REG - Ocado Group PLC - Half-year Report
21/07/2022 07:15
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RNS Number : 2685T Ocado Group PLC 21 July 2022
OCADO GROUP PLC
Building blocks all now in place for profitable growth and strong cash flows
Retail trading environment remains challenging
Guidance unchanged
Interim results for the 26 weeks ended 29 May 2022
21 July 2022
Business Highlights
● Strong growth in new, cash-generating assets; 6 new Customer
Fulfilment Centres ('CFCs') opened in H1 2022
● 16 CFCs now live for Ocado Smart Platform ('OSP') partners around the
world; 85 live modules, up 57% year on year
● 11 OSP partners in 9 countries with signing of Auchan Polska in March
● 8 out of 11 OSP partners are now using Ocado Group technology to
power their online grocery services
● Ocado Retail's CFC 5, in Purfleet, opened in September 2021, has
already achieved original target OSP economics and is on track to
deliver Group 22% ROCE with a clear path to 30%
● Accelerated customer acquisition at Ocado Retail, up 12% to 867k in
H1 2022, despite UK cost of living headwinds
● On track to deliver Ocado Re: Imagined innovations for CFCs opening
from H2 2023
● Ocado Re: Imagined is set to transform already industry-leading OSP
economics, benefiting both Ocado and its partners
Financial Highlights
● Group revenue down 4% to £1.3bn; strong growth in International
Solutions and UK Solutions & Logistics offset by fall in Ocado Retail
revenue
● Ocado Retail revenue of £1.1bn fell 8% versus H1 2021, reflecting
tough comparatives as the grocery market contracted post pandemic and the
rising cost of living crisis in UK
● International Solutions revenue more than doubled to £59m; 10 CFCs
now live compared with 4 at the end of H1 2021
● Group EBITDA* loss of £(14)m vs. profit of £61m in 1H21; driven
largely by Retail that saw a £72.8m reduction in EBITDA due to lower sales
and cost inflation, partly offset by release of management long-term incentive
provisions
● Loss before tax of £(211)m reflects increased depreciation and
amortisation costs with the ongoing roll out of OSP, and reduced exceptional
insurance income received in the period, compared with the prior year
● Strong liquidity position of £1.1bn at 1H22; currently c.£2.0bn
including £578m capital raise and £300m bank financing on 21 June
● No further Group financing expected to be required into the mid-term,
as the business becomes cash flow positive
£ million H1 2021
H1 2022 (restated)(2) Change
Revenue(1)
Retail 1,122.2 1,224.1 (8.3)%
UK Solutions & Logistics 395.6 357.3 10.7 %
International Solutions 58.5 26.6 119.9 %
Inter-segment and other (313.9) (288.1) 9.0%
Group 1,262.4 1,319.9 (4.4)%
EBITDA*(3)
Retail 31.3 104.1 (72.8)
UK Solutions & Logistics 28.6 30.1 (1.5)
International Solutions (57.2) (56.6) (0.6)
Group and other (16.3) (16.6) +0.3
Group* (13.6) 61.0 (74.6)
Exceptional items(24) (7.0) 53.0 (60.0)
Loss before tax(4) (211.3) (27.9) (183.4)
Capital expenditure 366.8 319.0 +47.8
Cash and cash equivalents and treasury deposits 1,082.7 1,657.8 (575.1)
Net (debt)/cash* (758.8) 188.5 (947.3)
* These measures are Alternative Performance Measures, refer to note 15 in the
condensed financial statements.
1. Revenue is a. Retail - online sales (net of returns) including charges for
delivery but excluding relevant vouchers/offers and value added tax, b.
International Solutions - the fees charged to international clients and c. the
recharge of costs and associated fees from UK Solutions & Logistics to our
UK clients with the exception of recharges from UK Solutions & Logistics
to Ocado Retail which are eliminated on consolidation.
2. See note 3 to the financial statements for details of the restatements.
3. EBITDA* is a non-GAAP measure which we define as earnings before net
finance cost, taxation, depreciation, amortisation, impairment and exceptional
items
4. Net exceptional costs of £(7.0)m primarily relates to £6.4m of insurance
income related to the Erith CFC fire in 2021, offset by litigation costs of
£11.1m (principally related to patent infringement litigation between the
Group and AutoStore Technology AS). Other exceptional items include costs
associated with Ocado Group Finance transformation and Software-as-a-Service
(SaaS) implementation costs, Ocado Retail IT systems transformation, and
Andover CFC and a benefit related to changes in fair value of contingent
consideration.
The commentary is on a pre-exceptional basis to aid understanding of
underlying performance of the business
Tim Steiner, Chief Executive Officer of Ocado Group, said:
"The last six months has seen significant progress at Ocado Group and we have
put all the building blocks in place to deliver profitable growth and strong
cash flows. Our International Solutions business has good momentum, with 16
CFCs now open, of 58 committed so far. Each of these CFCs will generate
dependable, recurring cash flows and attractive returns on capital. 11 of the
world's leading grocers are looking to Ocado to provide the technology and
solutions to power their online grocery activities and our new partner
pipeline is as strong as ever.
Ocado Re:Imagined, the suite of ground-breaking innovations launched in
January this year, will redefine both the customer experience, and the
economics, of online grocery shopping. We expect enhanced economics, and
improved customer propositions, to lead to faster growth from existing, and
new, OSP partners.
Following our recent successful financing, we now have a strong financial
position and ample liquidity to fund the requirements of our existing and
expected customer commitments into the mid-term. No additional Group financing
will be needed as the business becomes cash flow positive.
With these building blocks in place, notwithstanding the near-term challenges
for the consumer in the UK, we look forward to the future with confidence".
Key milestones in H1 2022
Ocado Group provides end-to-end online grocery fulfilment solutions to some of
the world's largest grocery retailers. It created the award winning UK online
grocery business Ocado.com over twenty years ago, which is now a 50:50 joint
venture with Marks & Spencer. Ocado has spent two decades innovating in
the online grocery space, investing in a broad technology estate that includes
robotics, AI & machine learning, simulation, forecasting, vision systems,
and cutting edge intelligence. This know-how is embodied in the highly
flexible Ocado Smart Platform, a hardware and software solution that has been
developed in-house to enable the eleven grocery companies we work with around
the world to bring the market-leading Ocado consumer experience to their own
customers.
Ocado Solutions: strong execution; roll out of OSP platform accelerating
globally
● The build programmes for new CFCs are progressing well. In Europe,
Alcampo has announced the site of its CFC while in APAC Coles and Aeon's first
tranche of CFCs remain on track. Good progress is being made in North America
in the rollout of new CFCs for Kroger and Sobeys
● 18 sites (including 2 micros) are now live, globally, across 6
partners and 5 countries, as we build into the 58 CFCs already announced by
our global OSP partners
● 6 CFCs went live in the half, including the first CFC for ICA in
Sweden, a second site in Canada for Sobeys, and 4 further sites for Kroger in
the US
● In the US specifically, Kroger now has 6 CFCs live in Monroe, OH,
Groveland, FL, Atlanta, GA, Dallas, TX, Pleasant Prairie, WI and Romulus, MI.
Order volumes are ramping up well. Kroger is also accelerating its spoke
program (trans-shipment sites used for the intermediate handling of customers'
orders) with the opening of spokes in Columbus, OH in April and Miami, FL and
Louisville, KY in May. Further spokes opened in Birmingham, AL and Oklahoma
City, OK in June, followed by Chicago, IL, Nashville, KY in July. Spokes in
San Antonio and Austin, TX are due to open soon. Kroger expects to extend the
reach of Kroger Delivery to over 40 million more US customers by the end of
2022
● Our first fully automated micro fulfilment centre ('MFC') opened in
Canning Town, serving Ocado Retail's Zoom immediacy proposition; we plan to
launch 3 more MFCs in the next 12 months, including the first internationally,
in the US
● 8 of our 11 OSP partners are now live on the OSP platform, with
Alcampo live for In-Store Fulfilment ('ISF') less than a year after signing
● 6 of our partners are now using our ISF solution, taking advantage of
the breadth and flexibility of the OSP platform to bring an online offer to a
wider customer base and to build volumes online ahead of future CFC launches
● Despite ongoing challenges in global supply chains, projects have
been delivered on time and on budget, and each one of our live CFC partners is
reporting leading customer satisfaction metrics in their respective markets
Ocado Solutions: progress towards target OSP economics
● Reflecting the early stage of the ongoing roll out of the OSP
platform, though revenues in the International Solutions segment more than
doubled in the period, to £59 million, EBITDA was broadly stable year on
year, a result of the previously guided upfront investments made in our
technology capabilities, and the impact of IFRS 15 Revenue from Contracts with
Customers ('IFRS 15'), which means we are unable to recognise fees received
from OSP partners for CFCs in build, before go-live
● We continued to make encouraging progress towards our targeted level
of engineering costs for OSP sites; cost per "each" (individual pick of stock
keeping units (SKUs)) fell 11% year on year at Erith CFC, with all our new
CFCs in the UK also operating at a similar level of engineering costs
● Direct operating cost (including engineering, cloud and other
technology support costs) at our latest UK site, Purfleet, is already tracking
ahead of our original target of 2% of client sales. With capital costs also on
target, the site is on track to achieve a 22%+ ROCE, with a clear path towards
30% after including the benefits of Ocado Re: Imagined
Innovating to reset the bar in online fulfilment, once again, with Ocado Re:
Imagined
● In January, we unveiled 7 key innovations, collectively called Ocado
Re: Imagined, which we expect to further transform OSP economics for partners
and Ocado Group. These are the 600 Series Bots, 600 Grid and Optimised Site
Design, Automated Frameload ('AFL'), On-Grid Robotic Pick ('OGRP'), Ocado
Swift Router, Ocado Orbit, and Ocado Flex. Clients ordering a CFC today for
delivery from the second half of 2023 and onwards will have these features
enabled, whilst orders made prior to the launch of Re: Imagined can be also be
retrofitted to include many of these enhancements
● Combining an additive first approach to the construction of the 600
series bot, with the use of topology optimisation, is expected to mirror the
operating metrics of the existing bot whilst driving weight down by 80%. In
turn, this innovation also enables a lighter grid and more optimised site
design and so a step change in capital efficiency for Ocado Group and
partners. Taken together, we expect these improvements to reduce the capex we
spend on mechanical handling equipment ('MHE') to fit out a site by at least
15%, whilst also halving the time we require for fit out of a standard
facility to just 5 months. Partners will benefit from reduced site capex
associated with the opportunity to deploy the solution in existing, versus
purpose-built, facilities, on a smaller footprint, and with c50% higher
productivity
● In H1 2022 we have started operating the 600s series bot in a live
test environment, running multiple more prototype development cycles than we
did in the development of the 500 Series bots and we have successfully begun
testing to build at scale from 2023
● We have also been testing the build of the lighter grid, and target
the first installation in a partner site for H2 2023
● We expect we can reduce the footprint required for standard sites
operating this Re: Imagined technology by 15-20% in future builds
● Increased automation, through the deployment of OGRP and AFL, is
expected to drive a step change in operating efficiency across our partner
sites. As we deliver a solution that can robotic pick 50-80% of the range, by
volume, in a given site, we expect to reduce labour cost by a further 30-40%,
in turn driving UPH >300
● In the UK, where we are testing the solution, we can now pick 30% of
the ambient temperature range
● We announced the acquisition of materials handling robotic start-up,
Myrmex, our partner in the development of Automated Frameload, bringing 30 new
colleagues as well as new opportunities for the development of bespoke
automation solutions for OSP
● We expect to begin live trials of both OGRP and AFL, in Purfleet, in
H2 2022
● Orbit (the world's first virtual distribution centre) and Swift
Router (delivery of short lead time orders as well as larger, longer lead-time
orders from the same van) will enable us to further push the boundaries in
terms of leading customer experience, by reducing the trade off currently
required from customers and retailers between range, speed and value. These
changes will materially reduce the higher cost of supply chain and delivery
typically associated with smaller sites and shorter lead time orders, whilst
preserving range
● The go-live of our first fully automated MFC in Canning Town (UK) in
the half represents a significant step with the seamless launch of the first
instance of Ocado OSP infrastructure allowing a larger range and more volume
potential from a significantly smaller site
● Ocado Flex further improves the flexibility of the platform, enabling
partners to use their own webshop and app solutions using a suite of Ocado
micro services to power core and advanced functionalities while taking
advantage of the data-collecting and analytics of OSP. We are on track to have
the core shopping journey enabled by the end of the year
Growing the OSP 'club'; bringing new partners to the platform and extending
current partnerships
● In signing Auchan Polska, we have our first deal in a market outside
of our previous guidance describing customer opportunity geographies as those
with a GDP per capita of over $25,000. This reinforces our expanding
opportunity set as we drive further step changes in operating and capital
efficiency with Re: Imagined
● We have extended our partnership with Groupe Casino. In addition to
growing together through the CFC in Fleury-Merogis, Paris, and ISF, we have
formed a joint venture to provide logistics services to other potential OSP
partners of Ocado Solutions in France. In addition to further reducing
complexity for prospective OSP partners, this capital-light joint venture will
open up the potential for multi-tenant CFCs across France. Integrating the
marketplace solution, Octopia, into the OSP platform will further increase
front end functionality, opening up an incremental fee opportunity
● The pipeline for future deals is encouraging; we are engaged in more
conversations with prospective partners than ever before and across a wider
range of markets, further increasing the Total Addressable Market
Strong liquidity position to deliver ambitious growth plans; no further
financing expected; cash flow positive in the mid-term
● Following the end of the half, the Group successfully raised gross
liquidity of £878 million via a £578 million equity placing and a £300
million revolving credit facility ('RCF'), bringing total liquidity to around
£2.0 billion
● This structure also provides us a further diversification of funding
sources bringing in access to a meaningful RCF
● The funding will provide the liquidity support for capex,
underpinning delivery of the committed and expected CFC programme for our
partners in the mid-term; we are on track to roll out around 50 modules (or 10
sites, at an average of 5 modules each) per year in the coming 4-6 years, with
around 80% of this build programme already ordered
● We expect our strong liquidity position to be enough to fund the
requirements of this roll out into the mid-term, with no additional Group
financing as the business then becomes cash flow positive
Ocado Retail, now a 50:50 JV between Ocado Group and M&S, is Ocado Group's
original business and a leading pure play online grocer.
Ocado Retail: growth in customer numbers despite challenging trading
environment in the UK
● Active customers (Ocado.com customers who have shopped in the last 12
weeks) grew to 867k at the end of H1 2022, up 12% on the prior year, and 9%
higher than the pre-COVID high, evidencing continued demand for online grocery
and Ocado Retail's leading customer proposition; net promoter score for
Ocado.com is outperforming other online grocery offerings in the UK by 25 ppts
● Revenue declined 8% in the period, with successful acquisition of new
customers offset by changing customer shopping behaviours as the trend towards
shopping smaller baskets with the end of Covid restrictions was further
compounded by the growing cost of living crisis in the UK
● Average basket in the period was £120, down 13% from £138 in H1
2021, largely driven by customers shopping fewer items per basket, down 15%, a
trend only partially offset by the impact of a 3% increase in average selling
price
● EBITDA of £31 million, compared with £104 million in the prior
year, reflects the impact of the current trading environment; a reduction in
volumes relative to fixed costs of new capacity, as well as higher utility and
fuel costs and increased customer acquisition costs, partly offset by a
release of management long-term incentive provisions given current trading, as
well as the non-repeat of investment spend seen in the prior year
● Underlying efficiency in both fulfilment and the last mile continues
to improve. Units picked per hour ('UPH') improved to 174 from 172 at mature
sites, and is consistently above 200 at newest sites Andover and Purfleet,
with Andover achieving 220. Deliveries per van per shift have improved by 10%,
though drops per van per week ('DPV') has declined to 177 from 183, reflecting
a decision to hold surplus vans to mitigate supply uncertainty
● As the business recovers the fixed costs of new capacity and when the
impact of the current cost of living crisis begins to abate, we expect EBITDA
margin to recover to high mid-single digit in the mid-term, with the benefits
of Re: Imagined still to come
● Alongside 4 further CFCs planned for the UK, Ocado Retail is
expanding the reach of its leading immediacy offering. The business will open
a further 2 Zooms in Leyton (East London), and Leeds by the end of the year
FY 2022 guidance
On track to deliver results in line with guidance given previously, at FY 2021
results and in the Ocado Retail trading update on May 25th.
