Numis reiterates 'buy' rating on Ocado

Numis reiterated a ‘buy’ rating and target price of 400p on Ocado Group on Tuesday after the online grocer reported growth in first half revenue and earnings.

The company posted a 5.7% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) to £40.4m and revenue rose 14.1% to £584.2m.

The FTSE 250 firm saw profit before tax hit £8.5m, up from £7.2m, although cash and cash equivalents dropped to £52.7m from £70.4m by the end of the 24 week period.

Ocado chief executive Tim Steiner said “the market remains competitive with ongoing price deflation but our increasing scale and operational efficiencies meant that we still grew profits, albeit at a slower rate”.

He said the company has been gaining share in the online grocery market, and expects this to continue.

Steiner added that testing of the company’s new proprietary fulfilment and software solutions in its third facility in Andover was progressing well and they expected to move on from the test phase in the autumn post the quieter summer period.

“Regarding an international deal, there is no new news – Ocado states that it remains ‘confident in its ability to sign multiple deals in the medium term’, while it is in ‘continued discussions with many potential international retailers to adopt the OSP’,” Numis said.

“The lack of deal announcement, competition-led downgrades, and investor concerns around competition (albeit Amazon Fresh is having no impact on trading) look set to continue to weigh on the shares, but we retain our positive stance, continuing to believe that central fulfilment is the best model and that Ocado has the leading global solution.”

Shares jumped 7.78% to 224.30p at 1309 BST.