Annual Report and
Accounts 2022
1
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
OCADO GROUP PLC Annual Report and Accounts 2022
OUR PROGRESS
Ocado Group
We are building on a track
record of more than 20 years
of pioneering innovation in the
online grocery market, leading
and benefiting from the global
consumer shift to online shopping.
At the heart of it all lies our
technological know-how and
unparalleled IP.
We are just getting started
on our growth journey in
grocery and beyond. Our
market-leading technology
will enable our partners to
win in the online channel,
with ever improving returns
and an unparalleled
customer offer.
What’s
inside
Strategic Report
Our Progress 01
Our Business at a Glance 02
Our Year in Review 04
A Message from Our Chair 06
Investment Case 08
Chief Executive’s Review 10
The Marketplace 12
Our Business Model 14
Stakeholder Engagement 16
Section 172(1) 23
Our Strategy at a Glance 26
Our Strategy in Action 28
Responsible Business 36
Group Key Performance Indicators 62
Business Unit 66
Financial Review 70
Risk Management 86
Going Concern and Viability 96
Governance
Governance at a Glance 101
Chair’s Governance Overview 102
Corporate Governance Report 104
Board of Directors 106
Corporate Governance
Statement 2022 110
UK Corporate Governance
Code Principles 110
People Committee Report 127
Audit Committee Report 132
Directors’ Remuneration Report 144
Letter from the Chair of the
Remuneration Committee 144
Annual Report on Remuneration 2022 149
Directors’ Report 171
Financial Statements
Group
Independent Auditor’s Report 180
Consolidated Income Statement 192
Consolidated Statement of
Comprehensive Income 193
Consolidated Balance Sheet 194
Consolidated Statement
of Changes in Equity 196
Consolidated Statement
of Cash Flows 197
Notes to the Consolidated
Financial Statements 198
Company
Company Balance Sheet 262
Company Statement of
Changes in Equity 263
Company Statement of Cash Flows 264
Notes to the Company
Financial Statements 265
Additional information
Glossary 275
Alternative Performance Measures 279
Five-Year Summary 282
Shareholder Information 283
Read more about our Strategy in
Action on pages 28 to 35
Strong underlying performance
amidst near-term pressures
Group EBITDA
A
(£m)
2018 2019
43.3
73.1
61.0
(74.1)
59.5
2020 2021 2022
XX
%
Gross liquidity position (£m)
*
A
2018
2019
850.6
1,706.8
1,468.6
1,628.0
510.8
2020 2021 2022
XX
%
Group revenue (£m)
2018
2019
1,756.6
2,331.8
2,498.8
2,513.8
1,598.8
2020 2021 2022
XX
%
Loss before tax (£m)
2018 2019
(214.5)
(52.3)
(176.9)
(500.8)
(44.4)
2020 2021 2022
Environmental
B
CDP rating
FY21 CDP rating: B
Read more
pages 52 to 55
44.4%
reduction in
carbon intensity
FY22: 458 tcO
2
e per 100,000 orders
FY21: 489 tc0
2
e per 100,000 orders
Read more
pages 46 to 53
0.9%
Ocado Retail food
waste as % of sales
FY21: 0.6%
Read more
pages 56 and 62
31
eNPS (Technology
Solutions)
FY21: 25
Read more
pages 38 to 45
Read more about our Strategy in
Action on pages 26 to 35 and our
Responsible Business Approach
pages 36 and 37
Discover more online
www.ocadogroup.com
See Alternative Performance Measures
on pages 279 and 281
A
* Gross Liquidity is Cash and Cash
Equivalents plus Revolving Credit Facility.
Contents
Contents
Contents
STRATEGIC REPORT
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OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
A global, technology-led,
software and robotics
platform business
OUR BUSINESS AT A GLANCE
Our purpose
To solve complex problems for the world’s
largest grocery retailers and businesses
beyond grocery.
We empower our people to drive change through learning and growth.
Our technologies, knowledge and experience provide our Client
Partners with sustainable and efficient solutions enabling competitive
advantage, and profitable, scalable growth for them and our trusted
suppliers. We achieve this responsibly with minimal impact on the
environment and a positive influence on the communities we serve.
Who we are
What we do
We provide a leading
technology platform,
as a managed service,
for retailers around
the world who are
looking to build winning
e-commerce operations
in their markets.
Our Geographical reach
We are a global company serving 12 partners in 10 countries. Together, we have announced
joint plans to build 45 further automated Customer Fulfilment Centres
*
, in addition to the
19 CFCs already live. You can see the spread of these plans below.
Our culture and values
Our desire to innovate is what drives
our culture and it’s our values and
behaviours that enable our success
empowering us to grow and transform
our business globally at pace – to
build our success for the future.
We’re in
it together.
We can be
even better.
We’re proud of
what we do.
Read more
page 38
Underlying business segments and planned reporting structure from 2023
How we report today
We currently report the activities of our business across
three operational segments, described below:
UK Solutions and Logistics
Reflecting both long-term
Solutions contracts for UK clients,
Ocado Retail and Morrisons,
and contracts for the provision
of logistics (distribution and
fulfilment) and other services.
Key highlights
Delivering operating
efficiencies ahead of target
for our UK Client Partners.
£67m
EBITDA
A
in 2022
International Solutions
Reflecting long term
Solutions contracts with
international partners for
the provision of the Ocado
Smart Platform (“OSP”)
as a managed service.
Key highlights
Material acceleration in the global
roll-out of OSP whilst also adding
more Client Partners and CFC
commitments to our pipeline.
£(113)m
EBITDA
A
in 2022
Retail
A pure play online grocery
retailer, serving big basket and
immediacy missions to 940,000
active customers in the UK.
A 50:50 joint venture with
Marks & Spencer.
Key highlights
Strong growth in active
customers to underpin recovery
in revenues and profits as
pandemic comparables fade
and the cost of living crisis eases.
£(4)m
EBITDA
A
in 2022
Ocado Technology
Solutions
Technology platform business
providing the Ocado Smart
Platform (‘OSP’) as a managed
service to (currently) 12 partners
around the world
>£590m
mid-term EBITDA
A
target
(4-6 years) margin c50%
Ocado Logistics
Industry leading 3PL (third
party logistics) business,
operating in the UK for
Ocado Retail and Morrisons
c£30m
mid-term EBITDA
A
target
(4-6 years), margin towards 3%
Ocado Retail
Pure play online grocery
retail business serving big
basket and immediacy missions
to customers in the UK
(50:50 joint venture with M&S)
>£270m
mid-term EBITDA
A
target
(4-6 years), high mid-single
digit margin
Read more
page 76
Read more
page 75
Read more
page 69
Read more
pages 66 and 67
Read more
page 68
Read more
page 69
4
8
1
1 6
2
2011
20
Canada
USA
UK
Sweden
Spain
Poland
South Korea Australia
Japan
France
* Reflects CFC plans publicly announced by partners, with number of CFCs corresponding to either the
announced number of sites or a number of sites determined by sales-based capacity announcements
apportioned into £350m equivalent ‘standard’ sized CFCs, based on average exchange rate since year
of announcement. Exact site sizes will vary. Does not include ISF commitments. For UK, excludes those
sites live before the 2019 joint venture deal (Hatfield, Dordon, Erith, Andover).
Contents
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STRATEGIC REPORT
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OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
A year of
achievement
OUR YEAR IN REVIEW
The next leap in
innovation: Ocado
Re:Imagined
Seven technological innovations, available
for commercial roll-out from the end of 2023.
Global OSP
roll-out picking
up pace
Adding
to the
OSP ‘club’
During the year we signed two new
partners, Auchan Polska, in Poland,
and Lotte Shopping, in South Korea.
The OSP ‘club’ now comprises
12 leading global retailers across
10 countries.
For the first time, we have mapped
out our Scope 3 baseline, across all
15 categories. This work was a critical
undertaking to enable future delivery
of our net zero commitments.
Read more
page 55
Net zero
in operations and value chain by
2035 and 2040, respectively
Building on successful collaboration with
Client Partners, we are working closely
with them to support them to get the very
best out of the OSP platform.
Read more
page 34
Local and
offsite
support, and specialist deployments
Progressing
on the path
towards
net zero
commitments
Working with
clients to drive
long-term
success
2022 saw a significant step up in the global
roll-out of OSP. Alongside successful execution
for our partners, we continued to innovate, at
pace, and made important strategic steps to
support future growth on our path to achieving
our net zero ambitions.
Collectively, we expect these
breakthroughs to enable partners to
offer their customers an even better
online grocery proposition, across
choice, short lead times, and value.
Re: Imagined will also bring a step-
change in economics for Group and
partners. The key efficiency metric
within the warehouse, UPH (units
picked per hour), is expected to
improve by c.50%, whilst capital
expenditure costs will also fall.
“ Say hello to the
world’s lightest,
and most efficient
grocery fulfilment
bot – the 600
series bot.”
Discover
more online
300+
UPH
up from 200+ UPH target
pre Re: Imagined
15%+
reduction in capital expenditure
for Ocado Group and partners
23
sites live, up from
11 at FY21
Discover
more online
Strong
liquidity
to support
mid-term
growth plans
In June, the business successfully
raised equity of £578m, with the
funding designed to provide support
for capital expenditure to deliver
the planned and expected CFC
programme for our partners in
the mid-term.
£1.6bn
FY 2022 gross liquidity (cash
and available revolving credit)
We successfully launched 12 new
sites for partners this year – 9 CFCs
and 3 Zooms (micro fulfilment centres)
– more than doubling the number of
sites live. They were delivered on
time and partners are reporting
strong customer satisfaction in their
respective markets.
64
CFCs planned,
up from 56 at FY21
Read more
page 67
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STRATEGIC REPORT
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OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
Chair’s Letter
A MESSAGE FROM OUR CHAIR
It has been a far from easy year as your
Board has sought to separate signal
from noise while our operating context
changed almost daily.
Our agenda is very much focused on
the factors that are key to delivering
both that future of profitability and
the proof the world is seeking that
we really can change the way the
world shops, for good and, by so
doing, transform the economics of
a vital but thin-margin sector. Those
factors boil down to the essentials
of people, technology and how they
combine to meet the aspirations of
our Client Partners.
Our people
We have raised the intensity of Board
attention on our people this year,
mindful that they have emerged
from the very difficult period of the
pandemic only to face a cost of living
crisis and new day-to-day frictions
across our global operations.
Engagement with our people has
been a spotlight for the Board, with
primary areas including diversity and
inclusion, payroll and the welfare of
our employees. Diversity, equity and
inclusion (“DEI”) continues to be an
essential business enabler and talent
magnet. It is also an important
challenge for us as a responsible
organisation to be better. Our teams
have been driving positive action in
supporting and enabling DEI across
Ocado Group. You can read more
about this on pages 38 to 41.
As a responsible employer, the
welfare of our employees is of
great importance to the Board.
This year has seen a big push
around the health and wellbeing
of our employees, and in listening
to our people we know that care
about wellbeing has been one of
the biggest drivers of engagement
in the last two years.
Alleviating the impact of the cost
of living crisis has also been a central
theme for the business and where
possible we’ve ensured continued
access to products and services
that enable our employees’ money
to go further, while signposting our
colleagues most in need to advice
and support when needed. You can
read more about some of these
initiatives on page 44.
It was decided this year to change the
name of the Nomination Committee
to the People Committee, which
reflects the decision to expand the
Committee’s remit. Its responsibilities
now include people engagement
issues for the whole Group, which
provides greater oversight of the
workforce and the culture of the
Group. The Committee is able to
discuss wider workforce views and
priorities and bring to the attention
of the Board important issues raised.
Andrew Harrison’s appointment
as Chair of the People Committee
provides an opportunity to strengthen
the link between the Board and our
people, as he is also our Designated
Non-Executive Director. More about
this can be found in the People
Committee Report on pages 127
to 131.
Technology
Technology continues to be
fundamental to the Ocado mission.
The Board has directed its attention
on a number of strategic pillars in
relation to the objectives of our
technology agenda. These have been:
providing an unrivalled shopper
experience; enabling best in class
profitability; reducing capital
investment and time to deploy CFCs;
supporting partners to leverage their
store estate; and providing a flexible,
secure, scalable and reliable platform.
New module sign-up has not been
as fast as we wish, as live partners
have centred on both increasing
capacity utilisation and deploying
early learnings to optimise economics
achieved at their initial sites. In the
future, we expect the improved
flexibility in site build and optimised
site design, enabled by Re:Imagined,
to see partner build and lease costs
fall by around 20%, while products
such as On-Grid Robotic Pick will also
improve site productivity by >50%,
dramatically reducing operational
costs. In further lowering the barrier
to acceptance, we expect these
innovations to underpin healthy
growth in the pipeline of orders in
the years ahead.
Following Board discussions, our
focus on partner success led to the
development of Partner Success
Teams to help our partners make the
most of the platform and accelerate
their growth. This is in the early
stages and will be a spotlight issue
for the Board over the coming year.
The OSP Leadership Club now
comprises 12 of our partners across
10 countries. The club brings together
representatives from all our global
partners to work collaboratively and
discuss experiences of shared
importance, building our understanding
of partners’ needs. Our flagship Ocado
Solutions product conference Beyond
2022, which is exclusive to our OSP
partners from around the world,
offered networking, expert talks,
panels, live tours, and an exhibition
of our Re:Imagined technologies.
Our competitive advantage is
efficiency. The Board is committed to
optimising operational and capital
efficiency for our partners and Ocado
Group, so that we can both achieve
an attractive return on investment
through OSP. In the UK, Ocado Retail
continues to evidence the efficiencies
our technology enables for partners.
For more detail, see page 69.
Environment
We continue to assess how the clear
operational efficiencies of our model
impact on carbon emissions as a
source of competitive advantage.
Our Carbon Strategy is to achieve
Net Zero emissions by 2040 and
product development teams in Ocado
Technology have launched a piece
of work to understand, calculate
and make recommendations to
reduce the carbon content of our
OSP. Our development teams have
begun exploring opportunities for
product re-designs that require less
supporting material, lower weight,
less carbon intensive materials, lower
transportation emissions and lower
operational energy, which have been
used as leading concepts in
the development of our Re:Imagined
products. The Board looks forward
to continuing to understand how we
can seek advantages in this area.
Looking ahead
We are set fair. We strive for capital
efficiency across the business.
The decision to undertake a capital
raise in June was taken to strengthen
our liquidity to allow us to continue
to invest in Technology Solutions
development to generate future value
and growth. This year we have also
reviewed and revised our five year
plan under which we expect to
become cash flow positive within
the next four to six years. The Board
has discussed our future sources of
capital and is keen to explore new
sources of capital as and when we
need to refinance our existing debt.
We should not let these important
debates distract from the basic belief
that we all share at Ocado, namely,
that the vision we are pursuing
represents one of the most profound
conceptual and technological leaps
forward in any sector over the past
century – our challenge is to
demonstrate to all that there is
substance to that belief.
Rick Haythornthwaite
Chair
28 February 2023
In January 2022, we unveiled seven
key innovations, collectively called
Ocado Re:Imagined, which we expect
to further transform OSP economics
for partners and Ocado Group. Work
on delivering these has been a big
push during the year and partners
ordering a CFC for delivery from the
second half of 2023 and onwards will
have the new features enabled, whilst
orders made prior to the launch of Re:
Imagined can be also be retrofitted to
include many of the enhancements.
Competition for technical talent
remains very strong, and we continue
to seek a competitive edge when
recruiting, but also in how we retain
our talent. We keep this under regular
review, so that we can be agile in
responding to the talent market.
Salary inflation is an ongoing focal
point, as we look to recruit, retain,
and support our employees.
Partners
While our people and technology
provide the essential ingredients
of the Ocado mix, our success is
crucially dependent on the pace of
adoption of our Client Partners – the
rate at which we sign up new partners
and the rate at which those new
partners ramp up the business that
they put through OSP.
We have continued to sign new
partners, signing our twelfth retail
partner, Lotte Shopping, in November
2022, one of the largest business
conglomerates in South Korea.
We extended our partnership with
Groupe Casino, by forming a joint
venture to provide logistics services
to other potential OSP partners of
Ocado Solutions in France. Kroger
continues to expand delivery across
the US and, in signing with Auchan
Polska, we have our first deal in a
market outside our previous guidance
(describing customer opportunity
geographies as those with a GDP
per capita of over $25,000). This
reinforces our expanding opportunity
set as we drive further step changes
in operating and capital efficiency
with Re:Imagined.
“ Our agenda is very much focused on the
factors that are key to delivering both the
future and the proof the world is seeking
that we really can change the way the
world shops, for good.”
Rick Haythornthwaite, Chair
Considerable progress
was made towards
realising the extraordinary
potential of the Ocado
vision and bringing that
all-important moment of
sustainable profitability
ever closer.
Contents
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STRATEGIC REPORT
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OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
9
A strong investment
INVESTMENT CASE
1.
2.
3.
4.
5.
6.
Channel shift to online grocery has been
a trend in most markets for some time.
The Covid-19 pandemic further accelerated
this shift in shopping habits. Although we have
seen some natural attrition in online volumes
from pandemic peaks, we are stabilising at
materially higher levels, and the outlook is for
continued channel shift and growth. We built
our business specifically for this change in
shopping behaviour – to benefit from, and to
lead, the online revolution for our partners.
The opportunity set is
large & getting larger
Grocery is the largest retail market.
Online grocery has now stabilised
at a materially higher level than pre
pandemic and is set to continue to
grow. Retailers around the world
must sustain and continue to develop
their online offer for customers, to
win in the channel, and overall, in the
long term.
Our Changing Markets
pages 12 and 13
We own 50% of Ocado
Retail; attractive growth
and return prospects
in the UK
We retain a 50% share in Ocado
Retail, an important test bed, and
a valued partner. Capacity largely
already invested underpins a
roadmap to £3.9billion in revenue
in the mid-term; +70% on FY22 and
customer growth is strong. As the
business fills available capacity and
current consumer pressures ease,
it expects to deliver a high mid-single
digit EBITDA
A
margin in the mid-term.
Ocado Retail
page 69
Our technology
continues to improve
and can take us
beyond grocery.
We announced Re:Imagined;
seven technology innovations,
available from the end of 2023,
that we expect to reset the bar
for operating and capital efficiency
in online grocery. In addition to
driving growth and improved
returns in grocery, Re:Imagined
expands our opportunity-set
to the wider ASRS (automated
storage and retrieval) space.
Our Changing Markets page 14
Financial Review page 81
We are changing
the way the world
shops, for good.
We are committed to innovation
that drives improved efficiencies.
Through ongoing technology
advancements we are driving
better labour efficiency and reduced
use of natural resources in our
automated CFCs. The UPH targeted
for Re:Imagined sites is double that
at our oldest facility (Hatfield CFC
in the UK). We have more than halved
our Scope 1 and 2 emissions
intensity since our 2012/13 baseline,
with an ambition to net zero in our
operations and value chain by
2035/40, respectively. And Ocado
Retail continues to achieve industry
low levels of food waste, a benefit
we expect to enable for partners as
their sites mature.
Responsible Business Approach
pages 36 and 37
Current partners provide
a strong runway for
growth and returns
We have 12 partners across 4
continents who together represent
>£200 billion in sales, the second
largest retail platform in the world.
Together, these partners have
announced plans for 64 CFCs,
equivalent to >£22 billion in sales
capacity. As partners scale, the
multiplier we achieve on innovation
grows with them and learnings
enabled by our partnership
community expand, further
accelerating our virtuous cycle of
growth, investment and innovation.
Our Changing Markets
page 13
OSP is a market-leading
online fulfilment solution
OSP is a flexible platform, able to
serve all missions, with a market-
leading customer offer and
compelling economics. The platform
can be configured to the needs of
individual partners and our full suite
of products and services enables us
to have a clear-eyed conversation
with our partners about their needs
and what solution is most appropriate
for time and place, to drive the best
possible results for our partners
and their customers.
Our Business Model
pages 14 and 15
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OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
Building blocks all now in
place for profitable growth
and strong cash flows
CHIEF EXECUTIVE’S REVIEW
Q&A.
We have made significant
and encouraging progress
this year, notably in
ramping up the roll-
out of OSP for clients
and continuing to
innovate at pace.
We are taking the right
steps to support long-
term success, internally
and in supporting our
clients to get the most
out of their first sites.
I am confident that
we are well placed
to navigate a more
challenged economic
environment and
make the most of
our opportunity set.
What do you think were
Group’s biggest successes
this year?
I think it comes down to the
combination of execution and
innovation; doubling our live sites
for partners, whilst simultaneously
progressing our extensive programme
of step change Re:Imagined innovations.
It’s amazing to think we now have
more than 20 automated sites live
for six clients, across five countries.
Just three years ago we had only
one robotic CFC live in the UK.
Importantly, our Client Partners have
praised each of these sites for
successfully bringing the market-
leading customer service we knew
was possible from the UK into their
respective markets. From a Group
perspective, we’re achieving
operating cost performance ahead
of plan at the latest live sites.
In the business we’re in we also
have to ensure we’re doing enough
to enable our clients’ success in
the long run. With Re:Imagined,
I’m convinced that is the case.
Delivery is progressing well and
I’m confident that these changes
will put us an even greater step
ahead of competition in terms of
cost of ownership, operating cost
and flexibility of the platform.
23
automated sites live
12
clients signed
10
countries with
OSP partners
What were the biggest
challenges this year?
For all businesses, evolving
economic uncertainty represents
a challenge. These times require
real operational agility, and a
renewed focus on management of
organisational structure and cost,
to enable delivery of key priorities
in the most efficient way possible.
We see this in Ocado Retail, where
changing and, now, subdued
consumer shopping behaviours
required a fast reset in approach
compared with the pandemic years.
In the Group, we’ve been focused
on ensuring we are well capitalised
to deliver on our significant growth
roadmap, whilst reshaping our
internal structure to make sure
we are using these resources in
the most prudent way.
Operationally, the teams have deftly
navigated stretched supply chains
and cost challenges and made sure
that we continue to motivate and
support our people through these
challenging times.
As Chairman of Ocado Retail,
how do you reflect on
performance and outlook
for the business in light of
performance in 2022?
The unfolding consumer environment
has been more challenging than
anyone expected at the start of the
year. By the second half of the year,
consumers were carefully managing
the cash spend of their shopping
basket. In practice, this means
shopping fewer items, cheaper items
and, or, less frequently. For Ocado
Retail, these trends came alongside
tough comparatives from the pandemic
period and some natural attrition in
the online channel once consumers
were able to return to their normal
lives. Naturally, these temporary
headwinds to volume growth were
the main cause of the margin pressure
we saw in the year.
Despite these headwinds, the
business posted only a small decline
in revenue this year. More importantly,
Ocado Retail ended the year with
940k active customers, +13% more
than the year before, highlighting the
underlying demand for the service.
Operationally, the latest sites are
achieving more than the targeted 200
UPH, before reaching mature volumes.
The underlying performance remains
strong, and under our new CEO,
Hannah Gibson’s leadership, I am
optimistic about the path ahead.
With so many OSP partners
now live, how do you think
about the meaning of
partnership in your contracts?
Has that thinking evolved
with the pace of delivery?
For us, the meaning of partnership
hasn’t changed. We are committed
to supporting our Client Partners to win
in the online grocery channel in their
respective markets. We do this through
the delivery of the best technology –
OSP – to enable that success,
alongside sharing key learnings to
make the most of that platform.
What has evolved is our hands-on
approach to helping clients to
absorb and redeploy early learnings
into their early operations. We’re
strengthening our Client Partner
success model to facilitate this
on the ground as well as remotely.
This model requires openness and
trust on both sides to ensure we get
the most out of our collaborations
between and across clients. When
done well, it can deliver amazing
results. Encouragingly, we’ve already
optimised delivery efficiency at Client
Partner sites, which in turn drives
improved fulfilment and volume
growth at the CFC.
This even tighter collaboration is a
focus and something that I think has
the potential to instil new meaning to
what successful partnership looks like.
What are you most excited
about in the coming year?
2023 will see us go live in Asia Pacific
(“APAC”) for the first time, with the
launch of three automated sites
across Australia and Japan. That is a
huge step, taking our footprint truly
global at the operational level.
The next year will also see delivery of
the Re:Imagined suite of technologies,
across the new 600 series bot, grid
with optimised site design, and a host
of software upgrades. This is a truly
groundbreaking step forward which
will revolutionise what success looks
like for clients and Ocado Group, in
terms of both customer proposition
and attainable economics, and in
grocery and across the whole ASRS
and robotic handling sectors.
It is an exciting time as we get closer
to commercial roll-out by the end of
the coming year.
Tim Steiner
CEO
28 February 2023
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Our changing markets
THE MARKETPLACE
For many years, grocery has been steadily migrating
online. The Covid-19 pandemic radically accelerated
this transition. Although there has been some natural
attrition from pandemic peaks, online penetration
has stabilised across global markets at much higher
levels than before the pandemic. Industry analysts
expect continued growth in the years to come.
Online grocery: a long runway for growth
in the largest retail market
2019 2020
2022 2023
(years)
2024 2025 20262021
2027
0.0
2.5
5.0
7.5
10.0
(%)
Change in median e-commerce penetration over time
Trends shaping grocery
fulfilment worldwide
OSP is a leading solution for
each of these structural trends
The opportunity for
Ocado Solutions
Ageing populations and urbanisation mean
consumers are increasingly prioritising
wellbeing and convenience.
To outperform, retailers must continually
adapt their customer proposition to meet
consumers’ changing expectations for
convenience. In practice, this requires a
model with the flexibility to serve customers
exactly what they want, when they want it,
for a reasonable price, and across an
evolving spectrum of shopping missions,
from the big basket shop to immediacy.
Online fulfilment – particularly in grocery
– is a uniquely complex logistical challenge
and it is only through technological
innovation that retailers will be able to
meet rising consumer expectations and
achieve profitable growth in this space.
Acknowledging this reality, markets are
increasingly exploring the roles that AI,
robotics and automation play in providing
flexible and robust grocery fulfilment options
and better consumer experiences.
Climate and labour force resilience are key
tenets that underpin the UN’s Sustainable
Development Goals (SDGs) providing a
shared blueprint for peace and prosperity
for people and the planet into the future.
Included within the 17 goals that make up
this blueprint are the need to reduce food
waste and GHG emissions, and improve
worker productivity, whilst promoting
inclusive and decent working conditions.
To drive sustainable competitive advantage,
and economic growth, it is imperative that
businesses have these issues in mind when
building solutions.
Using assumptions to carve out ‘key markets’ that
reflect relatively affluent geographies with a minimum
population size, we estimate a £4.0 billion–£30.0 billion
fee opportunity in online grocery, depending on the level
of online penetration reached in these markets.
Ocado is well placed to seize this opportunity as the
only end-to-end solutions provider for online grocery
fulfilment globally, which can serve all missions with
multiple formats. Indeed, 12 leading grocery retail
partners, across 10 countries and representing
>£220 billion in sales, have already chosen OSP to deliver
a market-leading shopping experience to their customers.
As we continue to innovate, our leadership position and
opportunity set evolves and expands. This expansion
includes opportunities in grocery in geographies with
GDP per capita levels lower than the $25,000 threshold
we currently use to define ‘key markets’. As evidence of
this, in 2022 we signed Auchan Polska, of Poland, to the
OSP ‘club’, the first OSP retailer beneath this GDP threshold.
Total Addressable Market (TAM) in Grocery
£4.0 billion –£30 billion fee opportunity in key markets
depending on online penetration achieved in these markets.
% of 0.7 trillion to market to move online
1.
2.
3.
>30%
increase in median online
penetration (top 20 markets)
expected in next 5 years
Grocery is the largest retail market globally. This
represents a huge opportunity for those who are able
to provide a leading customer offer with sustainable
economics to serve the online grocery channel.
With the innovations of Re:Imagined, we expect this
opportunity set to expand even further, to include
the wider automated storage and retrieval solutions
(ASRS) sectors.
Wider automated storage and retrieval (ASRS) opportunity
Our sophisticated OSP technology is applicable well
beyond grocery, and in 2022 we put in place a team to lead
our expansion into the wider ASRS market. Our technology
is able to serve needs ranging across a full spectrum of
requirements, from low to high throughput and high density
short or longer duration storage, as well as across
temperature zones and sizes; effectively, any company
looking to store, sort and ship products of any type.
With the further improvements to cost of ownership of
our technology, enabled by Re:Imagined, we believe OSP
will be both the highest throughput and lowest cost
solution in the wider ASRS sector and now is the right
time to make the most of this opportunity. In August
2022, Chief Operations Officer, Mark Richardson, took up
a new role as the CEO of a new business which will bring
Ocado’s technology and after-sales support to a wide
range of new clients in the broader ASRS space.
1 Planet Retail, assuming a 25% grocery market share and
assuming an online penetration of between 10% and 75% with
a 5.5% fee opportunity, which represents the mid-point of the
range provided to the market.
Societal
shifts
Transformational
technology
Resource
resilience
OSP as the solution
OSP enables partners to offer their customers
unparalleled choice and better quality and
service than anything else in the market, with
99% order accuracy, 95% on time delivery and
up to 50k+ SKUs in the range. The platform
can deliver this leading service across grocery
shopping missions, from immediacy to the big
basket shop, through a range of micro to large
automated sites. For retail partners, this market-
leading offer drives improved loyalty, enabling
them to take increased share in their markets
and, in turn, driving higher volumes through OSP.
Operating at the intersection of six disruptive
technologies – AI, robotics, digital twins, cloud,
big data, and IoT – OSP enables unmatched
efficiencies in fulfilment, at 200+ UPH, or just
15 labour minutes to fulfil a 50-item shop.
With the roll-out of the Re:Imagined suite of
technologies, this is expected to rise 300+ UPH
in the coming years, or just 10 labour minutes
including all direct labour processes in the CFC.
Driving increasingly efficient management of
human and natural capital is a core characteristic
of the OSP platform. Our technology enables
partners to achieve industry-leading levels of
food waste and labour productivity at their CFCs.
We continue to explore ways to reduce
emissions in both our UK logistics operation and
the design of our OSP technology. As a business,
we are focused on widening accessibility into
Technology jobs and developing a future ready
workforce that will continue to deliver
competitive advantage for us, and our partners,
into the long term.
£73bn
10%
£181bn
25%
£363bn
50%
£544bn
75%
6.9%
online share of grocery in top
20 markets 2022
+64%
increase in online penetration
vs. 2019 (pre pandemic)
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Creating long-term value
OUR BUSINESS MODEL
Delivering value for
all our stakeholders
Read more about this pages 16 to 22 and 26
People
competitive compensation, opportunity
to be themselves and grow
Fair pay
at or above national living wage in Logistics
31
eNPS score (Technology Solutions)
Investors
sustainable and attractive return
on capital
22% ROCE
at a site level; Purfleet on track in 2022
Partners
means to take market share and grow
profitably in the online channel
mid-single digit
EBITDA
A
margin target, with leading
customer satisfaction
Suppliers
reliable long-term growth, collaborative
approach and robust governance
64 CFCs
Long runway for growth
Society
efficient use of natural resources,
investment in innovation
0.9%
Ocado Retail food waste (% sales) in 2022
(44)%
Tonnes CO
2
e per 100,000 orders
(Scope 1 and 2) since 2012/13 baseline
Underpinned by
virtuous cycle:
Targeted
investment.
As we grow our revenue from partners,
increased resources enable us to continue
to invest in innovation. These investments
have a strong multiplier effect across our
partner base.
Read more about this
pages 27 and 81
Enhanced
OSP platform.
We are continuously improving our
market-leading OSP platform; ongoing
iterative improvements in combination
step-change leaps.
Read more about this
page 32
Faster partner
growth.
These improvements enable our
partners to scale in a profitable,
sustainable way, taking share in
their respective markets.
Read more about this
page 28
More
partners.
Improvements to the platform,
alongside the success of current
partners, drives new OSP
partner signings.
Read more about this
page 66
Key resources and
relationships
People
– Just under 20,000 talented individuals dedicated
to delivering for our partners around the world.
Intellectual property and brand
– Cutting-edge IP that drives a fundamental source of
competitive advantage, protected by ~650 patents
granted and ~1,250 filed at year end.
Physical assets
– Fast-growing base of installed MHE, now operational
in >20 sites around the world.
Financial resources
– Strong gross liquidity position of £1.6 billion, sufficient
to deliver on our mid-term growth plans.
Networks
– Robust and collaborative relationships, including our
OSP ‘club’ of 12 leading retailers and key suppliers.
Natural resources
– The resources we harness to sustain our business,
with a particular focus on fossil fuels within our logistics
operation and embodied carbon in our CFC technology, and
our impact on waste assimilation through our operations.
What we offer: market-leading, evolving
and sustainable solution
Key value added of OSP:
Market-leading customer
experience
Flexibility to serve the whole
range of customer missions
with solutions ranging from
micro fulfilment centres
(immediacy) to large,
automated sites.
Best service: 95% on-time
delivery, 99% basket accuracy,
50,000+ SKUs range.
Pricing flexibility.
Compelling
economics
Best-in-channel operating
costs in fulfilment and delivery;
enabling mid-single digit
EBITDA
A
margins at steady state.
Efficient use of natural
resources.
Accelerated innovation
>1,900 patents granted
or pending.
~3,000 technology headcount.
growing OSP “club”;
multilateral collaboration.
A virtuous cycle driving long-term
value creation for Ocado Group
and its stakeholders:
Purpose
To solve complex problems
for the world’s largest grocery
retailers and businesses
beyond grocery.
Mission
To change the
way the world
shops, for good.
Values and culture
Enable us to grow and transform
our business at pace – to build our
success for the future: we’re in it
together; we can be even better;
we’re proud of what we do.
Read more about this
pages 66 and 67
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Engaging with our
stakeholder groups
STAKEHOLDER ENGAGEMENT
The information in this section highlights our key stakeholders, including
why we consider these stakeholder groups to be important to our business
and success and the key issues that we have identified as material to
each stakeholder group. We outline how both the organisation and, more
specifically, the Board engage with these groups, the key outcomes this
year as a result of our engagement and our priorities for the next year.
CEO Tim Steiner and the Executive
Directors provide regular updates
through our business update
livestreams, which provide
engagement with our Executive
Directors and the opportunity
for employees to ask questions,
answered live, on topics and issues
that are important to them.
Periodic update reports are provided
at Board meetings on people matters
including culture, wellbeing, DEI,
talent and engagement. This year
the Board reviewed and discussed
the restructuring of the organisation
to deliver the five year plan and a
central focus was the impact of the
changes on our people and the
culture of the Group.
Regular updates are provided to the
Board on health and safety matters.
All significant new and revised
workforce policies are considered
by the Board. This year the Board
approved revised policies including
on anti-tax evasion, conflicts of
interest and fraud prevention, and
the Ocado Code of Conduct.
Outcomes from engagement
Following feedback through our
Peakon surveys regarding
communication, we increased the
frequency of Ocado Connect updates,
re-designed the Fuse homepage to
make navigating to relevant information
easier and increased the use of
business update livestreams, town
halls, all hands meetings and huddles,
holding them at times to suit
employees’ country locations.
We enhanced the flexibility and
choice offered in our benefits
package, investing in a Work From
Anywhere policy for our Technology
Solutions colleagues and shift swap
options for our Logistics colleagues.
As a result, autonomy scores in
Peakon have increased.
We have continued investment in
manager and leadership development
initiatives to coach, support and
engage our people.
Following feedback from employees
concerning payroll we implemented
a payroll improvement programme
to improve employees’ experience
of the system.
How the Group engages
Our listening and engagement
platform, Peakon, enables us to
regularly gather employee feedback
and take timely and responsive action.
All our people have the opportunity to
confidentially share their views and
the data is shared with managers and
leaders so actions can be tailored to
the feedback received. Over 14,500
of our people have shared their views
this year, which has enabled us to
improve the experience of working
at Ocado.
We champion inclusion communities
based on shared characteristics or
common social interests. There are
currently six global inclusion
communities, alongside craft and
regional communities, that provide
a platform for our people to connect
and voice their opinions, whilst
enabling networking and a sense
of belonging.
Various methods are used to
communicate to all employees,
including Ocado Connect, our digital
roundup of business and people-
related news; Slack, which connects
employees globally, enabling people
to communicate and collaborate to
simplify working together; and Fuse,
our intranet system, which provides
a range of useful information and
updates on the performance of the
Company and other business matters.
There is regular engagement with
employee representatives across
Ocado Group, including over 90
listening champions across the globe
and over 110 Logistics Council
representatives, who listen to
feedback and connect with our
people on the ground.
How the Board engages
Andrew Harrison, the Designated
Non-Executive Director for workforce
engagement (“DNED”), regularly
engages with our employees and
people experience teams. This
includes chairing the biannual National
Logistics Council meeting, engaging
with our inclusion communities and
meeting biannually with the
community chairs, and monthly
meetings with the Heads of People
and Global Culture, Engagement
and Development teams to review
listening insights and plan proactive
engagement. Andrew then reports
back at each Board meeting
highlighting issues and concerns
raised by our people and also the
initiatives being undertaken.
The remit of the People Committee
(previously the Nomination
Committee) was expanded this year
to include people engagement issues
for the whole Group. Andrew Harrison
was appointed as chair of the People
Committee which, coupled with his
role as DNED, strengthens the link
between the workforce and the Board.
The Remuneration Committee
receives an annual Group-wide report
on remuneration, including share plans
and benefits, as well as reports on
senior management remuneration and
DNED updates on employee
engagement on remuneration issues
throughout the year. This year the
Remuneration Committee broadened
the allocation under the Ocado 2019
Value Creation Plan scheme to include
additional senior management.
The Board meets with various
senior employees and this year
visited the Purfleet CFC, Sweden
development centre office, and
Swiftfields campus and met
employees working on these sites.
Our People
Priorities for 2023
Continue our work on achieving
accreditation under the Ernst &
Young (EY) Global Equality
Standard, to support our progress
in diversity, equity and inclusion.
Following an assessment by EY
at the start of 2022 we are now
working on a plan to address
priority areas and improve our
competencies under the Standard.
