Ocado pledges profit at pretax level in six years

By James Davey

LONDON (Reuters) -Ocado, the British online supermarket and technology group, reduced its annual loss and said it would make a profit at the pretax level in about five or six years.

FTSE 100-listed Ocado runs an online supermarket in Britain through a joint venture with Marks & Spencer and also sells its cutting-edge warehouse technology to retailers around the world, such as Kroger in the United States and Aeon in Japan.

It is the latter Technology Solutions division that has driven Ocado's stock market value, which soared to around 22 billion pounds ($28 billion) during the pandemic but has since fallen to 4 billion pounds. Its shares were up 2% on Thursday.

Founded by three former Goldman Sachs bankers in 2000, including current CEO Tim Steiner, Ocado has divided opinion like few other stocks.

Some view it as the future of grocery shopping, while others see it as a costly and complicated venture that will never make sustained profits.

However, finance chief Stephen Daintith said that in the next two to three years the Technology Solutions division would generate enough cash to fund the group's future growth and still deliver positive cashflow.

He said in five to six years the group would make a pretax profit.

"What gives us that confidence ... is also the visibility we have on the sites that are going live for us over the next three years," Daintith told reporters.

Ocado said it had signed a new partnership with Saudi Arabia's Panda Retail Company to support its e-commerce operations.

It expects three automated warehouses to go live in 2023/24 - two for Coles in Australia and one for Alcampo in Spain.

Ocado made a pretax loss of 403.2 million pounds for the year to Dec. 3 2023, ahead of analysts' average forecast for a loss of 410 million pounds and versus a loss of 500.8 million pounds in 2021/22. Revenue rose 9.9% to 2.83 billion pounds.

For the first time all three segments of the group - the Ocado Retail venture with M&S, Technology Solutions and Logistics - were profitable at the core earnings, or EBITDA, level.

Group EBITDA was 54.2 million pounds, ahead of analysts' average forecast of 44 million pounds and versus a loss of 74.1 million pounds in 2021/22.

Steiner said he was confident of "faster growth, stronger cash flows, and higher returns, in the current financial year and beyond".

($1 = 0.7898 pounds)

(Reporting by James Davey; Editing by Mark Potter, Kirsten Donovan)