OCADO GROUP
PLC
Full year results for the 53 weeks ended 3 December
2023
29 February 2024
FY23 is a 53-week year to 3 December 2023. The
comparative period to 27 November 2022 is 52 weeks. To aid
comparison, the FY23 results, associated commentary and percentage
changes are presented below on an unaudited 52-week basis unless
otherwise stated, up until the Consolidated Financial
Statements.
Financial, operational and strategic progress across
Ocado Group
Financial progress
●
Group revenue
£2.8bn, +9.9%: Technology
Solutions +44%, Ocado Logistics +1%, Ocado Retail +7%
●
Group adjusted
EBITDA*1 of £51.6m, up £125.7m from a loss of
£(74.1)m: Technology Solutions
positive at £15.4m; Ocado Logistics at £30.1m; Ocado Retail
returned to a positive adjusted EBITDA* of £10.4m; inter-segment
eliminations £(4.3)m
●
Cost reductions
across the Group: operational efficiencies and
lower support costs. Ocado Smart Platform ("OSP") direct operating
costs2 down from 2.02% to 1.65% of installed sales
capacity
●
Underlying cash
outflow*3 of £(473)m: +£356m versus FY22
(well ahead of guidance of +£200m)
●
Cash and cash
equivalents of £0.9bn; gross liquidity remains strong at
£1.2bn (including £0.3bn revolving credit
facility)
●
Net adjusting
items* £24m: primarily relates to income from
the settlement reached with AutoStore Technology AS ("AutoStore")
partially offset by the change in fair value of the contingent
consideration, per IFRS 13, due from Marks and Spencer Group plc
("M&S"). Other material one-off costs reflect Ocado Retail's
network capacity review, strategy and capacity review for Zoom
sites, and organisational restructuring
●
Loss before tax
of £(394)m, taking into account £187m from the
settlement reached with AutoStore, an improvement of £107m versus
FY22
●
FY23 results in
line or better than guidance
●
53 week year adjusted EBITDA* of £54m and loss before tax of
£(403)m
Operational and strategic progress
●
Technology
Solutions: +25% growth in average live
modules4 versus FY22 (up from 84 to 105); 111 live
modules at the end of the year, three new live Customer Fulfilment
Centres ("CFCs"); 26 sites live at the end of FY23 (22 CFCs, 4
Zooms). The 14 modules at Hatfield CFC and Leeds Zoom are included
in the 111 live modules. Despite the ceasing of operations at these
sites (with Hatfield capacity transferred to other CFCs, primarily
Luton), they continue to generate OSP fees
●
Partner Success
programme expanded: supporting our partners'
long-term growth and profitability. We are working with all of our
partners operating live CFCs to help them fill their capacity and
deliver attractive returns
●
Re:Imagined
technology rollout: certain Re:Imagined
technologies became available for commercial use in FY23 and were
deployed in the UK and Sweden
●
Ocado
Intelligent Automation ("OIA"): first OIA deal
signed with McKesson in Canada; 6 River Systems LLC ("6RS")
acquisition fully integrated
●
Ocado
Logistics: continued progress driving
productivity and efficiencies in warehouse and delivery services
for our UK partners
●
Ocado
Retail: continued strong customer retention and
growth. Delivery of 'Perfect Execution' Programme resulted in
strong trading performance and cost efficiencies in all areas of
the business, delivering positive full-year adjusted
EBITDA
Tim
Steiner, Chief Executive Officer of Ocado Group,
said:
"I am pleased
to report good progress across the Group in 2023. Our technology is
transforming the way people shop for food as we help some of the
world's best and most innovative retailers set the bar for
excellence in grocery ecommerce worldwide. We opened three new
state-of-the-art robotic CFCs; in Chiba city (near Tokyo) in Japan,
Calgary in Canada, and Luton here in the UK and increased the
amount of installed capacity for our clients by a quarter. We now
have installed capacity at our retail partners for gross annual
grocery sales of over £8bn.
Ocado Retail,
our JV with M&S in the UK, has had significant success growing
customer numbers, taking online grocery market share and rebuilding
profitability, proving, once again, the attractions of our online
model. Ocado Intelligent Automation, which brings our world-leading
Automated Storage and Retrieval Systems ("ASRS") technology, and
the automation of warehouses to sectors outside of grocery, signed
its first deal with pharmaceutical giant McKesson in
Canada.
These are all
big, tangible steps forward which demonstrate that our passion and
talent for innovation is delivering significant growth. There is,
of course, much more to come and much more to do.
In the current
year, we expect our Partner Success programme to help put our
partners well on the path to generating attractive returns from
their investment in the Ocado Smart Platform, a key deliverable to
drive orders for more capacity in their existing sites and
additional future sites. This is, for now, the primary focus of the
business and we are encouraged by the progress we are making in
helping our partners get the best out of the technology that we
have successfully installed for them. At Ocado Retail, we expect
further progress on its trajectory to restore an industry-leading
EBITDA margin over the mid-term. We are also confident in our
ability to win new OIA deals as we bring our solution to the
non-grocery market.
Future success
will be driven by the characteristics that have always set Ocado
apart: our ability to solve some of the most difficult engineering
challenges in the market, our capacity to innovate at pace, and our
discipline to turn vision into reality. I'm confident that we will
turn these qualities into faster growth, stronger cash flows, and
higher returns, in the current financial year and
beyond".
Ocado Group FY23 Income Statement
£m
|
FY23
53 weeks
|
FY23
52 weeks
|
FY227
52 weeks
|
Change
52 weeks
|
Revenue5
|
|
|
|
|
Technology Solutions
|
429.0
|
420.5
|
291.4
|
44.3%
|
Ocado Logistics
|
680.5
|
667.5
|
662.9
|
0.7%
|
Ocado Retail
|
2,408.8
|
2,357.5
|
2,203.0
|
7.0%
|
Inter-segment
eliminations
|
(693.3)
|
(679.9)
|
(640.5)
|
(6.2)%
|
Group
|
2,825.0
|
2,765.6
|
2,516.8
|
9.9%
|
Adjusted EBITDA*1
|
|
|
|
|
Technology Solutions
|
15.6
|
15.4
|
(101.5)
|
116.9
|
Ocado Logistics
|
30.8
|
30.1
|
33.6
|
(3.5)
|
Ocado Retail
|
12.1
|
10.4
|
(4.0)
|
14.4
|
Inter-segment
eliminations
|
(4.3)
|
(4.3)
|
(2.2)
|
(2.1)
|
Group
|
54.2
|
51.6
|
(74.1)
|
125.7
|
Depreciation, amortisation &
impairment
|
(405.2)
|
(395.9)
|
(348.6)
|
(47.3)
|
Net interest costs
|
(62.8)
|
(61.6)
|
(64.6)
|
3.0
|
FX (losses)/gains
|
(13.3)
|
(11.6)
|
16.4
|
(28.0)
|
Adjusting
items*6
|
23.9
|
23.9
|
(29.9)
|
53.8
|
Group loss before tax
|
(403.2)
|
(393.6)
|
(500.8)
|
107.2
|
* These measures are alternative
performance measures. Please refer to section 6 of the Consolidated
Financial Statements
Notes:
1. Adjusted EBITDA* is defined as
earnings before net finance cost, taxation, depreciation,
amortisation, impairment and adjusting items*.
2. Direct operating costs as a % of
installed sales capacity reflect the P12 exit rate position for all
OSP CFCs live at the period end. Direct operating costs include
engineering, cloud and other technology direct costs.
3. Underlying cash flow* is the
movement in cash and cash equivalents excluding the impact of
adjusting items*, costs of financing, purchase of/investment in
unlisted equity investments and FX movements. The FY23 underlying
cash flow* number is based on 53 weeks.
4. Average live modules measures the
weighted average number of modules of capacity installed and ready
for use by OSP clients during the year, which drives Technology
Solutions recurring revenue.
5. Revenue is a. Retail - online
sales (net of returns) including delivery charges to the customer
b. Technology Solutions - the fees charged to Solutions partners
and OIA clients and c. Logistics - the recharge of costs and
associated fees from Ocado Logistics to our UK clients. Recharges
from Technology Solutions and from Ocado Logistics to Ocado Retail
are eliminated on consolidation.
6. Net adjusting items* of £23.9m
primarily relate to £186.5m income from the agreement reached with
AutoStore to settle IP patent legal cases under which AutoStore
will pay the Group £200.0m in instalments over two years, £(67.0)m
change in IFRS 13 fair value relating to the revaluation of the
M&S contingent consideration and related costs, £(32.2)m UK
network capacity review, £(27.4)m costs in relation to the Zoom by
Ocado strategy and capacity review, and organisational
restructuring costs of £(15.5)m. Other adjusting items* include
costs associated with Finance, IT and HR systems transformation,
acquisition costs of 6RS and litigation costs.
7. The Group has changed its
segmental reporting for FY23 to reflect the Group's three distinct
business models: Technology Solutions, Ocado Logistics and Ocado
Retail. The FY22 prior year comparatives have been restated on the
new segment basis. We have carried out a detailed exercise to
ensure all costs are owned and managed within the appropriate
segment. This has resulted in a different cost allocation to that
used in the preparation of the pro forma numbers as presented in
the FY22 results presentations for Logistics and Technology
Solutions; Ocado Group adjusted EBITDA* loss of £74.1m at FY22
remains unchanged.
8. Technology Solutions contribution
margin % is revenue less direct operating costs.
9. Mid-term support cost target of
£130m subject to inflation from FY21 - estimated to be c.£150m
including inflation impact.
10. DP8 represents the customer
deliveries per standardised eight-hour shift for Ocado Retail
only.
11. Active customers are classified
as active if they have shopped at Ocado.com within the previous 12
weeks.
FY23 Operational and Strategic Review
The commentary is on a pre-adjusting items*
basis to aid understanding of the performance of the
business
Technology Solutions
OSP
capacity rollout; increase in live modules driving strong revenue
growth and profit flow-through
Technology Solutions delivered the rollout of
new capacity in both new and existing markets. During FY23, three
CFCs and 12 new modules went live, taking the total to 26 sites and
111 live modules at the end of the period. The first CFC went live
for AEON in Chiba city, near Tokyo in April; Sobeys' third CFC went
live in Calgary in March; and the Luton CFC, Ocado Retail's newest
CFC, opened in September. The Luton CFC has some of our latest
innovations installed, including its first phase of On-Grid Robotic
Pick ("OGRP"), enabling huge leaps forward in fulfilment
productivity, cost and a better experience for Ocado Retail
customers. In Australia, following completion of initial build and
testing phases, final regulatory approvals are now being sought by
Coles for the occupancy certificate for their Sydney CFC before
moving into the final stages for go-live. The Melbourne CFC build
is advancing well. Reflecting this progress, we expect to go live
with both sites in FY24.
We are pleased with the financial progress in
Technology Solutions: the full-year performance demonstrates the
operational leverage in the business. The growth in the number of
live modules drove revenue growth of 44% with a contribution
margin8 of 70%, which, combined with cost efficiencies,
delivered strong profit flow-through and positive adjusted EBITDA*
of £15m (FY22: £(102)m).
Our focus on efficiencies continues: support
costs were £17m lower in the period, falling from £208m to £191m,
as a result of significant cost reduction measures and the one-off
profit of £5m from the sale of the Dartford spoke. The £17m
reduction was achieved while still investing an additional £8m in
our Partner Success programme and OIA team. We expect further
progress in cost reductions during FY24, continuing towards our
mid-term target of annual spend of £150m9.
OSP
Partner Success programme delivering results
Our Technology Solutions Account Management
teams are supported by a dedicated Partner Success function. The
function is critical in providing targeted support to our partners
to get the best out of their ecommerce business, powered by OSP,
delivering advice and analysis as they go live and scale with the
platform. These teams work closely with our international partners
to drive improvements in operating efficiency, customer marketing
and attractive returns. We anticipate this will help accelerate
partner orders for additional modules and CFC sites. This is
particularly important to Ocado as we would like to grow our module
count with existing partners as well as future partners.
We continue to work closely with Kroger and the
results from our work with them in their first two CFCs (in Monroe,
Ohio and Groveland, Florida) are driving improved operational
performance; together, over the year we have achieved a 25%
reduction in operational cost per item, reflecting increased
warehouse productivity and more drops per van route. Our Partner
Success teams are working closely with all our partners across
areas including development of the online playbook, driving
operational efficiency and growth, and collaborating closely on the
product roadmap to meet evolving consumer expectations. We will
continue to work with Kroger, and all our partners, in each of
these areas, in order to support their path to generating
attractive returns through OSP.
Re:Imagined technology rollout
In January 2022 we unveiled Ocado Re:Imagined, a
series of technology innovations, both hardware and software,
designed to drive efficiency and performance. Some of our
Re:Imagined technologies became available for commercial use in
FY23 and have been deployed for Ocado Retail in the UK, with OGRP
live at the Purfleet and Luton CFCs and Automated Frameload ("AFL")
live at the Purfleet CFC. The phased rollout of Re:Imagined
technology across Ocado Retail's CFC estate is driving further
operational efficiencies through increased automation. In Sweden,
ICA went live with AFL during FY23 and their material handling
equipment ("MHE") continues to perform very well. We are in
discussions with several of our other international retail partners
about the roll out of Re:Imagined technologies.
Ocado Intelligent Automation announced its first deal with
McKesson Canada
OIA launched in August 2022 bringing Ocado's
unique and proprietary technology to clients outside of the grocery
sector. It operates a capital-light "MHE sell" (rather than "MHE
licence") model ensuring our cash flows are neutral/positive and
matching our outflows throughout the project life. OIA is now
ramping up its marketing and building its pipeline of
opportunities. The team received great feedback when it showcased a
mini version of the Ocado grid and bots at its first trade show,
Manifest, in Las Vegas in February 2024.
On 15 November 2023, OIA announced its first
deal to provide fulfilment technology to McKesson Canada, where
Ocado will sell its proven, unique warehouse fulfilment technology
and provide the AI-powered software applications necessary for the
long-term operation of that technology. McKesson Canada is a
leading diversified healthcare provider in Canada and is the
largest pharmaceutical distributor in the country. Ocado will
receive upfront fees during the construction process to fund the
cost of the project with a final payment upon final installation.
Ocado will also receive an ongoing annual fee related to the SaaS
services and the servicing and maintenance of the technology. The
deal is 'capital-light' which will be cash neutral throughout the
development phase and is expected to be cash and EBITDA positive in
FY25 when installation is due to be complete.
New
OSP partner signed
We are pleased to have signed a new partnership
with Panda Retail Company ("Panda") in the Kingdom of Saudi Arabia
to support their ambitious growth goals in a rapidly developing
market for grocery e-commerce. Under the partnership, Ocado will
support Panda to serve customers online via a network of manual
CFCs and stores across the market using the Ocado In-Store
Fulfilment solution, underpinned by the end-to-end capabilities of
OSP.
Outlook for Technology Solutions - FY24
●
Three further CFCs are expected to go live internationally
during FY24: two CFCs for Coles in Melbourne and Sydney and one for
Alcampo in Madrid
●
At the end of FY24 it is expected a minimum of 120 modules
will be live across our partners, with further modules dependent on
the results from the Partner Success programme, which is expected
to drive improved economics for our OSP partners supporting the
rollout of further sites and modules
●
Further cost reductions will support growth in
profitability
●
We continue to target further OSP deals
●
Ocado Intelligent Automation started marketing the ASRS
proposition at international trade shows in early 2024; ongoing
discussions with several possible partners are encouraging for
FY24
Ocado Logistics
Our third-party logistics ("3PL") operation,
that services Ocado Retail and Morrisons in the UK, continues to
perform strongly and remains a good example of our highly efficient
3PL distribution model. In FY23 fulfilment and delivery costs
remained broadly flat. This was driven by customer orders per week
across our two partners growing +3.2% and eaches delivered
declining (1.2)% driven by a reduction in items per shopping basket
as consumers responded to the impact of high inflation on their
cost of living.
Inflation also affected operational costs and
rising labour rates were well controlled by our teams and offset by
productivity improvements in our OSP CFCs which saw units picked
per labour hour ("UPH") improved strongly by 13.0% to a weighted
average UPH across our UK OSP CFCs of 208. Average drops per
standard 8-hour shift ("DP8")10 increased by 0.9% to
21.5. Ocado Logistics remains a reliable cash generator and
delivered an adjusted EBITDA* of £30m (FY22: £34m) decreasing
year-on-year driven by lower asset rental income and higher
non-recharged technology costs.
Outlook for Ocado Logistics - FY24
●
Continued improvement in productivity for our UK
partners
●
Volume growth expected to be high single-digit
Ocado Retail
A
return to profitability for the full year
Ocado Retail revenue grew by 7.0% in FY23 driven
by a mix of strong active customer11 growth of +5.9% to
998k, growth in average orders per week of +4.0% to 393k, and the
average basket value increasing +2.7%. The basket value increase
was driven by average selling price ("ASP") of +7.9% (net of
product mix effects), which was offset by a smaller number of items
per basket which declined by 4.5% to 44 items as customers managed
their overall basket spend in the current high inflation
environment. The number of items per basket has broadly stabilised
at 44 items.
Ocado Retail's share of online grocery increased
from 12.3% to 12.7% and their share of the overall UK grocery
market increased from 1.6% to 1.7% during the period. ASP inflation
of 7.9% was well below UK grocery inflation of 10.1% (Nielsen) and
the business continues to invest in price and broaden its range to
ensure to differentiate its customer offer further alongside
choice, service and experience. The Ocado Price Promise now matches
over 10,000 like-for-like goods between Ocado.com and Tesco and
Ocado Retail also lowered the prices of thousands of our products
through 'Big Price Drops'. This is a key part of the strategy to
support growth and the retention of customers. The increase in
total active customers and the mature customer base reinforces the
success of this strategy.
The total active customer base increased by
+5.9% and the growth in the mature customer base (those customers
who have shopped 5 or more times on Ocado.com) was stronger, up +9%
on the year, the highest level it has ever been. Today Ocado Retail
has over 1 million customers actively shopping on
Ocado.com.
The 'Perfect Execution' programme is driving
improved customer proposition and service levels, with on-time
deliveries and order accuracy back to pre-covid levels; 'Perfect
Orders' (on time and in full, with no substitutions) increased by
around six percentage points year on year, with 99% of items
delivered as promised. Consumers are being offered more choice,
with the number of M&S products on site increasing to around
90% of the addressable range. Furthermore, new and unique products
are being introduced to the Ocado Own Range.
Gross profit grew by 7.7% to £797m, which was
higher than revenue growth (+7.0%) and driven by improved range and
stock management, reduced wastage, and increased delivery income.
Continued cost control meant that combined costs fell as a
percentage of revenue, driven by productivity improvements at our
CFC sites, with overall UPH improving by 10.4%; and marketing
optimisation yielding results. This was partially offset by
increased capacity fees from the opening of the Luton CFC during
the year and the annualisation of capacity fees for CFCs which went
live during FY22. With the closure of our oldest CFC in Hatfield
and the opening of our latest robotic CFC in Luton, Ocado Retail
was (at the year-end) using >75% of available capacity (end of
FY22: c.60%). We expect ORL to continue increasing utilisation of
its available capacity during FY24.
Profitability improved through the year with the
Retail business delivering positive adjusted EBITDA* of £10m (FY22:
£(4)m). We see a clear pathway to continue this positive trend as
active customers continue to increase and we make further progress
increasing efficiencies, improving capacity utilisation of the CFCs
and delivering incremental profitability through the natural
operational gearing within the business.
UK
network capacity review supports greater efficiencies and a better
customer experience
In FY23, Ocado Retail conducted a network
capacity review for its CFCs and a strategy and capacity review for
its Zoom sites. This resulted in the decision to cease trading at
the Hatfield CFC and Leeds Zoom. The cessation of operations at our
oldest CFC in Hatfield will help to improve the profitability of
Ocado Retail as we transfer throughput to our highly efficient,
automated CFCs, primarily the brand-new Luton CFC, which opened in
September. There will be a natural reduction in excess capacity,
coupled with the more attractive economics of the latest generation
of robotic CFCs. The strategy and capacity review for the Zoom
network will seek to further optimise the utilisation of its London
properties.
Our latest generation CFCs are consistently
achieving well over 200 UPH within the facility compared to UPH of
around 150 for our first-generation CFC in Hatfield. The newest
sites also have much lower energy usage with Luton consuming
approximately one-third of the electricity of Hatfield, together
this will result in a reduction of fixed costs in FY24. With the
benefit of Ocado Re:Imagined, Ocado will continue to drive
improvements in UPH (to ultimately exceed the target of >300
UPH) and improve customer experience, including increased capacity
for same-day deliveries.
Luton CFC is our fastest-ever ramping CFC and
within the first four weeks, the site had ramped to c.40,000 orders
per week. At full capacity, the CFC will process 65,000 orders per
week. By the end of FY23 Luton CFC had already achieved UPH of 190,
which we expect to further increase over the coming years to over
300 UPH with the benefit of OGRP and AFL technologies.
Outlook for Ocado Retail - FY24
●
We have confidence that the business will continue its
encouraging momentum over the coming year, growing sales volumes
ahead of the market and benefiting from continued active customer
growth
●
Revenue growth is likely to be impacted by lower growth in
ASP, as we invest in value and as food price inflation continues to
subside
●
Overall revenue growth in FY24 is expected to be in the
mid-high single digits %
●
We expect to make further progress on increasing efficiencies
and demonstrating operational leverage while continuing on our
journey towards a high mid-single digit EBITDA margin in the
mid-term.
Ocado Group
Group cash flow
Underlying cash outflow* improved by £356m in
FY23, driven by revenue growth, strong profit flow-through, cost
reductions and lower capital expenditure. This was above the £200m
of underlying cash flow* improvement guided at FY22 due to improved
utilisation of MHE already on the balance sheet, higher net
interest income than forecast, and strong EBITDA
performance.
Group capital expenditure
Capital expenditure primarily comprises new site
construction costs and technology development costs to enhance OSP.
Capital expenditure was £520m in the period (FY22: £797m), a
reduction of £277m, driven by a decrease in the number of CFCs and
new modules that went live during the year. FY23 Group capital
expenditure of £520m was below the £550m guidance largely driven by
improved utilisation of MHE already on the balance sheet (as
mentioned above), a reduction in unit costs of capital, and a
reduction in new site capital expenditure for Ocado
Retail.
AutoStore Litigation
Settlement reached with AutoStore relating to patent
infringement
The litigation between AutoStore and Ocado,
which started with AutoStore issuing claims against us in October
2020 in the US International Trade Commission, the United States
District Court for the Eastern District of Virginia and the UK High
Court, was settled on 22 July 2023. The main terms of that
settlement were that AutoStore paid Ocado £200m (in instalments
over 24 months), the parties agreed a cross-licence arrangement
over all pre-2020 patents (other than that AutoStore is not able to
make a single-space cavity robot), and that neither party will
assert post-2020 patents against the other party's existing
products. En route to the settlement agreement actions were started
by Ocado against AutoStore in the USA, in Germany and in the EU
Unified Patent Court. Before these Ocado actions reached trial,
Ocado won the case in the ITC and the UK High Court, as well as the
German Patent Office. Ocado also received £6.7m as a contribution
to costs in the UK High Court trial.
Deconsolidation of Ocado Retail
Ocado Group plc and M&S are both joint equal
shareholders of Ocado Retail Limited. At present the results of
Ocado Retail Limited are consolidated into the results of Ocado
Group plc as Ocado Group plc are deemed to be the controlling
shareholder via certain tie-breaking rights. Our current intention
is to give up those tie-breaking rights to M&S in early April
2025. There will be no change in the economic interest of both
shareholders in Ocado Retail Limited, or any consideration paid by
M&S, as a result of this proposed change. After giving up the
tie-breaking rights to M&S, we expect that the results of Ocado
Retail Limited will cease to be consolidated into the results of
Ocado Group plc and will instead be equity accounted for as an
investment from this point onwards. From this point, M&S would
have the right to consolidate the results of Ocado Retail Limited
pursuant to the terms of the original Shareholder Agreement signed
in August 2019 when the Joint Venture was formed.
FY24 Guidance
Revenue:
●
Technology
Solutions: 15% to 20% growth
● Ocado
Logistics: stable: high single-digit % volume
growth offset by a reduction in costs recharged to customers due to
efficiency improvements
● Ocado Retail:
mid-high single digits % growth
Adjusted EBITDA*:
●
Technology
Solutions: greater than 10% EBITDA
margin
● Ocado
Logistics: stable at around £30m
● Ocado Retail:
underlying EBITDA margin of c.2.5% (underlying excludes
Hatfield fees of £33m p/a)
Capital expenditure: around
£475m
Underlying cash flow*: around £100m
improvement
Results Presentation
A results presentation will be available for
investors and analysts at 9.30 am on 29 February 2024. This can be
accessed online
here. Following the session there will be Q&A, also
accessible via the webcast.
Contacts
Tim Steiner, Chief Executive Officer on +44 20
7353 4200 today or +44 1707 228 000
Stephen Daintith, Chief Financial Officer on +44
20 7353 4200 today or +44 1707 228 000
Chandler Benet, Head of Investor Relations, on
+44 20 7353 4200 today or +44 1707 228 000
Martin Robinson at Teneo, Public Relations, on
+44 20 7353 4200
Financial Calendar
Ocado Group 1H24 Results will be reported on 16
July 2024. The schedule of Ocado Retail trading statements for FY24
is: Q1 Trading Statement on 26 March 2024, Q3 Trading Statement on
19 September 2024 and a Q4 Trading Statement on 14 January
2025.
Cautionary statement
Certain statements made in this announcement are
forward‐looking statements. Such statements are based on current
expectations and assumptions and are subject to a number of risks
and uncertainties that could cause actual events or results to
differ materially from any expected future events or results
expressed or implied in these forward‐looking statements. Persons
receiving this announcement should not place undue reliance on
forward‐looking statements. Unless otherwise required by applicable
law, regulation or accounting standard, Ocado does not undertake to
update or revise any forward‐looking statements, whether as a
result of new information, future developments or
otherwise.
Financial Review
Headlines
FY23 is a
53-week year to 3 December 2023. The comparative period is 52 weeks
to 27 November 2022. To aid comparability, the FY23 results,
associated commentary and percentage changes are presented on an
unaudited 52-week basis, other than year-end balance sheet and cash
flow data, unless otherwise stated.
