AO World plc is looking to raise £40 million in a share placing and retail offer after its share price sank to 47 pence.

The online electricals retailer, which recently announced that it is to close the ‘deteriorating’ German arm of its business, is also set to ‘reduce overheads’ in the UK amid the cost-of-living crisis.

A month ago, the company’s share price was at 72p – giving the Bolton-headquartered company a market cap of £342m – having fallen from an all-time high of 429p at the height of the COVID-19 pandemic.

Today its market cap is £225m based on the 47p share price. The offer to investors is 43p, with a £250 minimum investment required from retail investors using the PrimaryBid app.

AO said the net proceeds of the capital raise ‘will strengthen the balance sheet and increase liquidity back to historic levels, relative to revenue base, and provide the flexibility to capitalise on market opportunities’.

AO is led by CEO and founder John Roberts and employs more than 4,000 people. It said that owing to an unprecedented environment for business planning in the shifting post-pandemic retail environment, it will ‘rationalise, simplify and refocus its UK operations, exiting some lines of business and driving operational efficiencies and overhead reduction’.

It estimates this will generate at least £25m of benefits by FY25, with a medium-term target of more than 10% average revenue growth and EBITDA margin of 5+%.

“In addition to being a sensible piece of financial house-keeping 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,” said Roberts. 

“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.”

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