AO World PLC (LSE:AO.) shares were sent up and down in early trading on Wednesday after the online electricals retailer reported record annual profit and unveiled plans to return a further £20 million to shareholders after strong cash generation boosted its balance sheet.
Revenue rose 11.4% to £1.27 billion in the year to 31 March, helped by market share gains across its core product categories and a full-year contribution from musicMagpie.
Adjusted profit before tax increased 16.1% to a record £50.5 million.
AO ended the year with net funds of £16.4 million, compared with net debt of £35.9 million a year earlier, as free cash flow rose to £66.4 million from £26.3 million.
The group said shareholder returns would be made up of a £10 million special dividend and a new £10 million share buyback programme. That follows completion of a £10 million buyback during the year.
John Roberts, founder and chief executive, said: "These results represent an incredible team effort with revenue up 11% to £1.27 billion, profit up 16% to a record £50.5 million, and the strongest balance sheet in our history."
AO attracted more than 720,000 new customers during the year and said its post-pay mobile business had become profitable. The group also launched its Switch24 mobile proposition and has begun trials of AO Mobile ahead of a wider rollout in the first quarter of the 2027 financial year.
Looking ahead, the company said it was confident of delivering profit before tax in line with current market expectations, currently £54.6 million, based on the strength of its value proposition, the non-discretionary element of much of its product range, internal cost management and continued investment in technology. It also remains confident in achieving a medium-term objective to deliver a 5% PBT margin.
House broker Peel Hunt said results came in just ahead of guidance.
"Given FCF is building at £40–60m pa, we expect enhanced returns to remain a feature. We leave forecasts unchanged as AO continues to build market share in major domestic appliances and other categories, with a raft of initiatives in train.
"AO shares trade on 13x FY27E PE, with a c.8% FCF yield."
The shares rose almost 4% in early trading before falling 3.3% to 92.86p.
** UPDATE: Adds share price and broker comment **
