- Shares placed at 9.4% discount
- Firm claims 'significant' shareholder support
- Analysts say another hurdle 'cleared'
Online grocery delivery firm Ocado (OCDO) raised £575 million from investors overnight in order to fund the expansion of its OSP smart technology platform.
The fund raise consisted of a placing of 72.3 million new shares, representing 9.7% of Ocado’s existing capital, at 795p each or a discount of 9.4% to the closing price.
In addition, the firm announced it had agreed a new £300 million revolving credit facility with its lenders. Shares were 5% lower at 835p in late-morning trading.
‘SIGNIFICANT SHIFT’
Although overall food sales growth in the UK has been negative in recent months, the company believes the significant shift to ordering via the internet prompted by the pandemic is set to continue ‘as customers demand greater convenience for their online shopping’.
To meet this demand, the firm needs to ramp up its capacity while at the same time improving efficiency and reducing the amount of time it takes to launch new services.
At the same time, ‘the urgency to bring online grocery solutions to market is at the forefront of customers’ minds’, the firm says.
Over the past year the group has ‘materially accelerated’ the rollout of its OSP to more partners in more countries.
‘In markets where OSP is live, the solution has enabled partners to achieve leading customer satisfaction results, without sacrificing long-term profitability. This partner success underpins Ocado Group's confidence in the large visible growth opportunity.’
ONE-OFF RAISE
The firm claims the proceeds of the capital raise give it enough liquidity to meet its investment needs ‘with no additional financing expected as the business becomes cash-flow positive’.
Prior to launch, the firm said it consulted with a significant number of its shareholders to gauge their feedback as to the terms and conditions of the raise.
‘Feedback from this consultation was highly supportive and confirmed the board's view that, given the current market environment, the capital raise is in the best interests of shareholders and the wider stakeholders in Ocado Group’, the company said.
Analysts at Numis described the capital raise as ‘another hurdle passed’.
‘Ocado retail forecasts and liquidity challenges were key sticking points for the equity story. With forecasts for Ocado retail now sensibly reset, and liquidity concerns allayed via this action, this leaves a cleaner equity story’, they added.
