City analysts have had their say on the future prospects of online electricals giant AO after it raised its expectations despite its losses widening during the first half of its current financial year.
Experts at Panmure Gordon have said they are not sure whether the Bolton-headquartered company is "out of the woods" on financing despite it "reverting to making some money rather than chasing sales" following the closure of its German operations.
AO, in an update to the London Stock Exchange, confirmed that its pre-tax losses had gone from £4.3m to £11.6m while its revenue had fallen from £660.6m to £546.3m.
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In response to AO indicating that there will be no cost to it existing Germany, Panmure Gordon pointed to a bill of £11m from winding down operations in the six months to the end of September this year.
On AO's improved guidance, Panmure Gordon added: "Whilst we acknowledge the unreliability of previous company guidance, we have increased our own estimates.
"We would note that AO made some fairly unenthusiastic comments about chasing the market for Black Friday and that at EBITDA level AO is seeking to mitigate the demand position by improving its gross margin and containing costs.
"So this is a more conservative trading style which looks sensible in the conditions being faced."
Panmure Gordon also said: "Clearly looking at the long-term potential feels like wishful thinking until AO has demonstrated that its new strategy works for more than a short period with weak comparatives.
"Clearly AO's trading has been affected by its working capital related liquidity and the decline of the online MDA market as Covid benefits have dropped away.
"That said it has also been affected by management's strategic mistakes which are maybe more understandable given the investment background at the time.
"AO is probably number one in the UK electricals online market and cannot operate differentially to the UK online market in aggregate.
"AO's performance is clearly by come distance worse than the +15% sales growth and 6.3% EBITDA booked by Marks Electrical at its recent interims.
"But it generally reflects where AO is coming from and the mistakes made over the Covid period.
"AO is looking to reset itself during a very testing period for demand and still appears vulnerable to external factors. But at least it now recognises its own position."
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