Ocado Group PLC (LSE:OCDO) is likely to go cap-in-hand to investors for more funds, as the cash-hungry company continues to plough capital into its technology partnerships.
The online grocery group today announced an extension of its partnership with Groupe Casino in France, with a new joint venture replacing the previous deal for the FTSE 100 company to supply its robot-powered warehouses and associated software.
Following last week’s results, where Ocado announced much increased capital expenditure of £800mln for 2022, the tech and grocery delivery company today stated that “there is not expected to be any initial capital cost associated” with the Casino joint venture for either party.
However, Clive Black, head of research at Shore Capital, believes the use of the word ‘initial’ is key and indicates that future investment will be required.
“To fulfil development plans where cash returns are not upfront and central, we believe Ocado will need to raise further funds from the market,” the top-rated analyst said.
While Ocado said that the joint venture is “underpinned by the success of their partnership and expanding operations in Ile-de-France,” Black said there was “no financial evidence to support” this.
He also believes that Ocado will supply its Smart Platform to the grocery retail market in France, and not just to Groupe Casino.
Black has historically been unimpressed with the company’s financial performance and this continued with preliminary results released last week and today added his belief that the point where Ocado emerge as a cash generative business is still “a speck on a very distant horizon”.