Founder Gissing Ocado goodbye as shares slip 4%

The company was so close, yet so far from posting its first profit - as the second of its three founders announced his departure.

by Emma Haslett
Last Updated: 11 Dec 2014

- Read MT’s interview with Jason Gissing and Tim Steiner

Ocado may have been the best-performing share in Europe last year, but that didn’t stop its share price from slipping more than 4% this morning. The reasons behind the drop were twofold: 1) it posted results showing pre-tax losses rose to £12.5m in the year to December 1 and 2) it announced that co-founder and commercial director Jason Gissing will step down in May.

To the first point: last year, Ocado came tantalisingly close to making the first profit in its (then) 12-year history, with a loss of just £600,000. So the fact losses have widened – and by so much – will upset investors: there’s only so long a company can keep shareholders happy without making any profit, particularly when it’s listed (unless, of course, it’s Amazon – but that’s another story).

Analysts are similarly unimpressed. As retail analyst Nick Bubb pointed out: ‘Given the "unstoppable" momentum in online grocery shopping, it’s a bit disconcerting that Ocado isn’t growing faster and is still losing money, notwithstanding its hefty £3bn market cap, but perhaps we are missing something.’

But on this morning’s Today programme, chief executive Tim Steiner pointed to investment in its shiny new ‘Customer Fulfilment Centre’ (aka ‘warehouse’) in Warwickshire, which will help it with the logistics of its £216m deal to do all the online deliveries for Morrisons. Steiner’s point was that although Ocado has now spent 13 years growing fast without making a profit, with the Morrisons deal and the Warwickshire warehouse, a profit has been ‘forecast’. And that should be enough for investors.

And to be fair, sales did rise by 18.6% to £843m in 2013, with the value of the average order rising to £113.53, up from £112.10 last year.  

The company’s best chance of making profit now is in Morrisons-style white-labelling. It won’t be able to do it in the UK because it’s promised Morrisons it won’t – but moving to a more intellectual property type of operation would be a smart move.

On to Gissing (who, as MT regulars will remember, featured on our cover in October). In a separate statement this morning, the company said he wants to spend more time with his four young children, and ‘also has a passion for various environmental and social concerns’.

Steiner – the last man standing of the original three founders – paid tribute to him. ‘I have worked with Jason for 20 years…. He has been an invaluable partner and friend to me and I will miss his daily humour and insights.’

Sir Stuart Rose, the company’s chairman, added that Gissing ‘should be very proud of Ocado’. Yeah - he’d be prouder if it was making a profit, though, wouldn’t he…

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