Ocado Group (LON:OCDO) executives used the company’s FY25 results call to emphasize what they described as a year of “tangible growth” alongside a more disciplined approach to network planning with partners, particularly in North America, where several automated fulfillment sites were closed after demand failed to meet original expectations.
Chair Adam Crozier said Ocado had worked constructively with partners to address “early network decisions,” calling the closures difficult but reflective of a “mature approach” that aims to strengthen partnerships for long-term growth. Crozier also said exclusivity has ended in North America, and Ocado has started re-engaging in broader commercial opportunities in the region.
FY25 financial performance and balance sheet
On cash flow, Daintith said underlying cash flow was a £230 million outflow excluding a letter of credit, while including the letter of credit receipt would have improved underlying cash flow by £113 million. He cautioned that accounting related to closure fees tied to four site closures and the letter of credit “is not straightforward” and will “mostly” impact fiscal 2026 and future years, adding that the company provided modeling charts in the appendix.
Statutory earnings before tax were £403 million, which Daintith said was boosted by a large adjusting item tied to the valuation of Ocado’s 50% stake in Ocado Retail following deconsolidation when Marks & Spencer took over consolidation. Daintith also highlighted a £48 million increase in finance costs, and said the company intends to address debt and reduce gross debt levels as maturities approach.
On debt, Daintith said a £56 million convertible bond due December 2025 was paid just after year-end. He pointed to the £350 million convertible bond due January 2027 as a key maturity, saying Ocado has the option to repay it from cash, which would reduce gross debt and potentially help on interest costs.
Technology Solutions: modules growth, margins, and cost discipline
Daintith said Ocado’s Technology Solutions performance continues to be driven by the number of “live modules” across customer fulfillment centers (CFCs). The company reported 121 modules at year-end, with growth coming from new sites going live and module drawdowns (increasing utilization) at existing sites. He characterized module growth as a critical metric for reaching Ocado’s targets of turning cash flow positive in the second half of FY26 and achieving full-year cash generation in FY27.
Technology Solutions revenue was £444 million, with recurring revenue up 7%. Daintith said recurring revenue growth broadly tracked module growth and annual indexation to local inflation. Non-recurring revenue increased by £41 million, which he said included roughly £17 million related to a Morrisons fee after it exited five modules out of Erith, as well as a roughly £50 million component related to closure fees.
Daintith reported a 72% contribution margin for Technology Solutions and said Ocado also included a potential decommissioning provision associated with site closures to avoid taking the full benefit straight to contribution.
Looking ahead, Daintith said the company expects live modules to be at least 125 by FY27, targeting over 130. He also said total technology spend (including CapEx and P&L) declined to £248 million in FY25 and that the company expects about a £100 million reduction in that spend over the next two years as the business moves out of what management has described as a peak investment cycle following the rollout of its Re:Imagined innovations.
He also outlined a plan to take out £150 million in costs by FY27, including roughly £50 million from SG&A. Daintith said reductions will be implemented progressively over the next six months and “conclude by the end of November.”
Logistics and Ocado Retail: volume-led growth and productivity
In Ocado Logistics, Daintith reported 11% revenue growth, describing it as volume-driven, and said EBITDA was “pretty reliable” and up slightly year over year. He noted some improvement came as transition service agreements with Ocado Retail concluded. Operational metrics included 8% growth in an “issues” measure, 10% growth in orders per week, and continued improvement in UPH (units per hour), which management emphasized as central to the investment case for automated fulfillment.
For Ocado Retail, Daintith reported 15% revenue growth and said it was driven by volume rather than price. Orders were up 13%, while average basket value rose 1.3%. He highlighted operational leverage, noting CFC costs rose 7% against 15% revenue growth, and marketing costs grew just 3%. Daintith said Ocado Retail’s underlying EBITDA margin would be 3.8% if £33 million of Hatfield fees were added back, and said those fees are expected to decline as Ocado Retail orders more modules under a credit mechanism.
Operational highlights and commercial strategy: same-day, aggregators, and store-based automation
Chief Executive Officer Tim Steiner highlighted what he called strong platform growth and improving performance across the partner network. He said international CFC volume grew 26%, and the Ocado Smart Platform shipped 72 million orders with a fulfillment rate above 98% and average waste of 0.7%. Steiner said weighted-average drops per van per shift reached 21, and average CFC productivity improved 10% across clients.
Steiner also discussed same-day capabilities enabled by new software, saying it is deployed in nine CFCs and that the company has seen an “earliest” order-to-delivery time of 73 minutes for a full-basket order from a large-scale CFC without sacrificing productivity. He said one international CFC achieved 40% same-day deliveries on some days, calling the capability a “game changer.”
On aggregators, Steiner said Ocado has integrated aggregator platforms into its system over the past year, allowing orders from third-party delivery apps to be processed through Ocado CFCs or Ocado’s in-store picking software. He said this enabled Morrisons to expand aggregator coverage by another 100 geographies in the UK and enabled Monoprix to roll out to 22 additional cities in France with a global aggregator.
Steiner also outlined organizational and go-to-market changes, including combining Ocado Solutions and Ocado Intelligent Automation into a single sales and account management structure led by Chief Revenue Officer Nick de la Vega. He said Ocado’s technology is live in 127 warehouses and more than 1,000 stores worldwide, with 70 commercial clients and partners, more than 17,000 bots live on grids, 431 on-grid picking arms, and more than 2,500 Chuck AMRs. Steiner said Ocado sees opportunity to expand further “up the supply chain,” including case replenishment for stores and wider distribution networks.
Addressing North American closures in Q&A, Steiner said there was “very limited downside” remaining across the wider CFC network, while also acknowledging that Ocado and partners were “not blameless” in earlier decisions to build larger sites before sufficient volume was secured. He said the company has learned to focus on “right fulfillment for the right market,” stressing that large automated CFCs are “not a profitable asset” without sufficient utilization.
On store-based automation, Steiner said initial retailer interest is often strongest at the “biggest” and “busiest” stores where capacity is constrained. He said Ocado expects retailer paybacks of about two years in some cases, with upfront fees intended to cover most of Ocado’s investment. He also said ongoing fees for store-based automation are likely to be “slightly lower” than for the broader OSP offering because Ocado would not be financing as much equipment.
Daintith summarized FY26 guidance as including Technology Solutions revenue of around £500 million and an adjusted EBITDA margin of around 30%, with CapEx around £250 million. He also said the company expects a “perverse” dynamic in FY26 in which there is a £200 million outflow in the year it turns cash flow positive, driven by the timing of cost reduction actions that deliver a fuller benefit in FY27.
About Ocado Group (LON:OCDO)
Ocado Group is a UK based technology company that provides end-to-end online grocery fulfilment solutions, known as the Ocado Smart Platform, to some of the world’s largest grocery retailers and holds a 50% share of Ocado Retail Ltd in the UK in a Joint Venture with Marks & Spencer. OSP comprises access to Ocado’s physical infrastructure solutions, running highly efficient warehouse operations for the single pick of products, together with the entire end-to-end proprietary software applications required to operate a world class online grocery business.
