Earnings Call: H2 2020

Feb 9, 2021

Ladies and gentlemen, welcome to the Ocado Group Full Year Results for 2020. In many respects, this has been a challenging year for everyone, both here and abroad, and the consequences of the COVID-nineteen pandemic are likely to be with us for some time. Now with this in mind, I'd like to begin today by thanking all my colleagues at Ocado Group and Ocado Retail for their dedication, resilience, adaptability and determination in playing their part to help feed the nation, support our grocery partners around the world and through constant innovation and problem solving, create jobs and grow value for all our stakeholders and the communities we serve. I have no doubt that my colleagues will bring these characteristics to the challenges and opportunities that lie ahead of us in 2021 and beyond. With a major vaccination program now underway, it's right, I think, to think about what the post vaccine world looks like and Ocado's role within it. In this presentation we are about to make, we will focus on 4 key points. Firstly, the world has changed. Millions of people have tried online grocery for the first time and generally they see the benefits and they won't be going back. They will, however, become more discerning and this plays to our strengths because we set the standards for customer experience worldwide. In this segment, we will remind those of you who are not already customers of what that experience feels like and hear from some of our partners, including Sobeys, Kroger and of course, MEL at Ocado Retail. 2nd, how do we deliver this outstanding experience? Our unique, flexible and proprietary technology is the answer, built to solve the specific challenges in online grocery that we have experienced in our 2 decades as a pure play retailer in the UK. James Matthews will take us through what makes the tech special. Thirdly, in a post vaccine world, customers demand a whole range of missions served from big basket to immediacy, home delivery and pick up at store same day and next day. OSP does it all. And Luke Jensen will focus on some key components of the OSP ecosystem, including micros, minis and ISF and how we think about new partner acquisition. Fourthly, at the same time, we are constantly innovating to both expand our market opportunity and reduce the cost to serve it. In practice, it means applying the learnings of the last year to drive down costs and progressing our journey to a lights out future. Mark Richardson will talk about the learnings of the last 12 months and Tim will detail just why we are so excited about robotic picking and other areas of recent investment. The bottom line is that Ocado Group is ahead of the curve and intends to stay there. OSP is at the apex of the structural shift in consumer shopping behavior, a trend that has only been accelerated by and we will continue to use our imagination and creativity to lead this channel shift. Finally, this is my last time introducing Ocado Group's results. From May, I will be handing over the role of Chairman to Rick Haythorn Thwaite. Rick has an outstanding background with experience in leading and chairing a range of high profile industrial and technology companies, and he will play a key role in helping us to navigate a post COVID world, using his experience to help us scale up and take advantage of the very significant global opportunities that we believe lie ahead. Now it's been a real privilege to be Chairman of Ocado Group over the last 8 years and to have helped steer the business to where it is today, a world beating online grocer and solutions provider during unprecedented change in the industry. The extraordinary creativity, problem solving, resilience The ability shown by the people of Ocado Group has been in evidence particularly through the COVID-nineteen crisis. And I know that those qualities and will serve the business well in the years to come. Thank you. And now over to Tim. Thank you for that, Stuart. Before I move on, I'd also like to take the opportunity to thank all of the team at Ocado for the extraordinary efforts they put in this year. They really did live up to all of our values, showing how we are really all in it together, how we always believe we can do better, and how proud we are of what we do. Before we move on and talk about the future, I'd just like to hand over to Andrew to talk through last year's financials. Well, thanks, Tim, and good morning, everyone. Over the next few slides, I'll cover the results for the year, which come against the backdrop of unprecedented conditions as as a result of COVID-nineteen. I'll also provide guidance for the year ahead. In summary, The group performed strongly with revenue up by almost onethree, principally as a result of higher volumes in the retail business. EBITDA was also significantly higher, reflecting a number of factors. First, the benefit of operational leverage in retail, with the increase in volumes translating to significant bottom line growth. 2nd, a reduction in EBITDA for the U. K. Solutions and Logistics segment, with the benefit of higher fees from increased capacity being more than offset by additional costs of investment. And third, the impact of continued investment in International Solutions as we scale and develop the business for growth. As a result, we saw a material increase in group EBITDA, including the impact of higher costs as we invest in our people and the platform for future growth. We'll come back to each of these aspects shortly. Below the EBITDA line, we have higher depreciation and amortization charges, primarily reflecting our continued investment in OSP software and higher financing costs following the 2 convertible bond issuances during the year. As in the prior year, we are reporting exceptionals, again, mostly relating to the fire in Andover. Whereas last year, we had a charge for the impairment of the asset, This year, it swings to an exceptional credit as we recognize the insurance reimbursements for rebuild costs and business interruption. Taking all of these factors together, the result is a significantly lower statutory loss before tax for the year. Here's the split of revenue and EBITDA by segment. Starting with retail. Revenue grew by 35%. This reflects a Q1 which was largely unaffected by the impact of COVID-nineteen on customer buying patterns and saw a year on year revenue growth of around 10% for the quarter. By contrast, The remaining 9 months of the year were strongly influenced by COVID, with year on year revenue growth on average up over 40% per quarter. Capacity fees and cost recharges payable to UK solutions and logistics were higher, reflecting the ramping of throughput at the existing sites. And there were a number of other moving parts, including a proportionately lower marketing spend as we switched off new customer acquisition channels for some of the year, offset by an increase in head office costs, marking the 1st full year of operation on a stand alone basis. All in all, the impact of the higher volumes came through strongly to the bottom line with significant operational leverage. Turning to U. K. Solutions and Logistics. Revenue grew by 14%, reflecting higher cost recharges and fees to our U. K. Partners as a result of the increase in throughput and capacity that we have enabled for them. Within this, fees chargeable to Ocado Retail went up, reflecting the higher volumes and capacity growth, while fees for Morrisons were lower as a result of the Iirth holiday. Costs increased in this segment ahead of revenue, mainly due to the share of investment made in additional headcount and technology resources to support and improve the platform for future growth. We also incurred higher engineering related costs as a result of the rapid growth in capacity at Erith. As you'll see later, we've made good progress in reducing the engineering cost per order at Erith, but it is still relatively immature and remains above the levels achieved at our older sites. EBITDA for UK Solutions and Logistics declined year on year due to these factors. However, the performance provides a strong reminder of our ability to scale up existing assets and continue to drive efficiencies. Next, moving on to international solutions. Here, the story is simpler, with revenue starting to be recognized following the go live of Casanova and Sobeys CFCs. Distribution and admin costs continue to rise with increased headcount and cost to support the sites which are now live and to invest in the improvements to the platform to deliver future growth. As expected, EBITDA continued to decline as a result. And finally, the other segment. Here, the increase in losses is primarily the result of higher costs of share based senior management incentives, reflecting the increase in value over the last few years. The segment also includes FX movements and