TIDMOCDO
RNS Number : 7178N
Ocado Group PLC
02 February 2016
Ocado Group Plc
Preliminary results for the 52 weeks ended 29 November 2015
2 February 2016
Financial and statutory highlights
FY 2015 FY 2014 Change
GBPm GBPm vs 2014
%
------------------ -------- -------- ---------
Gross sales(1)
(Retail) 1,115.7 972.4 14.7
Revenue(2) 1,107.6 948.9 16.7
EBITDA(3) 81.5 71.6 13.8
Statutory profit
before tax 11.9 7.2 65.3
Cash and cash
equivalents 45.8 76.3
Statutory net
debt 127.0 99.4
External net
debt (cash)(4) 7.5 (31.4)
------------------ -------- -------- ---------
Tim Steiner, Chief Executive Officer of Ocado, said:
"We are pleased to announce results today which illustrate the
progress Ocado has made through its clear focus on innovation and
customer service. The continued enhancement of Ocado's
industry-leading technology and investment into our retail
proposition over the course of the year has meant our customers now
have greater choice, competitive prices and consistently high order
accuracy and on-time delivery. As a result, customer numbers grew,
reflected in strong revenue growth in a very challenging market
environment.
"We will shortly open our next Customer Fulfilment Centre in
Andover which houses the first installation of our new proprietary
equipment solution. This has been designed and is manufactured in
Britain by Ocado, and will significantly further enhance our
capabilities and efficiencies.
"Our ability to package our unique proprietary technology,
including our equipment solution, for retail partners outside the
UK through our Ocado Smart Platform is proving to be of great
interest to a significant number of retailers. We expect to sign
multiple deals in multiple territories in the medium term.
"We are transforming the shopping experience for the benefit of
our customers in the UK, and expect to do so for customers in other
countries through Ocado Smart Platform. We look forward to making
further progress over the current financial year."
We continued to make good progress in the delivery of our
strategic objectives - driving growth, maximising efficiency and
utilising proprietary knowledge, through the following actions:
Constantly improve the proposition to customers
-- Voted Best Online Grocer by Which? Magazine in its members'
Annual Satisfaction Survey for the sixth consecutive year and
Online Supermarket of the Year at the Grocer Gold Awards 2015
-- Market leading service levels maintained at 95.3% for on time
delivery (2014: 95.3%) and at 99.3% (2014: 99.3%) for order
accuracy
-- Range at Ocado.com further broadened to 47,000 SKUs (2014: 43,000 SKUs)
-- Further interface improvements including new mobile website and PayPal login
Strengthen brands
-- New customer acquisitions up over 20%, with active
customers(5) up 12.4% to 509,000 (2014: 453,000)
-- Order volumes grown by 16.8% to an average of over 195,000
orders per week (2014: 167,000 OPW), with the highest number of
orders delivered in a week exceeding 225,000
-- Average basket value declined by 2.1% to GBP109.95 (2014:
GBP112.25), negatively impacted by price deflation in the market
and increased mix of standalone orders for Fetch and Sizzle
-- Ocado own-label sales up by 16.8%, with over five products per average customer basket
-- Introduction of Ocado Smart Platform brand for international partnering
Develop ever more capital and operationally efficient
infrastructure solutions
-- Delivery efficiency improved further to 166 DPV (2014: 163
DPV), supported by a number of enhancements to our routing
system
-- Mature CFC(6) operational productivity improved to 155 UPH (2014: 145 UPH)
-- Advanced testing of the first installation of our new
proprietary fulfilment solution in our Andover CFC where we
anticipate to go live shortly
Enhance end-to-end technology systems
-- Further innovation and increased activity to protect our
intellectual property with 73 patent applications (covering 32
innovations) filed by the end of the year
-- Replatforming of IT systems is progressing well and remains in line with our expectations
-- Continued expansion of our technology team to over 700
technology professionals with plans to increase this to around
1,000 by the end of 2016, with a new technology centre recently
established in Bulgaria and another due to open in Southern
Europe
Enable Wm Morrison Supermarkets ("Morrisons") and future
partners' online businesses
-- Morrisons.com progressing well, with sales reaching around
GBP200 million after 12 months of trading(7) and continued growth
since
-- Despite not signing a first deal in 2015, discussions with
multiple potential international partners to adopt the Ocado Smart
Platform solution continue and our confidence in signing a deal
remains high
Results presentation
A results presentation will be held for investors and analysts
at 9.30am today at the offices of Goldman Sachs, Peterborough
Court, 133 Fleet Street, London EC4A 2BE. Presentation material
will be available online at
http://www.ocadogroup.com/investors/reports-and-presentations/2015.aspx.
Contacts
Tim Steiner, Chief Executive Officer on 020 7353 4200 today or
01707 228 000
Duncan Tatton-Brown, Chief Financial Officer on 020 7353 4200
today or 01707 228 000
David Hardiman-Evans, Head of IR & Corporate Finance on 020
7353 4200 today or 01707 228 000
David Shriver, Michelle Clarke at Tulchan Communications on 020
7353 4200
Notes
1. Gross sales includes VAT and marketing vouchers
2. Revenue is online sales (net of returns) including charges
for delivery but excluding relevant vouchers/offers and VAT. The
recharge of costs to Morrisons and fees charged to Morrisons are
also included in revenue
3. EBITDA is a non-GAAP measure which we define as earnings
before net finance cost, taxation, depreciation, amortisation,
impairment and exceptional items
4. External net debt (cash) is the statutory net debt less
amounts owing to MHE JVCo of GBP119.5 million (2014: GBP130.8
million)
5. Customers are classified as active if they have shopped on
ocado.com within the previous 12 weeks
6. A CFC is considered mature if it has been open for 12 months
by the start of the half year reporting period
7. Announced in Morrisons' Annual Report, March 2015
Financial Calendar
Our financial reporting calendar for the remainder of the year
will be a Q1 Trading Statement on 15 March 2016, a Half Year
Results Statement on 28 June 2016, a Q3 Trading Statement on 13
September 2016 and a Q4 Trading Statement on 8 December 2016.
Cautionary statement
Certain statements made in this announcement are forward-looking
statements. Such statements are based on current expectations and
assumptions and are subject to a number of risks and uncertainties
that could cause actual events or results to differ materially from
any expected future events or results expressed or implied in these
forward-looking statements. Persons receiving this announcement
should not place undue reliance on forward-looking statements.
Unless otherwise required by applicable law, regulation or
accounting standard, Ocado does not undertake to update or revise
any forward-looking statements, whether as a result of new
information, future developments or otherwise.
Chief Executive Officer's review
Good progress in a challenging market environment
The UK grocery market continued to experience significant
challenges throughout 2015. Ongoing price competitiveness and
deflationary pressure combined with changing customer behaviour, in
particular with continued shifts to discount stores and online,
have been reflected in declining store volumes at large
supermarkets and margin pressure across the industry.
Notwithstanding this challenging market environment, we
continued to deliver our strategic objectives, namely, to drive
growth, maximise efficiency and utilise our knowledge, ideally
positioning ourselves to benefit from the continued channel shift
to online grocery shopping. Our strategic objectives apply equally
to our own retail business and to our existing and future platform
activities.
The validity and robustness of our retail business model is
reflected in our 2015 performance. We grew our sales ahead of the
broader UK online grocery market and well ahead of the overall UK
grocery market, progressed work on our two next generation CFCs,
continued to deliver good services to Morrisons.com, and advanced
discussions with multiple potential international partners for our
Ocado Smart Platform.
Progress against our strategic objectives
We have a number of key complementary actions, which form a
framework to achieve our strategic objectives for our retail and
corporate customers, intended to deliver long-term shareholder
value. These actions are to:
-- Constantly improve the proposition to customers;
-- Strengthen our brands;
-- Develop ever more capital and operationally efficient infrastructure solutions;
-- Enhance our end-to-end technology systems; and
-- Enable Morrisons' and future partners' online businesses.
Constantly improve the proposition to customers
Offering the best possible proposition to our customers has
remained our core focus and is central to driving the growth of
both our retail and partner businesses.
In our retail business, we continued to improve the key elements
of our proposition to customers - our high quality service and user
experience, the broadest selection of products to choose from and
the competitiveness of our pricing.
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We improved across all these core elements. Our customers have
continued to recognise the quality of our service and extensive
range of products, evidenced by the award of Best Online
Supermarket in The Grocer Gold Awards 2015 and Best Online Grocer
by Which? Magazine for the sixth year running. We believe this
reflects the strengthening recognition of our consumer brand.
A consistently positive shopping experience is essential to
encourage consumers initially to try Ocado and then to return to us
for future shops. We believe that increasingly consumers will seek
to fulfil their grocery shopping requirements online if they
consider it the more compelling alternative to current store based
propositions. Our focus has remained on improving the customer
experience by enhancing the speed, convenience and ease of using
our service, allowing customers to be able to shop anywhere,
anytime, across intuitive and easy to use interfaces.
Our new mobile website for Ocado.com, which was launched in
January 2015 to complement our existing mobile apps, allows our
customers to shop more easily using their mobile devices and has
proven to be popular especially among first time users of our
service. Mobile continues to grow in importance for Ocado and the
wider retail sector. In 2015, over 50% of all orders were checked
out using a mobile device, using our latest apps and browsers.
We aim to be at the forefront of new developments and have
continued to focus on improving elements and features of the
customer interface to enhance the speed, convenience and usability
of our service. In 2015, we launched a redesigned Android app and
our first Apple Watch app which enabled Apple Watch owners to shop
using their device on the first day of its launch in the UK.
