Ocado profit falls on rising costs; company to raise capital
Source - SMW
Online food retailer Ocado said its annual earnings fell after higher revenue was offset by mounting staff costs and investments in its business.
Pre-tax profit fell sharply to £1.0m from £12.1m in 2016.
'Profitability in the period was adversely impacted by the wage increases partly impacted by increased national living wage, higher costs associated with the opening of Andover customer fulfilment centre, our continued investment in a number of strategic initiatives to aid future growth, and additional depreciation,' the company said.
Ocado also said it would issue new shares in the company to raise capital to fund its growth.
Shares representing around 5% of the existing capital of the company would be issued to institutional investors via a bookbuild. The price and number of shares would be announced as soon as practicable after the close of the bookbuild, Ocado said.
'The net proceeds of the placing will be used to facilitate the signing of new Ocado Solutions partnerships globally, to commit funding to associated investment capital expenditure and to increase Ocado's technology engineering and software capabilities,' the company said.
On its outlook, Ocado said it was confident of achieving revenue growth in its retail business of between 10-15% in the 2018 financial year as it increased its fulfilment capacity and grew market share in the UK. But it warned costs would also rise.
'In the 2018 financial year, group Ebitda will reflect the fixed costs of our largest ever CFC in Erith, the ramp up of our proprietary solution in both Andover and Erith, and an acceleration in the development of our platform. We expect the trends in Ebitda to improve significantly in FY19,' it added.
Total capital expenditure in FY18 would be approximately £210m.
Ebitda in FY17 was flat when adjusting for an extra week in the previous financial year, while retail revenue grew 12.4%, as previously reported in a trading update.