TIDMOCDO
RNS Number : 5832R
Ocado Group PLC
30 June 2015
Ocado Group Plc
Half year results for the 24 weeks ended 17 May 2015
30 June 2015
Financial and statutory highlights
24 weeks ended 24 weeks ended Change vs
17 May 2015 18 May 2014 2014
GBPmillion GBPmillion %
--------------------------- ---------------- ---------------- -----------
Gross sales(1) (Retail) 511.9 442.4 15.7%
Revenue(2) 507.7 429.7 18.2%
EBITDA(3) 38.2 34.3 11.4%
Statutory profit before
tax 7.2 7.5
Cash and cash equivalents 70.4 110.3
Statutory net debt (105.0) (44.6)
External net cash 24.9 64.1
--------------------------- ---------------- ---------------- -----------
Key operational highlights
-- Strong new customer growth of over 30% year on year,
underpinned by an increasing proportion from a broader set of
customer demographics
-- Key metrics supporting our UK retail business have continued
to improve against the ongoing structural headwinds of price
deflation and cost inflation
-- Maintained stability in our average basket size by item
despite some decline in selling prices driven by greater price
competition
Tim Steiner, Chief Executive Officer of Ocado, said:
"The channel shift towards online grocery shopping continued
during the period, with the broader grocery market remaining
characterised by intense price competition and deflationary
pressures.
"Against this backdrop, our relentless focus on customer
satisfaction continues to drive customer numbers and like-for-like
sales ahead of the online grocery market. The resilience of our
business model and increasing operational leverage also mean that
we have grown operating profit despite these industry
headwinds.
"Our continuous commitment to constant innovation in technology
not only allows us to give industry-leading service to our
customers at home but to offer our end-to-end platform solution to
retailers outside the UK. We are excited by the possibility and
reiterate our target of signing a first agreement during 2015."
Key progress against our strategic objectives
Constantly improve the proposition to customers
-- Continued market leading service levels with on time
deliveries maintained at a high level at 95.6% (1H 2014: 95.7%) and
order accuracy improved to 99.3% (1H 2014: 99.2%)
-- Range at Ocado.com significantly broadened to over 45,000 SKUs (1H 2014: 35,000 SKUs)
-- Over 50% of orders were checked out using a mobile device
using our latest apps and browsers and we launched our first Apple
Watch app
-- Won Best Online Supermarket in The Grocer Gold Awards 2015
Strengthen consumer brands
-- Ocado own-label sales up nearly 25% year on year
-- New customer acquisitions up over 30% year on year, driving
the increase of active customers(4) , up 18.9% to 471,000 (1H 2014:
396,000)
-- Average number of items in basket unchanged with average
basket value declining to GBP111.68 (1H 2014: GBP114.43), impacted
by price deflation and downward impact of orders for Fetch and
Sizzle
Develop ever more capital and operationally efficient
infrastructure solutions
-- Mature CFC(5) operational productivity of 153 UPH (1H 2014:
142 UPH), with Dordon CFC reaching over 170 UPH by end of
period
-- Delivery efficiency of 162 DPV broadly in line with last
year, with a number of enhancements to our routing system resulting
in improvements towards the end of the period
-- Commenced first installations of our proprietary
infrastructure solution into our Andover CFC (CFC3) and it remains
on track
-- Order volumes grown to an average of over 191,000 orders per
week (1H 2014: 161,000 OPW), with the highest number of orders
delivered in a week exceeding 207,000 during the period
Enhance end-to-end technology systems
-- IT systems replatforming progressing well and remains on track with our expectations
-- Continued expansion of our technology team to 620 developers
and IT professionals with plans to increase this to over 700 by the
end of 2015
Enable Morrisons' and future partners' online businesses
-- Morrisons.com reached around GBP200 million in annualised
run-rate sales after 12 months of trading (announced in Annual
Report, March 2015)
-- Discussions continue with multiple potential international
partners to adopt Ocado Smart Platform with target to sign first
agreement in 2015
Results presentation
A results presentation will be held for investors and analysts
at 9.30am today at the offices of Goldman Sachs, Peterborough
Court, 133 Fleet Street, London EC4A 2BE. Presentation material and
webcast will be available online at
www.ocadogroup.com/investors/reports-and-presentations/2015.aspx
Contacts
Tim Steiner, Chief Executive Office on 020 7353 4200 today or
01707 228 000
Duncan Tatton-Brown, Chief Financial Officer on 020 7353 4200
today or 01707 228 000
David Hardiman-Evans, Head of IR & Corporate Finance on 020
7353 4200 today or 01707 228 000
Andrew Grant, David Shriver, Michelle Clarke at Tulchan
Communications on 020 7353 4200
Notes
1. Gross sales include revenue plus VAT and marketing vouchers
2. 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 Morrisons and fees charged to
Morrisons are also included in revenue
3. EBITDA is a non-GAAP measure which we define as earnings
before net finance cost, taxation, depreciation, amortisation,
impairment and exceptional items
4. A customer is classified as active if they have shopped within the previous 12 weeks
5. Mature CFC operations. A CFC is considered mature if it has
been open 12 months by the start of the reporting period
Financial Calendar
Our financial reporting calendar for the remainder of the year
will be a Q3 Trading Statement on 15 September 2015, a Q4 Trading
Statement on 10 December 2015 and a Full Year Results Statement on
2 February 2016. We will not release a Christmas Trading
Statement.
Cautionary statement
Certain statements made in this announcement are forward-looking
statements. Such statements are based on current expectations and
assumptions and are subject to a number of risks and uncertainties
that could cause actual events or results to differ materially from
any expected future events or results expressed or implied in these
forward-looking statements. Persons receiving this announcement
should not place undue reliance on forward-looking statements.
Unless otherwise required by applicable law, regulation or
accounting standard, Ocado does not undertake to update or revise
any forward-looking statements, whether as a result of new
information, future developments or otherwise.
Chief Executive Officer's review
The UK grocery market has continued to experience significant
challenges from price competitiveness and deflationary pressures.
Against this backdrop, we continued to deliver on our strategic
objectives that apply to both our own retail business and our
existing and potential platform operations - to drive growth,
maximise efficiency and utilise our knowledge. Specifically, we
increased sales faster than the broader online grocery market,
progressed work on our next CFCs, continued to deliver good service
to Morrisons.com, and advanced discussions with multiple potential
international partners of our platform.
Business model validation
Our performance during the period provides further evidence of
the validity and robustness of our business model.
Despite the industry-wide headwinds of continuing price
competition and deflationary pressures, further improvements in
operating efficiencies have offset declines in margin. The
operating contribution pre overhead from our retail operations has
continued to increase year on year.
Overhead costs have increased as we continue to invest in our
platform to develop our international partner business, in line
with our strategic objectives.
Progress against our strategic objectives
We have a number of key complementary actions, which form a
framework to achieve our strategic objectives, intended to deliver
long-term shareholder value. These actions are to:
-- Constantly improve the proposition to customers;
-- Strengthen our consumer brands;
-- Develop ever more capital and operationally efficient infrastructure solutions;
-- Enhance our end-to-end technology systems; and
-- Enable Morrisons' and future partners' online businesses.
Constantly improve our proposition to customers
We continued to improve the core elements of our proposition to
customers - our service and user experience, the assortment of
products we sell and the keenness of our pricing.