Revenue increased by 9.9% to £2,765.6m
(FY22: £2,516.8m):
●
Technology
Solutions delivered strong revenue growth, up
44.3% to £420.5m (FY22: £291.4m) with 105 average live modules
during the period (FY22: 84), up by 25.0%. In the year we added
three new sites and 12 additional modules. These included the first
Customer Fulfilment Centre ("CFC") in the Asia-Pacific region for
AEON in Chiba city, just outside Tokyo, Japan; the third CFC for
Sobeys in Calgary, Canada; and the eighth CFC for Ocado Retail in
Luton, UK. We now have 26 live sites (FY22: 23 sites) and 111 live
modules (FY22: 99 live modules).
●
Logistics revenue grew by 0.7% to £667.5m
(FY22: £662.9m) and primarily represents cost recharges to Ocado
Retail and Wm Morrison Supermarkets Limited ("Morrisons") of
£633.9m (FY22: £633.6m). Orders per week increased by 3.2% to
510,000 (FY22: 494,000); eaches (individual items in the shopping
basket) declined by 1.2% primarily due to the decrease in basket
sizes as customers adjusted their spending in response to an
inflationary environment.
●
Retail revenue increased by 7.0%
year-on-year to £2,357.5m (FY22: £2,203.0m) reflecting growth of
5.9% in active customers to 998,000 at the end of the year (FY22:
942,000). Price inflation continued, with the average item price up
7.9% to £2.74 (FY22: £2.54). This was partially offset by smaller
basket sizes, declining 4.5% to an average of 44.2 individual items
(FY22: 46.3 items) as customers managed their overall basket spend.
Orders per week grew by 4.0% to 393,000 (FY22: 378,000), driven by
the increase in active customers and partially offset by the lower
frequency of orders.
Adjusted EBITDA* for the period was
£51.6m (FY22: loss of £74.1m), an improvement of £125.7m. The
change was driven by Technology Solutions, which generated a
positive adjusted EBITDA* of £15.4m, up £116.9m (FY22: loss of
£101.5m) due to the strong profit flow-through from revenue growth.
Logistics delivered adjusted EBITDA* of £30.1m (FY22: £33.6m) from
its resilient cost-plus model with adjusted EBITDA* decreasing
year-on-year driven by lower asset rental income and higher
non-recharged technology costs. Retail generated a £10.4m adjusted
EBITDA* profit (FY22: loss of £4.0m) driven by strong trading and
cost control.
Loss before tax of £393.6m (FY22: £500.8m
loss) includes depreciation, amortisation and impairment charges of
£395.9m (FY22: £348.6m), net finance costs of £73.2m (FY22: £48.2m)
and net adjusting items* of £23.9m income (FY22: £29.9m expense),
which is largely income from the settlement reached with AutoStore
Technology AS ("AutoStore") relating to patent infringement offset
by the reduction in the IFRS 13 value of the contingent
consideration due from M&S and one-off costs relating to
changes in Ocado Retail's UK site network.
Good liquidity maintained to support our growth
plans, with cash and cash equivalents of
£884.8m at the end of the period (FY22: £1,328.0m) and liquidity of
£1.2bn (FY22: £1.6bn) (including the undrawn revolving credit
facility ("RCF") of £0.3bn). Net debt* at the end of the period was
£(1,075.1)m (FY22: £(577.1)m).
Group summary
£m
|
FY23
53 weeks
|
Exclude
week 53
|
FY23
52 weeks
|
FY22
52 weeks
|
Change
|
Revenue
|
2,825.0
|
(59.4)
|
2,765.6
|
2,516.8
|
9.9%
|
Operating costs
|
(2,769.9)
|
56.8
|
(2,713.1)
|
(2,589.5)
|
(4.8)%
|
Share of results from joint ventures
and associates
|
(0.9)
|
-
|
(0.9)
|
(1.4)
|
35.7%
|
Adjusted EBITDA*
|
54.2
|
(2.6)
|
51.6
|
(74.1)
|
£125.7m
|
Depreciation, amortisation and
impairment
|
(405.2)
|
9.3
|
(395.9)
|
(348.6)
|
(13.6)%
|
Net finance costs
|
(76.1)
|
2.9
|
(73.2)
|
(48.2)
|
(51.9)%
|
Adjusted (loss)/profit before tax*
|
(427.1)
|
9.6
|
(417.5)
|
(470.9)
|
£53.4m
|
Adjusting items*
|
23.9
|
-
|
23.9
|
(29.9)
|
£53.8m
|
(Loss)/profit before tax
|
(403.2)
|
9.6
|
(393.6)
|
(500.8)
|
£107.2m
|
* These measures are alternative
performance measures. Please refer to Section 6 of the Consolidated
Financial Statements.
1.
Depreciation, amortisation and impairment of £395.9m (FY22:
£348.6m) excludes £47.5m (FY22: £nil) recognised in adjusting
items*.
2. Net
finance costs of £73.2m (FY22: £48.2m) excludes £6.1m (FY22: £nil)
recognised in adjusting items*.
This commentary is on a pre-adjusting item*
basis to aid understanding of the performance of the business on a
comparable basis. Following the change in the reporting of the
Group's operating segments during the year (as explained further
below), the Group has adopted a revised presentation of the Income
Statement. Cost of sales, distribution expenses and administrative
expenses are replaced with a single line item for operating costs.
Adjusted EBITDA* excludes the impact of adjusting items*.
Depreciation, amortisation and impairment, and net finance costs
are also shown excluding the impact of adjusting items*.
The revised presentation provides an Income
Statement that is more relevant for the total Group. Our three
reporting segments have different operating models and costs,
therefore we have summarised the presentation of costs for the
Consolidated Income Statement and provided relevant details by
segment in each of the appropriate sections. This reflects the
growing significance of the Technology Solutions business to the
Group's performance and provides more reliable reporting by
eliminating the need for allocations between distribution and
administrative expenses.
Revenue for the period increased by 9.9%
to £2,765.6m (FY22: £2,516.8m). Technology Solutions revenue
increased by 44.3% from £291.4m to £420.5m with the go-live of
three sites in the year. Sobeys' third CFC in Calgary and our first
CFC for AEON in Chiba city, just outside Tokyo, opened during the
first half of the year and Ocado Retail's Luton CFC opened in the
second half, ramping to 80% of capacity by the end of the year. The
average number of live modules is the key revenue driver for
Technology Solutions and average live modules increased by 25.0% to
105 from 84 in FY22.
Logistics revenue increased by 0.7% to £667.5m
(FY22: £662.9m) and largely comprises cost recharges to its two UK
customers, Ocado Retail and Morrisons. Retail revenue increased by
£154.5m from £2,203.0m to £2,357.5m, up by 7.0% reflecting strong
growth in active customers, growing order volumes and continued
price inflation, partially offset by smaller basket sizes as
customers manage their overall shopping basket spend.
Net
cumulative invoiced fees* to our partners on
our Balance Sheet and not yet recognised as revenue increased by
£23.8m from £422.9m at FY22 to £446.7m at FY23. Net cumulative
invoiced fees are recognised as contract liabilities on the Balance
Sheet and are an indicator of future revenues as the balances will
be released to the income statement over the life of our CFC
contracts. The following commentary is on a 53-week basis to
reflect the closing balance sheet position. The net movement of
£23.8m is driven by amounts invoiced of £47.6m and £9.2m acquired
on the acquisition of 6 River Systems LLC ("6RS") less revenue
recognised in the Income Statement of £33.0m during the 53 weeks.
The amounts invoiced of £47.6m were driven by 1. new orders from
our Ocado Smart Platform ("OSP") partners Lotte, Auchan Poland and
AEON, 2. incremental staged payments and orders from existing
partners and 3. amounts invoiced to 6RS customers. The release to
the income statement of £33.0m was mainly driven by revenue
recognised on operational CFCs in line with IFRS 15.
Operating costs include all costs
incurred in the continuing operations of the Group. Operating costs
increased by 4.8% to £2,713.1m (FY22: £2,589.5m). Technology
Solutions operating costs increased by 3.1% to £405.1m (FY22:
£392.9m) due to the increase in average live modules and their
associated operating costs and higher technology costs as we
continued to support and invest in OSP. This was partially offset
by an 8.3% reduction in support costs of £17.2m to £191.1m (FY22:
£208.3m). Logistics operating costs increased by 1.3% to £637.4m
(FY22: £629.3m) due to a 3.2% growth in orders that was offset by
lower basket sizes and improved productivity across our OSP sites.
Retail operating costs increased by 6.3% to £2,347.1m (FY22:
£2,207.0m) largely driven by the growth in orders, continued
inflation and incremental OSP fees year-on-year. Operating costs
for Retail increased at a lower rate than revenue due to 1.
improved gross margin, 2. strict control of support costs and 3.
electricity cost price decreases year-on-year.
Adjusted EBITDA* for the period was
£51.6m (FY22: £74.1m loss) with the £125.7m improvement driven by a
£116.9m improvement in Technology Solutions to £15.4m (FY22:
£101.5m loss), offset by a £3.5m decline in Logistics to £30.1m
(FY22: £33.6m). The improvement in Technology Solutions adjusted
EBITDA* was driven by the strong flow-through of incremental
revenue to adjusted EBITDA*, improving contribution margin of 70%
(FY22: 64%) and an absolute reduction in support costs, which were
down 8.3% to £191.1m (FY22: £208.3m). The improvement in Retail
adjusted EBITDA* was driven by a combination of 1. strong growth in
active customers resulting in a 4.0% increase in orders per week
and 2. operating cost control.
Depreciation, amortisation and impairment
increased by 13.6% to a charge of £395.9m (FY22: £348.6m),
primarily due to the increase in amortisation relating to
internally generated intangible assets (primarily the investment in
OSP) together with the continuing roll-out of OSP hardware and
software at our CFC sites. At the end of the period, there were 26
live sites (FY22: 23 sites) comprising 22 CFCs and 4 Zooms (FY22:
19 CFCs and 4 Zooms; a site is considered live when it has any
modules installed and is available for use by our partner).
Property, plant and equipment ("PP&E") held on the Balance
Sheet was £1,794.9m (FY22: £1,777.8m). The increase largely relates
to the three sites that went live in the year and the go-live of
technology development projects in the same period.
Net
finance costs of £73.2m increased by £25.0m
(FY22: £48.2m). This comprises the net of finance costs of £95.1m
(FY22: £90.0m) primarily related to our gross debt and lease
liabilities, finance income of £40.0m (FY22: £13.5m) primarily
interest on our cash balances, and the net impact of foreign
exchange and revaluation movements of £18.1m loss (FY22: gain of
£28.3m).
Adjusting items* of £23.9m income (FY22:
£29.9m expense) primarily relate to income from the agreement
reached with AutoStore to settle IP patent legal cases under which
AutoStore will pay the Group £200.0m in instalments over the two
years that commenced in July 2023, of which the full £200.0m
(discounted net present value of £186.5m) was recognised as
adjusting income in FY23. Other material one-off costs relate to 1.
the £67.0m reduction in the IFRS 13 value of the contingent
consideration due from M&S, 2. changes following Ocado Retail's
review of UK network capacity, including the ceasing of operations
at our Hatfield CFC, of £32.2m, 3. impairment costs relating to the
strategy and capacity review for the Zoom by Ocado network, of
£27.4m, and 4. organisational restructuring costs of
£15.5m.
Loss before tax of £393.6m (FY22: loss of
£500.8m) reflects an adjusted EBITDA* profit of £51.6m (FY22: loss
of £74.1m), depreciation, amortisation and impairment of £395.9m
(FY22: £348.6m), net finance costs of £73.2m (FY22: £48.2m) and net
adjusting items* of £23.9m income (FY22: £29.9m
expense).
Segmental summary
£m
|
FY23
52 weeks
|
FY22
52 weeks
|
Change
|
Revenue
|
|
|
|
Technology Solutions
|
420.5
|
291.4
|
44.3%
|
Logistics
|
667.5
|
662.9
|
0.7%
|
Retail
|
2,357.5
|
2,203.0
|
7.0%
|
Inter-segment
eliminations
|
(679.9)
|
(640.5)
|
(6.2)%
|
Group
|
2,765.6
|
2,516.8
|
9.9%
|
Adjusted EBITDA*
|
|
|
|
Technology Solutions
|
15.4
|
(101.5)
|
116.9
|
Logistics
|
30.1
|
33.6
|
(3.5)
|
Retail
|
10.4
|
(4.0)
|
14.4
|
Inter-segment
eliminations
|
(4.3)
|
(2.2)
|
(2.1)
|
Group
|
51.6
|
(74.1)
|
125.7
|
Change in operating segments
In FY23, the Group has changed the reporting of
its business segments to reflect the Group's three distinct
business models of Technology Solutions, Ocado Logistics and Ocado
Retail. The new segmental reporting commenced at the start of the
financial year and reflects the new operating structure. The
comparatives have been restated on this new basis. The analysis for
each segment has been set out to reflect the key revenue and cost
categories for each business area. Detailed components of each
revenue and cost category are provided within the narrative for the
relevant segment. An overview of each of our three business
segments is provided below.
Technology Solutions is the global
technology platform business providing OSP as a managed service to
12 grocery retail partners at the year end. This segment also
includes the revenue and costs associated with the Group's
non-grocery business, Ocado Intelligent Automation ("OIA"),
including Kindred and 6RS.
Technology Solutions comprises 1. the revenue
and direct operating costs of the OSP and OIA businesses, 2. the
commercial and technology costs to sustain and grow these
businesses and 3. the support costs for these businesses, such as
Solutions Sales and Partner Success, OIA Sales, Finance, Legal, HR,
Information Technology and the Board.
Ocado Logistics is our third-party
logistics business providing services to customers in the UK (Ocado
Retail and Morrisons). The Logistics business operates automated
warehouses and provides the associated supply chain and delivery
services to our UK partners, and recharges these costs in full,
together with an additional management fee. The business also
generates revenue from capital recharges relating to certain
historical material handling equipment ("MHE") assets used to
provide logistics services. The segment includes 1. revenue from
cost recharges (primarily CFC and delivery costs incurred), capital
recharges and the management fee for operating all UK sites, 2. the
related CFC fulfilment and delivery costs, 3. technology costs
directly related to sites and any non-OSP customer platform
technology costs, and 4. costs relating to central functions to
support the provision of the logistics business.
Ocado Retail is the UK online grocery
retail business serving a broad range of shopper missions, from
large weekly shops to "dinner-for-tonight" top-up shops. Ocado
Retail is a 50% owned joint venture with Marks & Spencer Group
plc ("M&S") and is fully consolidated into the Group's
results.
Inter-segment eliminations represent the
elimination of inter-segmental revenue and costs. These relate to
transactions between Ocado Retail, and the Technology Solutions and
Logistics businesses. Technology Solutions and Logistics each
generate revenue from services provided to Ocado Retail, which are
included as costs within the Ocado Retail segment. For FY23,
inter-segmental revenue eliminations were £679.9m (FY22: £640.5m).
The increase of £39.4m is primarily due to incremental OSP fees
charged to Ocado Retail by the Technology Solutions segment, due to
an increase in the number of live modules. Inter-segmental adjusted
EBITDA* eliminations relate to amortised upfront fees and CFC
pre-go-live services paid for by Ocado Retail to Technology
Solutions, which are included within revenue in Technology
Solutions. Ocado Retail capitalises these charges within fixed
assets relating to the CFC assets; the associated depreciation is
reported outside adjusted EBITDA*. For FY23, inter-segmental
adjusted EBITDA* eliminations were £4.3m (FY22: £2.2m). The £2.1m
increase is mainly driven by the annualisation of the four sites
opened during FY22 and the opening of the Luton CFC during the
year.
Technology Solutions
£m
|
FY23
52 weeks
|
FY22
52 weeks
|
Change
|
Fees invoiced*1
|
437.7
|
360.3
|
21.5%
|
Revenue
|
420.5
|
291.4
|
44.3%
|
Direct operating costs
|
(124.5)
|
(103.6)
|
(20.2)%
|
Contribution
|
296.0
|
187.8
|
57.6%
|
Contribution %
|
70%
|
64%
|
6ppts
|
Technology costs
|
(89.5)
|
(81.0)
|
(10.5)%
|
Support costs
|
(191.1)
|
(208.3)
|
8.3%
|
Adjusted EBITDA*
|
15.4
|
(101.5)
|
£116.9m
|
Adjusted EBITDA %*
|
4%
|
(35)%
|
39ppts
|
1. Fees
invoiced represent design and capacity fees invoiced during the
period for existing and future sites and in-store fulfilment
("ISF"). This also includes fees invoiced by the OIA business
relating to the provision of MHE and support services to the
non-grocery market. These are recognised in the Income Statement
under IFRS 15.
Key performance indicators
The following table sets out a summary of
selected operating information in the period:
|
FY23
52 weeks
|
FY22
52 weeks
|
Change
|
No. of live
modules1,2
|
111
|
99
|
12.1%
|
Average live modules
|
105
|
84
|
25.0%
|
Cumulative no. of modules
ordered2,3
|
232
|
232
|
-
|
Direct operating cost (% of site
sales capacity)4
|
1.65%
|
2.02%
|
0.37ppts
|
1. A
module is considered live when it has been fully installed and is
available for use by our partner. This includes 14 modules for the
Hatfield CFC and Leeds Zoom, which are not actively trading at the
year end, but are available for use by Ocado Retail and for which
fees are being received in full.
2. Ordered
modules represent the maximum capacity of sites for which a
contractual agreement has been signed with a partner and an invoice
has been issued for the associated site fees.
3. A
module of capacity is assumed as 5,000 eaches picked per hour and
c.£73m per annum of partner site sales capacity.
4. Direct
operating costs as a percentage of site sales capacity reflects the
P12 exit rate position for all OSP CFCs live at the period end.
Direct operating costs include engineering, cloud and other
technology direct costs.
As detailed above, the Technology Solutions
segment now combines our UK Solutions and International Solutions
businesses. Comparatives have been restated on a like-for-like
basis.
The scale of our international operations grew
further during the year with the milestone of the go-live of our
first CFC in the Asia-Pacific region for AEON in Chiba city, just
outside Tokyo; and the third CFC for Sobeys going live in Calgary.
In the UK, our eighth CFC for Ocado Retail went live in Luton and
capacity for Morrisons increased by two modules within our existing
facilities. We have 26 live sites, comprising 22 CFCs and four
Zooms, with a total of 111 live modules (FY22: 23 sites, 19 CFCs, 4
Zooms; 99 modules).
The 111 modules include 14 modules of capacity
installed and available for use by Ocado Retail, but on sites where
Ocado Retail has decided to cease operations. The Technology
Solutions business continues to charge Ocado Retail capacity fees
in full for these modules. This follows Ocado Retail carrying out a
network capacity review during the year for its CFCs and a strategy
and capacity review for its Zoom sites. The subsequent changes
include the decision to cease trading at the Hatfield CFC and Leeds
Zoom site and to optimise the utilisation of its London properties.
At the year-end date, Technology Solutions has 24 sites (21 CFCs
and 3 Zooms), with 97 modules in which partners are actively
trading.
Fees and revenue
Fees invoiced increased by 21.5% to
£437.7m (FY22: £360.3m). These fees include 1. the design and
access fees invoiced across clients relating to existing and future
CFC and ISF commitments, 2. the recurring capacity fees associated
with the live operations, primarily Ocado Retail, Kroger, Sobeys
and Morrisons, and 3. fees invoiced by the OIA business.
The 21.5% year-on-year growth in fees invoiced
was lower than the 44.3% year-on-year growth in revenue mainly due
to lower design and access fees invoiced as fewer sites went live
in the year. Ongoing capacity fees invoiced of £360.3m (FY22:
£247.3m) increased in line with the increase in ongoing revenue.
Fees invoiced by OIA increased year-on-year mainly driven by the
acquisition of 6RS during the year.
Under revenue recognition rules, design and
access fees are not recognised as revenue until a working solution
is delivered to the partner, i.e. the site goes 'live'. At the end
of the 53 weeks, cumulative fees not yet recognised as revenue, but
instead recorded on the Balance Sheet within contract liabilities,
were £446.7m (FY22: £422.9m).
Revenue in the period of £420.5m (FY22:
£291.4m) comprises ongoing capacity fees of £363.4m (FY22: £253.4m)
and £34.8m (FY22: £21.1m) relating to the release to the Income
Statement of the design and upfront fees received from our
operational partners, which were included within the contract
liability amount on the Balance Sheet; these primarily relate to
Ocado Retail, Kroger, Morrisons and Sobeys. Ongoing capacity fee
revenue in Technology Solutions is driven by the average number of
live modules in the period. In FY23 these grew by 25% to 105
average live modules (FY22: 84). Revenue grew at a faster rate than
the average live modules (+44.3% compared with +25.0%) due to the
increased number and proportion of live OSP modules, which generate
a higher fee per module of sales capacity than non-OSP
sites.
There are 30 legacy non-OSP modules within the
111 modules at the end of the year that primarily relate to the
Hatfield and Dordon CFCs and that generate a lower fee per module
than an OSP module. During the year the Hatfield CFC ceased
trading; the Technology Solutions business is entitled to continued
capacity fees at Hatfield and continues to charge them in full to
Ocado Retail. Revenue also includes £21.2m (FY22: £11.5m) relating
to OIA (previously Kindred) and equipment sales to retail partners
of £0.9m (FY22: £4.6m) recognised as revenue under IFRS 15 (the
cost of this equipment is recognised within direct operating
costs).
Direct costs
Direct operating costs relate to the
day-to-day costs of operating our CFC and Zoom sites, primarily
engineering support, maintenance and spares, and the costs of
hosting the technology services for partners. Costs increased by
£20.9m (20.2%) to £124.5m (FY22: £103.6m) primarily driven by the
25.0% growth in average live modules. The exit rate of direct
operating costs as a percentage of client sales capacity, a key
measure of operational efficiency across sites, improved from 2.02%
in FY22 to 1.65%. The decrease was mainly driven by a reduction in
cloud costs from decommissioning old environments, rationalising
the retained data and storage optimisation. This led to an
improvement in contribution margin from 64% to 70%.
Technology and support costs
Technology costs mainly comprise the non-capitalised management
time spent on early-stage research projects and maintaining OSP
through ongoing client support. Other costs include legal and
professional fees and non-capitalised software costs. Technology
costs in FY23 were £89.5m (FY22: £81.0m), an increase of £8.5m
primarily due to an increase in the average headcount of 280 as we
continue to invest in OSP.
Support costs are costs incurred
supporting the global operations of the business and have been
significantly streamlined over FY22 and FY23. They include several
different activities including Solutions Sales and Partner Success,
OIA Sales, Finance, HR, IT and Legal. Costs reduced by £17.2m to
£191.1m during the year (FY22: £208.3m). The £17.2m reduction in
spend was mainly driven by headcount reductions across our central
functions as we continued to optimise our cost base and ensure it
reflects the current and future needs of the business. £8.2m of the
gross savings of £20.4m from our cost reduction initiatives have
been reinvested in OIA, and Solutions Sales and Partner Success,
two areas of critical focus for the Group. Support costs also
include the one-off benefit of the sale of the Dartford spoke site
during the first half of the year, which generated a profit on
disposal of £5.0m.
Under the revised segmentation, Board costs of
£22.1m (FY22: £29.1m) are included within Technology Solutions
support costs. The year-on-year decrease of £7.0m was mainly driven
by a decrease in share-based payment charges of £6.2m to £10.7m
(FY22: £16.9m).
We invested a further £5.8m in developing the
Partner Success function, supported by a new and experienced
leadership team, which is dedicated to driving growth for new and
existing partners. OIA central costs increased in the year as we
continue to scale the business and were mainly driven by the
acquisition of 6RS during the second half of the year.
Adjusted EBITDA*
Technology Solutions delivered positive adjusted
EBITDA* for the period of £15.4m (FY22: loss of £101.5m), an
improvement of £116.9m. The strong profit flow-through from the
£129.1m growth in revenue was driven by 1. the benefits of scale as
more modules went live in our existing CFC sites, 2. the ongoing
optimisation of direct CFC operating costs (including maintenance
and data costs) which have reduced as a percentage of sales
capacity and 3. the benefit of cost reductions in support
costs.
Ocado Logistics
£m
|
FY23
52 weeks
|
FY22
52 weeks
|
Change
|
Cost recharges
|
633.9
|
633.6
|
-
|
Fee revenue
|
33.6
|
29.3
|
14.7
%
|
Revenue
|
667.5
|
662.9
|
0.7 %
|
Other income
|
6.8
|
10.7
|
(36.4)%
|
Fulfilment and delivery
costs
|
(579.3)
|
(580.2)
|
0.2
%
|
Technology and support
costs
|
(64.9)
|
(59.8)
|
(8.5)%
|
Adjusted EBITDA*
|
30.1
|
33.6
|
£(3.5)m
|
Key performance indicators
The following table sets out a summary of
selected operating information in the period:
|
FY23
52 weeks
|
FY22
52 weeks
|
Change
|
Total eaches (million)
|
1,182.4
|
1,196.3
|
(1.2)%
|
Orders per week (000s)
|
510
|
494
|
3.2%
|
OSP CFC UPH1,2
|
208
|
184
|
13.0%
|
DP83
|
21.5
|
21.3
|
0.9%
|
1.
Measured as units picked from the CFC per variable hour worked by
operational personnel.
2. OSP
CFCs are all CFCs excluding Hatfield and Dordon.
3. DP8
represents the drops per standardised eight-hour shift for Ocado
Retail only.
Ocado Logistics is a wholly-owned third-party
logistics business operating exclusively in the UK. This business
manages and operates automated warehouses and the related supply
chain and online delivery services on behalf of our two partners,
Ocado Retail and Morrisons. Ocado Logistics operates on a cost-plus
model whereby it charges its clients the costs of the operations we
manage on their behalf, plus a management fee of circa
4%.
Given this model, client volumes in the sites we
operate are a key driver of our revenue and costs. During the year,
average orders per week across our two partners increased by 3.2%
to 510,000 (FY22: 494,000). While orders grew, the volume of eaches
decreased by 1.2% to 1,182.4m (FY22: 1,196.3m). The decline in
eaches reflects the change in customer shopping behaviour towards
smaller shopping baskets in the face of high price
inflation.
Revenue
This comprises 1. cost recharges, which are the
recharge of variable and fixed costs incurred to provide fulfilment
and delivery services, which are recharged to Ocado Retail and
Morrisons, 2. a 4% management fee charged on rechargeable costs and
3. capital recharges to Ocado Retail for the use of certain
fixtures and fittings, and plant and machinery that were not
transferred to Ocado Retail on its formation as a separate
business.
Cost recharges of £633.9m were broadly
flat year-on-year (FY22: £633.6m). These costs represent the
operational costs that are recharged to Ocado Retail and Morrisons
for the provision of third-party logistics services. The key cost
recharge driver is the volume processed through the CFC sites.
