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Ocado (OCDO) has signed an agreement with Group Casino to develop a delivery service in France.

The British online grocer will supply its ‘Smart Platform’ to the group, which will see it construct an automated warehouse and provide web site functionality and logistics support.

The agreement sets out plans for the immediate initiation of the development of a customer fulfilment centre to serve the Greater Paris area, the Normandie and Hauts de France Regions.

The build and launch is expected to take at least two years.

Groupe Casino will pay Ocado certain upfront fees upon signing, and during the development phase, then ongoing fees linked to its utilisation of capacity within the CFC and service criteria.

In addition to the initial CFC, Groupe Casino and Ocado will consider further development of other CFCs close to other large urban areas.

Jean-Charles Naouri, CEO of Groupe Casino, said: “This agreement is a major leap in terms of quality: 50,000 food items will be offered in the first stage to customers in the Greater Paris area with precise and speedy delivery at home and through a platform which makes it achievable to do this profitably. Groupe Casino is very proud to have sealed this deal with Ocado which will further strengthen the quality of service available to its customers, at the core of its commitments for 120 years.”

Tim Steiner, CEO of Ocado added: “We believe that the scalable, modular end-to-end solutions provided by the Ocado Smart Platform, will allow retailers such as Groupe Casino to build their online grocery offer in a way that is profitable and sustainable, creating value for customers, suppliers and shareholders.

“We continue to make investments to commercialise our proprietary platform and expect this deal to be one of many successful collaborations with leading retailers to use it the world over.”

Ocado expects this deal to create “significant long term value to the business”. In 2018 Ocado expects the deal to be earnings neutral, given the cost of investment in establishing the partnership – which is expected to add £15m in annual capex next year with further spend in the future.

In 2019 and beyond, the profitability of Ocado Solutions is likely to grow as the fees from the transaction increase and as other deals are signed.

In order to provide greater clarity on the split between Ocado Retail and Ocado Solutions, Ocado will introduce segmental reporting of sales and EBITDA.

Ocado shares have soard by almost 22% this morning to 312p - recovering all the ground the shares had lost since mid-October. 

Morning update

Greencore (GNC) has reported pro forma revenue growth of 9.4% driven by an 18.8% jump in UK food-to-go sales, but headline profits fell markedly amid a number of one-off charges.

Reported revenue in the year was £2.32bn, an increase of 56.5% versus reflecting the incorporation of revenues from its Peacock Foods US acquisition.

Food to Go sales were up 24.4% or 18.8% on a pro forma basis, driven several important business wins and commercial launches. The business also extended a number of contracts and now has multi-year sole supply agreements in place with all of its core customers. Its market share of sandwiches in the UK grocery channel now stands at 60%.

The other parts of the Convenience Foods UK & Ireland division comprise the ready meals, chilled soups and sauces, cooking sauces, quiche, Yorkshire Pudding and cakes and desserts businesses, as well the Irish ingredients trading businesses. Revenue growth across these businesses was 2.7%, or 3.5% on a pro forma basis.

Greencore said raw material and packaging costs rose by approximately 3% in 2017 driven by a rise commodity costs such as dairy, as well as the inflationary impact of a weaker sterling on imported ingredients. Labour inflation in the UK was approximately 4% in the year, primarily due to the effect of increased National Living Wage levels on the Group’s wage structure.

However, it said it sucessfully mitigated the overall effects of this inflation during the year by working with customers on a variety of cost and innovation programmes, and by continued internal cost efficiency initiatives.

Its US division saw revenues jump 295% to £881.3m, primarily reflecting the acquisition of Peacock Foods. Pro forma revenue growth for the division was 5.9%, driven by underlying category growth and the impact of new business wins. The significant deflation in raw materials costs, seen especially in Peacock Foods in the first half of the year, eased as the year progressed.

Overall adjusted operating profit of £140.1m was 37.4% higher, primarily driven by the acquisition of Peacock Foods. Adjusted Operating Margin was 6.0%, 90bps below the prior year, primarily due to the impact of the acquisition of Peacock Foods and significant commercial investments in the UK.

Headline pre-tax profit fell 74.3% to £12.4m, largely due to £78.2m of exceptional costs (up from £17.4m last year) relating to IT costs, the Peacock Foods acquisition, exiting businesses and legal settlements.

CEO Patrick Coveney commented: “Greencore has been substantially transformed this year and the decisions made and work undertaken in FY17 have set us up very well for further progress.

“The acquisition of Peacock Foods and the significant UK network investments made to support large new business wins have reshaped our business. Group pro forma revenue growth was strong at 9.4% - driven in large part by 18.8% growth in UK Food to Go. We are pleased with the progress of the US integration to-date and with the development of our US commercial pipeline, as illustrated by a recently extended long term, strategic partnership with one of our largest and most important customers.

“While we have delivered good financial and operating progress in the year, the transformation has not been without its challenges. However, we are confident that our strategy, portfolio, business model and momentum positions Greencore well to drive profitability, cash flows and returns in FY18 and beyond.”