Acknowledging the difficulties
currently faced across industries
to attract and retain high-quality
people, continue to understand
what prospective and current
employees want and need to
enable Ocado to remain an
attractive employer.
Review and shape our career
development and reskilling
pathways to enable our people
to grow and develop with our
evolving global organisation.
Why we value 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.
Material interests
– Health and wellbeing at work.
– Having a voice and feeling heard.
– Opportunities for growth and
development.
– An inclusive and diverse working
environment.
– Fair reward and recognition.
– Being offered flexibility and choice.
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STAKEHOLDER ENGAGEMENT
Why we value them
Our current and potential investors
ensure our continued access to the
capital that enables us to pursue our
strategic objectives. In order to
continue our growth and promote
investor confidence it is important to
maintain regular and constructive
dialogue to communicate our strategy
and business objectives.
Material interests
– 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,
including execution risk.
– Long-term sustainable and
profitable growth of the Company.
– Material ESG issues related to
growth including climate change,
diversity and inclusion and
talent acquisition.
– Good governance and
transparency.
– Competitive advantage of
technology.
How the Group engages
Information is provided to current and
potential investors regarding our
strategy, performance and business
through our website, press releases,
regulatory news announcements,
shareholder circulars and quarterly,
half year and annual results.
This year we had broker-hosted
fireside chats with CFO Stephen
Daintith and/or CEO Tim Steiner
and Executive Directors and our
Investor Relations team attended and
participated at various investor
conferences. We were also able
to provide investor site visits to our
UK CFCs following the lifting of
Covid-19 restrictions.
Investor roadshows, both hybrid
and in person, held in Europe and
North America, as well as specific
APAC events.
Results presentations are held in
person and online on the day results
are announced, including a question
and answer session.
There are regular discussions with,
and briefings for, investors and
analysts including Group modelling
and cash flow seminars, held in
person and online, and a Financial
Capital Markets Day, during the year.
How the Board engages
Tim Steiner, Stephen Daintith and
Chair Rick Haythornthwaite held
one-to-one investor meetings and
Rick also held investor roadshows
during the year.
This year we continued digital
engagement events that allow for
greater participation and, following the
lifting of Covid-19 restrictions, we
were also able to reinstate in-person
meetings, including our first North
American investor meetings in over
two years and a Governance breakfast
hosted by Rick Haythornthwaite.
The Board reviews and approves
material communications to investors,
including trading updates, results
announcements, annual reports and
significant business events, such as
the capital raise undertaken in 2022.
Committee chairs engage on
significant matters related to their
areas of responsibility, including at a
Governance breakfast held this year.
The Board receives regular updates
on market sentiment, investor
relations activity and share price
performance and reports on feedback
following engagement at investor
events, such as the Group modelling
seminar and Ocado Re:Imagined
product launch.
Investors had the opportunity to
ask the Board questions and watch
business updates by Tim Steiner
and Rick Haythornthwaite at this
year’s AGM.
Outcomes from engagement
We have continued to offer virtual
meetings and presentations following
a positive response from investors and
encouraging levels of participation
demonstrating the benefit of these.
Our Group modelling and cash flow
seminars were held to help analysts
and investors to understand the
modelling of Ocado Group and the
underlying operating segments.
Our ESG strategy has been informed
by investor feedback regarding
climate change and broader ESG
concerns, including our approach
to reliance on carbon, talent and DEI.
Investors Partners
Why we value them
Building trusted partnerships through
ongoing dialogue and shared learnings
helps us to better understand the
needs of our partners. We are then able
to develop and improve our offering to
provide cutting-edge solutions that
support the growth and success of
both our partners and Ocado.
Material interests
– 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
There is direct engagement with
senior management, procurement
managers and commodity managers,
as well as broader engagement in
operations across the business as
relationships with our Client Partners
develop and more global CFCs
become operational.
Bringing together representatives
from all our Client Partners as part
of the OSP ‘club’ to work
collaboratively and discuss
experiences of shared importance,
building our understanding of
partners’ needs. Our flagship Ocado
Solutions product conference Beyond
2022, which is exclusive to our OSP
partners from around the world,
offered networking, expert talks,
panels, live tours and an exhibition
of our Re:Imagined technologies.
We held the Ocado Re:Imagined virtual
product launch at the start of this year
which unveiled to our partners and other
stakeholders our next leap of game-
changing technology and innovation.
We set KPIs and provide feedback
during ongoing projects with
our partners.
How the Board engages
The Board travelled to Sweden and
met with senior executives at ICA
and toured their new Stockholm CFC
earlier this year. In addition, Chair
Rick Haythornthwaite met with
leadership at Coles, Kroger, Groupe
Casino and Morrisons.
There is regular Executive Director
engagement with the senior executives
of partners, including quarterly
executive leadership meetings
between all global Client Partners.
The Board reviews and approves any
new significant partnerships, and
orders from current Client Partners.
Update reports are provided at each
Board meeting on Client Partner
relationships, including performance
and progress on operations. This
year, as more operations have gone
live, OSP partner performance has
been a strong focus for the Board.
The Board’s discussions centred on
how to structure client services within
Ocado to better support our partners.
Client Partner satisfaction scores,
obtained through surveys during the
year, are reported to the Remuneration
Committee and are a key metric of the
Ocado Annual Incentive Plan, as well
as providing a useful barometer of
Client Partner relations.
Outcomes from engagement
Working with Client Partners to
identify their top priorities regarding
solutions required has resulted in a
Solutions product strategy shaped
around their priorities, which is
integrated into our development plans.
The innovations unveiled at Ocado
Re:Imagined respond to our Client
Partners’ needs, understood through
working together, for more cost-
effective, simpler, and energy-
efficient technology that supports
the faster growth of their operations.
The client success team has been
developed to provide specialist
resources for the ongoing support
of our partners to maximise their
optimisation across the OSP platform.
Priorities for 2023
Continue to advance
communication of our strategy
and business objectives to current
and potential investors and help
increase their understanding of
our business model.
Continue to develop our reporting
and provide comprehensive
information regarding ESG issues.
Consider ways to maximise
investor engagement using
technology to enable broader
participation, whilst continuing
to build our level of in-person
engagement with investors.
Priorities for 2023
Continue to develop our offering
for Client Partners and utilise
technological advances and
innovation to provide more flexible,
scalable and efficient solutions.
As more of our Client Partners
become operational, ensure that
a robust and productive way of
working with them during this
phase is in place to ensure their
long-term success.
Engaging with our stakeholder groups
continued
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Why we value them
A strong supply chain is critical to our
business as we rely on our suppliers
to be able to meet the needs of our
Client Partners and ensure that we
can meet our shared targets for
growth and development across
our network.
Material interests
– Building a long-term strategic
relationship.
– Success and growth of
Ocado’s business.
– Fair trade.
– Social, environment and
ethical impacts.
– Equitable supply chain practices
and compliance with appropriate
regulatory and compliance
policies and/or processes.
– Ability to collaborate.
– Prompt and accurate payment.
How the Group engages
Our onboarding process provides
two-way communication to build
relationships with our suppliers.
Through auditing our critical/strategic
suppliers within our supply chain we
can ensure that high standards are
maintained. We maintain a regular
dialogue with suppliers to proactively
resolve any issues that arise.
We use a dedicated third party tool
for critical and high-risk suppliers/
categories of spend, for corporate
responsibility, ethics and responsible
sourcing management and reporting.
Our procurement and supplier
managers hold quarterly business
reviews as well as more regular
contract reviews with key suppliers,
as determined by turnover and
business criticality.
How the Board engages
Regular business reports to the
Board raise any issues or concerns
regarding managing supplier
relationships and the efforts needed
to ensure continuity of supply of key
components and the delivery of
products and equipment to new and
expanding sites; a particular focus this
year given the continued difficult
global trading conditions experienced.
Executive Director sponsorship of the
senior management relationship with
suppliers (Solutions). Any material
changes to key supplier relationships
are fed directly back to the executive
sponsor, Mark Richardson, during the
period, who will engage with the
senior executives of critical strategic
suppliers as required.
The Board oversees prompt payment
practices. Filings are made every six
months and in line with government
requirements must be approved by
a named Director prior to filing.
Currently these filings are approved
by CFO Stephen Daintith.
Outcomes from engagement
We introduced a new transparent
purchase to pay process, ensuring
timely instructions for goods/services
and prompt payment to suppliers.
We continued to drive strategic
supplier relationship management
with core and critical suppliers across
the business resulting in additional
value-add strategic partnerships.
STAKEHOLDER ENGAGEMENT
Why we value them
Making a meaningful contribution
to the wider society enables us to
create stronger communities and
generate positive environmental and
social impacts. Engagement with
organisations such as non-
governmental organisations and
community groups helps us to
address our impact on the wider
society and support ways in which
we can work together to make a
valuable, positive contribution.
Conversely, deteriorating physical
and social environments make it
more difficult for Ocado to achieve
its long-term commercial goals.
Material interests
– Environmental and social issues,
including climate change, carbon
emissions, human rights and
responsible sourcing, and waste
management.
– Legal and regulatory compliance
of the business.
– Responsible sourcing and
procurement practices.
– Environmental and socially
responsible business practices,
credentials and accreditations.
How the Group engages
We include corporate responsibility
reporting on our website, including
carbon, modern slavery, education
and information on Ocado Unlimited,
our strategy for moving towards a
sustainable future.
Our community initiatives Code for
Life and TutorMate.
The Ocado Foundation initiatives
including our partnership with
BizGive and the Ocado Foundation
for Good programme.
How the Board engages
Our ESG Committee is chaired by
Group General Counsel Neill Abrams
with additional executive sponsorship
by CFO Stephen Daintith. The ESG
Committee provides periodic reports
and updates to the Board, with issues
also brought to the Board’s attention
by Neill and Stephen as appropriate.
Information on the ESG Committee is
provided on pages 47 and 48.
The Board receives regular updates
regarding corporate responsibility,
ESG and governance and compliance.
Two training sessions were held
for the Board this year to increase
understanding regarding climate-
related issues: the first on ESG, climate
change and corporate reputation,
and the second on the Task Force on
Climate-related Financial Disclosures
(“TCFD”) recommended disclosures.
Outcomes from engagement
The necessary processes and
procedures were put in place to ensure
we could provide comprehensive TCFD
reporting in the Annual Report, as we
understand the importance of this
information for all our stakeholders.
We have further developed our
governance and reporting
frameworks to ensure relevant
workstreams are aligned and on track
to achieve transparent reporting
against our responsible sourcing
objectives and carbon strategy.
Suppliers
Environment,
Society and
Community
Priorities for 2023
Simplify and consolidate supply
arrangements under a single
responsible senior manager in
a new role to be appointed.
Ocado is committed to responsible
sourcing to ensure safe working
conditions, respect for human
rights and the protection of the
environment and will continue to
pursue these commitments and to
partner only with suppliers that are
committed to the same principles.
Continue to drive commercial value
in a challenging economic climate
by implementing procurement best
practice to allow value optimisation
and to mitigate supply chain risks to
support Ocado’s continued growth.
Identify and explore third party risk
management tools that could help
enhance supplier due diligence
and mitigate supply chain risks.
Priorities for 2023
Improve on and expand
transparent reporting on the
actions towards our responsible
sourcing strategy.
Further develop our scope 3
information and reporting through
a refinement of the data, sharing
recommendations across the
business and seeking
improvements in key areas.
Develop reporting on our social
impact and further engage with
Sustainable Development Goals
across the wider business.
Engaging with our stakeholder groups
continued
Contents
Contents
STRATEGIC REPORT
22 23
OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
STAKEHOLDER ENGAGEMENT SECTION 172(1)
Why we value them
Active and regular engagement with
the Government and our regulators
globally is essential in ensuring that
we understand changing regulatory
requirements and can track and
continue complying with them.
Material interests
– Legal and safe operations and
compliance with relevant
regulations.
– Worker pay and conditions.
– Waste management and
environmentally sound practices.
– Consumer protection.
– Food and product safety.
– Fire safety.
– Health and safety.
– Privacy and security.
– Environment and sustainability.
– Business ethics and good
governance.
How the Group engages
We undertake direct engagement
with regulators, mainly written,
including seeking sign-off approvals,
compliance reports, annual technical
submissions, making formal requests
for information, and reporting and
undertaking investigations in a
compliant manner.
We establish and maintain key
contact relationships with the Group’s
main regulators. This includes
maintaining an open relationship
with our HMRC Customer Compliance
Manager, communicating on a
regular basis.
We provide confirmation and updates
on the Company’s compliance with
regulations through our website,
regulatory news announcements
and the Annual Report.
In the UK we have established
strong relationships and are actively
engaging with our Primary Authority
for health and safety and food
regulatory matters, and key trade
associations with direct access to
and influence on regulators and
government bodies such as techUK
and the British Retail Consortium.
How the Board engages
The Board oversees the regulatory
and compliance framework.
The Board is informed of relevant
governance, legal, regulatory and
compliance matters on a quarterly
basis, including for example updates
on Russian sanctions.
The Board receives regular updates
relating to regulatory issues concerning
operational and construction safety
incidents, fire and food safety
compliance in Ocado sites, and data
protection and information security
issues and investigations.
As is usual practice, direct
engagement with regulators is not
necessarily required by the Board,
which delegates the various regulatory
relationship management to the
appropriate senior managers, although
the Board does engage with our
regulators as and when necessary.
Outcomes from engagement
Our corporate statements, including
the Modern Slavery Act Statement,
Gender Pay Gap Report, Anti-Bribery
Statement and Tax Strategy, are easily
accessible on our corporate website.
Section 172(1) Statement
Directors’ duty to promote the success of the Company
The Board of Ocado Group plc have acted
in the way that it considers, in good faith,
would be most likely to promote the success
of the Group for the benefit of its members
as a whole, having regard to our stakeholders
and the matters set out in Section 172(1) of
the Companies Act 2006 (“Section 172(1)”).
To deliver on the strategy and purpose of
the Group, consideration of the long-term
consequences and impact on different
stakeholders are key to the Board’s decision-
making process.
Regulatory
Bodies
Priorities for 2023
Continue to cooperate with
regulators as and when required
and to maintain strong engagement
with those regulators with whom
we actively engage.
The Board considers its duties under Section 172(1)
at each Board meeting. A reference to Section 172(1)
and the duty to consider stakeholder interests is
highlighted in each meeting and Board papers are
structured to include detail regarding potential outcomes
and consequences, including the effect on different
stakeholders, of proposals submitted to the Board.
In taking decisions, the Directors carefully consider the
balance of interests of the stakeholders who might be
affected and the likely short- and long-term impact.
The approach of the Board in considering the factors
set out in Section 172(1) in its actions, discussions and
decision-making is set out below.
A B
The likely consequences of any
decision in the long term
The interests of
our employees
The Board recognises that decisions taken today will
affect the long-term success and sustainability of the
Group. During the year the Board had particular regard
to the long-term success of the Group in its annual
review and ongoing discussions on the Group strategy,
balancing the short- and long-term requirements of the
business, with consideration of the Group risk profile.
The strategy is set to promote long-term growth and
increase value for all our stakeholders, and guides the
Board’s decisions. The decision to undertake a capital
raise in June and allocate capital to Technology
Solutions development was taken to generate future
value and growth. The Board has focused this year
on setting the five year financial plan under which we
expect to become cash flow positive within the next
four to six years.
The Board receives regular reports from across
the business on performance, financing and the
implementation of strategy, as well as updates on
external factors, including this year the conflict in
Ukraine, global supply chain issues and the cost of living
crisis. These factors feed into discussions on strategy
and setting priorities to ensure that the potential impact
of decisions, particularly in the long-term, are
understood and considered.
Our people are a vital tool in our continued growth.
The Board has supported initiatives on health and
wellbeing and diversity and inclusion across the Group,
as well as the expanded remit of the People Committee
to include employee engagement-related issues this
year. The impact of actions on our people is a
significant consideration in the Board’s decision-
making process.
Read more about this in the Stakeholder Engagement
section on pages 16 and 17, the Our People and Skills
for the Future section on pages 38 to 45, the Key
Board activities on pages 111 and 112, the Corporate
Governance Report on page 116 and the People
Committee Report on pages 127 to 131.
Engaging with our stakeholder groups
continued
Contents
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STRATEGIC REPORT
24 25
OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
SECTION 172(1)
Ocado Retail Limited (“Ocado Retail”)
We recognise Ocado Retail as a unique stakeholder for the Group. Ocado Retail is a 50:50 joint venture, which was formed
in August 2019 between Ocado Group and M&S. It combines Ocado Retail’s leading UK online grocery service with the
M&S food innovation expertise and extensive customer base, to create an unparalleled proposition for the UK consumer.
Powered by Ocado Group’s OSP and logistics services, the joint venture is set to continue to transform online grocery in
the UK.
Ocado Retail has its own governance framework which sits independent to either of its shareholders. For more detail
on this, see the Ocado Retail website at ocadoretail.com and the Ocado Retail Limited Annual Report and Accounts.
Our Board engages regularly with Ocado Retail, receiving updates from CEO Hannah Gibson at a number of Board
meetings. The report provides detail on trading performance of the business and the progress against the strategic
priorities, as well as updates on employee engagement, customer behaviour and supplier relationships. Group CEO
Tim Steiner is the Chair of Ocado Retail and Group CFO Stephen Daintith is a non-executive director of Ocado Retail,
and together with representative directors from each shareholder, they maintain oversight of the key operations
of Ocado Retail and support the strategic relationship between the Group, Ocado Retail and M&S.
The following demonstrates how the Board considered Section 172(1) matters
in its discussions and decision-making in two key Board decisions this year.
Capital raise and new financing
Section 172(1)
Stakeholders
considered
E FDCBA
In June 2022 Ocado completed a capital raise, raising proceeds of approximately £578m, through a placing of new ordinary
shares and an offer to retail investors to subscribe for ordinary shares, and agreed a new £300m revolving credit facility
provided by a syndicate of leading international banks.
The decision to undertake the capital raise and financing was based on the business plan projections for the next five years.
The Board received advice from the Group’s legal and financial advisors to enable them to make an informed decision in the
best interests of the business and our stakeholders. The Board considered the ability to meet the short- and medium-term
financing requirements of the Group and strengthen the Group’s liquidity, as well as providing the ability to invest to
increase value over the long term. The Board concluded that the financing would enhance the ability of the Group to
deliver on strategic objectives and return value to stakeholders in the long term.
The Board considered the need to minimise dilution for current shareholders and opted to include a retail offer in the capital
raise to provide retail investors with the opportunity to participate.
The Board considered the effect of the financing on our stakeholders. The ability to invest and deliver on strategic objectives
will increase value and be in the best long-term interests of stakeholders. In addition, demonstrating the capacity to finance our
strategic objectives provides confidence to stakeholders in our ability to deliver. By using the financing to continue to invest in
innovation and at a faster pace, the Group will be able to support our Client Partners with faster growth in fulfilment capacity.
The financing provides the ability to continue to invest in new technology and develop solutions to maintain the Group’s
reputation as a leader in the industry.
Auchan Retail Polska partnership
Section 172(1)
Stakeholders
considered
E FDCBA
In March 2022 Ocado announced the signing of a partnership with Auchan Retail Polska to develop its online business using OSP.
An initial CFC to serve the Warsaw region is expected to be completed in 2024, with additional CFCs planned, and includes the
use of Ocado’s In-Store Fulfilment software in Auchan’s hypermarkets nationwide in Poland.
The decision to enter into the new OSP partnership was based on the expectation that this will create significant long-term
value, bringing further growth to the business in a new geographical market, for the benefit of investors and other
stakeholders. As our second partnership with Auchan Retail – we have also partnered with Auchan-operated Alcampo
in Spain – there is potential to further expand our relationship with Auchan Retail in other countries in the future.
The Board considered the potential impact on current projects with other Client Partners and the challenges with global
supply chains to ensure that the resources would be in place to deliver on the new partnership and continue to meet our
commitments to all Client Partners. The Board also considered the interests of our employees, particularly in terms of
capacity to deliver but also the positive impact of a new partnership in continuing to drive momentum within the business.
The Board considered the impact of the Russian invasion of Ukraine on Poland and the appropriate timeline for entering
into the partnership.
The Board considered the positive effect on the Group’s reputation on delivering on our objective to continue to expand
globally and partnering, for the second time, with one of the world’s largest and best known grocery retailers.
C
E
D
F
The need to foster business
relationships with key stakeholders
The desirability of maintaining a reputation
for high standards of business conduct
The impact of the Group’s operations
on the community and environment
The need to act fairly
as between members
The Board recognises the importance of our key
stakeholders to the long-term success of the Group,
reflected in the focus on effective engagement with
stakeholders and building strong relationships with
our partners and suppliers. This year the Board
identified supporting our Client Partners’ operations
for growth as a key objective, resulting in the
development of our client success function to
provide specialist support.
The Board reviews a detailed analysis of our
stakeholders and the engagement mechanisms used
annually. Further, the Board receives reports and
updates regarding engagement and the feedback
and insight from stakeholders as a result of this
engagement on an ongoing basis from across the
business. This information, as well as that gained first
hand by Directors, is used to inform Board discussion
and decision-making.
Read more about this in the Stakeholder Engagement
section on pages 16 to 22 and in the Corporate
Governance Report on pages 115 to 117.
The Board is responsible for setting and monitoring
the culture, values and reputation of the Group.
Maintaining a reputation for high standards of business
conduct is an essential aspect of this responsibility.
Our Code of Conduct sets out the principles of how
we expect everyone who works with or represents
the Group to behave and do business and the Board
understands the need to lead by example. This year
the new role of Chief Reputation Officer was established
to act as custodian of the Group’s reputation.
The Board receives quarterly compliance reports,
including issues raised through Speak Up, our
confidential whistleblowing hotline, and our internal
controls and risk management framework include
regular reporting to the Board. Stakeholder
engagement and metrics such as supplier payment
practices and Client Partner satisfaction scores are
important tools used by the Board to ensure that the
Group’s good corporate reputation is maintained.
The Board monitors the Group’s corporate
responsibility, primarily through reporting from senior
management, including regular reports from the
ESG Committee. ESG objectives, in line with the ESG
roadmap, were set at the start of the year with progress
updates reported to the Board through the year.
The Board has oversight of the processes and
procedures put in place to improve ESG reporting,
including to meet the required TCFD disclosures this
year. The Board engaged in comprehensive discussions
regarding the Company’s approach to climate change
and environmental issues, including net zero
commitments, and this is a key consideration in
decision-making.
The Group’s ESG strategic objectives are aligned to
the Group strategy as the Board understands that
increasing energy efficiency and sustainability and
providing solutions that help our Client Partners to
improve in these areas support our strategic objectives
of growing revenue and providing efficient solutions.
Read more about this in the Responsible Business
section on pages 36 to 61.
The Directors and Investor Relations team held
meetings with investors, seminars and presentations,
and attended investor conferences throughout the
year, to provide investors the opportunity to discuss
their views on matters including the Group’s financial
and operational performance and material ESG issues.
This year it was possible to hold more face-to-face
meetings following the easing of Covid-19 restrictions.
However, we continue to utilise technology to broaden
accessibility for all investors. This year we held
in-person and online presentations with question and
answer sessions alongside our results announcements.
We also include comprehensive information and
updates regarding our business through our corporate
website, including webcasts of investor events such
as our Ocado Re:Imagined product launch and Group
modelling seminar, to ensure access for all investors.
Section 172(1) Statement
continued
People Suppliers
Investors Environment, Society and Community
Partners Regulatory Bodies
Contents
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STRATEGIC REPORT
26 27
OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
2.
We can be
even better.
We’re a community of limitlessly
innovative and ambitious people
who drive positive change. We’re
pioneers, we break the mould, we
push boundaries, learn fast from our
mistakes and lead the way with our
solutions. We inspire and challenge
each other – to be even better.
3.
We’re proud
of what we do.
We deliver a fast, efficient and
responsible service for our Client
Partners, their customers and for
each other. We always anticipate
the future and own our decisions
– we’re proud of what we do.
The right strategy
for growth
OUR STRATEGY AT A GLANCE
Overview
Our vision is to be the undisputed leader and global partner
of choice in providing technology and automation solutions
for grocery retail and beyond. To deliver on this vision, we
are laser focused on ensuring that our efforts are focused
in those areas that will successfully drive long-term value
for all of our key stakeholders.
To this end, in 2021, we unveiled a new strategy based on
five interdependent priorities to guide the ‘how’ as well as
the ‘what’ behind delivery of this vision. At the time, these
priorities were described as: grow revenue, optimise OSP
economics, deliver transformational technology, deliver
on client commitments and develop scale-up capabilities.
Integrating a sustainable business
In 2022 we have further clarified the fifth priority which was
labelled ‘develop scale-up capabilities’ in 2021. This part of
the strategy is focused on building and strengthening the
foundations that the business requires to continue to scale and
grow at pace, into the long term. These foundations encompass
everything from the right governance processes and policies
to the appropriate systems, and capital management – human
and natural – that will enable us to succeed.
In effect, this priority is therefore the foundation of ‘how’
we do business, that enables us to continue achieving
the ‘what’ even as the external environment and the size
and complexity of the business increases.
To improve internal and external clarity around this priority
it has, therefore, evolved to become a foundational bedrock
to the other four ‘pillars’ in the strategy. It has also been
renamed to the more straightforward and comprehensive
‘Responsible business approach’.
Our capital allocation framework
In 2022 we made £797m total capital investments to enable us to deliver against our strategy and drive significant
future value for our stakeholders and the Group. Read more about our investments to support our future in the
Financial Review on page 81.
How or culture supports strategy
We’re enabled by values and behaviours. Enabling us to grow and transform
our business globally at pace – to build our success for the future.
1.
1.
We’re in
it together.
Our inclusive community enables
our people to feel a sense of
belonging, part of one respectful
and supportive team. We’re
empowered and valued, kind
and understanding, honest
and trusting – in it together.
Deliver on
our client
commitments
Deliver
transformational
technology
Grow our
revenue
Optimise
OSP economics
Responsible
business
approach
Long-term goals
Read more
on page 36
Read more
on page 28
Read more
on page 30
Read more
on page 32
Read more
on page 34
Continuing to strengthen
our strategic business
foundations as we scale,
from human and natural
capital management, to
governance, will support
us to deliver on our
operational objectives
into the long-term
Developing, building,
acquiring and
diversifying our
revenue streams
Ensuring our technology,
implementation and
services deliver
industry-leading returns
and lowest-cost operations
Led by innovation,
we will always stay
ahead, by identifying,
developing and protecting
our digital ecosystem
Providing efficient and
scalable solutions –
listening first and
delivering a best in
class customer service
– Carbon intensity
(scope 1 and 2)
– Ocado Retail
food waste
– Technology eNPS
– Modules ordered
– Ocado Retail revenue
(£m)
– Direct operating cost
(% site sales)
– Units picked per hour
(UPH)
– Technology headcount
– Patents granted
– Modules live
– Total eaches processed
– Product Commercial
Proposition, Product
Performance, Product
Innovation, Intellectual
Property, Supply Chain,
Talent & Capability,
Cybersecurity, Fire
& Safety, Regulatory
& Compliance,
Geopolitical & Economic
Uncertainty, Climate
– Product Commercial
Proposition
– Product Performance
– Supply Chain
– Product Commercial
Proposition
– Product Innovation
– Supply Chain
– Geopolitical &
Economic Uncertainty
– Product Innovation
– Intellectual Property
– Talent & Capability
– Cybersecurity
– Climate
– Product Performance
– Supply Chain
– Talent & Capability
– Fire & Safety
– Geopolitical &
Economic Uncertainty
– Climate
Create an environment
that enables talent
development and growth,
leading with listening
to improve engagement
We innovate to create
sustainable success for
us and our partners
We collaborate to achieve
our cost targets so that
we are being efficient
and profitable
We are curious so we
experiment and evolve
to achieve more together
We push ourselves to
be accountable and go
beyond for our partners
Use of cash Reason FY22 investment Progress Projected returns
Technology Solutions
Global CFCs
Group investment in MHE to deliver
OSP for partners and drive secure and
recurring revenue streams for Group
£383m
12 sites launched in
the year; total of 23
now live and ramping
22% ROCE
at site level; Purfleet
on track deliver in 2022
Technology,
fulfilment
development
and innovation
To improve the OSP platform,
through innovation that drives either:
i. indirect improvements in
returns through improved
customer proposition
ii. direct improvements in returns
through step changes in capital
or operating efficiency
£228m
Re:Imagined on
track for delivery
end of 2023
mid-term targets:
40% ROCE
Group site level
15%+ reduction in
lease and capital costs,
1ppt+ operating
margin benefit for
OSP Clients
Other
Innovation enablement in supply
chain, IT upgrades, one-off retrofit,
pre-go-live costs
£52m
inc. system
transformations
across finance and
supply chain and
upgrades to talent
acquisition technology
enabling successful
scale up of the business
and delivery of
commitments to clients
Ocado Retail (fully consolidated)
Supporting
Ocado Retail
growth in UK
Build and maintenance capital
expenditure to support future capacity
growth, asset replenishment, IT, spoke
expansion and General Merchandising
(including recharges from logistics)
£134m
Bicester CFC and
3 Zoom sites live
in 2022, Luton CFC on
track for FY23 go-live
mid-term target:
High mid-
single digit
EBITDA
A
margin
Read more about our mid-term targets (4-6 years) for the business in our ‘Ocado Group modelling seminar’
(May 2022) and ‘Ocado Group cash flow seminar’ (Nov 2022) materials found on the group website.
Our strategic framework Our strategy delivery is focused on five priorities:
How culture
supports this
Link to
risks
Group KPIs & key
segmental drivers
Link to
stakeholders
Why this is
a priority
People Suppliers
Investors Environment, Society and Community
Partners Regulatory Bodies
Contents
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OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
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Adding OSP partners
in new and diverse
geographies; growing
addressable market
opportunity and
commitments
Increasing roll-out of
OSP underpins significant
and recurring future
revenue stream
Grow our
Revenue
OUR STRATEGY IN ACTION
2022 progress
The International Solutions segment
saw revenue more than double to
£148m, as the roll-out of OSP
continued globally
This was the first year that we
launched more sites for partners
outside of the UK with eight going
live internationally, six in the US and
one each in Canada and Sweden.
Each of these sites went live on
time and despite global supply
chain challenges
In addition to automated sites, we
ended the year with six partners live
on our In-Store Fulfilment (“ISF”)
solution. This included our Spanish
partner, Alcampo, which went
live less than a year after signing
We successfully continued to build our
future pipeline, adding two partners,
Auchan Polska and Lotte Shopping, to
the OSP ‘club’. We ended the year with
12 leading retail partners, and plans for
64 CFC commitments, up from 10
partners and 56 CFCs at FY21
Future focus
In 2023, the roll-out of
OSP will continue. We
expect to end the coming
year with almost 30 sites
live, including CFCs and
micro fulfilment centres.
We will expand for the
first time into APAC, with
the opening of sites in
both Australia and Japan
for partners.
Modules ordered
232
+9% vs. FY21
Ocado Retail
revenue
£2.2bn
(4)% vs. FY21
Fee revenue in UK Solutions and
Logistics grew 15% to £172m, as we
continued to support our UK partners
to bring their customers a market
leading online service
For Ocado Retail, we launched a
seventh CFC, mini-site Bicester,
which will bring a further 30,000
orders per week at maturity
Beyond the large basket shop, we
also supported the accelerated
roll-out of Zoom, for immediacy
missions, with the go-live of three
sites in and outside of London
Ocado Retail revenue declined by
4%, to £2.2 billion as normalising
customer shopping behaviour post
pandemic, compounded by
macroeconomic uncertainty, offset
continued growth in active customers
Encouragingly, active customers grew
by 13% during the year, driving orders
growth of 6%. However, the value
of the average basket fell 9% and
frequency reduced, hampering
revenue growth
The business remains confident in
the long-term outlook, with the online
channel expected to continue to grow
by 23% by 2027 (IGD) In this context,
capacity investments largely already
made underpin >70% revenue growth
to £3.9 billion
Beyond grocery, we announced
the creation of a new, dedicated,
team to lead our expansion into the
wider ASRS sector, beyond grocery
Mark Richardson is leading this effort,
enabled by the advantages that
Re:Imagined technology has for the
cost profile of our OSP technology.
With the reduced capital and
operating costs the Re:Imagined
brings for both partners and Ocado
Group, we believe that it will be the
highest-throughput and lowest-cost
technology in the sector
We’re ensuring our technology, implementation
and services deliver industry-leading returns
and lowest-cost operations.
In the UK, we will continue to help
Ocado Retail to expand its presence in
the large basket shop and immediacy
markets with the opening of Luton
CFC and at least one Zoom facility.
Notwithstanding short-term
consumer pressures, Ocado Retail
is well positioned to continue to
grow customers and take share
of the online channel in the UK.
We don’t stand still. We are confident
that we will continue to build out our
future revenue pipeline within and
outside of grocery, with current and
prospective partners.
Link to risks
Product Commercial Proposition
Product Performance
Supply Chain
Adding OSP partners
in new and diverse
geographies; growing
addressable market
opportunity and
commitments.
Increasing roll-out of
OSP underpins significant
and recurring future
revenue stream.
Global OSP roll-out
picking up pace
2022 saw a further acceleration of
our OSP roll-out, with nine CFC sites
and three Zoom (Micro fulfilment
centres) sites going live for partners.
This represents a significant step up,
from just 1 robotic CFC site live at
FY19, and 10 by FY21. This capacity
brought 38 new modules live, +62%
year-on-year, with the majority
reported in International Solutions,
driving a 122% increase in revenue.
This is secure and visible recurring
revenue that we will continue
to build on in the years ahead.
Future. Proof.
29
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OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
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Successfully driving
down cost of ownership
at latest sites to deliver
attractive returns.
Further innovations
in automation,
and to reduce cost
of ownership, will
enable us to deliver
even better returns.
Future. Proof.
Optimise OSP
Economics
OUR STRATEGY IN ACTION
Our focus is on optimising operational and capital efficiency
for our partners and Ocado Group, so that we can both achieve
an attractive return on investment through OSP.
Future focus
We expect Re:Imagined
technologies – available
from the end of 2023 –
to drive a step change
in the economics
achievable for Ocado
Group and our partners.
Driving down direct
site operating costs
Entering 2022, we had an interim
operating cost target of 2 ppts of
site sales, underpinning a path to
c.60% contribution margin at the
CFC level. In our latest sites,
including Purfleet CFC, we have
broken through this target,
enabling us to reduce our target
CFC operating cost to 1.5ppts as
percentage of site sales. As a result
of this, Purfleet is on track to achieve
22% ROCE. Further improvements
from Re:Imagined technologies
underpin an ambition to achieve
40% ROCE, at a site level, over time.
Direct operating cost
(% OSP site sales)
2.0%
(0.7)ppt (improvement) vs. FY21
Mature site UPH
175
+3% vs. FY21
2022 progress
For partners
In the UK, Ocado Retail continues
to evidence the efficiencies our
technology enables for partners
We measure efficiency within CFCs
by units picked per labour hour.
In our mature CFCs, productivity
improvements saw UPH improve
to 175 vs. 170 in 2021
OSP CFCs (all ex Hatfield and
Dordon) achieved an average UPH
of 185, with Andover and Purfleet
consistently >200, ahead of the
pre-Re:Imagined target
Efficiency in the last mile, as reported
by average deliveries per van per week
(Ocado Retail), was broadly stable at
176 compared with 177 in 2021
Enabled by OSP technology, Ocado
Retail continued to operate with
industry-low food waste (food not
sold) of just 0.9% of sales, vs. 2021
(0.6%) driven by higher wastage at
immature sites
This encouraging underlying
performance underpins confidence
in Ocado Retail’s return to a high
mid-single digit EBITDA
A
margin
performance, from around
breakeven in 2022, as volumes
build to cover the fixed costs
of underutilised capacity and
temporary inflationary pressures ease
For Ocado Group
We operate OSP as a managed
service, and are focused on reducing
our costs of ownership whilst
maintaining best-in-class service, to
ensure that we are able to achieve
our targeted returns
Globally, direct operating costs as
a percentage of sales across all OSP
sites has decreased to 2.0%, down
from 2.7% in 2021 on the path
towards the 1.5% target
Purfleet CFC, one of our most recent
sites in the UK, is on track to achieve
a 22% ROCE, before incorporating
the benefits of Re:Imagined
The business is strongly focused on
managing both the level and mix of
central R&D and support costs, to
ensure we are able to achieve our
target segment level economics
as we scale
Technology investments increased to
£344m total cash spend, +35% year
on year, with Group support costs,
also growing to support our rapidly
growing and increasing global CFC
operations. In the coming years, the
business is focused on ensuring both
the right scale and mix of headcount
to support the next phase of growth.
For partners, we expect the benefits
of increased automation to enable a
1ppt+ margin improvement, after fees,
due to reduced labour costs in the
CFC. Re:Imagined will also facilitate
less complex builds and a smaller site
footprint for the same capacity,
which we expect can reduce partner
construction and lease costs by
around 20% for new build sites.
For Ocado Group, lighter and cheaper
bots and grid are expected to reduce
capital costs by 15%. At the
same time, recurring fees will
increase as we share in the benefit
of improved operating efficiency
delivered for OSP partners. Overall,
these improvements underpin
our ambition for a future 40% ROCE
at the CFC site level, whilst better
phasing of capital spend, enabled by
optimised site design, is expected to
reduce the net cumulative peak cash
outflow for a typical CFC by half.