While orders per week increased by 3.2%, total eaches declined by
1.2%. Despite the decline in eaches, cost recharges were flat due
to labour and fuel price inflation and the negative impact of the
smaller shopping baskets (resulting in fewer eaches delivered per
van). These were offset by the improved efficiency from the higher
average number of units picked per labour hour ("UPH") in our OSP
sites where UPH increased by 13.0% to 208 (FY22: 184). Cost
recharges are greater than rechargeable costs of £618.8m (FY22:
£619.8m) as cost recharges include lease income for lease costs in
shared sites, where we are providing a service, for which the cost
is included below adjusted EBITDA*.
Fee
revenue of £33.6m (FY22: £29.3m) increased by
14.7% and includes £22.8m of management fees (FY22: £23.1m) and
£10.8m of capital recharges (FY22: £5.3m). The £4.3m increase in
fee revenue is primarily due to an increase of £5.5m in capital
recharges year-on-year due to the impact of a one-off reduction in
FY22. Management fees are around 4% of rechargeable costs and are
broadly flat period-on-period in line with the movement in cost
recharges.
Capital recharges of £10.8m (FY22: £5.3m) relate
to charges to Ocado Retail for the use of certain assets that are
owned by the Group and utilised by Ocado Retail. For partner-shared
sites (primarily Dordon and Erith), capital recharges are accounted
for (per IFRS 16) as revenue as we are considered to be providing a
service. For sites that are used exclusively by Ocado Retail
(primarily Hatfield, Purfleet, Bristol and Andover), this income is
accounted for (per IFRS 16) as finance income (below adjusted
EBITDA*) as we are considered to be providing a finance
lease.
Recharges and fees to Ocado Retail of £524.1m
(FY22: £521.1m) included within the £667.5m revenue (FY22: £662.9m)
are eliminated on consolidation.
Other income
Other income of £6.8m (FY22: £10.7m) relates to
MHE JVCo asset rental income. The year-on-year decrease of £3.9m
was mainly driven by the expiry of asset rental agreements in the
year. This is within operating costs in the Consolidated Income
Statement.
Fulfilment and delivery costs
These costs comprise the costs of fulfilment and
delivery operations which are recharged to Ocado Retail and
Morrisons.
Total fulfilment and delivery costs decreased by
0.2% to £579.3m (FY22: £580.2m) while eaches declined by 1.2% to
1,182.4m (FY22: 1,196.3m). Costs decreased by less than eaches
because higher fuel costs and labour inflationary pressure offset
the benefits from the year-on-year reduction in utilities unit
costs and productivity improvements.
Productivity improvements are demonstrated by
the improvement in UPH in OSP CFCs (Erith, Andover, Purfleet,
Bristol and Bicester), which improved year-on-year to an average
UPH of 208 in the period (FY22: 184), exceeding our target of 200
UPH. A higher UPH results in lower labour intensity and therefore
lower costs for the same volume. The improvement in UPH and
resulting productivity improvements reduced the labour cost
required per each and partially offset the inefficiencies generated
by smaller basket sizes.
Technology and support costs
Technology and support costs comprise 1. head
office and related costs to operate the Logistics business, 2.
technology costs related to the operating of our pre-OSP grocery
fulfilment platform and 3. the non-capitalised element of the
programme costs to transition our UK partners from the pre-OSP
technology platform to OSP. This programme is expected to be
largely completed in 2024.
Technology and support costs increased by £5.1m
to £64.9m (FY22: £59.8m) primarily due to investment in the Ocado
Retail transition to OSP. Head office costs and a portion of
technology costs are recharged to our partners as part of our
contractual agreements. The cost of operating the pre-OSP platform
and the transition to OSP is not recharged to partners.
Adjusted EBITDA*
Adjusted EBITDA* for the period was
£30.1m, a decrease of £3.5m (FY22: £33.6m); the £5.5m increase in
capital recharges was more than offset by the reduction in MHE JVCo
asset rental income and an increase in non-recharged technology
costs, each of which are described above.
Ocado Retail
£m
|
FY23
52 weeks
|
FY22
52 weeks
|
Change
|
Revenue
|
2,357.5
|
2,203.0
|
7.0%
|
Gross profit
|
797.2
|
739.9
|
7.7%
|
Gross margin %
|
33.8%
|
33.6%
|
0.2ppts
|
Fulfilment and delivery
costs
|
(467.1)
|
(463.8)
|
(0.7)%
|
Marketing costs
|
(43.0)
|
(57.6)
|
25.3%
|
Support costs
|
(101.6)
|
(83.4)
|
(21.8)%
|
Fees
|
(175.1)
|
(139.1)
|
(25.9)%
|
Adjusted EBITDA*
|
10.4
|
(4.0)
|
£14.4m
|
The results of the Ocado Retail Limited joint
venture (referred to as either "Ocado Retail" or "Retail") are
fully consolidated in the Group. The cost lines in the Ocado Retail
Income Statement have been amended since the FY22 Financial Review
to add clarity on the nature of the costs in Ocado Retail and align
with management reporting.
Key performance indicators
The following table sets out a summary of
selected Ocado.com operating information in the period:
Ocado.com1
|
FY23
52 weeks
|
FY22
52 weeks
|
Change
|
Active customers
(000s)2
|
998
|
942
|
5.9%
|
Average orders per week
(000s)3
|
393
|
378
|
4.0%
|
Average basket value
(£)4
|
120.94
|
117.74
|
2.7%
|
Average selling price
(£)5
|
2.74
|
2.54
|
7.9%
|
Average basket size
(eaches)
|
44.2
|
46.3
|
(4.5)%
|
1.
Ocado.com excludes Zoom by Ocado as Ocado.com represents the core
business of Ocado Retail.
2. Active
customers are classified as active if they have shopped at
Ocado.com within the previous 12 weeks at the statutory year-end
date of 3 December 2023. FY22 has been restated from 940,000 to
include customers active at trial sites, which were previously
excluded.
3. FY22
has been restated to no longer deduct cancelled orders on the road,
to align with management reporting. In the prior year, this metric
was reported as 377,000 and under the same methodology, FY23
like-for-like orders per week would be 391,000, an increase of
3.7%.
4. Average
basket value (£) is defined as product sales divided by total
orders. FY22 has been restated to reflect two changes to the
calculation of this KPI. First, we no longer deduct cancelled
orders on the road from total orders. Second, we have changed from
using gross sales to now using product sales. The revised approach
better reflects the equivalent basket value if purchased in a store
to enable better comparability. Under the previous approach FY22
was £118.46, FY23: £122.11.
5. Average
selling price (£) ("ASP") is defined as product sales divided by
total eaches. FY22 ASP has been restated to reflect two changes to
the calculation of this KPI. First, we no longer deduct cancelled
eaches on the road from total eaches. Second, we have changed from
using gross sales to now using product sales. The revised approach
better reflects the equivalent average item price if purchased in a
store to enable better comparability. Under the previous approach
FY22 ASP was £2.55, FY23: £2.75.
Revenue
Revenue increased by 7.0% to £2,357.5m
(FY22: £2,203.0m) driven by growth in Ocado.com, with 4.0% order
growth to 393,000 orders per week (FY22: 378,000 orders per week)
and 2.7% growth in basket value to £120.94 (FY22:
£117.74).
We continued to win new customers through a
focus on offering competitive prices. We achieved effective
customer acquisition results through vouchering and marketing
activity and improved customer retention through our strengthened
customer proposition. We continue to focus on consistent and strong
operational performance in key areas such as delivering on time and
in full. Active customers now stand at 998,000, up by 5.9% from
942,000 at FY22. Ocado grew its share of the online grocery market
to 12.7% (FY22: 12.3%, Nielsen; FY23 as at 2 December 2023; FY22 as
at 3 December 2022). As our customer base continued to increase,
average orders per week grew by 4.0% to 393,000 (FY22: 378,000).
The increase in average orders per week compared with growth in
active customers is due to the lower frequency of orders, which is
driven by customers managing their overall outgoings in response to
high levels of inflation.
The average basket value grew by 2.7% to £120.94
(FY22: £117.74) driven by the increase in selling price of 7.9% to
£2.74 (FY22: £2.54), partly offset by a reduction in the number of
eaches. In the face of cost-of-living pressures, shoppers managed
the overall value of their baskets by choosing smaller baskets and
slightly reducing the frequency of orders. As a consequence, the
average items per basket reduced by 4.5% to 44.2 items (FY22:
46.3).
We remain committed to offering reassuringly
good value to customers and did not pass through the full impact of
food price inflation to our customers; the average selling price on
Ocado.com has increased by 7.9%, well below UK grocery inflation of
10.4% (Nielsen). We continued to invest in the Ocado Price Promise,
which we launched in early 2023 matching customers' shops to
Tesco.com on over 10,000 products, including Clubcard prices. This
is a key component of our value strategy to support the growth and
retention of our customers. Alongside this, we made multiple rounds
of price cuts in the year, reducing the prices on thousands of
products, to ensure that we continue to combine our unbeatable
range and unrivalled service with reassuringly good value for our
customers.
Gross profit
Gross profit increased by 7.7% to £797.2m
(FY22: £739.9m). Growth was higher than revenue growth (+7.0%) due
to improvements in gross margin from 33.6% in FY22 to 33.8% in
FY23. This improvement was driven by improved range and stock
management, reduced wastage, and an increase in delivery income
following the reduction in lower-priced slots.
Gross profit includes the net benefit of
supplier-funded media income of £81.6m (FY22: £82.0m) and the cost
of vouchers of £24.7m (FY22: £21.1m).
Fulfilment and delivery costs
£m
|
FY23
52 weeks
|
FY22
52 weeks
|
Change
|
CFC
|
(182.1)
|
(187.7)
|
3.0%
|
Service delivery
|
(260.9)
|
(247.4)
|
(5.5)%
|
Utilities
|
(24.1)
|
(28.7)
|
16.0%
|
Fulfilment and delivery costs
|
(467.1)
|
(463.8)
|
(0.7)%
|
CFC
costs primarily comprise labour costs in CFCs.
Costs reduced by 3.0% to £182.1m (FY22: £187.7m) despite the 4.0%
growth in average orders per week. This improved efficiency was
achieved by again improving the productivity of our CFC sites. The
average UPH for Ocado.com improved by 10.4% from 173 to
191.
The OSP CFCs (Erith, Andover, Bristol, Bicester,
Purfleet and Luton) showed robust improvements in productivity
reaching an average of 208 UPH (FY22: 184 UPH), an improvement of
13.0%. All of the mature OSP sites (Erith, Andover, Purfleet and
Bristol) achieved an average of over 200 UPH in the
period.
Service delivery costs comprise labour,
fleet, fuel and related costs to enable the delivery of orders to
customers. Costs increased by 5.5% to £260.9m (FY22: £247.4m),
primarily driven by the growth in number of orders (+4.0%). Service
delivery costs are driven by the productivity of the delivery
('last mile' operations). This productivity is measured in 'eaches
per van', which reduced by 1.2% to 988 eaches (FY22: 1,000) as a
result of smaller basket sizes, reducing efficiency in the fleet,
and reflected in the service delivery costs growing at a higher
amount (+5.5%) than the growth in orders (+4.0%).
Utilities costs across CFCs and service
delivery decreased by 16.0% to £24.1m (FY22: £28.7m) due to
significantly lower unit costs (FY23: 27.1p per kilowatt hour;
FY22: 33.2p per kilowatt hour) partially offset by an increase in
the volume of electricity used driven by the increased number of
live modules year-on-year.
Marketing and support costs
Marketing costs comprise the cost of
marketing activities to customers and exclude vouchering costs,
which are included within revenue. Activities focused on driving
increased awareness of the Ocado value proposition. Costs decreased
by £14.6m to £43.0m (FY22: £57.6m) as we optimised the marketing
channel mix and improved marketing spend efficiency. As a result,
marketing spend as a percentage of revenue decreased to 1.8% (FY22:
2.6%).
Support costs of £101.6m (FY22: £83.4m)
comprise head office, customer support and other overhead costs for
Ocado Retail. Support costs increased by £18.2m, primarily due to
the prior year support costs benefiting from the accrual release of
management incentive plans. Excluding the impact of these one-offs,
underlying support costs reduced year-on-year, driven by headcount
rationalisation in support functions.
Fees
Fees comprise 1. the OSP fees paid to
Technology Solutions for the operation of OSP, 2. logistics
management fees and 3. capital recharges paid to Ocado Logistics.
Fees of £175.1m (FY22: £139.1m) increased by £36.0m, driven by the
additional OSP fees due to Technology Solutions following the
opening of the Luton CFC during the year and the annualisation of
CFCs which went live during FY22.
Adjusted EBITDA*
Adjusted EBITDA* for the Retail business
was £10.4m (FY22: £4.0m loss). The primary drivers for the £14.4m
year-on-year increase were growth in active customers and orders
driving trading performance, lower marketing spend from
optimisation of the marketing channel mix and savings in utilities
costs across our CFCs.
Adjusting items*
£m
|
|
FY23
52 weeks
|
FY22
52 weeks
|
Litigation costs net of cost
recoveries
|
|
(5.0)
|
(26.5)
|
Litigation settlement
|
|
186.5
|
-
|
Changes in IFRS 13 fair value of
contingent consideration and related costs
|
|
(68.1)
|
(58.4)
|
UK network capacity
review
|
|
(32.2)
|
-
|
Zoom by Ocado strategy and network
capacity review
|
|
(27.4)
|
-
|
Organisational
restructure
|
|
(15.5)
|
(3.0)
|
Finance, IT and HR systems
transformation
|
|
(12.2)
|
(11.0)
|
Acquisition costs of 6RS
|
|
(2.2)
|
-
|
Insurance proceeds relating to
Andover and Erith CFCs
|
|
-
|
70.4
|
Loss on disposal of Speciality
Stores Limited ("Fetch")
|
|
-
|
(1.4)
|
Total adjusting items*
|
|
23.9
|
(29.9)
|
Adjusting items* are items that are considered
to be significant due to their size/nature, not in the normal
course of business or are consistent with items that were treated
as adjusting in the prior periods or that may span multiple
financial periods.
Litigation costs, net of cost recoveries and litigation
settlement
Litigation costs within adjusting items* are
costs incurred on patent infringement litigation between the Group
and AutoStore. The gross costs during the period amount to £11.7m
(FY22: £26.5m), which have been offset by £6.7m (FY22: £nil)
received relating to cost recovery as a result of court judgements
as detailed below. The net litigation cost for the period is,
therefore, £5.0m (FY22: £26.5m).
Following Ocado's victory in the UK High Court,
in June 2023 the UK High Court issued a formal order stating that
Ocado infringes none of AutoStore's patents and that AutoStore's
bot patents are invalid and revoked. The UK High Court ordered
AutoStore to pay Ocado £6.7m in costs relating to the UK High Court
trial. As usual in patent cases, AutoStore was given leave to
appeal. The £6.7m received is included in the total litigation
costs for the period. The net cumulative costs to date are
£62.2m.
During the year, the Group reached an agreement
with AutoStore to settle all patent litigation and cross-licence
pre-2020 patents, for which AutoStore undertook to pay Ocado Group
a total of £200.0m in instalments over two years, beginning July
2023. At the end of the period, £186.5m was recognised in the
Consolidated Income Statement comprising £180.4m (as the discounted
net present value of the receivable) and £6.1m amortisation of the
discount recognised as adjusting finance income.
Changes in IFRS 13 fair value of contingent consideration and
related costs
The Group holds contingent consideration
receivable items at the accounting fair value as prescribed by IFRS
13. These are revalued through the Income Statement at each
reporting date. Refer to Note 3.5 to the Consolidated Financial
Statements for further details.
Under the terms of the disposal of 50% of Ocado
Retail to M&S that took place during 2019, a final
consideration payment may become due from M&S to Ocado Group of
£156.3m plus interest (the contingent consideration), dependent on
certain contractually defined Ocado Retail performance measures
(the "Target") being achieved for the FY23 financial
year.
The contractual outcome is binary, meaning if
the Target is achieved, it will trigger the full payment.
Conversely, there would be no consideration due if the Target is
not achieved. There is no formal arrangement for a payment between
zero and £190.7m.
Ocado Retail failed to meet the performance
measures for the FY23 financial year that were required for
automatic payment of the contingent consideration. However, the
contractual arrangement with M&S expressly provides for the
Target to be adjusted for certain Ocado Retail management decisions
or actions that differ from the assumptions used in the discounted
cash flow model which underpinned the sale transaction.
While the contractual outcome is binary, the
Group has applied the principles of IFRS 9 Financial Instruments
and IFRS 13 Fair Value Measurement in determining the accounting
fair value of the contingent consideration financial instrument
recorded in the Group's financial statements at each reporting
date. IFRS 13 requires that the characteristics of the contract be
valued from the perspective of a hypothetical, independent 'market
participant' who would exclude broader facts, circumstances and
commercial arrangements pertaining to the ongoing relationship with
M&S.
At the year end the IFRS 13 fair value has been
estimated using the expected present value technique and has been
based on several probability-weighted possible scenarios that a
market participant would consider and has been determined to be
£28.0m (FY22: £95.0m). This financial reporting estimate of the
contingent consideration at 3 December 2023 is significantly lower
than the amount that Ocado believes it will receive in the future
(either via a formal litigation process or settlement).
The Group has engaged specialists in order to
support the identification and quantification of proposed
adjustments to the contingent consideration Target, incurring costs
during the period of £0.7m. As these costs have been incurred in
the process of securing an adjusting income, these costs have been
classified as adjusting.
In FY19, the Group sold Marie Claire Beauty
Limited ("Fabled") to Next plc. Part of the consideration for this
transaction was contingent on future events. A loss on revaluation
of £0.4m (FY22: £0.8m loss) is reported through adjusting
items*.
UK
network capacity review
In April 2023, the Group announced the plan to
cease operations at its Hatfield CFC as part of a wider review of
UK network capacity. As a result, the Group recorded impairment
charges of £20.3m (right-of-use assets £13.2m; PP&E £7.0m;
£0.1m other intangible assets), restructuring costs of £6.8m and
other related costs of closure of £5.1m, which includes costs
provided for onerous contracts.
Zoom by Ocado strategy and network capacity
review
During the period, Ocado Retail undertook a
strategy and capacity review for the Zoom network, as a result the
Group recorded impairment charges of £27.2m (£14.5m to right-of-use
assets, £12.5m PP&E and £0.2m other intangible assets) and
other costs of £0.2m. These costs have been classified as adjusting
on the basis that they are material and part of a significant
strategic review.
Organisational restructure
During the period, the Group partially
reorganised its head office and support functions, resulting in
redundancies of around 400 heads and related costs of £15.5m. The
FY22 costs of £3.0m related to initial reorganisation in FY22,
resulting in redundancies of around 50 heads. Net cumulative costs
to date are £18.5m. These costs have been classified as an
adjusting item on the basis that the costs are considered to be
significant and resulted from a strategic restructuring which is
outside of the normal operating activities of the Group.
Finance, IT and HR systems transformation
Costs comprise 1. £7.6m (FY22: £7.0m) relating
to Ocado Group's Finance transformation programme; the cumulative
costs expensed to date amount to £14.6m (FY22: £7.0m), 2. £2.6m
(FY22: £4.0m) relating to Ocado Retail IT and Finance systems
transformation; the cumulative costs expensed to date amount to
£11.2m, and 3. £2.0m (FY22: £nil) relating to Ocado Group's HR
system transformation. Further details of these adjusting items*
can be found in Note 2.3 to the Consolidated Financial
Statements.
Acquisition costs of 6RS
In May 2023, the Group announced that it has
reached an agreement with Shopify Inc. to acquire 6RS, a
collaborative autonomous mobile robot ("AMR") fulfilment solutions
provider to the logistics and non-grocery retail sectors, based in
the US. The acquisition was completed on 30 June 2023 for
consideration of US$12.7m (£10.0m).
A total of £2.2m of acquisition-related costs
have been incurred and treated as an adjusting item as they are
significant and resulted from a strategic investment that is not
part of the normal operating costs of the business. The costs have
been recognised within operating costs in the Consolidated Income
Statement.
Tax
impact on adjusting items*
The change in IFRS 13 fair value of contingent
consideration receivable is not subject to tax. The remaining
adjusting items* are taxable or tax deductible and give rise to a
tax charge of £nil (FY22: tax credit of £0.8m). A further tax
charge of £21.7m (FY22: charge of £6.4m) has not been recognised as
it relates to tax losses which are not recognised for deferred tax
purposes.
Other items below adjusted EBITDA*
Depreciation, amortisation and impairment
Total depreciation, amortisation and impairment
costs were £395.9m (FY22: £348.6m), an increase of £47.3m, or 13.6%
year-on-year. This includes 1. depreciation of PP&E of £182.8m
(FY22: £154.4m), 2. depreciation of RoU assets of £69.1m (FY22:
£66.0m), 3. amortisation expense of £122.1m (FY22: £114.7m) and 4.
impairment charge of £21.9m (FY22: £13.5m).
The increase was driven by 1. £38.9m additional
depreciation and amortisation due to the go-live of three sites
within the previous 12 months, the annualisation of 12 sites that
went live during FY22 and technology projects going live in the
last 12 months, and 2. an £8.4m increase in impairments due to the
impairment of assets largely related to our contract with Groupe
Casino.
Net finance costs
Net
finance costs of £73.2m increased by £25.0m
(FY22: £48.2m). Net finance costs comprise the net of finance costs
of £95.1m (FY22: £90.0m), finance income of £40.0m (FY22: £13.5m)
and the net impact of foreign exchange and revaluation movements of
£18.1m loss (FY22: gain of £28.3m). Finance income is primarily
interest income on cash balances.
Finance costs of £95.1m (FY22: £90.0m) mainly
comprise: interest expense on borrowings
of £68.4m (FY22: £61.3m), which increased by £7.1m primarily
due to 1. interest expense on the shareholder loan from M&S to
Ocado Retail and 2. incremental fees on the RCF (agreed in June
2022), and interest expense on lease
liabilities of £25.3m (FY22:
£28.3m).
Net foreign exchange and revaluation movement
of £(18.1)m (FY22: gain of £28.3m) comprises net foreign exchange
losses of £11.6m (FY22: £16.4m gain), largely in respect of USD
balances held, and loss on
revaluation of
financial assets of £6.5m (FY22: £11.9m gain)
largely as a result of the Group's warrants held in Karakuri and
loan notes to Karakuri being written off as Karakuri has entered
into administration.
Total borrowings at the end of the 53-week
period were £1,462.1m (FY22: £1,372.8m). Total lease liabilities at
the end of the 53-week period were £497.8m (FY22:
£532.3m).
Share of results from joint ventures and
associates
The Group has accounted for a £0.9m loss (FY22:
£1.4m loss) for the share of results from joint
ventures and associates.
The Group has two joint ventures (Ocado Retail
and the MHE JVCo) and one associate (Karakuri, a robotics business
involved in the development of automation for quick-service
restaurants). The results of the Ocado Retail joint venture are
fully consolidated within the Ocado Group.
●
MHE
JVCo is a 50:50 joint venture with Morrisons
and holds the Dordon CFC MHE assets which Ocado Retail and
Morrisons use to service their online businesses. The Group's share
of the MHE JVCo loss after tax in the period amounted to £0.1m
(FY22: £0.2m loss); and
●
Karakuri
Limited is an associate and the Group's 26.3%
interest in Karakuri contributed a loss of £0.8m in the period
(FY22: £1.2m loss). Karakuri appointed administrators in June 2023
and the £0.8m share of losses in the period resulted in the
remaining investment of £0.8m being written down to £nil value. The
revaluation of equity investments (as referenced above) is in
respect of other assets related to Karakuri but not recorded
directly in investments in associates.
Adjusted loss before tax
Adjusted loss before tax of £417.5m
(FY22: loss of £470.9m) reflects an adjusted EBITDA* profit of
£51.6m (FY22: loss of £74.1m), depreciation, amortisation and
impairment of £395.9m (FY22: 348.6m), and net finance costs of
£73.2m (FY22: £48.2m).
Loss before tax
Loss before tax of £393.6m (FY22: loss of
£500.8m) is stated after net adjusting items* of £23.9m (FY22:
£29.9m expense).
Taxation
The Group reported a total tax credit in the
Income Statement for the period of £16.2m (FY22: £19.5m). This
amount includes a UK corporation tax charge of £3.2m (FY22: credit
of £8.4m). A deferred tax credit of £21.6m (FY22: credit of £11.3m)
was recognised in the period.
Deferred tax assets decreased due to the
derecognition of losses mainly in Ocado Retail. Deferred tax
liabilities decreased due to the removal of deferred tax on
consolidation following an intercompany transfer of intangible
assets from Haddington and Kindred to Ocado Innovation
Ltd.
At the end of the 53-week period, the Group had
£1,550.1m (FY22: £973.9m) of unutilised carried-forward tax
losses.
Dividend
During the period, the Group did not declare a
dividend (FY22: £nil).
Loss per share
Basic and diluted loss per share were 38.44
pence (FY22: 58.93 pence) on a 53-week basis (FY22: 52-week basis).
The 52-week adjusted loss per share was 43.89 pence (FY22: 53.47
pence).
Capital expenditure
Capital expenditure for the 53-week period
totalled £520.3m (FY22: £797.3m), a reduction of £277.0m, primarily
due to a decrease in the number of CFCs and new modules going live
and under construction in the year. Capital expenditure largely
comprises new site construction costs and technology development
costs to enhance OSP.
An analysis of capital expenditure by key
categories is presented below:
£m
|
FY23
53 weeks
|
FY22
52 weeks
|
Change
|
CFC sites
|
253.1
|
440.8
|
42.6%
|
Technology
|
202.8
|
186.7
|
(8.6)%
|
Group support and other
|
34.3
|
52.0
|
34.0%
|
Technology Solutions
|
490.2
|
679.5
|
27.9%
|
|
|
|
|
Logistics
|
14.4
|
19.5
|
26.2%
|
Retail
|
25.2
|
133.8
|
81.2%
|
Eliminations1
|
(9.5)
|
(35.5)
|
(73.2)%
|
Group capital expenditure
|
520.3
|
797.3
|
34.7%
|
1. The
elimination of capital expenditure comprises the design and set up
fees charged to Ocado Retail by Technology Solutions (those fees
charged to Ocado Retail are eliminated on consolidation of the
Group).
Technology Solutions
CFC
sites capital expenditure relates to the
construction of new CFCs and Zoom sites and was £253.1m in the
period, a decrease of £187.7m (FY22: £440.8m). The investment
predominantly relates to the launch of the three CFCs which went
live in FY23 together with five further sites under construction.
The reduction is primarily driven by 1. the lower number of new
CFCs going live in the year, with only three CFCs opening in FY23
(FY22: 9 CFCs, 3 Zooms) and 2. the reduced in-year capital
expenditure on sites under construction.
