Ocado raises £578m to fund international tech roll out

Ocado is aiming to raise an additional £575 million
// Ocado has raised £578 million from investors in order to roll-out more automated warehouses for its international partners
// Ratings agency Fitch downgraded the retailer on the back of the cash call as it now expects it to take longer for Ocado to be profitable overseas

Ocado has raised £578 million of fresh funding in order to invest in expanding its technology arm to fuel growth for its international retail partners.

The grocer said the funding would help it “invest in innovation at a faster pace”. It is building a swathe of robot-powered warehouses that pick and pack grocery orders for its international clients, which include the US supermarket Kroger, French grocer Casino and Canada’s Sobeys.

The grocer, which raised £1 billion from investors in 2020, placed a further £578 million shares on the market in a move known as an accelerated bookbuild.

The shares were placed at 795p a share, a discount of 9.41% on last night’s closing share price of 877½p.

READ MORE: Ocado annual losses widen as costs jump 20%

Ocado revealed it has also secured a £300 million loan from a consortium of banks and that members of its leadership team, including chief executive Tim Steiner, will buy new shares as part of the placing.

However, ratings agency Fitch downgraded Ocado to ‘negative’ from ‘stable’ on the back of the cash call as it believes the retailer’s international business will take longer than anticipated to become profitable overseas.

Fitch said: “Our updated rating case shows a one-year delay in Ocado’s Solutions business turning profitable, due to slower roll-out and ramp up assumptions in the international segment, along with higher expected investments in technology.”

Shore Capital retail analyst Clive Black said: “We do not see this as a fund raise to deliver growth from a position of strength as opposed to a business that is burning cash and needs access to more equity capital and liquid resources.”

Last month, Ocado reported a sales fall of 8% in the two months to 25 April as Brits felt the pressure from the rise in cost-of-living.

The online grocer warned that its sales growth will be less than half the rate it had hoped for as the cost-of-living crisis and return to office work impact trading.

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