18 June 2025

 AO WORLD PLC

FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2025

RECORD £45M LFL ADJUSTED PBT, AHEAD OF ORIGINAL GUIDANCE

12% SALES GROWTH IN CORE B2C RETAIL BUSINESS

AO World plc ("AO" or "the Group"), the UK's most trusted electrical retailer, today announces its audited financial results for the financial year ended 31 March 2025 ("FY25").

Our core B2C Retail business saw strong growth in the year, in line with our expectation of delivering double-digit growth. As planned, adjusted profits on a like-for-like (LFL¹) basis grew faster than revenues at 32% despite macroeconomic headwinds, with LFL adjusted profit before tax above the top end of our previously upgraded range of £39 to £44m.

Financial highlights 

• ​LFL Group revenue grew 7%, to £1.108bn with core B2C Retail revenue up 12% to £832m. Growth was driven by the expansion of our Five Star membership offering as well as the broadening of our product range to c9,000 products. musicMagpie contributed an additional £30m revenue to the Group for the period.

• ​As planned, LFL adjusted profit before tax grew faster than revenue - up 32% to £45m -with LFL adjusted PBT margin of 4.1%, making good progress towards our medium-term target of 5%. 

• ​Free cashflow of £23m (2024: £21m) driven by strong operating performance and efficient working capital management. The Group ended the year with net funds of £23m after the c.£35m cash costs relating to the musicMagpie acquisition and the funding of the EBT to purchase shares to satisfy share schemes.

• ​The Revolving Credit Facility was increased and extended with the total facility increasing from £80m to £120m which remains undrawn and now expiring in October 2028.

Operational highlights

• ​Successful acquisition of musicMagpie, enabling further vertical integration and enhancement of our customer offering in the electricals market.

• ​Five Star membership momentum continues to be strong with growth in membership numbers, renewal rates and share of wallet.

• ​Implementing our third-party warehousing solution for small products in the year has improved the unit economics enabling the profitable expansion of our range and therefore giving customers, particularly Five Star members, even more reasons to buy from us.

• ​Repeat customers accounted for over 60% of orders and are cheaper to acquire, give us better share of wallet and buy across more categories. We expect this trend to continue to improve over time as the proposition and awareness of it across categories grows.

• ​Over 650,000 new customers⁶ chose to buy from us for the first time during the year, which is fuel for our flywheel in the future.

• ​Cemented our position as the UK's most trusted electrical retailer in the year - increasing our Trustpilot⁶ score to a globally leading 4.9/5 on over 750,000 reviews.

• ​Extension to December 2033 of our arrangement with Domestic and General in relation to the sale and promotion of the "AO Care" product protection plans.

• ​Extension of NewDay arrangement to August 2033, with a rebase of commercial terms and a roadmap for future growth.

• ​Our culture is thriving, with happy, committed and engaged employees delivering exceptional customer service. AO was named as a top 200 UK best employer following a survey carried out by the Financial Times and Statista.

• ​Performance in the Mobile business has been materially behind our expectations and a drag on profits as the post-pay connection market has declined further, and customer preference has shifted towards disaggregation of mobile contracts. We continue to review our strategy in this area and will not continue to fund material losses going forward.

• ​Recycled or refurbished our eight millionth appliance at our AO Recycling facility.  Further capex investment in the facility included the addition of an extruder to the plastics plant which increases our capability to refine plastic output and is critical to our ambition of creating new fridges from old fridges.

Outlook

As we look to FY26 we have a number of initiatives in the pipeline which we expect to give customers more opportunities to buy from us, and more reasons to keep coming back to us. Despite the wider macroeconomic challenges, particularly employment cost increases, our objectives remain unchanged and we are confident in our ability to continue to grow revenue, alongside Group adjusted PBT of £40m to £50m.

Looking to the medium term, we reiterate our ambition of delivering a PBT margin of over 5%. And in the longer term, we are confident in our ability to take advantage of the c. £28bn total addressable market that we have in front of us.

AO's Founder and Chief Executive, John Roberts, said:

"Our 25th year in business has been our best yet. We've delivered a record¹⁰ 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."

Results presentation

An in-person results presentation will be held for analysts and investors at AO's London Office at 09.00am (BST) today, followed immediately by a live Q&A session. Advanced registration prior to arrival is required via [email protected].

A playback of the presentation will be available on AO World's investor website at www.ao-world.com in the afternoon.

About AO

AO World PLC, headquartered in Bolton and listed on the London Stock Exchange, is the UK's most trusted major electricals retailer, with a mission to be the destination for electricals. Our strategy is to create value by offering our customers brilliant customer service and making AO the destination for everything they need, in the simplest and easiest way, when buying electricals. 

We offer major and small domestic appliances and a growing range of mobile phones, AV, consumer electricals and laptops. We also provide ancillary services such as the installation of new and collection of old products and offer product protection plans and customer finance. We also serve the B2B market in the UK, providing electricals and installation services at scale. AO also ensures customers' electronic waste is dealt with responsibly through its WEEE processing facility alongside tech refurbishment via musicMagpie.

¹Like-for-like basis relates to the continuing operations of the Group excluding the post-acquisition revenue and profit before tax of musicMagpie.

² B2C (business-to-consumer) Retail revenue relates to products and services purchased by B2C customers through the retail websites (including membership fees and revenue attributable to protection plans sold with the products).

³Adjusted profit before tax is defined as statutory profit before tax adjusted for the fees related to the musicMagpie acquisition and the impairment charge relating to the Mobile cash generating unit.

⁴Adjusted basic earnings per share is defined as basic earnings per share adjusted for the impact of the fees relating to the acquisition of musicMagpie and the impairment charge relating to the Mobile CGU.

⁵ Free cashflow is defined as the movement in cash and cash equivalents in the year of (£12.7m) excluding the cost of funding the EBT to acquire shares in the company of £11.1m, the net cost of acquiring musicMagpie of £5.7m and the repayment of its debt of £19.1m.

⁶A customer is defined as an individual customer who has purchased via ao.com.

⁷Trustpilot scores sourced from their website, June 2025.

⁸ Total electricals market data from GfK, for the 12 months to 31 March 2025. AO's value is from company data, net value.

⁹Net funds is defined as cash and cash equivalents less borrowings less owned asset lease liabilities but excluding right of use asset lease liabilities.

¹⁰Record is defined as record LFL adjusted PBT.

Cautionary statement                                                                                                                           

This announcement may contain certain forward-looking statements (including beliefs or opinions) with respect to the operations, performance and financial condition of the Group. These statements are made in good faith and are based on current expectations or beliefs, as well as assumptions about future events. By their nature, future events and circumstances can cause results and developments to differ materially from those anticipated. Except as is required by the Listing Rules, Disclosure Guidance and Transparency Rules and applicable laws, no undertaking is given to update the forward-looking statements contained in this document, whether as a result of new information, future events or otherwise. Nothing in this document should be construed as a profit forecast or an invitation to deal in the securities of the Company. This announcement has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to AO World PLC and its subsidiary undertakings when viewed as a whole.

STRATEGIC REVIEW

Revenues in our core B2C Retail business have grown by c12% YoY, with total Group revenues (on a LFL basis) increasing by c7% YoY to £1.1bn. LFL adjusted PBT was £45.2m, with profits growing faster than sales, at 32% YoY.

