Ocado Group PLC · LSE:OCDO
Ocado — H1 2013 Earnings Presentation
33 slides from Ocado's earnings presentation, Jul 2, 2013
Slide 1: Ocado Group plc 2013 Half Year Results
Ocado Group plc 2013 Half Year Results 2 July 2013 www.ocadogroup.com
Slide 2: Forward-Looking Statements Disclaimer
Forward-Looking Statements 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 forw
Slide 3: Agenda
Agenda • Financial Review – Duncan Tatton-Brown • Business Review – Tim Steiner • Q&A www.ocadogroup.com 3
Slide 4: Duncan Tatton-Brown, CFO
Duncan Tatton-Brown CFO www.ocadogroup.com 4
Slide 5: Introduction
Introduction • Steady performance in H1 2013 • Stronger sales growth • EBITDA improvement driven by solid operational performance • CFC2 and NFDC ramp-up partially offsetting productivity gains but positions Ocado for future growth • First strategic customer - Morrisons www.ocadogroup.com 5
Slide 6: Financial summary
Financial summary1 1H13 1H12 1H13 (£m) 1H12 (£m) YOY Growth (% Revenue) (% Revenue) Gross sales 382.7 332.3 15.2% Revenue 355.9 308.0 Gross profit 108.9 93.8 30.6 30.5 EBITDA 19.2 14.9 28.7% 5.4 4.8 Depreciation, (17.5) (12.9) (4.9) (4.2) amortisation & impairment Operating profit 2 1.7 2.0 0.5 0.6
Slide 7: Operational KPIs
Operational KPIs 1H13 1H12 CFC efficiency (units per hour)1 132 114 Average deliveries per van per week 158 150 Items delivered exactly as ordered (%)2 98.9 98.3 Deliveries on time or early (%) 94.4 93.2 Average product wastage (% of revenue)3 1.0 0.7 1) Measured as units dispatched from the CFC per
Slide 8: Sales drivers
Sales drivers1 Gross sales, £m Average basket size, £ 383 +15.2% 115 +1.6% 332 113 1H12 1H13 1H12 1H13 Average orders per week, 000 Active customers2, 000 139 360 +13.4% 122 +6.8% 337 1H12 1H13 1H12 1H13 1) Percentage movements are based on unrounded numbers 2) A customer is classified as active if
Slide 9: Gross margin
Gross margin Gross margin1 (incl. other income), %me) 32.9 32.6 31.5 2.1 2.3 0.8 Other Income +32% 30.7 +14%30.5 30.6 +14% 1H11 1H12 1H13 1) Expressed as a percentage of Revenue www.ocadogroup.com 9
Slide 10: Operating costs
Operating costs 1H13 1H12 Growth 1H13 1H12 (£m)1 (£m)1 (£m) (% Revenue) (% Revenue) Trunking & delivery 41.0 37.5 3.5 11.5 12.2 CFC 31.0 27.3 3.7 8.7 8.8 Other operating costs 4.1 3.5 0.6 1.1 1.1 Administrative expenses 17.9 14.4 3.5 5.0 4.7 Marketing 3.8 2.7 1.1 1.1 0.9 Depreciation & 17.5 12.9 4.6
Slide 11: Marketing
Marketing Vouchering & Marketing costs, £m 8.9 8.2 6.7 3.8 2.7 +22% +48% -21% 3.2 Marketing costs Vouchering costs 5.5 5.1 3.5 1H11 1H12 1H13 % Revenue 2.4% 2.7% 2.5% www.ocadogroup.com 11
Slide 12: Statutory summary
Statutory summary 1H13 (£m) 1H12 (£m) Operating profit1 1.7 2.0 Adjusted1 (loss)/profit before tax (1.0) 0.4 Exceptional items (2.8) (0.3) (Loss)/profit before tax (3.8) 0.2 Tax - - (Loss)/profit per share (0.66p) 0.03p 1) Adjusted to exclude exceptional items www.ocadogroup.com 12
Slide 13: Capital investment
Capital investment 1H13 (£m) 1H12 (£m) CFC 1 3.9 9.0 CFC 2 23.9 49.7 Vehicles 3.9 2.9 IT 7.3 7.2 Other1 1.4 2.6 Total capital investment2 40.4 71.4 1) Includes non-food distribution centre spend of £1.1m in 1H13, capitalised staff costs of £1.9m in 1H12 2) Includes capitalised interest of £1.1m in 1
Slide 14: Cashflow
Cashflow 1H13 (£m) 1H12 (£m) EBITDA 19.2 14.9 Exceptional items (2.8) (0.3) Capital spend1 (43.2) (63.8) Working Capital movements 13.5 - Interest paid (5.8) (2.8) Cash movement (19.1) (52.0) excluding Financing activities Financing activities1 (7.5) 25.3 Opening cash 89.6 92.1 Closing cash 63.0 65.
