Ocado Group H1 2026 Earnings Report

Ocado Group EPS Results

• Actual EPS: -GBX 3.90
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Ocado Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Ocado Group Announcement Details

• Quarter: H1 2026
• Date: 7/16/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, July 16, 2026
• Conference Call Time: 4:30AM ET

Ocado Group (LON:OCDO) is a UK based technology company that provides end-to-end online grocery fulfilment solutions, known as the Ocado Smart Platform, to some of the world’s largest grocery retailers and holds a 50% share of Ocado Retail Ltd in the UK in a Joint Venture with Marks & Spencer. OSP comprises access to Ocado's physical infrastructure solutions, running highly efficient warehouse operations for the single pick of products, together with the entire end-to-end proprietary software applications required to operate a world class online grocery business. It is underpinned by Ocado's proven expertise and experience as a dedicated online grocer in the UK, with over two decades spent innovating for grocery online.

Ocado Group H1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Ocado said it remains on track to become cash flow positive in the second half of FY2026, with full-year cash flow positivity expected in FY2027 after major organizational changes and cost cuts.
• Positive Sentiment: Underlying business momentum remained strong, with international volumes up 27% and Ocado Retail revenue up 15%, supported by continued customer growth and improved order frequency.
• Positive Sentiment: The company highlighted several commercial wins and partner milestones, including Asda, a new U.S. customer, and the upcoming launch of its first South Korea CFC with new automation features such as Auto Freezer and dawn delivery.
• Positive Sentiment: Management said the commercial pipeline has become more active and more U.S.-weighted following the end of exclusivity in key markets, and that Ocado is now selling broader solutions beyond CFCs, including store-based automation and AMRs.
• Neutral Sentiment: While several execution issues remain, including delays to some CFC openings and the fact that store-based automation is still in pilot/prototype stages, management said these do not change its longer-term strategy or guidance.

Presentation

[Company Representative at Ocado Group]

Good morning, everyone. It's a pleasure to be with you here today and welcome you to Ocado's 2026 first half results. For disappointed England football fans in the room, I can confirm that there are no immediate plans for us to develop our business in Argentina. Before we kick off in earnest, I did want to reflect briefly on last week's announcements about succession planning at Ocado. I appreciate that there's been a lot of public speculation and commentary on this topic over recent weeks. We've announced a clear succession plan that gives certainty to everyone connected with the business, and that allows us now to focus our full attention on executing our strategy and continuing to deliver for our shareholders and partners. With that in mind, I hope you'll understand that that's all we'll be saying on the matter this morning.

[Company Representative at Ocado Group]

Today is about our strategy, updating on our strategy, the progress we're making with our clients, and our reinvigorated commercial focus worldwide. I'm going to hand over to Tim shortly, who'll take you through the highlights, but I first wanted to reflect briefly on a few key items of progress that we're making towards important goals for Ocado at this midpoint of the financial year. Firstly, following the significant organizational changes at the end of the large R&D cycle that we've talked about, we remain on course to turn cash flow positive during the second half of the year, with the expectation of being cash flow positive for the full year of FY 2027.

[Company Representative at Ocado Group]

This remains a very important goal for the business, creating a sustainable financial platform, and I'd like to thank everyone across Ocado who's been impacted by the changes made in the last few months, as well as those who have worked hard to implement them. Today, Ocado's structure is simpler, more efficient, and puts us in the best possible position to grow effectively with our clients in the coming years. As Stephen will reflect, we expect the significant impact of those changes to come through in earnest in the second half, and you'll see the detail of that in his presentation. Secondly, we are starting to see commercial benefits of this simplified and focused commercial structure with good momentum in our OSP business and new exciting partners signed in the last six months.

[Company Representative at Ocado Group]

This reinvigorated commercial focus, alongside the ending of exclusivity in many markets worldwide and our evolved solutions offering are allowing for a step change in the level of commercial engagement, and I'm excited that we're going to be joined by Nick de la Vega later to provide some insights on that commercial activity. Overall, we're confident that Ocado is in a strong position to grow with our existing partners worldwide and to bring our much-evolved solutions to a wide range of new clients. With that, I'll hand over to Tim to take us through the first half highlights.

[Tim Steiner, CEO at Ocado Group]

Thanks, Tim. Good morning, everyone. Today we'll be starting with our strategic update, which is also going to include an update from Nick to provide his feedback on what we're hearing from the industry now he's eight months into the role. Let's start with the first half highlights. I wanted to start with the growth in international volumes, which remains extremely strong at 27%. In fact, marginally above the number we talked about at the full year. The number excludes the CFCs that were closed at Kroger and Sobeys, which took the decision not to proceed with those sites that were underutilized. That 27%, therefore, represents the underlying growth that we're seeing in the international business, which will ultimately correspond to an increase in revenue. At the moment, because we still have unutilized capacity in a number of those facilities, has corresponded to a 5% revenue growth.

[Tim Steiner, CEO at Ocado Group]

A number, as I say, we expect to accelerate as more and more partners hit the drawn capacity in those sites. Secondly, that strong underlying growth is due to be reinforced with new OSP wins, and you'll already have seen obviously our recent partnership with Asda, but we expect more to come in that space. Thirdly, as you know, our target of turning cash flow positive during financial year 2026, it's an absolute core goal for the business, and we're on track to reach this target in the second half following the significant organizational changes we've gone through in the last few months, and Stephen's going to talk more about this in numbers when we get onto his section.

[Tim Steiner, CEO at Ocado Group]

Finally, we've sharpened our focus on new business in this first half, following the key changes to the commercial teams as well as to the end of exclusivity in markets around the world. We're now engaged with multiple retailers across a range of markets with a very healthy prospect pipeline. Nick, we're going to update us more on those conversations in a few minutes. Firstly, though, I'd like to pick up on the point about the strong volume growth. We're seeing it across the board. You've already seen in the RNS the numbers for Ocado Retail, where we've driven exceptional growth at 15% year-on-year. It's driven by a world-leading and constantly improving customer offer. Ocado is currently using more modules than the original design capacity of their warehouses, and that is growing month on month. Our growth is not limited or isolated to the U.K.

[Tim Steiner, CEO at Ocado Group]

Underlying growth across our international operations is extremely strong at 27% year-on-year. It reflects both the growth of the channel overall, but also reflects the market-leading proposition that our clients are bringing to the market with Ocado. They are outgrowing in their markets. I wanted to call out a few examples because it shows that recent OSP partners have gone live, and they are delivering particularly strong growth in their markets on the platform. To highlight a few, in Madrid, Alcampo CFC has seen growth of 65% year-on-year with a perfect order rate of 97%. These are both exceptional numbers and show the CFC as a key driver of market share for Alcampo in Spain's capital city. Moving on to Poland.

[Tim Steiner, CEO at Ocado Group]

Auchan Poland have been live with manual fulfillment software in stores since 2024. Last year they launched an automated CFC near Warsaw. They're already seeing their perfect order rate from the CFC, reaching up towards a very high, steady state number. The site is also delivering strong growth and is very close to reaching its original drawing capacity. I expect it to be drawing down additional capacity this year. They announced a 21% year-on-year growth across the network, including the ISF in stores. That growth is significantly higher in Warsaw, utilizing the CFC and the superior customer performance from it. In Japan, Aeon has seen really strong year-on-year growth at around 70%, following very strong engagement with our partner success teams, and their perfect order execution is also exceptional. Finally, Coles are continuing to drive strong growth.

