TIDMOCDO
RNS Number : 2949G
Ocado Group PLC
18 July 2023
OCADO GROUP PLC
Interim results for the 26 weeks ended 28 May 2023
18 July 2023
Financial and operational progress across Ocado Group
Financial progress
-- Group revenue GBP1.4bn, +9%: Technology Solutions +59%, Ocado
Logistics +2%, Ocado Retail +5%
-- Group EBITDA*(1) of GBP17m: Technology Solutions EBITDA*
positive; Ocado Logistics flat; Ocado Retail small loss in the
half; positive EBITDA* throughout Q2
-- Cost reductions across the Group: operational efficiencies and lower support costs
-- Underlying cash outflow*(2) of GBP(288)m; +GBP108m versus
1H22: liquidity remains strong at GBP1.3bn (including GBP0.3bn
revolving credit facility)
-- Group EBITDA of GBP17m is offset by depreciation &
amortisation and exceptional items to give a loss before tax of
GBP(289)m
-- FY23 guidance unchanged
Operational and strategic progress
-- Technology Solutions: +35% growth in average live modules
versus 1H22, increasing to 105 live modules at the end of the first
half, +2 new CFCs live; 25 sites now live (21 CFCs, 4 Zooms)
-- CFC direct operating costs(3) down from 2.1% to 1.8% of sales capacity
-- Partner Success programme: delivering tangible results and
improved economics for OSP partners
-- Ocado Intelligent Automation: proposition and business model
well advanced in attractive market
-- Ocado Logistics: increasing productivity and efficiencies in
warehouse and delivery services for our UK partners
-- Ocado Retail: continued strong customer acquisition growth,
items per basket has been stable since last October, improved
customer focus and efficiencies in all areas delivering positive
EBITDA* throughout Q2
Tim Steiner, Chief Executive Officer of Ocado Group, said:
"Ocado Group has made good progress over the last six months.
Technology Solutions has continued to deliver our industry-leading
Ocado Smart Platform around the world and the opening of the first
CFC for AEON, Japan's biggest food retailer, in Chiba City, just
outside Tokyo, is a landmark for the grocery sector. It
demonstrates that our proprietary AI and robotics can be applied to
businesses across the globe; Ocado Intelligent Automation is well
placed to sign its first deals to provide our automation solutions
outside of grocery; and we are pleased to report significant
progress in our Partner Success programme, where our partners such
as Kroger are seeing tangible improvements in their operational
performance. The success of this programme is important to our
plans to deliver stronger growth in orders for new capacity.
In the UK, Ocado Logistics had a steady, profitable first half
and Ocado Retail is making good progress, with a return to
profitability in Q2. Our operations in the UK remain an important
demonstration of the potential for our international ambitions, as
we seek to transform the economics of online grocery and expand
into the wider automated storage and retrieval solutions
market.
At a Group level, I am pleased to see the operational and
financial discipline delivered by all our teams as we focus on
driving cost efficiencies and cash flow improvement. For these
reasons, we look forward to delivering the full potential of the
business and continuing to create lasting value for all our
stakeholders."
Ocado Group 1H23 Income Statement
GBPm 1H23 1H22(6) GBPm change % change FY22(6)
---------------------------- ------- ------- ----------- ---------- -------
Revenue(4)
Technology Solutions 198.2 124.7 73.5 58.9% 291.4
Ocado Logistics 335.2 329.7 5.5 1.7% 659.9
Ocado Retail 1,178.5 1,122.2 56.3 5.0% 2,203.0
Inter-segment eliminations (341.2) (314.2) (27.0) 8.6% (640.5)
Group 1,370.7 1,262.4 108.3 8.6% 2,513.8
---------------------------- ------- ------- ----------- ---------- -------
EBITDA*(1)
Technology Solutions 5.9 (58.8) 64.7 110.0% (101.5)
Ocado Logistics 14.6 14.5 0.1 0.7% 33.6
Ocado Retail (2.5) 31.3 (33.8) (108.0)% (4.0)
Inter-segment eliminations (1.4) (0.6) (0.8) (133.3)% (2.2)
Group 16.6 (13.6) 30.2 222.1% (74.1)
---------------------------- ------- ------- ----------- ---------- -------
Depreciation & amortisation (192.5) (157.3) (35.2) (22.4)% (348.6)
Finance expense (31.4) (41.6) 10.2 24.5% (64.6)
FX gains/(losses) (5.0) 8.2 (13.2) (161.0)% 16.4
Exceptional items(5) (77.2) (7.0) (70.2) (1,002.9)% (29.9)
Group loss before tax(5) (289.5) (211.3) (78.2) (37.0)% (500.8)
---------------------------- ------- ------- ----------- ---------- -------
* These measures are Alternative Performance Measures, refer to
note 16 in the condensed financial statements.
Notes:
1. EBITDA* is a non-GAAP measure defined as earnings before net
finance cost, taxation, depreciation, amortisation, impairment and
exceptional items.
2.Underlying cash flow* is the movement in cash and cash
equivalents excluding the impact of exceptional items, costs of
financing, purchase of/investment in unlisted equity investments
and FX movements.
3.Direct operating costs as a % of site sales capacity reflects
the exit rate position for all OSP CFCs live at the period end.
Direct operating costs include engineering, cloud and other
technology direct costs. The prior year has been updated in line
with this definition (previously 1H22 was 2.4%).
4. Revenue is a. Retail - online sales (net of returns)
including charges for delivery b. Technology Solutions - the fees
charged to solutions clients and c. Logistics - the recharge of
costs and associated fees from Ocado Logistics to our UK clients.
Recharges from Technology Solutions & Ocado Logistics to Ocado
Retail are eliminated on consolidation.
5. Net exceptional costs of GBP77.2m primarily relates to
GBP38.7m UK network capacity review, GBP17.4m change in fair value
relating to the revaluation of the Marks and Spencer Group plc
("M&S") contingent consideration, litigation costs of GBP9.1m
(related to patent infringement litigation between the Group and
AutoStore Technology AS). Other exceptional items include costs
associated with Ocado Group Finance transformation costs,
Organisational restructuring costs and Ocado Retail IT systems
transformation.
6. The Group has changed its segmental reporting for FY23 to
reflect the Group's three distinct business models of Technology
Solutions, Ocado Logistics and Ocado Retail. The FY22 prior year
comparatives have been restated on the new segment basis. A
detailed exercise has been carried out to ensure all costs are
owned and managed within the appropriate segment. This has resulted
in a different cost allocation to that used in the preparation of
the pro forma numbers as presented in the 1H22 and FY22 results
presentations for Logistics and Technology Solutions; Ocado Group
EBITDA* loss of GBP14m at 1H22 and GBP74m at FY22 remain
unchanged.
The commentary is on a pre-exceptional basis to aid
understanding of the underlying performance of the business
1H23 Operational and Strategic Review
Technology Solutions
OSP capacity rollout is driving strong revenue growth and high
profit flow-through
Technology Solutions delivered strong operational execution with
the rollout of new capacity in both new and existing markets. In
the first half, two Customer Fulfilment Centres ("CFCs") and six
new modules went live, taking the total to 25 sites and 105 live
modules at the end of the period. The first CFC went live for AEON
in Chiba City, just outside Tokyo, Japan in April and Sobeys' third
CFC went live in Calgary in March. These new CFCs were delivered on
time and on budget. Our equipment is performing well and the sites
have started ramping up their capacity according to plan.
We are pleased with the improving financial progress in
Technology Solutions as the number of live modules grows,
reinforcing the dynamics of our business model. Our first-half
performance demonstrates this with revenue growth of 58.9% and
contribution margin of 71% which, combined with cost efficiencies,
delivered strong profit flow-through and positive EBITDA*.
Our focus on efficiencies continues, support costs were GBP12m
lower in the period, falling from GBP101m to GBP89m, as a result of
cost reduction measures and the one-off profit of GBP5m from the
sale of the Dartford spoke. We expect further progress over the
course of the year driven by headcount reduction initiatives,
discretionary cost expenditure actions, and specific project
efficiencies such as the new finance platform that is now in
place.
OSP Partner Success programme delivering results
Since January, Ocado's Partner Success teams have been working
with our international OSP partners to more closely support them in
delivering improved operational and financial performance in their
CFCs, webshop, and last-mile delivery network, in order to maximise
the power of OSP and help accelerate orders for more modules versus
the current rate which is currently towards the lower end of our
mid-term target.
For Kroger, initial results from our work with them in their
first two CFCs indicate significantly increased warehouse
productivity (units picked per labour hour within the facility
("UPH") +25%), waste reduction (-30%), drops per van (+10%) and a
lower operational cost per order (down 15%). Kroger is now applying
these operational learnings across other sites to ensure the best
performance is achieved from the OSP platform. There is still work
to do and we will continue to support our partners with these
dedicated teams, working together to make a sustainable difference
to their economic returns in online grocery.
Ocado Intelligent Automation is well placed for first contract
wins; acquisition of 6 River Systems
Ocado Intelligent Automation ("OIA") has been established to
bring Ocado's unique and proprietary technology to clients outside
grocery. OIA will operate a capital-light 'MHE sell' model designed
so that upfront fees better match Ocado's cash outflows and will
largely leverage existing OSP technology. Discussions are
well-progressed with several potential clients across a range of
industries. Although cash will be received up-front when the MHE is
sold, we expect that revenue and profit will be recognised when the
project goes 'live'.
On 30 June 2023, Ocado Group acquired 6 River Systems ("6RS")
from Shopify for $12.7m to support the technology roadmap for Ocado
Intelligent Automation. 6 River Systems is a collaborative
Autonomous Mobile Robot ("AMR") fulfilment solutions provider to
the logistics and non-grocery retail sectors, based in
Massachusetts, USA. Founded in 2015, it has developed an Autonomous
Mobile Robot product that provides automated assistance to pickers
in a warehouse, working collaboratively with human operators. 6
River Systems brings new exciting possibilities to Ocado's IP and
product set, as well as valuable commercial and R&D expertise
in the non-grocery sector. The business acquired by Ocado Group has
a good client list, is debt-free, cash flow positive, and generates
positive EBITDA.
Outlook for Technology Solutions - 2H23
-- One further CFC (Luton) will go live in 2H23. The opening of
the two CFCs for Coles in Melbourne and Sydney, previously
scheduled for 2H23 is under review, and we are working closely with
Coles on the revised timing.
-- Continued implementation of our Partner Success programme is
expected to drive improved economics for our OSP partners and
support the rollout of further sites and modules.
-- Further operating efficiencies and cost reductions will
support growth in profitability, including a gradual flattening of
technology costs; positive EBITDA* is expected for FY23.
Ocado Logistics
Our third-party logistics ("3PL") operation, supporting Ocado
Retail and Morrisons in the UK, continues to perform strongly and
remains a good example of our highly efficient 3PL distribution
model. In the first half operational costs grew by 0.6% driven by
customer orders per week across our two partners which grew +4.3%
and by eaches delivered which declined by 2.6% driven by fewer
items per basket.
Inflation also affected operational costs, but this was well
controlled by our teams and offset by productivity improvements in
our OSP CFCs which saw UPH (units per labour hour picked) improve a
strong 14%. Ocado Logistics is a reliable cash generator and
EBITDA* of GBP15m was flat in the period.
Outlook for Ocado Logistics - 2H23
-- Continued improvement in productivity for our UK partners
-- We expect Ocado Logistics EBITDA* of around GBP25m for the
full year, reflecting expected revenue growth and the cost-plus
business model.
Ocado Retail
A return to profitability in the second quarter
Ocado Retail revenue grew by 5.0% in 1H23 driven by a mix of
strong active customer growth of +10.6% to 959k, growth in average
orders per week of +4.0% to 392k, and the average basket value
increasing +1.5%. The basket value increase was driven by ASP
(average selling price) of +8.4% (net of product mix effects),
which was offset by smaller basket sizes which declined 6.3% to 45
items, and lower frequency of orders as customers managed their
overall basket spend. The number of items per basket over the last
quarter has stabilised at 44 items.
Ocado Retail's share of online grocery increased from 12.7% to
13.0% and remained stable as a % of the overall UK grocery market
during the period. ASP inflation was well below UK grocery
inflation of 12.8% (according to Nielsen) and we continue to invest
in price and broaden our range to ensure we differentiate ourselves
further alongside choice, service and experience. Our Ocado Price
Promise now matches over 10,000 like-for-like goods between
Ocado.com and Tesco. This is a key part of our strategy to support
growth and the retention of customers and the increase in the total
active customer base and mature customer base is indicating this
strategy is delivering.
The total active customer base increased modestly, up 2,000
customers since the end of Q1; however, the mature customer base
(those customers who have shopped 5 or more times with Ocado)
continues to grow steadily and was up 14,000 customers over the
same period, driven mainly by strong retention of new
customers.
The Ocado Retail "Perfect Execution" programme is driving
improved customer proposition and service levels, with on-time
deliveries and order accuracy back to pre-covid levels; "Perfect
Orders", meaning on time and in full, with no substitutions,
increased by around 6 percentage points year on year. During 1H23
we introduced c.700 new Marks and Spencer Group plc ("M&S")
grocery lines, offering customers even more choice.
There was strong control of costs across the board which meant
that combined costs fell as a percentage of revenue. This includes
productivity from improved efficiency at our CFC sites, where UPH
(units picked per hour) improved by 13.8%, and marketing
optimisation. This was offset by the increased capacity and costs
of operating 2 new Zoom sites but with the announced closure of
Hatfield CFC, we expect capacity used to reach greater than 75% by
the end of the year.
Profitability improved throughout the first half with the Retail
business delivering positive EBITDA* in each month of Q2. We see a
clear pathway to continue this positive EBITDA trend as the
capacity utilisation of the CFCs improves and the natural
operational gearing within the business delivers incremental
profitability.
UK network capacity review supports greater efficiencies and a
better customer experience
The ceasing of operations at our oldest CFC in Hatfield, UK and
the transfer of a portion of Hatfield's capacity to a new robotic
CFC in Luton, scheduled to open in 2H23, will assist in the
recovery of profitability for Ocado Retail. There will be a natural
reduction in excess capacity, coupled with the more attractive
economics of the latest generation of robotic CFCs. These CFCs are
consistently achieving over 200 units picked per labour hour within
the facility, compared to UPH of around 150 for our
first-generation CFC in Hatfield. The newest sites also have much
lower energy usage and together this will result in a reduction of
fixed costs in FY24. With the benefit of Ocado Re:Imagined, Ocado
will continue to drive improvements in UPH (to exceed the target of
>300 UPH) and customer experience, including increased capacity
for same-day deliveries. We continue to identify opportunities to
retain as many of our Hatfield colleagues as possible within our
other existing operations, primarily to the soon-to-be-opened Luton
CFC.
Outlook for Ocado Retail - 2H23
-- Q323 customer and order numbers will reflect the tougher
comparison with significant customer acquisition actions in
Q322.
-- Volume-driven growth is expected to accelerate again in Q4.
-- Ocado Retail is expected to be marginally EBITDA* positive in the full year.
Ocado Group
Group cash flow
Underlying cash outflow* improved by GBP108m in 1H23, driven by
revenue growth, cost reductions and lower capital expenditure. The
Group is on track to deliver the guided GBP200m of underlying cash
flow improvement in the full year.
Group capital expenditure
Capital expenditure primarily comprises new site construction
costs and technology development costs to enhance OSP. Capital
expenditure was GBP283.6m in the period (1H22: GBP366.8m), a
reduction of GBP83.2m, driven by a decrease in the number of CFCs
and new modules under construction. Capital expenditure in H2 is
expected to be lower than that in H1; full-year Group capital
expenditure is expected to be no more than GBP550m, in line with
the full-year guidance.
FY23 Guidance
The performance of our businesses in the first half gives us
confidence in the full-year financial outcome. In the second half,
our priorities remain focused on ongoing excellence in operational
execution and financial discipline with costs and cash flow. There
is no change to the financial guidance given at FY22 results on
February 18th 2023.
