Ocado Group PLC (LSE:OCDO) management revealed that after opening nine robot-run warehouses – or customer fulfilment centres (CFCs) as it calls them – last year, it expects this to slow to five additions in 2023, with broadly similar numbers in the next few years.
The fact that 23 CFCs are now open, with more outside the UK than inside, was one of “lots of interesting operational details” the FTSE 100-listed company shared with analysts after its results this week, said Barclays, with plenty of the sort of details that get Ocado investors salivating.
One of the most eye-catching from recent years was also reiterated: the belief that the company has enough liquidity to get to cash flow break-even in the medium-term.
Slowing its CFC openings “may be one of the causes of share price weakness,” Barclays said, with the shares down 6% compared to the Footsie being just below flat on the day, “although this understates growth given new modules will likely be added to existing facilities”.
On cash burn, which was around £800mln last year, directors expect this to reduce by circa £200mln a year over each of next few years as capex reduces and fees increase.
The Barclays analysts and their City colleagues were told by Ocado that it is expecting to launch its automated storage and retrieval technology (ASRS) venture imminently and sign a “first deal with a non-grocery partner” for ASRS in the 2023 financial year, with first revenue booked in 2025, while management also expect “orders for new capacity to increase” this year too.
Ocado expects to operate a capital-light model, with “immediate financial returns expected for Ocado on go-live”.
On a wider basis, the “new partner pipeline is strong and we continue to target further OSP deals,” was another management quote.
Operational titbits included that Ocado has also halved the amount of time that they need to spend installing kit on the client’s site in advance of go-live, with first CFCs to open this year in Japan and Australia.
Barclays reiterated its ‘equal weight’ rating and 740p share price target.