The retention rate of new customers is important to support our
growth and this has remained in line with historical trends. We
have introduced features such as Import Your Favourites, reduced
the number of steps in the registration process, added the ability
to start to shop with us without having to log in first, improved
our product search and introduced payment by PayPal. They have
proved to be beneficial in encouraging new customers to shop for
the first time and then for subsequent shops.
A reliable and high quality delivery service and experience is
critical to our customers and our business. We believe our customer
delivery service continues to be market leading. Delivery on time
or early, in the customer selected one-hour delivery window,
remained at a high level of 95.3% and order accuracy remained at
99.3%. Our Customer Service Team Members provide the important
quality face-to-face interaction with our customers.
Customers can now choose from nearly 47,000 SKUs (2014: 43,000
SKUs) when shopping at Ocado.com. This includes everyday items, the
Ocado and the Waitrose own label products, our customers' favourite
brands, non-food items and many specialist and international
product ranges.
2015 saw the launch of our vegetarian "shop in shop" with over
650 vegetarian and vegan products in one place. The shop has proved
popular with customers due to the extensive range which includes
big brands alongside niche products from small suppliers, and we
were recognised as the Best Online Retailer for Vegetarians in the
Veggie Awards 2015.
With the continued price competitive market environment, our Low
Price Promise ("LPP") basket matching scheme ensures that we stay
price competitive against the market leader. This provides
transparency of our pricing strategy to give our customers
confidence in what they are paying for their shopping. Despite
price reductions and broader food price deflation in the market,
over two thirds of our customers' baskets were already cheaper at
Ocado when checking for LPP. The cost of LPP to Ocado in the form
of vouchers used during the period has increased by less than 5bps
and remains low, reflecting our competitiveness in prices and
sustained promotional activity.
The Ocado Smart Pass, our bundled customer benefit membership
scheme which includes free delivery, continued to be popular with
over half of sales coming from customers with a pass. Membership
helps to drive customer loyalty, shopping frequency and ultimately
total spend per customer.
Our non-food sales have continued to grow, with year-on-year
growth of over 60% and now on average one non-food product per
basket, despite current limited investment in technology in that
area. Growth was driven by further development of the non-food
range on Ocado.com and strong sales growth from our destination
sites, Fetch, our specialist pet store, and Sizzle, our kitchen and
dining store. Both complement our range at Ocado.com and reflect
the convenience of shopping from a broader general merchandise
product range alongside customers' regular grocery shop.
Preparations for our premium beauty business in partnership with
Marie Claire are progressing well and we expect to launch this in
the second half of 2016. We believe the high quality of service
delivered by our technology and logistics platform combined with
the awareness and relevance of the Marie Claire brand, should make
this an attractive shopping destination for customers.
As we add improvements to our retail proposition, this enhances
the key features we can apply to the technology embedded in our
platform, thus benefiting our existing and future corporate
customers.
Strengthen brands
We continued to broaden the awareness, and reinforce the
strength and values of our Ocado, Fetch and Sizzle brands through
our marketing and promotional activities.
We focused our modest marketing expenditure on attracting new
customers with broader awareness campaigns with external partners,
as well as limited radio and national newspaper offers and
sponsorship opportunities such as the food section of the Ideal
Home Show. Ocado was also featured in a number of broadcast media
programmes including BBC's 'Tomorrow's Food', BBC One Breakfast at
the Autumn Fair and most recently, on Channel 4's 'Journey to the
Centre of my Plate', a show highlighting food journeys and ITV's
'Tonight' show.
Following the great success of last year, we launched our second
"Britain's Next Top Supplier" competition, an initiative to support
and nurture small British suppliers, who form a significant part of
our supplier base.
Our Ocado own-label reinforces brand recognition and strength
and continues to grow with sales up 16.8% against the equivalent
period last year, with growth constrained by our contractual
obligations with Waitrose. The average customer basket now contains
over five Ocado own-label products. The popularity of these
products is further evidenced by several awards received for our
Ocado own-label products in 2015. These included awards for the
Ocado own-label organic juicing and organic small veg boxes by
Women's Fitness as well as awards for meat products including best
lamb product for Ocado's Exclusives British lamb leg steaks by the
Meat Management Industry.
Our active customers grew to 509,000 (2014: 453,000), up 12.4%
and exceeded the half a million customers threshold for the first
time. 2015 continued to see strong growth in new customer
acquisition, up by over 20% during the period. Our overall
marketing spend, including vouchering, has remained in line with
retail sales percentage growth.
Our order volumes have grown to an average of over 195,000
orders per week ("OPW") (2014: 167,000 OPW), a strong growth of
nearly 17% with the highest number of orders delivered in a week
exceeding 225,000 during the period.
Our customers' average basket reduced by 2.1% to GBP109.95
(2014: GBP112.25) due to both the competitive environment and from
the impact of increased destination site orders from Fetch and
Sizzle. Excluding the impact of destination site orders, the
average basket value declined by 1.3% to GBP111.15 (2014:
GBP112.66). As the number of items in the average grocery basket
was stable, this decline compares well to the price deflation seen
in the overall UK grocery industry.
Fetch has continued to grow, with strong customer acquisition
reflecting better brand awareness, and sales driven by specialist
pet food lines. Sizzle has grown more modestly with limited
marketing support, whilst we wait to complete further usability
improvements.
During the year we introduced the Ocado Smart Platform as a
brand to simplify and strengthen the marketing of our service for
international retail partners.
Develop ever more capital and operationally efficient
infrastructure solutions
Both our Hatfield Customer Fulfilment Centre ("CFC1") and our
Dordon Customer Fulfilment Centre ("CFC2") continued to operate to
a high level of accuracy and with improved efficiency. Using the
units per labour hour efficiency measure ("UPH"), the average
productivity for the period in our Mature CFC operations was 155
UPH (2014: 145 UPH), where we consider a CFC to be mature if it has
been open for 12 months by the start of the half year reporting
period. We made good progress with the construction of our new CFCs
in Andover, Hampshire ("CFC3") and Erith, South East London
("CFC4"). We commenced the first installation of our new
proprietary modular, scalable physical fulfilment solution into our
Andover CFC, and anticipate going live shortly. CFC3 will add
65,000 OPW at full capacity at an estimated capital cost of GBP45
million for the material handling equipment ("MHE").
At the Erith site, the developer commenced building works in H1
2015 and we expect to start our fit out works at this site in 2016
with the plan to commence operations at the end of 2017. The MHE
solution in CFC4 is estimated to cost GBP135 million and will add
over 200,000 OPW of capacity to our operation.
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As with CFC3, this CFC will use our proprietary modular,
scalable fulfilment solution, and so the investment will be phased
over time in line with our capacity requirements. It will also make
this the most capital efficient CFC to be built to date, lowering
the capital costs involved in operating full service online grocery
operations thus improving our own economics and enabling us to
offer the same solution at attractive pricing to future corporate
customers of our Ocado Smart Platform offering.
We made a number of enhancements to our routing system
throughout the year, which led to an improvement to the average
deliveries achieved on a van route and has helped us increase
deliveries per van per week across all shifts ("DPV") to 166 (2014:
163). We have also raised our long term target for DPV from 175 to
190.
We expanded our delivery capacity within our existing catchments
with the opening of three additional spokes during the period at
Dagenham, West Drayton and Milton Keynes. In addition, we opened
the Park Royal spoke site which replaced our smaller White City
location nearby. In 2014 we received a one-off compensation payment
of GBP1.2 million from the landlord at the White City spoke to
cover costs of closure and the fit out costs of the new site, with
a further final GBP3.2 million received in 2015. The delivery
capacity for some of these new spokes is shared with Morrisons,
reducing the impact of the additional fixed costs of these
operations.
Enhance our end-to-end technology systems
The core of our business is our proprietary IP, knowledge and
technology that supports our market leading proposition to
customers and drives our operating efficiencies. We seek to
continually improve the technology we use and believe that this
innovation creates competitive advantages across our business. As
at the end of the period, we had filed patent applications covering
32 separate innovations, bringing the cumulative total number of
patent applications filed to 73, of which 25 have so far been
published. Our patent activities are intended to create a web of
protection for our intellectual property.
Over time we have developed a proprietary end-to-end solution
for operating grocery online, from the initial point of contact
with the customer, through the extensive fulfilment operations, to
the delivery of the basket of products to the customer's kitchen.
Each stage of the operation is optimised using our software and
algorithms. Our technology systems form a key part of this
solution.
We continued to develop our platform with the rewrite of our IT
systems to enable faster replication and roll out of our technology
internationally, and remain on track with our plans. This has been
supported by the expansion of our technology team which by the end
of the period employed over 700 developers and IT professionals,
with plans to increase this to around 1,000 by the end of 2016. Our
technology professionals currently operate from the UK and Poland,
with a new Ocado technology centre recently established in Bulgaria
and another due to open in Southern Europe.
Our technology team focuses on improving customer interfaces to
support our businesses and those of our partners, replatforming to
improve speed of systems development and to enable international
expansion, and other projects to drive efficiency in our
operations.
Enable Morrisons' and future partners' online businesses
We have built our retail operating business through developing
and utilising proprietary technology. This gives us opportunities
to generate significant value through commercialisation as the
innovations used in our own retail operations can be embedded into
our platform for existing and future partners.
