Ocado vow after £35.8m share placing

As well as selling new shares worth £35.8m, the group has extended the terms of its £100m loan facilities with its banks through to 2015.

The backing came as the grocer reported improved sales growth of 13.7 per cent for the six weeks to November 11, including a new high of 140,000 orders per week.

With Ocado hit by the cost of opening its second delivery centre in Dordon, Warwickshire next February, there were fears in the City that the company could breach loan agreements at the end of this month.

Shares jumped 20 per cent yesterday on relief at the funding boost and the improved trading performance.

Chief financial officer Duncan Tatton-Brown said the company now had the continuing resources to focus on increasing its rang- es.

He added: “It also gives us greater flexibility to invest in various marketing initiatives and significantly expand our non-food offering.”

Barclays, HSBC and Lloyds will extend the maturity of the company’s existing £100m lending facility for a further 18 months to July 2015.

Yesterday’s placing of new shares with key investors was priced at 64p a share, representing a 6 per cent premium on Friday night’s price, but still 65 per cent lower than the company’s flotation price of 180p a share in July 2010.

Despite yesterday’s developments and rapid share price turnaround, some analysts remain sceptical about the robustness of the company’s business model.

Clive Black, a retail analyst at Shore Capital, said: “Ocado provides a service that a number of customers clearly value and appreciate. However, whilst online grocery expands ahead of the overall market, Ocado is losing market share as its competitors grow more rapidly – increasingly augmented by a growing click and collect capability that Ocado is not capable of competing with due to its absence of a store base.”

Ocado, which delivers Waitrose and its own products to much of the UK, suffered a £2.4m loss in its last financial year due to capacity constraints at its existing Hatfield base.

And Waitrose was able to go head-to-head with Ocado from last year, when a clause banning it from offering online deliveries inside the M25 was dropped.

“Ocado is still operating an inefficient model, growing below City expectations and its multichannel competitors,” said Panmure Gordon analyst Philip Dorgan.