Big Bertha is hot and loud: the giant green machine emits bangs and mighty shudders as it grinds up a pile of broken electrical goods. The oversized blender, which can reduce up to 100 fridges an hour to tiny pieces, is a key part of online electrical goods retailer AO World’s plan to turn old appliances into new items for sale, and deal with part of UK’s hefty pile of unwanted electrical waste.
Boss John Roberts grins as he inspects the works. He’s wearing trainers and a belt bearing the company’s logo – in the same bright green as Bertha and most of the rest of the building’s machinery.
“I get drawn to difficult things like a moth to a flame,” says the chief executive, who started AO in 2000, apparently after a pal in the pub bet him £1 he wouldn’t. Roberts built AO into a business that by 2021 was worth £2bn, only to see it shrink back to a £480m valuation after problems with international expansion and a post-pandemic slump in trade. The former kitchen salesman from Bolton, who left school with no qualifications, is now worth just over £125m, according to the Sunday Times Rich List.
AO started out selling discounted kitchen appliances, and today sells more than £1.1bn worth of electrical goods, from washing machines and TVs to mobile phones, laptops, vacuum cleaners and earphones. Along with many other online retailers, it saw sales shrink last year, after the highs it had enjoyed when Covid lockdowns closed the high streets. Then post-Brexit labour shortages and energy supply issues caused by the Ukraine war sent costs soaring. AO dived to an £11m loss and had to raise £40m in new capital after falling £33m into debt. Last year, the company closed its German business, cut jobs and shelved a trial of outlets in Tesco stores to focus on its more profitable UK business, which made £8m this year.
The recycling arm, which is profitable, survived the cull. Roberts says it protects the wider business from having to rely on third parties charging a “rollercoaster of rates” to handle waste management, which is now a legal requirement for retailers and brands selling electrical goods in the UK.
He has invested more than £20m in the plant since 2016: each year it can process 1.2m of the appliances (almost half of them fridges) sent for recycling by households when they buy a new one from AO. About 50,000 of the unwanted items can be refurbished and sold to secondhand dealers; another 50,000 or so are broken up for spare parts. The rest are stripped of their glass shelves, cables, motors and compressors, which go elsewhere for processing. The gases are then siphoned out for safe disposal and the appliances ground up so the materials can be sorted and sold.
After a spin in Bertha, metals – including up to 20kg of steel per fridge – plus gas and plastic from insulating foam are extracted and the remaining shards of plastic are sent to another AO plant nearby for further processing. There, an array of flotation tanks, grinders and hi-tech sorting machines – some armed with lasers – turn that waste into plastic pellets worth more by weight – as much as £2,000 a tonne – than the metals extracted.
Mending and reusing unwanted appliances might be seen as the greenest route but Roberts says it is unlikely to be the answer to the UK’s waste problem. “Only 5% of broken appliances ever get repaired,” he says. “It is tiny in scale.”
His ultimate aim is to create a consistent flow of recycled plastic that can be used in a range of new appliances, and he is hopeful of putting such products on his virtual shelves within two years, via a partnership with a manufacturer. He doesn’t believe shoppers will be willing to pay more for them, but thinks an exclusive sustainable range will be helpful in retaining the 5 million-plus additional customers AO notched up in the pandemic.
Roberts says the company’s recycling arm would be bigger if government had delivered on its promise to tighten regulations. At present, companies must pay towards the cost of recycling the equivalent amount of goods to those sold. Those payments were set to step up further under an extended producer responsibility scheme to be introduced this year, but it has yet to be finalised and is now unlikely to happen until at least 2025. That scheme will see producers fully fund the “end of life” management of their products, a cost currently partly borne by local authorities.
Meanwhile the wider business is in “very, very good health”, according to Roberts, who says AO will make more money this year than in its pandemic sales boom. He says the depressed share price is down to the UK’s “macro environment”, which has put off overseas investors, especially from the US. “The UK is not very investible at the minute.”
One British investor which is not deterred is Sports Direct founder Mike Ashley’s Frasers Group, which now owns a 22% stake in AO. This is more than Roberts himself, but the chief executive dismisses suggestions that this might be a worry: “In this environment, [Ashley] is one of the most profitable retailers. He is not the pantomime villain everyone thinks.
“It’s clear he has no ambition to take the business over. I work closely with him and from my experience he is a friendly investor, straightforward and relaxed.”
One area where the two men may not agree, however, is on business rates. As an online specialist, Roberts is not keen on the idea of reforming property taxes, which pile additional costs on those with high street outlets. “It makes me laugh that supermarkets are lobbying the government about the death of the high street,” he says. “It’s a joke. They all make millions of pounds in profit and say they can’t afford business rates. Behave!”
Another area Roberts is passionate about is youth services. He accuses the government of having “done sweet FA for the underprivileged”, as “kids don’t vote”. He believes wealthy individuals should step into the breach. Last year, he donated his AO salary and almost 1.5m shares – worth £880,000 at the time – to charities including OnSide, a network of youth clubs.
“You get to a point where [you ask] how much more money do you need?” he says. “Talent is evenly distributed but opportunity is not. We have a responsibility to level that playing field.”
CV
Age 50
Family His wife, Sally, five children and four dogs.
Education “I didn’t go to university – academia was not for me, as is the case for many people.”
Pay His salary is £490,795.
Last holiday A trip to Dubai.
Best advice he’s been given “People can’t care deeply about things they don’t understand. If they don’t understand it’s your fault for explaining it badly, not theirs.”
Biggest career mistake His decision to step back as chief executive in 2017: “You don’t organise your way to success you drive your way there.”
Phrase he overuses “Treat every customer like your gran and make decisions that make your mum proud.”
How he relaxes Fun with family and friends and enjoying his favourite sport, skiing.
