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UPDATE 2-Ocado says focus on Morrisons, not more deals
February 4, 2014 / 8:20 AM / in 4 years

UPDATE 2-Ocado says focus on Morrisons, not more deals

* FY pretax loss 12.5 mln stg vs loss of 0.6 mln stg

* FY revenue 792.1 mln stg, up 18.8 pct

* Sees 2014 sales growth in line, or slightly ahead, of market

* Co-founder Jason Gissing to quit firm in May

* Shares fall up to 6.3 pct, up 394 pct over last year

By James Davey

LONDON, Feb 4 (Reuters) - British online grocer Ocado said investors should not expect more third-party deals any time soon similar to one signed last year with Morrisons , the UK’s No. 4 supermarket, as it was focused on ramping up this partnership.

Shares in Ocado have risen nearly five-fold over the last 12 months mainly on the back of the 200 million pounds-plus ($327 million) deal with Morrisons to provide its online grocery operation, and on hopes it could do similar deals overseas.

“Having a successful launch for our first business-to-business customer is enormously important for us,” Chief Executive Tim Steiner told reporters on Tuesday.

“We are spending a lot of time and money on preparing ourselves for further expansion beyond and but we aren’t expecting any imminent announcements on that.”

However, he added that the firm saw “massive opportunity” overseas and was talking to global grocers “on a daily basis”.

Steiner was speaking after Ocado posted a wider loss for its 2012-13 financial year, but said it was well positioned for 2013-14 - a year when analysts expect it to make a pretax profit for the first time.

Ocado also said on Tuesday its co-founder and commercial director Jason Gissing would retire from the board at the annual shareholder meeting in May and leave the company.

It said Gissing, who owns about 3 percent of Ocado’s equity, wanted to spend more time with his family and focus on environmental and social issues.

Ocado was the best performing major stock in Europe in 2013 but fell up to 6.3 percent on Tuesday on the back of Gissing’s departure and the firm’s forecast that in 2014 its sales would grow broadly in line with, or slightly ahead of, the market, which some analysts said was a bit subdued.

The firm, whose range includes products supplied by upmarket grocer Waitrose, made a pretax loss of 12.5 million pounds in the year to Dec. 1, reflecting increased investment in capacity. That compared with a loss of 0.6 million pounds in the 2011-12 year.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 35.1 percent to 45.8 million pounds, ahead of analysts’ average forecast of 43 million pounds, on revenue up 18.8 percent to 792.1 million pounds, reflecting an increase in customer numbers to 385,000 from 355,000 and a rise in average basket size to 113.53 pounds from 112.1 pounds.

Britain’s traditional supermarkets are seeing little, if any, growth in sales at their big stores, but the online grocery market is growing strongly.

The UK online grocery market is currently worth 6.5 billion pounds a year, according to IGD data. It forecasts the market will grow by 124 percent over the next five years to 14.6 billion pounds.

Ocado has not made an annual pretax profit since it was founded in 2000 but the Morrisons deal, which saw home deliveries start on Jan. 10, has transformed its prospects.

Before Tuesday’s update, analysts were forecasting a 2013-14 underlying pretax profit of 18-19 million pounds.

“The challenge for Ocado is whether it can continue taking share to the extent required to take it past the profitability threshold,” said analysts at Conlumino.

“To succeed it needs to continuously outstrip the (UK‘s) Big Four (grocers) and, as the likes of Tesco and Asda seek a resurgence, Ocado will find its own comparatives harder to match.”

Ocado also said it was looking at potential sites to increase its fulfilment capacity and expected to make an announcement this year.

Shares in the firm were down 23 pence at 500 pence at 1031 GMT, valuing the business at 2.93 billion pounds.

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