Ocado earnings increase by about a fifth as growth plans considered
Ocado has reported a 20.5% jump in earnings amid price increases and a cut in promotions, and is now exploring plans to raise at least £200 million to fund further growth.
The online retailer said underlying earnings rose to £37.6 million in the 22 weeks to April 30, compared to £31.2 million in a similar period covering the 20 weeks to April 17, following changes to its financial calendar.
Pre-tax profit rose 45.7% to £6.7 million amid a "reduced number of promotions" and "limited" price increases for some products while revenue was boosted 24.7% to £600.4 million thanks in part to its delivery deal with high street supermarket Morrisons.
The grocer released its financial results as it announced plans to raise fresh funding through senior debt that will be used in part to repay its revolving credit facility as well as bankroll company expansion.
"The proceeds of the offering will support the continued growth of our UK retail capacity, and further improvements to our proprietary platform," Ocado said.
It is understood that Ocado would be looking to raise a minimum of £200 million through the issue.
Ocado shares were down 2.7% following the release.
Bruno Monteyne, a senior food retail analyst at Bernstein, said adjusted earnings were only in line with pessimistic forecasts and claimed its fundraising plans confirmed Ocado's cash-poor position.
"The offer is in line with our expectation that the group is stretched for cash and would require additional new financing for further growth."
He also noted a slowdown in orders-per-week growth, which rose 16.2% to 258,000 for the period, while customers spent an average of £108.81 per shop - marking a 1.6% drop from £110.60 a year earlier.
However, the company's pool of full-time staff has grown by more than 13%, up from 9,131 last year to 10,324.
Ocado earlier this month confirmed it had reached a long-awaited overseas deal for its software platform with an unidentified "regional European retailer".
The company missed its self-imposed deadline of the end of 2015 to expand overseas, but the new agreement will see Ocado help its unnamed partner create an online grocery business.
The European retailer will not, however, use Ocado's automated warehouse technology, which could disappoint investors hoping for a more wide-ranging foreign deal.