Our balance sheet is robust and at the period end we had net funds⁸ of £23m following the acquisition of musicMagpie and the repayment of its debt (£25m) as well as the funding our Employee Benefit Trust to purchase AO shares (£11m) in the market to satisfy employee awards. The Group increased and extended its Revolving Credit Facility in the period on more favourable terms from £80m to £120m, which remains undrawn and now expiring in October 2028.   

This strong performance was delivered despite continuing challenges for our Mobile business which is operating in a declining market and continues to see significant competition.  These challenges have led to the impairment in the goodwill and intangible assets associated with the Mobile business of £19.6m at year end.  Nonetheless, mobile as a category is strategically important to the Group both through a consumer and supplier lens and we intend to offer both a SIM only and credit backed SIM free products on ao.com in the future. We will review our post pay connection business as we do not have appetite for continued losses on this area.   

As anticipated, there has been an impact to operational costs, particularly in our logistics operation, from inflationary pressures both in the year and as the benefit of multi-year contracts roll off. The largest increase in both quantum and percentage terms has been employment costs.  This will only further increase in FY26 because of government policy changes to minimum wage and employers NI. We anticipate that this is likely to continue for the next few years, and so we will increasingly look to mitigate these costs through automation, outsourcing and offshoring.

During the year we acquired musicMagpie, one of the UK's leading recommerce operators. With highly complementary business models, this acquisition will enable AO to enhance our consumer tech proposition. It offers a differentiated service to our customers, and will unlock value through our reverse supply chain while simultaneously advancing our sustainability objectives.    

Critically, we have continued to perform exceptionally well for customers over the year.  Our Trustpilot score has increased to 4.9 and we now have over 750,000 reviews, cementing our position as the UK's most trusted electrical retailer.  Our AO Five Star membership continues to grow strongly and we are increasing our frequency and share of wallet with customers, having re-engineered our model for cost effective warehousing and distribution of smaller items and newer categories. 

Our culture and people are fundamental to our success, and it is pleasing to see another year of high engagement, with an average Employee Index Score ("EIS") for the year of 81.  Our people are happy, committed, and have a sense of belonging - which is a key element of our ability to provide exceptional service to our customers. We are operating with a growth mindset, and working together cohesively and collaboratively across the Group to drive stakeholder value.  

OPERATIONAL AND FINANCIAL REVIEW

Operational highlights

B2C Retail

Our B2C Retail business is one of the UK's market leaders in MDA retailing. We serve customers directly through our website, ao.com, as well as through various marketplaces. Established over 20 years ago, we offer a comprehensive range of MDA products, smaller domestic appliances, computing, AV, mobile phones, consumer electronics, gaming and smart home products.

Ao.com, is the cornerstone of our retail operations and we pride ourselves on our exceptional customer service, extensive product range and competitive pricing. We are committed to enhancing the customer experience through improved product information, diverse payment options, flexible delivery and installation options, and recycling services. By continuously monitoring the market, we maintain our price promise to customers.

This year, over 650,000 new shoppers chose to buy from us bringing the total historical customer base on ao.com to over 12.5 million. We continue to report market-leading customer satisfaction scores with a Trustpilot rating of 4.9/5, on over 750,000 reviews, which undoubtedly supports a customer repeat rate of over 60% during the year. It also reflects our unwavering commitment to outstanding service, which we firmly believe is the most economical way to serve customers - that is, getting it right first time.

Our share of the total MDA market⁸ increased in the year by 1.1% to 16%, meaning that we have plenty of headroom to grow further in this core category. We continue to expand our product range in all categories, particularly those outside MDA, and now sell over 9,000 different SKU's; an increase of around 1,500 in the year.

Maintaining and improving brand awareness is key to driving new customers, and ensuring repeat customers keep returning. We continue to invest in advertising and marketing spend, with an increase in the year on direct acquisition costs with immediate transaction links, as well as continued brand investment across sponsorships, postal mail brochures and other media.

Our Care product protection offering performed resiliently as customers continue to recognise the value and peace of mind that our plans offer. We have extended our arrangement with Domestic and General in relation to the sale and promotion of our Care product protection plans to December 2033.

Shortly before the end of the period we extended our arrangement for a further seven years with New Day, who provide our Customer Finance. The extension allows for a number of new innovative finance products that we look forward to being released in the coming year.

Mobile

Mobile is the largest category in the electrical sector by value, and a strategically important product for AO to make available to its customers - given it is the product they change the most frequently and have the most emotional attachment to. However, our Mobile business has faced a challenging year, and the new contract mobile phone market decline of c13% has been driven by depressed customer demand, a lack of handset innovation and a move towards disaggregated contracts. The shrinking market has forced up acquisition costs through affiliate channels and reduced margins as competitors fight for share which has ultimately led to an impairment in the goodwill and intangibles of the Mobile business of £19.6m. We have focused on delivering a competitive and compelling proposition for our customers, but this has resulted in losses in the year.

We have made strategic progress, notably securing an exclusive licence from Lebara to operate a mobile handset webshop under the Lebara brand, leveraging their customer base. In addition, we entered into an agreement with Samsung where we provide a facility for customers buying handsets from Samsung, to be coupled with an airtime contract from certain mobile network operators.

As we enter the new financial year we are evaluating the non-core mobile websites with a view to finding a path to profitability, or closing those sites. We are looking to find sustainable solutions with the mobile network operators ("MNO") on whose behalf we connect customers to ensure that both parties make a sensible economic return. We will also enhance the offering on our main ao.com website and expect to launch a mobile virtual network operator ("MVNO") proposition and improved customer finance offerings that will leverage our brand and position our proposition in a way that resonates with customer demand.

musicMagpie

We were delighted to welcome the musicMagpie team to the AO family in December 2024. The acquisition will augment our capability and value capture in the consumer technology categories as well as further driving our ESG credentials. We expect that in time this will improve the affordability of many products on ao.com for customers, helping to further differentiate the AO proposition.

Logistics

Our market-leading in-house logistics infrastructure enables the nationwide delivery of millions of products annually, seven days a week, serving both AO's retail business and third-party clients. Our delivery network operates from our central hub in Crewe and encompasses warehouses and distribution centres with a total of over 1.4 million sq ft of space, supplemented by a network of 16 delivery depots across the UK.

With our continued focus on profit and cash generation, our logistics division continued to look to drive costs down and enhance efficiencies within our delivery and warehousing operations throughout the year. Our operations are adaptable to the retail business's demands for driver resources and can leverage our operational gearing through third-party logistics. Our expertise in complex two-person delivery, which is highly valued in our industry, allows us to achieve incremental profitability without detracting from our core business.

It is critically important that our people and our delivery partners are happy and feel valued in the work they do, given how central they are to delivering exceptional service to our customers.  During the year we reviewed the structure of driver payments which has resulted in increased tenure with a consequential link to customer satisfaction.

As part of the Group's wider roadmap for technology development, during the year we commenced the process of replacing our warehouse management systems which are expected to go live in FY26. We continue to invest in our fleet with a focus on driving capacity per vehicle as well as moving our trunking fleet to compressed natural gas fuel, with the target of having the vast majority transitioned by 2030.

We also outsourced the warehousing of smaller products to a third-party early in FY25. This change has improved unit economics and enabled us to expand the range of products available to customers giving them even more reasons to buy from us.