Revenue EBITDA* Capital Expenditure
-------------------- ---------------- ------------------- -------------------
Technology Solutions +40% positive
Ocado Logistics broadly stable around GBP25m
Ocado Retail mid-single digit marginally positive
growth
Total Group Capex - - GBP550m
AutoStore Litigation
On 30 March 2023 Ocado Group recorded a comprehensive victory in
the patent infringement suit brought by AutoStore at the UK High
Court. His Honour Judge Hacon held that the AutoStore patents were
invalid and Ocado did not infringe them. AutoStore had originally
asserted six patents against Ocado in October 2020. Of these six
patents, two were invalidated by the European Patent Office before
judgement was handed down, two were withdrawn by AutoStore shortly
before the hearing started and the remaining two patents were
invalidated by Judge Hacon in today's judgement. Judge Hacon
decided that even if he had not invalidated these remaining
patents, Ocado's OSP did not infringe them. In addition, he also
found that Ocado's bots did not infringe the patents that AutoStore
had withdrawn from the case. AutoStore has subsequently been
ordered to pay Ocado GBP6.7m in costs.
This UK High Court decision follows Ocado's victory over
AutoStore in the International Trade Commission in the USA in 2022.
Ocado's claims against AutoStore for infringing Ocado's IP continue
in Germany and New Hampshire, USA.
Results Presentation
A results presentation will be available for investors and
analysts at 9.30am. This can be accessed online here. Following the
session there will be Q&A, also accessible via the webcast.
Contacts
Tim Steiner, Chief Executive Officer on +44 20 7353 4200 today
or +44 1707 228 000
Stephen Daintith, Chief Financial Officer on +44 20 7353 4200
today or +44 1707 228 000
David Shriver, Chief Reputation Officer, on +44 20 7353 4200
today or +44 1707 228 000
Martin Robinson at Teneo on +44 20 7353 4200
Financial Calendar
The schedule for Ocado Retail results for the remainder of the
2022 financial year is for a Q3 Trading Statement on the 19th of
September 2023 and a Q4 Trading Statement on the 16th of January
2024.
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 8.6% to GBP1,370.7m (1H22:
GBP1,262.4m):
-- Technology Solutions delivered strong revenue growth, up
58.9% to GBP198.2m (1H22: GBP124.7m) with an average of 101 modules
live during the period (1H22: 75). In the period we have added two
new sites and six modules. These include the first Customer
Fulfilment Centre ("CFC") in the Asia-Pacific region for AEON in
Chiba City, just outside Tokyo, Japan; and the third CFC for Sobeys
in Calgary, Canada. We now have 25 live sites (1H22: 18 sites,
FY22: 23 sites) and 105 live modules (1H22: 86 live modules, FY22:
99 live modules).
-- Logistics revenue grew by 1.7% to GBP335.2m (1H22:
GBP329.7m), this primarily represents cost recharges to Ocado
Retail and Wm Morrison Supermarkets Limited ("Morrisons") of
GBP318.5m (1H22: GBP317.3m), which grew by 0.4%. While orders per
week increased by 4.3% to 512,000 orders per week (1H22: 491,000)
volumes, measured in eaches (individual items in the shopping
basket), declined by 2.6% primarily due to the decrease in basket
sizes as customers responded to the cost-of-living-crisis.
-- Retail revenue increased by 5.0% year-on-year to GBP1,178.5m
(1H22: GBP1,122.2m) reflecting growth of 10.6% in active customers
to 959,000 (1H22: 867,000, FY22: 940,000). Price inflation has
continued, with the average item price up 8.4% to GBP2.72 (1H22:
GBP2.51). This has been partially offset by smaller basket sizes,
declining 6.3% to 45 individual items (1H22: 48 items), as
customers manage their overall basket spend. Orders per week have
grown by 4.0% to 392,000 (1H22: 377,000), driven by the increase in
active customers and offset by lower frequency of orders.
EBITDA* for the period was GBP16.6m (1H22: loss of GBP13.6m), an
improvement of GBP30.2m driven by Technology Solutions, which
generated positive EBITDA of GBP5.9m, up GBP64.7m (1H22: loss of
GBP58.8m) due to strong profit flow-through from revenue growth.
Logistics delivered EBITDA of GBP14.6m (1H22: GBP14.5m) on its
resilient cost-plus model. Retail generated a GBP2.5m EBITDA loss
(1H22: GBP31.3m profit) with a steadily improving trajectory toward
full-year profitability. The year-on-year movement was driven by a
decline in gross profit margin and the non-repeat of certain
one-off benefits in 1H22.
Statutory loss before tax of GBP289.5m (1H22: GBP211.3m loss)
includes depreciation, amortisation and impairment charges of
GBP192.5m (1H22: GBP157.3m), net finance costs of GBP36.4m (1H22:
GBP33.4m), and net exceptional costs of GBP77.2m (1H22: GBP7.0m),
which include the one-off costs relating to the ceasing of
operations at our oldest CFC in Hatfield and the change in the fair
value of contingent consideration receivable from Marks and Spencer
Group plc ("M&S").
Strong balance sheet, with cash and cash equivalents of
GBP1,008.5m at the end of the period (FY22: GBP1,328.0m) and
liquidity of GBP1.3bn (FY22: GBP1.6bn) (including the undrawn
revolving credit facility ("RCF") of GBP0.3bn) to support our UK
and international growth plans. Net debt* at the end of the period
was GBP(900.7)m (1H22: GBP(758.8)m).
1H23 1H22
GBPm Pre- Exceptional Total Pre- Exceptional Total Pre-
exceptional* items reported exceptional* items reported exceptional
change
-------------------------- ------------- ----------- --------- ------------- ----------- --------- ------------
Revenue 1,370.7 - 1,370.7 1,262.4 - 1,262.4 8.6%
Insurance proceeds - - - - 6.3 6.3 n/a
Operating costs (1,353.2) (56.8) (1,410.0) (1,275.5) (13.3) (1,288.8) 6.1%
Share of results
from joint ventures
and associates (0.9) - (0.9) (0.5) - (0.5) 80.0%
EBITDA* 16.6 (56.8) (40.2) (13.6) (7.0) (20.6) GBP30.2m
Depreciation, amortisation
and impairment (192.5) (20.4) (212.9) (157.3) - (157.3) 22.4%
Net finance costs (36.4) - (36.4) (33.4) - (33.4) 9.0%
========================== ============= =========== ========= ============= =========== ========= ============
Loss before tax (212.3) (77.2) (289.5) (204.3) (7.0) (211.3) 3.9%
-------------------------- ------------- ----------- --------- ------------- ----------- --------- ------------
* These measures are alternative performance measures. Please
refer to note 16 of the consolidated financial statements.
This commentary is on a pre-exceptional basis to aid
understanding of the performance of the business on a comparable
basis. Following the change in the reporting of the Group's
operating segments during the period (as further explained below),
the Group has adopted a revised presentation of expenses in the
Income Statement, replacing Cost of sales, Distribution expenses
and Administrative expenses with a single line item for Operating
costs.
The revised presentation provides an Income Statement that is
more relevant for the total Group. Our three reporting segments
have different operating models and costs, therefore, we have
summarised the presentation of costs for the consolidated Income
Statement and provided relevant details by segment in each section.
This reflects the growing significance of the Technology Solutions
business and provides more reliable reporting by eliminating the
need for allocations between distribution and administrative
expenses.
Revenue for the period increased by 8.6% to GBP1,370.7m (1H22:
GBP1,262.4m). Technology Solutions revenue increased by 58.9% from
GBP124.7m to GBP198.2m with the go-live of five sites in 2H22
including three for Ocado Retail (Bicester, Leyton and Leeds) and
two for Kroger in the US (Denver and Baltimore). In 1H23, two sites
went live with Sobeys' third CFC in Calgary and our first CFC for
AEON in Chiba City, just outside Tokyo. The average number of live
modules is the key revenue driver for Technology Solutions and
increased by 34.7% from 75 in 1H22 to 101 in 1H23. Logistics
revenue increased by 1.7% to GBP335.2m (1H22: GBP329.7m) and
largely comprises cost recharges to its two UK customers, Ocado
Retail and Morrisons). Retail revenue increased by GBP56.3m from
GBP1,122.2m to GBP1,178.5m reflecting strong growth in active
customers, growing order volumes and continued price inflation
(that has led to smaller basket sizes, as customers manage their
overall shopping basket spend).
Net cumulative invoiced fees to our Ocado Smart Platform ("OSP")
partners that are on our balance sheet and not yet recognised as
revenue increased by GBP37.9m from GBP390.3m at 1H22 to GBP428.2m
at 1H23, driven by orders from our newest partners Lotte, Auchan
Poland and AEON.
Operating costs include all costs incurred in the continuing
operations of the Group. Operating costs increased by 6.1% to
GBP1,353.2m (1H22: GBP1,275.5m). Technology Solutions operating
costs increased by 4.8% to GBP192.3m (1H22: GBP183.5m) driven by an
increase in the costs of operating live sites, driven by the
increase in average live modules and higher technology costs as we
continue to support and invest in the OSP. This was partially
offset by a reduction in Technology Solutions support costs of
GBP12.1m to GBP88.5m (1H22: GBP100.6m). Logistics operating costs
increased by 1.7% to GBP320.6m (1H22: GBP315.2m) due to a 4.3%
growth in orders that was offset by lower basket sizes and improved
productivity across our OSP sites. Retail operating costs increased
by 8.3% to GBP1,181.0m (1H22: GBP1,090.9m) largely driven by the
growth in orders, continued inflation and incremental OSP fees
year-on-year.
EBITDA* for the period was GBP16.6m (1H22: GBP13.6m loss) with
the GBP30.2m improvement driven by a GBP64.7m improvement in
Technology Solutions to GBP5.9m (1H22: GBP58.8m loss), offset by a
GBP33.8m decline in Retail to GBP2.5m loss (1H22: GBP31.3m profit).
The improvement in Technology Solutions EBITDA* was driven by the
strong 88% flow-through of incremental revenue to EBITDA*,
improving contribution margin of 71% (1H22: 65%) and cost
reductions in support costs that were down 12.0% to GBP88.5m (1H22:
GBP100.6m). Retail EBITDA* decline was primarily driven by 1.
increased OSP fees for new sites that are not yet at full capacity;
2. investment in good value pricing to protect our customers from
high cost price inflation which resulted in a gross profit margin
decline from 34.3% to 33.1%; and 3. the one-off benefit in 1H22
from the release of a long-term incentive plan provision.
Depreciation, amortisation and impairment increased by 22.4% to
a charge of GBP192.5m (1H22: GBP157.3m), primarily due to the
increase in amortisation relating to internally generated
intangible assets (primarily the investment in the Ocado Smart
Platform) together with an increase in depreciation as a result of
the continuing roll-out of OSP hardware and software at our CFC
sites. At the end of the period, there were 25 live sites (1H22: 18
sites) including 21 CFCs and 4 Zooms. Property, plant and equipment
held on the balance sheet was GBP1,832.9m (1H22: GBP1,495.8m). The
increase largely relates to the seven sites that have gone live in
the last 12 months and the amortisation of technology projects that
have gone live in the same period.
Net finance costs of GBP36.4m increased by GBP3.0m (1H22:
GBP33.4m) and include finance costs related to our gross debt and
lease liabilities, finance income on our cash balances and foreign
exchange and revaluation movements.
Exceptional costs of GBP77.2m (1H22: GBP7.0m cost) primarily
relate to the one-off costs related to the cessation of operations
at the Hatfield site of GBP38.7m, the change in fair value of the
contingent consideration due from M&S of GBP17.0m, litigation
costs of GBP9.1m (primarily relating to the patent infringement
litigation between the Ocado Group and AutoStore Technology AS) and
organisational restructuring costs of GBP7.8m.
Statutory loss before tax of GBP289.5m (1H22: loss of GBP211.3m
loss) reflects an EBITDA profit of GBP16.6m (1H22: loss of
GBP13.6m), depreciation, amortisation and impairment of GBP192.5m
(1H22: GBP157.3m), net finance costs of GBP36.4m (1H22: GBP33.4m)
and net exceptional costs of GBP77.2m (1H22: GBP7.0m).
Segmental summary
GBPm 1H23 1H22(1) Change
--------------------------- ------- ------- ------
Revenue %
Technology Solutions 198.2 124.7 58.9%
Ocado Logistics 335.2 329.7 1.7%
Ocado Retail 1,178.5 1,122.2 5.0%
Inter-segment eliminations (341.2) (314.2) 8.6%
Group 1,370.7 1,262.4 8.6%
--------------------------- ------- ------- ------
EBITDA* GBPm
Technology Solutions 5.9 (58.8) 64.7
Ocado Logistics 14.6 14.5 0.1
Ocado Retail (2.5) 31.3 (33.8)
Inter-segment eliminations (1.4) (0.6) (0.8)
Group 16.6 (13.6) 30.2
--------------------------- ------- ------- ------
1. 1H22 has been restated to reflect the new reporting segments
Change in operating segments
For FY23, the Group has changed the reporting of its business
segments to better reflect the Group's three distinct business
models Technology Solutions, Ocado Retail and Ocado Logistics. From
1H23, the segmental reporting has been changed to reflect the new
operating structure and the comparatives have been restated on this
basis. The financial analysis for each segment has been set out to
reflect the key revenue and cost categories for each business area.
Further details on the components of each revenue and cost category
have been provided within the relevant segment. An overview of each
of our three business segments is provided below.
Technology Solutions is the global technology platform business
providing the Ocado Smart Platform ("OSP") as a managed service to
currently 12 grocery retail partners. This segment also includes
the revenue and costs associated with Ocado's non-grocery business,
Ocado Intelligent Automation ("OIA"), including Kindred, which was
acquired in 2020.
Technology Solutions comprises 1. the revenue and direct
operating costs of the OSP and OIA businesses, 2. the commercial
and technology costs to sustain and grow these businesses, 3. the
support costs for these businesses, such as Finance, Legal, HR,
Information Technology and Board costs.
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, with an additional management
fee. The business also generates revenue from capital recharges
relating to certain Material Handling Equipment ("MHE") assets used
to provide logistics services. The segment includes 1. revenue from
the management fees, cost recharges and capital recharges for
operating all UK sites, 2. the related CFC 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 and general merchandise
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 and 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 Ocado Logistics each generate
revenue from services provided to Ocado Retail, which are included
as costs within the Ocado Retail segment. For 1H23, inter-segmental
revenue eliminations were GBP341.2m (1H22: GBP314.2m). The increase
of GBP27.0m is primarily due to incremental OSP fees charged to
Ocado Retail by the Technology Solutions segment, due to an
increase in the number of live modules. Inter-segmental EBITDA
eliminations relate to amortised upfront fees paid by Ocado Retail
to Technology Solutions, which are included within revenue in
Technology Solutions. Ocado Retail capitalises these fees within
fixed assets relating to the CFC assets; the associated
depreciation is reported outside EBITDA.
Technology Solutions
GBPm 1H23 1H22 Change
----------------------- ------ ------- --------
Fees invoiced(1) 202.8 144.0 40.8%
======================= ====== ======= ========
Revenue 198.2 124.7 58.9%
Direct operating costs (58.1) (43.6) 33.3%
Contribution 140.1 81.1 72.7%
Contribution % 71% 65% 6ppts
Technology costs (45.7) (39.3) 16.3%
Support costs (88.5) (100.6) (12.0)%
EBITDA* 5.9 (58.8) GBP64.7m
----------------------- ------ ------- --------
1. Fees invoiced represent design and capacity fees invoiced
during the period for existing and future site and in-store
fulfilment (ISF) commitments. These are recognised in the Income
Statement in accordance with IFRS 15 from the time when the
site/ISF operation goes live.
Key performance indicators
The following table sets out a summary of selected operating
information in the period:
1H23 1H22 Change
--------------------------------------- ---- ---- ------
No. of modules live(1,) 105 86 22.1%
Average modules live 101 75 34.7%
Cumulative no. of modules ordered(2,3) 232 221 5.0%
Direct operating cost (% of site
sales)(4) 1.8% 2.1% (0.3)%
--------------------------------------- ---- ---- ------
1. A module is considered live when it has been fully installed
and is available for use by our partner.
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 sent for the associated fees.
3. A module of capacity is assumed as approximately 5,000 eaches
picked per hour and circa GBP73m per annum of partner sales
capacity.
