REG - Ocado Group PLC - Final Results
28/02/2023 07:00
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RNS Number : 2216R Ocado Group PLC 28 February 2023
OCADO GROUP PLC
28 February 2023
Continuing strong growth in Solutions, challenging year for Ocado Retail
Business Highlights
· 12 sites opened for partners around the world; 9 Customer
Fulfilment Centres ('CFCs') and 3 Zooms
· 23 sites now live (19 CFCs), 12 International sites and 11 UK
sites; further 6 sites (5 CFCs) expected to go live in FY23, including
expansion into APAC; Aeon (Tokyo) and Coles (Sydney and Melbourne)
· Live partners continue to report leading customer satisfaction
metrics in their markets
· Two new partnerships signed in the year, bringing total Ocado
Smart Platform ('OSP') partners to 12
· 8 out of 12 OSP partners now live on the platform; 2 more to be
added in the year ahead
· On track to deliver game-changing Ocado Re:Imagined innovations
by end of FY23; underpinning improved operating margin and lower capital costs
for partners and Ocado Group
· Strong growth in active customers year-on-year, drives higher
market share at Ocado Retail and broadly offsets volume drag of COVID unwind,
accelerated by the cost-of-living crisis
· Team in place to lead capital-light expansion of our technologies
into wider automated storage and retrieval solutions ("ASRS") space
Financial Highlights
· Group revenue broadly flat at £2.5bn; strong growth in Solutions
revenue offset by decline at Ocado Retail
· Ocado Retail revenue of £2.2bn, down 3.8%; robust customer
growth offset by lower value baskets
· International Solutions revenues more than doubled to £148m from
£67m in FY21 as live sites trebled; from 4 to 12
· Group EBITDA* loss of £(74)m, compared with a profit of £61m in
FY21, a result of cost pressures and capacity investments made to support
growth at Ocado Retail; EBITDA in UK Solutions & Logistics and
International Solutions segments broadly flat or improving
· Loss before tax of £(501)m, £324m lower than in FY21,
principally reflects Ocado Retail EBITDA and £349m depreciation and
amortisation, a £110m increase due to the 17 new CFC/Zoom sites opened over
the last two years (FY21:5, FY22:12)
· Healthy liquidity; cash balance of £1.3bn, following June equity
raise, supporting ambitious growth plans
£ million FY 2022 FY 2021 Change
Revenue
Retail 2,203.0 2,289.9 (3.8)%
UK Solutions & Logistics 802.7 710.4 13.0%
International Solutions 147.8 66.6 121.9%
Group and other 0.8 0.4 100.0%
Inter-segment eliminations (640.5) (568.5) 12.7%
Group(1) 2,513.8 2,498.8 0.6%
EBITDA*
Retail (4.0) 150.4 (154.4)
UK Solutions & Logistics 67.2 68.5 (1.3)
International Solutions (113.2) (119.3) +6.1
Group and other (21.9) (37.5) +15.6
Inter-segment eliminations (2.2) (1.1) (1.1)
Group*(2) (74.1) 61.0 (135.1)
Depreciation and amortisation (348.6) (238.4) (110.2)
Net finance costs (48.2) (42.3) (5.9)
Exceptional items(3) (29.9) 42.8 (72.7)
Loss before tax (500.8) (176.9) (323.9)
Capital expenditure 797.3 680.4 +116.9
Cash and cash equivalents and treasury deposits 1,328.0 1,468.6 (140.6)
Net (debt)/cash* (577.1) (359.8) (217.3)
* These measures are Alternative Performance Measures, refer to section 6 in
the condensed financial statements. Notes to the table found before the
Financial Review.
Tim Steiner, Chief Executive Officer of Ocado Group, said:
"Over the last year every company has had its business model tested by a
combination of macro-economic and geopolitical headwinds, and I am pleased
that, thanks to the creativity and commitment of my colleagues, we have more
confidence in our model than ever before.
We have rolled out CFCs across the world at unprecedented pace for our Ocado
Solutions partners who in turn have been able to set the bar for customer
experience online, recording industry-beating e-commerce growth in key
markets. Our dedicated client support teams are helping our partners to
achieve even better results. The pipeline for new partners is strong -
in November we were delighted to welcome Lotte to the "Ocado Club"
of leading international grocers following the joining of Auchan Polska
earlier in the year - and we look forward to opening the first CFCs
for our partners in Japan and Australia in 2023.
Ocado Re:Imagined, our suite of seven game-changing innovations, announced in
January last year, is getting ready for roll-out. The enthusiasm with which
our current and future partners have
embraced these innovations demonstrates the link between our Technology
R&D and value creation.
Ocado Retail, our UK JV with M&S, has shown its resilience against a
backdrop of higher costs and smaller baskets, reflecting the Covid unwind
and the UK cost of living crisis, by growing customer numbers and
increasing online market share. As the Covid unwind fades and customer growth
continues the business will start to recover the fixed costs of recent
capacity commitments.
We are poised to leverage our technology leadership further
with the imminent launch of a capital-light, highly efficient automated
fulfilment solution outside of grocery.
Our strong balance sheet gives us the means to finance our growth through
the mid-term (4-6 years) by which time we expect Ocado Group to be cash
flow positive with the cash flows from existing CFCs sufficient to finance
future investments. Over the last twelve months we have continued to deepen
our relationships with our partners, and have learnt a lot about how to help
them make the most of our world-leading technology. We are confident that we
will see the benefits of these learnings in the next few years as we
progress our mission to change the way the world shops, for good".
New business segments
Ocado Group provides end-to-end online grocery fulfilment solutions to some of
the world's largest grocery retailers, and maintains a 50% share in Ocado
Retail, the award winning UK online grocery business started over twenty years
ago, now a joint venture with Marks & Spencer. The Group has spent two
decades innovating in the online grocery space, across a broad technology
estate that includes robotics, AI & machine learning, simulation,
forecasting and vision systems. This know-how is now embodied in the Ocado
Smart Platform (OSP), which we provide as a managed service, to enable our
grocery retail partners around the world to bring the market-leading Ocado
consumer experience to their own retail customers.
To date, we have reported performance across three segments: (1) Ocado Retail,
which is 100% consolidated (2) International Solutions, reflecting contracts
to provide OSP to our 10 international clients outside of the UK and (3) UK
Solutions & Logistics, reflecting contracts to provide OSP and third party
logistics services to our 2 clients in the UK, including the Ocado Retail
joint venture.
During FY 2022, we announced a change of reporting that will take place from
FY 2023; to align our reporting structure with the three underlying business
segments detailed in our modelling
(https://webcasting.brrmedia.co.uk/broadcast/62827dc79523a2143f1bbdf0/6283a3a7ebf58725c01513e6)
and cash flow
(https://stream.brrmedia.co.uk/broadcast/6365479d6f383550d47ae91c) seminars,
held in May and November 2022. These are Ocado Retail, UK Logistics and
Technology Solutions.
As a distinct joint venture company, reporting of Ocado Retail will remain
unchanged in 2023. UK Logistics reflects our business providing leading
logistics support for Ocado Group's UK partners, Ocado Retail and Morrisons,
in fulfilment and delivery, recharging the cost of these services as with a
typical third party logistics contract. Technology Solutions encompasses the
operations of our global platform technology business, providing OSP as a
managed service to our 12 partners around the world.
The following discussion of our FY 2022 performance, and FY 2023 guidance, is
based on these underlying operating segments. A detailed review of performance
in the year, based on currently reported segments, follows in the Financial
Review.
FY 2022 performance
TECHNOLOGY SOLUTIONS
Channel shift to online remains the defining feature of the global grocery
market post COVID
· Online market share has stabilised at materially higher levels
following the pandemic; >50% higher in the top 20 markets worldwide.
· Industry data forecasts widespread and continued channel growth. For
example, Edge Ascential expects online market share in the top 20 markets,
globally, to grow by 30% through 2027.
· Against this backdrop, our partners have reported leading customer
satisfaction metrics and growth ahead of the broader online channel in their
respective markets. In the UK, Ocado Retail increased its share of online
grocery to 12.3% in FY22 (Nielsen, FY21: 11.7%). At their 3Q22 results, Kroger
reported year-on-year Delivery sales growth of 34%, driven by CFCs and Kroger
Boost, whilst the broader US online market has shown declines from the highs
of the pandemic.
The Ocado Smart Platform: ongoing innovation enabling even greater competitive
advantage in online channel
· Ocado Group has continued to innovate at pace. In FY22, we
announced 7 seven game-changing innovations, known as 'Ocado Re:Imagined', to
the technology powering OSP (details can be found on the Ocado Group website
here (https://ocadogroup.com/about-us/our-stories/ocado-reimagined/) ).
· New CFCs ordered since the beginning of 2022 can benefit from all
these innovations, which we expect will materially reduce capex and operating
expenses for both Ocado Group and our respective partners. CFCs already opened
can be retrofitted to adopt virtually all of these innovations (all except the
new grid and optimised site design).
· Target operating efficiency in a CFC, as defined by UPH (units
picked per hour), is forecast to rise to >300 from 200 today, delivering a
material margin benefit to be shared between Ocado Group and its partners.
· Changes in the design of the bots and grid, as well as optimised
site design, are expected to reduce both Ocado Group and partner capital or
lease costs by more than 15% in a typical CFC.
· We will pass on the majority of the economic benefits of
Re:Imagined to partners, enhancing their ability to take share in the online
channel in their respective markets.
Technology R&D driving faster growth and higher returns
· Progress in FY22 brings conviction in the link between R&D
with faster growth and higher returns.
· Technology R&D, which supports Ocado's ability to innovate at
pace, is enabling faster growth as the momentum of new partnerships resumes,
as well as delivering better economics for all parties.
· Total Technology cash spend, £344m in FY22, is being amortised
over a growing base of OSP partners. In addition, we believe around 70% of
technology already developed can be applied to activities outside of the
grocery sector. We expect total Technology cash spend to gradually reduce to
around £200m per annum over the next 3 to 5 years.
· The R&D investment behind Ocado Re:Imagined will deliver
better economics for Ocado Group. Although we expect to give our partners a
greater share of the operating improvements arising from Ocado Re:Imagined, we
expect to benefit from an increased capacity-related fee, over time, of c.5.5%
of the value of capacity installed versus c.5.0% previously.
· These enhanced economics underpin our target for a >70%
contribution margin on Re:Imagined CFCs, in the mid-term.
Improving momentum; new partnerships signed
· The increasing attractiveness of OSP has also played an important
role in new partner signings. In FY22, two new international partnerships were
announced - Lotte Shopping in South Korea and Auchan Polska in Poland - as
COVID-era restrictions on travel were lifted. This takes the total number of
Ocado Group partners from 10 to 12.
· The Lotte agreement, signed in November, supports the development
of a nationwide fulfilment network in Korea, with 6 CFCs planned by 2028 and
the first due to go live in 2025. Lotte will be deploying the new technologies
announced at Ocado Re:Imagined and will introduce multi-storey CFCs for the
first time, unlocking a wider range of property types for CFCs and enabling
more efficient use of space in densely built environments.
· Auchan Polska, signed in March, is expected to open its first CFC
in Warsaw in 2025, with additional CFCs to be announced at future dates. This
is the first deal in a market with a GDP per capita of less than $25,000 per
annum, an opportunity made possible by the enhanced operating and capital
efficiency enabled by Ocado Re:Imagined.
· Both Lotte and Auchan Polska will also leverage Ocado's In-Store
Fulfilment (ISF) software across their physical store network enabling more
efficient picking from these stores, demonstrating the value of the range of
tactical options available through the Ocado Smart Platform.
· The new partner pipeline is strong and we continue to target
further OSP deals.
Successful execution; go-live of new CFCs, with focus now on supporting
partners to achieve best results
· In FY22, Ocado Group significantly ramped up live capacity for
partners in the UK and internationally, with the number of modules live
increasing by 61%, from 61 at the end of FY21 to 99 by the end of FY22.
· We opened 12 sites during the year; in the US for Kroger we
opened 6 CFCs, in Atlanta, Dallas, Chicago, Detroit, Denver, and Baltimore;
the first ICA CFC was opened in Stockholm; and a second CFC was opened for
Sobeys in Montreal. In the UK, we opened a mini CFC, in Bicester, for Ocado
Retail, in addition to 3 Zooms (Canning Town, Leyton, and Leeds).
· Direct operating cost at OSP sites (including engineering and
hosting costs as a % of site sales) has improved to 2.0%, from 2.7% in 2021,
ahead of plan and on track to our mid-term target of 1.5%.
· Our partners are focused on ramping up capacity and deploying
early learnings to optimise operating economics at their initial sites, while
they assess how they deploy capital in the next phase of growth.
· Combined with fewer new partner signings during the pandemic,
this pause saw a lower increase in new modules ordered (+19 to 232 compared
with +45 to 213 in FY21), which will reduce the pace of modules going-live in
the near term
· We expect orders for new capacity to increase in FY23, as a
result of our targeted efforts to support clients towards optimised CFC
economics alongside the future opportunities presented by Re:Imagined
technologies
· Our enhanced Partner Success operating model is already
delivering encouraging early results. For example, in around one month, we
helped one of our clients to improve delivery efficiency (measured by drops
per van) by 15% at a site
Versatility of Ocado technology expands our opportunity-set into the wider
ASRS market
· The sophisticated technology that Ocado Group has built over the
last two decades is applicable well beyond grocery. The solution is able to
serve needs across the full spectrum of range and throughput requirements, as
well as temperature zones; effectively, any company looking to store, sort and
ship products of any type. We believe the further improvements to cost of
ownership of our technology, enabled by Re:Imagined, will deliver the highest
throughput and lowest cost solution in the ASRS sector.
· The addressable market for ASRS solutions is large and, over
time, we expect that our business providing automation outside of grocery will
be a significant part of future Group revenue.
· In August 2022, Mark Richardson, previously Chief Operations
Officer, took up a new role as the CEO of Ocado's new Automated Storage &
Retrieval Systems (ASRS) business which will bring Ocado's technology and
after-sales support to a wide range of new clients in the broader ASRS space.
· We expect to operate a capital-light model, with immediate
financial returns expected for Ocado on go-live. Additionally, activities in
this space will almost entirely leverage R&D investments already made for
OSP in grocery.
· As a result, the new venture will not require additional capital
beyond that previously guided at Group level.
· Significant progress has already been made marketing to potential
customers, with interest across a wide range of client and project sizes, and
industries.
Balance sheet strengthened; sufficient liquidity to support growth plans
· With gross liquidity of £1.6bn at end FY22, Ocado Group does not
need any additional Group financing to fund mid-term growth plans (assuming
refinancing of the Group's debt facilities that expire over this time frame).
· At maturity, we expect each CFC to generate strong, visible and
recurring cash flows and returns. Purfleet is already on track to achieve a
22% ROCE.
· The 232 modules already ordered by the end of FY22 underpin a
path to >£16bn of run rate client sales (assuming c.£70m sales per
module) through our platform, with almost half of this capacity (99 modules)
already live. 64 announced CFCs represent commitments to >£22bn in run
rate sales through OSP in the long-term.
· 133 modules still to go live (232 ordered, 99 already live), with
majority of this spend occurring upfront, before a site goes live, will
require good liquidity and a strong balance sheet.
· In June 2022, Ocado Group raised £578m of equity and secured a
£300m revolving credit facility to ensure that the business has sufficient
liquidity to cover expected capital investments through the mid-term.
· As the benefits of Re:Imagined come through, annual cash flows
received on our CFCs will increase. At the same time, both the net capital
investment per module and the phasing of upfront investment will reduce.
· In the mid-term, we expect the Technology Solutions business to
be able to self finance a module growth rate >20%.
OCADO RETAIL
Growing customer numbers while absorbing the impact of COVID unwind and UK
cost of living crisis
· As a 'shop window' to current and future partners, Ocado Retail
continues to evidence the leading customer experience and operational
efficiencies enabled by Ocado technologies.
· Progress on customer growth and fulfilment efficiency was
encouraging during the year. Active customers increased by +13%, to 940k, and
our latest CFCs, Andover, Purfleet and Bristol, are achieving efficiencies
above the 200 UPH target.
· However, as detailed in the recent 4Q22 Trading Update here
(https://www.ocadogroup.com/media/w2aj2uky/orl-fy22-q4-trading-statement-17-january-2022.pdf)
, full year headline revenue (-3.8%, to £2.2bn) and EBITDA (-£4m, compared
with £150m in FY21) performance reflects a combination of near-term pressures
offsetting this progress.
· The most significant of these has been a volume (and so revenue)
drag resulting from the unwind of the large basket shopping behaviours of the
pandemic, and accelerated by the current cost-of-living crisis in the UK,
followed by increased marketing spend to drive growth and relative to pandemic
era lows, and inflationary cost pressures (primarily utilities).
· Under the leadership of new CEO, Hannah Gibson, the business is
focused on a new 'Perfect Execution' programme in FY23, to drive continued
recovery in both revenues and margin, as some of these near term headwinds
ease.
· With the successful go-live of Bicester CFC in the second half of
2022, and Luton CFC due to go live in 2023, the business will have capacity of
around 700,000 orders per week at maturity; a path to c.£3.9bn in revenue
largely invested for.
· In the mid-term, Ocado Retail remains confident that growing
customer numbers, orders and increased utilisation of available capacity will
underpin a return to strong sales growth and high-mid single digit EBITDA
margins.
UK LOGISTICS
Delivering improving efficiencies for clients, increased autonomy in new
structure
· In FY22, revenue (cost recharges) increased by 13%, despite a 6%
decline in the volume of total eaches (shopping basket items) processed for UK
clients. This increase in costs reflects the impact of a full year of
operations for CFCs that went live in FY21, current inflationary cost
pressures and the fixed costs that we are incurring in sites not yet operating
at full capacity. This was partly offset by improved efficiencies in both our
first and second generation CFCs. UPH in mature sites has risen from 170 in
FY21 to 175, while the average for all OSP sites is now 184. These benefits
are passed on to clients.
· Reflecting the cost-plus business model, EBITDA remained broadly
stable.
· UK Logistics is being established to operate as a separate
entity, alongside Ocado Retail and the Technology Solutions business. This
autonomy is expected to deliver greater efficiency over time.
FY23 guidance:
Revenue
· Technology Solutions: around 40% OSP fee revenue growth, ahead of
expected growth in live modules, reflecting the full year benefit of sites
that went live in FY22 and an increasing share of higher fee OSP modules in
the mix.
· Ocado Retail: mid-single digit growth, with an improving
trajectory during the year, reflecting a return to volume growth as the
challenging comparison to larger volume basket shopping behaviours that
remained in early 2022 fades
· UK Logistics: broadly stable: with growth in eaches processed for
UK clients offset by improvements in cost per each, which are passed on to
clients.
EBITDA
· Technology Solutions:
o positive EBITDA (pre Group and other), while continuing to invest in
R&D and client success; further ramp up in recurring OSP revenues combined
with incremental progress on direct operating costs and effective management
of Group Support costs
o Group and other costs stable at around £(25)m (to be allocated to
Technology Solutions)
· Ocado Retail: marginally positive EBITDA, with the shape of the
year expected to reflect trends in volume and revenue growth; it is likely
that EBITDA will be negative in the first half and positive in the second
half, as a return to volume growth supports improved capacity utilisation and
reduced costs relative to sales.
· UK Logistics: stable at around £25m, reflecting expected revenue
growth and cost-plus model
Cash flow
· Underlying Group (inc. Retail) cash outflow to improve by around
£200m, with cash outflows reducing in both Ocado Retail and Technology
Solutions segments;
o Increasing fees inflows in Technology Solutions and guided EBITDA
improvements
o Outflows reducing; guided reduction in capital expenditure reflecting
lower investment in MHE for new sites
Capital Expenditure
· Total of at most £550m, a reduction of at least £250m
year-on-year:
o 90% in Technology Solutions, of which:
■ c.50% CFCs MHE, reflecting fewer site go-lives. We expect to
bring live 6 automated sites for partners in FY23 (5 CFCs)
■ c.40% Tech R&D; at peak, with growth vs. FY22 driven by
annualisation of year-end headcount
■ c.10% on Other; business and systems transformation projects to
support future growth and resilience
o 10% to support Ocado Retail, of which:
■ c.75% development capex; Luton CFC and one Zoom site, due to go
live in FY23, largely pre-invested
■ c.25% maintenance capex; to support the running of the UK
network (primarily mature CFCs, IT, spokes) including amounts recharged from
Ocado Logistics.
Results presentation
A results presentation will be available online for investors at 9.30am GMT
/10.30am CET. The webcast can be accessed from the Group website. Following
the presentation there will be Q&A. Questions can be submitted through the
webcast portal.
Financial calendar
Group 1H 2023 Results will be reported on the 18th July. The schedule of Ocado
Retail trading statements for FY23 is: Q1 Trading Statement on 28th March, Q3
Trading Statement on the 19th September and a Q4 Trading Statement on the 16th
of January 2024.