Technology development spend increased to
£202.8m (FY22: £186.7m), driven by the ongoing investment in OSP
with a continued focus on delivering the Re:Imagined product
innovations announced in January 2022. Re:Imagined includes seven
key innovations: the 600 series bot, the 600 grid and optimised
site design, Automated Frameload, On-Grid Robotic Pick ("OGRP"),
Ocado Orbit, Ocado Swift Router and Ocado Flex.
£m
|
FY23
53 weeks
|
FY22
52 weeks
|
Change
|
CFC technologies
|
119.1
|
108.1
|
(10.2)%
|
Ecommerce
|
28.6
|
29.9
|
4.3%
|
Logistics and supply
chain
|
22.1
|
18.8
|
(17.6)%
|
Other
|
33.0
|
29.9
|
(10.4)%
|
Technology
|
202.8
|
186.7
|
(8.6)%
|
We continue to enhance our customer
proposition delivering world-class end-to-end grocery ecommerce and
fulfilment solutions. OSP includes ecommerce, order management,
forecasting, routing and delivery, automated storage and retrieval
systems ("ASRS"), dexterous robotics and other material handling
elements.
● CFC
technologies are at the core of our OSP
proposition. This capital expenditure encompasses the ongoing
development of our grid and bots (our ASRS and the robots on the
grid), its peripheral MHE and the enhancement of these
propositions. We invested £119.1m this year (FY22: £108.1m), over
half of the £202.8m total Technology development spend capitalised.
This element of our capital expenditure is focused on reducing both
the capital cost and the ongoing running costs of the CFC for the
partner and Ocado Group.
FY23 development spend was invested in several key propositions,
including: the development of our lowest-cost and lightest bot ever
and its associated grid, the 600 series; the development and client
deployment of an automated freezer solution ("autofreezer"); and
the development of fire retardant metal totes.
This spend enabled key propositions to be introduced into the new
CFC at Luton from the site launch. This included both OGRP and
autofreezer capabilities. The autofreezer solution is more energy
efficient, reducing our energy costs. OGRP reduces partner labour
costs and enables a more optimised site design with reduced
mezzanine floor space as less space is needed for the manual
packing of groceries.
OGRP ramped up quickly from the launch date in Luton and is now
regularly picking more than 30,000 eaches per day. The system
targets 240 UPH and has been proven to pick over 200 UPH in our
development environment at our Purfleet CFC. To date, the system
has picked over one million items and has yielded critical
learnings that have been applied to the operational sites. We
expect both Luton and Purfleet to continue to ramp up in the coming
months, achieving the full operational benefits of reduced
labour.
● Ecommerce:
we invested £28.6m (FY22: £29.9m) in developing our ecommerce
platform, a core element of the OSP end-to-end solution. These
additional OSP ecommerce innovations continue to enhance every
aspect of the shopper journey. They include improvements to the
search and browse experience, specific developments to bolster our
capacities for general merchandise and the introduction of product
"regulars" to five additional partners providing a more tailored
and time-efficient experience for shoppers.
● Logistics and supply
chain: one of the core benefits of OSP is our
deep expertise in logistics and supply chain. We invested £22.1m in
these propositions in FY23 (FY22: £18.8m), with the focus of our
investment on the planning, optimisation and execution of delivery.
This includes optimisation of the grocery supply chain, including
ensuring increased availability to customers and decreased
stockholding days.
● The balance of the
spend predominantly relates to our teams creating tooling and
development systems for the wider Technology function where we
invested £33.0m (FY22: £29.9m).
Group support and other capital expenditure
comprise projects relating to support costs systems and
infrastructure; they include capital expenditure for our fully
consolidated joint venture, Jones Food Company Limited, related to
the opening of the company's second vertical farm. Capital
expenditure of £34.3m is £17.7m lower than last year (FY22: £52.0m)
as we have completed several key investments in support function
systems and infrastructure.
Logistics
Capital expenditure of £14.4m (FY22: £19.5m)
largely relates to technology system development of £13.3m (FY22:
£18.6m) to transition our UK clients from our legacy platforms onto
OSP.
Retail
Capital expenditure of £25.2m (FY22: £133.8m)
largely comprises CFC construction costs recharged from Ocado
Group, along with design and set-up fees for new sites and IT
project costs. Design and set-up fees of £9.5m (FY22: £35.5m) to
Ocado Retail from Technology Solutions are eliminated on
consolidation of the Group and principally relate to the Luton CFC.
This reduced year-on-year as no new CFC sites have been committed
to in the period.
Capital expenditure in Retail decreased by
£108.6m due to a reduction in new CFC investment following the
openings in FY22 of the Bicester CFC and the Zoom sites in Leeds
and Leyton. During the period CFC investment was primarily related
to building the new Luton CFC, which opened in the second half of
FY23.
Cash flow
£m
|
FY23
53 weeks
|
FY22
52 weeks
|
Adjusted EBITDA*
|
54.2
|
(74.1)
|
Movement in contract
liabilities
|
47.9
|
78.7
|
Other working capital
movements
|
19.4
|
32.0
|
Finance costs paid
|
(56.3)
|
(55.8)
|
Taxation received
|
9.9
|
13.4
|
Insurance proceeds relating to
business interruption
|
-
|
54.3
|
Adjusting items*
|
(1.7)
|
(43.9)
|
Other non-cash items
|
8.8
|
3.3
|
Operating cash flow
|
82.2
|
7.9
|
Capital expenditure
|
(536.4)
|
(785.9)
|
Acquisition of subsidiaries, net of
cash acquired
|
(11.4)
|
(5.5)
|
Insurance proceeds relating to
rebuilding Andover CFC and Erith claim
|
-
|
57.0
|
Dividend from joint
venture
|
5.1
|
8.0
|
Net proceeds from interest-bearing
loans and borrowings
|
54.1
|
37.2
|
Repayment of lease
liabilities
|
(66.8)
|
(57.4)
|
Net proceeds from share
issues
|
2.6
|
567.3
|
Other investing and financing
activities
|
42.6
|
9.0
|
Movement in cash and cash equivalents (excl. FX
changes)
|
(428.0)
|
(162.4)
|
Effect of changes in FX
rates
|
(15.2)
|
21.8
|
Movement in cash and cash equivalents (incl. FX
changes)
|
(443.2)
|
(140.6)
|
Cash and cash equivalents (including FX
changes) reduced by £443.2m (FY22: reduction of £140.6m). There was
an increase in cash outflow of £302.6m year-on-year, as FY22
included £564.1m of net cash proceeds from the equity
raise.
Adjusted EBITDA* (as detailed in the
alternative performance measures in Section 6 of the Consolidated
Financial Statements) improved by £128.3m to £54.2m on a 53-week
basis (FY22: loss of £74.1m).
Operating cash flow improved by £74.3m to
an inflow of £82.2m (FY22: inflow of £7.9m). The movement can be
analysed as follows:
●
Contract
liabilities: cash inflow of £47.9m (FY22:
£78.7m inflow) relating to upfront design and access
fees paid by partners. Design fees are typically paid in
instalments during the CFC construction process. The cash inflow is
lower than the prior year driven by the timing of design fee
instalment payments, fewer CFCs going live in the period and fewer
modules ordered.
●
Working capital:
cash inflow of £19.4m (FY22: £32.0m
inflow)
o Trade and
other receivables reduced by £36.6m mainly due to lower prepayments
and deposits for spares relating to new CFCs and cash receipts from
our Technology Solutions partners. This was partially offset by an
increase in receivables due to Ocado Retail mainly due to the
timing of receipt of media and promotional income.
o Inventories
reduced by £3.1m.
o Trade and
other payables reduced by £20.3m mainly due to the timing of the
payroll run at the period-end (in the prior year the monthly
payroll run was after the period end and the payment was accrued)
and reduced accruals for capital expenditure. This was partially
offset by higher VAT payable driven by higher amounts invoiced
during the year.
●
Finance costs:
cash outflow of £56.3m (FY22: £55.8m outflow)
comprises £30.6m interest and charges on borrowings (FY22: £27.5m)
and £25.7m for the interest element of assets held under finance
leases (FY22: £28.3m).
●
Taxation: cash
inflow of £9.9m (FY22: inflow of £13.4m)
reflects a tax refund received by Ocado Retail, partially offset by
taxation payments by foreign subsidiaries. No UK tax was paid in
the period.
●
Adjusting
items*: cash outflow of £1.7m (FY22: outflow of
£43.9m) relates to cash-settled adjusting items* and comprises the
following:
o £41.7m (FY22:
£nil) relating to the AutoStore litigation settlement;
o £(5.0)m
(FY22: £(26.5)m) relating to litigation costs;
o £(15.5)m
(FY22: £(3.0)m) organisational restructuring costs;
o £(12.2)m
(FY22: £(11.0)m) Finance, HR and Retail IT system transformation
costs;
o £(7.8)m
(FY22: £nil) UK network capacity review;
o £(2.2)m
(FY22: £nil) acquisition costs of 6RS;
o £(0.7)m
(FY22: £nil) costs relating to contingent consideration
negotiations with M&S; and
o £nil (FY22:
£(3.4)m) Andover CFC adjusting items*.
●
Other non-cash
items: inflow of £8.8m (FY22: inflow of £3.3m)
relates to adjustments for the following non-cash elements of
adjusted EBITDA*:
o £(33.0)m
(FY22: £(24.7)m) revenue recognised from long-term
contracts;
o £33.3m (FY22:
£42.0m) of share-based payments;
o £2.9m (FY22:
£10.8) non-cash write-off of property, plant and
equipment;
o £(5.0)m
(FY22: £nil) gain on the disposal of property, plant and equipment,
recognised in the Income Statement but the proceeds from the
disposal are included in other investing and financing
activities;
o £0.9m (FY22:
£1.4m) share of losses from joint ventures and associates;
and
o £9.7m (FY22:
£(26.2)m) movement in provisions.
The movements above result in an
operating cash
inflow of £82.2m (FY22: cash inflow of £7.9m).
The following movements explain the overall movement in cash and
cash equivalents outflow of £443.2m (FY22: outflow of
£140.6m):
●
Capital
expenditure of £536.4m (FY22: £785.9m)
primarily relates to the continued investment in OSP and new CFCs
in the UK and internationally. Capital expenditure also includes
investment in Group support activities. The year-on-year reduction
of £249.5m reflects 1. the lower number of new CFCs going live in
the year, with only three CFCs opening in FY23 (FY22: 9 CFCs, 3
Zooms) and 2. the reduced in-year capital expenditure on sites
under construction.
●
Net proceeds
from interest-bearing loans and borrowings of £54.1m
(FY22: £37.2m) reflect 1. £60.0m shareholder loan from
M&S to Ocado Retail, 2. £(10.0)m RCF repayment by Ocado Retail,
and 3. £4.1m net loan drawn down by Jones Food.
●
Lease liability
repayments of £66.8m (FY22: £57.4m), increased
by £9.4m year-on-year mainly driven by an increase in motor vehicle
leases, incremental CFC lease costs at Purfleet and Luton, and new
office leases.
●
Net proceeds
from share issue of £2.6m (FY22: £567.3m) in
respect of employee share schemes; the prior year includes the
equity raise of £564.1m (net of £14.1m associated
costs).
●
Other investing
and financing activities of £42.6m (FY22:
£9.0m) include £41.7m (FY22: £9.6m) of interest received on
treasury deposits, £9.4m (FY22: £nil) proceeds from the disposal of
assets held for sale and £1.5m (FY22: £nil) cash contingent
consideration received in respect of the sale of Fabled to Next
plc. This was offset by investments in Oxa Autonomy of £10.0m
(FY22: £nil).
●
Effect of
changes in FX rates of £(15.2)m (FY22: £21.8m
gain) relates to the FX loss (reported under net finance costs) and
translation FX on our non-sterling cash balances (predominantly USD
cash balances held to fund the expansion of our Technology
Solutions business in the US).
£m
|
FY23
53 weeks
|
FY22
52 weeks
|
Movement in cash and cash equivalents
|
(443.2)
|
(140.6)
|
Adjusting
items*1
|
1.7
|
(67.4)
|
Purchase of unlisted equity
investments and loans to investee companies2
|
10.0
|
0.6
|
Proceeds from disposal of asset held
for sale
|
(9.4)
|
-
|
Financing3
|
(56.7)
|
(604.5)
|
Cash received in respect of
contingent consideration receivable
|
(1.5)
|
-
|
Acquisition of subsidiaries, net of
cash acquired
|
11.4
|
5.5
|
Effect of changes in FX
rates
|
15.2
|
(21.8)
|
Underlying cash outflow*
|
(472.5)
|
(828.2)
|
1.
Adjusting items* of £67.4m in FY22 include the following items from
the cash flow above: adjusting items* outflow £(43.9)m, insurance
proceeds relating to business interruption £54.3m inflow, insurance
proceeds relating to rebuilding Andover CFC and Erith claim £57.0m
inflow.
2.
Purchase of unlisted equity investments and loans to investee
companies of £10.0m (FY22: £0.6m) during the year relates to the
Group's investment in Oxa Autonomy.
3.
Financing of £56.7m (FY22: £604.5m) includes net proceeds from
interest-bearing loans and borrowings of £54.1m (FY22: £37.2m) and
net proceeds from share issues of £2.6m (FY22: £567.3m).
Underlying cash outflow* is £472.5m
(FY22: £828.2m) and improved by £355.7m year-on-year. Underlying
cash flow* is the movement in cash and cash equivalents excluding
the impact of adjusting items*, costs of new financing activity,
investment in unlisted equity investments and FX
movements.
Balance Sheet
£m
|
3 December
2023
|
27 November
2022
|
Movement
|
Assets
|
|
|
|
Goodwill
|
158.6
|
164.7
|
(6.1)
|
Other intangible assets
|
461.3
|
377.2
|
84.1
|
Property, plant and
equipment
|
1,794.9
|
1,777.8
|
17.1
|
Right-of-use assets
|
428.1
|
493.9
|
(65.8)
|
Investment in joint venture and
associates
|
9.5
|
15.6
|
(6.1)
|
Trade and other
receivables
|
427.8
|
329.3
|
98.5
|
Cash and cash equivalents
|
884.8
|
1,328.0
|
(443.2)
|
Other financial assets
|
127.7
|
185.4
|
(57.7)
|
Inventories
|
127.1
|
106.8
|
20.3
|
Other assets
|
9.2
|
34.5
|
(25.3)
|
Total assets
|
4,429.0
|
4,813.2
|
(384.2)
|
|
|
|
|
Liabilities
|
|
|
|
Contract liabilities
|
(446.7)
|
(422.9)
|
(23.8)
|
Trade and other payables
|
(470.4)
|
(508.2)
|
37.8
|
Borrowings
|
(1,462.1)
|
(1,372.8)
|
(89.3)
|
Lease liabilities
|
(497.8)
|
(532.3)
|
34.5
|
Other Liabilities
|
(41.0)
|
(42.7)
|
1.7
|
Total liabilities
|
(2,918.0)
|
(2,878.9)
|
(39.1)
|
|
|
|
|
Net
assets
|
1,511.0
|
1,934.3
|
(423.3)
|
|
|
|
|
Total equity
|
(1,511.0)
|
(1,934.3)
|
423.3
|
Assets
Goodwill of £158.6m (FY22: £164.7m)
arises on the acquisition of a business where the purchase cost
exceeds the fair value of the tangible assets, the liabilities and
the intangible assets acquired. It therefore represents the
expected future benefit to Ocado Group of businesses that have been
acquired. Goodwill of £158.6m arises from the prior acquisitions of
Kindred Systems Inc., Haddington Dynamics Inc., Myrmex Inc. and
Jones Food Company. This future benefit derives from the
development of new technology, the ability to attract new customers
and cost synergies. Goodwill decreased by £6.1m in the year mainly
due to the foreign exchange impact of the revaluation of the
goodwill (predominantly USD-denominated).
Other intangible assets net book value of
£461.3m increased by £84.1m (FY22: £377.2m). The movement was
driven by:
●
£167.8m (FY22: £117.5m) internal development costs
capitalised during the year that related to the development of our
technology capabilities for our partners, across our CFC, Zoom and
ISF solutions;
●
£38.2m (FY22: £27.4m) of intangible assets acquired primarily
relating to software and patents;
●
Amortisation charge for the 53-week period of £125.0m (FY22:
£114.7m); and
●
Other smaller movements of £3.1m (FY22: £1.8m).
●
Other intangible assets are typically depreciated over five
years.
Property, plant and equipment net book
value increased by £17.1m to £1,794.9m (FY22: £1,777.8m) and
comprise fixtures, fittings, plant and machinery of £1,586.3m
(FY22: £1,577.2m), land and buildings of £206.0m (FY22: £197.5m)
and motor vehicles of £2.6m (FY22: £3.1m).
●
Fixtures, fittings, plant and machinery predominantly
comprise the material handling and other operating equipment within
our sites.
o This
increased by £9.1m to £1,586.3m driven by £261.3m of additions
(FY22: £494.4m) primarily relating to the go-live of client sites
for Sobeys, AEON and Ocado Retail.
o Internal
development costs of £32.7m (FY22: £63.9m) were capitalised and
relate to OSP technology development and deployment.
o These
increases were partly offset by depreciation for the 53-week period
of £182.9m (FY22: £148.5m), net foreign exchange movements of
£(47.2)m (FY22: £37.3m) and impairments of £41.2m (FY22: £9.2m).
Impairments were recognised relating to the cessation of operations
at our Hatfield CFC, the strategy and capacity review of the Zoom
network and assets relating to our contract with Groupe Casino and
other smaller movements.
●
Land and buildings comprise CFC and Zoom sites in the UK,
spokes and offices. The net book value increased by £8.5m to
£206.0m.
●
Motor vehicles primarily comprise the vehicles owned by Ocado
Group relating to CFC and head office operations.
●
Tangible assets are typically depreciated over nine
years
Right-of-use assets of £428.1m (FY22:
£493.9m) represent the value of assets held under long-term leases,
comprising land and buildings of £359.9m (FY22: £415.0m), motor
vehicles of £50.5m (FY22: £63.1m) and fixtures, fittings, plant and
machinery of £17.7m (FY22: £15.8m).
During the year, the Group entered into new
leases for assets of £32.7m:
●
£13.4m of which is fixtures, fittings, plant and machinery;
this primarily relates to new leases established with MHE JVCo, the
joint venture between the Group and Morrisons, for the operation of
MHE at the Dordon CFC;
●
£10.4m of which is motor vehicles; and
●
£8.9m of which is land and buildings, primarily relating to
our London and Toronto offices
The depreciation charge for the 53-week period
was £(70.4)m (FY22: £(66.0)m) and an impairment charge of £(27.7)m
(FY22: £(0.6)m) was recognised relating to the closure of the
Hatfield CFC and Zoom strategy and capacity review.
Investment in joint ventures and associates
includes the Group's 50% investment in MHE JVCo and the
Group's 26.3% investment in Karakuri (both no change in percentage
holding from the prior year). During the period, the Group's
investment in Karakuri was written off as the business entered into
administration in the year (FY22: £0.8m). The carrying amount at
the end of the period of £9.6m relates solely to the investment in
MHE JVCo (FY22: £14.8m).
Trade and other receivables increased by
£98.5m to £427.8m (FY22: £329.3m). The balance comprises the
following:
●
Trade receivables (net of expected credit loss allowance) of
£126.8m (FY22: £124.2m) primarily comprise receivable balances due
from Technology Solutions retail partners and amounts due to Ocado
Retail from suppliers as part of commercial and media
income.
●
Other receivables of £190.4m (FY22: £82.7m). Other
receivables largely comprise amounts receivable from AutoStore
following the settlement of patent litigation, tax refunds due and
receivables expected from contract manufacturers for components
sourced on their behalf. The increase of £107.7m is mainly driven
by the recognition of the AutoStore receivable and higher
corporation tax receivable offset by tax credit receipts in respect
of research and development.
●
Included in other receivables is £144.8m (FY22: £nil) due
from AutoStore as a result of the litigation settlement reached
during the period. The receivable was initially recognised at fair
value of £180.4m. The balance will be reduced by monthly
instalments received and increased by the unwinding of the
discounting as the receivable moves towards maturity.
●
Prepayments of £55.8m (FY22: £76.5m) include CFC components,
software maintenance payments, and business rates and utilities
payments. The £20.7m decrease was mainly driven by a reduction in
prepaid CFC components and the Group optimising its utilisation of
MHE already purchased.
●
Accrued income of £54.8m (FY22: £45.9m) relates to accrued
income for media and promotions, solutions capacity fees, and
volume-related rebates. The increase is mainly driven by accrued
media and promotional income and accrued fee income from our
partners.
●
Amounts due from suppliers relating to commercial and media
income are £91.5m (FY22: £71.2m). £59.1m (FY22: £52.5m) of the
total is within trade receivables and £32.4m (FY22: £18.7m) is
within accrued income.
Cash and cash equivalents were £884.8m
(FY22: £1,328.0m) at the year end. Gross debt (including lease
liabilities) at the period end was £1,959.9m (FY22: £1,905.1m),
with net debt* at the period-end of £1,075.1m (FY22: £577.1m). In
May 2023, the Group renegotiated the covenant terms on the RCF with
its banking group to provide additional flexibility around access
to the facility. Current borrowing facilities include a £600m
convertible bond that matures in December 2025, a £500m senior
unsecured note that matures in October 2026 and a £350m convertible
bond that matures in January 2027. These facilities are expected to
be refinanced on a timely basis to maintain appropriate
liquidity.
The Group also has access to a £300m RCF that is
undrawn. In May, the Group renegotiated the covenant terms on the
RCF with its banking group to provide additional flexibility around
access to the facility. The RCF is due to expire in June
2025.
Other financial assets of £127.7m (FY22:
£185.4m) comprise:
● £29.4m (FY22:
£98.3m) total contingent consideration receivables
○ £28.0m (FY22:
£95.0m) due from M&S relating to the disposal of 50% of Ocado
Retail in August 2019; and
○ £1.4m (FY22: £3.3m)
due from Next plc ("Next") relating to the disposal of Fabled in
July 2019;
● £82.7m (FY22:
£69.8m) unlisted equity investments held by the Group in Oxa
Autonomy, Wayve Technologies and 80 Acres;
● £14.4m (FY22:
£14.2m) loans receivable held at amortised cost; and
● £1.2m (FY22: £3.1m)
other items.
The decrease of £57.7m is due to 1. change in
the IFRS 13 fair value of the contingent consideration due from
M&S, 2. the revaluation of the Group's unlisted equity
investments, and 3. the increase in the Group's investment in Oxa
Autonomy.
Contingent consideration
receivables
Contingent
consideration due from M&S
We have reduced the value of the contingent
consideration due from M&S relating to the disposal of 50% of
Ocado Retail by £67.0m to £28.0m (FY22: £95.0m).
Under the terms of the disposal of 50% of Ocado
Retail to M&S that took place during 2019, a final
consideration payment may become due from M&S to Ocado Group of
£156.3m plus interest, dependent on certain contractually defined
Ocado Retail performance measures (the "Target") being achieved for
the FY23 financial year (the contingent consideration).
The contractual outcome is binary, meaning if
the Target is achieved, it will trigger the full payment.
Conversely, should the Target not be achieved, no consideration
would be payable by M&S. There is no formal arrangement for a
payment between zero and £190.7m. Ocado Retail failed to meet the
performance measures for the FY23 financial year that were required
for automatic payment of the contingent consideration.
The contractual arrangement with M&S does,
however, expressly provide for the Target to be adjusted for
certain decisions or actions taken by Ocado Retail management that
differ from the assumptions used in the discounted cash flow model
which underpinned the sale transaction. We believe that there were
several significant decisions and actions taken by Ocado Retail
management that require adjustment to the Target. The adoption of
these adjustments, if established, would result in Ocado Retail
achieving the Target (as adjusted) and the full payment of
£190.7m.
Notwithstanding the application of the
adjustments (that remains unresolved at present) the Group has
appropriately applied the principles of IFRS 9 Financial
Instruments and IFRS 13 Fair Value Measurement in determining the
fair value of the contingent consideration financial instrument
recorded in the Group's financial statements at each reporting
date. IFRS 13 requires that the characteristics of the contract be
valued from the perspective of a hypothetical, independent 'market
participant' who would exclude broader facts, circumstances and
commercial arrangements pertaining to the ongoing relationship with
M&S.
At the year end the fair value has been
estimated using the expected present value technique and has been
based on several probability-weighted possible scenarios that a
market participant would consider and has been determined to be
£28.0m (FY22: £95.0m), resulting in a £67.0m reduction in the value
of the asset. This financial reporting estimate is significantly
lower than the amount that Ocado believes it will receive in the
future (either via a formal litigation process or
settlement).
Contingent
consideration due from Next
The fair value of the contingent consideration
due from Next is estimated to be £1.4m (FY22: £3.3m). During the
period, the Group received cash consideration of £1.5m (FY22:
£nil).
Unlisted equity investments,
loans and other items
The fair value of unlisted equity investments
increased by £12.9m to £82.7m (FY22: £69.8m). The total movement
comprises £16.5m loss on the revaluation of these investments and
£29.4m increase in the Group's equity investment in Oxa
Autonomy.
During the year, the Group revalued its unlisted
equity investments designated as fair value through other
comprehensive income and recognised a loss of £16.5m (FY22: gain of
£33.3m) due to changes in the commercial outlook of the companies
in which the Group is invested, primarily to Oxa Autonomy, Paneltex
Limited ("Paneltex") and Inkbit Corporation ("Inkbit").
The Group has a 12.2% (FY22: 8.8%) share of Oxa
Autonomy, a technology company focused on the development of
autonomous vehicles. In December 2022, the company completed its
Series C Fundraising, which resulted in the Group's warrants being
exercised to acquire 21,934 Series B shares for £10.0m. Following
the exercise of the warrants, the Group now holds a 12.2% (FY22:
8.8%) interest in Oxa Autonomy. The fair value of the warrants
before the transaction was £19.4m, which together with the exercise
cost of £10.0m comprises a £29.4m increase in the Group's equity
investment in Oxa Autonomy.
Inventories of £127.1m (FY22: £106.8m)
comprise Ocado Retail grocery inventory, Technology Solutions grid
and bots spares and 6RS Chuck robots. Inventories increased by
£20.3m during the year mainly driven by the reclassification of
£12.5m of grid and bot spares from property, plant and equipment to
inventory under IAS 2. Inventory with a fair value of £10.7m was
acquired on acquisition of 6RS comprising mainly Chuck robots and
spares.
