
------------------------------ ---- -------------- ------------ --------
Total assets 503.6 546.0 549.2
------------------------------ ---- -------------- ------------ --------
Current liabilities
Trade and other payables 8 (262.6) (331.1) (313.9)
Borrowings 9 (55.0) (20.0) (45.0)
Lease liabilities 9 (18.8) (19.9) (20.3)
Provisions (2.7) (0.2) (0.4)
(339.1) (371.2) (379.6)
------------------------------ ---- -------------- ------------ --------
Net current liabilities (71.2) (67.0) (91.5)
------------------------------ ---- -------------- ------------ --------
Non-current liabilities
Trade and other payables 8 (3.6) (6.3) (6.4)
Lease liabilities 9 (71.4) (73.4) (88.3)
Deferred tax liability - (2.7) -
Provisions (3.1) (2.3) (2.5)
------------------------------ ---- -------------- ------------ --------
(78.1) (84.7) (97.2)
------------------------------ ---- -------------- ------------ --------
Total liabilities (417.2) (455.9) (476.8)
------------------------------ ---- -------------- ------------ --------
Net assets 86.4 90.1 72.4
------------------------------ ---- -------------- ------------ --------
Equity attributable to owners
of the parent
Share capital 10 1.4 1.2 1.2
Investment in own shares - - -
Share premium account 10 108.2 104.4 104.4
Other reserves 10 57.5 24.5 28.5
Retained losses (79.8) (38.7) (60.7)
------------------------------ ---- -------------- ------------ --------
Total 87.3 91.4 73.4
------------------------------ ---- -------------- ------------ --------
Non-controlling interest (0.9) (1.3) (1.0)
------------------------------ ---- -------------- ------------ --------
Total equity 86.4 90.1 72.4
------------------------------ ---- -------------- ------------ --------
CONDENSED CONSOLIDATED STATEMENT OF CHANGE IN EQUITY
At 30 September 2022
Other reserves
-----------------------------------------------------------
Share Investment Share Merger Capital Share-based Translation Other Retained Total Non-controlling Total
capital in premium reserve redemption payment reserve reserve losses interest
own account reserve reserve
shares
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- ----------- -------- -------- ----------- ------------ ------------ -------- --------- ------ ---------------- ------
Balance at 1 April
2022 1.2 - 104.4 22.2 0.5 11.8 (3.0) (3.0) (60.7) 73.4 (1.0) 72.4
(Loss) / Profit
for the period - - - - - - - - (19.0) (19.0) 0.1 (18.9)
Issue of share
capital
(net of expenses) 0.2 - 3.8 37.0 - - - - (2.0) 39.0 - 39.0
Foreign currency
loss arising on
consolidation - - - - - - (8.3) - - (8.3) - (8.3)
Share-based
payments
charge (net of
tax) - - - - - 2.2 - - - 2.2 - 2.2
Movement between
reserves - - - - - (1.9) - - 1.9 - - -
--------- ------
Balance at 30
September
2022 1.4 - 108.2 59.2 0.5 12.1 (11.3) (3.0) (79.8) 87.3 (0.9) 86.4
------------------ -------- ----------- -------- -------- ----------- ------------ ------------ -------- --------- ------ ---------------- ------
At 30 September 2021
Other reserves
-----------------------------------------------------------
Share Investment Share Merger Capital Share-based Translation Other Retained Total Non-controlling Total
capital in premium reserve redemption payment reserve reserve losses interest
own account reserve reserve
shares
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- ----------- -------- -------- ----------- ------------ ------------ -------- --------- ------ ---------------- ------
Balance at 1 April
2021 1.2 - 104.3 22.2 0.5 9.6 (4.0) (3.0) (33.1) 97.7 (1.3) 96.4
Loss for the
period - - - - - - - - (8.2) (8.2) - (8.2)
Issue of share
capital
(net of expenses) - - 0.1 - - - - - - 0.1 - 0.1
Foreign currency
loss arising on
consolidation - - - - - - (1.6) - - (1.6) - (1.6)
Share-based
payments
charge (net of
tax) - - - - - 3.4 - - - 3.4 - 3.4
Movement between
reserves - - - - - (2.6) - - 2.6 - - -
--------- ------
Balance at 30
September
2021 1.2 - 104.4 22.2 0.5 10.4 (5.6) (3.0) (38.7) 91.4 (1.3) 90.1
------------------ -------- ----------- -------- -------- ----------- ------------ ------------ -------- --------- ------ ---------------- ------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the 6 months ended 30 September 2022
6 months 6 months
ended 30 ended 30 Year ended
September September 31 March
GBPm 2022 2021 ([1]) 2022 ([1])
------------------------------------------------------------ ---------- ----------- -----------
Cash flows from operating activities
Loss for the period in continuing operations (11.0) (2.1) (3.3)
Net cash used in operating activities in
discontinued operations (6.9) (5.2) (7.3)
Adjustments for:
Depreciation and amortisation 14.5 13.4 28.5
Loss on disposals 0.7 0.3 0.4
Finance income (1.5) (1.3) (2.6)
Finance costs 3.8 2.6 5.6
Taxation (0.6) (2.2) (7.2)
Share-based payment charge 2.2 2.8 5.8
Increase in provisions 3.2 0.2 0.5
------------------------------------------------------------ ---------- ----------- -----------
Operating cash flows before movement in
working capital 4.4 8.5 20.4
------------------------------------------------------------ ---------- ----------- -----------
Decrease in inventories 12.2 21.3 33.0
(Decrease) / Increase in trade and other
receivables 9.2 (7.5) (10.8)
Decrease in trade and other payables (35.3) (78.6) (96.7)
Net movement in working capital (13.9) (64.8) (74.5)
Taxation received 0.7 0.7 1.7
------------------------------------------------------------ ---------- ----------- -----------
Cash used in operating activities (8.8) (55.6) (52.4)
------------------------------------------------------------ ---------- ----------- -----------
Cash flows from investing activities
Proceeds from the sale of property, plant
and equipment 0.1 - -
Acquisition costs relating to right of
use assets - - (1.0)
Acquisition of property, plant and equipment (1.0) (3.5) (7.4)
Acquisition of intangible assets - (0.9) (1.0)
Net cash (used in) investing activities
by
discontinued operations (0.3) (0.1) (0.2)
------------------------------------------------------------ ---------- ----------- -----------
Cash (used in) investing activities (1.2) (4.5) (9.6)
------------------------------------------------------------ ---------- ----------- -----------
Cash flows from financing activities
