ocado group plc fy19 results · cause ocado’s actual financial condition, performance and results...
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This presentation contains oral and written statements that are or may be “forward-looking statements” with respect to certain of Ocado’s plans and its current goals and
expectations relating to its future financial condition, performance and results. These forward-looking statements are usually identified by words such as ‘anticipate’, ‘target’,
‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’ or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they
are based on current expectations and assumptions but relate to future events and circumstances which may be beyond Ocado’s control. There are important factors that could
cause Ocado’s actual financial condition, performance and results to differ materially from those expressed or implied by these forward-looking statements, including, among
other things, UK domestic and global political, social, economic and business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies
and actions of regulatory authorities, the impact of competition, the possible effects of inflation or deflation, variations in commodity prices and other costs, the ability of Ocado to
manage supply chain sources and its offering to customers, the effect of any acquisitions by Ocado, combinations within relevant industries and the impact of changes to tax and
other legislation in the jurisdictions in which Ocado and its affiliates operate. Further details of certain risks and uncertainties are set out in our Annual Report for 2019 which can
be found at www.ocadogroup.com. Ocado expressly disclaims any undertaking or obligation to update the forward-looking statements made in this presentation or any other
forward-looking statements we may make except as required by law. Persons receiving this presentation should not place undue reliance on forward-looking statements which
are current only as of the date on which such statements are made.
Forward-looking statementsDISCLAIMER
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“We are pleased to report results which show strong momentum in the
business. Although statutory results reflected a combination of factors,
including the impact of the Andover fire, the underlying performance of Ocado
Retail and the successful growth of Ocado Solutions were very encouraging.
Our progress over the last twelve months, which includes signing our eighth
and ninth Solutions clients, Coles in Australia and Aeon in Japan, and
successfully maintaining strong growth post-Andover, has demonstrated many
of Ocado Group’s most important characteristics: resilience, innovation, focus
and execution. It is these qualities that will enable us to continue to develop
the Ocado Smart Platform to meet the evolving needs of our partners at the
cutting edge of online grocery retail.”
Tim Steiner, CEO
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1. Revenue is online sales (net of returns) including charges for delivery but excluding relevant vouchers/offers and value added tax. The recharge of costs to our UK Solutions clients and International Solutions clients are also included in revenue with the exception of recharges to Ocado Retail which are eliminated on consolidation
2. EBITDA excludes exceptional items. Group EBITDA in 2019 includes the EBITDA impact of IFRS 16 of £25.4m
Financial Summary
£m
FY 2019
Pre-exceptionals
FY 2018 Var
(%)
Group Revenue 1,756.6 1,598.8 9.9
Group EBITDA 43.3 59.5 (27.2)
Depreciation, amortisation,
impairment
(136.1) (91.4)
Net Interest (27.6) (12.5)
Loss before tax (120.4) (44.4)
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Reviewing exceptionals impact
£m
Exceptionals
Impact
Loss before tax pre exceptionals FY 2019 (120.4)
Andover CFC (111.8)
Insurance reimbursement 23.8
Disposal of Fabled (1.1)
Joint Venture with M&S (3.4)
Litigation costs (1.3)
Other (0.3)
Loss before tax post exceptionals FY 2019 (214.5)
©2020 Ocado Group plc. All rights reserved.
● Write off of Andover CFC tangible assets, inventory and additional operating costs
● Insurance income recognised out of £74m received in the period
● proceedings against T0day and others for IP theft
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Segmental Summary
1. Group totals include eliminations2. EBITDA excludes exceptional items and excludes the impact of IFRS 16
©2020 Ocado Group plc. All rights reserved.
