30029 9 February 2021 9:14 am Proof Shell30029 9 February 2021 9:14 am Proof ShellOcado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020Reimagining ShoppingOcado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020Ocado-Annual-Report-2020-Strategic.indd 3Ocado-Annual-Report-2020-Strategic.indd 309/02/2021 09:14:5409/02/2021 09:14:54Back to contents Living Our Purpose
We are reimagining
shopping, by solving
complex problems to
provide sustainable
solutions for online
grocery
We help our partners get to a leading
position in online grocery by providing
robotic and software solutions
that enable profitable, scalable
growth.
What’s Inside
Overview
01 The world of grocery retail has changed for good
– s172(1) Statement
Strategic Report
14 Our Purpose, Strategy and Values
16 Group at a Glance
18 Our Investment Case
20 Progress in 2020
22 Chairman’s Statement
23
24 Q&A with Tim Steiner
25 Chief Financial Officer succession
26 The Marketplace
30 Our Business Model
34 Our Solutions Business
38 Ocado Retail
40 Strategy
47 Key Performance Indicators
50
60 How We Manage Our Risks
72 Engaging With Our Stakeholders
82 Corporate Responsibility
90 Our People
98 Ethics and Compliance
Financial Review
Governance
102 Chairman Governance Overview
104 Corporate Governance Report
– Board of Directors
– Corporate Governance Statement 2020
109 Board Leadership and Group Purpose
114 Division of Responsibilities
121 Composition, Succession and Evaluation
126 Nomination Committee Report
130 Audit Committee Report
140 Directors’ Remuneration Report
– Letter from the Chairman of the Remuneration Committee
143 – Description of the Remuneration Committee
157 – Annual Report on Remuneration 2020
178 Directors’ Report
185 – Non-Financial Information Statement
Financial Statements
Group
188 Independent Auditor’s Report
199 Consolidated Income Statement
200 Consolidated Statement of Comprehensive Income
201 Consolidated Balance Sheet
202 Consolidated Statement of Changes in Equity
203 Consolidated Statement of Cash Flows
204 Notes to the Consolidated Financial Statements
Company
272 Company Balance Sheet
273 Company Statement of Changes in Equity
274 Company Statement of Cash Flows
275 Notes to the Company Financial Statements
Additional Information
290 Glossary
293 Alternative Performance Measures
295 Five-Year Summary
296 Shareholder Information
296 Company Information
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Living Our Purpose
We are reimagining
shopping, by solving
complex problems to
provide sustainable
solutions for online
grocery
We help our partners get to a leading
position in online grocery by providing
robotic and software solutions
that enable profitable, scalable
growth.
01 The world of grocery retail has changed for good
102 Chairman Governance Overview
104 Corporate Governance Report
– Board of Directors
– Corporate Governance Statement 2020
109 Board Leadership and Group Purpose
114 Division of Responsibilities
121 Composition, Succession and Evaluation
126 Nomination Committee Report
130 Audit Committee Report
140 Directors’ Remuneration Report
– Letter from the Chairman of the Remuneration Committee
143 – Description of the Remuneration Committee
157 – Annual Report on Remuneration 2020
178 Directors’ Report
185 – Non-Financial Information Statement
Group
188 Independent Auditor’s Report
199 Consolidated Income Statement
200 Consolidated Statement of Comprehensive Income
201 Consolidated Balance Sheet
202 Consolidated Statement of Changes in Equity
203 Consolidated Statement of Cash Flows
204 Notes to the Consolidated Financial Statements
Company
272 Company Balance Sheet
273 Company Statement of Changes in Equity
274 Company Statement of Cash Flows
275 Notes to the Company Financial Statements
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30029 9 February 2021 9:14 am Proof Shell“ We are bringing the best customer experience to market with our partners; responsibly and with superior, sustainable and proven economics. We are ready to seize the enlarged opportunity in online grocery in a post Covid-19 world.”Tim Steiner Chief Executive OfficerThe world of grocery retail has changed for goodThere has been a permanent global channel shift. Grocery retailing has changed permanently and for the better➔ Read more on page 0201Annual Report and Accounts Ocado Group plc Stock Code: OCDO Ocado-Annual-Report-2020-Strategic.indd 1Ocado-Annual-Report-2020-Strategic.indd 109/02/2021 09:15:0409/02/2021 09:15:04Back to contents 30029 9 February 2021 9:14 am Proof Shell“ We are bringing the best customer experience to market with our partners; responsibly and with superior, sustainable and proven economics. We are ready to seize the enlarged opportunity in online grocery in a post Covid-19 world.”Tim Steiner Chief Executive OfficerThe world of grocery retail has changed for goodThere has been a permanent global channel shift. Grocery retailing has changed permanently and for the better➔ Read more on page 0201Annual Report and Accounts Ocado Group plc Stock Code: OCDO Ocado-Annual-Report-2020-Strategic.indd 1Ocado-Annual-Report-2020-Strategic.indd 109/02/2021 09:15:0409/02/2021 09:15:0430029 9 February 2021 9:14 am Proof ShellReimagining ShoppingOcado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020Open the flap to start reading how we are Living Our Purpose➔ Visit our Corporate website at: www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 4Ocado-Annual-Report-2020-Strategic.indd 409/02/2021 09:14:5509/02/2021 09:14:55Back to contents 30029 9 February 2021 9:14 am Proof Shell01There’s been a momentous shift towards online grocery shopping in markets around the world, resulting in an even greater need for a sustainable, scalable solution to online grocery fulfilment, and an even greater opportunity for Ocado Group. Online share of UK grocery market almost doubled to 14%in November 2020 from 7% pre-pandemic Fee opportunity of £3.5–£26.3bn*depending on online penetrationKey markets are worth£2.8tn*Opportunity expands as markets develop and technology improvesAcross most markets globallyyears worth of channel shift to online within a few months➔ Read more about the Market Opportunity on page 26The world is changing in grocery retailingFOR GOOD . . .Through the permanent redrawing of the grocery landscape* Key markets as calculated at 2018 on basis of $25,000 or higher GDP per capita, and populations over 5 million. Fee opportunity reflects range for possible OSP license fees, assuming a 25% share of key markets and a range of online grocery penetration from 10% to 75%02Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 2Ocado-Annual-Report-2020-Strategic.indd 209/02/2021 09:15:0509/02/2021 09:15:05Back to contents 30029 9 February 2021 9:14 am Proof Shell01There’s been a momentous shift towards online grocery shopping in markets around the world, resulting in an even greater need for a sustainable, scalable solution to online grocery fulfilment, and an even greater opportunity for Ocado Group. Online share of UK grocery market almost doubled to 14%in November 2020 from 7% pre-pandemic Fee opportunity of £3.5–£26.3bn*depending on online penetrationKey markets are worth£2.8tn*Opportunity expands as markets develop and technology improvesAcross most markets globallyyears worth of channel shift to online within a few months➔ Read more about the Market Opportunity on page 26The world is changing in grocery retailingFOR GOOD . . .Through the permanent redrawing of the grocery landscape* Key markets as calculated at 2018 on basis of $25,000 or higher GDP per capita, and populations over 5 million. Fee opportunity reflects range for possible OSP license fees, assuming a 25% share of key markets and a range of online grocery penetration from 10% to 75%02Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 2Ocado-Annual-Report-2020-Strategic.indd 209/02/2021 09:15:0509/02/2021 09:15:0530029 9 February 2021 9:14 am Proof Shell2010OCADO GROUP MARKET CAP20152020£17.1bnOCADO GROUP MARKET CAP£2.2bnOCADO GROUP MARKET CAP£0.9bnOCADO GROUP MARKET CAPWhat this means for Ocado Solutions Building sustainable, scalable offerings for grocery online is now top of the agenda in grocery boardrooms worldwide. For the Ocado Smart Platform (“OSP”), the opportunity is huge.What this means for Ocado RetailFollowing an extraordinary few months of growth, an even bigger opportunity lies ahead with the continuing channel shift to online.These figures are as at: IPO 21 July 2010 and financial year end in 2015 and 2020.03Stock Code: OCDO Annual Report and Accounts Ocado Group plc Ocado-Annual-Report-2020-Strategic.indd 3Ocado-Annual-Report-2020-Strategic.indd 309/02/2021 09:15:0609/02/2021 09:15:06Back to contents 30029 9 February 2021 9:14 am Proof Shell➔ Read more about our OSP Leadership Club and Solutions Proposition on pages 34 to 3702The world is changing in grocery retailingFOR GOOD . . .We are ready to make the most of the expanded opportunity in front of usThe Ocado model has always been a virtuous cycle of investment in innovations that drive improved efficiency and faster growth. Now we intend to invest more and innovate even faster, to support current and prospective partners to meet the global increase in demand for online grocery, and to further expand our leadership position. We have the capital, human and financial, to capitalise on our full opportunity set in the medium term. 3 new CFCs will see Ocado Retail benefit from a 40% increase in available capacity in 2021Our ‘club’ of 9 leading grocery retail partners on OSP#2 retail platform by volume of global grocery salesFunding position of£2.1bnat the year end enables us to capitalise on the full opportunity set over the medium termAlmost500technology colleagues hired in 2020 to improve our platform capabilities faster04Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 4Ocado-Annual-Report-2020-Strategic.indd 409/02/2021 09:15:1009/02/2021 09:15:10Back to contents 30029 9 February 2021 9:14 am Proof Shell➔ Read more about our OSP Leadership Club and Solutions Proposition on pages 34 to 3702The world is changing in grocery retailingFOR GOOD . . .We are ready to make the most of the expanded opportunity in front of usThe Ocado model has always been a virtuous cycle of investment in innovations that drive improved efficiency and faster growth. Now we intend to invest more and innovate even faster, to support current and prospective partners to meet the global increase in demand for online grocery, and to further expand our leadership position. We have the capital, human and financial, to capitalise on our full opportunity set in the medium term. 3 new CFCs will see Ocado Retail benefit from a 40% increase in available capacity in 2021Our ‘club’ of 9 leading grocery retail partners on OSP#2 retail platform by volume of global grocery salesFunding position of£2.1bnat the year end enables us to capitalise on the full opportunity set over the medium termAlmost500technology colleagues hired in 2020 to improve our platform capabilities faster04Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 4Ocado-Annual-Report-2020-Strategic.indd 409/02/2021 09:15:1009/02/2021 09:15:1030029 9 February 2021 9:14 am Proof ShellReady for the futureWe are investing to grow our technology team and add synergistic technologies to our platform, to enable the even faster rate of development that our accelerated ambitions require. This innovation will see the global opportunity set continue to evolve and expand. There is an opportunity for us to lead the global online grocery market with our partners and fundamentally change the structure of grocery markets worldwide.➔ Read more about our Plans for acceleration on pages 43 to 45Our response:Ocado RetailWe are ready to seize the accelerated growth opportunity ahead, with our leading customer offer and scalable, sustainable model.Our response:Ocado Solutions We are investing for acceleration. We are serving our partners’ needs, supporting them to go further, faster, with their plans for online growth, by providing more capacity and flexibility with the OSP system. As the migration to online globally gains pace, we expect to add more partners to our platform, further strengthening the benefits of the OSP Leadership Club.05Stock Code: OCDO Annual Report and Accounts Ocado Group plc Ocado-Annual-Report-2020-Strategic.indd 5Ocado-Annual-Report-2020-Strategic.indd 509/02/2021 09:15:1209/02/2021 09:15:12Back to contents 30029 9 February 2021 9:14 am Proof Shell03The world is changing in grocery retailingFOR GOOD . . .Enabling us to make a sustainable impact globallyWe are determined to fulfill our mission of changing the way the world shops for good. We are committed to innovation that enables sustainable business, and to policies and actions that protect decent work today whilst inspiring and educating the innovators of the future.Food waste only 0.4% of Ocado Retail sales versus an industry average of 2–3%1 in 3 LGV vehicles gas powered, and a fleet of 17 eleCtric vehicles, with plans for further roll-out4,800 face coverings made from 7.7 tonnes of uniform diverted from landfill39% reduction in our carbon intensity measure of tonnes of CO2e per 100,000 orders since 2013 06Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 6Ocado-Annual-Report-2020-Strategic.indd 609/02/2021 09:15:1509/02/2021 09:15:15Back to contents 30029 9 February 2021 9:14 am Proof Shell03The world is changing in grocery retailingFOR GOOD . . .Enabling us to make a sustainable impact globallyWe are determined to fulfill our mission of changing the way the world shops for good. We are committed to innovation that enables sustainable business, and to policies and actions that protect decent work today whilst inspiring and educating the innovators of the future.Food waste only 0.4% of Ocado Retail sales versus an industry average of 2–3%1 in 3 LGV vehicles gas powered, and a fleet of 17 eleCtric vehicles, with plans for further roll-out4,800 face coverings made from 7.7 tonnes of uniform diverted from landfill39% reduction in our carbon intensity measure of tonnes of CO2e per 100,000 orders since 2013 06Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 6Ocado-Annual-Report-2020-Strategic.indd 609/02/2021 09:15:1509/02/2021 09:15:1530029 9 February 2021 9:14 am Proof ShellActing responsiblyOcado Solutions We are dedicated to disruption for a better future. We are continually optimising every aspect of the fulfilment and delivery life cycle. This drive for further efficiency ensures that we can meet our partners’ needs whilst minimising our impact on the planet for future generations. Serial innovation starts with enabling our people to be their best. We put our people first, and actively support the development of the innovators of tomorrow.Acting responsiblyOcado RetailPrioritising wellbeingWe have always been committed to enabling our customers to shop healthier, with more convenience. In the context of the Covid-19 pandemic, our model has also provided people a safer way to shop when they needed it most.Ensuring sustainable growthWe’re committed to meeting the needs of customers without compromising quality of life for future generations. We do this by focusing on four core areas: food waste, carbon impact, packaging waste, and responsible impact.➔ Read more about our approach to Corporate Responsibility on pages 82 to 8907Stock Code: OCDO Annual Report and Accounts Ocado Group plc Ocado-Annual-Report-2020-Strategic.indd 7Ocado-Annual-Report-2020-Strategic.indd 709/02/2021 09:15:1909/02/2021 09:15:19Back to contents 30029 9 February 2021 9:14 am Proof Shell➔ Read more about our Culture and People on page 9004The world is changing in grocery retailingFOR GOOD . . .Driven by our unique and mission-focused cultureOur purpose is reimagining shopping, by solving complex problems to provide sustainable solutions for online grocery Fulfilling our purpose requires fostering a culture that enables us to tackle challenges head-on and pursue new opportunities with vigour. Though our horizons have expanded with time, the things that make us tick have stayed the same: innovative thinking, teamwork and a passion for incredible customer service.For Ocado Group, this culture is defined by our values; that we are in this together, we are proud of what we do, and we can do better.We now have over 18,500 Ocado Group colleagues, each dedicated to doing their part so that we can continue to fulfil our purpose, in the best way possible, for and with our global Solutions partners.Our people demonstrated enormous pragmatism and resilience this year, amidst the worst of the pandemic. We successfully delivered our first two international CFCs, ahead of plan, and ramped up capacity for our partners in the UK and internationally, much faster than planned. We would like to thank them profoundly on behalf of all the stakeholders of Ocado Group.08Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 8Ocado-Annual-Report-2020-Strategic.indd 809/02/2021 09:15:2009/02/2021 09:15:20Back to contents 30029 9 February 2021 9:14 am Proof Shell➔ Read more about our Culture and People on page 9004The world is changing in grocery retailingFOR GOOD . . .Driven by our unique and mission-focused cultureOur purpose is reimagining shopping, by solving complex problems to provide sustainable solutions for online grocery Fulfilling our purpose requires fostering a culture that enables us to tackle challenges head-on and pursue new opportunities with vigour. Though our horizons have expanded with time, the things that make us tick have stayed the same: innovative thinking, teamwork and a passion for incredible customer service.For Ocado Group, this culture is defined by our values; that we are in this together, we are proud of what we do, and we can do better.We now have over 18,500 Ocado Group colleagues, each dedicated to doing their part so that we can continue to fulfil our purpose, in the best way possible, for and with our global Solutions partners.Our people demonstrated enormous pragmatism and resilience this year, amidst the worst of the pandemic. We successfully delivered our first two international CFCs, ahead of plan, and ramped up capacity for our partners in the UK and internationally, much faster than planned. We would like to thank them profoundly on behalf of all the stakeholders of Ocado Group.08Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 8Ocado-Annual-Report-2020-Strategic.indd 809/02/2021 09:15:2009/02/2021 09:15:2030029 9 February 2021 9:14 am Proof ShellOur people in action:Ocado Solutions Despite the challenges of the Covid-19 pandemic, our teams delivered our first two international CFCs ahead of plan, with no material delays to other ongoing projects. We accelerated capacity growth for our operational partners, and continued to innovate for the future.➔ Read more on page 78Our people in action: Ocado RetailOur incredible teams on the road, in the CFCs, and in our contact centres have worked around the clock to keep our customers informed and deliver to as many households as possible.➔ Read more on page 8009Stock Code: OCDO Annual Report and Accounts Ocado Group plc Ocado-Annual-Report-2020-Strategic.indd 9Ocado-Annual-Report-2020-Strategic.indd 909/02/2021 09:15:2409/02/2021 09:15:24Back to contents 30029 9 February 2021 9:14 am Proof ShellStories of resilience, dedication and innovative spirit run deep through our whole organisation. This is how some of our amazing people and teams delivered value for Ocado and our partners through an exceptionally difficult and challenging period.Our Inspirational Team➔ Read more about Our People on page 90PROACTIVELY SUPPORTING MENTAL WELLBEINGHugo Smadja’s Story:Determined to ‘take away the shame’ from days when we’re not OK, Hugo opened up about his own low energy and indecisiveness, in a video he shared with all colleagues.As one of our Mental Health First Aiders, by starting the conversation he further opened the floor for authentic dialogue.OutcomeOnly when colleagues can be their best can we deliver our best as a business. Colleagues like Hugo helped make this possible in a year that was especially difficult for many.Link to our valuesWe are in it together. USING HER TALENT TO KEEP HER COLLEAGUES SAFE 10Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 10Ocado-Annual-Report-2020-Strategic.indd 1009/02/2021 09:15:2509/02/2021 09:15:25Back to contents 30029 9 February 2021 9:14 am Proof ShellStories of resilience, dedication and innovative spirit run deep through our whole organisation. This is how some of our amazing people and teams delivered value for Ocado and our partners through an exceptionally difficult and challenging period.Our Inspirational Team➔ Read more about Our People on page 90PROACTIVELY SUPPORTING MENTAL WELLBEINGHugo Smadja’s Story:Determined to ‘take away the shame’ from days when we’re not OK, Hugo opened up about his own low energy and indecisiveness, in a video he shared with all colleagues.As one of our Mental Health First Aiders, by starting the conversation he further opened the floor for authentic dialogue.OutcomeOnly when colleagues can be their best can we deliver our best as a business. Colleagues like Hugo helped make this possible in a year that was especially difficult for many.Link to our valuesWe are in it together. USING HER TALENT TO KEEP HER COLLEAGUES SAFE 10Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 10Ocado-Annual-Report-2020-Strategic.indd 1009/02/2021 09:15:2509/02/2021 09:15:2530029 9 February 2021 9:14 am Proof ShellStory:Despite being caught by severe travel restrictions in March, the teams responsible for launching our international sites were committed to delivery on schedule for our partners.OutcomeWe launched our first two sites ahead of schedule and, importantly, process innovation, including the introduction of AR equipment at sites, can be used at all future sites to benefit ongoing launches.Link to our valuesWe are proud of what we do.In weeks, they replaced in-person, UK based training, with virtual home tools and new training hubs at CFCs under construction.TEAMWORK MAKING THE SEEMINGLY IMPOSSIBLE POSSIBLE USING HER TALENT TO KEEP HER COLLEAGUES SAFE Anna Moss’s Story:As a data scientist in our tech and logistics business, Anna regularly works with algorithms.Over Easter she deployed these skills to a new mission; rapidly readying an algorithm for scheduling Covid-19 testing for up to 3,500 employees at four sites, whilst contending with other constraints.OutcomeFinding a smarter way to regularly test our frontline workers meant that we could keep serving as many Ocado.com customers as possible whilst keeping everyone safe.Link to our valuesWe can do even better.11Stock Code: OCDO Annual Report and Accounts Ocado Group plc Ocado-Annual-Report-2020-Strategic.indd 11Ocado-Annual-Report-2020-Strategic.indd 1109/02/2021 09:15:2909/02/2021 09:15:29Back to contents 30029 9 February 2021 9:14 am Proof ShellOcado-Annual-Report-2020-Strategic.indd 12Ocado-Annual-Report-2020-Strategic.indd 1209/02/2021 09:15:2909/02/2021 09:15:29Back to contents 30029 9 February 2021 9:14 am Proof ShellOcado-Annual-Report-2020-Strategic.indd 12Ocado-Annual-Report-2020-Strategic.indd 1209/02/2021 09:15:2909/02/2021 09:15:2930029 9 February 2021 9:14 am Proof ShellStrategicReport.ContentsStrategic Report Approval The Company’s Strategic Report is set out on pages 14 to 99.The Strategic Report is approved by the Board and signed on its behalf by Neill Abrams Group General Counsel and Company Secretary 09 February 2021Our Purpose, Strategy and Values 14Group at a Glance 16Our Investment Case 18Progress in 2020 20Chairman’s Statement 22– s172(1) Statement 23Q&A with Tim Steiner 24Chief Financial Officer succession 25The Marketplace 26Our Business Model 30Our Solutions Business 34Ocado Retail 38Strategy 40Key Performance Indicators 47Financial Review 50How We Manage Our Risks 60Engaging With Our Stakeholders 72Corporate Responsibility 82Our People 90Ethics and Compliance 98Ocado-Annual-Report-2020-Strategic.indd 13Ocado-Annual-Report-2020-Strategic.indd 1309/02/2021 09:15:2909/02/2021 09:15:29Back to contents Our Purpose, Strategy and Values
Driven by our purpose
Our purpose informs our strategy, and our culture enables us to
enact that strategy to its best effect so that we can fulfil our purpose
and create sustainable value for the benefit of our stakeholders.
Our Purpose
Reimagining shopping, by
solving complex problems to provide
sustainable solutions for online grocery
Our Mission
Changing the way the world shops for good
Our Values
Our values say it
all – togetherness,
pride and being
better
Our Strategy
Facilitating sustained
growth for our partners
and in turn for our wider
stakeholders
14
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S
T
R
A
T
E
G
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C
R
E
P
O
R
T
Our Purpose, Strategy and Values
Driven by our purpose
Our purpose informs our strategy, and our culture enables us to
enact that strategy to its best effect so that we can fulfil our purpose
and create sustainable value for the benefit of our stakeholders.
Our Purpose
Reimagining shopping, by
solving complex problems to provide
sustainable solutions for online grocery
Our Mission
Changing the way the world shops for good
Our Values
Our values say it
all – togetherness,
pride and being
better
Our Strategy
Facilitating sustained
growth for our partners
and in turn for our wider
stakeholders
Our Purpose
We are reimagining shopping. We are online shopping
pioneers. We continue to make the delivery of consumers
essential groceries fit for modern lives and businesses.
Our technologies, combined knowledge and 20 years of
experience provide our client partners with exceptional
efficiency and economics, and their consumers customer
service that is among the best. Achieving this responsibly is
at the very core of how we have solved complex challenges
and how we will continually improve.
➔ Read more about Our Purpose on page 14
Our Mission
To fulfil our purpose we are committed to changing the way
the world shops, for good.
Our Strategy
We drive sustainable growth for our partners. We continuously
improve our OSP proposition so that they can deliver an ever
better service to ever more customers, whilst maximising
the efficiency of our operations, to reduce cost to serve and
maintain leading operational performance. We utilise our
proprietary knowledge as technology leaders to remain ahead
of the curve, driving further opportunities for value creation
within and beyond grocery.
➔ Read more about Our Strategy on pages 40 to 46
Our Values
Our values guide ways of working across our diverse network
of business areas, building an engaged and mission-driven
culture that empowers our people to fulfil our purpose each day.
➔ Read more about Our Culture and People on
pages 90 to 98
14
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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30029 9 February 2021 9:14 am Proof ShellGroup at a GlanceWe are a technology-led, global, software and robotics platform business, with a strong retail and logistics heritage.Offering a bespoke solution . . .We have a fast-growing client business with OSP. We enable the operational success of these partners, from concept to implementation and maintenance, through the end-to-end support provided by our business areas Ocado Solutions, Ocado Technology, Platform Implementation and Client Services. In addition, our Logistics business further facilitates the operational success of our partners in the UK. Our central Group operations functions underpin all of these commercial functions.We report the activities of these business areas as the core segments International Solutions, UK Solutions and Logistics. Descriptions of these segments and their leadership are included here.➔ Read more about Our Ocado Solutions on pages 34 to 36Ocado SolutionsInnovationOcado Group can leverage its technological know-how to drive additional value opportunities in the medium to long term.We are focused on constant innovation, with opportunities to use our technological know-how to drive better efficiencies and growth, alone or in partnership with others, in grocery and increasingly beyond. ➔ Read more about Our Virtuous Cycle on pages 32 to 33that is perpetually evolving.www.ocadogroup.comOcado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 202016Ocado-Annual-Report-2020-Strategic.indd 16Ocado-Annual-Report-2020-Strategic.indd 1609/02/2021 09:15:3409/02/2021 09:15:34Back to contents 30029 9 February 2021 9:14 am Proof ShellGroup at a GlanceWe are a technology-led, global, software and robotics platform business, with a strong retail and logistics heritage.Offering a bespoke solution . . .We have a fast-growing client business with OSP. We enable the operational success of these partners, from concept to implementation and maintenance, through the end-to-end support provided by our business areas Ocado Solutions, Ocado Technology, Platform Implementation and Client Services. In addition, our Logistics business further facilitates the operational success of our partners in the UK. Our central Group operations functions underpin all of these commercial functions.We report the activities of these business areas as the core segments International Solutions, UK Solutions and Logistics. Descriptions of these segments and their leadership are included here.➔ Read more about Our Ocado Solutions on pages 34 to 36Ocado SolutionsInnovationOcado Group can leverage its technological know-how to drive additional value opportunities in the medium to long term.We are focused on constant innovation, with opportunities to use our technological know-how to drive better efficiencies and growth, alone or in partnership with others, in grocery and increasingly beyond. ➔ Read more about Our Virtuous Cycle on pages 32 to 33that is perpetually evolving.www.ocadogroup.comOcado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 202016Ocado-Annual-Report-2020-Strategic.indd 16Ocado-Annual-Report-2020-Strategic.indd 1609/02/2021 09:15:3409/02/2021 09:15:3430029 9 February 2021 9:14 am Proof ShellJoint Venture with M&SA pure play online grocery retailer, serving customers in the UK, now a 50:50 joint venture with M&SOur customers:Ocado.com customers➔ Read more about Ocado Retail on pages 38 to 39We have a fast-growing client business with OSP. We enable the operational success of these partners, from concept to implementation and maintenance, through the end-to-end support provided by our business areas Ocado Solutions, Ocado Technology, Platform Implementation and Client Services. In addition, our Logistics business further facilitates the operational success of our partners in the UK. Our central Group operations functions underpin all of these commercial functions.We report the activities of these business areas as the core segments International Solutions, UK Solutions and Logistics. Descriptions of these segments and their leadership are included here.➔ Read more about Our Ocado Solutions on pages 34 to 36UK Solutions and Logistics Reflecting UK contracts with the Ocado Retail joint venture and Morrisons, inclusive of both Solutions contracts and service agreements with Ocado Logistics for the provision of third party logistics and other services.International SolutionsReflecting deals with international partners for the provision of OSP, so that they may lead in online grocery in their respective markets.Ocado SolutionsOcado RetailInnovationOcado Group can leverage its technological know-how to drive additional value opportunities in the medium to long term.We are focused on constant innovation, with opportunities to use our technological know-how to drive better efficiencies and growth, alone or in partnership with others, in grocery and increasingly beyond. ➔ Read more about Our Virtuous Cycle on pages 32 to 33VenturesA dedicated team making strategic investments in areas tangential to the grocery mission, or industries where we can leverage our technology competencies built up in grocery to participate in disruption with attractive long-term value potential.Our partners:Groupe Casino FranceSobeys CanadaICA Gruppen SwedenKroger USAColes AustraliaAeon JapanBon Preu Catalonia, SpainOur partners:Morrisons UKOcado Retail UKOur ventures:JFC (Vertical Farming)Infinite Acres (Vertical Farming)Inkbit (3D Printing)Karakuri (Automated Meal Prep)Kindred Systems, Inc. (Robotics)Haddington Dynamics, Inc. (Robotics)STRATEGIC REPORT17Annual Report and Accounts Ocado Group plc Stock Code: OCDO Ocado-Annual-Report-2020-Strategic.indd 17Ocado-Annual-Report-2020-Strategic.indd 1709/02/2021 09:15:3509/02/2021 09:15:35Back to contents 30029 9 February 2021 9:14 am Proof ShellOur Investment Case2.Our current partnerships provide a strong base, looking to grow fasterTaken together, current OSP partners make up a sales base of around £210 billion, the second largest retail platform by sales in the world. Our model is based on a virtuous cycle of growth, investment and innovation, with the network effects of this innovation magnified as our partner base scales➔ Read more about our OSP Leadership Club on pages 34 to 373.We offer a flexible platform with best customer offer and leading economicsOSP is a flexible platform, able to serve all missions, with a market-leading customer offer and compelling economics. We allow our partners to grow sales and win market share, profitably and sustainably➔ Read more about Our Business Model on pages 30 to 331.There has been a permanent redrawing of the landscape of the grocery industry, resulting in a significant global opportunityThe current environment has demonstrated a significant step up in online penetration that is expected to be sustained. The global opportunity in grocery is huge as retailers around the world seek to accelerate the development of their online offer for customers➔ Read more about Our Marketplace on pages 26 to 29Reasons to InvestOnline is the fastest growing channel in most markets. This has been the case for some time, and the Covid-19 pandemic has further accelerated this shift in shopping habits.We built our business specifically for this change in shopping behaviour – to benefit from, and to lead, the online revolution for our partners.18Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 18Ocado-Annual-Report-2020-Strategic.indd 1809/02/2021 09:15:4109/02/2021 09:15:41Back to contents 30029 9 February 2021 9:14 am Proof ShellOur Investment Case2.Our current partnerships provide a strong base, looking to grow fasterTaken together, current OSP partners make up a sales base of around £210 billion, the second largest retail platform by sales in the world. Our model is based on a virtuous cycle of growth, investment and innovation, with the network effects of this innovation magnified as our partner base scales➔ Read more about our OSP Leadership Club on pages 34 to 373.We offer a flexible platform with best customer offer and leading economicsOSP is a flexible platform, able to serve all missions, with a market-leading customer offer and compelling economics. We allow our partners to grow sales and win market share, profitably and sustainably➔ Read more about Our Business Model on pages 30 to 331.There has been a permanent redrawing of the landscape of the grocery industry, resulting in a significant global opportunityThe current environment has demonstrated a significant step up in online penetration that is expected to be sustained. The global opportunity in grocery is huge as retailers around the world seek to accelerate the development of their online offer for customers➔ Read more about Our Marketplace on pages 26 to 29Reasons to InvestOnline is the fastest growing channel in most markets. This has been the case for some time, and the Covid-19 pandemic has further accelerated this shift in shopping habits.We built our business specifically for this change in shopping behaviour – to benefit from, and to lead, the online revolution for our partners.18Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 18Ocado-Annual-Report-2020-Strategic.indd 1809/02/2021 09:15:4109/02/2021 09:15:4130029 9 February 2021 9:14 am Proof Shell5.Our offering is perpetually evolving and applicable beyond groceryWe continue to evolve our platform to meet new missions, whilst driving greater levels of efficiency and service. With new innovation, our opportunity set in grocery continues to evolve and expand. We see increasing opportunities to leverage our broad and deep technology real estate in markets outside of grocery➔ Read more about Ocado Technology on pages 44 to 466.Our Solutions make a real difference for goodWe are determined to fulfil our mission of changing the way the world shops for good; permanently and for the benefit of wider society. We are committed to innovation that enables sustainable business and to policies and actions that protect decent work today whilst inspiring and educating the innovators of the future➔ Read more about Corporate Responsibility on pages 82 to 894.We own 50% of the fastest-growing grocer in the UK market, Ocado RetailWe retain a 50% share in Ocado Retail, an important test bed, and a valued partner. Ocado Retail grew revenues by 35% in 2020, and has accelerated its growth plans to seize the even bigger opportunity in online grocery➔ Read more about Ocado Retail on pages 38 to 3919Stock Code: OCDO Annual Report and Accounts Ocado Group plc STRATEGIC REPORTOcado-Annual-Report-2020-Strategic.indd 19Ocado-Annual-Report-2020-Strategic.indd 1909/02/2021 09:15:4609/02/2021 09:15:46Back to contents Progress in 2020
Ocado Group: a review of top line expectations for our four operating segments
Looking at recent performance and expectations for top line trends across operating segments
Ocado Group
Revenue (Group) A (£m)
2
3
3
,
2
7
5
7
,
1
9
9
5
,
1
5
5
4
,
1
1
7
2
,
1
16
17
18
19
20
Group revenues predominantly reflect the fully
consolidated Ocado Retail joint venture and fees
for solutions and logistics services in the UK, with
a growing contribution from those International
Solutions contracts that have gone live to
customers. Recharges to Ocado Retail, reflected in
Revenue in the UK Solutions & Logistics segment,
as eliminated on consolidation.
Ocado Retail
Ocado Solutions
Revenue (Ocado Retail) A (£m)
Revenue (Solutions
Logistics – UK) A (£m)
Revenue (Solutions
International) A (£m)
9
8
1
,
2
8
1
6
,
1
7
6
4
,
1
6
4
3
,
1
2
7
1
,
1
4
5
6
6
7
5
1
4
5
7
1
11
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
Revenues from fully consolidated Ocado Retail
joint venture in the UK, in partnership with M&S. It
is expected that full consolidation of revenues will
continue for at least five years from the formation
of the joint venture, after which it is anticipated that
control of the joint venture will pass to M&S and,
when it does, it will consolidate the joint venture
A combination of fee revenue and cost recharges,
received from UK partners, the Ocado Retail joint
venture and Morrisons, for the execution of Solutions
and logistics contracts. Revenue will grow as these
partners grow their online businesses, adding
capacity and scaling their operational networks
Revenue that has been recognised to date, under
IFRS 15 Revenue Recognition, in respect of the fees
invoiced. Revenue will continue to build to more
closely track fees invoiced as CFCs go live and
capacity delivered in partner markets grow.
£117.1m
fee revenue
£123.9m
fees invoiced to International
Solutions partners
A
See Alternative Performance
Measures on pages 293 and 294.
➔ See further Key Performance Indicators
➔ Read the Financial Review on pages 50
on pages 47 to 49.
to 59.
20
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Back to contents Progress in 2020
Ocado Group: a review of top line expectations for our four operating segments
Looking at recent performance and expectations for top line trends across operating segments
Ocado Group
Revenue (Group) A (£m)
7
5
7
,
1
9
9
5
,
1
5
5
4
,
1
1
7
2
,
1
16
17
18
19
20
2
3
3
,
2
9
8
1
,
2
8
1
6
,
1
7
6
4
,
1
6
4
3
,
1
2
7
1
,
1
Group revenues predominantly reflect the fully
consolidated Ocado Retail joint venture and fees
for solutions and logistics services in the UK, with
a growing contribution from those International
Solutions contracts that have gone live to
customers. Recharges to Ocado Retail, reflected in
Revenue in the UK Solutions & Logistics segment,
as eliminated on consolidation.
Ocado Retail
Ocado Solutions
Revenue (Ocado Retail) A (£m)
Revenue (Solutions
Logistics – UK) A (£m)
Revenue (Solutions
International) A (£m)
4
5
6
6
7
5
1
4
5
7
1
11
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
Revenues from fully consolidated Ocado Retail
joint venture in the UK, in partnership with M&S. It
is expected that full consolidation of revenues will
continue for at least five years from the formation
of the joint venture, after which it is anticipated that
control of the joint venture will pass to M&S and,
when it does, it will consolidate the joint venture
A combination of fee revenue and cost recharges,
Revenue that has been recognised to date, under
received from UK partners, the Ocado Retail joint
IFRS 15 Revenue Recognition, in respect of the fees
venture and Morrisons, for the execution of Solutions
invoiced. Revenue will continue to build to more
and logistics contracts. Revenue will grow as these
closely track fees invoiced as CFCs go live and
partners grow their online businesses, adding
capacity and scaling their operational networks
capacity delivered in partner markets grow.
£117.1m
fee revenue
£123.9m
fees invoiced to International
Solutions partners
A
See Alternative Performance
Measures on pages 293 and 294.
➔ See further Key Performance Indicators
➔ Read the Financial Review on pages 50
on pages 47 to 49.
to 59.
Operational Highlights
• We successfully accelerated the build-out of more capacity for our
operational partners, in the UK and internationally, in response
to surging demand for online grocery in the face of the Covid-19
pandemic. Since March, we ramped volumes through our Erith
CFC by over 60% for Ocado Retail, and increased overall In-Store
Fulfilment (ISF) capacity for our operational partners, including
Morrisons and Bon Preu, by almost 8 fold.
• We launched our first two international CFCs, for Groupe
Casino in France and Sobeys in Canada, ahead of plan, despite
Covid-19 related disruption, enabling our partners to deliver for
their customers at a critical time. Despite restrictions on social
distancing and travel in the various markets where we operate,
we currently expect no material delays from Covid-19 in the
delivery of future CFCs for partners.
•
In partnership with Ocado Retail and Marks and Spencer, we
effectively navigated the switchover from Waitrose to M&S
products on Ocado.com, enabling customers to shop a full grocery
and hypermarket range, including their M&S favourites online
exclusively for the first time.
• We made capital investments of over £500 million, of which around
£350 million was invested in CFC sites in the UK and internationally,
with plans for Ocado Retail to launch 3 new sites in the UK and two
more international partners to go live on OSP in 2021. We invested
more than £100 million in the continued development of our platform.
Our technology and engineering headcount now stands at over 2,200.
➔ Read more on pages 42 to 45
Strategic Highlights
• We expanded a number of our global partnerships. In the UK,
Ocado Retail announced a larger and faster plan for capacity
roll-out. In Canada and France, both Sobeys and Groupe Casino
announced intentions to accelerate the delivery of further CFCs
with Sobeys confirming the details of CFC 3 in Alberta. Kroger
announced a further 4 CFCs in the US. Kroger and Sobeys made
new commitments to roll out our in-store fulfilment solution
across their store estates, to meet surging demand now, whilst
laying down the infrastructure to win in the channel for the future.
• We raised £1.6 billion of capital across two separate transactions,
in December 2019 (£600 million convertible bond) and June 2020
(£350 million convertible bond, £657 million equity), each time
to support a newly accelerated outlook for growth, following our
deal with Japanese retailer Aeon and in response to accelerated
channel shift to online grocery as a result of the Covid-19
pandemic. The attractive growth outlook for the Company and
strong demand, was reflected in the terms of each offering.
• We announced the strategic acquisitions of leading robotic
manipulation companies, Kindred Systems, Inc. and Haddington
Dynamics, Inc, completed after year-end. Together we aim to
accelerate commercial delivery of a robotic picking solution in the
CFC, a potential £7 million annual cost saving benefit to share with
partners. Further opportunities to leverage this technology exist
outside grocery, including in the fast growing general merchandise
and logistics markets.
➔ Read more on pages 42 to 46
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Case Study
Ocado Group in a post Covid-19 world
“ Voilà launched in the Greater Toronto
Area in June and we are very pleased
with the early results. Customer feedback
has been overwhelmingly positive and
our customer Net Promoter Score is the
highest I have seen in my career.”
Michael Medline
CEO, Sobeys
We believe that our proven business model is best placed to
capitalise on the rapid, sustainable, channel shift to online
grocery. OSP is the only solution that combines 20 years of
retail experience, with leading technological expertise across
an end-to-end suite of solutions, enabling attractive economics
and a leading customer experience for our partners. In a world
where more customers are shopping online, they are going to
be more discerning. A leading customer experience will be a
critical differentiator to win in the channel.
For good:
• Leading customer offer: range, convenience, freshness, value.
• Leading NPS scores for partners now live in their markets.
➔ Read more about Our Response to Covid-19 on page 59
20
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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30029 9 February 2021 9:14 am Proof ShellChairman’s StatementLord RoseChairman“ As a result of Covid-19, the grocery retail business as we know it has changed. Ocado is well placed to seize this accelerated opportunity.”Lord RoseChairmanIn an unprecedented year during the pandemic, Ocado has faced very different challenges to our business. Through the resilience and dedication of our colleagues and our ability to adapt solutions quickly we ended the year with a strong outlook.In this Strategic Report, we describe to you how Ocado is investing for the future and capitalising on opportunities to build on our success.Covid-19 has changed the grocery retail business. Years of online channel growth has accelerated in most markets globally. Like other retailers and industry commentators, we are confident that a significant portion of this channel shift will prove permanent, with more demand and faster growth. As the only end-to-end solutions provider for online grocery fulfilment globally, with a platform that offers both attractive economics and a leading customer offer, Ocado is well placed to seize this accelerated opportunity.At the start of the pandemic demand for online groceries increased significantly overnight and we made proactive decisions to prioritise our most vulnerable and most loyal customers. We acted swiftly to ensure the health and safety of our customers and our colleagues. During this exceptionally difficult period the business showed great resilience. Our colleagues showed impressive resourcefulness and strength in meeting new challenges.I would like to thank all my colleagues for their hard work and dedication throughout the year.Despite these testing circumstances we successfully delivered the first two international CFCs for our partners in France and Canada and expanded our agreements with Sobeys and Kroger to include In-Store Fulfilment (ISF), allowing our international partners to respond to the rapid increase in demand. In the UK we ramped up capacity in our CFCs much faster than ever before, improving productivity, to meet the heightened demand for both Ocado Retail and Morrisons. Additionally we rapidly scaled ISF for Morrisons. The strong technology underpinning and the flexibility of our OSP platform enabled this rapid response.The rapid shift towards online grocery shopping has demonstrated the huge opportunity for growth in this market, and in order to capitalise on this we continue to invest in our people and strategic opportunities, and drive forward innovation to develop our solutions offering and expand our leadership position. The capital raise undertaken in the summer has provided us with the financial capacity required to do this and we continue to invest in the tools, and to create value for our stakeholders.We are investing in the recruitment and retention of talent to develop the skills of our workforce to further drive innovation and find new solutions to meet future challenges. We are also focused on the wellbeing of our people and maintaining the mission-focused culture that underpins our success. We are investing in the development of our OSP platform and will utilise the power of our global OSP partners to seek new solutions for the challenges ahead. We are also making strategic investments, notably our recent acquisition of Kindred Systems, Inc. and Haddington Dynamics, Inc. to enhance our robotic manipulation capabilities. This brings a potential acceleration of the commercial delivery of robotic picking for our partners and also possibilities in other markets outside of grocery, such as general merchandise and logistics. As we have grown, the protection of our intellectual property at Ocado has always been a high priority. Currently Ocado is taking action to defend against the legal proceedings issued by AutoStore.The growth in online grocery shopping brings new opportunities but as we continue to develop as a global business we are aware of the challenges our business faces. Alongside increased demand, Covid-19 has also led to an increased risk of a decline in the high service levels in the retail business that we seek to maintain. In addition, climate change and other related environmental and social issues are emerging risks to which we need to monitor and respond. The events of this year shone an even brighter light on the importance of responsible business. Corporate responsibility is a key tenet of our approach to good business. We put our people first, support our communities, and seek greater efficiency with less environmental impact across our operations. During the pandemic, that meant process and policy changes to protect the wellbeing – physical, mental and financial – of our colleagues, adapting to new ways of working on the front line and at home. Our work supporting primary and STEM education progressed in new, virtual forms. Our technology drives efficiencies, reducing environmental impact. We see this in continued 22Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 22Ocado-Annual-Report-2020-Strategic.indd 2209/02/2021 09:15:5209/02/2021 09:15:52 improvements to our carbon efficiency and reduced food wastage
for partners. We will further strengthen our position as a responsible
business, as detailed in our new corporate responsibility strategy
“Ocado Unlimited – harnessing the power of technology for people and
planet”, and elsewhere in this report.
We recognise the importance of our stakeholders in the long-
term success of our business and the value in understanding and
considering the interests of our stakeholders in decision-making.
This year, due to Covid-19, we have had to adapt our methods of
engagement with our stakeholders but we have continued to find
ways to keep communications open. As we look towards growing
into our role as a global technology solutions provider, we have
undertaken a materiality assessment to confirm the most material
environmental, social and governance issues. This is an important
step in helping to further focus our business.
We look forward to meeting future challenges and building our
business for long-term success.
This is my last report as Chairman of the Board. It has been my
privilege to work with a highly talented and dedicated team at Ocado.
Key activity in the year
• December 2019: Ocado Group announced the successful
completion of a convertible bond offering comprised of £600
million of guaranteed senior unsecured convertible bonds.
• March 2020: Ocado Solutions announced the first international
Ocado CFC to go live for Groupe Casino in Fleury-Merogis,
near Paris.
• April 2020: Ocado Solutions announced the launch of the first
Ocado CFC in North America for Sobeys in Toronto, Ontario.
• June 2020: Ocado Group successfully completed a placing and
retail offer and a convertible bond offering, raising total gross
proceeds of approximately £1,007 million.
• September 2020: Ocado Retail switchover to Marks and Spencer
products is successfully completed.
• November 2020: Ocado Solutions and Kroger announced plans
to construct a new high tech CFC in the South region of the USA.
• November 2020: Ocado Group announced the proposed
acquisition of Kindred Systems, Inc. and Haddington Dynamics,
Inc. to enhance its robotic manipulation capabilities.
Lord Rose
Chairman
9 February 2021
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Section 172(1) Statement
The Board of Directors confirm that during the year under
review, it has acted to promote the long-term success of the
Company for the benefit of shareholders, whilst having due
regard to the matters set out in section 172(1)(a) to (f) of the
Companies Act 2006, being:
a. The likely consequences of any decision in the long term.
b. The interests of the Company’s employees.
c. The need to foster the Company’s business relationships
with suppliers, customers and others.
d. The impact of the Company’s operations on the community
and the environment.
e. The desirability of the Company maintaining a reputation for
high standards of business conduct.
f. The need to act fairly between members of the Company.
This statement includes the information demonstrating how
the Board has had regard to these matters in its actions as
detailed in the section Engaging With Our Stakeholders on
pages 72 to 81 and in the Corporate Governance Report on
pages 112 to 113 and page 118.
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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30029 9 February 2021 9:14 am Proof ShellChairman’s StatementLord RoseChairman“ As a result of Covid-19, the grocery retail business as we know it has changed. Ocado is well placed to seize this accelerated opportunity.”Lord RoseChairmanIn an unprecedented year during the pandemic, Ocado has faced very different challenges to our business. Through the resilience and dedication of our colleagues and our ability to adapt solutions quickly we ended the year with a strong outlook.In this Strategic Report, we describe to you how Ocado is investing for the future and capitalising on opportunities to build on our success.Covid-19 has changed the grocery retail business. Years of online channel growth has accelerated in most markets globally. Like other retailers and industry commentators, we are confident that a significant portion of this channel shift will prove permanent, with more demand and faster growth. As the only end-to-end solutions provider for online grocery fulfilment globally, with a platform that offers both attractive economics and a leading customer offer, Ocado is well placed to seize this accelerated opportunity.At the start of the pandemic demand for online groceries increased significantly overnight and we made proactive decisions to prioritise our most vulnerable and most loyal customers. We acted swiftly to ensure the health and safety of our customers and our colleagues. During this exceptionally difficult period the business showed great resilience. Our colleagues showed impressive resourcefulness and strength in meeting new challenges.I would like to thank all my colleagues for their hard work and dedication throughout the year.Despite these testing circumstances we successfully delivered the first two international CFCs for our partners in France and Canada and expanded our agreements with Sobeys and Kroger to include In-Store Fulfilment (ISF), allowing our international partners to respond to the rapid increase in demand. In the UK we ramped up capacity in our CFCs much faster than ever before, improving productivity, to meet the heightened demand for both Ocado Retail and Morrisons. Additionally we rapidly scaled ISF for Morrisons. The strong technology underpinning and the flexibility of our OSP platform enabled this rapid response.The rapid shift towards online grocery shopping has demonstrated the huge opportunity for growth in this market, and in order to capitalise on this we continue to invest in our people and strategic opportunities, and drive forward innovation to develop our solutions offering and expand our leadership position. The capital raise undertaken in the summer has provided us with the financial capacity required to do this and we continue to invest in the tools, and to create value for our stakeholders.We are investing in the recruitment and retention of talent to develop the skills of our workforce to further drive innovation and find new solutions to meet future challenges. We are also focused on the wellbeing of our people and maintaining the mission-focused culture that underpins our success. We are investing in the development of our OSP platform and will utilise the power of our global OSP partners to seek new solutions for the challenges ahead. We are also making strategic investments, notably our recent acquisition of Kindred Systems, Inc. and Haddington Dynamics, Inc. to enhance our robotic manipulation capabilities. This brings a potential acceleration of the commercial delivery of robotic picking for our partners and also possibilities in other markets outside of grocery, such as general merchandise and logistics. As we have grown, the protection of our intellectual property at Ocado has always been a high priority. Currently Ocado is taking action to defend against the legal proceedings issued by AutoStore.The growth in online grocery shopping brings new opportunities but as we continue to develop as a global business we are aware of the challenges our business faces. Alongside increased demand, Covid-19 has also led to an increased risk of a decline in the high service levels in the retail business that we seek to maintain. In addition, climate change and other related environmental and social issues are emerging risks to which we need to monitor and respond. The events of this year shone an even brighter light on the importance of responsible business. Corporate responsibility is a key tenet of our approach to good business. We put our people first, support our communities, and seek greater efficiency with less environmental impact across our operations. During the pandemic, that meant process and policy changes to protect the wellbeing – physical, mental and financial – of our colleagues, adapting to new ways of working on the front line and at home. Our work supporting primary and STEM education progressed in new, virtual forms. Our technology drives efficiencies, reducing environmental impact. We see this in continued 22Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 22Ocado-Annual-Report-2020-Strategic.indd 2209/02/2021 09:15:5209/02/2021 09:15:52Back to contents
30029 9 February 2021 9:14 am Proof ShellQ&A with Tim Steiner“ Customers who have experienced the benefits of online grocery shopping are likely to become ever more discerning. Winners in online will need to offer the very highest standards of customer service and the ability to serve a full range of customer missions. The uniquely flexible Ocado Smart Platform allows our partners to offer all this, supported by proprietary technology which is constantly evolving thanks to our ever-growing capacity to innovate.”Tim SteinerChief Executive OfficerQ How do you think about the future of the online channel in grocery?A We believe that in the long term, online can be a mainstream channel for grocery shopping. Covid-19 has been the catalyst to accelerate a structural change that would have taken place, just over a longer period of time. As channel shift occurs, the economic challenges that this migration represents to a sector with high fixed costs will increase. We expect this will drive a wider gap between customer experience in store versus online, in favour of the latter, creating a virtuous cycle for increased channel shift online and to those retailers with a leading online service, like that enabled by OSP.Q Now that the opportunity in online is clear, how will Ocado stay ahead in an increasingly competitive marketplace?A The important thing to realise is that we are constantly innovating, precisely for this purpose. We’ve continued to evolve OSP to fulfil all customer missions with multiple formats, and are the only end-to-end provider, globally, to offer this level of customisation for our partners. With new generations of technology we’ve delivered greater efficiency with market-leading customer service. All this will continue, along with step-change improvements. Notably, we expect investment made this year to accelerate commercialisation of solutions in robotic picking, packing and decant in CFCs, and there’s plenty going on that we can’t talk about just yet. In addition, the more we scale, the more we can invest in innovation, and with nine global partners, we are scaling very fast.Q How do you think about opportunities in verticals outside of grocery?A The opportunity in grocery is so huge, and has only got bigger this year, so that remains our core focus. Of course, we’ve developed a broad and deep technology portfolio over the last two decades trying to solve the complex problems in grocery fulfillment and that technology, and the competencies that come with it, is applicable in many other sectors. We are exploring those opportunities, and we’ve already made some investments which we think can create significant long-term value for Ocado Group, in robotics, vertical farming, and automated meal prep.24Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 24Ocado-Annual-Report-2020-Strategic.indd 2409/02/2021 09:15:5709/02/2021 09:15:57Back to contents 30029 9 February 2021 9:14 am Proof ShellQ&A with Tim Steiner“ Customers who have experienced the benefits of online grocery shopping are likely to become ever more discerning. Winners in online will need to offer the very highest standards of customer service and the ability to serve a full range of customer missions. The uniquely flexible Ocado Smart Platform allows our partners to offer all this, supported by proprietary technology which is constantly evolving thanks to our ever-growing capacity to innovate.”Tim SteinerChief Executive OfficerQ How do you think about the future of the online channel in grocery?A We believe that in the long term, online can be a mainstream channel for grocery shopping. Covid-19 has been the catalyst to accelerate a structural change that would have taken place, just over a longer period of time. As channel shift occurs, the economic challenges that this migration represents to a sector with high fixed costs will increase. We expect this will drive a wider gap between customer experience in store versus online, in favour of the latter, creating a virtuous cycle for increased channel shift online and to those retailers with a leading online service, like that enabled by OSP.Q Now that the opportunity in online is clear, how will Ocado stay ahead in an increasingly competitive marketplace?A The important thing to realise is that we are constantly innovating, precisely for this purpose. We’ve continued to evolve OSP to fulfil all customer missions with multiple formats, and are the only end-to-end provider, globally, to offer this level of customisation for our partners. With new generations of technology we’ve delivered greater efficiency with market-leading customer service. All this will continue, along with step-change improvements. Notably, we expect investment made this year to accelerate commercialisation of solutions in robotic picking, packing and decant in CFCs, and there’s plenty going on that we can’t talk about just yet. In addition, the more we scale, the more we can invest in innovation, and with nine global partners, we are scaling very fast.Q How do you think about opportunities in verticals outside of grocery?A The opportunity in grocery is so huge, and has only got bigger this year, so that remains our core focus. Of course, we’ve developed a broad and deep technology portfolio over the last two decades trying to solve the complex problems in grocery fulfillment and that technology, and the competencies that come with it, is applicable in many other sectors. We are exploring those opportunities, and we’ve already made some investments which we think can create significant long-term value for Ocado Group, in robotics, vertical farming, and automated meal prep.24Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 24Ocado-Annual-Report-2020-Strategic.indd 2409/02/2021 09:15:5709/02/2021 09:15:5730029 9 February 2021 9:14 am Proof ShellChief Financial Officer successionStephen Daintith Chief Financial Officer(to start 2021)Welcoming Stephen DaintithStephen will join us from Rolls-Royce where, as CFO, he has focused on managing a significant turnaround of the business. He has a deep understanding of international business across various sectors, having worked in the UK and internationally during his career, with senior roles at Daily Mail and General Trust plc, Dow Jones & Co. and News International. This experience internationally and in engineering and manufacturing will be very valuable additions as Ocado continues its growth as a leading technology-led global software and robotics platform business.“ Following a thorough search and selection process, I am delighted to be welcoming Stephen to Ocado Group. I am looking forward to working closely with him to drive Ocado forward and take full advantage of the opportunities that we see ahead.”Tim SteinerChief Executive OfficerDuncan Tatton-Brown, Chief Financial Officer(to 22 November 2020)After eight years as Chief Financial Officer of the Group, Duncan has departed from the Ocado Group Board.Duncan joined Ocado Group when it was a pure play online retailer, operating in the UK. He has been instrumental in contributing to the growth of the company, and the execution of the Group’s strategy, successfully transforming into the global solutions provider it is today. He leaves the business in a strong position to continue this journey, with the financial capital required to take advantage of the global acceleration of online channel shift.Duncan will continue as a Non-Executive Director of three Ocado subsidiaries: Ocado Retail Limited (our joint venture with M&S), Jones Food Company Limited and Karakuri Ltd.25Stock Code: OCDO Annual Report and Accounts Ocado Group plc STRATEGIC REPORTOcado-Annual-Report-2020-Strategic.indd 25Ocado-Annual-Report-2020-Strategic.indd 2509/02/2021 09:16:0109/02/2021 09:16:01Back to contents The Marketplace
The world is changing in
grocery retailing for good
The pandemic has turbocharged the adoption of online grocery by shoppers, resulting
in the redrawing of the global landscape. Many markets worldwide have seen years’
worth of acceleration in e-commerce penetration
The Global Acceleration in Online Grocery
For more than two decades, grocery has been steadily migrating
online. Now, the pandemic has radically accelerated this digital
transition in the space of a few months. Around the world, shoppers
have been breaking with lifelong habits by ordering groceries through
the internet instead of visiting a supermarket, and the data suggest
that, for many, this new way of shopping will become the norm.
22%
expected share of
online grocery in USA
by 2025
Source: Mercatus/Incisiv
Survey, eGrocery’s New
Reality: The Pandemic’s
Lasting Impact on U.S.
Grocery Shopping
Behavior, September 2020
25–30%
expected share
of online grocery
across key developed
European markets
by 2040
Source: GS report, ‘Europe’s
digital economy at a tipping
point’, January 2021
50%
expected share of
online grocery in
China by 2025
Source: GS report,
‘Grocery Re-imagined:
Steepening online shift in
China, November 2020
Significant acceleration in online grocery share in partners’ markets globally(1)
UK
Almost doubled
to 14%
Sweden
More than
doubled to 5%
Japan
Doubled to 5%
France
Increased by
almost 50% to 9%
USA
More than
doubled to 10%
Source: GS report, ‘Grocery Re-Imagined’ steepening online shift in China, November 2020; Svensk Dagligvaruhandel Grocery Index, November 2020 Report; Ministry of Trade, Economy
and Industry (METI); MS report, France Kantar market data: FMCG market up 8.8% for P12 2020, December 2020; Mercatus/Incisiv Survey, eGrocery’s New Reality: The Pandemic’s Lasting
Impact on U.S. Grocery Shopping Behavior, September 2020; Industry reports, DI, Nordea (for Sweden data)
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Back to contents
The Marketplace
The world is changing in
grocery retailing for good
The pandemic has turbocharged the adoption of online grocery by shoppers, resulting
in the redrawing of the global landscape. Many markets worldwide have seen years’
worth of acceleration in e-commerce penetration
The Global Acceleration in Online Grocery
For more than two decades, grocery has been steadily migrating
online. Now, the pandemic has radically accelerated this digital
transition in the space of a few months. Around the world, shoppers
have been breaking with lifelong habits by ordering groceries through
the internet instead of visiting a supermarket, and the data suggest
that, for many, this new way of shopping will become the norm.
22%
expected share of
25–30%
expected share
online grocery in USA
of online grocery
50%
expected share of
online grocery in
by 2025
across key developed
China by 2025
Source: Mercatus/Incisiv
Survey, eGrocery’s New
Reality: The Pandemic’s
Lasting Impact on U.S.
Grocery Shopping
Behavior, September 2020
European markets
by 2040
Source: GS report, ‘Europe’s
digital economy at a tipping
point’, January 2021
Source: GS report,
‘Grocery Re-imagined:
Steepening online shift in
China, November 2020
Significant acceleration in online grocery share in partners’ markets globally(1)
UK
Almost doubled
to 14%
Sweden
More than
doubled to 5%
Japan
Doubled to 5%
France
Increased by
almost 50% to 9%
USA
More than
doubled to 10%
Source: GS report, ‘Grocery Re-Imagined’ steepening online shift in China, November 2020; Svensk Dagligvaruhandel Grocery Index, November 2020 Report; Ministry of Trade, Economy
and Industry (METI); MS report, France Kantar market data: FMCG market up 8.8% for P12 2020, December 2020; Mercatus/Incisiv Survey, eGrocery’s New Reality: The Pandemic’s Lasting
Impact on U.S. Grocery Shopping Behavior, September 2020; Industry reports, DI, Nordea (for Sweden data)
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30029 9 February 2021 9:14 am Proof Shell£0.7tn 25% share£2.8tn key markets(1)£7.6tn global grocery£3.5bn–£26.3bn fee opportunity(2)£70bn£175bn£350bn10%25%50%£525bn75%% of £0.7tn to market to move onlineThe world is changing in grocery retailing for goodThe pandemic has turbocharged the adoption of online grocery by shoppers, resulting in the redrawing of the global landscape. Many markets worldwide have seen years’ worth of acceleration in e-commerce penetration The Global OpportunityWhat this means for Ocado GroupSeveral of the world’s largest grocery retailers have already chosen to partner with Ocado to deliver a market-leading shopping experience for their own customers. The acceleration of channel shift to online means that these partners will need to go faster to meet their customers’ needs. The remaining opportunity for Ocado Solutions is huge, as grocery retailers around the world seek to accelerate the development of their online offer to customers. We see a £3.5bn–£26.3bn fee opportunity, depending on the level of online penetration reached in key markets. Ocado Group is well placed to seize this opportunity, as the only end-to-end solutions provider for online grocery fulfilment globally, that can serve all missions with multiple formats. As we continue to innovate, to maintain our leadership position, our opportunity set will evolve and expand.(1) Source: Company information, Planet Retail(2) Planet Retail, assuming a 25% grocery market share and assuming an online penetration of between 10% and 75% with a 5% fee opportunity, which represents the mid-point of the range provided to the market.Global Addressable MarketSignificant Increase in Online Penetration is Expected to be SustainedThroughout our history with Ocado.com, we have found that, following a few shops, customers tend to stick with online grocery shopping for good, reflecting the improved service and convenience. We expect that the recent global channel shift to online is sustainable, and the data supports this.66% of first-time online shoppers in Western Europe expect to continue shopping this waySource: GS report, ‘Grocery Re-imagined: Steepening online shift in China, November 202070% US customers say they will continue online grocery shoppingSource: CH Robinson Consumer survey, October 202055% Chinese consumers will continue to shop for groceries onlineSource: McKinsey report, ‘Understanding Chinese Consumers: Growth Engine of the World’, November 202027Stock Code: OCDO Annual Report and Accounts Ocado Group plc STRATEGIC REPORTOcado-Annual-Report-2020-Strategic.indd 27Ocado-Annual-Report-2020-Strategic.indd 2709/02/2021 09:16:0309/02/2021 09:16:03Back to contents
30029 9 February 2021 9:14 am Proof ShellThe MarketplaceContinuedThe Fulfilment MarketplaceAside from the option to develop in-house e-commerce and fulfilment capabilities, there are currently a range of options available to grocery retailers for online grocery fulfilment. Fulfilment options:1 Customer Fulfilment Centre (CFC): Typically a large centralised hub capable of storing a wide range and processing large order volumes. Capable of serving customers across wide geographies via both direct delivery and spoked/trunked delivery.2 Mini CFC: Smaller format centralised fulfilment holding a wide product range and capable of serving 100% direct delivery and high volumes of ‘same day’ orders to a more limited geographic area.3 Micro Fulfilment Centre (MFC): MFCs are typically characterised by small-sized sites, reduced range compared to CFCs and serving a small-delivery catchment area with short lead times. Deployable within town and cities, and serving immediacy missions (for Ocado).4 In-Store Fulfilment (ISF): Manual fulfilment from stores, sometimes enabled by software to support more efficient pick walks and order consolidation. Serving home delivery and pickup.5 Outsourcing to third parties: A customer orders from their chosen retailer, and their shopping is delivered through a third-party shopping service.The OSP fulfilment ecosystem includes a wide range of fulfilment formats As the online grocery market continues to develop at pace, having access to a full range of fulfilment solutions gives OSP partners the tactical and strategic flexibility to meet short term pressures, as well as the long term capacity to win in e-commerce in their markets.Strategic criteriaTactical criteriaISFMicroMiniStandardCapital intensityOperating costCustomer offerTime to launchacbdabcdBest to worstThe OSP ecosystem will fit and develop with the needs of a partner in their given marketThe grocery online market is characterised by a wide and growing range of customer ‘missions’, from big basket, weekly shops to immediate, last-minute shopping. Winning and holding market share for the long-term in the online channel will require grocery retailers to reliably serve all these missions better than competitors, and with competitive prices. No single fulfilment model in the market meets all use cases, or optimally caters to every customer mission.The OSP fulfilment ecosystem, powered by our proprietary technology, includes all models across Standard CFCs, Mini CFCs, Micro Fulfilment Centres and In-Store Fulfilment software. This ecosystem gives our partners the strategic flexibility to deploy a fulfilment network across their markets that reaches as many customers as possible, with the best possible economics and customer propositions. It also enables them to tactically deploy capacity fast with in-store fulfilment software as needed to meet short-term demand, or to reach less dense populations.In the long term, we believe the best retailer economics and most compelling customer propositions come with deploying a fulfilment ecosystem with scaled, automated capacity at its core.CFCs offer the best outcomes in the long termManual options for tactical flexibility in current environment28Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 28Ocado-Annual-Report-2020-Strategic.indd 2809/02/2021 09:16:0709/02/2021 09:16:07Back to contents Other Trends Affecting the Grocery Industry
Societal
Shifts
Ageing population, urbanisation,
time poverty, health and wellbeing
Transformative
Technology
Artificial Intelligence, Robotics, Big Data,
Digital Twins and the Internet of Things
Resource
Resilience
Environmental impact, future
workforce and skill gaps
How are Markets Responding?
How are Markets Responding?
How are Markets Responding?
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
As societal shifts drive new definitions of
convenience for consumers, retailers have
to adapt to meet heightened expectations
of service. This requires a model with
the flexibility to serve customers exactly
what they want, when they want it, for
a reasonable price, across an evolving
spectrum of missions from the big basket
shop to immediacy.
Time Poverty
With more dual income households
and increased awareness about
the importance of good nutrition,
consumers are looking for affordable
ways to reduce time spent on grocery
shopping without compromising on
quality or choice.
Our Response
By delivering market-leading levels of
both punctuality and order accuracy,
with unparalleled range and freshness,
OSP enables partners to take the
time and frustration out of grocery
shopping for their customers. This
leading customer offer will drive
improved loyalty, enabling our
partners to take increased share
online in their markets, in turn driving
increased volumes through the OSP.
Competitors within the grocery market
are making moves towards tackling
these key issues, but our approach and
focus on technologies and solutions sets
us apart and positions us to better deal
with these important challenges, whilst
attracting and developing the innovators
of today and tomorrow, to support our
hunger for innovation.
Operating Responsibly
Climate change, food waste, and
pollution are all defining issues of our
time. It is imperative to have these issues
in mind, to drive sustainable change.
Technology-driven solutions require the
brightest, dedicated minds.
Our Response
As a purpose-led organisation, with
an increasingly global and esteemed
brand, we can attract real talent. We
invest in developing the skills of our
workforce to pioneer solutions to
the defining challenges today, whilst
also inspiring and educating the
next generation of young innovators.
Efficient use of resources, minimising
food waste, and a focus on recyclable
use of plastic, are all areas where
Ocado’s technology can make a
real difference to grocery and other
industries we may serve going forward.
And this is the beginning; we will
continue to disrupt the market with
investments in our core business
technologies and other areas where
we can leverage our competencies
for transformative and sustainable
change.
The global health crisis accelerated
the shift towards online, creating a
greater appreciation for the increased
convenience and reduced touchpoints
that automated systems offer. Consumer
desire for better, more personalised
experiences offering accurate, fresh,
on-time deliveries increases as they
become more familiar with shopping
online. Retailers now understand
that it is only through investment
into automation that they can deliver
excellent experiences to their customers
in a way that is still profitable for them.
Innovation
Markets increasingly explore the roles AI,
robotics and automation play in providing
flexible grocery fulfilment options and
better consumer experiences. Solutions
to manage customer demand through
virtual queues, booking systems, and data
simulations are increasingly essential for
providing equal access and supply chain
resilience.
Our Response
The technology underpinning OSP
enabled retail partners to grow
in response to rapidly changing
demand and consumer dynamics.
Our rich suite of solutions serve
the widest range of retail missions:
UK partners grew online orders by
40% and we delivered our first two
international large CFCs on schedule
despite pandemic pressures.
We continue to make advancements
in robotic picking and packing, and
to optimise our offerings using data
gathered from the digital twins of
our physical and digital assets. This
enables us to continually uncover
new paradigms for our platforms.
Our investment in innovative
businesses opens doors to
synergistic business opportunities.
Stock Code: OCDO
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30029 9 February 2021 9:14 am Proof ShellThe MarketplaceContinuedThe Fulfilment MarketplaceAside from the option to develop in-house e-commerce and fulfilment capabilities, there are currently a range of options available to grocery retailers for online grocery fulfilment. Fulfilment options:1 Customer Fulfilment Centre (CFC): Typically a large centralised hub capable of storing a wide range and processing large order volumes. Capable of serving customers across wide geographies via both direct delivery and spoked/trunked delivery.2 Mini CFC: Smaller format centralised fulfilment holding a wide product range and capable of serving 100% direct delivery and high volumes of ‘same day’ orders to a more limited geographic area.3 Micro Fulfilment Centre (MFC): MFCs are typically characterised by small-sized sites, reduced range compared to CFCs and serving a small-delivery catchment area with short lead times. Deployable within town and cities, and serving immediacy missions (for Ocado).4 In-Store Fulfilment (ISF): Manual fulfilment from stores, sometimes enabled by software to support more efficient pick walks and order consolidation. Serving home delivery and pickup.5 Outsourcing to third parties: A customer orders from their chosen retailer, and their shopping is delivered through a third-party shopping service.The OSP fulfilment ecosystem includes a wide range of fulfilment formats As the online grocery market continues to develop at pace, having access to a full range of fulfilment solutions gives OSP partners the tactical and strategic flexibility to meet short term pressures, as well as the long term capacity to win in e-commerce in their markets.Strategic criteriaTactical criteriaISFMicroMiniStandardCapital intensityOperating costCustomer offerTime to launchacbdabcdBest to worstThe OSP ecosystem will fit and develop with the needs of a partner in their given marketThe grocery online market is characterised by a wide and growing range of customer ‘missions’, from big basket, weekly shops to immediate, last-minute shopping. Winning and holding market share for the long-term in the online channel will require grocery retailers to reliably serve all these missions better than competitors, and with competitive prices. No single fulfilment model in the market meets all use cases, or optimally caters to every customer mission.The OSP fulfilment ecosystem, powered by our proprietary technology, includes all models across Standard CFCs, Mini CFCs, Micro Fulfilment Centres and In-Store Fulfilment software. This ecosystem gives our partners the strategic flexibility to deploy a fulfilment network across their markets that reaches as many customers as possible, with the best possible economics and customer propositions. It also enables them to tactically deploy capacity fast with in-store fulfilment software as needed to meet short-term demand, or to reach less dense populations.In the long term, we believe the best retailer economics and most compelling customer propositions come with deploying a fulfilment ecosystem with scaled, automated capacity at its core.CFCs offer the best outcomes in the long termManual options for tactical flexibility in current environment28Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 28Ocado-Annual-Report-2020-Strategic.indd 2809/02/2021 09:16:0709/02/2021 09:16:07Back to contents
30029 9 February 2021 9:14 am Proof ShellOur Business ModelWe are reimagining shopping, by solving complex problems to provide sustainable solutions for online grocery.1.Our PeopleOur business is built by passionate people who can find solutions to problems, and go the extra mile to deliver a high-quality service. Our technology and engineering development teams are crucial to our ability to improve and advance our intellectual property rapidly, allowing us to maintain technological leadership➔ Read more on page 90Intellectual PropertyTwenty years of learning, research and development have enabled us to build the world’s most advanced end-to-end e-commerce, fulfilment and logistics platform for online grocery. Our cutting edge IP, which spans our entire technology estate, has played a crucial role in making this solution the most advanced available. Our IP is a fundamental source of our competitive advantage and we take rigorous measures to protect it. Our patent attorneys and IP lawyers also work closely with technical teams on the ground to make sure we continue to find and protect the important inventions which add value to the company, now and in the future.➔ Read more on page 46TechnologyFor two decades we’ve developed our own innovative solutions to combat the complexities of online grocery in a way that provides quality, personal, seamless experiences for customers and superior economics for retailers. When the pandemic struck, we were in a unique position to leverage our capabilities in AI, data science, simulation, digital twins, robotics and automation not only to ramp up capacity quickly, but also to perform fast optimised decision-making for the benefit of our retail partners, and their customers, as well as for our own business resilience. These competencies continue to provide retailers with the unparalleled capabilities to build loyalty in a challenging marketplace.➔ Read more on page 44Our inputs enable us . . . www.ocadogroup.com30Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020Ocado-Annual-Report-2020-Strategic.indd 30Ocado-Annual-Report-2020-Strategic.indd 3009/02/2021 09:16:2109/02/2021 09:16:21Back to contents 30029 9 February 2021 9:14 am Proof ShellOur Business ModelWe are reimagining shopping, by solving complex problems to provide sustainable solutions for online grocery.1.Our PeopleOur business is built by passionate people who can find solutions to problems, and go the extra mile to deliver a high-quality service. Our technology and engineering development teams are crucial to our ability to improve and advance our intellectual property rapidly, allowing us to maintain technological leadership➔ Read more on page 90Intellectual PropertyTwenty years of learning, research and development have enabled us to build the world’s most advanced end-to-end e-commerce, fulfilment and logistics platform for online grocery. Our cutting edge IP, which spans our entire technology estate, has played a crucial role in making this solution the most advanced available. Our IP is a fundamental source of our competitive advantage and we take rigorous measures to protect it. Our patent attorneys and IP lawyers also work closely with technical teams on the ground to make sure we continue to find and protect the important inventions which add value to the company, now and in the future.➔ Read more on page 46TechnologyFor two decades we’ve developed our own innovative solutions to combat the complexities of online grocery in a way that provides quality, personal, seamless experiences for customers and superior economics for retailers. When the pandemic struck, we were in a unique position to leverage our capabilities in AI, data science, simulation, digital twins, robotics and automation not only to ramp up capacity quickly, but also to perform fast optimised decision-making for the benefit of our retail partners, and their customers, as well as for our own business resilience. These competencies continue to provide retailers with the unparalleled capabilities to build loyalty in a challenging marketplace.➔ Read more on page 44Our inputs enable us . . . www.ocadogroup.com30Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020Ocado-Annual-Report-2020-Strategic.indd 30Ocado-Annual-Report-2020-Strategic.indd 3009/02/2021 09:16:2109/02/2021 09:16:2130029 9 February 2021 9:14 am Proof ShellThe OSP EcosystemOSP is a single global platform that can be configured to the unique needs of our partners and their customers. With more people coming to the online channel in grocery than ever before, we believe that the winners in the channel will be those with the widest toolkit available for serving a market-leading customer experience in all geographies, underpinned by the best long-term economics. OSP has the flexibility to develop bespoke networks to serve the unique needs of each marketKey added value: • Flexibility to serve a developing range of customer missions• Compelling economics: Result of best-in-channel operating cost• Ease of customer use: Ability to order across devices and formats (inc. voice ordering)• Pricing flexibility• Service: 95% on-time delivery, 99% basket accuracy*• Range: 50,000+ SKUs• Future Proof: Long innovation pipeline➔ Read more about our OSP Leadership Club on pages 34 to 37* This is a representation of a consistent level pre-pandemic2.Our inputs enable us . . . To offer a proven, bespoke and flexible solution . . . Retail HeritageUnlike third party providers of technology products, services and software, we are also a retailer, and our systems, processes and hardware have evolved over many iterations in a live retail environment. Throughout our history, our entire attention has been on developing the best possible online grocery operation. This single-minded focus has enabled us to develop market-leading logistics and physical infrastructure solutions, driven by proprietary technology and innovation.➔ Read more about Ocado Retail on page 38Our Values and CultureOur values guide ways of working across our diverse network of business areas, building an engaged and mission-driven culture that enables us to tackle challenges head-on and pursue new opportunities with vigour, in turn, enabling us to fulfil our purpose and deliver value for all our stakeholders.“ Our purpose is to reimagine shopping, by solving complex problems to provide sustainable solutions for online grocery”➔ Read more on page 91KeyModulePrimary MissionSize (sq ft)1Standard CFCFull basket shop; large direct and spoked catchment200k+2Mini CFCFull grocery shop; shorter lead times or to connect lower density areas to network50–160k3MFCImmediacy5–25k4ISFBest fulfilment in remote areasn/a 4 1 2 3 2nn Immediacyn Same dayn Next dayKeyStock Code: OCDO STRATEGIC REPORT31Annual Report and Accounts Ocado Group plc Ocado-Annual-Report-2020-Strategic.indd 31Ocado-Annual-Report-2020-Strategic.indd 3109/02/2021 09:16:3409/02/2021 09:16:34Back to contents Our Business Model
Continued
3.
This is perpetually evolving . . .
Our Virtuous Cycle of
Investment and Growth
Our leading solutions, underpinned by proprietary
technology, enable partners to win in the online grocery
channel in their markets. This competitive advantage is
reinforced by the strength of the collective which today
stands at nine partners and ourselves. The centralised
nature of the OSP platform brings a strong multiplier
effect to continued investments in innovation.
We combine investment with learnings from our
increasingly global ‘leadership club’ of retail partners,
to bring a globally optimised experience for our
partners and their customers now, whilst continuously
horizon scanning for further opportunities.
The model below illustrates how we are able to
drive this virtuous cycle of growth, investment and
innovation, with the network effects of this innovation
magnified as our partner base scales.
1
Increased
Investment
Our
Virtuous
Cycle
3
Faster Partner
Growth
4
More
Partners
2
Enhanced
OSP
Platform
1 Increased investment
With increased scale, we are able to invest in growing our
technology teams, to improve our platform capabilities,
faster, for our partners.
2 Enhanced OSP Platform
OSP is the leading solution for online grocery fulfilment
and the only end-to-end solution capable of serving all
shopping missions. We continue to invest in building this
leadership position; in both cutting edge development to
make our platform even more secure, scalable, maintainable
and sustainable for partners, as well as in game-changing
technological advances.
3 Faster partner growth
Successive improvements in technology deliver greater
efficiency and market-leading customer service for our
partners, enabling them to grow faster and win share in their
markets, resulting in more growth and more resources for
investment in OSP.
4 More partners
A richer platform, driving strong results for partners, attracts
more interest from other leading retailers worldwide. More
partnerships drive more growth and more resources for
investment in OSP.
➔ Read more about Our Constant Drive
for Innovation on page 43
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Back to contents Our Business Model
Continued
3.
This is perpetually evolving . . .
Our Virtuous Cycle of
Investment and Growth
Our leading solutions, underpinned by proprietary
technology, enable partners to win in the online grocery
channel in their markets. This competitive advantage is
reinforced by the strength of the collective which today
stands at nine partners and ourselves. The centralised
nature of the OSP platform brings a strong multiplier
effect to continued investments in innovation.
We combine investment with learnings from our
increasingly global ‘leadership club’ of retail partners,
to bring a globally optimised experience for our
partners and their customers now, whilst continuously
horizon scanning for further opportunities.
The model below illustrates how we are able to
drive this virtuous cycle of growth, investment and
innovation, with the network effects of this innovation
magnified as our partner base scales.
1
Increased
Investment
Our
Virtuous
Cycle
4
More
Partners
3
Faster Partner
Growth
2
Enhanced
OSP
Platform
1 Increased investment
With increased scale, we are able to invest in growing our
technology teams, to improve our platform capabilities,
faster, for our partners.
2 Enhanced OSP Platform
OSP is the leading solution for online grocery fulfilment
and the only end-to-end solution capable of serving all
shopping missions. We continue to invest in building this
leadership position; in both cutting edge development to
make our platform even more secure, scalable, maintainable
and sustainable for partners, as well as in game-changing
technological advances.
3 Faster partner growth
Successive improvements in technology deliver greater
efficiency and market-leading customer service for our
partners, enabling them to grow faster and win share in their
markets, resulting in more growth and more resources for
investment in OSP.
4 More partners
A richer platform, driving strong results for partners, attracts
more interest from other leading retailers worldwide. More
partnerships drive more growth and more resources for
investment in OSP.
➔ Read more about Our Constant Drive
for Innovation on page 43
4.
In order to deliver long-term value for all our stakeholders
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
Our virtuous cycle of investment and growth
Partners
In the short to medium term:
We offer our retail partners a more flexible, scalable and efficient way of fulfilling online
grocery in their markets, with a leading customer offer, enabling them to take share
and grow sustainably.
In the long term:
We continue to invest in the platform, in continuous improvements
and step change innovations, to further enhance the competitive
advantage that OSP brings, facilitating our partners’
aspirations to lead in online in their markets.
Shareholders
In the short term:
We are investing heavily today to scale
the Solutions business and develop the
OSP platform, moving fast to capitalise
on the increasing opportunities
arising from the acceleration in online
penetration.
In the long term:
The addressable market opportunity
in online grocery is huge, facilitating
a long runway for growth. The
technology and competencies we have
built in grocery are applicable in other
verticals, and we will seek the most
compelling opportunities to leverage
that expertise to drive future value.
Delivering
value
Our People
In the short to medium term:
We make significant investments
in recruiting and developing our
people, and ensuring their wellbeing,
to maintain the culture and pace of
innovation that continues to underpin
our success.
In the long term:
Our success is dependent on hiring
employees globally. As we build up our
brand as an international employer
of choice our purpose, and focus
on development, will be critical in
attracting and retaining the highest
quality talent. We are committed to
providing a competitive compensation
package, and fostering the inclusive
environment required to attract the
diversity of talent and expertise
we need to succeed.
Society and Community
In the short to medium term:
Through technology, we are continually reducing the
environmental impact of our platform, enabling market-leading
food waste efficiency, near closed-loop recycling of plastic bags used in
deliveries, and improved carbon efficiency. We are committed to implementing
effective systems and controls to ensure decent work in our own business and our
supply chains.
32
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Annual Report and Accounts Ocado Group plc
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In the long term:
We are determined to fulfill our mission to change the way the world shops for good and for better. We do this
through commitment to innovation that enables us, and our partners, to be better stewards of our planet, and to policies
and actions that protect decent work today whilst developing the innovators of the future.
Back to contents
30029 9 February 2021 9:14 am Proof ShellA scalable, global supply chainIn addition to our long-standing relationships with European-based manufacturers, we created new partnerships this year with scaled global leaders in contract manufacturing, such as Jabil and Flex. These partnerships reinforce our ability to efficiently deliver MHE to projects worldwide and, combined with local partnerships to support installation at CFCs, they bolster our overall project delivery infrastructure as increasing numbers of CFCs move towards going live.Investing for accelerationOnline has consistently been the fastest expanding channel in grocery in recent years, and 2020 has been a catalyst for an even steeper acceleration towards online becoming a mainstream channel in grocery. As we look to bring more partners onto the Ocado Smart Platform, we continue to invest to ensure OSP drives the best customer experience, operating economics, and tactical flexibility of any solutions in the marketplace.7partners will be live with Ocado’s technology in 202110CFCs will be live worldwide in 2021 Our Solutions BusinessLuke JensenCEO of Ocado SolutionsServing our partners needsPartnering with leading retailersAs the online shift continues to accelerate in grocery, the Ocado Smart Platform offers our partners worldwide a wide range of tools to provide their customers with the best possible experience online, with leading economics. What we offer our partners:• Software: At the heart of OSP is a growing, fully-integrated software stack that optimizes operations across web-shop functions, supply chain forecasting, fulfilment, and delivery routing based on real-time decisions taken by customers. This software estate is continually expanding.• Fulfilment: OSP provides partners with a wide range of fulfilment formats that can be configured across geographies to meet the growing range of customer missions online. These include large CFCs, mini-CFCs, MFCs, and In-Store Fulfilment.• Services: OSP partners are able to leverage Ocado Group’s considerable grocery e-commerce expertise to support deployment and optimization of OSP in their markets. They also benefit from 24/7 engineering support once CFCs are live.In unprecedented circumstances, the Ocado Smart Platform reached significant milestones in 2020. The first Ocado CFCs to go live outside of the UK launched in France and Canada, introducing a world class customer experience online for grocery customers in Paris and the Greater Toronto Area.We have seen greater interest in our OSP platform as a way for retailers to meet the global increase in demand for online grocery, but have also had to work hard to adapt to new methods of engagement with clients and prospects in light of the international travel restrictions that have been in place during the year.Across our active partnerships we continued to make progress with worldwide CFC projects in 2020, with Kroger’s first sites due to go live for customers in 2021, followed by ICA’s Stockholm CFC in 2022. We also added more mini CFCs to our project pipeline with partners, with Ocado Retail Ltd now due to operate two mini-CFCs in Bristol and Bicester, and Kroger announcing a mini-CFC in Romulus, Michigan.➔ Read more about the OSP Ecosystem on page 283434Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 34Ocado-Annual-Report-2020-Strategic.indd 3409/02/2021 09:16:4509/02/2021 09:16:45Back to contents 30029 9 February 2021 9:14 am Proof ShellA scalable, global supply chainIn addition to our long-standing relationships with European-based manufacturers, we created new partnerships this year with scaled global leaders in contract manufacturing, such as Jabil and Flex. These partnerships reinforce our ability to efficiently deliver MHE to projects worldwide and, combined with local partnerships to support installation at CFCs, they bolster our overall project delivery infrastructure as increasing numbers of CFCs move towards going live.Investing for accelerationOnline has consistently been the fastest expanding channel in grocery in recent years, and 2020 has been a catalyst for an even steeper acceleration towards online becoming a mainstream channel in grocery. As we look to bring more partners onto the Ocado Smart Platform, we continue to invest to ensure OSP drives the best customer experience, operating economics, and tactical flexibility of any solutions in the marketplace.7partners will be live with Ocado’s technology in 202110CFCs will be live worldwide in 2021 Our Solutions BusinessLuke JensenCEO of Ocado SolutionsServing our partners needsPartnering with leading retailersAs the online shift continues to accelerate in grocery, the Ocado Smart Platform offers our partners worldwide a wide range of tools to provide their customers with the best possible experience online, with leading economics. What we offer our partners:• Software: At the heart of OSP is a growing, fully-integrated software stack that optimizes operations across web-shop functions, supply chain forecasting, fulfilment, and delivery routing based on real-time decisions taken by customers. This software estate is continually expanding.• Fulfilment: OSP provides partners with a wide range of fulfilment formats that can be configured across geographies to meet the growing range of customer missions online. These include large CFCs, mini-CFCs, MFCs, and In-Store Fulfilment.• Services: OSP partners are able to leverage Ocado Group’s considerable grocery e-commerce expertise to support deployment and optimization of OSP in their markets. They also benefit from 24/7 engineering support once CFCs are live.In unprecedented circumstances, the Ocado Smart Platform reached significant milestones in 2020. The first Ocado CFCs to go live outside of the UK launched in France and Canada, introducing a world class customer experience online for grocery customers in Paris and the Greater Toronto Area.We have seen greater interest in our OSP platform as a way for retailers to meet the global increase in demand for online grocery, but have also had to work hard to adapt to new methods of engagement with clients and prospects in light of the international travel restrictions that have been in place during the year.Across our active partnerships we continued to make progress with worldwide CFC projects in 2020, with Kroger’s first sites due to go live for customers in 2021, followed by ICA’s Stockholm CFC in 2022. We also added more mini CFCs to our project pipeline with partners, with Ocado Retail Ltd now due to operate two mini-CFCs in Bristol and Bicester, and Kroger announcing a mini-CFC in Romulus, Michigan.➔ Read more about the OSP Ecosystem on page 283434Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 34Ocado-Annual-Report-2020-Strategic.indd 3409/02/2021 09:16:4509/02/2021 09:16:4530029 9 February 2021 9:14 am Proof ShellCase StudyRapid launch of partner CFCsFranceThe site saw a rapid early ramp-up with a five-fold increase in the number of orders between end-May and end-June 2020, and a subsequent 60% increase in order volumes between end-June and end-September 2020. From September, the CFC also began fulfilling orders for the Casino brand, with the service area extended to cover 75% of the population in the Ile-de-France region.From 2021, Groupe Casino have said they will stock a range of 50,000 products in the CFC.“ Ocado has developed exceptional technology, which makes it possible to practice flawless e-commerce.”Jean Paul Mochet President, Monoprix. Le FigaroCEO of Groupe CasinoGroupe Casino went live with the first Ocado CFC outside of the UK in March 2020, followed shortly by Sobeys in May 2020. Public go-lives for both Monoprix Plus and Voila by Sobeys brands came amid rising demand in France and Canada as Covid-19 restrictions came into effect. CanadaThe Vaughan CFC in Ontario also launched on a test basis on 28 April 2020 with ‘Voila by Sobeys’, ahead of a full roll-out to the Greater Toronto Area from June.On the back of the successful launch of the Vaughan CFC and the introduction of curb-side pick-up enabled by Ocado’s in-store fulfilment software, Sobeys confirmed plans for a third CFC with Ocado to serve the Alberta region. Construction is already underway on the second CFC in Montreal; the company is targeting four CFCs across Canada.“ If we hadn’t made the deal with Ocado to have the best technology customer experience, I’d be very worried. I shudder to think if we hadn’t done the Ocado deal. It’s the only thing in the business that I considered, once I knew about it, we had to have.”Michael MedlineCEO Empire (parent company of Sobeys), Financial Post (December 2020)35Stock Code: OCDO Annual Report and Accounts Ocado Group plc STRATEGIC REPORTOcado-Annual-Report-2020-Strategic.indd 35Ocado-Annual-Report-2020-Strategic.indd 3509/02/2021 09:16:4609/02/2021 09:16:46Back to contents Our Solutions Business
Continued
The Benefits of Our Partnership Club
Alongside a suite of support services, software and fulfilment solutions, OSP provides our partners with access to innovations developed
for a diverse range of markets worldwide. In contrast to other sectors of the global economy, grocery is largely dominated by local
leaders. With OSP, we are bringing the innovations developed alongside local experience and know-how to a global client base.
As our club of partners grows,
its benefits are magnified
1. 2.
Scale gives us more
resources to realise the
growing ambitions of our
partners
As the number of partners on our platform
grows, we have more resources and
motivation to innovate faster, to the benefit
of current and prospective retailers on OSP.
Our expanding footprint
applies global learnings
to our partners’ local
strength
Our end-to-end solutions can be configured
to the unique needs of each market, enabling
us to switch on and off specific functionality
and resources as needed for our partners to
drive a market-leading customer offer and
future growth.
3.
We provide a central
forum for a diverse range
of retailers to learn from
each other
Our global partners share the same thirst
for innovation, collaboration, and new
learnings. Our geographic reach allows us
to bring a diverse range of retailers together
to collaborate on their priorities and
experiences within both their online and
offline businesses.
#2
#1
collective size of OSP Partners by
volume of global grocery sales
in terms of geographic reach
(EMEA, NA, APAC)
#9
leading retailers around the world are
accessing and growing the platform
“ Like all international businesses, Ocado Solutions had to
find new ways of working in 2020 to accommodate the
strictures of a global pandemic. I am extremely proud
of all our teams around the world who found innovative
ways to support our live partners, bring international
CFCs live for the first time, and keep our projects on
track through difficult months of rolling lockdowns
and travel restrictions.”
Luke Jensen
CEO of Ocado Solutions
Profitability
Online
24/7
Support
Future
Proofing
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Back to contents
Our Solutions Business
Continued
The Benefits of Our Partnership Club
Alongside a suite of support services, software and fulfilment solutions, OSP provides our partners with access to innovations developed
for a diverse range of markets worldwide. In contrast to other sectors of the global economy, grocery is largely dominated by local
leaders. With OSP, we are bringing the innovations developed alongside local experience and know-how to a global client base.
As our club of partners grows,
its benefits are magnified
1. 2.
Scale gives us more
resources to realise the
Our expanding footprint
applies global learnings
growing ambitions of our
to our partners’ local
partners
strength
3.
We provide a central
forum for a diverse range
of retailers to learn from
each other
As the number of partners on our platform
Our end-to-end solutions can be configured
Our global partners share the same thirst
grows, we have more resources and
to the unique needs of each market, enabling
for innovation, collaboration, and new
motivation to innovate faster, to the benefit
us to switch on and off specific functionality
learnings. Our geographic reach allows us
of current and prospective retailers on OSP.
and resources as needed for our partners to
to bring a diverse range of retailers together
drive a market-leading customer offer and
to collaborate on their priorities and
future growth.
experiences within both their online and
#2
#1
collective size of OSP Partners by
volume of global grocery sales
in terms of geographic reach
(EMEA, NA, APAC)
leading retailers around the world are
accessing and growing the platform
offline businesses.
#9
“ Like all international businesses, Ocado Solutions had to
find new ways of working in 2020 to accommodate the
strictures of a global pandemic. I am extremely proud
of all our teams around the world who found innovative
ways to support our live partners, bring international
CFCs live for the first time, and keep our projects on
track through difficult months of rolling lockdowns
and travel restrictions.”
Luke Jensen
CEO of Ocado Solutions
Profitability
Online
24/7
Support
Future
Proofing
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30029 9 February 2021 9:14 am Proof ShellOur proprietary technology, future innovation pipeline and expanding partnerships support our leading global position.Our competitive advantage is reinforced by the strength of the collective group of innovative businesses within the OSP Leadership Club, which today stands at nine partners and ourselves. This network positions us and our partners as “innovators” within the technology curve.➔ Read more about our Proprietary Technology on pages 45 and 4637Stock Code: OCDO Annual Report and Accounts Ocado Group plc STRATEGIC REPORTOcado-Annual-Report-2020-Strategic.indd 37Ocado-Annual-Report-2020-Strategic.indd 3709/02/2021 09:16:4909/02/2021 09:16:49Back to contents
30029 9 February 2021 9:14 am Proof ShellThe accelerated opportunityin online grocery in the UKIt has been an extraordinary year of growth and transformation for Ocado Retail.At the beginning of the Covid-19 outbreak in the UK, demand for online groceries increased significantly, almost overnight. The online channel doubled from 7% of UK grocery sales, to 14%, as a result of the pandemic. This unprecedented demand, combined with customers shopping both more frequently and bigger baskets, required a difficult proactive decision to deploy more of our overall capacity to serve a smaller number of active customers, well, at this challenging time.Despite pandemic related challenges, the business adapted rapidly, successfully accelerating to deliver significantly more groceries that ever before. September saw the successful switchover to M&S products on Ocado.com, as planned, bringing with it even more choice and better value for customers.The business managed to maintain leading service metrics for on time delivery, and accuracy, keeping substitutions below 4%.As we return to a new normal, with market leading customer offer and service metrics, Ocado Retail is now focused and on track to materially increase its capacity, and seize the huge opportunity ahead as accelerated channel shift to online continues in the UK.2021 will see the launch of three new CFC sites, increasing available capacity by over 40%. A further mini CFC is planned for go-live in the first half of 2022 and an accelerated search for further Zoom sites is underway.Tim Steiner Chief Executive OfficerOcado RetailMelanie SmithCEO of Ocado Retail“ These are transformational times and we will continue to set the bar in online grocery retail; to wow customers who are seeing the benefits of online shopping in ever greater numbers.”Melanie Smith CEO of Ocado Retail98%of Ocado Retail customers were shopping M&S products just weeks after the 1 September switchover from Waitrose1.7%share of the UK grocery market in November 2020, up from 1.2% in November 2019, with UK take home grocery sales up 11% over the same period38Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 38Ocado-Annual-Report-2020-Strategic.indd 3809/02/2021 09:16:5209/02/2021 09:16:52Back to contents 30029 9 February 2021 9:14 am Proof ShellThe accelerated opportunityin online grocery in the UKIt has been an extraordinary year of growth and transformation for Ocado Retail.At the beginning of the Covid-19 outbreak in the UK, demand for online groceries increased significantly, almost overnight. The online channel doubled from 7% of UK grocery sales, to 14%, as a result of the pandemic. This unprecedented demand, combined with customers shopping both more frequently and bigger baskets, required a difficult proactive decision to deploy more of our overall capacity to serve a smaller number of active customers, well, at this challenging time.Despite pandemic related challenges, the business adapted rapidly, successfully accelerating to deliver significantly more groceries that ever before. September saw the successful switchover to M&S products on Ocado.com, as planned, bringing with it even more choice and better value for customers.The business managed to maintain leading service metrics for on time delivery, and accuracy, keeping substitutions below 4%.As we return to a new normal, with market leading customer offer and service metrics, Ocado Retail is now focused and on track to materially increase its capacity, and seize the huge opportunity ahead as accelerated channel shift to online continues in the UK.2021 will see the launch of three new CFC sites, increasing available capacity by over 40%. A further mini CFC is planned for go-live in the first half of 2022 and an accelerated search for further Zoom sites is underway.Tim Steiner Chief Executive OfficerOcado RetailMelanie SmithCEO of Ocado Retail“ These are transformational times and we will continue to set the bar in online grocery retail; to wow customers who are seeing the benefits of online shopping in ever greater numbers.”Melanie Smith CEO of Ocado Retail98%of Ocado Retail customers were shopping M&S products just weeks after the 1 September switchover from Waitrose1.7%share of the UK grocery market in November 2020, up from 1.2% in November 2019, with UK take home grocery sales up 11% over the same period38Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 38Ocado-Annual-Report-2020-Strategic.indd 3809/02/2021 09:16:5209/02/2021 09:16:5230029 9 February 2021 9:14 am Proof ShellTim Steiner Chief Executive OfficerOcado Retail Partnership with M&SProviding sustainable solutions for our planetOcado Retail targeting Net Zero carbon emissions by 2040 as part of the BRC carbon roadmap.Ocad0 Waste: striving to be the most sustainable grocer in the UK, focusing on food and packaging waste, carbon impact and responsible impact.Driving positive social changeThe Ocado Retail leadership team is 15% BAME, reflecting the UK population, and 70% female, reflecting the Ocado.com customer base. It is committed to reflect the UK population in marketing and range choices.Case Study“ Demand for online grocery is unprecedented and we are committed to supporting Ocado Retail to make the most of this opportunity in the UK.”Since 1 September, Ocado.com customers have been shopping M&S products online, exclusively, for the first time. The launch saw a range of 4,400 food products replace around 4,000 Waitrose products with high quality alternatives at the same or better prices. 700 M&S Home & Lifestyle products were added, bringing customers an even richer hypermarket offer. The successful switchover was the culmination of a year’s worth of collaboration between Ocado Retail, the M&S product innovation teams, and the Ocado Group technology and logistics teams. It evidences the strength of the partnership, and was a key strategic step in setting up the joint venture for future growth.39Stock Code: OCDO Annual Report and Accounts Ocado Group plc STRATEGIC REPORTOcado-Annual-Report-2020-Strategic.indd 39Ocado-Annual-Report-2020-Strategic.indd 3909/02/2021 09:16:5609/02/2021 09:16:56Back to contents 30029 9 February 2021 9:14 am Proof ShellStrategy“ The world has changed in grocery retailing for good. We have prepared for greater speed of execution and innovation and we are ready to seize this faster, bigger future, with and for our partners.”Tim SteinerCEO of Ocado GroupTim Steiner CEO of Ocado GroupCreating Value with PurposeOur purpose is to reimagine shopping, by solving complex problems to provide sustainable solutions for online grocery. Our PurposeDriving Growth By creating solutions with real competitive advantages in grocery, and increasingly beyond, we facilitate sustained growth for our partners and in turn for our shareholders.Maximising EfficiencyAlways striving to develop both our technology and operations, to consistently improve our economic and operating performance.Utilising KnowledgeUsing our IP for future innovation, driving further opportunities for value creation, within and beyond grocery.Improving the PropositionContinually enhancing the value of our proposition for our Solutions partners, so that they can deliver an ever better service to their customers.This year has been all about going faster for our partners. In response to the unprecedented surge in demand for online grocery, worldwide, we launched our first two international CFCs ahead of plan and ramped capacity, whether manual or automated, for all our operational partners, much faster. The surge in online grocery has emphasised just how important it is for retailers to find a sustainable solution to serve online grocery, and Ocado Retail’s performance has evidenced the strengths of the OSP model as a profitable, scalable solution for the long term. We haven’t just been going faster for today. We are confident that accelerated growth in the online channel will continue, leading to a permanent redrawing of the landscape of the grocery industry worldwide. This will mean more demand for the Ocado Smart Platform from current and prospective partners. Our fundraising in the summer means that we have the human and financial capital to capitalise on our full opportunity set over the medium term. We have already made important progress to this end, expanding our relationships with our current partners in new ways and making strategic investments, most notably in robotic manipulation, to accelerate the development of our systems in line with the renewed scale of the opportunity set and our ambitions. 40Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 40Ocado-Annual-Report-2020-Strategic.indd 4009/02/2021 09:16:5909/02/2021 09:16:59Back to contents S
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Actions
We realise our strategy through continuous progress on these actions.
Strengthen our brands
Reinforce the Ocado Group
and Solutions brands
based on partnership
announcements and validity
of the model. Promote the
strength and value of our
technology and engineering
brands to attract the highest
quality talent.
Continuously develop
more capital and
operationally efficient
infrastructure solutions
Operating efficiency: Optimise
every aspect of the fulfilment
and delivery life cycle, to
improve our economics and
partner proposition.
Capital efficiency:
Continuously lower the cost
of investment required for
online grocery activities,
to support growth for our
platform partners.
Enable current and
future partners’
online businesses
Continuously develop new
and improved propositions,
so that partners can
build tailored and flexible
ecosystems to serve an
evolving and comprehensive
set of customer missions in
their given markets.
Constantly enhance
end-to-end technology
system solutions
Retain our technological
leadership through ceaseless
pursuit of innovation
ahead of the market, either
organically or through M&A.
Use our cutting-edge IP to
power our world-leading
end-to-end e-commerce,
fulfilment and logistics
solutions.
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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30029 9 February 2021 9:14 am Proof ShellStrategy“ The world has changed in grocery retailing for good. We have prepared for greater speed of execution and innovation and we are ready to seize this faster, bigger future, with and for our partners.”Tim SteinerCEO of Ocado GroupTim Steiner CEO of Ocado GroupCreating Value with PurposeOur purpose is to reimagine shopping, by solving complex problems to provide sustainable solutions for online grocery. Our PurposeDriving Growth By creating solutions with real competitive advantages in grocery, and increasingly beyond, we facilitate sustained growth for our partners and in turn for our shareholders.Maximising EfficiencyAlways striving to develop both our technology and operations, to consistently improve our economic and operating performance.Utilising KnowledgeUsing our IP for future innovation, driving further opportunities for value creation, within and beyond grocery.Improving the PropositionContinually enhancing the value of our proposition for our Solutions partners, so that they can deliver an ever better service to their customers.This year has been all about going faster for our partners. In response to the unprecedented surge in demand for online grocery, worldwide, we launched our first two international CFCs ahead of plan and ramped capacity, whether manual or automated, for all our operational partners, much faster. The surge in online grocery has emphasised just how important it is for retailers to find a sustainable solution to serve online grocery, and Ocado Retail’s performance has evidenced the strengths of the OSP model as a profitable, scalable solution for the long term. We haven’t just been going faster for today. We are confident that accelerated growth in the online channel will continue, leading to a permanent redrawing of the landscape of the grocery industry worldwide. This will mean more demand for the Ocado Smart Platform from current and prospective partners. Our fundraising in the summer means that we have the human and financial capital to capitalise on our full opportunity set over the medium term. We have already made important progress to this end, expanding our relationships with our current partners in new ways and making strategic investments, most notably in robotic manipulation, to accelerate the development of our systems in line with the renewed scale of the opportunity set and our ambitions. 40Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 40Ocado-Annual-Report-2020-Strategic.indd 4009/02/2021 09:16:5909/02/2021 09:16:59Back to contents
30029 9 February 2021 9:14 am Proof ShellStrategyContinuedThis has been a year of acceleration as we bring new resources, solutions and flexibility to the Ocado Smart Platform. 1. More Solutions: We continued to expand the wide technology estate at the heart of OSP throughout the year, bringing new experiences to the webshop and greater software functionality for partners across the end-to-end platform. Alongside the robotic pick capabilities we have developed in-house, we expect Ocado Group’s acquisition of Kindred Systems, Inc. and Haddington Dynamics, Inc. to bring significant new efficiencies to our automated fulfilment capabilities across CFCs, mini CFCs and micro fulfilment centres.2. Greater Flexibility:OSP enables our partners to deploy a wide range of fulfilment formats into their markets, all of them fully integrated into our end-to-end platform. With the acceleration in customer demand for online seen across all partner markets, OSP can provide our current partners with the tools to ramp up capacity quickly in the short term, whilst laying down the infrastructure to support significant, scalable, and profitable e-commerce in the long term.In offering our partners a range of formats across CFCs, mini-CFCs, MFCs and In-Store Fulfilment, we provide them with the tactical flexibility to map their deployment of Ocado’s technology to the growing range of customer shopping missions they want to serve, while retaining best possible economics. 3. A new customer proposition for shoppers in our partners’ markets:Not only are we constantly improving our own proposition to partners, we have also helped them to deliver new levels of customer service to shoppers in France and Canada, bringing the customer experiences achieved by Ocado.com in the UK to those markets.Improving the Proposition KPIs3Mini CFCs underway for Partners in 2020>85increase in ISF volumes across all Partners in 2020Risks• Risk of failing to deliver a sustainable operational infrastructure able to execute effectively the requirements for multiple Ocado Solutions contracts, simultaneously in many international locations.• Risk that current Solutions pricing levels may not provide both acceptable returns for our shareholders, if efficiencies are not achieved and attractive long-term cost of ownership for our clients, whilst delivering a viable fully operational end-to-end customer experience.“ Voilà launched in the Greater Toronto Area in June and we are very pleased with the early results. Customer feedback has been overwhelmingly positive, and our customer Net Promoter Score is the highest I have seen in my career.” Michael MedlineCEO Empire, Supermarket News42Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 42Ocado-Annual-Report-2020-Strategic.indd 4209/02/2021 09:17:0409/02/2021 09:17:04Back to contents 30029 9 February 2021 9:14 am Proof ShellStrategyContinuedThis has been a year of acceleration as we bring new resources, solutions and flexibility to the Ocado Smart Platform. 1. More Solutions: We continued to expand the wide technology estate at the heart of OSP throughout the year, bringing new experiences to the webshop and greater software functionality for partners across the end-to-end platform. Alongside the robotic pick capabilities we have developed in-house, we expect Ocado Group’s acquisition of Kindred Systems, Inc. and Haddington Dynamics, Inc. to bring significant new efficiencies to our automated fulfilment capabilities across CFCs, mini CFCs and micro fulfilment centres.2. Greater Flexibility:OSP enables our partners to deploy a wide range of fulfilment formats into their markets, all of them fully integrated into our end-to-end platform. With the acceleration in customer demand for online seen across all partner markets, OSP can provide our current partners with the tools to ramp up capacity quickly in the short term, whilst laying down the infrastructure to support significant, scalable, and profitable e-commerce in the long term.In offering our partners a range of formats across CFCs, mini-CFCs, MFCs and In-Store Fulfilment, we provide them with the tactical flexibility to map their deployment of Ocado’s technology to the growing range of customer shopping missions they want to serve, while retaining best possible economics. 3. A new customer proposition for shoppers in our partners’ markets:Not only are we constantly improving our own proposition to partners, we have also helped them to deliver new levels of customer service to shoppers in France and Canada, bringing the customer experiences achieved by Ocado.com in the UK to those markets.Improving the Proposition KPIs3Mini CFCs underway for Partners in 2020>85increase in ISF volumes across all Partners in 2020Risks• Risk of failing to deliver a sustainable operational infrastructure able to execute effectively the requirements for multiple Ocado Solutions contracts, simultaneously in many international locations.• Risk that current Solutions pricing levels may not provide both acceptable returns for our shareholders, if efficiencies are not achieved and attractive long-term cost of ownership for our clients, whilst delivering a viable fully operational end-to-end customer experience.“ Voilà launched in the Greater Toronto Area in June and we are very pleased with the early results. Customer feedback has been overwhelmingly positive, and our customer Net Promoter Score is the highest I have seen in my career.” Michael MedlineCEO Empire, Supermarket News42Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 42Ocado-Annual-Report-2020-Strategic.indd 4209/02/2021 09:17:0409/02/2021 09:17:0430029 9 February 2021 9:14 am Proof ShellCase study: Accelerating the commercial delivery of robotic picking for OSP partners In November 2020 we announced the acquisitions of Kindred Systems, Inc. and Haddington Dynamics, Inc. to accelerate the development of a commercial solution in robotic picking for our partners. We have long considered the opportunities for robotic manipulation solutions to be significant, both for OSP partners and across the fast-growing online retail and logistics sectors. Over the last several years, our technology teams have made material progress learning computer vision and engineering systems required for robotic picking. With our combined capabilities we will be able to accelerate delivery of a solution in grocery.In addition, Kindred’s fast-growing operations with customers across general merchandise and logistics, combined with Ocado Group’s scale, scope and resources, means opportunities in new verticals outside of grocery.Innovation will see the opportunity set continue to evolve and expand for our partners and, in turn, for Ocado Group.➔ Read more about Our Business Model on pages 30 to 33Increasing competitive advantage of OSP in grocery• Five robotic arms in Erith. • Pick rate doubled. • On track for FY target of efficiency similar to human.Leveraging our technological know-how and participating in other adjacencies • Investments to date: robotics for general merchandise (Kindred Systems, Inc.), vertical farming (JFC, Infinite Acres), automated meal prep (Karakuri) and 3D printing.The constant drive for innovation“ We see ourselves as an innovation house. The biggest risk is not taking enough risk. Standing still is a certain route to obsolescence.”Tim SteinerChief Executive OfficerInnovation is critical to maintaining and expanding Ocado’s leadership position as a solutions provider, and we are focused on sustaining the culture and pace of innovation we have achieved to date. In our growing technology teams, we have top talent dedicated to further increasing the competitive advantage that OSP drives in grocery. At the same time, our ventures team explores ways that we can leverage our technological know-how to participate in innovation in other, often adjacent, verticals to create future value for the medium to long term. Naturally, these streams are connected, and may converge depending on the timeframe and scope of the opportunity at hand.Business InsightParallel streams robotic pickingCorevertical farming, automated meal prep, 3D printingVentures43Stock Code: OCDO Annual Report and Accounts Ocado Group plc STRATEGIC REPORTOcado-Annual-Report-2020-Strategic.indd 43Ocado-Annual-Report-2020-Strategic.indd 4309/02/2021 09:17:0409/02/2021 09:17:04Back to contents 30029 9 February 2021 9:14 am Proof ShellStrategyContinuedOperational Efficiency We drive efficiencies throughout every process of our operations, from customer-facing interfaces in the webshop, inventory management systems and fulfilment, to the routing software that supports their deliveries. We achieve this by adhering to three design principles: automation, use of our own technology, and centralisation.Progress• Reducing the long-term costs of ownership of our fulfilment solution, the combination of capital and running costs, is critical as we scale. A key part of this is developing new generations of bots.• This year, our third generation bot went into production. This bot will underpin our UK and international roll-out, setting new levels of performance in its operation, ease of manufacture and serviceability. Continued investment in the software driving our bot fleet will see still further improvements in operational performance.• We measure efficiency within CFCs by average eaches processed per labour hour (UPH). In our mature CFCs in operation in the UK (which now includes Erith) UPH was 169 for the year, benefiting from higher volumes as a result of changes in customer shopping behaviour associated with the pandemic, as well as improvements as Erith scaled. At maturity, we expect our robotic CFCs in the UK and internationally to operate at 200+ UPH.• Average deliveries per van per week (DPV) for Ocado Retail, declined to 184, as larger baskets sizes limited the number of customer orders delivered by each van in a single shift. However, overall delivery cost was down, as the shift towards larger basket shops drove an increase in the number of eaches carried per van. • The platform continues to enable market-leading levels of food waste, at just 0.4% of sales for Ocado Retail in the UK.Maximising efficiency Future Focus We are always looking for ways to apply our technology to improve our operational efficiency, with both core business sponsored and more speculative research underway.A good example of this is the robotic picking and packing of customer orders. In grocery, this challenge is especially difficult due to the breadth of handling characteristics. Building on our eight years of progress in this field, this year we acquired two leading companies in the field of robotic manipulation, to accelerate the commercial delivery of this solution for our partners. Robotic picking is first on our roadmap, followed by decant. Together, these functions represent over half of the manual labour cost in a CFC. In the medium term, we see further opportunities to apply this technology in activities such as de-palletising and de-trashing.KPIs169UPH2019: 161Change of basis to include Erith CFC184DPV2019: 196Risks• Delays in implementing new capacity.• Risk of failing to deliver a sustainable operational infrastructure able to execute effectively the requirement for multiple Ocado Solutions contracts, simultaneously in many international locations.44Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 44Ocado-Annual-Report-2020-Strategic.indd 4409/02/2021 09:17:0709/02/2021 09:17:07Back to contents S
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• Every lesson we learn at sites in the UK and abroad, every
enhancement to automation and software, is quickly transferable
to every future partner site.
•
In addition to our long-standing manufacturers, we have entered
partnerships with some of the largest, global leaders in contract
manufacturing, Jabil and Flex. This will enable us to scale MHE
production for our partners faster, and bring benefits from scaled
manufacturing and larger procurement order sizes.
Future Focus
We continue to expect to see further improvements in the speed of
deployment allowing for reduced upfront capital commitment and
shorter ROI timescales, and automation enhancements that further
increase throughput and efficiency.
Robotic picking is one such enhancement; following the strategic
acquisition of two leading companies in the robotic manipulation
sector, we are confident that we can both bring a commercial solution
for robotic picking to our partners sooner than previously planned,
and at a capital cost that brings attractive returns on investment.
As we continue to progress operational CFCs, and go live with new
sites, learnings will naturally be passed on to the benefit of all our
Solutions partners.
By adding more partners to the platform, we will also see the benefits
of increased scale.
Capital Efficiency
The proprietary technology we use in our newer CFCs enables our
partners to achieve an attractive return on investment, even before
any further efficiency benefits from other innovations such as
robotic picking.
The modular nature of the mechanical handling equipment (MHE) solution
allows for reduced upfront capital commitment, and enables real flexibility
in customising the solution to the varying capacity requirements of our
partners. As we continue to develop new CFCs, at scale, we are able to
further improve the capital efficiency of our operations. Technological
innovations will compound these improvements.
Progress
• We were able to rapidly ramp up capacity at our Erith CFC, in
response to the Covid-19 driven surge in demand for online
grocery. At year end, the site was running at 130,000 orders per
week, and an increase of over 80% in the year.
• Our first operational sites in France and Canada are also
successfully ramping up ahead of original plans.
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30029 9 February 2021 9:14 am Proof ShellStrategyContinuedOperational Efficiency We drive efficiencies throughout every process of our operations, from customer-facing interfaces in the webshop, inventory management systems and fulfilment, to the routing software that supports their deliveries. We achieve this by adhering to three design principles: automation, use of our own technology, and centralisation.Progress• Reducing the long-term costs of ownership of our fulfilment solution, the combination of capital and running costs, is critical as we scale. A key part of this is developing new generations of bots.• This year, our third generation bot went into production. This bot will underpin our UK and international roll-out, setting new levels of performance in its operation, ease of manufacture and serviceability. Continued investment in the software driving our bot fleet will see still further improvements in operational performance.• We measure efficiency within CFCs by average eaches processed per labour hour (UPH). In our mature CFCs in operation in the UK (which now includes Erith) UPH was 169 for the year, benefiting from higher volumes as a result of changes in customer shopping behaviour associated with the pandemic, as well as improvements as Erith scaled. At maturity, we expect our robotic CFCs in the UK and internationally to operate at 200+ UPH.• Average deliveries per van per week (DPV) for Ocado Retail, declined to 184, as larger baskets sizes limited the number of customer orders delivered by each van in a single shift. However, overall delivery cost was down, as the shift towards larger basket shops drove an increase in the number of eaches carried per van. • The platform continues to enable market-leading levels of food waste, at just 0.4% of sales for Ocado Retail in the UK.Maximising efficiency Future Focus We are always looking for ways to apply our technology to improve our operational efficiency, with both core business sponsored and more speculative research underway.A good example of this is the robotic picking and packing of customer orders. In grocery, this challenge is especially difficult due to the breadth of handling characteristics. Building on our eight years of progress in this field, this year we acquired two leading companies in the field of robotic manipulation, to accelerate the commercial delivery of this solution for our partners. Robotic picking is first on our roadmap, followed by decant. Together, these functions represent over half of the manual labour cost in a CFC. In the medium term, we see further opportunities to apply this technology in activities such as de-palletising and de-trashing.KPIs169UPH2019: 161Change of basis to include Erith CFC184DPV2019: 196Risks• Delays in implementing new capacity.• Risk of failing to deliver a sustainable operational infrastructure able to execute effectively the requirement for multiple Ocado Solutions contracts, simultaneously in many international locations.44Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 44Ocado-Annual-Report-2020-Strategic.indd 4409/02/2021 09:17:0709/02/2021 09:17:07Back to contents
30029 9 February 2021 9:14 am Proof ShellOur Intellectual PropertySince 2000, Ocado has developed and scaled an online grocery sales platform, solving the challenge of reliably and accurately delivering a world-beating selection of groceries to customers across multiple temperature regimes in convenient time slots. 2020 saw the expansion of our proprietary technology to not only serve customers in the UK but those of Casino in France and Sobeys in Canada. Our best-in-class, end-to-end e-commerce, fulfilment and logistics solution is based on two decades of knowledge and experience in the online grocery sector. Our proprietary technology continues to be developed, expanding potential offerings to retailers around the globe and enabling our partners to be competitive in challenging situations such as the unexpected pandemic. Underlying these developments is a network of proprietary rights protecting our investments and ensuring our partner companies have unrivalled access to the technology required to enhance their offering in their relevant markets. Additionally, IP and innovation assets acquired during the course of this journey expands the reach of our system and protects our market-leading technology for the future.Progress• We completed the re-engineering of our bot and commissioned the next generation version on our mini-CFC site in Bristol, UK in late 2020. The re-engineered bot is protected by a suite of registered and unregistered IP rights, thereby ensuring the learnings from our previous generation bots continue to be exclusively available to Ocado partner companies. • In November 2020 we announced the acquisition of two robotic picking companies, completed after year-end. We have acquired intellectual assets that will complement and expand on our existing robotic picking proprietary knowledge and competencies. • To support continued, rapid, innovation we have significantly increased the numbers of people working in those specialised innovating teams focused on deploying our technology or knowhow towards medium to long term opportunities for value creation.• We have increased the size of the IP team to enable faster protection of this increased level of innovation.PatentsProtecting our intellectual property is key to ensuring our partner companies continue to benefit from our investment in development of our existing systems and expansion of our offerings. The exclusivity we are able to offer our partners is underpinned by our IP portfolio of registered and unregistered rights. As our engineering and technology teams have grown, our IP team has grown to ensure all aspects of Utilising Knowledge Risks• Innovation by third parties exceeds our own and offers improved solutions for end-to-end e-commerce fulfilment of groceries.• Failure to protect our proprietary technology lowers barrier to entry for third parties.• Failure to ensure freedom of operation of our technology without infringing a third party’s IP.➔ See further our Principal Risks on pages 64 to 67 and the Financial Review on pages 50 to 58our developments, whether within our core technology areas or in associated verticals or investment areas, are protected. Members of our IP team are embedded within the engineering and technology functions to ensure that IP generated, whether from research and development in core areas or blue-sky disruptive activities, is protected to ensure future competitiveness. Additionally, these IP team members ensure that commercial IP protection is in place in all collaborative agreements, whether with third party suppliers, academic institutions or other collaborators.Our intellectual property strategy creates a web of protection to ensure our technology remains unique in the marketplace. ProgressWe now hold 292 granted patents across 42 innovation families, a further 584 patent applications remain pending. 137 separate innovations are protected by one or more granted patents or patent applications.StrategyContinued46Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 46Ocado-Annual-Report-2020-Strategic.indd 4609/02/2021 09:17:1009/02/2021 09:17:10Back to contents Key Performance Indicators
Revenue A (Group) (£m)
Revenue A (Retail) (£m)
2
3
3
,
2
7
5
7
,
1
9
9
5
,
1
5
5
4
,
1
1
7
2
,
1
9
8
1
,
2
8
1
6
,
1
7
6
4
,
1
6
4
3
,
1
2
7
1
,
1
Revenue A (UK Solutions &
Logistics) (£m)
4
5
6
6
7
5
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4
5
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16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
Why we use this measure
Why we use this measure
Why we use this measure
Measures growth at Group level
reflecting revenue from the Ocado
Retail joint venture, and our UK and
International Solutions businesses.
Measures revenue growth of the
Ocado Retail joint venture.
Measures revenue growth of our UK
Solutions & Logistics business.
2020 performance
2020 performance
2020 performance
32.7% vs 2019
Strategic link
35.3% vs 2019
Strategic link
13.6% vs 2019
Strategic link
Revenue A (International
Solutions) (£m)
EBITDA A (Group) (£m)
EBITDA A (Retail) (£m)
7
1
4
8
7
7
3
7
0
6
3
4
9
4
1
1
4
0
3
11
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
Why we use this measure
Why we use this measure
Why we use this measure
Measures revenue growth of our
International Solutions business.
2020 performance
Measures operating profitability at
a Group level reflecting the Ocado
Retail joint venture and our UK and
International Solutions segments.
– vs 2019
Strategic link
2020 performance
66.8% vs 2019
Strategic link
Measures operating profitability of the
Ocado Retail joint venture.
2020 performance
264.5% vs 2019
Strategic link
A
See Alternative Performance Measures on pages 293 and 294.
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30029 9 February 2021 9:14 am Proof ShellOur Intellectual PropertySince 2000, Ocado has developed and scaled an online grocery sales platform, solving the challenge of reliably and accurately delivering a world-beating selection of groceries to customers across multiple temperature regimes in convenient time slots. 2020 saw the expansion of our proprietary technology to not only serve customers in the UK but those of Casino in France and Sobeys in Canada. Our best-in-class, end-to-end e-commerce, fulfilment and logistics solution is based on two decades of knowledge and experience in the online grocery sector. Our proprietary technology continues to be developed, expanding potential offerings to retailers around the globe and enabling our partners to be competitive in challenging situations such as the unexpected pandemic. Underlying these developments is a network of proprietary rights protecting our investments and ensuring our partner companies have unrivalled access to the technology required to enhance their offering in their relevant markets. Additionally, IP and innovation assets acquired during the course of this journey expands the reach of our system and protects our market-leading technology for the future.Progress• We completed the re-engineering of our bot and commissioned the next generation version on our mini-CFC site in Bristol, UK in late 2020. The re-engineered bot is protected by a suite of registered and unregistered IP rights, thereby ensuring the learnings from our previous generation bots continue to be exclusively available to Ocado partner companies. • In November 2020 we announced the acquisition of two robotic picking companies, completed after year-end. We have acquired intellectual assets that will complement and expand on our existing robotic picking proprietary knowledge and competencies. • To support continued, rapid, innovation we have significantly increased the numbers of people working in those specialised innovating teams focused on deploying our technology or knowhow towards medium to long term opportunities for value creation.• We have increased the size of the IP team to enable faster protection of this increased level of innovation.PatentsProtecting our intellectual property is key to ensuring our partner companies continue to benefit from our investment in development of our existing systems and expansion of our offerings. The exclusivity we are able to offer our partners is underpinned by our IP portfolio of registered and unregistered rights. As our engineering and technology teams have grown, our IP team has grown to ensure all aspects of Utilising Knowledge Risks• Innovation by third parties exceeds our own and offers improved solutions for end-to-end e-commerce fulfilment of groceries.• Failure to protect our proprietary technology lowers barrier to entry for third parties.• Failure to ensure freedom of operation of our technology without infringing a third party’s IP.➔ See further our Principal Risks on pages 64 to 67 and the Financial Review on pages 50 to 58our developments, whether within our core technology areas or in associated verticals or investment areas, are protected. Members of our IP team are embedded within the engineering and technology functions to ensure that IP generated, whether from research and development in core areas or blue-sky disruptive activities, is protected to ensure future competitiveness. Additionally, these IP team members ensure that commercial IP protection is in place in all collaborative agreements, whether with third party suppliers, academic institutions or other collaborators.Our intellectual property strategy creates a web of protection to ensure our technology remains unique in the marketplace. ProgressWe now hold 292 granted patents across 42 innovation families, a further 584 patent applications remain pending. 137 separate innovations are protected by one or more granted patents or patent applications.StrategyContinued46Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 46Ocado-Annual-Report-2020-Strategic.indd 4609/02/2021 09:17:1009/02/2021 09:17:10Back to contents
Key Performance Indicators
Continued
EBITDA A (UK Solutions &
Logistics) (£m)
EBITDA A (International
Solutions) (£m)
Profit/(Loss) Before Tax
(Group) (£m)
2
7
8
6
4
4
)
8
2
(
)
5
5
(
)
3
8
(
2
1
)
0
1
)(
4
4
(
)
5
1
2
(
)
0
.
4
4
(
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
Why we use this measure
Why we use this measure
Why we use this measure
Measures operating profitability of our
UK Solutions & Logistics business.
Measures operating profitability of our
International Solutions business.
2020 performance
(38.4)% vs 2019
Strategic link
2020 performance
(51.7)% vs 2019
Strategic link
Measures profitability at Group level
reflecting the profit of the Ocado
Retail joint venture and our UK and
International Solutions business.
2020 performance
81.9% vs 2019
Strategic link
Net Assets (Group) £m
Mature CFC Efficiency (UPH)*
Active Customer Base
7
3
8
,
1
7
5
0
,
1
6
5
5
9
4
2
8
4
2
0
6
1
4
6
1
3
6
1
1
6
1
9
6
1
0
0
0
,
5
9
7
0
0
0
,
1
2
7
0
0
0
,
0
8
6
0
0
0
,
5
4
6
0
0
0
,
0
8
5
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
Why we use this measure
Why we use this measure
Why we use this measure
Measures the surplus between
total assets and total liabilities
at Group level.
2020 performance
74.9% vs 2019
Strategic link
Measures CFC operational efficiency
2020 performance
5.0% vs 2019
Strategic link
• Change of basis to include Erith CFC.
UPH only includes UK sites
Measures growth in our core
customers who shopped in the last 12
weeks.
2020 performance
(14.5)% vs 2019
Strategic link
A
See Alternative Performance Measures on pages 293 and 294.
48
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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T
R
A
T
E
G
I
C
R
E
P
O
R
T
Key Performance Indicators
Continued
EBITDA A (UK Solutions &
EBITDA A (International
Profit/(Loss) Before Tax
Logistics) (£m)
Solutions) (£m)
(Group) (£m)
2
7
8
6
4
4
)
8
2
(
)
5
5
(
)
3
8
(
2
1
)
0
1
)(
4
4
(
)
5
1
2
(
)
0
.
4
4
(
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
Why we use this measure
Why we use this measure
Why we use this measure
Measures operating profitability of our
Measures operating profitability of our
Measures profitability at Group level
UK Solutions & Logistics business.
International Solutions business.
reflecting the profit of the Ocado
2020 performance
(38.4)% vs 2019
Strategic link
2020 performance
(51.7)% vs 2019
Strategic link
Retail joint venture and our UK and
International Solutions business.
2020 performance
81.9% vs 2019
Strategic link
7
3
8
,
1
7
5
0
,
1
6
5
5
9
4
2
8
4
2
Measures the surplus between
total assets and total liabilities
at Group level.
2020 performance
74.9% vs 2019
Strategic link
Why we use this measure
Why we use this measure
Why we use this measure
Measures CFC operational efficiency
Measures growth in our core
customers who shopped in the last 12
2020 performance
5.0% vs 2019
Strategic link
• Change of basis to include Erith CFC.
UPH only includes UK sites
weeks.
2020 performance
(14.5)% vs 2019
Strategic link
A
See Alternative Performance Measures on pages 293 and 294.
Net Assets (Group) £m
Mature CFC Efficiency (UPH)*
Active Customer Base
Number of Ocado Solutions
Partnerships Signed to Date
Fees Invoiced from
International Partners (£m)
0
6
1
4
6
1
3
6
1
1
6
1
9
6
1
0
0
0
,
5
9
7
0
0
0
,
1
2
7
0
0
0
,
0
8
6
0
0
0
,
5
4
6
0
0
0
,
0
8
5
9
9
6
3
1
4
2
1
1
8
9
5
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
Why we use this measure
Why we use this measure
Measures partner growth within our
Solution business.
Measures growth in total fees invoiced
in the year from Solutions partners.
2020 performance
2020 performance
– vs 2019
Strategic link
52.2% vs 2019
Strategic link
48
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Financial Review
“ The Group achieved significant revenue
growth, reflecting an acceleration in the
rate of demand for online grocery. We also
continued our good progress rolling out new
CFCs for our partners, both in the UK and
internationally.”
We have delivered a strong performance this year. The Group
achieved significant revenue growth in the UK Retail business, due to
an acceleration in the rate of demand for online grocery in response
to the Covid-19 pandemic. At the same time we have continued to
transform our business to support future growth: we continued our
good progress rolling out new CFCs for our partners, both in the
UK and internationally; we have made significant investments in
our International Solutions business, strengthening our teams and
investing in technology; we announced the acquisition of two leading
robotics businesses in the US, to accelerate the commercial delivery
of robotic solutions; and we have raised a total £1.6 billion in the
capital markets, to finance future growth. This supports our ability to
capitalise at pace on the structural growth opportunities available in
global online grocery adoption.
Group Highlights
• Revenue increased 32.7% to £2,331.8 million (2019: £1,756.6
million), reflecting an acceleration in demand in UK online grocery
in response to Covid-19.
• Gross profit increased 36.3%, ahead of the growth in Revenue,
with Retail gross margin up 130bps mainly due to changes in the
product mix.
• Group EBITDA A of £73.1 million (2019: £43.3 million), with a
significant increase in Retail EBITDA A to £148.5 million (2019:
£40.6m) offset by increased investment in both the UK and
International Solutions business to support future growth.
• Statutory loss before tax of £(44.0) million (2019: £(214.5) million)
including depreciation, amortisation, and impairment charges
of £168.9 million, and net exceptional income of £104.6 million
principally due to insurance income for the Andover CFC.
• Strong balance sheet, with cash and other financial assets of
£2.1 billion as at the end of the year, following the £600 million
convertible bond issue in December 2019, and £1 billion
convertible bond and share placing in June 2020.
• Post year-end completion of the acquisition of Kindred Systems
and Haddington Dynamics Inc. for consideration of $260 million
and $25 million respectively (subject to closing adjustments).
Revenue (£m)
EBITDA A (£m)
2
3
3
,
2
4
8
7
7
3
7
0
6
3
4
7
5
7
,
1
9
9
5
,
1
5
5
4
,
1
1
7
2
,
1
Profit/(Loss) Before Tax and
Exceptional Items A (£m)
2
1
)
0
1
)(
4
4
(
)
5
1
2
(
)
0
.
4
4
(
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
A
See Alternative Performance Measures on pages 293 and 294.
50
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
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“ The Group achieved significant revenue
growth, reflecting an acceleration in the
rate of demand for online grocery. We also
continued our good progress rolling out new
CFCs for our partners, both in the UK and
internationally.”
We have delivered a strong performance this year. The Group
achieved significant revenue growth in the UK Retail business, due to
an acceleration in the rate of demand for online grocery in response
to the Covid-19 pandemic. At the same time we have continued to
transform our business to support future growth: we continued our
good progress rolling out new CFCs for our partners, both in the
UK and internationally; we have made significant investments in
our International Solutions business, strengthening our teams and
investing in technology; we announced the acquisition of two leading
robotics businesses in the US, to accelerate the commercial delivery
of robotic solutions; and we have raised a total £1.6 billion in the
capital markets, to finance future growth. This supports our ability to
capitalise at pace on the structural growth opportunities available in
global online grocery adoption.
Group Highlights
• Revenue increased 32.7% to £2,331.8 million (2019: £1,756.6
million), reflecting an acceleration in demand in UK online grocery
in response to Covid-19.
• Gross profit increased 36.3%, ahead of the growth in Revenue,
with Retail gross margin up 130bps mainly due to changes in the
product mix.
• Group EBITDA A of £73.1 million (2019: £43.3 million), with a
significant increase in Retail EBITDA A to £148.5 million (2019:
£40.6m) offset by increased investment in both the UK and
International Solutions business to support future growth.
• Statutory loss before tax of £(44.0) million (2019: £(214.5) million)
including depreciation, amortisation, and impairment charges
of £168.9 million, and net exceptional income of £104.6 million
principally due to insurance income for the Andover CFC.
• Strong balance sheet, with cash and other financial assets of
£2.1 billion as at the end of the year, following the £600 million
convertible bond issue in December 2019, and £1 billion
convertible bond and share placing in June 2020.
• Post year-end completion of the acquisition of Kindred Systems
and Haddington Dynamics Inc. for consideration of $260 million
and $25 million respectively (subject to closing adjustments).
Revenue (£m)
EBITDA A (£m)
2
3
3
,
2
4
8
7
7
3
7
0
6
3
4
7
5
7
,
1
9
9
5
,
1
5
5
4
,
1
1
7
2
,
1
Profit/(Loss) Before Tax and
Exceptional Items A (£m)
2
1
)
0
1
)(
4
4
(
)
5
1
2
(
)
0
.
4
4
(
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
A
See Alternative Performance Measures on pages 293 and 294.
FY 2020
FY 2019
Pre-
Exceptional
Exceptional
Items
Total
Statutory
Reported
Pre-
Exceptional
Exceptional
Items
Total
Statutory
Reported
Pre-
Exceptional
Growth
2,331.8
813.9
87.6
–
–
103.9
2,331.8
1,756.6
813.9
191.5
597.3
83.9
-
(5.5)
23.8
1,756.6
591.8
107.7
32.7%
36.3%
4.4%
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
(827.5)
0.7
(826.8)
(638.6)
(12.3)
(650.9)
29.6%
(0.9)
73.1
(168.9)
–
(52.8)
(148.6)
–
104.6
–
–
–
104.6
(0.9)
177.7
0.7
43.3
–
6.0
0.7
49.3
–
68.8%
(168.9)
(136.1)
(99.0)
(235.1)
24.1%
––
(52.8)
(44.0)
(1.1)
(27.6)
(120.4)
(1.1)
–
(94.1)
(27.6)
(214.5)
–
91.3%
23.4%
£ millions
Revenue(1)
Gross profit
Other income
Distribution and administrative
costs
Share of results from joint
ventures and associates(2)
EBITDA A
Depreciation, amortisation and
impairment
Loss on disposal of subsidiary
Net Finance costs
(Loss) before tax
(1) Revenue is online sales (net of returns) including charges for delivery but excluding relevant vouchers/offers and value added tax. The recharge of costs and associated fees to our UK
Solutions clients and International Solutions clients are also included in revenue with the exception of recharges to Ocado Retail which are eliminated on consolidation.
(2) Share of results from joint ventures relates to joint ventures where the Group does not exercise control such as MHE JVCo and Infinite Acres Holdings BV. The Ocado Retail joint
venture, over which the Group exercises control, is not included in this category as its results are fully consolidated.
The commentary is on a pre-exceptional basis to aid understanding of
underlying performance of the business.
Group revenue for the period increased by 32.7% to £2,331.8 million in
comparison to FY 2019 revenue of £1,756.6 million. This was primarily
driven by a 35.3% increase in Retail revenue, reflecting increased
demand driven by Covid-19 restrictions, with a £31 increase in the
average basket value from £106 to £137. The Group also began
to recognise revenue under IFRS 15 in its International Solutions
business following the successful commencement of operations at
the first two international CFCs in Toronto and Paris, with reported
revenue of £16.6 million. Total invoiced fees across all International
Solutions partners were £123.9 million, an increase of 52.2%
compared to the prior period. Cumulative fees not yet recognised as
revenue at the end of the period stood at £256 million.
Gross profit grew strongly, particularly in the second half of the period,
principally due to the increase in revenue in UK Retail and change
in product mix. Other income grew at a lower rate than revenue, at
4.4% to £87.6 million, due to a lower rate of growth in media income
compared to overall Retail revenue, and primarily relating to changes
in product range implemented due to the additional demand caused
by Covid-19.
EBITDA A for the period was £73.1 million (2019: £43.3 million). The
benefit of higher revenues and operational efficiencies in the UK
Retail business was offset by the increased investment in areas to
support our platform growth, including additional headcount to
support our international relationships, and technology resources
to help scale and improve the platform and infrastructure needed to
support our UK and International business. In addition we incurred
A
See Alternative Performance Measures on pages 293 and 294.
higher Covid-19 related costs such as frontline worker bonuses and
additional safety measures, received lower fee income from Morrisons
due to a revised agreement which temporarily releases Erith capacity
following the Andover fire, and incurred higher management
incentive, FX and other acquisition related costs.
Depreciation, amortisation and impairment increased by 24.1% to
£168.9 million, primarily due to an increase in amortisation costs
relating to our investment and rollout of OSP software.
Net finance costs increased from £27.6 million to £52.8 million,
primarily due to increased interest expense as a result of the £600
million unsecured convertible bond issued in December 2019, and
the £350 million unsecured convertible bond issued in June 2020. The
majority of the increase year-on-year was due to non-cash accounting
charges for these instruments. Furthermore, the Group terminated the
existing Revolving Credit Facility (“RCF”) which resulted in the release
of previously capitalised finance costs.
As a result of the above, and exceptional items of £104.6 million
primarily relating to insurance proceeds from the Andover CFC, the
statutory loss before tax for the period was £(44.0) million (2019: loss
of £(214.5) million).
Trading Review by Segment
Segment revenue and Segment EBITDA A are shown below.
Consistent with the prior period, the Group has three reportable
trading segments, which reflect the structure of the Group following
the sale of 50% of Ocado Retail to Marks and Spencer Group
plc (“M&S”). These are: Retail, UK Solutions and Logistics, and
International Solutions.
50
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Financial Review
Continued
In the second half of the year, a detailed review of Group
administration costs was undertaken to assess how Group Operations
support both UK and International segments in light of the significant
investments made to support future platform growth across the
Group. This has resulted in the re-allocation of certain administrative
costs between UK, International and Other segments. FY 2019 results
for these segments have therefore been re-presented to ensure
comparability year-on-year, in addition to the restatement of segment
EBITDA A reported at the half year, relating to the re-presentation
of leases under IFRS 16. There is no impact from these changes on
overall Group EBITDA A for FY 2019.
Retail
Revenue
FY 2020
£million
FY 2019
£million
2,188.6
1,618.1
Gross profit and other income
749.0
Distribution costs(1)
(491.8)
Marketing (non-voucher)
costs
Other administrative costs(1)
EBITDA A (2)
Effect of IFRS 16
(22.1)
(86.6)
148.5
22.8
532.6
(417.3)
(20.0)
(54.7)
40.6
19.5
Growth
35.3%
40.6%
17.9%
10.5%
58.3%
265.8%
(1) Distribution and other administrative costs exclude depreciation, amortisation and
impairment
(2) EBITDA A does not include the impact of exceptional items
FY 2020 was a landmark year for Ocado Retail with revenue* growing
by 35.3% year on year to £2,188.6 million and EBITDA A expanding
from £40.6 million to £148.5 million.
Revenue
Retail Revenue grew by 35.3%, driven by strong customer demand
and enabled by a significant increase in the peak day capacity of
all three mature CFCs. Customer behaviour shifted significantly
following the introduction of Covid-19 restrictions and this allowed
Ocado Retail to spread customer orders more evenly over the whole
week compared to the normal peaks and troughs. The change
in the demand shape of the week combined with an increase in
peak day capacity led to volume growth of 28.1% year-on-year. An
increase in both the average units per basket and a small increase
in the average selling price led the average basket value to increase
by £31 to £137 (2019: £106). Covid-19 has put extra pressure on our
suppliers’ supply chains resulting in lower product availability and
higher levels of substitutions during FY 2020. Substitutions are now
back to normal levels and product availability is expected to return
to normal levels once the Covid-19 related restrictions are eased.
Due to unprecedented demand, higher frequency from our most
loyal customers and significantly increased basket size, Ocado Retail
deployed increased capacity to serve a smaller number of active
customers, with new customer acquisition activity paused, resulting
in a decline in active customers over the year from 795,000 to 680,000.
Increased CFC capacity in FY 2021 will provide the opportunity to
serve more customers.
A
See Alternative Performance Measures on pages 293 and 294.
Gross Profit and Other Income
Gross profit and other income increased by 40.6% to £749.0 million,
driven by higher revenue and improved product mix, together with
the benefit of the termination of the Waitrose Sourcing contract in
August 2020 and reduction in stock wastage. Other income grew year
on year but slightly less than the rate of sales growth as we made
certain product range changes to maximise our capacity during the
pandemic.
Distribution and Administrative Costs
CFC
Trunking and Delivery
Other operating costs
Total Distribution costs
FY 2020
£million
FY 2019
£million
158.0
235.6
98.2
491.8
135.7
195.5
86.1
417.3
Growth
16.4%
20.5%
14.1%
17.9%
Distribution costs primarily consist of fulfilment and delivery
operation costs which are provided to Ocado Retail by the UK
Logistics operation of the Ocado Group.
CFC costs increased by 16.4% to £158.0 million, significantly less
than the revenue growth due to improvements in productivity
and economies of scale which more than offset Covid-19 related
additional costs.
Trunking and delivery costs increased by 20.5% to £235.6 million,
which was also below the revenue growth primarily due to the growth
in average basket sizes. The larger basket sizes meant that the average
number of customer orders delivered by each van in a week fell to 184
(2019: 196). However, the larger average basket size meant that units
delivered by each van each week increased. Trunking and delivery
also incurred Covid-19 related additional costs but overall the total
cost per item delivered reduced by (9.4)% year-on-year.
Other operating costs of £98.2 million (2019: £86.1 million) include the
costs associated with the provision of the OSP and Logistics services
to Ocado Retail by UK Solutions & Logistics, in addition to payment
processing costs.
Marketing costs (excluding voucher spend) increased by £2.1 million
to £22.1 million, as we invested in preparation of our brand relaunch
in FY 2021, but marketing costs excluding vouchers declined as a
percentage of Retail revenue to 1.0% (2019: 1.2%).
Other administrative costs increased by £31.9 million to £86.6
million to support underlying business growth. This includes the
full year effect of Board and other head office costs following the
establishment of Ocado Retail as a stand-alone business unit in the
prior period. This included strengthening the buying team to source
more products directly from suppliers following the termination of
the Waitrose sourcing agreement. Board costs include the creation of
an annual bonus plan and incentive scheme for senior management
linked to long-term value creation. An accounting charge is required
each year based on an estimate of the current business value.
Payments will be assessed over the life of the scheme, with the first
measurement date for any potential vesting in FY 2022.
52
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
In the second half of the year, a detailed review of Group
Gross Profit and Other Income
administration costs was undertaken to assess how Group Operations
support both UK and International segments in light of the significant
investments made to support future platform growth across the
Group. This has resulted in the re-allocation of certain administrative
costs between UK, International and Other segments. FY 2019 results
for these segments have therefore been re-presented to ensure
comparability year-on-year, in addition to the restatement of segment
EBITDA A reported at the half year, relating to the re-presentation
of leases under IFRS 16. There is no impact from these changes on
overall Group EBITDA A for FY 2019.
Retail
Revenue
FY 2020
£million
FY 2019
£million
2,188.6
1,618.1
532.6
(417.3)
(20.0)
(54.7)
40.6
19.5
(22.1)
(86.6)
148.5
22.8
Growth
35.3%
40.6%
17.9%
10.5%
58.3%
265.8%
Gross profit and other income
749.0
Distribution costs(1)
(491.8)
Marketing (non-voucher)
costs
Other administrative costs(1)
EBITDA A (2)
Effect of IFRS 16
impairment
(1) Distribution and other administrative costs exclude depreciation, amortisation and
(2) EBITDA A does not include the impact of exceptional items
FY 2020 was a landmark year for Ocado Retail with revenue* growing
by 35.3% year on year to £2,188.6 million and EBITDA A expanding
from £40.6 million to £148.5 million.
Revenue
Retail Revenue grew by 35.3%, driven by strong customer demand
Gross profit and other income increased by 40.6% to £749.0 million,
driven by higher revenue and improved product mix, together with
the benefit of the termination of the Waitrose Sourcing contract in
August 2020 and reduction in stock wastage. Other income grew year
on year but slightly less than the rate of sales growth as we made
certain product range changes to maximise our capacity during the
pandemic.
Distribution and Administrative Costs
CFC
Trunking and Delivery
Other operating costs
Total Distribution costs
FY 2020
£million
FY 2019
£million
158.0
235.6
98.2
491.8
135.7
195.5
86.1
417.3
Growth
16.4%
20.5%
14.1%
17.9%
Distribution costs primarily consist of fulfilment and delivery
operation costs which are provided to Ocado Retail by the UK
Logistics operation of the Ocado Group.
CFC costs increased by 16.4% to £158.0 million, significantly less
than the revenue growth due to improvements in productivity
and economies of scale which more than offset Covid-19 related
additional costs.