Proceeds from issue of ordinary share capital
(net of costs) 39.0 0.1 0.1
New borrowings 10.0 20.0 45.0
Interest paid (1.7) (0.7) (1.6)
Interest paid on lease liabilities (2.1) (1.9) (4.3)
Repayment of lease liabilities (8.1) (11.8) (21.2)
Net cash used in financing activities by
discontinued operations (3.7) (1.6) (3.6)
Net cash generated from financing activities 33.6 4.1 14.4
------------------------------------------------------------ ---------- ----------- -----------
Net increase / (decrease) in cash 23.4 (56.0) (47.6)
Cash and cash equivalents at beginning
of period 19.5 67.1 67.1
Exchange gains on cash & cash equivalents - - -
------------------------------------------------------------ ---------- ----------- -----------
Cash and cash equivalents at end of period 42.9 11.1 19.5
------------------------------------------------------------ ---------- ----------- -----------
[1] Comparatives have been restated to present Germany as
discontinued operations. Refer to note 11 for further details.
NOTES TO THE FINANCIAL INFORMATION
1. Basis of preparation
The interim financial information was approved by the Board on
21 November 2022. The financial information for the 6 months ended
30 September 2022 has been reviewed by the Group's external
auditor. Their report is included within this announcement. The
financial information for the year ended 31 March 2022 is based on
information in the audited financial statements for that period
which are available online at
https://www.ao-world.com/investor-centre/ .
The comparative figures for the year ended 31 March 2022 are an
abridged version of the Group's full financial statements and,
together with other financial information contained in these
interim results, do not constitute statutory financial statements
of the Group as defined in section 434 of the Companies Act 2006. A
copy of the statutory accounts for the year ended 31 March 2022 has
been delivered to the Registrar of Companies. The auditors have
reported on those accounts: their report was unqualified, did not
draw attention to any matters by way of emphasis and did not
contain a statement under s498(2) or (3) of the Companies Act
2006.
Going concern
Notwithstanding net current liabilities of GBP71.2m as at 30
September 2022, the financial statements have been prepared on a
going concern basis which the Directors consider to be appropriate
for the following reasons:
The Group meets its day-to-day working capital requirements from
its cash balances and the availability of its GBP80m revolving
credit facility (which was extended by 12 months to now expire in
April 2024). At the date of approval of these financial statements
total liquidity amounted to GBP71.6m.
The Directors have prepared base and sensitised cash flow
forecasts for the Group covering a period of at least 12 months
from the date of approval of these financial statements ("the going
concern period") which indicate that the Group will remain
compliant with its covenants and will have sufficient funds through
its existing cash balances and availability of funds from Revolving
Credit Facility to meet its liabilities as they fall due for that
period. The forecasts take account of current trading, management's
view on future performance and their assessment of the impact of
market uncertainty and volatility. Whilst outside of the going
concern period, management are also mindful that the revolving
credit facility expires in April 2024 and assume that a like for
like facility is obtained during the first half of 2023.
In assessing the going concern basis, the Directors have taken
into account severe but plausible downsides to sensitise its base
case and have run these in combination. These primarily
include:
-- a downside of negative growth in the financial year ending
31 March 2023 and in the subsequent periods to account for
how the overall electrical online market could be impacted
by the continuing macro-economic factors exacerbated by the
conflict in Ukraine, such as inflation, consumer confidence
and interest rate increases;
-- the impact of higher interest rates on the Group's borrowings;
-- product protection plan cancellation increases as a result
of macroeconomic trends;
-- cost inflation being higher than anticipated particularly
in relation to wages; and
-- a tightening of credit terms with suppliers as a result of
potential withdrawals or reductions of credit insurance which
could in turn, result in a reduction in trade creditor days.
The severe but plausible downside has been considered at a
reduction of 34% on the cumulative average trade creditor
days over the previous 5 years.
Under this severe but plausible downside scenario the Group
continues to demonstrate headroom on its banking facilities and
remains compliant with quarterly covenants which are linked to
interest cover, dividend cover and leverage and its annual covenant
linked to net assets.
Consequently, the Directors are confident that the Group and the
Company will have sufficient funds to continue to meet its
liabilities as they fall due for at least 12 months from the date
of approval of the financial statements and therefore have prepared
the financial statements on a going concern basis.
Basis of preparation and accounting policies
This condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting under UK-adopted
international accounting standards. The annual financial statements
of the Group for the year ending 31 March 2023 will be prepared in
accordance with UK-adopted international accounting standards. As
required by the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority, the condensed set of financial
statements has been prepared applying the accounting policies,
judgements and presentation that were applied in the preparation of
the Company's published consolidated financial statements for the
year ended 31 March 2022.
Discontinued Operations and restatement of comparatives
In June 2022, the Group announced that it had taken the decision
to close its business in Germany. As a consequence, the German
operations are treated as a discontinued activity under IFRS5 and
the results and cashflows are therefore shown separately on the
face of each of these primary statements; comparatives have been
restated accordingly.
