TIDMOCDO
RNS Number : 0113T
Ocado Group PLC
15 July 2020
AMMENT
Amendments have been made to the "Half-year Report" announcement
released on 14 July 2020 at 7.00am under RNS Number: 8821S.
The amendments are made to the 2019 numbers (audited) in the
table at the end of Note 4 (Segmental Reporting) in the "Notes to
the condensed consolidated interim financial information" and
explained in footnote 2 to that table.
All other details remain unchanged.
The full amended text is shown below.
OCADO GROUP PLC
Strong performance in challenging times
Interim results for the 26 weeks ended 31 May 2020
14 July 2020
Financial highlights
-- 27% Retail Revenue growth, demonstrating Ocado's ability to
meet unprecedented, and sustained, demand for online grocery in the
UK
-- Fees invoiced to International Solutions partners of GBP73.7
million, up 58%, as international roll out gains pace with the
opening of the first partner Customer Fulfilment Centres in Paris
and Toronto
-- Group EBITDA of GBP19.8 million, down 36%, reflecting
increased costs from investment in International Solutions
business, offset by strong Retail performance during the current
crisis. Loss before tax of GBP40.6 million also reflects this
investment
-- Strong balance sheet. As at the date of this announcement,
cash position of GBP2.3 billion including the GBP1bn capital raise
after period end
-- Ocado investing more, and faster, to help partners accelerate
the roll out of the Ocado Smart Platform; greater momentum in
technology innovation to strengthen industry leadership
1H 2020 1H 2019 Change
(restated)(2) vs 1H 2019
GBPm GBPm %
--------------------------- --------- ------------------ ---------------
Revenue
Retail 1,021.6 803.2 27.2
UK Solutions & Logistics 320.4 293.9 9.0
International Solutions 1.6 0.3 433.3
Inter-Segment &
Other (256.8) (215.1)
Group(3) 1,086.8 882.3 23.2
EBITDA
Retail* 45.7 24.4 87.3
UK Solutions & Logistics* 29.3 40.8 (28.2)
International Solutions* (45.1) (23.7) (90.3)
Other* (10.1) (10.8) 6.5
Group*(4,5) 19.8 30.7 (35.5)
Exceptionals(1) 39.1 (99.0)
Loss before tax (40.6) (147.4)
Capital Expenditure 219.4 112.2
Cash and cash equivalents 1,300.3 360.1
Net cash/(debt)* 196.2 (283.4)
Notes:
1. Exceptionals in FY2019 primarily relate to the Andover fire
with a write down of associated assets of GBP111.8 million, offset
by insurance income of GBP23.8 million. GBP36.3 million of income
has been recognised in H1 2020
2. 1H 2019 is restated for IFRS 16
* These measures are Alternative Performance Measures; refer to
note 15 in the condensed financial statements.
See page 4 for Notes Continued
Tim Steiner, Chief Executive Officer of Ocado Group, said:
"Over the last six months, my colleagues at Ocado Group have
shown, in exceptionally demanding circumstances, the resilience,
dedication and innovative spirit that has always characterised this
business. I would like to thank them profoundly on behalf of all
the stakeholders of Ocado.
The world as we know it has changed. As a result of COVID-19 we
have seen years of growth in the online grocery market condensed
into a matter of months; and we won't be going back. We are
confident that accelerated growth in the online channel will
continue, leading to a permanent redrawing of the landscape of the
grocery industry worldwide. This will mean more demand for Ocado
Smart Platform from current and prospective partners and our recent
fundraising will ensure that we are able to meet that demand. It
will also mean that we can invest more capital in innovation for
our partners and further expand our leadership as the world's
preeminent solutions provider in online grocery.
Seizing the future will, of course, require the same mix of
constant questioning and innovation, focus, and quiet determination
that has brought us so far. I have no doubt that we will rise to
the challenge, taking advantage of a scale of opportunity that we
have never seen before".
Key milestones in H1 2020
Ocado Solutions, the business which helps grocers around the
world develop online grocery services through the application of
technology, robotics and AI, has made strong progress in the half,
with the launch of the first international Customer Fulfilment
Centres ("CFCs"), and in preparing all its partners for accelerated
channel shift to online grocery in their local markets.
A redrawing of the landscape in online grocery, worldwide
-- COVID-19 has significantly accelerated the ongoing channel
shift to online grocery. Industry data evidences that this is a
global trend; in the UK online penetration has nearly doubled
within a few months. In the US, by late June, monthly online
grocery sales had reached a level six times what they were in
August last year, and in China the major online grocery platforms
saw triple digit year-on-year sales growth during the COVID-19
outbreak
-- We believe that this channel shift is sustainable, as survey
data shows that many consumers who were shopping online during the
peak of the pandemic in their respective countries have either
continued to do so (56% of those in China), or intend to continue
online shopping as 'lockdown' measures ease. In the UK, 30% of
consumers say they will order more of their groceries this way
after the pandemic, whilst 90% of online shoppers in the USA expect
to continue grocery shopping this way
-- The combined revenue of our nine global partners is GBP210
billion, whilst sales in addressable key markets are GBP2.8
trillion. In the context of accelerated channel shift, we believe
this represents a fee opportunity of GBP3.5-GBP26.3 billion,
depending on the level of online penetration ultimately
achieved
Addressing our partners' needs in the context of accelerated
channel shift to online
-- We have worked with our partners in the UK and
internationally, to serve as many customers as possible in this
unprecedented time, and to ensure they are best positioned to
succeed in this new landscape for online grocery
-- Our first two international CFCs for Groupe Casino, in
France, and Sobeys, in Canada, were launched ahead of plan, despite
COVID-19 related disruption, enabling our partners to deliver for
their customers against a backdrop of expected long-term increase
in demand for online grocery
-- We ramped up capacity in UK CFCs significantly, to enable
Ocado Retail to serve as many loyal and vulnerable customers as
possible, with mature facilities running at peak volumes and orders
per week through Erith up c60% in the half
-- We have worked with Morrisons, in the UK, and Bon Preu, in
Catalonia, to materially increase their volumes of in store
fulfilment through the platform, with current operating levels at
over five times those seen at the beginning of March
-- In the US, Kroger announced three additional CFCs, bringing
the total announced so far to nine, and progressing their ambition
to use the CFC model to expand Kroger products to a larger
footprint
-- Despite restrictions on social distancing and travel, in the
various markets where we operate, whether in the UK or
internationally, we currently expect no material delays from
COVID-19 in the delivery of future CFCs for partners
Continuing to grow and evolve to deliver outstanding
execution
-- We have added 300 Technology colleagues in the period, to
allow us to meet, at this critical juncture, the accelerated needs
of our partners whilst continuing to innovate on the capabilities
of our platform to extend Ocado's leadership as a solutions
provider for the fulfilment of online grocery
-- To bring increased scale and reach to our supply chain, to
support future growth, we have partnered with global contract
manufacturing companies, in addition to continued work with
longstanding partners
-- Transformation continues within the business to ensure that
the organisational structures and processes in place are best able
to support accelerated growth. In the half, major developments
included committing to new accounting, procurement and MRP
(materials resource planning) systems and building of our client
services teams
Investing in innovation to future proof the platform for our
partners
-- Our first Ocado Zoom site, in West London, achieved planned
endgame capacity a year ahead of plan. The immediacy service
remains popular with customers, effectively serving missions beyond
the full basket shop. We are progressing the build of the second
Zoom facility, in North London, and are seeking further sites
-- Evidencing the unique flexibility of Ocado Smart Platform
("OSP") to meet the specific needs of our partners in their home
markets in online grocery, and to cater to a growing range of
shopping missions, Kroger announced the build of their first mini
CFC in Michigan
-- In an important step as we roll out CFCs at greater scale
with our partners, our third generation robot is now in
production
-- We now have three robotic pick arms live in Erith CFC, in
South East London, and have more than doubled the pick efficiency
of this technology since the beginning of the year
-- Our venture investments made, to date, seek to deploy
automation in food packing, preparation and production and, in the
case of vertical farming, reduce food miles and make production
more sustainable. The investment case in each of these areas is
stronger in a post COVID-19 environment
Ocado Retail has shown great resilience in the first half, doing
its part to feed the nation and adapt to the challenges posed by
unprecedented demand. The business, now a 50:50 JV between Ocado
Group and M&S, is the fastest growing grocer in the UK.
Adapting to unprecedented demand in the UK
-- Sales grew at 27.2% in the first half, as the business
adapted to serve a material and sustained increase in demand in
response to the COVID-19 crisis which required changes to the model
including prioritising the most loyal and the most vulnerable of
our customers
-- Exit rate of sales in the half remained over 40% versus the prior year
-- Despite volatility in customer shopping behaviour during the
period, and some associated supply chain disruption, service
metrics remained strong, with substitutions of less than 4% and 97%
of orders delivered on time
-- Units picked per labour hour ("UPH") in mature CFCs rose to
170 (1H 2019: 159), with facilities reaching their best ever
efficiencies in the second quarter and Erith now better than the
average, as they processed more volumes than ever before, also
benefiting from the faster processing time typically associated
with larger basket orders
-- Larger baskets saw the overall volume of products carried,
per van, increase significantly. This enabled better efficiencies
in terms of revenues per van shift, whilst driving a reduction in
number of deliveries per van per week ("DPV") to 175 (1H 2019:
192)
-- Ocado Retail continues to achieve market leading levels of food waste, at just 0.4% of sales
Bringing an even better offer to customers
-- Preparations for the September switchover from Waitrose to
M&S products are in their final stages and on track
-- Although any significant change carries an element of
uncertainty, we are firmly convinced that the switchover provides
Ocado Retail the opportunity to provide an even more compelling
offer for customers. This will include adding initially over 5,000
M&S Food lines with more to follow, which will be available
exclusively online at Ocado.com (compared to c4,000 Waitrose lines
currently available)
-- Ocado Retail will also stock c1,600 core M&S Clothing
& Home lines per year (compared to c250 Waitrose lines),
enriching the general merchandise offer currently available
Outlook statement
There is no material change to our guidance from previous public
statements.
-- Revenue growth:
-- Positive outlook for online grocery but Retail revenue growth
forecast suspended given uncertainties over the scale, and
duration, of ongoing impact of social distancing restrictions in
the UK
-- UK Solutions & Logistics below Retail, reflecting full
year impact of Morrisons' "holiday" from Erith
-- International Solutions is expected to be less than GBP10m,
as under IFRS 15 fees start to be recognised at go-live, with
initial CFC sites in France and Canada only operational for part of
the year
-- International Solutions fees invoiced growth of 40% or more
-- EBITDA:
-- Retail above revenue growth, reflecting the impact of
operational leverage in the business, offset by additional costs
associated with COVID-19 and the uncertainties of the duration of
social distancing measures
-- UK Solutions & Logistics to decline, primarily due to
full year impact of Morrisons' "holiday" from Erith, with
corresponding insurance benefits recorded in exceptional income
-- International Solutions to decline due to continued
investment in improving the platform and building the business, and
from increased support costs with launch of initial CFC sites
-- Insurance proceeds related to Andover fire to be received
over time; expect business interruption losses to be covered. Our
insurers have accepted our claim and GBP94 million has been
received to date with GBP36 million recognised in the income
statement in the period. Further insurance proceeds will be
received over time and be recognised as exceptional income when the
related capital expenditure is incurred or business interruption
claim settled
-- Total capital expenditure for the Group is expected to be
around GBP600 million with the majority of the increase reflecting
the additional capital to meet the needs of our Solutions
customers' growth in the UK and internationally
-- Continue to target further Solutions deals which would
generate additional cash fees but would negatively impact short
term profits
Results presentation
A results presentation will be available online for investors at
9.30am and the company will host a Q&A conference call
immediately following. This can be accessed via the Ocado Group
website, Ocadogroup.com.
Contacts
Tim Steiner, Chief Executive Officer on 020 7353 4200 today or
01707 228 000
Duncan Tatton--Brown, Chief Financial Officer on 020 7353 4200
today or 01707 228 000
David Shriver, Director of Communications, on 020 7353 4200
today or 01707 228 000
Martin Robinson at Tulchan Communications on 020 7353 4200
Notes continued
3. Revenue is online sales (net of returns) including charges
for delivery but excluding relevant vouchers/offers and value added
tax. The recharge of costs to our UK Solutions & Logistics
clients and International Solutions clients are also included in
revenue with the exception of recharges to Ocado Retail which are
eliminated on consolidation .
4. EBITDA* is a non-GAAP measure which we define as earnings
before net finance cost, taxation, depreciation, amortisation,
impairment and exceptional items*
5. Group EBITDA includes the impact of IFRS 16 of GBP13.8
million in 1H 2020 and GBP12.6 million in 1H 2019. See page 6 of
the Results Announcement for more details on the segmental
impact.
Financial Calendar
The schedule for Ocado Retail results for the remainder of the
year is for a Q3 Trading Statement on 15th September 2020 and a Q4
Trading Statement on 10th December 2020.
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.
