Ocado Group Plc · LSE:OCDO
Ocado — H1 2014 Earnings Presentation
33 slides from Ocado's earnings presentation, Jul 1, 2014
Slide 1: Ocado Group plc 2014 Half Year Results
Ocado Group plc 2014 Half Year Results 1 July 2014
Slide 2: Forward-looking Statement Disclaimer
Forward-looking Statement Disclaimer 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 forwa
Slide 3: Agenda
Agenda Introduction – Sir Stuart Rose Financial Review – Duncan Tatton-Brown Strategic Review – Tim Steiner Q&A Appendices 3
Slide 4: Sir Stuart Rose, Chairman
Sir Stuart Rose Chairman Mocado The online supermarket
Slide 5: Introduction
Introduction Market environment competitive Robust trading performance Well positioned for future platform opportunities 5
Slide 6: Duncan Tatton-Brown, CFO
Duncan Tatton-Brown CFO 6
Slide 7: Financial review
Financial review Solid trading performance in tougher market Investing for UK capacity growth and strategic opportunities Improved balance sheet flexibility 7
Slide 8: Financial summary
Financial summary1 1H14 1H13 Variance (£m) (£m) (%) Gross sales (Retail) 442.4 382.7 15.6% Revenue (Group) 429.7 355.9 20.7% EBITDA (pre-exceptional) 34.3 19.2 78.6% EBITDA % 8.0% 5.4% Depreciation, (23.4) (17.5) 33.7% amortisation and impairment2 Operating profit before 10.9 1.7 - exceptional items
Slide 9: Sales drivers (Retail)
Sales drivers (Retail)1 Gross sales, £m Average basket size, £ 15.6% 442 114.9 0.4% 114.4 383 1H13 1H14 1H13 1H14 Average orders per week, 000 Active 2 customers, 000 10.0% 396 15.8% 161 360 139 1H13 1H14 1H13 1H14 1. Figures are for Ocado retail business only 2. A customer is classified as active i
Slide 10: Customers
Customers Customer Service • Customer service improved Vouchering & marketing spend • On time or early: 95.7% (1H13: 94.4%) £8.9m £8.3m • Items delivered as ordered: 99.2% (1H13: 98.9%) 1.1% 1.0% Marketing Vouchering 1.4% 1.0% Marketing 1H13 1H14 • Absolute marketing spend in 1H14 lower % Revenue1 2
Slide 11: Gross margin (Retail)
Gross margin (Retail) Gross margin1 (incl. other income), %me) 32.6 32.9 32.5 2.1 2.3 2.6 30.5 30.6 29.9 1H12 1H13 1H14 From trading activites Other Income • Gross margins lower • Increased promotional activity • Further reductions in delivery charges • LPP cost as a % of retail sales maintained • O
Slide 12: Operating metrics
Operating metrics 1H141 1H131 1H142 1H132 (£m) (£m) (% Revenue) (% Revenue) Trunking and delivery 47.2 41.0 11.4% 11.5% CFC 32.5 31.0 7.9% 8.7% Other operating costs3 5.1 4.1 1.2% 1.2% Marketing (non vouchering) 4.0 3.8 1.0% 1.1% Total Operating 88.8 79.9 21.5% 22.5% Service delivery efficiency 163
Slide 13: Total costs
Total costs 1H14 1H13 1H141 1H131 (£m) (£m) (% Revenue) (% Revenue) Total Operating 88.8 79.9 20.7% 22.5% Administrative expenses 20.4 17.9 4.7% 5.0% Morrisons2 13.8 0.0 3.2% - Depreciation and Amortisation 23.4 17.5 5.4% 4.9% Total 146.4 115.3 34.1% 32.4% 1. Expressed as a percentage of group reven
Slide 14: Impact of Morrisons
Impact of Morrisons Revenue + Fees + Cost recharges Cost of goods = Other Income + Rental 50% of CFC and MHE Costs - Operational costs (fixed & variable) - Lease costs (excluding interest) - Additional costs (mainly IT) + Share of MHE JV Co results Interest - Lease interest costs 14
Slide 15: MHE JV Co impact
MHE JV Co impact Impact of Total MHE JV Co Underlying 1H14 1H14 1H14 (£m) (£m) (£m) EBITDA Ocado businesses 33.2 3.91 29.3 Share of results from joint venture 1.1 1.1 - Total EBITDA 34.3 5.0 29.3 Implied allocation Depreciation (23.4) (2.7) (20.7) Interest (3.4) (2.4) (1.0) Total PBT 7.5 (0.1) 7.6 1
Slide 16: Capital investment
Capital investment 1H13 1H14 Expected (£m) (£m) FY14 (£m) Existing CFCs1 CFC2 Phase 2 / efficiency and resiliency 28 17 30 projects Technology 7 7 25 People and hardware Vehicles & spokes 4 7 20 Vehicles and spokes Other 2 8 25 R&D, Non-food, Offices Total 40 39 100 Andover CFC 30 Total 130 1. This
Slide 17: Underlying cashflow
Underlying cashflow 1H14 1H13 (£m) (£m) EBITDA 34.3 19.2 Adjustments for non cash and exceptional items 1.3 (2.5) Capital spend (24.9) (43.2) Working capital (1.1) 13.2 Interest paid (0.7) (5.8) Cash movement excluding financing activities 8.9 (19.1) Net cash flows from financing activities (8.9) (7
