focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
VP: £394 mill of losses in the recent Ocado group year end results.... (that's a 52 week figure used for y-o-y comparison)
That includes £396m of depreciation, amortisation & impairment which is cash already spent in prior years and spread over a number of years for the purpose of tax optimisation. The business in 2023 generated a £54.2m profit before tax (full 53 weeks). Should OCDO not maximise legitimate tax allowances? Are you suggesting that Depreciation, Amortisation & Impairment represent an ongoing annual cash outflow?
Kroger actually has a new spoke opening in May 24, but let's just ignore that as it doesn't fit with our agenda.
VP, did you copy and paste that from your post the other day?
They seem very similar.
Losses stem from ongoing investment in R&D.
One of the partners who have paused new CFCs is Ocado Retail, which is part of the group so they are pausing paying development fees to themselves.
They are now back over 75% capacity at the existing sites.
Kroger closed spokes they set up and ran themselves. Nothing to do with Ocado as they run the CFCs and managing delivery operations is Kroger's responsibility. The modules at the CFCs will have been drawn down and still have to be paid for by Kroger.
The Walmart article you quote is not representative of the full range of investments Walmart has made across their business in automation. They have invested in and partnered with a number of leading automation companies like Symbotic.
My original point was what are the big UK supermarkets doing to automate in contrast to the likes of the US, Germany, Japan and Korea.
Ocado probably prefer to describe themselves as a tech company as calling themselves a robotics company is probably too narrow. It doesn't really account for their own software packages that they have developed etc
And automation is probably a much better word to use than robotics.
But by keep analysing them as if they were a pure play online supermarket and applying a valuation multiple in line with Tesco's rather than say Amazon's doesn't do anyone any favours.
£394 mill of losses in the recent Ocado group year end results.
The market will stomach the losses whilst new contracts are being regularly signed. However when the new deals slow then the spotlight focuses on any issues within the company. Currently existing 2 main partners have paused commissioning new CFCs. Theres a costly large overcapacity at Ocado retail caused by overoptimistic expansion. Spokes at Kroger closing. Not an issue for some on this board. A clear red flag for me and others.
Whilst there are no new contracts signed and existing partners are pausing ordering further CFCs then the downwards pressure on the share price continues.
Should get closer to £500m on Solutions for 2024 as 15-20% growth forecast on 2023 figure of £420m.
Some £360m of that was from recurring revenue as in the fees and cut of sales from existing CFCs.
Worth noting Boyo how Walmart have filed a few more patents for robots than Ocado:
Ocado may not have used the word ‘robot’ as much in patents because some of them may have wider application.
Walmart’s robots (supplied by Brain Corp) were more like Daleks and weren’t a great success:
https://retailwire.com/discussion/walmart-inventory-bots-flopped-will-sams-succeed/#:~:text=In%20November%20of%202020%2C%20Walmart,the%20employees%20working%20the%20shelves.
On its website, Ocado Group defines itself as: A global, technology business redefining ecommerce, fulfilment and logistics in online grocery and beyond.
Robotics isn’t mentioned in this defining sentence, https://www.ocadogroup.com/our-business/about-us/
As shareholders, we must currently accept that the Group’s financial statements don’t reflect that image, with Technology only providing around 15% of Group Revenue but a healthy 30% of profits. An analysis of the Group as a whole inevitably involves the Retail and Logistics segments and some analysts will do a better job than others. Anyone who focuses on the declared Loss figure without grasping that it reflects amortised development costs rather than a cash outflow will be getting the wrong impression - it’s a mistake that I’ve previously made.
Agreed and it's the likes of Clive Black driving UK companies stateside.
It's not as though the tech investment isn't showing decent revenues (over £400m forecast for 24), the UK commentators have zero understanding or patience with tech, hence why more are listing elsewhere
One of the reasons ARM chose to relist on the US market rather than the UK one was the greater depth of knowledge and understanding of it's business they would get from US analysts. No doubt they anticipated the sneering comments they would get from the likes of Clive Black complaining about "enormous losses" whilst making ongoing investment in R&D.
I mean with Ocado is it really that surprising that a high tech robotics company needs to keep reinvesting to stay ahead in an industry with incredibly fast moving developments in new technology?
FT article on the AGM quotes Clive Black from Shore Capital to complain about the incentive scheme.
All well and good but again Clive is very clearly an analyst specialising in supermarkets, with many news items quoting him on the likes of M&S, Aldi and the rest.
Don't think his understanding of building a high growth tech business from scratch will be that great. It would be interesting to know if he could answer fairly basic questions about the Solutions business.
Automation is inevitable
I should say .. "more" automation seems inevitable .... and competition is so strong that cutting costs and increasing efficiency is a "must-have" these days
AI forecasting tools are becoming a "must-have" too
Sang
Automation is inevitable ...customers have ever increasing expectations, and labour is getting more and more expensive and arguably less productive ...and yes...retirement of Boomers and falling birth rates ...adds to the inevitable situation
Agreed 100%. I am not bothered in the least about the SP at the moment.
The investments made in tech by the likes of Walmart and Kroger/Ocado makes you wonder what the likes of Sainsbury's and Tesco have been up to.
It looks like Sainsbury's are now going to belatedly make more investment in automation at their warehouses.
I wonder if there is any scope for one of the other supermarkets to pay Ocado Retail to add their product lines?
That seems to be what the partnership with Groupe Casino is looking to achieve. Rent CFC capacity to other French retailers.
Also wonder that maybe Ocado can afford to play tough with M&S because they could swap them out for Sainsbury's or Tesco.
We do have one of the lowest birthday rates and that's one of the reasons why Korea has such a highest number of robots to humans ratio in the world.
The UK has relied instead on cheap labour rather than investment in technology. This could come back to bite the likes of Sainsbury's in future.
Sang
If indeed Ocado has a very bright future mid-term onwards ...then.... it actually makes sense shorting now and bringing down the share price ..in the mean time....... so...as to take maximum advantage of that medium-term belief
( like a bow and arrow, first pull back the bow !!)
The chart here from Global Data gives an idea of where Ocado stands as a robotics company. The analysis is based on the number of patients filed, what applications they cover and what countries filed in. Worth noting that Myrmex, to the left of Ocado on the chart was bought by them in 2022 so they can really be bumped along to a higher score on the right.
The data goes up to 2021 I believe and they will have filed a lot more since then.
Worth noting Boyo how Walmart have filed a few more patents for robots than Ocado, while running a profitable grocery business.
https://www.retail-insight-network.com/data-insights/innovators-robotics-automated-inventory-management-retail/?cf-view&cf-closed