ECHOES of the dotcom bubble returned to the City yesterday, as an online grocery delivery firm that has not turned a profit in 10 years confirmed it will float with an estimated value of £1bn.
Ocado said it will seek to raise £200m when it floats this year and expects existing shareholders to cash in on shares worth about the same.
The John Lewis Pension Fund (JLPF) is expected to sell almost all of its 30 per cent stake, despite its wholly-owned subsidiary Waitrose having recently signed a 10-year contract to supply Ocado.
The firm’s chief financial officer Andrew Bracey said pension rules will force JLPF to reduce its stake but some members of the co-operative are understood to be eager to sever their ties with the firm.
One analyst said a valuation of £1bn over-rates Ocado. Clive Black of Shore Capital said: “It doesn’t merit a stratospheric rating because they’re not generating stratospheric profits or cash.”
In the six months to May, Ocado cut its operating loss by 63 per cent but was still in the red by £2.7m. Ebitda almost doubled to £8m and Its gross sales rose 30 per cent to £246m, with weekly orders topping 100,000 for the first time last month.
Bracey said yesterday the listing will help to fund a new distribution depot in the UK, and said the firm will also explore the possibility of overseas development.
Ocado is now in the top four players in the sector with roughly 14 per cent of the market, behind Tesco and roughly level with Sainsbury’s and Morrisons. All customers who have spent more than £300 with Ocado have been offered the chance to buy shares.
Bracey said the firm was not put off by the failed New Look IPO earlier this year, and said he hoped the float would help enhance Ocado’s profile. The firm was founded by former Goldman bankers Jason Gissing, Tim Steiner and Jonathan Fairman in 2000. The float will value their combined stakes in the region of £160m. Goldman Sachs International, JPMorgan Cazenove and UBS have been lined up to advise on the IPO. Bracey would not disclose the fees they will receive.