AO World saw its sales drop 17% in the six months to 30 September but the board was optimistic about the remainder of the year and eyed strong trading over the end of year festive period.

AO World sales fell to £546m in the first half, but were confident stringent management of costs would achieve full year adjusted EBITDA at the top end of their £20m-£30m guidance.

The optimism of their forecasts caught the attention of investors on Tuesday and AO World shares were over 15% higher at the time of writing. AO World shares are still 42% weaker year-to-date.

Analysts at AJ Bell highlighted the challenging nature of the retail environment and suggested the company were pinning their hopes on a strong festive period, which will be instrumental in achieving their guidance.

“First-half results from online electronics retailer AO World are being released in the calm before the storm which is Black Friday and Cyber Monday when the company will hope to be extremely busy,” said Russ Mould, investment director at AJ Bell.

“AO World was a pandemic winner whose fortunes have taken an alarming turn since, but these results hint that the company may have bottomed out and is ready to recover.

“The backdrop is undoubtedly difficult. Given the pressures on household budgets, people are putting off purchases of new appliances where they can, though to some extent if your washing machine or fridge freezer breaks down, a replacement is a non-discretionary item. 

“This set of numbers from AO World is as messy as the bottom of a student’s fridge, but management guidance is notably robust, with full-year earnings expected at the top end of expectations. Though it’s important to note this is largely being driven by cost cutting, rather than any inherent strength in the business.”

Severn Trent has provided insight into how they are operating in an environment punctuated by soaring inflation in their first half results in which revenue increased.

Soaring inflation meant the company’s revenue increased, but the impact of inflation-linked debt saw their overall earnings suffered.

Severn Trent’s revenue grew £103.6 million to £1,061.8 million but Adjusted basic EPS nearly halved to 29.9p from 54p.

The culprit was a sharp increase in net financing costs which hit £186.9m, compared to £120.8m in the year prior. This more than offset the increase in revenue and profit before interest and tax.

Nonetheless, Severn Trent increased their dividend. With a yield of 3.7%, the willingness to improve investor distributions, despite a challenging backdrop, will be an attraction to investors seeking a reliable income play.

“Severn Trent are showing the benefits of being a utility provider when inflation’s running wild, as inflation linked tariff rises gave revenue a £39m boost over the half,” said Matt Britzman, Equity Analyst at Hargreaves Lansdown.

“That’s not to say Severn Trent’s been immune to pressures, higher costs meant a big chunk of the 11% rise in revenue never made its way down to the profit line and inflations impact on index-linked debt meant financing costs shot up. Though it’s worth remembering, most of the rise in finance cost is a non-cash charge due to how changes in the value of index linked debt is accounted for, rather than a cost that had to be paid in cash.”

Real Good Food, the speciality food group focused on cakes, has secured £2.5m to fund their turnaround plan.

Real Good Food had previously announced a restructuring plan to deal with rising inflation which included job cuts and reduced overheads.

Real Good Food shares were up 42% at the time of writing on Monday.

The £2.5m injection came in the form of a 12 month facility from Hilco Private Capital which supplements a £6.3 million facility with Leumi ABL. Real Good Food now have a 12.1% average interest rate across third party funding.

“We are delighted that new funding has been secured to support the radical reform of RGF which is intended to reduce costs, protect revenues and preserve the inherent value of the Group,” said Mike Holt, Executive Chairman, Real Good Food

“With support from both customers and employees, we are making good progress on the required reforms and several major customers have already agreed to significant price re-sets. We are confident that the right actions are being put in place to return the business to sustainable profitability and being cash generative.”

“I am particularly pleased that Leumi ABL continues to support the Group and that Hilco has provided the new funds required. I would also like to thank our suppliers for their forbearance over recent months pending this funding being secured.”

One of Real Good Food’s main competitors was recently put into administration which highlights the risks to the business, but also the opportunity to gain market share.

Compass Group had a storming 2022 FY with revenue and new business surging on strong performance in North America and Europe.

Compass Group revenue grew 37.5% to £25.8bn in 2022 – and their 4th quarter sales were 116% of pre-pandemic 2019 levels.

The food services group saw their North American sales grow 53.4% on a reported basis and now accounts for 66.5% of group revenue. Europe’s share retreated to 23% from 25% in 2021.

Shares were slightly weaker on Monday, but Compass Group shares are still 23% higher over the last 52 weeks.

“On all metrics, this was a very strong year for Compass. Growth isn’t just coming from price increases, but also from new customers which the Group said exceeded its own expectations,” said Derren Nathan, Head of Equity Research at Hargreaves Lansdown.

“New business wins totalled £2.5bn, with a strong contribution from both North America and Europe. Pleasingly, 45% of this was from customers who were outsourcing their contract catering requirements for the first time.  We see this as reflective of long-term structural drivers that Compass Group is benefitting from and it’s a class operator, with customer loyalty reaching record levels.”

The group announced a £250m share buyback programme which may have disappointed some investors that were hoping for more. Nonetheless, Compass Group’s dividend jumped to 31.5p in 2022, up from 14p in 2021.