UK shares: Ocado tumbles to 13-year low, Rotork soars on (yet another) takeover

Ocado tech biz lacking fizz

Another weak performance from Ocado's technology division triggered yet another share price plunge, but CEO Tim Steiner is hanging on. Shares tumbled 20% to a 13-year low as the company reported Technology Solutions revenues down –8% to £256mn excluding the one-off impact of closures.

Recurring fees at the division were down -3% in the first half after Kroger in the US and Sobeys in Canada said they would shut some of their Customer Fulfilment Centres operated by Ocado. There were some one-off fees by the partial termination by these partners that flattered headline numbers but the underlying picture is weak.

Netting it all out Ocado posted a pre-tax loss of £33 million for the period, vs a profit of £605 million the year before. Group revenue rose just +1% to £684 million, while adjusted earnings declined -12% to £81 million. 

It comes after a tricky period for Ocado amid a boardroom battle that's seen CEO Tim Steiner hold onto his position but commit to finding a replacement by the beginning of fiscal 2028, which begins in December next year.

But it's not all been bad news – shares jumped in May after the company announced a deal with Asda to license its ecommerce Ocado Smart Platform, with a go-live early 2027. Meanwhile its retail division delivered +15% revenue growth in the first half. 

Looking ahead, Ocado guided FY26 Technology Solutions revenue of around £500mn and EBITDA margin c.30% excluding CFC closure impacts It's also on track to cut costs by around £150mn and is said to be in talks with potential new partners, saying it's in "multiple live engagements" with firms in the US.

Ocado also pointed to 6 CFCs going-live over the next 2-3 years at Busan & Tokyo in Japan, Barcelona in Spain and Phoenix, Arizona. With Kroger and Sobeys cutting back on CFCs, it may need a lot more of these.

Shares have been best avoided, down –35% YTD and –91% lower in the last five years following the pandemic-related peak, when online grocery was the hottest ticket around. 

Rotork becomes latest UK target

Industrial equipment maker Rotork has recommended the 506p-a-share cash offer from Swiss group ABB, making it the latest UK-listed plc to be subject to a takeover.

The deal values the FTSE 250 company at a £4.1bn, representing a 73% premium to the closing share price on Wednesday.

The deal seems to make strategic sense. Rotork's mission-critical flow control and instrumentation solutions are highly complementary to ABB's automation portfolio, which should boost the Swiss firm’s position. The acquisition will also expand ABB's automation offering for large and complex industrial and infrastructure applications, while increasing exposure to larger markets, the firms said.

The acquisition is expected to be immediately accretive to ABB's operational earnings margin and to be EPS accretive in the second year following completion. Rotork, which is expected to operate as a separate division within ABB's Automation division, will add 3% to ABB Group revenue and 12% to the revenues of the automation business for the financial year ended 31 December 2025.