Any remaining assets and liabilities continue to be shown in the
appropriate category on the face of the balance sheet except for
those assets held for resale which are expected to recover their
value via sale rather than in the normal course of business,
Further details are included in note 11.
Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, the
Directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant and are reviewed on an
ongoing basis. Actual results could differ from these estimates and
any subsequent changes are accounted for with an effect on income
at the time such updated information becomes available.
Accounting standards require the Directors to disclose those
areas of critical accounting judgement and key sources of
estimation uncertainty which carry a significant risk of causing
material adjustment to the carrying value of assets and liabilities
within the next 12 months. These are discussed below.
Impairment of intangible assets and goodwill
As part of the acquisition of Mobile Phones Direct Limited in
2018, the Group recognised amounts totalling GBP16.3m in relation
to the valuation of the intangible assets and GBP14.7m in relation
to residual goodwill. In aggregate as at 30 September 2022 these
amounted to GBP24.3m.
Intangible assets are reviewed for impairment if events or
changes in circumstances indicate that the carrying amount may not
be recoverable. Goodwill is reviewed for impairment on an annual
basis. When a review for impairment is conducted, the recoverable
amount is determined based on the higher of value in use and fair
value less costs to sell. The value in use method requires the
Group to determine appropriate assumptions (which are sources of
estimation uncertainty) in relation to the cash flow projections
over the three-year strategic plan period, the long-term growth
rate to be applied beyond this three-year period and the risk
adjusted pre-tax discount rate used to discount the assumed cash
flows to present value.
Whilst at 30 September 2022 the Directors have concluded that
there have been no events which would require a full impairment
review to be undertaken, and therefore that the carrying value of
the intangibles and goodwill is appropriate, relatively small
changes in any of the assumptions used in the annual review, which
could be driven by the end customer behaviour with the Mobile
Network Operators, could give rise to an impairment in the carrying
value.
Revenue recognition and recoverability of income from product
protection plans
Revenue recognised in respect of commissions receivable over the
lifetime of the plan for the sale of product protection plans is
recognised in line with the principles of IFRS 15, when the Group
obtains the right to consideration as a result of performance of
its contractual obligations (acting as an agent for a third
party).
Revenue in any one year therefore represents an estimate of the
commission due on the plans sold, which management estimate
reliably based upon a number of key inputs, including:
-- the contractual agreed margins;
-- the number of live plans;
-- the discount rate;
-- the estimated length of the plan;
-- the estimated historic rate of attrition; and
-- the estimated overall performance of the scheme.
Commission receivable also depends for certain transactions on
customer behaviour after the point of sale. Assumptions are
therefore required, particularly in relation to levels of customer
attrition within the contract period and expected levels of
customer spend. Such assumptions are based on extensive historical
evidence, and adjustment to the amount of revenue recognised is
made for the risk of potential changes in customer behaviour, but
they are nonetheless inherently uncertain e.g., changes seen in the
previous year as a result of Covid-19.
Reliance on historical data assumes that current and future
experience will follow past trends. The Directors believe that the
quantity and quality of historical data available provides an
appropriate proxy for current and future trends. Any information
about future market trends, or economic conditions that we believe
suggests historical experience would need to be adjusted, is taken
into account when finalising our assumptions each year. Our
experience over the last decade, which has been a turbulent period
for the UK economy as a whole, is that variations in economic
conditions have not had a material impact on consumer behaviour
and, therefore, no adjustment to commissions is made for future
market trends and economic conditions.
In assessing how consistent our observations have been, we
compare cash received in a period versus the forecast expectation
for that period as we believe this is the most appropriate check on
revenue recognised. Small variations in this measure support the
assumptions made.
For plans sold prior to 1 December 2016, the commission rates
receivable are based on pre-determined rates. For plans sold after
that date, base-assumed commissions will continue to be earned on
pre-determined rates but overall commissions now include a variable
element based on the future overall performance of the scheme.
Changes in estimates recognised as an increase or decrease to
revenue may be made, where for example, more reliable information
is available, and any such changes are required to be recognised in
the income statement. During the year, management have refined the
estimations in relation to claims (which impacts profit share)
based on more granular information from Domestic & General
regarding the claims performance of specific cohorts. This has
resulted in an increase in revenue recognised of GBP2.7m. As with
all years, other small refinements have been made but have had an
immaterial impact on the revenue recognised.
The commission receivable balance as at 30 September 2022 was
GBP92.6m (31 March 2021: GBP90.7m). The rate used to discount the
revenue for the FY23 cohort is 5.13% (2022: 3.54%). The weighted
average of discount rates used in the years prior to FY23 was 3.91%
(2022: 4.12%).
Revenue recognition and recoverability of income in relation to
network commissions
Revenue in respect of commissions receivable from the Mobile
Network Operators ("MNOs") for the brokerage of network contracts
is recognised in line with the principles of IFRS 15, when the
Group obtains the right to consideration as a result of performance
of its contractual obligations (acting as an agent for a third
party).
Revenue in any one year therefore represents an estimate of the
commission due on the contracts sold, which management estimates
based upon a number of key inputs, including:
-- The contractually agreed revenue share percentage - the percentage
of the consumer's spend (to MNOs) to which the Group is entitled;
-- The discount rate using external market data (including risk
free rate and counter party credit risk) - 2.20% (2022: 0.53%);
-- The length of contract entered into by the consumer (12 -
24 months); and
-- The estimated consumer average tenure which takes account
of both the default rate during the contract period and the
expectations that some customers will continue beyond the
initial contract period and generate out of contract ("OOC")
revenue (c4%).
The commission receivable on mobile phone connections can
therefore depend on customer behaviour after the point of sale.
