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Ocado's Core Earnings Weighed Down By Tech Investment

Ocado Group, the British online supermarket and technology firm, reported a 12.1% fall in annual core earnings on Tuesday, with investment in the business more than offsetting an increase in revenue.

The group's earnings before interest, tax, depreciation and amortisation (EBITDA) came in at £61.0 million ($82.5 million) in the year to 28 November 2021 - in line with analysts' average forecast of £60 million but down from £73.1 million in the 2019-20 year.

Its pretax loss widened to £176.9 million from £52.3 million.

Revenue rose 7.2% to £2.5 billion, while capital expenditure increased £154.8 million to £680.4 million reflecting increased investment in the roll-out of automated warehouses in Britain and overseas, along with investment in technology development and platforms.

Capital Expenditure Increase 

Ocado forecast capital expenditure would rise to around £800 million in 2022, driven by the worldwide roll-out of its platform.

The group has already struck partnership deals to provide its technology to supermarket groups in eight countries, including Kroger in the United States, Aeon in Japan, Casino in France and Coles in Australia.

Ocado said it had an encouraging pipeline for new deals.

It forecast the Ocado Retail business, a joint venture between Ocado Group and Marks & Spencer, would return to "mid-teens" revenue growth in 2022, fee growth of more than 30% in its UK technology business, with fee revenue to more than double in its international technology business.

EBITDA

The group also forecast a 50% increase in EBITDA in the UK technology business, with EBITDA in the international technology business flat.

It is targeting for Ocado Retail's EBITDA margin to rebuild towards 2021 levels following a year of investment in 2022.

Prior to Tuesday's update analysts' average forecast for Ocado Group EBITDA in 2022 was £92 million.

Shares in Ocado are down 50% over the last year, partly reflecting investor concern over ongoing two-way litigation on patents with Norwegian rival AutoStore.

However, its shares were boosted last month when it unveiled a suite of technological innovations from lightweight robots to hi-tech van routing systems which it predicted would raise its returns and win new customers.

News by Reuters, edited by Donna Ahern, Checkout. For more Technology news, click here. Click subscribe to sign up for the Checkout print edition.

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