Our first commercialisation agreement, with Morrisons, resulted
in the launch of Morrisons.com in January 2014. Using our existing
CFC infrastructure and technology solutions, Morrisons.com has
continued to develop well. In March 2015, Morrisons reported that
the run rate of sales after 12 months of trading for Morrisons.com
had reached about GBP200 million and has continued to develop well.
To our knowledge this is the fastest ramp up of an online grocery
business globally, and provides evidence of the effectiveness of
combining our platform with an existing grocery retailers' brand,
customer awareness and merchandising skills.
Using the benefit of our many years focused on online grocery
operations, we have now completed our vertical integration into
mechanical handling equipment ("MHE") with the design and
development of our proprietary physical fulfilment solution now
installed in CFC3. Multiple patent applications have been filed for
the MHE solution. Together with our end-to-end software and systems
based technology, offers a total solution for efficiently operating
online grocery businesses. We have packaged this into a single
service offering referred to as Ocado Smart Platform.
During the period, we started to engage and develop discussions
with multiple international retailers about how we might assist
them in launching or improving online business in their own markets
using Ocado Smart Platform.
We set out a target to sign our first Ocado Smart Platform
agreement in 2015, and although we have yet to announce a deal, our
confidence in the quality of our commercial proposition to
international grocery retailers remains high, and we expect to sign
multiple deals in multiple territories in the medium term.
People, awards and CR initiatives
By the end of the period, we employed over 10,000 people, a net
addition of over 1,500 new employees during the year, to further
support the growth of our retail businesses, our Morrisons platform
business and the development of Ocado Smart Platform.
We will continue expanding our talent pool in 2016, including
the addition of around 300 software engineers and IT specialists in
the UK and across Europe.
The energy and commitment of our people remains central to our
success and I want to once again acknowledge their remarkable
efforts throughout this very busy and exciting period. Our
operating model enables us to provide high levels of customer
service, and customers regularly highlight the outstanding service
they receive, in particular that provided by our Customer Service
Team Members who deliver their orders.
The efforts of our people were again recognised by a number of
awards received during 2015, including the 'Best Online Grocer' by
Which? Magazine (Members' Annual Satisfaction Survey), 'Online
Supermarket of the Year' by The Grocer Gold Awards, 'Best Online
Retailer for Vegetarians' by The Veggie Awards and 'Best Retailer -
Gold' by the Healthy Food and Drink Awards.
We believe that the ability to code software will be a vital
life skill for the next generation, akin to what literacy is to
ours. Our "Code for Life" IT programme, which we launched in
September 2014, today counts more than 44,000 users taking
advantage of the free resource "Rapid Router" aimed at teaching
primary school children across the UK to code. The programme is
also being used in schools overseas, such as in the US, Australia,
Spain, Portugal and Guatemala.
We launched a 'Donate Food with Ocado' scheme during the year, a
virtual food bank that allows customers to donate a sum of money to
buy food for the food banks we support. Customers donated nearly
GBP100,000 during the period, and these donations were matched with
groceries provided by Ocado.
Our business model has been built around driving efficiency and
low waste in our aim of becoming the UK's greenest, most innovative
and best value grocery retailer. We have operated plastic carrier
bag recycling since 2007 and introduced a 'Bag Recycling Bonus' in
September 2015, which incentivises customers to return bags to us
for recycling by paying them 5p for every bag (from Ocado or other
retailers) they hand back to us. Our Bag Recycling Bonus will also
help us to meet the aims of the new carrier bag charging
legislation in England, by helping to increase recycling and reduce
plastic bag litter.
Outlook statement
We reported gross sales (retail) growth of 14.7% for the period.
We expect to continue growing ahead of the online market.
We anticipate that capital expenditure in 2016 will be
approximately GBP150 million, including the expenditure for CFCs 3
and 4, and the increased costs for further development to our
infrastructure and technology solutions. The capital expenditure
requirements for any Ocado Smart Platform deals signed are not
expected to be significant in 2016.
Chief Financial Officer's review
For the period to 29 November 2015, we maintained double-digit
sales growth in a highly challenging and competitive grocery
environment. At Group level, sales were driven primarily by growth
in our retail business with the remainder from our agreement with
Morrisons.
Continued growth in retail sales was supported by improvements
to our proposition to customers and an increase in the number of
active customers in the period. These factors drove strong order
growth to the current average orders of 220,000 per week at the
period end. Operating profitability continued to strengthen in
comparison to the prior period due to more efficient operational
fulfilment mainly at CFC Dordon. This was offset by lower margins
reflecting the competitive and deflationary pressures in the
market, our sustained investment in a number of strategic
initiatives to support future growth of the business and higher
depreciation and amortisation arising from CFC Dordon, vehicles and
additional spokes to support current and future business
growth.
FY 2015 FY 2014 Variance
GBPm GBPm
========================== ======== ======== =========
Revenue(1) 1,107.6 948.9 16.7%
Gross profit 375.1 312.9 19.9%
-------------------------- -------- -------- ---------
EBITDA 81.5 71.6 13.8%
-------------------------- -------- -------- ---------
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Operating profit before
share of result from JV
and exceptional items 19.1 14.2 34.5%
Profit before tax 11.9 7.2 65.3%
========================== ======== ======== =========
FY 2015 FY 2014 Variance
GBPm GBPm
============================ ======== ======== =========
EBITDA 81.5 71.6 13.8%
---------------------------- -------- -------- ---------
Less Morrisons MHE JVCo
impact(2) (13.5) (11.3) 21.2%
Add Share based management
incentive charges 7.8 5.0 54.5%
Underlying EBITDA 75.8 65.3 16.1%
---------------------------- -------- -------- ---------
1. Revenue is online sales (net of returns) including charges
for delivery but excluding relevant vouchers/offers and value added
tax. The recharge of costs to Morrisons and fees charged to
Morrisons are also included in revenue
2. Morrison MHE JVCo impact includes the income arising from the
leasing arrangements with Morrisons for MHE assets and share of
results from joint venture
Revenue
FY 2015 FY 2014 Variance
GBPm GBPm
===================== ======== ======== =========
Retail 1,033.7 903.8 14.4%
Morrisons recharges 55.1 27.8 98.2%
Morrisons fees 18.8 17.3 8.7%
Total revenue 1,107.6 948.9 16.7%
===================== ======== ======== =========
Revenue increased by 16.7% to GBP1,107.6 million for the period.
Revenue from retail activities was GBP1,033.7 million, an increase
of 14.4%, which we believe to be ahead of the online grocery
market. Revenue growth was driven by a 16.8% year-on-year increase
in the full year average orders per week to 195,000. This was
offset by a reduction in average order size, down 2.1% from
GBP112.25 in 2014 to GBP109.95 in 2015, primarily due to deflation
in the average item price as experienced across the grocery
industry. During the period we continued to build on the strong
growth from the prior year of our non-food business with revenue
increasing by over 60% year-on-year. There was a dilutive effect on
the average basket from an increased mix of standalone destination
site orders as they typically have smaller basket values.
The Morrisons arrangement contributed GBP73.9 million of revenue
in 2015 (2014: GBP45.1 million). The main growth in revenue was
driven by increased income from recharges for services provided to
support the on-going expansion of the Morrisons.com business. The
fee income remained broadly in line with the prior year and was
comprised of the annual licence fees for services, technology
support, research and development and management fees.
Gross profit
FY 2015 FY 2014 Variance
GBPm GBPm
===================== ======== ======== =========
Retail 301.4 267.8 12.6%
Morrisons recharges 54.9 27.8 97.5%
Morrisons fees 18.8 17.3 8.7%
Total gross profit 375.1 312.9 19.9%
===================== ======== ======== =========
Gross profit rose by 19.9% year-on-year to GBP375.1 million
(2014: GBP312.9 million). Gross profit margin was 33.9% of revenue
(2014: 33.0%), ahead of 2014 due to additional gross profit
attributable to the Morrisons arrangement in the period. Retail
gross margin reduced to 29.2% (2014: 29.6%) as a result of
increased price competition. Gross profit from our arrangement with
Morrisons was GBP73.7 million, an increase from GBP45.1 million in
2014, driven mainly by the growth in the Morrisons.com
business.
Other income increased to GBP49.0 million, a 24.4% increase on
year-on-year (2014: GBP39.4 million). Media income of GBP30.0
million was 2.9% of retail revenue (2014: 2.8%). We continue to
grow our income from media related activities ahead of the rate of
increase in revenue as we increasingly engage our suppliers in
media opportunities on our customer interfaces (including website,
mobile apps and mobile websites). Other income also included
GBP11.2 million (2014: GBP8.9 million) of income arising from the
leasing arrangements with Morrisons for MHE assets and GBP2.5
million (2014: GBP2.5 million) of rental income relating to the
lease of CFC Dordon. This income, for the MHE assets, is generated
from charging MHE lease costs to Morrisons, when combined with the
share of results from joint venture, equates to the additional
depreciation and lease interest costs that we incur for the share
of the MHE assets effectively owned by Morrisons. Other income also
comprised a second and final payment of GBP3.2 million for the
surrender of the lease at our former White City operations which
were transferred to a new build site nearby at Park Royal.
Operating profit
Operating profit before the share of result from the joint
venture and exceptional items for the period was GBP19.1 million
(2014: GBP14.2 million).
Distribution costs and administrative expenses included costs
for both the Ocado and Morrisons picking and delivery operations.
