Ocado can’t outpace rivals

Gross sales rose 15 per cent to £382m in the six-month period, driven by a 13 per cent increase in average orders per week to 139,000 and modest growth in average basket size. As a result, cash profits did what the market expected and leapt 29 per cent to £19.2m. But operating costs rose sharply, too, up £17m on the prior half year, and another £2.8m of one-offs, including the cost of opening the Dordon customer fulfilment centre (CFC2) and £1.3m of professional fees to seal the Morrisons deal, tipped Ocado into the red. The company posted a loss of £1m even after stripping out exceptional charges.

Still, adding another 23,000 active customers during the period took the total to 360,000, and switching the marketing focus from existing, but infrequent, shoppers to new customers is paying off. Interestingly, Ocado's promise to match Tesco prices is broadening its appeal, too, helping shift the demographic closer to the UK average. And Ocado's Hatfield warehouse improved efficiency by 16 per cent to 132 units per hour, and some of that volume is already being shifted to Dordon. If shareholders back the Morrisons deal on 18 July, capacity there will ramp up significantly, and the £40m cost will be split between the two companies. Getting Morrisons online by January 2014 carries execution risk, too, and an international expansion plan is yet to be drafted.

Exane BNP Paribas expects Ocado to report an adjusted pre-tax loss of £2m for the full year, giving a loss per share of 0.34p. For the 12 months to November 2014, the broker pencils in pre-tax profits of £12.1m and EPS of 2.51p.