[Tim Steiner, CEO at Ocado Group]

They like to keep their numbers for their own presentations. They have got some nice quotes in here to explain some of their results using the platform, driving strong growth in Sydney and in Melbourne, and driving phenomenal customer reaction to the service out of the CFCs. Bigger ranges, better availability, improved freshness, and obviously seeing the CFCs outperforming their already very impressive growth numbers. You can see that we've really applied key lessons that we learned from some of our earlier deployments. We've got a laser focus on driving the dual benefit of strong, sustained growth in the CFCs, as well as a consistently market-beating customer offer. Wanted to talk more about the flexibility of OSP. I know we've shown you this before. It does continue to expand in terms of what we're capable of doing.

[Tim Steiner, CEO at Ocado Group]

Our platform has evolved massively since we started to establish our early exclusive partnerships. Today, it's much more flexible, more modular, broader, and easier to integrate than ever before. Hopefully, you can see this from the slide. Today, we can serve every lead time from one hour, same day, as well as more longer scheduled. We can pick that in a variety of different ways. We can take those orders directly on client CFCs, ones provided by OSP or from aggregators. Then we can deliver in a hugely different manner of ways, with new things being added all the time, like our dawn deliveries that will be going live soon in the Korean market. I wanted to spend some time showing you how this plays out in practice. Let's start with our newest announced partnership at Asda.

[Tim Steiner, CEO at Ocado Group]

We're super excited about this one, in part because once we're live and at scale with Asda, our platform will be powering the online operations of three of the five largest grocery operators in the U.K. I'm also excited about what it demonstrates about what our platform can do for a retailer like Asda today. Firstly, we expect to serve customers across every lead time with Asda, from immediacy through to next day. Secondly, they'll be able to benefit both from our market-leading web shop solution for asda.com, as well as the ability to serve customers shopping on a whole range of aggregator platforms, such as Deliveroo, Uber Eats, and Just Eat Takeaway. Aggregate those orders together and have them all fulfilled through the Ocado Technology.

[Tim Steiner, CEO at Ocado Group]

Thirdly, they're able to get on our system quickly with our AI-powered in-store software solutions due to be rolled out across their already sizable online business from next year. This speed onto the platform is really important to Asda. Last, they'll be able to operate a range of last mile options from direct home delivery through to courier-based deliveries and to click and collect. We're helping them reach their customers in a huge variety of ways with the best possible offer, and we want to see them return to significant online growth. Moving on to Korea, to Lotte. Across to the other side of the world, we're about to go live with our first CFC in Korea very imminently. This CFC is going to deliver a number of firsts for Ocado. It's the first international CFC to go live with our proprietary Auto Freezer solution, for instance.

[Tim Steiner, CEO at Ocado Group]

In fact, it's the first CFC anywhere to go live with it, as well as with multi-temperature totes. I want to take a step back and look at the whole platform they'll use, too. Firstly, they'll be able to offer both next day and same day options, but with an important Korea-specific variant that I'll come to. Secondly, we'll be supporting them both with their own e-commerce channel as well as via aggregators again in the market. They'll be using automated CFC solutions as well as in-store fulfillment, which has already gone live. As I mentioned, the CFC is going to have more automation than any CFC before with the introduction of our Auto Freezer. Finally, on the last-mile options, we'll be launching dawn delivery for the first time in Korea.

[Tim Steiner, CEO at Ocado Group]

It's a really interesting and widespread practice in the market there, representing more than 50% of the delivery market, with shoppers wanted packed delivery at their home, left outside the door, before 7:00 A.M. It's a great example of how we can flex the platform and deliver options to suit a wide range of differing markets and differing customer preferences around the world. Moving on to Coles. Many of you will be familiar with Coles, but as a quick recap, Coles had a substantial existing business based on manual fulfillment and wanted to shift their volumes in Victoria and New South Wales into more efficient fulfillment and also to deliver better proposition to their customers.

[Tim Steiner, CEO at Ocado Group]

We've launched CFCs in both markets that have enabled that shift into the automated fulfillment, which have already generated very significant growth and a massive improvement in the customer satisfaction that I spoke to earlier. In the last few months, Coles have also began to roll out same-day orders from those sites too, with Ocado Swift Router opening up more optionality in their automation-powered offer to their customers, and we hope to see more growth in the market in Australia. Finally, moving on to Ocado Retail, which continues its consecutive run as the U.K.'s fastest growing retailer. Ocado Retail really shows what's possible with OSP in terms of growth, customer offer, and profitability. It demonstrates the huge flexibility of the platform today in terms of lead times, fulfillment offer, and last-mile optionality.

[Tim Steiner, CEO at Ocado Group]

Having completed the full switch over to OSP last year, we're already seeing huge benefits from the business being on our latest platform, including the ramp of same-day orders across the U.K. and big efficiencies in last mile. As a case in point, the software upgrades we've made in our last-mile routing alone have delivered a significant increase in efficiency. For instance, the software changes mean that we will run 80,000 fewer routes this year for the same number of orders. It's a massive improvement. I'll come back to ORL before we move on to questions, but for now I'd like to introduce you to a new face on the stage, Nick de la Vega, Ocado's Chief Revenue Officer. Nick joined us about eight months ago to drive forward our sales and account management teams.

[Tim Steiner, CEO at Ocado Group]

I'm delighted that he's here with us today to report on that progress and the feedback that he's had in conversations across the market. Nick.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

Thank you, Tim. Good morning, everyone. How are we doing?

[Tim Steiner, CEO at Ocado Group]

Very good.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

Well, firstly, I just want to start by saying, it's been a real pleasure to join Ocado, and I've had a really exciting and interesting first eight months in the company. When I joined the organization, I was absolutely sure that we had world-class, world-leading technology. As I stand here today, I'm absolutely convinced of it. Having spent time with partners, prospects, and our teams around the world, I'm convinced. The reason why, because the problems and challenges and opportunities that retailers and grocers face align almost perfectly to the unique capabilities that we have today. The way I look at what we need to do over the next period of time is there are four things that we need to do, trying to keep it very simple.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

Number one, we need happy customers that are growing ahead of market. Number two, we need to earn the faith and trust of new organizations to enjoy our fabulous technology platform going forward. Number three, we need to evolve our pipeline in line with where we can add the greatest value to new partners, but also where we can add the greatest value to our shareholders in terms of continuing to scale the organization going forward. Finally, we need to evolve how the market sees us. We're not just one binary CFC organization. That has a firm place in our organization going forward, yes, but we do a whole lot more to add value to the grocery and retail industry. Because ultimately, retailers don't buy AS/RS grids and robots, for example. They buy capacity. They buy customer experience. They buy labor productivity.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