Total distribution costs and administrative expenses including
costs recharged to Morrisons grew by 19.8% year-on-year. Excluding
Morrisons, costs grew by 12.9% year-on-year, below the growth in
average orders per week of 16.8%. The costs relating to the
Morrisons operations are recharged and included in revenue.
FY 2015 FY 2014 Variance
GBPm GBPm
================================== ======== ======== =========
Distribution costs(1,2) 216.6 195.6 10.7%
Administrative expenses(1,2) 73.4 59.7 23.1%
Costs recharged to Morrisons(3) 54.9 27.8 97.5%
Depreciation and amortisation(4) 60.1 55.0 9.3%
Total distribution costs
and administrative expense 405.0 338.1 19.8%
================================== ======== ======== =========
1. Excluding chargeable Morrisons costs, depreciation,
amortisation and impairment charges
2. GBP2.4 million of reported administrative expenses in 2014
are now included as distribution costs
3. Morrisons costs include both distribution and administrative
costs
4. Included within depreciation and amortisation for the period
is a GBP1.8 million impairment charge (2014: GBP2.6 million)
At GBP216.6 million, distribution costs increased by 10.7%
compared to 2014, lower than the growth in retail revenue of 14.4%.
Operational efficiency improved at both CFC Hatfield and CFC
Dordon. Overall mature CFC UPH (for CFC Hatfield and CFC Dordon
combined) was 155 in 2015 compared with 145 in 2014. The
improvement in mature CFC UPH for the period was driven mainly by
the productivity at CFC Dordon which had grown by nearly 20 UPH to
165 UPH for the full year 2015 and regularly exceeded 170 UPH by
the end of the period. Deliveries per van per week have risen to
166 (2014: 163) as customer density improved. During the period the
Group opened three new spokes in Dagenham, West Drayton and Milton
Keynes and moved an inner London spoke at White City to Park Royal.
We also completed the expansion of the Bristol spoke by 50%. As a
result of these new spoke openings, spoke fixed costs as a
percentage of sales increased in the period.
FY 2015 FY 2014 Variance
GBPm GBPm
=============================== ======== ======== =========
Central costs - other(1,2) 55.1 44.7 23.3%
Central costs - share
based management incentive
charges 7.8 5.0 54.5%
Marketing costs (excluding
vouchers) 10.5 10.0 5.0%
=============================== ======== ======== =========
Total administrative expenses 73.4 59.7 22.8%
=============================== ======== ======== =========
1. Excluding chargeable Morrisons costs, depreciation,
amortisation and impairment
2. GBP2.4 million of reported administrative expenses in 2014
are now included as distribution costs
Total administrative expenses excluding depreciation,
amortisation and costs recharged to Morrisons increased to GBP73.4
million, a 22.8% increase from 2014 and was 7.1% as a percentage of
retail revenue (2014: 6.9%). Some of the cost increases were due to
additional costs to operate the Morrisons services which are not
recharged to Morrisons but for which the Group earns fees. In
addition we continued to invest in our strategic initiatives to
support future growth in our non-food business and Ocado Smart
Platform. Share based management incentive costs increased due to
the introduction of the third award under the long term incentive
plan ("LTIP") for 2015. Share based management incentive costs are
likely to stabilise in 2016 as the costs for the 2016 LTIP award
(which are spread over 2016, 2017 and 2018) will be offset by the
drop out of costs for the first LTIP award made in 2013 (which was
spread over 2013, 2014 and 2015).
Marketing costs excluding voucher spend were marginally higher
at GBP10.5 million (2014: GBP10.0 million) but lower as a
percentage of retail revenue at 1.0% (2014: 1.1%). Despite this
lower marketing spend as a percentage of retail revenue we
continued to increase our new customer acquisitions per week, up
over 20% versus 2014.
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Total depreciation and amortisation costs were GBP60.1 million
(2014: GBP55.0 million), an increase of 9.3% year-on-year and
includes an impairment charge of GBP1.8 million (2014: GBP2.6
million). The higher depreciation and amortisation is primarily
from the increased investment required for the development of CFC
Dordon, which includes depreciation on assets jointly owned with
Morrisons, and from the increased number of vans and LGVs required
to support business growth. The impairment charges are due to the
write off of certain assets at CFC Hatfield and as a result of a
detailed review of our legacy systems due to the rewrite a number
of key systems as part of our replatforming.
Share of result from joint venture
MHE JVCo Limited ("MHE JVCo") was incorporated in 2013 on the
completion of the Morrisons agreement, with Ocado owning a 50%
equity interest in this entity. MHE JVCo holds CFC Dordon assets
which are leased to Ocado to service its and Morrisons' businesses.
The income generated by MHE JVCo comprises interest income on
finance leases granted to Ocado, offset by administration charges
and depreciation on minor assets not subject to lease charges. The
Group share of MHE JVCo profit after tax in the period amounted to
GBP2.3 million (2014: GBP2.4 million).
Exceptional items
No exceptional items were reported in the period (2014: GBP0.3
million charge).
Net finance costs
Net finance costs of GBP9.5 million (2014: GBP9.1 million)
exclude GBP0.9 million (2014: nil) of prepaid commitment fees which
were incurred in connection with the GBP210.0 million Revolving
Credit Facility ("RCF") and GBP1.6 million of additional
arrangement fees. The small increase year-on-year of net finance
costs recognised in the income statement was attributable to lower
interest income on bank deposits.
Profit before tax
Profit before tax and exceptional items for the period was
GBP11.9 million (2014: GBP7.5 million).
Taxation
The Group provided for GBP0.1 million of corporation tax for one
of its legal entities that does not have available prior year
losses or capital allowances. Ocado has approximately GBP287.8
million (2014: GBP285.3 million) of unutilised carried forward tax
losses at the end of the period. During 2015 Ocado incurred GBP36.2
million (2014: GBP29.1 million) in a range of taxes including fuel
duty, PAYE and Employers' National Insurance and business
rates.
Earnings per share
Basic earnings per share was 2.01p (2014: 1.24p) and diluted
earnings per share was 1.91p (2014: 1.18p).
Capital expenditure
Capital expenditure for the period was GBP122.1 million (2014:
GBP86.4 million) and comprised the following:
FY 2015 FY 2014
GBPm GBPm
=================================== ======== ========
Mature CFCs 3.2 10.9
New CFCs 52.9 16.5
Delivery 25.3 22.1
Technology 23.0 16.8
Fulfilment Development 13.3 16.3
Other 4.4 3.8
=================================== ======== ========
Total capital expenditure(1,
2) (excluding share of MHE JVCo) 122.1 86.4
=================================== ======== ========
Total capital expenditure(3)
(including share of MHE JVCo) 126.5 98.1
=================================== ======== ========
1. Capital expenditure includes tangible and intangible
assets
2. Capital expenditure excludes assets leased from MHE JVCo
under finance lease arrangements
3. Total capital expenditure includes Ocado share of the MHE
JVCo of GBP4.4 million in 2015 and of GBP11.7 million in 2014
Total investment in Mature CFCs was GBP7.6 million, which
includes the capital expenditure relating to MHE JVCo of GBP4.4
million. The investment was on resiliency projects (for example
improving our pick aisles and upgrading some of our oldest
conveyors) in CFC Hatfield, on improvement projects (for example
bagging machines in both CFCs and the installation of a new pick
aisle to increase capacity in CFC Dordon) and the purchase of
operational totes in both CFCs.
We continue to build our new CFCs located in Andover and Erith.
CFC Andover will be smaller than our existing CFCs (expected
capacity of 65,000 OPW), and will utilise the first example of our
proprietary MHE which is designed in the long term to be faster to
install and more cost and capital efficient than the system in the
current CFCs.
In January 2015, we announced plans for our latest CFC located
in Erith, South East London. CFC Erith will be larger than our
existing CFCs (expected capacity of over 200,000 OPW). We expect
our site fit out to commence in 2016 and for the site to go live
towards the end of 2017. We have invested less than GBP5m in 2015
on third party professional fees, construction insurance and
internal staff costs supporting design and development.
Investment in new vehicles, including vans, trailers and
tractors, which are typically on five year financing contracts, was
higher than the prior year to support the business growth and the
replacement of existing vehicles at the end of their term. Delivery
capital expenditure also included investments for new spokes and
the transfer of one site to a new location; Dagenham, West Drayton,
Milton Keynes and Park Royal respectively. In addition to these new
spokes we also completed the expansion of the Bristol spoke in the
period. In total Delivery capital expenditure was GBP25.3 million
(2014: GBP22.1 million).
We continued to develop our own proprietary software and GBP18.1
million (2014: GBP14.1 million) of internal development costs were
capitalised as intangible assets in the period, with a further
GBP4.9 million (2014: GBP2.7 million) spent on computer hardware
and software. Our technology headcount grew to over 700 staff at
the end of the period (2014: 550 staff) as increased investments
were made to support our strategic initiatives, including the major
replatforming of Ocado's technology and migration of most of our
systems to run on a public or private cloud. This will allow Ocado
to achieve greater technical agility and enable the technology to
support possible international expansion opportunities. In
addition, we invested internal technology resources as part of
developing capital projects for Dordon CFC phase two and the
further development of the Morrisons proposition.
Fulfilment development capital expenditure of GBP13.3 million
was incurred to further develop our next generation fulfilment
solution which will be used in our new CFCs and for Ocado Smart
Platform customers.
Other capital expenditure of GBP4.4 million included investment
in further capacity in the NFDC to support our non-food business
growth, further investment to support the growth of our non-food
destination sites and other various head office capital expenditure
projects.
