Ocado falls to £215m loss after Andover warehouse fire
Online supermarket Ocado fell to a £214.5m loss last year, which the company blamed on a huge fire which burned down one of its warehouses in Andover last February.
The figures
Group revenue rose 9.9 per cent in the year, up from £1.6bn in 2018 to £1.8bn this year. This was largely driven by 10.3 per cent growth in the retail divisio, which grew to £1.6bn.
Group earnings before tax fell 27.2 per cent, from £59.5m to £43.3m over the whole year. Growth in both the retail and logistics divisions was offset by a £62.1m loss in international solutions.
Ocado posted a posted a £214.5m loss, almost five times larger than the £44.4m loss recorded the year before.
Exceptional charges of £94.1m, of which £88m was directly associated with the Andover facility, were responsible for the loss.
The company forecast retail revenue growth of 10 to 15 per cent in 2020.
Why it’s interesting
The online grocer was upbeat despite the size of the loss, saying that despite the impact of the fire, which cut sales capacity by 10 per cent, the results showed that it was the UK’s fastest growing supermarket.
It said that its solutions business, which helps grocers around the world develop their offering through robotics and AI, had seen three new clients this year, Australia’s Coles, Japan’s Aeon, and Marks & Spencer in the UK.
The first half of 2020 will see Ocado unveil the first of its new customer fulfilment centres, facilities which use robotics to provide automated services to international partners.
Ocado’s finance chief Duncan Tatton-Brown told press that the international solutions division would become the grocer’s new “centre of gravity”, but analysts said the firm had questions to answer as to when its international partners would begin to start producing real revenue.
Richard Hunter, head of markets at Interactive Investor, said Ocado’s partnerships have “kept anticipation at fever pitch, but the danger for investors is that the gap becomes too wide between expectation and reality”.
Alhough , he added, “the fact that Ocado has chosen to plough everything back into the business is not necessarily a negative – Amazon has shown just how successful that strategy can be, there could be elements of a disconnect emerging with the business continuing to be loss-making”.
Tatton-Brown said that the group “could guarantee that it would be producing some quite interesting cash flows in a a couple of years time”.
John Moore, senior investment manager at Brewin Dolphin, said that “Ocado’s solutions and platform remain compelling offerings – as do its prospects for international expansion, despite the investment required at this stage.
“However, key to Ocado’s share price pushing forward will be execution of the international business and improving cashflow, which should follow.”
Shares in the firm rose one per cent this morning.
What Ocado said
Ocado’s chief executive Tim Steiner said: “We are pleased to report results which show strong momentum in the business.
“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.
“The landscape of grocery retailing globally is changing. We are excited to be able to play a leadership role through Ocado Retail, our joint venture with M&S, and through our Solutions partnerships, as we fulfil our mission of “changing the way the world shops”.