Revenue
● Ocado Retail: low single digit growth reflecting the impact of the
cost of living crisis in the UK on consumer behaviour
● UK Solutions & Logistics:
○ Fee growth over 30% reflecting the accelerated capacity build out
in UK
○ Cost recharges to grow at least in line with Retail revenue growth
as we support our clients to build into the growing capacity
● International Solutions:
○ OSP fee revenue to more than double with increase of live
international CFCs from 4 to 12, and continued ramp in ISF volumes
○ Double digit growth in Kindred revenues from £10m in FY 2021
EBITDA
● Ocado Retail: low single digit margin: a result of slower sales
growth, coupled with the impact of higher utility and fuel costs
● UK Solutions & Logistics: EBITDA to increase by around 50%,
reflecting increased fees due to the increasing live capacity for clients and
engineering costs growing slower relative to this new capacity
● International Solutions: flat versus 2021; rising margin
contribution as revenues grow, offset by increased investments in platform
development and a minimum level of engineering cost required to support new
CFCs in the early stages of ramp
Total capital expenditure for the Group is expected to be around £800m driven
by accelerating roll out of OSP worldwide
● 30% UK, of which 60% dedicated to the continued roll out of CFC and
Zoom sites, inclusive of land, build and MHE cost, given consolidation of the
Ocado Retail joint venture
● 50% International, reflecting an additional 8CFCs to go-live during
the year, of a total of 13 CFCs in build internationally at the end of 2021
● 20% Technology investment to support key areas of OSP platform
development including additional focus areas such as autonomy
We continue to target further Solutions deals which would generate additional
cash fees but would negatively impact short term profits
We have a clear path to >£6.3 billion in revenue and >£750 million in
EBITDA in the mid-term (4-6 years) as outlined in the modelling seminar hosted
on the 25th May 2022
Note: Revenue and EBITDA guidance for UK Solutions & Logistics adjusts for
the accounting treatment, under IFRS 16, of lease costs for Ocado Retail
exclusive CFCs. No impact on Group revenue or EBITDA as revenues and costs are
eliminated on consolidation
Autostore update
The litigation between Ocado Group and AutoStore Technology AS ('AutoStore')
continues, with claims brought by Ocado Group against AutoStore in the US,
Germany and UK, and by AutoStore against Ocado Group in the US and UK.
In the first half of 2022, a final US International Trade Commission ('ITC')
decision was handed down in March with the full Commission formally confirming
the initial determination, in favour of Ocado. AutoStore has now appealed this
decision to the Court of Appeals for the Federal Circuit in the USA and a
decision is expected in Q3 2023.
Also in the US, IPRs (Inter Partes Reviews) of two Autostore patents were
decided by the Patent Trial Appeal Board (PTAB). In the first, the PTAB
invalidated 3 out of the 4 claims asserted by Autostore. The second patent was
maintained, but in terms that Ocado does not directly infringe. In a very
recent development, AutoStore's attempt to invalidate Ocado's Single Space Bot
patent was firmly rejected yesterday when the PTAB refused to institute a
review and held that the Ocado patent was valid. The Ocado claim against
Autostore in New Hampshire continues with a trial date set for December 2023
and an outcome expected in Q1 2024. All other actions are currently stayed.
The UK infringement trial was heard in the High Court in March with judgement
expected in Q3 or Q4 2022. Three of the six asserted AutoStore patents have
been revoked by the European Patent Office and two have been maintained. All
of these decisions except one are now in EPO Appeal proceedings. Further EPO
oppositions have been started with hearings expected between Q3 2022 and Q3
2023. As is common in patent litigation, a date for a Trial B in these
proceedings has been set for April 2023.
In Germany, the District Court infringement proceedings against AutoStore were
stayed in January pending AutoStore filing invalidity proceedings at the
German Patent Office on the IP rights Ocado asserted. The German Patent Office
decision is expected in Q4 2022.
Ocado continues to have confidence in the merits of its position and actively
continues to pursue its claims against AutoStore for infringement of Ocado's
patents and to defend Ocado's business against AutoStore's claims in both the
United States and Europe.
Results presentation
A results presentation will be available online for investors at 9.30am. This
can be accessed here
(https://webcasting.brrmedia.co.uk/broadcast/62bdb325c0d3e61cd0c97a45) .
Following the session there will be Q&A, also accessible via the webcast.
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, Director of Communications, on 020 7353 4200 today or 01707 228
000
Martin Robinson at Tulchan Communications on 020 7353 4200
Financial Calendar
The schedule for Ocado Retail results for the remainder of the 2022 financial
year is for a Q3 Trading Statement on the 13th September and a Q4 Trading
Statement on the 8th of December.
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.
Financial Review
● Revenue declined 4.4% to £1,262.4 million (H1 2021: £1,319.9
million), reflecting the challenging trading environment for Ocado Retail,
down 8.3% to £1,122.2 million, with the cost of living crisis compounding the
impact of a return to more normalised consumer behaviour compared to last year
when the country was experiencing peak COVID restrictions. There remains
strong demand for Ocado Retail's customer proposition with an 11.6% year on
year growth in active customers to 867,000 customers. Revenue growth in UK
Solutions & Logistics was good and in International Solutions was very
strong, up 119.9% to £58.5 million, as a further 6 CFCs went live in the
period.
● Gross profit and other income of £533.6 million was broadly in
line with prior year (H1 2021: £533.4 million), despite the 4.4% decline in
revenue with a gross margin improvement in period; 42.3% up from 40.4%, driven
by a more material contribution from the high gross margin International
Solutions business.
● Distribution and administrative costs of £546.7 million grew by
16.1% (H1 2021: £471.0 million) due to three key reasons; 1. continued
investment in building our technology capabilities for our partners, across
both CFC and in-store fulfilment solutions, 2. expanding our support functions
in order to fully support our rapidly growing and increasingly global CFC
operations and 3. significant inflationary pressures on the cost of utilities,
fuel and labour.
● Group EBITDA* loss of £(13.6) million (H1 2021: profit of £61.0
million), a reduction of £74.6 million, was driven by the £72.8m reduction
in Retail EBITDA* to £31.3 million (H1 2021: £104.1 million) reflecting
lower volumes together with the inflationary cost impacts on labour, utility
and fuel costs and the continued investment in our technology capability and
support functions, partially offset by releases of management long-term
incentive provisions given current trading.
● Statutory loss before tax of £(211.3) million (H1 2021: £(27.9)
million) after including depreciation, amortisation and impairment charges of
£157.3 million (H1 2021: £104.2 million), net finance costs of £33.4
million (H1 2021: £37.7 million), and net exceptional costs of £7.0 million
(H1 2021: income of £53.0 million) including litigation costs and insurance
income for the Andover and Erith CFCs.
● Strong balance sheet, with cash and cash equivalents of £1.1 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 £(758.8) million (H1
2021: £188.5 million net cash). In June 2022, the Group successfully raised
additional gross liquidity of £878.2 million, comprising a £578.2 million
equity placing and a new £300.0 million revolving credit facility, providing
a healthy liquidity position today of almost £2.0 billion and securing the
funding of our future growth plans.
H1 2022 H1 2021 (restated)(2)
£ million Pre- Exceptional items Total statutory reported Pre- Exceptional items Total statutory reported Pre-
exceptional exceptional exceptional change
Revenue(1) 1,262.4 - 1,262.4 1,319.9 - 1,319.9 (4.4%)
Gross profit and other income(2,3) 533.6 6.3 539.9 533.4 62.7 596.1 0.0%
Distribution and administrative costs(2) (546.7) (13.3) (560.0) (471.0) (1.2) (472.2) 16.1%
Share of results from joint ventures and associates(4) (0.5) - (0.5) (1.4) (8.5) (9.9) (64.3%)
EBITDA* (13.6) (7.0) (20.6) 61.0 53.0 114.0 (122.3%)
Depreciation, amortisation and impairment (157.3) - (157.3) (104.2) - (104.2) 51.0%
Net finance costs (33.4) - (33.4) (37.7) - (37.7) (11.4%)
Loss before tax (204.3) (7.0) (211.3) (80.9) 53.0 (27.9) 152.5%
1. Revenue is a. Retail - online sales (net of returns) including
charges for delivery but excluding relevant vouchers/offers and value added
tax, b. International Solutions - the fees charged to international clients
and c. the recharge of costs and associated fees from UK Solutions &
Logistics to our UK clients with the exception of recharges from UK Solutions
& Logistics to Ocado Retail which are eliminated on consolidation.
2. See note 3 to the financial statements for details of the
restatements.
3. Other income is income that is not generated through the primary
trading activities of the segments (for example, media income in the Retail
segment)
4. Share of results from joint ventures relates to joint ventures
where the Group does not exercise control, such as MHE JVCo Limited ("MHE
JVCo"), Karakuri Limited and Infinite Acres Holdings BV (which the Group
disposed of in October 2021). The Ocado Retail joint venture, over which the
Group exercises control, is not included in this category as its results are
fully consolidated.
* These measures are Alternative Performance Measures. Please refer to
the section "Alternative Performance Measures" in 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.
Group revenue for the period declined by 4.4% to £1,262.4 million (H1 2021:
£1,319.9 million). Retail revenue declined by 8.3% year on year in a
challenging trading environment, with the cost of living crisis compounding
the impact of a return of more normal customer behaviours compared with peak
lockdown restrictions in the prior year. International Solutions revenue
increased from £26.6 million to £58.5 million with the go-live of four
additional CFCs for Kroger in the US, a second CFC for Sobeys in Canada
(Montreal) and our first CFC for ICA Gruppen in Sweden (Stockholm). Total
invoiced fees (design and capacity fees) across all International partners
were £61.1 million, an increase of 21.7% compared to the prior year.
Cumulative invoiced fees not yet recognised as revenue across international
partners amounted to £354.2 million at the end of the period.
Gross profit and other income increased slightly to £533.6 million (H1 2021:
£533.4 million), despite a decline of £47.5 million in Retail (£385.4
million (H1 2021: £432.9 million), a gross margin of 34.4% (H1 2021: 35.3%),
driven by a combination of lower volumes, supplier cost inflation pressure and
product mix. This was largely offset by a good increase of £34.6 million in
International Solutions gross margin to £57.5 million (H1 2021: £22.9
million).
Distribution and administrative costs grew by £75.7 million to £546.7
million (H1 2021: £471.0 million) as the business expanded both in the UK and
internationally. The total costs of £546.7 million include £314.1 million of
distribution costs (increase of 9.5%); (H1 2021: £286.8 million) and £54.5
million of administrative costs (increase of 28.5%); (H1 2021: £42.4 million)
in UK Solutions & Logistics. UK distribution costs increased by 9.5%,
against a reduction in eaches (individual basket items) of 8.8%, reflecting
the significant inflationary pressures on the cost of utilities, fuel and
labour. The short-term increase in distribution costs also reflect the minimum
level of engineering cost required during the early stages of ramp for the
three UK CFCs that went live during the prior period (Bristol, Andover and
Purfleet). Distribution and administrative costs in the International
Solutions segment grew by 44.3% to £114.7 million as a result of increased
engineering support and technology costs reflecting the go-live of operations
and annualised costs for our 10 live international client sites, and continued
investment in the development of the Ocado Smart Platform as we build our
capabilities for our partners across both CFC and in-store fulfilment
solutions. Technology costs that have been expensed (and not capitalised)
increased from £121.9 million to £160.8 million reflecting wage inflation
and an increase in technology headcount from 2,400 to over 2,700.
EBITDA* for the period was £(13.6) million (H1 2021: £61.0 million) with the
£74.6 million reduction driven by a £72.8 million reduction in Retail.
Despite this decline in Retail, growth in UK Solutions & Logistics and
International Solutions helped to deliver a Group gross profit and other
income of £533.6 million, broadly in line with prior year (H1 2021: £533.4
million), and a gross margin of 42.3% (H1 2021: 40.4%). We continue to
reinvest much of our gross margin in our technology and support functions in
order to support our ambitious plans for growth in both the UK and
internationally, in turn scaling and improving the Ocado Smart Platform for
our clients.
Depreciation, amortisation and impairment increased by 51.0% to £157.3
million (H1 2021: £(104.2) million), primarily due to an increase in
depreciation and amortisation costs relating to our investment and rollout of
OSP hardware and software at live CFC locations. At the end of the period we
had 8 live UK sites (including Zoom) and 10 live international sites.
Property, plant and equipment held on the balance sheet is now £1,495.8
million (H1 2021: £978.5 million).
Net finance costs decreased from £37.7 million to £33.4 million, largely
reflecting unrealised foreign exchange gains of £8.2 million (H1 2021:
£(7.8) million loss) on foreign currency denominated cash balances. This was
partly offset by £7.0 million of incremental interest cost arising from the
issue of £500.0 million of Senior Unsecured Notes in October 2021 following
the redemption of the existing £225.0 million Senior Secured Notes. Gross
debt at the end of the period was £1,841.5 million (H1 2021: £1,469.3
million).
After including net exceptional costs of £(7.0) million (H1 2021: £53.0
million net income), primarily relating to litigation costs of £11.1 million
(principally related to patent infringement litigation between the Group and
AutoStore Technology AS), offset by £6.4 million of insurance income from the
Erith CFC, the Statutory loss before tax for the period was £(211.3) million
(H1 2021: loss of £(27.9) million).
Segmental summary
£ million H1 2022 H1 2021 Change
Revenue
Retail 1,122.2 1,224.1 (8.3)%
UK Solutions & Logistics 395.6 357.3 10.7 %
International Solutions 58.5 26.6 119.9 %
Inter-segment and other (313.9) (288.1) 9.0 %
Group 1,262.4 1,319.9 (4.4)%
EBITDA*
Retail 31.3 104.1 (69.9)%
UK Solutions & Logistics 28.6 30.1 (5.0)%
International Solutions (57.2) (56.6) 1.1 %
Group and other (16.3) (16.6) (1.8)%
Group (13.6) 61.0 (122.3)%
Inter-segment eliminations and other
All revenue charged from UK Solutions & Logistics to Ocado Retail is
eliminated on consolidation. For H1 2022, this was £314.2 million (H1 2021:
£288.4 million) on a pre-exceptional basis and is included as an elimination
entry in the 'Inter-segment and other' line within revenue. This is partly
offset by other revenue earned by Jones Food Company.
Group key performance indicators
The following table sets out a summary of selected unaudited operating
information in the period:
H1 2022 H1 2021 Change
No. of modules live(1,2) 86 54 59.3%
No. of modules ordered(1,2,3) 221 177 24.9%
Direct operating cost (% of site sales)(4) 2.4% 3.5% 47.7%
1. A module of capacity is assumed as approximately 5,000 eaches
per hour (dependent on the specific metrics of a partner) and c. £70m pa 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 capacity and design fees. This excludes modules which are required
to be ordered in order to maintain exclusivity agreements, but which have not
yet been agreed and invoiced
4. Direct operating costs as a % of site sales capacity reflects
the exit rate position at the period end. Direct operating costs include
engineering, cloud, and other technology support costs.
Retail
£ million H1 2022 H1 2021 Change
(restated)(4)
Revenue(2) 1,122.2 1,224.1 (8.3)%
Gross profit and other income(3,4) 385.4 432.9 (11.0)%
Distribution costs(4,5) (292.2) (262.3) 11.4 %
Marketing (non-voucher) costs(6) (25.3) (14.8) 70.9 %
Other administrative costs(5) (36.6) (51.7) (29.2)%
EBITDA* 31.3 104.1 (69.9)%
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. Revenue decline excluding
Fetch in 2021 was (7.8)%
3. Other Income includes £2.4 million income from the Transitional
Services Agreement relating to the sale of Fetch in H1 2021
4. See note 3 to the financial statements for details of the
restatements
5. Distribution and administrative costs exclude depreciation,
amortisation and impairment
6. Marketing costs exclude the cost of vouchers given to customers,
these are instead included in cost of sales
7. EBITDA* does not include the impact of exceptional items
Retail revenue declined by 8.3% year on year (underlying decline of 7.8%
adjusted for the disposal of Fetch) and EBITDA* decreased by £72.8 million
from £104.1 million to £31.3 million, driven by lower sales, together with
the impact of higher utility and fuel costs and fixed costs from the three new
CFCs launched in 2021 which continue to ramp to capacity.
