Ocado shares jump by a fifth

Shares in the online retailer Ocado jumped by a fifth recently after its latest interim results showed it has “nudged up” its cash flow and profit forecasts, says Isabella Fish in The Times .

Not only have pre-tax losses at the group narrowed to £154 million in the six months to the end of May, but group revenue also rose by 12.6% to £1.5 billion. It also expects annual underlying cash flow to climb by £150 million, up from a previous forecast of £100 million. Ocado’s solutions business, which licences warehouse and logistics technology to retailers, seems to have done particularly well, with sales increasing by 21.8% to £241.4 million.

The upgrade will “go some way towards allaying investors’ fears over the business”, says Lex in the Financial Times . The company has suffered a “series of blows”, including a decision by US supermarket chain Kroger to close three sites powered by Ocado’s technology, along with declining revenue from its retail arm.

Shareholders will also be happy that Ocado’s management has said the group will not need to raise more cash and repeated its plan to become profitable on a pre-tax basis in five years. The upgraded results and guidance will certainly be “music to the ears of investors hoping Ocado might be in a better position to start delivering the goods financially in the not-too-distant future”, says AJ Bell’s Dan Coatsworth.

However, it still needs to “make a habit of regularly producing results like these” if it wants to “make the critics put away the knives they’ve been sharpening for some time”. That “may not be easy” given its “slow progress” in signing up new technology partners for its grocery logistics platform, while a few existing partners “have scaled back expansion plans involving Ocado”. Ocado’s relationship with its UK retail partner, Marks & Spencer , also remains “fragile”.

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