4. Direct operating costs as a % of site sales capacity reflects
the exit rate position for all OSP CFCs live at the period end.
Direct operating costs include engineering, cloud and other
technology direct costs. The prior year has been updated in line
with this definition (previously 1H22 was 2.4%).
As detailed above, the Technology Solutions segment now combines
our UK and International Solutions businesses. Comparatives have
been restated on a like-for-like basis.
During the first half of the year, the scale of our
international operations has grown further with the milestone of
our first CFC going live in the Asia-Pacific region for AEON in
Chiba City, just outside Tokyo, and the third CFC for Sobeys going
live in Calgary. UK capacity for Morrisons increased slightly
within our existing facilities. We now have 25 live sites,
comprising 21 CFCs and 4 Zooms, and building on the growth in the
second half of FY22 the number of modules live year-on-year has
grown by 22.1% to 105 live modules (1H22: 18 sites, 16 CFCs, 2
Zooms; 86 modules).
Fees and revenue
Fees invoiced increased by 40.8% to GBP202.8m (1H22: GBP144.0m).
These fees include 1. the design and access fees invoiced across a
number of clients relating to existing and future CFC and in-store
fulfilment ("ISF") commitments, and 2. the recurring capacity fees
associated with the live operations, primarily Ocado Retail,
Kroger, Sobeys and Morrisons. Capacity fees increased in line with
the increase in revenue. Design and access fees in 1H23 were lower
than the prior year as fewer sites are going live in FY23, with two
sites going live so far this year.
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 GBP428.2m
(FY22: GBP422.9m, 1H22: GBP390.3m).
Revenue in the period of GBP198.2m (1H22: GBP124.7m) includes
ongoing capacity fees of GBP174.8m (1H22: GBP108.3m) and GBP15.9m
(1H22: GBP9.9m) relating to the amortisation of design and upfront
fees across our operational partners, primarily Ocado Retail,
Kroger, Morrisons and Sobeys. Ongoing capacity fee revenue in
Technology Solutions is driven by the average number of modules
live in the period. In 1H23 there were 101 average modules live
(1H22: 75), a growth of 34.7%. Revenue grew at a faster rate than
live modules (+58.9%) due to the increased number of live OSP
modules, which generate a higher fee per module of sales capacity
(there are 29 legacy non-OSP modules within the 105 modules at the
end of 1H23 that relate to Hatfield and Dordon and that generate a
lower fee per module than an OSP module). Revenue includes GBP6.2m
(1H22: GBP4.5m) relating to Kindred and equipment sales to retail
partners of GBP1.3m (1H22: GBP1.9m) recognised as revenue under
IFRS 15 (the cost of this equipment is recognised within direct
operating costs).
Direct costs
Direct operating costs 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. These costs increased by GBP14.5m (33.3%) to
GBP58.1m (1H22: GBP43.6m) primarily driven by the 34.7% growth in
average live modules. The exit rate of direct operating costs as a
percentage of client sales capacity, a key measure of operational
efficiency across sites, improved from 2.1% in 1H22 to 1.8% as the
business continues to realise efficiencies through scale and
optimisation initiatives. This led to an improvement in
contribution margin from 65% to 71%.
Technology and support costs
Technology costs comprise mainly the non-capitalised management
time spent on early-stage research projects, such as autonomous
mobility, and maintaining the Ocado Smart Platform (OSP) through
ongoing client support. Other costs include legal and professional
fees and non-capitalised software costs. Technology costs in 1H23
were GBP45.7m (1H22: GBP39.3m), an increase of GBP6.4m mainly due
to higher labour costs as we continue to invest in OSP. The
increase also includes higher legal and advisory fees relating to
the acquisition of 6 River Systems, announced in May 2023.
Support costs are costs incurred supporting the global
operations of the business. These include a number of different
activities including Sales and Partner Success, Finance, HR, IT and
Legal. Costs reduced by GBP12.1m to GBP88.5m (1H22: GBP100.6m)
driven by cost reductions across almost all areas and includes the
one-off benefit of the sale of the Dartford Spoke site, which
generated a profit on disposal of GBP5.0m. Under the revised
segmentation Board costs of GBP13.3m (1H22: GBP15.3m) are included
within Technology Solutions Support costs, this includes GBP7.4m of
share-based payments (1H22: GBP9.5m).
EBITDA *
Technology Solutions achieved a positive EBITDA* for the period
of GBP5.9m (1H22: loss of GBP58.8m), an improvement of GBP64.7m.
The strong profit flow-through from the GBP73.5m growth in revenue
reflects the high contribution margin of the OSP business and the
benefit of cost reductions in Support costs.
Ocado Logistics
GBPm 1H23 1H22 Change
----------------------------- ------- ------- -------
Cost recharges 318.5 317.3 0.4 %
Fee revenue 16.7 12.4 34.7 %
Revenue 335.2 329.7 1.7 %
Other income 6.9 6.7 3.0 %
Operational costs (295.6) (293.7) 0.6 %
Technology and support costs (31.9) (28.2) 13.1 %
EBITDA* 14.6 14.5 GBP0.1m
----------------------------- ------- ------- -------
Key performance indicators
The following table sets out a summary of selected operating
information in the period:
1H23 1H22 Change
--------------------------- ----- ----- ------
Total eaches (million) 595.9 611.9 (2.6)%
Orders per week (000s) 512 491 4.3%
OSP CFC UPH(1,2) 206 181 13.8%
Average deliveries per van
per week(3) 182 177 2.8%
--------------------------- ----- ----- ------
1. Measured as units dispatched from the CFC per variable hour
worked by operational personnel.
2. OSP CFCs are all sites excluding Hatfield and Dordon.
3. Average deliveries per van per week represents Ocado Retail
only, total deliveries by the average number of vans in the
fleet
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.
During the first half of FY23 average orders per week across our
two partners increased by 4.3% to 512,000 orders per week (1H22:
491,000). While orders grew, the volume of eaches decreased by 2.6%
to 596m (1H22: 612m). The decline in eaches reflects the changes in
customer shopping behaviours towards smaller shopping baskets in
the face of the high price inflation.
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, and 2. a 4% management fee charged on rechargeable costs
and 3. capital recharges to Ocado Retail for the use of certain
fixtures & fittings, and plant & machinery that were not
transferred to Ocado Retail on its formation.
Fee revenue of GBP16.7m (1H22: GBP12.4m) increased by 34.7%,
GBP4.3m and includes GBP11.6m of management fees (1H22: GBP11.7m)
and GBP5.1m of capital recharges (1H22: GBP(0.2)m). The GBP4.3m
increase in fee revenue is primarily due to an increase of GBP5.3m
in capital recharges year-on-year due to the impact in 1H22 of a
prior year adjustment. Management fees are around 4% of
rechargeable costs and are broadly flat period-on-period in line
with the movement in cost recharges.
Capital recharges of GBP5.1m (1H22: GBP(0.2)m) 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
within revenue as we are providing a service.
For sites that are used exclusively by Ocado Retail (primarily
Hatfield, Purfleet, Bristol and Andover), this income is included
within finance income (below EBITDA) as we are providing a finance
lease.
Cost recharges of GBP318.5m (1H22: GBP317.3m) increased by 0.4%.
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 volumes
processed through the CFC sites. While orders per week increased by
4.3%, total eaches declined by 2.6%. Despite the decline in eaches,
cost recharges increased by 0.4% due to labour and fuel price
inflation and the negative impact of the smaller shopping baskets
(resulting in fewer eaches delivered per van). These were partly
offset by the improved efficiency from higher average number of
units picked per labour hour ("UPH") in our OSP sites where UPH
increased by 13.8% to 206 units per hour (1H22: 181). Cost
recharges are greater than rechargeable costs 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
EBITDA.
Recharges and fees to Ocado Retail of GBP264.9m (1H22:
GBP259.4m) included within the GBP335.2m revenue (1H22: GBP329.7m)
are eliminated on consolidation.
Other income
Other income of GBP6.9m (1H22: GBP6.7m) relates to Erith and
Dordon property rental income and MHE JVCo asset rental income.
This is within Operating costs in the 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
operational costs increased by 0.6% to GBP295.6m (1H22: GBP293.7m),
against a reduction in eaches of 2.6% to 596m (1H22: 612m).
However, orders per week grew by 4.3% to 512,000 (1H23:
491,000).
Costs increased, despite a reduction in the volume of eaches,
due to the inefficiencies resulting from smaller baskets, and
inflation in fuel and labour costs, partially offset by a
year-on-year reduction in utilities unit costs and productivity
improvements.
Productivity improvements are demonstrated by the improvement in
UPH in OSP CFCs (Erith, Andover, Purfleet, Bristol and Bicester),
which improved year-on-year to 206 in the period (FY21: 181),
exceeding our target of 200 UPH. These productivity improvements
enabled increased throughput of eaches, resulting in lower labour
costs and partially offsetting the inefficiencies generated by
smaller basket sizes.
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 largely completed in
2024.
Technology and support costs increased by GBP3.7m to GBP31.9m
(1H22: GBP28.2m) primarily due to investment in the final phase of
the Ocado Retail transition to OSP. 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.
EBITDA*
EBITDA* for the period was GBP14.6m, an increase of GBP0.1m
(1H22: GBP14.5m): the GBP5.3m increase in capital recharges was
offset by the increase in non-recharged technology costs, as
described above.
Ocado Retail
GBPm 1H23 1H22 Change
------------------------------ ------- ------- ----------
Revenue 1,178.5 1,122.2 5.0%
Gross profit 389.9 385.4 1.2%
Gross margin % 33.1% 34.3% (1.2)ppts
Fulfilment and delivery costs (237.7) (234.1) 1.5%
Marketing costs (20.1) (26.6) (24.4)%
Support costs (49.0) (31.3) 56.5%
Fees (85.6) (62.1) 37.8%
EBITDA* (2.5) 31.3 GBP(33.8)m
------------------------------ ------- ------- ----------
The results of the Ocado Retail Limited joint venture (referred
to as either "Ocado Retail" or "Retail") are fully consolidated in
the Group. Costs in the Ocado Retail Income Statement have been
reclassified to add clarity.
Key performance indicators
The following table sets out a summary of selected Ocado.com
operating information in the period:
Ocado.com 1H23 1H22 Change
---------------------------------- ------ ------ ------
Active customers (000s)(1) 959 867 10.6%
Average orders per week (000s)(2) 392 377 4.0%
Average basket value (GBP)(3) 121.22 119.45 1.5%
Average selling price (GBP)(4) 2.72 2.51 8.4%
Average basket size (eaches) 45 48 (6.3)%
---------------------------------- ------ ------ ------
1. Active customers are classified as active if they have
shopped at Ocado.com within the previous 12 weeks.
2. Average orders per week (000s) is for Ocado.com only. 1H22
has been restated to reflect this (under the previous approach 1H22
was 381,000, like-for-like orders per week would be 401,000,
+5.2%)
3. Average basket value (GBP) is defined as product sales
divided by total orders. 1H22 has been restated to reflect the
update to no longer deduct cancelled orders on the road from total
orders and change from gross sales to product sales (under the
previous approach 1H22 was GBP120, 1H23: GBP122)
4. Average selling price (GBP) is defined as product sales
divided by total eaches. 1H22 has been restated to reflect the
update to no longer deduct cancelled orders on the road from total
orders and change from gross sales to product sales (under the
previous approach 1H22 was GBP2.52, 1H23: GBP2.73)
Revenue
Revenue increased by 5.0% to GBP1,178.5m (1H22: GBP1,122.2m)
driven by growth in Ocado.com, with 4.0% order growth to 392,000
orders per week (1H22: 377,000 orders per week) and 1.5% growth in
basket value to GBP121.22 (1H22: GBP119.45).
We have continued to win new customers through vouchering and
marketing activity. We improved customer retention driven by our
fair-value and competitive price proposition. We continue to focus
on consistent and strong operational performance in key areas such
as delivering on time and in full. Active customers now stand at
959,000, up by 10.6% from 867,000 at 1H22 (FY22: 940,000). Ocado
has grown its share of the online grocery market to 13.0% (1H22:
12.7%) (Nielsen). As our customer base continues to grow, average
orders per week have grown by 4.0% to 392,000 (1H22: 377,000).
The average basket value has grown by 1.5% to GBP121.22 (1H22:
GBP119.45) driven by the increase in selling price of 8.4% to
GBP2.72, partly offset by a reduction in the number of items
purchased. In the face of cost-of-living pressures, shoppers are
managing the overall value of their baskets and as a consequence
items per basket have reduced by 6.3% to 45 items (1H22: 48).
We remain committed to offering fair value to customers and have
not passed through the full impact of food price inflation to our
customers; the average selling price on Ocado.com has increased by
8.4%, well below UK grocery inflation of 12.8% (according to
Nielsen). In April 2022 we launched the Ocado Price Promise
("OPP"), a key component of our fair value strategy to support the
growth and retention of our customers. OPP matches the price of
like-for-like goods between Ocado.com and Tesco on over 10,000
lines; we aim for total baskets on Ocado.com to be the same price
or less. Where this is not the case we send the customer a voucher
for the difference.
Gross profit
Gross profit increased by 1.2% to GBP389.9m (1H22: GBP385.4m).
Growth is lower than revenue growth as we invested in customer
pricing to deliver fair value by not passing on all cost price
increases to customers and investing in sales promotions. As a
result of these dynamics, gross margin declined by 1.2 percentage
points to 33.1% (1H22: 34.3%). The gross profit figure includes
supplier-funded media income of GBP40.5m (1H22: GBP39.6m) and the
cost of vouchers of GBP12.6m (1H22: GBP6.8m).
Fulfilment and delivery costs
GBPm 1H23 1H22 Change
------------------ ------- ------- ------
CFC (93.4) (93.5) (0.1)%
Service delivery (130.2) (125.1) 4.1%
Utilities (14.1) (15.5) (9.0)%
Operational costs (237.7) (234.1) 1.5%
------------------ ------- ------- ------
CFC costs primarily comprise labour costs in CFCs. These costs
have remained broadly flat at GBP93.4m (1H22: GBP93.5m) despite the
4.0% growth in average orders per week. This improved efficiency
has been achieved by again improving the productivity of our CFC
sites. Units picked per hour ("UPH") across the network improved by
8.7% from 172 to 187. This has been offset by the costs of
operating new Zoom sites, with four Zoom sites now operational
(1H22: 2, FY22: 4).
The OSP sites have shown robust improvements in productivity
reaching an average of 206 UPH (1H22: 181 UPH), an improvement of
13.8%. All of the mature sites (Erith, Andover, Purfleet, Bristol)
achieved over 200 UPH in the period.
Service delivery costs comprise labour, fleet, fuel and related
costs to enable the delivery of orders to customers. Costs have
increased by 4.1% to GBP130.2m (1H22: GBP125.1m), primarily driven
by the increased number of orders (+4.0%). Service delivery costs
are driven by the productivity of each delivery van, measured in
eaches per van, which has reduced by (8.3)% to 934 eaches (1H22:
1,019), as a result of smaller basket sizes, reducing efficiency in
the fleet, and reflected in the service delivery costs growing at a
higher amount (+4.1%) than the growth in orders (+4.0%).
Utilities costs across CFCs and service delivery have reduced by
9.0% to GBP14.1m (1H22: GBP15.5m) due to lower unit costs partially
offset by an increase in the volume of electricity used (driven by
the increased number of live modules year-on-year).
Marketing and support costs
Marketing costs comprise the cost of marketing activities to
customers and exclude vouchering costs, which are within revenue.
Costs decreased by GBP6.5m to GBP20.1m (1H22: GBP26.6m) as we
optimised the marketing channel mix and improved marketing spend
efficiency. Activities were focused on driving increased awareness
of the Ocado value proposition. As a result, marketing spend as a
percentage of revenue decreased to 1.7% (1H22: 2.4%).
Support costs of GBP49.0m (1H22: GBP31.3m) comprise head office,
customer support and other overhead costs for Ocado Retail. The
1H22 costs of GBP31.3m benefitted from the GBP15.6m accrual release
of the long-term management incentive provision. Excluding this,
support costs have increased by GBP2.1m, primarily due to the
write-off of GBP2.5m costs incurred while exploring new CFC or Zoom
site opportunities that we have chosen not to pursue. We have held
support costs broadly flat and mitigated the impact of wage
inflation through headcount rationalisations.
