Ocado on right track despite half-year loss

Ocado’s half year results are a relatively solid performance for a company that's putting the right building blocks in place to get back in the black next year, and stay there for many years to come.

That’s according to Fiona Cincotta, Senior Market Analyst at City Index. Investment in new warehouses and IT systems saw the online grocer post a £9 million loss in the six months to 3rd June, compared with pre-tax profits of £7.7 million a year earlier. Underlying earnings, meanwhile, fell 13.9% to £38.9 million.

Highlights included partnership deals with the likes of Kroger. “This is a transformational period for Ocado. We have developed unique and proprietary technology to offer retailers an end-to-end operating solution for grocery retail that enables them to meet the changing needs of consumers,” says Chief Executive Tim Steiner.

He adds: “In order to fully capitalise on the opportunities ahead of us, we are working at pace, investing more and focusing sharply on execution to bring on new capacity in the UK and to achieve successful outcomes for our partners.”

“Ocado is very much in execution mode now, so all that red ink shouldn't be the cause of too much alarm,” comments Cincotta. “Capex and revenue guidance have been maintained and the new general merchandise warehouse in South London is up running as planned.”

“On the downside, the rate of retail revenue growth is still tracking towards the bottom end of the 10-15% guidance range, despite the weather improving markedly during the final weeks of the reporting period. It looks like investors expecting more big partnership deals will have to be patient, with management putting a 'medium term' time horizon on extra signings,” she concludes.