Contacts
Tim Steiner, Chief Executive Officer on 020 7353 4200 today or 01707 228 000
Stephen Daintith, Chief Financial Officer on 020 7353 4200 today or 01707 228
000
David Shriver, Chief Reputation Officer, on 020 7353 4200 today or 01707 228
000
Martin Robinson at Tulchan Communications on 020 7353 4200
Notes
1. Revenue is online sales (net of returns) including charges for delivery but
excluding relevant vouchers/offers and value added tax. The recharge of costs
to our UK Solutions clients and International Solutions clients are also
included in revenue with the exception of recharges to Ocado Retail which are
eliminated on consolidation
2. EBITDA* is a non-GAAP measure which we define as earnings before net
finance cost, taxation, depreciation, amortisation, impairment and exceptional
items*
3. Net exceptional expense of £(29.9)m primarily relates to £64.0m of
insurance income related to the Andover CFC fire in 2019, offset by changes in
fair value of contingent consideration of £(58.4)m and litigation costs of
£(26.5)m (principally related to patent infringement litigation between the
Group and AutoStore Technology AS).
4. Customers are classified as active if they have shopped at Ocado.com within
the previous 12 weeks
5. A module of capacity is assumed as approximately 5,000 eaches per hour
(dependent on the specific metrics of a partner) and c.£70m per annum of
sales capacity
6. A module is considered live when it is fully installed and is available for
use by our partner
7. Direct operating cost as a % of site sales capacity reflects the exit rate
position for CFCs live for at least six months at the period end. Direct
operating costs include engineering, cloud and other technology support cost
8. Gross liquidity is defined as cash and cash equivalents plus unused
availability under the revolving credit facility
9. Purfleet CFC on track from 22% site level ROCE, where ROCE is run rate EBIT
based on mid-term cost targets divided by capex net of upfront fees
10. 64 announced CFCs reflect plans publicly announced by partners. Number of
CFCs corresponds to either the announced number of sites or a number of sites
determined by sales-based capacity announcements apportioned into £350m
equivalent 'standard' sized CFCs, based on average exchange rate since year of
announcement. Exact site sizes will vary. Does not include ISF commitments.
For UK, excludes those sites live before the 2019 JV deal (Hatfield, Dordon,
Erith, Andover)
Cautionary statement
Certain statements made in this announcement are forward‐looking statements.
Such statements are based on current expectations and assumptions and are
subject to a number of risks and uncertainties that could cause actual events
or results to differ materially from any expected future events or results
expressed or implied in these forward‐looking statements. Persons receiving
this announcement should not place undue reliance on forward‐looking
statements. Unless otherwise required by applicable law, regulation or
accounting standard, Ocado does not undertake to update or revise any
forward‐looking statements, whether as a result of new information, future
developments or otherwise.
Ocado Group plc LEI: 213800LO8F61YB8MBC74
Ocado Group | Financial Review: FY22
Headlines
Revenue increased 0.6% to £2,513.8m (FY21: £2,498.8m):
· International Solutions grew strongly, up 121.9% to £147.8m; a
further eight international CFCs went live in the period. We now have 12 live
international sites (FY21: 4 sites) and 38 live modules (FY21: 12 live
modules).
· UK Solutions & Logistics revenue was up 13.0% to £802.7m; UK
Logistics volumes were down 6%, but significant cost inflation resulted in a
12.5% increase in cost recharges to our UK partners, increasing to £630.7m.
UK Solutions fees grew by 14.9% to £172.0m as a further 12 modules of sales
capacity went live, including three in Retail's new Bicester CFC, taking us to
a total of 61 live modules in our CFCs (FY21: 49 live modules).
· Ocado Retail revenue declined by 3.8% to £2,203.0m in a challenging
market as we see the unwind of the covid impact and normalised consumer
behaviour, leading to smaller baskets, exacerbated by the cost-of-living
crisis. There remains strong demand for Ocado Retail with active customers
growing by 13.0% over the year to 940,000 customers.
Gross profit and other income of £1,065.0m increased by 2.4% compared with
the prior year (FY21: £1,040.0m), with a gross margin improvement in the
period; up 0.8ppts from 41.6% to 42.4% as the growth in contribution from the
higher gross margin International Solutions business offset the reduction in
the Retail gross margin.
Distribution and administrative costs grew by £161.0m to £1,137.7m (FY21:
£976.7m) as the business continues to expand in the UK and internationally.
EBITDA* for the period was a loss of £(74.1)m (FY21: profit of £61.0m) with
the £135.1m reduction driven by a £154.4m fall in Retail EBITDA*.
Statutory loss before tax of £(500.8)m increased by £323.9m from the prior
year's loss of £(176.9)m, reflecting the £135.1m decline in Group EBITDA*,
and after including depreciation, amortisation and impairment charges of
£348.6m (FY21: £240.5m), net finance costs of £48.2m (FY21: £42.3m), and
net exceptional costs of £(29.9)m (FY21: income of £42.8m). Each of these
movements are explained below.
Strong balance sheet, with cash and cash equivalents of £1.3 billion as at
the end of the period, supporting our significant UK and International growth
plans. Net debt* at the end of the period was £(577.1)m (FY21: £(359.8)m net
debt*). In June 2022, the Group successfully raised additional gross liquidity
of £878.2m, comprising a £578.2m equity placing and a new three-year
£300.0m revolving credit facility, providing a healthy liquidity position
today of circa £1.6bn and securing the funding of our future growth plans.
Financial results
FY22 FY21
£m Pre- Exceptional items Total statutory reported Pre- Exceptional items Total statutory reported Pre-
exceptional exceptional exceptional change
Revenue 2,513.8 - 2,513.8 2,498.8 (0.5) 2,498.3 0.6 %
Gross profit and other income 1,065.0 73.8 1,138.8 1,040.0 79.2 1,119.2 2.4 %
Distribution and administrative costs (1,137.7) (103.7) (1,241.4) (976.7) (34.3) (1,011.0) 16.5 %
Share of results from joint ventures and associates (1.4) - (1.4) (2.3) - (2.3) (39.1)%
EBITDA* (74.1) (29.9) (104.0) 61.0 44.9 105.9 (221.5)%
Depreciation, amortisation and impairment (348.6) - (348.6) (238.4) (2.1) (240.5) 46.2 %
Net finance costs (48.2) - (48.2) (42.3) - (42.3) 13.9 %
Loss before tax (470.9) (29.9) (500.8) (219.7) 42.8 (176.9) 114.3 %
* These measures are alternative performance measures. Please refer to the
section 'Alternative Performance Measures' section 6 of the Condensed
Financial Statements.
The commentary is on a pre-exceptional basis to aid understanding of the
performance of the business on a comparable basis. Exceptional items are
covered later in the review and in note 2.3 to the Condensed Financial
Statements.
Revenue for the period increased by 0.6% to £2,513.8m (FY21: £2,498.8m).
Retail revenue declined by 3.8% year-on-year in a challenging trading
environment, with the cost-of-living crisis compounding the impact of a return
to more normal customer behaviours compared with lockdown restrictions in the
prior year (and seen in lower basket sizes). International Solutions revenue
increased by 121.9% from £66.6m to £147.8m with the go-live of eight new
CFCs; six additional CFCs for Kroger in the US (in Atlanta, Dallas, Chicago,
Detroit, Denver and Baltimore), a second CFC for Sobeys in Canada (in
Montreal) and our first CFC for ICA Gruppen in Sweden (in Stockholm). Total
invoiced fees* (design and capacity fees) across all international partners
were £180.9m, an increase of 26.5% compared to the prior year.
Net cumulative invoiced fees to our partners and not yet recognised as revenue
increased by £44.4m to £422.9m at the end of the period (FY21: £378.5m),
with an increase of £51.3m for our international partners to £388.9m (FY21:
£337.6m), offset by a decrease of £(6.9)m for our UK partners to £34.0m
(FY21: £40.9m).
Gross profit and other income increased slightly to £1,065.0m (FY21:
£1,040.0m), despite Retail gross profit declining by £82.4m to £739.9m
(FY21: £822.3m), driven by a combination of lower volumes, supplier cost
inflation pressure and product mix. This was offset by an increase of £87.0m
in International Solutions gross profit to £145.1m (FY21: £58.1m).
Distribution and administrative costs of £1,137.7m grew by 16.5% (FY21:
£976.7m) for three key reasons: 1) continued investment in building our
technology capabilities for our partners, across both CFC and in-store
fulfilment solutions ("ISF"), 2) expanding our support functions to support
our rapidly growing and increasingly global CFC operations and 3) significant
inflationary pressures on the cost of utilities, fuel and labour.
Group Technology costs that have been expensed (and not capitalised) increased
from £107.2m to £138.0m reflecting wage inflation and an increase in
technology headcount from circa 2,600 to 3,000.
EBITDA* loss of £(74.1)m (FY21: profit of £61.0m), a reduction of £135.1m
and driven by the £154.4m reduction in Retail EBITDA* to a loss of £(4.0)m
(FY21: profit of £150.4m). The decline in the Retail segment's EBITDA*
reflects lower volumes, and inflationary cost impacts on utility, fuel and
labour costs; these were partially offset by the release of long-term
management incentive provisions. The Group continued to invest in our
technology capability and support functions during the year to support the
future growth of new and existing partners around the world.
Depreciation, amortisation and impairment increased by 46.2% to £348.6m
(FY21: £238.4m), primarily due to our continued investment in our Ocado Smart
Platform ("OSP") technology and also due to the rollout of OSP hardware and
software at live CFC locations. Over the last two years we have opened 14 new
CFCs: 5 in FY21 and 9 in FY22; and 3 Zooms, bringing the total to 4. We now
have 23 live sites; 7 live UK CFCs, 4 UK Zooms and 12 live international CFCs.
Property, plant and equipment held on the balance sheet is £1,777.8m (FY21:
£1,257.8m).
Net finance costs of £48.2m increased by £5.9m (FY21: £42.3m). Finance
costs excluding foreign exchange gains/losses of £(90.0)m (FY21: £(71.6)m)
were offset by finance income excluding foreign exchange gains/losses of
£25.4m (FY21: £10.0m). Finance costs grew by £18.4m due to the increased
interest on lease liabilities (an increase of £10.3m) driven by the full-year
impact of the FY21 lease additions and further additions in FY22, and
increased interest expense (an increase of £8.6m) due to the full-year impact
of the incremental debt raised in FY21. The £15.4m increase in finance income
was mainly driven by £12.5m interest income on cash balances (FY21: £1.0m),
primarily due to higher interest rates. Net foreign exchange gains recognised
amounted to £16.4m (FY21: £19.3).
Exceptional costs of £29.9m (FY21: £42.8m net income) includes: 1) the
£58.4m reduction of contingent consideration receivable, primarily from
M&S relating to the Ocado Retail joint venture. 2) litigation costs
(£26.5m, FY21: £28.9m) primarily related to patent infringement litigation
between the Ocado Group and AutoStore Technology AS and 3) the final
settlement of insurance income from the Andover CFC (£67.4m, FY21: £78.6m).
Statutory loss before tax of £(500.8)m (FY21: loss of £(176.9)m) reflects an
EBITDA* loss of £(74.1)m (FY21: profit of £61.0m), depreciation,
amortisation and impairment of £348.6m (FY21: £238.4m), net finance costs of
£48.2m (FY21 : £42.3m) and net exceptional costs of £(29.9)m (FY21: £42.8m
net income).
Segmental summary
£m FY22 FY21 Change
Revenue
Retail 2,203.0 2,289.9 (3.8)%
UK Solutions & Logistics 802.7 710.4 13.0 %
International Solutions 147.8 66.6 121.9 %
Group and other 0.8 0.4 100.0 %
Inter-segment eliminations (640.5) (568.5) 12.7 %
Group 2,513.8 2,498.8 0.6 %
EBITDA*
Retail (4.0) 150.4 (102.7)%
UK Solutions & Logistics 67.2 68.5 (1.9)%
International Solutions (113.2) (119.3) (5.1)%
Group and other (21.9) (37.5) (41.6)%
Inter-segment eliminations (2.2) (1.1) 100.0 %
Group (74.1) 61.0 (221.5)%
Inter-segment eliminations represent the elimination on consolidation of
revenue charged from UK Solutions & Logistics to Ocado Retail. For FY22,
this was £640.5m (FY21: £568.5m).
Group and other includes revenue earned by Jones Food Company (£0.8m, FY21:
£0.4m) and central costs (predominantly Board costs and discussed in the
'Group and other' section of this report) that are not allocated to other
segments.
Group key performance indicators
The following table sets out a summary of selected unaudited operating
information for the period:
FY22 FY21 Change
No. of modules live(1,2) 99 61 62.3 %
Cumulative no. of modules ordered(1,2,3) 232 213 8.9 %
OSP direct operating cost (% of installed site sales capacity)(4) 2.0% 2.7% 25.9 %
1. A module of capacity is assumed as approximately 5,000 eaches
per hour (dependent on the specific metrics of a partner) and circa £70m per
annum of sales capacity.
2. A module is considered live when it has been fully installed
and is available for use by our partner.
3. A module is classified as ordered when a contractual
agreement has been signed with a partner and an invoice has been issued for
the associated design and access fees. This excludes modules which are
required to be ordered in order to maintain exclusivity agreements, but which
have not yet been agreed upon and invoiced.
4. Direct operating costs as a % of site sales capacity reflects
the exit rate position for CFCs live for at least six months at the period
end. Direct operating costs include engineering, cloud, and other technology
support costs.
The number of modules live has increased by 38, with further modules going
live in Ocado Retail, Kroger, Sobeys and ICA.
The cumulative number of modules ordered has increased by 19, primarily driven
by our two new clients Auchan Poland and Lotte.
OSP direct operating cost as a percentage of installed site sales capacity is
a key metric for the ongoing running cost of our CFCs that is borne by Ocado
and measures the engineering, cloud computing and other operating costs of our
OSP CFC operations. It has improved by 25.9% over the year as OSP performance
becomes increasingly efficient
Retail
£m FY22 FY21 Change
Revenue(2) 2,203.0 2,289.9 (3.8)%
Gross profit and other income(3) 739.9 822.3 (10.0)%
Distribution costs(4) (596.6) (536.7) 11.2 %
Marketing (non-voucher) costs(5) (57.6) (40.3) 42.9 %
Other administrative costs(4) (89.7) (94.9) (5.5)%
EBITDA* (4.0) 150.4 (102.7)%
1. The results of the Ocado Retail Limited joint venture
(referred to as either "Ocado Retail" or "Retail") are fully consolidated in
the Group.
2. Retail segment includes results from Speciality Stores
Limited ("Fetch") until its disposal on 31 January 2021. The revenue decline
in FY22 excluding Fetch was (3.5)%.
3. FY21 other Income includes £4.4m income from the
Transitional Services Agreement relating to the sale of Fetch in FY21.
4. Distribution and administrative costs exclude depreciation,
amortisation and impairment.
5. Marketing costs exclude the cost of vouchers given to
customers, these are included in cost of sales.
Key drivers
The following table sets out a summary of selected unaudited Ocado.com
operating information in the period:
FY22 FY21 Change FY19 Change(4)
Active customers (000s)(1) 940 832 13.0 % 795 18.2 %
Average orders per week (000s) 377 357 5.6 % 307 22.8 %
Average basket value (£)(2) 118 129 (8.5)% 106 11.3 %
Average selling price (£)(3) 2.55 2.44 4.5 % 2.30 10.9 %
Average basket size 46 52 (11.5)% 46 -
1. Active customers are classified as active if they have
shopped at Ocado.com within the previous 12 weeks.
2. Average basket value refers to the results of Ocado.com.
3. Average selling price is defined as gross sales divided by
total eaches.
4. Represents variance between FY22 and FY19 to reflect
pre-pandemic movement.
Retail revenue declined by 3.8% year-on-year driven by an unwind of shopping
behaviours experienced during the pandemic, only partly offset by rising item
prices.
EBITDA* decreased by £154.4m to a loss of £(4.0)m (FY21: profit of
£150.4m). The decline is primarily driven by investments in capacity to
support future growth, investments in marketing to grow customer numbers (and
relative to pandemic lows) and inflationary cost pressures. The loss includes
a benefit from the release of a provision relating to the long-term management
incentive plan.
We have continued to grow our active customer base, in turn driving growth in
orders per week though at a lower rate, as customers reduced shopping
frequency following the pandemic and in response to the cost-of-living crisis
in the UK. Basket volumes have also declined, reflecting the same trends.
We opened the Bicester CFC, which will add capacity of around 30,000 orders
per week at maturity and will bring the total capacity for Ocado Retail to
over 600,000 orders per week. Our Bristol, Andover and Purfleet CFCs which
opened in FY21 have all continued to ramp during the year. We continue to
invest in our immediacy proposition, Zoom, launching three new sites in FY22,
and now have four sites live: Acton, Canning Town, Leyton and Leeds.
Collectively these sites will have circa £20m annual sales capacity at
maturity.
Revenue
Retail revenue declined by 3.8% year-on-year in a challenging trading
environment, with inflationary pressures leading customers to reduce basket
size to manage spend.
The average basket value for Ocado.com was 8.5% lower at £118 (FY21: £129),
with customers ordering fewer items per shop than in the prior year. This
resulted in a decline in items per basket of 11.5% to 46 (FY21: 52), which is
now back in line with pre-pandemic levels (FY19: 46). We remain committed to
offering customers fair value, including investment in price and expanding our
value-for-money own label proposition. The business was impacted, however, by
the high-cost inflation being experienced by food suppliers and others in the
grocery supply chain, and this was reflected in an increase in average selling
price for Ocado.com of 4.5% in the period, up from £2.44 to £2.55 per item.
The decline in revenue was also driven by year-on-year growth in the use of
customer discount vouchers (the costs of which are a reduction to revenue) to
drive customer retention and acquisition (Ocado.com FY22: 0.9% of revenue,
FY21: 0.1% revenue). In FY21 there was a lower-than-usual amount of vouchering
given the increased demand for grocery deliveries during the pandemic. FY19
voucher spend for Ocado.com was 1.7% of revenue.
While there was a 3.8% decline in year-on-year revenue, there has been a
steadily improving trend. Revenue declined by 8.3% in the first half of the
year (with pandemic volumes as the comparator) and was followed by growth of
1.4% in the second half of the year as volumes started to trend towards a more
normal basket size; this was driven by improved customer acquisition and
through price inflation.
Customer acquisition has remained strong in the year as we invested in market
activity to drive long-term growth. Active Ocado.com customer numbers
increased year-on-year by 13% to 940,000 (FY21: 832,000), driving a 5.6%
increase in average orders per week, up from 357,000 to 377,000 orders per
week. As a result, our share of the larger online grocery market, following
the pandemic, has grown to 12.3% (Nielsen, FY21: 11.7%). Though there has been
some unwind from peak levels experienced during the pandemic, the online
channel's share of the total UK grocery market appears to be stabilising
around 11%, compared with 6% before the pandemic (IGD).
Gross profit and other income
Gross profit and other income declined by 10% to £739.9m (FY21: £822.3m)
with gross profit margin declining from 35.9% to 33.6% driven by lower
volumes, the element of supplier cost inflation that could not be passed on to
consumers, increased promotion costs and adverse product mix.
Distribution costs
£m FY22 FY21 Change
CFC costs 214.0 180.1 18.8 %
Trunking and delivery 261.5 250.8 4.3 %
Other operating costs 121.1 105.8 14.5 %
Total Distribution costs 596.6 536.7 11.2 %
Distribution costs primarily consist of fulfilment and delivery operation
costs which are provided by the UK Logistics operation of Ocado Group.
CFC costs mainly include labour and utility costs in our CFCs and increased by
18.8% to £214.0m (FY21: £180.1m) compared to a growth in average orders per
week in the period of 5.6%. The higher rate of cost growth (up 18.8%) compared
to order volume growth (up 5.6%) is driven by three key factors: 1. the cost
inefficiencies related to newer sites (Purfleet and Bicester) as they ramp to
full capacity, 2. the inflationary pressures across utility and labour costs
that we have experienced during the year, and 3. the impact on operating
leverage due to capacity investment to support future growth.
Productivity improvements partly offset the inflationary pressures, with units
picked per hour ("UPH") in mature sites (Hatfield, Dordon, Erith and Bristol)
improving by 2.9% to an average of 175 UPH. Our five OSP CFCs (all CFCs except
Hatfield and Dordon) achieved an average UPH of 184, with the newer sites of
Andover, Bristol and Purfleet all exceeding 200 UPH.
Trunking and delivery costs comprise people and fleet costs relating to
trunking and delivery operations and increased by 4.3% to £261.5m (FY21:
£250.8m) driven by the increase in the number of average orders per week (up
5.6%), by high fuel inflation and smaller average baskets. This is offset by
an improvement in operating efficiency, evidenced by higher deliveries per van
shift, which is the average number of deliveries achieved per driver shift.
Other operating costs of £121.1m (FY21: £105.8m) include OSP capacity fees
and capital recharges from UK Solutions & Logistics to Ocado Retail.
Capacity fees have increased significantly due to the recent increase in
modules, including the CFC in Bicester (which went live during FY22), and the
CFCs in Bristol, Andover and Purfleet (which all went live in FY21).