Link to Risks
Product Commercial Proposition
Product Innovation
Supply Chain
Geopolitical &
Economic Uncertainty
31
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STRATEGIC REPORT
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OCADO GROUP PLC Annual Report and Accounts 2022
33
Deliver Transformational
Technology
OUR STRATEGY IN ACTION
2022 progress
We ramped up the roll-out of OSP,
growing operations for Kroger, ICA,
Sobeys and Ocado Retail across
North America, Europe and the UK
We significantly progressed delivery
of Re:Imagined technologies:
– The first installation of On-Grid
Robotic Pick went live in the
second half of 2022. We can now
pick 30% of the range by volume,
and continue to target >50% by
the end of 2023
– The first installation of Automated
Frameload (AFL) also went live in
Purfleet CFC in 2H22
– We have been finalising the
design of the 600 series bot and
have made investments in supply
chain enablement that will help
us to print necessary parts, at
scale. The first installation of the
600 series bot is expected in the
UK in 2023
– With respect to software
improvements, Orbit (virtual
distribution centre) saw an
important step forward, with
the go-live of our first three
OSP automated Micro Fulfilment
Centres in the UK, being
replenished by larger sites
– The first version of Swift Router,
enabling delivery of last-minute
immediacy orders and larger,
longer lead-time orders from the
same van, was in live testing with
partners by year end
– The core shopping journey is now
live on Ocado Flex (more flexible
front end)
– To deliver on these innovations, we
continued to grow our Technology
team, ending 2022 with headcount
of ~3,000, up from 2,600 in 2021
Throughout the year, we evolved key
innovation partnerships:
– We completed the acquisition
of Myrmex, bringing the team
with whom we were already
collaborating on AFL fully into
the Ocado family
– In autonomy, work with Oxbotica,
Wayve continues to be encouraging
– We expect our first prototype
for a last-mile grocery logistics
vehicle to be on the road within
a year. The focus of this prototype
will be on simplifying the problem
of achieving regulatory
compliance on the road, as part
of our ambition towards fleets
of vehicles that can execute last
mile grocery, economically, by
the end of the decade
We are successfully protecting
important innovations, with >1,900
patents granted or patent
applications filed, compared with
>1,500 at the end of the prior year
We continued to robustly defend
our IP. In the ongoing litigation with
AutoStore, we had some important
successes, including the final
International Trade Commission (ITC)
decision in the US. This was handed
down in March, with the full
Commission confirming the initial
determination, in favour of Ocado
Future focus
Our key focus is on
delivering the suite
of seven Ocado
Re:Imagined innovations
for clients, from the
end of 2023.
These are the 600 series bot,
accompanying 600 grid with optimised
site design, On-Grid Robotic Pick,
Automated Frameload, Orbit, and OSP
Flex, which we expect to drive a step
change in the operational economics
and customer proposition of OSP,
offering customers ways of enabling
even shorter lead times to launch
and getting greater productivity
performance out of CFCs of
all configurations.
We are always working on the next
leap, and we will continue to develop
the platform in new ways and
continue to invest to acquire skill
sets we do not yet have, to build in
new and expanded business areas.
Re:Imagined technologies
to deliver transformation
improvements
We expect Re:Imagined technologies to represent
the next step-change in operating efficiency for
OSP partners and Ocado Group. We forecast that
these changes will enable our key operating
efficiency metric – UPH – to increase from our
target of 200+ currently, to >300 at partner sites.
This means under 10 minutes across all direct
labour processes to fulfil a 50-item grocery order.
At the same time, we expect innovations in the build
of the MHE to enable a 15%+ capital expenditure
saving for Ocado Group, and c.20% saving in
construction and lease costs for partners.
Led by innovation, we will always stay ahead, by identifying,
developing and protecting our digital ecosystem.
Link to risks
Product Innovation
Intellectual Property
Talent & Capability
Cybersecurity
Climate
Technology headcount
~3000
+15% vs. FY21
Patents granted
~650
+36% vs. FY21
On track to further
reset the bar in
the economics of
online fulfilment.
Building on over 20 years
of successful, market-
leading innovation.
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STRATEGIC REPORT
34
OCADO GROUP PLC Annual Report and Accounts 2022
35
Deliver on our
Client Commitments
OUR STRATEGY IN ACTION
2022 progress
We have delivered to plan across
go-lives and operations for our
global partners
We went live with nine CFCs and
three micro fulfilment sites for
partners in the year, across North
America, Europe and the UK. Each
of these sites went live on time,
contributing to a 62% increase in
modules live vs. 2021
Our partners have reported market-
leading customer satisfaction scores
in each of the markets where we
are now live with a CFC
Since go-live, we have delivered in
line or ahead of agreed service levels
at operational sites
We are supporting our clients to make
the most out of the OSP platform in
their own operations, leveraging our
over 20 years of experience in online
grocery in the UK
We processed 1.2 billion eaches for
our UK clients, a 6% reduction on
1.3 billion in 2021, reflecting the
challenges to volume growth for these
clients presented by normalising
customer behaviour post pandemic,
and the UK cost of living crisis.
We delivered these volumes with
improved operational efficiency, with
average UPH up 3% to 175 at mature
sites and 185 across OSP sites
Globally, we took steps to strengthen
our client success teams, building
on strong collaboration with
Client Partners already underway.
We expect this early investment
to drive significant value for the
business in the long term as
we support clients to achieve
optimised CFC economics faster
Aside from investing in headcount,
this means a new operating model
that enables local and remote
support as well as short-term
specialist deployments
We have already had some
encouraging results from this kind
of work, helping one of our clients
to improve delivery efficiency
(as measured by drops per van)
by >15%, in around one month since
implementation of an optimisation
plan, with accompanying
improvements in site volumes
The OSP leadership club continues
to be a valuable forum for partners
to share learnings with us, and
each other, across core themes and
touchpoints of the online grocery value
chain. During the year, we facilitated
>40 meetings between senior sponsors
and in committees, chaired by our
partners, covering topics across the
fulfilment chain and as broad as
leveraging data, sustainability and
data protection
Future focus
As the roll-out of OSP
continues, we are
committed to making
the entire partnership
experience – from design
to launch and ramp-up
of OSP – even better for
our partners.
Building on the momentum of 2022,
in the coming year we are focused
on supporting the ongoing roll-out
of OSP, notably bringing two new
partners live with their first CFCs in
Australia and Japan, in addition to
launching additional sites in the US,
Canada and the UK.
Across our growing infrastructure of
early stage CFC sites, we are laser
focused on helping our Client
Partners to achieve optimised
economics, as soon as possible.
Modules live (global)
99
+62% vs. FY21
Total eaches processed
(UK)
1,196m
(6)% vs. FY21
We’re providing efficient and scalable solutions – listening first
and delivering a best-in-class customer service.
Partnership with our clients means delivering on the technology we promised and empowering
them to make the most of what OSP can offer in their respective markets, so that they can give
their customers the best possible online experience and take market share.
Link to risks
Product Performance
Supply Chain
Talent & Capability
Fire & Safety
Geopolitical & Economic
Uncertainty
Climate
Strengthening our
partner success
operating model
We are growing our client success teams to
support partners in early site ramp
and operations. Our strengthened partner
success model will combine top-down
support, in the form of commercial regional
presidents in field support roles,
with specialist teams available for remote
support and/or deployed on assignments
and covering all the key areas required to
be successful in online fulfilment,
e-commerce, network planning, analytics
and construction. These teams have
already seen early success in projects for
partners, including materially improving
delivery efficiency and determining
a roadmap to optimise CFC economics for
specific clients and sites.
Well placed to win
in the online channel
and grow market
share with our Client
Partners.
Supporting our clients
to build on their success
to date and get the
best out of OSP.
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OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
RESPONSIBLE BUSINESS INTRO
Responsible Business
Approach and Priorities
We believe that a strong, materiality-focused foundation
in responsible business will underpin successful delivery
of the goals in our four strategic operational pillars.
Defining our material issues
In 2020, following the creation of the
Ocado Retail joint venture, in 2019,
and the start of our roll-out OSP for
international clients, we conducted
a robust materiality assessment to
re-evaluate our most material issues,
with a focus on our global Technology
Solutions business, providing OSP to
grocery retailers around the world.
We did this in partnership with a
consultancy and through a multi-step
process of (1) desk research,
leveraging established disclosure
frameworks (notably, SASB
materiality maps) and (2) stakeholder
engagement, including interviews
with senior sponsors at OSP partners
and workshops with employees,
investors, suppliers and industry
representatives.
The resulting matrix reflects a
combination of issues that represent
both risk and opportunity for Ocado
Group, as a result of the services we
provide directly through our OSP
(global) or logistics businesses (UK
only), or reflecting the influence we
have on certain aspects of the food
retail operations of our OSP partners
(including Ocado Retail) as a result of
these services. As Ocado Retail is
now a distinct joint venture entity,
these topics no longer include the
issues which the joint venture has
operational and governance oversight
over (e.g. food supply chain, health
and nutrition, animal welfare, or
labelling practices as relates to the
Ocado.com range).
On review, the Board has confirmed
these topics as those most material to
preserving and enhancing value.
Responsible business
governance
Our ESG Committee provides
governance over the delivery of
the ESG programme. The Committee
is chaired by our Group General
Counsel with additional sponsorship
by our Chief Financial Officer.
Members constitute leaders across
the business who are key to our
strategic and operational success.
The Committee meets quarterly, in
a decision-making capacity, and
reports into the Board. It is supported
by a cross-functional working group,
including colleagues from Risk,
Corporate Responsibility, Investor
Relations and Company Secretary.
Members of the working group partner
with business area leads to progress
actions and, where necessary, relay
feedback and refined proposals to
the Committee based on challenges
or opportunities identified. This
governance framework supports us
to monitor and manage the operational
progress of our ESG programme in a
comprehensive way, and to ensure
review of any related ESG disclosures,
in addition to that undertaken by our
auditors as part of the financial results
reporting process.
To support this governance
framework, in addition to regular
discussion of ESG topics, the Board
received specific training in the year
on ESG as it relates to corporate value
and reputation with a particular focus
on climate change.
Priorities for the
year ahead
Building on our progress in
2022, we are targeting further
significant steps forward in 2023.
We will continue our work to
further strengthen and mature
our roadmap to Net Zero targets
in our operations and value
chain by 2035/40 respectively.
This will include:
setting a developed scope 1
and 2 path to Net Zero; a key
strategic deliverable that is
also forms part of our executive
2023 remuneration targets
forming an indicative plan for
our scope 3 path to Net Zero
enhance the maturity of our
TCFD disclosures, including the
development of a Transition Plan
Aligned with our other strategic
focus areas, we will:
collaborate with OSP partners
with an ambition to set a
Solutions-focused KPI in food
waste, aligned with our
corporate strategy
continue to grow Development
Engineering talent pool
(a priority for Technology
Solutions talent attraction)
by diversifying pathways into
this talent population through
targeted programmes and
external partnerships
further support employee
talent growth and experience
by creating career paths
offering different routes for
individual growth for every
role across our Technology
Solutions organisation
SDG prioritisation
Our strategy focuses on the three
strategic opportunity areas identified in
our materiality work as those that can
play a key role in enhancing the positive
impact and competitive advantage of
Ocado Group as a global solutions
provider over time: Talent attraction &
development, energy efficiency &
carbon emissions and food waste.
We have mapped these focus areas
to the most relevant SDGs and their
underlying targets and identified
these are:
Materiality analysis
Importance to stakeholders
Business impact High
High
Low
Low
1
2
3
4
5
Ethics of artificials
intelligence and
robotics
Business ethics
and governance
Energy efficiency and
carbon emissions
Food waste
management
Operational
waste
management
Equipment
life cycle and
circularity
Occupational Health,
Safety and Wellbeing
Employee diversity
and inclusion
Community
engagement
Talent
Attraction
and
Development
Product quality
and governance
Data
privacy
management
Responsible
sourcing
Cybersecurity
6
7
8
9
10
11
1213
14
Strategic opportunity
focus areas
1. Energy efficiency and
carbon emissions
2. Food waste management
3. Operational waste
management
4. Equipment life cycle and
circularity
Environment
and natural
resources
5. Talent attraction and
development
6. Employee diversity and
inclusion
7. Occupational health, safety
and wellbeing
8. Community engagement
Our people
and skills for
the future
9. Product quality and
governance
10. Business ethics and
governance
11. Ethics of Artificials
Intelligence and Robotics
12. Data privacy management
13. Cybersecurity
14. Responsible sourcing
Platform
resilience and
innovation
Our governance structure
Audit
Committee
Board
ESG
Committee
Risk
Committee
Internal Audit
“ As we scale, our
responsible approach will
enable us to mitigate risks
resulting from increased
complexity and an evolving
regulatory and competitive
landscape, and deliver on
commercial opportunities
related to improving
human and natural capital
management.”
Tim Steiner, CEO
Identified by stakeholders as evidencing defining attributes
of the Ocado business model; outperformance to drive
enhanced competitive advantage
7.3 By 2030, double the
global rate of improvement
in energy efficiency
8.2 Achieve higher levels of
economic productivity through
diversification, technological
upgrading and innovation,
including through a focus on
high-value added and labour-
intensive sectors
8.5 By 2030, achieve full and
productive employment and
decent work for all women and
men, including for young people
and persons with disabilities, and
equal pay for work of equal value
12.2 By 2030, achieve the
sustainable management and
efficient use of natural resources
12.3 By 2030, halve per capita
global food waste at the retail
and consumer levels and reduce
food losses along production
and supply chains, including
post-harvest losses
Topic Specific
Committees
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OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
RESPONSIBLE BUSINESS
Talent attraction and development
is one of three key focus areas
that define our responsible business
approach, since success in this
area also represents a significant
strategic opportunity.
Maintaining a strong culture of
innovation, collaboration and
accountability will enable us to deliver
on our extensive innovation roadmap,
and drive improved customer
satisfaction from partners, protecting
and improving our competitive
advantage as a Solutions provider
for years to come.
We are focused on diversifying
pathways into technology, investing
in our development programmes,
and maturing our approach to
diversity, equity and inclusion (DEI),
employee wellbeing and flexibility,
to achieve our talent goals.
A differentiated culture
driving our success
Our culture is one of the great
differentiators that make Ocado
Group what it is today. This is created
by our amazing people in the
organisation who demonstrate
innovation, speed, smart risk-taking
and commercial acumen. Building on
our 22-year history, together we go
beyond for our people, clients,
customers and communities.
Our employees’ commitment to
deliver, in spite of the challenging
global market conditions, has enabled
us to continue to grow, innovate, find
solutions and deliver world-class
service. We’d like to take this
opportunity to thank every one of
our Ocado Group colleagues. Our
people continue to demonstrate
enormous resilience in a challenging
global market by going beyond to
serve our global customers.
We pride ourselves on a culture in
which we live our values and promote
behaviours that support inclusion
and equality.
We’re in it together
Our inclusive community enables our
people to feel a sense of belonging,
part of one respectful and supportive
team. We’re empowered and valued,
kind and understanding, honest and
trusting – in it together.
We can be even better
We’re a community of limitlessly
innovative and ambitious people who
drive positive change. We’re pioneers,
we break the mould, we push
boundaries, learn fast from our
mistakes and lead the way with our
solutions. We inspire and challenge
each other – to be even better.
We’re proud of what we do
We deliver a fast, efficient and
responsible service for our client
partners, for their customers and for
each other. We always anticipate
the future and own our decisions
– proud of what we do.
This culture is what’s driven our
success so far and continues to
underpin delivery of our strategy in
the future, as we grow and transform
our business at pace globally.
The increased ramp-up of our
technology solutions business for
clients around the world will mean
particular growth in our Engineering
and Development teams. These
are highly competitive talent pools.
Reflecting this, our Talent strategy
is focused on diversifying pathways
into, and up, Technology. This
strategy includes activities across the
earliest stages of the talent pipeline
to recruitment and development
within the Group.
Materiality: Talent attraction
and development
Strengthening the
5
talent pipeline
Early stage literacy through university
As a technology innovator, provider
and employer, we believe that we
can play a valuable role in supporting
educational development in the
early stages of the talent pipeline.
A solid foundation of literacy opens
up opportunities to learn to code
and develop in Science, Technology.
Engineering and Maths (STEM)
subjects, which can support
pathways into technology
employment later on.
TutorMate and Little Lives UK:
improving early stage literacy
TutorMate is a virtual reading support
programme, partnering volunteers
with schools and children across the
country to provide remote reading
support via an online platform. Since
September 2020, Ocado volunteers
have spent almost 800 hours reading
with 5-7-year-olds, helping to expand
the opportunities available to these
children through better reading skills.
To further facilitate learning, in
2022 we began working with the
charity Little Lives UK, which support
disabled and disadvantaged children
and young people to help them
build stronger futures. We donated
technology equipment to help
young people have greater access
to a digital world.
Code for Life: making coding
accessible to more children
Code for life is an Ocado-run
programme that has been in
operation for almost ten years, with
the stated ambition of ensuring every
child has the opportunity to learn to
code. As an online teaching resource
and learning tool, it is highly
accessible for all ages and abilities
(Key Stages 1 to 4) and free and easy
to use. As a result, the tool has scaled
significantly and now has >500k
registered users in >160 countries.
We are continuously improving the
reach and functionality of the tool for
users. And, importantly, we ensure
security and alignment to the
Information Commissioner’s Office
(ICO’s) Age Appropriate Design Code
and have installed new features such
as level access moderation and
age-based registration, to this effect.
Investing in graduates and facilitating
upskilling opportunities
As we continue to scale, we need
to attract the bold and ambitious
employees who will embody our
culture and deliver our strategic aims.
To support our efforts we are finding
ways to attract the best talent from a
variety of diverse backgrounds, and
to reskill our colleagues to enable new
and different professional pathways
into roles such as Technology.
Tailored Graduate Programmes
We onboard ambitious graduates
who help us solve problems for retail
partners all over the globe. Our
Graduate Programme offers tailored
programmes to support different
craft development across Software
Engineering, Hardware Engineering,
Business Management and Analytics,
alongside specialist programmes
across People, Finance and User
Experience (UX).
We train c.100 graduates per annum
over a two/ three-year programme,
with graduates completing six-month
placements across the full breadth of
the organisation. We partner with
universities and third party
organisations such as the 93% Club
and ‘IT’s not just for the boys’ to
ensure we enrol a diverse pipeline
of talent and are proud that 56% of
our current Engineering graduate
population identify as female, in
comparison with 20% in 2021.
At Ocado we are focused
on continuing to deliver
transformational technology
and fulfil our commitments
to our partners. In order to
achieve our growth
ambitions, we need to
attract, retain and develop
the best talent.
As identified in our principal risks
(talent and capability) this is a key
challenge for the business. We are
scaling our research, development
and platform delivery at pace for
our partners, and navigating the
increased complexity that a
growing global workforce brings.
We expect our work to support
talent attraction and
development at Ocado Group,
to enable our strategic success
whilst also contributing to a
stronger and more resilient
society, by enabling more
opportunities in roles of higher
economic productivity (8.2) and
of an increasingly diverse and
equitable nature (8.5).
8.2 Achieve higher levels of
economic productivity through
diversification, technological
upgrading and innovation,
including through a focus on
high-value added and labour-
intensive sectors.
8.5 By 2030, achieve full and
productive employment and
decent work for all women and
men, including for young people
and persons with disabilities, and
equal pay for work of equal value.
Code for Life: open source
coding resources
Proof: With more than 500k users enrolled globally,
Code for Life continues to offer the opportunity for
children and young people to learn to code, aligned
with UK national curriculum.
Future: Working with internal and external
stakeholders to understand the full lifecycle of our
commitment to STEM education. From age 6/7
through to our support of the Apprenticeship Levy
across Group and finalising our seat on the steerco of
the Centres for Doctoral Training Initiative; as well as
how we can expand our sphere of influence across
the ‘Women in Tech’ & ‘Girls in STEM’ movements.
Discover
more online
Our people and skills
for the future
Contents
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OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
Spotlight on leadership diversity
RESPONSIBLE BUSINESS
Our People and Skills for the Future
continued
Talent development data
610
programmes have been completed
with the Ocado Leadership &
Management Academy
335
more people are in the process
of completing programmes
90%
of graduates are likely to
apply what they have learned
to their roles
78%
would recommend the
programme they completed
613
projects/assignments have
been submitted where people
have applied their learning
to their roles
173
people have completed the
six-week core programmes
(Launch into Leadership or
Mastering Management Essentials)
3.5k hours
Assuming an average of
2.5 hours per week of any
programme for learning and
application, the above equates
to approximately 3.5k hours
of applied learning
Upskilling new hires and
current employees
Apprenticeship Levy
Ocado Group continues to invest
into the Apprenticeship Levy to fund
training and qualifications for current
employees and new hires including our
people on graduate or apprenticeship
programmes. We currently have 81
people upskilling in areas including
Technology and Engineering and we
plan to expand our apprenticeship and
reskilling programmes in 2023 to focus
on technical talent.
Bot School
Our bots are a unique and bespoke
combination of hardware and
software and ‘Bot School’ is our main
training package that introduces any
new starter to the combination of
these technologies. Two weeks of
intensive theoretical and practical
workshops on the intricacies of our
latest series of robots enables a
trainee to become part of the
engineering operation.
In 2022 we have successfully
onboarded 38 Technicians
and Engineers with this training,
including ten colleagues from our
Ocado Logistics business, who have
transferred into our Tech Operations
teams in the Technology Solutions
business as a result.
Materiality: Employee Diversity
and Inclusion
A key enabler of development
We recognise that in order to retain
and develop the diverse talent that
we welcome to Ocado Group, we
need to continue to improve our
understanding of diversity and
inclusion in the business, and to take
action to support progress towards
our ambition to become an even more
inclusive organisation. Fair treatment
to all, and an inclusive approach to
our processes, policies and practices
are core to achieving that.
Supporting development
within Ocado Group
To deliver strong and sustainable
growth for our Company, once in
the business our employees must
continue to grow with us. We are
investing in tools and training to
support this ongoing development.
Our comprehensive efforts across
leadership development, Diversity
and Inclusion and broader employee
wellbeing, health and safety underpin
our success in maintaining a target
employee eNPS at or above the
Technology benchmark. In FY22, we
achieved an employee Net Promoter
Score of 31 (25 in FY21). We consider
employee engagement as a KPI for our
human capital management approach,
to which executive remuneration is
also aligned.
Read more KPIs
pages 65 and 66
Read more Executive remuneration
on pages 147 to 173
Investing in leadership
We are committed to maintaining
and strengthening our strong people
culture and our leaders play a critical
role in shaping the talent and culture
we want.
We have made a significant
investment into cultivating leadership
skills across the business over the
past 18 months. The Ocado
Leadership & Management Academy
provides support with development,
and applies across all levels – from
aspiring and new line managers to our
executive leaders – and is available to
colleagues in both our Logistics and
Technology Solutions segments.
Activities have included Leading
Inclusively sessions and delivering
a Manager Onboarding Playbook as
well as New Leader Assimilation.
In addition, this year we launched:
– Leadership & Management
Academy, providing certified
learning programmes with top
business schools, accessible to
all employees globally; and
– Leader Learning Live event series
with over 130 executive and
senior leaders from across our
organisation, highlighting human
leadership, exploring what this
means in our evolving way of
work and the evolution of the
management role. The need to
listen, respond empathically and
build community for teams has
never been more critical.
Improving DEI insight to inform
our action plan
In 2022, we took significant steps
to improve business insight in this
area, including:
– Undertaking the Global Equality
Standard (GES) assessment and
review process, administered by
Ernst & Young (EY), to benchmark
our DEI competencies against
other businesses
– Expanding our demographic data
capture to track social mobility
and caring responsibilities
Alongside other data, we have used
this work to formulate a clear action
plan to prioritise next steps in DEI in
the years ahead.
Our strategic focus areas include:
improving people data and insight
by utilising deep dive analytics and
talent data; diversifying pathways
into Technology with targeted
programmes for technical skills; and
to shape inclusive ways of working,
including recruitment and promotion
processes as well as targeted support
for minority groups.
Supporting diversity and inclusivity
in hiring and development across
our segments
As we refined our future roadmap,
we continued to make active progress
across the business by providing
attractive work and development
opportunities, whilst acknowledging
the distinct characteristics of our
two businesses.
31 eNPS
(Technology Solutions)
in FY22
Ocado Group
business headcount
Total number
of employees
Board level
gender diversity
2018 2019
15,152
18,618
19,347
19,744
14,163
2020 2021 2022
34
19
10
4
15,517
3,847380
Senior management
gender diversity
Female Male
Not disclosed
Ocado Logistics
business headcount
3,853
1,322
274
11,664
2,525
106
Technology Solutions
business headcount
* Headcount as at end of FY22
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Our People and Skills for the Future
continued
Business wide
We introduced Advancing Leaders
Programme and Ocado Group Equity
Mentoring Programme, in which
over 100 mentors and mentees have
taken part to date, supporting the
growth of women and ethnic
minorities within our organisation.
Ocado Logistics
In the UK, we employ just over 14,290
people in our Logistics business. As a
significant employer, we are focused
on providing great employment and
development opportunities, building
fairness and inclusivity into each
stage of the employee experience.
To further these efforts, in 2022 we:
– revamped our assessment centre
format to identify top talent for
development, and build fairness
and inclusivity;
– partnered with the Department for
Work and Pensions (DWP) on its
Way to Work campaign to support
people getting back into work faster
following the Covid-19 pandemic.
This included a dedicated account
on the DWP’s ‘Find a Job’ site and
access to events such as job fairs,
recruitment events and Sector-
based Work Academy Programmes
(SWAPs). We currently have SWAP
programmes across the UK network
for Customer Service Team
Members and Personal Shoppers.
– piloted a development programme
for hourly paid team members to
gain the skills and experience to
achieve their first management
role; and
– Career Development Framework
and pathways commitment to
enable people to self-navigate their
learning and development.
Evidencing our success, we
continued to promote internally for
most of our frontline manager roles.
In Ocado Logistics, a large proportion
of management hires in our CFCs
and delivery operations network
are internal promotions, many of
whom will have come directly from
our driver and warehouse colleague
talent pool.
Technology Solutions
We employ over 5,400 people in our
global platform technology business,
across business areas including
Ocado Technology and Ocado
Solutions. As we ramp up the roll-out
of OSP sites for our partners around
the world, our Technology and
Engineering roles will experience
particular growth.
These fields are highly competitive
and traditionally less diverse. By
taking steps to improve employee
and future leader diversity, we will
continue to expand and strengthen
our accessible talent pool, facilitating
the future growth of the business.
Read more on Board diversity policy
in Governance section pages 130
and 134.
Military hiring
We are committed to supporting
the Armed Forces community
and recognise the value serving
personnel, veterans and military
families contribute to our business
and society. To support the growing
number of veterans working across
Ocado we have established a global
Veterans Community, sponsored by
the President Americas, Ocado
Solutions and Chief Partner Success
Officer (Mark Bentley) and led by
Paul Smithen, an Armed Forces
veteran. We are delighted to have
received the bronze award from the
Defence Employer Recognition
Scheme, which recognises the
commitment and support from UK
employers for defence personnel.
We also worked with the Officers
Association to promote opportunities
at Ocado and participated in its
career event supporting Women
into Employment in March 2022.
Materiality: Occupational Health,
Safety & Wellbeing
A stronger focus on
wellbeing and flexibility
Wellbeing: a new strategy
The pandemic and the rise in
technology have fundamentally
changed expectations of work roles,
ways of working and support needs
for employees and employers around
the world. At the core of all this is the
increasing importance and relevance
of employees’ wellbeing.
We have seen similar changes at
Ocado. Peakon – our global listening
tool – has consistently shown the
importance of wellbeing to employee
engagement. To adapt to this change,
we assessed our maturity using the
CCLA benchmark
*
and launched a new
Health and Wellbeing Strategy in June,
focusing on four key strategic priorities:
Reduce stigma
– we’ve created a global network of
68 Mental Wellbeing Champions
providing an added layer of support
for our people. These champions
are part of a global network and
have continuous learning and
support to develop their skills.
– launched a Mental Health
Foundations Course – Mental
Health Matters – to all our people,
combining expert content and
digital learning.
Create a conversation
– re-launched our Health and
Wellbeing Community to enable
sharing, learning and conversation.
The community (658 members
globally) is sponsored by Ocado’s
Chief Finance Officer, Stephen
Daintith, who has advocated for
this topic throughout the year.
– we have run several campaigns to
promote our wellbeing and inclusion
products and to drive awareness.
Along with the Ocado Foundation,
we partnered with Run Grateful to
encourage practising movement and
gratitude (15,752 miles achieved);
held a live panel with Paralympic
athletes during Global Inclusion
Week and have created toolkits on
Men’s Health and Women’s Health.
Building a more connected approach
with broader Health & Safety
Our work across employee wellbeing
focuses on creating a wider and
stronger connection with our overall
HSE (Healthy & Safety Executive)
strategy, as we recognise the
connection between mental and
physical wellbeing.
We continue to strengthen our HSE
approach to support Ocado Group’s
goal of establishing better ways of
doing business on a global scale.
Our vision is “to establish HSE ways
of working that reflects and supports
our global organisation.”
This also means protecting the health
and safety of our people, as well as
those impacted by the work that we
do, including the employees of our
client partners, who use our
technology in our CFCs around the
world, and members of the public.
In 2022 we continued to deliver on
this through:
– a global HSE management system
that reflects the scope of our entire
organisation.
– a new HSE team structure to
enable Ocado Group to understand
and manage risk effectively –
providing each of our business
areas an approach that meets the
requirements of the jurisdictions we
operate in as we build and service
CFCs for our client partners
– the right controls to enable Ocado
Group to improve and exceed legal
compliance requirements
– involving our people in developing
our approach – because they know
what needs to change
* The CCLA Corporate Mental Health Benchmarks are the culmination of sustained collaboration with workplace
mental health experts, data providers, charities and UK-listed and global companies. As responsible investors,
we want our companies to be successful and to make a positive difference in their sphere of influence. Successful
companies safeguard staff mental health because in doing so they also safeguard their economic success.
Empower wellbeing
– we recognised that usage across
our current health and wellbeing
services was dispersed and so
we have been reviewing and
onboarding new proactive and
reactive wellbeing solutions for
our people as well as evolving our
family care policies.
– to support our future thinking and
demonstrate our commitment to
creating mentally health workplaces,
we have signed a leadership
pledge with The Global Business
Collaboration for Better Workplace
Mental Health and are partnering
with Mind Forward Alliance.
Flexibility and choice: improving
work-life balance in creative ways
In today’s ‘always on’ working
environment – especially in the
rapidly growing and changing
working world of Ocado Group –
our employees desire more flexibility
and choice, so that they can better
personalise work to fit with their
individual needs. To respond to these
requests we continue to evolve our
offering, as described below:
– Work From Anywhere policy:
enabling those who can work
remotely the choice to work for
one month per year in another
country or location. This opens up
a worldwide workspace, giving
our people the freedom to be
closer to family, expand their
horizons or simply have a change
of scenery. >1k colleagues have
participated to date
– Self Shift Swap: launched in
March to support a better quality
of life for Logistics colleagues in
both delivery and fulfilment roles.
It allows our people to swap a given
shift based on availability and is
based on the size of the site, limits
on certain days and more
– more choice of part-time and
fixed shifts helping to attract
and retain a more diverse
workforce, including parents
and second jobbers.
Wellbeing highlights
68
Mental Wellbeing
Champions providing
an added layer of
support for our people
658
members of
re-launched
Health and Wellbeing
community
15,752
miles achieved
with Run Grateful to
encourage practising
movement and
gratitude
>1k
colleagues have
participated to date
as part of our Work
From Anywhere policy
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Our People and Skills for the Future
continued
“My favourite thing about
the Discounts+ portal is
that it’s so easy to use.
And who doesn’t love
discounts on their favourite
retailers or dining.”
“I like the app, it is very
handy and easy to use.
I also like that there is a
variety of retailers to choose
from. Already saved myself
a whole bunch of money.”
Ocado Employees using Discounts+
Fair reward and recognition
We are committed to ensuring our
people are rewarded fairly and
competitively for their contribution
to our success and that they feel
supported in a holistic way, not just in
their rate of pay. Our work to further
develop and empower our people
builds on a strong foundation of fair
reward and recognition. We continue
to evaluate and evolve our approach
to reward to ensure we remain
competitive in markets we operate in.
Investing in basic pay
In Logistics, we have invested in the
package recognising the pressures in
the labour market and the challenges
our employees were facing. Pay
settlements ranged between c.4.5%
and 7.5% for the majority of our hourly
paid colleagues. We also made a
significant investment in our large
goods vehicle drivers which was well
above the current inflation percentage.
We made a further notable
investments in pay for employees in
our UK Tech Solutions business with
average salaries rising by 7% year-on-
year vs. an investment of 3.5% for our
Executive Directors.
A comprehensive benefits package
Benefits+ platform
Our benefits platform (Benefits+)
continues to expand to all Ocado
locations, with plans for everyone to
have access in 2023. We are delighted
to see that employees are engaging
with the platform (100% US employees
submitting a benefit, 60% Bulgarian
colleagues logging in within their first
two weeks, 60% of UK logging in every
three weeks and 30% submitting a
benefit). We have also been reviewing
the benefits provision hosted on the site
and have introduced pension provision
in Japan and Sweden, alongside new
UK voluntary benefits including will
writing and health screening.
In the UK, we continue to promote
our retail discount on Ocado.com and,
where possible, we partner with the
Company Shop Group, the UK’s leading
redistributor of surplus food and
household products. Internationally,
we utilise local relationships to deliver
retail discounts.
Saving for the future
Ocado encourages shareholding for
our people by awarding Free Shares at
0.5% of salary to all employees globally
with six months service or more, twice
a year. We also offer a Sharesave
scheme and Buy As You Earn plan to
our people in the UK and an Employee
Stock Purchase Plan to international
employees, which means virtually
everyone can buy Ocado shares and
become an owner of our Company.
The launch of the Ocado Employee
Share Purchase Plan internationally
has resulted in an overall take-up of
47% across our non-UK sites.
Award-winning recognition scheme
in Ocado Logistics
Our people work hard, and recognising
their valuable contributions is an
important way to build and strengthen
our culture. Our All Stars scheme in
Ocado Logistics has been
acknowledged as a best in class
recognition scheme for our people.
Since the launch, 46% of our people
have recognised someone or reacted
to a recognition, and 48% have
received an award. The scheme won
Best Communications/Engagement
Initiative at the WSB Awards 2022 and
we were highly commended for the
Best Motivation or Recognition scheme
at the Employee Benefits Awards.
Materiality: Community Engagement
Ocado Foundation:
empowering employees
to give back
The Ocado Foundation remains
the home of our charitable and
fundraising activity. We support
employees globally in their
fundraising endeavours and
volunteering efforts with matching
donations and hours volunteered.
Ocado Foundation for Good:
continuing to build high impact
grant making activity
With our partner BizGive, we
successfully approved more than
£20,000 of grants to charitable
projects across the UK in 2022,
continuing to support ‘the many
rather than the few’ with grants
of up to £1,000.
One such project was to the YMCA
in Wearside, Sunderland, where they
used the grant used to buy laptops
to support online educational courses
for young, homeless people. More than
50 have now completed the courses,
41 have gone onto college, and six
have gained employment and three
have undertaken work placements.
Looking forward, and as we further
develop Community Engagement as
a material issue to the business,
social impact reporting and wider
engagement with the SDG’s across
the business remains a priority.
2022 Spotlight on cost of living crisis:
initiative to support employees
Alleviating the impact of the cost of
living crisis has been a central theme
for our business in 2022. Where
possible we’ve ensured continued
access to products and services that
enable our employees money to go
further; signposting our colleagues
most in need to advice and support
when needed. Our discounts offer has
helped our people to save money on
various lifestyle products and services
(£130,000 to date in the UK) with 72%
of active users on the Discounts+
platform. Discounts+ is now available
in the UK, US, Canada, Bulgaria, Japan
and Australia and is rolling out to our
other global locations in 2022/2023.
We launched our Salary Advance
offer in the UK so that employees
can immediately access half of what
they have already earned in a month,
helping with unexpected costs.
This new benefit exists alongside
our Salary Finance free financial
education which includes a range
of tips and tools for budgeting and
saving to help make managing money
easier. We have expanded our
Liftshare offer in the UK to main CFC
sites so that our employees can save
and share the cost of driving to work.
Matching and amplifying
colleague support for local
and global causes
Ukraine
The humanitarian crisis in Ukraine
prompted colleagues across Ocado
Group to make donations of time and
money. The Ocado Foundation match
funded donations to registered
charities in the UK and worldwide,
totalling in excess of £70,000, as well
as supporting colleagues who continue
to kindly host Ukrainian families.
Local impact initiatives
Colleagues continue to support
charities and charitable ventures close
to their hearts in a variety of ways,
with a few such examples being:
– a site-wide Bake off in Sofia,
Bulgaria for “Eyes on Four Paws
Foundation”, with all funds matched
by the Ocado Foundation.
– supporting the ‘Magic of Play’
Christmas appeal for Lister
hospital in the UK, by raising
funds to support the purchase of
Nintendo Switches and portable
DVD players to keep children
distracted during treatment.
c.4.5%
- 7.5%
pay settlements for the
majority of our hourly
paid colleagues
7%
Pay settlements for
UK Tech Solutions
business
Comprehensive benefits
47%
Overall take up
of Employee Share
Purchase plan
internationally
100%
US employees
submitting
a benefit
60%
Bulgarian
colleagues logging
in within their first
two-weeks
60%
of UK logging in
every three weeks
30%
submitting
a benefit
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Improving operating and capital
efficiency is a core tenet of the
OSP platform, and at the heart of
our strategic objective of improving
OSP economics. Improving our
efficiency includes reducing our use
of, and impact on, natural resources
over time. As a solution provider,
this progress will naturally be passed
on to our partners, supporting our
objective to grow revenue.
As identified in our Principal Risks
(Climate), failure to achieve this,
and enable it for our OSP partners,
could similarly undermine the
long-term operating economics of,
and demand for, our technology.
Our key materialities in this area
are: Energy efficiency and carbon
emissions, Food waste, Operational
waste, and Equipment Lifecycle and
Circularity. We include our climate-
related financial disclosures (TCFD)
alongside exploration of operational
progress in these areas below.
