Ocado, the British online supermarket and technology group, has reported a smaller first-half loss, said it was making "good progress" and raised its financial guidance for the full year.
The group runs an online grocer in Britain through a joint venture with Marks & Spencer and also sells its cutting-edge warehouse technology to retailers around the world.
Its shares have slumped 55% this year, with the market spooked by a slowdown in the rollout of robotic sites and modules for its retail partners.
Ocado said last month its Canadian supermarket partner Sobeys had paused the opening of a fourth robotic warehouse, or customer fulfilment centre (CFC), as Ocado calls them. Ocado has also seen Kroger in the United States slow down its rollout of sites. Some analysts also think Ocado will need to raise significant additional capital.
Half-Year Results
For the six months to June 2, the group reported a pretax loss of £154 million (€183.26 million), versus £290 million (€345.10 million) a year earlier. Revenue rose 12.6% to £1.5 billion (€1.785 billion).
First-half underlying earnings, or adjusted EBITDA, Ocado's preferred measure, was £71.2 million (€84.73 million), up from £16.6 million (€19.75 million).
'Unprecedented Period'
"We have come through an unprecedented period for online grocery, with multiple years of high food inflation following a surge in demand during the pandemic," commented Tim Steiner, chief executive. "The global channel shift to online has now resumed and Ocado is uniquely well-positioned to take advantage of the opportunity.
Ocado said it now expected its key technology solutions division to achieve a "mid-teens" EBITDA margin in the full 2023-24 year, versus previous guidance of over 10%.
It also forecast underlying cash flow would improve by £150 million (€178.50 million), ahead of a previous expectation of £100 million (€119 million), and said liquidity remains strong at £1.05 billion (€1.249 billion).
Analyst Viewpoint
Commenting on Ocado's performance, Dan Coatsworth, investment analyst at AJ Bell, said, “Ocado’s shares are like a yo-yo, down one minute and up the next. A day after a broker downgrade knocked the share price for six, better than expected half-year results have put a rocket under the stock.
“Much of the company’s criticism has been centred on its slow progress in signing up new technology partners for its grocery logistics platform, as well as fragile relationships with its UK retail partner, Marks & Spencer.
“Problems with the tech side of things are already well-known – a few existing partners have scaled back expansion plans involving Ocado and new contracts are few and far between. However, the M&S relationship might not be a complete disaster. Revenue is picking up and the venture can call itself the UK’s fastest growing food retailer. More focus is going into price, making sure core products are more affordable to a wider group of shoppers."
“Ocado needs to make a habit of regularly producing results like these if it is to properly win back the market’s favour. That may not be easy. Sustained improvements are the only ways to make the critics put away the knives they’ve been sharpening for some time. Given its business model is focused primarily on the technology side of things, not delivering food to people’s homes, Ocado cannot sit comfortably until it wins more contracts and builds scale.”
Additional reporting by ESM
