REG - Ocado Group PLC - Half-year Report
16/07/2024 07:00
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RNS Number : 4932W Ocado Group PLC 16 July 2024
This Announcement contains Inside Information
OCADO GROUP PLC
Interim results for the 26 weeks ended 2 June 2024
16 July 2024
Continuing financial, operational and strategic progress;
raising guidance for underlying cash flows and Technology Solutions EBITDA
Financial progress
● Group revenue £1.5bn, +12.6%: Technology Solutions +22%, Ocado
Logistics +6%, Ocado Retail +11%
● Group adjusted EBITDA*(1) of £71.2m, up £54.6m from £16.6m:
Technology Solutions EBITDA of £35.0m, up £29.1m; Ocado Logistics at
£17.2m, up £2.6m; Ocado Retail at £20.7m, up £23.2m; inter-segment
eliminations at £(1.7)m, down £0.3m
● Reported loss before tax £(154)m (1H23: £(290)m): after net
adjusting items* of £7.3m (1H23: £(77.2)m)
● Underlying cash outflow*(2) of £(197)m: £101m improvement vs.
1H23, driven by higher revenues, increasing EBITDA margins, lower capex and
good cost control; continuing a sequential improvement in the Group's cash
flow. Liquidity remains strong at £1,047m (1H23: £1,309m)
● Improving mid-term cash trajectory: underlying cash outflows in
FY24 now expected to be around £150m lower (improvement) vs. FY23. Clear
roadmap for Group to turn cash flow positive during FY26.
● Cost & capital discipline across the Group: commitment to
progressively reduce total technology & support annual spend towards our
mid-term goals; clear and focussed targets for technology cost reductions as
Re:Imagined innovations approach market-readiness and roll out to our partners
● Raising FY24 EBITDA* & cash flow guidance: Underlying cash
flow* expected to improve by £150m (previously £100m); Technology Solutions
to achieve a mid-teens EBITDA margin (>10% previously)
Operational and strategic progress
● Technology Solutions: +11% growth in average live modules(3) vs.
1H23 (up from 101 to 112) reflecting the incremental drawdown of capacity at
certain CFCs and the annualisation of three new CFCs in FY23; we expect the
CFCs in Madrid, Sydney and Melbourne to go-live in 2H24
● Partner Success: supporting our partners' long-term growth and
profitability remains a top priority; specialist resources embedded in our
local account teams, supported by a dedicated central function.
● Re:Imagined technology rollout: On Grid Robotic Pick ("OGRP") and
Automated Frameload ("AFL") installations progressing well; next-generation
robots and grid on track to be deployed with McKesson in Canada
● Ocado Logistics: continuing to drive leading levels of
productivity and efficiency for our UK partners
● Ocado Retail: 'Perfect Execution' Programme has driven a
market-leading trading performance, +11% growth in sales; on track for FY24
guidance of 2.5% adjusted EBITDA margin* (excl. Hatfield fees)
Tim Steiner, Chief Executive Officer of Ocado Group, said:
"Today's results illustrate good progress as we support thirteen of the
world's leading grocers to grow their online business with our technology. We
have come through an unprecedented period for online grocery, with multiple
years of high food inflation following a surge in demand during the pandemic.
The global channel shift to online has now resumed and Ocado is uniquely
well-positioned to take advantage of the opportunity.
Our technology is delivering high levels of productivity and customer
satisfaction. In the UK, Ocado Retail continues to lead the way in online
grocery, and internationally we have received orders for new capacity, with a
number of our partners reporting strong digital sales growth year-on-year.
The success of our partners is our top priority, and we are focused on helping
them execute their online strategies to deliver attractive returns from their
investment in our technology. While there remains more to do, we look forward
to making continued progress over the rest of the financial year and beyond,
as we build a profitable, cash-generating, technology business".
Ocado Group 1H24 Summary Income Statement
£m 1H24 1H23 £m change % change
Revenue(4)
Technology Solutions 241.4 198.2 43.2 21.8%
Ocado Logistics 354.0 335.2 18.8 5.6%
Ocado Retail 1,312.0 1,178.5 133.5 11.3%
Inter-segment eliminations (364.3) (341.2) (23.1) (6.8)%
Group 1,543.1 1,370.7 172.4 12.6%
Adjusted EBITDA*(1)
Technology Solutions 35.0 5.9 29.1 493%
Ocado Logistics 17.2 14.6 2.6 17.8%
Ocado Retail 20.7 (2.5) 23.2 n/a
Inter-segment eliminations (1.7) (1.4) (0.3) 21.4%
Group 71.2 16.6 54.6 329%
Depreciation, amortisation & impairment (210.3) (192.5) (17.8) 9.3%
Net finance costs (33.0) (27.4) (5.6) 20.4%
Other finance gains/(losses) 10.9 (9.0) 19.9 n/a
Adjusting items*(5) 7.3 (77.2) 84.5 n/a
Group loss before tax (153.9) (289.5) 135.6 46.8%
* These measures are alternative performance measures. Please refer to Note 16
of the Condensed Consolidated Financial Statements
Notes:
1. Adjusted EBITDA* is defined as earnings before net finance cost, taxation,
depreciation, amortisation, impairment and adjusting items*.
2. Underlying cash flow* is the movement in cash and cash equivalents
excluding the impact of adjusting items*, proceeds from the disposal of assets
held for sale, cash received in respect of contingent consideration, costs of
financing, purchase of/investment in unlisted equity investments and FX
movements.
3. Average live modules measures the weighted average number of modules of
capacity installed and ready for use by OSP clients during the year, which
drives Technology Solutions recurring revenue.
4. Revenue is a. Retail - online sales (net of returns) including delivery
charges to the customer b. Technology Solutions - the fees charged to
Solutions partners and OIA clients and c. Logistics - the recharge of costs
and associated fees from Ocado Logistics to our UK clients. Recharges from
Technology Solutions and from Ocado Logistics to Ocado Retail are eliminated
on consolidation.
5. Adjusting items* of £7.3m income (1H23: £77.2m expense) comprise largely
1. the unwind of the discount in relation to the settlement reached with
AutoStore to settle IP patent legal cases of £6.9m, 2. profit on the disposal
of Dagenham and Coventry spoke sites of £12.4m, and 3. finance, IT and HR
systems transformation costs of £8.2m.
6. Direct operating costs as a % of live sales capacity reflect the P6 exit
rate position for all OSP CFCs live at the period end. Direct operating costs
include engineering, cloud and other technology direct costs.
7. Mid-term support cost target of £130m subject to inflation from FY21 -
estimated to be c.£150m including inflation impact.
8. DP8 represents the customer deliveries per standardised eight-hour shift
for Ocado Retail only.
9. NIQ Total Till and NIQ Homescan from Nielsen Consumer LLC.
10. Active customers are classified as active if they have shopped at
Ocado.com within the previous 12 weeks.
1H24 Operational and Strategic Review
The commentary is predominantly on a pre-adjusting items* basis to aid
understanding of the performance of the business.
Technology Solutions
Strong revenue growth and profit flow-through
Our Technology Solutions business continues to show strong financial progress,
with 1H24 revenue growth of 21.8%. The growth principally reflects the
annualisation of CFC openings, in addition to the drawdown of incremental
capacity at our partners' existing CFCs. Average live modules increased by 11%
to 112 for the half, with the division's revenue growth augmented by a greater
mix of newer OSP modules and an inflation indexation.
The Luton CFC, Ocado Retail's newest CFC, has rapidly scaled its operations to
c.55k orders per week since its go-live in September 2023, relative to a
planned design capacity of c.65k orders per week. The Luton CFC also has some
of our latest innovations installed, including its first phase of On-Grid
Robotic Pick ("OGRP"), enabling around a quarter of eaches to be picked
robotically. At target, we expect c.70% SKUs to be picked robotically, with
the combination of OGRP and Automated Frameload ("AFL") ultimately able to
reduce labour costs by well over 100bps, driving the total labour productivity
of CFCs to above 300 units per labour hour ("UPH"). At the end of the half, we
had 26 live sites, comprising 22 CFCs and 4 Zooms, with a total of 112 live
modules.
We expect the Alcampo CFC in Madrid and the Coles CFCs in Sydney and Melbourne
to go live during the second half. As a consequence, we continue to expect a
minimum of 120 modules to be live across our partners by the end of FY24.
Subsequent to the period end, AEON also confirmed an order for a large CFC in
Kuki-Miyashiro, the Saitama prefecture of Japan; which we expect to commence
operations in late 2027.
We continue to drive operating efficiencies. Our direct operating costs(6) at
OSP CFCs improved by 20bps to 1.56% of sales capacity and we expect to benefit
from further, progressive improvements in the coming years. The improved
efficiency and strong revenue conversion led to adjusted EBITDA* of £35.0m
(1H23: £5.9m) for our Technology Solutions business, representing a margin of
15%.
Following a strong 1H24 performance, we retain our FY24 guidance for 15% to
20% revenue growth but raise our FY24 margin guidance to a mid-teens
percentage; previous guidance: 'greater than 10%'.
OSP Partner Success: a key focus for the group
Ocado has 13 OSP partners worldwide, and 22 CFCs live. By the end of FY24
Ocado expects to have 25 live CFCs. Ocado's technology is operating well
across all sites and live partners are reporting high levels of customer
satisfaction. CFCs scale to maturity and profitability over varying time
frames, depending on a range of factors including size, geography, and
commercial strategy. On average our partners' international CFCs have been
open for a period of just over 2 years, so in the main they are in the earlier
stage of their ramp.
The pandemic, closely followed by a sustained, generational high in global
food inflation disrupted the channel shift to online grocery in many mature
grocery markets, leading to slower cumulative sales growth than originally
projected. Against this backdrop, Ocado is working with a number of partners
to ensure their growth targets reflect a changed market environment. In some
cases, a decision was made to pause new site openings to focus on growing into
existing capacity.
A recent example is Sobeys in Vancouver, where a joint decision was taken to
extend the timeline to opening that site to concentrate on scaling operations
at their existing three CFCs. As announced in November 2022, a similar
decision was taken with Ocado Retail in the UK to pause the opening of new
sites in order to grow efficiently into existing capacity. As reflected in
today's results, that business is showing good growth in customer volumes and
strong progress in adjusted EBITDA*.
Looking to the second half of 2024, lower levels of grocery inflation and more
normalised volume trends are likely to continue. Many OSP partners and their
competitors are also now seeing strong rates of growth for online, both in
absolute terms and relative to in-store growth.
With the majority of international partners now live, the primary focus of
Ocado's account teams has shifted to supporting them to further increase
efficiency as they scale, and helping them to take advantage of the new growth
'levers' available to them in the online channel with OSP. This work
accelerated with the appointment of John Martin as CEO of Ocado Solutions in
September 2023. Our partner success programme is a core focus for us and
progressing well, delivering a positive impact on both operational performance
and customer growth.
There remains work to do as OSP partners move up the maturity curve with CFCs.
To accelerate this, Ocado Solutions completed a reorganisation in 1H24,
strengthening our partner success programme, implementing an enhanced
account-based structure with more specialist resources embedded in local
account teams. Ocado continues to scale this resource in order to support
partners in this critical area.
A focus on cost and capital discipline
Support costs were £90.0m in the half (1H23: £88.5m) and included £2.5m of
costs from the annualisation of the 6 River Systems acquisition and £4.1m of
investment in our Partner Success and OIA teams, partly offset by cost
reduction initiatives of £5.0m. We expect further progress in cost
reductions, continuing towards our FY26 target of annual spend of £150m(7),
with around £180m of support costs in FY24.
Total technology spend was £145m in the half (1H23: £149m) comprising
capital expenditure of £98m (1H23: £103m) and technology costs of £47m
(1H23: £46m); with the benefit to total spend from a lower headcount
partially offset by inflation. The technology costs principally relate to
non-capitalised research projects and maintaining the Ocado Smart Platform
through ongoing partner support, with the latter typically representing
one-third of the overall cash spend on technology. The largest element of the
capital expenditure relates to our investments in CFC technologies and the
delivery of the Ocado Re:Imagined suite. Ocado Re:Imagined is a series of
technology innovations, both hardware and software, designed to drive
efficiency and performance. Some of our Re:Imagined technologies have already
been deployed, with OGRP live at the Purfleet and Luton CFCs and AFL live at
the Purfleet and Stockholm CFCs.
As the development phase of our Re:Imagined innovations approaches its
completion and we begin to deploy the benefits to our partners, we expect our
total technology spend to reduce. As a consequence, we expect to progressively
lower our total technology spend to £240m by FY26, from around £290m in
FY24.
Ocado Intelligent Automation: building interest with McKesson on track
OIA brings Ocado's unique and proprietary technology to clients outside of the
grocery sector. It operates a capital-light "MHE sell" (rather than "MHE
licence") model ensuring our cash flows are neutral/positive throughout the
project life.
In November 2023, OIA announced its first deal to provide fulfilment
technology to McKesson in Canada, with the CFC on schedule to go live in FY25
using the latest 600 series robot and a prefabricated grid from Ocado's
Re:Imagined technologies. The deal will be cash-neutral throughout the
development phase and is expected to be cash and adjusted EBITDA* positive in
FY25 when installation is due to be complete. OIA continues to progress well,
building a pipeline of potential clients via its marketing and non-solicited
interest.
Outlook for Technology Solutions
● 15% to 20% Technology Solutions revenue growth for FY24
● Mid-teens percentage adjusted EBITDA margin* for FY24 (previously
'greater than 10%')
● Three further CFCs are expected to go live internationally during
FY24: two CFCs for Coles in Melbourne and Sydney, and one for Alcampo in
Madrid
● A minimum of 120 modules are expected to be live across our
partners by the end of FY24
● Lower total technology spend of £240m by FY26, with around £290m
in FY24; progressive cost reductions as Re:imagined automation is delivered
● Progressively lower support costs of £150m(7)by FY26, with around
£180m in FY24
● We continue to target further OSP deals and remain in several
'live' discussions
● Ocado Intelligent Automation continues to market its ASRS
proposition; ongoing discussions with several possible partners are
encouraging for new orders to be delivered in FY24
Ocado Logistics
Our third-party logistics ("3PL") operation, that services Ocado Retail and
Morrisons in the UK, continues to perform well and remains an excellent
example of a highly efficient 3PL distribution model.
In the first half of FY24, Ocado Logistics increased its total number of
eaches picked by 9.4% and its orders delivered by 7.8%. CFC productivity (OSP
units picked per labour hour or "UPH" of 221 vs. 206) primarily benefited from
greater volume utilisation, whilst our delivery efficiency ("DP8"(8) of 21.0
vs. 21.4) was impacted by longer stem times as a result of the Hatfield CFC
closure and an investment in both time on the doorstep and the training of
newly hired Customer Service Team Members.
As a result of the improved CFC efficiency and lower utility costs, together
offsetting the impact of higher delivery costs, cost recharges increased at a
slower rate than both eaches and orders; leading to cost-plus fee growth
closer to 6%. Nonetheless, Ocado Logistics reaffirmed its credentials as a
consistent generator of adjusted EBITDA*, delivering a 1H24 adjusted EBITDA*
of £17m (1H23: £15m).
Outlook for Ocado Logistics
● Continued improvement in productivity for our UK partners
● Volume growth expected to be high single-digit
● Stable revenue: high single-digit % volume growth offset by a
reduction in costs recharged to customers due to efficiency improvements
● Stable adjusted EBITDA* at around £30m
Ocado Retail
The UK's fastest growing food retailer(9)
Ocado Retail revenue grew by 11.3% in 1H24 driven by growth in average orders
per week of +9.2% to 428k, with growth in eaches of 9.5%. This delivered
adjusted EBITDA* of £20.7m in 1H24 (1H23 £(2.5)m) with the business on track
to deliver guidance of a FY24 adjusted EBITDA margin* of 2.5%, excluding
Hatfield fees of circa £33m per annum.
Ocado Retail's continued focus on its three core strategic pillars of
unbeatable choice, unrivalled service and reassuringly good value, resulted in
its share of the UK online grocery market increasing by 90bps to 12.3%(9),
with online penetration at 12.4% of the UK grocery market.
Ocado Retail is seeing continued momentum with the total active customer(10)
base increasing by +8.1% to 1,037k, and the growth in the mature customer base
(those customers who have shopped 5 or more times on Ocado.com) was stronger,
up +9.7% year on year.
The average basket value increased by +1.8% to £123. ASP inflation of 1.5%
was well below UK grocery inflation of 4.4%(9) as the business continued to
invest in price, lowering prices on more than 2,800 products and continuing to
deliver the 'Ocado Price Promise', matching baskets to Tesco.com on over
10,000 items. Taken together, these measures led to material improvements year
on year in customer value perceptions.
The strong performance reflects the progress the business has made on
delivering its Perfect Execution strategy - with its NPS further extending its
lead in the market.
Customers are being offered more choice, with over 1,800 new M&S products
launched. New products also continued to be introduced to our competitively
priced Ocado Own Range including Orange Juice, Sourdough, Burgers and
Crumpets. The business launched a Buy British aisle with over 800 products
from British farmers and growers and also a Makers Market range supporting
challenger brands.
Perfect orders (on time and in full, with no substitutions) increased by
around nine percentage points year on year ahead of pre-Covid levels, now with
99% of items delivered as promised, and product availability improving
significantly year on year as the business realised the benefits of rolling
out its new OSP forecasting engine.
Gross profit grew by 13.4% to £442m, which was higher than revenue growth
(+11.3%) driven by increased volumes alongside improved promotional
effectiveness and reductions in waste. Both CFC and utilities costs fell in
absolute terms, reflecting the increasing productivity and operational
leverage within the CFCs and the closure of Hatfield CFC.
Conversely, service delivery costs increased ahead of order growth, reflecting
inflation and network reorganisation as we closed Hatfield. In aggregate, our
fulfilment and delivery costs increased by 3.8% to £(247)m.
