Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin America. Watch the video here.
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Fair enough, that's your view. We will see over time who's correct, yourself or HSBC. HSBC have had a reduce rating on Ocado for over 6 months. So far they have been on the money.
HSBC can talk up the competition but the talk in the automation industry has been that warehouses themselves have been slow to automate so their remains a massive opportunity to be exploited.
I think it was Sangi rather than me - I was a bit dismissive and also mentioned the video was 6 months old.
I have researched the competition, that's why I'm interested in HSBC's list. I'd like to compare notes, like I did with Retireguy last week. But if it's not to hand , no worries, google will dig up something.
Some people ordered Teslas before they were a thing.
I expect OCDO's clients are smarter than that - so no take-up until availability of kit.
Now there's anpther CEO after a nice bonus whilst the share is down:
https://invst.ly/14l37r
The Delaware judge in Elon’s case said: "Swept up by the rhetoric of 'all upside,' or perhaps starry eyed by Musk’s superstar appeal, the board never asked the $55.8 billion question: Was the plan even necessary for Tesla to retain Musk and achieve its goals?"
How are we all voting in our AGM?
My complaint is a very valid one. The new partnership flow for Ocado has been slow given the anticipated increased frequency of signing up new partners post the Ocado reimagined tech being available to order in Jan 2022.
Yes the Korean CFCs will have the new tech.
I will let you research the competition yourself. HSBC is current research. You quoted Bernstein research a day ago. Their info is 6 months old. Many negative issues have emerged within Ocado in the last 6 months....
Well the CFCs ordered by Lotte are being fitted out with it
Did HSBC list the competition VP?
Sangijuelas1,
"One of VPs complaints was that the Reimagined tech was not being picked up by partners but when they announced it they said it would not be until the end of 2023 that it would be available for new CFC orders."
This is a very important issue. You've misunderstood it as many others have on this board since Ocado reimagined tech was launched in early 2022. See below information taken from the Ocado RNS dated 26th January 2022.
"Partners ordering standard-sized CFCs today for delivery in H2 2023 will have the following features enabled: 600 Series bots; the 600 grid and Optimised Site Design; Automated Frameload; On-grid Robotic Pick; Ocado Swift Router; and Ocado Flex"
When Ocado sign a partnership they announce it via an RNS if a CFC order is involved. The signing of a partnership agreement occurs long before any CFCs being built.
Reimagined tech has been available to order since 26th Jan 2022.
Warehouses will be automated in time however HSBC rightly highlight the risks to Ocado in their latest Ocado research released last week, as below.
"analysts at HSBC highlighted the fact that the robot warehouse business might not be as high growth as hoped, forecasting slower uptake in what it said was already a “highly competitive” market with “many established participants”.
According to this old article, Kroger has to work to retain their exclusivity with Ocado, which ensures that it will be able to sell to other US firms if Kroger falters in some way. The US firm will have to pay Ocado monthly exclusivity fees and Kroger will lose its exclusive right to Ocado’s platform should it fail to commit to the 20 CFCs within the next three years [this was written six years ago]
In the longer term, Kroger will have to meet targets based on its market share to keep its exclusivity, or order an agreed number of new CFCs each year – ensuring that Ocado is only cutting itself off from the rest of the US market whilst Kroger generates growth in some form or another, whether that be in sales or expanding its network of Ocado centres.
https://www.ig.com/uk/news-and-trade-ideas/shares-news/ocado-share-price-soars-after-striking-transformational-deal--ha-180522
Re: wanting Steiner to have a tough time at the AGM:
Ocado has said in the past that its pay schemes are approved by shareholders and only deliver above-market payouts for “the delivery of above-market, outstanding results”. I guess all on this board might have a view on whether the last three years have demonstrated outstanding results. However - there are good times around the corner apparently, providing the execs get even more incentive . What is the definition of a mug?
Tim got a £54 million bonus in 2020. At the time, Royal London Asset Management (RLAM) said that year’s bonus bonanza was “a classic example of how poorly-designed incentive plans can lead to excessive awards for management”.
According to BlackRock (Yes, Blackrock*), which voted against the remuneration report and the re-election of the entire remuneration committee, the incentive plans were: “subject to a single performance metric that only measured management’s performance indirectly”.“It was also designed to target an outcome that the executives — as significant shareholders themselves — were already incentivised to achieve”.
*Blackrock increased their short position two weeks ago…
Automated warehouses whether by Ocado or anyone else are an absolute MUST ..
Society just does not have enough labour for the economy needs , something made even more difficult on going by an ageing society and a falling birth rate
so... automation isnt something that has reached some kind of saturation or over competition ....it is an area that is actually much in need ..... competition usually suggests there is a big market out there from which to take some market share ....nobody wants or even aims to take the whole market
One of VPs complaints was that the Reimagined tech was not being picked up by partners but when they announced it they said it would not be until the end of 2023 that it would be available for new CFC orders.
This video introducing Reimagined is long but has some interesting content. Specifically the bit about 13 minutes in where they talk about how they set about designing the Series 600 not when Series 500 was still a prototype.
Also according to McKinsey there are 2 big obstacles to warehouse automation. Energy consumption and the need for greenfield sites to accommodate new systems.
