Ocado Share Chat (OCDO)

" ultrafast delivery is a scale game and the unit economics for the new players do work and can achieve 10-15%+ contribution margin long term"

LONG Term ... SCALE game ....

Its a different market and the big supermarkets will happily let the start-ups try things out ...the big boys tend to watch and learn the market and then strike a competitive Offer once they have their model and the market fully figured out .. I wouldn't write off the likes of Ocado Zoom or others just because some start-ups have started growing the market

There is a demand for quick deliveries .... but its a different model and warehousing system ..at least at present

JP Morgan for example as below, they are not nuts...

"Overall, we feel even more assured of our view that: 1) major changes are about to come in regards to consumer grocery shopping patterns; 2) ultrafast delivery is a scale game and the unit economics for the new players do work and can achieve 10-15%+ contribution margin long term with operations also being successful in less urban areas and 3) ultrafast online grocery could become the third significant disruption for grocers since 2008"

Fitch outline that new funding will be needed in 2023. Credit markets have deteriorated greatly since then and in all probability will do so more in the coming months. Ocado may well choose to raise cash from shareholders in its next fundraise.

Valueplay

with respect ....you must be nuts if you see this as a " significant threat " - ..you are talking about a threat to Ocado Zoom.... twiddly dee... Ocado is MUCH MORE than that

“The 15-minute delivery model requires a fundamentally different operating model and infrastructure to what Ocado has today, so they are quite simply not placed to compete, even if they wanted to,” says Simon Geale, executive VP of supply chain consultancy Proxima.

Fair enough Poker, I could easily quote the opposite argument in a quote from those articles.

We will see, they are more of a threat than most realise I believe.

I'm raising the issue that they are a significant threat and a lot more than just couriers. Not saying they are sure fire winners. Ocado may well adapt to see off the threat.

We will see in the coming months..

Contracts for the 600 bots will come through. Question will be though are they of a big enough scale.

Value I think you misunderstand the Fitch reference you offer. First Fitch are a credit rating agency and their job is to rate businesses for the credit rating that should be applied to their borrowings, the article you quote which is from DEC 2020 is entirely positive , it raises OCDO's credit rating,(which effectively lowers the interest rate at which they can borrow)and implies they will need no further cash until 2023 and further suggests that the credit markets will be entirely happy to provide that cash .

The articles I attached outline things in more detail

“The 15-minute delivery model requires a fundamentally different operating model and infrastructure to what Ocado has today, so they are quite simply not placed to compete, even if they wanted to,” says Simon Geale, executive VP of supply chain consultancy Proxima.

enough said ... end of

valueplay

I have no doubts that contracts for the new 600 Bots will come - no doubts

Just have to be patient...

I suggest you invest in them -- head over to Deliveroo

" They've raised huge amounts of capital from investors who see the profitable path for the ahead. "

I am sure on a global expansion of that kind of model .....and eventually some consolidation probably ..

Meanwhile..... I will keep my eye on the price drops of those Ocado Convertible Bonds which have fallen during the tech sell off.and Ocado "scare" stories ....and no doubt some dubious parts of the market will want them down as low as possible to scoop them up cheaply ...

OCDO looked like it was sinking with the green trend beaten, until, at 2pm, https://invst.ly/y7jp5 things turned for the better as the US market opened: AMZN was on the up and, in London, MKS recovered sharply.
However, the middle red line on the daily chart shows the battle isn’t over for OCDO:
https://invst.ly/y7jn7
Will it consolidate above 765?

Poker,

Ocado cash call mid 2023 is my view, see Fitch article also. Needing more cash is ok but there's a lot of pressure, as costs are currently rising greatly, on obtaining new contracts to show more light at the end of the tunnel.

Those big new contracts may come, we will see in time.

That's your view. I believe them to be a lot more of a threat than just couriers. They've raised huge amounts of capital from investors who see the profitable path for the ahead.

The articles I attached outline things in more detail

"That date could becoming nearer though as Ocado retails EBITDA falls and the retail environment be ones evermore challenging."

How about you put some proper figures down instead of all this blah,blah about how bad everything is

You are hardly being an analyst - here now are you ??

Draw up an excel sheet of figures and show this " becoming near" in more factual terms

Valuplay,

" Trade and other receivables increased by £119.6 million to £324.4 million driven by a growth in prepayments
relating to a number of initiatives relating to the manufacture of capital assets such as advance payments, prepayments for long lead items and a virtual warehouse to hold some assets prior to delivery to CFCs under construction."

Ocado Zoom isnt their main business venture though

Gorilla, Getir, Deliveroo Hop, Ocado Zoom, Globo, Delivery Hero - yes they are all competing .... like couriers

Casapinos,

I see Ocado raising more funding around middle 2023. That date could becoming nearer though as Ocado retails EBITDA falls and the retail environment be ones evermore challenging.