Materiality:
Energy efficiency and
1
carbon emissions
Energy efficiency and carbon
emissions: scope 3 reporting a
key step to support delivery of
Net Zero ambitions
Ocado Group targets Net Zero in
our operations and value chain
by 2035/40. In 2022, we made
significant progress towards
shaping the detail of this roadmap
with inaugural Scope 3 reporting.
A summary of our journey and
progress, to date, is included below.
You can find our Scope 1-3
emissions footprint detailed on
pages 53 to 55, as part of our
TCFD disclosures. Further detail is
available in our ‘Basis of Reporting’
document on the Group website at
https://www.ocadogroup.com/
our-responsible-business/corporate-
statements/.
Strong history reporting and
improvements in scope 1 and 2
emissions reflects the weight
of our operations to date
Our Logistics operation drives our
scope 1 and 2 footprint with almost
100% of total energy use (scope 1 and
2) UK based. These emissions derive
primarily from our fleet and Ocado
premises (mainly CFCs).
Evidencing the commercial
opportunities that this work unlocks,
our product development teams
have already identified re-design
opportunities in our Re:Imagined
technologies, to reduce emissions for
Group and partners (see case study).
Read more about this in the
case study above
Reflecting the maturity of our UK
operations, we have reported our
scope 1 and 2 emissions since
2012/13. Since then, we have
delivered a cumulative 44% reduction
in Scope 1 and 2 carbon intensity (as
defined by our location-based intensity
KPI measure of tCO
2
e per 100,000
orders), even as total emissions
have increased by 92%, reflecting
the rapid growth of our UK partners.
Key activities behind this progress
include fuel efficiency, investing in
alternative fuels, and changing the
purchasing of electricity to renewables
across our entire building estate.
Scope 1 and 2 emissions intensity
remained flat in 2022, a result of
improvements in fuel and vehicle
efficiency, and routing optimisation,
offset by growth in the van fleet.
Scope 3 reporting a key enabler to
inform further progress as we scale
the Technology Solutions business
Scaling as a Technology Solutions
provider will primarily increase our
scope 3 emissions. This reflects our
model, where we provide the OSP
platform as a managed service. This
drives downstream emissions, from
clients using the platform, including
the emissions in the expected energy
use and key hardware pieces of CFC
modules sold to clients. Upstream
emissions reflect purchases we make
of services or equipment to run our
technology. These include data hosting
and water usage, and the purchase of
capital goods related to electrical
equipment and machinery, electronic
products, and UK CFC construction.
Given the growth of our Technology
Solutions business, in 2022 we took
the critical step of mapping our scope
3 emissions, in partnership with
xtonnes, a carbon analytics provider.
We are pleased to have assessed
all 15 scope 3 categories.
This work enables the mapping of the
Net Zero roadmap in our value chain,
a shared management remuneration
objective for 2023. The resulting
roadmap will support deeper insight
for the Board as we mature our
assessment of those climate-related
risks and opportunities described in
our following TCFD disclosures.
Task Force on Climate-related
Financial Disclosures
Alongside this scope 3 progress,
we have further strengthened
governance over, and assessment of,
climate-related risk and opportunities
for Ocado Group, discussed in our
climate-related financial disclosures
in further detail. Consistent with
Listing Rule 9.8.6R(8) we set out
below our climate-related financial
disclosures consistent with all of the
TCFD recommendations and
recommended disclosures.
By this we mean the four TCFD
recommendations and the 11
recommended disclosures set out
in Figure 4 of Section C of the report
entitled “Recommendations of the
Task Force on Climate-related
Financial Disclosures” published in
June 2017 by the TCFD. We are
working towards the updated 2021
TCFD recommendations when they
apply to us next year.
Governance
The Board’s oversight of climate-
related risks and opportunities
Board – responsible for our strategy,
which includes the commitment to
reduce our environmental impact.
Climate-related risks and
opportunities are reported to
and considered by the Board in line
with our Enterprise Risk Management
(“ERM”) approach (pages 86 to 89).
The Board oversees budgeting for
mitigation plans as part of our five
year planning. To inform its decision-
making, it undertook two climate risk
and TCFD training sessions during
the year.
This year each of our directors had
an individual objective relating to
ESG including compliance with TCFD,
with internal objectives set more
broadly around scope 3 baseline and
improvement initiatives (refer to page
163 for a detailed breakdown).
Moving forward the 2023 AIP
corporate scorecard of performance
measures (page 151) includes ESG.
Reflecting the nature of our
OSP model, we believe we
are particularly well placed
to drive value for clients,
and wider society, in our
focus areas of Energy
Efficiency & Carbon
emissions, and Food
Waste; through technology
innovation that either
directly reduces the natural
resources required to build
and run the OSP platform
(7.3, 12.2), or via the
operating benefits that OSP
can enable for our partners
in online grocery fulfilment
(12.3). Notably, as we scale,
the multiplier on this impact
will be significant.
7.3 By 2030, double the
global rate of improvement
in energy efficiency
12.2 By 2030, achieve the
sustainable management and
efficient use of natural resources
12.3 By 2030, halve per capita
global food waste at the retail
and consumer levels and reduce
food losses along production
and supply chains, including
post-harvest losses
Our governance of climate-related risks and opportunities
Leadership have oversight of climate-related risks and opportunities through the Board,
Audit Committee, Risk Committee, and ESG Committee. Management level sub committees
and working groups coordinate delivery of the business level actions.
Audit
Committee
Board
ESG
Committee
Risk
Committee
ESG Sub
Committee
TCFD Working
Group
Carbon Steering
Committee
Ocado Retail
Alignment meeting
Incorporating scope 3 insights into
Re:Imagined product development
Proof: In collaboration with a specialist carbon
analytics provider, product development teams are
analysing areas of significant carbon impact across our
OSP platform, highlighting the most carbon intensive
areas of the upstream, operational, and downstream
phases of the product life cycle, and identifying
potential opportunities for emissions reduction.
Future: Development teams continue to identify
re-design opportunities for Re:Imagined products that
require less supporting or carbon intensive material,
create fewer transportation emissions, or reduce
operational energy use.
Discover
more online
Environment and
Natural Resources
Contents
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Audit Committee – meets quarterly
and consider climate-related topics as
part of its review of the effectiveness
of risk management and the
associated system of internal control.
Risk Committee – meets quarterly and
has delegated oversight of our Climate
principal risk to the ESG Committee in
line with ‘How we manage our risks’
(pages 86 to 95) to better leverage
subject matter expertise.
ESG Committee – established in
2021, convenes quarterly and has
oversight of our climate-related risks
and opportunities. The Committee is
chaired by Neill Abrams, Executive
Board sponsor of our climate change
agenda. He, along with Stephen
Daintith, our CFO, maintain oversight
of our Net Zero and climate risk
management activities and reporting.
Members include Claire Ainscough
and James Matthews. Quarterly
updates on its decisions and actions
are provided to the Risk Committee,
Audit Committee and the Board.
Training was obtained during the year
through engagement with third
party specialists.
Ocado Group and Ocado Retail
Alignment meeting – the Ocado
Retail TCFD programme is
governed independently from
the Ocado Group programme in line
with the governance structure for
the management of climate-related
risks and opportunities set out below.
A half yearly meeting was held to
ensure and maintain appropriate
alignment and management of
dependencies across the two
programmes. Various operational
meetings were held in addition to this.
Management’s role in assessing
and managing climate-related risks
and opportunities
ESG Sub Committee – is responsible
for managing climate-related risks and
opportunities. Members include Neill
Abrams, Stephen Daintith and the
TCFD Working Group (see right).
The ESG Sub Committee monitor and
reviews the management of climate-
related risks and opportunities, with
Committee members providing
oversight of various workstreams.
Our training was obtained during the
year through our engagement with
third party specialists.
TCFD Working Group – a central team
which coordinates the management
of climate-related risks.
Carbon Steering Committee –
the management meeting responsible
for the delivery of carbon-related
strategy and targets. Chaired by
members of the TCFD Working Group,
the Carbon Steering Committee
monitor and reviews the delivery
of carbon-related strategy and targets.
Our plans for the upcoming
12 months include:
– building on recent Board training
with strategy workshops;
– further embedding scenario
analysis within our ERM
approach; and
– extending our planning horizon to
provide detail beyond our five
year forecast.
Strategy
The business strategy and financial
planning are informed by our risk
management process. Climate is
identified as a principal risk (page 95),
with many of the impacts
materialising over the longer term.
To better understand and manage
these we extend our time horizons
beyond our five year strategic plan.
These are summarised in the
table below.
The climate-related risks and
opportunities the organisation has
identified over the short, medium
and long term
Our risk process identifies risks and
opportunities globally. During the year
we selected the following risks for
formal scenario analysis, focusing on
the UK, where our material business
operations are based, to better
understand their financial impact on
the business over the short, medium
and longer term:
Risks
– Urban flood (climate impact
on supply chain): Increased
severity of extreme weather
events such as heatwaves and
floods disrupting the supply
chain (acute physical risk).
– Heat stress (energy costs):
Increased heating and cooling
requirements (chronic physical risk).
– Carbon pricing and emissions
offsets (energy costs):
Introduction of carbon pricing
associated with carbon intensive
products and processes (policy
and legal transition risk).
– Fleet transformation: Fleet
transformation required due to a ban
on the sale of internal combustion
engines in our vans and trucks
(policy and legal transition risk).
Opportunities
– Switching to low carbon/circular
design alternatives (processes
and products) along the supply
chain (transition opportunity).
– Increased partnerships as
sustainable e-commerce solutions
become more desirable for retailers
(transition opportunity).
The impact of climate-related
risks and opportunities on the
organisation’s businesses, strategy
and financial planning
We undertake scenario analysis. During
the year our analysis considered these
risks from a UK perspective, excluding
other geographical regions in this
instance, to encompass our UK
Logistics business, and our shared
ownership Retail business. Our data
models used standard climate
databases, and considered an Orderly
Transition scenario and a Hot House
World scenario. Additional information
on these scenarios is included in the
graphic below.
We engage with stakeholders across
the business to confirm the resilience
of our strategy, and inform our five year
financial plan, via associated mitigation
practice and plans, including the
prioritisation of climate initiatives.
Aspects considered are set out in
the list below:
– Plant replacement to deploy
improved efficiency cooling and
heating systems across the
estate (refer to heat stress risk
on page 50);
– assessment of renewable energy
generation opportunities – which
also improves energy resilience;
– Re:Imagined – product design
opportunities to minimise carbon
intensive inputs (refer to page 47);
and
– site electrification and fleet
transformation. This encompasses
collaboration projects with vehicle
manufacturers, to provide them
with real world testing of next
generation vehicles (refer to fleet
transformation risk on page 51).
Monitoring activity of the risks
and plans for necessary mitigations
to be further developed in 2023.
Link to strategy: In 2022 we clarified
our fifth priority, and renamed it
‘Responsible business approach’.
This priority provides a foundational
bedrock to the other four ‘pillars’ in
the strategy, enabling us to focus on
our resilience and encompassing our
activities to address climate risk.
Our plans for the upcoming
12 months include:
– extending scenarios and further
refining the plans to mitigate the
risks under review.
Environment and Natural Resources
continued
Climate scenarios
– These scenarios are aligned to climate scenarios defined by the Network for Greening the Financial System
(“NGFS”), International Energy Agency (“IEA”) Carbon Price Models and the Intergovernmental Panel on Climate
Change Working Group I (“IPCC WGI”) Interactive Atlas.
– Proprietary Ocado operational data is overlaid to reflect the business strategy and trends.
– Our scenario analysis is performed over a 30-year timeframe, to 2050, aligning to the Paris Agreement and the
UK’s commitment in the Climate Change Act 2008 (2050 Target Amendment) Order 2019.
Orderly Transition
Description
– Climate policies are introduced early and
gradually become more stringent.
– Surface temperature is expected to stay below
a 2°C increase.
Key scenario drivers
– Carbon pricing is introduced in the early 2020s
and gradually increases by 2030.
– Significant levels of investment into energy
efficiency, green electricity and storage, and
carbon capture and storage are sustained from
2030 to 2050.
– Transition risks are expected to grow in
proportion with climate action.
– Physical impacts are less severe (although not
negligible) in comparison with the Hot House
World scenario.
Hot House World
Description
– Some climate policies are implemented,
but global efforts are insufficient in halting
significant global warming.
– Surface temperature is predicted to increase
within a range of 3-5°C.
Key scenario drivers
– Carbon pricing is introduced in the early 2020s
and anticipated to have negligible changes
through to 2050.
– While investment into energy efficiency,
green electricity and storage is still substantial,
investment into fossil fuel extraction and
brown electricity generation is greater than
in the Orderly Transition scenario.
– Transition risks are initially relatively low as limited
action is taken.
– Physical risks are severe, with irreversible impacts.
Medium term
Long term
Risk assessment period
Time horizon
Short term
3-10 years
This provides a
helpful projection
beyond our five
year strategic plan,
to offer additional
near-term insight.
0-2 years
This aligns with the
standard ERM
horizon used for
assessment of
principal and
key risks.
11-25 years
This considers the
impact of climate on
our business over
the lifetime of our
CFCs and other
significant assets.
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RESPONSIBLE BUSINESS
Physical risks
Present day risk Orderly Transition Hot House World
Summary of findings
and actions
Extreme weather – Based on materiality, the current year risk analysis was focused on UK operations,
excluding other geographical regions in this instance.
Urban flood (climate impact on supply chain)
Few existing sites have
direct flooding exposure.
The main impact arises
from disruption to
employees travelling
to work and disruption
to delivery routes.
The level of extreme
weather events projected
under the Orderly Transition
scenario is anticipated to
cause an increase in travel
and delivery route
disruption in the medium
and long term.
The level of extreme
weather events projected
under the Hot House World
scenario is anticipated to
cause greater travel and
delivery route disruption in
the medium and long term.
Our analysis anticipates
a similar financial impact
under both scenarios.
Current and future
mitigation options
– Current mitigation
measures minimise
disruption by
rerouting orders
from alternative sites.
– Higher-frequency
disruption would require
enhancements to improve
delivery resilience.
– Ongoing monitoring
will enable these
changes to be deployed
in line with the budget
planning process.
Heat stress (energy costs)
Present day exposure
is low for the majority
of CFCs.
The main impact is on
energy usage to maintain
food temperature.
Energy usage for CFC
cooling is anticipated to
increase over the medium
and long term. Energy
pricing is also expected to
increase over the medium
and long term.
The combination leads to
increased costs in the short
and medium term, and a
significant increase in the
long term.
Cooling energy usage is
anticipated to increase over
the medium and long term
to a greater extent than
under the Orderly Transition
scenario. Energy pricing is
also expected to increase
over the medium and long
term to a lesser extent than
under the Orderly Transition
scenario.
The combination leads to
increased costs in the short,
medium and long term.
Our analysis anticipates an
increase in the cost of
cooling under both
scenarios.
Current and future
mitigation options
– New CFCs are built with
increased heat resilience.
– Steps would be taken to
retrofit legacy sites as
part of the renewal
process when required.
– Ongoing monitoring would
enable changes in line
with the planning process.
Transition risks
Overview Risk and mitigation
Short-
term
impact
Medium-
term
impact
Long-
term
impact
Carbon pricing and emissions offsets (energy costs)
Carbon pricing includes
both direct carbon
taxes and the cost of
offsetting emissions.
Aggressive climate
mitigation could lead
to implementation of
carbon tax regimes and
an increase in the cost
of emissions offset.
Carbon pricing mechanisms currently exist in 40 countries
and more than 20 cities, states and provinces, with more
scheduled for implementation. Carbon taxes to date have
remained relatively low but are expected to substantially
increase in line with government climate commitments.
Additionally, an increase in the price of fossil fuel could be
caused by reduced supply.
Increased capital expenditure costs of CFCs
In the UK, increased cost of carbon intensive materials
used for CFC construction (e.g. cement and steel) would
likely result in a pass-through of these costs from suppliers,
thereby increasing the capital expenditure cost required
for CFC construction. Internationally, the responsibility for
siting and development of CFC buildings sits with Ocado’s
OSP partners; as such, Ocado has less direct financial
exposure to this risk outside of the UK.
Our Re:Imagined scope 3 work is identifying the most
carbon intensive areas of the upstream, operational, and
downstream phases of the product life cycle, informing
our mitigation activities.
Increased operational costs in the UK
The risk of increased operational costs impacts Ocado
predominantly in the UK where it has direct responsibility
for operation of CFCs. Internationally CFCs are operated
by our partners.
Medium High High
Fleet transformation
The replacement
of vehicles that are
dependent on fossil
fuels could result in
higher costs. There
is also a risk that
technologies selected
at the outset of a
planning process could
become outdated
and obsolete.
Ocado Logistics operates the fleet which enables Ocado
Retail and UK OSP partners to fulfil customer demands.
Currently a high proportion of the fleet are diesel vans
and we intend to transition these to electric or hybrid vehicles.
We are developing a fleet transformation roadmap, which
includes collaboration projects with vehicle manufacturers.
The UK Government, as part of its transport decarbonisation
plan, will end the sale of new petrol and diesel cars and vans
(under 3.5 tonnes) by 2030, while heavy goods vehicles
(above 3.5 tonnes), and new medium sized trucks (up to and
including 26 tonnes) are to be zero emissions from 2035,
with the heaviest (above 26 tonnes) zero emission by 2040.
The majority of our fleet are vans (under 3.5 tonnes) and
trucks (above 26 tonnes). We are a signatory member of the
British Retail Consortium (“BRC”) Net Zero roadmap and
are therefore already committed to decarbonising our fleet
by 2035 as part of its strategy.
One of the key considerations in developing a fleet
transformation roadmap is the timing and scale of
investment. Anticipated improvements in battery pack
technology and the introduction of subsidies is expected to
reduce the cost of fleet transition, however the cost of
waiting to transition could adversely affect our reputation.
Earlier adoption provides a particular advantage under the
Orderly Transition scenario.
Medium High High
Environment and Natural Resources
continued
The resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including
a 2°C or lower scenario
The table below describes the risks and mitigations determined
by our scenario analysis to improve our resilience.
Contents
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Risk management
How processes for identifying,
assessing and managing climate-
related risks are integrated
into the organisation’s overall
risk management
Our ERM approach has identified
climate risk as a principal risk. The
approach to identify, assess and
manage this risk on an ongoing basis
follows our overall risk management
approach which is described within
the ‘How we manage our risks’
segment of this report (pages
86 to 95).
In line with our risk management
process, climate-related risks are
identified and assessed via top
down analysis and bottom up review
of operational risk registers on an
ongoing basis. During the year we
also engaged subject matter experts
to obtain additional external
information and data to fully assess
the climate-related risks.
Amongst other considerations,
ongoing climate risk reviews include
assessment of impact on products
and services; supply chain; mitigation
activities; investment in research and
development; and operations.
The organisation’s processes for
identifying and assessing climate-
related risks
Climate-related risks and
opportunities are identified and
assessed in line with our ERM
approach. Our approach includes
qualitative assessments, which last
year reflected the following:
– Desktop identification of 47
potential climate risk and
opportunities.
– These were shortlisted through
key stakeholder interviews, and
further prioritised through climate
risk workshops.
– Key risks were classified based
on the expected impact. Risk levels
varied across the different Ocado
business segments. We performed
our scenario analysis on the highest-
rated risks.
– Risks such as compliance with
existing and emerging regulatory
requirements related to climate
change are considered against
principal risks such as Climate
(page 95) and Regulatory &
Compliance (page 94).
The organisation’s processes for
managing climate-related risks
Key climate risks are assigned to
senior owners in line with ERM
practice. Risk mitigation decisions are
taken by the ESG Sub Committee and
monitored by the ESG Committee.
Key risks and mitigation plans are
formally reviewed quarterly to ensure
they remained relevant and on track.
Our plans for the upcoming
12 months include:
– further adoption of scenario
analysis and deployment of
additional risk indicators in line
with our standard ERM
procedures; and
– further development of in-house
skills in climate risk management
to reduce dependency on
external consultancy.
Metrics and targets
The metrics used by the organisation
to assess climate-related risks and
opportunities in line with its strategy
and risk management process
We have established metrics and
targets to enable us to manage
and mitigate our identified climate
risks and ensure we capitalise on
opportunities relating to the transition
to a low carbon economy.
We currently use the following
metrics to assess climate-
related risks:
– CDP rating (page 55)
– GHG emissions (page 53)
– Scope 1
– Scope 2
– Scope 3
– Carbon intensity measure –
Tonnes of CO
2
e/100,000 orders
(scope 1 and 2)
– Ocado Retail food waste as %
of sales (page 56)
Remuneration
ESG has been considered in
Executive Directors’ personal
objectives, including compliance
with TCFD, with internal objectives
set more broadly around scope 3
baseline and improvement initiatives.
Read more about remuneration in the
Directors’ Remuneration Report
(pages 144 to 170).
GHG emissions
GHG emissions (Tonnes of CO
2
e)
*
2021/22 2020/21 2012/13
Scope 1 – Direct 96,386 94,912 39,530
Scope 2 – Indirect
Location-based 21,098 22,549 21,613
Market-based 815 1,385 N/A
Total emissions (Location-based) 117,484 117,461 61,143
Intensity measure (Tonnes of CO
2
e/100,000 orders)
Location-based 458 489 823.4
Market-based 379 401 N/A
Scope 3 457,324 N/A N/A
* Uses World Business Council for Sustainable Development/ World Resources Institute Greenhouse Gas
Protocol: a corporate accounting standard revised edition methodology with an operation control approach,
using UK Governance GHG conversion factors.
Under the SECR reporting requirements, we also include Ocado Retail’s carbon
footprint as a large unquoted company in the table (below).
Ocado Retail total energy consumption for 2021-22 is 2,368,441 kWh. It should
be noted that since July 2021 Ocado Retail has been accounting for 100% of
consumption at Apollo Court building, against 72% previously due to the building
being shared with Ocado Group. Also in the last financial year, business
travel has increased, due to fewer travel restrictions.
They have spent the past year working on scope 3 and intend to publish in
the coming months. Ocado Retail have also undertaken an independent gap
analysis of their operations against the TCFD recommendations to provide a
roadmap for full alignment with the objective of how they can further address
the risk of climate change.
More details will be published in the following year.
Carbon Emissions 2021/22 2020/21
Scope 1 emissions (tonnesCO
2
e) 146.42 116.73
Scope 2 (location-based) emissions (tonnesCO
2
e) 284.21 215.17
Scope 2 (market-based) emissions (tonnesCO
2
e) – –
Scope 3 emissions – business travel where responsible
for fuel (tonnesCO
2
e) 23.83 11.51
Intensity Measure – Tonnes CO
2
e per 100,000 orders 2.23 1.82
Environment and Natural Resources
continued
Scope 1, scope 2 and scope 3 GHG
emissions and the related risks.
Our scope 1, scope 2 and scope 3
GHG emissions and the related risks
are shown in the table on the right,
including for historical periods.
Our GHG emissions were calculated
in line with the GHG Protocol
methodology wherever possible,
and we have adopted standard
methodologies such as the GHG
Protocol Corporate Accounting and
Reporting Standard for emissions
reporting, and GHG Protocol Scope 3
Guidance. Refer to our ‘Basis of
Reporting’ document on our website
at https://www.ocadogroup.com/
our-responsible-business/corporate-
statements/ for more information
relating to the methodologies,
inclusions, exclusions, data integrity,
and our planned actions looking ahead.
For Scopes 1 and 2, Ocado has
reported a total of 117,484 tCO
2
e in
emissions for the year 2022, compared
to 117,461 tCO
2
e in emissions for the
year 2021, with emissions remaining
relatively consistent over the past two
years and only a 0.019% increase from
last year.
This year we undertook a detailed
analysis of our scope 3 emissions,
detailing all 15 categories. The ‘Basis
of Reporting’ document explains the
methodology behind each quantified
scope category and also our year 1
calculations and emissions. High
impact areas include use of sold
products such as client CFCs and
associated hardware, purchased
goods and services such as cloud
computing and capital goods such
as machinery and equipment and
construction works.
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RESPONSIBLE BUSINESS
Our location-based scope 1 and 2
emissions are predominantly UK
based with 99.55% of our footprint
originating here and only 0.45% from
other worldwide operations. These
emissions derive mainly from our
fleet, accounting for 80.4%, followed
by Ocado premises (mainly CFCs)
at 19.6%.
We continue to report on CO
2
emissions per 100,000 orders, and look
forward to reporting further on our
scope 3 progress, recommendation
and metrics in future years as that
piece of work becomes embedded
across the business. Refer to our
‘Basis of Reporting’ document to
understand more about how CO
2
emissions (tonnes of CO
2
e) per
100,000 orders is calculated.
This is the sixth year we partnered
with the Carbon Trust to carry out
a limited assurance engagement
on selected GHG emissions data
in accordance with ISO 14064:3.
The targets used by the organisation
to manage climate-related risks and
opportunities and performance
against targets
Our carbon strategy, which we
published this year, outlines our
commitments to becoming a Net Zero
business in our operations and value
chain, with goals to achieve Net Zero
in our own operations by 2035 and
within our value chain by 2040.
The following goals are currently
measured through our scope 1, 2 and
3 GHG emissions data (see ‘Basis of
Reporting’ document):
– 100% renewable electricity sources
by 2023
– Net Zero dry ice by 2030
– Net Zero fleet by 2035
– Net Zero refrigeration by 2035
– Net Zero business travel
– Net Zero waste
– Net Zero transportation and
distribution
– Net Zero majority owned
investments
Environment and Natural Resources
continued
Environment and Natural Resources
continued
Greenhouse Gas Protocol: description of Scope 1-3 emissions drivers
This diagram shows the drivers of scope 1, scope 2, and scope 3 GHG emissions, as measured
under the Greenhouse Gas Protocol.
In Ocado Group context: FY21/22 total GHG emissions footprint
This chart shows the activities which are the key drivers of our GHG emissions within each of
scope 1, scope 2, and scope 3.
Key drivers of our footprint
DirectIndirect Indirect
Indirect
Downstream
activities
Upstream
activities
Own
operations
Scope 3
Upstream
Scope 3
Downstream
Scope 1
What we burn and
release directly,
of which:
89%
in fleet operations for
UK clients
What we purchase as
energy to power our
operations, of which:
98%
for electricity related
to running premises
(mainly UK CFC network)
What others emit to power parts
of our operations, of which:
Downstream:
clients using the
OSP platform:
48% use of sold products:
operational emissions of
expected energy use of
hardware pieces in CFC
modules sold to clients
(accounted for over whole of
asset’s projected life )
Upstream: purchases of
equipment or services to run
our technology:
16% purchased good &
services inc. data hosting
and water usage
13% capital goods inc.
electrical equipment and
machinery, electronic products
and UK CFC construction
Reflecting
the
provision
and
operations
of the
global
Technology
Solutions
platform
Reflecting
Logistics
operations
serving UK
clients
Scope 1Scope 2Scope 3
16.8%
3.6%
79.6%
574,808
Total
emissions
Purchased
goods &
services
Capital
goods
Transport
& distribution
Fuel & energy
related
activity
Processing of
sold products
Transport
& distribution
Use of sold
products
Waste in
operations
Business
travel
Fugitive
emissions (inc
refrigerants)
Fuel used in
vehicles &
machines
Fuel used in
buildings
Purchased steam,
heating & cooling
Purchased
electricity
Employee
commuting
Leased assets
Remote
working
End of life
treatment of
sold products
Leased
assets
Franchises
Investments
Scope 2
Upstream
We use 100% Renewable Energy
Guarantee of Origin (“REGO”) certified
electricity, with the exception of one
Ocado Group location and one Ocado
Retail location, where electricity is
provided by the landlord and
therefore is outside of our control.
Transition Plan
Our work relating to scope 1, 2, and 3
carbon emissions has enabled us to
understand our baseline. We have
plans in place to develop our Net Zero
roadmap and interim targets in 2023,
building on this work to date, and in
the development of our Net Zero
roadmap we will consider alignment
with the Paris Agreement, to which the
UK is a signatory.
Our plans for the upcoming
12 months include:
– managing risks identified
through scenario analysis;
– establishing new metrics to
assess risk impact; and
– determining the timing and scale
of mitigation in line with the
business planning process.
New metrics in plan include:
– metrics to measure flood risk
by location;
– metrics to measure heat stress
risks by location; and
– fleet transformation measures.
We are delighted to have
participated in CDP’s Climate
Change Disclosure Submission
for the sixth consecutive year
and to have retained our B
score for the fifth year running.
574,808 tCO
2
e
global energy use in 2022 from
scope 1, 2, and 3 sources
B B B B B C
2022 2021 2020 2019 2018 2017
Contents
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Taking leading food waste performance
global with OSP.
Proof: We have a track-record of successful
collaboration with Ocado Retail to get the best food
waste performance out of OSP and many of our
other clients have big ambitions in this area.
We’re collaborating on this topic across the OSP
‘club’ through (1) multilateral discussions hosted as
part of the ‘OSP club’ network (2) partner specific
support provided by client success teams.
Future: In 2023 we’re focused on working with
clients to determine the most appropriate KPI for
measuring OSP-enabled food waste performance,
on a global scale, as more sites scale.
RESPONSIBLE BUSINESS
Materiality:
Food Waste:
2
Food loss and waste is recognised as
a critical global challenge to address.
Whilst food losses occur mainly in
developing countries, food waste
occurs mostly in developed countries,
where OSP operates. An estimated
17% of total food is wasted at the
consumer level (households, grocery
distribution and restaurants).
This wastage has wide reaching
environmental, social and economic
consequences. Food that ends up in
landfill generates 8-10% of global
greenhouse gas emissions. When food
is wasted, so are opportunities for
improving food security and improving
the environmental footprint of food
production and consumption. Food
waste is also a direct sales loss for
retailers, negatively impacting thin
operating margins. So, it is clear that
‘solving’ the food waste problem
represents a significant opportunity.
Retailers have an important role to
play. In the UK, 3% of total food waste
(by weight) is estimated to be at the
retail level.
However, solving this problem is
not simple. Consumer demand for
constant availability and a full range
of choice leads to excessive supply
and increased wastage, a challenge
that is compounded by imperfect
First In First Out processes and poor
storage. Pleasing customers and
mitigating these challenges requires
a combination of sophisticated
technologies to optimise inventory
management throughout the fulfilment
chain, from webshop to home.
Ocado Group has an established track
record in this field, evidenced by
Ocado Retail’s consistently low levels
of food waste; historically as low as
0.4% (FY19) as a % of sales.
FY22 at 0.9% of sales (0.6% in FY21)
reflects a high level of immature
capacity in the mix but, we believe,
remains market leading.
This performance reflects a
combination of technological
sophistication and collaboration.
OSP brings unprecedented accuracy,
efficiency and resilience, empowered
by scale, better predictive capabilities,
a perfect FIFO system, and strong
visibility of customer behaviour.
This enables low food waste despite
a promising Ocado.com customers
a number of days of freshness on all
perishable goods, something not
available in a store.
As we scale as a global technology
solutions provider, our ambition
is to enable each of our OSP
partners to achieve industry
leading levels of food waste in
their respective markets.
For our partners, this will drive
significant competitive advantage,
through both reduced operating costs
and improved reputation with their
end customers. For Ocado Group,
delivering this benefit will improve
our competitive moat as a solutions
provider and help to drive increased
sales with both current and
prospective partners.
Materiality:
Operational Waste
As we begin to formulate our Group
Waste Strategy, work has continued
to measure current activities, at both
our operational sites across the UK
and at our Head Office campus.
At operational sites, over the period,
we have continued to attain 51%
waste recycling and 100% landfill
diversion and over the next financial
year, we aim to continue improving
upon this and set both strategy and
targets, working in collaboration with
colleagues and supplier partners.
At the head office campus, data
collected with our partner Recorra
shows an average recycling rate
of mid-high 60’s during the year,
with efforts specifically directed at
separating materials at source such
as food, security paper, glass, WEEE
(electrical), wood and metal, as well as
consistently ensuring hazardous waste
is correctly disposed of. By separating
the different waste streams, waste can
be handled and disposed of in its best
form – enabling minimal contamination
and high quality thereby ensuring
as much of our waste as possible is
effectively recycled and transformed
into new products with minimal loss of
resources as possible.
We will continue to closely measure
and target improvements over the
next financial year. Activities to
support improvements include
introducing as many waste streams
to each of our buildings as possible,
increasing signage, greater awareness
and education with colleagues and
using statistics & reporting to help
us measure our journey and ensure
improvements continue to be made.
Materiality:
Equipment Lifecycle
and Circularity
As part of our commitment to a
sustainable future, we have begun
to better map and understand the
lifecycle of our assets and products.
It is still very early in our journey,
and we appreciate that for this to
be embedded in the business it
requires significant time, effort
and commitment. We continue to
evaluate how the work done in 2022
can be leveraged in the area of
lifefcycle circularity.
CFC Building Lifecycle
We have started an assessment
of a typical CFC building in line with
EN 15978, to better understand the
impact of their design, construction,
operation, and disassembly.
We expect this work will identify
opportunities to reduce the lifecycle
impact of new build CFCs; for example,
by reducing or reconfiguring the
operational design of the CFC through
advancements in our technology.
In a typical OSP contract, the Client
Partner is responsible for the build
and ongoing operations of the CFC
warehouse (e.g. cement floor or fridge
plant installation, ongoing utilities),
whilst Ocado Group installs, owns and
operates the MHE equipment within
the CFC. As a result, any opportunities
to reduce lifecycle impact can benefit
Group directly (where MHE is involved)
or indirectly, through the potential to
share learnings with partners.
Efficiency performance
Alongside and as part of the
verification of our GHG emission
calculations, we have begun looking
at modelling and forecasting different
scenarios of energy usage for the
various automation solutions of our
OSPs. We have also begun looking
at the design phase and looking
into how we can design products
to maintain or increase performance
with the same or lower energy use.
Engagement
The Scope 3 work we undertook
in 2022 brings valuable insight to
the discussions about carbon and
lifecycle impacts that we started
with our core suppliers in the year.
This insight will enable us to build
on these discussions in 2023,
moving towards our shared goal
of collaborating more fully on areas
related to the lifespan of materials
and circularity of replacements in
our material handling equipment.
Environment and Natural Resources
continued
Discover
more online
0.9%
food waste (not sold) as % sales
Ocado Retail in 2022, as low as
0.4% at mature sites
Read more about this on
page 62
Contents
Contents
Platform resilience
and innovation
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Policy in action
Data privacy is in focus throughout new client
onboarding, such as with Lotte Shopping, our most
recent signing in South Korea. Proof: Key stages in
action: Pre-contract negotiation stage: Ocado DPO
presents Ocado’s approach to data privacy.
Onboarding a Client: Frequency of meetings between
Ocado’s DPO and the Client’s DPO / Privacy Specialist
will be determined by the Client and a Record of
Processing will be made available to the client setting
out the activities carried out on their behalf in relation
to the processing of personal data.
Ongoing liaison with Client: Updates are made to the
Record of Processing when changes are made to
processing activities. Division of responsibilities are
set out between Ocado and the Client, where Ocado is
acting as a data processor and the client is the data
controller. The client is given access to a portal which
sets out privacy practices in relation to OSP, including
Ocado’s data breach notification process for notifying
clients in the event of a personal data breach.
Future: Safe, secure, platform, for long-term success.
RESPONSIBLE BUSINESS
We explore operational progress
and sources of future focus, in
each of these areas, below.
Materiality:
Responsible Sourcing
We are committed to respecting
and supporting the internationally
recognised human rights encapsulated
in the Universal Declaration of Human
Rights and the International Labour
Organisation’s Declaration on
Fundamental Principles and Rights
at Work. Throughout our operations,
we seek to prevent the infringement
of human rights and commit to
addressing any adverse human rights
impacts we identify as prescribed
by the UN Guiding Principles on
Business and Human Rights. We
support the elimination of all forms
of forced and compulsory labour
and support the protection of labour
rights that promote safe and secure
working environments for all workers.
The materiality assessment
undertaken in recent years, engaging
with all of our key stakeholder groups
to reassess and prioritise our most
material sustainability issues,
identified 14 materiality issues key
to our operations, this included
responsible sourcing. As part of
the ESG governance and reporting
framework, we set up a cross
functional working group during
this reporting year to ensure that
responsible sourcing is regularly
discussed and developed within
the company in a holistic manner.
During 2022 we launched a responsible
sourcing programme focused on our
Ocado Technology manufacturing
hardware supply chain.
This programme is managed by
a newly hired responsible sourcing
team and covers key product
categories that make up our OSP
solutions. We have been actively
working to better understand the
forced labour risks in our supply
chain and how to take action to
mitigate them through enhanced
due diligence for high risk markets.
During the reporting period we
established a strong foundation
for human rights due diligence under
our responsible sourcing programme.
We created a process for including
labour and human rights into supplier
selection criteria via a pre-qualification
questionnaire that includes a
series of questions that incoming
suppliers are required to answer.
To qualify as a business partner,
potential partners must demonstrate
they meet the minimum standards
set out in our new supplier code.
This code sets out our requirements
of suppliers and incorporates
international labour and human
rights principles and aligns with the
Responsible Business Alliance Code
of conduct. It requires direct suppliers
to comply with international
standards and applicable laws and
regulations relating to forced labour,
and cascading of the code to their
sub-suppliers. We are in the process
of implementing a risk-based
approach to alignment, verification
and monitoring of our supplier code.
To help us monitor suppliers during
our contractual relationship, we
partnered with EcoVadis, leveraging
the widely recognised EcoVadis
evaluation tool to provide increased
visibility and insights into supplier
performance on human rights, ethics
and supply chain management.
We have screened over 380 suppliers
for inherent risk utilising the platform,
and are prioritising further due diligence.
We acknowledge that understanding
the deeper tiers of our supply chain
is a crucial step in prioritising our
efforts to minimise adverse human
rights and forced labour risks, and to
drive positive impact. To address this,
we have launched a supply chain
mapping project with SupplyShift to
map our tier 1 suppliers in 2023, with
plans to cascade down the chain for
selected components and materials.
We are members of techUK, a trade
organisation with over 940 member
companies from the tech sector
across the UK. We actively engage
with their responsible business
conduct group.