The 600 is 80% lighter so takes less power to operate and also the lighter grid required can be fitted to existing sites.
https://www.ocadogroup.com/media/ocado-reimagined/
" I hope Steiner has a tough time at the AGM: after twenty + years building a top three UK on-line business and an advanced tech product he's still making a loss "
He has put together a tidy sum of £1.5 Billion of tax credits as a result of those "losses" .... and developing robotic tech is a long,long journey when starting from humble beginnings ... he would have been stupid to have created profits and paid taxes on them...what for? ..when there was still so much further to push the tech development
As has been written...a 100 engineers and years taken to integrate AI into a robotic arm just to be able to pick up products of different sizes,weights, textures etc ..
When tech problems get solved, the end result looks, well somewhat obvious and there is little to show for the immense amount of work that goes into solving such complex issues
and yes...the "losses" as a result of amortisation, depreciation etc ... and a tidy sum of £428m of liabilities just waiting to move across into revenues
Yes..the model is very much misunderstood
and of course there are posters who would not anyone to drill down and understand the model
Yeah would be good to see a more up to date one with the Reimagined tech on show.
Apparently the grids for the hive can now be stacked vertically as they are planning at one of the Korean sites.
Also about 80% of the Solutions revenue is recurring revenue from ongoing fees and the sales cut rather than cash received from development costs.
There is a clear indication in the annual report that they know what have a lot of work to do in terms of getting partners to draw down more modules at existing sites.
I am prepared to give them the benefit of the doubt in trusting that they can make progress with that.
The current SP is a more attractive point to take that bet than earlier this year. For a long term hold that is.
Although it’s two years old and doesn’t include the latest tech - like on grid picking robots - this is one of the best videos I’ve seen in terms of conveying the scale and product handling chain within the Ocado warehouse process.
https://youtu.be/ssZ_8cqfBlE?si=E3_iIiog-XBgi-74
There’s a lot to digest there, Sangijuelas and there’s no doubt that the business model is poorly understood. The Tech contribution to EBITDA certainly improved in 2023 alongside its revenue, which was up by 44.3%. If that continues then the picture should improve over time. I think there are three more CFC’s to be added this year - resulting in at least 120 live modules in total (up from 111 at FY23). In the meantime, however, the larger UK Retail and Logistics (ie Grocery) numbers will inevitably continue to dominate the FY statement and define perceptions of the company.
I note that the eye-catching FY23 Group loss before tax (393.6m) is largely made up of depreciation, amortisation and impairment (395.9m), which includes internally generated intangible assets (like the costs of developing OSP etc.) together with the continuing roll-out of OSP hardware and software at all CFC sites. I’m no accountant but I understand this largely represents cap ex from previous years like investment in development of the core technology and software which is then amortised or depreciated over a number of years for tax reasons. So the cash has been spent and my comment that OCDO still makes a loss should be qualified to clarify that operational profits are being made but that they are effectively buried in the headline pre-tax profit/loss figure by cap-ex depreciation/amortisation from years prior. In that sense the situation is not as bad as it may first appear.
Also with respect to Kroger closing 3 spokes. I think this is actually not that relevant to Ocado.
Ocado run the CFCs and Kroger take care of delivery. From what I can see the spokes are sites set up and run by Kroger to transfer orders made at the CFCs from lorries to delivery vans. So Ocado's involvement with them is limited to despatching orders to them from the CFCs.
The modules at the CFCs will already have been drawn down by Kroger whether these modules are used to fulfil orders within CFC reach or for orders going through the spokes.
You can argue that less spokes could lead to less modules been drawn down at the CFC but I don't think closing the existing spokes will mean a reduction in modules already drawn.
As I understand it Ocado earn from the CFC capacity used as well as in store fulfilment services. They don't have much to do with the spokes.
I am happy to be corrected on this if there's any reference to their tech actually being used at these sites.
All I can see are news articles about Kroger creating jobs in the spoke areas for people to work directly for them.
Just to be clear. The purchase obligation figures don't relate solely to Ocado. They include agreements to forward buy stock etc
Rather than emphasising these figures I was pointing towards their own statement about the likelihood of future CFC orders
In the notes to their financial statement there is a one (note 9) about how the Ocado costs are classed as leases (of the robots).
Their future liabilities to Ocado are recorded as long term debt and seem to be 785m dollars.
From page 46 of most recent Kroger annual report (April 2) detailing Purchase obligations, which are 827m dollars for 2024 dropping to 391 and 360m by 2026.
"We included our future commitments for customer fulfilment centers for which we have placed an order as of February 3, 2024. We did not include our commitments associated with additional customer fulfilment centers that have not yet been ordered. We expect our future commitments for customer fulfilment centers will continue to grow as we place orders for additional customer fulfilment centers".
One of the criticisms Kroger analysts have made are of Kroger's strategy. Rather than just buy tech upfront and then keep all future profits from digital sales they have to share sales revenue with Ocado.
So maybe the Ocado model is not as dumb as people make out. As well as getting the development fees they are setting themselves up for significant revenue streams in the future as more CFCs get up and running. I think this is the point Baillie Gifford are making when they say the business model is often poorly understood.
Lotte could also become a client of OIA as they have non grocery e-commerce business and also maybe in store fulfilment at their sites in Vietnam and Indonesia.
According to this the first Korean CFC is bigger than any of the Kroger ones- their largest was 375k square foot.
https://koreajoongangdaily.joins.com/news/2023-12-05/business/industry/Lotte-Shopping-breaks-ground-on-Ocadopowered-robotic-warehouse/1928264