Fees
Fees comprise 1. the OSP fees paid to Technology Solutions for
the operation of the Ocado Smart Platform and 2. logistics
management fees and capital recharges paid to Ocado Logistics. Fees
of GBP85.6m (1H22: GBP62.1m) increased by GBP23.5m, driven by the
impact of new sites and additional modules opened in FY22.
Additions include the Bicester CFC, three Zooms (Leeds, Leyton and
Canning Town) and additional module capacity in Andover and
Purfleet.
EBITDA*
EBITDA* for the Retail business was a GBP2.5m loss (1H22:
GBP31.3m profit). The primary drivers for the GBP33.8m
period-on-period movement are the absence of the one-off accrual
release in 1H22 of the GBP15.6m costs of a management incentive
scheme, the increase in OSP fees for new capacity and the
unabsorbed fixed costs of excess capacity. Notwithstanding the
GBP2.5m EBITDA loss in the period, EBITDA is on an improving trend,
with each of the last three months delivering positive EBITDA.
Exceptional items
GBPm 1H23 1H22
---------------------------------------- ------ ------
UK network capacity review (38.7) -
Litigation costs (9.1) (11.1)
Organisational restructure (7.8) -
Ocado Group Finance transformation (3.5) (4.0)
Ocado Retail IT systems transformation (0.7) (3.2)
Changes in fair value of contingent
consideration (17.4) 5.1
Andover CFC - (0.1)
Erith CFC - 6.3
Total exceptional items (77.2) (7.0)
---------------------------------------- ------ ------
UK network capacity review
In April 2023, the Group announced its intention to cease
operations in its CFC in Hatfield. This decision was made as part
of a wider review of the total UK network capacity. As a result,
the Group has recorded provisions for restructuring costs of
GBP11.0m, onerous contracts of GBP4.1m and other costs of GBP3.2m,
as well as an impairment charge of GBP20.4m (RoU assets GBP13.3m;
PP&E GBP7.1m). These costs almost entirely relate to the
ceasing of operations at our Hatfield CFC, which is currently
planned for September 2023.
Litigation costs
Litigation costs during the year were exclusively those costs
incurred on the patent infringement litigation between the Group
and AutoStore Technology AS ("AutoStore"). The costs during the
period were GBP9.1m (1H22: GBP11.1m). Please note the Subsequent
Event in respect of AutoStore litigation costs highlighted at the
end of this report.
Ocado Group Finance transformation
Following the Group's implementation of various Software as a
Service ("SaaS") solutions in 2H21, primarily the Oracle Fusion
implementation, the Group is carrying out a programme that focuses
on optimising and enhancing the existing SaaS solutions and related
finance processes. This programme is expected to complete in 1H24
and will deliver cost efficiencies across the business. The
cumulative 'finance transformation' costs expensed to date amount
to GBP10.5m and include GBP3.5m in 1H23 (1H22: GBP4.0m).
Ocado Retail IT systems transformation
In FY21, Ocado Retail Limited ("Retail") initiated its IT
Roadmap programme, which focuses on delivering IT systems and
services that will enable Retail to meet its obligation to
transition away from Ocado Group IT services, tools and support.
The IT Roadmap programme which is expected to run until the end of
FY23, includes the development of both on-premises and SaaS
solutions. The IT Roadmap programme costs that meet assets
recognition criteria will be recognised as intangible assets, and
implementation costs that do not meet assets recognition will be
expensed. The cumulative costs expensed to date amount to GBP9.3m.
These costs have been classified as exceptional because they are
expected to be significant and result from a transformational
activity which is considered only incremental to the core
activities of the Group.
Change in fair value of contingent consideration
In FY19, the Group sold Marie Claire Beauty Limited ("Fabled")
to Next plc and 50% of Retail to Marks and Spencer Group plc
("M&S"). Part of the consideration for these transactions was
contingent on future events. The Group holds contingent
consideration at fair value through profit or loss and revalues it
at each reporting date. A loss on revaluation of GBP17.4m (1H22:
gain of GBP5.1m) is reported through exceptional items and is due
to a GBP17.0m reduction in the estimated contingent consideration
receivable from M&S. Refer to note 9 for further details.
Organisational restructure
During the period, the Group partially reorganised its head
office and support functions, resulting in redundancies of around
250 heads and related costs of GBP7.8m. This followed an initial
reorganisation in 2H22 which incurred costs of GBP3.0m, with net
cumulative costs to date of GBP10.8m. These costs have been
classified as exceptional 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.
Tax impact on exceptional items
The change in fair value of contingent consideration receivable
is not subject to tax. The remaining exceptional items are taxable
or tax deductible and give rise to a tax credit of GBP13.8m of
which GBPnil (1H22: GBP0.6m) has been recognised. The tax credit
has not been recognised as it relates to tax losses which are not
recognised for deferred tax purposes.
Other items below EBITDA*
Depreciation, amortisation and impairment
Total depreciation, amortisation and impairment costs were
GBP192.5m (1H22: GBP157.3m), an increase of GBP35.2m, or 22.4%
year-on-year. This includes 1. depreciation of property, plant and
equipment of GBP95.8m (1H22: GBP76.6m), 2. depreciation of
right-of-use assets of GBP35.5m (1H22: GBP33.9m), 3. amortisation
expense of GBP59.7m (1H22: GBP46.4m) and 4. impairment costs of
GBP1.5m (1H22: GBP0.4m).
The increase was primarily driven by the full-year depreciation
of seven sites that went live within the previous 12 months and the
annualisation of seven sites that went live during 1H22 (GBP16.5m;
including right-of-use leases). The other key driver of the
movement was the amortisation of technology projects going live in
the last 12 months (GBP12.4m). The balance relates to impairments
and module draw-down in existing CFC sites.
Net finance costs
Net finance costs of GBP36.4m increased by GBP3.0m (1H22:
GBP33.4m). Net finance costs include Finance costs of GBP56.0m
(1H22: GBP43.5m) and Finance income of GBP19.6m (1H22:
GBP10.1m).
Finance costs of GBP56.0m (1H22: GBP43.5m) mainly comprise:
-- Interest expense on borrowings of GBP33.3m (1H22: GBP29.5m),
which increased by GBP3.8m primarily due to 1. incremental fees on
the RCF (agreed in June 2022) and 2. interest expense on the
shareholder loan from M&S to Ocado Retail.
-- Interest expense on lease liabilities of GBP13.1m (1H22: GBP13.5m).
-- A revaluation of financial assets of GBP4.0m (1H22: GBPnil)
as the Group's warrants held in Karakuri and loan notes to Karakuri
have been written off as Karakuri has entered into
administration
-- Net foreign exchange losses of GBP5.0m (1H22: GBP8.2m gain),
largely in respect of USD balances held.
Total borrowings at the end of the period were GBP1,393.2m
(1H22: GBP1,315.7m). Total lease liabilities at the end of the
period were GBP516.0m (1H22: GBP525.8m).
Share of results from joint ventures and associates
The Group has accounted for a GBP0.9m loss (1H22: GBP0.5m loss)
for the share of results from joint ventures and associates.
The group has two joint ventures (Ocado Retail and the MHE JVCo)
and one associate (Karakuri). 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 MHE JVCo loss
after tax in the period amounted to GBP0.1m (1H22: GBPnil).
-- Karakuri Limited is an associate and the Group's 26.3%
interest in Karakuri contributed a loss of GBP0.8m in the period
(1H22: GBP0.5m loss). Karakuri appointed administrators in June
2023 and the GBP0.8m share of losses in the period resulted in the
remaining investment of GBP0.8m being written down to GBPnil value.
The GBP4.0m revaluation of equity investments (above) is in respect
of other assets related to Karakuri but not recorded directly in
investments in associates.
Statutory loss before tax
Statutory loss before tax of GBP289.5m (1H22: loss of GBP211.3m)
reflects an EBITDA* profit of GBP16.6m (1H22: loss of GBP13.6m),
depreciation, amortisation and impairment of GBP192.5m (1H22:
GBP157.3m), net finance costs of GBP36.4m (1H22: GBP33.4m) and net
exceptional costs of GBP77.2m (1H22: GBP7.0m costs).
Taxation
The Group reported a total tax credit in the Income Statement
for the period of GBP14.1m (1H22: GBP0.8m). This amount includes a
UK corporation tax charge of GBP0.4m (1H22: credit of GBP3.1m) in
respect of overseas entities. A deferred tax credit of GBP14.5m
(1H22: charge of GBP3.9m) was recognised in the period).
Deferred tax assets decreased due to the derecognition of losses
mainly in Ocado Retail. Deferred tax liabilities decreased due to
the removal of deferred tax on consolidation following an
intercompany transfer of intangible assets from Haddington and
Kindred to Ocado Innovation Ltd.
At the end of the period, the Group had GBP1,165.6m (1H22:
GBP904.7m) of unutilised carried-forward tax losses.
Dividend
During the period, the Group did not declare a dividend (1H22:
GBPnil).
Loss per share
Basic and diluted loss per share were (28.65)p (1H22:
(28.67)p).
Capital expenditure
Capital expenditure was GBP283.6m in the period (1H22:
GBP366.8m), a reduction of GBP83.2m, primarily driven by a decrease
in the number of CFCs and new modules under construction. Capital
expenditure primarily comprises new site construction costs and
technology development costs to enhance OSP.
An analysis of capital expenditure by key categories is
presented below:
GBPm 1H23 1H22 Change
-------------------------- ----- ------ -------
CFC sites 142.6 195.7 (27.1)%
Technology 102.6 86.3 18.9%
Group support and other 21.5 29.1 (26.1)%
Technology Solutions 266.7 311.1 (14.3)%
Logistics 6.6 9.7 (32.0)%
Retail 12.7 61.8 (79.4)%
Eliminations (2.4) (15.8) (84.8)%
Group capital expenditure 283.6 366.8 (22.7)%
-------------------------- ----- ------ -------
Technology Solutions
CFC sites capital expenditure relates to the construction of new
CFCs and Zoom sites and was GBP142.6m in the period, a decrease of
GBP53.1m (1H22: GBP195.7m). The investment predominantly relates to
the launch of the two CFCs which went live in 1H23 together with
five further sites under construction. The reduction in site
capital expenditure is driven by the number of sites in
construction reducing from 12 at the end of 1H22 to 5 at the end of
1H23.
Technology development spend of GBP102.6m (1H22: GBP86.3m) was
driven by the continued investment in OSP with a focus on
delivering the Re:Imagined product innovation announced in January
2022. Re:Imagined includes seven key innovations: the 600 series
bot, the 600 grid and optimised site design, Automated Frameload,
On-Grid Robotic Pick, Ocado Orbit, Ocado Swift Router and Ocado
Flex.
Technology headcount grew slightly in the period from around
2,600 heads to around 2,700 heads. We continue to focus on
enhancing our customer proposition to deliver world-class
end-to-end grocery ecommerce and fulfilment solutions. OSP includes
ecommerce, order management, forecasting, routing and delivery,
automated storage and retrieval systems (ASRS), dexterous robotics
and other material handling elements.
Group support and other capital expenditure comprise projects
relating to support costs systems and infrastructure and includes
capital expenditure in our venture businesses. Capital expenditure
of GBP21.5m is GBP7.6m lower than last year (1H22: GBP29.1m) as we
have now completed several key investments in support function
systems and infrastructure. The single largest item within the
total spend of GBP21.5m is the GBP11.9m incurred in respect of
Jones Food's second vertical farm, based in Lydney, Gloucestershire
and that went live in June 2023 (Jones Food for 1H22: GBP4.6m).
Jones Food results are fully consolidated within the results of the
Group.
Logistics
Capital expenditure of GBP6.6m (1H22: GBP9.7m) largely relates
to technology system development of GBP6.6m (1H22: GBP8.9m).
Retail
Capital expenditure of GBP12.7m (1H22: GBP61.8m) largely
comprises CFC construction costs recharged from Ocado Group, along
with design and set-up fees for new sites and IT project costs.
Design and set-up fees of GBP2.4m (1H22: GBP15.8m) charged in the
period to Ocado Retail from Technology Solutions are eliminated on
consolidation of the Group and principally relate to Zoom sites.
This has reduced year-on-year as no new sites have opened or been
committed to in the period.
Capital expenditure in Retail decreased by GBP49.1m due to a
reduction in new CFC investment following the opening in FY22 of
the Bicester CFC and the Zoom sites in Leeds and Leyton. During the
period CFC investment was primarily related to building the new
Luton CFC which is expected to go live in the second half of
FY23.
Eliminations
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).
Cash flow
GBPm 1H23 1H22
----------------------------------------------------- ------- -------
EBITDA* 16.6 (13.6)
-----------------------------------------------------
Movement in contract liabilities 23.7 43.1
Other working capital movements (9.5) 22.9
Finance costs paid (28.1) (27.3)
Taxation received/(paid) 1.4 (0.5)
Insurance proceeds relating to business interruption - 10.0
Exceptional items (21.1) (18.3)
Other non-cash items 0.6 (10.6)
Operating cash flow (16.4) 5.7
Capital expenditure (288.8) (387.8)
Insurance proceeds relating to rebuilding
Andover CFC - 5.0
Net proceeds from interest-bearing loans
and borrowings 4.3 -
Repayment of lease liabilities (32.1) (23.1)
Proceeds from share issues 1.3 1.8
Other investing and financing activities 18.5 0.7
-----------------------------------------------------
Movement in cash and cash equivalents (excl.
FX changes) (313.2) (397.7)
Effect of changes in FX rates (6.3) 11.8
Movement in cash and cash equivalents (incl.
FX changes) (319.5) (385.9)
----------------------------------------------------- ------- -------
The movement in cash and cash equivalents (including FX changes)
was a reduction of GBP319.5m (1H22: reduction of GBP385.9m). There
was an improvement in cash outflow of GBP66.4m year-on-year.
EBITDA* (as explained above) improved by GBP30.2m to GBP16.6m
(1H22: loss of GBP13.6m).
Operating cash flow reduced by GBP22.1m to an outflow of
GBP16.4m (1H22: inflow of GBP5.7m). The key drivers of this decline
are explained below:
-- Contract liabilities: cash inflow of GBP23.7m (1H22: GBP43.1m
inflow) relating to upfront design and access fees paid by
partners. Design fees are typically paid in instalments during the
CFC construction process. The cash inflow is lower than the prior
year primarily due to the timing of design fee instalment payments
and fewer CFCs going live in the period.
-- Working capital: cash outflow of GBP9.5m (1H22: GBP22.9m
inflow) primarily driven by lower trade and other payables of
GBP(36.4)m mainly due to the timing of payroll run at the
period-end (in the prior period last year the monthly payroll run
was after the period-end and the payment was accrued). This was
partially offset by a reduction in inventories of GBP16.0m
reflecting the reduction of Ocado Retail stock after the busy
Christmas period, in combination with the seasonal decline in stock
levels ahead of the summer holiday period. The reduction also
reflects an improvement in Ocado Retail stock forecasting and
active management of stock levels. Trade and other receivables have
been reduced by GBP10.9m.
-- Finance costs: cash outflow of GBP28.1m (1H22: GBP27.3m
outflow) comprise GBP15.0m interest and charges on borrowings
(1H22: GBP13.8m) and GBP13.1m for the interest element of assets
held under finance leases (1H22: GBP13.5m).
-- Taxation: cash inflow of GBP1.4m (1H22: outflow of GBP0.5m)
reflects a tax refund received by Ocado Retail, partially offset by
taxation payments by foreign subsidiaries. No UK tax was paid in
the period.
-- Exceptional items: cash outflow of GBP21.1m (1H22: outflow of
GBP18.3m) relates to cash-settled exceptional items and comprise
the following:
o GBP9.1m (1H22: GBP11.1m) in relation to litigation costs;
o GBP7.8m (1H22: GBPnil) organisational restructuring costs;
o GBP3.5m (1H22: GBP4.0m) Finance transformation and SaaS
implementation costs;
o GBP0.7m (1H22: GBP3.2m) Ocado Retail IT systems transformation
costs.
