REG - Ocado Group PLC - Annual Financial Report
29/02/2024 16:30
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RNS Number : 0365F Ocado Group PLC 29 February 2024
ANNUAL FINANCIAL REPORT
OCADO GROUP PLC
29 February 2024
Ocado Group plc ("Ocado")
Annual Financial Report 2023
In compliance with Listing Rules 9.6.1 and 9.6.3 Ocado has today submitted to
the Financial Conduct Authority's National Storage Mechanism its annual report
and accounts for the 53 weeks ended 3 December 2023 ("annual report and
accounts").
In compliance with Disclosure Guidance and Transparency Rule 6.3.5(3), the
annual report and accounts is available to view on Ocado's website:
www.ocadogroup.com (http://www.ocadogroup.com/) (and will also be available
for viewing on the National Storage Mechanism at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) ).
This announcement follows Ocado's announcement today of its preliminary
results for the same period. A condensed set of Ocado's financial statements
and information on important events that have occurred during the year and
their impact on the financial statements and related party information were
included in Ocado's preliminary results announcement. That information
together with the information set out below is the information provided to
satisfy the requirements of Disclosure Guidance and Transparency Rule 6.3.5.
The description of principal risks and uncertainties below is extracted in
unedited full text from the annual report and accounts. Reading this
announcement and/or the preliminary results announcement should not be a
substitute for reading the full annual report and accounts.
Principal risks and uncertainties
Market proposition (OSP & OIA) Partner success (OSP)
What is the risk? Our OSP and OIA product offer, features, implementation What is the risk? We invest in robots and MHE alongside our partners in the
schedule, pricing or terms may not be sufficiently attractive to potential CFCs that we develop for them and we rely on the growth of our partners'
partners or may not be commercially attractive to them at a level that online businesses to generate appropriate economic returns from this
delivers adequate and sustainable returns for us. investment. If our partners do not achieve sustainable returns from their
investment then they may not expand their utilisation of the capacity that we
have jointly invested in, in which case we may fail to generate our planned
returns. It is also possible that if our partners are unable to generate
acceptable returns themselves they may close existing CFC facilities.
Key risks Key risks
● Commercial viability both for us and our partners ● Partners may be unable to generate sufficient demand to fill the
capacity of the CFCs in which they have invested
● Our pricing is not competitive
● Partners may be unable to operate their online grocery
● The functionality of our products is not sufficiently attractive businesses efficiently enough to generate the planned returns, including the
ability to generate density in last mile operations
● We fail to market our products professionally
● The strategies that our partners adopt may compromise their
● Competitive environment ability to generate viable ecommerce businesses
Risk owner John Martin, Mark Richardson Risk owner John Martin
Movement - no change Movement - increasing
Link to strategy - Grow our revenue; Optimise OSP Economics; Embed a Link to strategy - Grow our revenue; Optimise OSP economics; Deliver
responsible business approach transformational technology; Drive success for our partners
Responsible business - Environment and natural resources; Responsible business - n/a
Platform resilience and innovation
How we manage this risk How we manage this risk
● Our regional and commercial teams undertake quarterly pricing ● We have established and expanded our Partner Success teams with
reviews, review market pricing and seek price disclosure from prospective the sole aim of supporting our partners in the profitable growth of their
partners to ensure that we remain competitive. online businesses. The Partner Success teams include specialists in ecommerce,
marketing, retail media, retention, operations, last mile and solutions.
● We analyse prospective partner profitability to ensure that our
products can deliver benefits to both ourselves and our partners. Ocado is in ● We review and benchmark partner performance at least monthly to
the position of running a large scale operation of our own using the same identify areas for improvement which we discuss with our partners.
products that we are selling to our clients, which provides us with a unique
and valuable perspective of the value that our products bring. ● We review our technology roadmap with our partners to identify
specific, relevant features that we can develop to support their growth and
● We constantly develop our products to reduce their costs in profitability.
order to maximise market appeal and commercial viability.
