AO World sees losses deepen

Online electricals retailer AO World has seen annual losses nearly double amid competitive trading in the UK and after hefty investment in European expansion.

The firm reported groupwide pre-tax losses of £13.5 million for the year to 31 March against losses of £7m the previous year. Operating losses widened to £16.2m from £12m previously, with earnings in the UK plunging 25.4 per cent to £11.6m after ramping up spend on marketing and due to a “consistently competitive pricing environment”.

It remained deep in the red across Europe, where it has been expanding rapidly, although losses narrowed to £26m from £26.5m and revenues in the region surged 54.8 per cent to £116m.

AO World also cheered an 8.1 per cent jump in UK revenues to £680.8m, with website sales up 8.7 per cent to £606.6m.

The group added it remained on track to make its European business profitable by 2021.

Steve Caunce, chief executive of AO World, said: “The new financial year has started well in both the UK and Europe, with UK revenue growth returning to double-digit levels against the prior year.

“Whilst we remain cautious on outlook given economic and competitive pressures on the UK electricals market, we are confident of achieving our stated goals of future growth in the years ahead.”

The group said it reined in UK marketing spend over the second half, after sponsoring hit TV show Britain’s Got Talent, a campaign it said “fell short of expectations”.

AO World said despite this, it saw “good growth in a challenging market” over the final six months. It also plans a new marketingcampaignintheuk over the summer.

Analysts at Jefferies said the success of AO World’s forthcoming UK marketing campaign would be key to the current year outlook, and while current trading had improved, the overall market was “still a challenge”.