Marketing costs
Marketing costs increased by 42.9% to £57.6m (FY21: £40.3m). Marketing
activities were focused on driving increased awareness of the value
proposition that Ocado offers. We continued to invest in above-the-line
marketing, particularly seen with the 'there's an Ocado just for you' brand
campaign. Marketing spend increased as a percentage of revenue in the year to
2.6% (FY21: 1.8%) and contributed to a 13% increase in the number of active
customers to 940,000 (FY21: 832,000).
Administrative costs
Administrative costs decreased by £5.2m to £89.7m from £94.9m, with an
increase in people and property costs offset by a release relating to the
long-term management incentive plan. Total labour costs increased, driven by
an increase in headcount and wage inflation. Property costs increases were
primarily due to the write-off of certain costs related to the pausing of the
north-west and south-east CFCs announced previously.
EBITDA*
EBITDA* for the Retail business was £(4.0)m (FY21: £150.4m). As described in
detail above, the EBITDA* loss was driven by higher fixed costs for our new
CFCs while they grow to maturity; lower volumes; the reduction in gross
margin; utilities, fuel and labour inflation; and increased marketing to drive
customer acquisition.
UK Solutions & Logistics
£m FY22 FY21 Change
Fee revenue(1) 172.0 149.7 14.9 %
Cost recharges(2) 630.7 560.7 12.5 %
Revenue 802.7 710.4 13.0 %
Other income, net of cost of sales 3.6 3.5 2.9 %
Distribution costs(3) (621.5) (562.1) 10.6 %
Administrative costs(3) (117.6) (83.3) 41.2 %
EBITDA* 67.2 68.5 (1.9)%
1. Fee revenue includes fees charged to Ocado Retail of £140.9m
(FY21: £120.5m) which eliminates on consolidation.
2. Cost recharges include cost recharges to Ocado Retail of
£497.6m (FY21: £445.8m) which eliminates on consolidation.
3. Distribution and administrative costs exclude depreciation,
amortisation and impairment.
Key drivers
The following table sets out a summary of selected unaudited operating
information in the period:
FY22 FY21 Change
Total eaches (million) 1,196.3 1,273.3 (6.0)%
Orders per week (000s) 493.6 462.0 6.8 %
Mature site UPH(1,2) 175 170 2.9 %
Average deliveries per van per week(3) 176 177 (0.6)%
1. Measured as units dispatched from the CFC per variable hour
worked by operational personnel.
2. Mature sites include Hatfield, Dordon and Erith with FY22
also including Bristol as it has been operational for more than 18 months and
is considered mature
3. Average deliveries per van per week represents Ocado Retail
only, which is total deliveries by the average number of vans in the fleet
UK Solutions & Logistics full-year revenue increased by 13.0% from
£710.4m to £802.7m, reflecting continued capacity investments to support
current and future partner growth in the UK, and the impact of inflationary
pressures on cost recharges, which more than offsetting volume declines and
improvements in underlying efficiency.
EBITDA* decreased slightly from £68.5m to £67.2m. Higher capacity fees
relating to the three new CFCs that went live in the prior period were offset
by the year-on-year reduction in capital recharges for shared use sites
(Dordon and Erith) and the continuing investment in and rollout of OSP that is
included within administrative costs. As noted above, the recharges to Ocado
Retail for the lease costs of sites and assets used exclusively by Ocado
Retail are now accounted for as finance income and excluded from EBITDA*.
Revenue
Revenue from the UK Solutions & Logistics business increased by 13.0% to
£802.7m (FY21: £710.4m)
Fee revenue comprises the fees charged to our UK partners Ocado Retail and
Morrisons for access to Ocado's technology platforms, capital recharges,
management fees, and research and development (the portion of these fees that
are charged to Ocado Retail are eliminated on consolidation of the Group).
Total fees grew by 14.9% to £172.0m (FY21: £149.7m), as we continued to
invest in capacity to support our UK clients' current and future growth. Fees
to Ocado Retail grew broadly in line with overall live module capacity growth
from the new CFCs delivered in the current and prior periods. An additional 12
modules of sales capacity went live in the year, including three in our new
Bicester CFC.
Fees to Morrisons grew following its return to the Erith CFC in February 2021.
This resulted from the end of an agreement to temporarily free up the
Morrisons' Erith capacity for Ocado Retail to use following the Andover CFC
fire in February 2019.
Live CFCs at the end of the year will have a total capacity at maturity of
circa 800,000 orders per week across Ocado Retail and Morrisons. There are now
seven live CFCs in the UK and 61 live modules (FY21: 49).
Cost recharges represent the relevant operational variable and fixed costs
recharged by UK Solutions & Logistics to Ocado Retail and Morrisons (costs
recharged to Ocado Retail are eliminated on consolidation of the Group). These
predominantly relate to fulfilment and delivery operations included in
distribution costs but also include certain central, head office activities,
and transitional services fees to Ocado Retail that are reported within
administrative costs.
Total throughput in CFCs decreased by 6.0% to 1,196m individual items picked
(eaches) (FY21: 1,273m), while average orders per week increased by 6.9% to
494,000 orders per week (FY21: 462,000) across Ocado Retail (average of
377,000 orders per week in FY22) and Morrisons (average of 117,000 orders per
week in FY22). The decline in eaches reflects the changing customer shopping
behaviour trends towards shopping smaller baskets.
Cost recharges grew by 12.5%, compared to a decline in total CFC throughput of
6.0%, as customers reverted to shopping smaller baskets following the pandemic
and in response to the cost-of-living crisis. This increase in recharges
reflects the full-year impact of operations at our newer CFCs at Bicester,
Andover, Bristol and Purfleet as they ramp up to full capacity; together with
higher utility, dry ice and labour costs. The impact of cost inflation was
partly offset by improvements in efficiency.
Other income, net of cost of sales
Other income, net of cost of sales, was £3.6m (FY21: £3.5m) and primarily
relates to Erith and Dordon property rental costs that are charged to
Morrisons.
Distribution and administrative costs
Total distribution and administrative costs of £739.1m (FY21: £645.4m)
comprise £621.5m distribution costs (an increase of 10.6%; FY21: £562.1m)
and £117.6m of administrative costs (an increase of 41.2%; FY21: £83.3m).
Distribution costs comprise the costs of fulfilment and delivery operations
which are recharged to Ocado Retail and Morrisons. These also include
engineering and other support costs for the provision of the contracted
services, for which OSP fees are charged.
Total distribution costs grew by 10.6% to £621.5m (FY21: £562.1m), against a
reduction in eaches of 6.0% to 1,196m (FY21: 1,273m). Distribution costs grew
despite the reduction in eaches delivered due to 1) the higher costs from new
sites as they ramp up to full efficiency; and 2) the impact of significant
cost inflation in respect of energy, fuel costs, dry ice and wage inflation.
Productivity improvements saw the average number of units per hour (UPH) in
mature CFCs (Hatfield, Dordon, Erith and Bristol) improve year-on-year to 175
in the period (FY21: 170). Since opening in FY21, our first mini-CFC in
Bristol has achieved a UPH of over 200, and our newer sites in Andover and
Purfleet are already well ahead of our original expectations and each
exceeding our target of 200 UPH.
Distribution costs also include the engineering costs of operating CFCs for
which the OSP fee is charged to our UK partners. These costs increased over
the year due to the full year of operations of those CFCs which opened during
FY21, together with the impact of the opening of Bicester in September FY22.
UK OSP CFCs that were live at the start of the year all saw engineering cost
per each reduced by at least 20%.
Administrative costs grew by 41.2% from £83.3m in FY21 to £117.6m in FY22.
These costs include direct and centrally allocated head office costs (which
are largely recharged to Ocado Retail and Morrisons) and an allocation of
central technology costs that are incurred to support the continued
development of OSP, primarily as a result of the allocation of additional
headcount and technology resources to support and improve OSP, together with
ongoing investment in recruitment.
EBITDA*
EBITDA* from UK Solutions & Logistics activities was £67.2m, a decrease
of £1.3m. This reduction largely resulted from the continuing investment in
and roll-out of OSP, which is not recharged to customers; and a year-on-year
reduction in capital recharges to Ocado Retail as the lease costs of CFCs and
equipment used exclusively by Ocado Retail are accounted for as finance income
and excluded from EBITDA*. These are eliminated on Group consolidation.
International Solutions
£m FY22 FY21 Change
Fees invoiced*(1) 180.9 143.0 26.5 %
Revenue(2) 147.8 66.6 121.9 %
Cost of sales (2.9) (8.5) (65.9)%
Gross profit and other income 145.1 58.1 149.7 %
Distribution costs(3) (54.7) (25.6) 113.7 %
Administrative costs(3) (203.6) (151.8) 34.1 %
EBITDA* (113.2) (119.3) (5.1)%
1. Fees invoiced represent design and capacity fees invoiced
during the period for existing and future CFC and in-store fulfilment
commitments. These are recognised in the Income Statement according to IFRS 15
from the time when the CFC/ISF operation goes live
2. Revenue includes £11.5m revenue (FY21: £9.6m) from Kindred
Systems, and £4.6m of data centre fees and equipment sales (FY21: £8.1m) to
retail partners recognised as revenue under IFRS 15. The cost of this
equipment is recognised in cost of sales.
3. Distribution and administrative costs exclude depreciation,
amortisation and impairment
Key drivers
The following table sets out a summary of selected unaudited operating
information in the period:
FY22 FY21 Change
Fees invoiced* (£m) 180.9 143.0 26.5 %
No. of modules live(1,3) 38 12 216.7 %
Cumulative no. of modules ordered(2,3) 162 145 11.7 %
1. A module is considered live when it has been fully installed
and is available for use by our partner.
2. A module is classified as ordered when a contractual
agreement has been signed with a partner and an invoice has been sent for the
associated fees. This excludes modules which are required to be ordered in
order to maintain exclusivity agreements, but which have not yet been agreed
upon and invoiced.
3. A module of capacity is assumed as approximately 5,000 eaches
per hour (dependent on the specific metrics of a partner) and circa £70m per
annum of sales capacity.
Our international operations significantly expanded during the year with eight
new international CFCs going live. These include a further six CFCs for Kroger
in the US (in Atlanta, Dallas, Chicago, Detroit, Denver and Baltimore), the
second CFC for Sobeys (in Montreal) and our first CFC for ICA Gruppen (in
Stockholm). We now have 12 live international sites (FY21: 4 sites) and 38
live modules (FY21: 12 modules). As a result of this growth in live CFCs and
in live modules, revenue increased by 121.9% to £147.8m (FY21: £66.6m).
We have a strong pipeline of further CFC commitments in addition to
significant in-store fulfilment ("ISF") capabilities to be delivered across a
number of our existing partners, and two new partnerships, Auchan Poland
(signed in March 2022) and Lotte Shopping (signed in November 2022).
Distribution costs increased by 113.7% to £54.7m (FY21: £25.6m) and include
the engineering, maintenance and technology costs required to support the
increase in live CFC operations. EBITDA* losses in the period reduced by
£6.1m, to £(113.2)m from £(119.3)m in FY21.
Fees and revenue
Fees invoiced grew by 26.5% from £143.0m in FY21 to £180.9m in FY22. These
fees include the design and capacity fees invoiced across a number of clients
relating to existing and future CFC and ISF commitments, including our new
partnerships with Lotte Shopping and Auchan Poland, and fees associated with
the live operations, primarily Kroger, Sobeys and ICA.
Under revenue recognition rules, design and access fees relating to OSP are
not recognised as revenue until a working solution is delivered to the
partner, i.e. the CFC goes 'live'. At the end of the period, cumulative fees*
not yet recognised as revenue, but instead recorded on the balance sheet
within contract liabilities, amounted to £388.9m (FY21: £337.6m). The
£51.3m net increase in this balance includes £69.1m of invoices relating to
future CFCs (£92.6m in FY21) during the year offset by £17.8m of the balance
being released to revenue during the year (£10.6m in FY21). £1.1m of the
revenue released relates to equipment sales (a portion of the £4.6m in
footnote 2 above).
Revenue in the period of £147.8m (FY21: £66.6m) reflects ongoing capacity
fees of £117.2m (FY21: £37.2m) and £14.5m (FY21: £11.0m) previously
recorded on the balance sheet relating to design and upfront fees across our
current operational partners, Groupe Casino, Sobeys, Kroger and ICA, that has
been released to revenue during the year (as the relevant sites are now
'live'). Revenue also includes £11.5m (£9.6m in FY21) from Kindred and
£4.6m (FY21: £8.1m) from the sale of equipment (at cost) and data centres to
certain partners.
Distribution and administrative costs
Distribution and administrative costs grew by 45.6% to £258.3m (FY21:
£177.4m) as a result of increased engineering support and technology costs
reflecting the go-live of operations and annualised costs for our 12 live
international client sites (end of FY21: 4), and continued investment in the
development of OSP as we build our capabilities for our partners across both
CFC and in-store fulfilment solutions.
Distribution costs primarily consist of the engineering and technology costs
of operating the OSP platform and CFCs for our international clients. These
costs grew from £25.6m in FY21 to £54.7m in FY22 as a result of increased
engineering operations and cloud costs to support the growing number of
international CFCs. Distribution costs are also impacted by the annualisation
of costs relating to the two international CFCs that went live during FY21 as
they continue to ramp up.
Administrative costs primarily consist of costs supporting our international
partnership agreements and the non-capitalised technology costs to maintain
and further develop the OSP platform. We continue to invest in OSP and build
support functions to support rapid international expansion. As a result, these
costs grew by £51.8m from £151.8m in FY21 to £203.6m in FY22 as we
continued to increase our investment in building long-term OSP capabilities
for our partners.
EBITDA*
International Solutions EBITDA* improved by £6.1m from a loss of £119.3m in
FY21 to a loss of £113.2m in FY22. This result reflects the increased revenue
from our growing international business offset by 1) our investment in
technology to support our international growth ambitions; and 2) the central
support costs for our international partners. EBITDA* will turn positive as we
scale up our international CFC platform.
Group and other
£m FY22 FY21 Change
Board costs (11.8) (12.1) (2.5)%
Share-based payments(1) (16.9) (29.3) (42.3)%
Jones Food Company and other ventures(2) (4.3) (5.6) (23.2)%
Inter-segment eliminations(3) (2.2) (1.1) 100.0 %
Other(4) (3.8) (5.7) (33.3)%
Group and other costs (39.0) (53.8) (27.5)%
MHE rental income(5) 10.1 10.3 (1.9)%
Research and development credit ("RDEC")(6) 4.8 4.9 (2.0)%
Group and other EBITDA* (24.1) (38.6) (37.6)%
Group and other EBITDA* ex. eliminations(7) (21.9) (37.5) (41.6)%
1. Of the total share-based payment charges for the Group
(excluding ORL) of £34.9m (FY21: £36.8m), £18.0m are allocated to the
relevant business segment (FY21: £7.5m) and £16.9m (FY21: £29.3m) remains
in the Group segment.
2. Ventures relates to the profits and losses on our share of
investments and joint ventures during the period. The most significant is
Jones Food Company where we recorded losses of £3.0m (FY21: £3.3m loss). The
others are: Infinite Acres (which we sold to 80 Acres, of which we hold a c.2%
share), which was disposed of in October FY21 (FY21: £1.9m loss); MHE JVCo,
for which we recorded losses of £0.2m (FY21: £0.2m profit) and Karakuri, for
which we recorded losses of £1.2m (FY21 loss: £0.6m).
3. In FY21 Inter-segment eliminations and 'other' were shown as
one line, which totalled £6.8m.
4. Other costs include a small allocation of Group support and
central costs.
5. Rental income totalling £10.1m was received from MHE JVCo, a
joint venture with Morrisons.
6. Research and development (R&D) subsidies were £4.8m
(FY21: £4.9m) and are granted by HMRC as a fixed percentage on the value of
qualifying R&D expenditure.
7. Inter-segment eliminations represent the elimination due to
the consolidation of intercompany transactions.
This segment represents revenue and costs which do not relate to the Retail,
UK Solutions & Logistics and International Solutions segments. This
primarily includes Board costs, the costs of Group-wide share-based payments,
the consolidated results of Jones Food Company and other ventures, and MHE
JVCo rental income. This segment reported an EBITDA* loss of £(24.1)m (FY21
EBITDA* loss: £38.6m). The £14.5m improvement is largely due to a £12.4m
reduction in share-based Senior Management incentive charges (reflecting the
lower Ocado Group plc share price) and a reduction in losses in our ventures
businesses following the disposal of our interest in Infinite Acres Holding
B.V. in October FY21 (FY21 loss: £1.9m).
Board costs of £11.8m (FY21: £12.1m) include 1) salaries, bonuses and fees
for both Executive and Non-Executive Directors of £8.4m (FY21: £9.4m), which
reduced by £1.0m, primarily due to a reduction in bonus costs; 2) other Board
costs of £1.8m (FY21: £0.9m), which have increased largely due to higher
travel costs following the relaxation of covid travel restrictions and 3)
Directors' insurance costs of £1.6m (FY21: £1.8m).
Share-based payments reduced by £12.4m from £29.3m in FY21 to £16.9m in
FY22, primarily due to the lower Ocado Group plc share price. We established a
new share-based management incentive scheme during the year for certain senior
managers who lead the development of OSP. The costs of this scheme are
excluded from the 'Group and other' segment but are instead allocated to the
relevant business segments (see footnote 1 above).
Exceptional items
£m FY22 FY21
Andover CFC
Insurance reimbursement income 67.4 78.6
Other exceptional costs (3.4) (5.6)
Total Andover exceptional item 64.0 73.0
Erith CFC
Insurance reimbursement income 6.4 2.0
Other exceptional costs - (10.1)
Total Erith exceptional item 6.4 (8.1)
Litigation costs (26.5) (28.9)
Litigation settlement - 1.8
Ocado Group Finance transformation and SaaS implementation costs (7.0) (13.3)
Ocado Retail IT systems transformation (4.0) (4.6)
(Loss)/gain on disposal of Speciality Stores Limited ("Fetch") (1.4) 1.0
Gain on disposal of investment in Infinite Acres Holding B.V. - 5.0
Changes in fair value of contingent consideration (58.4) 16.9
Organisational restructure (3.0)
Total exceptional items (29.9) 42.8
Andover CFC
In February 2019, a fire destroyed the Andover CFC, including the building,
machinery and all inventory held on site. The Group has comprehensive
insurance and claims were formally accepted by the insurers.
Insurance reimbursement comprises reimbursement for the costs of rebuilding
the CFC and business interruption losses. The reimbursement has been
recognised as other income.
The Group reached an agreement with the insurers during the year for the final
settlement of the insurance claim for a total of £273.8m, which resulted in
an additional insurance reimbursement income of £67.4m in the year. This
concluded the Andover insurance fire claim.
Other exceptional costs of £3.4m (FY21: £5.6m) include, but are not limited
to, the write-off of certain assets, professional fees relating to the
insurance claims process, business rates, temporary costs of transporting
employees to other warehouses to work and redundancy costs. The cumulative
exceptional costs, across all prior periods, amounted to £124.9m.
Erith CFC
In July 2021, a fire destroyed part of the Erith CFC, including some machinery
and inventory held on site. The Group has comprehensive insurance and claims
were formally accepted by the insurer.
An agreement was reached with the insurers during the year for the final
settlement in respect of the claims relating to the Erith fire for a total of
£8.3m, £6.4m was received during the period and was recognised as an
insurance reimbursement income in FY22. The receipt of the £6.4m concluded
the Erith fire claim.
Other exceptional costs of £nil (FY21: £10.1m) include, but are not limited
to, stock write-offs, customer goodwill refund and the impairment of certain
fixed assets and labour costs. The cumulative exceptional costs, across all
periods, amounted to £10.1m.
Litigation costs and litigation settlement
Litigation costs during the year were exclusively the costs incurred on the
patent infringement litigation between the Group and AutoStore Technology AS
("AutoStore"). The costs during the year were £26.5m (FY21: £28.9m). The
prior year litigation costs also include costs of legal proceedings brought by
the Group against certain former employees and Project Today Holdings Limited
("T0day"), concerning misappropriation and unlawful use of the Group's
confidential information and intellectual property, which was settled in FY21.
The Group received £1.8m as part of the settlement of that litigation which
was recognised as exceptional income in FY21.
Ocado Group Finance transformation and SaaS implementation costs
As part of the Group's Finance transformation programme, the Group implemented
various software as a service ("SaaS") solutions, primarily Oracle Fusion,
which went live in FY21, across the business. Following the IFRS
Interpretations Committee ("IFRIC") accounting guidance in FY21, the Group
updated its accounting policy for the treatment of SaaS configuration and
customisation-related costs under IAS 38 Intangible Assets. The cumulative
Finance transformation and SaaS implementation costs expensed to date amount
to £28.6m and include £7.0m in FY22 (FY21: £13.3m).
These amounts have been disclosed as exceptional items in both FY21 and FY22
because they are material and arise from a strategic project that is not
considered by the Group to be part of the normal operating costs of the
business.
