AO tries to reassure customers after online electricals giant hits two-year low

AO has moved to reassure its customers after its value slumped to a two-year low. Shares in the Bolton-headquartered online electricals retailer fell by more than 18% at one stage in morning trading on Monday following the Sunday Times report revealing it has been hit by a cut in credit cover by Atradius.

Credit insurance protects suppliers against the risk of retailers collapsing before payment for goods is made and without this cover in place, suppliers often demand upfront payments, increasing cash flow woes.

Its share price recovered to just under 12% down when the group issued a statement reacting to the report to the London Stock Exchange.

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An AO statement said: "The company's current financial performance and financial position remain in line with the board's expectations and the guidance set out in its trading update on 29 April 2022.

"AO confirms that it is aware that one of the third-party credit insurers who provide credit insurance to some of its suppliers rebased their cover in May 2022 with respect to AO, reflecting post-Covid sales levels.

"This was a reduction from the heightened levels that had been in place and required through the period of the pandemic. To date this rebased cover has had no effect on AO's liquidity position which remains in-line with the Board's expectations for FY23."

On 9 June 2022, AO announced the decision to close its German operations. Progress to date has been encouraging with total cash costs of closure now expected to be towards the lower end of the company's original estimates of nil to £15m.

"The higher end of that range assumes the company would be unable to exit