Ocado Group On A Lookout For £1 Billion To Fund Its Online Shopping Business

Summary

• Ocado Group Plc is going to raise over 1K million pounds via the routes of shared settlement, retail proposal and transformable bonds
• Industry data shows that online shopping is on the rise during the novel coronavirus times
• Many UK jobs are going to be cut due to retail establishment closures

The COVID-19 has transformed the purchasing behaviours of shoppers as the demand for the care and cleanliness products rose during the pandemic scenario. The people in all over the world required their body, house and essential substance clean and worried to shield themselves from COVID-19. Lockdown in the world as a whole has been implemented since March 2020 to protect people during the spread of COVID-19. Due to that, many of the businesses have shifted their operations to an online platform, whether it is the retail sector, pharma sector or the beverages sector etc. During such a situation, when people are not able to come out of their homes, online business is the best way to earn revenues by companies. As per various media reports, online grocery sales are anticipated to increase by over one-third in the year 2020 over the last year as the COVID-19 lockdown has stimulated more and more families to buy sitting at home.

Supermarkets in the United Kingdom have started online operations to attend thousands of customers, which driven demand from helpless customers who are trying to avoid in-person trips to the shops. During such a situation, Ocado Group Plc, which is one of the biggest online grocery retailer company in the world, is going to raise over 1K million pounds via the shared settlement route, retail proposals and transformable bonds to supply the development of online grocery shopping with the social distancing norms in place. Ocado Group Plc strategy is to generate over 0.7 billion pounds via the share placement route, 0.4 billion pounds through the convertible bond offerings and around 7 million pounds from the retail proposals channel, according to the latest company reports.

Tim Steiner, Ocado Group’s CEO said that this capital raise will allow the company to go ahead with its expansion plans and serve its customers well. He felt that there is immense scope for raising the online market penetration, across the globe, hence the move.

As per the company announcement made on June 11, 2020, Ocado has successfully completed placing ordinary shares of 2 pence each through the Primary Bid stage to fund gross profits of up to around £657 million via the retail proposal route.

Let’s talk about the factors, which helped the company to pursue this Capital Raise

• The online grocery market is displaying a substantial growth - Online grocery has seen significant development internationally, due to a channel shift, as clients look for safe and reliable shopping options. Industry data shows that novel coronavirus has significantly upped this continuously changing spending behaviours, as "lock-down" procedures have forced shoppers to shop online.
• Increase in online growth is anticipated to have a lasting rise in online penetration – Surveys indicate that many shoppers who have purchased groceries online in recent months, will continue to buy in the same way. This will establish a new base line for online penetration.
• Present transactions within the Ocado Group also showing similar progress - As declared on 6th May 2020, sales within Ocado Retail Limited, the Group's UK joint venture with Marks & Spencer, have been robust as the Group is ramping-up its capacity at Erith. The group’s activity with all its other partners has been rising as well.
• Ocado Group's business model is well placed to capitalize on improving its online sales – the company is the only end-to-end solution supplier for online grocery internationally. The Group's technology delivers a flexible platform, which is able to oblige all assignments, with a leading economic model.

The share price performance of Ocado Group Plc - At around 10:09 AM GMT on 11th June 2020, the stock price of the company decreased by 5.99 per cent or 124.50 points to GBX 1,945.20 as compared to previous day closed price of GBX 2,079.0. The company current stock price is 13.09 per cent below the 52-week high of GBX 2,249.0 set on 02^nd June 2020. As on 11th June 2020, EPS have been reported to be at (TTM) -0.2922 GBP. The beta of the company was reported at 1.08, reflecting higher volatility of the stock compared to the benchmark.

The company’s stock price has almost doubled since March this year, taking its market capitalisation to 14.6 billion pounds. It is noteworthy that Ocado has a USP of a state-of-the-art robotic technology, which keeps it ahead of the competition.

Company sales had shot up in Q2 2020, which ended on May 6 this year, by a whooping 40 percent, which is a result of its proactive first mover advantage strategy.

Many of the UK jobs are going to cut due to retail closures

Retail businesses are one of the worst affected during the coronavirus pandemic. Many of them are renegotiating rent and lease terms with their owners, unable to pay the same. The Covid-19 pandemic has become the reason another 3.6K UK jobs cuts following the announcements by the restaurant group Monsoon Accessorize and fashion chain Quiz about their respective organisational restricting due to the impact of the corona pandemic. The group has declared 545 job losses and the termination of 35 shops, as a result of the restructuring. Fashion chain Quiz has also put its stores into administration as they are under tremendous financial stress. It will be saying god bye to nearly 100 employees. To add to all this, the restaurant group, which is running Frankie and Benny's, also anticipates to cut 3,000 staffs after its settling procedures and close 125 of its sites.