Slide 18: Debt facility
Debt facility New £100m unsecured 3 year RCF facility Bank group comprising Barclays, HSBC, RBS and Santander Typical covenants: Net debt to EBITDA ratio Interest cover Capital expenditure Margins 175 – 275 dependant on leverage Increases financial flexibility to support UK expansion
Slide 19: Summary
Summary Solid trading performance in tougher market Investing for UK capacity growth and strategic opportunities Improved balance sheet flexibility 19
Slide 20: Tim Steiner, CEO
Tim Steiner CEO 20
Slide 21: Key highlights
Key highlights Progress on each strategic objective Solid trading growth: Proposition enhancements Improvements in operational efficiency New capacity plans in place Good progress on platform opportunities 21
Slide 22: Strategy
Strategy Strategic objectives Driving • Developing proposition to customers growth • Growing customer numbers and encouraging spend Maximising • Optimising operations efficiency • Enhance efficiency of future capacity and drive scale benefits Utilising • Develop, leverage and commercialise the IP in
Slide 23: Online grocery market development continues
Online grocery market development continues “…online will be the fastest growing channel over the next five years…” 4% >7% UK Online Grocery Market Size (£bn, inc VAT) IGD Grocery 55% Other 16 45% online 12 8 4 2013 Grocery 2018 Grocery UK retail sales (2013) Market c £170bn Market c £206bn 0 2012 2
Slide 24: Driving growth: growing customer numbers and spend
Driving growth: growing customer numbers and spend Retail sales up 15.6% Active1 customers now 396,000 Basket steady, down 0.4% Proposition development Service Range Price Highest and improved service levels Wider range More promotions Quick and easy to use Expanding own label Better value Fresher p
Slide 25: Optimising current operations
Optimising current operations CFC1 UPH 145 CFC2 UPH 140 exceeded 135 CFC1 by 130 period end 125 120 115 110 105 100 1H09 1H10 1H11 1H12 1H13 1H14 Long term DPV/week target 175 170 160 150 140 130 120 110 100 1H09 1H10 1H11 1H12 1H13 1H14 25
Slide 26: Driving future efficiency
Driving future efficiency Future fulfilment assets Priority attributes Desirable attributes • More scaleable • More efficient − Can build in multiple phases ─ UPH target for CFC3 at least CFC2 • Modular • Cheaper − Different ultimate capacity for CFC3 ─ First version already expected to be 65,000 OP
Slide 27: Building future capacity
Building future capacity Capacity Feb 2013 Dordon go live 120,000 OPW 50% Ocado Jan 2014 Morrisons.com launched operating from Dordon 50% Morrisons Dordon Phase 2 capex program to extend CFC2 180,000 OPW Now Work to commence on CFC3, subject to planning 65,000 OPW 27
Slide 28: Strategic opportunities
Strategic opportunities • Launched January 2014 Morrisons • Ramp up progress good Replatform IT Platform as a Service • Progressing well Partner gets: • End to end technology solutions • Best in class fulfilment assets Optimise CFC model Partner pays: • Up front fees • Progressing well • Ongoing pla
Slide 29: Conclusion
Conclusion Trading robustly in challenging and competitive market Continued focus on proposition improvements Significant progress in projects to fulfil platform potential 29
Slide 30: Q&A
30 Q&A Mocado The online supermarket
Slide 31: Appendices
Appendices 1: Balance sheet 2: Capital spend, including MHE JV Co 31
Slide 32: Appendix: Balance Sheet
Appendix 1 Balance Sheet 1H14 FY2013 Property, plant, equipment and intangible assets 255.2 251.3 Deferred tax asset 7.9 7.9 Available for sale financial asset 0.4 0.4 Investment in joint venture 66.5 58.9 Cash and cash equivalents 110.3 110.5 Working capital1 (65.4) (61.1) Provisions (4.2) (3.7)
Slide 33: Appendix: Capital spend, including MHE JV Co
Appendix 2 Capital spend, including MHE JV Co 1H14 1H14 1H14 1H13 Ocado1 MHE JV Co2 Total Ocado (£m) (£m) (£m) (£m) CFC1 3.8 - 3.8 3.9 CFC2 1.8 11.5 13.3 23.9 Vehicles and Spokes 6.7 - 6.7 3.9 Technology 6.7 - 6.7 7.3 Other 8.3 - 8.3 1.4 Total capital investment 27.3 11.5 38.8 40.4 1. Capital expe