Ocado, the leading UK e-grocer, has issued a positive outlook for the remainder of its current financial year despite incurring an interim pre-tax loss of £9 million.
"Assuming economic conditions remain broadly stable, we remain confident in achieving revenue growth in our Retail business of between 10‐15% in the 2018 financial year as we increase our fulfilment capacity and grow market share in the UK," it said in a statement.
In the six months ending June 3, Ocado increased Retail revenues by 11.7% to £736.6 million but growth was impacted by severe weather in the first quarter, it said.
The company’s order volumes grew by almost 12% to an average of 291,000 orders per week with the highest number of orders delivered in a week exceeding 315,000. Active customers increased 12.8% year-on-year to 679,000.
The average basket size value was broadly stable at £108.18, with the ongoing trend of ordering on mobile phones, resulting in customers ordering slightly smaller baskets more frequently, offset by price inflation, Ocado noted.
“Customer loyalty remained strong, with double digit order growth being exhibited even in our most densely penetrated catchment areas ,” it underlined.
Retail EBITDA was up 0.7% on the first half of last year to £45.5 million.
“As anticipated, Retail EBITDA in 1H 2018 reflects the increased throughput at Andover (Customer Fulfilment Centre) and associated fixed costs plus extra investments in engineering to improve the long‐term reliability of the solution,” Ocado explained.
“In the second half, Retail EBITDA will include the fixed costs of our largest ever CFC in Erith, but we expect the trends in Retail EBITDA to improve significantly over the course of 2H 2018 partly due to lower engineering costs per order and as the new capacity is utilised at both sites at increasing efficiencies."
Commenting on the interim results, Ocado's CEO, Tim Steiner, said: "This is a transformational period for Ocado. We have developed unique and proprietary technology to offer retailers an end‐to‐end operating solution for grocery retail that enables them to meet the changing needs of consumers. In the past six months we have partnered with some of the world’s, biggest, best and most innovative retailers to help them redefine the shopping experience for their own customers."
He continued: "As a result, we are beginning to fulfil our ambition to change the way the world shops. The success of our technology platform contins to be demonstrated by our UK Retail business, where Ocado continues to outpace our competition in terms of service offring and our growth. We have just opened our latest state-of-the-art Customer Fufilment Centre (in Erith, South London), which once at full capacity, will be the largest automated warehouse for online grocery retail in the world and will showcase the scalability, adaptability and efficiency of our platform.
“In order to fully capitalise on the opportunities ahead of us, we are working at pace, investing more and focussing sharply on execution to bring on new capacity in the UK and to achieve successful outcomes for our partners. We are confident that we have the ability to scale‐up the business, deliver on our commitments, drive sustainable growth and deliver value to all our stakeholders.”
Apart from the commencement of operations at Ocado's fourth CFC in Erith, the highlights of the first half of the year included the doubling of throughput at the company's first robotic warehouse in Andover, with further progress expected in the second half of the year.
Ocado opened its second general merchandise warehouse (GMDC2), also in Erith, enabling an additional £200 million of sales capacity. In addition, it created more than 650 new jobs over the period and expects to add a further 1,500 jobs before the end of the financial year.
Delivery efficiency, as measured by Drops Per Van (DPV), improved further to an average of 189 DPV, just short of Ocado's revised target of 190 DPV set two years ago.