They buy higher NPS and competitive advantage. The Ocado Technology is simply a mechanism to deliver that. It just so happens that it's world-class at doing so, and it's these things that have anchored the work that we've been doing as a team over the last six months to set us up going forward. When I first joined, there were three areas that we felt that we could really sharpen. Number one, our commercial focus and consolidating the team into a single unit. Number two, doubling down on grocery. Number three, tilting towards the U.S., as exclusivity rolled off in the world's largest grocery market. Let's start with number one. We combined two separate commercial organizations who operated in silos, focusing on segments and products.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

Today, we focus on customer missions. In focusing on customer missions, our job is to bring the very best of Ocado, irrespective of which portfolio, which part of the portfolio the customer or prospect needs support on. In terms of doubling down on grocery, this is about recognizing a couple of things. One, we no longer have exclusivity in all the major markets, which allows us to be, number two, very picky. We now need to be ultimately very focused on where we apply our energy so that we are capitalizing on where we can take advantage of the greatest value, and where retailers and grocers can take the greatest value of our products and services going forward. Last but not least, tilting towards the U.S.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

Up front, I need to say, it's not tilting towards the U.S. in favor of, let's say, our fabulous customers in Europe and Asia Pacific. Actually, I see tremendous growth opportunities for us in those geographies. The U.S. market is special. It's unique. It's a single market across 48 contiguous states and one landmass that in 2025 had GBP 160 billion of online grocery plus. It's currently growing at about 13.5%-14%, and if conservatively it continues to grow at 8%, by 2030 it would have outstripped the entire U.K. online and offline market at around about GBP 255 billion. That's on a conservative growth rate of 8%. This gives us huge confidence in terms of the opportunities ahead. The evidence, as we look back over the last six months, is really encouraging. We've signed some new deals.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

Our really valuable OMRS business continues to grow. Our pipeline has significantly transformed. Let's explore them a little bit. Tim's talked about Asda. Asda is a super exciting deal for us. Ultimately they will take advantage of our world-class end-to-end software, delivering a fabulous front end customer experience, supporting very strong in-store pick, KPIs and operations, while delivering last mile capabilities with our software platform. This is all in a bid to dramatically improve the customer experience and to support their long-term growth. We also signed another customer in the last six months. In the U.S., leveraging one of the three Kroger warehouses which they shut down, a global logistics organization, which is on a superb growth rate, is going to take advantage of that site, leveraging our technology going forward. For them, it was the right location. We know the technology works.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

When we look at our OMRS business, so I'm thinking about our Chuck AMR as an example. In the first six months of this year, we sold more of our Chuck product than the entire of 2025. At the same time, our Porter product, which is our new AMR, which is an autonomous pallet moving robot, is gaining significant interest, and within the next few weeks, will be generally available for us to sell and deliver in the marketplace. Finally on this slide, as I said, our pipeline has significantly transformed. This is all about that maniacal focus I talked about earlier, where we are doubling down on grocery. We're being very clear on what we're not doing, where we're not going to play, and what we're not going to do, with a view to actually focusing in on the areas where we can genuinely add value.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

When we look across our pipeline for CFC, store-based automation, for end-to-end software and for AMRs, the pipeline is looking better today than it did by a long way compared to, let's say, six months ago or 12 months before that. It's more sustainable, it's less lumpy, and importantly, it includes a lot of U.S. activity as well. Which takes me onto one of the most exciting developments over the last six months. The U.S. was always going to be our biggest potential opportunity for all the reasons I've talked about and we've probably discussed in the past. With U.S. exclusivity ending at the very end of last year, come January, we were able to start testing our own assumptions about that marketplace.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

In doing so, we took stock and recruited one of the three largest consultancy companies in the world, and importantly, we didn't want them to validate our assumptions. We wanted them to challenge it. In challenging our assumptions, what's interesting is they were naturally skeptical to begin with. They were skeptical in terms of, is there really a market for store-based automation? Secondly, can you, Ocado, really step out of delivering CFCs into this smaller format SBA technology? What followed was a very detailed analysis which went right down to the store level across tens of thousands of stores, typically of the medium to larger box format, so let's say above 50,000 square foot, combined with our own activity. Between Tim, myself and the rest of our team, we spent a lot of time in the United States speaking to grocers, speaking to retailers.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

The conclusion, fundamentally, the U.S. doesn't have a technology problem. It has capacity problem. Let me explain. I've already mentioned earlier that the market exited 2025 at around about GBP 160 billion. If it grows at a conservative 8%, it will land at about GBP 255 billion by 2030. As I mentioned earlier, that's bigger than the whole U.S. online, offline market as it stands today. The online penetration has increased by something like six to sevenfold over the last 10 years, and far fewer stores are being built. I mean, stores are being thrown up, but nowhere near in the same way they have been in previous years. Which means by 2030, around about 8,400+ stores would be reaching or would have well breached max capacity.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

Which is to say, they can't service any more online demand from that store without taking more shelf space without completely detrimenting the ability to service the online shopper. This is a structural and accelerated problem, and that problem isn't just in the far east and the far west of the U.S. It's across 180 mass statistical areas, so conurbations around the country. This study, which we commissioned, didn't just validate our thinking, it opened up our eyes to just how big the opportunity was. What was really exciting is what we learned from our customers and prospects in talking to them around the U.S. The message was really consistent. Their eCom continues to grow. Its growth continues to accelerate. Let me give you an example. I went into a number of stores that were already 10% online penetration, and they were struggling. They couldn't do much more.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

I visited a bunch of other stores that were 25% penetration, and it was beginning to feel like a bit of a disaster zone. A couple of stores I went to, they were already reaching more than 50% penetration, and you couldn't actually see the offline shopper. You could see the store operations picking, you could see the third-party operators picking, but actually you couldn't tell where the offline shopper was. This online growth is being fueled to a very large extent by same day, and it's being powered, not exclusively, but powered by the aggregator 1099 marketplace companies. This is having a huge effect on their offline experience, as I mentioned, but also the operational capabilities within the store. Almost to a person, they've all tried automation. For a number of different reasons, it's not worked.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

In some cases, the automation required them to raise the roof. That's very expensive. Other cases, it needed a huge amount of space. Mainly, it just didn't deliver the productivity it promised. Importantly, we learned that it interrupted and disrupted the store operation. What we learned from speaking to grocers in the U.S. is that automation can solve capacity, yes, but it can't be done at the detriment to the store operation. What they need is capacity with the right economics. This is exactly why we believe that Ocado is genuinely, uniquely placed with a competitive advantage to help solve for this. In the last 10 years, the U.S. e-commerce grocery sector has grown penetration by six to sevenfold. At the same time, in the last two years, the productivity of what we can get out of our fulfillment centers has doubled. Right.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

When we think about addressing the problems that grocers tell us and that our consultancy service delivered to us, I reflect on that for a moment, if I think about the fit, our automation will fit within the existing stores without raising the roof. We need about 20-foot clearance. That's pretty standard in the U.S. from a medium to large box format. We fit within about 5,500 square foot to deliver $10, $12, $13, $14 million worth of e-commerce. Most back rooms in these format stores have 2,500, 3,500 square foot already used for consolidation of online orders today. The technology is proven. It's the same technology we use in our CFCs, and it's the same technology we use in our test and learn sites where we have smaller form factors doing exactly this kind of thing here in the U.K. It scales.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

If it turns out you buy a GBP 10 million a year box and you need to be GBP 20 million, it can do that. Really importantly, it delivers against all the missions, whether it's click and collect and drive, or whether it's immediacy with a 1099 or aggregator service. As I start to wrap up, the message I'd want to leave you with about this conclusion is that we are meeting the consumer, meeting the customer where they want to be met. We are convinced that we have the most flexible and broadest fulfillment platforms available on the marketplace today, again, meeting the consumer where they want to be met. As I reflect on my eight months here at Ocado, I'm even more excited than I was when I started. The reason why is not because of optimism.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

It's because I'm hearing it from our customers, I'm hearing it from our prospects, and I'm hearing it from the market. Thank you.

