November 21, 2017 / 7:29 AM / a year ago

Retailer AO World gears up for peak season after first-half loss

LONDON (Reuters) - British online home appliances retailer AO World (AO.L) reported a first-half loss on Tuesday due to an expensive marketing campaign in the summer but said the rate of sales growth has been picking up as it enters its peak season.

The company said revenue in the six months to Sept. 30 rose 13.3 percent to 368 million pounds but the higher spend on marketing and its expansion in mainland Europe resulted in an underlying loss before interest, tax, depreciation and amortisation (EBITDA) of 6.3 million pounds, compared with a 1.5 million-pound profit a year ago.

“We are broadly on track with our plans for the year as a whole ... in spite of the challenging UK market conditions,” said Chief Executive Steve Caunce.

The annualised rate of sales growth in Britain more than doubled to 13.3 percent in the second quarter compared with the first, in a tough consumer environment, he said.

Growth had continued in October and November, the company said, as it gears up for its busiest trading period, bracketed by the “Black Friday” offers that have already started and post-Christmas sales.

Its advertising and marketing spend in Britain rose by more than 50 percent in the first half to 17.4 million pounds, with most of the increase going on sponsoring broadcaster ITV’s (ITV.L) popular “Britain’s Got Talent” show in the summer.

Caunce said the sponsorship was designed to increase brand awareness rather than driving a short-term increase in sales.

However, the results fell short of expectations and Caunce said it had decided its marketing budget would be more effectively spent elsewhere in future.

For the full year it said it continued to see underlying EBITDA coming in towards the bottom of analysts’ forecasts, which range between a loss of 2.6 million pounds and a profit of 2.6 million pounds.

Shares in AO World, which fell to a record low of 98 pence earlier this month, were trading down 1.95 percent at 112.75 at 1300 GMT.

Editing by Kate Holton, Greg Mahlich

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