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Ocado Group PLC

Ocado Group PLC A platform for significant and sustainable long-term value

Ocado Group PLC (LON:OCDO), today announced preliminary results for the 52 weeks ended 2 December 2018.

Financial and statutory highlights

FY 2018

(52 weeks)

£m

FY 2017 restated

(52 weeks)

£m

Change

(52 vs 52)

v 2017 %

Retail Revenue2*

1,475.8

1,317.4

12.0%

Solutions Revenue*

123.0

106.2

15.8%

Group Revenue

1,598.8

1,423.6

12.3%

       

Retail EBITDA3*

82.5

79.2

4.2%

Solutions EBITDA*

(17.9)

(6.6)

Group EBITDA*

59.5

75.0

(20.7%)

(Loss) after tax

(44.9)

(9.8)

Cash and cash equivalents

410.8

150.0

173.9%

Statutory net cash/ (debt)

50.2

(228.0)

External net cash / (debt) 4*

124.7

(133.9)

Note: These numbers are reported for the first time under IFRS 15 which governs Revenue from Contracts with Customers. In order to understand the impact on FY17 and FY18 results please refer to the presentation on the Investor section of the Ocado Group website (http://www.ocadogroup.com/investors/reports-and-presentations/2019.aspx). See also the CFO review to follow and note 1.3 to the financial statements

Tim Steiner, Chief Executive Officer of Ocado, said:

“Our performance last year was the result of many years of focus, dedication and perseverance: what we have called our “18-year overnight success”. Our growth story, however, is only just beginning. We now have in place a platform for significant and sustainable long-term value creation as the leading pure-play digital grocer in the UK, a world-leading provider of end-to-end ecommerce grocery solutions, and as an innovative and creative technology company applying our proprietary knowledge to a range of challenges.

“Our transformation journey is well under way with increased cash fees earned and greater investment as we execute on behalf of our partners. Creating future value now will involve us continuing to scale the business, enhancing our platform, enabling our UK retail business to take advantage of all its opportunities for growth, and innovating for the future. We look forward to fulfilling these opportunities with excitement and determination”.

Key milestones

2018 was a transformative year for Ocado.

Adding partners to the Ocado Smart Platform

• Over the year we signed international partnerships with Sobeys, ICA and Kroger to develop the Ocado Smart Platform (“OSP”) in Canada, Sweden and the United States respectively, utilising both our proprietary software and algorithms as well as our robotic infrastructure solutions

• We are making good progress with all our partners. Bon Preu launched its online offer in Catalonia in November; Groupe Casino continues its building work on its first Customer Fulfilment Centre (“CFC”) in the south of Paris; Sobeys has begun building its first CFC site in the Greater Toronto area and is making good progress; ICA has identified the location of its first site in Stockholm: and Kroger has committed for its first three CFCs out of a total of 20 within the first three years. In the UK, we have begun to fulfil customer orders for Morrisons from our state-of-the-art facility at Erith (“CFC4”) and we continue to support their roll out of a store-pick based solution

• Cash fees from Solutions partners in 2018 were £200.1 million (2017: £146.1 million)

• We continue to engage with multiple retailers in a variety of markets with a view to adding more partnerships to our platform

Innovating in technology

• Headcount in Ocado Technology has increased by 76% in the last three years, including 300 programmers hired in FY18

• To protect our intellectual property we have increased the number of filed patent applications from 73 to 395 over the last three years, now covering 80 separate innovations across a broad and deep technology estate including real-time control systems, robotics, machine learning and AI and routing systems

• We have been testing robotic picking in our Andover CFC and are targeting to start using in live production over the coming months

Scaling the business to drive faster growth

• We have been able to meet the demand from new retail customers by adding capacity to our network, most notably by opening our fourth CFC in Erith, South London. At full capacity of £1.2bn, this will be the largest automated grocery fulfilment centre in the world

• We have successfully ramped up capacity at Erith and are now processing over 30,000 orders per week. In its first three weeks it reached the same volume it took us 32 weeks to achieve at Andover

• Our dedicated transformation team is in place and focused on preparing the business to open 23 CFCs for our Solutions partners in the coming years. Our strong order book gives us good visibility, long lead times, and an ability to phase execution

Improving the experience for Ocado’s retail customers

• We continue to lead the market for delivery punctuality at 94.9% (2017: 95.0%) and order accuracy at 98.8% (2017: 98.8%)

• Ocado offers the widest range of any UK grocer and we continue to make shopping easier, adding this year both low plastic and no-added sugar aisles

• We went paperless with our receipts, saving over 20 million sheets of paper every year

• Our general merchandise continued to grow strongly. All the products on our Sizzle destination site are now available on our webshop and we also launched a new range of Ocado own brand household products to give customers even more choice

• In 2018 we won numerous awards including The Grocer’s “Online Supermarket of the Year”, validating the progress we have been making improving the customer experience

Increasing efficiency in our retail operations

• Mature6 CFC operational productivity remained stable at 164 UPH (2017: 164 UPH)

• Delivery efficiency improved further to an average of 194 DPV (2017: 182 DPV)

• Food waste7 was reduced to 0.02%, or just 1 in 6,000 items

Growing the customer base and winning market share

• We grew active customers 11.8% in the year to 721,000 (2017: 645,000)

• Total order volumes increased 12.1% to an average of 296,000 orders per week (2017: 264,000)

• Average hypermarket basket value was slightly lower at £106.85 (2017: £107.28) driven by an increase in average price per item offset by a decrease in the average basket size

• Customer loyalty remained strong and we continued to grow orders in the double digits across all our catchment areas

Outlook statement

• Assuming economic conditions remain broadly stable, we remain confident in achieving revenue growth in our Retail business of between 10‐15% in the 2019 financial year as we increase our fulfilment capacity and grow market share in the UK

• As volumes grow, and we expand utilisation of our new CFCs, we will continue to find efficiencies in our business and as such we expect further growth in Retail EBITDA*

• Solutions Revenue* under IFRS 15 will only be recognised once a customer’s first CFC is opened, but we will still have to recognise the build costs. With no CFCs expected to open in 2019, whilst we expect Solutions revenue* growth well ahead of Retail growth, we expect a decline in EBITDA* given the £15-20m additional in operating costs necessary to prepare the CFCs and to provide features on the platform

• We continue to target further Solutions deals, which would generate additional cash fees but would impact short term profits

• Total capital expenditure for the group is expected to be £350m, with the increase reflecting the additional capital required to fulfil our obligations to our Solutions customers

Results presentation

A results presentation will be held for investors and analysts at 9.30am today at the offices of Goldman Sachs, River Court, 120 Fleet Street, London EC4A 2BE. Presentation material will be available online at http://www.ocadogroup.com/investors/reports-and-presentations/2019.aspx.