Ocado jumps to 5-month high after breaking into black in first half

Ocado Group PLC (LSE:OCDO) shares leapt 13% after the online grocery specialist reported an underlying profit for the first half of the year, boosted by opening a first customer warehouse in Japan and its UK businesses breaking even.

The outlook for the full year was held firm by what is London’s most-shorted company, including for underlying profits for all businesses on an EBITDA level and £200mln of underlying cash flow improvement.

Revenue of £1.4bn was declared by the FTSE 100-listed group for the half-year to 28 May 2023, up 8.6% on a year ago.

Positive EBITDA of £16.6mln was posted, flipped from a £13.6mln EBITDA loss last time and a £74.1mln underlying loss in the last full year.

Reported losses before tax increased, however, by 37% to £289.5mln, as depreciation mounted and there was £77mln of exceptional costs.

UK joint venture Ocado Retail, which is 50% owned by Marks and Spencer, returned to profitability in the second quarter, while the UK logistics business, which works with customers including Morrisons, had what was described as a “steady, profitable” period.

Ocado Technology Solutions had 25 operating customer fulfilment centres (CFCs) for overseas customers at the end of the period, having opened a first in the Asia-Pacific region for Japan’s AEON in Chiba City, just outside Tokyo; and a third for Sobeys in Canada.

Looking forward, two CFC openings expected in the second half for Australia’s Coles have been pushed back and are under review, but a new UK centre is due to open in the second half.

The Ocado Retail JV increased revenue 5.0% year-on-year to £1.2bn as active customers rose 10.6% and average prices rose 8.4%, partially offset by basket sizes shrinking 6.3%.

Shares in the company jumped 13% to 658p, the highest since early February.  

Analysts at Peel Hunt noted that EBITDA in the period was over 50% of its full-year estimate, with Technology Solutions revenues ahead of expectations and Ocado Retail showing “additional momentum” as it moved into profitability.

“Ocado’s results are extremely positive given the high level of growth, and increasing profitability, of its all important technology solutions division, which is the division we believe holds the majority of the group’s value,” they said.

   ** UPDATE: Adds share price and broker comment. **


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