As if the first half of 2022 wasn’t tough enough for online electricals retailer AO World (AO.), with a cut to profit guidance, the second half started with a thorough drubbing for the shares.

After reports that one of its credit insurance providers had cut cover for its suppliers, AO shares dropped 18% on 4 July and a further 13% the following day, putting the stock at a new all-time low of 48.66p.

Credit insurance protects suppliers from the risk of retailers going bust between dispatching goods for sale and receiving payment.

Without it, suppliers could ask retailers for payment in advance, which would greatly increase their working capital needs.

While AO recognised one of its credit insurers had ‘rebased their cover’ from the elevated levels of the pandemic, the firm said there had been no effect on its liquidity.

Moreover, the cash costs of closing its German operations were now seen at the lower end of the original range of zero to £15 million.

On 6 July AO launched a share issue to raise £40 million. It said the money would help strengthen its balance sheet and increase liquidity back to historic levels.

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