Chief Financial Officer's Review
For the period to 31 May 2020, we achieved significant sales
growth influenced by the customer demand due to COVID-19, while
continuing to transform our business to deliver our international
contracts.
The Group has successfully commenced operations at its first two
international CFCs, in Toronto and Paris, despite the travel
restrictions and supply challenges coming from COVID-19, continued
to progress our existing partnerships and supported our Retail
partners in delivering groceries in unprecedented times.
The Retail business achieved record-breaking revenue growth
while progressing its plans to switchover to M&S products.
Group profitability in the period was impacted by increased costs
from investment in the International Solutions business to support
future growth, offset by strong Retail performance, share-based
management incentive charges, and additional depreciation. In
addition, there were GBP39.1 million of exceptional items,
principally due to insurance income for the Andover CFC, overall
resulting in loss before tax of GBP40.6 million.
The commentary is on a pre-exceptional basis(2) to aid
understanding of underlying performance of the business.
Group Results
Exceptional
Pre-Exceptional Items Total Pre-Exceptional
HY 2020 HY 2020 HY 2019
Pre-Exceptional
GBPmillion GBPmillion GBPmillion GBPmillion Variance
--------------------------------- ---------------- ------------ ------------ ---------------- ----------------
Revenue (1) 1,086.8 - 1,086.8 882.3 23.2%
---------------- ------------ ------------ ---------------- ----------------
Gross profit 362.3 - 362.3 305.3 18.7%
---------------- ------------ ------------ ---------------- ----------------
Other income 37.2 36.3 73.5 39.7 (6.3)%
---------------- ------------ ------------ ---------------- ----------------
Distribution and administrative
costs (pre IFRS16) (393.4) 2.8 (390.6) (327.4) (20.2)%
---------------- ------------ ------------ ---------------- ----------------
Reduction in costs relating
to IFRS16 13.8 - 13.8 12.6 9.5%
---------------- ------------ ------------ ---------------- ----------------
Share of results from joint
ventures and associate(4) (0.1) - (0.1) 0.5 n/a
---------------- ------------ ------------ ---------------- ----------------
EBITDA*(2) 19.8 30.7 (35.5)%
---------------- ------------ ------------ ---------------- ----------------
Depreciation, amortisation
and impairment(3) (76.6) - (76.6) (65.0) (17.8)%
---------------- ------------ ------------ ---------------- ----------------
Net Finance costs(3) (22.9) - (22.9) (14.2) 61.3%
---------------- ------------ ------------ ---------------- ----------------
(Loss) before tax (79.7) 39.1 (40.6) (48.5) (64.3)%
--------------------------------- ---------------- ------------ ------------ ---------------- ----------------
1. Revenue is online sales (net of returns) including charges
for delivery but excluding relevant vouchers/offers and value added
tax. The recharge of costs to our UK Solutions & Logistics
clients and International Solutions clients are also included in
revenue with the exception of recharges to Ocado Retail which are
eliminated on consolidation
2. EBITDA* is stated before the impact of exceptional items*
3. HY2019 is restated for IFRS 16. For more details of IFRS 16
refer to note 3 in the financial statements (also see the
Accounting Seminar presentation at
https://www.ocadogroup.com/investors/reports-and-presentations/year/all
)
4. Share of results from joint ventures relates to joint
ventures where the Group does not exercise control such as MHE JVCo
and Jones Food Company. The Ocado Retail joint venture, over which
the Group exercises control, is not included as the results are
fully consolidated.
Group revenue for the period has grown by 23.2% in comparison to
1H 2019 revenue of GBP882.3 million. This was primarily driven by
an increase in the number of items sold, with significantly higher
basket size but reduced order volume growth, with the majority
driven by the increased demand from the social distancing
requirements due to COVID-19. Gross profit grew steadily, but
slightly below revenue growth as we remain competitively priced to
the market. Other income declined by 6.3% to GBP37.2 million,
primarily due to lower media income.
EBITDA before the impact of exceptional items for the period was
GBP19.8 million (1H 2019: GBP30.7 million). The benefit of higher
revenues was more than offset by the increased investment in areas
to support our platform growth such as people to help manage the
international relationships, technology resources to help scale and
improve the platform and the infrastructure needed to support our
international business. In addition we incurred higher COVID-19
related costs such as frontline worker bonuses, received lower fee
income from Morrisons due to a revised agreement which temporarily
releases Erith capacity following the Andover fire and higher share
incentive costs in the period.
Depreciation, amortisation and impairment increased by 17.8% to
GBP76.6 million, driven primarily by increased amortisation of OSP
software.
Net finance costs increased from GBP14.2 million to GBP22.9
million, which includes GBP8.5 million for interest on leases
recognised under IFRS 16 (1H 2019: GBP7.5 million). The balance of
the increase consists of finance costs relating to the GBP600
million unsecured convertible bond issued in December 2019.
As a result of the above and exceptional items of GBP39.1
million, the statutory loss before tax for the period was GBP40.6
million (1H 2019: loss of GBP147.4 million).
COVID-19 Impact
COVID-19 has impacted all aspects of our business, but the
immediate effects are predominantly in the Ocado Retail and UK
Solutions and Logistics business. The Group has considered the
additional costs and revenues incurred as a result of the pandemic
and has determined that COVID-19 impacts should not be treated as
an exceptional item.
Trading review by segment
Segment revenue and Segment EBITDA* are shown below, in line
with the Group's new segments. During the prior period the Group
determined that there are three reportable segments, which reflect
the structure of the Group post the sale of 50% of Ocado Retail to
M&S. For comparability purposes, the numbers by segment for 1H
2019 have been represented on a basis consistent with the Group's
new segments. Further details of segment reporting are included in
note 4 of the financial statements.
Retail Performance
HY 2020(3) HY 2019(3)
GBPmillion GBPmillion Variance
-------------------------------- ------------ ------------ ---------
Revenue 1,021.6 803.2 27.2%
------------ ------------ ---------
Gross profit & Other income 326.6 265.3 23.1%
------------ ------------ ---------
Distribution costs*(1) (246.1) (213.7) 15.2%
------------ ------------ ---------
Marketing (non-voucher) (11.7) (9.5) 23.2%
------------ ------------ ---------
Other administrative costs*(1) (34.3) (26.2) 30.9%
------------ ------------ ---------
IFRS 16 Impact 11.2 8.5 31.8%
------------ ------------ ---------
EBITDA*(2) 45.7 24.4 87.3%
------------ ------------ ---------
1. Distribution and administrative costs exclude depreciation,
amortisation and impairment for the period and are shown before the
impact of IFRS 16
2. EBITDA* does not include the impact of exceptional items*
3. Retail segment has been re-presented for FY2019. For further
details refer to note 4 of the financial statements
Retail revenue* growth of 27.2% was primarily due to a 27.7%
year-on-year increase in average basket size due to the material
increase in demand, up to GBP137.46 (1H FY19: GBP107.65). The
change in customer behaviour was driven by the COVID-19 impact
where customers were typically ordering one large shop a week, in
comparison to lower basket size orders in the prior year.
Gross profit & Other income
Gross profit & Other income was up 23.1% to GBP326.6
million, driven by higher order volumes and improved product mix,
offset with reduced other income.
Distribution and administrative costs
HY 2020 HY 2019(1)
GBPmillion GBPmillion Variance
-------------------------- ------------ ------------ ---------
CFC 82.9 71.2 16.4%
------------ ------------ ---------
Trunking and Delivery 113.1 96.0 17.8%
------------ ------------ ---------
Other operating costs 50.1 46.5 7.7%
------------ ------------ ---------
Total Distribution costs 246.1 213.7 15.2%
-------------------------- ------------ ------------ ---------
1. Retail segment has been re-presented for FY2019. For further
details refer to note 4 of the financial statements
Distribution costs predominantly consist of fulfilment and
delivery operation costs which are provided to Ocado Retail by the
Ocado UK Solutions & Logistics operation.
CFC costs increased from GBP71.2 million to GBP82.9 million, an
increase of 16.4% year-on-year. The growth was primarily due to the
increased throughput due to the increase in basket sizes driven
from COVID-19 impact and one-off bonuses to frontline workers.
Mature CFC (defined as Hatfield, Dordon and Erith CFCs) UPH
improved by 6.9% to 170 UPH (1H 2019: 159), driven mainly by
improvements at Erith CFC.
Trunking and delivery costs increased by GBP17.1 million to
GBP113.1 million, an increase of 17.8% year-on-year (1H 2019:
GBP96.0 million). This is due to significantly higher order growth
and a weekly bonus to frontline workers due to COVID-19. Although
delivery efficiencies improved, our deliveries per van per week
decreased to 175 from 192, primarily due to higher eaches per
basket.
Other operating costs of GBP50.1 million (1H 2019: GBP46.5
million) include the costs associated with provision of the OSP and
Logistics services to Ocado Retail by UK Solutions &
Logistics.
Marketing costs excluding voucher spend increased from GBP9.5
million to GBP11.7 million, 1.1% as a percentage of retail revenue
(1H 2019: 1.2%), up on the prior period due to activity in the
first part of the period offset by reduced marketing activity
needed resulting from the increased demand caused by COVID-19 and
the need to limit the number of customers using the Ocado.com
website.
Other administrative costs increased by GBP8.1 million to
GBP34.3 million to support underlying business growth and the
establishment of Ocado Retail as a stand-alone business unit
including a dedicated head office.
Following the 50% sale of the Retail business to M&S, UK
Solutions & Logistics entered into a contract with Retail to
provide third party logistics services during 2H 2019. Included
within the fees payable under this contract are a number of fees
relating to the use of fixed assets. Under IFRS 16, certain fees
are classified as "lease" payments. Therefore, any income that UK
Solutions & Logistics receives for these are removed from
EBITDA and the corresponding cost in Retail is also removed from
EBITDA. The total value of these fees in H1 2020 is GBP4.3 million
(1H 2019: GBP4.3 million).
EBITDA*
EBITDA* excluding exceptional items for the retail business was
GBP45.7 million (1H 2019: GBP24.4 million). Excluding the impact of
IFRS 16 on 2019, EBITDA increased by GBP18.6 million or 117.0%.
UK Solutions & Logistics Performance
HY 2020 HY 2019
GBPmillion GBPmillion Variance
---------------------- ------------ ------------ ---------
Fee revenue 59.3 60.0 (1.2)%
------------ ------------ ---------
Cost recharges(1) 261.1 233.9 11.6%
------------ ------------ ---------
Revenue 320.4 293.9 9.0%
------------ ------------ ---------
Other income 1.8 1.6 12.5%
------------ ------------ ---------
Distribution costs (266.2) (236.2) (12.7)%
------------ ------------ ---------
Administrative costs (28.5) (21.7) (31.3)%
------------ ------------ ---------
IFRS 16 Impact 1.6 3.2 (50.0)%
------------ ------------ ---------
EBITDA * 29.3 40.8 (28.2)%
---------------------- ------------ ------------ ---------
* Distribution and administrative costs excludes depreciation,
amortisation and impairment for the period and are shown before the
impact of IFRS 16
(1) Cost recharges include cost recharges to Ocado Retail of
GBP208 million which eliminate out on consolidation
Revenue
Revenue from the UK Solutions & Logistics business was
GBP320.4 million (1H 2019: GBP293.9 million). This comprises a
recharge of relevant operational variable and fixed costs to UK
partners Ocado Retail and Morrisons, as well as fees to access
Ocado's technology platforms, capital recharges, management fees
and research and development.
Other income
Other income increased to GBP1.8 million (1H 2019: GBP1.6
million) primarily related to rent received from Morrisons in
respect of Dordon CFC rent recharges.
Distribution and administrative costs
Distribution and administrative costs consist of fulfilment and
delivery operations costs for Ocado Retail and Morrisons as well as
head office costs. Distribution costs were GBP266.2 million and
increased 12.7% due to higher volumes offset by cost efficiencies
in both CFC and trunking and delivery operations.
Administrative costs were GBP28.5 million and increased
year-on-year following the organisation changes with the
establishment of Ocado Retail as a stand-alone business unit.
Following the 50% sale of the Retail business to M&S, UK
Solutions & Logistics entered into a contract with Retail
during 2H 2019 to provide third party logistics services. Included
within the fees receivable under this contract are a number of fees
relating to the use of fixed assets. Under IFRS 16, certain of
these fees are classified as "lease" repayments. Therefore, any
income that UK Solutions & Logistics receives for these is
removed from EBITDA and the corresponding cost in Retail is also
removed from EBITDA. The total value of this fee income in 1H 2020
is GBP4.3 million (1H 2019: GBP4.3 million).
EBITDA*
EBITDA* from our UK Solutions & Logistics activities was
GBP29.3 million, a decrease of GBP11.5 million. Excluding the
impact of IFRS 16 on 2019, EBITDA decreased by GBP9.9 million or
26.3% primarily driven by the reduction in fee income from
Morrisons as a result of the agreement to take back capacity
following the Andover fire, together with the allocation of
platform development costs to the UK Solutions & Logistics
segment.
