ii view: AO World still hungry after 25 years
Shares in this online retailer are down by close to fifth over the last year. Analyst Keith Bowman looks at prospects.
4th July 2025 15:35
by Keith Bowman from interactive investor
Full-year results to 31 March
- Revenue up 9% to £1.14 billion
- Adjusted pre-tax profit up 32% to £45 million
- Profit margin of 4.1%
- Group net cash down 32% to £23 million
Guidance:
- Expects adjusted pre-tax profit for the current full year of between £40 million and £50 million
- Pursuing a profit margin of more than 5% over the medium target
Chief Executive John Roberts said:
"Our 25th year in business has been our best yet.
"One of the key drivers of this performance is our Five Star membership programme, which is giving our customers even more reasons to keep coming back to us.
"And the really great news is that there's so much more for us to go after, with a total addressable market of over £28 billion.”
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ii round-up:
Online electrical retailer AO World (LSE:AO.) sells items ranging from kitchen white goods to TVs, laptops, and mobile phones.
It employs around 2,800 staff.
For a round-up of these latest results announced on 18 June, please click here.
ii view:
Began in 2000 and headquartered in Bolton, AO World continues to be run by founder John Roberts.
Product sales accounted for most revenues over this latest fiscal year at 83%. That was followed by mobile phone related revenues at 8%. Then re-commerce sales, involving the buying and selling of refurbished products as well as media such as CDs, at 4%. Finally, third party logistics at 3%, and product recycling at 2%. Other group brands include musicMagpie and Elekdirect.
For investors, the tough economic backdrop and potential future tax rises given elevated government borrowing should not be overlooked. An all-online UK-only offering compares to both store outlets and exposure overseas for rival Currys (LSE:CURY). A lack of mobile phone innovation and consumer contentment to keep phones for longer fed into falling divisional revenues, while AO currently pays no dividend, unlike Argos owner Sainsbury (J) (LSE:SBRY).
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On the upside, a focus on profits has seen the bottom line growing faster than sales over this latest year. A diversity of businesses now includes re-commerce brand musicMagpie and an electrical goods recycling division. Net cash held offers a robust balance sheet, while new product categories now include drones, fitness, and health and beauty.
In all, and while some caution continues to remain sensible, a consensus analyst estimate of fair value above 130p per share suggests ongoing optimism in the City.
Positives:
- Without the costs of a store portfolio
- Refocused on its UK business
Negatives:
- Not yet paying a dividend
- Uncertain economic outlook
The average rating of stock market analysts:
Buy
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