Member Info for JmcJ

I feel like it's basically an IQ test at this point. Each module loses ~£7m a year up front, and then ~£7.5m once the module goes live due to the ongoing CAPEX + operating costs.

In the short term, that obviously makes the financial metrics look bad, but the key is that a mature module (CAPEX phase complete) earns ~£2.4m per year in profit (recurring fees - operating costs). Management have said 120 live modules this FY, 130 in 25, 140 in 26. If you model that out and turn off the tap (i.e. no new modules) then the solutions business will get to £361m per annum.

He said EBT positive in the next 4-5 years or so. It's at 6.45 in the earnings call (recording is available https://www.lsegissuerservices.com/spark/OcadoGroupHatfield/events/51212304-5180-4aba-8c4a-c6fac81feedd)

Plus another easy to overlook part of the RNS is that AEON are also upgrading the existing CFC, in addition to committing to new CFC roll out. This is a huge vote of confidence in the Ocado Solution that the market is failing to price for:

"In addition to the network expansion, AEON will also upgrade its live operations with the latest Ocado technologies including On-Grid Robotic Pick ("OGRP")"

It's a result of companies seeing enormous demand spikes during Covid lockdowns and projecting those out as if they were permanent. As such, they start building out capacity (ordering CFCs in this case) to accommodate that demand but then saw that online growth wasn't as sticky as they were anticipating. This is temporary, and we're already seeing demand picking back up across the board. Plus key customers to the Solutions business are reaffirming their commitment:

"Our customers love the Kroger delivery experience with refrigerated products delivered directly to their doorstep. As a result, the Kroger delivery network has experienced remarkable growth with sales nearly doubling this quarter versus last year. As we focus on providing an incredible customer experience, we are learning and adjusting the delivery network. A good example of this is our decision in the first quarter to close three spoke locations to reallocate capacity closer to our automated fulfillment centers where we have higher customer density and better order-level profitability...We remain confident that our Kroger delivery network provides a differentiated customer experience and will continue to be a key pillar of our digital growth strategy." Kroger's CEO during Q1 2024 earnings call.

~17 modules will complete their CAPEX cycle this year. That's around £150m in expenses that will disappear from the income statement this year v last year - so net income should flip positive if I've got that right.

Long term, investors have to make a call on whether the Sobey's news is, as management suggest, a short term pause caused by current overcapacity (demand rolling off post Covid/inflation) or reflective of a long term trend of Solutions partners realising the model isn't working for them. With Sobey's Voila growing 23.5%, Kroger Delivery growing 17% and Ocado Retail itself at 12.1%, I'm convinced it's the former

Important to understand that the earnings profile of a typical module (for Ocado) is hugely loss making upfront, but very profitable once the module is mature. By my estimates, 17 modules should become mature in 2024 (meaning that the CAPEX spending is complete), while 9 modules "go live" meaning they begin to generate sales share for Ocado.

As a result, I estimate about £195m of profit for the solutions business this year, which could be the moment Ocado proves its model to the market. Looks like we're due to receive 0 new module orders this year, which is a worry going forward, however the overcapacity hangover from Covid should give way in the near term as demand catches up.

Price per share is not the valuation metric you should be looking for

Ding ding ding. You nailed it. Bears wrong as usual...nice of the market to dangle some hope in front of them this morning though

I have debt at around 18m in my notes. Interest cover on the debt was around 10x so I'm not particularly worried that the business goes bust.

Perhaps the other chunk of money you're thinking of is the deferred consideration? This isn't debt in the traditional sense, as it is only payable under certain conditions. There's an explainer note on this here: https://www.capitalaccessgroup.co.uk/research-portal#/portal/capital-access-group/research/23_2021051710364967558

" despite IFRS requiring an estimate be included on the balance sheet as a liability of a fixed size, it is almost entirely contingent upon the revenue and cash collection of the purchased businesses. In other words, if the purchased businesses don’t meet revenue estimates set at the point of acquisition, deferred consideration is not payable on the shortfall"

I agree with the general sentiment, but my God the share price is attractive...just can't bring myself to sell at these levels. There's a decent operating business under there somewhere, we just need to hope that management don't destroy it

This article in the BBC bodes well - https://www.bbc.co.uk/news/uk-england-beds-bucks-herts-61426148

Luton Airport hiring staff in expectation of the busiest summer since 2019. I don't think we operate from Luton, but shows the industry is going the right way

I'm not sure if it's the same thing, but there's a write up on the BBC news website today with Steve Heapy stating that demand is ahead of 2019.

https://www.bbc.co.uk/news/business-59905680

Didn't doubt them for a second. It was all a grand strategy to avoid trading on the day the new variant was announced. Genius.

Well, at least we're not getting delisted before Christmas then

Has the deal been accepted on the Arden side? I assume their shareholders won't be jumping at the chance of swapping shares with a delisted company

You're correct. 2 weeks left. This is from the London Stock Exchange site:

"If an AIM company ceases to have a nominated adviser the Exchange will suspend trading in its AIM securities. If within one month of that suspension the AIM company has failed to appoint a replacement nominated adviser, the admission of its AIM securities will be cancelled"

Maybe it was strategic. The share price got battered after the last placing, so this time they made sure that trading halted while they diluted shareholders.

Or maybe I'm being too cynical

Sales are ~8.5% down vs 2019...so let's take 8.5% off the market cap. Makes no sense at all to me, but it's definitely giving us a buying opportunity here.

£40k of buys, £3k of sells...share price is down 7%??? Do we just have some large delayed sells in the pipeline or is something going on?

I've been looking at PIP for a couple of days now, considering whether to open a position, as the operating business looks decent, and trading under fair value, however I can't get past the sense that this is a vehicle for Gordon Watt's self-enrichment. Can anyone translate what happened with the sale of SUMO a couple of years ago as it makes no sense to me at all. He sold Pipehawk's stake to himself...but loaned the consideration amount to Pipehawk, paying himself interest? Can anyone make sense of this?

"PipeHawk announces that it has sold its 28.4 per cent. joint venture interest in the ordinary share capital of SUMO Limited ("SUMO") to Gordon Watt, the Executive Chairman of the Company, for a consideration of £197,499, being the original cost of the investment, subject to shareholder approval ("the SUMO Share Sale"). The consideration will be satisfied in cash. Gordon Watt has agreed to pay the consideration immediately and therefore the payment of £197,499 will be treated as a loan, on identical terms to the existing loans due to Gordon Watt, until such amount becomes payable under the agreement for the SUMO Share Sale"