International Solutions Performance
HY 2020 HY 2019
GBPmillion GBPmillion Variance
---------------------------------------- ------------ ------------ ---------
Fees invoiced 73.7 46.6 58.2%
------------ ------------ ---------
Revenue 1.6 0.3 433.3%
------------ ------------ ---------
Distribution and administrative costs* (47.1) (24.7) (90.7)%
------------ ------------ ---------
EBITDA * (45.1) (23.7) (90.3)%
---------------------------------------- ------------ ------------ ---------
* Distribution and administrative costs excludes depreciation,
amortisation and impairment for the period and are shown before the
impact of IFRS 16
Fees and Revenue
Fees invoiced amounted to GBP73.7 million (1H 2019: GBP46.6
million). Fees relating to OSP are not recognised as revenue until
the OSP solution is defined as operationally live for each partner.
In 2020 revenue recognised from the International Solutions
business was increased due to the "Go live" of Sobeys in April
2020. Revenue is expected to continue to increase during the year
as our international CFCs commence operations.
Administration costs primarily consist of the non-capitalised
costs of employees who are developing OSP and other costs
supporting our international partnership agreements. These costs
grew year-on-year as a result of the increase in headcount to
support building further capabilities to sign future clients,
increased people and cloud costs to support existing international
clients in launching the CFCs and further improvements in our
platform.
EBITDA*
EBITDA* from our International Solutions activities was a loss
of GBP(45.1) million (1H 2019: GBP(23.7) million).
Other Segment
EBITDA loss was GBP(10.4) million in the current period (1H 2019
loss: GBP(11.0) million). The other segment represents revenue and
costs which do not relate to the other three segments. This
includes Board costs, the results of the Fabled business that was
divested during FY19 and the consolidated results of Jones Food
Company. The increase in costs is primarily due to an increase in
share-based senior management incentive charges, offset by GBP1.7
million of research and development tax credits.
Exceptional items
1H 2020 1H 2019 FY 2019
GBPmillion GBPmillion GBPmillion
------------------------------------ ------------ ------------ ------------
Andover CFC
------------ ------------ ------------
- Write-off of property, plant
and equipment - 96.9 96.9
------------ ------------ ------------
- Write-off of intangible assets - 3.2 2.1
------------ ------------ ------------
- Loss of inventory - 5.6 5.5
------------ ------------ ------------
- Insurance reimbursement (36.3) (11.8) (23.8)
------------ ------------ ------------
- Other exceptional costs 1.8 4.6 7.3
------------ ------------ ------------
Total Andover CFC (34.5) 98.5 88.0
------------ ------------ ------------
Loss on disposal of Marie Claire
Beauty Limited ("Fabled") - 0.1 1.1
------------ ------------ ------------
Costs on creation of joint venture
with M&S - 0.4 3.4
------------ ------------ ------------
Litigation costs 0.6 - 1.3
------------ ------------ ------------
Change in Fair Value of Contingent (5.2) - -
Consideration Receivable
------------ ------------ ------------
Other exceptional costs - - 0.3
------------------------------------ ------------ ------------ ------------
Net exceptional (income)/cost (39.1) 99.0 94.1
------------------------------------ ------------ ------------ ------------
Andover CFC
In February 2019 a fire destroyed the Andover CFC, including the
building, machinery and all inventory held on site. The Group has
comprehensive insurance and claims have been formally accepted by
the insurers.
Insurance reimbursement
This includes insurance reimbursements for the retail price of
destroyed inventory and other incremental costs plus a portion of
business interruption losses. The reimbursement has been presented
within "other income". A portion of reimbursements has been
received and recorded as deferred income. This will be released to
profit or loss in the future as the rebuilding costs of the CFC are
incurred.
The Group expects to receive further insurance reimbursements in
respect of reconstruction costs and business interruption losses.
Claim negotiations are ongoing and the Group has not included any
further amount in respect of these reimbursements as the likely
insurance proceeds cannot be quantified accurately at this point.
Income will be recognised in the future as the rebuilding costs of
the CFC are incurred.
Other exceptional costs
These include, but are not limited to, temporary costs of
transporting employees to other warehouses to work, professional
fees relating to the insurance claims process, reimbursement of
employees' personal assets that were destroyed and redundancy
costs.
Litigation costs
The Group has made a claim for damages and for injunctive relief
against Jonathan Faiman, Jonathan Hillary and Project T0day
Holdings Limited, a software and online fulfilment company, because
of the misappropriation and unlawful misuse of Group confidential
information and Intellectual Property. The Defendants' business
trades under the names "Today Development Partners" (TDP) or
"T0day". Using search orders we have recovered a large number of
hard copy confidential documents, and are in the process of
reviewing over 130,000 documents imaged from the defendants'
computers.
Hillary has admitted breaching his employment contract and
providing confidential Ocado information to Faiman, and over
GBP400,000 of his previous incentive payments has been repaid to
the Group under the malus and clawback provisions of our
schemes.
Faiman and TDP (but not Hillary) have made a counterclaim for
"hundreds of millions" alleging that the search orders were wrongly
obtained causing the TDP ecommerce solutions contract with Waitrose
to be terminated, but it has since become clear that there was no
such binding contract with Waitrose.
We strongly believe in the merits of our case. Ocado's
intellectual property is its greatest asset and represents a
significant portion of the Group's value; we have spent the last 20
years developing our intellectual property, technology and
know-how. The Group relishes fair competition, but will vigorously
protect its intellectual property and challenge any individual or
organisation that uses unlawfully obtained information, either
directly or indirectly. The Group is resolute that it will protect
all of its stakeholders' interests.
Legal and other costs have been incurred to recover the
misappropriated items and seek compensation. We will seek recovery
of our costs from the Defendants in the usual way.
Change in fair value of contingent consideration
In 2019 the Group sold Marie Claire Beauty Limited ("Fabled") to
Next plc and 50% of Ocado Retail Limited 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. The movement in the period reflects the
finance costs relating to the unwind of the discounted cash
flows.
Group Performance
HY 2020 HY 2019
GBPmillion GBPmillion Variance
------------------------------------------- ------------ ------------ ---------
EBITDA * 19.8 30.7 (35.5)%
------------ ------------ ---------
Depreciation, amortisation and impairment (76.6) (64.9) (18.0)%
------------ ------------ ---------
Net Finance costs (22.9) (14.2) (61.3)%
------------ ------------ ---------
Exceptional items 39.1 (99.0) 139.5%
------------ ------------ ---------
(Loss) before tax (40.6) (147.4) 72.5%
------------ ------------ ---------
(Loss) after tax (41.0) (147.6) 72.2%
------------------------------------------- ------------ ------------ ---------
Depreciation, amortisation and impairment
Total depreciation and amortisation costs were GBP76.6 million
(1H 2019: GBP64.9 million), an increase of 18.0% year-on-year. The
increase in year-on-year costs driven primarily by increased
amortisation of OSP software.
Net finance costs
Net finance costs of GBP22.9 million includes interest on
finance leases recognised under IFRS 16 of GBP8.5 million (1H 2019:
GBP7.5 million). Excluding this, net finance costs increased to
GBP14.4 million from GBP6.7 million. This primarily consists of
finance costs relating to the unsecured Convertible Bond.
GBP0.4 million of interest costs have been capitalised in the
period in relation to the senior secured notes and the RCF in
accordance with the relevant accounting standards (1H 2019: GBP0.3
million).
Share of result from joint ventures and associate
The Group has accounted for the share of results from two joint
ventures; MHE JVCo Limited ("MHE JVCo"), a joint venture with
Morrisons, and Infinite Acres Holdings BV, a vertical farming
company jointly owned with 80 Acres Farm Inc. and Priva Holdings
BV. MHE JVCo holds Dordon CFC assets, which Ocado uses to service
its and Morrisons' online business and is owned jointly by Ocado
and Morrisons. The Group share of MHE JVCo profit after tax in the
period amounted to GBP0.5 million (1H 2019: GBP0.5 million).
Infinite Acres Holdings BV was acquired during the second half of
FY2019, and has contributed a loss of GBP0.4 million to the Group's
results in the period (1H 2019: nil).
Loss before tax
Loss before tax for the period was GBP40.6 million (1H 2019:
loss of GBP147.4 million).
Taxation
Due to the availability of capital allowances and Group loss
relief, the Group does not expect to pay corporation tax during the
period. A deferred tax credit of GBP0.4 million was recognised in
the period. Ocado had GBP295.6 million (1H 2019: GBP267.5 million)
of unutilised carried forward tax losses at the end of the
period.
Dividend
During the period, the Group did not declare a dividend (1H
2019: GBPnil).
Loss per share
Loss and diluted loss per share was 8.18p (1H 2019: loss and
diluted loss of 20.40p).
Capital expenditure
Capital expenditure for the period:
HY 2020 HY 2019
GBPmillion GBPmillion
---------------------------------------------------------- ------------ ------------
UK operations 80.6 44.5
------------ ------------
International CFCs 82.9 22.4
------------ ------------
Technology, Fulfilment Development and Innovation 55.6 45.1
------------ ------------
Total capital expenditure (1, 2) (excluding share of MHE
JVCo) 219.1 112.0
---------------------------------------------------------- ------------ ------------
Total capital expenditure (3) (including share of MHE
JVCo) 219.4 112.2
---------------------------------------------------------- ------------ ------------
1. Capital expenditure includes tangible and intangible assets
2. Capital expenditure excludes assets leased from MHE JVCo under lease liability arrangements
3. Capital expenditure includes Ocado share of the MHE JVCo
capital expenditure in 1H 2020 of GBP0.3 million and in 1H 2019 of
GBP0.2 million
We invested GBP80.6 million in our UK operations. GBP77.5
million relates to our UK CFCs. This included GBP14.1 million
relating to the development work for Erith as it is currently
scaling up operations with an expected eventual capacity of over
200,000 Orders per Week; and investment of over GBP47 million in
new capacity across Andover, Bristol and Purfleet sites.
Total expenditure on new vehicles in the period was GBP3.9
million (1H 2019: GBP5.7 million). This expenditure enabled
business growth and replacement of vehicles that have reached or
exceeded their five year useful life.
Ocado continued to develop its own technology capabilities and
incurred GBP55.6 million of expenditure (1H 2019: GBP45.1 million).
Of this, we spent GBP35.2 million (1H 2019: GBP31.6 million)
investing in our proprietary software and hardware. We expanded our
Technology and Engineering headcount to over 2,700 staff at the end
of the period (FY 2019: over 2,400 staff) as increased investments
were made to support our strategic initiatives. The main areas of
investment were replatforming our technology and the greater use of
public and private cloud services, improvements in the efficiency
of our routing systems, enhancements to our customer proposition,
and support for the Erith CFC and existing partners future
CFCs.
Fulfilment development expenditure of GBP20.1 million (1H 2019:
GBP13.5 million) was spent in enhancing our next generation
fulfilment solutions for CFC and delivery operations of all our
Solutions partners.
We continued to make progress in developing our International
CFCs with two now operational. International capital expenditure of
GBP82.9 million (1H 2019: GBP22.4 million) was largely due to
expenditure on our CFCs in North America and Europe.
At 31 May 2020, capital commitments contracted, but not provided
for by the Group, amounted to GBP178.4 million (1H 2019: GBP78.8
million). We expect capital expenditure in 2020 to be approximately
GBP600 million which mainly comprises the roll out of the OSP
solution which will be installed into the new CFCs of our clients
both in the UK and internationally, continuing investment in our
infrastructure and technology solutions, the implementation of our
solution to our international partners, and additional investment
in new vehicles to support growth.
Cash flow
Net movement in cash and cash equivalents was GBP549.7 million,
an increase of GBP600.4 million compared to 1H 2019 as detailed
below:
HY 2020 HY 2019
GBPmillion GBPmillion
EBITDA*(1) 19.8 30.7
------------ ------------
Contract liabilities movement 59.7 41.9
------------ ------------
Working capital movement 88.4 (13.2)
------------ ------------
Other non-cash items 4.9 17.9
------------ ------------
Finance costs paid (17.2) (3.8)
------------ ------------
Cash settlement of Growth Incentive Plan - (80.2)
------------ ------------
Insurance proceeds received 10.0 3.5
------------ ------------
Operating cash flow 165.6 (3.2)
------------ ------------
Insurance proceeds relating to rebuilding Andover CFC 10.0 40.0
------------ ------------
Capital investment (192.1) (131.8)
------------ ------------
Proceeds from disposal of subsidiaries 2.8 -
------------ ------------
Dividend from joint venture - 6.6
------------ ------------
Increase in net debt/finance obligations 565.6 (18.0)
------------ ------------
Proceeds from share issues 10.5 57.7
------------ ------------
Other investing and financing activities (16.2) (3.8)
------------ ------------
Interest received 3.5 1.8
------------ ------------
Movement in cash and cash equivalents 549.7 (50.7)
------------ ------------
1. EBITDA* is stated before the impact of exceptional items*
Operating cash flow increased by GBP168.8 million to GBP165.6
million in comparison to the prior year.
