Morrisons delivery deal boosts profits at Ocado

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ONLINE grocer Ocado is set to announce its first ever annual profit after a distribution deal with Morrisons helped it swing into the black in the first half.

Ocado ​has not made an annual pre-tax profit since it was founded in 2000, but it has benefited from a £200m deal signed with Morrisons last year to launch the Bradford-based grocer’s late foray into online sales.

Ocado made an underlying pre-tax profit of £7.5m in the 24 weeks to May 18, compared with a £1m loss last year.

Analyst Clive Black at Shore Capital said: “Morrisons’ business is said to be ‘particularly encouraging’, creating a basis for future agreement apparently.”

Anecdotal evidence suggests that Morrisons, which is losing customers to German discounters Aldi and Lidl, has seen a strong start to its online sales push.

​Morrisons started delivering online grocery orders in East Yorkshire for the first time last month as it moved further into its Northern heartlands.

It already delivers to West and South Yorkshire, London, Birmingham and Warwickshire.

​Its link up with Ocado’s sophisticated delivery systems has enabled it to offer extras such as a chilled drink service, offering cold beer, wine and soft drinks for doorstep delivery.

​So far Morrisons has seen a 96 per cent success rate for delivering on time, ​thanks to Ocado’s expertise.

Morrisons is having to play catch-up with its three main rivals which have offered customers an online service for many years.

The group claims that while it is late to the party, its model is profitable and it can win back customers who shop online with rivals.

It expects its online service with Ocado ​to cover 50 per cent of the country by the beginning of 2015.

​The​ online grocery market is growing at 15 per ​​cent a year, far outpacing the broader market​.

It​ accounts for a mere 
five per ​cent of total grocery sales​ at the moment and ​​
retail researchers IGD ​
predict it will more than 
double​ in size over the next five years.

Despite the rapid growth, Ocado has struggled to make a profit.

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