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 certain asset leases, of which c.£10m of cash outflow would be due in future years.
"AO continues to have full access to its £80m revolving credit facility, the term of which runs until April 2024.
"In addition, the company continues to consider and implement a number of ongoing initiatives and further actions to strengthen its balance sheet while optimising its focus on profit and cash generation against the uncertain macroeconomic conditions in the UK and the continuing global supply chain challenges."
AO has already seen its share price decimated in recent months as its trading has pared back since a boom amid the pandemic, when bricks and mortar rivals were forced to shut.
The group issued its third profit warning in six months in April.
AO said Britons were cancelling repair warranties on their appliances to save money amid rising cost-of-living pressures.
There have also been mounting signs that consumer spending on big items is beginning to falter amid general belt-tightening in the face of soaring prices.
AO has moved to close its German business after eight years, announcing the decision last month.
It followed a strategic review launched in January, and warned that the closure will cost it up to £15m.
The company said at the time that it is set to post earnings of about £8m for the year to March, having guided late last year for annual earnings of between £10m and £20m.
The German business accounts for around 10% of AO's total group-wide revenues each year.
