The Ocado (LSE: OCDO) share price picked up a couple of percent early on 29 February, in response to FY 2023 results.
The shares have had a very erratic ride, soaring when the pandemic hit. Everyone stuck at home meant bumper sales for online retailers, right? Sure, until the Covid threat faded. And then Ocado shares slumped.
We’re now looking at a five-year fall of 50%. But what do these latest results say? And more importantly, is this a good time to buy?
Profit?
Ocado posted adjusted EBITDA of £51.6m. And that’s a £125.7m improvement on the £74.1m loss in 2022.
It looks like there’s still some way to go to see a positive bottom line, though. The group recorded a loss before tax of £393.6m in the 52 weeks. That’s still a £107.2m improvement on the prior year.
It all appears to be due to a rise in depreciation, amortisation & impairment charges to £395.9m. And that, it seems, is down to “internally generated intangible assets.” And “the continuing roll-out of OSP hardware and software at our CFC sites,” and things like that.
An investor could get lost digging through details of what turns a decent EBITDA into a big loss before tax. But that’s why I prefer to invest in companies whose accounts are easier to follow. I like stocks where things like operating profit and EBITDA are not a million miles away from bottom line earnings for shareholders.
Cash
The firm recorded an underlying cash outflow of £473m, which sounds like a big cash burn. But it’s actually £356m better than 2022, and “well ahead of guidance of +£200m.”
At the end of 2023, the balance sheet held cash and equivalents of £0.9bn, with gross liquidity of £1.2bn. There’s no pressing need for more cash right now, it seems.
Still, forecasts show losses continuing until at least 2025. The scale is falling, but earnings per share (EPS) losses look set to come down only slowly.
I’m still unsure about Ocado’s liquidity and the time it might take to reach sustainable profits.
Dispute
I also find a dispute with Marks & Spencer more than a bit off-putting. After Ocado Retail failed to meet some key performance targets, a contingent £191m payment from M&S will not automatically happen now.
Ocado insists the deal allowed for some target changes, and will not walk away quietly. The group says it might need to take legal action to settle the argument.
What this ultimately means in financial terms is up in the air now. But it doesn’t boost confidence to see such a high-profile partnership turning a bit sour like this.
Time to buy?
There are far too many uncertainties here for me to buy Ocado shares now. This is a far cry from the established, profitable stocks paying good dividends that I like.
Then again, for growth investors, a time like this might be a great time to buy. I think the stock could climb when interest rates fall and the economy turns round.
