Ocado uses £150m from shareholders for warehouse robots
Shares fall as online grocer reveals it has made a small loss and anticipates dented profits next year
Ocado has tapped shareholders for £150m as it pumps cash into fine-tuning the expensive technology behind its hi-tech warehouses where groceries are picked by robots.
The online grocer revealed it had made a small loss of £500,000 on sales of £1.3bn in the year to 3 December 2017. The Ocado chief executive, Tim Steiner, also warned that plans to step up investment in 2018 would dent profits in the new financial year.
Ocado’s shares tumbled as much as 12% in morning trading before recovering to close down just over 3% at 476.5p.
Steiner said Ocado had not had to beg investors for the fresh funds, as they were eager for the company to cash in on the clamour from international retailers to buy its technology services, which are being marketed under its new Ocado Solutions banner.
“We are investing for future profit at the expense of current profits,” he said. “As the momentum of new signings builds we need the financial flexibility to take advantage of our opportunities.”
After several years hawking its wares around the globe, Ocado signed its first international partnership deals with Groupe Casino of France and Canada’s Sobeys last month.
Steiner said it was now in “active discussions with multiple retailers in a variety of geographies” and the prospect of landing more deals meant it was keen to hone the latest technology being installed at its newest distribution centres in Andover, Hampshire, and Erith, Kent.
Ocado has earmarked expenditure of £210m for the coming year as it hires software engineers and developers to iron out glitches. “We want to improve its resilience,” said Steiner. “Rather than just fix things we are asking: why did it break?”
A Shore Capital analyst, Clive Black, said the disappointing update was a veiled profit warning from a company that only made its first full-year profit in its 15-year history in 2015.
“Ocado has issued a poor outcome for 2017, returning to loss-making,” said Black. “It looks like the group has issued a profit warning to our minds. The [share] placing reflects the magnitude of cash burn for its Nasa-like projects: high in technological detail but one just never sees their benefit from planet Earth.”
Ocado’s investment plans come at a time when its existing UK delivery business is under pressure from rising labour costs and food price inflation that is hitting Britons’ spending power.
A shortage of drivers in the south-east meant it was forced to increase pay last year, which pushed up annual distribution and administrative costs by 15.7%.
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