The quality of our service and extensive range of products
continued to be recognised by our customers, with the award of Best
Online Supermarket in The Grocer Gold Awards 2015 and for the sixth
consecutive year we were voted the Best Online Grocer by Which?
Magazine in its members' Annual Satisfaction Survey.
A positive shopping experience is critical to encouraging
consumers to try our service and to return to us for future shops.
Our focus has remained on improving the customer experience by
enhancing the speed, convenience and ease of using our service.
It is naturally important for us to be where our customers
interact and mobile continues to grow in importance. We enabled our
customers to shop more easily using their mobile devices with the
introduction of a mobile website at the end of last year which has
proved to be popular particularly for first time users of the
webshop. During the period we launched a redesigned Android app and
our first Apple Watch app enabled the owners of this new device to
shop using the watch on the first day of its launch in the UK. Over
50% of all orders are now checked out using a mobile device, using
our latest apps and browsers.
Our PayPal login introduced at the end of last year has become
increasingly popular, particularly for new customers.
We believe our order accuracy and on time delivery performance
continue to be market leading, both critical elements in providing
a high quality and reliable service for our customers. Orders
delivered on time or early remained at a high level at 95.6% (1H
2014: 95.7%) and order accuracy improved slightly to 99.3% (1H
2014: 99.2%).
We have trialled click and collect to test initial consumer
reaction and expect to continue this on a limited basis.
Our range at Ocado.com is now over 45,000 SKUs (1H 2014: 35,000
SKUs) with further extension including the launch of our vegetarian
"shop in shop" with over 650 vegetarian and vegan products in one
place. The shop has proved popular with customers due to the
extensive range which includes big brands alongside niche products
from small suppliers, and was recognised as the Best Online
Retailer for Vegetarians in the Veggie Awards 2015.
We also extended our range in non-food, which helped support
growth in non-food sales by almost 80% despite current limited
investment in technology in that area. Sales of sports nutrition
and slimming products were up even more, making it the largest
category for non-food at ocado.com. Fetch, our specialist pet
store, and Sizzle, our kitchen and dining shop, continue to grow.
We are also progressing preparations for the launch of our health
and beauty business alongside Marie Claire.
Our Low Price Promise ("LPP") basket-matching scheme ensures
that we remain price competitive against the market leader, giving
confidence to customers over our pricing position. Despite the
increased numbers of price reductions and broader food price
deflation in the market, when checking for LPP, over 70% of our
customers' baskets were already cheaper at Ocado. The cost of LPP
in the form of vouchers used during the period remained low,
reflecting our competitiveness in prices and consistent promotional
activity. We remain comfortable with this pricing position even
with the current market conditions.
Our value credentials were further supported by the introduction
of checkout walk gifting, where customers can accept supplier
funded gifts as they complete their order, and this offer has been
well received by customers.
Strengthen consumer brands
We have continued to broaden awareness of our brands and
reinforce their strength and values through our marketing and other
promotional activity. In light of the timing of new capacity, we
scaled down our above the line marketing programme and have focused
our limited marketing expenditure on attracting new customers to
Ocado with awareness campaigns with external partners, as well as
radio and national newspaper offers and sponsorship of the food
section of the Ideal Home Show.
Following the great success of last year's initiative, we
launched the second series of "Britain's Next Top Supplier"
competition, an initiative to support and nurture small British
suppliers, who form a significant part of our supplier base.
The Ocado own-label reinforces brand strength and grew in
popularity with the average basket now containing over five Ocado
own-label products, and with sales up nearly 25%, with growth
constrained by the cap under our contractual arrangements with
Waitrose.
Our active customer numbers grew to 471,000 (1H 2014: 396,000),
up 18.9% reflecting the strengthening position of our brand. More
significantly new customer acquisitions grew by over 30% in the
period.
While our customers' average baskets reduced to GBP111.68 (1H
2014: GBP114.43), including the impact of destination site orders
from Fetch and Sizzle, the number of items in the average grocery
basket remained stable. The average basket was GBP112.59 (1H 2014:
GBP114.29) when destination site orders are excluded.
Fetch has continued to grow, with strong customer acquisitions
from increased brand awareness, and sales driven by specialist pet
food lines. Sizzle has grown more modestly with limited marketing
support, whilst we wait to complete further usability advancements
which require technology resources.
Develop ever more capital and operationally efficient
infrastructure solutions
We have previously announced our plans for CFC3 and CFC4 in
Andover and Erith respectively. We commenced the first installation
of our new proprietary modular, scalable physical fulfilment
solution into our Andover CFC, and remain on track to commence
operations around the end of the year. The developer has now
commenced works at the Erith site and we expect to start our works
at this site in 2016.
Both our Hatfield CFC and our Dordon CFC continued to operate to
a high level of accuracy and with improved efficiency. Using the
units per hour efficiency measure ("UPH"), the average productivity
for the period in our mature CFC operations was 153 (1H 2014:142).
By the end of the period, operational efficiency in the Dordon CFC
reached over 170 UPH. During the period we installed into the
Dordon CFC its first three proprietary bagging machines, which are
now in the commissioning phase but which will benefit productivity
during the second half.
Ocado order volumes have grown to an average of over 191,000
orders per week ("OPW") (1H 2014: 161,000 OPW), with the highest
number of orders delivered in a week exceeding 207,000 during the
period.
We made a number of enhancements to our routing system which in
the second part of the period led to an improvement to the average
deliveries achieved on a van route. It takes a little longer to
align the total number of vans to the improved routing systems,
hence deliveries per van per week across all shifts ("DPV/ week")
fell marginally to 162 (1H 2014: 163) while drops per standard
driver shift improved.
We expanded our delivery capacity with the opening of additional
spokes during the period in Dagenham and Park Royal, and first
Ocado deliveries were made from our Knowsley site which opened just
prior to the end of 2014. The Park Royal site replaces our smaller
White City location which has now been closed. Last year we
received a one-off compensation payment of GBP1.2 million from the
landlord at the White City spoke to cover costs of closure and the
fit out costs of the new site, with a further GBP3.3 million
received shortly after the period. The delivery capacity for some
of these spokes is shared with Morrisons, reducing the impact of
the additional fixed costs of these operations which are only
partially utilised during their build-up of capacity.
Enhance our end-to-end technology solutions
The foundation of our business is proprietary IP, knowledge and
technology that supports our "best in class" proposition to
customers and drives our operating efficiencies.
We continue to develop our platform with the rewrite of our IT
systems to enable faster replication and roll out of our technology
internationally, and remain on track with our plans. We continue to
expand our technology team and by the end of the period employed
620 developers and IT professionals with plans to increase this to
over 700 by the end of 2015. Our technology professionals currently
operate from offices in the UK and Poland, and we have plans to
open a second technology office in Poland during 2015.
Enable Morrisons' and future partners' online businesses
Our IP and technology leadership present opportunities to
generate significant value through commercialisation.
Our first commercialisation agreement, with Wm Morrison
Supermarkets plc ("Morrisons"), resulted in the launch of
Morrisons.com in January 2014. Morrisons.com uses our existing CFC
technology and solutions and has continued to ramp up well. In
March 2015, Morrisons reported that the run rate of sales after 12
months of trading for Morrisons.com had reached about GBP200
million. To our knowledge this is the fastest ramp up of an online
grocery business globally, and provides evidence of the
effectiveness of combining our platform with an existing grocery
retailers' brand, customer awareness and merchandising skills.
