Ocado losses widen as it counts cost of warehouse blaze
The online retailer took a 拢98.5m hit as a result of the fire and saw sales growth held back but shares rose on an upbeat outlook.
Tuesday 9 July 2019 16:42, UK
Ocado has reported a half-year loss of 拢142.8m as it counted the cost of a warehouse fire earlier this year - and warned the knock-on impact of the blaze would continue to take its toll.
The online retailer recorded a £98.5m hit as a result of property and stock being destroyed in the fire at its warehouse in Andover, Hampshire, in February.
It also confirmed that revenue growth was held back, with the impact of the blaze estimated at 2% of sales in the six months to the end of June.
Ocado's losses for the period were up sharply on the same period a year ago, when it was in the red by £13.6m.
That was mainly due to the cost impact of the fire - but even stripping that out underlying earnings fell by half compared with the first half in 2018.
Ocado said that for the year as a whole, there would be a £15m impact on earnings from "Andover-related business disruption".
That was partly due to the loss of sales after the fire and also because of a hit to the revenues it receives from business partner Morrisons.
The supermarket has a deal to use Ocado's delivery infrastructure and warehouses for its own online grocery business.
But in the wake of the fire, Morrisons suspended its right to use part of a distribution centre in Erith, as the capacity was needed by Ocado.
The group's half-year report showed that property, plant and equipment valued at a total of £96.9m was destroyed in the Andover fire, as well as £5.6m of stock.
Further one-off charges include the cost of making 400 workers redundant as the site is rebuilt.
The total costs of £110.3m were offset by £11.8m claimed so far from insurers.
Despite the setbacks, Ocado grew its retail revenues by 9.7% in the period and expects this to pick up to 10-15% for the remainder of the financial year.
It comes as the business shifts focus following the announcement of a joint venture which will see Marks & Spencer pay £750m to acquire a 50% share of Ocado's retail business, in a tie-up which will replace the online grocer's partnership with Waitrose next year.
Ocado is also increasingly providing technology services to other retailers around the world, with fees from international partners almost doubling to £46.7m in the first half.
Chief executive Tim Steiner said: "In the last six months our centre of gravity has shifted.
"Our exciting new joint venture with M&S creates further growth opportunities for both parties in the UK and allows Ocado group to increase focus on growing our Ocado Solutions business and innovating for our partners.
"We have never had as many opportunities to grow as we do today."
Investors were cheered by the upbeat outlook, sending shares 5.6% higher - recovering losses suffered the previous day.