transaction costs related to our recent U. S. Acquisitions, amounting to around £8,000,000 in total and which, all else equal, is not expected to recur in future periods. Note that we have also made some adjustments to the segmental split in the prior year, following a review of our cost allocations in the second half. A full analysis is provided in the appendix to this slide presentation. But in summary, the result is a £7,000,000 reclass between U. K. Solutions, International Solutions and the other segment. There is no impact to group EBITDA overall. So those are the main drivers of performance in the period. I'd now like to return to each segment in a little more detail. Firstly, retail. This slide will be familiar to you from our review at the half year, with many of the trends we saw emerging as a result of COVID-nineteen restrictions continuing through the remainder of the year, Namely higher volumes, significantly larger basket sizes and a smooth trading week. As before, with the higher basket sizes, the number of each is per van increased, with deliveries per van decreasing. We've been able to deliver a 5% improvement in UPH for our mature CFCs, which now includes Erith as well as Dordon and Hatfield, with much of the improvement coming from the ramp up of Erith, which is now performing above the average UPH. On a normalized basis, orders per week at the end of the year were up almost 30% compared to the start of the year, with all CFCs benefiting from improved utilization with a smooth week. IRITH alone accounted for over half of the increase With the doubling of orders per week over the course of the year, the higher volumes and basket size drive efficiencies, which flow to the bottom line. Looking at the impact on the retail financials, which as in previous presentations, we show as a percentage of retail revenue. Here, we can see the benefits of operational leverage coming through. Gross margin improved year on year by 130 bps, driven by the combination of improved product mix, the benefit of the termination of the Waitrose sourcing agreement following the switch over to M and S And improvements in stock wastage. Trunking and delivery and CFC costs declined as a proportion of revenue, with the benefit of higher volumes from existing capacity. Marketing costs increased only slightly year on year in absolute terms, but declined as a proportion of revenue, notwithstanding the marketing activity associated with the switch over to M and S. And as we've already mentioned, fees payable to U. K. Solutions and logistics increased as a result of the additional throughput and capacity, but declined overall as a percentage of revenue. The only area to show an increase is admin costs. This reflects the 1st full year of retail's head office cost base as a standalone entity, including a strengthened buying team following the switch over to M and S, as well as board costs and management incentives. Taking each of these together, we see the effect of operational leverage in response to the increase in customer demand and the flattening of the trading week. Turning to U. K. Solutions and Logistics. As I mentioned earlier, the revenue growth reflects the recharge of fixed and variable costs to our U. K. Partners, which rose as a result of the increase in volumes and the benefit of higher capacity fees as we ramp throughput from our existing sites. Overall, we were able to increase volume throughput by over 20% year on year. Within the revenue increase, There are again a number of moving parts, with the benefit of higher retail volumes being partially offset by the impact of lower fees chargeable to Morrisons as a result of the Erith holiday, in turn partially offset by higher Morrison store pick fees. Remember that the insurance reimbursements for Andover are included as exceptional income. Now looking at the cost side of the equation. Distribution costs were higher, reflecting the additional volumes, mainly attributable to Aerith as we rapidly ramp the capacity there. Also included within distribution costs It's around £15,000,000 in respect of additional COVID related costs, mainly relating to our testing program, additional cleaning measures And bonus payments for all our frontline staff. These costs are recharged to our U. K. Partners. We continue to make good progress in bringing down the engineering cost per order at Erith, achieving a 20% reduction on average compared to the prior year. However, overall, the additional volumes came at a higher cost than for the existing mature capacity. Admin costs, as we've mentioned, Reflect the investment made in additional headcount and technology resources. This amounted to a circa £20,000,000 increase in the cost base for U. K. Solutions and Logistics. EBITDA for the segment is therefore down year on year, reflecting the investment for future growth and demonstrating the ability to ramp up capacity from the existing CFC base. Moving on to International Solutions. Revenue is now being recognized following the go live of Casanova and Sobeys CFCs during the year In accordance with IFRS 15. Note that included within this is a portion relating to equipment sales on a pass through basis. With the ongoing investments in the business, the EBITDA loss for the year has increased as expected. This includes a share of the cost of hiring The 500 additional tech colleagues during the year as we scale up our execution capabilities for our OSP partners. Importantly, The level of invoiced fees continues to grow strongly, up more than 50% year on year at over £120,000,000 The cumulative level of fees invoiced, but not yet recognized in revenue, is now over €250,000,000 Turning now to cash flow. We continue to generate strong operating cash flows, up fourfold from last year. This includes the impact of cash receipts from clients which are not recognized in EBITDA. CapEx for the year out turned at £525,000,000 Double the spend in FY 2019. There was a significant increase in both U. K. And overseas investment. And importantly, International CapEx is now almost at the same level as for the U. K, underlying in the continued growth trajectory of the group. You can see the impact of the cash raised in our £600,000,000 convertible bond issuance at the start of the year and the £1,000,000,000 convertible bond and equity fundraise in the second half. Our balance sheet is therefore in a strong position with almost £2,100,000,000 of cash and deposits. In line with the accounting requirements, We now show the split between cash and cash equivalents with a maturity of less than 3 months separately from treasury deposits with a duration greater than 3 months. Finally, looking ahead to FY 'twenty one, and first the impact on revenue. For retail, The outlook will clearly be highly dependent on the continued impact of COVID-nineteen restrictions and the duration of a smooth trading week. New UK capacity will come online And progressively ramp up, with Bristol expected to go live at the end of February and Andover and Perfaly to follow in the Q4. In U. K. Solutions and Logistics, we expect to achieve double digit revenue growth, reflecting the full year effect of capacity added in FY 2020, Together with the new capacity coming online and the return of Morrisons to Erith. For International Solutions, we expect revenue to increase to around £50,000,000 with the full year effect of the existing operational CFCs and with a partial year of operation for the first two Kroger CFCs. International Solutions invoiced fees are expected to grow by around 30% year on year. At the EBITDA level, the same factors apply, particularly the duration of COVID-nineteen related customer buying patterns. As we continue to invest to deliver accelerated growth, We expect costs to continue to increase. We are guiding to around €30,000,000 of additional costs of investment in technology and the platform in FY 2021, including the recruitment of a further 600 heads in technology as we scale to support growth. This includes costs associated with our recent U. S. Acquisitions to accelerate the development of our robotic capabilities. Our methodology Is to allocate these costs based on the number of CFC modules that are live or committed. Therefore, a proportionately larger share will be allocated to the International Solutions business in FY 2021. So to summarize the impact on each of the segments. For retail, revenue will be dependent on customer buying patterns for the remainder of the year and the cost base will reflect the additional capacity from the existing assets and from the new CFCs coming online this year. U. K. Solutions and Logistics similarly will earn higher fees and we expect its EBITDA to return to the levels seen in FY 2019. International Solutions will earn higher revenues, but this will be more than offset by the increase in the cost of our investments