Additionally, as part of our efforts
to increase external stakeholder
engagement on modern slavery and
human rights, this year we became
active members of Business for Social
Responsibility (BSR). They have
provided tailored support on
our responsible sourcing strategy,
and a platform to engage with industry
peers on shared challenges through
working group forums.
During this financial year we also
developed and implemented a modern
slavery awareness training course
for our own business operations. To
date more than 7,600 employees have
completed and passed the training.
In Ocado Technology, we trained
internal supply chain procurement
and manufacturing teams on the
Supplier Code of Conduct.
Furthermore, we continue to maintain
an independent and confidential
whistleblowing hotline, which is open
to employees and third parties that
may need to report any wrongdoing
or illegal practices.
Read our most recent Modern Slavery
Act Statement at www.ocadogroup.com.
Materiality:
Data privacy
Data compliance is a topic of critical
importance to Ocado. As a Solutions
provider, we act as Data Processor for
our OSP partners, in addition to Data
Controller for the personal data of our
People. In each of these roles, we have
a quality improvement programme in
place to monitor compliance with data
privacy laws, based on transparency,
data minimisation and privacy by
design principles. We work to a global
privacy standard and apply common
privacy requirements across all
Ocado entities with variances only
as required by local law. We have
an annual data privacy programme
to review compliance throughout
the year and make sure data privacy
obligations are embedded into the
culture of the organisation.
Governing and supporting this
work are:
– overarching Data Privacy Pillars,
aligned with Ocado’s values
– executive director level
responsibility which sits with
our Group General Counsel
– a Personal Data Committee which
supports and drives the data
privacy governance agenda,
reports to the Board, and is
accountable to the Audit committee
– data privacy and security teams
led by a Data Protection Officer
(DPO) and Chief Information
Security Officer (CISO)
– data champions within each
business unit, who (alongside their
day job) act as ambassadors to
further foster privacy as a core
organisation concept
We also have annual data privacy
and security training for all employees
and Board members, as well as
standards in place for employees
to adopt when required to introduce
or make changes to a process,
project, system implementation or
upgrade, based on the European
Data Protection Board’s (EDPB)
guidance on Privacy by Design and
Default and Data Protection Impact
Assessments (DPIA).
Like our processing activities, these
standards are audited annually.
Delivering a resilient,
scalable, platform and
business requires active
management of the
complex governance and
information technology
related operating risks
present today.
A key part of delivering on client
commitments, is providing our
Client Partners with a resilient and
scalable platform, able to cope
with the complex governance and
information technology related
operating risks present today.
Doing this requires proactive
management of material issues
ranging from Responsible Sourcing,
Business Ethics & Governance,
including the Ethics of AI & Robotics,
Data privacy, cybersecurity and
product quality and governance,
so that we can continue to deliver
leading service to our Client
Partners across our technology
solutions and logistics operations.
These material issues overlap
heavily with our Principal Risks
(Supply chain, Cybersecurity etc).
Though we do not anticipate that
strong management of these areas
will, in itself, drive incremental
business for Ocado Group, failure
to manage these risks to the
appropriate industry standards
could significantly impact the
operational success of our
business, with consequences
ranging from business disruption
and reputational damage, through
to regulatory impacts and fines.
Read more about this
pages 86 to 95
Discover
more online
Contents
Contents
Platform resilience and innovation
continued
STRATEGIC REPORT
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STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
RESPONSIBLE BUSINESS
Materiality:
Business & Ethics
Maintaining and building on our
compliance framework is critical to
supporting our aspiration to conduct
business to the highest standards of
honesty and integrity. Plans for, and
results of, this work, including key
compliance metrics, are regularly
reported to the Board, Audit
Committee and Risk Committee.
In 2022, our focus was on ensuring
that our framework continues to
mature in line with the needs of our
growing organisation by:
– Reviewing a number of our
existing compliance policies to
ensure they remain fit for purpose
and updating them as required
to reflect global requirements.
– Improving accessibility by
translating a number of compliance
policies and training modules into
the core language requirements
of our employees.
– Updating our compliance
platform, which brings together
all compliance materials in one
carefully designed location.
– Launching a new conflicts of
interest training module and
refreshing our annual code of
conduct module.
– Increasing the maturity of our fraud
compliance framework by updating
our policies and guidance and
running a training programme to help
embed the key principles at Ocado.
– Evolving our communication
approach in line with the way we
communicate as a business, with
a focus on bespoke messaging
across core audiences and trialling
different formats to increase
knowledge and awareness of
core compliance topics.
Encouragingly, the results of
our business-wide compliance
survey showed another increase
in knowledge and awareness
of compliance topics across the
board. The survey also provided an
opportunity for employees to feed
back on the compliance framework
and related activities; information
which will be used with other sources
to inform the compliance roadmap
for the year ahead.
Materiality:
Cybersecurity
We risk the loss of critical assets and
sensitive information as a result of a
cyber attack, insider threat, or a data
breach. This could result in business
disruption, reputational damage,
significant fines or the loss of
confidential business information.
The continued evolution and growth of
Ocado as a global technology solution
provider has increased the likelihood
of Ocado being the target of a cyber
attack. Cyber attacks have continued
to evolve, globally, in 2022, increasing
in both frequency and sophistication.
These changes, as well as the
uncertainty due to the war in Ukraine
have led to an increase in the risk of
a cyber incidents.
To address this risk, we have a
security program in place that covers
both our corporate systems and the
Ocado Smart Platform and includes:
A defined security governance
framework, overseen by the
Information Security Committee
– External audit of our security
framework through our SOC 2
compliance program
– A proactive awareness program
to educate all employees on
cybersecurity risks
– A dedicated security operations
team to detect and respond to
security incidents
– A vendor assurance program to
manage third party cyber risks.
– Regular security testing of our
applications and infrastructure.
– Secure by design: baking
security into our software
development process.
Our Code of Conduct
Our Code of Conduct supports
our rapidly-growing business by
cementing and expressing the
importance of the principles we live
and work by, as well as setting out
our mission, values and Company
policies all in one place.
Our Code of Conduct, which was
refreshed during the year, explains
how it is important for all of our
employees to comply with our
minimum standards and expectations.
It is also a useful reference point for
aspects relating to individual conduct,
working relationships and company
property and resources.
Find this online
https://ocadogroup.com/media/2b4lfrqn/
code-of-conduct-2022.pdf
Whistleblowing
We are committed to practising
good business and we do this
through creating an open and
transparent culture in which to work.
To help our employees understand
what whistleblowing is and how to
make a report without the fear of
retaliation or reprisal, we have our
Whistleblowing Policy.
Our awareness campaign this year
focused on encouraging employees
globally to report wrongdoing to
either their manager or their People
Partner, or by using our confidential
whistleblowing service operated by
independent third-party specialist,
Navex Global. Our whistleblowing
initiative, known internally as “Speak
Up”, allows employees and third parties
to report a concern by phone or the
website 24/7 throughout the year.
Anti-Bribery and Anti-Corruption
Our Anti-Bribery and Anti-Money
Laundering policies were reviewed and
remain fit for purpose. These policies
and our public-facing Anti-Bribery
Statement reiterate our zero-tolerance
approach to bribery and money
laundering and outline the standards
we expect of those working for us.
The Anti-Bribery policy also details
our position in respect of giving and
receiving gifts and hospitality and how
to report and record such matters and
is further supported with practical
guidance. The policy also details key
principles to apply when contracting
with third parties, which is supported
by an update to the supplier set up
form made during the year. New
starters receive training to help them
identify and manage the risk of bribery
as part of their induction and existing
employees receive refresher training on
the topic both biennially as part of our
topic- specific refresh programme, and
annually as part of our wider Code of
Conduct training programme. Our
expected standards in respect of
anti-bribery and other compliance
topics are set out in our standard
purchasing terms and conditions and
our Code of Conduct and confidential
reporting channels are provided.
You can view key corporate policy
statements on our website.
Find this online
https://www.ocadogroup.com/our-
responsible-business/corporate-
statements/
Materiality:
Ethics of AI and Robotics
As our business increasingly makes
use of AI or robotic systems to support
decision making and deliver tasks, it
is important that we do so in a
responsible way. This means holding
these systems to the same standards
we expect of Ocado employees.
It also helps us prepare for forthcoming
regulation like the EU AI Act.
Bringing together a range of
disciplines – including data,
engineering, product, UX, research,
legal, risk, privacy – resulted in the
following commitments:
When developing and deploying AI &
robotic AI systems at Ocado, we will:
Fairness
– Use high quality & representative
datasets, and mitigate against
unfair bias.
Transparency & Explicability
– Ensure these systems are well-
documented, and that we are able
to demonstrate reliability and track
back issues.
– Provide an easily understandable
explanation of how these systems
work to users.
Governance
– Ensure appropriate accountability
structures are in place before
internal or third party systems
are deployed.
– Regularly monitor systems to
check performance.
Robustness & Safety
– Make privacy and security integral
to design.
– Assess safety considerations and
build in appropriate safeguards.
Impact
– Ensure any interaction with people
(directly or indirectly) is conducted
with respect and empathy.
– Consider the impact of automation
on affected staff, communicate
in an upfront way and provide
opportunities for reskilling
where possible.
Ocado teams will incorporate these
commitments into their ways of
working and take responsibility for
any appropriate actions. A team-
centric approach ensures our
approach is flexible, practical and
proportionate to the risk level of
the project in question.
Our responsibility commitments are
already having an impact on how
we document and explain AI and
Robotics systems. The Technology
team has developed a comprehensive
internal registry of projects to support
better governance. And we’re working
to boost explainability of machine
learning (ML) models, which is business
critical for addressing any adoption
concerns our clients might have.
Materiality:
Product quality
and governance
One of our key responsibilities in
providing OSP is delivering hardware
for clients. Delivering a high quality
product means good platform longevity,
and customer satisfaction, as low cost.
To successfully do this requires
the right practice and organisation
as well as PLM (product lifecycle
management) applications.
PLM applications are used at an
enterprise level, to manage ‘product
defining data’ through the entire
product lifecycle. They act as a central
repository for data shared across the
enterprise – in our case, from Ocado
Technology through to Engineering
Supply Chain (PI) into Engineering
Operations (CS) – and are designed
to allow effective integration into
other tools, to facilitate sharing
and validation of Engineering Data
whilst reducing errors in data sets.
This application improves data quality
across all applications and processes
that drive delivery to clients,
minimising downstream interventions,
which can create service disruption
and additional unplanned costs.
In 2022 we progressed a
more sophisticated PLM strategy,
to significantly reduce downstream
costs of supporting products on site,
leveraging two concepts:
– digital thread which, through
processes and tools used for
communicating data in a connected
way through an asset’s lifecycle,
enable us to recreate the product
at any point in time throughout
it’s life
– digital twin which, is a
representation of the product
virtually at any point in time
For all products where Ocado owns
the IP, we establish the ‘digital thread’
across the lifecycle, connecting
initial business requirements
through design & manufacture to
maintenance, repairs & operational
performance in the field at Client
Sites. In being able to determine
the configuration of any deployed
product at any point during its life
cycle, we can then use the same
functionality to assess possible future
configurations and so accurately
predict impacts. This supports us
to provide leading customer service
across our OSP platform, whilst
eliminating wasted time, effort
and cost re-inventing solutions.
Contents
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STRATEGIC REPORT
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KEY PERFORMANCE INDICATORS
Group KPIs reflect
aggregate performance
across our reported
segments. Read more
about how these, and
our key segmental
drivers (pages 38 and
39) are considered
in both Directors’
remuneration report on
pages 136 to 169 and
Our strategy at a glance
pages 26 and 27.
Group Key Performance
Indicators
Group financial KPIs
Group non-financial KPIs
Food waste (% sales),
Ocado Retail
2018 2019
0.4
0.4
0.6
0.9
0.5
2020 2021 2022
50
%
Why we use this measure
Measures efficiency of Ocado
Retail operations, as enabled by
OSP technology, in terms of waste
minimisation: the lower the better.
Link to strategy
eNPS (Technology Solutions)
2021 2022
31
25
Why we use this measure
This is a scoring system widely used in
industry designed to help employers
measure loyalty and satisfaction of
workers within organisations.
Link to strategy
Number of modules ordered
2018 2019
168
213
232
2020 2021 2022
9
%
Why we use this measure
Measures cumulative modules of
capacity for which a contractual
agreement has been signed with
a partner and an invoice issued,
providing near to medium-term
visibility of ongoing capacity build.
Link to strategy
Direct operating cost
(% of site sales)
2018 2019
5.70%
3.70%
2.70%
2.00%
5.70%
2020 2021 2022
(25
)
%
Why we use this measure
Measures exit rate position at
the period end for the Group’s site
level operational costs, including
engineering, cloud, and other
technology support costs.
Link to strategy
Tonnes of CO
2
e/100,000
orders (Scope 1 and 2)
2018 2019
514
501
489
458
550
2020 2021 2022
(6
)
%
Why we use this measure
Measures the Greenhouse gas
emissions intensity (direct and
indirect) of our total business
operations.
Link to strategy
Number of modules live
2018 2019
44
61
99
2020 2021 2022
62
%
Why we use this measure
Measures cumulative modules of
capacity installed and ready for
use by OSP clients which, in turn,
drives recurring Solutions revenue.
Link to strategy
1. Grow our revenue
2. Optimise OSP economics
3. Deliver transformational technology
4. Deliver on our client commitments
5. Responsible business approach
Read more on Our
strategy at a glance
pages 26 and 27
Read more in Directors’
remuneration report
pages 144 to 170
Read more on
Responsible business
approach & priorities
pages 36 and 37
Contents
Contents
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STRATEGIC REPORT
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KEY PERFORMANCE INDICATORS
Key drivers of segmental
performance
Ocado Retail
International Solutions
Active customers
(000s)
2018 2019 2020 2021 2022
13
%
795
680
832
940
721
Why we use this measure
Measures growth in Ocado
Retail core customers who
shopped in the last 12 weeks.
Revenue
(£m)
2018 2019 2020 2021 2022
1618
2189
2290
2203
1467
(4)
%
Why we use this measure
Measures revenue growth of
the Ocado Retail joint venture.
Average selling price
(£)
2018 2019 2020 2021 2022
5
%
2.3
2.42
2.44
2.55
2.3
Why we use this measure
Measures impact of price inflation
on average shopping basket for
Ocado Retail.
Number of modules live
2018 2019 2020 2021 2022
217
%
4
12
38
Why we use this measure
Measures cumulative modules of
capacity installed and ready for use by
OSP clients outside of the UK which, in
turn, drives recurring segment revenue.
Number of modules ordered
2018 2019 2020 2021 2022
12
%
82
109
145
162
22
Why we use this measure
Measures cumulative modules of capacity for which a
contractual agreement has been signed and an invoice
issued, to partners outside the UK, providing near to
medium-term visibility of ongoing capacity build.
Average orders per week
(000s)
2018 2019 2020 2021 2022
6
%
325
334
357
377
296
Why we use this measure
Measures order growth in
the Ocado Retail business.
Average basket value
(£)
2018 2019 2020 2021 2022
(9)
%
106.3
137.19
129.08
118.46
106.85
Why we use this measure
Measures aggregate impact on
average shopping basket within
the Ocado Retail business.
Invoiced fees
(£m)
2018 2019 2020 2021 2022
27
%
81.4
123.9
143
180.9
59
Why we use this measure
Measures growth in total
fees invoiced in the year
from Solutions partners.
Key segmental drivers
determine and reflect
performance in our
individual operating
segments. In turn,
these inform or
combine together
to drive outcomes in
Group KPIs detailed
on the previous spread.
These metrics are
broadly discussed
in our overview of
Strategic progress
on pages 1 to 5.
UK Solutions and Logistics
Orders per week
(000s)
2018 2019 2020 2021 2022
7
%
325
416.4
462
494
296
Why we use this measure
Measures order growth across UK
clients (Ocado Retail and Morrisons).
Mature site UPH*
2018 2019 2020 2021 2022
3
%
161
169
170
175
163
Why we use this measure
Measures CFC operational efficiency.
* Note: UPH only includes mature UK sites Hatfield,
Dordon, Erith and Bristol (CFCs 1, 2, 4, 5)
Number of modules live
2018 2019 2020 2021 2022
20
%
40
49
59
Why we use this measure
Measures CFC operational efficiency.
Total eaches
(million)
2018 2019 2020 2021 2022
(6)
%
1229.1
1273.3
1196
Why we use this measure
Measures total units of volume fulfilled
for UK clients, the key driver of
changes in cost recharges revenue.
Average deliveries
per van per week
2018 2019 2020 2021 2022
196
184
177
176
194
(1)
%
Why we use this measure
Measures efficiency of our
service delivery operation.
Contents
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BUSINESS UNIT
Technology Solutions
Overview of performance
in the year
We continued to successfully roll out
OSP for our Client Partners, with total
modules live growing by 62%. At the
same time, we have reduced direct
operating costs (engineering and
cloud costs) at live OSP sites to 2%
(2.7% in 2021), well on the way to our
1.5% mid-term (four to six years)
target. Although modules ordered
grew more slowly (+9%), we added
two high quality clients to our ‘club’,
and we are confident that our work
to both support live clients to make
the most of OSP and drive step
change innovation, with Re:Imagined,
will support healthy growth in the
long term.
Our technology platform business providing OSP to currently 12 partners
around the world. The activities of this business span from product
ideation and development, technology and services implementation
and management, to sales and client relationship management.
What does your
business do?
JM: Our Technology Solutions division
is responsible for bringing Ocado’s
unique technology capabilities to
the operations of the world’s most
ambitious grocery retailers. We
apply more than 20 years of cutting
edge research & development to some
of the biggest challenges facing
retailers. We also bring to bear our
experience delivering large, complex
infrastructure projects across
diverse global markets, and to run
sophisticated online operations across
multiple retailers, banners, and
countries – all on a single platform.
LJ: We are bringing unparalleled
knowhow in online grocery to the
operations of our partners. In the
world’s fastest growing grocery
channel, our Technology Solutions
business enables partners to
outcompete in their markets. With our
world leading products, combined in
the Ocado Smart Platform, we are
bringing a world-class customer
proposition, and proven, positive
economics to our partners across a
growing number of markets. We are
constantly driving new innovations into
our platform, drawing on collective
learnings and experience of a diverse
range of grocery markets worldwide.
What were the highlights
of 2022?
JM: In January 2022 we unveiled the
next generation of our technology at
Ocado Re:Imagined, with seven key
innovations that represent the next
leap in OSP platform performance.
The team has been working hard to
deliver these innovations by the end
of 2023.
LJ: This year has been another time
of expansion. Our CFC programmes
continue to roll-out at pace around
the world and we welcomed our
11th and 12th partners to our unique
“OSP leadership club” of grocery
retailers powering their business with
Ocado’s technology. We’re excited
that both of our new partners will
benefit from enhancements
announced at Ocado Re:Imagined.
This year we also announced a Joint
Venture with Groupe Casino, opening
up our technology to all grocery
retailers in France.
What were the biggest
challenges?
JM: There have been the obvious
challenges around delivery in the
global supply chain and a tightening
of labour markets but Ocado is still
attracting a really strong talent pool
and we’re firmly establishing ourselves
as an employer of choice for top tech
talent to support future growth.
LJ: No sector has been immune
to some of the macro challenges
bearing down on the global economy
this year, and trends in grocery are
often bellwethers for wider market
dynamics. Despite these, our
Technology Solutions business has
grown at pace with our current
partners and we have signed new
deals in exciting markets.
Outlook
As we continue to go live with more
sites around the world, and ramp
up those already live, for partners,
we expect to see continued strong
growth in Solutions revenue, with
EBITDA
A
break-even now on the
horizon. During the year, we set out
our ambitious mid-term (four to six
years) growth plans in grocery, and
we look forward to expanding into
the wider ASRS opportunity-set in
the near future. Read more about our
mid-term targets in our ‘Ocado Group
modelling seminar’ (May 2022) and
‘Ocado Group cash flow seminar’
(Nov 2022) materials found on the
group website.
Mid-term target (4-6 yrs)
£590m
EBITDA
A
£350m
net cash flow
sufficient to fund
growth of >20%
In November 2022, Ocado Solutions
signed a partnership with Lotte
Shopping to develop Lotte’s online
business in South Korea.
Proof: Lotte Shopping operates more than 1,000
stores nationwide with an annual revenue of 15.6
trillion KRW (£9.5 billion).
Future: Ocado and Lotte will develop a nationwide
fulfilment network, with six CFCs planned by 2028.
Ocado’s ISF solution will also be rolled out across
Lotte’s store estate. This partnership brings news
technologies announced at Ocado Re:Imagined
and introduces multi-storey CFCs for the first time.
This innovation features OSP grids installed on
multiple levels, unlocking a wider range of property
types for CFCs and enabling more efficient use of
space in densely-built environments.
Discover
more online
An interview with
James Matthews,
CEO Technology and
Luke Jensen,
CEO of Solutions
Contents
Contents
STRATEGIC REPORT
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OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
BUSINESS UNIT
UK Logistics Ocado Retail
Overview of performance
in the year
In a year characterised by near-term
inflationary cost pressures and
volume challenges for our clients,
we continued to collaborate with
them to navigate these challenges,
whilst delivering improving
efficiencies. UPH improved across
our CFCs, and our latest sites
delivered above our stated
200 UPH target. These underlying
improvements are passed on to our
clients and support their healthy
long-term margin trajectory.
Reflecting the cost-plus nature of the
service model, the business achieved
EBITDA
A
of £35m, broadly consistent
with 2021, on revenues (largely cost
recharges) a little over £700m.
Outlook
In the near term, we will continue
to collaborate with our partners to
navigate through utility driven cost
pressures in the UK. As we enable
them to successfully scale, with
improving operational efficiency and
leading customer service levels, we
expect the business to see consistent
revenue growth, with the stable
EBITDA
A
and cash flow generation
of a 3PL model.
Read more about our mid-term (four
– six years) targets in our ‘Ocado
Group modelling seminar’ (May 2022)
and ‘Ocado Group cash flow seminar’
(Nov 2022) materials found on the
group website.
Our industry leading 3PL business, operating in the UK for Ocado Retail and
Morrisons. Through the provision of logistics services in the warehouse and
on the road, the business enables optimised efficiency and customer service
in delivery of the online offering for these clients’ end customers.
What does your
business do?
The Logistics business operates and
optimises Ocado Group’s platforms in
the UK to deliver maximum client and
customer value. We run a cost-plus
model; costs incurred to operate the
online business (in the warehouse or
on the road) are recharged to clients
and a fixed management fee levied
on these costs.
What were the
highlights of 2022?
We successfully brought live Bicester
CFC and three further Zooms in
London and Leeds for Ocado Retail,
on plan, and have consistently
achieved operating efficiency in
Andover and Purfleet CFCs above
the targeted 200 UPH for pre
Re:Imagined sites, a benefit that
is passed on to clients.
What were the biggest
challenges?
Inflationary pressures related to
utilities have been significant,
requiring tight collaboration with
UK partners to navigate fast rising
and volatile pricing across electricity
and dry ice, in particular.
Mid-term outlook (4-6 years)
c.£30m
EBITDA
A
c.£40m
free cash flow
Delivering leading efficiencies
for clients.
Proof: In our latest UK sites,
Andover, Purfleet, and Bristol, we
have already achieved above our
targeted 200 UPH (before the
benefits of Re:Imagined) for
fulfilment efficiency, with Andover
achieving around 220. As these
costs are recharged to partners,
the benefits of increased operating
efficiency, whether in the CFC or
on the road, are naturally passed
on to clients as part of the
operating model.
Future: We expect the increased
automation benefits of Re:Imagined
to enable an >300 UPH in our OSP
warehouses. Building on our strong
operational track record, we’re
confident we can deliver this
for clients.
A pure play online grocery retail business serving big basket
and immediacy shopping missions to 940,000 customers in
the UK. A 50:50 joint venture with Marks & Spencer Group plc.
An interview with
Hannah Gibson CEO,
Ocado Retail
What does your
business do?
We are a 50:50 joint venture between
Marks & Spencer Group and Ocado
Group, bringing UK consumers a
leading proposition in online grocery
through Ocado.com, our big basket
grocery offer, and Ocado Zoom, our
fast-growing immediacy service.
What were the
highlights of 2022?
We significantly grew our active
customer base (customers who have
shopped in the last 12 weeks), to
940,000 customers, +13% from
832,000 the year before, reflecting
continued demand for online grocery in
the UK. Our market share of the online
grocery channel increased to 12.3%
in 2022 from 11.7% in 2021 (Nielsen).
What were the biggest
challenges?
The volume headwind of customers
reverting to smaller basket shops,
following the pandemic, was further
exacerbated by the cost of living crisis.
This saw customers increasingly
manage their total cash grocery spend
during the year, which meant smaller
baskets and reduced frequency. In
addition to this, the business has been
navigating near-term inflationary cost
pressures, including utilities.
Overview of performance
in the year
Underlying progress was encouraging,
reflected in strong customer growth
and efficiencies achieved in our latest
sites. However, challenges associated
with smaller basket shopping,
increased marketing costs, and
inflationary cost pressures were
significant. These near-term pressures
drove Retail EBITDA
A
to around
breakeven, down from £150m and a
6.6% EBITDA
A
margin achieved in 2021.
Outlook
In 2023, Ocado Retail is focused
on a Perfect Execution programme;
delivering unbeatable choice
reassuringly good value, and with
leading service, to drive continued
strong growth in active customers.
The business will also no longer be
comparing against larger basket
shopping behaviours in the second
half of the year, which will support
a return to volume growth, improved
capacity utilisation and reduced costs
relative to sales.
Ocado Retail is confident in the strong
recovery in the mid-term (four – six
years). The path to >£3.9 billion in
revenue is largely invested for, and
customer numbers and increased
utilisation of available capacity will
underpin a recovery to high-mid
single digit EBITDA
A
margins.
Read more about our mid-term
(four – six years) targets in our
‘Ocado Group modelling seminar’
(May 2022) and ‘Ocado Group cash
flow seminar’ (Nov 2022) materials
found on the Group website.
Mid-term outlook (4-6 years)
£270m
EBITDA
A
£160m
annual cash flows,
sufficient to fund
growth of >20%
New leadership to navigate
near-term challenges and
deliver on Ocado Retail’s
long-term ambitions.
Proof: In September 2022, Hannah
Gibson took over as CEO of Ocado
Retail. She brings over 10 years of
experience at Ocado Group, ranging
from senior customer, commercial
and technology roles, most recently
as Chief Product Officer for Ocado
Technology, where she set the
strategy and drove forward OSP for
Ocado Group’s partners. Before the
launch of Ocado Retail as a joint
venture with M&S, she was also Head
of Ocado Zoom, the leading service
delivering groceries in up to
60 minutes, taking the proposition
from concept to launch in two years,
and Head of Product & Merchandising
on the Ocado Retail leadership team.
Future: Under her experienced
leadership, Ocado Retail is ready
to navigate near-term challenges
and deliver on Ocado Retail’s
long-term ambitions.
An interview with
Brian McClory
Managing
Director, Ocado
Logistics
Discover
more online
Discover
more online
Contents
Contents
STRATEGIC REPORT
70 71
OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
Financial Review
The commentary is on a pre-exceptional basis to aid
understanding of the performance of the business on
a comparable basis. Exceptional items are covered on
pages 78 to 79 and in Note 2.6 to the Consolidated
Financial Statements.
Revenue for the period increased by 0.6% to £2,513.8m
(FY21: £2,498.8m). Retail revenue declined by 3.8%
year-on-year in a challenging trading environment,
with the cost-of-living crisis compounding the impact of
a return to more normal customer behaviours compared
with lockdown restrictions in the prior year (and seen
in lower basket sizes). International Solutions revenue
increased by 121.9% from £66.6m to £147.8m with the
go-live of eight new CFCs; six additional CFCs for Kroger
in the US (in Atlanta, Dallas, Chicago, Detroit, Denver
and Baltimore), a second CFC for Sobeys in Canada (in
Montreal) and our first CFC for ICA Gruppen in Sweden
(in Stockholm). Total invoiced fees
A
(design and capacity
fees) across all international partners were £180.9m, an
increase of 26.5% compared to the prior year.
Net cumulative invoiced fees
A
to our partners and not yet
recognised as revenue increased by £44.4m to £422.9m
at the end of the period (FY21: £378.5m), with an increase
of £51.3m for our international partners to £388.9m
(FY21: £337.6m), offset by a decrease of £(6.9)m for
our UK partners to £34.0m (FY21: £40.9m).
Gross profit and other income increased slightly to
£1,065.0m (FY21: £1,040.0m), despite Retail gross profit
declining by £82.4m to £739.9m (FY21: £822.3m), driven
by a combination of lower volumes, supplier cost inflation
pressure and product mix. This was offset by an increase
of £87.0m in International Solutions gross profit to £145.1m
(FY21: £58.1m).
Distribution and administrative costs of £1,137.7m
grew by 16.5% (FY21: £976.7m) for three key reasons:
1) continued investment in building our technology
capabilities for our partners, across both CFC and in-store
fulfilment solutions (“ISF”), 2) expanding our support
functions to support our rapidly growing and increasingly
global CFC operations and 3) significant inflationary
pressures on the cost of utilities, fuel and labour.
Group Technology costs that have been expensed (and
not capitalised) increased from £107.2m to £138.0m
reflecting wage inflation and an increase in technology
headcount from circa 2,600 to 3,000.
EBITDA
A
loss of £(74.1)m (FY21: profit of £61.0m), a
reduction of £135.1m and driven by the £154.4m reduction
in Retail EBITDA
A
to a loss of £(4.0)m (FY21: profit of
£150.4m). The decline in the Retail segment’s EBITDA
A
reflects lower volumes, and inflationary cost impacts on
utility, fuel and labour costs; these were partially offset by
the release of long-term management incentive provisions.
The Group continued to invest in our technology capability
and support functions during the year to support the future
growth of new and existing partners around the world.
Depreciation, amortisation and impairment increased
by 46.2% to £348.6m (FY21: £238.4m), primarily due to
our continued investment in our Ocado Smart Platform
(“OSP”) technology and also due to the roll-out of OSP
hardware and software at live CFC locations. Over the
last two years we have opened 14 new CFCs: 5 in FY21
and 9 in FY22; and 3 Zooms, bringing the total to 4. We
now have 23 live sites; 7 live UK CFCs, 4 UK Zooms and
12 live international CFCs. Property, plant and equipment
held on the balance sheet is £1,777.8m (FY21: £1,257.8m).
Net finance costs of £48.2m increased by £5.9m
(FY21: £42.3m). Finance costs excluding foreign exchange
gains/losses of £(90.0)m (FY21: £(71.6)m) were offset by
finance income excluding foreign exchange gains/losses of
£25.4m (FY21: £10.0m). Finance costs grew by £18.4m due
to the increased interest on lease liabilities (an increase of
£10.3m) driven by the full-year impact of the FY21 lease
additions and further additions in FY22, and increased
interest expense (an increase of £8.6m) due to the full-year
impact of the incremental debt raised in FY21. The £15.4m
increase in finance income was mainly driven by £12.5m
interest income on cash balances (FY21: £1.0m), primarily
due to higher interest rates. Net foreign exchange gains
recognised amounted to £16.4m (FY21: £19.3).
Exceptional costs of £29.9m (FY21: £42.8m net income)
includes: 1) the £58.4m reduction of contingent
consideration receivable, primarily from M&S relating to
the Ocado Retail joint venture. 2) litigation costs (£26.5m,
FY21: £28.9m) primarily related to patent infringement
litigation between the Ocado Group and AutoStore
Technology AS and 3) the final settlement of insurance
income from the Andover CFC (£67.4m, FY21: £78.6m).
Statutory loss before tax of £(500.8)m (FY21: loss of
£(176.9)m) reflects an EBITDA
A
loss of £(74.1)m (FY21:
profit of £61.0m), depreciation, amortisation and
impairment of £348.6m (FY21: £238.4m), net finance
costs of £48.2m (FY21 : £42.3m) and net exceptional
costs of £(29.9)m (FY21: £42.8m net income).
Revenue increased 0.6% to £2,513.8m (FY21: £2,498.8m):
– International Solutions grew strongly, up 121.9% to
£147.8m; a further eight international CFCs went live
in the period. We now have 12 live international sites
(FY21: 4 sites) and 38 live modules (FY21: 12 live modules).
– UK Solutions & Logistics revenue was up 13.0% to
£802.7m; UK Logistics volumes were down 6%, but
significant cost inflation resulted in a 12.5% increase
in cost recharges to our UK partners, increasing to
£630.7m. UK Solutions fees grew by 14.9% to £172.0m as
a further 12 modules of sales capacity went live, including
three in Retail’s new Bicester CFC, taking us to a total of
61 live modules in our CFCs (FY21: 49 live modules).
– Ocado Retail revenue declined by 3.8% to £2,203.0m
in a challenging market as we see the unwind of the
covid impact and normalised consumer behaviour,
leading to smaller baskets, exacerbated by the cost-of-
living crisis. There remains strong demand for Ocado
Retail with active customers growing by 13.0% over the
year to 940,000 customers.
Gross profit and other income of £1,065.0m increased
by 2.4% compared with the prior year (FY21: £1,040.0m),
with a gross margin improvement in the period; up 0.8ppts
from 41.6% to 42.4% as the growth in contribution from
the higher gross margin International Solutions business
offset the reduction in the Retail gross margin.
Distribution and administrative costs grew by £161.0m
to £1,137.7m (FY21: £976.7m) as the business continues
to expand in the UK and internationally.
EBITDA
A
for the period was a loss of £(74.1)m (FY21:
profit of £61.0m) with the £135.1m reduction driven by
a £154.4m fall in Retail EBITDA
A
.
Statutory loss before tax of £(500.8)m increased by
£323.9m from the prior year’s loss of £(176.9)m, reflecting
the £135.1m decline in Group EBITDA
A
, and after including
depreciation, amortisation and impairment charges of
£348.6m (FY21: £240.5m), net finance costs of £48.2m
(FY21: £42.3m), and net exceptional costs of £(29.9)m
(FY21: income of £42.8m). Each of these movements are
explained below.
Strong balance sheet, with cash and cash equivalents
of £1.3 billion as at the end of the period, supporting our
significant UK and International growth plans. Net debt
A
at the end of the period was £(577.1)m (FY21: £(359.8)m
net debt
A
). In June 2022, the Group successfully raised
additional gross liquidity of £878.2m, comprising a
£578.2m equity placing and a new three-year £300.0m
revolving credit facility, providing a healthy liquidity position
today of circa £1.6bn and securing the funding of our future
growth plans.
“ In 2022, we successfully accelerated
the roll-out of OSP for partners around
the world and strengthened our balance
sheet to support delivery of our future
growth plans. Ocado Retail showed
resilience navigating significant near-term
trading pressures”
Stephen Daintith
Chief Financial Officer
Financial results
FY22 FY21
£m
Pre-
exceptional
Exceptional
items
Total
statutory
reported
Pre-
exceptional
Exceptional
items
Total
statutory
reported
Pre-
exceptional
change
Revenue 2,513.8 – 2,513.8 2,498.8 (0.5) 2,498.3 0.6%
Gross profit and other income 1,065.0 73.8 1,138.8 1,040.0 79.2 1,119.2 2.4%
Distribution and administrative costs (1,137.7) (103.7) (1,241.4) (976.7) (34.3) (1,011.0) 16.5%
Share of results from joint ventures
and associates
(1.4) – (1.4) (2.3) – (2.3) (39.1)%
EBITDA
A
(74.1) (29.9) (104.0) 61.0 44.9 105.9 (221.5)%
Depreciation, amortisation and impairment (348.6) – (348.6) (238.4) (2.1) (240.5) 46.2%
Net finance costs (48.2) – (48.2) (42.3) – (42.3) 13.9%
Loss before tax (470.9) (29.9) (500.8) (219.7) 42.8 (176.9) 114.3%
A
These measures are alternative performance measures. Please refer to the section ‘Alternative Performance Measures’ on pages 279 to 281.
Contents
Contents
STRATEGIC REPORT
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OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL REVIEW
Financial Review continued
Retail revenue declined by 3.8% year-on-year driven by
an unwind of shopping behaviours experienced during
the pandemic, only partly offset by rising item prices.
EBITDA
A
decreased by £154.4m to a loss of £(4.0)m
(FY21: profit of £150.4m). The decline is primarily driven
by investments in capacity to support future growth,
investments in marketing to grow customer numbers
(and relative to pandemic lows) and inflationary cost
pressures. The loss includes a benefit from the release
of a provision relating to the long-term management
incentive plan.
We have continued to grow our active customer base, in
turn driving growth in orders per week though at a lower
rate, as customers reduced shopping frequency following
the pandemic and in response to the cost-of-living crisis
in the UK. Basket volumes have also declined, reflecting
the same trends.
We opened the Bicester CFC, which will add capacity
of around 30,000 orders per week at maturity and will
bring the total capacity for Ocado Retail to over 600,000
orders per week. Our Bristol, Andover and Purfleet
CFCs which opened in FY21 have all continued to ramp
during the year. We continue to invest in our immediacy
proposition, Zoom, launching three new sites in FY22,
and now have four sites live: Acton, Canning Town,
Leyton and Leeds. Collectively these sites will have
circa £20m annual sales capacity at maturity.
Revenue
Retail revenue declined by 3.8% year-on-year in a
challenging trading environment, with inflationary
pressures leading customers to reduce basket size
to manage spend.
The average basket value for Ocado.com was 8.5% lower
at £118 (FY21: £129), with customers ordering fewer items
per shop than in the prior year. This resulted in a decline
in items per basket of 11.5% to 46 (FY21: 52), which is
now back in line with pre-pandemic levels (FY19: 46).
