Online grocer Ocado has finally broken cover on its plans to float on the London Stock Exchange. Ocado plans to raise £200m in the deal, which is estimated to value the company at £900m. Shares will be offered to staff and current customers as well as institutional investors.
Ocado, founded in January 2002 by former Goldman Sachs merchant bankers Jonathan Faiman, Jason Gissing, and Tim Steiner, has made its name as an upmarket online delivery service for Waitrose and a small but growing range of Ocado own-label products.
It describes itself as the UK’s sole online-only supermarket and the largest by revenue in the world. But the investment potential of its long-awaited flotation has been questioned by those who point out it has yet to make a profit.
Announcing the float, Ocado pointed to sales of £427m in its 2009 financial year and said its directors believed it had “greater EBITDA margin potential than its store-based competitors.”
It also announced interim results showing gross sales growth of 30% and EBITDA (earnings before interest, taxes, depreciation and amortisation) growth of 181%.
Michael Grade, Ocado’s non-executive chairman, said: “"The team at Ocado has achieved an extraordinary feat in building a business from scratch to be one of the most recognised brands in UK retail. Ocado represents an exciting growth prospect with significant expansion potential both in the UK and further afield."
Chief executive Tim Steiner said the UK’s online grocery market was now worth £3bn a year, and growing strongly.
“Since its inception,” he said, “Ocado has been built on delivering a superior customer offering in terms of quality and freshness of produce and convenience, reliability and accuracy of delivery.”
Of the £200m that Ocado aims to raise in the transaction, £45m will be spent on reducing debt, while there will also be investment to increase the size of its fulfillment centre, build another one, and increase the size of the delivery network.
The John Lewis Partnership, owner of Waitrose, welcomed the announcement, while its pension fund said it would use the opportunity to sell some of its own 29% stake in Ocado.
Waitrose and Ocado last month signed a new 10-year delivery contract widely thought to have helped push the flotation towards becoming a reality.
The company is at the forefront of technological development in its sector, with its apps for both iPhones and Android-based smartphones ahead of other supermarkets. In April the company said 4.4% of its total sales were now made via its iPhone app.
Customers who have spent more than £300 with Ocado between the start of the year and yesterday will qualify for the offering.