Member Info for Boyobach

I'm sure you told us that OCDO is ‘no longer an expanding business with a static inflexible solution bathed in old tech….’

Have you changed your mind? Because, unless you have, there's never going to be a good time or price.

Certain patterns are probably very familiar to the guys who day-trade OCDO. And sometimes the moves even standout to me.

Like today, when the biggest volume of the day (2) landed just as the sp broke through the falling trend (1) just after lunch:

https://invst.ly/14m-ic Why would someone looking to offload wait through the morning for the price to fall and then sell just as it starts to recover and break upwards again? It isn’t a smart selling move unless the objective is to use the power of volume to limit the price and drive it back down.

Later on, a little bit more volume also helped nearer the close too, helping the price to a nice low going into the auction,

Just imagine if you had happened to sell around 7k of shares during that last 15 minutes (at, say, 16.28.24) for £25.31k knowing that you might somehow buy them back just after the UT (at, say, 16.36.23) for a bit more - like £24.7k. That would have been an easy £580 in less than ten minutes wouldn’t it? Not big time stuff but OCDO is perfect for it - you couldn’t do that so easily with Shel or BP. That example was purely hypothetical, of course, and I’m absolutely sure the transactions I referred to were not connected.

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.

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.

Ha! It was, of course just over a week ago in April, not March, when 342 was the go-to bottom at reasonable pace, with a 335 overshoot at one point.

Time flies when you are in trading view.

The drop below nominal support line 350, isn’t too much of a surprise and the trend to 342 got the usual steeper branch added today:

15minute trading chart at 2pm: https://invst.ly/14mwwl

What has surprised me a bit has been the relative slowness of the drop. In March, 342 was the go-to bottom at reasonable pace, with a 335 overshoot at one point.

The return seems more reluctant this time around. Perhaps that indicates that support is firming up. I think the shorts will give us an indication.

But, yes, if it gets pushed hard enough (even though I don't think the bad management and refinancing narrative actually stacks up) I can see a bargain price approaching.

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.

Are you assuming that main shareholders never loan out their stock to Hedge Funds?

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'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.

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%

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.

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?

Ok Stupmy - got it! Much of what I say won't be of much relevance to you (especially the 'take a break' stuff!). I'd assumed you were mainly an LTH which requires a cooler and much less impulsive approach. ATB

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?

Context is everything Stupmy and you seem to have more of a day trader view than a long term investor. Combining the two can be stressful. For example, nothing I've seen today makes me especially interested other than it went below 350 which was a red flag warning in my mind but a potential trading opportunity for someone with a different perspective. The odd 20 or 30p doesn't ordinarily interest me with OCDO. Although, if I'm sat at home bored then yeah ....

Give yourself a break Stupmy.

If OCADO turns around it won’t be a big deal if you miss the absolute bottom. Better to accumulate as it rises than chase it by averaging down (that’s a mugs game).

The current sp may appear to be at rock bottom but it’s a volatile stock with lots of risks and a high short interest that isn’t reducing. This morning’s opening hour wasn’t great was it? If it breaks below 340 it could dive a good bit further.

So my advice would be to step back, take a break, including from this board, keep a more casual eye on the trends and, if you are familiar with it, the 8,21 daily EMA cross indicator. If you are looking for the long term then don’t watch the trading charts until you are actually ready to buy - they can help optimise the price on the day but at other times they can become an obsessive focus of attention.

Also keep an eye on the BlackRock short position - they are smart re OCDO and they haven’t reduced yet.

Ocado made operational profits of 54.2m last year. The 403m pre-tax loss you may be talking about includes 405m of depreciation, amortisation and impairment, which would include software and hardware development capex spent in previous years that is split over a period to offset tax.