Recycling

Our recycling plant in Telford is one of the most sophisticated fridge recycling facilities in Europe and adheres to the highest UK and European standards. This ensures the safe and efficient capture of environmentally harmful gases and oils. We specialise in recycling refrigeration products, including large American style fridges, but also process all old fridges and other white goods. Our highly skilled repairs team refurbishes appliances that still have a useful life, which are then sold with a warranty through our established base of trade customers.

We recycled or reused over 1.2m products in the year, bringing the total number of products recycled or reused to over 8.5 million. We continue to promote recycling by making it easy and accessible to all our customers.

We invested in our plastics refining facility during the year with the addition of an extruder which processes the plastics flakes into pellet form - a more commoditised and valuable product.  This has helped us develop our circular economy strategy with clients such as Volution Group and Ultra-Polymers and we were pleased to have been awarded BEAMA's Net Zero Collaboration Award for our work with Vent-Axia (a Volution Group brand), creating ventilation products from our recycled fridge plastics. Our medium-term strategic objective continues to be "Closing the Loop" partnerships with key manufacturers to supply recycled products to make electrical appliances and in doing so maximising value recovery.

We continue to collect third-party volumes using our own logistics network, providing efficient service from council amenity sites, while reducing the number of miles driven.

We continue to monitor potential legislative changes, including Extended Producer Responsibility and the possibility that retailers will have to take back old waste products for free when they deliver new ones. Although this will add complexity to our operation and comes at a cost, with our vertically integrated logistics and recycling businesses we would be best placed amongst our competition to deal with such a requirement should it arise and indeed it could provide further downstream opportunities.

Technology

During the year we continued to deliver against our multi-year technology strategy, with strong progress across digital, data, and core systems transformation. Our focus remained on enhancing customer experience, increasing operational efficiency, and building a scalable, resilient technology foundation for future growth.

We commenced Phase 2 of our ERP transformation programme, aiming at delivering significant process simplification and improved data visibility across supply chain & warehouse management. Our application modernisation agenda advanced further, including implementation of a new Contact Centre platform that will improve customer support experience and operational insight.

We also made progress in our data and analytics strategy-expanding our use of machine learning and advanced analytics to inform business decisions and enable more personalised customer interactions.

In parallel, we continued to invest in cyber security and resilience - focussing on technology, people and process - maintaining a strong security posture in an evolving threat landscape.

Looking forward we will complete the second phase of our ERP transformation programme in FY26. We will continue evolving our digital and data platforms-deepening the integration of AI/ML capabilities into core business processes and expanding the use of real-time data to improve responsiveness and performance. As part of our modernisation strategy, we will focus on rationalising legacy systems, accelerating cloud adoption, and continuing to shift undifferentiated workloads to enterprise-grade platforms.

Customer experience will remain a key priority. We will further enhance our personalisation capabilities, with new tools and data models aimed at delivering more relevant and engaging customer journeys across channels.

Finally, we will build on our progress in technology governance, architecture, and delivery capability ensuring we can scale sustainably, innovate responsibly, and support the evolving needs of the business.

Financial performance

The 2025 Financial Year saw a continued focus on growing revenue whilst generating profit and cash. The financial year covered a period of depressed consumer confidence because of the ongoing cost-of-living crisis as well as geopolitical events giving rise to uncertainty and volatility. Despite this backdrop, we maintained our strategy of delivering profitable, cash generative growth, through the following key steps:

1. Improving gross margin

We continued to improve our gross margin by optimising product margins and outsourcing the warehousing of small products to a third party. This transfer facilitated improved unit economics which has allowed us to increase the range of small products we offer to customers.

2. Optimisation of processes

A culture of continual improvement has delivered efficiency wins across our key operations including Logistics and Recycling. The vertically integrated nature of our business enables us to benefit from small changes in business units, generating financial gains to the P&L quickly, as well as capability wins for the business as we look to deliver profitable revenue growth.

3. Ongoing overhead control

We maintain our disciplined approach to overhead cost control. We are investing in making operational efficiencies to deal with inflationary pressures across all areas of overheads, specifically in our headcount cost.

4. Conversion of profit to cash

Converting profit to cash is a key component of our ability to deliver further growth. It has enabled us to invest in assets to drive the long-term profitability of the business. The current year has seen us continue to invest in our plastic processing plant at our recycling business and acquire musicMagpie to further strengthen our vertically integrated model.

We increased and extended our Revolving Credit Facility in October 2024 with the total facility increasing to £120m with the facility now due to expire in October 2028.

Our priorities for the current financial year remain to leverage our cost base and strengthen our balance sheet for profitable growth. AO remains a market leader in MDA in the UK with a 16% share of the total market, which provides us with a strong and resilient base from which to grow. Our strategy is to invest prudently in the business, seize the significant market opportunities that we see in front of us, and leverage our growing and loyal customer base.

The following commentary, unless otherwise stated, covers our UK business only and includes musicMagpie from the point of acquisition on 12^th December 2024.

Revenue

For the 12 months ended 31 March 2025, total Group revenue (including musicMagpie) increased by 9.5% to £1,137.5m (2024: £1,039.3m). LFL revenue increased YoY by 7% to £1.108bn.

B2C Retail Revenue

Revenue in our core B2C Retail business has increased 12% YoY in the in line with our plan to achieve double-digit revenue growth.  This increase has been driven by growth in product, service and delivery and product protection plan revenue.  Product, service and delivery revenue is generated from ao.com, marketplaces and third-party websites.

This performance comes as a result of our increased drive to grow not only our MDA market share but also in other electrical appliances. Our MDA revenue increased YoY by c8%, with our total MDA market share increasing c1% to 16%8. There was an increase in service revenue, which includes membership income, fees for delivery, recycling, installation and related services mainly driven by the increase in product revenue.

B2B Retail Revenue

Revenue has decreased 10.5% YoY in B2B as expected, in line with the groups focus on optimising for profitability.

Mobile revenue

Mobile revenue, generated from commissions paid by the phone networks per connection, decreased as a result of a decline in the total new contract market, and as we optimise our margin and acquisition cost structure.

Re-commerce revenue

Recommerce revenue is generated from product sales through Elekdirect and musicMagpie as well as reworked recycled products through AO Recycling.  Revenue grew YoY by £32.0m mainly as a result of the acquisition of musicMagpie on 12^th December 2024.

Third-party logistics revenue

Third-party logistics increased YoY by 10.8%, generating total revenue of £30.5m. Our expertise in complex two-person delivery is highly valued in our industry, and we undertake a number of deliveries and other services on behalf of third-party clients in the UK including Hisense and Simba. This revenue delivers incremental profitability. The business will continue to maximise this revenue opportunity to leverage our operational gearing, without it distracting from the core business.

Recycling revenue

Recycling revenues increased 2.6% over the year, which again was a pleasing performance when taking into account the wider trading environment. Increased MDA sales and uptake of our recycling service by customers increased processed volumes year on year along with the introduction of the palletisation of plastic. This increase in volumes was offset by a decrease in output prices for recycled materials due to market forces.

Gross Margin

Gross profit, including product margins, services and delivery costs, increased by 13.5% to £276.0m (2024: £243.3m), against a sales increase of 9.5%. Gross margin increased by 0.9ppts to 24.3%. This increase reflects the significant steps taken by the business to offset inflationary increases in operational costs through operational efficiencies, pricing actions and optimising margin.

