The Bolton-based AO World (LON:AO.) states that it is the UK's most trusted online electricals retailer, with a mission to be the destination for electricals.
Its strategy is to create value by offering its customers, when buying electricals, brilliant customer service and making AO the destination for everything they need, in the simplest and easiest way.
And having used the service several times I can vouch that it does just what it ‘says on the can’ – fast, efficient service and offering well-priced goods.
The Business
The group’s range on offer takes in major and small domestic appliances and a growing range of mobile phones, audio and video, consumer electricals and laptops.
Importantly, it also provides ancillary services such as the installation of new and collection of old products and offers product protection plans and customer finance.
It just makes it so easy for its customers – which in turn engenders more and better business.
Additionally, its AO Business side serves the business-to-business market in the UK, providing electrical and installation services at scale.
It also has a waste electrical and electronic equipment processing facility, ensuring that customers' electronic waste is dealt with responsibly – which is an excellent part of the group’s service.
2024 Results
Having recently taken decisive action to remove non-core channels and loss-making sales, the group saw the year to end-March 2024 report a 9% lower revenue at £1,039m (£1,139m), but its adjusted pre-tax profits were up an impressive 186% to £34.3m (£12.0m), while its earnings were 280% better at 4.29p (1.13p) per share.
Outlook
In late June the group stated that despite the ongoing macroeconomic challenges, its objectives remain unchanged, and it is confident in the group’s ability to deliver its ambition for double-digit revenue growth in FY25 alongside adjusted pre-tax profits of £36m to £41m.
Its Management reiterated its medium-term guidance of an adjusted PBT margin of 5%, double-digit growth, and with its earnings per share growing faster than revenue.
Founder and CEO John Roberts stated that:
"We have made good progress on our profit performance in FY24, which is a testament to the success of our strategic pivot to focusing on profit and cash generation.
We are now a much simpler, more efficient business and are performing better than ever for customers, with excellent and sustainable unit economics.
Our focus now is on delivering profitable top line growth with an ambition for double digit revenue growth in FY25.
During the year we passed the milestone of 500,000 Trustpilot reviews, with an increased Trust score of 4.8 out of 5.
This ranks AO as the leading and most trusted UK retailer for the combination of volume and quality and is an output of the amazing service we deliver every day for customers at scale.”
Analyst Views
Some six analysts follow this group, with the consensus sentiment on Buy for the shares, with Price Objectives ranging from 75p at the lowest to 150p at the top end, the average comes out at 121.5p - 4 Buys, 1 Hold, 1 Sell.
At Equity Development its analysts Hannah Crowe and Caroline Gulliver are estimating that the current year to end-March 2025 will show £1,175.5m of sales, with adjusted pre-tax profits of £38.7m and earnings of 4.9p per share.
For 2026 already they have figures out for £1,328.3m in revenues, with £51.6m profits and 6.5p per share in earnings.
They have a fair value estimate for the group’s shares of 140p.
My View
This group is another rebound to growth stock.
With Mike Ashley’s Frasers Group as its biggest shareholder with 138.27m shares, some 23.89% of the group’s equity, while John Roberts has 16.83% and Camelot Capital Partners with 20.41% of the group’s 580.3m shares in issue.
Tomorrow will see the group hold its AGM, but unfortunately, I do not expect an AGM Trading Update.
Having risen from a 77p low a year ago, the shares are now at 108.5p after hitting 120p in early July.
We will have to wait until the week beginning 25th November interims, before the next corporate news to help the shares carry on their upward trajectory.
However, despite its high price-to-earnings ratio, I am bullish about this company and now set a Target Price of 136p for its shares.
(Profile 17.09.24 @ 108.5p set a Target Price of 136p)
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