Member Info for Boyobach

Yes, the sp did take a bit of a pounding today. The shorts have been punching at 340 for a month now, three times with some force and once failing to make proper contact, with volumes tending to fall over the period apart from exceptions mainly associated with a price fight back: https://invst.ly/14zac7 Support at 340 remains intact, although today’s battle drew some blood with a drop to 333 but it was the closing auction that settled matters at 352 after a high of 357. Sangijuelas' prediction very nearly on the money. Nice Dumpty Pumpty trading day.

Nice shot Sangijuelas! hit the post unfortunately.

Cheers Pokerchips - a much better response than mine!

The Millenium short increase was on Tuesday, prior to MKS' statement and impact.

They've made their profit.

It's further short increases that will be of significant interest. Let's see where it closes

I'm really not the right person to comment on the move to 250. My understanding is that the 250 should be a better fit with OCDO because companies in the 100 are mostly blue chip dividend paying outfits, which doesn't match OCDO's profile. Obviously, though, 100 tracker funds will offload if they haven't already. I feel neutral about it but that might prove to be naive.

Yes Stupmy, OCDO’s sp is vulnerable if there’s more bad news. However, I’d say that as a totally separate retail outfit with no JV connection, Kroger’s performance should be less of an influence than MKS on the sp unless, of course, they directly attribute any shortcomings in their results to the technology. I don't think MKS made any negative comments about the automation, so it seems unlikely that Krogers will.

Well, we’ll soon find out VP. In terms of the MKS non-payment it effectively balances the Autostore payout so the net effect of the two on the fundamentals will have been near zero. In any case, it doesn’t materially affect the bottom line going forward as the hit appears to have mostly been factored in already. We’ve debated the other stuff and you and I must agree to differ on whether it’s cash burn as opposed to justified growth related expenditure. I’m not sure why the McKesson contract, the first contract outside grocery, doesn’t qualify as an order as far as you are concerned but it seems like a valid sale in the last twelve months to me. Yes, OCDO needs to put some things right. I do have concerns about TS’s leadership and I’m not entirely sure he’s consistently made sound decisions or had much regard for shareholders. So I acknowledge it’s not been perfect but I’m also thinking the bottom may have been reached. If that is the case then the prospects are potentially good given recent progress in retail and reductions in excess warehouse capacity. Unlike many here, I recognise that the retail element is currently more critical to the Group than the ‘pure tech’ investors would like it to be. However, that’s a fact of life whilst Ocado is structured as it is.

It’s always been a prospective one, but I’d rather take the chance now at around £3 per share, with the software and hardware much more mature and developed and with retail growing more efficiently, than at around £30 based on a temporary spike in on-line shopping triggered by COVID and rather absurd market expectations. Whichever way it goes, ATB to you.

Well it didn’t, despite today’s rather dismal MKS comments that understandably assisted shorts to bear down on 340, which incidentally happened to be my buyback target. All the diarised bad news is now in plain sight, unless OCDO manages to shoot itself in the foot in July. So shorts may now need a credibly negative analyst rating to help drive the sp further down. Failing that, it’s back to market sentiment, with many sellers possibly now thinking this could actually be the bottom: https://invst.ly/14yoq0 (daily ticks). Let’s see how it responds to further stress tests. Some things may be likelier than others but nothing about the sp’s next move is inevitable. It pays to be ready either way.

As far as financial reporting is concerned, it is my understanding (DYOR to check this ) that OCDO has already recorded a total hit of £162,7m (across the 2022 and 2023 FY reports) in respect of this fair value contingent consideration. So that ‘only’ £28m remains to be booked this year and the damage has largely been done. It appears to me that any net settlement, if there is one, might possibly be of similar scale to TS’s recently approved scheme.

Yes indeed waccy. What happens to Steiner’s bonus if OCDO fails to receive any of the £190.7m that was payable on meeting specified targets which were presumably agreed to by him at the time?

Failure to meet those targets or to negotiate appropriate variations in light of circumstances beyond OCDO’s control would surely have been his responsibility.