Selling, General and Administrative Expenses ("SG&A")

SG&A costs excluding the adjusting items (see Alternative Performance measures for further detail) increased to £232.1m (2024: £207.7m). Costs increased as a percentage of sales as a result of increased warehouse costs.

Advertising and marketing costs increased to £44.4m (2024: £40.5m) but remained flat as a percentage of revenue at 3.9%. We have seen a small increase in acquisition spend as a percentage of total revenue and have chosen to invest in direct marketing channels and move away from TV spend.

Warehousing costs, which include the costs of running our central warehouses for both our customers and for our third-party customers, the outbase infrastructure and our recycling operation increased to £62.0m (2024: £52.2m). The impact of inflation saw an increase in general property costs including rates; increased operational labour costs as well as an increase in rent for one of our central warehouses. Operational efficiencies including outsourcing the warehousing of SDA products and leasing warehouse space to third parties acted to partly offset the inflationary costs.

Other admin costs have marginally decreased as a percentage of revenue, with total pound spend in the year of £125.7m (2024: £115.0m). Inflationary pressures, mainly driven by wage inflation offset by our continued drive to right size the business and drive efficiencies.

Alternative performance measures

The group tracks a number of alternative performance measures in managing its business. These are not defined or specified under the requirements of IFRS because they exclude amounts that are included in, or include amounts that are excluded from, the most directly comparable measure calculated and presented in accordance with IFRS or are calculated using financial measures that are not calculated in accordance with IFRS. The Group believes that these alternative performance measures, which are not considered to be a substitute for, or superior to, IFRS measures, provide stakeholders with additional helpful information on the performance of the business. These alternative performance measures are consistent with how the business performance is planned and reported within the internal management reporting to the Board. Some of these alternative performance measures are also used for the purpose of setting remuneration targets. These alternative performance measures should be viewed as supplemental to, but not as a substitute for, measures presented in the consolidated financial statements relating to the Group, which are prepared in accordance with IFRS. The Group believes that these alternative performance measures are useful indicators of its performance.

Adjusted profit before tax

Adjusted profit before tax is calculated by adding back or deducting Adjusting Items to Profit Before Tax. Adjusting Items are those items which the Group excludes in order to present a further measure of the Group's performance. Each of these items, costs or incomes, is considered to be significant in nature and/or quantum or are consistent with items treated as adjusting in prior periods.

Excluding these items from profit metrics provides readers with helpful additional information on the performance of the business across periods because it is consistent with how the business performance is planned by, and reported to, the Board and the Chief Operating Decision Maker.

Adjusting items of £22.9m for the year ended 31 March 2025 are as follows:

·   On 12th December 2024, the Group acquired the whole of the issued and to be issued share capital of musicMagpie plc. Costs, relating to advisor fees, incurred during the period in relation to this transaction total £3.3m; and

·   The continued challenging trading conditions in the mobile market triggered an impairment review of the Mobile Cash Generating Unit ("CGU") resulting in an impairment charge of £14.7m recognised to reduce the goodwill in relation to this CGU down to nil and a further impairment of £4.8m against the carrying value of intangible fixed assets.

Due to their size and one off nature, these costs have been treated as adjusting items and are added back in arriving at Adjusted profit before tax. There were no Adjusting Items in the prior year.

LFL adjusted profit before tax

To give a meaningful comparison against prior years and in line with guidance previously given to the market we have stated a LFL adjusted PBT.  This is Adjusted PBT adding back the pre-tax losses of musicMagpie of £1.7m for the period from acquisition to 31 March 2025 to enable comparison on a LFL basis

The reconciliation of statutory Profit Before Tax to Adjusted PBT and LFL adjusted PBT is set out in table 4.

Taxation

The tax charge for the year was £10.9m (2024: £9.6m) resulting in an effective rate of tax for the year of 53.0%. The effective rate of tax is higher than the UK corporation tax rate for the period of 25% predominantly due to the impact of the non-deductible adjusting items (see above) in particular the goodwill impairment of £14.7m and the acquisition costs of £3.3m. Excluding these adjusting items, the effective rate of tax for the year would have been 28.3%.

Pillar Two legislation has been enacted in the UK to introduce the multinational top-up tax and domestic top-up tax to accounting periods beginning on or after 31 December 2023. The Group have performed an assessment of this legislation and do not expect a potential exposure to Pillar Two income taxes.

Our tax strategy can be found at ao-world.com/ responsibility/group-tax-strategy.

Retained profit for the year and earnings per share

The Group's retained profit for the year was £10.5m (2024: £24.7m).

Earnings per share were as follows:

Adjusted basic earnings per share is calculated by adding back the Adjusting items - see table 4 above

Cash resources and cashflow

At 31 March 2025, the Group's available liquidity, being Cash and cash equivalents plus amounts undrawn on its revolving credit facility, was £147.3m (2024: £116.4m). On 8 October 2024, the Group increased and extended its Revolving Credit Facility with the total facility increasing from £80m to £120m which now expires in October 2028. The total amount utilised at 31 March 2025 on the existing facility was £0.1m and represents letters of credit (2024: £3.7m of guarantees and letters of credit).

During the year, the Group had a cash outflow of £12.7m (2024: £21.0m inflow) as set out in the table below:

Cashflow from UK operating activities £56.8m (2024: £62.1m)

Despite the improvement in the operating performance in the year as detailed above, operating cashflows reduced largely due to an increase in tax payments (£9.3m v £1.2m) as a consequence of the majority of tax losses being utilised in the prior year. Working capital continued to be well controlled with key movements set out in the table below.

The Group's movement in working capital outflow is set out in the table below:

Inventories increased by £9m in the year principally as a result of the acquisition of musicMagpie (£5m) and within our Retail business where we continue to improve availability as well as broadening the range of products, particularly in new categories. Inventory days were 47 days at 31 March 2025 (31 March 2024: 43 days).

Trade and other receivables reduced by £14m to £191m. This was driven in the main by the impact of lower connection volumes in our Mobile business with cash received from past connections outweighing new income recognised.

Trade and other payables reduced by £15m to £213m. This again was impacted by Mobile with reduced connections impacting the purchases in the last quarter in addition to a reduction in upfront payments received from the networks. In the rest of the Group, the phasing of purchases in Q4 of each year in Retail impacted the year end position and the acquisition of musicMagpie added c£6m of payables to the current year. Creditor days at 31 March 2025 were 52 (31 March 2024: 55) reflecting continued support from our supplier base.

Cashflow from UK investing activities £13.5m outflow (2024: £7.6m outflow)

Cash capital expenditure in the year of £8.8m principally related to the continued refresh of delivery vehicles in Logistics and further investment in our Recycling activities. In addition, in December 2024, the Group acquired the whole of the issued share capital of musicMagpie for net cash consideration of £5.7m. 

Cashflow from UK financing activities £57.1m outflow (2024: £32.9m outflow)

The cash outflow principally related to lease repayments of £21.2m (2024: £18.4m), the purchase in the market, by the Company's EBT of shares in the Company totalling £11.1m (2024: £nil) including transaction fees, repayment of borrowings acquired with musicMagpie of £19.1m and net interest paid of £5.7m (2024: £6.9m).  The prior year also included the repayment of borrowings on the Group's revolving credit facility of £10.0m.

