Ocado to up geographical reach and range as it considers IPO

Finance director Andrew Bracey told Retail Week that its Everyday value range would be expanded, but no targets were specified.

He said: “There has been a shift towards value over the past year and about 45% of our customers put one or more Everyday products in their baskets.”

At present Ocado covers 65% of the UK and expects to extend its coverage in 2010.

The grocer will also develop applications for new mobile platforms, such as Google Android, after 4.4% of all orders were placed or updated on its iPhone app in the past financial year.

Ocado narrowed its operating losses 33% to £14.4m and increased its gross sales 25% to £427.3m in the year to November 29. Like-for-like sales, stripping out new delivery areas, were up 22%.

The online grocer, which distributes Waitrose products, has yet to make a pre-tax profit but EBITDA rocketed 321% to £9.2m for the year.

In the 12 weeks from the year-end to February 21, deliveries rose 35% in number and 30% by revenue like for like.

Bracey would not make financial projections about when the business might make a pre-tax profit, but said: “As turnover continues to go up, operating profit will go the same way. A lot of other businesses, like Amazon, took time to mature, and our growth plans make us a unique proposition.”

Ocado has appointed former Reuters finance director David Grigson and former KPMG UK vice-chairman Ruth Anderson as non-executive directors ahead of an IPO.

Bracey said Ocado is in “good shape” to float. He said proceeds would likely be used for a second warehouse but the Hatfield depot in Hertfordshire “still has capacity to double output”.

Collins Stewart broker Greg Lawless said Ocado’s business model with one picking depot for national distribution is “flawed” but that a second warehouse “would eat into short-term profitability”.

However, Credit Suisse analyst Andrew Kasoulis, said: “What is more interesting than pre-tax profit, is working out what the business will look like in five or 10 years’ time.”

Kasoulis said Ocado is “not a mainstream UK food business” and potential licence agreements on its intellectual property could take the business into international and non-food areas.