Ocado dishes up rotten fruit

Struggling online retailer Ocado (OCDO) has once again posted a pre-tax loss for the year, despite a 11 per cent annualised rise in sales - raising doubts that the grocer will ever be able to achieve a full-year pre-tax profit.

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.

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