in growing the business. And we expect CapEx of around $700,000,000 with international investment reaching similar levels to the U. K. With that, I'll hand back to Tim. Thank you, Andrew. What we've seen over the last 12 months is that millions of people globally have started shopping for groceries online, and they love it. But as the world settles into a new post pandemic normal, customers are going to become more and more discerning. And that's where Ocado and its OSP clients are going to shine. With a superior proposition and better execution, We've always delivered the most outstanding service in our market, and that's what helped Ocado Retail to grow for many years ahead of its competitors, And we'll help all of our global clients to achieve the same result. OSP is setting the benchmark for customer experience, Allowing our clients to offer services with the widest ranges, with the best execution, the most accurate orders delivered on time and outstanding value and to do so with market leading profitability. The early NPS scores from Voila by Sobeys are outstanding and you'll hear more on that from Michael Medline. The customer reviews for Monoprix at Group Casino are also excellent. If you look at this graph on the right hand side you'll see a familiar chart we've put out before. The cohort analysis of spend by customers at Ocado Retail over the years, every single color representing A group of customers are acquired in a different year. And what you can see is that once customers are acquired, they're retained very strongly and they continue to spend every single year. It's an outstanding graph and shows that our clients will be able to acquire, We retain and continue to serve customers and build a phenomenal long term profitable business. To hear more from our clients, I'm going to hand over now first to Mel from Ocado Retail, then to Michael Medline from Sobeys, Ocado Retail is the UK's best online supermarket, With the widest range in the market at almost 50,000 products, double our nearest competitors, we have the freshest food with the shortest supply chain from our Suppliers to our customers. Historically, 95% of our orders are delivered on time and 99% of items are delivered exactly as The customer ordered, and that is why we have had the best net promoter score in the market, historically at 63%. COVID Has made the last 12 months very challenging. We would have loved to have served more customers, but demand significantly Exceeded our ability to supply customers for most of the year, despite our colleagues working incredibly hard delivering 40% more groceries from our existing sites. Volatility was tough to measure as lockdown restrictions changed frequently, causing immediate changes in customer behavior, with basket sizes changing up or down by as many as 10 or 20 units as schools and workplaces closed. Our suppliers have worked really hard to support us, including through challenging periods of COVID related absence in their facilities, but consolidation of their ranges has impacted our ability to supply everything that customers ordered. But despite the challenges, we have managed to deliver 17,700,000 orders this year and add 40% more capacity to our operation. Our partners at Ocado Technology Have invested to ensure our site is incredibly stable. Our colleagues at Ocado Logistics ensured we picked and delivered 950,000,000 units, delivering the best customer experience in the market and keeping substitutions below 4%. Together, we have introduced significant measures to ensure our grocery deliveries are safe for both our customers and colleagues. Our technology minimizes the number of hands that touch groceries before they reach the customer. And we are the only grocer to offer weekly COVID tests to all of our colleagues. Our Ocado platform is incredibly resilient and has enabled us to do a better job for our customers during COVID than any of our competitors. I would like to say a huge thank you To our 15,000 amazing drivers, personal shoppers and all of our frontline colleagues for their dedication and hard work in feeding the nation this year, They have been extraordinary. We have so much to look forward to in 2021 as we continue to work together to give our customers the best possible shopping experience. We are opening 3 new customer fulfillment centers in 2021, which means we'll be able to provide more slots to existing customers and welcome some new customers. We are implementing exciting new technological advances, including robotic picking in the CFCs, which will help us fulfill more orders. And we're scaling our immediacy offering, fulfilling more customer missions and offering more ways for our customers to shop with us. 2020 was an extraordinary year. I am enormously grateful to our colleagues for delivering an outstanding performance, And I'm looking forward to bringing our market leading proposition to more customers. Hi, I'm Michael Medline, President and CEO of Empire Company. It's a pleasure to be here. I hope everyone is staying safe through this terrible pandemic. To say that 2020 was the right year to launch a grocery home delivery e commerce business would be an understatement. E commerce retailers around the world In retail and grocery have reported record multiples in growth, some that we didn't predict for years, especially in grocery. As Canada's 2nd largest grocer, the Empire family of brands employs more than 127,000 teammates across Canada and has more than 1500 stores under the banners of Sobeys, Safeway and IGA among others. Like many other grocers, we've tested grocery e Commerce and home delivery in a few different markets over the years. And while we have grown loyal customer bases, the case to scale these businesses Hasn't been strong. We announced our partnership with Ocado in 2018 to begin building our first CFC. And over the course of the next few years, I expect we will have built 4 in Canada's largest markets. This past June, we were thrilled to open our first CFC and add our new online grocery home delivery e commerce banner, Voila, to our family of brands. Voila has quickly become a trusted favorite for customers in the Greater Toronto Area in just 8 short months. We have truly been impressed with Voila's Customer satisfaction and operational metrics. Our weekly on time delivery score is 98.6% And our order fulfillment score is 99.6%. Both of these metrics are beating the ambitious goals we set for this new business. Our net promoter score is an extraordinary 87, and we are seeing extremely high customer satisfaction, Positive word-of-mouth referrals and repeat rates. In my 2 decades in retail, having worked in hard and soft goods, I can tell you These are best in industry metrics. Empire is very satisfied with the Ocado system throughout this journey. We look forward to continuing this partnership as we expand both in Door fulfillment and home delivery across Canada. Next stop, Montreal, Quebec. From there, we'll open in Calgary. Ocado's powerful technology sets a strong foundation for Empire to win grocery ecommerce in Canada. Thank you. A few years ago, we embarked upon our partnership with Ocado to accelerate our ability to provide customers anything they want, Anytime they want, anywhere they want. And now we're nearing several important milestones in our partnership. Soon, we will open our 1st customer fulfillment center in Monroe, Ohio, which is near our headquarters here in Cincinnati, and it's the heart of Kroger Country. This CFC will bring job growth to our home state and enable us to reach more customers than ever before. The Monroe CFC is a key step and our continued acceleration of our expansion to our national supply chain network to redefine the customer experience. The Kroger and Ocado partnership is and will continue to be rooted in our ability to deliver a value added customer centric solution that brings fresh food to customers through our seamless ecosystem that's supported by the technology and data. We are looking forward to the opening of our next CFC after this one in Groveland, Florida. It enables us to expand our footprint, enter a new market and serve even more customers. Throughout the pandemic, our customers' shopping habits have continued to change. And the demand for e commerce grocery shopping solutions It's the highest ever that it's been in the U. S, which is one of the reasons why we expected it, but COVID obviously has accelerated it, and one of the reasons we partner with Ocado because of their world class technology. We continue to invest and improve our e commerce capabilities, Focusing on cost effective solutions, and obviously, our partnership with Ocado is an important part of this evolving model. We've also built flexibility into the fulfillment ecosystem, which will be comprised of large CFCs like Monroe and Groveland, But also smaller and medium sized sites as well. This will allow us to maximize penetration across all of our diverse markets. At Kroger, we are fresh for everyone. That means providing fresh, affordable food and being there for our customers when they need us most. And the CFCs in Monroe and Groveland and future innovation and collaboration will enable us to serve even more customers across the entire US for many years to come, and Ocado is an important part of that overall partnership. Thank you, Mel, Michael and Rodney. We're really proud to work with you all. Only OSP can deliver the most outstanding customer experience. That's because it's built on 20 years experience at Ocado Retail. 