Trunking and delivery costs increased by 20.5% to £235.6 million,
which was also below the revenue growth primarily due to the growth
in average basket sizes. The larger basket sizes meant that the average
number of customer orders delivered by each van in a week fell to 184
(2019: 196). However, the larger average basket size meant that units
delivered by each van each week increased. Trunking and delivery
also incurred Covid-19 related additional costs but overall the total
cost per item delivered reduced by (9.4)% year-on-year.
and enabled by a significant increase in the peak day capacity of
Other operating costs of £98.2 million (2019: £86.1 million) include the
all three mature CFCs. Customer behaviour shifted significantly
costs associated with the provision of the OSP and Logistics services
following the introduction of Covid-19 restrictions and this allowed
to Ocado Retail by UK Solutions & Logistics, in addition to payment
Ocado Retail to spread customer orders more evenly over the whole
processing costs.
week compared to the normal peaks and troughs. The change
in the demand shape of the week combined with an increase in
peak day capacity led to volume growth of 28.1% year-on-year. An
increase in both the average units per basket and a small increase
in the average selling price led the average basket value to increase
Marketing costs (excluding voucher spend) increased by £2.1 million
to £22.1 million, as we invested in preparation of our brand relaunch
in FY 2021, but marketing costs excluding vouchers declined as a
percentage of Retail revenue to 1.0% (2019: 1.2%).
by £31 to £137 (2019: £106). Covid-19 has put extra pressure on our
Other administrative costs increased by £31.9 million to £86.6
suppliers’ supply chains resulting in lower product availability and
million to support underlying business growth. This includes the
higher levels of substitutions during FY 2020. Substitutions are now
full year effect of Board and other head office costs following the
back to normal levels and product availability is expected to return
establishment of Ocado Retail as a stand-alone business unit in the
to normal levels once the Covid-19 related restrictions are eased.
prior period. This included strengthening the buying team to source
Due to unprecedented demand, higher frequency from our most
more products directly from suppliers following the termination of
loyal customers and significantly increased basket size, Ocado Retail
the Waitrose sourcing agreement. Board costs include the creation of
deployed increased capacity to serve a smaller number of active
an annual bonus plan and incentive scheme for senior management
customers, with new customer acquisition activity paused, resulting
linked to long-term value creation. An accounting charge is required
in a decline in active customers over the year from 795,000 to 680,000.
each year based on an estimate of the current business value.
Increased CFC capacity in FY 2021 will provide the opportunity to
Payments will be assessed over the life of the scheme, with the first
serve more customers.
measurement date for any potential vesting in FY 2022.
Following the 50% sale of the Retail business to M&S, the UK Logistics
operation of the Ocado Group entered into a contract with Retail to
provide third party logistics services during FY 2019. Included within
the fees payable under this contract are a number of fees relating to the
use of fixed assets (‘capital recharges’). Under IFRS 16, certain fees are
classified as “lease” payments. Therefore, any income that UK Solutions
& Logistics receives for these are removed from EBITDA A and the
corresponding cost in Retail is also removed from EBITDA A . The total
value of these fees in FY 2020 was £8.7 million (2019: £8.5 million).
EBITDA A
EBITDA A for the Retail business was £148.5 million (2019: £40.6
million). Amounts recoverable under business interruption insurance
for Andover are included in Exceptional Income, and therefore are
excluded from the Retail segmental result.
UK Solutions & Logistics
Fee revenue
Cost recharges(1)
Revenue
Other Income and cost of
sales
Distribution costs(2)
Administrative costs(2)
EBITDA A
Effect of IFRS 16
FY 2020
£million
FY 2019(3)
£million
117.1
537.2
654.3
3.4
(544.4)
(68.9)
44.4
2.3
105.9
470.1
576.0
3.6
(458.0)
(49.5)
72.1
4.9
Growth
10.6%
14.3%
13.6%
(5.6)%
18.9%
39.2%
(38.4)%
(1) Cost recharges include cost recharges to Ocado Retail of £428.5 million which eliminate
on consolidation
(2) Distribution and administrative costs excludes depreciation, amortisation and
impairment
(3) Segment has been re-presented for FY 2019. For further details refer to note 2.1 of the
condensed financial statements
Revenue
Revenue from the UK Solutions & Logistics business increased by
£78.3 million to £654.3 million, an increase of 13.6%. This comprises
the recharge of relevant operational variable and fixed costs by the UK
Logistics operation to its UK partners Ocado Retail and Morrisons, as
well as fees charged to both partners for access to Ocado’s technology
platforms, capital recharges, management fees and research and
development. The increase in fees was due to the increase in CFC
capacity provided to Ocado Retail, partly offset by a loss of fees from
Morrisons as a result of the agreement to take back capacity at the
Erith CFC following the Andover fire until February 2021.
Other Income
Other income, net of cost of sales, was £3.4 million (2019: £3.6 million).
Other income primarily relates to rent received from Morrisons in
respect of Dordon CFC rent recharges.
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Distribution and Administrative Costs
Distribution and administrative costs grew by 20.8% to £613.3
million (2019: £507.5 million). These costs consist of fulfilment and
delivery operations costs which are recharged to Ocado Retail and
Morrisons; engineering and other support costs for the provision of
the contracted services, for which fees are charged; and an allocation
of technology and head office costs.
The volume throughput of the CFCs increased by 22.6% year on
year, with distribution costs increasing by £86.4 million to £544.4
million, an increase of 18.9%. Logistics related costs increased due to
higher volumes and additional Covid-19 related costs, offset by cost
efficiencies in both CFC and trunking and delivery operations as a
result of productivity improvements, and growth in capacity delivered
without the addition of new CFCs. Engineering costs increased
above the rate of volume growth as the majority of volume growth
took place in the Erith CFC, which currently has a higher cost as a
proportion of sales. Good progress was made to reduce costs at Erith
which reduced by 20% year on year as a proportion of sales.
Mature CFC (defined as Hatfield, Dordon and Erith CFCs) Units per
Hour (“UPH”) improved by 5.2% to 169.2 UPH (2019: 160.8), driven
mainly by improvements at Erith CFC.
Administrative costs grew by 39.2% to £68.9 million (2019: £49.5
million), primarily as a result of investment in additional headcount
and technology resources to support and improve the platform and
infrastructure needed for UK growth.
A
See Alternative Performance Measures on pages 293 and 294.
A
See Alternative Performance Measures on pages 293 and 294.
52
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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EBITDA A
Other Segment
EBITDA A from UK Solutions & Logistics activities was £44.4 million,
a decrease of £27.7 million, with the increase in fees from additional
capacity more than offset by the combination of reduced fee income
from Morrisons as a result of the agreement to take back capacity
following the Andover fire, together with the allocation of platform
development costs to the UK Solutions & Logistics segment. The value
of Morrisons fees which has been forgone forms part of the business
interruption insurance claim for Andover, but amounts recoverable
under this claim are included in Exceptional Income, and therefore
are excluded from the UK Solutions & Logistics segmental result.
International Solutions
Fees invoiced
Revenue(1)
Cost of sales
Distribution and
administrative costs(2)
EBITDA A
Effect of IFRS 16
FY 2020
£million
FY 2019(3)
£million
123.9
16.6
(7.0)
(92.9)
(83.3)
1.6
81.4
0.5
–
(55.4)
(54.9)
1.3
Growth
52.2%
–
–
67.7%
51.7%
(1) FY 2020 Revenue includes £7.0 million of equipment sales to a retail partner recognised
as revenue under IFRS 15. The impact on EBITDA is nil.
(2) Distribution and administrative costs excludes depreciation, amortisation and
impairment
(3) Segment has been re-presented for FY 2019. For further details refer to note 2.1 of the
condensed financial statements
Fees and Revenue
Fees invoiced amounted to £123.9 million (2019: £81.4 million), up 52.2%,
with growth driven by design fees across a number of clients, certain
upfront fees following the announcement of our new partnership with
Aeon, and fees associated with the commencement of operations for
Sobeys and Groupe Casino. Under IFRS15 revenue recognition, fees
relating to OSP are not recognised as revenue until a working solution
is delivered to the partner. In FY 2020 revenue recognised from the
International Solutions business increased due to the “Go live” during the
year of the first CFCs for Sobeys and Groupe Casino.
Distribution and Administrative Costs
Distribution and administrative costs primarily consist of the costs
of operating the technology platform and CFCs for our international
clients, other costs supporting our international partnership
agreements and the non-capitalised costs of employees who are
developing the OSP platform, such as research costs. These costs
grew year-on-year as a result of the increase in headcount to support
building further capabilities to sign future clients, increased people
and cloud costs to support existing international clients in launching
the CFCs, and further improvements in our platform.
EBITDA A
EBITDA A from our International Solutions activities was a loss of £(83.3)
million (2019: £(54.9) million), principally reflecting the increased
investment in our teams and technology to support our international
growth ambitions, and the support costs relating to new CFCs.
EBITDA A loss was £(36.5) million in the current period (2019 loss:
£(14.2) million). The “Other” segment represents revenue and costs
which do not relate to the other three segments. This includes Board
costs, the results of the Fabled business that was divested during
FY 2019 and the consolidated results of Jones Food Company. The
increase in costs is primarily due to an increase in share-based
senior management incentive charges, in part attributable to a
strong share price performance in FY 2020, together with net realised
foreign exchange losses of £(4.4) million, principally in respect of
FX movements on US Dollars purchased in preparation for the
acquisition of Kindred Solutions and Haddington Dynamics, and
acquisition related costs of £(3.5) million.
Exceptional Items
FY 2020
£million
FY 2019
£million
Andover CFC
Write off of property, plant and
equipment
Write off of intangible assets
Loss of inventory
Insurance reimbursement
Other exceptional costs
Total Andover exceptional
Disposal of Fabled
Set up costs for the joint venture with
Marks & Spencer
Litigation costs
Changes in fair value of contingent
consideration
Other exceptional items
Total exceptional items
Andover CFC
–
–
–
103.9
(4.0)
99.9
–
–
(2.7)
7.4
–
104.6
(96.9)
(2.1)
(5.5)
23.8
(7.3)
(88.0)
(1.1)
(3.4)
(1.3)
–
(0.3)
(94.1)
In February 2019 a fire destroyed the Andover CFC, including the
building, machinery and all inventory held on site. The Group has
comprehensive insurance and claims have been formally accepted
by the insurers.
Insurance Reimbursement
Insurance reimbursements of £103.9 million (2019: £23.8 million)
comprise reconstruction and other incremental costs of £59.2 million
(2019: £3.7 million) and reimbursement for business interruption
losses of £44.7 million (2019: £20.1 million). The reimbursement has
been presented within “other income”. A portion of reimbursements
has been received and recorded as deferred income. This will be
released to profit or loss in the future as the rebuilding costs of the
CFC are incurred.
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EBITDA A
Other Segment
EBITDA A from UK Solutions & Logistics activities was £44.4 million,
EBITDA A loss was £(36.5) million in the current period (2019 loss:
a decrease of £27.7 million, with the increase in fees from additional
£(14.2) million). The “Other” segment represents revenue and costs
capacity more than offset by the combination of reduced fee income
which do not relate to the other three segments. This includes Board
from Morrisons as a result of the agreement to take back capacity
costs, the results of the Fabled business that was divested during
following the Andover fire, together with the allocation of platform
FY 2019 and the consolidated results of Jones Food Company. The
development costs to the UK Solutions & Logistics segment. The value
increase in costs is primarily due to an increase in share-based
of Morrisons fees which has been forgone forms part of the business
senior management incentive charges, in part attributable to a
interruption insurance claim for Andover, but amounts recoverable
strong share price performance in FY 2020, together with net realised
under this claim are included in Exceptional Income, and therefore
foreign exchange losses of £(4.4) million, principally in respect of
are excluded from the UK Solutions & Logistics segmental result.
FX movements on US Dollars purchased in preparation for the
International Solutions
acquisition of Kindred Solutions and Haddington Dynamics, and
acquisition related costs of £(3.5) million.
FY 2020
£million
FY 2019(3)
£million
Exceptional Items
Fees invoiced
Revenue(1)
Cost of sales
Distribution and
administrative costs(2)
EBITDA A
Effect of IFRS 16
123.9
16.6
(7.0)
(92.9)
(83.3)
1.6
81.4
0.5
–
(55.4)
(54.9)
1.3
Growth
52.2%
–
–
67.7%
51.7%
(1) FY 2020 Revenue includes £7.0 million of equipment sales to a retail partner recognised
as revenue under IFRS 15. The impact on EBITDA is nil.
(2) Distribution and administrative costs excludes depreciation, amortisation and
(3) Segment has been re-presented for FY 2019. For further details refer to note 2.1 of the
impairment
condensed financial statements
Fees and Revenue
Andover CFC
Write off of property, plant and
equipment
Write off of intangible assets
Loss of inventory
Insurance reimbursement
Other exceptional costs
Total Andover exceptional
Disposal of Fabled
Set up costs for the joint venture with
Marks & Spencer
Litigation costs
Fees invoiced amounted to £123.9 million (2019: £81.4 million), up 52.2%,
with growth driven by design fees across a number of clients, certain
upfront fees following the announcement of our new partnership with
Changes in fair value of contingent
consideration
Aeon, and fees associated with the commencement of operations for
Other exceptional items
Sobeys and Groupe Casino. Under IFRS15 revenue recognition, fees
relating to OSP are not recognised as revenue until a working solution
Total exceptional items
is delivered to the partner. In FY 2020 revenue recognised from the
Andover CFC
International Solutions business increased due to the “Go live” during the
year of the first CFCs for Sobeys and Groupe Casino.
Distribution and Administrative Costs
Distribution and administrative costs primarily consist of the costs
by the insurers.
of operating the technology platform and CFCs for our international
Insurance Reimbursement
In February 2019 a fire destroyed the Andover CFC, including the
building, machinery and all inventory held on site. The Group has
comprehensive insurance and claims have been formally accepted
clients, other costs supporting our international partnership
agreements and the non-capitalised costs of employees who are
developing the OSP platform, such as research costs. These costs
grew year-on-year as a result of the increase in headcount to support
building further capabilities to sign future clients, increased people
and cloud costs to support existing international clients in launching
the CFCs, and further improvements in our platform.
Insurance reimbursements of £103.9 million (2019: £23.8 million)
comprise reconstruction and other incremental costs of £59.2 million
(2019: £3.7 million) and reimbursement for business interruption
losses of £44.7 million (2019: £20.1 million). The reimbursement has
been presented within “other income”. A portion of reimbursements
has been received and recorded as deferred income. This will be
released to profit or loss in the future as the rebuilding costs of the
CFC are incurred.
FY 2020
£million
FY 2019
£million
–
–
–
–
–
103.9
(4.0)
99.9
(2.7)
7.4
–
104.6
(96.9)
(2.1)
(5.5)
23.8
(7.3)
(88.0)
(1.1)
(3.4)
(1.3)
–
(0.3)
(94.1)
EBITDA A from our International Solutions activities was a loss of £(83.3)
million (2019: £(54.9) million), principally reflecting the increased
investment in our teams and technology to support our international
growth ambitions, and the support costs relating to new CFCs.
EBITDA A
54
The Group expects to receive further insurance reimbursement
relating to reconstruction costs and business interruption losses.
Claim negotiations are ongoing and the Group has not included any
future reimbursement since the likely insurance proceeds cannot yet
be quantified accurately. It is expected that income will be recognised
in the future as the costs of rebuilding the CFC and business
interruption losses are incurred.
Other Exceptional Costs
These include, but are not limited to, temporary costs of transporting
employees to other warehouses to work, professional fees relating to
the insurance claims process, reimbursement of employees’ personal
assets that were destroyed, and redundancy costs.
Litigation Costs
Exceptional litigation costs of £(2.7) million relate to legal proceedings
brought by the Group against Jonathan Faiman, Jonathan Hillary and
their company Project Today Holdings Limited in relation to theft and
unlawful use of the Group’s Intellectual Property, and patent infringement
complaints made against the Group by AutoStore AS (a Norwegian
company owned by the US private equity firm TH Lee) and two
subsequent counterclaims made by the Group against AutoStore AS.
Change in Fair Value of Contingent Consideration
In 2019 the Group sold Marie Claire Beauty Limited (trading as
“Fabled”) to Next plc and 50% of Ocado Retail Limited to Marks
and Spencer Group plc (“M&S”). Part of the consideration agreed
for these transactions was contingent on future events. The Group
holds contingent consideration at fair value through profit or loss,
and revalues it at each reporting date. This resulted in a gain of £7.4
million recognised in exceptional administrative expenses in FY 2020.
Covid-19
Covid-19 has impacted all aspects of the business, with the immediate
effects predominantly in the Ocado Retail and UK Solutions and
Logistics businesses. The Group considers the additional costs
incurred and revenues generated as being a fundamental part of
trading during the pandemic, reflecting the associated shifts in
customer behaviour and in working practices. All associated costs
have therefore been accounted for as pre-exceptional.
Whilst we have seen greater interest in our OSP platform as a way for
retailers to meet the global increase in demand for online grocery, we
have also had to work hard to adapt to new methods of engagement
with clients and prospects in light of the international travel
restrictions that have been in place during the year.
The Group has not taken advantage of any of the Covid-19 tax rebates
and other support measures offered by the UK Government or any
overseas Government.
Depreciation, Amortisation and Impairment
Total depreciation and amortisation costs were £168.9 million (2019:
£136.1 million), an increase of 24.1% year-on-year. The increase in
year-on-year costs is primarily due to an increase in amortisation
costs relating to our investment and rollout of OSP software.
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Net finance costs of £52.8 million increased from £27.6 million
in the prior period primarily due to interest expense on the two
unsecured Convertible Bonds issued during the year totalling £950m,
together with the release of previously capitalised interest costs
totalling £2.8 million relating to the RCF which was terminated in the
period. The vast majority of the movement primarily relates to the
accounting charge for these instruments and the impact of IFRS 16,
which are non-cash in nature, offset by finance income relating to
treasury deposits. The coupon paid in the year relating to these two
instruments was £2.7 million.
£0.5 million of interest costs have been capitalised in the period in
relation to the senior secured notes in accordance with the relevant
accounting standards (2019: £0.1 million).
Share of Result from Joint Ventures and Associates
The Group has accounted for the share of results from two joint
ventures; MHE JVCo Limited (“MHE JVCo”), a joint venture with
Morrisons, and Infinite Acres Holdings BV, a vertical farming company
jointly owned with 80 Acres Farm Inc. and Priva Holdings BV. MHE
JVCo holds Dordon CFC assets, which Ocado uses to service its
and Morrisons’ online business and is owned jointly by Ocado and
Morrisons. The Group share of MHE JVCo profit after tax in the period
amounted to £0.5 million (2019: £1.0 million). The Group’s interest
in Infinite Acres Holdings BV was acquired during FY 2019, and
contributed a loss of £(0.9) million to the Group’s results in the period
(2019: £(0.1) million).
Loss Before Tax
Loss before tax for the period was £(44.0) million (2019: loss of
£(214.5) million).
Annual Report and Accounts Ocado Group plc
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Financial Review
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Taxation
The Group’s reported tax charge for the period was £25.6 million.
This charge reflects corporation tax payable of £18.3 million, resulting
from the increase in profitability in the Retail business after utilising
all their respective carried forward tax losses. A deferred tax charge of
£6.6 million was recognised in the period representing the expected
future utilisation of UK tax losses and capital allowances. At the end
of the period, the Group had £407.4 million (2019: £284.7 million) of
unutilised carried forward tax losses.
Dividend
During the period, the Group did not declare a dividend (2019: nil).
Loss Per Share
Loss and diluted loss per share were (17.55)p (2019: (30.63)p).
Subsequent Events
Acquisitions
On 2 November 2020, the Group announced that it had agreed to
acquire the entire share capital of two companies, Kindred Systems
Inc. (“Kindred Systems”) and Haddington Dynamics Inc. (“Haddington
Dynamics”) for consideration of $260 million and $25 million
respectively (subject to closing adjustments). The acquisition of
Kindred Systems was completed on 15 December 2020, following the
satisfactory completion of closing conditions, including US regulatory
approvals. The acquisition of Haddington Dynamics was completed
on 21 December 2020.
The consideration agreed for the acquisition of Kindred Systems
comprises $257 million of cash paid on completion, and deferred cash
of $3.5 million, payable on the third anniversary of the acquisition.
The consideration agreed for the acquisition of Haddington Dynamics
comprises $8 million of cash paid on completion, and 0.6 million
ordinary shares of Ocado Group plc issued on completion.
Acquisition-related costs of £3.5 million, including legal and
professional fees, have been recognised in the current period within
administrative expenses in the Consolidated Income Statement.
Disposal
The Group is confident in the merits of its defences and in the integrity
of its existing portfolio of IP, together with the disciplined approach
taken to build its capabilities and the OSP system over the last 20
years. It is taking appropriate action to defend against these claims
and to protect its own intellectual property rights.
The Group has subsequently brought two separate proceedings
against AutoStore in the United States - the first alleging patent
infringement and the second an antitrust claim. In the antitrust claim
Ocado has alleged, based on the available evidence, that four of the
five AutoStore patents on which AutoStore has based its case were
procured by fraud against the US Patent and Trademark office.
On 21 January 2021 an application to declare invalid Ocado’s
European patent for its Single Space Bot (part of the OSP system) was
rejected by the European Patent Office, and the patent was declared
to be novel, inventive and valid.
Legal and other costs have been incurred to defend against
AutoStore’s claims and to file the Group’s claims.
Given the early nature of this litigation, the Group does not believe
that any contingent asset or liability should be reflected.
UK Withdrawal from the European Union (“Brexit”)
The conclusion and successful ratification of a binding post-Brexit
Free Trade Agreement between the UK and EU occurred after the
Group’s financial year end. This substantially mitigated many of the
principal risks relating to Brexit for the Group. The impact of this
agreement will continue to be monitored and managed, including
risks to the supply chain. The Group has created buffers of certain
critical ambient and frozen products and engineering spare parts until
there is confidence that the supply chain risk has subsided; however it
is not possible to do this for fresh and short-life perishables.
Capital Expenditure
Capital expenditure totalled £525.6 million in FY 2020 (2019: £260.7
million) as we continued to develop new CFCs in both the UK and
with our International retail partners, and invest in technology to
support our OSP growth ambitions.
On 7 January 2021, Ocado Retail announced that it had agreed to
sell the entire share capital of its wholly-owned subsidiary, Speciality
Stores Limited trading as Fetch, to Paws Holdings Limited for an
undisclosed sum. The disposal was completed on 31 January 2021.
UK Operations
International CFCs
Litigation
On 1 October 2020, AutoStore Technology AS (“AutoStore”), a
Norwegian company owned by the US private equity firm TH Lee, filed
patent infringement claims against the Group in the High Court in
England, the United States International Trade Commission, and the
United States District Court for Eastern District of Virginia.
Technology, Fulfilment Development
and Innovation
Total capital expenditure(1), (2)
(excluding MHE JVCo)
Total capital expenditure(3)
(including MHE JVCo)
FY 2020
£million
202.4
190.6
FY 2019(4)
£million
88.8
65.2
129.2
105.9
522.2
259.9
525.6
260.7
AutoStore subsequently applied to the UK intellectual property office
claiming ownership of several Ocado patents relating to elements of
the OSP system.
(1) Capital expenditure includes tangible and intangible assets
(2) Capital expenditure excludes assets leased from MHE JVCo under lease liability
arrangements
(3) Capital expenditure includes MHE JVCo capital expenditure in 2020 of £3.4 million and
in 2019 of £0.8 million
(4) FY 2019 reflects changes in the allocation of certain expenditure between International
CFCs and Technology, Fulfilment Development and Innovation to support appropriate
comparison with FY 2020.
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Financial Review
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Taxation
The Group’s reported tax charge for the period was £25.6 million.
This charge reflects corporation tax payable of £18.3 million, resulting
from the increase in profitability in the Retail business after utilising
all their respective carried forward tax losses. A deferred tax charge of
£6.6 million was recognised in the period representing the expected
future utilisation of UK tax losses and capital allowances. At the end
of the period, the Group had £407.4 million (2019: £284.7 million) of
unutilised carried forward tax losses.
During the period, the Group did not declare a dividend (2019: nil).
Loss and diluted loss per share were (17.55)p (2019: (30.63)p).
Dividend
Loss Per Share
Subsequent Events
Acquisitions
On 2 November 2020, the Group announced that it had agreed to
acquire the entire share capital of two companies, Kindred Systems
Inc. (“Kindred Systems”) and Haddington Dynamics Inc. (“Haddington
Dynamics”) for consideration of $260 million and $25 million
respectively (subject to closing adjustments). The acquisition of
The Group is confident in the merits of its defences and in the integrity
of its existing portfolio of IP, together with the disciplined approach
taken to build its capabilities and the OSP system over the last 20
years. It is taking appropriate action to defend against these claims
and to protect its own intellectual property rights.
The Group has subsequently brought two separate proceedings
against AutoStore in the United States - the first alleging patent
infringement and the second an antitrust claim. In the antitrust claim
Ocado has alleged, based on the available evidence, that four of the
five AutoStore patents on which AutoStore has based its case were
procured by fraud against the US Patent and Trademark office.
On 21 January 2021 an application to declare invalid Ocado’s
European patent for its Single Space Bot (part of the OSP system) was
rejected by the European Patent Office, and the patent was declared
to be novel, inventive and valid.
Legal and other costs have been incurred to defend against
AutoStore’s claims and to file the Group’s claims.
Given the early nature of this litigation, the Group does not believe
that any contingent asset or liability should be reflected.
UK Withdrawal from the European Union (“Brexit”)
Kindred Systems was completed on 15 December 2020, following the
The conclusion and successful ratification of a binding post-Brexit
satisfactory completion of closing conditions, including US regulatory
Free Trade Agreement between the UK and EU occurred after the
approvals. The acquisition of Haddington Dynamics was completed
Group’s financial year end. This substantially mitigated many of the
on 21 December 2020.
The consideration agreed for the acquisition of Kindred Systems
comprises $257 million of cash paid on completion, and deferred cash
of $3.5 million, payable on the third anniversary of the acquisition.
The consideration agreed for the acquisition of Haddington Dynamics
comprises $8 million of cash paid on completion, and 0.6 million
principal risks relating to Brexit for the Group. The impact of this
agreement will continue to be monitored and managed, including
risks to the supply chain. The Group has created buffers of certain
critical ambient and frozen products and engineering spare parts until
there is confidence that the supply chain risk has subsided; however it
is not possible to do this for fresh and short-life perishables.
ordinary shares of Ocado Group plc issued on completion.
Capital Expenditure
Acquisition-related costs of £3.5 million, including legal and
professional fees, have been recognised in the current period within
administrative expenses in the Consolidated Income Statement.
Capital expenditure totalled £525.6 million in FY 2020 (2019: £260.7
million) as we continued to develop new CFCs in both the UK and
with our International retail partners, and invest in technology to
support our OSP growth ambitions.
On 7 January 2021, Ocado Retail announced that it had agreed to
sell the entire share capital of its wholly-owned subsidiary, Speciality
Stores Limited trading as Fetch, to Paws Holdings Limited for an
UK Operations
undisclosed sum. The disposal was completed on 31 January 2021.
International CFCs
Disposal
Litigation
Technology, Fulfilment Development
and Innovation
129.2
105.9
On 1 October 2020, AutoStore Technology AS (“AutoStore”), a
Norwegian company owned by the US private equity firm TH Lee, filed
patent infringement claims against the Group in the High Court in
Total capital expenditure(1), (2)
(excluding MHE JVCo)
England, the United States International Trade Commission, and the
Total capital expenditure(3)
United States District Court for Eastern District of Virginia.
(including MHE JVCo)
525.6
260.7
AutoStore subsequently applied to the UK intellectual property office
(1) Capital expenditure includes tangible and intangible assets
claiming ownership of several Ocado patents relating to elements of
(2) Capital expenditure excludes assets leased from MHE JVCo under lease liability
the OSP system.
FY 2020
£million
202.4
190.6
FY 2019(4)
£million
88.8
65.2
522.2
259.9
arrangements
in 2019 of £0.8 million
(3) Capital expenditure includes MHE JVCo capital expenditure in 2020 of £3.4 million and
(4) FY 2019 reflects changes in the allocation of certain expenditure between International
CFCs and Technology, Fulfilment Development and Innovation to support appropriate
comparison with FY 2020.
In FY 2020 we invested £135.5 million (2019: £8.2 million) in three new
UK CFCs in Bristol, Andover and Purfleet. These are expected to go
live during FY 2021 which will add approximately 40% more capacity
once the facilities ramp up to full operational throughput. Included
within UK Operations is capital expenditure of £55.2 million for the
Andover CFC which represents the gross cost to the Group. This is
offset by insurance proceeds received to date or in the future, which is
recognised as exceptional income as capital expenditure is incurred.
We have also continued the development work for Erith CFC with
£19.2 million (2019: £39.0 million) invested to support a significant
scale up in operations. The remaining £47.7 million of UK operational
spend (2019: £41.6 million) increased by £6.1 million compared
to the prior period and primarily relates to spend on UK Vehicles,
together with investment in our back office systems and the Group’s
transformation programme.
During the period we invested £190.6 million (2019: £65.2 million)
in developing international CFCs for our clients, with two now
operational, and two more expected to be operational in 2021. Of this
spend, £104.4 million related to the CFCs in North America.
Ocado continues to invest in the development of its own technology
and incurred expenditure of £129.2 million (2019: £105.9 million).
Technology and Engineering headcount now stands at over 2,200
(2019: 1,700 staff), reflecting the increased investment we are making
to support our strategic initiatives. The main areas of investment are
greater use of public and private cloud services, improvements in
the efficiency of our routing systems, enhancements to our customer
proposition, and support for the Erith CFC and existing partners’
future CFCs. In addition, investment in the development of fulfilment
equipment totalled £50.8 million (2019: £33.3 million), enhancing our
next generation fulfilment solutions for CFCs and delivery operations
for all our Solutions partners.
At 29 November 2020, capital commitments contracted, but not provided
for by the Group, amounted to £328.7 million (2019: £93.6 million).
“ Capital expenditure totalled £525.6 million
in 2020 as we continued to develop new CFCs
in both the UK and with our International
retail partners, and invest in technology
to support our OSP growth ambitions.”
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
Cash flow
EBITDA A (1)
Movement in contract liabilities
Other working capital movements
Other non-cash items
Finance costs paid
Insurance proceeds received
Cash settlement of share incentive plan
Taxation paid
Operating cash flow
Capital investment
Insurance proceeds received
Proceeds from disposal of 50% share
in ORL
Dividend from joint venture
Increase/(decrease) in net debt A /
finance obligations
Proceeds from share issues
Movement of short-term deposits
Other investing and financing activities
Movement in cash and cash
equivalents
FY 2020
£million
FY 2019
£million
73.1
97.5
32.1
26.9
(25.8)
40.0
–
(18.4)
225.4
(451.8)
25.0
(13.1)
7.7
881.6
657.5
(260.0)
(3.7)
43.3
79.5
(29.0)
(5.1)
(30.6)
73.8
(80.2)
–
51.7
(259.6)
–
558.3
15.6
(65.7)
59.5
43.5
(20.0)
1,068.6
383.3
(1) EBITDA A is stated before the impact of exceptional items
Operating cash flow increased by £173.7 million to £225.4 million,
primarily driven by a strong Retail trading performance and growth in
fees in the International Solutions business.
Cash received during the period in relation to our Solutions partners,
excluding VAT (shown in movement in “contract liabilities”),
amounted to £97.5 million (2019: £79.5 million). This reflects stage
payments from both Kroger and Aeon as their CFC build programs
gather momentum, and payments from Groupe Casino and Sobeys
reflecting the achievement of go-live with both of these partners in
the year.
A net decrease in other working capital of £32.1 million (2019: net
increase of £29.0 million), primarily reflects movements as a result
of the increase in retail trading volumes and the timing of cash
flows relating to our expanded capital programme, which overall
contributed a positive movement in cash flow. This gave rise to an
increase in trade receivables of £59.2 million (2019: £29.4 million),
offset by an increase in trade and other payables of £52.8 million, and
an increase in inventory accruals of £38.5 million (2019: (£7.6) million)
due to the increased trading volumes and differences in the invoicing
cycle following the end of the Waitrose Sourcing Contract. Supplier
promotional activity and amounts outstanding with payment service
providers have increased in line with increased volume.
56
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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See Alternative Performance Measures on pages 293 and 294.
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Financial Review
Continued
Insurance proceeds of £40 million were received in the period relating
to the Andover business interruption claim and a further £25 million
was received relating to rebuilding the Andover CFC and shown within
investment activities in the cash flow.
Cash outflow for capital expenditure in 2020 amounted to £451.8
million as the Group invests for future growth comprising investments
in new CFCs both in the UK and internationally, and development
of our next generation fulfilment solutions. In anticipation of the
acquisition of Kindred and Haddington that completed post period-
end, the Group entered into a contract to purchase USD to hedge
FX exposure prior to completion. The acquisitions completed
subsequent to the year-end, in December 2020.
Investing activities include a net outflow of £260 million relating to
placing treasury deposits, which are not defined as cash equivalent as
the deposit term is greater than 3 months. Other investing activities
included the initial Fabled disposal proceeds of £3.0 million inflow,
joint venture dividends received of £7.7 million, interest received of
£5.2 million and loans made to associated companies amounting to
£11.2 million outflow.
Net debt and financing cash flows for the period were an inflow of
£1,526.0 million. This included £935.5 million from the issuance of two
new unsecured convertible bonds, proceeds from the issue of £646.2
million of new shares, offset by financing fees and £53.4 million of
repayment of other lease liabilities. Other financing activities include
£10.8 million proceeds from the allotment of share options and an
outflow of £13.1 million on final completion of the disposal of the 50%
share of Ocado Retail.
Balance Sheet
The Group had cash and cash equivalents and other treasury deposits
totalling £2,076.8 million (2019: £750.6 million) at the end of the
period, comprising cash and cash equivalents of £1,706.8 million
(2019 (restated): £640.6 million), and other treasury deposits classified
as other financial assets of £370.0 million (2019: £110.0 million). Gross
debt at the period end was £1,405.2 million (2019: £608.2 million),
with net cash at the period-end of £671.6 million (2019: £142.4
million). The balance of other current financial assets comprises loans
to joint ventures and associates.
Trade and other receivables includes £73.8 million (2019: £61.9
million) of amounts due from suppliers in respect of commercial and
media income. Of this amount £56.3 million (2019: £43.1 million) is
within trade receivables, and £17.5 million (2019: £18.8 million) within
accrued income.
Trade and other payables includes deferred income of £16.3 million
in respect of insurance proceeds which have not yet been recognised
as exceptional income. Within contract liabilities, £299.3 million
(2019: £191.8 million) relates to Solutions contracts, payments
made for performance-based payments, or progress payments on
ongoing service delivery. Where invoicing is greater than the revenue
recognised at the end of a period, a contract liability is recognised for
the difference. Within accrued income, £3.8 million (2019: £1.1 million)
is due from our Solutions customers.
Deferred tax assets decreased by £3.6 million to a balance of £23.6
million at the end of the period, primarily due to the utilisation
of brought forward losses by the Ocado Retail business. This was
partially offset by the recognition of a deferred tax asset on short term
timing differences in the period. Deferred tax liabilities increased by
£3.0 million to a balance of £19.3 million (2019: £16.3 million).
Provisions in the period relating to the insurance reimbursement
decreased by £43.7 million to £5.5 million resulting in the
reimbursement being utilised in the period. An insurance
reimbursement asset and an equal provision of £5.5 million has been
recognised on the balance sheet for the obligation to restore the
original asset at the Andover CFC site under the leasehold agreement.
Included within property, plant and equipment and intangible assets of
£339.1 million (2019: £141.2 million) is capital work-in-progress where
depreciation has not yet commenced. The increase year-on-year relates
to international CFCs, predominantly with Kroger, and the various UK
CFCs that are in progress, specifically Bristol, Andover and Purfleet.
Increasing Financing Flexibility
In the period the Group issued senior unsecured convertible bonds
of £600 million (December 2019) with a coupon of 0.875% due in
2025, and subsequently raised £1.0 billion (June 2020) in additional
funds consisting of a £657 million share issue and issuance of senior
unsecured convertible bonds of £350 million with a coupon of 0.75%
due in 2027. Subsequent to both fundraisings, the Group terminated a
£100 million RCF which had been renegotiated in 2017 and which was
undrawn in the period.
We expect increased demand for the Ocado platform and the
fundraisings carried out in 2020 will allow the Group greater
opportunities to grow faster and capitalise on the worldwide shift
to online retail. The additional capital supports Ocado Solutions in
its ability to sign more clients, build more CFCs, build CFCs faster
and invest in innovation to ensure the Ocado platform stays at the
forefront in the sector. As our client commitments grow we expect
further funding will be required to deliver additional CFC investments.
Key Performance Indicators
The following table sets out a summary of selected unaudited
operating information for FY 2020 and FY 2019:
FY 2020
FY 2019
Variance
Average orders per week (000’s)
Average basket size (£s)(1)
Average deliveries per van per
week (DPV/week)
Mature CFC efficiency (units
per hour)(2)
Active customers(3) (000’s)
334
137
184
169
680
325
106
196
161
795
2.8%
29.2%
(6.1)%
5.0%
(14.5)%
Source: the information in the table above is derived from information extracted from
internal financial and operating reporting systems and is unaudited. Fabled is excluded
from both years.
(1) Average basket size refers to results of Ocado.com and Fetch.
(2) Measured as units dispatched from the CFC per variable hour worked by Hatfield CFC,
Dordon CFC and Erith CFC operational personnel. We consider the mature CFCs to
be Hatfield, Dordon and Erith. FY 2019 therefore now includes Erith UPH to enable
comparison.
(3) Customers are classified as active if they have shopped on ocado.com within the
previous 12 weeks
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Financial Review
Continued
Insurance proceeds of £40 million were received in the period relating
partially offset by the recognition of a deferred tax asset on short term
to the Andover business interruption claim and a further £25 million
timing differences in the period. Deferred tax liabilities increased by
was received relating to rebuilding the Andover CFC and shown within
£3.0 million to a balance of £19.3 million (2019: £16.3 million).
investment activities in the cash flow.
Provisions in the period relating to the insurance reimbursement
Cash outflow for capital expenditure in 2020 amounted to £451.8
decreased by £43.7 million to £5.5 million resulting in the
million as the Group invests for future growth comprising investments
reimbursement being utilised in the period. An insurance
in new CFCs both in the UK and internationally, and development
reimbursement asset and an equal provision of £5.5 million has been
of our next generation fulfilment solutions. In anticipation of the
recognised on the balance sheet for the obligation to restore the
acquisition of Kindred and Haddington that completed post period-
original asset at the Andover CFC site under the leasehold agreement.
end, the Group entered into a contract to purchase USD to hedge
FX exposure prior to completion. The acquisitions completed
subsequent to the year-end, in December 2020.
Included within property, plant and equipment and intangible assets of
£339.1 million (2019: £141.2 million) is capital work-in-progress where
depreciation has not yet commenced. The increase year-on-year relates
Investing activities include a net outflow of £260 million relating to
to international CFCs, predominantly with Kroger, and the various UK
placing treasury deposits, which are not defined as cash equivalent as
CFCs that are in progress, specifically Bristol, Andover and Purfleet.
the deposit term is greater than 3 months. Other investing activities
included the initial Fabled disposal proceeds of £3.0 million inflow,
joint venture dividends received of £7.7 million, interest received of
£5.2 million and loans made to associated companies amounting to
£11.2 million outflow.
Net debt and financing cash flows for the period were an inflow of
£1,526.0 million. This included £935.5 million from the issuance of two
new unsecured convertible bonds, proceeds from the issue of £646.2
million of new shares, offset by financing fees and £53.4 million of
repayment of other lease liabilities. Other financing activities include
£10.8 million proceeds from the allotment of share options and an
outflow of £13.1 million on final completion of the disposal of the 50%
share of Ocado Retail.
Balance Sheet
Increasing Financing Flexibility
In the period the Group issued senior unsecured convertible bonds
of £600 million (December 2019) with a coupon of 0.875% due in
2025, and subsequently raised £1.0 billion (June 2020) in additional
funds consisting of a £657 million share issue and issuance of senior
unsecured convertible bonds of £350 million with a coupon of 0.75%
due in 2027. Subsequent to both fundraisings, the Group terminated a
£100 million RCF which had been renegotiated in 2017 and which was
undrawn in the period.
We expect increased demand for the Ocado platform and the
fundraisings carried out in 2020 will allow the Group greater
opportunities to grow faster and capitalise on the worldwide shift
to online retail. The additional capital supports Ocado Solutions in
its ability to sign more clients, build more CFCs, build CFCs faster
The Group had cash and cash equivalents and other treasury deposits
and invest in innovation to ensure the Ocado platform stays at the
totalling £2,076.8 million (2019: £750.6 million) at the end of the
forefront in the sector. As our client commitments grow we expect
period, comprising cash and cash equivalents of £1,706.8 million
further funding will be required to deliver additional CFC investments.
(2019 (restated): £640.6 million), and other treasury deposits classified
as other financial assets of £370.0 million (2019: £110.0 million). Gross
debt at the period end was £1,405.2 million (2019: £608.2 million),
with net cash at the period-end of £671.6 million (2019: £142.4
million). The balance of other current financial assets comprises loans
to joint ventures and associates.
Trade and other receivables includes £73.8 million (2019: £61.9
million) of amounts due from suppliers in respect of commercial and
media income. Of this amount £56.3 million (2019: £43.1 million) is
within trade receivables, and £17.5 million (2019: £18.8 million) within
accrued income.
Trade and other payables includes deferred income of £16.3 million
in respect of insurance proceeds which have not yet been recognised
as exceptional income. Within contract liabilities, £299.3 million
(2019: £191.8 million) relates to Solutions contracts, payments
made for performance-based payments, or progress payments on
ongoing service delivery. Where invoicing is greater than the revenue
recognised at the end of a period, a contract liability is recognised for
the difference. Within accrued income, £3.8 million (2019: £1.1 million)
is due from our Solutions customers.
Deferred tax assets decreased by £3.6 million to a balance of £23.6
million at the end of the period, primarily due to the utilisation
of brought forward losses by the Ocado Retail business. This was
Key Performance Indicators
The following table sets out a summary of selected unaudited
operating information for FY 2020 and FY 2019:
FY 2020
FY 2019
Variance
Average orders per week (000’s)
Average basket size (£s)(1)
Average deliveries per van per
week (DPV/week)
Mature CFC efficiency (units
per hour)(2)
Active customers(3) (000’s)
334
137
184
169
680
325
106
196
161
795
2.8%
29.2%
(6.1)%
5.0%
(14.5)%
Source: the information in the table above is derived from information extracted from
internal financial and operating reporting systems and is unaudited. Fabled is excluded
from both years.
(1) Average basket size refers to results of Ocado.com and Fetch.
(2) Measured as units dispatched from the CFC per variable hour worked by Hatfield CFC,
Dordon CFC and Erith CFC operational personnel. We consider the mature CFCs to
be Hatfield, Dordon and Erith. FY 2019 therefore now includes Erith UPH to enable
(3) Customers are classified as active if they have shopped on ocado.com within the
comparison.
previous 12 weeks
Response
to Covid-19
The Covid-19 pandemic has been a time of real challenge, globally.
At Ocado Group, we faced a different challenge to many; scaling
up Ocado.com to play its part in feeding the nation, and helping
our other partners in the UK and internationally to launch and/or
ramp up their online businesses more rapidly against a backdrop
of a likely long-term increase in demand for online. Meeting these
challenges, amidst ongoing disruption, has required resilience and
resourcefulness across the business. We put our people first, so we
could be our best, and deliver our best, for all our stakeholders.
Prioritising the wellbeing
of colleagues to delivery for
stakeholders during Covid-19
Our People
At Ocado Group, we have over 18,500 employees, working across
several countries and varied roles, from technology to logistics. The
pandemic required adapted ways of working, for both frontline
and office employees, almost overnight. Ensuring the safety of our
colleagues was our first priority, combined with a fast and holistic
approach to supporting everyone through the potential challenges to
wellbeing that pandemic-related disruption might represent. We can
proudly say, as reflected in colleague surveys, that this action enabled
us to maintain the wellbeing of our colleagues through the hardest
months of the Covid-19 crisis. In turn, our people were able to adapt
and deliver even more for our stakeholders than originally planned,
during a critical time.
Customers and Community
In our home market of the UK, though unprecedented demand
required difficult proactive decisions to prioritise the most vulnerable
and most loyal customers, we helped Ocado Retail to deliver many
more groceries to households than ever before. We increased
Morrisons in-store fulfilment capacity several fold, enabling them to
also do their part to feed the nation at a crucial time.
Away from the front line, we opened up our Rapid Router platform
to parents and caregivers, to support continued home learning as
part of our mission to #KeepKidsCoding and develop STEM skills
in the next generation.
➔ Read more on page 81
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
ramp them throughout the remainder of the year. We have seen no
material delays to other ongoing projects, are in talks to accelerate
future sites with partners, and have expanded our relationships with
some partners to include in-store fulfilment services, helping them
to meet the tactical demands of the material acceleration in online
grocery worldwide.
➔ Read more on page 35
Investors
We have continued to deliver on our strategic ambitions in the short
and long term, to deliver value for shareholders. We have grown
faster for, and with, our partners during this challenging period,
whilst continuing to invest in innovation. Following significant capital
raises in the year, we are well positioned to take advantage of our full
opportunity set in the medium term.
➔ Read more on pages 18 to 20
70+
health and safety
process changes
10%
bonus for front-line staff,
globally with sick pay from
day one
2
CFCs delivered early for
international partners, with
no material delays to ongoing
projects
Partners
For our operational partners in the UK and abroad, our teams
successfully enabled them to deliver much faster growth, with better
efficiency. Despite widespread disruption, we delivered our first two
international CFCs ahead of plan and have continued to successfully
Mind Yourself
global taskforce initiative
for employee wellbeing
58
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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How We Manage Our Risks
The Risk Management Framework
Ocado’s risk management process is designed to improve the
likelihood of delivering our business objectives, protect the interests
of our key stakeholders, enhance the quality of our decision-making,
and assist in the safeguarding of our assets, including people,
finances, property and reputation.
The Board is responsible for the review and approval of the risk
management framework and for the identification of Ocado’s key
strategic and emerging risks. The Audit Committee, delegated by
the Board, is responsible for the review of the effectiveness of risk
management, the system of internal control, and the monitoring of
the quality of financial statements and consideration of any findings
reported by the auditor, Deloitte LLP, in relation to Ocado’s control
environment and its financial reporting procedures. The review covers
all significant controls, including financial, operational, compliance
controls, and risk management systems.
The key features of our system of internal control and risk management,
including those relating to the financial reporting process, are:
• An organisational structure with clear segregation of duties, control
and authority, and a framework of policies covering all key areas;
• A system of financial reporting, business planning and forecasting
processes;
• A capital expenditure approval policy that controls Ocado’s capital
expenditure and a post-completion review process for significant
projects;
• Monitoring the progress of major projects by management and the
Board;
• An executive-led Risk Committee and a Governance, Risk and
Compliance team which monitor Ocado’s risks;
• An Information Security Committee and an Information Security
team which monitor Ocado’s information security;
• A Personal Data Committee and data protection team that support
data privacy governance;
• An Internal Audit function that provides independent assurance on
key risks, controls and programmes;
• A treasury policy overseen by a Treasury Committee that manages
Ocado’s cash and deposits, investments, foreign exchange and
interest rates, so as to ensure liquidity and minimise financial risk; and
• Other control measures outlined elsewhere in this Annual Report,
including legal and regulatory compliance, health and safety
compliance, food and product safety compliance and business
continuity planning.
Ocado Risk Management Process
The Ocado risk management process is designed to identify key
risks and to provide assurance that these risks are understood and
managed in line with the agreed risk appetite. The risk appetite is
reviewed by the Board as part of its annual strategy review. The risk
management process is aligned to our strategy and each principal risk
and uncertainty is considered in the context of how it relates to the
achievement of the Group’s strategic objectives.
The Risk Committee reviews an overall risk report twice a year and
this is in turn discussed by the Audit Committee and the Board.
The risk report captures the most significant risks faced by the
business, including any emerging risks, and identifies the potential
impact and likelihood at both inherent level (before consideration
of mitigating controls) and a residual level (after consideration of
mitigating controls). The appetite for each key risk is also discussed
and assessed with a target risk position agreed to reflect the level of
risk that the business is willing to accept. This process for identifying,
evaluating and managing the principal risks faced by the Group
Ocado Risk Management Process
1
Set
Strategy
4
Review
Risks
Evaluate
Risks
2
Implement
Mitigation
3
1 Our strategy informs
the setting of objectives
across the business and is
widely communicated.
2 Executive Directors
evaluate the most
significant strategic risks
for the Group. In addition,
each divisional director or
selected department head
prepares a risk register
for their respective
division, identifying
and highlighting their
significant risks. The Risk
Committee oversees risk
control processes and
risk analysis from each
part of the business,
and reviews these top
down and bottom up
representations to ensure
that no significant risks
have been omitted.
3 Divisional directors
or department heads
identify how they will
manage, and accept or
mitigate, their significant
risks. These actions are
then summarised into a
description of the Group-
wide mitigation process
for each risk.
4 Group-wide risks and
mitigation processes are
regularly reviewed by the
Risk Committee and by
the Audit Committee.
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expenditure and a post-completion review process for significant
4
Review
Risks
Evaluate
Risks
2
How We Manage Our Risks
The Risk Management Framework
The Risk Committee reviews an overall risk report twice a year and
Ocado’s risk management process is designed to improve the
this is in turn discussed by the Audit Committee and the Board.
likelihood of delivering our business objectives, protect the interests
The risk report captures the most significant risks faced by the
of our key stakeholders, enhance the quality of our decision-making,
business, including any emerging risks, and identifies the potential
and assist in the safeguarding of our assets, including people,
impact and likelihood at both inherent level (before consideration
of mitigating controls) and a residual level (after consideration of
mitigating controls). The appetite for each key risk is also discussed
and assessed with a target risk position agreed to reflect the level of
risk that the business is willing to accept. This process for identifying,
evaluating and managing the principal risks faced by the Group
Ocado Risk Management Process
finances, property and reputation.
The Board is responsible for the review and approval of the risk
management framework and for the identification of Ocado’s key
strategic and emerging risks. The Audit Committee, delegated by
the Board, is responsible for the review of the effectiveness of risk
management, the system of internal control, and the monitoring of
the quality of financial statements and consideration of any findings
reported by the auditor, Deloitte LLP, in relation to Ocado’s control
environment and its financial reporting procedures. The review covers
all significant controls, including financial, operational, compliance
controls, and risk management systems.
The key features of our system of internal control and risk management,
including those relating to the financial reporting process, are:
• An organisational structure with clear segregation of duties, control
and authority, and a framework of policies covering all key areas;
• A system of financial reporting, business planning and forecasting
processes;
projects;
Board;
• Monitoring the progress of major projects by management and the
• An executive-led Risk Committee and a Governance, Risk and
Compliance team which monitor Ocado’s risks;
• An Information Security Committee and an Information Security
team which monitor Ocado’s information security;
• A Personal Data Committee and data protection team that support
data privacy governance;
key risks, controls and programmes;
• A treasury policy overseen by a Treasury Committee that manages
Ocado’s cash and deposits, investments, foreign exchange and
interest rates, so as to ensure liquidity and minimise financial risk; and
continuity planning.
Ocado Risk Management Process
The Ocado risk management process is designed to identify key
risks and to provide assurance that these risks are understood and
managed in line with the agreed risk appetite. The risk appetite is
reviewed by the Board as part of its annual strategy review. The risk
management process is aligned to our strategy and each principal risk
and uncertainty is considered in the context of how it relates to the
achievement of the Group’s strategic objectives.
• An Internal Audit function that provides independent assurance on
the setting of objectives
representations to ensure
• Other control measures outlined elsewhere in this Annual Report,
significant strategic risks
including legal and regulatory compliance, health and safety
for the Group. In addition,
manage, and accept or
compliance, food and product safety compliance and business
each divisional director or
mitigate, their significant
1 Our strategy informs
down and bottom up
across the business and is
that no significant risks
widely communicated.
have been omitted.
2 Executive Directors
evaluate the most
3 Divisional directors
or department heads
identify how they will
selected department head
risks. These actions are
prepares a risk register
for their respective
division, identifying
and highlighting their
significant risks. The Risk
Committee oversees risk
control processes and
risk analysis from each
part of the business,
and reviews these top
then summarised into a
description of the Group-
wide mitigation process
for each risk.
4 Group-wide risks and
mitigation processes are
regularly reviewed by the
Risk Committee and by
the Audit Committee.
1
Set
Strategy
Implement
Mitigation
3
operated during the period and up to the date of this Annual Report.
Such a system can only provide reasonable, and not absolute,
assurance, as it is designed to manage rather than eliminate the risk
of failure to achieve business objectives.
➔ For further information on the review of financial reporting, refer
to page 132 of the Audit Committee report.
Covid-19 impact on the Group
UK Withdrawal from the European Union
Brexit impact on the Group
The Group is continuing to closely monitor the developments
and impact following the UK’s exit from the EU (“Brexit”). A Brexit
readiness committee was established in 2018, to prepare the Group
for the post-Brexit economic arrangements and has been progressing
the readiness alongside the ongoing Brexit negotiations, extensions,
transition, deals and the actual exit.
S
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The Board continues to monitor the impact of Covid-19 on the
business. The year-end risk assessment conducted by the Board
considered both the specific consequences of Covid-19 and its effect
on the underlying principal risks managed by the business.
The conclusion and successful ratification of a binding post-Brexit
Free Trade Agreement (FTA) between the UK and the EU substantially
mitigated many of the principal risks for the Group, but the impacts of
that agreement are continuing to be monitored and managed.
The Group considered the impact in a number of areas:
Employees
• The Group has a dedicated and talented workforce, a substantial
number of whom are EEA nationals in many different business areas.
The ability of these employees to continue to live and work in the UK
is of critical importance, although the UK Settled Status Scheme has
substantially mitigated that risk. Applicable employees have been
encouraged to take advantage of that scheme.
• Our technology division has several software development centres
in the EU that work closely with their UK based colleagues. We
are providing support to those UK and EEA nationals who need to
travel or relocate between the UK and the EU, given the travel and
migration frameworks that are now in place, to ensure that the
efficiency of these centres is not impacted.
Supply Chain
• The UK imports about 30% of its food from the EU and the Group
does not differ significantly from this average. Our supply chains
have been developed as part of this established system, allowing
for wide product choice, short ordering times and low inventories.
Whilst the FTA means that there is no longer a risk that tariffs will
impact on cost prices, the Group is continuing to monitor the
impact on cross-border haulage, where border check delays,
documentation problems, reduced capacity and inflated haulage
charges could impact on costs or lead to delisting of some short-
life products or reduction in ranges.
• Prior to the end of the transition period, the Group had created
buffers of certain critical ambient and frozen products, which will
continue to be maintained until there is confidence that the supply
chain risk has subsided. It is not possible to do this for fresh and
short-life perishables.
As outlined in the half-year statement, the Group has implemented
extensive measures to mitigate the effects of the pandemic on its
business. These measures are intended to ensure the health and
safety of its employees, customers and suppliers and to ensure the
continuity and operational effectiveness of the business, both the
Retail and Solutions divisions. These measures are wide-ranging and
include: implementing rapid-response Covid-19 tests for frontline
employees; following government guidance in closing offices and
introducing home-working; introducing social distancing and
hygiene measures in CFCs, vehicles, spokes, construction sites and
at customers’ doorsteps to keep employees and customers safe;
engaging with government and specialist advisers; and instigating
business continuity plans and regular monitoring.
The Group continues to monitor government guidance carefully
and where needed adapts its operational protocols and processes
to safeguard Retail customers and employees, so as to cater for the
continued operation of the Retail business and to allow the OSP
programmes to progress as planned.
Although the principal risks as stated prior to the pandemic remain
largely unchanged in substance, the pandemic has increased the
likelihood and effect of some of those risks. For example, international
travel restrictions impede the Group’s ability to bring technical
expertise to bear on some Solutions client projects, increasing the
possibility of delays or quality issues. Similar risks apply to the on-
boarding of new overseas manufacturing and supply chain partners,
further affected by the challenges posed by a lack of available
shipping. The level of Covid-19 related sickness both in production
and in the supply chain is understood to be a factor in having a
negative impact on the supply of goods.
The immediate effect of lockdown on the Retail business was a
multiple-fold increase in demand for online groceries, massively
exceeding our available CFC capacity in the UK. In ensuring the
continuity of the Retail operations, measures were taken both to
restrict access to the webshop and to prioritise availability of delivery
slots to the most loyal and most vulnerable customers. The platform
has been adapted and steps taken to increase capacity rapidly to
allow more groceries to be delivered to customers, but this has
affected some customers and meant that our product availability and
order fulfilment KPIs have been lower than typical for our business.
60
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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How We Manage Our Risks
Continued
Still, the UK’s exit from the free market necessitates new cross border
procedures and documentation. These changes are likely to delay
and reduce overall volumes of goods passing through the border,
whether due to reduced border capacity, or pre-emptive actions taken
by hauliers.
In respect to Ocado specifically, it is too early for those capacity
constraints to have directly impacted the Ocado Group operations.
The risk remains that delays will impact on the availability of the
components essential to the CFC builds in the UK and the EU, be
they due to reduced border capacity or the pre-emptive reductions
by hauliers.
Contingency measures taken during the transition period in late
2020 remain in place to mitigate any potential impact, including a
contingency of components at the major build sites, additional spares
at the operational sites and additional high-risk grocery stock within
the CFCs or the UK supply network.
Any impact of Brexit on the import of groceries and other products for
Ocado Retail is also not yet significant, particularly when compared to
the current Covid-19 related issues.
Another Brexit related issue includes the ongoing ability to transfer
data between the EU and the UK, given that the deal agreed did not
include an adequacy rating for the UK. As part of the agreement
between the UK and the EU, there is a transitional period of at least 4
months (the EU may extend this period by another 2 months), when
personal data can be transferred from the EU to the UK without any
additional measures. During this period, the EU will decide whether
or not the UK will be granted a finding of adequacy. There are no
changes to the way that personal data is transferred from the UK to
the EU. In the case that the UK is not granted a finding of adequacy,
there would be a potential risk of disruption to providing OSP services
to EU clients. We are working with the business to review contracts
with our clients and suppliers, making sure we have appropriate
safeguards in place to continue the safe transfer of personal data to
and from the EU following this period.
Technology
• Ocado Solutions exports UK-produced technology and equipment
to our partners in the EU and imports a significant proportion
of the components in the automation, warehouse, delivery and
maintenance equipment used in Ocado’s operations from the EU.
Buffers of technology components, including bots, will remain in
place at the major build sites, along with additional spares at the
operational sites.
• Any future divergence in standards or other trade barriers may
reduce our competitiveness and the Group will continue to
monitor any such developments. Tariffs are no longer a concern
although the Rules of Origin could have some impact.
• The Group is closely involved in a number of EU collaborations in
research and development. Whilst the EU funding is important,
access to EU-based academic skills, knowledge and collaboration
with other corporates is more important. The Group is pleased to
see that the UK will continue to participate in EU research funding
programmes, such as Horizon Europe as if it remains a member
state. Our EU-located development centres will also provide
opportunities for access to EU-based academic institutions.
• Ocado Solutions’ technology and engineering teams are designing
equipment for our UK and international partners. The Group’s
approach will be adapted given that certification by a UK authority
will no longer be suitable for both the EU and the UK.
• The lack of an adequacy rating between the EU and UK for data
protection remains a risk to the services provided to EU based
clients, which the Group is continuing to mitigate through
contractual clauses with relevant suppliers and clients and
intra-Group agreements.
The Group had engaged with suppliers, partners and external
advisers to explore solutions to these risks to its business. Aside
from considering the impact of Brexit on its operations and business
model, the Board gave consideration to Brexit in the context of
reviewing its viability and going concern, as noted below. The
Company also considered the impact of Brexit as part of its post
Balance Sheet events review process and did not identify any
adjusting events.
2020 concluded with the agreement of the trade deal between the
United Kingdom and the European Union. This was a considerable
relief to all UK companies that are dependent on trade with the EU
and substantially reduced the risks that had been identified in last
year’s Annual Report.
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Continued
Technology
• Ocado Solutions exports UK-produced technology and equipment
to our partners in the EU and imports a significant proportion
of the components in the automation, warehouse, delivery and
maintenance equipment used in Ocado’s operations from the EU.
Buffers of technology components, including bots, will remain in
place at the major build sites, along with additional spares at the
operational sites.
Still, the UK’s exit from the free market necessitates new cross border
procedures and documentation. These changes are likely to delay
and reduce overall volumes of goods passing through the border,
whether due to reduced border capacity, or pre-emptive actions taken
by hauliers.
In respect to Ocado specifically, it is too early for those capacity
constraints to have directly impacted the Ocado Group operations.
The risk remains that delays will impact on the availability of the
• Any future divergence in standards or other trade barriers may
components essential to the CFC builds in the UK and the EU, be
reduce our competitiveness and the Group will continue to
they due to reduced border capacity or the pre-emptive reductions
monitor any such developments. Tariffs are no longer a concern
by hauliers.
although the Rules of Origin could have some impact.
• The Group is closely involved in a number of EU collaborations in
research and development. Whilst the EU funding is important,
access to EU-based academic skills, knowledge and collaboration
with other corporates is more important. The Group is pleased to
see that the UK will continue to participate in EU research funding
programmes, such as Horizon Europe as if it remains a member
state. Our EU-located development centres will also provide
opportunities for access to EU-based academic institutions.
Contingency measures taken during the transition period in late
2020 remain in place to mitigate any potential impact, including a
contingency of components at the major build sites, additional spares
at the operational sites and additional high-risk grocery stock within
the CFCs or the UK supply network.
Any impact of Brexit on the import of groceries and other products for
Ocado Retail is also not yet significant, particularly when compared to
the current Covid-19 related issues.
• Ocado Solutions’ technology and engineering teams are designing
equipment for our UK and international partners. The Group’s
Another Brexit related issue includes the ongoing ability to transfer
data between the EU and the UK, given that the deal agreed did not
approach will be adapted given that certification by a UK authority
include an adequacy rating for the UK. As part of the agreement
between the UK and the EU, there is a transitional period of at least 4
months (the EU may extend this period by another 2 months), when
personal data can be transferred from the EU to the UK without any
additional measures. During this period, the EU will decide whether
or not the UK will be granted a finding of adequacy. There are no
changes to the way that personal data is transferred from the UK to
the EU. In the case that the UK is not granted a finding of adequacy,
there would be a potential risk of disruption to providing OSP services
to EU clients. We are working with the business to review contracts
with our clients and suppliers, making sure we have appropriate
safeguards in place to continue the safe transfer of personal data to
and from the EU following this period.
will no longer be suitable for both the EU and the UK.
• The lack of an adequacy rating between the EU and UK for data
protection remains a risk to the services provided to EU based
clients, which the Group is continuing to mitigate through
contractual clauses with relevant suppliers and clients and
intra-Group agreements.
The Group had engaged with suppliers, partners and external
advisers to explore solutions to these risks to its business. Aside
from considering the impact of Brexit on its operations and business
model, the Board gave consideration to Brexit in the context of
reviewing its viability and going concern, as noted below. The
Company also considered the impact of Brexit as part of its post
Balance Sheet events review process and did not identify any
adjusting events.
2020 concluded with the agreement of the trade deal between the
United Kingdom and the European Union. This was a considerable
relief to all UK companies that are dependent on trade with the EU
and substantially reduced the risks that had been identified in last
year’s Annual Report.
Emerging Risks
As part of the ongoing risk management process, emerging risks have
been identified and assessed. These risks are deemed to be very
significant but are not listed as one of the Group’s principal risks. The
business will bring additional focus to these emerging risks and look
at actions for addressing them.
One such emerging risk is climate change and the impact of this
on our business. Given the rapid global expansion of the business,
increasing complexity and the increasing importance of climate-
related performance to our stakeholders, the Risk Committee
discussed the strategic risks and opportunities posed by climate
change and other related environmental and social issues. The
Group is commencing a project to look at the Group’s strategic plans
for addressing climate change issues. The Board has had initial
discussions regarding a new carbon strategy as part of the new
corporate responsibility strategy. The carbon strategy will include
detailed plans to address carbon and energy efficiency, and the Board
will review these plans further in due course. Further information
on our strategic priorities for climate change is contained on pages
83 to 84.
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Another emerging risk relates to the acquisition of two specialist
robotic companies, Haddington Dynamics and Kindred Systems,
during the period. Both acquisitions represented a strategic
opportunity to accelerate our delivery and innovation in the area
of robotic manipulation solutions. However, the Group may fail
to realise the expected benefits of these acquisitions, including
improving the speed, accuracy, product range and economics for
robotic manipulation. In addition, the commercial opportunities to
enter new markets for robotic solutions outside of grocery in general
merchandise and logistics sectors may not be realised or be as strong
as forecast. Realising value and innovation improvements will depend
on a number of factors, including effective integration of the new
businesses and their technology capabilities into the Group’s existing
arrangements. A post-integration plan has been developed and will
be monitored by the Board. Whilst these risks exist, the acquisitions
are an important part of the Group developing robotic picking, which
is seen as an area of growth for the business and an important part of
the platform for Solutions clients.
Principal Risks and Uncertainties
The principal and emerging risks are discussed and monitored
throughout the year to identify changes to the risk landscape. The
Board carried out its assessment of principal risks and uncertainties
towards the end of the period. Set out overleaf are details of the
principal risks and uncertainties for the Group and the key mitigating
activities used to address them. The risks have been listed against the
most relevant Group strategic objectives and are not set out in any
order of priority or importance. The inherent (or pre-mitigation) risk
movement from prior year for each principal risk and uncertainty has
been assessed and is presented (per the key on page 64).
➔ For further information on the financial risks, see pages 246 to 249
of the notes to the Financial Statements.
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Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Stock Code: OCDO
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How We Manage Our Risks
Continued
Strategic
Objective
Risks
Mitigation
Action/Control
Change During
the Year
Risk of decline in high service levels in the retail
business. Covid-19 related disruption adds an
additional element of risk(1)
Improving the
Proposition
Risk of failing to maintain a retail proposition
which appeals to a broad customer base and
sustains growth rates(2)
Risk that current Solutions pricing levels may
not provide both acceptable returns for our
shareholders and attractive long-term cost of
ownership for our clients, whilst delivering a
viable fully operational end-to-end customer
experience
The risk has
increased
during the
period from
the impact of
Covid-19 on
the operations.
• Ongoing monitoring of the key performance
indicators and regular review meetings with
Operational Management and Ocado Retail
Management.
• Continuing initiatives to improve operational
performance of the CFCs and scaling of
operations at Erith. These arrangements help
reduce the impact of operational problems
in CFCs on customer service levels.
• Covid-19 mitigations in place, as described
on page 61.
• Continuing to refine and monitor the pricing
and value to customers.
• Development of own-label range.
• Closer supplier arrangements on product
range and terms.
• Continuation of investment and optimisation
of the marketing channels to acquire new
customers.
• Continued improvement of webshop
and apps.
• Development and roll-out of further
immediacy sites.
• Full review of projected financial impact
undertaken before signing any new
partnerships.
• Periodic review of financial model and
delivery costs and close relationship with our
partners provides oversight. The amount of
capital invested in our platform is carefully
controlled to manage costs.
• Regular review of rate of software
development and regular platform
steering meetings.
• Resources and capabilities are scaled and
reallocated to help meet Ocado Solutions
project deadlines.
• There is an ongoing programme of design
improvements for the platform.
Key:
Increased
Decrease
No Change
For notes see page 67.
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How We Manage Our Risks
Continued
Strategic
Objective
Risks
Improving the
Proposition
Risk of decline in high service levels in the retail
• Ongoing monitoring of the key performance
business. Covid-19 related disruption adds an
indicators and regular review meetings with
additional element of risk(1)
Operational Management and Ocado Retail
Management.
• Continuing initiatives to improve operational
performance of the CFCs and scaling of
operations at Erith. These arrangements help
reduce the impact of operational problems
in CFCs on customer service levels.
• Covid-19 mitigations in place, as described
on page 61.
The risk has
increased
during the
period from
the impact of
Covid-19 on
the operations.
Risk of failing to maintain a retail proposition
• Continuing to refine and monitor the pricing
which appeals to a broad customer base and
and value to customers.
sustains growth rates(2)
Risk that current Solutions pricing levels may
• Full review of projected financial impact
not provide both acceptable returns for our
undertaken before signing any new
shareholders and attractive long-term cost of
partnerships.
ownership for our clients, whilst delivering a
viable fully operational end-to-end customer
experience
• Development of own-label range.
• Closer supplier arrangements on product
range and terms.
• Continuation of investment and optimisation
of the marketing channels to acquire new
• Continued improvement of webshop
customers.
and apps.
• Development and roll-out of further
immediacy sites.
• Periodic review of financial model and
delivery costs and close relationship with our
partners provides oversight. The amount of
capital invested in our platform is carefully
controlled to manage costs.
• Regular review of rate of software
development and regular platform
steering meetings.
• Resources and capabilities are scaled and
reallocated to help meet Ocado Solutions
project deadlines.
• There is an ongoing programme of design
improvements for the platform.
Key:
Increased
Decrease
No Change
For notes see page 67.
Mitigation
Action/Control
Change During
the Year
Strategic
Objective
Risks
Mitigation
Action/Control
Change During
the Year
Risk of failing to deliver a sustainable operational
infrastructure able to execute effectively the
requirements for multiple Ocado Solutions
contracts, simultaneously in many international
locations, and risk of failing to develop suitable
management, technological and engineering
capabilities
Maximising
Efficiency
Risk of delays in the generation of additional
capacity in the UK and delivery of the
international OSP programme(3)
• The Group transformation team supports
the business in the implementation of the
new operating model and transformation
roadmap, which includes people, process
and systems, to transform the business.
• Development of cross-functional
programme governance committees to
provide programme oversight and regular
management oversight meetings.
•
Increased hiring of key skills.
• Review of reward frameworks, performance
management and succession planning for
all parts of the Group is underway.
• Capacity is increasing as Bristol CFC becomes
operational. Further capacity is under
development at CFC5 (Purfleet) and CFC3
(Andover).
• Dedicated resources continue to work on
modularising technology to enable faster
replication and reduced build times.
• Regular Steering and cross-functional
implementation meetings and Management
oversight for new CFC projects, including
managing programme risks, milestones and
actions.
• New programme management framework,
tools and process mapping for improved
project delivery.
Utilising
Proprietary
Knowledge
Risk that technological innovation supersedes
our own and offers improved methods of
distribution to consumers
• Establishing our identity as a technology
business, international platform provider and
innovation factory.
• Engagement with a wide number of
international grocers to understand market
needs.
• Experienced teams in place who understand
the current solutions and are aware of global
alternatives used in other industries.
• Horizon scanning over a five year timeframe
to identify new opportunities.
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Back to contents
Change During
the Year
The risk has
increased
during the
period given
the ongoing
patent litigation
and other
proceedings,
see page 56.
How We Manage Our Risks
Continued
Strategic
Objective
Risks
Mitigation
Action/Control
Risk of failing to protect Ocado’s own IP or risk
of infringing a third party’s IP (including the risk
of an adverse outcome in current litigation or
patent office opposition/review proceedings)
which could result in loss of use of the Group’s
IP, financial damages or harm to the Company’s
reputation or relationships(4)
Utilising
Proprietary
Knowledge
Risk of supply chain disruption, in particular for
single source equipment, adversely affecting
product availability, delivery, reliability and cost,
resulting in delays to contractual commitments
and loss of revenue
Operational
Risk of a safety incident
• Conducting “freedom to operate” searches
on selected technologies in selected
jurisdictions and monitoring IP filings
by a large number of companies.
• Ongoing effort to innovate and patent new
inventions.
• Expansion of IP team to help with IP
protection work and training of key staff.
• Where necessary, we take steps to protect
our IP from unauthorised use.
• Where appropriate, obtaining specialist
or legal advice, including to help ensure
our ability to use our IP is not restricted by
infringement claims.
• Combined internal and external legal counsel
management over litigation and other
proceedings.
• Actively managed risk matrix reviewed by
supply chain and procurement areas to
manage key suppliers and components.
• Agile approach to manufactured products,
including the ability to divert any product to
sites with the most pressing requirements.
• Supplier assessments, due diligence and
site audits undertaken during development
process.
• Supply chain demand monitored against
supply capacity constraints by steering group.
• Experienced technical experts monitor and
audit compliance against relevant safety
regulations, policies and procedures in safety
areas, including food, product, occupational
health and construction.
• Supplier approval and certification process.
• Training, risk assessments and safe systems
of work prepared by qualified staff to raise
awareness and knowledge.
• Active monitoring of regulatory changes
supported by external expertise and advice.
For notes see page 67.
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R
A
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G
I
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P
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How We Manage Our Risks
Continued
Strategic
Objective
Risks
Risk of failing to protect Ocado’s own IP or risk
• Conducting “freedom to operate” searches
of infringing a third party’s IP (including the risk
on selected technologies in selected
of an adverse outcome in current litigation or
jurisdictions and monitoring IP filings
patent office opposition/review proceedings)
by a large number of companies.
Utilising
Proprietary
Knowledge
which could result in loss of use of the Group’s
IP, financial damages or harm to the Company’s
reputation or relationships(4)
Risk of supply chain disruption, in particular for
• Actively managed risk matrix reviewed by
single source equipment, adversely affecting
supply chain and procurement areas to
product availability, delivery, reliability and cost,
manage key suppliers and components.
resulting in delays to contractual commitments
Operational
and loss of revenue
The risk has
increased
during the
period given
the ongoing
patent litigation
and other
proceedings,
see page 56.
• Ongoing effort to innovate and patent new
inventions.
• Expansion of IP team to help with IP
protection work and training of key staff.
• Where necessary, we take steps to protect
our IP from unauthorised use.
• Where appropriate, obtaining specialist
or legal advice, including to help ensure
our ability to use our IP is not restricted by
infringement claims.
• Combined internal and external legal counsel
management over litigation and other
proceedings.
• Agile approach to manufactured products,
including the ability to divert any product to
sites with the most pressing requirements.
• Supplier assessments, due diligence and
site audits undertaken during development
process.
• Supply chain demand monitored against
supply capacity constraints by steering group.
audit compliance against relevant safety
regulations, policies and procedures in safety
areas, including food, product, occupational
health and construction.
• Supplier approval and certification process.
• Training, risk assessments and safe systems
of work prepared by qualified staff to raise
awareness and knowledge.
• Active monitoring of regulatory changes
supported by external expertise and advice.
Mitigation
Action/Control
Change During
the Year
Strategic
Objective
Risks
Mitigation
Action/Control
Change During
the Year
Risk of changes in regulations or non-
compliance affecting our business model
or the viability of Solutions’ deals
Operational
Risk of negative effects due to changes in the
global economic and geopolitical environment,
including Brexit, which may impact our business
model
Risk of failing to prevent or respond to a major
cyber attack or data breach that could result
in business disruption, reputational damage,
significant fines or the loss of confidential
business information
Risk of a safety incident
• Experienced technical experts monitor and
Risk of business interruption
• Regular monitoring of regulatory
developments to ensure that changes are
identified. Due diligence, territory research
and specialist advice sought for regulatory
issues.
• Compliance framework of policies and
procedures and employee training.
• Brexit committee and supply chain teams
monitoring Brexit contingency plans include
supply chain continuity and management
and assessment of changes to trade
arrangements. See further on page 61.
• As noted on page 61, the Group has a
Covid-19 steering committee and many other
mitigation plans in place to manage the
disruption to the business from Covid-19.
•
IT systems are structured to operate reliably
and securely and some third party testing.
• An information security governance
programme overseen by the Information
Security Committee.
• A dedicated information security team to
monitor for security issues and respond
to security incidents.
• No customer payment card data is held
in Ocado’s databases.
• Data Protection Officer oversees the Group’s
privacy compliance programme.
• Cyber incident contingency planning.
•
IT systems are structured to operate reliably
and securely.
• Dedicated engineering teams on site with
daily maintenance programmes to support
the continued operation of equipment.
• Disaster recovery testing and business
continuity plans continue to be progressed
and updated.
• High level of protection for CFCs and
equipment, combined with business
interruption insurance to transfer residual risks.
The risk has
increased
during the
period as a
result of the
increasing
external threat
environment,
regulatory
actions and
Ocado’s higher
overall profile.
For notes see page 67.
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Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Notes:
(1) The risk described in the 2019 Annual Report as “Risk of decline in high service levels” no longer includes reference to “the transitional period of change associated with the creation
of the retail JV”, whilst recognising that “Covid-19 related disruption adds an additional element of risk”.
(2) The risk described in the 2019 Annual Report as “Failure to maintain a retail proposition” no longer includes reference to “managing changes resulting from our new arrangements
with M&S”.
(3) The risk described in the 2019 Annual Report as “Risk of delays in the generation of new capacity in the UK” has been expanded to include delivery of the international OSP
programme.
(4) The risk described in the 2019 Annual Report as “Risk of infringing a third party’s IP” has been expanded to include the litigation and patent proceedings risk noted.
Back to contents
How We Manage Our Risks
Continued
Context for Going Concern and Viability Statements
The Directors have assessed the Group’s prospects, both as a
going concern and its viability longer term. Understanding of our
business model, our strategy and our principal risks is a key element
in the assessment of the Group’s prospects, as well as the formal
consideration of viability. The Group’s strategy is detailed on pages 30
to 33 and 40 to 46 and our risk management framework is described
on pages 60 to 61.
The Group’s planning cycle is the primary annual strategic and
financial planning activity through which the Board assesses the
prospects of the Group, extending for the five successive financial
years that follow beyond the assessment date.
The planning process involves modelling under a series of assumptions
surrounding both internal and external parameters, with key assumptions
including new partnerships, increased capacity and volume growth, cost
base of the business (logistics, technology and corporate functions),
combined with the effects of major capital initiatives.
The robust planning process is led by the Chief Executive Officer,
the Chief Financial Officer, the Head of Corporate Strategy and other
members of the Divisional Management Team. The Board undertook
a detailed review of the plan during its Strategy Day, which was
approved by the Board.
At the time of preparing the plan, the Group had experienced about
six months of Covid-19 and considered the impact that would be
reasonable to include into the base case which underpins the viability
assessment for the period. Financially, the impact was positive for the
business, though action was required to maintain the safe operation
of the business.
The Group’s trading performance is reviewed by the Senior
Management Team and the Board in the context of the objectives
and targets of the forecast, within which the Group’s strategy
remains embedded.
Liquidity and Financing Position
Following completion of the £1 billion fundraising in June 2020, the
Group has cash of about £2.1 billion as at the end of the period (split
between cash and cash equivalents of £1,700 million and other financial
assets of £370 million, for term deposits which are greater than three
months notice).
During 2020, the Group terminated its revolving credit facility, which
was undrawn. The existing debt, namely our Senior Secured Notes,
carries a covenant of Finance Interest/EBITDA ratio of greater than
2:1, and, as such, the only covenants that must be monitored are
those relating to this debt. As at the 2020 year end, there is £225
million outstanding with a coupon of 4%; the Senior Secured Notes
are repayable in June 2024. The Group also has £600 million and £350
million of convertible bonds, repayable in 2025 and 2027 respectively
if not converted.
As set out in the modelling below, our base case sees the Group depleting
its cash reserves by the end of 2023 and therefore a further fundraise
would be required by the end of 2022.
Under the base case, the covenants are within their limits and there is
substantial headroom due to the forecast EBITDA A growth in the period
supported by modest levels of secured debt, sufficient to support a
further fundraise. This is a key criteria in the assessment of both going
concern and viability.
Operational and Business Impact of Covid-19
The Covid-19 pandemic resulted in high levels of demand for
grocery retail worldwide. In the UK, there was a significant amount
of demand on online grocery retailers which resulted in the Group
being designated as an “essential business” and continuing to trade
throughout lockdown periods. Financially, the impact was positive for
the business, with revenue for Ocado Retail up 27% in the first half of
the financial year and 35% for the full year.
On the international landscape, there were some short-term
operational challenges due to a mix of duration and severity of
lockdown restrictions across the geographies in which we operate.
However, overall, there was no material impact on the roll-out of our
CFC programme. Longer term, increased demand as a result of the
channel shift to online retail is expected to be positive for the Group.
The Group did not take advantage of any of the Covid-19 support
measures offered by the UK or any overseas government.
Assessment of Longer-term Viability
In accordance with the UK Corporate Governance Code, the Directors
have determined that three years was the most appropriate period for
assessing the Group’s prospects. Although the Group’s strategic plan
forecasts up to five years ahead, the Directors also took into account
the impact on forecast outcomes of the rapid growth of the business
and its changing strategic opportunities (among other factors) as
evidenced by developments in each of the last three years.
In prior years, we have adopted a three-year time horizon for the
viability period. We also considered the factors that could contribute
to a longer viability period, notably the duration of our Solutions
contracts, the length of the M&S partnership with the Ocado Retail
JV and the recent convertible bond issuances which are repayable in
2025 and 2027 respectively. However, consistent with the assessment
made in prior years, there are strong indicators that would support
a shorter time frame – including the rapid pace of strategic
development for the Group, both in the UK and Internationally.
Strategic development timescales can be further accelerated through
targeted M&A activity, under condensed timescales, as we have seen
with the recent robotic technology acquisitions in the US.
Given the pace of change, there would be significant uncertainty when
considering modelling beyond a three-year time horizon. As such,
the Directors have concluded that a three-year time horizon remains
appropriate for the viability review.
A
See Alternative Performance Measures on pages 293 and 294.
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Back to contents Context for Going Concern and Viability Statements
As set out in the modelling below, our base case sees the Group depleting
Financial Modelling
The Group has modelled three scenarios in its assessment of going concern and viability.
These are:
• The base case.
• Downside stress tests.
• A severe downside and reverse stress test.
Stress test scenario
Group Principal Risk
1
A material delay in rolling out new UK capacity with reduced revenues
as a result
2
3
A material proportion of our operational workforce is unable to attend
work due to mass outbreak of Covid-19 impacting throughput and
service to our partners in the UK
Service Levels, Retail Proposition, CFC Capacity &
Partner Delivery, Business Interruption
Service Levels, Retail Proposition, CFC Capacity &
Partner Delivery, Supply Chain, Safety,
Global Economic & Geopolitical Environment,
Business interruption
Severe downside scenario: A material increase in the cost base of the
business equivalent to an increase of 1% of retail partner sales across
the viability period
This scenario acted as the “reverse stress test” case to assess when
viability is no longer maintained
Commercial viability, Supply Chain, Safety,
Regulatory Compliance
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
How We Manage Our Risks
Continued
The Directors have assessed the Group’s prospects, both as a
going concern and its viability longer term. Understanding of our
business model, our strategy and our principal risks is a key element
in the assessment of the Group’s prospects, as well as the formal
consideration of viability. The Group’s strategy is detailed on pages 30
to 33 and 40 to 46 and our risk management framework is described
on pages 60 to 61.
The Group’s planning cycle is the primary annual strategic and
financial planning activity through which the Board assesses the
prospects of the Group, extending for the five successive financial
years that follow beyond the assessment date.
its cash reserves by the end of 2023 and therefore a further fundraise
would be required by the end of 2022.
Under the base case, the covenants are within their limits and there is
substantial headroom due to the forecast EBITDA A growth in the period
supported by modest levels of secured debt, sufficient to support a
further fundraise. This is a key criteria in the assessment of both going
concern and viability.
Operational and Business Impact of Covid-19
The Covid-19 pandemic resulted in high levels of demand for
grocery retail worldwide. In the UK, there was a significant amount
of demand on online grocery retailers which resulted in the Group
The planning process involves modelling under a series of assumptions
being designated as an “essential business” and continuing to trade
surrounding both internal and external parameters, with key assumptions
throughout lockdown periods. Financially, the impact was positive for
including new partnerships, increased capacity and volume growth, cost
the business, with revenue for Ocado Retail up 27% in the first half of
base of the business (logistics, technology and corporate functions),
the financial year and 35% for the full year.
combined with the effects of major capital initiatives.
On the international landscape, there were some short-term
The robust planning process is led by the Chief Executive Officer,
operational challenges due to a mix of duration and severity of
the Chief Financial Officer, the Head of Corporate Strategy and other
lockdown restrictions across the geographies in which we operate.
members of the Divisional Management Team. The Board undertook
However, overall, there was no material impact on the roll-out of our
a detailed review of the plan during its Strategy Day, which was
CFC programme. Longer term, increased demand as a result of the
approved by the Board.
channel shift to online retail is expected to be positive for the Group.
At the time of preparing the plan, the Group had experienced about
The Group did not take advantage of any of the Covid-19 support
six months of Covid-19 and considered the impact that would be
measures offered by the UK or any overseas government.
reasonable to include into the base case which underpins the viability
assessment for the period. Financially, the impact was positive for the
business, though action was required to maintain the safe operation
of the business.
The Group’s trading performance is reviewed by the Senior
Management Team and the Board in the context of the objectives
and targets of the forecast, within which the Group’s strategy
remains embedded.
Liquidity and Financing Position
Assessment of Longer-term Viability
In accordance with the UK Corporate Governance Code, the Directors
have determined that three years was the most appropriate period for
assessing the Group’s prospects. Although the Group’s strategic plan
forecasts up to five years ahead, the Directors also took into account
the impact on forecast outcomes of the rapid growth of the business
and its changing strategic opportunities (among other factors) as
evidenced by developments in each of the last three years.
In prior years, we have adopted a three-year time horizon for the
Following completion of the £1 billion fundraising in June 2020, the
viability period. We also considered the factors that could contribute
Group has cash of about £2.1 billion as at the end of the period (split
to a longer viability period, notably the duration of our Solutions
between cash and cash equivalents of £1,700 million and other financial
contracts, the length of the M&S partnership with the Ocado Retail
assets of £370 million, for term deposits which are greater than three
JV and the recent convertible bond issuances which are repayable in
months notice).
During 2020, the Group terminated its revolving credit facility, which
was undrawn. The existing debt, namely our Senior Secured Notes,
carries a covenant of Finance Interest/EBITDA ratio of greater than
2:1, and, as such, the only covenants that must be monitored are
those relating to this debt. As at the 2020 year end, there is £225
million outstanding with a coupon of 4%; the Senior Secured Notes
2025 and 2027 respectively. However, consistent with the assessment
made in prior years, there are strong indicators that would support
a shorter time frame – including the rapid pace of strategic
development for the Group, both in the UK and Internationally.
Strategic development timescales can be further accelerated through
targeted M&A activity, under condensed timescales, as we have seen
with the recent robotic technology acquisitions in the US.
are repayable in June 2024. The Group also has £600 million and £350
Given the pace of change, there would be significant uncertainty when
million of convertible bonds, repayable in 2025 and 2027 respectively
considering modelling beyond a three-year time horizon. As such,
if not converted.
the Directors have concluded that a three-year time horizon remains
appropriate for the viability review.
A
See Alternative Performance Measures on pages 293 and 294.
68
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Stock Code: OCDO
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How We Manage Our Risks
Continued
The Base Case
Downside Stress Tests
The Going Concern and Viability assessments use as their base the
Five Year Plan approved by the Board, updated to reflect the recent
robotic acquisitions, 2020 financial performance and the 2021 Budget.
The Five Year Plan assumes that the existing Senior Secured Notes
remain in place until maturity in 2024. The RCF has been terminated
in the period and does not factor in the analysis. The Convertible
Bonds issued with maturity dates of 2025 and 2027 are assumed to
remain in place and unconverted.
The Five Year Plan has a cash position of £2.1 billion as at the end of
the 2020 financial year, and showed positive cash headroom through
until the end of 2023.
The Plan for the 2021 financial year assumes a continuation of the
strong UK Retail volumes throughout the first two quarters of the year.
Capital expenditure in the 2021 Plan is assumed to continue to deliver
the roll-out of the CFC programme both in the UK and internationally.
In the event that the pace of growth in CFC roll-out is slower than
anticipated, the impact on cash flows in the short-term would be
positive and is therefore not considered a risk for the purposes of
going concern and viability.
Based on the operational cash flows assumed in the plan, our
expectation is that a further fundraise would be required in the
viability period in order to support ongoing capital expenditure
requirements. There remains some optionality around this
requirement as the pace of investment spend is increasingly
uncommitted and therefore the timing is within Management control
provided going concern is maintained.
With growing revenue and EBITDA A , and relatively modest levels of
existing debt, we believe that a fundraise would be achievable in the
equity, debt and/or convertible bond markets. In addition, we retain
the option to buy back the existing Senior Secured Notes.
Interest cover improves year on year during the viability period. Under
this case, the Group retains strong headroom under the interest
covenant on the Senior Secured Notes throughout the viability period
and sufficient EBITDA A to underpin a fundraise to fund ongoing
capital expenditure requirements. The Directors concluded that both
going concern and viability would be maintained under the base case
scenario, with significant headroom.
Two downside stress tests were undertaken to determine the sensitivity
to going concern.
The first case reflects a material delay in rolling out new UK capacity
resulting in reduced revenues across the assessment period. This was
modelled as a six-month delay to the go-live of new UK Capacity, whilst
capital expenditure is still incurred as per the base case across the
three-year period.
The second case reflects a material decline in our ability to fulfil
customer demand due to the Covid-19 pandemic impacting the ability
for the workforce, resulting in reduced revenues and higher costs
across the going concern period. This was modelled as a reduction in
throughput, as a result of an increased level of absenteeism of front-line
workers, over a six-month period across all live UK CFCs and Spokes.
Under both scenarios, going concern and viability could be maintained
with limited mitigating actions to be undertaken in the first year, with
improving headroom each subsequent year towards the end of year
three. Both scenarios therefore result in going concern and viability
being maintained.
The Severe Downside Case and the Reverse Stress Test
This case reflects a material increase in the cost base of the business
equivalent to an increase of 1% of retail partner sales across the
assessment period. This would represent a significant increase in the
cost base of the business.
Under this scenario, the 2021 financial year would see a breach with
interest cover falling slightly below the 2.0x required on the bond
covenant. The Directors have identified mitigating actions that would
be sufficient to avoid a breach. These would be readily accessible in
a short time frame, such as a pause on recruitment and discretionary
investment.
From the 2022 financial year onwards, and with no mitigating actions,
the Group remains compliant with its covenants, has positive cash
reserves throughout the period and retains sufficient EBITDA A to
support a fundraise.
A
See Alternative Performance Measures on pages 293 and 294.
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How We Manage Our Risks
Continued
The Base Case
The Going Concern and Viability assessments use as their base the
Two downside stress tests were undertaken to determine the sensitivity
Five Year Plan approved by the Board, updated to reflect the recent
to going concern.
robotic acquisitions, 2020 financial performance and the 2021 Budget.
The Five Year Plan assumes that the existing Senior Secured Notes
resulting in reduced revenues across the assessment period. This was
remain in place until maturity in 2024. The RCF has been terminated
modelled as a six-month delay to the go-live of new UK Capacity, whilst
in the period and does not factor in the analysis. The Convertible
capital expenditure is still incurred as per the base case across the
The first case reflects a material delay in rolling out new UK capacity
Bonds issued with maturity dates of 2025 and 2027 are assumed to
three-year period.
remain in place and unconverted.
The second case reflects a material decline in our ability to fulfil
The Five Year Plan has a cash position of £2.1 billion as at the end of
customer demand due to the Covid-19 pandemic impacting the ability
the 2020 financial year, and showed positive cash headroom through
for the workforce, resulting in reduced revenues and higher costs
until the end of 2023.
The Plan for the 2021 financial year assumes a continuation of the
strong UK Retail volumes throughout the first two quarters of the year.
across the going concern period. This was modelled as a reduction in
throughput, as a result of an increased level of absenteeism of front-line
workers, over a six-month period across all live UK CFCs and Spokes.
Capital expenditure in the 2021 Plan is assumed to continue to deliver
Under both scenarios, going concern and viability could be maintained
the roll-out of the CFC programme both in the UK and internationally.
with limited mitigating actions to be undertaken in the first year, with
In the event that the pace of growth in CFC roll-out is slower than
improving headroom each subsequent year towards the end of year
anticipated, the impact on cash flows in the short-term would be
three. Both scenarios therefore result in going concern and viability
positive and is therefore not considered a risk for the purposes of
being maintained.
going concern and viability.
Based on the operational cash flows assumed in the plan, our
expectation is that a further fundraise would be required in the
viability period in order to support ongoing capital expenditure
requirements. There remains some optionality around this
requirement as the pace of investment spend is increasingly
uncommitted and therefore the timing is within Management control
provided going concern is maintained.
With growing revenue and EBITDA A , and relatively modest levels of
existing debt, we believe that a fundraise would be achievable in the
equity, debt and/or convertible bond markets. In addition, we retain
the option to buy back the existing Senior Secured Notes.
Interest cover improves year on year during the viability period. Under
this case, the Group retains strong headroom under the interest
covenant on the Senior Secured Notes throughout the viability period
and sufficient EBITDA A to underpin a fundraise to fund ongoing
capital expenditure requirements. The Directors concluded that both
going concern and viability would be maintained under the base case
scenario, with significant headroom.
The Severe Downside Case and the Reverse Stress Test
This case reflects a material increase in the cost base of the business
equivalent to an increase of 1% of retail partner sales across the
assessment period. This would represent a significant increase in the
cost base of the business.
Under this scenario, the 2021 financial year would see a breach with
interest cover falling slightly below the 2.0x required on the bond
covenant. The Directors have identified mitigating actions that would
be sufficient to avoid a breach. These would be readily accessible in
a short time frame, such as a pause on recruitment and discretionary
investment.
From the 2022 financial year onwards, and with no mitigating actions,
the Group remains compliant with its covenants, has positive cash
reserves throughout the period and retains sufficient EBITDA A to
support a fundraise.
Downside Stress Tests
Reverse Stress Test
Going Concern Statement
This case reflects the downside case, with the relevant sensitivity
increased to the point where going concern is no longer maintained.
The modelling undertaken indicates that an increase in costs equivalent
to 2% of Retail Partner Sales would be the maximum that could be
sustained, whilst still maintaining the ability to raise finance for ongoing
roll-out of the Group’s capital investment programme.
Under this scenario, the covenant on the Senior Secured Notes would
likely be breached in the 2021 financial year; however this could either
be remedied through significant mitigating actions to reduce costs, or
by buying back the bonds through available cash. As in the base case, a
fundraise would be required, although the timing would be earlier, in the
2022 financial year. However, the Directors believe that this would still
be achievable under the scenario modelled, subject to global economic
market conditions.
Despite a significantly reduced EBITDA A profile compared to the base
case and other scenarios, as set out above, Group EBITDA A should still
support a material fundraise to fulfil its obligations. Furthermore, this
scenario assumes no mitigating actions. We consider this scenario to be
remote, given the scale of increase in the Group’s cost base that would be
implied, on a sustained basis. There would be scope for cost reductions
and re-phasing the capital expenditure to help manage the cash position
in such a scenario, de-risking the level of in-year funding required.
Confirmation of Viability
The assessment of the Group’s viability considers severe but plausible
scenarios aligned to the principal risks and uncertainties set out
on pages 64 to 67 where the realisation of these risks is considered
remote, considering the effectiveness of the Group’s risk management
and control systems and current risk appetite.
The degree of severity applied in these scenarios was based on
management’s experience and knowledge of the industry to
determine plausible movements in assumptions, including the impact
of Covid-19 on the business.
The Directors have also considered mitigating actions available to
the Group and have assumed that these mitigating actions can be
applied on a timely basis.
Based on the analysis, the Directors have a reasonable expectation
that the Group will be able to continue in operation and meet its
liabilities as they fall due over the three-year period from the approval
of this Annual Report.
The time horizon required for the Going Concern Statement is
a minimum of 12 months from the date of signing the financial
statements. However, consistent with prior periods, a time horizon of
18 months has been adopted.
Accounting standards require that Directors satisfy themselves that
it is reasonable for them to conclude whether it is appropriate to
prepare financial statements on a going concern basis. There has
been no material uncertainty identified which would cast significant
doubt upon the Group’s ability to continue using the going concern
basis of accounting for the 18 months following the approval of this
Annual Report.
In assessing going concern, the Directors take into account the
Group’s cash flows, solvency and liquidity positions and borrowing
facilities. As above, the Group had £2.1 billion of cash and other
financial assets as at the reporting date. The Group forecasts its
liquidity requirements, working capital position and the maintenance
of sufficient headroom against the financial covenants in its
borrowing facilities. The financial position of the Group, including
information on cash flow, can be found in the section on pages 188
to 269.
In determining whether there are material uncertainties, the Directors
consider the Group’s business activities, together with factors that
are likely to affect its future development and position (see the
information on pages 14–59) and the Group’s principal risks and the
likely effectiveness of any mitigating actions and controls available
to the Directors (see pages 60–71). Given the global economic
uncertainty of the Covid-19 pandemic, and taking into account the
recent guidance issued by the FCA and the FRC, the Directors have
considered the impact of Covid-19 for the going concern review.
After reviewing the Group’s liquidity and financial positions for the
going concern period along with the Covid-19 impact, the Directors
considered it appropriate to adopt the going concern basis of
accounting in the preparation of the Company’s and Group’s financial
statements.
A
See Alternative Performance Measures on pages 293 and 294.
A
See Alternative Performance Measures on pages 293 and 294.
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Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Engaging With Our Stakeholders
Our materiality assessment: a
key step in developing our ESG
strategy as a solutions provider
Materiality
This year we undertook a materiality assessment to
reflect the significant transformation journey the
business has been on in the last few years into our
role as a global technology company.
Ocado Retail is now a 50:50 joint venture with M&S, and a formal
partner to Ocado Solutions. With the launch of our first international
CFCs, we are set to accelerate into our role as a global software and
robotics solutions provider in grocery fulfilment and increasingly
further afield. In partnership with sustainability consultancy Finch &
Beak, we undertook a robust re-evaluation of those topics that are
most important to our stakeholders and of greatest business impact
in the years ahead.
Determining and prioritising material issues
We have identified the 14 environmental, social and governance
issues which are the most important in shaping our risks and
opportunities and the most likely to impact value for stakeholders
in the years ahead. We determined relevant topics through a
robust process of desk research and stakeholder engagement. In
practice, this meant assessing the likely priorities of each of our key
stakeholder groups, through sustainability reports and reporting
frameworks, industry reports, media scanning, and other internal and
external information. This initial work was further refined through
a series of interviews with key internal and external stakeholders,
to establish a comprehensive shortlist of material topics. Internal
workshops and external panel sessions were used to prioritise and
analyse these topics, which we have reviewed and ratified. For more
information on our ongoing progress in each of these areas, please
refer to the relevant sections of this Annual Report signposted in the
table on pages 74–75.
Materiality Matrix
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Environmental
Energy Efficiency & Carbon Emissions
Business Ethics
& Governance
Food Waste Management
Operational Waste Management
Equipment Life cycle & Circularity
Energy
Efficiency
& Carbon
Emissions
Occupational
Health
& Safety
Responsible
Sourcing
Data Privacy
Management
Food
Waste
Management
Talent
Attraction
& Development
Cybersecurity
Product Quality
& Safety
Social
Community
Engagement
Operational
Waste
Management
Employee
Diversity
& Inclusion
Ethics of Artificial
Intelligence & Robotics
Equipment
Life cycle
& Circularity
Talent Attraction & Development
Employee Diversity & Inclusion
Occupational Health & Safety
Product Quality & Safety
Community Engagement
Governance
Low
Business Impact
High
Business Ethics & Governance
Ethics of Artificial Intelligence & Robotics
Data Privacy Management
Cybersecurity
Responsible Sourcing
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Accelerating our sustainable business: areas of focus
for Ocado Group going forward
We have identified three key areas of potential strategic
differentiation for Ocado Group. These topics are representative
of the defining attributes of the business model and will play a
key role in the business sustaining and enhancing its competitive
advantage as a global solutions provider for online grocery. They
are: Energy Efficiency & Carbon Emissions, Talent Attraction &
Development, and Food Waste Management. Of the remaining
topics, we have identified six as important enablers, where
continued progress will put the Group in the best position to go
faster in the execution of our strategy. These are Employee D&I,
Community Engagement, Responsible Sourcing, Product Quality
& Safety, Operational Waste Management and Business Life
cycle and Circularity. The remaining five areas will be carefully
monitored so as to ensure compliance with leading standards to
mitigate risk.
In accordance with these insights, the outcome of this materiality
assessment will contribute to ongoing refinement of our Group
strategy going forward.
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Engaging With Our Stakeholders
Our materiality assessment: a
key step in developing our ESG
strategy as a solutions provider
Materiality
This year we undertook a materiality assessment to
reflect the significant transformation journey the
business has been on in the last few years into our
role as a global technology company.
Determining and prioritising material issues
We have identified the 14 environmental, social and governance
issues which are the most important in shaping our risks and
opportunities and the most likely to impact value for stakeholders
in the years ahead. We determined relevant topics through a
robust process of desk research and stakeholder engagement. In
Ocado Retail is now a 50:50 joint venture with M&S, and a formal
practice, this meant assessing the likely priorities of each of our key
partner to Ocado Solutions. With the launch of our first international
stakeholder groups, through sustainability reports and reporting
CFCs, we are set to accelerate into our role as a global software and
frameworks, industry reports, media scanning, and other internal and
robotics solutions provider in grocery fulfilment and increasingly
external information. This initial work was further refined through
further afield. In partnership with sustainability consultancy Finch &
a series of interviews with key internal and external stakeholders,
Beak, we undertook a robust re-evaluation of those topics that are
to establish a comprehensive shortlist of material topics. Internal
most important to our stakeholders and of greatest business impact
workshops and external panel sessions were used to prioritise and
in the years ahead.
analyse these topics, which we have reviewed and ratified. For more
information on our ongoing progress in each of these areas, please
refer to the relevant sections of this Annual Report signposted in the
table on pages 74–75.
Environmental
Energy Efficiency & Carbon Emissions
Business Ethics
& Governance
Food Waste Management
Operational Waste Management
Equipment Life cycle & Circularity
Energy
Efficiency
& Carbon
Emissions
Occupational
Health
& Safety
Responsible
Sourcing
Data Privacy
Management
Food
Waste
Management
Talent
Attraction
& Development
Cybersecurity
Product Quality
& Safety
Social
Materiality Matrix
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Engagement
Operational
Waste
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Employee
Diversity
& Inclusion
Ethics of Artificial
Intelligence & Robotics
Equipment
Life cycle
& Circularity
Low
Business Impact
High
Business Ethics & Governance
Talent Attraction & Development
Employee Diversity & Inclusion
Occupational Health & Safety
Product Quality & Safety
Community Engagement
Governance
Ethics of Artificial Intelligence & Robotics
Data Privacy Management
Cybersecurity
Responsible Sourcing
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Stock Code: OCDO
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Engaging With Our Stakeholders
Continued
Our material issues and how they influence ability to create value over time.
We continue to make encouraging progress in the environmental, social and governance areas material to the Group’s ability to create
sustainable value. The sections of this report where you can learn more about the specifics of this progress are signposted below.
In addition, a discussion of the Group risk management process, principal risks and associated strategic objectives can be found on pages 60-71,
How We Manage Our Risks. The material topics of greatest impact to the business and importance to shareholders are incorporated within our
principal risks and emerging risks, as a result of the ongoing process to identify, understand and manage key risks, to improve the likelihood of
delivering our business objectives and to protect the interests of our key stakeholders.
Key:
Environment
Social
Governance
Topic
Description
Opportunity
Risk
Example of
Decreasing our carbon footprint by
limiting greenhouse gas emissions,
for instance through energy
efficient solutions.
• Lower carbon footprint.
• Corporate reputation.
• Lower operational costs.
• Societal impacts of
climate change.
• Preparedness for
regulatory changes.
• Stakeholder pressure
and boycotts.
Read more
Corporate
Responsibility
pages 82–88
Enabling our retail partners to
guarantee that no edible food is sent
to landfills by creating technological
advances and procedures in our
customer fulfilment centres, including
food redistribution and anaerobic
digestion.
Limiting waste resulting from our
operations by reducing, reusing and
recycling transportation packaging
and fulfilment centre waste streams,
including plastics.
Managing the environmental impact
and enhancing the adaptability and
longevity of the equipment in our
customer fulfilment centres.
Being a preferred employer and
creating opportunities for skills
development for our employees.
• Operational cost
• Non-compliance with
efficiency.
regulations.
• Positive environmental
• Operational costs.
and social impact.
• Stakeholder pressure.
•
Innovation opportunities.
Corporate
Responsibility
pages 82–88
•
Improved quality and
efficiency.
• Non compliance with
regulations.
• Cost reductions.
• Reputational risks.
Corporate
Responsibility
pages 82–88
•
Innovation.
opportunities.
• Product innovation
•
and quality.
• Cost efficiency.
• Future-proofing of
product portfolio.
• Employer reputation.
•
• Employee engagement.
• Operational excellence.
Investment costs
and ROI.
Maximising Efficiency
pages 44 and 45
• Non-compliance with
future regulations.
• Outperformance by
competition.
Inability to deliver
strategy.
Our People
pages 90–98
• Development costs.
• High turnover.
Building a diverse and inclusive
workforce that offers equal
opportunities and actively prohibits
discrimination and harassment.
• Capacity to attract new
• High turnover.
talent.
• Cultural dissonance.
• Enhanced collaboration.
• Non-compliance.
• Capacity for innovation.
Our People
pages 90–98
Corporate Governance
Report
pages 118 and119
Energy
Efficiency &
Carbon
Emissions
Food Waste
Management
Operational
Waste
Management
Equipment
Life cycle &
Circularity
Talent Attraction
& Development
Employee
Diversity &
Inclusion
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Back to contents Engaging With Our Stakeholders
Continued
Our material issues and how they influence ability to create value over time.
Example of
We continue to make encouraging progress in the environmental, social and governance areas material to the Group’s ability to create
Topic
Description
Opportunity
Risk
sustainable value. The sections of this report where you can learn more about the specifics of this progress are signposted below.
In addition, a discussion of the Group risk management process, principal risks and associated strategic objectives can be found on pages 60-71,
How We Manage Our Risks. The material topics of greatest impact to the business and importance to shareholders are incorporated within our
principal risks and emerging risks, as a result of the ongoing process to identify, understand and manage key risks, to improve the likelihood of
delivering our business objectives and to protect the interests of our key stakeholders.
Preventing work-related injuries and
illnesses for both Ocado Group’s and
our partners’ employees.
• Employer reputation.
• Casualties.
• Operational excellence
• Operational costs.
and quality.
•
Impact on license to
operate.
Occupational
Health & Safety
Read more
Our People
pages 90–98
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Product Quality
& Safety
Community
Engagement
Business Ethics
& Governance
Providing technological solutions that
enable our retail partners to deliver
food products that comply with the
highest quality and safety standards.
Contributing to making a positive
impact in local communities by
investing in programmes and projects
with our employees and partners.
Operating with ethical and transparent
business practices by rigorously
complying with laws and regulations
and actively preventing bribery,
corruption and anti-competitive
behaviour.
• Company reputation.
• Product recalls,
• Stakeholder trust.
incidents.
Our Solutions business
pages 34 to 37
• Customer health risks.
• Employee engagement.
• Licence to operate.
• Collaboration
opportunities.
• Access to local talent.
• Stakeholder trust.
• Licence to operate.
• Future regulatory
compliance.
• Reputational risk.
• Unfair business
practices due to
impropriety.
•
Internal costs.
• Non-compliance
and fines.
Corporate
Responsibility
pages 82–88
Ethics & Compliance
page 98
Our People
pages 90–98
Considering and addressing the ethical
concerns surrounding technological
advances and their social impacts.
• Company reputation.
• Societal implications.
•
•
Increased efficiency.
• Non-compliance and
Innovation potential.
fines.
Ethics & Compliance
page 98
Respecting employee and customer
data and privacy by actively protecting
our security systems and implementing
rigorous policies.
• Corporate reputation.
• Exposure of personal
• Partner, consumer and
data.
employee trust.
• Non-compliance
How We Manage
Our Risks
pages 60–71
and fines.
Ethics of Artificial
Intelligence &
Robotics
Data Privacy
Management
Cybersecurity
Preventing the unauthorised access
to our networks and IT systems and
developing solutions that are resilient
to cyber threats.
• Differentiation from
• Non-compliance
competition.
and fines.
• Product innovation and
•
quality.
Impact on business
continuity.
• Stakeholder and
employee trust.
• Loss of sensitive
information.
Responsible
Sourcing
Safeguarding ethical and sustainable
sourcing in order to ensure responsible
environmental, social and governance
practices and respect human rights
standards throughout the supply chain.
• Cost reductions.
• Severe incidents and
•
Innovation opportunities.
human rights breaches.
• Stakeholder trust.
• Sourcing risks.
Leadership Structure
page 114
Audit Committee
Report
pages 130 to 137
How We Manage
Our Risks
pages 60–71
Leadership
Structure page 110
Audit Committee
Report
pages 130 to 137
Corporate
Responsibility
pages 82–88
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Key:
Environment
Social
Governance
Energy
Efficiency &
Carbon
Emissions
Food Waste
Management
Employee
Diversity &
Inclusion
74
Topic
Description
Opportunity
Risk
Read more
Decreasing our carbon footprint by
• Lower carbon footprint.
• Societal impacts of
Corporate
Example of
limiting greenhouse gas emissions,
for instance through energy
efficient solutions.
• Corporate reputation.
• Lower operational costs.
Responsibility
pages 82–88
climate change.
• Preparedness for
regulatory changes.
• Stakeholder pressure
and boycotts.
Enabling our retail partners to
• Operational cost
• Non-compliance with
Corporate
guarantee that no edible food is sent
efficiency.
regulations.
to landfills by creating technological
advances and procedures in our
customer fulfilment centres, including
food redistribution and anaerobic
digestion.
• Positive environmental
• Operational costs.
and social impact.
• Stakeholder pressure.
•
Innovation opportunities.
Limiting waste resulting from our
•
Improved quality and
• Non compliance with
Corporate
operations by reducing, reusing and
efficiency.
regulations.
Responsibility
pages 82–88
Responsibility
pages 82–88
Operational
Waste
Management
recycling transportation packaging
and fulfilment centre waste streams,
including plastics.
•
Innovation.
opportunities.
• Cost reductions.
• Reputational risks.
Managing the environmental impact
• Product innovation
•
Investment costs
Maximising Efficiency
and enhancing the adaptability and
and quality.
and ROI.
pages 44 and 45
Equipment
Life cycle &
Circularity
longevity of the equipment in our
customer fulfilment centres.
• Cost efficiency.
• Non-compliance with
• Future-proofing of
future regulations.
product portfolio.
• Outperformance by
competition.
Being a preferred employer and
• Employer reputation.
•
Inability to deliver
creating opportunities for skills
development for our employees.
• Employee engagement.
• Operational excellence.
strategy.
• Development costs.
• High turnover.
Talent Attraction
& Development
Building a diverse and inclusive
• Capacity to attract new
• High turnover.
workforce that offers equal
talent.
opportunities and actively prohibits
discrimination and harassment.
• Cultural dissonance.
• Enhanced collaboration.
• Non-compliance.
• Capacity for innovation.
Our People
pages 90–98
Our People
pages 90–98
Corporate Governance
Report
pages 118 and119
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30029 9 February 2021 9:14 am Proof ShellEngaging With Our StakeholdersContinuedPromoting the success of the Company for the benefit of all stakeholders Effective engagement with our key stakeholders is critical to delivering our strategy and ensuring the long-term success of our business. We use a range of engagement mechanisms in order to understand and consider our stakeholders’ views in the oversight and decision-making of the Board. In some cases the Board engages directly with stakeholders but there is also significant engagement at both the senior management and operational level of the Company. The Board receives reports and updates on such engagement and the views and feedback gathered from stakeholders and this information is used to inform discussion and decision-making. A key example of the consideration of stakeholder interests in decision-making is illustrated in the decisions taken in response to the Covid-19 pandemic as detailed on page 81.The section below sets out our key stakeholder groups, the value of each group to the Company, the issues that matter most to them and how we engage with them. Further information can be found in the Corporate Governance section on how the Board meets its obligations with regards to stakeholder engagement at pages 112 to 113 and on how the Board’s discussions and decisions have been informed by different stakeholder considerations at page 118.All the stakeholders identified are key to the Ocado Group but, as shown on the graphic opposite, Partners refer specifically to our Ocado Solutions partners, Customers are the retail customers of Ocado Retail Limited and due to their separate and specific interests we have separately identified Suppliers for both Ocado Solutions and Ocado Retail.Further information as to how the Board has had regard to the s172 factors:Our Board’s approachPromoting long-term thinking and action by continually engaging with our stakeholders Our PeopleSociety and CommunityRegulatory BodiesInvestorsPartnersSuppliers (Solutions)Customers (Retail)Suppliers (Retail)Core segmentsOcado GroupOcado SolutionsOcado Retails172 factorKey example(s)Page numberConsequence of any decision in the long-term• Purpose. • Strategy.• Risk management.14–15 & 110 40–46 & 110 60-71 & 135Interests of employees• Employee engagement. • Culture. • Diversity and inclusion. • Employee health and wellbeing.77 & 97 & 113 91 & 110–111 93 90–92 & 113Fostering business relationships with suppliers, customers and others• Engagement with suppliers. • Engagement with customers. • Supply chain practices.78 & 80 80 86s172 factorKey example(s)Page numberImpact of operations on the community and the environment• Corporate responsibility strategy. • Ocado Foundation. • Support of SafeSpace charity appeal.82–86 87 88Maintaining high standard of business conduct• Culture and values. • Whistleblowing. • Human rights and modern slavery. • Anti-bribery and anti-corruption. • Board leadership.14 & 110 98 86 & 98 98 114–115Acting fairly between members• Shareholder engagement. • Investor information/AGM.77 & 112 178–185Our Stakeholders76Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 76Ocado-Annual-Report-2020-Strategic.indd 7609/02/2021 09:17:3009/02/2021 09:17:30Back to contents S
T
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Our People People
Investors
Investors
Why we value them
What matters to them
Why we value them
What matters to them
Our people bring a diverse range
of experience, expertise and
perspectives that contribute to
the values and culture of Ocado
and are essential for the delivery
of our strategic objectives. It is vital
for Ocado’s continued success
that we maintain an environment
where our people feel valued,
motivated, and able to thrive.
• An inclusive and diverse
working environment.
• Opportunities for career
and personal development.
• Having a voice.
• a safe and secure workplace
• Good pay and benefits.
• Working for a company that
is fair, treats people well and
that they can be proud of.
How the Group engages
• Various methods are used to communicate to all employees,
including Fuse, our company intranet system, which provides a
range of useful information for employees and updates on the
performance of the Company and other business matters, and
Ocado Connections, the twice monthly People newsletter.
• This year there has been a strong focus on mental health and
diversity and inclusion. To support employee mental health our
Mind Yourself campaign launched this year and a newly created
role, Global Head of Culture and Engagement, is focused on how to
support our people. A new Diversity & Inclusion Manager role has
also been created and diversity and inclusion events have been
held across the year. We have in place five inclusion committees for
LGBTQ+, gender, mental health, ethnic minorities and disability.
• Our new employee engagement platform, Peakon, introduced
this year, enables the Company to continuously gather employee
feedback and take more timely, responsive and focused action.
• The Speak Up whistle-blowing hotline allows employees to
confidentially raise any concerns or issues.
• Our employee representative body, Ocado Council, provides a
voice to employees. This is now being transitioned into a new
framework to better represent our growing business.
• The Designated Non-Executive Director attends Ocado Council
meetings to answer questions and listen to employee feedback
and then reports back to the full Board.
• CEO Tim Steiner provides regular live stream updates on the
business, with other Executive Directors in attendance who also
contribute, which also provides all employees the opportunity to
submit questions to be answered during the update.
• All significant new policies are considered by the Board, notably the
Our current and potential
investors ensure our
continued access to
capital. It is important
to maintain regular and
constructive dialogue to
communicate Ocado’s
strategy and business
objectives in order
to promote investor
confidence.
• Financial and
operating performance
of the business.
• Understanding the
purpose, values and
culture of the Company.
• Understanding the risks
and opportunities that
affect Ocado’s strategy
and performance.
• Long-term sustainable
and profitable growth
of the Company.
• Good governance and
transparency.
How the Group engages
•
Information is provided to shareholders, potential
investors and investment analysts regarding our
strategy, performance and business through our
website (which has been relaunched this year), press
releases, regulatory news announcements, shareholder
circulars and quarterly, half year and annual results.
• Our Directors and investor relations team attend
investor conferences and one-to-one investor meetings
and respond to particular shareholder queries to
communicate our business and understand the
interests of our investors. Due to Covid-19 restrictions
most engagement events this year have been held
digitally.
• Regular discussions with, and briefings for, investors
and analysts.
• The Board reviews and approves material
communications to investors, such as trading updates,
results announcements, the annual report and
accounts, and significant business events.
• Engagement by Committee Chairmen on significant
matters related to their areas of responsibility.
• Regular updates to the Board on market sentiment,
investor relations activity, and share price performance.
approval this year of the new Ocado Code of Conduct.
• Due to Covid-19 restrictions, the normal full Director
• Update reports at each Board meeting on people matters
including culture, diversity, talent and engagement.
• Regular updates to the Board on health and safety matters. This
year regular updates were given and discussions undertaken on
the introduction of measures to protect employee health in light
of Covid-19.
attendance at the 2020 annual general meeting was not
possible. For the 2021 AGM the Company has ensured
shareholder participation will be possible electronically
through an online meeting platform.
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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30029 9 February 2021 9:14 am Proof ShellEngaging With Our StakeholdersContinuedPromoting the success of the Company for the benefit of all stakeholders Effective engagement with our key stakeholders is critical to delivering our strategy and ensuring the long-term success of our business. We use a range of engagement mechanisms in order to understand and consider our stakeholders’ views in the oversight and decision-making of the Board. In some cases the Board engages directly with stakeholders but there is also significant engagement at both the senior management and operational level of the Company. The Board receives reports and updates on such engagement and the views and feedback gathered from stakeholders and this information is used to inform discussion and decision-making. A key example of the consideration of stakeholder interests in decision-making is illustrated in the decisions taken in response to the Covid-19 pandemic as detailed on page 81.The section below sets out our key stakeholder groups, the value of each group to the Company, the issues that matter most to them and how we engage with them. Further information can be found in the Corporate Governance section on how the Board meets its obligations with regards to stakeholder engagement at pages 112 to 113 and on how the Board’s discussions and decisions have been informed by different stakeholder considerations at page 118.All the stakeholders identified are key to the Ocado Group but, as shown on the graphic opposite, Partners refer specifically to our Ocado Solutions partners, Customers are the retail customers of Ocado Retail Limited and due to their separate and specific interests we have separately identified Suppliers for both Ocado Solutions and Ocado Retail.Further information as to how the Board has had regard to the s172 factors:Our Board’s approachPromoting long-term thinking and action by continually engaging with our stakeholders Our PeopleSociety and CommunityRegulatory BodiesInvestorsPartnersSuppliers (Solutions)Customers (Retail)Suppliers (Retail)Core segmentsOcado GroupOcado SolutionsOcado Retails172 factorKey example(s)Page numberConsequence of any decision in the long-term• Purpose. • Strategy.• Risk management.14–15 & 110 40–46 & 110 60-71 & 135Interests of employees• Employee engagement. • Culture. • Diversity and inclusion. • Employee health and wellbeing.77 & 97 & 113 91 & 110–111 93 90–92 & 113Fostering business relationships with suppliers, customers and others• Engagement with suppliers. • Engagement with customers. • Supply chain practices.78 & 80 80 86s172 factorKey example(s)Page numberImpact of operations on the community and the environment• Corporate responsibility strategy. • Ocado Foundation. • Support of SafeSpace charity appeal.82–86 87 88Maintaining high standard of business conduct• Culture and values. • Whistleblowing. • Human rights and modern slavery. • Anti-bribery and anti-corruption. • Board leadership.14 & 110 98 86 & 98 98 114–115Acting fairly between members• Shareholder engagement. • Investor information/AGM.77 & 112 178–185Our Stakeholders76Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 76Ocado-Annual-Report-2020-Strategic.indd 7609/02/2021 09:17:3009/02/2021 09:17:30Back to contents
Engaging With Our Stakeholders
Continued
Partners
Partners
Suppliers
(Solutions)
Suppliers (Solutions)
Why we value them
What matters to them
Why we value them
What matters to them
Building trusted
partnerships through
ongoing dialogue and
shared learnings helps us
to better understand the
needs of our partners and
to develop and improve
our offering to continue
to provide cutting-edge
solutions.
•
Innovation.
• A flexible offering of
potential options for
fulfilment.
• Product development.
• Quality and financial
performance.
• Supply chain
management.
• Building a long-term
relationship.
How the Group engages
• Direct engagement with senior management,
procurement managers and commodity managers and
broader engagement in operations across the business
as relationships with our partners develop and the
global CFCs are becoming operational.
• Corporate responsibility and ethics reporting.
• Setting KPIs and providing feedback during ongoing
projects.
• Bring together representatives from all our global
partners as part of the OSP Leadership Club to work
collaboratively and discuss experiences of shared
importance, and build our understanding of partners’
needs.
• Work with our partners on press releases and updates
on projects undertaken.
• Regular Executive Director engagement with the senior
executives of partners, including quarterly executive
leadership meetings between all global partners.
• Board review and approval of any significant
partnerships or orders by current partners .
• Update reports at each Board meeting.
A strong supply chain is
critical to our business as
we rely on our suppliers to
be able to meet the needs
of our partners and ensure
that we can meet our
shared targets for growth
and development across
our network.
• Building a long-term
relationship.
• Success and growth of
Ocado’s business.
• Fair trade.
• Social and ethical
impact.
• Equitable supply chain
practices and anti-
bribery and corruption
policies in place.
• Ability to collaborate.
• Prompt and accurate
payment.
How the Group engages
• Our onboarding process provides two-way
communication to build relationships with our
suppliers, and through auditing across our supply
chains we can ensure that high standards are
maintained.
• We are currently developing a supplier onboarding
manual to help suppliers understand and meet Ocado’s
required standards.
• Direct engagement with the senior executives of
suppliers by our Executive Directors and regular
contact with suppliers from our procurement managers
provides an ongoing dialogue to address any issues
or potential issues. During the height of Covid-19,
Ocado provided letters to suppliers to confirm to their
regulators the need to keep operating to supply Ocado
as a key business during the pandemic.
• Corporate responsibility and ethics reporting.
• Review and approval of significant orders by the Board.
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P
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T
Engaging With Our Stakeholders
Continued
•
Innovation.
A strong supply chain is
• Building a long-term
critical to our business as
relationship.
Building trusted
partnerships through
ongoing dialogue and
shared learnings helps us
to better understand the
needs of our partners and
to develop and improve
our offering to continue
to provide cutting-edge
solutions.
• A flexible offering of
potential options for
fulfilment.
• Product development.
• Quality and financial
performance.
• Supply chain
management.
• Building a long-term
relationship.
How the Group engages
• Direct engagement with senior management,
procurement managers and commodity managers and
broader engagement in operations across the business
as relationships with our partners develop and the
global CFCs are becoming operational.
• Corporate responsibility and ethics reporting.
• Setting KPIs and providing feedback during ongoing
• Bring together representatives from all our global
partners as part of the OSP Leadership Club to work
collaboratively and discuss experiences of shared
projects.
needs.
• Work with our partners on press releases and updates
on projects undertaken.
• Regular Executive Director engagement with the senior
executives of partners, including quarterly executive
leadership meetings between all global partners.
• Board review and approval of any significant
partnerships or orders by current partners .
• Update reports at each Board meeting.
we rely on our suppliers to
be able to meet the needs
of our partners and ensure
that we can meet our
shared targets for growth
and development across
our network.
• Success and growth of
Ocado’s business.
• Fair trade.
• Social and ethical
impact.
• Equitable supply chain
practices and anti-
bribery and corruption
policies in place.
• Ability to collaborate.
• Prompt and accurate
payment.
How the Group engages
• Our onboarding process provides two-way
communication to build relationships with our
suppliers, and through auditing across our supply
chains we can ensure that high standards are
maintained.
• We are currently developing a supplier onboarding
manual to help suppliers understand and meet Ocado’s
required standards.
suppliers by our Executive Directors and regular
contact with suppliers from our procurement managers
provides an ongoing dialogue to address any issues
or potential issues. During the height of Covid-19,
Ocado provided letters to suppliers to confirm to their
regulators the need to keep operating to supply Ocado
as a key business during the pandemic.
• Corporate responsibility and ethics reporting.
• Review and approval of significant orders by the Board.
importance, and build our understanding of partners’
• Direct engagement with the senior executives of
Partners
Partners
Suppliers
(Solutions)
Suppliers (Solutions)
Society and
Community
Society and Community
Regulatory
Bodies
Regulatory Bodies
Why we value them
What matters to them
Why we value them
What matters to them
Why we value them
What matters to them
Why we value them
What matters to them
Making a meaningful
contribution to the
wider society enables
us to create stronger
communities and have a
positive environmental
and social impact.
Engagement with
non-governmental
organisations and
community groups
helps us to understand
our impact on the wider
society and the ways
in which we can work
together to make a
valuable difference.
How the Group engages
• Environmental and
social issues, including
climate change,
carbon emissions,
food and road safety,
human rights, waste
management, and
recycling.
• Legal and regulatory
compliance of the
business.
• Responsible sourcing
and procurement
practices.
• Having a positive
impact on the
community.
• Environmental and
socially responsible
business practices and
credentials.
Active and regular
engagement with the
government and our
regulators helps to ensure
we understand changing
regulatory requirements
and can maintain a
constructive dialogue to
meet these requirements.
• Legal and safe
operations with
compliance with
relevant regulations.
• Worker pay and
conditions.
• Waste management
and environmentally
sound practices.
• Consumer protection.
• Food and product
safety.
• Health and safety.
• Brexit preparedness.
• Privacy and security.
How the Group engages
• Direct engagement with regulators, mainly written,
including seeking sign-off approvals, reporting
breaches, annual technical submissions, making formal
requests for information, and during investigations.
• Establishing and maintaining key contact relationships
• Direct engagement locally with MPs, councils and
with the Company’s main regulators.
community groups.
• Environmental and social reporting on our website,
including corporate responsibility, modern slavery,
gender pay and carbon emissions.
• As part of Ocado’s ongoing free coding education
resource for teachers, Code for Life, we opened up
Rapid Router, free education resources that teach
children aged 6-13 coding and programming at home,
to the wider community.
• Philanthropy and employee-matched funding for
charity policy.
• Environmental and social issues update reports at
Board meetings.
• Oversight by the Board of corporate responsibility plans
and reporting, including the review and approval of key
corporate statements..
• Confirmation and updates on our compliance with
regulations through our website, regulatory news
announcements and the annual report.
• Engagement with the British Retail Consortium, and
other trade associations, including, this year, over the
grocery retail industry’s response to Covid-19.
• The Board is informed of relevant governance, legal,
regulatory and compliance matters, including updates
on preparations for the UK’s withdrawal from the EU
durnig the year.
• As our operations are becoming more global there is
an increasing focus on the need to engage with local
regulators globally and how best to achieve this.
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30029 9 February 2021 9:14 am Proof ShellEngaging With Our StakeholdersContinuedSuppliers (Retail) Suppliers (Retail)Why we value themGood suppliers are essential to be able to provide a full range of quality products to allow us to offer customers an excellent range and service.What matters to them• Prompt and accurate payment.• Understanding Ocado standards and policies for suppliers.• Long-term partnerships.• Responsible sourcing.• GSCOP compliance.• Ocado’s financial performance, reputation and growth prospects.How the Group engages• Compliance with the Groceries Supply Code of Practice (GSCOP).• Various methods of communication with suppliers are used, including through our dedicated supplier website, supplier surveys and attendance at supplier conferences. • This year we have held virtual conferences with our top suppliers and own brand suppliers. We also hold supplier forums on specific issues, for example regarding packaging with our own brand suppliers.• Regular update reports to the Board from Ocado Retail regarding retail performance and GSCOP.Customers (Retail) Customers (Retail)Why we value themCustomers are vital for the success of Ocado Retail and for the continuing growth and success of the technology and robotics business that supports the retail offering. Listening to customers helps us to better understand their needs so we can continue to meet these.What matters to them• Excellent customer service. • Access and ease of use of the online shopping experience.• A wide range of great value and quality products. • Availability of delivery slots and reliability of delivery.• Good communication.How the Group engages• Ongoing communication with customers and potential customers through emails, social media and advertising. Customer feedback on the switch to Marks and Spencer products was used to enable targeted communication addressing the queries raised.• Our customer contact centre is open seven days a week to assist customers with any queries and there is a new live chat feature on ocado.com allowing a quick response to customers on the website.• Regular update reports to the Board from Ocado Retail, including trading figures, customer behaviour and new and ongoing initiatives.• Many of our Directors are regular ocado.com customers which provides a great way to understand the customer experience. 80Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 80Ocado-Annual-Report-2020-Strategic.indd 8009/02/2021 09:17:3309/02/2021 09:17:33Back to contents 30029 9 February 2021 9:14 am Proof ShellEngaging With Our StakeholdersContinuedSuppliers (Retail) Suppliers (Retail)Why we value themGood suppliers are essential to be able to provide a full range of quality products to allow us to offer customers an excellent range and service.What matters to them• Prompt and accurate payment.• Understanding Ocado standards and policies for suppliers.• Long-term partnerships.• Responsible sourcing.• GSCOP compliance.• Ocado’s financial performance, reputation and growth prospects.How the Group engages• Compliance with the Groceries Supply Code of Practice (GSCOP).• Various methods of communication with suppliers are used, including through our dedicated supplier website, supplier surveys and attendance at supplier conferences. • This year we have held virtual conferences with our top suppliers and own brand suppliers. We also hold supplier forums on specific issues, for example regarding packaging with our own brand suppliers.• Regular update reports to the Board from Ocado Retail regarding retail performance and GSCOP.Customers (Retail) Customers (Retail)Why we value themCustomers are vital for the success of Ocado Retail and for the continuing growth and success of the technology and robotics business that supports the retail offering. Listening to customers helps us to better understand their needs so we can continue to meet these.What matters to them• Excellent customer service. • Access and ease of use of the online shopping experience.• A wide range of great value and quality products. • Availability of delivery slots and reliability of delivery.• Good communication.How the Group engages• Ongoing communication with customers and potential customers through emails, social media and advertising. Customer feedback on the switch to Marks and Spencer products was used to enable targeted communication addressing the queries raised.• Our customer contact centre is open seven days a week to assist customers with any queries and there is a new live chat feature on ocado.com allowing a quick response to customers on the website.• Regular update reports to the Board from Ocado Retail, including trading figures, customer behaviour and new and ongoing initiatives.• Many of our Directors are regular ocado.com customers which provides a great way to understand the customer experience. 80Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 80Ocado-Annual-Report-2020-Strategic.indd 8009/02/2021 09:17:3309/02/2021 09:17:3330029 9 February 2021 9:14 am Proof ShellCase StudyPragmatism and resilience in a year impacted by the Covid-19 pandemicThe Covid-19 pandemic has affected all our stakeholders in different ways and has changed the ways in which we have been able to engage. We have considered the particular issues facing stakeholders and this has been reflected through decisions we have made during the last year.Due to the pandemic our 2020 annual general meeting was conducted behind closed doors but we also held a trading update on the morning of the annual general meeting to be able to communicate with our shareholders. Without our people we would not have been able to achieve the success we have during this difficult period. We have put in place a number of initiatives during the pandemic to ensure that our colleagues have been supported. A 10% bonus was paid to frontline employees during the height of the pandemic and we introduced new health and safety protocols and mental health support systems for all employees. It was important to balance the needs of retail customers and the communities we serve and the safety and wellbeing of our people in the decisions made to adapt operations in light of the pandemic.We worked with our Solutions partners both in the UK and internationally to increase capacity so that as many customers as possible could be catered for, including increasing capacity at our current CFCs and working to continue to bring online our new CFC projects on time. Our supply chain is vital for the continuation of our business and during the pandemic, despite the challenges to maintain relationships with suppliers, we maintained an ongoing dialogue and provided support where possible. Letters were provided to those suppliers to Solutions key to our continuing operations to confirm to their regulators the need for them to be permitted to keep operating. An example with our retail suppliers was changing the packaging of eggs sold when suppliers were unable to source their usual cartons, to help their operations and enable us to continue to sell to our customers. We also engaged with the UK government and regulators, including the British Retail Consortium, regarding the response to the pandemic to ensure Ocado could help feed the nation.Forward-looking focusCovid-19 has significantly accelerated the shift to online grocery and there are strong signs that the increase in demand is going to be sustained in the future. We need to ensure we are in a strong position to build our business and support the growth potential of our partners globally. The capital raise undertaken by Ocado in June provided the necessary finance to allow further investment in the offering to our current Solutions partners and the ability to pursue opportunities with new potential partners. We have also invested in our people to allow us to continue to innovate and grow. With significant growth in our workforce globally we need to continue to invest in our people as the key driver for our future success. Our new direct employee engagement system Peakon will allow us to understand the ongoing needs of our employees and to respond quickly so we can support, retain and develop our people. We believe the investments we are making in our business, including our recent acquisitions of two specialised robotics companies, will ultimately benefit our shareholders as our success continues. As the Company grows and develops, meaningful engagement with our stakeholders and building good relationships will improve the quality of our decision-making. The materiality assessment, as detailed on pages 72 to 75, that we are undertaking is essential to improve our understanding of the priorities of our key stakeholders and to be able to take decisions about our future with this knowledge will be vital to our long-term success.81Stock Code: OCDO Annual Report and Accounts Ocado Group plc STRATEGIC REPORTOcado-Annual-Report-2020-Strategic.indd 81Ocado-Annual-Report-2020-Strategic.indd 8109/02/2021 09:17:3409/02/2021 09:17:34Back to contents Corporate Responsibility
Corporate Responsibility
refocussed for a changing
business
The strategy continues to hold the UN Sustainable
Development Goals (SDGs) as a central framework,
and is working in conjunction with the ESG
materiality work outlined on page 72.
The SDGs will be the central means of reporting progress in future annual and
Corporate Responsibility reports, as well as the wider governance reporting
set out in this report.
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Back to contents Corporate Responsibility
Corporate Responsibility
refocussed for a changing
business
The strategy continues to hold the UN Sustainable
Development Goals (SDGs) as a central framework,
and is working in conjunction with the ESG
materiality work outlined on page 72.
The SDGs will be the central means of reporting progress in future annual and
Corporate Responsibility reports, as well as the wider governance reporting
set out in this report.
S
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2.Skills for the Future
We will share our skills and capabilities
to ensure that everyone can learn today
the life skills they will need tomorrow,
providing opportunities to address basic
life skills where we feel as a business we
can contribute time or expertise.
Focus areas:
Enabling – reading as a basic necessity
to get on in life
Safety – keeping the communities we live
and work in safe
Connected – getting people online and
targeting the digital divide
Digital literacy is not just for software
developers and engineers, it’s a skill
that everyone needs to participate fully
in society and the economy. Our goal is
to empower others to get ahead in life,
supercharging the next generation of
talent with the most powerful tool we
know, technology.
Focus areas:
Accessibility – creating more equitable
opportunities for marginalised groups
Motivation – inspiring the next
generation of STEM leaders
Skills – upskilling learners and educators
to be ready for the future of work
➔ Read more about Skills for the
Future on page 85
Ocado Group Corporate Responsibility Strategy:
Our mission is to “change the way the world shops” – seeking to harness the unlimited
potential of technology for people and the planet. To get there we are preparing to
ensure our future is a sustainable one. The three pillars below identify the areas where we
have a significant impact, a great opportunity to make a difference and an ability to use
our expertise for greater environmental and societal change
1.Natural Resources
We will use our expertise and insight to enable partners to reduce their impact
on the planet, whilst radically reducing the impact of our own operations.
Focus areas
Climate – responding to the climate crisis and mapping our resource usage
Operations – reducing the climate impact of our operations
Innovation – investing in new technologies and innovating for good
➔ Read more about our Natural Resources
on page 84
3.
Responsible Sourcing
A tech company putting people first, we
go further to create a positive impact for
everybody across our supply chain.
Focus areas
Managing risk – mapping and
assessing high risk products and
materials
Modern slavery – tackling forced
labour and human trafficking
Human rights – stepping up our
commitments to human rights within
our supply chain
➔ Read more about Responsible
Sourcing on page 86
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Corporate Responsibility
Continued
1.Natural Resources
We contribute to climate change through our operations and we
face an acute threat to our supply chains and our customers and
employees’ livelihoods as climate change worsens. We have a
responsibility to manage our environmental impacts and all of our
stakeholders expect this of us. Rising to this challenge presents
commercial opportunities ranging from attracting talent, reducing
costs, identifying new income streams and innovating new solutions.
Our relationship with Ecometrica continued for the fifth year,
providing a centralised data management system. We track carbon
emissions from our CFCs, spokes and vehicles.
Compared to 2018/19 there has been a 0.58% decrease in our location-
based scope 1 and 2 total carbon emissions. Following on from our
success with CNG trucks we have increased their use this year and are
now using biomethane to reduce their footprint further. We have also
continued to invest in energy efficiency measures such as increasing LED
lighting within our buildings. Our location-based-intensity measure of
tCO2 e per 100,000 orders has decreased from our 2012/13 base line by
39.19%. Due to the Covid-19 pandemic, our order sizes have changed this
year, as customers purchase more within one delivery. As a consequence,
we have introduced a tCO2 e per 100,000 normalised orders, to more
accurately reflect this. To illustrate the unusual year, we have included
previous years of this metric as comparison.
The majority of our emissions continue to derive from our fleet,
accounting for 73%, followed by electricity at 20%. Our footprint is
predominantly UK based, with 99.7% originating in the UK and 0.3%
from other worldwide operations.
For the fourth year running we partnered with the Carbon Trust who
have carried out a limited assurance engagement on selected GHG
emissions data in accordance with ISO 14064:3 (table below). With the
introduction of the Streamlined Energy and Carbon Reporting (SECR)
we have also included for the first year our energy use, which was
assured at the same time as the carbon data.
GHG Emissions
GHG Emissions (tonnes CO2e)
2019/20
2018/19
2012/13
86,502
87,038
Scope 1 – Direct
Scope 2 – Indirect
22,811
21,644
Location-based
814
Market-based
729
Total Emissions (Location-based) 108,682
109,313
Intensity Measure (Tonnes of CO2e/100,000 orders)
514
Location-based
Market-based
411
Intensity Measure (Tonnes of CO2e/Normalised 100,000)
Location-based
Market-based
Energy (MWh)
398
321
424,439
491
392
n/a
501
404
39,530
21,613
n/a
61,143
823.4
n/a
730
n/a
n/a
Carbon Intensity Measures – Actual and Normalized Orders
y
t
i
s
n
e
t
n
i
n
o
b
r
a
C
850
800
750
700
650
600
550
500
450
400
350
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
tC02e per 100,000 orders
tC02e per 100,000 normalized orders
Financial Year FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
Reported intensity
measure
823.4
Normalized intensity
730
measure
815.1
725
582.8
596.4
550.1
514.0
501
731
660
585
569
546
491
398
Under the SECR reporting requirements, we also include ORL’s carbon
footprint as a large unquoted company in the table (below).They are
not reporting on any energy efficiency measures this year, but plan to
in future reports. Their footprint is solely UK based and total energy
consumption for 2019–20 is 1,378,537 kWh.
Emissions (Tonnes of CO2e)*
Scope 1
Scope 2 (location-based)
Scope 2 (market-based)
Scope 3 – business travel where responsible for fuel
Intensity measure – Tonnes CO2e per 100,000 orders
2019–20
91.39
198.27
0
7.70
17.94
* Uses WBCSD/WRI Greenhouse Gas Protocol: a corporate accounting standard revised edition
methodology with an operational control approach, using UK government GHG conversion factors.
We have participated in CDP’s Climate Change Disclosure Submission
for the fourth consecutive year. We are delighted to once again have
retained a score of a B.
BB
B C
20
19
18
17
424,439 MWh
Global energy use in 2020
from scope 1 and 2 sources
Food Waste Management
We continue to believe that Ocado has the lowest food wastage in
the industry. As in previous years, we are committed to ensuring that
no edible food goes to landfill and all edible food is redistributed. We
continue to send all inedible food to anaerobic digestion and during
2020 over 3,000 tones of inedible food was diverted from landfill,
saving 98% of the associated carbon. In 2020 only 0.044% of food
items in our CFCs was wasted, a figure we continue to be proud of.
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continued to invest in energy efficiency measures such as increasing LED
measure
730
731
660
585
569
546
491
398
lighting within our buildings. Our location-based-intensity measure of
tCO2 e per 100,000 orders has decreased from our 2012/13 base line by
39.19%. Due to the Covid-19 pandemic, our order sizes have changed this
Under the SECR reporting requirements, we also include ORL’s carbon
footprint as a large unquoted company in the table (below).They are
not reporting on any energy efficiency measures this year, but plan to
year, as customers purchase more within one delivery. As a consequence,
in future reports. Their footprint is solely UK based and total energy
Corporate Responsibility
Continued
1.Natural Resources
We contribute to climate change through our operations and we
face an acute threat to our supply chains and our customers and
employees’ livelihoods as climate change worsens. We have a
responsibility to manage our environmental impacts and all of our
stakeholders expect this of us. Rising to this challenge presents
commercial opportunities ranging from attracting talent, reducing
costs, identifying new income streams and innovating new solutions.
Our relationship with Ecometrica continued for the fifth year,
providing a centralised data management system. We track carbon
emissions from our CFCs, spokes and vehicles.
Compared to 2018/19 there has been a 0.58% decrease in our location-
based scope 1 and 2 total carbon emissions. Following on from our
success with CNG trucks we have increased their use this year and are
now using biomethane to reduce their footprint further. We have also
y
t
i
s
n
e
t
n
i
n
o
b
r
a
C
850
800
750
700
650
600
550
500
450
400
350
we have introduced a tCO2 e per 100,000 normalised orders, to more
accurately reflect this. To illustrate the unusual year, we have included
previous years of this metric as comparison.
The majority of our emissions continue to derive from our fleet,
accounting for 73%, followed by electricity at 20%. Our footprint is
predominantly UK based, with 99.7% originating in the UK and 0.3%
from other worldwide operations.
For the fourth year running we partnered with the Carbon Trust who
have carried out a limited assurance engagement on selected GHG
emissions data in accordance with ISO 14064:3 (table below). With the
introduction of the Streamlined Energy and Carbon Reporting (SECR)
we have also included for the first year our energy use, which was
assured at the same time as the carbon data.
GHG Emissions (tonnes CO2e)
2019/20
2018/19
2012/13
GHG Emissions
Scope 1 – Direct
Scope 2 – Indirect
Location-based
Market-based
Location-based
Market-based
Location-based
Market-based
Energy (MWh)
84
Total Emissions (Location-based) 108,682
109,313
61,143
Intensity Measure (Tonnes of CO2e/100,000 orders)
Intensity Measure (Tonnes of CO2e/Normalised 100,000)
87,038
86,502
39,530
21,644
729
22,811
814
21,613
n/a
501
404
398
321
424,439
514
411
491
392
n/a
823.4
n/a
730
n/a
n/a
Carbon Intensity Measures – Actual and Normalized Orders
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
tC02e per 100,000 orders
tC02e per 100,000 normalized orders
Financial Year FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
Reported intensity
Normalized intensity
measure
823.4
815.1
725
582.8
596.4
550.1
514.0
501
consumption for 2019–20 is 1,378,537 kWh.
Emissions (Tonnes of CO2e)*
Scope 1
Scope 2 (location-based)
Scope 2 (market-based)
Scope 3 – business travel where responsible for fuel
Intensity measure – Tonnes CO2e per 100,000 orders
* Uses WBCSD/WRI Greenhouse Gas Protocol: a corporate accounting standard revised edition
methodology with an operational control approach, using UK government GHG conversion factors.
We have participated in CDP’s Climate Change Disclosure Submission
for the fourth consecutive year. We are delighted to once again have
retained a score of a B.
2019–20
91.39
198.27
0
7.70
17.94
BB
B C
20
19
18
17
424,439 MWh
Global energy use in 2020
from scope 1 and 2 sources
Food Waste Management
We continue to believe that Ocado has the lowest food wastage in
the industry. As in previous years, we are committed to ensuring that
no edible food goes to landfill and all edible food is redistributed. We
continue to send all inedible food to anaerobic digestion and during
2020 over 3,000 tones of inedible food was diverted from landfill,
saving 98% of the associated carbon. In 2020 only 0.044% of food
items in our CFCs was wasted, a figure we continue to be proud of.