-- Other non-cash items: inflow of GBP0.6m (1H22: outflow of
GBP10.6m) relates to adjustments for the following non-cash
elements of EBITDA:
o GBP(13.1)m (1H22: GBP(12.7)m revenue recognised from long-term
contracts;
o GBP16.1m (1H22: GBP21.1m) of share-based payments;
o GBP0.4m (1H22: GBPnil) non-cash write off of property, plant
and equipment;
o GBP(5.0)m (1H22: GBPnil) gain on the disposal of property,
plant and equipment. The proceeds from the disposal are included in
other investing and financing activities;
o GBP0.9m (1H22: GBP0.5m) share of losses from joint ventures
and associates;
o GBP1.2m (1H22: GBP(19.6)m) movement in provisions. The
movement in the prior year reflects the release of the Ocado Retail
long-term management incentive plan.
The movements above result in an operating cash outflow of
GBP16.4m (1H22: cash inflow GBP5.7m). The following movements
explain the overall movement in cash and cash equivalents outflow
of GBP319.5m (1H22: outflow of GBP385.9m):
-- Capital expenditure of GBP288.8m (1H22: GBP387.8m) primarily
relates to the continued investment in OSP and in new CFCs in the
UK and internationally. Capital expenditure also includes
investment in group support activities. The year-on-year reduction
of GBP99.0m is primarily driven by the reduced number of sites in
construction; currently, five sites are under construction (1H22:
12 sites under construction).
-- Net proceeds from interest-bearing loans and borrowings of
GBP4.3m (1H22: GBPnil) primarily reflect 1. GBP10.0m shareholder
loan from M&S to Ocado Retail, 2. GBP(10.0)m RCF repayment by
Ocado Retail, and 3. GBP4.3m loan drawn down by Jones Food.
-- Lease liability repayments of GBP32.1m (1H22: GBP23.1m), an
increase of GBP9.0m year-on-year driven by an increase in motor
vehicle leases, new site leases and two new Ocado Zoom sites in
Leeds and Leyton. The increase also includes a number of rent
reviews.
-- Net proceeds from share issue of GBP1.3m (1H22: GBP1.8m) are
in respect of employee share schemes.
-- Other investing and financing activities GBP18.5m (1H22:
GBP0.7m) include GBP18.2m (1H22: GBP0.7m) of interest received on
treasury deposits, GBP9.4m (1H22: GBPnil) proceeds from the
disposal of assets held for sale and GBP0.9m (1H22: GBPnil) cash
contingent consideration received in respect of the sale of Fabled
to Next plc. This was offset by investments in Oxbotica of GBP10.0m
(1H22: GBPnil).
-- Effect of changes in FX rates of GBP(6.3)m (1H22: GBP11.8m)
relates to the FX loss (reported under net finance costs) and
translation FX on cash balances (predominantly USD cash balances
held to fund the expansion of our Technology Solutions business in
the USA).
Underlying cash outflow* is GBP287.7m (1H22: GBP396.2)m and
improved by GBP108.5m year-on-year. Underlying cash flow is the
movement in cash and cash equivalents excluding the impact of
exceptional items, costs of financing, investment in unlisted
equity investments and FX movements.
GBPm 1H23 1H22
----------------------------------------------------- ------- -------
Movement in cash and cash equivalents (319.5) (385.9)
Exceptional items 21.1 18.3
Insurance proceeds relating to business interruption - (10.0)
Insurance proceeds relating to rebuilding
Andover CFC - (5.0)
Financing (5.6) (1.8)
Investment in unlisted equity investments 10.0 -
Effect of changes in FX rates 6.3 (11.8)
Underlying cash outflow* (287.7) (396.2)
----------------------------------------------------- ------- -------
Net Assets
GBPm 1H23 1H22 FY22
------------------------------------------- --------- --------- ---------
Assets
Goodwill 161.8 152.6 164.7
Other intangible assets 413.6 385.4 377.2
Property, plant and equipment 1,832.9 1,495.8 1,777.8
Right-of-use assets 460.8 481.7 493.9
Investment in joint venture and associates 14.6 26.0 15.6
Trade and other receivables 308.9 324.7 329.3
Cash and cash equivalents 1,008.5 1,082.7 1,328.0
Other financial assets 194.8 218.2 185.4
Inventories 85.7 78.9 106.8
Other assets 7.2 29.6 34.5
Total assets 4,488.8 4,275.6 4,813.2
Liabilities
Contract liabilities (428.2) (390.3) (422.9)
Trade and other payables (456.7) (412.8) (508.2)
Borrowings (1,393.2) (1,315.7) (1,372.8)
Lease liabilities (516.0) (525.8) (532.3)
Other Liabilities (48.2) (62.4) (42.7)
Total liabilities (2,842.3) (2,707.0) (2,878.9)
Net assets 1,646.5 1,568.6 1,934.3
------------------------------------------- --------- --------- ---------
Assets
Goodwill of GBP161.8m (FY22: GBP164.7m) represents the future
benefit to Ocado Group 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 GBP2.9m in the year due to the
foreign exchange impact of the revaluation of the goodwill
(predominantly USD-denominated).
Other intangible assets of GBP413.6m increased by GBP36.4m
(FY22: GBP377.2m) primarily due to capitalised internal development
costs relating to the build-out of our technology capabilities for
our partners, across our CFC, Zoom and ISF solutions, along with
the capitalisation of software costs.
Property, plant and equipment net book value increased by
GBP55.1m to GBP1,832.9m (FY22: GBP1,777.8m) and comprise fixtures,
fittings, plant and machinery of GBP1,636.0m (FY22: GBP1,577.2m),
land and buildings of GBP193.5m (FY22: GBP197.5m) and motor
vehicles of GBP3.4m (FY22: GBP3.1m).
-- Fixtures, fittings, plant and machinery predominantly
comprise the material handling and other operating equipment within
our sites.
o This increased by GBP58.8m to GBP1,636.0m driven by GBP169.6m
of additions (FY22: GBP489.9m) primarily relating to the go-live of
two sites for our client partners including AEON and Sobeys.
o Internal development costs of GBP17.2m were capitalised
related to OSP technology development and deployment.
o These increases were partly offset by depreciation of
GBP94.5m, net foreign exchange movements of GBP26.9m, impairment of
GBP8.5m and other smaller movements.
-- Land and buildings comprise CFC and Zoom sites in the UK,
spokes and offices. The net book value decreased by GBP4.0m to
GBP193.5m due to the reclassification of certain assets to
fixtures, fittings, plant and machinery.
-- Motor vehicles primarily comprise the vehicles owned by Ocado
Group in relation to CFC and head office operations.
Right-of-use assets of GBP460.8m (FY22: GBP493.9m) represents
the asset value of assets held under long-term leases, comprising
land and buildings of GBP388.0m (FY22: GBP415.0m), motor vehicles
of GBP61.0m (FY22: GBP63.1m) and fixtures, fittings, plant and
machinery of GBP11.8m (FY22: GBP15.8m). During the year the Group
entered into new leases for assets of GBP17.5m, which comprise land
and buildings of GBP5.8m, motor vehicles of GBP9.1m and fixtures,
fittings, plant and machinery of GBP2.6m. The depreciation charge
for the period was GBP(35.6)m and an impairment charge of
GBP(13.3)m was recognised in relation to the closure of the
Hatfield CFC.
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). During the period, the Group's investment in Karakuri was
reduced from GBP1.8m to GBPnil with the carrying amount at the end
of the period of GBP14.6m relating solely to the investment in MHE
JVCo.
Trade and other receivables reduced by GBP20.4m to GBP308.9m
(FY22: GBP329.3m). The balance comprises the following:
-- Trade receivables (net of expected credit loss allowance) of
GBP83.2m (FY22: GBP124.2m), which predominantly comprise balances
due from Solutions customers and commercial and media income in
Retail. The decrease of GBP41.0m is mainly driven by the timing of
media and promotional invoices raised that is offset by the
increase in accrued income (as detailed below) and cash receipts
from our partners.
-- Other receivables of GBP65.7m (FY22: GBP82.7m). Other
receivables largely comprise tax refunds due and receivables
expected from contract manufacturers for components sourced on
their behalf. The decrease of GBP17.0m is mainly driven by
corporation tax and VAT refunds and tax credit receipts in respect
of research and development.
-- Prepayments of GBP85.7m (FY22: GBP76.5m). Prepayments
typically include CFC components, software maintenance payments and
vehicle maintenance payments. The GBP9.2m increase is mainly driven
by prepaid rates, utilities, insurance premiums and software
maintenance. This is offset by a reduction in prepaid CFC
components.
-- Accrued income of GBP74.3m (FY22: GBP45.9m) primarily relates
to accrued income for media and promotions, solutions capacity
fees, and volume-related rebates. The increase is mainly driven by
accrued media and promotional income and accrued fee income from
our partners.
Cash and cash equivalents were GBP1,008.5m (FY22: GBP1,328.0m)
at the end of the period. Gross debt (including lease liabilities)
at the period end was GBP1,909.2m (FY22: GBP1,905.1m), with net
debt* at the period-end of GBP(900.7)m (FY22: GBP(577.1)m). In May,
the Group renegotiated the covenant terms on the RCF with its
banking group in order to provide additional flexibility around
access to the facility. Current borrowing facilities mature in FY26
and FY27 with repayment due in December 2025 (GBP600m convertible
bond), October 2026 (GBP500m Senior Unsecured Notes) and January
2027 (GBP350m convertible bond). These facilities are expected to
be refinanced on a timely basis to maintain appropriate
liquidity.
Other financial assets of GBP194.8m (FY22: GBP185.4m) comprise
mainly the contingent consideration receivable from M&S on the
50% sale of Ocado Retail and unlisted equity investments held by
the Group in Oxa Autonomy Ltd ("Oxa Autonomy"), previously Oxbotica
Limited, Wayve Technologies and 80 Acres.
The increase of GBP9.4m is primarily due to the increase in the
Group's investment in Oxa Autonomy. In December 2022, Oxa Autonomy
successfully completed its Series C Fundraising, which resulted in
the Group's warrants being exercised to acquire 21,934 series-B
shares for GBP10.0m. Following the exercise of the warrants, the
Group now holds a 12.2% interest in Oxa Autonomy. At 1H23, the
unlisted equity investment in Oxa Autonomy totals GBP66.2m (FY22:
GBP36.8m; 1H22: GBP10.3m). The fair value of the warrants prior to
the transaction was GBP19.4m, which together with the exercise cost
of GBP10.0m comprises the GBP29.4m increase in the Group's equity
investment in Oxa Autonomy.
We have re-estimated the fair value of the contingent
consideration due from M&S at the balance sheet date based on
the probability weighting of a series of scenarios that consider
the current market uncertainty in the grocery sector and Retail's
current trading performance. As a result of this assessment, we
have reduced the value of the contingent consideration by GBP17.0m
to GBP78.0m (FY22: GBP95.0m).
Inventories of GBP85.7m (FY22: GBP106.8m) reduced by GBP21.1m
and comprised mainly goods held for resale (largely Retail grocery
inventory) which decreased by GBP21.3m to GBP67.9m (FY22:
GBP89.2m).
Other assets of GBP7.2m (FY22: GBP34.5m) relate primarily to
share warrants that have a carrying value of GBP5.8m (FY22:
GBP27.4m), and which have decreased by GBP21.6m mainly due to the
exercise of share warrants for Oxbotica of GBP19.4m and impairment
of Karakuri warrants of GBP2.1m.
Liabilities
Contract liabilities of GBP428.2m (FY22: GBP422.9m) primarily
relate to the consideration received in advance from Technology
Solutions customers. Revenue is then recognised when the
performance obligation is satisfied, typically when a site goes
live. Contract liabilities reflect amounts invoiced to partners for
their contracted contribution towards the initial MHE investment
made in a site, and increased by GBP18.8m during the year (1H22:
GBP24.5m). This was partly offset by GBP13.5m (1H22: GBP12.7m) in
respect of prior receipts recognised as revenue in the year. The
current contract liabilities balance of GBP32.0m (FY22: GBP29.1m)
represents amounts due to be recognised as revenue within 12 months
of the year-end.
Trade and other payables of GBP456.7m (FY22: GBP508.2m) reduced
by GBP51.5m, mainly due to the timing of the monthly payroll run
and reduced accruals for capital expenditure.
Borrowings of GBP1,393.2m (FY22: GBP1,372.8m) 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
GBP20.4m due to 1. GBP16.4m accrued interest on bonds held at
amortised cost, 2. GBP10.0m shareholder loan provided by M&S
(the non-controlling interest) to Ocado Retail, 3. GBP4.3m loan
drawn by Jones Food, and 4. GBP(10)m repayment of RCF by
Retail.
Lease liabilities of GBP516.0m (FY22: GBP532.3m) comprise land
and buildings of GBP439.2m (FY22: GBP441.4m), motor vehicles of
GBP63.2m (FY22: GBP65.5m) and fixtures, fittings, plant and
machinery of GBP13.6m (FY22: GBP25.4m). New lease liabilities of
GBP18.3m were entered into during the year (1H22: GBP24.4m) and
largely comprised motor vehicles and land and buildings. Lease
liabilities decreased by payments made of GBP45.2m (1H22: GBP36.9m)
and GBP(2.5)m of other movements, partly offset by GBP13.1m of
accrued interest (1H22: GBP13.5m).
Lease liabilities of GBP516.0m (FY22: GBP532.3m) include GBP9.0m
(FY22: GBP17.5m) payable to MHE JVCo, a company in which the Group
holds a 50% interest.
Other liabilities of GBP48.2m (FY22: GBP42.7m) comprise:
-- Provisions of GBP46.4m (FY22: GBP26.4m). The GBP20.0m
increase in provisions mainly reflects exceptional costs in
relation to the closure of the Hatfield CFC
-- Derivative financial liabilities of GBP1.8m (FY22: GBP1.6m).
-- Deferred tax liabilities of GBPnil (FY22: GBP14.7m). The
GBP14.7m decrease is due to the removal of deferred tax on
consolidation following an intercompany transfer of intangible
assets from Haddington and Kindred to Ocado Innovation Ltd
Subsequent events
Acquisition of 6 Rivers Systems
On 4 May 2023 the Group announced the agreement with Shopify
Inc. to acquire 6 River Systems LLC ("6RS"), a collaborative
Autonomous Mobile Robot ("AMR") fulfilment solutions provider to
the logistics and non-grocery retail sectors, based in
Massachusetts, USA. 6RS was founded in 2015 and has developed an
Autonomous Mobile Robot product called 'Chuck' that provides
automated assistance to pickers in a warehouse, working
collaboratively with human operators. Chuck robots are currently
deployed in over 100 warehouses worldwide, with more than 70
customers. The acquisition was completed on 30 June 2023 for a cash
consideration of GBP10.0m (US$12.7m). 6RS will become part of Ocado
Intelligent Automation and its results reported within Technology
Solutions.
AutoStore litigation cost recovery
Following Ocado's victory in the UK High Court as part of the
ongoing litigation with AutoStore, on 29 June 2023 the UK High
Court issued a formal order stating that Ocado infringes none of
the AutoStore patents and that AutoStore bot patents are invalid
and revoked. The UK High Court also ordered that AutoStore pay
Ocado GBP6.7m in costs in relation to the UK High Court trial. As
is usual in patent cases, AutoStore has been given the option to
appeal.
