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Ocado boosts profits despite tough market

Published: 08:40 28 Jun 2016 BST

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Ocado is facing the prospect of increased competition from online giant Amazon

Online grocery delivery service Ocado PLC (LON:OCDO) reported higher first-half profits and customer numbers despite a tough market.

Ocado said pre-tax profits in the 24 weeks to May 15 rose to £8.5mln from £7.2mln a year ago on a 13.9% increase in sales to £582.9mln.

Like other grocery retailers, Ocado has been facing growing competition from discounters and the threat of increased competition from online giant Amazon.com, Inc (NASDAQ:AMZN).

But it said its increasing scale and operational efficiencies meant it was still able to boost profits, albeit at a slower rate.

Ocado has been under pressure to form partnerships with overseas supermarkets to exploit its online distribution technology.

Despite not announcing any new deals, it said it was in talks with many potential international retailers and said it remained confident of striking partnerships.

Its active customers rose 14.9% to 541,000, with new customer acquisitions up 11% year on year.

The company's average basket value declined by 2.2% to £110.10 due to price deflation in the market

But Ocado's own-label range continued to expand with sales up by 11% and over five products in the average customer basket.

The group, which has a distribution deal with WM Morrison Supermarkets PLC (LON:MRW), said product throughput for the supermarket group was increasing.

Chief executive Tim Steiner said: "The market remains competitive with ongoing price deflation, but our increasing scale and operational efficiencies meant we still increased profits, albeit at a slower rate."

Shares in Ocado rose 29p, or 15%, to 237.2p in early London trading.  

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