We continue to receive interest from international parties to
discuss how our "Ocado Smart Platform", which combines our
end-to-end technology platform with our physical modular
infrastructure solution, might assist them in launching or
improving online businesses in their own markets.
During the period, discussions with multiple parties advanced
further with a view to utilising Ocado Smart Platform, and we
reiterate our target of signing a first agreement during 2015.
Market backdrop
We believe the outlook for the grocery market remains subdued
despite the more positive outlook for broader economic growth in
the UK.
Recent Kantar data suggests that prices have been declining
since September 2014, although the fall may not have been as steep
as in previous months. The price declines are primarily driven by
increased price competition to counter the growing threat posed by
discount operators, resulting in margin decline as well as food
industry deflation resulting from lower input costs in the food
chain.
Notwithstanding this broader market activity, online grocery
shopping has continued to expand faster than the total market, with
all the major supermarkets investing to satisfy growing online
demand.
Internationally there continues to be increased interest in
online grocery services from both consumers and retailers alike, as
major incumbent retailers seek to address the channel shift
online.
People and CR initiatives
By the end of the period, we employed over 8,400 people, an
addition of over 1,500 new employees since 1H 2014 to further
support the growth of our Ocado retail businesses, our Morrisons
platform business and the development of Ocado Smart Platform.
In response to customer feedback, we launched "Donate Food with
Ocado", a scheme whereby customers donate a sum of money which is
then matched by Ocado in groceries and donated to food bank
partners. Nearly GBP100,000 is in the scheme to date, with Ocado
committed to at least matching every donation made.
Reporting, current trading and outlook
We finished the period with growth in retail revenue of 15.1%.
We expect to continue growing slightly ahead of the online grocery
market.
Chief Financial Officer's review
During the period we continued to grow our sales against a
backdrop of a grocery retail market that remained challenging and
competitive. At the group level, sales were driven by continued
growth in our retail business and benefits from our agreement with
Morrisons.
Retail sales were driven by further improvement in our
proposition to customers and an increase in the number of loyal
customers. Operating profitability strengthened in comparison to
the prior period benefitting from more efficient operational
fulfilment. This was offset by lower margins reflecting the
competitiveness and deflationary pressures in the market. In
addition, we continued to invest in a number of strategic
initiatives to support future growth of the business and the period
was impacted by higher depreciation and amortisation arising from
Dordon CFC, vehicles and additional spokes to support current and
future business growth.
1H 2015 1H 2014 Variance
GBPm GBPm
===================================== ========= ========= ==========
Revenue(1) 507.7 429.7 18.2%
Gross profit 170.8 140.5 21.6%
------------------------------------- --------- --------- ----------
EBITDA 38.2 34.3 11.4%
------------------------------------- --------- --------- ----------
Operating profit before share
of result from joint venture and
exceptional items 10.6 9.8 8.2%
Share of results from joint venture 1.2 1.1 9.1%
------------------------------------- --------- --------- ----------
Profit before tax 7.2 7.5 (4.0)%
===================================== ========= ========= ==========
1H 2015 1H 2014 Variance
GBPm GBPm
=================================== ========= ========= ==========
EBITDA 38.2 34.3 11.4%
----------------------------------- --------- --------- ----------
Less Morrisons MHE JVCo impact(2) (6.1) (5.0) 22.0%
Add back non-cash share based
payments 3.5 1.6 118.8%
Underlying EBITDA 35.6 30.9 15.2%
----------------------------------- --------- --------- ----------
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
Morrisons and fees charged to Morrisons are also included in
revenue
2. Morrison MHE JVCo impact includes the income arising from the
leasing arrangements with Morrisons for MHE assets and share of
results from joint venture
Revenue
1H 2015 1H 2014 Variance
GBPm GBPm
===================== ========= ========= ==========
Retail 475.3 412.8 15.1%
Morrisons recharges 24.7 9.8 152.0%
Morrisons fees 7.7 7.1 8.5%
Total revenue 507.7 429.7 18.2%
===================== ========= ========= ==========
Group revenue improved by 18.2% to GBP507.7 million. Revenues
from retail activities were GBP475.3 million, an increase of 15.1%.
The Morrisons agreement contributed GBP32.4 million to revenue, up
from GBP16.9 million in 1H 2014. This comprised annual fees for
services, technology support, research and development, management
fees and a recharge of relevant operational variable and fixed
costs.
Retail revenue growth was driven by growing demand with average
orders per week of 191,000 up from 161,000 in 1H 2014, partially
offset by a decline in the average order size to GBP111.68 (1H 2014
GBP114.43).
We continued to acquire new customers with tailored marketing
and voucher activity and maintained a lower emphasis on
reactivating lapsed customers. New customer acquisitions were up
over 30% from 1H 2014, with voucher spend in the period increasing
to 1.2% of revenue (1H 2014 1.0%). We sustained the significant
growth of our non-food offering in the period with revenue
increasing by nearly 80% year on year.
Gross profit
1H 2015 1H 2014 Variance
GBPm GBPm
===================== ========= ========= ==========
Retail 138.4 123.6 12.0%
Morrisons recharges 24.7 9.8 152.0%
Morrisons fees 7.7 7.1 8.5%
Total gross profit 170.8 140.5 21.6%
===================== ========= ========= ==========
Gross profit rose to GBP170.8 million, up 21.6% year on year.
Gross margin was 33.6% of revenue (1H 2014: 32.7%), ahead of 1H
2014 principally due to the contribution from Morrisons gross
profit. The grocery trading environment remained challenging and as
a result of increased price competition, retail gross margin
reduced by (0.8)% to 29.1% (1H 2014: 29.9%) of retail revenue
partially offset by lower average product wastage. Average product
wastage reduced to 0.7% of retail revenue (1H 2014: 0.8%) mainly
due to improvements at Dordon CFC as this warehouse increased its
order volumes. Gross profit was GBP32.4 million from our
arrangement with Morrisons, an increase from GBP16.9 million in 1H
2014 driven by the growth in scale of Morrisons.com.
Other income increased by 22.9% to GBP19.3 million (1H 2014:
GBP15.7 million) with media income from suppliers of GBP12.4
million standing at 2.6% of retail revenue (1H 2014: 2.5%). Media
income from website related activities continued to grow strongly
because of increased demand from our suppliers, due to the benefits
of scale and a wider product range. Other income also included
GBP5.1 million (1H 2014: GBP3.9 million) of income arising from the
leasing arrangements with Morrisons for MHE assets and GBP1.1
million (1H 2014: GBP1.1 million) of rental income relating to the
lease of Dordon CFC. This income for the MHE assets is generated
from charging MHE lease costs to Morrisons and is fully offset by
the additional depreciation and lease interest costs that we incur
for the share of the MHE assets jointly owned with Morrisons.
Operating profit
Operating profit before the share of result from joint venture
and exceptional items ("adjusted operating profit") for the period
was GBP10.6 million, compared with GBP9.8 million in 1H 2014.
