City snapshot: Ocado slumps to £215m loss as Andover fire hits profits

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Ocado (OCDO) Retail has fallen to a £214.5m pre-tax loss despite double-digit revenue growth as international expansion and the impact of a fire at its Andover CFC last year hit its bottom line. 

Ocado Retail - its JV with M&S - saw sales up 10.3% to £1.62bn in the year ended 1 December 2019. Meanwhile, the rest of the group, including Ocado’s technology arm, reported revenues up 9.9% to £1.76bn. 

Group EBITDA, however, fell 27% to £43.3m from £59.5m last year, broadly in line with expectations due to the impact of the Andover fire. 

Its pre-tax loss widened significantly to £214.5m compared to £44.4m reflecting over £94m of exceptional costs of which £88m were related to write-downs at Andover and £111.8m of associated assets, partly offset by insurance proceeds. 

“We are pleased to report results which show strong momentum in the business. Although statutory results reflected a combination of factors, including the impact of the Andover fire, the underlying performance of Ocado Retail and the successful growth of Ocado Solutions were very encouraging,” CEO Tim Steiner said.

“Our progress over the last twelve months, which includes signing our eighth and ninth Solutions clients, Coles in Australia and Aeon in Japan, and successfully maintaining strong growth post-Andover, has demonstrated many of Ocado Group’s most important characteristics: resilience, innovation, focus and execution. It is these qualities that will enable us to continue to develop the Ocado Smart Platform to meet the evolving needs of our partners at the cutting edge of online grocery retail.”

Over the course of 2019, Ocado has achieved several “milestones” including signing deals with Coles, Aeon and inking its M&S JV, for which preparations are “well underway” ahead of a September switchover from Waitrose.

The first ever international CFCs, for Casino in France and Sobeys in Toronto are due to go live within the first half of 2021. Further sites in the US, UK, Sweden and Canada are currently in “various stages of construction”. 

Looking ahead, Ocado has various plans in the pipeline including the roll-out of mini-CFCs starting from Bristol and plans for a new Ocado Zoom site.

The business expects revenue growth to remain between 10% and 15% in the new year and expects future insurance proceeds related to the Andover fire to cover business interruption losses. 

Ocado shares opened 0.3% higher at 1,220p.

Morning update

Marks & Spencer (MKS) has snapped up Greencore (GNC) CFO Eoin Tonge to join its board as CFO in June. 

M&S CEO Steve Rowe said Tonge’s appointment concluded a ”rigorous search for a world-class finance director”.

“He brings in-depth knowledge of food, as well as strategy and operations, and is another addition to the very strong management team we are building to transform M&S,” he added. 

Meanwhile, M&S interim CFO David Surdeau will remain with the business to support a smooth transition. 

Tonge said he was “excited” to join M&S and “drive forward the transformation of the business, realise its full potential and make it special again.” 

Greencore has now launched a process to identify a successor for Tonge who will leave the business after 14 years. 

Marks & Spencer shares opened up 1.1% at 184.30p while Greencore shares were up 0.3% to 239.9p.

UK pork producer Cranswick (CWK) has announced it has acquired a leading UK-based pig farming business.

The company purchased the Buckle family’s pig farming and rearing operations as well as the family’s 50% share of the White Rose Farms pig production JV, set up by Cranswick and the family in 2018. 

The JV specialises in the production of Red Tractor assured pigs. 

“I am pleased to announce today’s transaction, which further reinforces our strategic commitment to supporting and growing the British pig farming industry,” CEO Adam Couch said.

No financial details of the transaction were disclosed.

Cranswick shares opened up 0.4% at 3,660p.

UK retail sales have slightly picked up in January, though the latest 12-month average figures hit a new record low.

Retail sales rose 0.4% on a total basis, according to figures from the BRC-KPMG retail sales monitor covering the five weeks to 1 February. Like-for-like sales were flat during the month.

The slight increase is above both the 3-month and 12-month average declines of 0.4% and 0.2%, with the 12-month average figure hitting the lowest level since records began in 1995.

Over the three months to January, food sales fell 0.1% on a like-for-like basis and rose 0.6% on a total basis.

“Growth has yet to recover momentum as the new decade gets underway. Even with January being a typically ‘slow’ month, the start to 2020 has proven to be especially disappointing with sales growth falling behind previous years,” IGD CEO Susan Barratt said.

“Moving into February retailers will be looking to drive some excitement around the first major ‘event’ of the year with St Valentine’s Day falling helpfully on a Friday this year.”

Meanwhile, over the same three-month period like-for-like non-food retail sales dropped 1.5% and were down 1.3% on a total basis.

BRC CEO Helen Dickinson said: “January saw a return to growth, however recent political uncertainty and a decade of austerity appear to have ingrained a more thrifty approach to shopping among consumers.

“Furthermore, as sustainability continues to rise up the agenda, many customers are switching to more environmentally friendly products or simply choosing to buy less.”

The FTSE 100 opened up 0.9% at 7,517.08pts.

Early risers included Fevertree (FEVR) up 1.4% to 1,437p, Greggs (GRG) up 0.7% to 2,272p and WH Smith (SMWH) up 0.8% to 2,424p.

Fallers saw Tate & Lyle (TATE) open down 0.7% to 784.40p, AG Barr (BAG) down 2.3% at 565p and Premier Foods (PDF) down 1% to 35.70p.

Yesterday in the City

The FTSE 100 closed down 0.3% at 7,446.88pts.

Among the fallers B&M European Value Retail (BME) closed down 1.2% at 371p, Ocado (OCDO) down 1% at 1,217p and Diageo (DGE) down 0.9% at 3,134.50p.

Risers included Fevertree (FEVR) closing up 3.1% at 1,417p, Tesco (TSCO) up 0.8% at 256.80p and Imperial Brands (IMB) up 0.8% at 1,847.20p.