It still starts with an o and it ends in an o, but at last online grocer Ocado has recorded a full-year statutory profit.

“It starts with an o, ends with an o and is worth zero.”

So ran the old joke by former analyst Philip Dorgan (now Poundland’s IR man) about online grocer Ocado.

But on Tuesday, 15 years after it was founded, Ocado made its first full-year pre-tax profit of £7.2m.

“Steiner never lost confidence as he built a business that’s as much a technology firm as a retailer”

George MacDonald

That may be a modest sum on sales not far short of £1bn but it’s vindication of founder and chief executive Tim Steiner’s vision and entrepreneurial capabilities.

Over the years he’s had as many jeers as cheers for his efforts, but the sometimes spiky Steiner never lost confidence as he built a business that’s as much a technology firm as a retailer.

Now that he can put behind him questions about whether Ocado would ever turn an annual pre-tax profit, the interest lies in future prospects.

There are various growth possibilities: further building Ocado’s core grocery etail business; more Morrisons-style deals where other retailers make use of Ocado’s technological and fulfilment expertise; and the development of new sites – a beauty and wellbeing joint venture with women’s mag Marie Claire was the latest instance, following standalone sites such as pet supplies specialist Fetch.

Outperforming the market

Ocado reported, like others, that that the grocery market is “subdued”. However the etailer maintained it outperformed the online grocery and wider food market last year.

It is certainly well placed to cater for changing shopping habits, although it remains unclear what proportion of food retail online will eventually account for and rivals are also growing.

Steiner was of course confident – he would be, wouldn’t he? – that Ocado has “significant opportunities for growth in sales and shareholder value”.

It sounds as if another deal along the lines of that struck with Morrisons may be in the offing overseas

Others are less sure. Steiner’s bête noire, Ocado ultra-sceptic Clive Black at Shore Capital, stuck to his sell stance despite acknowledging a profitability threshold had been crossed.

Black argued: “Ocado remains a remarkably shallow and fragile business to carry a market capitalisation of £2.6bn.”

But Steiner has defied his critics so far. He’s done it for 15 years. He’s unlikely to stop now, despite the challenges that remain.

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Ocado reports first annual pre-tax profit in its 15-year history

Ocado has reported its first pre-tax profit in history

Ocado has reported its first annual pre-tax profit in almost 15 years as it claims it will “continue to lead the grocery revolution in the UK and overseas”.