[Stephen Daintith, CFO at Ocado Group]

Thank you, Nick. Morning, everybody. I'll take you through the financials now. First of all, the headline financials, I'll just pop this down here. Just call out for the half-year results, we're excluding the net closure fee receipts from Kroger and Sobeys. A point of clarification, that means we're excluding them from the revenue and the EBITDA numbers that you see on this screen. They are, of course, included within the liquidity number in the bottom right-hand corner, just as a point of clarification. As another point as well, the appropriate accounting treatment is to put those closure fees through reported revenue. You will see an inflated reported revenue number that includes those closure fees. There's a table on the next slide that goes through that detail.

[Stephen Daintith, CFO at Ocado Group]

I'm not going to dwell on the table, it brings it all together on the following slide. Group revenue, excluding that revenue impact from closure receipts, is up 1%. Technology Solutions within that group, 5% on a like-for-like basis. What we mean by like-for-like is when the tech solutions, you take out the closure fee receipts, but you also take out the fees that were received in the prior year from those sites that are now closed. You get a like-for-like based on live sites. Logistics grew 8%. I'm going to go through that detail shortly. It's revenue. That was driven by the growth in volumes through the logistics business process for Ocado Retail. Morrisons. Our group Adjusted EBITDA, GBP 81 million in the half, GBP 11 million lower. That is impacted to some extent by GBP 13 million from the phasing of those closures.

[Stephen Daintith, CFO at Ocado Group]

We've got the second half openings of CFCs and the benefits of those, and further benefits to come, mostly of course are cost reductions. I'm going to go through our cost reductions in quite some detail. They were almost entirely implemented in either April or May of the first half, with limited benefit therefore in the first half of the year. You are going to see that flow through materially. In the second half, we pointed to GBP 150 million of annualized savings, and you're going to see that realized in the second half. Clearly, that's a key enabler to cash flow positive in the fourth quarter of this year, and full year cash flow positive in fiscal 2027. Again, we're reaffirming, we're probably increasing conviction given that we've now carried out the cost reductions, those numbers going forward. Underlying cash flow, GBP 147 million. That's GBP 39 million lower.

[Stephen Daintith, CFO at Ocado Group]

I'm going to go through the detail of that shortly. Healthy liquidity. Just over GBP 1 billion of liquidity. Again, that's over GBP 700 million of cash and a GBP 300 million undrawn but accessible revolving credit facility. I have a slide later on that shows our gross debt, and I will start to allude to some of the opportunities ahead of us to reduce gross debt in a material way over the next couple of years. Liquidity in excess of billion I talked about. Finally, the headline. We're unchanging our guidance that we gave at the start of this year. Guidance is completely unchanged, so reaffirming that. This table shows the impacts of the Kroger, Sobeys closures. That's the third from the right column, you add those numbers together.

[Stephen Daintith, CFO at Ocado Group]

You can see that our reported revenue, therefore, is just over GBP 1 billion when you include those numbers. Clearly, for the purposes of this presentation, we're focusing on those numbers, excluding those impacts in our profit and loss account. The pro forma 2025, by the way, is adjusted for the fact that we consolidated Ocado Retail for the first four or five months of that year. We're taking out those numbers in the 2025 year to get a like-for-like pro forma when we think about the change from year to year. Okay, moving on to Technology Solutions. A key driver of revenues for Technology Solutions is, of course, the average number of live modules. This has declined by 6% from 122 in the first half of last year to 115.

[Stephen Daintith, CFO at Ocado Group]

That's driven by the Kroger and Sobeys closures announced earlier this year, partly offset by the Walmart opening and then drawdowns at existing partner CFCs. Again, just reinforcing the point that the like-for-like referring fees are growing at 5%, and Tim talked around the 27% volume growth in the orders processed in our international partners. The non-recurring fees this year are GBP 30 million lower than last year, so 24 place 37, with a reminder that last year's numbers included the GBP 17 million we received from Morrisons following their exit from the Erith site. Second quarter cost reductions are going to flow through in the second half. Just again reinforcing my earlier comment. The contribution that we're reporting today is down GBP 17 million year-on-year, but that is still very much a margin of 74% or so consistent with the prior healthy contribution margin.

[Stephen Daintith, CFO at Ocado Group]

Technology costs and support costs are pretty much flat half year on half year. Again, I'll be pointing to the opportunities and the initiatives that we put in place, and in fact executed on, to deliver a much healthier EBITDA margin in the second half of the year, which allows us to reaffirm our guidance for Technology Solutions margin of at least 30% in fiscal 2026. Again, just pulling the point here, the penultimate line, the Kroger and Sobeys closure impact, when you add it on the Adjusted EBITDA on a reported basis, is GBP 410 million. Cost discipline and focus across all areas. Clearly not quite seeing it in the first half numbers, Those savings will flow through in the second half. Technology spend has been reducing over the last two or three years as we wind down from a significant investment cycle.

[Stephen Daintith, CFO at Ocado Group]

Those reimagined innovations are now live around the world, OGRP in particular proving particularly attractive for our clients. I will point later to the sort of reductions that we're expecting to see in our technology spend as we get into the second half of this year and into fiscal 2027. Direct operating costs, I think we can safely expect a healthy 74%, 26%, a 74% contribution margin from that particular operating cost, which looks after and maintains the warehouses around the world. Ocado Logistics. As you'll know, this is a cost-plus business. It grew its fee revenue by 6% year-on-year. Importantly, cost recharges grew by 8%. That's very much in line with the growth in each is per week that this business processed, again growing at 8%.

[Stephen Daintith, CFO at Ocado Group]

On the following slide, I'm going to talk about the improvements in productivity in our Ocado Logistics business delivered through the Ocado Technology. In both the units per hour and the drops per van per route, both improving significantly. I'm going to show the operational leverage and the impact on that on the Ocado Retail numbers on an annualized basis as a consequence of those improvements in those KPIs. EBITDA growing nicely, up 15% to GBP 22 million for the first half of the year and expected to maintain that, if not improve, during the second half of the year. The U.K. partner gains in both CFC and DPV delivery. First of all, on the left-hand side here, units per hour, that's the number of shopping items picked per labor hour.

[Stephen Daintith, CFO at Ocado Group]

It's been on improving trend over the course of the year, as we have increasingly got a portfolio of the up-to-date technology versus the legacy technology that we have in Hatfield and in Dordon, increasingly rolled out OGRP, 268 units per hour, up 12% year-on-year. This in itself, this improvement, delivers a GBP 10 million per annum efficiency for Ocado Retail in its EBITDA numbers, demonstrating the operational leverage of the Ocado Smart Platform as productivity improves, particularly driven by OGRP. You can see some very strong numbers coming out of Luton here that I'll be highlighting in the bullet point on the bottom left-hand side. An attractive customer proposition to improve margin in what is traditionally a low margin sector, With a fantastic customer experience as well.

