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AO World has announced plans to shift the bulk of its customer service operations abroad after being hit with a higher wage bill in the UK.
The online white goods retailer flagged an extra £8.5million in annual costs from changes to employer National Insurance contributions and an increase in the minimum wage.
It said rising employment costs had prompted it to outsource its inbound sales operations to South Africa, which has delivered £2million in savings and is set to trim annual costs by £4million.
There have been no redundancies or job losses as a result of the outsourcing, but 150 new roles have been created in South Africa that otherwise would have been in the UK.
AO World plans to continue recruiting abroad, which is ‘expected to result in the majority of our customer engagement operations being based overseas by the end of the financial year.’
Boss John Roberts told BBC Radio 4 this morning that Labour was throwing ‘more and more headwinds’ at the company, and said the company’s record profits were ‘despite, not because of’ government policy.
Delivering profits: AO World boasted record annual profits, but its boss blasted Labour
In an update, AO World said ‘targeted pricing’ action helped to offset higher costs and deliver a record profit haul against a 'backdrop of rising costs'.
The retailer reported a 16.1 per cent increase in adjusted pre-tax profits to a record £50.5million, as revenues jumped 11.4 per cent to £1.27billion for the year to 31 March.
AO World said it attracted more than 720,000 new customers during the year, claiming the boost was 'fuel for our flywheel in the future'. It also pointed to its AO Membership scheme, which ‘remains central’ to its strategy.
The firm's bottom line was also bolstered by market share gains across its core product categories and a full-year contribution from musicMagpie, which it bought in December 2024.
The group's adjusted profit margin of around 4 per cent edged further towards its 5 per cent medium term target.
The FTSE 250 firm also vowed to return a further £20million to investors, made up of a £10million special dividend and a new share buyback programme of £10million.
Looking ahead, the retailer said it was confident of delivering an annual pre-tax profit in line with current market expectations, currently £54.6million.
Richard Hunter, head of markets at Interactive Investor, said: 'On a valuation basis the shares are at a level which is undemanding historically and the immediate outlook is brightening, such that the market consensus of the shares as a buy is likely to remain in place on further growth prospects.'
AO World shares fell 3.69 per cent or 3.54p to 92.46p on Wednesday morning.
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