Ocado Retail has continued to win new customers and grow market share. Active
customers now stand at 867,000, up by 11.6% from 777,000 at H1 2021. Ocado
share of the online grocery market is estimated to be 12.1% (H1 2021: 10.8%)
(Nielsen). Ocado Retail has grown order volumes; averaging 381,000 orders per
week in the period and up by 7.0% (H1 2021: 356,000 orders per week). The
sales decline versus H1 2021 is almost entirely related to more normalised
customer behaviour in the post-COVID environment, in particular smaller
shopping baskets.
In the second week of May Ocado Retail delivered 400,000 orders to customers
for the first time. With the opening of a second Zoom site in Canning Town,
the first fully automated immediacy site in the UK, Ocado Retail started to
expand the reach of its leading immediacy solution.
Key indicators of efficiency in both fulfilment and the last mile continue to
show positive trends. Of particular note, units picked per labour hour (UPH)
in our newest sites, Andover and Purfleet, are exceeding our 200 UPH target.
Revenue
Retail revenue declined by 8.3% year on year (7.8% on an underlying basis
excluding Fetch), in a challenging trading environment, with the cost of
living crisis compounding the impact of changing customer shopping behaviours
trends towards shopping smaller baskets as COVID restrictions have ended and
many people return to eating out of the home.
In the last few months, the UK grocery market has declined by 4-5% compared to
2021 levels when the country was experiencing peak COVID restrictions. The
online grocery market has declined by around 20% compared with last year,
although remains 60-70% higher compared with pre-COVID levels. Today's online
share of the grocery market of 11-12% is almost double that of pre-pandemic
levels.
The average basket value for Retail is trending around 13% lower at £120 (H1
2021: £138) reflecting the impact of the cost of living crisis and the
normalisation of consumer behaviour, with consumers ordering fewer items per
shop than in the prior year, resulting in a decline in eaches (items) per
basket of around 14% to 48 (H1 2021: 55). Ocado Retail is committed to
offering customers fair value, however the business is experiencing the high
cost inflation also being experienced by food suppliers and others in the
grocery supply chain, and this is reflected in an increase in average selling
price of 2.9% in the period to £2.52 (H1 2021: £2.45).
With increased capacity through three new CFCs (Bristol, Andover and Purfleet)
going live during 2021, average orders per week grew to 381,000 (+7.0% year on
year) with active customers growing to 867,000 (+11.6% year on year), as we
invested in marketing activity to drive long-term stable growth. The Bicester
CFC going live in H2 2022 will bring Retail CFC capacity at maturity to in
excess of 600,000 orders per week.
Gross profit and other income
Gross profit and other income declined by 11.0% to £385.4 million, driven by
a combination of lower volumes, supplier cost inflation pressure and product
mix as customers trade down to lower price products. As a result, gross margin
deteriorated year on year to 34.3% (H1 2021: 35.4%).
Distribution costs
£ million H1 2022 H1 2021 (restated)(1) Change
CFC costs (107.7) (89.0) 21.0 %
Trunking and delivery (132.0) (122.5) 7.8 %
Other operating costs(1) (52.5) (50.8) 3.3 %
Total Distribution costs(1) (292.2) (262.3) 11.4 %
1. See note 3 to the financial statements for details of the
restatements
Distribution costs primarily consist of fulfilment and delivery operation
costs which are provided to Ocado Retail by the UK Logistics operation of the
Ocado Group.
CFC costs increased by 21.0% to £107.7 million compared to a growth in
average orders per week in the period of 7.0%. The higher rate of cost growth
(+21.0%) compared to order volume growth (+7.0%) reflects several factors.
These include the impact of fixed costs from the three new CFCs launched in
2021 which continue to ramp to capacity. CFC costs have also been impacted by
inflation, with significant increases in utility, labour and dry ice costs
together with labour challenges at the start of the financial year, with the
costs of additional temporary incentives to attract and retain staff. Despite
the labour challenges, overall productivity improved in the first half, with
Units per Hour (UPH) in mature sites improving year on year by 1.2% to 174.
Trunking and delivery costs increased by 7.8% to £132.0 million, slightly
more than the growth in orders as a result of increased labour and fuel costs.
Deliveries per van per shift increased by 13.2% to 21.5, but the number of
eaches (items) per delivery van reduced by 6.7% reflecting the reduced order
sizes (the 14% reduction in basket size noted above).
Other operating costs of £52.5 million (H1 2021: £50.8 million) include OSP
fees and the costs of logistics services provided by UK Solutions &
Logistics to Ocado Retail. The increase is primarily due to the increase in
OSP fees payable to UK Solutions from the new CFCs in Bristol, Andover and
Purfleet which went live in 2021.
Marketing costs increased by £10.5 million to £25.3 million, increasing as a
percentage of revenue to 2.3% (H1 2021: 1.2%). During 2021 Retail was able to
operate at lower than historical levels of marketing spend, largely due to
strong customer demand during the COVID lockdown period. As further capacity
has become available, we have increased investment in customer acquisition
spend including our new multi-media brand campaign, "There's An Ocado Just For
You", to drive brand awareness. The number of active customers has increased
significantly by 11.6% year on year to 867,000.
Administrative costs decreased by £15.1 million to £36.6 million, reflecting
non-repeat of prior year investment spend and releases of management long-term
incentive provisions given current trading.
EBITDA*
EBITDA* for the Retail business was £31.3 million (H1 2021: £104.1 million).
Amounts recoverable under business interruption insurance for Andover and
Erith are included in Group exceptional items, and therefore are excluded from
the Retail segmental result. Costs related to the exit of long term agreements
for IT services of £3.2 million are also included in exceptional items.
Key drivers
The following table sets out a summary of selected unaudited operating
information in the period:
H1 2022 H1 2021 Change
Active customers (000s)(1) 867 777 11.6%
Revenue (£ million) 1,122.2 1,224.1 (8.3%)
Average orders per week (000s) 381 356 7.0%
Average basket value (£)(2) 120 138 (13.0%)
Average selling price (£)(3) 2.52 2.45 2.9%
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 results of ocado.com
3. Average selling price is defined as gross sales divided by total
eaches
UK Solutions & Logistics
£ million H1 2022 H1 2021 (restated)(4) Change
Fee revenue(1) 79.7 73.2 8.9 %
Cost recharges(2) 315.9 284.1 11.2 %
Revenue 395.6 357.3 10.7 %
Other income, net of cost of sales 1.6 2.0 (20.0)%
Distribution costs(3,4) (314.1) (286.8) 9.5 %
Administrative costs(3,4) (54.5) (42.4) 28.5 %
EBITDA* 28.6 30.1 (5.0)%
1. Fee revenue includes fees charged to Ocado Retail of £63.4
million which eliminate on consolidation
2. Cost recharges include cost recharges to Ocado Retail of £250.4
million which eliminate on consolidation
3. Distribution and administrative costs excludes depreciation,
amortisation and impairment
4. Distribution and administrative costs have been re-presented for
FY2021 to reflect an updated split of activities, with no impact on overall
revenue and EBITDA
UK Solutions & Logistics saw a good performance in the period, with
customer fee revenue (from Ocado Retail and Morrisons) increasing by 8.9% to
£79.7 million as we continued to invest in capacity for current and future
growth. There are now 6 live CFCs in the UK and 54 live modules (H1 2021: 44).
Total throughput in CFCs decreased by 8.8% to 611.9 million eaches picked (H1
2021: 670.6 million), but average orders per week increased by 6.5% to 491,000
orders per week (H1 2021: 461,000) across Ocado Retail and Morrisons. The
decline in eaches reflected the changing customer shopping behaviour trends
towards shopping smaller baskets. With the addition of three new CFCs in
Bristol, Andover and Purfleet in 2021 and the expected go-live of our CFC in
Bicester in H2 2022, live CFCs at the end of the year will have a total
capacity of around 800,000 orders per week at maturity across Ocado Retail and
Morrisons.
Cost recharges to our UK partners increased by 11.2% to £315.9 million. The
increase in recharges compared to the decline in volume (the 8.8% decline in
eaches) reflects the higher costs as our new sites ramp up to full efficiency,
together with the impact of significantly increased utility, fuel, labour and
dry ice costs. This cost inflation impact is partially offset by improvements
in CFC efficiency in our mature CFCs.
EBITDA* decreased from £30.1 million to £28.6 million as the increase in fee
revenue in the period driven by the higher capacity fees relating to the three
new CFCs that went live in the prior period are outweighed by a year on year
reduction in capital recharges (the recharges to Ocado Retail for the lease
costs of CFCs used exclusively by Ocado Retail are accounted for as finance
income and excluded from EBITDA) and the continuing investment in, and rollout
of, our Ocado Smart Platform.
Revenue
Revenue from the UK Solutions & Logistics business increased by £38.3
million to £395.6 million, an increase of 10.7%.
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 (those fees charged to Ocado
Retail are eliminated on consolidation of the Group). Total fees grew by 8.9%
to £79.7 million, with fees to Ocado Retail growing broadly in line with
overall live module capacity growth from the three new CFCs delivered in the
prior period. Fees to Morrisons also grew following the return to the Erith
CFC in February 2021. This resulted from the end of an agreement to
temporarily release the Morrisons' Erith capacity back to Ocado Retail
following the fire in the Andover CFC in February 2019.
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 Group consolidation). 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. Cost recharges grew by 11.2% due to the increased costs
at our new CFCs at Andover, Bristol and Purfleet as they ramp up to full
capacity, together with higher utility, dry ice and labour costs.
Other income, net of cost of sales
Other income, net of cost of sales, was £1.6 million (H1 2021: £2.0
million). Other income primarily relates to Erith and Dordon property rental
costs that are charged to Morrisons.
Distribution and administrative costs
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 9.5% to £314.1 million (H1 2021: £286.8
million), against a reduction in average eaches shipped per week (total CFC
throughput) of 8.8% to 23.5 million (H1 2021: 25.8 million eaches per week).
Distribution costs grew despite the reduction in eaches delivered due to
higher costs from new sites as they ramp up to full efficiency, together with
the impact of significant cost inflation in respect of energy and fuel costs
and investment in labour costs to address labour shortage challenges that were
particularly evident during Q4 2021 and into the first quarter of 2022.
Productivity improvements saw the average number of Units per Hour (UPH) in
mature CFCs (Hatfield, Dordon and Erith) improve year on year to 174 in the
period (H1 2021: 172). Since opening in 2022, our first mini CFC in Bristol
has achieved UPH of 192, and our newest sites in Andover and Purfleet are
already well ahead of our original expectations and each exceeding our target
of 200 UPH.
Trunking and delivery operations saw average deliveries per van shift improve
across both UK partners, driven by more normalised shopping behaviour during
the week enabling roster improvements. These productivity improvements were
offset by a fall in deliveries per van per week to 177 (H1 2021: 183),
reflecting a decision to retain a surplus of vans to mitigate supply
uncertainty.
Distribution costs also include the engineering costs of operating CFCs for
which the OSP fee is charged to our UK partners. Due to the continued ramp and
relative immaturity of the three new CFCs that went live in 2021, these costs
are relatively higher on a cost per each basis as these CFCs ramp up volumes
and we maintain a largely fixed level of engineering support. By the end of
the period all three new CFCs are experiencing engineering costs per each
broadly in line with those at the Erith CFC, which itself saw engineering cost
per each fall by 11% during the period.
Administrative costs consist of 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 the Ocado Smart Platform. Administrative costs grew
by 28.5% to £54.5 million (H1 2021: £42.4 million), primarily as a result of
the allocation of additional headcount and technology resources to support and
improve the OSP. These costs also include investment in infrastructure (to
support the growing UK capacity) and the ongoing investment in recruitment and
learning and development.
EBITDA*
EBITDA* from UK Solutions & Logistics activities was £28.6 million, a
decrease of £1.5 million. This reduction largely resulted from the continuing
investment in, and rollout of, our Ocado Smart Platform and a year on year
reduction in capital recharges to Ocado Retail as the lease costs of CFCs used
exclusively by Ocado Retail are accounted for as finance income and excluded
from EBITDA. These are eliminated on Group consolidation.
Key drivers
The following table sets out a summary of selected unaudited operating
information in the period:
H1 2022 H1 2021 Change
Total eaches (million) 611.9 670.6 (8.8%)
Orders per week (000s) 491 461 6.5%
Mature site UPH(1) 174 172 1.2%
Average deliveries per van per week 177 183 (3.3%)
1. Measured as units dispatched from the CFC per variable hour
worked by Hatfield CFC, Dordon CFC and Erith CFC operational personnel.
International Solutions
£ million H1 2022 H1 2021 (restated)(4) Change
Fees invoiced(1) 61.1 50.2 21.7 %
Revenue(2) 58.5 26.6 119.9 %
Cost of sales (1.0) (3.7) (73.0)%
Gross profit 57.5 22.9 151.1 %
Distribution costs(3) (22.2) (12.9) 72.1 %
Administrative costs(3) (92.5) (66.6) 38.9 %
EBITDA* (57.2) (56.6) 1.1 %
1. Fees invoiced represents 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 IFRS15
once a working solution is provided to the customer
2. Revenue includes £4.5 million revenue (H1 2021: £3.9 million)
from Kindred Systems, and £1.9 million of equipment sales (H1 2021: £3.3
million) 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 excludes depreciation,
amortisation and impairment
4. Distribution and administrative costs have been re-presented for
H1 2021 to reflect an updated split of activities, with no impact on overall
revenue and EBITDA
We continue to expand our international operations with six new CFCs going
live in the period. These include a further four CFCs for Kroger in the US,
the second CFC for Sobeys in Montreal and our first CFC for ICA Gruppen in
Stockholm. Despite global supply chain challenges, these facilities have all
been delivered on time and on budget. We now have 10 live international sites
(H1 2021: 4 sites) and 32 live modules (H1 2021: 10 modules). As a result of
this growth the International Solutions business is starting to deliver
material revenue, with revenue increasing from £26.6 million in H1 2021 to
£58.5 million in 2022.
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, including a new partnership with Auchan
Poland that was signed in March 2022.
We also continue to invest in the Ocado Smart Platform and build the support
functions to support rapid international expansion. This has resulted in
distribution and administrative costs growing to £114.7 million from £79.5
million in 2021, primarily reflecting the increase in technology costs
allocated to the segment. Losses in the period grew slightly from £(56.6)
million to £(57.2) million.
Fees and revenue
Fees invoiced in the period totalled £61.1 million (H1 2021: £50.2 million),
and include design and capacity fees invoiced across a number of clients
relating to existing and future CFC and in-store fulfilment commitments,
including our new partnership with Auchan Poland, and fees associated with the
live operations with Kroger, Sobeys and ICA.
Under revenue recognition rules, 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 £354.2 million.
Revenue in the period of £58.5 million reflects ongoing capacity fees of
£38.0m and amounts previously recorded on the balance sheet relating to
design and upfront fees across our current operational partners, Group Casino,
Sobeys, Kroger and ICA, that are gradually released to revenue once the site
has gone 'live'. In addition to revenue contribution of £4.5 million from
Kindred Systems, International Solutions revenue also includes £1.9 million
relating to the sale of equipment (at cost) to a number of partners and is
recognised as revenue.
Distribution costs
Distribution primarily consists of the engineering and technology costs of
operating the OSP platform and CFCs for our international clients. These costs
grew from £12.9 million in H1 2021 to £22.2 million in H1 2022 as a result
of increased people and cloud costs to support the growing number of
international CFCs. This includes costs relating to our 10 live international
sites, that now include our first six CFCs with Kroger, and reflects the
additional costs for new sites which have gone live in the period.