[Stephen Daintith, CFO at Ocado Group]

Similarly, deliveries per van per shift, a 6% improvement year-over-year, now doing 22.5 on average in the second half of the year. That, again, delivers a GBP 20 million EBITDA efficiency on an annualized basis for Ocado Retail. A GBP 30 million of margin benefit from these two productivity improvements in drops per van per day, but also orders picked per unit per labor hour. Ocado Retail. Tim is particularly keen to talk to you about the splendid results for Ocado Retail, I'll hand over to you.

[Tim Steiner, CEO at Ocado Group]

Thanks, Stephen. Let's just first of all look at the sales. Revenue was up 15% first half to first half, which is being driven by a 13% increase in orders coming from an 11% increase in customers. You're seeing 11% active customers generating a slight increase above that, an increase in frequency of the active customers to get to the 13%, and then you can add the average basket value going up by 1.9% to get to your 15% growth. What you can see there at the bottom is the average selling price is up 2%, which is well below the U.K. grocery market inflation of 3.9%. That's a combination of Ocado getting more cost competitive and also some mixes in the basket as it continues to grow.

[Tim Steiner, CEO at Ocado Group]

With really high quality growth from our mature customers as well and our share of the online market increasing to 13.7%, and Ocado Retail continuing to be the U.K.'s fastest growing retailer now for the last 12 consecutive months. The question is, that's more interesting, is to look at how that flows through into numbers, and Stephen gave you some cash amounts as to what the improvements in UPH and DP8 or DPVs do to the business. I thought we could just run down those. If we go to the column on the far right here, let's just look at the percentage changes in each number. You can see revenue, as I mentioned before, up 15% year-on-year.

[Tim Steiner, CEO at Ocado Group]

Gross profit has actually outperformed that at 17% with a slight increase in the gross margin, despite the fact that we've got more cost competitive against the industry with only 2% cost increases versus 3.9% in the industry. The CFC leverage in terms of efficiency and utilization of the existing sites now reaching over 100%, and it will continue to grow, really showing through here, with only a 2% increase in the cost of operating the CFCs. We saw before a 6% improvement in the deliveries per van. Nevertheless, we're still at 15% increase in service delivery costs. That 6% being wiped out by changes largely driven by the government, in terms of things like national insurance and higher wages. You can see, nevertheless, despite that, we've managed to hold service delivery costs in line with revenue growth.

[Tim Steiner, CEO at Ocado Group]

Utilities slightly higher on a small number at 17%. Marketing costs up 11%, support costs up 10%. Operating leverage in both of those. Fees up only 6%, including the Hatfield fees because of the fact that we've been charging Hatfield. As we migrate those into live utilized modules, you're seeing good operating leverage there for Ocado Retail. You're also seeing increased fees obviously for Ocado Group. Overall, significant leverage. When you get down to the EBITDA line, you've seen EBITDA go from GBP 33 million up to GBP 73 million, 119% increase, driving after depreciation, amortization, and net finance costs, an Adjusted EBT of positive GBP 12 million.

[Tim Steiner, CEO at Ocado Group]

Really strong. This is a trend that we expect to continue to see as Ocado Retail continues to benefit from improvements in DP8, improvements in UPH, increasing utilization of the existing sites, where we've got another two years of growth capacity in sites that are already built, are already operating. That's just a massive enhancement. Things like waste that form part of gross profit decreasing significantly in the last six months. We'll see that coming through as we're seeing here in improvements in margins.

[Tim Steiner, CEO at Ocado Group]

If we take some of those numbers and look at the trends, if we start on the left-hand side with the average active customers, you can now see we've had a five-year CAGR at +13%, coming out of COVID with 688,000 active customers. Today having 1.28 million active customers with very strong retention at the moment to fifth shop, which is a key metric for us. Doing that without buying those customers. That's with stable vouchering that's less than 1% of sales. If we go into the middle box where we can look at basket size, you can see we start off at GBP 56 in 2021. That obviously was a COVID basket. We went into COVID with baskets in the GBP 44, GBP 45 number pre-COVID. We've come out of COVID, gone back to GBP 44, GBP 45. You can see relatively stable baskets with an increased frequency.

[Tim Steiner, CEO at Ocado Group]

That basket is maintained despite some of their shopping patterns, with more an increase in short lead time deliveries across the market and stuff, because it's enabled by the long tail assortment with the very high levels of availability to promise. Now looking up at the right-hand column in terms of the CFCs and their design capacities, when we hit COVID, we were able to operate the CFCs in a much flatter profile than a normal week. We were able to run seven days of Fridays. That enabled us to have more than 100% utilization of the design of the warehouses at the time. After we went back to the 44 item baskets, we obviously had drop off in volume. At one point we hit 61% utilization of the live facilities. We closed in the first half of 2023.

[Tim Steiner, CEO at Ocado Group]

Actually, it wasn't the first time, in the second half of 2023, we closed the Hatfield site, and that got us back up to 80% utilization of the live sites. In the first half of this year, we're at 103%. There are some of the sites there that we will take those up to between 130%-150% of their original design capacity. That's something that we can enable in some of our international sites that were built in the same period, and just shows the amazing work that our teams have done in terms of things like throughputs through pick stations, in terms of optimization, what we call our dash algorithms, they're the ones that power our robots running around on the grids and making them more efficient.

[Tim Steiner, CEO at Ocado Group]

Additional capacity with minimal capital outlay, that's minimal capital outlay, both for Ocado Technology Solutions, but also for Ocado Retail. It enables them to drive significantly more volumes without incremental management, without incremental food waste, with marginally incremental utilities costs, with no incremental rent. It's a significant opportunity. Stephen, back to you for cash flow.

[Stephen Daintith, CFO at Ocado Group]

Thank you. Okay, cash flow. This is the bridge from the GBP 81 million of EBITDA in the first half, down to the underlying cash flow of GBP 147 million. I've already talked about the EBITDA number, lower upfront fees I've talked about. We had a working capital outflow, from just the phasing of payments and receipts. We clearly expect that to reverse in the second half. The interest paid is at higher levels here, that a lot of this is around the timing of particular coupon payments on debt instruments. You'll know that our guidance is GBP 70 million-GBP 80 million of net interest costs per annum. Interest received, that's surplus cash balances that we hold. Underlying CapEx is driven by, of course, the investment in CFCs and technology spend, the latter of which declined during the first half of this year.

[Stephen Daintith, CFO at Ocado Group]

Lease cash costs flat year-on-year at around GBP 12 million. Our reported cash inflow is a positive GBP 25 million. Notwithstanding the underlying outflow of GBP 147 million, the big green column here is the GBP 260 million net closure receipts from the Kroger and Sobeys closures. Adjusting items of GBP 31 million are largely the cost reductions, the cost of those, the headcount reductions that we carried out late in the first half. Debt reduction. I'm going to talk about debt in a little bit more detail later, shortly. We paid down GBP 55 million of our gross debt from our existing cash, and that's an opportunity that is a broader opportunity, particularly as we turn cash flow positive in the fourth quarter of this year, and full year cash flow positive next year.