Distribution costs and administrative expenses include costs for
both the Ocado and Morrisons fulfilment and delivery operations, as
well as head office costs. The costs relating to the Morrisons
operations are recharged and included in revenue. Total
distribution costs and administrative expenses, including costs
recharged to Morrisons, grew by 22.6% year on year. Excluding
Morrisons, costs grew by 13.6%, lower than the growth in the retail
average orders per week of 18.6%.
1H 2015 1H 2014 Variance
GBPm GBPm
============================================= ========= ========= ==========
Distribution costs(1) 97.5 87.1 11.9%
Administrative expenses(1) 32.0 26.6 20.3%
Costs recharged to Morrisons(2) 23.6 9.3 153.8%
Depreciation and amortisation(3) 26.4 23.4 12.8%
Total distribution costs and administrative
expense 179.5 146.4 22.6%
============================================= ========= ========= ==========
1. Excluding chargeable Morrisons costs, depreciation, and
amortisation and impairment charges
2. Morrisons costs include both distribution and administrative
costs
3. Included within depreciation and amortisation for 1H 2014 is
a GBP0.2 million impairment charge
At GBP97.5 million, distribution costs increased by 11.9%
compared to 1H 2014, lower than the growth in the retail average
orders per week. Mature CFC UPH efficiencies continued to improve
year on year by 7.7% to 153. This improvement in mature CFC UPH was
driven mainly by the Dordon CFC productivity which exceeded 170 UPH
by the end of the period. UPH in the Hatfield CFC also improved at
the end of the period and reached 150 UPH.
We made a number of enhancements to our routing system which in
the second part of the period led to an improvement to the average
deliveries achieved on a van route. It takes a little longer to
align the total number of vans to the improved routing systems,
hence deliveries per van per week across all shifts ("DPV/ week")
fell marginally to 162 (1H 2014: 163) while drops per standard
driver shift improved. We also benefited from lower fuel costs.
We increased our distribution capacity in our existing
geographic coverage by the opening of two new spokes in the period
in Dagenham and Park Royal, the latter replacing the smaller White
City spoke which was closed during the period. We also benefited
from the opening of three new spokes in the second half of last
year (Sheffield, Enfield and Knowsley).
Total administrative expenses excluding depreciation,
amortisation and costs recharged to Morrisons increased to GBP32.0
million, a 20.3% increase from 2014 and 6.3% as a percentage of
revenue (1H 2014: 6.2%). This year on year increase is mainly a
result of additional technology professionals to support our
strategic initiatives, higher share based management incentive
costs and additional costs to operate the Morrisons services for
which the Group earns fees. Marketing costs excluding voucher spend
remained flat at GBP4.0 million (1H 2014: GBP4.0 million), falling
as a percentage of retail revenue to 0.8% (1H 2014: 1.0%).
Marketing spend excluding vouchers continued to be spent on
targeted activities and this lower spend as a percentage of sales
was offset by more vouchering to continue the strong momentum of
growth in our new customers, up over 30%.
1H 2015 1H 2014 Variance
GBPm GBPm
======================================== ========= ========= ==========
Central costs - other(1) 24.5 21.0 16.7%
Central costs - share based management
incentives 3.5 1.6 118.8%
Marketing costs (excluding vouchers) 4.0 4.0 -
Total administrative expenses 32.0 26.6 20.3%
======================================== ========= ========= ==========
1. Excluding chargeable Morrisons costs, depreciation and
amortisation
Total depreciation and amortisation costs were GBP26.4 million
(1H 2014: GBP23.4 million), an increase of 12.8% year on year. This
increase is due to higher depreciation and amortisation arising
from the full period impact of depreciations on the phase 2
extension works at Dordon CFC and increased investment in new
spokes and vehicles to support our order growth.
Share of result from joint venture
MHE JVCo Limited ("MHE JVCo") was incorporated in 2013 on the
completion of the Morrisons agreement, with Ocado owning a 50%
equity interest in this entity. MHE JVCo holds Dordon CFC assets,
which Ocado uses to service its and Morrisons' online business. The
Group share of MHE JVCo profit after tax in the period amounted to
GBP1.2 million (1H 2014: GBP1.1 million).
Net finance costs
Net finance costs were GBP4.6 million, versus GBP3.4 million in
1H 2014. This increase was attributable to GBP0.8 million of
additional interest under finance lease arrangements with MHE JVCo
and GBP0.3 million of commitment fees in respect of the previous
GBP100 million Revolving Credit Facility ("RCF").
Profit before tax
Profit before tax for the period was GBP7.2 million (1H 2014:
GBP7.5 million).
Taxation
Due to the availability of capital allowances and Group loss
relief, the Group did not pay corporation tax during the year. No
deferred tax credit was recognised in the period. Ocado had
approximately GBP285.3 million of unutilised carried forward tax
losses at the end of the period.
Earnings per share
Basic earnings per share was 1.23p and diluted earnings per
share was 1.17p.
Capital expenditure and cash flow
Capital expenditure for the period:
1H 2015 1H 2014
GBPm GBPm
============================================ ========= =========
Mature CFCs 1.6 5.6
New CFCs 19.0 0.5
Delivery 12.5 6.7
Technology 9.2 6.7
Fulfilment Development 7.1 5.9
Other 1.1 1.9
============================================ ========= =========
Total capital expenditure(1, 2) (excluding
share of MHE JVCo) 50.5 27.3
============================================ ========= =========
Total capital expenditure(3) (including
share of MHE JVCo) 52.9 38.8
============================================ ========= =========
1. Capital expenditure includes tangible and intangible
assets
2. Capital expenditure excludes assets leased from MHE JVCo
under finance lease arrangements
3. Capital expenditure includes Ocado share of the MHE JVCo
capex in 2015 of GBP2.4 million and in 2014 of GBP11.5 million
Capital expenditure in the Hatfield CFC was GBP1.6 million on
resiliency projects to refurbish zone pick aisles and conveyors and
some improvement projects such as additional bagging machines.
In July 2014, we announced plans for our next CFC located in
Andover, Hampshire in the south of England. The Andover CFC will be
smaller than our existing CFCs with expected capacity of 65,000
OPW. We have currently incurred GBP17.8 million of costs on the
main build of the warehouse and the early build costs for the first
installation of our proprietary infrastructure system.
In January 2015, we announced plans for our latest CFC located
in Erith, South East London. The Erith CFC will be larger than our
existing CFCs (expected capacity of 200,000 OPW). We expect our
work to commence in 2016 and for the site to go live during 2H
2017. We incurred GBP1.2 million of costs on this site in the
period.
Investment in new vehicles, which are typically on five year
financing contracts, was GBP7.9 million, higher than the prior year
(1H 2014: GBP4.4 million). This was to support the business growth
and the need to replace vehicles that have reached or exceeded
their five year useful life. Delivery capital expenditure also
included investments for new spokes of GBP2.6 million, which
included costs for the completion of the Dagenham spoke which
opened in January 2015 and costs for our new London spoke at Park
Royal, with operations transferred from the White City spoke in May
2015.
Ocado continued to develop its own proprietary software and
incurred GBP7.7 million (1H 2014: GBP5.6 million) of internal
development costs in the period on Technology, with a further
GBP1.5 million (1H 2014: GBP1.1 million) spent on computer hardware
and software. We expanded our technology total headcount to 620
staff at the end of the period (1H 2014: 450 staff) as increased
investments were made to support our strategic initiatives,
including the major replatforming of Ocado's technology and
migration of most of our systems to run on a public or private
cloud. This will allow Ocado to achieve greater technical agility
and enable the technology to support possible international
expansion opportunities. In addition, we have invested internal
technology resources as part of developing capital projects for
Dordon CFC phase 2, next generation of fulfilment solutions and the
further development of the Morrisons proposition.
