UK online grocery retailer, Ocado, continued to grow its top line, but profitability has been hit by intense competition.
For the first half of its reporting year (H1 2016), ended May 31, Ocado reported revenues of £584.2m, having grown by 15.1% year-on-year. In addition, the company expanded its EBITDA by 5.7%, to total £40.4m, though EBITDA as a percentage of revenue declined to 6.9%, from 7.5% in H1 2015.
The company reported that the growth in retail sales was driven by the rising number of active customers in the period. Additionally, the contract with Morrisons contributed £44.1m to revenue, up from £32.4m in H1 2015. Ocado’s retail distribution costs grew at a lower rate than revenues as a result of improved delivery efficiency and operational fulfilment. This was offset, however, by lower margins reflecting the competitive and deflationary pressures in the market.
Tim Steiner, Chief Executive Officer of Ocado, said, “I am encouraged by the steady progress in our business, with volumes through our operations, including the throughput for Morrisons, growing by 30%. The market remains competitive with ongoing price deflation but our increasing scale and operational efficiencies meant that we still grew profits, albeit at a slower rate.”
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