At 29 November 2015, capital commitments contracted, but not
provided for by the Group, amounted to GBP22.3 million (1 December
2014: GBP22.9 million). We expect capital expenditure in 2016 to be
approximately GBP150 million, to be invested in the next generation
of fulfilment solutions, roll out of our new CFCs and additional
investment in new vehicles to support business growth and the
replacement of vehicles coming to the end of their five year
financing contracts.
Cash flow
During the year the Group generated improved operating cash flow
after finance costs of GBP82.8 million, up from GBP75.5 million in
2014, as follows:
FY 2015 FY 2014
GBPm GBPm
========================================= =================== ==============
EBITDA 81.5 71.6
Working capital movement 2.3 9.9
Exceptional items - (0.3)
Other non-cash items(1) 8.7 4.0
Finance costs paid (9.7) (9.7)
========================================= =================== ==============
Operating cash flow 82.8 75.5
Capital investment (99.1) (78.8)
Dividend from joint venture(2) 8.1 -
Decrease in debt/finance obligations(3) (26.8) (34.6)
Proceeds from share issues net
of transaction costs 4.5 3.7
Decrease in cash and cash equivalents (30.5) (34.2)
========================================= =================== ==============
1. Other non-cash items include movements in provisions, share
of result from MHE JVCo and share based payment charges
2. Dividend received from MHE JVCo of GBP8.1 million (2014:
nil)
3. Includes financing fees paid
The operating cash flow increased by GBP7.3 million during the
year primarily as a result of an increase in EBITDA of GBP9.9
million. The positive working capital movement of GBP2.3 million
includes a GBP19.1 million increase in trade receivables primarily
due to an increase in receivables from Morrisons and MHE JVCo. This
is offset by a GBP23.7 million increase in trade and other payables
due to increased trade accruals.
We continue to reinvest our cash for future growth and as a
result the cash outflows due to capital investment increased to
GBP99.1 million comprising investments in CFC Andover, development
of our next generation fulfilment solution and spend on spoke
sites.
In the period GBP26.8 million (2014: GBP34.6 million) of cash
was utilised for the net repayment of debt, financing obligations
and financing arrangement fees.
Balance sheet
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The Group had cash and cash equivalents of GBP45.8 million at
the period end (2014: GBP76.3 million) with the decrease mainly
owing to a net cash outflow from investing activities in the
period.
External gross debt at the period end, which excludes finance
leases payable to MHE JVCo, was GBP53.3 million (2014: GBP44.9
million). The increase of GBP8.4 million is driven by GBP13.7
million of additional vehicle and property debt, offset by net
repayments of GBP5.3 million of other asset backed finance
borrowings.
Gross debt at the period end of GBP172.8 million (2014: GBP175.7
million) and includes amounts owing to MHE JVCo of GBP119.5 million
(2014: GBP130.8 million).
Net external debt at the period end was GBP7.5 million (2014:
Net external cash GBP31.4 million).
Increasing financing flexibility
During the period, the GBP100 million unsecured revolving credit
facility was increased to GBP210 million with improved covenant
levels and extended by 2 years to 1 July 2019. The participating
banks continue to be Barclays, HSBC, RBS and Santander and we
believe this new facility enhances our flexibility to exploit the
increasing growth opportunities available to our business. The
facility remained undrawn throughout the period.
Key performance indicators
The following table sets out a summary of selected unaudited
operating information for 2015 and 2014:
FY 2015 FY 2014 Variance
(unaudited) (unaudited) %
============================== ============= ============= =========
Average orders per week 195,000 167,000 16.8%
Average order size (GBP)
(1) 109.95 112.25 (2.1)%
Mature CFC efficiency (units
per hour) (2) 155 145 6.9%
Average deliveries per van
per week (DPV/week) 166 163 1.8%
Average product wastage
(% of revenue) (3) 0.7 0.8 (0.1)%
Items delivered exactly
as ordered (%) (4) 99.3 99.3 -
Deliveries on time or early
(%) 95.3 95.3 -
============================== ============= ============= =========
Source: the information in the table above is derived from
information extracted from internal financial and operating
reporting systems and is unaudited
1. Average retail value of goods a customer receives (including
VAT and delivery charge and including destination site orders) per
order
2. Measured as units dispatched from the CFC per variable hour
worked by CFC Hatfield and CFC Dordon operational personnel in
2014. We consider a CFC to be mature if it had been open 12 months
by the start of the half year reporting period
3. Value of products purged for having passed Ocado's "use by"
life guarantee divided by retail revenue
4. Percentage of all items delivered exactly as ordered, i.e.
the percentage of items neither missing nor substituted
Consolidated income statement for the 52 weeks ended 29 November
2015
52 weeks 52 weeks
ended ended
29 November 30 November
2015 2014
Notes GBPm GBPm
------------------------------------- ------ ------------- -------------
Revenue 2.2 1,107.6 948.9
Cost of sales (732.5) (636.0)
===================================== ====== ============= =============
Gross profit 375.1 312.9
Other income 49.0 39.4
Distribution costs (309.4) (253.1)
Administrative expenses (95.6) (85.0)
===================================== ====== ============= =============
Operating profit before result
from joint venture and exceptional
items 19.1 14.2
Share of result from joint
venture 2.3 2.4
Exceptional items 2.4 - (0.3)
===================================== ====== ============= =============
Operating profit 21.4 16.3
Finance income 4.3 0.2 0.4
Finance costs 4.3 (9.7) (9.5)
===================================== ====== ============= =============
Profit before tax 11.9 7.2
Taxation (0.1) 0.1
===================================== ====== ============= =============
Profit for the period 11.8 7.3
===================================== ====== ============= =============
Profit per share pence pence
Basic profit per share 2.01 1.24
Diluted profit per share 1.91 1.18
=========================== ====== ======
Non-GAAP measure: Earnings before interest, taxation,
depreciation, amortisation, impairment and exceptional items
(EBITDA)
52 weeks 52 weeks
ended ended
29 November 30 November
2015 2014
Notes GBPm GBPm
================================== ====== ============= =============
Operating profit 21.4 16.3
Adjustments for:
Depreciation of property, plant
and equipment 3.2 45.1 40.0
Amortisation expense 3.1 13.2 12.4
Impairment of property, plant
and equipment 3.2 1.0 1.1
Impairment of intangibles assets 3.1 0.8 1.5
Exceptional items 2.4 - 0.3
EBITDA 81.5 71.6
================================== ====== ============= =============
Consolidated statement of comprehensive income
for the 52 weeks ended 29 November 2015
52 weeks 52 weeks
ended ended
29 November 30 November
2015 2014
GBPm GBPm
====================================== ============= =============
Profit for the period 11.8 7.3
Other comprehensive income:
Items that may be subsequently
reclassified to profit or loss
Cash flow hedges
- Losses arising on hedging
contracts (0.7) (0.4)
- Gains transferred to property,
plant and equipment - 0.3
Foreign exchange loss on translation
of foreign subsidiary - (0.1)
(0.7) (0.2)
-------------------------------------- ------------- -------------
Other comprehensive income
for the period, net of tax (0.7) (0.2)
Total comprehensive income
for the period 11.1 7.1
======================================= ============= =============
Consolidated balance sheet
as at 29 November 2015
29 November 30 November
2015 2014
Note GBPm GBPm
================================== ===== ============ ============
Non-current assets
Intangible assets 3.1 52.9 38.4
Property, plant and equipment 3.2 327.3 275.2
Deferred tax asset 10.0 9.4
Financial assets 2.9 0.4
Investment in joint ventures 62.0 67.8
================================== ===== ============ ============
455.1 391.2
================================== ===== ============ ============
Current assets
Inventories 29.9 27.6
Trade and other receivables 60.8 43.1
Cash and cash equivalents 45.8 76.3
================================== ===== ============ ============
136.5 147.0
================================== ===== ============ ============
Total assets 591.6 538.2
================================== ===== ============ ============
Current liabilities
Trade and other payables (164.4) (136.5)
Borrowings 4.1 (1.6) (4.4)
Obligations under finance
leases 4.1 (26.5) (26.5)
Derivative financial instruments (0.7) (0.2)
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Provisions (2.8) (0.4)
================================== ===== ============ ============
(196.0) (168.0)
================================== ===== ============ ============
Net current liabilities (59.5) (21.0)
================================== ===== ============ ============
Non-current liabilities
Borrowings 4.1 (7.7) (2.3)
Obligations under finance
leases 4.1 (137.0) (142.5)
Provisions (6.3) (5.2)
Deferred tax liability (2.7) (2.0)
================================== ===== ============ ============
(153.7) (152.0)
================================== ===== ============ ============
Net assets 241.9 218.2
================================== ===== ============ ============
Equity
Share capital 4.4 12.6 12.5
Share premium 4.4 258.7 255.1
Treasury shares reserve 4.4 (50.9) (51.8)
Reverse acquisition reserve 4.4 (116.2) (116.2)
Other reserves 4.4 (0.8) (0.3)
Retained earnings 138.5 118.9
================================== ===== ============ ============
Total equity 241.9 218.2
================================== ===== ============ ============
Consolidated statement of changes in equity
for the 52 weeks ended 29 November 2015
Treasury Reverse
Share Share shares acquisition Other Retained Total
capital premium reserve reserve reserves earnings equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 December
2013 12.4 251.5 (52.4) (116.2) (0.1) 107.2 202.4
======================== ====== ========= ========= ========= ============= ========== ========== ========
Profit for the period - - - - - 7.3 7.3
Other comprehensive
income:
Cash flow hedges
Losses arising on
forward foreign
exchange
- contracts 4.4 - - - - (0.4) - (0.4)
Gains arising on
interest rate
- swaps 4.4 - - - - 0.3 - 0.3
Translation of foreign
subsidiary 4.4 - - - - (0.1) - (0.1)
======================== ====== ========= ========= ========= ============= ========== ========== ========
Total comprehensive
income/(expense) for
the period ended 30
November 2014 - - - - (0.2) 7.3 7.1
