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Boyobach
Thanks...yes I agree with your post ....
Musk regarding Tesla : " Any manager who retains more than three people who don’t obviously pass the excellent, necessary and trustworthy test” should resign"
maybe that is needed a bit here .... some more cost cutting to improve margins and achieve those cash targets
The FED may now set the tone for the next SP move .... but... the H1 Results are becoming clearer in terms of making some key figure predictions ..
That’s a useful and relevant set of information Pokerchips.
Yes: I think the bulk of the cap-ex spend on Tech R&D should have been done by now and the spend on CFC’s will be largely according to demand but will include an ongoing maintenance/update element..
I haven’t seen any additional Tech spend guidance but I would assume that the ‘£34.7m to technology projects (FY22: £26.5m)’ contained In your post would cover it and it would only get increased if there was a clear business justification. I’m sure those budgets would have been rigorously set by the start of the year, hence outlined fairly precisely in those FY23 figures.
Once you’ve developed a product ready for sale then nearly all of the development tech spend is done. There’ll be ongoing R&D to ensure the product is updated and improved as needed but the heavy lifting has been done and they should then target R&D in a strategic (sales orientated) way. In terms of selling the existing systems/products it’s simply a matter of building and installing them according to demand: no demand = no manufacturing or installation costs (beyond the core team employed full time - who possibly support existing clients anyway when they are not too stretched).
I’d be very surprised if VP’s Cash Reserve depletion scenario comes to pass because net cash outflow is reducing at a reasonable and controllable rate
TS (along with the other founders) is an ex GS banker isn’t he? If he was a Tech Guy I’d be less confident - only because the technology can become the main goal for them.
Boyobach
following on with regards cash needs , towards the end of the FY Report ..it states
" Contracts placed for future capital expenditure but not provided for in the financial statements are as follows: "
" Of the total (£105m) capital expenditure committed at the end of the period, £66.5m relates to new CFCs (FY22: £232.4m), £2.3m to existing CFCs (FY22: £1.3m), £nil to fleet costs (FY22: £7.6m) and £34.7m to technology projects (FY22: £26.5m)."
so does that indicate in itself the lowering of CAPEX for committed infrastructure....?
Do you have any 2024 Guidance figure on the TECH spend ??
....again, was a large amount of the requirement spent in 2023 meaning far less now needed in 2024?
I absolutely agree Pokerchips and in trying to dismiss the notion of cash reserves being depleted in an uncontrolled way (ie cash burn) I missed the opportunity to emphasise that the cash was used in a planned way to invest in key aspects of the business. Although VP would have seen the word investment used in the Financial Statement and understood this, but AquarianAge possibly hadn't.
And I also agree that many people are missing the point about the pre-tax 'Loss' including amortised costs (like the cash just invested).
Thanks for pointing that out.
Boyobach
outside of any argument about share prices ....
You could argue that a lot of " cash burn" is used to enrich( or whatever word) the company ....as a result of R&D investment ( + tax rebate) , future non invoiced revenues ( currently a book liability) and accumulated Tax losses as a result of bottom line "losses"
so... I personally would use the term "cash investment" rather than the commonly used term "cash burn"
Of course this "investment" isnt shown within share prices generally , as terms like "burn" and "loss" are always taken in a fully negative way
Sorry, I tend to associate significant and continuing reduction of cash reserves with cash burn.
I apparently made the same mistake as AquarianAge (Considering the rate at which Ocado burns through cash...)
If the cash outflow continues to halve every year, then the picture would be very different. And with all the hard development work done and CFCs earning revenue, that doesn't seem an unrealistic prospect to me.
Yes, net debt doubled in 2023. Could go even higher in 2024...
" Debt has doubled this year. "
VP
I think you mean last year and NET Debt ( as a result of a drop in cash) +86%
Gross Debt remained pretty much the same
"Gross debt (including lease liabilities) at the period end was £1,959.9m (FY22: £1,905.1m), with net debt* at the period-end of £1,075.1m (FY22: £577.1m) "
The thread is about Ocados cash reserves. 443m was spent last year leaving less than 2 years of reserves left at that spending rate. Debt has doubled this year.
Cash raise in around a year's time imo.
This thread is about cash burn - which actually reduced y-o-y .
Recording the AS settlement as a receivable is standard practice but only 20% of it has yet appeared as cash.