Marketing costs were broadly flat at £(20)m, representing 1.6% of revenue
(vs. 1.7%) as the business continued to drive efficiencies and marketing
channel optimisation.
Fees paid to Ocado Technology Solutions and Ocado Logistics increased to
£(101)m, reflecting the index-linked nature of the OSP fees and the
annualisation of the Luton CFC opening in 2H23. The total fees in the half
year period include an amount of £(17)m relating to our oldest CFC in
Hatfield which was closed in 2H23, with its order volumes facilitating the
rapid ramp of our Luton CFC.
The increasing productivity and operational leverage within the CFCs was the
primary driver of a strong revenue-to-EBITDA conversion, with adjusted EBITDA*
of £20.7m for the first half (1H23 £(2.5)m) with adjusted EBITDA margin*
rising by almost 2ppts to 1.6%. Excluding the Hatfield fees of £(17)m
incurred in the half year period, Ocado Retail delivered an adjusted EBITDA
margin* of 2.8%.
A clear pathway to sustained growth and a high mid-single-digit adjusted
EBITDA margin* (excluding the impact of Hatfield fees)
With the closure of our oldest CFC in Hatfield and rapid ramp at our latest
robotic CFC in Luton, Ocado Retail was (at the HY end) using c.80% of our
available network capacity. We expect ORL to continue increasing utilisation
of its available capacity during FY24.
Our latest generation CFCs are consistently achieving total labour
productivity of well over 200 UPH compared to UPH of around 150 for our
first-generation CFC in Hatfield. The newest sites also have much lower energy
usage with Luton consuming approximately one-third of the electricity of
Hatfield. With the benefit of Ocado Re:Imagined, Ocado will continue to drive
improvements in UPH (to ultimately exceed the target of >300 UPH) and to
improve our customers' experience, including an increased capacity for
same-day deliveries.
Luton CFC is our fastest-ever ramping CFC. Having reached c.40,000 orders per
week within the first four weeks of going live in September 2023, the facility
is now operating at close to its design capacity of 65,000 orders per week.
Over the last two weeks, the Luton CFC achieved a total labour productivity of
c.250 UPH, which we expect to increase to over 300 UPH in the coming years,
with the benefit of the OGRP and AFL technologies bringing down labour costs
considerably.
Based on the strength of Ocado Retail's customer proposition, its improving
profitability and its growing efficiency as our innovations continue to reduce
cost, we see a clear pathway to sustained growth and a high mid-single-digit
adjusted EBITDA margin* as the business continues to scale.
Outlook for Ocado Retail
● We have confidence the business will continue its encouraging
momentum across FY24, growing sales volumes ahead of the market and benefiting
from continued active customer growth
● Relative to FY23, FY24 revenue growth will continue to be impacted
by lower growth in ASP, as we invest in value and as food price inflation
continues to normalise
● Overall revenue growth in FY24 is expected to be in the mid-high
single-digits %
● FY24 adjusted EBITDA margin* of c.2.5% excluding annual Hatfield
fees of £33m, making further progress on increasing efficiencies and
demonstrating operational leverage, continuing on our journey towards a high
mid-single digit adjusted EBITDA margin* in the mid-term.
Ocado Group
Group cash flow
Underlying cash outflow* improved by £101m to £(197)m in 1H24, driven by a
strong profit flow-through and lower capital expenditure, partly offsetting a
working capital outflow due to higher retail and MHE inventories. We now
expect our underlying cash flow* to improve by around £150m for FY24 (vs.
guidance of £100m improvement previously) and we remain well on target to
turn cash flow positive during FY26.
Group capital expenditure
Capital expenditure primarily comprises new site construction costs and
technology development costs to enhance the OSP. Capital expenditure was
£211m in the period (1H23: £284m), a reduction of £73m, driven by a
decrease in the capital expenditure of CFC sites (£95m vs 1H23 £143m).
Capital expenditure on CFC sites has reduced by £48m primarily driven by the
non-repeat/reduction of certain capital expenditure incurred in the first half
of FY23. This included the capital expenditure incurred on the Aeon CFC in
Chiba City, Tokyo, and Sobeys CFC3 in Calgary, each of which went live in
FY23, and the capital expenditure on Coles CFCs in Sydney and Melbourne which
are approaching completion and readiness for go-live. CFC site capital
expenditure in 1H24 has also benefited from the draw-down on existing
inventory held on hand for new CFCs.
In 1H23 Jones Food (which is fully consolidated into the Group) invested
£11.9m in their new plant at Lydney and Ocado Retail invested in their new
Luton CFC. Neither investment has repeated in 1H24.
We are revising our guidance for Group capital expenditure to around £425m
for FY24 (vs guidance of £475m previously) driven by improved utilisation of
inventory and the delay to Sobeys' fourth CFC.
Deconsolidation of Ocado Retail
Ocado Group plc and M&S are both joint equal shareholders of Ocado Retail
Limited. At present the results of Ocado Retail Limited are consolidated into
the results of Ocado Group plc, as Ocado Group plc are deemed to be the
controlling shareholder via certain tie-breaking rights. The Shareholder
Agreement signed in August 2019 when the Joint Venture was formed provides for
Ocado Group plc to stop consolidating the results of Ocado Retail Limited no
earlier than the 5th anniversary and M&S to start consolidating after that
time; the parties are discussing the optimal time for the change. Following
that change, Ocado Retail Ltd will be equity accounted as an investment by
Ocado Group plc. There will be no change in the economic interest of both
shareholders in Ocado Retail Limited, or any consideration paid by M&S, as
a result of any future change.
Sustainability objectives
Ocado Group continues to make progress against its sustainability objectives.
This is reflected in the June 2024 review of the FTSE4Good Index Series where
Ocado moved to the 84th percentile in the global retail sector, from 56th in
2023.
Summary Financial Guidance for FY24
Revenue:
● Technology Solutions: 15% to 20% growth
● Ocado Logistics: stable revenues; high single-digit % volume
growth offset by a reduction in costs recharged to customers due to efficiency
improvements
● Ocado Retail: mid-high single digits % growth
Adjusted EBITDA*:
● Technology Solutions: mid-teens adjusted EBITDA margin* (vs.
greater than 10% previously)
● Ocado Logistics: stable at around £30m
● Ocado Retail: adjusted EBITDA margin* of c.2.5% excluding Hatfield
fees of £33m p/a
Capital expenditure: around £425m (vs. around £475m previously)
Underlying cash flow*: around £150m improvement (vs. around £100m
improvement previously)
Results Presentation
A results presentation will be available for investors and analysts at 9.30 am
on 16 July 2024. This can be accessed online here
(https://www.lsegissuerservices.com/spark/OcadoGroupHatfield/events/51212304-5180-4aba-8c4a-c6fac81feedd)
. Following the session there will be Q&A, also accessible via the
webcast.
Contacts
Tim Steiner, Chief Executive Officer on +44 20 3805 4822 today or +44 1707 228
000
Stephen Daintith, Chief Financial Officer on +44 20 3805 4822 today or +44
1707 228 000
Nick Coulter, Head of Investor Relations, on +44 20 3805 4822 today or +44
1707 228 000
Lucy Legh at the Headland Consultancy, Media Relations, on +44 20 3805 4822
Financial Calendar
Ocado Group FY24 Results will be reported on 27 February 2025.
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
Headlines
Revenue increased by 12.6% to £1,543.1m (1H23: £1,370.7m):
● Technology Solutions delivered strong revenue growth, up 21.8% to
£241.4m (1H23: £198.2m) with 112 average live modules during the period
(1H23: 101), up by 10.9%. At the end of the period we had 26 live sites (1H23:
25 sites) and 112 live modules (1H23: 105 live modules).
● Logistics revenue grew by 5.6% to £354.0m (1H23: £335.2m) and
primarily represents cost recharges to Ocado Retail and Wm Morrison
Supermarkets Limited ("Morrisons") of £336.2m (1H23: £318.5m). Orders per
week increased by 7.8% to 552,000 (1H23: 512,000); eaches (individual items in
the shopping basket) increased by 9.4% reflecting volume growth in both
retailers.
● Retail revenue increased by 11.3% in the period to £1,312.0m
(1H23: £1,178.5m) reflecting growth of 8.1% in active customers to 1,037,000
at the end of the period (1H23: 959,000). Positively, basket sizes remained
stable at an average of 44.7 individual items (1H23: 44.6 items) driven by
continued investment in value and improvements in service. Average item price
increased by 1.5% to £2.76 (1H23: £2.72) as we continued our price
investment and inflated prices below market levels. Orders per week grew by
9.2% to 428,000 (1H23: 392,000), driven mainly by the increase in active
customers.
Adjusted EBITDA* for the period was £71.2m (1H23: £16.6m), an improvement of
£54.6m. Technology Solutions generated adjusted EBITDA* of £35.0m (1H23:
£5.9m), up £29.1m due to the strong profit flow-through from revenue growth
and disciplined cost management. Logistics delivered adjusted EBITDA* of
£17.2m (1H23: £14.6m) from its resilient cost-plus model with adjusted
EBITDA* increasing year-on-year driven by higher management fees and lower
non-recharged technology and support costs. Retail generated adjusted EBITDA*
of £20.7m (1H23: loss of £2.5m) driven by a strong trading performance in
the period.
Statutory loss before tax of £153.9m (1H23: £289.5m loss) includes
depreciation, amortisation and impairment charges of £210.3m (1H23:
£192.5m), net finance costs of £22.1m (1H23: £36.4m) and net adjusting
items* of £7.3m income (1H23: £77.2m expense), which is largely the gain on
disposal of assets held for sale and the unwind of the discount in relation to
the settlement reached in the prior year with AutoStore Technology AS
("AutoStore"), offset by one-off costs relating to HR and IT system
transformation.
Good liquidity maintained to support our growth plans, with cash and cash
equivalents of £746.6m at the end of the period (FY23: £884.8m) and
liquidity of £1.05bn (FY23: £1.18bn) (including the undrawn revolving credit
facility ("RCF") of £300.0m). Net debt* at the end of the period was
£(1,222.1)m (FY23: £(1,075.1)m).
Group summary
£m 1H24 1H23 Change
Revenue 1,543.1 1,370.7 12.6%
Operating costs (1,472.1) (1,353.2) 8.8%
Share of results from joint ventures and associates 0.2 (0.9) (122.2)%
Adjusted EBITDA* 71.2 16.6 £54.6m
Depreciation, amortisation and impairment(1) (210.3) (192.5) 9.2%
Finance income(2) 18.1 19.6 (7.7)%
Finance costs (51.1) (47.0) 8.7%
Other finance gains and losses 10.9 (9.0) (221.1)%
Adjusted loss before tax (161.2) (212.3) £51.1m
Adjusting items* 7.3 (77.2) £84.5m
Loss before tax (153.9) (289.5) £135.6m
* These measures are alternative performance measures. Please refer to Note 16
to the Condensed Consolidated Financial Statements.
1. Depreciation, amortisation and impairment of £210.3m (1H23:
£192.5m) excludes £1.6m (1H23: £20.4m) recognised in adjusting items*.
2. Finance income of £18.1m (1H23: £19.6m) excludes £6.9m
(1H23: £nil) recognised in adjusting items*.
This commentary is on a pre-adjusting item* basis to aid understanding of the
performance of the business on a comparable basis. Adjusting items* are
detailed in Note 5 to the Condensed Consolidated Financial Statements.
Adjusted EBITDA* excludes the impact of adjusting items*. Depreciation,
amortisation and impairment, and net finance costs are also shown excluding
the impact of adjusting items*.
Revenue for the period increased by £172.4m to £1,543.1m (1H23: £1,370.7m).
Technology Solutions revenue increased by 21.8% from £198.2m to £241.4m
mainly driven by the annualisation of the three sites opened during FY23
(Sobeys' third CFC in Calgary and our first CFC for AEON in Chiba city, just
outside Tokyo, during the first half of the year and Ocado Retail's Luton CFC
in the second half). The average number of live modules is the key revenue
driver for Technology Solutions and average live modules increased by 10.9% to
112 (1H23: 101).
Logistics revenue increased by 5.6% to £354.0m (1H23: £335.2m) and largely
comprises cost recharges to its two UK customers, Ocado Retail and Morrisons.
Retail revenue increased by £133.5m from £1,178.5m to £1,312.0m, up by
11.3% primarily reflecting strong growth in active customers and growing order
volumes. Basket sizes remained stable during the period, supported by
investment in price which led to continued slower-than-market inflation. The
strong performance reflects the significant progress the business is making
with its strategy.
Net cumulative invoiced fees to our partners on our Balance Sheet and not yet
recognised as revenue increased by £3.2m from £446.7m at FY23 year-end
(1H23: £428.2m) to £449.9m at 1H24. Net cumulative invoiced fees are
recognised as contract liabilities on the Balance Sheet and are an indicator
of future revenues as the balances will be released to the income statement
over the life of our CFC contracts. The net movement of £3.2m during the
period is driven by amounts invoiced of £30.2m less revenue recognised in the
Income Statement of £27.0m. The amounts invoiced of £30.2m were driven by 1.
amounts invoiced to OIA customers, 2. incremental staged payments and orders
from existing partners, and 3. fees from our new Ocado Smart Platform ("OSP")
partner, Panda. The release to the income statement of £27.0m was mainly
driven by revenue recognised on operational CFCs in line with IFRS 15.
Operating costs include all costs incurred in the continuing operations of the
Group. Operating costs increased by 8.8% to £1,472.1m (1H23: £1,353.2m).
Technology Solutions operating costs increased by 7.3% to £206.4m (1H23:
£192.3m) due to the increase in average live modules and their associated
operating costs and higher support costs as we continued to invest in our OIA
and Solutions Sales and Partner Success programmes. The current year includes
£5.1m litigation income received, net of costs, following the settlement
reached with MasterCard and Visa in relation to bank interchange fees. The
prior year included the one-off profit of £5.0m from the sale of the Dartford
spoke. Logistics operating costs increased by 5.1% to £336.8m (1H23:
£320.6m) due to a 7.8% growth in orders that was offset by improved
productivity across our OSP sites. Retail operating costs increased by 9.3% to
£1,291.3m (1H23: £1,181.0m) largely driven by the growth in orders,
continued inflation and incremental OSP fees year-on-year. Operating costs for
Retail increased at a lower rate than revenue due to 1. improved gross profit
margin, 2. efficiencies in order fulfilment across all sites, and 3. a
year-on-year decrease in wholesale electricity prices.
Adjusted EBITDA* for the period was £71.2m (1H23: £16.6m) with all segments
delivering a positive adjusted EBITDA*. The £54.6m year-on-year increase was
driven by a £29.1m improvement in Technology Solutions to £35.0m (1H23:
£5.9m), £23.2m improvement in Retail to £20.7m (1H23: £2.5m loss) and
£2.6m improvement in Logistics to £17.2m (1H23: £14.6m). The improvement in
Technology Solutions adjusted EBITDA* was mainly driven by the strong
flow-through of incremental revenue to adjusted EBITDA*. The improvement in
Retail adjusted EBITDA* was driven by strong growth in active customers
resulting in a 9.2% increase in orders per week, improved gross profit margin
and an improvement in operational efficiency across the network. This was
partly offset by higher OSP fees reflecting the opening of the Luton CFC in
2H23.
Depreciation, amortisation and impairment increased by 9.2% to a charge of
£210.3m (1H23: £192.5m), primarily due to the increase in amortisation
relating to internally generated intangible assets (primarily the investment
in OSP) together with the continuing roll-out of OSP hardware and software at
our CFC sites. At the end of the period, there were 26 live sites (1H23: 25
sites) comprising 22 CFCs and four Zooms (1H23: 21 CFCs and four Zooms; a site
is considered live when it has any modules fully installed and is available
for use by our partner). Property, plant and equipment ("PP&E") held on
the Balance Sheet was £1,790.7m (FY23: £1,794.9m), a decrease of £4.2m in
the period.
Net finance costs of £22.1m decreased by £14.3m (1H23: £36.4m). This
comprises the net of finance costs of £51.1m (1H23: £47.0m) primarily
related to our gross debt and lease liabilities, finance income of £18.1m
(1H23: £19.6m) primarily interest on our cash balances, and the net impact of
foreign exchange and revaluation gains of £10.9m reflected in other finance
gains and losses (1H23: £9.0m loss).
Adjusting items* of £7.3m income (1H23: £77.2m expense) comprise largely 1.
profit on the disposal of Dagenham and Coventry spoke sites of £12.4m, 2. the
unwinding of the discount recognised from the agreement reached with AutoStore
to settle IP patent legal cases of £6.9m, and 3. finance, IT and HR systems
transformation costs of £8.2m. Further details of all adjusting items* can be
found in Note 5 to the Condensed Consolidated Financial Statements.
Statutory loss before tax of £153.9m (1H23: loss of £289.5m) reflects an
adjusted EBITDA* profit of £71.2m (1H23: £16.6m), depreciation, amortisation
and impairment of £210.3m (1H23: £192.5m), net finance costs of £22.1m
(1H23: £36.4m) and net adjusting items* of £7.3m income (1H23: £77.2m
expense).
Segmental summary
£m 1H24 1H23 Change
Revenue
Technology Solutions 241.4 198.2 21.8%
Logistics 354.0 335.2 5.6%
Retail 1,312.0 1,178.5 11.3%
Inter-segment eliminations (364.3) (341.2) (6.8)%
Group 1,543.1 1,370.7 12.6%
Adjusted EBITDA*
Technology Solutions 35.0 5.9 29.1
Logistics 17.2 14.6 2.6
Retail 20.7 (2.5) 23.2
Inter-segment eliminations (1.7) (1.4) (0.3)
Group 71.2 16.6 54.6
Technology Solutions is the global technology platform business providing OSP
as a managed service to 13 grocery retail partners. This segment also includes
the following:
● The revenue and costs associated with the Group's non-grocery
business, Ocado Intelligent Automation ("OIA"), including Kindred and 6RS; and
● The revenue and costs of our fully consolidated vertical farming
business, Jones Food.
