Belfast Telegraph

Ocado shares surge following overseas deal with mystery customer

Ocado shares surged after the online grocer announced a long-awaited overseas deal for its software platform - although the identity of the customer is yet to be disclosed.

The FTSE 250-listed firm said it has signed an agreement with "a regional European retailer" to help it access website software and other technology, but added that the customer "wishes to remain anonymous until it launches its online business".

The stock rose over 4% to 330.5p in morning trading.

It is the first international deal that the retailer has made, and has been long anticipated by the market.

The company missed its self-imposed deadline of the end of 2015 to expand overseas, and short-selling of the stock increased as investors grew increasingly sceptical over the retailer's strategy.

In a statement, Ocado chief executive Tim Steiner said that the company is in ongoing discussions with other retailers around the world, and hinted that the firm would be signing "multiple deals in the medium term".

He added: "This is an exciting step in the evolution of our business and in the delivery of our strategy."

Ocado said it will provide its new unnamed partner with its "full software platform, know-how and support services", helping it to create an online grocery business.

The European retailer will not, however, use Ocado's automated warehouse technology, which could disappoint investors hoping for a more wide-ranging foreign deal.

The deal gives the partner "the right to request" future installation of the equipment, but this would require a separate agreement.

Few details about the financials of the deal were given, although the group said it expects the agreement to make no difference to its earnings or cash flow this year or next. It added that it should become "increasingly accretive" after then.

The deal comes after a similar partnership with Morrisons was agreed in 2013. The two retailers agreed to extend that agreement last year.

Neil Wilson, senior market analyst at ETX Capital, said: "It's what investors have been waiting for: Ocado has at long last agreed an international deal with a retailer that it's been promising to deliver for over a year and a half.

"This is good news for sure. Investors have shown a great deal of patience and while the rewards from this agreement won't be immediately forthcoming, it bodes well for the future.

"Investors should be relatively hopeful that this is just the first of a slew of new deals around Europe."

However, he also warned that investors should watch "how much the technology push eats up cash and whether these deals increase the burn".

He added: "They will also need to beware a potential slowdown in the UK retail market."

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