Cash received during the period in relation to our Solutions
partners, excluding VAT, amounted to GBP59.7 million (1H 2019:
GBP41.9 million). This reflects the new contracts that have been
signed including Aeon and Coles and also reflects stage payments
received from Kroger.
Other working capital shows a net cash inflow of GBP88.4 million
(1H 2019: net outflow of GBP13.2 million) reflecting increased
trading and investment as trade payables increased by 24.8% within
the period. Total insurance proceeds of GBP20.0 million were
received in the period in connection with the claim for the fire at
Andover CFC.
In the six months to 31 May 2020 there has been cash expenditure
of GBP192.1 million on new assets as the Group continues to invest
for future growth comprising investments in new CFCs, development
of our next generation fulfilment solutions, and spend on new
vehicles and spoke sites.
Net debt and financing cash flows for the period were an inflow
of GBP565.6 million. This included GBP600 million from the issuance
of a new unsecured convertible bond, offset by financing fees and
GBP26.4 million of repayment of other lease liabilities including
the lease element of rentals under IFRS 16. Other investing and
financing activities include GBP11.5 million adjustment to proceeds
from finalising the completion accounts on the disposal of the 50%
share of Ocado Retail and a GBP4.7 million loan to Infinite
Acres.
Balance Sheet
The Group had cash and cash equivalents of GBP1,300.3 million at
the end of the period versus GBP750.6 million as at 1 December
2019. Gross debt at the period-end was GBP1,104.1 million (1H 2019:
GBP643.5 million), and includes an adjustment of GBP283.3 million
in respect of IFRS 16. Net cash is GBP196.2 million (1H 2019: net
debt GBP283.4 million).
Trade and other receivables include GBP50.4 million (1H 2019:
GBP51.5 million) of amounts due from suppliers in respect of
commercial and media income. Of this amount GBP8.6 million (1H
2019: GBP9.2 million) is within trade receivables, and GBP41.8
million (1H 2019: GBP42.3 million) within accrued income.
Trade and other payables include deferred income of GBP42.4
million in respect of the insurance monies which have not yet been
recognised as exceptional income. Within contract liabilities,
GBP263.4 million (1H 2019: GBP157.1 million) of amounts are related
to Solutions contracts, performance-based payments or progress
payments on ongoing service delivery. Where payments are greater
than the revenue recognised at the end of the period, a contract
liability is recognised for the difference. Within accrued income,
GBP0.2 million (1H 2019: GBPnil) is due from our Solutions
customers.
An insurance reimbursement asset and an equal provision of
GBP38.3 million has been recognised on the Balance Sheet,
representing the obligation to restore the original asset at the
Andover CFC site under the leasehold agreement.
Included within property, plant and equipment is capital
work-in-progress for land and buildings of GBP3.1 million (1H 2019:
GBP48.8 million) and capital work-in-progress for fixtures,
fittings, plant and machinery of GBP243.9 million (1H 2019: GBP56.4
million), the increases relating to the numerous new UK and
international CFCs, with those for Casino and Sobeys making up the
majority.
Increasing financing flexibility
In the period the Group issued senior unsecured convertible
bonds of GBP600 million with a coupon of 0.875% due in 2025. This
allows the Group to diversify its funding sources and capitalise on
issuance conditions, securing financial flexibility to support
growth opportunities. The GBP100 million Revolving Credit Facility
("RCF") which was renegotiated in 2017 was not drawn during the
period.
Post period end, the Group raised GBP1.0 billion in additional
funds consisting of a GBP657 million share issue and issuance of
senior unsecured convertible bonds of GBP350 million with a coupon
of 0.75% due in 2027. We expect increased demand for the Ocado
platform and the fundraise will allow the Group greater
opportunities to grow faster and capitalise on the worldwide shift
to online retail. The additional capital will help enable Ocado
Solutions to sign more clients, build more CFCs, build CFCs faster
and invest in innovation to ensure the Ocado platform stays at the
forefront in the sector.
Key performance indicators
The following table sets out a summary of selected unaudited
operating information for HY 2020 and HY 2019:
HY 2020 HY 2019 Variance
------------------------------------------------ -------- -------- ---------
Active customers(1) (000's) 639 744 (14.1%)
-------- -------- ---------
Mature CFC efficiency(2) (units per hour) 170 159 6.9%
-------- -------- ---------
Average deliveries per van per week (DPV/week) 175 192 (8.9%)
-------- -------- ---------
Source: the information in the table above is derived from
information extracted from internal financial and operating
reporting systems and is unaudited. Fabled is excluded from both
years.
1. Customers are classified as active if they have shopped on
ocado.com within the previous 12 weeks
2. Measured as units dispatched from the CFC per variable hour
worked by Hatfield CFC, Dordon CFC and Erith CFC operational
personnel. We consider the mature CFCs to be Hatfield, Dordon and
Erith
Consolidated Income Statement
for the 26 weeks ended 31 May 2020
26 weeks 52 weeks
ended ended
2 June 1 December
26 weeks ended 31 May 2020 2019 (restated)(1) 2019
=========================================
Results Exceptional
before items
exceptional (note
items 5) Total
GBPm GBPm GBPm GBPm GBPm
Notes (unaudited) (unaudited) (unaudited) (unaudited) (audited)
=============================== ====== ============= ============ ============ ==================== ============
Revenue 4 1,086.8 - 1,086.8 882.3 1,756.6
Cost of sales (724.5) - (724.5) (582.6) (1,164.8)
=============================== ====== ============= ============ ============ ==================== ============
Gross profit 362.3 - 362.3 299.7 591.8
Other income 37.2 36.3 73.5 51.5 107.7
Distribution costs (313.0) (1.0) (314.0) (276.8) (571.8)
Administrative expenses (143.2) 3.8 (139.4) (208.1) (314.2)
=============================== ====== ============= ============ ============ ==================== ============
Operating loss before
results from joint ventures
and associate (56.7) 39.1 (17.6) (133.7) (186.5)
Share of results from
joint ventures and associate (0.1) - (0.1) 0.5 0.7
=============================== ====== ============= ============ ============ ==================== ============
Operating loss (56.8) 39.1 (17.7) (133.2) (185.8)
Loss on disposal of subsidiary - - - - (1.1)
Finance income 7 3.5 - 3.5 1.6 3.3
Finance costs 7 (26.4) - (26.4) (15.8) (30.9)
=============================== ====== ============= ============ ============ ==================== ============
Loss before tax (79.7) 39.1 (40.6) (147.4) (214.5)
Taxation (0.4) - (0.4) (0.2) 2.7
=============================== ====== ============= ============ ============ ==================== ============
Loss for the period (80.1) 39.1 (41.0) (147.6) (211.8)
=============================== ====== ============= ============ ============ ==================== ============
Attributable to:
Owners of Ocado Group
plc (57.4) (147.6) (213.1)
Non-controlling interests 16.4 - 1.3
=============================== ====== ============= ============ ============ ==================== ============
(41.0) (147.6) (211.8)
=============================== ====== ============= ============ ============ ==================== ============
Loss per share pence Pence pence
======================== ======= ======== ========
Basic and diluted loss
per share 6 (8.18) (20.40) (29.37)
======================== ======= ======== ========
Earnings before interest, taxation, depreciation, amortisation,
impairment and exceptional items (EBITDA(*) )
52 weeks
26 weeks 26 weeks ended
ended ended 1 December
31 May 2020 2 June 2019 2019
(restated)(1)
GBPm GBPm GBPm
Note (unaudited) (unaudited) (audited)
===================================== ===== ============= ============== ============
Operating loss (17.7) (133.2) (185.8)
Adjustments for:
Depreciation of property, plant
and equipment 26.4 22.5 46.0
Depreciation of right-of-use assets 28.4 24.7 50.4
Amortisation expense 20.9 17.7 37.3
Impairment of property, plant and
equipment 0.4 - 0.6
Impairment of intangibles 0.5 - 1.8
Exceptional items 5 (39.1) 99.0 93.0
===================================== ===== ============= ============== ============
EBITDA(*) 19.8 30.7 43.3
===================================== ===== ============= ============== ============
1. The 2019 restatement is due to the adoption of IFRS 16 in the
second half of the prior year. See note 3 for further details.
* EBITDA is an alternative performance measure. See note 15 for
further information.
Condensed Consolidated Statement of Comprehensive Income
for the 26 weeks ended 31 May 2020
52 weeks
26 weeks 26 weeks ended
ended ended 1 December
31 May 2020 2 June 2019 2019
(restated)(1)
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
=============================================== ============= ============== ============
Loss for the period (41.0) (147.6) (211.8)
Other comprehensive income:
Items that may be reclassified to
profit or loss in subsequent years:
Cash flow hedges
- Losses arising on hedging contracts (1.1) (1.4) (1.7)
Foreign exchange loss on translation
of foreign subsidiaries 0.5 0.1 (0.6)
Items that will not be reclassified
to profit or loss in subsequent
years:
Gains on equity instruments designated
as at fair value through other comprehensive
income - 4.4 2.8
Reclassification of equity of Jones
Food Company Limited - - 0.1
================================================ ============= ============== ============
Other comprehensive (expense)/income
for the period, net of tax (0.6) 3.1 0.6
================================================ ============= ============== ============
Total comprehensive expense for
the period (41.6) (144.5) (211.2)
================================================ ============= ============== ============
Attributable to:
Owners of Ocado Group plc (58.0) (144.5) (212.5)
Non-controlling interests 16.4 - 1.3
================================================ ============= ============== ============
(41.6) (144.5) (211.2)
=============================================== ============= ============== ============
1. The 2019 restatement is due to the adoption of IFRS 16 in the
second half of the prior year. See note 3 for further details.
Condensed Consolidated Balance Sheet
as at 31 May 2020
1 December
31 May 2020 2 June 2019 2019
(restated)(1)
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
==================================== ====== ============ ============== ===========
Non-current assets
Goodwill 4.7 - 4.7
Other intangible assets 211.0 160.4 185.8
Property, plant and equipment 611.9 387.5 468.6
Right-of-use assets 368.4 382.8 368.8
Deferred tax assets 29.3 16.7 27.2
Contract assets 0.7 - 0.3
Costs to obtain contracts 0.8 0.8 0.8
Financial assets 187.3 10.8 177.3
Investment in joint ventures 46.2 46.1 45.8
Investment in associate 4.4 4.8 4.7
==================================== ====== ============ ============== ===========
1,464.7 1,009.9 1,284.0
==================================== ====== ============ ============== ===========
Current assets
Assets held for sale 10 4.2 12.5 4.2
Inventories 51.4 44.4 52.3
Contract assets - - 0.1
Costs to obtain contracts 0.1 - -
Trade and other receivables 135.3 143.9 150.0
Insurance reimbursement asset 38.3 - 49.2
Derivative financial instruments 0.2 - -
Financial assets - - 2.8
Cash and cash equivalents 9 1,300.3 360.1 750.6
==================================== ====== ============ ============== ===========
1,529.8 560.9 1,009.2
==================================== ====== ============ ============== ===========
Total assets 2,994.5 1,570.8 2,293.2
==================================== ====== ============ ============== ===========
Current liabilities
Trade and other payables (436.0) (366.8) (349.6)
Contract liabilities (7.4) (3.7) (5.1)
Lease liabilities 8 (71.3) (38.9) (50.1)
Derivative financial instruments (1.7) (0.1) (0.5)
Provisions (40.2) (0.8) (54.0)
Liabilities associated with assets
held for sale 10 - (2.4) -
==================================== ====== ============ ============== ===========
(556.6) (412.7) (459.3)
==================================== ====== ============ ============== ===========
Net current assets 973.2 148.2 549.9
==================================== ====== ============ ============== ===========
Non-current liabilities
Contract liabilities (256.0) (153.4) (186.7)
Borrowings 8 (713.4) (244.8) (219.7)
Lease liabilities 8 (319.4) (359.8) (338.4)
Provisions (17.3) (13.6) (14.5)
Deferred tax liabilities (18.1) (8.9) (16.3)
==================================== ====== ============ ============== ===========
(1,324.2) (780.5) (775.6)
==================================== ====== ============ ============== ===========
Net assets 1,113.7 377.6 1,058.3
==================================== ====== ============ ============== ===========
Equity
Share capital 14.3 14.1 14.2
Share premium 715.4 679.0 705.3
Treasury shares reserve (113.3) (88.9) (113.6)
Reverse acquisition reserve (116.2) (116.2) (116.2)
Other reserves 110.6 6.5 4.0
Retained earnings 479.0 (99.6) 555.2
==================================== ====== ============ ============== ===========
Equity attributable to owners of
Ocado Group plc 1,089.8 394.9 1,048.9
Non-controlling interests 23.9 (17.3) 9.4
==================================== ====== ============ ============== ===========
Total equity 1,113.7 377.6 1,058.3
==================================== ====== ============ ============== ===========
1. The 2019 restatement is due to the adoption of IFRS 16 in the
second half of the prior year. See note 3 for further details.
