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Losses widen at AO World amid tough trading; AO World bemoaned a "disappointing" performance in Europe, where it recently overhauled the management team.

Byline: Shelina Begum

Greater Manchester-based electricals retailer AO World has seen annual losses widen to [pounds sterling]18.9m amid tough trading in the UK and woes in its European arm.

The result compares with a [pounds sterling]13.5m pre-tax loss the previous year.

Bolton-headquartered AO World said UK revenues rose 5.7 per cent on a like-for-like basis "against a backdrop of ongoing weak consumer confidence in a continuingly competitive market, particularly in the UK".

But it bemoaned a "disappointing" performance in Europe, where it recently overhauled the management team, parachuting in staff from the UK operations to help turn trading around in the division.

Underlying earnings in the UK lifted by 20.9 per cent to [pounds sterling]27.4m, boosted by its recent acquisition of Mobile Phones Direct, or by 14.3 per cent with this stripped out.

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Its European division saw underlying losses widen to [pounds sterling]27.8m, against [pounds sterling]26m the previous year, due to driver issues in Germany, as well as higher but less profitable sales.

The group also said its bottom line was affected by costs of the Mobile Phones Direct business, as well as an onerous contract it was unable to exit in Germany.

AO World founder and chief executive John Roberts said: "The UK result was achieved against an ongoing tough trading environment and includes three months' contribution from Mobile Phones Direct which we acquired in December 2018 and its integration continues to go to plan.

"Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) losses in Europe have increased slightly against the prior year, with progress hampered somewhat by driver challenges in Germany and a lack of real improvement in product margin and customer acquisition costs."

He added: "Overall, the AO team deserve praise for their efforts in FY19 but we can do better and I'm pleased with the progress that we are now making in the first few months of this financial year."

In the UK, the company said it saw double-digit growth in all categories except major domestic appliances, which was hit by a declining wider market and a "more limited than expected" response to its TV marketing campaign.

The group said underlying profits in the UK had also been bolstered by a recent decision to cut advertising and marketing spend.

Russ Mould, investment director at Salford Quays-headquartered AJ Bell, said: ""The company, which sells items like TVs, dishwashers and fridges, may be pointing to a smaller underlying loss this morning but its statutory loss was materially higher year-on-year -- reflecting finance charges and the costs of management changes.

"And an improvement in underlying profit in its UK division was partly a reflection of reduced marketing spend, action which needs to be balanced against the requirement to maintain brand awareness.

"The need for action to bring its European business up to speed is evident in these results with margins under pressure."

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Credit: AO.com

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Publication:Birmingham Post (Birmingham, England)
Geographic Code:4EUUK
Date:Jun 6, 2019
Words:509
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