Ocado shares jump 4% despite wider pretax loss reports

Ocado Group Plc (LON:OCDO) have seen their shares jump over 4% as the firm reported revenue growth in its Tuesday update.

Ocado said that revenue growth was driven by increased demand in the last few months of trading, however its loss widened in its recently ended financial year.

The FTSE 100 lister said that pretax loss had widened across its financial year. The loss widened to £214.5 million from the £44.4 million figure a year ago, which was attributed to higher operating expenses.

Breaking this down further, the firm said that administrative expenses grew substantially by 88% to £314.2 million year-on-year.

Notably, distribution costs rose 18% to £571.8 million, which were the two biggest contributors to the widened loss reported this morning. Finance costs also doubled to to £30.9 million from £14.7 million one year ago.

Following a hazard in February 2018, where a fire destroyed one of their Andover customer fulfillment centers, this led to lower capacity to operate. However, this was somewhat compensated for when it agreed a a deal with Wm Morrison Supermarkets PLC (LON:MRW) to withdraw from the Erith customer fulfilment centre.

On a better note, Ocado reported revenue growth of almost 10% during the year from £1.6 billion to £1.76 billion which was driven by higher order numbers and strong consistent trading.

Looking forward, Ocado speculated that it is expecting revenue growth between the range of 10% to 15% in its current financial year.

Tim Steiner, Chief Executive Office commented:

“We are pleased to report results which show strong momentum in the business. Although statutory results reflected a combination of factors, including the impact of the Andover fire, the underlying performance of Ocado Retail and the successful growth of Ocado Solutions were very encouraging.

Our progress over the last twelve months, which includes signing our eighth and ninth Solutions clients, Coles in Australia and Aeon in Japan, and successfully maintaining strong growth post-Andover, has demonstrated many of Ocado Group’s most important characteristics: resilience, innovation, focus and execution. It is these qualities that will enable us to continue to develop the Ocado Smart Platform to meet the evolving needs of our partners at the cutting edge of online grocery retail.

The first half of this year will see a new milestone for Ocado Group; the opening of the first customer fulfilment centres for our international partners. These state-of-the-art robotic facilities are a core part of an end-to-end solution embracing automated fulfilment, an intuitive and easy to use webshop, and hyper-efficient last-mile delivery which will enable Sobeys and Groupe Casino to deliver the same outstanding customer experience to consumers in Canada and France as Ocado Retail does today here in the UK.

The landscape of grocery retailing globally is changing. We are excited to be able to play a leadership role through Ocado Retail, our joint venture with M&S, and through our Solutions partnerships, as we fulfil our mission of “changing the way the world shops”.

Ocado agrees deal with Aeon

In November, the firm told the market that it had struck a deal with Japanese firm Aeon.

The agreement outlines the development of a national fulfillment network to serve the whole of the Japanese market, which kept shareholders optimistic.

With this in place the firm expects sales capacity of around ¥600bn (£4.24bn) by 2030, growing to approximately ¥1tn by 2035.

Aeon chief executive Motoya Okada said: “We see Ocado as a state-of-the-art, exciting and transformative partner aligned with our strategy of accelerating Aeon’s digital shift to serve Japan’s consumers.”

Ocado said it expected an additional £25m of operating costs in fiscal year 2020 to implement the service.

Shares in Ocado trade at 1,269p (+4.31%). 11/2/20 10:53BST.

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