Ocado Group plc Segmental Reporting. 18 th January 2018

Transcription

1 Ocado Group plc Segmental Reporting 18 th January 2018

2 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 forward-looking statements are usually identified by words such as anticipate, target, expect, estimate, intend, plan, goal, believe or other words of similar meaning. By their nature, all forwardlooking statements involve risk and uncertainty because they are based on current expectations and assumptions but relate to future events and circumstances which may be beyond Ocado s control. There are important factors that could cause Ocado s actual financial condition, performance and results to differ materially from those expressed or implied by these forward-looking statements, including, among other things, UK domestic and global political, social, economic and business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition, the possible effects of inflation or deflation, variations in commodity prices and other costs, the ability of Ocado to manage supply chain sources and its offering to customers, the effect of any acquisitions by Ocado, combinations within relevant industries and the impact of changes to tax and other legislation in the jurisdictions in which Ocado and its affiliates operate. Further details of certain risks and uncertainties are set out in our Annual Report for 2016 which can be found at Ocado expressly disclaims any undertaking or obligation to update the forward-looking statements made in this presentation or any other forward-looking statements we may make except as required by law. Persons receiving this presentation should not place undue reliance on forward-looking statements which are current only as of the date on which such statements are made Ocado Group plc. All rights reserved. 2

3 Why are we adopting segmental reporting? Transparency: Our business is comprised of our own Retail operations and the provision of our Ocado Solutions services to our corporate customers, with another partner being added recently Both business streams are growing and segmental reporting will provide more visibility on the underlying performance of each segment and therefore will help shareholders better understand and challenge Valuation: Segmental reporting will enable a valuation of the Retail business excluding any benefits from our Solutions deals; and Allow the Solutions business to be valued on the potential from future deals whilst still disclosing the current performance 2017 Ocado Group plc. All rights reserved. 3

4 How will the presentation of numbers now look? We will adopt 2 segments, Retail and Solutions, but also have an Other column to include certain costs not attributable to either segment and notional income from MHE JVCo. FY2017 results will include Revenue and EBITDA by segment FY17 Revenue FY16 Variance % EBITDA Retail X X X X X X Solutions X X X X X X Other X X X FY17 FY16 Variance % Total X X X X X X 2017 Ocado Group plc. All rights reserved. 4

5 Definition: Retail The Retail segment provides online grocery and general merchandise to customers within the UK and therefore will include:- Grocery and General Merchandise sales, margins and marketing costs General Merchandise wholesale business, sales, margins and related fees Operational costs including the share of CFC and spoke costs in locations also used for Morrisons Share of technology costs Share of head office costs 2017 Ocado Group plc. All rights reserved. 5

6 Definition: Solutions The Solutions segment provides end-to-end ecommerce, fulfilment and last mile delivery services to corporate customers and therefore includes:- Fees from corporate customers Operational costs including the share of CFC and spoke costs in locations also used by Ocado Retail Share of technology costs Share of head office costs 2017 Ocado Group plc. All rights reserved. 6

7 How to split technology costs? We design and build the technology solutions that power our Retail and Solutions segments, comprising everything from websites, mobile apps, through to delivery route optimisation software and robotics Segmental split is to EBITDA and so no split of capitalised costs Certain costs (e.g. hosting, web traffic, software support costs) can be allocated based on scale of the operation and effective use Other costs for ongoing development (e.g. non capitalised management time, holiday and training costs), for research or for support (e.g. recruitment) have been apportioned to reflect a reasonable split of benefit 2017 Ocado Group plc. All rights reserved. 7

8 How to split head office costs? Most overheads are directly attributable to segments For example the commercial teams supporting Grocery, GM and Solutions Other areas, such as Business Planning & Supply Chain are allocated with reference to existing specific customer agreements Central departments such as HR, Finance & Legal have been apportioned based on review of activities and headcount There remains a balance of costs (Board, share scheme and other incentive costs) which have not been apportioned and are in Other 2017 Ocado Group plc. All rights reserved. 8

9 Other This segment includes Board and share schemes and other incentive costs This also includes the accounting impacts of the MHE JV Co which is not attributable to either Retail or Solutions. This legal structure was put in place to facilitate joint ownership of the MHE at the Dordon CFC, the use of which is shared with Morrisons. The JV grants a lease to Ocado for use of the MHE. Ocado uses half the capacity of these assets for its own grocery business and the other half to provide services to Morrisons.com. Ocado is liable for 100% of the lease payments to the JV. Ocado separately invoices Morrisons for its 50% share. Ocado, as the lessee must recognise the full lease liability on its books. Lease payments from Morrisons are recognised in Other Income, so EBITDA, but there is additional interest and depreciation Ocado incurs no cash outflow to extinguish the debt, hence, it is not real debt, so it is excluded from the overall debt position. This is because the lease payments net to nil for all parties 2017 Ocado Group plc. All rights reserved. 9

10 2016 Results split by Segment Total Retail Solutions Other Revenue 1, , Operating contribution Administrative cost 1,2 (69.5) (41.5) (17.2) (10.8) EBITDA Administrative costs exclude depreciation, amortisation, marketing costs 2 Reclassified 1.0m of cost originally in Admin costs to Distribution costs relating to certain General Merchandise operational costs 2017 Ocado Group plc. All rights reserved. 10

11 No balance sheet segmentation There are a number of areas where there is not yet a sufficiently robust split for external reporting purposes For technology hardware and software costs, there are significant historic costs for which there is no obvious allocation methodology. Some areas of working capital can be segmented, e.g. stock, but there are a number of suppliers which are common to both segments and a split of the current assets and liabilities is not practical at present. The financing of Ocado is a group activity and it is unlikely that this area will be segmented in the foreseeable future 2017 Ocado Group plc. All rights reserved. 11

12 Q&A 2017 Ocado Group plc. All rights reserved. 12