20 years of solving the challenges that are very unique to online grocery. The large order sizes, 45 to 50 items in a pre pandemic basket, from multiple temperature ranges, And also aggregated into delivery vans, usually 20 plus orders into a delivery van to be dispatched in a very tight time window. We intimately understand the problems that we solve for. We solve them using incredible technology. Today, we've filed over 750 patents with nearly 2,500 engineers in our business today. We have a broad and deep tech understanding and a bench of knowledge in AI, in robotics, In digital twins, in cloud, in big data, in the Internet of Things, and many other areas. Only OSP has the end to end integration, from the warehouse robots through to the web front ends, Mobile, supply chain, routing, and everything in between. To hear more about our technologies And the way that they create an outstanding customer experience through their seamless integration, I'm gonna hand over now to James Matthews, The CEO of Ocado Technology. You heard from Tim the elements that combine to make OSP unique. Let's bring some of these to life. Firstly, the end to end integrations of OSP make it much more powerful than some of its parts. To build such a platform, We've had to bring together the right technologies to solve challenges for every step of online grocery. OSP includes solutions for each part of the online grocery journey They're among the most advanced on the market. We've used data science, machine learning and artificial intelligence, robotics, and other advanced technologies to solve these challenges. Importantly, we weave solutions together seamlessly for our clients. Our seamless platform enables information flows, which allow optimizations that otherwise would not be possible. To illustrate the point, let's use a real world example. A customer, John, decides to change his order to treat himself for dinner tomorrow. Here's a steak and a bottle of wine and a chocolate dessert. The sort of change that happens 100 of times a minute on our platform. It's a simple task, yet the Engineering challenge to keep our order accuracy and on time delivery promises for all our customers is extraordinary. Firstly, we need to make sure we have the right products for our customers. Behind the scenes, our forecasting models predict demand in real time. They know exactly what's on our shelves, when new stock will be arriving, and which supplier orders can still be modified. Whatever changes John makes, he, like other customers, would expect to receive over 99% of his order exactly as he placed it. Good news for John. We can adjust one of our incoming supply orders so that everything he wants is in stock. As John updates his order, OSP's end to end integrations unlock a range of fulfillment, Picking, packing, and delivery optimizations. John's order is any different by a few items, yet a lot has changed behind the scenes. So how does this affect fulfillment? Well, the new items mean we have to rearrange the contents of John's bags. We have to ensure that fragile and deformable items are delivered in perfect condition. We also need to make sure that each bag is densely packed without being too heavy. Our software recalculates the optimum distribution of this packing and the directions for the pack in real time. So John is getting what he wanted, but we need to make sure he gets it when he wants it too. So what changes in delivery planning? Well, John's order now takes up an extra tote, and the weight has changed as well. The original van we had planned for John's order is now full, so we've had to move his order to a different van on a different route. Overall, delivery is a complex task. Our systems need to take account of other factors, such as anticipated road conditions and drug availability. Our optimizers make over 14,000,000 calculations per second to meet our customer promises. Lastly, back to our warehouse. Due to the different delivery planning, John's order needs to be picked in a different sequence. Our thousands of robots need to be reorganized to pick John's order as efficiently as possible to get it dispatched on time. John's a happy customer. Our driver gets there on time, as we do over 95% of the time, to deliver as much anticipated Friday night dinner. I hope we've been able to offer you a small glimpse into the Scale of the engineering challenge that comes with building the OSP customer experience. What's really exciting is, of the nearly 2 and a half 1000 technologies we have in Ocado Technology, The majority are working on features and capabilities not yet live on OSP, which have the potential to improve the customer experience and platform economics well beyond what I've been able to describe to you here today. Examples of these include investment in building our advanced robotic picking capabilities, optimizations across our bot fleet and other automation, and bringing more and more data to bear in our user interfaces. Many of these, you're going to hear more about in the rest of this presentation. Thank you, James. I'm now going to hand over to the CEO of Ocado Solutions, Luke Jensen, who's going to talk about the extraordinary year we've had in his area, Where we've turned on our first 2 international robotic warehouses in Canada and France, as well as seen extraordinary growth In our in store fulfillment platform. Over to you, Luke. Hello. I'm Luke Jensen, and I'm the Chief Executive of Ocado Solutions. As you've heard, 2020 has been a momentous year for Ocado. But I'm now going to turn to 2021 that promises to be even more exciting. 2021 will see an acceleration of our business with our partners, and we'll also see a further broadening and strengthening of the way in which we're helping them build Winning online businesses. By the end of 2021, we'll have 7 partners live on our platform, live with more CFCs, but also live with other fulfillment methods like in store fulfillment. We'll see our first CFCs go live in the U. S. With Kroger. And so 2021 will be another stepping stone in the deployment of CFC capacity ahead of a strong acceleration in 2022. We now have a staggering 17 CFCs under construction worldwide, and it's a real tribute to our teams and to the quality of our collaboration with our partners that those projects have all stayed on track despite COVID-nineteen. Strong collaboration and smart tools like virtual reality training have been key to making up for the challenges of restricted international travel. 2021 will also mark the next steps in the development of the unique OSP ecosystem, allowing our partners to achieve Maximum market penetration with the best economics. In addition to offering our partners the most advantaged economics and range proposition with standard CFCs, smaller formats like mini FCs or micro CFCs will allow to maximize customer reach and market penetration, while in store fulfillment allows rapid response to market demand and allows to reach low density geographies. In addition to this unique breadth of offering, OSP also leverages unique technology advantages across fulfillment methods, like the ability, for example, to replenish small CFCs from larger ones. With OSP, we'll offer our partners The best performance across every single fulfillment method. Let me shine a rapid spotlight on some of these formats. First, mini CFCs. What we've done with mini CFCs is we've taken that technology that was developed for large CFCs and we've managed to take it into a smaller footprint, dollars 150,000,000 of sales. And this has the big advantage of being able to bring The full advantage of OSP technology to smaller catchments, those would have previously been served through a spoke from a bigger site or through install fulfillment. And what that means is it means customer benefits of shorter lead times and also Economic benefits of the new formats. And Bristol, that's going live with Ocado Retail shortly, is a great example of that. Moving on to Micro FCs. Ocado Zoom has continued to demonstrate the opportunity to increase market penetration by serving Ultra immediacy demand within 1 hour. While larger planned shopping will always be most effectively served from