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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30029 9 February 2021 9:14 am Proof ShellCase StudyUpskilling OffendersIn 2020, we started working closely with all-female HM Prison Low Newton in Durham. From August, the residents began sewing reusable face covers for our employees, with a total of 4,800 made up to the end of November. We’ve prioritised distributing the covers to our drivers and warehouse operatives who are working on the front line. We aim to reduce the need for single-use plastic masks, which are often worn once, discarded, and may not biodegrade. This is a full-circle, sustainable project that takes uniform fabric – fleeces, trousers and tops – which could have gone to landfill and repurposes it to benefit both the makers and our employees. We plan to keep working with HM Prison Low Newton and others, such as HMP Styal in Cheshire, to protect more of our employees and continue to upskill prison residents. “ I really enjoy coming to work because I am getting the chance to learn new skills and I am getting the chance to get to meet new people.”Michele“ I enjoy coming to work, it gets me out of my room and it is a good feeling knowing I’ve achieved something and I enjoy working in a team and getting to learn new skills.”Emma2.Skills for the FutureA lack of education and digital skills acutely limit people’s life chances today and this will be exacerbated in the future. These issues affect our business by limiting our pool of talent which affects our growth, as well as the societal contribution we can make to children, young people and those returning to work. During the year, and particularly given the challenges posed by Covid-19, we have embraced a number of opportunities to contribute to skills, education and learning. TutorMateTutorMate is a unique, online, remote reading support solution for 5–7 year-olds in disadvantaged areas. It is the core programme of Innovations for Learning (IFL), a UK registered charity, established in December 2017, which believes in the power of literacy to transform lives. Since the return of UK schools in September 2020, Ocado Group has been providing employee volunteers, as well as funding, for the TutorMate online reading programme. This scheme supports over 800 struggling young readers in London, Leeds and Bradford. A total of 54 Ocado Group employees, from all parts of the business across the UK signed up to read remotely with primary school children for 30 minutes a week until the end of the current academic year. Of the volunteers, 38 were assigned to a student in London and there were 1,511 minutes of reading sessions with the children based in London in the four weeks 26 Oct–23 Nov. Volunteers were assigned to read with a child from Leeds and Bradford. A total of 23 reading sessions took place with these children in the four weeks 26 Oct–23 Nov, lasting 606 minutes in total.85Stock Code: OCDO Annual Report and Accounts Ocado Group plc STRATEGIC REPORTOcado-Annual-Report-2020-Strategic.indd 85Ocado-Annual-Report-2020-Strategic.indd 8509/02/2021 09:17:4309/02/2021 09:17:43Back to contents
Corporate Responsibility
Continued
3.Responsible
Sourcing
Human rights issues can be prevalent through a supply chain. Even
beyond a moral obligation to tackle these issues, businesses face a
serious risk to their licence to operate should this not be carefully
managed. By tackling these challenges we mitigate risks to our
business, help secure our reputation and demonstrate to all of our
stakeholders that we are a responsible business.
This year has seen vast amounts of work go into updating and
redrafting many of our policies, procedures and working practices, to
ensure they are in line with the changing business and as robust as
they can conceivably be.
We choose our business partners and suppliers carefully. We want
to build and maintain strong relationships with those who share our
values and demonstrate similar commitments and standards. Our Code
of Conduct sets out our minimum standards and expectations for all
Ocado Group employees and contractors, wherever they are based.
Our Human Rights Policy also sets out our requirements for all
persons working for us or on our behalf, in any capacity. Provisions
in the policy include:
• The prohibition of all forced and compulsory labour.
• The prohibition of child labour.
• The right to freedom of association and collective bargaining.
• That working hours, wages and deductions comply with
national laws.
• That discrimination does not occur in the conditions of
employment of workers.
Our whistle-blowing “Speak Up” policy encourages our employees,
suppliers and other third parties to report genuine suspicions about
any wrongdoing or malpractice within Ocado, or that impact Ocado,
and can be assured that any information received will be treated
seriously and confidentially.
Any instance of non-compliance will be investigated and appropriate
disciplinary action will be taken as needed.
Where there is a significant bribery or corruption risk, departments
must consult the legal team in relation to appropriate anti-bribery
and corruption compliance measures before:
• Appointing a new supplier or provider of goods;
• Appointing an agent to work on Ocado’s behalf; or
• Entering into a new contract or amending the terms of an
existing contract.
1,856
Direct suppliers
£1,255m
spent
95% of our spend was with
56
Suppliers
During FY20, 95% of supply chain spend was with just 3% of our
suppliers. This presents us with an opportunity to greatly focus our
engagement efforts with key suppliers, in the first instance, before
expanding out to the wider supply chain.
Beginning this financial year, we became a member of techUK.
Through our membership we attend their Sustainable Supply
Chain Group, a forum to hear from leading NGOs, government and
international officials, on topics including modern slavery and
human rights. Group discussions focus on the interpretation and
understanding of current requirements and new policies under
consideration by the UK Government, the EU, UN, OECD, and
international efforts.
➔ Read our most recent modern slavery act statement at
www.ocadogroup.com.
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Continued
3.Responsible
Sourcing
Human rights issues can be prevalent through a supply chain. Even
Any instance of non-compliance will be investigated and appropriate
beyond a moral obligation to tackle these issues, businesses face a
disciplinary action will be taken as needed.
serious risk to their licence to operate should this not be carefully
managed. By tackling these challenges we mitigate risks to our
business, help secure our reputation and demonstrate to all of our
stakeholders that we are a responsible business.
This year has seen vast amounts of work go into updating and
redrafting many of our policies, procedures and working practices, to
Where there is a significant bribery or corruption risk, departments
must consult the legal team in relation to appropriate anti-bribery
and corruption compliance measures before:
• Appointing a new supplier or provider of goods;
• Appointing an agent to work on Ocado’s behalf; or
ensure they are in line with the changing business and as robust as
• Entering into a new contract or amending the terms of an
they can conceivably be.
We choose our business partners and suppliers carefully. We want
to build and maintain strong relationships with those who share our
values and demonstrate similar commitments and standards. Our Code
of Conduct sets out our minimum standards and expectations for all
Ocado Group employees and contractors, wherever they are based.
Our Human Rights Policy also sets out our requirements for all
persons working for us or on our behalf, in any capacity. Provisions
in the policy include:
• The prohibition of all forced and compulsory labour.
• The prohibition of child labour.
• The right to freedom of association and collective bargaining.
• That working hours, wages and deductions comply with
national laws.
• That discrimination does not occur in the conditions of
employment of workers.
existing contract.
1,856
Direct suppliers
£1,255m
spent
95% of our spend was with
56
Suppliers
Our whistle-blowing “Speak Up” policy encourages our employees,
engagement efforts with key suppliers, in the first instance, before
suppliers and other third parties to report genuine suspicions about
expanding out to the wider supply chain.
During FY20, 95% of supply chain spend was with just 3% of our
suppliers. This presents us with an opportunity to greatly focus our
any wrongdoing or malpractice within Ocado, or that impact Ocado,
and can be assured that any information received will be treated
seriously and confidentially.
Beginning this financial year, we became a member of techUK.
Through our membership we attend their Sustainable Supply
Chain Group, a forum to hear from leading NGOs, government and
international officials, on topics including modern slavery and
human rights. Group discussions focus on the interpretation and
understanding of current requirements and new policies under
consideration by the UK Government, the EU, UN, OECD, and
international efforts.
➔ Read our most recent modern slavery act statement at
www.ocadogroup.com.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
We are also delighted to now be able to support international
colleagues, as the Ocado Foundation has spread its wings beyond
the UK and now offers support for colleagues in their fundraising
endeavours in other countries, where Ocado has established
operations.
Gurleen Minhas, a colleague in Canada, raised over $871 for the
Princess Margaret Cancer Centre, undertaking its 8th Annual
Journey to Conquer Cancer Run/Walk.
Gurleen said the following;
“ Having the backing of the Foundation
is greatly motivating. And knowing our
fundraising efforts are supported, wherever
we’re based, brings us together as global
colleagues. The additional funds will help
the Princess Margaret cancer research and
teaching centre further its vital work.”
Gurleen Minhas
£400,000+
in donations to charities
The Ocado Foundation remains the home of our charitable and
fundraising activity, both internally and externally.
This year has been somewhat different with many volunteering
opportunities and fundraising not taking place due to Covid-19,
but where colleagues and volunteers have been able to find
creative ways to support their charities and endeavours, we
have continued to support.
Covid-19 placed enormous pressure on charities’ resources and
their ability to operate. Sources of funding disappeared, and
needs of recipients increased. We worked hard to ease some
of these challenges, donating over £400,000 to food banks,
homeless accommodation and places of safety shelters, and
making over 100 donations with vouchers, matched funding and
funding in lieu of volunteering hours.
86
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Corporate Responsibility
Continued
SafeSpace
‘The Lister’ means everything to many
north Londoners – from Ocado Group
employees to the local community, to its
doctors, nurses, and ‘play specialists’ –
many of whom fundraise for the Stevenage
Hospital themselves. It is the hospital
closest to our head office in Hatfield.
More than 30,000 children pass through
Lister’s doors each year. And, for over
20% of them, it’s because of a mental
health crisis.
Whilst the NHS and Lister’s medical experts are doing everything
possible to treat sick and vulnerable children, our Ocado Foundation
is supporting Lister’s SafeSpace appeal to make the building feel more
friendly for the children who need it.
With our support, Lister’s latest
charity appeal, SafeSpace, will
create a new private safe area for
children to wait in the Emergency
Department.
Once complete, the room will be somewhere young people
can go if feeling angry, frightened or anxious. It will be a safe
space for them to calm down and let out their emotions,
without harming anyone.
Next on the list is refurbishing an A&E corridor for young
people and teens. Those aged 12–15 are often left out, or with
only children’s TV to watch. The finished corridor will have
them in mind. It will offer technology and reading materials,
as well as advisory leaflets on topics like sexual health,
suggesting where they can seek help.
We’re also funding two sensory medical equipment trolleys
for patients with sensory needs and learning disabilities,
including autism. By providing external stimulation, the
machines will help draw a young person’s mind away from
any negative thoughts, instead offering an engaging and
soothing experience.
The SafeSpace project will change the experience for
thousands of children in the years to come.
It’s not the first time we’ve given to Lister.
• We’ve supported the Lister ‘Magic of play’ for several years.
A giant, colourful mural brightens one corridor, whilst we
deliver Easter eggs and Christmas presents for each child
on the ward.
• Our last donation purchased two sensory projectors for
children with limited movement. It projects onto the floor
and inspires them to get up and be active.
All the toys had to be removed from Lister’s communal areas
during the Covid-19 pandemic. So, we provided Foundation
Activity Booklets for waiting areas to keep youngsters occupied
drawing their own robots, completing puzzles, and more.
88
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T
R
A
T
E
G
I
C
R
E
P
O
R
T
Corporate Responsibility
Continued
SafeSpace
‘The Lister’ means everything to many
north Londoners – from Ocado Group
employees to the local community, to its
doctors, nurses, and ‘play specialists’ –
many of whom fundraise for the Stevenage
Hospital themselves. It is the hospital
closest to our head office in Hatfield.
More than 30,000 children pass through
Lister’s doors each year. And, for over
20% of them, it’s because of a mental
health crisis.
Whilst the NHS and Lister’s medical experts are doing everything
possible to treat sick and vulnerable children, our Ocado Foundation
is supporting Lister’s SafeSpace appeal to make the building feel more
friendly for the children who need it.
With our support, Lister’s latest
charity appeal, SafeSpace, will
create a new private safe area for
children to wait in the Emergency
Department.
Once complete, the room will be somewhere young people
can go if feeling angry, frightened or anxious. It will be a safe
space for them to calm down and let out their emotions,
without harming anyone.
Next on the list is refurbishing an A&E corridor for young
people and teens. Those aged 12–15 are often left out, or with
only children’s TV to watch. The finished corridor will have
them in mind. It will offer technology and reading materials,
as well as advisory leaflets on topics like sexual health,
suggesting where they can seek help.
We’re also funding two sensory medical equipment trolleys
for patients with sensory needs and learning disabilities,
including autism. By providing external stimulation, the
machines will help draw a young person’s mind away from
any negative thoughts, instead offering an engaging and
soothing experience.
The SafeSpace project will change the experience for
thousands of children in the years to come.
It’s not the first time we’ve given to Lister.
• We’ve supported the Lister ‘Magic of play’ for several years.
A giant, colourful mural brightens one corridor, whilst we
deliver Easter eggs and Christmas presents for each child
on the ward.
• Our last donation purchased two sensory projectors for
children with limited movement. It projects onto the floor
and inspires them to get up and be active.
All the toys had to be removed from Lister’s communal areas
during the Covid-19 pandemic. So, we provided Foundation
Activity Booklets for waiting areas to keep youngsters occupied
drawing their own robots, completing puzzles, and more.
88
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Our People
Building a Workforce
for the Future
The world has changed and in a year like
no other, demand for our product and
services has been matched only by our
employees’ commitment to deliver. Against
a backdrop of a global pandemic, we’ve
continued to grow our business, innovate,
find solutions and deliver world-class
service. We call this ‘change for good’.
Our responsibility and commitment to #feedthenation extended
beyond the UK to our partners globally and at the heart of our
response was our people. Our unique culture and values meant we
were able to tackle any challenges head on.
We’d like to take this opportunity to thank every one of our Ocado
Group colleagues. Our people demonstrated enormous pragmatism
and resilience as Ocado delivered more capacity than ever before to
serve our global customers.
To support our people at the start of the pandemic, immediate and
significant safety and support measures were introduced across our
global sites, which never lost a day’s operation:
• Temperature scanning and antibody Covid-19 testing for all.
• Social distancing measures and mandatory mask wearing.
• Our frontline employees were paid bonuses for working during the
Covid-19 pandemic. The first payment was a 10% bonus on basic
pay for all hours worked from 23 March to 5 July 2020 and a further
lump sum bonus was paid in January 2021 in relation to the nine
months from March to the end of the period.
Further ‘change for good’ measures were also introduced to support
health and wellbeing to cover:
• Company Sickness Benefit from day one of employment for
anyone who contracted Covid-19, wherever they were based
in the world.
•
Introduction of a global Employee Assistance Service – offering
expert counselling, emotional support and practical guidance
available 24/7 to all of our people, in their local language.
• Priority access to ocado.com for all UK employees and 15%
discount on their orders.
•
Investment in proactive and preventative guidance tools and
learning to support our people to look after their mental health
and wellbeing.
Proactive and preventative
health and wellbeing
support
MIND
We rapidly scaled our mental health support
and launched a global communications and
awareness campaign called ‘Mind Yourself’.
Services were signposted at every opportunity, including our
global live stream sessions led by our CEO and executive team.
Mind Yourself included:
• Weekly voluntary check-in surveys to gauge workforce
state of mind.
• Access to Mental Health Champions trained in Mental Health
First Aid, equipped with knowledge of our health
and wellbeing support services.
• Colleagues were actively encouraged to join a host
Supporting you through the COVID18 crisis
of webinars targeted at different needs and types of
employees, from parents to those who live alone.
• Confidential network groups on hand to provide emotional
and practical support.
• Regular communications pointing employees to a wealth
of online mental health services and support available via
our intranet on Fuse and Slack.
• As we finish the year we are rolling out a new tool, ‘Unmind’
– a globally available app that supports all elements of our
employees’ wellbeing.
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Back to contents Our People
Building a Workforce
for the Future
The world has changed and in a year like
no other, demand for our product and
services has been matched only by our
employees’ commitment to deliver. Against
a backdrop of a global pandemic, we’ve
continued to grow our business, innovate,
find solutions and deliver world-class
service. We call this ‘change for good’.
Our responsibility and commitment to #feedthenation extended
beyond the UK to our partners globally and at the heart of our
response was our people. Our unique culture and values meant we
were able to tackle any challenges head on.
We’d like to take this opportunity to thank every one of our Ocado
Group colleagues. Our people demonstrated enormous pragmatism
and resilience as Ocado delivered more capacity than ever before to
serve our global customers.
To support our people at the start of the pandemic, immediate and
significant safety and support measures were introduced across our
global sites, which never lost a day’s operation:
• Temperature scanning and antibody Covid-19 testing for all.
• Social distancing measures and mandatory mask wearing.
• Our frontline employees were paid bonuses for working during the
Covid-19 pandemic. The first payment was a 10% bonus on basic
pay for all hours worked from 23 March to 5 July 2020 and a further
months from March to the end of the period.
Further ‘change for good’ measures were also introduced to support
health and wellbeing to cover:
• Company Sickness Benefit from day one of employment for
anyone who contracted Covid-19, wherever they were based
in the world.
•
Introduction of a global Employee Assistance Service – offering
expert counselling, emotional support and practical guidance
available 24/7 to all of our people, in their local language.
• Priority access to ocado.com for all UK employees and 15%
discount on their orders.
Proactive and preventative
health and wellbeing
support
MIND
We rapidly scaled our mental health support
and launched a global communications and
awareness campaign called ‘Mind Yourself’.
Services were signposted at every opportunity, including our
global live stream sessions led by our CEO and executive team.
Mind Yourself included:
• Weekly voluntary check-in surveys to gauge workforce
state of mind.
First Aid, equipped with knowledge of our health
and wellbeing support services.
• Colleagues were actively encouraged to join a host
Supporting you through the COVID18 crisis
of webinars targeted at different needs and types of
employees, from parents to those who live alone.
• Confidential network groups on hand to provide emotional
and practical support.
• Regular communications pointing employees to a wealth
of online mental health services and support available via
our intranet on Fuse and Slack.
• As we finish the year we are rolling out a new tool, ‘Unmind’
– a globally available app that supports all elements of our
lump sum bonus was paid in January 2021 in relation to the nine
• Access to Mental Health Champions trained in Mental Health
and wellbeing.
90
Our Culture
Ocado Group’s current and future success is dependent on our people and we know that by putting them first,
they will put our partners and customers first. This is why we are focused on continuing to change for good and
creating an environment that fuels growth by listening to, caring about and energising our people – for us as
individuals, for our teams and for our business.
The relentless pace and ‘always on’ nature of business today means
that it is impossible to truly separate our work and home lives.
Our people are our greatest asset and we recognise that a happy,
healthy and productive workforce is vital to our business success,
so we are reimagining our workplace and embedding health and
wellbeing at the heart of our business strategy.
Our ambition is clear. At Ocado we are creating a proactive and
data-driven approach to listening, wellbeing and inclusion that
understands, nurtures and celebrates our people. We call it
YouMatter.
To enable this increased level of effort and focus, we welcomed
pivotal new roles to our organisation; our Global Head of Culture
and Engagement, as well as Diversity and Inclusion, Health and
Wellbeing and Data Insight leads. Their close alignment to the
Chief People Officer and the Designated Non-Executive Director
for workforce engagement (“DNED”), ensure we are driving
the right culture from the top down to continuously
improve what we do and provide an amazing
experience for our people using our
YouMatter framework.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
Our People Fuel Our Growth
YouMatter Framework
YouMatter:
For everyone to feel a sense of purpose and belonging, we’re creating
a framework that will make Ocado the best place to work.
Strategic Pillar
Listening
So that everyone can
Feel heard and understood
Results in
Strategic Pillar
Wellbeing
So that everyone can
Feel cared for and energised
Results in
#yourvoicematters
#yourvoicematters
Strategic Pillar
Inclusion
So that everyone can
Feel valued and accepted
Results in
High engagement, increased productivity
Good health and high performance
Innovation and growth
Action
Be curious
Key message
Action
#yourenergymatters
#yourenergymatters
Action
Be caring
#yourvoicematters
#yourvoicematters
Key message
Be collaborative
Key message
•
Investment in proactive and preventative guidance tools and
learning to support our people to look after their mental health
employees’ wellbeing.
#yourvoicematters
#yourvoicematters
#yourenergymatters
#yourenergymatters
#belongingmatters
#belongingmatters
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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30029
#belongingmatters
#belongingmatters
9 February 2021 9:14 am
Proof Shell
#yourenergymatters
#yourenergymatters
#belongingmatters
#belongingmatters
Back to contents
#yourvoicematters
Our People
Continued
#yourvoicematters
– being included in every conversation, turning insights
into action and leading by listening
Work has already begun on shaping a Group-wide listening strategy,
through which we are embedding our engagement tool – Peakon – across
all our communities to continuously gather feedback and share insights
with managers and leaders who can take action. We are also building
#yourenergymatters
a global network of ‘listening champions’ to help us hear our people’s
voice and explore listening and we’re evolving the role of employee
representatives for our global partners business. This year saw the creation
of the UK Logistics Council and biannual National Logistics Council.
84
employee representatives
across the National Logistics
Council in the UK alone
#belongingmatters
72
listening champions
globally
6,501
people have shared their
views in Peakon
74,683
‘comments shared
through Peakon
1,173
managers exploring the
#yourvoicematters
data to listen and engage
with their team
58,789
comment
interactions
#yourenergymatters
– whatever ignites the spark
We’re always innovating and thinking one step ahead to deliver for our
partners and customers, this takes up a lot of energy. We work hard and
at a pace few organisations can sustain as we scale globally; that’s what
makes us progressive. To thrive whilst growing we need to support our
people to look after their wellbeing, learning and development, so they
feel happy and energised – that’s what will make us successful.
Through listening we’re developing a new mental health and
#belongingmatters
wellbeing strategy that feeds into our overall Occupational Health
and Safety strategy. At its heart is our new global mental health and
wellbeing product – Unmind – which provides guidance, tools and
learning as well as support our growing global community of mental
#yourenergymatters
health champions. Together they will help us remove the stigma
surrounding mental health, support change for good and signpost
support services to our people. This developing framework will be led
by a new Head of Health and Wellbeing to lead this important agenda
in the Global People Team.
#belongingmatters
– bring your whole self to work
In order for our people to feel like they belong, we’re creating a more
diverse and inclusive workplace. To support this important work we’re:
•
Investing in senior leadership roles to accelerate our work
in this area – Global Head of Culture and Engagement, Global
Diversity and Inclusion Lead and Global Head of Talent Acquisition.
Collectively, these roles are focused on promoting inclusion and
taking positive action to improve diversity at each stage of the
employee experience (attraction, recruitment, development and
succession planning).
• Becoming more data driven, capturing and analysing diversity data
and inclusion insights at each stage of the employee experience.
Further information about our Board Diversity can be found on page
104 and UK reporting on our gender pay gap can be found on our
Corporate Website (www.ocadogroup.com).
• Ensuring equal opportunities for all – our equal opportunities
policy is dedicated to creating an environment for our employees
that is free from discrimination, harassment and victimisation,
reflecting our commitment to creating a diverse workforce and an
inclusive environment that supports all individuals irrespective of
their gender, age, race, disability, sexual orientation, or religion.
We believe that this increases our pool of talent and benefits the
organisation.
• Empowering our employee communities – over the last
year we have focused on supporting our culture of inclusion by
establishing five diversity communities (mental health, ethnic
minorities, disability, LGBTQ+ and gender), bringing together
employees from all parts of our business to share their views,
support each other and educate others. We’ve also established
a global partnership with Stonewall and invested in innovative
recruitment solutions.
• Gathering data from these communities is critical to understand
where we need to focus.
• Growing female talent – our main populations are in logistics,
engineering and technology which are industries that struggle
with gender diversity at all levels, so we’re taking significant steps
to nurture and grow female talent and hire female talent into
leadership roles.
92
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents #yourvoicematters
Our People
Continued
#yourvoicematters
– being included in every conversation, turning insights
into action and leading by listening
Work has already begun on shaping a Group-wide listening strategy,
through which we are embedding our engagement tool – Peakon – across
all our communities to continuously gather feedback and share insights
with managers and leaders who can take action. We are also building
a global network of ‘listening champions’ to help us hear our people’s
#yourenergymatters
voice and explore listening and we’re evolving the role of employee
representatives for our global partners business. This year saw the creation
of the UK Logistics Council and biannual National Logistics Council.
84
72
employee representatives
listening champions
across the National Logistics
globally
Council in the UK alone
#belongingmatters
6,501
people have shared their
views in Peakon
74,683
‘comments shared
through Peakon
1,173
58,789
managers exploring the
#yourvoicematters
data to listen and engage
comment
interactions
with their team
learning as well as support our growing global community of mental
health champions. Together they will help us remove the stigma
#yourenergymatters
surrounding mental health, support change for good and signpost
support services to our people. This developing framework will be led
by a new Head of Health and Wellbeing to lead this important agenda
in the Global People Team.
#belongingmatters
– bring your whole self to work
In order for our people to feel like they belong, we’re creating a more
diverse and inclusive workplace. To support this important work we’re:
•
Investing in senior leadership roles to accelerate our work
in this area – Global Head of Culture and Engagement, Global
Diversity and Inclusion Lead and Global Head of Talent Acquisition.
Collectively, these roles are focused on promoting inclusion and
taking positive action to improve diversity at each stage of the
employee experience (attraction, recruitment, development and
succession planning).
• Becoming more data driven, capturing and analysing diversity data
and inclusion insights at each stage of the employee experience.
Further information about our Board Diversity can be found on page
104 and UK reporting on our gender pay gap can be found on our
Corporate Website (www.ocadogroup.com).
• Ensuring equal opportunities for all – our equal opportunities
policy is dedicated to creating an environment for our employees
that is free from discrimination, harassment and victimisation,
reflecting our commitment to creating a diverse workforce and an
inclusive environment that supports all individuals irrespective of
their gender, age, race, disability, sexual orientation, or religion.
We believe that this increases our pool of talent and benefits the
organisation.
• Empowering our employee communities – over the last
year we have focused on supporting our culture of inclusion by
establishing five diversity communities (mental health, ethnic
minorities, disability, LGBTQ+ and gender), bringing together
employees from all parts of our business to share their views,
support each other and educate others. We’ve also established
a global partnership with Stonewall and invested in innovative
#yourenergymatters
– whatever ignites the spark
We’re always innovating and thinking one step ahead to deliver for our
partners and customers, this takes up a lot of energy. We work hard and
at a pace few organisations can sustain as we scale globally; that’s what
recruitment solutions.
where we need to focus.
• Gathering data from these communities is critical to understand
makes us progressive. To thrive whilst growing we need to support our
• Growing female talent – our main populations are in logistics,
people to look after their wellbeing, learning and development, so they
engineering and technology which are industries that struggle
feel happy and energised – that’s what will make us successful.
with gender diversity at all levels, so we’re taking significant steps
to nurture and grow female talent and hire female talent into
leadership roles.
Through listening we’re developing a new mental health and
#belongingmatters
wellbeing strategy that feeds into our overall Occupational Health
and Safety strategy. At its heart is our new global mental health and
wellbeing product – Unmind – which provides guidance, tools and
92
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
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30029 9 February 2021 9:14 am Proof ShellNurturing and growing female talent To increase our pipeline of female leadership talent we have focused on: • Building targeted development and succession plans for female leaders.• Participating in the 30% club mentoring programme for high-potential female talent; will have reached 60 mentors and mentees by end of the year.• Creating customised ‘Women in Tech’ mentoring programme for high-potential female leaders in Ocado Technology.Hiring female talent into leadership roles We see every hire as an opportunity, whilst also remaining committed to hiring the best talent. Proactive recruitment initiatives include:• Investing in ‘Work 180’, an online platform to connect talented women with leadership roles in technology. • Partnership with ‘SheCanCode’ to support women to enter, remain and excel in the technology industry. • Using new recruitment technology to capture and track diversity data throughout the candidate pipeline.• Running new leaders assimilation to accelerate the onboarding process for new hires.• Increasing the diversity of our graduate hires (10% increase in number of women since 2018); a critical feeder for future leadership roles.Promoting inclusion and diversity at OcadoFor diverse talent to flourish we need to create the right environment and supportive culture. Our work to enable this include:• Introducing a Board diversity policy that sets out our approach and commitments to ensuring diversity and inclusion on the Board of Ocado.• Creating global inclusion communities; one is focused on gender and unites leaders and passionate women across all parts of our business.Gathering global listening data on inclusion and diversity to target areas for improvement and shape targeted strategies/KPIs to support female talent.1.2.3.Spotlight on gender diversity93Stock Code: OCDO Annual Report and Accounts Ocado Group plc STRATEGIC REPORTOcado-Annual-Report-2020-Strategic.indd 93Ocado-Annual-Report-2020-Strategic.indd 9309/02/2021 09:17:5409/02/2021 09:17:54Back to contents Our People
Continued
Talent Attraction and Development
We continue to grow through our retail business, our international partners and our
acquisitions. In this financial year, we have welcomed almost 3,000 new colleagues to Ocado
Group, 500 of those outside of the UK.
Ocado Technology is on target to hire an additional 500 technologists across all our UK and
international development centres by July 2021. We also welcomed colleagues from Kindred
Systems, Inc. and Haddington Dynamics, Inc.. This acquired expertise will support and
contribute to us solving one of the world’s hardest challenges in robotic manipulation – the
picking and packing of groceries.
The Client Services business area is currently 530 employees strong, operating and supporting
nine partners in eight countries with a significant presence in another seven territories on
partners sites. We hired our first employee in Japan which now means we have employees in
ten countries.
The organisation we support
10
Countries with
employees in
7.7
Engagement
Score
(Peakon)
Business-wide
18.5k
Headcount
(rounded to
nearest 100)
By mission
Client Services 530
Group Ops. 670
Logistics* 1,220
Solutions 110
Platform Imp. 510
Technology 2,100
Change is the new normal. As stability gives way to unpredictability, more than ever,
individuals and teams need to be adaptable and resilient to cope with an ever-evolving
organisational landscape. To support all of our people, we offer a cycle of continuous learning
and development, from onboarding new starters, graduate programmes and manager and
leadership development to support our innovative and ambitious growth.
Total Number of Employees
8
1
6
,
8
1
2
5
1
,
5
1
3
6
1
,
4
1
9
9
7
,
2
1
2
0
9
,
1
1
16
17
18
19
20
Senior Managers
1
2
1 Female 17
2 Male 53
All Employees by Gender
1
2
2
1 Female 3,433
2 Male 15,185
Directors
1 Female 0
2 Male 5
94
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30029 9 February 2021 9:14 am Proof ShellDevelopment UpdateThis year our central L&D team delivered a number of programmes to support our culture and ways of working:Created a common ‘behaviours’ language with over1,000 Insights profiles delivered globallyCheck-in development campaign on better conversations with over1,000 attendances and over 5,000 views of new online resources (94% recommend and 4.2/5 will do something differently)Launched over100 apprenticeshipsDelivered a virtual leadership toolkit to support Covid-19 working with over450‘views’ of resourcesDelivered CFC development campaign for managers to support Logistics transformationTo attract those who possess these unique cultural attributes, we understand that employee benefits make an important contribution to both employee engagement and the attractiveness of Ocado as a place to work. We are committed to continuing to provide a competitive compensation package inclusive of salary, pensions and other benefits. Critical to our DNA is sharing in our success, so Ocado encourages shareholding for its employees by offering Free Shares at 1% of salary to all employees, annually. We also offer both an employee Share Incentive Plan (“SIP”) and a Sharesave scheme to all employees. This year the offer was expanded to employees outside the UK with access to an Ocado Employee Share Purchase Plan. It’s similar to the UK Save As you Earn scheme, which means now virtually everyone really can buy Ocado shares and become an owner of our Company. Case StudyOcado Employee Share Purchase PlanThe launch of the Ocado Employee Share Purchase Plan in October 2020 generated an overall take-up 62%. The average take-up for International Purchase Plans is usually quoted at around 30% to 37%. Breakdown by country: EligibleEnrolledTake-upBulgaria1056865%Canada543259%France562036%Poland47931065%Spain1207663%Sweden88100%US351851%Total85753262%95Stock Code: OCDO Annual Report and Accounts Ocado Group plc STRATEGIC REPORTOcado-Annual-Report-2020-Strategic.indd 95Ocado-Annual-Report-2020-Strategic.indd 9509/02/2021 09:18:0009/02/2021 09:18:00Back to contents
Our People
Continued
Total Number of Employees
Talent Attraction and Development
We continue to grow through our retail business, our international partners and our
acquisitions. In this financial year, we have welcomed almost 3,000 new colleagues to Ocado
Group, 500 of those outside of the UK.
Ocado Technology is on target to hire an additional 500 technologists across all our UK and
international development centres by July 2021. We also welcomed colleagues from Kindred
Systems, Inc. and Haddington Dynamics, Inc.. This acquired expertise will support and
contribute to us solving one of the world’s hardest challenges in robotic manipulation – the
picking and packing of groceries.
The Client Services business area is currently 530 employees strong, operating and supporting
nine partners in eight countries with a significant presence in another seven territories on
partners sites. We hired our first employee in Japan which now means we have employees in
ten countries.
The organisation we support
10
Countries with
employees in
7.7
Engagement
Score
(Peakon)
Business-wide
18.5k
Headcount
(rounded to
nearest 100)
By mission
Client Services 530
Group Ops. 670
Logistics* 1,220
Solutions 110
Platform Imp. 510
Technology 2,100
Change is the new normal. As stability gives way to unpredictability, more than ever,
individuals and teams need to be adaptable and resilient to cope with an ever-evolving
organisational landscape. To support all of our people, we offer a cycle of continuous learning
and development, from onboarding new starters, graduate programmes and manager and
leadership development to support our innovative and ambitious growth.
2
5
1
,
5
1
3
6
1
,
4
1
9
9
7
,
2
1
2
0
9
,
1
1
16
17
18
19
20
Senior Managers
1 Female 17
2 Male 53
All Employees by Gender
2
2
8
1
6
,
8
1
1
1
2
1 Female 3,433
2 Male 15,185
Directors
1 Female 0
2 Male 5
94
Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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9 February 2021 9:14 am
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30029 9 February 2021 9:14 am Proof ShellDevelopment UpdateThis year our central L&D team delivered a number of programmes to support our culture and ways of working:Created a common ‘behaviours’ language with over1,000 Insights profiles delivered globallyCheck-in development campaign on better conversations with over1,000 attendances and over 5,000 views of new online resources (94% recommend and 4.2/5 will do something differently)Launched over100 apprenticeshipsDelivered a virtual leadership toolkit to support Covid-19 working with over450‘views’ of resourcesDelivered CFC development campaign for managers to support Logistics transformationTo attract those who possess these unique cultural attributes, we understand that employee benefits make an important contribution to both employee engagement and the attractiveness of Ocado as a place to work. We are committed to continuing to provide a competitive compensation package inclusive of salary, pensions and other benefits. Critical to our DNA is sharing in our success, so Ocado encourages shareholding for its employees by offering Free Shares at 1% of salary to all employees, annually. We also offer both an employee Share Incentive Plan (“SIP”) and a Sharesave scheme to all employees. This year the offer was expanded to employees outside the UK with access to an Ocado Employee Share Purchase Plan. It’s similar to the UK Save As you Earn scheme, which means now virtually everyone really can buy Ocado shares and become an owner of our Company. Case StudyOcado Employee Share Purchase PlanThe launch of the Ocado Employee Share Purchase Plan in October 2020 generated an overall take-up 62%. The average take-up for International Purchase Plans is usually quoted at around 30% to 37%. Breakdown by country: EligibleEnrolledTake-upBulgaria1056865%Canada543259%France562036%Poland47931065%Spain1207663%Sweden88100%US351851%Total85753262%95Stock Code: OCDO Annual Report and Accounts Ocado Group plc STRATEGIC REPORTOcado-Annual-Report-2020-Strategic.indd 95Ocado-Annual-Report-2020-Strategic.indd 9509/02/2021 09:18:0009/02/2021 09:18:00Back to contents
30029 9 February 2021 9:14 am Proof ShellAndrew Harrison Non-Executive Director Designated to Workforce EngagementOur PeopleContinuedOur Code of ConductOur business has grown rapidly across the world and we continue to form new partnerships and welcome more international colleagues to Ocado Group. As new people come on board it’s important that we communicate what life is like at Ocado, we introduce the values, culture and principles that we live by, and help establish our expectations and standards of conduct. To deliver these key messages consistently, we launched our new Global Employee Handbook and Code of Conduct to frame the existing Global Onboarding Programme – Let’s go Ocado. These aim to be the three key global documents that provide our people with a gateway to the fundamental employment information they need for daily life at Ocado. They are available on Fuse, our mobile first communications platform to which all employees have access. The safety and wellbeing of Ocado’s employees and associates is of the utmost importance. The Company’s objective is to ensure the safety of all employees in line with Ocado’s Health, Safety and Environment Policy and to ensure that its activities do not harm the public, customers or employees. Ocado does not tolerate any form of bribery and corruption, or the giving or receiving of bribes for any purpose. Ocado’s Anti-Bribery Policy sets out definitions of bribery and corruption, and our internal training provides examples of this, such as the rules around gifts and hospitality, as well as how to report any cases of suspected wrongdoing.Whistleblowing We offer an independent and confidential whistle-blowing service that allows our employees, suppliers and other third parties to raise concerns about possible wrongdoing that would be of public interest.This initiative is referred to internally as ‘Speak Up’. A campaign of awareness runs regularly to the global workforce who are encouraged to make their disclosures either in person to a line manager or using the external independent system hosted by Expolink via either telephone, app or web. It is possible to make anonymous reports where permitted in relevant countriesOn a quarterly basis the Board receives high level updates on all whistle-blowing. The introduction of these procedures has provided beneficial insight, supporting the integrity of the operational control environment.➔ Read about Whistleblowing on page 98Celebrating 20 yearsAs a start-up 20 years ago, Ocado had a highly developed sense of mission. It formed a core part of the culture of the organisation. And it still does. Whilst we develop new missions for the different elements of our global business, we have worked hard to maintain the culture that underpins our ways of working to ensure we stay aligned and true to our heritage. These culture principles are fundamental elements of our values, behaviours and career opportunities that are to be used to attract talent into the business. They are all a part of what makes us Ocado.To celebrate our 20th anniversary, we asked our employees to share their stories of life at Ocado in just six words. Each one reflected or illustrated our closely held values and we were delighted with the hundreds of entries we received which perfectly summed up the spirit of Ocado, or the ‘Ocado magic’ as we like to call it. Everyone has a story to tell – and these are some of ours.96Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 96Ocado-Annual-Report-2020-Strategic.indd 9609/02/2021 09:18:0209/02/2021 09:18:02Back to contents 30029 9 February 2021 9:14 am Proof ShellAndrew Harrison Non-Executive Director Designated to Workforce Engagement“ Caring for and listening to our people is not simply the right thing to do in this context, it is also an essential requirement and a commercial priority for us as a global FTSE 30 organisation.”The processIn line with the UK Corporate Governance Code (2018) Andrew Harrison, Designated Non-Executive Director (DNED) works with the Chief People Officer and the Global Head of Culture and Engagement in a role that complements and enables our commitment to giving our employees a voice, and who advocates and directly represents them during Board discussions. To ensure engagement in the process, the DNED and Head of Global Culture and Engagement:• Meet on a monthly basis and use the insights from established employee forums and new listening technology to identify and explore issues and, where required, escalate these to Senior Management.• Attend existing and set up new listening forums to involve and engage employees across all parts of Ocado Group.• Conduct a quarterly review and report all listening and wellbeing insights across Ocado, to be shared and discussed with the Board.• Communicate back to the workforce the steps being taken to address concerns or explain why steps have not been taken.Case StudyWorkforce Engagement2020 SummaryIn 2020 Andrew Harrison represented and engaged with employees on a number of different issues, including: • Attended Ocado Council meetings, and presented at the Group Council Conference.• Visited spokes and CFCs, and worked with Head of Retail and Ocado Logistics to support frontline engagement.• Introduced a Covid-19 weekly update to the Board to drive support for Logistics colleagues around welfare, bonuses and rosters.• Reviewed and supported the focus on mental health and wellbeing issues.• Updated the workforce on a number of Board issues such as Executive Pay, acquisitions of robotic companies and the Covid-19 response.• Ensured the review of Payroll services was delivered, with results being shared at Board level.• Engaged with shareholders on workforce engagement and inclusion.• Monitored business KPIs, Employee KPIs and business comms, combined with a monthly report on workforce trends and engagement.97Stock Code: OCDO Annual Report and Accounts Ocado Group plc STRATEGIC REPORTOcado-Annual-Report-2020-Strategic.indd 97Ocado-Annual-Report-2020-Strategic.indd 9709/02/2021 09:18:0509/02/2021 09:18:0530029 9 February 2021 9:14 am Proof ShellAndrew Harrison Non-Executive Director Designated to Workforce EngagementOur PeopleContinuedOur Code of ConductOur business has grown rapidly across the world and we continue to form new partnerships and welcome more international colleagues to Ocado Group. As new people come on board it’s important that we communicate what life is like at Ocado, we introduce the values, culture and principles that we live by, and help establish our expectations and standards of conduct. To deliver these key messages consistently, we launched our new Global Employee Handbook and Code of Conduct to frame the existing Global Onboarding Programme – Let’s go Ocado. These aim to be the three key global documents that provide our people with a gateway to the fundamental employment information they need for daily life at Ocado. They are available on Fuse, our mobile first communications platform to which all employees have access. The safety and wellbeing of Ocado’s employees and associates is of the utmost importance. The Company’s objective is to ensure the safety of all employees in line with Ocado’s Health, Safety and Environment Policy and to ensure that its activities do not harm the public, customers or employees. Ocado does not tolerate any form of bribery and corruption, or the giving or receiving of bribes for any purpose. Ocado’s Anti-Bribery Policy sets out definitions of bribery and corruption, and our internal training provides examples of this, such as the rules around gifts and hospitality, as well as how to report any cases of suspected wrongdoing.Whistleblowing We offer an independent and confidential whistle-blowing service that allows our employees, suppliers and other third parties to raise concerns about possible wrongdoing that would be of public interest.This initiative is referred to internally as ‘Speak Up’. A campaign of awareness runs regularly to the global workforce who are encouraged to make their disclosures either in person to a line manager or using the external independent system hosted by Expolink via either telephone, app or web. It is possible to make anonymous reports where permitted in relevant countriesOn a quarterly basis the Board receives high level updates on all whistle-blowing. The introduction of these procedures has provided beneficial insight, supporting the integrity of the operational control environment.➔ Read about Whistleblowing on page 98Celebrating 20 yearsAs a start-up 20 years ago, Ocado had a highly developed sense of mission. It formed a core part of the culture of the organisation. And it still does. Whilst we develop new missions for the different elements of our global business, we have worked hard to maintain the culture that underpins our ways of working to ensure we stay aligned and true to our heritage. These culture principles are fundamental elements of our values, behaviours and career opportunities that are to be used to attract talent into the business. They are all a part of what makes us Ocado.To celebrate our 20th anniversary, we asked our employees to share their stories of life at Ocado in just six words. Each one reflected or illustrated our closely held values and we were delighted with the hundreds of entries we received which perfectly summed up the spirit of Ocado, or the ‘Ocado magic’ as we like to call it. Everyone has a story to tell – and these are some of ours.96Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Strategic.indd 96Ocado-Annual-Report-2020-Strategic.indd 9609/02/2021 09:18:0209/02/2021 09:18:02Back to contents Ethics and Compliance
We are committed to maintaining the
highest standards of ethical conduct and
integrity in our business practices and
we have in place compliance policies and
processes to ensure these standards are
embedded across the business.
This year we undertook a comprehensive compliance risk assessment
across the business on a range of important compliance and legal
areas. We also carried out an employee compliance survey to gain
an understanding of the current awareness and understanding of
core compliance topics and the overall compliance culture across
the business. These both fed into the compliance roadmap for the
year. A policy tracker has been put in place and a Policies Working
Group established to ensure our policies remain up to date and fit for
purpose across our global operations.
We recently introduced a new Code of Conduct that sets forth the
values and behaviours expected of all employees and provides
guidance on our policies and processes and how these are to be
applied. It is applicable across all geographical areas of the business
and is flexible enough to adapt to the future growth of the Group.
Employees were required to undertake training on the topics covered
in the Code of Conduct, to embed the knowledge and understanding
of the principles and policies contained therein, and complete an
annual compliance statement confirming adherence across important
areas of compliance.
Anti-bribery and Anti-corruption
In response to the increase in scale and complexity of the business and
the growth in headcount and geographical coverage, a new anti-bribery
policy and a new standalone money laundering policy were launched
this year, following a risk assessment across the business. The anti-
bribery policy reiterates our zero-tolerance approach to bribery across
all of our global operations. A training programme for employees was
launched alongside the policy and associated guidance to help embed
the principles and practical application of the policy. The updated
money laundering policy provided clearer guidance on potential red
flags to aid the identification of potential issues.
Whistleblowing
As part of our open and transparent culture, it is vital that all
employees and others that work with us feel able to raise concerns
of any safety, legal or ethical issues, without any fear of reprisal. The
Company operates a system managed externally by an independent
third party, Speak Up, available in all countries in which the Company
operates, where employees can make a report via a confidential
telephone helpline, website or mobile phone application. This
permits employees to raise concerns, without any fear of retaliation,
where they feel uncomfortable making a report to their manager. All
reports are submitted to relevant investigators within the Company,
as determined by the nature of the concern, so that appropriate
investigations and actions can be taken.
Human Rights and Modern Slavery
Our commitment to protecting the human rights of our workforce and
ensuring respect for human rights in our supply chains is embedded
within our Code of Conduct and Human Rights Policy. The Code of
Conduct and our policies and processes are designed to strengthen
and sustain our culture of integrity and transparency and we are
focused on ensuring our workforce is respected and supported.
The Group has a zero-tolerance position with regards to slavery and
human trafficking, which is set out in our Modern Slavery Statement,
available on the Ocado website, and clearly communicated to our
partners and our supply chains.
➔ For more details on our workforce policies and practices see
Our People section on pages 90 to 98
➔ For more details on our supply chain see Corporate
Responsibility section on pages 82 to 88
As we continue to develop our technological capabilities we are
mindful of the need to consider the ethical concerns surrounding
technological advances and their social impacts. This is an area we
aim to review further to ensure that our operations continue to meet
our own ethical standards.
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Back to contents Ethics and Compliance
We are committed to maintaining the
Whistleblowing
highest standards of ethical conduct and
integrity in our business practices and
we have in place compliance policies and
processes to ensure these standards are
embedded across the business.
This year we undertook a comprehensive compliance risk assessment
across the business on a range of important compliance and legal
areas. We also carried out an employee compliance survey to gain
an understanding of the current awareness and understanding of
core compliance topics and the overall compliance culture across
As part of our open and transparent culture, it is vital that all
employees and others that work with us feel able to raise concerns
of any safety, legal or ethical issues, without any fear of reprisal. The
Company operates a system managed externally by an independent
third party, Speak Up, available in all countries in which the Company
operates, where employees can make a report via a confidential
telephone helpline, website or mobile phone application. This
permits employees to raise concerns, without any fear of retaliation,
where they feel uncomfortable making a report to their manager. All
reports are submitted to relevant investigators within the Company,
as determined by the nature of the concern, so that appropriate
investigations and actions can be taken.
the business. These both fed into the compliance roadmap for the
Human Rights and Modern Slavery
year. A policy tracker has been put in place and a Policies Working
Group established to ensure our policies remain up to date and fit for
purpose across our global operations.
We recently introduced a new Code of Conduct that sets forth the
values and behaviours expected of all employees and provides
guidance on our policies and processes and how these are to be
applied. It is applicable across all geographical areas of the business
and is flexible enough to adapt to the future growth of the Group.
Employees were required to undertake training on the topics covered
in the Code of Conduct, to embed the knowledge and understanding
of the principles and policies contained therein, and complete an
annual compliance statement confirming adherence across important
Our commitment to protecting the human rights of our workforce and
ensuring respect for human rights in our supply chains is embedded
within our Code of Conduct and Human Rights Policy. The Code of
Conduct and our policies and processes are designed to strengthen
and sustain our culture of integrity and transparency and we are
focused on ensuring our workforce is respected and supported.
The Group has a zero-tolerance position with regards to slavery and
human trafficking, which is set out in our Modern Slavery Statement,
available on the Ocado website, and clearly communicated to our
partners and our supply chains.
➔ For more details on our workforce policies and practices see
Our People section on pages 90 to 98
areas of compliance.
Anti-bribery and Anti-corruption
In response to the increase in scale and complexity of the business and
the growth in headcount and geographical coverage, a new anti-bribery
policy and a new standalone money laundering policy were launched
this year, following a risk assessment across the business. The anti-
bribery policy reiterates our zero-tolerance approach to bribery across
all of our global operations. A training programme for employees was
launched alongside the policy and associated guidance to help embed
the principles and practical application of the policy. The updated
money laundering policy provided clearer guidance on potential red
flags to aid the identification of potential issues.
➔ For more details on our supply chain see Corporate
Responsibility section on pages 82 to 88
As we continue to develop our technological capabilities we are
mindful of the need to consider the ethical concerns surrounding
technological advances and their social impacts. This is an area we
aim to review further to ensure that our operations continue to meet
our own ethical standards.
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30029 9 February 2021 8:51 am Proof Shell BOcado-Annual-Report-2020-Governance.indd 100Ocado-Annual-Report-2020-Governance.indd 10009/02/2021 09:12:1409/02/2021 09:12:14Back to contents 30029 9 February 2021 8:51 am Proof Shell BOcado-Annual-Report-2020-Governance.indd 100Ocado-Annual-Report-2020-Governance.indd 10009/02/2021 09:12:1409/02/2021 09:12:1430029 9 February 2021 8:51 am Proof Shell BGovernance.ContentsChairman’s Governance Overview 102Corporate Governance Report 104– Board of Directors 104– Corporate Governance Statement 2020 108Board Leadership and Group Purpose 109Division of Responsibilities 114Composition, Succession and Evaluation 121Nomination Committee Report 126Audit Committee Report 130Directors’ Remuneration Report 140– Letter from the Chairman of the Remuneration Committee 140– Description of the Remuneration Committee 143– Annual Report on Remuneration 2020 157Directors’ Report 178– Non-Financial Information Statement 185Ocado-Annual-Report-2020-Governance.indd 101Ocado-Annual-Report-2020-Governance.indd 10109/02/2021 09:12:1409/02/2021 09:12:14Back to contents 30029 9 February 2021 8:51 am Proof ShellChairman’s Governance OverviewLord RoseChairmanGovernance Highlights• Richard Haythornthwaite joined the Board, after year end, in January 2021 as an independent Non-Executive Director and Chairman-elect• Appointment of Stephen Daintith as Chief Financial Officer, to start in the role later in 2021• Michael Sherman joined the Board in October 2020 as an independent Non-Executive Director and member of the Nomination Committee• An externally facilitated Board evaluation conducted by Manchester Square Partners• A review of Board composition• Robust assessment of the Group’s principal and emerging risksDear ShareholderOn behalf of the Board I am pleased to introduce the Corporate Governance Report for the year ended 29 November 2020. This report describes the governance structures and procedures in place and summarises the work of the Board and its Committees to illustrate how our responsibilities have been discharged this year. The Board recognises the value and importance of good corporate governance and the role it plays in supporting the long-term success and sustainability of the business. This is the first year the requirements of the 2018 UK Corporate Governance Code have applied to the Group and you can read how we have complied with the updated principles throughout this Corporate Governance Report.Covid-19During the pandemic the Board’s primary concern has been to keep our employees safe, support our customers and partners, and serve the wider community by doing our part to feed the nation. Although the Board was rarely able to meet in person we continued to hold regular meetings to discuss the impact on the business and oversee the Group’s response to the pandemic. The Group introduced a range of new health and safety measures to ensure the wellbeing of our employees and customers, and worked to increase capacity to serve additional demand from customers, including the customers of our international Solutions partners.➔ For further information on how we have responded to Covid-19 see pages 59 and 61Stakeholder EngagementThe Board has always sought to engage with and understand the views of our key stakeholders and consider their interests in decision-making, but the new reporting requirements in this area have increased the emphasis on stakeholder interests. We recognise that stakeholder engagement is critical to the long-term success of our business. Our aim is to develop the practice of considering stakeholder voices in discussions and decision-making not only at Board level but across the organisation. ➔ For further information on Engaging With Our Stakeholders see pages 72 to 81“ The Board recognises the value and importance of good corporate governance and the role it plays in supporting the long-term success of the business.”102Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Governance.indd 102Ocado-Annual-Report-2020-Governance.indd 10209/02/2021 09:12:1609/02/2021 09:12:16Back to contents G
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Our People
Our people are essential to the delivery of our strategic objectives and
our continued success and, therefore, it is vital that we provide a work
environment where everyone feels valued, motivated and able to thrive.
We have introduced a number of initiatives to support the well-being
of our employees, including our Employee Assistance Programme, our
Mind Yourself campaign and the introduction of live stream presentations
to all employees from CEO Tim Steiner. The pandemic has proven
the value of such a work environment – our people have shown great
strength, commitment and resilience, and have continued to grow online
capacity for our partners. Despite the pandemic we opened our first two
international CFCs ahead of plan.
➔ For further information on Our People see pages 90 to 97
Culture
Our positive corporate culture is an important asset, and we
acknowledge the challenge of retaining it as the Group grows into a much
larger organisation. The Board reviews and approves all workforce related
policies and processes to ensure that they help to embed this culture,
which this year this included the introduction of a new Code of Conduct
and Global Employee Handbook. The Group has also introduced a
number of initiatives to promote diversity and inclusion, including
establishing five diversity and inclusion committees, holding forums
and events across the organisation, and appointing a new Diversity and
Inclusion Manager.
➔ For further information on Culture and Diversity see pages 91 to 94
Accountability and Risk
The Board understands that to ensure the long-term success and
resilience of the Group, long-term decisions must be taken and risks
and opportunities in the short and long-term must be assessed and,
where required, mitigated. The risk management procedures were
overhauled this year to better reflect the management structure and
expanding global footprint of the business. The Board maintains regular
oversight of the principal and emerging risks facing the Group and
the controls in place and the risk appetite of the Group, with a formal
annual review. Covid-19 has provided additional risk, particularly to
the service levels of the retail business. The acquisition of Haddington
Dynamics and Kindred Systems in 2020 bring exciting opportunities in
robotic solutions but we must mitigate the risk that these opportunities
are not realised. An important emerging risk the Board is considering
in the short and long-term is climate change and other related
environmental and social issues.
➔ For further information on How We Manage Our Risks see pages
60 to 71
Finance Transformation
In response to the recent significant change to the Group, including
the establishment of the Ocado Retail joint venture and the expansion
of Ocado Solutions and Ocado Ventures, this year has seen the
ongoing transformation of our Finance function. This has included
considerable recruitment, the development of existing controls,
strengthening user access controls and the implementation of
additional reconciliation processes.
➔ Read more in Audit Committee Report see pages 130 to 137
Board Developments
We are very sorry that Duncan Tatton-Brown retired from the Board
and as Chief Financial Officer this year and we would like to thank
Duncan for his valuable contribution to the Board and the Group.
We are pleased that Stephen Daintith has been appointed as his
successor and look forward to welcoming him to the Group in the
near future.
Richard Haythornthwaite joined the Board as an independent Non-
Executive Director and Chairman-elect, after the end of the period, in
January 2021, bringing a wealth of international board-level experience.
Michael Sherman joined the Board as an independent Non-Executive
Director in October 2020 and his experience and knowledge in the
technology industry has already proven an asset to the Board. We are
sorry that following the year end Claudia Arney stepped down from the
Board as a Non-Executive Director and thank her for her contribution.
I will be stepping down from the Board after this year’s AGM, following
eight years as Chairman, but I am confident that I am leaving Ocado
in good hands with Rick stepping into the role. It has been a privilege
to help steer the business and oversee its transformation to a leading
global solutions provider in online grocery and I would like to thank
all my colleagues for their support during my tenure.
Future Outlook
The Board strongly believes that good governance is a key part of
the strength of our business and that by continually reviewing and
monitoring our existing practices we can ensure that our governance
evolves alongside our changing business. As the Group grows and
develops we will continue to focus on our values and culture and to
ensure that as a business we innovate and find new solutions to the
challenges faced.
Lord Rose
Chairman
9 February 2021
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30029 9 February 2021 8:51 am Proof ShellChairman’s Governance OverviewLord RoseChairmanGovernance Highlights• Richard Haythornthwaite joined the Board, after year end, in January 2021 as an independent Non-Executive Director and Chairman-elect• Appointment of Stephen Daintith as Chief Financial Officer, to start in the role later in 2021• Michael Sherman joined the Board in October 2020 as an independent Non-Executive Director and member of the Nomination Committee• An externally facilitated Board evaluation conducted by Manchester Square Partners• A review of Board composition• Robust assessment of the Group’s principal and emerging risksDear ShareholderOn behalf of the Board I am pleased to introduce the Corporate Governance Report for the year ended 29 November 2020. This report describes the governance structures and procedures in place and summarises the work of the Board and its Committees to illustrate how our responsibilities have been discharged this year. The Board recognises the value and importance of good corporate governance and the role it plays in supporting the long-term success and sustainability of the business. This is the first year the requirements of the 2018 UK Corporate Governance Code have applied to the Group and you can read how we have complied with the updated principles throughout this Corporate Governance Report.Covid-19During the pandemic the Board’s primary concern has been to keep our employees safe, support our customers and partners, and serve the wider community by doing our part to feed the nation. Although the Board was rarely able to meet in person we continued to hold regular meetings to discuss the impact on the business and oversee the Group’s response to the pandemic. The Group introduced a range of new health and safety measures to ensure the wellbeing of our employees and customers, and worked to increase capacity to serve additional demand from customers, including the customers of our international Solutions partners.➔ For further information on how we have responded to Covid-19 see pages 59 and 61Stakeholder EngagementThe Board has always sought to engage with and understand the views of our key stakeholders and consider their interests in decision-making, but the new reporting requirements in this area have increased the emphasis on stakeholder interests. We recognise that stakeholder engagement is critical to the long-term success of our business. Our aim is to develop the practice of considering stakeholder voices in discussions and decision-making not only at Board level but across the organisation. ➔ For further information on Engaging With Our Stakeholders see pages 72 to 81“ The Board recognises the value and importance of good corporate governance and the role it plays in supporting the long-term success of the business.”102Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Governance.indd 102Ocado-Annual-Report-2020-Governance.indd 10209/02/2021 09:12:1609/02/2021 09:12:16Back to contents 30029 9 February 2021 8:51 am Proof ShellExecutive/Non-Executive: Non-ExecutiveCommittee Membership: Nomination (Chairman)Independent: NoSkills and experience: Lord Rose has worked in the retail industry for over 40 years, including over 25 years board-level experience. He has held Chief Executive Officer roles at Argos plc, Booker plc, Arcadia Group plc and M&S plc. He was Chairman of M&S plc from 2008 to 2011. Lord Rose’s in-depth understanding of UK corporate governance requirements and extensive experience in the retail sector provides the Board with valuable, strong leadership. His considerable experience in change management has been invaluable in driving the Group whilst retaining focus on the core strategic objectives during a period of significant transformation. Lord Rose was knighted in 2008 for services to the retail industry and corporate social responsibility, and granted a life peerage in August 2014.External Appointments: Chairman of Stylemania Limited, trading as Dressipi; Non-Executive Director of RM2 International S.A.; Chairman of Majid Al Futtaim Retail based in Dubai; Non-Executive Director of Time Out Group plc; Chairman of Zenith; Chairman of EG Group Limited.Executive/Non-Executive: ExecutiveCommittee Membership: N/AIndependent: NoSkills and experience: Tim is the founding Chief Executive Officer of Ocado, which he started in 2000 and has led continuously since that time. He provides not only unparalleled knowledge of the Group but also a passion that has not dimmed over the 20 years since the Group’s formation. His drive and vision continue to be instrumental in the impressive growth and success of the Group. In 2016 he was appointed OBE in the Queen’s Honours List, and in 2018 he was voted Sunday Times’ Businessman of the Year. Prior to Ocado, he spent eight years at Goldman Sachs, during which time he gained international experience working in London, Hong Kong and New York in the Fixed Income division. Tim graduated from Manchester University in 1992 with an honours degree in Economics, Finance and Accountancy.External Appointments: NoneExecutive/Non-Executive: ExecutiveCommittee Membership: N/AIndependent: NoSkills and experience: Mark was Head of Technology at Ocado from 2001 until he joined the Board in 2012. He is responsible for the day-to-day running of the Ocado operation, including CFCs, logistics developments, customer service, business planning and engineering, and for the installation and maintenance of international OSP facilities. Prior to joining Ocado, Mark held a number of IT positions at the John Lewis Partnership, including Head of Selling Systems at Waitrose. Mark contributes valuable knowledge, through his technology capability and operational experience. He graduated from University College, London with a degree in Physics.External Appointments: Non-Executive Director of Paneltex Ltd*.* Ocado owns 25% of Paneltex Ltd.Executive/Non-Executive: ExecutiveCommittee Membership: N/AIndependent: NoSkills and experience: Luke joined Ocado as Chief Executive Officer of Ocado Solutions in 2017, before joining the Board in 2018. Prior to joining Ocado, Luke was a Senior Advisor at Boston Consulting Group and previously Group Development Director at Sainsbury’s, where he was responsible for online and digital and all customer-facing digital activities. Luke has extensive experience in strategy, online and grocery retailing and since joining Ocado has overseen the establishment of a number of international partnerships and the launch of our first international CFCs. During his career, Luke has also worked at OC&C Strategy Consultants where he was Partner and Head of the Retail and Consumer practice. He graduated from ESCP and holds an MBA from INSEAD.External Appointments: Non-Executive Director of Hana Group SAS, registered in France; Non-Executive Director of ASOS plc.Executive/Non-Executive: ExecutiveCommittee Membership: N/AIndependent: NoSkills and experience: Neill was on the founding team of Ocado, joining the Board in September 2000, and provides broad legal and corporate governance knowledge with a profound understanding of the business. He has responsibility for the Group Operations departments – Legal, Governance, Intellectual Property, Insurance, Real Estate, Government Relations and Corporate Responsibility. Prior to Ocado, he was a barrister in practice at One Essex Court and spent nine years at Goldman Sachs in London in the investment banking and legal divisions. Neill holds degrees in industrial psychology and law from the University of the Witwatersrand in Johannesburg and a Masters in Law from Sidney Sussex College, Cambridge. He is admitted as a barrister in England & Wales, an attorney in New York and an advocate in South Africa.External Appointments: Alternate Non-Executive Director of Mr Price Group Limited, listed in South Africa.Executive/Non-Executive: Non-ExecutiveCommittee Membership: Remuneration (Chairman), Audit, NominationIndependent: YesSkills and experience: Andrew is a partner at Freston Ventures Management Ltd, which invests in consumer brands that challenge the status quo. He chairs two of the businesses, online estate agent Strike and Whocanfixmycar.com, and advises other businesses such as Five Guys, Secret Cinema and Cubitts. Andrew previously served as Chairman of Carphone Warehouse Ltd and was formerly Group CEO of Carphone Warehouse plc before its merger, which he led, with Dixons Group plc. During his career he has successfully grown numerous new businesses, has international retail experience and developed and ran a global services business. He brings impressive business and leadership experience to the Board. Andrew graduated from the University of Leeds with a BA (Hons) in Management Studies in 1992.External Appointments: Chairman of Trustees of The Mix; Chairman of Strike (House Simple Ltd); Partner of Freston Ventures Management Ltd; Director of Chik’n Ltd; Chairman of Whocanfixmycar.com Ltd.Corporate Governance ReportLord Rose, ChairmanTim Steiner OBE, Chief Executive OfficerMark Richardson, Chief Operations Officer104Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Governance.indd 104Ocado-Annual-Report-2020-Governance.indd 10409/02/2021 09:12:2309/02/2021 09:12:23Back to contents 30029 9 February 2021 8:51 am Proof ShellExecutive/Non-Executive: Non-ExecutiveCommittee Membership: Nomination (Chairman)Independent: NoSkills and experience: Lord Rose has worked in the retail industry for over 40 years, including over 25 years board-level experience. He has held Chief Executive Officer roles at Argos plc, Booker plc, Arcadia Group plc and M&S plc. He was Chairman of M&S plc from 2008 to 2011. Lord Rose’s in-depth understanding of UK corporate governance requirements and extensive experience in the retail sector provides the Board with valuable, strong leadership. His considerable experience in change management has been invaluable in driving the Group whilst retaining focus on the core strategic objectives during a period of significant transformation. Lord Rose was knighted in 2008 for services to the retail industry and corporate social responsibility, and granted a life peerage in August 2014.External Appointments: Chairman of Stylemania Limited, trading as Dressipi; Non-Executive Director of RM2 International S.A.; Chairman of Majid Al Futtaim Retail based in Dubai; Non-Executive Director of Time Out Group plc; Chairman of Zenith; Chairman of EG Group Limited.Executive/Non-Executive: ExecutiveCommittee Membership: N/AIndependent: NoSkills and experience: Tim is the founding Chief Executive Officer of Ocado, which he started in 2000 and has led continuously since that time. He provides not only unparalleled knowledge of the Group but also a passion that has not dimmed over the 20 years since the Group’s formation. His drive and vision continue to be instrumental in the impressive growth and success of the Group. In 2016 he was appointed OBE in the Queen’s Honours List, and in 2018 he was voted Sunday Times’ Businessman of the Year. Prior to Ocado, he spent eight years at Goldman Sachs, during which time he gained international experience working in London, Hong Kong and New York in the Fixed Income division. Tim graduated from Manchester University in 1992 with an honours degree in Economics, Finance and Accountancy.External Appointments: NoneExecutive/Non-Executive: ExecutiveCommittee Membership: N/AIndependent: NoSkills and experience: Mark was Head of Technology at Ocado from 2001 until he joined the Board in 2012. He is responsible for the day-to-day running of the Ocado operation, including CFCs, logistics developments, customer service, business planning and engineering, and for the installation and maintenance of international OSP facilities. Prior to joining Ocado, Mark held a number of IT positions at the John Lewis Partnership, including Head of Selling Systems at Waitrose. Mark contributes valuable knowledge, through his technology capability and operational experience. He graduated from University College, London with a degree in Physics.External Appointments: Non-Executive Director of Paneltex Ltd*.* Ocado owns 25% of Paneltex Ltd.Executive/Non-Executive: ExecutiveCommittee Membership: N/AIndependent: NoSkills and experience: Luke joined Ocado as Chief Executive Officer of Ocado Solutions in 2017, before joining the Board in 2018. Prior to joining Ocado, Luke was a Senior Advisor at Boston Consulting Group and previously Group Development Director at Sainsbury’s, where he was responsible for online and digital and all customer-facing digital activities. Luke has extensive experience in strategy, online and grocery retailing and since joining Ocado has overseen the establishment of a number of international partnerships and the launch of our first international CFCs. During his career, Luke has also worked at OC&C Strategy Consultants where he was Partner and Head of the Retail and Consumer practice. He graduated from ESCP and holds an MBA from INSEAD.External Appointments: Non-Executive Director of Hana Group SAS, registered in France; Non-Executive Director of ASOS plc.Executive/Non-Executive: ExecutiveCommittee Membership: N/AIndependent: NoSkills and experience: Neill was on the founding team of Ocado, joining the Board in September 2000, and provides broad legal and corporate governance knowledge with a profound understanding of the business. He has responsibility for the Group Operations departments – Legal, Governance, Intellectual Property, Insurance, Real Estate, Government Relations and Corporate Responsibility. Prior to Ocado, he was a barrister in practice at One Essex Court and spent nine years at Goldman Sachs in London in the investment banking and legal divisions. Neill holds degrees in industrial psychology and law from the University of the Witwatersrand in Johannesburg and a Masters in Law from Sidney Sussex College, Cambridge. He is admitted as a barrister in England & Wales, an attorney in New York and an advocate in South Africa.External Appointments: Alternate Non-Executive Director of Mr Price Group Limited, listed in South Africa.Executive/Non-Executive: Non-ExecutiveCommittee Membership: Remuneration (Chairman), Audit, NominationIndependent: YesSkills and experience: Andrew is a partner at Freston Ventures Management Ltd, which invests in consumer brands that challenge the status quo. He chairs two of the businesses, online estate agent Strike and Whocanfixmycar.com, and advises other businesses such as Five Guys, Secret Cinema and Cubitts. Andrew previously served as Chairman of Carphone Warehouse Ltd and was formerly Group CEO of Carphone Warehouse plc before its merger, which he led, with Dixons Group plc. During his career he has successfully grown numerous new businesses, has international retail experience and developed and ran a global services business. He brings impressive business and leadership experience to the Board. Andrew graduated from the University of Leeds with a BA (Hons) in Management Studies in 1992.External Appointments: Chairman of Trustees of The Mix; Chairman of Strike (House Simple Ltd); Partner of Freston Ventures Management Ltd; Director of Chik’n Ltd; Chairman of Whocanfixmycar.com Ltd.Corporate Governance ReportLord Rose, ChairmanTim Steiner OBE, Chief Executive OfficerMark Richardson, Chief Operations Officer104Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Governance.indd 104Ocado-Annual-Report-2020-Governance.indd 10409/02/2021 09:12:2309/02/2021 09:12:2330029 9 February 2021 8:51 am Proof ShellExecutive/Non-Executive: Non-ExecutiveCommittee Membership: Nomination (Chairman)Independent: NoSkills and experience: Lord Rose has worked in the retail industry for over 40 years, including over 25 years board-level experience. He has held Chief Executive Officer roles at Argos plc, Booker plc, Arcadia Group plc and M&S plc. He was Chairman of M&S plc from 2008 to 2011. Lord Rose’s in-depth understanding of UK corporate governance requirements and extensive experience in the retail sector provides the Board with valuable, strong leadership. His considerable experience in change management has been invaluable in driving the Group whilst retaining focus on the core strategic objectives during a period of significant transformation. Lord Rose was knighted in 2008 for services to the retail industry and corporate social responsibility, and granted a life peerage in August 2014.External Appointments: Chairman of Stylemania Limited, trading as Dressipi; Non-Executive Director of RM2 International S.A.; Chairman of Majid Al Futtaim Retail based in Dubai; Non-Executive Director of Time Out Group plc; Chairman of Zenith; Chairman of EG Group Limited.Executive/Non-Executive: ExecutiveCommittee Membership: N/AIndependent: NoSkills and experience: Tim is the founding Chief Executive Officer of Ocado, which he started in 2000 and has led continuously since that time. He provides not only unparalleled knowledge of the Group but also a passion that has not dimmed over the 20 years since the Group’s formation. His drive and vision continue to be instrumental in the impressive growth and success of the Group. In 2016 he was appointed OBE in the Queen’s Honours List, and in 2018 he was voted Sunday Times’ Businessman of the Year. Prior to Ocado, he spent eight years at Goldman Sachs, during which time he gained international experience working in London, Hong Kong and New York in the Fixed Income division. Tim graduated from Manchester University in 1992 with an honours degree in Economics, Finance and Accountancy.External Appointments: NoneExecutive/Non-Executive: ExecutiveCommittee Membership: N/AIndependent: NoSkills and experience: Mark was Head of Technology at Ocado from 2001 until he joined the Board in 2012. He is responsible for the day-to-day running of the Ocado operation, including CFCs, logistics developments, customer service, business planning and engineering, and for the installation and maintenance of international OSP facilities. Prior to joining Ocado, Mark held a number of IT positions at the John Lewis Partnership, including Head of Selling Systems at Waitrose. Mark contributes valuable knowledge, through his technology capability and operational experience. He graduated from University College, London with a degree in Physics.External Appointments: Non-Executive Director of Paneltex Ltd*.* Ocado owns 25% of Paneltex Ltd.Executive/Non-Executive: ExecutiveCommittee Membership: N/AIndependent: NoSkills and experience: Luke joined Ocado as Chief Executive Officer of Ocado Solutions in 2017, before joining the Board in 2018. Prior to joining Ocado, Luke was a Senior Advisor at Boston Consulting Group and previously Group Development Director at Sainsbury’s, where he was responsible for online and digital and all customer-facing digital activities. Luke has extensive experience in strategy, online and grocery retailing and since joining Ocado has overseen the establishment of a number of international partnerships and the launch of our first international CFCs. During his career, Luke has also worked at OC&C Strategy Consultants where he was Partner and Head of the Retail and Consumer practice. He graduated from ESCP and holds an MBA from INSEAD.External Appointments: Non-Executive Director of Hana Group SAS, registered in France; Non-Executive Director of ASOS plc.Executive/Non-Executive: ExecutiveCommittee Membership: N/AIndependent: NoSkills and experience: Neill was on the founding team of Ocado, joining the Board in September 2000, and provides broad legal and corporate governance knowledge with a profound understanding of the business. He has responsibility for the Group Operations departments – Legal, Governance, Intellectual Property, Insurance, Real Estate, Government Relations and Corporate Responsibility. Prior to Ocado, he was a barrister in practice at One Essex Court and spent nine years at Goldman Sachs in London in the investment banking and legal divisions. Neill holds degrees in industrial psychology and law from the University of the Witwatersrand in Johannesburg and a Masters in Law from Sidney Sussex College, Cambridge. He is admitted as a barrister in England & Wales, an attorney in New York and an advocate in South Africa.External Appointments: Alternate Non-Executive Director of Mr Price Group Limited, listed in South Africa.Executive/Non-Executive: Non-ExecutiveCommittee Membership: Remuneration (Chairman), Audit, NominationIndependent: YesSkills and experience: Andrew is a partner at Freston Ventures Management Ltd, which invests in consumer brands that challenge the status quo. He chairs two of the businesses, online estate agent Strike and Whocanfixmycar.com, and advises other businesses such as Five Guys, Secret Cinema and Cubitts. Andrew previously served as Chairman of Carphone Warehouse Ltd and was formerly Group CEO of Carphone Warehouse plc before its merger, which he led, with Dixons Group plc. During his career he has successfully grown numerous new businesses, has international retail experience and developed and ran a global services business. He brings impressive business and leadership experience to the Board. Andrew graduated from the University of Leeds with a BA (Hons) in Management Studies in 1992.External Appointments: Chairman of Trustees of The Mix; Chairman of Strike (House Simple Ltd); Partner of Freston Ventures Management Ltd; Director of Chik’n Ltd; Chairman of Whocanfixmycar.com Ltd.Luke Jensen, Chief Executive Officer, Ocado Solutions Neill Abrams, Group General Counsel and Company Secretary Andrew Harrison, Senior Independent Director and Designated Non-Executive Director105Stock Code: OCDO Annual Report and Accounts Ocado Group plc GOVERNANCEOcado-Annual-Report-2020-Governance.indd 105Ocado-Annual-Report-2020-Governance.indd 10509/02/2021 09:12:2809/02/2021 09:12:28Back to contents 30029 9 February 2021 8:51 am Proof ShellExecutive/Non-Executive: Non-ExecutiveCommittee Membership: Nomination Independent: YesSkills and experience: Jörn is the Head of M&A for Tetra Laval Group and has over 30 years’ experience in corporate development and international mergers and acquisitions. Jörn has been a valued member of the Board since before the Group was listed and his in depth knowledge and understanding of the business is a great asset to the Board. Jörn holds a degree in Business Administration from Lund University, Sweden.External Appointments: Group Board Member of Tetra Laval; Board Member of Alfa Laval AB; Board Member of DeLaval Holding AB.Executive/Non-Executive: Non-ExecutiveCommittee Membership: Nomination, AuditIndependent: YesSkills and experience: John has extensive operational and financial management experience of running large international businesses, as well as significant experience in strategic development and driving improvements in operational performance. Until he stepped down from the role in November 2019, John was Group Chief Executive for Ferguson plc, the world’s leading specialist distributor of plumbing and heating products. John was also a partner at Alchemy Partners, a private equity group, and prior to that he was Chief Financial Officer at Travelex Group, the international payments business, and Hays Plc. John graduated from Imperial College, London in 1987 and qualified as a Chartered Accountant with Arthur Andersen, where he worked for nine years in Audit, Operational Consulting and Corporate Finance. He was also Group Controller of The Stationery Office Group after its privatisation in 1996.External Appointments: NoneExecutive/Non-Executive: Non-ExecutiveCommittee Membership: Audit (Chairman), Nomination, Remuneration Independent: YesSkills and experience: Previously a finance director at Virgin Atlantic and at Porsche Cars Great Britain, Julie has both significant financial expertise and board-level experience. She has chaired audit committees at various FTSE listed companies with operations both in the UK and internationally and brings significant proficiency to the Audit Chairman role at Ocado. She is also an experienced remuneration committee chairman. Julie holds a BA (Hons) in Economics from the University of Cambridge and is a Chartered Accountant.External Appointments: Non-Executive Director and Chairman of the Audit Committee of Rentokil Initial plc; Non-Executive Director and Chairman of the Audit Committee at NXP Semiconductors N.V.; Non-Executive Director and Chairman of the Audit Committee of easyJet plc.; Non-Executive Director of Shilton Midco 2 LimitedExecutive/Non-Executive: Non-ExecutiveCommittee Membership: Nomination, Audit, RemunerationIndependent: YesSkills and experience: As Sky’s Chief Business Development Officer, Emma identifies and builds revenue growth opportunities. This includes responsibility for key strategic relationships with Sky’s technology and content partners. Emma has overseen the creation of Sky’s start-up venture investment function and US presence, leading to investment in over 30 technology start-ups. Her knowledge of venture investment is invaluable to the Group as new opportunities are identified and invested in to increase innovation. Emma graduated with a BA Joint Hons in Management Studies and Geography from the University of Leeds in 1992.External Appointments: Group Director of Business Development, Strategic Partnerships and Investments of Sky, a Comcast Company.Executive/Non-Executive: Non-ExecutiveCommittee Membership: NominationIndependent: YesSkills and experience: Michael brings a wealth of experience in growth strategy and improving operational efficiency in the technology and telecommunications industry. He is currently Chief Strategy and Transformation Officer of BT Group, having joined the Group in 2018. As an experienced technology executive with strong transformation experience Michael brings a vital skill set to the Board as the Group completes its transformation into a global technology-led Group. Michael has a BS in Computer Science and Electrical Engineering from Duke University and an MBA from Duke University’s Fuqua School of Business.External Appointments: Chief Strategy and Transformation Officer of BT Group plc.Executive/Non-Executive: Non-ExecutiveCommittee Membership: NominationIndependent: YesSkills and experience: Rick has extensive board-level experience, having previously held the role of Chairman at Mastercard Inc., Centrica plc and Network Rail Limited, the CEO role at Blue Circle Group plc and Invensys plc, and non-executive directorships at Land Securities Group plc, Imperial Chemical Industries plc, Lafarge SA and Cookson Group plc. His recent experience, from 2006 to 2020, overseeing a period of huge growth and development at Mastercard is a valuable asset as Ocado continues to grow. Rick also provides leadership experience in the technology sector as the Chairman and co-founder of QiO Technologies Ltd, an advanced analytics and AI software company.External Appointments: Non-Executive Director of Globant SA.Corporate Governance ReportContinuedJörn Rausing, Non-Executive DirectorJohn Martin, Non-Executive DirectorJulie Southern, Non-Executive Director106Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Governance.indd 106Ocado-Annual-Report-2020-Governance.indd 10609/02/2021 09:12:3309/02/2021 09:12:33Back to contents 30029 9 February 2021 8:51 am Proof ShellExecutive/Non-Executive: Non-ExecutiveCommittee Membership: Nomination Independent: YesSkills and experience: Jörn is the Head of M&A for Tetra Laval Group and has over 30 years’ experience in corporate development and international mergers and acquisitions. Jörn has been a valued member of the Board since before the Group was listed and his in depth knowledge and understanding of the business is a great asset to the Board. Jörn holds a degree in Business Administration from Lund University, Sweden.External Appointments: Group Board Member of Tetra Laval; Board Member of Alfa Laval AB; Board Member of DeLaval Holding AB.Executive/Non-Executive: Non-ExecutiveCommittee Membership: Nomination, AuditIndependent: YesSkills and experience: John has extensive operational and financial management experience of running large international businesses, as well as significant experience in strategic development and driving improvements in operational performance. Until he stepped down from the role in November 2019, John was Group Chief Executive for Ferguson plc, the world’s leading specialist distributor of plumbing and heating products. John was also a partner at Alchemy Partners, a private equity group, and prior to that he was Chief Financial Officer at Travelex Group, the international payments business, and Hays Plc. John graduated from Imperial College, London in 1987 and qualified as a Chartered Accountant with Arthur Andersen, where he worked for nine years in Audit, Operational Consulting and Corporate Finance. He was also Group Controller of The Stationery Office Group after its privatisation in 1996.External Appointments: NoneExecutive/Non-Executive: Non-ExecutiveCommittee Membership: Audit (Chairman), Nomination, Remuneration Independent: YesSkills and experience: Previously a finance director at Virgin Atlantic and at Porsche Cars Great Britain, Julie has both significant financial expertise and board-level experience. She has chaired audit committees at various FTSE listed companies with operations both in the UK and internationally and brings significant proficiency to the Audit Chairman role at Ocado. She is also an experienced remuneration committee chairman. Julie holds a BA (Hons) in Economics from the University of Cambridge and is a Chartered Accountant.External Appointments: Non-Executive Director and Chairman of the Audit Committee of Rentokil Initial plc; Non-Executive Director and Chairman of the Audit Committee at NXP Semiconductors N.V.; Non-Executive Director and Chairman of the Audit Committee of easyJet plc.; Non-Executive Director of Shilton Midco 2 LimitedExecutive/Non-Executive: Non-ExecutiveCommittee Membership: Nomination, Audit, RemunerationIndependent: YesSkills and experience: As Sky’s Chief Business Development Officer, Emma identifies and builds revenue growth opportunities. This includes responsibility for key strategic relationships with Sky’s technology and content partners. Emma has overseen the creation of Sky’s start-up venture investment function and US presence, leading to investment in over 30 technology start-ups. Her knowledge of venture investment is invaluable to the Group as new opportunities are identified and invested in to increase innovation. Emma graduated with a BA Joint Hons in Management Studies and Geography from the University of Leeds in 1992.External Appointments: Group Director of Business Development, Strategic Partnerships and Investments of Sky, a Comcast Company.Executive/Non-Executive: Non-ExecutiveCommittee Membership: NominationIndependent: YesSkills and experience: Michael brings a wealth of experience in growth strategy and improving operational efficiency in the technology and telecommunications industry. He is currently Chief Strategy and Transformation Officer of BT Group, having joined the Group in 2018. As an experienced technology executive with strong transformation experience Michael brings a vital skill set to the Board as the Group completes its transformation into a global technology-led Group. Michael has a BS in Computer Science and Electrical Engineering from Duke University and an MBA from Duke University’s Fuqua School of Business.External Appointments: Chief Strategy and Transformation Officer of BT Group plc.Executive/Non-Executive: Non-ExecutiveCommittee Membership: NominationIndependent: YesSkills and experience: Rick has extensive board-level experience, having previously held the role of Chairman at Mastercard Inc., Centrica plc and Network Rail Limited, the CEO role at Blue Circle Group plc and Invensys plc, and non-executive directorships at Land Securities Group plc, Imperial Chemical Industries plc, Lafarge SA and Cookson Group plc. His recent experience, from 2006 to 2020, overseeing a period of huge growth and development at Mastercard is a valuable asset as Ocado continues to grow. Rick also provides leadership experience in the technology sector as the Chairman and co-founder of QiO Technologies Ltd, an advanced analytics and AI software company.External Appointments: Non-Executive Director of Globant SA.Corporate Governance ReportContinuedJörn Rausing, Non-Executive DirectorJohn Martin, Non-Executive DirectorJulie Southern, Non-Executive Director106Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Governance.indd 106Ocado-Annual-Report-2020-Governance.indd 10609/02/2021 09:12:3309/02/2021 09:12:3330029 9 February 2021 8:51 am Proof ShellExecutive/Non-Executive: Non-ExecutiveCommittee Membership: Nomination Independent: YesSkills and experience: Jörn is the Head of M&A for Tetra Laval Group and has over 30 years’ experience in corporate development and international mergers and acquisitions. Jörn has been a valued member of the Board since before the Group was listed and his in depth knowledge and understanding of the business is a great asset to the Board. Jörn holds a degree in Business Administration from Lund University, Sweden.External Appointments: Group Board Member of Tetra Laval; Board Member of Alfa Laval AB; Board Member of DeLaval Holding AB.Executive/Non-Executive: Non-ExecutiveCommittee Membership: Nomination, AuditIndependent: YesSkills and experience: John has extensive operational and financial management experience of running large international businesses, as well as significant experience in strategic development and driving improvements in operational performance. Until he stepped down from the role in November 2019, John was Group Chief Executive for Ferguson plc, the world’s leading specialist distributor of plumbing and heating products. John was also a partner at Alchemy Partners, a private equity group, and prior to that he was Chief Financial Officer at Travelex Group, the international payments business, and Hays Plc. John graduated from Imperial College, London in 1987 and qualified as a Chartered Accountant with Arthur Andersen, where he worked for nine years in Audit, Operational Consulting and Corporate Finance. He was also Group Controller of The Stationery Office Group after its privatisation in 1996.External Appointments: NoneExecutive/Non-Executive: Non-ExecutiveCommittee Membership: Audit (Chairman), Nomination, Remuneration Independent: YesSkills and experience: Previously a finance director at Virgin Atlantic and at Porsche Cars Great Britain, Julie has both significant financial expertise and board-level experience. She has chaired audit committees at various FTSE listed companies with operations both in the UK and internationally and brings significant proficiency to the Audit Chairman role at Ocado. She is also an experienced remuneration committee chairman. Julie holds a BA (Hons) in Economics from the University of Cambridge and is a Chartered Accountant.External Appointments: Non-Executive Director and Chairman of the Audit Committee of Rentokil Initial plc; Non-Executive Director and Chairman of the Audit Committee at NXP Semiconductors N.V.; Non-Executive Director and Chairman of the Audit Committee of easyJet plc.; Non-Executive Director of Shilton Midco 2 LimitedExecutive/Non-Executive: Non-ExecutiveCommittee Membership: Nomination, Audit, RemunerationIndependent: YesSkills and experience: As Sky’s Chief Business Development Officer, Emma identifies and builds revenue growth opportunities. This includes responsibility for key strategic relationships with Sky’s technology and content partners. Emma has overseen the creation of Sky’s start-up venture investment function and US presence, leading to investment in over 30 technology start-ups. Her knowledge of venture investment is invaluable to the Group as new opportunities are identified and invested in to increase innovation. Emma graduated with a BA Joint Hons in Management Studies and Geography from the University of Leeds in 1992.External Appointments: Group Director of Business Development, Strategic Partnerships and Investments of Sky, a Comcast Company.Executive/Non-Executive: Non-ExecutiveCommittee Membership: NominationIndependent: YesSkills and experience: Michael brings a wealth of experience in growth strategy and improving operational efficiency in the technology and telecommunications industry. He is currently Chief Strategy and Transformation Officer of BT Group, having joined the Group in 2018. As an experienced technology executive with strong transformation experience Michael brings a vital skill set to the Board as the Group completes its transformation into a global technology-led Group. Michael has a BS in Computer Science and Electrical Engineering from Duke University and an MBA from Duke University’s Fuqua School of Business.External Appointments: Chief Strategy and Transformation Officer of BT Group plc.Executive/Non-Executive: Non-ExecutiveCommittee Membership: NominationIndependent: YesSkills and experience: Rick has extensive board-level experience, having previously held the role of Chairman at Mastercard Inc., Centrica plc and Network Rail Limited, the CEO role at Blue Circle Group plc and Invensys plc, and non-executive directorships at Land Securities Group plc, Imperial Chemical Industries plc, Lafarge SA and Cookson Group plc. His recent experience, from 2006 to 2020, overseeing a period of huge growth and development at Mastercard is a valuable asset as Ocado continues to grow. Rick also provides leadership experience in the technology sector as the Chairman and co-founder of QiO Technologies Ltd, an advanced analytics and AI software company.External Appointments: Non-Executive Director of Globant SA.Changes to the BoardDuring the period and up to the date of signing of the financial statements the following changes to the composition of the Board took place.Duncan Tatton-Brown resigned as Executive Director on 22 November 2020.Michael Sherman was appointed as Non-Executive Director on 5 October 2020.Claudia Arney resigned as Non-Executive Director on 25 December 2020, after the end of the period.Rick Haythornthwaite was appointed as Non-Executive Director and Chairman-elect on 1 January 2021, after the end of the period.Emma Lloyd, Non-Executive DirectorMichael Sherman, Non-Executive DirectorRichard (Rick) Haythornthwaite, Non-Executive Director and Chairman-elect 107Stock Code: OCDO Annual Report and Accounts Ocado Group plc GOVERNANCEOcado-Annual-Report-2020-Governance.indd 107Ocado-Annual-Report-2020-Governance.indd 10709/02/2021 09:12:3609/02/2021 09:12:36Back to contents Corporate Governance Report
The layout of the Corporate Governance Report follows the
structure of the principles of the UK Corporate Governance
Code 2018 (the “Code”) to illustrate how the Code principles
have been applied.
Code Principles
1 Board leadership and Group purpose
A Effective Board (page 109)
B Purpose, strategy, values and culture (page 110)
C Governance framework and Board resources (page 111)
D Stakeholder engagement (page 112)
E Workforce policies and practices (page 113)
2 Division of responsibilities
F Board roles (page 114)
G Independence (page 119)
H External commitments and conflicts of interest (page 120)
I Board Efficiency: Key activities of the Board (page 118)
3 Composition, succession and evaluation
J Appointments to the Board (page 121)
K Board composition (page 122)
L Annual Board evaluation (page 124)
4 Audit, risk and internal control
M Financial reporting (page 132)
External Auditor & Internal audit (page 136)
N Review of the 2020 Annual Report (pages 132 and 138)
O Internal financial controls (page 135)
Risk management (page 135)
➔ Read more in our Audit Committee Report
on pages 130 to 137
5 Remuneration
P Linking remuneration with purpose and strategy (page 148)
Q Remuneration Policy review (page 156)
R Performance outcomes in 2020 (page 163)
Strategic targets (page 152)
➔ Read more in our Directors’ Remuneration
Report on pages 140 to 177
Corporate Governance Statement 2020
This Corporate Governance Statement, together with the rest of the
Corporate Governance Report and Committee Reports, provides
information on how the Group has applied the principles and
complied with all relevant provisions of the UK Corporate Governance
Code 2018, and meets other relevant requirements including
provisions of the Listing Rules and the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority.
The Corporate Governance Statement as required by the Financial
Conduct Authority’s Disclosure Guidance and Transparency Rules
forms part of the Directors’ Report, and has been prepared in
accordance with the principles of the Code. A copy of the Code
and further information on the Code can be found on the Financial
Reporting Council’s website, www.frc.org.uk.
For the year ended 29 November 2020, the Board considers that it
has complied with the provisions of the Code except that the Senior
Independent Director did not meet with the Board without the
Chairman present to appraise the Chairman’s performance. However,
the Chairman’s performance was appraised as part of the external
Board review undertaken during the period.
The key requirements under the Disclosure Guidance and
Transparency Rules DTR 7.2 are covered in greater detail throughout
the Annual Report for which we provide reference as follows:
• The Group’s risk management and internal control systems
are described on pages 60 to 71
•
•
Information with regards to share capital are presented in the
Directors’ Report on page 179
Information on Board and Committee composition can be
found on pages 104 to 107 and pages 126, 130 and 140
• The Board diversity policy is discussed on pages 122 and 129
Board Approval of the Corporate Governance Statement
This separate Corporate Governance Statement is approved by the
Board and signed on behalf of the Board by its Chairman and the
Group General Counsel and Company Secretary.
Lord Rose
Chairman
Neill Abrams
Group General Counsel and Company Secretary
9 February 2021
108 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Corporate Governance Report
The layout of the Corporate Governance Report follows the
structure of the principles of the UK Corporate Governance
Code 2018 (the “Code”) to illustrate how the Code principles
have been applied.
Code Principles
1 Board leadership and Group purpose
A Effective Board (page 109)
B Purpose, strategy, values and culture (page 110)
C Governance framework and Board resources (page 111)
D Stakeholder engagement (page 112)
E Workforce policies and practices (page 113)
2 Division of responsibilities
F Board roles (page 114)
G Independence (page 119)
H External commitments and conflicts of interest (page 120)
I Board Efficiency: Key activities of the Board (page 118)
3 Composition, succession and evaluation
J Appointments to the Board (page 121)
K Board composition (page 122)
L Annual Board evaluation (page 124)
4 Audit, risk and internal control
M Financial reporting (page 132)
External Auditor & Internal audit (page 136)
N Review of the 2020 Annual Report (pages 132 and 138)
O Internal financial controls (page 135)
Risk management (page 135)
➔ Read more in our Audit Committee Report
on pages 130 to 137
5 Remuneration
P Linking remuneration with purpose and strategy (page 148)
Q Remuneration Policy review (page 156)
R Performance outcomes in 2020 (page 163)
Strategic targets (page 152)
➔ Read more in our Directors’ Remuneration
Report on pages 140 to 177
Corporate Governance Statement 2020
This Corporate Governance Statement, together with the rest of the
Corporate Governance Report and Committee Reports, provides
information on how the Group has applied the principles and
complied with all relevant provisions of the UK Corporate Governance
Code 2018, and meets other relevant requirements including
provisions of the Listing Rules and the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority.
The Corporate Governance Statement as required by the Financial
Conduct Authority’s Disclosure Guidance and Transparency Rules
forms part of the Directors’ Report, and has been prepared in
accordance with the principles of the Code. A copy of the Code
and further information on the Code can be found on the Financial
Reporting Council’s website, www.frc.org.uk.
For the year ended 29 November 2020, the Board considers that it
has complied with the provisions of the Code except that the Senior
Independent Director did not meet with the Board without the
Chairman present to appraise the Chairman’s performance. However,
the Chairman’s performance was appraised as part of the external
Board review undertaken during the period.
The key requirements under the Disclosure Guidance and
Transparency Rules DTR 7.2 are covered in greater detail throughout
the Annual Report for which we provide reference as follows:
• The Group’s risk management and internal control systems
are described on pages 60 to 71
•
Information with regards to share capital are presented in the
Directors’ Report on page 179
•
Information on Board and Committee composition can be
found on pages 104 to 107 and pages 126, 130 and 140
• The Board diversity policy is discussed on pages 122 and 129
Board Approval of the Corporate Governance Statement
This separate Corporate Governance Statement is approved by the
Board and signed on behalf of the Board by its Chairman and the
Group General Counsel and Company Secretary.
Lord Rose
Chairman
Neill Abrams
9 February 2021
Group General Counsel and Company Secretary
Board
Leadership and
Group Purpose
G
O
V
E
R
N
A
N
C
E
Effective Board
The primary role of the Board is to
promote the long-term sustainable
success of the Group, to generate and
preserve value and to contribute to the
wider society.
This is achieved through good governance and a Board of
Directors which includes the necessary skills, knowledge and
experience to provide effective leadership for the Group.
The key contributions of the Board in driving the long-term
success of the Group are set out below.
Driving long-term success
1. 2. 3. 4.
Strategy:
The Board sets the
strategic priorities of
the Group, monitors the
implementation of strategic
initiatives and measures
proposals against, and
takes decisions in line with,
the strategy.
Purpose, Values
& Culture:
The Board establishes the
purpose and values of the
Group that underpin the
foundations of the Group’s
culture, and monitors
these to ensure they are
aligned.
Stakeholders:
The Board oversees
engagement with all
key stakeholders and
takes into account their
interests in exercising its
responsibilities to focus on
improving outcomes for all
stakeholders.
Governance:
The Board ensures a
framework of prudent
and effective governance
is in place, including the
management of risks, to
maintain stakeholders’
trust and confidence in the
Group.
108 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Back to contents Board Leadership and Group Purpose
Continued
Purpose, Strategy, Values and Culture
The Board is responsible for setting
the strategic direction of the Group,
establishing the Group’s purpose and
values and taking a leading role in laying
the foundations of the Group’s culture. The
Board recognises that a clearly established
purpose and strategy, alongside strong
values and a positive culture, is essential
for the Group’s performance and long-term
sustainability and success.
Our purpose, ‘reimagining shopping, by solving complex problems
to provide sustainable solutions for online grocery’, describes our
core focus and is the basis of our actions. Our strategy sets the
direction we are undertaking in order to pursue our purpose. The
Board is confident that our purpose, and our strategy to achieve this,
will serve the interests of our key stakeholders and drive long-term
sustainable success for the Group. Our purpose and strategy are key
considerations in the actions and decision-making of the Board and
the oversight of implementation of these into the operations of the
business.
➔ For further information on the actions of the Board this year see
the Key Activities of the Board on page 118
Our values guide how the Board and workforce behave, individually
and collectively, and underpin our culture. Our engaged and
mission-driven culture enables us to tackle challenges and pursue
opportunities to realise our strategy and achieve our purpose. Our
values are reflected in our culture which is open and collegiate,
engaged and entrepreneurial. Our culture enables us to find new
solutions to challenges and pursue opportunities with innovative
thinking. During the global pandemic the strength of our culture
has been demonstrated through the resilience of our business.
➔ Read more about Our Purpose,
Strategy, Values on pages 14 and 15
and Our Culture on pages 91 and 92
Despite challenging circumstances the Group successfully delivered
the first two international CFCs for our global partners, ramped up
productivity in our UK CFCs, and expanded in-store picking capability
to meet heightened demand.
With a rapidly growing and more international workforce, reinforcing
our values is of paramount importance to ensure that our positive
culture is embedded across the Group. This year we introduced a new
Code of Conduct and a new Global Employee Handbook that provide
an overview of Ocado and the values expected of all employees. The
Directors strive through their own behaviours to set a strong tone from
the top for senior management and the wider workforce. The Board
leads by example in its actions to promote the culture, by maintaining
high standards of ethics and integrity, and ensures that the necessary
policies and procedures are put in place to maintain the culture. The
Board monitors and assesses the Group’s culture and the table on
the opposite page demonstrates the key actions taken by the Board
during the year to meet this responsibility. If the Board is concerned or
dissatisfied with any behaviours or actions it seeks assurance from the
Executive Directors and senior management that corrective action is
being taken. No issues were raised this year.
Our Purpose
Reimagining shopping, by solving
complex problems to provide
sustainable solutions for online grocery'
E
R
U
T
L
U
C
R
U
O
Our Values
and Culture
Our values say it
all - togetherness,
pride and
being better
O
U
R
C
U
L
T
U
R
E
Our Strategy
Facilitating sustained growth
for our partners and in turn
for our wider stakeholders
110
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Back to contents
Board Leadership and Group Purpose
Continued
Purpose, Strategy, Values and Culture
The Board is responsible for setting
the strategic direction of the Group,
establishing the Group’s purpose and
values and taking a leading role in laying
the foundations of the Group’s culture. The
Board recognises that a clearly established
purpose and strategy, alongside strong
values and a positive culture, is essential
for the Group’s performance and long-term
sustainability and success.
Our purpose, ‘reimagining shopping, by solving complex problems
to provide sustainable solutions for online grocery’, describes our
core focus and is the basis of our actions. Our strategy sets the
direction we are undertaking in order to pursue our purpose. The
Board is confident that our purpose, and our strategy to achieve this,
will serve the interests of our key stakeholders and drive long-term
sustainable success for the Group. Our purpose and strategy are key
considerations in the actions and decision-making of the Board and
the oversight of implementation of these into the operations of the
business.
➔ For further information on the actions of the Board this year see
the Key Activities of the Board on page 118
Our values guide how the Board and workforce behave, individually
and collectively, and underpin our culture. Our engaged and
mission-driven culture enables us to tackle challenges and pursue
opportunities to realise our strategy and achieve our purpose. Our
values are reflected in our culture which is open and collegiate,
engaged and entrepreneurial. Our culture enables us to find new
solutions to challenges and pursue opportunities with innovative
thinking. During the global pandemic the strength of our culture
has been demonstrated through the resilience of our business.
➔ Read more about Our Purpose,
Strategy, Values on pages 14 and 15
and Our Culture on pages 91 and 92
Despite challenging circumstances the Group successfully delivered
the first two international CFCs for our global partners, ramped up
productivity in our UK CFCs, and expanded in-store picking capability
to meet heightened demand.
With a rapidly growing and more international workforce, reinforcing
our values is of paramount importance to ensure that our positive
culture is embedded across the Group. This year we introduced a new
Code of Conduct and a new Global Employee Handbook that provide
an overview of Ocado and the values expected of all employees. The
Directors strive through their own behaviours to set a strong tone from
the top for senior management and the wider workforce. The Board
leads by example in its actions to promote the culture, by maintaining
high standards of ethics and integrity, and ensures that the necessary
policies and procedures are put in place to maintain the culture. The
Board monitors and assesses the Group’s culture and the table on
the opposite page demonstrates the key actions taken by the Board
during the year to meet this responsibility. If the Board is concerned or
dissatisfied with any behaviours or actions it seeks assurance from the
Executive Directors and senior management that corrective action is
being taken. No issues were raised this year.
Our Purpose
Reimagining shopping, by solving
complex problems to provide
sustainable solutions for online grocery'
E
R
U
T
L
U
C
R
U
O
Our Values
and Culture
Our values say it
all - togetherness,
pride and
being better
O
U
R
C
U
L
T
U
R
E
Our Strategy
Facilitating sustained growth
for our partners and in turn
for our wider stakeholders
G
O
V
E
R
N
A
N
C
E
Board Action
Link to Culture
Updates at Board meetings
from the People team on
employee matters including
engagement, recruitment,
retention and diversity
Board reviews and approves all
key workforce related policies,
including a new Code of
Conduct and Global Employee
Handbook
Provides information to help
gauge the culture, for example
recruitment and retention of
employees that indicates a
positive culture, and feedback
on the wellbeing of employees
which enables monitoring of
the culture
Enables assessment and
oversight to ensure that
policies reflect the values
and desired behaviours of
employees to help embed the
corporate culture
Designated Non-Executive
Director attends all Ocado
Council meetings and reports
back to the Board
Provides direct update on the
concerns raised by employees to
assist in monitoring the culture
and identifying any issues
Reports to the Board on
whistleblowing statistics and
issues raised
Provides information on risks
and concerns identified so
these can be assessed and
mitigated as appropriate
Updates to the Board on health
and safety matters, for example
injury rates, safety incidents,
and risk assessment results
Enables the Board to assess the
effectiveness of safety practices
and behaviours and assess any
risks and actions required
Board oversees the launch of new
employee wellbeing initiatives,
such as the Mind Yourself
campaign, and actions focused
on enhancing diversity and
inclusion, such as the creation of
five inclusion committees
Review and approve modern
slavery statement and gender
pay gap statement
Enables oversight of the
initiatives and actions taken
to ensure the tools for a
positive culture and employee
wellbeing are in place
Enables assessment of the
broader culture of the Group
and its relationships with
suppliers and customers
Governance Framework
and Board Resources
Maintaining good governance is essential to support the
delivery of the Group’s strategic objectives, and to ensure that
the business is run well for the benefit of all stakeholders and
sustainable long-term value. A good governance structure is
not static and as the Group grows and develops the Board
continues to monitor the framework so it remains appropriate
to the business. As part of the Group’s transformation
programme the management leadership structure has moved
to a mission-based structure organised around the missions of
the business.
The governance framework embeds our values into the policies
and processes of the Group and therefore helps to strengthen
the corporate culture. The framework of Board and executive
committees and clearly stated levels of authority create
clear lines of accountability and effective oversight. This also
facilitates timely decision-making at the correct level.
➔ Read more about our Leadership Structure on
pages 114 to 115
During this year the Board has reviewed and approved an
updated Schedule of Matters Reserved for the Board, Board
Committee Terms of Reference and Delegations of Authority
Policy. There is an internal controls system in place which
allows the Board to assess and manage risks to the business.
➔ Read more in How We Manage Our Risks on pages 60 to
71 and the Audit Committee Report on pages 130 to 137
The Board provides support to senior management in
implementing strategic priorities as well as oversight and
constructive challenge on the running of the business. Through
reporting, including the use of both financial and non-financial
metrics, the Board is able to evaluate and guide the progress
and performance of the Group. Reports from across all areas of
the business are provided at each Board meeting to update the
Board and enable effective discussion.
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www.ocadogroup.com
Stock Code: OCDO
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Back to contents
Board Leadership and Group Purpose
Continued
Stakeholder Engagement
Board Engagement in 2020
9
Broker-hosted Q&A
events (outside of
results) with Director
presentations
8
Formal investor update
sessions with Directors
11
All-employee live stream
business updates led by
CEO Tim Steiner
30,000
Combined total views
of employee live stream
video updates
The Board recognises its responsibilities to engage with and
incorporate the views of key stakeholders in strategic planning and
decision-making, and the importance of stakeholder trust in building
resilience and long-term sustainability. The induction of new directors
includes appropriate training on the director duties of section 172 and
the role of stakeholder engagement. Annually the Board is provided
with a detailed analysis of stakeholder interests and engagement
mechanisms and given a refresher on section 172. A reference
to section 172 and the duty to consider stakeholder interests is
highlighted in each meeting and recent changes to the structure of
Board papers formalises the requirement to provide an assessment of
the effect on stakeholders in proposals submitted to the Board.
Although the Board retains overall responsibility for stakeholder
engagement there is interaction at various levels of the business so
that it is carried out by those most relevant to a particular stakeholder
group or particular issue. The Engaging With Our Stakeholders section
on pages 72 to 81 sets out the main interests of key stakeholders and
the ways in which the Group engages with them. Where engagement
is delegated to senior management or other employees the
Board maintains oversight through reports provided to the Board.
Engagement and feedback from stakeholders provides not only
valuable information on the interests of stakeholders but also helps to
keep the Board aware of any material issues and significant changes
within the market which can then be factored into decision-making.
The Board recognises the importance of considering all stakeholders
in its decision-making, although the weight given to each
stakeholder group may vary depending on the subject in question.
Through engagement and greater understanding of the interests of
stakeholders, the Board is able to assess the long-term consequences
of decisions on stakeholders and the business. We continue to work
on embedding practices across the Group so that consideration of
stakeholder interests in decisions is second nature at all levels of
the business.
➔ Read more about the Key Activities of the Board on page 118
In addition to individual stakeholder groups the Board is mindful of
the impact of the Group’s operations and the actions directed by the
Board on the wider society and environment.
The Board in its actions seeks to maintain the highest standards of
professionalism, integrity and ethics and to ensure that the Group
maintains its reputation for high standards of business conduct.
➔ Read more in our Corporate Responsibility section on
pages 82 to 89
➔ Read more in our Ethics and Compliance section on
page 98
Shareholder Engagement
The Group is committed to engaging with shareholders and
prospective investors to inform and aid understanding of its
strategy and progress. The focus of all communications is ensuring
transparent, detailed and meaningful information. The Chairman
has overall responsibility for ensuring that the Group has appropriate
channels of communication with its shareholders and is supported in
this by the Senior Independent Director and the Executive Directors.
Shareholders are consulted on a variety of issues, as appropriate,
such as the composition of the Board and Director remuneration. The
Board regularly receives feedback from the Group’s brokers, advisers
and the Executive Directors on the views of major shareholders
and the investor relations programme, and also receives reports on
significant changes to the composition of the Group’s share register.
Due to the pandemic the usual direct engagement mechanisms
with shareholders have been curtailed but the Directors have
continued communications virtually through one-to-one meetings
and responding to specific shareholder queries and provided digital
presentations, including for the Half-Year results announcement. In
order to ensure that shareholder engagement is facilitated at the 2021
AGM, despite the potential ongoing restrictions for in person meetings
due to the pandemic, the Company is utilising an online meeting
platform to allow for electronic participation by all shareholders.
112 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Board Leadership and Group Purpose
Continued
Stakeholder Engagement
Board Engagement in 2020
9
Broker-hosted Q&A
events (outside of
results) with Director
presentations
8
Formal investor update
sessions with Directors
11
All-employee live stream
business updates led by
CEO Tim Steiner
30,000
Combined total views
of employee live stream
video updates
The Board recognises its responsibilities to engage with and
The Board in its actions seeks to maintain the highest standards of
incorporate the views of key stakeholders in strategic planning and
professionalism, integrity and ethics and to ensure that the Group
decision-making, and the importance of stakeholder trust in building
maintains its reputation for high standards of business conduct.
resilience and long-term sustainability. The induction of new directors
includes appropriate training on the director duties of section 172 and
the role of stakeholder engagement. Annually the Board is provided
with a detailed analysis of stakeholder interests and engagement
mechanisms and given a refresher on section 172. A reference
to section 172 and the duty to consider stakeholder interests is
highlighted in each meeting and recent changes to the structure of
Board papers formalises the requirement to provide an assessment of
the effect on stakeholders in proposals submitted to the Board.
Although the Board retains overall responsibility for stakeholder
engagement there is interaction at various levels of the business so
that it is carried out by those most relevant to a particular stakeholder
group or particular issue. The Engaging With Our Stakeholders section
on pages 72 to 81 sets out the main interests of key stakeholders and
the ways in which the Group engages with them. Where engagement
is delegated to senior management or other employees the
Board maintains oversight through reports provided to the Board.
Engagement and feedback from stakeholders provides not only
valuable information on the interests of stakeholders but also helps to
keep the Board aware of any material issues and significant changes
within the market which can then be factored into decision-making.
The Board recognises the importance of considering all stakeholders
in its decision-making, although the weight given to each
stakeholder group may vary depending on the subject in question.
Through engagement and greater understanding of the interests of
stakeholders, the Board is able to assess the long-term consequences
of decisions on stakeholders and the business. We continue to work
on embedding practices across the Group so that consideration of
stakeholder interests in decisions is second nature at all levels of
the business.
➔ Read more about the Key Activities of the Board on page 118
In addition to individual stakeholder groups the Board is mindful of
the impact of the Group’s operations and the actions directed by the
Board on the wider society and environment.
➔ Read more in our Corporate Responsibility section on
➔ Read more in our Ethics and Compliance section on
pages 82 to 89
page 98
Shareholder Engagement
The Group is committed to engaging with shareholders and
prospective investors to inform and aid understanding of its
strategy and progress. The focus of all communications is ensuring
transparent, detailed and meaningful information. The Chairman
has overall responsibility for ensuring that the Group has appropriate
channels of communication with its shareholders and is supported in
this by the Senior Independent Director and the Executive Directors.
Shareholders are consulted on a variety of issues, as appropriate,
such as the composition of the Board and Director remuneration. The
Board regularly receives feedback from the Group’s brokers, advisers
and the Executive Directors on the views of major shareholders
and the investor relations programme, and also receives reports on
significant changes to the composition of the Group’s share register.
Due to the pandemic the usual direct engagement mechanisms
with shareholders have been curtailed but the Directors have
continued communications virtually through one-to-one meetings
and responding to specific shareholder queries and provided digital
presentations, including for the Half-Year results announcement. In
order to ensure that shareholder engagement is facilitated at the 2021
AGM, despite the potential ongoing restrictions for in person meetings
due to the pandemic, the Company is utilising an online meeting
platform to allow for electronic participation by all shareholders.
Workforce Policies and Practices
Our people bring a diverse range of experience, expertise and
perspectives that contribute to the values and culture of Ocado and
are essential for the delivery of our strategic objectives. A positive
environment where our people feel valued, motivated and able
to thrive is essential to the Group’s continued success. The Board
recognises the value of, and supports, significant investment of time
and resources in our workforce to allow the Group to attract and
retain talent and develop the skills of our employees.
The Board reviews and approves all key policies that impact our
workforce to ensure that policies and practices support the Group’s
purpose and reflect our values. This year a new Code of Conduct
and a Global Employee Handbook were both introduced, which
provide important information on working at Ocado and help embed
the behaviours and values of the Group alongside more practical
information to enable our employees to work effectively and efficiently.
We have also introduced updated anti-bribery and anti-corruption
policies this year. Employees undertake mandatory training on key
policies to ensure that they are properly read and understood and to
help embed the principles as part of our culture.
The Board is responsible for overseeing the Company’s arrangements
for the workforce to be able to raise matters of concern and seeks
to foster an environment where individuals can be confident about
speaking up about concerns without fear of retaliation. The Company
operates an externally facilitated system, Speak Up, detailed in the
Ethics and Compliance section on page 98. The Board monitors this
area through reports on the number and types of reports submitted
through the whistleblowing process and the outcomes of the
concerns raised.
Ocado is focused on the importance of the wellbeing of our workforce
and this has been heightened during the global pandemic with
additional challenges for our frontline workers and our newly
remote workers. We have introduced a number of new initiatives
to provide support for wellbeing including a global Employee
Assistance Programme, the Mind Yourself global wellbeing support
programme and our new approach to listening, wellbeing and
inclusion called #YouMatter. We also introduced a comprehensive
new induction programme designed to take place remotely that has
been successfully utilised as we have continued to hire during the
pandemic.
➔ Read more in Our People section on pages 90 to 97
G
O
V
E
R
N
A
N
C
E
Workforce Engagement
The Board engages with the workforce using various methods to
ensure they receive information on the Group to remain engaged and
committed and to ensure the Board understands the composition
and views of employees. As the Designated Non-Executive Director,
Andrew Harrison is an important link to the workforce. Andrew
attended all Ocado Council meetings this year and reported back
to the Board on the views and concerns of the workforce, as well as
being able to respond to questions raised at these meetings.
➔ Read more about the DNED in the Our People section
on page 97
Since the start of the pandemic, regular electronic live streams to
all employees from CEO Tim Steiner have proven to be a very useful
engagement mechanism. Tim, and the executive team, update the
workforce on all aspects of the business and take direct questions in
real time from employees. This year the frequency of updates from
the Chief People Officer increased to provide the Board with up to
date, valuable information on the workforce. This year has also seen
the introduction of a new employee engagement platform, Peakon,
which enables employee feedback to be gathered continuously, as
opposed to an annual survey, to provide more useful data and enable
more timely action in response.
➔ Read more in our Engaging With Our Stakeholders section on
pages 72 to 81
112 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Back to contents Division of Responsibilities
Leadership Structure
The Board is responsible for providing leadership to the Group. The structure of the Board, and management, roles and committees ensures controls and
oversight with a balanced approach to risk aligned with Ocado’s culture. The structure assists the Board with carrying out its responsibilities and is designed
to ensure that the Board focuses on strategy, monitoring the performance of the Group and governance, risk and control issues.
The following diagram shows the role of the Board and its Committees and senior management:
Board of Directors
The Board is collectively responsible for the long-term success of the Company. The business of the Company is managed by
the Board who may exercise all of the powers of the Company. The Board has a formal schedule of matters reserved for the
Board’s decision-making which is available on the Corporate Website. Although the Board retains overall responsibility,
it delegates certain matters to the Board Committees, and the detailed implementation of matters approved by the Board
and the day-to-day operational aspects of the business to the Executive Group.
Board Committees
The Board Committees consist of Non-Executive Directors and each Committee Chairman reports to the Board on matters
discussed at Committee meetings and highlights any significant issues that require Board attention. The terms of reference for
each Board Committee are reviewed annually and are available on the Corporate Website. The reports by each Board Committee
are given in this Annual Report.
Audit Committee
Remuneration Committee
Nomination Committee
Reviews and reports to the
Board on the Group’s financial
reporting, internal control and risk
management systems. Monitors the
independence and effectiveness
of the external auditor and the
effectiveness of the internal audit
function.
Determines the remuneration,
bonuses, long-term incentive
arrangements, contract terms and
other benefits in respect of the
Executive Directors, the Chairman,
the Company Secretary and
senior management. Oversees the
remuneration and workforce policies
and takes these into account when
setting the policy for Directors’
remuneration.
Provides succession planning for
the Board and leads the process
for all Board appointments. Keeps
under review the membership and
composition of the Board, including
the combination of skills, experience
and diversity, and ensures it remains
appropriate.
Executive Group
The Executive Group is responsible for the day-to-day running of the business, carrying out and overseeing operational
management, and implementing the strategies the Board has set. The Executive Group meets weekly.
Executive Committees
These governance Committees are chaired by an Executive Director and report to the Executive Group, and the Board or Board
Committees as appropriate.
Risk Committee
Oversees the Group’s risk register, risk
control processes and disaster recovery
plans.
Information Security Committee
Monitors the Group’s information security
measures and oversees changes to
security systems.
Treasury Committee
Oversees the treasury policy concerning the
Group’s cash and deposits, investments,
foreign exchange and interest rates.
Safety Committee
Oversees the Group’s health, safety and
environment management systems and
monitors the progress of safety plans.
Capital Expenditure Group
Reviews and authorises capital
expenditure projects, overspends and
property expenditure, in accordance with
agreed limits.
Personal Data Committee
Supports and drives data privacy
governance and provides assurance that
best practice mechanisms are in place.
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Back to contents Division of Responsibilities
Leadership Structure
The Board is responsible for providing leadership to the Group. The structure of the Board, and management, roles and committees ensures controls and
oversight with a balanced approach to risk aligned with Ocado’s culture. The structure assists the Board with carrying out its responsibilities and is designed
to ensure that the Board focuses on strategy, monitoring the performance of the Group and governance, risk and control issues.
The following diagram shows the role of the Board and its Committees and senior management:
Board of Directors
The Board is collectively responsible for the long-term success of the Company. The business of the Company is managed by
the Board who may exercise all of the powers of the Company. The Board has a formal schedule of matters reserved for the
Board’s decision-making which is available on the Corporate Website. Although the Board retains overall responsibility,
it delegates certain matters to the Board Committees, and the detailed implementation of matters approved by the Board
and the day-to-day operational aspects of the business to the Executive Group.
Board Committees
The Board Committees consist of Non-Executive Directors and each Committee Chairman reports to the Board on matters
discussed at Committee meetings and highlights any significant issues that require Board attention. The terms of reference for
each Board Committee are reviewed annually and are available on the Corporate Website. The reports by each Board Committee
are given in this Annual Report.
Audit Committee
Remuneration Committee
Nomination Committee
Reviews and reports to the
Board on the Group’s financial
Determines the remuneration,
bonuses, long-term incentive
reporting, internal control and risk
arrangements, contract terms and
management systems. Monitors the
other benefits in respect of the
independence and effectiveness
of the external auditor and the
effectiveness of the internal audit
function.
Executive Directors, the Chairman,
the Company Secretary and
senior management. Oversees the
and takes these into account when
setting the policy for Directors’
remuneration.
remuneration and workforce policies
appropriate.
Provides succession planning for
the Board and leads the process
for all Board appointments. Keeps
under review the membership and
composition of the Board, including
the combination of skills, experience
and diversity, and ensures it remains
Executive Group
The Executive Group is responsible for the day-to-day running of the business, carrying out and overseeing operational
management, and implementing the strategies the Board has set. The Executive Group meets weekly.
Executive Committees
Committees as appropriate.
These governance Committees are chaired by an Executive Director and report to the Executive Group, and the Board or Board
Risk Committee
Information Security Committee
Treasury Committee
Oversees the Group’s risk register, risk
Monitors the Group’s information security
Oversees the treasury policy concerning the
control processes and disaster recovery
measures and oversees changes to
Group’s cash and deposits, investments,
plans.
security systems.
foreign exchange and interest rates.
Safety Committee
Capital Expenditure Group
Personal Data Committee
Oversees the Group’s health, safety and
Reviews and authorises capital
Supports and drives data privacy
environment management systems and
expenditure projects, overspends and
governance and provides assurance that
monitors the progress of safety plans.
property expenditure, in accordance with
best practice mechanisms are in place.
agreed limits.
G
O
V
E
R
N
A
N
C
E
Non-Executive Directors
• Support and constructively challenge the Executive Directors
• Monitor the delivery of the Group’s strategy within the risk and control framework set by the Board
• Provide an external perspective and bring a diverse range of skills and experience to the Board’s
decision-making
• Meet with the Chairman regularly without Executive Directors present
• Oversee the appointment and removal of Executive Directors
Executive Group
• Day-to-day management of the Group’s operations
• Execute the strategy once agreed by the Board
• Undertake certain detailed aspects of the Board’s responsibilities as delegated to the Executive
Group
• Executive Group carry out some of these responsibilities through Executive-led Committees
Chairman
•
Leads the Board
• Promotes high standards of governance and ensures the effectiveness of the Board in directing
the Company
• Sets the Board’s agenda
• Responsible for encouraging and facilitating engagement by the Directors to ensure all Directors
make an effective contribution
• Promotes a culture of openness, constructive debate and challenge on the Board
Senior Independent Director
• Supports and acts as a sounding board for the Chairman
• Available to the shareholders
Designated Non-Executive Director
• Understands the views of the workforce and identifies any areas of concern
• Communicates the views of the workforce to the Board
• Ensures the Board considers the workforce in all its proposals
• Explains to the workforce the Company’s policy on executive remuneration
Chief Executive Officer
• Responsible for the day-to-day running of the Group’s business and performance and the
implementation of strategy
•
Leads the Executive Group
• Represents management on the Board
Group General Counsel and Company Secretary
• Ensures Board procedures are followed
•
Implements and oversees the governance framework
• Ensures that information flows between management, the Board and its Committees
The role descriptions for CEO, Chairman,
Senior Independent Director and Designated
Non-Executive Director are set out in writing
and provide a system of checks and balances
to ensure no individual has unfettered
decision-making power.
Information for Directors
The Chairman is responsible for ensuring
that all of the Directors are properly briefed
on issues arising at Board meetings and that
they have full and timely access to accurate,
relevant information. To enable the Board
to discharge its duties, all Directors receive
appropriate information, including briefing
papers distributed in advance of the Board
meetings.
Directors can, where they judge it to be
necessary to discharge their responsibilities
as Directors, obtain independent
professional advice at the Company’s
expense. The Board Committees have access
to sufficient resources to discharge their
duties, including external consultants and
advisers and access to internal resources
and relevant personnel. The Directors also
have access to the advice and services of the
Company Secretary as required.
Indicates delegation
Indicates Board support
114 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Division of Responsibilities
Continued
Board and Committee Meetings and Attendance
During the year, due to the pandemic, the Board and its committees have conducted meetings remotely through video calls to enable the Board
to continue to function and maintain the integrity of our governance structure. During the period, the Non-Executive Directors held a number of
meetings without the Executive Directors present. In the event a Director was unable to attend a meeting they still received all the papers for the
meeting and were updated on matters discussed at the meeting.
Meetings attended
Possible meetings the Director could have attended
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
Lord Rose (Chairman)
Andrew Harrison (SID, DNED)
Emma Lloyd (NED)
Jörn Rausing (NED)
Julie Southern (NED)
Claudia Arney (NED)*
John Martin (NED)
Michael Sherman (NED) – appointed within the year
Tim Steiner (CEO)
Duncan Tatton-Brown (CFO) – resigned within the year
Mark Richardson (COO)
Luke Jensen (CEO, Ocado Solutions)
Neill Abrams (Group General Counsel and
Company Secretary)
* Claudia retired from the Board after the end of the financial year.
12 12
11 12
12 12
12 12
12 12
11 12
12 12
4
4
12 12
12 12
12 12
12 12
12 12
N/A
7
7
7
7
N/A
7
7
N/A
7
7
N/A
N/A
N/A
N/A
N/A
N/A
4
3
4
4
4
3
4
1
4
4
4
4
4
4
4
1
N/A
N/A
N/A
N/A
N/A
N/A
7
7
N/A
N/A
6
6
7
7
N/A
N/A
N/A
N/A
N/A
N/A
N/A
116 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Division of Responsibilities
Continued
Board and Committee Meetings and Attendance
During the year, due to the pandemic, the Board and its committees have conducted meetings remotely through video calls to enable the Board
to continue to function and maintain the integrity of our governance structure. During the period, the Non-Executive Directors held a number of
meetings without the Executive Directors present. In the event a Director was unable to attend a meeting they still received all the papers for the
meeting and were updated on matters discussed at the meeting.
Meetings attended
Possible meetings the Director could have attended
Board
Committee
Committee
Committee
Audit
Nomination
Remuneration
Lord Rose (Chairman)
Andrew Harrison (SID, DNED)
Emma Lloyd (NED)
Jörn Rausing (NED)
Julie Southern (NED)
Claudia Arney (NED)*
John Martin (NED)
Tim Steiner (CEO)
Michael Sherman (NED) – appointed within the year
Duncan Tatton-Brown (CFO) – resigned within the year
Mark Richardson (COO)
Luke Jensen (CEO, Ocado Solutions)
Neill Abrams (Group General Counsel and
Company Secretary)
* Claudia retired from the Board after the end of the financial year.
12 12
11 12
12 12
12 12
12 12
11 12
12 12
4
4
12 12
12 12
12 12
12 12
12 12
N/A
7
7
7
7
N/A
7
7
N/A
7
7
N/A
N/A
N/A
N/A
N/A
N/A
4
3
4
4
4
3
4
1
4
4
4
4
4
4
4
1
N/A
N/A
N/A
N/A
N/A
N/A
7
7
N/A
N/A
6
6
7
7
N/A
N/A
N/A
N/A
N/A
N/A
N/A
G
O
V
E
R
N
A
N
C
E
116 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Division of Responsibilities
Continued
Board Effectiveness: Key Activities of the Board
The table below sets out some of the Board’s key areas of focus and discussions through the year as it effectively discharged its responsibilities. It also shows
the stakeholder views and interests, gathered through stakeholder engagement and feedback, that were considered in each of the actions identified.
Area
Actions
Stakeholders
considered
Strategy,
Performance
and Financing
Annual strategy conference to review and set the Group’s strategy and medium-term plan, including updates
on strategic initiatives from across the business and discussion of priorities in the short and long-term.
Received regular updates on the impact of Covid-19 on the business, particularly projects with
Solutions partners and online grocery demand, and oversaw the response to the pandemic,
including increasing capacity and putting in place new health and safety measures.
Received regular reports from senior management, including Ocado Retail, on trading, business
performance, financing and the implementation of strategy throughout the year.
Approved a capital raise of approximately £1,007 million comprising the placing of approximately
£650 million of new ordinary shares and share offer on PrimaryBid, and the offering of £350 million
of convertible bonds due 2027.
Approved the acquisition of Haddington Dynamics Inc. and Kindred Systems Inc., specialist robotic
companies.
Reporting, Risk
Management,
and
Accountability
Controls
Undertook annual review of the principal and emerging risks of the Group and consideration of
risk appetite. Reviewed and validated the effectiveness of the Group’s systems of internal controls
and risk management framework.
Reviewed reports on specific risk areas across the business including the cyber security control environment,
ongoing material litigation, and health and safety measures introduced in response to Covid-19.
Reviewed and approved the Group’s full-year 2018/19 and half-year 2020 results as well as the quarterly
results, regulatory announcements and the Group’s Viability Statement and going concern status.
Operations
Approved the annual budget, the business plan for the Group and individual capital expenditure projects.
Received regular reports on the key projects including new technologies and the switchover to M&S
products on ocado.com.
Received regular reports on the implementation of CFC projects for Solutions clients, including the launch
of new CFCs in France and Canada and the ongoing work on CFCs in Australia, the USA and the UK.
Leadership and
People
Consideration of the composition and effectiveness of the Board, including the appointment of
Michael Sherman and Rick Haythornthwaite.
Reviewed and discussed the outcomes of the externally facilitated Board evaluation and reviewed
progress against the 2019 Board evaluation action plan.
Received reports on people issues including diversity and inclusion, gender pay gap analysis, the introduction
of new employee wellbeing initiatives, and the launch of a new employee engagement platform.
Governance
and Corporate
Responsibility
Reviewed various environmental, governance and social related matters including, annual stakeholder
analysis, corporate responsibility update, and materiality assessment.
Reviewed and approved corporate statements including gender pay gap statement, modern slavery
statement, and carbon assurance statement and basis of preparation document.
Key to icons:
Our People
Partners
Society and Community
Suppliers (Solutions)
Regulatory Bodies
Suppliers (Retail)
Investors
Customers (Retail)
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Back to contents Division of Responsibilities
Continued
Board Effectiveness: Key Activities of the Board
The table below sets out some of the Board’s key areas of focus and discussions through the year as it effectively discharged its responsibilities. It also shows
the stakeholder views and interests, gathered through stakeholder engagement and feedback, that were considered in each of the actions identified.
Area
Actions
and Financing
Strategy,
Annual strategy conference to review and set the Group’s strategy and medium-term plan, including updates
Performance
on strategic initiatives from across the business and discussion of priorities in the short and long-term.
Stakeholders
considered
Received regular updates on the impact of Covid-19 on the business, particularly projects with
Solutions partners and online grocery demand, and oversaw the response to the pandemic,
including increasing capacity and putting in place new health and safety measures.
Received regular reports from senior management, including Ocado Retail, on trading, business
performance, financing and the implementation of strategy throughout the year.
Approved a capital raise of approximately £1,007 million comprising the placing of approximately
£650 million of new ordinary shares and share offer on PrimaryBid, and the offering of £350 million
of convertible bonds due 2027.
companies.
Approved the acquisition of Haddington Dynamics Inc. and Kindred Systems Inc., specialist robotic
Reporting, Risk
Undertook annual review of the principal and emerging risks of the Group and consideration of
Management,
risk appetite. Reviewed and validated the effectiveness of the Group’s systems of internal controls
and
and risk management framework.
Accountability
Controls
Reviewed reports on specific risk areas across the business including the cyber security control environment,
ongoing material litigation, and health and safety measures introduced in response to Covid-19.
Reviewed and approved the Group’s full-year 2018/19 and half-year 2020 results as well as the quarterly
results, regulatory announcements and the Group’s Viability Statement and going concern status.
Operations
Approved the annual budget, the business plan for the Group and individual capital expenditure projects.
Received regular reports on the key projects including new technologies and the switchover to M&S
products on ocado.com.
Received regular reports on the implementation of CFC projects for Solutions clients, including the launch
of new CFCs in France and Canada and the ongoing work on CFCs in Australia, the USA and the UK.
Leadership and
Consideration of the composition and effectiveness of the Board, including the appointment of
People
Michael Sherman and Rick Haythornthwaite.
Reviewed and discussed the outcomes of the externally facilitated Board evaluation and reviewed
progress against the 2019 Board evaluation action plan.
Received reports on people issues including diversity and inclusion, gender pay gap analysis, the introduction
of new employee wellbeing initiatives, and the launch of a new employee engagement platform.
Governance
Reviewed various environmental, governance and social related matters including, annual stakeholder
and Corporate
analysis, corporate responsibility update, and materiality assessment.
Reviewed and approved corporate statements including gender pay gap statement, modern slavery
statement, and carbon assurance statement and basis of preparation document.
Responsibility
Key to icons:
Our People
Partners
Society and Community
Suppliers (Solutions)
Regulatory Bodies
Suppliers (Retail)
Investors
Customers (Retail)
Board Independence
1
2
3
1 Executive Director 4
2 Chairman 1
3 Non-Executive Director 7
Figures as at year end.
Independence
At end of the financial year the Board
comprised twelve Directors, including
seven Non-Executive Directors, excluding
the Chairman (who was independent
on appointment), all determined by
the Board to be independent and four
Executive Directors (for the majority of
the year prior to the retirement of Duncan
Tatton-Brown there were five Executive
Directors). Therefore the Board complies
with the Code recommendation that
independent non-executive directors
should make up at least half of the
Board, excluding the Chairman. The
independence of the Non-Executive
Directors is assessed annually, including
the length of tenure and relationships
or other circumstances that are likely to,
or could appear to, impair a Director’s
judgement. Similarly, the composition
of the Nomination Committee, Audit
Committee and Remuneration Committee
complied in all respects with the
independence provisions of the Code
during the period.
G
O
V
E
R
N
A
N
C
E
is expanding substantially outside of the
UK. Jörn also ensures there is a long-
term perspective brought to the Board’s
decision-making reflecting the approach
adopted at Tetra Laval to its own technology
development and commercial expansion.
The Board considers Jörn to be independent
in character and judgement, and does not
believe the size of Apple’s shareholding, nor
the duration of Jörn’s tenure on the Board,
amounts to a relationship or circumstance
which may affect his judgement. Jörn has
stood for re-election annually since 2011 and
on each occasion has been re-elected by a
substantial majority of shareholders.
Jörn Rausing
The Board has scrutinised the factors relevant
to its determination of the independence of
Non-Executive Director Jörn Rausing. Jörn
Rausing has been a Director for 17 years,
ten of which the Company was listed. Jörn
is a beneficiary of the Apple III Trust, which
owns Apple III Limited (together, “Apple”), a
significant (approximately 10%) shareholder
of the Company. Jörn is not a representative
of Apple, nor does Apple have any right to
appoint a Director to the Board.
The Board considers his continuing
directorship to benefit the Group and support
the principles of the Code. Jörn’s significant
experience as a co-owner and manager of
Tetra Laval, a global technology and industrial
group, enhances the skills and experience on
the Board in addition to bringing international
expertise during a period when the Group
118 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
Change in Directors’ Commitments
Director
Lord Rose
Change in Commitment
Appointed Chairman of EG Group Limited
Resigned from Fat Face Group Limited
Andrew Harrison
Appointed Chairman of Trustees of The Mix (previously Trustee)
Appointed Chairman of Whocanfixmycar.com Ltd (previously Director)
Claudia Arney
Appointed Director of RooFoods Ltd
Effective Date of Change
21 January 2021 (after period end)
23 October 2020
July 2020
March 2019
23 November 2020
Julie Southern
Appointed Director of Shilton Midco 2 Limited
3 December 2020 (after period end)
External Commitments and
Conflicts of Interest
The Company is mindful of the time commitment required from Non-
Executive Directors in order to effectively fulfil their responsibilities
on the Board, particularly providing constructive challenge and
holding management to account and utilising their diverse skills and
experience to benefit the Company and provide strategic guidance.
Prior to their appointment, prospective Directors are asked to provide
details of any other roles or significant obligations that may affect the
time available for them to commit to the Company. The Chairman
and the Board are then kept informed by each Director of any
proposed external appointments or other significant commitments
as they arise. These are monitored to ensure that each Director has
sufficient time to fulfil their obligations and Chairman approval
is required prior to a Director taking on any additional external
appointment. Each Director’s biographical details and significant
time commitments outside of the Company are set out in the Board
Biographies on pages 104 to 107. There have been a number of
changes to the Directors’ external appointments during the period as
set out in the table above.
The Companies Act 2006 provides that Directors must avoid a
situation where they have, or can have, a direct or indirect interest
that conflicts, or possibly may conflict, with the Company’s interests.
Boards of public companies may authorise conflicts and potential
conflicts, where appropriate, if their company’s articles of association
permit, which the Articles do.
Whenever a Director takes on additional external responsibilities, the
Director will discuss the potential position with the Chairman and
confirm that, as far as they are aware, there are no conflicts of interest.
Each Director is required to disclose conflicts and potential conflicts
to the Chairman and the Company Secretary as and when they
arise. As part of the induction process, a newly appointed Director
completes a questionnaire that requires him or her to disclose any
conflicts of interest to the Company. Thereafter, each Director has
an opportunity to disclose conflicts at the beginning of each Board
and Committee meeting and as part of an annual review. During
the year some Directors declared potential conflicts of interest in
relation to matters being discussed by the Board and as such did not
participate in discussions regarding these matters. None of the other
Directors declared to the Company any actual or potential conflicts
of interest between any of his or her duties to the Company and his
or her private interests and/or other duties, except in the case of the
Executive Directors, each of whom holds the position of Director
of the Company and director of a number of Group subsidiary
companies. The system in place for monitoring potential Director
conflicts remained effective throughout the period.
Ocado Retail Limited and Conflicts of Interest
Tim Steiner and Duncan Tatton-Brown are Ocado appointed directors
on the Ocado Retail Limited board. Notwithstanding their Companies
Act 2006 duties and obligations under the Articles, both directors are
subject to the provisions of the Ocado Retail articles of association
and to the provisions within the Ocado Retail shareholders agreement
on conflicts of interest and related party matters.
120 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Division of Responsibilities
Continued
Director
Lord Rose
Change in Directors’ Commitments
Change in Commitment
Appointed Chairman of EG Group Limited
Resigned from Fat Face Group Limited
Andrew Harrison
Appointed Chairman of Trustees of The Mix (previously Trustee)
Appointed Chairman of Whocanfixmycar.com Ltd (previously Director)
Claudia Arney
Appointed Director of RooFoods Ltd
Julie Southern
Appointed Director of Shilton Midco 2 Limited
3 December 2020 (after period end)
Effective Date of Change
21 January 2021 (after period end)
23 October 2020
July 2020
March 2019
23 November 2020
External Commitments and
Conflicts of Interest
The Company is mindful of the time commitment required from Non-
Executive Directors in order to effectively fulfil their responsibilities
on the Board, particularly providing constructive challenge and
holding management to account and utilising their diverse skills and
experience to benefit the Company and provide strategic guidance.
Prior to their appointment, prospective Directors are asked to provide
details of any other roles or significant obligations that may affect the
time available for them to commit to the Company. The Chairman
and the Board are then kept informed by each Director of any
proposed external appointments or other significant commitments
as they arise. These are monitored to ensure that each Director has
sufficient time to fulfil their obligations and Chairman approval
is required prior to a Director taking on any additional external
appointment. Each Director’s biographical details and significant
time commitments outside of the Company are set out in the Board
Biographies on pages 104 to 107. There have been a number of
changes to the Directors’ external appointments during the period as
set out in the table above.
The Companies Act 2006 provides that Directors must avoid a
situation where they have, or can have, a direct or indirect interest
that conflicts, or possibly may conflict, with the Company’s interests.
Boards of public companies may authorise conflicts and potential
conflicts, where appropriate, if their company’s articles of association
permit, which the Articles do.
Whenever a Director takes on additional external responsibilities, the
Director will discuss the potential position with the Chairman and
confirm that, as far as they are aware, there are no conflicts of interest.
Each Director is required to disclose conflicts and potential conflicts
to the Chairman and the Company Secretary as and when they
arise. As part of the induction process, a newly appointed Director
completes a questionnaire that requires him or her to disclose any
conflicts of interest to the Company. Thereafter, each Director has
an opportunity to disclose conflicts at the beginning of each Board
and Committee meeting and as part of an annual review. During
the year some Directors declared potential conflicts of interest in
relation to matters being discussed by the Board and as such did not
participate in discussions regarding these matters. None of the other
Directors declared to the Company any actual or potential conflicts
of interest between any of his or her duties to the Company and his
or her private interests and/or other duties, except in the case of the
Executive Directors, each of whom holds the position of Director
of the Company and director of a number of Group subsidiary
companies. The system in place for monitoring potential Director
conflicts remained effective throughout the period.
Ocado Retail Limited and Conflicts of Interest
Tim Steiner and Duncan Tatton-Brown are Ocado appointed directors
on the Ocado Retail Limited board. Notwithstanding their Companies
Act 2006 duties and obligations under the Articles, both directors are
subject to the provisions of the Ocado Retail articles of association
and to the provisions within the Ocado Retail shareholders agreement
on conflicts of interest and related party matters.
Composition, Succession and Evaluation
Appointments to the Board
The Nomination Committee leads the process for Board
appointments and makes recommendations to the Board and also
ensures that succession plans are in place for the Board and senior
management. The formal procedure for Board appointments and
succession planning is detailed in the Nomination Committee Report
on pages 128 to 129.
Director Re-election
Each Director is required under the Articles to retire at every annual
general meeting and submit themselves for re-election by shareholders.
At the 2020 annual general meeting, all of the current Directors (except
for Michael Sherman and Rick Haythornthwaite who had not yet been
appointed) stood for reappointment, and were duly elected with
majorities ranging from 80.35% to 99.78% of the votes cast.
All the Directors will retire and seek re-election at the 2021 Annual
General Meeting of the Company (“AGM”), except for Lord Rose who
intends to stand down at the AGM. This report and in particular the
Board Biographies on pages 104 to 107 sets forth the contribution
of each Director on the Board to the Company and on this basis
the Board, and specifically the Chairman, believes each Director
proposed for re-election at the AGM should be reappointed. The
Board has based its recommendations for re-election or election, in
part, on its review of the results from the Board evaluation process
outlined on pages 124 and 125, on the reviews of the Executive
Directors conducted at meetings of the Non-Executive Directors, the
Chairman’s review of individual evaluations, and whether a Director
has demonstrated substantial commitment to the role (including
time for Board and Committee meetings noted in this report) and
other responsibilities, taking into account a number of considerations
including outside commitments and any changes thereof during
the period. Jörn Rausing has served as a Non-Executive Director
for 17 years, seven of which were before the Company’s Admission.
Accordingly, due to the length of tenure, the recommendation of
his reappointment to the Board was subject to particular scrutiny
(including the importance of maintaining Board continuity).
G
O
V
E
R
N
A
N
C
E
Board Induction and Professional Development
On joining the Board, it is the responsibility of the Chairman and
Company Secretary to ensure that all newly appointed Directors
receive a full and formal induction, which is tailored to their individual
needs based on experience and background. The induction
programme includes a comprehensive overview of the Group
and begins with the Director attending the standard employee
onboarding to provide first hand experience of the introduction
provided to all new employees. Then the Director meets with the
Executive Director or appropriate senior management from each
of the areas of the business: Ocado Solutions, Ocado Technology,
Platform Implementation, Ocado Logistics, Client Services and Group
Operations. Guidance and training, as appropriate, is provided on
Board governance and the duties, responsibilities and liabilities of
a director of a listed company. These activities formed part of the
induction programme for Michael Sherman who joined the Board
in October 2020 and Rick Haythornthwaite who joined the Board in
January 2021.
The Board and Board Committees receive training, including in
specialist areas, and updates on issues relevant to the Group’s
business, including legal, regulatory and governance developments
and operational and technological updates. Training is typically
arranged by the Company Secretary in consultation with the
Chairman or relevant Board Committee Chairman. The members
of the Remuneration Committee received updates from the
Remuneration Committee’s remuneration advisers including on the
new remuneration reporting market practices. Members of the Audit
Committee received written technical updates from the external
auditor to keep them abreast of the latest accounting, auditing, tax
and reporting developments. The Board have also received briefings
from external advisers on a range of strategic matters.
120 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
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Back to contents Composition, Succession and Evaluation
Continued
Board Composition
The composition of the Board and Board
Committees is continually assessed to
ensure an appropriate balance of skills
and experience is maintained. The Board
takes into account various considerations
in assessing the composition of the Board
including length of Director tenure, Board
diversity, independence and the combination
of skills and experience of the Directors. As
highlighted in the external Board evaluation
undertaken in 2019, the shift in the Group’s
business from purely UK grocery retail
based to a technology-led global solutions
provider, created new areas of skills and
experience the Board needed to include. The
appointment of Michael Sherman this year
has strengthened the Board in these areas
due to his global business background and
technology industry based experience. The
appointment of Rick Haythornthwaite as
Non-Executive Director and Chairman-elect
brings further depth to the Board in global
business experience as well as extensive
leadership experience, including in the
technology sector. The combination of skills
and experience of the Board is illustrated on
the chart on the opposite page.
Board Diversity
The Board considers a diverse Board, of
gender, ethnicity and social backgrounds,
leads to better outcomes and improved
decision making and is committed to
improving diversity on the Board. The Board
diversity policy includes agreed objectives
to improve diversity, and progress against
the objectives is regularly monitored. Further
details on the policy and diversity and
inclusion at Board level is included in the
Nomination Committee report on page 129
and for the Group as a whole in the People
section on pages 90 to 97. The charts below
and opposite illustrate the gender diversity
of the Board and senior management and
the diversity characteristics of the Board as
identified by individual Directors.
➔ Read more in the Board’s Biographies
on pages 104 to 107
Board Gender Diversity
Senior Management
Gender Diversity
Length of Tenure of Chairman
and Non-Executive Directors
9
1
4
5
4
3
3
2
Total
Board
Executive
Non-
Executive
Female
(25% of Board, 43% of NEDS)
Male
1 Female 17
2 Male 53
Note that all information is recorded as at the end of the period.
2
1
1
0-3
years
3-6
years
6-10
years
10+
years
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Composition, Succession and Evaluation
Continued
Board Composition
The composition of the Board and Board
technology industry based experience. The
the objectives is regularly monitored. Further
Committees is continually assessed to
appointment of Rick Haythornthwaite as
details on the policy and diversity and
ensure an appropriate balance of skills
Non-Executive Director and Chairman-elect
inclusion at Board level is included in the
and experience is maintained. The Board
brings further depth to the Board in global
Nomination Committee report on page 129
takes into account various considerations
business experience as well as extensive
and for the Group as a whole in the People
in assessing the composition of the Board
leadership experience, including in the
section on pages 90 to 97. The charts below
including length of Director tenure, Board
technology sector. The combination of skills
and opposite illustrate the gender diversity
diversity, independence and the combination
and experience of the Board is illustrated on
of the Board and senior management and
of skills and experience of the Directors. As
the chart on the opposite page.
the diversity characteristics of the Board as
highlighted in the external Board evaluation
undertaken in 2019, the shift in the Group’s
business from purely UK grocery retail
based to a technology-led global solutions
provider, created new areas of skills and
experience the Board needed to include. The
appointment of Michael Sherman this year
has strengthened the Board in these areas
due to his global business background and
Board Diversity
The Board considers a diverse Board, of
gender, ethnicity and social backgrounds,
leads to better outcomes and improved
decision making and is committed to
improving diversity on the Board. The Board
diversity policy includes agreed objectives
to improve diversity, and progress against
identified by individual Directors.