Net funds and total net debt

As a result of the above movements, Net funds and Total net debt were as follows:

Borrowings of £1.9m (2023: £2.1m) relate to a mortgage used to partly fund the acquisition of one of the Group's recycling sites.

Lease liabilities decreased by £7.4m to £61.4m (2024: £68.8m) principally reflecting capital repayments of £21.2m offset partly by net new leases of £10.4m (including the reassessment of lease terms) mainly relating to leased premises in our Logistics business and £3.4m of property leases acquired with musicMagpie.

CONDENSED CONSOLIDATED INCOME STATEMENT

For the year ended 31 March 2025

The Group has no items of other comprehensive income for the period ended 31 March 2025 or the prior period. As a result, the total comprehensive income for the period is the same as the profit for the period and therefore no separate Statement of Comprehensive Income has been presented.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March 25

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

As at 31 March 2025

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 March 2025

NOTES TO THE FINANCIAL INFORMATION

1.   Basis of preparation

This financial information has been prepared and approved by the Directors in accordance with UK adopted International Accounting Standards ("UK adopted IFRS").

Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 March 2025 or 2024 but is derived from those accounts. Statutory accounts for 2024 have been delivered to the Registrar of Companies and those for 2025 will be delivered following the Company's Annual General Meeting. The auditor has reported on those accounts; the report was unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under section 498(2) or (3) Companies Act 2006.

Certain financial data have been rounded. As a result of this rounding, the totals of data presented in this document may vary slightly from the actual arithmetic totals of such data.

Discontinued Operations

Following the closure of the German operations in FY23, the German operations are treated as a discontinued activity under IFRS5 and the results and cashflows are therefore shown separately on the face of each of the primary statements.  Further details are included in note 10.

Adoption of new and revised standards

The accounting policies set out in Note 3 of the Group financial statements have been applied in preparing this financial information.

New accounting standards in issue but not yet effective

New standards and interpretations that are in issue but not yet effective are listed below:

·      Amendments to IAS 21, Lack of exchangeability (effective date 1 January 2025).

·   Amendments to IFRS 9 and IFRS 7, Classification and measurement of financial instruments (effective date 1 January 2026)

·      IFRS 18, Presentation and Disclosure in Financial Statements (effective date 1 January 2027)  

The Group continues to monitor the potential impact of new standards and interpretations which may be endorsed and require adoption by the Group in future reporting periods. The Group does not consider that any of the issued standards, or standard amendments or interpretations issued by the IASB, but not yet applicable, will have a significant impact on the financial statements with the exception of IFRS 18 which will primarily affect the classification and presentation of income and expense items.

Going concern

Notwithstanding net current liabilities of £9.2m as at 31 March 2025, the financial statements have been prepared on a going concern basis which the Directors consider to be appropriate for the following reasons:

The Group meets its day-to-day working capital requirements from its cash balances and the availability of its £120m revolving credit facility (which was amended and extended in October 2024 to now expire in October 2028).

The Directors have prepared base and sensitised cash flow forecasts for the Group for a period of 12 months from the expected approval of the financial statements ("the going concern period") which indicate that the Group will remain compliant with its covenants and will have sufficient funds through its existing cash balances and availability of funds from its revolving credit facility to meet its liabilities as they fall due for that period. The forecasts take account of current trading, management's view on future performance and their assessment of the impact of market uncertainty and volatility.

In assessing the going concern basis, the Directors have taken into account a severe but plausible downside to sensitise its base case by applying a sales risk of 15%, which restricts revenue growth to levels below those achieved in the year ended 31 March 2025. Further sensitivities have been modelled to reduce gross margin by 1% and to assume greater than inflation staff costs for non-head office staff.

Although not modelled in these severe but plausible downside scenarios, the risks above could be offset with controllable mitigations across various expense categories and discretionary spend. Under this severe but plausible downside scenario the Group continues to demonstrate headroom on its banking facilities and remains compliant with its quarterly covenants which are interest cover (Adjusted EBITDA being at least 4x net finance costs) and leverage (Net debt to be no more than 2.5x EBITDA). The likelihood of a breach of covenants is considered remote and hence headroom against its covenants has not been disclosed.

Consequently, the Directors are confident that the Group and Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.

Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant and are reviewed on an ongoing basis.

Actual results could differ from these estimates and any subsequent changes are accounted for with an effect on income at the time such updated information becomes available.

Accounting standards require the Directors to disclose those areas of critical accounting judgement and key sources of estimation uncertainty that carry a significant risk of causing material adjustment to the carrying value of assets and liabilities within the next 12 months.

As a result of macro-economic factors in recent years, the Directors consider that impairment of intangibles and goodwill and revenue recognition in respect of commission for product protection plans and network connections include significant areas of accounting estimation.

With regard to revenue recognition in respect of commission for product protection plans and network connections, the Directors have applied the variable consideration guidance in IFRS 15 and as a result of revenue restrictions do not believe there is a significant risk of a material downward adjustment. Revenue has been restricted to ensure that it is only recognised when it is highly probable and therefore subsequently, there could be a material reversal of restrictions.

Given the estimates used in valuing the intangible fixed assets acquired with musicMagpie, management have also included this area as a key source estimation uncertainty.

The information below sets out the estimates and judgements used in these areas.

Revenue recognition and recoverability of income from product protection plans

Revenue recognised in respect of commissions receivable over the lifetime of the plan for the sale of product protection plans is recognised in line with the principles of IFRS 15, when the Group obtains the right to consideration as a result of performance of its contractual obligations (acting as an agent for a third party).

Revenue in any one year therefore represents an estimate of the commission due on the plans sold, which management estimate reliably based upon a number of key inputs, including:

•   the contractual agreed margins;

•   the number of live plans;

•   the discount rate;

•   the estimated length of the plan;

•   the estimate of profit share relating to the scheme as a whole;

•   the estimated rate of attrition based on historic data; and

•   the estimated overall performance of the scheme.

Commission receivable also depends for certain transactions on customer behaviour after the point of sale. Assumptions are therefore required, particularly in relation to levels of customer attrition within the contract period, expected levels of customer spend, and customer behaviour beyond the initial contract period. Such assumptions are based on extensive historical evidence, and adjustment to the amount of revenue recognised is made for the risk of potential changes in customer behaviour, but they are nonetheless inherently uncertain.

Reliance on historical data assumes that current and future experience will follow past trends. The Directors believe that the quantity and quality of historical data available provides an appropriate proxy for current and future trends. Any information about future market trends, or economic conditions that we believe suggests historical experience would need to be adjusted, is taken into account when finalising our assumptions each year. Our experience over the last decade, which has been a turbulent period for the UK economy as a whole, is that variations in economic conditions have not had a material impact on consumer behaviour and, therefore, no adjustment to commissions is made for future market trends and economic conditions.

In assessing how consistent our observations have been, we compare cash received in a period versus the forecast expectation for that period as we believe this is the most appropriate check on revenue recognised. Small variations in this measure support the assumptions made.

For plans sold prior to 1 December 2016, the commission rates receivable are based on pre-determined rates. For plans sold after that date, base-assumed commissions will continue to be earned on pre-determined rates but overall commissions now include a variable element based on the future overall performance of the scheme.

