Ocado Group PLC

LSE:OCDO

Earnings Call Transcript 2021-Q3

[Operator]

Good day, and welcome to the Ocado Q3 Analyst Call. At this time, I would like to turn the conference over to David Shriver. Please go ahead.

[David M. Shriver, Communications Director]

Thank you, and good morning, everyone. This is David Shriver, Communications Director of Ocado Group. Welcome to the third quarter trading update for Ocado Retail, which, as you all know, is a 50-50 joint venture between Ocado Group and M&S. I'm joined today by Tim Steiner, Chief Executive Officer of Ocado Group and Chairman of Ocado Retail; and Niall McBride, the Chief Financial Officer of Ocado Retail. Now we'll begin by reviewing the highlights of the quarter, and then hand over to Tim, who will sum up. We'll then go to questions where Stephen Daintith, Ocado Group CFO, will also be on the call. Niall, over to you.

[Niall McBride]

Thanks, David. We are very pleased to report resilient underlying performance throughout the third quarter. Although Q3 headline sales were down 10.8%, this really was a quarter of 2 halves, a strong first 6 weeks before the fire at the Erith on July 16, and the 7 weeks following why we were recovering from the effects of the fire. We should also note that total sales for this quarter, despite the air of disruption were $142 million, up 38% on Q3 sales in FY '19. Before July 16, the business was performing in line with expectations as record customer acquisition drove orders per week up 22% during the 6-week period, while the value of the average basket continued to trend toward pre-pandemic levels over the quarter to GBP 124. This net resulted in sales marginally down 1.8% in that period. The performance also reflects a year-on-year comparison against exceptionally strong growth in Q3 2020 of 52% when ongoing pandemic restrictions drove very strong demand during what are usually softer trading months in the summer, as many customers traditionally go on holiday. Our performance in this period clearly shows that many customers who tried online grocery shopping for the first time have liked the experienced and are not going back to the old ways. They are becoming savvy about where the best service and value is to be found and are thus migrating to Ocado. After July 16, however, sales growth declined 19% for the remaining 7 weeks of the quarter. This was for 2 principal reasons. First, we need to cancel a small number of orders on and around the date of the fire. And second, the loss of sales capacity we would have expected to grow into. Taken together, and net of the offsetting impact of increasing capacity at other CFCs, we estimate that in the period, we lost around 300,000 orders or around GBP 35 million of revenue due to the fire. As a result, despite the strong start to the quarter, overall sales growth in the period was down 10.8%. The good news is that the Erith fire is a one-off. We are firmly in growth mode and the capacity is progressively being increased, with work ongoing to get back to the levels we were at before the incident. We expect that the Erith CFC will be back to pre-fire operational capacity by the end of November. And with new capacity at CFC 5 and Andover and CFC 6 in perfect also available, we've already processed a number of items similar to our peak last year. Given strong demand, we are delighted to announce also today that additional CFC capacity will open across FY '22 and FY '23, a new CFC in Luton will contribute to 65,000 orders per week on top of the new CFC investor, which will contribute 30,000 orders per week. As a result of the GBP 35 million of lost sales, we expect the Ocado Retail to take a one-off financial hit to EBITDA of GBP 10 million, which will flow through to GRIP results. This impact largely falls within the insurance deductible. In addition to this business disruption, we expect about GBP 10 million of costs associated with stock and fixed asset write-offs. Both these costs and the compensation we expect to receive from our insurers, will be treated as exceptional items so will not affect EBITDA. The resulting net cost to Ocado is therefore currently estimated to be around GBP 10 million, which will impact group EBITDA in FY '21. In addition, I need to highlight that there is a risk of additional headwinds in Q4, mainly related to the rising costs and availability of labor, particularly LGV and delivery drivers. This is an increasingly important issue for the whole sector that may result and a further GBP 5 million impact to full year numbers, which covers additional temporary measures we have taken to hire new staff, including raising some early rates and offering sign on bonuses at specific sites. We will be working to mitigate these costs as best we can. These 2 factors will, of course, have an impact on the account of grid consensus for FY '21. The bottom line, though, is that the underlying trajectory performance of Ocado Retail is strong, and we are excited by the long-term trajectory that the business is on. We expect a bumper Christmas and to deliver strong revenue growth in FY '22. Tim, over to you.

