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Online grocer Ocado has almost halved its first-half losses amid a double-digit increase in revenues as the “global channel shift to online has now resumed”.
Overall revenues in the six months to 2 June were up 12.6% to £1.54bn.
The group’s ‘technology solutions’ revenues were up by 21.8% from £198.2m to £241.4m, mainly driven by the annualisation of the three sites opened during 2023 (Sobeys’ third CFC in Calgary, its first CFC for Aeon just outside Tokyo, and Ocado Retail’s Luton CFC).
At the end of the period the group had 26 live sites globally, up from 25, and 112 live modules compared with 105 in the same period last year.
By the end of FY24 Ocado expects to have 25 live CFCs.
Ocado retail revenue in the UK increased by £133.5m from £1.18bn to £1.31bn, up by 11.3%, primarily reflecting strong growth in active customers and growing order volumes.
This growth reflected an 8.1% rise in active customers to 1.04 million at the end of the period, while basket sizes remained stable at an average of 44.7 individual items, driven by continued investment in value and improvements in service.
Average item price increased by 1.5% to £2.76 as the group continued price investment and inflated prices below market levels.
Orders per week grew by 9.2% to 428,000 (up from 392,000), driven mainly by the increase in active customers.
Logistics revenue increased by 5.6% to £354m, largely comprising cost recharges to its two UK customers, Ocado Retail and Morrisons.
A notable improvement in profitability in its technology arm saw overall adjusted EBITDA for the period jump to £71.2m from £16.6m, an improvement of £54.6m.
Technology solutions generated adjusted EBITDA of £35m up from £5.9m due to the strong profit flow-through from revenue growth and disciplined cost management.
Retail moved to an adjusted EBITDA of £20.7m from a £2.5m loss last year, driven by a strong trading performance in the period.
Statutory loss before tax was cut to £153.9m from £289.5m, with headline figures reflecting depreciation, amortisation and impairment charges of £210.3m (from £192.5m last year) and £22.1m of net finance costs.
The loss was also cut by net one-off gains of £7.3m related to the disposal of assets and the settlement reached in the prior year with AutoStore Technology, compared to £77.2m of exceptional expenses in the same period last year.
CEO Tim Steiner noted: “Today’s results illustrate good progress as we support 13 of the world’s leading grocers to grow their online business with our technology. We have come through an unprecedented period for online grocery, with multiple years of high food inflation following a surge in demand during the pandemic. The global channel shift to online has now resumed and Ocado is uniquely well positioned to take advantage of the opportunity.
“Our technology is delivering high levels of productivity and customer satisfaction. In the UK, Ocado Retail continues to lead the way in online grocery, and internationally we have received orders for new capacity, with a number of our partners reporting strong digital sales growth year on year.
“The success of our partners is our top priority, and we are focused on helping them execute their online strategies to deliver attractive returns from their investment in our technology. While there remains more to do, we look forward to making continued progress over the rest of the financial year and beyond, as we build a profitable, cash-generating, technology business.”
Ocado said its retail business will continue its “encouraging momentum” for the rest of the year, growing sales volumes ahead of the market and benefiting from continued active customer growth.
Its tech arm will see revenue growth of 15%-20% and mid-teens percentage adjusted EBITDA margin for the year, upgrading from previous guidance of ‘greater than 10%’.
Ocado shares have bounced back 11.8% this morning on the results to 380.6p.
Morning update
B&M Bargains owner B&M European Value Retail saw a slowdown in like-for-like sales in its first quarter, with momentum hampered by wet weather and strong comparatives.
For the 13-week period from 31 March 2024 to 29 June 2024 group revenues increased 2.4% to £1.35bn, driven by volume and a disciplined store opening programme across the three businesses
However, B&M UK like-for-like sales fell back 3.5%, excluding the Easter year-on-year timing impact of 1.6% in the quarter. The group said this result is reflected against exceptionally strong comparatives of 9.2% in Q1 of last year and unseasonal weather in April and May this year.
Overall growth in B&M UK of 1.5% was supported by store openings, with 19 gross stores opened in Q1, on track for 45 gross new store openings in the year.
B&M said margin performance has been “strong”, and “well-planned” seasonal stock buy, particularly in gardening, has delivered high sell-through in the quarter with no markdown risk in spring/summer.
Elsewhere, B&M France was up 7.5% to £126m, supported by two new store openings, while Heron Foods was up 2.7% to £139m.
It said its three businesses are well set up commercially and operationally into Q2.
“Availability is very strong, product ranges and price points in general merchandise are market leading,” it stated.
“Our logistics capacity across the UK and France continues to support volume growth well. Our network configuration in the UK has been strengthened in the last two years with additional capacity in France already underway.”
CEO Alex Russo commented: “The growth fundamentals of our business are strong, with a highly disciplined approach on pricing, product and high operational standards. We continue to offer our customers exceptional value at a time when household incomes are under pressure.
“Ahead of Q2, we have launched our Everyday Value range with more than 500 new lines in core categories across home, electrical and pet in the UK and France. As we transition towards autumn/winter in the months ahead, our relentless focus on everyday low price and everyday low cost will ensure we continue to serve our customers well.”
Finally this morning, private label household goods manufacturer McBride has posted a full-year trading update for the 12 months ended 30 June 2024.
It said it has delivered the expected strong financial and operational performance, building on the significant improvement achieved in financial year 2023.
The group therefore anticipates that adjusted operating profit will be in line with its recently upgraded current market expectations.
Group revenue was 6.2% higher for the full year on a constant currency basis, and 5.2% higher at reported rates, primarily driven by strong volumes, with overall sales volumes up 5.7% and private label volumes up 7.2%.
It said the improvement in demand for its products had been driven by a combination of business wins and strong demand increases on existing private label contracts.
Additionally, contract manufacturing volumes grew 13.4% in the second half, driven by fourth-quarter volumes from the commencement of a significant new long-term contract.
The group’s improved profitability and continued focus on net debt reduction resulted in net debt closing at £131.5m, a £14.2m reduction versus the half year end and a £35m reduction versus the prior year end of £166.5m.
On the markets this morning, the FTSE 100 is down another 0.4% to 8,151.5pts.
Other than Ocado, risers include B&M European Value Retail, up 1.8% to 454.4p, Deliveroo, up 1.6% to 131.4p and Naked Wines, up 1.6% to 62p.
Fallers include McBride, down 9.4% to 128.3p, Virgin Wines, down 8.3% to 41.3p and Just Eat Takeaway.com, down 1.2% to 949p.
Yesterday in the City
The FTSE 100 opened the week 0.9% down to 8,182pts.
Ocado plunged 10.4% ahead of its half year results this morning, dropping back to 340.4p after a downgrade from broker Bernstein.
The day’s other fallers included Ocado’s UK retail partners Marks & Spencer, down 3.1% to 299.9p, while also down were Nichols, down 2.9% to 1,020p, FeverTree, down 2.7% to 992.5p, Diageo, down 2% to 2,488p, Reckitt Benckiser, down 1.9% to 4,279p and AG Barr, down 1.8% to 616p.
The day’s risers included Virgin Wines, up 4.7% to 45p, Kerry Group, up 2.1% to 77.6p, McBride, up 1.8% to 141.5p, PayPoint, up 0.8% to 653p and Premier Foods, up 0.7% to 173.4p.
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