➔ Read more in the Board’s Biographies
on pages 104 to 107
Board Gender Diversity
Senior Management
Gender Diversity
Length of Tenure of Chairman
and Non-Executive Directors
9
1
4
5
4
3
3
2
Total
Board
Executive
Non-
Executive
(25% of Board, 43% of NEDS)
Female
Male
1 Female 17
2 Male 53
Note that all information is recorded as at the end of the period.
2
1
1
0-3
years
3-6
years
6-10
years
10+
years
Combination of skills and experience as identified by the Board
Number of Directors
Number of Directors
Chairmanship
Risk management
Financial reporting
Workforce engagement
International board experience
7
8
10
10
Investor relations
Retail industry
Marketing
11
Governance
Grocery industry
Prior FTSE Board experience
5
Business development
Financial acumen
Technology
12
Operational
11
10
11
10
10
7
8
8
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The Board participated in a process to identify their own cognitive diversity characteristics taking into account less
tangible factors such as life experience and personal attitudes(1)
(1) Categories taken from the Office for National Statistics.
.
1
2
9
7
5
1
2
7
4
Diversity
Characteristics
9
1
1
1
1 2
1
Age
41-55
56-70
70+
What is your ethnic group?
White
Mixed/multiple ethnic groups
Black/African/Caribbean/Black British
Sexual orientation
Heterosexual/straight
Do you consider yourself to have a disability
defined by the Equality Act 2010?
No
Prefer to self-describe
What is your highest level of educational
attainment?
Level 7 – Master’s degree
Level 6 – Bachelor’s degree
Level 5 – Higher national diploma
Were you educated outside of the UK?
Yes
No
Note that all information is recorded as at the end of the period
122 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Composition, Succession and Evaluation
Continued
Annual Board Evaluation
Review of Board Effectiveness
In October 2020 a board evaluation review was externally facilitated by
Manchester Square Partners (“MSP”) (who have no other connection with
the Company, and are considered by the Board to be independent).
The Board recognise that a continuous and constructive review of its
performance supports the development of a high-performing board.
It is committed to conducting annual reviews with external input at
least once every three years, as recommended by the Code.
A board effectiveness review was also externally facilitated by
MSP in 2019. Given the impact of the Covid-19 pandemic and the
unprecedented challenges and increase in retail demand it presented,
it was agreed by the Chairman and the Company Secretary that
external insight and input on the Board’s effectiveness would be
particularly valuable. MSP were selected to facilitate the evaluation,
providing continuity of the evaluation completed in 2019.
2019
External
evaluation
conducted
by MSP
2020
External
evaluation
conducted
by MSP
2021
Internal
evaluation
2020 External Board Evaluation Process
1 An online questionnaire was developed by MSP in collaboration
with the Company Secretary to address the performance and
effectiveness of the Board whilst applying the principles of
the Code.
2 Individual interviews were conducted with the Chairman,
Senior Independent Director, Chief Executive Officer and Chief
Financial Officer.
3 Summary and detailed anonymised data were provided
in a separate report. The data, free format comments and
interviews formed the basis of the board evaluation report,
which was discussed with the Chairman before presenting to
the Board.
External Board Evaluation Results 2020
The evaluation report concluded that:
• The Board and its Committees function well with excellent
dynamics. The Board is led by a strong, inclusive and effective
Chairman who encourages engagement, contribution, openness
and trust.
• The Board responded well to the Covid-19 pandemic, the
challenges it presented and the significant increase in online
demand whilst transitioning the retail business, expanding work
with existing partners and developing the Solutions business.
• The Board is effective, providing good oversight, leadership
and support to the business with all Directors engaged,
recognizing the opportunities and challenges, and focused on
ensuring a successful future, whilst providing keen and active
contribution wherever possible within a remote environment.
The review also highlighted the following as areas to
consider during 2021:
External Board Evaluation Actions 2020
Action
Succession
planning
Further develop on-boarding plans for new
appointments and review support given to
transitions.
More discussion, with action plans on
future management structures and issues of
diversity and inclusion in management.
Consider recruiting a Non-Executive Director
with international experience in software or
engineering to support the expansion of the
Solutions business.
Develop an enhanced performance
reporting pack.
Continue to build on board paper
improvements initiated in 2020, including
mechanisms to improve contributions
and debate.
Solutions
Business
Performance
Board
papers and
discussion
Board Agenda
planning
To review forthcoming agenda items to
ensure appropriate board time is allocated
across key areas.
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Composition, Succession and Evaluation
Continued
Annual Board Evaluation
Review of Board Effectiveness
In October 2020 a board evaluation review was externally facilitated by
Manchester Square Partners (“MSP”) (who have no other connection with
the Company, and are considered by the Board to be independent).
The Board recognise that a continuous and constructive review of its
performance supports the development of a high-performing board.
It is committed to conducting annual reviews with external input at
least once every three years, as recommended by the Code.
A board effectiveness review was also externally facilitated by
External Board Evaluation Results 2020
The evaluation report concluded that:
• The Board and its Committees function well with excellent
dynamics. The Board is led by a strong, inclusive and effective
Chairman who encourages engagement, contribution, openness
and trust.
• The Board responded well to the Covid-19 pandemic, the
challenges it presented and the significant increase in online
demand whilst transitioning the retail business, expanding work
MSP in 2019. Given the impact of the Covid-19 pandemic and the
with existing partners and developing the Solutions business.
unprecedented challenges and increase in retail demand it presented,
it was agreed by the Chairman and the Company Secretary that
external insight and input on the Board’s effectiveness would be
particularly valuable. MSP were selected to facilitate the evaluation,
providing continuity of the evaluation completed in 2019.
• The Board is effective, providing good oversight, leadership
and support to the business with all Directors engaged,
recognizing the opportunities and challenges, and focused on
ensuring a successful future, whilst providing keen and active
contribution wherever possible within a remote environment.
2019
External
evaluation
conducted
by MSP
2020
External
evaluation
conducted
by MSP
2021
Internal
evaluation
2020 External Board Evaluation Process
1 An online questionnaire was developed by MSP in collaboration
with the Company Secretary to address the performance and
effectiveness of the Board whilst applying the principles of
2 Individual interviews were conducted with the Chairman,
Senior Independent Director, Chief Executive Officer and Chief
the Code.
Financial Officer.
3 Summary and detailed anonymised data were provided
in a separate report. The data, free format comments and
interviews formed the basis of the board evaluation report,
which was discussed with the Chairman before presenting to
the Board.
The review also highlighted the following as areas to
consider during 2021:
External Board Evaluation Actions 2020
Succession
Further develop on-boarding plans for new
planning
appointments and review support given to
Action
transitions.
More discussion, with action plans on
future management structures and issues of
diversity and inclusion in management.
Consider recruiting a Non-Executive Director
with international experience in software or
engineering to support the expansion of the
Solutions business.
Solutions
Business
Performance
Develop an enhanced performance
reporting pack.
Board
Continue to build on board paper
papers and
improvements initiated in 2020, including
discussion
mechanisms to improve contributions
and debate.
Board Agenda
To review forthcoming agenda items to
planning
ensure appropriate board time is allocated
across key areas.
Progress Against 2019 External Board Evaluation Actions
The outcome of the 2019 externally facilitated board evaluation was reported in detail in last year’s Annual Report. The focus areas
highlighted by that review and progress made are set out below:
Board pack and
presentations
Action
Outcome(s)
Review of board meeting reporting and
development of metrics that readily highlight
key points for discussion, enabling an
appropriate level of preparation, questions,
debate and challenge.
Board Intelligence software, one of the market
leaders in board reporting, is in the early stages of
implementation, providing access to their platform,
including templates and learning tools, for all board
paper contributors.
G
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Length of meetings
Visibility of relationship
with Stakeholders
Given the pace and activity of change, allotted
time for Board meetings should be extended
to ensure enough opportunity for full
discussion on all topics.
Given the evolving range and nature of key
stakeholder groups, further visibility and
review of key stakeholder groups to take
place at Board level.
Board composition
Consider a Non-Executive Director that will
further support the Group’s shift towards the
Solutions Business.
Effective Reporting Workshops have been provided by
Board Intelligence to Board paper contributors, with a
particular focus on s172 requirements and the provision
of an executive summary/key points for discussion.
Executive Management are developing a results pack
that reports key performance metrics to provide
better information concerning the performance of the
Solutions business in particular.
Meeting length increased, monitored and
reviewed regularly.
There has been significant focus on workforce
engagement during the year. Following a trial with Ocado
Technology, Peakon, the market-leading employee
feedback tool that enables employees to instantly,
anonymously and continuously give feedback, was
introduced to Operational Management and Head Office
roles across the globe, with Andrew Harrison, Designated
Non-Executive Director (DNED), an active sponsor of the
project.
As an active conduit between the Board and employees,
the DNED provides feedback to the Board following
discussions with employees and management and
likewise communicates Board decisions to the workforce.
The introduction of Peakon supports the feedback
process, providing insights across all cross sections of our
employees, ensuring an even better understanding of our
people and putting them at the centre of our business
decisions.
Consultation takes place with shareholders on
remuneration policies and Board composition.
Management reporting includes feedback from
Solutions partners.
Michael Sherman appointed as a Non-Executive Director
in October 2020. Michael brings extensive technology
sector experience and skills to support the Group’s
growth as a technology-led software and robotics
platform business.
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30029 9 February 2021 8:51 am Proof ShellLord Rose, Committee ChairmanDate of Appointment: 11 March 2013Independent: NoEmma Lloyd,Date of Appointment: 1 December 2016Independent: YesMichael Sherman,Date of Appointment: 5 October 2020Independent: YesJohn Martin,Date of Appointment: 1 June 2019Independent: YesAndrew Harrison,Date of Appointment: 1 March 2016Independent: YesRick Haythornthwaite,Date of Appointment: 1 January 2021*Independent: YesJörn Rausing,Date of Appointment: 9 March 2010Independent: YesJulie Southern,Date of Appointment: 1 September 2018Independent: YesLord RoseChairman“ The Nomination Committee believe our recent appointments fit well with Ocado’s current and future strategic needs.”Dear ShareholderOn behalf of the Board, I am pleased to present the report of the Nomination Committee for the 52 weeks ended 29 November 2020. This has been a busy year for the Nomination Committee with a number of significant changes to the Board. Following his resignation after eight years in his role as Chief Financial Officer and Executive Director, I would like to thank Duncan Tatton-Brown for his dedication and hard work and the significant contribution he made throughout his time with Ocado. Stephen Daintith will succeed Duncan as Chief Financial Officer. We look forward to welcoming Stephen in the near future.During the year the Nomination Committee undertook a thorough review of the Board’s composition, placing a strong focus on succession plans, business transformation reviews and talent development and organisation succession. A new Non-Executive Director, Michael Sherman, took up his position on 5 October 2020 as an independent Non-Executive Director making an important addition to our skill set. The Committee also undertook a thorough search for a new Chairman, following my decision to retire at this year’s AGM after eight years of service. This process was led and overseen by John Martin and the Committee, resulting in the appointment of Richard Haythornthwaite as an independent Non-Executive Director and Chairman-elect on 1 January 2021. Richard will assume his role as Chairman following the AGM on 13 May 2021.As a Committee, we believe our recent appointments fit well with Ocado’s current and future strategic needs.Claudia Arney stepped down from the Board on 25 December 2020. As well as serving as a Non-Executive Director she was also a member of both the Remuneration and Nomination Committees. We thank her for her contribution. Please read on for more information about the work of the Committee during the year.I will be available at the AGM to answer any questions about the work of the Nomination Committee.Lord RoseChairmanCommittee MembershipThe membership of the Nomination Committee, together with the appointment dates, are set out below:Nomination Committee Report† Claudia Arney Retired 25 December 2020 (appointment 1 September 2019 and was Independent)* after period end126Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Governance.indd 126Ocado-Annual-Report-2020-Governance.indd 12609/02/2021 09:13:0209/02/2021 09:13:02Back to contents Delivering an
effective Board
G
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How the Committee Spent its Time During the Year
The responsibilities of the Nomination Committee are set out in
its Terms of Reference. The Nomination Committee has an annual
work plan, developed from its Terms of Reference, whilst also
dealing with specific issues as they arise predominantly relating
to the appointment and succession planning of the Board and
senior management, and also supporting the development of a
diverse pipeline. The main matters that the Nomination Committee
considered during the year are described below:
•
•
recruitment process for a new Non-Executive director, resulting in
Michael Sherman’s appointment to the Board;
the process used in relation to appointments, the approach to
succession planning and how both support developing a diverse
pipeline;
• Stephen Daintith’s appointment as Chief Financial Officer,
following succession planning from Duncan Tatton-Brown’s
resignation;
•
•
•
recruitment process and succession planning in line the
Chairman’s planned resignation following eight years of service,
resulting in the appointment of Richard Haythornthwaite;
reviewing the gender balance of those in senior management
and their direct reports in line with the Company’s governance
structure; and
refining the company’s internal leadership structure for senior
management and their direct reports in line with company
strategy, talent development and organisation succession.
Key Responsibilities
• Review the structure, size and composition of the Board and its
Committees
• Give full consideration to succession planning for the Board and
senior management and oversee the development of a diverse
pipeline for succession
• Review the leadership needs of the organisation, both executive
and non-executive
•
Identify and nominate potential candidates for Board vacancies as
and when they arise, in line with succession planning
• Evaluate the combination of skills, experience, independence,
diversity and knowledge on the Board and its Committees
• Review and act upon the results of the Board performance
evaluation process and assess how effectively members work
together to achieve objectives
• Liaise as necessary with other Board Committees and the Board,
ensuring this interaction is regularly reviewed
• Support workforce initiatives that promote a culture of inclusion
and diversity
Membership
As required under the Terms of Reference, the Nomination
Committee comprises all Non-Executive Directors, and the
Chairman, and holds a minimum of two meetings a year. Michael
Sherman became a member of the Nomination Committee on
his appointment to the Board on 5 October 2020. Claudia Arney
resigned from the Committee and the Board after the end of the
period on 25 December 2020. The biography of each member of
the Nomination Committee is set out in the Board Biographies
on pages 104 to 107. Other attendees at Nomination Committee
meetings include the Chief Executive Officer and the Chief People
Officer. The Deputy Company Secretary is the secretary to the
Committee.
Stock Code: OCDO
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30029 9 February 2021 8:51 am Proof ShellLord Rose, Committee ChairmanDate of Appointment: 11 March 2013Independent: NoEmma Lloyd,Date of Appointment: 1 December 2016Independent: YesMichael Sherman,Date of Appointment: 5 October 2020Independent: YesJohn Martin,Date of Appointment: 1 June 2019Independent: YesAndrew Harrison,Date of Appointment: 1 March 2016Independent: YesRick Haythornthwaite,Date of Appointment: 1 January 2021*Independent: YesJörn Rausing,Date of Appointment: 9 March 2010Independent: YesJulie Southern,Date of Appointment: 1 September 2018Independent: YesLord RoseChairman“ The Nomination Committee believe our recent appointments fit well with Ocado’s current and future strategic needs.”Dear ShareholderOn behalf of the Board, I am pleased to present the report of the Nomination Committee for the 52 weeks ended 29 November 2020. This has been a busy year for the Nomination Committee with a number of significant changes to the Board. Following his resignation after eight years in his role as Chief Financial Officer and Executive Director, I would like to thank Duncan Tatton-Brown for his dedication and hard work and the significant contribution he made throughout his time with Ocado. Stephen Daintith will succeed Duncan as Chief Financial Officer. We look forward to welcoming Stephen in the near future.During the year the Nomination Committee undertook a thorough review of the Board’s composition, placing a strong focus on succession plans, business transformation reviews and talent development and organisation succession. A new Non-Executive Director, Michael Sherman, took up his position on 5 October 2020 as an independent Non-Executive Director making an important addition to our skill set. The Committee also undertook a thorough search for a new Chairman, following my decision to retire at this year’s AGM after eight years of service. This process was led and overseen by John Martin and the Committee, resulting in the appointment of Richard Haythornthwaite as an independent Non-Executive Director and Chairman-elect on 1 January 2021. Richard will assume his role as Chairman following the AGM on 13 May 2021.As a Committee, we believe our recent appointments fit well with Ocado’s current and future strategic needs.Claudia Arney stepped down from the Board on 25 December 2020. As well as serving as a Non-Executive Director she was also a member of both the Remuneration and Nomination Committees. We thank her for her contribution. Please read on for more information about the work of the Committee during the year.I will be available at the AGM to answer any questions about the work of the Nomination Committee.Lord RoseChairmanCommittee MembershipThe membership of the Nomination Committee, together with the appointment dates, are set out below:Nomination Committee Report† Claudia Arney Retired 25 December 2020 (appointment 1 September 2019 and was Independent)* after period end126Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Governance.indd 126Ocado-Annual-Report-2020-Governance.indd 12609/02/2021 09:13:0209/02/2021 09:13:02Back to contents Nomination Committee Report
Continued
Board Appointment Process
Board Composition and Succession Planning
Step One
Evaluate the combination of skills, experience, independence,
diversity and knowledge of the Board and in light of this
evaluation prepare a description of the role and capabilities
required for a particular appointment and the time commitment
expected.
Step Two
Begin facilitating the search using open advertising and
instructing external advisers. Identify a strong long list of potential
candidates (8-10) based on a number of factors including
experience, merit and diversity.
Step Three
Narrow down a short list from those longlisted and invite those
candidates to proceed to a 3 stage interview process, facilitated
by a combination of Non-Executive and Executive Directors, the
Chairman and senior management.
Nomination Committee Approval
Nomination Committee selects and recommends the preferred
candidate choice to the Board.
Board Approval
The Board approves the formal appointment of the selected
candidate and an announcement is made to the market.
The Nomination Committee seeks to ensure that the Board’s
composition, and that of its Committees, is appropriate to discharge
its duties effectively. During the year the Nomination Committee
undertook a thorough review of the Board’s composition. This review
took into account various considerations including the tenure of
Directors, independence, diversity and ensuring a combination of Board
knowledge, experience and skills. This review preceded the Board
agreeing changes to the composition of the Board that occurred during
the period, which included the appointment of Michael Sherman as
Non-Executive Director with effect from 5 October 2020, the appointment
of Stephen Daintith as a Chief Financial Officer due to begin later in 2021,
and the appointment of Rick Haythorthwaite as Non-Executive Director
and Chairman-elect with effect from 1 January 2021.
➔ More information about the Board’s Composition can be found
on pages 122 to 123 and Independence can be found on page 119
The Nomination Committee continues to review Board composition
to ensure that there is effective succession planning at Board level.
This includes the review of a regularly updated skills matrix for all
Directors, supported by a self-assessment analysis completed by
each Director. Following the announcement of Duncan Tatton-
Brown stepping down as CFO and Executive Director, changes were
undertaken to ensure a smooth and effective transition with the
appointment of a new CFO. The Company also appointed a new Non-
Executive Director during the period and John Martin successfully led
the recruitment process for a new Chairman, following Lord Rose’s
decision to resign at the 2021 AGM after eight years of service. The
Nomination Committee engaged Russell Reynolds, an executive
search agency, to assist in both Non-Executive Director appointments.
The Company and the Directors have no other connection with
Russell Reynolds.
The Nomination Committee oversaw the succession planning for
the role of Chairman in line with the Board diversity policy and the
Company’s strategic vision for the next nine years. The Nomination
Committee believes that the appointment of Rick Haythornthwaite as
Chairman-elect will bring a vast depth of experience and represents
an excellent cultural fit for both the Company and Board.
Following Claudia Arney’s resignation from the Board, after year end
on 25 December 2020, a vacant position was left on the Remuneration
Committee. As a result, Emma Lloyd has been appointed to fill this
position keeping the membership of the Remuneration Committee as
three members.
In addition to reviewing Board composition, the Nomination
Committee oversees the process of succession and management
development for the Executive Directors and the next layer of
management below. With regard to the development of the
management team, two senior managers regularly attend the Board
meetings to report on their respective business areas, while the
Board has exposure to other senior managers who present or report
to the Board on their business areas or particular projects. The
Nomination Committee acknowledges that the make-up of the senior
management team needs to facilitate the Company’s growth from
a UK based online grocery retailer to an international e-commerce
and logistics company. In light of this, the Nomination Committee
128 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Nomination Committee Report
Board Appointment Process
Board Composition and Succession Planning
Evaluate the combination of skills, experience, independence,
its duties effectively. During the year the Nomination Committee
diversity and knowledge of the Board and in light of this
undertook a thorough review of the Board’s composition. This review
evaluation prepare a description of the role and capabilities
took into account various considerations including the tenure of
required for a particular appointment and the time commitment
Directors, independence, diversity and ensuring a combination of Board
The Nomination Committee seeks to ensure that the Board’s
composition, and that of its Committees, is appropriate to discharge
Continued
Step One
expected.
Step Two
Begin facilitating the search using open advertising and
instructing external advisers. Identify a strong long list of potential
candidates (8-10) based on a number of factors including
experience, merit and diversity.
Step Three
Narrow down a short list from those longlisted and invite those
candidates to proceed to a 3 stage interview process, facilitated
by a combination of Non-Executive and Executive Directors, the
Chairman and senior management.
Nomination Committee Approval
Nomination Committee selects and recommends the preferred
candidate choice to the Board.
Board Approval
The Board approves the formal appointment of the selected
candidate and an announcement is made to the market.
knowledge, experience and skills. This review preceded the Board
agreeing changes to the composition of the Board that occurred during
the period, which included the appointment of Michael Sherman as
Non-Executive Director with effect from 5 October 2020, the appointment
of Stephen Daintith as a Chief Financial Officer due to begin later in 2021,
and the appointment of Rick Haythorthwaite as Non-Executive Director
and Chairman-elect with effect from 1 January 2021.
➔ More information about the Board’s Composition can be found
on pages 122 to 123 and Independence can be found on page 119
The Nomination Committee continues to review Board composition
to ensure that there is effective succession planning at Board level.
This includes the review of a regularly updated skills matrix for all
Directors, supported by a self-assessment analysis completed by
each Director. Following the announcement of Duncan Tatton-
Brown stepping down as CFO and Executive Director, changes were
undertaken to ensure a smooth and effective transition with the
appointment of a new CFO. The Company also appointed a new Non-
Executive Director during the period and John Martin successfully led
the recruitment process for a new Chairman, following Lord Rose’s
decision to resign at the 2021 AGM after eight years of service. The
Nomination Committee engaged Russell Reynolds, an executive
search agency, to assist in both Non-Executive Director appointments.
The Company and the Directors have no other connection with
Russell Reynolds.
The Nomination Committee oversaw the succession planning for
the role of Chairman in line with the Board diversity policy and the
Company’s strategic vision for the next nine years. The Nomination
Committee believes that the appointment of Rick Haythornthwaite as
Chairman-elect will bring a vast depth of experience and represents
an excellent cultural fit for both the Company and Board.
Following Claudia Arney’s resignation from the Board, after year end
on 25 December 2020, a vacant position was left on the Remuneration
Committee. As a result, Emma Lloyd has been appointed to fill this
position keeping the membership of the Remuneration Committee as
three members.
In addition to reviewing Board composition, the Nomination
Committee oversees the process of succession and management
development for the Executive Directors and the next layer of
management below. With regard to the development of the
management team, two senior managers regularly attend the Board
meetings to report on their respective business areas, while the
Board has exposure to other senior managers who present or report
to the Board on their business areas or particular projects. The
Nomination Committee acknowledges that the make-up of the senior
management team needs to facilitate the Company’s growth from
a UK based online grocery retailer to an international e-commerce
and logistics company. In light of this, the Nomination Committee
reviewed the proposed new organisation structure. Through the
business transformation programme, a new operating model was
implemented for the Group during the period that allows the business
to reorganise around its objectives and missions. By taking this
approach, the business can ensure productive and effective decision
making from those closest to each mission, establish a broader range
of diversity in senior management and focus each area of business
on achieving their objectives. The Nomination Committee reviewed
management succession plans reflecting the new management
structure and debated the areas for further strengthening given the
transformation and strategic direction of the business. The Committee
noted that the technology, construction and engineering teams
had grown substantially in recent years and development of senior
leadership in those departments is an area of focus for future years.
Board Diversity
The Nomination Committee supports the importance of diversity and
inclusion both in the boardroom and throughout the organisation,
and understands that a diverse Board will offer wider perspectives,
which lead to improved decision-making, enabling it to better meet
its responsibilities.
The Board’s diversity policy considers a broad range of characteristics
when considering diversity including age, disability, social and
educational backgrounds, as well as gender and ethnicity. This
policy includes a commitment to increasing female and ethnic
representation on the Board and throughout the wider organisation.
At the end of the period, the Board had 25% female representation,
falling short of the aim of 33% representation as set out in the Board
diversity policy, but met the policy aim of one non-white director
on the Board. The Board continues to review the diversity policy
annually and the criteria is under review organisation wide. In doing
so, the Board is committed not only to increasing the percentage
of women and ethnically diverse individuals on the Board and in
senior management, but also to supporting initiatives throughout the
workforce that foster a culture of inclusion and diversity.
Any future appointments to the Board will continue to be based on
merit and objective criteria to ensure that the best individuals are
considered and appointed to the role. Wherever possible, the search
pool will be extensive and where an executive search consultancy
is used, Ocado will only engage with those firms that have adopted
the “Voluntary Code of Conduct for Executive Search Firms”. This
includes Russell Reynolds, who were engaged to help the Company
secure a new Non-Executive Director and Chairman for the Group. The
Nomination Committee monitors these objectives and will evaluate
the balance of skills, experience, knowledge and diversity on the
Board throughout the year.
For more information on diversity in respect of all the Group’s
employees, see the Our People section on pages 90 to 97
Annual Review
The Nomination Committee carried out a review and updated its
Terms of Reference during the year. The Nomination Committee’s
terms of reference can be found on the Corporate Website,
www.ocadogroup.com.
128 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Back to contents 30029 9 February 2021 8:51 am Proof ShellAudit Committee ReportAudit Risk and Internal ControlJulie Southern, Committee ChairmanDate of Appointment: 1 September 2018*Independent: YesJohn Martin, Date of Appointment: 1 June 2019*Independent: YesEmma Lloyd, Date of Appointment: 1 April 2019*Independent: YesAndrew Harrison, Date of Appointment: 1 March 2016*Independent: YesJulie SouthernAudit Committee Chairman“ During the year the Committee has continued to play a valuable role in the Group’s governance framework.”Dear ShareholderI am pleased to present the report of the Audit Committee for the 52 weeks ended 29 November 2020. During the year the Committee has continued to play a valuable role in the Group’s governance framework, monitoring and reviewing the integrity of financial information and providing challenge and oversight across the Company’s financial reporting and internal control procedures.Last year saw significant and rapid change for the Group, including the creation of the Ocado Retail joint venture and the expansion of Ocado Solutions and Ocado Ventures. This year the transformation of the Finance department has continued, in order to reflect the changes to the business and to continue to meet the demands of the Group effectively. This has included additional recruitment to expand both the headcount and skill set of the team and the launch of a wide-reaching finance transformation project, to reflect the global business we have become. Plans are well advanced to implement a new finance system with associated controls, processes and reporting appropriate for the Group’s global expansion plans. During the last year, the use of the existing systems and automated processes has been improved, additional reconciliation processes have been implemented, user access controls have been strengthened and finance and tax risk registers have been updated. The expansion of the Solutions business will require the implementation of strong systems and processes across different jurisdictions and a greater focus on key treasury and international tax issues, all of which are being addressed. As a result of this activity I am pleased to report that the overall control environment is much improved.Covid-19 has had a considerable influence on the business this year. The Finance team had to quickly adapt to the restrictions that remote working imposed but through the team’s hard work the integrity of the financial control environment was maintained. The Audit Committee has monitored the risks associated with Covid-19 and any impact on the internal control mechanisms and risk management framework throughout the year. Committee MembershipThe membership of the Audit Committee, together with the appointment dates, are set out below:For Committee attendance, see the table on page 116.* Appointed to Committee130Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Governance.indd 130Ocado-Annual-Report-2020-Governance.indd 13009/02/2021 09:13:0709/02/2021 09:13:07Back to contents This report sets out the role of the Audit Committee and how its
duties and responsibilities have been discharged. This includes
significant accounting matters and issues in relation to the Group’s
financial statements that the Committee has assessed during the year
including the carrying value of software and construction in progress
and accounting for the revenue recognised from our Solutions
contracts that have gone live. The report explains why the issues were
considered significant, which provides context for understanding the
Group’s accounting policies and financial statements for the period.
The other primary responsibilities of the Committee, including
reviewing the effectiveness of the Group’s assurance functions, are
also detailed.
Key Responsibilities
• Monitor the integrity of the financial statements of the Company
and Group
• Review announcements relating to financial performance
• Review the Company’s internal control and risk management
systems
• Monitor and review the effectiveness of the Company’s Internal
Audit function
• Review the effectiveness of the external audit process
• Advise the Board on the appointment, reappointment and removal
of the external auditor
I would like to take the opportunity to thank Duncan Tatton-Brown,
who retired as Chief Financial Officer in November 2020, for his
valuable contribution.
I will be available at the AGM to answer any questions about our work.
• Agree the external auditor’s terms of engagement
• Develop and implement policies on the engagement of the
external auditor to supply non-audit services
• Monitor and review the external auditor’s independence and
G
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Julie Southern
Audit Committee Chairman
9 February 2021
objectivity
• Fulfil reporting obligations
Membership
The Audit Committee is composed of independent Non-Executive
Directors with relevant experience and proficiency in line with the
requirements of the Code and its Terms of Reference. Julie Southern
and John Martin are both chartered accountants with the Institute
of Chartered Accountants in England and Wales and are considered
by the Board to have competence in accounting. All members have
recent and relevant financial experience and the Audit Committee
as a whole has competence relevant to the sectors in which the
Company operates, notably the retail and technology sectors. The
biography of each member of the Audit Committee is set out in the
Board Biographies on pages 104 to 107. There have been no changes
to the membership of the Audit Committee during the year.
Meetings
The Audit Committee holds a minimum of three meetings annually,
as required under its Terms of Reference, and this year held seven
meetings. The timing of meetings coincides with key intervals in
the Group’s reporting and audit cycle. The Chairman of the Audit
Committee reports at each Board meeting on the business conducted
at the previous Audit Committee meeting, any recommendations
made by the Audit Committee and the discharge of its responsibilities
as set out in this report.
Regular attendees at Audit Committee meetings include the Chief
Financial Officer, the Group General Counsel and Company Secretary,
the Deputy Chief Financial Officers, the Head of Internal Audit and the
external auditor. Other attendees who attend as required include the
Chief Executive Officer, the Chairman, a number of senior members of
the Finance department, other members of senior management and
operational teams and other advisers to the Company. The Deputy
Company Secretary is the secretary to the Audit Committee.
Following the departure of Duncan Tatton-Brown as CFO, the duties
and responsibilities of the CFO have been undertaken by the Deputy
CFOs, Andrew Page and Richard Exact, until Stephen Daintith takes up
the role.
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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30029 9 February 2021 8:51 am Proof ShellAudit Committee ReportAudit Risk and Internal ControlJulie Southern, Committee ChairmanDate of Appointment: 1 September 2018*Independent: YesJohn Martin, Date of Appointment: 1 June 2019*Independent: YesEmma Lloyd, Date of Appointment: 1 April 2019*Independent: YesAndrew Harrison, Date of Appointment: 1 March 2016*Independent: YesJulie SouthernAudit Committee Chairman“ During the year the Committee has continued to play a valuable role in the Group’s governance framework.”Dear ShareholderI am pleased to present the report of the Audit Committee for the 52 weeks ended 29 November 2020. During the year the Committee has continued to play a valuable role in the Group’s governance framework, monitoring and reviewing the integrity of financial information and providing challenge and oversight across the Company’s financial reporting and internal control procedures.Last year saw significant and rapid change for the Group, including the creation of the Ocado Retail joint venture and the expansion of Ocado Solutions and Ocado Ventures. This year the transformation of the Finance department has continued, in order to reflect the changes to the business and to continue to meet the demands of the Group effectively. This has included additional recruitment to expand both the headcount and skill set of the team and the launch of a wide-reaching finance transformation project, to reflect the global business we have become. Plans are well advanced to implement a new finance system with associated controls, processes and reporting appropriate for the Group’s global expansion plans. During the last year, the use of the existing systems and automated processes has been improved, additional reconciliation processes have been implemented, user access controls have been strengthened and finance and tax risk registers have been updated. The expansion of the Solutions business will require the implementation of strong systems and processes across different jurisdictions and a greater focus on key treasury and international tax issues, all of which are being addressed. As a result of this activity I am pleased to report that the overall control environment is much improved.Covid-19 has had a considerable influence on the business this year. The Finance team had to quickly adapt to the restrictions that remote working imposed but through the team’s hard work the integrity of the financial control environment was maintained. The Audit Committee has monitored the risks associated with Covid-19 and any impact on the internal control mechanisms and risk management framework throughout the year. Committee MembershipThe membership of the Audit Committee, together with the appointment dates, are set out below:For Committee attendance, see the table on page 116.* Appointed to Committee130Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Governance.indd 130Ocado-Annual-Report-2020-Governance.indd 13009/02/2021 09:13:0709/02/2021 09:13:07Back to contents Audit Committee Report
Audit Risk and Internal Control Continued
How the Committee Spent its Time During the Year
The responsibilities of the Audit Committee are set out in its Terms of
Reference, which were last updated in October 2020 and are available
on the Corporate Website. The Audit Committee sets an annual work
plan, developed from its Terms of Reference, with standing items that
the Audit Committee considers at each meeting, in addition to areas
of risk identified for detailed review and any matters that arise during
the year. The main matters that the Audit Committee considered
during the year are listed below:
Financial Statements and Reporting: The Audit Committee
monitored the financial reporting processes for the Group, which
included reviewing reports from, and discussing these with, the
external auditor. As part of the year end reporting process the Audit
Committee reviewed this Annual Report, a management report
on accounting estimates and judgements, the external auditor’s
reports on internal controls, accounting and reporting matters, and
management representation letters concerning accounting and
reporting matters.
•
financial control environment;
• provisions, contingent liabilities and contingent assets;
• Ocado Solutions revenue recognition;
• Andover CFC fire accounting;
• accounting and disclosure for new acquisitions and investments;
•
impairment of capitalised costs;
• Group tax strategy;
•
financial reporting process;
• viability and going concern including key underlying assumptions;
• Governance, Risk and Compliance annual plan and updates;
•
risk management and internal control systems;
• Covid-19 risks;
•
review of new risk management policy and procedure;
• effectiveness of internal control and risk management framework;
•
•
internal audit plan and reports and internal audit effectiveness
review;
regulatory and compliance roadmap review and changes to the
governance framework;
• cyber security program update;
•
•
review of auditor appointment policy;
review of Committee Terms of Reference; and
• evaluation of Committee paper.
Monitoring the integrity of the financial statements of the Company,
the financial reporting process and reviewing the significant
accounting issues are key roles of the Audit Committee. The Board
ensures this Annual Report, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Company’s position, performance,
business model and strategy and the Audit Committee plays an
important role in assisting the Board in reaching those conclusions.
For information concerning the process followed by the Company
in preparing this Annual Report see page 138 of the Corporate
Governance Report. The Audit Committee also monitors the financial
reporting processes for the Group’s half year report, which is a similar
role to the one it carries out for full year reporting.
Accounting judgements and key sources of estimation
uncertainty: The Audit Committee reviewed and discussed reports
from management on accounting policies, current accounting issues
and the key judgements and estimates in relation to this Annual
Report. It assessed whether suitable accounting policies had been
adopted and the reasonableness of the judgements and estimates
that had been made by management. This section outlines those
significant issues which received particular focus from the Audit
Committee in relation to the financial statements for the period and
how these issues were addressed.
132 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Audit Committee Report
Audit Risk and Internal Control Continued
The responsibilities of the Audit Committee are set out in its Terms of
Reference, which were last updated in October 2020 and are available
on the Corporate Website. The Audit Committee sets an annual work
plan, developed from its Terms of Reference, with standing items that
the Audit Committee considers at each meeting, in addition to areas
of risk identified for detailed review and any matters that arise during
the year. The main matters that the Audit Committee considered
during the year are listed below:
•
financial control environment;
• provisions, contingent liabilities and contingent assets;
• Ocado Solutions revenue recognition;
• Andover CFC fire accounting;
• accounting and disclosure for new acquisitions and investments;
•
impairment of capitalised costs;
• Group tax strategy;
•
financial reporting process;
• viability and going concern including key underlying assumptions;
• Governance, Risk and Compliance annual plan and updates;
•
risk management and internal control systems;
• Covid-19 risks;
•
review of new risk management policy and procedure;
•
internal audit plan and reports and internal audit effectiveness
review;
•
regulatory and compliance roadmap review and changes to the
governance framework;
• cyber security program update;
•
•
review of auditor appointment policy;
review of Committee Terms of Reference; and
• evaluation of Committee paper.
monitored the financial reporting processes for the Group, which
included reviewing reports from, and discussing these with, the
external auditor. As part of the year end reporting process the Audit
Committee reviewed this Annual Report, a management report
on accounting estimates and judgements, the external auditor’s
reports on internal controls, accounting and reporting matters, and
management representation letters concerning accounting and
reporting matters.
Monitoring the integrity of the financial statements of the Company,
the financial reporting process and reviewing the significant
accounting issues are key roles of the Audit Committee. The Board
ensures this Annual Report, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Company’s position, performance,
business model and strategy and the Audit Committee plays an
important role in assisting the Board in reaching those conclusions.
For information concerning the process followed by the Company
in preparing this Annual Report see page 138 of the Corporate
Governance Report. The Audit Committee also monitors the financial
reporting processes for the Group’s half year report, which is a similar
role to the one it carries out for full year reporting.
Accounting judgements and key sources of estimation
uncertainty: The Audit Committee reviewed and discussed reports
from management on accounting policies, current accounting issues
Report. It assessed whether suitable accounting policies had been
adopted and the reasonableness of the judgements and estimates
that had been made by management. This section outlines those
significant issues which received particular focus from the Audit
Committee in relation to the financial statements for the period and
how these issues were addressed.
• effectiveness of internal control and risk management framework;
and the key judgements and estimates in relation to this Annual
How the Committee Spent its Time During the Year
Financial Statements and Reporting: The Audit Committee
Major Audit Committee Judgements and Estimates during the period
Area
Revenue
recognition
Accounting
for Ocado
Retail JV
Key Accounting Policies, Judgements and
Key Sources of Estimation Uncertainty
Factors and Reasons Considered
and Conclusion
Impact on Financial
Information and Disclosure
in Financial Statements
The accounting for Solutions contracts
is complex. Key areas of management
judgement include the timing of
recognition of upfront and ongoing fees
payable under the relevant contract.
The Audit Committee reviewed and agreed with
management’s proposed accounting treatment
and policies, reviewing each Solutions customer
individually in light of IFRS 15 guidance (including
confirmation of timing of revenue recognition as
two international customers went live).
The accounting treatment is
included in the Consolidated
Income Statement on page
199 and Note 2.1 to the
Consolidated Financial
Statements.
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The Ocado Retail joint venture, in
which the Group holds 50% of the
voting rights, requires management
to exercise judgement over whether
the rights granted to Ocado under the
Ocado Retail joint venture give the
Group control under IFRS 10.
The Audit Committee reviewed and agreed with
management’s assessment that the Group still
retained control of the Ocado Retail joint venture.
The dispute resolution procedures (in relation to
approval of the business plan and appointment
and removal of the Ocado Retail CEO) remain
unchanged in the shareholder agreement, giving
Ocado Group control as defined by IFRS 10.
The Ocado Retail joint venture
is accounted for as a subsidiary
and as such is consolidated
fully in the financial statements
of the Group. A Non-
Controlling interest is reported
to reflect the fact that 50% of
the ownership is held outside
the Group. See Note 5.2 to
the Consolidated Financial
Statements.
There is no impact to the
financial statements and no
additional disclosures required
for the period.
See Note 3.14 to the
Consolidated Financial
Statements.
There is no impact to the
financial statements and no
additional disclosures required
for the period.
See Note 3.14 to the
Consolidated Financial
Statements.
See Note 2.6 in the
Consolidated Financial
Statements for the exceptional
items disclosed and the
explanation on page 134.
Provisions,
Contingent
Liabilities and
Contingent
Assets –
Solutions
Provisions,
Contingent
Liabilities and
Contingent
Assets –
Litigation
Exceptional
items
The implementation of the platform for
each Solutions customer is a complex
project. A typical Solutions contract includes
a number of key milestones during the
project implementation phase. Failure to
achieve these key events can be subject to
contractual financial penalties. Management
judgement is required to review the progress
of ongoing projects and determine whether
there is a risk that Ocado will not meet the
agreed key milestones and thus incur a
financial penalty.
Autostore has filed several patent
infringement claims against Ocado Group
and action is in process to defend against
these claims.
Management judgement was applied in
order to treat certain one-off transactions
as exceptional, including the ongoing
transactions relating to the Andover fire.
Management has judged that additional
costs caused by the Covid-19 pandemic
would not be treated as exceptional.
The Audit Committee considered the
management report concerning the progress
of all current Solutions projects in order to
assess whether liabilities might arise for non-
performance or delay. At the balance sheet date,
it was concluded that there were no material risks
to key milestones that would result in payment
obligations by the Group and hence there were no
contingent liabilities to disclose.
The Audit Committee considered the
management report including the intention to
defend against these claims. At this early stage it
is not possible to predict an outcome or quantify
any financial impact and so as guided by IAS 37
the claim is not treated as a contingent liability.
The Audit Committee considered the management
reports on the accounting treatment of certain one-
off transactions including the Andover fire costs and
agreed that they were not in the ordinary course of
business and therefore warranted clear disclosure
in the Group accounts.
The Audit Committee agreed with management’s
view that it was useful management information
to track the incremental level of Covid-19 costs,
but the nature of the costs themselves were
not out of the ordinary and therefore were not
exceptional. The Group also correctly expected
that the elevated costs would continue for a
long period and as such would be considered as
normal.
132 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Back to contents Audit Committee Report
Audit Risk and Internal Control Continued
Area
Fair Value of
Contingent
Consideration
Share Based
Payment
Schemes
The sale of Ocado Retail in 2019 resulted
in future payments of up to £187.5
million which is treated as contingent
consideration. Management judgement
must be applied at each reporting period
to evaluate the fair value of this significant
amount and consider the likelihood of
achieving the contractual performance
targets linked to the deferred payment.
Management judgement must be
applied to the valuation of the share
schemes within the Group in particular
new schemes established for the Ocado
Retail joint venture.
Impairment
of capitalised
costs
Management judgement must be applied
in assessing any assets which should be
impaired during the year, in particular
internally developed software and capital
and work-in-progress.
Key Accounting Policies, Judgements and
Key Sources of Estimation Uncertainty
Factors and Reasons Considered
and Conclusion
The Audit Committee reviewed management
reports on the expected future performance and
agreed with the conclusion that the full amount
(as discounted) of the payment be recognised in
light of the expected achievement of projections
for the Retail business.
Impact on Financial
Information and Disclosure
in Financial Statements
See Note 4.7 to the
Consolidated Financial
Statements for the fair value
applied to the contingent
consideration.
The Audit Committee gave due consideration to
the management report on the fair value of all the
existing schemes. The establishment of the new
Retail scheme was debated within the Committee
to ensure sufficient review of the potential
performance ranges in light of the impact of the
Covid-19 pandemic on performance and targets.
See Note 4.10 to the
Consolidated Financial
Statements for the fair value of
incentive schemes including
the VCP schemes.
The Audit Committee reviewed and agreed
with the management report concerning the
assessment performed and quantification of
impairment of capitalised costs.
See Notes 3.2 and 3.3 to
the Consolidated Financial
Statements for the impairment
charge recorded in the year.
The previous table is not a complete list of all the Group’s accounting
issues, judgements, estimates and policies, but highlights the
most significant ones for the period in the opinion of the Audit
Committee. Accounting for the judgemental nature surrounding
commercial income for the Retail business and the recognition of
deferred tax assets are recurring issues for the Group, but did not
require a significant change in the basis of the estimate or judgement
during the period. The accounting treatment of all significant issues
and judgements was subject to audit by the external auditor. For
a discussion of the areas of particular audit focus by the external
auditor, refer to pages 188 to 198 of the Independent Auditor’s Report.
The Audit Committee considers that the Company has adopted
appropriate accounting policies and made appropriate estimates
and judgements.
Andover Insurance Claim: The Group’s financial results were
impacted by the fire that destroyed the Andover CFC in February 2019.
Management provided the Audit Committee with periodic updates
during the year on the accounting treatment of insurance proceeds
and costs including for loss of inventory and assets and the business
interruption costs. The Audit Committee considered the appropriate
accounting treatment, which is unchanged from the prior period, and
also the clear reporting of these amounts in the financial statements.
Segmental Reporting: Management have considered how they
manage, plan and report the performance of the business internally.
There is no proposed change to the presentation of segments by
management and the methodology used in the prior year was
applied for segmenting the business. The disclosures are provided
to shareholders including financial statement information and key
performance indicators.
Going Concern and Viability Assessments: The Audit Committee
and the Board reviewed the Group’s going concern and viability
statements (as set out on pages 68 to 71) and the assessment reports
prepared by management in support of such statements. The report
on the viability statement included updated downside scenarios and
reverse stress test in light of the increased disclosure requirements
and the Covid-19 pandemic, which the Audit Committee considered
were appropriate. The Audit Committee gave careful consideration
to the period of assessment used for the viability statement. It took
into account a wide range of factors (as set out on pages 68 to 71)
and concluded the time period of three years remained appropriate.
The external auditor discussed the statements with management
and, as outlined in their audit report, have nothing to report in
respect of the conclusions reached by management regarding going
concern and viability. The Board and Audit Committee reviewed the
more extensive disclosure contained in the statements noting that it
reflected much of the detailed analysis and assumptions presented to
them in support of the statement.
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Audit Risk and Internal Control Continued
Key Accounting Policies, Judgements and
Factors and Reasons Considered
Information and Disclosure
Area
Key Sources of Estimation Uncertainty
and Conclusion
in Financial Statements
Fair Value of
The sale of Ocado Retail in 2019 resulted
The Audit Committee reviewed management
See Note 4.7 to the
Contingent
in future payments of up to £187.5
reports on the expected future performance and
Consolidated Financial
Consideration
million which is treated as contingent
agreed with the conclusion that the full amount
Statements for the fair value
consideration. Management judgement
(as discounted) of the payment be recognised in
applied to the contingent
must be applied at each reporting period
light of the expected achievement of projections
consideration.
Impact on Financial
to evaluate the fair value of this significant
for the Retail business.
amount and consider the likelihood of
achieving the contractual performance
targets linked to the deferred payment.
Share Based
Management judgement must be
The Audit Committee gave due consideration to
See Note 4.10 to the
Payment
Schemes
applied to the valuation of the share
the management report on the fair value of all the
Consolidated Financial
schemes within the Group in particular
existing schemes. The establishment of the new
Statements for the fair value of
new schemes established for the Ocado
Retail scheme was debated within the Committee
incentive schemes including
Retail joint venture.
to ensure sufficient review of the potential
the VCP schemes.
performance ranges in light of the impact of the
Covid-19 pandemic on performance and targets.
Impairment
of capitalised
costs
Management judgement must be applied
The Audit Committee reviewed and agreed
See Notes 3.2 and 3.3 to
in assessing any assets which should be
with the management report concerning the
the Consolidated Financial
impaired during the year, in particular
assessment performed and quantification of
Statements for the impairment
internally developed software and capital
impairment of capitalised costs.
charge recorded in the year.
and work-in-progress.
The previous table is not a complete list of all the Group’s accounting
Segmental Reporting: Management have considered how they
issues, judgements, estimates and policies, but highlights the
manage, plan and report the performance of the business internally.
most significant ones for the period in the opinion of the Audit
There is no proposed change to the presentation of segments by
Committee. Accounting for the judgemental nature surrounding
management and the methodology used in the prior year was
commercial income for the Retail business and the recognition of
applied for segmenting the business. The disclosures are provided
deferred tax assets are recurring issues for the Group, but did not
to shareholders including financial statement information and key
require a significant change in the basis of the estimate or judgement
performance indicators.
during the period. The accounting treatment of all significant issues
and judgements was subject to audit by the external auditor. For
a discussion of the areas of particular audit focus by the external
auditor, refer to pages 188 to 198 of the Independent Auditor’s Report.
The Audit Committee considers that the Company has adopted
appropriate accounting policies and made appropriate estimates
and judgements.
Going Concern and Viability Assessments: The Audit Committee
and the Board reviewed the Group’s going concern and viability
statements (as set out on pages 68 to 71) and the assessment reports
prepared by management in support of such statements. The report
on the viability statement included updated downside scenarios and
reverse stress test in light of the increased disclosure requirements
and the Covid-19 pandemic, which the Audit Committee considered
Andover Insurance Claim: The Group’s financial results were
were appropriate. The Audit Committee gave careful consideration
impacted by the fire that destroyed the Andover CFC in February 2019.
to the period of assessment used for the viability statement. It took
Management provided the Audit Committee with periodic updates
into account a wide range of factors (as set out on pages 68 to 71)
during the year on the accounting treatment of insurance proceeds
and concluded the time period of three years remained appropriate.
and costs including for loss of inventory and assets and the business
The external auditor discussed the statements with management
interruption costs. The Audit Committee considered the appropriate
and, as outlined in their audit report, have nothing to report in
accounting treatment, which is unchanged from the prior period, and
respect of the conclusions reached by management regarding going
also the clear reporting of these amounts in the financial statements.
concern and viability. The Board and Audit Committee reviewed the
more extensive disclosure contained in the statements noting that it
reflected much of the detailed analysis and assumptions presented to
them in support of the statement.
in response to business requirements and regulatory changes including
improving awareness and accountability on the control environment. A
new finance system is planned for completion in mid-2021 significantly
enhancing the automation of financial controls, processes and reporting
appropriate for the Group’s global expansion plans.
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As well as considering internal control system effectiveness, the Board
and the Audit Committee discussed the evolving risk landscape for
the business as a result of the continued international expansion
of the Solutions business and growth of the business as a whole.
This year a comprehensive review and update of the Group Risk
Management Policy and Procedures Manual has been undertaken
that included discussion and review of the Group’s risk appetite and
the risk acceptance methodology. In addition, the terms of reference
for the Risk Committee were reviewed and updated. In response
to the introduction of Ocado’s new organisational structure, put in
place to reflect the changes in the business over recent years, the risk
register hierarchy was rebuilt and the Audit Committee is continuing to
monitor the ongoing work to deliver refreshed risk registers covering
the Group’s operations. As part of this work Governance, Risk and
Compliance updated the assurance maps based on the three lines of
defence model. The mapping exercise helped identify the relevant high
level controls and management oversight reflecting the new mission
structure. The exercise will be used to further develop the control
framework and to identify areas for further assurance work.
Every year the Audit Committee focuses its attention on risk areas
of particular importance, typically linked to the Group’s principal
risks. The Audit Committee spent time discussing a number of key
programmes intended to mature the technology and security controls
for the business. Such additional controls would be necessary to
provide a control environment commensurate with providing the OSP
platform to third party clients. Programme updates from management
and assurance reports from Internal Audit were provided to the Audit
Committee in a range of information security areas including: the
programme to achieve compliance under the Security and Organisation
Controls standard, the PCI compliance programme and new security
controls for the existing information security systems. The Audit
Committee expects to carefully monitor progress of management plans
as this is such an important control area for the business.
➔ Further details of the risk review and the Group’s risk management
and internal control systems, including financial controls, are set
out in the How We Manage Our Risks section on pages 60 to 71
Tax Review: During the year a review of the Group’s tax risks was
undertaken, including the framework of responsibilities, people,
policies and processes in place for managing tax compliance risk.
The substantial changes to the scale of the business and increase
in international operations and the changes to the risk profile were
considered. In light of these changes a comprehensive update of
the Group’s tax strategy was also completed. The strategy includes a
low risk tax efficient model for the international Solutions business
to meet the needs of our growing global operations. This covers our
strategy in relation to issues such as transfer pricing, customs, cash
extraction and IP rights holding. The Board reviewed and approved
the Group’s tax strategy and related statement, which is available on
the Corporate Website.
Risk and Internal Control Review: The Board has ultimate
responsibility for the effective management of risk for the Group
including determining its risk appetite, identifying key strategic and
emerging risks, and reviewing the risk management and internal
control framework. The Audit Committee, in supporting the Board
to assess the effectiveness of risk management and internal control
processes, relies on a number of different sources to carry out its work
including Internal Audit assurance reports, the assurance provided
by the external auditor and other third parties in specific risk areas,
reports from Finance management and other areas of the business
and an annual assessment report provided by Governance, Risk
and Compliance. In addition, the Audit Committee Chairman gains
additional insight on the management of risk in Ocado, by attending
the Group’s regular Risk Committee meetings. The Risk Committee,
which is chaired by the Group General Counsel and Company
Secretary, receives reports from the business on a range of risk topics
and discusses principal risks and risk appetite.
As outlined from page 130, the Audit Committee and the Board have
given consideration to the effectiveness of the Group’s system of
internal control and risk management and noted the improvements
made during the year and the plans in place to further improve the
Group’s underlying control environment.
During the period, the Group continued to undergo significant change
and the Finance team embedded a finance transformation programme
with the objective, among others, of designing and implementing a
more robust financial control environment responsive to the Group’s
growing complexity and strategy. This sought to address some of
the shortcomings identified at the end of 2019 and reported on in
the Company’s previous annual report. Swift action has been taken
to grow and strengthen the Finance team to improve the control
environment, provide additional control rigour and improve overall
efficiency thereby reducing risk. Resources within the Finance team
were prioritised to undertake a number of control improvements as
part of the transformation programme which will increase the maturity
of the Group’s financial control environment. The established Financial
Controls team has been strengthened, with clear accountability, to act as
the second line of defence to monitor, design and drive improvements
in internal controls over financial reporting which are being embedded
in the Group’s end-to-end processes. Meaningful progress has set the
foundations of a control framework which will be continuously refined
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Audit Risk and Internal Control Continued
Group compliance programme: The Audit Committee reviewed,
considered and approved the annual plan for the Group compliance
programme, including its extension to cover the global operation.
This plan included the introduction of a number of new and updated
policies, enhanced guidance material, new training modules and risk
assessments in core areas of the business. The biggest milestone this
year was the launch of a new global Code of Conduct both internally
and externally. The Code, which was approved by the Board, was
accompanied by a new training module that incorporated an annual
statement of compliance covering a number of core compliance topics.
The Board also considered and approved a new global Delegations
of Authority Policy, supported by both systems updates to support
financial controls, and comprehensive guidance. A further key focus was
an updated anti-bribery programme, which included a risk assessment
and a new global policy, both of which were reviewed and approved by
the Board. This programme was also supported by enhanced approval
tools for gifts and hospitality and a new training module. The Audit
Committee will continue to monitor the implementation, enhancement
and effectiveness of the Group compliance programme.
Internal Audit
The Internal Audit function provides independent and objective
assurance to the Audit Committee on the effectiveness of the
Group’s systems of internal control and risk management. The Audit
Committee reviewed and approved the Internal Audit plan in January
2020, and subsequent changes to the plan throughout the year. This
included prioritisation of audit work and an increase in resources so
that Internal Audit could cover more areas across the Group, in light
of the growth in scope and complexity of the business. The Audit
Committee also reviewed and approved the Internal Audit Charter.
Audits performed in 2020 included financial and operational risk areas
such as food safety, privacy, treasury and business continuity; audits
of key technology systems; and audits of key programmes.
The Audit Committee receives reports from Internal Audit at each
meeting. The reports enable the Audit Committee to discuss key
findings, recommendations and plans by management to address any
areas of weakness. Management actions are tracked and the status of
these actions is reviewed. Progress against the Internal Audit plan is
also reviewed. During the period, the Audit Committee met with the
Head of Internal Audit without management present.
Internal Audit Effectiveness Review: Internal Audit is subject to
an effectiveness review each year. This year PricewaterhouseCoopers
completed an external effectiveness assessment of the Internal Audit
function. The set up and working practices, the current views of
stakeholders on Internal Audit and its performance, and the future
expectations of stakeholders were all considered, through a mix of
interviews, analysis and benchmarking. The review acknowledged that
the Internal Audit function has evolved in response to the challenging
and changing needs of the business. It noted that the fast paced,
entrepreneurial nature of the business created a specific challenge, but
Internal Audit has worked to ensure its approach provides challenge
and support without impeding the rate of change. The review
recommended that in order to further strengthen the function, Internal
Audit focus on stronger alignment with the business risks and actively
engage with senior management to align expectations. The review
concluded that Internal Audit is fulfilling its role, with positive feedback
from stakeholders, and the provision of valuable reports to the
business. The key recommendations from the review will be addressed
by Internal Audit in 2021.
In order to assess the effectiveness of the Internal Audit function, the Audit
Committee review and approve the annual plan, assess the quality of
Internal Audit reports and monitor actions taken in relation to the findings.
In consideration of these factors, together with the results of the external
effectiveness assessment, the Audit Committee concluded that the Internal
Audit function was effective and provides appropriate assurance on the
controls in place to manage the principal risks facing the Group.
External Auditor
The Audit Committee has primary responsibility for managing
the relationship with the external auditor, including assessing its
performance, effectiveness and independence, recommending
to the Board its reappointment or removal and agreeing terms of
engagement. Deloitte was reappointed as external auditor of the
Group at the 2020 annual general meeting. The current audit partner
Mark Lee-Amies has held the role for four years. Deloitte has been
the external auditor for four years, since the last tender process was
undertaken in 2016 for the financial year ended 3 December 2017.
The Committee currently intends to conduct a tender process no
later than the 2027 year-end audit, in accordance with the current
regulation requiring a tender every 10 years, subject to the annual
assessment of the effectiveness and independence of the external
auditor carried out by the Committee. The Audit Committee agreed to
conduct a process in 2021 for selecting a successor audit partner for
when Mark Lee-Amies steps down.
Assessing the Effectiveness of the External Audit Process and
the External Auditor: In assessing the effectiveness of the external
auditor the Audit Committee reviewed the resources, expertise
and qualifications of the auditor, the planning and organisation
of the audit process, the quality of the overall audit and outcome,
and the independence and objectivity of the external auditor. The
Audit Committee also reviewed and approved the external audit
plan, considering the extent to which it was tailored to the Group’s
business, and monitored whether the agreed plan was met. Like last
year, the Audit Committee again dedicated additional meeting time to
allow for a careful review of the audit plan and ensure that sufficient
planning had been done to ensure a robust and quality audit of the
year-end financial statements would be performed. In reviewing the
audit plan the Audit Committee considered certain significant and
elevated risk areas, identified by the external auditor, which might give
rise to material financial reporting errors or those perceived to be of
higher risk thereby requiring further audit attention. These risk areas
include those set out in the Independent Auditor’s Report on pages
188 to 198. The Audit Committee also considered the audit scope and
materiality threshold and the response of the auditor to questions
from the Committee.
The Audit Committee met with the external auditor at various stages
throughout the period to discuss the remit and issues arising from the
work of the auditor. This periodic review process was seen as an important
opportunity to check-in with the auditors to assess achievement of key
deliverables in the audit and ensure that the audit remained on track,
particularly given the challenges for the year-end presented by Covid-19
restricted working conditions for the finance and audit teams. To further
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Audit Risk and Internal Control Continued
programme, including its extension to cover the global operation.
by Internal Audit in 2021.
This plan included the introduction of a number of new and updated
policies, enhanced guidance material, new training modules and risk
assessments in core areas of the business. The biggest milestone this
year was the launch of a new global Code of Conduct both internally
and externally. The Code, which was approved by the Board, was
accompanied by a new training module that incorporated an annual
statement of compliance covering a number of core compliance topics.
The Board also considered and approved a new global Delegations
of Authority Policy, supported by both systems updates to support
financial controls, and comprehensive guidance. A further key focus was
an updated anti-bribery programme, which included a risk assessment
and a new global policy, both of which were reviewed and approved by
the Board. This programme was also supported by enhanced approval
tools for gifts and hospitality and a new training module. The Audit
Committee will continue to monitor the implementation, enhancement
and effectiveness of the Group compliance programme.
Internal Audit
The Internal Audit function provides independent and objective
assurance to the Audit Committee on the effectiveness of the
Group’s systems of internal control and risk management. The Audit
Committee reviewed and approved the Internal Audit plan in January
2020, and subsequent changes to the plan throughout the year. This
included prioritisation of audit work and an increase in resources so
that Internal Audit could cover more areas across the Group, in light
of the growth in scope and complexity of the business. The Audit
In order to assess the effectiveness of the Internal Audit function, the Audit
Committee review and approve the annual plan, assess the quality of
Internal Audit reports and monitor actions taken in relation to the findings.
In consideration of these factors, together with the results of the external
effectiveness assessment, the Audit Committee concluded that the Internal
Audit function was effective and provides appropriate assurance on the
controls in place to manage the principal risks facing the Group.
External Auditor
The Audit Committee has primary responsibility for managing
the relationship with the external auditor, including assessing its
performance, effectiveness and independence, recommending
to the Board its reappointment or removal and agreeing terms of
engagement. Deloitte was reappointed as external auditor of the
Group at the 2020 annual general meeting. The current audit partner
Mark Lee-Amies has held the role for four years. Deloitte has been
the external auditor for four years, since the last tender process was
undertaken in 2016 for the financial year ended 3 December 2017.
The Committee currently intends to conduct a tender process no
later than the 2027 year-end audit, in accordance with the current
regulation requiring a tender every 10 years, subject to the annual
assessment of the effectiveness and independence of the external
auditor carried out by the Committee. The Audit Committee agreed to
conduct a process in 2021 for selecting a successor audit partner for
when Mark Lee-Amies steps down.
Committee also reviewed and approved the Internal Audit Charter.
Assessing the Effectiveness of the External Audit Process and
Audits performed in 2020 included financial and operational risk areas
such as food safety, privacy, treasury and business continuity; audits
of key technology systems; and audits of key programmes.
the External Auditor: In assessing the effectiveness of the external
auditor the Audit Committee reviewed the resources, expertise
and qualifications of the auditor, the planning and organisation
of the audit process, the quality of the overall audit and outcome,
The Audit Committee receives reports from Internal Audit at each
and the independence and objectivity of the external auditor. The
meeting. The reports enable the Audit Committee to discuss key
Audit Committee also reviewed and approved the external audit
findings, recommendations and plans by management to address any
plan, considering the extent to which it was tailored to the Group’s
areas of weakness. Management actions are tracked and the status of
business, and monitored whether the agreed plan was met. Like last
these actions is reviewed. Progress against the Internal Audit plan is
year, the Audit Committee again dedicated additional meeting time to
also reviewed. During the period, the Audit Committee met with the
allow for a careful review of the audit plan and ensure that sufficient
Head of Internal Audit without management present.
planning had been done to ensure a robust and quality audit of the
Internal Audit Effectiveness Review: Internal Audit is subject to
an effectiveness review each year. This year PricewaterhouseCoopers
completed an external effectiveness assessment of the Internal Audit
function. The set up and working practices, the current views of
stakeholders on Internal Audit and its performance, and the future
expectations of stakeholders were all considered, through a mix of
interviews, analysis and benchmarking. The review acknowledged that
the Internal Audit function has evolved in response to the challenging
and changing needs of the business. It noted that the fast paced,
year-end financial statements would be performed. In reviewing the
audit plan the Audit Committee considered certain significant and
elevated risk areas, identified by the external auditor, which might give
rise to material financial reporting errors or those perceived to be of
higher risk thereby requiring further audit attention. These risk areas
include those set out in the Independent Auditor’s Report on pages
188 to 198. The Audit Committee also considered the audit scope and
materiality threshold and the response of the auditor to questions
from the Committee.
entrepreneurial nature of the business created a specific challenge, but
The Audit Committee met with the external auditor at various stages
Internal Audit has worked to ensure its approach provides challenge
throughout the period to discuss the remit and issues arising from the
and support without impeding the rate of change. The review
work of the auditor. This periodic review process was seen as an important
recommended that in order to further strengthen the function, Internal
opportunity to check-in with the auditors to assess achievement of key
Audit focus on stronger alignment with the business risks and actively
deliverables in the audit and ensure that the audit remained on track,
engage with senior management to align expectations. The review
particularly given the challenges for the year-end presented by Covid-19
concluded that Internal Audit is fulfilling its role, with positive feedback
restricted working conditions for the finance and audit teams. To further
Group compliance programme: The Audit Committee reviewed,
from stakeholders, and the provision of valuable reports to the
considered and approved the annual plan for the Group compliance
business. The key recommendations from the review will be addressed
facilitate open dialogue and assurance the Committee also met with the
external auditor without management present.
The Audit Committee, the Executive team, and members of
management from across the Company completed an external audit
effectiveness review questionnaire at the end of the period. The
questionnaire asked respondents to consider the robustness of the
audit process and the quality of delivery, reporting, people and service.
The Audit Committee reviewed the results of the questionnaire, in
addition to meeting with management, without Deloitte present, to
listen to views on the effectiveness of the external auditor.
The Audit Committee was satisfied that Deloitte delivered a robust
and quality audit, with appropriate focus given to the significant risk
areas and key areas of accounting judgement, effective challenge to
senior management, and providing the appropriate resources to the
Company in the period. Therefore, the Committee concluded that
Deloitte had remained effective in their role.
Independence and Objectivity: The Audit Committee monitors
and assesses the independence and objectivity of the external
auditor, including the evaluation of potential threats to independence
and the safeguards in place to mitigate these. The Committee
considered there were no relationships between the external auditor
and the Group that could adversely affect its independence and
objectivity. The external auditor reported to the Committee that it had
considered its independence in relation to the audit and confirmed
that it complies with UK regulatory and professional requirements
and that its objectivity is not compromised. The Committee also
considered the tenure of the external auditor, the auditor’s own
processes for maintaining independence and the nature and amount
of non-audit work undertaken by the auditor. The Audit Committee
took these factors into account in considering the external auditor’s
independence and concluded that Deloitte remained independent
and objective in relation to the audit.
Non-Audit Work Carried Out by the External Auditor: To help
safeguard the auditor’s objectivity and independence, the provision
of any non-audit services provided by the external auditor requires
prior approval, as set out in the table below. These thresholds are
unchanged. During the year the Audit Committee reviewed and
approved the Policy on Auditor Appointment and Independence,
which includes the policy on non-audit services.
Approval Thresholds for
Non-Audit Work
Over £10,000 and up to £30,000
per engagement
Approver
Chief Financial Officer
Over £30,000 and up to £100,000
per engagement
Chief Financial Officer and Audit
Committee Chairman
Audit Committee
Greater than £100,000 per
engagement, or if the value of
non-audit fees to audit fees reaches
a ratio of 1:2 as a result of a new
engagement, regardless of value
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An additional protection is provided by way of a non-audit services
fee cap. The Audit Committee (or the Company) may not approve an
engagement of the external auditor if annual non-audit services fees
would exceed 70% of the average audit fees (not including fees for
audit-related services or for services required by regulation) charged
in the previous three years. Certain types of non-audit services are of
sufficiently low risk so as not to require the prior approval of the Audit
Committee, such as “audit-related services” including the review of
interim financial information. “Prohibited services” are those that
have the potential to conflict directly with the auditor’s role, such as
providing internal audit services, and are not permitted. Only non-
audit services permitted by the FRC’s Ethical Standard 2019 may be
procured from the auditor.
Non-Audit Work Undertaken During the Period: The total of
non-audit fees, audit fees and audit-related services fees paid to
the external auditor during the period is set out in Note 2.4 to the
Consolidated Financial Statements on page 217. The non-audit
service fees of £190,000 (2019: £415,000) paid to Deloitte during the
period related to £154,000 paid for audit-related assurance services
for the review of the half year financial statements and £36,000 for
other agreed upon assurance services in relation to an EU grant. All
non-audit work engagements were approved by the Chief Financial
Officer and Audit Committee Chairman as the fees concerned were
within the approval thresholds set under the policy.
The Audit Committee received a regular report from management
regarding the extent of non-audit services performed by the external
auditor. The external auditors provided a report to the Audit
Committee on the specific safeguards put in place for each piece
of non-audit work confirming that it was satisfied that neither the
extent of the non-audit services provided nor the size of the fees
charged had any impact on its independence as statutory auditor. It
was concluded that appropriate safeguards were in place to prevent
a compromise of auditor independence. The Audit Committee
was satisfied this was the case and so concluded that the auditor’s
independence from the Group was not compromised.
Audit Fees: The Audit Committee was satisfied that the level
of audit fees payable in respect of the audit services provided
(excluding audit-related services) being £917,000 (2019: £868,000) was
appropriate and that an effective audit could be conducted for such a
fee. The increase in fees was partly attributable to the additional audit
work required for a more complex business. The existing authority for
the Audit Committee to determine the current remuneration of the
external auditor is derived from the shareholder approval granted at
the Company’s annual general meeting in 2020. At the 2020 annual
general meeting, 99.69% of votes cast by shareholders were in favour
of granting the Directors this authority.
Statement of Compliance with the Competition and
Markets Authority (CMA) Order
The Company confirms that it has complied with The Statutory Audit
Services for Large Companies Market Investigation (Mandatory Use of
Competitive Processes and Audit Committee Responsibilities) Order
2014 (Article 7.1), including with respect to the Audit Committee’s
responsibilities for agreeing the audit scope and fees and authorising
non-audit services.
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Continued
How the Directors Formally Report to Shareholders and
take Responsibility for this Annual Report
Communication and shareholder engagement are important to
the Board. Therefore the Group follows a regular reporting and
announcement agenda including the formal regulatory news service
announcements in accordance with the Group’s reporting obligations.
The Group reports trading performance, including information on the
growth of the Retail revenue and average order numbers and size, on
a quarterly basis; recognising that it is important to regularly update
the market due to the emphasis shareholders place on receiving
regular communications about sales and the current competitive
pressures in the market.
Other announcements include the half year report, the preliminary
announcement of annual results, the Annual Report and investor
presentation slides and videos. We also presented to shareholders on
changes in our segmental reporting, key accounting policies including
adoption of IFRS 16 and KPIs. These documents are available on the
Group’s Corporate Website. Shareholders can choose to receive the
Annual Report in paper or electronic form. An updated Corporate
Website was released during the period, designed to provide more
effective communication with shareholders and other stakeholders.
The Directors take responsibility for preparing this Annual Report and
make a statement to shareholders to this effect. The Statement of
Directors’ Responsibilities on page 184 of this Annual Report is made at
the conclusion of a robust and effective process undertaken by the Group
for the preparation and review of this Annual Report.
The Directors believe that these well-established arrangements
enable them to ensure that the information presented in this Annual
Report complies with the disclosure requirements, including those in
the Companies Act 2006, and is fair, balanced and understandable,
and provides the information necessary for shareholders to assess
the Group’s position, performance, business model and strategy. In
addition to this Annual Report, the Group’s internal processes cover
(to the extent necessary) the preliminary announcement, the half year
report, trading statements and other financial reporting.
The Group’s internal processes in the preparation and review of this
Annual Report (and other financial reporting) include:
•
•
review of and feedback on iterations of this Annual Report by the
Executive Directors and the full Board;
in-depth review of specific sections of this Annual Report by the
relevant Board Committees;
• Audit Committee review of a management report on accounting
estimates and judgements, auditor and management reports on
internal controls and risk management, accounting and reporting
matters and a management representation letter concerning
accounting and reporting matters;
• Board and Audit Committee review of a supporting paper specifically
highlighting the parts of this Annual Report that best evidenced how
this Annual Report was fair, balanced and understandable;
• paper from the Group General Counsel and Company Secretary
highlighting how reporting, regulatory and governance issues had
been addressed in this Annual Report;
• Board and Audit Committee review of management reports on
assessments on going concern and viability;
•
•
the Audit Committee regularly reporting to the Board on the
discharge of its responsibilities;
input from both internal and external legal advisers and other advisers
to cover relevant regulatory, governance and disclosure obligations;
• discussions between contributors and management to identify
relevant and material information;
• detailed debates and discussions concerning the principal risks
and uncertainties;
• checking of factual statements and financial information against
source materials;
• specific Board review of Directors’ belief statements and key
statements; and
• separate approval by the Group General Counsel and Company
Secretary, the Board Committees and the Board.
The statement by the external auditor on its reporting responsibilities
is set out in the Independent Auditor’s Report on pages 188 to 198.
The Group receives reporting and information from the Ocado Retail
joint venture. The Ocado Retail board reviews and approves financial
information and reporting regarding Ocado Retail, which is then
consolidated into the Group.
In addition to this Annual Report, the Group provides other
statements to its shareholders regarding the Group and its operations,
including the modern slavery statement, tax strategy statement,
gender pay and supplier payments.
The Group’s Annual General Meeting 2021
Shareholders will have the opportunity to question all of the Directors
at the AGM, which will this year be held as a combined physical and
electronic meeting with shareholder participation through an online
meeting platform.
A detailed explanation of each item of business to be considered at
the AGM is included with the Notice of Meeting. Shareholders who are
unable to attend the AGM are encouraged to vote in advance of the
meeting, either online at ocadoshares.com or by using the proxy card
which is sent with the Notice of Meeting (if sent by post) or can be
downloaded from the Corporate Website.
Shareholder Voting 2020 Annual General Meeting
At the 2020 annual general meeting, all resolutions were passed with
votes in support ranging from 70.24% to 99.99%.
At the 2020 annual general meeting, there were significant minority
votes against two resolutions: Resolution 2 (Directors’ Remuneration
Report) and Resolution 10 (Re-appointment of Andrew Harrison). The
Company understands that this outcome was broadly attributable
to concerns around the performance of the Growth Incentive Plan
(“GIP”), the implementation of the VCP and the approach to Executive
Directors’ salary progression.
Ocado’s 2019 Remuneration Policy and the VCP were subject to
extensive consultation with all major shareholders and investor
bodies prior to the 2019 annual general meeting. All shareholder
feedback received was carefully considered and as a result, multiple
changes were made to the operation of the VCP. The Board reviewed
the voting outcomes and believes that the current Policy continues
to be aligned with Ocado’s strategy and business needs and hence
remains the right vehicle to remunerate and retain our Executives.
In conclusion, the Board understood the main areas of concern for
shareholders, and the response at the annual general meeting was in
line with expectations from the consultation exercise in 2019.
In keeping with the Investment Association guidance, an update
statement was sent to the Investment Association and can be found
on the corporate website, www.ocadogroup.com.
138 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Corporate Governance Report
Continued
How the Directors Formally Report to Shareholders and
• discussions between contributors and management to identify
take Responsibility for this Annual Report
relevant and material information;
Communication and shareholder engagement are important to
the Board. Therefore the Group follows a regular reporting and
and uncertainties;
• detailed debates and discussions concerning the principal risks
announcement agenda including the formal regulatory news service
• checking of factual statements and financial information against
announcements in accordance with the Group’s reporting obligations.
source materials;
The Group reports trading performance, including information on the
growth of the Retail revenue and average order numbers and size, on
a quarterly basis; recognising that it is important to regularly update
the market due to the emphasis shareholders place on receiving
regular communications about sales and the current competitive
pressures in the market.
Other announcements include the half year report, the preliminary
announcement of annual results, the Annual Report and investor
presentation slides and videos. We also presented to shareholders on
changes in our segmental reporting, key accounting policies including
adoption of IFRS 16 and KPIs. These documents are available on the
Group’s Corporate Website. Shareholders can choose to receive the
Annual Report in paper or electronic form. An updated Corporate
Website was released during the period, designed to provide more
• specific Board review of Directors’ belief statements and key
statements; and
• separate approval by the Group General Counsel and Company
Secretary, the Board Committees and the Board.
The statement by the external auditor on its reporting responsibilities
is set out in the Independent Auditor’s Report on pages 188 to 198.
The Group receives reporting and information from the Ocado Retail
joint venture. The Ocado Retail board reviews and approves financial
information and reporting regarding Ocado Retail, which is then
consolidated into the Group.
In addition to this Annual Report, the Group provides other
statements to its shareholders regarding the Group and its operations,
including the modern slavery statement, tax strategy statement,
effective communication with shareholders and other stakeholders.
gender pay and supplier payments.
The Directors take responsibility for preparing this Annual Report and
make a statement to shareholders to this effect. The Statement of
Directors’ Responsibilities on page 184 of this Annual Report is made at
the conclusion of a robust and effective process undertaken by the Group
for the preparation and review of this Annual Report.
The Directors believe that these well-established arrangements
enable them to ensure that the information presented in this Annual
Report complies with the disclosure requirements, including those in
the Companies Act 2006, and is fair, balanced and understandable,
and provides the information necessary for shareholders to assess
the Group’s position, performance, business model and strategy. In
addition to this Annual Report, the Group’s internal processes cover
(to the extent necessary) the preliminary announcement, the half year
report, trading statements and other financial reporting.
The Group’s Annual General Meeting 2021
Shareholders will have the opportunity to question all of the Directors
at the AGM, which will this year be held as a combined physical and
electronic meeting with shareholder participation through an online
meeting platform.
A detailed explanation of each item of business to be considered at
the AGM is included with the Notice of Meeting. Shareholders who are
unable to attend the AGM are encouraged to vote in advance of the
meeting, either online at ocadoshares.com or by using the proxy card
which is sent with the Notice of Meeting (if sent by post) or can be
downloaded from the Corporate Website.
Shareholder Voting 2020 Annual General Meeting
At the 2020 annual general meeting, all resolutions were passed with
The Group’s internal processes in the preparation and review of this
votes in support ranging from 70.24% to 99.99%.
Annual Report (and other financial reporting) include:
•
review of and feedback on iterations of this Annual Report by the
Executive Directors and the full Board;
•
in-depth review of specific sections of this Annual Report by the
relevant Board Committees;
• Audit Committee review of a management report on accounting
estimates and judgements, auditor and management reports on
internal controls and risk management, accounting and reporting
matters and a management representation letter concerning
accounting and reporting matters;
• Board and Audit Committee review of a supporting paper specifically
highlighting the parts of this Annual Report that best evidenced how
this Annual Report was fair, balanced and understandable;
• paper from the Group General Counsel and Company Secretary
highlighting how reporting, regulatory and governance issues had
been addressed in this Annual Report;
• Board and Audit Committee review of management reports on
assessments on going concern and viability;
•
the Audit Committee regularly reporting to the Board on the
discharge of its responsibilities;
•
input from both internal and external legal advisers and other advisers
to cover relevant regulatory, governance and disclosure obligations;
At the 2020 annual general meeting, there were significant minority
votes against two resolutions: Resolution 2 (Directors’ Remuneration
Report) and Resolution 10 (Re-appointment of Andrew Harrison). The
Company understands that this outcome was broadly attributable
to concerns around the performance of the Growth Incentive Plan
(“GIP”), the implementation of the VCP and the approach to Executive
Directors’ salary progression.
Ocado’s 2019 Remuneration Policy and the VCP were subject to
extensive consultation with all major shareholders and investor
bodies prior to the 2019 annual general meeting. All shareholder
feedback received was carefully considered and as a result, multiple
changes were made to the operation of the VCP. The Board reviewed
the voting outcomes and believes that the current Policy continues
to be aligned with Ocado’s strategy and business needs and hence
remains the right vehicle to remunerate and retain our Executives.
In conclusion, the Board understood the main areas of concern for
shareholders, and the response at the annual general meeting was in
line with expectations from the consultation exercise in 2019.
In keeping with the Investment Association guidance, an update
statement was sent to the Investment Association and can be found
on the corporate website, www.ocadogroup.com.
138 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Back to contents 30029 9 February 2021 8:51 am Proof ShellAndrew Harrison Committee ChairmanDate of Appointment: 1 March 2016*Independent: YesClaudia Arney ResignedDate of Appointment: 1 September 2019Independent: YesFor Committee attendance, see the table on page 116.* Appointed to CommitteeJulie Southern Date of Appointment: 1 June 2019Independent: YesEmma Lloyd Date of Appointment: 2 February 2021*Independent: YesDirectors’ Remuneration Report“ Our colleagues, customers and communities continue to be faced with a set of unique circumstances as a result of Covid-19. The Committee is committed to ensuring that our remuneration structure and outcomes reflect the Company’s ambition to create a sustainable long-term model that benefits all stakeholders post-crisis.”Andrew Harrison,Remuneration Committee ChairmanCommittee MembershipThe membership of the Remuneration Committee, together with the appointment dates, are set out below:Letter from the Chairman of the Remuneration Committee Dear Shareholder On behalf of the Board, I am pleased to present the Directors’ Remuneration Report for 2020. The performance of the Group this year saw continued growth in the Retail business as we sought to meet the increased demand for our services, delivering 35.3% Retail revenue growth compared to the prior year. The UK and international online grocery markets grew very rapidly during 2020. Building sustainable, scalable offerings for grocery online is now top of the agenda in grocery boardrooms worldwide. This permanent shift in the market has been reflected in the Company’s very significant share price growth, which was 2218 pence per share at the end of the period (2019: 1325 pence per share). Our Response to Covid-19 The Covid-19 pandemic has created a seismic shift in the way that all businesses must operate. At Ocado we have been committed to ensuring that our customers continue to be able to access reliable, efficient and safe grocery deliveries during this turbulent time, while also supporting our colleagues and partners however we can. Further details on our response to Covid-19 are set out below and on page 59. We have increased capacity in our Customer Fulfilment Centres (“CFCs”) as fast as possible to address the increased demand. Via our Solutions business we have also enabled Morrisons to treble their capacity to serve customers using our In-Store Fulfilment technology, thereby reaching more homes across the nation. None of this however would be possible without our colleagues who continue to serve our communities and adapt to ever changing circumstances. We are extremely proud of their work and to say thank you while we adjusted to the new environment and challenging times, our frontline employees were paid bonuses for working during the Covid-19 pandemic. There were a number of actions taken by the Company in order to support our colleagues during this difficult period. Wellbeing and safety remains the top priority for our business and our “Mind Yourself” wellbeing programme is available to all colleagues to provide information to support their mental, physical, social and financial health.140Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Governance.indd 140Ocado-Annual-Report-2020-Governance.indd 14009/02/2021 09:13:1409/02/2021 09:13:14Back to contents Our colleagues, customers and communities continue to be faced with
a set of unique circumstances as a result of Covid-19 whilst the world we
live in, the market we operate in, and our business permanently changes.
Our challenge going forward is to ensure we continue to optimise our
business and create a sustainable long-term model that benefits all
stakeholders post-crisis. Our remuneration principles, which cascade
throughout the business, underpin our Remuneration Policy (“2019
Policy”) and can be found on page 148. The Remuneration Committee is
committed to ensuring that the remuneration structure and outcomes
reflect this ambition.
Relationship Between Pay and Performance
2018 Long Term Incentive Plan (“LTIP”) Vesting
The 2018 LTIP is the last award granted by the Company under
this plan under the old remuneration policy. During the period, we
reviewed performance against the 2018 LTIP award targets, which had
a performance period ending at period end. The 2018 LTIP awards
were subject to the achievement of targets relating to Ocado Group
and Ocado Retail’s performance, including Retail business revenue
and profitability and Solutions business efficiency and revenue for
OSP. Based on the results to the end of the performance period, the
Directors achieved 79.9% against the objectives under the LTIP for the
period. The 2018 LTIP awards are expected to vest in March 2021.
The Committee considers a number of factors when assessing
variable pay outcomes. This year, the Committee also considered the
following factors in addition to business performance:
The Committee carefully considered the formulaic outcome under
the LTIP measures and assessed whether the measures reflected the
Company’s performance.
• Decisions in respect of the wider workforce – The Company did
➔ More details about the LTIP vesting can be found on page 168.
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not make any redundancies as a result of the pandemic nor were
any employees furloughed. The other measures taken by the
Company such as additional bonuses for frontline workers and
wellbeing initiatives demonstrate the importance of the employee
experience to Ocado;
• Management performance – Strong decision making by
management delivered an exceptional performance in light of the
challenges – for example, scaling the Erith CFC faster than planned,
reacting to the needs of our international clients and increasing
in-store fulfilment, responding to the very significant operational
challenges created by the rapidly changing customer behaviour
and successfully delivering the switchover to M&S;
• Shareholder experience – The Company’s share price has risen
substantially over the period;
• Government support – The Company did not utilise any
Government support, for example tax relief or furlough, despite
these being available to the Company; and
• Capital raise – The Company made the strategic decision to raise
capital by issuing new shares and convertible bonds in June 2020
in order to accelerate its capability in the medium term and be
able to meet growing customer demand.
2020 Annual Incentive Plan (“AIP”)
We have approved a bonus payment to the Executive Directors
based on 93.6% to 95.6% achievement against objectives under the
AIP for the period.
The Committee carefully considered the formulaic outcome under the
AIP measures, assessing the extent to which the measures reflect the
underlying performance of the business.
➔ Further information on the AIP can be found on pages 166 to 167.
2019 Value Creation Plan (“VCP”)
The first Measurement Date for the VCP was 12 March 2020. The
Measurement Price (£11.23) was below the Hurdle/Threshold Total
Shareholder Return (£15.16) required to bank awards and therefore
no nil-cost options were banked by the Executive Directors in 2020.
The second VCP Measurement Date will be in March 2021 and an
unaudited estimate of the number of options expected to be granted
as a result was reviewed by the Committee.
Due to the capital raise that was undertaken by the Company in June
2020, a new Tranche of award under the VCP was created to ensure
that the management team neither unduly benefit nor are penalised
as a result of the capital raise.
➔ More details about the first and second VCP Measurement
Dates can be found on page 165.
➔ Further information on the second VCP Tranche can be found
on page 165.
2020 Annual General Meeting Voting
The Committee acknowledges that at our 2020 annual general
meeting all resolutions were successfully passed with the requisite
majority, although there were significant minority votes against
two resolutions: Resolution 2 (Directors’ Remuneration Report) and
Resolution 10 (Re-appointment of Andrew Harrison). The Company
understands that this outcome was broadly attributable to concerns
around the performance of the Growth Incentive Plan (“GIP”), the
implementation of the VCP and the approach to Executive Directors’
salary progression.
The GIP was a one-off incentive plan granted in 2014 and vested in
May 2019. The outcome of the GIP was subject to discussion with
shareholders in November 2019 and having discussed the outcome,
the Committee felt that the value of this award, earned over a five year
period, reflected the outstanding returns received by shareholders.
Ocado’s 2019 Policy and the VCP were subject to an extensive
consultation with all major shareholders and investor bodies prior to
the 2019 annual general meeting. All shareholder feedback received
was carefully considered and as a result, multiple changes were made
Stock Code: OCDO
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30029 9 February 2021 8:51 am Proof ShellAndrew Harrison Committee ChairmanDate of Appointment: 1 March 2016*Independent: YesClaudia Arney ResignedDate of Appointment: 1 September 2019Independent: YesFor Committee attendance, see the table on page 116.* Appointed to CommitteeJulie Southern Date of Appointment: 1 June 2019Independent: YesEmma Lloyd Date of Appointment: 2 February 2021*Independent: YesDirectors’ Remuneration Report“ Our colleagues, customers and communities continue to be faced with a set of unique circumstances as a result of Covid-19. The Committee is committed to ensuring that our remuneration structure and outcomes reflect the Company’s ambition to create a sustainable long-term model that benefits all stakeholders post-crisis.”Andrew Harrison,Remuneration Committee ChairmanCommittee MembershipThe membership of the Remuneration Committee, together with the appointment dates, are set out below:Letter from the Chairman of the Remuneration Committee Dear Shareholder On behalf of the Board, I am pleased to present the Directors’ Remuneration Report for 2020. The performance of the Group this year saw continued growth in the Retail business as we sought to meet the increased demand for our services, delivering 35.3% Retail revenue growth compared to the prior year. The UK and international online grocery markets grew very rapidly during 2020. Building sustainable, scalable offerings for grocery online is now top of the agenda in grocery boardrooms worldwide. This permanent shift in the market has been reflected in the Company’s very significant share price growth, which was 2218 pence per share at the end of the period (2019: 1325 pence per share). Our Response to Covid-19 The Covid-19 pandemic has created a seismic shift in the way that all businesses must operate. At Ocado we have been committed to ensuring that our customers continue to be able to access reliable, efficient and safe grocery deliveries during this turbulent time, while also supporting our colleagues and partners however we can. Further details on our response to Covid-19 are set out below and on page 59. We have increased capacity in our Customer Fulfilment Centres (“CFCs”) as fast as possible to address the increased demand. Via our Solutions business we have also enabled Morrisons to treble their capacity to serve customers using our In-Store Fulfilment technology, thereby reaching more homes across the nation. None of this however would be possible without our colleagues who continue to serve our communities and adapt to ever changing circumstances. We are extremely proud of their work and to say thank you while we adjusted to the new environment and challenging times, our frontline employees were paid bonuses for working during the Covid-19 pandemic. There were a number of actions taken by the Company in order to support our colleagues during this difficult period. Wellbeing and safety remains the top priority for our business and our “Mind Yourself” wellbeing programme is available to all colleagues to provide information to support their mental, physical, social and financial health.140Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020www.ocadogroup.comOcado-Annual-Report-2020-Governance.indd 140Ocado-Annual-Report-2020-Governance.indd 14009/02/2021 09:13:1409/02/2021 09:13:14Back to contents Directors’ Remuneration Report
Continued
to the operation of the VCP. The Committee does, however, continue
to believe that the VCP remains the most appropriate vehicle to drive
exceptional and sustainable growth of the business and retain a
highly entrepreneurial executive team, and we are pleased with the
support of our largest shareholders for the VCP. Executive Director
salary progression was made in two stages to ensure that salaries
were benchmarked to 2020 market data. The Committee’s strategy
remains to position Executive Director salaries in the lower quartile
while variable pay is in the upper quartile to drive strong performance.
The Company remains committed to governance best practice and
will continue its policy of continually keeping remuneration under
review and proactively engaging with shareholders and advisory
bodies on such matters.
Changes to Base Salaries and Fees from April 2021
Changes to base salaries for the Executive Directors were agreed
to take effect from 1 April 2021. These increases are in line with the
budgeted increase for all employees and more details can be found
on page 164.
Changes to fees for the Non-Executive Directors were agreed (by the
Executive Directors and Chairman) to take effect from 1 April 2021,
including the Non-Executive Director (“NED”) base fees, Committee
Chairman fees and Committee membership fees. These increases
are being made to reflect that the Ocado business continues to grow
and become increasingly complex, requiring an increased workload
and time commitment from the Chairman and the Non-Executive
Directors. More details can be found on page 169.
➔ Further details on our response to the 2020 voting outcomes can
Other Workforce Considerations
At Ocado we value diversity and celebrate difference. It is the
diversity of our people and the skills that they have that enable us
to continually grow and innovate and we are constantly learning
and developing to help attract and retain top talent. This is reflected
in our Equal Opportunities Policy. Whilst we want to have the right
people with the same values and a communal focus on delivering
our strategy, we are committed to building an inclusive and diverse
culture in the workplace. The Company ensures that promotion
and recruitment is fair and objective and that all of our people
are rewarded appropriately for their valued contribution to our
achievements. When making decisions on executive remuneration,
the Remuneration Committee considers a number of factors related
to the wider workforce, including feedback from the Designated
Non-Executive Director (“DNED”) on workforce remuneration and our
all-employee remuneration report.
➔ Further details on Workforce Remuneration can be found
on page 157.
I will be available at the AGM to answer any questions about the work
of the Remuneration Committee.
Andrew Harrison
Remuneration Committee Chairman
09 February 2021
be found on page 177.
Changes to the Implementation of the Policy in 2021
The appointment of Stephen Daintith as Group CFO was announced
on 27 August 2020. The Committee considered Stephen’s
remuneration on appointment. More information can be found
on the corporate website, www.ocadogroup.com.
The maximum potential award for the Group General Counsel and
Company Secretary under the AIP will be increased from 190%
to 215% of salary in FY21 to bring the award in line with the other
Executive Directors. This change also reflects the new importance of
this role given the growth in the Solutions Business and reflects the
same rationale behind the salary increase to bring this role into line
with the other Executive Directors.
Changes to Non-Executive Director Remuneration
Changes to fees for the Non-Executive Directors were also agreed
(by the Executive Directors and Chairman) in 2020 including Non-
Executive Director (“NED”) base fees, the Committee Chairman fees
and the introduction of a fee for being a member of either the Audit
Committee or Remuneration Committee (effective 1 April 2020).
The increases were made to reflect the growing complexity of the
Ocado business and subsequent responsibilities, workload and time
commitment required from the Chairman and the Non-Executive
Directors.
As announced on 18 December 2020, Rick Haythornthwaite was
appointed as an independent Non-Executive Director with effect from
1 January 2021, with the intention to appoint him as independent
non-executive Chairman of the Board from the AGM in May 2021.
Details of the remuneration arrangements on Rick’s appointment can
be found on page 172.
➔ Please see page 169 for further information on NED fees.
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Continued
to believe that the VCP remains the most appropriate vehicle to drive
exceptional and sustainable growth of the business and retain a
highly entrepreneurial executive team, and we are pleased with the
support of our largest shareholders for the VCP. Executive Director
salary progression was made in two stages to ensure that salaries
were benchmarked to 2020 market data. The Committee’s strategy
remains to position Executive Director salaries in the lower quartile
while variable pay is in the upper quartile to drive strong performance.
The Company remains committed to governance best practice and
will continue its policy of continually keeping remuneration under
review and proactively engaging with shareholders and advisory
bodies on such matters.
Changes to base salaries for the Executive Directors were agreed
to take effect from 1 April 2021. These increases are in line with the
budgeted increase for all employees and more details can be found
on page 164.
Changes to fees for the Non-Executive Directors were agreed (by the
Executive Directors and Chairman) to take effect from 1 April 2021,
including the Non-Executive Director (“NED”) base fees, Committee
Chairman fees and Committee membership fees. These increases
are being made to reflect that the Ocado business continues to grow
and become increasingly complex, requiring an increased workload
and time commitment from the Chairman and the Non-Executive
Directors. More details can be found on page 169.
➔ Further details on our response to the 2020 voting outcomes can
Other Workforce Considerations
be found on page 177.
Changes to the Implementation of the Policy in 2021
The appointment of Stephen Daintith as Group CFO was announced
on 27 August 2020. The Committee considered Stephen’s
remuneration on appointment. More information can be found
on the corporate website, www.ocadogroup.com.
At Ocado we value diversity and celebrate difference. It is the
diversity of our people and the skills that they have that enable us
to continually grow and innovate and we are constantly learning
and developing to help attract and retain top talent. This is reflected
in our Equal Opportunities Policy. Whilst we want to have the right
people with the same values and a communal focus on delivering
our strategy, we are committed to building an inclusive and diverse
The maximum potential award for the Group General Counsel and
culture in the workplace. The Company ensures that promotion
Company Secretary under the AIP will be increased from 190%
to 215% of salary in FY21 to bring the award in line with the other
and recruitment is fair and objective and that all of our people
are rewarded appropriately for their valued contribution to our
Executive Directors. This change also reflects the new importance of
achievements. When making decisions on executive remuneration,
this role given the growth in the Solutions Business and reflects the
the Remuneration Committee considers a number of factors related
same rationale behind the salary increase to bring this role into line
to the wider workforce, including feedback from the Designated
with the other Executive Directors.
Non-Executive Director (“DNED”) on workforce remuneration and our
all-employee remuneration report.
➔ Further details on Workforce Remuneration can be found
on page 157.
I will be available at the AGM to answer any questions about the work
of the Remuneration Committee.
Andrew Harrison
Remuneration Committee Chairman
09 February 2021
Changes to Non-Executive Director Remuneration
Changes to fees for the Non-Executive Directors were also agreed
(by the Executive Directors and Chairman) in 2020 including Non-
Executive Director (“NED”) base fees, the Committee Chairman fees
and the introduction of a fee for being a member of either the Audit
Committee or Remuneration Committee (effective 1 April 2020).
The increases were made to reflect the growing complexity of the
Ocado business and subsequent responsibilities, workload and time
commitment required from the Chairman and the Non-Executive
Directors.
As announced on 18 December 2020, Rick Haythornthwaite was
appointed as an independent Non-Executive Director with effect from
1 January 2021, with the intention to appoint him as independent
non-executive Chairman of the Board from the AGM in May 2021.
Details of the remuneration arrangements on Rick’s appointment can
be found on page 172.
➔ Please see page 169 for further information on NED fees.
to the operation of the VCP. The Committee does, however, continue
Changes to Base Salaries and Fees from April 2021
Description of the Remuneration Committee
This section of the Directors’ Remuneration Report describes the
membership of the Remuneration Committee, its advisers and principal
activities during the period. It forms part of the Annual Report on
Remuneration section of the Directors’ Remuneration Report.
As required under the Terms of Reference, the Remuneration
Committee has three members, all of whom are independent Non-
Executive Directors, and holds a minimum of two meetings a year.
Other attendees at Remuneration Committee meetings during the
year included the Chairman of the Board, the Chief Executive Officer,
the Chief Financial Officer, the Group Chief People Officer and the
external adviser to the Remuneration Committee. The Chairman,
Executive Directors and other attendees are not involved in any
decisions of the Remuneration Committee and are not present at any
discussions regarding their own remuneration. The Deputy Company
Secretary is secretary to the Remuneration Committee.
Following the end of the period, Claudia Arney retired from the
Committee on 25 December 2020. Emma Lloyd joined the Committee
with effect from 2 February 2021.
External Advice
During the period, the Remuneration Committee and the Company
retained independent external advisers to assist them on various aspects
of the Company’s remuneration and share schemes as set out below:
Adviser
PricewaterhouseCoopers LLP (“PwC”)
Retained by
Remuneration Committee
Services
Provided to the
Remuneration
Committee
Other Services
Provided by PwC
Advice on a range of remuneration issues
including attendance at Remuneration
Committee meetings, information on market
practice in relation to various aspects of
remuneration, market trends and benchmarking
of Executive Director and Chairman remuneration.
The same PwC advisory team advised
management on remuneration strategy, policy
and benchmarking for senior management
remuneration and incentive arrangements.
Other PwC advisory teams advised the Group
on a range of matters during the period
including the JV with M&S, internal controls, risk
management, cyber security, accounting and
diversity and inclusion advice.
A separate PwC team have been engaged to
provide SOC (System and Organisation Controls)
audit assurance services to the Group.
PricewaterhouseCoopers LLP Reappointment
and Review
The Remuneration Committee considered the reappointment of
PricewaterhouseCoopers LLP. This review took into account PwC’s
effectiveness, independence, period of appointment and fees. PwC were
initially appointed by the Remuneration Committee in 2017 following a
tender process and were reappointed after the last review in 2020.
This period the Remuneration Committee reviewed the performance
of PwC based on feedback from members of the Remuneration
Committee and senior management. The criteria for assessing their
effectiveness included their understanding of business issues and
risks, their knowledge and expertise, and their ability to manage
expectations. The Remuneration Committee concluded that the
performance of PwC remained effective.
The Remuneration Committee considered the independence
and objectivity of PwC. PwC have provided assurances to the
Remuneration Committee that they have effective internal processes
in place to ensure that they are able to provide remuneration
consultancy services independently and objectively. PwC confirmed
to the Company that they remain a member of the Remuneration
Consultants Group and as such operate under the code of conduct
in relation to executive remuneration consulting in the UK. The
Remuneration Committee is, following its annual review, satisfied that
PwC have continued to maintain independence and objectivity.
For the period, £106,500 (2019: £127,600) in fees were paid or
payable to PwC for advisory services provided to the Remuneration
Committee. The basis for this is a fixed retainer fee and a time-based
fee for additional work.
Following the review by the Remuneration Committee, it was agreed
that PwC should be reappointed.
Other Support for the Remuneration Committee
In addition to the external advice received, the Remuneration Committee
consulted and received reports from the Company’s Chief Executive
Officer, the Chief Financial Officer, the Chairman, the Group Chief
People Officer and the Deputy Company Secretary. The Remuneration
Committee is mindful of the need to recognise and manage conflicts of
interest when receiving views and reports from, or consulting with, the
Executive Directors or members of senior management.
142 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
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Back to contents Directors’ Remuneration Report
Continued
• Reviewing and approving various senior management
arrangements on joining and leaving the Company.
• Receiving reports and advice from advisers on a range of matters
including senior executive pay, market themes and trends and new
governance requirements.
• Reviewing the performance of advisers.
• Review of Committee composition, Terms of Reference and
performance.
The Executive Directors and the Chairman reviewed the remuneration
arrangements of the Non-Executive Directors.
How the Committee Spent its Time in 2020
The Remuneration Committee has, under its Terms of Reference,
been delegated responsibility for setting remuneration for all of
the Executive Directors, the Chairman and the Company Secretary.
The Remuneration Committee’s work also includes monitoring
and considering the level and structure of remuneration for senior
management. In line with its Terms of Reference, the Remuneration
Committee’s work during the period is set out below:
Key Agenda Items
• Approving the Directors’ Remuneration Report for FY19.
• Approving the annual general meeting explanatory notices and a
minor amendment to the Ocado Employee Share Purchase Plan
rules.
• Reviewing a response statement regarding shareholder
consultation following the 2020 annual general meeting.
• Approving the Group’s Gender Pay Gap Report for FY19.
• Receiving a report on Director performance and/or pay (Executive
Director, Non-Executive Director and Chairman).
• Receiving a report from the CEO and Chairman on performance
and remuneration of the Executive Directors.
• Approving Executive Director pay increases.
• Approving a change to employer pension contributions for
Executive Directors.
• Reviewing performance under the FY19 AIP and consideration of
any bonuses payable.
• Reviewing performance and approving payments under the FY17
and FY18 LTIP awards.
• Reviewing performance under the VCP as at the first Measurement
Date and approving the creation of a new tranche of award under
the VCP as a result of the capital raise in June 2020.
• Approving the FY20 AIP performance targets and reviewing the
design/measures for the FY21 AIP.
• Receiving a report on the vesting of the 2016 Sharesave scheme.
• Receiving regular reports on Group-wide remuneration for
FY19 and reports from the DNED on workforce remuneration
arrangements and issues.
• Approving a proposal for new international share schemes.
• Receiving a report on the Group’s share scheme and plans for FY21.
• Approving the remuneration arrangements upon retirement of
Duncan Tatton-Brown, Group CFO.
• Approving the remuneration arrangements upon appointment of
Stephen Daintith, Group CFO.
• Approving remuneration arrangements in light of the acquisition of
Haddington Dynamics, Inc. and Kindred Systems, Inc.
• Approving incentive payments and salary changes for senior
management.
• Approving a framework for senior management remuneration
arrangements.
144 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
How the Committee Spent its Time in 2020
The Remuneration Committee has, under its Terms of Reference,
• Reviewing and approving various senior management
arrangements on joining and leaving the Company.
been delegated responsibility for setting remuneration for all of
• Receiving reports and advice from advisers on a range of matters
the Executive Directors, the Chairman and the Company Secretary.
including senior executive pay, market themes and trends and new
The Remuneration Committee’s work also includes monitoring
governance requirements.
and considering the level and structure of remuneration for senior
management. In line with its Terms of Reference, the Remuneration
Committee’s work during the period is set out below:
• Reviewing the performance of advisers.
• Review of Committee composition, Terms of Reference and
performance.
Key Agenda Items
• Approving the Directors’ Remuneration Report for FY19.
arrangements of the Non-Executive Directors.
The Executive Directors and the Chairman reviewed the remuneration
G
O
V
E
R
N
A
N
C
E
• Approving the annual general meeting explanatory notices and a
minor amendment to the Ocado Employee Share Purchase Plan
rules.
• Reviewing a response statement regarding shareholder
consultation following the 2020 annual general meeting.
• Approving the Group’s Gender Pay Gap Report for FY19.
• Receiving a report on Director performance and/or pay (Executive
Director, Non-Executive Director and Chairman).
• Receiving a report from the CEO and Chairman on performance
and remuneration of the Executive Directors.
• Approving Executive Director pay increases.
• Approving a change to employer pension contributions for
• Reviewing performance under the FY19 AIP and consideration of
• Reviewing performance and approving payments under the FY17
Executive Directors.
any bonuses payable.
and FY18 LTIP awards.
• Reviewing performance under the VCP as at the first Measurement
Date and approving the creation of a new tranche of award under
the VCP as a result of the capital raise in June 2020.
• Approving the FY20 AIP performance targets and reviewing the
design/measures for the FY21 AIP.
• Receiving a report on the vesting of the 2016 Sharesave scheme.
• Receiving regular reports on Group-wide remuneration for
FY19 and reports from the DNED on workforce remuneration
arrangements and issues.
• Approving a proposal for new international share schemes.
• Receiving a report on the Group’s share scheme and plans for FY21.
• Approving the remuneration arrangements upon retirement of
Duncan Tatton-Brown, Group CFO.
• Approving the remuneration arrangements upon appointment of
Stephen Daintith, Group CFO.
• Approving remuneration arrangements in light of the acquisition of
Haddington Dynamics, Inc. and Kindred Systems, Inc.
• Approving incentive payments and salary changes for senior
• Approving a framework for senior management remuneration
management.
arrangements.
144 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
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Continued
Remuneration Summary
Executive Pay at Ocado
The Components of Remuneration
The different components of remuneration in this report are colour coded as follows:
Fixed
Variable
Salary
Benefits
Pension
AIP Cash +
Deferred Bonus
One-off Value
Creation Plan
Aligned with all
other employee
arrangements
Reflects the value
of the individual,
their role, skills,
experience and
contribution to the
business
Motivates key
individuals to
achieve long-
Provides an
Incentivises
appropriate level
achievement of
of retirement
benefits. All
annual objectives
and aligns Director
term targets and
Executive Directors
and shareholder
exceptional levels
are aligned with
employee pension
interests by
delivering a
contributions
proportion in AIP
shares
of performance
Total
Remuneration
Sum of the fixed
and variable
components of
remuneration
Single Figure for 2020
The table below provides a summary total single figure of remuneration for 2020. Further details are set out on page 163 in the Annual Report on
Remuneration.
Executive Director
Tim Steiner
Mark Richardson
Neill Abrams
Luke Jensen
Duncan Tatton-Brown
Outcomes for 2020
Fixed components
Total 2020
(£’000)
Total 2019
(£’000)
6,970
3,402
2,626
3,303
3,478
59,038
15,978
1,932
8,696
15,991
Tim
Steiner
CEO
Mark
Richardson
COO
Neill Abrams
Group GC &
CoSec
Luke Jensen
CEO Ocado
Solutions
Duncan
Tatton-Brown,
CFO
Salary (£’000)
Benefits (include car allowance, private medical
and other benefits) (£’000)
Pension – up to 7% of salary (£’000)
Total (£)
708
12
50
770
433
1
36
470
433
1
32
466
433
12
25
470
421
1
36
458
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Continued
Remuneration Summary
Executive Pay at Ocado
The Components of Remuneration
The different components of remuneration in this report are colour coded as follows:
Fixed
Variable
Salary
Benefits
Pension
AIP Cash +
Deferred Bonus
One-off Value
Creation Plan
Reflects the value
of the individual,
their role, skills,
experience and
contribution to the
business
Aligned with all
other employee
arrangements
Provides an
Incentivises
appropriate level
achievement of
of retirement
benefits. All
annual objectives
and aligns Director
term targets and
Executive Directors
and shareholder
exceptional levels
Motivates key
individuals to
achieve long-
of performance
Total
Remuneration
Sum of the fixed
and variable
components of
remuneration
are aligned with
employee pension
interests by
delivering a
contributions
proportion in AIP
shares
Single Figure for 2020
Remuneration.
Executive Director
Tim Steiner
Mark Richardson
Neill Abrams
Luke Jensen
Duncan Tatton-Brown
Outcomes for 2020
Fixed components
Salary (£’000)
Benefits (include car allowance, private medical
and other benefits) (£’000)
Pension – up to 7% of salary (£’000)
Total (£)
Steiner
Richardson
Group GC &
CEO Ocado
Tatton-Brown,
Mark
Neill Abrams
Luke Jensen
Duncan
Tim
CEO
708
12
50
770
COO
433
1
36
470
CoSec
433
1
32
466
Solutions
433
12
25
470
Total 2020
Total 2019
(£’000)
6,970
3,402
2,626
3,303
3,478
(£’000)
59,038
15,978
1,932
8,696
15,991
CFO
421
1
36
458
Pay for Performance at a Glance
2020 AIP outturn
Under this plan, the CEO had a maximum bonus opportunity of 275% of salary, the Group GC & CoSec had a maximum opportunity of
190% of salary, and the other Executive Directors had a maximum opportunity of 215% of salary. A summary of the outcomes is as follows.
G
O
V
E
R
N
A
N
C
E
Threshold
Maximum
New International Solutions
commitments (30%)
Retail segment EBITDA (20%)
Erith Capacity (20%)
OSP Features (10%)
Individual objectives (20%)
Total
Outcome
(% total award)
27.4
20
20
10
16.2–18.2
93.6–95.6
➔ Further details are set out on pages 166 to 167 in the Annual Report on Remuneration.
2018 LTIP outturn
Under this plan, the CEO was granted an award of 200% of salary, the Group GC & CoSec was granted an award of 120% of salary, and the
other Executive Directors were granted awards of 150% of salary. A summary of the outcomes is as follows.
The table below provides a summary total single figure of remuneration for 2020. Further details are set out on page 163 in the Annual Report on
Threshold
Maximum
Retail revenue (25%)
Retail EBIT (25%)
Platform operational efficiency (i)(12.5%)
Platform capital efficiency (ii) (12.5%)
Solutions revenue (25%)
Total
This was the last award to be made to Executive Directors under the LTIP.
➔ Further details are set out on page 168 in the Annual Report on Remuneration.
Outcome
(% total award)
25
24.2
6.3
0
24.4
79.9
Tim Steiner
Mark Richardson
Neill Abrams
Luke Jensen
Duncan Tatton-Brown
2020 AIP
2018 LTIP
Outcome
(% of max)
Outcome
(£’000)
Number of
shares vesting
Value on
vesting (£’000)
94.2%
95.6%
94.6%
93.6%
94.7%
£1,865
£904
£791
£886
£879
175,477
81,313
54,592
77,989
80,792
£4,299
£1,992
£1,338
£1,911
£1,979
2020 VCP Outturn
The first Measurement Date under the 5-year VCP was 12 March 2020. No nil-cost options were banked by Executive Directors on the first
Measurement Date.
Measurement
Date
Hurdle Price/
Threshold TSR
Measurement
Price
Tim
Steiner
Mark
Richardson
12 March 2020
£15.16
£11.23
£0
£0
Neill
Abrams
£0
Luke
Jensen
Duncan
Tatton-Brown
£0
£0
Value of nil-cost options banked (£m)
➔ Further details are set out on page 165.
146 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
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Continued
2019 Remuneration Policy Summary
Base Salary
Reflects the skills of the individual,
their role, skills, experience (taking
into account appropriate market
data) and contributions to the
businesses
Fixed
Benefits
Aligned with all other employee
arrangements
Pension
Annual
Incentive
Plan
Deferred
Bonus
Under AIP
Provides an appropriate level of
retirement benefits and is aligned
with the levels received by the wider
workforce
Incentivises achievement
of annual objectives
Aligns Director and shareholder
interests by delivering bonus payments
in deferred shares
with a holding period
One-off
Plans
Motivates key individuals to
achieve long-term targets and
exceptional levels of performance
Variable
Reward philosophy
Our remuneration principles, which we also
cascade throughout the business, underpin our
Remuneration Policy. These principles are that
our remuneration should:
• Support the long-term success of the
business and sustainable long-term
shareholder value.
• Be relevant and aligned to the business
strategy and achievement of planned
business goals.
• Reflect and support the entrepreneurial and
high performance culture of the business.
• Be compatible with the Group’s risk policies
and systems.
• Link above-market pay-outs only to
outstanding results.
• Ensure that performance-related pay
constitutes a proportion of the overall
package appropriate to each level of the
organisation.
• Provide a balance between attracting,
retaining and motivating the right calibre of
candidates and supporting equal opportunity
and diversity of talent.
• Be clear and explainable to appropriate
stakeholders.
The Remuneration Policy for Executive Directors
is made up of elements of fixed and variable
remuneration. The Remuneration Committee
is mindful of the weighting of fixed and variable
pay and balance of short and long-term awards
and has sought to position a larger proportion
of the remuneration package as equity-based
and performance-related in order to support
the Company’s strategic objectives of high
growth and expansion and to create shareholder
alignment. The deferral and holding periods
and the minimum shareholding requirements
all help to ensure a longer term focus for the
business from the Executive Directors.
The Remuneration Committee is committed to
ensuring that the wider workforce is part of its
considerations during the year. See pages 157
to 162 for a discussion of how the Committee
considered these issues during the year.
148 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
2019 Remuneration Policy Summary
Base Salary
Fixed
➔ You can find the full Remuneration Policy on the Corporate Website, www.ocadogroup.com.
Base Salary
To attract and retain the right calibre of senior executives globally required to support the long-term interests of the business.
Summary Policy table for Executive Directors
In this section we provide a summary of the key elements of the 2019 Remuneration Policy for Executive Directors approved by shareholders at
our 2019 annual general meeting on 1 May 2019. In addition, we have set out how the Policy was operated in 2019/20 and how it is intended to
be operated in 2020/21.
G
O
V
E
R
N
A
N
C
E
t
n
e
m
e
l
E
0
2
/
9
1
0
2
1
2
/
0
2
0
2
2
2
/
1
2
0
2
3
2
/
2
2
0
2
4
2
/
3
2
0
2
5
2
/
4
2
0
2
Operation
y
r
a
l
a
S
e
s
a
B
Paid monthly in cash.
Reviewed annually or
when there is a change in
position or responsibility.
The review takes into
account:
• The Group’s annual
review process.
• Business performance.
• Total remuneration.
• Appropriate market
data for comparable
roles for companies
of equivalent size and
complexity in similar
sectors and locations to
the Company.
• Economic conditions or
governance.
• An individual’s
contribution to the
Group.
Opportunity
There is no prescribed
maximum.
Normally, maximum
salary increases will
be within the normal
percentage range applied
to the UK-based monthly
paid employees of the
Company in that year.
Larger increases may be
awarded in exceptional
circumstances for
example, if the role has
increased significantly in
scope or complexity.
Operation in the year
ended 29 November 2020
Operation in
the year ending
28 November 2021
As at 1 April 2020:
• Tim Steiner (CEO):
£720,000
• Mark Richardson
(COO): £440,000
• Neill Abrams (Group GC
& CoSec): £440,000
• Luke Jensen (CEO
Ocado Solutions):
£440,000
• Duncan Tatton-Brown
(CFO): £440,000
As at 1 April 2021 salaries
will increase as follows:
• Tim Steiner (CEO):
£738,000
• Mark Richardson
(COO): £451,000
• Neill Abrams (Group GC
& CoSec): £451,000
• Luke Jensen (CEO
Ocado Solutions):
£451,000
These increases are in
line with the budgeted
increases for all
employees.
Benefits
To attract and retain the right calibre of senior executives required to support the long-term interests of the business.
t
n
e
m
e
l
E
0
2
/
9
1
0
2
1
2
/
0
2
0
2
2
2
/
1
2
0
2
3
2
/
2
2
0
2
4
2
/
3
2
0
2
5
2
/
4
2
0
2
Operation
s
t
i
f
e
n
e
B
Benefits provided aligned
with those provided to
all employees under our
flexible benefits policy.
Opportunity
Benefits are set at a level
which is considered
to be appropriate
against market data for
comparable roles.
Operation in the year
ended 29 November 2020
Includes car allowance,
driver, private medical
insurance and other
benefits.
Operation in
the year ending
28 November 2021
No planned change.
Reflects the skills of the individual,
their role, skills, experience (taking
into account appropriate market
data) and contributions to the
businesses
Benefits
Aligned with all other employee
arrangements
Pension
Annual
Incentive
Plan
Deferred
Bonus
Under AIP
Provides an appropriate level of
retirement benefits and is aligned
with the levels received by the wider
workforce
Incentivises achievement
of annual objectives
Aligns Director and shareholder
interests by delivering bonus payments
in deferred shares
with a holding period
One-off
Plans
Motivates key individuals to
achieve long-term targets and
exceptional levels of performance
Variable
Reward philosophy
Our remuneration principles, which we also
cascade throughout the business, underpin our
Remuneration Policy. These principles are that
our remuneration should:
• Support the long-term success of the
business and sustainable long-term
shareholder value.
• Be relevant and aligned to the business
strategy and achievement of planned
business goals.
• Reflect and support the entrepreneurial and
high performance culture of the business.
• Be compatible with the Group’s risk policies
and systems.
• Link above-market pay-outs only to
outstanding results.
• Ensure that performance-related pay
constitutes a proportion of the overall
package appropriate to each level of the
organisation.
• Provide a balance between attracting,
retaining and motivating the right calibre of
candidates and supporting equal opportunity
and diversity of talent.
• Be clear and explainable to appropriate
stakeholders.
The Remuneration Policy for Executive Directors
is made up of elements of fixed and variable
remuneration. The Remuneration Committee
is mindful of the weighting of fixed and variable
pay and balance of short and long-term awards
and has sought to position a larger proportion
of the remuneration package as equity-based
and performance-related in order to support
the Company’s strategic objectives of high
growth and expansion and to create shareholder
alignment. The deferral and holding periods
and the minimum shareholding requirements
all help to ensure a longer term focus for the
business from the Executive Directors.
The Remuneration Committee is committed to
ensuring that the wider workforce is part of its
considerations during the year. See pages 157
to 162 for a discussion of how the Committee
considered these issues during the year.
148 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Directors’ Remuneration Report
Continued
Pension
To attract and retain the right calibre of senior executives required to support the long-term interests of the business.
t
n
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3
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3
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0
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2
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4
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2
Operation
n
o
i
s
n
e
P
Executive Directors can
choose to participate in
the defined contribution
Group personal
pension scheme or an
occupational money
purchase scheme.
Where lifetime or pension
allowances have been
met, the balance of
employer contributions
may be paid as a cash
allowance or into a
personal pension
arrangement.
Opportunity
Maximum contribution
of 7% of salary from April
2020.
Operation in
the year ending
28 November 2021
No planned change.
Operation in the year
ended 29 November
2020
In order to ensure
continued alignment
between Executive
Director and wider
workforce pension
contributions, the
Remuneration
Committee reduced the
contribution rate for
Executive Directors from
8% to 7% of salary from
April 2020 onwards.
150 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Directors’ Remuneration Report
To attract and retain the right calibre of senior executives required to support the long-term interests of the business.
Operation in the year
Operation in
ended 29 November
the year ending
Operation
Opportunity
2020
28 November 2021
Executive Directors can
Maximum contribution
In order to ensure
No planned change.
choose to participate in
of 7% of salary from April
continued alignment
the defined contribution
2020.
Continued
Pension
t
n
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0
2
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9
1
0
2
1
2
/
0
2
0
2
2
2
/
1
2
0
2
3
2
/
2
2
0
2
4
2
/
3
2
0
2
5
2
/
4
2
0
2
n
o
i
s
n
e
P
Group personal
pension scheme or an
occupational money
purchase scheme.
Where lifetime or pension
allowances have been
met, the balance of
employer contributions
may be paid as a cash
allowance or into a
personal pension
arrangement.
between Executive
Director and wider
workforce pension
contributions, the
Remuneration
Committee reduced the
contribution rate for
Executive Directors from
8% to 7% of salary from
April 2020 onwards.
Annual Incentive Plan (AIP)
To reinforce and reward delivery of annual strategic business priorities, based on performance measures relating to both Group and individual performance.
Bonus deferral provides alignment with shareholder interests.
t
n
e
m
e
l
E
0
2
/
9
1
0
2
1
2
/
0
2
0
2
2
2
/
1
2
0
2
3
2
/
2
2
0
2
4
2
/
3
2
0
2
5
2
/
4
2
0
2
Operation
Opportunity
Operation in
the year ended
29 November 2020
Operation in
the year ending
28 November 2021
G
O
V
E
R
N
A
N
C
E
Up to 50% of any bonus
will be paid in cash (up
to a maximum of 100%
of salary) and at least
50% will be deferred into
shares.
Main terms of deferred
shares:
• Minimum deferral
period of three years
from the date of grant.
• Additional two-year
post vesting holding
period.
• Continued
employment to the
end of the deferral
period (unless “good
leaver”).
Dividend equivalents may
be awarded on deferred
shares.
)
P
I
A
(
n
a
l
P
e
v
i
t
n
e
c
n
I
l
a
u
n
n
A
Maximum opportunity of
275% of salary.
Maximum potential for the
year of (as % of salary):
• CEO: 275%
• Group GC & CoSec:
190%
• Other Executive
Directors: 215%
AIP was measured against
the following performance
measures:
To bring the remuneration
of the Group GC & CoSec
in line with the other
Executive Directors, the
maximum potential for that
role will increase to 215%
of salary.
AIP will be measured
against the following
performance measures:
• Retail segment EBITDA
• New International
(20%)
• New Solutions
commitments (25%)
• OSP capacity (15%)
• Technology capabilities
(10%)
• Engineering cost per
order (10%)
•
Individual objectives
(20%) (further details on
page 152)
Percentage of maximum
bonus earned for levels of
performance:
• Threshold: 25%
• Maximum: 100%
Solutions commitments
(30%)
• Retail segment EBITDA
(20%)
• Erith Capacity (20%)
• OSP Features (10%)
•
Individual objectives
(20%)
Executive Directors to be
paid bonuses in February
2021 of:
• Tim Steiner (CEO): 259%
of salary
• Mark Richardson (COO):
206% of salary
• Neill Abrams (Group
GC & CoSec): 180% of
salary
• Luke Jensen (CEO
Ocado Solutions): 201%
of salary
• Duncan Tatton-Brown
(CFO): 200% of salary
Link to Strategy: The AIP measures for 2021 provide a good balance of rewarding performance based on both
the Retail and Solutions businesses, as well as focusing on individual performance.
The specific performance targets for the AIP are not disclosed for the 2021 financial year on the basis the Remuneration Committee considers that these targets are commercially
sensitive to the Company and if disclosed could damage the Company’s commercial interests at this stage. These targets will be disclosed at the end of the 2021 financial year.
150 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Directors’ Remuneration Report
Continued
Individual Objectives for 2021 AIP
The following table sets out the categories of individual objectives that will be assessed over 2021. More detail on the objectives and assessment
against these will be disclosed in next year’s report.
Tim Steiner
•
Improve the client business to ensure we maintain or improve our relationships with current and
prospective clients
• Ensure Ocado Group prioritises future innovation
• Successfully Chairman the ORL Board, with business performing to expectations
• Ensure that Ocado Group engages with its shareholders
• Listen to and engage with employees and ensure successful transition of key roles
Mark Richardson
• Reduce building costs in the UK, MHE installation time globally and cost of OSP maintenance
• Launch CFCs and ISF for Kroger; launch ORL capacity in various locations in the UK
• Oversee supply chain for bots and peripherals, improving manufacture and on site delay rates
• Engage with employees and improve rostering for hourly paid employees
Neill Abrams
• Manage litigation
• Continued management of Andover insurance claim
•
Improve departmental employee engagement and work satisfaction
• Legal support for international transactions
• Roll-out of compliance policies and training
Luke Jensen
• Grow the Ocado Solutions client base
•
IP protection and growth – targeted growth of patent portfolio, and IP protection and compliance regime.
• Successful launch of Kroger CFCs and ISF and ICA on track for launch
• Build the infrastructure and capabilities of Ocado Solutions to provide required support to clients
• Build profile and reputation of Ocado Solutions
• Oversee the successful integration of Kindred Systems Inc. into Solutions
• Listen to and engage with employees
Stephen Daintith
• Develop a high-performing, highly capable and engaged finance team, focussing on culture, engagement, skills
and capabilities
• Optimise finance processes, tools and systems with strong control environment supported by clear funding
strategy
• Develop a 10-year Corporate Strategy
• Engage with and build relationships with shareholders
• Develop a five year plan for the Solutions and Ventures business
152 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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O
V
E
R
N
A
N
C
E
4
2
/
3
2
0
2
0
2
/
9
1
0
2
1
2
/
0
2
0
2
2
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/
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2
5
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E
Operation
Opportunity
Operation in
the year ended
29 November 2020
Operation in
the year ending
28 November 2021
One-off Plan: Value Creation Plan (VCP)
To align the interests of senior executives and shareholders, by incentivising senior executives to deliver substantial and sustained total
shareholder return over the long term.
3
2
/
2
2
0
2
Directors’ Remuneration Report
Continued
Individual Objectives for 2021 AIP
against these will be disclosed in next year’s report.
The following table sets out the categories of individual objectives that will be assessed over 2021. More detail on the objectives and assessment
Tim Steiner
•
Improve the client business to ensure we maintain or improve our relationships with current and
prospective clients
• Ensure Ocado Group prioritises future innovation
• Successfully Chairman the ORL Board, with business performing to expectations
• Ensure that Ocado Group engages with its shareholders
• Listen to and engage with employees and ensure successful transition of key roles
Mark Richardson
• Reduce building costs in the UK, MHE installation time globally and cost of OSP maintenance
• Launch CFCs and ISF for Kroger; launch ORL capacity in various locations in the UK
• Oversee supply chain for bots and peripherals, improving manufacture and on site delay rates
• Engage with employees and improve rostering for hourly paid employees
Neill Abrams
• Manage litigation
• Continued management of Andover insurance claim
•
Improve departmental employee engagement and work satisfaction
• Legal support for international transactions
• Roll-out of compliance policies and training
Luke Jensen
• Grow the Ocado Solutions client base
•
IP protection and growth – targeted growth of patent portfolio, and IP protection and compliance regime.
Stephen Daintith
• Develop a high-performing, highly capable and engaged finance team, focussing on culture, engagement, skills
• Successful launch of Kroger CFCs and ISF and ICA on track for launch
• Build the infrastructure and capabilities of Ocado Solutions to provide required support to clients
• Build profile and reputation of Ocado Solutions
• Oversee the successful integration of Kindred Systems Inc. into Solutions
• Listen to and engage with employees
• Optimise finance processes, tools and systems with strong control environment supported by clear funding
and capabilities
strategy
• Develop a 10-year Corporate Strategy
• Engage with and build relationships with shareholders
• Develop a five year plan for the Solutions and Ventures business
No planned change.
The maximum number
of share awards that may
vest under the VCP is
2.75% of the issued share
capital.
Awards are subject to an
annual cap on the value
on vesting of:
• CEO: £20 million;
• Other Executive
Directors: £5 million.
For Executive Directors,
the following maximum
limits apply:
• CEO: 1% of the total
value created above
the hurdle;
• Other Executive
Directors: 0.25% of the
value created.
)
P
C
V
(
n
a
l
P
n
o
i
t
a
e
r
C
e
u
l
a
V
:
n
a
l
P
f
f
O
-
e
n
O
A one-off award that
grants Executive Directors
the opportunity to share
in 2.75% of the total value
created for shareholders
above a 10% p.a. Total
Shareholder Return
(“TSR”) hurdle over a five-
year performance period.
Vesting schedule:
• 50% of the cumulative
number of share
awards vest following
the third and fourth
Measurement Dates.
• 100% of the
cumulative number
of share awards vest
following the fifth
Measurement Date.
Additional holding
periods apply such that
vested shares become
unrestricted no earlier
than five years from the
start of the plan.
Vesting of awards is also
subject to a minimum
return of 10% TSR p.a.
Executive Directors
may choose to receive
their share awards by
acquiring jointly owned
equity awards at the time
that they are invited to
join the VCP.
Link to Strategy: The single total shareholder return measure is well aligned to our strategy of delivering
substantial and sustained returns to shareholders by driving innovation and growth in our platform business.
152 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Directors’ Remuneration Report
Continued
Shareholding Requirement
t
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E
0
2
/
9
1
0
2
1
2
/
0
2
0
2
2
2
/
1
2
0
2
3
2
/
2
2
0
2
4
2
/
3
2
0
2
5
2
/
4
2
0
2
Operation
Opportunity
t
n
e
m
e
r
i
u
q
e
R
g
n
d
l
o
h
e
r
a
h
S
i
Shareholding
requirement for Executive
Directors:
• CEO: 400% of salary.
• Other Executive
Directors: 300% of
salary.
Shareholding
requirement for Non-
Executive Directors:
• Hold shares
equivalent to one
year’s annual fee.
Post-cessation
shareholding requirement
of 100% of pre-cessation
shareholding requirement
for 12 months from leaving
the Company.
Operation in
the year ending
28 November 2021
No planned change.
Operation in
the year ended
29 November 2020
Current Executive Director
minimum shareholding
requirements are:
• CEO: 400% of salary
• CFO: 300% of salary
• COO: 300% of salary
• Group GC & CoSec:
300% of salary
• CEO Ocado Solutions:
300% of salary
See page 173 for
Non-Executive
Director Shareholding
requirements.
(1) The assessment for the Executive Directors’ shareholdings as a percentage of salary was based on the Directors’ shareholdings at the end of the period, and the share price as at
26 January 2021 (being the last practicable date prior to the publication of this Annual Report).
154 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Directors’ Remuneration Report
Continued
Shareholding Requirement
t
n
e
m
e
l
E
0
2
/
9
1
0
2
1
2
/
0
2
0
2
2
2
/
1
2
0
2
3
2
/
2
2
0
2
4
2
/
3
2
0
2
5
2
/
4
2
0
2
Operation in
the year ended
Operation in
the year ending
Opportunity
29 November 2020
28 November 2021
t
n
e
m
e
r
i
u
q
e
R
g
n
i
d
l
o
h
e
r
a
h
S
Operation
Shareholding
requirement for Executive
Directors:
• CEO: 400% of salary.
• Other Executive
Directors: 300% of
salary.
Shareholding
requirement for Non-
Executive Directors:
• Hold shares
equivalent to one
year’s annual fee.
Post-cessation
shareholding requirement
of 100% of pre-cessation
shareholding requirement
for 12 months from leaving
the Company.
minimum shareholding
requirements are:
• CEO: 400% of salary
• CFO: 300% of salary
• COO: 300% of salary
• Group GC & CoSec:
300% of salary
• CEO Ocado Solutions:
300% of salary
See page 173 for
Non-Executive
Director Shareholding
requirements.
(1) The assessment for the Executive Directors’ shareholdings as a percentage of salary was based on the Directors’ shareholdings at the end of the period, and the share price as at
26 January 2021 (being the last practicable date prior to the publication of this Annual Report).
Current Executive Director
No planned change.
Element
Operation
Opportunity
Summary Policy Table for Non-Executive Directors
The table below summarises the key elements of the 2019 Remuneration Policy for the Chairman and Non-Executive Directors.
G
O
V
E
R
N
A
N
C
E
Operation in
the year ended
29 November 2020
As at 1 April 2020:
• Lord Rose (Chairman):
£300,000.
Operation in
the year ended
28 November 2021
Upon his appointment
as Chairman at the
AGM in May 2021, Rick
Haythornthwaite will
receive an annual fee of
£375,000.
Normally, any increases
will be within the normal
percentage range
applied to the UK-based
monthly paid employees
of the Company in that
year.
Chairman Fee
Paid monthly in cash.
To attract and retain
an individual with the
appropriate degree
of expertise and
experience.
Non-Executive
Director Fee
To attract and retain
expert people with the
appropriate degree
of expertise and
experience.
Reviewed annually by the
Remuneration Committee.
The review takes into account:
• The Group’s annual review
process.
• Business performance.
• Appropriate market data
for comparable roles for
companies of equivalent size
and complexity in similar
sectors or locations to the
Company.
Paid monthly in cash.
Fee structure includes an annual
base fee and may include
additional fees for being the
Senior Independent Director (SID),
a Board Committee Chairman or
other additional responsibility.
Reviewed annually by the
Executive Directors and Chairman.
The review takes into account:
• The Group’s annual review
process.
• Business performance.
• Appropriate market data
for comparable roles for
companies of equivalent size
and complexity in similar
sectors/locations to the
Company.
Normally, any increases
will be within the normal
percentage range
applied to the UK-based
monthly paid employees
of the Company in that
year.
As at 1 April 2020:
• Base fee: £68,000.
• SID fee: £17,000.
• Committee Chairman
fee: £18,000.
• Audit Committee
membership fee:
£5,000.
• Remuneration
Committee
membership fee:
£5,000.
As at 1 April 2021 salaries
will increase as follows:
• Base fee: £74,000.
• SID fee: £20,000.
• Committee Chairman
fee: £20,000.
• Audit Committee
membership fee:
£7,500.
• Remuneration
Committee
membership fee:
£7,500.
154 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Directors’ Remuneration Report
Continued
Other Remuneration
During the period, the Executive Directors continued their participation in the all-employee Sharesave and SIP schemes. It is expected that in
2021, the Executive Directors will carry on their participation in the schemes.
How does our salary/target total remuneration compare to our peers?
The following tables show the Company’s comparative positioning of both salary and total remuneration against the FTSE 100 (data as at
September 2020). This demonstrates the Remuneration Committee’s positioning of salaries below the market with competitive levels of
remuneration only earned by the Executive Directors if strong performance is delivered.
FTSE 100 Salary positioning
FTSE 100 Total Target Remuneration positioning
CEO
COO
CEO OS
Group GC
and Co Sec
CEO
COO
CEO OS
Group GC
and Co Sec
Top quartile
2nd quartile
3rd quartile
Bottom quartile
Ocado –Salary
Top quartile
2nd quartile
3rd quartile
Bottom quartile
Ocado – Total target
remuneration
Note: Total Target Remuneration figures for Ocado are based on current salaries, target AIP and includes pension contributions. The value of the VCP shown is the IFRS 2 fair value which
has been annualised to reflect a five-year term.
Source of information: Annual Reports of FTSE 100 companies, benchmarking methodology aligned to standard approach taken by the company.
Source of data: PwC Annual Report database.
Additional Context on Executive Director pay
Overall link to remuneration and equity of the Executive Directors
The table below sets out, for each Executive Director, the single figure for 2019/20, the number of shares held by the Director at the beginning
and end of the financial year and the impact on the value of these shares taking the opening price and closing price for the year. It is the
Remuneration Committee’s view that the total exposure of the Executive Directors to the Company is more relevant to their focus on the long-
term sustainable performance of the Company than the single figure of remuneration for a particular year.
Tim Steiner
Mark Richardson
Neill Abrams
Luke Jensen
2019/20
single figure
(£’000)
Shares held
at start of
year
Shares held
at end of
year
Value of
shares at
start of year
(£’000)
Value of
shares at
end of year
(£’000)
Difference
(£’000)
6,970
3,397
2,631
3,303
23,597,672
21,573,254
312,669
478,495
+165,826
1,547,739
3,602,071
194,524
1,607,151
3,641,224
245,149
20,508
47,727
2,577
35,647
80,762
5,437
+15,139
+33,035
+2,860
The closing market price of the Company’s shares as at 27 November 2020, being the last trading day in the period ended 29 November 2020, was
2,218 pence per ordinary share (2019: 1,325 pence), and the share price range applicable during the period was 1,064 pence to 2,895 pence per
ordinary share.
156 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Directors’ Remuneration Report
Continued
Other Remuneration
During the period, the Executive Directors continued their participation in the all-employee Sharesave and SIP schemes. It is expected that in
2021, the Executive Directors will carry on their participation in the schemes.
How does our salary/target total remuneration compare to our peers?
The following tables show the Company’s comparative positioning of both salary and total remuneration against the FTSE 100 (data as at
September 2020). This demonstrates the Remuneration Committee’s positioning of salaries below the market with competitive levels of
remuneration only earned by the Executive Directors if strong performance is delivered.
FTSE 100 Salary positioning
FTSE 100 Total Target Remuneration positioning
CEO
COO
CEO OS
Group GC
and Co Sec
CEO
COO
CEO OS
Group GC
and Co Sec
Top quartile
2nd quartile
3rd quartile
Bottom quartile
Ocado –Salary
Top quartile
2nd quartile
3rd quartile
Bottom quartile
Ocado – Total target
remuneration
Note: Total Target Remuneration figures for Ocado are based on current salaries, target AIP and includes pension contributions. The value of the VCP shown is the IFRS 2 fair value which
has been annualised to reflect a five-year term.
Source of information: Annual Reports of FTSE 100 companies, benchmarking methodology aligned to standard approach taken by the company.
Source of data: PwC Annual Report database.
Additional Context on Executive Director pay
Overall link to remuneration and equity of the Executive Directors
The table below sets out, for each Executive Director, the single figure for 2019/20, the number of shares held by the Director at the beginning
and end of the financial year and the impact on the value of these shares taking the opening price and closing price for the year. It is the
Remuneration Committee’s view that the total exposure of the Executive Directors to the Company is more relevant to their focus on the long-
term sustainable performance of the Company than the single figure of remuneration for a particular year.
2019/20
Shares held
Shares held
Value of
shares at
Value of
shares at
single figure
at start of
at end of
start of year
end of year
Difference
(£’000)
year
year
6,970
3,397
2,631
3,303
23,597,672
21,573,254
1,547,739
3,602,071
194,524
1,607,151
3,641,224
245,149
(£’000)
312,669
20,508
47,727
2,577
(£’000)
478,495
35,647
80,762
5,437
(£’000)
+165,826
+15,139
+33,035
+2,860
The closing market price of the Company’s shares as at 27 November 2020, being the last trading day in the period ended 29 November 2020, was
2,218 pence per ordinary share (2019: 1,325 pence), and the share price range applicable during the period was 1,064 pence to 2,895 pence per
Tim Steiner
Mark Richardson
Neill Abrams
Luke Jensen
ordinary share.
G
O
V
E
R
N
A
N
C
E
Annual Report on Remuneration – 2020
Introduction
This part of the Directors’ Remuneration Report sets out the Directors’ remuneration paid in respect of the 2020 Financial Year. It details the
payments to Directors and the link between Company performance and remuneration of the Chief Executive Officer.
Alignment of the Directors’ Remuneration Policy with the UK Corporate Governance Code
The Remuneration Committee has a strong focus on setting remuneration policy and practices that are designed to support strategy and
promote the long-term success of Ocado. When determining the application of the Directors’ Remuneration Policy, the Committee considered
the following, as set out in the 2018 Code:
• Clarity – remuneration arrangements are transparent and set out in the 2019 Policy. Details of how the 2019 Policy has been applied are
set out in this Report. The VCP has a single total shareholder return performance measure which is fully transparent, while the AIP has
meaningful and robust one-year performance targets which are fully disclosed;
• Simplicity – the VCP has a simple payment mechanism whereby the Executive Directors receive 2.75% of the value above the hurdle
calculated on an annual basis with the shares received at the end of three, four and five years from the start of the VCP period, with a simple
performance condition that rewards absolute returns to shareholders;
• Risk – the combination of reward for short-term strategic decisions and long-term sustainable shareholder returns drives the right behaviours
for the Company and shareholders, while the VCP has caps which mitigate against excessive reward. The Committee can apply judgement
and discretion, while malus and clawback provisions are included in both the AIP and VCP;
• Predictability – the range of possible values under our remuneration structure for Executive Directors are identified and explained at the time
of approving the policy. Award limits and operation of a cap on annual vesting ensure the potential payouts under the VCP are limited both
annually and in terms of number of awards, over the entire life of the VCP;
• Proportionality – there is a clear and direct link between Company performance and individual rewards under the VCP, with the sole
performance measure of total shareholder return. The underpin in the VCP operates such that share awards will only vest if Total Shareholder
Return is 10% Compound Annual Growth Rate or more and if not achieved at the final vesting date, any unvested share awards will lapse – so
there can be no payout for poor performance; and
• Alignment to culture – the Remuneration Committee is satisfied that the VCP incentivises and retains the highly entrepreneurial Chief
Executive Officers and Executive Directors in Ocado. Strategic implementation within Ocado is not linear, with priorities shifting and
developing often in the short-term and the Remuneration Committee has worked hard to formulate a Policy and incentive plans that drive
exceptional, sustainable growth while also rewarding appropriate short-term strategic decisions.
These principles are explained in more detail on page 112 of the 2018 annual report.
Wider Workforce Considerations and Our Approach to Fairness
➔ For more information about How We Engaged With Our Stakeholders, read pages 72 to 81.
Ocado is committed to ensuring our workforce has the diversity of talent and expertise that it needs for the business to continue to grow and
innovate. Our people are critical to us achieving our strategy and the Remuneration Committee is aware that ensuring our people are rewarded
fairly and competitively for their contribution to our success is important for hiring, developing and retaining the highest quality of talent
throughout Ocado.
The Remuneration Policy is designed in line with the remuneration principles outlined on page 148, which reflect the remuneration principles for
the Group. In this section, we provide context to our Executive Director pay by explaining our approach to fairness, as well as the ratio of CEO pay
to that of the wider workforce.
Against the backdrop of a global pandemic, Ocado has seen demand for our product and services matched only by our employees’
commitment to deliver. During the year, the Company made a number of decisions in respect of the wider workforce in relation to Covid-19:
• The Company did not make any redundancies nor were any employees furloughed as a result of Covid-19;
• Our frontline employees were paid bonuses for working during the Covid-19 pandemic. The first payment was a 10% bonus on basic pay for
all hours worked from 23 March to 5 July 2020 and a second further lump sum was paid in January 2021 in relation to the nine months from
March 2020 to the end of the period; and
• Employee wellbeing and safety has long been a priority of the Company, and this year’s “Mind Yourself” wellbeing programme has been
made available to all colleagues to provide information and support for mental, physical, social and financial health.
The UK Corporate Governance Code 2018 (“2018 Code”) widened the remit of the Committee to include determining and agreeing the
framework or broad policy for the remuneration of senior management. During the year, the Committee approved a new remuneration
framework for senior management remuneration arrangements.
156 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
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Continued
Group-Wide Remuneration Report
The Remuneration Committee receives a regular report from management on Group-wide remuneration. This review covers changes to pay,
benefits, pensions and share schemes for all employees in the Group, including the percentage increases in base pay for monthly and hourly
paid employees. The Designated Non-Executive Director (“DNED”) for engagement with the Company’s workforce is Andrew Harrison. The DNED
advocates and directly represents the employee voice during Board discussions. The DNED reports to the Committee on insights from activities
undertaken across the year with regards to DNED responsibilities. For more details of what the DNED has done in 2020, see page 97. The
Remuneration Committee carefully considers the relevant parts of these reports when making decisions on executive remuneration.
Share Schemes
A key remuneration principle for the Group is that share awards be used to recognise and reward good performance, and attract and retain employees.
To help support alignment across the Group and with the interests of shareholders and reward for company performance, all UK employees are
eligible to participate in the Group Share Incentive Plan and Sharesave plan and employees located outside the UK are eligible to participate in
the international equivalent share schemes.
Cascade of Remuneration Through Company
All UK staff in the Company are eligible to participate in the Company’s all-employee share schemes, pension scheme and life assurance
arrangements. In line with the 2018 Code, the 2019 Remuneration Policy ensures that pension contributions for existing and any future Executive
Directors will be aligned with the level currently offered to all employees to ensure greater fairness across the Company.
The remuneration arrangements for employees below Board level reflect the seniority of the role and individual performance. The components
and levels of remuneration for different employees differ from the remuneration framework for the Executive Directors. The Group operates
some tailored bonus and long-term incentive arrangements for certain groups of employees with the aim that they will be aligned to one
framework in the future.
The all employee remuneration report produced by the Company is considered by the Remuneration Committee when making decisions on pay
for both Executive Directors and the wider workforce population.
Employment at Ocado
Our Equal Opportunities Policy is dedicated to creating an environment for our employees that is free from discrimination, harassment and
victimisation, reflecting our commitment to creating a diverse workforce, environment and pay strategy that supports all individuals irrespective
of their gender, age, race, disability, sexual orientation, or religion.
Gender Pay Gap
Ocado is committed to pay parity and has an ambition to ensure we provide equal opportunity for all. We are proud of the work we have done
in Diversity and Inclusion during the period and want to improve retention and attract the best female talent as well as other under-represented
groups.
The Company reports specific information about the difference in average pay for its male and female employees as required by gender pay gap
legislation. The Company’s gender pay gap metrics are submitted by the Group’s main employing entity, Ocado Central Services Limited and
the headline gender pay metric is the difference in the median hourly pay received by men and women. For 2020, this metric remains balanced
as it has done in previous years, although now marginally favours women, with a difference of 0.2%. We are committed to paying fairly and we
are focused on providing an equal opportunity for all employees. We are proud of the work we have done in Diversity and Inclusion to date and
want to improve how we attract and retain the best female talent as well as other under-represented groups. For more information and to view
the full metrics see the Government Gender Pay Gap portal or our Corporate Website, www.ocadogroup.com.