● We develop training and development materials and best-practice
● We review the features and functionality that our solutions information which we share with our partners.
provide, and discuss this with potential clients and partners to understand
how well our solutions fulfil their needs and determine whether it is ● We appoint dedicated account management and development teams to
appropriate to develop specific features that our prospective partners support professional account management and partner success. These teams are
require. encouraged to locate either on or close to partner sites.
● We invest substantially in product teams to develop our
technology roadmaps to ensure that our products are as relevant as possible
and cost effective to our current and prospective partners.
● We invest significant sums in the development of our products to
ensure that they remain leading-edge.
● We assess the potential for new business in each of our three
international regions.
● In 2023 we launched OIA to deploy our product to a new market
segment.
● Our Board approves all material new deals.
Product innovation, protection & performance (OSP & OIA) Supply chain
What is the risk? Our innovation and development processes may not meet What is the risk? Disruption in our extended and complex supply chain may
partner needs, or we may fail to provide protected, reliable and commercially adversely affect product availability and responsible sourcing. This could
viable products. This could undermine our ability to attract and retain result in increased costs and fines, delays to contractual commitments and
partners. loss of revenue.
Key risks Key risks
● Product strategy and roadmap ● Contract performance and forecasting demand
● Disruptive technologies are not adopted and invested in early ● Regulation and responsible sourcing (natural resources)
enough, e.g. AI
● Supplier dependencies
● IP infringement and lack of protection
● Insufficiently sustainable design
● Insufficient product quality and performance
● Site implementation timeframes
Risk owner James Matthews, Neill Abrams Risk owner James Matthews
Movement - no change Movement - no change
Link to Strategy - Optimise OSP economics; Deliver transformational Link to Strategy - Grow our revenue; Optimise OSP economics; Deliver
technology; Embed a responsible business approach transformational technology; Drive success for our partners; Embed a
responsible business approach
Link to ESG - Our people and skills for the future; Environment and natural Link to ESG - Our people and skills for the future; Environment and natural
resources; Platform resilience and innovation resources; Platform resilience and innovation
How we manage this risk How we manage this risk
● The Technology Solutions Committee and Risk Committee provide ● Improved internal forecasting of product demand and client
overarching governance. requirements in 2023 has helped better manage Ocado's requirements.
● Our design development (or engineering) teams undertake ● Governance is provided by the Sales and Operations Planning
quarterly product planning meetings within each stream that are presented to executive review meetings.
the Executive Committee for oversight and approval.
● Management KPI reporting packs are reviewed to align supply and
● Our research teams continually monitor the market and actively demand.
participate in funded research with academic institutions, and we are
currently involved in three parallel Horizon projects where Ocado Technology ● We are embedding strategic sourcing and supplier relationship
is funded to undertake state of the art research. management into the business.
● Our IP team conducts freedom to operate searches and IP filing ● Supplier assessments, due diligence and site audits are
monitoring. undertaken during the product development process.
● Our specialist patent attorneys work with product developer ● We are deploying materials resource planning across new
teams to ensure we protect not just the systems we build but also the other categories which helps manage the areas of higher global supply chain
ideas and concepts that are generated during the innovation and development volatility.
lifecycle. For example, in 2023 we had a successful outcome in the AutoStore
litigation. ● The Responsible Sourcing Working Group monitors multiple work
streams and reports to the ESG Committee.
● Innovation development lifecycle including: ideation sessions
with IP; mergers and acquisitions strategy; integration of AI into our ● Combining the above capability we are now better able to review
systems; and partner conferences to demonstrate our latest technology our supply chain suitability, developing deeper strategic relationships and
innovations. For example at our Beyond Conference we presented the latest systematically aligning scale of supply with demand to maintain confidence in
iteration of the OGRP system. our delivery. In addition, our enhancements in our people capability, systems,
data and root cause analysis allow us to provide greater insight to the
● Our "Build Right, Run Right" initiative embeds product business to underpin strategic decision-making.
industrialisation within the development lifecycle for our ASRS product to
meet the needs of our OIA client base.