larger formats, We see MFCs as a great opportunity to increase share of wallet and customer loyalty. Think of it as the convenience store of online retailing. And we're going to see be seeking multiple new sites to roll out zoom for Ocado retail in Greater London and other cities in the UK. And finally, let me touch on in store fulfillment. In store fulfillment brings maximum flexibility to reach low density catchments and to respond to short term changes in demand. This was always going to be an important part of the platform in geographies like Australia or Sweden where you have that mix of concentrated urban catchments with low density large tracts of country. But what it has also proven highly effective for is responding this year with Morrisons to the increased demand from COVID in the UK by rolling it out in just a few months across the nation. By the end of 2021, we'll be live within store fulfillment with Five partners and in more than a 1000 stores and as with other fulfillment methods our approach is to bring Ocado's unique technology skills to create best in class tools. So for example, using simulation tools developed for the complexity of CFCs to be able to Optimize the pit walk in stores while preparing orders with ISF. So while 2020 was definitely a significant stepping stone in the development of Ocado Solutions. We look forward to 2021 as a year of major acceleration in us helping our partners Build winning online businesses. Thank you. Thank you very much, Luke. Now I'm going to hand over to Mark Richardson, The Ocado Group's COO, who's going to explain how we're ready to ramp as fast as our clients need us to, and how we're constantly reducing the cost to serve Through continuous innovation. We are ready to ramp as fast as our partners require. Successful launches in France and Canada during the year have provided many learnings on which we're already building. Those launches took place under the extraordinary circumstances of COVID-nineteen And the travel restrictions which still apply today. Like many organizations, we've been forced to adapt to this new reality. The good news is that those adaptations have made us stronger, forcing us to adopt new ways of working, and in some cases, New technologies to enable tasks to be performed at great distance. The result is not just successful launches this time around, But also a template for future projects and permanent benefits to speed and cost. In particular, we've developed new methods for testing and training at work without large numbers of colleagues having to travel and be on-site. At the same time, our reporting tools have continued to improve, Giving our teams greater insights and remote visibility. And of course, with each new launch, there is new data. Data we can learn from and data we can share with our partners to support their own launches. By the end of our 2021 financial year, We would have launched a total of 9 CFCs with this technology, our learning accelerating all the time. Over the last year, we transformed our organization and built in scale and capability. We formed partnerships with major international manufacturers, Including Flex and Jabil, and with local electromechanical installers. We created new international team structures and hired specialists in 8 Different countries. Overall, we've added more than 640 colleagues to the teams that implement our solution and then maintain it for our clients, And further growth is planned for the year ahead. As our technology is maturing, we have the capability and now the experience to ramp new client sites fast. Here in the U. K, in our IRIS CFC, our solution is already operating at a scale far beyond any planned in our client CFCs. That's giving us and our clients great confidence that we can meet any scaling challenge. Continuous improvement is bringing benefits across our solution to the hardware itself, The onboard software and the cost to maintain. In 2016, as we were starting to ramp our Andover CFC, We'd already designed our proprietary modular and future proofed MHE. By 2018, as our IRID CFC was ramping, we implemented our 2nd generation robot with 25 percent of the parts new compared to the original. Now in 2021, we are rolling out our 3rd generation bot, This time with 75% new parts compared to Gen 2. Our software solution was already proprietary end to end from the outset. In 2018, we were starting to employ sensor data from the robot to monitor the health of our system, and we began to roll out a new bot software platform. That rollout was completed in 2020, and we have now integrated the new BOT software with our digital twin of the CFC, Enabling faster and more accurate simulation, which in turn allows us to scale with greater confidence. In 2016, We had capacity to test roughly 50 bot run hours per week. By 2018, that had increased 20 fold. And we were running each new software release For 1,000 hours before each deployment. In 2020, we embedded testing in our BOP manufacturing process, Massively reducing times to fix and driving up quality. We are driving relentlessly towards hardware that's smarter, more scalable, More reliable and easier to maintain. That's improving performance, reducing downtime and cost of ownership. Last year, we saw significant reductions in maintenance costs, and we have programs in place to drive those costs still lower in the year ahead, both here in the UK And across our estate internationally. Thanks, Mark. I want to pick up on one of the areas where we're working to reduce the cost to serve for our clients. You'll recall from previous explanations that an average store pick operator spends an hour and 14 minutes of people time To get an order from the supplier's truck into one of their own delivery vehicles. And on Ocado's OSP platform, We've previously explained that we've brought that hour and 14 minutes down to around 15 minutes. But of that 15 minutes, the bulk Is in picking and decanting. And today, that represents about £7,000,000 of labor a year in an average warehouse. When you multiply that by the number of warehouses we expect to build for our clients over the next few years, it's a very large number. So this year, we acquired 2 businesses To help accelerate our efforts in this area, Kindred Systems and Haddington Dynamics. And working together with our own robotic teams, We believe that we can much more rapidly get robotic pick into our clients' facilities and pick an increasing part of their range. That £7,000,000 represents an opportunity to transform the economics for our partners through shared cost savings. The continuing and accelerating channel shift means a large runway for growth. We've looked together at some of these numbers before, The £7,600,000,000,000 global grocery market, the £2,800,000,000,000 in what we call key markets, Ones with high GDP per capita and larger populations. If our future Exclusive Partners have a 25% share of that market that would represent £700,000,000,000 a year. Today, our clients are just over about a quarter of that size. If we then look at how much of that in the future moves online, At 10% online, our clients would put £100,000,000,000 through our platform. At 75% online, our clients would put £500,000,000,000 Through our platform, which means there's a very big future fee opportunity of between £3,500,000,000 £26,000,000,000. The reason that we want to help our clients to lower their costs is because we're going to improve their and our business in multiple ways. If we can lower their costs, there'll be a bigger key market opportunity for them, as they can expand faster, Serving their customers with lower priced groceries. As our partners beat their competitors, It means they've got a competitive advantage which will enable them to have faster growth in their markets and increase their market share. And as they do more services on the Ocado Smart platform, like Robotic Pick, there's an incremental fee opportunity for Ocado as well. The continued automation of the end to end processes for our partners will drive more opportunity for them, Faster growth for them and more opportunity and faster growth for us as well. We continue to be really focused on transforming the economics for our client partners through shared cost savings. We're going to continue to invest in the core. We've also made some important investments in adjacencies around grocery. This is all about Improving the end customer experience that our clients can offer and our clients' long term economics. We've made some exciting progress In some of our existing investments. In Jones Food, our vertical farming investment, there's a fundraising in process And there are 2 further farms planned for the end of 2021 beginning of 2022. At Infinite Acres There are now over a 100 commercially grown crops in their facilities and there are 8 operating farms. At