Ocado raises £578mn to expand loss-making grocery empire
Ocado’s (OCDO) loss-making robotic grocery business has secured its next round of growth funding, raising £578mn through the placement of 72.3mn new shares. Shares were offered at 795p per share, a 9 per cent discount to yesterday’s closing price, and received buy-in from retail and institutional investors including Capital, Baillie Gifford and Apple III. The firm has also locked in a new revolving credit facility from a group of international banks, worth £300mn.
The tech sell-off has hit Ocado this year, with shares falling by almost a third since Investors’ Chronicle’s ‘Sell’ recommendation on the stock in April. Management’s change of heart, having previously planned to fund expansion through debt issuance, could partly reflect the drying up of deep wells of private capital funding the grocery tech space, with rapid delivery firms like Getir forced to lay off staff and scale back growth plans this year.
Nevertheless, Ocado said the latest funding will go towards building its current pipeline of 58 robotic warehouses - known as customer fulfilment centres (CFCs) - for overseas partners like Kroger and Casino Groupe. Seen as the drivers of Ocado’s future growth, CFCs have long lead times and typically require two years from initial construction to become net earners, which has led to Ocado to be criticised for its “jam tomorrow” business model.
Yesterday, Fitch Ratings also downgraded Ocado’s credit rating to negative from stable, saying the firm’s path to profitability is getting longer, with profits now expected to appear in the year ending November 2024. Shares fell by 5 per cent in morning trading. MT
Classing gas as green would be misleading, investor groups say
The leaders of three groups representing institutional investors have written to the UK government opposing the inclusion of natural gas in the country’s ‘green taxonomy’.
The heads of the Institutional Investors Group on Climate Change (IIGCC) – a European body whose members manage over €51tn (£44tn) of clients’ money – the UK Sustainable Investment and Finance Association (UK SIF) and the Principles for Responsible Investment said that classifying gas as green risked undermining the credibility of the UK’s classification system.
The taxonomy being developed “is meant to be a science-based tool to define green activities”, the IIGCC’s chief executive Stephanie Pfeifer said.
“There may be a legitimate role for natural gas as a ‘bridge’ during the energy transition, but this should not be interpreted as gas equating to green,” she added.
A report in the Daily Telegraph last month said business secretary Kwasi Kwarteng was keen to ensure gas projects are included in classifications as environmentally sustainable, following the European Commission’s proposal to include both gas and nuclear projects in its taxonomy.
European governments have paid much closer attention to energy security since Russia’s invasion of Ukraine in February. The UK launched its new energy security strategy in April and the EU revealed a €300bn plan to wean itself off Russian gas last month.
The letter signed by the three CEOs said classing gas as green would send “misleading signals to investors” at a time when greater clarity is needed.
“The inclusion of gas would significantly damage the UK’s leadership position on sustainability for years to come,” said UK SIF chief executive James Alexander. “There is a huge economic and leadership opportunity for the UK should it choose to follow the path of a taxonomy based purely on science.” MF
Glencore convicted on bribery charges in UK court
Following the $1bn-plus (£810mn) in fines levied by the US over corrupt practices, a UK court has convicted mining and trading giant Glencore (GLEN) of similar offences. The Serious Fraud Office, which has often failed to get its cases to this stage, said on Tuesday Glencore had “been convicted on all charges of bribery”.
“The SFO’s investigation exposed that Glencore, via its employees and agents, paid bribes of over $28mn for preferential access to oil, including increased cargoes, valuable grades of oil and preferable dates of delivery,” the investigative body said.
This took place in Nigeria, Cameroon, Ivory Coast, Equatorial Guinea and South Sudan. Last month, US authorities said a “staggering” level of bribery and corruption had been uncovered and across two regulatory bodies Glencore was slapped with $1.2bn in fines.
Tuesday’s court appearance had been billed as sentencing but that will take place in November, the SFO said. AH
Treasury steps up oversight of buy now, pay later sector
The booming buy now, pay later (BNPL) business looks set to be subject to the same oversight as regular lenders.
Customers who use such services might benefit from the greater flexibility of being able to spread payments but are not currently afforded the same levels of protections as other borrowers, HM Treasury said in a statement on Monday.
It is planning to introduce rules forcing BNPL providers to carry out the same eligibility checks as other lenders and ensure the rates being levied on consumers are affordable. BNPL lenders will need to be approved by the Financial Conduct Authority and ensure any advertisements are fair, clear and not misleading.
“By holding Buy-Now Pay-Later to the high standards we expect of other loans and forms of credit, we are protecting consumers and fostering the safe growth of this innovative market in the UK,” said John Glen, economic secretary to the Treasury.
The BNPL market is forecast to grow by 50 per cent in the UK this year to $29.9bn (£24.4bn), according to data firm Research and Markets. Billions have poured into the sector over the last 18 months, with Europe’s biggest provider Klarna valued at $46bn following an injection of capital by Softbank in June last year. MF
SMS revs up EV charging presence
Smart Metering Systems (SMS) is stepping up its presence in the electric vehicle charging business, spending £2mn for a 25 per cent stake in Clenergy, a charging point software and systems provider based in South Wales.
The deal contains an option to buy a further 26 per cent stake, giving it a majority, for an extra £2mn after a year and to buy out the remaining shares after five years.
SMS, which provides smart meters, battery storage units and other renewable infrastructure, also said it is buying 100 per cent of n3rgy for an initial £1.4mn in cash, with up to £800,000 more dependent on hitting future performance targets. It makes software that takes readings from smart meters to use for billing and energy saving advice.
EasyJet orders 56 new Airbus planes
EasyJet (EZJ) has agreed conditional arrangements to buy 56 Airbus A320neo aircraft, with deliveries expected to start in the 2026 financial year, replacing the carrier's older planes.
The proposed purchase secures hard-to-find delivery slots in the aviation sector as it faces ongoing supply chain pressures, while also maintaining the benefits of easyJet’s earlier deal with Airbus in 2013, allowing it to buy aircraft “very substantially below” the list price.
The new aircraft are expected to deliver between a 15 and 25 per cent unit cost fuel efficiency improvement compared to the older planes in easyJet’s fleet, reducing the air carrier’s costs and proportionally reducing carbon emissions.
The fleet refresh will be funded from cash, sale and leaseback transactions and debt, said the budget airline, which expects that the deal will deliver benefits including “up gauging, cost efficiencies and sustainability enhancements” to support positive returns for the business. MT
HSS Hire lifts sales
HSS Hire (HSS) said that it is managing to make revenue gains despite “ongoing macroeconomic challenges”, with full year earnings still expected to be in line with market expectations.
The company, which has substantially cut its debt and moved to a more “capital-light” operating model, relying less on branches and more on builders’ merchant concessions and online sales, said it expects operating profit before amortisation and exceptional items to remain in line with market expectations, which range from £30.5mn-£32.7mn. Activity in construction slowed last month due to weaker housebuilding activity, although this was offset by busier commercial property and infrastructure markets, according to S&P Global’s monthly construction survey. MF