Fulfilment development capital expenditure includes GBP7.1
million of investment in developing our next generation fulfilment
solution which will be used in our new CFCs and for Ocado Smart
Platform partners.
In the period we incurred our share of the capital expenditure
relating to MHE JVCo of GBP2.4 million for the completion of Dordon
CFC phase 2 to improve operational capacity of the warehouse and
various minor improvement projects (e.g. bagging machines).
At 17 May 2015, capital commitments contracted, but not provided
for by the Group, amounted to GBP35.3 million (30 November 2014:
GBP20.1 million). We expect capital expenditure in 2015 full year
to be approximately GBP150 million, with further investments in the
next generation of fulfilment solutions, work on our new CFCs,
additional new vehicles to support business growth and the
replacement of vehicles coming to the end of their five year
financing contracts.
Net operating cash flow after finance costs increased to GBP41.1
million, up 21.6% from GBP33.8 million in 1H 2014 as detailed
below:
1H 2015 1H 2014
GBPm GBPm
=============================================== ========= =========
EBITDA 38.2 34.3
Working capital movement 1.3 (1.1)
Other non-cash items 3.7 1.3
Finance costs paid (2.1) (0.7)
=============================================== ========= =========
Operating cash flow 41.1 33.8
Capital investment (40.6) (24.9)
Decrease in net debt/finance obligations (9.2) (12.6)
Proceeds from share issues net of transaction
costs 2.8 3.7
=============================================== ========= =========
Movement in cash and cash equivalents (5.9) -
=============================================== ========= =========
The Group continues to invest for future growth comprising
investments in new CFCs, development of our next generation
fulfilment solution and spend on new vehicles and spokes sites. We
incurred GBP50.5 million of capital expenditure during the period.
GBP40.6 million of capital expenditure was settled in cash during
the period.
Net financing cash flows in the period were GBP(6.4) million
comprising GBP(9.2) million net repayment of debt and financing
obligations and GBP2.8 million of proceeds from the issue of new
share capital following the exercise of employee share options and
options under Ocado's Save As You Earn share scheme.
Balance sheet
The Group had cash and cash equivalents of GBP70.4 million at
the end of period versus GBP76.3 million at 30 November 2014.
Gross debt at the period end was GBP175.4 million (1H 2014:
GBP154.9 million) and external gross debt, excluding obligations
under finance leases owing to MHE JVCo Limited, was GBP45.5 million
(1H 2014: GBP46.2 million). Net external cash at the period end was
GBP24.9 million (1H 2014: GBP64.1 million).
Trade and Other Receivables includes GBP26.1 million (2014:
GBP24.0 million) of amounts due from suppliers in respect of
commercial income. GBP10.7 million (2014: GBP8.7 million) is within
trade receivables, and GBP15.4 million (2014: GBP15.3 million)
within accrued income.
Increasing financing flexibility
On 30 June 2015, the Group amended and extended its existing
unsecured RCF. The facility was increased to GBP210 million and
extended by 2 years to 1 July 2019. The participating banks are
Barclays, HSBC, RBS and Santander.
Key performance indicators
The following table sets out a summary of selected unaudited
operating information for 1H 2015 and 1H 2014:
1H 2015 1H 2014 Variance
GBPm GBPm
==================================== ========= ========= ==========
Average orders per week 191,000 161,000 18.6%
Average order size (GBP) (1) 111.68 114.43 (2.4)%
Overall CFC efficiency (units
per hour) (2) 153 142 7.7%
Average deliveries per van per
week (DPV/week) 162 163 (0.6)%
Average product wastage (% of
retail revenue) (3) 0.7 0.8 (11.4)%
Items delivered exactly as ordered
(%) (4) 99.3 99.2 0.1%
Deliveries on time or early (%) 95.6 95.7 (0.1)%
------------------------------------ --------- --------- ----------
Source: the information in the table above is derived from
information extracted from internal financial and operating
reporting systems and is unaudited
1. Average retail value of goods a customer receives (including
VAT and delivery charge and including destination site orders) per
order
2. Measured as units dispatched from the CFC per variable hour
worked by Hatfield CFC and Dordon CFC operational personnel in
2014. We consider a CFC to be mature if it had been open 12 months
by the start of the half year reporting period
3. Value of products purged for having passed Ocado's "use by"
life guarantee divided by retail revenue
4. Percentage of all items delivered exactly as ordered, i.e.
the percentage of items neither missing nor substituted
Consolidated income statement
for the 24 weeks ended 17 May 2015
24 weeks 24 weeks 52 weeks
ended ended ended 30
17 May 18 May November
2015 2014 2014
Notes GBPm GBPm GBPm
===================================== ====== ============ ============ ==========
(unaudited) (unaudited) (audited)
Revenue 5 507.7 429.7 948.9
Cost of sales (336.9) (289.2) (636.0)
===================================== ====== ============ ============ ==========
Gross profit 170.8 140.5 312.9
Other income 19.3 15.7 39.4
Distribution costs (137.1) (110.7) (253.1)
Administrative expenses (42.4) (35.7) (85.0)
===================================== ====== ============ ============ ==========
Operating profit before share of result
from joint venture and exceptional items 10.6 9.8 14.2
Share of result from joint venture 1.2 1.1 2.4
------------------------------------- ------ ------------ ------------ ----------
Exceptional items - - (0.3)
===================================== ====== ============ ============ ==========
Operating profit 11.8 10.9 16.3
Finance income 6 0.1 0.2 0.4
Finance costs 6 (4.7) (3.6) (9.5)
===================================== ====== ============ ============ ==========
Profit before tax 7.2 7.5 7.2
Taxation - - 0.1
Profit for the period 7.2 7.5 7.3
===================================== ====== ============ ============ ==========
Earnings per share pence pence pence
===================================== ====== ============ ============ ==========
Basic 9 1.23 1.28 1.24
Diluted 9 1.17 1.20 1.18
===================================== ====== ============ ============ ==========
Non-GAAP measure: Earnings before interest, taxation,
depreciation, amortisation, impairment and exceptional items
(EBITDA)
24 weeks 24 weeks 52 weeks
ended ended ended 30
17 May 18 May November
2015 2014 2014
GBPm GBPm GBPm
================================= ============ ============ ==========
(unaudited) (unaudited) (audited)
Operating profit 11.8 10.9 16.3
Adjustments for:
Depreciation of property, plant
and equipment 20.4 17.8 40.0
Amortisation expense 6.0 5.4 12.4
Impairment of property, plant
and equipment - 0.2 1.1
Impairment of intangibles - - 1.5
Exceptional items - - 0.3
EBITDA 38.2 34.3 71.6
================================== ============ ============ ==========
Consolidated statement of comprehensive income
for the 24 weeks ended 17 May 2015
24 weeks 24 weeks 52 weeks
