Ocado shares surge after grocery delivery company strikes overseas distribution deal

CEO Tim Steiner said that Ocado continues to expect to sign 'multiple deals in the medium term'

Some analysts said that an overseas partnerships is considered a key driver of the company’s market valuation

Shares in food delivery group Ocado surged on Monday after the group confirmed that it had struck an overseas deal with an unnamed European retailer.

In morning trading, shares in the company were around 5 per cent higher.

“This is an exciting step in the evolution of our business and in the delivery of our strategy,” said Ocado chief executive Tim Steiner. He added that “discussions with other retailers across the globe are ongoing” and said that Ocado continues to expect to sign “multiple deals in the medium term”.

Some analysts said that an overseas partnerships is considered a key driver of the company’s market valuation.

“It’s what investors have been waiting for,” said Neil Wilson, an analyst at ETX Capital. “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,” he said.

He added that there is hope among investors that Ocado can use this deal as the basis for more.

But others struck a more cautious note.

Analyst Daniel Ekstein at UBS said that the “economics looks skinny” and noted that Ocado said that the deal would be “earnings and cash neutral in the current and 2018 financial years”.

He said that the news could even “act as a catalyst for profit taking, following strong recent share performance”.

In the UK, Ocado already sells products supplied by Waitrose and Morrisons, which is Britain's fourth largest supermarket.

Shares in the company listed in 2010 at 180 pence. They ended Friday’s trading session at 317.9 pence, which values the business at £2bn according to Reuters.