Distribution costs are also impacted by the annualisation of costs relating to
the 4 live international CFC sites at the start of the year as they continue
to ramp up.
Administrative costs
Administrative costs primarily consist of costs supporting our international
partnership agreements and the non-capitalised costs of employees who are
developing the OSP platform, such as research costs. These costs grew from
£66.6 million in the prior year to £92.5 million in 2022 as we continued to
increase our investment in building long-term OSP capabilities for our
partners, across both CFC and in-store fulfilment (ISF) solutions.
EBITDA*
EBITDA* from our International Solutions activities was a loss of £(57.2)
million (H1 2021: £(56.6) million), reflecting the growing investment in
technology to support our international growth ambitions, and the support
costs relating to new CFCs.
Key drivers
The following table sets out a summary of selected unaudited operating
information in the period:
H1 2022 H1 2021 Change
Invoiced fees (£ million) 61.1 50.2 21.7%
No. of modules live(1,3) 32 10 220.0%
No. of modules ordered(2,3) 152 115 32.2%
1. A module is considered live when it has been fully installed and
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 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 c. £70m pa of
sales capacity.
Group and other
The 'Group and other' segment represents revenue and costs which do not relate
to the Retail, UK Solutions & Logistics, and International Solutions
segments. This includes Board costs, the consolidated results of Jones Food
Company, and MHE rental income. This segment reported an EBITDA* loss of
£(16.3) million in the current period (H1 2021 loss: £(16.6) million). This
loss includes a decrease 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 2021 (H1 2021: £1.3 million loss).
£ million H1 2022 H1 2021 Change
Board costs(1) (6.4) (6.2) 3.4%
Share based payments(2) (9.5) (11.1) (14.6%)
Jones Food Company and other ventures(3) (1.6) (3.2) (49.8%)
Other(4) (6.3) (3.4) 85.3%
Group and other costs (23.8) (24.0) (0.5%)
MHE rental income(5) 5.1 5.2 (1.9%)
Research and development credit ("RDEC")(6) 2.4 2.2 11.6%
Group and other EBITDA (16.3) (16.6) (1.8%)
1. Board costs include salaries, bonuses and fees for Directors
totalling £4.5 million (H1 2021: £4.5 million); director insurance costs of
£0.8 million (H1 2021: £0.9 million) and other Board costs of £1.1m (H1
2021: £0.8 million)
2. Of the share based payment charges for the Group (excluding
ORL), £7.6 million are allocated out to other segments and £9.5 million
remains in the Group segment.
3. 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 £1.1 million (H1 2021: £1.8
million loss). The others are: Infinite Acres / 80 Acres, which was disposed
in October 2021 (H1 2021: £1.3 million loss); MHE JVCo, for which we recorded
profits of £nil (H1 2021: £0.1 million profit) and Karakuri, for which we
recorded losses of £0.5 million (H1 2021: £0.3 million loss)
4. Other costs include a small allocation of Group support and
central costs.
5. Rental income totalling £5.1 million was received from MHE
JVCo, a joint venture with Morrisons.
6. Research and development (R&D) subsidies totalling £2.4
million were received in H1 2022. These are granted by HMRC as a fixed
percentage on the value of qualifying R&D expenditure.
Exceptional items
£ million H1 2022 H1 2021
Andover CFC
Insurance reimbursement income - 62.7
Other exceptional costs (0.1) (2.9)
Total Andover exceptional (0.1) 59.8
Erith CFC
Insurance reimbursement income 6.3 -
Total Erith exceptional 6.3 -
Ocado Group Finance transformation and Software-as-a-Service (SaaS) (4.0) (4.3)
implementation costs
Gain on disposal of Speciality Stores Limited ("Fetch") - 1.7
Litigation costs (11.1) (11.4)
Changes in fair value of contingent consideration 5.1 7.2
Ocado Retail IT systems transformation (3.2) -
Total exceptional items (7.0) 53.0
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 have been formally accepted by the insurers.
Insurance reimbursement income
This comprises reimbursement for the costs of rebuilding the CFC and business
interruption losses and recognised as income within Exceptional items. Total
cumulative income recognised to date, across all prior periods, is £206.3
million and included £62.7 million in H1 2021. Amounts yet to be received are
recognised as accrued income and total £22.5 million within the cumulative
income recognised to date. This relates to reimbursement of spend on the
capital expenditure and will be received in H2 2022. As at 29 May 2022, the
final settlement of the insurance claim had not been agreed, therefore, no
further insurance reimbursement income was recognised in H1 2022.
Subsequent to H1 2022, the Group has now reached agreement with the insurers
for the final settlement of the insurance claim for a total of £273.8
million. This means that a further £67.5 million of insurance reimbursement
income and £90.0 million of cash has been received and recognised in H2 2022,
together with any further associated costs. This will then conclude the
Andover fire insurance claim.
Other exceptional costs
In addition to the building, machinery and inventory costs relating to the
fire, other exceptional costs have been incurred that relate to, but are not
limited to, professional fees in respect of the insurance claims process,
business rates, temporary costs of transporting employees to other warehouses
to work and redundancy costs. The cumulative costs to date amount to £121.5
million with £0.1 million of these costs incurred in the period.
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
have been formally accepted by the insurer.
As at H1 2022, agreement was reached with the insurers for the final
settlement in respect of the claims relating to the Erith fire for a total of
£8.3 million. An interim payment of £2.0 million was received in August 2021
which was recognised as insurance reimbursement income in H2 2021 and a
further £6.3 million has been received in H2 2022 which has been recognised
as insurance reimbursement income in H1 2022 and a corresponding accrued
income is held on the balance sheet. The receipt of the £6.3 million will
conclude the Erith fire claim.
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 H2 2021,
across the business. Following the IFRIC agenda decision, in FY2021 the Group
updated its accounting policy for the treatment of SaaS related costs under
IAS 38 Intangible Assets. The updated policy was applied retrospectively and
as a result, the prior year comparatives have been restated to expense £4.3
million of SaaS costs incurred in H1 2021 that had originally been
capitalised, and which no longer meet the criteria for recognition as an
asset. The cumulative finance transformation and SaaS implementation costs
expensed to date amount to £25.6 million and include £4.0 million in H1
2022.
These amounts have been disclosed as exceptional items 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 in relation to the ongoing programme will continue
to be disclosed as exceptional items. Ongoing license fees for SaaS
arrangements and the cost of business as usual finance activity will not form
part of the exceptional items.
Litigation costs
Litigation costs relating to the patent infringement litigation between the
Group and Autostore Technology AS ("Autostore") amounted to £11.1 million (H1
2021: £10.9 million). The prior year litigation costs also includes costs of
legal proceedings brought by the Group against Jonathan Faiman, Jonathan
Hilary and Project Today Holdings Limited ("T0day"), in relation to
misappropriation and unlawful use of the Group's confidential information and
intellectual property.
Change in fair value of contingent consideration
In 2019, the Group sold Marie Claire Beauty Limited ("Fabled") to Next plc and
50% of ORL 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. As at 29 May 2022, the total value of the
contingent consideration across these two transactions was £161.8 million (FY
2021: £156.7 million). A gain on revaluation of £5.1 million is reported
through exceptional items.
Ocado Retail IT systems transformation
In FY 2021, 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 FY2023, includes the
development of both on-premises and SaaS solutions. IT Roadmap programme costs
that meet asset recognition criteria will be recognised as intangible assets,
and implementation costs that do not meet asset recognition will be expensed.
The cumulative costs expensed to date amount to £7.8 million.
These costs have been classified as exceptional because they are expected to
be significant and result from a transformational activity which is considered
only incremental to the core activities of the Group.
Tax impact 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 £2.3 million of which £0.6m (H1 2021: nil) has been
recognised. A further tax credit of £1.7 million (H1 2021: nil) has not been
recognised as it relates to tax losses which are not recognised for deferred
tax purposes.
Other items
Depreciation, amortisation and impairment
Total depreciation, amortisation and impairment costs were £157.3 million (H1
2021: £104.2 million), an increase of £53.1 million, or up 51.0% year on
year, and includes depreciation of property, plant and equipment of £76.6
million (H1 2021: £38.9 million), depreciation of right-of-use assets of
£33.9 million (H1 2021: £28.9 million), amortisation expense of £46.4
million (H1 2021: £35.7 million) and impairment costs of £0.4 million (H1
2021: £0.7 million).
The increase was principally driven by CFCs that have gone live within the
previous 12 months (£24.4 million; including right-of-use leases). The charge
incurred on CFCs that were live in the prior year also increased by £14.9
million, as we see the impact of annualisation, alongside additional spend as
we ramp our live sites. The remaining movement is driven primarily by
amortisation of technology projects following the go-live of CFCs in the
period (£11.9 million).
Net finance costs
Net finance costs of £33.4 million reduced by £4.3 million (H1 2021: £37.7
million) largely reflecting unrealised foreign exchange gains in the year of
£8.2 million (H1 2021: £(7.8) million loss) on foreign currency denominated
cash and intercompany balances. This was partly offset by the incremental
costs incurred with the issue of £500.0 million of Senior Unsecured Notes in
October 2021, offset by the redemption of the existing £225.0 million Senior
Secured Notes. Gross debt increased (as a result of the new note issue and
redemption of the existing note) to £1,841.5 million at the end of the period
(H1 2021: £1,469.3 million). The majority of the additional costs are
non-cash items relating to the effective interest rate of these instruments
and accrued interest.
Share of results from joint ventures and associates
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 its and Morrisons' online business.
The Group's share of MHE JVCo profit after tax in the period amounted to £nil
(H1 2021: £0.1 million). The Group's interest in Infinite Acres Holdings BV
was disposed of in October 2021 and contributed £nil to the Group's results
in the period (H1 2021: £(1.3) million). The Group's interest in Karakuri
Limited contributed a loss of £(0.5) million in the period (H1 2021: £(0.3)
million loss).
Loss before tax
The loss before tax for the period was £(211.3) million (H1 2021 - restated:
loss of £(27.9) million). This includes EBITDA (post exceptionals) of
£(20.6) million (H1 2021: £114.0 million), depreciation, amortisation and
impairment costs of £157.3 million (H1 2021: £104.2 million) and net finance
costs (post exceptionals) of £33.4 million (H1 2021: £37.7 million).
Taxation
The Group's reported total tax charge for the period was £0.8 million (H1
2021: £10.8 million). This reflects a corporation tax credit of £3.1 million
(H1 2021: £12.5m charge) and a deferred tax charge of £3.9 million (H1 2021:
£1.7 million credit). The reduction in tax charge and other movements mainly
relate to Ocado Retail due to accelerated tax relief for capital expenditure.
At the end of the period, the Group had £904.7 million (H1 2021: £507.1
million) of unutilised carried forward tax losses.
Dividend
During the period, the Group did not declare a dividend (H1 2021: nil).
Loss per share
Basic and diluted loss per share were (28.67)p (H1 2021: (11.12)p).
Capital expenditure
Capital expenditure totalled £366.8 million in the period (H1 2021: £319.0
million) 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.
£ million H1 2022 H1 2021(4)
UK CFCs and operations 119.8 138.0
International CFCs 140.7 105.7
Technology, Fulfilment Development and Innovation 106.3 75.3
Total capital expenditure(1,2,3) (including MHE JVCo) 366.8 319.0
1. Capital expenditure includes tangible and intangible assets
2. Capital expenditure excludes assets leased from MHE JVCo under
lease liability arrangements
3. Capital expenditure includes MHE JVCo capital expenditure in
2022 of £1.6 million and in 2021 of £2.0 million
4. 2021 reflects changes in the allocation of certain expenditure
between UK Operations, International CFCs and Technology, Fulfilment
Development and Innovation to support appropriate comparison with 2022
In the period we invested £119.8 million in our UK CFCs and operations (H1
2021: £138.0 million), of which £93.1 million (H1 2021: £97.2 million)
relates to our CFCs in the UK. This includes £4.8 million for our second Zoom
site in Canning Town which went live during the period and £31.5 million for
our CFC in Bicester which will be operational during the second half of the
year. The opening of these sites will increase total potential capacity across
both our UK retail partners to over 800,000 orders per week at maturity. The
Group also incurred £26.8 million of capital expenditure in relation to our
CFC in Luton which is expected to go-live during 2023. The remaining £56.7
million of UK operations capital expenditure includes post go-live capital
expenditure at our sites in Andover, Erith and Purfleet of £22.2 million, new
site development costs of £5.1 million, pre go-live engineering and cloud
costs and central spares of £9.1 million, group property costs of £5.0
million including new technology sites, and investment of £6.8 million to
upgrade some of our core group support systems to support ORL and
international expansion.
Investment in developing international CFCs for our partners continues to
accelerate as our committed CFC pipeline grows. Our capital expenditure on
international CFCs in the period was £140.7 million (H1 2021: £105.7
million), including £115.6 million related to the CFCs in North America where
four Kroger CFCs and one Sobeys CFC have gone live during the period, £13.6
million in Asia-Pacific and £3.1 million in Europe.
We also continue to invest in the development of our own technology,
particularly around the further development of the Ocado Smart Platform
including Ocado Re:Imagined, the suite of ground-breaking innovations launched
in January this year. We expanded technology and engineering headcount to over
2,700 staff as we increased investments to support the business' strategic
initiatives. Total technology expenditure in the period was £161.0 million,
of which £93.5 million was capitalised. The main areas of investment continue
to be the greater use of public and private cloud services, improvements in
the efficiency of our routing systems, enhancements to our customer
proposition, and existing partners' future CFCs.
Within this CFC-focussed investment, £35.6 million relates to Retrieval and
Handling Robotics (for which total cash spend, including operating
expenditure, in the period was £42.0 million), and where we see a significant
opportunity to drive further improvements in online grocery economics for
Ocado, and our clients globally.
Investment in the development of fulfilment equipment totalled £9.9 million
(H1 2021: £6.0 million), enhancing our next generation fulfilment solutions
for CFCs and delivery operations for all our Solutions partners, further
reinforcing our 'lowest cost operator' pursuit.
Cash Flow
£ million H1 2022 H1 2021
EBITDA* (13.6) 61.0
Movement in contract liabilities 43.1 57.5
Other working capital movements 23.1 (32.4)
Insurance proceeds relating to business interruption 10.0 30.0
Finance costs paid (27.3) (16.9)
Taxation paid (0.5) (9.2)
Other operating cash flow (29.1) 3.3
Operating cash flow 5.7 93.3
Capital expenditure (387.8) (297.2)
Insurance proceeds relating to rebuilding Andover CFC 5.0 -
Acquisition of Kindred Systems and Haddington Dynamics - (196.2)
Repayment of lease liabilities (23.1) (22.2)
Proceeds from share issues 1.8 2.1
Movement of short-term deposits - 370.0
Other investing and financing activities 0.7 8.1
Movement in cash and cash equivalents (excl. FX changes) (397.7) (42.1)
Effect of changes in FX rates 11.8 (6.9)
Movement in cash and cash equivalents (incl. FX changes) (385.9) (49.0)
1. EBITDA* is stated before the impact of exceptional items
EBITDA* in the period was £(13.6) million (H1 2021: £61.0 million) and a
£74.6 million reduction on the prior year reflecting a challenging
environment for our Retail segment with lower volumes alongside inflationary
cost pressures. The reduction in EBITDA was the single largest driver of the
movement in operating cash flow during the period of £5.7 million, a
reduction of £87.6 million compared with the prior year (H1 2021: £93.3
million).
The movement in contract liabilities includes cash received from our UK and
international Solutions partners and was £43.1 million (H1 2021: £57.5
million). The reduction is due to a smaller number of CFC agreements with
partners and therefore reduced design fees being invoiced compared with prior
year.
Other working capital movements include a net reduction in other working
capital (representing a net cash inflow) in the period of £23.1 million (H1
2021: net increase/cash outflow of £32.4 million). Driving this movement was
an increase in trade payables of £33.3 million (net cash inflow), driven by
the expansion of International Solutions activity, and a reduction in
inventories of £12.0 million (net cash inflow), reflecting the release of
Ocado Retail stock after the busy Christmas period, in combination with the
seasonal decline in stock levels ahead of the summer holiday period. Trade and
other receivables increased by £22.4 million (net cash outflow) which was
principally due to prepayments for the purchase of long lead items of capital
expenditure required for CFCs under construction.