Revenue1 EBITDA2
£m
FY 2019 FY 2018Var
%
FY 2019
Post
IFRS16
FY 2019
Pre
IFRS16
FY 2018 Var
%
Pre
IFRS16
Retail 1,617.5 1,466.6 10.3 35.0 20.2 30.1 (33.0)
UK Solutions &
Logistics
583.2 541.1 7.8 84.8 74.2 67.5 10.0
International Solutions 0.5 0.5 - (62.1) (62.1) (28.4) -
Other 9.8 9.2 6.5 (14.4) (14.4) (9.7) -
Total 1,756.6 1,598.8 9.9 43.3 17.9 59.5 (69.9)
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Cash fees show progress building International Solutions
FY 2019 FY 2018Var
%
Revenue 0.5 0.5 -
EBITDA (62.1) (28.4) -
Fees invoiced 81.4 58.8 38.4
● Fees invoiced from international partners up significantly
● Immaterial revenue recognised under IFRS 15
● Cumulative unrecognised cash fees of around £140m of by end of 2019
● Significant growth in costs to support client requirements
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UK Solutions: progress in underlying efficiencies
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FY 2019 FY 2018Var
%
Revenue 583.2 541.1 7.8
EBITDA* 74.2 67.5 10.0
● Revenue growth lower due to part year of Morrisons “holiday”
● Improvement in underlying efficiencies:
○ DPV1 up to 196, approaching new target of 200
○ Mature UPH improved to 168, with Erith UPH now regularly above Hatfield
● Full year of fixed costs at Erith
● Significant progress in engineering costs; average cost per order down by a third across the
year, with the new generation robot to come
11* Pre-IFRS16 impact1. DPV is for Ocado Retail only
Ocado Retail: growth to bring improving efficiencies
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10.3% growth in active
customers drives order volumes
With growth in orders coming
through new generation facilitiesWhich will drive material CFC
efficiency increases (UPH) at scale
+10.7%
growth in
big basket
order
volumes
Erith >70k OPW
Robotic
picking to
bring
efficiency
gains
beyond this
target
2018 2019 2018 2019 2019
Mature CFCs
Erith target
at maturity
721k
795k
294k
325k
Mature CFCs
Erith CFC
Andover CFC
168
200+
Note: Chart detailing order volumes growth is shown on a full year basis. The Andover fire occurred 6th February 2019. As a result, some of the capacity growth achieved in 2019 occurred before this date
Wastage: technology drives continuous operational improvement
©2020 Ocado Group plc. All rights reserved.
Industry
average range
2018
Ocado Retail
2019
Ocado Retail
2.0-3.0%
0.8%
0.4%
Wastage1 is a huge operational
challenge for the grocery industry
Hurdles
ForecastingInventory supply
Customer demand
Inventory
managementImperfect FIFO
Storage
Incorrect method
or extended time
OSP enables market
leading performance...
unprecedented accuracy,
efficiency and resilience
Scale
Better predictive capabilities
Perfect FIFO system
Strong visibility of customer
behaviour
...and is still improving
impact of:
Improved AI and ML
driven forecasting
1. Food items not sold as a % of sales Food that goes to landfill is only 0.02% of sales13
20191,2
(% Retail
Revenue)
20181,2
(% Retail
Revenue)
Var
(%)
Gross margin 32.9 33.0 (0.1)
Trunking and delivery costs (12.2) (12.4) 0.2
CFC costs (8.9) (8.4) (0.5)
Other operating costs (0.6) (0.7) (0.0)
Marketing costs (1.3) (0.9) (0.4)
Fees (5.1) (5.0) (0.1)
Operating contribution 4.8 5.6 (0.8)
Admin costs (3.5) (3.5) 0.0
EBITDA 1.3 2.1 (0.8)
1. Excluding exceptionals and pre-IFRS16.2. The costs of Ocado Retail’s operation in 2018, and in 2019 prior to the formation of the joint venture with M&S, have been allocated between the Retail Segment and UK & Logistics segment in order to be broadly comparable to the current contractual arrangements now in place
Ocado Retail performance
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Continued underlying progress,
fixed costs of Erith
Increased marketing costs following
Andover fire and with offline trial
Fees paid to Ocado Group for the
OSP and logistics solutions to
operate online offer
P&L20191,2
(% Retail Revenue) Consideration v. client P&L
Gross margin 32.9 Includes Waitrose sourcing fee and without scale advantages
Trunking and delivery costs (12.2)
CFC costs (8.9) Lower efficiency due to legacy assets
Other operating costs (0.6)
Marketing costs (1.3) Includes impact of Andover fire and without benefit of existing brand
Fees (5.1) Includes 3PL fees but lower OSP fee reflecting lower efficiency assets
Operating contribution 4.8
Admin costs (3.5) Higher admin fees due to set up and smaller scale
EBITDA 1.3
1. Excluding exceptionals2. The costs of Ocado Retail’s operation in 2019 prior to the formation of the joint venture with M&S, have been allocated between the Retail Segment and UK & Logistics segment in order to be broadly comparable to the current contractual arrangements now in place.