The Finance transformation programme will continue through to, and will
complete in, FY23 with a focus on optimising and enhancing the SaaS solutions
and related Finance processes to improve efficiency across the business.
Incremental costs incurred concerning the ongoing programme will continue to
be disclosed as exceptional items. Ongoing licence fees for SaaS arrangements
will be treated as ordinary operating costs and are not treated as exceptional
items.
Ocado Retail IT systems transformation
In FY21, Ocado Retail Limited ("ORL") initiated its IT Roadmap programme,
which focuses on delivering IT systems and services that will enable ORL to
meet its obligation to transition away from Ocado Group IT services, tools and
support. The IT Roadmap programme, which is expected to run until the end of
FY23, includes the development of both on-premises and SaaS solutions. The IT
Roadmap programme costs that meet assets recognition criteria will be
recognised as intangible assets and implementation costs that do not meet
assets recognition will be expensed as exceptional items. The cumulative costs
expensed to date amount to £8.6m.
(Loss)/gain on disposal of Speciality Stores Limited ("Fetch")
On 31 January 2021, Ocado Retail completed the sale of the entire share
capital of Speciality Stores Limited, its wholly-owned pets business trading
as Fetch, to Paws Holdings Limited ("Paws Holdings"), resulting in a gain on
disposal of £1.0m in FY21.
During the period, a provision of £1.4m was made against the deferred
consideration based on the likelihood of receipt.
Gain on disposal of investment in Infinite Acres Holding B.V. ("Infinite
Acres")
In October 2021, the Group sold its 33.3% interest in Infinite Acres Holding
B.V. ("Infinite Acres") to 80 Acres Urban Agriculture Inc. ("80 Acres") in
exchange for 2.5% of 80 Acres' issued share capital, resulting in a gain on
disposal of £5.0m.
Change in fair value of contingent consideration
In FY19, the Group sold Marie Claire Beauty Limited ("Fabled") to Next plc and
50% of Ocado Retail to Marks and Spencer Group plc ("M&S"). Part of the
consideration for these transactions was contingent on future events. The
Group holds contingent consideration at fair value through profit or loss and
revalues it at each reporting date. A loss on revaluation of £58.4m (FY21:
£16.9m gain) is reported through exceptional items, primarily driven by the
reduction in the contingent consideration receivable from M&S. Refer to
note 3.5 of the Condensed Financial Statements for details.
Organisational restructure
During the current year, the Group undertook a partial reorganisation of its
head office functions resulting in redundancies and related costs of £3.0m.
Further organisational restructuring was announced in January 2023, affecting
around 250 people and incurring total related costs of £7.0m.
Tax impacts on exceptional items
The change in fair value of contingent consideration receivable is not subject
to tax. The remaining exceptional items are taxable or tax deductible and give
rise to a tax credit of £0.8m (FY21: tax charge of £0.5m). A further tax
charge of £6.4m (FY21: charge of £3.7m) has not been recognised as it
relates to tax losses which are not recognised for deferred tax purposes.
Below EBITDA*
Total depreciation, amortisation and impairment costs were £348.6m (FY21:
£238.4m), an increase of £110.2m, or up 46.2% year-on-year, and includes
depreciation of property, plant and equipment of £154.4m (FY21: £84.4m),
depreciation of right-of-use assets of £66.0m (FY21: £65.6m), amortisation
expense of £114.7m (FY21: £78.0m), and impairment costs of £13.5m (FY21:
£10.4m).
The increase was principally driven by the full-year depreciation of the 5
CFCs that went live in FY21 and the partial-year depreciation of the 9 CFCs
that went live in FY22 (£48.5m including right-of-use leases). The remaining
movement is driven primarily by the amortisation of technology projects going
live in the period (£13.0m) and the prior period (£36.5m).
Net finance costs of £48.2m increased by £5.9m (FY21: £42.3m). Finance
costs excluding foreign exchange gains/losses of £(90.0)m (FY21: £(71.6)m)
were offset by finance income excluding foreign exchange gains/losses of
£25.4m (FY21: £10.0m). Finance costs grew by £18.4m due to the increased
interest on lease liabilities (an increase of £10.3m) driven by the full-year
impact of the FY21 lease additions and further additions in FY22, and
increased interest expense (an increase of £8.6m) due to the full-year impact
of the incremental debt raised in FY21. The £15.4m increase in finance income
was mainly driven by £12.5m interest income on cash balances (FY21: £1.0m),
primarily due to higher interest rates. Net foreign exchange gains recognised
amounted to £16.4m (FY21: £19.3).
The Group has accounted for the share of results from joint ventures and
associates. MHE JVCo is a 50/50 joint venture with Morrisons and holds Dordon
CFC assets, which Ocado uses to service the Ocado Retail and Morrisons' online
business. The Group's share of MHE JVCo loss after tax in the period amounted
to £(0.2)m (FY21: £0.2m profit). The Group's interest in Infinite Acres
Holdings B.V. was disposed of in October FY21 and contributed £nil to the
Group's results in the period (FY21: £(1.9)m). The Group's interest in
Karakuri Limited contributed a loss of £(1.2)m in the period (FY21: £(0.6)m
loss). The Group recognised a reduction in the value of Karakuri due to the
reclassification of £1.9m of the purchase price to warrants.
The loss before tax for the period was £(470.9)m (FY21: loss of £(219.7)m)
after including the impact of depreciation, amortisation and impairment costs
of £348.6m (FY21: £238.4m), and net finance costs pre-exceptionals of
£48.2m (FY21: £42.3m).
The Group reported a total tax credit in the Income Statement for the period
of £19.5m (FY21: £8.8m reported tax charge). This amount includes a UK
corporation tax credit of £8.4m (FY21: £7.7m charge) in respect of the
Retail business. The tax credit in Retail is due to the availability of the
'super-deduction' of capital allowances on our investment in fixed assets. A
deferred tax credit of £11.3m (FY21: £0.4m deferred tax charge) was
recognised in the period mainly arising from the recognition of losses for
utilisation in Retail.
At the end of the period, the Group had £973.9m (FY21: £677.7m) of
unutilised carried-forward tax losses. We are not expecting to pay UK tax
within our five-year outlook.
During the period, the Group did not declare a dividend (FY21: £nil).
Basic and diluted loss per share was (58.93)p (FY21: (30.18)p).
Capital expenditure
Capital expenditure totalled £797.3m in the period (FY21: £680.4m) as we
continued to develop new CFCs both in the UK and with our international retail
partners. We also continued to invest in technology to support our OSP growth
ambitions, and within our Group support functions.
£m FY22 FY21
UK CFCs & Operations 212.0 250.0
International CFCs 357.1 273.2
Technology, fulfilment development and innovation 228.2 157.2
Total capital expenditure (including MHE JVCo) 797.3 680.4
● Capital expenditure includes tangible and intangible
assets
● Capital expenditure excludes assets leased from MHE JVCo
under lease liability arrangements
● Capital expenditure includes MHE JVCo capital expenditure
in FY22 of £1.6m and in FY21 of £2.8m
UK CFCs & Operations
In the period we invested £212.0m in our UK CFCs & Operations (FY21:
£250.0m), of which, £164.1m (FY21: £166.8m) relates to our CFC and Zoom
sites in the UK. This includes the Bicester CFC, which went live during the
year and the Luton CFC, which will go live in 2023. The opening of these sites
will increase the total potential capacity across our UK retail partners to
over 850,000 orders per week at maturity. Approximately half of the total
spend is in the Retail business (largely land & buildings) and half is in
the UK Solutions & Logistics business (largely material handling
equipment, "MHE").
The balance of UK capital spend of £47.9m (FY21: £83.2m) relates to
operational spend in the normal course of the UK Logistics business and spend
in support of our Group central functions; this comprises patent and IP
capitalisation, refurbishing buildings for our technology teams, system
transformations across finance and supply chain, and upgrades to our talent
acquisition technology.
International CFCs
International CFC investment in the year was £357.1m (FY21: £273.2m), which
includes the launch of the eight CFCs which went live in the period. £120.5m
of the total spend relates to the four international CFCs that we expect to go
live in 2023.
Technology, fulfilment development and innovation
We continue to invest in the development of our own technology, particularly
OSP. We invested £228.2m (FY21: £157.2m) driven by the continued investment
in OSP with a focus on the innovation we announced at Ocado Re:Imagined in
January 2022. Re:Imagined includes seven key innovations: the 600 series bot,
the 600 grid and optimised site design, Automated Frameload, On-Grid Robotic
Pick, Ocado orbit, Ocado swift router and Ocado flex.
Technology headcount grew to around 3,000 colleagues to support the business'
strategic initiatives. Total technology expenditure in the period was £343.7m
(FY21: £255.0m), of which £205.7m was capitalised (FY21: £147.8m). We
continue to focus on enhancing our customer proposition to deliver world-class
end-to-end grocery ecommerce and fulfilment solutions. OSP includes ecommerce,
order management, forecasting, routing and delivery, automated storage and
retrieval systems (ASRS), dexterous robotics and other material handling
elements.
The CFC is the basis of our product proposition, it is the grid and bots (our
ASRS and the robots on the grid) and its peripheral material handling
equipment. We have invested £94.3m this year (FY21: £66.1m), approaching
half of the £205.7m of capitalised spend, focused on reducing both the
capital cost and the ongoing running costs of the CFC for the partner and
Ocado Group.
This development spend has been invested in a number of key propositions, a
few of which are: our lowest cost and lightest bot ever, the 600 series and
grid; the development of an automated freezer solution; the development and
client deployment of automatic frame loading for our vehicles; and initial
investment into modifying our ASRS for the non-grocery market. Alongside these
investments, the investment in and subsequent acquisition of Myrmex Inc.
enabled us to deliver our automatic frame-loading product into the Purfleet
site.
We are committed to the development of advanced technologies where they
enhance our product proposition. A good example here is the use of additive
manufacturing in the 600 series bot. We are also focused on generalised
dexterous robotic manipulation and autonomous vehicles. In FY20 we acquired
Kindred and Haddington for their vision, machine learning and dexterous
robotics capabilities; and we have invested in Wayve and Oxbotica to provide a
strategic advantage in autonomous vehicle innovation. We have invested £33.9m
(FY21: £13.3m) this year to further develop these propositions. This has
enabled the testing and development of a dexterous picking solution for our
clients that can pick a significant proportion of our clients' ranges and
perform at a speed that allows the product to compete with human performance.
We have continued to work towards ultimately having an autonomous delivery
solution, both by conducting on-road autonomous driving testing with our
partners and through testing and development of the customer-facing aspects.
OSP is a client and shopper-focused proposition, to that end, we have invested
£27.7m (FY21: £20.5m) in developing our ecommerce platform. OSP ecommerce
made strong progress across every aspect of the shopper journey. Shoppers will
benefit from improvements to the search and browse experience, and the
introduction of shoppable recipes and delivery pass subscriptions. Of
particular note, we introduced new onsite monetisation opportunities with new
content spaces and featured products, allowing partners to create more
engaging experiences for shoppers whilst earning retail media income.
One of the core benefits of OSP is our deep expertise in logistics and supply
chain, where we have invested £18.8m in these propositions this year (FY21:
£16.5m). These developments help to ensure that goods in and goods out of our
CFCs operate in the most effective way. We focus investment on the planning,
optimisation and execution of delivery; which includes the Re:Imagined swift
router product now live enabling retailers to offer short lead time slots to
customers with CFC range and economics. We also focus on the optimisation of
the grocery supply chain, including ensuring that products are not substituted
with alternatives, are accurately forecasted to avoid waste and that supply
chain systems are easy to use.
The balance of the spend relates to investment in technology platforms, core
UK infrastructure and Jones Food Company where its second vertical farm is due
to go live later this year.
Cash flow
£m FY22 FY21
EBITDA* (74.1) 61.0
Movement in contract liabilities 78.7 107.0
Other working capital movements 32.0 (134.5)
Insurance proceeds relating to business interruption 54.3 30.0
Finance costs paid (55.8) (34.8)
Taxation received/(paid) 13.4 (26.2)
Other non-cash items (40.6) (18.5)
Operating cash flow 7.9 (16.0)
Capital expenditure (785.9) (690.7)
Acquisition of subsidiaries, net of cash acquired (5.5) (189.7)
Insurance proceeds relating to rebuilding Andover CFC and Erith claim 57.0 2.0
Proceeds from additional investment in Jones Food Company - 20.0
Dividend from joint venture 8.0 7.7
Net proceeds from interest-bearing loans and borrowings 37.2 266.6
Repayment of lease liabilities (57.4) (48.6)
Proceeds from share issues 567.3 10.6
Movement of short-term deposits - 370.0
Other investing and financing activities 9.0 10.6
Movement in cash and cash equivalents (excl. FX changes) (162.4) (257.5)
Effect of changes in FX rates 21.8 19.3
Movement in cash and cash equivalents (incl. FX changes) (140.6) (238.2)
Cash and cash equivalents (including FX changes) reduced by £140.6m (FY21:
reduced by £238.2m), a £97.6m improvement compared with the prior year.
EBITDA* (as explained above) declined by £135.1m from £61.0m in FY21 to a
loss of £(74.1)m in FY22.
Operating cash flow, improved by £23.9m, despite the decline in EBITDA* (from
an outflow of £16.0m in FY21 to an inflow of £7.9m in FY22). The key drivers
of this improvement are explained below:
· Contract liabilities: cash inflow of £78.7m reflecting upfront fees
paid by partners in relation to CFCs and new module commitments and which have
not yet been recognised as revenue in accordance with IFRS 15. The cash inflow
of £78.7m is lower than the prior year inflow of £107.0m primarily due to
fewer modules ordered by our clients and the timing of cash received.
· Working capital: cash inflow of £32.0m, an improvement of £166.5m
compared with the prior year outflow of £134.5m, largely driven by improved
management of supplier payment terms (£122.0m of the total improvement).
Trade and other receivables increased by £50.7m (a net cash outflow, £26.9m
lower than FY21), principally due to prepayments for the purchase of long lead
items of capital expenditure required for CFCs under construction and the
release of insurance accrued income related to the Andover fire. There was a
£10.9m outflow (£44.3m lower than FY21) related to growth in inventory
levels, primarily due to low-value spares (previously expensed) now recorded
in inventory.
· Insurance proceeds relating to business interruption: cash inflow of
£54.3m (FY21: £30.0m) related to the reimbursement of business interruption
losses and associated costs in relation to the fires at our Andover and Erith
CFCs.
· Finance costs: cash outflow of £55.8m (FY21: £34.8m) comprise
£27.9m interest paid on borrowing (FY21: £16.8m) and £27.9m for the
interest element of leases (FY21: £18.0m). The £11.1m increase in interest
paid on borrowing is driven by the incremental funding secured in October
FY21, whereby the Group issued £500m of senior unsecured notes (SUNs), with
part of the proceeds used to repay the £225m 2017 senior secured notes.
· Taxation: cash inflow of £13.4m (FY21: taxation paid of £26.2m)
relates to a tax refund received by Ocado Retail in relation to an overpayment
in FY21, partially offset by taxation payments by foreign subsidiaries. No UK
tax was paid in the period, reflecting the impact of the acceleration of tax
relief for capital expenditure in Ocado Retail as a result of the
'super-deduction', combined with the decline in Retail EBITDA*.
· Other non-cash items: outflow of £40.6m (FY21: cash outflow of
£18.5m) relates to adjustments for the following non-cash elements of
EBITDA*:
○ £(26.2)m (FY21: £4.2m increase) reduction in management
incentive plan provisions (primarily within the Retail segment);
○ £(24.7)m (FY21: £(15.2)m) revenue recognised from long-term
contracts;
○ £42.0m (FY21: £35.5m) of share-based payments;
○ £10.8m (FY21: £nil) non-cash write off of property, plant and
equipment;
○ £(43.9)m (FY21: £(45.3)m) is the adjustment for non-cash
exceptional items;
○ £1.4m (FY21: £2.3m) share of losses from joint ventures and
associates.
The movements above result in an Operating cash inflow for the year of £7.9m
(FY21: cash outflow of £16.0m. The following movements explain the overall
movement in cash and cash equivalents an outflow of £140.6m (2021: an outflow
of £238.2m):
· Capital expenditure of £785.9m during the year (FY21: £690.7m)
primarily includes the MHE of both UK and International partner CFCs. Capital
expenditure also includes our continued investment in OSP, including the
products announced in Ocado Re:Imagined, and investment in our central support
capabilities.
· Acquisition of subsidiaries, net of cash acquired of £5.5m (FY21:
£189.7m), reflecting the acquisition of materials handling robotics start-up
Myrmex Inc. in June to accelerate the development of intelligent asset
handling systems for OSP.
· Insurance proceeds relating to rebuilding of £57.0m (FY21: £2.0m)
relates to the reimbursement of costs for the rebuild of our CFCs at Andover
and Erith which includes machinery costs.
· Dividends from joint ventures of £8.0m (FY21: £7.7m) relate to the
MHE JVCo, in which Ocado Group and Morrisons engaged in a joint venture that
owns material handling assets in our Dordon shared CFC.
· Net proceeds from interest-bearing loans and borrowings of £37.2m
(FY21: £266.6m) reflects the drawdown by Ocado Retail of 1) a shareholder
loan facility and 2) of its revolving credit facility, partially offset by the
costs of the new credit facility with HSBC.
· Lease liability repayments of £57.4m (FY21: £48.6m), an increase of
£8.8m due to an increase in motor vehicle leases, the full-year impact of the
leases relating to the CFCs that went live in FY21 and lease payments for the
new Bicester CFC.
· Net proceeds from share issue of £567.3m relate to the £578.2m
equity raise (net £564.1m after £14.1m costs) that was carried out in June
FY22 together with a small amount in respect of employee share schemes.
· Movement of short-term deposits in the prior year (FY22: £nil)
represents a drawdown of £370.0m of treasury deposits which matured during
the period and were not defined as cash and cash equivalents at the start of
the FY21 financial year.
· Other investing and financing activities of £9.0m (FY21: £10.6m)
include £9.6m of interest income on bank deposits (FY21: £1.0m) offset by
£0.6m of loans made to investee companies (FY21: £12.5m). The FY21 inflow
was driven by cash contingent consideration received relating to the Ocado
Retail joint venture with M&S (£33.9m), which was offset by loans to
investee companies (£12.5m) and investments in Wayve and Oxbotica (£11.4m).
· Effect of changes in FX rates of £21.8m (FY21: £19.3m) relates to
the FX gain (reported under net finance costs) and translation FX on cash
balances (predominantly USD cash balances held to fund the expansion of our
Solutions business in the US).
Balance Sheet
£m FY22 FY21 Movement
Assets
Goodwill 164.7 144.8 19.9
Other intangible assets 377.2 345.2 32.0
Property, plant and equipment 1,777.8 1,257.8 520.0
Right-of-use assets 493.9 494.6 (0.7)
Investment in joint ventures and associates 15.6 26.5 (10.9)
Trade and other receivables 329.3 324.4 4.9
Cash and cash equivalents 1,328.0 1,468.6 (140.6)
Other financial assets 185.4 212.6 (27.2)
Inventories 106.8 86.7 20.1
Other assets 34.5 22.4 12.1
Total assets 4,813.2 4,383.6 429.6
Liabilities
Contract liabilities (422.9) (378.5) (44.4)
Trade and other payables (508.2) (393.2) (115.0)
Borrowings (1,372.8) (1,300.0) (72.8)
Lease liabilities (532.3) (528.4) (3.9)
Other (42.7) (74.1) 31.4
Total liabilities (2,878.9) (2,674.2) (204.7)
Net assets 1,934.3 1,709.4 224.9
Assets
Goodwill of £164.7m (FY21: £144.8m) increased by £5.7m as a result of the
acquisition of Myrmex Inc, as detailed above. The remaining increase in
goodwill of £14.2m relates to the foreign exchange benefit of the revaluation
of the (predominantly USD-denominated) goodwill of £144.8m that was held at
the start of the reporting period. Goodwill represents the future benefit to
Ocado Group from the acquisitions of Myrmex in the current year and the
acquisitions of Kindred, Haddington and Jones Food Company in prior years.
This future benefit derives from the development of new technology, the
ability to attract new customers and cost synergies.
Other intangible assets of £377.2m increased by £32.0m (FY21: £345.2m)
primarily due to capitalised internal development costs relating to the
build-out of our technology capabilities for our partners, across both CFC and
ISF solutions, along with the capitalisation of software costs.
Property, plant and equipment net book value increased by £520.0m to
£1,777.8m (FY21: £1,257.8m) and comprise fixtures, fittings, plant and
machinery of £1,577.2m (FY21: £1,143.9m), land and buildings of £197.5m
(FY21: £113.1m) and motor vehicles of £3.1m (FY21: £0.8m).