Technology Solutions comprises 1. the revenue and direct operating costs of
the OSP, OIA and Jones Food businesses, 2. the commercial and technology costs
to sustain and grow these businesses and 3. the support costs for these
businesses, including Technology Operations, Solutions Sales and Partner
Success, OIA Sales, Finance, Legal, HR, Information Technology and the Board.
Ocado Logistics is our third-party logistics business providing services to
customers in the UK (Ocado Retail and Morrisons). The Logistics business
operates automated warehouses and provides the associated supply chain and
delivery services to our UK partners, and recharges these costs in full,
together with an additional management fee. The business also generates
revenue from capital recharges relating to certain historical material
handling equipment ("MHE") assets used to provide logistics services. The
segment includes 1. revenue from cost recharges (primarily CFC and delivery
costs incurred), capital recharges and the management fee for operating all UK
sites, 2. the related CFC fulfilment and delivery costs, 3. technology costs
directly related to sites and any non-OSP customer platform technology costs,
and 4. costs relating to central functions to support the provision of the
logistics business.
Ocado Retail is the UK online grocery retail business serving a broad range of
shopper missions, from large weekly shops to "dinner-for-tonight" top-up
shops. Ocado Retail is a 50% owned joint venture with Marks & Spencer
Group plc ("M&S") and is fully consolidated into the Group's results.
Inter-segment eliminations represent the elimination of inter-segmental
revenue and costs. These relate to transactions between Ocado Retail, and the
Technology Solutions and Logistics businesses. Technology Solutions and
Logistics each generate revenue from services provided to Ocado Retail, which
are included as costs within the Ocado Retail segment. For 1H24,
inter-segmental revenue eliminations were £364.3m (1H23: £341.2m). The
increase of £23.1m is driven by 1. incremental OSP fees charged to Ocado
Retail by the Technology Solutions segment, due to an increase in the number
of average live modules, and 2. incremental variable and fixed costs recharged
to Ocado Retail from the Logistics business, driven by volume growth.
Inter-segmental adjusted EBITDA* eliminations relate to amortised upfront fees
and CFC pre-go-live services paid for by Ocado Retail to Technology Solutions,
which are included within revenue in Technology Solutions. Ocado Retail
capitalises these charges within fixed assets relating to the CFC assets; the
associated depreciation is reported outside adjusted EBITDA*. For 1H24,
inter-segmental adjusted EBITDA* eliminations were £1.7m (1H23: £1.4m). The
£0.3m increase is mainly driven by the annualisation of upfront fees and CFC
pre-go-live services following the opening of the Luton CFC in 2H23.
Technology Solutions
£m 1H24 1H23 Change
Fees invoiced*(1) 243.3 202.8 20.0%
Revenue 241.4 198.2 21.8%
Direct operating costs (69.6) (58.1) (19.8)%
Contribution 171.8 140.1 22.6%
Contribution % 71% 71% 0ppts
Technology costs (46.8) (45.7) (2.4)%
Support costs (90.0) (88.5) (1.7)%
Adjusted EBITDA* 35.0 5.9 £29.1m
Adjusted EBITDA %* 15% 3% 12ppts
1. Fees invoiced represent design and capacity fees invoiced
during the period for existing and future sites and in-store fulfilment
("ISF"). This also includes fees invoiced by the OIA business relating to the
provision of MHE and support services to the non-grocery market. These are
recognised in the Income Statement under IFRS 15.
Key performance indicators
The following table sets out a summary of selected operating information in
the period:
1H24 1H23 Change
No. of live modules(1,3) 112 105 6.7%
Average live modules 112 101 10.9%
Cumulative no. of modules ordered(2,3) 232 232 -
Direct operating cost (% of live sales capacity)(4) 1.56% 1.76% 0.20ppts
1. A module is considered live when it has been fully installed
and is available for use by our partner. This includes 14 modules for the
Hatfield CFC and Leeds Zoom, which are not actively trading during the period,
but are available for use by Ocado Retail and for which fees are being
received in full.
2. Ordered modules represent the maximum capacity of sites for
which a contractual agreement has been signed with a partner and an invoice
has been issued for the associated site fees.
3. A module of capacity is assumed as 5,000 eaches picked per
hour and c.£75m per annum of partner live sales capacity.
4. Direct operating costs as a percentage of live sales capacity
reflects the P6 exit rate position for all OSP CFCs live at the period end.
Direct operating costs include engineering, cloud and other technology direct
costs.
Technology Solutions is the global technology platform business providing OSP
as a managed service to 13 grocery retail partners.
During the period we continued our focus on supporting our partners to
increase volume growth in order to improve capacity utilisation in their CFCs,
investing in our partner success programme and scaling the OIA business. Our
partner success teams have been working closely with our partners to support
sales growth, drive operational efficiency and improve profitability.
Our OIA business continues to perform well and contributed a positive adjusted
EBITDA* during the period. We remain focused on building a strong pipeline of
Ocado Storage and Retrieval Systems ("OSRS") and 6RS partners.
At the end of the period we had 26 live sites, comprising 22 CFCs and four
Zooms, with a total of 112 live modules (1H23: 25 sites, 21 CFCs, four Zooms;
105 modules).
The 112 modules include 14 modules of capacity installed and available for use
by Ocado Retail, but on sites where Ocado Retail has decided to cease
operations. The Technology Solutions business continues to charge Ocado Retail
capacity fees in full for these modules. This follows Ocado Retail carrying
out a network capacity review during FY23 for its CFCs and a strategy and
capacity review for its Zoom sites. At the end of the period, Technology
Solutions has 24 sites, with 98 modules, in which partners are actively
trading (21 CFCs and three Zooms).
Fees and revenue
Fees invoiced* increased by 20.0% to £243.3m (1H23: £202.8m). These fees
include 1. the design and access fees invoiced across clients relating to
existing and future CFC and ISF commitments, 2. the ongoing capacity fees
associated with the live operations, primarily Ocado Retail, Kroger, Sobeys,
Morrisons, and Aeon, and 3. fees invoiced by the OIA business.
The 20.0% year-on-year growth in fees invoiced was lower than the 21.8%
year-on-year growth in revenue mainly due to lower design and access fees
invoiced as fewer sites went live in the year. The 18.4% increase in ongoing
capacity fees invoiced of £206.2m (1H23: £174.1m) was higher than the 16.3%
increase in ongoing capacity fee revenue of £203.3m (1H23: £174.8m) due to
the timing of invoices raised. Fees invoiced by OIA increased year-on-year
mainly driven by the partnership announced in the prior year with McKesson,
Canada and the annualisation of the acquisition of 6RS in 2H23.
Under revenue recognition rules, design and access fees are not recognised as
revenue until a working solution is delivered to the partner, i.e. the site
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, were £449.9m (FY23: £446.7m).
Revenue in the period of £241.4m (1H23: £198.2m) comprises ongoing capacity
fees of £203.3m (1H23: £174.8m) and £17.7m (1H23: £15.9m) relating to the
release to the Income Statement of the design and upfront fees received from
our operational partners, which were included within the contract liability
amount on the Balance Sheet; these primarily relate to Kroger, Morrisons,
Sobeys, ICA, Aeon and Ocado Retail (which is eliminated on the consolidated
Balance Sheet). Ongoing capacity fee revenue in Technology Solutions is driven
by the average number of live modules in the period. During the period, these
grew by 10.9% to 112 average live modules (1H23: 101). Ongoing capacity fee
revenue grew at a faster rate than the average live modules (+16.3% compared
with +10.9%) due to the increased number and proportion of live OSP modules,
which generate a higher fee per module of sales capacity than non-OSP sites.
There are 30 legacy non-OSP modules within the 112 modules at the end of the
period that primarily relate to the Hatfield and Dordon CFCs and that generate
a lower fee per module than an OSP module. During FY23 the Hatfield CFC ceased
trading; the Technology Solutions business is entitled to continued capacity
fees of circa £33m per annum at Hatfield and continues to charge them in full
to Ocado Retail. Revenue also includes 1. £17.7m (1H23: £6.2m) relating to
OIA and 2. equipment sales to retail partners of £2.3m (1H23: £1.3m)
recognised as revenue under IFRS 15 (the cost of this equipment is recognised
within direct operating costs).
Direct costs
Direct operating costs largely relate to the day-to-day costs of operating our
CFC and Zoom sites, primarily engineering support, maintenance and spares, and
the costs of hosting the technology services for partners. Costs increased by
£11.5m (19.8%) to £69.6m (1H23: £58.1m) mainly driven by the 10.9% growth
in average live modules, annualisation of OIA direct costs following the
acquisition of 6RS in the prior year, and Jones Food operational costs,
following the opening of its second vertical farm in FY23.
The exit rate of direct operating costs as a percentage of live sales
capacity, a key measure of operational efficiency across OSP sites, decreased
from 1.76% in 1H23 to 1.56%. The decrease was mainly driven by a reduction in
cloud costs as we continued to decommission old environments, rationalise the
retained data and optimise storage.
Technology and support costs
Technology costs mainly comprise the non-capitalised management time spent on
early-stage research projects and maintaining OSP through ongoing client
support. Other costs include direct legal and professional fees and
non-capitalised software costs. Technology costs in 1H24 were £46.8m (1H23:
£45.7m), an increase of £1.1m primarily due to a higher non-capitalised
software and services costs.
Support costs are costs incurred in supporting the global operations of the
business. They include Solutions Sales and Partner Success, OIA Sales,
Technology Operations, Finance, HR, IT and Legal. Costs increased by £1.5m to
£90.0m during the period (1H23: £88.5m). Cost reduction initiatives of
£5.0m were offset by £4.1m of investment in OIA, Solutions Sales and Partner
Success, which are of critical importance for the group and £2.5m
annualisation of 6RS support costs following its acquisition during 2H23.
Support costs also include the one-off benefit of a settlement reached with
MasterCard and Visa in relation to interchange fees, which generated a net
income of £5.1m. 1H23 included the one-off benefit of the sale of the
Dartford spoke site, which generated a profit on disposal of £5.0m.
Board costs of £10.2m (1H23: £13.3m) are included within Technology
Solutions support costs. The year-on-year decrease of £3.1m was mainly driven
by a decrease in share-based payment charges of £2.4m to £5.0m (1H23:
£7.4m) following the cessation of the Value Creation Plan during the year.
We invested £4.1m in developing the OIA, Solutions Sales and Partner Success
functions, supported by an experienced leadership team, which is dedicated to
driving growth for new and existing partners. OIA central costs increased
during the period as we continued to scale the business following the first
OIA deal to provide automated fulfilment solutions to McKesson Canada and the
acquisition of 6RS during 2H23.
Adjusted EBITDA*
Adjusted EBITDA* for the period was £35.0m (1H23: £5.9m), an improvement of
£29.1m. The strong profit flow-through from the £43.2m growth in revenue was
driven by 1. the benefits of scale as more modules went live in our existing
CFC sites, 2. the ongoing optimisation of direct CFC operating costs
(including maintenance and data costs) which have reduced as a percentage of
sales capacity and 3. the benefit of cost reductions in support costs.
Ocado Logistics
£m 1H24 1H23 Change
Cost recharges 336.2 318.5 5.6 %
Fee revenue 17.8 16.7 6.6 %
Revenue 354.0 335.2 5.6 %
Other income 2.3 6.9 (66.7)%
Fulfilment and delivery costs (305.4) (295.6) (3.3)%
Technology and support costs (33.7) (31.9) (5.6)%
Adjusted EBITDA* 17.2 14.6 £2.6m
Key performance indicators
The following table sets out a summary of selected operating information in
the period:
1H24 1H23 Change
Total eaches (million) 651.8 595.9 9.4%
Orders per week (000s) 552 512 7.8%
OSP CFC UPH(1,2) 221 206 7.3%
DP8(3) 21.0 21.4 (1.9)%
1. Measured as units picked from the CFC per variable hour
worked by operational personnel.
2. OSP CFCs are all CFCs excluding Hatfield and Dordon.
3. DP8 represents the drops per standardised eight-hour shift
for Ocado Retail only.
Ocado Logistics is a wholly-owned third-party logistics business operating
exclusively in the UK. This business manages and operates automated warehouses
and the related supply chain and online delivery services on behalf of our two
partners, Ocado Retail and Morrisons. Ocado Logistics operates on a cost-plus
model whereby it charges its clients the costs of the operations we manage on
their behalf, plus a management fee of circa 4%.
Given this model, client volumes in the sites we operate are a key driver of
our revenue and costs. During the period, average orders per week across our
two partners increased by 7.8% to 552,000 (1H23: 512,000) while the volume of
eaches increased by 9.4% to 651.8m (1H23: 595.9m). The increase in eaches
reflects improved trading across both of our partners, as grocery inflation
normalises.
Revenue
This comprises 1. cost recharges, which are the recharge of variable and fixed
costs incurred to provide fulfilment and delivery services, which are
recharged to Ocado Retail and Morrisons, 2. a 4% management fee charged on
rechargeable costs and 3. capital recharges to Ocado Retail for the use of
certain fixtures and fittings, and plant and machinery that were not
transferred to Ocado Retail on its formation as a separate business.
Cost recharges increased by £17.7m to £336.2m (1H23: £318.5m). These costs
represent the operational costs that are recharged to Ocado Retail and
Morrisons for the provision of third-party logistics services. The key cost
recharge driver is the volume processed through the CFC sites. While total
eaches increased by 9.4%, cost recharges increased at a slower rate increasing
by 5.6% with fulfilment efficiencies driven by, 1. the continued rollout of
our Re:Imagined technology, 2. increased volumes, 3. year-on year reductions
to fuel price and utilities unit costs, and 4. cost savings associated with
the closure of the Hatfield CFC in the prior year. Improved efficiency from
the higher average number of units picked per labour hour ("UPH") in our OSP
sites is demonstrated as UPH increased by 7.3% to 221 (1H23: 206). Cost
recharges are greater than rechargeable costs of £328.4m (1H23: £312.5m) as
cost recharges include lease income for lease costs in shared sites, where we
are providing a service, for which the cost is included below adjusted
EBITDA*.
Fee revenue of £17.8m (1H23: £16.7m) increased by 6.6% and includes £12.3m
of management fees (1H23: £11.6m) and £5.5m of capital recharges (1H23:
£5.1m). The £1.1m increase in fee revenue is largely due to an increase in
management fees, which are around 4% of rechargeable costs. Management fees
increased by 6.0% in the year.
Capital recharges of £5.5m (1H23: £5.1m) relate to charges to Ocado Retail
for the use of certain assets that are owned by the Group and utilised by
Ocado Retail. For partner-shared sites (primarily Dordon and Erith), capital
recharges are accounted for (in accordance with IFRS 16) as revenue as we are
considered to be providing a service. For sites that are used exclusively by
Ocado Retail (primarily Purfleet, Bristol and Andover), this income is
accounted for (per IFRS 16) as finance income (below adjusted EBITDA*) as we
are considered to be providing a finance lease. The £0.4m year-on-year
increase was mainly driven by the renewal of LGV leases during the year.
Recharges and fees to Ocado Retail of £276.8m (1H23: £264.9m) included
within the £354.0m revenue (1H23: £335.2m) are eliminated on consolidation.
Other income
Other income of £2.3m (1H23: £6.9m) relates to MHE JVCo asset rental income.
1H23 included £2.2m of CFC rental income from one of our partners, which in
the current year, is presented within revenue in accordance with IFRS 15. The
remaining year-on-year decrease of £2.4m was mainly driven by the expiry of
asset rental agreements in the year. Other income is presented within
operating costs in the Condensed Consolidated Income Statement.
Fulfilment and delivery costs
These costs comprise the costs of fulfilment and delivery operations which are
recharged to Ocado Retail and Morrisons.
Total fulfilment and delivery costs increased by 3.3% to £305.4m (1H23:
£295.6m) with eaches increasing by 9.4% to 651.8m (1H23: 595.9m). Costs
increased by less than eaches due to improvements to productivity and benefit
from 1. the year-on-year reduction in utilities unit costs and fuel costs, and
2. fixed cost savings associated with the closure of the Hatfield CFC, which
more than offset the higher costs of delivery in the year.
Productivity improvements are demonstrated by the improvement in UPH in OSP
CFCs (Erith, Andover, Purfleet, Bristol and Bicester), which improved
year-on-year to an average UPH of 221 in the period (1H23: 206), significantly
exceeding our target of 200 UPH. The average UPH of 221 also includes the
Luton CFC. A higher UPH results in lower labour intensity and therefore lower
costs for the same volume. The improvement in UPH and resulting productivity
improvements reduced the labour cost required per each and partially offset
the additional hours required by increased volumes.
The effectiveness of our delivery operations is measured by DP8. This reduced
by 1.9% to an average of 21.0 drops per standardised 8-hour shift for Ocado
Retail (1H23: 21.4 drops). The decrease was mainly driven by 1. investment in
our customer service through the re-introduction of delivery into homes and
increased slot availability and same-day offering, and 2. the expected
increase in distance to our customers following the closure of Ocado Retail's
Hatfield CFC and opening of the Luton CFC. This was partly offset by the
year-on-year increase in volumes and improved density of our drops.
Technology and support costs
Technology and support costs comprise 1. head office and related costs to
operate the Logistics business, 2. technology costs related to the operating
of our pre-OSP grocery fulfilment platform and 3. the non-capitalised element
of the programme costs to transition our UK partners from the pre-OSP
technology platform to OSP. This programme is expected to be completed in
FY25.
Technology and support costs increased by £1.8m to £33.7m (1H23: £31.9m)
primarily due to higher head office recruitment and training costs. Head
office costs and a portion of technology costs are recharged to our partners
as part of our contractual agreements. The cost of operating the pre-OSP
platform and the transition to OSP is not recharged to partners.
Adjusted EBITDA*
Adjusted EBITDA* for the period was £17.2m, an increase of £2.6m (1H23:
£14.6m); increased cost recoveries and management fees were partly offset by
lower MHE JVCo asset rental income and higher technology and support costs,
each of which is described above.
