AO closes Netherlands business as it focuses on sustainable growth

AO revealed the closure of the Dutch division as its unveiled first-half results showing “green shoots” in the UK and a “path to profitability” in Germany.

AO posted a statutory group operating loss of £10.6m – flat year on year – in the six months to September 30. Total sales advanced 16.3% to £470.1m, up 3.2% on a like-for-like basis excluding revenues from the AO Mobile phones business acquired last year and rebranded in the summer.

Total UK revenues rose 20.3% to £402.7m – 4.5% like-for-like excluding the mobile business, while in Europe they slipped 3.4% to €75.7m.

Pre-IFRS16 adjusted EBITDA in the UK rose to £7.8m from £6.9m and in Europe losses increased to €15.9m from €13.8m.

AO founder and chief executive John Roberts said: “These results were achieved during a period of significant change for the business where we were focused on laying the foundation for disciplined, long-term growth. 

“There are encouraging green shoots of profitable growth across our UK business, including within our core MDA offer and we will continue to invest to drive this further. 

“Our relentless focus to accelerate profitability in Europe continues and as part of this, we have today announced the closure of our Netherlands operation. This will enable us to concentrate on the transformation of our German business, where we have increased confidence in, and visibility of, the core drivers of the business model that will put us on the path to profitability.

“We have also kept a clear focus on cash generation, and we expect to be cash generative at a group level as we enter the new financial year.

“Our ecosystem of complementary products and services continues to strengthen, providing us with the belief that these can be leveraged to underpin future growth and profitability in the UK.  Overall, I am pleased with the operational progress that we have made.”

The closure of the loss-making Netherlands business is expected to cost about £3m.

Roberts said AO remains determined to build the German operations but struck a note of caution. He said: “We continue to be totally committed to the scale of the opportunity, the model and strategy in Germany and have real conviction that it will succeed.

“There are, however, a number of outcomes from the actions that we have taken that will not materialise until early 2020; if we are wrong in our conviction, it will be clear to us by at the very latest summer 2020 and in a worst case scenario we believe the cost of closure is c£20m.”