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AO World PLC on Wednesday said it plans to raise £40 million through a share placing to strengthen its balance sheet, just days after the online electricals retailer defended its financial position.
AO World will price its placing at 43 pence per share, an 8.5% discount to Tuesday's closing price of 47.0p.
Shares in AO World were 4.2% lower at 45.02p each in London on Wednesday morning, and the stock has lost 34% since the start of the week.
‘The company is a cash generative business at the UK operating level, and the capital raise will increase the company's liquidity back to historic levels (relative to revenue base), strengthen the balance sheet for suppliers and provide the flexibility to capitalise on market opportunities,’ said AO World.
Wednesday's fundraise comes just days after the Bolton, England-based electrical goods seller at the start of the week said its financial position was ‘in line with the board's expectations’.
AO World had confirmed in a statement on Monday that it was aware that one of the third-party credit insurers which provides credit insurance to some of its suppliers had rebased their cover in May with respect to AO World, reflecting post-Covid sales levels.
It followed a report in the Sunday Times which stated that Atradius, a credit insurer, cut its credit cover for the online retailer's suppliers. Credit cover is crucial aspect of the retail supply chain. It provides cover for firms should customers not pay debts in time or at all.
Also on Wednesday, AO World said first quarter trading was ‘materially in-line with the board's expectations’.
‘The board remains mindful of the ongoing volatile and challenging macroeconomic environment and continuing supply chain disruption,’ it added.
AO World said its realigned UK plan is targeting medium-term average revenue growth in excess of 10% per year and an Ebitda margin of over 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. It will also allow us to deliver on the new financial targets that we are setting today,’ said Chief Executive John Roberts.
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