The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Craig's tweet about it said the very end piece, after he'd gone, was particularly interesting. All they really said was that the leakbot could be used much more broadly than just homes, such as schools and offices. A quick google suggests there are c.1.8m non residential buildings in the UK, and assuming that their size, water use and insurance premiums are higher than residential ones on average, the ROI for insurers using leakbot could be much stronger than in residential.
It should make the relationship with LF even stickier too - if leakbot's a key part of their app / engagement they're even less likely not to continue the relationship beyond the 5yr contract period than otherwise.
On the penetration rate, Craig confirmed today that there's no reason why Nationwide won't want ALL their Smart Home
policy holders to use leakbot, in principle, and I can't see why they wouldn't want all their policy holders to be on the Smart Home platform. Clearly that will probably include some apartments though, which aren't suitable for leakbot, which may be the reason why the deal has added 2.5m homes to the addressable market rather than the 3.4m homes they actually cover (according to the presentation today).
I think 10% penetration is the highest they've got to historically, but that was largely pre the LF deal. For the new deals, I'm pretty sure the leakbot is free to the home owner (often with a discount on their policy too) and they're in markets where the ROI is much better for the insurer than in the original UK market, so it's a no-brainer, and we know that the initial LF trial reached 50% penetration. Continued marketing over time should increase it further. The penetration rate will obviously drop rapidly as new contracts are hopefully signed, but personally I'd be disappointed if penetration of the current 5m TAM isn't well above 10% within 5 years. 10% penetration would still be a good result financially / share-price wise from here though, I think.
I don't think it's been disclosed anywhere, but Ondo has said it's a global company that can scale up production easily. Currently using their UK facility, but I think the recent research note (that I haven't seen) mentioned a Mexican facility too.
It all depends on the working capital dynamics from my perspective. We know that the current approach is for the insurer to pay annually in advance, which obviously covers the cost of making the leakbot in principal (and some will be in stock already), but there might be a timing delay between having to pay the manufacturer and actually receiving the cash from the insurer, depending on credit terms etc. I'm sure this could be bridged without recourse to equity if necessary, however (eg invoice discounting)
Last year's weren't audited either, and they were released 14th Nov for the six months to the end of August.
The reporting period is now to the end of September, hence all else being equal we shouldn't expect to see interims until mid-December.
They may well be ready by the end of Nov, but I don't think it's wise to have that as an expectation.
It can take many, many months to agree contracts. It would be great to have seen something by now but I'm relaxed that we haven't. Completely understand if others aren't. Had Craig said we look forward to announcing something "imminently" / "in the next quarter" etc then I'd be a bit concerned, but he just said the "future".
I was (obviously!) hoping to have seen something from the WNS relationship by now too, but we need to remember that to get the WNS guarantee on the leakbot ROI, the insurer needs to use WNS for the claims handling element. WNS obviously does a lot of claims handling work for some insurers already, but leak claims may be a new area for insurers to outsource, and some may not have outsourced anything in the past. Agreeing how the relationship with WNS is going to work will probably take far more time than deciding whether or not to give leakbot a go in principle, and is probably the reason why things are taking longer than I first imagined they would).
Suggestions on twitter are that Dowgate has written a 39 page report (for their clients only) with a target price of 50p, being their estimate of 4x EV / FY26 Sales
Can't copy the link here but just search for #ondo on twitter
I think the £30m is just a conservative estimate based on comments by Craig around the time of the announcement, based on a certain ramp-up profile. More interesting to me is how many units are installed at the end of the ramp-up period - if they hit 50% penetration, similar to the trial areas, it would be c.1m homes, worth c.£40 p.a. each of high margin revenue that should be recurring indefinitely. You can debate what multiple to put on that, but it's a lot more than 1 in a normal market. That's the potential value I'm focused on, rather than the headline £30m.
Yes chameleon - it would be some icing on the cake if we could sell that to non-Ondo plumbers, which Craig said should be possible
On a related note, there were a couple of questions about what's next after leakbot, and it seems to me that whilst they do see themselves broadening the offer in the future, there's basically nothing else being worked on at the moment because they've only just started to scratch the surface of the leakbot opportunity and there's little rationale / requirement to devote resources to anything else.
Well worth listening to this I think (see youtube link on StockBox's twitter feed). Key things from me:
- Craig was as open as usual, providing full answers where possible (understandably couldn't answer some of the detailed financial ones off the top of his head)
- feels like it's only a matter of time before we see a water co joining with an insurer(s) to jointly fund a pilot / rollout in the UK, as it's a no-brainer
- implies there are a lot of US leads / good pipeline
- referenced that State Farm, the largest US insurer, is rolling out 1m units of a device that helps warn of fire risks, which has apparently prompted other insurers to look more closely at claim prevention tech too, which should obviously benefit Ondo
- Swedish insurance policies don't have excesses for water claims, unlike UK, so claims are more prevalent there and hence the ROI on leakbot is better there than in the UK, for instance
- noted that the average UK home insurance policy cost is c.£250. I'd argue that this would make a c.£50 p.a. leakbot service v expensive on AVERAGE for an insurer alone, but I'd imagine there's still a sizeable market paying a much higher price that could still deliver a good ROI on leakbot. And water companies contributing to the cost would obviously improve the ROI for the insurer
- in contrast, the US average cost is c.$1,000, so a much better ROI on AVERAGE than in the UK
If the leakbot identifies a leak, the home owner can book an Ondo plumber to come and repair it - this service is included in at least some of the deals (at no additional charge to the user / insurer)
Https://www.lsegissuerservices.com/spark/ONDOINSURTECH/events/2d4e98b1-af0f-4e94-870d-221a53e792ed