UPDATE 1-AO World sales jump as pandemic boosts electricals demand

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LONDON, Oct 15 (Reuters) - British online electricals retailer AO World expects to report a 57% increase in first-half revenue on strong consumer demand during the COVID-19 pandemic, it said on Thursday, sending its shares higher.

With many Britons working from home during the crisis, sales of electrical goods and home office products have been high.

AO World, which sells washing machines, fridges, cookers and televisions as well as mobile phones and printers, said it expects to report revenue of 715 million pounds ($930 million) for the six months to Sept. 30.

UK revenue is expected to be up by about 54% while the increase in Germany is expected to be about 83% on a constant currency basis. The company reports interim results on Nov. 24.

“In our UK retail business, the sales momentum continued from Q1 throughout Q2 despite the reopening of competitor bricks and mortar stores. We believe we have seen a lasting step change in online penetration,” AO World said.

It noted, however, a change in the behaviour of some mobile phone customers, with gross margins hit by increased cashback redemption rates and cancellation of contracts with networks.

AO World is profitable in the UK but loss-making in Germany, a market it entered in 2014. It forecast its German business would be profitable from its 2021-22 year.

“Whilst we remain mindful of the uncertain economic climate caused by the pandemic and Brexit, we are on track with plans and well set for our biggest ever peak trading period in the UK and Germany,” founder and Chief Executive John Roberts said.

Shares in AO were up 8% at 0714 GMT, extending 2020 gains to 180% and valuing the business at 1.2 billion pounds. ($1 = 0.7692 pounds) (Reporting by James Davey Editing by David Goodman)