It’s early in the day but after an hour and a half of trading, despite an initial lift by those who maybe hadn't read it properly, the market hasn’t yet moved much in response to this morning's MKS FY . At around 358, OCDO is pretty much where it was a week ago (15’ view): https://invst.ly/14ygb9

I'm content to remain on the sidelines. I can't see it challenging the main red trend here other than by simply moving sideways, with shorting activity likely to keep it under pressure.

To which MKS would simply reiterate what they have formally said today : 'We have not, to date, seen evidence we believe would result in a payment being made.'

Stupmy's query : I wasn't around when the expression was first used.

Referring to the disputed target related payment, this appears in today's MKS FY Statement:

.... there is a mechanism for reasonable adjustments to be made to the performance target to reflect certain events, if applicable. Both shareholders have proposed adjustments which are currently being evaluated but we have not, to date, seen evidence we believe would result in a payment being made.

In these circumstances, the fair value of the liability has been recorded as £nil.

(DYOR to verify)

Something of a 'curate's egg', not especially positive overall Here are a couple of bits to give a flavour:

[OCADO JV] profitability is well below original expectations and there is considerable scope to leverage our combined capabilities in sourcing and marketing, and to develop Ocado's delivery service and online experience….

The new Luton CFC opened in September 2023 and delivered a rapid ramp up in operations as business transferred from less productive capacity at Hatfield, with the new site also providing a test bed for on-grid robotic picking. With capacity fees for Hatfield continuing to be charged by Ocado Group, we do not currently expect Ocado Retail to reap the full financial benefit of transferring to the new site.

·Ocado Retail still operates on legacy technology for its website, last mile delivery and supply chain systems. It will be migrating to Ocado Technology's much delayed 'OSP' solution over the course of the next 18 months, which is anticipated to offer customers increased convenience and greater personalisation, as well as long term operational efficiencies for the business.

Although the financial performance of Ocado Retail remains disappointing, the revenue improvement this year under the new management team has been marked. And in a world where several operators have exited the online food delivery market, the potential competitive advantages of the M&S / Ocado combination are increasingly evident.

That does make sense Sangi - in fact I made a similar point myself a couple of days ago in reference to the JV going over-capacity post COVID. Excess capacity being an issue that VP has often highlighted, of course.

Both companies need to get their act together and sort the dispute - it's not helpful to either.

That's a very interesting point, Sangijuelas, regarding 'baseline assumptions and that if those proved wrong the targets were adjustable.'

I was unaware of that detail If that is a legally binding issue in the contract then OCDO would appear to have a strong case. Yet surely the COVID ramp up was in response to higher than expected on-line shopping, so the targets should have been surpassed?

I also could not understand why the contract was so binary in terms of targets - on the face of it it appears to be sloppy and ill considered: either the targets were too loose and easily achievable or too tight to accommodate any contingencies. There should have been some formal 'contract variation' process and documentation requiring both CEO's to agree to target changes, probably with their respective Board's approval.

A terrific dumpin’ pumpin’ day: great for trading: https://invst.ly/14y2x7

The closing price hasn’t set things up well for longs tomorrow and 340 is still creeping closer on the daily view: https://invst.ly/14y2xz

A pity it failed to trigger my limit buy (set closer to 240). I should have paid more attention but the sun was shining. Still there’ll be other opportunities for sure. Don’t assume that 340 is my low target for OCDO, btw: it was just a potential point set for today in my buy-back journey.

It'll be interesting to see If MKS disrupts the pattern tomorrow.

The squeeze on OCDO continued on Monday: https://invst.ly/14xuak

Longs will ideally want to see it move above 370 by Friday and shorts will be keen to see pressure returning on 340. However, the battle could still last more than three weeks.

Phoenixy: To be clear: the large reduction in warehouse space by the move from Hatfield I mentioned was a positive indication of improved efficiency and use of capacity during a period of strong customer retention and growth. It was not a negative comment.