By James Davey
LONDON (Reuters) -Ocado Group, the British online supermarket and technology group, plunged to a worse than expected full year loss as it took a big accounting charge and profits at its joint venture with Marks & Spencer were wiped out.
Shares in the group were down 9% in morning trading Tuesday, extending losses over the last year to 59%.
Ocado (LON:OCDO) made a pretax loss of 501 million pounds ($604 million) for the year to Nov. 27, 2022 - worse than analysts' average forecast for a loss of 399 million and a loss of 176.9 million in the previous year. Group revenue was broadly flat at 2.5 billion pounds.
Despite the wider loss, CEO Tim Steiner said he had more confidence in the Ocado model than ever before.
He highlighted "encouraging momentum" in the group's technology solutions division which sells automated warehouse technology to grocery partners around the world, such as Kroger (NYSE:KR) in the United States, and has driven Ocado's 5 billion pound market capitalisation.
He noted the group opened 12 sites for partners in 2022, taking the total of live sites to 23, and said the pipeline for new partners was "strong".
Steiner also said Ocado was close to launching an automated fulfilment solution outside of the grocery sector.
One top 20 Ocado investor said the group was still well placed to benefit from the long-term structural shift towards automated processes for retailers.
But the naysayers remain.
Clive Black, analyst at Shore Capital and house broker to M&S (LON:MKS), said the results were "truly dismal".
"One day in a distant time zone the Ocado Group may be surrounded by the words, meaningful sequential pre-tax profits ... but one cannot yet see the rainbow, never mind any pot of gold," he said.
Ocado Retail, the 50:50 joint venture between Ocado Group and M&S, made a loss of 4 million pounds, having made earnings of 150.4 million pounds the previous year.
Its revenue fell 3.8% as even its typically more affluent shoppers felt the squeeze from higher inflation and energy bills.
The group pretax loss also reflected a 349 million pounds charge for depreciation and amortisation.
At the core earnings level, Ocado made an EBITDA loss of 74 million pounds, worse than 66 million pound loss analysts had forecast.
For 2023, the group forecast "marginally positive" EBITDA for Ocado Retail, "positive" EBITDA for the technology solutions division and "stable" EBITDA in UK logistics.
Ocado ended the year with cash of 1.3 billion pounds.
"Our strong balance sheet gives us the means to finance our growth through the mid-term (4-6 years)," Steiner said.
($1 = 0.8272 pounds)