Condensed Consolidated Statement of Changes in Equity
for the 26 weeks ended 31 May 2020
Attributable to owners of Ocado Group
plc
===========================================================================
Treasury Reverse
Share Share shares acquisition Other Retained Non-controlling Total
capital premium reserve reserve reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================ ======== ======== ========= ============ ========= ========= ======== ================ ========
Balance at 2
December
2019 (audited) 14.2 705.3 (113.6) (116.2) 4.0 555.2 1,048.9 9.4 1,058.3
================ ======== ======== ========= ============ ========= ========= ======== ================ ========
Loss for the
period - - - - - (57.4) (57.4) 16.4 (41.0)
Other
comprehensive
income:
Cash flow
hedges
- Losses
arising on
hedging
contracts - - - - (1.1) - (1.1) - (1.1)
Translation of
foreign
subsidiaries - - - - 0.5 - 0.5 - 0.5
================ ======== ======== ========= ============ ========= ========= ======== ================ ========
Total
comprehensive
expense
for the period
ended
31 May 2020 - - - - (0.6) (57.4) (58.0) 16.4 (41.6)
================ ======== ======== ========= ============ ========= ========= ======== ================ ========
Transactions
with owners:
- Issue of
ordinary
shares - 0.4 - - - - 0.4 - 0.4
- Allotted in
respect
of share
option
schemes 0.1 9.7 - - - - 9.8 - 9.8
- Disposal of
treasury
shares - - 0.3 - - - 0.3 - 0.3
- Share-based
payments
charge - - - - - 10.8 10.8 - 10.8
- Adjustments
arising
from
part-disposal
of
Ocado Retail
Limited - - - - - (29.9) (29.9) (1.7) (31.6)
- Issue of
convertible
bonds(2) - - - - 107.2 - 107.2 - 107.2
- Additional
investment
in Jones Food
Company
Limited - - - - - 0.3 0.3 (0.2) 0.1
Total
transactions
with
owners 0.1 10.1 0.3 - 107.2 (18.8) 98.9 (1.9) 97.0
================ ======== ======== ========= ============ ========= ========= ======== ================ ========
Balance at 31
May 2020
(unaudited) 14.3 715.4 (113.3) (116.2) 110.6 479.0 1,089.8 23.9 1,113.7
================ ======== ======== ========= ============ ========= ========= ======== ================ ========
Attributable to owners of Ocado Group
plc
===========================================================================
Treasury Reverse
Share Share shares acquisition Other Retained Non-controlling Total
capital premium reserve reserve reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=================== ======== ======== ========= ============ ========= ========= ======== ================ ========
Balance at 3
December
2018 (audited)(3) 14.0 589.9 (9.2) (116.2) 1.4 76.7 556.6 - 556.6
=================== ======== ======== ========= ============ ========= ========= ======== ================ ========
IFRS 9: Effect of
change
in accounting
policy - - - - 2.0 - 2.0 - 2.0
Adjusted balance
at 3
December 2018
(unaudited) 14.0 589.9 (9.2) (116.2) 3.4 76.7 558.6 - 558.6
Restated loss for
the
period(1) - - - - - (147.6) (147.6) - (147.6)
Other
comprehensive
income:
Cash flow hedges
- Losses arising
on
hedging
contracts - - - - (1.4) - (1.4) - (1.4)
Translation of
foreign
subsidiaries - - - - 0.1 - 0.1 - 0.1
Gain on equity
investments
designated as at
fair
value through
other
comprehensive
income - - - - 4.4 - 4.4 - 4.4
=================== ======== ======== ========= ============ ========= ========= ======== ================ ========
Total
comprehensive
expense
for the period
ended
2 June 2019 - - - - 3.1 (147.6) (144.5) - (144.5)
=================== ======== ======== ========= ============ ========= ========= ======== ================ ========
Transactions with
owners:
- Issue of
ordinary
shares 0.1 87.6 (86.4) - - - 1.3 - 1.3
- Allotted in
respect
of share option
schemes - 1.5 - - - - 1.5 - 1.5
- Disposal of
treasury
shares on
exercise by
participants - - 0.5 - - 0.2 0.7 - 0.7
- Disposal of
unallocated
treasury shares - - 5.7 - - 48.5 54.2 - 54.2
- Transfer of
treasury
shares to
participants - - 0.8 - - (0.8) - - -
-
Reclassification
between
reserves - - (0.3) - - 0.3 - - -
- Growth
Incentive Plan
cash settlement
on vesting - - - - - (80.2) (80.2) - (80.2)
- Share-based
payments
charge - - - - - 3.3 3.3 - 3.3
- Transaction
costs
on part-disposal
of Ocado
Retail Limited - - - - - - - (17.3) (17.3)
=================== ======== ======== ========= ============ ========= ========= ======== ================ ========
Total transactions
with
owners 0.1 89.1 (79.7) - - (28.7) (19.2) (17.3) (36.5)
=================== ======== ======== ========= ============ ========= ========= ======== ================ ========
Restated balance
at 2
June 2019
(unaudited) 14.1 679.0 (88.9) (116.2) 6.5 (99.6) 394.9 (17.3) 377.6
=================== ======== ======== ========= ============ ========= ========= ======== ================ ========
1. The 2019 restatement is due to the adoption of IFRS 16 in the
second half of the prior year. See note 3 for further details.
2. In December 2019, GBP600.0 million of convertible bonds were
issued. The equity component of the bonds was valued at GBP107.2
million and recognised in other reserves.
3. Historic losses of GBP2.9 million on the utilisation of
treasury shares to satisfy the vesting of Long-Term Incentive Plan
awards have been reclassified from share premium to retained
earnings, and reflected in Balance at 3 December 2018.
Condensed Consolidated Statement of Cash Flows
for the 26 weeks ended 31 May 2020
52 weeks
26 weeks 26 weeks ended
ended ended 1 December
31 May 2020 2 June 2019 2019
(restated)(1)
GBPm GBPm GBPm
Note (unaudited) (unaudited) (audited)
============================================ ===== ============= ============== ============
Cash flows from operating activities
Loss before tax (40.6) (147.4) (214.5)
Adjustments for:
- Depreciation, amortisation and
impairment losses 76.6 64.9 233.0
- Write-off of fixed assets, intangible
assets and inventories - 105.7 9.5
- Movement in provisions (1.2) (2.8) (1.0)
- Share of results from joint ventures (0.1) (0.5) (0.9)
- Share of results from associate 0.2 - 0.2
- Net loss on derivative financial
instruments (1.1) - (1.7)
- Revenue from long-term contracts (1.3) - (2.9)
- Other income from insurance proceeds (36.3) - (23.8)
- Share-based payments charge 10.8 3.3 12.8
- Net finance cost 7 22.9 14.2 27.6
- Other non-cash exceptional items (5.2) - -
- Settlement of cash flow hedges - 0.1 (0.1)
Changes in working capital:
- Movement in inventories 0.9 6.6 (7.6)
- Movement in trade and other receivables 12.7 (53.9) (29.4)
- Movement in trade and other payables 74.8 34.1 8.0
- Movement in contract liabilities 59.7 41.9 79.5
============================================ ===== ============= ============== ============
Cash generated from operations 172.8 66.2 88.7
Interest paid (17.2) (3.8) (30.6)
Cash settlement of Growth Incentive
Plan - (80.2) (80.2)
Movement in other taxation relating
to settlement of Growth Incentive
Plan - 11.1 -
Insurance proceeds relating to destroyed
inventory and business interruption 10.0 3.5 73.8
============================================ ===== ============= ============== ============
Net cash flows from/(used in) operating
activities 165.6 (3.2) 51.7
============================================ ===== ============= ============== ============
Cash flows from investing activities
Insurance proceeds relating to rebuilding
Andover CFC 10.0 40.0 -
Purchase of property, plant and
equipment (145.0) (88.4) (175.5)
Purchase of intangible assets (47.1) (38.6) (84.1)
Proceeds from disposal of Marie
Claire Beauty Limited, net of cash
sold 2.8 - (0.5)
Dividends received from joint ventures - 6.6 15.6
Purchase of investments in associate
and joint venture - (4.8) (13.6)
Purchase of Jones Food Company Limited,
net of cash acquired - - (7.6)
Purchase of unlisted equity investment - - (1.6)
Loan to joint venture (4.7) - -
Interest received 3.5 1.8 3.3
============================================ ===== ============= ============== ============
Net cash flows used in investing
activities (180.5) (83.4) (264.0)
============================================ ===== ============= ============== ============
Cash flows from financing activities
Proceeds from issue of ordinary
share capital, net of transaction
costs 0.4 1.3 0.8
Proceeds from allotment of share
options 9.8 1.5 2.4
Proceeds from disposal of treasury
shares on exercise by participants 0.3 0.7 0.8
Proceeds from Value Creation Plan
- jointly-owned equity awards - - 1.3
Proceeds from disposal of unallocated
treasury shares, net of transaction
costs - 54.2 54.2
Proceeds from part-disposal of Ocado
Retail Limited, net of transaction
costs (11.5) - 558.3
Proceeds from issue of convertible
bond, net of transaction costs 592.0 - -
Repayment of borrowings - - (25.0)
Repayment of lease liabilities (26.4) (17.7) (40.2)
Payment of financing fees - (0.3) (0.5)
Transaction costs - (3.8) -
============================================ ===== ============= ============== ============
Net cash flows from financing activities 564.6 35.9 552.1
============================================ ===== ============= ============== ============
Net increase/(decrease) in cash
and cash equivalents 549.7 (50.7) 339.8
Cash and cash equivalents at the
beginning of the period 750.6 410.8 410.8
============================================ ===== ============= ============== ============
Cash and cash equivalents at the
end of the period 1,300.3 360.1 750.6
============================================ ===== ============= ============== ============
1. The 2019 restatement is due to the adoption of IFRS 16 in the
second half of the prior year. See note 3 for further details.
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 31 May 2020.
The prior financial periods represent the 26 weeks ended 2 June
2019 and the 52 weeks ended 1 December 2019.
2. Basis of preparation
The Financial Information has been prepared in accordance with
IAS 34 "Interim Financial Reporting" as adopted by the European
Union and the Disclosure Rules and Transparency Rules of the UK
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 1 December 2019 which was prepared in
accordance with IFRS as adopted by the European Union and was filed
with the Registrar of Companies. This report is available either on
request from the Company's registered office or at
www.ocadogroup.com. The Independent Auditor's Report on these
accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under Section 498 of
the Companies Act 2006.
The Financial Information is presented in pounds sterling,
rounded to the nearest 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.
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 GBP1,300.3 million (1H 2019: GBP360.1 million) and
net current assets of GBP973.2 million (1H 2019: GBP148.2
million).
3. Significant 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 1
December 2019.
IFRS 16 "Leases"
The Group adopted IFRS 16 "Leases" early using the modified
retrospective approach for the 52-week period ended 1 December
2019. The standard was only adopted in the second half of 2019, so
the 1H 2019 comparatives require restatement. This note shows the
effect of the adoption of IFRS 16 on the Group's results for the 26
weeks ended 2 June 2019.
On adoption of IFRS 16 the Group recognised lease liabilities in
relation to leases which had previously been classified as
operating leases. These liabilities were measured at the present
values of the remaining lease payments, discounted using the
incremental borrowing rates at 3 December 2018. Right-of-use assets
equal to these liabilities were recognised at 3 December 2018, so
there was no effect on retained earnings.
Restatement of Condensed Consolidated Income Statement for the
26 weeks ended 2 June 2019
26 weeks 26 weeks
ended Effect of ended
2 June 2019 IFRS 16 2 June 2019
(previously
reported) (restated)
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (unaudited)
=============================== ====== ============= ============ =============
Revenue 4 882.3 - 882.3
Cost of sales (582.6) - (582.6)
=============================== ====== ============= ============ =============
Gross profit 299.7 - 299.7
Other income 51.5 - 51.5
Distribution costs (279.7) 2.9 (276.8)
Administrative expenses (208.1) - (208.1)
=============================== ====== ============= ============ =============
Operating loss before results
from joint venture (136.6) 2.9 (133.7)
Share of results from joint
venture 0.5 - 0.5
=============================== ====== ============= ============ =============
Operating loss (136.1) 2.9 (133.2)
Finance income 7 1.6 - 1.6
Finance costs 7 (8.3) (7.5) (15.8)
=============================== ====== ============= ============ =============
Loss before tax (142.8) (4.6) (147.4)
Taxation (0.2) - (0.2)
=============================== ====== ============= ============ =============
Loss for the period (143.0) (4.6) (147.6)
=============================== ====== ============= ============ =============
Attributable to:
Owners of Ocado Group plc (143.0) (4.6) (147.6)
Non-controlling interests - - -
=============================== ====== ============= ============ =============
(143.0) (4.6) (147.6)
=============================== ====== ============= ============ =============
Loss per share pence Pence pence
============================ ======== ======= ========
Basic and diluted loss per
share 6 (19.77) (0.63) (20.40)
============================ ======== ======= ========
Restatement of earnings before interest, taxation, depreciation,
amortisation, impairment and exceptional items (EBITDA(*) )
26 weeks 26 weeks
ended Effect of ended
2 June 2019 IFRS 16 2 June 2019
(previously
reported) (restated)
GBPm GBPm GBPm
Note (unaudited) (unaudited) (unaudited)
============================== ===== ============= ============ =============
Operating loss (136.1) 2.9 (133.2)
Adjustments for:
Depreciation of property,
plant and equipment 37.5 (15.0) 22.5
Depreciation of right-of-use
assets - 24.7 24.7
Amortisation expense 17.7 - 17.7
Exceptional items 5 99.0 - 99.0
============================== ===== ============= ============ =============
EBITDA* 18.1 12.6 30.7
============================== ===== ============= ============ =============
* EBITDA is an alternative performance measure. See note 15 for
further information.
