ii view: AO World completes Jessops purchase

First-half trading update to 30 September

• Expects revenues up 5.5%
• Expect pre-tax profit up over 20% to around £21.5 million

Guidance:

• Continues to expect full-year 2027 pre-tax profit in line with City forecasts of around £54.4 million versus last year’s £50.5 million
• Continues to target a medium term adjusted profit margin of 5%, potentially up from 4% over the last 2026 financial year

Chief Executive John Roberts said:

"We've carried our momentum into the new financial year with continued growth against a sluggish backdrop in the wider UK retail sector. We have given over £29 million of discounts to our members in the period, which is further proof that our shared economics model is doing exactly what it's built to do.

“Maintaining our world-class Trustpilot score of 4.9 out of 5 on over a million reviews does not happen by accident. It is a company-wide obsession and one we never take for granted.

“There continues to be a lot of uncertainty in the world but we look forward to heading into peak trading with confidence and momentum behind us."

• Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

ii round-up:

Retailer AO World (LSE:AO.) has completed the acquisition of photographic retailer Jessops, adding to its category capabilities and giving more reasons for consumers to become an AO member.

Sales for the half-year to late September rose 5.5% year-over-year, with expected growth in interim profit of more than 20% to around £21.5 million continuing to outpace growth in sales. Ongoing investments and tougher second-half comparatives leave annual profit expectations unchanged at around £54.4 million. That’s a potential increase from last year’s £50.5 million.

Shares in the FTSE 250 company fell 5% in reaction to the results having come into this latest news down by close to a fifth so far in 2026. However, they've since clawed back a lot of that lost ground. The FTSE 250 index is up around 9% this year. Rival Currys (LSE:CURY) have gained by close to a fifth year-to-date.

AO sells items ranging from kitchen white goods to TVs, laptops, and mobile phones, as well as operating recommerce website musicMagpie and chance to buy and sell both electrical items and media like DVDs.

AO expects to end the half-year with over £200 million in liquidity headroom, following a £10 million special dividend payment and the completion of half of its ongoing £10 million share buyback program.

The acquisition of Jessops comes via existing cash held and brings a trusted brand and specialist expertise in cameras and optical technology. It also brings Jessop’s own recommerce business, Camera Jungle, a business highly complementary to musicMagpie.

AO flagged its ongoing medium-term ambition to push its adjusted profit margin to 5%. That’s up from 4% achieved over its 2026 financial year to 31 March.

First-half results to 30 September are scheduled for 24 November.  

ii view:

Started in the year 2000 and headquartered in Bolton, AO today continues to be headed by founder John Roberts. AO sales to consumers totalled 72% of all sales over its last financial year, with those to businesses making a further 8%. Mobile phone related revenues totalled 6%, with recommerce revenues at 9%. Finally, revenues from delivery of other company’s goods came in at 3%, with those to recycle electrical items the balance of 2%.  

For investors, consumer incomes remained pressured by elevated energy prices, with next month's Autumn Budget possibly hiking taxes. An all-online UK-only offering compares to both store outlets and exposure overseas for rival Currys. An arguable lack of mobile phone innovation has left many consumers happy to keep existing handsets for longer, with such sales down 18% last financial year, while a forecast dividend yield of 2% at AO compares to yields of 2.3% and 4.2% at Currys and Argos owner Sainsbury (J) (LSE:SBRY).

• Week Ahead: Greggs, Saga, Topps Tiles, Wetherspoons
• Watch our webinar: Q4 Global Market Outlook
• Two-thirds of investors predict UK interest rate hike in November

More favourably, a focus on profits continues to see their growth rates outpace that of sales. The acquisition of Jessops adds another product category as well as boosting the recommerce business where existing sales rose 180% over the last financial year. High customer service levels continue to support a push to grow market share, while improved free cashflows over the last financial year generated a late March net cash balance of £16.4 million versus net debt of £36 million the year before.

On balance, and while risks remain, a consensus analyst fair value estimate above 140p per share points to ongoing optimism in the City.

Positives:

• Without the costs of a store portfolio
• Diversity of product categories

Negatives:

• Poor mobile phone sales
• Uncertain economic outlook

The average rating of stock market analysts:

Buy