Other assets of £9.2m (FY22: £34.5m)
relate primarily to assets held for sale of £4.9m (FY22: £4.4m) and
share warrants that have a carrying value of £3.3m (FY22: £27.4m),
and which decreased by £24.1m mainly due to the exercise of share
warrants for Oxa Autonomy of £19.4m, revaluation of warrants for
Wayve Technologies and 80 Acres of £2.5m and impairment of Karakuri
warrants of £2.1m.
Liabilities
Contract liabilities of £446.7m (FY22:
£422.9m) primarily relate to the consideration received in advance
from Technology Solutions and OIA customers. Revenue is recognised
when the performance obligation is satisfied, typically when a site
goes live or OIA products and services are provided. The £23.8m
increase in the year is driven by:
● £47.6m (FY22:
£69.1m) invoiced to partners for their contracted contribution
towards the initial MHE investment made in a site or build and
design of MHE;
● £9.2m recognised on
acquisition of 6RS; and
● £(33.0)m (FY22:
£(24.7)m) in respect of prior receipts recognised as revenue in the
year.
The current liabilities portion of the contract
liabilities balance of £38.6m (FY22: £29.1m) represents amounts due
to be recognised as revenue within 12 months of the year end.
Long-term liabilities of £408.1m (FY22: £393.8m) make up the
balance.
Trade and other payables of £470.4m
(FY22: £508.2m) reduced by £37.8m, mainly due to the timing of the
monthly payroll run and reduced accruals for capital expenditure
partly offset by the timing of VAT payments.
Borrowings of £1,462.1m (FY22: £1,372.8m)
comprise the liability element of the two unsecured convertible
bonds, the senior unsecured bond and the shareholder loan provided
by M&S (the non-controlling interest) to Ocado Retail. The
increase of £89.3m is due to:
● £65.8m accrued
interest on loans and borrowings held at amortised cost;
● £60.0m shareholder
loan provided by M&S (the non-controlling interest) to Ocado
Retail;
● £4.4m loan drawn by
Jones Food;
● £(30.6)m interest
repayments; and
● £(10.3)m principal
repayments comprising largely the repayment of the RCF by Ocado
Retail.
Lease liabilities of £497.8m (FY22:
£532.3m) comprise land and buildings of £426.9m (FY22: £447.3m),
motor vehicles of £51.6m (FY22: £65.5m) and fixtures, fittings,
plant and machinery of £19.3m (FY22: £19.5m). New lease liabilities
of £32.9m were entered into during the year (FY22: £64.2m) and
largely comprised fixtures, fittings, plant and machinery and land
and buildings. Lease liabilities decreased by payments made of
£92.5m (FY22: £85.7m) and £(0.6)m of other movements (FY22:
£(2.9)m), partly offset by £25.7m of accrued interest (FY22:
£28.3m).
Lease liabilities of £497.8m (FY22: £532.3m)
include £16.5m (FY22: £17.5m) payable to MHE JVCo, a company in
which the Group holds a 50% interest.
Other liabilities of £41.0m (FY22:
£42.7m) comprise:
●
£40.8m (FY22: £26.4m) of provisions. The £14.4m increase in
provisions mainly reflects adjusting items* costs relating to the
closure of the Hatfield CFC;
●
£0.2m (FY22: £1.6m) derivative financial liabilities
primarily related to diesel hedges; and
●
£nil (FY22: £14.7m) of deferred tax liabilities. The £14.7m
decrease is due to the removal of deferred tax on consolidation
following an intercompany transfer of intangible assets from
Haddington and Kindred to Ocado Innovation Limited.
Consolidated Financial
Statements
Consolidated Income Statement
for
the 53 weeks ended 3 December 2023
|
|
53 weeks ended 3 December
2023
|
52 weeks
ended 27 November 2022 (restated1)
|
|
|
Results before adjusting
items
|
Adjusting
items
(Note 2.3)
|
Total
|
Results
before
adjusting items
|
Adjusting
items
(Note
2.3)
|
Total
|
|
Notes
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Revenue
|
2.2
|
2,825.0
|
-
|
2,825.0
|
2,516.8
|
-
|
2,516.8
|
Insurance and legal settlement
proceeds
|
2.3
|
-
|
180.4
|
180.4
|
-
|
73.8
|
73.8
|
Operating costs
|
|
(3,175.1)
|
(162.6)
|
(3,337.7)
|
(2,938.1)
|
(103.7)
|
(3,041.8)
|
Operating (loss)/profit before results of joint ventures and
associate
|
|
(350.1)
|
17.8
|
(332.3)
|
(421.3)
|
(29.9)
|
(451.2)
|
Share of results of joint venture
and associate
|
|
(0.9)
|
-
|
(0.9)
|
(1.4)
|
-
|
(1.4)
|
Operating (loss)/profit
|
|
(351.0)
|
17.8
|
(333.2)
|
(422.7)
|
(29.9)
|
(452.6)
|
Finance income
|
2.4
|
40.7
|
6.1
|
46.8
|
13.5
|
-
|
13.5
|
Finance costs
|
2.4
|
(97.0)
|
-
|
(97.0)
|
(90.0)
|
-
|
(90.0)
|
Other finance gains and
losses
|
2.4
|
(19.8)
|
-
|
(19.8)
|
28.3
|
-
|
28.3
|
(Loss)/profit before tax
|
|
(427.1)
|
23.9
|
(403.2)
|
(470.9)
|
(29.9)
|
(500.8)
|
Income tax credit
|
|
16.2
|
-
|
16.2
|
18.7
|
0.8
|
19.5
|
(Loss)/profit for the period
|
|
(410.9)
|
23.9
|
(387.0)
|
(452.2)
|
(29.1)
|
(481.3)
|
Attributable to:
|
|
|
|
|
|
|
|
Owners of Ocado Group
plc
|
|
|
|
(314.0)
|
|
|
(455.5)
|
Non-controlling
interests
|
|
|
|
(73.0)
|
|
|
(25.8)
|
|
|
|
|
(387.0)
|
|
|
(481.3)
|
Loss per share
|
|
|
|
Pence
|
|
|
Pence
|
Basic and diluted loss per share
|
2.5
|
|
|
(38.44)
|
|
|
(58.93)
|
1.
During the period, the Group changed the presentation of its
expenses and other income. Consequently, the prior year
comparatives have been restated. See Note 1.2 for the
details.
Adjusted earnings before interest, taxation, depreciation,
amortisation, impairment and adjusting items (Adjusted
EBITDA*)
|
|
|
|
53 weeks
ended
3 December
2023
|
|
|
52 weeks
ended
27
November 2022
|
|
Notes
|
|
|
£m
|
|
|
£m
|
Operating loss
|
|
|
|
(333.2)
|
|
|
(452.6)
|
Adjustments for:
|
|
|
|
|
|
|
|
Adjusting items*
|
2.3
|
|
|
(17.8)
|
|
|
29.9
|
Amortisation of intangible
assets
|
3.2
|
|
|
125.0
|
|
|
114.7
|
Impairment of intangible
assets
|
3.2
|
|
|
0.2
|
|
|
3.6
|
Depreciation of property, plant and
equipment
|
3.3
|
|
|
187.9
|
|
|
154.4
|
Impairment of property, plant and
equipment
|
3.3
|
|
|
21.7
|
|
|
9.3
|
Depreciation of right-of-use
assets
|
3.4
|
|
|
70.4
|
|
|
66.0
|
Impairment of right-of-use
assets
|
3.4
|
|
|
-
|
|
|
0.6
|
Adjusted EBITDA*
|
|
|
|
54.2
|
|
|
(74.1)
|
*See Section 6 - Alternative
performance measures for further information. Adjusting items
include impairment charges in respect of other intangible assets of
£0.3m (FY22: £nil), property, plant and equipment of £19.5m (FY22:
£nil) and right-of-use assets of £27.7m (FY22:
£nil).
Consolidated Statement of Comprehensive
Income
for
the 53 weeks ended 3 December 2023
|
|
53 weeks
ended
3 December
2023
|
52 weeks
ended
27
November 2022
|
|
|
£m
|
£m
|
Loss for the period
|
|
(387.0)
|
(481.3)
|
Other comprehensive income
|
|
|
|
Items that may be reclassified to profit or loss in subsequent
periods:
|
|
|
|
Fair value movements in cash flow
hedges
|
|
(0.4)
|
7.7
|
Items reclassified from cash flow
hedge reserve
|
|
1.1
|
(8.8)
|
Foreign exchange (loss)/gain on
translation of foreign subsidiaries
|
|
(53.0)
|
69.1
|
Share of change in net assets of
associate through other comprehensive income
|
|
-
|
0.4
|
Net other comprehensive (expense)/income that may be
reclassified to profit or loss in subsequent
periods
|
|
(52.3)
|
68.4
|
Items that will not be reclassified to profit or loss in
subsequent periods:
|
|
|
|
(Loss)/gain on equity instruments
designated as at fair value through other comprehensive
income
|
|
(16.5)
|
33.3
|
Income tax relating to items that
will not be reclassified subsequently to profit or loss
|
|
(4.6)
|
(7.2)
|
Net other comprehensive (expense)/income that will not be
reclassified to profit and loss in subsequent
periods
|
|
(21.1)
|
26.1
|
Other comprehensive (expense)/income for the period, net of
income tax
|
|
(73.4)
|
94.5
|
Total comprehensive expense for the period
|
|
(460.4)
|
(386.8)
|
Attributable to:
|
|
|
|
Owners of Ocado Group
plc
|
|
(387.4)
|
(361.0)
|
Non-controlling
interests
|
|
(73.0)
|
(25.8)
|
|
|
(460.4)
|
(386.8)
|
Consolidated Balance Sheet
as
at 3 December 2023
|
|
3 December
2023
|
27
November 2022
|
|
Notes
|
£m
|
£m
|
Non-current assets
|
|
|
|
Goodwill
|
3.1
|
158.6
|
164.7
|
Other intangible assets
|
3.2
|
461.3
|
377.2
|
Property, plant and
equipment
|
3.3
|
1,794.9
|
1,777.8
|
Right-of-use assets
|
3.4
|
428.1
|
493.9
|
Investment in joint venture and
associate
|
|
9.5
|
15.6
|
Other financial assets
|
3.5
|
84.0
|
181.6
|
Trade and other
receivables
|
|
50.9
|
-
|
Deferred tax assets
|
|
0.9
|
1.9
|
Derivative financial
assets
|
|
3.3
|
27.4
|
|
|
2,991.5
|
3,040.1
|
Current assets
|
|
|
|
Other financial assets
|
3.5
|
43.7
|
3.8
|
Inventories
|
|
127.1
|
106.8
|
Trade and other
receivables
|
|
375.4
|
329.3
|
Current tax assets
|
|
1.5
|
-
|
Cash and cash
equivalents
|
|
884.8
|
1,328.0
|
Derivative financial
assets
|
|
0.1
|
0.8
|
|
|
1,432.6
|
1,768.7
|
Asset held for sale
|
|
4.9
|
4.4
|
|
|
1,437.5
|
1,773.1
|
Total assets
|
|
4,429.0
|
4,813.2
|
Current liabilities
|
|
|
|
Contract liabilities
|
2.2
|
(38.6)
|
(29.1)
|
Trade and other payables
|
|
(468.4)
|
(506.3)
|
Current tax liabilities
|
|
(0.9)
|
-
|
Borrowings
|
4.1
|
(2.6)
|
(10.2)
|
Provisions
|
|
(13.2)
|
(1.0)
|
Lease liabilities
|
3.4
|
(52.9)
|
(58.6)
|
Derivative financial
liabilities
|
|
(0.2)
|
(1.6)
|
|
|
(576.8)
|
(606.8)
|
Net current assets
|
|
860.7
|
1,166.3
|
Non-current liabilities
|
|
|
|
Contract liabilities
|
2.2
|
(408.1)
|
(393.8)
|
Provisions
|
|
(27.6)
|
(25.4)
|
Borrowings
|
4.1
|
(1,459.5)
|
(1,362.6)
|
Lease liabilities
|
3.4
|
(444.9)
|
(473.7)
|
Trade and other payables
|
|
(1.1)
|
(1.9)
|
Deferred tax liabilities
|
|
-
|
(14.7)
|
|
|
(2,341.2)
|
(2,272.1)
|
Net assets
|
|
1,511.0
|
1,934.3
|
Equity
|
|
|
|
Share capital
|
4.3
|
16.6
|
16.5
|
Share premium
|
4.3
|
1,942.9
|
1,939.3
|
Treasury shares reserve
|
4.3
|
(112.9)
|
(112.9)
|
Other reserves
|
4.3
|
90.6
|
164.0
|
Retained earnings
|
|
(449.8)
|
(169.0)
|
Equity attributable to owners of
Ocado Group plc
|
|
1,487.4
|
1,837.9
|
Non-controlling
interests
|
|
23.6
|
96.4
|
Total equity
|
|
1,511.0
|
1,934.3
|
Consolidated Statement of Changes in Equity
for
the 53 weeks ended 3 December 2023
|
|
Equity
attributable to owners of Ocado Group plc
|
|
|
|
Notes
|
Share
capital
£m
|
Share
premium
£m
|
Treasury
shares reserve
£m
|
Other
reserves
£m
|
Retained
earnings
£m
|
Total
£m
|
Non-
controlling interests
£m
|
Total
equity
£m
|
Balance at 28 November 2021
|
|
15.0
|
1,372.0
|
(113.0)
|
69.9
|
244.3
|
1,588.2
|
121.2
|
1,709.4
|
Loss for the period
|
|
-
|
-
|
-
|
-
|
(455.5)
|
(455.5)
|
(25.8)
|
(481.3)
|
Other comprehensive
income
|
|
-
|
-
|
-
|
94.1
|
0.4
|
94.5
|
-
|
94.5
|
Total comprehensive income/(expense) for the
period
|
|
|
|
|
94.1
|
(455.1)
|
(361.0)
|
(25.8)
|
(386.8)
|
Transactions with owners
|
|
|
|
|
|
|
|
|
|
- Issue of ordinary
shares
|
4.3
|
1.5
|
565.0
|
-
|
-
|
-
|
566.5
|
-
|
566.5
|
- Allotted in respect of share
option schemes
|
4.3
|
-
|
2.3
|
-
|
-
|
-
|
2.3
|
-
|
2.3
|
- Disposal of unallocated treasury
shares
|
4.3
|
-
|
-
|
0.1
|
-
|
(0.1)
|
-
|
-
|
-
|
- Share-based payments
charge
|
|
-
|
-
|
-
|
-
|
42.0
|
42.0
|
-
|
42.0
|
- Tax on share-based payments
charge
|
|
-
|
-
|
-
|
-
|
0.9
|
0.9
|
-
|
0.9
|
- Reduction in investment in Jones
Food Company Limited
|
|
-
|
-
|
-
|
-
|
(1.0)
|
(1.0)
|
1.0
|
-
|
Total transactions with owners
|
|
1.5
|
567.3
|
0.1
|
-
|
41.8
|
610.7
|
1.0
|
611.7
|
Balance at 27 November 2022
|
|
16.5
|
1,939.3
|
(112.9)
|
164.0
|
(169.0)
|
1,837.9
|
96.4
|
1,934.3
|
Loss for the period
|
|
-
|
-
|
-
|
-
|
(314.0)
|
(314.0)
|
(73.0)
|
(387.0)
|
Other comprehensive
expense
|
|
-
|
-
|
-
|
(73.4)
|
-
|
(73.4)
|
-
|
(73.4)
|
Total comprehensive expense for the period
|
|
-
|
-
|
-
|
(73.4)
|
(314.0)
|
(387.4)
|
(73.0)
|
(460.4)
|
Transactions with owners
|
|
|
|
|
|
|
|
|
|
- Issue of ordinary
shares
|
4.3
|
0.1
|
2.1
|
-
|
-
|
-
|
2.2
|
-
|
2.2
|
- Allotted in respect of share
option schemes
|
4.3
|
-
|
1.5
|
-
|
-
|
-
|
1.5
|
-
|
1.5
|
- Share-based payments
charge
|
|
-
|
-
|
-
|
-
|
33.3
|
33.3
|
-
|
33.3
|
- Tax on share-based payments
charge
|
|
-
|
-
|
-
|
-
|
0.1
|
0.1
|
-
|
0.1
|
- Additional investment in Jones
Food Company Limited
|
|
-
|
-
|
-
|
-
|
(0.2)
|
(0.2)
|
0.2
|
-
|
Total transactions with owners
|
|
0.1
|
3.6
|
-
|
-
|
33.2
|
36.9
|
0.2
|
37.1
|
Balance at 3 December 2023
|
|
16.6
|
1,942.9
|
(112.9)
|
90.6
|
(449.8)
|
1,487.4
|
23.6
|
1,511.0
|
Consolidated Statement of Cash Flows
for
the 53 weeks ended 3 December 2023
|
|
53 weeks
ended
3 December
2023
|
52 weeks
ended
27
November 2022
|
|
Notes
|
£m
|
£m
|
Cash generated from/(used in) operations
|
4.4
|
86.9
|
(4.0)
|
Insurance proceeds relating to
business interruption and stock losses
|
|
-
|
54.3
|
Cash received from the AutoStore
settlement
|
2.3
|
41.7
|
-
|
Corporation tax received
|
|
9.9
|
13.4
|
Interest paid
|
|
(56.3)
|
(55.8)
|
Net cash flow from operating activities
|
|
82.2
|
7.9
|
Cash flows from investing activities
|
|
|
|
Insurance proceeds relating to
rebuilding Andover Customer Fulfilment Centre ("CFC")
|
|
-
|
54.5
|
Insurance proceeds relating to
Erith claim
|
|
-
|
2.5
|
Acquisition of subsidiaries, net of
cash acquired
|
|
(11.4)
|
(5.5)
|
Purchase of intangible
assets
|
|
(205.1)
|
(137.1)
|
Purchase of property, plant and
equipment
|
|
(331.3)
|
(648.8)
|
Dividend received from joint
venture
|
|
5.1
|
8.0
|
Purchase of unlisted equity
investments
|
3.5
|
(10.0)
|
-
|
Loans paid to joint ventures,
associates and investee companies
|
|
-
|
(0.6)
|
Proceeds from disposal of asset
held for sale
|
|
9.4
|
-
|
Cash received in respect of
contingent consideration receivable
|
|
1.5
|
-
|
Interest received
|
|
41.7
|
9.6
|
Net cash flow used in investing activities
|
|
(500.1)
|
(717.4)
|
Cash flows from financing activities
|
|
|
|
Proceeds from issue of ordinary
share capital
|
|
2.1
|
566.5
|
Proceeds from allotment of share
options
|
|
0.5
|
0.8
|
Proceeds from interest-bearing
loans and borrowings
|
4.2
|
64.4
|
40.6
|
Transaction costs on issue of
borrowings
|
|
-
|
(3.4)
|
Repayment of borrowings
|
4.2
|
(10.3)
|
-
|
Repayment of principal element of
lease liabilities
|
4.2
|
(66.8)
|
(57.4)
|
Net cash flow (used in)/generated from financing
activities
|
|
(10.1)
|
547.1
|
Net decrease in cash and cash
equivalents
|
|
(428.0)
|
(162.4)
|
Cash and cash equivalents at
beginning of period
|
|
1,328.0
|
1,468.6
|
Effect of changes in foreign
exchange rates
|
|
(15.2)
|
21.8
|
Cash and cash equivalents at end of period
|
|
884.8
|
1,328.0
|
Notes to the consolidated financial
statements
Section 1 - Basis of preparation
1.1 General information
Ocado Group plc (hereafter the "Company") is a
listed company, limited by shares, incorporated in England and
Wales under the Companies Act 2006 (company number: 07098618). The
Company is the parent and the ultimate parent of the Group. The
address of its registered office is Buildings One & Two Trident
Place, Mosquito Way, Hatfield, Hertfordshire, United Kingdom, AL10
9UL. The financial statements comprise the results of the Company
and its subsidiaries (hereafter the "Group").
The financial period represents the 53 weeks
ended 3 December 2023. The prior financial period represents the 52
weeks ended 27 November 2022.
1.2 Basis of preparation
The financial statements have been prepared in
accordance with the Listing Rules and the Disclosure Guidance and
Transparency Rules of the United Kingdom Financial Conduct
Authority (where applicable), International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and
UK-adopted International Financial Reporting Standards ("IFRSs"),
including the interpretations issued by IFRS Interpretations
Committee ("IFRIC"). Unless otherwise stated, the accounting
policies have been applied consistently to all periods presented in
these consolidated Group financial statements.
The financial information set out in this
announcement does not constitute the Group's statutory accounts for
the 53 weeks ended 3 December 2023 or the 52 weeks ended 27
November 2022 within the meaning of Section 435 of the Companies
Act 2006 (the "Act"). The financial information for the period
ended 27 November 2022 has been extracted from the statutory
accounts on which an unqualified audit opinion has been issued.
Statutory accounts for the period ended 3 December 2023 will be
delivered to the Registrar of Companies in advance of the Group's
annual general meeting.
The financial statements are presented in pounds
sterling, rounded to the nearest hundred thousand unless otherwise
stated, and have been prepared under the historical cost
convention, as modified by the revaluation of financial asset
investments and certain other financial assets and liabilities,
which are held at fair value.
The Directors consider it appropriate to adopt
the going concern basis of accounting in preparing the financial
statements of the Group.
New standards, amendments and interpretations adopted by the
Group
The Group has considered the following new
standards, interpretations and amendments to published standards
that are effective for the Group for the period beginning 28
November 2022, and concluded either that they are not relevant to
the Group or that they would not have a significant effect on the
Group's financial statements other than on disclosures:
|
|
Effective
date
|
IAS 16
|
Property, Plant and Equipment -
proceeds before intended use
|
1 January
2022
|
IAS 37
|
Onerous Contracts - cost of
fulfilling a contract
|
1 January
2022
|
IFRS 3
|
Reference to the Conceptual
Framework
|
1 January
2022
|
Annual Improvements to IFRS,
2018-2020 Cycle
|
Amendments to IFRS 1, IFRS 9, IFRS
16 and IAS 41
|
1 January
2022
|
New standards, amendments and interpretations not yet adopted
by the Group
The following new standards, interpretations and
amendments to published standards and interpretations that are
relevant to the Group have been issued but are not effective for
the period beginning 28 November 2022, and have not been adopted
early:
|
|
Effective
date
|
IFRS 17
|
Insurance Contracts
|
1 January
2023
|
IAS 1
|
Classification of Liabilities as
Current or Non-Current
|
1 January
2023
|
IAS 1
|
Disclosure of Accounting Policies
(amendments)
|
1 January
2023
|
IAS 8
|
Disclosure of Accounting Estimates
(amendments)
|
1 January
2023
|
IAS 12
|
Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
(amendments)
|
1 January
2023
|
IAS 12
|
Income taxes - International Tax
Reform - Pillar Two Model Rules (amendments)
|
1 January
2023
|
IAS 1
|
Non-current Liabilities with
Covenants
|
1 January
2024
|
IFRS 10
|
Consolidated Financial Statements
(amendments)
|
Deferred
|
IAS 28
|
Investments in Associates and Joint
Ventures (amendments)
|
Deferred
|
These standards, interpretations and amendments
to published standards and interpretations are not expected to have
a material effect on the Group's financial statements.
The Group has applied the exemption to
recognising and disclosing information about deferred tax in
relation to the IAS 12 amendment for FY23.
Change in presentation of expenses in the Consolidated Income
Statement
Following the change of the Group's operating
segments during the period (see Note 2.1 for details), the Group
has also adopted a revised presentation of the Income Statement,
replacing Cost of Sales (FY22: £1,549.5m), Distribution Expenses
(FY22: £831.8m) and Administrative Expenses (FY22: £758.2m) with a
single line item for Operating Costs. The Group also reassessed the
classification amounts previously reported as Other Income,
resulting in amounts of £3.0m being reported within Revenue and
£97.7m being offset within Operating Costs (principally in relation
to media and other income of £87.3m). In addition, the Group
reclassified gains and losses relating to foreign exchange and on
revaluation of financial instruments from Finance Income and
Finance Costs to Other Finance Gains and Losses. This resulted in
£28.3m being reclassified from Finance Income to Other Finance
Gains and Losses.
The revised presentation provides an Income
Statement that is more relevant for the Group, reflecting the
increased impact of the Technology Solutions business where the
nature of the associated costs does not have the typical cost of
sales, distribution and administrative expenses.
1.3 Critical accounting judgements and key sources of
estimation uncertainty
The preparation of the Group's financial
statements requires the use of certain judgements, estimates and
assumptions that affect the reported amounts of assets,
liabilities, income and expenses. Judgements and estimates are
evaluated regularly, and represent management's best estimates
based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. However, events or actions may mean that
actual results ultimately differ from those estimates, and the
differences may be material.
Critical accounting judgements
Critical accounting judgements are those that
the Group has made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in the financial statements.
Area
|
Judgement
|
Notes
|
Consolidation of Ocado Retail
Limited ("Ocado Retail")
|
Management reviews if the Group
continues to have control over Ocado Retail in accordance with IFRS
10. Management has concluded that the Group controls Ocado Retail,
since it holds 50.0% of the voting rights of the company, and an
agreement signed by the shareholders grants the Group determinative
rights, after agreed dispute-resolution procedures, in relation to
the approval of Ocado Retail's business plan and budget and the
appointment and removal of Ocado Retail's Chief Executive Officer
who is responsible for directing the relevant activities of the
business.
|
|
Revenue from contracts with
customers
|
Due to the size and complexity of
some of Technology Solutions' contracts, there are significant
judgements that must be made. The identification of performance
obligations in a contract is a significant judgement, since it
determines when revenue is recognised. Management has judged that
each fulfilment channel is independent of each other and the
provision of the use of the Ocado Smart Platform ("OSP") in each
fulfilment channel represents a separate performance obligation,
and that revenue should begin to be recognised when a working
solution relevant to the fulfilment channel is operational for a
customer. The identification of consideration and material rights
in a contract is another significant judgement, since it determines
the period over which upfront fees are recognised as revenue.
Alternative judgements would result in different amounts of revenue
being recognised at different times.
|
2.2
|
Capitalisation of internal
development costs
|
The Group capitalises internal
costs directly attributable to the development of both intangible
and tangible assets. Management judgement is exercised in
determining whether the projects meet the criteria for
capitalisation. During the period, the Group has capitalised
internal development costs amounting to £167.8m (FY22: £117.5m) and
£32.7m (FY22: £63.9m) on intangible and tangible assets
respectively.
|
3.2
3.3
|
Adjusting items
|
Management believes that separate
presentation of the adjusting items provides useful information in
the understanding of the financial performance of the Group and its
businesses. Management exercises judgement in determining the
classification of certain transactions as adjusting items by
considering the nature, occurrence and materiality of the amounts
involved in those transactions. Note 2.3 provides information on
amounts disclosed as adjusting items in the current and comparative
financial statements together with the Group's definition of
adjusting items. These definitions have been applied consistently
over the periods.
|
2.3
|
Key estimation uncertainties
Key areas of estimation uncertainty are the
key assumptions concerning the future and other data points at the
reporting date that may have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next period.
