Market Report: AO World continues to prioritise growth over profits

Investors’ patience with AO World is wearing thin as the online white goods retailer continues to prioritise growth over profits. AO plunged 23p to 140p as it swung to a first-half loss of £8m from a slight profit last year after heavy investment in marketing in the UK and Germany.

Revenues rose 22 per cent to £264.3m, but news that it is launching in the Netherlands in the spring sparked concerns that the company will remain loss-making for some time yet.

Start-ups breaking untrodden ground typically put growth ahead of profits – think Twitter for example – but 15-year-old AO World is trying to crack a market with plenty of established players able to replicate the online model.

The shares have slumped since the controversial float in February last year that valued it at £1.2bn, prompting its broker Jefferies to later admit the price was “punchy”.

Travel stocks took another beating after a Russian jet was shot down by Turkey, putting pressure on airlines EasyJet, 52p cheaper at 1,594p, and British Airways owner IAG, down 18.5p at 549.5p. The sector’s decline took its toll on the FTSE 100, which fell 28.26 points to 6,277.23.

Burberry was the biggest loser, falling 63p to a three-year low of 1,195p, after Nomura painted a gloomy picture of the outlook for luxury goods retailers and downgraded the fashion house to neutral with a 1,500p target price.

Education publisher Pearson managed to recover after an early slump to finish down just 8p at 808.5p. A target price downgrade from Berenberg sent the shares into reverse before rumours surfaced that media giant Bertelsmann is looking for a buyer for Pearson’s 47 per cent stake in Fifty Shades publisher Penguin Random House.

UAE private healthcare group NMC, still hoping for a tie-up with Al Noor Hospitals, paid $189m (£125m) for a 51 per cent stake in vitro fertilisation specialist Fakih IVF Group and jumped 46.5p to 810p.

Meanwhile, Falklands Islands oil driller Rockhopper Exploration, unmoved at 35.25p, is buying smaller rival Falkland Oil & Gas, up 0.4p at 10p, in an all-share deal worth £57.1m.