18th Jul 2023 13:53
(Alliance News) - Ocado Group PLC shares surged on Tuesday on "positive" results, but the firm still faces doubt from analysts amid "spoof" bid stories.
Ocado shares jumped 16% to 675.00 pence each on Tuesday afternoon in London.
"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," Peel Hunt's James Lockyer and Oliver Tippling commented.
The Hertfordshire-based online grocer and warehouse technology firm reported that revenue in the half-year ended May 28 increased 8.6% to GBP1.37 billion from GBP1.26 billion a year earlier. Ocado's pretax loss widened to GBP289.5 million from GBP211.3 million.
Unconvinced, AJ Bell's Danni Hewson noted: "a bear would point to ongoing pre-tax losses for the group, continued slow pace in signing up new partners, and pedestrian gains in the total number of active customers for its UK retail operations".
It reported GBP77.2 million worth of exceptional costs, up markedly from GBP7.0 million a year prior. Costs this year included GBP38.7 million worth from a UK network capacity review, and GBP17.4 million stemming from the fair value of contingent consideration receivable due from Marks & Spencer Group PLC for its 50% stake in the Ocado Retail joint-venture.
Ocado reported earnings before interest, taxation, depreciation, amortisation, impairment and exceptional items of GBP16.6 million, swinging from a loss of GBP13.6 million a year prior.
Looking ahead, Ocado backed yearly guidance. It expects mid-single digit revenue growth in Ocado Retail and a "marginally positive" Ebitda at the unit.
Despite the positive figures, Chore Capital's Clive Black takes a much dimmer view of the firm, commenting: "The numbers remain grim, time is running out for this story, with the jam drying up."
In particular, Black notes that the firm made no mention of the board discussing potential bids for the company, which he said: "leaves a bad taste in the mouth about the veracity of the stories and their sources" relating to rumours that Amazon.com is considering a bid for Ocado.
Black described the reports as "spoof bid stories", adding that "if Amazon or anyone else for that matter was talking to the Ocado board, and/or had tabled a bid or even made an approach, then in light of the share price appreciation, the UK Takeover Panel would have sought for matters to be clarified".
Similarly, AJ Bell's Hewson commented: "Amazon is already a master at robotic-led warehouses so one has to wonder why it would need to buy Ocado. Yes, it wants to be bigger in the food sector – but it could just become a technology customer rather than buy Ocado outright if it wanted to take advantage of the systems."
"That life isn't getting any worse for the company is enough to satisfy the market. Although what matters to most investors is whether Ocado remains a takeover target," Hewson said.
By Harvey Dorset, Alliance News reporter
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