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Ocado slides to £143m loss after robotic warehouse fire

Tom Belger
Finance and policy reporter
A delivery driver returns empty crates to his Ocado delivery van. Photo: Paul Ellis/AFP/Getty

Ocado is confident it can increase sales by up to 15% in the second half of 2019 despite suffering a £142.8m loss from a huge fire at its flagship robotic warehouse.

Core earnings almost halved at the online supermarket and tech company, with accounting changes and the cost of share schemes also denting earnings.

But the company, which has seen its share price increase by 48% this year, said its “centre of gravity” had shifted after it signed a £750m delivery deal with M&S earlier this year.

The agreement replaces Ocado’s sourcing deal with Waitrose, with M&S products set to be available on Ocado.com by September 2020.

One analyst said it had “largely shrugged off” the blaze started by an electrical fault which destroyed its fulfilment centre in Andover in February.

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The company revealed the £110m costs of the fire in its half-year report released on Tuesday, saying it wiped out 10% of its capacity but only dented sales by 2%.

The group had to write off £96.9m of property, plant and equipment after all the machinery and inventory at the Andover site was destroyed.

It said it would cause a £15m dent in its underlying earnings this year, though the costs were offset by £11.8m in insurance payouts so far.

Ocado said it remained confident of rapid sales growth despite the blaze, leaving its revenue forecast for the second half of the year unchanged.

Firefighters at the scene of Ocado robotic warehouse in Andover, Hampshire after a huge blaze that swept through the building was brought under control. Photo: PA

Data from market research firm Kantar in May showed it had seen far stronger UK sales growth than most of its supermarket rivals in the first half of the year.

“Ocado has largely shrugged off the fire at its Andover warehouse to deliver a healthy bump in retail revenues, whilst it’s also sharply increasing fees from partners using its technology,” said Neil Wilson, chief analyst at Markets.com.

Ocado has also signed deals this year to expand in Australia and Canada. Wilson said it had now started to see the “slow trickle” of income from international technology partnerships “turn into a flood.”

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Ocado’s loss before tax of £142.8m for the 26 weeks to 2 June marked a steep decline on the £13.6m loss this time last year.

The online grocer saw revenue rise 10% to £811.5m in the period.

Adjusted earnings before interest, tax, depreciation and amortisation almost halved to £18.7m.

Tim Steiner, chief executive of Ocado, said: "Our exciting new joint venture with M&S creates further growth opportunities for both parties in the UK and allows Ocado Group to increase focus on growing our Ocado Solutions business and innovating for our partners.”