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Ocado Shares Spike on First-Half Update

Ocado shares, already up 60% this year, rise further on revenue growth in the first half, although losses have widened

James Gard 9 July, 2019 | 2:31PM

Ocado

Ocado’s first-half update was well received by investors, with the online supermarket’s shares the biggest riser on the FTSE 100 despite widening losses.

Shares rose nearly 10% as investors received clarity on the costs of the Hampshire warehouse fire and saw a 20% rise in revenue at the high-growth “Solutions” division. Retail revenue was 9.7% higher to £811 million in the first half of 2019 and group revenue was 10.5% higher in the same period.

But losses before tax spiked from £13.6 million in the first half of 2018 to a £142 million in the first half of 2019. Adjusted for the sale of retail business Fabled to Next, losses widened from £12.9 million to £43 million. The warehouse fire cost £98.5 million, Ocado said, taking into account a £11.8 million insurance payout.

AJ Bell investment director Russ Mould says Ocado has managed to bounce back from the warehouse fire and continues to make progress, despite the lack of profit. "For all the criticisms of the business, Ocado is doing what it said it would do. It continues to sign up overseas partners to power their online food operations," he adds.

Ocado’s shares were the best performing on the FTSE 350 in 2018 with a gain of more than 90%. Since the start of the year that growth has continued, helped by news in February of a deal with Marks & Spencer (MKS), with shares up 60% from 790p to £12.81.

As a member of the FTSE 100, Ocado is held by a wide range of active and passive funds. The company is the biggest holding in Baillie Gifford Worldwide Discovery, which has a Silver Rating from Morningstar analysts. Just under 8% of the fund's portfolio is invested in Ocado, the largest allocation to the firm among active funds.

Of funds rated by Morningstar as Negative and above, Baillie Gifford Worldwide Discovery is the best performing UK fund in the first half of the year.

Among closed-end funds, Ocado makes up around 5% of Silver-rated Edinburgh Worldwide (EWI).

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Baillie Gifford WW Discovery F GBP Acc10.91 GBP0.44
Edinburgh Worldwide Ord184.30 GBP-0.16
Ocado Group PLC1,189.50 GBP0.00

About Author

James Gard  is content editor for Morningstar.co.uk

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