AO World losses widen to £18.9m

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AO losses
// AO World sees pre-tax losses widen to £18.9m for the year to March 31
// Compares with a £13.5m pre-tax loss the previous year
// UK earnings improved 20.9% to £27.4m pounds, losses in mainland Europe increased to £27.8m
// UK revenues rose 5.7% on a like-for-like basis

AO World has seen annual losses widen to £18.9 million thanks to tough trading in its European arm.

The result, which covers the year ending March 31, compares to the £13.5 million pre-tax loss the online electricals and whitegoods retailer recorded in its previous financial year.

However, adjusted EBIDTA came in at loss of £400,000, in line with guidance issued in April and an improvement on the loss of £3.4 million last year.

AO World said its core 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”.

In addition, UK underlying earnings lifted by 20.9 per cent year-on-year to £27.4 million, boosted by its recent acquisition of Mobile Phones Direct, or by 14.3 per cent with this stripped out.

However, the retailer bemoaned a “disappointing” performance in mainland Europe, where underlying losses widened to £27.8 million compared £26 million the previous year.

AO World attributed this to driver issues in Germany, as well as higher but less profitable sales, and recently overhauled its European management team and parachuted in staff from the UK operations to help turn around the division.

The retailer added that 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.

“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,” AO World founder and chief executive John Roberts said.

“Adjusted EBITDA 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 retailer said underlying profits in the UK had also been bolstered by a recent decision to cut advertising and marketing spend.

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