×

UK online grocer Ocado makes first annual profit

British online grocer Ocado reported an annual pretax profit for the first time in its 15 year history on Tuesday and said it aimed this year to seal its first technology deal with an overseas retailer.

Ocado, founded by three former Goldman Sachs bankers in 2000, has divided analysts like few other stocks, with some viewing its door-step deliveries from giant distribution centres as the future of grocery shopping and others seeing it as a costly and complicated venture that will never make much money.


OCADO
Jason Alden | Bloomberg | Getty Images

The company, whose investors have included Tetra-Pak billionaire Jorn Rausing and former U.S. vice-president Al Gore, signed its first third-party deal in 2013 to carry out online orders for British grocer Morrisons, and believes it can also help foreign retailers to ramp up their online businesses.

"We are targeting to sign the first such agreement during 2015 although there is no guarantee we can meet this timeline," Chief Executive Tim Steiner told reporters, adding he was talking to parties in Europe, North and Latin America and Asia.

Ocado shares, which have had a roller coaster ride since they debuted at 180 pence apiece in 2010, were up 3.1 percent to 428.3 pence at 1000 GMT.

"Investor willingness to be short of the shares may diminish in the months ahead given management's clearer optimism regarding a deal being signed," said Barclays analysts, who have a "neutral" rating on the stock.

Read MoreSupermarket wars hit UK retail sales

Ocado reported a pretax profit before one-off items of 10.1 million pounds ($15.2 million) in the year ended Nov. 30. That was in line with analyst expectations and compared with a loss of 3.8 million pounds the year before.

Its gross retail sales rose 15.3 percent to 972.4 million pounds and were up 14.8 percent in December.

The firm said it expected to continue growing slightly ahead of the online grocery market, though it noted some rivals' online growth had recently slowed.

Online grocery sales rose by about 16 percent in Britain last year, compared with little or no growth in the broader market. While online orders account for less than 5 percent of total UK food and grocery sales, industry body IGD forecasts the market will more than double to 17 billion pounds by 2019.

Ocado's range includes products supplied by upmarket grocer Waitrose [JLP.UL]. Though the contract runs to 2020, there is a possible break point in spring 2017 requiring 18 months notice. That means in theory either party could serve notice towards the end of 2015.

"I see no reason at the moment not to continue until the end of the contract in 2020 and I've no information that anyone else feels otherwise," said Steiner.