======================== ====== ========= ========= ========= ============= ========== ========== ========
Transactions with
owners:
Issues of
ordinary
- shares 4.4 0.1 3.6 - - - - 3.7
Share-based
payments
- charge - - - - - 4.4 4.4
Disposal of
treasury
- shares - - 0.6 - - - 0.6
==== ================== ====== ========= ========= ========= ============= ========== ========== ========
Total transactions
with owners 0.1 3.6 0.6 - - 4.4 8.7
======================== ====== ========= ========= ========= ============= ========== ========== ========
Balance at 30 November
2014 12.5 255.1 (51.8) (116.2) (0.3) 118.9 218.2
======================== ====== ========= ========= ========= ============= ========== ========== ========
Profit for the period - - - - - 11.8 11.8
Other comprehensive
income:
Cash flow hedges
Gains arising on
forward
- contracts 4.4 - - - - 0.2 - 0.2
Losses arising on
- commodity swaps 4.4 - - - - (0.7) - (0.7)
- Gains arising on 4.4 - - - - - - -
interest rate
swaps
Translation of foreign 4.4 - - - - - - -
subsidiary
======================== ====== ========= ========= ========= ============= ========== ========== ========
Total comprehensive
income/(expense)
for the period
ended 29 November 2015 - - - - (0.5) 11.8 11.3
================================ ========= ========= ========= ============= ========== ========== ========
Transactions with
owners:
Issues of
ordinary
- shares 4.4 0.1 4.4 - - - - 4.5
Share-based
payments
- charge - - - - - 7.8 7.8
Reacquisition of
interests in
treasury
- shares - (0.8) 0.8 - - - -
Disposal of
treasury
- shares - - 0.1 - - - 0.1
Total transactions
with owners 0.1 3.6 0.9 - - 7.8 12.4
======================== ====== ========= ========= ========= ============= ========== ========== ========
Balance at 29 November
2015 12.6 258.7 (50.9) (116.2) (0.8) 138.5 241.9
======================== ====== ========= ========= ========= ============= ========== ========== ========
Consolidated statement of cash flows
for the 52 weeks ended 29 November 2015
52 weeks 52 weeks
ended ended
29 November 30 November
2015 2014
Note GBPm GBPm
==== =================================== ===== ============= =============
Cash flows from operating activities
Profit before tax 11.9 7.2
Adjustments for:
Depreciation, amortisation 3.1,
- and impairment losses 3.2 60.1 55.0
- Movement in provisions 3.2 1.9
- Share of profit in joint venture (2.3) (2.4)
- Share-based payments charge 7.8 4.4
- Foreign exchange movements - 0.1
- Net Finance costs 4.3 9.5 9.1
Changes in working capital:
- Movement in inventories (2.3) (3.6)
Movement in trade and other
- receivables (19.1) (0.3)
Movement in trade and other
- payables 23.7 13.8
==== =================================== ===== ============= =============
Cash generated from operations 92.5 85.2
Finance costs paid (9.7) (9.7)
========================================= ===== ============= =============
Net cash flows from operating
activities 82.8 75.5
========================================= ===== ============= =============
Cash flows from investing activities
Purchase of property, plant
and equipment (70.7) (53.0)
Purchase of intangible assets (28.4) (25.8)
Dividend received from joint 8.1 -
venture
Interest received 0.2 0.5
========================================= ===== ============= =============
Net cash flows from investing
activities (90.8) (78.3)
========================================= ===== ============= =============
Cash flows from financing activities
Proceeds from the issue of
ordinary share capital net
of transaction costs 4.4 4.4 3.7
Proceeds from borrowings 8.2 -
Repayment of borrowings (5.6) (2.9)
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Repayments of obligations under
finance leases (26.9) (30.5)
Payment of financing fees(1) (2.5) (1.2)
Settlement of cash flow hedges (0.2) (0.5)
========================================= ===== ============= =============
Net cash flows from financing
activities (22.5) (31.4)
========================================= ===== ============= =============
Net decrease in cash and cash
equivalents (30.5) (34.2)
Cash and cash equivalents at
the beginning of the period 76.3 110.5
========================================= ===== ============= =============
Cash and cash equivalents at
the end of the period 45.8 76.3
========================================= ===== ============= =============
(1) GBP1.2 million in relation to financing fees paid in the
prior year has been reclassified from movement in trade and other
receivables to payment of financing fees.
Notes to the consolidated financial information
Section 1 - Basis of preparation
General information
Ocado Group plc (hereafter "the Company") is a listed company
incorporated in England and Wales. The registered office is Titan
Court, 3 Bishops Square, Hatfield Business Park, Hatfield,
Hertfordshire, AL10 9NE.
The financial information comprises the consolidated income
statement, consolidated statement of comprehensive income,
consolidated balance sheet, consolidated statement of changes in
equity, consolidated statement of cash flows and the related notes.
The financial information for the 52 weeks ended 29 November 2015
is extracted from the audited consolidated financial statements.
The financial information for the 52 weeks ended 30 November 2014
is derived from the statutory accounts.
The financial information in this preliminary results
announcement does not constitute the Group's statutory accounts for
the 52 weeks ended 29 November 2015 or the 52 weeks ended 30
November 2014 and does not constitute full accounts within the
meaning of section 435 (1) and (2) of the Companies Act 2006. The
statutory accounts for 2014 have been delivered to the Registrar of
Companies. The auditors have reported on the Group's statutory
accounts for the 52 weeks ended 29 November 2015; their report was
(i) unqualified, (ii) did not include a reference to a matter to
which the auditors drew attention by way of an emphasis of matter
without qualifying their report and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act 2006.
The Group's statutory accounts will be delivered to the Registrar
of Companies following the Company's Annual General Meeting.
The financial year represents the 52 weeks ended 29 November
2015 (the prior financial year represents the 52 weeks ended 30
November 2014). The consolidated financial statements for the 52
weeks ended 29 November 2015 comprise the financial statements of
the Company and its subsidiaries ("the Group").
Basis of preparation
The financial information has been prepared in accordance with
the Listing Rules and the Disclosure and Transparency Rules of the
UK Financial Services Authority (where applicable), International
Financial Reporting Standards ("IFRS") and International Financial
Reporting Standards Interpretation Committee ("IFRIC")
interpretations as endorsed by the European Union ("IFRS-EU"), and
with those parts of the Companies Act 2006 applicable to companies
reporting under IFRS. The accounting policies applied are
consistent with those described in the annual report and financial
statements for the 52 weeks ended 30 November 2014 of Ocado Group
plc.
The financial information is presented in sterling, rounded to
the nearest million unless otherwise stated. The financial
information has been prepared under the historical cost convention,
as modified by the revaluation of financial asset investments and
certain financial assets and liabilities, which are held at fair
value.
The Directors considered it appropriate to adopt the going
concern basis of accounting in preparing the financial statements
of the Group and the Company.
Standards, amendments and interpretations adopted by the Group
in 2014/15 or issued that are effective
The Group has considered the following new standards,
interpretations and amendments to published standards that are
effective for the Group for the financial year beginning 1 December
2014 and concluded that they are either not relevant to the Group
or that they would not have a significant impact on the Group's
financial statements:
Effective
Date
==== =================================== =========
IFRS 1 January
10 Consolidated Financial Statements* 2014
IFRS Disclosure of Interests in Other 1 January
12 Entities* 2014
IAS 1 July
19 Employee Benefits 2014
IAS 1 January
27 Separate Financial Statements 2014
IAS 1 January
32 Financial Instruments: Presentation 2014
IAS 1 January
36 Impairment of Assets 2014
IAS Financial Instruments: Recognition 1 January
39 and Measurement 2014
==== =================================== =========
*The amendments for investment entities which are effective in
IFRS 10, IFRS 12 and IAS 27, above, are not relevant for the Group.
Amendments regarding the application of the consolidation exception
for IFRS 10 and IFRS 12 are effective from 1 January 2016, and
amendments regarding the reinstatement of the equity method as an
accounting option for investments in subsidiaries, joint ventures
and associates in an entity's separate financial statements are
effective from 1 January 2016, and are included in the table
below.
Standards, amendments and interpretations issued that are not
effective, and which have not been early adopted by the Group
The following further new standards, interpretations and
amendments to published standards and interpretations which are
relevant to the Group have been issued but are not effective for
the financial year beginning 1 December 2014 and have not been
adopted early:
Effective
Date
======= ===================================== =========
1 January
IFRS 9 Financial Instruments 2018
1 January
IFRS 10 Consolidated Financial Statements 2016
1 January
IFRS 11 Joint Arrangements 2016
Disclosure in Interests in Other 1 January
IFRS 12 Entities 2016
1 January
IFRS 15 Revenue from Contracts with Customers 2018
1 January
IAS 1 Presentation of Financial Statements 2016
1 January
IAS 16 Property, Plant and Equipment 2016
1 January
IAS 27 Separate Financial Statements 2016
Investments in Associates and Joint 1 January
IAS 28 Ventures 2016
1 January
IAS 38 Intangible Assets 2016
Amendments to various IFRSs and IASs
including those arising from the
Various IASB's annual improvements project. Various
======= ===================================== =========
The following new standards are not yet effective and the impact
on the Group is currently under review:
IFRS 16 "Leases" provides guidance on the classification,
recognition and measurement of leases to help provide useful
information to the users of financial statements. The main aim of
this standard is to ensure all leases will be reflected on the
balance sheet, irrespective of substance over form. The new
standard will replace IAS 17 "Leases" and is effective for annual
periods beginning on or after 1 January 2019 unless adopted early.
