RE: Ocado in Money Week 27/05/2229 May 2022 15:32
It’s good to see healthy debate here with strong arguments either side. When you’ve stuck with a share through thick and thin but ultimately conclude that it hasn’t followed the path you expected then I find that disillusion - rightly or wrongly - sets in and this results in a more critical assessment as the favourably tinted specs are removed. I haven’t been in OCDO long enough to have reached the point of disillusion but it has certainly underperformed relative to my expectations of a few months back, so I’m not a ‘believer’ by any means.
SFH’s ‘Money Week’ post is sobering and the outlook there runs counter to that presented by OCADO itself - so it’s a case for investors of either trusting the captain and crew onboard or the observations of those sat at a distance on the shore. The article says ‘With £1.5bn of cash in reserve, it’s clear Ocado will need to return to the capital markets in the near future as it pushes forward with new CFC developments.’ Meanwhile, according to Chilting's post, the modelling seminar indicated that Ocado Group anticipates being able to fund 10 new CFC's per year from cash flow, without the need to raise new funds, and may even show a profit. This does, of course, imply that they will either be limiting the number of CFCs or that they will have sufficient cash flow to service any additional debt arising from their current plans.
Another significant factor for ‘Money Week’ is the legal battle with Autostore, where it says the two parties have been slogging it out in the courts for years… and… it looks as if this fight will continue for some time. This is plainly at odds with the March RNS issued by OCADO, which concluded, after a detailed update, that ‘We expect further vindication in the High Court in London in the weeks ahead, where AutoStore has already abandoned half of the patents in the case.’
Whilst ‘weeks ahead’ can indeed seem like eternity, the RNS was entirely positive in view of the ITC’s final conclusions which comprehensively confirmed the judge's original findings in favour of OCDO last December
https://www.lse.co.uk/rns/OCDO/statement-regarding-autostore-eyf1zlbk6g0mma2.html
On balance, I’m not fully persuaded by Money Week’s negatives but it has to be recognised that current uncertainties don’t make investment choices easy.
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