Changes in estimates recognised as an increase or decrease to revenue may be made, where for example, more reliable information is available, and any such changes are required to be recognised in the income statement. During the year, management have refined estimations in relation to the valuation of plans which has resulted in £1.3m of previously recognised revenue being reversed in the year ended 31 March 2025.

In line with the requirements of IFRS 15, the Group only recognises revenue to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue will not occur when the uncertainty associated with its variable consideration is subsequently resolved. This 'constraint' results in potential revenue of £3.0m being restricted at 31 March 2025 (31 March 2024: £nil).

The commission receivable balance as at 31 March 2025 was £98.1m (2024: £96.5m). The rate used to discount the revenue for the FY25 cohort is 5.15% (2024: 5.85%). The weighted average of discount rates used in the years prior to FY25 was 4.73% (2024: 4.34%).

Revenue recognition and recoverability of income in relation to network commissions

Revenue in respect of commissions receivable from the Mobile Network Operators ("MNOs") for the brokerage of network contracts is recognised in line with the principles of IFRS 15, when the Group obtains the right to consideration as a result of performance of its contractual obligations (acting as an agent for a third party).

Revenue in any one year therefore represents an estimate of the commission due on the contracts sold, which management estimates reliably based upon a number of key inputs, including:

•  The contractually agreed revenue share percentage - the percentage of the consumer's spend (to MNOs) to which the Group is entitled;

•  The discount rate using external market data (including risk free rate and counter party credit risk) 4.25% (2024: 4.49%);

•  The length of contract entered into by the consumer (12 - 24 months) and the resulting estimated consumer average tenure which takes account of both the default rate during the contract period and the expectations that some customers will continue beyond the initial contract period and generate out of contract ("OOC") revenue (c4%).

The commission receivable on mobile phone connections can therefore depend on customer behaviour after the point of sale. The revenue recognised and associated receivable in the month of connection is estimated based on all future cash flows that will be received from the MNO and these are discounted based on the timing of receipt. This also takes into account the potential clawback of commission by the MNOs and any additional churn expected as a result of recent price increases announced and applied by the MNOs, for which a restriction to revenue is made based on historical experience.

The Directors consider that the quality and quantity of the data available from the MNOs is appropriate for making these estimates and, as the contracts are primarily for 24 months, the period over which the amounts are estimated is relatively short. As with commissions recognised on the sale of product protection plans, the Directors compare the cash received to the initial amount recognised in assessing the appropriateness of the assumptions used.

Changes in estimates recognised as an increase or decrease to revenue may be made where, for example, more reliable information is available, and any such changes are required to be recognised in the income statement. During the year, management have refined the estimations in relation to the valuation of connections which has resulted in a £1.4m of previously constrained revenue which has now been recognised in the year ended 31 March 2025.

In line with the requirements of IFRS 15, the Group only recognises revenue to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue will not occur when the uncertainty associated with its variable consideration is subsequently resolved. This 'constraint' results in potential revenue of £3.2m being restricted at 31 March 2025 (31 March 2024: £3.2m).

Whilst there is estimation uncertainty in valuing the contract asset, reasonably possible changes in assumptions are not expected to result in material changes to the valuation of the asset in the next financial year.

The commission receivable balance as at 31 March 2025 was £46.7m (2024: £63.1m).

Impairment of intangibles and goodwill

On the acquisition of Mobile Phones Direct Limited in 2018, the Group recognised amounts totalling £16.3m in relation to the valuation of the intangible assets and £14.7m in relation to residual goodwill.

Intangible assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is reviewed for impairment on an annual basis. When a review for impairment is conducted, the recoverable amount is determined based on the higher of value in use and fair value less costs to sell.

The value in use method requires the Group to determine appropriate assumptions (which are sources of estimation uncertainty) in relation to the cash flow projections over the three-year strategic plan period and the long-term growth rate to be applied beyond this three-year period.

The Group has considered if indicators of impairment exist with regard to a number of factors, including the decline in the overall Mobile post pay market, changes in inflation and interest rates and general uncertainty in the wider macroeconomic environment.

Management concluded that the continuing challenging trading conditions in the competitive UK mobile market including a 15%-20% year-on-year reduction in the market for post pay contracts are indicators of impairment and consequently, an impairment review was undertaken per IAS 36 using the value in use method.

As a result of the impairment review, a full impairment of the £14.7m goodwill and a further £4.8m impairment to the carrying value of intangibles has been recognised leaving a carrying value of £2.5m as at 31 March 2025.

Whilst the impairment was a significant estimate and judgement during the year, having booked an impairment, the Directors no longer believe there is any significant estimation uncertainty going forwards.

Valuation of intangible assets acquired in business combinations

The Group applies the acquisition method of accounting to account for business combinations in accordance with IFRS 3, 'Business Combinations'.

In December 2024, the Group acquired musicMagpie for cash consideration of £9.8m. In determining the fair value of intangible assets arising on business combinations, management is required to estimate the timing and amount of future cash flows applicable to the intangible assets being acquired and select an appropriate valuation methodology.

The valuation of intangible assets therefore involves significant estimates and assumptions which are inherently subjective and was therefore a key source of estimation uncertainty at the acquisition date but management do not expect there to be a significant risk of any further material changes in the next 12 months.

Having engaged an independent third-party valuation expert to assist in the identification and fair valuation of the identifiable intangible assets acquired, Management believes the assumptions applied and valuation method used are reasonable as at 31 March 2025.

2.   Revenue

During the period, management have considered whether the disaggregation of revenue continues to appropriately reflect the ongoing nature of the Group's business and how it is managed.  Having taken account of the nature, amount, timing and cashflows from the different parts of the business, management believe that a disaggregation which splits revenue based on the nature of revenue rather than the product is more appropriate and provides greater clarity to the users of the financial statements. Consequently, prior year reported numbers have been represented and this does not have an impact on total revenue. Following the acquisition of musicMagpie, whose revenue is all recommerce, management have disaggregated this revenue stream from the rest of the business and has now been combined with the existing recommerce revenue in the Group.

The table below shows the Group's revenue by major business area.

3.   Segmental analysis

Operating segments are determined by the internal reporting regularly provided to the Group's Chief Operating Decision Maker. The Chief Operating Decision Maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Directors.

The Group's Chief Operating Decision Maker reviews the Group's performance as a whole and makes decisions for allocating resources based on the Group as a whole, as such, there is only one operating segment in the Group.

4.   Taxation

The expected corporation tax charge for the year is calculated at the UK corporation tax rate of 25% (2024: 25%) on the profit before tax for the year.

The charge for the year can be reconciled to the profit in the statement of comprehensive income as follows:

5.   Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

The basic earnings per share is affected by adjusting items that are one off in nature as set out in note 3 of the Groups financial statements. Management have therefore presented an adjusted earnings per share which is based on adjusted earnings attributable to the owners of the parent company as they believe it provides helpful additional information for stakeholders in assessing the performance of the business.

6.   Goodwill

*The impairment charge relates to the impairment of goodwill of the Mobile CGU- a further amount of £4.8m was impaired against the carrying value of other intangible assets in the Mobile CGU which is discussed further below.

The carrying value of goodwill relates to the purchase of Expert Logistics Limited, the purchase by DRL Holdings Limited (now AO World PLC) of DRL Limited (now AO Retail Limited), the acquisition of AO Recycling Limited (formerly The Recycling Group Limited) and the acquisition of musicMagpie by AO Limited. The previous year balance also included goodwill from the acquisition of Mobile Phones Direct Limited (now AO Mobile Limited) by AO Limited which is discussed further below.