[Timothy Steiner, CEO & Executive Director]

Thanks, Niall. We're really pleased with the continued strong performance of Ocado Retail and very confident for the future. Ocado is improving the customer experience even further and continuing to grow in a post-lockdown environment. The last 18 months have shown that not only is Ocado Retail able to constantly set the gold standard for customer service and online grocery, but to do so with attractive and sustainable economics. This is encouraging for our Ocado Solutions partners, as what Ocado Retail can do now is what their businesses will be able to do in the future. This last quarter has had its challenges, of course, and I would like to take this opportunity to pay tribute to the efforts of all my colleagues who worked so hard to get Ocado back to business so quickly following the fire in Erith. The success of these efforts demonstrated again the resilience of Ocado and its people and our ability to learn and get better. I am proud of you all. Operator, back to you for questions.

[Operator]

[Operator Instructions] We'll take the first question from Nick Coulter from Citi.

[Nick Coulter, Director]

I know you haven't updated on the fire impacts before, but my sense was that 1% of the grid was damaged and it was back up and running after broadly a week. That seems not to be the case, I guess, with the impact still lingering. So if you could correct my lack of knowledge, please. I guess I'm intrigued by the additional safety measures that are still in place at Erith? That's the first one. And I have another one on the CFC pipeline.

[Timothy Steiner, CEO & Executive Director]

Sure, Nick. So we were back up and running, as in, we proved that we could do the end-to-end business of the site. And we've got all inbound -- we firstly got few orders out to show the whole process is, all the systems and networks and everything else were running. Then we had to remove -- at the same time, we were removing damaged stock, then we had to rebuild the stock provision, then we started shipping outbound orders and scaling that back up again. What we learned in this incident is that whilst previous testing had shown that the robots were okay for a type of collision that can occasionally occur, that there was a third party involved, i.e., a third one, as we said at the time, where the 2 that collided has hit somebody else, and the way they managed to do that was the problem. That is a problem only for old bots that we stopped delivering at the beginning of this year. What we are doing at the moment, we've cleaned everything up, but we're just running it at slightly reduced rates whilst we implement some physical changes that will give greater protection to those robots to reduce the possibility of this ever happening again. So they're just running at a lower speed, slightly more space around them, which gives us a slightly reduced capacity. We expect by the end of November, so we've increased all those and to be back to the pre-COVID levels on all of those bots. And this does not affect the new box that we've been delivering this year and are now rolling out to our client sites.

[Nick Coulter, Director]

Okay. So you're not replacing the bots, you're just correcting or updating the hardware that may have caused them not to stop on their mark effectively?

[Timothy Steiner, CEO & Executive Director]

It's slightly more complicated than that. But yes, we're making some small hardware changes. So in the rare event that they ever didn't behave exactly as intended and collided that they're not able to penetrate something that you don't want them to penetrate. It's not possible on the new bots. We discovered it was possible on the old bots. We can make 2 physical changes to them that are quite minor and but they've had to be designed, they have to be tested. They then got to be manufactured and rolled out, which is what we will have completed by the end of November. And then they will not be possible to do that anymore and then they can run back exactly the way that they were before.

[Nick Coulter, Director]

Okay. Super. And then a question on the CFC pipeline, if I may. How quickly will you ramp Andover and Purfleet? It looked like you've set them up for quite a quick build. But are there -- do you anticipate the phases? Or are they kind of good to go? And then on Lithium, when do you expect that to go live? And I guess as a quick follow up to that, when should we expect some news on a second Zoom site? At present, it seems like it's easier to find the full-scale sites, the CFCs is for a second Zoom.

[Timothy Steiner, CEO & Executive Director]

Nick, I'm going to take the scaling, Andover and Purfleet questions. And I'm going to give the other ones to Niall, because I can only remember one at a time.So we've already scaled those sites at a record rate. So Andover scale, I think something close to twice as far as we managed to do so in Bristol, which was already any faster than anything that's been done before. So what that's showing you is that the equipment, once installed on site, can go to full capacity very quickly, get only to the hiring on site, the hiring and training of the team on site to be able to actually operate. So the speed with which we can scale Andover or Purfleet now at size, is just a function of both going and attracting demand but also constructed by the ability to hire fast enough and add the relevant team members to the team.

[Nick Coulter, Director]

Sorry, Tim, was that a follow up on that?

