Ocado's Full-Year Results – What The Analysts Said

By Steve Wynne-Jones
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Ocado's Full-Year Results – What The Analysts Said

Retailer and technology provider Ocado has reported a 10.3% increase in retail revenue in its full year to 1 December 2019, however group EBITDA was down 27.2% due to a fire at its Andover depot last year.

"We are pleased to report results which show strong momentum in the business," commented chief executive Tim Steiner. "Although statutory results reflected a combination of factors, including the impact of the Andover fire, the underlying performance of Ocado Retail and the successful growth of Ocado Solutions were very encouraging."

Here's how leading industry analysts viewed its performance:

Nigel Frith,

"Losses at Ocado have deepened considerably compared to last year. Loss grew to an eye watering £2145 million, up from £44.4 million despite revenue increasing 9.9% to £1.76 billion. The deepening losses are not surprising given that Ocado has invested heavily in its robotic warehouse and delivery system and following a large fire at the Andover warehouse last year.

"With M&S products still not available until September, attention has fallen on the solutions division, whereby retailers pay Ocado to use its robotics systems. The first fulfilment centres are due to open in the first half of 2020 and look set to propel Ocado from a grocer towards a tech stock. This obviously has significant costs associated with it.


"With shares trading flat on the open, investors are clearly willing to give Ocado the benefit of the doubt. Shares rallied 34% across the past year. Investors are willing to wait patiently to see whether Ocado can live up to its new tech stock plans. So far so good."

Clive Black, Shore Capital

"Exceptional items in FY2019 were £94.1m, of which c£88m related to the Andover fire. Stripping these items out then Ocado reported a loss of c£120m, up from £44.3m in FY2018; quite an achievement. That loss follows a year of £259.9m of capital expenditure (FY2018; £213.4m), which after all the equity and bond fund raising means net cash at the period end (November 2019) was £142.4m, a strong burn rate (wait for the capital expenditure guidance, more fund raising is coming).

"Tim Steiner, the Group CEO, is absolutely correct to point out Ocado’s notable successes, especially in internationalisation, the Kroger and Aeon deals being transformational, in our view, as was the partial exit from UK dependency with the M&S joint venture. He also uses the word ‘resilience’, which we would underscore.

"To be fair, Ocado is also a truly innovative Group, for which we give it considerable credit. Techno-babble still also, happily, features; try this: ‘These state-of-the-art robotic facilities are a core part of an end-to-end solution embracing automated fulfilment, an intuitive and easy to use webshop, and hyper-efficient last mile delivery…’. We, along with the whole grocery industry, look forward to the definition of hyper-efficiency."


Bruno Monteyne, Bernstein Research

"What matters in this set of numbers is the progress in execution, one of the big risks highlighted by bears. And all is on track despite the higher than expected number of retail partners. In terms of financials: they were provided using their new segmental disclosure.

"Given the number of reporting changes and the peculiar profit-recognition rules of IFRS15 for contracts, and the likely small sample size for consensus, we hesitate to draw too much of a conclusion on these results versus consensus (EBITDA was ahead). Rather, we focus more on the qualitative commentary, particularly on the outlook for the year ahead."

Patrick O'Brien, GlobalData

"Ocado has continued to build its UK retail business faster than the online food & grocery market with double-digit (but only just) growth to £1,617m. While the unit is once again profitable at the EBITDA level, greater losses at its International Solutions business and the cost of the fire at its Andover centre drove an overall loss before tax of £214.5m.

It is the longer-term expectations of profits delivered on the back of signing up international retailers to its technology that has driven its share price to extremely high multiples, despite its current losses. Its market capitalisation of £8.7bn is that of Sainsbury’s and Morrisons combined. Once an industry joke for always being on the verge – but never announcing – international clients, a string of major wins has transformed its outlook. Still, for all its talk of “unrecognised fees”, the international business’s revenue for the year was just £0.5m.


"Closer to home, its high-stakes battle with Waitrose looms. The supply switch to its joint-venture partner M&S will take place in six months’ time, and Ocado claims that plans are progressing well, and that a range review has confirmed that M&S has substitutes for the majority of the 4,000 Waitrose products it stocks at the same price or lower, and at the same quality or better.

"It also points out that Waitrose only provides 7% of the 58,000 products in its range, believing customers are more wedded to the Ocado brand and service than Waitrose’s food. It certainly appears confident – issuing guidance of retail revenue growth of 10-15% for the year ahead."

© 2020 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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