Area
|
Estimation uncertainty
|
Note
|
Fair value measurement - contingent
consideration due from M&S
|
At the reporting date, the fair
value of contingent consideration due from Marks and Spencer
Holdings Limited ("M&S"), agreed on the disposal of 50% of
Ocado Retail Limited ("Ocado Retail") to M&S in August 2019 is
28.0m.
Under the terms of the disposal, a
final payment may become due from M&S to Ocado Group of £156.3m
plus interest, dependent on certain contractually defined Ocado
Retail performance measures (the 'Target') being achieved for the
FY23 financial year (the 'Contingent Consideration'). The
contractual outcome is binary, meaning if the Target is achieved,
it will trigger the payment in full of £190.7m (£156.3m plus £34.4m
of interest, assuming a payment date of August 2024). Conversely,
should the Target not be achieved, no consideration would be
payable by M&S. There is no formal arrangement for a payment
between zero and £190.7m.
The contractual arrangement with
M&S expressly provides for the Target to be adjusted for
certain decisions or actions taken by Ocado Retail management that
differ from the assumptions used in the discounted cash flow model
which underpinned the sale transaction.
The actual FY23 performance is
below the Target required for automatic payment of the Contingent
Consideration. However, the Group has identified a number of
significant decisions and actions taken by Ocado Retail management
that it believes require adjustment to the Target under the terms
of the contractual agreement with M&S. The adoption of these
adjustments, if established, would result in Ocado Retail achieving
the Target (as adjusted) and the full payment of
£190.7m.
The contract requires the
shareholders to engage in good faith discussions concerning
possible adjustments, and we intend to pursue that process, however
there can be no assurance that an adjustment proposed by one party
will be eventually accepted by another or that a wider agreement
will be reached and if so formal legal proceedings may well result.
It would be prudent to assume that in any negotiation or legal
proceedings M&S would propose adjustments to the Target of
their own.
The fair value of £28.0m recorded
in respect of the Contingent Consideration under IFRS 13 has been
estimated using the expected present value technique and is based
on a number of probability-weighted possible scenarios that a
market participant would consider in valuing the contract
reflecting the facts and circumstances that existed at the balance
sheet date. It is management's belief that the fair value currently
recorded is significantly lower than the amount that Ocado may
receive at the point of settlement.
|
3.5
|
Impairment assessment -
customer-level CGUs
|
The performance of the Group's
impairment assessments requires management to make judgements in
determining whether an asset or cash-generating unit ('CGU') shows
any indicators of impairment that would require an impairment test
to be carried out as well as identifying the relevant CGUs to be
assessed. The Group has determined that assets directly associated
with individual Solutions contracts (i.e. Partner by Partner)
represent the lowest-level group of assets at which impairment can
be assessed, i.e. the CGU. The performance of impairment testing
requires management to make a number of estimates and assumptions
in determining the recoverable amount of the CGUs. These include
forecast future cash flows estimated based on management-approved
financial budgets and plans, long-term growth rates, and post-tax
discount rate as well as an assessment of the expected growth
profile of the respective CGU. Key estimates used in the impairment
test and sensitivities are disclosed in Note 3.3.
|
3.3
|
Climate-related risks
The Group has considered the impact of climate
change, particularly in the context of the climate-related risks
identified in the TCFD disclosures, on its financial performance
and position. There has been no material impact identified on the
financial reporting judgements and estimates. In particular, the
Group considered the impact of climate change in respect of going
concern and viability of the Group over the next three years,
forecast cash flows for the purposes of impairment assessments of
non-current assets, and the useful lives of certain assets. Whilst
there is currently little short to medium-term impact expected from
climate change, the Directors are aware of the changing nature of
risks associated with climate change and will regularly assess
these risks against judgements and estimates made in preparation of
the Group's financial statements.
1.4 Going concern basis
Accounting standards require that Directors
satisfy themselves that it is reasonable for them to conclude on
whether or not it is appropriate to prepare financial statements on
the going concern basis.
In assessing going concern, the Directors take
into account the financial position of the Group, its cash flows,
liquidity position and borrowing facilities, which are set out in
the Financial Review. In addition, the Directors consider the
Group's business activities, together with factors that are likely
to affect its future development and position, and the Group's
principal risks and the likely effectiveness of any mitigating
actions and controls available to the Directors.
At the reporting date, the Group had cash and
cash equivalents of £884.8m (FY22: £1,328.0m), external gross debt
of £1,943.4m (FY22: £1,887.6m) (excluding lease liabilities payable
to MHE JVCo Limited of £16.5m (FY22: £17.5m)) and net current
assets of £860.7m (FY22: £1,166.3m). The Group has a mixture of
medium-term financing arrangements, including £600.0m of senior
unsecured convertible bonds due in 2025, £500.0m of senior
unsecured notes due in 2026 and £350.0m of senior unsecured
convertible bonds due in 2027. The Group forecasts its liquidity
and working capital requirements, and ensures it maintains
sufficient headroom so as not to breach any financial covenants in
its borrowing facilities, as well as maintaining sufficient
liquidity over the forecast period.
Having had consideration for these areas, the
Directors have concluded that it is appropriate to continue to
adopt the going concern basis in preparing the financial
statements.
Section 2 - Results for the period
2.1 Segmental reporting
In accordance with IFRS 8 "Operating Segments",
an operating segment is defined as a business activity whose
operating results are reviewed by the chief operating decision
maker ("CODM"), for which discrete information is available.
Operating segments are reported in a manner consistent with the
internal reporting provided to the CODM. The CODM, who is
responsible for allocating resources and assessing performance of
the operating segments, has been identified as the
Board.
To better reflect the structure of the Group's
businesses, commencing FY23, the Group changed the reporting
structure of its operating segments to align with the three
underlying business models: Retail, Logistics and Technology
Solutions:
● The Retail segment
provides online grocery and general merchandise offerings to
customers within the United Kingdom, and relates entirely to the
Ocado Retail joint venture.
● The Logistics
segment provides the CFCs and logistics services for customers in
the United Kingdom (Wm Morrison Supermarkets Limited and Ocado
Retail Limited).
● The Technology
Solutions segment provides end-to-end online retail and automated
storage and retrieval solutions for general merchandise to
corporate customers both in and outside of the United
Kingdom.
The 2023 segmental disclosures have been
prepared to reflect the above structure, with the prior period
comparatives restated on this basis.
Inter-segment eliminations relate to revenues
and costs arising from inter-segment transactions, and are required
to reconcile segmental results to the consolidated Group
results.
Any transactions between the segments are
subject to normal commercial terms and market conditions. Segmental
results include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis.
The Group is not currently reliant on any major
customer for 10% or more of its revenue.
|
Retail
£m
|
Logistics
£m
|
Technology
Solutions
£m
|
Group
eliminations
£m
|
Total
£m
|
53
weeks ended 3 December 2023
|
|
|
|
|
|
Revenue
|
2,408.8
|
680.5
|
429.0
|
(693.3)
|
2,825.0
|
Adjusted EBITDA*
|
12.1
|
30.8
|
15.6
|
(4.3)
|
54.2
|
52 weeks ended 27 November 2022 -
restated
|
|
|
|
|
|
Revenue
|
2,203.0
|
662.9
|
291.4
|
(640.5)
|
2,516.8
|
Adjusted EBITDA*
|
(4.0)
|
33.6
|
(101.5)
|
(2.2)
|
(74.1)
|
*See section 6 - Alternative
Performance Measures.
No measure of total assets and total liabilities
is reported for each reportable segment, as such amounts are not
provided to the CODM.
2.2 Revenue
Below is a summary of timing of revenue
recognition:
|
53 weeks
ended
3 December
2023
£m
|
52
weeks
ended
27
November
2022
(restated1)
£m
|
At a point in time
|
2,386.7
|
2,179.9
|
Over time
|
438.3
|
336.9
|
|
2,825.0
|
2,516.8
|
Revenue split by geographical area:
|
53 weeks
ended
3 December
2023
£m
|
52
weeks
ended
27
November
2022
(restated1)
£m
|
UK
|
2,449.4
|
2,369.0
|
Overseas
|
375.6
|
147.8
|
|
2,825.0
|
2,516.8
|
1 Refer to Note 1.2 for details.
No individual overseas region or country
contributed more than 10% of total revenue.
Contract balances
|
|
3 December
2023
£m
|
27
November
2022
£m
|
Trade receivables
|
|
62.7
|
59.6
|
Accrued income
|
|
4.4
|
14.2
|
Contract liabilities -
current
|
|
(38.6)
|
(29.1)
|
Contract liabilities -
non-current
|
|
(408.1)
|
(393.8)
|
Contract
liabilities
The contract liabilities relate primarily to
consideration received from Solutions customers in advance, for
which revenue is recognised as the performance obligation is
satisfied. The movement in contract liabilities during the current
and prior period is:
|
53 weeks
ended
3 December
2023
£m
|
52 weeks
ended
27
November
2022
£m
|
Balance at beginning of
period
|
(422.9)
|
(378.5)
|
Recognised on acquisition of
subsidiaries
|
(9.2)
|
-
|
Amount invoiced
|
(47.6)
|
(69.1)
|
Amount recognised as
revenue
|
33.0
|
24.7
|
Balance at end of period
|
(446.7)
|
(422.9)
|
£28.6m (FY22: £24.7m) of revenue recognised
during the period was included in contract liabilities at the
beginning of the period and £4.4m relates to revenue recognised
from acquisition in the year (FY22: £nil).
Future transaction price
As well as the amounts currently held as
contract liabilities, the Group anticipates receiving £172.2m
(FY22: £152.4m) over the next four years in respect of upfront fees
that are contracted but not yet due. These amounts represent the
aggregate amount of contracted transaction price allocated to the
committed performance obligations that are unsatisfied or partially
satisfied as at the period end. The amounts received and to be
received in respect of these performance obligations will be
recognised in revenue from the go-live date over the estimated
customer life. The total amount of transaction price that the Group
will earn over the estimated customer life also includes ongoing
fees. These fees have been excluded from the disclosure as the
Group has taken the practical expedient under IFRS 15.121(b) for
revenues recognised in line with the invoicing.
2.3 Adjusting items*
Adjusting items, as disclosed on the face of the
Consolidated Income Statement, are items that are considered to be
significant due to their size/nature, not in the normal course of
business or are consistent with items that were treated as
adjusting in the prior periods or that may span multiple financial
periods. They have been classified separately in order to draw them
to the attention of the readers of the financial statements, and
facilitate comparison with prior periods to assess trends in the
financial performance more readily. The Group applies judgement in
identifying the items of income and expense that are recognised as
adjusting.
|
Ref.
|
53 weeks
ended
3 December
2023
£m
|
52 weeks
ended
27
November
2022
£m
|
Andover CFC
|
A
|
|
|
- Insurance reimbursement
income
|
|
-
|
67.4
|
- Other adjusting costs
|
|
-
|
(3.4)
|
|
|
-
|
64.0
|
Erith CFC insurance reimbursement
income
|
B
|
-
|
6.4
|
Litigation costs net of
recoveries
|
C
|
(5.0)
|
(26.5)
|
Litigation settlement
|
C
|
186.5
|
-
|
Ocado Group Finance
transformation
|
D
|
(7.6)
|
(7.0)
|
Ocado Retail IT and Finance systems
transformation
|
E
|
(2.6)
|
(4.0)
|
Loss on disposal of Speciality
Stores Limited ("Fetch")
|
F
|
-
|
(1.4)
|
Change of fair value of contingent
consideration receivable and related costs
|
G
|
(68.1)
|
(58.4)
|
Organisational
restructure
|
H
|
(15.5)
|
(3.0)
|
UK network capacity
review
|
I
|
(32.2)
|
-
|
Zoom by Ocado network capacity and
strategy review
|
J
|
(27.4)
|
-
|
Ocado Group HR system
transformation
|
K
|
(2.0)
|
-
|
Acquisition costs of 6 River
Systems LLC ("6RS")
|
L
|
(2.2)
|
-
|
Net adjusting income/(expense)
|
|
23.9
|
(29.9)
|
* Adjusting items are alternative
performance measures. See Section 6 - Alternative Performance
Measures.
A.
Andover CFC
In February 2019, a fire destroyed the Andover
CFC, including the building, machinery and all inventory held on
site. The Group has comprehensive insurance and claims were
formally accepted by the insurers.
Insurance reimbursement comprises reimbursement
for the costs of rebuilding the CFC and business interruption
losses.
During the prior period, the Group reached an
agreement with the insurers for the final settlement of the
insurance claim for a total of £273.8m, which resulted in an
additional insurance reimbursement income of £67.4m in the prior
period. This concluded the Andover insurance fire claim.
Other adjusting costs include, but are not
limited to, write-off of certain assets, professional fees relating
to the insurance claims process, business rates, temporary costs of
transporting employees to other warehouses to work and redundancy
costs. The cumulative adjusting costs recognised, across all
periods, totalled £124.9m.
B.
Erith CFC
In July 2021, a fire damaged part of the Erith
CFC, including some machinery and inventory held on site. The Group
has comprehensive insurance and claims were formally accepted by
the insurer.
During the prior period, an agreement was
reached with the insurers for the final settlement in respect of
the claims relating to the Erith fire for a total of £8.3m. A final
payment of £6.4m was received during the prior period and was
recognised as an insurance reimbursement income in FY22. The
receipt of the £6.4m concluded the Erith fire claim.
C.
Litigation costs and litigation settlement
Litigation costs are costs incurred on patent
infringement litigation between the Group and AutoStore Technology
AS ("AutoStore"). The gross costs during the period amount to
£11.7m (FY22: £26.5m), which have been offset by £6.7m (FY22: £nil)
received in relation to cost recovery as a result of court
judgements as detailed below. The net litigation cost for the
period is therefore £5.0m (FY22: £26.5m).
Following Ocado's victory in the UK High Court,
on 29 June 2023 the UK High Court issued a formal order stating
that Ocado infringes none of AutoStore's patents and that
AutoStore's bot patents are invalid and revoked. The UK High Court
also ordered AutoStore to pay Ocado £6.7m in costs in relation to
the UK High Court trial. As usual in patent cases, AutoStore was
given leave to appeal. The amount received was £6.7m and is
included in the net litigation costs for the period. The net
cumulative costs to date amount to £62.2m.
Furthermore, on 22 July 2023, the Group reached
an agreement with AutoStore to settle all patent litigation and
cross-licence pre-2020 patents, for which AutoStore undertook to
pay the Group a total of £200m in 24 monthly instalments, beginning
July 2023. The settlement has been recorded as a receivable
measured initially at fair value and subsequently at amortised
cost. The settlement receivable initially recognised was £180.4m
and has been recorded within insurance and legal settlement
proceeds in the Consolidated Income Statement. The unwinding of the
discount over the life of the receivable is recorded as finance
income with £6.1m recorded in the current period. During the
period, payments totalling £41.7m have been received. All amounts
are classified as adjusting items, in line with the Group's
adjusting items policy, as the amounts are material, and represent
income unrelated to operating activities of the Group.
D.
Ocado Group Finance transformation
Subsequent to the Group's implementation of
various Software as a Service ("SaaS") solutions in FY21, the Group
has undertaken a multi-year programme which focuses on optimising
and enhancing the existing SaaS solutions and related finance
processes to improve efficiency across the business. This programme
is expected to complete in 1H24. The cumulative finance
transformation costs expensed to date amount to £14.6m and include
£7.6m in FY23 which largely relate to spend on external consultants
and contractors. These amounts have been disclosed as adjusting
items because the total costs associated with this programme are
significant and arise from a strategic project that is not
considered by the Group to be part of the normal operating costs of
the business.
E.
Ocado Retail IT and Finance systems
transformation
In FY21, Ocado Retail initiated its IT Roadmap
programme, which focuses on delivering IT systems and services that
will enable Ocado Retail to meet its obligation to transition away
from Ocado Group IT services, tools and support. The IT Roadmap
programme, which is expected to run until FY24, includes the
development of both on-premises and SaaS solutions. IT Roadmap
programme costs that meet assets recognition criteria will be
recognised as intangible assets and implementation costs that do
not meet assets recognition criteria will be expensed. The costs
incurred during the current period amount to £1.5m (FY22: £4.0m),
and the cumulative costs expensed to date total £10.1m. These costs
have been classified as adjusting because they are expected to be
significant and result from a transformational activity which is
considered only incremental to the core activities of the
Group.
In the current period, Ocado Retail implemented
a finance system transformation programme as part of which it
replaced the current Enterprise Resource Planning ("ERP") with
Oracle Fusion. The cumulative costs incurred to date are £1.1m and
the programme will continue into FY24.
F.
Loss on disposal of Speciality Stores Limited
("Fetch")
On 31 January 2021, Ocado Retail completed the
sale of the entire share capital of Speciality Stores Limited, its
wholly-owned pets business trading as Fetch, to Paws Holdings
Limited, resulting in a gain on disposal of £1.0m in
FY21.
During the prior period, a provision of £1.4m
was made against the deferred consideration based on the likelihood
of receipt.
G.
Change in fair value of contingent consideration and related
costs
In 2019, the Group sold Marie Claire Beauty
Limited ("Fabled") to Next plc and 50% of Ocado Retail to Marks and
Spencer Holdings Limited ("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
("FVTPL"), and revalues it at each reporting date. A loss on
revaluation of £67.4m (FY22: £58.4m loss) is reported through
adjusting items, primarily driven by the reduction in the
contingent consideration receivable from M&S. Refer to Note 3.5
for details.
The Group has engaged specialists in order to
support the identification and quantification of proposed
adjustments to the contingent consideration Target, incurring costs
during the period of £0.7m. As these costs have been incurred in
the process of securing an adjusting income, these costs have been
classified as adjusting.
H.
Organisational restructure
During the period, the Group undertook a partial
reorganisation of its head office and support functions resulting
in redundancies and related costs of £15.5m. This followed an
initial reorganisation in FY22 which incurred costs of £3.0m, with
net cumulative costs to date of £18.5m.
These costs have been classified as adjusting on
the basis that the aggregate costs are considered to be significant
and resulted from a strategic restructuring which is not part of
the normal operating activities of the Group.
I.
UK network capacity review
On 25 April 2023, the Group announced the plan
to cease operations at its CFC in Hatfield as part of a wider
review of UK network capacity.
As a result, the Group has recorded impairment
charges of £20.3m, of which £7.0m relates to property, plant and
equipment, £13.2m to right-of-use assets and £0.1m to other
intangible assets. Total costs recorded also include restructuring
costs of £6.8m and other related costs of closure of £5.1m, which
were provided for.
These costs have been classified as adjusting on
the basis that they are material and relate primarily to a site
where no ongoing trading activities will take place.
J.
Zoom by Ocado network capacity and strategy
review
During the period, Ocado Retail undertook a
strategy and capacity review for the Zoom network, which resulted
in the Group recording impairment charges totalling £27.2m, of
which £12.5m relates to property, plant and equipment, £14.5m to
right-of-use assets and £0.2m to other intangible assets, and other
costs of £0.2m.
These costs have been classified as adjusting on
the basis that they are material and part of a significant
strategic review.
K.
Ocado Group HR system transformation
Following a review of the Group's Human Capital
Management ("HCM") and payroll systems the Group has commenced a
plan to implement new HCM and payroll systems for its Logistics
business and to optimise and enhance its existing payroll solutions
for the Technology Solutions business.
This programme is expected to complete in 1H25.
The cumulative HR systems transformation costs expensed to date
amount to £2.0m which largely relate to spend on external
consultants and contractors. These amounts have been disclosed as
adjusting items because the total costs associated with this
programme are expected to be in the region of £15.0m and arise from
a strategic project that is not considered by the Group to be part
of the normal operating costs of the business.
L.
Acquisition costs of 6 River Systems LLC
On 4 May 2023, the Group announced that it has
reached an agreement with Shopify Inc. to acquire 6RS, a
collaborative autonomous mobile robot ("AMR") fulfilment solutions
provider to the logistics and non-grocery retail sectors, based in
the US. The acquisition was completed on 30 June 2023 for
consideration of US$12.7m (£10.0m).
A total of £2.2m acquisition-related costs have
been incurred and treated as adjusting as they are significant and
resulted from a strategic investment that is not part of the normal
operating costs of the business. The costs have been recognised
within operating costs in the Consolidated Income
Statement.
Tax
impacts on adjusting items
The change in fair value of contingent
consideration receivable is not subject to tax. The remaining
adjusting items are taxable or tax deductible and give rise to a
tax charge of £nil (FY22: tax credit of £0.8m). A further tax
charge of £21.7m (FY22: charge of £6.4m) has not been recognised as
it relates to tax losses which are not recognised for deferred tax
purposes.
2.4 Finance income and costs
|
Note
|
53 weeks
ended
3 December
2023
£m
|
52
weeks
ended
27
November
2022
£m
|
Interest income on cash
balances
|
|
39.6
|
12.5
|
Interest income on loans
receivable
|
|
1.0
|
1.0
|
Unwind of discount on AutoStore
receivable
|
2.3
|
6.1
|
-
|
Other finance income
|
|
0.1
|
-
|
Finance income
|
|
46.8
|
13.5
|
Interest expense on
borrowings
|
|
(69.8)
|
(61.3)
|
Interest expense on lease
liabilities
|
|
(25.7)
|
(28.3)
|
Interest expense on
provisions
|
|
(1.2)
|
(0.4)
|
Other finance costs
|
|
(0.3)
|
-
|
Finance costs
|
|
(97.0)
|
(90.0)
|
(Loss)/gain on revaluation of
financial instruments designated at FVTPL
|
|
(6.5)
|
11.9
|
(Loss)/gain on foreign
exchange
|
|
(13.3)
|
16.4
|
Other finance gains and losses
|
|
(19.8)
|
28.3
|
Net finance cost
|
|
(70.0)
|
(48.2)
|
2.5 Loss per share
The basic loss per share is calculated by
dividing the loss attributable to the owners of the Company by the
weighted average number of ordinary shares in issue during the
period, excluding ordinary shares held pursuant to the Group's
Joint Share Ownership Scheme ("JSOS") and linked jointly owned
equity ("JOE") awards under the Ocado Group Value Creation Plan
("Group VCP"), which are accounted for as treasury
shares.
The diluted loss per share is calculated by
adjusting the weighted average number of ordinary shares
outstanding to assume conversion or vesting of all potentially
dilutive shares. The Company has five classes of instruments that
are potentially dilutive: share options; share interests held
pursuant to the Group's JSOS; linked JOE awards under the Group
VCP; and shares under the Group's staff incentive plans and
convertible bonds.
There was no difference in the weighted average
number of shares used for the calculation of the basic and diluted
loss per share since the effect of all potentially dilutive shares
outstanding was anti-dilutive.
The basic and diluted loss per share has been
calculated as follows:
|
|
53 weeks
ended
3 December
2023
|
52 weeks
ended
27
November 2022
|
|
|
Million
|
Million
|
Weighted average number of shares
at end of period
|
|
816.5
|
772.9
|
|
|
£m
|
£m
|
Loss attributable to owners of the
Company
|
|
(314.0)
|
(455.5)
|
|
|
Pence
|
Pence
|
Basic and diluted loss per share
|
|
(38.44)
|
(58.93)
|
Section 3 - Assets and Liabilities
3.1 Goodwill
Goodwill arises on the acquisition of a business
when the fair value of the consideration exceeds the fair value
attributed to the net assets acquired (including contingent
liabilities). Goodwill is not amortised but subject to annual
impairment reviews. Goodwill generated from an acquisition is
allocated to and monitored at an operating segment
level.
Carrying amount of goodwill as at 3 December
2023 is as follows:
|
Goodwill
£m
|
Cost
|
|
At 28 November 2021
|
144.8
|
Additions
|
5.7
|
Effect of changes in foreign
exchange rates
|
14.2
|
At 27 November 2022
|
164.7
|
Additions
|
0.8
|
Effect of changes in foreign
exchange rates
|
(6.9)
|
At
3 December 2023
|
158.6
|
Goodwill - Impairment testing
Goodwill generated from an acquisition is
allocated to an operating segment level as this represents the
lowest level at which goodwill is monitored by management.
Management considers each segment to represent a group of
CGUs.
During the year, the Group changed the reporting
structure of its operating segments to align with the three
underlying business models: Retail, Logistics and Technology
Solutions (see Note 2.1 for details). As a result of the change in
segments, goodwill is now allocated to a single segment, Technology
Solutions.
The recoverable amounts of the group of CGUs is
the higher of fair value less costs of disposal ("FVLCD") and value
in use. Management concluded that FVLCD was more appropriate for
determining the recoverable amount of the group of CGUs because the
Group's cash flows are mainly based on future growth expectation
from CFC commitments/expected capital investments.
FVLCD has been estimated using present value
techniques using a discounted cash flow method. The fair value
method relies on unobservable inputs where there is little market
activity for the asset and are therefore categorised at level 3 in
the fair value hierarchy. However, those unobservable inputs are
determined using market participants' view.
The key assumptions used by management in
estimating FVLCD were:
Discount rates - based on the Weighted
Average Cost of Capital ("WACC") of a typical market participant.
The post-tax discount rate used was 11.7% (FY22: 11.0%). The
discount rate has increased reflecting market volatility in
risk-free rate and equity risk premium inputs.
Forecast cash flows - based on
assumptions from the approved budget and 5-year plan, with
projections extending to 10 years for the Technology Solutions
segment. The projections, which incorporate the Directors' best
estimates of future cash flows and take into account future growth
and price increases, and the Directors believe the estimates are
appropriate.
Long-term growth rates - A long-term
growth rate of 2.0% (FY22: 2.0%) was used for cash flows outside
the plan projections.
The impairment assessment resulted in a
significant headroom in the group of CGUs that comprise the
Technology Solutions segment and no impairment has been recognised.
Any reasonably possible change in any of the key assumptions does
not erode the headroom.