The Group is currently reviewing the impact of IFRS 16.
Use of non-GAAP profit measures
The Directors believe that the EBITDA measure presented provides
a clear and consistent presentation of the underlying performance
of the Group. EBITDA is not a measure of operating performance in
accordance with IFRS-EU and may not be directly comparable with
measures used by other companies.
The Group defines EBITDA as earnings before interest, taxation,
depreciation of property, plant and equipment, amortisation
expense, impairment of property, plant and equipment, intangibles
and exceptional items.
Section 2 - Results for the year
2.1 Segmental reporting
The Group's principal activities are grocery retailing and the
development and monetisation of Intellectual Property ("IP") and
technology used for the online retailing, logistics and
distribution of grocery and consumer goods, currently derived
solely from the UK. The Group is not reliant on any major customer
for 10% or more of its revenue.
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In accordance with IFRS 8 "Operating Segments", an operating
segment is defined as a business activity whose operating results
are reviewed by the chief operating decision-maker ("CODM") and for
which discrete information is available. Operating segments are
reported in a manner consistent with the internal reporting
provided to the CODM, as required by IFRS 8. The CODM, who is
responsible for allocating resources and assessing performance of
the operating segments, has been identified as the Executive
Directors.
The principal activities of the Group are currently managed as
one segment. Consequently, all activities relate to this
segment.
The CODM's main indicator of performance of the segment is
EBITDA, which is reconciled to operating profit below the income
statement.
2.2 Gross sales
A reconciliation of revenue to gross sales is as follows:
52 weeks 52 weeks
ended 29 ended
November 30 November
2015 2014
GBPm GBPm
==================== ========== =============
Revenue 1,107.6 948.9
VAT 82.4 66.3
Marketing vouchers 14.4 11.3
---------------------- ---------- -------------
Net book value 1,204.4 1,026.5
====================== ========== =============
2.3 Profit per share
Basic profit per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the period,
excluding ordinary shares held pursuant to the Group's joint share
ownership scheme ("JSOS") which are accounted for as treasury
shares.
Diluted profit per share is calculated by adjusting the weighted
average number of ordinary shares outstanding to assume conversion
or vesting of all dilutive potential shares. The Company has two
(2014: two) classes of instruments that are potentially dilutive,
namely share options and shares held pursuant to the JSOS.
Basic and diluted profit per share has been calculated as
follows:
52 weeks 52 weeks
ended ended
29 November 30 November
2015 2014
Number Number
of shares of shares
(m) (m)
============================== ============= =============
Issued shares at the
beginning of the period,
excluding treasury shares 586.1 582.5
Effect of share options
exercised in the period 2.2 2.1
Effect of treasury shares
disposed of in the period - 0.3
Effect of shares issued - -
in the period
Weighted average number of
shares at the end of the
period for basic earnings
per share 588.3 584.9
Potentially dilutive
share options and shares 31.1 29.4
Weighted average number
of diluted ordinary shares 619.4 614.3
=============================== ============= =============
GBPm GBPm
============================== ============= =============
Profit attributable
to the owners of the
Company 11.8 7.3
=============================== ============= =============
pence pence
Basic profit per share 2.01 1.24
Diluted profit per share 1.91 1.18
=============================== ============= =============
The only transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of these
financial statements were the exercise of 16,754 share options
under the company ESOS scheme, 2,903 share options under the SAYE3
scheme and the issue of 28,463 Partnership Shares under the
SIP.
2.4 Exceptional items
52 weeks 52 weeks
ended ended
29 November 30 December
2015 2014
GBPm GBPm
======================= =============== =============
Corporate restructure - (0.3)
- (0.3)
======================== ============== =============
Corporate restructure
During the prior year, the Group undertook a corporate
restructuring. The Group's business was split between a number of
legal entities in order to reflect broadly the operational division
of the business. To assist the restructuring the Group sought tax,
accountancy and legal advice, for which a number of one-off costs
were incurred.
Section 3 - Operating assets and liabilities
3.1 Intangible assets
Internally Other intangible Total
generated assets intangible
assets assets
-------------------------- ----------- ----------------- ------------
GBPm GBPm GBPm
-------------------------- ----------- ----------------- ============
Cost
At 1 December 2013 58.0 13.4 71.4
Additions - 8.0 8.0
Internal development
costs capitalised 17.3 - 17.3
Disposals (9.7) (8.2) (17.9)
========================== =========== ================= ============
At 30 November 2014 65.6 13.2 78.8
========================== =========== ================= ============
Additions - 4.4 4.4
Internal development
costs capitalised 24.1 - 24.1
Disposals (6.7) - (6.7)
========================== =========== ================= ============
At 29 November 2015 83.0 17.6 100.6
========================== =========== ================= ============
Accumulated amortisation
At 1 December 2013 (33.3) (11.1) (44.4)
Charge for the period (11.5) (0.9) (12.4)
Impairment (1.5) - (1.5)
Disposals 9.7 8.2 17.9
========================== =========== ================= ============
At 30 November 2014 (36.6) (3.8) (40.4)
========================== =========== ================= ============
Charge for the period (12.4) (0.8) (13.2)
Impairment (0.8) - (0.8)
Disposals 6.7 - 6.7
========================== =========== ================= ============
At 29 November 2015 (43.1) (4.6) (47.7)
========================== =========== ================= ============
Net book value
At 30 November 2014 29.0 9.4 38.4
========================== =========== ================= ============
At 29 November 2015 39.9 13.0 52.9
========================== =========== ================= ============
The net book value of intangibles held under finance leases is
analysed below:
52 weeks 52 weeks
ended 29 ended
November 30 November
2015 2014
GBPm GBPm
========================== ========== =============
Cost 13.8 13.2
Accumulated amortisation (9.3) (7.2)
---------------------------- ---------- -------------
Net book value 4.5 6.0
============================ ========== =============
For the 52 weeks ended 29 November 2015, internal development
costs capitalised represented approximately 85% (2014: 68%) of
expenditure on intangible assets and 19% (2014: 15%) of total
capital spend including property, plant and equipment.
3.2 Property, plant and equipment
Fixtures,
fittings,
Land plant
and and Motor
buildings machinery vehicles Total
GBPm GBPm GBPm GBPm
========================== =========== =========== ========== ========
Cost
At 1 December 2013 42.3 296.8 38.9 378.0
Additions 13.2 67.2 12.6 93.0
Disposals (0.3) (11.9) (4.1) (16.3)
========================== =========== =========== ========== ========
At 30 November 2014 55.2 352.1 47.4 454.7
========================== =========== =========== ========== ========
Additions 25.5 54.3 18.4 98.2
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Disposals - (3.1) (10.6) (13.7)
At 29 November 2015 80.7 403.3 55.2 539.2
========================== =========== =========== ========== ========
Accumulated depreciation
and impairment
At 1 December 2013 (16.7) (119.0) (18.0) (153.7)
Charge for the period (1.8) (30.0) (8.2) (40.0)
Impairment (0.3) (0.8) - (1.1)
Disposals 0.3 11.0 4.0 15.3
========================== =========== =========== ========== ========
At 30 November 2014 (18.5) (138.8) (22.2) (179.5)
========================== =========== =========== ========== ========
Charge for the period (1.9) (33.4) (9.8) (45.1)
Impairment (0.1) (0.9) - (1.0)
Disposals - 3.1 10.6 13.7
===========
At 29 November 2015 (20.5) (170.0) (21.4) (211.9)
========================== =========== =========== ========== ========
Net book value
At 30 November 2014 36.7 213.3 25.2 275.2
========================== =========== =========== ========== ========
At 29 November 2015 60.2 233.3 33.8 327.3
========================== =========== =========== ========== ========
Included within property, plant and equipment is capital
work-in-progress for land and buildings of GBP31.9 million (2014:
GBP15.4 million) and capital work-in-progress for fixtures,
fittings, plant and machinery of GBP57.5 million (2014: GBP20.1
million).
The net book value of non-current assets held under finance
leases is set out below:
Fixtures,
fittings,
Land plant
and and Motor
buildings machinery vehicles Total
GBPm GBPm GBPm GBPm
========================== =========== =========== ========== ========
At 30 November 2014
Cost 30.3 203.7 46.5 280.5
Accumulated depreciation
and impairment (16.3) (73.9) (21.6) (111.8)
Net book value 14.0 129.8 24.9 168.7
========================== =========== =========== ========== ========
At 29 November 2015
Cost 30.3 207.0 54.5 291.8
Accumulated depreciation
and impairment (17.9) (92.7) (20.8) (131.4)
Net book value 12.4 114.3 33.7 160.4
========================== =========== =========== ========== ========
Property, plant and equipment with a net book value of GBP18.8
million (2014: GBP13.3 million) has been pledged as security for
the secured loans (Note 4.1).
