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Ocado slips back into the red

The online grocer finds itself in need of cash after slipping back into a lossmaking position and signing a slew of new deals
February 6, 2018

Shares in Ocado (OCDO) slipped into reverse following the release of these figures, partly as a consequence of a general market correction, with the mood hardly enhanced by news of a placing of 31.5m shares. The group reported a decent acceleration at the top line as customers increasingly turned online for weekly food shops, but the technology provider slipped back into the red by £0.5m (on an equal 52-week basis), compared with a £12m profit last year.

IC TIP: Sell at 461p

A slew of new international deals has thrown significant momentum behind the share price lately, but management believes it could spend up to £210m in capital expenditure this year to facilitate these future contracts. The group also said current-year cash profits would “reflect the fixed costs” involved with building and expanding existing logistics hubs in the UK – comments some City analysts likened to a profit warning.

The share placing has therefore been designed to ease the group’s – not to mention investors’ – short-term suffering. Although pricing wasn’t made clear to the market, Peel Hunt reckons a fundraising at the previous day’s closing price would drum up £155m. For now, the broker still expects adjusted pre-tax profits of £7.6m and EPS of 1.2p for the year ending November 2018, moving to £12m and 1.6p in FY2019.

OCADO (OCDO)   
ORD PRICE:461pMARKET VALUE:£2.76bn
TOUCH:460.7-461.3p12-MONTH HIGH:551pLOW: 233p
DIVIDEND YIELD:NILPE RATIO:NA
NET ASSET VALUE:45p*NET DEBT:84%
Year to 3 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20130.79-12.5-2.2nil
20140.957.21.2nil
20151.1111.92.0nil
20161.2712.12.0nil
2017**1.461.00.2nil
% change+15-92-92-
Ex-div:na   
Payment:na   
*Includes intangible assets of £112m, or 19p a share **53-week period