[Stephen Daintith, CFO at Ocado Group]

Therefore, put all those numbers together, you get to a first half reported cash flow of GBP 25 million positive. Outlook for the year. Very much on track to turn cash flow positive during the second half, full year 2027. You'll recognize this slide showing the profile of Ocado's cash flows over the last few years. I think we've navigated successfully these outflows in the refinancing of our existing debt and taking on new debt at increasing cost, we acknowledge that, but navigated through that, and now we are turning the corner, generating cash, paying down gross debt. The cost savings that I talked about a little earlier, and we'll go into some detail on the following slide, reinforce that delivery of cash flow positive. So on the cost savings.

[Stephen Daintith, CFO at Ocado Group]

The group spent a lot of time in, was it March, April, May, across the group identifying the cost savings, communicating with the people that were impacted by those decisions. The savings were a combination of both people savings and non-people savings. The whole company was mobilized in this particular activity, whether impacted or whether driving down those costs across their own particular areas. There are four key work streams here. Clearly a little bit of overlap one with the other, I've highlighted those and the savings coming from each. Organizational efficiency. This is around headcount spend in this particular area in support costs, very much rationalizing the sizes of teams, eliminating areas of duplication, finding opportunities to merge teams with some of the parts as a consequence. That drove out or will drive out GBP 30 million-GBP 40 million of savings from those that redesign of the organization.

[Stephen Daintith, CFO at Ocado Group]

A much simpler design and a way of working that I think is early signs are landing well within the organization. Location optimization, around GBP 10 million of savings there. This is closure of our sites around the world. First of all, in London and Barcelona, there are opportunities to rationalize the number of offices there. Similarly, the U.K. research sites, we've significantly trimmed the number of those locations. At the same time, we have enlarged the shared support center in Sofia, Bulgaria, that will have close to 100 people housed there operating both finance activities and human resource activities, and we're recruiting fast in that space. We're around three quarters of the way through that recruitment program. Expect to complete that within the next, probably the next four weeks, we'll complete that. Non-people cost optimization, a zero-based mentality around our costs with our third parties.

[Stephen Daintith, CFO at Ocado Group]

Here in finance, for example, we've retendered all the services that are carried out overseas by the firms of accountants in respect of our tax and financial accounting and filing of statutory accounts and so on in those territories. That sort of activity is being carried out around the group on looking at our non-people spend, renegotiating contracts, putting them out to tender and getting good savings from that. Finally, focused technology spend. The bulk of the cost savings, GBP 18 million-GBP 19 million cost reductions there. Very much focusing on the short payback opportunities where we can see the quick payback, and we are certain of the payback.

[Stephen Daintith, CFO at Ocado Group]

We are optimizing the continuity of our existing partner base, as you might expect, and also partner commitments that we have made that are paid for by the customer, but something that they need to enhance the Ocado Smart Platform in their own markets that's tailored for them. As with many corporates, we are ramping up our AI-driven activity and efficiencies there. Just rolled out Claude across the organization, retiring our previous AI provider, and we're expecting decent benefits to come from that again. A lot of activity. Can't see it in the first half numbers, but you will see it in the second half and in full year 2027. I've gone through these key building blocks already, so full year 2027, but just to highlight some of the specifics here on the right-hand side.

[Stephen Daintith, CFO at Ocado Group]

The question that I will be asked, and I'll preempt that question, is how do you get to cash flow positive in fiscal 2027? Here are the key building blocks. First of all, live modules between 120-125 modules. We generate around GBP 4 million of contribution or so per module. That is clearly a key enabler for us. That's based on the existing live sites that we have today, plus the six, seven sites that we expect to open over the next couple of years. That will generate a contribution of around GBP 400 million cash contribution per module when you take out the direct operating costs of GBP 3 million. We've got total technology spend and support costs of around GBP 250 million in fiscal 2027. That's going to be about GBP 150 million lower than the GBP 400 million in fiscal 2025.

[Stephen Daintith, CFO at Ocado Group]

That's largely, of course, the bulk of those cost savings that I just talked about. We do receive every year other net inflows from logistics, from fees received from partners. You deduct lease costs, and of course, we've got movements in working capital, which can be a positive or a negative depending on timing of receipts and payments. Net interest costs we've got steady in this modeling of GBP 80 million-GBP 100 million a year. Putting this model together generates cash flow positive, but also importantly, sufficient cash flow to fund 10% module growth year-on-year. After years of consuming cash, as we've gone through our growth and won new customers around the world and developed new technologies and rolled those out, we're now moving into the cash generation phase. As you'll see as a consequence, an opportunity to reduce our gross debt levels.

[Stephen Daintith, CFO at Ocado Group]

On gross debt, cash and cash equivalents at the first half of GBP 765 million. Now, I should add that this excludes the GBP 90 million loan that we have made to Ocado Retail, along with M&S, who have made a similar size loan. We should clearly, now that Ocado Retail is getting into cash flow generation territory, will be shortly, I expect, in the position to be able to pay down those shareholders' loans to some extent. That excludes that GBP 90 million. It also excludes any decision we might wish to make on some of the investments that we have on our balance sheet. Wayve is an obvious example. You may have seen its recent refinancing.

[Stephen Daintith, CFO at Ocado Group]

We've got a 2% stake or so in Wayve, and there's been a material valuation uplift as a consequence of the profile, the trajectory of Wayve, and how customers are seeing, and how shareholders in particular are seeing the prospects for that business. We look at our gross debt stack here. We've got gross debt of GBP 1.438 billion at the end of the first half, 50-odd million GBP lower than the same position at the end of fiscal 2025. We've been able to pay down GBP 55 million out of our cash of the remaining stub of the GBP 600 million senior unsecured note. You'll see that there at the top. We do have sufficient cash on our balance sheet today, and moving into cash flow positive to fund the GBP 350 million convert, which you see here, during January 2027.

[Stephen Daintith, CFO at Ocado Group]

We can pay that down out of existing cash, further reducing gross debt. When you do the maths, if we chose to run our liquidity down to a level of around GBP 500 million or so, there's around another GBP 100 million, GBP 150 million of cash available again to pay down even further debt. There's an opportunity therefore to get our gross debt levels down to GBP 700 million, GBP 800 million or so within the next 12 to 18 months. Finally, our guidance is unchanged for fiscal 2027. Technology Solutions revenue of around GBP 500 million, around a 30% EBITDA margin. Ocado Logistics, again, high mid-single-digit percentage growth. EBITDA of between 30% and 35%. Turning cash flow positive and an underlying cash outflow of around GBP 200 million, CapEx of around GBP 250 million, maintaining those numbers. Thank you very much. One last slide. My key messages, building commercial momentum.

[Stephen Daintith, CFO at Ocado Group]

Nick's talked a lot about that, as has Tim. Cost and capital discipline, I think I've gone through sufficient detail on that one. Active management of our balance sheets, reinforcing my message just now, and very much on track to turn cash flow positive during the second half of the year. Now we are in Q and A.