Unilever (ULVR) will hold its annual investor events this week and will tell shareholders its strategic plans are progressing well and its expects to deliver growth ahead of our markets with underlying sales growth of 3-5% per year between now and 2020.

Its 5-S supply chain savings and zero-based budgeting programmes are delivering faster than planned, which will enable reinvestment behind brands for growth and provide momentum towards our underlying operating margin target of 20% by 2020.

Unilever expects underlying sales growth within the 3 to 5% range, an improvement in underlying operating margin of at least 100 basis points, and strong cash flow delivery.

As previously announced, Unilever is conducting a review of the dual-headed legal structure. It said this review is “progressing well” and the board considers that unification with a single share class would be in the best interests of Unilever and its shareholders as a whole, providing greater ongoing strategic flexibility for value-creating portfolio change.

”Unilever is a geographically diversified business with a very small corporate centre compared to the scale of its global operations.  Reflecting this, following any unification, we envisage one lean, agile corporate centre,” it said.

However it will maintain listings in the Netherlands, United Kingdom and United States

Elsewhere this morning, pork producer Cranswick has reported a rise in sales of 23% to £714.6m in the six months to 30 September, with like-for-like revenues up 18%.

Growth was supported by contributions throughout the period from Crown Chicken and the Ballymena pork processing business which were acquired in the previous financial year.

Volumes were up 9.9%, with each category delivering positive volume growth, comfortably ahead of overall category market growth, with stronger pricing reflecting partial recovery of higher input costs compared to those experienced in the same period last year.

Adjusted profit before tax for the period also increased 17.2% to £44.4m.

However, adjusted group operating margin at 6.2 per cent was 34 basis points lower than in the same period last year, with pressure from higher input costs being partly offset by a combination of ongoing support from our customers, further operational efficiency improvements, better capacity utilisation and tight cost control.

Cranswick CEO Adam Couch commented: “We have invested a record £29 million in our infrastructure during the first half of the year.

“As part of the development of our rapidly growing poultry business we are announcing today our planned investment in a new primary poultry facility in Eye, Suffolk. This class-leading facility, which is scheduled for completion in late 2019, will double our existing capacity with further room for expansion. The facility will incorporate the highest animal welfare standards and latest generation production techniques and equipment to drive operational efficiency gains. We also plan to upscale our feed mill and hatchery operations to maintain our fully integrated supply chain model.

“During the period we have strengthened our asset base, enhanced market positions and developed new customer relationships. We continue to make good progress against each of our strategic objectives and we are well placed to continue our successful development in the current financial year and going forward.”

Card Factory, the UK retailer of greeting cards, has appointed Greggs (GRG) CEO Roger Whiteside as an independent non-executive director of the company effective from 4 December 2017.

Before Greggs, Whiteside served as chief executive of both the Thresher Group off-licence chain and Punch Taverns as well as having been a founding member and joint MD of Ocado and worked for 20 years at Marks & Spencer where he ultimately led its food business.

British American Tobacco (BATS) has tweaked its management board. Ricardo Oberlander, currently regional director, Americas, will be appointed President and CEO of Reynolds American replacing Debra Crew, who has decided to leave BAT, with effect from 31 December 2017, to pursue other opportunities outside the company.

Kingsley Wheaton, previously MD, next generation products, will become regional director, Americas and Sub Saharan Africa (AMSSA), replacing Ricardo.

On the markets this morning, the FTSE 100 is up 0.3% to 7,406pts.

Greencore has fallen back 1.6% to 188.8p after this morning’s announcemnet, Unilever is up 0.9% to 4,273.5p and Cranswick has jumped 7.3% to 3,238p.

Other risers include Hilton Food Group (HFG), up 3.4% to 858p, McBride (MCB), up 3.4% to 228.8p and Science in Sport (SIS), up 2.6% to 79p.

Fallers include Real Good Food (RGD), down 4.6% to 21p and Total Produce (TOT), down 1.2% to 220.7p.

Yesterday in the City

The news that Ocado has penned a key international agreement will have come as little surprise to some in the City, as rumours of news of a new partnership saw the online supermarket’s shares jumped 7.3% to 256.2p yesterday.

Ocado was a rare good news story on a somewhat downbeat day for the City as the FTSE 100 dropped 0.4% back to 7,383.9pts.

Greencore was up 1.8% to 191.9p ahead of this morning’s annual results, while Marks & Spencer (MKS) and Compass Group (CPG) were both up 0.7% to 300p and 1,521p respectively.

Other risers included Hotel Chocolat (HOTC), up 3% to 358.5 and McBride (MCB), up 2.8% to 221.3p.

Fallers included CARR’s Group (CARR), down 4.9% to 124.9p, PayPoint (PAY), down 3.6% to 921.5p, Finsbury Food Group (FIF), down 2.4% to 102p, Nichols (NICL), down 2.3% to 1,592p.

Other fallers included TATE & Lyle (TATE), down 1.5% to 673p, Dairy Crest (DCG), down 1.2% to 559.5p, Greggs (GRG), down 0.9% to 1,348p and B&M European Value Retail (BME), down 0.9% to 385.8p.

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