The addition in the year represents the residual goodwill on the acquisition of musicMagpie by AO Limited (see note 12). In line with IAS36, goodwill is allocated to CGUs or groups of CGUs that are expected to benefit from the combination. Management have allocated £11.7m of the residual goodwill to the UK CGU and £0.4m to the musicMagpie CGU, being the lowest levels within the Group that this allocated goodwill is monitored for internal management purposes.

Impairment of goodwill

UK CGU - £26.4m (2024: £13.5m)

At 31 March 2025, goodwill acquired through UK business combinations (excluding Mobile Phones Direct Limited) was allocated to the UK (excluding Mobile) cash-generating unit ("CGU"). There was an additional £12.9m allocated to the UK CGU as a result of the acquisition of musicMagpie plc during the year, with the balance of £0.4m being allocated to the musicMagpie group of the CGUs. This represents the lowest level within the Group at which the allocated goodwill is monitored for internal management purposes.

The Group performed its annual impairment test as at 31 March 2025. The recoverable amount of the CGU has been determined based on the value in use calculations. The Group prepares cash flow forecasts derived from the most recent financial budget and financial plan for three years. The final year cash flow is used to calculate a terminal value and is based on an estimated growth rate of 1%. This rate does not exceed the average long term growth rate for the market.

Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to this CGU. In arriving at the appropriate discount rate to use, we adjust the CGU's post-tax weighted average cost of capital to reflect the impact of risks and tax effects specific to the cash flows. The weighted average pre-tax discount rate we used was approximately 13.4% (2024: 11.9%).

The key assumptions, which take account of historic trends, upon which management has based their cash flow projections are sales growth rates, selling prices and product margin.  Management do not believe that any reasonable possible sensitivity would result in any impairment to this goodwill.

Mobile Phones Direct Limited - £nil (2024: £14.7m)

Goodwill arose on the acquisition of Mobile Phones Direct Limited ("MPD") in 2018. In addition, included in this CGU group are websites and domains of affordablemobiles.co.uk and buymobiles.net which the Group acquired in the previous year.

The 30 September 2024 interim financial statements outlined the minimal amount of headroom against the Mobile CGU and that reasonably plausible changes in assumptions could lead to a material impairment. During the second half of FY25, trading conditions have remained challenging, with the market down c13% year-on-year and therefore management deemed this to be a trigger for a full impairment review at 31 March 2025.

Management have undertaken a reforecast of the business based on the current exit run-rates for FY25 as well as a look forward for the period to FY29. Key assumptions include:

·      A continued decline in the new connections and upgrade market in FY26;

·      An annualization of new contracts which commenced in FY25;

·      Revenue growth beyond FY26 of 3%; and

·      Cost inflation and cost savings of between +3% and -2% beyond FY26, based on expectations for inflation and managements estimate of product price changes based on industry knowledge and reductions overheads

The resultant cashflow has been discounted using a pre-tax discount rate of 13% based on the capital structure of an equivalent business and reflecting market risk and volatility due to current macro- economic uncertainty to arrive at a value in use of £9.8m. This has been compared to the carrying value which showed there was a significant deficit against the carrying value in managements base case and as a result, an impairment charge of £14.7m has been recognised reducing the goodwill balance for the Mobile CGU to £nil (2024 carrying value: £14.7m).

As a result of the above, and to ensure the carrying amount of the remaining intangibles is not below the Fair Value Less Costs of Disposal ("FVLCD"), management have also determined the recoverable amount for the remaining intangibles in the Mobile CGU by calculating the FVLCD. Management applied a "relief from royalties" valuation to determine a recoverable amount with the key assumptions being: forecast revenue (with no growth beyond FY26), royalties of 1% and a pre-tax discount rate of 13% resulting in a recoverable amount of £2.5m for the remaining intangibles (the measurement is categorised within Level 3 of the fair value hierarchy, as it involves significant unobservable inputs) and therefore, an impairment of £4.8m against the carrying value of intangibles of the Mobile CGU has been recognised.

7.   Trade and other receivables

The trade and other receivables are classified as:

All of the amounts classified as non-current assets relate to contract assets.

Contract assets

Contract assets represent the expected future commissions receivable in respect of product protection plans and mobile phone connections. The Group recognises revenue in relation to these plans and connections when it obtains the right to consideration as a result of performance of its contractual obligations (acting as an agent for a third party). Revenue in any one year therefore represents the estimate of the commission due on the plans sold or connections made.

The reconciliation of opening and closing balances for contract assets is shown below:

Revisions to estimates represents changes to previously recognised or constrained revenue from periods prior to the current year.

Product protection plans

Under our arrangement with Domestic & General ("D&G"), the Group receives commission in relation to its role as agent for introducing its customers to D&G and recognises revenue at the point of sale as it has no future obligations following this introduction. It also receives a share of the overall profitability of the scheme. A discounted cash flow methodology is used to measure the estimated value of the revenue and contract assets in the month of sale of the relevant plan, by estimating all future cash flows that will be received from D&G and discounting these based on the expected timing of receipt. Subsequently, the contract asset is measured at the present value of the estimated future cash flows. The key inputs into the model which forms the base case for management's considerations are:

•   the contractually agreed margins, which differ for each individual product covered by the plan as is included in the agreement with D&G;

•   the number of live plans based on information provided by D&G;

•  the discount rate for plans sold in the year using external market data reflecting the time value of money;

•  the estimate of profit share relating to the scheme as a whole based on information provided by D&G;

•   historic rate of customer attrition that uses actual cancellation data for each month for the previous 6 years to form an estimate of the cancellation rates to use by month going forward (range of 0% to 9.0% weighted average cancellation by month); and

•   the estimated length of the plan based on historical data plus external assessments of the potential life of products (5 to 17 years).

The last two inputs are estimated based on extensive historical evidence obtained from our own records and from D&G. The Group has accumulated historical empirical data over the last 16 years from c.3.7m plans that have been sold. Of these, c.1.12m are live. Applying all the information above, management calculates their initial estimate of commission receivable. Consideration is then given to other factors outside of the historical data noted above that could impact the valuation. This primarily considers the reliance on historical data as this assumes that current and future experience will follow past trends. There is, therefore, a risk that changes in consumer behaviour could reduce or increase the total cash flows ultimately realised over the forecast period. Management makes a regular assessment of the data and assumptions with a detailed review at half year and full year to ensure this continues to reflect the best estimate of expected future trends. As set out in Note 1, the Directors do not believe there is a significant risk of a downward material adjustment to the revenue recognised in relation to these plans over the next 12 months. The sensitivity analysis below is disclosed as we believe it provides useful insight to the users of the financial statements into the factors taken into account when calculating the revenue to be recognised.

The table shows a possible indicative sensitivity of the carrying value of the commission receivable and revenue to a reasonably possible change in inputs to the discounted cash flow model over the next 12 months. However, there are other reasonably possible alternative outcomes that could result in the contract asset increasing materially in the next 12 months.

Cancellations

The number of cancellations and therefore the cancellation rate can fluctuate based on a number of factors including macroeconomic changes such as unemployment and cost of living. The impact of reasonable potential changes is shown in the sensitivities above.