Ocado Retail: considerations versus other partners
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Client business with higher EBITDA margin at scale and low capital costs
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16
Group net cash flow development
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411
751
43
50
74
(80)
(36)
558
60
(260)
(65)
FY18 Cash position
EBITDA
Working Capital
Insurance proceeds
GIP settlement
Finance costs + other
M&S deal proceeds
Share sales
Capex1
Other
FY19 Cash position
Proceeds from
M&S deal and
convertible
support strong
funding position
for future
growth
● proceeds received to date
● GIP cash settlement offset in
part by share sales
● Majority finance costs including
interest element of IFRS 16
● £600m convertible bond
issuance post year end1351
Capex split1
UK
CFCs
Int.
CFCs
Platform
Dev
Other
47
71
104
38
Strong operating
cash flow offset
by settlement
of GIP
(4)
Finance obligations
£m
1. Variance is the difference between accrued capital expenditure and cash capital expenditure
Outlook for 2020
● Revenue growth:
○ Retail 10‐15%
○ UK Solutions & Logistics below Retail reflecting full year impact of Morrisons’
“holiday” from Erith
○ International Solutions expected to be <£10m
■ International fees start to be recognised once operations commence
■ part year operations for Casino and Sobeys
● International Solutions fees invoiced > 40% growth
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Outlook for 2020 (continued)
● EBITDA:
○ Retail above revenue growth, reflecting improved operating margins as Erith scales
○ UK Solutions and Logistics to decline due to Morrisons’ “holiday” from Erith, with insurance
benefits recorded in exceptionals
○ International solutions to decline due to continued investment in build of the business and
increased support costs with launch of initial CFCs
● Continued insurance receipts
○ Partly funds UK CFCs
○ Both rebuild and business interruption recognised as exceptional income
● Capex forecast £600m
○ International CFCs - £225m
○ UK CFCs - £225m; Andover (c.40% of total) to be funded from insurance proceeds
○ Development and other - £150m
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Tim SteinerCEO
©2020 Ocado Group plc. All rights reserved.
Building for tomorrow, at pace
Propose this picture as something
simulation related - visual way to remind
people of the importance of the software
element of the platform
Groupe Casino: Fleury-Mérogis, France
Sobeys: Vaughan, Ontario, Canada
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Four key elements to the Ocado story in 2020
1. Developing the Ocado Smart Platform
2. Managing greater velocity in the business
3. Enhancing the customer experience at Ocado Retail
4. Creating the future, today: transformative innovation in the pipeline
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1 OSP: reliably providing the best customer outcomes...
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A market leading customer offer
Range
58,000 SKUs
8 products1 in
average basket
only at Ocado
Service
95% of orders
delivered on time
99% order accuracy
Ease of Use
Order through app,
website, and on
chosen device
Always improving
Price
Flexibility to price our
range so that we
offer the most value
for customers
221. Meaning any third party branded product that cannot be found elsewhere, including entire brands or different versions of a given product
1 ...while producing the best economics
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Centralised fulfilment has
fundamental characteristics
That drive economic
benefits
Typical micro
fulfilment centre
Leveraged in
our Zoom model
1. Large scale, centralised
operations
Margin benefit (long tail)
Improved
efficiencies
Inbound
Picking
Waste
2. Reduced supply chain Minimal supply chain cost
3. Use of own, purpose-built
technology and IP
Flexibility to pursue iterative
and step change innovation
Operating cost result Best in channel Materially higher Slightly higher
23
?
