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No new deal for Ocado

Despite a nice little earner from rival Morrisons, Ocado has yet to sign another lucrative licensing deal
June 30, 2015

Recent trading at the UK's major grocers shows widespread price deflation continues to put the industry under significant pressure. It's encouraging, therefore, that first-half profit at Ocado (OCDO) outperformed market expectations. The online grocer reported an 11 per cent improvement in half-year cash profit to £38.2m - just ahead of brokerage Numis's £37.5m forecast - despite an 80 basis point drop in retail gross margins to 29.1 per cent.

IC TIP: Hold at 430p

This success reflected a 30 per cent increase in new customers, and although the average order size dropped to just below £112 from £114, the number of average orders per week rose by 19 per cent to 191,000.

An increasingly healthy dose of group revenue comes from Ocado's online leasing agreement with its larger rival Morrisons (MRW). In the first half, Ocado earned £32.4m from that partnership, compared with £16.9m during the same period last year. The group hasn't announced any further licensing deals as yet, but management still hopes to sign a new contract before the calendar year is up.

Analysts at Numis Securities expect full-year pre-tax profit of £12.7m, giving EPS of 2.1p. That compares with £10.1m and 1.7p for the year ended November 2014.

OCADO (OCDO)
ORD PRICE:430pMARKET VALUE:£2.53bn
TOUCH:429-431p12-MONTH HIGH:452pLOW: 217p
DIVIDEND YIELD:nilPE RATIO:361
NET ASSET VALUE:39pNET DEBT:45%

Half-year to 17 MayTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20144307.51.3nil
20155087.21.2nil
% change+18-4-4-