LONDON (Alliance News) - Online-only supermarket Ocado Group PLC Tuesday reported another loss for the financial year ended December 1, 2013, as the group continued to invest heavily in the business, hindering its chance of breaking even.
Ocado, the UK online grocery distribution business, is yet to make it first statutory profit, and has been subject to a lot of skepticism over the years about the future of the company and its growth trajectory.
Ocado also announced the departure of Jason Gissing, the co-founder of Ocado, who will be retiring at the next annual general meeting in May.
Analysts had been forecasting the group to break even in 2013 or come close to making its first statutory profit. Instead, Ocado's losses widened significantly, having reported a pretax loss of GBP12.5 million, compared with a pretax loss of only GBP0.6 million a year earlier.
On a more positive note, Ocado beat analyst expectations for earnings before interest, tax, depreciation and amortisation. It reported EBITDA of GBP45.8 million, up from GBP34 million the prior year, beating analyst expectations for GBP42 million.
The group booked a total of GBP7.4 million in exceptional items during the year, including costs relating to the pre-opening costs for its new customer fulfilment centre in Dordon, and its first dedicated non-food distribution centre opened in Welwyn Garden City to support continued growth of non-food business.
Chief Executive Officer Tim Steiner told journalists in a call after the results were released that this year will be the year for the company.
"We should break into profit this year. We were forecast to, even before the Morrison deal," he said.
Ocado recently launched a joint venture partnership with the UK's fourth-largest supermarket chain Wm Morrison Supermarket PLC to act as a delivery partner for a grocer that has lagged behind its supermarket rivals online. Under the deal Ocado provides the delivery logistics for Morrisons.
"Is 2014 about bedding down Morrisons," Steiner said. "Having a successful launch for our first business-to-business customers is incredibly important and is a priority. We are spending a lot of time and money on the whole business."
Ocado has been expanding capacity significantly, one of the reasons behind the delay in making a profit.
By the end of the current financial year, Steiner said there will be GBP1.3 billion in spending on new capacity for the Ocado business, and GBP500 million for the Morrison business.
"We will continue to do capital-expenditure projects. Are we considering other sites for future expansion, yes, for both Ocado and Morrisons. However we will announce something about a new facility later this year," he said.
The group did not confirm whether it is in active negotiations with anyone regarding another Morrison-style partnership, but did say it is considering overseas expansion, although Steiner would not elaborate on where and when.
"We are working on seriously preparing our platform and technology for multiple operators. As consumers shift to online, we will help retailers take advantage of that shift, for a high level of service, and low execution costs," Steiner said.
Ocado currently sells goods ranging from groceries to household products and toys. The group said kitchen, homewares, and baby and beauty products are the next possible categories on which it will focus.
For the recent year, Ocado said gross sales increased by almost 19% to GBP852.4 million for the period, up from GBP719 million the prior year. It said the Morrisons agreement contributed GBP9.4 million of gross sales in 2013.
It reported revenues of GBP792.1 million, compared with GBP666.6 million a year earlier.
"There was a change in marketing focus from the second half of 2012 which involved more tailored voucher activity targeted at acquiring new customers rather than reactivating lapsed customers. In addition there was an increase in promotional activity and further growth in our product range," the company said in its statement Tuesday.
Ocado increased its active customer base to 385,000 from 355,000 a year earlier, with new customer acquisition more than 40% up on 2012. It said average baskets increased to GBP113.53, up from GBP112.10 a year earlier.
"There is a structural shift to online grocery, and we have increased market share. The revenue increase also reflects improvements, as we have increased our range to 34,000 products from 28,000" said Steiner.
Ocado was the third biggest faller among FTSE 250 stocks Tuesday morning, down 3.9% at 503.16 pence per share.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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