Ocado, the British online supermarket and technology group, has forecast faster growth this year after an improved performance from its automated warehouse technology unit helped to deliver better-than-expected annual earnings.
FTSE 100-listed Ocado operates an online supermarket in Britain through a joint venture with Marks & Spencer and also sells its cutting edge warehouse technology to grocery retailers around the world, such as Kroger in the United States, Casino in France and Aeon in Japan.
It is the latter Technology Solutions division that has driven Ocado's stock market value, which soared to around £22 billion (€25.7 billion) during the pandemic but has since fallen to £4 billion (€4.67 billion).
Pretax Loss
The group said on Thursday it made a pretax loss of £403.2 million (€472.44 million) for the year to December 3, 2023, versus analysts' average forecast for a loss of £410 million (€479.70 million) and a loss of £500.8 million (€585.96 million) in 2021/22. Revenue rose 9.9% to £2.83 billion (€3.31 billion).
At the core earnings level, Ocado returned to profit with adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of £54.2 million (€63.47 million), versus analysts' average forecast of £44 million (€51.48 million) and a loss of £74.1 million (€86.72 million) in 2021/22.
That improvement reflected a return to profit at Ocado Retail, the joint venture with M&S, a first profit in Technology Solutions and stable profit in the logistics division.
The group said that it was confident of 'faster growth, stronger cash flows, and higher returns, in the current financial year and beyond'.
'Future Success'
"At Ocado Retail, we expect further progress on its trajectory to restore an industry-leading EBITDA margin over the mid-term," commented Tim Steiner, Ocado chief executive. "We are also confident in our ability to win new OIA deals as we bring our solution to the non-grocery market.
"Future success will be driven by the characteristics that have always set Ocado apart: our ability to solve some of the most difficult engineering challenges in the market, our capacity to innovate at pace, and our discipline to turn vision into reality."
Analyst Viewpoint
“If you squint your eyes enough then Ocado posted a rare profit for 2023 – although only once several exceptional items had been set aside," commented AJ Bell investment director Russ Mould.
“The most significant development is a maiden profit for the company’s technology solutions arm. This is the part of the business which created real excitement a few years ago, particularly when the online groceries sector reached a zenith at the height of the pandemic.
“The idea Ocado could licence its platform to help supermarkets around the world set up their own web-based solutions captured the imagination. However, despite agreeing some deals progress has largely been slow."
Additional reporting by ESM
