AO launches £40m share placing after insurer cuts cover

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Pureplay electricals giant AO is aiming to raise £40m through a share placing weeks after its credit insurance for suppliers was cut.

AO van on street

AO said it needed a cash injection to tap into the growing market for online electricals

The retailer announced on Wednesday morning it is raising the funds immediately through an accelerated book-building process, offering investors new shares at 43 pence per share, and a separate offering through the PrimaryBid platform in a bid to raise £40m.

The proceeds will go towards strengthening AO’s balance sheet, increasing liquidity back to historic levels and providing “flexibility to capitalise on market opportunities.”

Jefferies and Numis are acting as joint global coordinators, joint bookrunners and joint brokers.

AO said it needed the fresh cash injection to tap into the growing £23.4bn market for online electricals, which represents “an unprecedented environment for business planning as the post-pandemic retail environment is substantially shifting, which presents both challenges and opportunities”.

The announcement comes just days after it emerged that AO’s finances were in question after Atradius cut its credit cover. Atradius provides credit insurance for AO’s suppliers, protecting them against the risk of the business going bust and leaving orders being made and not paid for.

It came after AO issued its third profit warning in a row at the end of April as the business was hit by soaring inflation and supply chain issues. The electricals pureplay also closed its German business earlier in the year.

AO said on Wednesday that current trading and financial performance during the first quarter was “materially in-line” with the board’s expectations. However, the retailer said it remained “mindful of the ongoing volatile and challenging macroeconomic environment and continuing supply chain disruption.”

Chief executive officer John Roberts said: “In addition to being a sensible piece of financial housekeeping given the short-term macroeconomic uncertainty, this Capital Raise will give us the necessary foundation from which to go after the significant long-term growth opportunities that we see for AO in the UK. It will also allow us to deliver on the new financial targets that we are setting today.

“Our core major domestic appliance category is proving to be resilient over time, given the natural replacement cycle of white goods and their non-discretionary nature. In addition, expanding into newer categories remains a key priority and a major opportunity for us. I remain hugely optimistic about the future of our business underpinned by the fantastic people we have in it and the way they amaze our customers every day.”