Ocado Group CEO Tim Steiner said he remains “fully focused” and “as excited and energised about Ocado’s future” as ever, pushing back against rumors that he might leave the company. The remarks came as the online grocery technology company reported its first-half financial results, which showed a decline in underlying profitability even as headline revenue surged.
Revenue jump hides a weak core business
Ocado’s headline revenue soared 54% to £1 billion, but the jump was inflated by a one-time £354 million payout from Kroger and Sobeys after those retailers canceled contracts. Strip out those termination payments, and revenue grew just 1% in the first half of the financial year.
Group underlying profitability — measured by EBITDA — fell from £92 million to £81 million. The company’s underlying net cash outflow hit £147 million, more than a third worse than the same period a year earlier. Steiner pointed to “strong commercial momentum” and “rigorous cost discipline,” saying those factors would push the group into sustainable positive cashflow in the second half. He also noted that Ocado has made “significant organisational changes to strengthen cost and capital discipline.”
Cost cuts and delayed projects
Ocado is running a £150 million cost reduction program.
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Most of the initiatives were put in place during the second quarter of the year, with benefits expected later. The CEO said the company has been re-engaging with retailers across the world’s largest grocery markets, with the US a particular focus, backed by what he called a “significantly evolved” technology portfolio.
But while international warehouse volumes grew 27%, several key projects slipped.
Kroger’s Phoenix site was pushed back a year, and the Lotte Shopping site in Seoul was also delayed.
The financial results and project delays make its newly signed deal with Asda feel like a make-or-break moment. Freetrade investment writer Duncan Ferris said, “The fact of the matter is that Ocado needs more tech contracts with retailers.” He noted that Technology Solutions revenue and profit declined, the number of live modules fell, and cash burn worsened. “Ocado might have been well compensated for customers’ warehouse closures, but termination payments are not a sustainable growth model.” Ferris added, “We need to see other retailers forming a queue soon, too. Ocado says US engagement is strong, but shareholders need to see interest turning into signed contracts.”
Steiner’s future and succession talk
Steiner’s own position has been a subject of speculation.
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Asked about rumors of a headhunting process for a new CEO, he said only that the firm had in recent weeks “established a clear process for long-term succession planning at Ocado.”
The company’s share price has swung wildly over the years.
The tension between Ocado’s promise and its performance is familiar in the world of tech-enabled logistics. Investors have heard confident talk before, only to watch contract signings drag and cash burn persist. The first-half numbers do little to settle the question of whether Ocado can convert its technology into a steady, profitable business.
For now, Steiner is betting that the cost cuts and a revived US sales push will turn the tide. But with cash still leaking faster than last year and key clients delaying expansions, the evidence that a turnaround is underway remains thin.
