Investment in new vehicles, which are typically on five year financing contracts, was £12.5 million which is higher than the prior year (2013: £9.0 million) to support the business growth. Delivery capital expenditure also included investments for new spokes of £8.5 million, including the purchase of the freehold of a site in Dagenham which opened, after the period end, in January 2015.
Ocado continued to develop its own proprietary software and £14.1 million (2013: £10.4 million) of internal development costs were capitalised as intangible assets in the period, with a further £2.7 million (2013: £3.7 million) spent on computer hardware and software. Our technology headcount grew to 550 staff at the end of the period (2013: 400 staff) as increased investments were made to support our strategic initiatives, including the commencing of a major replatforming exercise of Ocado's technology and migration of most of its 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 have invested internal technology resources as part of developing the following capital projects: CFC2 Phase 2; next generation of fulfilment solutions; development of the Morrisons proposition; and launch of new destination websites.
Other capital expenditure includes £16.3 million of investment in developing our next generation fulfilment solution, £1.8 million for the second phase of the NFDC to provide further capacity to support our non-food business growth and a further investment of £1.3 million to support the growth of our non-food destination sites and webshop.
At 30 November 2014, capital commitments contracted, but not provided for by the Group, amounted to £22.9 million (1 December 2013: £28.8 million). We expect capital expenditure in 2015 to be approximately £150.0 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.
During the year the Group generated improved operating cash flow after finance costs of £74.3 million, an increase of 23.0% year-on-year, up from £60.4 million in 2013, as detailed below:
|Working capital movement1||8.7||23.5|
|Other non-cash items2||4.0||2.8|
|Finance costs paid1||(9.7)||(7.1)|
|Operating cash flow||74.3||60.4|
|(Decrease)/Increase in debt/finance obligations3||(33.4)||34.2|
|Proceeds from share issues net of transaction costs||3.7||3.8|
|(Decrease)/Increase in cash and cash equivalents||(34.2)||20.9|
- FY 2013 capital investment was adjusted for capitalised borrowing costs attributable to an adjustment in working capital and finance costs paid
- Other non-cash items include movements in provisions, share of income from MHE JV Co and share based payment charges
- FY 2013 includes sale and leaseback of MHE assets to MHE JV Co
The operating cash flow increased by £13.9 million during the year primarily as a result of an increase in EBITDA of £25.8 million. This was offset by a reduction in positive movement in working capital of £14.8 million driven by a reduction in trade and other payables due to timing of payments for capital projects and the amortisation of a one off payment received in 2013 as part of the Morrisons agreement. In addition trade and other receivables reduced by £6.5 million arising from a capital contribution into MHE JV Co to finance the acquisition of CFC2 fixed assets. Additional funds to finance these CFC MHE fixed assets is received from the payment by Ocado of finance lease obligations owing to MHE JV Co.
We continue to reinvest our cash for future growth and as a result the cash outflow due to capital investment increased to £78.8 million comprising investments in CFC3, development of our next generation fulfilment solution and spend on spoke sites.
In the period £33.4 million of cash was utilised for the repayment of debt and financing obligations. The prior year included the proceeds from the MHE sales and leaseback arrangement entered into as part of the Morrisons agreement.
The Group had cash and cash equivalents of £76.3 million at the period end (2013: £110.5 million) the decrease mainly owing to a net cash outflow from investing activities and repayments of finance leases in the period.
Gross debt at the period end was £175.7 million (2013: £161.4 million). Gross debt has increased by £14.3 million reflecting an increase in obligations payable to MHE JV Co of £18.1 million offset by a reduction of £3.8m in property mortgages and asset finance obligations.
External gross debt at the period end, excluding the finance leases payable to MHE JV Co, was £44.9 million (2013: £48.7 million).
Increasing financing flexibility
In the period, we put in place a 3 year £100 million unsecured revolving credit facility. The participating banks are Barclays, HSBC, RBS and Santander. We believe this new facility enhances our flexibility to exploit the increasing growth opportunities open to us in the future. The facility remained undrawn throughout the period.
Key performance indicators
The following table sets out a summary of selected unaudited operating information for 2014 and 2013:
|Average orders per week||167,000||143,000||16.8%|
|Average order size (£)1||112.25||113.53||(1.1)%|
|Mature CFC efficiency (units per hour)2||145||135||7.4%|
|Average deliveries per van per week (DPV/week)||163||160||1.9%|
|Average product wastage (% of revenue)3||0.8||1.0||(0.2)%|
|Items delivered exactly as ordered (%)4||99.3||99.0||0.3%|
|Deliveries on time or early (%)||95.3||95.2||0.1%|
Source: the information in the table above is derived from information extracted from internal financial and operating reporting systems and is unaudited.
- Average retail value of goods a customer receives (including VAT and delivery charge and including standalone orders) per order
- Measured as units dispatched from the CFC per variable hour worked by CFC1 and CFC2 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
- Value of products purged for having passed Ocado's "use by" life guarantee divided by retail revenue
- Percentage of all items delivered exactly as ordered, i.e. the percentage of items neither missing nor substituted