Network commissions

The Group operates under contracts with a number of Mobile Network Operators ("MNOs"). Over the life of these contracts, the service provided by the Group to each MNO is the procurement of connections to the MNO's networks. The individual consumer enters into a contract with the MNO for the MNO to supply the ongoing airtime over that contract period. The Group earns a commission for the service provided to each MNO. Revenue is recognised at the point the individual consumer signs a contract and is connected with the MNO. Consideration from the MNO becomes receivable over the course of the contract between the MNO and the consumer. The Group has determined that the number and value of consumers provided to each MNO in any given month represents the measure of satisfaction of each performance obligation under the contract. A discounted cash flow methodology is used to measure the estimated value of the revenue and contract assets in the month of connection, by estimating all future cash flows that will be received from the MNOs and discounting these based on the expected timing of receipt. Subsequently, the contract asset is measured at the present value of the estimated future cash flows.

The key inputs to management's base case model are:

•   revenue share percentage, i.e. the percentage of the consumer's spend (to the MNO) to which the Group is entitled;

•   the discount rate using external market data to reflect the time value of money;

•  the length of contract entered into by the consumer (12 - 24 months) and the resulting estimated consumer average tenure that takes account of both the default rate during the contract period and the expectations that some customers will continue beyond the initial contract period and generate out of contract revenue.

The input is estimated based on extensive historical evidence obtained from the networks, and adjustment is made for the risk of potential changes in consumer behaviour. Applying all the information above, management calculates their initial estimate of commission receivable. Consideration is then given to other factors outside of the historical data noted above which could impact the valuation. This primarily considers the reliance on historical data as this assumes that current and future experience will follow past trends.

The risk remains that changes in consumer behaviour could reduce or increase the total cash flows ultimately realised over the forecast period. Management make a regular assessment of the data and assumptions with a detailed review at half year and full year to ensure this continues to reflect the best estimate of expected future trends and appropriate revisions are made to the estimates.

As set out in Note 4, the Directors do not believe there is a significant risk of a downward material adjustment to the revenue recognised in relation to these plans over the next 12 months given the variable revenue constraints applied.

The sensitivity analysis below is disclosed as we believe it provides useful insight to the users of the financial statements by giving insight into the factors taken into account when calculating the revenue to be recognised. The table shows the sensitivity of the carrying value of the commission receivables and revenue to a reasonably possible change in inputs to the discounted cash flow model over the next 12 months, having taken account of the changes in behaviour experienced in the period.

Cancellations

The number of cancellations and, therefore, the cancellation rate, can fluctuate based on a number of factors. These include macroeconomic changes e.g., unemployment, interest rates and inflation. The impact of reasonable potential changes is shown in the sensitivities above.

8.   Trade and other payables

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 52 days (2024: 55 days). Advanced payments on account relate to payments on account from Mobile Network Operators and our product protection plan provider where there is no right of set off with the contract asset.

Trade and other payables are classified as:

9.   Net debt and movement in financial liabilities

Whilst not required by IAS 1 Presentation of Financial Statements, the Group has elected to disclose its lease liabilities split by those which ownership transfers to the Group at the end of the lease ("Owned asset lease liabilities") and are disclosed within the Property Plant and Equipment table in note 18 of the Group financial statements, and those leases which are rental agreements and where ownership does not transfer to the Group at the end of the lease as Right of use asset lease liabilities which are disclosed within the Right of use assets table in the Group financial statements. This is to give additional information that the Directors feel will be useful to the understanding of the business.

Movement in financial liabilities in the year was as follows:

New lease liabilities include existing leases that have been renewed or extended beyond their original lease terms.

Reassessment of lease terms relate to leases the Group exited during the period and those that will end before their original lease term.

Repayment of borrowings includes £19.1m relating to loans and accumulated interest, acquired on the acquisition of musicMagpie (see note 12).

10.  Discontinued Operations

Following the closure of the Groups German business in FY23, the business has been treated and presented as a discontinued operation in the year ended 31 March 2025. The tables below show the results of the German operation for the relevant reporting periods:

Revenue in the current year represents a payment in full and final settlement to AO Deutschland by Domestic and General ("D&G") in relation to any commercial obligations or liabilities in respect of insurance backed warranty plans previously sold in the territory.

Basic earnings per share from discontinued operations is 0.14p (2024: 0.00p). Diluted earnings per share from discontinued operations is 0.13p (2024: 0.00p).

The table below summarises the cashflows of the German operation for the relevant reporting periods:

11.  Share capital, investment in own shares and share premium

On 8 July 2024, the Company issued 1,733,027 shares to satisfy options granted in July 2020 under the FY21 AO Incentive plan. The shares were acquired and are held in the Company's Employee Benefit Trust ("EBT"), at nominal values, and the EBT transfers to the participants as they are exercised.

On 1 and 2 August 2024, the Company's EBT also purchased 8,882,350 and 434,602 respectively, of the Company's ordinary shares at market value. Consideration paid was £11.1m, which includes transaction costs of £0.2m. Shares held by the EBT will be used to satisfy options under the Group's share schemes.

8,882,350 of the shares were purchased at market value (117.3p per share and total consideration of £10.4m) from John Roberts, Sally Roberts and Chris Hopkinson who are considered related parties. There were no outstanding balances with these related parties as at 31 March 2025.

As at 31 March 2025, the number of shares held by the EBT was 11,161,642 (2024: 788,578).

12.  Acquisition of subsidiaries

On 12 December 2024, the Group acquired all the ordinary shares in musicMagpie for £9.8m, satisfied in cash. The net cash cost of the acquisition was £5.7m, reflecting cash balances acquired of £4.1m.

musicMagpie operates in the re-commerce sector, specialising in the buying, renting and selling of refurbished consumer technology and physical media products. The company has established operations in the UK and the acquisition enables the existing AO Group to enhance its consumer technology offering.

In the period from acquisition to 31 March 2025 the subsidiary contributed revenue of £29.7m and a loss before tax of £1.7m to the consolidated result for the year. If the acquisition had occurred on the first day of the accounting period, Group revenue would have been £1,212.4m and profit before tax would have been £16.4m, which excludes adjusting items incurred by musicMagpie. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition occurred on the first day of accounting period.

The acquisition had the following effect on the Group's assets and liabilities:

Goodwill has arisen on the acquisition primarily due to the expected synergies, ability to integrate existing tech capabilities and the associated future growth potential of the group in addition to intangible assets that don't meet recognition criteria such as the assembled workforce of musicMagpie.

Fair values determined on a provisional basis

Fair value adjustments have been determined on a provisional basis and, in line with relevant accounting standards, will be finalised in the 12-month hindsight period. The principal fair value adjustments related to intangible fixed assets. An independent third-party valuation expert was engaged by management to assist in the identification and fair valuation of the identifiable intangible assets acquired - a "relief from royalty" method was utilised to arrive at the valuation of the marketing assets of £7.2m using a 1% royalty rate and a replacement cost method utilised to arrive at the valuation for the technology assets of £4.0m  using management's best estimate of the number of full time equivalents employees and hours it would take to replace the technology assets.

Acquisition related costs

The Group incurred acquisition related costs of £3.3m related to adviser fees. These costs have been included in administrative expenses in the Group's consolidated statement of comprehensive income.