I watched a fascinating on-line presentation from Ocado (OCDO) this morning. The financial results are difficult to interpret due to heavy investment in new CFCs (Customer Fulfillment Centres, i.e. warehouses), the exceptional costs of a fire in their CFC at Andover and the time lag on new CFCs becoming operational. Key points though are that retail revenue was up 9.7% and Solutions Revenue up 20.6%. The Solutions business is that part of the group that builds and operates CFCs for other people. But the statutory loss increased substantially and the adjusted group EBITDA fell 46%.
The interesting aspect is more their future business plans. As the CEO, Tim Steiner, said “2019 has seen a shift in the centre of gravity of Ocado Group. We have pivoted from being a pure play online grocer in the UK with a separate Solutions business to being a technology-led global software and robotics business providing a unique end-to-end solution for online grocery”.
They are also investing in Karakuri which provides robotic meal preparation, and Jones Food that operates automated vertical farms. They also covered the Ocado Zoom service which promises delivery within one hour, and averages 30 minutes. They suggest this will be profitable even with delivery charges of only £1.99 or £2.99 and will compete with food delivery services such as Deliveroo, most of which lose money.
Ocado clearly has ambitions to revolutionise the retail food market and they have the funds to do so it would seem with no need for more fund raising required in the short term. But valuing the business is not easy.
The share price is up 5.7% today at the time of writing.
The presentation can be viewed here: https://www.ocadogroup.com/investors/reports-and-presentations/2019.aspx
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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