Section 4 - Capital structure and financing costs
4.1 Borrowings and finance leases
Between Between
one two
Less year years
than and and
one two five
year years years Total
GBPm GBPm GBPm GBPm
======================== ====== ======== ======== ======
As at 30 November 2014
Secured loans 4.4 1.8 0.5 6.7
========================= ====== ======== ======== ======
Total borrowings 4.4 1.8 0.5 6.7
========================= ====== ======== ======== ======
As at 29 November 2015
Secured loans 1.6 1.5 6.2 9.3
Total borrowings 1.6 1.5 6.2 9.3
========================= ====== ======== ======== ======
The secured loans outstanding at period end can be analysed as
follows:
Carrying Carrying
amount amount
as as
at at
Current Final 29 30
Principal Secured interest Instalment payment November November
amount Inception over rate frequency due 2015 2014
GBPm GBPm GBPm
========== ========== =========== =========== =========== ========= ========== ==========
Clearing
Property, bank base
plant and rate +
8.0 May-07 equipment 3.0% Quarterly Feb-15 - 0.8
Freehold LIBOR +
1.5 Dec-06 property 2.75% Quarterly Feb-15 - 0.4
Freehold LIBOR +
1.5 Feb-09 property 2.75% Quarterly Feb-15 - 0.6
Freehold LIBOR +
2.8 Dec-09 property 2.75% Quarterly Dec-15 - 1.5
Freehold LIBOR +
2.6 Jul-12 property 2.75% Quarterly Jul-15 - 1.9
Property,
plant and
2.5 Jul-12 equipment 9.12% Monthly Jul-17 1.1 1.5
Freehold LIBOR +
8.2 Sep-15 Property 1.5% Quarterly Sep-18 8.2 -
9.3 6.7
========== ========== =========== =========== =========== ========= ========== ==========
Disclosed
as:
Current 1.6 4.4
Non-current 7.7 2.3
======================
9.3 6.7
========== ========== =========== =========== =========== ========= ========== ==========
Calculated as the effective interest rate, the calculation of
which includes an optional balloon payment at the end of the
term.
In the prior year a three-year GBP100 million revolving credit
facility was entered into with Barclays, HSBC, RBS and Santander.
In the current year the Group amended and extended this unsecured
RCF. The facility was increased to GBP210 million and extended by
two years to 1 July 2019. As at 29 November 2015 the facility
remains unutilised. The facility contains typical restrictions
concerning dividend payments and additional debt and leases.
Obligations under finance leases
29 November 30 November
2015 2014
GBPm GBPm
=========================== ============ ============
Obligations under finance
leases due:
Within one year 26.5 26.5
Between one and two years 23.8 22.4
Between two and five
years 62.1 56.0
After five years 51.1 64.1
============================ ============ ============
Total obligations under
finance leases 163.5 169.0
============================ ============ ============
External obligations under finance leases are GBP44.0 million
(2014: GBP38.2 million) excluding GBP119.5 million (2014: GBP130.8
million) payable to MHE JV Co, a joint venture company.
29 November 30 November
2015 2014
GBPm GBPm
=========================== ============ ============
Minimum lease payments
due:
Within one year 34.8 34.9
Between one and two years 30.3 29.3
Between two and five
years 75.0 70.4
After five years 55.3 71.0
============================ ============ ============
195.4 205.6
Less: future finance
charges (31.9) (36.6)
============================ ============ ============
Present value of finance
lease liabilities 163.5 169.0
============================ ============ ============
Disclosed as:
Current 26.5 26.5
Non-current 137.0 142.5
============================ ============ ============
163.5 169.0
=========================== ============ ============
4.2 Analysis of net debt
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Net debt
29 November 30 November
2015 2014
GBPm GBPm
=========================== ============ ============
Current assets
Cash and cash equivalents 45.8 76.3
Current liabilties
Borrowings (1.6) (4.4)
Obligations under finance
leases (26.5) (26.5)
============================ ============ ============
(28.1) (30.9)
=========================== ============ ============
Non-current liabilities
Borrowings (7.7) (2.3)
Obligations under finance
leases (137.0) (142.5)
============================ ============ ============
(144.7) (144.8)
Total net debt (127.0) (99.4)
============================ ============ ============
Net debt is GBP7.5 million (2014: net cash GBP31.4 million),
excluding finance lease obligations of GBP119.5 million (2014:
GBP130.8 million) payable to MHE JV Co, a joint venture company.
GBP4.8 million (2014: GBP2.3 million) of the Group's cash and cash
equivalents are considered to be restricted and are not available
to circulate within the Group on demand.
Reconciliation of net cash flow to movement in net debt
29 November 30 November
2015 2014
GBPm GBPm
==== ============================ ============ ============
Net increase/(decrease)
in cash and cash equivalents (30.5) (34.2)
Net (increase)/decrease
in debt and lease financing 24.3 33.4
Non-cash movements:
Assets acquired under
- finance lease (21.4) (47.7)
==== ============================= ============ ============
Movement in net debt in
the period (27.6) (48.5)
Opening net debt (99.4) (50.9)
Closing net debt (127.0) (99.4)
================================== ============ ============
4.3 Finance income and costs
52 weeks ended 52 weeks
29 November ended
2015 30 November
2014
GBPm GBPm
=========================== =============== =============
Interest on cash balances 0.2 0.4
Finance income 0.2 0.4
============================ =============== =============
Borrowing costs
- Obligations under
finance leases (8.8) (8.7)
- Borrowings (0.6) (0.9)
Fair value movement in
derivative (0.2) 0.1
Fair value movement on (0.1) -
provisions
Finance costs (9.7) (9.5)
============================ =============== =============
Net finance costs (9.5) (9.1)
============================ =============== =============
4.4 Share capital and reserves
Share capital and reserves
The movements in the called up share capital and share premium
accounts are set out below:
Ordinary Ordinary Share
shares shares premium
Number GBPm GBPm
of shares
(m)
=========================== =========== ========= =========
At 1 December 2013 617.7 12.4 251.5
Issues of ordinary shares 0.5 - 0.1
Alloted in respect of
Joint Share Ownership
Scheme - - 0.2
Allotted in respect
of share option schemes 2.7 0.1 3.3
============================ =========== ========= =========
At 30 November 2014 620.9 12.5 255.1
============================ =========== ========= =========
Issues of ordinary shares 0.6 - 0.5
Reacquisition of interest
in treasury shares - - (0.8)
Allotted in respect
of share option schemes 3.9 0.1 3.9
============================ =========== ========= =========
At 29 November 2015 625.4 12.6 258.7
============================ =========== ========= =========
Included in the total number of ordinary shares outstanding
above are 34,770,981 (2014: 34,810,561) ordinary shares held by the
Group's employee benefit trust (see Note 4.4(a)). The ordinary
shares held by the trustee of the Group's employee benefit trust
pursuant to the JSOS are treated as treasury shares in the
consolidated balance sheet in accordance with IAS 32 "Financial
Instruments: Presentation". These ordinary shares have voting
rights but these have been waived by the trustee (although the
trustee may vote in respect of shares that have vested and remain
in the trust). The number of allotted, called up and fully paid
shares, excluding treasury shares, at the end of each period
differs from that used in the earnings per share calculation in
Note 2.3 as earnings per share is calculated using the weighted
average number of ordinary shares in issue during the period,
excluding treasury shares.
The movements in reserves other than share premium are set out
below:
Treasury Reverse Fair
shares acquisition value
reserve reserve reserve
GBPm GBPm GBPm
============================= ========= ============= =========
At 1 December 2013 (52.4) (116.2) (0.1)
Movement on derivative
financial instrument - - (0.2)
Disposal of treasury shares 0.6 - -
============================= ========= ============= =========
At 30 November 2014 (51.8) (116.2) (0.3)
============================== ========= ============= =========
Movement on derivative
financial instrument - - (0.5)
Disposal of treasury shares 0.1 - -
Reacquisition of interest 0.8 - -
in treasury shares
============================= ========= ============= =========
At 29 November 2015 (50.9) (116.2) (0.8)
============================== ========= ============= =========
(a) Treasury shares reserve
This reserve arose when the Group issued equity share capital
under its JSOS, which is held in trust by the trustee of the
Group's employee benefit trust. Treasury shares cease to be
accounted for as such when they are sold outside the Group or the
interest is transferred in full to the participant pursuant to the
terms of the JSOS. Participant interests in unexercised shares held
by participants are not included in the calculation of treasury
shares; unvested interests of leavers which have been reacquired by
the Group's employee benefit trust during the period are not
accounted for as treasury shares.
(b) Fair value reserve
The fair value reserve comprises gains and losses on movements
in the Group's cash flow hedges, which consist of commodity swaps
and foreign currency hedges.
4.5 Capital commitments
Contracts placed for future capital expenditure but not provided
for in the financial statements are as follows:
29 November 30 November
2015 2014
GBPm GBPm
===================================== ============ ============
Land and buildings 3.4 2.9
Property, plant and equipment 18.9 20.0
====================================== ============ ============
Total capital expenditure committed
at the end of the period 22.3 22.9
====================================== ============ ============
Of the total capital expenditure committed at the current period
end, GBP14.4 million relates to new CFCs, GBP1.5 million to
existing CFCs, GBP1.5 million to fleet costs and GBP1.2 million
relates to technology related projects.
Section 5 - Other notes
5.1 Related party transactions
Key management personnel
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