We remain committed to offering customers fair value,
including investment in price and expanding our value-for-
money own label proposition. The business was impacted,
however, by the high-cost inflation being experienced by
food suppliers and others in the grocery supply chain,
and this was reflected in an increase in average selling
price for Ocado.com of 4.5% in the period, up from £2.44
to £2.55 per item. The decline in revenue was also driven
by year-on-year growth in the use of customer discount
vouchers (the costs of which are a reduction to revenue)
to drive customer retention and acquisition (Ocado.com
FY22: 0.9% of revenue, FY21: 0.1% revenue). In FY21 there
was a lower-than-usual amount of vouchering given the
increased demand for grocery deliveries during the
pandemic. FY19 voucher spend for Ocado.com was
1.7% of revenue.
While there was a 3.8% decline in year-on-year revenue,
there has been a steadily improving trend. Revenue
declined by 8.3% in the first half of the year (with
pandemic volumes as the comparator) and was followed
by growth of 1.4% in the second half of the year as
volumes started to trend towards a more normal basket
size; this was driven by improved customer acquisition
and through price inflation.
Segmental summary
Inter-segment eliminations
represent the elimination on
consolidation of revenue charged
from UK Solutions & Logistics to
Ocado Retail. For FY22, this was
£640.5m (FY21: £568.5m).
Group and other includes revenue
earned by Jones Food Company
(£0.8m, FY21: £0.4m) and central
costs (predominantly Board costs
and discussed in the ‘Group and
other’ section of this report) that
are not allocated to other segments.
Revenue (Group)
(£m)
FY22FY21FY20FY19FY18
1,599
1,757
2,332
2,499
2,514
EBITDA
A
(£m)
60
43
73
61
(74)
FY22FY21FY20FY19
FY18
(Loss) before Tax and
Exceptional Items
A
(£m)
(44)
(215)
(149)
(220)
(471)
FY22FY21FY20FY19FY18
The number of modules live has
increased by 38, with further
modules going live in Ocado
Retail, Kroger, Sobeys and ICA.
The cumulative number of modules
ordered has increased by 19,
primarily driven by our two new
clients Auchan Poland and Lotte.
OSP direct operating cost as a
percentage of installed site sales
capacity is a key metric for the
ongoing running cost of our
CFCs that is borne by Ocado and
measures the engineering, cloud
computing and other operating
costs of our OSP CFC operations.
It has improved by 25.9% over the
year as OSP performance becomes
increasingly efficient.
Group key performance indicators
The following table sets out a summary of selected unaudited operating
information for the period:
£m FY22 FY21 Change
No. of modules live
1,2
99 61 62.3%
Cumulative no. of modules ordered
1,2,3
232 213 8.9%
OSP direct operating cost
(% of installed site sales capacity)
4
2.0% 2.7% 25.9%
1. A module of capacity is assumed as approximately 5,000 eaches per hour (dependent on the specific
metrics of a partner) and circa £70m per annum of sales capacity.
2. A module is considered live when it has been fully installed and is available for use by our partner.
3. A module is classified as ordered when a contractual agreement has been signed with a partner and an
invoice has been issued for the associated design and access fees. This excludes modules which are
required to be ordered in order to maintain exclusivity agreements, but which have not yet been agreed
upon and invoiced.
4. Direct operating costs as a % of site sales capacity reflects the exit rate position for CFCs live for at least
six months at the period end. Direct operating costs include engineering, cloud, and other technology
support costs.
£m FY22 FY21 Change
Revenue
Retail 2,203.0 2,289.9 (3.8)%
UK Solutions & Logistics 802.7 710.4 13.0%
International Solutions 147.8 66.6 121.9%
Group and other 0.8 0.4 100.0%
Inter-segment eliminations (640.5) (568.5) 12.7%
Group 2,513.8 2,498.8 0.6%
EBITDA
A
Retail (4.0) 150.4 (102.7)%
UK Solutions & Logistics 67.2 68.5 (1.9)%
International Solutions (113.2) (119.3) (5.1)%
Group and other (21.9) (37.5) (41.6)%
Inter-segment eliminations (2.2) (1.1) 100.0%
Group (74.1) 61.0 (221.5)%
Retail
£m FY22 FY21 Change
Revenue
2
2,203.0 2,289.9 (3.8)%
Gross profit and
other income
3
739.9 822.3 (10.0)%
Distribution costs
4
(596.6) (536.7) 11.2%
Marketing
(non-voucher) costs
5
(57.6) (40.3) 42.9%
Other administrative costs
4
(89.7) (94.9) (5.5)%
EBITDA
A
(4.0) 150.4 (102.7)%
Key drivers
FY22 FY21 Change FY19 Change
9
Active customers
(000s)
6
940 832 13.0% 795 18.2%
Average orders
per week (000s)
377 357 5.6% 307 22.8%
Average basket
value (£)
7
118 129 (8.5)% 106 11.3%
Average selling
price (£)
8
2.55 2.44 4.5% 2.30 10.9%
Average
basket size 46 52 (11.5)% 46 –
1. The results of the Ocado Retail Limited joint venture (referred to as either “Ocado Retail” or “Retail”) are fully consolidated in the Group.
2. Retail segment includes results from Speciality Stores Limited (“Fetch”) until its disposal on 31 January 2021. The revenue decline in FY22 excluding Fetch was (3.5)%.
3. FY21 other Income includes £4.4m income from the Transitional Services Agreement relating to the sale of Fetch in FY21.
4. Distribution and administrative costs exclude depreciation, amortisation and impairment.
5. Marketing costs exclude the cost of vouchers given to customers, these are included in cost of sales.
6. Active customers are classified as active if they have shopped at Ocado.com within the previous 12 weeks.
7. Average basket value refers to the results of Ocado.com.
8. Average selling price is defined as gross sales divided by total eaches.
9. Represents variance between FY22 and FY19 to reflect pre-pandemic movement.
Contents
Contents
STRATEGIC REPORT
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OCADO GROUP PLC Annual Report and Accounts 2022
STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL REVIEW
Financial Review continued
Customer acquisition has remained strong in the year as
we invested in market activity to drive long-term growth.
Active Ocado.com customer numbers increased year-on-
year by 13% to 940,000 (FY21: 832,000), driving a 5.6%
increase in average orders per week, up from 357,000 to
377,000 orders per week. As a result, our share of the
larger online grocery market, following the pandemic, has
grown to 12.3% (Nielsen, FY21: 11.7%). Though there has
been some unwind from peak levels experienced during
the pandemic, the online channel’s share of the total UK
grocery market appears to be stabilising around 11%,
compared with 6% before the pandemic (IGD).
Gross profit and other income
Gross profit and other income declined by 10% to £739.9m
(FY21: £822.3m) with gross profit margin declining from
35.9% to 33.6% driven by lower volumes, the element of
supplier cost inflation that could not be passed on to
consumers, increased promotion costs and adverse
product mix.
Distribution costs
£m FY22 FY21 Change
CFC costs 214.0 180.1 18.8%
Trunking and delivery 261.5 250.8 4.3%
Other operating costs 121.1 105.8 14.5%
Total distribution costs 596.6 536.7 11.2%
Distribution costs primarily consist of fulfilment and
delivery operation costs which are provided by the UK
Logistics operation of Ocado Group.
CFC costs mainly include labour and utility costs in our
CFCs and increased by 18.8% to £214.0m (FY21: £180.1m)
compared to a growth in average orders per week in the
period of 5.6%. The higher rate of cost growth (up 18.8%)
compared to order volume growth (up 5.6%) is driven by
three key factors: 1. the cost inefficiencies related to
newer sites (Purfleet and Bicester) as they ramp to full
capacity, 2. the inflationary pressures across utility and
labour costs that we have experienced during the year,
and 3. the impact on operating leverage due to capacity
investment to support future growth.
Productivity improvements partly offset the inflationary
pressures, with units picked per hour (“UPH”) in mature
sites (Hatfield, Dordon, Erith and Bristol) improving by
2.9% to an average of 175 UPH. Our five OSP CFCs (all CFCs
except Hatfield and Dordon) achieved an average UPH of
184, with the newer sites of Andover, Bristol and Purfleet
all exceeding 200 UPH.
Total fees grew by 14.9% to £172.0m (FY21: £149.7m),
as we continued to invest in capacity to support our UK
clients’ current and future growth. Fees to Ocado Retail
grew broadly in line with overall live module capacity
growth from the new CFCs delivered in the current and
prior periods. An additional 12 modules of sales capacity
went live in the year, including three in our new Bicester CFC.
Fees to Morrisons grew following its return to the Erith
CFC in February 2021. This resulted from the end of an
agreement to temporarily free up the Morrisons’ Erith
capacity for Ocado Retail to use following the Andover
CFC fire in February 2019.
Live CFCs at the end of the year will have a total capacity
at maturity of circa 800,000 orders per week across
Ocado Retail and Morrisons. There are now seven live
CFCs in the UK and 61 live modules (FY21: 49).
Cost recharges represent the relevant operational
variable and fixed costs recharged by UK Solutions
& Logistics to Ocado Retail and Morrisons (costs
recharged to Ocado Retail are eliminated on
consolidation of the Group). These predominantly
relate to fulfilment and delivery operations included in
distribution costs but also include certain central, head
office activities, and transitional services fees to Ocado
Retail that are reported within administrative costs.
Total throughput in CFCs decreased by 6.0% to
1,196m individual items picked (eaches) (FY21: 1,273m),
while average orders per week increased by 6.9% to
494,000 orders per week (FY21: 462,000) across
Ocado Retail (average of 377,000 orders per week
in FY22) and Morrisons (average of 117,000 orders
per week in FY22). The decline in eaches reflects the
changing customer shopping behaviour trends towards
shopping smaller baskets.
Cost recharges grew by 12.5%, compared to a decline
in total CFC throughput of 6.0%, as customers reverted
to shopping smaller baskets following the pandemic and
in response to the cost-of-living crisis. This increase in
recharges reflects the full-year impact of operations at
our newer CFCs at Bicester, Andover, Bristol and Purfleet
as they ramp up to full capacity; together with higher
utility, dry ice and labour costs. The impact of cost
inflation was partly offset by improvements in efficiency.
UK Solutions & Logistics full-year revenue increased by
13.0% from £710.4m to £802.7m, reflecting continued
capacity investments to support current and future partner
growth in the UK, and the impact of inflationary pressures
on cost recharges, which more than offsetting volume
declines and improvements in underlying efficiency.
EBITDA
A
decreased slightly from £68.5m to £67.2m.
Higher capacity fees relating to the three new CFCs that
went live in the prior period were offset by the year-on-
year reduction in capital recharges for shared use sites
(Dordon and Erith) and the continuing investment in and
roll-out of OSP that is included within administrative costs.
As noted above, the recharges to Ocado Retail for the
lease costs of sites and assets used exclusively by
Ocado Retail are now accounted for as finance income
and excluded from EBITDA
A
.
Revenue
Revenue from the UK Solutions & Logistics business
increased by 13.0% to £802.7m (FY21: £710.4m).
Fee revenue comprises the fees charged to our UK
partners Ocado Retail and Morrisons for access to
Ocado’s technology platforms, capital recharges,
management fees, and research and development
(the portion of these fees that are charged to Ocado
Retail are eliminated on consolidation of the Group).
Trunking and delivery costs comprise people and fleet
costs relating to trunking and delivery operations and
increased by 4.3% to £261.5m (FY21: £250.8m) driven
by the increase in the number of average orders per
week (up 5.6%), by high fuel inflation and smaller average
baskets. This is offset by an improvement in operating
efficiency, evidenced by higher deliveries per van shift,
which is the average number of deliveries achieved per
driver shift.
Other operating costs of £121.1m (FY21: £105.8m)
include OSP capacity fees and capital recharges from
UK Solutions & Logistics to Ocado Retail. Capacity fees
have increased significantly due to the recent increase
in modules, including the CFC in Bicester (which went
live during FY22), and the CFCs in Bristol, Andover and
Purfleet (which all went live in FY21).
Marketing costs
Marketing costs increased by 42.9% to £57.6m
(FY21: £40.3m). Marketing activities were focused on
driving increased awareness of the value proposition that
Ocado offers. We continued to invest in above-the-line
marketing, particularly seen with the ‘there’s an Ocado just
for you’ brand campaign. Marketing spend increased as
a percentage of revenue in the year to 2.6% (FY21: 1.8%)
and contributed to a 13% increase in the number of active
customers to 940,000 (FY21: 832,000).
Administrative costs
Administrative costs decreased by £5.2m to £89.7m from
£94.9m, with an increase in people and property costs
offset by a release relating to the long-term management
incentive plan. Total labour costs increased, driven by an
increase in headcount and wage inflation. Property costs
increases were primarily due to the write-off of certain
costs related to the pausing of the north-west and south-
east CFCs announced previously.
EBITDA
A
EBITDA
A
for the Retail business was £(4.0)m
(FY21: £150.4m). As described in detail above, the EBITDA
A
loss was driven by higher fixed costs for our new CFCs
while they grow to maturity; lower volumes; the reduction
in gross margin; utilities, fuel and labour inflation; and
increased marketing to drive customer acquisition.
UK Solutions & Logistics
£m FY22 FY21 Change
Fee revenue
1
172.0 149.7 14.9%
Cost recharges
2
630.7 560.7 12.5%
Revenue 802.7 710.4 13.0%
Other income, net
of cost of sales
3.6 3.5 2.9%
Distribution costs
3
(621.5) (562.1) 10.6%
Administrative costs
3
(117.6) (83.3) 41.2%
EBITDA
A
67.2 68.5 (1.9)%
Key drivers
£m FY22 FY21 Change
Total eaches (million) 1,196.3 1,273.3 (6.0)%
Orders per week (000s) 493.6 462.0 6.8%
Mature site UPH
4,5
175 170 2.9%
Average deliveries per van
per week
6
176 177 (0.6)%
1. Fee revenue includes fees charged to Ocado Retail of £140.9m (FY21: £120.5m) which eliminates on consolidation.
2. Cost recharges include cost recharges to Ocado Retail of £497.6m (FY21: £445.8m) which eliminates on consolidation.
3. Distribution and administrative costs exclude depreciation, amortisation and impairment.
4. Measured as units dispatched from the CFC per variable hour worked by operational personnel.
5. Mature sites include Hatfield, Dordon and Erith with FY22 also including Bristol as it has been operational for more than 18 months and is considered mature
6. Average deliveries per van per week represents Ocado Retail only, which is total deliveries by the average number of vans in the fleet
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FINANCIAL REVIEW
Financial Review continued
Other income, net of cost of sales
Other income, net of cost of sales, was £3.6m
(FY21: £3.5m) and primarily relates to Erith and Dordon
property rental costs that are charged to Morrisons.
Distribution and administrative costs
Total distribution and administrative costs of £739.1m
(FY21: £645.4m) comprise £621.5m distribution costs
(an increase of 10.6%; FY21: £562.1m) and £117.6m of
administrative costs (an increase of 41.2%; FY21: £83.3m).
Distribution costs comprise the costs of fulfilment and
delivery operations which are recharged to Ocado Retail
and Morrisons. These also include engineering and other
support costs for the provision of the contracted services,
for which OSP fees are charged.
Total distribution costs grew by 10.6% to £621.5m
(FY21: £562.1m), against a reduction in eaches of 6.0%
to 1,196m (FY21: 1,273m). Distribution costs grew despite
the reduction in eaches delivered due to 1) the higher
costs from new sites as they ramp up to full efficiency;
and 2) the impact of significant cost inflation in respect
of energy, fuel costs, dry ice and wage inflation.
Productivity improvements saw the average number
of units per hour (“UPH”) in mature CFCs (Hatfield,
Dordon, Erith and Bristol) improve year-on-year to 175
in the period (FY21: 170). Since opening in FY21, our first
mini-CFC in Bristol has achieved a UPH of over 200,
and our newer sites in Andover and Purfleet are
already well ahead of our original expectations and
each exceeding our target of 200 UPH.
Distribution costs also include the engineering costs of
operating CFCs for which the OSP fee is charged to our
UK partners. These costs increased over the year due
to the full year of operations of those CFCs which opened
during FY21, together with the impact of the opening of
Bicester in September FY22. UK OSP CFCs that were live
at the start of the year all saw engineering cost per each
reduced by at least 20%.
Administrative costs grew by 41.2% from £83.3m in
FY21 to £117.6m in FY22. These costs include direct
and centrally allocated head office costs (which are
largely recharged to Ocado Retail and Morrisons) and an
allocation of central technology costs that are incurred
to support the continued development of OSP, primarily
as a result of the allocation of additional headcount and
technology resources to support and improve OSP,
together with ongoing investment in recruitment.
EBITDA
A
EBITDA
A
from UK Solutions & Logistics activities was
£67.2m, a decrease of £1.3m. This reduction largely
resulted from the continuing investment in and roll-out
of OSP, which is not recharged to customers; and a
year-on-year reduction in capital recharges to Ocado
Retail as the lease costs of CFCs and equipment used
exclusively by Ocado Retail are accounted for as finance
income and excluded from EBITDA
A
. These are eliminated
on Group consolidation.
Our international operations significantly expanded during
the year with eight new international CFCs going live.
These include a further six CFCs for Kroger in the US
(in Atlanta, Dallas, Chicago, Detroit, Denver and Baltimore),
the second CFC for Sobeys (in Montreal) and our first
CFC for ICA Gruppen (in Stockholm). We now have 12
live international sites (FY21: 4 sites) and 38 live modules
(FY21: 12 modules). As a result of this growth in live CFCs
and in live modules, revenue increased by 121.9% to
£147.8m (FY21: £66.6m).
We have a strong pipeline of further CFC commitments
in addition to significant in-store fulfilment (“ISF”)
capabilities to be delivered across a number of our
existing partners, and two new partnerships, Auchan
Poland (signed in March 2022) and Lotte Shopping
(signed in November 2022).
Distribution costs increased by 113.7% to £54.7m
(FY21: £25.6m) and include the engineering, maintenance
and technology costs required to support the increase in
live CFC operations. EBITDA
A
losses in the period reduced
by £6.1m, to £(113.2)m from £(119.3)m in FY21.
Fees and revenue
Fees invoiced grew by 26.5% from £143.0m in FY21 to
£180.9m in FY22. These fees include the design and
capacity fees invoiced across a number of clients relating
to existing and future CFC and ISF commitments, including
our new partnerships with Lotte Shopping and Auchan
Poland, and fees associated with the live operations,
primarily Kroger, Sobeys and ICA.
Under revenue recognition rules, design and access
fees relating to OSP are not recognised as revenue until
a working solution is delivered to the partner, i.e. the CFC
goes ‘live’. At the end of the period, cumulative fees
A
not
yet recognised as revenue, but instead recorded on the
balance sheet within contract liabilities, amounted to
£388.9m (FY21: £337.6m). The £51.3m net increase in
this balance includes £69.1m of invoices relating to future
CFCs (£92.6m in FY21) during the year offset by £17.8m
of the balance being released to revenue during the year
(£10.6m in FY21). £1.1m of the revenue released relates to
equipment sales (a portion of the £4.6m in footnote 2 above).
Revenue in the period of £147.8m (FY21: £66.6m) reflects
ongoing capacity fees of £117.2m (FY21: £37.2m) and
£14.5m (FY21: £11.0m) previously recorded on the balance
sheet relating to design and upfront fees across our
current operational partners, Groupe Casino, Sobeys,
Kroger and ICA, that has been released to revenue during
the year (as the relevant sites are now ‘live’). Revenue
also includes £11.5m (£9.6m in FY21) from Kindred and
£4.6m (FY21: £8.1m) from the sale of equipment (at cost)
and data centres to certain partners.
Distribution and administrative costs
Distribution and administrative costs grew by 45.6%
to £258.3m (FY21: £177.4m) as a result of increased
engineering support and technology costs reflecting the
go-live of operations and annualised costs for our 12 live
international client sites (end of FY21: 4), and continued
investment in the development of OSP as we build our
capabilities for our partners across both CFC and in-store
fulfilment solutions.
Distribution costs primarily consist of the engineering
and technology costs of operating the OSP platform and
CFCs for our international clients. These costs grew from
£25.6m in FY21 to £54.7m in FY22 as a result of increased
engineering operations and cloud costs to support the
growing number of international CFCs. Distribution costs
are also impacted by the annualisation of costs relating
to the two international CFCs that went live during FY21
as they continue to ramp up.
Administrative costs primarily consist of costs supporting
our international partnership agreements and the non-
capitalised technology costs to maintain and further
develop the OSP platform. We continue to invest in OSP
and build support functions to support rapid international
expansion. As a result, these costs grew by £51.8m from
£151.8m in FY21 to £203.6m in FY22 as we continued to
increase our investment in building long-term OSP
capabilities for our partners.
EBITDA
A
International Solutions EBITDA
A
improved by £6.1m from
a loss of £119.3m in FY21 to a loss of £113.2m in FY22.
This result reflects the increased revenue from our
growing international business offset by 1) our investment
in technology to support our international growth
ambitions; and 2) the central support costs for our
international partners. EBITDA
A
will turn positive as we
scale up our international CFC platform.
International Solutions
£m FY22 FY21 Change
Revenue
2
147.8 66.6 121.9%
Cost of sales (2.9) (8.5) (65.9)%
Gross profit and
other income 145.1 58.1 149.7%
Distribution costs
3
(54.7) (25.6) 113.7%
Administrative costs
3
(203.6) (151.8) 34.1%
EBITDA
A
(113.2) (119.3) (5.1)%
Key drivers
£m FY22 FY21 Change
Fees invoiced
A
(£m) 180.9 143.0 26.5%
No. of modules live
4,6
38 12 216.7%
Cumulative no. of
modules ordered
5,6
162 145 11.7%
1. Fees invoiced represent design and capacity fees invoiced during the period
for existing and future CFC and in-store fulfilment commitments. These are
recognised in the Income Statement according to IFRS 15 from the time when
the CFC/ISF operation goes live
2. Revenue includes £11.5m revenue (FY21: £9.6m) from Kindred Systems, and
£4.6m of data centre fees and equipment sales (FY21: £8.1m) to retail partners
recognised as revenue under IFRS 15. The cost of this equipment is recognised
in cost of sales.
3. Distribution and administrative costs exclude depreciation, amortisation
and impairment
4. A module is considered live when it has been fully installed and is available for
use by our partner.
5. A module is classified as ordered when a contractual agreement has been signed
with a partner and an invoice has been sent for the associated fees. This excludes
modules which are required to be ordered in order to maintain exclusivity
agreements, but which have not yet been agreed upon and invoiced.
6. A module of capacity is assumed as approximately 5,000 eaches per hour
(dependent on the specific metrics of a partner) and circa £70m per annum
of sales capacity.
International Solutions
Invoiced fees
59
81
124
143
181
FY22FY21FY20FY19FY18
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STRATEGIC REPORT
OCADO GROUP PLC Annual Report and Accounts 2022
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Financial Review continued
This segment represents revenue and costs which do
not relate to the Retail, UK Solutions & Logistics and
International Solutions segments. This primarily includes
Board costs, the costs of Group-wide share-based
payments, the consolidated results of Jones Food
Company and other ventures, and MHE JVCo rental
income. This segment reported an EBITDA
A
loss of £(24.1)
m (FY21 EBITDA
A
loss: £38.6m). The £14.5m improvement
is largely due to a £12.4m reduction in share-based
Senior Management incentive charges (reflecting the
lower Ocado Group plc share price) and a reduction in
losses in our ventures businesses following the disposal
of our interest in Infinite Acres Holding B.V. in October
FY21 (FY21 loss: £1.9m).
Board costs of £11.8m (FY21: £12.1m) include 1) salaries,
bonuses and fees for both Executive and Non-Executive
Directors of £8.4m (FY21: £9.4m), which reduced by
£1.0m, primarily due to a reduction in bonus costs; 2)
other Board costs of £1.8m (FY21: £0.9m), which have
increased largely due to higher travel costs following the
relaxation of covid travel restrictions and 3) Directors’
insurance costs of £1.6m (FY21: £1.8m).
Share-based payments reduced by £12.4m from £29.3m
in FY21 to £16.9m in FY22, primarily due to the lower
Ocado Group plc share price. We established a new
share-based management incentive scheme during
the year for certain senior managers who lead the
development of OSP. The costs of this scheme are
excluded from the ‘Group and other’ segment but are
instead allocated to the relevant business segments
(see footnote 1 below).
Erith CFC
In July 2021, a fire destroyed part of the Erith CFC,
including some machinery and inventory held on site.
The Group has comprehensive insurance and claims
were formally accepted by the insurer.
An agreement was reached with the insurers during
the year for the final settlement in respect of the claims
relating to the Erith fire for a total of £8.3m, £6.4m was
received during the period and was recognised as an
insurance reimbursement income in FY22. The receipt
of the £6.4m concluded the Erith fire claim.
Other exceptional costs of £nil (FY21: £10.1m) include,
but are not limited to, stock write-offs, customer
goodwill refund and the impairment of certain fixed
assets and labour costs. The cumulative exceptional
costs, across all periods, amounted to £10.1m.
Litigation costs and litigation settlement
Litigation costs during the year were exclusively the
costs incurred on the patent infringement litigation
between the Group and AutoStore Technology AS
(“AutoStore”). Further details are provided in note 3.14
to the Consolidated Financial Statements. The costs
during the year were £26.5m (FY21: £28.9m). The
prior year litigation costs also include costs of legal
proceedings brought by the Group against certain former
employees and Project Today Holdings Limited (“T0day”),
concerning misappropriation and unlawful use of the
Group’s confidential information and intellectual property,
which was settled in FY21. The Group received £1.8m
as part of the settlement of that litigation which was
recognised as exceptional income in FY21.
Ocado Group Finance transformation
and SaaS implementation costs
As part of the Group’s Finance transformation programme,
the Group implemented various software as a service
(“SaaS”) solutions, primarily Oracle Fusion, which went live in
FY21, across the business. Following the IFRS Interpretations
Committee (“IFRIC”) accounting guidance in FY21, the Group
updated its accounting policy for the treatment of SaaS
configuration and customisation-related costs under IAS 38
Intangible Assets. The cumulative Finance transformation
and SaaS implementation costs expensed to date amount
to £28.6m and include £7.0m in FY22 (FY21: £13.3m).
These amounts have been disclosed as exceptional items
in both FY21 and FY22 because they are material and arise
from a strategic project that is not considered by the Group
to be part of the normal operating costs of the business.
The Finance transformation programme will continue
through to, and will complete in, FY23 with a focus on
optimising and enhancing the SaaS solutions and related
Finance processes to improve efficiency across the
business. Incremental costs incurred concerning the
ongoing programme will continue to be disclosed as
exceptional items. Ongoing licence fees for SaaS
arrangements will be treated as ordinary operating
costs and are not treated as exceptional items.
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 were formally accepted by the insurers.
Insurance reimbursement comprises reimbursement for the
costs of rebuilding the CFC and business interruption losses.
The reimbursement has been recognised as other income.
The Group reached an agreement with the insurers
during the year for the final settlement of the insurance
claim for a total of £273.8m, which resulted in an additional
insurance reimbursement income of £67.4m in the year.
This concluded the Andover insurance fire claim.
Other exceptional costs of £3.4m (FY21: £5.6m) include,
but are not limited to, the write-off of certain assets,
professional fees relating to the insurance claims process,
business rates, temporary costs of transporting employees
to other warehouses to work and redundancy costs. The
cumulative exceptional costs, across all prior periods,
amounted to £124.9m.
Ocado Retail IT systems transformation
In FY21, Ocado Retail Limited (“ORL”) initiated its IT
Roadmap programme, which focuses on delivering
IT systems and services that will enable ORL to meet
its obligation to transition away from Ocado Group IT
services, tools and support. The IT Roadmap programme,
which is expected to run until the end of FY23, includes
the development of both on-premises and SaaS solutions.
The IT Roadmap programme costs that meet assets
recognition criteria will be recognised as intangible
assets and implementation costs that do not meet assets
recognition will be expensed as exceptional items. The
cumulative costs expensed to date amount to £8.6m.
(Loss)/gain on disposal of Speciality Stores
Limited (“Fetch”)
On 31 January 2021, Ocado Retail completed the sale
of the entire share capital of Speciality Stores Limited,
its wholly-owned pets business trading as Fetch, to
Paws Holdings Limited (“Paws Holdings”), resulting in
a gain on disposal of £1.0m in FY21.
During the period, a provision of £1.4m was made against
the deferred consideration based on the likelihood of receipt.
Gain on disposal of investment in Infinite Acres
Holding B.V. (“Infinite Acres”)
In October 2021, the Group sold its 33.3% interest in
Infinite Acres Holding B.V. (“Infinite Acres”) to 80 Acres
Urban Agriculture Inc. (“80 Acres”) in exchange for 2.5%
of 80 Acres’ issued share capital, resulting in a gain on
disposal of £5.0m.
Change in fair value of contingent consideration
In FY19, the Group sold Marie Claire Beauty Limited
(“Fabled”) to Next plc and 50% of Ocado Retail to Marks
and Spencer Group plc (“M&S”). Part of the consideration
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. A loss on revaluation of £58.4m (FY21: £16.9m gain)
is reported through exceptional items, primarily driven by
the reduction in the contingent consideration receivable
from M&S. Refer to note 3.7 to the Consolidated Financial
Statements for details.
Organisational restructure
During the current year, the Group undertook a partial
reorganisation of its head office functions resulting in
redundancies and related costs of £3.0m. Further
organisational restructuring was announced in January
2023, affecting around 250 people and incurring total
related costs of £7.0m.
Tax impacts on exceptional items
The change in fair value of contingent consideration
receivable is not subject to tax. The remaining exceptional
items are taxable or tax deductible and give rise to a tax
credit of £0.8m (FY21: tax charge of £0.5m). A further tax
charge of £6.4m (FY21: charge of £3.7m) has not been
recognised as it relates to tax losses which are not
recognised for deferred tax purposes.
1. Of the total share-based payment charges for the Group (excluding ORL) of £34.9m (FY21: £36.8m), £18.0m are allocated to the relevant business segment
(FY21: £7.5m) and £16.9m (FY21: £29.3m) remains in the Group segment.
2. Ventures relates to the profits and losses on our share of investments and joint ventures during the period. The most significant is Jones Food Company where
we recorded losses of £3.0m (FY21: £3.3m loss). The others are: Infinite Acres (which we sold to 80 Acres, of which we hold a c.2% share), which was disposed
of in October FY21 (FY21: £1.9m loss); MHE JVCo, for which we recorded losses of £0.2m (FY21: £0.2m profit) and Karakuri, for which we recorded losses of
£1.2m (FY21 loss: £0.6m).
3. In FY21 Inter-segment eliminations and ‘other’ were shown as one line, which totalled £6.8m.
4. Other costs include a small allocation of Group support and central costs.
5. Rental income totalling £10.1m was received from MHE JVCo, a joint venture with Morrisons.
6. Research and development (R&D) subsidies were £4.8m (FY21: £4.9m) and are granted by HMRC as a fixed percentage on the value of qualifying R&D expenditure.
7. Inter-segment eliminations represent the elimination due to the consolidation of intercompany transactions.
£m FY22 FY21 Change
Board costs (11.8) (12.1) (2.5)%
Share-based payments
1
(16.9) (29.3) (42.3)%
Jones Food Company and
other ventures
2
(4.3) (5.6) (23.2)%
Inter-segment eliminations
3
(2.2) (1.1) 100.0%
Other
4
(3.8) (5.7) (33.3)%
Group and other costs (39.0) (53.8) (27.5)%
MHE rental income
5
10.1 10.3 (1.9)%
Research and development
credit ("RDEC")
6
4.8 4.9 (2.0)%
Group and other EBITDA
A
(24.1) (38.6) (37.6)%
Group and other EBITDA
A
ex.
eliminations
7
(21.9) (37.5) (41.6)%
Group and other
£m FY22 FY21
Andover CFC
Insurance reimbursement income 67.4 78.6
Other exceptional costs (3.4) (5.6)
Total Andover exceptional item 64.0 73.0
Erith CFC
Insurance reimbursement income 6.4 2.0
Other exceptional costs – (10.1)
Total Erith exceptional item 6.4 (8.1)
Litigation costs (26.5) (28.9)
Litigation settlement – 1.8
Ocado Group Finance transformation
and SaaS implementation costs (7.0) (13.3)
Ocado Retail IT systems transformation (4.0) (4.6)
(Loss)/gain on disposal of Speciality
Stores Limited (“Fetch”) (1.4) 1.0
Gain on disposal of investment in Infinite
Acres Holding B.V. – 5.0
Changes in fair value of contingent
consideration (58.4) 16.9
Organisational restructure (3.0)
Total exceptional items (29.9) 42.8
Exceptional items
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Financial Review continued
Below EBITDA
A
Depreciation, amortisation and impairment
Total depreciation, amortisation and impairment costs
were £348.6m (FY21: £238.4m), an increase of £110.2m,
or up 46.2% year-on-year, and includes depreciation of
property, plant and equipment of £154.4m (FY21: £84.4m),
depreciation of right-of-use assets of £66.0m
(FY21: £65.6m), amortisation expense of £114.7m
(FY21: £78.0m), and impairment costs of £13.5m
(FY21: £10.4m).
The increase was principally driven by the full-year
depreciation of the 5 CFCs that went live in FY21 and
the partial-year depreciation of the 9 CFCs that went
live in FY22 (£48.5m including right-of-use leases).
The remaining movement is driven primarily by the
amortisation of technology projects going live in the
period (£13.0m) and the prior period (£36.5m).
Net finance costs
Net finance costs of £48.2m increased by £5.9m
(FY21: £42.3m). Finance costs excluding foreign exchange
gains/losses of £(90.0)m (FY21: £(71.6)m) were offset by
finance income excluding foreign exchange gains/losses of
£25.4m (FY21: £10.0m). Finance costs grew by £18.4m due
to the increased interest on lease liabilities (an increase of
£10.3m) driven by the full-year impact of the FY21 lease
additions and further additions in FY22, and increased
interest expense (an increase of £8.6m) due to the full-year
impact of the incremental debt raised in FY21. The £15.4m
increase in finance income was mainly driven by £12.5m
interest income on cash balances (FY21: £1.0m), primarily
due to higher interest rates. Net foreign exchange gains
recognised amounted to £16.4m (FY21: £19.3).
Capital expenditure
£m FY22 FY21
UK CFCs & Operations 212.0 250.0
International CFCs 357.1 273.2
Technology, fulfilment development
and innovation
228.2 157.2
Total capital expenditure (including
MHE JVCo) 797.3 680.4
Capital expenditure totalled £797.3m in the period
(FY21: £680.4m) as we continued to develop new CFCs
both in the UK and with our international retail partners. We
also continued to invest in technology to support our OSP
growth ambitions, and within our Group support functions.
UK CFCs & Operations
In the period we invested £212.0m in our UK CFCs
& Operations (FY21: £250.0m), of which, £164.1m
(FY21: £166.8m) relates to our CFC and Zoom sites in
the UK. This includes the Bicester CFC, which went live
during the year and the Luton CFC, which will go live in
2023. The opening of these sites will increase the total
potential capacity across our UK retail partners to over
850,000 orders per week at maturity. Approximately half
of the total spend is in the Retail business (largely land
& buildings) and half is in the UK Solutions & Logistics
business (largely material handling equipment, “MHE”).
The balance of UK capital spend of £47.9m (FY21: £83.2m)
relates to operational spend in the normal course of
the UK Logistics business and spend in support of our
Group central functions; this comprises patent and IP
capitalisation, refurbishing buildings for our technology
teams, system transformations across finance and supply
chain, and upgrades to our talent acquisition technology.
International CFCs
International CFC investment in the year was £357.1m
(FY21: £273.2m), which includes the launch of the eight
CFCs which went live in the period. £120.5m of the total
spend relates to the four international CFCs that we
expect to go live in 2023.
Technology, fulfilment development and innovation
We continue to invest in the development of our own
technology, particularly OSP. We invested £228.2m
(FY21: £157.2m) driven by the continued investment
in OSP with a focus on the innovation we announced
at Ocado Re:Imagined in January 2022. Re:Imagined
includes seven key innovations: the 600 series bot,
the 600 grid and optimised site design, Automated
Frameload, On-Grid Robotic Pick, Ocado orbit, Ocado
swift router and Ocado flex.
Share of results from joint ventures and associates
The Group has accounted for the share of results from
joint ventures and associates. MHE JVCo is a 50/50 joint
venture with Morrisons and holds Dordon CFC assets,
which Ocado uses to service the Ocado Retail and
Morrisons’ online business. The Group’s share of MHE
JVCo loss after tax in the period amounted to £(0.2)m
(FY21: £0.2m profit). The Group’s interest in Infinite Acres
Holdings B.V. was disposed of in October FY21 and
contributed £nil to the Group’s results in the period
(FY21: £(1.9)m). The Group’s interest in Karakuri Limited
contributed a loss of £(1.2)m in the period (FY21: £(0.6)m
loss). The Group recognised a reduction in the value of
Karakuri due to the reclassification of £1.9m of the
purchase price to warrants.
Loss before tax
The loss before tax for the period was £(470.9)m
(FY21: loss of £(219.7)m) after including the impact
of depreciation, amortisation and impairment costs
of £348.6m (FY21: £238.4m), and net finance costs
pre-exceptionals of £48.2m (FY21: £42.3m).
Taxation
The Group reported a total tax credit in the Income
Statement for the period of £19.5m (FY21: £8.8m reported
tax charge). This amount includes a UK corporation tax
credit of £8.4m (FY21: £7.7m charge) in respect of the
Retail business. The tax credit in Retail is due to the
availability of the ‘super-deduction’ of capital allowances
on our investment in fixed assets. A deferred tax credit of
£11.3m (FY21: £0.4m deferred tax charge) was recognised
in the period mainly arising from the recognition of losses
for utilisation in Retail.
At the end of the period, the Group had £973.9m
(FY21: £677.7m) of unutilised carried-forward tax losses. We
are not expecting to pay UK tax within our five-year outlook.
Dividend
During the period, the Group did not declare a dividend
(FY21: £nil).
Loss per share
Basic and diluted loss per share was (58.93)p (FY21: (30.18)p).
