Ocado robots propel revenues towards full year targets

The FTSE 100 online grocery specialist reported 12% revenue growth from its UK retail operations in the final three months of 2018, in line with guidance for the full year.

Average orders per week grew 13.1% to 320,000 and the average order size fell 1.0% to £105.

Situated in Erith, which is jammed between Woolwich and Dartford, Ocado's fourth 'customer fulfilment centre' was said to be processing more than 30,000 customer orders per week. In September, 14 weeks after opening, Erith was churning out over 20,000 orders, a number which took the third CFC, in Andover, 15 months to achieve.

The company reported cash and equivalents of £411m on the balance sheet, with £286m of external debt.

It was another quarter of "satisfying growth", said chief executive Tim Steiner. "The new capacity that we have brought on stream in CFCs 3 and 4 in Andover and Erith has enabled us to again report double digit growth in new customer acquisition. Both facilities are performing well and Erith continues to ramp up in line with our expectations."

After signing contracts to roll out similar CFCs for several large grocery groups overseas during 2018, Steiner said it had been "a transformative year for Ocado [but] the story has only just begun".

Ahead of full-year results are due on 5 February 2019, management will be hosting a seminar in mid-January.

Ocado shares, which have more than doubled during the year, were up almost 2% to 804p on Thursday.

Broker Shore Capital noted that the company has until recently been capacity constrained across its network, until the opening of the new facility at Erith in South East London. "One wonders what the underlying sales rate would be excluding Erith, as some of the sales growth will be from processing existing customer orders from both Hatfield (CFC1) and Andover (CFC3). We wonder whether the underlying sales growth would be mid single digit without the addition of Erith. We also note that despite manageable inflationary pressures across the food retail sector, that Ocado’s average order value continues to tick down."

But analysts said that with the transformational licencing contracts of its technology platform to the likes of Kroger in the US and Casino in France, Ocado was, in their view, "now a technology stock".