ended ended ended 30
17 May 18 May November
2015 2014 2014
GBPm GBPm GBPm
======================================= ============ ============ ==========
(unaudited) (unaudited) (audited)
Profit for the period 7.2 7.5 7.3
Other comprehensive income/(expense):
Cash flow hedges
- Gains/(losses) arising on forward
foreign exchange contracts - (0.2) (0.4)
- Gains/(losses) arising on forward 0.1 - -
commodity contracts
- (Gains)/losses transferred
to property, plant and equipment (0.1) - 0.3
Translation of foreign subsidiary 0.1 - (0.1)
======================================== ============ ============ ==========
Other comprehensive income/(expense)
for the period, net of tax 0.1 (0.2) (0.2)
Total comprehensive income for
the period 7.3 7.3 7.1
======================================== ============ ============ ==========
Consolidated balance sheet
as at 17 May 2015
17 May 18 May 30 November
2015 2014 2014
Notes GBPm GBPm GBPm
================================== ====== ============ ============ ============
(unaudited) (unaudited) (audited)
Non-current assets
Intangible assets 44.1 28.8 38.4
Property, plant and equipment 294.7 226.4 275.2
Deferred tax asset 9.5 7.9 9.4
Available-for-sale financial
asset 0.4 0.4 0.4
Investment in Joint Venture 69.0 66.5 67.8
417.7 330.0 391.2
================================== ====== ============ ============ ============
Current assets
Inventories 25.9 21.8 27.6
Trade and other receivables 62.5 47.8 43.1
Cash and cash equivalents 70.4 110.3 76.3
158.8 179.9 147.0
Total assets 576.5 509.9 538.2
================================== ====== ============ ============ ============
Current liabilities
Trade and other payables (160.2) (134.7) (136.5)
Borrowings 8 (3.6) (3.9) (4.4)
Obligations under finance leases 8 (32.9) (29.8) (26.5)
Derivative financial instruments (0.1) (0.3) (0.2)
Provisions (0.7) (0.7) (0.4)
(197.5) (169.4) (168.0)
Net current assets (38.7) 10.5 (21.0)
================================== ====== ============ ============ ============
Non-current liabilities
Borrowings 8 (0.8) (4.3) (2.3)
Obligations under finance leases 8 (138.1) (116.9) (142.5)
Provisions (6.5) (3.5) (5.2)
Deferred tax liability (1.9) (0.4) (2.0)
(147.3) (125.1) (152.0)
Net assets 231.7 215.4 218.2
================================== ====== ============ ============ ============
Equity
Share capital 12.5 12.4 12.5
Share premium 257.9 254.5 255.1
Treasury shares reserve (51.7) (51.7) (51.8)
Reverse acquisition reserve (116.2) (116.2) (116.2)
Other reserves (0.2) (0.3) (0.3)
Retained earnings 129.4 116.7 118.9
Total equity 231.7 215.4 218.2
================================== ====== ============ ============ ============
Consolidated statement of cash flows
for the 24 weeks ended 17 May 2015
24 weeks 24 weeks 52 weeks
ended 17 ended 18 ended 30
May 2015 May 2014 November
2014
Notes GBPm GBPm GBPm
====================================== ====== ============ ============ ==========
(unaudited) (unaudited) (audited)
Cash flow from operating activities
Profit before tax 7.2 7.5 7.2
Adjustments for:
- Depreciation, amortisation and
impairment losses 26.4 23.4 55.0
- Movement in provisions 1.6 0.4 1.9
- Share of profit in joint venture (1.2) (1.1) (2.4)
- Share-based payments charge 3.3 2.0 4.4
- Foreign exchange movements - - 0.1
- Net finance costs 6 4.6 3.4 9.1
Changes in working capital:
- Movement in inventories 1.6 2.1 (3.6)
- Movement in trade and other
receivables (19.5) (8.7) (1.5)
- Movement in trade and other
payables 19.2 5.5 13.8
====================================== ====== ============ ============ ==========
Cash generated from operations 43.2 34.5 84.0
Interest paid (2.1) (0.7) (9.7)
Net cash flows from operating
activities 41.1 33.8 74.3
====================================== ====== ============ ============ ==========
Cash flows from investing activities
Purchase of property, plant and
equipment (29.1) (17.6) (53.0)
Purchase of intangible assets (11.7) (7.4) (25.8)
Interest received 0.2 0.1 0.5
Net cash flows from investing
activities (40.6) (24.9) (78.3)
====================================== ====== ============ ============ ==========
Cash flows from financing activities
Proceeds from the issue of ordinary
share capital net of transactions
costs 2.8 3.7 3.7
Repayments of borrowings (2.3) (1.4) (2.9)
Repayments of obligations under
finance leases (6.7) (11.2) (30.5)
Settlement of forward foreign
exchange contracts (0.2) - (0.5)
Net cash flows from financing
activities (6.4) (8.9) (30.2)
====================================== ====== ============ ============ ==========
Net (decrease) in cash and cash
equivalents (5.9) - (34.2)
Cash and cash equivalents at the
beginning of the period 76.3 110.5 110.5
Exchange adjustments - (0.2) -
Cash and cash equivalents at the
end of the period 70.4 110.3 76.3
====================================== ====== ============ ============ ==========
Consolidated statement of changes in equity
for the 24 weeks ended 17 May 2015
Treasury Reverse
Share Share shares acquisition Other Retained Total
capital premium reserve reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=========== ====================== ====== ======== ======== ========= ============ ========= ========= =======
Balance at 30 November
2014 12.5 255.1 (51.8) (116.2) (0.3) 118.9 218.2
Profit for the period - - - - - 7.2 7.2
Other comprehensive
income/(expense):
Cash flow hedges
Gains/(losses) arising on
- forward commodity contracts - - - - 0.1 - 0.1
(Gains)/losses transferred
- to property, plant and equipment - - - - (0.1) - (0.1)
Translation of foreign
subsidiary - - - - 0.1 - 0.1
Total comprehensive income for
the period - - - - 0.1 7.2 7.3
=========================================== ======== ======== ========= ============ ========= ========= =======
Transactions with owners:
- Issue of ordinary shares - 2.8 - - - - 2.8
Reduction in treasury
- shares - - 0.1 - - - 0.1
Share-based payments
- charge - - - - - 3.3 3.3
----------------------------- ------ --------
Total transactions
with owners - 2.8 0.1 - - 3.3 6.2
======== ======== ========= ============ ========= ========= =======
Balance at 17 May 2015 12.5 257.9 (51.7) (116.2) (0.2) 129.4 231.7
=================================== ====== ======== ======== ========= ============ ========= ========= =======
Notes to the consolidated interim financial information
1 General information
Ocado Group plc (hereafter "the Company") is incorporated and
domiciled in the United Kingdom (registration number
07098618).The address of its registered office is Titan Court, 3
Bishops Square, Hatfield, Hertfordshire, AL10 9NE. The consolidated
interim financial information (hereafter "financial information")
comprises the results of the Company and its subsidiaries
(hereafter "the Group").
The financial period represents the 24 weeks ended 17 May 2015
(prior period 24 weeks ended 18 May 2014; prior financial year 52
weeks ended 30 November 2014).
2 Basis of preparation
The financial information has been prepared in accordance with
IAS 34 'Interim Financial Reporting' as adopted by the
European Union and the Disclosure and Transparency Rules of the
UK Financial Conduct Authority.
