Hello, and welcome to Ocado's AGM and trading update analyst call. Throughout this, all participants will be in listen-only mode, and afterwards, there'll be a question-and-answer session. Today, I'm pleased to present David Shriver, Communications Director. Please begin.
Thank you, Huan, and hello everyone. Thank you all for joining the call today. I hope that you, your families, friends, and colleagues are all safe and healthy. Our sympathies to those who may have been touched more closely by the virus. Of course, we're grateful for the tremendous work of those on the front lines. This includes our own people, of course, and we're very proud of the way our colleagues have responded to this unprecedented challenge. We're doing something unusual today: publishing a trading update with our AGM. We're doing this for two reasons. First, because we think it's important to keep the market updated on current trading during these exceptional times. Second, because as a result of government regulations, we're not allowed to have a physical meeting this year.
Duncan is gonna give you an update first on current trading at Ocado Retail, the joint venture between M&S and Ocado Group, and then he will give a business update for Ocado Group itself. We'll then take your questions. Duncan, over to you.
Thank you, David. Let me begin with an update on Ocado Retail. Since the crisis hit, we've seen unprecedented levels of demand. We've had to adapt quickly to current market conditions and make difficult decisions to prioritize our most vulnerable and our most loyal customers. We're now delivering more groceries to households than ever before. As an example, in the four weeks from the 23rd of March, we've delivered more than 50 million items to households across England and Wales. I would like again to thank all of our frontline and other staff involved who've continued to work tirelessly to help serve customers at this time of need. We've been able to do this by adapting quickly and pragmatically to the challenges of current environments. We've continued to operate our facilities at peak levels of throughput throughout the week.
Bigger baskets with more similar items mean that we can process those baskets faster. Bigger baskets have partly come as many of our customers shop for their family, their neighbors, or for the vulnerable. We have also reduced complexity in the range to improve these operations further. As an example, suspending the delivery of mineral water has allowed us to deliver to 6,000 additional households. Two months into the quarter, sales are running at just over 40% growth on last year, up on the 10.3% growth we reported in the first quarter. We continue to price-match individual products against our competitors, with the proportion of sales on promotion initially declining in line with the industry to discourage stockpiling.
Our long-standing Ocado Low-Price Promise ensures that we continue to deliver great value by sending vouchers to customers in the event their basket is more expensive than a comparable Tesco's dot-com basket. Ocado Group, which provides the operating platform and logistics for Ocado Retail, has been working hard to ramp up capacity significantly. Mature customer fulfillment centers are running at their peak and at their best-ever efficiencies. CFC4 in Iris, Southeast London, continues to ramp up and is currently processing 110,000 standard-sized orders per week versus an equivalent number of around 80,000 at the end of the first quarter. Ocado Zoom, an important part of the group's fulfillment ecosystem, has now achieved planned end-game capacity a year ahead of plan. In order to ramp at this kind of speed, we've added more resources using engineering contractors to help us scale faster.
To reward the continued efforts of our frontline staff in feeding the nation, we've been paying a 10% bonus on basic pay since the end of March and will continue to do so throughout the crisis. Moving to our solutions business, for the first half of 2020, we've seen a very important milestone: the opening of the first international customer fulfillment centers on behalf of our partners, Casino Group in France and Sobeys in Canada. Casino Group announced the go-live of its facility at Fleury-Mérogis to the south of Paris in March, and Sobeys undertook a test launch of its facility in Vaughan, Ontario, on the 27th of April. We think the fact that these facilities have been delivered on time in the middle of a global health crisis shows the ability of the business to execute well even under the most challenging circumstances.
We've also been supporting our partners to enable them to bring an online grocery service to as many customers as possible. For example, we've scaled the platform for Morrisons using StorePick software to allow them to significantly increase online capacity with higher sales in existing stores and many more stores. Combined with our support for Ocado Retail, we're enabling delivery of over 40% more groceries in the U.K. than were being done on our platform before the impact of COVID-19. I'm also glad to say that we're currently experiencing no material delays in the delivery of future CFCs for Ocado Solutions clients. Finally, we continue to look to add new clients to our roster of the most progressive and forward-looking grocers around the world as the migration to online globally gains pace. That's my introduction at this point. Happy to answer your questions.
