AO expecting higher profits after raising delivery charges

AO is expecting to achieve higher profits than it previously thought after raising delivery charges.

The Bolton-headquartered online electricals giant issued an unscheduled update to investors in which it upped its earnings outlook for the third time in just over three months.

AO said its profits had seen a better-than-expected improvement as it drives cost savings thanks to a "resilient" customer base.

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But experts at City analyst firm Panmure Gordon said they believe the decision to raise how much it charges for delivery to be the "largest factor" in AO's profits boost.

AO is now expecting its underlying earnings to be in the range of £37.5m to £45m for its full financial year, up from the £30m to £40m it forecast last month.

The group had already increased earnings guidance in November and again in January as its turnaround plan to strip out costs has been bearing fruit.

In a statement to the London Stock Exchange, AO said: "The steps we have taken to simplify the business and become more efficient have outperformed expectations and been delivered quicker than expected."

"Margin improvement initiatives coupled with a continued resilient underlying customer base has driven higher retail gross margins than previously expected and we anticipate that this will continue for the remaining five weeks of the financial year," it added.

It comes after AO World slumped to a £12m loss in its first half, with shares hammered last year following a series of profit warnings as the cost crisis hit consumer spending on white goods, and due to labour shortages and supply chain disruption.

The company started its turnaround plan with a £40m fundraising round