[Niall McBride]

Yes. Luton the second Zoom, Luton, at the moment, we're expecting Luton to lose some in the first half of '23. Obviously, it is a site that we are going to be constructing. So we're subject to getting all of that right in the supply chain in that entry. But that's our expectation is ongoing to make it happen. Second Zoom, we have the second Zoom and that will be in [indiscernible]. And we hope to open that again early in the coming year. The other site, we have identified other sites. We're in negotiations on them. And as and when we complete negotiations, we will be announcing.

[Timothy Steiner, CEO & Executive Director]

And Nick, just to put the question on -- we took Andover some north of over 20,000 orders in the first 4 weeks, which is in 80% of that run-rate sales in under 4 weeks. It's quite extraordinary for automation like that.

[Operator]

We'll now take the next question from Andrew Gwynn from Exane.

[Andrew Philip Gwynn, Senior Food Researcher & Analyst of Food Retail]

Just going back to the disruption. If I add back the GBP 35 million, I mean, I think your sales are still down quite sharply for the quarter. I appreciate obviously, maybe GBP 35 million might be a conservative estimate, but just wondering what else might be going on. Is it just seasonal impact returning to the business? And the second question, really just a quick one. I appreciate it's a call about retail. But obviously, the core part of your business is solutions. So just wondering if there's anything you wanted to reflect there.

[Timothy Steiner, CEO & Executive Director]

Let me take the first one. So Andrew, yes, look, the thing to remember here is what we're comparing quarter-over-quarter. So last year, in Q3, was an unusual year in that it was a pandemic restrictions were in place. We grew 53%, and we did not have the typical summer softness we see when customers are often away on holidays. And this year, you've got a return of seasonality there, which was -- we expected that to happen. I think if you look at the first part of the half, pre-Erith, orders were up 22%. So I think that sort of -- if you take from that, that we see the demand in the market and as we bring on the capacity, there's demand there to serve, but there is a return to some of that pre-pandemic behavior because you can see it in the basket as well. So I think it's -- as we expected, nothing other than that really going on.

[Andrew Philip Gwynn, Senior Food Researcher & Analyst of Food Retail]

And sorry, back to the -- go ahead.

[Timothy Steiner, CEO & Executive Director]

Sorry, you go ahead.

[Andrew Philip Gwynn, Senior Food Researcher & Analyst of Food Retail]

Yes. Because I mean if I look at the pre-pandemic period, if I look at Q3, it was down maybe about 5% versus Q2. This figure seems to be down quite a lot more versus Q2. So it seems like it always is more seasonality than normal?

[Timothy Steiner, CEO & Executive Director]

Andrew, we normally went from a peak volume end of June. By the time you hit mid-August, we were normally down 15% to 20% week-on-week sales for the last 18 years. That's fairly normal. Used to estimate that 20% of our customers would take -- would be away at any 1 point in time, representing kind of most of our customers having a 2-week break during that 6- or 8-week period. And I think we've just seen more normal behavior like that. And obviously, combined with the fact that actually is now saying it's more customers, it's more orders because this time last year, the basket size was extremely high, and it's still higher than pre-pandemic, but it's significantly smaller than last year. So there's a lot more orders going through but smaller baskets as people are able to go out and eat in restaurants and our vaccinations feel more comfortable about doing so.

[Andrew Philip Gwynn, Senior Food Researcher & Analyst of Food Retail]

Okay. Cool. Sorry, then the solutions?

[Timothy Steiner, CEO & Executive Director]

So as you said, this is a retail update, but we are pleased -- I'll be brief. We're pleased with the progress on solutions. We've recently had another contract for a number of sites from our partners in the United States for a number of different formats. And so great progress going on. Obviously, we mentioned earlier in the year, bringing our tenth customer on board, but we're making progress on building sites, launching sites, getting customers to connect to more sites and the progress in the existing life site is very positive as well.

[Operator]

We'll now take the next question from Andrew Porteous from HSBC.

[Andrew Ian Porteous, Analyst, European Retail]

A few from me. Can you just talk about the sort of the shape of normalization? I know you've sort of flagged average baskets down at sort of 124. Is that a level they've sort of stabilized that? Or have they been sort of normalizing through the quarter, so that your exit rates are a little bit lower than that? And are we starting to see the peaks come back into the week as well as people sort of go back to more normal life there? Second one, I mean, obviously, there's a bit of press coverage around sort of Zoom wage rates. Could you just talk about the mechanics of what went on there? And what -- I guess why you're getting that press coverage and what you're doing to resolve it? And then a last one really more on the solutions side again. I know you flagged some cost pressures on the retail side. What are you seeing on the solutions side? Are there mechanics in your contracts and solutions to pass cost increases through.