Technology headcount grew to around 3,000 colleagues
to support the business’ strategic initiatives. Total
technology expenditure in the period was £343.7m
(FY21: £255.0m), of which £205.7m was capitalised
(FY21: £147.8m). We continue to focus on enhancing our
customer proposition to deliver world-class end-to-end
grocery ecommerce and fulfilment solutions. OSP includes
ecommerce, order management, forecasting, routing and
delivery, automated storage and retrieval systems (ASRS),
dexterous robotics and other material handling elements.
The CFC is the basis of our product proposition, it is the
grid and bots (our ASRS and the robots on the grid) and its
peripheral material handling equipment. We have invested
£94.3m this year (FY21: £66.1m), approaching half of the
£205.7m of capitalised spend, focused on reducing both
the capital cost and the ongoing running costs of the CFC
for the partner and Ocado Group.
This development spend has been invested in a number of
key propositions, a few of which are: our lowest cost and
lightest bot ever, the 600 series and grid; the development
of an automated freezer solution; the development and
client deployment of automatic frame loading for our
vehicles; and initial investment into modifying our ASRS
for the non-grocery market. Alongside these investments,
the investment in and subsequent acquisition of Myrmex
Inc. enabled us to deliver our automatic frame-loading
product into the Purfleet site.
We are committed to the development of advanced
technologies where they enhance our product
proposition. A good example here is the use of
additive manufacturing in the 600 series bot. We
are also focused on generalised dexterous robotic
manipulation and autonomous vehicles. In FY20 we
acquired Kindred and Haddington for their vision,
machine learning and dexterous robotics capabilities;
and we have invested in Wayve and Oxbotica to provide
a strategic advantage in autonomous vehicle innovation.
We have invested £33.9m (FY21: £13.3m) this year to
further develop these propositions. This has enabled
the testing and development of a dexterous picking
solution for our clients that can pick a significant
proportion of our clients’ ranges and perform at a
speed that allows the product to compete with human
performance. We have continued to work towards
ultimately having an autonomous delivery solution,
both by conducting on-road autonomous driving testing
with our partners and through testing and development
of the customer-facing aspects.
OSP is a client and shopper-focused proposition, to that
end, we have invested £27.7m (FY21: £20.5m) in developing
our ecommerce platform. OSP ecommerce made strong
progress across every aspect of the shopper journey.
Shoppers will benefit from improvements to the search
and browse experience, and the introduction of shoppable
recipes and delivery pass subscriptions. Of particular note,
we introduced new onsite monetisation opportunities
with new content spaces and featured products, allowing
partners to create more engaging experiences for shoppers
whilst earning retail media income.
Notes
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 FY22 of £1.6m
and in FY21 of £2.8m
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Financial Review continued
One of the core benefits of OSP is our deep expertise in
logistics and supply chain, where we have invested £18.8m
in these propositions this year (FY21: £16.5m). These
developments help to ensure that goods in and goods out
of our CFCs operate in the most effective way. We focus
investment on the planning, optimisation and execution
of delivery; which includes the Re:Imagined swift router
product now live enabling retailers to offer short lead
time slots to customers with CFC range and economics.
We also focus on the optimisation of the grocery supply
chain, including ensuring that products are not substituted
with alternatives, are accurately forecasted to avoid waste
and that supply chain systems are easy to use.
The balance of the spend relates to investment in
technology platforms, core UK infrastructure and
Jones Food Company where its second vertical
farm is due to go live later this year.
£m FY22 FY21
EBITDA
A
(74.1) 61.0
Movement in contract liabilities 78.7 107.0
Other working capital movements 32.0 (134.5)
Insurance proceeds relating to
business interruption 54.3 30.0
Finance costs paid (55.8) (34.8)
Taxation received/(paid) 13.4 (26.2)
Other non-cash items (40.6) (18.5)
Operating cash flow 7.9 (16.0)
Capital expenditure (785.9) (690.7)
Acquisition of subsidiaries, net of cash
acquired (5.5) (189.7)
Insurance proceeds relating to
rebuilding Andover CFC and Erith
claim 57.0 2.0
Proceeds from additional investment
in Jones Food Company – 20.0
Dividend from joint venture 8.0 7.7
Net proceeds from interest-bearing
loans and borrowings 37.2 266.6
Repayment of lease liabilities (57.4) (48.6)
Proceeds from share issues 567.3 10.6
Movement of short-term deposits – 370.0
Other investing and financing
activities 9.0 10.6
Movement in cash and cash
equivalents (excl. FX changes) (162.4) (257.5)
Effect of changes in FX rates 21.8 19.3
Movement in cash and cash
equivalents (incl. FX changes) (140.6) (238.2)
Cash flow
Cash and cash equivalents (including FX changes)
reduced by £140.6m (FY21: reduced by £238.2m), a
£97.6m improvement compared with the prior year.
EBITDA
A
(as explained above) declined by £135.1m
from £61.0m in FY21 to a loss of £(74.1)m in FY22.
The movements above result in an Operating cash inflow
for the year of £7.9m (FY21: cash outflow of £16.0m. The
following movements explain the overall movement in
cash and cash equivalents an outflow of £140.6m
(2021: an outflow of £238.2m):
– Capital expenditure of £785.9m during the year
(FY21: £690.7m) primarily includes the MHE of both UK
and International partner CFCs. Capital expenditure also
includes our continued investment in OSP, including the
products announced in Ocado Re:Imagined, and
investment in our central support capabilities.
– Acquisition of subsidiaries, net of cash acquired of
£5.5m (FY21: £189.7m), reflecting the acquisition of
materials handling robotics start-up Myrmex Inc. in
June to accelerate the development of intelligent
asset handling systems for OSP.
– Insurance proceeds relating to rebuilding of £57.0m
(FY21: £2.0m) relates to the reimbursement of costs
for the rebuild of our CFCs at Andover and Erith which
includes machinery costs.
– Dividends from joint ventures of £8.0m (FY21: £7.7m)
relate to the MHE JVCo, in which Ocado Group and
Morrisons engaged in a joint venture that owns material
handling assets in our Dordon shared CFC.
– Net proceeds from interest-bearing loans and
borrowings of £37.2m (FY21: £266.6m) reflects the
drawdown by Ocado Retail of 1) a shareholder loan
facility and 2) of its revolving credit facility, partially
offset by the costs of the new credit facility with HSBC.
– Lease liability repayments of £57.4m (FY21: £48.6m),
an increase of £8.8m due to an increase in motor vehicle
leases, the full-year impact of the leases relating to the
CFCs that went live in FY21 and lease payments for the
new Bicester CFC.
– Net proceeds from share issue of £567.3m relate to the
£578.2m equity raise (net £564.1m after £14.1m costs)
that was carried out in June FY22 together with a small
amount in respect of employee share schemes.
– Movement of short-term deposits in the prior year
(FY22: £nil) represents a drawdown of £370.0m of
treasury deposits which matured during the period
and were not defined as cash and cash equivalents
at the start of the FY21 financial year.
– Other investing and financing activities of £9.0m
(FY21: £10.6m) include £9.6m of interest income on
bank deposits (FY21: £1.0m) offset by £0.6m of loans
made to investee companies (FY21: £12.5m). The FY21
inflow was driven by cash contingent consideration
received relating to the Ocado Retail joint venture with
M&S (£33.9m), which was offset by loans to investee
companies (£12.5m) and investments in Wayve and
Oxbotica (£11.4m).
– Effect of changes in FX rates of £21.8m (FY21: £19.3m)
relates to the FX gain (reported under net finance costs)
and translation FX on cash balances (predominantly
USD cash balances held to fund the expansion of our
Solutions business in the US).
Operating cash flow, improved by £23.9m, despite the
decline in EBITDA
A
(from an outflow of £16.0m in FY21
to an inflow of £7.9m in FY22). The key drivers of this
improvement are explained below:
– Contract liabilities: cash inflow of £78.7m reflecting
upfront fees paid by partners in relation to CFCs and
new module commitments and which have not yet been
recognised as revenue in accordance with IFRS 15. The
cash inflow of £78.7m is lower than the prior year inflow
of £107.0m primarily due to fewer modules ordered by
our clients and the timing of cash received.
– Working capital: cash inflow of £32.0m, an improvement
of £166.5m compared with the prior year outflow of
£134.5m, largely driven by improved management
of supplier payment terms (£122.0m of the total
improvement). Trade and other receivables increased
by £50.7m (a net cash outflow, £26.9m lower than FY21),
principally due to prepayments for the purchase of long
lead items of capital expenditure required for CFCs under
construction and the release of insurance accrued
income related to the Andover fire. There was a £10.9m
outflow (£44.3m lower than FY21) related to growth in
inventory levels, primarily due to low-value spares
(previously expensed) now recorded in inventory.
– Insurance proceeds relating to business interruption:
cash inflow of £54.3m (FY21: £30.0m) related to the
reimbursement of business interruption losses and
associated costs in relation to the fires at our Andover
and Erith CFCs.
– Finance costs: cash outflow of £55.8m (FY21: £34.8m)
comprise £27.9m interest paid on borrowing (FY21: £16.8m)
and £27.9m for the interest element of leases (FY21: £18.0m).
The £11.1m increase in interest paid on borrowing is
driven by the incremental funding secured in October
FY21, whereby the Group issued £500m of senior
unsecured notes (SUNs), with part of the proceeds
used to repay the £225m 2017 senior secured notes.
– Taxation: cash inflow of £13.4m (FY21: taxation paid of
£26.2m) relates to a tax refund received by Ocado Retail
in relation to an overpayment in FY21, partially offset by
taxation payments by foreign subsidiaries. No UK tax
was paid in the period, reflecting the impact of the
acceleration of tax relief for capital expenditure in
Ocado Retail as a result of the ‘super-deduction’,
combined with the decline in Retail EBITDA
A
.
– Other non-cash items: outflow of £40.6m
(FY21: cash outflow of £18.5m) relates to adjustments
for the following non-cash elements of EBITDA
A
:
– £(26.2)m (FY21: £4.2m increase) reduction in
management incentive plan provisions (primarily
within the Retail segment);
– £(24.7)m (FY21: £(15.2)m) revenue recognised from
long-term contracts;
– £42.0m (FY21: £35.5m) of share-based payments;
– £10.8m (FY21: £nil) non-cash write off of property,
plant and equipment;
– £(43.9)m (FY21: £(45.3)m) is the adjustment for
non-cash exceptional items;
– £1.4m (FY21: £2.3m) share of losses from joint
ventures and associates.
£m FY22 FY21 Movement
Assets
Goodwill 164.7 144.8 19.9
Other intangible assets 377.2 345.2 32.0
Property, plant and
equipment 1,777.8 1,257.8 520.0
Right-of-use assets 493.9 494.6 (0.7)
Investment in joint
ventures and associates 15.6 26.5 (10.9)
Trade and other
receivables 329.3 324.4 4.9
Cash and cash
equivalents 1,328.0 1,468.6 (140.6)
Other financial assets 185.4 212.6 (27.2)
Inventories 106.8 86.7 20.1
Other assets 34.5 22.4 12.1
Total assets 4,813.2 4,383.6 429.6
Liabilities
Contract liabilities (422.9) (378.5) (44.4)
Trade and other payables (508.2) (393.2) (115.0)
Borrowings (1,372.8) (1,300.0) (72.8)
Lease liabilities (532.3) (528.4) (3.9)
Other (42.7) (74.1) 31.4
Total liabilities (2,878.9) (2,674.2) (204.7)
Net assets 1,934.3 1,709.4 224.9
Balance Sheet
Assets
Goodwill of £164.7m (FY21: £144.8m) increased by £5.7m
as a result of the acquisition of Myrmex Inc, as detailed
above. The remaining increase in goodwill of £14.2m
relates to the foreign exchange benefit of the revaluation
of the (predominantly USD-denominated) goodwill of
£144.8m that was held at the start of the reporting period.
Goodwill represents the future benefit to Ocado Group
from the acquisitions of Myrmex in the current year and
the acquisitions of Kindred, Haddington and Jones Food
Company in prior years. This future benefit derives from
the development of new technology, the ability to attract
new customers and cost synergies.
Other intangible assets of £377.2m increased by
£32.0m (FY21: £345.2m) primarily due to capitalised
internal development costs relating to the build-out of
our technology capabilities for our partners, across both
CFC and ISF solutions, along with the capitalisation of
software costs.
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Financial Review continued
Property, plant and equipment net book value increased
by £520.0m to £1,777.8m (FY21: £1,257.8m) and comprise
fixtures, fittings, plant and machinery of £1,577.2m
(FY21: £1,143.9m), land and buildings of £197.5m
(FY21: £113.1m) and motor vehicles of £3.1m (FY21: £0.8m).
– Fixtures, fittings, plant and machinery predominantly
comprise the material handling and other operating
equipment within our CFCs and spokes.
– This increased by £433.3m (FY22: £1,577.2m,
FY21: £1,143.9) driven by £494.4m of additions
(FY21: £489.9) relating to the go-live of 12 sites
(9 CFCs and 3 Zooms) for our Client Partners
including Ocado Retail, Kroger, Sobeys and ICA.
– We capitalised £63.9m (FY21: £35.0m) of internal
development costs related to OSP technology
development and deployment.
– These increases were partly offset by £(148.5)m of
depreciation (FY21: £(81.0)m) due to the increased
net book value of assets live, impairment of £(9.2)m
(FY21: £(11.4)m) and disposals at net book value of
£(5.3)m (FY21: £(0.2)m).
– Land and buildings comprise our CFCs in the UK,
spokes and offices. This increased by £84.4m
(FY22: £197.5m, FY21 £113.1m) largely comprising
the land and buildings for Ocado Retail’s UK sites.
– Motor vehicles predominantly comprise the vehicles
owned by Ocado Group in relation to CFC and head
office operations.
Right-of-use assets of £493.9m (FY21: £494.6m)
represents the asset value of assets held under long-
term leases, comprising land and buildings £415.0m
(FY21: £409.0m), motor vehicles £63.1m (FY21: £60.1m)
and fixtures, fittings, plant and machinery £15.8m
(FY21: £25.5m). During the year the Group entered into
new leases for assets of £70.5m (FY21: £182.8m) and
comprise land and buildings of £43.4m (FY21: £152.0m),
motor vehicles of £24.9m (FY21: £30.8m) and fixtures,
fittings, plant and machinery of £2.2m (FY21: £nil). Certain
leases were terminated during the year with a net book
value of £4.6m (FY21: £7.6m), and the depreciation charge
for the year was £66.0m (FY21: £65.6m).
Other financial assets decreased by £27.2m to £185.4m
(FY21: £212.6m). This decrease was driven by a £57.6m
reduction, from £152.6m (FY21) to £95.0m, in the
contingent consideration receivable from Marks and
Spencer Group plc (M&S) on the 50% sale of Ocado Retail.
We estimated the fair value of the contingent consideration
at the year-end based on the probability weighting of a
series of scenarios that consider the current market
uncertainty in the grocery sector and Retail’s current
trading performance (see note 3.7 to the Consolidated
Financial Statements). This decrease was partly offset by
a £39.4m increase in other financial assets mainly related
to an improvement in the fair value of our investments in
Oxbotica and Wayve, two autonomous vehicle start-ups.
The increase in value for these two assets is a result of
Oxbotica’s successful series C fundraise; and the
completion of Wayve’s series B fundraise, which
triggered the conversion of our loan note to equity.
Inventories of £106.8m (FY21: £86.7m) increased by
£20.1m and mostly comprise goods held for resale
(largely Retail grocery inventory) which increased by
£7.4m to £89.2m (FY21: £81.8m) due to higher cost
prices and increased stock holding across the larger
number of Retail sites (three new sites in FY21 and
four new sites, including Zooms, in FY22).
We also adopted a new inventory accounting policy
for low-value spares (items below £500), which had
previously been expensed. Under the new accounting
policy, low-value spares are now initially recognised as
inventory and expensed as used. £7.3m of low-value
spares have been recognised within inventories at the
period end (FY21: £nil).
Other assets of £34.5m (FY21: £22.4m) relate primarily
to share warrants that have a carrying value of £27.4m
(FY21: £9.6m), and which have increased by £17.8m due
to a revaluation of the share warrants for Oxbotica and
80 Acres. Other assets include £4.4m of assets held for
sale (FY21: £4.2m), predominantly the Dartford spoke, and
£1.9m of deferred tax assets (FY21: £7.2m) relating to the
historical losses of the group, which have decreased due
to a revised view of the timing of future profit flows.
Liabilities
Contract liabilities of £422.9m (FY21: £378.5m) primarily
relate to the consideration received in advance from UK
and International Solutions customers where revenue is
recognised when the performance obligation is satisfied,
typically when a CFC goes live. Contract liabilities
reflect amounts invoiced to partners for their contracted
contribution towards the initial MHE investment made
in a CFC, and increased by £69.1m during the year
(FY21: £94.4m). This was partly offset by £24.7m
(FY21: £15.2m) in respect of prior receipts recognised as
revenue in the year. The current contract liabilities balance
of £29.1m (FY21: £21.8m) represents amounts due to be
recognised as revenue within 12 months of the year-end.
Investment in joint ventures and associates includes
the Group’s 50% investment in MHE JVCo and the
Group’s 26.3% investment in Karakuri (both no change
in percentage holding from the prior year). The decrease
in carrying value in the period of £10.9m to £15.6m
(FY21: £26.5m) is due to the full-year dividend received
from MHE JVCo of £8.0m (FY21: £7.7m), losses for the
year in Karakuri and a reduction in the value of Karakuri
due to the reclassification of £1.9m of the purchase price
to warrants.
Trade and other receivables increased by £4.9m to
£329.3m (FY21: £324.4m), comprising the following:
– Trade receivables (net of expected credit loss
allowance) of £124.2m (FY21: £124.6m), which
predominantly comprise balances due from Solutions
customers and commercial and media income in Retail.
– Other receivables increased by £21.3m to £82.7m
(FY21: £61.4m) driven by the reclassification of Retail
VAT receivable (previously in other payables), partly
offset by a reduction in customer balances due for
our US subsidiary, Kindred. Other receivables largely
comprise tax refunds and credits due, receivables
expected from contract manufacturers for components
we have sourced on their behalf and receivables in our
US subsidiary, Kindred.
– Prepayments increased by £7.1m to £76.5m
(FY21: £69.4m) due to increased forward purchasing
of components key to the construction of our CFCs.
Prepayments typically include CFC components,
software maintenance payments and vehicle
maintenance payments.
– Accrued income decreased by £23.1m to £45.9m
(FY21: £69.0m) due to the cash receipt of insurance
proceeds relating to the Andover fire, partly offset by
an increase in accrued Solutions income. The balance
primarily relates to accrued income for Solutions
capacity fees, and media and promotional income.
– Amounts due from suppliers in respect of commercial
and media income is £71.2m (FY21: £70.7m). £52.5m
(FY21: £50.9m) of the total is within trade receivables
and £18.7m (FY21: £19.8m) is within accrued income.
Cash and cash equivalents are £1,328.0m
(FY21: £1,468.6m) at the end of the period. Gross debt
(including lease liabilities) at the period end was £1,905.1m
(FY21: £1,828.4m), with net debt
A
at the period-end of
£(577.1)m (FY FY21: £(359.8)m). In June FY22, the Group
successfully raised additional gross liquidity of £878.2m,
comprising a £578.2m equity placing (£564.1m net of costs)
and a new £300.0m revolving credit facility. We believe this
provides sufficient liquidity in the short to medium term as
we move closer towards being cash flow positive.
Trade and other payables increased by £115.0m to
£508.2m (FY21: £393.2m) mainly due to the improved
management, in line with contractual terms, of supplier
payment terms (trade payables increased by £83.3m to
£176.9m FY21: £93.6m). The remaining increase relates
to US property taxes due, which are increasing in line with
the growth of equipment in the jurisdiction, and an increase
in accruals, primarily relating to the timing of payroll.
Borrowings increased by £72.8m to £1,372.8m
(FY21: £1,300.0m) largely due to a £30.0m shareholder
loan provided by M&S (the non-controlling interest) to
the Retail business and the £10.0m draw down by Retail
of an existing revolving credit facility. The remaining
increase in borrowing is largely due to the unwind of the
liability element of the two unsecured convertible bonds,
which are held at amortised cost.
Lease liabilities increased by £3.9m to £532.3m
(FY21: £528.4m) and comprise land and building £441.4m
(FY21: £431.6m), motor vehicles £65.5m (FY21: £62.0m)
and fixtures, fittings, plant and machinery £25.4m
(FY21: £34.8m). New lease liabilities within this total that
were entered during the year were £64.2m (FY21: £176.9m)
and largely comprised land and buildings, with the balance
across motor vehicles and fixtures, fittings, plant and
machinery. Lease liabilities decreased by payments made
of £85.7million (FY21: £66.6m) and lease terminations
(predominantly underutilised office space), partly offset
by £28.3m of accrued interest (FY21: £18.0m).
Lease liabilities due to third parties were £514.8m
(FY21: £494.4m) and excludes £17.5m (FY21: £34.0m)
payable to MHE JVCo in which the Group holds a
50% interest.
Other liabilities of £42.7m (FY21: £74.1m) principally
relate to dilapidation provisions and deferred tax liabilities.
The £31.4m reduction in other liabilities is largely driven by
the release of various employee incentive plan accruals of
£26.6m, of which the majority relates to the cancellation of
the Ocado Retail management incentive scheme. Deferred
tax liabilities reduced by £9.7m to £14.7m (FY21: £24.4m)
primarily due to tax losses in Retail offsetting the liability
relating to fixed assets.
Stephen Daintith
Chief Financial Officer
Note:
1) Total internal development costs capitalised across other intangible assets and property, plant and equipment are £181.4m (2021: £130.6) comprising £63.9m of
internal development costs relating to property, plant and equipment (FY21: £35.0m) and £117.5m (FY21: £95.6m) of internal development costs relating to intangible
assets. The increase of £50.8m is primarily driven by the continued investment in OSP and the innovations announced with Re:Imagined that include the further
development of our grid and bots, dexterous robotics, our ecommerce platform, and fulfilment and supply chain propositions.
2) Total capital work-in-progress, relating to projects where spend has been capitalised but the asset is not yet in use is £544.4m (FY21: £482.3m) and included across
intangible assets (£76.9m, up from £45.9m in FY21) and property, plant and equipment (£467.5m, up from £436.4m in FY21).
Contents
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STRATEGIC REPORT
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RISK MANAGEMENT
How we manage
our risks
Ocado Group’s Enterprise Risk Management (“ERM”) enhances
our resilience and improves confidence in the delivery of our
strategy and business objectives.
Our approach is underpinned by the ERM process and internal
control framework that help us to identify, evaluate and manage
our threats and opportunities.
1. Set strategy
Our strategy informs the setting
of objectives across the business.
Executive Directors determine and
evaluate the principal risks and
associated risk appetite for the Group.
2. Evaluate risks
Segment directors and second line
teams identify risks significant to each
of their areas. This is captured in local
operational risk registers.
These risk registers are reviewed to
create a consolidated set of key risks
for the enterprise.
Risk management operation
The Ocado ERM process is designed
to identify, assess, manage and
monitor key threats and opportunities
arising from our strategic direction,
our business model and our business
environment.
Organisation
Our risk organisation is structured
around a collaborative three lines
model, with the participation of the
underlying teams continually evolving
to meet our changing business needs.
Our second line teams provide targeted
monitoring and guidance to ensure
effective identification, assessment,
management and monitoring of our risks
across the full span of the business.
Architecture
During the year we introduced an
Enterprise Tier 2 key risk register
to our architecture, to improve
transparency, provide improved
clarity of understanding around
principal risks and ensure consistent
and effective risk management
across all segments of the business.
This register is monitored holistically
by the Enterprise Risk team. Each
second line team monitors the key
risks associated with the principal risks
they have responsibility for, to ensure
the principal risk remains aligned with
our strategic and operational priorities
and continues to reflect the wider
business context.
3. Implement mitigation
Taking account of risk appetite,
management determines how risks will
be managed. Mitigation information is
added to the operational and key risk
registers as appropriate to determine
residual exposure.
4. Review risks
The Enterprise Risk team in
conjunction with the Risk Committee
oversees the risk management
process. Group-wide risks and
mitigation processes are regularly
reviewed by the Risk Committee
and Audit Committee.
This process for identifying, evaluating
and managing the principal risks faced
by the Group 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.
COSO Enterprise Risk Management Framework
Source: COSO Enterprise Risk Management Framework
Governance
& Culture
Strategy &
Objective-Setting
Performance
Review &
Revision
Information,
Communication
& Reporting
Mission,
Vision &
Core Values
Strategy
Development
Implementation
&
Performance
Enhanced
Value
Business
Objective
Formulation
Regulatory bodies
External assurance providers
Process
Our process starts with our strategy
to identify, understand and manage the
threats and opportunities that influence
our ability to deliver on the objectives.
Ocado risk management process
Set
strategy1.
Evaluate
risks
2.
Review
risks4.
Implement
mitigation
3.
Enterprise Tier 1 and Tier 2 and operational risks
– First line and second line
operational risk registers
– Used by teams to manage their
risks on a day-to-day basis and
forms a critical part of our risk
management
– Underlying significant risks across
the business
– Enterprise-wide view to focus on
our resources
– Provides transparency on the
management of our risk
– The strategic threats to our
business
– Owned directly by the Executive
Director level
– Published externally, providing
important insight for our investors
Enterprise Tier 1
Principal risks
Enterprise Tier 2
Key risks
Operational risks
Risk management principles and culture
During the year we continued the evolution of our risk management approach, embedding
foundational principles based on the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) ERM Framework. This aims to improve governance and operations,
and enhance our stakeholder value.
Governing body roles: integrity, leadership and transparency
First line roles:
Provision of
products/services
to clients;
managing risk
Second line roles:
Expertise, support,
monitoring and
challenge on
risk-related matters
Governing body
Accountability to stakeholders for organised oversight
Regulatory bodies
External assurance providers
Third line roles:
Independent and
objective assurance
and advice on all matters
related to the achievement
of objectives
Risk organisation three lines model framework
Accountability,
reporting
Delegation, direction,
resources, oversight
Alignment,
communication,
coordination,
collaboration
Internal Audit
Independent assurance
Management
Actions (including managing risk)
to achieve organisational objectives
Source: The Institute of Internal Auditors Three Lines Model
Process-level
risk
Process-level
risk
Process-level
risk
Key risk Key risk
Principal risk
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STRATEGIC REPORT
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RISK MANAGEMENT
How we manage our risks
continued
Risk management governance
Risk management delivery is governed
by a structured set of Committees:
– The Board is responsible for the
review and approval of the risk
management framework and Ocado
Group’s key strategic and emerging
risks. Our risk management 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. As part
of its annual strategy review, the
Board also reviews and approves
the associated risk appetite.
– The Audit Committee, delegated by
the Board, is responsible for the
review of the effectiveness of risk
management, the system of internal
control, the monitoring of the quality
of financial statements and
consideration of any findings
reported by the external auditor.
The review covers all significant
controls, including financial,
operational and compliance controls
and risk management systems.
Continuous improvement activity
underway:
– To further embed scenario analysis,
including climate-related scenario
analysis, within ERM.
– To increase operational maturity of
our second line functions which were
assessed as part of our Internal
Control Effectiveness review.
– To enhance our management of
opportunities.
The strengthening of the financial
control environment remains an area
of focus for the Audit Committee and
further activity was undertaken during
the period to improve our controls; this
is explained on page 140 of the Audit
Committee Report.
Principal and emerging risks
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 and emerging
risks towards the end of the period
informed by recommendations from
the Risk Committee, ensuring that
procedures are in place to manage and
mitigate risks. Significant ESG matters,
and climate-related risks and
opportunities were taken into account
as part of the Board’s risk review.
We consider ESG as being the
environmental, social and governance
work we do, which is critical to
building our sustainable value. As
noted on page 26, monitoring and
managing our material ESG issues are
a strategic imperative. From a risk
management perspective, ESG
elements are considered individually in
identifying and assessing the principal
risks and are embedded throughout.
Set out overleaf are details of the
principal risks and uncertainties for the
Group, our risk appetite, and the key
mitigating activities used to address
them. The risks are not set out in any
order of priority or importance. Risk
appetite is the level of risk that we are
willing to accept in pursuit of our
strategy, before any action is
determined to be necessary in order
to reduce that risk. We monitor our risk
levels against appetite at the Audit and
Risk Committees. In line with the prior
year, we evaluate our risks against our
strategic objectives and our ESG
materialities to consider both the
risk and opportunity perspectives
associated with these priorities.
The residual (or post-mitigation) risk
movement during the year for each
principal risk and uncertainty has
been assessed and is included in
the disclosure.
Details of consideration given to
finance risks by the Company are set
out on pages 96 to 99 and 243 to 245.
Details of consideration given to
climate-related risks by the Company
are set out on pages 47 to 55 and 95.
Ocado Retail
In addition to the principal risks
impacting the Group, we also consider
risk in relation to our activities and
investment in Ocado Retail. Ocado
Group’s Audit Committee and Risk
Committee formally review the Ocado
Retail principal and key risks as part
of their half year and full year risk
reviews. Risks of significance are set
out below:
– Geopolitical and economic
uncertainty given the current
situation with higher fuel, utilities
and cost prices, and continuing
events in Ukraine.
– Failure to maintain a retail
proposition that appeals to a
broad customer base.
Changes to our principal risks
During the year a comprehensive
review of Ocado’s principal risks was
undertaken that resulted in a refresh
of their titles and definitions plus the
following underlying changes in scope:
– The risk described in the 2021
Annual Report addressing Product
(OSP) Innovation, Quality and
Safety has been realigned with
Quality included in Product
Performance, and Safety within
Fire & Safety.
– The risk described in the 2021
Annual Report addressing Business
Interruption and Catastrophic
Events has been incorporated
within Product Performance and
Cybersecurity.
Emerging risks
In analysing Ocado Group’s risk
universe, utilising both internal and
external sources, emerging risks
which have been identified are set
out below:
Market volatility risk (including
competition): We continue to monitor
the ongoing situation including
industrial action and inflation, and
consider mitigation activities as part
of the Geopolitical & Economic
Uncertainty principal risk (page 95).
Business transformation risk: We
continue to transform our business to
take advantage of new markets and
opportunities, and our emerging risk
process seeks to ensure that we are
aware of risks and opportunities
arising from business transformation.
– The Risk Committee reviews,
inputs, and challenges principal
and emerging risks, monitors
effectiveness of risk management
across the Group and provides
governance over programmes
to strengthen our risk culture.
The Committee is chaired by an
Executive Director. Attendees
include other executives, the Chair
of the Audit Committee and the
Committee is directly supported
by the Enterprise Risk team. The
Committee reviews a full enterprise
risk report twice a year which 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
taking account of mitigation
activities. The risk appetite is also
assessed to ensure that it reflects
the level of risk that the business is
willing to accept in order to achieve
our strategic objectives.
The Risk Committee is supported
by specialist risk committees and
supporting second line teams
covering risk areas such as
information security, safety, ESG and
data privacy. In addition the Treasury
Committee manages Ocado Group’s
cash and deposits, investments,
foreign exchange and interest rates,
so as to ensure liquidity and minimise
financial risk.
Internal Audit supports the Audit
Committee and Risk Committee in
reviewing the effectiveness of the risk
management framework and the
management of individual risks driven
by a risk-based audit plan.
We have an ERM Policy which
covers the management of risks,
encompassing ESG matters. This
has the purpose of protecting and
enhancing enterprise value. The
Company has a number of other
policies which cover specific ESG
topics. You can find further detail on
certain of these policies on page 99.
Strengthening our framework
The Board’s review found the
Company’s risk management and
internal control systems to be
effective. As part of our continuous
improvement of risk management and
resilience, we continue to develop our
approach to support effective
decision-making.
Achievements during the year:
– Aligned more closely with the
COSO ERM Framework to enhance
our guiding principles.
– Introduced Enterprise Tier 2 key
risks to focus risk management
resource and oversight across the
segments – assessed by our Internal
Control Effectiveness review.
– Introduced deep dives to surface
understanding in areas of
significant concern and drive
engagement within broader
stakeholder groups.
– Piloted scenario analysis to support
the identification and assessment
of risks, as well as informing risk
management actions.
– Further enhanced coordination
across our second line operations
and our delegated risk governance
to enable us to meet emerging
challenges with greater resilience.
– Strengthened the coverage of
ESG risks within our remuneration
incentives.
Overview of risk management governance structure
Audit
Committee
Board
ESG
Committee
Safety
Committee
Privacy
Committee
Infosec
Committee
Risk
Committee
Internal Audit
Contents
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STRATEGIC REPORT
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RISK MANAGEMENT
How we manage our risks
continued
What is the risk?
Our OSP offer, pricing and contractual terms may
not provide adequate and sustainable returns for us
and our shareholders and an attractive commercial
proposition for our clients.
Key risk drivers
– Commercial viability
– Commodity and cost inflation
– Partner dependency
– Partner market volatility
– Food waste
How we manage it
– Pricing model approved by Chief Commercial Officer,
Ocado Solutions and Board.
– All deals are modelled and reviewed before signing
– Quarterly pricing review.
– Monthly monitoring of project P&Ls undertaken
by Finance.
– Diversified pipeline of deals with new partners
in new territories.
What is the risk?
Failure to provide clients with timely, consistently
reliable performance at a level of quality to meet the
needs of their end customers. Partners may not have
the necessary knowledge, guidance, or capabilities to
operate OSP efficiently and cost-effectively. These
issues could lead to increased costs, reduced revenue
or penalties for Ocado and its clients.
Key risk drivers
– Partner (operational) performance
– Contractual obligation and change
– Platform implementation delays
– Product quality
– Operational disruption (including technical and
software failures)
How we manage it
– Governance teams monitor individual projects.
– Monthly reviews of partner performance undertaken,
including KPIs and partner engagement.
– Partner Success Teams share knowledge and
advise on improved ways of working.
– New products are tested at dedicated
development sites.
What is the risk?
Failure to respond to emerging technology or disruptive
business models could undermine our ability to attract
and retain clients.
Key risk drivers
– Disruptive technology
– Product strategy and roadmap
How we manage it
– Quarterly product planning meetings assess product
development against functionality, target KPIs,
timelines and budget.
– Ongoing market research to identify our
partners’ needs and market trends.
– Establishing our identity as a technology
business, international platform provider
and innovation factory.
Product Commercial
Proposition
Product Performance Product Innovation
Linking principal risks with strategy
The table below shows the primary link between
our principal risks and strategy, which enables us
to be a more resilient business.
In 2022 we clarified our fifth priority and renamed
it ‘Responsible business approach’. This priority
provides a foundational bedrock to the other four
‘pillars’ in the strategy, enabling us to continue our
focus on resilience and ensure that our risk
management activities fully underpin our strategy.
Principal Risk Strategic link
Product Commercial Proposition
Product Performance
Product Innovation
Intellectual Property
Supply Chain
Talent & Capability
Cybersecurity
Fire & Safety
Regulatory & Compliance
Geopolitical & Economic Uncertainty
Climate
Risk owner
Luke Jensen
Risk appetite
Cautious
Movement
Link to strategy
Risk owner
James Matthews and
Luke Jensen
Risk appetite
Cautious
Movement
Link to strategy
Risk owner
James Matthews
Risk appetite
Open
Movement
Link to strategy
Responsible
business
approach link
Responsible
business
approach link
Responsible
business
approach link
1. Grow our revenue
2. Optimise OSP economics
3. Deliver transformational technology
4. Deliver on our client commitments
5. Responsible business approach
54
3
1
2
Strategic pillars key
Responsible business
approach key
Risk movement key
Our people and skills
for the future
Increased
Environment and
natural resources
Decreased
Platform resilience
and innovation
–
No change
Risk appetite key
Open – Will take justified risks to achieve highest return and accept
possibility of failure.
Flexible – Will take strongly justified risks and will manage impact of
possible failure.
Cautious – Preference for safe delivery and will accept if trade-off is
limited, and heavily outweighed by benefits.
Minimal – Extremely conservative and will accept only if essential and
limited possibility of failure.
Averse – Avoidance of risk is a core objective, and will always select the
lowest risk option.
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RISK MANAGEMENT
How we manage our risks
continued
Supply Chain Talent & Capability CybersecurityIntellectual Property
Risk owner
Neill Abrams
Risk appetite
Cautious
Movement
Link to strategy
Risk owner
James Matthews
Risk appetite
Cautious
Movement
Link to strategy
Risk owner
Claire Ainscough
Risk appetite
Flexible
Movement
Link to strategy
Risk owner
James Matthews
Risk appetite
Minimal
Movement
Link to strategy
Responsible
business
approach link
Responsible
business
approach link
Responsible
business
approach link
Responsible
business
approach link
Responsible business
approach key
Risk movement key
Our people and skills
for the future
Increased
Environment and
natural resources
Decreased
Platform resilience
and innovation
–
No change
Risk appetite key
Open – Will take justified risks to achieve highest return and accept
possibility of failure.
Flexible – Will take strongly justified risks and will manage impact of
possible failure.
Cautious – Preference for safe delivery and will accept if trade-off is
limited, and heavily outweighed by benefits.
Minimal – Extremely conservative and will accept only if essential and
limited possibility of failure.
Averse – Avoidance of risk is a core objective, and will always select the
lowest risk option.
What is the risk?
Third party IP infringement or failure to protect our
own IP could result in loss of use of the Group’s assets,
financial damages or harm to the Company’s reputation
or relationships.
Key risk drivers
– Infringement
– Protection
How we manage it
– Conduct Freedom to Operate searches on relevant
technologies and in selected jurisdictions.
– Monitor IP filings and grants by a large number of
competitor companies.
– Specialist patent attorneys work with the
development streams to identify new innovations and
provide training and guidance.
– Combine internal and external legal counsel
management of litigation and other IP proceedings.
What is the risk?
Disruption in our extended and complex supply
chain may adversely affect product availability and
responsible sourcing. This could result in increased
costs and fines, delays to contractual commitments
and loss of revenue.
