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Ocado shares enjoy momentary rally

The online grocery specialist still faces a number of challenges despite a market-pleasing set of numbers
June 28, 2016

Just a few short days on from the Brexit vote, it's fair to say that companies are rolling the dice by releasing results in such a febrile atmosphere. It seemed to work in Ocado's (OCDO) favour, though, as the shares rose by nearly 10 per cent on the back of a 14 per cent rise in interim gross sales to £583m and a 5.7 per cent increase in adjusted cash profits to £40.4m. Volumes also improved by 30 per cent and the number of active customers is on the rise too, but margins continue to be put under pressure thanks to ongoing deflationary trends in the grocery market.

IC TIP: Sell at 228p

There's still a major bugbear with Ocado, though. Once again the group failed to announce a new fulfilment deal, although as usual it claimed negotiations with "many international retailers". Another concern comes in the form of US behemoth Amazon (US:AMZ), which recently announced its intention to commence fresh food deliveries in the UK, thus posing a major threat to Ocado's existing market share. Worryingly, Wm Morrison (MRW) has announced a new supply agreement with Amazon sparking concerns over its existing contract with Ocado.

Analysts at Numis expect pre-tax profits of £9.5m for the year ending November 2016, giving EPS of 1.2p, compared with £11.9m and 2.0p in FY2015.

 

OCADO (OCDO)
ORD PRICE:228pMARKET VALUE:£1.36bn
TOUCH:226-229p12-MONTH HIGH:479pLOW: 203p
DIVIDEND YIELD:NilPE RATIO:103
NET ASSET VALUE:43p*NET DEBT:6%

Half-year to 15 MayTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20155087.21.2nil
20165848.51.5nil
% change+15+18+18-

Ex-div: na

Payment: na

*Includes intangible assets of £62.4m, or 10p a share