Undervalued 5* power
AO’s FY25 results illustrate the power of its excellent customer service, rated 4.9/5 on Trustpilot.12% growth in B2C Retail revenues and a focus on improved unit economics has led to LFL Adj. PBT rising 32% to £45m - and margin +80bps to 4.1%.
As already announced, FY26E will bring significant cost headwinds and so Adj. PBT guidance is £40m-£50m (we are unchanged at £45m). However, the medium-term outlook for AO is encouraging given the revenue momentum and opportunity for further margin expansion.
Trading on under 15x Cal 2026 PER and a 7.5% Cal 2026 FCF yield we believe AO is significantly underrated and we reiterate our 150p fair value, equivalent to a cal 2026 FCF yield of 5%.
AO World is an electrical retailer. Co. sells major domestic appliances (such as freezers) and small domestic appliances (such as air treatment) and consumer electronics in the U.K., Germany and the Netherlands and delivers them via its in-house logistics business and third parties. Co. also provides ancillary services such as the installation of new and collection of old products and provides product protection plans and customer finance. Via its facility, Co. is also able to carry out the recycling of waste appliances. Co. has two reportable segments: online retailing of domestic appliances to customers in the U.K.; and online retailing of domestic appliances to customers in Europe.
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