Ocado Retail
£m 1H24 1H23 Change
Revenue 1,312.0 1,178.5 11.3%
Gross profit 442.1 389.9 13.4%
Gross profit % 33.7% 33.1% 0.6ppts
Fulfilment and delivery costs (246.8) (237.7) (3.8)%
Marketing costs (20.4) (20.1) (1.5)%
Support costs (53.4) (49.0) (9.0)%
Fees (100.8) (85.6) (17.8)%
Adjusted EBITDA* 20.7 (2.5) £23.2m
The results of the Ocado Retail Limited joint venture (referred to as either
"Ocado Retail" or "Retail") are fully consolidated in the Group.
Key performance indicators
The following table sets out a summary of selected Ocado.com operating
information in the period:
Ocado.com(1) 1H24 1H23 Change
Active customers (000s)(2) 1,037 959 8.1%
Average orders per week (000s) 428 392 9.2%
Average basket value (£)3 123.36 121.22 1.8%
Average selling price (£)4 2.76 2.72 1.5%
Average basket size (eaches) 44.7 44.6 0.2%
1. Ocado.com excludes Zoom by Ocado as Ocado.com represents the
core business of Ocado Retail.
2. Active customers are classified as active if they have
shopped at Ocado.com within the previous 12 weeks.
3. Average basket value (£) is defined as product sales divided
by total orders.
4. Average selling price (£) ("ASP") is defined as product
sales divided by total eaches.
Revenue
Revenue increased by 11.3% to £1,312.0m (1H23: £1,178.5m) driven by growth
in Ocado.com, with 9.2% order growth to 428,000 orders per week (1H23: 392,000
orders per week) and 1.8% growth in basket value to £123.36 (1H23: £121.22).
We continued to win new customers and gain market share through a continued
focus on our 'Perfect Execution' strategy, with an emphasis on unbeatable
choice, reassuringly good value and unrivalled service. We achieved effective
customer acquisition results through improvements in marketing activity,
driven by channel efficiency activities, and improved customer retention
through our strengthened customer proposition. We continue to focus on
consistent and strong operational performance and customer service in key
areas such as delivering on time and in full alongside improving product
availability; all of which improved in the half.
Active customers now stand at 1,037,000, up by 8.1% from 959,000 at 1H23.
Ocado grew its share of the online grocery market to 12.3% (1H23: 11.4%,
Nielsen revised methodology**; 1H24 as at 18 May 2024; 1H23 as at 20 May
2023). As our customer base continued to increase, average orders per week
grew by 9.2% to 428,000 (1H23: 392,000). The increase in average orders per
week of 9.2% was higher than the growth in active customers of 8.1% due to the
higher frequency of orders, with a greater proportion of mature customers
shopping more often with the business.
** Under the previous methodology market share was 14.2% (1H23: 13.0%).
The average basket value grew by 1.8% to £123.36 (1H23: £121.22) driven by
the increase in selling price of 1.5% to £2.76 (1H23: £2.72). Average basket
size remained broadly stable at an average of 44.7 items (1H23: 44.6 items).
We remain committed to offering reassuringly good value to customers and did
not pass through the full impact of food price inflation to our customers; the
average selling price on Ocado.com has increased by 1.5%, well below UK
grocery inflation of 4.4% (Nielsen). We continued to invest in the 'Ocado
Price Promise', which we launched in early 2023 matching customers' shops to
Tesco.com on over 10,000 products, including Clubcard prices. This is a key
component of our value strategy to support the growth and retention of our
customers. Alongside this, our 'Big Price Drop' campaign delivered multiple
rounds of price cuts in the year, as we reduced the prices on thousands of
products, to ensure that we continue to combine our unbeatable range and
unrivalled service with reassuringly good value for our customers.
Gross profit
Gross profit increased by 13.4% to £442.1m (1H23: £389.9m). Growth was
higher than the 11.3% revenue growth due to improvements in the gross profit
margin from 33.1% in 1H23 to 33.7% in 1H24. This improvement was mainly driven
by improvements in promotional effectiveness and investment alongside
improvements in waste.
Gross profit includes the net benefit of supplier-funded media income of
£45.0m (1H23: £40.5m) and the cost of vouchers of £13.9m (1H23: £12.6m).
Fulfilment and delivery costs
£m 1H24 1H23 Change
CFC (90.7) (93.4) 2.9%
Service delivery (148.1) (130.2) (13.7)%
Utilities (8.0) (14.1) 43.3%
Fulfilment and delivery costs (246.8) (237.7) (3.8)%
CFC costs primarily comprise labour costs in CFCs. Costs reduced by 2.9% to
£90.7m (1H23: £93.4m) despite the 9.2% growth in average orders per week.
This improved efficiency was achieved by again improving the productivity of
our CFC sites and the closure of the low-productivity Hatfield CFC. The
average UPH for Ocado.com improved by 15.5% from 187 to 216.
The OSP CFCs (Erith, Andover, Purfleet, Bicester, Bristol) showed robust
improvements in productivity reaching an average of 221 UPH (1H23: 206 UPH),
an improvement of 7.3%. Average UPH in 1H24 also includes the Luton CFC.
Service delivery costs comprise labour, fleet, fuel and related costs to
enable the delivery of orders to customers. Costs increased by 13.7% to
£148.1m (1H23: £130.2m), driven by the growth in the number of orders
(+9.2%), as well as inflation and network reorganisation following the closure
of Hatfield. Service delivery costs are driven by the productivity of the
delivery ('last mile' operations). This productivity is measured in 'eaches
per van', which reduced by 0.2% to 991 eaches (1H23: 993 eaches). The
reduction was mainly due to longer stem times as a result of the Hatfield CFC
closure and an investment in both time on the doorstep and the training of
newly hired Customer Service Team Members. This resulted in service delivery
costs growing at a higher rate of 13.7% than the growth in orders of 9.2%.
Utilities costs across CFCs and service delivery decreased by 43.3% to £8.0m
(1H23: £14.1m) due to significantly lower electricity unit costs (1H24: 21.8p
per kilowatt hour; 1H23: 32.4p per kilowatt hour) and the closure of the
Hatfield CFC in 2H23.
Marketing and support costs
Marketing costs comprise the cost of marketing activities to customers and
exclude vouchering costs, which are included within revenue. Activities
focused on driving increased awareness of the Ocado value proposition through
our 'Ocado Price Promise' and 'Big Price Drop' campaigns. Costs remained
broadly flat year-on-year at £20.4m (1H23: £20.1m) as we continued to
optimise the marketing channel mix. As a result, marketing spend as a
percentage of revenue decreased to 1.6% (1H23: 1.7%).
Support costs of £53.4m (1H23: £49.0m) comprise head office, customer
support and other overhead costs for Ocado Retail. The £4.4m, 8.9%, increase
year-on-year whilst lower than revenue growth was higher driven by 1. cost
inflation, 2. filling senior, strategic vacancies from the prior year, and 3.
incremental costs to hire.
Fees
Fees comprise 1. the OSP fees paid to Technology Solutions for the operation
of OSP, 2. logistics management fees and 3. capital recharges paid to Ocado
Logistics. Fees of £100.8m (1H23: £85.6m), which include costs in relation
to the closed Hatfield CFC, increased by £15.2m, mainly driven by the
index-linked OSP fees due to Technology Solutions and annualisation of the
Luton CFC opening in FY23.
Adjusted EBITDA*
Adjusted EBITDA* for the Retail business was £20.7m (1H23: £2.5m loss). The
primary drivers for the £23.2m year-on-year increase were growth in active
customers and orders driving trading performance, partly offset by higher fees
paid to Technology Solutions from indexation and the annualisation of the
opening of the Luton CFC in FY23, and higher service delivery costs.
Non-segmental items
Depreciation, amortisation and impairment
Total depreciation, amortisation and impairment costs were £210.3m (1H23:
£192.5m), an increase of £17.8m, or 9.2% year-on-year. This includes 1.
depreciation of PP&E of £103.7m (1H23: £95.8m), 2. depreciation of
right-of-use assets of £30.2m (1H23: £35.5m), 3. amortisation expense of
£74.2m (1H23: £59.7m) and 4. impairment charge of £2.2m (1H23: £1.5m).
The increase was mainly driven by £22.4m additional depreciation and
amortisation due to the annualisation of the three sites that went live during
FY23, and technology projects going live in the last 12 months. This was
partly offset by a £5.3m reduction in the depreciation of right-of-use
assets, as leases on plant and machinery in respect of our Dordon shared site
expired in the prior year.
Net finance costs
Net finance costs of £22.1m decreased by £14.3m (1H23: £36.4m). Net finance
costs comprise the net of finance costs of £51.1m (1H23: £47.0m), finance
income of £18.1m (1H23: £19.6m) and the net impact of foreign exchange and
revaluation gains of £10.9m (1H23: loss of £9.0m). Finance income is
primarily interest income on cash balances.
Finance costs of £51.1m (1H23: £47.0m) mainly comprise the interest expense
of £37.9m (1H23: £33.3m) on borrowings. The increase in interest expense of
£4.6m was primarily due to the interest expense on the shareholder loan from
M&S to Ocado Retail. This was partly offset by lower interest expense of
£12.5m (1H23: £13.1m) on lease liabilities.
Net foreign exchange and revaluation gains of £10.9m (1H23: loss of £9.0m)
comprise:
● Gain on revaluation of financial assets of £9.7m (1H23: £4.0m
loss). During the year, Wayve Technologies Limited ("Wayve") successfully
completed a Series C fundraising, following which the Group now holds a 1.5%
interest in Wayve (1H23: 2.5%). The Group has recorded an increase in the fair
value of its outstanding warrants of £9.7m. Further details of this can be
found in Note 9 to the Condensed Consolidated Financial Statements; and
● Net foreign exchange gains of £1.2m (1H23: £5.0m loss), largely
in respect of USD balances held.
Total borrowings at the end of the period were £1,482.2m (FY23: £1,462.1m).
Total lease liabilities at the end of the period were £486.5m (FY23:
£497.8m).
Share of results from joint ventures and associates
The Group has accounted for a £0.2m profit (1H23: £0.9m loss) for the share
of results from joint ventures and associates.
The Group has two joint ventures (Ocado Retail and MHE JVCo) and one associate
(Karakuri, a robotics business involved in the development of automation for
quick-service restaurants). The results of the Ocado Retail joint venture are
fully consolidated within the Ocado Group.
● MHE JVCo is a 50:50 joint venture with Morrisons and holds the
Dordon CFC MHE assets which Ocado Retail and Morrisons use to service their
online businesses. The Group's share of the MHE JVCo profit after tax in the
period amounted to £0.2m (1H23: £0.1m loss); and
● Karakuri Limited is an associate and the Group's 26.3% interest in
Karakuri contributed £nil in the period (1H23: £0.8m loss). Karakuri
appointed administrators in June 2023 and the remaining investment in Karakuri
was written down to £nil in the prior period.
Adjusted loss before tax
Adjusted loss before tax of £161.2m (1H23: loss of £212.3m) reflects an
adjusted EBITDA* profit of £71.2m (1H23: £16.6m), depreciation, amortisation
and impairment of £210.3m (1H23: 192.5m), and net finance costs of £22.1m
(1H23: £36.4m).
Loss before tax
Loss before tax of £153.9m (1H23: loss of £289.5m) is stated after net
adjusting items* of £7.3m income (1H23: £77.2m expense).
Taxation
The Group reported a total tax credit in the Income Statement for the period
of £0.6m (1H23: £14.1m). This amount includes a corporation tax charge of
£1.7m (1H23: £0.4m). A deferred tax credit of £2.3m (1H23: credit of
£14.5m) was recognised in the period.
Deferred tax assets increased due mainly to the availability of future R&D
tax relief in Poland. Deferred tax liabilities increased due to the increased
valuation of the investment in Wayve Technologies Limited.
At the end of the period, the Group had £1,608.4m (1H23: £1,165.6m) of
unutilised carried-forward tax losses.
Dividend
During the period, the Group did not declare a dividend (1H23: £nil).
Loss per share
Basic and diluted loss per share were 16.65 pence (1H23: 28.65 pence).
Capital expenditure
Capital expenditure for the period totalled £210.5m (1H23: £283.6m), a
reduction of £73.1m, primarily driven by a decrease in capital expenditure of
CFC sites. Capital expenditure largely comprises new site construction costs
and technology development costs to enhance OSP.
An analysis of capital expenditure by key categories is presented below:
£m 1H24 1H23 Change
CFC sites 94.7 142.6 33.6%
Technology 97.9 102.6 4.6%
Group support and other 11.0 21.5 48.8%
Technology Solutions 203.6 266.7 23.7%
Logistics 5.2 6.6 21.2%
Retail 3.0 12.7 76.4%
Eliminations(1) (1.3) (2.4) (45.8)%
Group capital expenditure 210.5 283.6 25.8%
1. The elimination of capital expenditure comprises the design
and set up fees charged to Ocado Retail by Technology Solutions (those fees
charged to Ocado Retail are eliminated on consolidation of the Group).
Technology Solutions
CFC sites capital expenditure relates to the construction of new sites and
costs associated with upgrading our live sites, and totalled £94.7m in the
period, a decrease of £47.9m (1H23: £142.6m). The investment primarily
relates to seven sites under construction and Ocado Retail's Luton CFC which
went live in 2H23. The year-on-year reduction is primarily driven by higher
capital expenditure in the prior year on the three sites that went live in
FY23, and sites that are near completion and due to go live in FY24. CFC sites
capital expenditure in 1H24 also benefited from the draw-down on existing
inventory held on hand for new CFCs.
Technology development spend decreased to £97.9m (1H23: 102.6m). During the
period, we continued to invest in OSP with a focus on delivering the
Re:Imagined product innovations announced in January 2022. Re:Imagined
includes seven key innovations: the 600 series bot, the 600 grid and optimised
site design, Automated Frameload ("AFL"), On-Grid Robotic Pick ("OGRP"), Ocado
Orbit, Ocado Swift Router and Ocado Flex.
£m 1H24 1H23 Change
CFC technologies 48.4 60.5 20.0%
Ecommerce 18.1 14.9 (21.5)%
Logistics and supply chain 13.2 10.5 (25.7)%
Other 18.2 16.7 (9.0)%
Technology 97.9 102.6 4.6%
We continue to enhance our customer proposition delivering world-class
end-to-end grocery ecommerce and fulfilment solutions. OSP includes ecommerce,
order management, forecasting, routing and delivery, automated storage and
retrieval systems ("ASRS"), dexterous robotics and other material handling
elements.
● CFC technologies are at the core of our OSP proposition. This
capital expenditure encompasses the ongoing development of our grid and bots
(our ASRS and the robots on the grid), its peripheral MHE and the enhancement
of these propositions. This element of our capital expenditure is focused on
reducing both the capital cost and the ongoing running costs of the CFC for
the partner and Ocado Group.
We invested £48.4m in CFC technologies during the period (1H23: £60.5m) in
several key propositions that aim to increase energy efficiency and reduce
build and running costs. These include: the development of our lowest-cost and
lightest bot ever and its associated grid, the 600 series; an automated
freezer solution ("autofreezer"); and AFL. AFL reduces partner labour hours
and allows higher productivity per employee by removing the challenging
process of manually loading ready-for-customer orders onto delivery frames.
During the period, we launched the first of our 600 series bots into Ocado
Retail's Bicester CFC and deployed AFL into the Luton CFC.
● Ecommerce: we invested £18.1m (1H23: £14.9m) in developing our
ecommerce platform, a core element of the OSP end-to-end solution. These
additional OSP ecommerce innovations continue to enhance every aspect of the
shopper journey. They include improvements to the search and browse
experience, and specific developments to bolster the range of products our
partners can sell.
● One of the core benefits of OSP is our expertise in Logistics and
supply chain as part of our end-to-end solution. We invested £13.2m in these
propositions in 1H24 (1H23: £10.5m), with the focus of our investment on the
optimisation of the grocery supply chain and efficiency of the last mile
delivery. This includes ensuring strong product availability to customers,
whilst maintaining low waste and stock holding days in our partners' CFCs. Our
last-mile solution aims to deliver excellent slot availability to end
customers.
● The balance of the spend predominantly relates to our teams
creating tooling and development systems necessary to deliver for the wider
Technology function where we invested £18.2m (1H23: £16.7m).
Group support and other capital expenditure comprise projects relating to
support costs systems and infrastructure. Other capital expenditure of £11.0m
is £10.5m lower year-on-year (1H23: £21.5m) following completion of Jones
Food's second vertical farm in Lydney, Gloucestershire which opened in FY23.
Logistics
Capital expenditure of £5.2m (1H23: £6.6m) largely relates to technology
system development of £4.8m (1H23: £6.6m) to transition our UK partners from
our legacy platforms onto OSP.
Retail
Capital expenditure of £3.0m (1H23: £12.7m) largely comprises CFC automation
costs recharged from Ocado Group and IT project costs. The year-on-year
decrease of £9.7m is due to a reduction in new CFC investment following the
opening of the Luton CFC in 2H23.
Design and set-up fees of £1.3m (1H23: £2.4m) to Ocado Retail from
Technology Solutions are eliminated on consolidation of the Group and
principally relate to the Luton CFC. This reduced year-on-year as no new sites
have been committed to in the period.
Cash flow
£m 1H24 1H23
Adjusted EBITDA* 71.2 16.6
Movement in contract liabilities 22.1 23.7
Other working capital movements (23.8) (9.5)
Finance costs paid (27.8) (28.1)
Taxation paid (2.9) 1.4
Adjusting items* 39.3 (21.1)
Other non-cash items (9.0) 0.6
Operating cash flow 69.1 (16.4)
Capital expenditure (214.2) (288.8)
Net proceeds from interest-bearing loans and borrowings 0.2 4.3
Repayment of lease liabilities (27.7) (32.1)
Net proceeds from share issues 1.1 1.3
Other investing and financing activities 34.6 18.5
Movement in cash and cash equivalents (excl. FX changes) (136.9) (313.2)
Effect of changes in FX rates (1.3) (6.3)
Movement in cash and cash equivalents (incl. FX changes) (138.2) (319.5)
Cash and cash equivalents (including FX changes) reduced by £138.2m (1H23:
reduction of £319.5m). There was a decrease in cash outflow of £181.3m
year-on-year.