Thank you. Ladies and gentlemen, if you wish to ask a question, can you please press Star and then Two on your phone keypad now? That is Star and then Two. There will be a brief pause while the questions are being registered. Okay. Our first question is from the line of Bruno Monteyne at Bernstein. Please go ahead, Bruno. Your line is now open.
Good morning. First question is, are there permanent benefits to the capacity and the productivity, or are these higher capacity and productivity really temporary and you'll have to take them back out? My second question is, you're suspending the 10%-15% guidance. Surely, because you expect it to be materially higher than that, just wanted to be sure about that. Third of all, can you give us a bit more detail about Sobeys and the Monoprix start of the trial? Initially, you said there were like RF-sized, no, and oversized CFCs. How quickly do you think, you know, will you get to 20%, 50%, or 100% capacities? Can you tell a little bit more about how quickly we can expect the full capacities of and overstaffed to be ready for them?
Any more details you can say on how the tests are going? Thank you.
Good morning, Bruno. Okay, on your questions, I think the permanent increase in capacity is really at Iris because that is continuing to scale as business, and therefore the growth in capacity are permanent. The drivers of some of the capacity increases elsewhere are the flattening of the week, or rather, I think really in response to the Andover fire, we've talked a lot about flattening of the week. Now, we're not really talking about flattening of the week. We're talking about a flat week. Effectively, every day, the same size volume. That is a peak throughput because customer demand is so high. Is that permanent? I think it's permanent as long as customer demand exceeds supply to that extent.
The second change is the much bigger basket size with more purchasing of multiple items, which enables us to process more. That capacity is permanent as long as people are buying bigger baskets. You know, some of those changes will last as long as the customer demand is there. The last one is some of the range changes that we've taken, slight simplification of the range. One would presume that we would unwind some of those at a different time, so they will not be as permanent. Again, some of them we may decide to say. We may say that they're a trade-off for some of the range for a bit more capacity. That is that one.
Just on the guidance, yes, just to be definitive, I think it's quite difficult to get to a point where you can justify that you stay within the 10-15% range. The simple maths means that we have to go substantially below 10% in the balance of the year to stay even in that guidance at the top end. That is the way why we've removed it. I think it's too early to give a prediction for the balance of the year. For Sobeys and Casino through the Monoprix brand, how are they ramping? I think the details on how they're ramping, I think we will leave to our partners. Those operations are progressing as we would expect.
You know, without being too definitive, because again, these are for our partners, you would imagine there are some discussions ongoing with those partners and other partners, of whether the global environment might mean that they want to accelerate capacity. Remember that for us to be able to accelerate capacity, we need to accelerate purchases in the supply chain and get more robots, and more of the kit generally faster. We are not unconstrained in our ability to grow, but clearly we'll try and accommodate as much growth as we can.
Maybe if I try the last question slightly different. We know that the end target is an oversized capacity. You always made it sure you would not go live with 100% of the capacity. You only have books for a certain part of the full capacity. Is the initial capacity you release to Casino and Sobeys, at what level is that? Is that 25% of ultimate, 50, 75%? Could you sort of ballpark what level of capacity you initiate?
I won't go into the detail, but I think to help ballparking, Bruno, assume about the 25% rather than anything different. It's not that economic for us to launch at very small volumes, but because these were the first sites, it's also unlikely we should expect them to open with huge, huge capacity. Yeah, a ballpark 25%.
Ballpark 25, and you could, you would probably be able to scale that up within one or two years to full capacity if there was demand for that. Would that be fair?
In terms of our ability to scale, if it's predicted, we could scale, we could open the facilities at full capacity, and we can grow them much faster than that. If our clients have indicated that they want to, for example, scale every three years, to change that to scale every 18 months, depending on how many of our clients do that globally, depending on the requirements of Ocado Retail in the U.K., then that may become more difficult in the short term whilst we ramp up the supply of things like robots. I'm not wanting to give any indication that we are concerned about this, but I'm really trying to respond to the, is there an unlimited ability to scale? No, you have to work on some of the other areas. That might take a few months to scale up.
Those are the discussions you're currently having, presumably with these partners about potentially accelerating and ramp up growth?
Yeah. I think generally on this topic, and I think it may come up again, I think our belief is the unprecedented time that we live in is creating a greater demand for online groceries globally. I think when talking to our stakeholders, it's important to say until we have evidence of that, I don't want to overpromise on that. I think it's better to wait until we can announce that, we can demonstrate that rather than making any significant predictions today. I think most people have accept that these circumstances are going to increase the demand for our platform.
