Market report: Eurosceptic City sends AO World down on worries of over-expansion abroad

When John Roberts, the maverick chief executive of AO World, unveiled his drastic plan for European domination, it is fair to say some in the City were less than impressed.

Investors wanted Roberts to prove the model at home first before an ambitious drive into the Continent.

The scepticism surrounding AO’s European expansion returned today as Morgan Stanley came back from the white goods company’s investor day in Germany a fortnight ago with a bearish view of its growth prospects.

The investment bank cut its rating to Underweight and its target price to 135p, arguing that the FTSE 250 firm would struggle to hit its 30% growth target in Germany and the Netherlands even if it raises its marketing budget significantly. “Our forecasts were already below consensus and we feel expectations for Europe, particularly in outer years, will still need to come down further,” said analyst Miriam Adisa.

She cut her revenue forecasts for Europe by 13% and 19% for this year and next, adding that the overseas business is unlikely to break even by 2021. Her annual forecasts for this year are now at the bottom end of guidance.

The gloomy note dragged AO shares down 3.8p, or 2.4%, to 156.2p.

On the wider market, disappointing numbers from HSBC sent the FTSE 100 down 11.63 points to 7288.23 as the banking giant — the LSE’s second biggest company after Shell — dived 45.8p, nearly 6.5%, to 666.5p.

Beleaguered outsourcer Capita was back in the red, falling 4.5p to 509.5p as it wrote down the value of historic contracts to the tune of £50 million. However, the shares began to recover from heavier early falls as analysts at Numis argued that investors are wrong to expect another profit warning, management shake-up and a fundraising.

On the mid-cap index, the £11 million deal by construction group Balfour Beatty to sell its Middle East joint ventures lifted shares 0.9p to 274p, and solid first-half figures bolstered housebuilder Galliford Try, up 14p to 1530p.

Theresa May’s critics have lambasted the Prime Minister for inaction in blocking foreign takeovers, but her constituents were busy in the market today.

The Royal Borough of Windsor and Maidenhead — she is MP for the latter — have taken a combined 20% stake in Gresham House.

The AIM-listed specialty asset manager has launched the British Strategic Investment Fund, a £300 million fund to invest in innovation, housing and infrastructure, three themes highlighted by Chancellor Philip Hammond in his Autumn Statement. Shares rose 19.5p, or 6.4%, to 322.5p.

Elsewhere, a £50,000 share purchase by executive chairman John Watkins did little to stop investors reversing out of telematics business Trakm8, which dived 34p, or 31%, to 76p after a painful profit warning.