Condensed Consolidated Financial Statements
Condensed Consolidated Income Statement
for the 26 weeks ended 28 May 2023
26 weeks ended 28 May 26 weeks ended 29 May
2023 (unaudited) 2022 (unaudited) - (restated(1)
)
Exceptional
Before items Before Exceptional
exceptional (Note exceptional items
items 5) Total items (Note 5) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 4 1,370.7 - 1,370.7 1,262.4 - 1,262.4
Insurance proceeds - - - - 6.3 6.3
Operating costs (1,545.7) (77.2) (1,622.9) (1,432.8) (13.3) (1,446.1)
-------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Operating loss before
results from joint
ventures and associate (175.0) (77.2) (252.2) (170.4) (7.0) (177.4)
Share of results from
joint ventures and
associate (0.9) - (0.9) (0.5) - (0.5)
-------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Operating loss (175.9) (77.2) (253.1) (170.9) (7.0) (177.9)
Finance income 7 19.6 - 19.6 10.1 - 10.1
Finance costs 7 (56.0) - (56.0) (43.5) - (43.5)
-------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Loss before tax (212.3) (77.2) (289.5) (204.3) (7.0) (211.3)
Taxation 14.1 - 14.1 (1.4) 0.6 (0.8)
-------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Loss for the period (198.2) (77.2) (275.4) (205.7) (6.4) (212.1)
-------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Attributable to:
Owners of Ocado Group
plc (233.7) (212.5)
Non-controlling interests (41.7) 0.4
-------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
(212.1
(275.4) )
-------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Loss per share Pence Pence
------------------ ------- -------
Basic and diluted
loss per share 6(28.65) (28.67)
------------------ ------- -------
1. During the period, the Group changed the presentation of its
expenses. Consequently, the prior year comparatives have been
restated. See Note 3 for the details of the restatement.
Earnings before interest, taxation, depreciation, amortisation,
impairment and exceptional items (EBITDA(*) )
26 weeks 26 weeks
ended ended
28 May 29 May
2023 2022
GBPm GBPm
Note (unaudited) (unaudited)
----------------------------- ---- ----------- -----------
Operating loss (253.1) (177.9)
Adjustments for:
Exceptional items* 5 77.2 7.0
Amortisation of intangible
assets 59.7 46.4
Impairment of intangible
assets 0.1 -
Depreciation of property,
plant and equipment 95.8 76.6
Impairment of property,
plant and equipment 1.4 0.4
Depreciation of right-of-use
assets 35.5 33.9
EBITDA(*) 16.6 (13.6)
----------------------------- ---- ----------- -----------
* See Alternative performance measures in Note 16 for further
information.
Condensed Consolidated Statement of Comprehensive Income
for the 26 weeks ended 28 May 2023
26 weeks 26 weeks
ended ended
28 May 2023 29 May 2022
GBPm GBPm
(unaudited) (unaudited)
----------------------------------------------------- ------------ ------------
Loss for the period (275.4) (212.1)
Other comprehensive income:
Items that may be reclassified to profit or loss
in subsequent years:
(Loss)/gain arising on cash flow hedges (1.0) 4.6
Foreign exchange (loss)/gain on translation of
foreign subsidiaries (28.8) 43.6
------------------------------------------------------ ------------ ------------
Net other comprehensive (expense)/income that
may be reclassified to profit or loss in subsequent
periods (29.8) 48.2
------------------------------------------------------ ------------ ------------
Items that will not be reclassified to profit
or loss in subsequent periods:
Gains on equity instruments designated as fair
value through other comprehensive income - 0.2
Net other comprehensive income that will not
be reclassified to profit and loss in subsequent
periods - 0.2
Other comprehensive (expense)/income for the
period, net of tax (29.8) 48.4
------------------------------------------------------ ------------ ------------
Total comprehensive expense for the period (305.2) (163.7)
------------------------------------------------------ ------------ ------------
Attributable to:
Owners of Ocado Group plc (263.5) (164.1)
Non-controlling interests (41.7) 0.4
------------------------------------------------------ ------------ ------------
(305.2) (163.7)
----------------------------------------------------- ------------ ------------
Condensed Consolidated Balance Sheet
as at 28 May 2023
27 November
28 May 2023 29 May 2022 2022
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
-------------------------------------------- ----- ----------- ----------- -----------
Non-current assets
Goodwill 161.8 152.6 164.7
Other intangible assets 413.6 385.4 377.2
Property, plant and equipment 1,832.9 1,495.8 1,777.8
Right-of-use assets 460.8 481.7 493.9
Deferred tax assets 1.4 8.9 1.9
Costs to obtain contracts - 0.7 -
Other financial assets 9 193.3 217.3 181.6
Investment in joint ventures and associates 14.6 26.0 15.6
Derivative financial assets 10 5.8 10.5 27.4
3,084.2 2,778.9 3,040.1
-------------------------------------------- ----- ----------- ----------- -----------
Current assets
Inventories 85.7 78.9 106.8
Contract assets - 0.1 -
Costs to obtain contracts - 0.1 -
Trade and other receivables 308.9 324.7 329.3
Derivative financial assets 10 - 4.9 0.8
Other financial assets 9 1.5 0.9 3.8
Cash and cash equivalents 8 1,008.5 1,082.7 1,328.0
-------------------------------------------- ----- ----------- ----------- -----------
1,404.6 1,492.3 1,768.7
-------------------------------------------- ----- ----------- ----------- -----------
Asset held for sale - 4.4 4.4
-------------------------------------------- ----- ----------- ----------- -----------
1,404.6 1,496.7 1,773.1
-------------------------------------------- ----- ----------- ----------- -----------
Total assets 4,488.8 4,275.6 4,813.2
-------------------------------------------- ----- ----------- ----------- -----------
Current liabilities
Trade and other payables (456.3) (412.3) (506.3)
Borrowings 8 (0.4) - (10.2)
Contract liabilities (32.0) (25.3) (29.1)
Lease liabilities 8 (59.4) (61.3) (58.6)
Provisions 12 (20.0) (1.1) (1.0)
Derivative financial liabilities 10 (1.8) - (1.6)
-------------------------------------------- ----- ----------- ----------- -----------
(569.9) (500.0) (606.8)
-------------------------------------------- ----- ----------- ----------- -----------
Net current assets 834.7 996.7 1,166.3
-------------------------------------------- ----- ----------- ----------- -----------
Non-current liabilities
Contract liabilities (396.2) (365.0) (393.8)
Borrowings 8 (1,392.8) (1,315.7) (1,362.6)
Lease liabilities 8 (456.6) (464.5) (473.7)
Provisions 12 (26.4) (29.8) (25.4)
Trade and other payables (0.4) (0.5) (1.9)
Deferred tax liabilities - (31.5) (14.7)
-------------------------------------------- ----- ----------- ----------- -----------
(2,272.4) (2,207.0) (2,272.1)
-------------------------------------------- ----- ----------- ----------- -----------
Net assets 1,646.5 1,568.6 1,934.3
-------------------------------------------- ----- ----------- ----------- -----------
Equity
Share capital 16.5 15.0 16.5
Share premium 1,940.6 1,373.8 1,939.3
Treasury shares reserve (112.9) (113.0) (112.9)
Other reserves 134.2 118.3 164.0
Retained earnings (385.2) 51.9 (169.0)
-------------------------------------------- ----- ----------- ----------- -----------
Equity attributable to owners of Ocado
Group plc 1,593.2 1,446.0 1,837.9
Non-controlling interests 53.3 122.6 96.4
-------------------------------------------- ----- ----------- ----------- -----------
Total equity 1,646.5 1,568.6 1,934.3
-------------------------------------------- ----- ----------- ----------- -----------
Condensed Consolidated Statement of Changes in Equity
for the 26 weeks ended 28 May 2023
Attributable to owners of Ocado
Group plc
Treasury Non-
Share Share shares Other Retained controlling Total
capital premium reserve reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
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 29 May 2023
(unaudited) 16.5 1,940.6 (112.9) 134.2 (385.2) 1,593.2 53.3 1,646.5
---------------------------------- -------- -------- -------- --------- --------- ------- ------------ -------
Attributable to owners of Ocado
Group plc
Treasury Non-
Share Share shares Other Retained controlling Total
capital premium reserve reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 28 November
2021 (audited) 15.0 1,372.0 (113.0) 69.9 244.3 1,588.2 121.2 1,709.4
(Loss)/profit for the period - - - - (212.5) (212.5) 0.4 (212.1)
Other comprehensive income - - - 48.4 - 48.4 - 48.4
Total comprehensive
income/(expense)
for the period ended 29
May 2022 (unaudited) - - - 48.4 (212.5) (164.1) 0.4 (163.7)
---------------------------------- -------- -------- -------- --------- --------- ------- ------------ -------
Transactions with owners:
- Issue of ordinary shares - 1.2 - - - 1.2 - 1.2
- Allotted in respect of
share option schemes - 0.6 - - - 0.6 - 0.6
- Share-based payments
charge (net of tax) - - - - 21.1 21.1 - 21.1
- Reduction in investment
in Jones Food Company Limited(2) - - - - (1.0) (1.0) 1.0 -
---------------------------------- -------- -------- -------- --------- --------- ------- ------------ -------
Total transactions with
owners - 1.8 - - 20.1 21.9 1.0 22.9
---------------------------------- -------- -------- -------- --------- --------- ------- ------------ -------
Balance at 29 May 2022
(unaudited) 15.0 1,373.8 (113.0) 118.3 51.9 1,446.0 122.6 1,568.6
---------------------------------- -------- -------- -------- --------- --------- ------- ------------ -------
1. In April 2023, the Group exercised warrants in Jones Food
Company Limited ("Jones Food Company") to acquire 2.3 million
shares for GBP3.7m and therefore, the Group's shareholdings in
Jones Food Company is 54.6%. The Group retains control of Jones
Food Company.
2. In January 2022, Jones Food Company issued new shares to
three individuals, which resulted in the Group's shareholdings in
Jones Food Company decreasing to 48.1%. The Group retained control
of Jones Food Company following this transaction.
Condensed Consolidated Statement of Cash Flows
for the 26 weeks ended 28 May 2023
26 weeks 26 weeks
ended ended
28 May 2023 29 May 2022
GBPm GBPm
Note (unaudited) (unaudited)
----------------------------------------------------- ---- ------------ ------------
Cash generated from operations 13 10.3 23.5
Corporation tax refund/(paid) 1.4 (0.5)
Interest paid (28.1) (27.3)
Insurance proceeds relating to destroyed inventory
and business interruption - 10.0
----------------------------------------------------- ---- ------------ ------------
Net cash flows (used in)/from operating activities (16.4) 5.7
----------------------------------------------------- ---- ------------ ------------
Cash flows from/(used in) investing activities
Insurance proceeds relating to rebuilding Andover
Customer Fulfilment Centre ("CFC") - 5.0
Purchase of property, plant and equipment (194.8) (305.8)
Purchase of intangible assets (94.0) (82.0)
Purchase of unlisted equity investment at FVTOCI (10.0) -
Proceeds from disposal of asset held for sale 9.4 -
Interest received 18.2 0.7
----------------------------------------------------- ---- ------------ ------------
Net cash flows used in investing activities (271.2) (382.1)
----------------------------------------------------- ---- ------------ ------------
Cash flows from/(used in) financing activities
Proceeds from issue of ordinary share capital 1.1 0.6
Proceeds from allotment of share options 0.2 1.2
Proceeds from interest-bearing loans and borrowings 14.3 -
Repayment of borrowings (10.0) -
Repayment of lease liabilities (32.1) (23.1)
Cash received in respect of contingent consideration
receivable 0.9 -
Net cash flows used in financing activities (25.6) (21.3)
----------------------------------------------------- ---- ------------ ------------
Net decrease in cash and cash equivalents (313.2) (397.7)
Cash and cash equivalents at the beginning of
the period 1,328.0 1,468.6
Effects of changes in foreign exchange rates (6.3) 11.8
----------------------------------------------------- ---- ------------ ------------
Cash and cash equivalents at the end of the
period 1,008.5 1,082.7
----------------------------------------------------- ---- ------------ ------------
Notes to the condensed consolidated interim financial
information
1. General information
Ocado Group plc (hereafter the "Company") is incorporated in the
United Kingdom under the Companies Act 2006 (company number:
07098618). The address of its registered office is Buildings One
& Two Trident Place, Mosquito Way, Hatfield, Hertfordshire,
AL10 9UL, United Kingdom. The condensed consolidated interim
financial information (hereafter "Financial Information") comprises
the results of the Company and its subsidiaries (hereafter the
"Group").
The financial period represents the 26 weeks ended 28 May 2023.
The prior financial periods represent the 26 weeks ended 29 May
2022 and the 52 weeks ended 27 November 2022.
2. Basis of preparation
This condensed consolidated interim financial report for the
half-year reporting period ended 28 May 2023 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 52 weeks ended 27 November 2022 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 GBP1,008.5m (27 November 2022: GBP1,382.0m) and net
current assets of GBP834.7m (27 November 2022: GBP1,166.3m), 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 that has been
considered in the assessment. In addition, the Directors considered
mitigating actions available in the event of a deterioration in
trading performance, notably the ability to reduce capital
expenditure in the short term or to make cost efficiencies where
appropriate.
Taking these factors together, the Directors believe that it is
appropriate to continue to adopt the going concern basis in
preparing the condensed consolidated financial statements.
3. Significant accounting policies
Accounting policies
The accounting policies applied by the Group in these interim
financial statements are consistent with those applied by the Group
in its consolidated financial statements for the 52 weeks ended 27
November 2022.
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 52 weeks ended 27
November 2022.
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
-------------------- ----------------------------------------- ---------------
Property, Plant and Equipment - proceeds
IAS 16 of intended use 1 January 2022
Onerous Contracts - costs of fulfilling
IAS 37 a contract 1 January 2022
IFRS 3 Reference to the Conceptual Framework 1 January 2022
Annual Improvements
to IFRS, 2018-2020 Amendments to IFRS 1, IFRS 9, IFRS 16
Cycle and IAS 41 1 January 2022
-------------------- ----------------------------------------- ---------------
Change in presentation of expenses in the condensed consolidated
income statement
Following the change of the Group's operating segments during
the period (see Note 4 for details), the Group has also adopted a
revised presentation of expenses in the Income Statement, replacing
Cost of Sales, Distribution Expenses and Administrative Expenses
with a single line item for Operating Costs, resulting in 1H22
previously reported amounts of GBP777.7m, GBP418.8m and GBP285.2m
respectively aggregating to a 1H22 restated amount of GBP1,481.7m.
The revised presentation provides an Income Statement that is more
relevant for the Group, reflecting the increased impact of the
Technology Solutions business where the nature of the associated
costs, does not have the typical cost of sales, distribution and
administrative expenses. In addition, the revised presentation also
provides more reliable reporting by removing any allocations
between distribution and administrative expenses.
In addition, the Group has reassessed the classification of
certain items which were previously reported as Other Income and
which are now being reported within operating costs. The prior
period comparatives have been restated on this basis, with GBP48.9m
now being recorded within the restated Operating expenses of
GBP1,446.1m.
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
EBITDA(*) .
To better reflect the structure of the Group's businesses,
commencing FY23, the Group changed the reporting structure of 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 2023 segmental disclosures have been prepared to reflect the
above structure, with the prior period comparatives restated on
this basis.
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 Inter-segment
Retail Logistics Solutions eliminations Total
Segmental revenue and EBITDA(*) GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------- ---------- ---------- ------------- -------
26 weeks ended 28 May
2023 (unaudited)
Segmental revenue(*) 1,178.5 335.2 198.2 (341.2) 1,370.7
Segmental EBITDA(*) (2.5) 14.6 5.9 (1.4) 16.6
-------------------------------- ------- ---------- ---------- ------------- -------
26 weeks ended 29 May
2022 (unaudited) - restated
Segmental revenue(*) 1,122.2 329.7 124.7 (314.2) 1,262.4
Segmental EBITDA(*) 31.3 14.5 (58.8) (0.6) (13.6)
-------------------------------- ------- ---------- ---------- ------------- -------
52 weeks ended 27 November
2022 (audited) - restated
Segmental revenue(*) 2,203.0 659.9 291.4 (640.5) 2,513.8
Segmental EBITDA(*) (4.0) 33.6 (101.5) (2.2) (74.1)
-------------------------------- ------- ---------- ---------- ------------- -------
* 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. Exceptional items*
Exceptional items*, as disclosed on the face of the Consolidated
Income Statement, are items that are considered to be significant
due to their size and/or nature, not in the normal course of
business or are consistent with items that were treated as
exceptional in prior periods or that may span multiple financial
periods. They have been classified separately in order to draw them
to the attention of the readers of the financial statements and
facilitate comparison with prior periods to assess trends in
financial performance more readily. The Group applies judgement in
identifying the items of income and expense that are recognised as
exceptional.