Thank you very much.
Question. Our next question is from the line of Xavier Lemen at Bank of America. Please go ahead. Your line is open.
Hey, good morning. Thank you, David, and thank you for taking my question. Just a quick one. Right now, with Ocado Retail, you are not accepting any new customers. You will have to open the door, you know, to anyone who wants to shop with Ocado. How do you think the post-lockdown period, where potentially people will start to go a bit more back to stores a bit more, the volumes will go down, and you will start to reopen, you know, the website to anyone? How are you going to attract potentially grumpy customers who are not able to access Ocado in the recent weeks?
Good morning. Xavier, I mean, I think, if I go back a couple of years, I think for quite a number of years, we've always talked about our ability to track new customers is substantially easier if they've previously tried online shopping at one of our competitors. And so proportionately, we've found a much greater success rate from acquiring those, you know, for example, shop at the tescoes.com than somebody who just shops the Tesco store. We think the significant additional capacity that's coming into the industry is exposing a lot more customers to the benefits of shopping online. We have a confidence that our proposition is by far the best proposition, and therefore will make us, you know, make it easier for us to attract them. We see a lot of good news in this.
You know, there will be some people who will have tried to get a shop at Ocado over the last couple of months and have not been able to. We do not think that long term will impact our ability to attract them as customers.
Okay. Thank you.
Our next question is from the line of Andrew Porteous at HSBC. Please go ahead. Your line is now open.
Hi, hi Duncan. A few quick ones if I could. Firstly, in terms of exit rates, I assume the 40% is sort of an average over the quarter. Have you been increasing capacity through that? So your exit rate's a bit higher. Could you give us some detail around that? Just a bit of color around what the split is between new orders and average basket size? Because it sounds like average baskets are up quite a bit. I would have thought that's probably doing most of the work in terms of the overall sales growth. The last one, just in terms of social distancing and how that's playing out in terms of your CFCs. Are there issues in terms of running the CFCs at the moment?
Do you sort of see any potential issues around CFC operation going forward if we have to sort of have more social distancing in how we work?
Go on, Andrew. You're right in terms of exit rate. Exit rate capacity is bigger than the beginning of the quarter. We have been ramping notably Iris over the quarter. Yes. We were not running at 110,000 orders per week of standard sized orders throughout the whole quarter. That has been ramping, and one would expect that to continue to ramp. If, importantly, I think on exit rate, year-on-year sales growth, year-on-year sales growth are primarily determined by what last year's sales were. We are running at consistent levels of throughput with this gradual increase as we squeeze more capacity. Year-on-year, the sales growth can be quite different depending on whether it was a holiday period in the prior year.
If, and I'm not saying that this will happen, but if the levels of demand are the same in the middle of the high summer season, normal high summer season in August, our sales growth will be substantially higher than they are today, because we'll be delivering the same or slightly more capacity, but the prior year comparative is much smaller. Our operations are running at full capacity, which are gradually growing. The year-on-year sales growth is driven by what we had last year. In terms of the mix, mix between order size and order numbers, you're right to assume that the basket size is a, is quite a substantial increase. Therefore there's been less growth. In fact, sometimes there's been a decline in the number of orders.
Important to note, as I mentioned in my introduction, that quite a bit of that is from our customers shopping for more than themselves. And we know that our customers are shopping for their friends. Sometimes they might only get a delivery once a fortnight, but with a friend, between the two of them, they're getting a delivery once a week. They are shopping together. They are doing that for friends, for family, for neighbors, for the vulnerable. And we know that, you know, quite a number of our customers are shopping for those in need, which we would encourage. It enables us to deliver more groceries in aggregate, which is, I think, what we're trying to do at this time. On social distancing, our operations, I think, are set up for the biggest element of the lockdown.
Although we don't know the details clearly, if and when, well, when lockdowns start to ease, I don't think we'll see any further challenges to our operation. There are more than 100 operational procedure changes in the way we've operated: cleaning routines, distancing staff separate, break times, temperature monitoring when they enter our facilities. Now, testing of frontline staff, on a regular basis. There is a whole host of changes that we've made. We think we can sustain those changes and contain the low, the levels of throughput that we've got at the moment.
