Ocado losses narrow after shaky float

ONLINE grocery delivery company Ocado yesterday said its losses had narrowed in 2010 – after it weathered the storm following a controversial stock market float.

The internet retailer halved its pre-tax loss to £12.2m.

Meanwhile it made pre-tax profit of £300,000 for the final quarter – the first profit it has recorded.

Ocado chief executive Tim Steiner, a former Goldman Sachs banker, told City A.M.: “We are ahead of our forecasts and are doing well because we are so customer focused. During the harsh winter weather our vans were well equipped to continue deliveries.

“Also our delivery service via mobile phone apps has been extremely successful.”

Ocado was formed in 2000 by Steiner and two other Goldman Sachs bankers and floated in July, much to the derision of some analysts who claimed the £1bn value being touted was excessive. Its shares finally floated at 180p each, lower than hoped.

The company spent £3.5m on getting the float away, including a bill to public relations specialists helping to argue Ocado’s case for expansion.

Steiner added: “We understand that because our business model is new some analysts were not sure about the float.

“However we were confident and we are doing what we said. People are entitled to their opinions and we have no problem with that.” Ocado shares surged 13.6 per cent yesterday.

But some sceptics remain, with Philip Dorgan at Altium saying in a note yesterday: “The 2010 results are irrelevant to the valuation argument... We have set out our stall with the bears because we don’t believe that Ocado is capable of generating superior returns.”

GOLDMAN SACHS
INVESTMENT bankers took around £12m in fees for advising on the flotation of Ocado.

They will no doubt be breathing a sigh of relief that the company is living up to its forecasts after a jittery start, with its float price slashed at the eleventh hour.

Goldman Sachs, as main adviser, will be the chief beneficiary while JP Morgan Cazenove and UBS also pitched in to help the float get off the launchpad despite scepticism among some analysts.

The remainder was split between Barclays, Lloyds Banking Group, HSBC, Numis Securities and Jefferies.
Ocado’s float plan was attacked by some institutional investors who insisted that the business was overvalued.

But with big hitters among the advisers, the online retailer was in a strong position to win over the bigger investors.

Two of the banks that were advising Ocado, Goldman and UBS, are among the shareholders in the firm.
Ocado floated on the stock market last July at 180p, but the shares quickly tanked.

However, the price has since risen. The shares surged 13.6 per cent to 247.7p at the close of trading yesterday – and the latest figures are being used as evidence that the company has a bright future.