July 2, 2013 / 6:42 AM / 4 years ago

UPDATE 2-Ocado sees Waitrose coming round to Morrisons deal

* Ocado CEO says Waitrose now understands Morrisons deal

* H1 EBITDA 19.2 mln stg, up 29 pct

* H1 pretax loss 3.8 mln stg

* Shares down 2 pct, up 275 pct in last year (Adds CEO, analyst comments, detail, background, shares)

By James Davey

LONDON, July 2 (Reuters) - British online grocer Ocado believes long-term partner Waitrose is coming round to its new joint venture with Wm Morrison Supermarkets, reducing the risk that Ocado might lose its main supplier in the years ahead.

Upmarket grocer Waitrose reacted angrily to Ocado’s deal with Morrisons when it was announced in May and instructed its lawyers to seek to view the contract.

Ocado Chief Executive Tim Steiner said on Tuesday he had not granted this request, but added Ocado had held talks with Waitrose since the Morrisons agreement was unveiled on May 17.

“They probably understand now that the deal is absolutely fine for us to enter into and will not breach our agreements with them,” he said.

Ocado’s supply deal with Waitrose is due to run until 2020 and although there is a break clause in 2017, Steiner said it was “absolutely not inevitable” that Waitrose would exercise it.

Waitrose declined to comment.

Shares in Ocado have risen nearly five-fold since November and hit a record high last month after the 200 million pounds-plus ($304 million), 25-year deal with Morrisons to provide its online grocery operation by January 2014.

Steiner was speaking after Ocado posted a 28.7 percent rise in underlying first-half earnings as it won new customers and increased their average spend, though it still made a loss at the pretax level.

Ocado said earnings before interest, tax, depreciation and amortisation (EBITDA) were 19.2 million pounds in the 24 weeks to May 19 - ahead of analysts’ average forecast of 18.1 million pounds, according to a company poll, and up from 14.9 million pounds in the same period last year.

The firm made a statutory pretax loss of 3.8 million pounds, versus a profit of 0.2 million pounds in the same period last year, due to the investment it has made in its infrastructure.

Ocado has not made an annual pretax profit since it was founded in 2000 by three former Goldman Sachs bankers.

Britain’s traditional supermarkets are seeing little, if any, growth in sales at their stores, but the online grocery market is growing about 16 percent a year.

Ocado’s first-half sales rose 15.2 percent to 382.7 million pounds and the firm said it expected to continue to grow broadly in line with the market.

“We remain well placed to take advantage of the accelerating structural changes in the industry as more customers choose online delivery for their grocery shopping,” said Steiner.

Ocado shares were down 2.3 percent at 305 pence at 0845 GMT, valuing the business at about 1.67 billion pounds.

“This remains a business that continues to be valued on unsubstantiated potential rather than cash flows with high visibility,” said Shore Capital analyst Clive Black.

The stock has also been buoyed by bid speculation, with Amazon seen as a possible suitor.

Steiner said he was unaware of any takeover approaches.

However, he said Ocado had received approaches from parties interested in the firm’s technology platform and operational expertise and talks were ongoing.

“But we’re not looking to make a quick announcement about another transaction. We’re looking to deliver on the existing transaction (Morrisons) and continuing to invest in the platform,” added Steiner.

$1 = 0.6568 British pounds Editing by Kate Holton and Mark Potter

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