Finsur: AO World’s pivot faces real-world tests as musicMagpie integration begins under pressure

AO, best known for its strong presence in appliance and electronics retail, reported robust financials for the year. Group revenues exceeded €1.3 billion, with like-for-like B2C retail revenues rising 12% to €980 million. Adjusted profit before tax climbed 32% to €53 million, pushing margins from 3.3% to 4.1%. Free cash flow increased to € 27 million, and net funds also stood at € 27 million—despite last year’s € 41 million acquisition of musicMagpie. The company also retains access to an undrawn € 140 million credit facility, a signal of continued lender confidence.

AO mobile business faces structural decline

AO’s mobile operations, once promising after the € 45 million acquisition of Mobile Phones Direct, are under strain. Commission receivables dropped 49% from FY2021, forcing a € 23 million impairment this year. Structural market contraction of 13-15%, increasing acquisition costs and changing consumer behaviour all hit AO’s business model. AO is now planning a pivot to an MVNO model, seeking to stabilise cash flow with wholesale contracts. Analysts are watching closely for signs of either recovery or retreat.

musicMagpie shows early signs of strain

musicMagpie, acquired in October 2024 for € 41 million, generated € 35 million in revenue over 3.6 months, indicating a significant year-over-year decline. Management aims to extract value through operational synergies, but recommerce fundamentals remain difficult. With extended phone ownership cycles and tight supply, the integration must deliver efficiencies. MusicMagpie’s historical gross margins outpace AO’s, but profitability remains elusive due to high amortisation and reported € 2 million in losses so far.

AO Care protection plans provide stability

AO’s protection plan programme, AOCare, remains a steady contributor with €115 million in receivables and over 1.12 million active policies. The partnership with Domestic & General has been extended to 2033. Each plan brings in an average of €103 in future value. Pricing pressure and claim inflation have reduced the average value per plan slightly, but the business continues to generate reliable cash flow and long-term customer engagement.

Recommerce market remains under pressure

While AO’s acquisition of MusicMagpie extends their value chain into recommerce, the segment is not yet showing signs of growth. Structural headwinds, including supply chain competitiveness and longer device life cycles, are pushing margins down. As major players like Samsung and Alchemy ramp up efforts, AO must invest in automation and cross-category refurbishing to extract long-term value.