Karikuri, they completed a successful fundraising. They've launched the prototype for both hot and cold meal prep. Inkbit have built a proprietary 3 d vision system And the production printer is currently being assembled, and we're working very closely with Inkbit on some of our own future developments, Where they're enabling some really fantastic transformational advances. And Miramex, where we announced a minority stake in October 2020, Are working to create some bespoke material handling solutions for us. If we look at the bigger investments that we made At, for example, Kindred Systems, although today they've got 180 live robotic picking systems, there's an enormous space for growth beyond The grocery opportunities that we've already outlined. We want to add significant long term value opportunities where we can leverage our expertise Or our technology. Before I conclude the presentation, I'd yet again like to thank the outstanding team members at Ocado, Who through an incredibly difficult year have done an outstanding job both for our customers and our clients. I'd like to thank the participants with me that have joined in today in our presentation. Over the last 12 months, the world has changed. Millions Of grocery customers worldwide have moved online. They've done it for the first time and they love it And they're not going back. The grocery landscape has changed forever and for the good. In a post vaccine world, customers will, however, become much more discerning, and they will look for the best customer experience, Which is what our clients can provide given their use of the Ocado Smart platform. Grocery customers will also expect retailers to serve a range of grocery missions. The flexible OSP ecosystem enables our partners to do it all with proven and sustainable economics. And as we enable our partners to grow, we are increasing our investment in innovation, Reducing our cost to serve and expanding our total addressable market. This means more investment now to generate more value long term. Ocado Group is ahead of the curve, And the energy and vision of the business will help it to stay there. This concludes the presentation, But we're now going to move to Q and A. The numbers for the dial in are in the R and S announcements. And we'll now take our first question. It comes from Andrew Gwynn of Exane BNP Paribas. Please go ahead. Hi, good morning team. Two three questions if I can. So apologies. 1st on the gross margin, it looks like you saw a very significant improvement in the second half in the retail business. And obviously, some of that is the sourcing fee from Waitrose. And I know this is sort of build out the buying team, but just wondering how much of that we should extrapolate into future 2 years, given some of the shifts in mix. The second, just looking on the mini CFC, I appreciate the benefits of the immediacy there. But I think you mentioned that would be sourced through potentially some of the other CFCs within the business. So I'm just wondering to what extent Some of the operational efficiency you have at the Ocado model could be negated if you're using many CFCs where effectively there's handling of the product elsewhere. And then final question. AvocadoZoom, and obviously, it's been a little while since we had that trial in West London. It feels like progress there is a bit subdued. So I'm just wondering, is the build out just slowed due to planning and so forth? Or is there anything else we should be aware of? Thank you very much. Hi, Andrew. So let me just quickly take the gross margin question. So yes, obviously we stopped paying the Waitrose sourcing fee, which has come down through into the gross margin. We've also had less vouchering due to the huge demand for the service that's also helped. And as you said, a change in the mix, most of that I would expect to carry on, obviously, the sourcing fee and the mix to carry on going forwards and depending on how long we have this excessive amount of demand to see reduced amount of marketing. So that's the main area. In terms of the minis, yeah, look, minis are not as operationally efficient as the large sheds, But they are very operationally efficient compared to any other, means of fulfilling online grocery orders. And we do have some clever Sourcing tricks up our sleeve that we're not going into great detail that will help them to operate with not dissimilar economics to the big sheds, Although a little bit, you know, a little bit more expensive. In terms of Zoom, planning is the main, issue. Obviously, we've had some planning issues on the second site. We do have some other sites, lined up and we hope to make some good progress there. There's nothing else slowing us down other than We will now take our next question. It comes from Rod Joyce of Goldman Sachs. Please go ahead. Good morning. Thanks for taking the questions. 3 from me as well. First one follows on a little bit from Andrews. Just In terms of that 8.8 percent EBITDA margin you delivered in the second half there, I guess if we're thinking longer term, If we don't believe there is a return to normal trading patterns or the smooth week continues, is that a good indication of the potential margins and the long term the retail business can achieve. And is there any way of thinking what that long term margin looks like under a return to those normalized trading conditions? The second one is just, again, on a smooth week. Is this something your OSP partners, I guess, particularly Sobeys, Are already seeing? And how does this impact in terms of the capacity they can get from their sites and the fees you can Potentially earn from those sites. And then the third one just on Zoom. Can you confirm how that basket size is? I think it was over £50 average last time we heard. And just let us know, who is are you using third party couriers to deliver from those Zoom sites? Thank you. I'll do my best. Right. The second half margins, Will they obviously, they have benefited from larger basket sizes, from flatter trading profile And from less marketing. So you know, I'm not going to go into the exact numbers, but each of those things has had fit on the operating margin as well as the increased scale. We would expect some of those things to continue in a new normal, maybe not quite as strongly as they are now. So still believe that people will eat more at home because they're going to work more at home. People are going to have Shop with a flatter trading pattern because they're going to work more from home. And, you know, there is an acceleration in the channel shift that means That maybe we won't have to drive as hard to acquire as many new customers as we need to take up the growth of new facilities that we're building. So Hopefully, some of that will continue. And I guess that's kind of partly your 1 and 2 questions. In terms of the Sobeys angle, look, it wouldn't it's not appropriate for us to discuss our clients' businesses In that way, we'll talk in the future about aggregated data. It's harder at the moment when we've, you know, you can try and, well, a, you've asked about a specific client, But also it's kind of easier to try and guess who's doing what. But overall, globally, I would expect people to benefit from work from home With flatter trading profiles, flatter trading profiles will give people more capacity out of the same site that will Largely leverage the existing fees they've paid, although at some point they'll pay slightly higher fees. But predominantly, it will allow them to operate more efficiently, which obviously lowers their operating costs. They'll probably pass that on to the consumer and therefore that's a virtuous cycle of growth we hope for clients and for ourselves. Zoom basket size has remained very strong this year, probably stronger than we would expect it to be in the long term. And yes, we currently use third parties to make those deliveries. Thanks, Tim. Just to confirm that the volume benefits from a smooth week would accrue to the OSP client Rather than additional fees for yourselves? Predominantly, yes. Thanks very much. And Rob, we obviously think that accrues to us as well as in they will have a better economic model which will help them to grow their business faster, Which will help them to want more facilities. Yes, absolutely. Understood. Thank you. Thank you. We will now take our next question. It comes from Andrew Porteous of HSBC. Please go ahead. Hi, good morning team. 3 from me as well, please. Can you just talk about the different opportunities within your services Now that you've sort of broadened out the offer a bit in terms of CFC versus mini CFC versus ISF. I mean, Are there different sort of revenue and profit opportunities versus capital? I mean, if it's more if your customers go more down the ISF route, is the revenue opportunity a bit lower, but there's obviously