Adjusted EBITDA* (as detailed in the alternative performance measures in Note
16 of the Consolidated Financial Statements) improved by £54.6m to £71.2m
(1H23: £16.6m).
Operating cash flow improved by £85.5m to an inflow of £69.1m (1H23: outflow
of £16.4m). The movement can be analysed as follows:
● Contract liabilities: cash inflow of £22.1m (1H23: £23.7m
inflow) relating to upfront design and access fees paid by our grocery retail
partners and advances received by our OIA business. Design fees are typically
paid in instalments during the CFC construction process.
● Working capital: cash outflow of £23.8m (1H23: £9.5m outflow)
o Trade and other receivables increased by £9.8m mainly due to the timing
of prepayments relating to insurance premiums, rates and software maintenance
and the timing of cash receipts from our Technology Solutions partners. This
was partially offset by a decrease in receivables for Ocado Retail mainly due
to the timing of receipt of media and promotional income.
o Inventories increased by £14.6m mainly driven by the timing of stock
receipts in Ocado Retail (adjusted by accruals for goods received not
invoiced) and increase in bots and spares inventory as we scale the OIA
business.
o Trade and other payables increased by £0.6m.
● Finance costs: cash outflow of £27.8m (1H23: £28.1m outflow)
comprises £15.3m interest and charges on borrowings (1H23: £15.0m) and
£12.5m for the interest element of assets held under finance leases (1H23:
£13.1m).
● Taxation: cash outflow of £2.9m (1H23: inflow of £1.4m) reflects
taxation payments by foreign subsidiaries. No UK tax was paid in the period.
● Adjusting items*: cash inflow of £39.3m (1H23: outflow of
£21.1m) relates to cash-settled adjusting items* and primarily comprises the
following:
o £49.8m proceeds from the settlement of AutoStore patent litigation and
cross-licence pre-2020 patents;
o £(8.2)m (1H23: £(4.2)m) relating to Finance, HR and Retail IT system
transformation costs;
o £(1.2)m (1H23: £(7.8)m) relating to organisational restructuring costs;
and
o £nil (1H23: £(9.1)m) relating to litigation costs
● Other non-cash items: outflow of £(9.0)m (1H23: inflow of £0.6m)
relates to adjustments for the following non-cash elements of adjusted
EBITDA*:
o £(27.1)m (1H23: £(13.1)m) revenue recognised from long-term contracts;
o £19.9m (1H23: £16.1m) of share-based payments;
o £(1.8)m (1H23: £1.2m) movement in provisions.
o £(0.2)m share of profit from joint ventures and associates (1H23: £0.9m
share of loss);
o £0.2m (1H23: £0.4m) non-cash write-off of property, plant and equipment;
and
o £nil (1H23: £(5.0)m) gain on the disposal of property, plant and
equipment, as this is recognised in adjusting items* in the Condensed
Consolidated Income Statement but the proceeds from the disposal are included
in other investing and financing activities.
The movements above result in an operating cash inflow of £69.1m (1H23: cash
outflow of £16.4m). The following movements explain the overall movement in
cash and cash equivalents outflow of £138.2m (1H23: outflow of £319.5m):
● Capital expenditure of £214.2m (1H23: £288.8m) primarily relates
to the continued investment in OSP and new CFCs in the UK and internationally.
Capital expenditure also includes investment in Group support activities. The
year-on-year reduction of £74.6m reflects higher capital expenditure in the
prior year on the three sites that went live in FY23 and sites that are near
completion and due to go live in FY24. The prior year also included Jones
Food's investment in their new plant in Lydney. Cash capital expenditure of
£214.2m is higher than accounting capital expenditure of £210.5m mainly due
to the timing of cash spend on capital items. This difference is reflected in
accruals and prepayments on the balance sheet.
● Net proceeds from interest-bearing loans and borrowings of £0.2m
(1H23: £4.3m) reflect a loan drawn down by Jones Food. Jones Food is fully
consolidated into Ocado Group and this represents the portion of a £5.0m loan
that was lent by entities outside of the Group.
● Lease liability repayments of £27.7m (1H23: £32.1m), decreased
by £4.4m year-on-year mainly driven by the expiry of certain plant and
machinery leases in the prior year.
● Net proceeds from share issue of £1.1m (1H23: £1.3m) in respect
of employee share schemes.
● Other investing and financing activities of £34.6m (1H23:
£18.5m) include £18.6m (1H23: £9.4m) proceeds from the disposal of assets
held for sale, £15.0m (1H23: £18.2m) of interest received on treasury
deposits, and £1.0m (1H23: £0.9m) cash contingent consideration received in
respect of the sale of Fabled to Next plc.
● Effect of changes in FX rates of £1.3m (1H23: £6.3m loss)
relates to the FX loss (reported under other finance gains and losses) and
translation FX on our non-sterling cash balances (predominantly USD cash
balances held to fund the expansion of our Technology Solutions business in
the US).
£m 1H24 1H23(1)
Movement in cash and cash equivalents (138.2) (319.5)
Adjusting items* (39.3) 21.1
Proceeds from disposal of assets held for sale (18.6) (9.4)
Purchase of unlisted equity investments and loans to investee companies - 10.0
Cash received in respect of contingent consideration (1.0) (0.9)
Financing(2) (1.3) (5.6)
Effect of changes in FX rates 1.3 6.3
Underlying cash outflow* (197.1) (298.0)
1. Underlying cash outflow for 1H23 has been re-presented to
exclude proceeds from the disposal of assets held for sale of £(9.4)m and
cash received in respect of contingent consideration of £(0.9)m as these are
not recurring, core business items. Underlying cash outflow for 1H23 was
previously reported as £287.7m
2. Financing of £1.3m (1H23: £5.6m) includes net proceeds from
share issues of £1.1m (1H23: £1.3m) and net proceeds from interest-bearing
loans and borrowings of £0.2m (1H23: £4.3m).
Underlying cash outflow* is £197.1m (1H23: £298.0m) and improved by £100.9m
year-on-year. Underlying cash flow* is the movement in cash and cash
equivalents excluding the impact of adjusting items*, proceeds from the
disposal of assets held for sale, cash received in respect of contingent
consideration, costs of new financing activity, investment in unlisted equity
investments and FX movements.
Balance Sheet
£m 1H24 1H23 FY23
Assets
Goodwill 157.9 161.8 158.6
Other intangible assets 480.8 413.6 461.3
Property, plant and equipment 1,790.7 1,832.9 1,794.9
Right-of-use assets 414.5 460.8 428.1
Investment in joint venture and associates 9.7 14.6 9.5
Trade and other receivables 405.3 308.9 427.8
Cash and cash equivalents 746.6 1,008.5 884.8
Other financial assets 138.6 194.8 127.7
Inventories 123.5 85.7 127.1
Other assets 16.2 7.2 9.2
Total assets 4,283.8 4,488.8 4,429.0
Liabilities
Contract liabilities (449.9) (428.2) (446.7)
Trade and other payables (449.8) (456.7) (470.4)
Borrowings (1,482.2) (1,393.2) (1,462.1)
Lease liabilities (486.5) (516.0) (497.8)
Other Liabilities (43.2) (48.2) (41.0)
Total liabilities (2,911.6) (2,842.3) (2,918.0)
Net assets 1,372.2 1,646.5 1,511.0
Total equity (1,372.2) (1,646.5) (1,511.0)
Assets
Goodwill of £157.9m (FY23: £158.6m) arises on the acquisition of a business
where the purchase cost exceeds the fair value of the tangible assets, the
liabilities and the intangible assets acquired. It therefore represents the
expected future benefit to Ocado Group of businesses that have been acquired.
Goodwill of £157.9m arises from the prior acquisitions of Kindred Systems
Inc., Haddington Dynamics Inc., Myrmex Inc. and Jones Food Company. This
future benefit derives from the development of new technology, the ability to
attract new customers and cost synergies. Goodwill decreased by £0.7m in the
period mainly due to the foreign exchange impact of the revaluation of the
goodwill (predominantly USD-denominated).
Other intangible assets net book value of £480.8m increased by £19.5m (FY23:
£461.3m). The movement was driven by:
● £88.4m (1H23: £79.8m) internal development costs capitalised
during the period that related to the development of our technology
capabilities for our partners, across our CFC, Zoom and ISF solutions;
● £8.8m (1H23: £15.3m) of intangible assets acquired primarily
relating to software and patents;
● Amortisation charge for the period of £74.2m (1H23: £59.7m); and
● Other smaller movements of £(3.5)m.
Other intangible assets are typically depreciated over five years.
Property, plant and equipment net book value decreased by £4.2m to £1,790.7m
(FY23: £1,794.9m) and comprise fixtures, fittings, plant and machinery of
£1,588.4m (FY23: £1,586.3m), land and buildings of £199.9m (FY23: £206.0m)
and motor vehicles of £2.4m (FY23: £2.6m).
● Fixtures, fittings, plant and machinery predominantly comprise the
material handling and other operating equipment within our sites.
o This increased by £2.1m to £1,588.4m driven by £99.9m of additions
(1H23: £169.6m) primarily relating to client sites currently under
construction.
o Internal development costs of £11.7m (1H23: £17.2m) were capitalised and
relate to OSP technology development and deployment.
o These increases were partly offset by depreciation for the period of
£99.1m (1H23: £94.5m), net foreign exchange movements of £(11.4)m (1H23:
£26.9m) and impairments of £3.8m (1H23: £8.5m) and other smaller movements.
Impairments recognised largely relate to the strategy and capacity review of
the Zoom network.
● Land and buildings comprise CFC and Zoom sites in the UK, spokes
and offices. The net book value decreased by £6.1m to £199.9m.
● Motor vehicles primarily comprise the vehicles owned by Ocado
Group relating to CFC and head office operations.
● Tangible assets are typically depreciated over eight to ten years.
Right-of-use assets of £414.5m (FY23: £428.1m) represent the value of assets
held under long-term leases, comprising land and buildings of £349.4m (FY23:
£359.9m), motor vehicles of £48.6m (FY23: £50.5m) and fixtures, fittings,
plant and machinery of £16.5m (FY23: £17.7m).
During the period, the Group entered into new leases for assets of £11.8m:
● £8.8m of which is motor vehicles;
● £1.7m of which is fixtures, fittings, plant and machinery; and
● £1.3m of which is land and buildings.
The Group recognised a depreciation charge for the period of £30.2m (1H23:
£35.5m).
Investment in joint ventures and associates includes the Group's 50%
investment in MHE JVCo and the Group's 26.3% investment in Karakuri (both no
change in percentage holding from the prior year). The Group's investment in
Karakuri was written off in the prior year and the carrying amount at the end
of the period of £9.7m relates solely to the investment in MHE JVCo (FY23:
£9.6m).
Trade and other receivables decreased by £22.5m to £405.3m (FY23: £427.8m).
The balance comprises the following:
● Trade receivables (net of expected credit loss allowance) of
£116.9m (FY23: £126.8m) primarily comprise receivable balances due from
Technology Solutions retail partners and amounts due to Ocado Retail from
suppliers as part of commercial and media income.
● Other receivables of £146.3m (FY23: 190.4m). Other receivables
largely comprise amounts receivable from AutoStore following the settlement of
patent litigation, tax refunds due and receivables expected from contract
manufacturers for components sourced on their behalf. The decrease of £44.1m
is mainly driven by cash receipts from AutoStore.
● Accrued income of £72.4m (FY23: £54.8m) relates to accrued
income for media and promotions, solutions capacity fees, and volume-related
rebates. The increase is mainly driven by higher accrued media and promotional
income due to the timing of invoicing.
● Prepayments of £69.7m (FY23: £55.8m) include CFC components,
software maintenance payments, and business rates and utilities payments. The
£13.9m increase was mainly driven by the timing of utilities and rates
prepayments.
● Amounts due from suppliers relating to commercial income are
£40.4m (FY23: £91.5m). £15.2m (FY23: £59.1m) of the total is within trade
receivables and £25.2m (FY23: £32.4m) is within accrued income.
Cash and cash equivalents were £746.6m (FY23: £884.8m) at the end of the
period. Gross debt (including lease liabilities) at the period end was
£1,968.7m (FY23: £1,959.9m), with net debt* at the end of the period of
£1,222.1m (FY23: £1,075.1m). Current borrowing facilities include a £600m
convertible bond that matures in December 2025, a £500m senior unsecured note
that matures in October 2026 and a £350m convertible bond that matures in
January 2027. These facilities are expected to be refinanced on a timely basis
to maintain appropriate liquidity.
The Group also has access to a £300m undrawn RCF that is due to expire in
June 2025.
Other financial assets of £138.6m (FY23: £127.7m) comprise:
● £94.8m (FY23: £82.7m) unlisted equity investments held by the
Group in Oxa Autonomy, Wayve and 80 Acres;
● £28.4m (FY23: £29.4m) total contingent consideration receivable
● £14.7m (FY23: £14.4m) loans receivable held at amortised cost;
and
● £0.7m (FY23: £1.2m) other items.
The increase of £10.9m is mainly due to 1. the revaluation of the Group's
unlisted equity investments, principally Wayve (as detailed below) and 2. cash
received in respect of contingent consideration due from Next.
Unlisted equity investments, loans and other items
The fair value of unlisted equity investments increased by £12.1m to £94.8m
(FY23: £82.7m).
During the period, Wayve completed a Series C fundraising, following which the
Group now holds a 1.5% interest in Wayve (FY23: 2.5%). The Group has recorded
an increase in fair value of its equity investment in Wayve of £11.7m, and an
increase in the value of its outstanding warrants of £9.7m.
Contingent consideration receivables
Contingent consideration due from M&S
The fair value of the contingent consideration due from M&S in relation to
the disposal of 50% of Ocado Retail in 2019 is estimated to be £28.0m (FY23:
£28.0m).
Contingent consideration due from Next
The fair value of the contingent consideration due from Next is estimated to
be £0.4m (FY23: £1.4m). During the period, the Group received cash
consideration of £1.0m (1H23: £0.9m).
Further details can be found in Note 9 to the Condensed Consolidated Financial
Statements.
Inventories of £123.5m (FY23: £127.1m) comprise Ocado Retail grocery
inventory, Technology Solutions grid and bots spares and 6RS Chuck robots.
Inventories decreased by £3.6m during the period mainly driven by the
seasonal reduction in Ocado Retail's grocery stock.
Other assets of £16.2m (FY23: £9.2m) comprise:
● Share warrants that have a carrying value of £13.0m (FY23:
£3.3m). The £9.7m increase during the period reflects an increase in the
value of warrants outstanding in respect of Wayve as noted above and;
● Deferred tax assets of £3.2m (FY23: £0.9m).
Liabilities
Contract liabilities of £449.9m (FY23: £446.7m) primarily relate to the
consideration received in advance from Technology Solutions and OIA customers.
Revenue is recognised when the performance obligation is satisfied, typically
when a site goes live or OIA products and services are provided. The £3.2m
increase in the year is driven by:
● £30.2m (1H23: £18.8m) invoiced to partners for their contracted
contribution towards the initial MHE investment made in a site, or build and
design of MHE; and
● £(27.0)m (1H23: £(13.5)m) in respect of prior receipts
recognised as revenue in the year.
The current liabilities portion of the contract liabilities balance of £37.5m
(FY23: £38.6m) represents amounts due to be recognised as revenue within 12
months of the half-year end. Long-term liabilities of £412.4m (FY23:
£408.1m) make up the balance.
Trade and other payables of £449.8m (FY23: £470.4m) reduced by £20.6m. The
balance comprises the following:
● Trade payables of £186.0m (FY23: £181.0m). Trade payables at the
end of the period predominantly relate to amounts payable by Ocado Retail to
suppliers.
● Accrued expenses £191.2m (FY23: £213.3m). Accrued expenses at
the end of the period largely relate to 1. accrued payroll expenses, 2. CFC
site support and maintenance costs, and 3. accrued capital expenditure. Ocado
Retail accrued expenses largely relate to goods received and not yet invoiced.
Accrued expenses reduced by £22.1m during the period largely due to the
seasonal reduction in purchases in Ocado Retail and an acceleration in invoice
processing during the year.
● Tax and social security payables of £58.3m (FY23: £61.1m). Tax
and social security payables at the end of the period predominantly relate to
amounts due to HM Revenue and Customs in respect of VAT and Pay As You Earn.
● Deferred income of £14.3m (FY23: £15.0m). Deferred income
primarily relates to advance receipts of ongoing capacity fees and R&D tax
credits by Technology Solutions. Deferred income also includes amounts
received by Ocado Retail in respect of annual delivery passes not yet
recognised as revenue, in accordance with IFRS 15.
Borrowings of £1,482.2m (FY23: £1,462.1m) comprise the liability element of
the two unsecured convertible bonds, the senior unsecured bond and the
shareholder loan provided by M&S (the non-controlling interest) to Ocado
Retail. The increase of £20.1m is due to:
● £35.2m accrued interest on loans and borrowings held at amortised
cost;
● £0.2m loan drawn by Jones Food; and
● £(15.3)m interest repayments;
Lease liabilities of £486.5m (FY23: £497.8m) comprise land and buildings of
£420.2m (FY23: £426.9m), motor vehicles of £49.1m (FY23: £51.6m) and
fixtures, fittings, plant and machinery of £17.2m (FY23: £19.3m). New lease
liabilities of £11.7m were entered into during the year (1H23: £18.3m) and
largely comprised motor vehicles. Lease liabilities decreased by payments made
of £40.2m (1H23: £45.2m), partly offset by £12.5m of accrued interest
(1H23: £13.1m) and £4.7m of other movements.