The revenue recognised and associated receivable in the month of
connection is estimated based on all future cash flows that will be
received from the MNO and these are discounted based on the timing
of receipt.
This also takes into account the potential clawback of
commission by the MNOs and any additional churn expected as a
result of recent price increases announced and applied by the
MNO's, for which a reduction to revenue is made based on historical
experience. The Directors consider that the quality and quantity of
the data available from the MNOs is appropriate for making these
estimates and, as the contracts are primarily for 24 months, the
period over which the amounts are estimated is relatively short. As
with commissions recognised on the sale of product protection
plans, the Directors compare the cash received to the initial
amount recognised in assessing the appropriateness of the
assumptions used.
Changes in estimates recognised as an increase or decrease to
revenue may be made, where for example, more reliable information
is available, and any such changes are required to be recognised in
the income statement. During the year, management have refined the
estimations in relation to the assumed collection of commissions
utilising more recent trends (and ignoring the unusual factors seen
during FY21). This has resulted in an increase in revenue
recognised of GBP1.4m. Other small refinements have been made which
have had an immaterial impact on the revenue recognised.
The commission receivable balance as at 30 September 2022 was
GBP75.1m (31 March 2021: GBP83.4m). The rate used to discount the
current year revenue is 2.20% (2022: 0.53%).
Impairment of assets in AO Deutschland
In the prior year, due to the continued losses in Germany,
management commenced a strategic review of the operations in the
country. An impairment assessment as at 31 March 2022 was
undertaken and this resulted in the write down of certain assets at
the year-end.
In the current year, the Group has successfully negotiated the
exit from most of its existing lease commitments and where possible
managed to recover part of their valuation via third
party-settlements. This partial recovery has been reflected as a
reversal of a previous impairment in note 11. Any leases that the
Group has been unable to return to the landlord or sublease during
the period have been assessed for impairment as at 30 September
2022 and this resulted in the further write down of certain assets.
In addition, two properties owned by the company are for sale and
their carrying value is based on information at the time of
preparing this report. Should external factors change, this could
impact on the values reflected in the balance sheet.
Furthermore, negotiations with suppliers with regards to the
amounts due to or from the German business with regards to trading
have been ongoing throughout the period. At 30 September 2022,
following the conclusion of virtually all negotiations, the Group
is satisfied that amounts included in the balance sheet regarding
suppliers are either contractually due or payable.
Recoverability of Deferred tax assets
The group continues to recognise a deferred tax asset in respect
of UK tax losses brought forward. Tax losses brought forward
previously arising in the UK have been utilised against the current
period tax profit. The business expects to be profitable in the
future and therefore has assessed that continuing to utilise the
losses is probable, and as such the asset continues to be
recognised.
In recognising the asset, management have taken account of the
historic profitability of the UK business together with its
forecasts (utilising the same information as in the going concern
and viability statement). Management acknowledge that the economic
environment is providing a difficult backdrop on which to forecast
but believes that its forecasts reflect the impact of the current
challenges. However, as a consequence of the significance of the
asset, this is disclosed as a significant area of accounting
judgement.
2. Revenue
The table below shows the Group's revenue by each major business
area. All revenue is accounted for at a point in time as the Group
has satisfied its performance obligations on the sale of its
products/services.
Major product/services lines
6 months 6 months Year
ended 30 September ended 30 September ended 31
GBPm 2022 2021 March 2022
------------------------------ ------------------- ------------------- -----------
Product revenue 432.5 538.3 1,114.4
Service revenue 23.3 25.1 50.3
Commission revenue 65.9 75.6 156.8
Third-party logistics revenue 12.9 9.7 22.7
Recycling revenue 11.7 11.8 24.1
------------------------------ ------------------- ------------------- -----------
546.3 660.6 1,368.3
------------------------------ ------------------- ------------------- -----------
3. Segmental analysis
In the periods prior to the current period, the Group had two
reportable segments, online retailing of domestic appliances and
ancillary services to customers in the UK and online retailing of
domestic appliances and ancillary services to customers in Germany.
Following the decision in June 2022 to close the German operations
(which are now treated as discontinued), the UK operation is the
only reportable segment.
Operating segments are determined by the internal reporting
regularly provided to the Group's Chief Operating Decision Maker.
The Chief Operating Decision Maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Executive Directors and has
determined that the primary segmental reporting format of the Group
remains as geographical by customer location, based on the Group's
management and internal reporting structure.
4. Finance income
6 months 6 months
ended 30 ended 30 Year ended
September September 31 March
GBPm 2022 2021 2022
-------------------------------------- ----------- ----------- -----------
Unwind of discounting on non-current
contract assets 1.5 1.3 2.6
1.5 1.3 2.6
-------------------------------------- ----------- ----------- -----------
5. Finance costs
6 months 6 months Year ended
ended 30 ended 30 31 March
September September 2022
GBPm 2022 2021
------------------------------- ----------- ----------- -----------
Interest on lease liabilities 2.1 2.0 4.3
Interest on borrowings 1.4 0.5 0.6
Other finance costs 0.3 0.1 0.7
3.8 2.6 5.6
------------------------------- ----------- ----------- -----------
6. Goodwill
GBPm
----------------------------------------- -----
Carrying value at 30 September 2022 and
30 September 2021 28.2
----------------------------------------- -----
Goodwill relates to the purchase of Expert Logistics Limited,
the purchase by DRL Holdings Limited (now AO World PLC) of DRL
Limited (now AO Retail Limited), the acquisition of AO Recycling
Limited (formerly The Recycling Group Limited) and the acquisition
of Mobile Phones Direct Limited (now AO Mobile Limited) by AO
Limited.
