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magazineOcado delivers on growth at the expense of short-term earnings
Ocado (OCDO) £26.63
Gain to date: 15.7%
Original entry point: Buy at £23.01, 23 December 2020
Online supermarket firm Ocado (OCDO) posted strong results for the year to 29 November, registering a 35% increase in retail revenues and a 52% increase in fees billed to its overseas technology customers.
A positive result in the retail business was never in doubt as more people sign up for online grocery delivery, and operating profits jumped a staggering 265%.
The UK technology business grew its revenues by double digits, but continued investment in capacity and software/hardware meant profits were lower.
The overseas technology business finally delivered proof of concept, booking its first capacity-related fees from customer fulfilment centres (CFCs) for French hypermarket group Casino and Australia’s Sobeys.
A third international CFC, for US grocer Kroger, is set to go live soon and seven more firms should be on its platform this year.
Continued high levels of investment came at the expense of group profits. The firm booked a pre-tax loss of £44 million and hinted that group operating profits would be lower this year, leading to weakness in the shares on the day of the results (9 Feb).
SHARES SAYS: Ocado is at a major turning point as overseas customers start to go live with its technology. Keep buying the shares.
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