Lease liabilities of £486.5m (FY23: £497.8m) include £14.0m (FY23: £16.5m)
payable to MHE JVCo, a company in which the Group holds a 50% interest.
Other liabilities of £43.2m (FY23: £41.0m) comprise:
● £39.8m (FY23: £40.8m) of provisions largely in respect of 1.
dilapidation of properties and vehicles 2. employers NIC on taxable
equity-settled schemes and cash-settled employee long-term incentive schemes,
and 3. Onerous contracts in relation to unavoidable costs expected to be
incurred in exiting manufacturing contracts as a result of changes to design
and production;
● £0.5m (FY23: £0.2m) derivative financial liabilities primarily
related to diesel hedges; and
● £2.9m (FY23: £nil) of deferred tax liabilities. The £2.9m
increase is due to the deferred tax liability arising from the increase in the
fair value of the Group's unlisted equity investments and is recognised in the
Condensed Consolidated Statement of Comprehensive Income.
Condensed Consolidated Financial Statements
Condensed Consolidated Income Statement
for the 26 weeks ended 2 June 2024
26 weeks ended 26 weeks ended
2 June 2024 (unaudited) 28 May 2023 (unaudited)(1, 2)
Before adjusting items Adjusting items Total Before adjusting items Adjusting items Total
(Note 5) (Note 5)
Notes £m £m £m £m £m £m
Revenue 4 1,543.1 - 1,543.1 1,370.7 - 1,370.7
Insurance and legal settlement proceeds - - - - - -
Operating costs (1,682.4) 0.4 (1,682.0) (1,545.7) (77.2) (1,622.9)
Operating loss before results from joint ventures and associate (139.3) 0.4 (138.9) (175.0) (77.2) (252.2)
Share of results from joint ventures and associate 0.2 - 0.2 (0.9) - (0.9)
Operating loss (139.1) 0.4 (138.7) (175.9) (77.2) (253.1)
Finance income 6 18.1 6.9 25.0 19.6 - 19.6
Finance costs 6 (51.1) - (51.1) (47.0) - (47.0)
Other finance gains and losses 6 10.9 - 10.9 (9.0) - (9.0)
Loss before tax (161.2) 7.3 (153.9) (212.3) (77.2) (289.5)
Income tax credit 0.6 - 0.6 14.1 - 14.1
Loss for the period (160.6) 7.3 (153.3) (198.2) (77.2) (275.4)
Attributable to:
Owners of Ocado Group plc (136.3) (233.7)
Non-controlling interests (17.0) (41.7)
(153.3) (275.4)
1. In FY23, the Group changed the presentation of other finance gains and
losses. See Note 3 for details.
2. In 1H24, Revenue includes £2.4m of CFC rent revenue. In 1H23, the
equivalent amount is offset within Operating costs. If 1H23 was presented in
line with the classification in 1H24, Revenue would be £1,372.9m in 1H23.
Loss per share Pence Pence
Basic and diluted loss per share 7 (16.65) (28.65)
Refer to Note 16 Alternative Performance Measures for a reconciliation of
operating loss to adjusted earnings before interest, taxation, depreciation,
amortisation, impairment and adjusting items (adjusted EBITDA(*)).
Condensed Consolidated Statement of Comprehensive Income
for the 26 weeks ended 2 June 2024
26 weeks ended 26 weeks ended
2 June 2024 28 May 2023
£m £m
(unaudited) (unaudited)
Loss for the period (153.3) (275.4)
Other comprehensive income:
Items that may be reclassified to profit or loss in subsequent years:
Fair value movements in cash flow hedges (0.5) (1.0)
Foreign exchange loss on translation of foreign subsidiaries (14.7) (28.8)
Net other comprehensive expense that may be reclassified to profit or loss in (15.2) (29.8)
subsequent periods
Items that will not be reclassified to profit or loss in subsequent periods:
Gains on equity instruments designated as fair value through other 8.7 -
comprehensive income
Net other comprehensive income that will not be reclassified to profit and 8.7 -
loss in subsequent periods
Other comprehensive expense for the period, net of tax (6.5) (29.8)
Total comprehensive expense for the period (159.8) (305.2)
Attributable to:
Owners of Ocado Group plc (142.8) (263.5)
Non-controlling interests (17.0) (41.7)
(159.8) (305.2)
Condensed Consolidated Balance Sheet
as at 2 June 2024
2 June 2024 28 May 2023 3 December 2023
£m £m £m
Notes (unaudited) (unaudited) (audited)
Non-current assets
Goodwill 157.9 161.8 158.6
Other intangible assets 480.8 413.6 461.3
Property, plant and equipment 1,790.7 1,832.9 1,794.9
Right-of-use assets 414.5 460.8 428.1
Investment in joint ventures and associate 9.7 14.6 9.5
Other financial assets 9 95.5 193.3 84.0
Trade and other receivables 7.8 - 50.9
Deferred tax assets 3.2 1.4 0.9
Derivative financial assets 10 13.0 5.8 3.3
2,973.1 3,084.2 2,991.5
Current assets
Other financial assets 9 43.1 1.5 43.7
Inventories 123.5 85.7 127.1
Trade and other receivables 394.7 308.9 375.4
Current tax assets 2.8 - 1.5
Cash and cash equivalents 8 746.6 1,008.5 884.8
Derivative financial assets 10 - - 0.1
1,310.7 1,404.6 1,432.6
Asset held for sale - - 4.9
1,310.7 1,404.6 1,437.5
Total assets 4,283.8 4,488.8 4,429.0
Current liabilities
Contract liabilities (37.5) (32.0) (38.6)
Trade and other payables (447.6) (456.3) (468.4)
Current tax liabilities (1.1) - (0.9)
Borrowings 8 (4.9) (0.4) (2.6)
Provisions (11.1) (20.0) (13.2)
Lease liabilities 8 (55.1) (59.4) (52.9)
Derivative financial liabilities 10 (0.5) (1.8) (0.2)
(557.8) (569.9) (576.8)
Net current assets 752.9 834.7 860.7
Non-current liabilities
Contract liabilities (412.4) (396.2) (408.1)
Provisions (28.7) (26.4) (27.6)
Borrowings 8 (1,477.3) (1,392.8) (1,459.5)
Lease liabilities 8 (431.4) (456.6) (444.9)
Trade and other payables (1.1) (0.4) (1.1)
Deferred tax liabilities (2.9) - -
(2,353.8) (2,272.4) (2,341.2)
Net assets 1,372.2 1,646.5 1,511.0
Equity
Share capital 16.6 16.5 16.6
Share premium 1,944.0 1,940.6 1,942.9
Treasury shares reserve (112.9) (112.9) (112.9)
Other reserves 84.1 134.2 90.6
Retained earnings (566.2) (385.2) (449.8)
Equity attributable to owners of Ocado Group plc 1,365.6 1,593.2 1,487.4
Non-controlling interests 6.6 53.3 23.6
Total equity 1,372.2 1,646.5 1,511.0
Condensed Consolidated Statement of Changes in Equity
for the 26 weeks ended 2 June 2024 (unaudited)
Equity 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 3 December 2023 (audited) 16.6 1,942.9 (112.9) 90.6 (449.8) 1,487.4 23.6 1,511.0
Loss for the period - - - - (136.3) (136.3) (17.0) (153.3)
Other comprehensive expense - - - (6.5) - (6.5) - (6.5)
Total comprehensive expense for the period ended 2 June 2024 (unaudited) - - - (6.5) (136.3) (142.8) (17.0) (159.8)
Transactions with owners:
- Issue of ordinary shares - 0.9 - - - 0.9 - 0.9
- Allotted in respect of share option schemes - 0.2 - - - 0.2 - 0.2
- Share-based payments charge - - - - 19.9 19.9 - 19.9
Total transactions with owners - 1.1 - - 19.9 21.0 - 21.0
Balance at 2 June 2024 (unaudited) 16.6 1,944.0 (112.9) 84.1 (566.2) 1,365.6 6.6 1,372.2
for the 26 weeks ended 28 May 2023 (unaudited)
Equity 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 27 November 2022 (audited) 16.5 1,939.3 (112.9) 164.0 (169.0) 1,837.9 96.4 1,934.3
Loss for the period - - - - (233.7) (233.7) (41.7) (275.4)
Other comprehensive expense - - - (29.8) - (29.8) - (29.8)
Total comprehensive expense for the period ended 28 May 2023 (unaudited) - - - (29.8) (233.7) (263.5) (41.7) (305.2)
Transactions with owners:
- Issue of ordinary shares - 1.1 - - - 1.1 - 1.1
- Allotted in respect of share option schemes - 0.2 - - - 0.2 - 0.2
- Share-based payments charge (net of tax) - - - - 16.1 16.1 - 16.1
- Additional investment in Jones Food Company Limited(1) - - - - 1.4 1.4 (1.4) -
Total transactions with owners - 1.3 - - 17.5 18.8 (1.4) 17.4
Balance at 28 May 2023 (unaudited) 16.5 1,940.6 (112.9) 134.2 (385.2) 1,593.2 53.3 1,646.5
1. In April 2023, the Group exercised warrants in Jones Food Company Limited
("Jones Food Company") to acquire 2.3 million shares for £3.7m and therefore,
the Group's shareholdings in Jones Food Company is 54.6%. The Group retains
control of Jones Food Company.
Condensed Consolidated Statement of Cash Flows
for the 26 weeks ended 2 June 2024
26 weeks ended 26 weeks ended
2 June 2024 28 May 2023
£m £m
Note (unaudited) (unaudited)
Cash generated from operations 11 50.0 10.3
Cash received from the AutoStore settlement 5 49.8 -
Corporation tax (paid)/received (2.9) 1.4
Interest paid (27.8) (28.1)
Net cash flows (used in)/from operating activities 69.1 (16.4)
Cash flows from/(used in) investing activities
Purchase of property, plant and equipment (120.5) (194.8)
Purchase of intangible assets (93.7) (94.0)
Purchase of unlisted equity investment at FVTOCI - (10.0)
Proceeds from disposal of asset held for sale 18.6 9.4
Cash received in respect of contingent considerations receivable 1.0 0.9
Interest received 15.0 18.2
Net cash flows used in investing activities (179.6) (270.3)
Cash flows from/(used in) financing activities
Proceeds from issue of ordinary share capital 0.9 1.1
Proceeds from allotment of share options 0.2 0.2
Proceeds from interest-bearing loans and borrowings 0.2 14.3
Repayment of borrowings - (10.0)
Repayment of principal element of lease liabilities (27.7) (32.1)
Net cash flows used in financing activities (26.4) (26.5)
Net decrease in cash and cash equivalents (136.9) (313.2)
Cash and cash equivalents at the beginning of the period 884.8 1,328.0
Effects of changes in foreign exchange rates (1.3) (6.3)
Cash and cash equivalents at the end of the period 746.6 1,008.5
Notes to the condensed consolidated interim financial statements
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 2 June 2024. The prior
financial periods represent the 26 weeks ended 28 May 2023 and the 53 weeks
ended 3 December 2023.
2. Basis of preparation
These condensed consolidated interim financial statements for the half-year
reporting period ended 2 June 2024 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 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 53 weeks ended 3 December 2023 which was
prepared in accordance with the Listing Rules and the Disclosure Guidance and
Transparency Rules of the United Kingdom Financial Conduct Authority (where
applicable), International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and UK-adopted International Financial
Reporting Standards ('IFRS'), including the interpretations issued by IFRS
Interpretation Committee ('IFRIC'). 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 hundred thousand 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 £746.6m (3 December
2023: £884.8m) and net current assets of £752.9m (3 December 2023:
£860.7m), which 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. In addition, the Directors considered mitigating
actions available in the event of either a deterioration in trading
performance or the crystallisation of one or more of the Group's principal
risks, notably the ability to reduce capital expenditure in the short term or
to make cost efficiencies where appropriate.
The Directors also considered the maturity profile of the Group's debt
facilities, with particular focus on the Revolving Credit Facility ("RCF")
which matures in June 2025 (currently includes an option to extend to June
2027) and Convertible Bonds which mature in December 2025. Whilst the
scenarios modelled indicate no draw down of the RCF would be required and the
maturity of the convertible bonds is outside of the going concern assessment
period, the Directors have considered the risk that the Group has insufficient
ability to access the capital markets to refinance debt as it approaches
maturity. The Directors are comfortable, based on the Group's previous record
in raising finance, that an extension to the RCF and refinance of the
convertible bonds ahead of maturity will be successfully achieved and will
therefore not impact the ability of the Group to continue to meet existing
financial commitments as they fall due.
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. Material accounting policies
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 53 weeks ended 3 December 2023.
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 critical accounting judgements 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 53 weeks ended 3 December 2023.
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:
Effective date
IFRS 17 Insurance Contracts 1 January 2023
IAS 1 Disclosure of Accounting Policies (amendments) 1 January 2023
IAS 8 Disclosure of Accounting Estimates (amendments) 1 January 2023
IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single 1 January 2023
Transaction (amendments)
IAS 12 Income taxes - International Tax Reform - Pillar Two Model Rules (amendments) 3 May 2023
IFRS 10 Consolidated Financial Statements (amendments) Deferred
IAS 28 Investments in Associates and Joint Ventures (amendments) Deferred
Change in presentation of other finance gains and losses in the Condensed
Consolidated Income Statement
In FY23 the Group reclassified gains and losses relating to foreign exchange
and on revaluation of financial instruments from Finance Income and Finance
Costs to Other Finance Gains and Losses. Comparative amounts for 1H23 have
been represented to align to this presentation which resulted in £9.0m being
reclassified from Finance Costs to Other Finance Gains and Losses.
The revised presentation provides an Income Statement that is more relevant
for the Group and is in line with the Annual Report and Accounts for the 53
weeks ended 3 December 2023.
4. Segmental reporting
In accordance with IFRS 8 "Operating Segments", an operating segment is
defined as a business activity whose operating results are reviewed by the
chief operating decision-maker ("CODM") and 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 Board. The Board assesses the
performance of all operating segments on the basis of adjusted EBITDA(*).
The Group reports its operating segments to align with the three underlying
business models: Retail, Logistics and Technology 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 Logistics segment provides the CFCs and logistics services for
customers in the United Kingdom (Wm Morrison Supermarkets Limited and Ocado
Retail Limited).
● The Technology Solutions segment provides end-to-end online retail
and automated storage and retrieval solutions for general merchandise to
corporate customers both in and outside of the United Kingdom.
The 1H24 segmental disclosures have been prepared to reflect the above
structure.
Inter-segment eliminations relate to revenues and costs arising from
inter-segment transactions, and are required to reconcile segmental results to
the consolidated Group results.
Any transactions between the segments are subject to normal commercial terms
and market conditions. Segmental results include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis.
The Group is not currently reliant on any major customer for 10% or more of
its revenue.
Technology Solutions Logistics Retail Inter-segment eliminations Total
Segmental revenue and EBITDA(*) £m £m £m £m £m
26 weeks ended 2 June 2024 (unaudited)
Revenue 241.4 354.0 1,312.0 (364.3) 1,543.1
Adjusted EBITDA(*) 35.0 17.2 20.7 (1.7) 71.2
26 weeks ended 28 May 2023 (unaudited)
Revenue 198.2 335.2 1,178.5 (341.2) 1,370.7
Adjusted EBITDA(*) 5.9 14.6 (2.5) (1.4) 16.6
53 weeks ended 3 December 2023 (audited)
Revenue 429.0 680.5 2,408.8 (693.3) 2,825.0
Adjusted EBITDA(*) 15.6 30.8 12.1 (4.3) 54.2
* See Alternative performance measures in Note 16 for further information.
No measure of total assets and total liabilities is reported to each
reportable segment, as such amounts are not provided to the CODM.
5. Adjusting items*
Adjusting items*, as disclosed on the face of the Condensed 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 adjusting 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 adjusting.
26 weeks ended 26 weeks ended
2 June 2024 28 May 2023
£m £m
Ref. (unaudited) (unaudited)
Litigation costs net of recoveries A - (9.1)
Litigation settlement income and unwind of discount A 6.9 -
Ocado Group Finance transformation B (2.6) (3.5)
Ocado Retail IT and Finance systems transformation C (2.1) (0.7)
Change in fair value of contingent consideration receivable and related costs D (1.0) (17.4)
Organisational restructure E (1.2) (7.8)
Ocado Group HR systems transformation F (3.5) -
UK network capacity review G - (38.7)
Zoom by Ocado network capacity and strategy review H (1.6) -
Gain on disposal of assets held for sale I 12.4 -
Net adjusting income/(expense) 7.3 (77.2)
* Adjusting items are alternative performance measures. See Note 16 for
further information.
A. Litigation costs and litigation settlement
Litigation costs are costs incurred on patent infringement litigation between
the Group and AutoStore Technology AS ("AutoStore"). The net cumulative costs
to date amount to £66.7m and include £9.1m incurred in 1H23.
On 22 July 2023, the Group reached an agreement with AutoStore to settle all
patent litigation and cross-licence pre-2020 patents, for which AutoStore
undertook to pay the Group a total of £200m in 24 monthly instalments,
beginning July 2023. The settlement was recorded as a receivable measured
initially at fair value and subsequently at amortised cost. The settlement
receivable initially recognised was £180.4m. The unwinding of the discount
over the life of the receivable is recorded as finance income with £6.9m
recorded in the current period (1H23: £nil). During the period, payments
totalling £49.8m (1H23: £nil) have been received. All amounts are classified
as adjusting items, in line with the Group's adjusting items policy, as the
amounts are material, and represent income unrelated to operating activities
of the Group.
