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Ocado eases investors’ fears after blaze at robotic warehouse

[LONDON] Ocado Group Plc shares surged after the UK online grocer reassured investors that its strategy is on track despite a fire that levelled one of its warehouses earlier this year.

The company maintained its full-year sales guidance even as it estimates the blaze in February will cut earnings by 15 million pounds (S$25.6 million). The shares gained as much as 7.7 per cent in London, the most in more than four months.

Though the incident at the automated facility in Andover, England, trimmed retail sales in the first half, the company still expects full-year growth of as much as 15 per cent. Ocado has removed some decorative parts from robots after saying an electrical fault that ignited a plastic lid on one of the machines caused the fire.

"We've taken some steps to dramatically reduce the effects of it happening again," Chief Executive Officer Tim Steiner said by phone.

The company said it made further progress in its shift from e-commerce sales to becoming more of a software and robotics platform. Revenue from grocery partners that have licensed its technology rose by more than one-third from a year earlier. Ocado has struck technology deals with the likes of Kroger Co in the US, and Steiner said the company is eyeing additional agreements in other countries.

‘Encouraging Execution'

"Qualitative updates are encouraging," Numis analysts wrote in a note, pointing to "encouraging execution on current solutions deals."

Ocado formed a joint venture with Marks & Spencer Group Plc in February to operate food deliveries in the UK and recently invested in non-grocery ventures including automated meal preparation and vertical farming.

Another UK partner, Wm Morrison Supermarkets Plc, agreed to free some of its warehouse capacity to help Ocado after the Andover fire. This will slow revenue growth in its solutions business, given the loss of fees and higher fixed costs, Ocado said. Morrison also loosened its pact with the online grocer in May to strengthen its partnership with rival Inc.