Impairment of goodwill
UK CGU - GBP13.5m
At 30 September 2022, goodwill acquired through UK business
combinations (excluding Mobile Phones Direct Limited) was allocated
to the UK cash-generating unit ("CGU") which is also the UK
operating segment.
This represents the lowest level within the Group at which
goodwill is monitored for internal management purposes.
The Group performed its annual impairment test as at 31 March
2022. The recoverable amount of the CGU was determined based on the
value in use calculations. The Group prepared cash flow forecasts
derived from the most recent financial budget and financial plan
for three years, and extrapolated cash flows for the following
years, up until year five, based on an estimated growth rate of 1%.
This rate does not exceed the average long term growth rate for the
market. The final year cash flow is used to calculate a terminal
value.
During the six months ended 30 September 2022, there have been
no significant changes in the assumptions or performance of the
related businesses which would indicate an impairment test is
required at 30 September 2022.
AO Mobile Limited - GBP14.7m
At 30 September 2022, the goodwill allocated to the Mobile cash
generating unit was GBP14.7m.
The Group performed its annual impairment test as at 31 March
2022 which showed there was headroom against the carrying value of
GBP0.7m in managements base case. The main assumptions underlying
the value in use calculation were the volume of mobile connections
(and hence revenue) where growth was forecast at 3% per annum per
year and EBITDA that was assumed to stay flat at c2% and the
discounted rate.
The Directors performed sensitivity analysis on the numbers
included in the three-year strategic plan for the business in
assessing the value in use.
During the six months ended 30 September 2022, there have been
no significant changes in the assumptions or performance of the
Mobile business which would indicate an impairment test is required
at 30 September 2022.
7. Trade and other receivables
30 September 30 September 31 March
GBPm 2022 2021 2022
-------------------------------- ------------- ------------- ---------
Trade receivables 26.7 23.8 25.8
Contract assets 167.7 173.6 174.1
Prepayments and accrued income 43.5 49.5 50.0
Other receivables 0.6 10.8 12.2
-------------------------------- ------------- ------------- ---------
238.5 257.7 262.1
-------------------------------- ------------- ------------- ---------
The trade and other receivables are classified as:
30 September 30 September 31 March
GBPm 2022 2021 2022
-------------------- ------------- ------------- ---------
Non-current assets 89.1 84.6 92.4
Current assets 149.4 173.1 169.7
-------------------- ------------- ------------- ---------
238.5 257.7 262.1
-------------------- ------------- ------------- ---------
All of the amounts classified as non-current assets relate to
contract assets.
Contract assets
Contract assets represent the expected future commissions
receivable in respect of product protection plans and mobile phone
connections. The Group recognises revenue in relation to these
plans and connections when it obtains the right to consideration as
a result of performance of its contractual obligations (acting as
an agent for a third party). Revenue in any one year therefore
represents the estimate of the commission due on the plans sold or
connections made.
The reconciliation of opening and closing balances for contract
assets is shown below:
6 months 6 months Year
ended 30 ended 30 ended 31 March
September September 2022
GBPm 2022 2021
------------------------ ---------- ---------- ---------------
Balance brought forward 174.1 172.2 172.2
Revenue recognised 61.2 70.6 145.9
Cash received (71.2) (73.7) (151.0)
Revisions to estimates 2.1 3.2 4.4
Unwind of discounting 1.5 1.3 2.6
Balance carried forward 167.7 173.6 174.1
------------------------ ---------- ---------- ---------------
Included in the contract asset balance in relation to product
protection plans at 30 September 2022 was an amount of (GBP0.9m) in
relation to variable consideration recognised as revenue up to 31
March 2022 which has reversed in the period ended 30 September
2022. This is included in the revisions to estimates above.
Included in the contract asset balance in relation to Network
Commissions at 30 September 2022 was an amount of GBP3.0m in
relation to previously constrained revenue which has now been
recognised in the period ended 30 September 2022. This is included
in the revisions to estimates above.
The Group still recognises that there is inherent risk in the
amount of revenue recognised as it is dependent on future customer
behaviour which is outside of the Group's control and therefore at
30 September 2022 an amount of GBP8.2m has been constrained in
relation to revenue recognised relating to network commissions.
Product protection plans
Under our arrangement with Domestic & General ("D&G"),
the Group receives commission in relation to its role as agent for
introducing its customers to D&G and recognises revenue at the
point of sale as it has no future obligations following this
introduction. A discounted cash flow methodology is used to measure
the estimated value of the revenue and contract assets in the month
of sale of the relevant plan, by estimating all future cash flows
that will be received from D&G and discounting these based on
the expected timing of receipt. Subsequently, the contract asset is
measured at the present value of the estimated future cash flows.
The key inputs into the model which forms the base case for
management's considerations are:
-- the contractually agreed margins, which differ for each individual
product covered by the plan as is included in the agreement
with D&G;
-- the number of live plans based on information provided by
D&G;
-- the discount rate for plans sold in the year using external
market data - 5.13% (31 March 2022: 3.54%);
-- the estimate of profit share relating to the scheme as a whole
based on information provided by D&G;
-- historic rate of customer attrition that uses actual cancellation
data for each month since the start of the plans in 2008 to
form an estimate of the cancellation rates to use by month
going forward (range of 0% to 9.1% weighted average cancellation
by month); and
-- the estimated length of the plan based on historical data
plus external assessments of the potential life of products
(5 to 16 years).
The last two inputs are estimated based on extensive historical
evidence obtained from our own records and from D&G. The Group
has accumulated historical empirical data over the last 15 years
from c.2.9m plans that have been sold. Of these, c.1.05m are live.
Applying all the information above, management calculate their
initial estimate of commission receivable. Consideration is then
given to other factors outside of the historical data noted above
that could impact the valuation. This primarily considers the
reliance on historical data as this assumes that current and future
experience will follow past trends. There is, therefore, a risk
that changes in consumer behaviour could reduce or increase the
total cash flows ultimately realised over the forecast period.