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Back to contents Chief Executive Officer Pay Ratio
The tables below set out the total pay of the Group Chief Executive Officer and UK employee population as a whole at median, lower quartile
and upper quartile using the methodology applied to the single figure of remuneration at the end of the period. We set this out on the
following bases:
G
O
V
E
R
N
A
N
C
E
• The previous year’s 2019 pay ratio, both with and without the one-off GIP payment; and
• This year’s 2020 pay ratio.
The CEO pay ratio, when calculated in line with the Regulations, is higher than in 2019 when compared to the figure without the GIP payment,
which is a more comparable figure. This has mainly been driven by the exceptionally strong share price growth, which resulted in a higher
achievement under the LTIP than in the prior year.
Executive Director pay is more at risk than wider employee pay due to the use of variable pay, resulting in a total pay ratio that can change
significantly from year to year.
All UK staff in the Company are eligible to participate in the Company’s all-employee share schemes, pension scheme and life assurance
arrangements. In line with the 2018 Code, the 2019 Remuneration Policy ensures that pension contributions for existing and any future Executive
Year
2019/20 – reported figures
2018/19 – reported figures – restated
2018/19 – without GIP payment – restated
CEO
Remuneration
(£’000)
25th
percentile
pay ratio
6,970
59,038
4,918
318:1
2,834:1
236:1
Median
pay ratio
312:1
2,619:1
218:1
75th
percentile
pay ratio
244:1
2,349:1
196:1
(1) Option B was selected to calculate CEO pay ratios as a proportionate, sustainable and repeatable approach given the size and structure of the Ocado workforce.
(2) From the information used to calculate the most recent gender pay return at each of the 25th, 50th and 75th percentiles twenty employees were identified as comparators and their
remuneration calculated. The median remuneration for each group of twenty employees is reported as the comparator value for CEO pay ratio calculations. Using the median value
from groups of employees at each of the 25th, 50th and 75th percentiles provides a more representative estimate than if based on an individual employee, reducing the influence of
an outlier value.
(3) The 2018/19 figures were restated to include the actual vested amount for the 2017 LTIP awards.
Chief Executive Officer
UK employees (full time equivalents)
Total pay
and benefits
(£’000)
6,970
Year
2019/20
Total pay and benefits (£’000)
Salary (£’000)
Salary
(£’000)
708
25th
percentile
21.9
Median
22.4
75th
percentile
25th
percentile
28.5
19.7
Median
21.3
75th
percentile
24.5
Directors’ Remuneration Report
Continued
Group-Wide Remuneration Report
The Remuneration Committee receives a regular report from management on Group-wide remuneration. This review covers changes to pay,
benefits, pensions and share schemes for all employees in the Group, including the percentage increases in base pay for monthly and hourly
paid employees. The Designated Non-Executive Director (“DNED”) for engagement with the Company’s workforce is Andrew Harrison. The DNED
advocates and directly represents the employee voice during Board discussions. The DNED reports to the Committee on insights from activities
undertaken across the year with regards to DNED responsibilities. For more details of what the DNED has done in 2020, see page 97. The
Remuneration Committee carefully considers the relevant parts of these reports when making decisions on executive remuneration.
Share Schemes
A key remuneration principle for the Group is that share awards be used to recognise and reward good performance, and attract and retain employees.
To help support alignment across the Group and with the interests of shareholders and reward for company performance, all UK employees are
eligible to participate in the Group Share Incentive Plan and Sharesave plan and employees located outside the UK are eligible to participate in
the international equivalent share schemes.
Cascade of Remuneration Through Company
Directors will be aligned with the level currently offered to all employees to ensure greater fairness across the Company.
The remuneration arrangements for employees below Board level reflect the seniority of the role and individual performance. The components
and levels of remuneration for different employees differ from the remuneration framework for the Executive Directors. The Group operates
some tailored bonus and long-term incentive arrangements for certain groups of employees with the aim that they will be aligned to one
framework in the future.
The all employee remuneration report produced by the Company is considered by the Remuneration Committee when making decisions on pay
for both Executive Directors and the wider workforce population.
Employment at Ocado
Our Equal Opportunities Policy is dedicated to creating an environment for our employees that is free from discrimination, harassment and
victimisation, reflecting our commitment to creating a diverse workforce, environment and pay strategy that supports all individuals irrespective
of their gender, age, race, disability, sexual orientation, or religion.
Gender Pay Gap
groups.
Ocado is committed to pay parity and has an ambition to ensure we provide equal opportunity for all. We are proud of the work we have done
in Diversity and Inclusion during the period and want to improve retention and attract the best female talent as well as other under-represented
The Company reports specific information about the difference in average pay for its male and female employees as required by gender pay gap
legislation. The Company’s gender pay gap metrics are submitted by the Group’s main employing entity, Ocado Central Services Limited and
the headline gender pay metric is the difference in the median hourly pay received by men and women. For 2020, this metric remains balanced
as it has done in previous years, although now marginally favours women, with a difference of 0.2%. We are committed to paying fairly and we
are focused on providing an equal opportunity for all employees. We are proud of the work we have done in Diversity and Inclusion to date and
want to improve how we attract and retain the best female talent as well as other under-represented groups. For more information and to view
the full metrics see the Government Gender Pay Gap portal or our Corporate Website, www.ocadogroup.com.
158 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Directors’ Remuneration Report
Continued
Chief Executive Officer Historical Remuneration
The table below summarises in respect of the Chief Executive Officer the single figure of total remuneration, the AIP or bonus plan payment as
a percentage of maximum opportunity, and the long-term incentives as a percentage of maximum opportunity for the current period and the
previous nine financial years.
Chief Executive Officer
Total Remuneration
(£’000)
AIP or Bonus Payment
as a Percentage of
Maximum Target
Achievement
(% of maximum)
Value of AIP or Bonus
Payment
(£’000)
Long-Term Incentives
as a Percentage of
Maximum Opportunity
(% of maximum)
6,970
59,038
3,996
1,337
1,141
5,098
6,483
1,011
483
987
94.2
57.0
70.5
41.8
43.6
65.0
56.0
98.3
29.7
0
1,865
1,074
539
310
315
459
385
528
104
0
79.9
94.5
50.0
33.4
43.2
90.8
100
0
0
100
Year
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
(1) The Chief Executive Officer total remuneration figures prior to the 2013 period represent the previously presented audited information with necessary adjustments for amounts
required to be included in the single total figure of remuneration (such as pension amounts) under the new regulations (which first applied to the 2013 financial period).
(2) From 2010, the Company had the JSOS as the main form of long-term incentive plan. In 2011, the first tranche of JSOS shares vested in that period. For the 2012 and 2013 financial
years, the JSOS interests did not have any value at the vesting date. In 2014, the final tranche of JSOS shares vested in that period (the value of such remuneration is noted in the single
total figure of remuneration above). The LTIP was implemented in 2013 and the first award had a performance period ending in 2015 and a vesting date in 2016. The GIP and SIP were
both implemented in 2014, but had vesting dates in 2019 and 2017 respectively. As of last year, the VCP is now the main form of long-term incentive plan.
(3) The total remuneration amounts shown above are the amounts restated to account for the final vesting of each of the LTIP awards. For an explanation of this restatement in respect of
the 2020 period see note 1 of the total remuneration table on page 163.
(4) The 2017 LTIP vested at 46.1% of maximum and the GIP vested at 100% of maximum. The 2019 period Long-Term Incentive value is a weighted average of the 2017 LTIP and the GIP.
(5) The 2018 LTIP vested at 79.9% of maximum. There was no vesting in the first year of the VCP therefore, the 2020 Long-Term Incentive value is the same as the 2018 LTIP vesting percentage.
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Continued
The table below summarises in respect of the Chief Executive Officer the single figure of total remuneration, the AIP or bonus plan payment as
a percentage of maximum opportunity, and the long-term incentives as a percentage of maximum opportunity for the current period and the
previous nine financial years.
AIP or Bonus Payment
as a Percentage of
Long-Term Incentives
Total Remuneration
Achievement
(% of maximum)
Payment
Maximum Opportunity
(£’000)
(% of maximum)
(£’000)
6,970
59,038
3,996
1,337
1,141
5,098
6,483
1,011
483
987
94.2
57.0
70.5
41.8
43.6
65.0
56.0
98.3
29.7
0
1,865
1,074
539
310
315
459
385
528
104
0
79.9
94.5
50.0
33.4
43.2
90.8
100
0
0
100
Year
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
(1) The Chief Executive Officer total remuneration figures prior to the 2013 period represent the previously presented audited information with necessary adjustments for amounts
required to be included in the single total figure of remuneration (such as pension amounts) under the new regulations (which first applied to the 2013 financial period).
(2) From 2010, the Company had the JSOS as the main form of long-term incentive plan. In 2011, the first tranche of JSOS shares vested in that period. For the 2012 and 2013 financial
years, the JSOS interests did not have any value at the vesting date. In 2014, the final tranche of JSOS shares vested in that period (the value of such remuneration is noted in the single
total figure of remuneration above). The LTIP was implemented in 2013 and the first award had a performance period ending in 2015 and a vesting date in 2016. The GIP and SIP were
both implemented in 2014, but had vesting dates in 2019 and 2017 respectively. As of last year, the VCP is now the main form of long-term incentive plan.
(3) The total remuneration amounts shown above are the amounts restated to account for the final vesting of each of the LTIP awards. For an explanation of this restatement in respect of
the 2020 period see note 1 of the total remuneration table on page 163.
(4) The 2017 LTIP vested at 46.1% of maximum and the GIP vested at 100% of maximum. The 2019 period Long-Term Incentive value is a weighted average of the 2017 LTIP and the GIP.
(5) The 2018 LTIP vested at 79.9% of maximum. There was no vesting in the first year of the VCP therefore, the 2020 Long-Term Incentive value is the same as the 2018 LTIP vesting percentage.
Chief Executive Officer Historical Remuneration
Director Percentage Change Versus Employee Group
Chief Executive Officer
Maximum Target
Value of AIP or Bonus
as a Percentage of
Year-on-year increase in pay for Directors compares to the average employee increase:
The table below shows how the percentage increase in each Director’s salary/fees, taxable benefits and annual incentive plan between 2019 and
2020 compares with the average percentage increase in each of those components of pay for the UK-based employees of the Group as a whole.
Disclosure for all Directors in addition to the CEO has been added this year in line with the new requirements under the EU Shareholder Rights
Directive II and over time a five-year comparison will be built up. Ocado Group plc has no employees and therefore a subset of the Group’s
employees, UK employees has been used.
G
O
V
E
R
N
A
N
C
E
Director
Tim Steiner
Mark Richardson
Neill Abrams
Luke Jensen
Lord Stuart Rose
Jörn Rausing
Andrew Harrison
Emma Lloyd
Julie Southern
John Martin
Michael Sherman
Claudia Arney
Average percentage increase for UK employees
(1) Most of the Group’s employees are not entitled to earn an annual bonus payment as part of their remuneration.
(2) The change in salary data for the Group’s employees is on a per capita basis.
(3) The change in salary for the Executive Directors is based on the base salary review set out on page 164.
(4) The change in taxable benefits for the Executive Directors is as set out on page 163.
(5) UK employees have been chosen as the majority of our workforce is UK-based.
2019 to 2020
Taxable
benefits
(33%)
–
–
(29%)
–
–
–
–
–
–
–
–
AIP
74%
82%
72%
68%
–
–
–
–
–
–
–
–
5%
100%
Salary/Fees
7%
7%
12%
7%
12%
10%
21%
15%
6%
12%
N/A
12%
3%
(6) John Martin and Claudia Arney were appointed on 1 June 2019 and 1 September 2019 respectively and therefore were paid a partial fee in the prior year. The percentage change
applied to their fee in year has therefore been shown.
(7) Michael Sherman was appointed as a Non-Executive Director on 5 October 2020 so no fee was payable in the prior year.
The Committee monitors the changes year-on-year between our Director pay and the average employee increase, shown in the table. There
is a difference between the percentage increases for Directors and employees, the explanation for which is set out on page 164 for Executive
Directors and page 169 for Non-Executive Directors.
160 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Continued
Total Shareholder Return
The following graph shows the Total Shareholder Return (TSR) performance of an investment of £100 in Ocado shares compared with an
equivalent investment in the FTSE 100 and FTSE 250 Indices over the past ten years. These indices were chosen as Ocado has historically been
a constituent of the FTSE 250 Index, and entered the FTSE 100 in 2018. Both represent a broad equity market index against which the Company
can be compared historically. The Company has not paid a dividend since its Admission so the Company’s TSR does not factor in dividends
reinvested in shares.
0
0
1
£
f
o
t
n
e
m
t
s
e
v
n
I
n
a
f
o
e
c
n
a
m
r
o
f
r
e
P
R
S
T
1,600
1,400
1,200
1,000
800
600
400
200
0
Ocado TSR
FTSE 100 TSR
FTSE 250 TSR
26 Nov 2010 25 Nov 2011 30 Nov 2012 29 Nov 2013 28 Nov 2014 27 Nov 2015 25 Nov 2016 01 Dec 2017
30 Nov 2018 29 Nov 2019 27 Nov 2020
Relative Importance of Spend on Pay
The following table shows the Company’s profit and total Group-wide expenditure on pay for all employees for the period and last financial year.
The Company has not paid a dividend or carried out a share buyback in the current year nor previous year. The information shown in this table is:
• Loss – Group loss before tax as set out in the Consolidated Income Statement on page 199.
• Total gross employee pay – total gross employment costs for the Group (including pension, variable pay, share-based payments and social
security) as set out in Note 2.5 to the Consolidated Financial Statements.
Loss before tax
Total gross employee pay
29 November
2020
(£m)
1 December
2019
(£m)
(44.0)
622.0
(214.5)
476.8
162 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Directors’ Remuneration Report
Continued
Total Shareholder Return
The following graph shows the Total Shareholder Return (TSR) performance of an investment of £100 in Ocado shares compared with an
equivalent investment in the FTSE 100 and FTSE 250 Indices over the past ten years. These indices were chosen as Ocado has historically been
a constituent of the FTSE 250 Index, and entered the FTSE 100 in 2018. Both represent a broad equity market index against which the Company
can be compared historically. The Company has not paid a dividend since its Admission so the Company’s TSR does not factor in dividends
reinvested in shares.
Ocado TSR
FTSE 100 TSR
FTSE 250 TSR
0
0
1
£
f
o
t
n
e
m
t
s
e
v
n
I
n
a
f
o
e
c
n
a
m
r
o
f
r
e
P
R
S
T
1,600
1,400
1,200
1,000
800
600
400
200
0
26 Nov 2010 25 Nov 2011 30 Nov 2012 29 Nov 2013 28 Nov 2014 27 Nov 2015 25 Nov 2016 01 Dec 2017
30 Nov 2018 29 Nov 2019 27 Nov 2020
Relative Importance of Spend on Pay
The following table shows the Company’s profit and total Group-wide expenditure on pay for all employees for the period and last financial year.
The Company has not paid a dividend or carried out a share buyback in the current year nor previous year. The information shown in this table is:
• Loss – Group loss before tax as set out in the Consolidated Income Statement on page 199.
• Total gross employee pay – total gross employment costs for the Group (including pension, variable pay, share-based payments and social
security) as set out in Note 2.5 to the Consolidated Financial Statements.
Loss before tax
Total gross employee pay
29 November
1 December
2020
(£m)
(44.0)
622.0
2019
(£m)
(214.5)
476.8
Executive Directors
Total Remuneration (Audited)
The total remuneration for the period for each of the Executive Directors is set out in the table below.
Tim Steiner
Mark Richardson
Neill Abrams
Luke Jensen
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
708
12
50
770
1,865
4,299
–
–
36
–
–
661
18
49
728
1,074
2,992
54,120
–
19
105
–
433
1
36
470
406
1
33
440
433
1
32
466
904
497
791
1,992
1,387
1,338
–
–
36
–
–
13,530
–
19
105
–
–
–
31
–
–
2019
£’000
386
1
31
418
461
932
–
–
16
105
–
2020
£’000
433
12
25
470
886
1,911
–
–
36
–
–
2019
£’000
406
17
19
442
528
1,367
6,359
–
–
–
–
Salary
Taxable Benefits
Pensions
Total Fixed Pay
Variable Pay
AIP
LTIP
GIP
ESOS and
2014 ESOS
SIP
Sharesave
VCP
G
O
V
E
R
N
A
N
C
E
2019
£’000
2,265
38
165
Duncan
Tatton-Brown
Total
2020
£’000
2019
£’000
2020
£’000
421
1
36
458
406
2,428
1
33
27
179
440
2,634
2,468
879
510
5,325
1,979
1,387
11,519
3,070
8,065
–
13,530
–
87,539
126
36
–
–
–
19
105
–
126
175
–
–
–
73
420
–
Total Variable Pay
6,200
58,310
2,932
15,538
2,160
1,514
2,833
8,254
3,020
15,551
17,145
99,167
Recovery of Sums
Paid
Total
Remuneration
–
–
–
–
–
–
–
–
–
–
–
–
6,970
59,038
3,402
15,978
2,626
1,932
3,303
8,696
3,478
15,991
19,779 101,635
(1) The value of LTIP awards for 2017 included in the column for the 2019 financial year has been restated to show the actual vested amount (based on the vesting of the award on 15
March 2020 at a price of 1433 pence per share). The actual vested amount is £838,000 higher than the estimated vested amount stated in the 2019 annual report of £7,227,000 due to
growth in the share price. The estimated vested amount was based on the three-month average share price from 2 September 2019 to 29 November 2019 of 1283.92 pence per share.
No dividends were paid.
(2) The value of LTIP awards for 2018 included in the column for the 2020 financial year has been based on 79.9% vesting and estimated using the three-month average share price from
31 August 2020 to 27 November 2020 of 2450 pence per share, as these awards are not capable of vesting until after the end of the period, on 18 March 2021. This value assumes no
dividends will be payable and that the Executive Director will not be required to pay an amount to acquire the conditional shares, being the nominal price of 2 pence per share. These
estimated figures will be restated in next year’s annual report.
(3) Under the Share Incentive Plan, awards of Free Shares and Matching Shares became unrestricted during the period. These awards are explained on page 169 of this report.
(4) Taxable benefits includes one or more of: private healthcare; life assurance; private use of a company driver; or a car allowance.
(5) The value of the GIP included in the column for the 2019 financial year displays the face value of the nil-cost options at the time of vesting on 8 May 2019, at a price of 1,353 pence per share.
(6) 50% of the AIP payment is deferred in shares for a period of three years, with an additional two year holding period. There are no performance conditions attached to the deferred element.
(7) No figures are stated for the VCP to show that there is no expected value for the 2020 financial year. The first point at which any banked awards may vest under the VCP will be in March
2022, subject to the minimum TSR underpin being met.
(8) Due to an administrative error, an over-payment of pension benefits was made to Luke Jensen in the 2018 financial year, therefore there was a downward adjustment in the 2019
financial year to rectify the error.
(9) Duncan Tatton-Brown retired from the Board with effect from 22 November 2020.
162 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Directors’ Remuneration Report
Continued
An explanation of each element of Total Remuneration paid in the table on page 163 is set out in the following section.
Base Salary (Audited)
Executive Director salaries were reviewed in FY19 following the significant growth of the Company and its entry into the FTSE 100 Index in
June 2018 to ensure that they accurately reflected the enhanced scale and complexity of the Executive Directors’ roles. The review focused on
many factors including business performance, total remuneration, market data for comparable organisations and roles as well as individual
performance. The Committee concluded that the significant growth in scale and complexity of the business warranted increases to the Executive
Directors’ salaries. Furthermore, it was determined that the increases would be awarded in two steps, with the second increase subject to
continued strong individual performance and the Company remaining in the FTSE 100. The resulting salaries (after both increases) position the
Executive Directors around the lower quartile of FTSE 100 equivalent roles. The second increase was awarded on 1 April 2020.
Director
Tim Steiner
Mark Richardson
Neill Abrams
Luke Jensen
Duncan Tatton-Brown
Salary 2020
(£)
720,000
440,000
440,000
440,000
440,000
Salary 2019
(£) Effective from
685,000
01/04/2020
420,000
01/04/2020
420,000
01/04/2020
420,000
01/04/2020
420,000
01/04/2020
(1) Duncan Tatton-Brown retired from the Board with effect from 22 November 2020.
The changes to base salary were made in line with the Directors’ Remuneration Policy. The increase in base pay received by the Executive
Directors in April 2020 was 5% (rounded accordingly) to reflect the significant growth in the Company over the past two years.
Taxable Benefits (Audited)
The Executive Directors received taxable benefits during the period, notably private medical insurance and travel insurance. The Executive
Directors also received other benefits, which are not taxable including income protection insurance, life assurance and Group-wide employee
benefits, such as an employee discount. The taxable benefits shown in the Total Remuneration Table on page 163 include the private use of a
company driver for Tim Steiner, and a car allowance for Luke Jensen. Non-business use of the chauffeur is tracked and is shown as a taxable
benefit in the total remuneration table to the extent it was used for that purpose. These benefit arrangements were made in line with the
Directors’ Remuneration Policy which allows the Company to provide a broad range of employee benefits.
Pensions (Audited)
The Company made pension contributions on behalf of the Executive Directors to the defined contribution Group personal pension scheme.
The employer contributions to the pension scheme in respect of each Executive Director are made in line with the Group personal pension
scheme for all employees. In order to ensure continued alignment between Executive Director and wider workforce pension contributions, all
Executive Directors received a contribution rate of 7% of salary from April 2020. Previously, the contributions made on behalf of the Executive
Directors were up to 8% of base salary. These contributions were made in line with the Directors’ Remuneration Policy and the wider workforce.
Pension contributions can be made to the Executive Directors (and any other employee) as a cash allowance where the Executive Director (or
employee) has reached either the HMRC annual tax free limit or HMRC lifetime allowance limit for pension contributions as provided for in
the Directors’ Remuneration Policy. In accordance with the policy, Tim Steiner, Mark Richardson, Luke Jensen and Neill Abrams have elected
to receive part of their pension contributions as an equivalent cash allowance. Duncan Tatton-Brown elected to receive all of his pension
contribution as cash in line with the Company policy.
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O
V
E
R
N
A
N
C
E
Continued
Base Salary (Audited)
Director
Tim Steiner
Mark Richardson
Neill Abrams
Luke Jensen
Duncan Tatton-Brown
Executive Director salaries were reviewed in FY19 following the significant growth of the Company and its entry into the FTSE 100 Index in
June 2018 to ensure that they accurately reflected the enhanced scale and complexity of the Executive Directors’ roles. The review focused on
many factors including business performance, total remuneration, market data for comparable organisations and roles as well as individual
performance. The Committee concluded that the significant growth in scale and complexity of the business warranted increases to the Executive
Directors’ salaries. Furthermore, it was determined that the increases would be awarded in two steps, with the second increase subject to
continued strong individual performance and the Company remaining in the FTSE 100. The resulting salaries (after both increases) position the
Executive Directors around the lower quartile of FTSE 100 equivalent roles. The second increase was awarded on 1 April 2020.
Salary 2020
Salary 2019
(£)
720,000
440,000
440,000
440,000
440,000
(£) Effective from
685,000
01/04/2020
420,000
01/04/2020
420,000
01/04/2020
420,000
01/04/2020
420,000
01/04/2020
(1) Duncan Tatton-Brown retired from the Board with effect from 22 November 2020.
The changes to base salary were made in line with the Directors’ Remuneration Policy. The increase in base pay received by the Executive
Directors in April 2020 was 5% (rounded accordingly) to reflect the significant growth in the Company over the past two years.
Taxable Benefits (Audited)
The Executive Directors received taxable benefits during the period, notably private medical insurance and travel insurance. The Executive
Directors also received other benefits, which are not taxable including income protection insurance, life assurance and Group-wide employee
benefits, such as an employee discount. The taxable benefits shown in the Total Remuneration Table on page 163 include the private use of a
company driver for Tim Steiner, and a car allowance for Luke Jensen. Non-business use of the chauffeur is tracked and is shown as a taxable
benefit in the total remuneration table to the extent it was used for that purpose. These benefit arrangements were made in line with the
Directors’ Remuneration Policy which allows the Company to provide a broad range of employee benefits.
Pensions (Audited)
The Company made pension contributions on behalf of the Executive Directors to the defined contribution Group personal pension scheme.
The employer contributions to the pension scheme in respect of each Executive Director are made in line with the Group personal pension
scheme for all employees. In order to ensure continued alignment between Executive Director and wider workforce pension contributions, all
Executive Directors received a contribution rate of 7% of salary from April 2020. Previously, the contributions made on behalf of the Executive
Directors were up to 8% of base salary. These contributions were made in line with the Directors’ Remuneration Policy and the wider workforce.
Pension contributions can be made to the Executive Directors (and any other employee) as a cash allowance where the Executive Director (or
employee) has reached either the HMRC annual tax free limit or HMRC lifetime allowance limit for pension contributions as provided for in
the Directors’ Remuneration Policy. In accordance with the policy, Tim Steiner, Mark Richardson, Luke Jensen and Neill Abrams have elected
to receive part of their pension contributions as an equivalent cash allowance. Duncan Tatton-Brown elected to receive all of his pension
contribution as cash in line with the Company policy.
Directors’ Remuneration Report
An explanation of each element of Total Remuneration paid in the table on page 163 is set out in the following section.
Value Creation Plan (VCP) (Audited)
VCP awards were granted in May 2019. The award gives Executive Directors the opportunity to share in a proportion of the total value created for
shareholders above a 10% Total Shareholder Return (“TSR”) hurdle (“Threshold TSR”) at the end of each year (“Measurement Date”) over a five-
year period. At each Measurement Date, up to 2.75% of the value created above the hurdle will be “banked” in the form of share awards, which
will be released in line with the vesting schedule.
The initial price for the VCP is £13.97 (the average price over the 30-day period prior to the 2019 annual general meeting). The Executive Directors
will receive the right at the end of each year of the performance period to share awards with a value representing the level of the Company’s total
shareholder return (“Measurement TSR”) above the Threshold TSR at the relevant Measurement Date.
The Threshold TSR or hurdle which has to be exceeded before share awards can be earned by the Executive Directors is the higher of:
•
•
the highest previous Measurement TSR; and
the Initial Price (£13.97) compounded by 10% p.a.
If the value created at the end of a given year does not exceed the Threshold TSR, nothing will accrue in that year under the VCP.
The vesting schedule provides that 50% of the cumulative number of share awards will vest following the third Measurement Date, 50% of the
cumulative balance following the fourth Measurement Date, with 100% of the cumulative number of share awards vesting following the fifth
Measurement Date. At each vesting date, vesting of awards is subject to:
(1) A minimum TSR underpin of 10% Compound Annual Growth Rate being maintained.
(2) Any shares vesting cannot be sold prior to the fifth anniversary.
(3) An annual cap on vesting of £20 million for the CEO and £5 million for other Executive Directors.
(4) Remuneration Committee discretion (as set out in the Remuneration Policy) to adjust the formulaic vesting outcome if it is not a fair and
accurate reflection of performance.
Measurement Dates
The first and second VCP Measurement Dates are 12 March 2020 and 11 March 2021, 30 days after the publication of the FY19 and FY20 financial
results respectively.
Due to the capital raising that was undertaken by the Company in June 2020, a new Tranche of award under the VCP was created. The newly issued
equity (Tranche 2) was created at the date that the equity was raised and its initial price is the share price at which the equity was issued (£19.60).
Tranche 2 must be grown at the same growth rates (i.e. 10% p.a.) at each corresponding Measurement Date as the initial equity (Tranche 1).
VCP participants will be entitled to the same share of the new equity as the initial equity, above a Threshold Total Shareholder Return.
Performance will be tested for Tranche 2 at the same dates as Tranche 1. This approach ensures that any vesting under the VCP is fully
attributable to management’s performance in growing the value of shareholder funds provided and for delivering value to existing shareholders.
The Remuneration Committee reviewed an estimate of the outcome under the second Measurement Date, which will occur on 11 March 2021.
The following information has not been audited. The following table sets out the number of nil-cost options that may be granted to Executive
Directors at the first and second Measurement Dates under the VCP. At the time of writing the second Measurement Date has not yet occurred
and therefore the Year 2 figures are estimates based on a 30-day average share price for the 30 days up to and including 26 January 2021.
It should be noted that the nil-cost options in the table below have only been conditionally allocated to Executive Directors at this point in time. On the
third anniversary of the start of the plan, the 10% CAGR TSR underpin has to be met before any vesting will occur and the Remuneration Committee
retains discretion to vary the level of vesting where it is considered that the formulaic vesting would not be a fair and accurate reflection of performance.
Unaudited
Measurement Date
Threshold TSR (per share)
Measurement TSR (Measurement Price)
Aggregate number of Nil-Cost Options (NCOs) granted to Executive Directors
Tim Steiner (NCOs granted)
Mark Richardson (NCOs granted)
Neill Abrams (NCOs granted)
Luke Jensen (NCOs granted)
Duncan Tatton-Brown (NCOs granted)
Year 1
12 March 2020
£10.6 billion
(£15.16)
£7.9 billion
(£11.23)
0
0
0
0
0
0
Year 2 (estimated)
Tranche 1
Tranche 2
11 March 2021
Cumulative
total
–
£11.94 billion
(£16.69)
£17.95 billion
(£25.10)
4,199,951
2,399,972
599,993
599,993
599,993
-
£0.71 billion
(£21.06)
£0.84 billion
(£25.10)
94,614
54,066
13,516
13,516
13,516
-
–
–
4,294,565
2,454,038
613,509
613,509
613,509
-
(1) The Measurement Price is the 30-day average closing share price for the 30 days following the announcement of the results for the relevant financial year. This is £11.23 for the first Measurement Date.
For the purpose of providing a VCP performance update for the second Measurement Date, we have used the 30 day average closing share price for 30 days up to 26 January 2021, which is £25.10.
(2) The Threshold TSR for Tranche 1 is the Initial Price compounded by 10% p.a. between 1 May 2019 and 11 March 2021, being the start of the VCP performance period, and the second
Measurement Date. The Threshold TSR for Tranche 2 is the Placing Price (£19.60) compounded by 10% p.a. between 10 June 2020 and 11 March 2021, being the date of the capital
raising and the second Measurement Date.
(3) Duncan Tatton-Brown retired from the Board with effect from 22 November 2020. His awards lapsed on his retirement from the Company.
164 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Continued
Annual Incentive Plan (AIP) (Audited)
The 2020 AIP was based on performance against the targets and weightings set out below at the end of the financial year. The Chief Executive
Officer had a maximum bonus opportunity of 275% of salary, the Group General Counsel and Company Secretary had a maximum bonus
opportunity of 190% of salary and the other Executive Directors had a maximum opportunity of 215% of salary.
Weighting
of each
condition
Performance
targets required
Actual
Performance
Percentage
of maximum
performance
achieved
Annual bonus value achieved (£’000)
Tim
Steiner
Mark
Richardson
Neill
Abrams
Luke
Jensen
Duncan
Tatton-
Brown
30% Threshold
30 modules
47.7 modules
27.4%
542.5
259.2
229.1
259.2
254.2
Maximum
50 modules
20% Threshold
Maximum
£66m
£109m
£125.7m
20%
396.0
189.2
167.2
189.2
185.5
Performance
conditions
New International
Solutions
commitments
Retail segment
EBITDA
Erith Capacity
20% Threshold
4.032m eaches
per week
5.670m eaches
per week
20%
396.0
189.2
167.2
189.2
185.5
Maximum
4.928m eaches
per week
OSP Features
10% Threshold
70% growth
306% growth
10%
198.0
94.6
83.6
94.6
92.8
Individual
Objectives
Total
Maximum
85% growth
20%
See next page
16.2%–18.2%
332.6
172.2
143.8
153.3
160.5
100%
1865.1
904.4
790.9
885.5
878.5
(1) The Remuneration Committee has agreed “threshold” and “maximum” conditions that must be achieved. An award will not vest unless a “threshold” level of the performance
condition has been achieved.
(2) There is no threshold or maximum target set for the individual objectives. Each objective is weighted and scored to provide a total score out of 20. Performance may range from zero to 20.
(3) The applicable salary used for calculating the bonus payment under the rules of the 2020 AIP is the applicable base salary on the date of payment.
(4) Duncan Tatton-Brown retired from the Board with effect from 22 November 2020. He was treated as a good leaver and his award granted under the 2020 AIP has been pro-rated to his
retirement date. At least 50% of the AIP achieved will be deferred into shares for three years with a further two-year holding period on vesting, in line with the Executive Directors.
The performance under the 2020 AIP was measured against five performance targets over the 2020 financial year. In approving a bonus payment
to the Executive Directors based on 93.6 to 95.6% achievement, the Committee carefully considered and discussed the formulaic outcome of
each of the AIP measures, assessing the extent to which the measures reflected the underlying performance of the business. The Committee
considered both business factors and broader considerations outside of Ocado, as noted on page 157. The Committee took into account, when
forming its judgement about whether the performance outcomes had been met, a number of relevant changes during the period including the
impact of Covid-19 and the decision taken by the Board to support Kroger with the roll out of the in-store fulfilment solution for its stores. The
in-store fulfilment capacity was appropriately measured and factored into the calculation used in determining the achievement against the
measure for new international solutions commitments. The Committee considered it appropriate to consider commitments by international
Solutions clients for both in-store fulfilment and CFC modules, to reflect the broadening of the Solutions platform offering to meet expectations
of Solutions clients during the period. The Committee considers that this replicates the original intention of the CFC modules measure.
Performance achieved for the international Solutions commitments target was 27.4%.
Through the course of the pandemic, the Committee had been informed on the progress made by the business against Retail segment EBITDA,
and the impact was apparent. The Committee felt it appropriate to adjust the targets upwards to reflect the change in consumer behaviour so as to
ensure the performance measure remained stretching for management. The final outcome still exceeded the maximum level set and resulted in a
20% achievement. The Retail EBITDA performance target excludes IFRS16 and is therefore not consistent with Retail EBITDA as reported elsewhere in the
Annual Report. This measure is used by the Remuneration Committee to assess performance for the 2020 AIP only and is not considered an Alternative
Performance Measure.
Covid-19 materially impacted the customer demand profile for the Retail business for much of the period, which meant that it was most
appropriate for the Committee to look at the delivery of eaches from Erith when judging the achievement of the Erith capacity performance
measure. The eaches numbers were considered by the Committee to more fairly reflect the huge growth in volumes of throughput in the Erith
customer fulfilment centre than measuring capacity using orders per week, given that customer basket sizes had increased markedly during the
pandemic. The Committee considers the substitute capacity measure to be equivalent in challenge to the original measure. The actual eaches
volumes achieved at the Erith customer fulfilment centre exceeded the maximum performance target resulting in 20% achievement.
The OSP Features performance target refers to the development of OSP technology capabilities required for providing the platform to Solutions
clients during the period. It is the required percentage increase in capabilities delivered relative to the 2019 financial year. The period saw a
306% increase in capabilities, exceeding the maximum performance target.
In agreeing to pay the bonus, the Committee applied the rules, which stipulate that 50% of the AIP achieved in the year will be deferred into shares for
three years (subject to a two-year holding period on vesting). Up to 50% of any bonus will be paid in cash (up to a maximum of 100% of salary) and at
least 50% will be deferred into shares.
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Continued
Annual Incentive Plan (AIP) (Audited)
The 2020 AIP was based on performance against the targets and weightings set out below at the end of the financial year. The Chief Executive
Officer had a maximum bonus opportunity of 275% of salary, the Group General Counsel and Company Secretary had a maximum bonus
opportunity of 190% of salary and the other Executive Directors had a maximum opportunity of 215% of salary.
Weighting
of each
condition
Percentage
of maximum
Annual bonus value achieved (£’000)
Performance
Actual
performance
Tim
Mark
Neill
Luke
targets required
Performance
achieved
Steiner
Richardson
Abrams
Jensen
Duncan
Tatton-
Brown
New International
30% Threshold
30 modules
47.7 modules
27.4%
542.5
259.2
229.1
259.2
254.2
Retail segment
20% Threshold
£125.7m
20%
396.0
189.2
167.2
189.2
185.5
Erith Capacity
20% Threshold
4.032m eaches
5.670m eaches
20%
396.0
189.2
167.2
189.2
185.5
per week
per week
Performance
conditions
Solutions
commitments
EBITDA
Maximum
50 modules
Maximum
£66m
£109m
Maximum
4.928m eaches
per week
Maximum
85% growth
OSP Features
10% Threshold
70% growth
306% growth
10%
198.0
94.6
83.6
94.6
92.8
20%
See next page
16.2%–18.2%
332.6
172.2
143.8
153.3
160.5
100%
1865.1
904.4
790.9
885.5
878.5
(1) The Remuneration Committee has agreed “threshold” and “maximum” conditions that must be achieved. An award will not vest unless a “threshold” level of the performance
Individual
Objectives
Total
condition has been achieved.
(3) The applicable salary used for calculating the bonus payment under the rules of the 2020 AIP is the applicable base salary on the date of payment.
(4) Duncan Tatton-Brown retired from the Board with effect from 22 November 2020. He was treated as a good leaver and his award granted under the 2020 AIP has been pro-rated to his
retirement date. At least 50% of the AIP achieved will be deferred into shares for three years with a further two-year holding period on vesting, in line with the Executive Directors.
The performance under the 2020 AIP was measured against five performance targets over the 2020 financial year. In approving a bonus payment
to the Executive Directors based on 93.6 to 95.6% achievement, the Committee carefully considered and discussed the formulaic outcome of
each of the AIP measures, assessing the extent to which the measures reflected the underlying performance of the business. The Committee
forming its judgement about whether the performance outcomes had been met, a number of relevant changes during the period including the
impact of Covid-19 and the decision taken by the Board to support Kroger with the roll out of the in-store fulfilment solution for its stores. The
in-store fulfilment capacity was appropriately measured and factored into the calculation used in determining the achievement against the
measure for new international solutions commitments. The Committee considered it appropriate to consider commitments by international
Solutions clients for both in-store fulfilment and CFC modules, to reflect the broadening of the Solutions platform offering to meet expectations
of Solutions clients during the period. The Committee considers that this replicates the original intention of the CFC modules measure.
Performance achieved for the international Solutions commitments target was 27.4%.
Through the course of the pandemic, the Committee had been informed on the progress made by the business against Retail segment EBITDA,
and the impact was apparent. The Committee felt it appropriate to adjust the targets upwards to reflect the change in consumer behaviour so as to
ensure the performance measure remained stretching for management. The final outcome still exceeded the maximum level set and resulted in a
20% achievement. The Retail EBITDA performance target excludes IFRS16 and is therefore not consistent with Retail EBITDA as reported elsewhere in the
Annual Report. This measure is used by the Remuneration Committee to assess performance for the 2020 AIP only and is not considered an Alternative
Performance Measure.
Covid-19 materially impacted the customer demand profile for the Retail business for much of the period, which meant that it was most
appropriate for the Committee to look at the delivery of eaches from Erith when judging the achievement of the Erith capacity performance
measure. The eaches numbers were considered by the Committee to more fairly reflect the huge growth in volumes of throughput in the Erith
customer fulfilment centre than measuring capacity using orders per week, given that customer basket sizes had increased markedly during the
pandemic. The Committee considers the substitute capacity measure to be equivalent in challenge to the original measure. The actual eaches
volumes achieved at the Erith customer fulfilment centre exceeded the maximum performance target resulting in 20% achievement.
The OSP Features performance target refers to the development of OSP technology capabilities required for providing the platform to Solutions
clients during the period. It is the required percentage increase in capabilities delivered relative to the 2019 financial year. The period saw a
306% increase in capabilities, exceeding the maximum performance target.
In agreeing to pay the bonus, the Committee applied the rules, which stipulate that 50% of the AIP achieved in the year will be deferred into shares for
three years (subject to a two-year holding period on vesting). Up to 50% of any bonus will be paid in cash (up to a maximum of 100% of salary) and at
least 50% will be deferred into shares.
Individual Objectives for 2020 AIP
The Remuneration Committee reviewed the performance of each Executive Director against the measurable performance metrics and based
their judgement on a scoring report by the Chief Executive Officer and the Chairman. In reviewing the outcomes of the objectives, the impact of
Covid-19 was taken into consideration by the CEO and the Chairman, and by the Committee.
G
O
V
E
R
N
A
N
C
E
Objective
Achievement
Tim Steiner
• Grow the international Ocado Solutions client base and
build the foundations for future revenue growth
• Launch Sobeys and Casino CFCs in set timeframe
• Deliver Ocado Retail sales and EBITDA
• Successful delivery against the technology and
innovation strategy
• Continued discussions with multiple retailers globally,
impacted by travel restrictions due to Covid-19.
• Both launches successful.
• Strong sales and EBITDA results.
• Strategic focus on scale due to Covid-19 pandemic.
• Deliver the organisational transformation
• Organisational transformation underway.
Overall performance against individual strategic objectives (maximum opportunity: 20%)
Mark Richardson
• Launch of Sobeys and Casino CFCs in set timeframe
• Grow Erith order capacity
• Create Implementation team capable of meeting OSP
roll-out challenge
• Both launches successful.
• Demand and capacity grew very strongly this year, due to Covid-19.
• Team appointed and strong performance delivered this year.
• Create Client Services team capable of supporting live
• Client Services team appointed and successfully supporting
and future OSP clients
client operations globally.
(2) There is no threshold or maximum target set for the individual objectives. Each objective is weighted and scored to provide a total score out of 20. Performance may range from zero to 20.
Overall performance against individual strategic objectives (maximum opportunity: 20%)
considered both business factors and broader considerations outside of Ocado, as noted on page 157. The Committee took into account, when
• Continue transformation of Legal, Governance and IP function • Transformation continued with strengthening of team.
Overall performance against individual strategic objectives (maximum opportunity: 20%)
Luke Jensen
• Grow the international Ocado Solutions client base
• Continued discussions with multiple retailers globally,
impacted by travel restrictions due to Covid-19.
Neill Abrams
• Support the execution of signed international Ocado
Solutions deals
• Solutions contracts supported effectively.
• Support CEO in continued transformation of Ocado
• Multinational legal team in place and growth of IP portfolio.
Group into a technology business
%
achievement
84%
91%
86%
• Build the foundations for future revenue growth of Ocado
• Strong growth in commitments from Solutions Partners.
Solutions
• Develop Ocado Solutions/International infrastructure to
• Product and Commercial teams functioning effectively.
support future growth
• Build profile and reputation of Ocado Solutions
• Discussions held with multiple retailers globally, interviewed by
several high profile publications and spoke at 2 major congresses.
Overall performance against individual strategic objectives (maximum opportunity: 20%)
81%
Duncan Tatton-Brown
• Review and enhance operation of the broader Finance
•
team including the Transformation team
Identify and complete suitable new venture investments
and ensure optimal outcome for existing investments with
limited support from the core business
• Reduce the long term ownership cost of the solution
• Ensure suitable funding structure remains in place to
allow the Group to achieve its strategic objectives
• Team strengthened, significant improvements in controls.
• Good performance of ORL and partnership with M&S
maintained. New investments in Haddington Dynamics Inc.
and Kindred Systems Inc.
• Strategic focus on scale due to Covid-19 pandemic.
• Well executed and significant successful fundraisings.
Overall performance against individual strategic objectives (maximum opportunity: 20%)
166 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
86.5%
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Back to contents Directors’ Remuneration Report
Continued
Long-Term Incentive Plan (LTIP) (Audited)
The three-year performance period for the 2018 LTIP awards expired at the end of the financial year. The Remuneration Committee reviewed the
performance against the five performance conditions for the 2020 Financial Year and has recommended overall vesting of 79.9%.
The value of the 2018 LTIP awards in the total remuneration table and below is estimated based on the average Company share price for the final three
months of the period, being 2450 pence per share. The 2018 LTIP award was made on 1 March 2018 at a price of £5.4093 per share. The expected vesting
date of the 2018 LTIP award is 18 March 2021. Subject to the continued satisfaction of the award conditions, final vesting will be determined.
Performance
conditions
Weighting
of each
condition
Performance targets
required
Actual
Performance
Percentage
of maximum
performance
achieved
Estimated LTIP value (£’000)
Tim
Steiner
Mark
Richardson
Neill
Abrams
Luke
Jensen
Retail Revenue
25% Threshold
£1,755m
£2,189m
25%
1,345
Maximum
£2,012m
Retail EBIT
25% Threshold
Maximum
£42.1m
£72.4m
£71.1m
24.2%
1,302
12.5% Threshold
160 UPH
171 UPH
6.3%
339
Maximum
192 UPH
624
603
157
419
405
106
598
579
150
Duncan
Tatton-
Brown
619
600
156
12.5% Threshold See below
See below
0%
–
–
–
–
–
Maximum See below
25% Threshold
Maximum
£25m
£62m
£60.8m
24.4%
1,313
608
408
584
604
100%
79.9%
4,299
1,992
1,338
1,911
1,979
Platform
Operational
Efficiency (i)
Platform Capital
Efficiency (ii)
Solutions
Revenue
Total
(1) The Remuneration Committee has agreed “threshold” and “maximum” conditions that must be achieved. An award will not vest unless a “threshold” level of the performance
condition has been achieved. At “threshold” performance for a financial performance measure, 5% of the total award will vest and 25% vesting will occur for achieving or exceeding
“maximum” performance for a condition. A straight-line sliding scale applies in relation to the intermediate points between the “threshold” and “maximum”.
(2) Details of the number of conditional shares awarded to each Director for the 2018 LTIP awards are shown in the table on page 174.
(3) Duncan Tatton-Brown retired from the Board with effect from 22 November 2020. He was treated as a good leaver and his award has been prorated to his retirement date. The shares
are expected to vest in March 2021 and will be subject to a two-year holding period from the vesting date, in line with the Executive Directors.
The Committee carefully considered and discussed the formulaic outcome of each of the LTIP measures, assessing the extent to which the
measures reflected the underlying performance of the business for the 2020 financial year. The Committee considered both business factors
and broader considerations, as noted on page 157. In judging performance against the Retail EBIT measure, the Committee was mindful of the
changes that occurred to the financial reporting segments for the Group since the setting of the 2018 LTIP targets three years ago. These new
reporting segments came about because of the change to the structure in the business brought about by the Retail joint venture with M&S. The
Committee carefully examined the financial information presented and the reconciliation between the financial data for the Retail business
segment as it was defined in 2018 (and used for calculating the original measure) and the current financial information for the business post the
creation of the Retail joint venture (and used for determining the final performance outcome under the LTIP award).
As noted on page 215, revenue for the Retail business was £2,189 million for the financial yea which exceeded the maximum performance target.
The Platform Efficiency target for the 2020 financial year is made up of two separate targets, each comprising 12.5 per cent, namely the Platform
Operational Efficiency target and the Platform Capital Efficiency target. The Platform Operational Efficiency target was based on performance of
the Erith CFC and exceeded the threshold of 160 UPH. The actual performance of the Erith customer fulfilment centre in the 2020 financial year
was 171 UPH resulting in 6.3% achievement. The Platform Capital Efficiency target for the 2020 financial year did not exceed the threshold which
resulted in no achievement against this target. The Platform Capital Efficiency target is a measure of the equipment costs required to achieve a
certain level of throughput at CFCs measured in millions of pound per module. The specific performance target showing the pound amount for
Platform Capital Efficiency has not been disclosed for the 2020 financial year on the basis that the Remuneration Committee considers that these
targets are commercially sensitive to the Company and if disclosed could damage the Company’s commercial interests, in particular, commercial
discussions with current and potential Solutions clients. The actual performance achieved for Platform Capital Efficiency fell short of the threshold.
The Committee believes however, that incentivising management to achieve improved capital efficiency is in the interests of the business and
shareholders and accordingly supports such performance targets for the Group’s management incentives.
The Ocado Solutions Revenue target for the 2020 financial year of £60.8m almost met the maximum performance target. The Solutions revenue
concerns the value of sales of the platform during the period. The target and actual performance numbers ignore the impact of the IFRS 15
assumptions regarding fee recognition.
168 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
Duncan
Tatton-
Brown
619
600
156
598
579
150
624
603
157
419
405
106
The three-year performance period for the 2018 LTIP awards expired at the end of the financial year. The Remuneration Committee reviewed the
performance against the five performance conditions for the 2020 Financial Year and has recommended overall vesting of 79.9%.
The value of the 2018 LTIP awards in the total remuneration table and below is estimated based on the average Company share price for the final three
months of the period, being 2450 pence per share. The 2018 LTIP award was made on 1 March 2018 at a price of £5.4093 per share. The expected vesting
date of the 2018 LTIP award is 18 March 2021. Subject to the continued satisfaction of the award conditions, final vesting will be determined.
Weighting
Percentage
of maximum
Estimated LTIP value (£’000)
Performance
of each
Performance targets
Actual
performance
Tim
Mark
Neill
Luke
conditions
condition
required
Performance
achieved
Steiner
Richardson
Abrams
Jensen
Retail Revenue
25% Threshold
£1,755m
£2,189m
25%
1,345
Platform Capital
12.5% Threshold See below
See below
0%
–
–
–
–
–
Retail EBIT
25% Threshold
£71.1m
24.2%
1,302
12.5% Threshold
160 UPH
171 UPH
6.3%
339
Maximum
£2,012m
Maximum
£42.1m
£72.4m
Maximum
192 UPH
Maximum See below
25% Threshold
Maximum
£25m
£62m
Platform
Operational
Efficiency (i)
Efficiency (ii)
Solutions
Revenue
Total
£60.8m
24.4%
1,313
608
408
584
604
100%
79.9%
4,299
1,992
1,338
1,911
1,979
(1) The Remuneration Committee has agreed “threshold” and “maximum” conditions that must be achieved. An award will not vest unless a “threshold” level of the performance
condition has been achieved. At “threshold” performance for a financial performance measure, 5% of the total award will vest and 25% vesting will occur for achieving or exceeding
“maximum” performance for a condition. A straight-line sliding scale applies in relation to the intermediate points between the “threshold” and “maximum”.
(2) Details of the number of conditional shares awarded to each Director for the 2018 LTIP awards are shown in the table on page 174.
(3) Duncan Tatton-Brown retired from the Board with effect from 22 November 2020. He was treated as a good leaver and his award has been prorated to his retirement date. The shares
are expected to vest in March 2021 and will be subject to a two-year holding period from the vesting date, in line with the Executive Directors.
The Committee carefully considered and discussed the formulaic outcome of each of the LTIP measures, assessing the extent to which the
measures reflected the underlying performance of the business for the 2020 financial year. The Committee considered both business factors
and broader considerations, as noted on page 157. In judging performance against the Retail EBIT measure, the Committee was mindful of the
changes that occurred to the financial reporting segments for the Group since the setting of the 2018 LTIP targets three years ago. These new
reporting segments came about because of the change to the structure in the business brought about by the Retail joint venture with M&S. The
Committee carefully examined the financial information presented and the reconciliation between the financial data for the Retail business
segment as it was defined in 2018 (and used for calculating the original measure) and the current financial information for the business post the
creation of the Retail joint venture (and used for determining the final performance outcome under the LTIP award).
As noted on page 215, revenue for the Retail business was £2,189 million for the financial yea which exceeded the maximum performance target.
The Platform Efficiency target for the 2020 financial year is made up of two separate targets, each comprising 12.5 per cent, namely the Platform
Operational Efficiency target and the Platform Capital Efficiency target. The Platform Operational Efficiency target was based on performance of
the Erith CFC and exceeded the threshold of 160 UPH. The actual performance of the Erith customer fulfilment centre in the 2020 financial year
was 171 UPH resulting in 6.3% achievement. The Platform Capital Efficiency target for the 2020 financial year did not exceed the threshold which
resulted in no achievement against this target. The Platform Capital Efficiency target is a measure of the equipment costs required to achieve a
certain level of throughput at CFCs measured in millions of pound per module. The specific performance target showing the pound amount for
Platform Capital Efficiency has not been disclosed for the 2020 financial year on the basis that the Remuneration Committee considers that these
targets are commercially sensitive to the Company and if disclosed could damage the Company’s commercial interests, in particular, commercial
discussions with current and potential Solutions clients. The actual performance achieved for Platform Capital Efficiency fell short of the threshold.
The Committee believes however, that incentivising management to achieve improved capital efficiency is in the interests of the business and
shareholders and accordingly supports such performance targets for the Group’s management incentives.
The Ocado Solutions Revenue target for the 2020 financial year of £60.8m almost met the maximum performance target. The Solutions revenue
concerns the value of sales of the platform during the period. The target and actual performance numbers ignore the impact of the IFRS 15
assumptions regarding fee recognition.
Long-Term Incentive Plan (LTIP) (Audited)
Share Incentive Plan (SIP)
The 2017 award of Free Shares made under the Share Incentive Plan (the “SIP”) became unrestricted during the period on 21 September 2020.
Certain Matching Shares also became unrestricted during the period. Free Shares and Matching Shares awarded under the SIP are subject to a
three-year forfeiture period starting from the date of grant. This means that if an Executive Director ceases to be employed by the Group during
the three-year period, the Free Shares and Matching Shares will be forfeited. Partnership Shares purchased under the SIP are not included in
the total remuneration table as these are purchased by the Executive Directors from their salary, rather than granted by the Company as an
element of remuneration. Only the value of Free Shares and Matching Shares that became unrestricted during the period are shown in the total
remuneration table. The value shown is the value of the shares on the date that they became unrestricted. Unrestricted shares can be held in
trust under the SIP for as long as the Executive Director remains an employee of the Company.
Recovery of Sums Paid (Audited)
No sums paid or payable to the Executive Directors were sought to be recovered by the Group.
Non-Executive Directors
Total fees (Audited)
The fees paid to the Non-Executive Directors and the Chairman during the period are set out in the remuneration table below. The Non-
Executive Directors received no remuneration from the Group other than their annual fee.
Fees
Taxable
Benefits
Pension
Entitlements
Annual
Bonus
Long-term
Incentives
Recovery of
Sums Paid
Total
Remuneration
G
O
V
E
R
N
A
N
C
E
Non-Executive
Director
Lord Rose
Jörn Rausing
Andrew Harrison
Emma Lloyd
Julie Southern
John Martin
Michael Sherman
Claudia Arney
Ruth Anderson
Doug McCallum
Total
2020
£’000
300
67
104
70
75
70
11
70
–
–
2019
£’000
267
61
86
61
71
33
–
16
54
28
767
677
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2019
£’000
267
61
86
61
71
33
–
16
54
28
300
67
104
70
75
70
11
70
–
–
767
677
(1) Michael Sherman joined the Board with effect from 5 October 2020.
(2) Rick Haythornthwaite joined the Board with effect from 1 January 2021 and therefore did not receive any fees in the period.
(3) Claudia Arney retired from the Board with effect from 25 December 2020.
(4) Due to an administrative error, a Non-Executive Director was overpaid £12,583 in the prior period. This amount was repaid during the period.
The remuneration arrangements for the Non-Executive Directors (except the Chairman) were reviewed by the Executive Directors and the
Chairman during the period. The base fees for Non-Executive Directors were increased to £68,000 (2019: £65,000); whilst the fee for chairing a
Committee was increased to £18,000 (2019: £16,000). The fee for the role of Senior Independent Director fee of £15,000 was increased to £17,000
during the period. A fee of £5,000 was introduced for being a member of the Audit Committee or Remuneration Committee. The Chairman does
not receive a fee for his role as Nomination Committee Chairman.
The Chairman’s fee was reviewed by the Remuneration Committee and was unchanged from £300,000 (2019: £300,000). Upon his appointment
as Chairman at the AGM in May 2021, Rick Haythornthwaite will receive an annual fee of £375,000.
Similar in approach to the increases applied to Executive Director salaries, the Executive Directors and the Chairman identified the need for
a staged approach to increasing fees for the Non-Executive Directors. Changes to Non-Executive Director fees were therefore agreed to take
effect from 1 April 2021. The base fees for Non-Executive Directors will increase to £74,000; the fee for chairing a Committee will increase to
£20,000; the fee for the role of Senior Independent Director fee will increase to £20,000 and the fee for being a member of the Audit Committee
or Remuneration Committee will increase to £7,500. The Chairman will continue to not receive a fee for his role as Nomination Committee
Chairman. Fee adjustments were made in 2020 and 2021 in line with the 2019 Policy and recognise the significantly greater size and complexity
of the Non-Executive Director role and to position fees around the market median.
168 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
169
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Continued
Other Remuneration for the Non-Executive Directors (Audited)
In addition to the fees, the Non-Executive Directors are entitled to a staff shopping discount in line with the Group’s employees.
The Company has obtained a written confirmation from each Non-Executive Director that they have not received any other items in the nature of
remuneration from the Group, other than those already referred to in this report.
Other Remuneration Disclosures
Executive Directors’ Service Contracts
Each of the Executive Directors has a service contract with the Group. The principal terms of these contracts are as follows:
Notice period
Effective date
of contract
From
Company
From
Director
23 June 2010
12 months
6 months
27 February 2012
12 months
6 months
6 months
6 months
Executive Director
Position
Tim Steiner
Chief Executive Officer
Mark Richardson
Chief Operating Officer
Neill Abrams
Luke Jensen
Group General Counsel and Company Secretary
23 June 2010
12 months
CEO Ocado Solutions
30 January 2017
12 months
The contracts provide for payment in lieu of notice of one times basic salary only (and do not include other fixed elements of pay, which are
permitted by the policy).
The appointment of Stephen Daintith was announced on 27 August 2020. Mr Daintith’s service contract will have a notice period of 12 months
from both the Company and Mr Daintith.
Non-Executive Directors’ Letters of Appointment
The Chairman and the Non-Executive Directors do not have service contracts and were appointed by letter of appointment for an initial period
of three years, subject to annual reappointment at the annual general meeting and usually for a maximum of nine years. Copies of the letters of
appointment and the service contracts of the Directors are available for inspection at the Company’s registered office.
Director
Lord Rose
Andrew Harrison
Emma Lloyd
Jörn Rausing
Julie Southern
John Martin
Michael Sherman
Claudia Arney
Date of Original
Appointment
11 March 2013
1 March 2016
1 December 2016
13 March 2003
1 September 2018
1 June 2019
5 October 2020
1 September 2019
Date of
Reappointment
1 May 2019
1 May 2019
1 May 2019
1 May 2019
1 May 2019
N/A
N/A
N/A
Notice Period
6 Months
1 Month
1 Month
1 Month
1 Month
1 Month
1 Month
1 Month
Expiry of
Nine Year Term
March 2022
March 2025
December 2025
N/A
September 2027
June 2028
October 2029
September 2028
(1) Claudia Arney retired from the Board with effect from 25 December 2020.
170 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents G
O
V
E
R
N
A
N
C
E
Directors’ Remuneration Report
Continued
In addition to the fees, the Non-Executive Directors are entitled to a staff shopping discount in line with the Group’s employees.
The Company has obtained a written confirmation from each Non-Executive Director that they have not received any other items in the nature of
remuneration from the Group, other than those already referred to in this report.
Each of the Executive Directors has a service contract with the Group. The principal terms of these contracts are as follows:
Other Remuneration Disclosures
Executive Directors’ Service Contracts
Executive Director
Position
Tim Steiner
Chief Executive Officer
Mark Richardson
Chief Operating Officer
Notice period
Effective date
From
From
of contract
Company
Director
23 June 2010
12 months
6 months
27 February 2012
12 months
6 months
6 months
6 months
Neill Abrams
Luke Jensen
Group General Counsel and Company Secretary
23 June 2010
12 months
CEO Ocado Solutions
30 January 2017
12 months
The contracts provide for payment in lieu of notice of one times basic salary only (and do not include other fixed elements of pay, which are
permitted by the policy).
The appointment of Stephen Daintith was announced on 27 August 2020. Mr Daintith’s service contract will have a notice period of 12 months
from both the Company and Mr Daintith.
Non-Executive Directors’ Letters of Appointment
The Chairman and the Non-Executive Directors do not have service contracts and were appointed by letter of appointment for an initial period
of three years, subject to annual reappointment at the annual general meeting and usually for a maximum of nine years. Copies of the letters of
appointment and the service contracts of the Directors are available for inspection at the Company’s registered office.
Director
Lord Rose
Andrew Harrison
Emma Lloyd
Jörn Rausing
Julie Southern
John Martin
Michael Sherman
Claudia Arney
Reappointment
Notice Period
Nine Year Term
Date of Original
Appointment
11 March 2013
1 March 2016
1 December 2016
13 March 2003
1 September 2018
1 June 2019
5 October 2020
1 September 2019
Date of
1 May 2019
1 May 2019
1 May 2019
1 May 2019
1 May 2019
N/A
N/A
N/A
Expiry of
March 2022
March 2025
December 2025
N/A
September 2027
June 2028
October 2029
September 2028
6 Months
1 Month
1 Month
1 Month
1 Month
1 Month
1 Month
1 Month
(1) Claudia Arney retired from the Board with effect from 25 December 2020.
Other Remuneration for the Non-Executive Directors (Audited)
Director Retirement Arrangements and Payments for Loss of Office (Audited)
It was determined in accordance with the Directors’ Remuneration Policy that the arrangements set out below should apply in relation to the
remuneration on retirement of Duncan Tatton-Brown and Claudia Arney.
Duncan Tatton-Brown retired from the Board with effect from 22 November 2020. Following his retirement as a Director of Ocado Group plc, Mr
Tatton-Brown remains as a non-executive director on the boards of Ocado Retail Limited, Jones Food Company Limited and Karakuri Ltd, for
which he will receive compensation.
Element of
Remuneration
Duncan Tatton-Brown
Remuneration
Payments
Treatment
All outstanding salary, benefits and pension entitlements were paid to Duncan Tatton-Brown up to 22 November 2020,
in accordance with the terms of his service contract. No payments are expected after the date of retirement for Duncan
Tatton-Brown.
Payment for
Loss of Office
No payment for loss of office or other remuneration payment was made or is expected to be made to Duncan
Tatton-Brown.
Incentive Schemes
In line with Ocado’s policy for loss of office in force at that time, and the rules of the Annual Incentive Plan, the LTIP and
the VCP, the Remuneration Committee determined that Duncan Tatton-Brown is a good leaver. Therefore, the following
arrangements should apply in relation to Duncan Tatton-Brown’s outstanding incentive awards:
2019 Annual
Incentive Plan
2020 Annual
Incentive Plan
Mr Tatton-Brown was awarded a payment of £510,000 pursuant to the 2019 Annual Incentive
Plan, as set out on pages 121-122 of the Company’s 2019 Annual Report. 50% of the AIP
achieved was deferred into shares for three years with a further two-year holding period on
vesting. Mr Tatton-Brown retains his 17,632 deferred 2019 AIP shares, which will vest in line
with the original vesting schedule.
As a good leaver the award granted under the 2020 Annual Incentive Plan will be prorated
to his retirement date. The performance period for the AIP will end on 1 December 2020. At
least 50% of the AIP achieved will be deferred into shares for three years with a further two-
year holding period on vesting.
2018 Long Term
Incentive Plan
As a good leaver the award will be prorated to his retirement date. The performance period
for the LTIP will end on 1 December 2020 and the shares are expected to vest in March 2021.
There is a two-year holding period from the vesting date.
2019 Value
Creation Plan
Share Incentive Plan
Free Shares
Share Incentive Plan
Partnership and
Matching Shares
Mr Tatton-Brown’s VCP awards lapsed on retirement from the Company.
Free Share awards are subject to a three-year forfeiture period from date of grant and
therefore those that are yet to meet that three-year forfeiture period lapsed on retirement
from the Company.
Matching Shares are subject to a three-year forfeiture period from date of grant and
therefore those that are yet to meet that three-year forfeiture period lapsed on retirement
from the Company. Partnership Shares are purchased from salary rather than granted as an
element of remuneration and are not subject to forfeiture.
Duncan Tatton-Brown has a post-cessation shareholding requirement of 300% of salary for 12 months from leaving
the Company.
All outstanding fees up to 25 December 2020 were paid to Claudia Arney in accordance with the terms of her letter of
appointment. No payments are expected after the date of retirement for Claudia Arney.
No payment for loss of office or other remuneration payment was made or is expected to be made to Claudia Arney.
Post-cessation
Shareholding
Requirement
Claudia Arney
Remuneration
Payments
Payment for
Loss of Office
Share Schemes
At the time of her retirement, Claudia Arney did not participate in a Company share scheme.
170 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Directors’ Remuneration Report
Continued
Director Appointment Arrangements (Audited)
As announced on 8 September 2020, Michael Sherman was appointed to the Board as a Non-Executive Director with effect from 5 October 2020.
Michael Sherman’s remuneration is in line with the Directors’ Remuneration Policy. On appointment, Michael Sherman’s basic annual fee was
£68,000, which was in line with the other Non-Executive Directors. Michael Sherman will not receive any other benefits or payments, in line with
the Directors’ Remuneration Policy.
As announced on 18 December 2020, Rick Haythornthwaite was appointed to the Board as a Non-Executive Director and Chairman-elect with
effect from 1 January 2021. Rick Haythornthwaite’s remuneration is in line with the Directors’ Remuneration Policy. On appointment as a Non-
Executive Director, Rick Haythornthwaite’s basic annual fee was £68,000. Mr Haythornthwaite will assume the role of Chairman of the Company
following the AGM in May 2021. Upon his appointment as Chairman, Rick Haythornthwaite will receive an annual fee of £375,000 in place of his
Non-Executive Director fee.
The appointment of Stephen Daintith as Group CFO was announced on 27 August 2020. In line with the Directors’ Remuneration Policy, Mr
Daintith will receive an annual salary of £550,000 and a pension allowance of 7% of salary, in line with the wider workforce in the UK. He will be
eligible to participate in Ocado’s existing annual incentive plan up to a maximum of 215% of salary and the Ocado Value Creation Plan.
Payments to Past Directors (Audited)
None.
External Remuneration for Executive Directors
As at the date of this Annual Report:
•
•
•
In addition to his role as Executive Director of the Company, Neill Abrams is an alternate non-executive director of Mr Price Group Limited, a
JSE Top 40 company listed on the Johannesburg Stock Exchange. Neill does not receive any remuneration for carrying out that role.
In addition to his role as Executive Director of the Company, Mark Richardson is a non-executive director of Paneltex Limited. This role does
not involve any remuneration paid or payable to Mark.
In addition to his role as Executive Director of the Company, Luke Jensen is a Non-Executive director of Hana Group SAS, registered in France,
and ASOS plc, an AIM listed company. During the financial year, he received Board attendance fees of €30,000 for his role in Hana Group and
£50,000 for his role at ASOS.
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Continued
Director Appointment Arrangements (Audited)
Director Shareholdings (Audited)
As announced on 8 September 2020, Michael Sherman was appointed to the Board as a Non-Executive Director with effect from 5 October 2020.
Michael Sherman’s remuneration is in line with the Directors’ Remuneration Policy. On appointment, Michael Sherman’s basic annual fee was
£68,000, which was in line with the other Non-Executive Directors. Michael Sherman will not receive any other benefits or payments, in line with
the Directors’ Remuneration Policy.
The table below shows the beneficial interests in the Company’s shares of Directors serving at the end of the period, and their connected
persons, as shareholders and as discretionary beneficiaries under trusts. The table also shows current compliance with the Director
shareholding requirements in the Directors’ Remuneration Policy as at the date of this Annual Report. All Directors comply with the Director
shareholding requirements.
G
O
V
E
R
N
A
N
C
E
As announced on 18 December 2020, Rick Haythornthwaite was appointed to the Board as a Non-Executive Director and Chairman-elect with
effect from 1 January 2021. Rick Haythornthwaite’s remuneration is in line with the Directors’ Remuneration Policy. On appointment as a Non-
Executive Director, Rick Haythornthwaite’s basic annual fee was £68,000. Mr Haythornthwaite will assume the role of Chairman of the Company
following the AGM in May 2021. Upon his appointment as Chairman, Rick Haythornthwaite will receive an annual fee of £375,000 in place of his
Non-Executive Director fee.
The appointment of Stephen Daintith as Group CFO was announced on 27 August 2020. In line with the Directors’ Remuneration Policy, Mr
Daintith will receive an annual salary of £550,000 and a pension allowance of 7% of salary, in line with the wider workforce in the UK. He will be
eligible to participate in Ocado’s existing annual incentive plan up to a maximum of 215% of salary and the Ocado Value Creation Plan.
Payments to Past Directors (Audited)
None.
External Remuneration for Executive Directors
As at the date of this Annual Report:
•
In addition to his role as Executive Director of the Company, Neill Abrams is an alternate non-executive director of Mr Price Group Limited, a
JSE Top 40 company listed on the Johannesburg Stock Exchange. Neill does not receive any remuneration for carrying out that role.
•
In addition to his role as Executive Director of the Company, Mark Richardson is a non-executive director of Paneltex Limited. This role does
not involve any remuneration paid or payable to Mark.
•
In addition to his role as Executive Director of the Company, Luke Jensen is a Non-Executive director of Hana Group SAS, registered in France,
and ASOS plc, an AIM listed company. During the financial year, he received Board attendance fees of €30,000 for his role in Hana Group and
£50,000 for his role at ASOS.
Ordinary Shares
of 2 pence each held at
29 November 2020
Ordinary Shares
of 2 pence each held at
1 December 2019
Direct
Holding
Indirect
Holding
Direct
Holding
Indirect
Holding
Minimum
shareholding
requirement
(% of Base
Salary
or Fee)
Met
minimum
shareholding
requirement?
Name
Executive Directors
Tim Steiner
21,564,826
8,428
23,589,652
Mark Richardson
1,584,813
22,338
1,534,755
8,020
12,984
Neill Abrams
Luke Jensen
Non-Executive
Directors
Lord Rose
Jörn Rausing
Andrew Harrison
Emma Lloyd
Julie Southern
John Martin
Michael Sherman
2,073,426 1,567,798
2,336,180
1,265,891
164,150
80,999
117,314
77,210
452,284
–
602,284
–
– 69,015,602
–
69,015,602
18,166
17,300
3,779
–
–
–
–
–
––
––
–
18,166
17,300
3,779
–
–
5,230
–
–
–
100
100
–
Claudia Arney
5,230
Basis for compliance
Indirect and direct shareholdings
Indirect and direct shareholdings
Indirect and direct shareholdings
Indirect and direct shareholdings
Indirect and direct shareholdings
Indirect shareholdings
Direct shareholdings
Direct shareholdings
N/A
N/A
N/A
N/A
400
300
300
300
100
100
100
100
100
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
N/A
N/A
N/A
100
N/A
(1) No Director had an interest in any of the Company’s subsidiaries at the beginning or end of the period.
(2) There have been no changes in the Directors’ interests in shares issued or options granted by the Company and its subsidiaries between the end of the period and the date of this
Annual Report, except shares held pursuant to the SIP, as set out on page 175.
(3) On 13 May 2016, in respect of various contracts for the transfer of shares (as described on pages 235 and 238 of the Prospectus), Tim Steiner delayed the date on which completion
under the contracts for transfer would take place to 30 June 2019, or such later date as the parties may agree. On 2 June 2019, Tim Steiner agreed again to extend the completion
dates for the contracts to future dates. The first contract completed on 30 June 2020.
(4) Julie Southern, John Martin and Michael Sherman were appointed on 1 September 2018, 1 June 2019 and 5 October 2020 respectively. Non-Executive Directors are expected to hold
shares equivalent to one year’s annual fee. This holding can be built up over three years from appointment. Therefore, while Julie Southern, John Martin, and Michael Sherman do not
hold the requisite number of shares to comply with the shareholding requirement currently, they are compliant with the policy.
(5) Rick Haythornthwaite joined the Board on 1 January 2021 after the period end and therefore is not included in the table.
(6) The assessment for shareholding compliance is based on the current annualised salary or fee (as set out in the total remuneration tables) which applied on 26 January 2021 (being the
last practicable date prior to the publication of this Annual Report) and the higher of the original purchase price(s) or the current market price (being 2787 pence per share on
26 January 2021), of the relevant shareholdings.
(7) Where applicable, the above indirect holdings include SIP Partnership and Free Shares held under the SIP, which are held in trust.
(8) The indirect holding for Neill Abrams includes holdings by Caryn Abrams (wife of Neill Abrams), who holds 79,609 (2019: 78,109) ordinary shares, is a discretionary beneficiary of a trust
holding 74,100 (2019:74,100) ordinary shares, and is the trustee of three trusts each holding 100,000 ordinary shares for the benefit of each of their three children. In addition, Daniella
Abrams (daughter of Neill Abrams) holds 1,363 (2019: 1,363) ordinary shares, Mia Abrams (daughter of Neill Abrams) holds 2,143 (2019: 2,143) ordinary shares and Joshua Abrams (son
of Neill Abrams) holds 2,143 (2019: 2,143) ordinary shares.
(9) The indirect holding for Luke Jensen includes a holding by Sandrine Jensen (wife of Luke Jensen) who holds 77,329 (2019: 74,670) ordinary shares.
(10) Jörn Rausing is a beneficiary of the Apple III Trust, which owns Apple III Limited (together, “Apple”), a significant (approximately 10%) shareholder of the Company. Jörn is not a
representative of Apple, nor does Apple have any right to appoint a Director to the Board of the Company.
172 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
Director Interests in Share Schemes (Audited)
Long-term Incentive Plan (LTIP) (Audited)
At the end of the period, the Executive Directors’ total LTIP awards were as follows:
Director
Tim Steiner
Mark Richardson
Neill Abrams
Luke Jensen
Type of Interest
Conditional shares
Conditional shares
Conditional shares
Conditional shares
Date of
Grant
01/03/18
01/03/18
01/03/18
01/03/18
Basis on
which
Award is
made
(% of
Salary)
200
150
120
150
Number of
Shares
Face Value
of Award
(£)
End of
Performance
Period
Expected
Vesting Date
219,621
101,769
68,326
97,609
1,187,996
550,499
369,596
527,999
03/12/20
03/12/20
03/12/20
03/12/20
18/03/21
18/03/21
18/03/21
18/03/21
(1) The 2018 LTIP award was awarded based on a price of 540.93 pence per share, being the volume weighted average price of the Company’s ordinary shares on the three trading days
prior to 1 March 2018.
Vested: The 2017 LTIP awards had a vesting date of 19 March 2020 for a three-year performance period that ended with the 2018/19 Financial
Year. As explained in the 2019 Annual Report, the Remuneration Committee reviewed the performance against the award’s four equally weighted
performance conditions, which were Retail Revenue, Adjusted Retail EBT*, Platform Operational Efficiency and Solutions Revenue for the
2018/19 Financial Year. Achievement against the performance targets was 46.1%.
The performance period for the 2018 LTIP awards finished in the year, although these awards are not capable of vesting until 18 March 2021.
More detail can be found on page 168.
* This measure is used by the Remuneration Committee to assess management performance for the LTIP only. It is not considered an Alternative Performance Measure.
Value Creation Plan (VCP) (Audited)
The VCP was approved by shareholders on 1 May 2019. The scheme aligns the remuneration of Executive Directors with the value generated for
shareholders.
No nil-cost options were awarded to Executive Directors in respect of the first VCP Measurement Date on 12 March 2020. This is because the
Measurement Price (£11.23) was below the Threshold Total Shareholder Return (£15.16). The number of the nil-cost options that accrue at the
second Measurement Date in March 2021 will be disclosed in our 2021 Annual Report. Please see page 153 of the Summary Policy table for
Executive Directors for further details on the operation of the VCP.
Executive Share Option Scheme and 2014 Executive Share Option Scheme (Audited)
At the end of the period, the Executive Directors held options under the ESOS or 2014 ESOS as follows:
Director
Luke Jensen
Type of
Interest
Date of
Grant
Number
of Share
Options
Exercise
Price (£)
Face Value
of Grant
(£)
Exercise Period
Option
15/03/17
11,709
2.562
29,998
15/03/20 – 14/03/27
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Continued
Director Interests in Share Schemes (Audited)
Long-term Incentive Plan (LTIP) (Audited)
At the end of the period, the Executive Directors’ total LTIP awards were as follows:
Director
Tim Steiner
Mark Richardson
Neill Abrams
Luke Jensen
prior to 1 March 2018.
Type of Interest
Conditional shares
Conditional shares
Conditional shares
Conditional shares
Date of
Grant
01/03/18
01/03/18
01/03/18
01/03/18
Face Value
End of
Number of
of Award
Performance
Expected
Shares
219,621
101,769
68,326
97,609
(£)
Period
Vesting Date
1,187,996
550,499
369,596
527,999
03/12/20
03/12/20
03/12/20
03/12/20
18/03/21
18/03/21
18/03/21
18/03/21
Basis on
which
Award is
made
(% of
Salary)
200
150
120
150
(1) The 2018 LTIP award was awarded based on a price of 540.93 pence per share, being the volume weighted average price of the Company’s ordinary shares on the three trading days
Vested: The 2017 LTIP awards had a vesting date of 19 March 2020 for a three-year performance period that ended with the 2018/19 Financial
Year. As explained in the 2019 Annual Report, the Remuneration Committee reviewed the performance against the award’s four equally weighted
performance conditions, which were Retail Revenue, Adjusted Retail EBT*, Platform Operational Efficiency and Solutions Revenue for the
2018/19 Financial Year. Achievement against the performance targets was 46.1%.
The performance period for the 2018 LTIP awards finished in the year, although these awards are not capable of vesting until 18 March 2021.
* This measure is used by the Remuneration Committee to assess management performance for the LTIP only. It is not considered an Alternative Performance Measure.
More detail can be found on page 168.
Value Creation Plan (VCP) (Audited)
shareholders.
The VCP was approved by shareholders on 1 May 2019. The scheme aligns the remuneration of Executive Directors with the value generated for
No nil-cost options were awarded to Executive Directors in respect of the first VCP Measurement Date on 12 March 2020. This is because the
Measurement Price (£11.23) was below the Threshold Total Shareholder Return (£15.16). The number of the nil-cost options that accrue at the
second Measurement Date in March 2021 will be disclosed in our 2021 Annual Report. Please see page 153 of the Summary Policy table for
Executive Directors for further details on the operation of the VCP.
Executive Share Option Scheme and 2014 Executive Share Option Scheme (Audited)
At the end of the period, the Executive Directors held options under the ESOS or 2014 ESOS as follows:
Director
Luke Jensen
Type of
Interest
Date of
Grant
Number
of Share
Options
Exercise
Price (£)
Face Value
of Grant
(£)
Exercise Period
Option
15/03/17
11,709
2.562
29,998
15/03/20 – 14/03/27
G
O
V
E
R
N
A
N
C
E
Share Incentive Plan (Audited)
At the end of the period, interests in shares held by the Executive Directors under the SIP were as follows:
Partnership
Shares
Acquired in
the Year
Matching
Shares
Awarded in
the Year
Free Shares
Awarded in
the Year
107
107
107
107
15
15
15
15
126
126
126
126
Director
Tim Steiner
Mark Richardson
Neill Abrams
Luke Jensen
Total Face
Value of Free
Shares and
Matching
Shares
Awarded in
the Year
(£)
2,040
2,033
2,033
2,036
Total SIP
Shares Held
29/11/2020
SIP Shares
that Became
Unrestricted
in the Period
Total
Unrestricted
SIP Shares
Held at
29/11/2020
8,428
8,421
7,640
2,756
1,335
1,335
1,156
1,242
6,997
6,991
6,258
1,451
(1) Unrestricted shares are those which have been held beyond the three-year forfeiture period.
(2) The value of the share awards made under the SIP is based on the closing share price on the trading day immediately preceding the date of grant.
Granted: The Directors continued their SIP participation during the period. The SIP scheme is made available to all employees. The SIP allows
for the grant of a number of different forms of awards. An award of Free Shares was made to the Executive Directors in September 2020 under
the terms of the SIP and the Directors’ Remuneration Policy. “Free shares” of up to £3,600 of ordinary shares may be allocated to any employee
in any year. Free Shares are allocated to employees equally on the basis of salary, as permitted by the relevant legislation.
An award of Matching Shares was made to those Executive Directors who purchased Partnership Shares (using deductions taken from their
gross basic pay) under the terms of the SIP and in accordance with the Directors’ Remuneration Policy.
➔ For more details about the SIP, please see page 169.
The Executive Directors continued their membership in the SIP after the end of the period and were therefore awarded further Matching Shares
pursuant to the SIP rules. Between the end of the period and 26 January 2021, being the last practicable date prior to the publication of this
Annual Report, the Executive Directors acquired or were awarded further shares under the SIP as set out in the table below:
Director
Tim Steiner
Mark Richardson
Neill Abrams
Luke Jensen
Partnership
Shares
Acquired
Matching
Shares
Awarded
Free Shares
Award
13
13
13
13
2
2
2
2
–
–
–
–
Total Face
Value of Free
Shares and
Matching
Shares
(£)
363
363
363
363
Total SIP
Shares
Held at
29/01/2021
8,443
8,436
7,655
2,771
(1) The value of the share awards made under the SIP is based on the closing share price on the trading day immediately preceding the date of grant.
Vested: For details of Free Shares and Matching Shares that became unrestricted in the period, see above.
Sharesave Scheme (Audited)
At the end of the period, the Executive Directors’ option interests in the Sharesave scheme were as follows:
Director
Neill Abrams
Type of
Interest
Date of
Grant
Options
27/08/19
Number
of Share
Options
1,610
Exercise
Price
(£)
Face Value
(£)
Exercise Period
11.17
17,991
01/12/22 – 01/05/23
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Continued
Dilution
Dilution Limits
Awards granted under the Company’s Sharesave and SIP schemes are met by the issue of new shares when the options are exercised or shares
granted. Awards granted under the VCP may be met by the issue of new shares, the transfer of shares from treasury, or the purchase or transfer
of existing shares by the EBT (where available). Awards vesting under the LTIP are typically satisfied by the issue of new shares and transfer of
existing shares by the EBT.
There are limits on the number of shares that may be allocated under the Company’s share plans. These dilution limits were recommended
by the Remuneration Committee and incorporated into the rules of the various share schemes, which have been approved by the Company’s
shareholders.
The dilution limits restrict the commitment to issue new ordinary shares or reissue treasury shares under all share schemes of the Group to 10%
of the nominal amount of the Company’s issued share capital and under the LTIP and the VCP (and any other selective share scheme) to 5% of
the nominal amount of the issued share capital of the Company in any rolling ten-year period. These limits are consistent with the guidelines of
institutional shareholders.
Impact on Dilution
The Company monitors the number of shares issued under these schemes and their impact on dilution. The charts below show the Company’s
commitment, as at the last practicable date prior to the publication date of this Annual Report being 26 January 2021, to issue new shares in
respect of its share schemes assuming all performance conditions are met, all award holders remain in employment to the vesting date and
all awards are settled in newly issued shares. For these purposes, no account is taken of ordinary shares allocated prior to the Company’s
Admission.
All Share Plans
%
0
1
%
1
7
.
5
Discretionary
Share Plans
%
5
%
2
.
3
Actual Limit
Actual Limit
Shareholder Approval and Votes at AGM
The 2020 Directors’ Remuneration Report will be subject to a shareholder vote at the AGM. Entitlement of a Director to remuneration is not made
conditional on this resolution being passed.
The table below sets out the actual voting in respect of resolutions regarding remuneration at previous annual general meetings.
Resolution Text
2020 Annual General Meeting
Votes
For
%
For
Votes
Against
% Against
Total
Votes
Votes
Withheld
Approve the 2019 Directors’ Remuneration Report 407,632,068
70.2
172,726,518
29.8
580,358,586
25,108,206
Approve the Ocado 2019 Executive Share Option
Scheme
Approve the Ocado Employee Share Purchase
Plan
Approve the Ocado Restricted Share Plan
599,781,833
99.03
5,863,273
0.97
605,645,106
34,381
605,269,126
588,683,007
99.73
97.23
182,039
16,761,407
0.03
2.77
605,451,165
605,444,414
15,628
22,379
(1) A withheld vote is not a vote in law and is not counted in the calculation of the proportion of votes cast for and against a resolution.
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Awards granted under the Company’s Sharesave and SIP schemes are met by the issue of new shares when the options are exercised or shares
granted. Awards granted under the VCP may be met by the issue of new shares, the transfer of shares from treasury, or the purchase or transfer
of existing shares by the EBT (where available). Awards vesting under the LTIP are typically satisfied by the issue of new shares and transfer of
There are limits on the number of shares that may be allocated under the Company’s share plans. These dilution limits were recommended
by the Remuneration Committee and incorporated into the rules of the various share schemes, which have been approved by the Company’s
The dilution limits restrict the commitment to issue new ordinary shares or reissue treasury shares under all share schemes of the Group to 10%
of the nominal amount of the Company’s issued share capital and under the LTIP and the VCP (and any other selective share scheme) to 5% of
the nominal amount of the issued share capital of the Company in any rolling ten-year period. These limits are consistent with the guidelines of
The Company monitors the number of shares issued under these schemes and their impact on dilution. The charts below show the Company’s
commitment, as at the last practicable date prior to the publication date of this Annual Report being 26 January 2021, to issue new shares in
respect of its share schemes assuming all performance conditions are met, all award holders remain in employment to the vesting date and
all awards are settled in newly issued shares. For these purposes, no account is taken of ordinary shares allocated prior to the Company’s
Continued
Dilution
Dilution Limits
existing shares by the EBT.
shareholders.
institutional shareholders.
Impact on Dilution
Admission.
All Share Plans
%
0
1
%
1
7
.
5
Discretionary
Share Plans
%
5
%
2
.
3
Actual Limit
Actual Limit
Shareholder Approval and Votes at AGM
conditional on this resolution being passed.
Resolution Text
2020 Annual General Meeting
Approve the Ocado 2019 Executive Share Option
Approve the Ocado Employee Share Purchase
Scheme
Plan
The 2020 Directors’ Remuneration Report will be subject to a shareholder vote at the AGM. Entitlement of a Director to remuneration is not made
The table below sets out the actual voting in respect of resolutions regarding remuneration at previous annual general meetings.
Votes
For
%
For
Votes
Against
% Against
Total
Votes
Votes
Withheld
Approve the 2019 Directors’ Remuneration Report 407,632,068
70.2
172,726,518
29.8
580,358,586
25,108,206
599,781,833
99.03
5,863,273
0.97
605,645,106
34,381
Approve the Ocado Restricted Share Plan
605,269,126
588,683,007
99.73
97.23
182,039
16,761,407
0.03
2.77
605,451,165
605,444,414
15,628
22,379
(1) A withheld vote is not a vote in law and is not counted in the calculation of the proportion of votes cast for and against a resolution.
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Shareholder Consultation and 2020 Annual General Meeting Voting
The Committee notes that at our 2020 annual general meeting all resolutions were successfully passed with the requisite majority, although there were
significant minority votes against two resolutions: Resolution 2 (Directors’ Remuneration Report) and Resolution 10 (Re-appointment of Andrew Harrison).
Resolutions 2 and 10 – Directors’ Remuneration Report and Re-appointment of Andrew Harrison
Ocado’s 2019 Remuneration Report (the “2019 Report”) was approved at the 2020 annual general meeting with 70.24% of votes in support of the
resolution. The Company understands that this outcome was broadly attributable to concerns around the performance of the Growth Incentive
Plan (“GIP”), the implementation of a Value Creation Plan (“VCP”), and the approach to Executive Directors’ salary progression.
The Remuneration Committee seeks to ensure that the quantum of remuneration provided to Executive Directors is both fair and competitive,
in order to support the long-term success of the business and sustainable long-term shareholder value. We are also committed to regular
engagement with shareholders on this topic, and aim to maintain open dialogue on such decisions. We have sought to provide additional clarity
on the three areas of concern below.
The GIP was a one-off incentive plan granted in 2014 and subsequently vested in May 2019. The outcome of the GIP was subject to discussion with
shareholders in November 2019, and was raised as one of the main reasons why some shareholders voted against this resolution. The Committee
discussed this outcome and feels the value of this award, earned over a five year period, reflects the outstanding returns received by shareholders. The
Committee notes that it also took into consideration the structure of the GIP (which enabled such values to be paid in a single year) when designing the
VCP. In contrast to the GIP, the VCP is designed to ensure any payments to management would be spread over a longer time period going forward.
In terms of the salary progression, the Committee awarded salary increases above the average employee due to a set of unique circumstances. The
salary increases reflect the rapid growth and resulting increase in complexity and scale of the Executive Directors’ roles. Following the increases, the
Executive Directors’ salaries are positioned broadly around the lower quartile of the FTSE 100. This is in line with our remuneration philosophy which
aims to set fixed pay at the lower quartile of the market, and only offer substantial comparative reward, via the VCP, for transformational performance.
Ocado’s new long-term incentive plan, the Value Creation Plan (“VCP”) was approved at our annual general meeting in May 2019 with
shareholder support of 75.72% of votes in favour of the VCP. At that time, the Company understood that that outcome was attributable, in large
part, to concerns regarding the implementation of the VCP and the potential level of quantum available to Executive Directors under this Plan.
Ocado’s 2019 Policy was subject to an extensive consultation with all major shareholders and investor bodies prior to the annual general meeting in
2019 and we would again like to thank those investors who gave their time and input during this process. It was apparent at the time of the consultation
that there were differing views amongst shareholders on the suitability of the Policy, which were ultimately reflected in the voting outcome at the
annual general meeting in 2019. We note that at the time, all shareholder feedback received was carefully considered and as a result, multiple changes
were made to the operation of the VCP to reflect suggestions made by shareholders. These changes were in turn explained in the annual report. In
November 2019, I wrote to the Company’s largest shareholders and held further consultations regarding the implementation of the Policy for FY19 and
FY20. Further details on the consultation process and discussions can be found in the Company’s 2018 annual report on pages 110 to 111. Given the
extensive consultation process we undertook regarding the Company’s remuneration, we feel we understand why shareholders voted as they did at the
2020 annual general meeting.
The Company understands that the 19.65% of votes cast against Resolution 10 (Andrew Harrison’s re-appointment) at the 2020 annual general
meeting this year were linked to the above outcomes.
The Remuneration Committee reviewed the voting outcomes and believes that the current Policy continues to be aligned with Ocado’s strategy and
business needs and hence remains the right vehicle to remunerate and retain our Executives. In conclusion, the Committee understands the main areas
of concern for shareholders, and the response at the 2020 annual general meeting was in line with expectations from the consultation exercise in 2019.
The Company continues to be committed to governance best practice and will continue its policy of keeping executive remuneration under review and
proactively engaging with shareholders and advisory bodies on such matters to ensure it is aligned to the shareholder and employee experience.
Basis of Preparation and Audit
This report is a Directors’ Remuneration Report for the 52 weeks ended 29 November 2020, prepared for the purposes of satisfying Section 420(1)
and Section 421(2A) of the Companies Act 2006. It has been drawn up in accordance with the Companies Act 2006 and the Code, the Regulations
and the Listing Rules.
In accordance with section 497 of the Companies Act 2006 and the Regulations, certain parts of this Directors’ Remuneration Report (where
indicated) have been audited by the Company’s auditor, Deloitte LLP.
A copy of this Directors’ Remuneration Report will be available on the Corporate Website, www.ocadogroup.com.
This Directors’ Remuneration Report is approved by the Board and signed on its behalf by:
Andrew Harrison
Remuneration Committee Chairman
9 February 2021
176 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Introduction
This Directors’ Report should be read in conjunction with the Strategic
Report (pages 14 to 99), which includes Corporate Responsibility
(pages 82 to 89), and the Corporate Governance Statement (page 108),
which are incorporated by reference into this Directors’ Report.
Directors’ Report Disclosures
The Company has chosen in accordance with S414C (11) of the
Companies Act 2006 to provide disclosures and information in
relation to a number of matters which are covered elsewhere in this
Annual Report. These matters, together with those required under the
2013 Large and Medium sized Companies and Groups (Accounts and
Reports) Regulations 2008, are cross referenced in the table below.
Page
14-177
60-71
40-46
30-33
93-94
14-59
14-59
47-48
82-89
92-93
90-98
72-81
82-88
Topic
Fair review of the
Company’s business
Principal risks and
uncertainties
Section of the Report
Management Report, as
defined in the Directors’
Report
Management Report, as
defined in the Directors’
Report
Strategy
Business Model
Strategic Report
Strategic Report
Gender breakdown
Our People
Important events impacting
the business
Strategic Report
Likely future developments Strategic Report
Financial key performance
indicators
Non-financial key
performance indicators
Financial instruments
Key Performance Indicators
Key Performance Indicators
48-49
Note 4.7 of the Consolidated
Financial Statements
243-246
Environmental matters
Corporate Responsibility
Employees with disabilities Our People
Company’s employees
Social, community and
human rights issues
s172 and relationships with
customers, suppliers and
others
Our People
Stakeholder Engagement
Corporate Responsibility
Stakeholder Engagement
72-81
Natural Resources
Corporate Responsibility
Directors’ induction and
training
Composition, Succession and
Evaluation
84
121
Information Required by Listing Rules 9.8.4 (R)
Topic
Section of the Report
Page
Directors’ Interests in SharesDirectors’ Remuneration
173-175
Going Concern and Viability
Statements
Report
Strategic Report
Long-term incentive
schemes
Directors’ Remuneration
Report
Information Required by DTR 7.2
Topic
Section of the Report
Corporate Governance
Statement
Other Disclosures
Corporate Governance Report
Topic
Section of the Report
Strategic Report
In accordance with
Provision 31 of the UK
Corporate Governance
Code 2018 – Long term
Viability
68-71
165-168
Page
108
Page
68-71
Disclosure Guidance and Transparency Rule 4.1.8
The Strategic Report and the Directors’ Report (or parts thereof),
together with sections of this Annual Report incorporated by
reference, are the “Management Report” for the purposes of DTR 4.1.8.
This Annual Report
The Directors are required under the Companies Act 2006 to prepare a
Strategic Report for the Company and the Group. The Strategic Report
contains the Directors’ explanation of the basis on which the Group
preserves and creates value over the longer term and the strategy
for delivering the objectives of the Group. The Companies Act 2006
requires that the Strategic Report must:
• contain a fair review of the Group’s business and contain a
description of the principal risks and uncertainties facing the
Group; and
• be a balanced and comprehensive analysis of the development
and performance of the Group’s business during the financial year
and the position of the Group’s business at the end of that year,
consistent with the size and complexity of the business.
The information that fulfils the strategic report requirements is set
out in the Strategic Report on pages 14 to 99. The Non-Financial
Information Statement on page 185 forms part of the Strategic Report.
The Strategic Report and the Directors’ Report, together with the
sections of this Annual Report incorporated by reference, have been
drawn up and presented in accordance with and in reliance upon
applicable English company law and the liabilities of the Directors
in connection with that report shall be subject to the limitations and
restrictions provided by such law.
➔ For an explanation of how the Board satisfies itself that this Annual
Report meets the disclosure requirements, refer to the Corporate
Governance Statement on page 108 and the Statement of
Directors’ Responsibility on page 184
178 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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This Directors’ Report should be read in conjunction with the Strategic
Topic
Section of the Report
Page
Report (pages 14 to 99), which includes Corporate Responsibility
(pages 82 to 89), and the Corporate Governance Statement (page 108),
which are incorporated by reference into this Directors’ Report.
Directors’ Interests in SharesDirectors’ Remuneration
173-175
Report
Going Concern and Viability
Strategic Report
68-71
Directors’ Report Disclosures
Statements
The Company has chosen in accordance with S414C (11) of the
Long-term incentive
Directors’ Remuneration
165-168
Companies Act 2006 to provide disclosures and information in
schemes
Report
relation to a number of matters which are covered elsewhere in this
Annual Report. These matters, together with those required under the
Information Required by DTR 7.2
2013 Large and Medium sized Companies and Groups (Accounts and
Topic
Section of the Report
Reports) Regulations 2008, are cross referenced in the table below.
Corporate Governance
Corporate Governance Report
Topic
Section of the Report
Fair review of the
Management Report, as
Company’s business
defined in the Directors’
Statement
Page
14-177
Other Disclosures
Page
108
Page
68-71
Financial key performance
Key Performance Indicators
This Annual Report
indicators
performance indicators
Non-financial key
Key Performance Indicators
48-49
Financial instruments
Note 4.7 of the Consolidated
243-246
Principal risks and
uncertainties
Management Report, as
defined in the Directors’
Report
Report
Strategic Report
Strategic Report
Strategy
Business Model
Gender breakdown
Our People
Important events impacting
Strategic Report
the business
Likely future developments Strategic Report
Financial Statements
Environmental matters
Corporate Responsibility
Employees with disabilities Our People
Company’s employees
Our People
Stakeholder Engagement
Social, community and
Corporate Responsibility
human rights issues
customers, suppliers and
others
Natural Resources
Corporate Responsibility
Directors’ induction and
Composition, Succession and
training
Evaluation
60-71
40-46
30-33
93-94
14-59
14-59
47-48
82-89
92-93
90-98
72-81
82-88
84
121
Topic
Section of the Report
In accordance with
Strategic Report
Provision 31 of the UK
Corporate Governance
Code 2018 – Long term
Viability
Disclosure Guidance and Transparency Rule 4.1.8
The Strategic Report and the Directors’ Report (or parts thereof),
together with sections of this Annual Report incorporated by
reference, are the “Management Report” for the purposes of DTR 4.1.8.
The Directors are required under the Companies Act 2006 to prepare a
Strategic Report for the Company and the Group. The Strategic Report
contains the Directors’ explanation of the basis on which the Group
preserves and creates value over the longer term and the strategy
for delivering the objectives of the Group. The Companies Act 2006
requires that the Strategic Report must:
• contain a fair review of the Group’s business and contain a
description of the principal risks and uncertainties facing the
Group; and
• be a balanced and comprehensive analysis of the development
and performance of the Group’s business during the financial year
and the position of the Group’s business at the end of that year,
The information that fulfils the strategic report requirements is set
out in the Strategic Report on pages 14 to 99. The Non-Financial
Information Statement on page 185 forms part of the Strategic Report.
The Strategic Report and the Directors’ Report, together with the
sections of this Annual Report incorporated by reference, have been
drawn up and presented in accordance with and in reliance upon
applicable English company law and the liabilities of the Directors
in connection with that report shall be subject to the limitations and
restrictions provided by such law.
➔ For an explanation of how the Board satisfies itself that this Annual
Report meets the disclosure requirements, refer to the Corporate
Governance Statement on page 108 and the Statement of
Directors’ Responsibility on page 184
s172 and relationships with
Stakeholder Engagement
72-81
consistent with the size and complexity of the business.
Introduction
Information Required by Listing Rules 9.8.4 (R)
Board of Directors
Details of the Directors of the Company who held office during the year,
and up to the date of the signing of the financial statements, are set out
on pages 104 to 107. During the period Duncan Tatton-Brown resigned
as Chief Financial Officer and Executive Director, on 22 November 2020,
and Michael Sherman was appointed as an Independent Non-Executive
Director, on 5 October 2020. Following the end of the period Claudia
Arney resigned as Non-Executive Director, on 25 December 2020, and
Richard Haythornthwaite was appointed as an Independent Non-
Executive Director, on 1 January 2021.
Details of directors’ beneficial and non-beneficial interests in the
shares of the Company are shown on pages 173 and 175. Options
granted to directors under the Save As You Earn (SAYE) and Executive
Share Option Schemes are shown on pages 174 and 175.
Powers of the Directors
Subject to the Company’s Articles of Association (the “Articles”), the
Companies Act 2006 and any special resolution of the Company, the
business of the Company is managed by the Board, who may exercise
all the powers of the Company. In particular, the Board may exercise
all the powers of the Company to borrow money, to guarantee, to
indemnify, to mortgage or charge any of its undertakings, property,
assets and uncalled capital and to issue debentures and other
securities and to give security for any debt, liability or obligation of the
Company or of any third party.
Appointment and Replacement of Directors
The appointment and replacement of directors is governed by the
Articles, the UK Corporate Governance Code 2018 (the “Code”), the
Companies Act 2006 and related legislation.
Appointment of Directors: A Director may be appointed by the
Company by ordinary resolution of the shareholders or by the Board.
The Board or any Committee authorised by the Board may from
time to time appoint one or more Directors to hold any employment
or executive office for such period and on such terms as they may
determine and may also revoke or terminate any such appointment. A
Director appointed by the Board holds office only until the next annual
general meeting of the Company and is then eligible for reappointment.
Retirement of Directors: At every annual general meeting of the
Company, each Director shall retire from office and may offer himself
or herself for reappointment by the members.
Removal of Directors by Special Resolution: The Company may,
by special resolution, remove any Director before the expiration of his
or her period of office.
Vacation of Office: The office of a Director shall be vacated if: (i) they
resign; (ii) their resignation is requested by all of the other Directors
(not fewer than three in number); (iii) they have been suffering from
mental or physical ill health and the Board resolves that their office
be vacated; (iv) they are absent without the permission of the Board
from meetings of the Board (whether or not an alternate Director
appointed by them attends) for six consecutive months and the Board
resolves that their office is vacated; (v) they become bankrupt; (vi)
they are prohibited by law from being a Director; (vii) they cease to
be a Director by virtue of the Companies Act 2006; or (viii) they are
removed from office pursuant to the Articles.
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➔ For a description of changes of the Company’s Directors during the
period see the Corporate Governance Report on pages 104 to 107
Directors’ Insurance and Indemnities
The Company maintains directors’ and officers’ liability insurance
cover for its Directors and officers as permitted under the Articles
and the Companies Act 2006. Such insurance policies were renewed
during the period and remain in force as at the date of this Annual
Report. The Company also agrees to indemnify the Directors under
an indemnity deed with each Director, which contains provisions that
are permitted by the director liability provisions of the Companies Act
2006 and the Articles. An indemnity deed is usually entered into by a
Director at the time of his or her appointment to the Board.
Amendment of Articles of Association
The Company’s Articles may be amended by a special resolution of
the Company’s shareholders. At the Company’s 2020 annual general
meeting shareholders approved amendments to the Articles to
amend the language in the Articles to be gender neutral, to allow
general meetings of the Company to be held electronically as well as
physically, to increase the borrowing powers of the Board to allow
net borrowings to the amount of £1,500 million, to clarify that the
Company may send strategic reports with supplementary materials
instead of the summary financial statement previously provided, and
to remove the obligation for the Company to ascertain as to whether a
proxy or representative of a corporation has voted in accordance with
the member’s instructions.
Share Capital
The Company’s authorised and issued ordinary share capital as at
29 November 2020 comprised a single class of ordinary shares. The
shares have a nominal value of 2 pence each. The ISIN of the shares is
GB00B3MBS747. The LEI of the Company is 213800LO8F61YB8MBC74.
As at 26 January 2021, being the last practicable date prior to
publication of this report, the Company’s issued share capital
consisted of 748,802,273 issued ordinary shares, compared with
711,072,430 issued ordinary shares per the 2019 annual report. Details
of movements in the Company’s issued share capital can be found in
Note 4.9 to the Consolidated Financial Statements. During the period,
shares in the Company were issued to satisfy options and awards
under the Company’s share and incentive schemes, as set out in Note
4.10 to the Consolidated Financial Statements.
Rights Attached to Shares
The Company’s shares when issued are credited as fully paid and free
from all liens, equities, charges, encumbrances and other interests. All
shares have the same rights (including voting and dividend rights and
rights on a return of capital) and restrictions as set out in the Articles,
described below.
Except in relation to dividends that may have been declared and
rights on a liquidation of the Company, the shareholders have no
rights to share in the profits of the Company.
The Company’s shares are not redeemable. However, the Company
may purchase or contract to purchase any of the shares on or off-
market, subject to the Companies Act 2006 and the requirements of
the Listing Rules, as described below.
178 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Continued
No shareholder holds shares in the Company which carry special
rights with regard to control of the Company. There are no shares
relating to an employee share scheme which have rights with regard
to control of the Company that are not exercisable directly and
solely by the employees, other than in the case of the JSOS, where
share interests can be transferred to a spouse, civil partner or lineal
descendant of a participant in the JSOS or certain trusts under the
rules of the JSOS (as noted below).
Voting Rights
Each ordinary share carries one right to vote at a general meeting of
the Company. At any general meeting, a resolution put to the vote
of the meeting shall be decided on a show of hands unless a poll is
demanded. On a show of hands, every member who is present in
person or by proxy at a general meeting of the Company shall have
one vote. On a poll, every member who is present in person or by
proxy shall have one vote for every share of which they are a holder.
The Articles provide a deadline for submission of proxy forms of no
less than 48 hours before the time appointed for the holding of the
meeting or adjourned meeting. No shareholder shall be entitled to
vote in respect of a share held by him or her if any call or sum then
payable by him or her in respect of such share remains unpaid or
if a member has been served a restriction notice, described on the
following page.
JSOS Voting Rights: Of the issued ordinary shares, as at 29 November
2020, 625,750 (2019: 869,358) were held by Wealth Nominees Limited
and 9,890,719 (2019: 9,981,158) were held by Numis Nominees (Client)
Ltd, both on behalf of Estera Trust (Jersey) Limited, the independent
company which is the trustee of Ocado’s employee benefit trust (the
“EBT Trustee”). The EBT Trustee has waived its right to exercise its voting
rights in respect of 9,890,719 of these ordinary shares, although it may
at the request of a participant vote in respect of 625,750 ordinary shares
which have vested under the JSOS and remain in the trust at period
end. The total of 9,890,719 ordinary shares held by the EBT Trustee are
treated as treasury shares in the Group’s Consolidated Balance Sheet in
accordance with IAS 3 – Financial Instruments: Presentation. As such,
calculations of earnings per share for Ocado exclude the ten ordinary
shares held by the EBT Trustee. Note 4.10 to the Consolidated Financial
Statements provides more information on the Group’s accounting
treatment of treasury shares.
Restrictions on Transfer of Securities
The Company’s shares are freely transferable, save as set out below.
The transferor of a share is deemed to remain the holder until the
transferee’s name is entered in the register. The Board can decline
to register any transfer of any share that is not a fully paid share. The
Company does not currently have any partially paid shares. The Board
may also decline to register a transfer of a certificated share unless
the instrument of transfer: (i) is duly stamped or certified or otherwise
shown to be exempt from stamp duty and is accompanied by the
relevant share certificate; (ii) is in respect of only one class of share;
and (iii) if to joint transferees, is in favour of not more than four such
transferees. Registration of a transfer of an uncertificated share may
be refused in the circumstances set out in the uncertificated securities
rules (as defined in the Articles) and where, in the case of a transfer to
joint holders, the number of joint holders to whom the uncertificated
share is to be transferred exceeds four.
Restriction on Transfer of JSOS Interests: Participants’ interests
under the JSOS are generally non-transferable during the period
beginning on acquisition of the interest and ending at the expiry of
the relevant restricted period as set out in the JSOS rules. However,
interests can be transferred to a spouse, civil partner or lineal
descendant of a participant; a trust under which no person other than
the participant or their spouse, civil partner or lineal descendant has
a vested beneficial interest; or any other person approved by the EBT
Trustee. If a participant purports to transfer, assign or charge his or her
interest other than as set out above, the EBT Trustee may acquire the
participant’s interest for a total price of £1.
Other than as described above and on pages 171 to 173 with respect
to agreements concerning the Directors’ shareholdings, the Company
is not aware of any agreements existing at the end of the period
between holders of securities that may result in restrictions on the
transfer of securities or that may result in restrictions on voting rights.
Powers for the Company to Buy Back its Shares
The Company was authorised by shareholders on 6 May 2020, at the
2020 annual general meeting, to purchase in the market up to 10% of
its issued ordinary shares (excluding any treasury shares), subject to
certain conditions laid out in the authorising resolution. This standard
authority is renewable annually; the Directors will seek to renew this
authority at the AGM. The Directors did not exercise their authority to
buy back any shares during the period.
Powers for the Company to Issue its Shares
The Directors were granted authority at the 2020 annual general
meeting on 6 May 2020, to allot shares in the Company under two
separate resolutions: (i) up to one-third of the Company’s issued share
capital; and (ii) up to two-thirds of the Company’s issued share capital
in connection with a rights issue. These authorities apply until the end
of the AGM (or, if earlier, until 6 August 2021).
The Directors were also granted authority at the 2020 annual general
meeting on 6 May 2020 to disapply pre-emption rights. This resolution
(which is in accordance with the guidance issued by the Pre-Emption
Group (the “PEG Principles”)) sought the authority to disapply pre-
emption rights over 5% of the Company’s issued ordinary share capital.
A further authority was granted to the Directors to disapply pre-emption
rights for an additional 5% for certain acquisitions or specified capital
investments as allowed by the PEG Principles. The Company sought
similar authorities at the 2019 annual general meeting.
The Company will, at the AGM, continue to seek authority to allot
shares on the basis of the authorities sought at the 2020 annual
general meeting. The Company believes such approach is appropriate
given that it follows the guidance set by the Pre-Emption Group and
Investment Association on the allotment of shares.
180 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
rights with regard to control of the Company. There are no shares
joint holders, the number of joint holders to whom the uncertificated
relating to an employee share scheme which have rights with regard
share is to be transferred exceeds four.
to control of the Company that are not exercisable directly and
solely by the employees, other than in the case of the JSOS, where
share interests can be transferred to a spouse, civil partner or lineal
descendant of a participant in the JSOS or certain trusts under the
rules of the JSOS (as noted below).
Voting Rights
Each ordinary share carries one right to vote at a general meeting of
the Company. At any general meeting, a resolution put to the vote
of the meeting shall be decided on a show of hands unless a poll is
demanded. On a show of hands, every member who is present in
person or by proxy at a general meeting of the Company shall have
one vote. On a poll, every member who is present in person or by
proxy shall have one vote for every share of which they are a holder.
The Articles provide a deadline for submission of proxy forms of no
less than 48 hours before the time appointed for the holding of the
meeting or adjourned meeting. No shareholder shall be entitled to
vote in respect of a share held by him or her if any call or sum then
payable by him or her in respect of such share remains unpaid or
Restriction on Transfer of JSOS Interests: Participants’ interests
under the JSOS are generally non-transferable during the period
beginning on acquisition of the interest and ending at the expiry of
the relevant restricted period as set out in the JSOS rules. However,
interests can be transferred to a spouse, civil partner or lineal
descendant of a participant; a trust under which no person other than
the participant or their spouse, civil partner or lineal descendant has
a vested beneficial interest; or any other person approved by the EBT
Trustee. If a participant purports to transfer, assign or charge his or her
interest other than as set out above, the EBT Trustee may acquire the
participant’s interest for a total price of £1.
Other than as described above and on pages 171 to 173 with respect
to agreements concerning the Directors’ shareholdings, the Company
is not aware of any agreements existing at the end of the period
between holders of securities that may result in restrictions on the
transfer of securities or that may result in restrictions on voting rights.
Powers for the Company to Buy Back its Shares
if a member has been served a restriction notice, described on the
The Company was authorised by shareholders on 6 May 2020, at the
following page.
JSOS Voting Rights: Of the issued ordinary shares, as at 29 November
2020, 625,750 (2019: 869,358) were held by Wealth Nominees Limited
and 9,890,719 (2019: 9,981,158) were held by Numis Nominees (Client)
Ltd, both on behalf of Estera Trust (Jersey) Limited, the independent
company which is the trustee of Ocado’s employee benefit trust (the
2020 annual general meeting, to purchase in the market up to 10% of
its issued ordinary shares (excluding any treasury shares), subject to
certain conditions laid out in the authorising resolution. This standard
authority is renewable annually; the Directors will seek to renew this
authority at the AGM. The Directors did not exercise their authority to
buy back any shares during the period.
“EBT Trustee”). The EBT Trustee has waived its right to exercise its voting
Powers for the Company to Issue its Shares
rights in respect of 9,890,719 of these ordinary shares, although it may
at the request of a participant vote in respect of 625,750 ordinary shares
which have vested under the JSOS and remain in the trust at period
end. The total of 9,890,719 ordinary shares held by the EBT Trustee are
treated as treasury shares in the Group’s Consolidated Balance Sheet in
accordance with IAS 3 – Financial Instruments: Presentation. As such,
calculations of earnings per share for Ocado exclude the ten ordinary
shares held by the EBT Trustee. Note 4.10 to the Consolidated Financial
Statements provides more information on the Group’s accounting
treatment of treasury shares.
Restrictions on Transfer of Securities
The Directors were granted authority at the 2020 annual general
meeting on 6 May 2020, to allot shares in the Company under two
separate resolutions: (i) up to one-third of the Company’s issued share
capital; and (ii) up to two-thirds of the Company’s issued share capital
in connection with a rights issue. These authorities apply until the end
of the AGM (or, if earlier, until 6 August 2021).
The Directors were also granted authority at the 2020 annual general
meeting on 6 May 2020 to disapply pre-emption rights. This resolution
(which is in accordance with the guidance issued by the Pre-Emption
Group (the “PEG Principles”)) sought the authority to disapply pre-
emption rights over 5% of the Company’s issued ordinary share capital.
The Company’s shares are freely transferable, save as set out below.
A further authority was granted to the Directors to disapply pre-emption
The transferor of a share is deemed to remain the holder until the
rights for an additional 5% for certain acquisitions or specified capital
transferee’s name is entered in the register. The Board can decline
investments as allowed by the PEG Principles. The Company sought
to register any transfer of any share that is not a fully paid share. The
similar authorities at the 2019 annual general meeting.
Company does not currently have any partially paid shares. The Board
may also decline to register a transfer of a certificated share unless
the instrument of transfer: (i) is duly stamped or certified or otherwise
shown to be exempt from stamp duty and is accompanied by the
relevant share certificate; (ii) is in respect of only one class of share;
and (iii) if to joint transferees, is in favour of not more than four such
transferees. Registration of a transfer of an uncertificated share may
be refused in the circumstances set out in the uncertificated securities
The Company will, at the AGM, continue to seek authority to allot
shares on the basis of the authorities sought at the 2020 annual
general meeting. The Company believes such approach is appropriate
given that it follows the guidance set by the Pre-Emption Group and
Investment Association on the allotment of shares.
No shareholder holds shares in the Company which carry special
rules (as defined in the Articles) and where, in the case of a transfer to
Significant Shareholders
During the period the Company has received notifications, in
accordance with Disclosure Guidance and Transparency Rule 5.1.2R,
of interests in 3% or more of the voting rights attaching to the
Company’s issued share capital, as set out in the table below:
Number of
Ordinary
Shares/
Voting
Rights
Percentage
of
Issued Share
Capital
Nature of
Holding
90,421,714
12.09% Direct/Indirect
76,974,615
10.78%
Indirect
35,829,016
5.02%
Indirect
The London &
Amsterdam Trust
Company Limited
The Capital Group
Companies
Baillie Gifford & Co
Limited
These figures represent the number of shares and percentage held as
at the date of notification to the Company.
No changes have been disclosed in accordance with Disclosure
Guidance and Transparency Rule 5.1.2R in the period between
29 November 2020 and 26 January 2021.
American Depositary Receipt Program
The Company has a sponsored level 1 American Depositary Receipt
(“ADR”) program with The Bank of New York Mellon as depositary
bank. Each ADR represents two ordinary shares of the Company.
The ADRs trade on the over-the-counter (OTC) market in the United
States. The CUSIP number for the ADRs is 674488101, the ISIN is
US6744881011 and the symbol is OCDDY. An ADR is a security that
has been created to permit US investors to hold shares in non-US
companies and, in a level 1 programme, to trade them on the OTC
market in the United States. In contrast to underlying ordinary shares,
ADRs permit US investors to trade securities denominated in US
dollars in the US OTC market with US securities dealers. Were the
Company to pay a dividend on its ordinary shares, ADR holders would
receive dividend payments in respect of their ADRs in US dollars.
Senior Secured Notes Due 2024 listed
on the Irish Stock Exchange
The Company has Senior Secured Notes due 2024 (the “Notes”) listed
on the Irish Stock Exchange and trade on the Global Exchange Market
which is the exchange regulated market of the Irish Stock Exchange.
The ISIN of the Notes is XS163400189. Interest on the notes is payable
semi-annually in arrear. The Notes will mature on 15 June 2024.
The Company may redeem the Notes in whole or in part at any time on
or after 15 June 2020, in each case, at the redemption prices set out as
part of the offering. Prior to 15 June 2020, the Company was entitled to
redeem, at its option, all or a portion of the Notes at a redemption price
equal to 100% of the principal amount of the Notes, plus accrued and
unpaid interest and additional amounts, if any, to the redemption date,
plus a “make-whole” premium. Prior to 15 June 2020, the Company
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was able to, at its option, and on one or more occasions, also redeem
up to 40% of the original aggregate principal amount of the Notes
with the net proceeds from certain equity offerings. Prior to 15 June
2020, the Company was able to redeem during each 12-month period
commencing on the issue date up to 10% of the aggregate principal
amount of the Notes originally issued (including the aggregate principal
amount of any additional Notes) at a redemption price equal to 103%
of the principal amount thereof, plus accrued and unpaid interest to the
applicable redemption date. Additionally, the Company may redeem
the Notes in whole, but not in part, at a price equal to their principal
amount plus accrued and unpaid interest and additional amounts, if
any, upon the occurrence of certain changes in applicable tax law.
On 17 June 2019 the Company redeemed £25,000,000 of the
aggregate principal amount of the Notes at a redemption price equal
to 103% of the principal amount of the Notes redeemed, plus accrued
and unpaid interest.
Convertible Bonds Due 2025 listed on the unregulated
open market of the Frankfurt Stock Exchange
(Freiverkehr)
The Company issued £600 million of guaranteed senior unsecured
convertible bonds due 2025 (the “2025 Bonds”) on 9 December 2019.
The net proceeds of the 2025 Bonds will be used by the Company to
fund capital expenditure in relation to Ocado Solutions’ commitments
and general corporate purposes. The 2025 Bonds are currently
guaranteed by certain members of the Ocado group.
The 2025 Bonds were issued at par and carry a coupon of 0.875%
per annum payable semi-annually in arrear in equal instalments on
9 June and 9 December, with the first payment on 9 June 2020. The
2025 Bonds will be convertible into ordinary shares of the Company
(the “Ordinary Shares”). The initial conversion price shall be £17.9308,
representing a premium of 45.0% above the reference price of
£12.3661, being the volume weighted average price (VWAP) of an
Ordinary Share on the London Stock Exchange between the opening
and pricing of the offering on 2 December 2019. The conversion price
will be subject to adjustment in certain circumstances in line with
market practice. The conversion period commenced on 19 January
2020 and shall end on the tenth calendar day prior to the maturity
date or, if earlier, ending on the tenth calendar day prior to any earlier
date fixed for redemption of the 2025 Bonds. Unless previously
redeemed, or purchased and cancelled, the 2025 Bonds will be
convertible at the option of the bondholders on any day during the
conversion period. The Company has the option to redeem all, but
not some only, of the 2025 Bonds on or after 30 December 2023, at
par plus accrued but unpaid interest, if the parity value (as described
in the Terms and Conditions relating to the 2025 Bonds) on each of
at least 20 dealing days in a period of 30 consecutive dealing days
shall have exceeded 130% of the principal amount. The Company
also has the option to redeem all outstanding 2025 Bonds, at par
plus any accrued but unpaid interest, at any time if 85% or more of
the principal amount of the 2025 Bonds shall have been previously
converted or repurchased and cancelled.
180 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Continued
Convertible Bonds Due 2027 listed on the unregulated
open market of the Frankfurt Stock Exchange
(Freiverkehr)
The Company issued £350 million of guaranteed senior unsecured
convertible bonds due 2027 (the “2027 Bonds”) on 18 June 2020. The
net proceeds of the 2027 Bonds will be used by the Company to give it
the financial flexibility to capitalise on opportunities arising from the
significant acceleration in online adoption and grow faster over the
medium term. The 2027 Bonds are currently guaranteed by certain
members of the Ocado Group.
The 2027 Bonds were issued at par and carry a coupon of 0.75% per
annum payable semi-annually in arrears in equal instalments on
28 January and 18 July, with the first payment on 18 January 2021.
The 2027 Bonds will be convertible into Ordinary Shares of the
Company. The initial conversion price shall be £26.46, representing
a premium of 35% above the reference price of £19.60, being the
placing price determined in the concurrent placing bookbuild.
The conversion price will be subject to adjustment in certain
circumstances in line with market practice. The conversion period
commenced on 29 July 2020 and shall end on the tenth calendar day
prior to the maturity date or, if earlier, ending on the tenth calendar
day prior to any earlier date fixed for the redemption of the 2027
Bonds. Unless previously redeemed, or purchased and cancelled, the
2027 Bonds will be convertible at the option of the bondholders on
any day during the conversion period. The Company has the option
to redeem all, but not some only, of the 2027 Bonds on or after
8 February 2025, at par plus accrued interest, if the parity value (as
described in the Terms and Conditions relating to the 2027 Bonds)
on each of the at least 20 dealing days in a period of 30 consecutive
dealing days shall have exceeded 130% of the principal amount.
The Company also has the option to redeem all outstanding 2027
Bonds, at par plus accrued interest, at any time if 85% or more of
the principal amount of the 2027 Bonds shall have been previously
converted or repurchased and cancelled.
Significant Related Party Agreements
There were no contracts of significance during the period between the
Company or any Group company and: (i) a Director of the Company; (ii)
a close member of a Director’s family; or (iii) a controlling shareholder
of the Company.
Change of Control
The Company does not have any agreements with any Director or
employee that would provide compensation for loss of office or
employment resulting from a takeover bid except that it should be
noted that: (i) provisions of the Company’s share schemes may cause
options and awards granted to employees under such schemes to vest
on a takeover; and (ii) certain members of senior management (not
including the Directors) who were employed prior to 2010 are entitled to
a payment contingent on a change of control of the Company or merger
of the Company (irrespective of loss of employment) as set out in his
or her respective employment contract. For further information on the
change of control provisions in the Company’s share schemes refer to the
Directors’ Remuneration Report on page 126 of the 2018 annual report.
Significant Agreements
There are a number of key agreements to which the Group is a party
that contain certain rights triggered on the change of control of
the Company. Details of the change of control provisions of these
agreements are summarised below.
Solutions Agreements: The Group has a number of agreements
to provide retailers with access to OSP (comprising the Ocado
Group’s proprietary MHE and end-to-end software platform). The key
Solutions agreements are those with Aeon, Bon Preu, Coles, Groupe
Casino, ICA, Kroger, Ocado Retail and Sobeys.
Under those agreements (save for those with Ocado Retail and
Kroger), the retailer is entitled to terminate for convenience at any
time following the commencement date of the relevant services. On
termination in these circumstances the client would be obliged to pay
Ocado termination fees calculated relative to the length of time for
which the service has been live. However, such termination fees are not
payable should the client terminate within a certain period following
the Company coming under the control of certain of the retailer’s
competitors (or certain controllers with whom the client has a strategic
conflict) or if there is a marked deterioration in service levels following
the Company coming under the control of any person.
Morrisons Agreements: The Group has a number of commercial
arrangements with Morrisons. If certain competitors of Morrisons
acquire more than 50% of the voting rights in the Company’s shares
or take control of the composition of the board, or acquire all or
substantially all of the Group’s business and undertakings, then
Morrisons would be entitled to give notice to terminate the agreements
by giving not less than four (but not more than four and a half) years’
notice. Following Morrisons giving such a notice, Morrisons would be
entitled to procure equivalent services from third parties, the Company
losing its remaining exclusivity rights to be Morrisons’ supplier of
online grocery fulfilment services. Similarly, all restrictions within those
agreements on the UK retail grocers to whom the Company is entitled
to provide certain services would cease to apply. At the end of the four
to four and a half years’ notice period, the Company would be required
to purchase Morrisons’ shares in MHE JVCo Limited (the owner of the
mechanical handling equipment in Dordon CFC).
Senior Secured Notes due 2024: Following a change of control
of the Company, holders of the Notes may require it to repurchase
all or part of their holding at a purchase price in cash equal to 101%
of the aggregate principal amount of their holding, plus accrued and
unpaid interest.
Convertible Bonds Due 2025: Following a change of control of the
Company, the holder of each 2025 Bond will have the right to require
the Company to redeem that 2025 Bond at its principal amount,
together with accrued and unpaid interest or the bondholders may
exercise their conversion right using the formula as described in the
Terms and Conditions relating to the 2025 Bonds.
Convertible Bonds Due 2027: Following a change of control of the
Company, the holder of each 2027 Bond will have the right to require
the Company to redeem that 2027 Bond at its principal amount,
together with accrued and unpaid interest or the bondholders may
exercise their conversion right using the formula as described in the
Terms and Conditions relating to the 2027 Bonds.
182 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
Convertible Bonds Due 2027 listed on the unregulated
Significant Agreements
open market of the Frankfurt Stock Exchange
(Freiverkehr)
There are a number of key agreements to which the Group is a party
that contain certain rights triggered on the change of control of
The Company issued £350 million of guaranteed senior unsecured
the Company. Details of the change of control provisions of these
convertible bonds due 2027 (the “2027 Bonds”) on 18 June 2020. The
agreements are summarised below.
net proceeds of the 2027 Bonds will be used by the Company to give it
the financial flexibility to capitalise on opportunities arising from the
significant acceleration in online adoption and grow faster over the
medium term. The 2027 Bonds are currently guaranteed by certain
members of the Ocado Group.
The 2027 Bonds were issued at par and carry a coupon of 0.75% per
annum payable semi-annually in arrears in equal instalments on
28 January and 18 July, with the first payment on 18 January 2021.
The 2027 Bonds will be convertible into Ordinary Shares of the
Company. The initial conversion price shall be £26.46, representing
a premium of 35% above the reference price of £19.60, being the
placing price determined in the concurrent placing bookbuild.
The conversion price will be subject to adjustment in certain
circumstances in line with market practice. The conversion period
commenced on 29 July 2020 and shall end on the tenth calendar day
prior to the maturity date or, if earlier, ending on the tenth calendar
day prior to any earlier date fixed for the redemption of the 2027
Solutions Agreements: The Group has a number of agreements
to provide retailers with access to OSP (comprising the Ocado
Group’s proprietary MHE and end-to-end software platform). The key
Solutions agreements are those with Aeon, Bon Preu, Coles, Groupe
Casino, ICA, Kroger, Ocado Retail and Sobeys.
Under those agreements (save for those with Ocado Retail and
Kroger), the retailer is entitled to terminate for convenience at any
time following the commencement date of the relevant services. On
termination in these circumstances the client would be obliged to pay
Ocado termination fees calculated relative to the length of time for
which the service has been live. However, such termination fees are not
payable should the client terminate within a certain period following
the Company coming under the control of certain of the retailer’s
competitors (or certain controllers with whom the client has a strategic
conflict) or if there is a marked deterioration in service levels following
the Company coming under the control of any person.
Bonds. Unless previously redeemed, or purchased and cancelled, the
Morrisons Agreements: The Group has a number of commercial
2027 Bonds will be convertible at the option of the bondholders on
arrangements with Morrisons. If certain competitors of Morrisons
any day during the conversion period. The Company has the option
acquire more than 50% of the voting rights in the Company’s shares
to redeem all, but not some only, of the 2027 Bonds on or after
or take control of the composition of the board, or acquire all or
8 February 2025, at par plus accrued interest, if the parity value (as
substantially all of the Group’s business and undertakings, then
described in the Terms and Conditions relating to the 2027 Bonds)
Morrisons would be entitled to give notice to terminate the agreements
on each of the at least 20 dealing days in a period of 30 consecutive
by giving not less than four (but not more than four and a half) years’
dealing days shall have exceeded 130% of the principal amount.
notice. Following Morrisons giving such a notice, Morrisons would be
The Company also has the option to redeem all outstanding 2027
entitled to procure equivalent services from third parties, the Company
Bonds, at par plus accrued interest, at any time if 85% or more of
losing its remaining exclusivity rights to be Morrisons’ supplier of
the principal amount of the 2027 Bonds shall have been previously
online grocery fulfilment services. Similarly, all restrictions within those
converted or repurchased and cancelled.
Significant Related Party Agreements
There were no contracts of significance during the period between the
Company or any Group company and: (i) a Director of the Company; (ii)
a close member of a Director’s family; or (iii) a controlling shareholder
of the Company.
Change of Control
agreements on the UK retail grocers to whom the Company is entitled
to provide certain services would cease to apply. At the end of the four
to four and a half years’ notice period, the Company would be required
to purchase Morrisons’ shares in MHE JVCo Limited (the owner of the
mechanical handling equipment in Dordon CFC).
Senior Secured Notes due 2024: Following a change of control
of the Company, holders of the Notes may require it to repurchase
all or part of their holding at a purchase price in cash equal to 101%
The Company does not have any agreements with any Director or
of the aggregate principal amount of their holding, plus accrued and
employee that would provide compensation for loss of office or
unpaid interest.
employment resulting from a takeover bid except that it should be
noted that: (i) provisions of the Company’s share schemes may cause
options and awards granted to employees under such schemes to vest
on a takeover; and (ii) certain members of senior management (not
including the Directors) who were employed prior to 2010 are entitled to
a payment contingent on a change of control of the Company or merger
of the Company (irrespective of loss of employment) as set out in his
Convertible Bonds Due 2025: Following a change of control of the
Company, the holder of each 2025 Bond will have the right to require
the Company to redeem that 2025 Bond at its principal amount,
together with accrued and unpaid interest or the bondholders may
exercise their conversion right using the formula as described in the
Terms and Conditions relating to the 2025 Bonds.
or her respective employment contract. For further information on the
Convertible Bonds Due 2027: Following a change of control of the
change of control provisions in the Company’s share schemes refer to the
Company, the holder of each 2027 Bond will have the right to require
Directors’ Remuneration Report on page 126 of the 2018 annual report.
the Company to redeem that 2027 Bond at its principal amount,
together with accrued and unpaid interest or the bondholders may
exercise their conversion right using the formula as described in the
Terms and Conditions relating to the 2027 Bonds.
Shareholders’ Agreement relating to Ocado Retail: If there is a change
of control of Ocado Holdings and/or the Company where the person having
control following the change of control is a competitor of M&S, this would
amount to an event of default and M&S could elect to purchase all shares
held in Ocado Retail at a price prescribed in the agreement.
Solutions and Third Party Logistics Agreement with Ocado
Retail: If there is a competitor change of control of Ocado Operating,
Ocado Retail may terminate the third party logistics agreement
by giving six months’ written notice within three months of the
competitor change of control becoming effective. In addition, if there
is a change of control (whether or not a competitor change of control)
and there is a marked deterioration in the service levels thereafter,
Ocado Retail may terminate the third party logistics agreement and
the Solutions agreement.
Research and Development Activities
The Group has dedicated in-house software, logistics and
engineering design and development teams with primary focus
on IT and improvements to the customer interfaces, the CFCs and
the automation equipment used in them. Costs relating to the
development of computer software are capitalised if it is probable
that the future economic benefits that are attributable to the asset
will accrue to the entity and the costs can be measured reliably. The
Company is carrying out a number of IT and engineering design and
build projects with the intention of developing new and improved
automation equipment and processes for its warehouses.
Greenhouse Gas Emissions (“GHG”) Methodology
To calculate our greenhouse gas emissions, we use an operational
control approach, in accordance with selected aspects of the GHG
protocol by the World Business Council for Sustainable Development
and World Resources Institute’s (WBCSD/WRI). The following sources
of information have been considered, government conversion
factors published by BEIS (2020), IPCC fourth assessment report:
climate change 2007, IPCC guidelines for national greenhouse gas
inventories: reference manual (2006), EPA emissions & generation
resource integrated database (eGRID) (2020), guidelines and statistics
published by IEA (2019) and the Association of Issuing Bodies (AIB)
(2020) European residual mixes 2019.
Details regarding the Group’s carbon emissions, energy consumption
and energy efficiency are included in the Strategic Report on page 84.
Future Developments of the Business
The Group’s likely future developments including its strategy are
described in the Strategic Report on pages 14 to 99.
Statement of engagement with employees
Details on engagement with employees by the Board and the Group
and the mechanisms employed to consult and communicate with
employees and take into account the interests of employees in
decision-making can be found in the Engaging With Our Stakeholders
section on pages 72 to 81, Our People section on pages 90 to 97 and
the Corporate Governance Report on pages 112 to 113.
Employees with Disabilities
Applications for employment by people with disability are given full and
fair consideration bearing in mind the respective aptitudes and abilities of
the applicant concerned and our ability to make reasonable adjustments
to the role and the work environment. In the event of existing employees
becoming disabled, all reasonable effort is made to ensure that
appropriate training is given and their employment within the Group
continues. Training, career development and promotion of a disabled
person is, as far as possible, identical to that of an able bodied person.
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Statement of Engagement with Suppliers,
Customers and Others
Details on the methods used to build strong business relationships
with the Group’s suppliers, customers and partners and the effect
of those interests on decision-making can be found in the Engaging
With Our Stakeholders section on pages 72 to 81 and the Corporate
Governance Report on page 112.
Profit/Loss and Dividends
The Group’s results for the period are set out in the Consolidated
Income Statement on page 199. The Group’s loss before tax for the
period amounted to £44 million (2019: £214.5 million). The Directors
do not propose to pay a dividend for the period (2019: £nil).
Branches
There are no branches of the Company.
Post Balance Sheet Events
There have been no material events after the Balance Sheet date of 29
November 2020 to the date of this Annual Report except for the below.
On 2 November 2020, the Group announced that it had acquired the
entire share capital of two companies, Kindred Systems, Inc. and
Haddington Dynamics, Inc. for the consideration of $260.3 million
and $25.1 million respectively (subject to closing adjustments). The
acquisition of Kindred Systems and Haddington Dynamics completed
on 15 December 2020 and 21 December 2021 respectively.
On 1 October 2020, AutoStore Technology AS (a Norweigan company
owned by the US private equity firm TH Lee) filed patent infringement
claims against the Group in the High Court in England, the United
States International Trade Commission, and the United States District
Court for Eastern Virginia. The Group has subsequently filed its own
claim against AutoStore for infringement of Ocado patents in the
US District Court for New Hampshire and a separate antitrust claim
against AutoStore in the US District Court for Eastern Virginia. Legal
and other costs have been incurred to defend against AutoStore’s
claims and to file the Group’s claim. Recovery of costs will be sought
where permitted.
On 7 January 2021, Ocado Retail Limited announced that it had
agreed to sell the entire share capital of Speciality Stores Limited, its
pet business trading as Fetch, to Paws Holdings Limited. The disposal
was completed on 31 January 2021.
Note 5.5 to the Consolidated Financial Statements provides more
information on the Group’s Post Balance Sheet events.
Political Donations
No donations were made by the Group to any political party,
organisation or candidate during the period (2019: nil).
182 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Continued
Disclosure of Information to Auditor
In accordance with Section 418 of the Companies Act 2006, each
Director who held office at the date of the approval of this Directors’
Report (included in the Biographies of the Directors on pages 104 to
107) confirms that, so far as they are aware, there is no relevant audit
information of which the Group’s auditor is unaware, and that each
Director has taken all of the steps that they ought to have taken as
a Director in order to make themselves aware of any relevant audit
information and to establish that the Group’s auditor is aware of that
information.
Statement of Directors’ Responsibilities
The Directors are responsible for preparing this Annual Report,
the Directors’ Remuneration Report and the financial statements
in accordance with applicable law and regulations. Company law
requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Group
and parent Company financial statements in accordance with
International Financial Reporting Standards (the “IFRSs”) as adopted
by the European Union. Under company law the Directors must not
approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Company and the
Group and of the result of the Company and the Group for that period.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are reasonable
and prudent;
• state whether applicable IFRSs as adopted by the European Union
have been followed, subject to any material departures disclosed
and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial position
of the Company and the Group and to enable them to ensure that the
financial statements and the Directors’ Remuneration Report comply
with the Companies Act 2006 and, as regards the Group financial
statements, in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union. They
are also responsible for safeguarding the assets of the Company and
the Group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities. The Directors are responsible
for the maintenance and integrity of the Corporate Website. Legislation
in the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
As is required under the Code, the Directors consider that this Annual
Report, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Company’s position and performance, business model and strategy.
Each of the Directors who held office at the date of the approval of
this Annual Report (included in the Biographies of the Directors on
pages 104 to 107) confirms, to the best of his or her knowledge, that:
•
•
the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit or loss of
the Group; and
the “Management Report” (as defined in the Directors’ Report
on page 178) includes a fair review of the development and
performance of the business and the position of the Group,
together with a description of the principal risks and uncertainties
that it faces.
184 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Directors’ Report
Continued
Disclosure of Information to Auditor
In accordance with Section 418 of the Companies Act 2006, each
Director who held office at the date of the approval of this Directors’
Report (included in the Biographies of the Directors on pages 104 to
107) confirms that, so far as they are aware, there is no relevant audit
information of which the Group’s auditor is unaware, and that each
Director has taken all of the steps that they ought to have taken as
a Director in order to make themselves aware of any relevant audit
information and to establish that the Group’s auditor is aware of that
information.
Statement of Directors’ Responsibilities
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial position
of the Company and the Group and to enable them to ensure that the
financial statements and the Directors’ Remuneration Report comply
with the Companies Act 2006 and, as regards the Group financial
statements, in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union. They
are also responsible for safeguarding the assets of the Company and
the Group and hence for taking reasonable steps for the prevention and
The Directors are responsible for preparing this Annual Report,
detection of fraud and other irregularities. The Directors are responsible
the Directors’ Remuneration Report and the financial statements
for the maintenance and integrity of the Corporate Website. Legislation
in accordance with applicable law and regulations. Company law
in the United Kingdom governing the preparation and dissemination of
requires the Directors to prepare financial statements for each
financial statements may differ from legislation in other jurisdictions.
financial year. Under that law the Directors have prepared the Group
and parent Company financial statements in accordance with
International Financial Reporting Standards (the “IFRSs”) as adopted
by the European Union. Under company law the Directors must not
approve the financial statements unless they are satisfied that they
As is required under the Code, the Directors consider that this Annual
Report, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Company’s position and performance, business model and strategy.
give a true and fair view of the state of affairs of the Company and the
Each of the Directors who held office at the date of the approval of
Group and of the result of the Company and the Group for that period.
this Annual Report (included in the Biographies of the Directors on
In preparing these financial statements, the Directors are required to:
pages 104 to 107) confirms, to the best of his or her knowledge, that:
• select suitable accounting policies and then apply them
•
the Group financial statements, which have been prepared in
• make judgements and accounting estimates that are reasonable
consistently;
and prudent;
• state whether applicable IFRSs as adopted by the European Union
have been followed, subject to any material departures disclosed
and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
that it faces.
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit or loss of
the Group; and
•
the “Management Report” (as defined in the Directors’ Report
on page 178) includes a fair review of the development and
performance of the business and the position of the Group,
together with a description of the principal risks and uncertainties
Non-Financial Information Statement
The following table sets out where stakeholders can find relevant Non-Financial information within this Annual Report, further to the Financial
Reporting Directive requirements contained in sections 414CA and 414CB of the Companies Act 2006. Where possible, it also states where
additional information can be found that support these requirements.
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Reporting requirement
Relevant Ocado policies and procedures Where to read more in this report
1 Business model
2 Principal risks and impact
Risk Management Policy
of business activity
3 Non-financial KPIs
4 Employee Engagement
5 Human rights
6 Social matters
Code of Conduct and Employee Handbook
Whistleblowing policy
Board Diversity policy
Equal Opportunities Policy
Peakon
Fuse
Human Rights policy
Modern slavery statement
Code of Conduct
Corporate Responsibility Strategy
Code of Conduct
Our Business Model
How We Manage Our Risks
Audit Committee Report
Strategy
Key Performance Indicators
Our People
Stakeholder Engagement
Corporate Governance Report
Our People
Corporate Responsibility
Ethics and Compliance
Corporate Responsibility
7
Anti-bribery and
corruption
Anti-bribery policy
Money Laundering policy
Ethics and Compliance
Corporate Governance Report
8 Environmental matters
Corporate Responsibility Strategy
Corporate Responsibility
Page
30-33
60-71
130-137
40-46
47-49
90-97
72-81
104-125
90-97
82-89
98
82-89
98
104-125
82-89
The Directors’ Report is approved by the Board and signed on its
behalf by
Neill Abrams
Group General Counsel and Company Secretary
9 February 2021
Ocado Group plc,
Registered Number: 07098618
Registered Office Address: Buildings One & Two, Trident Place,
Mosquito Way, Hatfield, Hertfordshire, AL10 9UL, United Kingdom
Country of Incorporation: England and Wales
Type: Public Limited Company
184 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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30029 9 February 2021 9:09 am V1 BFinancials.Ocado-Annual-Report-2020-Financials.indd 186Ocado-Annual-Report-2020-Financials.indd 18609/02/2021 09:15:4409/02/2021 09:15:44Back to contents 30029 9 February 2021 9:09 am V1 BFinancials.Ocado-Annual-Report-2020-Financials.indd 186Ocado-Annual-Report-2020-Financials.indd 18609/02/2021 09:15:4409/02/2021 09:15:4430029 9 February 2021 9:09 am V1 BGroupFinancials.ContentsIndependent Auditor’s Report188Consolidated Income Statement199Consolidated Statement of Comprehensive Income200 Consolidated Balance Sheet201Consolidated Statement of Changes in Equity202Consolidated Statement of Cash Flows203Notes to the Consolidated Financial Statements204Ocado-Annual-Report-2020-Financials.indd 187Ocado-Annual-Report-2020-Financials.indd 18709/02/2021 09:15:4409/02/2021 09:15:44Back to contents Independent Auditor’s Report
to the members of Ocado Group plc
Report on the audit of the financial statements
1. Opinion
In our opinion the financial statements of Ocado Group plc (“the Company”) and its subsidiaries (“the Group”):
• Give a true and fair view of the state of the Group’s and the Company’s affairs as at 29 November 2020, and of the Group’s loss for the period
then ended;
• Have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006
and International Financial Reporting Standards (IFRSs) as adopted by the European Union; and
• Have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4
of the IAS Regulation.
We have audited the financial statements which comprise:
• The Consolidated Income Statement;
• The Consolidated Statement of Comprehensive Income;
• The Consolidated and Company Balance Sheets;
• The Consolidated and Company Statements of Changes in Equity;
• The Consolidated and Company Statements of Cash Flows; and
• The related notes 1 to 5.5 to the consolidated financial statements and notes 1 to 5.2 to the Company financial statements.
The financial reporting framework that has been applied in their preparation is applicable law and international accounting standards in
conformity with the requirements of the Companies Act 2006 and IFRSs as adopted by the European Union.
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the United Kingdom, including the Financial Reporting Council’s (“FRC’s”) Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to the
Group for the year are disclosed in note 2.4 to the consolidated financial statements. We confirm that we have not provided to the Group or the
Company any non-audit services that are prohibited by the FRC’s Ethical Standard.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the period were:
• Recognition of Retail revenue;
• Accounting for Solutions contracts; and
•
Impairment of capitalised project costs.
Within this Report, key audit matters are identified as follows:
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
Scoping
The materiality that we used for the consolidated financial statements was £10.5 million which was determined on the basis of
revenue as the primary benchmark. We also considered net assets as a supporting benchmark.
The scope of the Group audit includes all significant trading companies in the United Kingdom, whose results taken
together account for over 95% of the Group’s revenue and net assets. We performed specified or analytical audit procedures
on the overseas entities.
Significant changes
in our approach
We did not consider the Group’s control of Ocado Retail, the joint venture with Marks and Spencer, to be a key audit
matter for the period. As explained in the Audit Committee’s Report on page 133, the dispute resolution procedures
remained unchanged in the shareholder agreement and therefore there were no significant changes to the key
judgements in relation to control as defined by IFRS 10 “Consolidated Financial Statements”.
There have been no other significant changes to our audit approach for the period.
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In our opinion the financial statements of Ocado Group plc (“the Company”) and its subsidiaries (“the Group”):
4.1 Going concern
4. Conclusions relating to going concern, principal risks and viability statement
We have reviewed the Directors’ statement in note 1.2 to the consolidated financial statements about whether
they considered it appropriate to adopt the going concern basis of accounting in preparing them and their
identification of any material uncertainties to the Group’s and the Company’s ability to continue to do so over
a period of at least twelve months from the date of approval of the financial statements.
We considered as part of our risk assessment the nature of the Group, its business model and related risks
including, where relevant, the effect of the Covid-19 pandemic and Brexit, the requirements of the applicable
financial reporting framework and the system of internal control. We evaluated the Directors’ assessment
of the Group’s ability to continue as a going concern, including challenging the underlying data and key
assumptions used to make the assessment, and evaluated the Directors’ plans for future actions in relation to
their going concern assessment.
We are required to state whether we have anything material to add or draw attention to in relation to that
statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with our
knowledge obtained in the audit.
Going concern is the basis of
preparation of the financial
statements that assumes
an entity will remain in
operation for a period of
at least 12 months from
the date of approval of the
financial statements.
We confirm that we have
nothing material to report, add
or draw attention to in respect
of these matters.
• The related notes 1 to 5.5 to the consolidated financial statements and notes 1 to 5.2 to the Company financial statements.
4.2 Principal risks and viability statement
The financial reporting framework that has been applied in their preparation is applicable law and international accounting standards in
conformity with the requirements of the Companies Act 2006 and IFRSs as adopted by the European Union.