[William Woods, Analyst at Bernstein]

Good morning. Is that on? Okay. Good morning, William Woods from Bernstein. Two questions just on the store-based automation. I think we talked last time, have you got a solution actually live and rolling as a pilot on this yet? Linked to that, I suppose we talked before about the operational challenges of shrinking the technology in terms of duplication of picking depth and breadth of SKUs, replenishment problems, all that kind of stuff that many of the players who've used MFCs have faced. Do you think you've solved those operational challenges? The second one is on the delays. Obviously, you've seen two CFCs further delayed. I suppose, why is that? Do you see any signs of life in terms of more Korean and Japanese CFCs coming on board? Thanks.

[Tim Steiner, CEO at Ocado Group]

Let's start with the SBA question. No, we've got early prototype sites, as you know, like the Ocado Zoom sites that show some of the flows and some of the miniaturization of the grids. We've got test sites in our research centers here. We've got some test stuff. We've also got a demonstration site in the U.S., like a mini demonstration site in Dallas. We've got a facility there that we hosted about 70-something people there-

[William Woods, Analyst at Bernstein]

Sure

[Tim Steiner, CEO at Ocado Group]

In the last month or so. We've got a lot of designs because actually there isn't a one-size-fits-all. Everybody doesn't want 5,000 sq ft and GBP 12 million. We've got designs from five to 45,000 sq ft. We've got a lot of work on all the designs, and we've got all the components that you can see. We have got the new dispatch port, here in the U.K., the first one of those, available to look at in our test facilities. You can see how it all kind of comes together. We're obviously looking to get a pilot site live in the next 12 months, wait and see where that's going to be. We're hoping to do several of them around the world. To your more detailed question around why have people failed in these in the past and have we addressed those issues, we believe, yes.

[Tim Steiner, CEO at Ocado Group]

Nick mentioned space utilization, the kind of the density of our solution is unmatched. Nick mentioned ceilings, some of those people were building shuttle systems and asked people to spend millions and millions of pound or dollars or whatever it was, increasing the physical size of their buildings. We're going to put this into a standard store format. Flows. Flows of product within-- If it's in a supermarket, the environment of mixing a certain batch picked and just-in-time picked stuff from the supermarket and the flows on the inbound side. We've done a lot of work on that. We're obviously unique, as Nick mentioned in his presentation, in terms of we're not just a robotics company. We understand grocery. We ship billions of items of grocery a year. That's all kind of fairly unique. Does that address your SBA question? Your second bit was-

[William Woods, Analyst at Bernstein]

The delays and then any further progress since your invest-

[Tim Steiner, CEO at Ocado Group]

We're opening a site right now in Korea imminently. The first site in Busan is opening. We do expect the site in Seoul to take a little bit longer because I think a partner wants to see some more results out of Busan first. They're currently enjoying very strong growth, which is really good. Obviously as the site goes live, we've got the overnight, the dawn deliveries going live as well, which will provide a big growth pickup opportunity, a big growth opportunity. Tokyo is a different situation entirely in that site one, two, and three all serve contiguous geography. Actually when they looked at the plans and went, "Hold on a minute, we won't have filled sites one and two. Why would we want to have another management team, another waste, more utilities, et cetera?

[Tim Steiner, CEO at Ocado Group]

Why don't we just grow one and two higher before we open three?" That looked like it made sense for us and for them in terms of the deployment of capital. I don't think we expect to see less fees as a result because we'll see more fees from one and two rather than seeing the fees shared across one, two, and three, and we'll lay out our capital later. It's kind of a win-win for everybody. Probably the original timetable just hadn't been thought through in enough detail. That's a different situation. There was a third part. Was there to your question or was that?

[William Woods, Analyst at Bernstein]

No.

[Tim Steiner, CEO at Ocado Group]

No, that was it. Okay, fantastic.

[Tintin Stormont, Analyst at Deutsche Numis]

Morning. Tintin Stormont from Deutsche Numis. On SBA again, this is for Nick, in terms of the discussions you were having, what have you learned about sort of sales cycles, competition, and in terms of the customer standpoint, in terms of price point and revenue model, that they are sort of, kind of happy to pay? Secondly, in the AMR space, could you talk about the sales and the pipeline there and the split between existing customers and actually entirely new customers?

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

Why don't I venture and then Tim, you can add and keep me honest as we go along. In terms of your first question was around sales cycle for SBA. We've got across a number of different prospects in the U.S., 10+ as an example. A significant number of conversations that are active today. What I would say is they're all moving at different speeds. There's a number of them that actually they've tried this before. They know what they're getting, they know what's going to happen, and they actually want to go on quite an accelerated journey. There are others that recognize the problem, recognize the capacity constraint, know they need to do it, but actually it's more of a, I'll solve for it in 2028, 2029, 2030, therefore it's more of a slightly different glide path.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

We're seeing the momentum out there in terms of, yes, we need to do it. Yes, I'm interested in it, across the number of people we're talking to, there are different degrees of speed. That's number one. In terms of, I think your second question was about the economics.

[Tintin Stormont, Analyst at Deutsche Numis]

That's the third one, in the general economics. The secondone is about competition. When they're having discussions with you-

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

Yeah

[Tintin Stormont, Analyst at Deutsche Numis]

Does this come out what else they've tried and what else they might need to try?

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

Yeah, both. In terms of what they've tried, they're all very vocal about why that didn't work, the problems that they've been facing into, and in many cases, they just simply stopped what they've tried or just turned it off, shut it down, mothballed it. Once in a while, we come across trials, or that's not even true. I think that's starting a journey of having a conversation with someone else to try something. Truthfully, that's not really a competitive force just yet because it's technology that hasn't been deployed as far as we can tell, in any meaningful fashion in more than one or two locations. I think the competition is still a bit nascent in truth. Pause there for a second, maybe Tim, make sure I haven't missed anything.

[Tim Steiner, CEO at Ocado Group]

No, I think it's good.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

Okay. To answer your first two parts of the question, in terms of the economics, could you repeat your question?

[Tintin Stormont, Analyst at Deutsche Numis]

Yeah. Just in terms of, I guess, price point?

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

Yeah

[Tintin Stormont, Analyst at Deutsche Numis]

Kind of revenue model, if that's been discussed already.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

Has been discussed. With a number of prospects out there, we've shared very detailed working models. As Tim says, it's not interesting, it's not one size fits all. That's a lesson we've learned over the last six months. They all want a slightly different mission, use case, different conurbations require different flow of vehicles, whether it's drive or 1099 aggregators coming through. Therefore, that changes the economics to a degree in each site, but to a degree. In a couple of conversations, they've actually set us a test. If you can do it under this number, that's what we need you to do, because if you do it under that number, actually the economics from this site is the same, if not potentially even better than an offline site, i.e., customers walking into a store.

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

In those earlier conversations, or, sorry, early conversations, we've actually been able to demonstrate how we could do it at that number or below. In a number of the conversations, the economics has been a positive part of it in terms of what they would have to put down, the effort we would take away from them, and effectively the total cost of ownership of that box, if you will. In none of those conversations has it been a blocker. I think they've all been, to date at least, pleasantly surprised by the limited amount of capital they would need to deploy and the speed to which they would start getting the benefit from that.

