ii view: Ocado revenues growing fast

by Keith Bowman from interactive investor |

Despite a warehouse fire, is online grocer Ocado still hot in the eyes of investors? 

First-half results for the six months ending 30 April 2019

  • Revenue rose 10.9% to £882.3 million
  • Loss before tax widened to £142.8 million from £13.6 million
  • Adjusted pre-tax loss grew to £43 million from £13 million
  • No dividend declared

Chief executive Tim Steiner said:

"In the last six months the centre of gravity at Ocado Group (LSE:OCDO) has shifted. Our exciting new joint venture with Marks & Spencer Group (LSE:MKS) creates further growth opportunities for both parties in the UK and allows Ocado Group to increase focus on growing our Ocado Solutions business and innovating for our partners. At the same time we are beginning to apply our technology skills and expertise to other related activities which we expect to be of benefit to our Solutions partners as well as to other Ocado Group stakeholders."

ii round-up:

This online grocery retailer was founded in 2000 and listed on the London Stock Exchange in July 2010 at an IPO price of 180p per share. 

Today it operates two divisions - Retail and Solutions. Retail is the company’s own online supermarket business, while Solutions is responsible for corporate partnerships with online retailers using the Ocado Smart Platform software and technology.

Ocado has over 700,000 active customers, with around 1,000 robots powering its newest warehouse. 

For a round-up of these half-year results, please click here.

ii view:

The difficulty in accurately valuing a growing but loss-making online business such as Ocado divides both analysts and investors. With a stock market value of £8.7 billion, nearly twice that of traditional retailer Sainsbury's (LSE:SBRY) (£4.4 billion), investors look to have already priced in a lot of good news. 

Arguably, Sainsbury’s and other traditional supermarkets do not offer a direct comparison. Ocado has won large contracts with significant overseas retailers, and its technology tag clearly warrants serious consideration when attempting to paint a picture of future prospects. However, while recent progress has been impressive, given the degree of forecasting necessary, the stock remains an investment for higher risk investors. 

Positives: 

  • Active customers up 9.7% to 745,000
  • Signed sixth international partnership 
  • Fees invoiced from solutions partners up 36% to £122.7 million

Negatives:

  • Warehouse fire caused £142.8 million loss
  • Doesn’t pay a dividend
  • Ongoing need for heavy investment

The average rating of stock market analysts:

Hold

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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