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
Based solely on reading the Directors’ statements and considering whether they were consistent with the
knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of
the Directors’ assessment of the Group’s and the Company’s ability to continue as a going concern, we are
required to state whether we have anything material to add or draw attention to in relation to:
Viability means the ability of
the Group to continue over
the time horizon considered
appropriate by the Directors.
those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.
• The disclosures on pages 60 to 67 that describe the principal risks, procedures to identify emerging risks,
and an explanation of how these are being managed or mitigated;
• The Directors’ confirmation on page 60 and 61 that they have carried out a robust assessment of the
principal and emerging risks facing the Group, including those that would threaten its business model,
future performance, solvency or liquidity; or
• The Directors’ explanation on page 68 as to how they have assessed the prospects of the Group, over what
period they have done so and why they consider that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the Group will be able to continue in operation and meet
its liabilities as they fall due over the period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We are also required to report whether the Directors’ statement relating to the prospects of the Group required
by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
We confirm that we have
nothing material to report, add
or draw attention to in respect
of these matters.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements for the
period, and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereupon, and we
do not provide a separate opinion on these matters.
Independent Auditor’s Report
to the members of Ocado Group plc
Report on the audit of the financial statements
1. Opinion
then ended;
• Give a true and fair view of the state of the Group’s and the Company’s affairs as at 29 November 2020, and of the Group’s loss for the period
• Have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006
and International Financial Reporting Standards (IFRSs) as adopted by the European Union; and
• Have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4
of the IAS Regulation.
We have audited the financial statements which comprise:
• The Consolidated Income Statement;
• The Consolidated Statement of Comprehensive Income;
• The Consolidated and Company Balance Sheets;
• The Consolidated and Company Statements of Changes in Equity;
• The Consolidated and Company Statements of Cash Flows; and
We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the United Kingdom, including the Financial Reporting Council’s (“FRC’s”) Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to the
Group for the year are disclosed in note 2.4 to the consolidated financial statements. We confirm that we have not provided to the Group or the
Company any non-audit services that are prohibited by the FRC’s Ethical Standard.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the period were:
• Recognition of Retail revenue;
• Accounting for Solutions contracts; and
•
Impairment of capitalised project costs.
Within this Report, key audit matters are identified as follows:
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
The materiality that we used for the consolidated financial statements was £10.5 million which was determined on the basis of
revenue as the primary benchmark. We also considered net assets as a supporting benchmark.
Scoping
The scope of the Group audit includes all significant trading companies in the United Kingdom, whose results taken
together account for over 95% of the Group’s revenue and net assets. We performed specified or analytical audit procedures
on the overseas entities.
Significant changes
We did not consider the Group’s control of Ocado Retail, the joint venture with Marks and Spencer, to be a key audit
in our approach
matter for the period. As explained in the Audit Committee’s Report on page 133, the dispute resolution procedures
remained unchanged in the shareholder agreement and therefore there were no significant changes to the key
judgements in relation to control as defined by IFRS 10 “Consolidated Financial Statements”.
There have been no other significant changes to our audit approach for the period.
188 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Independent Auditor’s Report
to the members of Ocado Group plc
5.1 Recognition of Retail revenue
Key audit matter
description
The Group recognised Retail revenue of £2,188.6 million for the period (2019: £1,618.1 million).
Retail revenue, including its growth year on year, is a key metric when evaluating the performance of the business,
and continues to receive scrutiny externally and internally. This scrutiny has increased as a result of both the joint
venture and sourcing arrangement with Marks and Spencer.
There were significant changes in customer behaviour during the year, affecting basket size, basket mix and order
volume. This meant that the reconciling items that bridge the gap between the master sales record generated by
the Webshop system (which records raw order data) and customer credit card receipts became less predictable.
Based on our risk assessment procedures, we concluded that these items exhibited the greatest potential risk of
Management manipulation in the Retail revenue process.
In addition, as Retail sales are high volume and low value, we devoted significant effort to developing a data-driven
audit approach in order to test the occurrence of Retail revenue recognised in the year. For these reasons, we have
included recognition of Retail revenue as a key audit matter.
See notes 2.1 and 2.2 to the consolidated financial statements for further detail on the accounting policies for
revenue recognition and segmental revenue.
How the scope of our
audit responded to the
key audit matter
In response to the potential risk of Management manipulation, we conducted specific procedures to test the value
of items that bridge the gap between the master sales record and customer credit card receipts. For example,
we selected a sample of customer and Group employee receipts and traced these back to the items in the
reconciliation to assess whether they represented valid adjustments to orders, cash and revenue recorded in the
ledger.
To address the risk of occurrence of Retail revenue, our procedures included:
• Obtaining an understanding of the general IT controls over the Webshop system;
• Obtaining an understanding of Management’s controls over the appropriate recognition of Retail revenue, in
particular the reconciliation of the master sales record with the revenue recorded in the general ledger and
customers credit card receipts;
• An independent reperformance of the reconciliation control by:
− Independently reproducing the master sales record with our analytics specialists using the raw data from the
Webshop system;
− Testing the rationale and value of items that bridge the gap between the master sales record and customer
credit card receipts;
− Evaluating the completeness of customer credit card receipts in the reconciliation by tracing a sample of
amounts received in bank statements to payment service provider reports, and reconciling these reports with
the general ledger;
• Tracing an independent sample of orders from origination to the raw order data in the Webshop system.
Key observations
We are satisfied that Retail revenue has been appropriately recognised.
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Back to contents 5.1 Recognition of Retail revenue
5.2 Accounting for Solutions contracts
Key audit matter
The Group recognised Retail revenue of £2,188.6 million for the period (2019: £1,618.1 million).
description
Key audit matter
description
The Solutions business has agreed contracts with nine (2019: nine) customers. As discussed on page 21, the first
international CFCs for Sobeys and Groupe Casino “went live” during the period.
At the reporting date, the Group had contract liabilities of £299.3 million (2019: £191.8 million). Of this amount, £14.4
million (2019: £5.1 million) is expected to be recognised within the next year, with the remainder over future periods.
The accounting for these arrangements is complex and requires significant judgement. For the up-front and
ongoing fees, the appropriate timing and profile of revenue recognition, including with reference to the distinct
performance obligations, needs to be considered under IFRS 15 “Revenue from Contracts with Customers”.
Given the considerable external focus on the development of the Solutions business, we consider there to be a
potential risk for fraud in relation to the inappropriate timing and profile of revenue recognition.
See notes 2.1 and 2.2 to the consolidated financial statements for further detail on the accounting policies for
revenue recognition and segmental revenue.
In order to address the risk over the timing of revenue recognition, including those over the corresponding
performance obligations, our audit procedures included:
• Ascertaining the appropriate amount of revenue that should be allocated to each performance obligation by
assessing the fees that the Group expects to receive over the duration of each contract;
• Assessing the time period and profile over which revenue should be recognised as well as consideration of any
material rights identified and potential contradictory evidence;
• Where relationships have “gone live” during the period, specifically the arrangements with Sobeys and Groupe
Casino, obtaining evidence to support transactions and performance obligations, such as invoices for services,
cash receipts, or proof of delivery for software solutions; and
How the scope of our
audit responded to the
key audit matter
• Obtaining an understanding of the general IT controls over the Webshop system;
•
Independently recalculating the recognition of revenue and comparing to Management’s approach.
Key observations
We are satisfied that revenue from Solutions contracts has been recognised appropriately in line with IFRS 15.
Independent Auditor’s Report
to the members of Ocado Group plc
Retail revenue, including its growth year on year, is a key metric when evaluating the performance of the business,
and continues to receive scrutiny externally and internally. This scrutiny has increased as a result of both the joint
venture and sourcing arrangement with Marks and Spencer.
There were significant changes in customer behaviour during the year, affecting basket size, basket mix and order
volume. This meant that the reconciling items that bridge the gap between the master sales record generated by
the Webshop system (which records raw order data) and customer credit card receipts became less predictable.
Based on our risk assessment procedures, we concluded that these items exhibited the greatest potential risk of
Management manipulation in the Retail revenue process.
In addition, as Retail sales are high volume and low value, we devoted significant effort to developing a data-driven
audit approach in order to test the occurrence of Retail revenue recognised in the year. For these reasons, we have
included recognition of Retail revenue as a key audit matter.
See notes 2.1 and 2.2 to the consolidated financial statements for further detail on the accounting policies for
revenue recognition and segmental revenue.
How the scope of our
In response to the potential risk of Management manipulation, we conducted specific procedures to test the value
audit responded to the
of items that bridge the gap between the master sales record and customer credit card receipts. For example,
key audit matter
we selected a sample of customer and Group employee receipts and traced these back to the items in the
reconciliation to assess whether they represented valid adjustments to orders, cash and revenue recorded in the
ledger.
To address the risk of occurrence of Retail revenue, our procedures included:
• Obtaining an understanding of Management’s controls over the appropriate recognition of Retail revenue, in
particular the reconciliation of the master sales record with the revenue recorded in the general ledger and
customers credit card receipts;
• An independent reperformance of the reconciliation control by:
− Independently reproducing the master sales record with our analytics specialists using the raw data from the
− Testing the rationale and value of items that bridge the gap between the master sales record and customer
− Evaluating the completeness of customer credit card receipts in the reconciliation by tracing a sample of
amounts received in bank statements to payment service provider reports, and reconciling these reports with
Webshop system;
credit card receipts;
the general ledger;
• Tracing an independent sample of orders from origination to the raw order data in the Webshop system.
Key observations
We are satisfied that Retail revenue has been appropriately recognised.
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Independent Auditor’s Report
to the members of Ocado Group plc
5.3 Impairment of capitalised project costs
Key audit matter
description
The Group continues to invest significantly in developing the software and hardware it uses to operate the Retail
business and to provide the end-to-end OSP to Solutions customers.
The net book value of the Group’s intangible assets and property, plant and equipment has increased further year
on year to £1,024.5 million (2019: £654.4 million).
Amounts that have been capitalised in the year include £89.6 million (2019: £70.2 million) of internally-generated
intangible assets (see note 3.2 to the consolidated financial statements) and £351.6 million (2019: £164.0 million)
fixtures, fittings, plant and machinery (see note 3.3 to the consolidated financial statements.)
Expenditure is held as capital work-in-progress and is not depreciated or amortised if it relates to projects that are
not yet live and ready for use. This includes expenditure for in-progress United Kingdom and overseas CFCs as well
as bot and automation development for future use. At the reporting date, capital work-in-progress amounted to
£339.1 million (2019: £141.2 million).
Given the nature of this expenditure, we identified the possibility of unrecorded impairment as a key audit
matter. The sums being invested each year, the fast pace of development and the potential for new technology to
supersede previously-capitalised assets mean there is significant judgement involved in determining whether an
impairment charge or acceleration of depreciation and amortisation may be required. There is also judgement
involved in assessing whether project assets will generate future economic benefits, in particular those relating to
the Solutions business. As a result, there is a potential risk of Management manipulation in the judgements made
over the identification and timeliness of recognition of impairment.
The impairment charge recorded for the period was £5.4 million (2019: £2.4 million). See notes 3.2 and 3.3 to the
consolidated financial statements.
How the scope of our
audit responded to the
key audit matter
To address the risk that the value of capitalised project costs are overstated due to unrecorded impairments, our
audit procedures included:
• Obtaining a detailed understanding of Management’s impairment review control, including obtaining evidence
of each step of its control activities;
• Applying professional scepticism to the significant judgements made and conclusions drawn by Management,
including searching for indicators of bias (for example, in the criteria used for investigation and follow up);
• Selecting a risk-focussed sample of projects and:
− Conducting detailed enquiries with project managers, outside of the finance function, to enhance our
understanding of the plans, business rationale and economic benefits of those projects, and obtaining
evidence of budget approvals and extensions;
− Obtaining and inspecting evidence of budget approvals, expenditure against budget, and milestones
achieved to search for contradictory evidence and indicators of impairment such as significant delays, over-
spend or superseding of assets;
− Following the end of the period, conducting follow-up enquiries with project managers to ascertain whether
there had been any significant changes to previous conclusions reached, including with reference to
Management’s impairment review papers;
• Analysing the capital work-in-progress balance, with a focus on aged items to assess whether these remained
recoverable or should be impaired.
In addition to the above, to help consider and address the risk of Management manipulation further, we performed
a series of analytical tests on the asset registers to identify items that appeared unusual, for example projects with
limited or negative costs capitalised, and obtained explanations and supporting evidence.
Key observations
We are satisfied that the impairment charge on capitalised project costs has been appropriately determined and
recorded.
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6.1 Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in
evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Consolidated financial statements
Company financial statements
Materiality
£10.5 million (2019: £8.5 million)
£9.5 million (2019: £6.8 million)
Basis for determining
materiality
We determined materiality based 0.5% (2019: 0.5%)
of Group revenue as the primary benchmark. We
also considered the supporting benchmark of 0.6%
(2019: 0.8%) of net assets.
Rationale for the
benchmark applied
We determined materiality principally based on revenue
given the importance of this as a measure of overall
performance of the Group. However, we also considered
net assets as a supporting benchmark as the Group has
continued to invest significant sums in technology and in
the development of CFCs, much of which is capital work-
in-progress.
Company materiality is determined on the basis of
net assets and capped at 90% (2019: 80%) of Group
materiality, which has increased to reflect the contribution
of the parent company to the Group. It equates to 0.8%
(2019: 0.6%) of net assets.
The Company’s principal activities include holding
investments in other Group companies and incurring
costs and liabilities on behalf of the Group, including
borrowings. As a result, we considered net assets to be the
most relevant benchmark on which to base materiality.
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How the scope of our
To address the risk that the value of capitalised project costs are overstated due to unrecorded impairments, our
6.2 Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the financial statements as a whole. Group performance materiality was set at 65% (2019: 70%) of
Group materiality. In determining this, we considered the following:
• As outlined in the Report of the Chair of the Audit Committee on page 135, the Group is undergoing significant change and is implementing a
more robust financial control environment; this programme was commenced during the year and is still in progress; and
• Our past experience of the audit, including the level of misstatements identified and Management’s willingness to investigate and correct these.
6.3 Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £525,000 (2019: £423,000), as well
as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on
disclosure matters that we identified when assessing the overall presentation of the financial statements.
Independent Auditor’s Report
to the members of Ocado Group plc
5.3 Impairment of capitalised project costs
Key audit matter
The Group continues to invest significantly in developing the software and hardware it uses to operate the Retail
description
business and to provide the end-to-end OSP to Solutions customers.
audit responded to the
audit procedures included:
key audit matter
• Obtaining a detailed understanding of Management’s impairment review control, including obtaining evidence
The net book value of the Group’s intangible assets and property, plant and equipment has increased further year
on year to £1,024.5 million (2019: £654.4 million).
Amounts that have been capitalised in the year include £89.6 million (2019: £70.2 million) of internally-generated
intangible assets (see note 3.2 to the consolidated financial statements) and £351.6 million (2019: £164.0 million)
fixtures, fittings, plant and machinery (see note 3.3 to the consolidated financial statements.)
Expenditure is held as capital work-in-progress and is not depreciated or amortised if it relates to projects that are
not yet live and ready for use. This includes expenditure for in-progress United Kingdom and overseas CFCs as well
as bot and automation development for future use. At the reporting date, capital work-in-progress amounted to
£339.1 million (2019: £141.2 million).
Given the nature of this expenditure, we identified the possibility of unrecorded impairment as a key audit
matter. The sums being invested each year, the fast pace of development and the potential for new technology to
supersede previously-capitalised assets mean there is significant judgement involved in determining whether an
impairment charge or acceleration of depreciation and amortisation may be required. There is also judgement
involved in assessing whether project assets will generate future economic benefits, in particular those relating to
the Solutions business. As a result, there is a potential risk of Management manipulation in the judgements made
over the identification and timeliness of recognition of impairment.
The impairment charge recorded for the period was £5.4 million (2019: £2.4 million). See notes 3.2 and 3.3 to the
consolidated financial statements.
of each step of its control activities;
• Applying professional scepticism to the significant judgements made and conclusions drawn by Management,
including searching for indicators of bias (for example, in the criteria used for investigation and follow up);
• Selecting a risk-focussed sample of projects and:
− Conducting detailed enquiries with project managers, outside of the finance function, to enhance our
understanding of the plans, business rationale and economic benefits of those projects, and obtaining
evidence of budget approvals and extensions;
− Obtaining and inspecting evidence of budget approvals, expenditure against budget, and milestones
achieved to search for contradictory evidence and indicators of impairment such as significant delays, over-
spend or superseding of assets;
− Following the end of the period, conducting follow-up enquiries with project managers to ascertain whether
there had been any significant changes to previous conclusions reached, including with reference to
• Analysing the capital work-in-progress balance, with a focus on aged items to assess whether these remained
Management’s impairment review papers;
recoverable or should be impaired.
In addition to the above, to help consider and address the risk of Management manipulation further, we performed
a series of analytical tests on the asset registers to identify items that appeared unusual, for example projects with
limited or negative costs capitalised, and obtained explanations and supporting evidence.
Key observations
We are satisfied that the impairment charge on capitalised project costs has been appropriately determined and
recorded.
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Independent Auditor’s Report
to the members of Ocado Group plc
7. An overview of the scope of our audit
7.1 Identification and scoping of components
The scope of our Group audit was broadly consistent with the prior period, covering all significant trading companies in the United Kingdom,
including Ocado Retail (a joint venture with Marks and Spencer which is controlled and consolidated by the Group) and the joint venture with
Morrisons. The results for these entities account for over 95% (2019: 95%) of the Group’s revenue and net assets. Furthermore, we performed
specified audit procedures on certain balances in the overseas entities including cash, capitalised project costs, revenue and contract liabilities.
For the entities not subject to detailed audit work, we tested the consolidation process and conducted analytical procedures to confirm our
conclusion that there were no material misstatements in the aggregated financial information. All entities are currently managed from one
central location in the United Kingdom and all audit work relevant to the Group audit is conducted by the Group audit team based in London.
7.2 Our consideration of the control environment
We tested and relied upon the key manual and automated controls in the inventory process. We involved IT specialists to test the general
IT controls over key financial reporting systems, such as Oracle, Webshop and the Warehouse Management Systems.
We were able to rely on automated controls after inspecting sufficient evidence that appropriate restrictions existed over user access rights.
We tested manual controls at the material warehouse locations, varying our approach in response to the restrictions for Covid-19. Senior team
members visited and tested key controls at one CFC and one General Merchandise Distribution Centre (“GMDC”), and controls at other material
locations were tested remotely using video call technology.
As noted on page 135 of the Report from the Chairman of the Audit Committee, the Group has commenced a finance transformation
programme which included the objective of designing and implementing a more robust financial control environment. Management has taken
steps to improve the breadth and expertise of the finance team, in particular with the dedicated Head of Financial Control. Continued focus is
required in this area to respond to the increasing complexity and size of the Group, for example with respect to taxation, financial reporting as
well as potential future regulatory changes such as those charged with governance attesting to the quality of financial reporting controls.
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Back to contents Independent Auditor’s Report
to the members of Ocado Group plc
7. An overview of the scope of our audit
7.1 Identification and scoping of components
The scope of our Group audit was broadly consistent with the prior period, covering all significant trading companies in the United Kingdom,
including Ocado Retail (a joint venture with Marks and Spencer which is controlled and consolidated by the Group) and the joint venture with
Morrisons. The results for these entities account for over 95% (2019: 95%) of the Group’s revenue and net assets. Furthermore, we performed
specified audit procedures on certain balances in the overseas entities including cash, capitalised project costs, revenue and contract liabilities.
For the entities not subject to detailed audit work, we tested the consolidation process and conducted analytical procedures to confirm our
conclusion that there were no material misstatements in the aggregated financial information. All entities are currently managed from one
central location in the United Kingdom and all audit work relevant to the Group audit is conducted by the Group audit team based in London.
7.2 Our consideration of the control environment
We tested and relied upon the key manual and automated controls in the inventory process. We involved IT specialists to test the general
IT controls over key financial reporting systems, such as Oracle, Webshop and the Warehouse Management Systems.
We were able to rely on automated controls after inspecting sufficient evidence that appropriate restrictions existed over user access rights.
We tested manual controls at the material warehouse locations, varying our approach in response to the restrictions for Covid-19. Senior team
members visited and tested key controls at one CFC and one General Merchandise Distribution Centre (“GMDC”), and controls at other material
locations were tested remotely using video call technology.
As noted on page 135 of the Report from the Chairman of the Audit Committee, the Group has commenced a finance transformation
programme which included the objective of designing and implementing a more robust financial control environment. Management has taken
well as potential future regulatory changes such as those charged with governance attesting to the quality of financial reporting controls.
8. Other information
The Directors are responsible for the other information. The other information comprises the information
included in the Annual Report, other than the financial statements and our auditor’s report thereon.
We have nothing to report in
respect of these matters.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our Report, we do not express any form of assurance conclusion thereupon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in so doing, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material
misstatements of the other information include where we conclude that:
• Fair, balanced and understandable – the statement given by the Directors that they consider the Annual
Report and financial statements taken as a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s position and performance, business model
and strategy, is materially inconsistent with our knowledge obtained in the audit; or
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steps to improve the breadth and expertise of the finance team, in particular with the dedicated Head of Financial Control. Continued focus is
• Audit Committee reporting – the section describing the work of the Audit Committee does not
required in this area to respond to the increasing complexity and size of the Group, for example with respect to taxation, financial reporting as
appropriately address matters communicated by us to the Audit Committee; or
• Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the
Directors’ statement required under the Listing Rules relating to the Group’s compliance with the UK
Corporate Governance Code containing provisions specified for review by the auditor in accordance with
Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate
Governance Code.
We have nothing to report in respect of these matters.
9. Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud and non-compliance with laws and
regulations are set out below.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
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Independent Auditor’s Report
to the members of Ocado Group plc
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and
perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for
our opinion.
11.1 Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
• The nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration
policies, key drivers for Directors’ remuneration, bonus levels and performance targets;
• Results of our enquiries of Management, internal audit, the legal function including the Group’s General Counsel and Chief Compliance
Officer, the Chief Executive Officer and Chief Financial Officer of the Group and the Ocado Retail businesses, and the Audit Committee about
their own identification and assessment of the risks of irregularities;
• Any matters we identified having obtained and reviewed the Group’s documentation of its policies and procedures relating to:
− Identifying, evaluating and complying with laws and regulations and whether it was aware of any instances of non-compliance;
− Detecting and responding to the risks of fraud and whether it has knowledge of any actual, suspected or alleged fraud;
− The internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
• The matters discussed among the audit engagement team and involving relevant internal specialists, including IT and tax specialists,
regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified
the greatest potential for fraud in the following areas: recognition of Retail revenue, the accounting for Solutions contracts and impairment of
capitalised project costs. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk
of Management override.
We also obtained an understanding of the legal and regulatory framework in which the Group operates, focussing on provisions of those laws
and regulations that:
• Had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we
considered in this context included the UK Companies Act, Listing Rules and relevant tax legislation; and
• Do not have a direct effect on the financial statements but compliance with which may be fundamental to the Group’s ability to operate or to
avoid a material penalty. These included the Group’s compliance with the Groceries Supply Code of Practice (“GSCOP”).
11.2 Audit response to risks identified
As a result of performing the above, we identified recognition of Retail revenue, the accounting for Solutions contracts and impairment of
capitalised project costs related to the potential risk of fraud. The key audit matters section of our report explains these in more detail and also
describes the specific procedures we performed in response.
In addition to the above, our procedures to respond to the risks identified included the following:
• Reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant
laws and regulations described as having a direct effect on the financial statements;
• Enquiring of Management, the Audit Committee, in-house legal counsel and external legal advisors concerning actual and potential litigation
and claims;
• Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to
fraud;
• Reading minutes of meetings of those charged with governance and reviewing internal audit reports; and
• Addressing the risk of fraud through Management override of controls, testing the appropriateness of journal entries and other adjustments;
assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business
rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal
specialists, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
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to the members of Ocado Group plc
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and
perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for
our opinion.
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006.
11.1 Identifying and assessing potential risks related to irregularities
In our opinion, based on the work undertaken in the course of the audit:
• The information given in the Strategic Report and the Directors’ Report for the period for which the financial statements are prepared is
consistent with the financial statements; and
• The Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent company and their environment obtained in the course of the
audit, we have not identified any material misstatements in the Strategic Report or the Directors’ Report.
13. Matters on which we are required to report by exception
13.1 Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• We have not received all the information and explanations we require for our audit; or
We have nothing to report in
respect of these matters.
• Adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
• The Company financial statements are not in agreement with the accounting records and returns.
13.2 Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’
remuneration have not been made or the part of the Directors’ Remuneration Report to be audited is not in
agreement with the accounting records and returns.
We have nothing to report in
respect of these matters.
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In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
• The nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration
policies, key drivers for Directors’ remuneration, bonus levels and performance targets;
• Results of our enquiries of Management, internal audit, the legal function including the Group’s General Counsel and Chief Compliance
Officer, the Chief Executive Officer and Chief Financial Officer of the Group and the Ocado Retail businesses, and the Audit Committee about
their own identification and assessment of the risks of irregularities;
• Any matters we identified having obtained and reviewed the Group’s documentation of its policies and procedures relating to:
− Identifying, evaluating and complying with laws and regulations and whether it was aware of any instances of non-compliance;
− Detecting and responding to the risks of fraud and whether it has knowledge of any actual, suspected or alleged fraud;
− The internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
• The matters discussed among the audit engagement team and involving relevant internal specialists, including IT and tax specialists,
regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified
the greatest potential for fraud in the following areas: recognition of Retail revenue, the accounting for Solutions contracts and impairment of
capitalised project costs. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk
We also obtained an understanding of the legal and regulatory framework in which the Group operates, focussing on provisions of those laws
of Management override.
and regulations that:
• Had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we
considered in this context included the UK Companies Act, Listing Rules and relevant tax legislation; and
• Do not have a direct effect on the financial statements but compliance with which may be fundamental to the Group’s ability to operate or to
avoid a material penalty. These included the Group’s compliance with the Groceries Supply Code of Practice (“GSCOP”).
11.2 Audit response to risks identified
As a result of performing the above, we identified recognition of Retail revenue, the accounting for Solutions contracts and impairment of
capitalised project costs related to the potential risk of fraud. The key audit matters section of our report explains these in more detail and also
describes the specific procedures we performed in response.
In addition to the above, our procedures to respond to the risks identified included the following:
• Reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant
laws and regulations described as having a direct effect on the financial statements;
• Enquiring of Management, the Audit Committee, in-house legal counsel and external legal advisors concerning actual and potential litigation
and claims;
fraud;
• Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to
• Reading minutes of meetings of those charged with governance and reviewing internal audit reports; and
• Addressing the risk of fraud through Management override of controls, testing the appropriateness of journal entries and other adjustments;
assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business
rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal
specialists, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
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Independent Auditor’s Report
to the members of Ocado Group plc
14. Other matters
14.1 Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by the Board of Directors on 3 May 2017 to audit the financial
statements for the period ending 3 December 2017 and subsequent periods. The period of total uninterrupted engagement including previous
renewals and reappointments of the firm is four years, covering the periods ended 3 December 2017 to 29 November 2020.
14.2 Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
15. Use of our report
This Report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and its members as a body, for our audit work, for this Report, or for the opinions we have formed.
Mark Lee-Amies FCA (Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
9 February 2021
198 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Independent Auditor’s Report
to the members of Ocado Group plc
Consolidated Income Statement
for the 52 weeks ended 29 November 2020
14. Other matters
14.1 Auditor tenure
15. Use of our report
Following the recommendation of the Audit Committee, we were appointed by the Board of Directors on 3 May 2017 to audit the financial
statements for the period ending 3 December 2017 and subsequent periods. The period of total uninterrupted engagement including previous
renewals and reappointments of the firm is four years, covering the periods ended 3 December 2017 to 29 November 2020.
14.2 Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
This Report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and its members as a body, for our audit work, for this Report, or for the opinions we have formed.
Mark Lee-Amies FCA (Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
9 February 2021
Revenue
Cost of sales
Gross profit
Other income
Distribution costs
Administrative expenses
Operating profit/(loss) before results of joint ventures
and associate
Share of results of joint ventures and associate
Operating profit/(loss)
Loss on disposal of subsidiary
Finance income
Finance costs
Loss before tax
Income tax
Loss for the period
Attributable to:
Owners of Ocado Group plc
Non-controlling interests
Loss per share
Basic and diluted loss per share
52 weeks ended 29 November 2020
Notes
2.1
2.3
3.5, 3.6
2.6
4.5
4.5
2.7
5.2
Results before
exceptional
items A
£m
Exceptional
items A
(note 2.6)
£m
2,331.8
(1,517.9)
813.9
87.6
(653.4)
(343.0)
(94.9)
(0.9)
(95.8)
–
5.5
(58.3)
(148.6)
(25.6)
(174.2)
–
–
–
103.9
(1.0)
1.7
104.6
–
104.6
–
–
–
104.6
–
104.6
2.8
Total
£m
2,331.8
(1,517.9)
813.9
191.5
(654.4)
(341.3)
9.7
(0.9)
8.8
–
5.5
(58.3)
(44.0)
(25.6)
(69.6)
(126.0)
56.4
(69.6)
pence
(17.55)
52 weeks
ended
1 December
2019(1)(2)
£m
1,756.6
(1,164.8)
591.8
107.7
(549.7)
(336.3)
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
(186.5)
0.7
(185.8)
(1.1)
3.3
(30.9)
(214.5)
2.7
(211.8)
(213.1)
1.3
(211.8)
pence
(30.63)
(1) £22.1 million of adjustments relating to the adoption of IFRS 16 “Leases” have been reclassified from administrative expenses to distribution costs for the 52 weeks ended 1 December
2019, since the leases to which they relate are used for distribution rather than administration.
(2) The basic and diluted loss per share for the 52 weeks ended 1 December 2019 has been amended to reflect the correct weighted average number of shares at the end of the period.
See note 2.8 for more information.
Earnings before interest, taxation, depreciation, amortisation, impairment and exceptional items (EBITDA) A
Operating profit/(loss)
Adjustments for:
Exceptional items A
Amortisation of intangible assets
Impairment of intangible assets
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Depreciation of right-of-use assets
EBITDA A
The notes on pages 204 to 269 form part of these financial statements.
52 weeks
ended
29 November
2020
£m
8.8
52 weeks
ended
1 December
2019
£m
(185.8)
(104.6)
49.0
3.3
57.2
2.1
57.3
73.1
93.0
37.3
1.8
46.0
0.6
50.4
43.3
Notes
2.6
3.2
3.2
3.3
3.3
3.4
198 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
199
A
See Alternative Performance Measures on pages 293 and 294.
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Consolidated Statement of Comprehensive Income
for the 52 weeks ended 29 November 2020
Loss for the period
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent periods:
Cash flow hedges
– Gain/(loss) arising on hedging contracts
Foreign exchange loss on translation of foreign subsidiaries and joint venture
Items that will not be reclassified to profit or loss in subsequent periods:
Gain on equity investments designated as at fair value through other comprehensive income
Reclassification of equity of Jones Food Company Limited
Other comprehensive income for the period, net of income tax
Total comprehensive expense for the period
Attributable to:
Owners of Ocado Group plc
Non-controlling interests
The notes on pages 204 to 269 form part of these financial statements.
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
(69.6)
(211.8)
Notes
4.9
4.9
4.9
4.9
5.2
0.4
(0.9)
5.2
–
4.7
(64.9)
(121.3)
56.4
(64.9)
(1.7)
(0.6)
2.8
0.1
0.6
(211.2)
(212.5)
1.3
(211.2)
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Back to contents Consolidated Statement of Comprehensive Income
for the 52 weeks ended 29 November 2020
Consolidated Balance Sheet
as at 29 November 2020
Loss for the period
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent periods:
Cash flow hedges
– Gain/(loss) arising on hedging contracts
Foreign exchange loss on translation of foreign subsidiaries and joint venture
Items that will not be reclassified to profit or loss in subsequent periods:
Gain on equity investments designated as at fair value through other comprehensive income
Reclassification of equity of Jones Food Company Limited
Other comprehensive income for the period, net of income tax
Total comprehensive expense for the period
Attributable to:
Owners of Ocado Group plc
Non-controlling interests
The notes on pages 204 to 269 form part of these financial statements.
52 weeks
ended
52 weeks
ended
29 November
1 December
2020
£m
(69.6)
2019
£m
(211.8)
Notes
4.9
4.9
4.9
4.9
5.2
0.4
(0.9)
5.2
–
4.7
(1.7)
(0.6)
2.8
0.1
0.6
(64.9)
(211.2)
(121.3)
56.4
(64.9)
(212.5)
1.3
(211.2)
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Investment in joint ventures
Investment in associate
Other financial assets
Contract assets
Costs to obtain contracts
Deferred tax assets
Current assets
Asset held for sale
Inventories
Trade and other receivables
Other financial assets
Cash and cash equivalents
Insurance reimbursement asset
Contract assets
Costs to obtain contracts
Derivative financial assets
Total assets
Current liabilities
Contract liabilities
Trade and other payables
Provisions
Lease liabilities
Derivative financial liabilities
Net current assets
Non-current liabilities
Contract liabilities
Provisions
Borrowings
Lease liabilities
Deferred tax liabilities
Net assets
Equity
Share capital
Share premium
Treasury shares reserve
Other reserves
Retained earnings
Equity attributable to owners of Ocado Group plc
Non-controlling interests
Total equity
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
29 November
2020
£m
Notes
3.1
3.2
3.3
3.4
3.5
3.6
3.7
2.1
2.1
2.7
3.8
3.9
3.10
3.7
3.11
3.13
2.1
2.1
4.6
2.1
3.12
3.13
4.2
4.6
2.1
3.13
4.1
4.2
2.7
4.9
4.9
4.9
4.9
5.2
4.7
239.5
785.0
385.0
37.4
4.1
166.8
0.3
0.7
23.6
1,647.1
4.2
61.6
200.6
402.0
1,706.8
5.5
0.1
0.1
0.2
2,381.1
4,028.2
(14.4)
(422.9)
(8.4)
(48.1)
(0.3)
(494.1)
1,887.0
(284.9)
(35.6)
(997.4)
(359.7)
(19.3)
(1,696.9)
1,837.2
15.0
1,361.6
(113.2)
76.9
425.5
1,765.8
71.4
1,837.2
1 December
2019
2 December
2018
(restated)(1)(2)
(restated)(1)(2)
£m
4.7
185.8
468.6
368.8
45.8
4.7
177.3
0.3
0.8
27.2
1,284.0
4.2
52.3
150.0
112.8
640.6
49.2
0.1
–
–
1,009.2
2,293.2
(5.1)
(350.6)
(54.0)
(50.1)
(0.5)
(460.3)
548.9
(186.7)
(14.5)
(219.7)
(338.4)
(16.3)
(775.6)
1,057.3
14.2
705.3
(113.6)
(112.2)
554.2
1,047.9
9.4
1,057.3
£m
–
143.2
556.7
–
52.2
–
4.1
–
0.8
16.6
773.6
4.2
56.5
104.7
153.5
257.3
–
–
–
0.1
576.3
1,349.9
(6.6)
(292.0)
(8.3)
(22.9)
(0.5)
(330.3)
246.0
(108.6)
(8.8)
(244.3)
(93.4)
(8.9)
(464.0)
555.6
14.0
589.9
(9.2)
(114.8)
75.7
555.6
–
555.6
(1) £110.0 million (2018: £153.5 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019. See note 1.7 for more information.
(2) Trade and other payables have been increased as at 2 December 2018 and 1 December 2019 by £1.0 million to correct immaterial historical errors, with a corresponding decrease of retained earnings.
The notes on pages 204 to 269 form part of these financial statements.
200 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
201
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The consolidated financial statements on pages 199 to 203 were authorised for issue by the Board of Directors and signed on its behalf by:
Tim Steiner
Chief Executive Officer
Neill Abrams
Group General Counsel
and Company Secretary
Ocado Group plc
Company number: 07098618 (England and Wales)
9 February 2021
Back to contents
Consolidated Statement of Changes in Equity
for the 52 weeks ended 29 November 2020
Notes
Equity attributable to owners of Ocado Group plc
Share
capital
£m
14.0
–
14.0
–
Share
premium
£m
589.9
–
589.9
–
Treasury
shares
reserve
£m
(9.2)
–
(9.2)
–
Other
reserves
£m
(114.8)
2.0
(112.8)
–
Retained
earnings
£m
75.7
–
75.7
(213.1)
Non-
controlling
interests
£m
–
–
–
1.3
Total
£m
555.6
2.0
557.6
(213.1)
Total
equity
£m
555.6
2.0
557.6
(211.8)
(1.7)
(0.6)
2.8
0.1
(211.2)
2.1
2.4
0.8
54.2
–
–
(80.2)
12.8
716.7
2.1
710.9
1,057.3
(69.6)
–
–
–
(1.7)
(0.6)
2.8
–
(213.1)
0.1
(212.5)
–
–
2.1
2.4
0.3
48.5
(0.8)
0.3
(80.2)
12.8
710.7
–
691.6
554.2
(126.0)
0.8
54.2
–
–
(80.2)
12.8
710.7
–
702.8
1,047.9
(126.0)
–
–
–
–
1.3
–
–
–
–
–
–
–
–
6.0
2.1
8.1
9.4
56.4
–
–
0.4
(0.9)
–
–
0.4
(0.9)
–
(126.0)
5.2
(121.3)
–
56.4
5.2
(64.9)
(0.1)
–
0.2
(0.1)
22.4
–
646.2
10.8
0.5
–
22.4
184.5
–
–
–
–
–
–
646.2
10.8
0.5
–
22.4
184.5
–
(24.8)
(24.8)
5.2
(19.6)
4.9
4.9
4.9
4.9
4.9
4.9
4.9
4.9
4.9
4.9
4.10
4.9
4.9
4.9
4.9
4.9
4.9
4.9
4.10
4.1
–
–
–
–
–
0.2
–
–
–
–
–
–
–
–
–
0.2
14.2
–
–
–
–
–
–
–
–
–
–
113.0
2.4
–
–
–
–
–
–
–
–
115.4
705.3
–
–
–
–
–
0.7
0.1
645.6
10.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(111.1)
–
0.5
5.7
0.8
(0.3)
–
–
–
–
(104.4)
(113.6)
–
–
–
–
–
–
–
0.3
0.1
–
–
–
(1.7)
(0.6)
2.8
0.1
0.6
–
–
–
–
–
–
–
–
–
–
–
(112.2)
–
0.4
(0.9)
5.2
4.7
–
–
–
–
–
184.5
Balance at 2 December 2018(1)
Adjustment on adoption of IFRS 9
Adjusted balance at 2 December 2018
Loss for the period
Other comprehensive income:
Cash flow hedges
– Loss arising on hedging contracts
Foreign exchange loss on translation of foreign
subsidiaries and joint venture
Gain on equity investments designated as at
fair value through other comprehensive income
Reclassification of equity of Jones Food
Company Limited
Total comprehensive expense for the period
Transactions with owners
– Issue of ordinary shares
– Allotted in respect of share option schemes
– Disposal of treasury shares on exercise
by participants
– Disposal of unallocated treasury shares
– Transfer of treasury shares to participants
– Reclassification between reserves
– Cash settlement of Growth Incentive Plan
– Share-based payments charge
– Part-disposal of Ocado Retail Limited
– Acquisition of Jones Food Company Limited
Total transactions with owners
Balance at 1 December 2019(1)
Loss for the period
Other comprehensive income:
Cash flow hedges
– Gain arising on hedging contracts
Foreign exchange loss on translation of foreign
subsidiaries and joint venture
Gain on equity investments designated as at
fair value through other comprehensive income
Total comprehensive expense for the period
Transactions with owners
– Issue of ordinary shares
– Allotted in respect of share option schemes
– Disposal of treasury shares on exercise
by participants
– Disposal of unallocated treasury shares
– Share-based payments charge
– Issue of convertible bonds
– Adjustments arising from part–disposal
of Ocado Retail Limited(2)
– Additional investment in Jones Food
Company Limited
Total transactions with owners
Balance at 29 November 2020
–
0.8
15.0
–
656.3
1,361.6
–
0.4
(113.2)
(0.1)
184.4
76.9
(0.3)
(2.7)
425.5
(0.4)
839.2
1,765.8
0.4
5.6
71.4
–
844.8
1,837.2
(1) Trade and other payables have been increased as at 2 December 2018 and 1 December 2019 by £1.0 million to correct immaterial historical errors, with a corresponding decrease of
retained earnings.
(2) The completion statement relating to the part-disposal of Ocado Retail Limited in August 2019 was not finalised until February 2020, after the financial statements for the prior period
had been issued. An adjustment was recognised to the gain on disposal in the current period to reflect the repayment of consideration to Marks and Spencer Holdings Limited and
other completion-related adjustments.
The notes on pages 204 to 269 form part of these financial statements.
202 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Equity attributable to owners of Ocado Group plc
Treasury
Share
Share
shares
Other
Retained
capital
premium
reserve
reserves
earnings
Notes
£m
14.0
£m
589.9
£m
(9.2)
Non-
controlling
interests
£m
£m
(114.8)
2.0
£m
75.7
–
75.7
–
(213.1)
1.3
Adjusted balance at 2 December 2018
14.0
589.9
(9.2)
(112.8)
Balance at 2 December 2018(1)
Adjustment on adoption of IFRS 9
Loss for the period
Other comprehensive income:
Cash flow hedges
– Loss arising on hedging contracts
Foreign exchange loss on translation of foreign
subsidiaries and joint venture
Gain on equity investments designated as at
fair value through other comprehensive income
Reclassification of equity of Jones Food
Company Limited
Total comprehensive expense for the period
Transactions with owners
– Issue of ordinary shares
– Allotted in respect of share option schemes
– Disposal of treasury shares on exercise
by participants
– Disposal of unallocated treasury shares
– Transfer of treasury shares to participants
– Reclassification between reserves
– Cash settlement of Growth Incentive Plan
– Share-based payments charge
– Part-disposal of Ocado Retail Limited
– Acquisition of Jones Food Company Limited
Total transactions with owners
Balance at 1 December 2019(1)
Loss for the period
Other comprehensive income:
Cash flow hedges
– Gain arising on hedging contracts
Foreign exchange loss on translation of foreign
subsidiaries and joint venture
Gain on equity investments designated as at
fair value through other comprehensive income
Total comprehensive expense for the period
Transactions with owners
– Issue of ordinary shares
– Allotted in respect of share option schemes
– Disposal of treasury shares on exercise
by participants
– Disposal of unallocated treasury shares
– Share-based payments charge
– Issue of convertible bonds
– Adjustments arising from part–disposal
of Ocado Retail Limited(2)
– Additional investment in Jones Food
Company Limited
Total transactions with owners
Balance at 29 November 2020
retained earnings.
4.9
4.9
4.9
4.9
4.9
4.9
4.9
4.9
4.9
4.9
4.10
4.9
4.9
4.9
4.9
4.9
4.9
4.9
4.10
4.1
(213.1)
(212.5)
1.3
(211.2)
0.2
(111.1)
113.0
2.4
Total
£m
555.6
2.0
557.6
(213.1)
(1.7)
(0.6)
2.8
0.1
2.1
2.4
0.8
54.2
–
–
–
(80.2)
12.8
710.7
702.8
1,047.9
(126.0)
0.4
(0.9)
5.2
646.2
10.8
0.5
–
22.4
184.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.5
5.7
0.8
(0.3)
0.3
0.1
–
–
–
–
–
–
–
–
–
–
0.3
48.5
(0.8)
0.3
(80.2)
12.8
710.7
–
691.6
554.2
(126.0)
(0.1)
0.2
(0.1)
22.4
–
(1.7)
(0.6)
2.8
0.1
0.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.4
(0.9)
5.2
4.7
184.5
(0.1)
184.4
76.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.0
2.1
8.1
9.4
56.4
Total
equity
£m
555.6
2.0
557.6
(211.8)
(1.7)
(0.6)
2.8
0.1
2.1
2.4
0.8
54.2
–
–
(80.2)
12.8
716.7
2.1
710.9
1,057.3
(69.6)
0.4
(0.9)
5.2
(64.9)
646.2
10.8
0.5
–
22.4
184.5
(19.6)
–
844.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(126.0)
(121.3)
56.4
0.7
0.1
645.6
10.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
14.2
115.4
705.3
(104.4)
(113.6)
(112.2)
0.8
15.0
656.3
0.4
1,361.6
(113.2)
(24.8)
(24.8)
(0.3)
(2.7)
(0.4)
839.2
5.2
0.4
5.6
425.5
1,765.8
71.4
1,837.2
(1) Trade and other payables have been increased as at 2 December 2018 and 1 December 2019 by £1.0 million to correct immaterial historical errors, with a corresponding decrease of
(2) The completion statement relating to the part-disposal of Ocado Retail Limited in August 2019 was not finalised until February 2020, after the financial statements for the prior period
had been issued. An adjustment was recognised to the gain on disposal in the current period to reflect the repayment of consideration to Marks and Spencer Holdings Limited and
other completion-related adjustments.
The notes on pages 204 to 269 form part of these financial statements.
Consolidated Statement of Changes in Equity
for the 52 weeks ended 29 November 2020
Consolidated Statement of Cash Flows
for the 52 weeks ended 29 November 2020
Cash flows from operating activities
Loss before tax
Adjustments for
– Revenue recognised from long-term contracts
– Depreciation, amortisation and impairment expenses
– Insurance proceeds recognised as other income
– Non-cash exceptional items A
– Write-off of fixed assets, intangible assets and inventories
– Share of results of joint ventures and associate
– Movement of provisions
– Net finance cost
– Net gain/(loss) on derivative financial instruments
– Settlement of cash flow hedges
– Share-based payments charge
Changes in working capital
– Movement of contract liabilities
– Movement of inventories
– Movement of trade and other receivables
– Movement of trade and other payables
Cash generated from operations
Insurance proceeds relating to destroyed inventory and business interruption
Corporation tax paid
Interest paid
Cash settlement of Growth Incentive Plan
Net cash flow from operating activities
Cash flows from investing activities
Insurance proceeds relating to rebuilding Andover CFC
Proceeds from disposal of Marie Claire Beauty Limited, net of cash sold
Purchase of Jones Food Company Limited, net of cash acquired
Purchase of intangible assets
Purchase of property, plant and equipment
Dividend received from joint venture
Purchase of investments in joint venture and associate
Purchase of other treasury deposits
Proceeds from other treasury deposits
Purchase of unlisted equity investments
Loans to joint venture and associate
Interest received
Net cash flow used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary share capital, net of transaction costs
Proceeds from allotment of share options
Proceeds from disposal of treasury shares on exercise by participants
Proceeds from disposal of unallocated treasury shares, net of transaction costs
Proceeds from Value Creation Plan – jointly-owned equity awards
Proceeds from issue of convertible bonds, net of issue costs
Repayment of borrowings
Repayment of lease liabilities
Payment of financing fees
Proceeds from part-disposal of Ocado Retail Limited, net of transaction costs
Net cash flow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of changes in foreign exchange rates
Cash and cash equivalents at end of period
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
(restated)(1)
£m
(44.0)
(214.5)
(6.1)
168.9
(103.9)
(7.4)
–
0.9
18.5
52.8
0.4
(2.5)
22.4
97.5
38.5
(59.2)
52.8
229.6
40.0
(18.4)
(25.8)
–
225.4
25.0
3.0
–
(107.2)
(344.6)
7.7
–
(355.0)
95.0
(0.7)
(11.2)
5.2
(682.8)
646.2
10.8
0.5
–
–
935.5
–
(53.4)
(0.5)
(13.1)
1,526.0
1,068.6
640.6
(2.4)
1,706.8
(2.9)
233.0
(23.8)
–
9.5
(0.7)
(1.0)
27.6
(1.7)
(0.1)
12.8
79.5
(7.6)
(29.4)
8.0
88.7
73.8
–
(30.6)
(80.2)
51.7
–
(0.5)
(7.6)
(84.1)
(175.5)
15.6
(13.6)
(70.0)
113.5
(1.6)
–
3.3
(220.5)
0.8
2.4
0.8
54.2
1.3
–
(25.0)
(40.2)
(0.5)
558.3
552.1
383.3
257.3
–
640.6
Notes
2.1
2.4
2.6
2.6
2.6
3.5, 3.6
4.5
4.10
3.5
3.5, 3.6
4.1
4.1
3.11
202 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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(1) £110.0 million (2018: £153.5 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019. See note 1.7 for more information.
The notes on pages 204 to 269 form part of these financial statements.
A
See Alternative Performance Measures on pages 293 and 294.
Back to contents
Notes to the Consolidated Financial Statements
Section 1 – Basis of preparation
1.1 General information
Ocado Group plc (hereafter “the Company”) is a listed company, limited by shares, incorporated in England and Wales under the Companies
Act 2006 (company number: 07098618). The Company is the parent and the ultimate parent of the Group. The address of its registered office is
Buildings One & Two Trident Place, Mosquito Way, Hatfield, Hertfordshire, United Kingdom, AL10 9UL. The financial statements comprise the
results of the Company and its subsidiaries (hereafter “the Group”) (see note 5.1 for a full list of the subsidiaries). The financial period represents
the 52 weeks ended 29 November 2020. The prior financial period represents the 52 weeks ended 1 December 2019. The principal activities of
the Group are described in the Strategic Report on pages 14 to 99.
1.2 Basis of preparation
The financial statements have been prepared in accordance with the Listing Rules and the Disclosure Guidance and Transparency Rules of the
United Kingdom Financial Conduct Authority (where applicable), international accounting standards in conformity with the requirements of
the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union. The accounting policies applied are consistent with those described in the Annual Report and Accounts for the 52 weeks
ended 1 December 2019 of the Group.
The financial statements are presented in pounds sterling, rounded to the nearest hundred thousand unless otherwise stated. The financial
statements have been prepared under the historical cost convention, as modified by the revaluation of financial asset investments and certain
other financial assets and liabilities, which are held at fair value.
The Directors consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements of the Group.
New standards, amendments and interpretations adopted by the Group
In the current period, the Group has not adopted any new standards, but in the prior period, IFRS 9 “Financial Instruments” and IFRS 16 “Leases”
were adopted for the first time.
The Group has considered the following new standards, interpretations and amendments to published standards that are effective for the Group
for the period beginning 2 December 2019, and concluded either that they are not relevant to the Group or that they would not have a significant
effect on the Group’s financial statements other than on disclosures:
IAS 19
IFRIC 23
Annual Improvements to
IFRS Standards 2015–2017 Cycle
Employee Benefits (amendments)
Uncertainty over Income Tax Treatments
Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23
Effective date
1 January 2019
1 January 2019
1 January 2019
New standards, amendments and interpretations not yet adopted by the Group
The following new standards, interpretations and amendments to published standards and interpretations which are relevant to the Group have
been issued but are not effective for the period beginning 2 December 2019, and have not been adopted early:
IFRS 3
IFRS 7, IFRS 9, IAS 39
IAS 1, IAS 8
Various
IFRS 4, IFRS 7, IFRS 9, IFRS 16, IAS 39
IAS 16
IAS 37
Annual Improvements to
IFRS Standards 2018–2020 Cycle
IFRS 17
IAS 1
IFRS 10
IAS 28
Business Combinations (amendments)
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
Definition of Material (Amendments to IAS 1 and IAS 8)
Amendments to References to the Conceptual Framework in IFRS Standards
Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7,
IFRS 4 and IFRS 16)
Property, Plant and Equipment – proceeds of intended use
Onerous contracts – costs of fulfilling a contract
Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41
Insurance Contracts
Classification of liabilities as Current or non-Current
Consolidated Financial Statements (amendments)
Investments in Associates and Joint Ventures (amendments)
Effective date
1 January 2020
1 January 2020
1 January 2020
1 January 2020
1 January 2021
1 January 2022
1 January 2022
1 January 2022
1 January 2023
1 January 2023
Deferred
Deferred
These standards, interpretations and amendments to published standards and interpretations are not expected to have a material effect on the
Group’s financial statements.
204 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Notes to the Consolidated Financial Statements
Section 1 – Basis of preparation
1.1 General information
Ocado Group plc (hereafter “the Company”) is a listed company, limited by shares, incorporated in England and Wales under the Companies
Act 2006 (company number: 07098618). The Company is the parent and the ultimate parent of the Group. The address of its registered office is
Buildings One & Two Trident Place, Mosquito Way, Hatfield, Hertfordshire, United Kingdom, AL10 9UL. The financial statements comprise the
results of the Company and its subsidiaries (hereafter “the Group”) (see note 5.1 for a full list of the subsidiaries). The financial period represents
the 52 weeks ended 29 November 2020. The prior financial period represents the 52 weeks ended 1 December 2019. The principal activities of
the Group are described in the Strategic Report on pages 14 to 99.
1.2 Basis of preparation
The financial statements have been prepared in accordance with the Listing Rules and the Disclosure Guidance and Transparency Rules of the
United Kingdom Financial Conduct Authority (where applicable), international accounting standards in conformity with the requirements of
the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union. The accounting policies applied are consistent with those described in the Annual Report and Accounts for the 52 weeks
ended 1 December 2019 of the Group.
The financial statements are presented in pounds sterling, rounded to the nearest hundred thousand unless otherwise stated. The financial
statements have been prepared under the historical cost convention, as modified by the revaluation of financial asset investments and certain
other financial assets and liabilities, which are held at fair value.
The Directors consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements of the Group.
New standards, amendments and interpretations adopted by the Group
In the current period, the Group has not adopted any new standards, but in the prior period, IFRS 9 “Financial Instruments” and IFRS 16 “Leases”
were adopted for the first time.
The Group has considered the following new standards, interpretations and amendments to published standards that are effective for the Group
for the period beginning 2 December 2019, and concluded either that they are not relevant to the Group or that they would not have a significant
effect on the Group’s financial statements other than on disclosures:
IAS 19
IFRIC 23
Annual Improvements to
IFRS Standards 2015–2017 Cycle
Employee Benefits (amendments)
Uncertainty over Income Tax Treatments
Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23
New standards, amendments and interpretations not yet adopted by the Group
The following new standards, interpretations and amendments to published standards and interpretations which are relevant to the Group have
been issued but are not effective for the period beginning 2 December 2019, and have not been adopted early:
IFRS 7, IFRS 9, IAS 39
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
Business Combinations (amendments)
Definition of Material (Amendments to IAS 1 and IAS 8)
Amendments to References to the Conceptual Framework in IFRS Standards
IFRS 4, IFRS 7, IFRS 9, IFRS 16, IAS 39
Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7,
IFRS 3
IAS 1, IAS 8
Various
IAS 16
IAS 37
IFRS 17
IAS 1
IFRS 10
IAS 28
Annual Improvements to
IFRS Standards 2018–2020 Cycle
IFRS 4 and IFRS 16)
Property, Plant and Equipment – proceeds of intended use
Onerous contracts – costs of fulfilling a contract
Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41
Insurance Contracts
Classification of liabilities as Current or non-Current
Consolidated Financial Statements (amendments)
Investments in Associates and Joint Ventures (amendments)
Effective date
1 January 2019
1 January 2019
1 January 2019
Effective date
1 January 2020
1 January 2020
1 January 2020
1 January 2020
1 January 2021
1 January 2022
1 January 2022
1 January 2022
1 January 2023
1 January 2023
Deferred
Deferred
These standards, interpretations and amendments to published standards and interpretations are not expected to have a material effect on the
Group’s financial statements.
1.3 Basis of consolidation
The Group’s consolidated financial statements consist of the financial statements of the Company, all entities controlled by the Company
(its subsidiaries) and the Group’s share of its interests in joint ventures and associates.
Subsidiaries
The financial statements of subsidiaries are included in the consolidated financial statements from the date on which the Company obtains control,
and excluded when the Company loses control over them. Control is achieved when the Company has power over a subsidiary, exposure or rights
to variable returns from it, and the ability to use its power to affect these returns. This ability enables the Company to affect the amount of economic
benefit generated from the entity’s activities. This ability and right exists for all of the Group’s subsidiaries listed in note 5.1.
Ocado Bulgaria EOOD, Ocado Solutions (US) ProCo LLC and Ocado Spain S.L.U. have a reporting date of 31 December, Jones Food Company
Limited of 30 April, and JFC Hydroponics Limited of 31 March. All these companies have prepared additional financial information for the 52
weeks ended 29 November 2020 to enable consolidation.
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
All other subsidiaries have a reporting date of 29 November 2020.
All intercompany balances and transactions, including recognised gains arising from intra-Group transactions, have been eliminated in full.
Unrealised losses are eliminated in the same manner as recognised gains except to the extent that they provide evidence of impairment.
The Group allocates the total comprehensive income or expense of subsidiaries to the owners of the Company and non-controlling interests,
based on their respective ownership interests.
Joint ventures and associates
The Group’s share of the results of joint ventures and associates is included in the Consolidated Income Statement using the equity method of
accounting. Investments in joint ventures and associates are held on the Consolidated Balance Sheet at cost, plus post-acquisition changes in
the Group’s share of the net assets of the entities, less any impairment in value and dividends received. The carrying values of the investments in
joint ventures and associates include implicit goodwill.
If the Group’s share of losses in a joint venture or associate equals or exceeds its initial investment in the joint venture or associate, the Group
does not recognise further losses, unless it has incurred obligations to do so or made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the Group’s interest in the entity.
Accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out in the relevant notes to the financial
statements. Accounting policies not specifically attributable to a note are set out below. These policies have been applied consistently to all
the periods presented unless stated otherwise.
Foreign currency translation
Functional and presentational currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment
in which the entity operates (the “functional currency”). The pound sterling is the Company’s functional and the Group’s presentational currency.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated at
exchange rates prevailing on the reporting date. Income and expenses are translated at the average exchange rates for the period or at the date of
the transaction. Exchange differences arising are recognised in other comprehensive income and accumulated in a separate component of equity.
Transactions and balances
Transactions in foreign currencies are translated into the functional currency using the exchange rates prevailing at the dates of the transactions
or, where items are remeasured, at the dates of the remeasurements. Foreign exchange gains or losses resulting from the settlement of such
transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the Consolidated Income Statement.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Consolidated Income
Statement within finance income or costs. All other foreign exchange gains and losses are presented in the Consolidated Income Statement
within operating profit or loss.
204 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Back to contents
Notes to the Consolidated Financial Statements
Continued
1.3 Basis of consolidation continued
Group companies
The results and financial position of all the Group’s entities (none of which has the currency of a hyper-inflationary economy) that have a
different functional currency to the Group’s presentational currency are translated into the presentational currency as follows:
a. Assets and liabilities for each Balance Sheet presented are translated at the closing rate at the date of that Balance Sheet;
b. Income and expenses for each Income Statement are translated at average exchange rates (unless the average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated
at the rates on the dates of the transactions); and
c. All resulting exchange differences are recognised as a separate component of equity.
1.4 Significant accounting policies and critical estimates, judgements and assumptions
The preparation of the Group’s financial statements requires the use of certain judgements, estimates and assumptions that affect the reported
amounts of assets, liabilities, income and expenses. Estimates and judgements are evaluated continually, and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Key estimation uncertainties are the key assumptions concerning the future and other key sources of estimation uncertainty at the reporting
date that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next period.
Significant judgements are those that the Group has made in the process of applying the Group’s accounting policies and that have the most
significant effect on the amounts recognised in the financial statements.
Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimates were based, or as a result
of new information or more experience.
Significant accounting policies, key estimation uncertainties and significant judgements are provided below:
Significant accounting policies
Area
Policy
Revenue
recognition
For the Retail segment, revenue from the sale of goods is recognised when the customer obtains control of the goods,
which is generally on delivery to the customer’s home for Ocado deliveries, and upon transfer of goods to the courier
for third-party deliveries.
For the UK Solutions & Logistics and International Solutions segments, revenue from the rendering of services is
recognised over the life of the contract from the date the customer first benefits from those services.
Key estimation uncertainties
Area
Estimation uncertainty
Fair value
measurement
The fair value of contingent consideration receivable is based on an estimate of discounted future cash in-flows. At the
reporting date the fair value recognised was £173.6 million. The majority of this relates to the payment of up to £187.5
million plus interest by Marks and Spencer Holdings Limited agreed on the sale of 50.0% of Ocado Retail Limited, which is
contingent on specific performance targets being hit. The fair value reflects the full, discounted £187.5 million plus interest,
since it is expected that the agreed performance targets will be hit. Should some or all of these targets be missed, less
consideration would be received. Should the discount rate applied be changed, the fair value of the consideration would
change, but the amount of consideration that would actually be received would not necessarily change.
Note
2.1
Note
4.7
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Back to contents Notes to the Consolidated Financial Statements
Continued
1.3 Basis of consolidation continued
Group companies
The results and financial position of all the Group’s entities (none of which has the currency of a hyper-inflationary economy) that have a
different functional currency to the Group’s presentational currency are translated into the presentational currency as follows:
a. Assets and liabilities for each Balance Sheet presented are translated at the closing rate at the date of that Balance Sheet;
b. Income and expenses for each Income Statement are translated at average exchange rates (unless the average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated
at the rates on the dates of the transactions); and
c. All resulting exchange differences are recognised as a separate component of equity.
1.4 Significant accounting policies and critical estimates, judgements and assumptions
The preparation of the Group’s financial statements requires the use of certain judgements, estimates and assumptions that affect the reported
amounts of assets, liabilities, income and expenses. Estimates and judgements are evaluated continually, and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Key estimation uncertainties are the key assumptions concerning the future and other key sources of estimation uncertainty at the reporting
date that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next period.
Significant judgements are those that the Group has made in the process of applying the Group’s accounting policies and that have the most
significant effect on the amounts recognised in the financial statements.
Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimates were based, or as a result
Significant accounting policies, key estimation uncertainties and significant judgements are provided below:
of new information or more experience.
Significant accounting policies
Policy
Area
Revenue
recognition
for third-party deliveries.
Key estimation uncertainties
Area
Estimation uncertainty
For the Retail segment, revenue from the sale of goods is recognised when the customer obtains control of the goods,
which is generally on delivery to the customer’s home for Ocado deliveries, and upon transfer of goods to the courier
For the UK Solutions & Logistics and International Solutions segments, revenue from the rendering of services is
recognised over the life of the contract from the date the customer first benefits from those services.
Fair value
measurement
The fair value of contingent consideration receivable is based on an estimate of discounted future cash in-flows. At the
reporting date the fair value recognised was £173.6 million. The majority of this relates to the payment of up to £187.5
million plus interest by Marks and Spencer Holdings Limited agreed on the sale of 50.0% of Ocado Retail Limited, which is
contingent on specific performance targets being hit. The fair value reflects the full, discounted £187.5 million plus interest,
since it is expected that the agreed performance targets will be hit. Should some or all of these targets be missed, less
consideration would be received. Should the discount rate applied be changed, the fair value of the consideration would
change, but the amount of consideration that would actually be received would not necessarily change.
Note
2.1
Note
4.7
1.4 Significant accounting policies and critical estimates, judgements and assumptions continued
Significant judgements
Area
Judgement
Consolidation of
Ocado Retail
Revenue from
contracts with
customers
Amortisation
and depreciation
charges
Management has concluded that the Group controls Ocado Retail Limited (“Ocado Retail”), since it holds 50.0% of the
voting rights of the company, and an agreement signed by the shareholders grants the Group determinative rights, after
agreed dispute-resolution procedures, in relation to the approval of Ocado Retail’s business plan and budget and the
appointment and removal of Ocado Retail’s Chief Executive Officer who is responsible for directing the relevant activities
of the business.
Due to the size and complexity of some of Ocado Solutions’ contracts, there are significant judgements which must be
made. The identification of performance obligations in a contract is a significant judgement, since it determines from when
revenue is recognised. Management has adjudged that there is one underlying performance obligation in each contract,
and that revenue should begin to be recognised when a working solution is operational for a customer. The identification
of consideration and material rights in a contract is another significant judgement, since it determines the period over
which up-front fees are recognised as revenue. Alternative judgements would result in different amounts of revenue being
recognised at different times. It is expected that more revenue will be recognised as more Solutions contracts go live.
At the reporting date, intangible assets (excluding goodwill) and plant, property and equipment totalled £1,024.5 million
(2019: £654.4 million). For the period, the amortisation charge on intangible assets and depreciation charge on plant,
property and equipment totalled £106.2 million (2019: £83.3 million). Management’s judgement is required in assessing the
useful lives of assets, which determines the level of the amortisation and depreciation charge recognised each period. A
shorter assessed useful life of a specific asset would result in a higher amortisation or depreciation charge being recognised
per period over a smaller number of periods.
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Note
5.1
2.1
3.2,
3.3
Other estimates, assumptions and judgements are applied by the Group. These include, but are not limited to, those relating to identifying
exceptional items, recognising deferred tax assets for historical losses, calculating impairment charges on intangible assets and plant, property
and equipment, and calculating the fair values of equity instruments granted. These estimates, assumptions and judgements are also evaluated
on an ongoing basis but are not deemed significant.
1.5 Changes in significant accounting policies
The accounting policies adopted are consistent with those of the prior period; there have been no changes in significant accounting policies.
206 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Notes to the Consolidated Financial Statements
Continued
1.6 Going concern basis
Accounting standards require that Directors satisfy themselves that it is reasonable for them to conclude on whether or not it is appropriate to
prepare financial statements on the going concern basis. There has been no material uncertainty identified which would cast significant doubt
upon the Group’s ability to continue using the going concern basis of accounting for the 12 months following the approval of this Annual Report.
In assessing going concern, the Directors take into account the Group’s cash flows, solvency and liquidity positions and borrowing facilities.
At the reporting date, the Group had cash and cash equivalents of £1,706.8 million (2019 (restated): £640.6 million), other treasury deposits of
£370.0 million (2019 (restated): £110.0 million), external gross debt A of £1,355.5 million (2019: £544.2 million) (excluding lease liabilities payable
to MHE JVCo Limited of £49.7 million (2019: £64.0 million)) and net current assets of £1,887.0 million (2019: £548.9 million). The Group has a
mixture of short- and medium-term financing arrangements, including £225.0 million of senior secured notes due in 2024, £600.0 million of
senior unsecured convertible bonds due in 2025, and £350.0 million of senior unsecured convertible bonds due in 2027. The Group forecasts
its liquidity and working capital requirements, and ensures it maintains sufficient headroom so as not to breach any financial covenants in its
borrowing facilities. The financial position of the Group, including information on cash flows, can be found in Group Financials on pages 188 to
287. In determining whether there are material uncertainties, the Directors consider the Group’s business activities, together with factors that
are likely to affect its future development and position (see the Strategic Report on pages 14 to 99) and the Group’s principal risks and the likely
effectiveness of any mitigating actions and controls available to the Directors (see pages 60 to 67.)
Unlike its effect on many other businesses, Covid-19 has increased customers’ demand for the Group’s services, and this demand looks set to
continue both in the short term and through the longer-term trend towards online retail.
Further details of the Group’s considerations are provided in the Viability Statement and Going Concern Statement on page 71.
1.7 Restatement of cash and cash equivalents
IAS 7 “Statement of Cash Flows” defines cash equivalents as being “held for the purpose of meeting short-term cash commitments”. It suggests
that “an investment normally qualifies as a cash and cash equivalent only when it has a short maturity of, say, three months or less from the date
of acquisition”.
At the end of the prior period, the Group disclosed £110.0 million (2018: £153.5 million) of treasury deposits with maturities of more than three
months (but no more than six months) from the date of acquisition as cash and cash equivalents. Subsequently, the comparative figures have
been restated to reflect the reclassification of these balances from cash and cash equivalents to other current financial assets.
Only the Consolidated Balance Sheet and Consolidated Statement of Cash Flows are affected as detailed below:
Restatement of Consolidated Balance Sheet as at 1 December 2019
Non-current assets
Current assets
Other financial assets
Cash and cash equivalents
Other current assets
Total assets
Current liabilities
Net current assets
Non-current liabilities
Net assets
Total equity
1 December
2019
(previously
reported)
£m
1,284.0
Reclassification
£m
1 December
2019
(restated)
£m
–
1,284.0
2.8
750.6
255.8
1,009.2
2,293.2
(460.3)
548.9
(775.6)
1,057.3
1,057.3
110.0
(110.0)
–
–
–
–
–
–
–
–
112.8
640.6
255.8
1,009.2
2,293.2
(460.3)
548.9
(775.6)
1,057.3
1,057.3
A
See Alternative Performance Measures on pages 293 and 294.
208 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
1.6 Going concern basis
Accounting standards require that Directors satisfy themselves that it is reasonable for them to conclude on whether or not it is appropriate to
prepare financial statements on the going concern basis. There has been no material uncertainty identified which would cast significant doubt
upon the Group’s ability to continue using the going concern basis of accounting for the 12 months following the approval of this Annual Report.
In assessing going concern, the Directors take into account the Group’s cash flows, solvency and liquidity positions and borrowing facilities.
At the reporting date, the Group had cash and cash equivalents of £1,706.8 million (2019 (restated): £640.6 million), other treasury deposits of
£370.0 million (2019 (restated): £110.0 million), external gross debt A of £1,355.5 million (2019: £544.2 million) (excluding lease liabilities payable
to MHE JVCo Limited of £49.7 million (2019: £64.0 million)) and net current assets of £1,887.0 million (2019: £548.9 million). The Group has a
mixture of short- and medium-term financing arrangements, including £225.0 million of senior secured notes due in 2024, £600.0 million of
senior unsecured convertible bonds due in 2025, and £350.0 million of senior unsecured convertible bonds due in 2027. The Group forecasts
its liquidity and working capital requirements, and ensures it maintains sufficient headroom so as not to breach any financial covenants in its
borrowing facilities. The financial position of the Group, including information on cash flows, can be found in Group Financials on pages 188 to
287. In determining whether there are material uncertainties, the Directors consider the Group’s business activities, together with factors that
are likely to affect its future development and position (see the Strategic Report on pages 14 to 99) and the Group’s principal risks and the likely
effectiveness of any mitigating actions and controls available to the Directors (see pages 60 to 67.)
Unlike its effect on many other businesses, Covid-19 has increased customers’ demand for the Group’s services, and this demand looks set to
continue both in the short term and through the longer-term trend towards online retail.
1.7 Restatement of cash and cash equivalents
IAS 7 “Statement of Cash Flows” defines cash equivalents as being “held for the purpose of meeting short-term cash commitments”. It suggests
that “an investment normally qualifies as a cash and cash equivalent only when it has a short maturity of, say, three months or less from the date
of acquisition”.
At the end of the prior period, the Group disclosed £110.0 million (2018: £153.5 million) of treasury deposits with maturities of more than three
months (but no more than six months) from the date of acquisition as cash and cash equivalents. Subsequently, the comparative figures have
been restated to reflect the reclassification of these balances from cash and cash equivalents to other current financial assets.
Only the Consolidated Balance Sheet and Consolidated Statement of Cash Flows are affected as detailed below:
Restatement of Consolidated Balance Sheet as at 1 December 2019
Non-current assets
Current assets
Other financial assets
Cash and cash equivalents
Other current assets
Total assets
Current liabilities
Net current assets
Non-current liabilities
Net assets
Total equity
1 December
2019
(previously
reported)
Reclassification
(restated)
1 December
2019
£m
1,284.0
2.8
750.6
255.8
1,009.2
2,293.2
(460.3)
548.9
(775.6)
1,057.3
1,057.3
£m
–
110.0
(110.0)
–
–
–
–
–
–
–
–
£m
1,284.0
112.8
640.6
255.8
1,009.2
2,293.2
(460.3)
548.9
(775.6)
1,057.3
1,057.3
1.7 Restatement of cash and cash equivalents continued
Restatement of Consolidated Balance Sheet as at 2 December 2018
Non-current assets
Current assets
Other financial assets
Cash and cash equivalents
Other current assets
Total assets
Current liabilities
Net current assets
Non-current liabilities
Net assets
Total equity
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2 December
2018
(previously
reported)
£m
773.6
Reclassification
£m
2 December
2018
(restated)
£m
–
773.6
–
410.8
165.5
576.3
1,349.9
(330.3)
246.0
(464.0)
555.6
555.6
153.5
(153.5)
–
–
–
–
–
–
–
–
153.5
257.3
165.5
576.3
1,349.9
(330.3)
246.0
(464.0)
555.6
555.6
Further details of the Group’s considerations are provided in the Viability Statement and Going Concern Statement on page 71.
Restatement of Consolidated Statement of Cash Flows for the 52 weeks ended 1 December 2019
Net cash flow from operating activities
Cash flows from investing activities
Purchase of other treasury deposits
Proceeds from other treasury deposits
Other cash flows used in investing activities
Net cash flow used in investing activities
Net cash flow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
52 weeks
ended
1 December
2019
(previously
reported)
£m
51.7
–
–
(264.0)
(264.0)
552.1
339.8
410.8
750.6
52 weeks
ended
1 December
2019
(restated)
£m
Reclassification
£m
–
51.7
(70.0)
113.5
–
43.5
–
43.5
(153.5)
(110.0)
(70.0)
113.5
(264.0)
(220.5)
552.1
383.3
257.3
640.6
Restatement of Consolidated Statement of Cash Flows for the 52 weeks ended 2 December 2018
Net cash flow from operating activities
Cash flows from investing activities
Purchase of other treasury deposits
Other cash flows used in investing activities
Net cash flow used in investing activities
Net cash flow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
52 weeks
ended
2 December
2018
(previously
reported)
£m
128.4
–
(167.9)
(167.9)
300.3
260.8
150.0
410.8
52 weeks
ended
2 December
2018
(restated)
£m
Reclassification
£m
–
128.4
(153.5)
–
(153.5)
–
(153.5)
–
(153.5)
(153.5)
(167.9)
(321.4)
300.3
107.3
150.0
257.3
A
See Alternative Performance Measures on pages 293 and 294.
208 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Notes to the Consolidated Financial Statements
Continued
Section 2 – Results for the period
2.1 Revenue
Accounting policies
Revenue represents the transaction prices to which the Group expects to be entitled in return for delivering goods or services to its customers.
The amount recognised in any period is based on a judgement of when the customer is able to benefit from the goods or services provided,
and an assessment of the progress made towards completely satisfying each performance obligation. The following provides information
about the nature and timing of the satisfaction of performance obligations in contracts and the related revenue recognition policies, categorised
by reportable segments. For information about reportable segments, see note 2.2.
Retail segment
Identification of performance obligations
In a typical Retail contract there is one performance obligation, which is to deliver goods ordered online to the customer at the scheduled time
and to the agreed address. Ocado Smart Pass, the Group’s discounted pre-pay membership scheme, is a separate contract with a customer and
has a separate single performance obligation which is to provide delivery services for an agreed period of time. The Group applies the practical
expedient allowed under IFRS 15 “Revenue from Contracts with Customers” to apply the standard requirements to a portfolio of contracts, rather
than individual contracts, as it believes the characteristics of each sale are similar, and that doing so does not materially affect the financial
statements.
Determining transaction prices
Customers pay in full at the point of sale. The transaction price is based on the aggregation of all order values, shown net of any material
adjustment for expected returns or expected future redemption of marketing vouchers in accordance with guidance on variable consideration
in IFRS 15. Standard delivery charges and carrier bag receipts are included in transaction prices. Smart Pass transaction prices are the contracted
values of the memberships for the agreed periods of delivery services.
Allocation of transaction prices to performance obligations
Each contract has a single performance obligation and so the whole transaction price is assigned to that single obligation. At the end of each
reporting period, Management reviews and adjusts for elements of variable consideration such as expected refunds or expected voucher
redemptions.
Revenue recognition
Revenue from online grocery orders is recognised at a point in time when the customer obtains control of the goods, which for deliveries
performed by the Group usually occurs when the goods are delivered to and have been accepted at the customer’s home. For goods which
are delivered by third-party couriers, revenue is recognised when the items have been transferred to the third party for onward delivery to the
customer. These are shown net of returns, relevant marketing vouchers and offers and value added taxes. Relevant vouchers and offers include
money-off coupons, conditional-spend vouchers and offers such as buy three for the price of two. Revenue from Ocado Smart Pass
is recognised over the duration of the membership on a time-elapsed, straight-line basis.
UK Solutions & Logistics and International Solutions segments
Identification of performance obligations
Solutions contracts are allocated to one of the two Solutions segments based on geography. The approach taken to evaluate the accounting
treatment of a contract is the same for both segments, with each contract being considered on a case-by-case basis. A typical Ocado Solutions
contract has a single performance obligation: “to enable the client to access the OSP end-to-end online grocery platform from the go-live date,
with an agreed physical capacity, from a CFC for example, for the use of its retail brands”. The ability to derive independent benefit is a key
determinant. For example, there are several critical contractual milestones which occur before the service is operational, such as the design of
the CFC for the customer or preparation of the OSP. However, Management has concluded that the customer is not able to derive any benefit
from these individual elements until the service is operational and they are able to fulfil an order. Depending on the individual customer,
fulfilment of an order may include the delivery of goods to the final consumer, and this would make up part of the obligation.
Consequently, designing the CFC or building the customer OSP is not a separate performance obligation and no revenue can be assigned to
satisfying these aspects of the contract. Some contracts, however, have multiple components, for example, the addition of Store Pick services
or additional CFCs, which lead to additional distinct performance obligations. In these situations, Management uses its judgement to determine
whether there are separable performance obligations from which the customer is able to benefit independently.
Determining transaction prices
At the inception of a contract, the total transaction price is estimated, being the amount to which the Group expects to be entitled over the
expected duration of the contract, based on the rights it has under the present contract. Such expected amounts are only included to the
extent that it is highly probable that no revenue reversal will occur.
210 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
Section 2 – Results for the period
2.1 Revenue
Accounting policies
Revenue represents the transaction prices to which the Group expects to be entitled in return for delivering goods or services to its customers.
The amount recognised in any period is based on a judgement of when the customer is able to benefit from the goods or services provided,
and an assessment of the progress made towards completely satisfying each performance obligation. The following provides information
about the nature and timing of the satisfaction of performance obligations in contracts and the related revenue recognition policies, categorised
by reportable segments. For information about reportable segments, see note 2.2.
Retail segment
Identification of performance obligations
In a typical Retail contract there is one performance obligation, which is to deliver goods ordered online to the customer at the scheduled time
and to the agreed address. Ocado Smart Pass, the Group’s discounted pre-pay membership scheme, is a separate contract with a customer and
has a separate single performance obligation which is to provide delivery services for an agreed period of time. The Group applies the practical
expedient allowed under IFRS 15 “Revenue from Contracts with Customers” to apply the standard requirements to a portfolio of contracts, rather
than individual contracts, as it believes the characteristics of each sale are similar, and that doing so does not materially affect the financial
statements.
Determining transaction prices
redemptions.
Revenue recognition
Customers pay in full at the point of sale. The transaction price is based on the aggregation of all order values, shown net of any material
adjustment for expected returns or expected future redemption of marketing vouchers in accordance with guidance on variable consideration
in IFRS 15. Standard delivery charges and carrier bag receipts are included in transaction prices. Smart Pass transaction prices are the contracted
values of the memberships for the agreed periods of delivery services.
Allocation of transaction prices to performance obligations
Each contract has a single performance obligation and so the whole transaction price is assigned to that single obligation. At the end of each
reporting period, Management reviews and adjusts for elements of variable consideration such as expected refunds or expected voucher
Revenue from online grocery orders is recognised at a point in time when the customer obtains control of the goods, which for deliveries
performed by the Group usually occurs when the goods are delivered to and have been accepted at the customer’s home. For goods which
are delivered by third-party couriers, revenue is recognised when the items have been transferred to the third party for onward delivery to the
customer. These are shown net of returns, relevant marketing vouchers and offers and value added taxes. Relevant vouchers and offers include
money-off coupons, conditional-spend vouchers and offers such as buy three for the price of two. Revenue from Ocado Smart Pass
is recognised over the duration of the membership on a time-elapsed, straight-line basis.
UK Solutions & Logistics and International Solutions segments
Identification of performance obligations
Solutions contracts are allocated to one of the two Solutions segments based on geography. The approach taken to evaluate the accounting
treatment of a contract is the same for both segments, with each contract being considered on a case-by-case basis. A typical Ocado Solutions
contract has a single performance obligation: “to enable the client to access the OSP end-to-end online grocery platform from the go-live date,
with an agreed physical capacity, from a CFC for example, for the use of its retail brands”. The ability to derive independent benefit is a key
determinant. For example, there are several critical contractual milestones which occur before the service is operational, such as the design of
the CFC for the customer or preparation of the OSP. However, Management has concluded that the customer is not able to derive any benefit
from these individual elements until the service is operational and they are able to fulfil an order. Depending on the individual customer,
fulfilment of an order may include the delivery of goods to the final consumer, and this would make up part of the obligation.
Consequently, designing the CFC or building the customer OSP is not a separate performance obligation and no revenue can be assigned to
satisfying these aspects of the contract. Some contracts, however, have multiple components, for example, the addition of Store Pick services
or additional CFCs, which lead to additional distinct performance obligations. In these situations, Management uses its judgement to determine
whether there are separable performance obligations from which the customer is able to benefit independently.
Determining transaction prices
At the inception of a contract, the total transaction price is estimated, being the amount to which the Group expects to be entitled over the
expected duration of the contract, based on the rights it has under the present contract. Such expected amounts are only included to the
extent that it is highly probable that no revenue reversal will occur.
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2.1 Revenue continued
In order to arrive at the transaction price, Management is initially required to make a judgement about the duration of the contract. The majority
of Solutions contracts do not have a fixed term, but run for an indefinite period until cancelled. For the purposes of applying IFRS 15, and in
particular making the disclosures in respect of unsatisfied performance obligations, Management determines the duration of a contract, having
considered the type of contract, performance against contractual service-level agreements (“SLAs”) and termination provisions. The point
at which any termination penalties payable by the customer would no longer be considered “substantive” is particularly relevant. This key
judgement on contract duration defines the period for which unsatisfied and partially unsatisfied performance obligations are measured and
disclosed when calculating the transaction price.
Typically, Solutions contracts include both up-front fees, paid by the customer in the period prior to the solution going live, and subsequent
annual amounts that are either recurring or variable. The up-front fees are one-off payments and are included in the transaction price and
recognised over the expected customer life. Expected customer life is a key judgement as it affects the amount of deferred up-front fees that
are released as revenue each period, and the factors considered in reaching the judgement on expected customer life include the nature of the
performance obligation, the scale of current and future planned investment, performance against contractual SLAs, the evolving technology and
competitive landscape. The judgements made for contract duration may be different to those judgements for expected customer life.
A Solutions contract often includes recurring fees which are due on an annual basis throughout the contract, are recognised over the duration of
the contract and are included in the estimate of the total transaction price.
Variable amounts are annual fees whereby typically the variability relates to the volume of sales transactions processed or variable costs
associated with providing the service to the customer. It has been determined that these variable amounts should be recognised in the period in
which they arise, because they relate to the services provided in that period. In determining the total transaction price for disclosure the amount
of future variable consideration has been estimated for the contract duration described above.
IFRS 15 requires estimates of future variable consideration to be conservative and “highly probable” to become due. In respect of agreements
that are already operating, constrained estimates have been reached by assuming 90.0% of the committed capacity only. This estimate excludes
potential benefits from both indexation and future revenue growth from capacity improvements and the continued channel shift to online in the
industry. It also considers potential risks from new entrants to the online fulfilment market as it continues to grow and the competitive nature of
the grocery market itself which could have an adverse effect on volumes.
Although for most Solutions contracts there is the possibility that the customer will add capacity in the form of additional modules in existing
CFCs or additional CFCs in new locations, which would lead to increased revenue, this has been excluded from the calculation of the estimated
transaction price.
Taken together, it is considered that the above approach represents a suitably conservative view of future estimated revenue in the disclosures
of unsatisfied obligations as required by IFRS 15.
For each Solutions contract an assessment has been made by the Group as to whether there is a significant finance benefit arising from the
timing of payments required from the customer. Judgement is required to choose an appropriate interest rate used in the assessment and to
set a reasonable threshold for determining whether any finance benefit is significant.
Allocation of transaction prices to performance obligations
Single component contracts have a single performance obligation and the whole transaction price is assigned to that single deliverable. Multiple
component contracts will have more than one obligation, each with its own contract duration as adjudged by Management. Each contract
clearly states the fees relating to each component. This provides Management with a basis for allocation of the calculated transaction price to
the performance obligations as required by IFRS 15 in proportion to their relative revenue value in the contract.
Revenue recognition
For each performance obligation and its allocated transaction price, revenue is recognised from the point at which the customer starts to benefit
from the services, and over the period the services are provided. The nature of the services provided, that is the ability to fulfil online grocery
orders, represents equal value to the customer every day that the service is provided. This uniformity of value to the customer over time has led
the Group to decide that the most appropriate way of measuring the satisfaction of obligations is by using a straight-line, time-elapsed basis.
IFRS 15 defines this as an “output method” which recognises revenue by reference to the value to the customer.
Judgement is applied in relation to contract and customer lives, as typically contracts have no end date. Depending on the expected customer
life, the amount and timing of revenue recognised may be different in different accounting periods. International CFCs are still a relatively
new aspect of the business and consequently the Directors have limited relevant historical information on which to base their assumptions
on expected customer life. Therefore, in making their judgements, the Directors have considered qualitative and quantitative reasonable and
supportable information such as market evidence and certain clauses contained within Solutions contracts.
210 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
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Notes to the Consolidated Financial Statements
Continued
2.1 Revenue continued
Contract modifications
The Group’s contracts may be amended for changes to specifications and requirements. Contract modifications exist when the amendment creates
new, or changes existing, enforceable rights and obligations. The effect of a contract modification on the transaction price and the Group’s measure
of progress for the performance obligation to which it relates, is recognised as an adjustment to revenue in one of the following ways:
a. Prospectively as an additional separate contract;
b. Prospectively as a termination of the existing contract and creation of a new contract;
c. As part of the original contract using a cumulative catch-up; or
d. As a combination of b and c.
For contracts for which the Group has decided there is a series of distinct goods and services that are substantially the same and have the same
pattern of transfer where revenue is recognised over time, the modification will always be treated under a or b.
The facts and circumstances of any contract modification are considered individually as the types of modifications vary contract by contract
and may result in different accounting outcomes.
Judgement is applied in relation to the accounting for such modifications where the final terms or legal contracts have not been agreed prior
to the reporting date, since Management needs to determine if a modification has been approved, and if so, whether it creates new, or changes
existing, enforceable rights and obligations of the parties. Depending upon the outcome of such negotiations, the timing and amount of revenue
recognised may be different in different accounting periods. Modification and amendments to contracts are undertaken via an agreed formal
process. For example, if a change in scope has been approved but the corresponding change in price is still being negotiated, Management uses
its judgement to estimate the change to the total transaction price. Importantly, any variable consideration is only recognised to the extent that
it is highly probable that no revenue reversal will occur.
Contract-related assets and liabilities
As a result of the contracts into which the Group enters with its customers, a number of different assets and liabilities are recognised on the
Consolidated Balance Sheet. These include but are not limited to:
•
Intangible assets;
• Property, plant and equipment;
• Contract assets;
• Contract liabilities; and
• Costs to obtain contracts.
Contract assets and liabilities
The Group’s contracts with customers include a diverse range of payment schedules, depending upon the nature and type of goods and
services being provided. The Group often agrees payment schedules at the inception of long-term contracts under which it receives payments
throughout the terms of the contracts. These payment schedules may include performance-based payments or progress payments as well as
regular monthly or quarterly payments for ongoing service delivery. Payments for transactional goods and services may be made at the delivery
dates, in arrears or through part-payments in advance. Where cumulative payments made (or when the Group has an unconditional right to
payment) at the reporting date are greater than the cumulative revenues recognised, the Group recognises the differences as contract liabilities.
Where cumulative payments made at the reporting date are less than the cumulative revenues recognised, and the Group has an unconditional
right to payment, the Group recognises the differences as contract assets or accrued income.
Costs to obtain contracts
These are costs that are incurred to obtain a contract with a customer that would not have been incurred if the contract had not been obtained.
Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained or not shall be recognised as an
expense when incurred, unless those costs are explicitly chargeable to the customer regardless of whether the contract is obtained.
The incremental costs of obtaining a contract with a customer are recognised as an asset if they are expected to be recoverable.
212 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
2.1 Revenue continued
Contract modifications
The Group’s contracts may be amended for changes to specifications and requirements. Contract modifications exist when the amendment creates
new, or changes existing, enforceable rights and obligations. The effect of a contract modification on the transaction price and the Group’s measure
of progress for the performance obligation to which it relates, is recognised as an adjustment to revenue in one of the following ways:
a. Prospectively as an additional separate contract;
b. Prospectively as a termination of the existing contract and creation of a new contract;
c. As part of the original contract using a cumulative catch-up; or
d. As a combination of b and c.
For contracts for which the Group has decided there is a series of distinct goods and services that are substantially the same and have the same
pattern of transfer where revenue is recognised over time, the modification will always be treated under a or b.
The facts and circumstances of any contract modification are considered individually as the types of modifications vary contract by contract
and may result in different accounting outcomes.
Judgement is applied in relation to the accounting for such modifications where the final terms or legal contracts have not been agreed prior
to the reporting date, since Management needs to determine if a modification has been approved, and if so, whether it creates new, or changes
existing, enforceable rights and obligations of the parties. Depending upon the outcome of such negotiations, the timing and amount of revenue
recognised may be different in different accounting periods. Modification and amendments to contracts are undertaken via an agreed formal
process. For example, if a change in scope has been approved but the corresponding change in price is still being negotiated, Management uses
its judgement to estimate the change to the total transaction price. Importantly, any variable consideration is only recognised to the extent that
it is highly probable that no revenue reversal will occur.
Contract-related assets and liabilities
As a result of the contracts into which the Group enters with its customers, a number of different assets and liabilities are recognised on the
Consolidated Balance Sheet. These include but are not limited to:
•
Intangible assets;
• Property, plant and equipment;
• Contract assets;
• Contract liabilities; and
• Costs to obtain contracts.
Contract assets and liabilities
The Group’s contracts with customers include a diverse range of payment schedules, depending upon the nature and type of goods and
services being provided. The Group often agrees payment schedules at the inception of long-term contracts under which it receives payments
throughout the terms of the contracts. These payment schedules may include performance-based payments or progress payments as well as
regular monthly or quarterly payments for ongoing service delivery. Payments for transactional goods and services may be made at the delivery
dates, in arrears or through part-payments in advance. Where cumulative payments made (or when the Group has an unconditional right to
payment) at the reporting date are greater than the cumulative revenues recognised, the Group recognises the differences as contract liabilities.
Where cumulative payments made at the reporting date are less than the cumulative revenues recognised, and the Group has an unconditional
right to payment, the Group recognises the differences as contract assets or accrued income.
Costs to obtain contracts
These are costs that are incurred to obtain a contract with a customer that would not have been incurred if the contract had not been obtained.
Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained or not shall be recognised as an
expense when incurred, unless those costs are explicitly chargeable to the customer regardless of whether the contract is obtained.
The incremental costs of obtaining a contract with a customer are recognised as an asset if they are expected to be recoverable.
2.1 Revenue continued
Utilisation, derecognition and impairment of costs to obtain contracts
Incremental costs to obtain a contract are amortised on a straight-line basis over the estimated duration of the contract life, beginning on the
date the customer begins to benefit from the goods or services the Group agreed to provide.
Incremental costs to obtain a contract are derecognised either when they are disposed of or when no further economic benefits are expected
to flow from their use or disposal.
Management is required to determine the recoverability of contract-related assets within property, plant and equipment, intangible assets,
capitalised costs to obtain contracts, accrued income and trade receivables. At each reporting date, the Group determines whether or not the
capitalised costs to obtain contracts are impaired by comparing the carrying amounts of the assets with the remaining amounts of consideration
that the Group expects to receive, less the costs that relate to providing services under the relevant contracts. In determining the estimated
amount of consideration to be received, the Group uses the same principles as it does to determine the contract transaction price, except that
any constraints used to reduce the transaction price will be removed for the impairment test.
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Disaggregation of revenue
Set out below is a disaggregation of the Group’s revenue:
Retail
UK Solutions & Logistics
International Solutions
Other
Group eliminations
Timing of revenue recognition
At a point in time
Over time
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019(1)
£m
2,188.6
654.3
16.6
–
(527.7)
2,331.8
2,188.5
143.3
2,331.8
1,618.1
576.0
0.5
9.8
(447.8)
1,756.6
1,626.4
130.2
1,756.6
(1) The figures for the 52 weeks ended 1 December 2019 have been re-presented to reflect changes to the basis of allocating revenue to segments. The total revenue is the same, but the
figure attributed to each segment has changed.
Contract balances
Trade receivables
Contract assets
Contract liabilities
Contract assets
Current
Non–current
29 November
2020
£m
1 December
2019
£m
2 December
2018
£m
33.8
0.4
(299.3)
12.3
0.4
(191.8)
8.6
–
(115.2)
29 November
2020
£m
1 December
2019
£m
2 December
2018
£m
0.1
0.3
0.4
0.1
0.3
0.4
–
–
–
The contract assets represent Solutions revenue recognised in the Consolidated Income Statement, but not yet invoiced.
Significant changes in the contract assets balance during the period are as follows:
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
212 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
Balance at beginning of period
Amount recognised as revenue
Balance at end of period
0.4
–
0.4
–
0.4
0.4
213
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Notes to the Consolidated Financial Statements
Continued
2.1 Revenue continued
Contract liabilities
Current
Non-current
29 November
2020
£m
1 December
2019
£m
2 December
2018
£m
(14.4)
(284.9)
(299.3)
(5.1)
(186.7)
(191.8)
(6.6)
(108.6)
(115.2)
The contract liabilities relate primarily to consideration received from Solutions customers in advance, for which revenue is recognised as the
performance obligation is satisfied.
Significant changes in the contract liabilities balance during the period are as follows:
Balance at beginning of period
Amount invoiced
Amount recognised as revenue
Balance at end of period
Set out below is the amount of revenue recognised from:
Amount included in contract liabilities at beginning of period
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
(191.8)
(113.6)
6.1
(299.3)
(115.2)
(79.5)
2.9
(191.8)
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
6.1
2.9
The transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) are expected to be recognised as
revenue as follows:
Within one year
In between one and five years
In more than five years
Total transaction price
29 November
2020
£m
1 December
2019
£m
195.3
1,407.2
3,554.4
5,156.9
114.5
1,004.9
3,308.8
4,428.2
The total transaction price includes £2,154.5 million (2019: £1,824.0 million) in respect of potential revenue in relation to the recovery of costs
that are expected to be incurred in existing Solutions contracts.
The amounts disclosed above in respect of unsatisfied and partially unsatisfied performance obligations do not include estimates of any
amounts that will arise if the customer continues to receive services beyond the estimated contract term. In addition, they are reduced, during
the contract term, so as to limit the estimate of future variable amounts to a conservative amount that is “highly probable”. The figures disclosed
do not include any incremental amounts in relation to CFCs and other solutions to which a customer is not yet committed. However, they do
include any amounts that are payable by the customer irrespective of whether an option for future CFCs and other solutions is exercised (i.e.
amounts that are equivalent to a non-refundable deposit).
Costs to obtain contracts
Current
Non-current
29 November
2020
£m
1 December
2019
£m
0.1
0.7
0.8
–
0.8
0.8
214 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents F
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Notes to the Consolidated Financial Statements
Continued
2.1 Revenue continued
Contract liabilities
Current
Non-current
revenue as follows:
Within one year
In between one and five years
In more than five years
Total transaction price
Current
Non-current
The contract liabilities relate primarily to consideration received from Solutions customers in advance, for which revenue is recognised as the
performance obligation is satisfied.
Significant changes in the contract liabilities balance during the period are as follows:
Balance at beginning of period
Amount invoiced
Amount recognised as revenue
Balance at end of period
Set out below is the amount of revenue recognised from:
Amount included in contract liabilities at beginning of period
The transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) are expected to be recognised as
The total transaction price includes £2,154.5 million (2019: £1,824.0 million) in respect of potential revenue in relation to the recovery of costs
that are expected to be incurred in existing Solutions contracts.
The amounts disclosed above in respect of unsatisfied and partially unsatisfied performance obligations do not include estimates of any
amounts that will arise if the customer continues to receive services beyond the estimated contract term. In addition, they are reduced, during
the contract term, so as to limit the estimate of future variable amounts to a conservative amount that is “highly probable”. The figures disclosed
do not include any incremental amounts in relation to CFCs and other solutions to which a customer is not yet committed. However, they do
include any amounts that are payable by the customer irrespective of whether an option for future CFCs and other solutions is exercised (i.e.
amounts that are equivalent to a non-refundable deposit).
Costs to obtain contracts
52 weeks
ended
52 weeks
ended
29 November
1 December
2020
£m
(191.8)
(113.6)
6.1
(299.3)
2019
£m
(115.2)
(79.5)
2.9
(191.8)
52 weeks
ended
52 weeks
ended
29 November
1 December
2020
£m
6.1
2019
£m
2.9
29 November
1 December
2020
£m
195.3
1,407.2
3,554.4
5,156.9
2019
£m
114.5
1,004.9
3,308.8
4,428.2
29 November
1 December
2020
£m
0.1
0.7
0.8
2019
£m
–
0.8
0.8
2.1 Revenue continued
Significant changes in the costs to obtain contracts balance during the period are as follows:
29 November
1 December
2 December
2020
£m
(14.4)
(284.9)
(299.3)
2019
£m
(5.1)
(186.7)
(191.8)
2018
£m
(6.6)
(108.6)
(115.2)
Balance at beginning of period
Amortisation recognised in profit or loss
Balance at end of period
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
0.8
–
0.8
0.8
–
0.8
Management expects the incremental costs of obtaining contracts (i.e. sales bonuses) to be recovered. The Group, therefore, capitalises them as
costs to obtain contracts.
These capitalised costs will be amortised over the period of transferring goods or services to the customer.
2.2 Segmental reporting
The Group’s principal activities are grocery retailing and the development and monetisation of Intellectual Property (“IP”) and technology used
for online grocery retailing, fulfilment, logistics and services in the United Kingdom, Europe, North America, Australia and Japan. The Group is
not currently reliant on any major customer for 10.0% or more of its revenue.
In accordance with IFRS 8 “Operating Segments”, an operating segment is defined as a business activity whose operating results are reviewed
by the chief operating decision-maker (“CODM”), for which discrete information is available. Operating segments are reported in a manner
consistent with the internal reporting provided to the CODM, as required by IFRS 8. The CODM, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as the Executive Directors.
The Group has determined it has three reportable segments: Retail, UK Solutions & Logistics and International Solutions.
The Retail segment provides online grocery and general merchandise offerings to customers within the United Kingdom, and comprises the
Ocado Retail joint venture. The UK Solutions & Logistics segment provides the IT platform, CFCs and logistics for customers in the United
Kingdom (Wm Morrisons Supermarkets plc and Ocado Retail Limited). The International Solutions segment provides end-to-end online retail
solutions to corporate customers outside the United Kingdom. In order to reconcile segmental revenue A and segmental EBITDA A with the
Group’s revenue and EBITDA A two other headings are used: “Other” represents revenue and costs which do not relate to any of the three
segments; “Group eliminations” relates to revenue and costs arising from intra-Group transactions.
The Board assesses the performance of all segments on the basis of EBITDA A . EBITDA A , as reported internally by segment, is the key measure
utilised in assessing the performance of operating segments within the Group.
The accounting policies of the segments are the same as those for the Group as a whole. Any transactions between the business segments are
subject to normal commercial terms and market conditions. Segmental results include items directly attributable to a segment as well as those
that can be allocated on a reasonable basis.
Segmental revenue A and segmental EBITDA A for the period are as follows:
52 weeks ended 29 November 2020
Segmental revenue A
Segmental EBITDA A
52 weeks ended 1 December 2019(1)
Segmental revenue A
Segmental EBITDA A
Retail
£m
UK Solutions
& Logistics
£m
International
Solutions
£m
Other
£m
Group
eliminations
£m
Total
£m
2,188.6
148.5
1,618.1
40.6
654.3
44.4
576.0
72.1
16.6
(83.3)
0.5
(54.9)
–
(36.5)
9.8
(14.2)
(527.7)
2,331.8
–
73.1
(447.8)
(0.3)
1,756.6
43.3
(1) The figures for the 52 weeks ended 1 December 2019 have been re-presented to reflect changes to the basis of allocating revenue and expenses to segments. The total revenue and
EBITDA A are the same, but the figures attributed to each segment have changed.
No measure of total assets and total liabilities is reported for each reportable segment, as such amounts are not regularly provided to the chief
operating decision-maker.
214 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
215
A
See Alternative Performance Measures on pages 293 and 294.
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Notes to the Consolidated Financial Statements
Continued
2.3 Other income
Accounting policies
Other income comprises the fair value of consideration received or receivable for advertising services provided by the Group to suppliers and
other third parties on the Webshop, commission income, rental income, sub-lease payments receivable and amounts receivable not in the
ordinary course of business. Income for advertising services is recognised over the particular time period for which the service is provided on
an accruals basis. An adjustment is made at the reporting date to accrue for the amount of income in relation to campaigns that may span the
reporting date, but such adjustments are not typically material.
Other income comprises:
Media and other income
Rental income
Exceptional insurance income
Other income
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
74.4
13.2
103.9
191.5
70.6
13.3
23.8
107.7
2.4 Operating expenses
Accounting policies
Cost of sales
Cost of sales represents the cost of groceries and other products the Group sells, any associated licence fees which are driven by the volume
of sales of specific products or product groups, including the branding and sourcing fees payable to Marks and Spencer and Waitrose (2019:
Waitrose), adjustments to inventory and charges for transportation of goods from a supplier to a CFC.
Commercial income
The Group has agreements with suppliers whereby promotional allowances and volume-related rebates are received in connection with the
promotion or purchase of goods for resale from those suppliers. The allowances and rebates are included in cost of sales. For the period,
promotional allowances represent 82% (2019: 84%) of commercial income, with volume-related rebates representing 18% (2019: 16%).
Promotional allowances
Cost of sales includes monies received from suppliers in relation to the agreed funding of selected items that are sold by the Group on
promotion, and these are recognised once the promotional activity has taken place in the period to which it relates on an accruals basis. The
estimates required for this source of income are limited because the time periods of promotional activity, in most cases, are less than one month
and the invoicing for the activity occurs on a regular basis shortly after the promotions have ended.
Volume-related rebates
At the reporting date, the Group is required to estimate supplier income due from annual agreements for volume-related rebates which cross
the reporting date. Estimates are required since confirmation of some amounts due is often only received three to six months after the reporting
date. Where estimates are required, these are based on current performance, historical data for prior periods and a review of significant supplier
contracts.
Uncollected commercial income
Uncollected commercial income at the reporting date is recognised within trade and other receivables. Where commercial income has been
earned, but not invoiced at the reporting date, the amount is recorded in accrued income.
Distribution costs
Distribution costs consist of all the costs incurred, excluding product costs, to the point of sale. In most cases, this is the customer’s home.
This includes the payroll-related expenses for the picking, dispatch and delivery of products sold to the point of sale, the cost of making those
deliveries, including fuel, tolls, maintenance of vehicles, the operating costs of the properties required for the picking, dispatch and onward
delivery operations and all associated depreciation, amortisation and impairment charges, call centre costs and payment processing charges.
These include costs incurred on behalf of Morrisons which are subsequently recharged.
Administrative expenses
Administrative expenses consist of all IT costs, advertising and marketing expenditure (excluding vouchers), share-based payment costs,
employment costs of all central functions, which include board, legal, finance, human resources, marketing and procurement, property-related
costs for the head office, all fees for professional services, and the depreciation, amortisation and impairment associated with IT equipment,
software, fixtures and fittings. These include costs incurred on behalf of Morrisons which are subsequently recharged.
216 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
2.3 Other income
Accounting policies
Other income comprises the fair value of consideration received or receivable for advertising services provided by the Group to suppliers and
other third parties on the Webshop, commission income, rental income, sub-lease payments receivable and amounts receivable not in the
ordinary course of business. Income for advertising services is recognised over the particular time period for which the service is provided on
an accruals basis. An adjustment is made at the reporting date to accrue for the amount of income in relation to campaigns that may span the
reporting date, but such adjustments are not typically material.
Other income comprises:
52 weeks
ended
52 weeks
ended
29 November
1 December
2020
£m
74.4
13.2
103.9
191.5
2019
£m
70.6
13.3
23.8
107.7
Media and other income
Rental income
Exceptional insurance income
Other income
2.4 Operating expenses
Accounting policies
Cost of sales
Commercial income
Promotional allowances
Volume-related rebates
contracts.
Uncollected commercial income
Distribution costs
Cost of sales represents the cost of groceries and other products the Group sells, any associated licence fees which are driven by the volume
of sales of specific products or product groups, including the branding and sourcing fees payable to Marks and Spencer and Waitrose (2019:
Waitrose), adjustments to inventory and charges for transportation of goods from a supplier to a CFC.
The Group has agreements with suppliers whereby promotional allowances and volume-related rebates are received in connection with the
promotion or purchase of goods for resale from those suppliers. The allowances and rebates are included in cost of sales. For the period,
promotional allowances represent 82% (2019: 84%) of commercial income, with volume-related rebates representing 18% (2019: 16%).
Cost of sales includes monies received from suppliers in relation to the agreed funding of selected items that are sold by the Group on
promotion, and these are recognised once the promotional activity has taken place in the period to which it relates on an accruals basis. The
estimates required for this source of income are limited because the time periods of promotional activity, in most cases, are less than one month
and the invoicing for the activity occurs on a regular basis shortly after the promotions have ended.
At the reporting date, the Group is required to estimate supplier income due from annual agreements for volume-related rebates which cross
the reporting date. Estimates are required since confirmation of some amounts due is often only received three to six months after the reporting
date. Where estimates are required, these are based on current performance, historical data for prior periods and a review of significant supplier
Uncollected commercial income at the reporting date is recognised within trade and other receivables. Where commercial income has been
earned, but not invoiced at the reporting date, the amount is recorded in accrued income.
Distribution costs consist of all the costs incurred, excluding product costs, to the point of sale. In most cases, this is the customer’s home.
This includes the payroll-related expenses for the picking, dispatch and delivery of products sold to the point of sale, the cost of making those
deliveries, including fuel, tolls, maintenance of vehicles, the operating costs of the properties required for the picking, dispatch and onward
delivery operations and all associated depreciation, amortisation and impairment charges, call centre costs and payment processing charges.
These include costs incurred on behalf of Morrisons which are subsequently recharged.
Administrative expenses
Administrative expenses consist of all IT costs, advertising and marketing expenditure (excluding vouchers), share-based payment costs,
employment costs of all central functions, which include board, legal, finance, human resources, marketing and procurement, property-related
costs for the head office, all fees for professional services, and the depreciation, amortisation and impairment associated with IT equipment,
software, fixtures and fittings. These include costs incurred on behalf of Morrisons which are subsequently recharged.
2.4 Operating expenses continued
Operating expenses include:
Cost of inventories recognised as an expense
Employment costs
Amortisation of intangible assets
Impairment of intangible assets
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Depreciation of right-of-use assets
Increase in provision for impairment of receivables
Research and development costs
Operating lease rentals on short-term leases and low-value items
– Land and buildings
– Plant, machinery, fixtures, fittings and motor vehicles
Net foreign exchange loss
During the period, the Group paid the following to its auditor:
F
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L
S
T
A
T
E
M
E
N
T
S
–
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R
O
U
P
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
1,496.3
502.0
49.0
3.3
57.2
2.1
57.3
0.4
0.1
0.2
0.1
4.4
1,145.8
383.0
37.3
1.8
46.0
0.6
50.4
0.7
0.1
0.7
–
0.4
Notes
2.5
3.2
3.2
3.3
3.3
3.4
3.10
4.2
4.2
52 weeks
ended
29 November
2020
£000
52 weeks
ended
1 December
2019
£000
Fees payable to the Company’s auditor and its associates for the audit of the Company’s annual financial statements
Fees payable to the Company’s auditor and its associates for the audit of the Company’s subsidiaries
Other fees payable for statutory audit services
Total audit fees
Audit-related assurance services
– ISRE 2410 services
Other assurance services
– Transaction support services required by regulation
– Other transaction support services
– Agreed-upon assurance services
Total non-audit fees
90
724
103
917
154
–
–
36
190
80
718
70
868
50
70
265
30
415
Total fees
1,107
1,283
The Audit Committee considered that certain non-audit services relating to the part-disposal of Ocado Retail Limited in 2019 should be provided
by the external auditor because its existing knowledge of the business made this the most efficient and effective way for these services to be
performed.
2.5 Employee information
Accounting policies
The Group contributes to the personal pension plans of its employees through Group Personal Pension Plans administered by Legal & General.
Legacy employer’s contributions to the plans are calculated as a percentage of salary based on length of scheme membership. Since October
2017, new members to the plans have been enrolled through a matching contribution structure. Contributions are charged to the Consolidated
Income Statement in the period to which they relate.
216 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Notes to the Consolidated Financial Statements
Continued
2.5 Employee information continued
Employment costs for the period were as follows:
Wages and salaries
Social security costs
Other pension costs
Share-based payment expense(1)
Total gross employment costs
Staff costs capitalised as intangible assets
Staff costs capitalised as property, plant and equipment
Total employment costs
Average monthly number of employees (including Executive Directors) by function
Operational staff
Support staff
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
Notes
3.2
3.3
514.1
46.9
16.0
45.5
622.5
(89.6)
(30.9)
502.0
13,747
3,374
17,121
403.2
37.3
12.1
24.2
476.8
(70.2)
(23.6)
383.0
12,406
2,738
15,144
(1) Included in the share-based payment expense is an IFRS 2 “Share-based Payment” equity-settled charge of £22.4 million (2019: £12.8 million) and an additional provision of £23.1
million (2019: £11.4 million) for the payment of amounts due to participants in the Cash LTIP and Retail VCP, and for the payment of employer’s National Insurance contributions on
HMRC-unapproved employee incentive schemes.
2.6 Exceptional items A
Accounting policies
Exceptional items A , as disclosed on the face of the Consolidated Income Statement, are items that due to their material and/or non-recurring
nature have been classified separately in order to draw them to the attention of the reader of the financial statements and to avoid distortion
of underlying performance. This facilitates comparison with prior periods to assess trends in financial performance more readily. The Group
applies judgement in identifying the significant non-recurring items of income and expense that are recognised as exceptional.
The Group has adopted a three-columned approach to the Consolidated Income Statement to aid clarity and allow users of the financial
statements to understand more easily the performance of the underlying business and the effect of one-off events.
The Group believes this format is useful as it highlights non-recurring items, such as the costs relating to a warehouse fire, corporate
reorganisation and restructuring costs, profit or loss on disposal of operations, impairment of assets and any other material costs outside the
normal course of business.
Andover CFC
– Write-off of property, plant and equipment
– Write-off of inventory
– Write-off of intangible assets
– Other exceptional costs
– Insurance reimbursement
Loss on disposal of Marie Claire Beauty Limited
Costs on creation of joint venture with Marks and Spencer Holdings Limited
Litigation costs
Change of fair value of contingent consideration receivable
Other exceptional costs
Net exceptional (income)/expense
Notes
3.3
3.2
2.3
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
–
–
–
4.0
(103.9)
–
–
2.7
(7.4)
–
(104.6)
96.9
5.5
2.1
7.3
(23.8)
1.1
3.4
1.3
–
0.3
94.1
A
See Alternative Performance Measures on pages 293 and 294.
218 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
2.5 Employee information continued
Employment costs for the period were as follows:
Wages and salaries
Social security costs
Other pension costs
Share-based payment expense(1)
Total gross employment costs
Staff costs capitalised as intangible assets
Staff costs capitalised as property, plant and equipment
Total employment costs
Operational staff
Support staff
HMRC-unapproved employee incentive schemes.
2.6 Exceptional items A
Accounting policies
Average monthly number of employees (including Executive Directors) by function
(1) Included in the share-based payment expense is an IFRS 2 “Share-based Payment” equity-settled charge of £22.4 million (2019: £12.8 million) and an additional provision of £23.1
million (2019: £11.4 million) for the payment of amounts due to participants in the Cash LTIP and Retail VCP, and for the payment of employer’s National Insurance contributions on
Exceptional items A , as disclosed on the face of the Consolidated Income Statement, are items that due to their material and/or non-recurring
nature have been classified separately in order to draw them to the attention of the reader of the financial statements and to avoid distortion
of underlying performance. This facilitates comparison with prior periods to assess trends in financial performance more readily. The Group
applies judgement in identifying the significant non-recurring items of income and expense that are recognised as exceptional.
The Group has adopted a three-columned approach to the Consolidated Income Statement to aid clarity and allow users of the financial
statements to understand more easily the performance of the underlying business and the effect of one-off events.
The Group believes this format is useful as it highlights non-recurring items, such as the costs relating to a warehouse fire, corporate
reorganisation and restructuring costs, profit or loss on disposal of operations, impairment of assets and any other material costs outside the
normal course of business.
Notes
3.2
3.3
52 weeks
ended
52 weeks
ended
29 November
1 December
2020
£m
514.1
46.9
16.0
45.5
622.5
(89.6)
(30.9)
502.0
13,747
3,374
17,121
2019
£m
403.2
37.3
12.1
24.2
476.8
(70.2)
(23.6)
383.0
12,406
2,738
15,144
Notes
3.3
3.2
2.3
52 weeks
ended
52 weeks
ended
29 November
1 December
2020
£m
–
–
–
–
–
–
4.0
(103.9)
2.7
(7.4)
(104.6)
2019
£m
96.9
(23.8)
5.5
2.1
7.3
1.1
3.4
1.3
–
0.3
94.1
Andover CFC
– Write-off of property, plant and equipment
– Write-off of inventory
– Write-off of intangible assets
– Other exceptional costs
– Insurance reimbursement
Loss on disposal of Marie Claire Beauty Limited
Costs on creation of joint venture with Marks and Spencer Holdings Limited
Litigation costs
Change of fair value of contingent consideration receivable
Other exceptional costs
Net exceptional (income)/expense
A
See Alternative Performance Measures on pages 293 and 294.
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
2.6 Exceptional items A continued
Andover CFC
In February 2019, a fire destroyed the Andover CFC, including the building, machinery and all inventory held on site. The Group has
comprehensive insurance and claims have been formally accepted by the insurers.
Other exceptional costs
These include, but are not limited to, temporary costs of transporting employees to other warehouses to work, professional fees relating to the
insurance claims process, reimbursement of employees’ destroyed personal assets, and redundancy costs.
Insurance reimbursement
This mainly comprises reimbursement for the costs of rebuilding the CFC, and business interruption losses. Reimbursement has been
recognised as other income. A portion of reimbursement has been received and recognised as deferred income. This will be released to profit or
loss in the future as the costs of rebuilding the CFC are incurred. Another portion has not yet been received but has been recognised as accrued
income. This relates to incurred business interruption losses and will be received in the 2021 financial year.
The Group expects to receive further insurance reimbursement relating to reconstruction costs and business interruption losses. Claim
negotiations are ongoing and the Group has not recognised any future reimbursement since the likely insurance proceeds cannot yet be
quantified accurately. Income will be recognised in the future as the costs of rebuilding the CFC and business interruption losses are incurred.
Litigation costs
Litigation costs relate to legal proceedings brought by the Group against Jonathan Faiman, Jonathan Hillary and Project Today Holdings Limited
in relation to the theft and unlawful use of the Group’s Intellectual Property, and patent infringement claims made against the Group by AutoStore
Technology AS (“AutoStore”) and two subsequent claims made by the Group against AutoStore.
Change of fair value of contingent consideration
In 2019, the Group sold Marie Claire Beauty Limited to Next Holdings Limited, and 50.0% of Ocado Retail Limited to Marks and Spencer Holdings
Limited. Part of the consideration agreed for these transactions was contingent on future events. The Group holds contingent consideration
receivable as a financial asset at fair value through profit or loss, and revalues it at each reporting date. See note 3.7 for more information.
2.7 Income tax
Accounting policies
The tax charge for the period comprises current and deferred tax. Tax is recognised in the Consolidated Income Statement, except to the
extent that it relates to items recognised in other comprehensive income or directly in equity, in which case the tax is also recognised in other
comprehensive income or directly in equity respectively.
Current tax
Current tax is the expected tax payable on the taxable income for the period, calculated using tax rates enacted by the reporting date.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax
Deferred tax is recognised using the balance sheet method on temporary differences arising between the tax base of assets and liabilities and
their carrying amount in the financial statements. Deferred tax is calculated at the tax rates that have been enacted or substantively enacted
by the reporting date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred
income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of reversal of the temporary
differences is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary
differences can be utilised. Recognition, therefore, involves judgement regarding the prudent risk-adjusted forecasting of future taxable profits
of the business and in applying an appropriate risk adjustment factor. The final outcome of some of these items may give rise to material profit
and loss and/or cash-flow variances. At the reporting date, Management forecasted that the Group would generate future taxable profits against
which existing tax losses could be relieved. The carrying amount of deferred tax assets is reviewed at each reporting date.
Deferred tax assets and liabilities are offset against each other when there is a legally-enforceable right to offset current tax assets against current
tax liabilities and it is the intention to settle these on a net basis.
Research and development expenditure credit
The Group takes advantage of the incentives offered under the United Kingdom’s Research and Development Expenditure Credit (“RDEC”)
regime to claim a credit for the Group’s significant expenditure on qualifying research and development. As enacted in the Finance Act 2020,
the credit due to the Group is equal to 13.0% (2019: 12.0%) of the Group’s qualifying expenditure. The Group continues to utilise the additional
benefits from the scheme in light of the Group’s commitment to its innovative technology and software.
During the period, the Group claimed a credit of £4.7 million for the 52 weeks ended 1 December 2019 (2019: £4.1 million for the 52 weeks ended
2 December 2018).
A
See Alternative Performance Measures on pages 293 and 294.
218 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Notes to the Consolidated Financial Statements
Continued
2.7 Income tax continued
Future changes to tax legislation
The Group undertakes regular reviews in order to ensure its ongoing compliance with current and future proposed changes to United Kingdom
tax legislation. The Group has undertaken a review of the Group’s activities in light of the OECD’s Base Erosion and Profit Shifting (“BEPS”)
publications and does not foresee any significant effect on the Group’s effective tax rate resulting from the proposed changes in the short- to
medium-term.
The Group’s future tax charge, and effective tax rate, could be affected by several factors including tax reform in countries around the world,
including any arising from the OECD’s or European Commission’s work on the taxation of the digital economy and European Commission
initiatives such as the anti-tax avoidance directive.
Management does not anticipate that Brexit will have a significant effect on the Group’s future tax charge, liabilities or assets, but this may
change. It continues to monitor developments in this area.
Income tax – Consolidated Income Statement
Current tax
United Kingdom Corporation Tax on profits for period
Overseas corporation tax on profits for period
Total current tax
Deferred tax
Origination and reversal of temporary differences
Effect of change in rate of United Kingdom Corporation Tax
Overseas deferred tax on profits for period
Total deferred tax
Income tax charge/(credit)
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
18.3
0.7
19.0
7.7
(1.2)
0.1
6.6
25.6
–
0.5
0.5
(3.2)
–
–
(3.2)
(2.7)
The tax on the Group’s loss before tax differs from the theoretical amount that would arise using the effective tax rate applicable to profits of the
Group as follows:
Loss before tax
Effective tax credit at United Kingdom tax rate of 19.0% (2019: 19.0%)
Effect of:
Losses arising in period on which no deferred tax is recognised
Permanent differences
Differences in overseas tax rates
Temporary differences on which no deferred tax is recognised
Income tax charge/(credit)
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
(44.0)
(8.4)
36.6
(5.8)
(0.8)
4.0
25.6
(214.5)
(40.8)
10.7
(15.0)
(0.1)
42.5
(2.7)
220 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
2.7 Income tax continued
Future changes to tax legislation
medium-term.
The Group undertakes regular reviews in order to ensure its ongoing compliance with current and future proposed changes to United Kingdom
tax legislation. The Group has undertaken a review of the Group’s activities in light of the OECD’s Base Erosion and Profit Shifting (“BEPS”)
publications and does not foresee any significant effect on the Group’s effective tax rate resulting from the proposed changes in the short- to
2.7 Income tax continued
Income tax – Consolidated Balance Sheet
The movement of deferred tax assets is as follows:
The Group’s future tax charge, and effective tax rate, could be affected by several factors including tax reform in countries around the world,
including any arising from the OECD’s or European Commission’s work on the taxation of the digital economy and European Commission
initiatives such as the anti-tax avoidance directive.
Management does not anticipate that Brexit will have a significant effect on the Group’s future tax charge, liabilities or assets, but this may
change. It continues to monitor developments in this area.
Income tax – Consolidated Income Statement
Balance at 2 December 2018
Amount credited/(charged) to Consolidated Income Statement
Balance at 1 December 2019
Effect of change in rate of United Kingdom Corporation Tax
Amount credited/(charged) to Consolidated Income Statement
Balance at 29 November 2020
Tax losses
carried
forward
£m
Accelerated
capital
allowances
£m
Share-based
payments
£m
Other short-
term timing
differences
£m
9.5
13.0
22.5
2.6
(23.0)
2.1
7.1
(2.4)
4.7
0.5
7.3
12.5
–
–
–
–
7.9
7.9
–
–
–
–
1.1
1.1
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
Total
£m
16.6
10.6
27.2
3.1
(6.7)
23.6
52 weeks
ended
52 weeks
ended
29 November
1 December
2020
£m
2019
£m
The Finance Act 2020 reversed the previously-enacted reduction in the rate of United Kingdom Corporation Tax to 17.0% as provided for in
Finance (No.2) Act 2015 and Finance Act 2016. The rate of Corporation Tax will now remain 19.0%. Deferred tax has been provided for at the rate
at which the deferred tax assets are expected to be realised.
The movement of unrecognised deferred tax assets is set out below:
The tax on the Group’s loss before tax differs from the theoretical amount that would arise using the effective tax rate applicable to profits of the
Group as follows:
Current tax
United Kingdom Corporation Tax on profits for period
Overseas corporation tax on profits for period
Total current tax
Deferred tax
Origination and reversal of temporary differences
Effect of change in rate of United Kingdom Corporation Tax
Overseas deferred tax on profits for period
Total deferred tax
Income tax charge/(credit)
Loss before tax
Effect of:
Effective tax credit at United Kingdom tax rate of 19.0% (2019: 19.0%)
Losses arising in period on which no deferred tax is recognised
Permanent differences
Differences in overseas tax rates
Temporary differences on which no deferred tax is recognised
Income tax charge/(credit)
18.3
0.7
19.0
7.7
(1.2)
0.1
6.6
25.6
2020
£m
(44.0)
(8.4)
36.6
(5.8)
(0.8)
4.0
25.6
–
0.5
0.5
(3.2)
–
–
(3.2)
(2.7)
2019
£m
(214.5)
(40.8)
10.7
(15.0)
(0.1)
42.5
(2.7)
52 weeks
ended
52 weeks
ended
29 November
1 December
Balance at 2 December 2018
Potential movement in period not credited/(charged) to
Consolidated Income Statement
Balance at 1 December 2019
Effect of change in rate of United Kingdom Corporation Tax
Potential movement in period not credited/(charged) to
Consolidated Income Statement
Balance at 29 November 2020
Tax losses
carried
forward
£m
Accelerated
capital
allowances
£m
Share-based
payments
£m
Other short-
term timing
differences
£m
34.6
(8.7)
25.9
2.6
48.4
76.9
20.4
18.6
39.0
4.8
(18.7)
25.1
–
–
–
–
11.9
11.9
1.0
–
1.0
0.1
3.8
4.9
Total
£m
56.0
9.9
65.9
7.5
45.4
118.8
At the reporting date, the Group had approximately £407.4 million of unutilised tax losses (2019: approximately £284.7 million) available to offset
against future profits. Deferred tax assets of £2.1 million (2019: £22.5 million) have been recognised in respect of £11.0 million (2019: £132.4
million) of such losses, the recovery of which is supported by the expected level of future profits of the Group. The recognition of the deferred
tax assets is based on forecast operating results calculated in approved business plans and a review of tax planning opportunities.
No deferred tax asset has been recognised in respect of the remaining losses on the basis that their future economic benefit is uncertain given
the unpredictability of future profit streams. All tax losses, both recognised and unrecognised, can be carried forward indefinitely.
Management has concluded that there is sufficient evidence for the recognition of the deferred tax assets of £23.6 million (2019: £27.2 million).
The movement of deferred tax liabilities is set out below:
Balance at 2 December 2018
Amount charged to Consolidated Income Statement
Balance at 1 December 2019
Effect of change in rate of United Kingdom Corporation Tax
Amount credited to Consolidated Income Statement
Balance at 29 November 2020
Accelerated
capital
allowances
£m
(8.9)
(7.4)
(16.3)
(1.9)
(1.1)
(19.3)
At the reporting date, the Group has recognised deferred tax liabilities of £19.3 million (2019: £16.3 million). Of this amount, £19.3 million (2019:
£16.3 million) is in respect of intangible assets that Management assessed as qualifying for research and development Corporation Tax relief. The
timing of the tax deductions in respect of expenditure incurred on these assets differs from the amortisation profile of the assets giving rise to
the deferred tax liabilities. The liabilities will be unwound over the useful lives of the assets.
220 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Notes to the Consolidated Financial Statements
Continued
2.8 Loss per share
The basic loss per share is calculated by dividing the loss attributable to the owners of the Company by the weighted average number of
ordinary shares in issue during the period, excluding ordinary shares held pursuant to the Group’s Joint Share Ownership Scheme (“JSOS”) and
linked jointly-owned equity (“JOE”) awards under the Value Creation Plan (“VCP”), which are accounted for as treasury shares.
The diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion or
vesting of all potentially dilutive shares. The Company has four classes of instruments that are potentially dilutive: share options; share interests
held pursuant to the Group’s JSOS; linked JOE awards under the VCP; and shares under the Group’s employee incentive plans.
There was no difference in the weighted average number of shares used for the calculation of the basic and diluted loss per share since the
effect of all potentially dilutive shares outstanding was anti-dilutive.
The basic and diluted loss per share have been calculated as follows:
Weighted average number of shares at end of period
Loss attributable to owners of the Company
Basic and diluted loss per share
52 weeks
ended
29 November
2020
million
52 weeks
ended
1 December
2019(1)
million
718.0
£m
(126.0)
pence
(17.55)
695.8
£m
(213.1)
pence
(30.63)
(1) The basic and diluted loss per share for the 52 weeks ended 1 December 2019 has been amended to reflect the correct weighted average number of shares at the end of the period.
222 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Notes to the Consolidated Financial Statements
Continued
2.8 Loss per share
The basic loss per share is calculated by dividing the loss attributable to the owners of the Company by the weighted average number of
ordinary shares in issue during the period, excluding ordinary shares held pursuant to the Group’s Joint Share Ownership Scheme (“JSOS”) and
linked jointly-owned equity (“JOE”) awards under the Value Creation Plan (“VCP”), which are accounted for as treasury shares.
The diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion or
vesting of all potentially dilutive shares. The Company has four classes of instruments that are potentially dilutive: share options; share interests
held pursuant to the Group’s JSOS; linked JOE awards under the VCP; and shares under the Group’s employee incentive plans.
There was no difference in the weighted average number of shares used for the calculation of the basic and diluted loss per share since the
effect of all potentially dilutive shares outstanding was anti-dilutive.
The basic and diluted loss per share have been calculated as follows:
Weighted average number of shares at end of period
Loss attributable to owners of the Company
Basic and diluted loss per share
(1) The basic and diluted loss per share for the 52 weeks ended 1 December 2019 has been amended to reflect the correct weighted average number of shares at the end of the period.
52 weeks
ended
52 weeks
ended
29 November
1 December
2020
million
718.0
£m
(126.0)
pence
(17.55)
2019(1)
million
695.8
£m
(213.1)
pence
(30.63)
Section 3 – Assets and liabilities
3.1 Business combinations
Accounting policies
The acquisition method of accounting is used for the acquisition of subsidiaries. The cost of the acquisition is measured at the aggregate fair
value of the consideration given. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition
under IFRS 3 “Business Combinations” are recognised at their fair values at the date the Group assumes control of the acquiree.
Acquisition-related costs are recognised in the Consolidated Income Statement as incurred.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from agreed contingent consideration measured
at fair value at the date control is achieved. Subsequent changes in fair value are adjusted against the cost of acquisition where they qualify as
measurement period adjustments. All other subsequent changes in the fair value of contingent consideration classified as an asset or liability
are accounted for in accordance with relevant IFRS.
Goodwill
Goodwill is the excess of consideration transferred over the fair value of identifiable net assets acquired. The movement of goodwill is as follows:
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
Cost
At 2 December 2018
Recognised on acquisition of Jones Food Company Limited
At 1 December 2019 and 29 November 2020
Accumulated impairment
At 2 December 2018 and 1 December 2019
Impairment charge
At 29 November 2020
Net book value
At 1 December 2019
At 29 November 2020
Goodwill
£m
–
4.7
4.7
–
–
–
4.7
4.7
The whole goodwill balance relates to the acquisition of Jones Food Company Limited (“Jones Food Company”), which was completed in June
2019. For the purpose of annual impairment testing, it has been allocated to the Other segment. Management has calculated the recoverable
amount of the Group’s holding of Jones Food Company as its fair value less costs to sell. It has also reconsidered factors such as the skills and
expertise of the workforce and expectations of future growth, and at the time of writing there are no indicators to suggest that the goodwill has
been impaired. See note 3.2 for more information on impairment reviews of non-financial assets.
Business combinations
The acquisition of Jones Food Company was the only significant investment made in a subsidiary during the prior period.
No significant investments were made during the current period.
3.2 Other intangible assets
Accounting policies
Intangible assets, other than goodwill, comprise internally-generated intangible assets relating mainly to computer software, and other
intangible assets relating mainly to externally-acquired computer software and assets and the right to use land. These are held at cost, less
accumulated amortisation and any recognised impairment charge. Other intangible assets, such as externally-acquired computer software
and software licences, are capitalised and amortised on a straight-line basis over their useful lives of three to 15 years. Costs relating to the
development of computer software for internal use are capitalised once all the development phase recognition criteria of IAS 38 “Intangible
Assets” are met. When the software is available for its intended use, these costs are amortised in equal annual amounts over the estimated
useful life of the software. Amortisation and impairment of computer software or licences are charged to administrative expenses in the period
in which they arise.
Amortisation of intangible assets is calculated on a straight-line basis from the date on which the assets are brought into use, is charged to
administrative expenses, and is calculated based on the useful lives indicated below:
Internally-generated intangible assets
3 – 15 years
Other intangible assets
3 – 15 years
Amortisation periods and methods are reviewed annually and adjusted if appropriate.
222 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Notes to the Consolidated Financial Statements
Continued
3.2 Other intangible assets continued
Cost capitalisation
The cost of an internally-generated intangible asset is capitalised as an intangible asset where Management determines that the ability to
develop the asset is technically feasible, will be completed, and that the asset will generate economic benefit that outweighs its cost. This
is in line with the recognition criteria outlined in IAS 38. Management determines whether the nature of the projects meets the recognition
criteria to allow for the capitalisation of internal costs, which include the total cost of any external products or services and labour costs directly
attributable to development. During the period, Management has considered whether costs in relation to the time spent on specific software
projects can be capitalised. Time spent that was eligible for capitalisation included time which was intrinsic to the development of new
assets, CFCs and General Merchandise Distribution Centres, and the enhancement and efficiency improvements of existing warehouse system
capabilities to accommodate expanding capacity and scalable opportunities. Time has also been spent on the ongoing implementation and
integration of the functionality of the OSP used by the Group’s customers.
Other development costs that do not meet the above criteria are recognised as expenses as incurred. Development costs previously recognised
as an expense are never capitalised in subsequent periods.
Research costs are recognised as expenses as incurred. These are costs that contribute to gaining new knowledge, which Management assesses
as not satisfying the capitalisation criteria of IAS 38 as outlined above. Examples of research costs include, but are not limited to, the following:
salaries and benefits of employees assessing and analysing future technologies and their likely viability, and professional fees such as marketing
costs and the cost of third-party consultancy.
In certain circumstances, some assets are ready for use, but are not performing as intended by Management. Development costs that relate to
the enhancement or modifications of existing assets are capitalised until the asset is performing as intended by Management. Management
assesses the capitalisation of these costs by consulting the guidance outlined in IAS 38, and exercises judgement in determining the qualifying
costs. When unsure if the enhancement or modification costs relate to the development of the asset or to its maintenance, Management treats
the costs as if incurred in the research phase only in line with the guidance in IAS 38.
Internally-generated intangible assets consist primarily of costs relating to intangible assets which provide economic benefit independent of
other assets, and intangible assets that are utilised in the operation of property, plant and equipment. These intangible assets are required
for certain tangible assets to operate as intended by Management. Management assesses each material addition of an internally-generated
intangible asset and considers whether it is integral to the successful operation of a related item of hardware, can be used across a number
of applications and, therefore, whether the asset should be recognised as property, plant and equipment. If the asset could be used on other
existing or future projects it will be recognised as an intangible asset. For example, should an internally-generated intangible asset, such as the
software code to enhance the operation of existing equipment in a CFC, be expected to form the foundation or a substantial element of future
software development, it has been recognised as an intangible asset.
Estimation of useful life
The periodic amortisation charge is derived by estimating an asset’s expected useful life and the expected residual value at the end of its life.
Increasing an asset’s expected life or its residual value would result in a reduced amortisation charge in the Consolidated Income Statement.
The useful life is determined by Management at the time software is acquired and brought into use, and is reviewed for appropriateness
regularly. For computer software licences, the useful life represents Management’s view of the expected period over which the Group will receive
benefits from the software.
For unique software products developed and controlled by the Group, the life is based on historical experience with similar products as well as
anticipation of future events which may affect their useful life, such as changes in technology.
Where the right to use land has been granted, amortisation is charged over the period until the right expires.
Impairment of non-financial assets (including goodwill (note 3.1) and plant, property and equipment (note 3.3))
Those non-financial assets which do not have indefinite useful lives are subject to an annual amortisation or depreciation charge. These assets
are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may exceed their recoverable
amounts. The recoverable amount is the higher of an asset’s fair value less costs to sell, and its value in use. Management makes an assessment
based on the current usage level and condition of an asset and assesses whether the asset will continue to stay in use for the remainder of its
useful life. Those non-financial assets which do have indefinite useful lives are reviewed for impairment at least once a year.
For the purpose of assessing impairment, assets are grouped at the lowest level for which there are separately-identifiable cash flows (cash-
generating units (“CGUs”)). Given the Group’s current operating structure, separately-identifiable cash flows are only available for operating
segments.
224 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
3.2 Other intangible assets continued
Cost capitalisation
The cost of an internally-generated intangible asset is capitalised as an intangible asset where Management determines that the ability to
develop the asset is technically feasible, will be completed, and that the asset will generate economic benefit that outweighs its cost. This
is in line with the recognition criteria outlined in IAS 38. Management determines whether the nature of the projects meets the recognition
criteria to allow for the capitalisation of internal costs, which include the total cost of any external products or services and labour costs directly
attributable to development. During the period, Management has considered whether costs in relation to the time spent on specific software
projects can be capitalised. Time spent that was eligible for capitalisation included time which was intrinsic to the development of new
assets, CFCs and General Merchandise Distribution Centres, and the enhancement and efficiency improvements of existing warehouse system
capabilities to accommodate expanding capacity and scalable opportunities. Time has also been spent on the ongoing implementation and
integration of the functionality of the OSP used by the Group’s customers.
Other development costs that do not meet the above criteria are recognised as expenses as incurred. Development costs previously recognised
as an expense are never capitalised in subsequent periods.
Research costs are recognised as expenses as incurred. These are costs that contribute to gaining new knowledge, which Management assesses
as not satisfying the capitalisation criteria of IAS 38 as outlined above. Examples of research costs include, but are not limited to, the following:
salaries and benefits of employees assessing and analysing future technologies and their likely viability, and professional fees such as marketing
costs and the cost of third-party consultancy.
In certain circumstances, some assets are ready for use, but are not performing as intended by Management. Development costs that relate to
the enhancement or modifications of existing assets are capitalised until the asset is performing as intended by Management. Management
assesses the capitalisation of these costs by consulting the guidance outlined in IAS 38, and exercises judgement in determining the qualifying
costs. When unsure if the enhancement or modification costs relate to the development of the asset or to its maintenance, Management treats
the costs as if incurred in the research phase only in line with the guidance in IAS 38.
Internally-generated intangible assets consist primarily of costs relating to intangible assets which provide economic benefit independent of
other assets, and intangible assets that are utilised in the operation of property, plant and equipment. These intangible assets are required
for certain tangible assets to operate as intended by Management. Management assesses each material addition of an internally-generated
intangible asset and considers whether it is integral to the successful operation of a related item of hardware, can be used across a number
of applications and, therefore, whether the asset should be recognised as property, plant and equipment. If the asset could be used on other
existing or future projects it will be recognised as an intangible asset. For example, should an internally-generated intangible asset, such as the
software code to enhance the operation of existing equipment in a CFC, be expected to form the foundation or a substantial element of future
software development, it has been recognised as an intangible asset.
Estimation of useful life
The periodic amortisation charge is derived by estimating an asset’s expected useful life and the expected residual value at the end of its life.
Increasing an asset’s expected life or its residual value would result in a reduced amortisation charge in the Consolidated Income Statement.
The useful life is determined by Management at the time software is acquired and brought into use, and is reviewed for appropriateness
regularly. For computer software licences, the useful life represents Management’s view of the expected period over which the Group will receive
benefits from the software.
For unique software products developed and controlled by the Group, the life is based on historical experience with similar products as well as
anticipation of future events which may affect their useful life, such as changes in technology.
Where the right to use land has been granted, amortisation is charged over the period until the right expires.
Impairment of non-financial assets (including goodwill (note 3.1) and plant, property and equipment (note 3.3))
Those non-financial assets which do not have indefinite useful lives are subject to an annual amortisation or depreciation charge. These assets
are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may exceed their recoverable
amounts. The recoverable amount is the higher of an asset’s fair value less costs to sell, and its value in use. Management makes an assessment
based on the current usage level and condition of an asset and assesses whether the asset will continue to stay in use for the remainder of its
useful life. Those non-financial assets which do have indefinite useful lives are reviewed for impairment at least once a year.
For the purpose of assessing impairment, assets are grouped at the lowest level for which there are separately-identifiable cash flows (cash-
generating units (“CGUs”)). Given the Group’s current operating structure, separately-identifiable cash flows are only available for operating
segments.
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
3.2 Other intangible assets continued
Non-financial assets that have suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period. When
an impairment charge is subsequently reversed, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying amount that would have existed had no impairment charge been
recognised for the asset in prior periods. A reversal of an impairment charge is recognised immediately as income.
Cost
At 2 December 2018
Additions
Internal development costs capitalised
Impairment of Andover CFC (see note 2.6)
At 1 December 2019
Additions
Internal development costs capitalised
Disposals
At 29 November 2020
Accumulated amortisation
At 2 December 2018
Charge for the period
Impairment charge
Impairment of Andover CFC (see note 2.6)
At 1 December 2019
Charge for the period
Impairment charge
Disposals
At 29 November 2020
Net book value
At 1 December 2019
At 29 November 2020
Internally-
generated
intangible
assets
£m
Other
intangible
assets
£m
211.4
–
70.2
(3.3)
278.3
–
89.6
(2.1)
365.8
(92.4)
(32.6)
(0.6)
1.2
(124.4)
(40.7)
(1.7)
1.2
(165.6)
153.9
200.2
34.7
13.6
–
–
48.3
17.4
–
(1.8)
63.9
(10.5)
(4.7)
(1.2)
–
(16.4)
(8.3)
(1.6)
1.7
(24.6)
31.9
39.3
Total
£m
246.1
13.6
70.2
(3.3)
326.6
17.4
89.6
(3.9)
429.7
(102.9)
(37.3)
(1.8)
1.2
(140.8)
(49.0)
(3.3)
2.9
(190.2)
185.8
239.5
Included within intangible assets is capital work-in-progress for internally-generated intangible assets of £31.2 million (2019: £17.7 million) and
£3.9 million (2019: £8.3 million) for other intangible assets.
224 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Notes to the Consolidated Financial Statements
Continued
3.3 Property, plant and equipment
Accounting policies
Property, plant and equipment (excluding land) are stated at cost, less accumulated depreciation and any recognised impairment charge. Cost
includes the original purchase price of the asset, any costs attributable to bringing the asset to its working condition for its intended use, and
major spares. An item of property, plant and equipment is recognised as an asset if it is probable that future economic benefits associated with
the asset will flow to the entity, and the cost of the asset can be measured reliably.
At the reporting date, property, plant and equipment made up 19.5% (2019: 20.4%) of the total asset base of the Group. The estimates and
assumptions made to determine the carrying value of property, plant and equipment and related depreciation are important to the Group’s
financial position and performance. Management assesses the estimates and assumptions based on available external information and
historical experience.
In determining the cost of property, plant and equipment, certain costs that relate to the intangible element of an asset are separately disclosed
within intangible assets (see note 3.2.) Management exercises judgement in reviewing each material addition of an asset and considers whether
the intangible asset element can be used for other property, plant and equipment additions in the current or future periods. The OSP has been
identified as a standalone intangible asset, because it has been developed and used to deliver the Group’s latest CFCs, and will be used to
provide part of the foundation software for future CFCs. Similarly, the restructuring of the software which manages CFC operations to increase
modularity has been identified as a separate asset because it will improve software stability for CFCs.
Depreciation on an item of property, plant and equipment is calculated on a straight-line basis from the date on which the item is brought into
use, is charged to distribution costs or administrative expenses depending on the nature of the item, and is calculated based on the useful lives
indicated below:
30 years
Freehold buildings
5–10 years
Fixtures and fittings
Plant and machinery 3–20 years
2–7 years
Motor vehicles
Land is held at cost and not depreciated.
Assets in the course of construction are held at cost, less any recognised impairment charge. Cost includes professional fees and other directly-
attributable costs. Depreciation of these assets commences when the assets are ready for their intended use, on the same basis as other assets.
Gains and losses on disposal are determined by comparing proceeds with the asset’s carrying amount and are recognised within operating profit.
For more information on the Group’s policy on capitalising borrowing costs, see note 4.1.
Estimation of useful life
Depreciation is provided at rates estimated to write off the cost of the relevant assets, less their estimated residual values, by equal annual
amounts over their expected useful lives. Residual values and expected useful lives are reviewed and adjusted, if appropriate, at the end of each
reporting period.
The charge in respect of periodic depreciation is derived by estimating an asset’s expected useful life and the expected residual value at the
end of its life. Increasing an asset’s expected life or its residual value would result in a reduced depreciation charge in the Consolidated Income
Statement. The useful lives of the Group’s assets are determined by Management at the time the assets are acquired, and reviewed at least once
a year for appropriateness.
Management also assesses the useful lives based on historical experience with similar assets, as well as anticipation of future events which may
affect their useful lives, such as changes in technology. A review of useful lives took place during the period, and no change in useful lives
was required.
226 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
3.3 Property, plant and equipment
Accounting policies
Property, plant and equipment (excluding land) are stated at cost, less accumulated depreciation and any recognised impairment charge. Cost
includes the original purchase price of the asset, any costs attributable to bringing the asset to its working condition for its intended use, and
major spares. An item of property, plant and equipment is recognised as an asset if it is probable that future economic benefits associated with
the asset will flow to the entity, and the cost of the asset can be measured reliably.
At the reporting date, property, plant and equipment made up 19.5% (2019: 20.4%) of the total asset base of the Group. The estimates and
assumptions made to determine the carrying value of property, plant and equipment and related depreciation are important to the Group’s
financial position and performance. Management assesses the estimates and assumptions based on available external information and
historical experience.
In determining the cost of property, plant and equipment, certain costs that relate to the intangible element of an asset are separately disclosed
within intangible assets (see note 3.2.) Management exercises judgement in reviewing each material addition of an asset and considers whether
the intangible asset element can be used for other property, plant and equipment additions in the current or future periods. The OSP has been
identified as a standalone intangible asset, because it has been developed and used to deliver the Group’s latest CFCs, and will be used to
provide part of the foundation software for future CFCs. Similarly, the restructuring of the software which manages CFC operations to increase
modularity has been identified as a separate asset because it will improve software stability for CFCs.
Depreciation on an item of property, plant and equipment is calculated on a straight-line basis from the date on which the item is brought into
use, is charged to distribution costs or administrative expenses depending on the nature of the item, and is calculated based on the useful lives
indicated below:
Freehold buildings
30 years
Fixtures and fittings
5–10 years
Plant and machinery 3–20 years
Motor vehicles
2–7 years
Land is held at cost and not depreciated.