Thanks. That's helpful.
Okay. Our next question is from the line of Nick Coulter at Citi. Please go ahead.
Morning, Duncan. Hello, Dave from Stuartthwaite. A few, if I may, just firstly to follow up there on Andrew's question. Is it possible to have a kind of a guide on the working assumption for the growth in orders, please? I guess also it would be useful to understand what the kind of the average absolute basket size has been for ocado.com, taking your points around absolute growth over different seasonal periods. That would be the first one. Thank you.
Because we've got a 40% growth in capacity I talked about, then what I think you should assume is a modest decline in order numbers and a substantial growth in basket size. I won't give you the figure, but if it's 40%, that could be 10% order decline and 50% basket growth.
Okay.
If.
That basket size comes down, then obviously that order number will kind of waterbed up, I guess, from what you're saying.
Absolutely. Our facilities don't actually work to orders. They work to the number of items picked.
Mm-hmm.
If we, you know, a standard basket size you've heard in the past is sort of between 45 and 50 items. You just take, you know, to make it easy, 100,000 orders of 50,000 items. That gives you the product throughput, and you can deliver that same throughput with bigger baskets and smaller number of orders or smaller baskets and larger number of orders.
Got it. Thank you. If I may, just a couple more on how does that roll through onto the economics, or the operation within delivery? I guess DVW might be somewhat of a misleading statistic in this instance, but things like the length of time for an average van run probably come down exponentially. Certainly, I would have thought so in terms of distance. It would be great to get your kind of narrative around delivery economics, please.
Yes. Nick, you're right going to another, another level of detail. If you're delivering orders, and this is not the case, but just to make it easy, if you're delivering double-sized orders, then to deliver the same number of groceries, you have half the number of deliveries. If you're delivering half the number of deliveries, there's, you know, quite a proportion of the route of the time that our frontline staff are involved in is at the drop. It's much quicker to deliver one double-sized order than two half-sized orders.
Okay.
Yes, there are some efficiencies.
Yeah.
Just imagine it from the frontline staff. It's, it's not a straight roll-through because the volume and the weight of groceries they're having to carry hasn't changed. It's still very hard work for them, and we're very appreciative of that. We are weight-limited on our vans. If the weight limit on the vans were slightly different, were bigger, then we could get some more efficiency. Lastly, of course, there's less traffic on the roads.
Yeah.
Van speeds are slightly better. So yes, without doubt, there are some delivery efficiencies that we're seeing.
On the cost side, obviously, you've called out the staff bonus, and you've alluded to extra engineering costs. Presumably, there are a whole host of other things from medical checks to staff absences, etc., etc. What we can probably have a go at kind of quantifying is the staff bonus. When you look at the other costs in aggregate, how do they sit in proportion to that staff cost, the cost of the staff bonus? Thank you.
Yeah, so there's additional costs in terms of, just to repeat what you've said to a certain extent, Nick, so that everybody hears it. Yeah, additional costs of bonus, additional engineering costs, additional costs of testing. Some of the operational procedures bring some additional costs. So there's some costs associated with that. There's clearly some efficiencies in delivery. There's some efficiencies in the CFCs. Net, net, I think at an operational EBITDA level, there's no real benefit. And margins are not benefiting. We're still as price competitive as we were before. Net, net, there's no real change. For the retail business overall, clearly, there's an element of fixed cost which is unchanged. So EBITDA margins might be slightly better in retail.
I would also note the fact that given expectation of additional demand from solutions clients, we need to consider doing things faster. At the earlier question on how fast can we scale, we need to consider how the supply chain of the fulfillment solution needs to be enhanced. You know, we're seeing, I don't think you should read anything into the release today to say that you should change the consensus,
Okay.
today.
There is no operating leverage ready to contribution margin, but it might be a little bit to EBITDA. One final one, if I may, just cheekily. On the capacity in areas, obviously, you've added 30,000 standard size orders in the blink of an eye. Have you learnt to go faster there? I guess there's a cost benefit within that, but it looks like a very material ramp. Does that impact how you roll out going forwards? Thank you.