26 weeks 26 weeks
ended ended
28 May 2023 29 May 2022
GBPm GBPm
Ref. (unaudited) (unaudited)
------------------------------------------------- ----- ------------ ------------
Andover CFC
- Other exceptional costs - (0.1)
Erith CFC
- Insurance reimbursement - 6.3
Ocado Group Finance transformation A (3.5) (4.0)
Litigation costs B (9.1) (11.1)
Ocado Retail IT systems transformation C (0.7) (3.2)
Change in fair value of contingent consideration D (17.4) 5.1
Organisational restructure E (7.8) -
UK network capacity review F (38.7) -
------------------------------------------------- ----- ------------ ------------
Net exceptional costs (77.2) (7.0)
-------------------------------------------------------- ------------ ------------
* Exceptional items are alternative performance measures. See
Note 16 for further information.
A. 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 is expected to
complete in 1H24. The cumulative finance transformation costs
expensed to date amount to GBP10.5m and include GBP3.5m in 1H23
which largely relate to spend on external consultants and
contractors. These amounts have been disclosed as exceptional 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.
B. Litigation costs
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 GBP66.7m
and include GBP9.1m in 1H23.
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 conclude in FY23 includes the development of both
on-premises and SaaS solutions. IT Roadmap programme costs that
meet assets recognition criteria will be recognised as intangible
assets, and implementation costs that do not meet assets
recognition will be expensed. The cumulative costs expensed to date
amount to GBP9.3m. These costs have been classified as exceptional
because they are expected to be significant and result from a
transformational activity which is considered only incremental to
the core activities of the Group.
D. Change in fair value of contingent consideration
In 2019, the Group sold Marie Claire Beauty Limited ("Fabled")
to Next plc and 50% of ORL to Marks and Spencer Group plc
("M&S"). Part of the consideration for these transactions was
contingent on future events. The Group holds contingent
consideration at fair value through profit or loss, and revalues it
at each reporting date. As at 28 May 2023, the value of the
contingent consideration was GBP80.1m (FY22: GBP98.3m). A loss on
revaluation of GBP17.4m (1H22: GBP5.1m gain) is reported through
exceptional items, primarily driven by the reduction in the
contingent consideration receivable from M&S. Refer to Note 9
for details.
E. Organisational restructure
During the period, the Group undertook a partial reorganisation
of its head office and support functions resulting in redundancy
and related costs of GBP7.8m. This followed an initial
reorganisation in 2H22 which incurred costs of GBP3.0m, with net
cumulative costs to date of GBP10.8m. These costs have been
classified as exceptional 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. 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, the Group has recorded provisions for restructuring
costs of GBP11.0m, onerous contracts of GBP4.1m and other costs of
GBP3.2m, as well as an impairment charge of GBP20.4m (RoU assets
GBP13.3m; PP&E GBP7.1m).
These costs have been classified as exceptional on the basis
that they are expected to be material and relate primarily to a
site where no ongoing trading activities will take place.
Tax impact on exceptional items
The change in fair value of contingent consideration receivable
is not subject to tax. The remaining exceptional items are taxable
or tax deductible and give rise to a tax credit of GBP13.8m of
which GBPnil (1H22: GBP0.6m) 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. 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 26 weeks
ended ended
28 May 2023 29 May 2022
(unaudited) (unaudited)
Million Million
Weighted average number of shares at the end
of the period 815.8 741.1
---------------------------------------------- ------------ ------------
GBPm GBPm
----------------------------------------------- ------- -------
Loss for the period attributable to the owners
of Ocado Group plc (233.7) (212.5)
------------------------------------------------ ------- -------
Pence Pence
--------------------------------- ------- -------
Basic and diluted loss per share (28.65) (28.67)
---------------------------------- ------- -------
7. Finance income and costs
26 weeks 26 weeks
ended ended
28 May 2023 29 May 2022
GBPm GBPm
(unaudited) (unaudited)
--------------------------------------------------- ------------ ------------
Interest income on cash balances 19.1 0.7
Interest income on loans receivable 0.5 0.4
Gain on revaluation of financial assets designated
at FVTPL - 0.8
Foreign exchange gain - 8.2
---------------------------------------------------- ------------ ------------
Finance income 19.6 10.1
---------------------------------------------------- ------------ ------------
Borrowing costs:
- Interest on lease liabilities (13.1) (13.5)
- Interest and other charges on borrowings (33.3) (29.5)
Loss on revaluation of financial assets designated
at FVTPL (4.0) -
Foreign exchange loss (5.0) -
Unwinding of discounting of provisions (0.6) (0.5)
---------------------------------------------------- ------------ ------------
Finance costs (56.0) (43.5)
---------------------------------------------------- ------------ ------------
Net finance cost (36.4) (33.4)
---------------------------------------------------- ------------ ------------
8. Movements in net debt(*)
Net debt(*) is calculated as cash and cash equivalents less
total debt (borrowings and lease liabilities).
Non-cash movements
-----------------------------------------
Net new
27 November Cash lease Foreign Unwinding 28 May
2022 flows liabilities exchange of interest 2023
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- -------------- -------- ------------- ---------- -------------- ----------
Cash and cash equivalents 1,328.0 (313.2) - (6.3) - 1,008.5
Liabilities from financing
activities:
Borrowings (1,372.8) (4.3) - - (16.1) (1,393.2)
Lease liabilities (532.3) 32.1 (15.7) (0.1) - (516.0)
----------------------------- -------------- -------- ------------- ---------- -------------- ----------
Gross debt* (1,905.1) 27.8 (15.7) (0.1) (16.1) (1,909.2)
Net debt* (577.1) (285.4) (15.7) (6.4) (16.1) (900.7)
----------------------------- -------------- -------- ------------- ---------- -------------- ----------
Non-cash movements
-----------------------------------------
Net new
28 November lease Foreign Unwinding 29 May
2021 Cash flows liabilities exchange of interest 2022
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- -------------- ----------- ------------- ---------- -------------- ----------
Cash and cash equivalents 1,468.6 (397.7) - 11.8 - 1,082.7
Liabilities from financing
activities:
Borrowings (1,300.0) - - - (15.7) (1,315.7)
Lease liabilities (528.4) 23.1 (20.5) - - (525.8)
----------------------------- -------------- ----------- ------------- ---------- -------------- ----------
Gross debt* (1,828.4) 23.1 (20.5) - (15.7) (1,841.5)
Net debt* (359.8) (374.6) (20.5) 11.8 (15.7) (758.8)
----------------------------- -------------- ----------- ------------- ---------- -------------- ----------
* Gross debt and net debt are alternative performance measures.
See Note 16 for further information.
9. Other financial assets
Other financial assets comprise contingent consideration
receivable, unlisted equity investments, loans receivable and
contributions towards dilapidations costs receivable.
27 November
28 May 2023 29 May 2022 2022
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
---------------------------------------- ----------- ----------- -----------
Non-current assets
Contingent consideration receivable 78.6 161.1 96.3
Unlisted equity investments held at
FVTOCI 99.2 39.5 69.8
Unlisted equity investments held at
FVTPL - 0.9 -
Loans receivable held at FVTPL 0.5 1.9 0.6
Loans receivable held at amortised
cost 14.3 13.2 14.2
Contribution towards dilapidation costs
receivable 0.7 0.7 0.7
----------------------------------------- ----------- ----------- -----------
193.3 217.3 181.6
---------------------------------------- ----------- ----------- -----------
Current assets
Contingent consideration receivable 1.5 0.7 2.0
Loans receivable held at FVTPL - 0.2 1.8
1.5 0.9 3.8
---------------------------------------- ----------- ----------- -----------
Contingent consideration receivable
Total contingent consideration receivable at the balance sheet
date is GBP80.1m (FY22: GBP98.3m; 1H22: GBP161.8m), and comprises
two amounts: GBP78.0m (FY22: GBP95.0m; 1H22: GBP158.9m) due from
Marks and Spencer Holdings Limited ("M&S") relating to the
part-disposal of Ocado Retail Limited ("Ocado Retail") in August
2019; and GBP2.1m (FY22: GBP3.3m; 1H22 GBP2.9m) 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
Under the contractual terms of the part-disposal of Ocado Retail
during 2019, there is a contingent consideration due from M&S
to Ocado Group of GBP190.7m (GBP156.3m plus interest of GBP34.4m)
that is payable in cash by no later than August 2024.
This payment is dependent on certain contractually defined Ocado
Retail performance measures ("the Target") being achieved during
the 2023 financial year. The outcome is a binary one, meaning
should the Target be achieved, this will trigger the payment in
full of GBP190.7m. Conversely, should the Target not be achieved,
no consideration would be payable by M&S.
The contractual arrangement with M&S expressly provides for
the Target performance measures to be adjusted for actions taken by
management since the date of the part-disposal that were not
included in the business case which underpinned the sale
transaction.
Whilst the contractual outcome is binary, i.e the payment is
either made in full or is a zero payment, under the terms of IFRS9
(Financial Instruments) and IFRS13 (Fair Value Measurement) the
Group is required to determine the fair value of the contingent
consideration receivable from M&S at each reporting date.
This fair value exercise has been carried out as at the period
end and determined a fair value of GBP78.0m, a decrease of GBP17.0m
from the fair value of GBP95.0m recorded at the end of the prior
period.
The fair value of GBP78.0m has been estimated using the expected
present value technique and is based on a number of
probability-weighted scenarios and applying an appropriate discount
rate to reflect the timing of the possible payment. In arriving at
this valuation, a range of scenarios were considered, taking into
account Ocado Retail's current and forecast trading performance.
The valuation also considered current market conditions and the
impact of adjustments to the Target as permitted under the terms of
the part-disposal agreement.
There remains significant uncertainty in this estimate of fair
value. Given the binary nature of the contractual agreement, it is
reasonably possible that the actual amount received at the point of
settlement will be materially different to the fair value currently
recorded. Given the uncertainty in the determination of the
post-adjustment Target performance measures, there is also a
possibility that the contingent consideration may be agreed through
a negotiated settlement between the two shareholders.
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").
In December 2022, Oxa Autonomy Ltd ("Oxa Autonomy"), previously
Oxbotica Limited, successfully completed its Series C Fundraising,
which resulted in the Group's warrants being exercised to acquire
21,934 B shares for GBP10.0m. Following the exercise of the
warrants and the Series C fundraising, the Group now holds a 12.2%
interest in Oxa Autonomy. At 1H23, the unlisted equity investment
in Oxa Autonomy totals GBP66.2m (FY22: GBP36.8m; 1H22: GBP10.3m).
The fair value of the warrants prior to the transaction was
GBP19.4m, which together with the exercise cost of GBP10.0m
comprises the GBP29.4m increase in the Group's equity investment in
Oxa Autonomy.
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 are
classified as level 2. The contingent consideration and unlisted
equity investments are classified as level 3.
Set out below is an analysis of all financial instruments at
fair value:
27 November
28 May 2023 29 May 2022 2022
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
--------------------------------------- ------ ----------- ----------- -----------
Financial assets held at fair value
Level
- Contingent consideration receivable 3 80.1 161.8 98.3
Level
- Unlisted equity instruments 3 99.2 40.4 69.8
Level
- Loans receivable held at FVTPL 3 0.5 2.1 2.4
Level
- Derivative assets: warrants 3 5.8 10.4 27.4
Level
- Derivative assets: commodity swaps 2 - 4.9 0.8
--------------------------------------- ------ ----------- ----------- -----------
Total financial assets held at fair
value 185.6 219.8 198.7
----------------------------------------------- ----------- ----------- -----------
Financial liabilities held at fair
value
Level
Derivative financial liabilities 2 (1.8) - (1.6)
Total financial liabilities held at
fair value (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 Significant unobservable
and key inputs inputs
--------------------------- -------------------------------------------------------- -------------------------------
Contingent consideration Discount rate of 10.0%.
receivable * Discounted cash flows. Expected cash inflows
of GBP193.0m.
Adjustments to the Target
* Expected cash inflows are estimated based on the performance measures available
terms of the share purchase agreements and the to the shareholder for
probability weighting of possible scenarios of actions taken by management
meeting financial and operational targets. that were not included
in the original business
case.
--------------------------- -------------------------------------------------------- -------------------------------
Unlisted equity investments Probabilities of expected
and derivative assets * Probability weighted expected return method revenue in a number of
("PWERM"). different scenarios.
Probabilities of various
* Forecasted revenue, revenue multiples, exit date, future valuations.
discount rate and probabilities.
* Option pricing model
* Market approach along with a capitalisation of
earnings approach.
* Forecasted EBITDA, EBITDA multiples and discount
rates.
* Undiscounted, estimate-based valuation.
--------------------------- -------------------------------------------------------- -------------------------------
11. Capital expenditure and commitments
During the period, the Group acquired property, plant and
equipment of GBP171.3m (1H22: GBP264.7m, FY22: GBP588.5m) and
intangible assets of GBP15.3m (1H22: GBP20.2m, FY22: GBP27.4m).
Internal development costs of GBP97.0m (1H22: GBP87.1m, FY22:
GBP181.4m) were capitalised. Capital expenditure relates to CFCs in
the UK, investment in international CFCs and technology
expenditure.
At 28 May 2023 capital commitments contracted, but not provided
for by the Group, amounted to GBP187.4m (1H22: GBP387.2m, FY22:
GBP275.5m).
12. Provisions
During the period, the Group recorded a net increase of
provisions of GBP20.0m (1H22: net release of provision of
GBP19.4m), the majority of which relates to the provision of costs
related to the closure of the Hatfield CFC as a result of the UK
network capacity review (refer to Note 5).
13. Analysis of cash flows given in the cash flow statement -
cash generated from operations
26 weeks 26 weeks
ended ended
28 May 2023 29 May 2022
GBPm GBPm
Note (unaudited) (unaudited)
------------------------------------------------------ ---- ------------ ------------
Loss before tax (289.5) (211.3)
Adjustments for:
- Depreciation, amortisation and impairment
losses(1) 213.0 157.3
- Property, plant and equipment write off 0.4 -
- Gain on disposal of asset held for sale (5.0) -
- Movement in provisions 19.5 (19.6)
- Share of results from joint ventures and associate 0.9 0.5
- Revenue from long-term contracts (13.1) (12.7)
- Other income from insurance proceeds - (6.3)
- Share-based payments charge 16.1 21.1
- Net finance cost 7 36.4 33.4
- Other non-cash exceptional items 17.4 (5.1)
Changes in working capital:
- Movement in inventories 16.0 12.0
- Movement in trade and other receivables 10.9 (22.4)
- Movement in trade and other payables (36.4) 33.3
- Cash received from contract liabilities (upfront
fees) 23.7 43.1
- Movement in contract assets - 0.2
------------------------------------------------------ ---- ------------ ------------
Cash generated from operations 10.3 23.5
------------------------------------------------------ ---- ------------ ------------
(1) Included within depreciation, amortisation and impairment
losses is an exceptional impairment charge of GBP20.4m relating to
the UK network capacity review. Refer to Note 5 for further
details.
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 (1H22: none). At the end
of the period, there was GBPnil (1H22: GBPnil) 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:
52 weeks
26 weeks 26 weeks ended
ended ended 27 November
28 May 2023 29 May 2022 2022
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
------------------------------------ ------------ ------------ ------------
Dividend received from MHE JVCo - - 8.0
Reimbursement of supplier invoices
paid on behalf of MHE JVCo 0.8 - 1.1
Capital element of lease liability
instalments accrued or paid to MHE
JVCo 8.6 9.5 16.5
Interest element of lease liability
instalments accrued or paid to MHE
JVCo 0.3 0.9 1.3
------------------------------------- ------------ ------------ ------------
Included within trade and other receivables is a balance of
GBP1.9m (1H22: GBP0.5m; FY22: GBP2.3m) owed by MHE JVCo. Included
within trade and other payables is a balance of GBP12.5m (1H22:
GBP12.0m; FY22: GBP1.8m) owed to MHE JVCo. Included within lease
liabilities is a balance of GBP9.0m (1H22: GBP25.9m; FY22:
GBP17.5m) owed to MHE JVCo.
