Ocado posts strong revenue growth in "challenging" market

The FTSE 250 online grocery website posted its results for the 52 weeks to 29 November 2015on Tuesday.

It said revenue had jumped 16.7% from £948.9m to £1.108bn compared to 2014.

That was driven by a 12.4% jump in active customers from 453,000 to 509,000, and a 16.8% increase in order volumes with an average of over 195,000 orders per week.

However the company did note that the average basket value declined by 2.1% to £109.95 due to price deflation and an increased mix of standalone orders from its pet store Fetch and kitchen store Sizzle.

Statutory profit before tax rose over 65% to £11.9m for the full year.

Chief executive officer Tim Steiner said the results illustrate the progress Ocado has made through its clear focus on innovation and customer service.

“The continued enhancement of Ocado's industry-leading technology and investment into our retail proposition over the course of the year has meant our customers now have greater choice, competitive prices and consistently high order accuracy and on-time delivery.

“As a result, customer numbers grew, reflected in strong revenue growth in a very challenging market environment.”

The company also said discussions with multiple potential international partners to adopt the Ocado Smart Platform solution continue.

Steiner said the company expects to sign multiple deals in the medium term.

“Our ability to package our unique proprietary technology, including our equipment solution, for retail partners outside the UK through our Ocado Smart Platform is proving to be of great interest to a significant number of retailers.”

However John Ibbotson, director the retail consultancy firm Retail Vision, said Ocado is fond of portraying itself as the grocery of the future but on this evidence there’s a danger it always will be.

“Its potential is still frustratingly unfulfilled," he said. "These results show solid revenue growth, but don’t yet answer the fundamental question of what Ocado is for.

“There is clearly a place in the market for Ocado’s high-end, online-only offering. Its hard-earned reputation for service is keeping customers loyal, but with the average order size falling and each delivery costing the company up to £20, it is working harder and paying more for every pound of revenue than its rivals.”

He noted the results also haven’t done anything to address the company’s £127m of net debt, which increased from £99.4m.