Ocado Group Plc · LSE:OCDO
Ocado — H1 2015 Earnings Presentation
35 slides from Ocado's earnings presentation, Jun 30, 2015
Slide 1: Ocado Group plc 2015 Half Year Results
Ocado Group plc 2015 Half Year Results 30 June 2015
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 update – Duncan Tatton-Brown Business update – Tim Steiner Q&A Appendices 3
Slide 4: Introduction
Introduction Continued growth in competitive market Solid UK retail economics Capacity plans on track Well positioned for future platform opportunities 4
Slide 5: Financial summary
Financial summary 1H15 1H14 (£m) (£m) Revenue 507.7 429.7 +18.2% EBITDA 38.2 34.3 +11.4% EBITDA % of revenue 7.5% 8.0% Profit before tax 7.2 7.5 5
Slide 6: EBITDA summary
EBITDA summary 1H15 1H14 (£m) (£m) EBITDA 38.2 34.3 +11.4% Morrisons MHE JVCo impact 6.1 5.0 Non-cash share based payments (3.5) (1.6) Underlying EBITDA 35.6 30.9 +15.2% Depreciation and amortisation1 (26.4) (23.4) Financing costs (4.6) (3.4) Adjusted profit2 7.2 7.5 Exceptional items - - Profit bef
Slide 7: Sales drivers (Retail)
Sales drivers (Retail)1 Revenue, £m Orders Basket value 475 (% change y-o-y) (% change y-o-y) +15% 412 Total 19% (2.4%) Hypermarket 16% (1.5%) (ocado.com) 1H14 1H15 Destination > 400% > 20% sites Active2 customers, 000 • Hypermarket basket size (#items) flat 471 +19% 396 • Competitive impact on item
Slide 8: Customers
Customers Customer Service Service levels remained strong On time or early: 95.6% (1H14: 95.7%) Vouchering & marketing spend¹ Items delivered as ordered: 99.3% (1H14: 99.2%) 0.8% 1.0% 1.3%² 1.0%² Marketing 1H14 1H15 Resulted in higher marketing spend, driven by more new customer vouchering V
Slide 9: Gross margin (Retail)
Gross margin (Retail) Gross margin1 (incl. media² income), %me) 32.9 32.5 31.9 2.3 2.6 2.8 30.6 29.9 29.1 1H13 1H14 1H15 From trading activites Media income Gross margins lower impacted by competitor pricing activity Partially offset by further increase in media income 1. Expressed as a percenta
Slide 10: Operating metrics (Retail)
Operating metrics (Retail) 1H15 1H14 1H15 1H14 (% Retail (% Retail (£m) (£m) Revenue) Revenue) Trunking & delivery1,2 54.6 47.4 11.5 11.5 CFC1,2 37.2 34.8 7.8 8.4 Other operating costs3 5.7 4.9 1.2 1.2 Marketing (non vouchering) 4.0 4.0 0.8 1.0 Total Operating 101.5 91.1 21.3 22.1 Mature CFC efficie
Slide 11: UK retail operating contribution
UK retail operating contribution 1H15 1H14 (% Retail (% Retail Revenue) Revenue) Gross Margin 29.1 29.9 (0.8) Media income¹ 2.8 2.6 0.2 Trunking & delivery2,3 (11.5) (11.5) - CFC2,3 (7.8) (8.4) 0.6 Other operating costs4 (1.2) (1.2) - Marketing (non vouchering) (0.8) (1.0) 0.2 Operating contribution
Slide 12: Total Costs
Total Costs 1H15 1H14 1H15 1H14 (£m) (£m) (% Revenue) (% Revenue) Total operating1,4 101.5 91.1 20.0 21.2 Administrative expenses2,4 28.0 22.6 5.5 5.3 Morrisons³ 23.6 9.3 4.6 2.2 Depreciation and amortisation 26.4 23.4 5.2 5.4 Total 179.5 146.4 35.4 34.1 1. Total operating costs include marketing (n
Slide 13: Capital investment
Capital investment1 1H15 1H14 (£m) (£m) Mature CFCs 4 17 New CFCs 19 - Delivery (vehicles, spokes) 13 7 Technology 9 7 Fulfilment development 7 6 Other2 1 2 Total 53 39 1. Capital investment includes tangible and intangible assets and also Ocado’s share of the MHE JV Co capital (1H 2015: £2.4 millio
Slide 14: Underlying cashflow
Underlying cashflow 1H15 1H14 (£m) (£m) EBITDA 38.2 34.3 Adjustments for non cash and exceptional items 3.7 1.3 Capital spend (40.6) (24.9) Working capital 1.3 (1.1) Interest paid (2.1) (0.7) Cash movement excluding financing 0.5 8.9 activities Net cash flows from financing activities (6.4) (8.9) To
Slide 15: Debt facility
Debt facility Facility extended and increased: 2 year extension to mid 2019 Increased from £100 million to £210 million Improved pricing and increased covenant headroom Sufficient flexibility for Andover and Erith CFC capital requirements 15
Slide 16: Summary
Summary Continued growth in competitive market Solid UK retail economics Capacity plans on track Well positioned for future platform opportunities 16
Slide 17: Tim Steiner, CEO
Tim Steiner CEO Mocado The online supermarket
Slide 18: Strategic review
Strategic review Challenging market environment Positive customer trends UK business model progression Drivers – progress against our strategic objectives 18
Slide 19: Challenging market environment
Challenging market environment Items in basket stable despite difficult market and growth in new customers Deflationary pressures in overall market Average number of basket items steady despite 4.0% Deflationary/price pressures in the 3.0% overall market 2.0% Increasing numbers of new customers
