Ocado swings to profit for first time amid growth in online grocery market

Grocery specialist Ocado made its first ever pre-tax profit for the full-year, driven by growth in the online market.

Despite “intense competition”, the group’s revenues rose 19.8% during the year to £948.9m while earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 56.3% to £71.6m.

Last year’s losses before tax of £12.5m turned into profits of £7.2m.

The group has entered a partnership with Morrisons in January last year, which is “ramping up smoothly”.

“While the broader grocery market was characterised by intense competition with minimal growth in the segment, declining supermarket store sales, competitive price activity and cautious consumer spending, we continued to grow ahead of the online grocery market and significantly ahead of the market overall,” said chief executive Tim Steiner.

The company said it expects growth to be slightly ahead of the online grocery market, which Ocado believes it remains subdued.

Numis analysts said: “Notwithstanding the short-term earnings impact, we are very encouraged by the progress on the modular solution and the confidence that a deal will be signed this year; we continue to believe that Ocado is uniquely positioned to leverage its market-leading IP to support Ocado Retail and develop partnerships with global grocery retailers looking for the best online grocery fulfilment solution.”

The broker gave a ‘buy’ recommendation and a 500p price target.

Shares were up 3.66% to 430.7p on Tuesday at 09:21.