Insurance proceeds relating to business interruption of £10.0 million (H1
2021: £30.0 million) is the reimbursement of business interruption losses and
associated costs in relation to the fire at our Andover CFC in February 2019.
Taxation paid of £0.5 million (H1 2021: £9.2 million) relates to overseas
entities. 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'.
Finance costs paid of £27.3m (H1 2021: £16.9m) increased by £10.4m
primarily due to interest paid on the £500.0 million senior unsecured notes
issued in October 2021.
Other operating cash flow items of £(29.1) million includes £(18.4) million
of cash-settled exceptional costs including litigation costs of £(11.1)
million, together with £(10.7) million of non-cash adjustments reflecting
£(12.7) million of revenue recognised from long-term contracts and £(19.6)
million movement on provisions, offset by £21.1 million of share-based
payment charges.
Capital expenditure (cash) during H1 2022 amounted to £387.8 million (H1
2021: £297.2 million) as the Group continues to invest for future growth,
incurring additional investment in new CFCs both in the UK and
internationally, developing next generation fulfilment solutions, and
investing in our central support capabilities.
Insurance proceeds relating to rebuilding Andover CFC of £5.0 million relates
to the reimbursement of costs for the rebuild of our CFC at Andover which
includes machinery costs. The Group has comprehensive insurance and claims
have been formally accepted by the insurers.
Lease liability repayments increased by £0.9m in the period to £23.1 million
(H1 2021: £22.2 million) and broadly reflect the additional cost of UK CFCs
that went live during and after the prior period.
Proceeds from share issues of £1.2 million (H1 2021: £1.3 million) relates
to the exercise of fully vested share options.
Movement of short-term deposits in the prior year represented a drawdown of
£370.0 million of treasury deposits which matured during the period, and were
not defined as cash and cash equivalents at the start of the 2021 financial
year.
Effect of changes in FX rates of £11.8 million relates to the FX gain
(reported under net finance costs) and translation FX on cash balances
predominantly regarding USD balances driven by the international expansion of
our Solutions business.
Balance Sheet
£ million 29 May 2022 30 May 2021 28 Nov 2021
(restated)(1)
Assets
Goodwill 152.6 136.4 144.8
Other intangible assets 385.4 328.6 345.2
Property, plant and equipment 1,495.8 978.5 1,257.8
Right-of-use assets 481.7 427.7 494.6
Investment in joint ventures and associates 26.0 39.7 26.5
Trade and other receivables 324.7 242.9 324.4
Cash and cash equivalents 1,082.7 1,657.8 1,468.6
Other financial assets 233.6 218.9 222.5
Other 93.1 82.1 99.2
Total assets 4,275.6 4,112.6 4,383.6
Liabilities
Contract liabilities (390.3) (326.4) (378.5)
Trade and other payables (412.8) (427.4) (393.2)
Borrowings (1,315.7) (1,012.0) (1,300.0)
Lease liabilities (525.8) (457.3) (528.4)
Other (62.4) (65.2) (74.1)
Total liabilities (2,707.0) (2,288.3) (2,674.2)
Net assets 1,568.6 1,824.3 1,709.4
1. See note 3 to the financial statements for details of the
restatements.
Assets
Goodwill increased during the six month period by £7.8 million to £152.6
million as a result of foreign exchange rate revaluations primarily reflecting
the movement in GBP / USD. Goodwill represents the future benefit of new
technology, the ability to attract new customers, and future synergies through
Ocado Group plc cost savings.
Other intangible assets increased by £40.2 million to £385.4 million mainly
as a result of capitalised internal development costs reflecting investment in
building our technology capabilities for our partners, across both CFC and
in-store fulfilment solutions, along with additional software costs.
Property, plant and equipment increased by £238.0 million to £1,495.8
million (FY 2021: £1,257.8 million). The increase principally relates to our
ongoing investment in the development and go-live of our international CFCs
for our client partners including Kroger, Sobeys and ICA.
Right of use assets decreased by £(12.9) million to £481.7 million largely
due to depreciation (£29.7 million), partially offset by additions of motor
vehicles and other operational assets.
Investment in joint ventures and associates decreased by £0.5 million to
£26.0 million as a result of a £(0.5) million loss incurred in relation to
the Group's interest in Karakuri Limited during the period.
Trade and other receivables increased by £0.3 million to £324.7 million (FY
2021: £324.4 million) driven by prepayments for the purchase of long lead
items of capital expenditure required for CFCs under construction.
The Group had cash and cash equivalents totalling £1,082.7 million (FY 2021:
£1,468.8 million) at the end of the period. Gross debt (including lease
liabilities) at the period end was £1,841.5 million (FY 2021: £1,828.4
million), with net debt at the period-end of £(758.8) million (FY 2021:
£(359.8) million). In June 2022, the Group successfully raised additional
gross liquidity of £878.2 million, comprising a £578.2 million equity
placing and a new £300.0 million revolving credit facility, providing a
healthy liquidity position today of almost £2.0 billion. We believe this
provides sufficient liquidity to support investment in capital expenditure to
meet existing financial commitments, and deliver future growth in the short to
medium term.
Other financial assets increased by £11.1 million to £233.6 million
reflecting an increase of £5.1m in the fair value of contingent consideration
receivable in respect of the sale of 50% of Ocado Retail to Marks and Spencer
Group plc ("M&S") and an increase in derivative financial assets of £4.5m
in relating to diesel hedge commodity swaps.
Other assets of £93.1 million predominantly consist of inventories (£78.9
million) and deferred tax assets (£8.9 million) relating to the recognition
of losses in US and Canada Solutions.
Liabilities
Contract liabilities of £390.3 million (FY 2021: £378.5 million) relates to
Solutions contracts, payments made for performance-based delivery, or progress
payments on ongoing service delivery. Where invoicing is greater than the
revenue recognised at the end of a period, a contract liability is recognised
for the difference.
Trade and other payables increased by £19.6 million to £412.8 million due to
increases in supplier payables aligned with the growth of the business.
Borrowings increased by £15.7 million to £1,315.7 million (FY 2021:
£1,300.0 million) as a result of interest accruing on borrowings during the
period.
Lease liabilities decreased by £2.6 million to £(525.8) million primarily
due to the movement of existing lease obligations into current liabilities
partly offset by additional liabilities in respect of new leases.
Other liabilities of £(62.4) million principally refers to deferred tax
liabilities of £31.5 million arising from business combinations and
decelerated capital allowances resulting from a 'super deduction' claim being
made by Ocado Retail, along with provisions of £29.8 million including
liabilities in respect of share incentive schemes of £7.8 million and
dilapidations of £22.0 million.
Subsequent Events
Acquisitions
On 19 May 2022, Ocado Ventures (Myrmex) Limited entered into an agreement to
acquire an 87.8% share in materials handling robotic start-up, Myrmex Inc
("Myrmex"), a private company incorporated in the United States of America.
Myrmex became a wholly owned subsidiary of the Group following the completion
of the transaction on 6 June 2022. Prior to the transaction, the Group held a
12.2% interest in Myrmex.
Financing
On 21 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 795 pence per Placing Share (the "Placing Price"), with existing and
new institutional investors. In addition, retail investors subscribed via the
PrimaryBid platform for a total of 246,405 new Ordinary Shares in the capital
of the Group (the "Retail Offer Shares") at the Placing Price.
In conjunction with the Placing, the Group CEO, CFO and General Counsel
subscribed for an aggregate of 150,944 new ordinary shares in the capital of
the Company at the Placing Price pursuant to the Subscription (the
"Subscription Shares").
Together, the Placing Shares, the Retail Offer Shares and the Subscription
Shares in aggregate comprise 72,724,393 new Ordinary Shares, which will raise
gross proceeds of approximately £578.2 million. The Placing Price of 795
pence per Placing Share represented a discount of approximately 9.41% to the
closing share price of 877.6 pence on 20 June 2022. The Placing Shares, the
Retail Offer Shares and the Subscription Shares being issued together
represent approximately 9.7% of the existing issued ordinary share capital of
the Company prior to the Placing, the Retail Offer and the Subscription.
The Placing Shares, the Retail Offer Shares and the Subscription Shares will,
when issued, be credited as fully paid and will rank pari passu in all
respects with the existing Ordinary Shares of Ocado Group. This includes the
right to receive all dividends and other distributions declared or paid in
respect of such ordinary shares after the date of issue of the Placing Shares,
the Retail Offer Shares and the Subscription Shares.
Following Admission, the total number of ordinary shares in issue in Ocado
Group will be 824,753,451. Ocado Group currently holds no ordinary shares in
treasury, and, therefore, following Admission, the total number of voting
shares in Ocado Group in issue will be 824,753,451.
Together with the share issue of £578.2 million in June 2022, the Group
successfully agreed a new £300.0 million revolving credit facility, provided
by a syndicate of six leading international banks.
Groupe Casino
On 30 June 2022, the Group announced the extension of its partnership deal
with French retailer Groupe Casino. The extension includes the creation of a
joint venture to provide logistics services to Ocado-powered customer
fulfilment centres in France, which will be available to all grocery
retailers.
Insurance
In June 2022, a final settlement agreement was reached with our insurers in
respect of the claim relating to the fire at Andover in 2019 for £273.8
million. This will result in the recognition of a further £67.5 million of
exceptional income in H2 2022. The Group had received £183.8 million in
respect of the claim at H1 2022. Cash settlement of the remaining £90.0
million was received in July 2022.
Condensed Consolidated Income Statement
for the 26 weeks ended 29 May 2022
26 weeks ended 29 May 2022 (unaudited) 26 weeks ended 30 May 2021 (unaudited) (restated(1))
Before exceptional items Exceptional items Total Before exceptional items Exceptional items (Note 5) Total
(Note 5)
Notes £m £m £m £m £m £m
Revenue 4 1,262.4 - 1,262.4 1,319.9 - 1,319.9
Cost of sales (777.7) - (777.7) (836.2) - (836.2)
Gross profit 484.7 - 484.7 483.7 - 483.7
Other income 48.9 6.3 55.2 49.7 62.7 112.4
Distribution costs (418.8) (0.2) (419.0) (348.8) (1.2) (350.0)
Administrative expenses (285.2) (13.1) (298.3) (226.4) (8.5) (234.9)
Operating (loss)/profit before results from joint ventures and associate (170.4) (7.0) (177.4) (41.8) 53.0 11.2
Share of results from joint ventures and associate (0.5) - (0.5) (1.4) - (1.4)
Operating (loss)/profit (170.9) (7.0) (177.9) (43.2) 53.0 9.8
Finance income 7 10.1 - 10.1 1.0 - 1.0
Finance costs 7 (43.5) - (43.5) (38.7) - (38.7)
Loss before tax (204.3) (7.0) (211.3) (80.9) 53.0 (27.9)
Taxation (1.4) 0.6 (0.8) (10.8) - (10.8)
(Loss) / profit for the period (205.7) (6.4) (212.1) (91.7) 53.0 (38.7)
Attributable to:
Owners of Ocado Group plc (212.5) (82.1)
Non-controlling interests 0.4 43.4
(212.1) (38.7)
Profit / (loss) per share Pence Pence
6 (28.67) (11.12)
Earnings before interest, taxation, depreciation, amortisation, impairment and
exceptional items (EBITDA(*))
26 weeks ended 26 weeks ended
29 May 2022 30 May 2021
(restated(1))
£m £m
Note (unaudited) (unaudited)
Operating (loss)/profit (177.9) 9.8
Adjustments for:
Depreciation of property, plant and equipment 76.6 38.9
Depreciation of right-of-use assets 33.9 28.9
Amortisation of intangible assets 46.4 35.7
Impairment of property, plant and equipment 0.4 0.4
Impairment of intangible assets - 0.3
Exceptional items* 5 7.0 (53.0)
EBITDA(*) (13.6) 61.0
1. See note 3 for the details of the restatements.
* See Alternative performance measures in note 16 for further information.
Condensed Consolidated Statement of Comprehensive Income
for the 26 weeks ended 29 May 2022
26 weeks ended 26 weeks ended
29 May 2022 30 May 2021
(restated(1))
£m £m
(unaudited) (unaudited)
Loss for the period (212.1) (38.7)
Other comprehensive income:
Items that may be reclassified to profit or loss in subsequent years:
Cash flow hedges
- Gains arising on hedging contracts 4.6 1.0
Gains on equity instruments designated as fair value through other 0.2 -
comprehensive income
Foreign exchange gain/(loss) on translation of foreign subsidiaries 43.6 (20.9)
Other comprehensive income/(expense) for the period, net of tax 48.4 (19.9)
Total comprehensive expense for the period (163.7) (58.6)
Attributable to:
Owners of Ocado Group plc (164.1) (102.0)
Non-controlling interests 0.4 43.4
(163.7) (58.6)
1. See note 3 for the details of the restatements.
Condensed Consolidated Balance Sheet
as at 29 May 2022
29 May 2022 30 May 2021 28 November 2021
(restated(1))
£m £m £m
Notes (unaudited) (unaudited) (audited)
Non-current assets
Goodwill 152.6 136.4 144.8
Other intangible assets 385.4 328.6 345.2
Property, plant and equipment 1,495.8 978.5 1,257.8
Right-of-use assets 481.7 427.7 494.6
Deferred tax assets 8.9 4.9 7.2
Contract assets - 0.1 -
Costs to obtain contracts 0.7 0.7 0.7
Financial assets 9 217.3 184.0 211.4
Investment in joint ventures and associates 26.0 39.7 26.5
Trade and other receivables - 5.5 0.5
Derivative financial assets 10 10.5 - 9.6
2,778.9 2,106.1 2,498.3
Current assets
Assets held for sale 4.4 4.2 4.2
Inventories 78.9 71.8 86.7
Contract assets 0.1 0.3 0.3
Costs to obtain contracts 0.1 0.1 0.1
Trade and other receivables 324.7 237.4 323.9
Derivative financial instruments 10 4.9 0.9 0.3
Financial assets 9 0.9 34.0 1.2
Cash and cash equivalents 8 1,082.7 1,657.8 1,468.6
1,496.7 2,006.5 1,885.3
Total assets 4,275.6 4,112.6 4,383.6
Current liabilities
Trade and other payables (412.3) (427.4) (393.2)
Contract liabilities (25.3) (21.3) (21.8)
Lease liabilities 8 (61.3) (51.4) (51.0)
Provisions 12 (1.1) (1.2) (1.0)
(500.0) (501.3) (467.0)
Net current assets 996.7 1,505.2 1,418.3
Non-current liabilities
Contract liabilities (365.0) (305.1) (356.7)
Borrowings 8 (1,315.7) (1,012.0) (1,300.0)
Lease liabilities 8 (464.5) (405.9) (477.4)
Provisions 12 (29.8) (44.6) (48.7)
Trade payables (0.5) - -
Deferred tax liabilities (31.5) (19.4) (24.4)
(2,207.0) (1,787.0) (2,207.2)
Net assets 1,568.6 1,824.3 1,709.4
Equity
Share capital 15.0 15.0 15.0
Share premium 1,373.8 1,366.9 1,372.0
Treasury shares reserve (113.0) (113.1) (113.0)
