Ocado finally posts a healthy profit

Ocado has made its first ever quarterly profit - of £300,000. And what a good time to do it.

by Dave Waller
Last Updated: 06 Nov 2012
It’s big news for the online delivery service, which, after years of losses, finally made a £300k profit in the final quarter of 2010. The business took a lot of stick after floating in a blaze of publicity last July, being derided in some quarters as nothing but a load of fridges on wheels that don't make any money.

However, sentiment seems to be shifting. Its share price has now shot up by more than 80% in the last three months, fuelled in part by speculation that that Morrisons may be thinking about using Ocado to keep pace with Tesco and Asda online. And now it has officially ended a quarter in the black for the first time, there’s finally some concrete evidence that Ocado's business model can deliver in its own right, despite the challenge of these heavyweight food-floggers. Its shares jumped another 5% to 228p this morning.  

Before we get too carried away, it’s worth putting this into context. This is Ocado’s first set of full-year results since flotation, and despite that £300k profit for Q4, it still slumped to an annual loss of £12.2m. So the doubters won't be instantly won over; this is just one three-month period, after all (albeit one where you'd have expected it to suffer in the snow).

On the other hand, Ocado's story is looking more compelling all the time. Gross sales were up 29% to £551m; its average orders per week were up by almost a third to 92,916 (and it allegedly delivered 99% of them exactly as ordered). And that £12.2m pre-tax loss was still 52% lower than the £25m loss it made in 2009 – while if you strip out the £3.5m in one-off costs from the IPO, its adjusted loss was actually £8.7m, down 65%.

Chief executive Tim Steiner described it as ‘a landmark year for Ocado... we have delivered on the targets set out at the flotation,' he crowed, noting the record numbers of customers and sales, plus the not-insignificant fact that it actually made some money. OK, so it's only one quarter - but hitting this milestone in your first year as a public company is a great way to create/ keep up momentum. The markets may initially have been a bit cool on Ocado's fridges-on-wheels. But it looks as though they're warming to the idea very quickly.

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