Talent & capability Cybersecurity & data
What is the risk? Difficulty in filling key positions, a loss of top What is the risk? The disruption or loss of critical assets and sensitive
performers and an inability to embed diversity could undermine business information as a result of a cyber attack, insider threat or a data breach
operations and growth plans. within our Group network or our supply chain could result in business
interruption, reputational damage or regulatory impacts, for both Ocado and
our partners.
Key risks Key risks
● Retention and rewards ● Deliberate destruction of systems
● Attraction ● Commercial data loss
● Training and development ● Third party compromise
● Diversity and inclusion ● Infrastructure outage
● Succession planning ● Personal data loss
● Culture and wellbeing
● Organisational structure
Risk owner Claire Ainscough Risk owner James Matthews
Movement - no change Movement - increasing
Link to Strategy - Deliver transformational technology; Drive success for our Link to Strategy - Deliver transformational technology; Embed a responsible
partners; Embed a responsible business approach business approach
Link to ESG - Our people and skills for the future; Platform resilience and Link to ESG - Platform resilience and innovation
innovation
How we manage this risk How we manage this risk
● We launched new Technology Solutions values and measured these ● Our security strategy defines priorities and is agreed with the
in our regular employee survey. Ocado Board.
● We also have very transparent communication processes (e.g. open ● Regular governance and oversight of our security programme is
Q&A tools and Slack) and we prioritise our goals process to ensure it is provided by the Information Security Committee.
highly aligned between our commercial and technical teams.
● Our Information Security function is led by our Chief
● We continue to work with our employees to create lifestyle Information Security Officer who is responsible for the management of our
policies to support our culture and launched Fertility and Menopause community security strategy, the security programme and security risks.
groups.
● Our dedicated Security Operations team, supported by a 24/7
● Governance is provided by the Risk Committee and People specialist security partner, detects and responds to security incidents.
Committee.
● We regularly test our cyber incident response plan, including
● We conduct periodic reviews of remuneration and incentive plans annual cyber simulations for the Executive Committee.
to align with market trends and internal and external fairness.
● We have developed secure build standards for our core IT assets.
● We continue to undertake employee surveys to analyse opinions
and engagement levels. ● Security patching is in place for our core IT assets and is
measured each month.
● We launched a talent and performance framework to help us
differentiate, develop and deploy the talent we have, supporting future ● Regular penetration testing is carried out for the Ocado
business growth and high performance. Platform.
● We launched two new learning platforms, LinkedIn Learning and ● Our zero trust solution provides employees with secure access to
Learnerbly, to better support our people in developing the skills they need to Ocado's systems.
grow their careers.
● Each year the security controls environment for the Ocado
● We have invested in developing management capabilities by Platform is externally audited as part of our SOC2 certification.
launching a signature programme focused on critical practices for leading a
team, including creating a feedback culture. ● The Ocado Platform is PCI compliant and is externally audited
every year. No payment card data is processed directly by the Ocado Platform.
● We have launched DE&I and wellbeing learning programmes to
build awareness of unconscious bias and how to create an inclusive culture ● Cyber insurance is in place to reduce the cost impact of a major
with practical tools, guidance and resources. cyber incident.
● Immutable backups have been set up to help protect the Ocado
Platform from deliberate destruction.
● Our Data Protection Officer oversees the Group's privacy
compliance programme.
Fire & safety Regulatory & compliance
What is the risk? Fire, or injury to a worker or customer, caused by product What is the risk? Failure to comply with local and international regulations
design or operating failures could result in business disruption, loss of could lead to loss of trust, penalties and personal liability for our
assets and reputational loss. employees, and undermine our ability to operate.
Key risks Key risks
● Fire safety ● Statutory compliance across jurisdictions of operation
● Product safety ● Fraud, bribery, sanctions and industry specific compliance
● Food safety ● New geographies
● People safety (construction, operation and logistics) ● Accelerating pace of global regulatory change (mandatory
climate-related disclosures, and wider sustainability reporting and supply
chain requirements)
● Governance
Risk owner James Matthews Risk owner Neill Abrams
Movement - no change Movement - increasing
Link to Strategy - Drive success for our partners; Embed a responsible Link to Strategy - Embed a responsible business approach
business approach
Link to ESG - Our people and skills for the future; Platform resilience and Link to ESG - Platform resilience and innovation
innovation
How we manage this risk How we manage this risk
● Our governance programme is overseen by the Safety Committee. ● Governance is provided by the Risk Committee.