Other reserves 118.3 63.2 69.9
Retained earnings 51.9 365.2 244.3
Equity attributable to owners of Ocado Group plc 1,446.0 1,697.2 1,588.2
Non-controlling interests 122.6 127.1 121.2
Total equity 1,568.6 1,824.3 1,709.4
1. See note 3 for the details of the restatements.
Condensed Consolidated Statement of Changes in Equity
for the 26 weeks ended 29 May 2022
Attributable to owners of Ocado Group plc
Share capital Share premium Treasury shares reserve Other reserves Retained earnings Total Non- Total equity
controlling interests
£m £m £m £m £m £m £m £m
Balance at 28 November 2021 (audited) 15.0 1,372.0 (113.0) 69.9 244.3 1,588.2 121.2 1,709.4
(Loss)/ profit for the period - - - - (212.5) (212.5) 0.4 (212.1)
Other comprehensive income:
- Gain arising on hedging contracts - - - 4.6 - 4.6 - 4.6
- Gain on equity investments designated as at fair value through other - - - 0.2 - 0.2 0.2
comprehensive income
- Foreign exchange gain on translation of foreign subsidiaries and joint - - - 43.6 - 43.6 - 43.6
venture
Total comprehensive income / (expense) for the period ended 29 May 2022 - - - 48.4 (212.5) (164.1) 0.4 (163.7)
(unaudited)
Transactions with owners:
- Issue of ordinary shares - 1.2 - - - 1.2 - 1.2
- Allotted in respect of share option schemes - 0.6 - - - 0.6 - 0.6
- Share-based payments charge (net of tax) - - - - 21.1 21.1 - 21.1
- Reduction in investment in Jones Food(1) - - - - (1.0) (1.0) 1.0 -
Total transactions with owners - 1.8 - - 20.1 21.9 1.0 22.9
Balance at 29 May 2022 (unaudited) 15.0 1,373.8 (113.0) 118.3 51.9 1,446.0 122.6 1,568.6
Attributable to owners of Ocado Group plc
Share capital Share premium Treasury shares reserve Other reserves Retained earnings Total Non- Total equity
controlling interests
£m £m £m £m £m £m £m £m
Balance at 29 November 2020 (audited) (restated(2)) 15.0 1,361.6 (113.2) 76.9 421.4 1,761.7 71.4 1,833.1
(Loss)/profit for the period (restated(2)) - - (82.1) (82.1) 43.4 (38.7)
Other comprehensive income:
- Gains arising on hedging contracts - - - 1.0 - 1.0 - 1.0
- Foreign exchange gain on translation of foreign subsidiaries and joint - - - (20.9) - (20.9) - (20.9)
venture
Total comprehensive expense for the period ended 30 May 2021 (unaudited) - - - (19.9) (82.1) (102.0) 43.4 (58.6)
(restated(2))
Transactions with owners:
- Issue of ordinary shares - 0.7 - - - 0.7 - 0.7
- Allotted in respect of share option schemes - 4.6 - - - 4.6 - 4.6
- Disposal of treasury shares - - 0.1 - - 0.1 - 0.1
- Share-based payments charge - - - - 16.3 16.3 - 16.3
- Issue of ordinary shares for the purchase of Haddington Dynamics Inc - - - 6.2 - 6.2 - 6.2
- IFRS 3 portion of the rollover shares issued by Ocado for the purchase of - - - - 1.9 1.9 - 1.9
Kindred Systems Inc
- Additional investment in Jones Food Company Limited(3) - - - - 7.7 7.7 12.3 20.0
Total transactions with owners - 5.3 0.1 6.2 25.9 37.5 12.3 49.8
Balance at 30 May 2021 (unaudited) (restated(2)) 15.0 1,366.9 (113.1) 63.2 365.2 1,697.2 127.1 1,824.3
1. In January 2022, Jones Food Company Limited ("Jones Food Company") issued
new shares to three individuals, which resulted in the Group's shareholdings
in Jones Food Company decreasing to 48%. The Group retains control of Jones
Food Company.
2. See note 3 for the details of the restatements.
3. In April 2021, Jones Food Company completed an equity raise of £25.0m, as
part of which Ocado Ventures (JFC) Limited invested an additional £5.0m in
ordinary shares, this resulted in the Group's shareholding decreasing from 72%
to 52%. The Group retained control of Jones Food Company.
Condensed Consolidated Statement of Cash Flows
for the 26 weeks ended 29 May 2022
26 weeks ended 26 weeks ended
29 May 2022 30 May 2021
(restated(1))
£m £m
Note (unaudited) (unaudited)
Cash generated from operations 12 23.5 89.4
Corporation tax paid (0.5) (9.2)
Interest paid (27.3) (16.9)
Insurance proceeds relating to destroyed inventory and business interruption 10.0 30.0
Net cash flows from operating activities 5.7 93.3
Cash flows from/(used in) investing activities
Insurance proceeds relating to rebuilding Andover Customer Fulfilment Centre 5.0 -
("CFC")
Purchase of property, plant and equipment (305.8) (231.0)
Purchase of intangible assets (82.0) (66.2)
Proceeds from disposal of Speciality Stores Limited ("Fetch"), net of cash - (0.4)
Net cash on business acquisitions - (196.2)
Purchase of unlisted equity investment - (10.0)
Proceeds from other treasury deposits - 370.0
Loan to joint venture - (2.2)
Interest received 0.7 0.7
Net cash flows used in investing activities (382.1) (135.3)
Cash flows from/(used in) financing activities
Proceeds from issue of ordinary share capital, net of transaction costs 0.6 0.7
Proceeds from allotment of share options 1.2 1.3
Proceeds from disposal of treasury shares on exercise by participants - 0.1
Net cash as a result of additional investment in Jones Food Group - 20.0
Repayment of lease liabilities (23.1) (22.2)
Net cash flows used in financing activities (21.3) (0.1)
Net decrease in cash and cash equivalents (397.7) (42.1)
Cash and cash equivalents at the beginning of the period 1,468.6 1,706.8
Effects of changes in foreign exchange rates 11.8 (6.9)
Cash and cash equivalents at the end of the period 1,082.7 1,657.8
1. See note 3 for the details of the restatements.
Notes to the condensed consolidated interim financial information
1. General information
Ocado Group plc (hereafter the "Company") is incorporated in the United
Kingdom under the Companies Act 2006 (company number: 07098618). The address
of its registered office is Buildings One & Two Trident Place, Mosquito
Way, Hatfield, Hertfordshire, AL10 9UL, United Kingdom. The condensed
consolidated interim financial information (hereafter "Financial Information")
comprises the results of the Company and its subsidiaries (hereafter the
"Group").
The financial period represents the 26 weeks ended 29 May 2022. The prior
financial periods represent the 26 weeks ended 30 May 2021 and the 52 weeks
ended 28 November 2021.
2. Basis of preparation
This condensed consolidated interim financial report for the half-year
reporting period ended 29 May 2022 has been prepared in accordance with the
UK-adopted International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of the UK's
Financial Conduct Authority. The group transitioned to UK-adopted
International Accounting Standards in its consolidated financial statements on
29 November 2021. This change constitutes a change in accounting framework.
However, there is no impact on recognition, measurement or disclosure in the
period reported as a result of the change in framework.
The Financial Information does not amount to full statutory accounts within
the meaning of Section 434 of the Companies Act 2006 and does not include all
of the information and disclosures required for full annual financial
statements. It should be read in conjunction with the Annual Report and
Accounts of Ocado Group plc for the 52 weeks ended 28 November 2021 which was
prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and International Financial
Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union and was filed with the Registrar of Companies.
This report is available either on request from the Company's registered
office or at www.ocadogroup.com. The Independent Auditor's Report on these
accounts was unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under Section 498 of the Companies Act 2006.
The Financial Information is presented in pounds sterling, rounded to the
nearest million unless otherwise stated. It has been prepared under the
historical cost convention, as modified by the revaluation of financial asset
investments and certain financial assets and liabilities, which are held at
fair value.
Going concern
The Directors are satisfied that the Group has sufficient resources to
continue in operation for the foreseeable future, a period of not less than 12
months from the date of this report. Accordingly, they continue to adopt the
going concern basis in preparing the condensed consolidated financial
statements.
In assessing going concern, the Directors take into account the Group's cash
flows, solvency and liquidity positions and borrowing facilities. At the end
of the period, the Group had cash and cash equivalents of £1,082.7m (28
November 2021: £1,468.6m) and net current assets of £996.7m (28 November
2021: £1,418.3m), which, together with the recently announced fundraising
that raised gross proceeds of approximately £578m and the £300m revolving
credit facility (refer to note 14) the Directors believe would be sufficient
to maintain the Group's liquidity over the going concern period, including
continued investment to meet existing financial commitments and to deliver
future growth.
The Directors considered a range of scenarios as part of their assessment,
each of which showed positive cash headroom throughout the 18-month period
from the balance sheet date that has been considered in the assessment. In
addition, the Directors considered mitigating actions available in the event
of a deterioration in trading performance, notably the ability to reduce
capital expenditure in the short term or to make cost efficiencies where
appropriate.
Taking these factors together, the Directors believe that it is appropriate to
continue to adopt the going concern basis in preparing the condensed
consolidated financial statements.
3. Significant accounting policies and restatements to prior year
Accounting policies
The accounting policies applied by the Group in these interim financial
statements are consistent with those applied by the Group in its consolidated
financial statements for the 52 weeks ended 28 November 2021 except for the
one new accounting policy outlined below.
Inventories - low-value spares (items below £500)
During the period the Group has adopted a new inventory accounting policy for
its low-value spares (items below £500). Under the new accounting policy
low-value spares will be recognised initially in inventory and expensed as
used.
In prior years the Group recognised low-value spares as an expense upon
purchase. This was accounted as such as the aggregate amount of those items
have historically not been material. The Group has adopted the inventory
accounting policy for low value spares as outlined above as it expects the
purchase of low-value spares to increase in line with the growing number of
CFCs and the aggregate value of these spares to become more significant.
This is a new accounting policy for an area that was previously immaterial and
as such has been applied prospectively from the beginning of the period in
accordance with the requirements of IAS 8 - Accounting Policies, Changes in
Accounting Estimates and Errors. Consequently, £5.4m which would have been
otherwise expensed on purchase has been recognised within inventories at the
period end. No adjustment has been made for the year ended 28 November 2021.
Judgements and estimates
The preparation of interim financial information requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expense. Actual results may differ from these estimates. In preparing
these interim financial statements, the significant judgments made by
management in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the Annual
Report and Accounts for the 52 weeks ended 28 November 2021.
New standards, amendments and interpretations
The following new standards, interpretations and amendments to published
standards and interpretations are relevant to the Group and have been deemed
to have an immaterial effect on these interim financial statements:
· Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9, IAS
39 and IFRS 7, IFRS 4 and IFRS 16 (Part A)) - effective 1 January 2021.
Restatement of prior year
The prior period comparatives have been restated to reflect the impact of the
following items. All of these items were identified and reported in the FY21
Annual Report and Accounts and the adjustments below represent the flow
through of these to the comparative half year period:
1. In H2 2021, the Group updated its policy on IAS 38 Intangible Assets
following the IFRIC interpretation on accounting for configuration or
customisation costs in cloud computing or Software as a Service ("SaaS")
arrangements. As a result of the Group's change in accounting policy,
following the IFRIC's agenda decision in relation to SaaS arrangements, H1
2021 comparatives have been restated to derecognise previously capitalised
SaaS related costs amounting to £4.3m. This restatement increased the Group's
loss for the prior period by £4.3m and a corresponding decrease in the net
exceptional income for the same amount. The impact on the H1 2021 balance
sheet is a decrease in non-current assets by £12.6m which includes amounts
capitalised in FY20 of £8.3m.
2. In H2 2021, the Group implemented a new Enterprise Resource Planning
("ERP") system, a business analytics solution used for analysis, reporting and
collaboration. As part of the implementation process, the Group reviewed the
categorisation of certain prior period costs and has made the following
reclassifications for H1 2021: cost of sales (£7.0m increase), distribution
costs (£21.6m decrease) and administrative expenses (£14.6m increase). There
is no impact on the Group's balance sheet.
3. In H2 2021, an adjustment of £4.2m was identified relating to the
part-disposal of Ocado Retail Limited ("ORL"). The impact on the H1 2021
balance sheet is an increase of £4.2m in current assets and a corresponding
increase in opening reserves.
4. In H2 2021, the Group updated its approach to netting deferred tax
assets and liabilities and the H1 2021 comparatives have been restated to
reflect this approach. The impact on the balance sheet is a reduction in
deferred tax liabilities of £26.5m and a corresponding reduction in deferred
tax assets. There is no impact on net assets.
In addition to the restatements above, consistent with the FY21 Annual Report
the Group has adopted a three column format for the income statement which
shows exceptional items as a column rather than a single line item. The H1
2021 comparatives have been represented to reflect this approach.
The effect of the above restatements on the Consolidated Income Statement is
as follows:
26 weeks ended Restatement 1 - SaaS Represent exceptional items 26 weeks ended
30 May 2021 (previously reported) Restatement 2 - classification 30 May 2021 (restated)
£m £m £m £m £m
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Revenue 1,319.9 - - - 1,319.9
Cost of sales (829.2) - (7.0) - (836.2)
Gross profit 490.7 - (7.0) - 483.7
Other income 49.7 - - 62.7 112.4
Distribution costs (370.4) - 21.6 (1.2) (350.0)
Administrative expenses (211.8) (4.3) (14.6) (4.2) (234.9)
Operating profit/(loss) before exceptional items and results from joint (41.8) (4.3) - 57.3 11.2
ventures and associate
Exceptional items 57.3 - - (57.3) -
Share of results from joint ventures and associate (1.4) - - - (1.4)
Operating profit/(loss) 14.1 (4.3) - - 9.8
Finance income 1.0 - - - 1.0
Finance costs (38.7) - - - (38.7)
Loss before tax (23.6) (4.3) - - (27.9)
Taxation (10.8) - - - (10.8)
Loss for the period (34.4) (4.3) - - (38.7)
Attributable to:
Owners of Ocado Group plc (77.8) (4.3) - - (82.1)
Non-controlling interests 43.4 - - - 43.4
(34.4) (4.3) - - (38.7)
The effect of the above restatements on the Consolidated Balance Sheet is as
follows:
30 May 2021 (previously reported) Restatement 1 - SaaS Restatement 3 - ORL Restatement 4 - Tax 30 May 2021 (restated)
£m £m £m £m £m
Balance sheet (extract) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Other non-current assets 1,767.1 - - - 1,767.1
Other intangible assets 341.2 (12.6) - 328.6
Deferred tax assets 31.4 - - (26.5) 4.9
Trade and other receivables 1.3 - 4.2 5.5
Non-current assets 2,141.0 (12.6) 4.2 (26.5) 2,106.1
Current assets 2,006.5 - - - 2,006.5
Total assets 4,147.5 (12.6) 4.2 (26.5) 4,112.6
Current liabilities (501.3) - - - (501.3)
Net current assets 1,505.2 - - - 1,505.2
Other non-current liabilities (1,767.6) - - - (1,767.6)
Deferred tax liabilities (45.9) - - 26.5 (19.4)
Non-current liabilities (1,813.5) - - 26.5 (1,787.0)
Net assets 1,832.7 (12.6) 4.2 - 1,824.3
Equity
Retained earnings 373.6 (12.6) 4.2 - 365.2
Other equity 1,332.0 - - - 1,332.0
Equity attributable to owners of Ocado Group plc 1,705.6 (12.6) 4.2 - 1,697.2
Non-controlling interest 127.1 - - - 127.1
Total equity 1,832.7 (12.6) 4.2 - 1,824.3
All of the above restatements are non-cash items and have no impact on the
totals of the Group's operating, investing or financing cash flows for the 26
weeks ended 30 May 2021.
4. Segmental reporting
The Group's principal activities are grocery retailing and the development and
monetisation of Intellectual Property ("IP") and technology used for online
grocery retailing, fulfilment and logistics and services in the United
Kingdom, Europe, North America, Australia and Japan. The Group is not
currently reliant on any major customer for 10% or more of its revenue.
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, as required by IFRS 8. The CODM, who
is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Executive Directors.
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 relates entirely to the Ocado
Retail joint venture.
The UK Solutions & Logistics segment provides the IT platform, CFCs and
logistics services for customers in the United Kingdom (Wm Morrison
Supermarkets plc 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 revenues and EBITDA(*) with the Group's
revenue and EBITDA(*) two other headings are used: "Group eliminations and
Other" represents revenue and costs which do not relate to any of the three
segments; "Group eliminations" relates to revenue and costs arising from
intra-Group transactions, primarily between Retail and UK Solutions &
Logistics.