Yes. I mean, I think, I think in times of crisis, you know, people learn how to do things differently. And yes, I think we have benefited from the crisis, and, you know, that has enabled us to speed up on some things. We are, you know, we feel quite good about the fact that we have scaled it so quickly. We think in Iris, it is a permanent scaling of capacity. And clearly, if our clients are buying facilities smaller than this, it clearly demonstrates we can ramp all of our clients' facilities at a faster pace. Yeah, we think it is encouraging. We would not necessarily, I think, in normal times, say that you want to trade off some of those engineering costs to accelerate at that pace.
Given the unprecedented levels of demand in the U.K., given the need to, to do our bit to, to feed the nation, you know, it's the right trade-off for the U.K. business today, and prove that we can do it faster elsewhere.
Super. Thank you very much.
Okay. Our next question is from the line of Simon Bowler at Numis. Please go ahead, Simon. Your line is now open.
Thank you. Morning. A couple from myself. That kind of rate of capacity growth, areas, is that kind of a can we roll that forwards in terms of the rate at which you can continue to scale from here across the, say, the second half of the fiscal year?
Simon, I couldn't guarantee that we could grow at 30,000 every two months, which is effectively what we've done. I will not hide from the fact that our internal target for the year-end is now higher than it was before. We definitely think we'll have ramped Iris faster this year than we would originally have ramped it. I wouldn't assume 30,000 every two months, but do assume a further growth from there.
Okay. And then with regards to Ocado Zoom, can you just talk a bit around what the implications are for that? You know, how, how fully developed is the blueprint for Zoom? You know, can you accelerate that rollout? Or given it's still fundamentally used at CFC capacity, does that in some way get deprioritized at this point?
No. Simon, I think the team, we're very busy. We're very busy because you would imagine that if we believe there's some increased demand for our solution, both for the Ocado consumer business here in the U.K., but for our clients generally, you know, we need to work pretty fast on a number of levels. We need to build our capability to manufacture more robots faster. We need to look for more sites, with our clients internationally or with our client in the U.K., Ocado. Zoom is definitely part of that. There are, you know, I don't think you should take this as a negative read onto the desire to roll out Zoom in more locations. I think you should take it as a positive read. Given the amount we've got on our plate, don't assume that we can switch it on overnight.
Maybe the motivation for opening more Zooms has got stronger rather than weaker over the last two months.
Okay. That makes sense. Final one for myself. You kind of mentioned, I think it makes good sense in terms of there's not an unlimited ability to scale. In that context, can you just talk a bit about how you think around prioritizing U.K. versus existing clients versus potential new clients and how that decision process works?
That's a good, good question. And as you'd imagine, a question of much debate internally. Frankly, as it always is. You know, this puts more pressure on that debate, but it's a permanent part of the management time, which is where do we put our resources? Where do we put our management time? What's the area of focus? Because the opportunity asset ahead of us is so big, we are constantly prioritizing. This has added to that challenge. But frankly, Simon, I, you know, these are really nice challenges to have. Which opportunity to go for first or, you know, what proportion of your resource do you put on which opportunity in which order? These are really great challenges. You know, those are ongoing debates. And we will try and serve all of our clients.
Undoubtedly, we'll never be able to serve all of their needs exactly when they want because we are, you know, we have been scaling our business pretty dramatically over the last couple of years. We need to keep scaling it, frankly, as dramatically over the next couple of years and, arguably even more so as a result of these events.
Makes sense. Thank you.
Okay. Our next question is over the line of Lucas Schmidt at SW Mitchell Capital. Please go ahead. Your line is now open. Okay. We've just lost that line. Now we go over to the line of Maria- Laura Adurno at Morgan Stanley. Please go ahead. Your line is now open.
Yes. Hello. Thank you for taking my questions. I just have two. The first one, in normal times, can you tell us how much of your revenue sales is usually derived from promotions? The second question, coming back to some of the comments that were actually made earlier. You talked a lot about efficiencies, but at the same time, incremental costs. Just wondering, during this period of time when you saw pretty punchy growth in your volumes, have you seen any type of positive operating leverage? Yeah, any comments on this? Also, you had growth of 40%, but how is this now, has it leveled back to more normalized levels? Thank you.
Maria Laura, thank you for the questions. On promotions, yes, the level of promotions that we ran substantially decreased right at the outset. You have got to remember in those first few weeks, there was a big challenge on the supply chain. There was, you know, you could not pick up a newspaper without a story about shortages of food. You know, we, like the industry, cut back on promotions. Promotions now, now we are in, as it were, a position for sort of the temporary new normal, let's say, with different levels of demand, but now a bit more steady demand. Promotional activity is now returning back to where it used to be. Throughout this process, we always had more items on promotion than any of our competitors. Despite cutting back, we were always, you know, very well represented.