3.2 Other intangible assets
Carrying amount of other intangible assets as
at 3 December 2023 is as follows:
|
Internally
generated
intangible
assets
£m
|
Other
intangible
assets
£m
|
Total
£m
|
Cost
|
|
|
|
At 28 November 2021
|
452.1
|
78.8
|
530.9
|
Additions
|
24.2
|
3.2
|
27.4
|
Internal development costs
capitalised
|
116.4
|
1.1
|
117.5
|
On acquisition of
subsidiaries
|
1.6
|
-
|
1.6
|
Reclassification
|
(3.6)
|
0.8
|
(2.8)
|
Disposals
|
(0.1)
|
-
|
(0.1)
|
Effect of changes in foreign
exchange rates
|
0.3
|
7.6
|
7.9
|
At 27 November 2022
|
590.9
|
91.5
|
682.4
|
Additions
|
16.4
|
21.8
|
38.2
|
Internal development costs
capitalised
|
166.4
|
1.4
|
167.8
|
On acquisition of
subsidiaries
|
2.0
|
-
|
2.0
|
Effect of changes in foreign
exchange rates
|
0.1
|
0.6
|
0.7
|
At
3 December 2023
|
775.8
|
115.3
|
891.1
|
Accumulated amortisation
|
|
|
|
At 28 November 2021
|
(155.4)
|
(30.3)
|
(185.7)
|
Charge for the period
|
(98.2)
|
(16.5)
|
(114.7)
|
Impairment charge
|
(3.4)
|
(0.2)
|
(3.6)
|
Effects of changes in foreign
exchange rates
|
-
|
(1.2)
|
(1.2)
|
At 27 November 2022
|
(257.0)
|
(48.2)
|
(305.2)
|
Charge for the period
|
(109.9)
|
(15.1)
|
(125.0)
|
Impairment charge
|
(0.3)
|
(0.2)
|
(0.5)
|
Effect of changes in foreign
exchange rates
|
0.1
|
0.8
|
0.9
|
At
3 December 2023
|
(367.1)
|
(62.7)
|
(429.8)
|
Net book value
|
|
|
|
At 27 November 2022
|
333.9
|
43.3
|
377.2
|
At
3 December 2023
|
408.7
|
52.6
|
461.3
|
At the end of the period, included
within intangible assets is capital work-in-progress for internally
generated intangible assets of £153.3m (FY22: £72.8m) and £6.5m
(FY22: £4.1m) for other intangible assets.
3.3 Property, plant and equipment
Carrying amount of property, plant and
equipment as at 3 December 2023 is as follows:
|
Land and
buildings
£m
|
Fixtures,
fittings,
plant and
machinery
£m
|
Motor
vehicles
£m
|
Total
£m
|
Cost
|
|
|
|
|
At 28 November 2021
|
122.6
|
1,431.9
|
8.8
|
1,563.3
|
Additions
|
92.5
|
494.4
|
1.6
|
588.5
|
Internal development costs
capitalised
|
-
|
63.9
|
-
|
63.9
|
Recognised on acquisition of
subsidiaries
|
-
|
0.1
|
-
|
0.1
|
Reclassification
|
1.3
|
0.6
|
0.9
|
2.8
|
Disposals
|
(3.7)
|
(7.5)
|
-
|
(11.2)
|
Effect of changes in foreign
exchange rates
|
0.1
|
39.4
|
-
|
39.5
|
At 27 November 2022
|
212.8
|
2,022.8
|
11.3
|
2,246.9
|
Additions
|
19.1
|
261.3
|
1.2
|
281.6
|
Internal development costs
capitalised
|
-
|
32.7
|
-
|
32.7
|
Recognised on acquisition of
subsidiaries
|
-
|
5.2
|
-
|
5.2
|
Reclassification1
|
-
|
(12.5)
|
-
|
(12.5)
|
Disposals
|
(2.4)
|
(6.3)
|
-
|
(8.7)
|
Reclassified to asset held for
sale
|
(5.7)
|
-
|
-
|
(5.7)
|
Effect of changes in foreign
exchange rates
|
-
|
(53.1)
|
-
|
(53.1)
|
At
3 December 2023
|
223.8
|
2,250.1
|
12.5
|
2,486.4
|
Accumulated depreciation
|
|
|
|
|
At 28 November 2021
|
(9.5)
|
(288.0)
|
(8.0)
|
(305.5)
|
Charge for the period
|
(5.7)
|
(148.5)
|
(0.2)
|
(154.4)
|
Impairment charge
|
(0.1)
|
(9.2)
|
-
|
(9.3)
|
Disposals
|
-
|
2.2
|
-
|
2.2
|
Effects of changes in foreign
exchange rates
|
-
|
(2.1)
|
-
|
(2.1)
|
At 27 November 2022
|
(15.3)
|
(445.6)
|
(8.2)
|
(469.1)
|
Charge for the period
|
(3.3)
|
(182.9)
|
(1.7)
|
(187.9)
|
Impairment charge
|
-
|
(41.2)
|
-
|
(41.2)
|
Reclassified to asset held for
sale
|
0.8
|
-
|
-
|
0.8
|
Effect of changes in foreign
exchange rates
|
-
|
5.9
|
-
|
5.9
|
At
3 December 2023
|
(17.8)
|
(663.8)
|
(9.9)
|
(691.5)
|
Net book value
|
|
|
|
|
At 27 November 2022
|
197.5
|
1,577.2
|
3.1
|
1,777.8
|
At
3 December 2023
|
206.0
|
1,586.3
|
2.6
|
1,794.9
|
1 These amounts relate to reclassification of certain
capital-work-in-progress items to inventory.
At the end of the period, included within
property, plant and equipment is capital work-in-progress for land
and buildings of £36.3m (FY22: £84.5m), fixtures, fittings, plant
and machinery of £347.7m (FY22: £382.0m) and motor vehicles of
£1.4m (FY22: £1.0m).
The impairment charges during the period
include amounts relating to the fixed assets held in the CFC in
Hatfield of £7.0m and certain Ocado Retail zoom sites of £12.5m.
Refer to Note 2.3 for further details.
Impairment assessment -
customer-level CGU
The Group has determined that assets directly
associated with individual Technology Solutions contracts (i.e.
Partner by Partner) represent the lowest-level group of assets at
which impairment can be assessed, i.e. the CGU. The Group has
undertaken a review for indicators of impairment for each
Technology Solutions contract and, where indicators of impairment
exist, a full asset impairment review was carried out comparing
carrying value to fair value less cost to dispose ("FVLCD"). FVLCD
has been estimated using present value techniques using a
discounted cashflow method. The fair value method relies on
unobservable inputs where there is little market activity for the
asset and are therefore categorised at Level-3 in the fair value
hierarchy. However, those unobservable inputs are determined using
market participants' view.
The key inputs and assumptions in arriving at
the FVLCD are:
- a
probability-weighted approach of possible scenarios using the
expected future cash flows from the contract based on management
forecasts for a 10-year period, including an assessment of ramp-up
of capacity, ongoing operating costs and associated increase in
fees and capital expenditure;
- discount
rate that specifically takes into account the risk pertaining to
the customer specific cash flows - 10.7% to 11.5% (FY22: 10.8%);
and
-
long-term growth rate to reflect growth outside of the forecast
period - 2.0% (FY22: 2.0%).
Based on the outcome of the assessment, an
impairment of £15.2m (FY22: £nil) has been recognised for Groupe
Casino CGU ("Casino"), which prior to this impairment had a
carrying value of £54.4m as at the end of FY23 (FY22: £59.0m). An
increase in discount rate of 1 percentage point ("ppt") or a
decrease in long-term growth rate of 1 ppt will result in a further
impairment of £1.6m and £0.3m, respectively.
Over recent years Casino has not invested in the
marketing resources required to fulfil the full potential of their
online grocery retail business, which has led to a slow module ramp
in their CFC and so impacted our estimate of the fair value of the
contract (the FVLCD). This has required the Group to record a
partial impairment of the related assets as described above. In the
background, Casino is engaged in a corporate restructuring and it
is envisaged that there will be a new majority owner of Casino and
an injection of new equity in due course. We are working with
Casino management to determine how to best move forward together
with their online grocery retail business.
For another CGU (a single partner contract with
no live CFC), there are a number of factors that could impact the
fair value assessment going forward, therefore no impairment has
been recognised in FY23. However, a 0.1 ppt increase in discount
rate or a 0.3 ppt decrease in long-term growth rate would result in
the headroom being fully eroded. The CGU currently has a carrying
value of £121.6m.
3.4 Right-of-use assets and lease
liabilities
An analysis of the Group's right-of-use assets
and lease liabilities is as follows:
Right-of-use assets
|
Land and
buildings
£m
|
Fixtures,
fittings,
plant and
machinery
£m
|
Motor
vehicles
£m
|
Total
£m
|
At 28 November 2021
|
409.0
|
25.5
|
60.1
|
494.6
|
Additions
|
43.4
|
2.2
|
24.9
|
70.5
|
Disposals
|
(4.0)
|
(0.1)
|
(0.5)
|
(4.6)
|
Impairment
|
(0.6)
|
-
|
-
|
(0.6)
|
Depreciation
|
(32.8)
|
(11.8)
|
(21.4)
|
(66.0)
|
At 27 November 2022
|
415.0
|
15.8
|
63.1
|
493.9
|
Additions
|
8.9
|
13.4
|
10.4
|
32.7
|
Recognised on acquisition of
subsidiaries
|
0.3
|
-
|
-
|
0.3
|
Disposals
|
(0.1)
|
(0.1)
|
(0.3)
|
(0.5)
|
Impairment
|
(27.7)
|
-
|
-
|
(27.7)
|
Depreciation
|
(36.8)
|
(10.9)
|
(22.7)
|
(70.4)
|
Asset reclassification
|
0.5
|
(0.5)
|
-
|
-
|
Effect of changes in foreign
exchange rates
|
(0.2)
|
-
|
-
|
(0.2)
|
At
3 December 2023
|
359.9
|
17.7
|
50.5
|
428.1
|
During the period, the Group recognised
impairment charges in respect of the existing leases held in the
CFC Hatfield following its closure and certain Ocado Retail zoom
sites on the basis of the strategic review of the Zoom network.
Refer to Note 2.3 further details.
Lease liabilities
|
Land and
buildings
£m
|
Fixtures,
fittings,
plant and
machinery
£m
|
Motor
vehicles
£m
|
Total
£m
|
At 28 November 2021
|
431.7
|
34.6
|
62.1
|
528.4
|
Additions
|
37.7
|
2.0
|
24.5
|
64.2
|
Terminations
|
(2.9)
|
-
|
-
|
(2.9)
|
Interest
|
24.7
|
1.4
|
2.2
|
28.3
|
Payments
|
(43.9)
|
(18.5)
|
(23.3)
|
(85.7)
|
At 27 November 2022
|
447.3
|
19.5
|
65.5
|
532.3
|
Additions
|
9.3
|
13.2
|
10.4
|
32.9
|
Recognised on acquisition of
subsidiaries
|
0.3
|
-
|
-
|
0.3
|
Terminations
|
(0.1)
|
-
|
(0.6)
|
(0.7)
|
Interest
|
22.9
|
0.7
|
2.1
|
25.7
|
Payments
|
(52.6)
|
(14.1)
|
(25.8)
|
(92.5)
|
Effects of changes in foreign
exchange rates
|
(0.2)
|
-
|
-
|
(0.2)
|
At
3 December 2023
|
426.9
|
19.3
|
51.6
|
497.8
|
|
3 December
2023
£m
|
27
November
2022
£m
|
Disclosed as:
|
|
|
Current
|
52.9
|
58.6
|
Non-current
|
444.9
|
473.7
|
|
497.8
|
532.3
|
External obligations under lease liabilities are
£481.3m (FY22: £514.8m), excluding £16.5m (FY22: £17.5m) payable to
MHE JVCo Limited, a company incorporated in England and Wales in
which the Group holds a 50% interest.
The existing lease arrangements entered into by
the Group contain no restrictions concerning dividends, additional
debt and further leasing. Furthermore, no material leasing
arrangements exist relating to contingent rent payable, renewal or
purchase options and escalation clauses.
The expenses relating to short-term leases and
leases of low-value items not included in the measurement of the
lease liability are as follows:
|
53 weeks
ended
3 December
2023
£m
|
52 weeks
ended
27
November
2022
£m
|
Short-term leases
|
2.9
|
3.2
|
Leases of low-value
items
|
0.4
|
-
|
|
3.3
|
3.2
|
3.5 Other financial assets
An analysis of the Group's other financial
assets is as follows:
|
|
3 December
2023
£m
|
27
November 2022
£m
|
Contingent consideration
receivable
|
|
29.4
|
98.3
|
Unlisted equity investments held at
FVTOCI
|
|
82.7
|
69.8
|
Loans receivable held at
FVTPL
|
|
0.5
|
2.4
|
Loan receivable held at amortised
cost
|
|
14.4
|
14.2
|
Contributions towards dilapidations
costs receivable
|
|
0.7
|
0.7
|
Other financial assets
|
|
127.7
|
185.4
|
Disclosed as:
|
|
|
|
Current
|
|
43.7
|
3.8
|
Non-current
|
|
84.0
|
181.6
|
|
|
127.7
|
185.4
|
Contingent consideration receivable
Total contingent consideration receivable at the
balance sheet date is £29.4m (FY22: £98.3m), and comprises two
amounts: £28.0m (FY22: £95.0m) due from Marks and Spencer Holdings
Limited ("M&S") relating to the part-disposal of Ocado Retail
Limited ("Ocado Retail") in August 2019; and £1.4m (FY22: £3.3m)
due from Next Holdings Limited ("Next") relating to the disposal of
Marie Claire Beauty Limited ("Fabled") in July 2019. Refer to Note
1.3 for details on the estimation uncertainty in relation to the
fair value measurement of contingent consideration
receivable.
Contingent consideration due from M&S
Under the terms of the disposal of 50% of Ocado
Retail to M&S that took place during 2019, a final payment may
become due from M&S to Ocado Group of £156.3m plus interest,
dependent on certain contractually defined Ocado Retail performance
measures (the "Target") being achieved for the FY23 financial year
(the "Contingent Consideration").
The contractual outcome is binary, meaning if
the Target is achieved, it will trigger the payment in full of
£190.7m (£156.3m plus £34.4m of interest, assuming a payment date
of August 2024). Conversely, should the Target not be achieved, no
consideration would be payable by M&S. There is no formal
arrangement for a payment between zero and £190.7m.
The contractual arrangement with M&S
expressly provides for the Target to be adjusted for certain
decisions or actions taken by Ocado Retail management that differ
from the assumptions used in the discounted cash flow model which
underpinned the sale transaction.
We believe that there were a number of
significant decisions and actions taken by Ocado Retail management
that require adjustment to the Target under the terms of the
contractual agreement with M&S. The adoption of these
adjustments, if established, would result in Ocado Retail achieving
the Target (as adjusted) and the full payment of £190.7m. It may be
that a legal process is required for this outcome to be assessed.
The precise outcome of a legal process is inherently uncertain but
would be binary - payment of either the £190.7m in full, or no
payment. This creates a risk for both us and M&S and an
incentive to reach a negotiated settlement to avoid the legal
route. We believe a negotiated settlement will reflect a
significant proportion of the full amount of the contingent
consideration of £190.7m - particularly given the wider JV
relationship.
Accounting
treatment
While the contractual outcome is a binary one,
the Group is required to apply the principles of IFRS 9 Financial
Instruments and IFRS 13 Fair Value Measurement in determining the
fair value of the Contingent Consideration financial instrument
recorded in the Group's financial statements at each reporting
date. IFRS 13 requires that the characteristics of the contract be
valued from the perspective of a hypothetical, independent 'market
participant' who would not consider any non-contract specific
factors at the measurement date. In valuing this asset, a market
participant would also exclude broader facts, circumstances and
commercial arrangements pertaining to the ongoing relationship with
M&S.
Under IFRS 13 there is judgement required in
selecting and applying the appropriate measurement basis as viewed
from the perspective of a market participant. There is no directly
observable market for this financial instrument. We are therefore
required to theoretically determine a market participant and have
considered entities such as litigation funders, vulture funds and
hedge funds in this determination. We have also assumed that the
market participant would price into the valuation the inherent risk
associated with the outcome and would also include consideration of
the margin they would seek in acquiring the asset.
In the prior reporting period, the fair value of
the Contingent Consideration was estimated using an expected
present value technique based on a number of probability-weighted
scenarios for the FY23 performance outturn and applying an
appropriate discount rate to reflect the time value of the possible
payment. The Group considered a range of scenarios reflecting
market uncertainty at the time, the impact of likely adjustments to
the Target, and Ocado Retail's expected trading performance. With
the FY23 year now closed, the end of the measurement period for the
Target has been reached and the valuation of the Contingent
Consideration has been revisited.
The actual FY23 performance is below the Target
required for automatic payment of the Contingent Consideration.
However, as stated above, the contract includes a mechanism for
adjusting the Target.
The contract requires the shareholders to engage
in good faith discussions concerning possible adjustments, and we
intend to pursue that process, however there can be no assurance
that an adjustment proposed by one party will be eventually
accepted by another or that a wider agreement will be reached and
if so formal legal proceedings may well result.
The Group has identified a number of material
adjustments that it considers to result from decisions taken by
Ocado Retail management, and which should be reflected in
determining whether the Target has been met. These adjustments
include the impact of significant decisions taken in 2020 and 2021
during the COVID pandemic, particularly in the way in which Ocado
Retail management chose to limit access to the website and ration
delivery slots. Ocado Retail's management chose to prioritise
vulnerable customers and certain existing customers at the expense
of other existing customers and to stop the registration of new
customers. These were decisions that differed from the business
plan assumptions underpinning the formulation of the Target in the
original sale agreement with M&S. We believe that the impact of
these decisions, whether intended or not, was to maximise earnings
in 2020 and 2021 at the expense of later years, for
example:
- In
February 2020, just before the onset of COVID, Ocado Retail had
just over 850,000 active customers, having grown consistently at a
compound annual growth rate ("CAGR") of around 11% over the
previous 5 years. Within 12 months of making these decisions,
active customers had declined to just less than 650,000 customers,
a loss of approximately 200,000 active customers. Post-COVID Ocado
Retail resumed its historical performance of growing active
customers at around 11%. Ocado Group management believes that the
loss of around 200,000 active customers during COVID significantly
and negatively impacted the average number of active customers
during the FY23 measurement year, particularly compared to that
envisaged in the long-term plan that underpinned the Target
measure. The lower number of average customers consequently lowered
profitability in FY23 compared to the original business
plan.
- Ocado
Retail management decisions were taken to expand CFC capacity
during COVID significantly ahead of previous plans, which resulted
in excess capacity and excess overheads throughout FY23 that were
not included in the original business plan.
The financial impact of these, and other
decisions by Ocado Retail's management are, in our assessment of
the contractual arrangements with M&S, valid and appropriate
adjustments in determining the payment of the Contingent
Consideration. If successfully established, the application of
these adjustments would result in the Target being achieved and the
full amount of Contingent Consideration becoming due.
It would be prudent to assume that in any
negotiation or legal proceedings M&S would propose adjustments
to the Target of their own.
As at the year end, the fair value has been
estimated using the expected present value technique and is based
on a number of probability-weighted possible scenarios that a
market participant would consider in valuing the contract
reflecting our current understanding of the matter. We have
estimated the risk and return on investment that a market
participant would require in its valuation of a contingent
contractual claim. The year-end fair value is based on the
information available at the end of the financial year and has been
determined to be £28.0m (FY22: £95.0m).
The financial reporting estimate of £28.0m for
the Contingent Consideration at 3 December 2023 is significantly
lower than the amount that Ocado believes it will receive in the
future (either via a formal litigation process or
settlement).
Summary
There remains significant uncertainty regarding
the conclusion of the amount due from M&S in respect of the
Contingent Consideration. Management is fully committed to ensuring
the amount of the Contingent Consideration due is maximised and
intends to use all contractual or legal means available in order to
achieve this aim.
Management believes that there is a greater
likelihood that the amount to be paid in respect of the Contingent
Consideration will be agreed through a negotiated settlement
between the two shareholders. This settlement may also include
other matters. Under IFRS 13, however, any broader commercial
issues cannot be taken into account in determining the fair value
of the Contingent Consideration for financial reporting purposes at
the year end date.
The fair value of £28.0m recorded in respect of
the Contingent Consideration under IFRS 13, reflects the facts and
circumstances that existed at the balance sheet date. It is
management's belief that the fair value currently recorded is
significantly lower than the amount that Ocado may receive at the
point of settlement.
Contingent consideration due from Next
The consideration due from Next is a percentage
of the sales of Fabled for the period to July 2024. The total cash
still receivable under the earn-out arrangement is estimated to be
£1.4m (FY22: £3.7m), payable in tranches in March and September
each year. During the period, cash received totalled £1.5m (FY22:
£nil).
Unlisted equity investments held at FVTOCI
|
|
|
% of share capital
held
|
Carrying
amount
|
Company
|
Principal activity
|
Country of incorporation
|
3 December
2023
|
27
November 2022
|
3 December
2023
£m
|
27
November 2022
£m
|
80 Acres Urban Agriculture
Inc.
|
Vertical farming
|
United States of America
|
2.0%
|
2.5%
|
11.8
|
10.2
|
Inkbit Corporation
|
3D printing
|
United States of America
|
5.0%
|
5.5%
|
0.1
|
3.5
|
Oxa Autonomy Ltd
|
Autonomous vehicle
technology
|
England and Wales
|
12.2%
|
8.8%
|
56.4
|
36.8
|
Paneltex Limited
|
Manufacturing refrigerated
vehicles
|
England and Wales
|
25.0%
|
25.0%
|
2.5
|
7.6
|
Sanctuary Cognitive Systems
Corporation
|
Artificial intelligence
|
Canada
|
1.5%
|
1.6%
|
1.8
|
1.0
|
Wayve Technologies
Limited
|
Autonomous vehicle
technology
|
England and Wales
|
2.5%
|
2.6%
|
10.1
|
10.7
|
Unlisted equity investments held at FVTOCI
|
|
|
82.7
|
69.8
|
In December 2022, Oxa Autonomy Limited ("Oxa
Autonomy"), previously Oxbotica Limited, successfully completed its
Series C Fundraising, which resulted in the Group's warrants being
exercised to acquire 21,934 B shares for £10.0m. The fair value of
the warrants prior to the transaction was £19.4m, which together
with the exercise cost of £10.0m resulted in a £29.4m increase in
the Group's equity investment in Oxa Autonomy. At the FY23 period
end, the unlisted equity investment in Oxa Autonomy has been
revalued to £56.4m (FY22: £36.8m). Following exercise of the
warrants and the Series C fundraising, the Group now holds a 12.2%
interest in Oxa Autonomy.
The investment in Paneltex Limited has not been
treated as an associate since the Group does not have significant
influence over the company. In arriving at this decision, the Board
has reviewed the conditions set out in IAS 28 "Investments in
Associates and Joint Ventures" and concluded that, despite the size
of the Group's holding, it is unable to participate in the
financial and operating policy decisions of Paneltex due to the
position of the majority shareholder as Executive Managing
Director. The relationship between the Group and the company is at
arm's length.
Loans receivable held at FVTPL
|
|
|
|
Carrying
amount
|
Borrower
|
Principal amount
|
Coupon rate
|
Repayment due
|
3 December
2023
£m
|
27
November 2022
£m
|
Karakuri Limited
|
£1.7m
|
8%
|
October 2023
|
-
|
1.8
|
Inkbit Corporation
|
US$0.6m
|
6%
|
November 2024
|
0.5
|
0.6
|
Loans receivable held at FVTPL
|
|
|
|
0.5
|
2.4
|
Loans receivable held at FVTPL previously
included a convertible loan to Karakuri, a company in which the
Group holds a 26.3% interest. Refer to Note 5.2 for further
details.
Loan receivable held at amortised cost
The loan receivable held at amortised cost is a
US$15.0m loan to Infinite Acres Holding B.V. In October 2021,
following the Group's divestment in Infinite Acres, 80 Acres Urban
Agriculture, Inc. ("80 Acres") became a guarantor to the loan.
Interest is chargeable on the US$15.0m principal at 5% per annum to
December 2021, and 7% thereafter. The loan is repayable in full in
September 2024, along with any unpaid accrued interest.
Contributions towards dilapidations costs
receivable
Contributions towards dilapidation costs are due
from the former tenant of two properties whose leases the Group
took over in 2017, and will be paid when the dilapidations costs
are incurred on expiry of the leases.
Section 4 - Capital structure and financing
costs
4.1 Borrowings
|
3 December
2023
£m
|
27
November
2022
£m
|
Senior unsecured convertible
bonds
|
868.0
|
835.9
|
Senior unsecured notes
|
498.2
|
496.3
|
Revolving credit
facility
|
-
|
10.0
|
Other borrowings
|
95.9
|
30.6
|
Borrowings
|
1,462.1
|
1,372.8
|
|
|
|
Disclosed as:
|
|
|
Current
|
2.6
|
10.2
|
Non-current
|
1,459.5
|
1,362.6
|
|
1,462.1
|
1,372.8
|
Senior unsecured convertible bonds and senior unsecured
notes
|
|
|
|
Carrying
amount
|
Facility
|
Inception
|
Coupon rate
|
Maturity
|
53 weeks
ended
3 December
2022
£m
|
52 weeks
ended
27
November 2022
£m
|
£600m senior unsecured convertible
bonds
|
December
2019
|
0.875%
|
December
2025
|
560.2
|
540.7
|
£350m senior unsecured convertible
bonds
|
June
2020
|
0.750%
|
January
2027
|
307.8
|
295.2
|
£500m senior unsecured
notes
|
October
2021
|
3.875%
|
October
2026
|
498.2
|
496.3
|
The £600.0m of senior unsecured convertible
bonds (the "2025 Bonds") were issued in December 2019, raising
£592.1m, net of transaction fees. At the date of issue, the
liability component was valued at £485.0m, with the remaining
£107.1m recognised in the convertible bonds reserve. The bonds are
convertible into ordinary shares of the Company at a conversion
price of £17.93. The conversion period commenced on 19 January 2020
and shall end on the 10th calendar day prior to the maturity date.
Unless previously redeemed, or purchased and cancelled, the 2025
Bonds will be convertible at the option of the bondholders on any
day during the conversion period. The Company has the option to
redeem all, but not some only, of the 2025 Bonds on or after 30
December 2023, at par plus accrued but unpaid interest, if the
parity value (as described in the Terms and Conditions relating to
the 2025 Bonds) on each of at least 20 dealing days in a period of
30 consecutive dealing days shall have exceeded 130% of the
principal amount. The Company also has the option to redeem all
outstanding 2025 Bonds, at par plus any accrued but unpaid
interest, at any time if 85% or more of the principal amount of the
2025 Bonds shall have been previously converted or repurchased and
cancelled.
