Struggling online retailer
Ocado has spent the past two years investing £250m to double its capacity with the construction of a new fulfilment centre, due to open this month. Finance director Duncan Tatton-Brown says the efficiency improvements from this high-tech warehouse will make the group cash generative by the end of the year. Efficiency gains - such as increasing the number of products picked per hour at the existing fulfilment centre - are already paying off and helped boost underlying operating profits to £4.9m from £1.1m.
Cash profits rose 20 per cent and the number of active customers increased to 355,000 from 298,000, with weekly orders up by 13,000. But, as broker Panmure Gordon points out, on sales of nearly £700m, the grocer makes just £1m of profit, ignoring exceptional costs and including capitalised costs. Moreover, net debt has risen from £19.2m to £55.2m
Broker Numis Securities expects EPS of -2.1p and a pre-tax loss of £12.7m in 2013, rising to -1.1p and £6.7m in 2014.
|OCADO GROUP (OCDO)|
|ORD PRICE:||119p||MARKET VALUE:||£694m|
|TOUCH:||119-120p||12-MONTH HIGH:||134p||LOW: 57p|
|DIVIDEND YIELD:||nil||PE RATIO:||na|
|NET ASSET VALUE:||36p||NET DEBT:||27%|
|Year to 27 Nov||Turnover (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
*53 weeks to 3 Dec
Ocado is relying on its new fulfilment centre to generate the efficiency and scale it needs to be profitable. This is quite a gamble. Despite the recent appointment of retail guru Sir Stuart Rose as chairman, the shares remain a hold until we see sustained profitability
Last IC view: Hold, 101p, 22 January 2013