Ocado Half-Year Results: What The Analysts Said

By Steve Wynne-Jones
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Ocado Half-Year Results: What The Analysts Said

Online grocer and technology firm Ocado has posted a 9.7% increase in retail revenue in the first half of its financial year, despite a major fire at its Andover depot, with group revenue up 10.5% for the period.

Commenting on the group’s performance, Tim Steiner, Ocado chief executive, said, “In the last six months the centre of gravity at Ocado Group has shifted.

"Our exciting new joint venture with M&S creates further growth opportunities for both parties in the U.K. and allows Ocado Group to increase focus on growing our Ocado Solutions business and innovating for our partners,” he added.

Here’s how leading retail analysts viewed its performance:

Russ Mould, AJ Bell

“Ocado has laid the foundations for its future by signing up multiple overseas partners over the past few years. Everyone now wants to know how much money Ocado can make from these partners and when these contracts are going to start delivering a profit.


“The market appears to be excited about the latest set of financial results because Ocado has managed to bounce back from the fire-related problems and chief executive Tim Steiner says the business has never had as many growth opportunities as it does today.

“For all the criticisms of the business, Ocado is doing what it said it would do. It continues to sign up overseas partners to power their online food operations and the UK operations have been given a new lease of life by striking the joint venture deal with Marks & Spencer.

“Ocado is investing heavily in tech engineers to ensure the business remains one step ahead, and it is also ploughing money into innovation to remain competitive. This includes buying stakes in third party businesses involved in automated meal preparation and vertical farming. All of these actions suggest Ocado is on the right path to achieve its bold growth ambitions. It just has turn the magical promise into profit.”

David Beadle, Moody’s

“Ocado’s credit quality continues to be underpinned by strong underlying growth in retail revenues, the large Solutions pipeline, and its significant liquidity, which will be boosted further next month by receipt of cash from M&S for the grocery joint venture.”


James Yacoub, GlobalData

“Ocado’s continued investment to futureproof its business model has led to robust growth with retail revenue rising £74.9m to reach £811.5m however it still remains a cash-draining enterprise as its loss before tax increased to £142.8m, up from £13.6m in H1 2017/18.

“It has proved to be resilient in the face of catastrophe following the fire at its state of the art warehouse in Andover, losing just 2% of sales in the half despite the facility accounting for 10% of its capacity. Ocado continues to outperform the UK online grocery market which GlobalData estimates will grow by 9.3% in 2019, helping Ocado’s share price to increase by 6.9% this morning.

“Following the announcement of its 50/50 joint venture with M&S, Ocado’s share price rocketed to its highest level in the online pureplay’s history, indicating that it may have got the better half of the deal. However by cutting its ties with Waitrose, Ocado has potentially traded a chunk of its loyal customer base for a deal with a retailer that is struggling, as its food sales continue to decline.

“There are little tangible signs to indicate that M&S has the same potential foothold as Waitrose in the online food and grocery market, which has led speculators to question whether the £750m paid for the joint venture was simply too much and that it may be anchoring on to Ocado to help turn its fortunes around.”


Bruno Monteyne, Bernstein Research

“Almost all EBITDA today comes from the Retail business. From Q3 onwards, Ocado will only own half of that EBITDA. Ocado's valuation is driven by the Solutions business, so we see management commentary on (1) how the current pipeline is developing and (2) what the future pipeline might look like as being far more valuable information.

“From that point of view, the results delivered what we wanted: (1) ability to outgrow the developed world's largest ecommerce market, (2) increasing ability to monetise the industry's revenue stream of the future: advertising, (3) more deals signed up during the half, (4) indication of further deal making in the pipeline, (5) more technologies ready for monetisation (Ocado Zoom), (6) much improved financing situation thanks to the M&S deal, (7) a shift towards more technology and less retail.”

© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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