AO World – despite a fluctuating share price, I remain confident of further growth, shares 100.30p, new TP 120p

18.06.2025

This one has taken some time to wake up, following my Substack Profile way back in mid-September last year, in fact it has been something of a ‘latent dog’.

At that time the shares of AO World (LON:AO.), the UK’s most trusted electricals retailer, were 108.50p, with my Target price being set at 136p.

Within days they were up to 113p, since when they have been down to 85p.

That was at the beginning of April, following which the shares gradually moved up to 106.60p by the end of May.

Just a week ago they were down to 92.70p, before closing last night at 100.80p.

Yes, they see-saw around, ideal for market traders but somewhat dissatisfying for investors.

Now I feel that, despite the tricky retail environment generally, it is about to see a continuing upswing in its share price.

This Morning’s Finals

The £580m-capitalised group has today issued its results for the year to end-March 2025.

Including the recently acquired Music Magpie business, they showed a 9% increase in group revenues to £1,138m (£1,039m), but with a better than expected 27% increase in adjusted pre-tax profits to £44.0m (£34.0m), with basic adjusted earnings 33% better at 5.70p (4.29p) per share.

I noted that repeat customers accounted for over 60% of the group’s orders – and you know just how much I love to see ‘repeat revenues’ and AO World enjoys impressive business.

As for its treatment of electronic waste, the group also makes some very valid points in quoting that it has ​recycled or refurbished its eight millionth appliance at its AO Recycling facility – a totally ‘responsible’ aspect of the group’s growth.

Outlook

For the current year the group has a number of initiatives in the pipeline which are expected to give customers more opportunities to buy from AO World, and more reasons to keep on returning to do business.

Despite the wider macroeconomic challenges, particularly employment cost increases, the group states that its objectives remain unchanged and is confident in its ability to continue to grow revenue, with guidance of a group adjusted PBT of £40m to £50m.

Furthermore, in looking to the medium term, it has reiterated its ambition of delivering a PBT margin of over 5%.

While in the longer term, it is confident in its ability to take advantage of the circa £28bn total addressable market ahead of it.

Management Comment

Founder and CEO John Roberts today stated that:

"Our 25th year in business has been our best yet.

We've delivered a record profit before tax performance, significantly grown our sales, and continued to delight our ever-growing customer base with trusted, outstanding service.

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.

We're also broadening our product range beyond the Major Domestic Appliance category that we're best known for.

We added over 1,500 new products during the year, which means that categories such as fitness, drones, cameras and health and beauty are all now available at fantastic prices through AO.

And the really great news is that there's so much more for us to go after, with a total addressable market of over £28bn.

Given the size of that prize, the fantastic momentum that we're seeing across the business, and our awesome team of AOers, I couldn't be more excited about the next 25 years. In many ways, we're only just getting started."

The Business

AO World, which is based in Bolton is the UK's most trusted major electricals retailer, with a mission to be the destination for electricals.

The group’s strategy is to create value by offering its customers brilliant customer service and making AO the destination for everything they need, in the simplest and easiest way, when buying electricals. 

The retailer offers major and small domestic appliances and a growing range of mobile phones, audio visual, consumer electricals and laptops.

It also provides ancillary services such as the installation of new and collection of old products and offers product protection plans and customer finance.

The group also serves the business-to-business market in the UK, providing electricals and installation services at scale.

AO also ensures customers' electronic waste is dealt with responsibly through its waste electrical and electronic equipment processing facility.

With over 580.3m shares in issue, the group's largest shareholder is Mike Ashley and his Frasers Group with 25.01% of the equity, ranking ahead of Camelot Capital Partners (20.41%), and CEO John Roberts (16.40%).

Other larger holders include Phoenix Asset Management Partners (5.84%), Odey Asset Management (5.13%), Lancaster Investment Management (4.09%), The Vanguard Group (2.38%), Waystone Management (2.29%), Union Bancaire Privee (1.34%), and BlackRock Investment Management (1.03%).

Analysts at Peel Hunt, Canaccord Genuity and Jefferies all rate the group’s shares as a Buy, with the top Target Price being 150p.

My View

I still see this group’s shares going a lot higher than the 100.30p at the time of writing this note.

I do admit, though, that on recent price performance it may well take some time before my 136p Target Price is achieved.

AO World recycling

Accordingly, I am now setting a new Target Price of 120p, which could well be achieved within the next year.

(Profile 17.09.24 @ 108.50p set a Target Price of 136p)

(Profile 18.06.25 @ 100.30p set a Target Price of 120p)