Thirteen months ago, the City thought Ocado was doomed. Goldman Sachs, the alma mater of the internet grocer’s three most senior executives, was busy downgrading the loss-making company and there was wild speculation that its debts could overwhelm it. The shares traded at 57p, valuing the company at not much more than £300m.
What a fast-moving world online retailing really is. Ocado is now back in the City’s good books. Its shares, at 401p, are not far off October’s peak of 469p, valuing the group at £2.3bn. Goldman is now enthusiastic about Ocado’s prospects.
One boost was the £216m deal with Morrisons that Ocado announced in May, to run alongside its ongoing arrangement with Waitrose.
That venture begins next month, with 1,000 staff due to be recruited next year, taking Ocado’s total to 8,000.
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Operating from huge depots in Hatfield, Hertfordshire, and near Tamworth, Warkwickshire, and 10 smaller warehouses, Ocado now covers 73pc of the UK’s population.
But people in Scotland, Newcastle, Hull, Norwich, Devon, Cornwall and most of Wales are still to see their first Ocado delivery van.
With so many areas still to be conquered, Ocado chief executive Tim Steiner is bullish, saying he’s being inundated with enquiries from overseas companies that want to license Ocado’s technology and export Britain’s leadership in online grocery to other shores.
“Our platform business will unquestionably be bigger than the UK groceries business of Ocado.com,” he says. “Online is 4pc of the grocery market, while we have a market share in the areas of the UK that we cover of 0.9pc of Britain’s overall grocery market. The overall UK groceries market is worth £165bn and we’re expected to achieve £1bn [of that] in the current financial year.
“It’s not bad for a company founded 14 years ago in a small room.”
The journey has not been without severe growing pains.
Formed in January 2000, Ocado floated at 180p in July 2010, valued at £940m. But it hit problems a year later, with under-capacity at Hatfield.
“We flatlined for a while and that hammered our stock, which went as low as 50p,” recalls Steiner. “We became the most shorted company in the FTSE All-Share Index and the one with the most ‘sell’ recommendations.
“We cured the issue and the shares got back up to 130p, but then there were lots of rumours about our survival and talk that we were going to run out of cash and that we were a disaster and a basket-case. It happened all over again and we hit a low of 57p in November 2012.”
Ocado raised £33m at 64p a share to stave off the crisis, agreeing a rollover of banking facilities.
Date: 14 Dec 2013