Associate
During a prior period, the Group loaned GBP1.7m to Karakuri
Limited ("Karakuri"), a company in which the Group holds a 26.3%
interest. The loan is held at fair value through profit or loss
within other financial assets, however following Karakuri entering
into administration in 1H23, a write-down of GBP1.9m was recognised
and hence its carrying amount at 28 May 2023 is GBPnil (1H22:
GBP1.9m, FY22: GBP1.8m). During the period, GBP0.1m (1H22: GBP0.1m)
of interest income was recognised within finance income.
No other transactions that require disclosure under IAS 24
"Related Party Disclosures" have occurred during the current
financial period. There are no changes in the related party
transactions described in the last annual report that could have a
material effect on the financial position or performance of the
group in the first six months of the current financial year.
15. Post-Balance Sheet events
Acquisition of 6 River Systems
On 4 May 2023, the Group announced that it has reached an
agreement with Shopify Inc. to acquire 6 River Systems LLC, a
collaborative autonomous mobile robot ("AMR") fulfilment solutions
provider to the logistics and non-grocery retail sectors, based in
the United States of America. The acquisition was completed on 30
June 2023 for an initial cash consideration of US$12.7m
(GBP10.0m).
Autostore litigation cost recovery
On 29 June 2023, the UK High Court issued a formal order
following Ocado's victory in the UK part of the litigation in March
2023. The order states that none of the Autostore patents are
infringed by Ocado, and that the Autostore bot patents are invalid
and revoked. The UK High Court also ordered that Autostore pay
Ocado GBP6.7m in costs in relation to the UK High Court trial. As
usual in patent cases, Autostore has been given the option to
appeal.
16. Alternative performance measures
The Group assesses its performance using a variety of
alternative performance measures, which are not defined under IFRS
and are therefore termed "non-GAAP" measures. These measures
provide additional useful information on the underlying trends,
performance and position of the Group. The non--GAAP measures used
by the Group are as follows:
-- EBITDA;
-- Exceptional items;
-- Gross debt and external gross debt
-- Net debt
-- Technology Solutions fees invoiced; and
-- Underlying cash outflow
Reconciliations of these non-GAAP measures to the nearest
measures prepared in accordance with IFRS are presented below. The
alternative performance measures used may not be directly
comparable with similarly titled measures used by other
companies.
EBITDA
In addition to measuring its financial performance based on
operating profit, the Group measures performance based on EBITDA.
EBITDA is defined as the Group's earnings before depreciation,
amortisation, impairment, net finance cost, taxation and
exceptional items. EBITDA is a common measure used by investors and
analysts to evaluate the operating financial performance of
companies. A reconciliation of operating profit to EBITDA can be
found on the face of the Condensed Consolidated Income
Statement.
The Group considers EBITDA to be a useful measure of its
operating performance because it approximates the underlying
operating cash flows by eliminating depreciation and amortisation.
EBITDA is not a direct measure of liquidity, which is shown by the
Condensed Consolidated Statement of Cash Flows, and needs to be
considered in the context of the Group's financial commitments.
The financial performance of the Group's segments is measured
based on EBITDA, as reported internally. A reconciliation of the
EBITDA of the Group with the EBITDA for the segments is disclosed
in Note 4.
Exceptional items
The Group's Condensed Consolidated Income Statement identifies
separately trading results before exceptional items. The Directors
believe that presentation of the Group's results in this way is
relevant to an understanding of the Group's financial performance.
This presentation is consistent with the way that financial
performance is measured by management and reported to the Board and
assists in providing a meaningful analysis of the trading results
of the Group. This also facilitates comparison with prior periods
to assess trends in financial performance more readily. Exceptional
items are disclosed in Note 5.
The Group applies judgement in identifying significant
exceptional items of income and expense that are recognised as
exceptional to help provide an indication of the Group's underlying
business. In determining whether an event or transaction is
exceptional in nature, management considers quantitative as well as
qualitative factors such as the frequency or predictability of
occurrence.
Examples of items that the Group considers exceptional include,
but are not limited to corporate reorganisations, material
litigation, multi-year transformation programmes and any material
costs outside of the normal course of business as determined by
management.
Gross debt and external gross debt
Gross debt is calculated as borrowings and lease liabilities as
disclosed in Note 8. 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:
52 weeks
26 weeks 26 weeks ended
ended ended 27 November
28 May 2023 29 May 2022 2022
GBPm GBPm GBPm
Note (unaudited) (unaudited) (audited)
----------------------------------- ---- ------------ ------------ ------------
Gross debt 8 1,909.2 1,841.5 1,905.1
Lease liabilities payable to joint
ventures (9.0) (25.9) (17.5)
----------------------------------- ---- ------------ ------------ ------------
External gross debt 1,900.2 1,815.6 1,887.6
----------------------------------- ---- ------------ ------------ ------------
Net debt
Net debt is calculated as cash and cash equivalents less gross
debt. Total debt is measured as the net proceeds raised, adjusted
to amortise any discount over the term of the debt.
Net debt is a measure of the Group's net indebtedness, and
provides an indicator of the overall strength of the Condensed
Consolidated Balance Sheet. It is also a single measure that can be
used to assess the combined effect of the Group's cash position and
its indebtedness. The use of the term "net cash" does not
necessarily mean that the cash included in the net cash calculation
is available to settle the liabilities included in this
measure.
Net debt is considered to be an alternative performance measure
as it is not defined in IFRS. The most directly comparable IFRS
measure is the aggregate of borrowings and lease liabilities and
cash and cash equivalents. A reconciliation of these measures with
net debt is disclosed in Note 8.
Technology Solutions fees invoiced
Technology Solutions fees invoiced is used as a key measure of
performance of the Technology Solutions business as an alternative
to revenue and represent design and capacity fees invoiced during
the period for existing and future CFC and in-store fulfilment
commitments.
Underlying cash flow
Underlying cash flow is the movement in cash and cash
equivalents excluding the impact of exceptional items, costs of
financing, purchase of unlisted equity investments and foreign
exchange movements. A reconciliation of the movement in cash and
cash equivalents to underlying cash outflow is detailed within the
Financial Review: 1H23.
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 52 weeks ended 27 November 2022 were details of the principal
risks and uncertainties for the Group and the key mitigating
activities used to address them, applicable at that time.
Since year-end, the impact on the Ocado business of certain
geopolitical and economic risks has remained significant and
although our principal risks remain unchanged in substance,
inflationary pressures, interest rate rises and the general
economic backdrop mean that many of our principal risks remain
elevated. The Group continues to take cost mitigation measures to
protect liquidity in FY23, but it has limited mitigations for some
costs including the increasing commodity, freight and utility costs
(aside from some diesel, electricity and FX hedging). The Group
continues to carefully monitor its cash flows and financing
requirements and the changing external environment for
financing.
As part of the ongoing risk management process, emerging risks
are identified and assessed. These risks are deemed to be
significant but are not listed as one of the Group's principal
risks. The business will bring additional focus to these emerging
risks and look at actions for addressing them. The Group's Annual
Report and Accounts for the 52 weeks ended 27 November 2022
contains a description of the emerging risks for the Group.
The Board considers that the principal risks and uncertainties
have not changed, and remain relevant for the remaining six months
of the 2023 financial year.
-- 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 - 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 disruption, reputational damage and
regulatory impacts, for us and our clients.
-- Fire & Safety - Fire, or harm 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.
-- Geopolitical & Economic Uncertainty - Global economic and
political crises may undermine customer demand, our access to
skills and our supply chain. This could impair operations and
delivery of new capacity.
-- Product Commercial Proposition - Our OSP offer, pricing and
contractual terms may not provide adequate and sustainable returns
for us and our shareholders and an attractive commercial
proposition for our clients.
-- Product Performance - Failure to provide clients with timely,
consistently reliable performance at a level of quality to meet the
needs of their end customers. Partners may not have the necessary
knowledge, guidance, or capabilities to operate OSP efficiently and
cost-effectively. These issues could lead to increased costs,
reduced revenue or penalties for Ocado and its clients.
-- Product Innovation - Failure to respond to emerging
technology or disruptive business models could undermine our
ability to attract and retain clients.
-- Intellectual Property - Third party IP infringement or
failure to protect our own IP could result in loss of use of the
Group's assets, financial damages or harm to the Company's
reputation or relationships.
-- 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.
-- Climate - Extreme weather events and climate-related
regulation could disrupt our supply chain, operations and demand
for our product.
Principal risks and uncertainties (continued)
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.
More information on these principal risks and uncertainties
together with an explanation of the Group's approach to risk
management is set out in Ocado Group plc's Annual Report and
Accounts for the 52 weeks ended 27 November 2022, 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 28 May 2023 which comprises the income statement,
statement of comprehensive income, the balance sheet, the statement
of changes in equity, the cash flow statement, 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 28 May
2023 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
18 July 2023
Statement of Directors' Responsibilities
The Directors confirm that, to the best of their knowledge:
-- the condensed set of financial statements gives a true and
fair view of the assets, liabilities, financial position, and
profit or loss of the issuer, or undertakings included in the
consolidation, as required by DTR 4.2.4R and prepared in accordance
with UK adopted IAS 34 "Interim Financial Reporting";
-- the interim management report includes a fair review of the
information required by DTR 4.2.7R, namely:
o an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements; and
o a description of the principal risks and uncertainties for the
remaining six months of the financial year;
-- the interim management report includes a fair review of the
information required by DTR 4.2.8 R, namely:
o material related party transactions that have taken place in
the first six months of the financial year and that have materially
affected the financial position or performance of the enterprise
during that period; and
o any material changes in the related party transactions
described in the last annual report and that could have a material
effect on the financial position or performance of the enterprise
in the first six months of the current financial year.
The Directors of Ocado Group plc as at the date of this
announcement are as follows:
Executive Directors
Tim Steiner, Chief Executive Officer
Luke Jensen, Chief Executive Officer, Ocado Solutions
Stephen Daintith, Chief Financial Officer
Neill Abrams, Group General Counsel and Company Secretary
Mark Richardson, Chief Operations Officer
Non-Executive Directors
Richard Haythornthwaite, Chairman
Andrew Harrison, Senior Independent Director
Jörn Rausing
Emma Lloyd
Julie Southern
John Martin
Nadia Shouraboura
Julia M. Brown
Approved by the Board and signed on its behalf by:
Stephen Daintith Neill Abrams
Chief Financial Officer Group General Counsel and Company
Secretary
18 July 2023
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
Active customer (ORL) - means a customer who has shopped at
Ocado.com within the previous 12 weeks.
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. Pu awska
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.
Average basket value - means the average amount spent by
shoppers in one transaction, calculated as product sales divided by
total orders.
Average number of modules live - 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 (ORL) - means the average number of
Orders per week processed within CFCs.
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 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.
CMA - means the Competition and Markets Authority.
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.
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 cost (% of CFC sales capacity) - means the
direct operating costs of running the CFC estate; includes
engineering support, maintenance and spares, and the costs of
hosting and technology services for partners.
Directors - means the Directors of the Company, whose names and
biographies are set out on pages 106 to 109 of the 2022 Annual
Report, 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).
DPV - means deliveries per van.
EBITDA - means the non-GAAP measure which Ocado has defined as
earnings before net finance cost, taxation, depreciation,
amortisation, impairment and exceptional items.
eNPS - means employee Net Promoter Score.
ESG - means Environmental, Social, and Corporate Governance.
Exceptional items - means items that due to their material
and/or not in the normal course of business nature have been
classified separately in order to draw them to the attention of the
reader of the financial statements.
Fabled or Fabled.com - means the Group's premium beauty online
store in collaboration with Marie Claire and Time Inc., sold to
Next Holdings Limited in 2019.
FCA - means the Financial Conduct Authority.
FRC - means the Financial Reporting Council.
GAAP - means generally accepted accounting principles.
GDPR - means General Data Protection Regulation.
GMDC - means the General Merchandise Distribution Centres in
Welwyn Garden City and Erith, dedicated, highly-automated
warehouses used for the operation of the business.
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.
GSCOP - means Groceries Supply Code of Practice.
Haddington Dynamics - means Haddington Dynamics Inc., a company
incorporated in Nevada, United States of America, acquired by the
Group on 21 December 2020.
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.
Infinite Acres - means Infinite Acres Holding B.V., a company
incorporated in the Netherlands, whose registered office is Oude
Delft 128, 2611 CG Delft, Netherlands.
Inkbit - means Inkbit Corporation, a company incorporated in
Delaware, United States of America, whose business address is 200
Boston Ave #1875, Medford, MA, 02155.
IP - means Intellectual Property.
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 Phase 2 Celsius Parc,
Cupola Way, Scunthorpe, England, DN15 9YJ.
Karakuri - means Karakuri Limited, a company incorporated in
England and Wales with company number 11228129, whose registered
office is at Unit 2 Hammersmith Studios, 55a Yeldham Road, London,
England, W6 8JF.
Kindred Systems - means Kindred Systems 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).
Liquidity - means the sum of cash and cash equivalents and
undrawn facilities available for use by the Group.
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 and Spencer or M&S - means Marks and 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.
Mature customer - means a customer who has shopped on Ocado.com
5 or more times
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.
Module of capacity - is assumed as approximately 5,000 eaches
picked per hour (dependent on the specific metrics of a partner)
and GBP73m pa of sales capacity (FY22: GBP70m of sales
capacity)
Morrisons - means Wm Morrison Supermarkets Limited, a company
incorporated in England and Wales with company number 00358949,
whose registered office is at Hilmore House, Gain Lane, Bradford,
West Yorkshire, BD3 7DL.
Morrisons.com - means Morrisons' online retail business.
Myrmex - means Myrmex Inc., a company incorporated in Delaware,
United States of America, whose business address is 2350 Mission
College Boulevard, Suite 495, Santa Clara, CA, 95054.
Net finance cost - means finance costs less finance income.
NPS - means net promoter score.
Number of live modules - means modules that are fully installed
and available for use by our partners.
Number of modules ordered - means the maximum module capacity of
sites for which a contractual agreement has been signed with a
partner and an invoice has been sent for the associated fees
Ocado.com - means the Group's online retail business operated
via Ocado.com (excludes Ocado Zoom).
Ocado Holdings - means Ocado Holdings Limited.
Ocado Operating - means Ocado Operating Limited.
Ocado Re:Imagined or Re:Imagined - means a series of innovations
and changes to the technology powering our Ocado Smart Platform
(OSP).
Ocado Retail - means Ocado Retail Limited, a joint venture
between Ocado Holdings 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 9EX.
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.
Technology Solutions - means the Group's Technology Solutions
business.
Ocado Ventures - means the Group's Ventures business.
Ocado Zoom - means Ocado Zoom, the Group's immediacy delivery
offering.
OECD - means the Organisation for Economic Co-operation and
Development.
OSP Leadership Club - means the collective group of Ocado Group
and its global Solutions Partners.
Operating costs - means all costs incurred in the continuing
operations of the Group.
R&D - means research and development.
RCF - means revolving credit facility.
Retail VCP - means the Ocado Retail Value Creation Plan for the
senior leadership team of Ocado Retail.
ROI - means return on investment.
Senior unsecured notes or notes - means the Company's offering
of GBP500m senior unsecured notes due 2026.
Senior unsecured convertible bonds or convertible bonds - means
the Company's offerings of GBP600m senior unsecured convertible
bonds due 2025 at a coupon of 0.875% and an issue price of 100.0%,
and of GBP350m senior unsecured convertible bonds due 2027 at a
coupon of 0.750% and an issue price of 100.0%.
Shareholder - means a holder for the time being of ordinary
shares of the Company.
SKU - means stock-keeping unit; that is, a line of stock.
Smart Pass (previously Saving Pass) - means the Ocado pre pay
membership scheme which includes the delivery pricing scheme
previously known as Delivery Pass and the discount membership
scheme formerly known as Saving Pass.
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.
UPH - means average units processed per labour hour.
VCP - means the Value Creation Plan.
Webshop - means the customer-facing internet-based virtual shop
accessible via the website www.ocado.com.
6 Rivers Systems - means 6 Rivers Systems LLC, a company
incorporated in Massachusetts, United States of America, acquired
by the Group on 30 June 2023.
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END
IR UBRARORUBAUR
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