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* Core earnings up 69% in 2019-20
* Ocado Retail revenue up 35%
* Sees huge market opportunity
* Plans 700 mln stg of capex
(Adds detail, CEO comments, shares)
By James Davey
LONDON, Feb 9 (Reuters) - British online grocer and
technology group Ocado said the landscape for food
retailing was changing for good as it reported a 69% jump in
annual core earnings that were boosted by the COVID-19 pandemic
generating huge demand for home delivery.
The increase reflected revenue growth of 35% at Ocado
Retail, a joint venture between Ocado and Marks & Spencer
, which offset a negative contribution from Ocado's
overseas technology arm due to additional costs associated with
faster growth and accounting rules.
"The rapid acceleration of many pre-existing trends in
business and society has been a feature of the COVID-19 crisis
and the dramatic channel shift in grocery is a clear example of
this," said CEO Tim Steiner.
"The landscape for food retailing is changing, for good," he
said.
Steiner said that generally when shoppers try online
grocery, they like it.
"Historically, we've always seen when customers have done
this three to five times they tend to stick with it," he told
reporters.
Shares in Ocado have more than doubled over the last year,
giving the group a stock market capitalisation of nearly 21
billion pounds ($29 billion) - nearly four times the value of
Sainsbury's, Britain's No.2 supermarket group by sales.
That valuation has been driven by a combination of the
pandemic highlighting the attractions of home delivery and
demand for its state-of-the-art robot-operated warehouses from
supermarket chains around the world.
In 2020 Ocado opened its first Customer Fulfilment Centres
(CFC) for Casino in France and Sobeys in Canada.
It also has deals with groups including Kroger in the
United States and Aeon in Japan.
Steiner sees huge opportunity. He said key markets for Ocado
were worth 2.8 trillion pounds, of which its current partners
currently represented 210 billion pounds, or 7.5%.
Ocado's earnings before interest, tax, depreciation and
amortisation (EBITDA) rose to 73.1 million pounds ($101 million)
in the year to Nov. 29 2020 from 43.3 million in 2018-19.
Group revenue increased 32.7% to 2.33 billion pounds, with
Ocado Retail contributing 2.19 billion pounds.
Revenue from the UK technology arm rose 13.6% to 654.3
million pounds, but was just 16.6 million in the international
technology arm.
Accounting rules prevent Ocado from recognising revenue on
partnership contracts until the first CFC is opened but it does
incur all the costs.
Ocado said retail revenue growth in 2020-21 year would be
highly dependent on the length of COVID-19 restrictions and the
timing of planned additional capacity.
It forecast double-digit percentage revenue growth in the UK
technology arm and revenue at the international technology arm
to grow to about 50 million pounds.
Shares in Ocado were down 3.5% at 1043 GMT, reflecting a
planned hike in capital expenditure to 700 million pounds and an
expectation of increased international technology losses as
investment is stepped up.
($1 = 0.7258 pounds)
(Reporting by James Davey; editing by Sarah Young, Jason Neely
and David Evans)
