Ocado boosted by second year of profits

Ocado boosted by second year of profits

Online supermarket Ocado has secured its second year of profits as it bucked the trend in the under-pressure grocery sector.

The group saw statutory pre-tax profits rise 65% to £11.9m in its full year results to the end of November 2015, as it continued to make strides after first moving into the black in February last year.

It was cheered on by a 14.7% spike in gross retail sales to £1.1bn over the period as order volumes grew 16.8% to 195,000 a week, despite a "very challenging market environment."

Revenues overall were 16.7% higher at £1.1bn for the full year, coming in line with expectations.

But while the company said it was in "discussion with multiple potential international partners", shares fell 2% as some analysts questioned why it had still failed to secure its long-waited global deal.

Ocado said its deal to provide the online operation for Morrisons was progressing well, with sales notching up to £200m in the first 12 months of trading.

But Ocado's average basket value dipped 2.1% to £109.9m in the period to the end of November last year.

Ocado chief executive Tim Steiner said the company was "ideally positioning" itself to take advantage of the shift in customer habits towards shopping online, as the UK grocery market continued to face "significant challenges."

The results came as the company announced it would bolster its technology workforce by 300 to 1,000 by the end of year, as it launched a second IT centre in Southern Europe.

The FTSE 250 firm signed a £170m contract with Morrisons in 2013, providing the Bradford-based supermarket with its first online delivery service.

The deal prevents Ocado from tying-up with any rival UK grocers, but leaves open the option of a deal with an international partner.

Analyst Clive Black at Shore Capital said he was concerned about the company's business model amid the increasing threat from online retailer Amazon.

He said his concerns about future plans from Amazon, Morrisons and Waitrose "outweigh any potential enthusiasm" for Ocado, and the business could be "migrating away from being a proprietary grocer to a third party picker and distributor for other players".