Slide 20: Positive customer trends continue
Positive customer trends continue Strong growth in new customer acquisition & broadening customer base New customer acquisitions (,000) New customer household income distribution (by year of registration)¹ 2010² May 2015 10% 20% 26% 19% 45% 27% 27% 27% 2013 2014 2015 Time <£40k £40k-£60k £60k-£100k
Slide 21: With more efficient operations
With more efficient operations Overall CFC efficiency continues to improve as we add more efficient capacity UPH target Mature CFC efficiency¹, UPH Erith 200+ target³ >180² Andover 180+ target³ 153 Dordon 170 (target 180) 114 Hatfield 150 2012 2013 2014 2015 2020+ Projection 1. A CFC is considered m
Slide 22: … and a better distribution network
… and a better distribution network As we add more CFCs and spokes (~4-5 additional spokes to be added during the next 12 months) DPV increases steadily as customer density improves, hereby reducing delivery costs Trunking costs decrease as we open more CFCs in existing geography Drops per van/
Slide 23: Our UK retail business demonstrates the strength of our model
Our UK retail business demonstrates the strength of our model Further improvements in efficiency metrics will have a positive impact on our operating costs Development in operating costs¹ 170bps improvement Projected further cost efficiency benefits of 100-200bps H1 2012 H1 2015 Projection² CFC oper
Slide 24: Drivers - Steady progress on strategic objectives
Drivers - Steady progress on strategic objectives Driving Growth Maximising Utilising Efficiency Proprietary Knowledge • Continued customer proposition • Continued operational efficiency • Morrisons agreement successful improvements improvements • Advanced discussions further on • Significant growth
Slide 25: Constantly improving proposition to customers
Constantly improving proposition to customers Retail revenues up 15.1% Active1 customers 471,000 Average basket2 £111.68 Proposition development Service Range Price • Highest and improved service levels • Wider range • More promotions • Quick and easy to use • Expanding own label • Better value • Fr
Slide 26: …with focus on developing our user interfaces
…with focus on developing our user interfaces Launched mobile website for Ocado.com PayPal login & check out Launched Apple Watch app Refreshed app designs Refreshed Android app Optimisation Personalisation Logged out shopping 26
Slide 27: Continued strengthening of our consumer brands
Continued strengthening of our consumer brands The Favourite Online Supermarket in Customer Survey 2009, 2010, 2011, 2012, 2013, 2014, 2015 Ocado Organic Juicing Fruit & Veg Box 27
Slide 28: Enable Morrisons' and future partners' online businesses
Enable Morrisons’ and future partners’ online businesses Launched January 2014 Ramp up progress continues well Morrisons announced a 12 month sales run rate of around £200m in March 2015 28
Slide 29: Ocado Smart Platform (OSP) – International partnership deals
Ocado Smart Platform (OSP) – International partnership deals OSP offers retailers: Attractive customer proposition Scalable, modular approach Better operational efficiency Inbound partner interest continues Ability to extend range significantly Advanced discussions further with multiple
Slide 30: Summary
Summary Robust UK retail economics in competitive environment Customer trends encouraging Capacity plans remain on track Discussions advancing for future platform opportunities 30
Slide 31: Ocado The online supermarket
ocado 31 The online supermarket
Slide 32: Appendices
Appendices 1. Balance sheet 2. Statutory cashflow 3. Market update 32
Slide 33: Appendix – Balance sheet
Appendix 1 – Balance sheet 1H15 1H14 (£m) (£m) Non-current assets Property, plant and equipment 294.7 226.4 Other 123.0 103.6 Total 417.7 330.0 Current assets Cash and cash equivalents 70.4 110.3 Other current assets 88.4 69.6 Total 158.8 179.9 Total Assets 576.5 509.9 Current Liabilities Trade and
Slide 34: Appendix – Statutory cashflow
Appendix 2 - Statutory cashflow 1H15 1H14 (£m) (£m) EBITDA 38.2 34.3 Working capital movement 1.3 (1.1) Exceptional items - - 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)/Increase in net debt/finance (9.2) (12.6
Slide 35: Appendix – Market update
Appendix 3 – Market update UK Online Grocery Market Size (£bn, incl. VAT)¹ Positive outlook for the online grocery market 20 17.2 15 CAGR UK grocery market to increase in value 14% 10 7.7 8.9 by 13% to £201bn over the next five 6.5 5 years 0 2013 2014 2015 2020 Online to continue to be the faste