Top story

Ocado (OCDO) has posted a 21.8% jump in pre-tax profits before exceptional items for the year to 27 November 2016, but has not given the market a material update on its long-awaited international expansion efforts.

Overall sales in the period increased by 14.8% to £1.27bn, with revenue from retail activities up 13.3% to £1.17bn.

This revenue growth was driven by a 17.9% year-on-year increase in the full year average orders per week to 230,000, though this was slightly mitigated by a 2.7% fall in average hypermarket order size from £111.15 in 2015 to £108.10 in 2016, primarily due to widespread grocery deflation.

Overall average basket size fell by 3.7% due to deflation and the increased number of standalone destination site orders which are typically smaller.

The Morrisons arrangement contributed £99.4 million of revenue in 2016 (up from £73.9m last year), with growth mainly driven by increased revenue from recharges for services provided to support the expansion of the Morrisons.com business.

Its active customer base grew 13.9% to 580,000 as it continued to grow in all of our existing catchment areas.

Gross profit rose by 16% year-on-year to £435.3m and was 34.2% of revenue - up from 33.9% last due to additional gross profit attributable to the Morrisons arrangement in the period and the growth of the Morrisons.com business.

Profit before tax and exceptional items was up 21.8% to £14.5m. However, overall pre-tax profit was dragged back to growth of just 1.7% to £12m due to £2.4m of exceptional charges relating to Ocado’s head office move and litigation against payment providers.

There was no definitive update on agreements with international partners, with Ocado only stating it had “advanced discussions with multiple potential international partners to utilise Ocado Smart Platform”.

CEO Tim Steiner said: “We are pleased to announce results today which reflect robust trading in our core business and shows continued progress against our strategic objectives in what has been a challenging retail environment.

“We commenced operations at our new Customer Fulfilment Centre in Andover, which has the first installation of our new proprietary technology. At the same time, we have made good progress in improving the efficiency and throughput of our existing operations, increasing our capacity from existing facilities by over 20,000 weekly orders. These developments position us well for future growth, whilst improving our returns and enhancing the service we can offer our customers.

“In this ever evolving retail environment, we look forward to further developing our capabilities through innovation, creating the next generation eCommerce capabilities that will ensure our offer remains compelling for both retail and OSP customers alike.”

Ocado shares have jumped 7.4% to 262.5p this morning after beating earnings guidance.

Morning update

Britvic (BVIC) has this morning reported first quarter revenue of £351m, an increase of 4.3% on the previous year.

The “strong” start to the year was underpinned by volume growth of 3.9%. Its GB region reported a 2.2% increase in revenue on the previous year, driven by its focus on the convenience and foodservice channels, including Subway.

GB carbonates “continued its outperformance of the market” with a revenue increase of 5.5%. Pepsi Max and 7UP were both in strong growth, as was R Whites, benefiting from its relaunch last year.

GB Stills revenue declined by 3.8%, with sales of Robinsons and Fruit Shoot continuing to decline “reflecting the challenging categories in which they operate”.

CEO Simon Litherland commented: “The new financial year has started well with group revenue 4.3% ahead of last year, continuing the good progress we made as a business in the prior year. Encouragingly all our key markets have delivered revenue growth.

“Whilst the external environment remains uncertain, we are confident that the strong execution of our marketing and innovation plans combined with disciplined revenue management and our cost saving initiatives will deliver full year results in line with market expectations.”

Greencore (GNC) has issued a trading update covering the 13 weeks to 30 December 2017 this morning.

It has reported a 17.1% increase in sales over the 13 weeks to £417m. On a like for like basis (constant currency and excluding revenue from The Sandwich Factory acquisition in July 2016), revenue was ahead by 9.1% in the quarter.

Its convenience foods divisional sales were up 16.4% to £401.6m and up 8.9% on a like for like basis. In the UK, Q1 revenue was up 13.9% on a reported basis and up 9% like for like, driven principally by strong growth in its food to go business.

In the US, reported Q1 revenues were up 31.2%, and up 8% on a like for like basis, driven largely by the addition of operations in Seattle.

In terms of outlook, Greencore stated that the integration of Peacock Foods in the US is “on track”, albeit the process is at an early stage. Inflation in raw material and packaging prices and labour costs are expected to increase for the remainder of the year, although it claims the combination of supply chain, purchasing and pricing initiatives will mitigate these impacts.

“Overall, the business is delivering a complex investment and change agenda to drive both the US integration and the new capacity additions that support the significant new business in the UK. Notwithstanding these investment costs and their impact on the phasing of profit delivery, we remain confident in our ability to deliver FY17 performance in line with market expectations.”

Unilever (ULVR) priced £350m in bonds on the sterling market yesterday. The 1.125% fixed rate notes are due February 2022 and the proceeds will be used for general corporate purposes.

Finally, Conviviality (CVR) has been forced to amend its full-year results issued yesterday. There was an error in the calculation of the weighted average number of shares and as a result, the adjusted fully diluted Earnings Per Share figure should have been stated as 7.2p per share rather than the 9.2p per share stated.

On the markets this morning, the FTSE 100 has rebounded 0.3% to 7,137pts after yesterday’s falls.

Britvic is up 3.9% to 612p, while Greencore is up 4% to 227.1p after their respective updates this morning.

Yesterday in the City

The US “travel ban” weighed heavily on international stock markets yesterday, with shares in London dropping 0.9% to drag the FTSE 100 back to 7,118pts.

Two of the markets major fallers were Tesco (TSCO) and Booker (BOK) as the intensifying competition concerns around their deal removed some of Friday’s froth from the stocks.

Tesco was down 4.2% to 197.8p, while Booker fell back 3.7% to 204.5p – albeit both remain comfortably ahead from their levels at close of play on Thursday last week.

Notably Sainsbury’s was one of the day’s few major grocery stocks on the rise, climbing 0.9% to 256.9p and wiping out some of Friday’s fall.

Elsewhere, fallers included B&M European Value Retail (BME), down 2% to 299.2p, Greencore (GNC), down 1.8% to 218.3p, Marks & Spencer (MKS), down 1.2% to 339.9p and Diageo (DGE), down 1.2% to 2,218p.

Conviviality fell 0.4% to 259p after its annual results yesterday, while Ocado was down 0.1% to 244.4p ahead of its own annual results this morning.

Topics