· Fixtures, fittings, plant and machinery predominantly comprise the
material handling and other operating equipment within our CFCs and spokes.
o This increased by £433.3m (FY22: £1,577.2m, FY21: £1,143.9) driven by
£494.4m of additions (FY21: £489.9) relating to the go-live of 12 sites (9
CFCs and 3 Zooms) for our client partners including Ocado Retail, Kroger,
Sobeys and ICA.
o We capitalised £63.9m (FY21: £35.0m) of internal development costs
related to OSP technology development and deployment.
o These increases were partly offset by £(148.5)m of depreciation (FY21:
£(81.0)m) due to the increased net book value of assets live, impairment of
£(9.2)m (FY21: £(11.4)m) and disposals at net book value of £(5.3)m (FY21:
£(0.2)m).
· Land and buildings comprise our CFCs in the UK, spokes and offices.
This increased by £84.4m (FY22: £197.5m, FY21 £113.1m) largely comprising
the land and buildings for Ocado Retail's UK sites.
· Motor vehicles predominantly comprise the vehicles owned by Ocado
Group in relation to CFC and head office operations.
Note:
1) Total internal development costs capitalised across other
intangible assets and property, plant and equipment are £181.4m (2021:
£130.6) comprising £63.9m of internal development costs relating to
property, plant and equipment (FY21: £35.0m) and £117.5m (FY21: £95.6m) of
internal development costs relating to intangible assets. The increase of
£50.8m is primarily driven by the continued investment in OSP and the
innovations announced with Re:Imagined that include the further development of
our grid and bots, dexterous robotics, our ecommerce platform, and fulfilment
and supply chain propositions.
2) Total capital work-in-progress, relating to projects where
spend has been capitalised but the asset is not yet in use is £544.4m (FY21:
£482.3m) and included across intangible assets (£76.9m, up from £45.9m in
FY21) and property, plant and equipment (£467.5m, up from £436.4m in FY21).
Right-of-use assets of £493.9m (FY21: £494.6m) represents the asset value of
assets held under long-term leases, comprising land and buildings £415.0m
(FY21: £409.0m), motor vehicles £63.1m (FY21: £60.1m) and fixtures,
fittings, plant and machinery £15.8m (FY21: £25.5m). During the year the
Group entered into new leases for assets of £70.5m (FY21: £182.8m) and
comprise land and buildings of £43.4m (FY21: £152.0m), motor vehicles of
£24.9m (FY21: £30.8m) and fixtures, fittings, plant and machinery of £2.2m
(FY21: £nil). Certain leases were terminated during the year with a net book
value of £4.6m (FY21: £7.6m), and the depreciation charge for the year was
£66.0m (FY21: £65.6m).
Investment in joint ventures and associates includes the Group's 50%
investment in MHE JVCo and the Group's 26.3% investment in Karakuri (both no
change in percentage holding from the prior year). The decrease in carrying
value in the period of £10.9m to £15.6m (FY21: £26.5m) is due to the
full-year dividend received from MHE JVCo of £8.0m (FY21: £7.7m), losses for
the year in Karakuri and a reduction in the value of Karakuri due to the
reclassification of £1.9m of the purchase price to warrants.
Trade and other receivables increased by £4.9m to £329.3m (FY21: £324.4m),
comprising the following:
· Trade receivables (net of expected credit loss allowance) of £124.2m
(FY21: £124.6m), which predominantly comprise balances due from Solutions
customers and commercial and media income in Retail.
· Other receivables increased by £21.3m to £82.7m (FY21: £61.4m)
driven by the reclassification of Retail VAT receivable (previously in other
payables), partly offset by a reduction in customer balances due for our US
subsidiary, Kindred. Other receivables largely comprise tax refunds and
credits due, receivables expected from contract manufacturers for components
we have sourced on their behalf and receivables in our US subsidiary, Kindred.
· Prepayments increased by £7.1m to £76.5m (FY21: £69.4m) due to
increased forward purchasing of components key to the construction of our
CFCs. Prepayments typically include CFC components, software maintenance
payments and vehicle maintenance payments.
· Accrued income decreased by £23.1m to £45.9m (FY21: £69.0m) due to
the cash receipt of insurance proceeds relating to the Andover fire, partly
offset by an increase in accrued Solutions income. The balance primarily
relates to accrued income for Solutions capacity fees, and media and
promotional income.
· Amounts due from suppliers in respect of commercial and media income
is £71.2m (FY21: £70.7m). £52.5m (FY21: £50.9m) of the total is within
trade receivables and £18.7m (FY21: £19.8m) is within accrued income.
Cash and cash equivalents are £1,328.0m (FY21: £1,468.6m) at the end of the
period. Gross debt (including lease liabilities) at the period end was
£1,905.1m (FY21: £1,828.4m), with net debt* at the period-end of £(577.1)m
(FY FY21: £(359.8)m). In June FY22, the Group successfully raised additional
gross liquidity of £878.2m, comprising a £578.2m equity placing (£564.1m
net of costs) and a new £300.0m revolving credit facility. We believe this
provides sufficient liquidity in the short to medium term as we move closer
towards being cash flow positive.
Other financial assets decreased by £27.2m to £185.4m (FY21: £212.6m). This
decrease was driven by a £57.6m reduction, from £152.6m (FY21) to £95.0m,
in the contingent consideration receivable from Marks and Spencer Group plc
(M&S) on the 50% sale of Ocado Retail.
We estimated the fair value of the contingent consideration at the year-end
based on the probability weighting of a series of scenarios that consider the
current market uncertainty in the grocery sector and Retail's current trading
performance (see note 3.5 of the Condensed Financial Statements). This
decrease was partly offset by a £39.4m increase in other financial assets
mainly related to an improvement in the fair value of our investments in
Oxbotica and Wayve, two autonomous vehicle start-ups. The increase in value
for these two assets is a result of Oxbotica's successful series C fundraise;
and the completion of Wayve's series B fundraise, which triggered the
conversion of our loan note to equity.
Inventories of £106.8m (FY21: £86.7m) increased by £20.1m and mostly
comprise goods held for resale (largely Retail grocery inventory) which
increased by £7.4m to £89.2m (FY21: £81.8m) due to higher cost prices and
increased stock holding across the larger number of Retail sites (three new
sites in FY21 and four new sites, including Zooms, in FY22).
We also adopted a new inventory accounting policy for low-value spares (items
below £500), which had previously been expensed. Under the new accounting
policy, low-value spares are now initially recognised as inventory and
expensed as used. £7.3m of low-value spares have been recognised within
inventories at the period end (FY21: £nil).
Other assets of £34.5m (FY21: £22.4m) relate primarily to share warrants
that have a carrying value of £27.4m (FY21: £9.6m), and which have increased
by £17.8m due to a revaluation of the share warrants for Oxbotica and 80
Acres. Other assets include £4.4m of assets held for sale (FY21: £4.2m),
predominantly the Dartford spoke, and £1.9m of deferred tax assets (FY21:
£7.2m) relating to the historical losses of the group, which have decreased
due to a revised view of the timing of future profit flows.
Liabilities
Contract liabilities of £422.9m (FY21: £378.5m) primarily relate to the
consideration received in advance from UK and International Solutions
customers where revenue is recognised when the performance obligation is
satisfied, typically when a CFC goes live. Contract liabilities reflect
amounts invoiced to partners for their contracted contribution towards the
initial MHE investment made in a CFC, and increased by £69.1m during the year
(FY21: £94.4m). This was partly offset by £24.7m (FY21: £15.2m) in respect
of prior receipts recognised as revenue in the year. The current contract
liabilities balance of £29.1m (FY21: £21.8m) represents amounts due to be
recognised as revenue within 12 months of the year-end.
Trade and other payables increased by £115.0m to £508.2m (FY21: £393.2m)
mainly due to the improved management, in line with contractual terms, of
supplier payment terms (trade payables increased by £83.3m to £176.9m FY21:
£93.6m). The remaining increase relates to US property taxes due, which are
increasing in line with the growth of equipment in the jurisdiction, and an
increase in accruals, primarily relating to the timing of payroll.
Borrowings increased by £72.8m to £1,372.8m (FY21: £1,300.0m) largely due
to a £30.0m shareholder loan provided by M&S (the non-controlling
interest) to the Retail business and the £10.0m draw down by Retail of an
existing revolving credit facility. The remaining increase in borrowing is
largely due to the unwind of the liability element of the two unsecured
convertible bonds, which are held at amortised cost.
Lease liabilities increased by £3.9m to £532.3m (FY21: £528.4m) and
comprise land and building £441.4m (FY21: £431.6m), motor vehicles £65.5m
(FY21: £62.0m) and fixtures, fittings, plant and machinery £25.4m (FY21:
£34.8m). New lease liabilities within this total that were entered during the
year were £64.2m (FY21: £176.9m) and largely comprised land and buildings,
with the balance across motor vehicles and fixtures, fittings, plant and
machinery. Lease liabilities decreased by payments made of £85.7million
(FY21: £66.6m) and lease terminations (predominantly underutilised office
space), partly offset by £28.3m of accrued interest (FY21: £18.0m).
Lease liabilities due to third parties were £514.8m (FY21: £494.4m) and
excludes £17.5m (FY21: £34.0m) payable to MHE JVCo in which the Group holds
a 50% interest.
Other liabilities of £42.7m (FY21: £74.1m) principally relate to
dilapidation provisions and deferred tax liabilities. The £31.4m reduction in
other liabilities is largely driven by the release of various employee
incentive plan accruals of £26.6m, of which the majority relates to the
cancellation of the Ocado Retail management incentive scheme. Deferred tax
liabilities reduced by £9.7m to £14.7m (FY21: £24.4m) primarily due to tax
losses in Retail offsetting the liability relating to fixed assets.
Consolidated Income Statement
for the 52 weeks ended 27 November 2022
52 weeks ended 52 weeks ended
27 November 2022 28 November 2021
Notes Results before exceptional items* Exceptional items* Results before exceptional items* Exceptional items* Total
£m (Note 2.3) Total £m (Note 2.3) £m
£m £m £m
Revenue 2.2 2,513.8 - 2,513.8 2,498.8 (0.5) 2,498.3
Cost of sales (1,549.5) - (1,549.5) (1,562.9) (2.6) (1,565.5)
Gross profit 964.3 964.3 935.9 (3.1) 932.8
-
Other income 100.7 73.8 174.5 104.1 82.3 186.4
Distribution costs (830.2) (1.6) (831.8) (666.7) (7.2) (673.9)
Administrative expenses (656.1) (102.1) (758.2) (548.4) (29.2) (577.6)
Operating (loss)/profit before results of joint ventures and associate (421.3) (29.9) (451.2) (175.1) 42.8 (132.3)
Share of results of joint ventures and associate (1.4) - (1.4) (2.3) - (2.3)
Operating (loss)/profit (422.7) (29.9) (452.6) (177.4) 42.8 (134.6)
Finance income 2.4 41.8 - 41.8 10.0 - 10.0
Finance costs 2.4 (90.0) - (90.0) (52.3) - (52.3)
(Loss)/Profit before tax (470.9) (29.9) (500.8) (219.7) 42.8 (176.9)
Income tax credit/(charge) 18.7 0.8 19.5 (8.3) (0.5) (8.8)
(Loss)/profit for the period (452.2) (29.1) (481.3) (228.0) 42.3 (185.7)
Attributable to:
Owners of Ocado Group plc (455.5) (223.2)
Non-controlling interests (25.8) 37.5
(481.3) (185.7)
Loss per share pence Pence
Basic and diluted loss per share 2.5 (58.93) (30.18)
Earnings before interest, taxation, depreciation, amortisation, impairment and
exceptional items (EBITDA)*
Notes 52 weeks 52 weeks
ended ended
27 November 28 November
2022 2021
£m £m
Operating loss (452.6) (134.6)
Adjustments for:
Exceptional items* 2.3 29.9 (42.8)
Amortisation of intangible assets 3.2 114.7 78.0
Impairment of intangible assets 3.2 3.6 1.1
Depreciation of property, plant and equipment 3.3 154.4 84.4
Impairment of property, plant and equipment 3.3 9.3 9.3
Depreciation of right-of-use assets 3.4 66.0 65.6
Impairment of right-of-use assets 3.4 0.6 -
EBITDA* (74.1) 61.0
* See Section 6 Alternative Performance Measures
Consolidated Statement of Comprehensive Income
for the 52 weeks ended 27 November 2022
Notes 52 weeks 52 weeks
ended ended
27 November 28 November
2022 2021
£m £m
Loss for the period (481.3) (185.7)
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent periods:
(Loss)/gain arising on cash flow hedges (1.1) 0.4
Foreign exchange gain/(loss) on translation of foreign subsidiaries and joint 4.3 69.1 (10.5)
venture
Share of change in net assets of associate through other comprehensive income 0.4 -
Foreign exchange gain on translation of foreign joint venture reclassified to 4.3 - 0.8
profit or loss
Net other comprehensive income/(expense) that may be reclassified to profit or 68.4 (9.3)
loss in subsequent periods
Items that will not be reclassified to profit or loss in subsequent periods:
Gain/(loss) on equity investments designated as at fair value through other 33.3 (3.9)
comprehensive income
Income tax relating to items that will not be reclassified subsequently to (7.2) -
profit or loss
Net other comprehensive income/(expense) that will not be reclassified to 26.1 (3.9)
profit and loss in subsequent periods
Other comprehensive income/(expense) for the period, net of income tax 94.5 (13.2)
Total comprehensive expense for the period (386.8) (198.9)
Attributable to:
Owners of Ocado Group plc (361.0) (236.4)
Non-controlling interests (25.8) 37.5
(386.8) (198.9)
Consolidated Balance Sheet
as at 27 November 2022
Notes 27 November 2022
28 November 2021
£m
£m
Non-current assets
Goodwill 3.1 164.7 144.8
Other intangible assets 3.2 377.2 345.2
Property, plant and equipment 3.3 1,777.8 1,257.8
Right-of-use assets 3.4 493.9 494.6
Investment in joint venture and associate 15.6 26.5
Other financial assets 3.5 181.6 211.4
Trade and other receivables - 0.5
Costs to obtain contracts - 0.7
Deferred tax assets 1.9 7.2
Derivative financial assets 27.4 9.6
3,040.1 2,498.3
Current assets
Other financial assets 3.5 3.8 1.2
Inventories 106.8 86.7
Trade and other receivables 329.3 323.9
Cash and cash equivalents 1,328.0 1,468.6
Contract assets - 0.3
Costs to obtain contracts - 0.1
Derivative financial assets 0.8 0.3
1,768.7 1,881.1
Asset held for sale 4.4 4.2
1,773.1 1,885.3
Total assets 4,813.2 4,383.6
Current liabilities
Contract liabilities 2.2 (29.1) (21.8)
Trade and other payables (506.3) (393.2)
Borrowings 4.1 (10.2) -
Provisions (1.0) (1.0)
Lease liabilities 3.4 (58.6) (51.0)
Derivative financial liabilities (1.6) -
(606.8) (467.0)
Net current assets 1,166.3 1,418.3
Non-current liabilities
Contract liabilities 2.2 (393.8) (356.7)
Provisions (25.4) (48.7)
Borrowings 4.1 (1,362.6) (1,300.0)
Lease liabilities 3.4 (473.7) (477.4)
Trade and other payables (1.9) -
Deferred tax liabilities (14.7) (24.4)
(2,272.1) (2,207.2)
Net assets 1,934.3 1,709.4
Equity
Share capital 4.3 16.5 15.0
Share premium 4.3 1,939.3 1,372.0
Treasury shares reserve 4.3 (112.9) (113.0)
Other reserves 4.3 164.0 69.9
Retained earnings (169.0) 244.3
Equity attributable to owners of Ocado Group plc 1,837.9 1,588.2
Non-controlling interests 96.4 121.2
Total equity 1,934.3 1,709.4
Consolidated Statement of Changes in Equity
for the 52 weeks ended 27 November 2022
Equity attributable to owners of Ocado Group plc
Notes Share Share premium Treasury shares reserve Other reserves Retained earnings Total Non- controlling interests Total
capital
equity
£m £m £m £m £m £m
£m £m
Balance at 29 November 2020 15.0 1,361.6 (113.2) 76.9 421.4 1,761.7 71.4 1,833.1
Loss for the period - - - - (223.2) (223.2) 37.5 (185.7)
Other comprehensive expense - - - (13.2) - (13.2) - (13.2)
Total comprehensive expense for the period - - - (13.2) (223.2) (236.4) 37.5 (198.9)
Transactions with owners
- Issue of ordinary shares 4.3 - 1.9 - - - 1.9 - 1.9
- Allotted in respect of share option 4.3 - 8.5 - - - 8.5 - 8.5
schemes
- Disposal of treasury shares on exercise 4.3 - - 0.1 - 0.1 0.2 - 0.2
by participants
- Disposal of unallocated treasury shares 4.3 - - 0.1 - (0.1) - - -
- Share-based payments charge - - - - 36.0 36.0 - 36.0
- Tax on share-based payments charge - - - - 0.5 0.5 - 0.5
- Acquisition of Haddington Dynamics Inc. - - - 6.2 - 6.2 - 6.2
- IFRS 3 portion of the rollover shares - - - - 1.9 1.9 - 1.9
issued for the purchase of Kindred
Systems Inc.
- Additional investment in Jones Food - - - - 7.7 7.7 12.3 20.0
Company Limited
Total transactions with owners - 10.4 0.2 6.2 46.1 62.9 12.3 75.2
Balance at 28 November 2021 15.0 1,372.0 (113.0) 69.9 244.3 1,588.2 121.2 1,709.4
Loss for the period - - - - (455.5) (455.5) (25.8) (481.3)
Other comprehensive income/(expense) - - - 94.1 0.4 94.5 - 94.5
Total comprehensive income/(expense) for the period 94.1 (455.1) (361.0) (25.8) (386.8)
Transactions with owners
- Issue of ordinary shares 4.3 1.5 565.0 - - - 566.5 - 566.5
- Allotted in respect of share option 4.3 - 2.3 - - - 2.3 - 2.3
schemes
- Disposal of unallocated treasury shares 4.3 - - 0.1 - (0.1) - - -
- Share-based payments charge - - - - 42.0 42.0 - 42.0
- Tax on share-based payments charge - - - - 0.9 0.9 - 0.9
- Reduction in investment in Jones Food - - - - (1.0) (1.0) 1.0 -
Company Limited
Total transactions with owners 1.5 567.3 0.1 - 41.8 610.7 1.0 611.7
Balance at 27 November 2022 16.5 1,939.3 (112.9) 164.0 (169.0) 1,837.9 96.4 1,934.3
Consolidated Statement of Cash Flows
for the 52 weeks ended 27 November 2022
Notes 52 weeks 52 weeks
ended ended
27 November 28 November
2022 2021
£m £m
Cash (used in)/generated from operations 4.4 (4.0) 15.0
Insurance proceeds relating to business interruption and stock losses 54.3 30.0
Corporation tax received/(paid) 13.4 (26.2)
Interest paid (55.8) (34.8)
Net cash flow from/(used in) operating activities 7.9 (16.0)
Cash flows from investing activities
Insurance proceeds regarding Erith claim 2.5 2.0
Insurance proceeds relating to rebuilding Andover CFC 54.5 -
Net cash outflow from disposal of Speciality Stores Limited ("Fetch"), net of 2.3 - (0.4)
cash sold
Acquisition of subsidiaries, net of cash acquired (5.5) (189.7)
Purchase of intangible assets (137.1) (131.8)
Purchase of property, plant and equipment (648.8) (558.9)
Dividend received from joint venture 8.0 7.7
Proceeds from disposal of other treasury deposits - 370.0
Purchase of unlisted equity investments - (11.4)
Loans paid to joint ventures, associates and investee companies (0.6) (12.5)
Interest received 9.6 1.0
Net cash flow used in investing activities (717.4) (524.0)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 566.5 1.9
Proceeds from allotment of share options 0.8 8.5
Proceeds from disposal of treasury shares on exercise by participants - 0.2
Proceeds from interest-bearing loans and borrowings 4.2 40.6 500.0
Transaction costs on issue of borrowings 4.1 (3.4) (8.4)
Repayment of borrowings 4.2 - (225.0)
Repayment of principal element of lease liabilities (57.4) (48.6)
Net cash as a result of additional investment in Jones Food Company Limited by - 20.0
NCI
Cash received in respect of contingent consideration receivable - 33.9
Net cash flow from financing activities 547.1 282.5
Net decrease in cash and cash equivalents (162.4) (257.5)
Cash and cash equivalents at beginning of period 1,468.6 1,706.8
Effect of changes in foreign exchange rates 21.8 19.3
Cash and cash equivalents at end of period 1,328.0 1,468.6
Notes to the consolidated financial statements
Section 1 - Basis of preparation
1.1 General information
Ocado Group plc (hereafter the "Company") is a listed company, limited by
shares, incorporated in England and Wales under the Companies Act 2006
(company number: 07098618). The Company is the parent and the ultimate parent
of the Group. The address of its registered office is Buildings One & Two
Trident Place, Mosquito Way, Hatfield, Hertfordshire, United Kingdom, AL10
9UL. The financial statements comprise the results of the Company and its
subsidiaries (hereafter the "Group"). The financial period represents the 52
weeks ended 27 November 2022. The prior financial period represents the 52
weeks ended 28 November 2021.
