Coronavirus Update

Ocado Group Plc - Half-year Report

This content has been sourced from:


Strong performance in challenging times

Interim results for the 26 weeks ended 31 May 2020

14 July 2020

Financial highlights 

? 27% Retail Revenue growth, demonstrating Ocado's ability to meet unprecedented, and sustained, demand for online grocery in the UK

? Fees invoiced to International Solutions partners of £73.7 million, up 58%, as international roll out gains pace with the opening of the first partner Customer Fulfilment Centres in Paris and Toronto

? Group EBITDA of £19.8 million, down 36%, reflecting increased costs from investment in International Solutions business, offset by strong Retail performance during the current crisis. Loss before tax of £40.6 million also reflects this investment

? Strong balance sheet. As at the date of this announcement, cash position of £2.3 billion including the £1bn capital raise after period end

? Ocado investing more, and faster, to help partners accelerate the roll out of the Ocado Smart Platform; greater momentum in technology innovation to strengthen industry leadership


1H 2020



1H 2019




vs 1H 2019










UK Solutions & Logistics




International Solutions




Inter-Segment & Other
















UK Solutions & Logistics*




International Solutions*




















Loss before tax




Capital Expenditure




Cash and cash equivalents




Net cash/(debt)*












1. Exceptionals in FY2019 primarily relate to the Andover fire with a write down of associated assets of £111.8 million, offset by insurance income of £23.8 million. £36.3 million of income has been recognised in H1 2020

2. 1H 2019 is restated for IFRS 16

* These measures are Alternative Performance Measures; refer to note 15 in the condensed financial statements.

See page 4 for Notes Continued

Tim Steiner, Chief Executive Officer of Ocado Group, said:

"Over the last six months, my colleagues at Ocado Group have shown, in exceptionally demanding circumstances, the resilience, dedication and innovative spirit that has always characterised this business. I would like to thank them profoundly on behalf of all the stakeholders of Ocado.

The world as we know it has changed. As a result of COVID-19 we have seen years of growth in the online grocery market condensed into a matter of months; and we won't be going back. We are confident that accelerated growth in the online channel will continue, leading to a permanent redrawing of the landscape of the grocery industry worldwide. This will mean more demand for Ocado Smart Platform from current and prospective partners and our recent fundraising will ensure that we are able to meet that demand. It will also mean that we can invest more capital in innovation for our partners and further expand our leadership as the world's preeminent solutions provider in online grocery.

Seizing the future will, of course, require the same mix of constant questioning and innovation, focus, and quiet determination that has brought us so far. I have no doubt that we will rise to the challenge, taking advantage of a scale of opportunity that we have never seen before". 

Key milestones in H1 2020

Ocado Solutions, the business which helps grocers around the world develop online grocery services through the application of technology, robotics and AI, has made strong progress in the half, with the launch of the first international Customer Fulfilment Centres ("CFCs"), and in preparing all its partners for accelerated channel shift to online grocery in their local markets.

A redrawing of the landscape in online grocery, worldwide

? COVID-19 has significantly accelerated the ongoing channel shift to online grocery. Industry data evidences that this is a global trend; in the UK online penetration has nearly doubled within a few months. In the US, by late June, monthly online grocery sales had reached a level six times what they were in August last year, and in China the major online grocery platforms saw triple digit year-on-year sales growth during the COVID-19 outbreak

? We believe that this channel shift is sustainable, as survey data shows that many consumers who were shopping online during the peak of the pandemic in their respective countries have either continued to do so (56% of those in China), or intend to continue online shopping as 'lockdown' measures ease. In the UK, 30% of consumers say they will order more of their groceries this way after the pandemic, whilst 90% of online shoppers in the USA expect to continue grocery shopping this way

? The combined revenue of our nine global partners is £210 billion, whilst sales in addressable key markets are £2.8 trillion. In the context of accelerated channel shift, we believe this represents a fee opportunity of £3.5-£26.3 billion, depending on the level of online penetration ultimately achieved

Addressing our partners' needs in the context of accelerated channel shift to online

? We have worked with our partners in the UK and internationally, to serve as many customers as possible in this unprecedented time, and to ensure they are best positioned to succeed in this new landscape for online grocery

? Our first two international CFCs for Groupe Casino, in France, and Sobeys, in Canada, were launched ahead of plan, despite COVID-19 related disruption, enabling our partners to deliver for their customers against a backdrop of expected long-term increase in demand for online grocery

? We ramped up capacity in UK CFCs significantly, to enable Ocado Retail to serve as many loyal and vulnerable customers as possible,  with mature facilities running at peak volumes and orders per week through Erith up c60% in the half

? We have worked with Morrisons, in the UK, and Bon Preu, in Catalonia, to materially increase their volumes of in store fulfilment through the platform, with current operating levels at over five times those seen at the beginning of March

? In the US, Kroger announced three additional CFCs, bringing the total announced so far to nine, and progressing their ambition to use the CFC model to expand Kroger products to a larger footprint

? Despite restrictions on social distancing and travel, in the various markets where we operate, whether in the UK or internationally, we currently expect no material delays from COVID-19 in the delivery of future CFCs for partners