[Tim Steiner, CEO at Ocado Group]

Yeah. I would just add from our side that the economics are slightly different to an OSP warehouse, because generally people now obviously are buying them with less live modules to start with, and therefore have got better utilization straight away. An SBA, they're looking to be very high utilization straight away. Okay? The risk of, "I've built it and I'm not going to use it," is very low, and they're small. They're between $10 million-$100 million in scale. Their upfront capital as a percentage of maximum sales is a larger number than on the big sheds. Okay? But it's a low-risk number because I know I need to use it, and I'm going to use it quickly, and I can buy it in small increments exactly where I want it. Right?

[Tim Steiner, CEO at Ocado Group]

Means that their ongoing fees are also lower because we don't need to be amortizing as much upfront capital or zero upfront capital into those sites. We're obviously making our margin and our operating and the cloud costs and everything else, and the ongoing R&D out of those ongoing fees. From our side, whereas the returns on a standard warehouse are a J-curve of capital goes in, and then we start to make long-term returns, as an SBA site goes live, it will just have a net positive impact to us. The more sites, the better. There isn't a risk of a significant amount of outflow of capital beyond a small outflow in the original test sites that we're talking about, which sometimes we're building with a slightly older version of a product than the one that we intend to use when we do a mass rollout.

[Tintin Stormont, Analyst at Deutsche Numis]

Just on the AMR.

[Tim Steiner, CEO at Ocado Group]

Sorry, you have to remind me of the question.

[Tintin Stormont, Analyst at Deutsche Numis]

Chuck and Porter, when they look at.

[Tim Steiner, CEO at Ocado Group]

Yeah

[Tintin Stormont, Analyst at Deutsche Numis]

Sales in May, June, July, are they all existing customers?

[Tim Steiner, CEO at Ocado Group]

No. Our renewal rate is very good. It's very high in terms of customers coming to either buy more or recontracting, for refresh of the current Chuck technology. Actually, I haven't got the percentages to hand, a very good percentage of the conversations that we've converted into sales in the first half of this year were new, which is why we're able to sell twice as much in the first half of this year compared to all of last year. There's a lot of new revenue, accretive to top and bottom line that's coming through from the current activity.

[Analyst at Bank of America]

Okay. Still on SBA, sorry, Xavier from Bank of America. I do not want to sound a bit sarcastic, it's not like you are ticking all the boxes, you've got the right solution, the right pricing. Everything seems to be great, we don't have any deals. How long will it take? In terms of negotiation, because we've seen that it could take up to eight, nine months, potentially a year, to come to something. Second point is, you said some people may be interested, maybe in 2028, 2029, or 2030. It's great, it's not a good reason for us to potentially buy your stock because we want to see proof now rather than 2030. How do you see that?

[Nick de la Vega, Chief Revenue Officer at Ocado Group]

Why don't I address the last bit first, I'll let you jump into the first bit. Just to reframe what I said, I may have done it clumsily. We have some people that are really interested now, like right now, we need to work through that dialogue with them. How long will that take? I have to work that through with them, some of them are quite imminent. Others recognize the problem and the opportunity, it's down the line. I wasn't saying it's all back-ended. Far from it, actually. I'm quite excited by the opportunity in front of us and what that looks like in the near term, in the short term.

[Tim Steiner, CEO at Ocado Group]

Look, also, just to add to that part, if you take a retailer's store portfolio and you think about this, not from the economic uplift that they could achieve or the improvements in the customer proposition, just look at it from the capacity constraints perspective. Basically, every year, the number of stores that are constrained is growing. Some people might not be there yet or have a very small portfolio that are constrained and aren't worrying about this yet. As people are looking forwards, they can see this line just going straight down the portfolio. The key at the moment is to try and persuade the people that are saying to Nick, "Look, I think I've got a problem in 2028," to say, "Well, hold on a minute. You need to get us a site for trial before that.

[Tim Steiner, CEO at Ocado Group]

Let's think about getting a trial site live so that you know then how it works. If you want to start deploying 2028, 2029, 2030 to put 1,000 stores in, you know what you're doing. That's some of the kind of conversations that he's having with the ones that are initially starting off slower, and then there are the ones that are starting off and wanting to move faster. Look, I understand, at the end of the day, none of us can have 100% confidence until we sign some contracts and you'll hear about them when you hear about them. It would be naive of us to say we're going to sign this many contracts by December, and then, we're at the mercy of that.

[Tim Steiner, CEO at Ocado Group]

The answer is, we've got positive momentum, we've got very positive conversations going on, and we hope to be able to come back and talk to you about some of those in the near future.

[Oliver Tipping, Analyst at Peel Hunt]

Thank you. Oliver Tipping from Peel Hunt. It wasn't just the Sole CFC that's been delayed. The Phoenix one has obviously been delayed as well. Is there a chance that that just gets canceled? If it did get canceled, do you guys still get fees? Is that still part of the negotiations? More broadly, how do you currently view the relationship with Kroger? I have a second one, just based on retail, which I think has been super success story. When you say you've got another two years of growth capacity within existing sites, how much growth are you factoring in when you say that? Because obviously if it suddenly doubles, then you probably will run out of capacity, right?

[Tim Steiner, CEO at Ocado Group]

Working backwards, yes. If ORL's growth rate went to 35% or something and we were compounding that, we would obviously run out of capacity. If it continues in the low to mid-teens, we have enough capacity between taking back the Erith capacity that Morrisons relinquished and then taking sites like Luton, Andover, Purfleet, Bristol, and Bicester in particular up by 30%-50% in terms of their weekly throughputs, which is what we believe is achievable in those sites. The accumulation of that is what gets us to being able to make that statement around two years. The Phoenix question, look, you can see what we got paid. It was very formulaic to come to the number that you saw on the sites that didn't open or closed.

[Tim Steiner, CEO at Ocado Group]

Therefore, should that one not open, I believe it is going to open, but in the event that Kroger changed their minds and decided not to, my expectation is that I could guess how much money it is because I could put it in the same formula that we used for the other sites, and I know what drops out the other side. It's obviously a very substantial sum of money, but our expectation is that site is going to open. We do still have some ongoing work to do in the site on our side to do with the Auto Freezer that required some incremental permitting that we're still waiting to get back into the site and complete it, which is why our expectation is that the date has moved out. In terms of the relationship, it's very good.

[Tim Steiner, CEO at Ocado Group]

Nick and I were out recently and met with Greg as well as with Yael and had dinner with Greg in the U.S. I think there's a new figure, if that's the right word, would you say to use, in terms of the relationship with the now a permanent CEO who's very engaged in the online channel. We hope to do more work with Kroger going forward. Again, bit like the Preston over here, it's going to have to be a wait and see for everybody to understand that.

[Company Representative at Ocado Group]

Great. Any more? Over there.

[Tim Steiner, CEO at Ocado Group]

Thank you. Thanks for coming

Participants

Executives

• Company Representative
• Tim Steiner, CEO
• Nick de la Vega, Chief Revenue Officer
• Stephen Daintith, CFO

Analysts

• William Woods, Analyst at Bernstein
• Tintin Stormont, Analyst at Deutsche Numis
• Analyst at Bank of America
• Oliver Tipping, Analyst at Peel Hunt