16th Jul 2024 16:18
(Alliance News) - Ocado Group PLC reported improved half-year revenue, giving its shares some respite, though the grocer still faces a fight to shore up investor confidence, RBC Brewin Dolphin said.
Ocado shares were 6.5% higher at 362.40 pence each in London on Tuesday afternoon. Shares are down some 38% on 12 months earlier, however.
The Hatfield, England-based online grocer and technology licensor said in the half year that ended June 2, its pretax loss narrowed to GBP153.9 million from GBP289.5 million a year before.
Ocado's half-year revenue was up 13% to GBP1.54 billion from GBP1.37 billion. Technology Solutions revenue increased 22% to GBP241.4 million, while Retail revenue was up 11% to GBP1.31 billion. Logistics revenue added 6% to GBP354.0 million.
Operating costs fell 3.5% to GBP1.68 billion from GBP1.62 billion.
Chief Executive Officer Tim Steiner said: "Today's results illustrate good progress as we support thirteen of the world's leading grocers to grow their online business with our technology. We have come through an unprecedented period for online grocery, with multiple years of high food inflation following a surge in demand during the pandemic.
"Our technology is delivering high levels of productivity and customer satisfaction. In the UK, Ocado Retail continues to lead the way in online grocery, and internationally we have received orders for new capacity, with a number of our partners reporting strong digital sales growth year-on-year."
Currently, 13 partners use the Ocado Smart Platform, an end-to-end e-commerce, fulfilment and logistics solution.
There are now 22 live customer fulfilment centres, with plans in place to increase this to 25 by the end of the year.
Looking ahead, Ocado said it expects to see further revenue gains, forecasting 15% to 20% growth for the full year from Technology Solutions.
Ocado anticipates stable revenue for Logistics, with high single-digit percentage volume growth. Retail revenue growth is expected to be a mid-to-high single digit percentage, benefiting from a lower inflation rate as food prices continue to normalise.
In light of this, adjusted earnings before interest, tax, depreciation, and amortisation margins for the full year are forecasted to be in the mid-teens, up 10% from previous guidance.
RBC Brewin Dolphin analyst John Moore commented: "Ocado finds itself at a crossroads. While there is decent growth at its business divisions, the deferral of rolling out additional customer fulfilment centres is a drag on the momentum the company needs to ramp up cashflow and refinance the debt that falls due over the next three years.
"On the positive side, revenue and cashflow remain on a positive trend, and the easing of inflation should help attract more customers. However, there is a lot of ground to make up for Ocado to get to where many analysts hoped it would be by now, and some self-help will be required to meaningfully reverse the share price decline of the past three years."
Ocado suffered a 10% share price plunge on Monday, undoing some of the progress made in a nine-day winning streak before the decline at the start of the week.
Ocado slumped on Monday after Bernstein cut it to 'underperform' from 'outperform'. Bloomberg defined Bernstein as a "long-standing Ocado bull". Bloomberg noted Bernstein had rated Ocado at 'outperform' since March 2022.
By Eric Cunha, Alliance News news editor
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