Technology

Ocado Half-Year Results – What The Analysts Said

By Steve Wynne-Jones
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Ocado Group has reported a 4% drop in revenue in its half-year period to 29 May 2022, with growth in its Ocado Solutions business offset by a weaker performance in Ocado Retail.

“The last six months has seen significant progress at Ocado Group and we have put all the building blocks in place to deliver profitable growth and strong cash flows," commented CEO Tim Steiner.

Here's how leading industry analysts viewed its performance:

Clive Black, Shore Capital

"Ocado Group has issued H1 FY22 results that embrace a period where a further material earnings warning was issued and a notable liquidity event took place, both of which severely depleted earnings per share. As such, unsurprisingly, the financial output of the group is materially weather year-on-year; a £211 million loss (excl. exceptional items). We remain highly sceptical on the equity's investment thesis and see it as overvalued.

"In terms of guidance, given that the group has recently engaged in a notable placing, there does not appear to be any further downward momentum albeit we suggest that investors await any updates from its house brokers on this matter. We note that FY22 capital expenditure will be c.£800 million, which is eye watering given the financial performance of the group, and that Ocado states still that further solutions deals will negatively impact short-term financial performance."

Walid Koudmani, XTB

"Despite the challenging trading environment in the UK, today's report showed that Ocado has been able to make underlying progress with International Solutions retail revenue growth +120% while actual Retail dropped by 8% and with group EBITDA reaching £-14m.

'It appears that the focus on the Ocado Smart Platform is paying off and will continue to be a key focus for the company as it attempts to offset several factors impacting retail. Prospects appear to be promising and if the general economic environment improves it could provide a real boost to performance for the group."

William Woods, Bernstein

"Ocado reported H1-22 results today with both revenue and EBITDA came broadly in line with our numbers, given the updated guidance and pre-reporting on Retail. Group revenue for H1 at £1262 million is -2% below our expectations, which flows through to EBITDA at -£14m vs. our expectation of +£1m. Int. solutions came in as expected with £59 million revenue vs. £62 million and EBITDA beat at £58 million vs. -£63 million.

"Retail EBITDA was -£5 million softer than our expectations (driven mainly by lower revenue) and UK Solutions was -£17 million lower than expectations, driven by Morrisons revenue."

Alex Smith, Third Bridge

“With a biting cost of living crisis unfolding, Ocado’s heydays as a pandemic-era darling now feel like a distant memory. However, our experts expect online penetration to grow to 20% within the next five years. Ocado looks set to benefit if it can expand its capacity in good time.

“Although Ocado is currently the leader in the warehouse picking robotic technology, our experts say it is still at least 3-4 years away from becoming a pure-technology company. The technology part of Ocado’s business remains tiny even though it grew by 300% last year.

“Ocado should be relatively resilient during a recession because it targets a premium customer segment and some customers will trade down from eating out. At the same time, Ocado offers a broad range of high-quality private label products. In order to go compete with trendy rapid delivery players, Ocado should start leveraging the M&S real estate and open more urban fulfilment centres.”

Barclays European Food Retail Equity Research

"Today's results seem broadly as expected, although Retail sales do seem to have weakened further in May. While there is no news on any further International Solutions customers, there may be some relief that Ocado has reiterated FY22 guidance after previous cuts.

"Retail sales (ie M&S JV) down by -8.3% for 1H (implies -10.8% for 2Q, vs -5.7% in 1Q). Ocado had already disclosed that 2Q sales were down c-8% in March/April, so this implies a further slowdown in May."

© 2022 European Supermarket Magazine. Article by Stephen Wynne-Jones. For more Technology news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine

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