Ocado Half-Year Results – What The Analysts Said

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

Ocado Group has reported a return to profit in the first half of its financial year, while half-year revenue was up 8.6% at group level.

"I am pleased to see the operational and financial discipline delivered by all our teams as we focus on driving cost efficiencies and cash flow improvement," commented Tim Steiner, Ocado chief executive.

Here's how leading industry analysts from GlobalData, AJ Bell, Shore Capital and Bernstein viewed its performance.

Joe Dawson, GlobalData

“After a turbulent month of share price fluctuation following speculation around a potential Amazon bid, Ocado has released results showing group revenue up 8.6% to £1.4 billion, keeping its guidance for the first half of the year, returning to underlying profit of £16.6 million. While this is an improvement on last year, growth was mostly driven by the success of its technology solutions arm, which provides robotics to many of the world’s biggest supermarkets.

"The Ocado Retail joint venture with Marks & Spencer, which makes up the bulk of the group’s sales, saw revenue growing just 5.0% year on year against weak comparatives. This is unlikely to have been the progress that Marks & Spencer bosses were hoping for, and leaves much to be desired as the retail division suffered a £2.5 million loss for H1.


"The surprise decision to close the original Hatfield customer fulfilment centre (CFC) is indicative of a strategy shift at Ocado to focus on profitability amid weaker sales growth forecasts, but it will be an uphill battle for Ocado Retail to return to its previous peak in the pandemic.

“Compared to H1 2022, the number of active customers increased 10.6% to 959,000 while the average selling price of products grew just 8.4%, bringing the average basket value up 1.5% to £121.50.

"Keeping price increases below the level of food inflation in the UK (18.4% in May) will have been key to attracting and retaining customers as shoppers continue to seek out value for money and low prices. However, volumes are still constrained, with the average basket size down 6.3% to 45 items, broadly reflecting the dynamics of the wider food & grocery market."

Danni Hewson, AJ Bell

“There are two ways of looking at Ocado’s results. The business has generated a small EBITDA profit versus market forecasts of a loss. Sales are up across all of its divisions and clients are busy opening new fulfilment centres or reaping the benefits of Ocado’s system through improved operational performance. Ocado even believes it could win contracts outside of the grocery sector for its technology.


“However, a bear would point to ongoing pre-tax losses for the group, continued slow pace in signing up new partners, and pedestrian gains in the total number of active customers for its UK retail operations.

“That life isn’t getting any worse for the company is enough to satisfy the market. Although what matters to most investors is whether Ocado remains a takeover target. Rumours that Amazon wanted to buy the business breathed new life into the share price in recent weeks but the retail giant has remained quiet on the speculation.

“Amazon is already a master at robotic-led warehouses so one has to wonder why it would need to buy Ocado. Yes, it wants to be bigger in the food sector – but it could just become a technology customer rather than buy Ocado outright if it wanted to take advantage of the systems.”

Read More: Shares In Ocado Soar Amid Talk Of Amazon Bid Interest


Clive Black, Shore Capital

"We have said it before and we’ll say it again, despite several cash flow seminars, Ocado Group has very low financial visibility, which we do not believe to be a virtue when it comes to equity valuation multiples.

"OR aside, which also has not exactly been a bastion of steady progress and forecasts transparency, there is virtually no basis for credibly model the Solutions activity of the Group where to date, so much has been invested for such material accumulated losses, noting considerable capitalisation of costs.

"As such, sadly, we continue to feel unable to forecast Ocado Group’s medium-term financial output with any confidence whatsoever, and, accordingly, we do not have a recommendation on the Group’s equity, albeit our caution remains palpable."

William Woods, Bernstein

"Ocado reported H1-23 today with a strong shift to profitability with beats on both retail and technology solutions. Kroger commentary was encouraging but the CFC build out is unlikely to pick up until FY24. The beat on profitability came broadly from retail (-£2.5 million vs. -£27 million) and technology solutions (£6 million vs. -£24 million).


"Retail profit was positive for each month of Q2 helped by higher operating efficiencies which should be positive. There was no change to guidance. Commentary on liquidity was positive with £1.3 billion cash (inc. RCF). Cash outflows and capex were in line to slightly below our expectations."

Read More: Ocado Launches First Robotic Warehouse In Asia With Aeon

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