Management makes a regular assessment of the data and
assumptions with a detailed review at half year and full year to
ensure this continues to reflect the best estimate of expected
future trends.
As set out in Note 2, the Directors do not believe there is a
significant risk of a material adjustment to the revenue recognised
in relation to these plans over the next 12 months. The sensitivity
analysis below is disclosed as we believe it provides useful
insight to the users of the financial statements into the factors
taken into account when calculating the revenue to be recognised.
The table shows the sensitivity of the carrying value of the
commission receivables and revenue to a reasonably possible change
in inputs to the discounted cash flow model over the next 12
months.
Impact on
contract asset
and revenue
Sensitivity GBPm
--------------------------------------------- ---------------
Cancellations increase by 2% (1.9)
Cancellation rate reduces by 2% 1.9
Profit share increases or (decreases) by 10% 1.8 / (1.8)
--------------------------------------------- ---------------
Cancellations
The number of cancellations and therefore the cancellation rate
can fluctuate based on a number of factors. These include
macroeconomic changes e.g., unemployment and changes in consumer
behaviour. The impact of reasonable potential changes is shown in
the sensitivities above.
Profit share
The profit share attaching to the overall scheme is dependent on
factors such as the price of the plan, the cost of claims and the
administration of the scheme itself. Given changes in macroeconomic
conditions, there is an increased risk that claims cost could
increase but this would be countered by an increase in the price
per plan. The above sensitivity considers what any reasonable
change in either of these could mean to the overall profit
share.
Network commissions
The Group operates under contracts with a number of Mobile
Network Operators ("MNOs"). Over the life of these contracts, the
service provided by the Group to each MNO is the procurement of
connections to the MNO's networks. The individual consumer enters
into a contract with the MNO for the MNO to supply the ongoing
airtime over that contract period. The Group earns a commission for
the service provided to each MNO. Revenue is recognised at the
point the individual consumer signs a contract and is connected
with the MNO. Consideration from the MNO becomes receivable over
the course of the contract between the MNO and the consumer. The
Group has determined that the number and value of consumers
provided to each MNO in any given month represents the measure of
satisfaction of each performance obligation under the contract. A
discounted cash flow methodology is used to measure the estimated
value of the revenue and contract assets in the month of
connection, by estimating all future cash flows that will be
received from the MNOs and discounting these based on the expected
timing of receipt. Subsequently, the contract asset is measured at
the present value of the estimated future cash flows.
The key inputs to management's base case model are:
-- revenue share percentage, i.e. the percentage of the consumer's
spend (to the MNO) to which the Group is entitled;
-- the discount rate using external market data - 2.20% (31 March
2022: 0.53%);
-- the length of contract entered into by the consumer (12 -
24 months); and
-- consumer average tenure that takes account of both the default
rate during the contract period and the expectations that
some customers will continue beyond the initial contract period
and generate out of contract revenue.
The last two inputs are estimated based on extensive historical
evidence obtained from the networks, and adjustment is made for the
risk of potential changes in consumer behaviour. Applying all the
information above, management calculate their initial estimate of
commission receivable. Consideration is then given to other factors
outside of the historical data noted above which could impact the
valuation. This primarily considers the reliance on historical data
as this assumes that current and future experience will follow past
trends.
The risk remains that changes in consumer behaviour may continue
and could reduce or increase the total cash flows ultimately
realised over the forecast period. Management make a regular
assessment of the data and assumptions with a detailed review at
half year and full year to ensure this continues to reflect the
best estimate of expected future trends and appropriate revisions
are made to the estimates. The sensitivity analysis below is
disclosed as we believe it provides useful insight to the users of
the financial statements by giving insight into the factors taken
into account when calculating the revenue to be recognised. The
table shows the sensitivity of the carrying value of the commission
receivables and revenue to a reasonably possible change in inputs
to the discounted cash flow model over the next 12 months, having
taken account of the changes in behaviour experienced in the
period.
Impact on
contract
asset and
revenue
Sensitivity GBPm
---------------------------------------- -----------
2% increase in cancellations (1.1)
2% decrease in cancellations 1.1
6% increase in contractual entitlement 1.2
---------------------------------------- -----------
Cancellations
The number of cancellations and therefore the cancellation rate
can fluctuate based on a number of factors. These include
macroeconomic changes e.g., unemployment, interest rates and
inflation. The impact of reasonable potential changes is shown in
the sensitivities above.
Contractual entitlement
The entitlement from the MNOs is based on our percentage share
of the customers spend. As monthly spend may increase given prices
are linked to RPI the Group's potential share of spend could
increase. Countering this, any increase in prices may result in
increased churn and therefore the above sensitivity aims to provide
a reasonable estimate of what any further change in RPI (primarily
from April 2023) could have on our contractual entitlement.
Prepayments and accrued income
At 30 September 2022, included in prepayments and accrued income
is GBP12.3m (30 September 2021: GBP15.7m) in relation to volume
rebates receivable. The amounts are largely coterminous and are
mainly agreed in the month after recognition.
At 31 October 2022, the balance outstanding was GBP3.5m (31
October 2021: GBP4.4m).
8. Trade and other payables
30 September 30 September 31 March
GBPm 2022 2021 2022
Trade payables 172.8 208.3 205.0
Accruals 25.1 36.4 28.9
Contract liabilities 34.4 47.9 44.1
Deferred income 17.3 24.4 18.1
Other payables 16.6 20.4 24.2
---------------------- ------------- ------------- ---------
266.2 337.4 320.3
---------------------- ------------- ------------- ---------
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 50 days (31 March 2022:
47 days; 30 September 2021: 47 days).