The Board assesses the performance of all segments on the basis of revenue and
EBITDA(*). Revenue and EBITDA(*), as reported internally by segment, are the
key measures utilised in assessing the performance of operating segments
within the Group.
The accounting policies of the segments are the same as those for the Group as
a whole. Any transactions between the business segments are subject to normal
commercial terms and market conditions. Segmental results and assets include
items directly attributable to a segment as well as those that can be
allocated on a reasonable basis.
Retail UK Solutions & Logistics International Solutions Other Group eliminations Total
Segmental revenue and EBITDA(*) £m £m £m £m £m £m
26 weeks ended 29 May 2022 (unaudited)
Segmental revenue(*) 1,122.2 395.6 58.5 0.3 (314.2) 1,262.4
Segmental EBITDA(*) 31.3 28.6 (57.2) (15.7) (0.6) (13.6)
26 weeks ended 30 May 2021 (unaudited)
Segmental revenue(*) 1,224.1 357.3 26.6 0.3 (288.4) 1,319.9
Segmental EBITDA(*) 104.1 30.1 (56.6) (16.6) - 61.0
52 weeks ended 28 November 2021 (audited)
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 Alternative performance measures in note 15 for further information.
5. 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
and/or nature, not in the normal course of business or are consistent with
items that were treated as exceptional in 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 financial
performance more readily. The Group applies judgement in identifying the items
of income and expense that are recognised as exceptional.
26 weeks ended 26 weeks ended
29 May 2022 30 May 2021
(restated(1))
£m £m
(unaudited) (unaudited)
Andover CFC
- Insurance reimbursement - 62.7
- Other exceptional costs (0.1) (2.9)
Erith CFC
- Insurance reimbursement 6.3 -
Ocado Group Finance transformation and SaaS implementation costs (4.0) (4.3)
Gain on disposal of Speciality Stores Limited ("Fetch") - 1.7
Litigation costs (11.1) (11.4)
Ocado Retail IT systems transformation (3.2) -
Change in fair value of contingent consideration 5.1 7.2
Net exceptional (costs) / income (7.0) 53.0
1. See note 3 for the details of the restatements.
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 have been 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. Total insurance reimbursement recognised in the
income statement, including those recognised in prior periods is £206.3m.
Amounts that are yet to be received are accounted for as accrued income and
total £22.5m within the cumulative income recognised to date. Amounts
recognised to date relates to reimbursement of capital expenditure costs. As
at 29 May 2022, the final settlement of the insurance claim had not been
agreed, therefore, no further insurance reimbursement income was recognised in
H1 2022.
Subsequent to H1 2022, the Group has now reached agreement with the insurers
for the final settlement of the insurance claim for a total of £273.8m. This
means that a further £67.5m of insurance reimbursement income and £90.0m of
cash has been received and recognised in H2 2022, together with any further
associated costs. This will then conclude the Andover fire insurance claim.
Other exceptional costs include, but are not limited to, 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 costs to date amount to £121.5m.
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
have been formally accepted by the insurer.
As at H1 2022, 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. An interim payment of £2.0m was received in August 2021 which was
recognised as insurance reimbursement income in H2 2021 and a further £6.3m
has been received in H2 2022 which was recognised as an insurance
reimbursement income in H1 2022 and a corresponding accrued income is held in
the balance sheet. The receipt of the £6.3m will conclude the Erith fire
claim.
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 H2
2021, 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 updated
policy was applied retrospectively and as a result, the prior period
comparatives have been restated to expense £4.3m of SaaS configuration and
customisation costs incurred in H1 2021 that had originally been capitalised,
and which no longer meet the criteria for recognition as an asset. The
cumulative finance transformation and SaaS implementation costs expensed to
date amount to £25.6m and include £4.0m in H1 2022.
These amounts have been disclosed as exceptional items in both 2021 and 2022
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 license fees for SaaS
arrangements and the cost of business as usual finance activity will not form
part of the exceptional items.
Litigation costs
Litigation costs are costs incurred on patent infringement litigation between
the Group and AutoStore Technology AS ("AutoStore"). The costs amounted to
£11.1m (H1 2021: £10.9m). The prior year litigation costs also include costs
of legal proceedings brought by the Group against Jonathan Faiman, Jonathan
Hilary and Project Today Holdings Limited ("T0day"), in relation to
misappropriation and unlawful use of the Group's confidential information and
intellectual property.
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 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 FY2023 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 will be expensed.
The cumulative costs expensed to date amount to £7.8m. These costs have been
classified as exceptional because they are expected to be significant and
result from a transformational activity which is considered only incremental
to the core activities of the Group.
Change in fair value of contingent consideration
In 2019, the Group sold Marie Claire Beauty Limited ("Fabled") to Next plc and
50% of ORL 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. As at 29 May 2022, the value of the
contingent consideration was £161.8m (FY 2021: £156.7m). A gain on
revaluation of £5.1m (H1 2021:£7.2m) is reported through exceptional items.
Tax impact 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 £2.3m of which £0.6m (H1 2021: nil) has been
recognised. A further tax credit of £1.7m (H1 2021: nil) has not been
recognised as it relates to tax losses which are not recognised for deferred
tax purposes.
6. Profit / (loss) per share
Basic loss per share is calculated by dividing the loss attributable to equity
holders 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 Value Creation Plan ("VCP"), which are accounted for
as treasury shares.
Diluted loss per share is calculated by adjusting the weighted average number
of ordinary shares outstanding to assume conversion or vesting of all dilutive
potential 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 VCP, 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 basic and diluted loss per share as the effect of all
potentially dilutive shares outstanding was anti-dilutive.
The basic and diluted loss per share has been calculated as follows:
26 weeks ended 26 weeks ended
29 May 2022 30 May 2021
restated(1)
Million Million
(unaudited) (unaudited)
Weighted average number of shares at the end of the period 741.1 738.6
£m £m
Loss for the period attributable to the owners of Ocado Group plc (212.5) (82.1)
Pence Pence
Basic and diluted loss per share (28.67) (11.12)
(1). See note 3 for the details of the restatements.
7. Finance income and costs
26 weeks ended 26 weeks ended
29 May 2022 30 May 2021
£m £m
(unaudited) (unaudited)
Interest on cash balances 0.7 0.7
Interest on loan to joint venture 0.4 0.3
Gain on revaluation of equity investments designated at FVTPL 0.8 -
Foreign exchange gain 8.2 -
Finance income 10.1 1.0
Borrowing costs:
- Interest on lease liabilities (13.5) (8.1)
- Interest on borrowings (29.5) (22.5)
Foreign exchange loss - (7.8)
Unwinding of discounting of provisions (0.5) (0.3)
Finance costs (43.5) (38.7)
Net finance cost (33.4) (37.7)
8. Analysis of net (debt)/cash(*)
Net (debt)/cash(*) is calculated as cash and cash equivalents less total debt
(borrowings and lease liabilities).
29 May 2022 30 May 2021 28 November 2021
£m £m £m
(unaudited) (unaudited) (audited)
Current assets
Cash and cash equivalents 1,082.7 1,657.8 1,468.6
Cash and cash equivalents including treasury deposits 1,082.7 1,657.8 1,468.6
Current liabilities
Lease liabilities (61.3) (51.4) (51.0)
Non-current liabilities
Borrowings (1,315.7) (1,012.0) (1,300.0)
Lease liabilities (464.5) (405.9) (477.4)
(1,780.2) (1,417.9) (1,777.4)
Total borrowings and lease liabilities (1,841.5) (1,469.3) (1,828.4)
Net (debt)/cash(*) (758.8) 188.5 (359.8)
Reconciliation of net cash flow to movement in net (debt)/cash(*)
29 May 2022 30 May 2021 28 November 2021
£m £m £m
(unaudited) (unaudited) (audited)
Net decrease in other treasury deposits - (370.0) (370.0)
Net decrease in cash and cash equivalents (385.9) (49.0) (238.2)
Net decrease/(increase) in debt and lease financing 6.4 7.6 (430.9)
Non-cash movements:
- (Assets acquired)/terminations of leases (19.5) (71.7) 7.7
Movement in net debt(*) in the period (399.0) (483.1) (1,031.4)
Opening net cash(*) (359.8) 671.6 671.6
Closing net (debt)/cash(*) (758.8) 188.5 (359.8)
* Net (debt)/cash is an alternative performance measure. See note 15 for
further information.
9. Financial assets
Financial assets comprise treasury deposits with a maturity of more than three
months at the date of acquisition, contingent consideration receivable,
unlisted equity investments, loans to a joint venture and an associate, and
contributions towards dilapidations costs receivable.
29 May 2022 30 May 2021 28 November 2021
£m £m £m
(unaudited) (unaudited) (audited)
Non - current assets
Contingent consideration receivable 161.1 147.6 156.5
Unlisted equity investments held at FVTOCI(1) 39.5 21.8 30.5
Unlisted equity investments held at FVTPL 0.9 1.0 0.9
Loans receivable held at FVTPL 13.2 11.1 12.1
Convertible loan to associate (1) 1.9 1.8 10.7
Contribution towards dilapidation costs receivable 0.7 0.7 0.7
217.3 184.0 211.4
Current assets
Contingent consideration receivable 0.7 33.2 0.2
Contribution towards dilapidation costs receivable - 0.8 0.8
Convertible loan to associate 0.2 - 0.2
0.9 34.0 1.2
(1) During the period Wayve Technologies Limited ("Wayve") undertook a
fundraise event which triggered conversion of the convertible loan into
168,028 Series B shares, at a conversion rate of £59.51 per share. Wayve's
Series B shares were valued at £89.76 per share.
10. Financial instruments
Financial assets and liabilities at fair value
Financial instruments carried at fair value on the Condensed Consolidated
Balance Sheet comprise contingent consideration, unlisted equity investments
and the derivative assets and liabilities. The Group uses the following
hierarchy for determining and disclosing the fair value of these financial
instruments:
● quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1);
● inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly (level 2); and
● inputs for the assets or liabilities that are not based on
observable market data (level 3).
The Group's derivative financial assets and liabilities are classified as
level 2. The contingent consideration and unlisted equity investments are
classified as level 3.
Set out below is an analysis of all financial instruments at fair value:
29 May 2022 30 May 2021 28 November 2021
£m £m £m
(unaudited) (unaudited) (audited)
Financial assets held at fair value
- Contingent consideration receivable Level 3 161.8 180.8 156.7
- Unlisted equity instruments Level 3 40.4 22.8 31.4
- Convertible loan to associate Level 3 2.1 1.8 10.9
- Derivative assets: warrants Level 3 10.4 - 9.6
- Derivative assets: commodity swaps Level 2 4.9 0.9 0.4
Total financial assets held at fair value 219.8 206.3 209.0
The following table provides information about how the fair values of
financial instruments classified as level 3 are determined:
Description Valuation techniques and key inputs Significant unobservable inputs
Contingent consideration receivable · Discounted cash flows. Discount rate of 8.40%.
· Expected cash inflows are estimated based on the terms of the share Expected cash inflows of £194.1m.
purchase agreements and the Group's expectations of future performance and
meeting financial and operational targets.
Unlisted equity investments and derivative assets · Probability weighted expected return method ("PWERM"). Probabilities of expected revenue in five different scenarios.
· Forecasted revenue, revenue multiples, exit date, discount rate and
probabilities.
Probabilities of various future valuations.
· Market approach along with a capitalisation of earnings approach.
· Forecasted EBITDA, EBITDA multiples and discount rates.
· Undiscounted, estimate based valuation.
The contingent consideration relating to the part-disposal of ORL to M&S
valued at £158.9m (FY 2021: £152.6m; H1 2021: £177.9m) comprises three
individual amounts, with separate payment triggers. Management considers it
probable that the remaining trigger will be met, and this has been reflected
in the calculation of the fair value.
The consideration relating to the disposal of Fabled valued at £2.9m (FY
2021: £4.1m; H1 2021: £2.9m) is based on an "earn-out" agreement whereby the
Group will receive sums in proportion to Fabled's future sales.
The convertible loan to associate was initially recognised at the amount of
cash loaned. Accrued interest is added to the carrying amount. It is held at
fair value through profit or loss ("FVTPL") and is revalued at each reporting
date.
11. Capital expenditure and commitments
During the period, the Group acquired property, plant and equipment of
£264.7m (H1 2021: £207.5m, FY 2021: £374.0m) and intangible assets of
£20.2m (H1 2021: £10.4m, FY 2021: £6.9m). Internal development costs of
£87.1m (H1 2021: £77.0m, FY 2021: £89.6m) were capitalised. Capital
expenditure relates to CFCs in the UK, investment in international CFCs and
technology expenditure.
At 29 May 2022 capital commitments contracted, but not provided for by the
Group, amounted to £387.2m (H1 2021: £370.8m, FY 2021: £324.2m).
12. Provisions
During the period, the Group recorded a net release of provisions of £19.4m
(HY 2021: increase in provision of £7.5m), the majority of which relates to
Ocado Retail, in respect of IFRS 2 cash settled share based payment
obligations. This release of prior provisions is a result of current trading.
13. Analysis of cash flows given in the cash flow statement - cash generated
from operations
26 weeks ended 26 weeks ended
29 May 2022 30 May 2021
(restated(1))
£m £m
Note (unaudited) (unaudited)
Loss before tax (211.3) (27.9)
Adjustments for:
- Depreciation, amortisation and impairment losses 157.3 104.2
- Movement in provisions (19.6) 6.0
- Share of results from joint ventures and associate 0.5 1.4
- Net loss/(profit) on derivative financial instruments - 1.0
- Revenue from long-term contracts (12.7) (7.6)
- Other income from insurance proceeds (6.3) (62.7)
- Share-based payments charge 21.1 16.3
- Net finance cost 7 33.4 37.7
- Other non-cash exceptional items (5.1) (4.6)
- Settlement of cash flow hedges - 0.5
Changes in working capital:
- Movement in inventories 12.0 (26.4)
- Movement in trade and other receivables (22.4) (21.5)
- Movement in trade and other payables 33.3 15.5
- Movement in contract liabilities 43.1 57.5
- Movement in contract assets 0.2 -
Cash generated from operations 23.5 89.4
14. Related party transactions
Key management personnel
Only the Executive and Non-Executive Directors are recognised as being key
management personnel. It is the Board which has responsibility for planning,
directing and controlling the activities of the Group.
With the exception of remuneration, there were no related party transactions
with key management personnel (H1 2021: none). At the end of the period, there
was £nil (H1 2021: £nil) owed by key management personnel to the Group.
Joint venture
The following transactions were carried out with MHE JVCo Limited ("MHE
JVCo"), a company incorporated in the United Kingdom in which the Group holds
a 50% interest:
26 weeks ended 26 weeks ended 52 weeks ended
29 May 2022 30 May 2021 28 November 2021
£m £m £m
(unaudited) (unaudited) (audited)
Dividend received from MHE JVCo - - 7.7
Reimbursement of supplier invoices paid on behalf of MHE JVCo - 0.7 2.5
Capital element of lease liability instalments accrued or paid to MHE JVCo 9.5 9.1 15.6
Interest element of lease liability instalments accrued or paid to MHE JVCo 0.9 1.2 2.1
Included within trade and other receivables is a balance of £0.5m (H1 2021:
£1.5m; FY 2021: £0.2m) owed by MHE JVCo. Included within trade and other
payables is a balance of £12.0m (H1 2021: £10.7m; FY 2021: £1.8m) owed to
MHE JVCo. Included within lease liabilities is a balance of £25.9m (H1 2021:
£42.0m; FY 2021: £34.0m) owed to MHE JVCo.
Associate
During 2020, the Group loaned £1.7m to Karakuri Limited ("Karakuri"), a
company incorporated in England and Wales in which the Group holds a 26.3%
interest. The loan is held at fair value through profit or loss within other
financial assets, and its carrying amount was £1.9m (H1 2021: £1.8m) at the
reporting date. During the period, £0.1m (H1 2021: £0.1m) of interest income
was recognised within finance income.
No other transactions that require disclosure under IAS 24 "Related Party
Disclosures" have occurred during the current financial period. There are no
changes in the related party transactions described in the last annual report
that could have a material effect on the financial position or performance of
the group in the first six months of the current financial year.