a lot lower capital intensity? And then secondly, could you talk a little bit about new solutions customers? I mean, you talked about troubles with Traveling and restrictions around COVID, it seems like there's a lot of activity going on in the sector if I look at, say, THG Ingenuity or Dermatic in terms of Signing up new customers. I mean, what is it specifically that you're struggling with to get customers over the line? And then lastly, Can you just talk about the shape of capacity in Ocado retail over the next year? Should we think about it as being sort of the same absolute base of sales as we saw in Q4 for a period Before the new capacity sort of comes on stream in Q4 this year. Okay. Hi, Andrew. So firstly, Yeah, look, obviously, as CFC and MINIs have similar economics fees, capital, Profit opportunity. ISF, as you rightly point out, is lower fees, can have attractive margins, Is, completely capital light, so, or capital non existent. So yes, they're all slightly different. In the long term, you'd rather have volume going through the CFCs because there's more fees and therefore more profit opportunity. In the short term, ISF is a great model. In terms of new customers, look we're super busy talking to a whole bunch of people. It is definitely harder In terms of there are a lot of countries we can't get to, that got much worse towards the end of the year in terms of, you know, getting people out of the UK and into other countries. And it's also hard to get people to come over and see the facilities, which has always been a big catalyst in making the major commitment that, these Customers make to us. So obviously, the customers aren't in the UK, and therefore, that that is a a barrier. It's not an insurmountable barrier, And we have some conversations going on that could well result in customers signing up without, seeing the facilities, But it's definitely helpful when they can. And those that have, you know, managed to turn them on, obviously, we've heard from both our clients have turned facilities on and both of them You know, and Michael's been explicit today talking about 4 facilities, obviously, having had his first one go live earlier this year. So you can see the kind of growth potential there. Shape of capacity for the year, the Bristol site will go live soon, As will Morrisons returning into IRF. So largely, I would think about most of the growth of IRF going to Morrisons and Bristol as an opportunity for growth for Q2 2 and Q3 and in Q3, the other sites starting to go live Q3, Q4 and starting to be able to give us capacity at that point. So overall, I think what you said is peak trading day up 40% over a 2 year period before we open any incremental facilities beyond those 3. Thanks a lot. And we'll now take our next question. It comes from Xavier Lemann of Bank of America. Please go ahead. Yes. Good morning, gentlemen. 3, if I may actually. First one actually, can you provide a bit more visibility on the pipeline for the new for the new funding for the TFCs beyond 2021. You mentioned in the past also your ability to go faster if need be. So Have you seen any changes there? And do you have discussion with your partner actually to accelerate the 2 of the first one? Second question, you mentioned the opportunity of growing business and profit outside your core grocery online business. So what are your expectation midterms for it twice. Should we expect you to grow organically from the base you have? Or should we expect also more bolt on acquisition? And lastly, just on the outlook, we understand that 2021 is about potential normalization with more cost to I. E. EBITDA to be done year on year. But when do you expect the trend to reverse I. E, to deliver sustainable EBITDA growth with potentially, I would say, enough international CFCs blocks to offset the start of the opening Could you have a year in mind? Zavvi, let me just start. I think we mentioned in the presentation that we've got 17 in build. So you can imagine that we're obviously going to see a constant stream of sites opening this year and beyond. And what isn't opening this year that's in build now is likely to open in the following year or very shortly thereafter. So I think that's kind of the visibility question. Mostly, there are clients, as you've heard Michael saying, We're talking about 4 sites. The the the we're getting a bit better at building them a bit faster, but obviously our clients still need to find sites. And so finding sites is probably the biggest Barrierto getting them open as quickly as one would love to have them open. I would highlight the, you know, 10 times increase in live CFC modules, expected in 2022 versus 2020. So there's quite there's a lot of growth going on. We have the ability to take on new commitments from existing and new clients. And I think that's one of the things that we've emphasized today. In terms of business outside of the core, I mean, largely, I would expect organic. Obviously, we did make 2 decent sized acquisitions this year. 1 of those businesses is growing rapidly In its space in robotic pick. And so obviously, that's outside of our core and we're continuing to support it in its growth. So We're supporting it to achieve its original business objectives and accelerate them whilst also adding to its Objectives to work with our own robotics team and our other acquisitions to dramatically transform the speed and breadth that we can deploy robotic pick in our own businesses. We're not actively looking for kind of quote unquote outside bolt ons. We are always looking around the market to see if there's anything that we Need as such or would like to have to boost our offer and our proposition for our clients. I'll hand over to Andrew for the outlook part if he'd like to take that one on. Sure. Thank you, So in terms of the outlook, exactly as you've said, we expect and we guided towards additional costs in FY 2021 And those predominantly impacting the International Solutions business. So as a result, you would expect EBITDA for International Solutions to be proportionately lower. However, probably, you'd hope FY 2021 would be the last year of increasing losses On that basis, so begin to turn the corner after that. And of course, that in turn all reflects You know, the well, the accounting treatment, but just when we recognize revenue coming through as the new CFCs come on stream, but that should start to build progressively And we'll now take our next question. It comes from Nick Coulter of Citi. Please go ahead. Hi, good morning. Hope everyone's keeping well. I'll keep the 3 and go 1 by 1, if I may. Firstly, on engineering costs and the latest generation of robots on the grid in Ohio. I'm sure you've got a bunch of guys making sure it all goes very smoothly. But based on your testing, please can I ask How far away the engineering costs will be from your long run targets for those latest robots? Thank you. Nick, the site where we've got most of the newest generation of robots is actually Bristol. And the early signs are extremely encouraging that they are on trend to hit our long term plans. The earliest The earliest numbers coming out of there have exceeded our expectations. It's still early days, but very positive so far. So you basically expect to hit those targets with the Bristol robots from what you're saying and then go beyond that in the future? Look, we've as a business, we've always set targets and when we get close to them, decided that we should set a more aggressive target. But we would be happy to achieve our target, obviously. If we start to get close to it, we'll start to push ourselves to go further. Obviously, that's always kind of our long term direction. But all I'm saying is that the newest generation are there at the moment and also starting to go worldwide. But, that's where we're really doing the, the kind of learning on them and, The large scale testing that effectively is. And yes, we're very pleased with the early progress. Okay, great. That sounds very achievable. Then secondly, if I might ask a factual question on the single space bot. Hypothetically, if your box took up 2 spaces, how much would that reduce your throughput by? I'm not sure that's a number that we would want to put out there. Let's just say it's a very important patent. It was Thoroughly tested at the EPO recently and is intact, and we're very pleased to be the holder of it. Okay. Thank you. Then lastly, perhaps you could talk through the thought process on the sale of Fetch. Is that just that you need the capacity for grocery or the non food allocation in the U. K. Has gone to M and S Clothing and Home? I guess, how should we think about ancillary non grocery and the opportunity with M and S? And I guess maybe how does Sabees and Monoprix look at ancillary non food? Or what are they offering, I guess, is what you can speak to? Thank