Ocado targets international deals after beating profit expectation

Joe Hall
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The online delivery business recorded 30 per cent customer growth (Source: Ocado)

The figures

Ocado delivered better-than-expected pre-tax profit of £7.2m in the first half of the year, amid reports the grocery delivery giant is closing in on a deal with an international retailer.

Read more: Ocado's making robots that will help in the workplace

Despite intense price competition in the UK's supermarket sector, Ocado enjoyed a 15.7 per cent rise in gross sales to £511.9m in the 24 weeks ended 17 May 2015.

Revenue rose 18.2 per cent from £429.7m to £507.7m, as order growth rose to an average of 191,000 per week - up from the 183,000 recorded in the first-quarter. However, the average order size dipped 2.4 per cent to £111.70 as food prices fell nationwide.

Shares in Ocado opened almost two per cent down this morning.

Why it's interesting

After recording its first full-year pre-tax profit last year, Ocado has continued to shrug off pressures on the UK supermarket sector, and now has its eyes on markets beyond these shores.

Recent reports have linked the online retailer with an international firm such as Carrefour of France, and the group confirmed in its release that it was conducting "discussions with multiple potential international partners to adopt Ocado Smart Platform with target to sign first agreement in 2015".

Chief executive Tim Steiner himself talked up the possibility of extending its platforms "to retailers outside the UK".

One of Ocado's existing partners, Morrisons, has enjoyed growth in sales after switching online retail businesses to Ocado's platform.

What Ocado said

Steiner said:

The broader grocery market remaining characterised by intense price competition and deflationary pressures.

Against this backdrop, our relentless focus on customer satisfaction continues to drive customer members 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.

Our continuous commitment to constant innovation in technology not only allows to give industry-leading service to our customers at home but to offer our end-to-end platform solution to retailers outside the UK.

In short

Ocado continues to hold its own in the crowded and competitive UK market, having successfully established its online platform. Next up could be international expansion, something the company is actively targeting to achieve this year.

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