Restatement of Condensed Consolidated Balance Sheet as at 2 June
2019
Effect of
2 June 2019 IFRS 16 2 June 2019
(previously
reported) (restated)
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (unaudited)
================================== ====== ============ ============ ============
Non-current assets
Intangible assets 160.4 - 160.4
Property, plant and equipment 498.5 (111.0) 387.5
Right-of-use assets - 382.8 382.8
Deferred tax assets 16.7 - 16.7
Costs to obtain contracts 0.8 - 0.8
Financial assets 10.8 - 10.8
Investment in joint ventures 46.1 - 46.1
Investment in associate 4.8 - 4.8
================================== ====== ============ ============ ============
738.1 271.8 1,009.9
================================== ====== ============ ============ ============
Current assets
Assets held for sale 10 12.5 - 12.5
Inventories 44.4 - 44.4
Trade and other receivables 144.8 (0.9) 143.9
Cash and cash equivalents 9 360.1 - 360.1
================================== ====== ============ ============ ============
561.8 (0.9) 560.9
================================== ====== ============ ============ ============
Total assets 1,299.9 270.9 1,570.8
================================== ====== ============ ============ ============
Current liabilities
Trade and other payables (377.5) 10.7 (366.8)
Contract liabilities (3.7) - (3.7)
Lease liabilities 8 (26.5) (12.4) (38.9)
Derivative financial instruments (0.1) - (0.1)
Provisions (0.8) - (0.8)
Liabilities associated with
assets held for sale 10 (2.4) - (2.4)
================================== ====== ============ ============ ============
(411.0) (1.7) (412.7)
================================== ====== ============ ============ ============
Net current assets 150.8 (2.6) 148.2
================================== ====== ============ ============ ============
Non-current liabilities
Contract liabilities (153.4) - (153.4)
Borrowings 8 (244.8) - (244.8)
Lease liabilities 8 (88.9) (270.9) (359.8)
Provisions (10.7) (2.9) (13.6)
Deferred tax liabilities (8.9) - (8.9)
================================== ====== ============ ============ ============
(506.7) (273.8) (780.5)
================================== ====== ============ ============ ============
Net assets 382.2 (4.6) 377.6
================================== ====== ============ ============ ============
Equity
Share capital 14.1 - 14.1
Share premium 679.0 - 679.0
Treasury shares reserve (88.9) - (88.9)
Reverse acquisition reserve (116.2) - (116.2)
Other reserves 6.5 - 6.5
Retained earnings (95.0) (4.6) (99.6)
================================== ====== ============ ============ ============
Equity attributable to owners
of Ocado Group plc 399.5 (4.6) 394.9
Non-controlling interests (17.3) - (17.3)
================================== ====== ============ ============ ============
Total equity 382.2 (4.6) 377.6
================================== ====== ============ ============ ============
Restatement of Condensed Consolidated Statement of Cash Flows
for the 26 weeks ended 2 June 2019
26 weeks 26 weeks
ended Effect of ended
2 June 2019 IFRS 16 2 June 2019
(previously
reported) (restated)
GBPm GBPm GBPm
Note (unaudited) (unaudited) (unaudited)
======================================= ===== ============= ============ =============
Cash flows from operating activities
Loss before tax (142.8) (4.6) (147.4)
Adjustments for:
- Depreciation, amortisation
and impairment losses 55.2 9.7 64.9
- Write-off of fixed assets,
intangible assets and inventories 105.7 - 105.7
- Movement in provisions (5.7) 2.9 (2.8)
- Share of results from joint
ventures (0.5) - (0.5)
- Share-based payments charge 3.3 - 3.3
- Net finance costs 7 6.7 7.5 14.2
- Settlement of cash flow hedges 0.1 - 0.1
Changes in working capital:
- Movement in inventories 6.6 - 6.6
- Movement in trade and other
receivables (54.8) 0.9 (53.9)
- Movement in trade and other
payables 44.8 (10.7) 34.1
- Movement in contract liabilities 41.9 - 41.9
======================================= ===== ============= ============ =============
Cash generated from operations 60.5 5.7 66.2
Interest paid (3.5) (0.3) (3.8)
Cash settlement of Growth Incentive
Plan (80.2) - (80.2)
Movement in other taxation relating
to settlement of Growth Incentive
Plan 11.1 - 11.1
Insurance proceeds relating
to destroyed inventory and business
interruption 3.5 - 3.5
======================================= ===== ============= ============ =============
Net cash flows used in operating
activities (8.6) 5.4 (3.2)
======================================= ===== ============= ============ =============
Cash flows from investing activities
Insurance proceeds relating
to rebuilding Andover CFC 40.0 - 40.0
Purchase of property, plant
and equipment (88.4) - (88.4)
Purchase of intangible assets (38.6) - (38.6)
Dividends received from joint
ventures 6.6 - 6.6
Purchase of investment in associate (4.8) - (4.8)
Interest received 1.8 - 1.8
======================================= ===== ============= ============ =============
Net cash flows used in investing
activities (83.4) - (83.4)
======================================= ===== ============= ============ =============
Cash flows from financing activities
Proceeds from issue of ordinary
share capital, net of transaction
costs 1.3 - 1.3
Proceeds from allotment of share
options 1.5 - 1.5
Proceeds from disposal of treasury
shares on exercise by participants 0.7 - 0.7
Proceeds from disposal of unallocated
treasury shares, net of transaction
costs 54.2 - 54.2
Repayment of lease liabilities (12.3) (5.4) (17.7)
Payment of financing fees (0.3) - (0.3)
Transaction costs (3.8) - (3.8)
======================================= ===== ============= ============ =============
Net cash flows from financing
activities 41.3 (5.4) 35.9
======================================= ===== ============= ============ =============
Net decrease in cash and cash
equivalents (50.7) - (50.7)
Cash and cash equivalents at
the beginning of the period 410.8 - 410.8
======================================= ===== ============= ============ =============
Cash and cash equivalents at
the end of the period 360.1 - 360.1
======================================= ===== ============= ============ =============
The application of IFRS 16 to the 1H 2019 results has affected
numerous line items in the Condensed Consolidated Income Statement
and the Condensed Consolidated Balance Sheet. Although there has
been no change to cash and cash equivalents at the beginning and
end of the period, a number of reclassifications have been required
in the Condensed Consolidated Statement of Cash Flows.
Taxes on income in the interim periods are accrued using the tax
rate that is expected to be applicable to expected total annual
earnings.
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 and liabilities, income and expense. Actual
results may differ from these estimates. In preparing these interim
financial statements, the significant judgements made by management
in applying the Group's accounting policies and the key sources of
estimation were the same as those that applied to the Annual Report
and Accounts for the 52 weeks ended 1 December 2019.
4. Segmental reporting
The Group's principal activities are grocery retailing and the
development and monetisation of Intellectual Property ("IP") and
technology used for online grocery retailing, fulfilment and
logistics and services in the United Kingdom, Europe, North
America, Australia and Japan. The Group is not currently reliant on
any major customer for 10% or more of its revenue.
In accordance with IFRS 8 "Operating Segments", an operating
segment is defined as a business activity whose operating results
are reviewed by the chief operating decision-maker ("CODM"), for
which discrete information is available. Operating segments are
reported in a manner consistent with the internal reporting
provided to the CODM, as required by IFRS 8. The CODM, who is
responsible for allocating resources and assessing performance of
the operating segments, has been identified as the Executive
Directors.
The separation of Ocado's Retail and Logistics operations into
distinct business units and the creation of the joint venture with
Marks and Spencer Group plc have led to changes in how the
management team reports and manages performance. The Group has
determined it now has three reportable segments: Retail, UK
Solutions & Logistics and International Solutions. The 1H 2019
comparatives have been re-presented on this basis.
The Retail segment provides online grocery and general
merchandise offerings to customers within the United Kingdom, and
comprises the Ocado Retail joint venture. The UK Solutions &
Logistics segment provides the IT platform, CFCs and logistics for
customers in the United Kingdom (Wm Morrison Supermarkets plc and
Ocado Retail Limited). The International Solutions segment provides
end-to-end online retail solutions to corporate customers outside
the United Kingdom. In order to reconcile segmental revenues and
EBITDA(*) with the Group's revenue and EBITDA(*) two other headings
are used: "Other" represents revenue and costs which do not relate
to any of the three segments; "Group eliminations" relates to
revenue and costs arising from intra-Group transactions.
The Board assesses the performance of all segments on the basis
of EBITDA(*) . EBITDA(*) , as reported internally by segment, is
the key measure utilised in assessing the performance of operating
segments within the Group.
The accounting policies of the segments are the same as those
for the Group as a whole. Any transactions between the business
segments are subject to normal commercial terms and market
conditions. Segmental results and assets include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis.
UK Solutions International Group
Retail & Logistics Solutions Other eliminations Total
Segmental revenue and EBITDA(*) GBPm GBPm GBPm GBPm GBPm GBPm
================================= ======== ============= ============== ======= ============== ========
26 weeks ended 31 May 2020
(unaudited)
Segmental revenue(*) 1,021.6 320.4 1.6 0.1 (256.9) 1,086.8
Segmental EBITDA(*) 45.7 29.3 (45.1) (10.4) 0.3 19.8
================================= ======== ============= ============== ======= ============== ========
26 weeks ended 2 June 2019
(restated)(1) (unaudited)
Segmental revenue(*) 803.2 293.9 0.3 8.3 (223.4) 882.3
Segmental EBITDA(*) 24.4 40.8 (23.7) (11.0) 0.2 30.7
================================= ======== ============= ============== ======= ============== ========
52 weeks ended 1 December
2019 (restated) (2) (audited)
Segmental revenue(*) 1,618.1 584.5 0.5 9.8 (456.3) 1,756.6
Segmental EBITDA(*) 40.6 79.1 (60.8) (15.2) (0.4) 43.3
================================= ======== ============= ============== ======= ============== ========
1. The 2019 restatement is due to the adoption of IFRS 16 in the
second half of the prior year. See note 3 for further details.
2. The numbers in the table above for FY19, principally in
respect of the IFRS 16 adjustment, have been amended for each
segment from those published at 7am on 14 July 2020. There is no
impact on Group numbers for each line item as the amendments only
apply to the inter-segment split for FY19 full year.
* EBITDA, segmental revenue and segmental EBITDA are alternative
performance measures. See note 15 for further information.
5. Exceptional items
52 weeks
26 weeks 26 weeks ended
ended ended 1 December
31 May 2020 2 June 2019 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
==================================== ============= ============= ============
Andover CFC
- Write-off of property, plant
and equipment - 96.9 96.9
- Write-off of intangible assets - 3.2 2.1
- Loss of inventory - 5.6 5.5
- Insurance reimbursement (36.3) (11.8) (23.8)
- Other exceptional costs 1.8 4.6 7.3
Loss on disposal of Marie Claire
Beauty Limited ("Fabled") - 0.1 1.1
Costs on creation of joint venture
with Marks and Spencer Group plc
("M&S") - 0.4 3.4
Litigation costs 0.6 - 1.3
Change in fair value of contingent
consideration receivable (5.2) - -
Other exceptional costs - - 0.3
Net exceptional (income)/cost (39.1) 99.0 94.1
===================================== ============= ============= ============
Andover CFC
In February 2019 a fire destroyed the Andover CFC, including the
building, machinery and all inventory held on site. The Group has
comprehensive insurance and claims have been formally accepted by
the insurers.
Insurance reimbursement
This includes insurance reimbursements for the retail price of
destroyed inventory and other incremental costs plus a portion of
business interruption losses. The reimbursement has been presented
within "other income". A portion of reimbursements has been
received and recorded as deferred income. This will be released to
profit or loss in the future as the rebuilding costs of the CFC are
incurred.
The Group expects to receive further insurance reimbursements in
respect of reconstruction costs and business interruption losses.
Claim negotiations are ongoing and the Group has not included any
further amount in respect of these reimbursements as the likely
insurance proceeds cannot be quantified accurately at this point.
Income will be recognised in the future as the rebuilding costs of
the CFC are incurred.
Other exceptional costs
These include, but are not limited to, temporary costs of
transporting employees to other warehouses to work, professional
fees relating to the insurance claims process, reimbursement of
employees' personal assets that were destroyed and redundancy
costs.