The £350.0m of senior unsecured convertible
bonds (the "2027 Bonds") were issued in June 2020, raising £343.4m,
net of transaction fees. At the date of issue, the liability
component was valued at £266.0m, with the remaining £77.4m
recognised in the convertible bonds reserve. The bonds are
convertible into ordinary shares of the Company at a conversion
price of £26.46. The conversion period commenced on 29 July 2020
and shall end on the 10th calendar day prior to the maturity date.
Unless previously redeemed, or purchased and cancelled, the 2027
Bonds will be convertible at the option of the bondholders on any
day during the conversion period. The Company has the option to
redeem all, but not some only, of the 2027 Bonds on or after 8
February 2025, at par plus accrued interest, if the parity value
(as described in the Terms and Conditions relating to the 2027
Bonds) on each of the at least 20 dealing days in a period of 30
consecutive dealing days shall have exceeded 130% of the principal
amount. The Company also has the option to redeem all outstanding
2027 Bonds, at par plus accrued interest, at any time if 85% or
more of the principal amount of the 2027 Bonds shall have been
previously converted or repurchased and cancelled.
The £500.0m of senior unsecured notes were
issued in October 2021, raising £491.6m, net of transaction
fees.
Revolving credit facility
In June 2022, the Group entered into a
three-year multi-currency Revolving Credit Facility ("RCF'') of
£300m with a syndicate of international banks. The RCF is due to
mature on 20 June 2025. As at 3 December 2023, the facility remains
undrawn. Interest is payable on the amounts drawn down at a margin
of 2.25% plus the applicable reference rate depending on the
currency of the amounts drawn down. The Group is subject to a
springing covenant under this facility which is required to be met
when drawing down and subsequent quarters if a loan is
outstanding.
Transaction costs of £3.4m relating to the RCF
were capitalised in the prior period and are being amortised in the
Income Statement on a straight-line basis over the term of the
RCF.
The Group also had an existing RCF of £10.0m at
the prior period end that was repaid upon expiration of the
facility in December 2022.
Other borrowings
Other borrowings include a shareholder loan of
£90.0m (2022: £30.0m) provided to Ocado Retail from the
non-controlling interest. The loan has a termination date of August
2039 and incurs interest at SONIA + 4% per annum.
3
December 2023
|
Due in less than one
year
£m
|
Due in between one and two
years
£m
|
Due in between two and five
years
£m
|
Due in more than five
years
£m
|
Total
£m
|
Senior unsecured convertible
bonds
|
-
|
-
|
868.0
|
-
|
868.0
|
Senior unsecured notes
|
-
|
-
|
498.2
|
-
|
498.2
|
Revolving credit
facility
|
-
|
-
|
-
|
-
|
-
|
Other borrowings
|
2.6
|
0.4
|
0.3
|
92.6
|
95.9
|
Borrowings
|
2.6
|
0.4
|
1,366.5
|
92.6
|
1,462.1
|
27 November 2022
|
Due in
less than one year
£m
|
Due in
between one and two years
£m
|
Due in
between two and five years
£m
|
Due in
more than five years
£m
|
Total
£m
|
Senior unsecured convertible
bonds
|
-
|
-
|
835.9
|
-
|
835.9
|
Senior unsecured notes
|
-
|
-
|
496.3
|
-
|
496.3
|
Revolving credit
facility
|
10.0
|
-
|
-
|
-
|
10.0
|
Other borrowings
|
0.2
|
0.1
|
0.3
|
30.0
|
30.6
|
Borrowings
|
10.2
|
0.1
|
1,332.5
|
30.0
|
1,372.8
|
The Group reviews its financing arrangements
regularly. The senior unsecured notes and senior unsecured
convertible bonds contain typical restrictions concerning dividend
payments and additional debt and leases.
4.2 Movements in net debt*
|
|
|
Cash
movements
|
|
Non-cash
movements
|
|
|
Notes
|
27
November 2022
£m
|
Cash flows excluding
interest
£m
|
Interest
received
£m
|
Interest
paid
£m
|
|
Interest income/
(charge)
£m
|
Net new lease
liabilities
£m
|
Foreign
exchange
£m
|
3
December
2023
£m
|
Cash and cash
equivalents
|
|
1,328.0
|
(469.7)
|
41.7
|
-
|
|
-
|
-
|
(15.2)
|
884.8
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
4.1
|
(1,372.8)
|
(54.1)
|
-
|
30.6
|
|
(65.8)
|
-
|
-
|
(1,462.1)
|
Lease liabilities
|
3.4
|
(532.3)
|
66.8
|
-
|
25.7
|
|
(25.7)
|
(32.5)
|
0.2
|
(497.8)
|
Gross debt*
|
|
(1,905.1)
|
12.7
|
-
|
56.3
|
|
(91.5)
|
(32.5)
|
0.2
|
(1,959.9)
|
|
|
|
|
|
|
|
|
|
|
|
Net debt*
|
|
(577.1)
|
(457.0)
|
41.7
|
56.3
|
|
(91.5)
|
(32.5)
|
(15.0)
|
(1,075.1)
|
|
|
|
Cash
movements
|
|
Non-cash
movements
|
|
|
Notes
|
28
November 2021
£m
|
Cash
flows excluding interest
£m
|
Interest
received
£m
|
Interest
paid
£m
|
|
Interest
income/
(charge)
£m
|
Net new
lease liabilities
£m
|
Foreign
exchange
£m
|
27
November 20221
£m
|
Cash and cash
equivalents
|
|
1,468.6
|
(172.0)
|
9.6
|
-
|
|
-
|
-
|
21.8
|
1,328.0
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
4.1
|
(1,300.0)
|
(40.6)
|
-
|
27.5
|
|
(59.7)
|
-
|
-
|
(1,372.8)
|
Lease liabilities
|
3.4
|
(528.4)
|
57.4
|
-
|
28.3
|
|
(28.3)
|
(61.3)
|
-
|
(532.3)
|
Gross debt*
|
|
(1,828.4)
|
16.8
|
-
|
55.8
|
|
(88.0)
|
(61.3)
|
-
|
(1,905.1)
|
|
|
|
|
|
|
|
|
|
|
|
Net debt*
|
|
(359.8)
|
(155.2)
|
9.6
|
55.8
|
|
(88.0)
|
(61.3)
|
21.8
|
(577.1)
|
*Gross debt and net debt are alternative performance measures. See
Section 6 - Alternative Performance Measures.
1 The prior year balances have been amended to provide
additional information on the cash and non-cash movements during
the period.
4.3 Share capital and reserves
Share capital and share premium
At the reporting date, the number of ordinary
shares available for issue under the Block Listing Facilities was
9,588,329 (FY22: 9,447,982). These ordinary shares will only be
issued and allotted when the shares under the relevant share plan
have vested, or the share options have been exercised. They are,
therefore, not included in the total number of ordinary shares
outstanding below.
The movements in called-up share capital and
share premium are set out below:
|
Ordinary
shares
million
|
Share
capital
£m
|
Share
premium
£m
|
Balance at 28 November
2021
|
751.4
|
15.0
|
1,372.0
|
Issue of ordinary shares
|
73.9
|
1.5
|
565.0
|
Allotted in respect of share option
schemes
|
0.6
|
-
|
2.3
|
Balance at 27 November
2022
|
825.9
|
16.5
|
1,939.3
|
Issue of ordinary shares
|
2.1
|
0.1
|
2.1
|
Allotted in respect of share option
schemes
|
0.4
|
-
|
1.5
|
Balance at 3 December 2023
|
828.4
|
16.6
|
1,942.9
|
In June 2022, Ocado Group plc successfully
completed the placing of 72,327,044 new ordinary shares of 2 pence
each (the "Placing Shares") at a price of £7.95 per Placing Share
(the "Placing Price"), with existing and new institutional
investors. In addition, retail investors subscribed for a total of
246,405 new Ordinary Shares at the Placing Price (the "Retail Offer
Shares") and the Group CEO, CFO and GC subscribed for an aggregate
of 150,944 new ordinary shares at the Placing Price (the
"Subscription Shares").
In aggregate, the Placing Shares, the Retail
Offer Shares and the Subscription Shares comprise 72,724,393 new
Ordinary Shares, which raised proceeds of £564.1m net of qualifying
transaction costs directly related to the issuance of shares
amounting to £14.1m, which were deducted from the share
premium.
Included in the total number of ordinary shares
outstanding above are 10,480,773 (FY22: 10,438,075) ordinary shares
held by the Group's Employee Benefit Trust. The ordinary shares
held by the Trustee of the Group's Employee Benefit Trust pursuant
to the JSOS, and the linked jointly owned equity ("JOE") awards
under the Ocado Group Value Creation Plan ("Group VCP") are treated
as treasury shares on the Consolidated Balance Sheet. These
ordinary shares have voting rights but these have been waived by
the Trustee (although the Trustee may vote in respect of shares
that have vested and remain in the Trust). The number of allotted,
called-up and fully paid shares, excluding treasury shares, at the
end of each period differs from that used in the basic loss per
share calculation in Note 2.5, since the basic loss per share is
calculated using the weighted average number of ordinary shares in
issue during the period, excluding treasury shares.
Treasury shares reserve
The treasury shares reserve arose when the Group
issued equity share capital under its JSOS. In 2019, the Group
issued share capital relating to the linked jointly owned equity
("JOE") awards under the Group VCP. The shares under both plans are
held in trust by the Trustee of the Group's Employee Benefit Trust.
Treasury shares cease to be accounted for as such when they are
sold outside the Group or the interest is transferred in full to
the participant pursuant to the terms of the JSOS and Group VCP.
Participants' interests in unexercised shares held by participants
are not included in the calculation of treasury shares.
Other reserves
The movements in other reserves are set out
below:
|
Other
reserves
|
|
|
Reverse
acquisition
reserve
£m
|
Convertible bonds
reserve
£m
|
Merger
reserve
£m
|
Translation
reserve
£m
|
Fair value
reserve
£m
|
Hedging
reserve
£m
|
Total
£m
|
Balance at 28 November
2021
|
(116.2)
|
184.5
|
6.2
|
(11.0)
|
6.1
|
0.3
|
69.9
|
Net gain arising on cash flow
hedges
|
-
|
-
|
-
|
-
|
-
|
(1.1)
|
(1.1)
|
Foreign exchange gain on
translation of foreign subsidiaries
|
-
|
-
|
-
|
69.1
|
-
|
-
|
69.1
|
Gain on equity investments
designated as at fair value through other comprehensive
income
|
-
|
-
|
-
|
-
|
33.3
|
-
|
33.3
|
Tax on gain on equity
investments
|
-
|
-
|
-
|
-
|
(7.2)
|
-
|
(7.2)
|
Balance at 27 November
2022
|
(116.2)
|
184.5
|
6.2
|
58.1
|
32.2
|
(0.8)
|
164.0
|
Net loss arising on cash flow
hedges
|
-
|
-
|
-
|
-
|
-
|
0.7
|
0.7
|
Foreign exchange loss on
translation of foreign subsidiaries
|
-
|
-
|
-
|
(53.0)
|
-
|
-
|
(53.0)
|
Loss on equity investments
designated as at fair value through other comprehensive
income
|
-
|
-
|
-
|
|
(16.5)
|
-
|
(16.5)
|
Tax on loss on equity
investments
|
-
|
-
|
-
|
|
(4.6)
|
-
|
(4.6)
|
Balance at 3 December 2023
|
(116.2)
|
184.5
|
6.2
|
5.1
|
11.1
|
(0.1)
|
90.6
|
Reverse acquisition
reserve
The acquisition by the Company of the entire
issued share capital in 2010 of Ocado Holdings Limited was
accounted for as a reverse acquisition under IFRS 3 "Business
Combinations". Consequently, the previously recognised book values
and assets and liabilities have been retained, and the consolidated
financial information for the period to 3 December 2023 has been
presented as if the Company had always been the parent company of
the Group.
Convertible bonds
reserve
The convertible bonds reserve contains the
equity components of convertible bonds issued by the Group, net of
apportioned transaction costs. The carrying amounts of the equity
components will not change until the liability components are
redeemed through repayment or conversion into ordinary
shares.
Refer to Note 4.1 for further details on the
senior unsecured convertible bonds issued by the Group.
Merger
reserve
The merger reserve comprises shares issued as
consideration for Haddington Dynamics Inc.
Translation
reserve
The translation reserve comprises cumulative
foreign exchange differences on the translation of foreign
subsidiaries.
Fair value
reserve
The fair value reserve comprises cumulative
changes in the fair value of assets and liabilities recognised
through other comprehensive income.
Hedging
reserve
The hedging reserve comprises cumulative gains
and losses on movements in the Group's hedging
arrangements.
4.4 Cash generated from operations
A reconciliation from profit before tax to
cash generated from operations is as follows:
|
Notes
|
53 weeks
ended
3 December
2023
£m
|
52
weeks
ended
27
November
2022
£m
|
Cash flows from operating
activities
|
|
|
|
Loss before tax
|
|
(403.2)
|
(500.8)
|
Adjustments for
|
|
|
|
- Revenue recognised from long-term
contracts
|
2.2
|
(33.0)
|
(24.7)
|
- Depreciation, amortisation and
impairment losses1
|
|
452.7
|
348.6
|
- Property, plant and equipment
write-off
|
|
2.9
|
10.8
|
- Gain on disposal of asset held
for sale
|
|
(5.0)
|
-
|
- Insurance proceeds
income
|
2.3
|
-
|
(73.8)
|
- Litigation settlement income and
interest unwind
|
2.3
|
(186.5)
|
-
|
- Other non-cash adjusting
items
|
2.3
|
67.4
|
59.8
|
- Share of results of joint
ventures and associate
|
|
0.9
|
1.4
|
- Movement of provisions
|
|
13.5
|
(26.2)
|
- Net finance
cost2
|
2.4
|
76.1
|
48.2
|
- Share-based payments
charge
|
|
33.3
|
42.0
|
Changes in working
capital
|
|
|
|
- Movement in contract
assets
|
|
-
|
0.3
|
- Cash received from contract
liabilities (upfront fees)
|
|
47.9
|
78.7
|
- Movement of
inventories
|
|
3.1
|
(10.9)
|
- Movement of trade and other
receivables
|
|
36.6
|
(50.7)
|
- Movement of trade and other
payables
|
|
(19.8)
|
93.3
|
Cash generated from/(used in) operations
|
|
86.9
|
(4.0)
|
1 Included within depreciation, amortisation and impairment
losses are impairment charges of £20.3m and £27.2m, relating to the
UK network capacity review and Zoom by Ocado network capacity and
strategy review, respectively, which are included in the adjusting
items. Refer to Note 2.3 for further details.
2 Excludes £6.1m interest unwind on AutoStore litigation
settlement, which is included within litigation settlement income
and interest unwind.
Section 5 - Other notes
5.1 Commitments
Capital commitments
Contracts placed for future capital expenditure
but not provided for in the financial statements are as
follows:
|
3 December
2023
£m
|
27
November 2022
£m
|
Land and buildings
|
0.1
|
0.4
|
Property, plant and
equipment
|
104.9
|
275.1
|
Capital commitments
|
105.0
|
275.5
|
Of the total capital expenditure committed at
the end of the period, £66.5m relates to new CFCs (FY22: £232.4m),
£2.3m to existing CFCs (FY22: £1.3m), £nil to fleet costs (FY22:
£7.6m) and £34.7m to technology projects (FY22: £26.5m).
5.2 Related party transactions
Key management personnel
Only members of the Board (the Executive and
Non-Executive Directors) are recognised as being key management
personnel. It is the Board that has responsibility for planning,
directing and controlling the activities of the Group. The
aggregate emoluments of key management personnel are as
follows:
|
53 weeks ended 3 December
2023
£m
|
52 weeks
ended 27 November 2022
£m
|
Salaries and other short-term
employee benefits
|
5.9
|
5.8
|
Post-employment benefits
|
0.2
|
0.2
|
Share-based payments
|
4.9
|
11.4
|
Aggregate emoluments
|
11.0
|
17.4
|
Due to restrictions in place during the
Covid-19 pandemic, chartered flights were required on a small
number of occasions in order for key management personnel to be
able to visit the Group's global sites and undertake client
meetings. The Group chartered aircraft through accessing flying
hours owned by a family member of one of the key management
personnel. The price paid was at the open market rate and amounted
to £nil (FY22: £32,100). At the end of the period, no amounts were
owed in relation to the purchase of these flights.
Other related party transactions with key
management personnel made during the period amount to £nil (FY22:
£nil). All transactions were on an arm's length basis. At the
reporting date, no amounts were owed by key management personnel to
the Group (FY22: £nil). During the period, there were no other
material transactions or balances between the Group and its key
management personnel or members of their close family.
Joint venture
MHE JVCo
Limited
The following transactions were carried out
with MHE JVCo:
|
53 weeks ended 3 December
2023
£m
|
52 weeks
ended 27 November 2022
£m
|
Dividend received from MHE
JVCo
|
5.1
|
8.0
|
Reimbursement of supplier invoices
paid on behalf of MHE JVCo
|
4.1
|
1.1
|
Lease liability additions of assets
from MHE JVCo
|
11.4
|
-
|
Capital element of lease liability
instalments paid to MHE JVCo
|
12.0
|
15.1
|
Capital element of lease liability
instalments due to MHE JVCo
|
0.5
|
1.4
|
Interest element of lease liability
instalments accrued or paid to MHE JVCo
|
0.5
|
1.3
|
During the period, the Group incurred lease
instalments (including interest) of £13.0m (FY22: £17.8m) to MHE
JVCo.
Of the lease instalments incurred, £6.8m was
recovered directly from Wm Morrison Supermarkets Limited in the
form of other income (FY22: £8.2m).
Included within trade and other receivables is a
balance of £0.7m due from MHE JVCo (FY22: £2.3m), which primarily
relates to capital recharges.
Included within trade and other payables is a
balance of £0.7m due to MHE JVCo (FY22: £1.8m).
Included within lease liabilities is a balance
of £16.5m due to MHE JVCo (FY22: £17.5m).
Associate
Karakuri
Limited
During a prior period, the Group lent £1.7m to
Karakuri, a company in which the Group holds a 26.3% interest. The
loan is held at fair value through profit or loss within other
financial assets. However, following Karakuri entering into
administration during the period, a write-down of £1.9m was
recognised, reducing the carrying amount to £nil (FY22: £1.8m).
During the period, £0.1m (FY22: £0.2m) of interest was recognised
within finance income.
No other transactions that require disclosure
under IAS 24 "Related Party Disclosures" have occurred during the
period.
Section 6 - Alternative performance
measures
The Group assesses its performance using a
variety of alternative performance measures ('APMs'), which are not
defined under IFRS and are, therefore, termed "non-GAAP" measures.
These measures provide additional useful information on the
underlying trends, performance and position of the Group. The APMs
used are:
●
Adjusting items;
●
Adjusted EBITDA;
●
Adjusted EBITDA %;
●
Gross debt and external gross debt;
●
Net debt;
●
Technology Solutions fees invoiced;
●
Underlying cash flow; and
●
52 week income statement
Definitions of these APMs, together with
reconciliations of these APMs with the nearest measures prepared in
accordance with IFRS are presented below. The APMs used may not be
directly comparable with similarly titled measures used by other
companies.
Adjusting items
The Consolidated Income Statement separately
identifies trading results before adjusting items. Adjusting items
are items that are considered to be significant due to their
size/nature, not in the normal course of business or are consistent
with items that were treated as adjusting in the prior periods or
that may span multiple financial periods. They have been classified
separately in order to draw them to the attention of the readers of
the financial statements, and facilitate comparison with prior
periods to assess trends in the financial performance more
readily.
The Directors believe that presentation of the
Group's results in this way is important for understanding the
Group's financial performance. This presentation is consistent with
the way that financial performance is measured by management and
reported to the Board.
The Group applies judgement in identifying items
of income and expense that are recognised as adjusting to help
provide an indication of the Group's underlying business. In
determining whether an event or transaction is adjusting in nature,
management considers quantitative as well as qualitative factors
such as the frequency or predictability of occurrence.
Examples of items that the Group considers
adjusting include corporate reorganisations, material litigation,
and any other material costs outside of the normal course of
business as determined by management.
The Group has adopted a three-columned approach
to the Consolidated Income Statement to aid clarity and allow users
of the financial statements to understand more easily the
performance of the underlying business and the effect of adjusting
items.
Adjusting items are disclosed in Note
2.3.
Adjusted EBITDA
In addition to measuring its financial
performance based on operating profit, the Group measures
performance based on Adjusted EBITDA. Adjusted EBITDA is defined as
the Group's earnings before depreciation, amortisation, impairment,
net finance cost, taxation and adjusting items. EBITDA is a common
measure used by investors and analysts to evaluate the operating
financial performance of companies. A reconciliation of operating
profit to Adjusted EBITDA can be found on the face of the
Consolidated Income Statement.
The Group considers Adjusted EBITDA to be a
useful measure of its operating performance because it approximates
the underlying operating cash flow by eliminating depreciation and
amortisation. Adjusted EBITDA is not a direct measure of liquidity,
which is shown by the Consolidated Statement of Cash Flows, and
needs to be considered in the context of the Group's financial
commitments.
The financial performance of the Group's
segments is measured based on Adjusted EBITDA, as reported
internally. A reconciliation of the Adjusted EBITDA of the Group
with the Adjusted EBITDA by segment is disclosed in Note 2.1 of the
consolidated financial statements.
Adjusted EBITDA %
Adjusted EBITDA % is calculated as the
adjusted EBITDA divided by revenues.
Gross debt and external gross debt
Gross debt is calculated as borrowings and lease
liabilities as disclosed in Note 4.2 of the consolidated financial
statements. External gross debt is calculated as gross debt less
lease liabilities payable to joint ventures of the Group. External
gross debt is a measure of the Group's indebtedness to third
parties which are not considered related parties of the
Group.
A reconciliation of gross debt with external
gross debt is set out below:
|
|
3 December
2023
|
27
November 2022
|
|
Note
|
£m
|
£m
|
Gross debt
|
4.2
|
1,959.9
|
1,905.1
|
Lease liabilities payable to joint
ventures
|
3.4
|
(16.5)
|
(17.5)
|
External gross debt
|
|
1,943.4
|
1,887.6
|
Net
debt
Net debt is calculated as cash and
cash equivalents, less gross debt.
Net debt is a measure of the Group's
net indebtedness that provides an indicator of the overall strength
of the Consolidated Balance Sheet. It is also a single measure that
can be used to assess the combined effect of the Group's cash
position and its indebtedness.
The most directly comparable IFRS
measure is the aggregate of borrowings and lease liabilities
(current and non-current) and cash and cash equivalents. A
reconciliation of these measures with net debt can be found in Note
4.2 to the consolidated financial statements.
Technology Solutions fees invoiced
Technology Solutions fees invoiced is used as a
key measure of performance of the Technology Solutions business as
an alternative to revenue and represent design and capacity fees
invoiced during the period for existing and future CFC and in-store
fulfilment commitments.
Underlying cash flow
Underlying cash flow is the movement in cash and
cash equivalents excluding the impact of adjusting items, costs of
financing, purchase of unlisted equity investments and foreign
exchange movements. A reconciliation of the movement in cash and
cash equivalents to underlying cash outflow is detailed within the
Financial Review: FY23.
52
week income statement
In order to provide comparability with the prior
year results for the 52 weeks ended 27 November 2022, the tables
below present the Group's statutory results and Adjusted EBITDA on
a 53-week basis to 3 December 2023, adjusted to remove the results
of week 53 to separately present the Consolidated Income Statement
on a 52-week basis to 26 November 2023. In determining the week 53
adjustment, revenue represents the actual trading performance in
that week, with operating costs allocated on a reasonable basis to
reflect an estimate of costs for that week, unless a split was not
deemed to sufficiently represent the actual costs incurred during
week 53.
Consolidated Income Statement
|
|
|
|
|
|
Notes
|
2023
as reported on a 53-week
basis
£m
|
Exclude
week 53
£m
|
APM
2023
52-week
basis
£m
|
Revenue
|
2.2
|
2,825.0
|
59.4
|
2,765.6
|
Insurance and legal settlement
proceeds
|
2.3
|
180.4
|
-
|
180.4
|
Operating costs
|
|
(3,337.7)
|
(66.1)
|
(3,271.6)
|
Operating loss before results of joint ventures and
associate
|
|
(332.3)
|
(6.7)
|
(325.6)
|
Share of results of joint ventures
and associate
|
|
(0.9)
|
-
|
(0.9)
|
Operating loss
|
|
(333.2)
|
(6.7)
|
(326.5)
|
Finance income
|
2.4
|
46.8
|
0.7
|
46.1
|
Finance costs
|
2.4
|
(97.0)
|
(1.9)
|
(95.1)
|
Other finance gains and
losses
|
2.4
|
(19.8)
|
(1.7)
|
(18.1)
|
Loss before tax
|
|
(403.2)
|
(9.6)
|
(393.6)
|
Income tax credit
|
|
16.2
|
-
|
16.2
|
Loss for the period
|
|
(387.0)
|
(9.6)
|
(377.4)
|
Adjusted earnings before interest, taxation, depreciation,
amortisation, impairment and adjusting items (Adjusted
EBITDA*)
|
Notes
|
2023
as reported on a 53-week
basis
£m
|
Exclude
week 53
£m
|
APM
2023 on a
52-week
basis
£m
|
Operating loss
|
|
(333.2)
|
(6.7)
|
(326.5)
|
Adjustments for:
|
|
|
|
|
Adjusting items*
|
2.3
|
(17.8)
|
-
|
(17.8)
|
Amortisation of intangible
assets
|
3.2
|
125.0
|
2.9
|
122.1
|
Impairment of intangible
assets
|
3.2
|
0.2
|
-
|
0.2
|
Depreciation of property, plant and
equipment
|
3.3
|
187.9
|
5.1
|
182.8
|
Impairment of property, plant and
equipment
|
3.3
|
21.7
|
-
|
21.7
|
Depreciation of right-of-use
assets
|
3.4
|
70.4
|
1.3
|
69.1
|
Impairment of right-of-use
assets
|
3.4
|
-
|
-
|
-
|
Adjusted EBITDA*
|
|
54.2
|
2.6
|
51.6
|
Adjusting items include impairment
charges in respect of other intangible assets of £0.3m (FY22:
£nil), property, plant and equipment of £19.5m (FY22: £nil) and
right-of-use assets of £27.7m (FY22: £nil).
Announcement information
Person responsible for arranging the release of
this announcement:
Neill Abrams
Group General Counsel and Company
Secretary
Ocado Group plc
Buildings One & Two, Trident Place, Mosquito
Way,
Hatfield, Hertfordshire AL10 9UL
Fax: +44 (0)1707 227 997
email: company.secretary@ocado.com
Ocado Group plc LEI:
213800LO8F61YB8MBC74