There are two schools of thought on Ocado. It’s either a technological innovator whose unique licensing proposition is disrupting a $2tn+ global market, or it’s a grocery delivery company that subsidises its customers.
Whichever way, Ocado burns cash. Lots and lots and lots and lots and lots of cash:
Full-year results today from Ocado were ugly even by its standards. A £501mn pre-tax loss was the biggest in its 23 years of trading. The group’s 50-50 joint venture with Marks and Spencer turned lossmaking on an Ebitda level. Annual revenue from International Solutions, the licensing bit, barely covered the division’s underlying loss. Guidance for this year was to expect something not much better, which has raised the prospect of another cash call to follow Ocado’s fundraisings in 2010, 2012, 2020 and 2022.
According to our calculations, Ocado has lost a total of £1.5bn since its formation in 2000. Every £1 of revenue generated over its lifetime has cost approximately £1.08:
Or to put it another way, the average basket value of £118 Ocado reported for 2022 had an all-in cost of almost £141 (in addition to an as-yet undefined loss worn by retail joint-venture partner M&S). Forget for a moment all the international ambitions and the company has effectively been paying approximately £23 per order for its customers not to go to the shops.
Tim Steiner, Ocado’s co-founder and CEO, said: “Our strong balance sheet gives us the means to finance our growth through the midterm (4-6 years) by which time we expect Ocado Group to be cash flow positive with the cash flows from existing CFCs sufficient to finance future investments.”
And sure, why not. What’s another six years in the scheme of things?
— Goldman Sachs starts coverage of Ocado with “buy” rating (PDF, 2010)
— This time it’s different (FTAV, 2010)