[Timothy Steiner, CEO & Executive Director]

So I'll take the last one, and I'll let Niall go with the first 2, I think, and add comments if I need to.

[Niall McBride]

Perfect. So ship with the normalization, Andrew, I mean, I think it is in line with our expectations in terms of we are seeing number of items in the basket and basket size trend down work through the period. It's difficult to say exactly where that will normalize to or where exactly that will finish. Our expectation is that we will continue to see a sort of a tailwind from COVID, because more people will be at home into the future and probably spending and therefore, able to take delivery of groceries on different days of the week or maybe they haven't done before. And so we kind of expect to see normalizing shape of the week and normalizing basket where it finishes. We're not sure, but it definitely trends down, but not -- I mean we're talking about maybe a couple of items in the basket over the period, not a huge might compare to how far we've gone up.

[Timothy Steiner, CEO & Executive Director]

It's also interesting, Niall, is that while shape has been coming back into the week, it's not been coming back into the week where it was before the pandemic. So before the pandemic, there was more demand in the afternoon and evening than there was in the morning. And now there's more demand in the morning than there is in the afternoon, evening, for example, and peak days have changed as well. So I think you can see -- whilst you can see that the level of demand that you could sell any slot in any hour at any time of the week, it's not the same as it was during the middle of the pandemic, you can see that people's lives have changed and the peak period is slightly different. So off on the Zoom one?

[Niall McBride]

Zoom. So Andrew, we are aware of the coverage that's out there and the concerns, and we do have a recognized union, but let me just -- let me take a step back. So all Ocado.com deliveries are made by Ocado employees who receive significantly above the living wage. Overall, 99% of all of our drivers are employed by the Ocado Group. And we're looking -- we're actually looking for more full-time drivers and for those people who want to seek direct deployment with us. And for Zoom specifically, that's our immediately service operating web. A small proportion of deliveries are made by third-party delivery partners. And obviously, drivers who accept the fellow orders for those partners received well above the living wage on a pro rata basis. So we do not accept anything that's out there in terms of the state that we meet in the press. And in fact, over the past year, we've already been ramping up our in-house directly for employees at that site. So it'd be fair to say for us, it would be unacceptable for any drivers to be paid below the living wage, and we're committed to working pretty closely with our suppliers to ensure that our model delivers great outcomes are ever been involved, including everyone delivering orders for our Zoom customers.

[Andrew Ian Porteous, Analyst, European Retail]

And then the last question was just on the solutions side around what pressures there and the mechanisms to pass them through.

[Timothy Steiner, CEO & Executive Director]

So yes, the contracts all have some linkage to inflation in them. And we're not, I mean, globally at the moment, we're not seeing as much pressure as we are in the U.K. So I think the U.K. has got more factors affecting its wage rates than we're seeing in certain other markets. And at the moment, we are -- any other kind of supply chain type pressures, we are managing them. There are -- there's a lot to manage with disruptions in global shipping and electronic components and stuff like that, but we're managing through it quite successfully.

[Operator]

We will now take the next question from Xavier le Mene from Bank of America.

[Xavier Le Mené]

Only one actually, but now that you've got more capacity building up in the U.K., I just want to know what you're doing to hire new customers. And if there is any cost associated to that and how you're working with M&S actually to achieve that?

[Timothy Steiner, CEO & Executive Director]

I think nothing very particular to say but I mean we're trying to attract customers as we always have. We have a fantastic proposition. We've got a great range, including the M&S range. And we have a fantastic service, right? So I mean all of our service metrics are industry-leading, and we're going out and trying to win customers who we know probably a lot of them have tried online for the first time the pandemic have liked and want to find the best way to do their grocery shopping online. So I think it's pretty much what we were doing before, but really ramping it up as we try to attract more and more customers to the proposition. And that includes working with M&S to attract the M&S customer who wants to shop online. And we're working very closely with them. They've obviously got a huge customer base, and we're looking at the best way to tap into that.

[Operator]

The next question comes from Maria-Laura Adurno from Morgan Stanley.

[Maria-Laura R Adurno]

I have 2. So the first one, perhaps on the back of everything you've discussed about labor costs and general, well, input costs as well. So what are your comments around pricing into year-end? And how you see that evolving at Ocado? And then the second question, coming back to one of the question that was already asked. Could you summarize a seasonally weaker quarter? But can you perhaps just talk about the trends that you've already started to see into September?

