LONDON BRIEFING: Ocado Retail Says Coping With "Exceptional Demand"

(Alliance News) - Online grocer Ocado Group on Thursday posted a rise in revenue for Ocado Retail, as the joint venture with Marks & Spencer Group continued to benefit from the coronavirus pandemic.

Ocado Retail posted a rise in fourth-quarter revenue, which it said reflected strong demand for online grocery during the recent lockdowns and other restrictions in the UK.

For the 13 weeks to November 29, retail revenue rose 35% to GBP579.6 million from GBP429.7 million in the fourth quarter last year. Average orders per week were 360,000 during the period, up 3.0% from 350,000 last year. Of this, 130,000 orders per week were filled by the relatively new Erith customer fulfilment centre. Average order size was GBP133.

Ocado said customers are buying the full M&S range, with the biggest sellers coming from everyday essentials in the M&S fresh categories.

Looking ahead, Ocado Retail expects full-year earnings before interest, tax, depreciation and amortisation to be more than GBP70 million. It said growth in financial 2021 will be determined by the extent to which Ocado Retail returns to a "normalised" trading week and the timing of additional capacity going live.

"Despite exceptional demand during the period, we have high rates of on-time customer delivery and low rates of substitutions. This, together with our commitment to competitive prices and the freshest produce available, all delivered in a way that minimises handling and maximises hygiene, has strengthened our credentials as the UK online grocery market leader in terms of customer experience. With three new warehouses opening in 2021 which will ultimately give us 40% more capacity to our business, we look forward to being able to offer more slots to existing customers while welcoming new customers to Ocado and showing them what we can offer," said Melanie Smith, Ocado Retail's chief executive officer.

Added Chair Tim Steiner: "We enter the holiday period with confidence and look ahead to better times for all in 2021."

Ocado shares down 3.9% early Thursday, while M&S shares were down 2.3%. Ocado shares remain up 74% so far this year, while M&S shares are down 35%.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: up 0.5% at 6,599.34

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Hang Seng: down 0.4% at 26,410.59

Nikkei 225: closed down 0.2% at 26,756.24

DJIA: closed down 105.07 points, or 0.4%, at 30,068.81

S&P 500: closed down 0.8% at 3,672.82

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GBP: down at USD1.3318 (USD1.3382)

EUR: firm at USD1.2094 (USD1.2080)

Gold: down at USD1,836.55 per ounce (USD1,849.10)

Oil (Brent): firm at USD48.93 a barrel (USD48.72)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Thursday's Key Economic Events still to come

1100 GMT Ireland consumer price index

1230 GMT UK NIESR monthly GDP tracker

1345 CET EU ECB interest rate announcement

1430 CET EU ECB President Christine Lagarde press conference

0830 EST US consumer price index

0830 EST US jobless claims

1030 EST US EIA weekly natural gas storage report

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UK economic growth lost momentum in October against a backdrop of rising coronavirus cases, the Office for National Statistics said. On a monthly basis, the UK gross domestic product grew 0.4% in October, easing from 1.1% growth in September. The reading was in line with expectations. UK industrial production was fell 5.5% in October on an annual basis, following a 6.3% decline in September. The reading beat market consensus, cited by FXStreet, for a 6.5% drop. UK manufacturing production decreased 7.1% in October year-on-year, easing from a 7.9% fall in September. The print beat market consensus for an 8.4% fall.

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BROKER RATING CHANGES

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BERENBERG RAISES CRODA INTERNATIONAL TO 'BUY' (HOLD) - TARGET 7,200 (6,000) PENCE

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JPMORGAN CUTS BUNZL TO 'NEUTRAL' ('OVERWEIGHT') - TARGET 2,800 PENCE

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BARCLAYS RAISES VICTREX TO 'EQUAL WEIGHT' (UNDERWEIGHT) - TARGET 1,980 (1,710) PENCE

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BERENBERG CUTS WORKSPACE GROUP TO 'SELL' ('HOLD') - TARGET 670 (590) PENCE

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JPMORGAN RAISES MAN GROUP TO 'OVERWEIGHT' ('NEUTRAL') - TARGET 150 (140) PENCE

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COMPANIES - FTSE 100

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Packaging company DS Smith reported a fall in interim earnings but resumed dividend payments. DS Smith said it delivered a resilient performance in the first half despite a challenging environment and declared a shareholder payout in response. For the six months to October 31, revenue was down to GBP2.89 billion from GBP3.19 billion a year before, and pretax profit plunged to GBP97 million to GBP213 million. DS Smith said that, over the half-year period, there was an initial further reduction in paper prices as European corrugated demand fell during lockdowns and a temporary but sharp peak in old corrugated containers prices. DS resumed dividend payments, declaring an interim payout of 4.0 pence. "While the economic and political environment remains uncertain due to Covid-19 and Brexit, we see continued momentum for our business, underpinning confidence in continued performance in line with our expectations for the year. Strong demand has driven ongoing paper price increases, supporting future box pricing, which, together with customer wins in Europe and the US and our strong position to benefit from attractive structural trends, reinforces our confidence in the business going forward," the company said.

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COMPANIES - FTSE 250

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Tui said coronavirus badly hurt operations in its most recently ended financial year, and it expects to operate at sharply reduced capacity well into the year ahead. The Anglo-German holiday operator said revenue for the financial year to the end of September declined by 58% to EUR7.95 billion from EUR18.93 billion, resulting in a pretax loss of EUR3.13 billion versus EUR691 million in earnings a year ago. Tui declared no dividend, having distributed EUR0.54 a share a year prior.

Tui currently expects to operate an adjusted capacity of 20% for winter 2021 which will be weighted towards our financial second quarter. Tui also said it continues to expect to operate an adjusted capacity of 80% for summer 2021, which will be flexed as the company gains more visibility on future imposed travel restrictions.

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COMPANIES - GLOBAL

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Hitachi announced the energization of the NordLink project, a 623-kilometre high-voltage direct current electricity interconnection that links German and Norwegian power markets. The Japanese conglomerate highlighted the interconnection linking the power markets of the two countries enables access to renewable energy and accelerates Europe towards a carbon-neutral energy system. It explained NordLink is the world's first HVDC Light bi-pole installation to perform at a record level of 525-kilovolts and 1,400 megawatts, almost doubling the power transmission capacity when compared with earlier systems.

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Thursday's Shareholder Meetings

7digital Group PLC - AGM

Falcon Oil & Gas Ltd - AGM

Softcat PLC - AGM

Upland Resources Ltd - AGM

Amur Minerals Corp - AGM

Ceres Power Holdings PLC - AGM

Bioventix PLC - AGM

Lok'n Store Group PLC - AGM

Petro Matad Ltd - AGM

PRS REIT PLC - AGM

YouGov PLC - AGM

Chelverton Growth Trust PLC - AGM

EKF Diagnostics Holdings PLC - GM re Trellus Health dividend in specie distribution

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By Tom Waite; thomaslwaite@alliancenews.com

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