Slide 15: Morrisons' agreement - key accounting impacts (1)
Morrisons’ agreement - key accounting impacts (1) • Initial fee - amortised over 5 years Operating arrangements • Cost sharing - charged as service as incurred • Technology and management fees - charge in year they occur Sale of Last Mile • Reduces external debt, increases cash on balance sheet Deve
Slide 16: Morrisons' agreement - key accounting impacts (2)
Morrisons’ agreement - key accounting impacts (2) Commercial impact Accounting impact • Reduces external debt, increases cash on • Increases reported debt due to inclusion of balance sheet 100% of finance lease liability Joint Venture Company • Reduces assets and costs of assets by 50% • Retains 100
Slide 17: Morrisons' agreement - impact on 2014 revenue & profits
Morrisons’ agreement - impact on 2014 revenue & profits Impact on Impact on revenue profitability Initial fee1 + + Technology & management fees ++ ~ Bonus fee - - Cost recharging ++ + Property Transaction ++ + 1) Amortised over 5 years, no cash effect in 2014 www.ocadogroup.com 17
Slide 18: Capital spend
Capital spend Additional 2014 £m Notes investment CFC1 +10 Adding additional capacity and resiliency Dordon Phase 2 in 2014 (Ocado share), also CFC2 +10 +£10m in 2013 Non Food +5 Additional NFDC Faster investment in technology Technology +5 to10 developments, split between P&L and capital still to b
Slide 19: Summary
Summary • Steady performance in H1 2013 • Stronger sales growth • EBITDA improvement driven by solid operational performance • CFC2 and NFDC ramp-up partially offsetting productivity gains but positions Ocado for future growth • First strategic customer - Morrisons www.ocadogroup.com 19
Slide 20: Tim Steiner, CEO
Tim Steiner CEO www.ocadogroup.com
Slide 21: Strategy
Strategy Strategic objectives Update for the period • Additional service and usability enhancements Developing the proposition • Continued range expansion to customer • Price initiatives gaining recognition • Active customers grown Growing customer numbers • Rate of new customer acquisition stable a
Slide 22: Developing the proposition to customers
Developing the proposition to customers Improving our offer to customers – service, range and price www.ocadogroup.com 22
Slide 23: Developing the proposition to customers
Developing the proposition to customers Making it easier for our customers with new developments and excellent service “After months of problems, cock- ups, bad substitutions and late deliveries from another home shopping company, my first two Ocado home deliveries have been on-time and all good. No
Slide 24: Developing the proposition to customers
Developing the proposition to customers Range expanded to over 31,000 SKUs – Ocado private label and niche branded products gaining traction “I try to buy everything in “Sorry should have put that Ocado white the ocado range.” sliced bread is a real hit in our house as it is dairy and soya free. Wel
Slide 25: Developing the proposition to customers
Developing the proposition to customers Price initiatives gaining recognition – value is important www.ocadogroup.com 25
Slide 26: Growing customer numbers and spend
Growing customer numbers and spend Active customers growing, new customer growth maintained, retention and basket growing modestly Active customers1, 000 Customer Basket 360 337 293 • New customer growth • Basket growing modestly maintaining momentum, • Downward pressure of new above 50% customers a
Slide 27: Optimising operations and building capacity
Optimising operations and building capacity Increasing capacity, efficiency and resilience Improvement Status CFC2 • Fully operational, now 50,000 OPW NFDC • Fully operational CFC1 Fulfilment CFC1 • Productivity improved, up to 132 UPH • Average orders per week increased to 139,000 • Over 152,000 or
Slide 28: Optimising operations and building capacity
Optimising operations and building capacity CFC2 CFC2 is ramping up ahead of schedule Orders per week Original plan Achieved 1 2 3 4 5 6 7 8 9 10 11 12 Weeks after launch • Fully operational • First order delivered February 2013 • On budget • Now at 50,000 OPW www.ocadogroup.com 28
Slide 29: Optimising operations and building capacity
Optimising operations and building capacity Delivery catchment area does not change, efficiency and capacity improve Ocado coverage – over 70% of UK population LEEDS MANCHESTER Fulfilment Centre Spoke location CFC2 OXFORD NFDC OXFORD CFC1 BRISTOL WHITE CITY WEYBRIDGE DARTFORD WIMBLEDON SOUTHAMPTON w
Slide 30: Commercialising intellectual property
Commercialising intellectual property Our first strategic customer Customer Interfaces Supply Warehouse Vans and Routing www.ocadogroup.com 30
Slide 31: Commercialising intellectual property
Commercialising intellectual property Why is this agreement attractive to Ocado? • Enables greater investment in R&D • Improves Ocado’s economic model with sharing of costs and faster utilisation of fulfilment capacity • Validates Ocado’s operating model and provides template for future deals • Stre
Slide 32: Summary
Summary Customers • Proposition improvements continue • Customers growing in number, loyalty and spend Operations • Productivity improved • Customer service improved • CFC2 and NFDC fully operational Development • Commercialising IP with first strategic customer www.ocadogroup.com 32
Slide 33: Q&A
ocado Q&A hy 33 ocado ‘veww.ocadogroup.com