Operating click & collect is
not ‘free’ for a retailer3
● A store can service a limited amount of online sales
● Needs staff to operate; more required as scales
● We estimate click and collect could cost 3-4%
of sales to operate
Trunking is a small part
of delivery expense2
● The theoretical ‘gain’ to be made from closer start
location to customer
● Trunking costs 1.2% of sales for Ocado Retail
Scaled, centralised
planning drives benefits1
1 The last mile
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The benefit of proximity alone is minimal in the context of the operational benefits of the CFC model
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● Strategic spoke network enables improved last mile
efficiency, including disbenefit of longer stem time
● We estimate that central planning brings an
operating benefit of around 0.5% of sales
Key Module Primary mission size(sq ft)
1Standard
CFCFull basket shop; large direct
and spoked catchment200k+
2MiniCFC
Full grocery shop; shorter lead times or to connect lower density areas to network
50-160k
3 MFC Immediacy 5-25k
4Store pick software
Best fulfilment in remote areas n/a
1 The OSP ecosystem
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OSP has the flexibility to develop bespoke networks to serve the unique needs of each market
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3
4
An illustrative example
immediacy
same day
next day
Work underway to leverage the
ecosystem to reduce cost even further
2
25
1 Ocado Zoom: next steps in immediacy
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Working on plans for second site
FY19
The consumer trial
Future
Roll out with OSP
Validated real market opportunity in immediacy
Increased confidence we can deliver the best
offer and economics
Proving the model
Ongoing
Install our solution
Focus on operational efficiencies e.g. waste
Explore options to further optimise technology
Micro fulfilment solution to serve
immediacy missions in markets globally
Continue to evolve
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1 Exploring the benefits of being a ‘member of the club’
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3. Global view
of consumer trends to keep
ahead of peers in local markets
1. Increased innovation
as Ocado Group scales,
with increased resources
and footprint
4. Future optionality
2. Share learnings
Quarterly meetings to discuss
build, launch and scaling in
home markets
A collaborative and future-focused network for forward-looking retailers
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2 Managing greater velocity in the business
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First two international CFCs to open in 1H20, with over 30 operational in the next few years
A global team of top technology talent
Business transformation Financial flexibility
+£558mM&S deal
+£600mconvertible bond
US office opened
Upgrading support teams and systems
Internal restructure to mission-focused teams
Launch of global systems; HR, finance, product management
Strong funding position
for commitments and future opportunities
London development centre opened
+350technology colleagues
New corporate website
Continued growth of technology and
support services
FY19
FY20+
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2 First CFCs opening - creating a template for execution
Enabling our partners to grow on their own terms, in and across markets
Pre-launchPreparation
responsibilities
Launch and GrowthGo-live and ramp according to
each partner’s strategic plan
Partner
SoftwareDevelopment and testing
HardwareInstallation and testing
PeopleRecruit and train
(PMs, engineers)
PeopleRecruit and train
(drivers, CFC staff)
Complete site
Roll out and drive propositionphasing, marketing, pricing, range
Project management Relationship management
assist on early execution share feedback, refine, grow
----------------------------
Support: online retail expertise, technical service24/7 on the ground and remote
Collaboration and innovationLeveraging shared learnings for all current and future sites
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1.Develop
commercial and
marketing abilities
2.strengthening GM
1. Food innovation with
sourcing at scale
2. Working on
integrated CRM
1.Leading fulfilment operations with
continuous technology upgrades
2.New, profitable, immediacy and same
day models
3 Enhancing the customer experience at Ocado Retail
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Preparing for faster growth after near term capacity constraints ease
And together, we will improve
the customer offer even further
Creating new
opportunities
More data and
insights to act on
Unparalleled offer
More missions
served
To grow faster
Current
geographies
and missions
New geographies
New missions
We are well
placed to lead
Fastest growing
grocer in UK
Award-winning
proposition
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4 Creating the future, today
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Parallel streams of innovation creating future value for the medium to long term
Pursuing constant
innovation
In the CoreFurther increasing the
competitive advantage that
OSP drives in grocery
VenturesA growing portfolio, leveraging
our technological know-how
and participating in innovation
in other adjacencies
Vertical farming
Automated
meal prep
3D printing
Robotic picking
● picking is c.50% of
CFC labour cost
● Aspire to equal
performance of
human for portion of
the range by FY20
31
Conclusions
©2020 Ocado Group plc. All rights reserved.
● OSP is a flexible model, with leading economics, that will help our partners
to win in online grocery across all missions and markets
● The model is always evolving and improving
● We are ready to work at even higher velocity
● Ocado Retail is poised for even faster growth in the UK
● We are innovating to drive future value, in grocery and beyond
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Cash Position
2019 (£m)
Cash and cash equivalents FY18 411
Net cash flow (218)
Proceeds from creation of JV with M&S 558
Cash and cash equivalents 751
Existing undrawn RCF 100
Total headroom 851
>£1.4bn in total headroom inclusive of £600m convertible bond issued after year end
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35
Capital expenditure1
FY 2019 (£m) FY 2018 (£m)
Mature CFCs 5 6
New CFCs 42 80
International CFCs 71 11
Delivery 17 22
Technology development 71 55
Fulfilment development 33 21
Other 21 18
Total 260 213
1. Capex excludes assets leased from MHE JV Co under finance lease arrangements
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