Litigation costs
The Group has made a claim for damages and for injunctive relief
against Jonathan Faiman, Jonathan Hilary and Project Today Holdings
Limited, a software and online fulfilment company trading under the
name T0day, because of the theft and unlawful use of the Group's
Intellectual Property ("IP"). The Group believes strongly in the
merit of its case. Ocado's IP is its greatest asset and represents
a significant portion of the Group's value. It has spent the last
20 years developing its IP, technology and know-how. The Group
relishes fair competition, but vigorously protects its IP and
challenges any individual or organisation that uses information
obtained illegally, whether directly or indirectly. Management is
determined to protect its stakeholders' interests.
Legal and other costs have been incurred to recover the stolen
items and seek compensation. Recovery of costs will also be sought
from the defendants.
Change in fair value of contingent consideration
In 2019 the Group sold Marie Claire Beauty Limited ("Fabled") to
Next plc and 50% of Ocado Retail Limited 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.
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 Value Creation Plan ("VCP"), which are accounted
for as treasury shares.
Diluted loss per share is calculated by adjusting the weighted
average number of ordinary shares outstanding to assume conversion
or vesting of all dilutive potential shares. The Company has five
classes of instruments that are potentially dilutive: share
options, share interests held pursuant to the Group's JSOS, linked
JOE awards under the VCP, shares under the Group's staff incentive
plans and convertible bonds.
There was no difference in the weighted average number of shares
used for the calculation of basic and diluted loss per share as the
effect of all potentially dilutive shares outstanding was
anti-dilutive.
The basic and diluted loss per share has been calculated as
follows:
52 weeks
26 weeks 26 weeks ended
ended ended 1 December
31 May 2020 2 June 2019 2019
(restated)(1)
million million million
(unaudited) (unaudited) (audited)
=================================== ============= ============== ============
Weighted average number of shares
at the end of the period 701.3 723.4 725.7
==================================== ============= ============== ============
GBPm GBPm GBPm
=================================== ======= ======== ========
Loss for the period attributable
to the owners of Ocado Group plc (57.4) (147.6) (213.1)
==================================== ======= ======== ========
pence Pence Pence
================================== ======= ======== ========
Basic and diluted loss per share (8.18) (20.40) (29.37)
=================================== ======= ======== ========
1. The 2019 restatement is due to the adoption of IFRS 16 in the
second half of the prior year. See note 3 for further details.
Post the period end, the Group has issued additional shares.
Please refer to note 14 for further details.
7. Finance income and costs
52 weeks
26 weeks 26 weeks ended
ended ended 1 December
31 May 2020 2 June 2019 2019
(restated)(1)
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
======================================== ============= ============== ============
Interest on cash balances 3.4 1.6 3.3
Interest on loan to joint venture 0.1 - -
---------------------------------------- ------------- -------------- ------------
Finance income 3.5 1.6 3.3
========================================= ============= ============== ============
Borrowing costs:
- Interest on lease liabilities (10.5) (10.4) (20.6)
- Interest on borrowings (15.7) (5.4) (10.3)
Unwinding of discounting of provisions (0.2) - -
---------------------------------------- ------------- -------------- ------------
Finance costs (26.4) (15.8) (30.9)
========================================= ============= ============== ============
Net finance cost (22.9) (14.2) (27.6)
========================================= ============= ============== ============
1. The 2019 restatement is due to the adoption of IFRS 16 in the
second half of the prior year. See note 3 for further details.
8. Borrowings and lease liabilities
1 December
31 May 2020 2 June 2019 2019
(restated)(1)
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
======================================== ============ ============== ===========
Current liabilities
Lease liabilities 71.3 38.9 50.1
========================================= ============ ============== ===========
Non-current liabilities
Borrowings 713.4 244.8 219.7
Lease liabilities 319.4 359.8 338.4
========================================= ============ ============== ===========
1,032.8 604.6 558.1
======================================== ============ ============== ===========
Total borrowings and lease liabilities 1,104.1 643.5 608.2
========================================= ============ ============== ===========
1. The 2019 restatement is due to the adoption of IFRS 16 in the
second half of the prior year. See note 3 for further details.
9. Analysis of net cash/debt(*)
Net cash/debt(*) is calculated as cash and cash equivalents less
total debt (borrowings and lease liabilities as disclosed in note
8).
1 December
31 May 2020 2 June 2019 2019
(restated)(1)
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
=========================== ============ ============== ===========
Current assets
Cash and cash equivalents 1,300.3 360.1 750.6
============================ ============ ============== ===========
Current liabilities
Lease liabilities (71.3) (38.9) (50.1)
============================ ============ ============== ===========
Non-current liabilities
Borrowings (713.4) (244.8) (219.7)
Lease liabilities (319.4) (359.8) (338.4)
============================ ============ ============== ===========
(1,032.8) (604.6) (558.1)
=========================== ============ ============== ===========
Net cash/(debt)(*) 196.2 (283.4) 142.4
============================ ============ ============== ===========
Reconciliation of net cash flow to movement in net
cash/debt(*)
1 December
31 May 2020 2 June 2019 2019
(restated)(1)
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
================================= ============ ============== ===========
Net increase/(decrease) in cash
and cash equivalents 549.7 (50.7) 339.8
Net (increase)/decrease in debt
and lease financing (486.8) 18.0 57.6
Non-cash movements:
- Assets acquired under leases (9.1) (300.9) (305.2)
================================== ============ ============== ===========
Movement in net cash/debt(*) in
the period 53.8 (333.6) 92.2
Opening net cash(*) 142.4 50.2 50.2
Closing net cash/(debt)(*) 196.2 (283.4) 142.4
================================== ============ ============== ===========
1. The 2019 restatement is due to the adoption of IFRS 16 in the
second half of the prior year. See note 3 for further details.
* Net cash/debt is an alternative performance measure. See note
15 for further information.
10. Assets held for sale
1 December
31 May 2020 2 June 2019 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
=========================================== ============ ============ ===========
Assets held for sale
- Marie Claire Beauty Limited ("Fabled") - 8.3 -
- Property 4.2 4.2 4.2
============================================ ============ ============ ===========
Gross assets classified as held
for sale 4.2 12.5 4.2
============================================ ============ ============ ===========
Liabilities associated with assets
held for sale - (2.4) -
Net assets classified as held for
sale 4.2 10.1 4.2
============================================ ============ ============ ===========
Property
The property held for sale is in the United Kingdom and was
previously used in the Group's distribution network. The Group is
in the process of selling it, but the completion of the sale has
been delayed by circumstances beyond the Group's control.
Negotiations are well advanced, and the Group remains committed to
the sale which is expected to be completed in the second half of
2020. Accordingly, the asset has continued to be classified as held
for sale. The proceeds of disposal are expected to exceed the book
value and accordingly, no gain or loss was recognised on the
classification of the property as held for sale.
11. 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:
31 May 2020
Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
(unaudited) (unaudited) (unaudited) (unaudited)
===================================== ============= ============ ============ ============
Financial assets
At fair value through profit or
loss
- Contingent consideration - - 171.4 171.4
- Derivative assets - 0.2 - 0.2
At fair value through comprehensive
income
- Unlisted equity investments - - 6.8 6.8
===================================== ============= ============ ============ ============
Total financial assets - 0.2 178.2 178.4
===================================== ============= ============ ============ ============
Financial liabilities
At fair value through profit or
loss
- Derivative liabilities - (1.7) - (1.7)
===================================== ============= ============ ============ ============
Total financial liabilities - (1.7) - (1.7)
===================================== ============= ============ ============ ============
2 June 2019
Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
(unaudited) (unaudited) (unaudited) (unaudited)
===================================== ============= ============ ============ ============
Financial assets
At fair value through comprehensive
income
- Unlisted equity investments - - 6.8 6.8
===================================== ============= ============ ============ ============
Total financial assets - - 6.8 6.8
===================================== ============= ============ ============ ============
Financial liabilities
At fair value through profit or
loss
- Derivative liabilities - (0.1) - (0.1)
===================================== ============= ============ ============ ============
Total financial liabilities - (0.1) - (0.1)
===================================== ============= ============ ============ ============
1 December 2019
Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
(audited) (audited) (audited) (audited)
===================================== =========== ========== ========== ==========
Financial assets
At fair value through profit or
loss
- Contingent consideration - - 166.3 166.3
At fair value through comprehensive
income
- Unlisted equity investments - - 6.8 6.8
===================================== =========== ========== ========== ==========
Total financial assets - - 173.1 173.1
===================================== =========== ========== ========== ==========
Financial liabilities
At fair value through profit or
loss
- Derivative liabilities - (0.5) - (0.5)
===================================== =========== ========== ========== ==========
Total financial liabilities - (0.5) - (0.5)
===================================== =========== ========== ========== ==========
The derivative assets and liabilities relate to forward
commodity swap contracts.
The following table provides information about how the fair
values of financial instruments classified as level 3 are
determined:
Valuation techniques Significant unobservable
Description and key inputs inputs
============================ ============================== =========================
Contingent consideration Discounted cash flows Discount rate of 8.00%
Expected cash inflows Expected cash inflows
are estimated based on of GBP226.9 million
the terms of the share
purchase agreements and
the Group's expectations
of future performance
and meeting financial
and operational targets
---------------------------- ------------------------------ -------------------------
Unlisted equity investments Market comparison Market multiple
The valuation model is
based on market multiples
derived from market research
reports for industries
comparable to the investee
and the EBITDA of the
investee
============================ ============================== =========================
The consideration relating to the part-disposal of Ocado Retail
Limited valued at GBP169.1 million (1H 2019: GBPnil) comprises
three individual amounts, with three individual "triggers".
Management considers it probable that these triggers will be met,
and this has been reflected in the calculation of the fair
value.
The consideration relating to the disposal of Marie Claire
Beauty Limited ("Fabled") valued at GBP2.3 million (1H 2019:
GBPnil) is based on an "earn-out" agreement whereby the Group will
receive sums in proportion to Fabled's future sales.
12. Capital expenditure and commitments
During the period the Group acquired property, plant and
equipment of GBP154.0 million (1H 2019: GBP68.6 million, 2019:
GBP142.3 million) and intangible assets of GBP8.1 million (1H 2019:
GBP5.9 million, 2019: GBP13.6 million). Internal development costs
of GBP54.5 million (1H 2019: GBP40.9 million, 2019: GBP93.8
million) were capitalised.
At 31 May 2020, capital commitments contracted, but not provided
for by the Group, amounted to GBP178.4 million (1H 2018: GBP78.8
million, 2019: GBP93.6 million).
13. Related party transactions
Key management personnel
Only the Executive and Non-Executive Directors are recognised as
being key management personnel. It is the Board which has
responsibility for planning, directing and controlling the
activities of the Group.
With the exception of remuneration, there were no related party
transactions with key management personnel (1H 2019: none). At the
end of the period, there was GBPnil (1H 2019: GBPnil) owed by key
management personnel to the Group.
Investment
The following transactions were carried out with Paneltex
Limited ("Paneltex"), a company incorporated in the United Kingdom
in which the Group holds a 25% interest:
52 weeks
26 weeks 26 weeks ended
ended ended 1 December
31 May 2020 2 June 2019 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
======================== ============= ============= ============
Purchase of goods
- Plant and machinery - 0.1 0.7
- Consumables 0.2 0.3 0.6
========================= ============= ============= ============
Indirect transactions, consisting of the purchase of plant and
machinery through some of the Group's leasing counterparties, were
carried out with Paneltex to the value of GBPnil (1H 2019: GBP0.5
million). At the end of the period, the Group owed Paneltex
GBP5,000 (1H 2019: GBP0.7 million).
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 1 December
31 May 2020 2 June 2019 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
======================================== ============= ============= ============
Dividend received from MHE JVCo - 6.6 15.6
(Settlement)/reimbursement of supplier
invoices paid on behalf of MHE JVCo (0.1) 3.7 4.2
Capital element of lease liability
instalments accrued or paid to MHE
JVCo 8.5 9.9 25.8
Interest element of lease liability
instalments accrued or paid to MHE
JVCo 1.6 1.6 3.7
========================================= ============= ============= ============
Included within trade and other receivables is a balance of
GBP1.0 million (1H 2019: GBP0.7 million) owed by MHE JVCo. Included
within trade and other payables is a balance of GBP10.7 million (1H
2019: GBP15.8 million) owed to MHE JVCo. Included within lease
liabilities is a balance of GBP57.0 million (1H 2019: GBP69.1
million) owed to MHE JVCo.
In January 2020 the Group loaned $6.0 million (GBP4.7 million at
the period-end) to Infinite Acres Holding B.V., a company
incorporated in the Netherlands in which the Group holds a 33.3%
interest. Interest is chargeable on the loan at 5% per annum for
two years from the date of the loan, and 7% thereafter. The loan is
repayable in full on or before 23 September 2024. In the period
GBP0.1 million of interest was recognised.
No other transactions that require disclosure under IAS 24
"Related Party Disclosures" have occurred during the current
financial period.
14. Post-Balance-Sheet events
In June 2020, the Group raised GBP1 billion in funds, comprising
issues of GBP657 million of ordinary shares and GBP350 million of
senior unsecured convertible bonds with a coupon of 0.75% due in
2027.
