AO World looking to automation and offshoring in face of wage cost surge

Independent

4 hours ago

Online electricals retailer AO World has revealed plans to use artificial intelligence and to offshore more work overseas in a bid to slash costs after seeing its wage bill surge.
The group revealed late last year that it was facing around an extra £8 million in costs a year from April's higher national insurance contributions and minimum wage rise.
It said on unveiling results on Wednesday that wage costs are set to keep rising over the next few years, 'so we will increasingly look to mitigate these costs through automation, outsourcing and offshoring'.
Founder and chief executive John Roberts told the PA news agency that the group had no plans to cut jobs and was recruiting staff, but said some of these would be likely to be outside of the UK.
He said: 'We don't have any plans to get rid of people or have any plans for redundancies.
'We're on a recruitment drive across the business.'
But Mr Roberts added that 'not all will be in the UK'.
'While the costs with legs walking into the business keep rising, then the motivation to invest more in efforts to try to offset that are increased,' he said.
The group already offshores some roles abroad and said it was looking to increase this, though Mr Roberts stressed service would have to be 'at the right standard'.
The chief executive warned last autumn when the extra costs were announced in the budget that prices would probably have to rise, but he told PA they had not risen significantly as the group looks to remain competitive.
The comments came as AO World revealed record annual profits, cheering the success of its membership scheme and surging sales.
The group reported a better-than-expected 32% rise in underlying pre-tax profits to £45 million for the year to March 31.
Including its recently acquired Music Magpie business, underlying profits rose 27% to £44 million.
The group saw like-for-like sales lift 7% to £1.11 billion and said it was 'confident' of another sales rise in the new financial year.
Sales were boosted by the deal to buy Music Magpie last October for around £10 million, with AO World saying this added £30 million to revenues.
It also hailed its membership scheme for helping drive sales, as well as moves to broaden its product range to about 9,000 items.
AO World said: 'Despite the wider macroeconomic challenges, particularly employment cost increases, our objectives remain unchanged and we are confident in our ability to continue to grow revenue, alongside group adjusted pre-tax profit of £40 million to £50 million.'