you. I think, look, this was a decision by, the ORL management team. They clearly see a bigger opportunity, as you suggest, in things like clothing at home and other ranges that they now have compared to the pet business. And also more and more of these products that we sold And have actually ended up in the mainstream shop where they have bigger sell through than they do in their specialist stores. So I think largely, just expect them to Do other exciting things in the non food categories, but doing them inside the Ocado shop. Okay, great. And how are savings and monetary approaching that? Have they got decent non food or ancillary ranges? Again, that's that it's for them to decide how much range to put in their stores, what range to put in them and how to market them and all that kind of stuff. So It's not a question for me. Okay. But they've got nothing at the moment from your answer, I guess. Thank you so much. Thanks. We will now take our next question. It comes from Victoria Petrova of Credit Suisse. Please go ahead. Good morning. Thank you very much for letting me ask my questions. First of all, on the model System, can you let us know what sort of 1st year capacity utilization usually is And the second, 3rd year and how many years your CFC currently would be reaching full capacity? Secondly, Is throughput per CFC or mini CFC is proportional to its size? And thirdly, on the micro Fulfillment space, do you see any challenges related to large international retailers signing at an MFC model like Walmart with several MFC operators. That would be very helpful. Thank you. Sure. So in new facilities now Of the size that our clients and Ocado Retail are also building, they can ramp them up very quickly. So You know, we would not be surprised to see a client who wanted to ramp, you know, is entering a market where they already had demand, for example, To ramp a facility in, say, 12 months. So, you know, rapid growth, there's no need to spend 2 or 3 years ramping a facility If the demand is in that market. So, you know, the infrastructure is capable of ramping very quickly. What a client can't do Tell us they're going to ramp it over 3 years, ask for an amount of capacity for the 1st 6 months and then 3 weeks in, say, I'd like to go to 100% next week. So there's a stability point there where there's a little bit of lead time involved. Your second question is, Largely, they are proportionate to size. Obviously, there is some economy of scale as you get larger just in terms of kind of wasted space that minimizes As they get bigger, until you get down to something like a micro where you may not, for example, store finished orders, they might literally just go out the door as they're picked. So Then you can get some of that back. But largely, yes, they're proportionate to size. 3, do we see micro challenges? Look, obviously our clients aren't going to be the only people to apply automation to the grocery industry, otherwise they will end up with 100 they would end up with 100% the grocery market at some point. We believe that the micros that we can offer to our clients are more efficient than any other in the business and the Ecosystem of operating our micros in conjunction with our larger sheds will give them hundreds of basis points of cost advantage over anything else we've seen in the market. Thank you very much. And just one follow-up in terms of your addressable market. You mentioned China in your presentation. Is it now a market you sort Seriously could consider entering? And secondly, in how many countries, maybe you can comment on Canada, Do you have exclusivity? I'm just wondering if you can have more than 4 CFCs in Canada and maybe other large markets. We know that Kroger Relationships are completely exclusive. Do you have any flexibility anywhere else? Thank you. That's it from me, I promise. In Canada, our relationship is also one of conditional exclusivity. Our client is growing very successfully. Michael didn't say today that he sees, In the long term, having 4 CFCs, he's talking about having 4 CFCs to get his business going with good geographical spread. Once those CFCs are successful in filling, I'm sure Michael will want more CFCs. I mean, in those markets where we are exclusive, it's always worth remembering Our exclusivity is dependent on our clients growing and having a significant market share without getting into the very specifics of each one. Sorry, I've distracted myself. The second part to your question there was China. Was China. China. The answer, of course, is There are solutions, as we mentioned in the presentation, take time out, something like 80% of the time involved in a manual solution. Obviously, that is, More attractive when you're having to pay for robotics in higher labor cost markets. So China as a whole, if you look at the averages, it may not be Although if you went to some of the, you know, some of the more expensive cities, it might start to be attractive and it gets more attractive every year as their labor gets more expensive every year and it will get attractive, more attractive every year as we work out how to bring the cost of our solution down every year. So there will obviously come We will now take our next question. It comes from Tom Davies of Berenberg. Please go ahead. Good morning, guys. A couple of questions for me. Just firstly on the robotic pick, Will that be like an add on feature to the OSP solution? And thereby, are you able to Charge an incremental fee for your CFC partners given the economic benefits they will receive. Secondly, Click and Collect. You've tried Click and Collect at Ocado Retail UK before, but given the UK market, it's seen like a shift of mix towards Click and Collect as well. Has this changed your view? And if so, could you leverage some of the M and S store estate? And then finally, just in terms of the competitive environment for at Arcado Solutions. Why are some of the other grocers internationally trying with multiple partners? Is there something wrong with some of their solutions? What challenges are they facing? So the first question is, yes, it is an add on service that will come at an And therefore, it is a profit opportunity for both of us. So as we say, there's a significant shared saving, in terms of the Incremental cost of a picking robot versus the saving for the client, and we will charge a fee for it. The client will be better off, and we have another fee opportunity to Make money on the yes. 2, click and collect in the UK market. Our view still remains that our competitors are seeing Demand more demand for delivery that they're unable to satisfy, and therefore, they've launched Click and Collect at the same time because they can scale the Picking in the stores faster than they can scale the delivery part of their business, and that actually the UK consumer, not in every market we're in, The UK consumer still has a huge preference for delivery. And so I'm not sure, whilst we could trial it again, I'm not We would expect in the short term to have a significant click and collect proposition in the UK. Obviously, globally, that's not the case and our solution Has Click and Collect and is active in Click and Collect right now. And Your last one was, a competitor's decline In terms of the competitive environment. I think what you asked, if I correctly understood your question, you're saying to me, why do I think that some of the retail competitors, competitors to our clients, Are now trying additional solutions, having previously suggested they were trying other solutions. Do I imagine there are problems with the first solution? Is that what you were asking me? Yeah. That's probably what I'm asking. Look, I think that a number of the Solutions away from Ocado out there are, you know, how do we how do I say it politely, Are over selling themselves in the in what they're going to achieve. And therefore, I think that people that try them are Not as pleased with the solutions that they try as we've seen some of our clients today, talking about our solution and therefore we'll try another one. And also, if you think about micros for a moment, micros are super small and relatively cheap. And so actually, if you're a big retailer, trying a few Is maybe not an irresponsible thing to do, right? Because you just, you know, you can just you learn something. You might even just try one to see what your competitors might roll out, just to understand what their economics are likely to be like without even having a view that you're going to roll out loads Because they might be single digit 1,000,000 of pounds worth of initial investment. Great. Thanks, Bob. It It appears we have no further questions at this time. I would like to hand the call back to our speakers for any additional or closing remarks. Just like to thank everyone for joining us today, and please stay safe.