Only two years behind schedule, online grocer Ocado (OCDO) has finally announced a second international partnership. The deal is with French chain Casino. Ocado's shares shot up a fifth by way of response, but is this indicative of a change in fortunes for the group?
A new international deal was announced in June, but Ocado refused to name the partner. This deal, it’s thought, is new. There was also speculation ahead of this announcement that Ocado would sign another agreement with Swedish chain ICA in the new year. But, while momentum is improving when it comes to new business wins, the question is – how much does this cost?
Ocado has a 240,000 sq ft automated depot in Andover, Hampshire, that is largely serviced by robots rather than humans. That might be cutting edge, but it certainly isn’t cheap. Net debt is creeping up, and the Casino deal will add another £15m to capex. There’s little indication of what this contract is worth in the long term, too. During the 2018 financial year, it’s expected to be earnings-neutral, although beyond FY2019 the board hopes profits from its technology solutions business will grow as fees amass and new partnerships are signed.