As pointed out previously, the losses figure is a consequence of handling large software and system development costs (which have already been paid for) in a tax-efficient manner.
Conflating separate elements of the accounts can give misleading conclusions about future cash burn.
It is true that "This year's losses would have been higher than the last were it not for the one off Autostore receipt of funds re legal case settlement."
It's being paid in instalments but the whole amount has been taken into account as received:
Well that was clear from my post: The settlement has been recorded as a receivable measured initially at fair value and subsequently at amortised cost.
Most of the cash inflow from the receivable is yet to occur.
Underlying cash outflow is £472.5m (FY22: £828.2m) and improved by £355.7m year-on-year.
Current borrowing facilities include a £600m convertible bond that matures in December 2025, a £500m senior unsecured note that matures in October 2026 and a £350m convertible bond that matures in January 2027. These facilities are expected to be refinanced on a timely basis to maintain appropriate liquidity.
It's being paid in installments but the whole amount has been taken into account as received. Below is recent FY 23 accounts.
"Loss before tax of £(394)m, taking into account £187m from the settlement reached with AutoStore, an improvement of £107m versus FY22"
The one off Autostore receipt of funds re legal case settlement is being paid in 20 instalments:
Group reached an agreement with AutoStore to settle all patent litigation and cross-licence pre-2020 patents, for which AutoStore undertook to pay the Group a total of £200m in 24 monthly instalments, beginning July 2023. The settlement has been recorded as a receivable measured initially at fair value and subsequently at amortised cost.
Payments totalling £41.7m had been received in FY23, so a little over 20%
Earnings out today, would expect some positive results and a nice jump in the share price.
Considering the rate at which Ocado burns through cash, the sooner it can raise more cash the better. If it doesn't raise any more money by the end of this year I predict that it's cash pile will dwindle down to around £400m by the end of this year. If it fails to make a positive net profit (after operating costs, finance costs and taxes) by that time, I fear that the company will be in trouble.
Ocado already has almost £1.5bn of borrowings - at least half of these are in the form of convertible bonds with quite close maturity dates from 2025-27. So it's not ideal for the company to take on more debt.
The only hope, and there is absolutely no guarentee that this will happen, would be for the share price to near double from current levels to around £6-7 a share at some point in the coming months. If this happens then the company should jump at the chance to do another placing and raise an extra £1bn of cash. It could do this be issueing another 150m of shares and the total number of shares in circulation would still be below one billion.
I wouldn't say they are a long way off needing more cash. At current cash spend rates Ocado group will run out of cash in less than 2 years from 3rd Dec 2023. Of course Ocado will not run down their cash reserves to anywhere near zero, far too risky. Id say a new cash raise is coming in a years time, could be earlier.
Revenue is building but losses are still very high too. This year's losses would have been higher than the last were it not for the one off Autostore receipt of funds re legal case settlement.
OK VP - but they are a way off needing more cash at present and revenue should now be building. Those investments will be amortised - better than left as cash sat in a bank I'd say.
Ocado eats through a lot of cash.
Just going over the lastest annual report again for the year ending 3rd Dec 2023, the following points are of note from the cash flow statement...
Net cash flow used in investing activities was £500.1m for the year ending 3rd December 2023.
This figure was even higher at £717.4m for the year ending 27 november 2022.
Now of course I fully understand that Ocado is investing in it's business to grow it and this is fine. However, almost all it's cash has come from borrowings and share placings. This is the problem. Hence my concerns about liquidity.
Boyo,
I simply stated that Ocados cash reserves are being depleted quickly and it's debt is rising sharply. Ocados liquidity has reduced £400m since previous year. Of course Ocado will want to raise funds well ahead of needing them. Significant likelihood of another cash raise possibly this year, most likely next year imo.
Clarification & correction:
intangible assets (like software development costs)
VP Re: ‘ Cash and cash equivalents of £884.8m at the end of the period (FY22: £1,328.0m) ….’
That drop is largely in respect of the £536.4m purchases of property, plant, equipment and intangible assets (like software)
So it’s investments (exactly as it is termed in the results you quoted) it's not cash burn as you seemed to imply. Did you intend to portray it as that? I haven't fully checked the rest but liquidity looks fine doesn't it?
There's over 2 years left at the current burn rate. Losses are also reducing each year so there's likely more than that. By that time the mckesson deal will also be EBIDTA positive.
Some desperate selling from our shorty friends who have recently borrowed stock!