Ocado shares crash as Olympic worries take hold

Ocado, the online grocer, saw its shares crash by more than 20 per cent yesterday after it warned of "disruption" from the Diamond Jubilee and the forthcoming Olympics on its third-quarter sales.

Despite continued double-digit sales growth, the food delivery company, which floated at 180p in July 2010, has never made a full-year pre-tax profit and its first-half results appeared to again stoke the concerns of investors about its long-term prospects. Alongside posting a rise in its debts, Ocado also said its underlying profit margins fell in its first half. This was due to increased investment to deal with "capacity constraints" at the end of last year and launching more vouchers to combat a blitz of money-off coupons by the big supermarkets.

Despite reporting "some disruption" from the Queen's Jubilee, Ocado saw its gross sales increase by 12 per cent to £332.3m over the 24 weeks to 13 May. But wary investors took flight and its shares fell by 22.1p to 86p. While Ocado benefited from buoyant demand in the first half of the week before the Jubilee, sales fell off immediately before and during the two bank holidays of the celebration.

Tim Steiner, the chief executive of Ocado, said: "We like the Queen but we would have preferred her to have a slightly more subdued Jubilee."

Ocado, which operates from an automated warehouse in Hatfield, Hertfordshire, said it was "uncertain" about the impact the London Olympics would have, such as traffic congestion or its effect on shopping behaviour.

Mr Steiner said: "We don't know if the road disruption will affect 5 per cent or 45 per cent of our customers' addresses in London."

Ocado blamed a near quadrupling in its net debt from £19.2m to £71.3m on the hefty investment in its second distribution centre in Warwickshire, which opens in early 2013. Pre-tax profits at Ocado were flat at £200,000 over the half year.

The company also confirmed Duncan Tatton-Brown as its new finance director yesterday. He was most recently the finance director at the gym group Fitness First and before then held the same role at Kingfisher, the owner of the B&Q DIY chain.

Ocado was founded in 2000 by three former Goldman Sachs bankers, including Tim Steiner, its chief executive and Jason Gissing, commercial director.