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AO World shares rally on better July trading

LONDON (Reuters) - British online domestic appliances retailer AO World (AO.L) said its second quarter had started strongly after intense competition and the general election held back trading in the previous quarter, prompting a rally in its share price.

Shares in the company rose by 9.7 percent on Tuesday after the firm also said it was on track to meet market expectations for full-year profit.

AO World floated at 285 pence in February 2014 and peaked at 412 pence on its listing day. But the stock slumped after a profit warning in February this year and hit an all time low of 120 pence on Monday.

The shares were up 11.6 pence at 130.4 pence at 0820 GMT (0920 BST).

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AO World, which rivals Dixons Carphone (DC.L) and Home Retail's (HOME.L) Argos, selling everything from washing machines and fridges to vacuum cleaners and TVs, said on Tuesday its UK revenue grew 6.5 percent in the three months to June 30, its fiscal first quarter, a slowdown from fourth quarter growth, estimated by analysts at about 14 percent.

"This growth was delivered through a period of particularly intense competitive activity in the market, compounded by the uncertainty surrounding the (May 7) general election," said the firm.

Chief Executive John Roberts noted that Dixons Carphone had been particularly aggressive in stepping up marketing spend during the first quarter.

However, Roberts said AO had enjoyed better trading in July and was encouraged by indications of growth in housing transactions and disposable income in the broader market.

He told Reuters he was comfortable with analysts' forecasts for growth of 17-20 percent in 2015-16 UK adjusted core earnings. The firm made 16.5 million pounds ($26 million) in 2014-15.

Roberts said progress in Germany, a market it entered last year, was also on track.

Commenting on AO's share price performance he told Reuters: "Ultimately the market sets the share price. I'm not convinced it always follows a lot of logic ... but for us we're focused on the long term strategic plan that we set out and that long term strategic plan that people invested in at the IPO is absolutely on track."

(Reporting by James Davey, editing by Louise Heavens)