Friday 11 June 2010

Ocado delivering too much?

Despite not having made any profits in 10 years of trading, it is understandable that the owners of Ocado want to establish the latent value of their operation via a partial flotation. In other words, if initial investors, including loyal customers, take up the offer as expected, it will value the operation at £1bn.

According to the Evening Standard, Ocado has 1 million customers and sales of £427m. The only problems are lack of profit, possibly unsustainable service levels and the multiples playing online catchup…

Key issue will be customer alienation if service levels are reduced or charges increased to move EBITDA to acceptable levels of net profit and dividend payouts for shopper-shareholders…

Have a deliverable weekend, from the Namnews Team!

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