UK: Ocado FY losses widen despite sales gain

By Katy Askew | 4 February 2014

Ocado shares dip on wider losses

Ocado shares dip on wider losses

Online UK grocer Ocado has reported higher annual losses despite growing sales ahead of the market and establishing a tie-up with supermarket group Morrisons.

The company said today (4 February) that pre-tax net losses for the year to 1 December widened to GBP12.5m (US$20.4m), up from GBP600,000 a year earlier.

However, the company reported an improved operating result in the period. EBITDA rose 35.1% to GBP45.8m, when adjusted for the an extra trading week in 2011/2012. Adjusted revenue increased 18.8% during the period, climbing to GBP792.1m.

Ocado CEO Tim Steiner said the company had continued to benefit from the "unstoppable" movement of UK consumers to shopping online. "Today the momentum seems unstoppable and, as the market evolves, we are leading the way in delivering market-leading service, innovation, and technology to the benefit of our customers," he said.

Steiner also emphasised could potentially represent a new growth avenue for Ocado through the GBP200m long-term contract to supply Morrisons' online business with logistical support. "This development reflects the increasing demand for online grocery shopping in the UK and internationally, and a validation of the unique technology, IP and operating model pioneered by Ocado," he said.

In a separate announcement, Ocado revealed co-founder and commercial director Jason Gissing would leave the firm following the annual general meeting in May.

Conlumino retail consultant George Scott suggested the departure of such a key figure represented both a challenge and opportunity for Ocado. Gissing's exit "presents another challenge" for the group - "albeit perhaps also an opportunity for the business to start the new growth trajectory it needs", Scott said.

Ocado shares were down 4.2% at 09:50 GMT, dropping to 501.5 pence.

The group's stock performed strongly over the course of 2013, rising almost 410% in the 12-month period. Since the beginning of this year, Ocado's share price has continued its ascent, rising 13.6% since 1 January. 

Show the press release

OCADO GROUP PLC

 

Preliminary results for the 52 weeks ended 1 December 2013

4 February 2014

Key financials and statutory highlights¹

 

 

52 Weeks 2013

£m

53 Weeks 2012

£m

53 Weeks Variance

%

52 Weeks 2012

£m

52 Weeks Variance

%

Gross sales 2 (Retail)  

843.0

731.9

15.2%

719.0

17.2%

Revenue 3

792.1

678.6

16.7%

666.6

18.8%

EBITDA 4

45.8

34.5

32.8%

33.9

35.1%

 

 

 

 

 

 

(Loss)/profit before tax before exceptional items 5

(5.1)

1.8

 

 

 

Loss before tax

(12.5)

(0.6)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

110.5

89.6

 

 

 

Net debt

(50.9)

(55.2)

 

 

 

 

Strategic progress

During the year the grocery market accelerated its structural shift to online. We improved our sales growth, added significant fulfilment capacity and signed a transformational agreement with Wm Morrison Supermarkets Plc ("Morrisons").

Developing our proposition to customers

·        Industry leading service levels for both on time delivery and in full orders improved further with orders delivered on time or early significantly increased to 95.2% (2012: 92.7%) and item accuracy improved to 99.0% (2012: 98.0%)

·        Range extended at Ocado.com to 34,000 SKUs (2012: 28,000 SKUs)

·        Launched Fetch.co.uk ("Fetch"), a specialist pet shop with over 6,000 SKUs, and the first of our dedicated destination stores

·        Price initiatives, including Low Price Promise, impacted positively on customer price perceptions and our actual price position relative to competitors.

Growing customer numbers and spend

·        Active customers increased to 385,000 (2012: 355,000), with new customer acquisition over 40% up on 2012

·        Growth in frequent shoppers increased over twice as quickly as growth in active customers due to increased focus on new customer acquisition rather than low value customer retention

·        Average baskets increased to £113.53 (2012: £112.10).

Optimising operations

·        Improved Hatfield Customer Fulfilment Centre ("CFC1") capacity and efficiency with average productivity increased to 135 UPH (2012: 121 UPH)

·        Delivery performance improved to 160 DPV per week (2012: 152 DPV per week).

Enhancing capital efficiency of future capacity

·        Our new Customer Fulfilment Centre in Dordon ("CFC2") opened on time and on budget, with further capacity increase underway, and CFC2 variable cost per order now lower than CFC1

·        First dedicated Non-Food Distribution Centre ("NFDC") opened in Welwyn Garden City to support continued growth of non-food business.

Developing and leveraging our proprietary intellectual property

·        First strategic client, Morrisons, confirmed, and Morrisons.com successfully launched improving Ocado operating economics.

Tim Steiner, Chief Executive Officer of Ocado, said:

"Last year the food retail market in the UK was driven by consumers' increasing preference for shopping online. Today the momentum seems unstoppable and, as the market evolves, we are leading the way in delivering market-leading service, innovation, and technology to the benefit of our customers.

 

"2013 was an extremely busy year for us with significant progress in growing both our customer numbers and average spend thanks to a wider range of products, even better prices, and the fact that we are now even easier to shop. We have continued to grow our general merchandise business, adding depth to the range in certain non-food categories and launching Fetch, our specialist online pet store.

 

"The successful opening of our new CFC during the year provides us with the capacity to continue to grow and we are well placed to take advantage of significant change in our industry.

 

"During the year, we also announced a long term agreement with our first strategic client, Morrisons, to provide them with IP and operating services to launch their online grocery business. The efforts of our teams, and the strength of our technology platform, have allowed us to deliver this project successfully in a very short timeframe. This development reflects the increasing demand for online grocery shopping in the UK and internationally, and a validation of the unique technology, IP and operating model pioneered by Ocado. We are confident that we are well positioned to benefit from future strategic developments as online grocery shopping increases in popularity. " 

Original source: Ocado

Sectors: Financials, Multichannel, Retail

Companies: Ocado

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