Contract liabilities includes payments on account from Mobile
Network Operators where there is no right of set off with the
contract asset and cashback liabilities due to the end customer
within the mobile business.
The trade and other payables are classified as:
6 months
ended 30 6 months Year ended
September ended 30 September 31 March
GBPm 2022 2021 2022
----------------------- ----------- -------------------- -----------
Current liabilities 262.6 331.1 313.9
Long-term liabilities 3.6 6.3 6.4
----------------------- ----------- -------------------- -----------
266.2 337.4 320.3
----------------------- ----------- -------------------- -----------
9. Net debt and movement in financial liabilities
6 months 6 months Year
ended ended 30 ended
30 September September 31 March
GBPm 2022 2021 2022
---------------------------------------- -------------- ----------- ----------
Cash and cash equivalents 42.9 11.1 19.5
Borrowings - Repayable within one year (55.0) (20.0) (45.0)
Finance lease liabilities - Repayable
within one year (1.9) (2.9) (2.0)
Finance lease liabilities - Repayable
after one year (4.6) (5.9) (5.3)
---------------------------------------- -------------- ----------- ----------
Net debt (excluding leases relating to
right of use assets) (18.6) (17.7) (32.8)
Right of use asset lease liabilities
-
Repayable within one year (16.9) (17.0) (18.3)
Right of use asset lease liabilities
-
Repayable after one year (66.8) (67.5) (83.0)
---------------------------------------- -------------- ----------- ----------
Net debt (102.3) (102.2) (134.1)
---------------------------------------- -------------- ----------- ----------
Whilst not required by IAS 1 Presentation of Financial
Statements, the Group has elected to disclose its lease liabilities
split by the nature of the asset that they relate to. This is to
give the users of these Financial Statements additional information
that the Directors feel will be useful to the readers understanding
of the business.
The movement in financial liabilities in the period ending 30
September 2022 was as follows:
Lease
GBPm Borrowings Liabilities
---------------------------------------- ---------- ------------
Balance at 1 April 2022 45.0 108.6
Changes from financing cash flows
New Borrowings 10.0 -
Repayment of lease liabilities - (8.1)
Capital repayments of lease liabilities
in Germany - (7.2)
Payment of interest (1.4) (2.1)
---------------------------------------- ---------- ------------
Total changes from financing cash flows 8.6 (17.4)
---------------------------------------- ---------- ------------
Other changes
New leases - 3.1
Interest expense 1.4 2.1
Reassessment of lease terms - (7.2)
Foreign exchange differences - 1.0
---------------------------------------- ---------- ------------
Total other changes 1.4 (1.0)
---------------------------------------- ---------- ------------
Balance at 30 September 2022 55.0 90.2
---------------------------------------- ---------- ------------
Lease
GBPm Borrowings Liabilities
---------------------------------------- ---------- ------------
Balance at 1 April 2021 - 95.3
Changes from financing cash flows
New Borrowings 20.0 -
Repayment of lease liabilities - (11.8)
Capital repayments of lease liabilities
in Germany - (1.2)
Payment of interest (0.5) (2.0)
---------------------------------------- ---------- ------------
Total changes from financing cash flows 19.5 (15.0)
---------------------------------------- ---------- ------------
Other changes
New leases - 10.9
Interest expense 0.5 2.0
Foreign exchange differences - 0.1
---------------------------------------- ---------- ------------
Total other changes 0.5 13.0
---------------------------------------- ---------- ------------
Balance at 30 September 2021 20.0 93.3
---------------------------------------- ---------- ------------
On 6 April 2020, AO Limited, a direct subsidiary of AO World PLC
entered into an GBP80m revolving credit facility. The facility is
secured by a debenture over the assets of the companies party to
the agreement, a charge over the relevant company shares and a
charge over the AO.com domain name. During the year ended 31 March
2022, the facility expiry date was extended by 12 months to 6 April
2024.
At 30 September 2022, AO Limited had undrawn amounts on its
revolving credit facility of GBP24.8m (31 March 2022: GBP30.1m).
The amount utilised at 30 September 2022 represents GBP55.0m of
cash drawings and GBP0.2m of letters of credit/guarantees.
10. Share Capital and other reserves
During the year, the Company completed a Capital raise through
the issue of 95,856,552 new ordinary shares of 0.25p each in the
Company raising GBP40.3m (before expenses). The net proceeds of the
Capital raise, which amounted to GBP39.0m, strengthened the balance
sheet and increased liquidity back to historic levels (relative to
revenue base), and provide the flexibility to capitalise on market
opportunities. The shares were issued by the Company in
consideration for the transfer of 100% of the issued share capital
of the cash box company. As a consequence, the Company has applied
the guidance included in section 612 of the Companies Act with
regard to merger relief and the difference between the nominal
value of the shares and their fair value has been taken to the
merger reserve.