15. Post-Balance-Sheet events
Acquisition
On 19 May 2022, Ocado Ventures (Myrmex) Limited entered into an agreement to
acquire an 87.8% share in Myrmex Inc, ("Myrmex") a private company
incorporated in the United States of America for a cash consideration of
€8.3m. Myrmex is a materials handling robotics provider and became a wholly
owned subsidiary of the Group following the completion of the transaction on 6
June 2022. Prior to the transaction, the Group held 12.2% interest in Myrmex.
Fundraising
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 795 pence per Placing Share (the "Placing Price"), with existing
and new institutional investors. In addition, retail investors have subscribed
via the PrimaryBid platform for a total of 246,405 new Ordinary Shares in the
capital of the Group (the "Retail Offer Shares") at the Placing Price.
In conjunction with the Placing the Group CEO, CFO and GC have agreed to
subscribe for an aggregate of 150,944 new ordinary shares in the capital of
the Company at the Placing Price pursuant to the Subscription (the
"Subscription Shares").
Together, the Placing Shares, the Retail Offer Shares and the Subscription
Shares in aggregate comprise 72,724,393 new Ordinary Shares, which will
raise gross proceeds of approximately £578m. The Placing Price
of 795 pence per Placing Share represents a discount of approximately 9.41%
to the closing share price of 877.6 pence on 20 June 2022. The Placing
Shares, the Retail Offer Shares and the Subscription Shares being issued
together represent approximately 9.7% of the existing issued ordinary share
capital of the Company prior to the Placing, the Retail Offer and the
Subscription.
The Placing Shares, the Retail Offer Shares and the Subscription Shares will,
when issued, be credited as fully paid and will rank pari passu in all
respects with the existing Ordinary Shares of Ocado Group. This includes the
right to receive all dividends and other distributions declared or paid in
respect of such ordinary shares after the date of issue of the Placing Shares,
the Retail Offer Shares and the Subscription Shares.
Following Admission, the total number of ordinary shares in issue in Ocado
Group will be 824,753,451. Ocado Group currently holds no ordinary shares in
treasury, and, therefore, following Admission, the total number of voting
shares in Ocado Group in issue will be 824,753,451.
Alongside the capital raised in June 2022, the Group also successfully agreed
a new £300m revolving credit facility, provided by a syndicate of leading
international banks.
Groupe Casino
On 30 June 2022, the Group announced the extension of its partnership deal
with French retailer Groupe Casino. The extension includes the creation of a
joint venture to provide logistics services to Ocado-powered customer
fulfilment centres in France, which will be available to all grocery retailer.
Insurance
In June 2022, agreement was reached with our insurers in respect of the claim
relating to the fire at Andover in 2019 for £273.8m. This will result in the
recognition of a further £67.5m of exceptional income in H2 2022. The Group
had received £183.8m in respect of the claim at H1 2022. Cash settlement of
the remaining £90.0m was received in July 2022.
16. Alternative performance measures
The Group assesses its performance using a variety of alternative performance
measures, which are not defined under IFRS and are therefore termed "non-GAAP"
measures. These measures provide additional useful information on the
underlying trends, performance and position of the Group. The non‑GAAP
measures used by the Group are as follows:
● Exceptional items;
● EBITDA;
● Segmental EBITDA;
● External gross debt; and
● Net cash/(debt).
Reconciliations of these non-GAAP measures to 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.
In addition to the alternative performance measures, there are additional
statutory measures that are also considered - these are segmental revenue,
segmental gross profit, segmental other income, segment distribution and
administrative costs.
Exceptional items
The Group's Condensed Consolidated Income Statement identifies separately
trading results before exceptional items. The Directors believe that
presentation of the Group's results in this way is relevant to an
understanding of 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. Exceptional
items are disclosed in note 5.
The Group applies judgement in identifying significant exceptional items of
income and expense 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, but are not
limited to corporate reorganisations, material litigation, multi-year
transformation programmes and any material costs outside of the normal course
of business as determined by management.
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 reported revenue, the most directly comparable IFRS measure,
with the segmental revenues is disclosed in note 4.
Segmental gross profit
Segmental gross profit is a measure which 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 the segmental
gross profits, is set out below:
26 weeks ended 26 weeks ended 52 weeks ended
29 May 2022 30 May 2021 28 November 2021
(restated)(1)
£m £m £m
(unaudited) (unaudited) (audited)
Retail gross profit 345.8 392.0 737.5
UK Solutions & Logistics gross profit 395.6 357.6 710.4
International Solutions gross profit 57.4 22.9 57.5
Other gross profit 0.1 (0.4) (1.0)
Group eliminations (314.2) (288.4) (568.5)
Reported gross profit 484.7 483.7 935.9
Segmental other income
Segmental other income is a measure which seeks to reflect segmental income
which is not generated through the primary trading activities of the segments
(for example, volume-rebates from suppliers in the Retail segment). A
reconciliation of reported other income, the most directly comparable IFRS
measure, with the segmental other incomes, is set out below:
26 weeks ended 26 weeks ended 52 weeks ended
29 May 2022 30 May 2021 28 November 2021
£m £m £m
(unaudited) (unaudited) (audited)
Retail other income 39.6 40.9 84.8
UK Solutions & Logistics other income 1.6 1.7 3.5
International Solutions other income 0.1 - 0.6
Other segment other income 7.6 7.4 15.2
Group eliminations - (0.3) -
Reported other income 48.9 49.7 104.1
Segmental distribution and administrative costs
Segmental distribution and administrative costs is a measure which 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 segment: depreciation, amortisation, impairment and other
central costs. A reconciliation of reported distribution and administrative
costs, the most directly comparable IFRS measure, with the segmental
distribution and administrative costs, is set out below:
26 weeks ended 26 weeks ended 52 weeks ended
29 May 2022 30 May 2021 28 November 2021
(restated(1))
£m £m £m
(unaudited) (unaudited) (audited)
Retail distribution and administrative costs 354.1 328.8 671.9
UK Solutions & Logistics distribution and administrative costs 368.6 329.2 645.4
International Solutions distribution and administrative costs 114.7 79.5 177.4
Other distribution and administrative costs 22.9 22.2 49.4
Group eliminations (313.6) (288.7) (567.4)
Depreciation, amortisation, impairment and other central costs 157.3 104.2 238.4
704.0 575.2 1,215.1
26 weeks ended 26 weeks ended 52 weeks ended
29 May 2022 30 May 2021 28 November 2021
(restated(1))
£m £m £m
(unaudited) (unaudited) (audited)
Reported distribution costs 418.8 348.8 666.7
Reported administrative expenses 285.2 226.4 548.4
704.0 575.2 1,215.1
(1). See note 3 for the details of the restatements.
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. A reconciliation of operating profit with EBITDA can be found on
the face of the Condensed Consolidated Income Statement.
The Group considers EBITDA to be a useful measure of its operating performance
because it approximates the underlying operating cash flows by eliminating
depreciation and amortisation. EBITDA is not a direct measure of liquidity,
which is shown by the Condensed Consolidated Statement of Cash Flows, and
needs to be considered in the context of the Group's financial commitments.
Segmental EBITDA
The financial performance of the Group's segments is measured based on EBITDA,
as reported internally. A reconciliation of the EBITDA of the Group with the
EBITDA for the segments is disclosed in note 4.
External gross debt
External gross debt is calculated as gross debt (borrowings and lease
liabilities as disclosed in note 8), less lease liabilities payable to joint
ventures 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 is set out
below:
26 weeks ended 26 weeks ended 52 weeks ended
29 May 2022 30 May 2021 28 November 2021
£m £m £m
Note (unaudited) (unaudited) (audited)
Gross debt 8 1,841.5 1,469.3 1,828.4
Lease liabilities payable to joint ventures (25.9) (42.0) (34.0)
External gross debt 1,815.6 1,427.3 1,794.4
Net cash/(debt)
Net cash/(debt) is calculated as cash and cash equivalents less gross debt
(borrowings and lease liabilities as disclosed in note 8). Total debt is
measured as the net proceeds raised, adjusted to amortise any discount over
the term of the debt.
Net cash/(debt) is a measure of the Group's net indebtedness, and provides an
indicator of the overall strength of the Condensed 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 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 and cash and cash equivalents. A
reconciliation of these measures with net cash/(debt) is disclosed in note 8.
Principal risks and uncertainties
The Group faces a number of risks and uncertainties that may have an adverse
impact on the Group's operation, performance or future prospects.
The Board assesses and monitors the principal risks of the business. Set out
in the Group's Annual Report and Accounts for the 52 weeks ended 28 November
2021 were details of the principal risks and uncertainties for the Group and
the key mitigating activities used to address them, applicable at that time.
Since year-end, the impact on the Ocado business of certain geopolitical and
economic risks has become more acute. The Board has taken this into account as
part of its review of principal risks and although the description of our
principal risks remain unchanged, these significant external pressures have
had a significant impact on both the Ocado Retail business and the Solutions
business. These risks present significant uncertainty for the remainder of the
financial year.
We continue to carefully monitor the impact of the war in Ukraine and working
with our international offices, partners and suppliers have taken steps to
mitigate disruption to our OSP development programmes. The global impact of
the war is apparent within the entire supply chain of products and services
that are already struggling to recover from the pandemic and now experiencing
further increasing inflationary pressures and economic uncertainty.
The period since year end has seen increasing financial related risks, these
include inflationary pressures and interest rate rises. Whilst the Group has
taken cost mitigation measures to protect profitability during the year, it
has few mitigations for increasing commodity, freight and utility costs, aside
from its existing diesel and foreign exchange hedging arrangements. Although
increasing consumer pricing and other Ocado Retail initiatives will help
mitigate some of these impacts on the Ocado Retail business. The significant
increase in cost of living is having a significant impact on customer
behaviour and will be an ongoing challenge for the remainder of the year.
During the COVID pandemic Ocado implemented extensive measures to mitigate
impacts to our business. These measures were to ensure the health and safety
of our employees, customers and suppliers and to ensure the continuity of the
business, both the Ocado Retail business and the Solutions business.
Governments, over the last six months, have rescinded much regulation and
guidance and these changes have been reflected in our revised operating
procedures. The reduction in pandemic restrictions has impacted business
performance; for the OSP business, this has meant we are better able to
support our OSP Clients, but the effects have also meant a reduction in
customer demand in the Retail business. Ocado will continue to remain
vigilant to the ongoing COVID risks.
As part of the ongoing risk management process, emerging risks are identified
and assessed. These risks are deemed to be significant but are not listed as
one of the Group's principal risks. The business will bring additional focus
to these emerging risks and look at actions for addressing them. The Group's
Annual Report and Accounts for the 52 weeks ended 28 November 2021 contains a
description of the emerging risks for the Group.
The Board does not consider that the principal risks and uncertainties have
changed and remain relevant for the remaining six months of the 2022 financial
year.
· Our business operations and growth plans could be at risk from a
difficulty finding and retaining sufficient employees to support our growth,
in filling key positions and critical roles, a loss of top performers, a
potential shortfall of future leaders, and an inability to embed diversity and
inclusion.
· We risk the loss of critical assets and sensitive information as a
result of a cyber-attack, insider threat, or a data breach. This could result
in business disruption, reputational damage, significant fines or the loss of
confidential business information.
· Health, safety and wellbeing risks that can lead to the harm,
injury, death, or illness of a worker in a workplace or to a retail customer
of our product.
· Ocado must comply with legislative and regulatory requirements both
locally and internationally. Failure to comply could negatively impact our
business model, our ability to conduct business and the viability of our
Solutions deals, and also risks damage to our reputation, loss of stakeholder
support and financial penalties.
· Risks causing disruption to our extended and complex supply chain.
Impacting responsible sourcing and adversely affecting product availability,
delivery, reliability and cost, resulting in delays to contractual commitments
and loss of revenue.
· Major service disruption, customer confidence and increased costs
arising from a failure at key locations caused by physical events, such as
fire, or technical events, such as an IT outage or mechanical failure through
malicious or accidental means.
· Our OSP offer, pricing and contractual terms do not provide
adequate and sustainable returns for us and our shareholders and an attractive
commercial proposition for our clients.
· Implementation and service delivery do not provide the client with
timely, consistently reliable performance at a level of quality to meet the
needs of their end customers. This could lead to increased costs, reduced
revenue and penalties.
· Failure to build a quality product in terms of performance,
security, availability, safety and overall OSP economic model. Failure to meet
emerging client needs or support growth in client operational volumes. Risk
that technological innovation supersedes our own and offers improved methods
of distribution to consumers.
· Failure to protect Ocado Group's own IP or risk of infringing a
third party's IP (including the risk of an adverse outcome in current
litigation or patent office opposition/review proceedings), which could result
in loss of use of the Group's assets, financial damages or harm to the
Company's reputation or relationship.
· Our UK and international operations are dependent on access to a
range of people, resources, markets and suppliers. Economic and political
disruption and uncertainty could disrupt our business model, preventing the
delivery of new capacity or undermining our operations.
· Climate change and governmental actions to reduce such changes may
increase our costs and/or disrupt our operations.
This principal risks section should be read in conjunction with the rest of
this statement as the impact of the geopolitical and economic risks and
Covid-19 on the business is explained there and helps provide an understanding
of the risks and opportunities facing Ocado.
More information on these principal risks and uncertainties together with an
explanation of the Group's approach to risk management is set out in Ocado
Group plc's Annual Report and Accounts for the 52 weeks ended 28 November
2021, a copy of which is available on the Group's corporate website,
www.ocadogroup.com.
Independent Review Report to Ocado Group plc
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the 26 weeks ended 29 May
2022 which comprises the income statement, the balance sheet, the statement of
changes in equity, the cash flow statement and related notes 1 to 15. We have
read the other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the group will be
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34 "Interim Financial
Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Financial
Reporting Council for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and consequently does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the 26 weeks ended 29 May 2022 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity"
issued by the Financial Reporting Council. Our work has been undertaken so
that we might state to the company those matters we are required to state to
it in an independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company, for our review work, for this report, or for the
conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, UK
20 July 2022
Statement of Directors' Responsibilities
The Directors confirm that, to the best of their knowledge:
· the condensed set of financial statements gives a true and fair
view of the assets, liabilities, financial position, and profit or loss of the
issuer, or undertakings included in the consolidation, as required by DTR
4.2.4R and prepared in accordance with UK adopted IAS 34 "Interim Financial
Reporting";
· the interim management report includes a fair review of the
information required by DTR 4.2.7R, namely:
o an indication of important events that have occurred during the first six
months and their impact on the condensed set of financial statements; and
o a description of the principal risks and uncertainties for the remaining
six months of the financial year;
· the interim management report includes a fair review of the
information required by DTR 4.2.8 R, namely:
o material related party transactions that have taken place in the first six
months of the financial year and that have materially affected the financial
position or performance of the enterprise during that period; and
o any material changes in the related party transactions described in the
last annual report and that could have a material effect on the financial
position or performance of the enterprise in the first six months of the
current financial year.
The Directors of Ocado Group plc as at the date of this announcement are as
follows:
Executive Directors
Tim Steiner, Chief Executive Officer
Luke Jensen, Chief Executive Officer, Ocado Solutions
Stephen Daintith, Chief Financial Officer
Neill Abrams, Group General Counsel and Company Secretary
Mark Richardson, Chief Operations Officer
Non-Executive Directors
Richard Haythornthwaite, Chairman
Andrew Harrison, Senior Independent Director
Jörn Rausing
Emma Lloyd
Julie Southern
John Martin
Michael Sherman
Nadia Shouraboura
Approved by the Board and signed on its behalf by:
Stephen Daintith
Neill Abrams
Chief Financial Officer
Group General Counsel and Company Secretary
20 July 2022
Person responsible for arranging the release of this announcement:
Neill Abrams
Group General Counsel and Company Secretary
Ocado Group plc
Buildings One & Two
Trident Place
Mosquito Way
Hatfield
Hertfordshire AL10 9UL
Fax: +44 (0)1707 227 997
email: company.secretary@ocado.com
Ocado Group plc LEI: 213800LO8F61YB8MBC74
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