Britain’s Ocado counts cost of fire at flagship warehouse

LONDON (Reuters) – British online supermarket and technology group Ocado reported a ballooning annual pretax loss and a 27% fall in core earnings, mainly due to a fire which destroyed a hi-tech flagship warehouse in Andover, southern England.

Ocado has transformed itself over the last two years from a domestic grocery delivery firm to a provider of state-of-the-art online retail technology, winning partnerships with Kroger in the United States, Casino in France and most recently Aeon in Japan.

Those deals have helped push its shares 31% higher in the last year, giving it an 8.6 billion pound stock market valuation, well above those of traditional British supermarket groups such as Sainsbury’s, which is worth 4.4 billion pounds and Marks & Spencer at 3.5 billion pounds, according to Refinitiv Eikon data.

The shares were up 1.2% at 0830 GMT, even though Ocado said its loss before tax widened to 214.5 million pounds ($276.8 million) in the year to Dec. 1, 2019 versus 44.4 million pounds in 2017-18.

The loss reflected exceptional charges of 94.1 million pounds relating to the write-down of the Andover site.

Ocado made earnings before interest, tax, depreciation and amortization (EBITDA) of 43.3 million pounds ($55.9 million), versus a re-stated 59.5 million pounds for 2017-18.

That outcome, which also reflected accounting changes and the costs of share schemes, was broadly in line with analysts’ consensus forecast.

The losses and drop in core earnings were despite a 9% increase in group revenue to 1.76 billion pounds.

“We are pleased to report results which show strong momentum in the business,” said Chief Executive Tim Steiner.

“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.”

The Ocado Retail division is now a joint venture between Ocado Group and M&S. Their deal, completed in August, signaled the end of Ocado’s supply contract with upmarket supermarket chain Waitrose in September 2020 and the start of M&S’ first grocery home delivery service.

For the 2019-2020 year Ocado forecast retail revenue growth of 10-15% and invoiced international technology fees growth of at least 40%.

It forecast EBITDA from retail above its revenue growth. However, EBITDA from UK solutions & logistics and from international solutions was forecast to decline.

Prior to Tuesday’s update analysts’ average forecast for 2019-20 EBITDA was 33 million pounds.