Fitch ratings amongst others also see a cash call from Ocado coming next year..

https://www.fitchratings.com/research/corporate-finance/fitch-affirms-ocado-at-b-outlook-stable-02-12-2020

The consumer is more and more requesting a smaller amount of items to be delivered in a shorter time. This damages the economics of the Ocado model and boosts the ultra fast delivery model.

Let's see how things pan out in the coming months

Poker,

Ocados model is to finance the majority of CFC build costs up front and receive revenue from some up front fees but mostly from fees received as a percentage of the value of the goods that flow through the CFCs. The contracts are not public information but this info is what has been outlined before when contracts have been announced.

Valueplay

ultra fast delivery model is the most expensive with the least number of products to choose from - and are designed to be single deliveries to each customer within about 10 minutes distance - fast food, drinks, milk ... almost like Uber Eats kind of need .. I saw one to a construction site the other day - the guy had FOUR items ..I watched him

- not multiple deliveries for many customers for a must bigger range with a much bigger delivery van !!

How much can you fit on the back of an e-bike or a scooter , exactly ??

Globo kind of stuff -

You have to also take into consideration the deposits received from clients with regards to the builds - which may be included in the £800m spend

" Partners ordering CFCs today will be able to go-live quicker, at lower cost, and achieve higher margins and return on capital"

Walmart announced a " 60% rise in capital expenditure to increase automation and strengthen its supply chain through projects such as massive high-tech distribution centres."

Pokerchips,

Many brokers see the ultra fast delivery model severely eating into Ocados revenues/market share. I'm not saying I fully agree with that but it's a possibility. Below are a few articles with info, there are many more out there:

https://www.proactiveinvestors.co.uk/companies/news/954983/supermarkets-facing-existential-threat-from-ultra-fast-delivery-upstarts-954983.html#amp_tf=From%20%251%24s&aoh=16534931723480&referrer=https%3A%2F%2Fwww.google.com&share=https%3A%2F%2Fwww.proactiveinvestors.co.uk%2Fcompanies%2Fnews%2F954983%2Fsupermarkets-facing-existential-threat-from-ultra-fast-delivery-upstarts-954983.html

https://www.thegrocer.co.uk/online/is-ocados-tim-steiner-right-to-shrug-off-ultra-fast-grocery-delivery/658655.article

We differ in opinion, great, that's what discussion boards are about, best of luck

Value .. I hesitate to disagree with you as I know you are a long-termer here.....BUT I think you seriously underestimate OCDO's cash position, at the last AR they were cash positive (cash assets £1.4bill, liabilities £1.3bill) and their finance costs were £35 mill per annum. even after the recent sharp SP falls the company is valued at 4X liabilities and I have little doubt that if they needed to they could, even in a rising interest rate environment, raise funds at a reasonable rate. I do not expect a cash call on investors in the foreseeable future.
Only last September OCDO issued £500 mill(oversubscribed) notes due 2026 with a coupon of 3.875% and IMO that would be the source , if needed, of further funding.

Valueplay

good luck

too argue that Gorilla or Delivery Hop deliveries on an e-bike are competing with main family Ocado shopping deliveries is ... ...well..

Ocado and MKS wont want such small deliveries .from a van .if they do..they will introduce a similar e-bike /scooter scenario alongside

Gorilla and Hop pick their short deliveries from a small closed warehouse - TINY in comparison

Just in time grocery delivery is a different scenario but it is a method of delivery that the customer is increasingly requesting. I believe you are underestimating their capacity for growth and expansion. As their networks have grown costs have fallen. The economics around costing re just in time delivery is very opaque, just as Ocados contracts and tech costings are.

From Ocados final results:

Total capital expenditure for the Group is expected to be around £800 million driven by accelerating roll out of OSP worldwide

? 30% UK, of which 60% dedicated to the continued roll out of CFC and Zoom sites, inclusive of land, build and MHE cost, given consolidation of the Ocado Retail joint venture

? 50% International, reflecting an additional 8 CFCs to go-live during the year, of a total of 13 CFCs in build internationally at the end of 2021

? 20% Technology investment to support key areas of OSP platform development including additional focus areas such as autonomy

Ocado is burning through cash at a great rate.

True energy and fuel will be hedged but in all likelihood after their current hedging period those costs will remain very high.

Rest assured, Midas, I would. And your reply only confirms the view. For all I know you might be a financial genius, but you're clearly no medical expert or epidemiologist, nor are you apparently capable of discerning and analysing conspiracy theories. If you had any knowledge of linguistics or how news media works it would have been clear in your response. But ...

Bye now.