Ocado successfully went cap in hand to shareholders to the tune of £36m this week sparking a massive 24% jump in the shares to 75p.
Together with the 18-month extension of the company’s existing £100m debt facility, the fundraising buys time for the company to open and run its new distribution centre (CFC2) in Dordon, Warwickshire, without worrying about its banking covenants. Even long-term critic Philip Dorgan at Panmure Gordon admitted: “Ocado now has the funds to survive for some time.”
However, the scale of the share price reaction was disproportionate. About a quarter of Ocado’s shares were out on loan to short-sellers who rushed to cover their positions, sending the shares sky-rocketing.
For Barclays Capital analyst James Anstead the real test is yet to come. “This time next year we should be able to tell whether the new capacity unleashes pent-up demand or simply adds to the cost base,” he said.
Premier Foods shares also had a good week. After losing a £75m bread contract with The Co-operative Group last month, it announced the closure of two bakeries with the loss of 900 jobs. It was greeted as good news for investors. “We see this as a welcome move to improve long-term profitability,” said Investec analyst Martin Deboo.
Some encouraging quarterly sales, the appointment of former Uniq boss Geoff Eaton as CEO and the sale of Branston to Japanese group Mizkan for £92.5m have all contributed to a 70% increase in Premier’s share price since September.
Another strong performer this week was Majestic wine. It has enjoyed a steadier rise in its shares this year, and that continued this week after the retailer reported a 3.9% increase in pre-tax profits to £9.2m for the half-year to 1 October. Its sales were down 1.4% because of a “managed reduction” of lower-margin wholesale sales, which Investec analyst Bethany Hocking said was “strategically positive” in the long-term. Its shares climbed more than 2% to 475p.
It was also an excellent week for SABMiller. Its shares jumped 7% to £28.16 on Thursday morning after the global brewer reported a 12% increase in first-half pre-tax profits to $2.76bn and hiked its interim dividend 12% to $0.24. “The results look strong,” said Shore Capital analyst Phil Carroll.