You know, that's back at or around normal levels. In terms of positive operating leverage, I think if you take away the COVID costs of extra bonus, testing costs, operational procedures, yes, there is positive operating leverage. As I've said earlier, I would call it sort of operationally that our margins are unchanged despite those costs, but there is some benefit because the fixed costs are fixed, and so that's coming through. In terms of, you know, the sort of normal levels of growth, I'd come back to what I said earlier, which is every day of every week, we're operating at full capacity, and we expect that capacity to grow over the next couple of months as we continue to get more capacity from Iris.
The year-on-year growth rates will be different week on week, depending on whether last year was a half-term or a holiday week. You know, 40% growth we've reported in the eight weeks to date includes some weeks at lower levels of growth and some weeks at substantially higher, depending on what the profile of demand was in the prior year. This year, every hour of every day is full. We're not serving any new customers. We're not serving many of our existing customers. We're only able to serve our most loyal customers. You know, frankly, at the moment, we don't see any expectation of reduction in demand, but that will come at some time, you know, as we all hope to return to a normal level of, a normal situation.
Okay. We now go to the line of Andrew Porteous at HSBC. Andrew, please go ahead.
Hi, guys. Sorry. Just have one quick follow-up, really to an earlier question around sort of delivery efficiency. I'm just wondering how that works. If I'm a delivery driver that's got 10 orders normally and now I'm delivering 5 orders of twice the size, do I come back to the CFC and do another order, or how do you manage that? Are you shortening the shift times of drivers, or?
Andrew, depending on where they are, depending on the type of route, if you're delivering to one of our newer areas, for example, out in Norfolk, for example, down into Devon, because those are long routes, you're not necessarily able to get the van back and back out again in the eight-hour period. In some of the more dense urban areas, we often operate like that. We have been operating like that for some time where some of the routes are shorter routes, and then going out multiple times. Yes, we've increased an element of that. Frankly, you know, if our drivers get, instead of working eight hours, only work seven and a half hours, we're also, you know, not exactly concerned about that because they're carrying the same amount of groceries.
You know, frankly, it's a pretty tough job. You know, we do not want to overwork them either, so.
Of course. Thank you.
Our next question is over the line of Rob Joyce at Goldman Sachs. Please go ahead. Rob, your line is now open.
Morning, Duncan. Thanks for taking the questions. Just two, quick ones. Could you remind us what % of sales your fuel costs are in more normalized times, maybe while we're running out now? And then the second one, does the ramp for Iris represent a step change in the sort of supply chain capacity to produce robots, or is there something else you've done to really accelerate that? Thanks very much.
Sorry. Rob, can you repeat that second question again? I was slightly distracted.
Sorry. Yeah. I was just saying, does the, does the accelerated ramp for Iris, is that as a result of you managing to really accelerate the capacity within your robot supply chain, or is there something more Iris-specific that you've done to accelerate that? Thank you.
In Iris, what we've been able to do is we always have an element within our supply chain. We always have, you know, an element of a contingency of robots because we're constructing them over a sustained period. What we've been able to do by putting more engineering resources is get more robots on the grid quite quickly, and therefore scale our capacity more quickly. You know, that has helped us do that. We're obviously working with our manufacturers to try and produce more robots more quickly so we can continue to ramp that. No, this is effectively utilizing the robots that we already have in construction. In terms of fuel costs, I don't have a figure to hand, so I'm not going to quote a figure.
I can obviously understand the reason behind your question, which is how much are we benefiting from fuel price declines. As you well know, a large proportion of what we pay is actually in tax, and so we only benefit on, you know, it's about a third of the cost, any reduction. It's also worth saying that at Ocado, for a number of years, we've hedged our fuel purchases, so we forward buy. We're not seeing a substantial benefit today. Obviously, we'll see that benefit spread over the next year or so, as the cost of hedging going forward comes down dramatically.
Okay. Thank you very much.
The next question is from the line of Andrew Quinn at BNP Paribas. Please go ahead. Your line is now open.