B. Ocado Group Finance transformation
Subsequent to the Group's implementation of various Software as a Service
("SaaS") solutions in 2H21, the Group has undertaken a multi-year programme
which focuses on optimising and enhancing the existing SaaS solutions and
related finance processes to improve efficiency across the business. This
programme completed in 1H24. The cumulative finance transformation costs
expensed to date amount to £17.2m and includes £2.6m in 1H24 which largely
relates to spend on external consultants and contractors. These amounts have
been disclosed as adjusting items because the total costs associated with this
programme are significant and arise from a strategic project that is not
considered by the Group to be part of the normal operating costs of the
business.
C. 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 the end of FY24, 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 £11.6m, which
includes costs incurred during the current period of £1.5m (1H23: £0.7m).
These costs have been classified as adjusting items 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.
During 2H23, Ocado Retail implemented a finance system transformation
programme as part of which it replaced the current Enterprise Resource
Planning ("ERP") with Oracle Fusion. The cumulative costs incurred to date are
£1.7m which includes costs incurred during the current period of £0.6m and
the programme will continue during FY24.
D. Change in fair value of contingent consideration receivable and related
costs
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. In the prior period, a loss on revaluation
of £17.4m was reported through adjusting items, primarily driven by the
reduction in the contingent consideration receivable from M&S. Refer to
Note 9 for details.
During the period, the Group has incurred consultancy costs of £1.0m (1H23:
£nil) in relation to the above.. As these costs have been incurred in the
process of securing an adjusting income item, these costs have been classified
as adjusting.
E. Organisational restructure
During the current period, the Group undertook a final reorganisation of its
head office and support function resulting in redundancy and related costs of
£1.2m. This followed an initial reorganisation in 2H22 which incurred costs
of £3.0m, and a further partial reorganisation of its head office and support
functions in the prior period resulting in redundancy and related costs of
£15.5m, bringing net cumulative costs to date of £19.7m. These costs have
been classified as adjusting on the basis that the aggregate costs are
considered to be significant and resulted from a strategic restructuring which
is only incremental to the normal operating activities of the Group.
F. Ocado Group HR systems transformation
Following a review of the Group's Human Capital Management ("HCM") and payroll
systems in FY23 the Group has commenced a plan to implement new HCM and
payroll systems for its Logistics business and to optimise and enhance its
existing payroll solutions for the Technology Solutions business.
This programme is expected to complete in 1H25. The cumulative HR systems
transformation costs expensed to date amount to £5.5m, including £3.5m in
1H24 (1H23: £nil) which largely relate to spend on external consultants and
contractors. These amounts have been disclosed as adjusting items because the
total costs associated with this programme are expected to be in the region of
£15.0m and arise from a strategic project that is not considered by the Group
to be part of the normal operating costs of the business.
G. UK network capacity review
On 25 April 2023, the Group announced the plan to cease operations at its
Customer Fulfilment Centre ("CFC") in Hatfield as part of a wider review of UK
network capacity.
As a result, in the prior period the Group recorded provisions for
restructuring costs of £11.0m, onerous contracts of £4.1m and other costs of
£3.2m, as well as an impairment charge of £20.4m (RoU assets £13.3m;
PP&E £7.1m).
These costs have been classified as adjusting items on the basis that they are
expected to be material and relate primarily to a site where no ongoing
trading activities will take place.
H. Zoom by Ocado network capacity and strategy review
During 2H23, Ocado Retail undertook a strategy and capacity review for the
Zoom network, which resulted in
the Group recording impairment charges totalling £27.2m, of which £12.5m
related to property, plant and equipment, £14.5m to right-of-use assets and
£0.2m to other intangible assets, and other costs of £0.2m.
In the current period the Group has recognised an additional impairment of
£1.6m relating to property, plant and equipment.
These costs have been classified as adjusting on the basis that they are
material and part of a significant strategic review.
I. Gain on disposal of assets held for sale
During the period the Group disposed of two spoke sites for net proceeds of
£18.6m which resulted in a gain on disposal of £12.4m. One of the sites was
held for sale as at FY23 and had a carrying value of £4.9m. The gain on
disposal has been treated as an adjusting item because it is material and has
arisen on a transaction that is considered to be outside the normal operations
of the business.
Tax impact on adjusting items
The change in fair value of contingent consideration receivable is not subject
to tax. The remaining adjusting items are taxable or tax deductible and give
rise to a tax credit of £0.6m of which £nil (1H23: £nil) has been
recognised. The tax credit has not been recognised as it relates to tax
losses which are not recognised for deferred tax purposes.
6. Finance income and costs
26 weeks ended 26 weeks ended
2 June 2024 28 May 2023
£m £m
(unaudited) (unaudited)
Interest income on cash balances 17.6 19.1
Interest income on loans receivable 0.4 0.5
Unwind of discount on AutoStore receivable 6.9 -
Other finance income 0.1 -
Finance income 25.0 19.6
Interest expense on borrowings (37.9) (33.3)
Interest expense on lease liabilities (12.5) (13.1)
Interest expense on provisions (0.6) (0.6)
Other finance costs (0.1) -
Finance costs (51.1) (47.0)
Gain/(loss) on revaluation of financial assets designated at FVTPL 9.7 (4.0)
Foreign exchange gain/(loss) 1.2 (5.0)
Other finance gains and losses 10.9 (9.0)
Net finance cost (15.2) (36.4)
7. 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 Ocado Group Value Creation Plan ("Group VCP"), which
are accounted for as treasury shares.
The diluted loss per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion or vesting of all
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
2 June 2024 28 May 2023
(unaudited) (unaudited)
Million Million
Weighted average number of shares at the end of the period 818.9 815.8
£m £m
Loss for the period attributable to the owners of Ocado Group plc (136.3) (233.7)
Pence Pence
Basic and diluted loss per share (16.65) (28.65)
8. Movements in net debt(*)
Net debt(*) is calculated as cash and cash equivalents less total debt
(borrowings and lease liabilities).
Cash movements Non-cash movements
Cash flows excluding interest Interest paid Interest income/ Net new Foreign exchange
3 £m Interest received £m (charge) lease £m 2 June
December 2023 £m £m liabilities 2024
£m £m £m
Cash and cash equivalents 884.8 (151.9) 15.0 - - - (1.3) 746.6
Liabilities from financing activities:
Borrowings (1,462.1) (0.2) - 15.3 (35.2) - - (1,482.2)
Lease liabilities (497.8) 27.7 - 12.5 (12.5) (16.4) - (486.5)
Gross debt* (1,959.9) 27.5 - 27.8 (47.7) (16.4) - (1,968.7)
Net debt* (1,075.1) (124.4) 15.0 27.8 (47.7) (16.4) (1.3) (1,222.1)
Cash movements Non-cash movements
27 November 2022 Cash flows excluding interest Interest paid Interest income/ (charge) Net new Foreign exchange 28 May
£m £m Interest received £m £m lease liabilities £m 2023(1)
£m £m £m
Cash and cash equivalents 1,328.0 (331.5) 18.2 - - - (6.2) 1,008.5
Liabilities from financing activities:
Borrowings (1,372.8) (4.3) - 15.0 (31.1) - - (1,393.2)
Lease liabilities (532.3) 32.0 - 13.1 (13.1) (15.7) - (516.0)
Gross debt* (1,905.1) 27.7 - 28.1 (44.2) (15.7) - (1,909.2)
Net debt* (577.1) (303.8) 18.2 28.1 (44.2) (15.7) (6.2) (900.7)
* Gross debt and net debt are alternative performance measures. See Note 16
for further information.
1. Consistent with the FY23 financial statements, the prior period movements
have been amended to provide additional information on the split between cash
and non-cash movements during the period.
In accordance with its financial strategy, at the latest Ocado plans to
refinance outstanding debt maturities prior to an instrument becoming current
and more broadly continues to evaluate opportunities related to addressing its
2025, 2026 and 2027 debt maturities. In connection with potential refinancing
opportunities, Ocado continues to monitor market conditions and evaluate
potential near term new issuance alternatives, including in the high yield
bond market (including evaluating currencies and medium term tenors to
appropriately manage its capital structure) and related liability management
options. The Company has a preference not to issue equity in the near term.
9. Other financial assets
Other financial assets comprise contingent consideration receivable, unlisted
equity investments, loans receivable and contributions towards dilapidations
costs receivable.
2 June 2024 28 May 2023 3 December 2023
£m £m £m
(unaudited) (unaudited) (audited)
Contingent consideration receivable 28.4 80.1 29.4
Unlisted equity investments held at FVTOCI 94.8 99.2 82.7
Loans receivable held at FVTPL - 0.5 0.5
Loans receivable held at amortised cost 14.7 14.3 14.4
Contribution towards dilapidation costs receivable 0.7 0.7 0.7
Other financial assets 138.6 194.8 127.7
Disclosed as:
Current 43.1 1.5 43.7
Non-Current 95.5 193.3 84.0
138.6 194.8 127.7
Contingent consideration receivable
Total contingent consideration receivable at the balance sheet date is £28.4m
(FY23: £29.4m; 1H23: £80.1m), and comprises two amounts: £28.0m (FY23:
£28.0m; 1H23: £78m) due from Marks and Spencer Holdings Limited ("M&S")
relating to the part-disposal of Ocado Retail Limited ("Ocado Retail") in
August 2019; and £0.4m (FY23: £1.4m; 1H23 £2.1m) due from Next Holdings
Limited ("Next") relating to the disposal of Marie Claire Beauty Limited
("Fabled") in July 2019.
Contingent consideration due from M&S
At FY23, the IFRS 13 fair value was estimated using the expected present value
technique and was based on several probability-weighted possible scenarios
that a market participant would consider and was determined to be £28.0m.
Management has reviewed this valuation and considered the weightings ascribed
to each of the possible scenarios in light of the current circumstances and
facts and have determined that the value of £28.0m remains appropriate at
1H24.
Unlisted equity investments held at FVTOCI
The Group holds a number of long-term, strategic investments that are
accounted for as fair value through other comprehensive income ("FVTOCI").
During the period, Wayve Technologies Limited ("Wayve") successfully completed
a Series C fundraising, following which the Group now holds a 1.5% interest in
Wayve (FY23: 2.5%). The Group has recorded an increase in fair value of its
equity investment in Wayve of £11.7m (£8.7m net of tax), and an increase in
the value of its outstanding warrants of £9.7m. At 1H24 the fair value of the
Group's equity investment in Wayve was £21.7m and the fair value of the
Group's warrants was £10.0m.
During the period, Inkbit Corporation ("Inkbit") completed a qualifying
fundraising that resulted in the conversion of the Group's convertible loan
note into equity. Following the fundraise and conversion of the loan note the
Group holds a 4.6% interest in Inkbit (FY23: 5.0%).
Refer to Note 10 for further details on the valuation techniques and key
inputs utilised in the fair value measurement of the financial instruments.
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 in relation to
commodity swaps are classified as level 2. The Group' warrants, contingent
consideration and unlisted equity investments are classified as level 3.
Financial assets and liabilities held at fair value have been valued as
follows:
2 June 2024 28 May 2023 3 December 2023
£m £m £m
(unaudited) (unaudited) (audited)
Financial assets held at fair value
- Contingent consideration receivable Level 3 28.4 80.1 29.4
- Unlisted equity investments Level 3 94.8 99.2 82.7
- Loans receivable held at FVTPL Level 3 - 0.5 0.5
- Derivative assets: warrants Level 3 13.0 5.8 3.3
- Derivative assets: commodity swaps Level 2 - - 0.1
Total financial assets held at fair value 136.2 185.6 116.0
Financial liabilities held at fair value
- Derivative financial liabilities: commodity swaps Level 2 (0.5) (1.8) (0.2)
Total financial liabilities held at fair value (0.5) (1.8) (1.6)
There were no transfers between the levels of the fair value hierarchy during
the period. There were also no changes made to any of the valuation techniques
during the period.
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
Unlisted equity investments Probability weighted expected return method ("PWERM") Probabilities of expected revenue in a number of different scenarios.
Forecasted revenue, revenue multiples, exit date, discount rate and Discount rate
probabilities
Time to exit
Option pricing model method ("OPM")
Volatility
11. Cash generated from operations
26 weeks ended 26 weeks ended
2 June 2024 28 May 2023
£m £m
Note (unaudited) (unaudited)
Cash flows from operating activities
Loss before tax (153.9) (289.5)
Adjustments for:
- Revenue recognised from long-term contracts (27.1) (13.1)
- Depreciation, amortisation and impairment losses(1) 211.8 213.0
- Property, plant and equipment write-off 0.2 0.4
- Gain on disposal of asset held for sale 5 (12.4) (5.0)
- Litigation settlement income and interest unwind 5 (6.9) -
- Other non-cash adjusting items - 17.4
- Share of results from joint ventures and associate (0.2) 0.9
- Movement in provisions (1.8) 19.5
- Share-based payments charge 19.9 16.1
- Net finance cost(2) 6 22.1 36.4
Changes in working capital:
- Movement in inventories (14.6) 16.0
- Movement in trade and other receivables (9.8) 10.9
- Movement in trade and other payables 0.6 (36.4)
- Cash received from contract liabilities (upfront fees) 22.1 23.7
Cash generated from operations 50.0 10.3
( )
(1) Included within depreciation, amortisation and impairment losses in the
prior year is an adjusting impairment charge of £20.4m relating to the UK
network capacity review. Refer to Note 5 for further details.
(2) Excludes £6.9m interest unwind on AutoStore litigation settlement, which
is included within litigation settlement income and interest unwind line item.
12. Capital expenditure and commitments
During the period, the Group acquired property, plant and equipment of
£101.6m (1H23: £171.3m, FY23: £281.6m) and intangible assets of £8.8m
(1H23: £15.3m, FY23: £38.2m). Internal development costs of £100.1m (1H23:
£97.0m, FY23: £167.8m) were capitalised. Capital expenditure relates to CFCs
in the UK, investment in international CFCs and technology expenditure.
At 2 June 2024 capital commitments contracted, but not provided for by the
Group, amounted to £74.0m (1H23: £187.4m, FY23: £105m).
13. Impairment review
The Group has determined that assets directly associated with individual
Technology Solutions contracts (i.e. partner by partner) represent the
lowest-level group of assets at which impairment can be assessed, i.e. the
CGU. The Group has undertaken a review for indicators of impairment for each
Technology Solutions contract, and determined that no additional indicators of
impairment exist at the half year from those identified at the year end.
Further to disclosure in the FY23 Annual Report, the corporate restructuring
and change of majority ownership envisaged in relation to the Groupe Casino
CGU ("Casino") has been completed. The Group has engaged with, and will
continue to work with Casino's new majority owner to determine how best to
move forward together with their online grocery retail business. The Group
will continue to monitor indicators of impairment that may result from these
discussions and potential decisions taken by Casino's majority owners, and
undertake full impairment assessments as and when they are deemed necessary.
14. Related party transactions
Key management personnel
Only members of the Board (the Executive and Non-Executive Directors) are
recognised as being key management personnel. It is the Board 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 (1H23: £nil). At the end of the period, there
was £nil (1H23: £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 53 weeks ended
2 June 2024 28 May 2023 3 December 2023
£m £m £m
(unaudited) (unaudited) (audited)
Dividend received from MHE JVCo - - 5.1
Reimbursement of supplier invoices paid on behalf of MHE JVCo 1.3 0.8 4.1
Lease liability additions from MHE JVCo 0.5 - 11.4
Capital element of lease liability instalments accrued or paid to MHE JVCo 3.5 8.6 12.5
Interest element of lease liability instalments accrued or paid to MHE JVCo 0.6 0.3 0.5
During the period, the Group incurred lease instalments (including interest)
of £4.1m (1H23: £8.9m) to MHE JVCo. Of the lease instalments incurred,
£1.9m was recovered directly from WM Morrison SuperMarkets Limited in the
form of other income (1H23: £4.3m).
Included within trade and other receivables is a balance of £4.9m (1H23:
£1.9m; FY23: £0.7m) owed by MHE JVCo. Included within trade and other
payables is a balance of £1.3m (1H23: £12.5m; FY23: £0.7m) owed to MHE
JVCo. Included within lease liabilities is a balance of £14.0m (1H23: £9.0m;
FY23: £16.5m) owed to MHE JVCo.
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
Update on Sobeys Partnership
On 20 June 2024, Empire Company Limited announced a pause to the planned
go-live of Sobeys' CFC4 in Vancouver, Canada, which was originally planned for
2025. The go-live timeline for the Vancouver CFC will be under regular review,
and the site will be able to commission and scale quickly when required.
Aeon Update
On 8 July 2024, the Group and AEON announced the continued expansion of their
partnership, with plans to construct a third Customer Fulfilment Centre
("CFC") in Kuki-Miyashiro, the Saitama prefecture of Japan. In addition to the
network expansion, AEON will also upgrade its live operations with the latest
Ocado technologies including On-Grid Robotic Pick ("OGRP").
16. Alternative performance measures
The Group assesses its performance using a variety of alternative performance
measures ('APMs'), 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 APMs used
are:
● Adjusting items;
● Adjusted EBITDA;
● Adjusted EBITDA margin;
● Gross debt and external gross debt;
● Net debt;
● Technology Solutions fees invoiced;
● Underlying cash flow.
Definitions of these APMs, together with reconciliations of these APMs with
the nearest measures prepared in accordance with IFRS are presented below. The
APMs used may not be directly comparable with similarly titled measures used
by other companies.
Adjusting items
The Consolidated Income Statement separately identifies trading results before
adjusting items. Adjusting items are items that are considered to be
significant due to their size/nature, not in the normal course of business or
are consistent with items that were treated as adjusting in the prior periods
or that may span multiple financial periods. They have been classified
separately in order to draw them to the attention of the readers of the
financial statements, and facilitate comparison with prior periods to assess
trends in the financial performance more readily.
The Directors believe that presentation of the Group's results in this way is
important for understanding the Group's financial performance. This
presentation is consistent with the way that financial performance is measured
by management and reported to the Board.
The Group applies judgement in identifying items of income and expense that
are recognised as adjusting to help provide an indication of the Group's
underlying business. In determining whether an event or transaction is
adjusting 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 adjusting include corporate
reorganisations, material litigation, and any other material costs outside of
the normal course of business as determined by management.