● Our team of technical experts monitors and audits compliance ● Co-ordinated by the Regulatory & Compliance team, the
against regulations, policies and procedures in safety areas including food, business tracks global regulatory changes, leveraging third-party advice as
product, occupational health, fire and construction. needed to inform our actions and respond to new requirements. The business has
had to respond rapidly in 2023 to minimise disruption to our operations and
● We deploy training and carry out risk and safe systems of work supply chain and ensure we operate in a compliant manner with the dynamic
assessments to raise awareness and knowledge. changes to sanctions and export control laws in particular.
● We monitor regulatory change, leveraging third-party expert ● In 2023 our global regulations tracking process broadened to
advice to introduce appropriate mitigations. encompass wider ESG requirements and was aimed at supporting the business to
prepare to meet multiple new non-financial reporting requirements.
● This year we continued our programme of fire insight days for
local authorities; and introduced an expert third-party Fire Risk Assessment ● Our Due Diligence and Territory Research teams conduct extensive
programme for UK premises. This is supplemented by our annual programme of research and engage specialist advice to understand local market regulatory
risk engineering surveys. issues when exploring new territories and new partners to ensure we understand
and fully cost the potential risks.
● Following the Andover CFC fire, we started to investigate fire
retardant tote designs. The activity involved lengthy investigations supported ● We have deployed and continue to develop a compliance framework
by FM Global and its fire research campus. This has resulted in the current of policies and procedures underpinned by employee training, guidance and
metal tote design which is anticipated to significantly reduce our fire risk tailored awareness campaigns, refreshing policies where needed to reflect
These are currently being deployed at significant cost across our global evolving standards, including updating our Human Rights Policy, and we are
footprint. also implementing a new Sanctions and Export Control Policy.
● We conduct periodic risk assessments on core compliance topics
to ensure that we identify and close gaps arising from organisational change
and evolving standards. This year we refreshed our anti-bribery risk
assessment and next year we will focus on our fraud risk assessment to account
for new legislation on this topic.
Climate, environment & geopolitical Liquidity & cash management
What is the risk? Transformation pressures and adverse external events could What is the risk? Insufficient liquidity (cash balances plus undrawn
increase cost, disrupt our supply chain and operations, and the demand for our facilities) to deliver our business goals and/or settle our liabilities.
product.
Key risks Key risks
● Internal combustion engine vehicles ban ● Inability to access the capital markets to refinance our debt as
it approaches maturity
● Energy usage
● Inability to extend or access our RCF including due to failure
● Natural resources to comply with its financial covenants
● Net Zero Challenge ● Deterioration in financial performance (profitability and cash
flow generation) that causes refinancing of existing debt to become difficult
● Extreme weather
● Poor cash management forecasting processes leading to
● War, conflict and sanctions unanticipated shortfalls in liquidity which compromise our ability to meet our
commitments
● Civil unrest and activism
● Societal disruption (pandemic, cost of living)
Risk owner Stephen Daintith, Neill Abrams Risk owner Stephen Daintith
Movement - no change Movement - no change
Link to Strategy - Grow our revenue; Optimise OSP economics; Deliver Link to Strategy - Embed a responsible business approach
transformational technology; Drive success for our partners; Embed a
responsible business approach
Link to ESG - Our people and skills for the future; Environment and natural Link to ESG - Platform resilience and innovation
resources; Platform resilience and innovation
How we manage this risk How we manage this risk
● Governance is provided by our ESG Committee and Risk Committee, ● We ensure that we carry out our refinancing activities well in
with other relevant forums such as our Environmental Sustainability Compliance advance of our maturity dates.
and Reporting Working Group co-ordinating environmental sustainability risk,
compliance and reporting activities. ● We monitor the capital markets carefully and, with the
assistance of our advisors, assess the accessibility of the capital markets on
● We are involved in several vehicle manufacturer engagement a regular basis (at least monthly).
programmes to aid the development of zero-emission vehicle alternatives.