Hi. Good morning, team. Hope you're all well. Two questions for me. The first question just comes back to the partners. I'm just wondering when the next CFC is due to open. I think that's Kroger, presumably at some point in sort of late Q1, early Q2. The second question is the kind of bigger question, but obviously, it strikes me now that you do have quite a lot of pricing power versus your partners. I appreciate that it's quite difficult to exploit with your existing partners, but going forward, do you think that Ocado's in a stronger position to effectively take a slightly bigger slice of the pie?
Andrew, good morning. Yeah. The next CFC due to open will be a Kroger CFC in 2021, of course, if you exclude those in the U.K., because, you know, we are in the process of building three CFCs in the U.K. One, obviously, the rebuild of Andover, but also the Bristol fleet. All of those are ongoing and several no. Offer. Of course, it does give us a little bit more negotiating power, which I think is useful around the edges, but I wouldn't assume anything substantive.
Okay. Thank you. Cheers.
Our next question is from the line of Tom Davies at Berenberg. Please go ahead. Your line is now open.
Hi, guys. I guess two questions for me. First of all, in terms of M&S partnering with Deliveroo, how does that affect the relationship with Ocado Retail, given that Deliveroo is now part of Amazon, and in the contract it says that now you can partner with Amazon? Second of all, just a clarification question. In terms of the EBITDA margin, are you saying that at group level, it will be flat, but Ocado Retail will be up?
Tom, yeah, thanks for your questions. I think, first of all, on the sort of Delivery service with M&S, I think the important thing to say at the moment is, you know, the U.K., as many countries around the world, is in unprecedented times, and we're trying to do our bit, all of us, to feed the nation. Despite the contractual constraints that exist that might prevent some of those things happening, we were more than happy to let M&S do that with Delivery because, you know, you know, what does a contract matter when you've got to try and help serve those in need at home?
You know, it's, it's, we believe a temporary situation, relatively small scale, and we're more than happy for M&S to do that, because, you know, M&S are trying to do their bit to help feed the nation. In terms of EBITDA margin, yes, Tom, you got it right. At a group level, I wouldn't assume they change, but clearly, you know, one can't see a 40% growth in sales with your fixed costs being fixed and not expect some leverage in EBITDA for the retail business. Now, we have stopped providing guidance going forward, but as to one of the first questions, you know, that's unlikely to be less than 15% growth unless something pretty dramatic happens. We don't know what's going to happen. At the moment, you've got to assume that it's slightly positive this year for the retail EBITDA figure.
Right. I just, I guess, one more question. In terms of the CFC fix in Bristol, is that still on track for the December launch given the disruption?
Yeah, Tom. We always said the formal launch date was in early 2021. We were hopeful of trying to get it in the back end of 2020, but you could imagine that there's been travel restrictions, difficulty of getting contractors onsite, and, you know, slip the program by a week or two weeks. You hit Christmas. I think it's now highly unlikely that we'll get it open to our aspirational target, but I do think it's likely that we'll open it in our announced formal target. Thanks.
Okay. The final question for today is over the line of Nick Coulter at Citi. Please go ahead, Nick. Your line is now open.
Thank you. Apologies for the follow-up. Just very quickly on consensus. I think you said you did not expect it to move, but is that more a case of, given the lack of visibility, that you are kind of withdrawing any informal everyday guidance? Is that the correct understanding? 'Cause obviously, the risks seem to be to the upside here.
Yeah, so I mean, I think what I was, what hopefully people have understood is, within the cons, within the overall, you might assume slightly more positive in the retail business, but I would lead you to assume slightly more negative in the solutions business because extra demand.
That's inflation? Yeah. Okay.
Yeah. Extra demand means extra sourcing of robots. It means extra technology requirements. If you have an expectation of extra demand in a couple of years ahead, short term, those are very sensible decisions to take. I would not assume an overall change, might mildly positive for retail, mildly negative for the rest of the group.
Okay. Extra costs for positive reasons, effectively.
It exactly. We, we if you think you've got more demand, you should accelerate the pace of your development to meet that demand.
Brilliant. Super. Thank you.
As that was the final question for today's call, may I please pass it back to you for any closing comments at this stage?
Thank you, everybody. We look forward to speaking to you all again with our interim results on the 14th of July.
For the moment, thanks very much, and have a good day.
This now concludes today's call. Thank you all very much for attending, and you can now disconnect.