AO World managed to increase sales but saw losses widen last year as it ramped up investment in Europe and lowered its prices while increasing its marketing spend in the UK to fend off competition.
The online electricals retailer, which operates in the UK, Germany and the Netherlands, said full-year revenues increased by 13.6 per cent to £796.8million.
But pre-tax loss widened to £16.2million in the year to the end of March from £12million loss in the previous financial year. On an adjusted basis, group losses increased to £3.4million from £2.1million.
Rising sales: UK website sales rose by nearly 9 per cent to £606.6million
However, AO left its guidance unchanged and said it was on track to make its European business profitable by 2021.
Shares in AO rose 1.5 per cent to 155p in morning trading as results were slightly better than expected.
UK website sales rose by nearly 9 per cent to £606.6million, but adjusted profits fell by 7 per cent to £22.6million, impacted mainly by higher marketing costs in the first half and ‘a consistently competitive pricing environment’.
AO said it reined in marketing spend across the UK over the second half, after sponsoring hit TV show Britain’s Got Talent in the first six months – a campaign which it said ‘fell short of expectations’.
The group remained deep in the red across Europe, where it has been expanding rapidly, although losses narrowed slightly to £26million from £26.5million and it saw revenues in the region surge 54.8 per cent to £116million.
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.’
AO said it had started selling new product categories in the year, including mobile phones, gaming consoles, smart home and cameras in the UK, small kitchen appliances in Germany and audio-visual products in the Netherlands.
It also said that its new recycling facility in Telford was now fully operational, processing all AO domestic appliance recycling in the UK and also serving third-party customers.
Brokers at Killik & Co noted that despite the widening losses, AO had managed to increase sales at a time when consumer spending is falling.
‘We continue to believe in the long-term secular growth potential from AO’s business model, both in the UK and across Europe,’ they said.
‘The group continues to make good progress, with continued growth in UK sales over a period where consumer spending has fallen, while Europe continues to develop with little traditional marketing expenditure, and has now reached an inflection point where revenue growth is earnings accretive.’
AJ Bell investment director Russ Mould was more negative: ‘The company is still unable to derive a profit despite the increase in sales. Losses widened year-on-year due to investment in European expansion and weak pricing in the UK.
‘The spend in Europe is another reminder that just because a retailer operates online it does mean it is spared any costs of doing business.
‘Management are also cautious on the outlook amid strong competition and economic uncertainty,’ he added.