[Timothy Steiner, CEO & Executive Director]

So the pricing one, obviously, what we want to do is offer customers the absolute best proposition that we can. We're not seeing a lot on pricing at the moment. The taking where is the question coming from, the driver shortages and obviously a national as you know that and call it specific ones, it's very difficult to say to the extent which that will translate into anything. So at the moment, we're not seeing anything. Our aim is to absolutely offer customers the best proposition that we can on Ocado. In terms of second question, going into September, I think what are we seeing so is the seasonal week that's ended? And is the -- I think it's -- yes, sure version. As any other normal September, we're starting to see the demand coming through. And we're trying to bring on as much capacity as quick as we can to deliver to it.

[Maria-Laura R Adurno]

And sorry, the GBP 35 million impact stemming from Erith, does it include the fact that you're just going to be fully ramped up into November? Or is it just the impact for the summer?

[Niall McBride]

That's in the quarter. But we -- yes.

[Operator]

[Operator Instructions] We'll now move to the next question from Simon Bowler from Numis.

[Simon Bowler, Analyst]

I've got 3. I'll go one by one, if okay. Firstly, did I hear you say that early into Q4, you're back to posting or achieving a similar volume of capacity year-on-year? And is it therefore fair to assume with ongoing ramping that you'd be hoping for 4Q revenues in line, if not ahead year-on-year?

[Niall McBride]

Yes, you did hear that. I mean we're talking about a similar number of units. And I think if you look at we have added the capacity in Andover, and we're going to seek to ramp those up as quick as we can. We're obviously aiming to bring Erith back up to the prefire levels before the end of November. We're attracting new customers, so that's our objective, growth in Q4.

[Simon Bowler, Analyst]

Okay. Great. And then -- and sorry, I think this is my line going right near to start. Did you mention or any of your partners CFCs run on these old parts? So is there any retrofitting or any safety measures needed across any of your international partners, CFCs or is that a nonissue?

[Timothy Steiner, CEO & Executive Director]

Simon, we are doing some retrofitting to some of those bots that are in the original overseas partners CFCs. They're not currently affecting volume in those sites, because we had excess bots ready to deploy that. So we've put those bots just on the grid. So we're not expecting any impact at our clients, but we do have a little bit of retrofitting to do to to eliminate that risk. And then all the new sites that we're launching at the moment do not have those bots in them.

[Simon Bowler, Analyst]

Okay. Great. And then I think you also kind of dropped into a question earlier, news around signing a new contract with Kroger. Is there any other color, you could -- I appreciate that again, it's a retail call. But is there any other color you can share on that? And is it fair to assume that is going kind of over and above the 20 sites that initially start the announcement and started the deal?

[Timothy Steiner, CEO & Executive Director]

Well, it's not so much. It's going over the 20. It's in building up to the 20, we will have been announcing specific locations and sites and things like that. And I think we were previously at 11. I think the last time we updated that, I say last thing it was 11, we're now 16. And that includes Zoom and in a different format, different sizes to serve multiple missions, take advantage of the ecosystem that we can provide for Kroger to do a range of customer missions in e-commerce. And so that's in addition to the ones they've already announced the info for Zoom's software that we're working on with them as well. And so it's the continued expansion of our partnership into more geographies. We expect to continue announcing more sites in the future, but it's just specific locations, which we're not putting out today. That's the program to go in their own time.

[Operator]

We take the next question from Victoria Petrova from Credit Suisse.

[Victoria Petrova, Research Analyst]

I have just 2 small follow ups. First, are you seeing any inflation in your insurance costs given that this is sort of the second fire in the last 2 years? And my second question, there was a press release from Kroger that it collaborates with Snap to modernize its Great Lakes distribution center. Does it come into any competition with your solution? Or are those completely different tasks of modernization and automation, Kroger is dealing with?

[Timothy Steiner, CEO & Executive Director]

So on the second part of your question, Victoria, the facility is a case pick trade facility. Kroger already had some from another company called Witron. It's just an expansion of their store replenishment systems. So it has no concept whatsoever with the e-commerce projects that we're working with Kroger on. In terms of the insurance costs are moving around all the time based on different things go in the insurance markets and the different measures. The key is when you have an incident is understanding, do you have the right mitigation strategies in place, which obviously in Erith, we did. So the fire, as you know, was extinguished very quickly. The damage was limited, so that's important. And then can you make any further changes, any further learnings to reduce the future risks of either starting or it spreading? Which we can and which we work on together very closely with our insurers, that normally means that there is not a significant change outside of the normal changes going on in the insurance market.