Assets in the course of construction are held at cost, less any recognised impairment charge. Cost includes professional fees and other directly-
attributable costs. Depreciation of these assets commences when the assets are ready for their intended use, on the same basis as other assets.
Gains and losses on disposal are determined by comparing proceeds with the asset’s carrying amount and are recognised within operating profit.
For more information on the Group’s policy on capitalising borrowing costs, see note 4.1.
Depreciation is provided at rates estimated to write off the cost of the relevant assets, less their estimated residual values, by equal annual
amounts over their expected useful lives. Residual values and expected useful lives are reviewed and adjusted, if appropriate, at the end of each
The charge in respect of periodic depreciation is derived by estimating an asset’s expected useful life and the expected residual value at the
end of its life. Increasing an asset’s expected life or its residual value would result in a reduced depreciation charge in the Consolidated Income
Statement. The useful lives of the Group’s assets are determined by Management at the time the assets are acquired, and reviewed at least once
Management also assesses the useful lives based on historical experience with similar assets, as well as anticipation of future events which may
affect their useful lives, such as changes in technology. A review of useful lives took place during the period, and no change in useful lives
Estimation of useful life
reporting period.
a year for appropriateness.
was required.
3.3 Property, plant and equipment continued
Cost
At 2 December 2018
Reclassified to right-of-use assets at 3 December 2018
Additions
Internal development costs capitalised
Acquired on purchase of Jones Food Company Limited
Impairment of Andover CFC (see note 2.6)
Disposals
At 1 December 2019
Additions
Internal development costs capitalised
Disposals
Effect of changes in foreign exchange rates
At 29 November 2020
Accumulated depreciation
At 2 December 2018
Reclassified to right-of-use assets at 3 December 2018
Charge for the period
Impairment charge
Impairment of Andover CFC (see note 2.6)
Disposals
At 1 December 2019
Charge for the period
Impairment charge
Disposals
At 29 November 2020
Net book value
At 1 December 2019
At 29 November 2020
Fixtures,
fittings,
plant and
machinery
£m
Land and
buildings
£m
Motor
vehicles
£m
130.5
(32.4)
0.9
–
0.6
(32.3)
–
67.3
22.5
–
–
–
89.8
(27.8)
23.2
(2.8)
–
2.6
–
(4.8)
(2.4)
(0.1)
–
(7.3)
62.5
82.5
697.0
(211.1)
140.4
23.6
4.8
(82.8)
(2.6)
569.3
320.7
30.9
(1.2)
1.0
920.7
(283.3)
143.2
(41.6)
(0.6)
15.6
0.8
(165.9)
(54.0)
(2.0)
1.8
(220.1)
403.4
700.6
82.5
(69.8)
1.0
–
–
–
(2.7)
11.0
–
–
–
–
11.0
(42.2)
32.8
(1.6)
–
–
2.7
(8.3)
(0.8)
–
–
(9.1)
2.7
1.9
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
Total
£m
910.0
(313.3)
142.3
23.6
5.4
(115.1)
(5.3)
647.6
343.2
30.9
(1.2)
1.0
1,021.5
(353.3)
199.2
(46.0)
(0.6)
18.2
3.5
(179.0)
(57.2)
(2.1)
1.8
(236.5)
468.6
785.0
Included within property, plant and equipment is capital work-in-progress for land and buildings of £28.0 million (2019: £0.1 million) and £276.1
million (2019: £115.1 million) for fixtures, fittings, plant and machinery.
3.4 Right-of-use assets
Accounting policies
Right-of-use assets are measured at cost, which is the initial measurement of the lease liabilities, adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the assets
at the ends of the leases, less any lease incentives received.
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life
of the right-of-use asset or the lease term. The Group also assesses the right-of-use assets for impairment when such indicators exist.
The right-of-use assets are included in a separate line within non-current assets on the Consolidated Balance Sheet.
226 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Notes to the Consolidated Financial Statements
Continued
3.4 Right–of–use assets continued
Cost
At 2 December 2018
Reclassified from property, plant and equipment
Recognised on adoption of IFRS 16
At 3 December 2018
Additions
Disposals
At 1 December 2019
Additions
Disposals
At 29 November 2020
Accumulated depreciation
At 2 December 2018
Reclassified from property, plant and equipment at 3 December 2018
Charge for the period
Disposals
At 1 December 2019
Charge for the period
Disposals
At 29 November 2020
Net book value
At 1 December 2019
At 29 November 2020
Fixtures,
fittings,
plant and
machinery
£m
Land and
buildings
£m
Motor
vehicles
£m
–
32.4
268.5
300.9
8.9
–
309.8
53.2
(0.2)
362.8
–
(23.2)
(19.4)
–
(42.6)
(24.5)
0.2
(66.9)
267.2
295.9
–
211.1
3.0
214.1
–
(0.2)
213.9
0.2
(0.3)
213.8
–
(143.2)
(15.6)
0.2
(158.6)
(15.2)
0.3
(173.5)
55.3
40.3
–
69.8
4.4
74.2
20.4
(3.8)
90.8
20.1
(3.4)
107.5
–
(32.8)
(15.4)
3.7
(44.5)
(17.6)
3.4
(58.7)
46.3
48.8
Total
£m
–
313.3
275.9
589.2
29.3
(4.0)
614.5
73.5
(3.9)
684.1
–
(199.2)
(50.4)
3.9
(245.7)
(57.3)
3.9
(299.1)
368.8
385.0
3.5 Investment in joint ventures
Accounting policies
The Group has assessed the nature of its joint arrangements with MHE JVCo Limited and Infinite Acres Holding B.V. under IFRS 11 “Joint
Arrangements” and determined both to be joint ventures.
The Group’s share of the results of joint ventures is included in the Consolidated Income Statement, and is accounted for using the equity
method of accounting. Investments in joint ventures are held on the Consolidated Balance Sheet at cost, plus post-acquisition changes in the
Group’s share of the net assets of the entity, less any impairment in value. On transfer of assets to joint ventures, the Group recognises only its
share of any profits or losses, namely that proportion sold outside the Group.
If the Group’s share of losses in a joint venture equals or exceeds its investment in the joint venture, the Group does not recognise further losses,
unless it has incurred obligations to do so or made payments on behalf of the joint venture.
Unrealised gains arising from transactions with joint ventures are eliminated to the extent of the Group’s interest in the entity.
Investment in joint ventures
The Group holds a 50.0% interest in MHE JVCo Limited (“MHE JVCo”), a private company incorporated in England and Wales, with its registered
address at Buildings One & Two Trident Place, Mosquito Way, Hatfield, Hertfordshire, United Kingdom, AL10 9UL. MHE JVCo holds assets which
it leases to the Group.
The Group also holds a 33.3% interest in Infinite Acres Holding B.V. (“Infinite Acres”), a private company incorporated in the Netherlands, with its
registered address at Oude Delft 128, 2611 CG Delft, Netherlands. Infinite Acres designs and builds vertical farms.
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Continued
3.4 Right–of–use assets continued
Cost
At 2 December 2018
Reclassified from property, plant and equipment
Recognised on adoption of IFRS 16
At 3 December 2018
Additions
Disposals
Additions
Disposals
At 1 December 2019
At 29 November 2020
Accumulated depreciation
At 2 December 2018
Charge for the period
Disposals
At 1 December 2019
Charge for the period
Disposals
At 29 November 2020
Net book value
At 1 December 2019
At 29 November 2020
Reclassified from property, plant and equipment at 3 December 2018
Fixtures,
fittings,
plant and
machinery
£m
Land and
buildings
£m
Motor
vehicles
£m
–
32.4
268.5
300.9
8.9
–
309.8
53.2
(0.2)
362.8
(23.2)
(19.4)
–
–
(42.6)
(24.5)
0.2
(66.9)
267.2
295.9
211.1
3.0
214.1
–
–
(0.2)
213.9
0.2
(0.3)
213.8
–
(143.2)
(15.6)
0.2
(158.6)
(15.2)
0.3
(173.5)
55.3
40.3
–
69.8
4.4
74.2
20.4
(3.8)
90.8
20.1
(3.4)
107.5
–
(32.8)
(15.4)
3.7
(44.5)
(17.6)
3.4
(58.7)
46.3
48.8
Total
£m
–
313.3
275.9
589.2
29.3
(4.0)
614.5
73.5
(3.9)
684.1
–
(199.2)
(50.4)
3.9
(245.7)
(57.3)
3.9
(299.1)
368.8
385.0
3.5 Investment in joint ventures
Accounting policies
The Group has assessed the nature of its joint arrangements with MHE JVCo Limited and Infinite Acres Holding B.V. under IFRS 11 “Joint
Arrangements” and determined both to be joint ventures.
The Group’s share of the results of joint ventures is included in the Consolidated Income Statement, and is accounted for using the equity
method of accounting. Investments in joint ventures are held on the Consolidated Balance Sheet at cost, plus post-acquisition changes in the
Group’s share of the net assets of the entity, less any impairment in value. On transfer of assets to joint ventures, the Group recognises only its
share of any profits or losses, namely that proportion sold outside the Group.
If the Group’s share of losses in a joint venture equals or exceeds its investment in the joint venture, the Group does not recognise further losses,
unless it has incurred obligations to do so or made payments on behalf of the joint venture.
Unrealised gains arising from transactions with joint ventures are eliminated to the extent of the Group’s interest in the entity.
Investment in joint ventures
it leases to the Group.
The Group holds a 50.0% interest in MHE JVCo Limited (“MHE JVCo”), a private company incorporated in England and Wales, with its registered
address at Buildings One & Two Trident Place, Mosquito Way, Hatfield, Hertfordshire, United Kingdom, AL10 9UL. MHE JVCo holds assets which
The Group also holds a 33.3% interest in Infinite Acres Holding B.V. (“Infinite Acres”), a private company incorporated in the Netherlands, with its
registered address at Oude Delft 128, 2611 CG Delft, Netherlands. Infinite Acres designs and builds vertical farms.
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
3.5 Investment in joint ventures continued
The carrying amounts of the investments at the beginning and end of the period can be reconciled as follows:
MHE JVCo Limited
Infinite Acres Holding B.V.
Total
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
Investment at beginning of period
Acquisition during period
Share of total comprehensive income/(expense)
attributable to Group
Foreign exchange difference recognised in other
comprehensive income
Dividends received from joint ventures
Investment at end of period
37.6
–
0.5
–
(7.7)
30.4
52.2
–
1.0
–
(15.6)
37.6
8.2
–
(0.9)
(0.3)
–
7.0
–
8.8
(0.1)
(0.5)
–
8.2
45.8
–
(0.4)
(0.3)
(7.7)
37.4
52.2
8.8
0.9
(0.5)
(15.6)
45.8
The tables below provide summarised financial information of the Group’s joint ventures. The information disclosed reconciles the amounts
presented in the financial statements of the relevant joint ventures with the Group’s share of those amounts.
Non-current assets
Current assets
– Cash and cash equivalents
– Other current assets
Current liabilities
– Current financial liabilities (excluding trade
and other payables)
– Other current liabilities
Non-current liabilities
– Non-current financial liabilities (excluding trade
and other payables)
– Other non-current liabilities
Net assets
Share of net assets attributable to Group
Adjustment for specific allocation of assets to
investors
Legal costs capitalised on acquisition
Implicit goodwill
Investment at end of period
MHE JVCo Limited
Infinite Acres Holding B.V.
Total
29 November
2020
£m
1 December
2019
£m
29 November
2020
£m
1 December
2019
£m
29 November
2020
£m
1 December
2019
£m
43.3
1.6
17.0
–
(0.7)
–
–
61.2
30.6
(0.2)
–
–
30.4
57.6
1.5
17.0
–
(0.3)
–
–
75.8
37.9
(0.3)
–
–
37.6
2.9
3.3
9.8
–
(6.2)
(9.0)
(0.1)
0.7
0.2
–
0.5
6.3
7.0
3.1
1.1
0.2
–
(1.1)
–
–
3.3
1.1
–
0.5
6.6
8.2
46.2
4.9
26.8
–
(6.9)
(9.0)
(0.1)
61.9
30.8
(0.2)
0.5
6.3
37.4
60.7
2.6
17.2
–
(1.4)
–
–
79.1
39.0
(0.3)
0.5
6.6
45.8
228 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Notes to the Consolidated Financial Statements
Continued
3.5 Investment in joint ventures continued
MHE JVCo Limited
Infinite Acres Holding B.V.
Total
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
52 weeks
ended
29 November
2020
£m
10 weeks
ended
1 December
2019
£m
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
Revenue
Cost of sales
Gross profit
Administrative expenses
Depreciation, amortisation and impairment charges
Interest income
Interest expense
Income tax expense
Profit/(loss) and total comprehensive income/
(expense) for the period
Share of total comprehensive income/
(expense) attributable to Group
Foreign exchange loss recognised in other
comprehensive income
Dividends received from joint ventures
–
–
–
0.7
(1.8)
3.0
–
(0.8)
1.1
0.5
–
7.7
–
–
–
–
(1.6)
3.7
–
–
2.1
1.0
–
15.6
10.2
(10.0)
0.2
(2.7)
(0.4)
0.5
(0.3)
–
(2.7)
(0.9)
(0.3)
–
–
–
–
(0.3)
(0.1)
–
–
–
(0.4)
(0.1)
(0.5)
–
10.2
(10.0)
0.2
(2.0)
(2.2)
3.5
(0.3)
(0.8)
(1.6)
(0.4)
(0.3)
7.7
–
–
–
(0.3)
(1.7)
3.7
–
–
1.7
0.9
(0.5)
15.6
3.6 Investment in associate
Accounting policies
The Group’s share of the results of associates is included in the Consolidated Income Statement, and is accounted for using the equity method
of accounting. Investments in associates are carried on the Consolidated Balance Sheet at cost, plus post-acquisition changes in the Group’s
share of the net assets of the entity, less any impairment in value. On transfer of assets to associates, the Group recognises only its share of any
profits or losses, namely that proportion sold outside the Group.
If the Group’s share of losses in an associate equals or exceeds its investment in the associate, the Group does not recognise further losses,
unless it has incurred obligations to do so or made payments on behalf of the associate.
Unrealised gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the entity.
Investment in associate
The investment in associate is a 20.8% interest in Karakuri Limited (“Karakuri”), a private company incorporated in England and Wales, with
its registered address at 14 Amherst Avenue, London, England, W13 8NQ. Its principal place of business is Unit 2, Hammersmith Studios, 55a
Yeldham Road, London, W6 8JF, United Kingdom. Karakuri develops and builds robots.
The carrying amount of the investment is £4.1 million (2019: £4.7 million). For the period, Karakuri made a loss after tax of £2.5 million (2019: £0.7
million from the date of acquisition), of which £0.5 million (2019: £0.2 million) is attributable to the Group.
3.7 Other financial assets
Accounting policies
Other financial assets comprise treasury deposits with a maturity of more than three months at the date of acquisition, contingent consideration
receivable, unlisted equity investments, loans to a joint venture and associate, and contributions towards dilapidations costs receivable.
Other treasury deposits are classified as other financial assets rather than cash and cash equivalents since they are not available to meet
short-term cash commitments.
Unlisted equity investments have been designated as at fair value through other comprehensive income (“FVTOCI”) because they represent
strategic investments which the Group intends to hold indefinitely. They are measured at fair value with gains and losses arising from changes in
fair value recognised in other comprehensive income and accumulated in other reserves. The cumulative gains or losses will not be reclassified
to profit or loss on disposal of the investments; instead they will be transferred directly to retained earnings. Dividends on these investments are
recognised as other income in profit or loss.
The loan to the joint venture was initially recognised at the fair value of the cash lent. Accrued interest is added to the carrying amount. It is held
at amortised cost, reduced by appropriate provisions for estimated irrecoverable amounts.
The convertible loan to the associate was initially recognised at the amount of cash lent. Accrued interest is added to the carrying amount. It is
held at fair value through profit or loss (“FVTPL”) and is revalued at each reporting date.
230 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
3.5 Investment in joint ventures continued
MHE JVCo Limited
Infinite Acres Holding B.V.
Total
52 weeks
ended
52 weeks
ended
52 weeks
ended
10 weeks
ended
52 weeks
ended
52 weeks
ended
29 November
1 December
29 November
1 December
29 November
1 December
2020
£m
–
–
–
0.7
(1.8)
3.0
–
(0.8)
1.1
0.5
–
7.7
2019
£m
–
–
–
–
–
–
(1.6)
3.7
2.1
1.0
–
15.6
2020
£m
10.2
(10.0)
0.2
(2.7)
(0.4)
0.5
(0.3)
–
(2.7)
(0.9)
(0.3)
–
2019
£m
(0.3)
(0.1)
–
–
–
–
–
–
(0.4)
(0.1)
(0.5)
–
2020
£m
10.2
(10.0)
0.2
(2.0)
(2.2)
3.5
(0.3)
(0.8)
(1.6)
(0.4)
(0.3)
7.7
2019
£m
–
–
–
–
–
(0.3)
(1.7)
3.7
1.7
0.9
(0.5)
15.6
Revenue
Cost of sales
Gross profit
Interest income
Interest expense
Income tax expense
Administrative expenses
Depreciation, amortisation and impairment charges
Profit/(loss) and total comprehensive income/
(expense) for the period
Share of total comprehensive income/
(expense) attributable to Group
Foreign exchange loss recognised in other
comprehensive income
Dividends received from joint ventures
3.6 Investment in associate
Accounting policies
The Group’s share of the results of associates is included in the Consolidated Income Statement, and is accounted for using the equity method
of accounting. Investments in associates are carried on the Consolidated Balance Sheet at cost, plus post-acquisition changes in the Group’s
share of the net assets of the entity, less any impairment in value. On transfer of assets to associates, the Group recognises only its share of any
profits or losses, namely that proportion sold outside the Group.
If the Group’s share of losses in an associate equals or exceeds its investment in the associate, the Group does not recognise further losses,
unless it has incurred obligations to do so or made payments on behalf of the associate.
Unrealised gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the entity.
Investment in associate
Yeldham Road, London, W6 8JF, United Kingdom. Karakuri develops and builds robots.
The carrying amount of the investment is £4.1 million (2019: £4.7 million). For the period, Karakuri made a loss after tax of £2.5 million (2019: £0.7
million from the date of acquisition), of which £0.5 million (2019: £0.2 million) is attributable to the Group.
3.7 Other financial assets
Accounting policies
short-term cash commitments.
Other financial assets comprise treasury deposits with a maturity of more than three months at the date of acquisition, contingent consideration
receivable, unlisted equity investments, loans to a joint venture and associate, and contributions towards dilapidations costs receivable.
Other treasury deposits are classified as other financial assets rather than cash and cash equivalents since they are not available to meet
Unlisted equity investments have been designated as at fair value through other comprehensive income (“FVTOCI”) because they represent
strategic investments which the Group intends to hold indefinitely. They are measured at fair value with gains and losses arising from changes in
fair value recognised in other comprehensive income and accumulated in other reserves. The cumulative gains or losses will not be reclassified
to profit or loss on disposal of the investments; instead they will be transferred directly to retained earnings. Dividends on these investments are
recognised as other income in profit or loss.
The loan to the joint venture was initially recognised at the fair value of the cash lent. Accrued interest is added to the carrying amount. It is held
at amortised cost, reduced by appropriate provisions for estimated irrecoverable amounts.
The convertible loan to the associate was initially recognised at the amount of cash lent. Accrued interest is added to the carrying amount. It is
held at fair value through profit or loss (“FVTPL”) and is revalued at each reporting date.
3.7 Other financial assets continued
Prepaid fees in relation to financing activities are recognised when incurred. The prepaid fees are amortised in proportion to the utilisation
of the underlying facility. Amortisation commenced when the underlying facility was first utilised through to the earlier of the expected
refinancing date or end of the term. Any of the prepaid fee which has not been amortised when the facility is refinanced or repaid will be charged
immediately to the Consolidated Income Statement.
Other treasury deposits
Contingent consideration receivable
Unlisted equity investments
Loan to joint venture
Convertible loan to associate
Contributions towards dilapidations costs receivable
Prepaid financing fees
Other financial assets
Disclosed as:
Current
Non-current
29 November
2020
£m
Note
5.4
5.4
370.0
173.6
12.7
9.3
1.7
1.5
–
568.8
402.0
166.8
568.8
1 December
2019
(restated)(1)
£m
110.0
169.1
6.8
–
–
1.4
2.8
290.1
112.8
177.3
290.1
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
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(1) £110.0 million (2018: £153.5 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019. See note 1.7 for more information.
Other treasury deposits
Other treasury deposits are cash deposits with banks with a maturity of more than three months at the date of acquisition.
Contingent consideration receivable
Contingent consideration receivable comprises two amounts: £170.7 million (2019: £163.5 million) due from Marks and Spencer Holdings
Limited (“M&S”) relating to the part-disposal of Ocado Retail Limited in August 2019, and £2.9 million (2019: £5.6 million) due from Next Holdings
Limited (“Next”) relating to the disposal of Marie Claire Beauty Limited (“Fabled”) in July 2019.
The consideration due from M&S comprises three separate amounts totalling £224.5 million in cash, which will become payable if three separate
financial and operational targets are met. Both the Group and M&S fully expect all three amounts to become payable: £33.8 million in the 2021
financial year, and £190.7 million in the 2024 financial year.
The investment in associate is a 20.8% interest in Karakuri Limited (“Karakuri”), a private company incorporated in England and Wales, with
its registered address at 14 Amherst Avenue, London, England, W13 8NQ. Its principal place of business is Unit 2, Hammersmith Studios, 55a
The consideration due from Next is a percentage of the sales of Fabled for the period to July 2024. The total cash still receivable under the
earn-out arrangement is estimated to be £4.1 million, payable in tranches in March and September each year.
Unlisted equity investments
Unlisted equity investments comprise a 25.0% interest in Paneltex Limited (“Paneltex”), a private company incorporated in England and Wales, with its
registered address at Paneltex House, Somerden Road, Hull, HU9 5PE. Paneltex designs and modifies refrigerated vehicles. It has not been treated as an
associate since the Group does not have significant influence over the company. In arriving at this decision, the Board has reviewed the conditions set
out in IAS 28 “Investments in Associates and Joint Ventures” and concluded that despite the size of the Group’s holding, it is unable to participate in the
financial and operating policy decisions of Paneltex due to the position of the majority shareholder as Executive Managing Director. The relationship
between the Group and the company is at arm’s length. The fair value of the investment is £10.4 million (2019: £5.2 million).
Unlisted equity investments also comprise a 5.9% interest in Inkbit Corporation and a 6.7% interest in Myrmex Inc. (“Myrmex”), both private
companies incorporated in the United States of America. The interest in Myrmex was acquired in October 2020. The fair value of these
investments are £1.6 million and £0.7 million respectively (2019: £1.6 million and £nil).
Loan to joint venture
Loan to joint venture is a loan to Infinite Acres Holding B.V. (“Infinite Acres”), a company incorporated in the Netherlands in which the Group
holds a 33.3% interest.
It comprises two amounts of $6.0 million each, drawn down in January and June 2020. Interest is chargeable on the total $12.0 million at 5.0%
per annum for two years from the date of the first drawdown, and 7.0% thereafter. The loan is repayable in full in September 2024, along with
any unpaid accrued interest.
Convertible loan to associate
Loan to associate is a loan to Karakuri Limited (“Karakuri”), a company incorporated in England and Wales in which the Group holds a 20.8%
interest, made in October 2020. Interest is chargeable on the £1.7 million principal at 8.0% per annum. The principal and any unpaid accrued
interest are convertible into preference shares of Karakuri at the option of the Group. Otherwise, the loan is repayable in full in October 2023,
along with any unpaid accrued interest.
230 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Notes to the Consolidated Financial Statements
Continued
3.7 Other financial assets continued
Contributions towards dilapidations costs receivable
Contributions towards dilapidations costs are due from the former tenant of two properties whose leases the Group took over in 2017, and will
be paid when the dilapidations costs are incurred on expiry of the leases.
Prepaid financing fees
The prepaid financing fees related to the £100.0 million revolving credit facility (“RCF”). The RCF was terminated in October 2020, and the fees
were recognised as finance costs.
3.8 Asset held for sale
Accounting policies
Assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Assets and disposal groups are classified as held for sale if their carrying amount will be recovered through sale rather than
through continuing use. This condition is regarded as met only when the sale is highly probable, and the asset (or disposal group) is available
for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition
as a completed sale within 12 months from the date of classification.
Asset held for sale
The asset held for sale of £4.2 million (2019: £4.2 million) is a property in the United Kingdom, previously used in the Group’s distribution
network, which the Group is in the process of selling.
The completion of the sale has been delayed by circumstances beyond the Group’s control. The Group remains committed to the sale, which it expects
to complete within 12 months of the reporting date. Accordingly, the asset has continued to be classified as held for sale. The proceeds of the disposal
are expected to exceed the carrying amount and, accordingly, no gain or loss was recognised on the classification of the property as held for sale.
3.9 Inventories
Accounting policies
Inventories comprise goods held for resale, fuel and other consumable goods. Inventories are valued at the lower of cost (using the first-in-first-
out basis as provided in IAS 2 “Inventories”) and net realisable value. Goods held for resale and consumables are valued on the historical cost
basis. Net realisable value represents the estimated selling price, less all estimated costs of completion and costs to be incurred in marketing,
selling and distribution. It also takes into account slow-moving, obsolete and defective inventory. Fuel stocks are valued at calculated average
cost. Costs include all direct expenditure and other appropriate attributable costs incurred in bringing inventories to their present location and
condition. There has been no security granted over inventories unless stated otherwise.
The Group has a mix of grocery and general merchandise items within inventory which have different characteristics. For example, grocery
lines have high inventory turnover, while non-food lines are typically held within inventory for a longer period of time and so run a higher risk
of obsolescence. As inventories are held at the lower of cost and net realisable value, this requires the estimation of the eventual sales price of
goods to customers. Judgement is applied when estimating the effect on the carrying value of inventories, such as slow-moving, obsolete and
defective inventory, which includes reviewing the quantity, age and condition of inventories throughout the period.
Goods for resale
Consumables
Inventories
29 November
2020
£m
1 December
2019
£m
58.7
2.9
61.6
50.6
1.7
52.3
The provision for slow-moving, obsolete and defective stock has decreased by £0.6 million from the prior period (2019: £0.6 million) and the
corresponding gain has been recognised in the Consolidated Income Statement.
3.10 Trade and other receivables
Accounting policies
Trade receivables are not interest-bearing and are due on commercial terms. Trade receivables are recognised initially at their transaction price
and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
Other receivables are also not interest-bearing and are recognised initially at their transaction price, and subsequently at amortised cost,
reduced by appropriate provisions for estimated irrecoverable amounts.
Provision for impairment of trade receivables
The Group has elected to apply the IFRS 9 “Financial Instruments” simplified approach to measuring expected credit losses using a lifetime
expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based
on similar credit risks and ageing.
232 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
3.7 Other financial assets continued
Contributions towards dilapidations costs receivable
Prepaid financing fees
were recognised as finance costs.
3.8 Asset held for sale
Accounting policies
Contributions towards dilapidations costs are due from the former tenant of two properties whose leases the Group took over in 2017, and will
be paid when the dilapidations costs are incurred on expiry of the leases.
The prepaid financing fees related to the £100.0 million revolving credit facility (“RCF”). The RCF was terminated in October 2020, and the fees
Assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Assets and disposal groups are classified as held for sale if their carrying amount will be recovered through sale rather than
through continuing use. This condition is regarded as met only when the sale is highly probable, and the asset (or disposal group) is available
for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition
as a completed sale within 12 months from the date of classification.
Asset held for sale
network, which the Group is in the process of selling.
The asset held for sale of £4.2 million (2019: £4.2 million) is a property in the United Kingdom, previously used in the Group’s distribution
The completion of the sale has been delayed by circumstances beyond the Group’s control. The Group remains committed to the sale, which it expects
to complete within 12 months of the reporting date. Accordingly, the asset has continued to be classified as held for sale. The proceeds of the disposal
are expected to exceed the carrying amount and, accordingly, no gain or loss was recognised on the classification of the property as held for sale.
3.9 Inventories
Accounting policies
Inventories comprise goods held for resale, fuel and other consumable goods. Inventories are valued at the lower of cost (using the first-in-first-
out basis as provided in IAS 2 “Inventories”) and net realisable value. Goods held for resale and consumables are valued on the historical cost
basis. Net realisable value represents the estimated selling price, less all estimated costs of completion and costs to be incurred in marketing,
selling and distribution. It also takes into account slow-moving, obsolete and defective inventory. Fuel stocks are valued at calculated average
cost. Costs include all direct expenditure and other appropriate attributable costs incurred in bringing inventories to their present location and
condition. There has been no security granted over inventories unless stated otherwise.
The Group has a mix of grocery and general merchandise items within inventory which have different characteristics. For example, grocery
lines have high inventory turnover, while non-food lines are typically held within inventory for a longer period of time and so run a higher risk
of obsolescence. As inventories are held at the lower of cost and net realisable value, this requires the estimation of the eventual sales price of
goods to customers. Judgement is applied when estimating the effect on the carrying value of inventories, such as slow-moving, obsolete and
defective inventory, which includes reviewing the quantity, age and condition of inventories throughout the period.
29 November
1 December
2020
£m
58.7
2.9
61.6
2019
£m
50.6
1.7
52.3
Goods for resale
Consumables
Inventories
3.10 Trade and other receivables
Accounting policies
The provision for slow-moving, obsolete and defective stock has decreased by £0.6 million from the prior period (2019: £0.6 million) and the
corresponding gain has been recognised in the Consolidated Income Statement.
Trade receivables are not interest-bearing and are due on commercial terms. Trade receivables are recognised initially at their transaction price
and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
Other receivables are also not interest-bearing and are recognised initially at their transaction price, and subsequently at amortised cost,
reduced by appropriate provisions for estimated irrecoverable amounts.
Provision for impairment of trade receivables
The Group has elected to apply the IFRS 9 “Financial Instruments” simplified approach to measuring expected credit losses using a lifetime
expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based
on similar credit risks and ageing.
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
3.10 Trade and other receivables continued
The expected loss rates are based on the Group’s historical credit losses, adjusted for reasonable and supportable information that is available
at the reporting date about past events, current conditions and forecasts of future economic conditions.
For a reconciliation of the provisions at the end of the current and prior periods, see note 4.8.
Gross trade receivables
Less: Provision for impairment of trade receivables
Trade receivables
Other receivables
Prepayments
Accrued income
Trade and other receivables
Note
4.8
29 November
2020
£m
107.1
(2.6)
104.5
31.4
34.1
30.6
200.6
1 December
2019
£m
69.7
(2.2)
67.5
32.9
26.0
23.6
150.0
Included within trade receivables is a balance of £0.6 million (2019: £0.3 million) owed by MHE JVCo Limited, a company incorporated in
England and Wales in which the Group holds a 50.0% interest. £33.8 million (2019: £12.3 million) of trade receivables relates to contract balances
outstanding for Solutions contracts. See note 2.1 for more detail.
Included in trade receivables is £56.3 million (2019: £43.1 million) due from suppliers in relation to commercial and media income. At 3 January
2021, £47.1 million had been received. Included in accrued income is £7.0 million (2019: £8.0 million) to be invoiced to suppliers in relation to
supplier-funded promotional activity and £10.5 million (2019: £10.8 million) to be invoiced to suppliers in relation to volume-related rebates.
At 9 January 2021, £14.9 million of accrued income had been invoiced. Trade receivables and trade payables with the same supplier are presented
separately until they reach their due dates, at which point they are presented on a net basis until settlement.
Also included in accrued income is £3.8 million (2019: £1.1 million) relating to the Group’s right to consideration for work completed but not
billed at the reporting date on Solutions contracts.
3.11 Cash and cash equivalents
Accounting policies
Cash and cash equivalents comprise cash at bank and in hand, money market funds, and treasury deposits with banks with a maturity of three
months or less at the date of acquisition. Cash at bank and in hand includes customers’ credit card payments received within five working days where
notification of a chargeback or reserve fund has not been received from the payment service provider at the reporting date. Cash and cash equivalents
are classified as current assets on the Consolidated Balance Sheet. The carrying amount of these assets approximates to their fair value.
Cash at bank and in hand
Money market funds
Short-term treasury deposits
Cash and cash equivalents
29 November
2020
£m
247.7
1,249.1
210.0
1,706.8
1 December
2019
(restated)(1)
£m
69.7
280.0
290.9
640.6
(1) £110.0 million (2018: £153.5 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019. See note 1.7 for more information.
£2.5 million (2019: £2.9 million) of the Group’s cash and cash equivalents is held by the Group’s captive insurance company to maintain its solvency
requirements. Included in cash at bank and in hand are customers’ credit card payments of £28.9 million (2019: £27.6 million) received within five working
days of the reporting date. A further £2.8 million (2019: £2.4 million) is held by the Trustee of the Group’s Employee Benefit Trust relating to the Sharesave
Scheme for employees in Poland. These funds are restricted and are not available to circulate within the Group on demand.
232 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Notes to the Consolidated Financial Statements
Continued
3.12 Trade and other payables
Accounting policies
Trade and other payables are initially recognised at their transaction price and subsequently at amortised cost, using the effective interest method.
Trade payables
Taxation and social security
Accruals and other payables
Deferred insurance income
Other deferred income
Trade and other payables
29 November
2020
£m
139.4
13.7
238.7
16.3
14.8
422.9
1 December
2019(1)
£m
122.4
10.2
132.1
71.3
14.6
350.6
(1) Trade payables has been increased as at 1 December 2019 by £1.5 million and accruals and other payables decreased by £0.5 million to correct immaterial historical errors, with a
corresponding net decrease of retained earnings.
Deferred income includes the value of delivery income received under the Ocado Smart Pass scheme, lease incentives and media income from
suppliers which all relate to future periods. It also includes a portion of insurance reimbursement received relating to the Andover CFC (see note 2.6.)
3.13 Provisions
Accounting policies
Provisions are recognised in line with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”. Provisions can be distinguished from
other types of liability by considering the events that give rise to the obligation and the degree of uncertainty as to the amount or timing of the
liability. These are recognised on the Consolidated Balance Sheet when the Group has a present legal or constructive obligation as a result of a
past event, it is probable that an out-flow of resources will be required to settle the obligation, and the amount can be estimated reliably.
The amounts recognised as provisions are Management’s best estimates of the expenditure required to settle present obligations at the
reporting date. The outcome depends on future events, which are by their nature uncertain. Any difference between expectations and the actual
future liability will be accounted for in the period in which this is determined. In assessing the likely outcome, Management bases its assessment
on historical experience and other factors that are believed to be reasonable in the circumstances.
Insurance claims
Provisions for insurance claims relate to potential motor insurance claims and potential public liability claims where accidents have occurred
but a claim has yet to be made. The provision is made based on estimates provided to the Group by the third-party manager of the Ocado Cell in
Atlas Insurance PCC Limited (the “Ocado Cell”).
Dilapidations
Provisions for dilapidations are made for properties and vehicles where there are obligations to return the assets to the condition and state they
were in when the Group obtained the right to use them. These are recognised on an asset-by-asset basis, and are based on the Group’s best
estimate of the likely committed cash out-flow. Where relevant, these estimated out-flows are discounted to net present value.
Employee incentive schemes
Provisions for employee incentive schemes relate to HMRC-unapproved equity-settled schemes, the cash-based Long-Term Incentive Plan
(“Cash LTIP”), and the Ocado Retail Value Creation Plan (“Retail VCP”). For all unapproved schemes and the Cash LTIP and Retail VCP, the Group
is liable to pay employer’s NIC upon exercise of the share awards.
Unapproved schemes are the Executive Share Ownership Scheme (“ESOS”), the Long-Term Incentive Plan (“LTIP”), the Value Creation Plan
(“VCP”), the Long-Term Operating Plan, the Annual Incentive Plan (“AIP”), the Employee Share Purchase Plan (“SPP”) and the Restricted Share
Plan (“RSP”). For more details on these schemes, refer to note 4.10.
In 2014, the Group established the Cash LTIP in order to incentivise selected high-performing employees of the Group. At the end of the three-
year vesting period, employees will be paid a cash amount equal to the notional number of awards at the prevailing share price, adjusted for the
achievement of the performance conditions. The Cash LTIP ended during the current period.
Insurance reimbursement
In February 2019, a fire destroyed the Andover CFC, including the building, machinery and all inventory held on site. Under the terms of the
lease, the Group has an obligation to restore the site; the costs of reconstruction are covered under the Group’s insurance policy. Therefore,
Management has recognised the future insurance reimbursement as an asset on the face of the Consolidated Balance Sheet, and a
corresponding provision representing the obligation to reinstate the building.
234 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Trade and other payables are initially recognised at their transaction price and subsequently at amortised cost, using the effective interest method.
Continued
3.12 Trade and other payables
Accounting policies
Trade payables
Taxation and social security
Accruals and other payables
Deferred insurance income
Other deferred income
Trade and other payables
3.13 Provisions
Accounting policies
29 November
1 December
2020
£m
139.4
13.7
238.7
16.3
14.8
422.9
2019(1)
£m
122.4
10.2
132.1
71.3
14.6
350.6
(1) Trade payables has been increased as at 1 December 2019 by £1.5 million and accruals and other payables decreased by £0.5 million to correct immaterial historical errors, with a
corresponding net decrease of retained earnings.
Deferred income includes the value of delivery income received under the Ocado Smart Pass scheme, lease incentives and media income from
suppliers which all relate to future periods. It also includes a portion of insurance reimbursement received relating to the Andover CFC (see note 2.6.)
Provisions are recognised in line with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”. Provisions can be distinguished from
other types of liability by considering the events that give rise to the obligation and the degree of uncertainty as to the amount or timing of the
liability. These are recognised on the Consolidated Balance Sheet when the Group has a present legal or constructive obligation as a result of a
past event, it is probable that an out-flow of resources will be required to settle the obligation, and the amount can be estimated reliably.
The amounts recognised as provisions are Management’s best estimates of the expenditure required to settle present obligations at the
reporting date. The outcome depends on future events, which are by their nature uncertain. Any difference between expectations and the actual
future liability will be accounted for in the period in which this is determined. In assessing the likely outcome, Management bases its assessment
on historical experience and other factors that are believed to be reasonable in the circumstances.
Insurance claims
Atlas Insurance PCC Limited (the “Ocado Cell”).
Dilapidations
Provisions for dilapidations are made for properties and vehicles where there are obligations to return the assets to the condition and state they
were in when the Group obtained the right to use them. These are recognised on an asset-by-asset basis, and are based on the Group’s best
estimate of the likely committed cash out-flow. Where relevant, these estimated out-flows are discounted to net present value.
Employee incentive schemes
Provisions for employee incentive schemes relate to HMRC-unapproved equity-settled schemes, the cash-based Long-Term Incentive Plan
(“Cash LTIP”), and the Ocado Retail Value Creation Plan (“Retail VCP”). For all unapproved schemes and the Cash LTIP and Retail VCP, the Group
is liable to pay employer’s NIC upon exercise of the share awards.
Unapproved schemes are the Executive Share Ownership Scheme (“ESOS”), the Long-Term Incentive Plan (“LTIP”), the Value Creation Plan
(“VCP”), the Long-Term Operating Plan, the Annual Incentive Plan (“AIP”), the Employee Share Purchase Plan (“SPP”) and the Restricted Share
Plan (“RSP”). For more details on these schemes, refer to note 4.10.
In 2014, the Group established the Cash LTIP in order to incentivise selected high-performing employees of the Group. At the end of the three-
year vesting period, employees will be paid a cash amount equal to the notional number of awards at the prevailing share price, adjusted for the
achievement of the performance conditions. The Cash LTIP ended during the current period.
Insurance reimbursement
In February 2019, a fire destroyed the Andover CFC, including the building, machinery and all inventory held on site. Under the terms of the
lease, the Group has an obligation to restore the site; the costs of reconstruction are covered under the Group’s insurance policy. Therefore,
Management has recognised the future insurance reimbursement as an asset on the face of the Consolidated Balance Sheet, and a
corresponding provision representing the obligation to reinstate the building.
3.13 Provisions continued
Balance at 2 December 2018
Recognised on adoption of IFRS 16 at 3 December 2018
Charged/(credited) to Consolidated Income Statement
– Additional provision
– Unused amounts reversed
– Unwinding of discounting
Recognition of insurance reimbursement asset
Used during period
Balance at 1 December 2019
Charged to Consolidated Income Statement
– Additional provision
– Unwinding of discounting
Recognition of right-of-use assets
Recognition of insurance reimbursement asset
Used during period
Balance at 29 November 2020
The provisions at 29 November 2020 can be analysed as follows:
Current
Non-current
Provisions for insurance claims relate to potential motor insurance claims and potential public liability claims where accidents have occurred
but a claim has yet to be made. The provision is made based on estimates provided to the Group by the third-party manager of the Ocado Cell in
The provisions at 1 December 2019 can be analysed as follows:
Current
Non-current
Insurance
claims
£m
Dilapidations
£m
Employee
incentive
schemes
£m
Insurance
reimburse-
ment
£m
0.3
–
0.5
(0.2)
–
–
–
0.6
0.3
–
–
–
(0.6)
0.3
6.9
3.2
3.4
(0.2)
0.3
–
(0.1)
13.5
–
0.3
0.9
–
–
14.7
9.9
–
11.8
(0.5)
–
–
(16.0)
5.2
23.1
–
–
–
(4.8)
23.5
–
–
–
–
–
49.2
–
49.2
–
–
–
2.8
(46.5)
5.5
Insurance
claims
£m
Dilapidations
£m
0.3
–
0.3
0.3
14.4
14.7
Employee
incentive
schemes
£m
Insurance
reimburse-
ment
£m
2.3
21.2
23.5
5.5
–
5.5
Insurance
claims
£m
Dilapidations
£m
0.2
0.4
0.6
–
13.5
13.5
Employee
incentive
schemes
£m
Insurance
reimburse-
ment
£m
4.6
0.6
5.2
49.2
–
49.2
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
Total
£m
17.1
3.2
15.7
(0.9)
0.3
49.2
(16.1)
68.5
23.4
0.3
0.9
2.8
(51.9)
44.0
Total
£m
8.4
35.6
44.0
Total
£m
54.0
14.5
68.5
Insurance claims
The Ocado Cell uses statistical information built up over several years to estimate, as accurately as possible, the future outcome of the total claims
value incurred but not reported at the reporting date. In practice, the Ocado Cell receives newly-reported claims after the end of the underwriting
period that must be allocated to the period of loss (i.e. the underwriting period of occurrence). The calculation of this provision involves estimating
a number of variables, principally the level of claims which may be received and the level of any compensation which may be payable. Uncertainty
associated with these factors may result in the ultimate liability being different from the reported provision. Although it is expected that £0.3 million
of claims will be settled within 12 months of the reporting date, the exact timing of utilisation of the provision is uncertain.
Dilapidations
The dilapidations provision is based on the future expected costs required to restore the Group’s leased buildings and vehicles to their fair
condition at the end of their lease terms.
The Hatfield CFC lease expires in 2032, the Dordon CFC lease in 2038, the Andover CFC lease in 2092, the Erith CFC lease in 2046, the GMDC
leases between 2027 and 2033, and the head office leases between 2022 and 2029, with leases for the spokes expiring up to 2068. Contractual
amounts are due to be incurred at the end of the lease terms.
Leases for vehicles run for an average of five years, with the contractual obligation per vehicle payable at the end of the lease term. If a non-
contractual option to extend individual leases is exercised by the Group, the contractual obligation remains the same but is deferred by six months.
234 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Notes to the Consolidated Financial Statements
Continued
3.13 Provisions continued
Employee incentive schemes
The provision consists of the Cash LTIP, Retail VCP and employer’s NIC on HMRC unapproved equity-settled schemes.
The Cash LTIP ended during the period. The provision relates to an award which has already vested which will be settled in cash in 2021. In the
prior period, the provision represented the expected cash payments to participants upon vesting of the awards.
To calculate the employer’s NIC provision, the rate of employer’s NIC is applied to the number of share awards which are expected to
vest, valued with reference to the share price at the reporting date. The number of share awards expected to vest is dependent on various
assumptions which are determined by Management. These comprise participants’ retention rate, the expectation of meeting the performance
criteria, if any, and the liquidity discount. All assumptions are supported by historical trends, and internal financial forecasts, where appropriate.
For the VCP, external valuations have been obtained to determine the fair value of the awards granted and the related employer’s NIC provision
(see note 4.10.)
If at any point during the life of each share award, any non-market conditions are subject to change, such as the retention rate or the likelihood
of the performance condition being met, the number of share awards likely to vest will need to be recalculated which will cause the value of the
employer’s NIC provision to change accordingly.
Once the share awards under each of the schemes have vested, the provision will be utilised when they are allotted to participants. Vesting will
occur between 2021 and 2024, and allotment will take place between 2021 and 2029.
Ocado Retail Value Creation Plan
During the period, the Group established the Ocado Retail Value Creation Plan (“Retail VCP”) for the senior leadership team of Ocado Retail
Limited (“Ocado Retail”), a subsidiary of the Company. The Retail VCP will be settled in cash and includes a market-based performance condition
relating to the value of Ocado Retail. Therefore, it has been accounted for as cash-settled in accordance with IFRS 2 “Share-based Payment”.
The Plan has a performance period of six years from the date of grant, with awards vesting in accordance with a vesting schedule, subject
to annual caps and underpins. The underpin is defined as growth of 9.0% per annum in the value of Ocado Retail, and there are three
measurement dates at which awards can be “banked”, the first being in July 2022. There is a maximum potential allocation of 4.00% of value
above the hurdle, of which 3.50% was allocated to employees/secondees during the current period.
At each reporting date, following a valuation in accordance with IFRS 2, based on the updated actual performance of Ocado Retail, the
accounting cost will be trued up until the last such date where the total accounting cost will reflect the final pay-out under the Plan. This means
that the final accounting cost of the Plan will not be known until after the final measurement date. However, by using a Monte Carlo model,
based on the latest available analyst valuation reports at each reporting date, the accrued amounts and the final cost of the Plan will converge.
During the period, the Group recognised the cost of the Retail VCP in the Consolidated Income Statement, which includes employer’s NIC which
is payable on the value of the cash award on vesting.
236 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
3.13 Provisions continued
Employee incentive schemes
The provision consists of the Cash LTIP, Retail VCP and employer’s NIC on HMRC unapproved equity-settled schemes.
The Cash LTIP ended during the period. The provision relates to an award which has already vested which will be settled in cash in 2021. In the
prior period, the provision represented the expected cash payments to participants upon vesting of the awards.
To calculate the employer’s NIC provision, the rate of employer’s NIC is applied to the number of share awards which are expected to
vest, valued with reference to the share price at the reporting date. The number of share awards expected to vest is dependent on various
assumptions which are determined by Management. These comprise participants’ retention rate, the expectation of meeting the performance
criteria, if any, and the liquidity discount. All assumptions are supported by historical trends, and internal financial forecasts, where appropriate.
For the VCP, external valuations have been obtained to determine the fair value of the awards granted and the related employer’s NIC provision
(see note 4.10.)
employer’s NIC provision to change accordingly.
Once the share awards under each of the schemes have vested, the provision will be utilised when they are allotted to participants. Vesting will
occur between 2021 and 2024, and allotment will take place between 2021 and 2029.
Ocado Retail Value Creation Plan
During the period, the Group established the Ocado Retail Value Creation Plan (“Retail VCP”) for the senior leadership team of Ocado Retail
Limited (“Ocado Retail”), a subsidiary of the Company. The Retail VCP will be settled in cash and includes a market-based performance condition
relating to the value of Ocado Retail. Therefore, it has been accounted for as cash-settled in accordance with IFRS 2 “Share-based Payment”.
The Plan has a performance period of six years from the date of grant, with awards vesting in accordance with a vesting schedule, subject
to annual caps and underpins. The underpin is defined as growth of 9.0% per annum in the value of Ocado Retail, and there are three
measurement dates at which awards can be “banked”, the first being in July 2022. There is a maximum potential allocation of 4.00% of value
above the hurdle, of which 3.50% was allocated to employees/secondees during the current period.
At each reporting date, following a valuation in accordance with IFRS 2, based on the updated actual performance of Ocado Retail, the
accounting cost will be trued up until the last such date where the total accounting cost will reflect the final pay-out under the Plan. This means
that the final accounting cost of the Plan will not be known until after the final measurement date. However, by using a Monte Carlo model,
based on the latest available analyst valuation reports at each reporting date, the accrued amounts and the final cost of the Plan will converge.
During the period, the Group recognised the cost of the Retail VCP in the Consolidated Income Statement, which includes employer’s NIC which
is payable on the value of the cash award on vesting.
If at any point during the life of each share award, any non-market conditions are subject to change, such as the retention rate or the likelihood
of the performance condition being met, the number of share awards likely to vest will need to be recalculated which will cause the value of the
AutoStore subsequently applied to the United Kingdom Intellectual Property Office claiming ownership of several of the Group’s patents relating
to elements of the OSP system.
3.14 Contingent liabilities
Obligations under Solutions contracts
In the construction phases of its Solutions contracts, the Group agrees to reach key milestones by specific points in time. If it fails to reach
these milestones, financial penalties may be incurred. These potential financial penalties could have a material effect on the Group’s financial
statements, and, therefore, are considered contingent liabilities.
At the reporting date, Management undertook a review of the agreed milestones within its Solutions contracts, and concluded that the
possibility of not reaching them was remote.
Claims and litigation
On 1 October 2020, AutoStore Technology AS (“AutoStore”), a Norwegian company owned by the United States private equity firm Thomas
H. Lee Partners, L.P., filed patent infringement claims against the Group in the High Court in England, the United States International Trade
Commission, and the United States District Court for the Eastern District of Virginia.
F
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A
L
S
T
A
T
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M
E
N
T
S
–
G
R
O
U
P
The Group is confident in the merits of its defences and in the integrity of its existing portfolio of IP, together with the disciplined approach taken
to building its capabilities over the last 20 years. It is taking appropriate action to defend against these claims and to protect its own intellectual
property rights.
The Group has subsequently brought two separate proceedings against AutoStore in the United States; the first a patent infringement claim; the
second an antitrust claim. In the antitrust claim, the Group has alleged, based on the evidence available, that four of the five AutoStore patents
on which AutoStore has based its case were procured fraudulently from the United States Patent and Trademark Office.
On 21 January 2021, proceedings by AutoStore and another party to declare invalid the Ocado’s European patent for its Single Space Bot (part of
the OSP system) was rejected by the European Patent Office, and the patent was declared to be novel, inventive and valid.
Legal and other costs have been incurred to defend against AutoStore’s claims and to file the Group’s claims.
Given the early stage of this litigation, the outcome is uncertain and unquantifiable, and so the Group has not recognised a contingent asset or
liability.
The Group also has contingent liabilities in respect of other legal claims arising in the ordinary course of business, all of which the Group expects
will either be covered by its insurances or will not have a material effect on the Group’s financial statements.
236 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Notes to the Consolidated Financial Statements
Continued
Section 4 – Capital structure and financing costs
4.1 Borrowings and lease liabilities
Accounting policies
Borrowings
Interest-bearing loans and bank overdrafts are initially recorded at fair value, net of transaction costs. Subsequent to initial recognition, interest-
bearing borrowings are stated at amortised cost, with any difference between cost and redemption value being recognised in the Consolidated
Income Statement over the period to redemption using the effective interest method, or capitalised as part of the cost of qualifying assets.
Convertible bonds are compound financial instruments, and so their liability and equity components are presented separately in accordance
with IAS 32 “Financial Instruments: Presentation”. At the date of issue, the liability component is valued by reference to a similar liability that
does not have an associated equity component, and is recognised as borrowings. The difference between the proceeds received and the
liability component is recognised in the convertible bonds reserve, directly in reserves. The liability and equity components are recorded net
of transaction costs. The liability component is then held at amortised cost, with any difference between initial fair value and redemption value
being recognised in the Consolidated Income Statement over the period to redemption using the effective interest method, or capitalised as
part of the cost of qualifying assets. The carrying amount of the equity component does not change until the liability component is redeemed
through repayment or conversion into ordinary shares.
Leases
At the commencement date of a lease, the Group recognises a right-of-use asset and a lease liability on the Consolidated Balance Sheet.
The Group measures the lease liability at the present value of the lease payments that have not been paid at that date, discounted using the
interest rate implicit in the lease (if that rate is readily available) or the Group’s incremental borrowing rate. Subsequent to initial measurement,
the liability is reduced for payments made, and increased for interest charged. If required, it is remeasured to reflect modifications, with
corresponding adjustments reflected in the right-of-use asset.
The Group has elected to account for short-term leases and leases of low-value items using practical expedients. Instead of recognising a right-
of-use asset and lease liability, the payments relating to these leases are recognised as expenses in the Consolidated Income Statement on a
straight-line basis over the lease terms.
29 November
2020
£m
1 December
2019
£m
Notes
Current liabilities
Lease liabilities
Non-current liabilities
Borrowings
Lease liabilities
Total borrowings and lease liabilities
Borrowings
29 November 2020
Senior secured notes
Senior unsecured convertible bonds
Chattel mortgages
Total borrowings
1 December 2019
Senior secured notes
Chattel mortgages
Total borrowings
4.2
4.2
48.1
997.4
359.7
1,357.1
1,405.2
Due in less
than one
year
£m
Due in
between
one and two
years
£m
Due in
between
two and five
years
£m
Due in more
than five
years
£m
–
–
–
–
–
–
–
–
220.8
–
0.2
221.0
–
776.4
–
776.4
Due in less
than one year
£m
Due in
between one
and two years
£m
Due in
between two
and five years
£m
Due in more
than five years
£m
–
–
–
–
–
–
219.5
0.2
219.7
–
–
–
50.1
219.7
338.4
558.1
608.2
Total
£m
220.8
776.4
0.2
997.4
Total
£m
219.5
0.2
219.7
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Borrowings at 29 November 2020 can be analysed as follows:
Principal amount
£m
225.0
0.3
600.0
350.0
Inception
June 2017
January 2019
December 2019
June 2020
Security
held
Collateral
Collateral
None
None
Coupon
rate
4.000%
8.800%
0.875%
0.750%
Instalment
frequency
Biannual
Monthly
Biannual
Biannual
Final
payment due
June 2024
January 2023
December 2025
January 2027
liability component is recognised in the convertible bonds reserve, directly in reserves. The liability and equity components are recorded net
Borrowings at 1 December 2019 can be analysed as follows:
Principal amount
£m
225.0
0.3
Inception
June 2017
January 2019
Security
held
Collateral
Collateral
Coupon
rate
4.000%
8.800%
Instalment
frequency
Biannual
Monthly
Final
payment due
June 2024
January 2023
F
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M
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G
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Carrying amount
at 29 November
2020
£m
220.8
0.2
504.2
272.2
Carrying amount
at 1 December
2019
£m
219.5
0.2
The £100.0 million revolving credit facility was terminated in October 2020; it was not used in the current or prior period.
The senior secured notes were issued in June 2017, raising £250.0 million, and are carried net of transaction fees. The senior secured notes are
secured by charges over the issued share capital of the Company’s subsidiaries which acted as guarantors for the notes. In the prior period £25.0
million was repaid, incurring early repayment fees of £0.8 million.
The £600.0 million of senior unsecured convertible bonds were issued in December 2019, raising £592.1 million, net of transaction fees. At
the date of issue, the liability component was valued at £485.0 million, with the remaining £107.1 million recognised in the convertible bonds
reserve, directly in reserves.
The £350.0 million of senior unsecured convertible bonds were issued in June 2020, raising £343.4 million, net of transaction fees. At the date of
issue, the liability component was valued at £266.0 million, with the remaining £77.4 million recognised in the convertible bonds reserve, directly
in reserves.
The Group reviews its financing arrangements regularly. The senior secured notes and senior unsecured convertible bonds contain typical
restrictions concerning dividend payments and additional debt and leases.
4.2 Lease liabilities
The Group leases properties, vehicles and other items of equipment. The leases have varying terms, escalation clauses and renewal rights. With
the exception of short-term leases and leases of low-value items, each lease is reflected on the Consolidated Balance Sheet as a right-of-use
asset and a lease liability.
Discounted lease payments due:
Within one year
In between one and two years
In between two and five years
In more than five years
Lease liabilities
29 November
2020
£m
1 December
2019
£m
48.1
46.9
93.9
218.9
407.8
50.1
42.9
90.1
205.4
388.5
External obligations under lease liabilities are £358.1 million (2019: £320.4 million), excluding £49.7 million (2019: £64.0 million) payable to MHE
JVCo Limited, a company incorporated in England and Wales in which the Group holds a 50.0% interest.
Notes to the Consolidated Financial Statements
Continued
Accounting policies
Borrowings
Section 4 – Capital structure and financing costs
4.1 Borrowings and lease liabilities
Interest-bearing loans and bank overdrafts are initially recorded at fair value, net of transaction costs. Subsequent to initial recognition, interest-
bearing borrowings are stated at amortised cost, with any difference between cost and redemption value being recognised in the Consolidated
Income Statement over the period to redemption using the effective interest method, or capitalised as part of the cost of qualifying assets.
Convertible bonds are compound financial instruments, and so their liability and equity components are presented separately in accordance
with IAS 32 “Financial Instruments: Presentation”. At the date of issue, the liability component is valued by reference to a similar liability that
does not have an associated equity component, and is recognised as borrowings. The difference between the proceeds received and the
of transaction costs. The liability component is then held at amortised cost, with any difference between initial fair value and redemption value
being recognised in the Consolidated Income Statement over the period to redemption using the effective interest method, or capitalised as
part of the cost of qualifying assets. The carrying amount of the equity component does not change until the liability component is redeemed
through repayment or conversion into ordinary shares.
Leases
At the commencement date of a lease, the Group recognises a right-of-use asset and a lease liability on the Consolidated Balance Sheet.
The Group measures the lease liability at the present value of the lease payments that have not been paid at that date, discounted using the
interest rate implicit in the lease (if that rate is readily available) or the Group’s incremental borrowing rate. Subsequent to initial measurement,
the liability is reduced for payments made, and increased for interest charged. If required, it is remeasured to reflect modifications, with
corresponding adjustments reflected in the right-of-use asset.
The Group has elected to account for short-term leases and leases of low-value items using practical expedients. Instead of recognising a right-
of-use asset and lease liability, the payments relating to these leases are recognised as expenses in the Consolidated Income Statement on a
straight-line basis over the lease terms.
29 November
1 December
Current liabilities
Lease liabilities
Non-current liabilities
Borrowings
Lease liabilities
Total borrowings and lease liabilities
Borrowings
29 November 2020
Senior secured notes
Chattel mortgages
Total borrowings
Senior unsecured convertible bonds
1 December 2019
Senior secured notes
Chattel mortgages
Total borrowings
Notes
4.2
4.2
Due in
years
£m
220.8
–
0.2
221.0
£m
219.5
0.2
219.7
2020
£m
48.1
997.4
359.7
1,357.1
1,405.2
years
£m
–
–
776.4
776.4
£m
–
–
–
2019
£m
50.1
219.7
338.4
558.1
608.2
Total
£m
220.8
776.4
0.2
997.4
Total
£m
219.5
0.2
219.7
Due in less
between
Due in more
than one
one and two
two and five
than five
Due in
between
years
£m
year
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Due in
Due in
Due in less
between one
between two
Due in more
than one year
and two years
and five years
than five years
£m
£m
238 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Notes to the Consolidated Financial Statements
Continued
4.2 Lease liabilities continued
Undiscounted lease payments due:
Within one year
In between one and two years
In between two and five years
In more than five years
Less: Future finance charges
Lease liabilities
Disclosed as:
Current
Non-current
29 November
2020
£m
1 December
2019(1)
£m
67.1
63.8
134.2
324.9
590.0
(182.2)
407.8
48.1
359.7
407.8
62.0
58.3
134.0
320.8
575.1
(186.6)
388.5
50.1
338.4
388.5
(1) The minimum lease payments and future finance charges as at 1 December 2019 have been corrected.
The existing lease arrangements entered into by the Group contain no restrictions concerning dividends, additional debt and further leasing.
Furthermore, no material leasing arrangements exist relating to contingent rent payable, renewal or purchase options and escalation clauses.
The expenses relating to short-term leases and leases of low-value items not included in the measurement of the lease liability are as follows:
Short-term leases
Leases of low-value items
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
0.2
0.1
0.3
0.6
0.1
0.7
At the reporting date, the Group was committed to £0.2 million (2019: £0.2 million) for short-term leases and leases of low-value items.
The total cash out-flow relating to leases during the period (including short-term leases and leases of low-value items) was £68.4 million (2019:
£61.2 million).
4.3 Reconciliation of liabilities arising from financing activities
Borrowings
Lease liabilities
Borrowings
Lease liabilities
Non-cash movements
Notes
4.1
4.2
1 December
2019
£m
219.7
388.5
608.2
Cash flows
£m
Additions
£m
Unwinding of
interest
£m
29 November
2020
£m
739.9
(68.1)
671.8
–
72.7
72.7
37.8
14.7
52.5
997.4
407.8
1,405.2
Non-cash movements
Notes
4.1
4.2
2 December
2018
£m
Cash flows
£m
Remeasurement
for IFRS 16
£m
Additions
£m
Unwinding of
interest
£m
1 December
2019(1)
£m
244.3
116.3
360.6
(34.9)
(60.5)
(95.4)
–
283.1
283.1
–
29.3
29.3
10.3
20.3
30.6
219.7
388.5
608.2
(1) The unwinding of interest and cash flows for the 52 weeks ended 1 December 2019 have been corrected.
240 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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4.2 Lease liabilities continued
Undiscounted lease payments due:
Within one year
In between one and two years
In between two and five years
In more than five years
Less: Future finance charges
Lease liabilities
Disclosed as:
Current
Non-current
Short-term leases
Leases of low-value items
£61.2 million).
Borrowings
Lease liabilities
Borrowings
Lease liabilities
(1) The minimum lease payments and future finance charges as at 1 December 2019 have been corrected.
The existing lease arrangements entered into by the Group contain no restrictions concerning dividends, additional debt and further leasing.
Furthermore, no material leasing arrangements exist relating to contingent rent payable, renewal or purchase options and escalation clauses.
The expenses relating to short-term leases and leases of low-value items not included in the measurement of the lease liability are as follows:
At the reporting date, the Group was committed to £0.2 million (2019: £0.2 million) for short-term leases and leases of low-value items.
The total cash out-flow relating to leases during the period (including short-term leases and leases of low-value items) was £68.4 million (2019:
4.3 Reconciliation of liabilities arising from financing activities
1 December
Unwinding of
29 November
Cash flows
Additions
interest
Non-cash movements
Notes
4.1
4.2
2018
£m
244.3
116.3
360.6
2019
£m
219.7
388.5
608.2
£m
(34.9)
(60.5)
(95.4)
£m
739.9
(68.1)
671.8
£m
–
283.1
283.1
£m
–
72.7
72.7
£m
–
29.3
29.3
Notes
4.1
4.2
2 December
Remeasurement
Unwinding of
1 December
Cash flows
for IFRS 16
Additions
interest
Non-cash movements
(1) The unwinding of interest and cash flows for the 52 weeks ended 1 December 2019 have been corrected.
2020
£m
67.1
63.8
134.2
324.9
590.0
(182.2)
407.8
48.1
359.7
407.8
2020
£m
0.2
0.1
0.3
£m
37.8
14.7
52.5
£m
10.3
20.3
30.6
2019(1)
£m
62.0
58.3
134.0
320.8
575.1
(186.6)
388.5
50.1
338.4
388.5
2019
£m
0.6
0.1
0.7
2020
£m
997.4
407.8
1,405.2
2019(1)
£m
219.7
388.5
608.2
Notes to the Consolidated Financial Statements
29 November
1 December
4.4 Analysis of net cash A
Net cash A
Current assets
Other treasury deposits
Cash and cash equivalents
Current liabilities
Lease liabilities
Non-current liabilities
Borrowings
Lease liabilities
Net cash A
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
Notes
3.7
3.11
4.2
4.1
4.2
29 November
2020
£m
370.0
1,706.8
2,076.8
1 December
2019
(restated)(1)
£m
110.0
640.6
750.6
(48.1)
(50.1)
(997.4)
(359.7)
(1,357.1)
671.6
(219.7)
(338.4)
(558.1)
142.4
52 weeks
ended
52 weeks
ended
29 November
1 December
(1) £110.0 million (2018: £153.5 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019. See note 1.7 for more information.
At the reporting date, the Group had net cash A of £721.3 million (2019: £206.4 million), excluding lease liabilities of £49.7 million (2019: £64.0
million) payable to MHE JVCo Limited, a company incorporated in England and Wales in which the Group holds a 50.0% interest. £5.3 million
(2019: £5.3 million) of the Group’s cash and cash equivalents is considered to be restricted, and is not available to circulate within the Group on
demand. For more information, see note 3.11.
Reconciliation of net cash flow with movement of net cash A
Net increase/(decrease) in other treasury deposits
Net increase in cash and cash equivalents
Net (increase)/decrease in borrowings and lease liabilities
Non-cash movements
– Assets acquired under leases
Movement of net cash A in period
Net cash A at beginning of period
Net cash A at end of period
52 weeks
ended
29 November
2020
£m
260.0
1,066.2
(724.3)
(72.7)
529.2
142.4
671.6
52 weeks
ended
1 December
2019
(restated)(1)
£m
(43.5)
383.3
57.6
(305.2)
92.2
50.2
142.4
(1) £110.0 million (2018: £153.5 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019. See note 1.7 for more information.
4.5 Finance income and costs
Accounting policies
Borrowing costs
Borrowing costs which are directly attributable to the acquisition or construction of qualifying assets are capitalised. They are defined as the
borrowing costs that would have been avoided if the expenditure on the qualifying asset had not been made. All other borrowing costs which
are not capitalised are charged to finance costs, using the effective interest method.
Borrowing costs capitalised during the period were £0.5 million (2019: £0.1 million). The rate used to determine the amount of finance costs
capitalised during the period was 1.1% (2019: 1.0%).
Finance income and costs
Interest income is accounted for on an accruals basis using the effective interest method. Finance costs comprise interest expenses on
borrowings, lease liabilities and provisions. The interest expense on borrowings is recognised using the effective interest method. The interest
expense on lease liabilities is recognised over the lease periods so as to produce constant periodic rates of interest on the remaining balances of
the liabilities.
A
See Alternative Performance Measures on pages 293 and 294.
240 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Notes to the Consolidated Financial Statements
Continued
4.5 Finance income and costs continued
Interest income on cash balances
Interest income on loans to joint venture and associate
Finance income
Interest expense on borrowings
Interest expense on lease liabilities
Interest expense on provisions
Foreign exchange loss
Finance costs
Net finance cost
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
5.2
0.3
5.5
(40.9)
(14.7)
(0.3)
(2.4)
(58.3)
(52.8)
3.3
–
3.3
(10.3)
(20.6)
–
–
(30.9)
(27.6)
4.6 Derivative financial instruments
Accounting policies
Derivative financial instruments are initially recognised at fair value on the contract date, and are subsequently measured at their fair value at
each reporting date. The method of recognising the resulting fair value gain or loss depends on whether or not the derivative is designated as a
hedging instrument, and on the nature of the item being hedged. At 29 November 2020 and 1 December 2019, the Group’s derivative financial
instruments consisted of commodity swap contracts which are designated as cash flow hedges of highly-probable transactions.
The Group documents at the inception of the hedge the relationship between hedging instruments and hedged items, the risk management
objectives and strategy, and its assessment of whether the derivatives that are used in hedging transactions are highly effective in offsetting
changes in fair values or cash flows of hedged items.
This assessment is performed retrospectively at the end of each financial reporting period. Movements in the hedging reserve within reserves
are shown in the Consolidated Statement of Comprehensive Income. The fair value of hedging derivatives is classified as current when the
remaining maturity of the hedged item is less than 12 months.
Cash flow hedges
The Group uses commodity swap contracts to hedge the cost of future purchases of fuel to be used in the business. The cash flows are expected
to occur within one year of the reporting date, and hedges cover 50.0% to 80.0% of expected risk.
The effective portion of changes in the fair value of derivatives that are designated as cash flow hedging instruments and qualify for hedge
accounting is recognised in other comprehensive income. Amounts accumulated through other comprehensive income are recycled in the
Consolidated Income Statement in the periods in which the hedged items affect profit or loss. Throughout the period, all of the Group’s cash
flow hedges were effective, and there is, therefore, no ineffective portion recognised in profit or loss.
Commodity swap contracts
The notional principal amounts of the outstanding commodity swap contracts at the reporting date were £5.6 million (2019: £13.0 million). The
weighted average strike price of the outstanding commodity swap contracts at the reporting date was 27.2 pence per litre (2019: 39.9 pence per
litre). The hedged highly probable forecast transactions are expected to occur at various dates during the next 12 months. A cumulative net gain
of £0.4 million (2019: £1.7 million net loss) has been recognised in the hedging reserve through other comprehensive income. This gain will be
recognised in profit or loss in the periods during which the hedged forecast transactions affect the Consolidated Income Statement.
Derivative assets
Derivative liabilities
Net derivative liability
29 November
2020
£m
1 December
2019
£m
0.2
(0.3)
(0.1)
–
(0.5)
(0.5)
Financial assets and financial liabilities are recognised on the Consolidated Balance Sheet when the Group becomes a party to the contractual
4.7 Financial instruments
Accounting policies
provisions of the instruments.
The Group classifies its financial assets using the following categories:
• Amortised cost;
• Fair value through profit or loss (“FVTPL”); and
• Fair value through other comprehensive income (“FVTOCI”).
The classification depends on the characteristics of the contractual cash flows, and the Group’s business model for managing them.
Financial liabilities are measured at amortised cost, except for derivatives which are measured at fair value with gains or losses recognised in
profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments). Classification depends on
the purpose for which the liability was acquired.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity
instrument is any contract that gives a residual interest in the assets of the Group, after deducting all of its liabilities.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported on the Consolidated Balance Sheet when there is a legally-enforceable right
to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
The Group has categorised its financial instruments as follows:
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
Other receivables and accrued income
Cash and cash equivalents
29 November 2020
Financial assets
Other financial assets
Trade receivables
Contract assets
Derivative assets
Total financial assets
Financial liabilities
Trade payables
Accruals and other payables
Senior secured notes
Senior unsecured convertible bonds
Other borrowings
Lease liabilities
Derivative liabilities
Total financial liabilities
1 December 2019 (restated)(1)(2)
Financial assets
Other financial assets
Trade receivables
Other receivables and accrued income
Cash and cash equivalents
Contract assets
Total financial assets
Financial liabilities
Trade payables
Accruals and other payables
Senior secured notes
Other borrowings
Lease liabilities
Derivative liabilities
Total financial liabilities
Amortised
cost
£m
Notes
FVTOCI
£m
FVTPL
£m
12.0
176.0
2,254.5
12.0
0.2
176.2
3.7
3.10
3.10
3.11
2.1
4.6
3.12
3.12
4.1
4.1
4.1
4.2
4.6
3.7
3.10
3.10
3.11
2.1
3.12
3.12
4.1
4.1
4.2
4.6
380.8
104.5
62.0
1,706.8
0.4
–
(139.4)
(252.4)
(220.8)
(776.4)
(0.2)
(407.8)
–
(1,797.0)
Amortised
cost
£m
114.2
67.5
56.5
640.6
0.4
879.2
(122.4)
(142.3)
(219.5)
(0.2)
(388.5)
–
(872.9)
Total
£m
568.8
104.5
62.0
1,706.8
0.4
0.2
2,442.7
(139.4)
(252.4)
(220.8)
(776.4)
(0.2)
(407.8)
(0.3)
(1,797.3)
Total
£m
290.1
67.5
56.5
640.6
0.4
(122.4)
(142.3)
(219.5)
(0.2)
(388.5)
(0.5)
(873.4)
(0.3)
(0.3)
FVTPL
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.5)
(0.5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.8
169.1
1,055.1
Notes
FVTOCI
£m
6.8
169.1
242 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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(1) £110.0 million (2018: £153.5 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019. See note 1.7 for more information.
(2) Trade payables has been increased as at 1 December 2019 by £1.5 million and accruals and other payables decreased by £0.5 million to correct immaterial historical errors, with a
corresponding net decrease of retained earnings.
Back to contents
Notes to the Consolidated Financial Statements
Continued
4.5 Finance income and costs continued
Interest income on cash balances
Interest income on loans to joint venture and associate
Finance income
Interest expense on borrowings
Interest expense on lease liabilities
Interest expense on provisions
Foreign exchange loss
Finance costs
Net finance cost
4.6 Derivative financial instruments
Accounting policies
Derivative financial instruments are initially recognised at fair value on the contract date, and are subsequently measured at their fair value at
each reporting date. The method of recognising the resulting fair value gain or loss depends on whether or not the derivative is designated as a
hedging instrument, and on the nature of the item being hedged. At 29 November 2020 and 1 December 2019, the Group’s derivative financial
instruments consisted of commodity swap contracts which are designated as cash flow hedges of highly-probable transactions.
The Group documents at the inception of the hedge the relationship between hedging instruments and hedged items, the risk management
objectives and strategy, and its assessment of whether the derivatives that are used in hedging transactions are highly effective in offsetting
changes in fair values or cash flows of hedged items.
This assessment is performed retrospectively at the end of each financial reporting period. Movements in the hedging reserve within reserves
are shown in the Consolidated Statement of Comprehensive Income. The fair value of hedging derivatives is classified as current when the
remaining maturity of the hedged item is less than 12 months.
Cash flow hedges
The Group uses commodity swap contracts to hedge the cost of future purchases of fuel to be used in the business. The cash flows are expected
to occur within one year of the reporting date, and hedges cover 50.0% to 80.0% of expected risk.
The effective portion of changes in the fair value of derivatives that are designated as cash flow hedging instruments and qualify for hedge
accounting is recognised in other comprehensive income. Amounts accumulated through other comprehensive income are recycled in the
Consolidated Income Statement in the periods in which the hedged items affect profit or loss. Throughout the period, all of the Group’s cash
flow hedges were effective, and there is, therefore, no ineffective portion recognised in profit or loss.
Commodity swap contracts
The notional principal amounts of the outstanding commodity swap contracts at the reporting date were £5.6 million (2019: £13.0 million). The
weighted average strike price of the outstanding commodity swap contracts at the reporting date was 27.2 pence per litre (2019: 39.9 pence per
litre). The hedged highly probable forecast transactions are expected to occur at various dates during the next 12 months. A cumulative net gain
of £0.4 million (2019: £1.7 million net loss) has been recognised in the hedging reserve through other comprehensive income. This gain will be
recognised in profit or loss in the periods during which the hedged forecast transactions affect the Consolidated Income Statement.
Derivative assets
Derivative liabilities
Net derivative liability
29 November
1 December
2020
£m
0.2
(0.3)
(0.1)
2019
£m
–
(0.5)
(0.5)
52 weeks
ended
52 weeks
ended
29 November
1 December
2020
£m
5.2
0.3
5.5
(40.9)
(14.7)
(0.3)
(2.4)
(58.3)
(52.8)
2019
£m
3.3
–
3.3
(10.3)
(20.6)
–
–
(30.9)
(27.6)
4.7 Financial instruments
Accounting policies
Financial assets and financial liabilities are recognised on the Consolidated Balance Sheet when the Group becomes a party to the contractual
provisions of the instruments.
The Group classifies its financial assets using the following categories:
• Amortised cost;
• Fair value through profit or loss (“FVTPL”); and
• Fair value through other comprehensive income (“FVTOCI”).
The classification depends on the characteristics of the contractual cash flows, and the Group’s business model for managing them.
Financial liabilities are measured at amortised cost, except for derivatives which are measured at fair value with gains or losses recognised in
profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments). Classification depends on
the purpose for which the liability was acquired.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity
instrument is any contract that gives a residual interest in the assets of the Group, after deducting all of its liabilities.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported on the Consolidated Balance Sheet when there is a legally-enforceable right
to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
The Group has categorised its financial instruments as follows:
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
29 November 2020
Financial assets
Other financial assets
Trade receivables
Other receivables and accrued income
Cash and cash equivalents
Contract assets
Derivative assets
Total financial assets
Financial liabilities
Trade payables
Accruals and other payables
Senior secured notes
Senior unsecured convertible bonds
Other borrowings
Lease liabilities
Derivative liabilities
Total financial liabilities
1 December 2019 (restated)(1)(2)
Financial assets
Other financial assets
Trade receivables
Other receivables and accrued income
Cash and cash equivalents
Contract assets
Total financial assets
Financial liabilities
Trade payables
Accruals and other payables
Senior secured notes
Other borrowings
Lease liabilities
Derivative liabilities
Total financial liabilities
Amortised
cost
£m
Notes
FVTOCI
£m
3.7
3.10
3.10
3.11
2.1
4.6
3.12
3.12
4.1
4.1
4.1
4.2
4.6
Notes
3.7
3.10
3.10
3.11
2.1
3.12
3.12
4.1
4.1
4.2
4.6
380.8
104.5
62.0
1,706.8
0.4
–
2,254.5
(139.4)
(252.4)
(220.8)
(776.4)
(0.2)
(407.8)
–
(1,797.0)
Amortised
cost
£m
114.2
67.5
56.5
640.6
0.4
879.2
(122.4)
(142.3)
(219.5)
(0.2)
(388.5)
–
(872.9)
12.0
–
–
–
–
–
12.0
–
–
–
–
–
–
–
–
FVTOCI
£m
6.8
–
–
–
–
6.8
–
–
–
–
–
–
–
FVTPL
£m
176.0
–
–
–
–
0.2
176.2
–
–
–
–
–
–
(0.3)
(0.3)
FVTPL
£m
169.1
–
–
–
–
169.1
–
–
–
–
–
(0.5)
(0.5)
Total
£m
568.8
104.5
62.0
1,706.8
0.4
0.2
2,442.7
(139.4)
(252.4)
(220.8)
(776.4)
(0.2)
(407.8)
(0.3)
(1,797.3)
Total
£m
290.1
67.5
56.5
640.6
0.4
1,055.1
(122.4)
(142.3)
(219.5)
(0.2)
(388.5)
(0.5)
(873.4)
242 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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(1) £110.0 million (2018: £153.5 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019. See note 1.7 for more information.
(2) Trade payables has been increased as at 1 December 2019 by £1.5 million and accruals and other payables decreased by £0.5 million to correct immaterial historical errors, with a
corresponding net decrease of retained earnings.
Back to contents
Notes to the Consolidated Financial Statements
Continued
4.7 Financial instruments continued
The derivative assets and liabilities are forward commodity swap contracts. Derivative financial instruments are held at FVTPL, but where they
are hedging instruments, related gains and losses are recognised in other comprehensive income.
Impairment of financial assets
Assets held at amortised cost
The Group has elected to apply the simplified approach to measuring expected credit losses under IFRS 9 “Financial Instruments”, using a
lifetime expected credit loss provision for trade receivables (see note 3.10.)
Financial assets and liabilities at fair value
The Group uses the following hierarchy for determining and disclosing the fair value of its financial instruments:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
•
•
Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly (level 2); and
Inputs for the assets or liabilities that are not based on observable market data (level 3).
Set out below is a comparison by category of carrying amounts and fair values of all financial instruments that are included in the financial
statements:
Financial assets
Other financial assets
Trade receivables
Other receivables and accrued income
Cash and cash equivalents
Contract assets
Derivative assets
Total financial assets
Financial liabilities
Trade payables
Accruals and other payables
Senior secured notes
Senior unsecured convertible bonds
Other borrowings
Lease liabilities
Derivative liabilities
Total financial liabilities
29 November 2020
1 December 2019 (restated)(1)(2)
Carrying
amount
£m
Fair value
£m
Carrying
amount
£m
Fair value
£m
Notes
3.7
3.10
3.10
3.11
2.1
4.6
3.12
3.12
4.1
4.1
4.1
4.2
4.6
568.8
104.5
62.0
1,706.8
0.4
0.2
2,442.7
(139.4)
(252.4)
(220.8)
(776.4)
(0.2)
(407.8)
(0.3)
568.8
104.5
62.0
1,706.8
0.4
0.2
2,442.7
(139.4)
(252.4)
(230.1)
(776.4)
(0.2)
(407.8)
(0.3)
(1,797.3)
(1,806.6)
290.1
67.5
56.5
640.6
0.4
–
1,055.1
(122.4)
(142.3)
(219.5)
–
(0.2)
(388.5)
(0.5)
(873.4)
290.1
67.5
56.5
640.6
0.4
–
1,055.1
(122.4)
(142.3)
(231.3)
–
(0.2)
(388.5)
(0.5)
(885.2)
(1) £110.0 million (2018: £153.5 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019. See note 1.7 for more information.
(2) Trade payables has been increased as at 1 December 2019 by £1.5 million and accruals and other payables decreased by £0.5 million to correct immaterial historical errors, with a
corresponding net decrease of retained earnings.
The fair values of other financial assets, cash and cash equivalents, receivables and payables are assumed to approximate to their carrying
values but for completeness are included in this analysis.
The fair value of the senior secured notes is determined based on the quoted price in the active market. The carrying value in the table above is
stated after deduction of issue costs of £4.2 million (2019: £5.5 million).
The fair values of all other financial assets and liabilities have been calculated using discounted cash flows or the venture capital method.
244 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Notes to the Consolidated Financial Statements
Continued
4.7 Financial instruments continued
Impairment of financial assets
Assets held at amortised cost
The derivative assets and liabilities are forward commodity swap contracts. Derivative financial instruments are held at FVTPL, but where they
are hedging instruments, related gains and losses are recognised in other comprehensive income.
The Group has elected to apply the simplified approach to measuring expected credit losses under IFRS 9 “Financial Instruments”, using a
lifetime expected credit loss provision for trade receivables (see note 3.10.)
Financial assets and liabilities at fair value
The Group uses the following hierarchy for determining and disclosing the fair value of its financial instruments:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly (level 2); and
Inputs for the assets or liabilities that are not based on observable market data (level 3).
Set out below is a comparison by category of carrying amounts and fair values of all financial instruments that are included in the financial
•
•
statements:
Financial assets
Other financial assets
Trade receivables
Other receivables and accrued income
Cash and cash equivalents
Contract assets
Derivative assets
Total financial assets
Financial liabilities
Trade payables
Accruals and other payables
Senior secured notes
Senior unsecured convertible bonds
Other borrowings
Lease liabilities
Derivative liabilities
Total financial liabilities
29 November 2020
1 December 2019 (restated)(1)(2)
Carrying
amount
£m
Fair value
£m
Carrying
amount
£m
Fair value
£m
Notes
2,442.7
2,442.7
1,055.1
1,055.1
3.7
3.10
3.10
3.11
2.1
4.6
3.12
3.12
4.1
4.1
4.1
4.2
4.6
1,706.8
1,706.8
568.8
104.5
62.0
0.4
0.2
(139.4)
(252.4)
(220.8)
(776.4)
(0.2)
(407.8)
(0.3)
568.8
104.5
62.0
0.4
0.2
(139.4)
(252.4)
(230.1)
(776.4)
(0.2)
(407.8)
(0.3)
(1,797.3)
(1,806.6)
290.1
67.5
56.5
640.6
0.4
–
(122.4)
(142.3)
(219.5)
–
(0.2)
(388.5)
(0.5)
(873.4)
290.1
67.5
56.5
640.6
0.4
–
(122.4)
(142.3)
(231.3)
–
(0.2)
(388.5)
(0.5)
(885.2)
(1) £110.0 million (2018: £153.5 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019. See note 1.7 for more information.
(2) Trade payables has been increased as at 1 December 2019 by £1.5 million and accruals and other payables decreased by £0.5 million to correct immaterial historical errors, with a
corresponding net decrease of retained earnings.
The fair values of other financial assets, cash and cash equivalents, receivables and payables are assumed to approximate to their carrying
values but for completeness are included in this analysis.
The fair value of the senior secured notes is determined based on the quoted price in the active market. The carrying value in the table above is
stated after deduction of issue costs of £4.2 million (2019: £5.5 million).
The fair values of all other financial assets and liabilities have been calculated using discounted cash flows or the venture capital method.
4.7 Financial instruments continued
Financial assets and liabilities held at fair value have been valued as follows:
29 November 2020
Financial assets held at fair value
Contingent consideration receivable
Unlisted equity investments
Convertible loan to associate
Derivative assets
Total financial assets held at fair value
Financial liabilities held at fair value
Derivative liabilities
Total financial liabilities held at fair value
1 December 2019
Financial assets held at fair value
Contingent consideration receivable
Unlisted equity investments
Total financial assets held at fair value
Financial liabilities held at fair value
Derivative liabilities
Total financial liabilities held at fair value
Notes
Level 1
£m
Level 2
£m
Level 3
£m
3.7
3.7
3.7
4.6
4.6
–
–
–
–
–
–
–
Notes
Level 1
£m
3.7
3.7
4.6
–
–
–
–
–
–
–
0.2
0.2
(0.3)
(0.3)
Level 2
£m
–
–
(0.5)
(0.5)
173.6
12.7
1.7
–
188.0
–
–
Level 3
£m
169.1
6.8
175.9
–
–
Changes in the fair values of financial instruments categorised in level 3 are as follows:
Balance at 2 December 2018
Adjustment on adoption of IFRS 9
Adjusted balance at 2 December 2018
Recognised during period
Gains recognised in other comprehensive income
Balance at 1 December 2019
Recognised during period
Cash received
Gains recognised in exceptional administrative expenses
Gains recognised in other comprehensive income
Interest recognised in finance income
Balance at 29 November 2020
Contingent
consideration
receivable
£m
Unlisted
equity
investments
£m
Convertible
loan to
associate
£m
Note
–
–
–
169.1
–
169.1
–
(2.9)
7.4
–
–
173.6
0.4
2.0
2.4
1.6
2.8
6.8
0.7
–
–
5.2
–
12.7
3.7
4.9
3.7
2.6
4.9
4.5
–
–
–
–
–
–
1.7
–
–
–
–
1.7
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
Total
£m
173.6
12.7
1.7
0.2
188.2
(0.3)
(0.3)
Total
£m
169.1
6.8
175.9
(0.5)
(0.5)
Total
£m
0.4
2.0
2.4
170.7
2.8
175.9
2.4
(2.9)
7.4
5.2
–
188.0
The following table provides information about how the fair values of financial instruments categorised in level 3 are determined:
Description
Contingent
consideration
receivable
Unlisted equity
investments – Paneltex
Limited
Valuation techniques and key inputs Significant unobservable inputs
Discounted cash flow
Discount rate of 8.9%
Expected cash in-flows are estimated
based on the terms of the share
purchase agreements and the Group’s
expectations of future performance
and meeting financial and operational
targets.
Discounted cash flow
Expected cash inflows of £228.6 million
Discount rate of 14.8%
Expected cash in-flows are estimated
based on forecast performance.
Expected terminal growth rate of
EBITDA of 2.0%
A
See Alternative Performance Measures on pages 293 and 294.
Sensitivity of the fair value
measurement to input
An increase in the discount rate of
1.0% would decrease the fair value by
£5.0 million.
Management does not consider that
the value of expected future cash in-
flows will change materially during the
next 12 months.
An increase in the discount rate of
1.0% would decrease the fair value by
£0.8 million.
A decrease in the expected terminal
growth rate of EBITDA of 0.2% would
decrease the fair value by £0.1 million.
244 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents
Notes to the Consolidated Financial Statements
Continued
4.7 Financial instruments continued
The consideration due from Marks and Spencer Holdings Limited relating to the part-disposal of Ocado Retail Limited, valued at £170.7 million
(2019: £163.5 million), comprises three separate amounts, with three separate targets. Management considers it highly likely that these targets
will be hit, and this has been reflected in the calculation of fair value.
The consideration due from Next Holdings Limited relating to the disposal of Marie Claire Beauty Limited (“Fabled”), valued at £2.9 million (2019:
£5.6 million), is based on an “earn-out” agreement whereby the Group will receive sums in proportion to Fabled’s future sales.
4.8 Financial risk management
Overview
The Group’s financial instruments comprise cash and cash equivalents, trade and other receivables and payables, borrowings, lease liabilities,
derivatives and unlisted investments. The main financial risks faced by the Group relate to the risk of default by counterparties following
financial transactions, to the availability of funds for the Group to meet its obligations as they fall due, and to fluctuations in interest and foreign
exchange rates.
The management of these risks is set out below:
Credit risk
The Group’s exposure to credit risk arises from holdings of cash and cash equivalents, trade and other receivables, and derivative assets. The
carrying amounts of these financial assets, as set out in note 4.7, represent the maximum credit exposure. No collateral is held as security
against these assets.
Management does not believe that the credit risk of any financial instrument has increased significantly since its initial recognition.
Cash and cash equivalents
The Group’s exposure to credit risk on cash and cash equivalents is managed by investing in banks and financial institutions with investment
grade credit ratings (all rated A or above according to Fitch Ratings Inc.’s long-term credit ratings), and by regular review of counterparty risk.
Trade and other receivables
Trade and other receivables at the reporting date comprise mainly monies due from suppliers, which are considered of a good credit quality, as
well as VAT receivable. The Group provides for doubtful receivables in respect of monies due from suppliers.
The Group has elected to apply the IFRS 9 “Financial Instruments” simplified approach to measuring expected credit losses using a lifetime
expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based
on similar credit risks and ageing.
The expected loss rates are based on the Group’s historical credit losses, adjusted for reasonable and supportable information that is available
at the reporting date about past events, current conditions and forecasts of future economic conditions.
The Group provides for 30.0% of amounts due from suppliers which are between 61 and 360 days overdue, and 100.0% of amounts more than
360 days overdue. It provides for 100.0% of amounts due from Retail customers which are more than 30 days overdue. Amounts due from each
Solutions customer are treated on a case-by-case basis, depending on the credit risk assigned to the counterparty, the amount outstanding, and
the length of time to or from the due date.
The Group has very low retail credit risk due to transactions being principally of a high volume, low value and short maturity. Therefore, it also
has very low concentration risk. The Group has effective controls over this area.
The Group’s definition of default differs between suppliers and customers. A supplier is deemed to have defaulted if they have not paid an
amount due within 360 days of the due date. A Retail customer is deemed to have defaulted if they have not paid an amount due within 30 days
of the due date. Solutions customers are treated on a case-by-case basis, and the definition of default varies.
Receivables are written off when there is no realistic prospect of recovery. This is generally the case when the Group determines that the
counterparty does not have sufficient assets or sources of income to repay the relevant amounts. However, receivables that have been written
off may still be subject to enforcement activity. The recovery of an amount previously written off is recognised as a gain in the Consolidated
Income Statement.
246 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
4.7 Financial instruments continued
The consideration due from Marks and Spencer Holdings Limited relating to the part-disposal of Ocado Retail Limited, valued at £170.7 million
(2019: £163.5 million), comprises three separate amounts, with three separate targets. Management considers it highly likely that these targets
will be hit, and this has been reflected in the calculation of fair value.
The consideration due from Next Holdings Limited relating to the disposal of Marie Claire Beauty Limited (“Fabled”), valued at £2.9 million (2019:
£5.6 million), is based on an “earn-out” agreement whereby the Group will receive sums in proportion to Fabled’s future sales.
The Group’s financial instruments comprise cash and cash equivalents, trade and other receivables and payables, borrowings, lease liabilities,
derivatives and unlisted investments. The main financial risks faced by the Group relate to the risk of default by counterparties following
financial transactions, to the availability of funds for the Group to meet its obligations as they fall due, and to fluctuations in interest and foreign
4.8 Financial risk management
Overview
The management of these risks is set out below:
exchange rates.
Credit risk
against these assets.
Cash and cash equivalents
Trade and other receivables
The Group’s exposure to credit risk arises from holdings of cash and cash equivalents, trade and other receivables, and derivative assets. The
carrying amounts of these financial assets, as set out in note 4.7, represent the maximum credit exposure. No collateral is held as security
Management does not believe that the credit risk of any financial instrument has increased significantly since its initial recognition.
The Group’s exposure to credit risk on cash and cash equivalents is managed by investing in banks and financial institutions with investment
grade credit ratings (all rated A or above according to Fitch Ratings Inc.’s long-term credit ratings), and by regular review of counterparty risk.
Trade and other receivables at the reporting date comprise mainly monies due from suppliers, which are considered of a good credit quality, as
well as VAT receivable. The Group provides for doubtful receivables in respect of monies due from suppliers.
The Group has elected to apply the IFRS 9 “Financial Instruments” simplified approach to measuring expected credit losses using a lifetime
expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based
on similar credit risks and ageing.
The expected loss rates are based on the Group’s historical credit losses, adjusted for reasonable and supportable information that is available
at the reporting date about past events, current conditions and forecasts of future economic conditions.
The Group provides for 30.0% of amounts due from suppliers which are between 61 and 360 days overdue, and 100.0% of amounts more than
360 days overdue. It provides for 100.0% of amounts due from Retail customers which are more than 30 days overdue. Amounts due from each
Solutions customer are treated on a case-by-case basis, depending on the credit risk assigned to the counterparty, the amount outstanding, and
the length of time to or from the due date.
The Group has very low retail credit risk due to transactions being principally of a high volume, low value and short maturity. Therefore, it also
has very low concentration risk. The Group has effective controls over this area.
The Group’s definition of default differs between suppliers and customers. A supplier is deemed to have defaulted if they have not paid an
amount due within 360 days of the due date. A Retail customer is deemed to have defaulted if they have not paid an amount due within 30 days
of the due date. Solutions customers are treated on a case-by-case basis, and the definition of default varies.
Receivables are written off when there is no realistic prospect of recovery. This is generally the case when the Group determines that the
counterparty does not have sufficient assets or sources of income to repay the relevant amounts. However, receivables that have been written
off may still be subject to enforcement activity. The recovery of an amount previously written off is recognised as a gain in the Consolidated
Income Statement.
4.8 Financial risk management continued
Movements in the provision for the impairment of trade and other receivables are as follows:
Balance at beginning of period
Provision for impairment of receivables
Uncollectable amounts written off
Recovery of amounts previously provided for
Balance at end of period
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
(2.2)
(2.6)
0.8
1.4
(2.6)
(1.5)
(2.1)
0.7
0.7
(2.2)
Note
3.10
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
Liquidity risk
The Group has adequate cash resources to manage the short-term working capital needs of the business. In December 2019, it issued £600.0
million of senior unsecured convertible bonds. In June 2020 it issued another £350.0 million of senior unsecured convertible bonds, alongside
£657.1 million of ordinary shares. The £100.0 million revolving credit facility was terminated in October 2020; it was not utilised in the current or
prior period. The Group regularly reviews its financing arrangements. For further details of the review see the Viability Statement on page 71.
The Group monitors its liquidity requirements to ensure it has sufficient cash to meet operational needs. For further details, see note 4.11.
The table below analyses the Group’s financial liabilities based on the period remaining to the contractual maturity dates at the reporting date.
The amounts disclosed in the table are the carrying amounts and undiscounted net contractual cash flows.
29 November 2020
Trade payables
Accruals and other payables
Senior secured notes
Senior unsecured convertible
bonds
Other borrowings
Lease liabilities
Derivative liabilities
1 December 2019(1)
Trade payables
Accruals and other payables
Senior secured notes
Other borrowings
Lease liabilities
Derivative liabilities
Carrying
amount
£m
Contractual
cash flows
£m
(139.4)
(252.4)
(220.8)
(776.4)
(0.2)
(407.8)
(0.3)
(1,797.3)
(139.4)
(252.4)
(261.0)
(996.0)
(0.2)
(590.0)
(0.3)
(2,239.3)
Due in less
than one
year
£m
Due in
between
one and two
years
£m
Due in
between
two and five
years
£m
Due in more
than five
years
£m
(139.4)
(252.4)
(9.0)
(7.9)
(0.1)
(67.1)
(0.3)
(476.2)
–
–
(9.0)
(7.9)
(0.1)
(63.8)
–
(80.8)
–
–
(243.0)
(23.6)
–
(134.2)
–
(400.8)
–
–
–
(956.6)
–
(324.9)
–
(1,281.5)
Carrying
amount
£m
Contractual
cash flows
£m
Due in less
than one
year
£m
Due in
between
one and two
years
£m
Due in
between
two and five
years
£m
Due in more
than five
years
£m
(122.4)
(142.3)
(219.5)
(0.2)
(388.5)
(0.5)
(873.4)
(122.4)
(142.3)
(270.0)
(0.3)
(575.1)
(0.5)
(934.8)
(122.4)
(142.3)
(9.0)
(0.1)
(62.0)
(0.5)
(329.1)
–
–
(9.0)
(0.1)
(58.3)
–
(55.1)
–
–
(252.0)
(0.1)
(134.0)
–
(345.2)
–
–
–
–
(320.8)
–
(205.4)
Notes
3.12
3.12
4.1
4.1
4.1
4.2
4.6
Notes
3.12
3.12
4.1
4.1
4.2
4.6
(1) Trade payables has been increased as at 1 December 2019 by £1.5 million and accruals and other payables decreased by £0.5 million to correct immaterial historical errors, with a
corresponding net decrease of retained earnings. The contractual cash flows for lease liabilities as at 1 December 2019 have also been corrected.
246 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Notes to the Consolidated Financial Statements
Continued
4.8 Financial risk management continued
Market risk
Currency risk
The Group has exposure to foreign currency risk through trade receivables and payables and lease liabilities denominated in foreign currencies
and a portion of its cash and cash equivalents.
Foreign currency trade receivables arise principally on amounts invoiced under Solutions contracts, primarily in euros, Japanese yen, Swedish
krona and United States dollars. Foreign currency trade payables arise principally on purchases of plant and machinery, primarily in Australian
dollars, Canadian dollars, euros, Japanese yen, Polish złoty, Swedish krona and United States dollars. Bank accounts are maintained in these
foreign currencies in order to minimise the Group’s exposure to fluctuations in foreign currencies relating to current and future revenue and
purchases of plant and equipment.
The Group’s exposure to currency risk is based on the following amounts:
Trade receivables – EUR
Trade receivables – JPY
Trade receivables – SEK
Trade receivables – USD
Cash and cash equivalents – AUD
Cash and cash equivalents – CAD
Cash and cash equivalents – EUR
Cash and cash equivalents – JPY
Cash and cash equivalents – PLN
Cash and cash equivalents – SEK
Cash and cash equivalents – USD
Trade payables – AUD
Trade payables – CAD
Trade payables – EUR
Trade payables – JPY
Trade payables – PLN
Trade payables – SEK
Trade payables – USD
Lease liabilities – EUR
Lease liabilities – USD
29 November
2020
£m
1 December
2019
£m
0.2
0.2
3.0
12.7
0.6
0.8
7.3
1.3
4.1
0.2
232.7
(1.1)
(0.8)
(0.9)
(0.1)
–
(0.5)
(1.5)
(11.5)
(5.1)
241.6
–
–
–
–
–
–
2.7
–
5.1
–
3.3
–
(2.7)
(2.0)
–
(0.1)
–
(1.3)
–
–
5.0
The table below shows the Group’s sensitivity to changes in foreign exchange rates on its financial instruments denominated in foreign currencies:
10.0% appreciation of above foreign currencies against sterling
10.0% depreciation of above foreign currencies against sterling
29 November 2020
1 December 2019
Increase/
(decrease)
in income
£m
Increase/
(decrease)
in equity
£m
24.2
(24.2)
–
–
Increase/
(decrease)
in income
£m
0.5
(0.5)
Increase/
(decrease)
in equity
£m
–
–
During the period, the currencies to which the Group is exposed appreciated and depreciated against sterling by between 0.1% and 6.9%. Given
these historical movements, as well as the ongoing uncertainty surrounding Brexit and Covid-19, a 10.0% appreciation or depreciation of foreign
currencies is deemed reasonably likely to happen, and so has been used for the above analysis. The analysis assumes that all other variables
remain constant.
Interest rate risk
The Group is exposed to interest rate risk on its variable rate cash and cash equivalents. The Group’s interest rate risk policy seeks to minimise
finance charges and volatility by structuring the interest rate profile into a diversified portfolio of fixed rate and variable rate financial assets and
liabilities.
248 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
Market risk
Currency risk
4.8 Financial risk management continued
The Group has exposure to foreign currency risk through trade receivables and payables and lease liabilities denominated in foreign currencies
and a portion of its cash and cash equivalents.
Foreign currency trade receivables arise principally on amounts invoiced under Solutions contracts, primarily in euros, Japanese yen, Swedish
krona and United States dollars. Foreign currency trade payables arise principally on purchases of plant and machinery, primarily in Australian
dollars, Canadian dollars, euros, Japanese yen, Polish złoty, Swedish krona and United States dollars. Bank accounts are maintained in these
foreign currencies in order to minimise the Group’s exposure to fluctuations in foreign currencies relating to current and future revenue and
purchases of plant and equipment.
The Group’s exposure to currency risk is based on the following amounts:
29 November
1 December
Trade receivables – EUR
Trade receivables – JPY
Trade receivables – SEK
Trade receivables – USD
Cash and cash equivalents – AUD
Cash and cash equivalents – CAD
Cash and cash equivalents – EUR
Cash and cash equivalents – JPY
Cash and cash equivalents – PLN
Cash and cash equivalents – SEK
Cash and cash equivalents – USD
Trade payables – AUD
Trade payables – CAD
Trade payables – EUR
Trade payables – JPY
Trade payables – PLN
Trade payables – SEK
Trade payables – USD
Lease liabilities – EUR
Lease liabilities – USD
The table below shows the Group’s sensitivity to changes in foreign exchange rates on its financial instruments denominated in foreign currencies:
29 November 2020
1 December 2019
Increase/
(decrease)
in income
Increase/
(decrease)
in equity
Increase/
(decrease)
in income
Increase/
(decrease)
in equity
£m
24.2
(24.2)
£m
–
–
£m
0.5
(0.5)
£m
–
–
10.0% appreciation of above foreign currencies against sterling
10.0% depreciation of above foreign currencies against sterling
During the period, the currencies to which the Group is exposed appreciated and depreciated against sterling by between 0.1% and 6.9%. Given
these historical movements, as well as the ongoing uncertainty surrounding Brexit and Covid-19, a 10.0% appreciation or depreciation of foreign
currencies is deemed reasonably likely to happen, and so has been used for the above analysis. The analysis assumes that all other variables
The Group is exposed to interest rate risk on its variable rate cash and cash equivalents. The Group’s interest rate risk policy seeks to minimise
finance charges and volatility by structuring the interest rate profile into a diversified portfolio of fixed rate and variable rate financial assets and
remain constant.
Interest rate risk
liabilities.
2020
12.7
£m
0.2
0.2
3.0
0.6
0.8
7.3
1.3
4.1
0.2
232.7
(1.1)
(0.8)
(0.9)
(0.1)
–
(0.5)
(1.5)
(11.5)
(5.1)
241.6
2019
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
2.7
5.1
3.3
(2.7)
(2.0)
(0.1)
(1.3)
5.0
4.8 Financial risk management continued
At the reporting date, the interest rate profile of the Group’s interest-bearing financial instruments was as follows:
Fixed rate instruments
Financial assets
Financial liabilities
Variable rate instruments
Financial assets
Financial liabilities
29 November
2020
£m
1 December
2019
£m
591.0
(1,405.2)
1,496.8
–
380.6
(608.2)
370.0
–
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
Sensitivity analysis
An increase of 1.0% in interest rates would affect equity and profit or loss by the amounts shown below. Given that global interest rates are
expected to remain low for a number of years as the global economy recovers from the effects of Covid-19, a movement of 1.0% is deemed the
maximum increase likely to occur in the short term. The calculation applies the increase to average variable rate interest-bearing borrowings and
cash and cash equivalents existing during the period. This analysis assumes that all other variables remain constant and considers the effect on
financial instruments with variable interest rates.
Increase in income
Increase in equity
29 November
2020
£m
1 December
2019
£m
15.0
–
1.4
–
4.9 Share capital and reserves
Accounting policy
Equity instruments issued by the Group are recorded as the proceeds received, net of direct issue costs.
Share capital and reserves
At the reporting date, the number of ordinary shares available for issue under the Block Listing Facilities was 9,278,146 (2019: 13,657,551). These
ordinary shares will only be issued and allotted when the shares under the relevant share plan have vested, or the share options have been
exercised. They are, therefore, not included in the total number of ordinary shares outstanding below.
The movements in called-up share capital and share premium are set out below:
Balance at 2 December 2018
Issue of ordinary shares
Allotted in respect of share option schemes
Balance at 1 December 2019
Issue of ordinary shares
Allotted in respect of share option schemes
Balance at 29 November 2020
Ordinary
shares
million
Share
capital
£m
Share
premium
£m
698.3
10.0
0.9
709.2
34.3
4.6
748.1
14.0
0.2
–
14.2
0.7
0.1
15.0
589.9
113.0
2.4
705.3
645.6
10.7
1,361.6
Included in the total number of ordinary shares outstanding above are 10,587,150 (2019: 10,850,516) ordinary shares held by the Group’s Employee
Benefit Trust (see note 4.10.) The ordinary shares held by the Trustee of the Group’s Employee Benefit Trust pursuant to the JSOS, and the linked
jointly owned equity (“JOE”) awards under the Value Creation Plan (“VCP”) are treated as treasury shares on the Consolidated Balance Sheet in
accordance with IAS 32 ‘‘Financial Instruments: Presentation’’. These ordinary shares have voting rights but these have been waived by the Trustee
(although the Trustee may vote in respect of shares that have vested and remain in the Trust). The number of allotted, called-up and fully-paid
shares, excluding treasury shares, at the end of each period differs from that used in the basic loss per share calculation in note 2.8, since the basic
loss per share is calculated using the weighted average number of ordinary shares in issue during the period, excluding treasury shares.
248 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Notes to the Consolidated Financial Statements
Continued
4.9 Share capital and reserves continued
The movements in reserves other than share premium and retained earnings are set out below:
Other reserves
Treasury
shares
reserve
£m
Reverse
acquisition
reserve
£m
Convertible
bonds
reserve
£m
Translation
reserve
£m
Fair value
reserve
£m
Hedging
reserve
£m
Balance at 2 December 2018
Adjustment on adoption of IFRS 9
Adjusted balance at 2 December 2018
Loss arising on hedging contracts
Foreign exchange loss on translation of foreign
subsidiaries and joint venture
Gain on equity investments designated as at fair
value through other comprehensive income
Reclassification of equity of Jones Food Company
Limited
Issue of ordinary shares
Disposal of treasury shares on exercise by
participants
Disposal of unallocated treasury shares
Transfer of treasury shares to participants
Reclassification of reserves
Balance at 1 December 2019
Gain arising on hedging contracts
Foreign exchange loss on translation of foreign
subsidiaries and joint venture
Gain on equity investments designated as at fair
value through other comprehensive income
Disposal of treasury shares on exercise by
participants
Disposal of unallocated treasury shares
Issue of convertible bonds
Additional investment in Jones Food Company
Limited
Balance at 29 November 2020
(9.2)
–
(9.2)
–
–
–
–
(111.1)
0.5
5.7
0.8
(0.3)
(113.6)
–
–
–
0.3
0.1
–
(116.2)
–
(116.2)
–
–
–
–
–
–
–
–
–
(116.2)
–
–
–
–
–
–
–
(113.2)
–
(116.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
184.5
–
184.5
0.2
–
0.2
–
(0.6)
–
–
–
–
–
–
–
(0.4)
–
(0.9)
–
–
–
–
–
2.0
2.0
–
–
2.8
0.1
–
–
–
–
–
4.9
–
–
5.2
–
–
–
1.2
–
1.2
(1.7)
–
–
–
–
–
–
–
–
(0.5)
0.4
–
–
–
–
–
–
(1.3)
(0.1)
10.0
–
(0.1)
Treasury shares reserve
The treasury shares reserve arose when the Group issued equity share capital under its JSOS. During the prior period, the Group issued share
capital relating to the linked jointly owned equity (“JOE”) awards under the Value Creation Plan (“VCP”). The shares under both plans are held
in trust by the Trustee of the Group’s Employee Benefit Trust. Treasury shares cease to be accounted for as such when they are sold outside the
Group or the interest is transferred in full to the participant pursuant to the terms of the JSOS and VCP. Participants’ interests in unexercised
shares held by participants are not included in the calculation of treasury shares. See note 4.10 for more information on the JSOS and VCP.
Reverse acquisition reserve
The acquisition by the Company of the entire issued share capital in 2010 of Ocado Limited was accounted for as a reverse acquisition under
IFRS 3 “Business Combinations”. Consequently, the previously-recognised book values and assets and liabilities have been retained, and the
consolidated financial information for the period to 29 November 2020 has been presented as if the Company had always been the parent
company of the Group.
Convertible bonds reserve
The convertible bonds reserve contains the equity components of convertible bonds issued by the Group, net of apportioned transaction costs.
The carrying amounts of the equity components will not change until the liability components are redeemed through repayment or conversion
into ordinary shares.
£600.0 million of senior unsecured convertible bonds were issued in December 2019, with £107.1 million being recognised in the convertible
bonds reserve. Another £350.0 million of senior unsecured convertible bonds were issued in June 2020, with £77.4 million being recognised in
the convertible bonds reserve.
250 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
4.9 Share capital and reserves continued
The movements in reserves other than share premium and retained earnings are set out below:
Other reserves
Translation
reserve
Fair value
reserve
Hedging
reserve
Reverse
Convertible
Treasury
shares
reserve
acquisition
reserve
bonds
reserve
£m
£m
(9.2)
(9.2)
£m
(116.2)
(116.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
184.5
£m
0.2
0.2
–
–
(0.6)
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.9)
£m
–
2.0
2.0
2.8
0.1
–
–
–
–
–
–
–
–
–
–
–
–
5.2
(0.1)
10.0
£m
1.2
–
1.2
(1.7)
(0.5)
0.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(116.2)
(0.4)
4.9
Balance at 2 December 2018
Adjustment on adoption of IFRS 9
Adjusted balance at 2 December 2018
Loss arising on hedging contracts
Foreign exchange loss on translation of foreign
subsidiaries and joint venture
Gain on equity investments designated as at fair
value through other comprehensive income
Reclassification of equity of Jones Food Company
Limited
Issue of ordinary shares
Disposal of treasury shares on exercise by
participants
Disposal of unallocated treasury shares
Transfer of treasury shares to participants
Reclassification of reserves
Balance at 1 December 2019
Gain arising on hedging contracts
Foreign exchange loss on translation of foreign
subsidiaries and joint venture
Gain on equity investments designated as at fair
value through other comprehensive income
Disposal of treasury shares on exercise by
participants
Disposal of unallocated treasury shares
Issue of convertible bonds
Additional investment in Jones Food Company
Limited
Treasury shares reserve
–
–
–
–
–
–
–
–
–
–
(111.1)
0.5
5.7
0.8
(0.3)
(113.6)
0.3
0.1
Balance at 29 November 2020
(113.2)
(116.2)
184.5
(1.3)
(0.1)
The treasury shares reserve arose when the Group issued equity share capital under its JSOS. During the prior period, the Group issued share
capital relating to the linked jointly owned equity (“JOE”) awards under the Value Creation Plan (“VCP”). The shares under both plans are held
in trust by the Trustee of the Group’s Employee Benefit Trust. Treasury shares cease to be accounted for as such when they are sold outside the
Group or the interest is transferred in full to the participant pursuant to the terms of the JSOS and VCP. Participants’ interests in unexercised
shares held by participants are not included in the calculation of treasury shares. See note 4.10 for more information on the JSOS and VCP.
The acquisition by the Company of the entire issued share capital in 2010 of Ocado Limited was accounted for as a reverse acquisition under
IFRS 3 “Business Combinations”. Consequently, the previously-recognised book values and assets and liabilities have been retained, and the
consolidated financial information for the period to 29 November 2020 has been presented as if the Company had always been the parent
The convertible bonds reserve contains the equity components of convertible bonds issued by the Group, net of apportioned transaction costs.
The carrying amounts of the equity components will not change until the liability components are redeemed through repayment or conversion
£600.0 million of senior unsecured convertible bonds were issued in December 2019, with £107.1 million being recognised in the convertible
bonds reserve. Another £350.0 million of senior unsecured convertible bonds were issued in June 2020, with £77.4 million being recognised in
Reverse acquisition reserve
company of the Group.
Convertible bonds reserve
into ordinary shares.
the convertible bonds reserve.
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
4.9 Share capital and reserves continued
Translation reserve
The translation reserve comprises cumulative foreign exchange differences on the translation of foreign subsidiaries and the foreign joint venture.
Fair value reserve
The fair value reserve comprises cumulative changes in the fair value of assets and liabilities recognised through other comprehensive income.
Hedging reserve
The hedging reserve comprises cumulative gains and losses on movements in the Group’s hedging arrangements (see note 4.6.)
4.10 Share options and other equity instruments
Accounting policies
Employee benefits
Employees (including Directors) of the Group receive part of their remuneration in the form of share-based payments, whereby, depending on
the scheme, employees render services in exchange for rights over shares (“equity-settled transactions”) or entitlement to future cash payments
(“cash-settled transactions”).
The cost of equity-settled transactions with employees is measured, where appropriate, with reference to the fair value of the equity instruments
at the date on which they are granted. Where options need to be valued, an appropriate valuation model is applied. The expected lives used
in the models have been adjusted, based on Management’s best estimates, for the effects of non-transferability, exercise restrictions and
behavioural considerations.
The cost of cash-settled transactions is measured with reference to the fair value of the amounts payable, which is taken to be the closing price of the
Company’s shares at the measurement date. Until a liability is settled, it is remeasured at the end of each reporting period and at the date of settlement,
with any changes in fair value being recognised in the Consolidated Income Statement for the relevant period. For more details, see note 3.13.
The cost of equity-settled transactions is recognised, along with a corresponding increase in equity, over the periods in which the performance
conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“the vesting date”). The cost of
cash-settled transactions is recognised, along with a corresponding provision for the expected cash settlement, over the vesting period.
At each reporting date, the cumulative expense recognised for equity-settled transactions reflects the extent to which the vesting period has
expired, and the number of awards that, in the opinion of Management, will ultimately vest. Management’s estimates are based on the best
available information at that date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are
treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.
The Group has exposure to cash-settled share-based payment transactions and share-based payment transactions with cash alternatives as
defined by IFRS 2 “Share-based Payment” in respect of bad leaver provisions in the Group’s JSOS and Cash LTIP, and the Ocado Retail Value Creation
Plan (“Retail VCP”) (see note 3.13.) National Insurance contribution (NIC) obligations arising from cash-settled schemes and HMRC-unapproved
equity-settled schemes are treated as if they are cash-settled, regardless of the actual cash or equity determination of the scheme itself.
Share options and other equity instruments
The Group operates various employee share incentive schemes, namely the Executive Share Ownership Scheme (“ESOS”), the Joint Share
Ownership Scheme (“JSOS”), the Sharesave Scheme (“SAYE”), the Long-Term Incentive Plan (“LTIP”), the Share Incentive Plan (“SIP”), the Value
Creation Plan (“VCP”), the Ocado Technology Award, the Long-Term Operating Plan, the Annual Incentive Plan (“AIP”), the Employee Share
Purchase Plan (“SPP”), and the Restricted Share Plan (“RSP”). The Group also operates two cash-settled incentive schemes, the Cash LTIP and
the Retail VCP.
The total expense for the period relating to employee share-based payment plans was £45.5 million (2019: £24.2 million), of which £22.4 million
(2019: £12.8 million) related to equity-settled share-based payment transactions and £23.1 million (2019: £11.4 million) to the provision for the
payment of employer’s NIC upon allotment of HMRC-unapproved equity-settled share schemes and the Cash LTIP (see note 3.13).
(a) ESOS
The Group’s ESOS is an equity-settled share option scheme approved by HMRC. Options have also been granted under the terms of HMRC’s
schedule, which are not approved. The ESOS was established by the Group in 2001.
Under the ESOS, the Group or the trustees of an employee trust may grant options over shares of the Company to eligible employees. The
eligible employees to whom options are granted and the terms of such options are determined by the Directors of the Group or the trustees.
The employees who are eligible to participate in the ESOS are all the Group’s Executive Directors and employees, including the employees of
the Company’s wholly-owned subsidiaries. Options are not transferable. The exercise price of options may not be less than the market value of
the Company’s shares on the date of grant. If the trustees or the Directors have determined that the exercise of an option will be satisfied by the
issue of ordinary shares, the exercise price may also not be less than the nominal value of ordinary shares.
250 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Notes to the Consolidated Financial Statements
Continued
4.10 Share options and other equity instruments continued
The Directors of the Group or the trustees may impose a performance target and any further condition determined to be appropriate on the exercise of
an option. In most cases, any performance target must be measured over a period of at least three years. There are currently no options granted which
are subject to performance targets that have not yet been met. The vesting period for the ESOS is three years. If the options remain unexercised after a
period of ten years from the date of grant or the employee leaves the Group, the options expire (subject to a limited number of exceptions).
At the reporting date, the outstanding options were as follows:
Approved options
Year of issue
29 November
2020
Exercise
price
(£)
1 December
2019
Exercise
price
(£)
2010
2011
2011
2012
2012
2012
2013
2013
2013
2014
2014
2014
2015
2015
2015
2015
2016
2016
2016
2017
2017
2017
2018
2018
2018
2018
2018
2019
2019
2020
2020
2012
2014
2014
2014
2015
2015
2015
2015
2016
2016
2017
2017
2018
2018
2019
2019
2020
2020
–
20,768
3,835
33,548
92,769
9,353
47,380
20,071
–
2,883
59,966
–
57,962
–
5,284
5,231
111,860
–
2,609
392,384
–
6,174
267,165
7,561
–
13,764
–
189,064
–
182,011
4,147
1,535,789
6,159
9,313
4,128
1,543
2,783
6,625
–
3,065
48,189
19,128
79,158
49,122
66,141
25,283
34,990
32,978
36,685
3,960
429,250
1,965,039
–
2.55
1.89
1.03
1.05
0.85
1.28
3.02
–
5.10
4.84
–
3.77
–
4.46
4.39
2.70
–
2.59
2.56
–
2.92
5.68
5.68
5.68
10.45
10.45
12.40
12.40
14.47
25.08
1.05
4.84
3.36
3.27
3.77
4.46
–
4.39
2.70
2.59
2.56
2.92
5.68
10.45
11.37
12.40
14.47
20.72
75,439
45,066
5,317
49,031
147,451
11,003
68,782
38,898
288
4,998
94,073
2,890
88,583
1,835
7,457
9,098
184,394
4,341
6,297
860,706
46,562
14,749
285,479
15,691
1,700
17,820
2,871
196,133
241
–
–
2,287,193
45,800
14,997
5,328
1,975
4,858
7,877
1,638
4,638
71,014
29,314
175,390
80,966
68,546
26,589
36,667
35,321
–
–
610,918
2,898,111
1.65
2.55
1.89
1.03
1.05
0.85
1.28
3.02
3.02
5.10
4.84
4.84
3.77
3.77
4.46
4.39
2.70
2.70
2.59
2.56
2.56
2.92
5.68
5.68
5.68
10.45
10.45
12.40
12.40
–
–
1.05
4.84
3.36
3.27
3.77
4.46
4.46
4.39
2.70
2.59
2.56
2.92
5.68
10.45
11.37
12.40
–
–
Total approved options
Unapproved options
Total unapproved options
Total options
Exercise period
30/06/13 – 29/06/20
14/02/14 – 13/02/21
19/07/14 – 18/07/21
21/02/15 – 13/02/22
09/03/15 – 08/03/22
27/06/15 – 26/06/22
05/03/16 – 04/03/23
08/07/16 – 07/07/23
08/07/16 – 05/08/20
05/02/17 – 04/02/24
17/03/17 – 16/03/24
17/03/17 – 05/08/20
13/03/18 – 12/03/25
13/03/18 – 05/08/20
01/07/18 – 30/06/25
10/07/18 – 09/07/25
16/03/19 – 15/03/26
16/03/19 – 05/08/20
15/07/19 – 14/07/26
14/03/20 – 13/03/27
05/08/19 – 13/09/20
15/08/20 – 14/08/27
21/03/21 – 20/03/28
05/08/19 – 19/09/21
21/03/21 – 19/09/21
13/08/21 – 12/08/28
05/08/19 – 11/02/22
29/07/22 – 28/07/29
29/07/22 – 28/01/23
20/03/23 – 19/03/30
27/08/23 – 26/08/30
09/03/15 – 08/03/22
17/03/17 – 16/03/24
01/08/17 – 31/07/24
08/08/17 – 07/08/24
13/03/18 – 12/03/25
01/07/18 – 30/06/25
01/07/18 – 05/08/20
10/07/18 – 09/07/25
16/03/19 – 15/03/26
15/07/19 – 14/07/26
14/03/20 – 13/03/27
15/08/20 – 14/08/27
21/03/21 – 20/08/28
13/08/21 – 14/08/28
16/08/22 – 14/08/29
29/07/22 – 27/07/29
20/03/23 – 19/03/30
10/06/23 – 09/03/30
252 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
4.10 Share options and other equity instruments continued
The Directors of the Group or the trustees may impose a performance target and any further condition determined to be appropriate on the exercise of
an option. In most cases, any performance target must be measured over a period of at least three years. There are currently no options granted which
are subject to performance targets that have not yet been met. The vesting period for the ESOS is three years. If the options remain unexercised after a
period of ten years from the date of grant or the employee leaves the Group, the options expire (subject to a limited number of exceptions).
At the reporting date, the outstanding options were as follows:
29 November
Year of issue
2020
price
(£)
1 December
2019
Exercise
Exercise
price
(£)
Approved options
2010
2011
2011
2012
2012
2012
2013
2013
2013
2014
2014
2014
2015
2015
2015
2015
2016
2016
2016
2017
2017
2017
2018
2018
2018
2018
2018
2019
2019
2020
2020
2012
2014
2014
2014
2015
2015
2015
2015
2016
2016
2017
2017
2018
2018
2019
2019
2020
2020
–
20,768
3,835
33,548
92,769
9,353
47,380
20,071
2,883
59,966
57,962
5,284
5,231
111,860
2,609
392,384
6,174
267,165
7,561
13,764
189,064
–
–
–
–
–
–
–
–
182,011
4,147
1,535,789
6,159
9,313
4,128
1,543
2,783
6,625
–
3,065
48,189
19,128
79,158
49,122
66,141
25,283
34,990
32,978
36,685
3,960
–
2.55
1.89
1.03
1.05
0.85
1.28
3.02
5.10
4.84
3.77
4.46
4.39
2.70
2.59
2.56
2.92
5.68
5.68
5.68
–
–
–
–
–
10.45
10.45
12.40
12.40
14.47
25.08
1.05
4.84
3.36
3.27
3.77
4.46
–
4.39
2.70
2.59
2.56
2.92
5.68
10.45
11.37
12.40
14.47
20.72
75,439
45,066
5,317
49,031
147,451
11,003
68,782
38,898
288
4,998
94,073
2,890
88,583
1,835
7,457
9,098
184,394
4,341
6,297
860,706
46,562
14,749
285,479
15,691
1,700
17,820
2,871
196,133
241
–
–
45,800
14,997
5,328
1,975
4,858
7,877
1,638
4,638
71,014
29,314
175,390
80,966
68,546
26,589
36,667
35,321
–
–
2,287,193
Exercise period
30/06/13 – 29/06/20
14/02/14 – 13/02/21
19/07/14 – 18/07/21
21/02/15 – 13/02/22
09/03/15 – 08/03/22
27/06/15 – 26/06/22
05/03/16 – 04/03/23
08/07/16 – 07/07/23
08/07/16 – 05/08/20
05/02/17 – 04/02/24
17/03/17 – 16/03/24
17/03/17 – 05/08/20
13/03/18 – 12/03/25
13/03/18 – 05/08/20
01/07/18 – 30/06/25
10/07/18 – 09/07/25
16/03/19 – 15/03/26
16/03/19 – 05/08/20
15/07/19 – 14/07/26
14/03/20 – 13/03/27
05/08/19 – 13/09/20
15/08/20 – 14/08/27
21/03/21 – 20/03/28
05/08/19 – 19/09/21
21/03/21 – 19/09/21
13/08/21 – 12/08/28
05/08/19 – 11/02/22
29/07/22 – 28/07/29
29/07/22 – 28/01/23
20/03/23 – 19/03/30
27/08/23 – 26/08/30
09/03/15 – 08/03/22
17/03/17 – 16/03/24
01/08/17 – 31/07/24
08/08/17 – 07/08/24
13/03/18 – 12/03/25
01/07/18 – 30/06/25
01/07/18 – 05/08/20
10/07/18 – 09/07/25
16/03/19 – 15/03/26
15/07/19 – 14/07/26
14/03/20 – 13/03/27
15/08/20 – 14/08/27
21/03/21 – 20/08/28
13/08/21 – 14/08/28
16/08/22 – 14/08/29
29/07/22 – 27/07/29
20/03/23 – 19/03/30
10/06/23 – 09/03/30
1.65
2.55
1.89
1.03
1.05
0.85
1.28
3.02
3.02
5.10
4.84
4.84
3.77
3.77
4.46
4.39
2.70
2.70
2.59
2.56
2.56
2.92
5.68
5.68
5.68
10.45
10.45
12.40
12.40
–
–
1.05
4.84
3.36
3.27
3.77
4.46
4.46
4.39
2.70
2.59
2.56
2.92
5.68
10.45
11.37
12.40
–
–
Total approved options
Unapproved options
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
4.10 Share options and other equity instruments continued
Details of the movement of the number of share options outstanding during each period are as follows:
Outstanding at beginning of period
Granted during period
Forfeited during period
Exercised during period
Outstanding at end of period
Exercisable at end of period
52 weeks ended
29 November 2020
52 weeks ended
1 December 2019
Number of
share
options
2,898,111
232,176
(54,887)
(1,110,361)
1,965,039
1,101,290
Weighted
average
exercise
price (£)
3.98
14.78
7.54
2.56
5.96
2.61
Number of
share
options
3,679,280
273,385
(139,042)
(915,512)
2,898,111
1,107,336
Weighted
average
exercise
price (£)
3.01
12.26
3.65
2.58
3.98
2.59
Since the Company’s Admission, the market value of the Company’s shares at each option grant date has been taken to be the closing mid-
market price of the shares on the day prior to issuance. Prior to Admission, the market value of the Company’s shares was derived from the
market value of similar companies, and by taking into account transactions with shareholders during the relevant period. The Share Valuation
Office of HMRC has confirmed in correspondence that in respect of options granted prior to Admission, the exercise price was not less than the
market value of the Company’s shares at each option grant date.
For exercises during the period, the weighted average share price at the date of exercise was £18.19 (2019: £11.88).
In determining the fair value of the share options granted during the period, the Black-Scholes option pricing model was used with the following inputs:
Weighted average share price
Weighted average exercise price
Expected volatility
Weighted expected life – years
Weighted average risk-free interest rate
Expected dividend yield
29 November
2020
1 December
2019
£14.67
£14.78
0.34
3.00
0.0%
0.0%
£12.26
£12.26
0.34
3.00
0.4%
0.0%
The expected volatility was determined by considering the historical performance of the Company’s shares. The expected life used in the
model has been adjusted, based on Management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural
considerations. All share awards under the ESOS are equity-settled, apart from employer’s NIC due on unapproved ESOS awards, which are
treated as cash-settled.
Total unapproved options
Total options
429,250
1,965,039
610,918
2,898,111
252 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Notes to the Consolidated Financial Statements
Continued
4.10 Share options and other equity instruments continued
The weighted average remaining contractual lives for outstanding share options under the ESOS are as follows:
29 November 2020
1 December 2019
Weighted
average
remaining
contractual
life
(years)
Exercise
price (£)
Number of
share options
Exercise price
(£)
Number of
share options
Weighted
average
remaining
contractual
life
(years)
0.85
1.03
1.05
1.28
1.65
1.89
2.55
2.56
2.59
2.70
2.92
3.02
3.27
3.36
3.77
4.39
4.46
4.84
5.10
5.68
10.45
11.37
12.40
14.47
20.72
25.08
9,353
33,548
98,928
47,380
–
3,835
20,768
471,542
21,737
160,049
55,296
20,071
1,543
4,128
60,745
8,296
11,909
69,279
2,883
340,867
39,047
34,990
222,042
218,696
3,960
4,147
1,965,039
1.6
1.2
1.3
2.3
–
0.6
0.2
6.3
5.6
5.3
6.7
2.6
3.7
3.7
4.3
4.6
4.6
3.3
3.2
7.3
7.7
8.7
8.7
9.3
9.7
9.5
6.3
0.85
1.03
1.05
1.28
1.65
1.89
2.55
2.56
2.59
2.70
2.92
3.02
3.27
3.36
3.77
4.39
4.46
4.84
5.10
5.68
10.45
11.37
12.40
–
–
–
11,003
49,031
193,251
68,782
75,439
5,317
45,066
1,082,658
35,611
259,749
95,715
39,186
1,975
5,328
95,276
13,736
16,972
111,960
4,998
371,416
47,280
36,667
231,695
–
–
–
2,898,111
2.6
2.2
2.3
3.3
0.6
1.6
1.2
7.1
6.6
6.2
7.7
3.6
4.7
4.7
5.2
5.6
5.1
4.2
4.2
8.2
8.7
9.7
9.7
–
–
–
6.4
Total options
(b) JSOS
The JSOS is an executive incentive scheme which was introduced to incentivise and retain the Executive Directors and senior managers of
the Group (“the Participants”). It is a share ownership scheme under which the Participants and Estera Trust (Jersey) Limited, Trustee of the
Employee Benefit Trust (“the Trustee”), held at the reporting date separate beneficial interests in 1,341,549 (2019: 1,604,915) ordinary shares,
which represents 0.2% (2019: 0.2%) of the issued share capital of the Company. Of these shares, 695,210 (2019: 735,557) are held by the
Employee Benefit Trust on an unallocated basis.
Nature of interests
Interests take the form of a restricted interest in ordinary shares of the Company (“an Interest”). An Interest permits a Participant to benefit
from the increase (if any) in the value of a number of ordinary shares of the Company (“the Shares”) over specified threshold amounts. In order
to acquire an Interest, a Participant must enter into a joint share ownership agreement with the Trustee, under which the Participant and the
Trustee jointly acquire the Shares and agree that once all vesting conditions have been satisfied, the Participant is awarded a specific number of
Shares equivalent to the benefit achieved, or at their discretion, when the Shares are sold, the Participant has a right to receive a proportion of
the sale proceeds insofar as the value of the Shares exceeds the threshold amount.
254 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Notes to the Consolidated Financial Statements
Continued
4.10 Share options and other equity instruments continued
The weighted average remaining contractual lives for outstanding share options under the ESOS are as follows:
29 November 2020
1 December 2019
Weighted
average
remaining
contractual
Weighted
average
remaining
contractual
life
(years)
Exercise
Number of
price (£)
share options
life
Exercise price
Number of
(years)
(£)
share options
0.85
1.03
1.05
1.28
1.65
1.89
2.55
2.56
2.59
2.70
2.92
3.02
3.27
3.36
3.77
4.39
4.46
4.84
5.10
5.68
10.45
11.37
12.40
14.47
20.72
25.08
9,353
33,548
98,928
47,380
–
3,835
20,768
471,542
21,737
160,049
55,296
20,071
1,543
4,128
60,745
8,296
11,909
69,279
2,883
340,867
39,047
34,990
222,042
218,696
3,960
4,147
1,965,039
1.6
1.2
1.3
2.3
–
0.6
0.2
6.3
5.6
5.3
6.7
2.6
3.7
3.7
4.3
4.6
4.6
3.3
3.2
7.3
7.7
8.7
8.7
9.3
9.7
9.5
6.3
0.85
1.03
1.05
1.28
1.65
1.89
2.55
2.56
2.59
2.70
2.92
3.02
3.27
3.36
3.77
4.39
4.46
4.84
5.10
5.68
10.45
11.37
12.40
–
–
–
11,003
49,031
193,251
68,782
75,439
5,317
45,066
1,082,658
35,611
259,749
95,715
39,186
1,975
5,328
95,276
13,736
16,972
111,960
4,998
371,416
47,280
36,667
231,695
–
–
–
2,898,111
2.6
2.2
2.3
3.3
0.6
1.6
1.2
7.1
6.6
6.2
7.7
3.6
4.7
4.7
5.2
5.6
5.1
4.2
4.2
8.2
8.7
9.7
9.7
–
–
–
6.4
Total options
(b) JSOS
The JSOS is an executive incentive scheme which was introduced to incentivise and retain the Executive Directors and senior managers of
the Group (“the Participants”). It is a share ownership scheme under which the Participants and Estera Trust (Jersey) Limited, Trustee of the
Employee Benefit Trust (“the Trustee”), held at the reporting date separate beneficial interests in 1,341,549 (2019: 1,604,915) ordinary shares,
which represents 0.2% (2019: 0.2%) of the issued share capital of the Company. Of these shares, 695,210 (2019: 735,557) are held by the
Employee Benefit Trust on an unallocated basis.
Nature of interests
Interests take the form of a restricted interest in ordinary shares of the Company (“an Interest”). An Interest permits a Participant to benefit
from the increase (if any) in the value of a number of ordinary shares of the Company (“the Shares”) over specified threshold amounts. In order
to acquire an Interest, a Participant must enter into a joint share ownership agreement with the Trustee, under which the Participant and the
Trustee jointly acquire the Shares and agree that once all vesting conditions have been satisfied, the Participant is awarded a specific number of
Shares equivalent to the benefit achieved, or at their discretion, when the Shares are sold, the Participant has a right to receive a proportion of
the sale proceeds insofar as the value of the Shares exceeds the threshold amount.
4.10 Share options and other equity instruments continued
Participants
In prior periods, Interests were acquired by the Participants under the first JSOS scheme (“JSOS1”) in 32,476,700 shares at an issue price of £1.50
per share, and under the second JSOS scheme (“JSOS2”) in 3,990,799 shares at an issue price of £1.70 per share. In prior periods, 2,953,675
shares, in which interests of Participants had lapsed, were reallocated to JSOS3. For JSOS1 and JSOS2 there are four tranches, each with their
own hurdle price. For JSOS3 there are two tranches, each with their own hurdle price.
JSOS1
JSOS2
Tranche
Vesting date
1 (2011)
2 (2012)
3 (2013)
4 (2014)
January 2011
January 2012
January 2013
January 2014
Hurdle
value
£1.73
£1.91
£2.08
£2.28
%
of issue
price Tranche
Vesting
date
Hurdle
value
115% 1 (2012) June 2012
127% 2 (2013) June 2013
139% 3 (2014) June 2014
152% 4 (2015) June 2015
£1.96
£2.15
£2.36
£2.59
%
of issue
price Tranche Vesting date
115% 1 (2013)
127% 2 (2014)
–
139%
–
152%
January 2013
January 2014
–
–
JSOS3
Hurdle
value
£1.70
£1.80
–
–
%
of issue
price
230% – 265%
244% – 280%
–
–
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
For JSOS1, Participants were required to purchase their Interest for 2.0% of the issue price. For JSOS2, the price ranged from 7.1% to 10.8%, and
for JSOS3, 1.5% to 1.7% of the share price at the date of issue. When an Interest vests, the Trustee transfers shares to the Participant of equal
value to the Participant’s Interest, or the shares are sold and the Trustee pays the balance (i.e. the difference between the sale proceeds (less
expenses) and the hurdle price) to the Participant.
Vesting conditions
The vesting of the Interests granted to Participants is subject to a time vesting condition, as detailed above.
The fair value of the Interests awarded under the JSOS was determined using the Black–Scholes option pricing model. In accordance with IFRS
2 “Share-based Payment”, market-based vesting conditions and the share price target conditions in the JSOS have been taken into account in
establishing the fair value of the equity instruments granted. Other non-market or performance-related conditions were not taken into account
in establishing the fair value of equity instruments granted; instead, these non-market vesting conditions are taken into account by adjusting the
number of equity instruments included in the measurement of the transaction amount so that the amount recognised for services received as
consideration for the equity instruments granted is based on the number of equity instruments that will eventually vest.
In determining the fair value of the Interests granted, the Black–Scholes option pricing model was used with the following inputs:
JSOS1
Weighted average share price
Weighted average exercise price
Expected volatility
Weighted expected life – years
Risk-free interest rate
Expected dividend yield
JSOS2
Weighted average share price
Weighted average exercise price
Expected volatility
Weighted expected life – years
Risk-free interest rate
Expected dividend yield
Tranche 1
Tranche 2
Tranche 3
Tranche 4
£1.35
£1.73
0.25
0.91
3.5%
0.0%
£1.35
£1.91
0.25
1.91
3.5%
0.0%
£1.35
£2.08
0.25
2.91
3.5%
0.0%
£1.35
£2.28
0.25
3.91
3.5%
0.0%
Tranche 1
Tranche 2
Tranche 3
Tranche 4
£1.70
£1.96
0.25
1.0
3.5%
0.0%
£1.70
£2.15
0.25
2.0
3.5%
0.0%
£1.70
£2.36
0.25
3.0
3.5%
0.0%
£1.70
£2.59
0.25
4.0
3.5%
0.0%
Expected volatility was determined by comparing the Company with a basket of other companies of a similar size and/or which operate in a
similar industry.
As the Interests in JSOS3 were reallocated from lapsed Interests in JSOS1 and JSOS2, the fair value of those Interests had been calculated in
prior periods using the inputs disclosed in the tables above.
254 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Notes to the Consolidated Financial Statements
Continued
4.10 Share options and other equity instruments continued
Details of the movement of the number of allocated Interests in shares during the current and prior periods are as follows:
Outstanding at beginning of period
Exercised during period
Outstanding at end of period
Exercisable at end of period
52 weeks ended
29 November 2020
52 weeks ended
1 December 2019
Number of
interests in
shares
869,358
(223,019)
646,339
646,339
Weighted
average
exercise
price (£)
2.25
2.22
2.26
2.26
Number of
interests in
shares
1,922,414
(1,053,056)
869,358
869,358
Weighted
average
exercise
price (£)
2.25
2.24
2.25
2.25
(c) Sharesave Scheme
In 2010, the Group launched the Sharesave Scheme (“SAYE”). This is an HMRC-approved scheme and is open to any employee of the Group
at the launch date. Under the scheme, members save a fixed amount each month for three years. At the end of the three-year period they are
entitled to use these savings to buy shares of the Company at 90.0% of the market value at launch date.
At the reporting date, employees of the Company’s subsidiaries held 3,787 (2019: 2,610) contracts in respect of options over 3,049,851 (2019:
6,723,223) shares. Details of the movement of the number of Sharesave options outstanding during the current and prior periods are as follows:
Outstanding at beginning of period
Granted during period
Forfeited during period
Exercised during period
Outstanding at end of period
Exercisable at end of period
52 weeks ended
29 November 2020
52 weeks ended
1 December 2019
Number of
share options
6,723,223
–
(225,751)
(3,447,621)
3,049,851
2,130
Weighted
average
exercise
price (£)
4.97
–
8.23
2.31
7.73
2.28
Number of
share options
5,396,601
1,629,893
(272,599)
(30,672)
6,723,223
3,248,787
Weighted
average
exercise
price (£)
3.09
11.17
5.04
2.81
4.97
2.28
(d) Long-Term Incentive Plan
The Group operates equity-settled long-term incentive plans (“LTIP”), as approved by the Remuneration Committee and shareholders, under
which shares are awarded conditionally to Executive Directors and certain senior managers. The number of awards issued is calculated based
on a percentage of the participants’ salaries, and will vest at the end of a period of three years from the grant date. The final number and
proportion of awards which will vest depends on achievement of certain performance conditions. For the 2016 LTIP, which vested in the prior
period, there were four equally-weighted performance conditions, which were operational efficiency and capital efficiency metrics relating to
the retail business and the platform business, the Group’s retail business revenue and the Group’s retail business earnings before tax for the
financial year ended 2 December 2018. For both the 2017 LTIP (which vested in the current period) and the 2018 LTIP, there are four equally-
weighted performance conditions based on performance in the 2019 and 2020 financial years respectively, which relate to: the efficiency of the
OSP; the revenue of Ocado Solutions; the revenue of the Group’s retail business and the earnings before interest and tax of the Group’s retail
business.
The number of awards issued, adjusted to reflect the achievement of the performance conditions, will vest during 2021 for the 2018 LTIP, with
the exception of awards issued to the Executive Directors which have a two-year holding period and will be released in 2023. Full vesting will
only, therefore, occur where exceptional performance levels have been achieved, and significant shareholder value created. An award will lapse
if a participant ceases to be employed within the Group before the vesting date.
256 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents In 2010, the Group launched the Sharesave Scheme (“SAYE”). This is an HMRC-approved scheme and is open to any employee of the Group
at the launch date. Under the scheme, members save a fixed amount each month for three years. At the end of the three-year period they are
entitled to use these savings to buy shares of the Company at 90.0% of the market value at launch date.
At the reporting date, employees of the Company’s subsidiaries held 3,787 (2019: 2,610) contracts in respect of options over 3,049,851 (2019:
6,723,223) shares. Details of the movement of the number of Sharesave options outstanding during the current and prior periods are as follows:
52 weeks ended
29 November 2020
52 weeks ended
1 December 2019
Number of
interests in
shares
869,358
(223,019)
646,339
646,339
Weighted
average
exercise
price (£)
2.25
2.22
2.26
2.26
Number of
interests in
shares
1,922,414
(1,053,056)
869,358
869,358
Weighted
average
exercise
price (£)
2.25
2.24
2.25
2.25
52 weeks ended
29 November 2020
52 weeks ended
1 December 2019
Number of
share options
6,723,223
–
(225,751)
(3,447,621)
3,049,851
2,130
Weighted
average
exercise
price (£)
Number of
share options
5,396,601
1,629,893
(272,599)
(30,672)
6,723,223
3,248,787
4.97
–
8.23
2.31
7.73
2.28
Weighted
average
exercise
price (£)
3.09
11.17
5.04
2.81
4.97
2.28
Outstanding at beginning of period
Exercised during period
Outstanding at end of period
Exercisable at end of period
(c) Sharesave Scheme
Outstanding at beginning of period
Granted during period
Forfeited during period
Exercised during period
Outstanding at end of period
Exercisable at end of period
(d) Long-Term Incentive Plan
Notes to the Consolidated Financial Statements
Continued
4.10 Share options and other equity instruments continued
Details of the movement of the number of allocated Interests in shares during the current and prior periods are as follows:
4.10 Share options and other equity instruments continued
Outstanding share awards under the LTIP at the beginning and end of the period can be reconciled as follows:
Outstanding at beginning of period
Forfeited during period
Vested during period
Outstanding at end of period
Exercisable at end of period
52 weeks
ended
29 November
2020
52 weeks
ended
1 December
2019
2,470,271
(896,002)
(760,334)
813,935
–
4,247,037
(1,067,195)
(709,571)
2,470,271
–
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
The Group recognised an expense of £3.5 million (2019: £2.7 million) in the Consolidated Income Statement during the period relating to
these awards. The expectation of meeting the performance criteria, based upon internal budgets and forecasts, was taken into account when
calculating this expense.
(e) Share Incentive Plan
In 2014, the Group introduced the Share Incentive Plan (“SIP”). This HMRC-approved scheme provides all employees, including
Executive Directors, the opportunity to receive and invest in the Company’s shares. All SIP shares are held in a SIP Trust, administered by the
Yorkshire Building Society.
There are two elements to the plan: the Buy As You Earn (“BAYE”) arrangement and the Free Share Award. Under the BAYE, participants can
purchase shares of the Company (“Partnership Shares”) each month using contributions from pre-tax pay, subject to an upper limit. For every
seven shares purchased, the Company gifts the participant one free share (a “Matching Share”).
Under the Free Shares Award, shares are given to eligible employees, as a proportion of their annual base pay, subject to a maximum. Eligible
employees are those with six months’ service at the grant date.
For Partnership Shares, eligible employees are those with three months’ service. Partnership shares can be withdrawn from the Plan Trust at any
time, but Matching Shares and Free Shares are subject to a three-year holding period, during which continuous employment within the Group is
required. The Matching Shares and Free Shares will be forfeited if any corresponding Partnership Shares are removed from the Plan Trust within
this three-year period, or if the participant leaves the Group.
Outstanding shares held under the SIP at the beginning and end of the period can be reconciled as follows:
The Group operates equity-settled long-term incentive plans (“LTIP”), as approved by the Remuneration Committee and shareholders, under
which shares are awarded conditionally to Executive Directors and certain senior managers. The number of awards issued is calculated based
on a percentage of the participants’ salaries, and will vest at the end of a period of three years from the grant date. The final number and
proportion of awards which will vest depends on achievement of certain performance conditions. For the 2016 LTIP, which vested in the prior
period, there were four equally-weighted performance conditions, which were operational efficiency and capital efficiency metrics relating to
the retail business and the platform business, the Group’s retail business revenue and the Group’s retail business earnings before tax for the
financial year ended 2 December 2018. For both the 2017 LTIP (which vested in the current period) and the 2018 LTIP, there are four equally-
weighted performance conditions based on performance in the 2019 and 2020 financial years respectively, which relate to: the efficiency of the
OSP; the revenue of Ocado Solutions; the revenue of the Group’s retail business and the earnings before interest and tax of the Group’s retail
business.
