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(Alliance News) - Moody's Investors Service's ratings actions on Ocado Group PLC's painted a mixed picture on Wednesday, with the grocer's long-term corporate family rating being downgraded, but a notes issue receiving an upgrade.
The credit ratings agency downgraded the FTSE 100 firm's long-term corporate family score to B2 from Ba3. A GBP225 million outstanding backed senior secured notes, due 2024, were upgraded to Ba2 from Ba3. The ratings have a stable outlook.
The downgrade, Moody's said, was attributed to Ocado doubling its gross debt after issuing GBP600 million in convertible bonds back in December. Moody's also outlined Ocado's falling profitability, though noted this was largely due to an accounting change.
The company's results for the 52 weeks ended December 1 showed a widened pretax loss of GBP214.5 million from GBP44.4 million a year prior.
Ocado has also ramped up spending in its online delivery offering, Moody's noted.
Moody's added: "More positively the ratings recognise several positive developments since the original rating assignment in 2017 including contractual agreements to develop online delivery solutions for seven international grocers, which includes a number of fulfilment centres going live this year."
Moody's noted the company's market capitalisation has also increased since 2017. Ocado shares were trading 1.7% lower at 1,220.00 pence each in London on Thursday afternoon. At the end of 2017, its share price was 397.18p.
"The establishment in early 2019 of a retail joint venture with Marks & Spencer Group PLC which resulted in a significant cash receipt for Ocado and also secured a new branded grocery supplier ahead of the expiry of the contract with Waitrose later this year. These factors in combination mean that Moody's consider that Ocado's liquidity will remain good during this year and next notwithstanding its major capital spending plans," Moody's added.
By Eric Cunha; ericcunha@alliancenews.com
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