15. Alternative performance measures
The Group assesses its performance using a variety of
alternative performance measures, which are not defined under IFRS
and are therefore termed "non-GAAP" measures. These measures
provide additional useful information on the underlying trends,
performance and position of the Group. The non -- GAAP measures
used by the Group are as follows:
-- Exceptional items;
-- Segmental revenue;
-- Segmental gross profit;
-- Segmental other income;
-- Segment distribution and administrative costs;
-- EBITDA;
-- Segmental EBITDA;
-- External gross debt; and
-- Net cash/debt.
Reconciliations of these non-GAAP measures to the nearest
measures prepared in accordance with IFRS are presented below. The
alternative performance measures used may not be directly
comparable with similarly titled measures used by other
companies.
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
non-recurring 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, material costs relating to the opening of a
new warehouse, corporate reorganisations, material litigation, and
any material costs outside of the normal course of business as
determined by management.
The Group has adopted a three-columned approach to the Condensed
Consolidated Income Statement to aid clarity and allow users of the
financial statements to understand more easily the performance of
the underlying business and the effects of one-off events.
Segmental revenue
Segmental revenue is a measure of reported revenue for the
Group's Retail, UK Solutions & Logistics and International
Solutions segments. A reconciliation of reported revenue, the most
directly comparable IFRS measure, with the segmental revenues is
disclosed in note 4.
Segmental gross profit
Segmental gross profit is a measure which seeks to reflect the
profitability of segments in relation to their revenues earned. A
reconciliation of reported gross profit, the most directly
comparable IFRS measure, with the segmental gross profits, is set
out below:
52 weeks
26 weeks 26 weeks ended
ended ended 1 December
31 May 2020 2 June 2019 2019
(restated)(1)
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
======================================= ============= ============== ============
Retail gross profit 298.1 233.3 466.4
UK Solutions & Logistics gross profit 320.6 293.9 583.2
International Solutions gross profit 1.3 0.3 0.4
Other gross profit (0.2) 1.2 0.9
Group eliminations (257.5) (223.4) (453.6)
======================================== ============= ============== ============
Reported gross profit 362.3 305.3 597.3
======================================== ============= ============== ============
1. The 2019 restatement is due to the adoption of IFRS 16 in the
second half of the year. See note 3 for further details.
Segmental other income
Segmental other income is a measure which seeks to reflect
segmental income which is not generated through the primary trading
activities of the segments (for example, volume-rebates from
suppliers in the Retail segment). A reconciliation of reported
other income, the most directly comparable IFRS measure, with the
segmental other incomes, is set out below:
52 weeks
26 weeks 26 weeks ended
ended ended 1 December
31 May 2020 2 June 2019 2019
(restated)(1)
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
======================================= ============= ============== ============
Retail other income 28.5 32.0 65.6
UK Solutions & Logistics other income 1.8 1.6 3.0
International Solutions other income - - -
Other segment other income 7.1 6.4 15.4
Group eliminations (0.2) (0.3) (0.1)
======================================== ============= ============== ============
Reported other income 37.2 39.7 83.9
======================================== ============= ============== ============
1. The 2019 restatement is due to the adoption of IFRS 16 in the
second half of the prior year. See note 3 for further details.
Segmental distribution and administrative costs
Segmental distribution and administrative costs is a measure
which seeks to reflect the performance of the Group's segments in
relation to the long-term sustainable growth of the Group. These
measures exclude certain costs that are not allocated to a segment:
depreciation, amortisation, impairment and other central costs. A
reconciliation of reported distribution and administrative costs,
the most directly comparable IFRS measure, with the segmental
distribution and administrative costs, is set out below:
52 weeks
26 weeks 26 weeks ended
ended ended 1 December
31 May 2020 2 June 2019 2019
(restated)(1)
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
======================================== ============= ============== ============
Retail distribution and administrative
costs 280.9 240.9 498.1
UK Solutions & Logistics distribution
and administrative costs 293.1 254.7 501.3
International Solutions distribution
and administrative costs 46.4 24.0 61.2
Other distribution and administrative
costs 17.2 19.1 31.4
Group eliminations (258.0) (223.9) (453.4)
Depreciation, amortisation, impairment
and other central costs 76.6 64.9 136.1
========================================= ============= ============== ============
456.2 379.7 774.7
======================================== ============= ============== ============
52 weeks
26 weeks 26 weeks ended
ended ended 1 December
31 May 2020 2 June 2019 2019
(restated)(1)
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
================================== ============= ============== ============
Reported distribution costs 313.0 272.2 564.8
Reported administrative expenses 143.2 107.5 209.9
456.2 379.7 774.7
================================== ============= ============== ============
1. The 2019 restatement is due to the adoption of IFRS 16 in the
second half of the prior year. See note 3 for further details.
EBITDA
In addition to measuring its financial performance based on
operating profit, the Group measures performance based on EBITDA.
EBITDA is defined as the Group's earnings before depreciation,
amortisation, impairment, net finance cost, taxation and
exceptional items. EBITDA is a common measure used by investors and
analysts to evaluate the operating financial performance of
companies. A reconciliation of operating profit with EBITDA can be
found on the face of the Condensed Consolidated Income Statement on
page 14.
The Group considers EBITDA to be a useful measure of its
operating performance because it approximates the underlying
operating cash flows by eliminating depreciation and amortisation.
EBITDA is not a direct measure of liquidity, which is shown by the
Condensed Consolidated Statement of Cash Flows, and needs to be
considered in the context of the Group's financial commitments.
Segmental EBITDA
The financial performance of the Group's segments is measured
based on EBITDA, as reported internally. A reconciliation of the
EBITDA of the Group with the EBITDA for the segments is disclosed
in note 4.
External gross debt
External gross debt is calculated as total debt (borrowings and
lease liabilities as disclosed in note 8), less lease liabilities
payable to joint ventures of the Group. External gross debt is a
measure of the Group's indebtedness to third parties which are not
considered related parties of the Group. A reconciliation of gross
debt with external gross debt is set out below:
1 December
31 May 2020 2 June 2019 2019
(restated)(1)
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
==================================== ============ ============== ===========
Gross debt 1,104.1 643.5 608.2
Lease liabilities payable to joint
ventures (57.0) (69.1) (64.0)
External gross debt 1,047.1 574.4 544.2
===================================== ============ ============== ===========
1. The 2019 restatement is due to the adoption of IFRS 16 in the
second half of the year. See note 3 for further details.
Net cash/debt
Net cash/debt is calculated as cash and cash equivalents less
total debt (borrowings and lease liabilities as disclosed in note
8). Total debt is measured as the net proceeds raised, adjusted to
amortise any discount over the term of the debt.
Net cash/debt is a measure of the Group's net indebtedness, and
provides an indicator of the overall strength of the Condensed
Consolidated Balance Sheet. It is also a single measure that can be
used to assess the combined effect of the Group's cash position and
its indebtedness. The use of the term "net cash" does not
necessarily mean that the cash included in the net cash calculation
is available to settle the liabilities included in this
measure.
Net cash/debt is considered to be an alternative performance
measure as it is not defined in IFRS. The most directly comparable
IFRS measure is the aggregate of borrowings and lease liabilities
and cash and cash equivalents. A reconciliation of these measures
with net cash/debt is disclosed in note 9.
Principal risks and uncertainties
The Group faces a number of risks and uncertainties that may
have an adverse effect on its operations, performance and future
prospects.
The Board assesses and monitors the principal risks of the
business regularly. Set out in the Group's Annual Report and
Accounts for the 52 weeks ended 1 December 2019 were details of the
principal risks and uncertainties for the Group and the key
mitigating activities used to address them at that time.
The Board's latest risk assessment has considered both the
specific consequences of COVID-19 and its effect on the underlying
principal risks managed by the business.
The Group has implemented extensive measures to mitigate the
effects of the pandemic on its business. These measures are
intended to ensure the health and safety of its employees,
customers and suppliers and to ensure the continuity of the
business, both the Retail and Solutions sectors. These measures are
wide-ranging and include: implementing rapid-response Coronavirus
tests for frontline employees; following government guidance in
closing offices and introducing home-working; introducing
distancing and hygiene measures in CFCs, vehicles, spokes,
construction sites and at customers' doorsteps to keep employees
and customers safe; engaging with government and specialist
advisors; and instigating business continuity plans and regular
monitoring.
The Group will continue to monitor government guidance carefully
and where needed adapt its operational protocols and processes to
safeguard Retail customers and employees, so as to cater for the
continued operation of the Retail business and to allow the OSP
programmes to progress as planned.
Although the principal risks prior to the pandemic remain
largely unchanged in substance, the pandemic has increased the
likelihood and effect of those risks. For example, international
travel restrictions impede the Group's ability to bring technical
expertise to bear on some Solutions client projects, increasing the
possibility of delays or quality issues. Similar risks apply to the
on-boarding of new overseas manufacturing and supply chain
partners, further affected by the challenges posed by a lack of
available shipping.
The immediate effect of lockdown was a multiple-fold increase in
demand for online groceries, massively exceeding our capacity. In
ensuring the continuity of the Retail operations, measures were
taken both to restrict access to the webshop and to prioritise
availability of delivery slots to the most loyal and most
vulnerable customers. The platform has been adapted and steps taken
to increase capacity rapidly to allow more groceries to be
delivered to customers, but this has affected some customers and
meant that order fulfilment KPIs have been lower.
Other than where indicated below, the Board does not consider
that the principal risks and uncertainties have changed, but will
remain relevant for the remaining six months of the 2020 financial
year.
-- Risk of a decline in the high service levels in the Retail
business, especially during the transitional period associated with
the creation of the Retail joint venture. COVID-19-related
disruption adds an additional element of risk.
-- Risk of failing to maintain a retail proposition which
appeals to a broad customer base and sustains growth rates while
managing changes resulting from the new arrangements with
M&S
-- Risk that current Solutions pricing levels may not provide
both acceptable returns for shareholders and attractive long-term
cost of ownership for clients, whilst delivering a viable,
fully-operational end-to-end customer experience
-- Risk of the transformation programme failing to deliver a
sustainable operational infrastructure able to execute effectively
the requirements for multiple Solutions contracts simultaneously in
many international locations, whilst providing for sufficient
management, technological and engineering capabilities
-- Risk of delays in the generation of additional capacity in the United Kingdom
o This risk is now broadened to include the risk of delays in
the international OSP programme as a result of COVID-19, as
highlighted above.
-- Risk that technological innovation supersedes our own and
offers improved methods of food distribution to consumers
-- Risk of infringing a third party's Intellectual Property
("IP") or failing to protect Ocado's own IP
-- Risk of supply chain disruption, in particular for single
source equipment, adversely affecting product availability,
delivery, reliability and cost, resulting in delays to contractual
commitments and loss of revenue
-- Risk of a food safety, product safety or health and safety incident
-- Risk of changes in regulations affecting our business model
or the viability of Solutions' deals
-- Risk of negative effects due to changes in the global
economic and geopolitical environment, including Brexit and the
associated tariffs or difficulty in hiring employees, that may
affect our business model
-- Risk of failing to prevent or respond to a major cyber-attack
or data breach that could result in business disruption,
reputational damage, significant fines or the loss of customers',
employees' or confidential business information
-- Risk of business interruption
This principal risks section should be read in conjunction with
the rest of this statement as the effect of COVID-19 on the
business is explained there and helps provide an understanding of
the risks and opportunities facing the Group.
More information on most of 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 1 December 2019, a copy of
which is available on the Group's corporate website,
www.ocadogroup.com.
Independent Review Report to Ocado Group plc
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
26 weeks ended 31 May 2020 which comprises the income statement,
the balance sheet, the statement of changes in equity, the cash
flow statement and related notes 1 to 15. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 26 weeks ended 31 May
2020 is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
14 July 2020
Statement of Directors' Responsibilities
The Directors confirm that, to the best of their knowledge, this
set of condensed consolidated financial statements has been
prepared in accordance with IAS 34 "Interim Financial Reporting" as
adopted by the European Union, and that the interim management
report includes a fair review of the information required by DTR
4.2.7R and DTR 4.2.8R of the Disclosure Rules and Transparency
Rules.
The Directors of Ocado Group plc as at the date of this
announcement are as follows:
Executive Directors
Tim Steiner, Chief Executive Officer
Luke Jenson, Chief Executive Officer, Ocado Solutions
Duncan Tatton-Brown, Chief Financial Officer
Neill Abrams, Group General Counsel and Company Secretary
Mark Richardson, Chief Operations Officer
Non-Executive Directors
Lord Rose, Chairman
Andrew Harrison, Senior Independent Director
Jörn Rausing
Emma Lloyd
Julie Southern
John Martin
Claudia Arney
Approved by the Board and signed on its behalf by:
Duncan Tatton-Brown
Chief Financial Officer
Neill Abrams
Group General Counsel and Company Secretary
14 July 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BZLLFBDLEBBK
(END) Dow Jones Newswires
July 15, 2020 02:00 ET (06:00 GMT)
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