Ocado keeps overseas deals in sight

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Online grocer Ocado confirmed hopes to agree an international tie-up before the end of the year as it posted a hike in half-year earnings.

The firm, which delivers goods for both Waitrose and Morrisons, has seen shares rise by 30 per cent over the last three months on increasing speculation over a long-awaited deal to sell its technology to overseas retailers.

Chief executive Tim Steiner said Ocado was “excited by the possibility” of an international agreement, with the firm stressing it had progressed talks with a number of possible partners outside of the UK.

Half-year figures showed underlying earnings rose 11.4 per cent to £38.2 million in the 24 weeks to May 17 on sales 15.7 per cent higher.

Bottom line profits dipped to £7.2 million from £7.5 million a year earlier.

Ocado revealed in February it made an annual profit for the first time since it was founded nearly 15 years ago, producing a bottom-line surplus of £7.2 million after sales jumped by nearly 20%.

But the group said it had not been immune to the harsh environment set by the supermarket price wars and price deflation, with the average value of baskets falling to £111.68 in its first half from £114.43 a year earlier.

Mr Steiner said the wider grocery market was hit by “intense price competition and deflationary pressures”, with the Big Four players slashing prices to compete with discounters such as Aldi and Lidl.

He said: “Against this backdrop, our relentless focus on customer satisfaction continues to drive customer numbers and like-for-like sales ahead of the online grocery market.

“The resilience of our business model and increasing operational leverage also mean that we have grown operating profit despite these industry headwinds.”

Ocado is almost two years into a £170 million 25-year delivery partnership with Morrisons, but its long-running deal with Waitrose allows the upmarket grocer to pull out in September if it wishes.

The group said its Morrisons partnership contributed £32.4 million to revenues in its first half, up from £16.9 million a year earlier.

It reported a rise in the number of orders a week to more than 191,000, from 161,000 a year earlier, with the highest number of orders delivered in a week topping 207,000.

The firm also said the number of active customers rose by 18.9 per cent to 471,000 in the half-year.

Ocado, which employs about 8,500 people, is now setting its sights on the international market, with plans to sell its Ocado Smart Platform technology abroad.

It is hoped this would lessen its reliance on UK partners Morrisons and Waitrose.

But the company’s share price dropped as investors were kept waiting for a firm announcement on overseas deals.

Clive Black, retail analyst at Shore Capital, said: “The key to Ocado’s stock performance remain its ability to internationalise its Ocado Smart Platform, and once again management has reiterated its target is to sign a first agreement in 2015, though with speculation in the weekend press that an agreement may be imminent, the lack of news today may well disappoint the market.”