[Operator]

We will now take our next question from Fabienne Caron from Kepler.

[Fabienne Caron, Head of Food Retail Sector]

Two from me. The first one, given the shortage in building materials as well on as well on electronic components, are you confident that you can stick to your timetable regarding your CFC abroad? Or should we expect some delay? And the second question, can you give us some more details regarding the Zoom performance over the quarter?

[Timothy Steiner, CEO & Executive Director]

So yes, Fabienne, on your first part, there are delays around the world on different building materials than on electronic components. And we have small impact sometimes which we work hard to mitigate to ensure that we can turn on our client facilities on time. We're not yet looking at any delays from those impacts. Sometimes, it just means that we have to rejuggle things or we have to work a little bit harder to catch up a week here, week there. But from handover to us of our clients' sites to us, handing them back to use, I don't think we've got any notable delays across the building network. I'll let Niall answer about Zoom performance in the quarter.

[Niall McBride]

So Zoom, I mean, remember, we're talking about the site and activities on one site. The performance is pretty good. That site is more or less operating at capacity. In the quarter, we saw the effect, again, a little bit of the seasonality of the quarter but in line with expectations. More or less, the site is at capacity. So we're looking forward to getting more capacity on Zoom as quick as we can.

[Fabienne Caron, Head of Food Retail Sector]

Okay. Did you see as well some decline in basket size on Zoom?

[Niall McBride]

Not particularly. I mean a little bit, nothing to call out. There wasn't any wave movements in it.

[Operator]

We'll now take the next question from James Grzinic from Jefferies.

[James Robert Grzinic, Equity Analyst]

I have 2 quick ones. First one is, where do you see consensus EBITDA before today? Before that GBP 15 million adjustment for the full year? And in addition to that, you seem to be a lot more vocal in terms of media spend in the U.K. Can you perhaps give us some context of how much more you're spending from that perspective? I think you're talking about that back of half 1, but any thoughts about the exact ramp up would be very helpful.

[Timothy Steiner, CEO & Executive Director]

Okay. So well, consensus before we announced this was about 167 for ORL and 174 group, and that's going to move down, we think, by at least the 10 that we highlighted today, because there's that risk of that extra GBP 5 million around labor shortages, which will be what it will be. But that's our estimate at this stage as to what that cost might be in respect to the labor shortages.

[Niall McBride]

I'm not quite sure I've picked up the exact question on media spend. I think you're asking what's our view of where media spend is.

[Timothy Steiner, CEO & Executive Director]

I think also noting that you see more media. So we've done more about the life which the strategy, we put in place even 18 months ago or something.

[Niall McBride]

Yes. I mean I think, obviously, James, our plan has been, as we're coming into adding all the capacity over the summer. We've launched the very visible, hopefully, Bolden Campion. And again, that's about customer acquisition and remaining customer of where we are and bringing people to the state. So it's very much all part of we're bringing on the capacity, and we're spending the media money with it to make sure that we then use that capacity. That was, let's say, in the first part of this quarter, quite successful, and we will continue to do that through the back half of the year and into 2022 to fill up the capacity as we bring it on.

[James Robert Grzinic, Equity Analyst]

Is there any way you could give us an order of magnitude of the step-up year-on-year, please?

[Timothy Steiner, CEO & Executive Director]

James, I'm not sure we go to that detail, but what I would just say is when you're smaller, that we spend the money, we still spend money, it's on direct response. So you individually might not see what's out there. As when you get to a certain scale, the incremental direct response is less effective. And what's more effective is to add like a fixed component of more visible media that makes the direct response that you are doing more effective. We've only just, as a business, really reached that scale in the last 12 months, which is why in the last 12 months, you've seen Niall and their team doing more of that broad media to make the direct response they are doing more effective. But whilst you spend more on the big media, you save some on the direct response, because it's naturally more effective because the awareness is higher. But we're not going to get into specific details of the exact amount of spending on media.

[Operator]

As there are no further questions, I would like to hand the call back over to David for any additional or closing remarks.

[David M. Shriver, Communications Director]

Great. Thank you, everyone. That concludes our call. We'll report next on the 9th of December with the Q4 trading update from Ocado Retail. I'm sure we'll be speaking to most of you before then. But for the moment, thank you, and have a good day.

[Operator]

Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.