The financial information does not amount to full statutory
accounts within the meaning of section 434 of the Companies Act
2006 and does not include all of the information and disclosures
required for full annual financial statements. It should be read in
conjunction with the Annual Report and accounts of Ocado Group plc
for the 52 weeks ended 30 November 2014 which was prepared in
accordance with IFRS as adopted by the European Union and were
filed with the Registrar of Companies. This report is available
either on request from the Company's registered office or to
download from www.ocadogroup.com. The auditor's report on these
accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under section 498 of
the Companies Act 2006.
The financial information is presented in sterling, rounded to
the nearest hundred thousand unless otherwise stated. It has been
prepared under the historical cost convention, except for
derivative financial instruments which have been measured at fair
value.
The financial information has been prepared on the going concern
basis, which assumes that the Company will continue to be able to
meet its liabilities as they fall due for the foreseeable
future.
3 Accounting policies
The accounting policies applied by the Group in these interim
financial statements are substantially the same as those applied by
the Group in its consolidated financial statements for the 52 weeks
ended 30 November 2014. Whilst there have been a number of minor
changes to standards which will become applicable for the financial
year ending 29 November 2015, none have been assessed as having a
significant impact on the Group.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
The preparation of interim financial information requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates. In preparing these interim
financial statements, the significant judgements made by management
in applying the Group's accounting policies and the key sources of
estimation were the same as those that applied to the Annual Report
and Accounts for the 52 weeks ended 30 November 2014.
4 Segmental reporting
The Group's principal activity is grocery retailing and the
development of Intellectual Property ("IP") and technology used for
the online retailing, logistics and distribution of grocery and
consumer goods for our UK business and other partners. The Group is
not reliant on any major customer for 10% or more of its
revenue.
In accordance with IFRS 8 "Operating Segments", an operating
segment is defined as a business activity whose operating results
are reviewed by the chief operating decision-maker and for which
discrete information is available. Operating segments are reported
in a manner consistent with the internal reporting provided to the
chief operating decision-maker, as required by IFRS 8. The chief
operating decision-maker, who is responsible for allocating
resources and assessing performance of the operating segments, has
been identified as the Executive Directors.
The principal activities of the Group are currently managed as
one segment. Consequently, all activities relate to this
segment.
The chief operating decision-maker's main indicator of
performance of the segment is EBITDA, which is reconciled to
operating profit below the income statement.
5 Gross sales
24 weeks 24 weeks 52 weeks
ended 17 ended 18 ended 30
May 2015 May 2014 November
2014
GBPm GBPm GBPm
==================== ============ ============ ==========
(unaudited) (unaudited) (audited)
Revenue 507.7 429.7 948.9
VAT 30.5 28.7 66.3
Marketing vouchers 6.1 4.3 11.3
===================== ============ ============ ==========
Gross sales 544.3 462.7 1,026.5
===================== ============ ============ ==========
6 Finance income and costs
24 weeks 24 weeks 52 weeks
ended 17 ended 18 ended 30
May 2015 May 2014 November
2014
GBPm GBPm GBPm
=================================== ============ ============ ==========
(unaudited) (unaudited) (audited)
Interest on cash balances 0.1 0.2 0.4
Finance income 0.1 0.2 0.4
==================================== ============ ============ ==========
Borrowing costs
- Obligations under finance
leases (4.2) (3.5) (8.7)
- Borrowings (0.5) (0.3) (0.9)
Fair value movement on derivative
financial instruments - 0.2 0.1
Finance costs (4.7) (3.6) (9.5)
==================================== ============ ============ ==========
Net finance costs (4.6) (3.4) (9.1)
==================================== ============ ============ ==========
7 Capital expenditure and commitments
During the period the Group acquired property, plant and
equipment of GBP40.0 million (1H 2014: GBP21.1 million). Of the
current period additions of GBP40.0 million (1H 2014: GBP21.1
million), GBPnil (1H 2014: GBP0.9 million) relates to the initial
sale of assets to MHE JVCo which was leased back and included in
total additions. During the period, the Group acquired intangible
assets of GBP1.7 million (1H 2014: GBP0.5 million) and internal
development costs capitalised were GBP10.1 million (1H 2014: GBP6.6
million).
In the period the Group did not dispose of property, plant and
equipment (1H 2014: GBP0.9 million). All of the prior period
disposals related to the initial sale of assets of MHE JVCo which
was subsequently leased back. During the period, the Group did not
dispose of intangible assets (1H 2014: GBP11.5 million). At 17 May
2015, capital commitments contracted, but not provided for by the
Group, amounted to GBP35.3 million (1H 2014: GBP20.1 million).
8 Borrowings and obligations under finance leases
17 May 2015 18 May 2014 30 November
2014
GBPm GBPm GBPm
==================================== ============ ============ ============
(unaudited) (unaudited) (audited)
Current liabilities
Borrowings 3.6 3.9 4.4
Obligations under finance leases 32.9 29.8 26.5
===================================== ============ ============ ============
36.5 33.7 30.9
==================================== ============ ============ ============
Non-current liabilities
Borrowings 0.8 4.3 2.3
Obligations under finance leases 138.1 116.9 142.5
===================================== ============ ============ ============
138.9 121.2 144.8
==================================== ============ ============ ============
Total Group borrowings and finance
leases 175.4 154.9 175.7
===================================== ============ ============ ============
9 Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the period,
excluding ordinary shares held pursuant to the Group's Joint Share
Ownership Scheme which are accounted for as treasury shares.
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all potentially dilutive shares. The Company has
three categories of potentially dilutive shares, namely share
options, shares held pursuant to the Group's Joint Share Ownership
Scheme and shares under the Group's staff incentive plans.
Basic and diluted earnings per share have been calculated as
follows:
24 weeks 24 weeks 52 weeks
ended 17 ended 18 ended 30
May 2015 May 2014 November
2014
million million million
(unaudited) (unaudited) (audited)
===================================== ============ ============ ==========
Number of shares
Issued shares at the beginning
of the period 586.1 580.0 582.5
Weighted average effect of share
options exercised in the period 0.4 1.3 2.1
Weighted average effect of treasury
shares disposed of in the period - 0.3 0.3
-------------------------------------- ------------ ------------ ----------
Weighted average number of shares
at the end of the period for
the purposes of basic earnings
per share 586.5 581.6 584.9
Potentially dilutive share options
and shares 31.1 37.9 29.4
-------------------------------------- ------------ ------------ ----------
Weighted average numbers of
diluted ordinary shares 617.6 619.5 614.3
-------------------------------------- ------------ ------------ ----------
Earnings GBPm GBPm GBPm
Profit for the period 7.2 7.5 7.3
====================================== ------------ ------------ ----------
pence pence pence
Basic earnings per share 1.23 1.28 1.24
Diluted earnings per share 1.17 1.20 1.18
====================================== ============ ============ ==========
10 Related party transactions
Key management personnel
Only the Executive and Non-Executive Directors are deemed to be
key management personnel. It is the Board which has responsibility
for planning, directing and controlling the activities of the
Group. Other related party transactions with key management
personnel made during the period related to the purchase of
professional services and amounted to GBP3,000 (1H 2014: GBP3,000).
All transactions with Directors are on an arm's length basis and no
period end balances have arisen as a result of these
transactions.