● We prepare robust five-year cash flow forecasts (which are
● We use various energy supply monitoring and diversification updated annually and are tested on a regular basis for their integrity).
initiatives, including the use of an anaerobic digester.
● We have also prepared a five-year cash flow forecast that
● Our MHE stock levels provide resilience in construction and includes various downside scenarios and used this to determine future cash
operation. requirements, liquidity levels and covenant compliance metrics under these
scenarios.
● Our global client footprint provides resilience from local
shocks. ● The five-year cash flow forecasts include all investment plans.
These are reviewed by the Board (subject to materiality tests) and approved
● We conduct risk assessments prior to entering new geographical only after meeting strict return requirements.
markets or undertaking new ventures.
● Over the course of the year we have enhanced our cash flow
● We maintain financial and physical reserves to cushion any forecasts to include quarterly compliance with financial covenants. This helps
operational impact. us assess our ability to access the RCF on a quarter-by-quarter basis. This
gives us further comfort in our testing of sufficient liquidity headroom.
● This year we engaged external experts to support our physical
climate risk assessment using third-party scenario-based data. ● We engage regularly with our relationship banking group to
maintain the strong relations that we have with them. We also ensure that they
● In 2023 we formally established our Net Zero programme. are well informed of our cash flows and liquidity.
● We have recently appointed a new Head of Capital Markets to work
alongside the CFO and the Group FD to maintain these strong working
relationships with our relationship banks.
● We continue to monitor the capital markets and our refinancing
strategy and update the Board on these matters at each Board meeting. These
Board discussions will also include a review of the optimal time to carry out
any refinancing activities.
For further information on the financial risks see pages 112 to 114 and 278 to
280 of the notes to the consolidated financial statements in the annual report
and accounts for the 53 weeks ended 3 December 2023.
Directors' Responsibility Statement
Ocado's annual report and accounts contains the following statements regarding
responsibility for the financial statements and the annual report in
compliance with DTR 4.1.12. This responsibility statement is repeated here
(below) solely for the purposes of complying with Disclosure Guidance and
Transparency Rule 6.3.5. It is not connected to the extracted information
presented in the preliminary results announcement or this announcement.
Each of the Directors who held office at the date of the approval of the
Annual Report (included in the biographies of the Directors on pages 118 to
121) confirms, to the best of their knowledge, that:
● the Group financial statements, which have been prepared
in accordance with UK-adopted IFRSs, 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 205) 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.
The Directors of Ocado Group plc are listed on pages 118 to 121 of the annual
report and accounts and are listed on the Ocado Group's corporate
website: www.ocadogroup.com (http://www.ocadogroup.com/) . The Directors of
Ocado Group plc as at the date of this announcement are as follows:
Rick Haythornthwaite;
Tim Steiner;
Stephen Daintith;
Jörn Rausing;
Andrew Harrison;
Emma Lloyd;
Julie Southern;
Nadia Shouraboura;
Julia M. Brown; and
Rachel Osborne.
Enquiries
For further information contact:
Ocado Group plc Head of Investor Relations
Chandler Benet
Group General Counsel & Company Secretary
+44 1707 228 000
Neill Abrams
investor.relations@ocadogroup.com (mailto:investor.relations@ocadogroup.com)
email: company.secretary@ocadogroup.com
(mailto:company.secretary@ocadogroup.com)
Person responsible for arranging the release of this announcement:
Neill Abrams
Group General Counsel & Company Secretary
Ocado Group plc
Buildings One & Two
Trident Place
Mosquito Way
Hatfield
Hertfordshire AL10 9UL
Fax: +44 (0)1707 227 997
email: company.secretary@ocadogroup.com
(mailto:company.secretary@ocadogroup.com)
Ocado Group plc LEI: 213800LO8F61YB8MBC74
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