1.2 Basis of preparation
The financial statements have been prepared in accordance with the Listing
Rules and the Disclosure Guidance and Transparency Rules of the United Kingdom
Financial Conduct Authority (where applicable), International Accounting
Standards in conformity with the requirements of the Companies Act 2006 and
UK-adopted International Financial Reporting Standards ("IFRS"), including the
interpretations issued by IFRS Interpretation Committee ("IFRIC"). The
accounting policies applied are consistent with those described in the Annual
Report and Accounts for the 52 weeks ended 27 November 2022 of the Group,
unless otherwise stated.
The financial information set out in this announcement does not constitute the
Group's statutory accounts for the 52 weeks ended 27 November 2022 or the 52
weeks ended 28 November 2021 within the meaning of Section 435 of the
Companies Act 2006 (the "Act"). The financial information for the period ended
28 November 2021 has been extracted from the statutory accounts on which an
unqualified audit opinion has been issued. Statutory accounts for the period
ended 27 November 2022 will be delivered to the Registrar of Companies in
advance of the Group's annual general meeting.
The financial statements are presented in pounds sterling, rounded to the
nearest hundred thousand unless otherwise stated, and have been prepared under
the historical cost convention, as modified by the revaluation of financial
asset investments and certain other financial assets and liabilities, which
are held at fair value.
The Directors consider it appropriate to adopt the going concern basis of
accounting in preparing the financial statements of the Group.
New standards, amendments and interpretations adopted by the Group
The Group has considered the following new standards, interpretations and
amendments to published standards that are effective for the Group for the
period beginning 29 November 2021, and concluded either that they are not
relevant to the Group or that they would not have a significant effect on the
Group's financial statements other than on disclosures:
Effective date
IFRS 4, IFRS 7, IFRS 9, IFRS 16, IAS 39 Interest Rate Benchmark Reform, Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, 1 January 2021
IFRS 4 and IFRS 16)
IFRS 4 Extension of the Temporary Exemption from Applying IFRS 9 1 January 2021
IFRS 16 Covid-19-Related Rent Concessions beyond 30 June 2021 1 April 2021
New standards, amendments and interpretations not yet adopted by the Group
The following new standards, interpretations and amendments to published
standards and interpretations that are relevant to the Group have been issued
but are not effective for the period beginning 29 November 2021, and have not
been adopted early:
Effective date
IAS 16 Property, Plant and Equipment - proceeds of intended use 1 January 2022
IAS 37 Onerous Contracts - costs of fulfilling a contract 1 January 2022
IFRS 3 Reference to the Conceptual Framework 1 January 2022
Annual Improvements to IFRS, 2018-2020 Cycle Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 1 January 2022
IFRS 17 Insurance Contracts 1 January 2023
IAS 1 Classification of Liabilities as Current or Non-Current 1 January 2023
IAS 1 Disclosure of Accounting Policies (amendments) 1 January 2023
IAS 8 Disclosure of Accounting Estimates (amendments) 1 January 2023
IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single 1 January 2023
Transaction (amendments)
IFRS 10 Consolidated Financial Statements (amendments) Deferred
IAS 28 Investments in Associates and Joint Ventures (amendments) Deferred
These standards, interpretations and amendments to published standards and
interpretations are not expected to have a material effect on the Group's
financial statements.
1.3 Critical accounting judgement and key sources of estimation uncertainty
The preparation of the Group's financial statements requires the use of
certain judgements, estimates and assumptions that affect the reported amounts
of assets, liabilities, income and expenses. Judgements and estimates are
evaluated regularly, and represent management's best estimates based on
historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. However,
events or actions may mean that actual results ultimately differ from those
estimates, and the differences may be material.
Critical accounting judgements
Critical accounting judgements are those that the Group has made in the
process of applying the Group's accounting policies and that have the most
significant effect on the amounts recognised in the financial statements.
Area Judgement Notes
Consolidation of Ocado Retail Limited ("ORL") Management reviews if the Group continues to have control over ORL in
accordance with IFRS 10. Management has concluded that the Group controls ORL,
since it holds 50.0% of the voting rights of the company, and an agreement
signed by the shareholders grants the Group determinative rights, after agreed
dispute-resolution procedures, in relation to the approval of ORL's business
plan and budget and the appointment and removal of ORL's Chief Executive
Officer who is responsible for directing the relevant activities of the
business.
Revenue from contracts with customers Due to the size and complexity of some of Ocado Solutions' contracts, there 2.2
are significant judgements that must be made. The identification of
performance obligations in a contract is a significant judgement, since it
determines when revenue is recognised. Management has judged that each
fulfilment channel is independent of each other and the provision of the use
of the Ocado Smart Platform ("OSP") in each fulfilment channel represents a
separate performance obligation, and that revenue should begin to be
recognised when a working solution relevant to the fulfilment channel is
operational for a customer. The identification of consideration and material
rights in a contract is another significant judgement, since it determines the
period over which upfront fees are recognised as revenue. Alternative
judgements would result in different amounts of revenue being recognised at
different times.
Capitalisation of internal development costs The Group capitalises internal costs directly attributable to the development 3.2
of both intangible and tangible assets. Management judgement is exercised in
determining whether the projects meet the criteria for capitalisation. During 3.3
the period, the Group has capitalised internal development costs amounting to
£117.5m and £63.9m on intangible and tangible assets respectively.
Provisions, Contingent Liabilities and Contingent Assets - Solutions Determined from assessments of progress against agreed milestones to highlight
if any financial penalties might be incurred in case of delay or
non-performance of milestones, in which case provisions are made in accordance
with IAS 37.
Exceptional items Management believes that separate presentation of the exceptional items 2.3
provides useful information in the understanding of the financial performance
of the Group and its businesses. Management exercises judgement in determining
the classification of certain transactions as exceptional items by considering
the nature, occurrence and the materiality of the amounts involved in those
transactions. Note 2.3 provides information on amounts disclosed as
exceptional items in the current and comparative financial statements together
with the Group's definition of exceptional items. These definitions have been
applied consistently over the periods.
Key estimation uncertainties
Key areas of estimation uncertainty are the key assumptions concerning the
future and other data points at the reporting date that may have a significant
risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next period.
Area Estimation uncertainty Note
Fair value measurement - contingent consideration due from M&S At the reporting date, the fair value of contingent consideration recognised 3.5
was £98.3m. The majority of this relates to an amount due from Marks and
Spencer Holdings Limited ("M&S"), agreed on the part disposal of Ocado
Retail Limited ("Ocado Retail") in August 2019. The payment of the contingent
consideration totalling £190.7m in cash is contingent on certain
contractually defined Ocado Retail performance measures being achieved during
the 2023 financial year. The outcome is a binary one, meaning should the
performance measures be achieved, this will trigger the payment in full of
£156.3m plus £34.4m of interest whereas should the performance measures not
be achieved, no consideration would be payable by M&S.
The fair value of the contingent consideration has been estimated using the
expected present value technique and is based on a number of
probability-weighted possible scenarios and applying an appropriate discount
rate to reflect the time value of the possible payment. The Group considered a
range of scenarios reflecting current market uncertainty, the impact of likely
adjustments to the performance target and Ocado Retail's current trading
performance. Management determined that the fair value of the contingent
consideration due from M&S as at the reporting date is £95.0m.
The fair value measurement of the asset at the reporting date is considered
principally to be sensitive to reasonably possible changes in the target
performance measure. To illustrate this sensitivity, if the performance
measure was £25m higher or lower than assumed in the valuation approach, the
fair value of the asset based on period end valuation model would increase by
£13.0m or decrease by £14.6m respectively
Impairment assessment - goodwill, property, plant and equipment and other The performance of the Group's impairment assessments requires management to 3.1
intangible assets make judgements in determining whether an asset or cash generating unit
('CGU') shows any indicators of impairment that would require an impairment 3.2
test to be carried out. The performance of impairment testing requires
management to make a number of estimates and assumptions in determining the 3.3
recoverable amount of the CGUs. These include forecast future cash flows
estimated based on management-approved financial budgets and plans, long-term
growth rates, and post-tax discount rate as well as an assessment of the
expected growth profile of the respective CGU. Key estimates used in
impairment tests and sensitivities are disclosed in the relevant notes.
Climate-related risks
The Group has considered the impact of climate-related risks, on its financial
performance and position, for example those that might have an effect on
forecast cash flows for the purposes of going concern, viability and
impairment assessments, or the useful lives of certain assets. Given the early
stages of our plans and our overall climate-related strategy, and the expected
timing of our roadmap to Net Zero targets, we have not identified a material
impact on the financial reporting judgements and estimates.
1.4 Going concern basis
Accounting standards require that Directors satisfy themselves that it is
reasonable for them to conclude on whether or not it is appropriate to prepare
financial statements on the going concern basis.
In assessing going concern, the Directors take into account the financial
position of the Group, its cash flows, liquidity position and borrowing
facilities, which are set out in the Finance Review. In addition, the
Directors consider the Group's business activities, together with factors that
are likely to affect its future development and position and the Group's
principal risks and the likely effectiveness of any mitigating actions and
controls available to the Directors.
At the reporting date, the Group had cash and cash equivalents of £1,328.0m
(2021: £1,468.6m), external gross debt of £1,887.6m (2021: £1,794.4m)
(excluding lease liabilities payable to MHE JVCo Limited of £17.5m (2021:
£34.0m)) and net current assets of £1,166.3m (2021: £1,418.3m). The Group
has a mixture of medium-term financing arrangements, including £600.0m of
senior unsecured convertible bonds due in 2025, £500.0m of senior unsecured
notes due in 2026, and £350.0m of senior unsecured convertible bonds due in
2027. The Group forecasts its liquidity and working capital requirements, and
ensures it maintains sufficient headroom so as not to breach any financial
covenants in its borrowing facilities, as well as maintaining sufficient
liquidity over the forecast period.
Having had consideration for these areas, the Directors have concluded that it
is appropriate to continue to adopt the going concern basis in preparing the
financial statements.
Section 2 - Results for the period
2.1 Segmental reporting
In accordance with IFRS 8 "Operating Segments", an operating segment is
defined as a business activity whose operating results are reviewed by the
chief operating decision maker ("CODM"), for which discrete information is
available. Operating segments are reported in a manner consistent with the
internal reporting provided to the CODM. The CODM, who is responsible for
allocating resources and assessing performance of the operating segments, has
been identified as the Board.
The Group has determined it has three reportable segments: Retail, UK
Solutions & Logistics, and International Solutions.
The Retail segment provides online grocery and general merchandise offerings
to customers within the United Kingdom, and comprises Ocado Retail Limited.
The UK Solutions & Logistics segment provides the IT platform, CFCs and
logistics for customers in the United Kingdom (Wm Morrisons Supermarkets
Limited and Ocado Retail Limited). The International Solutions segment
provides end-to-end online retail solutions to corporate customers outside the
United Kingdom. In order to reconcile segmental revenue* and segmental EBITDA*
with the Group's revenue and EBITDA*, two other headings are used: "Other"
represents revenue and costs that do not relate to any of the three segments;
"Group eliminations" relates to revenue and costs arising from intra-Group
transactions.
The Board assesses the performance of all segments on the basis of EBITDA*.
EBITDA*, as reported internally by segment, is the key measure utilised in
assessing the performance of operating segments within the Group.
Any transactions between the business segments are subject to normal
commercial terms and market conditions. Segmental results include items
directly attributable to a segment as well as those that can be allocated on a
reasonable basis.
The Group is not currently reliant on any major customer for 10% or more of
its revenue.
Segmental revenue* and segmental EBITDA* for the period are as follows:
Retail UK Solutions & Logistics International Solutions Other Group eliminations Total
£m £m £m £m £m £m
52 weeks ended 27 November 2022
Segmental revenue* 2,203.0 802.7 147.8 0.8 (640.5) 2,513.8
Segmental EBITDA* (4.0) 67.2 (113.2) (21.9) (2.2) (74.1)
52 weeks ended 28 November 2021
Segmental revenue 2,289.9 710.4 66.6 0.4 (568.5) 2,498.8
Segmental EBITDA 150.4 68.5 (119.3) (37.5) (1.1) 61.0
*See Section 6 Alternative Performance Measures
No measure of total assets and total liabilities is reported for each
reportable segment, as such amounts are not provided to the chief operating
decision maker.
2.2 Revenue
52 weeks 52 weeks ended
ended 28 November
27 November 2021
2022 £m
£m
Retail 2,203.0 2,289.9
UK Solutions & Logistics 802.7 710.4
International Solutions 147.8 66.6
Other 0.8 0.4
Group eliminations (640.5) (568.5)
Revenue 2,513.8 2,498.8
Timing of revenue recognition
At a point in time 2,179.9 2,289.9
Over time 333.9 208.9
2,513.8 2,498.8
Revenue split by geographical area
52 weeks 52 weeks ended
ended 28 November
27 November 2021
2022 £m
£m
UK 2,366.0 2,432.2
Overseas 147.8 66.6
2,513.8 2,498.8
Contract balances
27 November
2022 28 November
£m 2021
£m
Trade receivables 59.6 50.8
Accrued income 14.2 5.5
Contract assets - current - 0.3
Contract liabilities - current (29.1) (21.8)
Contract liabilities - non-current (393.8) (356.7)
Contract liabilities
The contract liabilities relate primarily to consideration received from
Solutions customers in advance, for which revenue is recognised as the
performance obligation is satisfied. The movement in contract liabilities
during the current and prior period is:
52 weeks ended 52 weeks ended
27 November 28 November
2022 2021
£m £m
Balance at beginning of period (378.5) (299.3)
Amount invoiced (69.1) (94.4)
Amount recognised as revenue 24.7 15.2
Balance at end of period (422.9) (378.5)
£24.7m (2021: £15.2m) of revenue recognised during the period was included
in contract liabilities at the beginning of the period.
The transaction price allocated to the performance obligations that are
unsatisfied (or partially unsatisfied) are expected to be recognised as
revenue as follows:
27 November 28 November
2022 2021
£m £m
Within one year 355.1 258.6
In between one and five years 2,127.2 1,643.5
In more than five years 4,827.9 4,016.3
Total transaction price 7,310.2 5,918.4
The total transaction price includes £1,972.1m (2021: £1,812.6m) in respect
of potential revenue in relation to the recovery of costs that are expected to
be incurred in existing Solutions contracts.
The amounts disclosed above in respect of unsatisfied and partially
unsatisfied performance obligations do not include estimates of any amounts
that will arise if the customer continues to receive services beyond the
estimated contract term. In addition, given the early stage of the customer
contracts, they are reduced, during the contract term, so as to limit the
estimate of future variable amounts to a conservative amount that is highly
probable and where a significant reversal of revenue will not occur. The
figures disclosed do not include any incremental amounts in relation to CFCs
and other solutions to which a customer is not yet committed. However, they do
include any amounts that are payable by the customer irrespective of whether
an option for future CFCs and other solutions is exercised (i.e. amounts that
are equivalent to a non-refundable deposit).
2.3 Exceptional items*
Exceptional items, as disclosed on the face of the Consolidated Income
Statement, are items that are considered to be significant due to their
size/nature, not in the normal course of business or are consistent with items
that were treated as exceptional in the prior periods or that may span
multiple financial periods. They have been classified separately in order to
draw them to the attention of the readers of the financial statements, and
facilitate comparison with prior periods to assess trends in the financial
performance more readily. The Group applies judgement in identifying the items
of income and expense that are recognised as exceptional.
Ref. 52 weeks ended 52 weeks ended
27 November 28 November
2022 2021
£m £m
Andover CFC A
- Insurance reimbursement income 67.4 78.6
- Other exceptional costs (3.4) (5.6)
64.0 73.0
Erith CFC B
- Insurance reimbursement income 6.4 2.0
- Other exceptional costs - (10.1)
6.4 (8.1)
Litigation costs C (26.5) (28.9)
Litigation settlement C - 1.8
Ocado Group Finance transformation and SaaS implementation costs D (7.0) (13.3)
Ocado Retail IT systems transformation E (4.0) (4.6)
(Loss)/gain on disposal of Speciality Stores Limited ("Fetch") F (1.4) 1.0
Gain on disposal of investment in Infinite Acres Holding B.V. G - 5.0
Change of fair value of contingent consideration receivable H (58.4) 16.9
Organisational Restructure I (3.0) -
Net exceptional (expense)/income (29.9) 42.8
* See Section 6 Alternative Performance Measures
A. Andover CFC
In February 2019, a fire destroyed the Andover CFC, including the building,
machinery and all inventory held on site. The Group has comprehensive
insurance and claims were formally accepted by the insurers.
Insurance reimbursement comprises reimbursement for the costs of rebuilding
the CFC and business interruption losses. The reimbursement has been
recognised as other income.
During the period, the Group reached an agreement with the insurers for the
final settlement of the insurance claim for a total of £273.8m, which
resulted in an additional insurance reimbursement income of £67.4m in the
period. This has then concluded the Andover insurance fire claim.
Other exceptional costs include, but are not limited to, write off of certain
assets, professional fees relating to the insurance claims process, business
rates, temporary costs of transporting employees to other warehouses to work
and redundancy costs. The cumulative exceptional costs recognised to date,
across all periods, amount to £124.9m.
B. Erith CFC
In July 2021, a fire destroyed part of the Erith CFC, including some machinery
and inventory held on site. The Group has comprehensive insurance and claims
were formally accepted by the insurer.
During the period, an agreement was reached with the insurers for the final
settlement in respect of the claims relating to the Erith fire for a total of
£8.3m. A final payment of £6.4m was received during the period and was
recognised as an insurance reimbursement income in FY22. The receipt of the
£6.4m has concluded the Erith fire claim.
Other exceptional costs include, but are not limited to, stock write-offs,
customer goodwill refund, impairment of certain fixed assets and labour costs.
The cumulative exceptional costs expensed to date amount to £10.1m.
C. Litigation costs and litigation settlement
Litigation costs are primarily costs incurred on patent infringement
litigation between the Group and AutoStore Technology AS ("AutoStore"). The
costs during the period amount to £26.5m (FY21: £28.9m). The prior year
litigation costs also include costs of legal proceedings brought by the Group
against certain former employees and Project Today Holdings Limited ("T0day"),
in relation to misappropriation and unlawful use of the Group's confidential
information and intellectual property, which was settled in 2021. The Group
received £1.8m as part of the settlement which was recognised as an
exceptional income in FY21. The net cumulative costs to date amount to
£57.6m.
D. Ocado Group Finance transformation and SaaS implementation costs
As part of the Group's Finance transformation programme, the Group implemented
various SaaS solutions, primarily Oracle Fusion, which went live in
FY21, across the business. Following the IFRIC agenda decision, in FY21, the
Group updated its accounting policy for the treatment of SaaS configuration
and customisation related costs under IAS 38 Intangible Assets. The cumulative
finance transformation and SaaS implementation costs expensed to date amount
to £28.6m and include £7.0m in FY22.
These amounts have been disclosed as exceptional items in both FY21 and FY22
because they are material and arise both from a strategic project that is not
considered by the Group to be part of the normal operating costs of the
business.
The finance transformation programme will continue through to, and will
complete in, FY23 with a focus on optimising and enhancing the SaaS solutions
and related finance processes to improve efficiency across the business.
Incremental costs incurred in relation to the ongoing programme will continue
to be disclosed as exceptional items. Ongoing licence fees for SaaS
arrangements and the cost of business as usual finance activity do not form
part of the exceptional items.
E. Ocado Retail IT systems transformation
In FY21, Ocado Retail initiated its IT Roadmap programme, which focuses on
delivering IT systems and services that will enable Ocado Retail to meet its
obligation to transition away from Ocado Group IT services, tools and support.
The IT Roadmap programme, which is expected to run until FY23, includes the
development of both on-premises and SaaS solutions. IT Roadmap programme costs
that meet assets recognition criteria will be recognised as intangible assets
and implementation costs that do not meet assets recognition criteria will be
expensed. The cumulative costs expensed to date amount to £8.6m.
F. (Loss)/gain on disposal of Speciality Stores Limited ("Fetch")
On 31 January 2021, Ocado Retail completed the sale of the entire share
capital of Speciality Stores Limited, its wholly-owned pets business trading
as Fetch, to Paws Holdings Limited ("Paws Holdings"), resulting in a gain on
disposal of £1.0m in FY21.
During the period, a provision of £1.4m was made against the deferred
consideration based on the likelihood of receipt.
G. Gain on disposal of investment in Infinite Acres Holding B.V. ("Infinite
Acres")
In October 2021, the Group sold its 33.3% interest in Infinite Acres Holding
B.V. ("Infinite Acres") to 80 Acres Urban Agriculture Inc. ("80 Acres") in
exchange for 2.5% of 80 Acres' issued share capital, resulting in a gain on
disposal of £5.0m.
H. Change in fair value of contingent consideration
In 2019, the Group sold Marie Claire Beauty Limited ("Fabled") to Next plc and
50% of Ocado Retail to Marks and Spencer Group plc ("M&S"). Part of the
consideration for these transactions was contingent on future events. The
Group holds contingent consideration at fair value through profit or loss, and
revalues it at each reporting date. A loss on revaluation of £58.4m (FY21:
£16.9m gain) is reported through exceptional items, primarily driven by the
reduction in the contingent consideration receivable from M&S. Refer to
Note 3.5 for details.