The Group has adopted a three-columned approach to the Consolidated Income
Statement to aid clarity and allow users of the financial statements to
understand more easily the performance of the underlying business and the
effect of adjusting items.
Adjusting items are disclosed in Note 5 to the consolidated financial
statements.
Adjusted EBITDA
In addition to measuring its financial performance based on operating profit,
the Group measures performance based on adjusted EBITDA. Adjusted EBITDA is
defined as the Group's earnings before depreciation, amortisation, impairment,
net finance cost, taxation and adjusting items. EBITDA is a common measure
used by investors and analysts to evaluate the operating financial performance
of companies. A reconciliation of operating profit to adjusted EBITDA is set
out below.
The Group considers adjusted EBITDA to be a useful measure of its operating
performance because it approximates the underlying operating cash flow by
eliminating depreciation and amortisation. Adjusted EBITDA is not a direct
measure of liquidity, which is shown by the Consolidated Statement of Cash
Flows, and needs to be considered in the context of the Group's financial
commitments.
Adjusted EBITDA reconciliation 26 weeks ended 26 weeks ended
2 June 2024 28 May 2023
£m £m
Note (unaudited) (unaudited)
Operating loss (138.7) (253.1)
Adjustments for:
Adjusting items* 5 (0.4) 77.2
Amortisation of intangible assets 74.2 59.7
Impairment of intangible assets - 0.1
Depreciation of property, plant and equipment 103.7 95.8
Impairment of property, plant and equipment 2.2 1.4
Depreciation of right-of-use assets 30.2 35.5
Adjusted EBITDA 71.2 16.6
The financial performance of the Group's segments is measured based on
adjusted EBITDA, as reported internally. A reconciliation of the adjusted
EBITDA of the Group with the adjusted EBITDA by segment is disclosed in Note 4
of the consolidated financial statements.
Adjusted EBITDA margin
Adjusted EBITDA margin is calculated as the adjusted EBITDA divided by
revenues.
Gross debt and external gross debt
Gross debt is calculated as borrowings and lease liabilities as disclosed in
Note 8 of the consolidated financial statements. External gross debt is
calculated as gross debt 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 2 June 2024 26 weeks ended 28 May 2023
3 December 2023
Note £m £m £m
Gross debt 8 1,968.7 1,909.2 1,959.9
Lease liabilities payable to joint ventures (14.0) (9.0) (16.5)
External gross debt 1,954.7 1,900.2 1,943.4
Net debt
Net debt is calculated as cash and cash equivalents, less gross debt.
Net debt is a measure of the Group's net indebtedness that provides an
indicator of the overall strength of the Consolidated Balance Sheet. It is
also a single measure that can be used to assess the combined effect of the
Group's cash position and its indebtedness.
The most directly comparable IFRS measure is the aggregate of borrowings and
lease liabilities (current and non-current) and cash and cash equivalents. A
reconciliation of these measures with net debt can be found in Note 8 to the
consolidated financial statements.
Technology Solutions fees invoiced
Technology Solutions fees invoiced is used as a key measure of performance of
the Technology Solutions business in addition to revenue and represents design
and capacity fees invoiced during the period for existing and future CFC and
in-store fulfilment commitments.
Underlying cash flow
Underlying cash flow is the movement in cash and cash equivalents excluding
the impact of adjusting items, proceeds from the disposal of assets held for
sale, cash received in respect of contingent consideration, costs of
financing, purchase of unlisted equity investments and foreign exchange
movements, as these are not recurring, core business items. A reconciliation
of the movement in cash and cash equivalents to underlying cash outflow is
detailed within the Financial Review.
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 regularly assesses and monitors the principal risks of the business.
Set out in the Group's Annual Report and Accounts for the 53 weeks ended 3
December 2023 were details of the principal risks and uncertainties for the
Group and the key mitigating activities used to address them, applicable at
that time.
The Board considers that the principal risks and uncertainties for the Group
have not changed, and remain relevant for the remaining six months of the 2024
financial year.
● Market Proposition (OSP & OIA): Our OSP and OIA product offer,
features, implementation schedule, pricing or terms may not be sufficiently
attractive to potential partners or may not be commercially attractive to them
at a level that delivers adequate and sustainable returns for us.
● Partner Success (OSP): We invest in robots and MHE alongside our
partners in the CFCs that we develop for them and we rely on the growth of our
partners' online businesses to generate appropriate economic returns from this
investment. If our partners do not achieve sustainable returns from their
investment then they may not expand their utilisation of the capacity that we
have jointly invested in, in which case we may fail to generate our planned
returns. It is also possible that if our partners are unable to generate
acceptable returns themselves they may close existing CFC facilities.
● Product Innovation, protection and performance: Our innovation and
development processes may not meet partner needs, or we may fail to provide
protected, reliable and commercially viable products. This could undermine our
ability to attract and retain partners.
● Supply Chain: Disruption in our extended and complex supply chain
may adversely affect product availability and responsible sourcing. This could
result in increased costs and fines, delays to contractual commitments and
loss of revenue.
● Talent & Capability: Difficulty in filling key positions, a
loss of top performers and an inability to embed diversity could undermine
business operations and growth plans.
● Cyber Security & Data: The disruption or loss of critical
assets and sensitive information as a result of a cyber attack, insider threat
or a data breach within our Group network or our supply chain could result in
business interruption, reputational damage or regulatory impacts, for both
Ocado and our partners.
● Fire & Safety: Fire, or injury to a worker or customer, caused
by product design or operating failures could result in business disruption,
loss of assets and reputational loss.
● Regulatory & Compliance: Failure to comply with local and
international regulations could lead to loss of trust, penalties, and
undermine our ability to operate.
● Climate, Environment and Geopolitical: Transformation pressures
and adverse external events could increase cost, disrupt our supply chain and
operations, and the demand for our product.
● Liquidity & Cash Management: Insufficient liquidity (cash
balances plus undrawn facilities) to deliver our business goals and/or settle
our liabilities.
This principal risks section should be read in conjunction with the rest of
this statement as the impact of the current market conditions and trading
patterns on the business are explained there and help provide an understanding
of the risks and opportunities facing Ocado. In particular:
● Partner Success: The announcement on 20 June 2024, after the
period end, of the pause to the planned go-live of Sobeys' CFC4 in Vancouver,
Canada highlights the significance and the risks of the Partner Success
programme. This statement outlines that we continue to focus on partner
success work; in 1H24, we restructured Ocado Solutions to provide more
dedicated resources. Where our partner success work is already well advanced,
it has had a positive impact on both operational performance and customer
growth, and this restructuring will enable us to deliver these benefits to all
our live partners. There is much work still to do to further support our
partners and we remain reliant on the growth of our partners' online
businesses to generate appropriate returns on our investment and to continue
to draw CFC capacity in future.
● Liquidity & Cash Management: As outlined in the Notes to the
condensed consolidated interim financial information, the Group's debt
facilities include a Revolving Credit Facility (RCF) (undrawn) which matures
in June 2025, and borrowing facilities with repayment due in December 2025
(£600m convertible bond), October 2026 (£500m SUNs) and January 2027 (£350m
convertible bond). The Group will need to obtain replacement funding to
refinance existing facilities. The Directors anticipate any refinancing would
take place well in advance of maturity, in line with normal market practice.
Given current market conditions, the coupon rates on any refinancing are
expected to be significantly higher than the coupon rates on current
facilities. The Group has a previous track record of successful refinancing,
and is confident in delivering the refinancing as described. The risk remains
though that a refinancing cannot be successfully achieved.
As part of the ongoing risk management process, emerging risks for the Group
are identified and assessed. These risks are deemed to be significant but are
not listed as one of the Group's principal risks.
More information on these principal risks and uncertainties and emerging
risks, 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 53 weeks
ended 3 December 2023, a copy of which is available on the Group's corporate
website, www.ocadogroup.com.
Independent Review Report to Ocado Group plc
Conclusion
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 2 June
2024 which comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the condensed
consolidated balance sheet, the condensed consolidated statement of changes in
equity, the condensed consolidated statement of cash flows and related notes 1
to 16.
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 2 June 2024 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.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 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 (ISRE (UK) 2410). 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.
As disclosed in note 2, the annual financial statements of the group are
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".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of 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.
In preparing the half-yearly financial report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
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
16 July 2024
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
Stephen Daintith, Chief Financial Officer
Non-Executive Directors
Richard Haythornthwaite, Chairman
Andrew Harrison, Senior Independent Director
Jörn Rausing
Emma Lloyd
Julie Southern
Nadia Shouraboura
Julia M. Brown
Rachel Osborne
Gavin Patterson
Approved by the Board and signed on its behalf by:
Stephen Daintith
Chief Financial Officer
16 July 2024
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
Glossary
6 River Systems or 6RS - means 6 River Systems LLC, a company incorporated in
Massachusetts, United States of America, acquired by the Group on 30 June
2023.
Active customer - means a customer who has shopped with Ocado Retail at
Ocado.com within the previous 12 weeks.
Adjusting items - means items considered significant due to their size/nature,
not in the normal course of business or are consistent with items treated as
adjusting in the prior periods or that may span multiple financial periods.
These have been classified separately to draw them to the attention of the
reader of the financial statements.
AEON - means AEON Co., Ltd., a company incorporated in Japan, whose registered
office is at 1-5-1 Nakase, Mihama-ku, Chiba-shi, Chiba, 261-8515.
Alcampo - means Alcampo S.A., a company incorporated in Spain under registered
company number C.I.F. A-28581882 whose registered office is at Madrid, c/
Santiago Compostela
Sur, s/n (Edificio de Oficinas la Vaguada) CP.28029 Madrid.
ASRS - means automated storage retrieval systems.
Auchan Polska - means Auchan Polska Sp. z.o.o., a company incorporated in
Poland, whose registered office is at ul. Puławska 46, 05-500 Piaseczno.
AutoStore - means AutoStore Technology AS, a company incorporated in Norway,
whose registered office is at Stokkastrandvegen 85, 5578, Nedre Vats,
Rogaland, Norway.
Auto Frame Load or AFL - means the part of the MHE that transfers delivery
totes which have been filled with products ordered by a customer from the
picking operation into delivery frames.
Average basket value - means the average amount shoppers spend in one
transaction.
Average live modules - means the weighted average number of modules that were
fully installed and available for use by our client partners during the
period.
Average orders per week - means the average number of orders per week
processed within CFCs for Ocado Retail.
Average selling price - means product sales divided by total eaches.
Board - means the Board of Directors of the Company or its subsidiaries from
time to time as the context may require.
Bon Preu - means Bon Preu SA, a company incorporated in Spain, whose
registered office is at Carrer C, 17, 08040 Barcelona.
Client - means a client of Ocado Group that has purchased warehouse automation
products and services offered to non-grocery customers.
Code - means the UK Corporate Governance Code published by the FRC in 2018, or
the 2024 Code.
Coles - means Coles Supermarkets Australia Pty Ltd, a company incorporated in
Australia, whose registered office is at 800 Toorak Road, Hawthorn East, VIC
3123.
Companies Act - means the Companies Act 2006.
Company - means Ocado Group plc, a company incorporated in England and Wales
with company number 07098618, whose registered office is
at Buildings One & Two Trident Place, Mosquito Way, Hatfield,
Hertfordshire, United Kingdom, AL10 9UL.
Contribution - means Technology Solutions revenue less Technology Solutions
direct operating costs.
Contribution margin - means Technology Solutions contribution divided by
Technology Solutions revenue.
Corporate website - means www.ocadogroup.com.
Customer Fulfilment Centre or CFC - means a dedicated, highly automated
warehouse used for the operation of the business.
Deloitte - means Deloitte LLP, the Group's statutory auditor and advisor in
respect of non-audit services.
Direct operating costs (% of live sales capacity) - means the direct costs of
running our OSP CFC estate within Technology Solutions. Direct operating costs
include engineering, cloud and other technology direct costs.
Directors - means the Directors of the Company, whose names and biographies
are set out on pages 118 to 121 of the 2023 Annual Report and Accounts , or
the Directors of the Company's subsidiaries from time to time as the context
may require.
Disclosure Guidance and
Transparency Rules or DTR - means the disclosure guidance and transparency
rules made under Part VI of the Financial Services and Markets Act 2000 (as
amended).
DP8 - means customer deliveries per standardised eight-hour shift.
FCA - means the Financial Conduct Authority.
FRC - means the Financial Reporting Council.
GAAP - means generally accepted accounting principles.
Gross liquidity - means cash and cash equivalents plus unused availability of
revolving credit facility.
Group - means Ocado Group plc, its subsidiaries, significant undertakings and
affiliated companies under its control or common control.
Groupe Casino or Casino - means Casino Guichard Perrachon SA, a company
incorporated in France, whose registered office is at 24 Rue de la Montat,
Saint-Etienne.
Haddington Dynamics - means Haddington Dynamics Inc., a company incorporated
in Nevada, United States of America, acquired by the Group on 21 December
2020.
HMRC - means His Majesty's Revenue and Customs.
IAS - means International Accounting Standards.
ICA - means ICA Gruppen AB, a company incorporated in Sweden, whose registered
office is at Svetsarvägen 16, Solna.
IFRIC - means International Financial Reporting Standards Interpretations
Committee.
IFRS - means International Financial Reporting Standards.
Inkbit - means Inkbit Corporation, a company incorporated in Delaware, United
States of America, whose business address is 200 Boston Ave #1875, Medford,
MA, 02155.
ISA (UK & Ireland) - means International Standard on Auditing in the
United Kingdom and Ireland.
ISF - means in-store fulfilment.
Jones Food Company or JFC - means Jones Food Company Limited, a company
incorporated in England and Wales with company number 10504047, whose
registered office is at Old Forge Place, Lydney GL15 5SA.
Kindred Systems - means Kindred Inc., a company incorporated in Delaware,
United States of America, acquired by the Group on 15 December 2020.
KPI - means key performance indicator.
Kroger - means The Kroger Co., a company incorporated in the United States of
America, whose registered office is at 1014 Vine Street, Cincinnati, Ohio.
LGV - means large goods vehicle.
Listing Rules - means the Listing Rules made by the UK Listing Authority under
Part VI of the Financial Services and Markets Act 2000 (as amended).
Lotte - means Lotte Shopping Co., Ltd, a company incorporated and registered
in the Republic of Korea with registered number 5298500774 whose registered
office is at Lotte World Tower, 26th floor, 300, Olympic Street, Songpagu,
Seoul, Republic of Korea.
Marks & Spencer or M&S - means Marks & Spencer Group plc, a
company incorporated in England and Wales with company number 04256886, whose
registered office is at Waterside House, 35 North Wharf Road, London, W2 1NW,
or one of its subsidiaries.
McKesson or McKesson Canada - means McKesson Canada Corporation, a company
incorporated in Canada and whose registered office is at 4705 Dobrin Street,
Montreal, Quebec, H4R 2P7.
MHE - means mechanical handling equipment.
MHE JVCo - means MHE JVCo Limited, a company incorporated in England and Wales
with company number 08576462, jointly owned by Ocado Holdings and Morrisons,
whose registered office is at Buildings One & Two Trident Place, Mosquito
Way, Hatfield, Hertfordshire, United Kingdom, AL10 9UL.
Morrisons - means Wm Morrison Supermarkets Limited, a company incorporated in
England and Wales with company number 00353949, whose registered office is at
Hilmore House, Gain Lane, Bradford, West Yorkshire, BD3 7DL.
Net finance costs - means the total of finance income, finance costs and other
finance gains and losses before. Finance income is composed principally of
bank interest. Finance costs are composed primarily of interest on borrowings
and lease liabilities.
Number of modules live - means modules that are fully installed and available
for use by our partners.
Modules ordered - the maximum capacity of sites for which a contractual
agreement has been signed with a partner and an invoice has been issued for
the associated site fees.
Ocado.com - means the Group's online retail business serviced from the
Ocado.com website and excludes the Zoom by Ocado business.
Ocado Re:Imagined or Re:Imagined - means a series of innovations and changes
to the technology powering our Ocado Smart Platform (OSP).
Ocado Retail or ORL - means Ocado Retail Limited, a joint venture between
Ocado Holdings Limited and Marks and Spencer Holdings Limited, which is
incorporated in England and Wales, and whose registered office is at Apollo
Court, 2 Bishop Square, Hatfield Business Park, Hatfield, Hertfordshire,
United Kingdom, AL10 9NE.
Ocado Smart Platform or OSP - means the end-to-end solution for operating
online in the grocery market, which has been developed by the Group.
Operating costs - means all costs incurred in the continuing operations of the
group.
Partner - means a client of Ocado Group that has purchased the Ocado Smart
Platform Solution or part of the OSP Solution to deliver their operations.
RCF - means revolving credit facility.
ROI - means return on investment.
Senior unsecured notes or notes - means the Company's offering of £500m
senior secured notes due 2026.
Senior unsecured convertible bonds or convertible bonds - means the Company's
offerings of £600m senior unsecured convertible bonds due 2025 at a coupon of
0.875% and an issue price of 100.0%, and of £350m senior unsecured
convertible bonds due 2027 at a coupon of 0.750% and an issue price of 100.0%.
Shareholder - means a holder of ordinary shares of the Company.
SKU - means stock-keeping unit; that is, a line of stock.
Sobeys - means Sobeys Inc., a wholly-owned subsidiary of Empire Company
Limited incorporated in Canada, whose registered office is at 115 King Street,
Stellarton, Nova Scotia.
Spoke - means the trans-shipment sites used for the intermediate handling of
customers' orders.
Stem time - means the time from when a driver leaves the CFC/spoke until the
driver makes the first delivery
Substitution - means an alternative product provided in place of the original
product ordered by a customer.
UPH - means average units picked per labour hour.
VCP - means the Value Creation Plan.
Zoom by Ocado or Zoom - means Zoom by Ocado, the Group's immediacy delivery
offering.
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