At the end of the period, key management personnel did not owe
the Group any amounts (1H 2014: GBPnil). There were no other
material transactions or balances between the Group and its key
management personnel or members of their close family.
Investment
The Group holds a 25% interest in Paneltex Limited whose
registered office is at Paneltex House, Somerden Road, Hull,
HU9
5PE. The Group's interest in Paneltex Limited has not been
treated as an associated undertaking as Ocado does not have
significant influence over Paneltex Limited.
The following direct transactions were carried out with Paneltex
Limited:
24 weeks 24 weeks 52 weeks
ended 17 ended 18 ended 30
May 2015 May 2014 November
2014
GBPm GBPm GBPm
========================= ============ ============ ==========
(unaudited) (unaudited) (audited)
Purchase of goods
- Plant and machinery 0.1 - -
- Consumables 0.1 0.1 0.4
0.2 0.1 0.4
========================= ============ ============ ==========
Indirect transactions, consisting of the purchase of plant and
machinery through some of the Group's finance lease counterparties,
were carried out with Paneltex Limited to the value of GBP3.8
million (1H 2014: GBP2.0 million).
At period end, the Group owed GBP25,000 to Paneltex (1H 2014:
Group was owed GBP5,000 by Paneltex).
Joint Venture
The following transactions were carried out with MHE JVCo, a
joint venture company in which the Group holds a 50% interest:
24 weeks 24 weeks 52 weeks
ended 17 ended 18 ended 30
May 2015 May 2014 November
2014
GBPm GBPm GBPm
==================================== ========== ========== ==========
Sale and Leaseback Transaction
Capital contributions made to
MHE JVCo - 6.5 6.5
Reimbursement of supplier invoices
paid on behalf of MHE JVCo 2.3 17.3 34.9
Lease of assets from MHE JVCo - 0.9 31.0
Capital element of finance lease
instalments paid to MHE JVCo 1.0 4.1 15.7
Interest element of finance lease
instalments accrued or paid to
MHE JVCo 2.9 2.4 5.4
6.2 31.2 93.5
==================================== ========== ========== ==========
The above disclosure of transactions with MHE JVCo is consistent
with that set out in Ocado Group plc's Annual Report and Accounts
for the 52 weeks ended 30 November 2014, in which additional
disclosure was implemented. The disclosure of the comparative
information for the 24 weeks ended 18 May 2014 has been updated for
the additional disclosure.
Included within trade and other receivables is a balance of
GBP4.3 million owed by MHE JVCo (1H 2014: GBP6.5 million).
Included within trade and other payables is a balance of GBP5.3
million owed to MHE JVCo (1H 2014: GBP4.3 million).
Included within obligations under finance leases is a balance of
GBP129.8 million owed to MHE JVCo (1H 2014: GBP108.7 million).
No other transactions that require disclosure under IAS 24 have
occurred during the current financial period.
11 Analysis of net debt
(a) Net debt
17 May 2015 18 May 2015 30 November
2014
GBPm GBPm GBPm
======================================== ============ ============ ============
(unaudited) (unaudited) (audited)
Current assets
Cash and cash equivalents 70.4 110.3 76.3
----------------------------------------- ------------ ------------ ------------
70.4 110.3 76.3
======================================== ============ ============ ============
Current liabilities
Borrowings (3.6) (3.9) (4.4)
Obligations under finance leases (32.9) (29.8) (26.5)
============ ============ ============
(36.5) (33.7) (30.9)
======================================== ============ ============ ============
Non-current liabilities
Borrowings (0.8) (4.3) (2.3)
Obligations under finance leases (138.1) (116.9) (142.5)
========================================= ============ ============ ============
(138.9) (121.2) (144.8)
======================================== ============ ============ ============
Total net debt before non-current
assets held for sale (105.0) (44.6) (99.4)
Borrowings associated with non-current - - -
assets held for sale
============ ------------ ------------
Total net debt (105.0) (44.6) (99.4)
========================================= ============ ============ ============
Net external cash at the period end was GBP24.9 million (1H
2014: GBP64.1 million).
(b) Reconciliation of net cash flow to movement in net debt
24 weeks 24 weeks 52 weeks
ended 17 ended 18 ended 30
May 2015 May 2014 November
2014
GBPm GBPm GBPm
==================================== ============ ============ ==========
(unaudited) (unaudited) (audited)
Net decrease in cash and cash
equivalents (5.9) - (34.2)
Exchange adjustments - (0.2) -
Net decrease/(increase) in debt
and lease financing 9.0 12.6 33.4
Non-cash movements:
- Assets acquired under finance
lease (8.7) (6.1) (47.7)
Movement in net debt in the period (5.6) 6.3 (48.5)
Opening net debt (99.4) (50.9) (50.9)
Closing net debt (105.0) (44.6) (99.4)
===================================== ============ ============ ==========
12 Post balance sheet events
There were no events after the balance sheet date which require
adjustment to or disclosure in the financial information.
Principal risks and uncertainties
The Group faces a number of risks and uncertainties that may
have an adverse impact on the Group's operation, performance or
future prospects. The Board has identified the following principal
risks and uncertainties to the successful operation of the
business. These risks, along with the events in the financial
markets and their potential impacts on the wider economy, remain
those most likely to affect the Group in the second half of the
year.
-- Failure to maintain competitive pricing position
-- A risk of decline in high service levels
-- Failure to develop retail proposition to appeal to broader
customer base and sustain growth rates
-- A risk of delays in the implementation of new capacity for both Ocado and Morrisons
-- Technological innovation supersedes our own and offers
improved methods of food distribution to consumers or results in
alternative grocery platform business models
-- Failure to protect current technology and process and failure
to ensure that our technology can be freely operated without
infringing a third party's IP
-- A risk of a food or product safety incident
-- A risk of changes in regulations impacting our retail
business model or the viability of OSP deals
-- Failure of technology or data loss
-- Business interruption
-- A risk of unintentional infringement of competition legislation
-- Failure to develop sufficient management and technology
capability or capacity to deliver on all our strategic
priorities
More information on most of these principal risks and
uncertainties together with an explanation of the Group's approach
to risk management is set out in Ocado Group plc's Annual Report
and Accounts for the 52 weeks ended 30 November 2014 on pages 32 to
35, a copy of which is available on the Group's corporate website,
www.ocadogroup.com.
Statement of Directors' responsibilities
The Directors confirm that, to the best of their knowledge, this
condensed set of consolidated financial statements have been
prepared in accordance with IAS 34 ('Interim Financial Reporting')
as adopted by the European Union, and that the interim management
report includes a fair review of the information required by DTR
4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules.
The Directors of Ocado Group plc as at the date of this
announcement are as follows:
Executive Directors
Tim Steiner, Chief Executive Officer;
Neill Abrams, Legal & Business Affairs Director;
Duncan Tatton-Brown, Chief Financial Officer;
Mark Richardson, Operations Director;
Non-Executive Directors
Lord Rose, Chairman;
David Grigson, Senior Independent Director;
Ruth Anderson;
Robert Gorrie;
Jörn Rausing;
Douglas McCallum; and
Alex Mahon.
By order of the Board
Duncan Tatton-Brown
Chief Financial Officer
Neill Abrams
Legal & Business Affairs Director
30 June 2015
This information is provided by RNS
The company news service from the London Stock Exchange
END
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