I. Organisational restructure
During the period, the Group undertook a partial reorganisation of its head
office functions resulting in redundancies and related costs of £3.0m.
Further organisational restructuring was announced in January 2023, affecting
around 250 people and incurring total related costs of £7.0m.
Tax impacts on exceptional items
The change in fair value of contingent consideration receivable is not subject
to tax. The remaining exceptional items are taxable or tax deductible and
give rise to a tax credit of £0.8m (FY21: tax charge of
£0.5m). A further tax charge of £6.4m (FY21: charge of £3.7m) has not
been recognised as it relates to tax losses which are not recognised for
deferred tax purposes.
2.4 Finance income and costs
52 weeks 52 weeks
ended ended
27 November 28 November
2022 2021
£m £m
Interest income on cash balances 12.5 1.0
Interest income on loans receivable 1.0 0.6
Gain on revaluation of derivative financial instruments designated at FVTPL 11.9 8.4
Net foreign exchange gain 16.4 -
Finance income 41.8 10.0
Interest expense on borrowings (61.3) (52.7)
Interest expense on lease liabilities (28.3) (18.0)
Interest expense on provisions (0.4) (0.9)
Foreign exchange gain/(loss) - 19.3
Finance costs (90.0) (52.3)
Net finance cost (48.2) (42.3)
2.5 Loss per share
The basic loss per share is calculated by dividing the loss attributable to
the owners of the Company by the weighted average number of ordinary shares in
issue during the period, excluding ordinary shares held pursuant to the
Group's Joint Share Ownership Scheme ("JSOS") and linked jointly owned equity
("JOE") awards under the Ocado Group Value Creation Plan ("Group VCP"), which
are accounted for as treasury shares.
The diluted loss per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion or vesting of all
potentially dilutive shares. The Company has five classes of instruments that
are potentially dilutive: share options; share interests held pursuant to the
Group's JSOS; linked JOE awards under the Group VCP; and shares under the
Group's staff incentive plans and convertible bonds.
There was no difference in the weighted average number of shares used for the
calculation of the basic and diluted loss per share since the effect of all
potentially dilutive shares outstanding was anti-dilutive.
The basic and diluted loss per share has been calculated as follows:
52 weeks 52 weeks
ended ended
27 November 28 November
2022 2021
million million
Weighted average number of shares at end of period 772.9 739.5
£m £m
Loss attributable to owners of the Company (455.5) (223.2)
pence pence
Basic and diluted loss per share (58.93) (30.18)
Section 3 - Assets and liabilities
3.1 Goodwill
Goodwill arises on the acquisition of a business when the fair value of the
consideration exceeds the fair value attributed to the net assets acquired
(including contingent liabilities). Goodwill is not amortised but subject to
annual impairment reviews. Goodwill generated from an acquisition is allocated
to and monitored at an operating segment level.
Carrying amount of goodwill as at 27 November 2022 is as follows:
Goodwill
£m
Cost
At 29 November 2020 4.7
Additions 139.8
Effect of changes in foreign exchange rates 0.3
At 28 November 2021 144.8
Additions 5.7
Effect of changes in foreign exchange rates 14.2
At 27 November 2022 164.7
Accumulated amortisation -
At 29 November 2020 -
Charge for the period -
At 28 November 2021 -
Charge for the period -
At 27 November 2022 -
Net book value
At 28 November 2021 144.8
At 27 November 2022 164.7
Goodwill - Impairment testing
Goodwill generated from an acquisition is allocated to and monitored at an
operating segment level. An analysis of goodwill by operating segment is:
Retail International Solutions UK Solutions & Logistics Goodwill
£m
At 28 November 2021 - 104.0 40.8 144.8
Additions - 4.1 1.6 5.7
Effect of changes in foreign exchange rates - 10.2 4.0 14.2
At 27 November 2022 - 118.3 46.4 164.7
The recoverable amounts of these CGUs are the higher of fair value less costs
of disposal ("FVLCD") and value in use. Management concluded that FVLCD was
more appropriate for determining the recoverable amount of the CGUs because
the Group's cash flows are mainly based on future growth expectation from CFC
commitments / expected capital investments.
FVLCD has been estimated using present value techniques using a discounted
cashflow method. The fair value method relies on inputs not normally
observable by market participants and is therefore categorised at Level-3 in
the fair value hierarchy.
The key assumptions used by management in estimating FVLCD were:
Discount rates - based on the Weighted Average Cost of Capital (WACC) of a
typical market participant. The post tax discount rate used was 11.0% (FY21:
7.2%). The discount rate has increased reflecting market volatility in risk
free rate and equity risk premium inputs.
Forecast cash flows - based on assumptions from the approved budget and 5-year
plan, with projections extending to 10 years for International Solutions. The
projections, which incorporate our best estimates of future cash flows and
take into account future growth and price increases, have proved to be
reliable guides in the past and the Directors believe the estimates are
appropriate.
Long-term growth rates - A long-term growth rate of 2.0% (FY21: 2.0%) was used
for cash flows outside the plan projections. This long term growth rate is
conservative and is considered to be lower than the long-term historic growth
rates in the underlying territories in which the CGUs operate and the
long-term growth rate prospects of the sectors in which the CGUs operate.
No impairment has been recognised. For UK Solutions and Logistics, a 1.5ppt
increase in discount rate would result in £132.0m of headroom being fully
eroded. The CGU has a carrying value of £531.9m.
3.2 Other intangible assets
Carrying amount of other intangible assets as at 27 November 2022 is as
follows:
Internally generated Other Total
intangible assets intangible £m
£m assets
£m
Cost
At 29 November 2020 357.5 63.9 421.4
Additions 7.6 14.8 22.4
Internal development costs capitalised 95.6 - 95.6
On acquisition of subsidiaries 64.6 10.1 74.7
Disposals (73.6) (10.0) (83.6)
Effect of changes in foreign exchange rates 0.4 - 0.4
At 28 November 2021 452.1 78.8 530.9
Additions 24.2 3.2 27.4
Internal development costs capitalised 116.4 1.1 117.5
On acquisition of subsidiaries 1.6 - 1.6
Reclassification (3.6) 0.8 (2.8)
Disposals (0.1) - (0.1)
Effect of changes in foreign exchange rates 0.3 7.6 7.9
At 27 November 2022 590.9 91.5 682.4
Accumulated amortisation
At 29 November 2020 (165.6) (24.6) (190.2)
Charge for the period (63.4) (14.6) (78.0)
Impairment charge - (1.1) (1.1)
Disposals 73.6 10.0 83.6
At 28 November 2021 (155.4) (30.3) (185.7)
Charge for the period (98.2) (16.5) (114.7)
Impairment charge (3.4) (0.2) (3.6)
Disposals - - -
Effect of changes in foreign exchange rates - (1.2) (1.2)
At 27 November 2022 (257.0) (48.2) (305.2)
Net book value
At 28 November 2021 296.7 48.5 345.2
At 27 November 2022 333.9 43.3 377.2
Included within intangible assets is capital work-in-progress for internally
generated intangible assets of £72.8m (2021: £39.7m) and £4.1m (2021:
£6.2m) for other intangible assets.
3.3 Property, plant and equipment
Carrying amount of property, plant and equipment as at 27 November 2022 is as
follows:
Land and Fixtures, Motor
buildings fittings, vehicles Total
£m plant and £m £m
machinery
£m
Cost
At 29 November 2020 89.8 920.7 11.0 1,021.5
Additions 32.8 489.9 0.1 522.8
Internal development costs capitalised - 35.0 - 35.0
Recognised on acquisition of subsidiaries - 9.1 - 9.1
Disposals - (24.7) (2.3) (27.0)
Effect of changes in foreign exchange rates - 1.9 - 1.9
At 28 November 2021 122.6 1,431.9 8.8 1,563.3
Additions 92.5 494.4 1.6 588.5
Internal development costs capitalised - 63.9 - 63.9
Recognised on acquisition of subsidiaries - 0.1 - 0.1
Reclassification 1.3 0.6 0.9 2.8
Disposals (3.7) (7.5) - (11.2)
Effect of changes in foreign exchange rates 0.1 39.4 - 39.5
At 27 November 2022 212.8 2,022.8 11.3 2,246.9
Accumulated depreciation
At 29 November 2020 (7.3) (220.1) (9.1) (236.5)
Charge for the period (2.2) (81.0) (1.2) (84.4)
Impairment charge - (9.3) - (9.3)
Impairment of Erith assets (see Note 2.3) - (2.1) - (2.1)
Disposals* - 24.5 2.3 26.8
At 28 November 2021 (9.5) (288.0) (8.0) (305.5)
Charge for the period (5.7) (148.5) (0.2) (154.4)
Impairment charge (0.1) (9.2) - (9.3)
Disposals - 2.2 - 2.2
Effect of changes in foreign exchange rates - (2.1) - (2.1)
At 27 November 2022 (15.3) (445.6) (8.2) (469.1)
Net book value
At 28 November 2021 113.1 1,143.9 0.8 1,257.8
At 27 November 2022 197.5 1,577.2 3.1 1,777.8
Included within property, plant and equipment is capital work-in-progress for
land and buildings of £84.5m (2021: £24.4m), fixtures, fittings, plant and
machinery of £382.0m (2021: £412.0m) and motor vehicles of £1.0m (2021:
£nil).
Impairment assessment - PPE and intangible assets
The Group has determined that assets directly associated with individual
International Solutions contracts (i.e. partner by partner) represent the
lowest level group of assets at which impairment can be assessed. The Group
has undertaken a review for indicators of impairment for each solution
contract and, where indicators of impairment exist, a full asset impairment
review was carried out comparing carrying value to fair value less cost to
dispose (FVLCD).
The key inputs and assumptions in arriving at the FVLCD are:
· expected future cash flows from the contract based on management
forecasts for a ten year period, including an assessment of ramp-up of
capacity, ongoing operating costs and associated increase in fees and capital
expenditure
· discount rate that specifically takes into account the risk
pertaining to the customer specific cash flows - 10.8%
· long-term growth rate to reflect growth outside of the forecast
period - 2.0%
Based on the outcome of the assessment, no impairment has been recognised.
For one CGU (a single partner contract with currently just one live CFC), a
25% reduction in the FY23 to FY30 forecasted module ramp-up profile would
result in £8.1m of headroom being fully eroded as a result of reduction in
anticipated future cash flows. Any further reductions in ramp-up profile would
lead to an impairment. The CGU has a carrying value of £53.2m.
3.4 Right-of-use assets and Lease Liabilities
An analysis of the Group's right-of-use assets and lease liabilities are as
follows:
Right of Use Assets Land and Fixtures, Motor
buildings fittings, vehicles Total
£ plant and £m £m
machinery
£m
Cost
At 29 November 2020 354.1 213.8 79.9 647.8
Additions 152.0 - 30.8 182.8
Disposals (35.0) (76.1) (5.7) (116.8)
At 28 November 2021 471.1 137.7 105.0 713.8
Additions 43.4 2.2 24.9 70.5
Disposals (5.8) (0.8) (4.7) (11.3)
At 27 November 2022 508.7 139.1 125.2 773.0
Accumulated depreciation
At 29 November 2020 (58.2) (173.5) (31.1) (262.8)
Charge for the period (31.5) (14.6) (19.5) (65.6)
Disposals 27.6 75.9 5.7 109.2
At 28 November 2021 (62.1) (112.2) (44.9) (219.2)
Charge for the period (32.8) (11.8) (21.4) (66.0)
Impairment charge (0.6) - - (0.6)
Disposals 1.8 0.7 4.2 6.7
At 27 November 2022 (93.7) (123.3) (62.1) (279.1)
Net book value
At 28 November 2021 409.0 25.5 60.1 494.6
At 27 November 2022 415.0 15.8 63.1 493.9
Lease liabilities
Total
£m
At 29 November 2020 407.8
Additions 176.9
Terminations (7.7)
Interest 18.0
Payments (66.6)
At 28 November 2021 528.4
Additions 64.2
Terminations (2.9)
Interest 28.3
Payments (85.7)
At 27 November 2022 532.3
27 November
2022 28 November
£m 2021
£m
Disclosed as:
Current 58.6 51.0
Non-current 473.7 477.4
532.3 528.4
External obligations under lease liabilities are £514.8m (2021: £494.4m),
excluding £17.5m (2021: £34.0m) payable to MHE JVCo Limited, a company
incorporated in England and Wales in which the Group holds a 50% interest.
The existing lease arrangements entered into by the Group contain no
restrictions concerning dividends, additional debt and further leasing.
Furthermore, no material leasing arrangements exist relating to contingent
rent payable, renewal or purchase options and escalation clauses.
The expenses relating to short-term leases and leases of low-value items not
included in the measurement of the lease liability are as follows:
52 weeks ended 52 weeks ended
27 November 28 November
2022 2021
£m £m
Short-term leases 3.2 0.2
Leases of low-value items - 0.2
3.2 0.4
3.5 Other financial assets
Note 27 November 2022
£m 28 November
2021
£m
Contingent consideration receivable 98.3 156.7
Unlisted equity investments held at FVTOCI 69.8 30.4
Unlisted equity investment held at FVTPL - 1.0
Loans receivable held at FVTPL 5.2 2.4 10.9
Loan receivable held at amortised cost 5.2 14.2 12.1
Contributions towards dilapidations costs receivable 0.7 1.5
Other financial assets 185.4 212.6
Disclosed as:
Current 3.8 1.2
Non-current 181.6 211.4
185.4 212.6
Contingent consideration receivable
Total contingent consideration receivable at the balance sheet date is £98.3m
(2021: £156.7m), and comprises two amounts: £95.0m (2021: £152.6m) due from
Marks and Spencer Holdings Limited ("M&S") relating to the part-disposal
of Ocado Retail Limited ("Ocado Retail") in August 2019; and £3.3m (2021:
£4.1m) due from Next Holdings Limited ("Next") relating to the disposal of
Marie Claire Beauty Limited ("Fabled") in July 2019. Refer to Note 1.3 for
details on the estimation uncertainty in relation to the fair value
measurement of contingent consideration receivable.
Contingent consideration due from M&S
Under the terms of the part-disposal of Ocado Retail during 2019, there is a
contingent consideration due from M&S to Ocado Group of £190.7m that is
payable in cash by no later than August 2024. This payment is dependent on
certain contractually defined Ocado Retail performance measures ("the Target")
being achieved during the 2023 financial year. The outcome is a binary one,
meaning should the Target be achieved, this will trigger the payment in full
of £190.7m (£156.3m plus £34.4m of interest, due no later than August
2024). Conversely, should the Target not be achieved, no consideration would
be payable by M&S. The contractual arrangement with M&S expressly
provides for the Target to be adjusted by the shareholders for actions taken
since the part-disposal was effected.
Whilst the contractual outcome is binary, the Group is required, under IFRS 9
Financial Instruments, to determine the fair value of the contingent
consideration receivable from M&S. The outcome of this determination is a
fair value at the period end of £95.0m, which is a reduction of £57.6m from
the fair value of £152.6m recorded at the end of the prior period.
The fair value of £95.0m has been estimated using the expected present value
technique and is based on a number of probability-weighted possible scenarios
and applying an appropriate discount rate to reflect the timing of the
possible payment. We have considered a range of scenarios reflecting current
market uncertainty, the impact of likely adjustments to the performance
measures target and Ocado Retail's current trading performance. A discount
rate of 10.0% was used. There is significant uncertainty in this estimate of
fair value and given the binary nature of the contractual agreement it is
reasonably possible that the actual amount received at the point of settlement
will be materially different to the fair value currently recorded. Given there
is a degree of subjectivity in the determination of the post-adjustment
performance measure, there is also a possibility that the contingent
consideration may be agreed through a negotiated settlement between the two
shareholders.
Contingent consideration due from Next
The consideration due from Next is a percentage of the sales of Fabled for the
period to July 2024. The total cash still receivable under the earn-out
arrangement is estimated to be £3.7m (2021: £5.1m), payable in tranches in
March and September each year.
Unlisted equity investments held at FVTOCI
% of share capital held Carrying amount
Company Principal activity Country of incorporation 27 November 2022 28 November 27 November 2022 28 November
2021 £m 2021
£m
80 Acres Urban Agriculture Inc. Vertical farming United States of America 2.5% 2.5% 10.2 11.1
Oxbotica Limited(1) Autonomous vehicle technology England and Wales 8.8% 8.8% 36.8 10.3
Paneltex Limited Manufacturing refrigerated vehicles England and Wales 25.0% 25.0% 7.6 6.1
Inkbit Corporation 3D printing United States of America 5.5% 5.5% 3.5 2.9
Sanctuary Cognitive Systems Corporation Artificial intelligence Canada 1.6% - 1.0 -
Wayve Technologies Limited(2) Autonomous vehicle technology England and Wales 2.6% - 10.7 -
Unlisted equity investments held at FVTOCI 69.8 30.4
(1)The fair value of the Group's equity investment in Oxbotica Limited
("Oxbotica") increased as a result of the company undertaking a series C
fundraise. The Series C Fundraising was successfully completed in December
2022.
(2)During the period, Wayve Technologies Limited ("Wayve"), successfully
completed its Series B Fundraising resulting in the Group's convertible loan
note converting into equity.
The investment in Paneltex Limited has not been treated as an associate since
the Group does not have significant influence over the company. In arriving at
this decision, the Board has reviewed the conditions set out in IAS 28
"Investments in Associates and Joint Ventures" and concluded that, despite the
size of the Group's holding, it is unable to participate in the financial and
operating policy decisions of Paneltex due to the position of the majority
shareholder as Executive Managing Director. The relationship between the Group
and the company is at arm's length.
Loans receivable held at FVTPL
Carrying amount
Borrower Principal amount Coupon rate Repayment due 27 November 2022 28 November
£m 2021
£m
Wayve Technologies Limited £10.0m - August 2024 - 8.8
Karakuri Limited £1.7m 8% October 2023 1.8 1.9
Myrmex Inc. €0.2m 5% July 2022 - 0.2
Inkbit Corporation US$0.6m 6% November 2024 0.6 -
Loans receivable held at FVTPL 2.4 10.9
Loans receivable held at FVTPL includes a convertible loan to Karakuri.
Interest is chargeable on the £1.7 million principal at 8.0% per annum. The
principal and any unpaid accrued interest are convertible into preference
shares of Karakuri at the option of the Group. Otherwise, the loan is
repayable in full in October 2023 along with any unpaid interest. The fair
value of the loan receivable at 27 November 2022 is £1.8m (2021: £1.9m).
Loan receivable held at amortised cost
The loan receivable held at amortised cost is a USD15m loan to Infinite Acres
Holding B.V. In October 2021, following the Group's divestment in Infinite
Acres, 80 Acres Urban Agriculture, Inc. ("80 Acres") became a guarantor to the
loan. Interest is chargeable on the USD15.0m principal at 5% per annum to
December 2021, and 7% thereafter. The loan is repayable in full in September
2024, along with any unpaid accrued interest.
Contributions towards dilapidations costs receivable
Contributions towards dilapidation costs are due from the former tenant of two
properties whose leases the Group took over in 2017, and will be paid when the
dilapidations costs are incurred on expiry of the leases.
Section 4 - Capital structure and financing costs
4.1 Borrowings
27 November 28 November
2022 2021
£m £m
Senior unsecured convertible bonds 835.9 805.3
Senior unsecured notes 496.3 494.6
Revolving credit facility 10.0 -
Other borrowings 30.6 0.1
Borrowings 1,372.8 1,300.0
Disclosed as:
Current 10.2 -
Non-current 1,362.6 1,300.0
1,372.8 1,300.0
Senior unsecured convertible bonds and senior unsecured notes
Carrying amount
Facility Inception Coupon rate Maturity 27 November 2022 28 November 2021
£m £m
£600m senior unsecured convertible bonds December 2019 0.875% December 2025 540.7 522.0
£350m senior unsecured convertible bonds June 2020 0.750% January 2027 295.2 283.3
£500m senior unsecured notes October 2021 3.875% October 2026 496.3 494.6
The £600.0m of senior unsecured convertible bonds were issued in December
2019, raising £592.1m, net of transaction fees. At the date of issue, the
liability component was valued at £485.0m, with the remaining £107.1m
recognised in the convertible bonds reserve.
The £350.0m of senior unsecured convertible bonds were issued in June 2020,
raising £343.4m, net of transaction fees. At the date of issue, the liability
component was valued at £266.0m, with the remaining £77.4m recognised in the
convertible bonds reserve.
The £500.0m of senior unsecured notes were issued in October 2021, raising
£491.6m, net of transaction fees. Part of the proceeds were used to repay the
£225m senior secured notes early. The senior secured notes were issued in
June 2017, raising £250.0m, and £25.0m had been repaid in 2019. Unamortised
borrowing costs of £3.2m were written off at the time of repayment.
Revolving credit facility
In June 2022, the Group entered into a three-year multi-currency Revolving
Credit Facility ("RCF'') of £300m with a syndicate of international banks.