In August 2022, the Company issued 1,541,911 ordinary shares of
0.25p each to satisfy options granted in July 2018 under the AO
2018 Incentive Plan.
The movement in Share Capital and other reserves, as a result of
the Capital raise and other share issues, during the period was as
follows:
Number Share
of shares Capital Share Merger
GBPm (Unless stated) (m) Premium Reserves
----------------------------- ---------- -------- -------- ---------
Balance at 1 April 2022 479.5 1.2 104.4 22.2
Share Placing 95.9 0.2 3.8 37.0
Other share issues 1.5 - - -
Balance at 30 September 2022 576.9 1.4 108.2 59.2
----------------------------- ---------- -------- -------- ---------
11. Discontinued operations
Due to the continued losses in Germany, in the latter part of
FY22, management commenced a strategic review of the operations in
that country. Following this review a decision was taken in June
2022 to close that business and in line with IFRS5 the business has
been treated as a discontinued operation in the six months ended 30
September 2022. The tables below show the results of the German
operation for the relevant reporting periods
Income Statement of discontinued operations
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
GBPm 2022 2021 2022
------------------------------- ------------- ------------- ---------
Revenue 36.4 99.0 189.0
Expenses (47.4) (105.1) (208.4)
------------------------------- ------------- ------------- ---------
Loss profit before tax (11.0) (6.1) (19.4)
Taxation credit / (charge) 0.5 - (0.1)
------------------------------- ------------- ------------- ---------
Loss after tax (10.5) (6.1) (19.5)
Gain / (Loss) on remeasurement
of assets 2.6 - (7.3)
Loss after tax of discontinued
operations (7.9) (6.1) (26.8)
------------------------------- ------------- ------------- ---------
The gain/(loss) on the remeasurement of assets arose following
the decision to close the business in June 2022. The balance sheet
at 31 March 2022 reflected management's initial view of the impact
on assets held based on information available at that date. As the
closure proceeded during FY23 and leases were exited, management
have been able to true up the original estimates and this has given
rise to a GBP2.6m reversal of previous impairments during the
period.
Cash flow statement
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
GBPm 2022 2021 2022
----------------------------------------- ------------- ------------- ---------
Net cash flows from operating activities (6.9) (5.2) (7.3)
Net cash flows from investing activities (0.3) (0.1) (0.2)
Net cash flows from financing activities (3.7) (1.6) (3.6)
----------------------------------------- ------------- ------------- ---------
Net cash flows from discontinued
operations (10.9) (6.9) (11.1)
----------------------------------------- ------------- ------------- ---------
12. Share-based payments
AO Incentive Plan
On 25 August 2022, the Company made awards to participants under
the AO 2018 Incentive Plan (2022 grant). The full details of these
grants can be found in the Group's most recent annual financial
statements.
Income Statement
The total charge in the Income Statement in relation to the AO
Incentive Plan and the original Value Creation Plan 2020, was
GBP2.1m (2021: GBP2.3m) and SAYE Schemes was GBP0.7m (2021:
GBP0.6m).
13. Post balance sheet event
Since the period end the Company has exercised its final call
option to acquire the remaining shares in AO Recycling Limited from
its founders for consideration of GBP2.4m. Accordingly AO Recycling
is now a wholly owned subsidiary.
14. Financial Instruments
As detailed in the Group's most recent annual financial
statements, our principal financial instruments consist of a call
and put option, trade and other receivables, accrued income, cash
and cash equivalents, trade and other payables and leases and
borrowings. As indicated in Note 1, there have been no changes to
the accounting policies for financial instruments, from those
disclosed in the Company's Annual Report at 31 March 2022.
There have been no changes to the categorisation or fair value
hierarchy (level three) of our financial instruments. The fair
values of cash and cash equivalents, trade and other receivables,
accrued income, and trade and other payables, leases and borrowings
are all deemed to approximate their carrying values and these can
be identified on the face of the Statement of Financial Position
and accompanying notes.
15. Principal risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from expected or historical results.
The Directors do not consider that the principal risks and
uncertainties have changed materially since the publication of the
Annual Report for the year ended 31 March 2022.
The principal risks as set out in the Annual Report are
summarised below and further information on these together with
information as to how the Group seeks to mitigate these risks is
set out on pages 54-65 inclusive of the Annual Report and Accounts
2022 which can be found at www.ao-world.com :
-- Risks relating to our culture and people.
-- Risk relating to IT systems resilience, cyber security and
agility.
-- Risks relating to compliance with changes in laws and regulations,
in particular Data protection and privacy legislation.
-- Risks of business interruption.
-- Risks relating to the macro-economic environment and competitive
conditions
-- Risks relating to our key commercial relationships and supply
chain
-- Risk relating to our funding and liquidity
-- Risks in relation to significant accounting matters including
revenue recognition and contract asset recoverability in
relation to product protection plans, revenue recognition
and contract asset recoverability in relation to network
commissions, the carrying value of goodwill and intangible
assets arising on the acquisition of AO Mobile Ltd, impairment
of assets in relation to AO Deutschland and going concern
and viability assessments.
Responsibility statement
Responsibility statement of the directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as
adopted for use in the UK;
-- The interim management report includes a fair review of
the information required by:
(a)DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have
occurred during the first six months of the financial year
and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties
for the remaining six months of the year; and
(b)DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken
place in the first six months of the current financial year
and that have materially affected the financial position
or performance of the entity during that period; and any
changes in the related party transactions described in the
last annual report that could do so.
On behalf of the Board
John Roberts Mark Higgins
CEO CFO
21 November 2022 21 November 2022
INDEPENDENT REVIEW REPORT TO AO WORLD PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2022 which comprises Condensed
Consolidated Income Statement, Condensed Consolidated Statement of
Comprehensive Income, Condensed Consolidated Statement of Financial
Position, Condensed Consolidated Statement of Changes in Equity,
Condensed Consolidated Statement of Cash Flows and the related
explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2022 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted for
use in the UK and the Disclosure Guidance and Transparency Rules
("the DTR") of the UK's Financial Conduct Authority ("the UK
FCA").
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued for use in the UK. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. We
read the other information contained in the half-yearly financial
report and consider whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed
set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of conclusion
section of this report, nothing has come to our attention that
causes us to believe that the directors have inappropriately
adopted the going concern basis of accounting, or that the
directors have identified material uncertainties relating to going
concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the group to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with UK-adopted international
accounting standards.
The directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report
in accordance with IAS 34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the
directors are responsible for assessing the group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review. Our conclusion, including our
conclusions relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the Basis
for conclusion section of this report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
David Neale
For and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
21 November 2022
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