Ocado (LON:OCDO) is reporting its interims on 9 July and there should be news of the new retail joint venture and progress with generating revenues from the company’s software and technology.

Ocado is moving from being an online food retailer to being a technology-focused business. This technology focus started more than one year ago, but it is becoming even more true. Shareholders agreed to the new 50/50 joint venture with Marks & Spencer at a general meeting back in May.

Marks & Spencer is paying a total of £750m for its 50% stake in Ocado.com. It is still early days but there should be news of progress. Marks & Spencer products will not be available until September 2020, when the sourcing deal with Waitrose comes to an end.  


Retail revenues were 11% ahead in the first quarter, but business was held back by a fire at the warehouse facility in Andover in February. There should be news about the recovery from the fire.

Morrison is helping Ocado out with its warehouse problem. Ocado will have sole use of the Erith facility until January 2021, after which Morrison will have a pre-agreed 30% of Erith’s capacity.


Ocado has developed a smart platform that can be used for other retail operations. It does not have to be food retail.

Last year, the solutions division increased its EBITDA loss from £6.6m to £17.9m, even though revenues rose from £106.2m to £123m. Revenues predominantly come from Morrison, although other deals have been done.

Of course, that reported loss does not take account of the investment that is being poured into the technology. Last year, capitalised investment in intangibles was £57.3m. That figure is likely to rise with the development of the Zoom product.

The IFRS 15 accounting standard means that revenues will not be recognised prior to a deal going live. This does not affect cash flow, but it does mean that revenues will be lower and the reported loss will be higher.

More recent deals include one with New York Stock Exchange-listed retailer Kroger, where Ocado will eventually run 20 fulfilment centres. Australian retailer Coles online grocery business has signed up to the Ocado Smart Platform.

Other deals have been done with Groupe Casino in France, Bon Preu in Catalonia and Sobeys in Toronto.

The new JV will also generate technology revenues.


Ocado remains loss-making and although it had net cash of £102.2m at the beginning of March 2019. Ocado is receiving an initial £562.5m in cash from Marks & Spencer, but this will not be in the balance sheet at the end of the six month period. A further £187.5m is deferred for five years and is dependent on financial and operational conditions.

There is likely to be significant capital investment in tangible assets on top of the capitalised development of technology. That means that the cash outflow is set to continue.