The RCF is due to mature on 20 June 2025. As at 27 November 2022, the facility
remains undrawn. Interest is payable on the amounts drawn down at a margin of
2.25% plus the applicable reference rate depending on the currency of the
amounts drawn down. The Group is subject to certain financial covenants under
this facility.
Transaction costs of £3.4m relating to the RCF have been capitalised and are
being amortised in the Income Statement on a straight-line basis over the term
of the RCF.
The Group had an existing RCF of which £10.0m was drawn at year end.
Other borrowings
Other borrowings include a shareholder loan of £30.0m provided to Ocado
Retail from the non-controlling interest in November 2022. The loan has a
termination date of August 2039 and incurs interest at SONIA + 4% per annum.
27 November 2022 Due in between one and two years Due in between two and five years Total
Due in less than one year £m £m Due in more than five years £m
£m £m
Senior unsecured convertible bonds - - 835.9 - 835.9
Senior unsecured notes - - 496.3 - 496.3
Revolving credit facility 10.0 - - - 10.0
Other borrowings 0.2 0.1 0.3 30.0 30.6
Borrowings 10.2 0.1 1,332.5 30.0 1,372.8
Due in between one and two years Due in between two and five years Total
Due in less than one year £m £m Due in more than five years £m
28 November 2021 £m £m
Senior unsecured convertible bonds - - 522.0 283.3 805.3
Senior unsecured notes - - 494.6 - 494.6
Other borrowings - 0.1 - - 0.1
Borrowings - 0.1 1,016.6 283.3 1,300.0
The Group reviews its financing arrangements regularly. The senior unsecured
notes and senior unsecured convertible bonds contain typical restrictions
concerning dividend payments and additional debt and leases.
4.2 Movements in net (debt)/cash
Non-cash movements
Notes 28 November Cash flows Net new lease Foreign exchange Unwinding of interest 27 November
2021 £m liabilities £m £m 2022
£m £m £m
Cash and cash equivalents 1,468.6 (162.4) - 21.8 - 1,328.0
Liabilities from financing activities:
Borrowings 4.1 (1,300.0) (40.6) - - (32.2) (1,372.8)
Lease liabilities 3.4 (528.4) 57.4 (61.3) - - (532.3)
(1,828.4) 16.8 (61.3) - (32.2) (1,905.1)
Net debt (359.8) (145.6) (61.3) 21.8 (32.2) (577.1)
Non-cash movements
Notes 29 November Cash flows Net new lease Foreign exchange Unwinding of interest 28 November
2020 £m liabilities £m £m 2021
£m £m £m
Other treasury deposits 370.0 (370.0) - - - -
Cash and cash equivalents 1,706.8 (257.5) - 19.3 - 1,468.6
2,076.8 (627.5) - 19.3 - 1,468.6
Liabilities from financing activities:
Borrowings 4.1 (997.4) (266.5) - - (36.1) (1,300.0)
Lease liabilities 3.4 (407.8) 48.6 (169.2) - - (528.4)
(1,405.2) (217.9) (169.2) - (36.1) (1,828.4)
Net debt 671.6 (845.4) (169.2) 19.3 (36.1) (359.8)
At the reporting date, the Group had net debt of £559.6m (2021: net debt
£325.8m), excluding lease liabilities of £17.5m (2021: £34.0m) payable to
MHE JVCo Limited (Note 5.2). £2.9m (2021: £4.4m) of the Group's cash and
cash equivalents is considered to be restricted, and is not available to
circulate within the Group on demand.
4.3 Share capital and reserves
Share capital and share premium
At the reporting date, the number of ordinary shares available for issue under
the Block Listing Facilities was 9,447,982 (2021: 7,259,291). These ordinary
shares will only be issued and allotted when the shares under the relevant
share plan have vested, or the share options have been exercised. They are,
therefore, not included in the total number of ordinary shares outstanding
below.
The movements in called-up share capital and share premium are set out below:
Ordinary Share Share
shares capital premium
million £m £m
Balance at 29 November 2020 748.1 15.0 1,361.6
Issue of ordinary shares 1.4 - 1.9
Allotted in respect of share option schemes 1.9 - 8.5
Balance at 28 November 2021 751.4 15.0 1,372.0
Issue of ordinary shares 73.9 1.5 565.0
Allotted in respect of share option schemes 0.6 - 2.3
Balance at 27 November 2022 825.9 16.5 1,939.3
In June 2022, Ocado Group plc successfully completed the placing of 72,327,044
new ordinary shares of 2 pence each (the "Placing Shares") at a price of
£7.95 per Placing Share (the "Placing Price"), with existing and new
institutional investors. In addition, retail investors subscribed for a total
of 246,405 new Ordinary Shares at the Placing Price (the "Retail Offer
Shares") and the Group CEO, CFO and GC subscribed for an aggregate of 150,944
new ordinary shares at the Placing Price (the "Subscription Shares").
In aggregate, the Placing Shares, the Retail Offer Shares and the Subscription
Shares comprise 72,724,393 new Ordinary Shares, which raised proceeds of
£564.1m net of qualifying transaction costs directly related to the issuance
of shares amounting to £14.1m, which were deducted from the share premium.
Included in the total number of ordinary shares outstanding above are
10,438,075 (2021: 10,454,148) ordinary shares held by the Group's Employee
Benefit Trust . The ordinary shares held by the Trustee of the Group's
Employee Benefit Trust pursuant to the JSOS, and the linked jointly owned
equity ("JOE") awards under the Ocado Group Value Creation Plan ("Group VCP")
are treated as treasury shares on the Consolidated Balance Sheet in accordance
with IAS 32 ''Financial Instruments: Presentation''. These ordinary shares
have voting rights but these have been waived by the Trustee (although the
Trustee may vote in respect of shares that have vested and remain in the
Trust). The number of allotted, called-up and fully paid shares, excluding
treasury shares, at the end of each period differs from that used in the basic
loss per share calculation in Note 2.5, since the basic loss per share is
calculated using the weighted average number of ordinary shares in issue
during the period, excluding treasury shares.
Treasury shares reserve
The treasury shares reserve arose when the Group issued equity share capital
under its JSOS. In 2019, the Group issued share capital relating to the linked
jointly owned equity ("JOE") awards under the Group VCP. The shares under both
plans are held in trust by the Trustee of the Group's Employee Benefit Trust.
Treasury shares cease to be accounted for as such when they are sold outside
the Group or the interest is transferred in full to the participant pursuant
to the terms of the JSOS and Group VCP. Participants' interests in unexercised
shares held by participants are not included in the calculation of treasury
shares.
Other reserves
The movements in other reserves are set out below:
Other reserves
Reverse Convertible bonds reserve Merger reserve Translation Fair value Hedging reserve Total
acquisition £m £m reserve reserve £m £m
reserve £m £m
£m
Balance at 29 November 2020 (116.2) 184.5 - (1.3) 10.0 (0.1) 76.9
Gain arising on cash flow hedges - - - - - 0.4 0.4
Foreign exchange gain/(loss) on translation of foreign subsidiaries and joint - - - (10.5) - - (10.5)
venture
Foreign exchange gain on translation of foreign joint venture reclassified to - - - 0.8 - - 0.8
profit or loss
Loss on equity investments designated as at fair value through other - - - - (3.9) - (3.9)
comprehensive income
Acquisition of Haddington Dynamics Inc. - - 6.2 - - - 6.2
Balance at 28 November 2021 (116.2) 184.5 6.2 (11.0) 6.1 0.3 69.9
Loss arising on cash flow hedges - - - - - (1.1) (1.1)
Foreign exchange gain/(loss) on translation of foreign subsidiaries and joint - - - 69.1 - - 69.1
venture
Gain on equity investments designated as at fair value through other - - - - 33.3 - 33.3
comprehensive income
Tax on gain on equity investments - - - - (7.2) - (7.2)
Balance at 27 November 2022 (116.2) 184.5 6.2 58.1 32.2 (0.8) 164.0
Reverse acquisition reserve
The acquisition by the Company of the entire issued share capital in 2010 of
Ocado Holdings Limited was accounted for as a reverse acquisition under IFRS 3
"Business Combinations". Consequently, the previously recognised book values
and assets and liabilities have been retained, and the consolidated financial
information for the period to 27 November 2022 has been presented as if the
Company had always been the parent company of the Group.
Convertible bonds reserve
The convertible bonds reserve contains the equity components of convertible
bonds issued by the Group, net of apportioned transaction costs. The carrying
amounts of the equity components will not change until the liability
components are redeemed through repayment or conversion into ordinary shares.
Refer to Note 4.1 for further details on the senior unsecured convertible
bonds issued by the Group.
Merger reserve
The merger reserve comprises shares issued as consideration for Haddington
Dynamics Inc.
Translation reserve
The translation reserve comprises cumulative foreign exchange differences on
the translation of foreign subsidiaries.
Fair value reserve
The fair value reserve comprises cumulative changes in the fair value of
assets and liabilities recognised through other comprehensive income.
Hedging reserve
The hedging reserve comprises cumulative gains and losses on movements in the
Group's hedging arrangements.
4.4 Cash generated from operations
A reconciliation from profit before tax to cash generated from operations is
as follows:
Notes 52 weeks 52 weeks
ended ended
27 November 28 November
2022 2021
£m £m
Cash flows from operating activities
Loss before tax (500.8) (176.9)
Adjustments for
- Revenue recognised from long-term contracts 2.2 (24.7) (15.2)
- Depreciation, amortisation and impairment charges 348.6 238.4
- Property, plant and equipment write off 10.8 -
- Insurance reimbursement recognised as other income 2.3 (73.8) (80.6)
- Non-cash exceptional items 2.3 59.8 (7.5)
- Share of results of joint ventures and associate 1.4 2.3
- Movement of provisions (26.2) 4.2
- Net finance cost 2.4 48.2 42.3
- Share-based payments charge 42.0 35.5
Changes in working capital
- Movement in contract assets 0.3 0.1
- Movement of contract liabilities 78.7 107.0
- Movement of inventories (10.9) (55.2)
- Movement of trade and other receivables (50.7) (77.6)
- Movement of trade and other payables 93.3 (1.8)
Cash (used in)/generated from operations (4.0) 15.0
Section 5 - Other notes
5.1 Commitments
Capital commitments
Contracts placed for future capital expenditure but not provided for in the
financial statements are as follows:
27 November 2022
£m 28
November 2021
£m
Land and buildings 0.4 0.2
Property, plant and equipment 275.1 374.0
Capital commitments 275.5 374.2
Of the total capital expenditure committed at the end of the period, £232.4m
relates to new CFCs (2021: £348.9m), £1.3m to existing CFCs (2021: £1.0m),
£7.6m to fleet costs (2021: £7.7m) and £26.5m to technology projects (2021:
£6.9m).
5.2 Related party transactions
Key management personnel
Only members of the Board (the Executive and Non-Executive Directors) are
recognised as being key management personnel. It is the Board that has
responsibility for planning, directing and controlling the activities of the
Group. The aggregate emoluments of key management personnel are as follows:
52 weeks ended 27 November 2022 52 weeks ended 28 November 2021
£m £m
Salaries and other short-term employee benefits 5.8 5.0
Post-employment benefits 0.2 0.2
Share-based payments 11.4 16.2
Aggregate emoluments 17.4 21.4
Due to restrictions in place during the Covid-19 pandemic, chartered flights
were required on a small number of occasions in order for key management
personnel to be able to visit the Group's global sites and undertake client
meetings. The Group chartered aircraft through accessing flying hours owned by
a family member of one of the key management personnel. The price paid was at
the open market rate and amounted to £32,100 (2021: £72,000). At the end of
the period, no amounts were owed in relation to the purchase of these flights.
Other related party transactions with key management personnel made during the
period amount to £nil (2021: £nil). All transactions were on an arm's length
basis. At the reporting date, no amounts were owed by key management personnel
to the Group (2021: £nil). During the period, there were no other material
transactions or balances between the Group and its key management personnel or
members of their close family.
Joint venture
MHE JVCo Limited
The following transactions were carried out with MHE JVCo:
52 weeks ended 52 weeks ended
27 November 2022 28 November 2021
£m £m
Dividend received from MHE JVCo 8.0 7.7
Supplier invoices paid on behalf of MHE JVCo 1.1 2.5
Capital element of lease liability instalments paid to MHE JVCo 15.1 14.2
Capital element of lease liability instalments due to MHE JVCo 1.4 1.4
Interest element of lease liability instalments accrued or paid to MHE JVCo 1.3 2.1
During the period, the Group incurred lease instalments (including interest)
of £17.8m (2021: £17.7m) to MHE JVCo.
Of the lease instalments incurred, £8.2m was recovered directly from Wm
Morrisons Supermarkets Limited in the form of other income (2021: £9.0m).
Included within trade and other receivables is a balance of £2.3m due from
MHE JVCo (2021: £0.2m), which primarily relates to capital recharges.
Included within trade and other payables is a balance of £1.8m due to MHE
JVCo (2021: £1.8m).
Included within lease liabilities is a balance of £17.5m due to MHE JVCo
(2021: £34.0m).
Associate
Karakuri Limited
During a prior period, the Group lent £1.7m to Karakuri. The loan was
recognised within other financial assets, and its carrying amount was £1.8m
(2021: £1.9m) at the reporting date. During the period, £0.2m (2021: £0.1m)
of interest was recognised within finance income. Karakuri also issued
warrants to Ocado to subscribe for additional shares in the future. The
warrants expire in 2024. No other transactions that require disclosure under
IAS 24 "Related Party Disclosures" have occurred during the period.
5.3 Post-Balance Sheet events
Exercise of warrants in Oxbotica Limited
On 01 December 2022, Oxbotica Limited ("Oxbotica"), a company in which the
Group holds a minority interest, successfully completed its Series C
Fundraising. This resulted in the Group's warrants being exercised to acquire
21,934 B shares. Following exercise of the warrants and the Series C
fundraising, the Group holds a 12.5% interest in Oxbotica.
Section 6 - Alternative Performance Measures
The Group assesses its performance using a variety of alternative performance
measures that are not defined under IFRS and are, therefore, termed "non-IFRS"
measures. These measures provide additional useful information on the
underlying trends, performance and position of the Group. The non-IFRS
measures used are:
● Exceptional items;
● EBITDA;
● Segmental revenue;
● Segmental EBITDA;
● Segmental gross profit;
● Segmental other income;
● Segmental distribution costs and administrative expenses;
● Net cash/debt;
● External gross debt;and
● International Solutions fees invoiced
Reconciliation of these non-IFRS measures with the nearest measures prepared
in accordance with IFRS are presented below. The alternative performance
measures used may not be directly comparable with similarly titled measures
used by other companies.
Exceptional items
The Consolidated Income Statement identifies separately trading results before
exceptional items. The Directors believe that presentation of the Group's
results in this way is important for understanding the Group's financial
performance. This presentation is consistent with the way that financial
performance is measured by management and reported to the Board, and assists
in providing a meaningful analysis of the trading results of the Group. This
also facilitates comparison with prior periods to assess trends in financial
performance more readily.
The Group applies judgement in identifying significant items of income and
expenditure that are recognised as exceptional to help provide an indication
of the Group's underlying business. In determining whether an event or
transaction is exceptional in nature, management considers quantitative as
well as qualitative factors such as the frequency or predictability of
occurrence.
Examples of items that the Group considers exceptional include corporate
reorganisations, material litigation, and any other material costs outside of
the normal course of business as determined by management.
The Group has adopted a three-columned approach to the Consolidated Income
Statement to aid clarity and allow users of the financial statements to
understand more easily the performance of the underlying business and the
effect of one-off events.
Exceptional items are disclosed in Note 2.3.
EBITDA
In addition to measuring its financial performance based on operating profit,
the Group measures performance based on EBITDA. EBITDA is defined as the
Group's earnings before depreciation, amortisation, impairment, net finance
cost, taxation and exceptional items. EBITDA is a common measure used by
investors and analysts to evaluate the operating financial performance of
companies.
The Group considers EBITDA to be a useful measure of its operating performance
because it approximates the underlying operating cash flow by eliminating
depreciation and amortisation. EBITDA is not a direct measure of liquidity,
which is shown by the Consolidated Statement of Cash Flows, and needs to be
considered in the context of the Group's financial commitments.
A reconciliation of operating profit with EBITDA can be found on the face of
the Consolidated Income Statement.
Segmental revenue
Segmental revenue is a measure of reported revenue for the Group's Retail, UK
Solutions & Logistics and International Solutions segments. A
reconciliation of revenue for the segments with revenue for the Group can be
found in Notes 2.1 and 2.2.
Segmental EBITDA
The financial performance of the Group's segments is assessed using EBITDA, as
reported internally.
A reconciliation of EBITDA of the segments with EBITDA of the Group can be
found in Note 2.1.
Segmental gross profit
Segmental gross profit is a measure that seeks to reflect the profitability of
segments in relation to their revenues earned.
A reconciliation of reported gross profit, the most directly comparable IFRS
measure, with segmental gross profit is set out below:
52 weeks ended 27 November 2022 52 weeks ended 28 November 2021
£m £m
Retail gross profit 657.9 737.5
UK Solutions & Logistics gross profit 802.7 710.4
International Solutions gross profit 144.9 57.5
Other gross profit (0.7) (1.0)
Group eliminations gross profit (640.5) (568.5)
Reported gross profit 964.3 935.9
Segmental other income
Segmental other income is a measure that seeks to reflect segmental income
which is not generated through the primary trading activities of the segments
(for example, volume-related rebates from suppliers in the Retail segment).
A reconciliation of reported other income, the most directly comparable IFRS
measure, with segmental other income is set out below:
52 weeks ended 27 November 2022 52 weeks ended 28 November 2021
£m £m
Retail other income 82.0 84.8
UK Solutions & Logistics other income 3.6 3.5
International Solutions other income 0.2 0.6
Other income 14.9 15.2
Group eliminations other income - -
Reported other income 100.7 104.1
Segmental distribution costs and administrative expenses
Segmental distribution costs and administrative expenses is a measure that
seeks to reflect the performance of the Group's segments in relation to the
long-term, sustainable growth of the Group. These measures exclude certain
costs that are not allocated to a specific segment: depreciation,
amortisation, impairment and other central costs.
A reconciliation of reported distribution costs and administrative expenses,
the most directly comparable IFRS measures, with segmental distribution costs
and administrative expenses, is set out below:
52 weeks ended 27 November 2022 52 weeks ended 28 November 2021
£m £m
Retail distribution costs and administrative expenses 743.9 671.9
UK Solutions & Logistics distribution costs and administrative expenses 739.1 645.4
International Solutions distribution costs and administrative expenses 258.3 177.4
Other distribution costs and administrative expenses 34.8 49.4
Group eliminations distribution costs and administrative expenses (638.4) (567.4)
Depreciation, amortisation, impairment and other central costs 348.6 238.4
Reported distribution costs and administrative expenses 1,486.3 1,215.1
52 weeks ended 27 November 2022 52 weeks ended 28 November 2021
£m £m
Reported distribution costs 830.2 666.7
Reported administrative expenses 656.1 548.4
Reported distribution costs and administrative expenses 1,486.3 1,215.1
Net cash/debt
Net cash/debt is calculated as cash and cash equivalents, plus other treasury
deposits, less gross debt (borrowings plus lease liabilities).
Net cash/debt is a measure of the Group's net indebtedness that provides an
indicator of the overall strength of the Consolidated Balance Sheet. It is
also a single measure that can be used to assess the combined effect of the
Group's cash position and its indebtedness. The use of the term "net cash"
does not necessarily mean that the cash included in the net cash/debt
calculation is available to settle the liabilities included in this measure.
Net cash/debt is considered to be an alternative performance measure as it is
not defined in IFRS. The most directly comparable IFRS measure is the
aggregate of borrowings and lease liabilities (current and non-current) and
cash and cash equivalents. A reconciliation of these measures with net
cash/debt can be found in Note 4.2.
External gross debt
External gross debt is calculated as gross debt (borrowings plus lease
liabilities), less lease liabilities payable to the joint venture of the
Group. External gross debt is a measure of the Group's indebtedness to third
parties, which are not considered related parties of the Group.
A reconciliation of gross debt with external gross debt can be found below:
27 November 2022 28 November 2021
£m £m
Gross debt 1,905.1 1,828.4
Less: Lease liabilities payable to joint venture (17.5) (34.0)
External gross debt 1,887.6 1,794.4
International Solutions fees invoiced
International Solutions fees invoiced is used as a key measure of performance
of the International Solutions business as an alternative to revenue and
represent design and capacity fees invoiced during the period for existing and
future CFC and in-store fulfilment commitments.
Announcement information
Person responsible for arranging the release of this announcement:
Neill Abrams
Group General Counsel & Company Secretary
Ocado Group plc
Buildings One & Two Trident Place
Mosquito Way
Hatfield
Hertfordshire
AL10 9UL
Fax: +44 (0)1707 227997
email: company.secretary@ocado.com
Ocado Group plc LEI: 213800LO8F61YB8MBC74
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