The number of awards issued, adjusted to reflect the achievement of the performance conditions, will vest during 2021 for the 2018 LTIP, with
the exception of awards issued to the Executive Directors which have a two-year holding period and will be released in 2023. Full vesting will
only, therefore, occur where exceptional performance levels have been achieved, and significant shareholder value created. An award will lapse
if a participant ceases to be employed within the Group before the vesting date.
Outstanding at 1 December 2019
Awarded during period
Forfeited during period
Released during period
Outstanding at 29 November 2020
Unrestricted at 29 November 2020
Outstanding at 2 December 2018
Awarded during period
Forfeited during period
Released during period
Outstanding at 1 December 2019
Unrestricted at 1 December 2019
Partnership
Shares
Matching
Shares
390,549
54,526
–
(74,325)
370,750
370,750
55,464
7,555
(3,765)
(6,695)
52,559
32,500
Partnership
Shares
Matching
Shares
403,253
65,222
–
(77,926)
390,549
390,549
57,311
9,142
(5,624)
(5,365)
55,464
23,537
Free
Shares
1,367,686
117,468
(87,660)
(271,346)
1,126,148
654,148
Free
Shares
1,637,458
208,597
(143,175)
(335,194)
1,367,686
457,688
Total
1,813,699
179,549
(91,425)
(352,366)
1,549,457
1,057,398
Total
2,098,022
282,961
(148,799)
(418,485)
1,813,699
871,774
During the period, the Group recognised an expense of £1.5 million (2019: £1.4 million) relating to these awards. The expectation of meeting the
holding period was taken into account when calculating this expense.
256 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Notes to the Consolidated Financial Statements
Continued
4.10 Share options and other equity instruments continued
(f) Value Creation Plan
Following the approval of shareholders on 1 May 2019, the Group launched the Value Creation Plan (“VCP”).
Nature of conditional award
Under the VCP, participants are granted a conditional award giving the potential right to earn nil-cost options based on the absolute total
shareholder return generated over the VCP period. The award gives participants the opportunity to share in a proportion of the total value
created for shareholders above a hurdle (“Threshold Total Shareholder Return”) at the end of each Plan Year (“Measurement Date”) over the five-
year VCP period.
At each Measurement Date, up to 2.75% of the value created above the hurdle will be “banked” in the form of share awards which will be
released in line with the vesting schedule. The Initial Price for Tranche 1 is the average share price over the 30-day period prior to the 2019
Annual General Meeting at which the approval of shareholders was sought for the Plan (i.e. £13.97). The Initial Price for Tranche 2 is the share
price used for the issue in June 2020 of 33.5 million ordinary shares (“the June 2020 Capital Raise”) (i.e. £19.60). The Initial Price is independent
of the share price on the date of grant. Participants will receive the right at the end of each year of the performance period to share awards with
a value representing the level of the Company’s total shareholder return (“Measurement Total Shareholder Return”) above the Threshold Total
Shareholder Return at the relevant Measurement Date. The share price used at the Measurement Date will be the 30-day average following the
announcement of the Group’s results for the relevant financial year, plus any dividends in respect of the Plan.
The Threshold Total Shareholder Return or hurdle which has to be exceeded before share awards can be earned by Participants is the higher of:
• The highest previous Measurement Total Shareholder Return; and
• The Initial Price compounded by 10.0% per annum.
If the value created at the end of a given Plan Year does not exceed the Threshold Total Shareholder return, nothing will accrue in that year under
the VCP.
At the first Measurement Date in March 2020, no nil-cost options were banked. The next Measurement Date will be 30 days after the publication
of these financial statements.
Vesting conditions
The vesting schedule provides that 50.0% of the cumulative number of share awards will vest following the third Measurement Date, 50.0% of
the cumulative balance following the fourth Measurement Date, with 100.0% of the cumulative number of share awards vesting following the
fifth Measurement Date. At each vesting date, vesting of awards is subject to:
a. A minimum TSR of 10.0% CAGR being maintained:
• Where the TSR has been achieved at the third Measurement Date, 50.0% of the cumulative balance will vest. If the TSR has not been
achieved no share awards will vest at this point but they will not lapse;
• Where the TSR has been achieved at the fourth Measurement Date, 50.0% of the cumulative balance will vest. If the TSR has not been
achieved no share awards will vest at this point but they will not lapse;
• Where the TSR has been achieved at the fifth Measurement Date, 100.0% of the cumulative balance will vest. If the TSR has not been
achieved no share awards will vest at this point and the remaining cumulative balance will lapse;
b. Any shares vesting cannot be sold prior to the fifth anniversary of the date of the implementation of the VCP;
c. An annual cap on vesting of £20.0 million for the CEO and a proportionate limit for other participants:
•
In the event that in any year vesting as described above would exceed the annual cap, any share awards above the cap will be rolled
forward and allowed to vest in subsequent years provided the cap is not exceeded in those years, until the VCP is fully paid-out or after
five years after the fifth Measurement Date when any unvested share awards will automatically vest. Share awards rolled forward will not
be subject to further underpins, performance or service conditions.
258 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
4.10 Share options and other equity instruments continued
(f) Value Creation Plan
Following the approval of shareholders on 1 May 2019, the Group launched the Value Creation Plan (“VCP”).
Nature of conditional award
year VCP period.
Under the VCP, participants are granted a conditional award giving the potential right to earn nil-cost options based on the absolute total
shareholder return generated over the VCP period. The award gives participants the opportunity to share in a proportion of the total value
created for shareholders above a hurdle (“Threshold Total Shareholder Return”) at the end of each Plan Year (“Measurement Date”) over the five-
At each Measurement Date, up to 2.75% of the value created above the hurdle will be “banked” in the form of share awards which will be
released in line with the vesting schedule. The Initial Price for Tranche 1 is the average share price over the 30-day period prior to the 2019
Annual General Meeting at which the approval of shareholders was sought for the Plan (i.e. £13.97). The Initial Price for Tranche 2 is the share
price used for the issue in June 2020 of 33.5 million ordinary shares (“the June 2020 Capital Raise”) (i.e. £19.60). The Initial Price is independent
of the share price on the date of grant. Participants will receive the right at the end of each year of the performance period to share awards with
a value representing the level of the Company’s total shareholder return (“Measurement Total Shareholder Return”) above the Threshold Total
Shareholder Return at the relevant Measurement Date. The share price used at the Measurement Date will be the 30-day average following the
announcement of the Group’s results for the relevant financial year, plus any dividends in respect of the Plan.
The Threshold Total Shareholder Return or hurdle which has to be exceeded before share awards can be earned by Participants is the higher of:
• The highest previous Measurement Total Shareholder Return; and
• The Initial Price compounded by 10.0% per annum.
the VCP.
of these financial statements.
Vesting conditions
At the first Measurement Date in March 2020, no nil-cost options were banked. The next Measurement Date will be 30 days after the publication
The vesting schedule provides that 50.0% of the cumulative number of share awards will vest following the third Measurement Date, 50.0% of
the cumulative balance following the fourth Measurement Date, with 100.0% of the cumulative number of share awards vesting following the
fifth Measurement Date. At each vesting date, vesting of awards is subject to:
a. A minimum TSR of 10.0% CAGR being maintained:
• Where the TSR has been achieved at the third Measurement Date, 50.0% of the cumulative balance will vest. If the TSR has not been
achieved no share awards will vest at this point but they will not lapse;
• Where the TSR has been achieved at the fourth Measurement Date, 50.0% of the cumulative balance will vest. If the TSR has not been
achieved no share awards will vest at this point but they will not lapse;
• Where the TSR has been achieved at the fifth Measurement Date, 100.0% of the cumulative balance will vest. If the TSR has not been
achieved no share awards will vest at this point and the remaining cumulative balance will lapse;
b. Any shares vesting cannot be sold prior to the fifth anniversary of the date of the implementation of the VCP;
c. An annual cap on vesting of £20.0 million for the CEO and a proportionate limit for other participants:
•
In the event that in any year vesting as described above would exceed the annual cap, any share awards above the cap will be rolled
forward and allowed to vest in subsequent years provided the cap is not exceeded in those years, until the VCP is fully paid-out or after
five years after the fifth Measurement Date when any unvested share awards will automatically vest. Share awards rolled forward will not
be subject to further underpins, performance or service conditions.
4.10 Share options and other equity instruments continued
Valuation of awards
During the prior period, 2.55% of a possible 2.75% was awarded in total to participants, of which 0.25% lapsed during the period. In the current
period, a further 0.10% was awarded to participants, and Tranche 2 was created following the June 2020 Capital Raise. As such, Tranche 1 is
based on the total number of shares in issue, less the number of shares under Tranche 2. Tranche 2 is based on the total number of shares
issued in the June 2020 Capital Raise.
The fair value of awards granted under the VCP to date is £55.6 million (2019: £46.9 million) spread over the five-year period. The Group
recognised an expense of £12.7 million (2019: £5.7 million) in the Consolidated Income Statement during the period relating to these awards. A
further expense of £6.6 million (2019: £nil) was recognised for employer’s NIC payable on nil-cost options, valued independently using a Monte
Carlo model. In determining the fair value of the VCP awards granted, a Monte Carlo model was used with the following inputs:
Date of grant
Portion of VCP granted
Share price at grant
Initial price
Exercise price
Expected volatility
Expected life from date of grant – years
Risk-free interest rate
Expected dividend yield
Tranche 1
Tranche 1
Tranche 1
Tranche 1
Tranche 2
31 May 2019
1.95%(1)
£11.95
£13.97
£0.00
0.34
2.78/3.78/4.78
0.61%
0.00%
23 October 2019
0.05%
£12.84
£13.97
£0.00
0.34
2.39/3.39/4.39
0.44%
0.00%
8 November 2019
0.30%
£11.90
£13.97
£0.00
0.34
2.34/3.34/4.34
0.50%
0.00%
9 September 2020
0.10%
£23.02
£13.97
£0.00
0.34
1.50/2.50/3.50
(0.03%)
0.00%
9 September 2020
2.40%
£23.02
£19.60
£0.00
0.34
1.50/2.50/3.50
(0.03%)
0.00%
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If the value created at the end of a given Plan Year does not exceed the Threshold Total Shareholder return, nothing will accrue in that year under
(1) The original grant was 2.20%, of which 0.25% lapsed in the period.
Linked JOE awards
Under the terms of the VCP, at the time a VCP award is made, the participant may acquire a linked jointly-owned equity (“JOE”) award with
Estera Trust (Jersey) Limited, the Trustee of the Employee Benefit Trust. The JOE award permits participants to benefit from the increase (if
any) in the value of a number of ordinary shares above a hurdle of 10.0% per annum cumulative annual growth rate (which reflects the VCP
Threshold Total Shareholder Return) over a time period matching the performance period of the VCP. Participants acquired JOE awards over a
total of 9,245,601 shares. The value of these JOE awards (if any) will be applied to deliver part of the total value of the participants’ VCP awards
on realisation of the VCP awards.
JOE award participants pay an initial cost for the JOE awards, which is not repayable to them even if no value is delivered under the JOE awards.
(g) Ocado Technology Award
During the prior period, the Group granted shares to a senior employee of Ocado Technology. These were conditional on continued
employment within the Group. The vesting of the award was split into tranches, with vestings taking place over five years. During the current
period, the award was cancelled and replaced at the same date with an award under the RSP scheme (see note 4.10 (k).) This has been
accounted for as a modification, with the incremental fair value recognised in the Consolidated Income Statement during the period being £nil.
Outstanding share awards under the Ocado Technology Award at the beginning and end of the period can be reconciled as follows:
Outstanding at beginning of period
Granted during period
Forfeited during period
Vested during period
Outstanding at end of period
Exercisable at end of period
52 weeks
ended
29 November
2020
52 weeks
ended
1 December
2020
205,475
–
(165,475)
(40,000)
–
–
–
235,475
(30,000)
205,475
–
The Group did not recognise an expense (2019: £1.0 million) in the Consolidated Income Statement during the period relating to this award.
258 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
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Notes to the Consolidated Financial Statements
Continued
4.10 Share options and other equity instruments continued
(h) Long-Term Operating Plan
In 2019, the Group granted shares to selected employees. The number of awards issued was calculated based on a percentage of the participants’
salaries. The awards will vest in three equal tranches over three years. Upon vesting, each tranche is subject to an additional two-year holding period
after which the shares will be released to the participants. The vesting of each tranche is conditional on continued employment within the Group and
subject to the Company’s share price exceeding a predetermined minimum.
Outstanding share awards under the Long-Term Operating Plan at the beginning and end of the period can be reconciled as follows:
Outstanding at beginning of period
Granted during period
Vested during period
Outstanding at end of period
Exercisable at end of period
52 weeks
ended
29 November
2020
52 weeks
ended
1 December
2020
166,856
12,959
(55,619)
124,196
–
–
166,856
–
166,856
–
The Group recognised an expense of £1.3 million (2019: £0.4 million) in the Consolidated Income Statement during the period in relation to this award.
(i) Annual Incentive Plan
During the period, the Group granted awards under the Annual Incentive Plan (“AIP) in the form of nil-cost options over shares of the Company
to the Executive Directors and selected members of senior management. The award was based on the following four performance conditions
and weightings: Retail revenue (20%), Retail EBITDA (20%), number of International Solutions commitments (40%) and individual objectives
(20%). Actual performance was assessed over a 12-month performance period ended on 1 December 2019 against threshold and maximum
conditions. The maximum opportunity was based on a participant-specific percentage of salary on the date of payment.
The AIP shares will vest after three years (i.e. in 2023), but are subject to a further two-year holding period for the Executive Directors only, during
which time they cannot be sold, and so will be released in 2025.
An award will lapse if a participant ceases to be employed by the Group before the vesting date.
Outstanding share awards under the AIP at the beginning and end of the period can be reconciled as follows:
Outstanding at beginning of period
Granted during period
Outstanding at end of period
Exercisable at end of period
52 weeks
ended
29 November
2020
–
150,035
150,035
–
The Group recognised an expense of £1.7 million (2019: £nil) in the Consolidated Income Statement during the period relating to this award.
The expense for AIP awards is recognised at the start of the relevant performance period. The expense recognised in the current period relates to the
above 2019 AIP awards, and the 2020 AIP awards which will be granted in the next period. The performance period for the 2020 AIP is the 52 weeks
ended 29 November 2020. The expectation of hitting the 2020 AIP performance targets was taken into account when calculating this expense.
260 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
4.10 Share options and other equity instruments continued
(h) Long-Term Operating Plan
In 2019, the Group granted shares to selected employees. The number of awards issued was calculated based on a percentage of the participants’
salaries. The awards will vest in three equal tranches over three years. Upon vesting, each tranche is subject to an additional two-year holding period
after which the shares will be released to the participants. The vesting of each tranche is conditional on continued employment within the Group and
subject to the Company’s share price exceeding a predetermined minimum.
Outstanding share awards under the Long-Term Operating Plan at the beginning and end of the period can be reconciled as follows:
The Group recognised an expense of £1.3 million (2019: £0.4 million) in the Consolidated Income Statement during the period in relation to this award.
During the period, the Group granted awards under the Annual Incentive Plan (“AIP) in the form of nil-cost options over shares of the Company
to the Executive Directors and selected members of senior management. The award was based on the following four performance conditions
and weightings: Retail revenue (20%), Retail EBITDA (20%), number of International Solutions commitments (40%) and individual objectives
(20%). Actual performance was assessed over a 12-month performance period ended on 1 December 2019 against threshold and maximum
conditions. The maximum opportunity was based on a participant-specific percentage of salary on the date of payment.
The AIP shares will vest after three years (i.e. in 2023), but are subject to a further two-year holding period for the Executive Directors only, during
which time they cannot be sold, and so will be released in 2025.
An award will lapse if a participant ceases to be employed by the Group before the vesting date.
Outstanding share awards under the AIP at the beginning and end of the period can be reconciled as follows:
Outstanding at beginning of period
Granted during period
Vested during period
Outstanding at end of period
Exercisable at end of period
(i) Annual Incentive Plan
Outstanding at beginning of period
Granted during period
Outstanding at end of period
Exercisable at end of period
52 weeks
ended
52 weeks
ended
29 November
1 December
2020
166,856
12,959
(55,619)
124,196
–
2020
166,856
166,856
–
–
–
52 weeks
ended
29 November
2020
150,035
150,035
–
–
The Group recognised an expense of £1.7 million (2019: £nil) in the Consolidated Income Statement during the period relating to this award.
The expense for AIP awards is recognised at the start of the relevant performance period. The expense recognised in the current period relates to the
above 2019 AIP awards, and the 2020 AIP awards which will be granted in the next period. The performance period for the 2020 AIP is the 52 weeks
ended 29 November 2020. The expectation of hitting the 2020 AIP performance targets was taken into account when calculating this expense.
4.10 Share options and other equity instruments continued
(j) Employee Share Purchase Plan
During the period, the Group launched the Employee Share Purchase Plan (“SPP”). The SPP is a non-United Kingdom “all-employee” share
purchase plan under which eligible employees are awarded options (“SPP Options”) over shares of the Company. SPP Options are granted at the
beginning of a specific offering period, which will not normally exceed 24 months. Participants enrol in the SPP by authorising payroll deductions
from their salary during the relevant offering period.
At the end of an offering period, employees are entitled to use these savings to buy shares of the Company at 90.0% of the market value on the date
of grant or at the end of the offering period, whichever is lower.
At the reporting date, employees of the Group held 531 (2019: nil) contracts in respect of granted SPP Options.
There were no SPP Options exercisable as at 29 November 2020.
(k) Restricted Share Plan
During the period, the Group established the Restricted Share Plan (“RSP”). Under the plan, participants will either be granted nil-cost options over
shares of the Company, or a conditional award of shares. It is proposed that the RSP be used for two purposes:
a. To allow all-employee free share awards outside the United Kingdom, similar to the Group’s Share Incentive Plan; and
b. To give the Group the flexibility to make discretionary share awards, particularly to aid recruitment.
RSP awards may be made subject to performance conditions and may be subject to an additional holding period following vesting. As a general
rule, an unvested RSP award will lapse immediately upon a participant ceasing to hold office or employment within the Group.
During the period, the Group granted a conditional RSP award to a senior employee. The vesting of the award is split into two tranches, one which
vested in the period, and the other which will vest in 2022.
Outstanding share awards under the RSP at the beginning and end of the period can be reconciled as follows:
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Outstanding at beginning of period
Granted during period
Vested during period
Outstanding at end of period
Exercisable at end of period
52 weeks
ended
29 November
2020
–
65,000
(50,000)
15,000
–
The Group recognised an expense of £1.4 million (2019: £nil) in the Consolidated Income Statement during the period relating to this award.
Other RSP awards granted during the period are deemed immaterial, so have not been disclosed separately.
260 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Notes to the Consolidated Financial Statements
Continued
4.11 Capital management
The Board’s objective is to maintain an appropriate balance of debt and equity financing to enable the Group to continue as a going concern, to
sustain future development of the business, and to maximise returns to shareholders and benefits to other stakeholders.
The Board closely manages trading capital, defined as net assets, plus net cash A . Net cash A is calculated as cash and cash equivalents, plus
other treasury deposits, less gross debt (borrowings and lease liabilities as shown on the Consolidated Balance Sheet). The Group’s net assets at
the reporting date were £1,837.2 million (2019: £1,057.3 million) ,and it had net cash A of £671.6 million (2019: £142.4 million).
The main areas of capital management revolve around working capital and compliance with externally-imposed financial covenants. The Group’s
objectives when managing capital are to safeguard its ability to continue as a going concern, and to allow the Group to grow, whilst operating with
sufficient headroom within its covenants. The components of working capital management include monitoring inventory turnover, age of inventory,
age of receivables, receivables days, payables days, Balance Sheet re-forecasting, period projected profit or loss, weekly cash flow forecasts, and
daily cash balances. Major investment decisions are based on reviewing the expected future cash flows, and all major capital expenditure requires
approval by the Board. There were no changes in the Group’s approach to capital management during the period.
The Group issued £600.0 million of senior unsecured convertible bonds in December 2019 and a further £350.0 million in June 2020 to fund
growth. The £100.0 million revolving credit facility was terminated in October 2020; it was not utilised in the current or prior period.
The Group reviews its financing arrangements regularly. Throughout the period, the Group has complied with all covenants imposed by lenders.
Given the Group’s commitment to expand the business and the investment required to complete future CFCs, the declaration and payment of a
dividend is not part of the short-term capital management strategy of the Group.
At the reporting date, the Group’s undrawn facilities, cash and cash equivalents and other treasury deposits were as follows:
Total facilities available
Facilities drawn down
Undrawn facilities
Other treasury deposits
Cash and cash equivalents
Undrawn facilities, cash and cash equivalents and other treasury deposits
29 November
2020
£m
Notes
1,656.6
(1,583.1)
73.5
370.0
1,706.8
2,150.3
3.7
3.11
1 December
2019
(restated)(1)
£m
741.7
(608.2)
133.5
110.0
640.6
884.1
(1) £110.0 million (2018: £153.5 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019. See note 1.7 for more information.
A
See Alternative Performance Measures on pages 293 and 294.
262 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
4.11 Capital management
The Board’s objective is to maintain an appropriate balance of debt and equity financing to enable the Group to continue as a going concern, to
sustain future development of the business, and to maximise returns to shareholders and benefits to other stakeholders.
The Board closely manages trading capital, defined as net assets, plus net cash A . Net cash A is calculated as cash and cash equivalents, plus
other treasury deposits, less gross debt (borrowings and lease liabilities as shown on the Consolidated Balance Sheet). The Group’s net assets at
the reporting date were £1,837.2 million (2019: £1,057.3 million) ,and it had net cash A of £671.6 million (2019: £142.4 million).
The main areas of capital management revolve around working capital and compliance with externally-imposed financial covenants. The Group’s
objectives when managing capital are to safeguard its ability to continue as a going concern, and to allow the Group to grow, whilst operating with
sufficient headroom within its covenants. The components of working capital management include monitoring inventory turnover, age of inventory,
age of receivables, receivables days, payables days, Balance Sheet re-forecasting, period projected profit or loss, weekly cash flow forecasts, and
daily cash balances. Major investment decisions are based on reviewing the expected future cash flows, and all major capital expenditure requires
approval by the Board. There were no changes in the Group’s approach to capital management during the period.
The Group issued £600.0 million of senior unsecured convertible bonds in December 2019 and a further £350.0 million in June 2020 to fund
growth. The £100.0 million revolving credit facility was terminated in October 2020; it was not utilised in the current or prior period.
The Group reviews its financing arrangements regularly. Throughout the period, the Group has complied with all covenants imposed by lenders.
Given the Group’s commitment to expand the business and the investment required to complete future CFCs, the declaration and payment of a
dividend is not part of the short-term capital management strategy of the Group.
At the reporting date, the Group’s undrawn facilities, cash and cash equivalents and other treasury deposits were as follows:
Total facilities available
Facilities drawn down
Undrawn facilities
Other treasury deposits
Cash and cash equivalents
Undrawn facilities, cash and cash equivalents and other treasury deposits
(1) £110.0 million (2018: £153.5 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019. See note 1.7 for more information.
29 November
1 December
2019
(restated)(1)
Notes
3.7
3.11
2020
£m
1,656.6
(1,583.1)
73.5
370.0
1,706.8
2,150.3
£m
741.7
(608.2)
133.5
110.0
640.6
884.1
F
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–
G
R
O
U
P
Section 5 – Other notes
5.1 Related undertakings
In accordance with Section 409 of the Companies Act 2006, a full list of related undertakings, their countries of incorporation, and the effective percentage of
equity owned at the reporting date is disclosed below. All undertakings are indirectly owned by the Company unless otherwise stated.
Share class
C shares
Ordinary shares
Ordinary shares
Preference shares
Ordinary shares
“B” shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
% of share
capital held
33.3%
68.4%
68.4%
20.8%
100.0%
50.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
50.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
25.0%
100.0%
100.0%
Name
Infinite Acres Holding B.V.
JFC Hydroponics Ltd
Jones Food Company Limited
Karakuri Limited
Last Mile Technology Limited
MHE JVCo Limited
Ocado Bulgaria EOOD
Ocado Canada Holdings Inc.†
Ocado Central Services Limited
Ocado Finco 1 Limited†
Ocado Finco 2 Limited†
Ocado Holdings Limited†
Ocado Information Technology Limited
Ocado Innovation Limited†
Ocado Operating Limited
Ocado Polska Sp. z o.o.
Ocado Retail Limited
Ocado Solutions Australia Pty Limited
Ocado Solutions Canada Inc.
Ocado Solutions France SAS
Ocado Solutions Japan K.K.
Ocado Solutions Limited†
Ocado Solutions Sweden AB
Ocado Solutions (US) ProCo LLC
Ocado Solutions USA Inc.
Ocado Spain S.L.U.
Ocado Sweden AB
Ocado US Holdings Inc.†
Ocado US Holdings Sub 1 Inc.
Ocado US Holdings Sub 2 LLC
Ocado Ventures Holdings Limited†
Ocado Ventures (80 Acres) Limited
Ocado Ventures (Infinite Acres) Limited
Ocado Ventures (Inkbit) Limited
Ocado Ventures (JFC) Limited
Ocado Ventures (Karakuri) Limited
Ocado Ventures (Myrmex) Limited
Oxford US LLC
Paneltex Limited
Paws & Purrs Limited
Speciality Stores Limited
† Interest held directly by Ocado Group plc.
Country of incorporation
Netherlands(1)
United Kingdom(2)
United Kingdom(2)
United Kingdom(3)
United Kingdom(4)
United Kingdom(4)
Bulgaria(5)
Canada(6)
United Kingdom(4)
United Kingdom(4)
United Kingdom(4)
United Kingdom(4)
Ireland(7)
United Kingdom(4)
United Kingdom(4)
Poland(8)
United Kingdom(9)
Australia(10)
Canada(11)
France(12)
Japan(13)
United Kingdom(4)
Sweden(14)
United States of America(15)
United States of America(15)
Spain(16)
Sweden(17)
United States of America(15)
United States of America(15)
United States of America(15)
United Kingdom(4)
United Kingdom(4)
United Kingdom(4)
United Kingdom(4)
United Kingdom(4)
United Kingdom(4)
United Kingdom(4)
United States of America(18)
United Kingdom(19)
United Kingdom(9)
United Kingdom(9)
Principal activity
Holding company
Non-trading company
Vertical farming
Robotics
Non-trading company
Leasing
Technology
Holding company
Business services
Financing
Financing
Holding company
Non-trading company
Technology
Logistics and distribution
Technology
Retail
Business services
Business services
Business services
Business services
Business services
Business services
Business services
Business services
Technology
Technology
Holding company
Holding company
Holding company
Holding company
Non-trading company
Holding company
Holding company
Holding company
Holding company
Holding company
Non-trading company
Manufacturing
Non-trading company
Retail
The registered offices of the above companies are as follows:
(1) Oude Delft 128, 2611 CG Delft, Netherlands
(2) Phase 2 Celsius Parc, Cupola Way, Scunthorpe, England, DN15 9YJ
(3) 14 Amherst Avenue, London, England, W13 8NQ
(4) Buildings One & Two Trident Place, Mosquito Way, Hatfield, Hertfordshire, United Kingdom, AL10 9UL
(5) 7th Floor, 13 Henrik Ibsen Street, Lozenets District, Sofia 1407, Bulgaria
(6) Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC, V6C 2X8, Canada
(7) 2 Grand Canal Square, Grand Canal Harbour, Dublin, Ireland
(8) High5ive Building, Pawia 21st, 31-154, Kraków, Poland
(9) Apollo Court 2 Bishop Square, Hatfield Business Park, Hatfield, Hertfordshire, United Kingdom, AL10 9EX
(10) Level 9, 63 Exhibition Street, Melbourne, VIC 3000, Australia
(11) TMF Canada Inc, Suite 900, Purdy’s Wharf Tower One, 1959 Upper Water Street, Halifax, N.S., B3J 3N2, Canada
(12) TMF Pôle, 3-5 Rue Saint-Georges, 75009 Paris, France
(13) Tokyo Club Building 11F, 3-2-6 Kasumigaseki, Chiyoda-ku, Tokyo, Japan
(14) TMF Sweden, Sergels Torg 12, Stockholm, Sweden
(15) 251 Little Falls Drive, New Castle, Wilmington, DE, 19808, United States of America
(16) Av. Josep Tarradellas 38, Planta 8a, 08029 Barcelona, Spain
(17) Drottning Kristinas Väg 53, 114 28 Stockholm, Sweden
(18) 1209 Orange Street, Wilmington, Delaware 19801, United States of America
(19) Paneltex House, Somerden Road, Hull, HU9 5PE, United Kingdom
A
See Alternative Performance Measures on pages 293 and 294.
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Notes to the Consolidated Financial Statements
Continued
5.1 Related undertakings continued
In accordance with the exemption under Section 479A of the Companies Act 2006, the standalone financial statements for a subsidiary, Paws &
Purrs Limited (company number: 07538307), will not be audited for the period, but are included in the Group’s consolidated financial statements
for the period.
The Group owns 50.0% of the equity share capital of Ocado Retail Limited (“Ocado Retail”). However, Management has determined that the
Group controls Ocado Retail. This is on the basis that the Group has certain tie-breaking rights in relation to any deadlocks which may arise
in respect of the approval of Ocado Retail’s business plan and budget and the appointment or removal of the chief executive officer of Ocado
Retail.
The Group has effective control over the financial and operating activities of the Ocado Cell in Atlas Insurance PCC Limited, an insurance
company incorporated in Malta and, therefore, consolidates the Ocado Cell in its financial statements in accordance with IFRS 10 “Consolidated
Financial Statements”. The Group uses the Ocado Cell to provide self-insurance for its vehicle fleet and public and product liability claims.
5.2 Non-controlling interests
Accounting policies
Non-controlling interests are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
Non-controlling interests
Non-controlling interests hold a 50.0% interest in Ocado Retail Limited (“Ocado Retail”) and a 31.6% interest in Jones Food Company Limited
(“Jones Food Company”).
In December 2019, the Group increased its stake in Jones Food Company, reducing non-controlling interests from 35.9% to 31.6%.
The completion statement relating to the part-disposal of Ocado Retail in August 2019 was not finalised until February 2020, after the financial
statements for the prior period had been issued. An adjustment was recognised in the current period to increase net assets attributable to non-
controlling interests at the date of disposal by £5.2 million.
The table below provides summarised financial information of Ocado Retail and Jones Food Company. The information disclosed reconciles
the amounts presented in the financial statements of the relevant companies (adjusted for differences in fair values on acquisition) with the non-
controlling interests’ share of those amounts.
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets at end of period
Non-controlling interests at end of period
Revenue
Profit/(loss) and total comprehensive income/(expense) for period
Share of total comprehensive income/(expense) attributable to non-controlling interests
Net cash flow from/(used in) operating activities
Net cash flow used in investing activities
Net cash flow from financing activities
Net increase in cash and cash equivalents
No dividends were paid to non-controlling interests during the current or prior period.
52 weeks ended 29 November 2020
Ocado Retail
£m
Jones Food
Company
£m
314.2
518.5
(460.1)
(232.7)
139.9
70.0
2,188.6
114.3
57.1
204.4
(93.8)
12.8
123.4
5.3
0.9
(1.5)
(0.2)
4.5
1.4
–
(2.4)
(0.7)
(1.8)
(0.2)
2.8
0.8
Total
£m
319.5
519.4
(461.6)
(232.9)
144.4
71.4
2,188.6
111.9
56.4
202.6
(94.0)
15.6
124.2
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Back to contents In accordance with the exemption under Section 479A of the Companies Act 2006, the standalone financial statements for a subsidiary, Paws &
Purrs Limited (company number: 07538307), will not be audited for the period, but are included in the Group’s consolidated financial statements
5.3 Commitments
Capital commitments
Contracts placed for future capital expenditure but not provided for in the financial statements are as follows:
Land and buildings
Property, plant and equipment
Capital commitments
29 November
2020
£m
1 December
2019
£m
6.9
321.8
328.7
1.5
92.1
93.6
Of the total capital expenditure committed at the end of the period, £288.5 million (2019: £72.5 million) relates to new CFCs, £2.5 million (2019:
£9.5 million) to existing CFCs, £1.0 million (2019: £3.3 million) to fleet costs and £36.4 million (2019: £1.3 million) to technology projects.
Lease commitments
The Group has a number of short-term leases and leases of low-value items. The payments relating to these leases are recognised as expenses in
the Consolidated Income Statement on a straight-line basis over the lease terms (see note 4.1.)
At the reporting date, the ageing profile of future aggregate minimum lease payments under non-cancellable operating leases is as follows:
Due within one year
Due in more than one year
Lease commitments
29 November
2020
£m
1 December
2019
£m
0.2
–
0.2
0.2
–
0.2
5.4 Related party transactions
Key management personnel
Only the Executive and Non-Executive Directors are recognised as being key management personnel. It is the Board which has responsibility for
planning, directing and controlling the activities of the Group. The aggregate emoluments of key management personnel are as follows:
Salaries and other short-term employee benefits
Share-based payments
Aggregate emoluments
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
5.7
17.7
23.4
4.7
14.7
19.4
Further information on the remuneration of Directors and Directors’ interests in ordinary shares of the Company is disclosed in the Directors’
Remuneration Report on pages 140 to 177.
Other related party transactions with key management personnel made during the period relating to the purchase of professional services
amounted to £nil (2019: £5,000). All transactions were on an arm’s length basis. At the reporting date, no amounts (2019: £nil) were owed by key
management personnel to the Group. During the period, there were no other material transactions or balances between the Group and its key
management personnel or members of their close family.
Notes to the Consolidated Financial Statements
Continued
5.1 Related undertakings continued
for the period.
Retail.
5.2 Non-controlling interests
Accounting policies
Non-controlling interests
(“Jones Food Company”).
The Group owns 50.0% of the equity share capital of Ocado Retail Limited (“Ocado Retail”). However, Management has determined that the
Group controls Ocado Retail. This is on the basis that the Group has certain tie-breaking rights in relation to any deadlocks which may arise
in respect of the approval of Ocado Retail’s business plan and budget and the appointment or removal of the chief executive officer of Ocado
The Group has effective control over the financial and operating activities of the Ocado Cell in Atlas Insurance PCC Limited, an insurance
company incorporated in Malta and, therefore, consolidates the Ocado Cell in its financial statements in accordance with IFRS 10 “Consolidated
Financial Statements”. The Group uses the Ocado Cell to provide self-insurance for its vehicle fleet and public and product liability claims.
Non-controlling interests are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
Non-controlling interests hold a 50.0% interest in Ocado Retail Limited (“Ocado Retail”) and a 31.6% interest in Jones Food Company Limited
In December 2019, the Group increased its stake in Jones Food Company, reducing non-controlling interests from 35.9% to 31.6%.
The completion statement relating to the part-disposal of Ocado Retail in August 2019 was not finalised until February 2020, after the financial
statements for the prior period had been issued. An adjustment was recognised in the current period to increase net assets attributable to non-
controlling interests at the date of disposal by £5.2 million.
The table below provides summarised financial information of Ocado Retail and Jones Food Company. The information disclosed reconciles
the amounts presented in the financial statements of the relevant companies (adjusted for differences in fair values on acquisition) with the non-
controlling interests’ share of those amounts.
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets at end of period
Non-controlling interests at end of period
Revenue
Net cash flow from/(used in) operating activities
Net cash flow used in investing activities
Net cash flow from financing activities
Net increase in cash and cash equivalents
Profit/(loss) and total comprehensive income/(expense) for period
Share of total comprehensive income/(expense) attributable to non-controlling interests
No dividends were paid to non-controlling interests during the current or prior period.
52 weeks ended 29 November 2020
Ocado Retail
Jones Food
Company
£m
314.2
518.5
(460.1)
(232.7)
139.9
70.0
2,188.6
114.3
57.1
204.4
(93.8)
12.8
123.4
£m
5.3
0.9
(1.5)
(0.2)
4.5
1.4
–
(2.4)
(0.7)
(1.8)
(0.2)
2.8
0.8
Total
£m
319.5
519.4
(461.6)
(232.9)
144.4
71.4
2,188.6
111.9
56.4
202.6
(94.0)
15.6
124.2
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
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Notes to the Consolidated Financial Statements
Continued
5.4 Related party transactions continued
Joint ventures
MHE JVCo Limited
The following transactions were carried out with MHE JVCo Limited (“MHE JVCo”), a company incorporated in England and Wales in which the
Group holds a 50.0% interest:
Dividend received from MHE JVCo
Supplier invoices paid on behalf of MHE JVCo
Capital element of lease liability instalments paid to MHE JVCo
Interest element of lease liability instalments accrued or paid to MHE JVCo
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
7.7
2.3
14.9
3.0
15.6
4.2
24.6
3.7
During the period, the Group incurred lease instalments (including interest) of £18.0 million (2019: £29.6 million) to MHE JVCo.
Of the £18.0 million, £9.0 million (2019: £9.0 million) was recovered directly from Morrisons in the form of other income, and £7.7 million (2019:
£15.6 million) was received from MHE JVCo by way of a dividend. Of the remaining £1.3 million, £nil (2019: £1.2 million) represents the capital
element of the lease liability instalments due to MHE JVCo, and £1.3 million (2019: £3.7 million) interest incurred on the lease liabilities due to
MHE JVCo.
Included within trade and other receivables is a balance of £0.6 million (2019: £0.3 million) due from MHE JVCo. £0.6 million (2019: £0.3 million)
of this relates to capital recharges.
Included within trade and other payables is a balance of £1.8 million (2019: £1.8 million) due to MHE JVCo.
Included within lease liabilities is a balance of £49.7 million (2019: £64.0 million) due to MHE JVCo.
Infinite Acres Holding B.V.
During the period, the Group loaned $12.0 million to Infinite Acres Holding B.V. (“Infinite Acres”), a company incorporated in the Netherlands in
which the Group holds a 33.3% interest. The loan was recognised within other financial assets, and its carrying amount was £9.3 million (2019:
£nil) at the reporting date. £0.3 million (2019: £nil) of interest income was recognised within finance income during the period. For more details
on the Group’s relationship with Infinite Acres, see note 3.5. For more details on the terms of the loan, see note 3.7.
Associate
Karakuri Limited
During the period, the Group loaned £1.7 million to Karakuri Limited (“Karakuri”), a company incorporated in England and Wales in which the
Group holds a 20.8% interest. The loan was recognised within other financial assets, and its carrying amount was £1.7 million (2019: £nil) at the
reporting date. £17,000 (2019: £nil) of interest income was recognised within finance income during the period. For more details on the Group’s
relationship with Karakuri, see note 3.6. For more details on the terms of the loan, see note 3.7.
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5.4 Related party transactions continued
Continued
Joint ventures
MHE JVCo Limited
Group holds a 50.0% interest:
Dividend received from MHE JVCo
Supplier invoices paid on behalf of MHE JVCo
Capital element of lease liability instalments paid to MHE JVCo
Interest element of lease liability instalments accrued or paid to MHE JVCo
The following transactions were carried out with MHE JVCo Limited (“MHE JVCo”), a company incorporated in England and Wales in which the
5.4 Related party transactions continued
Unlisted equity investments
Paneltex Limited
The following transactions were carried out with Paneltex Limited (“Paneltex”), a company incorporated in England and Wales in which the
Group holds a 25.0% interest. For more details on the Group’s relationship with Paneltex, see note 3.7.
52 weeks
ended
52 weeks
ended
29 November
1 December
2020
£m
7.7
2.3
14.9
3.0
2019
£m
15.6
4.2
24.6
3.7
Purchase of goods
– Plant and machinery
– Consumables
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
–
0.4
0.7
0.6
During the period, the Group incurred lease instalments (including interest) of £18.0 million (2019: £29.6 million) to MHE JVCo.
Indirectly, through some of the Group’s leasing counterparties, the Group purchased motor vehicles from Paneltex, worth £10.9 million (2019:
£9.1 million).
Of the £18.0 million, £9.0 million (2019: £9.0 million) was recovered directly from Morrisons in the form of other income, and £7.7 million (2019:
Included within trade and other payables are no amounts (2019: £23,000) due to Paneltex.
£15.6 million) was received from MHE JVCo by way of a dividend. Of the remaining £1.3 million, £nil (2019: £1.2 million) represents the capital
element of the lease liability instalments due to MHE JVCo, and £1.3 million (2019: £3.7 million) interest incurred on the lease liabilities due to
No other transactions that require disclosure under IAS 24 “Related Party Disclosures” have occurred during the period.
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
G
R
O
U
P
MHE JVCo.
of this relates to capital recharges.
Included within trade and other receivables is a balance of £0.6 million (2019: £0.3 million) due from MHE JVCo. £0.6 million (2019: £0.3 million)
Included within trade and other payables is a balance of £1.8 million (2019: £1.8 million) due to MHE JVCo.
Included within lease liabilities is a balance of £49.7 million (2019: £64.0 million) due to MHE JVCo.
Infinite Acres Holding B.V.
During the period, the Group loaned $12.0 million to Infinite Acres Holding B.V. (“Infinite Acres”), a company incorporated in the Netherlands in
which the Group holds a 33.3% interest. The loan was recognised within other financial assets, and its carrying amount was £9.3 million (2019:
£nil) at the reporting date. £0.3 million (2019: £nil) of interest income was recognised within finance income during the period. For more details
on the Group’s relationship with Infinite Acres, see note 3.5. For more details on the terms of the loan, see note 3.7.
Associate
Karakuri Limited
During the period, the Group loaned £1.7 million to Karakuri Limited (“Karakuri”), a company incorporated in England and Wales in which the
Group holds a 20.8% interest. The loan was recognised within other financial assets, and its carrying amount was £1.7 million (2019: £nil) at the
reporting date. £17,000 (2019: £nil) of interest income was recognised within finance income during the period. For more details on the Group’s
relationship with Karakuri, see note 3.6. For more details on the terms of the loan, see note 3.7.
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Notes to the Consolidated Financial Statements
Continued
5.5 Post-Balance Sheet events
Acquisition
On 2 November 2020, the Group announced that it had agreed to acquire the entire share capital of two companies, Kindred Systems Inc.
(“Kindred Systems”) and Haddington Dynamics Inc. (“Haddington Dynamics”). The acquisition of Kindred Systems was completed on 15
December 2020 for consideration of $260.3 million, following the satisfactory completion of closing conditions, including United States
regulatory approvals and employee retention. The acquisition of Haddington Dynamics was completed on 21 December 2020 for consideration
of $25.1 million.
The consideration paid for Kindred Systems comprised $256.8 million of cash paid on completion, and deferred cash of $3.5 million, payable on
the third anniversary of the acquisition. The consideration paid for Haddington Dynamics comprised $7.8 million of cash paid on completion,
and 0.6 million ordinary shares of Ocado Group plc issued on completion.
Acquisition-related costs of £3.5 million, including legal and professional fees, have been recognised in the current period within administrative
expenses in the Consolidated Income Statement.
Given the size, complexity and close proximity of these acquisitions to the date of approval of the financial statements, the initial calculations of
the fair values of the assets and liabilities acquired have not yet been completed, and no value can be disclosed for goodwill.
Disposal
On 7 January 2021, Ocado Retail Limited announced that it had agreed to sell the entire share capital of Speciality Stores Limited, its pets
business trading as Fetch, to Paws Holdings Limited. The disposal was completed on 31 January 2021.
Litigation
On 1 October 2020, AutoStore Technology AS (“AutoStore”), a Norwegian company owned by the United States private equity firm Thomas
H. Lee Partners, L.P., filed patent infringement claims against the Group in the High Court in England, the United States International Trade
Commission, and the United States District Court for the Eastern District of Virginia.
The Group initially learned of the filing of these claims through the media, and has been very clear that it does not believe it has infringed any
valid rights of AutoStore.
AutoStore subsequently applied to the United Kingdom Intellectual Property Office claiming ownership of several of the Group’s patents relating
to elements of the OSP system.
The Group is confident in the merits of its defences and in the integrity of its existing portfolio of IP, together with the disciplined approach taken
to building its capabilities over the last 20 years. It is taking appropriate action to defend against these claims and to protect its own intellectual
property rights.
The Group has subsequently brought two separate proceedings against AutoStore in the United States; the first a patent infringement claim; the
second an antitrust claim. In the antitrust claim, the Group has alleged, based on the evidence available, that four of the five AutoStore patents
on which AutoStore has based its case were procured fraudulently from the United States Patent and Trademark Office.
On 21 January 2021, proceedings by AutoStore and another party to declare invalid the Ocado’s European patent for its Single Space Bot (part of
the OSP system) was rejected by the European Patent Office, and the patent was declared to be novel, inventive and valid.
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Back to contents Notes to the Consolidated Financial Statements
Continued
5.5 Post-Balance Sheet events
Acquisition
On 2 November 2020, the Group announced that it had agreed to acquire the entire share capital of two companies, Kindred Systems Inc.
(“Kindred Systems”) and Haddington Dynamics Inc. (“Haddington Dynamics”). The acquisition of Kindred Systems was completed on 15
December 2020 for consideration of $260.3 million, following the satisfactory completion of closing conditions, including United States
regulatory approvals and employee retention. The acquisition of Haddington Dynamics was completed on 21 December 2020 for consideration
of $25.1 million.
The consideration paid for Kindred Systems comprised $256.8 million of cash paid on completion, and deferred cash of $3.5 million, payable on
the third anniversary of the acquisition. The consideration paid for Haddington Dynamics comprised $7.8 million of cash paid on completion,
and 0.6 million ordinary shares of Ocado Group plc issued on completion.
Acquisition-related costs of £3.5 million, including legal and professional fees, have been recognised in the current period within administrative
expenses in the Consolidated Income Statement.
Given the size, complexity and close proximity of these acquisitions to the date of approval of the financial statements, the initial calculations of
the fair values of the assets and liabilities acquired have not yet been completed, and no value can be disclosed for goodwill.
On 7 January 2021, Ocado Retail Limited announced that it had agreed to sell the entire share capital of Speciality Stores Limited, its pets
business trading as Fetch, to Paws Holdings Limited. The disposal was completed on 31 January 2021.
On 1 October 2020, AutoStore Technology AS (“AutoStore”), a Norwegian company owned by the United States private equity firm Thomas
H. Lee Partners, L.P., filed patent infringement claims against the Group in the High Court in England, the United States International Trade
Commission, and the United States District Court for the Eastern District of Virginia.
The Group initially learned of the filing of these claims through the media, and has been very clear that it does not believe it has infringed any
AutoStore subsequently applied to the United Kingdom Intellectual Property Office claiming ownership of several of the Group’s patents relating
The Group is confident in the merits of its defences and in the integrity of its existing portfolio of IP, together with the disciplined approach taken
to building its capabilities over the last 20 years. It is taking appropriate action to defend against these claims and to protect its own intellectual
The Group has subsequently brought two separate proceedings against AutoStore in the United States; the first a patent infringement claim; the
second an antitrust claim. In the antitrust claim, the Group has alleged, based on the evidence available, that four of the five AutoStore patents
on which AutoStore has based its case were procured fraudulently from the United States Patent and Trademark Office.
On 21 January 2021, proceedings by AutoStore and another party to declare invalid the Ocado’s European patent for its Single Space Bot (part of
the OSP system) was rejected by the European Patent Office, and the patent was declared to be novel, inventive and valid.
Disposal
Litigation
valid rights of AutoStore.
to elements of the OSP system.
property rights.
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30029 9 February 2021 9:09 am V1 BFinancials.Ocado-Annual-Report-2020-Financials.indd 270Ocado-Annual-Report-2020-Financials.indd 27009/02/2021 09:16:0409/02/2021 09:16:04Back to contents 30029 9 February 2021 9:09 am V1 BFinancials.Ocado-Annual-Report-2020-Financials.indd 270Ocado-Annual-Report-2020-Financials.indd 27009/02/2021 09:16:0409/02/2021 09:16:0430029 9 February 2021 9:09 am V1 BCompanyFinancials.ContentsCompany Balance Sheet272Company Statement of Changes in Equity273Company Statement of Cash Flows274Notes to the Company Financial Statements275Ocado-Annual-Report-2020-Financials.indd 271Ocado-Annual-Report-2020-Financials.indd 27109/02/2021 09:16:0409/02/2021 09:16:04Back to contents Company Balance Sheet
as at 29 November 2020
Non-current assets
Investments
Current assets
Other receivables
Other financial assets
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Provisions
Net current assets
Non-current liabilities
Provisions
Borrowings
Net assets
Equity
Share capital
Share premium
Convertible bonds reserve
Retained earnings
Total equity
29 November
2020
£m
Notes
3.1
3.3
3.2
3.4
3.5
3.6
3.6
4.1
4.8
4.8
581.3
581.3
2,266.4
174.4
158.2
2,599.0
3,180.3
(185.1)
(2.2)
(187.3)
2,411.7
(7.3)
(997.2)
(1,004.5)
1,988.5
15.0
1,361.6
184.5
427.4
1,988.5
1 December
2019
2 December
2018
(restated)(1)
(restated)(1)
£m
549.8
549.8
980.7
50.0
54.3
1,085.0
1,634.8
(277.3)
(4.6)
(281.9)
803.1
(0.6)
(219.5)
(220.1)
1,132.8
14.2
705.3
–
413.3
1,132.8
£m
525.7
525.7
690.2
55.0
93.7
838.9
1,364.6
(17.3)
(7.6)
(24.9)
814.0
(2.3)
(244.3)
(246.6)
1,093.1
14.0
589.9
–
489.2
1,093.1
(1) £50.0 million (2018: £55.0 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019, and £406.9 million (2019: £153.5 million) of amounts due from subsidiaries from cash and cash equivalents to other receivables. See note
1.4 for more information.
The Company’s loss for the period was £8.2 million (2019: £8.5 million).
The notes on pages 275 to 287 form part of these financial statements.
The Company financial statements on pages 272 to 287 were authorised for issue by the Board of Directors and signed on its behalf by:
Tim Steiner
Chief Executive Officer
Neill Abrams
Group General Counsel and Company Secretary
9 February 2021
Ocado Group plc
Company registration: 07098618 (England and Wales)
272 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Company Balance Sheet
as at 29 November 2020
Company Statement of Changes in Equity
for the 52 weeks ended 29 November 2020
29 November
1 December
2 December
(restated)(1)
(restated)(1)
Notes
3.1
3.3
3.2
3.4
3.5
3.6
3.6
4.1
4.8
4.8
2020
£m
581.3
581.3
2,266.4
174.4
158.2
2,599.0
3,180.3
(185.1)
(2.2)
(187.3)
2,411.7
(7.3)
(997.2)
(1,004.5)
1,988.5
15.0
1,361.6
184.5
427.4
1,988.5
2019
£m
549.8
549.8
980.7
50.0
54.3
1,085.0
1,634.8
(277.3)
(4.6)
(281.9)
803.1
(0.6)
(219.5)
(220.1)
1,132.8
14.2
705.3
–
413.3
1,132.8
2018
£m
525.7
525.7
690.2
55.0
93.7
838.9
1,364.6
(17.3)
(7.6)
(24.9)
814.0
(2.3)
(244.3)
(246.6)
1,093.1
14.0
589.9
–
489.2
1,093.1
Balance at 2 December 2018
Loss for the period
Total comprehensive expense for the period
Transactions with owners
– Issue of ordinary shares
– Allotted in respect of share option schemes
– Cash settlement of Growth Incentive Plan
– Share-based payments charge
Total transactions with owners
Balance at 1 December 2019
Loss for the period
Total comprehensive expense for the period
Transactions with owners
– Issue of ordinary shares
– Allotted in respect of share option schemes
– Share-based payments charge
– Issue of convertible bonds
Total transactions with owners
Balance at 29 November 2020
Share
capital
£m
Share
premium
£m
Convertible
bonds
reserve
£m
Retained
earnings
£m
Notes
4.8
4.8
4.9
4.8
4.8
4.9
14.0
–
–
0.2
–
–
–
0.2
14.2
–
–
0.7
0.1
–
–
0.8
15.0
589.9
–
–
113.0
2.4
–
–
115.4
705.3
–
–
645.6
10.7
–
–
656.3
1,361.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
184.5
184.5
184.5
489.2
(8.5)
(8.5)
–
–
(80.2)
12.8
(67.4)
413.3
(8.2)
(8.2)
(0.1)
–
22.4
–
22.3
427.4
F
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Total
£m
1,093.1
(8.5)
(8.5)
113.2
2.4
(80.2)
12.8
48.2
1,132.8
(8.2)
(8.2)
646.2
10.8
22.4
184.5
863.9
1,988.5
The notes on pages 275 to 287 form part of these financial statements.
Non-current assets
Investments
Current assets
Other receivables
Other financial assets
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Provisions
Net current assets
Non-current liabilities
Provisions
Borrowings
Net assets
Equity
Share capital
Share premium
Convertible bonds reserve
Retained earnings
Total equity
1.4 for more information.
Tim Steiner
Chief Executive Officer
Neill Abrams
Group General Counsel and Company Secretary
9 February 2021
Ocado Group plc
Company registration: 07098618 (England and Wales)
(1) £50.0 million (2018: £55.0 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019, and £406.9 million (2019: £153.5 million) of amounts due from subsidiaries from cash and cash equivalents to other receivables. See note
The Company’s loss for the period was £8.2 million (2019: £8.5 million).
The notes on pages 275 to 287 form part of these financial statements.
The Company financial statements on pages 272 to 287 were authorised for issue by the Board of Directors and signed on its behalf by:
272 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Company Statement of Cash Flows
for the 52 weeks ended 29 November 2020
Cash flows from operating activities
Loss before tax
Adjustments for
– Gain on disposal of subsidiaries
– Net finance cost
– Movement of provisions
– Share-based payments charge
Changes in working capital
– Movement of other receivables
– Movement of trade and other payables
Cash generated from operating activities
Interest paid
Net cash flow used in operating activities
Cash flows from investing activities
Purchase of other treasury deposits
Proceeds from other treasury deposits
Interest received
Net cash flow (used in)/from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary share capital, net of transaction costs
Proceeds from allotment of share options
Proceeds from Value Creation Plan – jointly-owned equity awards
Proceeds from issue of convertible bonds, net of issue costs
Repayment of borrowings
Payment of financing fees
Net cash flow from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of changes in foreign exchange rates
Cash and cash equivalents at end of period
52 weeks
ended
29 November
2020
£m
Notes
(8.2)
(24.4)
32.2
(0.6)
–
(1,285.8)
(92.2)
(1,379.0)
(11.0)
(1,390.0)
(150.0)
50.0
3.8
(96.2)
646.2
10.8
–
935.5
–
–
1,592.5
106.3
54.3
(2.4)
158.2
3.4
52 weeks
ended
1 December
2019
(restated)(1)
£m
(8.5)
–
6.2
(4.7)
12.8
(290.5)
260.0
(24.7)
(1.3)
(26.0)
(50.0)
55.0
2.7
7.7
0.8
2.4
1.3
–
(25.0)
(0.6)
(21.1)
(39.4)
93.7
–
54.3
(1) £50.0 million (2018: £55.0 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019, and £406.9 million (2019: £153.5 million) of amounts due from subsidiaries from cash and cash equivalents to other receivables. See note
1.4 for more information.
The notes on pages 275 to 287 form part of these financial statements.
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Back to contents Company Statement of Cash Flows
for the 52 weeks ended 29 November 2020
Notes to the Company Financial Statements
Cash flows from operating activities
Loss before tax
Adjustments for
– Gain on disposal of subsidiaries
– Net finance cost
– Movement of provisions
– Share-based payments charge
Changes in working capital
– Movement of other receivables
– Movement of trade and other payables
Cash generated from operating activities
Interest paid
Net cash flow used in operating activities
Cash flows from investing activities
Purchase of other treasury deposits
Proceeds from other treasury deposits
Interest received
Net cash flow (used in)/from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary share capital, net of transaction costs
Proceeds from allotment of share options
Proceeds from Value Creation Plan – jointly-owned equity awards
Proceeds from issue of convertible bonds, net of issue costs
Repayment of borrowings
Payment of financing fees
Net cash flow from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of changes in foreign exchange rates
Cash and cash equivalents at end of period
52 weeks
29 November
ended
1 December
52 weeks
ended
2019
(restated)(1)
£m
Notes
2020
£m
(8.2)
(24.4)
32.2
(0.6)
–
(1,285.8)
(92.2)
(1,379.0)
(11.0)
(1,390.0)
(150.0)
50.0
3.8
(96.2)
646.2
10.8
935.5
–
–
–
1,592.5
106.3
54.3
(2.4)
158.2
(8.5)
–
6.2
(4.7)
12.8
(290.5)
260.0
(24.7)
(1.3)
(26.0)
(50.0)
55.0
2.7
7.7
0.8
2.4
1.3
–
(25.0)
(0.6)
(21.1)
(39.4)
93.7
–
54.3
(1) £50.0 million (2018: £55.0 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019, and £406.9 million (2019: £153.5 million) of amounts due from subsidiaries from cash and cash equivalents to other receivables. See note
1.4 for more information.
The notes on pages 275 to 287 form part of these financial statements.
3.4
Section 1 – Basis of preparation
1.1 General information
Ocado Group plc is incorporated in England and Wales. The Company is the parent and the ultimate parent of the Group. The address of its
registered office is Buildings One & Two Trident Place, Mosquito Way, Hatfield, Hertfordshire, United Kingdom, AL10 9UL. The financial period
represents the 52 weeks ended 29 November 2020. The prior financial period represents the 52 weeks ended 1 December 2019.
1.2 Basis of preparation
The financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of
the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
The financial statements are presented in pounds sterling, rounded to the nearest hundred thousand unless otherwise stated. They have been
prepared under the historical cost convention.
The Directors consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements of the Company.
F
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Exemptions
The Directors have taken advantage of the exemption available under Section 408 of the Companies Act 2006 not to present an Income
Statement or a Statement of Comprehensive Income for the Company alone.
New standards, amendments and interpretations adopted by the Company
No new standards have been adopted by the Company during the period.
The Company has considered the following new standards, interpretations and amendments to published standards that are effective for the
Company for the period beginning 2 December 2019, and concluded either that they are not relevant to the Company or that they would not
have a significant effect on the Company’s financial statements other than on disclosures:
IAS 19
IFRIC 23
Annual Improvements to IFRS Standards
2015–2017 Cycle
Employee Benefits (amendments)
Uncertainty over Income Tax Treatments
Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23
Effective date
1 January 2019
1 January 2019
1 January 2019
New standards, amendments and interpretations not yet adopted by the Company
The following further new standards, interpretations and amendments to published standards and interpretations which are relevant to the
Company have been issued but are not effective for the period beginning 2 December 2019 and have not been adopted early:
IFRS 7, IFRS 9, IAS 39
IAS 1, IAS 8
Various
IFRS 4, IFRS 7, IFRS 9, IFRS 16, IAS 39
Annual Improvements to IFRS Standards
2018–2020 Cycle
IAS 1
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
Definition of Material (Amendments to IAS 1 and IAS 8)
Amendments to References to the Conceptual Framework in IFRS Standards
Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7,
IFRS 4 and IFRS 16)
Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41
Classification of liabilities as Current or non-Current
Effective date
1 January 2020
1 January 2020
1 January 2020
1 January 2021
1 January 2022
1 January 2023
These standards, interpretations and amendments to published standards and interpretations are not expected to have a material effect on the
Company’s financial statements.
Accounting policies
Foreign currency translation
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions
or, where items are remeasured, at the dates of the remeasurements. Foreign exchange gains or losses resulting from the settlement of such
transactions, and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the Income Statement.
Income tax
Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in
equity, in which case the tax is also recognised in other comprehensive income or directly in equity respectively.
Current tax is the expected tax payable on the taxable income for the period, calculated using tax rates enacted by the reporting date.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.
274 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Notes to the Company Financial Statements
Continued
1.3 Critical accounting estimates and assumptions
The preparation of the Company financial statements requires the use of certain judgements, estimates and assumptions that affect the
reported amount of assets, liabilities, income and expenses. Estimates and judgements are evaluated continually, and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Key estimation uncertainties are the key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting
date that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next period.
Significant judgements are those that the Group has made in the process of applying the Group’s accounting policies, and that have the most
significant effect on the amounts recognised in the financial statements.
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the
related actual results. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimates were
based, or as a result of new information or more experience.
Significant accounting policies, key estimation uncertainties, and significant judgements are provided below:
Key estimation uncertainties
Estimate
Area
Amounts due from
subsidiaries
The Company uses estimates in calculating the recoverable amounts of amounts due from its subsidiaries, which it then
uses to assess whether the amounts due are impaired. The Company performed an impairment review as at the reporting
date and concluded that all the amounts due from its subsidiaries were recoverable.
Note
3.3
1.4 Restatement of cash and cash equivalents
IAS 7 “Statement of Cash Flows” defines cash equivalents as being “held for the purpose of meeting short-term cash commitments”. It suggests
that “an investment normally qualifies as a cash and cash equivalent only when it has a short maturity of, say, three months or less from the date
of acquisition”.
At the end of the prior period, the Company disclosed £50.0 million (2018: £55.0 million) of treasury deposits with maturities of more than three
months (but no more than six months) from the date of acquisition as cash and cash equivalents. Subsequently, the comparative figures have
been restated to reflect the reclassification of these balances from cash and cash equivalents to other current financial assets. In addition, cash
equivalents of £406.9 million (2019: £153.5 million) belonging to subsidiaries have been reclassified from cash and cash equivalents to other
receivables.
Only the Company Balance Sheet and Company Statement of Cash Flows are affected as detailed below:
Restatement of Company Balance Sheet as at 1 December 2019
Non-current assets
Current assets
Other receivables
Other financial assets
Cash and cash equivalents
Total assets
Current liabilities
Net current assets
Non-current liabilities
Net assets
Total equity
1 December
2019
(previously
reported)
£m
549.8
Reclassification
£m
1 December
2019
(restated)
£m
–
549.8
573.8
–
511.2
1,085.0
1,634.8
(281.9)
803.1
(220.1)
1,132.8
1,132.8
406.9
50.0
(456.9)
–
–
–
–
–
–
–
980.7
50.0
54.3
1,085.0
1,634.8
(281.9)
803.1
(220.1)
1,132.8
1,132.8
276 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Notes to the Company Financial Statements
Continued
1.3 Critical accounting estimates and assumptions
The preparation of the Company financial statements requires the use of certain judgements, estimates and assumptions that affect the
reported amount of assets, liabilities, income and expenses. Estimates and judgements are evaluated continually, and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Key estimation uncertainties are the key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting
date that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next period.
Significant judgements are those that the Group has made in the process of applying the Group’s accounting policies, and that have the most
significant effect on the amounts recognised in the financial statements.
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the
related actual results. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimates were
based, or as a result of new information or more experience.
Significant accounting policies, key estimation uncertainties, and significant judgements are provided below:
Key estimation uncertainties
Area
Estimate
Amounts due from
The Company uses estimates in calculating the recoverable amounts of amounts due from its subsidiaries, which it then
subsidiaries
uses to assess whether the amounts due are impaired. The Company performed an impairment review as at the reporting
date and concluded that all the amounts due from its subsidiaries were recoverable.
1.4 Restatement of cash and cash equivalents
IAS 7 “Statement of Cash Flows” defines cash equivalents as being “held for the purpose of meeting short-term cash commitments”. It suggests
that “an investment normally qualifies as a cash and cash equivalent only when it has a short maturity of, say, three months or less from the date
Note
3.3
At the end of the prior period, the Company disclosed £50.0 million (2018: £55.0 million) of treasury deposits with maturities of more than three
months (but no more than six months) from the date of acquisition as cash and cash equivalents. Subsequently, the comparative figures have
been restated to reflect the reclassification of these balances from cash and cash equivalents to other current financial assets. In addition, cash
equivalents of £406.9 million (2019: £153.5 million) belonging to subsidiaries have been reclassified from cash and cash equivalents to other
of acquisition”.
receivables.
Only the Company Balance Sheet and Company Statement of Cash Flows are affected as detailed below:
Restatement of Company Balance Sheet as at 1 December 2019
Non-current assets
Current assets
Other receivables
Other financial assets
Cash and cash equivalents
Total assets
Current liabilities
Net current assets
Non-current liabilities
Net assets
Total equity
1 December
2019
(previously
reported)
Reclassification
1 December
2019
(restated)
£m
549.8
573.8
–
511.2
1,085.0
1,634.8
(281.9)
803.1
(220.1)
1,132.8
1,132.8
£m
–
406.9
50.0
(456.9)
–
–
–
–
–
–
–
£m
549.8
980.7
50.0
54.3
1,085.0
1,634.8
(281.9)
803.1
(220.1)
1,132.8
1,132.8
1.4 Restatement of cash and cash equivalents continued
Restatement of Company Balance Sheet as at 2 December 2018
Non-current assets
Current assets
Other receivables
Other financial assets
Cash and cash equivalents
Total assets
Current liabilities
Net current assets
Non-current liabilities
Net assets
Total equity
Restatement of Company Statement of Cash Flows for the 52 weeks ended 1 December 2019
Cash flows from operating activities
Movement of other receivables
Other cash flows from operating activities
Net cash flow from/(used in) operating activities
Cash flows from investing activities
Purchase of other treasury deposits
Proceeds from other treasury deposits
Interest received
Net cash flow from investing activities
Net cash flow used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Restatement of Company Statement of Cash Flows for the 52 weeks ended 2 December 2018
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
C
O
M
P
A
N
Y
2 December
2018
(previously
reported)
£m
Reclassification
£m
2 December
2018
(restated)
£m
525.7
536.7
–
302.2
838.9
1,364.8
(24.9)
814.0
(246.6)
1,093.1
1,093.1
–
153.5
55.0
(208.5)
–
–
–
–
–
–
–
525.7
690.2
55.0
93.7
838.9
1,364.8
(24.9)
814.0
(246.6)
1,093.1
1,093.1
52 weeks
ended
1 December
2019
(previously
reported)
£m
52 weeks
ended
1 December
2019
(restated)
£m
Reclassification
£m
(37.1)
264.5
227.4
–
–
2.7
2.7
(21.1)
209.0
302.2
511.2
(253.4)
–
(253.4)
(50.0)
55.0
–
5.0
–
(248.4)
(208.5)
(456.9)
(290.5)
264.5
(26.0)
(50.0)
55.0
2.7
7.7
(21.1)
(39.4)
93.7
54.3
52 weeks
ended
2 December
2018
(previously
reported)
£m
52 weeks
ended
2 December
2018
(restated)
£m
Reclassification
£m
276 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
Cash flows from operating activities
Movement of other receivables
Other cash flows from operating activities
Net cash flow used in operating activities
Cash flows from investing activities
Purchase of other treasury deposits
Interest received
Net cash flow from/(used in) investing activities
Net cash flow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
(151.0)
4.4
(146.6)
–
1.8
1.8
329.5
184.7
117.5
302.2
(153.5)
–
(153.5)
(55.0)
–
(55.0)
–
(208.5)
–
(208.5)
(304.5)
4.4
(300.1)
(55.0)
1.8
(53.2)
329.5
(23.8)
117.5
93.7
277
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Notes to the Company Financial Statements
Continued
Section 2 – Results for the period
2.1 Loss before tax
Accounting policies
Administrative expenses
Administrative expenses consist of fees for professional services, bank charges and any other costs of an administrative nature.
2.2 Operating results
During the period, the Company obtained audit services from its auditor, Deloitte LLP, amounting to £90,000 (2019: £80,000).
2.3 Employee information
The Company does not incur direct staff costs as the Group’s employees are employed by its subsidiaries.
See note 4.9 for information on share-based payments.
Section 3 – Assets and liabilities
3.1 Investments
Accounting policies
Investments in subsidiaries are carried at cost, less any impairment in value. Where the recoverable amount of an investment is less than its
carrying amount, impairment is recognised. Impairment reviews are undertaken whenever there is indication of impairment, and at least once a
year.
Cost
Contributions to subsidiaries
– Novation of derivative liability in respect of warrants issued by Ocado Limited
– Group share-based payments
Investments
29 November
2020
£m
1 December
2019
£m
476.5
1.1
103.7
581.3
476.5
1.1
72.2
549.8
Investments represent investments in subsidiaries, Ocado Holdings Limited and Ocado Innovation Limited. A list of subsidiaries held by the
Company is disclosed in note 5.1 to the consolidated financial statements.
The Company charges subsidiaries the amounts recognised as share-based payments relating to awards to their employees. These are
recognised as an increase in the investment in relevant subsidiaries in accordance with IFRS 2 “Share-based Payment”. For details of the share-
based payments which have increased the Company’s investments, see note 4.10 to the consolidated financial statements.
During the annual impairment review as at the reporting date, no indicators of impairment were identified.
278 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Section 2 – Results for the period
Continued
2.1 Loss before tax
Accounting policies
Administrative expenses
2.2 Operating results
Administrative expenses consist of fees for professional services, bank charges and any other costs of an administrative nature.
During the period, the Company obtained audit services from its auditor, Deloitte LLP, amounting to £90,000 (2019: £80,000).
2.3 Employee information
The Company does not incur direct staff costs as the Group’s employees are employed by its subsidiaries.
Investments in subsidiaries are carried at cost, less any impairment in value. Where the recoverable amount of an investment is less than its
carrying amount, impairment is recognised. Impairment reviews are undertaken whenever there is indication of impairment, and at least once a
See note 4.9 for information on share-based payments.
Section 3 – Assets and liabilities
3.1 Investments
Accounting policies
year.
Cost
– Novation of derivative liability in respect of warrants issued by Ocado Limited
Contributions to subsidiaries
– Group share-based payments
Investments
Investments represent investments in subsidiaries, Ocado Holdings Limited and Ocado Innovation Limited. A list of subsidiaries held by the
Company is disclosed in note 5.1 to the consolidated financial statements.
The Company charges subsidiaries the amounts recognised as share-based payments relating to awards to their employees. These are
recognised as an increase in the investment in relevant subsidiaries in accordance with IFRS 2 “Share-based Payment”. For details of the share-
based payments which have increased the Company’s investments, see note 4.10 to the consolidated financial statements.
During the annual impairment review as at the reporting date, no indicators of impairment were identified.
3.2 Other financial assets
Accounting policies
Loans due from subsidiaries are not interest-bearing and are recognised initially at their transaction price, and subsequently at amortised cost,
reduced by appropriate provisions for estimated irrecoverable amounts. No security has been granted over loans due from subsidiaries unless
stated otherwise. The loans due from subsidiaries are repayable on demand.
Other treasury deposits
Loans due from subsidiaries
Other financial assets
Disclosed as:
Current
Non-current
29 November
2020
£m
150.0
24.4
174.4
174.4
–
174.4
1 December
2019
(restated)(1)
£m
50.0
–
50.0
50.0
–
50.0
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
C
O
M
P
A
N
Y
29 November
1 December
2020
£m
476.5
1.1
103.7
581.3
2019
£m
476.5
1.1
72.2
549.8
(1) £50.0 million (2018: £55.0 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019. See note 1.4 for more information.
Other treasury deposits
Other treasury deposits are cash deposits with banks with a maturity of more than three months at the date of acquisition. They are classified as
other financial assets rather than cash and cash equivalents since they are not available to meet short-term cash commitments.
3.3 Other receivables
Accounting policies
Other receivables are not interest-bearing and are recognised initially at their transaction price, and subsequently at amortised cost, reduced by
appropriate provisions for estimated irrecoverable amounts. No security has been granted over other receivables unless stated otherwise. The
amounts due from subsidiaries are repayable on demand.
Amounts due from subsidiaries
Other receivables
Other receivables
29 November
2020
£m
2,264.9
1.5
2,266.4
1 December
2019
(restated)(1)
£m
980.0
0.7
980.7
(1) £406.9 million (2018: £153.5 million) of amounts due from subsidiaries have been reclassified from cash and cash equivalents to other receivables as at 1 December 2019. See note 1.4
for more information.
3.4 Cash and cash equivalents
Accounting policies
Cash and cash equivalents comprise cash at bank and in hand, money market funds, and treasury deposits with banks with a maturity of three
months or less at the date of acquisition. Cash and cash equivalents are classified as current assets on the Balance Sheet. The carrying amount
of these assets approximates to their fair value.
Cash at bank and in hand
Short-term treasury deposits
Cash and cash equivalents
29 November
2020
£m
93.2
65.0
158.2
1 December
2019
(restated)(1)
£m
0.3
54.0
54.3
(1) £50.0 million (2018: £55.0 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents
to other financial assets as at 1 December 2019, and £406.9 million (2019: £153.5 million) of amounts due from subsidiary undertakings from cash and cash equivalents to other
receivables. See note 1.4 for more information.
278 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Notes to the Company Financial Statements
Continued
3.5 Trade and other payables
Accounting policies
Trade and other payables are initially recognised at their transaction price, and subsequently at amortised cost, using the effective interest method.
Amounts due to subsidiaries
Accruals and other payables
Trade and other payables
29 November
2020
£m
1 December
2019
£m
12.7
172.4
185.1
270.6
6.7
277.3
3.6 Provisions
Accounting policies
Employee incentive schemes
Provisions for employee incentive schemes relate to HMRC-unapproved equity-settled schemes and the cash-based Long-Term Incentive Plan
(“Cash LTIP”). For all unapproved schemes and the Cash LTIP, the Group is liable to pay employer’s NIC upon allotment of the share awards.
Unapproved schemes are the Executive Share Ownership Scheme (“ESOS”), the Long-Term Incentive Plan (“LTIP”), the Value Creation Plan
(“VCP”), the Long-Term Operating Plan, the Annual Incentive Plan (“AIP”), the Employee Share Purchase Plan (“SPP”) and the Restricted Share
Plan (“RSP”). For more details on these schemes, refer to note 4.10 to the consolidated financial statements.
In 2014, the Company established the Cash LTIP in order to incentivise selected high-performing employees of the Group. At the end of the
three-year vesting period, employees will be paid a cash amount equal to the notional number of awards at the prevailing share price, adjusted
for the achievement of the performance conditions. The Cash LTIP ended during the current period.
Balance at 2 December 2018
Charged/(credited) to Income Statement
– Additional provision
– Unused amounts reversed
Used during period
Balance at 1 December 2019
Charged to Income Statement
– Additional provision
Used during period
Balance at 29 November 2020
Provisions at 29 November 2020 can be analysed as follows:
Current
Non–current
Provisions at 1 December 2019 can be analysed as follows:
Current
Non–current
Employee
incentive
schemes
£m
9.9
11.8
(0.5)
(16.0)
5.2
9.1
(4.8)
9.5
Employee
incentive
schemes
£m
2.2
7.3
9.5
Employee
incentive
schemes
£m
4.6
0.6
5.2
280 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Trade and other payables are initially recognised at their transaction price, and subsequently at amortised cost, using the effective interest method.
29 November
1 December
2020
£m
12.7
172.4
185.1
2019
£m
270.6
6.7
277.3
Continued
3.5 Trade and other payables
Accounting policies
Amounts due to subsidiaries
Accruals and other payables
Trade and other payables
3.6 Provisions
Accounting policies
Employee incentive schemes
Provisions for employee incentive schemes relate to HMRC-unapproved equity-settled schemes and the cash-based Long-Term Incentive Plan
(“Cash LTIP”). For all unapproved schemes and the Cash LTIP, the Group is liable to pay employer’s NIC upon allotment of the share awards.
Unapproved schemes are the Executive Share Ownership Scheme (“ESOS”), the Long-Term Incentive Plan (“LTIP”), the Value Creation Plan
(“VCP”), the Long-Term Operating Plan, the Annual Incentive Plan (“AIP”), the Employee Share Purchase Plan (“SPP”) and the Restricted Share
Plan (“RSP”). For more details on these schemes, refer to note 4.10 to the consolidated financial statements.
3.6 Provisions continued
Employee incentive schemes
The provision consists of the Cash LTIP and employer’s NIC on HMRC-unapproved equity-settled schemes.
The Cash LTIP ended during the period. The provision relates to an award which has already vested which will be settled in cash in 2021. In the
prior period, the provision represented the expected cash payments to participants upon vesting of the awards.
To calculate the employer’s NIC provision, the rate of employer’s NIC is applied to the number of share awards which are expected to
vest, valued with reference to the share price at the reporting date. The number of share awards expected to vest is dependent on various
assumptions which are determined by Management. These comprise participants’ retention rate, the expectation of meeting the performance
criteria, if any, and the liquidity discount. All assumptions are supported by historical trends, and internal financial forecasts, where appropriate.
For the VCP, external valuations have been obtained to determine the fair value of the awards granted (see note 4.10 to the consolidated
financial statements.)
If at any point during the life of each share award, any non-market conditions are subject to change, such as the retention rate or the likelihood
of the performance condition being met, the number of share awards likely to vest will need to be recalculated which will cause the value of the
employer’s NIC provision to change accordingly.
Once the share awards under each of the schemes have vested, the provision will be utilised when they are allocated to participants. Vesting will
occur between 2021 and 2024, and allotment will take place between 2021 and 2029.
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
C
O
M
P
A
N
Y
In 2014, the Company established the Cash LTIP in order to incentivise selected high-performing employees of the Group. At the end of the
three-year vesting period, employees will be paid a cash amount equal to the notional number of awards at the prevailing share price, adjusted
for the achievement of the performance conditions. The Cash LTIP ended during the current period.
Section 4 – Capital structure and financing costs
4.1 Borrowings
Non-current liabilities
Borrowings
Total borrowings
Borrowings at 29 November 2020 can be analysed as follows:
29 November
2020
£m
1 December
2019
£m
997.2
997.2
219.5
219.5
Provisions at 29 November 2020 can be analysed as follows:
Borrowings at 1 December 2019 can be analysed as follows:
Principal amount
£m
225.0
600.0
350.0
Inception
June 2017
December 2019
June 2020
Security
held
Collateral
None
None
Coupon
rate
4.000%
0.875%
0.750%
Instalment
frequency
Biannual
Biannual
Biannual
Final
payment due
June 2024
December 2025
January 2027
Principal amount
£m
225.0
Inception
June 2017
Security
held
Collateral
Coupon
rate
4.000%
Instalment
frequency
Biannual
Final
payment due
June 2024
Carrying amount
at 29 November
2020
£m
220.8
504.2
272.2
Carrying amount
at 1 December
2019
£m
219.5
Balance at 2 December 2018
Charged/(credited) to Income Statement
– Additional provision
– Unused amounts reversed
Used during period
Balance at 1 December 2019
Charged to Income Statement
– Additional provision
Used during period
Balance at 29 November 2020
Provisions at 1 December 2019 can be analysed as follows:
Current
Non–current
Current
Non–current
Employee
incentive
schemes
£m
9.9
11.8
(0.5)
(16.0)
5.2
9.1
(4.8)
9.5
£m
2.2
7.3
9.5
£m
4.6
0.6
5.2
Employee
incentive
schemes
Employee
incentive
schemes
280 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
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Notes to the Company Financial Statements
Continued
4.2 Reconciliation of liabilities arising from financing activities
Borrowings
Borrowings
Non-cash
movement
1 December
2019
£m
Cash flows
£m
Unwinding of
interest
£m
29 November
2020
£m
219.5
740.0
37.7
997.2
Non-cash
movement
2 December
2018
£m
Cash flows
£m
Unwinding of
interest
£m
1 December
2019(1)
£m
244.3
(35.3)
10.5
219.5
Note
4.1
Note
4.1
(1) The unwinding of interest and cash flows for the 52 weeks ended 1 December 2019 have been corrected.
4.3 Analysis of net debt A
Net debt A
Current assets
Other treasury deposits
Cash and cash equivalents
Non-current liabilities
Borrowings
Net debt A
29 November
2020
£m
Notes
3.2
3.4
4.1
150.0
158.2
308.2
(997.2)
(689.0)
1 December
2019
(restated)(1)
£m
50.0
54.3
104.3
(219.5)
(115.2)
(1) £50.0 million (2018: £55.0 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019 , and £406.9 million (2019: £153.5 million) of amounts due from subsidiaries from cash and cash equivalents to other receivables. See note
1.4 for more information.
None of the Company’s cash and cash equivalents (2019: £nil) is considered to be restricted and is not available to circulate within the Group
on demand.
Reconciliation of net cash flow with movement of net debt A
Net increase/(decrease) in other treasury deposits
Net increase/(decrease) in cash and cash equivalents
Net (increase)/decrease in borrowings
Movement of net debt A in period
Net debt A at beginning of period
Net debt A at end of period
52 weeks
ended
29 November
2020
£m
100.0
103.9
(777.7)
(573.8)
(115.2)
(689.0)
52 weeks
ended
1 December
2019
(restated)(1)
£m
(5.0)
(39.4)
24.8
(19.6)
(95.6)
(115.2)
(1) £50.0 million (2018: £55.0 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019 , and £406.9 million (2019: £153.5 million) of amounts due from subsidiaries from cash and cash equivalents to other receivables. See note
1.4 for more information.
A
See Alternative Performance Measures on pages 293 and 294.
282 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Continued
4.2 Reconciliation of liabilities arising from financing activities
1 December
Unwinding of
29 November
Cash flows
interest
Non-cash
movement
£m
37.7
Non-cash
movement
£m
740.0
Cash flows
interest
£m
(35.3)
£m
10.5
2019
£m
219.5
2018
£m
244.3
Note
4.1
Note
4.1
2 December
Unwinding of
1 December
2020
£m
997.2
2019(1)
£m
219.5
50.0
54.3
104.3
(219.5)
(115.2)
29 November
1 December
2019
(restated)(1)
£m
Notes
3.2
3.4
4.1
2020
£m
150.0
158.2
308.2
(997.2)
(689.0)
(1) The unwinding of interest and cash flows for the 52 weeks ended 1 December 2019 have been corrected.
4.3 Analysis of net debt A
Net debt A
Borrowings
Borrowings
Current assets
Other treasury deposits
Cash and cash equivalents
Non-current liabilities
Borrowings
Net debt A
1.4 for more information.
on demand.
4.4 Financial instruments
Accounting policies
Financial assets and financial liabilities are recognised on the Balance Sheet when the Company becomes a party to the contractual provisions
of the instruments.
The Company classifies its financial assets using the following categories:
• Amortised cost;
• Fair value through profit or loss (“FVTPL”); and
• Fair value through other comprehensive income (“FVTOCI”).
The classification depends on the characteristics of the contractual cash flows and the Company’s business model for managing them.
Financial liabilities are measured at amortised cost, except for derivatives which are measured at fair value with gains or losses recognised in
profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments). Classification depends on
the purpose for which the liability was acquired.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity
instrument is any contract that gives a residual interest in the assets of the Company, after deducting all of its liabilities.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported on the Balance Sheet when there is a legally-enforceable right to offset the
recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
The Company has categorised its financial instruments as follows:
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
C
O
M
P
A
N
Y
(1) £50.0 million (2018: £55.0 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019 , and £406.9 million (2019: £153.5 million) of amounts due from subsidiaries from cash and cash equivalents to other receivables. See note
None of the Company’s cash and cash equivalents (2019: £nil) is considered to be restricted and is not available to circulate within the Group
Reconciliation of net cash flow with movement of net debt A
Net increase/(decrease) in other treasury deposits
Net increase/(decrease) in cash and cash equivalents
Net (increase)/decrease in borrowings
Movement of net debt A in period
Net debt A at beginning of period
Net debt A at end of period
(1) £50.0 million (2018: £55.0 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019 , and £406.9 million (2019: £153.5 million) of amounts due from subsidiaries from cash and cash equivalents to other receivables. See note
1.4 for more information.
52 weeks
ended
1 December
29 November
52 weeks
ended
2019
(restated)(1)
2020
£m
100.0
103.9
(777.7)
(573.8)
(115.2)
(689.0)
£m
(5.0)
(39.4)
24.8
(19.6)
(95.6)
(115.2)
29 November 2020
Financial assets
Investments
Other financial assets
Other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Accruals and other payables
Senior secured notes
Senior unsecured convertible bonds
Total financial liabilities
1 December 2019 (restated)(1)
Financial assets
Investments
Other financial assets
Other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Accruals and other payables
Senior secured notes
Total financial liabilities
Amortised
cost
£m
Notes
3.1
3.2
3.3
3.4
3.5
4.1
4.1
Notes
3.1
3.2
3.3
3.4
3.5
4.1
581.3
174.4
2,266.4
158.2
3,180.3
(185.6)
(220.8)
(776.4)
(1,182.8)
Amortised
cost
£m
549.8
50.0
980.7
54.3
1,634.8
(277.3)
(219.5)
(496.8)
A
See Alternative Performance Measures on pages 293 and 294.
282 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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(1) £50.0 million (2018: £55.0 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019, and £406.9 million (2019: £153.5 million) of amounts due from subsidiaries from cash and cash equivalents to other receivables. See note
1.4 for more information.
Back to contents
Notes to the Company Financial Statements
Continued
4.4 Financial instruments continued
Financial assets and liabilities at fair value
The Group uses the following hierarchy for determining and disclosing the fair value of its financial instruments:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
•
•
Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly (level 2); and
Inputs for the assets or liabilities that are not based on observable market data (level 3).
All the Company’s financial assets and liabilities are classified as level 3 except for the senior secured notes, which are classified as level 1.
Set out below is a comparison by category of carrying amounts and fair values of all financial instruments that are included in the financial
statements:
Financial assets
Investments
Other financial assets
Other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Accruals and other payables
Senior secured notes
Senior unsecured convertible bonds
Total financial liabilities
29 November 2020
1 December 2019 (restated)(1)
Notes
3.1
3.2
3.3
3.4
3.5
4.1
4.1
Carrying
amount
£m
581.3
174.4
2,266.4
158.2
3,180.3
(185.6)
(220.8)
(776.4)
(1,182.8)
Fair
value
£m
Carrying
amount
£m
581.3
174.4
2,266.4
158.2
3,180.3
(185.6)
(230.1)
(776.4)
(1,192.1)
549.8
50.0
980.7
254.3
1,634.8
(277.3)
(219.5)
–
(496.8)
Fair
value
£m
549.8
50.0
980.7
254.3
1,634.8
(277.3)
(231.3)
–
(508.6)
(1) £50.0 million (2018: £55.0 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019, and £406.9 million (2019: £153.5 million) of amounts due from subsidiaries from cash and cash equivalents to other receivables. See note
1.4 for more information.
The fair values of cash and cash equivalents, other financial assets, receivables and payables are assumed to approximate to their carrying
values but for completeness are included in this analysis.
4.5 Credit risk
The Company’s exposures to credit risk arise from holdings of cash and cash equivalents and other receivables.
Exposure to credit risk
The carrying value of financial assets, as set out in note 4.4, represents the maximum credit exposure. No collateral is held as security against
these assets.
Management does not believe that the credit risk of any financial instrument has increased significantly since its initial recognition.
Cash and cash equivalents
The Company’s exposure to credit risk on cash and cash equivalents is managed by investing in banks and financial institutions with strong
credit ratings, and by regular review of counterparty risk.
Other receivables
Other receivables at the reporting date comprise mainly amounts due from subsidiaries. Management provides for irrecoverable debts when
there are indicators that a balance may not be recoverable.
The ageing of other receivables at the reporting date was as follows:
Not past due
29 November 2020
1 December 2019
Note
3.3
Gross
£m
Impairment
£m
2,266.4
–
Gross
£m
980.7
Impairment
£m
–
284 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Back to contents Notes to the Company Financial Statements
Continued
4.4 Financial instruments continued
Financial assets and liabilities at fair value
The Group uses the following hierarchy for determining and disclosing the fair value of its financial instruments:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly (level 2); and
Inputs for the assets or liabilities that are not based on observable market data (level 3).
All the Company’s financial assets and liabilities are classified as level 3 except for the senior secured notes, which are classified as level 1.
Set out below is a comparison by category of carrying amounts and fair values of all financial instruments that are included in the financial
•
•
statements:
29 November 2020
1 December 2019 (restated)(1)
Carrying
amount
£m
Notes
3.1
3.2
3.3
3.4
3.5
4.1
4.1
581.3
174.4
2,266.4
158.2
3,180.3
(185.6)
(220.8)
(776.4)
Fair
value
£m
581.3
174.4
2,266.4
158.2
3,180.3
(185.6)
(230.1)
(776.4)
(1,182.8)
(1,192.1)
Carrying
amount
£m
549.8
50.0
980.7
254.3
(277.3)
(219.5)
–
(496.8)
Fair
value
£m
549.8
50.0
980.7
254.3
(277.3)
(231.3)
–
(508.6)
1,634.8
1,634.8
Financial assets
Investments
Other financial assets
Other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Accruals and other payables
Senior secured notes
Senior unsecured convertible bonds
Total financial liabilities
1.4 for more information.
4.5 Credit risk
Exposure to credit risk
these assets.
(1) £50.0 million (2018: £55.0 million) of treasury deposits with a maturity of more than three months at the date of acquisition have been reclassified from cash and cash equivalents to
other financial assets as at 1 December 2019, and £406.9 million (2019: £153.5 million) of amounts due from subsidiaries from cash and cash equivalents to other receivables. See note
The fair values of cash and cash equivalents, other financial assets, receivables and payables are assumed to approximate to their carrying
values but for completeness are included in this analysis.
The Company’s exposures to credit risk arise from holdings of cash and cash equivalents and other receivables.
The carrying value of financial assets, as set out in note 4.4, represents the maximum credit exposure. No collateral is held as security against
Management does not believe that the credit risk of any financial instrument has increased significantly since its initial recognition.
The Company’s exposure to credit risk on cash and cash equivalents is managed by investing in banks and financial institutions with strong
Other receivables at the reporting date comprise mainly amounts due from subsidiaries. Management provides for irrecoverable debts when
Cash and cash equivalents
credit ratings, and by regular review of counterparty risk.
Other receivables
there are indicators that a balance may not be recoverable.
The ageing of other receivables at the reporting date was as follows:
Not past due
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
C
O
M
P
A
N
Y
4.6 Liquidity risk
The Company has adequate cash resources to manage the short-term working capital needs of the business. In December 2019, it issued £600.0
million of senior unsecured convertible bonds. In June 2020, it issued another £350.0 million of senior unsecured convertible bonds, alongside
£657.1 million of ordinary shares. The £100.0 million revolving credit facility was terminated in October 2020; it was not utilised in the current
or prior period. The Company’s capital management policies are consistent with those of the Group. For further details on the Group’s capital
management strategy, see note 4.11 to the consolidated financial statements.
The table below analyses the Company’s financial liabilities based on the period remaining to the contractual maturity dates at the reporting
date. The amounts disclosed in the table are the carrying amounts and undiscounted net contractual cash flows.
29 November 2020
Accruals and other payables
Senior secured notes
Senior unsecured convertible
bonds
1 December 2019
Accruals and other payables
Senior secured notes
Carrying
amount
£m
Contractual
cash flows
£m
(185.6)
(220.8)
(185.6)
(261.0)
(776.4)
(1,182.8)
(996.0)
(1,442.6)
Carrying
amount
£m
Contractual
cash flows
£m
(277.3)
(219.5)
(496.8)
(277.3)
(270.0)
(547.3)
Due in less
than one
year
£m
Due in
between
one and two
years
£m
Due in
between
two and five
years
£m
Due in more
than five
years
£m
(185.6)
(9.0)
(7.9)
(202.5)
Due in less
than one
year
£m
(277.3)
(9.0)
(286.3)
–
(9.0)
(7.9)
(16.9)
–
(243.0)
(23.6)
(266.6)
–
–
(956.6)
(956.6)
Due in
between
one and two
years
£m
Due in
between
two and five
years
£m
Due in more
than five years
£m
–
(9.0)
(9.0)
–
(252.0)
(252.0)
–
–
–
Notes
3.5
4.1
4.1
Notes
3.5
4.1
4.7 Market risk
Currency risk
The Company engages in foreign currency transactions to a very limited extent. No financial assets are held in foreign currencies. Due to the
Company’s lack of exposure to currency risk, no sensitivity analysis has been performed.
Interest rate risk
The Company has no interest-bearing financial liabilities with a variable rate, and its interest-bearing financial assets consist of only cash and
cash equivalents and other treasury deposits. These financial assets are exposed to interest rate risk as the Company holds money market
deposits at variable interest rates. The risk is managed by investing cash in a range of cash deposit accounts with banks in the United Kingdom
split between fixed-term deposits, notice accounts and money market funds.
At the reporting date, the interest rate profile of the Company’s interest-bearing financial instruments was as follows:
Fixed rate instruments
Financial assets
Financial liabilities
Variable rate instruments
Financial assets
Financial liabilities
29 November
2020
£m
1 December
2019
£m
215.0
(997.2)
93.2
–
260.0
(219.5)
44.3
–
29 November 2020
1 December 2019
Gross
Impairment
Impairment
Gross
£m
980.7
£m
–
Note
3.3
£m
2,266.4
£m
–
Sensitivity analysis
An increase of 1.0% in interest rates would affect equity and profit or loss by the amounts shown below. Given that interest rates are expected
to remain low for a number of years, a movement of 1.0% is deemed the maximum increase likely to occur in the short term. The calculation
applies the increase to average variable rate interest-bearing borrowings and cash and cash equivalents existing during the period. This analysis
assumes that all other variables remain constant and considers the effect on financial instruments with variable interest rates.
284 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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5.1 Related party transactions continued
Transactions with subsidiaries
Group share-based payments
Increase of loans and amounts due from subsidiaries
(Decrease)/increase of amounts due to subsidiaries
Balances with subsidiaries
Loans and amounts due from subsidiaries
Amounts due to subsidiary undertakings
5.2 Post-Balance Sheet events
No significant events affecting the Company have occurred since the reporting date.
52 weeks
ended
52 weeks
ended
29 November
1 December
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
C
O
M
P
A
N
Y
2019
£m
24.2
444.3
257.9
2020
£m
980.0
(270.6)
2020
£m
31.5
1,309.3
(257.9)
2020
£m
2,289.3
(12.7)
29 November
1 December
Notes to the Company Financial Statements
Continued
4.7 Market risk continued
Increase in income
Increase in equity
29 November
2020
£m
1 December
2019
£m
0.9
–
0.4
–
4.8 Share capital and premium
Accounting policies
Equity instruments issued by the Company are recorded as the proceeds received, net of direct issue costs.
Share capital and premium
Included in the total number of ordinary shares outstanding below are 10,587,150 (2019: 10,850,516) ordinary shares held by the Group’s
Employee Benefit Trust (see note 4.10 to the consolidated financial statements.) The ordinary shares held by the Trustee of the Group’s
Employee Benefit Trust pursuant to the JSOS, and the linked jointly owned equity (“JOE”) awards under the Value Creation Plan (“VCP”) are
treated as treasury shares on the Consolidated Balance Sheet in accordance with IAS 32 ‘‘Financial Instruments: Presentation’’. These ordinary
shares have voting rights but these have been waived by the Trustee (although the Trustee may vote in respect of shares that have vested and
remain in the Trust). The number of allotted, called-up and fully-paid shares, excluding treasury shares, at the end of each period differs from
that used in the basic loss per share calculation in note 2.8 to the consolidated financial statements, since the basic loss per share is calculated
using the weighted average number of ordinary shares in issue during the period, excluding treasury shares.
At the reporting date, the number of ordinary shares available for issue under the Block Listing Facilities was 9,278,146 (2019: 13,657,551). These
ordinary shares will only be issued and allotted when the shares under the relevant share plan have vested, or the share options have been
exercised. They are, therefore, not included in the total number of ordinary shares outstanding below.
The movements in called-up share capital and share premium are set out below:
Balance at 2 December 2018
Issue of ordinary shares
Allotted in respect of share option schemes
Balance at 1 December 2019
Issue of ordinary shares
Allotted in respect of share option schemes
Balance at 29 November 2020
Ordinary
shares
million
Share
capital
£m
Share
premium
£m
698.3
10.0
0.9
709.2
34.3
4.6
748.1
14.0
0.2
–
14.2
0.7
0.1
15.0
589.9
113.0
2.4
705.3
645.6
10.7
1,361.6
4.9 Share-based payments
For more information on the Group’s share schemes, see note 4.10 to the consolidated financial statements.
4.10 Capital management
The Board’s objectives and policies for the Company are consistent with those of the Group. Full details are provided in note 4.11 to the
consolidated financial statements.
Section 5 – Other notes
5.1 Related party transactions
Key management personnel
Only the Executive and Non-Executive Directors are recognised as being key management personnel. It is the Board which has responsibility for
planning, directing and controlling the activities of the Company. The Executive and Non-Executive Directors did not receive any remuneration
for their services to the Company.
Directors’ interests in ordinary shares of the Company are disclosed in the Directors’ Remuneration Report on page 174.
During the period, there were no transactions between the Company and its key management personnel or members of their close family. At the
reporting date, key management personnel did not owe the Company any amounts.
Subsidiaries
The Company makes loans to its subsidiaries. Interest of £3.9 million (2019: £1.6 million) was charged on these loans during the period. All intra-
Group loans and balances are unsecured and repayable on demand.
286 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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29 November
1 December
2020
£m
0.9
–
2019
£m
0.4
–
5.1 Related party transactions continued
Transactions with subsidiaries
Group share-based payments
Increase of loans and amounts due from subsidiaries
(Decrease)/increase of amounts due to subsidiaries
Balances with subsidiaries
Loans and amounts due from subsidiaries
Amounts due to subsidiary undertakings
5.2 Post-Balance Sheet events
No significant events affecting the Company have occurred since the reporting date.
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
31.5
1,309.3
(257.9)
24.2
444.3
257.9
29 November
2020
£m
1 December
2020
£m
2,289.3
(12.7)
980.0
(270.6)
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
–
C
O
M
P
A
N
Y
Notes to the Company Financial Statements
Continued
4.7 Market risk continued
Increase in income
Increase in equity
4.8 Share capital and premium
Accounting policies
Share capital and premium
Balance at 2 December 2018
Issue of ordinary shares
Balance at 1 December 2019
Issue of ordinary shares
Allotted in respect of share option schemes
Allotted in respect of share option schemes
Balance at 29 November 2020
4.9 Share-based payments
4.10 Capital management
consolidated financial statements.
Section 5 – Other notes
5.1 Related party transactions
Key management personnel
for their services to the Company.
Equity instruments issued by the Company are recorded as the proceeds received, net of direct issue costs.
Included in the total number of ordinary shares outstanding below are 10,587,150 (2019: 10,850,516) ordinary shares held by the Group’s
Employee Benefit Trust (see note 4.10 to the consolidated financial statements.) The ordinary shares held by the Trustee of the Group’s
Employee Benefit Trust pursuant to the JSOS, and the linked jointly owned equity (“JOE”) awards under the Value Creation Plan (“VCP”) are
treated as treasury shares on the Consolidated Balance Sheet in accordance with IAS 32 ‘‘Financial Instruments: Presentation’’. These ordinary
shares have voting rights but these have been waived by the Trustee (although the Trustee may vote in respect of shares that have vested and
remain in the Trust). The number of allotted, called-up and fully-paid shares, excluding treasury shares, at the end of each period differs from
that used in the basic loss per share calculation in note 2.8 to the consolidated financial statements, since the basic loss per share is calculated
using the weighted average number of ordinary shares in issue during the period, excluding treasury shares.
At the reporting date, the number of ordinary shares available for issue under the Block Listing Facilities was 9,278,146 (2019: 13,657,551). These
ordinary shares will only be issued and allotted when the shares under the relevant share plan have vested, or the share options have been
exercised. They are, therefore, not included in the total number of ordinary shares outstanding below.
The movements in called-up share capital and share premium are set out below:
Ordinary
shares
million
698.3
10.0
0.9
709.2
34.3
4.6
748.1
Share
capital
Share
premium
£m
14.0
0.2
–
14.2
0.7
0.1
15.0
£m
589.9
113.0
2.4
705.3
645.6
10.7
1,361.6
For more information on the Group’s share schemes, see note 4.10 to the consolidated financial statements.
The Board’s objectives and policies for the Company are consistent with those of the Group. Full details are provided in note 4.11 to the
Only the Executive and Non-Executive Directors are recognised as being key management personnel. It is the Board which has responsibility for
planning, directing and controlling the activities of the Company. The Executive and Non-Executive Directors did not receive any remuneration
Directors’ interests in ordinary shares of the Company are disclosed in the Directors’ Remuneration Report on page 174.
During the period, there were no transactions between the Company and its key management personnel or members of their close family. At the
reporting date, key management personnel did not owe the Company any amounts.
Subsidiaries
The Company makes loans to its subsidiaries. Interest of £3.9 million (2019: £1.6 million) was charged on these loans during the period. All intra-
Group loans and balances are unsecured and repayable on demand.
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30029 9 February 2021 9:09 am V1 BAdditionalInformation.Ocado-Annual-Report-2020-Financials.indd 288Ocado-Annual-Report-2020-Financials.indd 28809/02/2021 09:16:0909/02/2021 09:16:09Back to contents 30029 9 February 2021 9:09 am V1 BAdditionalInformation.Ocado-Annual-Report-2020-Financials.indd 288Ocado-Annual-Report-2020-Financials.indd 28809/02/2021 09:16:0909/02/2021 09:16:0930029 9 February 2021 9:09 am V1 BContentsGlossary290Alternative Performance Measures293Five-Year Summary295Shareholder Information296Company Information296AdditionalInformation.Ocado-Annual-Report-2020-Financials.indd 289Ocado-Annual-Report-2020-Financials.indd 28909/02/2021 09:16:0909/02/2021 09:16:09Back to contents Glossary
2019 Directors’ Remuneration Policy
or 2019 Policy – means the Directors’
remuneration policy which was approved
by shareholders at the 2019 Annual General
Meeting
Administrative expenses – means all IT
costs, advertising and marketing expenditure
(excluding vouchers), share-based payment
costs, employment costs of all central
functions, which include board, legal,
finance, human resources, marketing and
procurement, property-related costs for the
head office, all fees for professional services,
and the depreciation, amortisation and
impairment associated with IT equipment,
software, fixtures and fittings.
Admission – means the admission of
the ordinary shares of the Company to the
premium listing segment of the Official
List and to trading on the London Stock
Exchange’s main market for listed securities,
which occurred on 26 July 2010.
Aeon – means Aeon Co., Ltd., a company
incorporated in Japan, whose registered
office is at 1–5–1 Nakase, Mihama-ku, Chiba-
shi, Chiba, 261–8515.
AGM – means the Annual General Meeting
of the Company, which will be held on
13 May 2021 at 10am at Buildings One &
Two Trident Place, Mosquito Way, Hatfield,
Hertfordshire, AL10 9UL. In light of public
health guidance and legislation issued by
the Government of the United Kingdom in
relation to the Covid-19 pandemic, which
imposes restrictions on public gatherings
and travel, and in order to protect the health
and safety of the Company’s shareholders
and directors, the Annual General Meeting
will be held as a combined physical
and online meeting. This means that
shareholders and other attendees will not
currently be permitted to attend the Annual
General Meeting in person, save for such
persons nominated by the Chairman of the
meeting in order to establish a quorum. The
right of shareholders to attend the meeting
shall be limited to participation through
the online meeting platform. Details can be
found in the Notice of Meeting.
AIP – means the Annual Incentive Plan for
the Executive Directors.
American Depositary Receipt – means
securities that have been created to permit
United States investors to hold shares in
non-United States companies and, in a Level
1 programme, to trade them on the over-
the-counter market in the United States of
America.
Articles – means the articles of association
of the Company.
AutoStore – means Autostore
Technology AS, a company incorporated
in Norway, whose registered office is at
Stokkastrandvegen 85, 5578, Nedre Vats,
Rogaland, Norway.
Board – means the Board of Directors of
the Company or its subsidiaries from time to
time as the context may require.
Bon Preu – means Bon Preu SA, a
company incorporated in Spain, whose
registered office is at Carrer C, 17, 08040
Barcelona.
Brexit – means the United Kingdom’s
decision to leave the European Union
following the referendum on 23 June 2016.
Cash LTIP – means the Company’s cash-
based long-term incentive plan for senior
employees.
CMA – means the Competition and Markets
Authority.
CNG – means compressed natural gas.
Code – means the UK Corporate
Governance Code published by the FRC in
2018.
Coles – means Coles Supermarkets
Australia Pty Ltd, a company incorporated
in Australia, whose registered office is at 800
Toorak Road, Hawthorn East, VIC 3123.
Companies Act – means the Companies
Act 2006.
Company – means Ocado Group plc,
a company incorporated in England and
Wales with company number 07098618,
whose registered office is at Buildings One &
Two Trident Place, Mosquito Way, Hatfield,
Hertfordshire, United Kingdom, AL10 9UL.
Corporate website – means
www.ocadogroup.com.
CR – means Corporate Responsibility.
Customer Fulfilment Centre or
CFC – means a dedicated, highly-
automated warehouse used for the operation
of the business.
Deloitte – means Deloitte LLP, the Group’s
statutory auditor and advisor in respect of
non-audit services.
Directors – means the Directors of the
Company, whose names and biographies are
set out on pages 104 to 107, or the Directors
of the Company’s subsidiaries from time to
time as the context may require.
Disclosure Guidance and Transparency
Rules or DTR – means the disclosure
guidance and transparency rules made
under Part VI of the Financial Services and
Markets Act 2000 (as amended).
Distribution costs – means all the costs
incurred, excluding product costs, to the
point of sale. In most cases, this is the
customer’s home. This includes the payroll-
related expenses for the picking, dispatch
and delivery of products sold to the point
of sale, the cost of making those deliveries,
including fuel, tolls, maintenance of vehicles,
the operating costs of the properties required
for the picking, dispatch and onward delivery
operations and all associated depreciation,
amortisation and impairment charges, call
centre costs and payment processing charges.
DNED – means the Designated Non-
Executive Director for workforce engagement.
Dobbies – means Dobbies Garden Centres
Limited, a company incorporated in Scotland
with company number SC010975, whose
registered office is at Melville Nurseries,
Lasswade, Midlothian, Scotland, EH18 1AZ.
DPV – means deliveries per van.
EBITDA – means the non-GAAP measure
which Ocado has defined as earnings before
net finance cost, taxation, depreciation,
amortisation, impairment and exceptional
items.
EBT – as relating to the Consolidated
Income Statement, means earnings before
tax; as relating to share schemes, means
Employee Benefit Trust.
Covid-19 – means the disease caused
by Severe Acute Respiratory Syndrome
Coronavirus 2, which has caused the ongoing
global pandemic.
EBT Trustee – means the Trustee from
time to time of the Employee Benefit Trust
established for the purposes of the JSOS,
currently Estera Trust (Jersey) Limited.
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2019 Directors’ Remuneration Policy
American Depositary Receipt – means
CR – means Corporate Responsibility.
or 2019 Policy – means the Directors’
securities that have been created to permit
remuneration policy which was approved
United States investors to hold shares in
by shareholders at the 2019 Annual General
non-United States companies and, in a Level
Customer Fulfilment Centre or
CFC – means a dedicated, highly-
automated warehouse used for the operation
Meeting
Administrative expenses – means all IT
costs, advertising and marketing expenditure
America.
1 programme, to trade them on the over-
the-counter market in the United States of
of the business.
(excluding vouchers), share-based payment
Articles – means the articles of association
costs, employment costs of all central
of the Company.
functions, which include board, legal,
finance, human resources, marketing and
procurement, property-related costs for the
head office, all fees for professional services,
and the depreciation, amortisation and
impairment associated with IT equipment,
software, fixtures and fittings.
Admission – means the admission of
the ordinary shares of the Company to the
premium listing segment of the Official
List and to trading on the London Stock
Exchange’s main market for listed securities,
which occurred on 26 July 2010.
Aeon – means Aeon Co., Ltd., a company
incorporated in Japan, whose registered
office is at 1–5–1 Nakase, Mihama-ku, Chiba-
shi, Chiba, 261–8515.
AGM – means the Annual General Meeting
of the Company, which will be held on
13 May 2021 at 10am at Buildings One &
Two Trident Place, Mosquito Way, Hatfield,
Authority.
Hertfordshire, AL10 9UL. In light of public
health guidance and legislation issued by
the Government of the United Kingdom in
relation to the Covid-19 pandemic, which
imposes restrictions on public gatherings
2018.
AutoStore – means Autostore
Technology AS, a company incorporated
in Norway, whose registered office is at
Stokkastrandvegen 85, 5578, Nedre Vats,
Rogaland, Norway.
Board – means the Board of Directors of
the Company or its subsidiaries from time to
time as the context may require.
Deloitte – means Deloitte LLP, the Group’s
statutory auditor and advisor in respect of
non-audit services.
Directors – means the Directors of the
Company, whose names and biographies are
set out on pages 104 to 107, or the Directors
of the Company’s subsidiaries from time to
time as the context may require.
Disclosure Guidance and Transparency
Rules or DTR – means the disclosure
guidance and transparency rules made
under Part VI of the Financial Services and
Bon Preu – means Bon Preu SA, a
Markets Act 2000 (as amended).
company incorporated in Spain, whose
registered office is at Carrer C, 17, 08040
Barcelona.
Distribution costs – means all the costs
incurred, excluding product costs, to the
point of sale. In most cases, this is the
Brexit – means the United Kingdom’s
customer’s home. This includes the payroll-
decision to leave the European Union
related expenses for the picking, dispatch
following the referendum on 23 June 2016.
and delivery of products sold to the point
Cash LTIP – means the Company’s cash-
based long-term incentive plan for senior
employees.
CMA – means the Competition and Markets
of sale, the cost of making those deliveries,
including fuel, tolls, maintenance of vehicles,
the operating costs of the properties required
for the picking, dispatch and onward delivery
operations and all associated depreciation,
amortisation and impairment charges, call
CNG – means compressed natural gas.
centre costs and payment processing charges.
Code – means the UK Corporate
DNED – means the Designated Non-
Governance Code published by the FRC in
Executive Director for workforce engagement.
and travel, and in order to protect the health
Coles – means Coles Supermarkets
Dobbies – means Dobbies Garden Centres
Limited, a company incorporated in Scotland
and safety of the Company’s shareholders
and directors, the Annual General Meeting
will be held as a combined physical
and online meeting. This means that
shareholders and other attendees will not
currently be permitted to attend the Annual
General Meeting in person, save for such
persons nominated by the Chairman of the
meeting in order to establish a quorum. The
right of shareholders to attend the meeting
shall be limited to participation through
the online meeting platform. Details can be
found in the Notice of Meeting.
AIP – means the Annual Incentive Plan for
the Executive Directors.
Australia Pty Ltd, a company incorporated
with company number SC010975, whose
in Australia, whose registered office is at 800
registered office is at Melville Nurseries,
Toorak Road, Hawthorn East, VIC 3123.
Lasswade, Midlothian, Scotland, EH18 1AZ.
Companies Act – means the Companies
DPV – means deliveries per van.
Act 2006.
Company – means Ocado Group plc,
a company incorporated in England and
Wales with company number 07098618,
EBITDA – means the non-GAAP measure
which Ocado has defined as earnings before
net finance cost, taxation, depreciation,
amortisation, impairment and exceptional
whose registered office is at Buildings One &
items.
Two Trident Place, Mosquito Way, Hatfield,
Hertfordshire, United Kingdom, AL10 9UL.
Corporate website – means
www.ocadogroup.com.
EBT – as relating to the Consolidated
Income Statement, means earnings before
tax; as relating to share schemes, means
Employee Benefit Trust.
Covid-19 – means the disease caused
by Severe Acute Respiratory Syndrome
EBT Trustee – means the Trustee from
time to time of the Employee Benefit Trust
Coronavirus 2, which has caused the ongoing
established for the purposes of the JSOS,
global pandemic.
currently Estera Trust (Jersey) Limited.
ESG – means Environmental, Social, and
Corporate Governance.
ESOS – means the HMRC-approved 2001
Executive Share Option Scheme and the 2001
HMRC-unapproved Executive Share Option
Scheme and 2014 Executive Share Option
Scheme.
Exceptional items – means items that due
to their material and/or non-recurring nature
have been classified separately in order to
draw them to the attention of the reader of
the financial statements.
Executive Directors – means Tim Steiner,
Mark Richardson, Luke Jensen and Neill
Abrams.
Fabled or Fabled.com – means the
Group’s premium beauty online store in
collaboration with Marie Claire and Time Inc.,
sold to Next Holdings Limited in 2019.
FCA – means the Financial Conduct Authority.
Fetch or Fetch.co.uk – means the Group’s
dedicated online pet store, sold to Paws
Holdings Limited in January 2021.
Financial period – means the 52-week
period, or 53-week period where relevant,
ending on the Sunday closest to
30 November.
Financial year or FY – see financial period.
Flex – means Flex Ltd, a company
incorporated in Singapore, whose registered
office is 2 Changi South Lane, 486123,
Singapore.
FRC – means the Financial Reporting Council.
GAAP – means generally accepted
accounting principles.
GDPR – means General Data Protection
Regulation.
GHG – means greenhouse gas(ses).
GIP – means the Growth Incentive Plan.
GMDC – means the General Merchandise
Distribution Centres in Welwyn Garden City and
Erith, dedicated, highly-automated warehouses
used for the operation of the business.
Group – means Ocado Group plc, its
subsidiaries, significant undertakings and
affiliated companies under its control or
common control.
A
D
D
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I
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N
A
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I
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F
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M
A
T
I
O
N
Groupe Casino or Casino – means
Casino Guichard Perrachon SA, a company
incorporated in France, whose registered
office is at 24 Rue de la Montat, Saint-Etienne.
GSCOP – means Groceries Supply Code of
Practice.
Haddington Dynamics – means
Haddington Dynamics Inc., a company
incorporated in Nevada, United States of
America, acquired by the Group on
21 December 2020.
HMRC – means Her Majesty’s Revenue and
Customs.
IAS – means International Accounting
Standards.
ICA – means ICA Gruppen AB, a company
incorporated in Sweden, whose registered
office is at Svetsarvägen 16, Solna.
IFRIC – means International Financial
Reporting Standards Interpretations
Committee.
IFRS – means International Financial
Reporting Standards.
Infinite Acres – means Infinite Acres
Holding B.V., a company incorporated in the
Netherlands, whose registered office is Oude
Delft 128, 2611 CG Delft, Netherlands.
Inkbit – means Inkbit Corporation, a
company incorporated in Delaware, United
States of America, whose business address is
200 Boston Ave #1875, Medford, MA, 02155.
IP – means Intellectual Property.
ISA (UK & Ireland) – means International
Standard on Auditing in the United Kingdom
and Ireland.
ISF – means in-store fulfilment.
Jabil – means Jabil Inc., a company
incorporated in Delaware, United States of
America, whose business address is 10560
Dr. Martin Luther King Jr St, N. St Petersburg,
FL, 33716.
John Lewis – means John Lewis plc, the
parent company of Waitrose, incorporated in
England and Wales with company number
00233462, whose registered office is at 171
Victoria Street, London, SW1E 5NN.
Jones Food Company or JFC – means
Jones Food Company Limited, a company
incorporated in England and Wales with
company number 10504047, whose
registered office is at Phase 2 Celsius Parc,
Cupola Way, Scunthorpe, England, DN15 9YJ.
JSOS – means the Joint Share Ownership
Scheme. It comprises three issues called
JSOS1, JSOS2 and JSOS3.
Karakuri – means Karakuri Limited, a
company incorporated in England and Wales
with company number 11228129, whose
registered office is at 14 Amherst Avenue,
London, England, W13 8NQ.
Kindred Systems – means Kindred
Systems Inc., a company incorporated in
Delaware, United States of America, acquired
by the Group on 15 December 2020.
KPI – means key performance indicator.
Kroger – means The Kroger Co., a company
incorporated in the United States of America,
whose registered office is at 1014 Vine Street,
Cincinnati, Ohio.
LGV – means large goods vehicle.
Listing Rules – means the Listing Rules
made by the UK Listing Authority under Part
VI of the Financial Services and Markets Act
2000 (as amended).
LTIP – means the Long-Term Incentive Plan
for Executive Directors and selected senior
managers.
Marks and Spencer or M&S – means
Marks and Spencer Group plc, a company
incorporated in England and Wales with
company number 04256886, whose
registered office is at Waterside House, 35
North Wharf Road, London, W2 1NW.
MHE – means mechanical handling
equipment.
MHE JVCo – means MHE JVCo Limited, a
company incorporated in England and Wales
with company number 08576462, jointly
owned by Ocado Holdings and Morrisons,
whose registered office is at Buildings One &
Two Trident Place, Mosquito Way, Hatfield,
Hertfordshire, United Kingdom, AL10 9UL.
Morrisons – means Wm Morrison
Supermarkets plc, a company incorporated
in England and Wales with company number
00353949, whose registered office is at
Hilmore House, Gain Lane, Bradford, West
Yorkshire, BD3 7DL.
Morrisons.com – means Morrisons’ online
retail business.
Myrmex – means Myrmex Inc., a company
incorporated in Delaware, United States of
America, whose business address is 2350
Mission College Boulevard, Suite 495, Santa
Clara, CA, 95054.
290 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
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Stock Code: OCDO
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Glossary
Continued
Net finance cost – means finance costs less
finance income. Finance costs are composed
primarily of interest on borrowings and lease
liabilities. Finance income is composed
principally of bank interest.
Non–Executive Directors – means the
Non–Executive Directors of the Company
designated as such on page 115.
Notice of Meeting – means the notice of
the Company’s AGM.
NPS – means net promoter score.
Ocado.com – means the Group’s online
retail business.
Ocado Council – means the Ocado forum
used to consult with our employees.
Ocado Holdings – means Ocado Holdings
Limited.
Ocado Operating – means Ocado
Operating Limited.
Ocado Smart Platform or OSP – means
the end-to-end solution for operating online
in the grocery market, which has been
developed by the Group.
Ocado Solutions – means the Group’s
Solutions business.
Ocado Retail – means Ocado Retail
Limited, a joint venture between Ocado
Holdings and Marks and Spencer Holdings
Limited, which is incorporated in England
and Wales, and whose registered office is
at Apollo Court, 2 Bishop Square, Hatfield
Business Park, Hatfield, Hertfordshire, United
Kingdom, AL10 9EX.
Ocado Ventures – means the Group’s
Ventures business.
Ocado Zoom – means Ocado Zoom, the
Group’s immediacy delivery offering.
OECD – means the Organisation for
Economic Co-operation and Development.
OSP Leadership Club – means the
collective group of Ocado Group and its
global Solutions Partners.
Other income – means primarily revenue
for advertising services provided by Ocado
to suppliers and other third parties on
the Webshop, commission income, rental
income and sub-lease payments receivable.
Other income is recognised in the period to
which it relates on an accruals basis.
Smart Pass (previously Saving
Pass) – means the Ocado pre pay
membership scheme which includes the
delivery pricing scheme previously known as
Delivery Pass and the discount membership
scheme formerly known as Saving Pass.
Sobeys – means Sobeys Inc., a wholly-
owned subsidiary of Empire Company
Limited incorporated in Canada, whose
registered office is at 115 King Street,
Stellarton, Nova Scotia.
Spoke – means the trans-shipment sites
used for the intermediate handling of
customers’ orders.
STEM – means four closely-connected
areas of study: science, technology,
engineering and maths.
Substitution – means an alternative
product provided in place of the original
product ordered by a customer.
techUK – means the trade association
which brings together people, companies
and organisations to realise the positive
outcomes of applying digital technology.
It creates a network for innovation and
collaboration across business, government
and stakeholders to provide a better future
for people, society, the economy and the
planet. For more details, see page 86.
TSR – means total shareholder return, the
growth in value of a shareholding over a
specified period, assuming that dividends
are reinvested to purchase additional units of
the stock.
UPH – means average units processed per
labour hour.
VCP – means the Value Creation Plan for
Executive Directors.
Waitrose – means Waitrose Limited, a
company incorporated in England and Wales
with company number 00099405, whose
registered office is at 171 Victoria Street,
London, SW1E 5NN.
Webshop – means the customer-facing
internet-based virtual shop accessible via the
website www.ocado.com.
Participants – means eligible staff who
participate in one of the Groups’ employee
share schemes.
Prospectus – means the Company’s
prospectus dated 6 July 2010 prepared in
connection with the Company’s Admission.
PwC – means PricewaterhouseCoopers
LLP, the Group’s external advisor on
remuneration.
R&D – means research and development.
RCF – means revolving credit facility.
Retail VCP – means the Ocado Retail Value
Creation Plan for the senior leadership team
of Ocado Retail.
Revenue – means online sales (net of
returns) through the Webshop and Ocado
On The Go, including charges for delivery,
but excluding relevant vouchers, offers and
value added tax. The recharge of costs to
Morrisons and fees charged to Morrisons
and other Solutions clients are also included
in revenue. Relevant vouchers and offers
include money-off coupons, conditional
spend vouchers and multi-buy offers, such as
buy three for the price of two.
ROI – means return on investment.
RSP – means the Restricted Share Plan.
Senior secured notes or notes – means
the Company’s offering of £250 million
senior secured notes due 2024 at a coupon
of 4.000% and an issue price of 100.0%. For
more details, see pages 238 and 239.
Senior unsecured convertible bonds or
convertible bonds – means the Company’s
offerings of £600 million senior unsecured
convertible bonds due 2025 at a coupon of
0.875% and an issue price of 100.0%, and of
£350 million senior unsecured convertible
bonds due 2027 at a coupon of 0.750% and
an issue price of 100.0%. For more details,
see page 238 and 239.
Shareholder – means a holder for the time
being of ordinary shares of the Company.
SAYE – means the Sharesave Scheme,
the HMRC-approved share option plan for
employees.
SID – means Senior Independent Director.
SIP – means the Share Incentive Plan.
SPP – means the Employee Share Purchase
Plan.
SKU – means stock-keeping unit; that is, a
line of stock.
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Continued
Net finance cost – means finance costs less
Participants – means eligible staff who
Smart Pass (previously Saving
finance income. Finance costs are composed
participate in one of the Groups’ employee
Pass) – means the Ocado pre pay
primarily of interest on borrowings and lease
share schemes.
liabilities. Finance income is composed
principally of bank interest.
Prospectus – means the Company’s
prospectus dated 6 July 2010 prepared in
Non–Executive Directors – means the
connection with the Company’s Admission.
Non–Executive Directors of the Company
designated as such on page 115.
PwC – means PricewaterhouseCoopers
LLP, the Group’s external advisor on
Notice of Meeting – means the notice of
remuneration.
the Company’s AGM.
NPS – means net promoter score.
Ocado.com – means the Group’s online
retail business.
R&D – means research and development.
RCF – means revolving credit facility.
membership scheme which includes the
delivery pricing scheme previously known as
Delivery Pass and the discount membership
scheme formerly known as Saving Pass.
Sobeys – means Sobeys Inc., a wholly-
owned subsidiary of Empire Company
Limited incorporated in Canada, whose
registered office is at 115 King Street,
Stellarton, Nova Scotia.
Spoke – means the trans-shipment sites
Retail VCP – means the Ocado Retail Value
used for the intermediate handling of
Creation Plan for the senior leadership team
customers’ orders.
Ocado Council – means the Ocado forum
of Ocado Retail.
used to consult with our employees.
Revenue – means online sales (net of
STEM – means four closely-connected
areas of study: science, technology,
Ocado Holdings – means Ocado Holdings
returns) through the Webshop and Ocado
engineering and maths.
Limited.
Ocado Operating – means Ocado
Operating Limited.
Ocado Smart Platform or OSP – means
the end-to-end solution for operating online
in the grocery market, which has been
developed by the Group.
On The Go, including charges for delivery,
but excluding relevant vouchers, offers and
value added tax. The recharge of costs to
Morrisons and fees charged to Morrisons
and other Solutions clients are also included
in revenue. Relevant vouchers and offers
include money-off coupons, conditional
spend vouchers and multi-buy offers, such as
Ocado Solutions – means the Group’s
buy three for the price of two.
Solutions business.
Ocado Retail – means Ocado Retail
Limited, a joint venture between Ocado
Holdings and Marks and Spencer Holdings
Limited, which is incorporated in England
and Wales, and whose registered office is
at Apollo Court, 2 Bishop Square, Hatfield
Business Park, Hatfield, Hertfordshire, United
ROI – means return on investment.
RSP – means the Restricted Share Plan.
Senior secured notes or notes – means
the Company’s offering of £250 million
senior secured notes due 2024 at a coupon
of 4.000% and an issue price of 100.0%. For
more details, see pages 238 and 239.
Kingdom, AL10 9EX.
Senior unsecured convertible bonds or
Substitution – means an alternative
product provided in place of the original
product ordered by a customer.
techUK – means the trade association
which brings together people, companies
and organisations to realise the positive
outcomes of applying digital technology.
It creates a network for innovation and
collaboration across business, government
and stakeholders to provide a better future
for people, society, the economy and the
planet. For more details, see page 86.
TSR – means total shareholder return, the
growth in value of a shareholding over a
specified period, assuming that dividends
are reinvested to purchase additional units of
the stock.
convertible bonds – means the Company’s
UPH – means average units processed per
offerings of £600 million senior unsecured
labour hour.
Ocado Ventures – means the Group’s
Ventures business.
Ocado Zoom – means Ocado Zoom, the
Group’s immediacy delivery offering.
OECD – means the Organisation for
OSP Leadership Club – means the
collective group of Ocado Group and its
global Solutions Partners.
Economic Co-operation and Development.
an issue price of 100.0%. For more details,
see page 238 and 239.
Shareholder – means a holder for the time
being of ordinary shares of the Company.
London, SW1E 5NN.
convertible bonds due 2025 at a coupon of
0.875% and an issue price of 100.0%, and of
£350 million senior unsecured convertible
bonds due 2027 at a coupon of 0.750% and
VCP – means the Value Creation Plan for
Executive Directors.
Waitrose – means Waitrose Limited, a
company incorporated in England and Wales
with company number 00099405, whose
registered office is at 171 Victoria Street,
Webshop – means the customer-facing
internet-based virtual shop accessible via the
website www.ocado.com.
Other income – means primarily revenue
SAYE – means the Sharesave Scheme,
for advertising services provided by Ocado
the HMRC-approved share option plan for
to suppliers and other third parties on
employees.
the Webshop, commission income, rental
income and sub-lease payments receivable.
Other income is recognised in the period to
SID – means Senior Independent Director.
SIP – means the Share Incentive Plan.
which it relates on an accruals basis.
SPP – means the Employee Share Purchase
Plan.
line of stock.
SKU – means stock-keeping unit; that is, a
Alternative Performance Measures
The Group assesses its performance using a variety of alternative
performance measures which are not defined under IFRS and are,
therefore, termed “non-IFRS” measures. These measures provide
additional useful information on the underlying trends, performance
and position of the Group. The non-IFRS measures used are:
• Exceptional items;
• EBITDA;
• Segmental revenue;
• Segmental EBITDA;
• Segmental gross profit;
• Segmental other income;
• Segmental distribution costs and administrative expenses;
• Net cash/debt; and
• External gross debt.
Reconciliation of these non-IFRS measures with the nearest
measures prepared in accordance with IFRS are presented below.
The alternative performance measures used may not be directly
comparable with similarly-titled measures used by other companies.
Exceptional items
The Consolidated Income Statement identifies separately trading
results before exceptional items. The Directors believe that
presentation of the Group’s results in this way is important for
understanding the Group’s financial performance. This presentation
is consistent with the way that financial performance is measured
by Management and reported to the Board, and assists in providing
a meaningful analysis of the trading results of the Group. This also
facilitates comparison with prior periods to assess trends in financial
performance more readily.
The Group applies judgement in identifying significant non-recurring
items of income and expenditure that are recognised as exceptional
to help provide an indication of the Group’s underlying business. In
determining whether an event or transaction is exceptional in nature,
Management considers quantitative as well as qualitative factors such
as the frequency or predictability of occurrence.
Examples of items that the Group considers exceptional include, but
are not limited to, corporate reorganisations, material litigation, and
any other material costs outside of the normal course of business as
determined by Management.
The Group has adopted a three-columned approach to the
Consolidated Income Statement to aid clarity and allow users of the
financial statements to understand more easily the performance of
the underlying business and the effect of one-off events.
Exceptional items are disclosed in note 2.6 to the consolidated
financial statements.
A
D
D
I
T
I
O
N
A
L
I
N
F
O
R
M
A
T
I
O
N
EBITDA
In addition to measuring its financial performance based on operating
profit, the Group measures performance based on EBITDA. EBITDA
is defined as the Group’s earnings before depreciation, amortisation,
impairment, net finance cost, taxation and exceptional items. EBITDA
is a common measure used by investors and analysts to evaluate the
operating financial performance of companies.
The Group considers EBITDA to be a useful measure of its operating
performance because it approximates the underlying operating cash
flow by eliminating depreciation and amortisation. EBITDA is not
a direct measure of liquidity, which is shown by the Consolidated
Statement of Cash Flows, and needs to be considered in the context
of the Group’s financial commitments.
A reconciliation of operating profit with EBITDA can be found on the
face of the Consolidated Income Statement on page 199.
Segmental revenue
Segmental revenue is a measure of reported revenue for the Group’s
Retail, UK Solutions & Logistics and International Solutions segments.
A reconciliation of revenue for the segments with revenue for the
Group can be found in notes 2.1 and 2.2 to the consolidated financial
statements.
Segmental EBITDA
The financial performance of the Group’s segments is assessed using
EBITDA, as reported internally.
A reconciliation of EBITDA of the segments with EBITDA of the Group
can be found in note 2.2 to the consolidated financial statements.
Segmental gross profit
Segmental gross profit is a measure which seeks to reflect the
profitability of segments in relation to their revenues earned.
A reconciliation of reported gross profit, the most directly-comparable
IFRS measure, with segmental gross profit is set out below:
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019(1)
£m
679.0
653.9
9.6
(0.9)
(527.7)
813.9
467.1
576.0
0.4
0.9
(447.1)
597.3
Retail gross profit
UK Solutions & Logistics gross profit
International Solutions gross profit
Other gross profit
Group eliminations gross profit
Reported gross profit
(1) The figures for the 52 weeks ended 1 December 2019 have been re-presented to
reflect changes to the basis of allocating revenue and expenses to segments. The total
revenue and is the same, but the figure attributed to each segment has changed.
292 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
293
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Alternative Performance Measures
Continued
Segmental other income
Segmental other income is a measure which seeks to reflect
segmental income which is not generated through the primary trading
activities of the segments (for example, volume-related rebates from
suppliers in the Retail segment).
A reconciliation of reported other income, the most directly-comparable
IFRS measure, with segmental other income is set out below:
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019(1)
£m
70.0
3.8
–
14.3
(0.5)
87.6
65.6
3.6
–
15.4
(0.7)
83.9
Retail other income
UK Solutions & Logistics other income
International Solutions other income
Other other income
Group eliminations other income
Reported other income
(1) The figures for the 52 weeks ended 1 December 2019 have been re-presented to reflect
changes to the basis of allocating other income to segments. The total other income is
the same, but the figure attributed to each segment has changed.
Segmental distribution costs and
administrative expenses
Segmental distribution costs and administrative expenses is a measure
which seeks to reflect the performance of the Group’s segments in
relation to the long-term, sustainable growth of the Group. These
measures exclude certain costs that are not allocated to a specific
segment: depreciation, amortisation, impairment and other central costs.
A reconciliation of reported distribution costs and administrative
expenses, the most directly-comparable IFRS measures, with segmental
distribution costs and administrative expenses, is set out below:
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019(2)
£m
653.4
343.0
996.4
542.7
232.0
774.7
Reported distribution costs
Reported administrative expenses
Reported distribution costs and
administrative expenses
(2) £22.1 million of costs relating to the adoption of IFRS 16 “Leases” have been reclassified
from distribution costs to administrative expenses for the 52 weeks ended 1 December
2019, since the leases to which they relate are used for administration rather than
distribution.
Net cash/debt
Net cash/debt is calculated as cash and cash equivalents, plus other
treasury deposits, less gross debt (borrowings plus lease liabilities).
Net cash/debt is a measure of the Group’s net indebtedness that
provides an indicator of the overall strength of the Consolidated
Balance Sheet. It is also a single measure that can be used to
assess the combined effect of the Group’s cash position and
its indebtedness. The use of the term “net cash/debt” does not
necessarily mean that the cash included in the net cash/debt
calculation is available to settle the liabilities included in this
measure.
Net cash/debt is considered to be an alternative performance
measure as it is not defined in IFRS. The most directly-comparable
IFRS measure is the aggregate of borrowings and lease liabilities
(current and non-current) and cash and cash equivalents. A
reconciliation of these measures with net cash/debt can be found in
note 4.4 to the consolidated financial statements.
External gross debt
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019 (1)
£m
External gross debt is calculated as gross debt (borrowings plus lease
liabilities), less lease liabilities payable to joint ventures of the Group.
External gross debt is a measure of the Group’s indebtedness to third
parties which are not considered related parties of the Group.
A reconciliation of gross debt with external gross debt can be found
below:
29 November
2020
£m
1 December
2019
£m
Gross debt
Lease liabilities payable to joint ventures
External gross debt
1,405.2
(49.7)
1,355.5
608.2
(64.0)
544.2
Retail distribution costs and
administrative expenses
UK Solutions & Logistics distribution
costs and administrative expenses
International Solutions distribution costs
and administrative expenses
Other distribution costs and
administrative expenses
Group eliminations distribution costs
and administrative expenses
Depreciation, amortisation, impairment
and other central costs
Reported distribution costs and
administrative expenses
600.5
613.3
92.9
49.0
492.1
507.5
55.3
31.2
(528.2)
(447.5)
168.9
996.4
136.1
774.7
(1) The figures for the 52 weeks ended 1 December 2019 have been re-presented to reflect
changes to the basis of allocating expenses to segments. The total distributions costs
and administrative expenses is the same, but the figure attributed to each segment has
changed.
294 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
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Back to contents Alternative Performance Measures
Five-Year Summary
The following figures have not been audited:
Revenue
Gross profit
EBITDA A
Adjusted operating (loss)/profit(1)
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
52 weeks
ended
2 December
2018
£m
53 weeks
ended
3 December
2017
£m
52 weeks
ended
27 November
2016
£m
2,331.8
813.9
73.1
(94.9)
1,756.6
597.3
43.3
(93.5)
1,598.8
547.5
59.5
(33.0)
1,454.5
495.0
76.7
4.1
1,267.0
431.3
80.3
17.9
A
D
D
I
T
I
O
N
A
L
I
N
F
O
R
M
A
T
I
O
N
(1) Adjusted to exclude exceptional items A and share of results of joint ventures and associate.
Active customer base
Average orders per week
Average order size (£)(2),(3)
CFC efficiency (UPH)(4)
DPV per week
Product waste (%)
52 weeks
ended
29 November
2020
52 weeks
ended
1 December
2019
52 weeks
ended
2 December
2018
53 weeks
ended
3 December
2017
52 weeks
ended
27 November
2016
680,000
334,000
137.19
169
184
0.4
795,000
325,000
106.30
161
196
0.7
721,000
296,000
106.85
163
194
0.8
645,000
264,000
107.28
164
182
0.7
580,000
230,000
108.10
160
176
0.7
(2) Refers to Ocado.com orders and includes standalone orders for Fetch.co.uk, Sizzle.co.uk and Fabled.com. This is after cancelled orders are deducted.
(3) Average order size excludes destination sites from 2014 onwards; prior to this, destination sites were not material.
(4) Mature CFC operations are defined as CFC1, CFC2 and CFC4. CFC4 became a “mature” CFC in the current period. The figure for the prior period has been updated to include CFC4.
52 weeks
ended
52 weeks
ended
29 November
1 December
2020
£m
653.4
343.0
996.4
2019(2)
£m
542.7
232.0
774.7
Reported distribution costs
Reported administrative expenses
Reported distribution costs and
administrative expenses
(2) £22.1 million of costs relating to the adoption of IFRS 16 “Leases” have been reclassified
from distribution costs to administrative expenses for the 52 weeks ended 1 December
2019, since the leases to which they relate are used for administration rather than
distribution.
Net cash/debt
Net cash/debt is calculated as cash and cash equivalents, plus other
treasury deposits, less gross debt (borrowings plus lease liabilities).
Net cash/debt is a measure of the Group’s net indebtedness that
provides an indicator of the overall strength of the Consolidated
Balance Sheet. It is also a single measure that can be used to
assess the combined effect of the Group’s cash position and
its indebtedness. The use of the term “net cash/debt” does not
necessarily mean that the cash included in the net cash/debt
calculation is available to settle the liabilities included in this
measure.
Net cash/debt is considered to be an alternative performance
measure as it is not defined in IFRS. The most directly-comparable
IFRS measure is the aggregate of borrowings and lease liabilities
(current and non-current) and cash and cash equivalents. A
reconciliation of these measures with net cash/debt can be found in
note 4.4 to the consolidated financial statements.
External gross debt
External gross debt is calculated as gross debt (borrowings plus lease
liabilities), less lease liabilities payable to joint ventures of the Group.
External gross debt is a measure of the Group’s indebtedness to third
parties which are not considered related parties of the Group.
A reconciliation of gross debt with external gross debt can be found
below:
Gross debt
Lease liabilities payable to joint ventures
External gross debt
(528.2)
(447.5)
29 November
1 December
2020
£m
1,405.2
(49.7)
1,355.5
2019
£m
608.2
(64.0)
544.2
Continued
Segmental other income
Segmental other income is a measure which seeks to reflect
segmental income which is not generated through the primary trading
activities of the segments (for example, volume-related rebates from
suppliers in the Retail segment).
A reconciliation of reported other income, the most directly-comparable
IFRS measure, with segmental other income is set out below:
52 weeks
ended
52 weeks
ended
29 November
1 December
2020
£m
70.0
3.8
–
14.3
(0.5)
87.6
2019(1)
£m
65.6
3.6
–
15.4
(0.7)
83.9
Retail other income
UK Solutions & Logistics other income
International Solutions other income
Other other income
Group eliminations other income
Reported other income
(1) The figures for the 52 weeks ended 1 December 2019 have been re-presented to reflect
changes to the basis of allocating other income to segments. The total other income is
the same, but the figure attributed to each segment has changed.
Segmental distribution costs and
administrative expenses
Segmental distribution costs and administrative expenses is a measure
which seeks to reflect the performance of the Group’s segments in
relation to the long-term, sustainable growth of the Group. These
measures exclude certain costs that are not allocated to a specific
segment: depreciation, amortisation, impairment and other central costs.
A reconciliation of reported distribution costs and administrative
expenses, the most directly-comparable IFRS measures, with segmental
distribution costs and administrative expenses, is set out below:
52 weeks
ended
52 weeks
ended
29 November
1 December
Retail distribution costs and
administrative expenses
UK Solutions & Logistics distribution
costs and administrative expenses
International Solutions distribution costs
and administrative expenses
Other distribution costs and
administrative expenses
Group eliminations distribution costs
and administrative expenses
Depreciation, amortisation, impairment
and other central costs
Reported distribution costs and
administrative expenses
2020
£m
600.5
613.3
92.9
49.0
168.9
996.4
2019 (1)
£m
492.1
507.5
55.3
31.2
136.1
774.7
(1) The figures for the 52 weeks ended 1 December 2019 have been re-presented to reflect
changes to the basis of allocating expenses to segments. The total distributions costs
and administrative expenses is the same, but the figure attributed to each segment has
changed.
294 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
Stock Code: OCDO
Annual Report and Accounts Ocado Group plc
295
A
See Alternative Performance Measures on pages 293 and 294.
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Shareholder Information
Financial calendar
Q1 Trading Statement
Annual General Meeting
Half Year Results Announcement
18 March 2021
13 May 2021
6 July 2021
14 September 2021 Q3 Trading Statement
9 December 2021 Q4 Trading Statement
8 February 2022
Final Results Announcement
Shareholding information
Fraud
Please contact our Registrar, Link Market Services, directly
for all enquiries about your shareholding. Visit their website,
www.ocadoshares.com, for online information about your
shareholding (you will need your shareholder reference number
which can be found on your share certificate), or telephone the
Registrar direct on +44 (0)871 664 0300. (Calls are charged at the
standard geographic rate and will vary by provider. Calls outside the
United Kingdom will be charged at the applicable international rate.
Lines are open 9am to 5.30pm, Monday to Friday excluding public
holidays in England and Wales.)
Shareholders should be aware that they may be targeted by certain
organisations offering unsolicited investment advice or the opportunity
to buy or sell worthless or non-existent shares. Should you receive any
unsolicited calls or documents to this effect, you are advised not to give
out any personal details or to hand over any money without ensuring
that the organisation is authorised by the United Kingdom Financial
Conduct Authority (FCA) and doing further research.
If you are unsure or think you may have been targeted you should report
the organisation to the FCA. For further information, please visit the FCA’s
website at www.fca.org.uk, email consumer.queries@fca.org.uk or call
the FCA consumer helpline on 0800 111 6768 if calling from the United
Kingdom or +44 20 7066 1000 if calling from outside the United Kingdom.
Company Information
Registered office:
Buildings One & Two
Trident Place
Mosquito Way
Hatfield
Hertfordshire
United Kingdom
AL10 9UL
Company number: 07098618
Independent
auditor:
Registrars:
Deloitte LLP
1 New Street Square
London
EC4A 3HQ
Link Market Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4ZF
All Intellectual Property Rights in the content and materials in this Annual Report vests in and are owned absolutely by Ocado unless otherwise
indicated, including in respect of or in connection with but not limited to all trademarks and the Report’s design, text, graphics, its selection and
arrangement.
“Ocado Changing the way the world shops” is a trademark of Ocado Group plc.
Copyright © Ocado 2021
296 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
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Shareholder Information
Financial calendar
18 March 2021
Q1 Trading Statement
13 May 2021
6 July 2021
Annual General Meeting
Half Year Results Announcement
14 September 2021 Q3 Trading Statement
9 December 2021 Q4 Trading Statement
8 February 2022
Final Results Announcement
Shareholding information
Fraud
Please contact our Registrar, Link Market Services, directly
Shareholders should be aware that they may be targeted by certain
for all enquiries about your shareholding. Visit their website,
organisations offering unsolicited investment advice or the opportunity
www.ocadoshares.com, for online information about your
to buy or sell worthless or non-existent shares. Should you receive any
shareholding (you will need your shareholder reference number
unsolicited calls or documents to this effect, you are advised not to give
which can be found on your share certificate), or telephone the
out any personal details or to hand over any money without ensuring
Registrar direct on +44 (0)871 664 0300. (Calls are charged at the
that the organisation is authorised by the United Kingdom Financial
standard geographic rate and will vary by provider. Calls outside the
Conduct Authority (FCA) and doing further research.
United Kingdom will be charged at the applicable international rate.
Lines are open 9am to 5.30pm, Monday to Friday excluding public
holidays in England and Wales.)
If you are unsure or think you may have been targeted you should report
the organisation to the FCA. For further information, please visit the FCA’s
website at www.fca.org.uk, email consumer.queries@fca.org.uk or call
the FCA consumer helpline on 0800 111 6768 if calling from the United
Kingdom or +44 20 7066 1000 if calling from outside the United Kingdom.
Company Information
Registered office:
Buildings One & Two
Independent
Deloitte LLP
Registrars:
Link Market Services
auditor:
1 New Street Square
London
EC4A 3HQ
Trident Place
Mosquito Way
Hatfield
Hertfordshire
United Kingdom
AL10 9UL
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4ZF
All Intellectual Property Rights in the content and materials in this Annual Report vests in and are owned absolutely by Ocado unless otherwise
indicated, including in respect of or in connection with but not limited to all trademarks and the Report’s design, text, graphics, its selection and
Company number: 07098618
arrangement.
Copyright © Ocado 2021
“Ocado Changing the way the world shops” is a trademark of Ocado Group plc.
CBP005904
The paper is Carbon Balanced with World Land Trust, an international conservation charity, who offset
carbon emissions through the purchase and preservation of high conservation value land.
Through protecting standing forests, under threat of clearance, carbon is locked in that would
otherwise be released. These protected forests are then able to continue absorbing carbon from the
atmosphere,referred to as REDD (Reduced Emissions from Deforestation and forest Degradation). This is
now recognised as one of the most cost-effective and swiftest ways to arrest the rise in atmospheric CO2
and global warming effects. Additional to the carbon benefits is the flora and fauna this land preserves,
including a number of species identified at risk of extinction on the IUCN Red List of Threatened Species.
This document is printed on Revive Silk 100 which is made from 100% FSC® Recycled pulp and post-
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296 Ocado Group plc Annual Report and Accounts for the 52 weeks ended 29 November 2020
www.ocadogroup.com
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Ocado Group plc
Buildings One & Two,
Trident Place, Mosquito Way,
Hatfield, Hertfordshire,
AL10 9UL, United Kingdom
Tel: +44(0) 1707 227800
Fax: +44(0) 1707 227999
www.ocadogroup.com
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