Continuing to grow and evolve to deliver outstanding execution

? We have added 300 Technology colleagues in the period, to allow us to meet, at this critical juncture, the accelerated needs of our partners whilst continuing to innovate on the capabilities of our platform to extend Ocado's leadership as a solutions provider for the fulfilment of online grocery

? To bring increased scale and reach to our supply chain, to support future growth, we have partnered with global contract manufacturing companies, in addition to continued work with longstanding partners

? Transformation continues within the business to ensure that the organisational structures and processes in place are best able to support accelerated growth. In the half, major developments included committing to new accounting, procurement and MRP (materials resource planning) systems and building of our client services teams

Investing in innovation to future proof the platform for our partners

? Our first Ocado Zoom site, in West London, achieved planned endgame capacity a year ahead of plan. The immediacy service remains popular with customers, effectively serving missions beyond the full basket shop. We are progressing the build of the second Zoom facility, in North London, and are seeking further sites

? Evidencing the unique flexibility of Ocado Smart Platform ("OSP") to meet the specific needs of our partners in their home markets in online grocery, and to cater to a growing range of shopping missions, Kroger announced the build of their first mini CFC in Michigan

? In an important step as we roll out CFCs at greater scale with our partners, our third generation robot is now in production

? We now have three robotic pick arms live in Erith CFC, in South East London, and have more than doubled the pick efficiency of this technology since the beginning of the year

? Our venture investments made, to date, seek to deploy automation in food packing, preparation and production and, in the case of vertical farming, reduce food miles and make production more sustainable. The investment case in each of these areas is stronger in a post COVID-19 environment

Ocado Retail has shown great resilience in the first half, doing its part to feed the nation and adapt to the challenges posed by unprecedented demand. The business, now a 50:50 JV between Ocado Group and M&S, is the fastest growing grocer in the UK.

Adapting to unprecedented demand in the UK

? Sales grew at 27.2% in the first half, as the business adapted to serve a material and sustained increase in demand in response to the COVID-19 crisis which required changes to the model including prioritising the most loyal and the most vulnerable of our customers

? Exit rate of sales in the half remained over 40% versus the prior year

? Despite volatility in customer shopping behaviour during the period, and some associated supply chain disruption, service metrics remained strong, with substitutions of less than 4% and 97% of orders delivered on time

? Units picked per labour hour ("UPH") in mature CFCs rose to 170 (1H 2019: 159), with facilities reaching their best ever efficiencies in the second quarter and Erith now better than the average, as they processed more volumes than ever before, also benefiting from the faster processing time typically associated with larger basket orders

? Larger baskets saw the overall volume of products carried, per van, increase significantly. This enabled better efficiencies in terms of revenues per van shift, whilst driving a reduction in number of deliveries per van per week ("DPV") to 175 (1H 2019: 192)

? Ocado Retail continues to achieve market leading levels of food waste, at just 0.4% of sales

Bringing an even better offer to customers

Preparations for the September switchover from Waitrose to M&S products are in their final stages and on track

Although any significant change carries an element of uncertainty, we are firmly convinced that the switchover provides Ocado Retail the opportunity to provide an even more compelling offer for customers. This will include adding initially over 5,000 M&S Food lines with more to follow, which will be available exclusively online at (compared to c4,000 Waitrose lines currently available)

Ocado Retail will also stock c1,600 core M&S Clothing & Home lines per year (compared to c250 Waitrose lines), enriching the general merchandise offer currently available

Outlook statement

There is no material change to our guidance from previous public statements.

Revenue growth:

  • Positive outlook for online grocery but Retail revenue growth forecast suspended given uncertainties over the scale, and duration, of ongoing impact of social distancing restrictions in the UK
  • UK Solutions & Logistics below Retail, reflecting full year impact of Morrisons' "holiday" from Erith
  • International Solutions is expected to be less than £10m, as under IFRS 15 fees start to be recognised at go-live, with initial CFC sites in France and Canada only operational for part of the year

International Solutions fees invoiced growth of 40% or more


  • Retail above revenue growth, reflecting the impact of operational leverage in the business, offset by additional costs associated with COVID-19 and the uncertainties of the duration of social distancing measures
  • UK Solutions & Logistics to decline, primarily due to full year impact of Morrisons' "holiday" from Erith, with corresponding insurance benefits recorded in exceptional income
  • International Solutions to decline due to continued investment in improving the platform and building the business, and from increased support costs with launch of initial CFC sites

? Insurance proceeds related to Andover fire to be received over time; expect business interruption losses to be covered. Our insurers have accepted our claim and £94 million has been received to date with £36 million recognised in the income statement in the period. Further insurance proceeds will be received over time and be recognised as exceptional income when the related capital expenditure is incurred or business interruption claim settled

? Total capital expenditure for the Group is expected to be around £600 million with the majority of the increase reflecting the additional capital to meet the needs of our Solutions customers' growth in the UK and internationally

? Continue to target further Solutions deals which would generate additional cash fees but would negatively impact short term profits