Key risk drivers
– Contract performance
– Responsible sourcing
– Supplier dependency
– Power shortages/blackouts
– CO
2
shortage
How we manage it
– Steering group monitors supply chain demand
against supplier capacity constraints.
– Dedicated procurement teams with specific market
and product knowledge.
– Supplier assessments, due diligence and site audits
undertaken during product development process.
– Quarterly business review of all major suppliers
covers performance, product quality, cost and
market assessment.
– Responsible Sourcing Working Group monitors multiple
work streams, reporting to the ESG Committee.
What is the risk?
Difficulty in filling key positions, a loss of top
performers and an inability to embed diversity could
undermine business operations and growth plans.
Key risk drivers
– Retention and rewards
– Attraction
– Training and development
– Diversity and inclusion
– Succession planning
– Culture and wellbeing (employee engagement
and relations)
– Organisational structures
How we manage it
– Workforce planning undertaken to identify current
and future landscape.
– Periodic review of remuneration and incentive plans
to align with market trends.
– Talent development programmes implemented to
support resourcing plans.
– Employee surveys to analyse opinions
– Succession plan developed.
What is the risk?
Disruption or loss of critical assets and sensitive
information as a result of a cyber attack, insider threat
or a data breach within our Group network or our supply
chain, could result in business disruption, reputational
damage and regulatory impacts, for us and our clients.
Key risk drivers
– Cybersecurity breach
– Commercial data loss
– Personal data loss
– Infrastructure outage
– Third party compromise
How we manage it
– IT infrastructure established to operate with
resilience and security.
– Regular testing by third parties and cyber incident
contingency planning.
– Data Protection Officer oversees Group’s privacy
compliance programme.
– No customer payment card data is held in Ocado
Group’s databases.
– Dedicated Information Security team monitors
security issues and responds to security incidents.
1. Grow our revenue
2. Optimise OSP economics
3. Deliver transformational technology
4. Deliver on our client commitments
5. Responsible business approach
54
3
1
2
Strategic pillars key
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STRATEGIC REPORT
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RISK MANAGEMENT
How we manage our risks
continued
Regulatory & Compliance Geopolitical & Economic
Uncertainty
ClimateFire & Safety
Risk owner
James Matthews
Risk appetite
Minimal
Movement
Link to strategy
Risk owner
Neill Abrams
Risk appetite
Minimal
Movement
Link to strategy
Risk owner
Stephen Daintith
Risk appetite
Flexible
Movement
Link to strategy
Risk owner
Neill Abrams
Risk appetite
Flexible
Movement
Link to strategy
Responsible business
approach key
Risk movement key
Our people and skills
for the future
Increased
Environment and
natural resources
Decreased
Platform resilience
and innovation
–
No change
Risk appetite key
Open – Will take justified risks to achieve highest return and accept
possibility of failure.
Flexible – Will take strongly justified risks and will manage impact of
possible failure.
Cautious – Preference for safe delivery and will accept if trade-off is
limited, and heavily outweighed by benefits.
Minimal – Extremely conservative and will accept only if essential and
limited possibility of failure.
Averse – Avoidance of risk is a core objective, and will always select the
lowest risk option.
Responsible
business
approach link
Responsible
business
approach link
Responsible
business
approach link
Responsible
business
approach link
What is the risk?
Fire, or harm to a worker or customer, caused by product
design or operating failures could result in business
disruption, loss of assets and reputational loss.
Key risk drivers
– Fire safety
– Product safety
– Food safety
– People safety (construction and logistics)
How we manage it
– Health and safety governance programme overseen
by the Safety Committee.
– Experienced technical experts monitor and audit
compliance against relevant safety regulations, policies
and procedures in safety areas, including food, product,
occupational health, fire and construction.
– Training, risk assessments and safe systems of
work undertaken by qualified staff to raise awareness
and knowledge.
– Regulatory changes actively monitored and
supported by external expertise and advice.
What is the risk?
Failure to comply with local and international
regulations could lead to loss of trust, penalties,
and undermine our ability to operate.
Key risk drivers
– Statutory compliance
– Fraud, bribery and industry specific compliance
– New geographies
– Governance
How we manage it
– UK, EU and rest of world regulatory monitoring
tracker.
– Perform due diligence and territory research and
seek specialist advice for regulatory issues.
– Monitor regulatory developments to ensure that
changes are identified.
– Implement compliance framework of policies and
procedures and employee training.
What is the risk?
Global economic and political crises may undermine
customer demand, our access to skills and our supply
chain. This could impair operations and delivery of
new capacity.
Key risk drivers
– Sanctions
– War and conflict
– Cost of living
– Pandemic
– Civil unrest/activism
How we manage it
– Risk assessments prior to entering new geographical
markets or undertaking new ventures.
– Scan of government and media channels for
emerging threats.
– Maintain financial and physical reserves to cushion
any operational impact for an extended period.
– Update business continuity management plans in
response to threats.
What is the risk?
Extreme weather events and climate-related regulation
could disrupt our supply chain, operations and demand
for our products.
Key risk drivers
– Climate reporting
– Fleet transformation
– Energy costs
– Climate impact on supply chain
– Natural disasters
How we manage it
– ESG Committee oversight of ESG and climate
programmes.
– Risk workshops and scenario analysis to identify
financial impact, and mitigations over extended
timeframe (see TCFD disclosure note – pages 47 to 55).
– KPI monitoring.
– Climate and Net Zero roadmap planning.
– Horizon scanning to identify regulatory
developments.
1. Grow our revenue
2. Optimise OSP economics
3. Deliver transformational technology
4. Deliver on our client commitments
5. Responsible business approach
54
3
1
2
Strategic pillars key
Contents
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STRATEGIC REPORT
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GOING CONCERN AND VIABILITY
Going Concern and
Viability Statements
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 14 and 15, and 26 to 35, and
our risk management framework is
described on pages 86 to 95.
The Group’s planning cycle is the
primary annual strategic and financial
planning activity through which the
Board assesses the prospects of the
Group, covering the five successive
financial years from FY23 to FY27.
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 and other
members of the Divisional
Management Team. The Board
undertook a detailed review of the
plan during its annual Strategy Day in
June 2022, which was approved by
the Board. The plan was then updated
to reflect the outcome of the Group
FY23 Budget, which was approved by
the Board in December 2022.
In preparing the plan the Board
considered the impact of Covid-19,
both the positive impact to online
grocery retail demand through
lockdown, supporting the longer-term
case for online grocery retail, and
the potential normalisation of
consumer buying patterns in a
post-Covid-19 economy.
The Board continues to assess these
factors, including the extent to which
consumer buying patterns may have
normalised, along with other factors
such as the availability and cost of
labour and other key requirements
for 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 £578m
capital raising in June 2022, the
Group has cash and cash equivalents
of £1.3 billion and net debt of
£0.6 billion as at the end of the
period, compared to cash and cash
equivalents of £1.5 billion and net
debt of £0.4 billion at the end of FY21.
The Group also has access to
additional liquidity through its
£0.3 billion Revolving Credit Facility
(“RCF”) until June 2025 with options
to extend for an additional two years
subject to agreement with the
banking syndicate.
The Group’s Senior Unsecured Notes
(“SUNs”) contain typical high yield
covenants, including a Fixed Charge
Cover Ratio (“FCCR”) which provides
greater financial flexibility when
greater than 2.0x, and a Consolidated
Net Leverage Ratio (“CNLR”) which
governs the Groups ability to make
certain restricted distributions. In
both cases, the covenants are only
tested on an “incurrence” basis (i.e.
when accessing additional funding)
and apply to the Restricted Group
– the consolidated group excluding
Ocado Retail and Jones Food and the
results of the Group’s captive
insurance entity. Whilst no additional
funding requirement is indicated in
the modelling below, we expect the
FCCR to be maintained above 2.0x
throughout the assessment period
maintaining our ability to access
additional funding if required.
The RCF also contains a net leverage
covenant similar to the CNLR covenant
in the SUNs, which needs to be met in
order to be able to draw down under
the facility. We have considered the
need and ability to access this RCF
over the going concern and viability
assessment period in each of the base
case, downside and severe downside
scenarios and we have assumed that
the option to extend the RCF is
exercised to cover the full viability
assessment period.
Current borrowing facilities mature in
FY26 and FY27 with repayment due in
December 2025 (£600m convertible
bond), October 2026 (£500m SUNs)
and January 2027 (£350m convertible
bond). Whilst these fall out of the
viability period it is anticipated that
replacement funding would be
obtainable as required to refinance
existing facilities.
Assessment of
longer-term viability
In accordance with the UK Corporate
Governance Code, the Directors have
considered the appropriate time
horizon to adopt when assessing the
longer-term viability of the Group.
In prior years, we have adopted a
three-year time horizon for the
viability period.
Whilst there are a number of factors
which could support a longer term
time-horizon – notably the five-year
duration of the Group’s annual
strategic planning process; the four to
six years (medium-term) considered
in the cash flow modelling seminar;
the open-ended duration of our
Solutions contracts; and the Group’s
financing profile which extends out
to 2026 (Senior Unsecured Notes)
and 2025 and 2027 respectively
(Convertible Bonds) – the rapid
pace of strategic and technological
development for the Group, both in
the UK and Internationally, are strong
indicators that would support a
shorter time frame.
Given the pace of change and delivery,
the Directors have concluded that a
three-year time horizon remains
appropriate for the viability review.
The scenarios modelled do not make
allowance for other mitigating actions
available to the Board that could be
taken in response to the
crystallisation of one or more of the
significant risks. These mitigating
actions include:
– Reducing or temporarily slowing
down our investment in Technology
– Disposing of all or part of our 50%
holding in Ocado Retail
– Disposing of some or all of our
strategic ventures investments
Financial Modelling
The Group has modelled three cases in its assessment of going concern and viability. These are:
– The base case.
– Downside stress tests – see (1) below.
– A severe downside stress test – see (2) below.
Stress test scenario Group Principal Risk
1 Downside scenario:
Limiting growth in CFCs to those either currently
committed or under construction (e.g. assuming
no new international Client Partners are added)
with a corresponding impact on fees, together
with a small reduction in the level of operational
efficiencies assumed in the base case scenario
and reflecting the potential receipt of contingent
consideration to be outside the assessment period.
Product Commercial Proposition and Product Innovation
– inability to attract new clients
Geopolitical & Economic Uncertainty – reduced customer
demand impacting client growth
Product Performance and Supply Chain – increasing costs
of solution delivery
2 Severe downside scenario:
As per (1) above, but also assumes a material
reduction in the level of operational cost
efficiencies achieved in client services and
engineering compared to the base case. This is
modelled by assuming that there will be no further
reduction in costs as a percentage of client sales
beyond those currently being achieved at our
mature sites. This also covers potential costs of
an adverse litigation outcome.
Product Commercial Proposition and Product Innovation
– inability to attract new clients
Geopolitical & Economic Uncertainty – reduced customer
demand impacting client growth
Product Performance and Supply Chain – increasing costs
of solution delivery
Intellectual Property – adverse litigation outcome resulting
in increased costs (e.g. licensing)
The Base Case
The Going Concern and Viability
assessments use as their base the
five-year strategic plan approved by
the Board, updated to reflect the
FY22 outturn financial performance
and the Group FY23 Budget.
The Convertible Bonds issued with a
maturity date of 2025 are assumed to
remain in place and to convert at
maturity and those with a maturity
date of 2027 are assumed to remain
in place and unconverted throughout
the assessment period.
The Group has a cash position of
£1.3 billion as at the end of FY22, and
under the base case is forecast to
retain positive cash headroom
throughout the assessment period.
The base case assumes a
continuation of the trends seen in
FY22, including further normalisation
of customer buying patterns and
heightened input cost pressures in
the UK Retail business. Growth is
forecast to continue in the UK with
the addition of further CFCs and
Zoom sites, and internationally with
CFC orders from both existing and
new clients.
Capital expenditure is assumed to
continue to deliver the roll-out of the
CFC programme, as well as continued
investment in our technology and the
platform. 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 no further fundraise would be
required within the viability period in
order to support ongoing capital
expenditure requirements.
The Directors have therefore
concluded that going concern and
viability would be maintained under
the base case scenario. Given the
significant liquidity headroom under
the base case, no further stress test
was undertaken with respect to
Going Concern.
Downside Stress Tests
A downside stress scenario was
undertaken to determine the
sensitivity to viability, as noted in
the table above.
Under this scenario, there is a
decrease in the cash position of the
Group compared to the base case
such that the Group would have
minimal cash headroom by the end of
the viability period. In such a scenario,
mitigating actions (such as described
above), agreement with lenders to
relax or change financial covenants
of the RCF or an additional fundraise,
may be required. The Directors are
satisfied that any such mitigating
measures, revisions or fundraise
would be available to support the
Group under this scenario.
The Directors have therefore
concluded that viability would be
maintained under the Downside
stress test.
Contents
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STRATEGIC REPORT
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GOING CONCERN AND VIABILITY
Going Concern and Viability
continued
The Severe Downside Case
This case applies the Downside stress
test as above, and also assumes a
material reduction in the level of
operational cost efficiencies achieved
in client services and engineering
compared to the base case. We have
modelled this by assuming that there
will be no further reduction in costs
beyond those currently being achieved
at our mature sites. This would
represent a significant increase
in the cost base of the business.
Under this scenario, there is a more
significant decrease in the cash
position of the Group compared
to the base case, indicating that
mitigating actions (such as described
above), agreement with lenders to
relax or change financial covenants
of the RCF or an additional fundraise,
would be required towards the end of
the assessment period. The Directors
are satisfied that any such mitigating
measures, revisions or fundraise
would be available to support the
Group under this scenario.
The Directors have therefore
concluded that viability would be
maintained under the Severe
Downside case.
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 86 to 95 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.
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 viability
assessment period.
Going Concern Statement
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.
In assessing going concern, the
Directors take into account the
financial position of the Group, its cash
flows, liquidity position and borrowing
facilities, which are set out in the
Finance Review on pages 70 to 85.
In addition, the Directors consider
the Group’s business activities,
together with factors that are likely
to affect its future development and
position, as set out in the Strategic
Report on pages 1 to 85, and the
Group’s principal risks and the likely
effectiveness of any mitigating actions
and controls available to the Directors
as set out on pages 86 to 95.
After reviewing the Group’s liquidity
and financial positions, the Directors
considered it appropriate to adopt the
going concern basis of accounting,
with no material uncertainty identified,
in the preparation of the Company’s
and Group’s financial statements.
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.
Reporting requirement Relevant Ocado policies and procedures Additional information
1 Business model Our Business Model,
pages 14 and 15
2 Principal risks and impact
of business activity
Our ERM Policy covers the management of risks. Risk Management,
pages 86 to 95
Audit Committee Report,
pages 132 to 143
3 Non-financial KPIs Our Strategy, pages 26 to 35
Key Performance Indicators,
pages 62 to 65
4 Our employees Our Code of Conduct sets out the principles of how
we expect our employees to conduct themselves.
Our Whistleblowing Policy provides guidance on how
to report suspected wrongdoing.
Our Equal Opportunities Policy sets out our commitment
to treat all our employees fairly and equally.
Our Work from Anywhere Policy provides flexibility for our
employees to work remotely in another country or location.
Our Board Diversity Policy confirms the Board’s
commitment to support and promote diversity and inclusion
across the Group.
Our Health and Wellbeing Strategy is focused on
supporting and enhancing the wellbeing of our employees.
Responsible Business,
pages 36 to 61
People Committee Report,
pages 127 to 131
Directors’ Remuneration
Report, pages 144 to 170
5 Respect for human rights Our Human Rights Policy sets out requirements for all
persons working for us or on our behalf to ensure their
human rights are respected.
Our Modern Slavery Statement confirms our commitment
to human rights and safe and secure working environments.
Responsible Business,
pages 36 to 61
6 Social matters Our Code of Conduct guides our behaviour in line with
our values and provides a framework for responsible
business practices.
Responsible Business,
pages 36 to 61
7 Anti-bribery and anti-
corruption
Our Anti-Bribery Policy and Anti-Money Laundering
Policy set out expected standards of behaviour and
guidance on how to deal with bribery and corruption issues.
Our Conflicts of Interest Policy provides guidance
regarding the management of conflicts of interests.
Responsible Business,
pages 36 to 61
8 Environmental matters Our ESG Strategy sets out our objectives with respect to
our impact on the environment, including reducing the
climate impact of our operations.
Responsible Business,
pages 36 to 61
Strategic Report Approval
The Company’s Strategic Report is set out on pages 1 to 99.
The Strategic Report is approved by the Board and signed on its behalf by
Neill Abrams
Group General Counsel and Company Secretary
28 February 2023
Contents
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STRATEGIC REPORT
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OCADO GROUP PLC Annual Report and Accounts 2022
GOVERNANCE
OCADO GROUP PLC Annual Report and Accounts 2022
Contents
GOVERNANCE
Our
Governance.
Governance at a Glance 101
Chair’s Governance Overview 102
Corporate Governance Report 104
Board of Directors 106
Corporate Governance Statement 2022 110
UK Corporate Governance Code Principles 110
People Committee Report 127
Audit Committee Report 132
Directors’ Remuneration Report 144
– Letter from the Chair of the
Remuneration Committee 144
– Description of the
Remuneration Committee 146
– Annual Report on Remuneration 2022 149
Directors’ Report 171
GOVERNANCE
Governance at a Glance
The role of the Board
Provide effective leadership,
establishing the Group’s purpose
and values and monitoring its culture.
Determine and review the Group’s
strategy, assessing performance
against it and overseeing the
execution of strategic actions.
Review and approve all significant
transactions or financial commitments
and any major changes to corporate,
capital and management structures.
Set the Group’s risk appetite and
review its principal and emerging
risks, and maintain sound risk
management and internal
control systems.
Ensure effective engagement with
key stakeholders to enable the
Board to understand their views
and take these into consideration
in decision-making.
Key governance
developments
Increased transparency regarding
the operation of different parts of
the business and improved setting
and monitoring of targets.
Treasury risk management
review and new electricity
procurement arrangement.
More mature safety strategy.
Improvements in maturity of
the compliance and governance
framework, a key to the first
successful SOC audit.
Key Board decisions
New OSP partnerships with
Auchan Polska and Lotte
Shopping and the extension
of our partnership with
Groupe Casino
Further investment into
Oxbotica and Inkbit ventures
Mark Richardson’s new role as
CEO of a new ASRS business
focused on extending our
product offering into new
market sectors
Climate risk strategy and
TCFD reporting processes
Capital raise and new
revolving credit facility
Acquisition of Myrmex, our
partner in the development
of the Automated Frameload
Five-year financial plan
and strategic focus to
enable delivery
Restructuring of the size and
shape of the organisation to
be able to deliver against the
five-year plan
Development of the client
success function to provide
specialised support to
Client Partners
Contents
Contents
CHAIR’S INTRODUCTION
Chair’s Governance Overview
Q.
What have been the key
governance highlights
this year?
A.
This year we undertook a
reorganisation of the size
and shape of the Group to ensure the
business is appropriately resourced to
deliver on our five-year plan and meet
our strategic objectives. This included
the development of our client success
function providing specialised ongoing
support to our Client Partners and
setting up a new dedicated team, led
by Mark Richardson, to expand the
use of our solutions into new markets
beyond grocery. We have also
continued to make improvements
to our compliance and governance
framework, including developing
an improved fraud prevention
framework, updating key policies
to reflect global requirements and
focusing on employee awareness
and training. The strengthening of
our compliance structure was key
to achieving our first successful SOC
audit this year. Lastly, we have
improved the setting and monitoring
of targets across the business, leading
to a better understanding of delivery
requirements and ability to track
progress. These developments have
all contributed to strengthening our
governance structure and better
equipping the Group to deliver on our
key strategic objectives.
Q.
As the Chair, what is
your view on the role
of governance?
A.
I believe that strong corporate
governance, which supports
effective decision-making and
enables us to control risk and ensure
compliance, is critical to our long-
term success. The governance
structure should provide transparency,
accountability and fairness. This
gives confidence to our stakeholders
regarding the operation of our
business and provides an environment
for our people to understand their
roles and be able to act with confidence.
Q.
What were the key
outcomes and actions
from the external Board
evaluation undertaken
this year?
A.
I was pleased that the external
evaluator reported on the
strong Board dynamics and found the
culture of the Board to be positive,
entrepreneurial and engaging, as
this mirrors what I perceive. One of
the key outcomes was the strong
endorsement of the significant
changes made over the past year
to improve the effectiveness of the
Board, illustrated by the clarity and
alignment of the Board on strategic
priorities and the Board’s role in
Ocado’s continuing development.
We will seek to further embed these
processes, including the focus on
strategic topics and allowing
sufficient time for free-flowing
discussion, and also ensure the
Non-Executive Directors continue
to strongly challenge the Executive
Group. We will also continue to focus
on ensuring that there is appropriate
review regarding the delivery of
objectives and performance against
our strategy and, in particular, the
five-year plan. This includes making
sure that relevant information from
across the business is provided to
the Directors, through focused Board
papers and the provision of
information outside of the meeting
cycle as appropriate.
Q.
What is the Board’s role
from a sustainability
governance perspective?
A.
The Board’s role in setting the
strategy and values for the
Group, overseeing the governance
structure, monitoring risk and
understanding stakeholders’ views is
key from a sustainability governance
perspective. The Board is responsible
for ensuring there is a strong
governance framework in place,
grounded in the principles of
transparency, accountability and
integrity, which fosters the trust
and confidence in our stakeholders
that supports our sustainability.
The long-term sustainable success
of the Group, through value creation
and a positive contribution to the
wider society, is a key consideration
of the Board in setting our strategic
priorities and objectives.
In its decision-making the Board
considers the impact of actions,
including environmental, social,
and economic, and the long-term
consequences of decisions, as
opposed to merely focusing on
short-term financial value. The Board
oversees Ocado’s ESG strategy and
monitors progress against the agreed
objectives, and I am pleased that
we are reporting against the TCFD
framework in depth for the first time
in this report. We will continue to
assess our impact on the environment
and wider society and what actions
we can take to create positive
outcomes, whilst ensuring robust
and transparent reporting.
Q.
What are your
future priorities?
A.
Above all, delivering on our
short-term promises so that
we might earn the right to push
our long-term vision forward.
We will also continue to monitor
our governance structure including
the practices and policies that
ensure it as our business develops,
and to build on our engagement
with stakeholders and keep under
consideration the most effective
ways to encourage a constructive
dialogue with those stakeholders.
Following the reorganisation of
the Group this year, and in
consideration of our increasingly
global workforce, we must also
continue to reassure ourselves
that the culture of the Group
remains aligned with our values and
supports our strategic objectives.
Rick Haythornthwaite
Chair
28 February 2023
“ The role of the Board is to
set a tone that promotes
the purpose and values
of the Group.”
Rick Haythornthwaite, Chair
Q.
What engagement
with stakeholders
has the Board had
during the year?
A.
We understand the need to
build and maintain successful
relationships with a wide range of
stakeholders to enable the Group
to achieve long-term sustainable
success. Understanding stakeholders’
views and considering the potential
effects of actions is an important
aspect of the Board’s decision-
making process. I have met with
senior management at Morrisons and
our Client Partners Coles, Kroger and
Groupe Casino, as well as ICA with
the whole Board. This year we held
a number of events to enable greater
dialogue with our investors and other
stakeholders, including the Group
modelling and cash flow seminars,
a governance breakfast and the
Ocado Re:Imagined launch, receiving
valuable feedback from investors.
Q.
How does the Board
maintain and monitor
the culture of Ocado?
A.
The Board reviews and
approves all key workforce
policies and we are responsible for
ensuring our policies and practices
reinforce our culture. The culture
is monitored and assessed by the
Board using a range of metrics and
reporting from across the business,
alongside engagement with our
people and other stakeholders. We
understand the role of the Board and
senior management in setting the
tone for our people and strive to lead
by example in our behaviour. As the
Group continues to grow and our
international workforce increases
we will continue to monitor closely
to ensure our culture is embedded
across the Group. We recognise the
importance of diversity and inclusion
and the value this brings to our
business and the Board is focused
on this area as we acknowledge that
more can be done, both at the Board
and senior management level, and
throughout the Group. The expansion
of the People Committee remit this
year, to provide oversight to people
engagement across the Group,
provides the opportunity to better
understand the views of our people
and to monitor the culture.
Q&A.
We’re structured for
success and led by a
Board primed to take
us there.
The role of the Board is to set a tone
that promotes the purpose and values
of the Group, as well as underpin its
reputation for honesty, reliability,
competence and, thus, trustworthiness.
We are responsible for ensuring the
necessary processes and practices
are in place and to keep the governance
structure under review. The framework
is not static and must be able to adapt
as our business develops and in
response to external changes, such
as new regulations, to support our
continued success.
Contents
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GOVERNANCE
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103
Corporate Governance Report
How the Directors Formally Report to Shareholders
and take Responsibility for this Annual Report
GOVERNANCE
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. These documents are available on the Group’s corporate
website. Shareholders can choose to receive the Annual Report in paper or electronic form.
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 178
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.
Report preparation
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 management highlighting
how reporting, regulatory and
governance issues had been
addressed in this Annual Report;
– Board and Audit Committee review
of management reports on
assessments of 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;
– checking of report electronic tagging;
– 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 from page 180.
The Group receives reporting and
information from the Ocado Retail joint
venture. The Ocado Retail board and
audit committee review and approve
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 Act Statement, Tax
Strategy Statement, Gender Pay Gap
Statement and supplier payments.
The Company’s Annual
General Meeting 2023
Ocado Group plc’s 2023 Annual
General Meeting will be held on
2 May 2023 at 2.30 pm at Numis
Securities Limited, 45 Gresham Street,
London, EC2V 7BF. This will be an
in-person meeting. Shareholders will
have the opportunity to question all
of the Directors at the AGM and to
submit questions in advance of
the meeting.
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
www.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,
www.ocadogroup.com.
The outcome of the resolutions put
to the AGM will be published on the
London Stock Exchange’s and our
corporate website once the AGM
has concluded.
The Directors believe that these
well-established arrangements
enable them to ensure that the
information presented in this Annual
Report complies with regulatory
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.
When forming its opinion on whether
the Annual Report is fair, balanced
and understandable, the Board
considered a number of factors.
These included:
Fair
– the whole story has been presented
and no material information has
been omitted (positive or negative);
– reporting on the business in the
narrative reporting section is
consistent with the reports in
the financial reporting and
Financial Statements;
– the key messages in the narrative
are reflected in the financial
reporting; and
– the key performance indicators are
disclosed at an appropriate level
based on the financial reporting.
Balanced
– there is a good level of consistency
between the front-end narrative
and the financial reporting,
with both sections conveying
the same message;
– the Annual Report is truly a
document for shareholders;
– the statutory and adjusted
measures are explained clearly
with appropriate prominence; and
– the key judgements and significant
issues in the Audit Committee
Report are consistent with the
disclosures of key estimation
uncertainties and critical judgements
set out in the Financial Statements,
and whether these compare with
the risks that the auditor includes
in its report.
Understandable
– there is a clear and understandable
framework to the report;
– the important messages are
highlighted appropriately
throughout the document; and
– the layout is clear with good
linkage throughout which
reflects the whole story.
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OUR BOARD
Board of Directors
Committee membership
Audit People Remuneration Committee chair
A
P R
Rick Haythornthwaite
Chair
Tim Steiner OBE
Chief Executive Officer
Stephen Daintith
Chief Financial Officer
Mark Richardson
Chief Executive Officer,
Ocado ASRS*
Appointment: 1 January 2021 Appointment: 13 April 2000 Appointment: 22 March 2021 Appointment: 3 February 2012
Independent: On appointment Independent: No Independent: No Independent: No
Committee memberships:
P
Committee memberships:
N/A
Committee memberships:
N/A
Committee memberships:
N/A
Nationality: British Nationality: British Nationality: British Nationality: British
Skills and experience
Rick held the role of chair of
Mastercard Inc. from 2006 until
the end of 2020. He is currently
the chair of QiO Technologies Ltd,
an advanced analytics and AI
software company; Railsr, an
embedded finance technology
company; and the AA. He is also a
non-executive director of Globant
SA. Rick has previously held the
position of chair at Centrica plc and
Network Rail Limited, CEO 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.
External appointments
Non-Executive Chair of The AA plc;
Chair and Cofounder of QiO
Technologies Limited; Non-Executive
Director of Globant SA; Non-
Executive Chair of Railsr; Non-
Executive Director of Goodwood,
Amazing Curated Experiences.
Skills and experience
Tim is the founding Chief Executive
Officer of Ocado, which he started
in 2000. He is one of an elite group
of founders to have built a FTSE 100
business from scratch. In 2018, Tim
was awarded The Sunday Times
Business Person of the Year. He was
awarded an OBE in the Queen’s
Birthday Honours List in 2016.
External appointments
None.
Skills and experience
Stephen joined Ocado as Chief
Financial Officer of the Group
from Rolls-Royce in 2021, bringing
with him a deep understanding
and experience of international
business across various sectors.
Having worked in the UK and
internationally, Stephen held many
senior roles including at Daily Mail
and General Trust plc, Dow Jones
& Co, and News International.
Stephen has also held senior
positions at British American
Tobacco, Forte and the Civil
Aviation Authority. He graduated
from the University of Leeds with
a BA in Economics and Accounting
and qualified as a Chartered
Accountant at Price Waterhouse
(now PwC).
External appointments
Non-Executive Director of 3i
Group plc.
Skills and experience
Mark was Head of Technology at
Ocado from 2001 until he joined the
Board in 2012. Since then he ran
MHE development until 2019 and
the Ocado Logistics operation
and CFC construction until 2022.
Mark was Ocado’s Chief Operating
Officer until August 2022. He
currently leads a new business
inside Ocado, selling Ocado’s
proprietary technology to
companies outside of grocery.
Mark is a director of Paneltex
Limited, a company in which the
Group holds a 25% shareholding.
Prior to joining Ocado, Mark held a
number of IT positions at the John
Lewis Partnership, including Head
of Selling Systems at Waitrose. He
graduated from University College,
London with a degree in Physics.
External appointments
Non-Executive Director of Paneltex
Ltd**.
* In August 2022, Mark Richardson,
previously COO of the Group, took
up a new role as the CEO of Ocado’s
new Automated Storage & Retrieval
Systems (ASRS) business which
will bring Ocado’s technology
and after-sales support to a wide
range of new clients in the broader
ASRS space.
** Ocado owns 25% of Paneltex 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 Director
Jörn Rausing
Non-Executive Director
Appointment: 1 March 2018 Appointment: 8 September 2000 Appointment: 1 March 2016 Appointment: 13 March 2003
Independent: No Independent: No Independent: Yes Independent: Yes
Committee memberships:
N/A
Committee memberships:
N/A
Committee memberships:
AR P
Committee memberships:
P
Nationality: British and French Nationality: British Nationality: British Nationality: Swedish
Skills 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. 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
a Master of Business Administration
from INSEAD.
External appointments
Non-Executive Director of Hazel
Parentco SAS, registered in France
(parent company of Hana Group).
Skills and experience
Neill was on the founding team
of Ocado, joining the Board in
September 2000. He has Board
responsibility for the Group
Operations departments – Legal,
Governance, Intellectual Property,
Real Estate, Government Relations
and ESG. 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.
Skills and experience
Andrew is a partner at Freston Road
Ventures which invests in consumer
brands that challenge the status
quo. He chairs a number of the
investments, including Strike Ltd,
an online estate agent, and advises
and works with others such as Five
Guys. Andrew previously served as
chair 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. Andrew
graduated from the University of
Leeds with a BA (Hons) in
Management Studies in 1992.
External appointments
Chair of Trustees of The Mix;
Director of Strike Ltd (Chair);
Partner of Freston Ventures
Management LLP; Director of
Chik’n Ltd (Chair); Director of
Whocanfixmycar.com Ltd. (Chair);
Director of Smiles and Smiles
Holding Limited.
Skills and experience
Jörn 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.
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OUR BOARD
Board of Directors
continued
John Martin
Non-Executive Director
Julie Southern
Non-Executive Director
Emma Lloyd
Non-Executive Director
Michael Sherman
Non-Executive Director
Appointment: 1 June 2019 Appointment: 1 September 2018 Appointment: 1 December 2016 Appointment: 5 October 2020
Independent: Yes Independent: Yes Independent: Yes Independent: Yes
Committee memberships:
A P
Committee memberships:
PRA
Committee memberships:
R P
Committee memberships:
A P
Nationality: British Nationality: British Nationality: British Nationality: American
Skills 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. John was appointed
CFO of Vertical Aerospace in
February 2023. Previously, John
was chair of Countryside Properties
plc, until July 2022, and CEO of
Ferguson plc, stepping down in
November 2019. He was also a
partner at Alchemy Partners, and
prior to that he was CFO at Travelex
Group 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
CFO of Vertical Aerospace.
Skills and experience
Julie was appointed as non-
executive director and chair
designate of RWS Holdings plc in
July 2022. 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 Chair role at Ocado. She is
also an experienced remuneration
committee chair. Julie will be
standing down from the easyJet plc
Board this year and will complete
her nine-year term at Rentokil Initial
plc during the year. Julie holds a BA
(Hons) in Economics from the
University of Cambridge and is a
Chartered Accountant.
External appointments
Non-Executive Director and Chair
Designate of RWS Holdings plc;
Non-Executive Director and Chair
of the Audit Committee of Rentokil
Initial plc; Non-Executive Director
and Chair of the Audit Committee
at NXP Semiconductors N.V.;
Non-Executive Director and Chair
of the Audit Committee of easyJet
plc; Non- Executive Director of
Shilton Midco 2 Limited.
Skills and experience
Emma is VP Business Development,
EMEA at Netflix, responsible for
commercial partnerships across
the region. She joined Netflix in
September 2021 and previously
held the position of Chief Business
Development Officer at Sky Group,
where she was responsible for key
strategic relationships with Sky’s
technology and content partners.
Emma oversaw 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
VP, Business Development EMEA,
Netflix.
Skills and experience
Michael brings a wealth of
experience in growth strategy
and improving operational
efficiency in the technology and
telecommunications industry.
He is currently Managing Director
for Customer Strategy and
Commercial Delivery for Barclays
UK, having joined in 2022. 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
Managing Director of Customer
Strategy and Commercial Delivery
of Barclays plc.
Nadia Shouraboura
Non-Executive Director
Julia M. Brown
Non-Executive Director
Appointment: 1 September 2021 Appointment: 1 January 2023
Independent: Yes Independent: Yes
Committee memberships:
A P
Committee memberships:
R P
Nationality: American Nationality: American
Skills and experience
Nadia founded and served as
the CEO of Hointer, Inc. & Vice
President, Technology, Worldwide
Operations at Amazon.com, Inc
and was a Non-Executive Director
of Cimpress plc. Nadia is an
industry leader in the field of
machine learning and robotics,
holding a PhD in Mathematics
from Princeton University.
External appointments
Non-Executive Director of
Ferguson plc; Senior Advisor
to New Mountain Capital LLC;
Non-Executive Director of
Mobile TeleSystems PJSC.
Skills and experience
Julia has led significant cultural,
operational, and organisational
change initiatives and business
turnarounds, delivering billions in
value during her career in consumer
products and hospitality. Julia
began her career at Procter &
Gamble in Toronto, where she
played a key role in the
consolidation and creation of
the North American business.
Previously she has been the
Chief Procurement Officer of Mars
Wrigley, Carnival Corporation & Plc,
Kraft Foods, Mondelez International
and Clorox. Julia has also served in
global leadership roles at Procter &
Gamble, Diageo and Gillette. Julia’s
board service includes non-profit
organisations, currently serving as a
trustee for the Chartered Institute
for Purchasing and Supply and the
Perez Art Museum.
External appointments
Non-Executive Director of Molson
Coors Beverage Company;
Non-Executive Director of Solo
Brands, Inc; Non-Executive Director
of The Honest Company, Inc.
Changes to the Board
During the period and up to the date of signing of the
Financial Statements the following change to the
composition of the Board took place:
– Julia M. Brown was appointed as Non-Executive Director
on 1 January 2023.
Committee membership
Audit People Remuneration Committee chair
A
P R
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GOVERNANCE
Our Corporate Governance
Statement 2022
In respect of the year ended 27 November 2022, Ocado Group plc was subject to the UK
Corporate Governance Code 2018 (the “Code”). This Corporate Governance Statement 2022,
together with the rest of the Corporate Governance Report and Committee Reports, provides
information on how the Group has applied and complied with the principles and provisions of
the Code 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 (“FCA”) Disclosure
Guidance and Transparency Rules
(“DTR”) 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
(“FRC”) website, www.frc.org.uk.
Compliance with the Code
For the year ended 27 November
2022, the Board considers that it has
applied all the principles and complied
with the provisions of the Code.
The key requirements under 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 86 to 95.
– Information with regard to
share capital is presented
in the Directors’ Report on
pages 171 to 178.
– Information on Board and
Committee composition can be
found on pages 122 to 126 and
information on their operation is
included across the Corporate
Governance Report and in the
individual Committee reports.
– The Board Diversity Policy is
discussed on page 131.
Board approval
This separate Corporate Governance
Statement 2022 is approved by the
Board and signed on behalf of the Board
by its Chair and the Group General
Counsel and Company Secretary.
Rick Haythornthwaite
Chair
Neill Abrams
Group General Counsel
and Company Secretary
28 February 2023
Code principles
The layout of the Corporate Governance Report follows the structure of the principles
of the Code and illustrates how the Code principles have been applied.
Board Leadership and
Company Purpose
Key Board activities
Link to
strategy
Stakeholders
considered
Strategy
and financing
Held a two-day strategy offsite to discuss medium and
long-term strategy and growth opportunities, including
challenges and risks, and determine key strategic objectives.
Reviewed and approved the five-year financial plan.
Approved undertaking a capital raise and entering into
a new revolving credit facility.
Approved new OSP partnerships with Auchan Polska
and Lotte Shopping and the extension of the existing
partnership with Groupe Casino.
Approved the acquisition of Myrmex, a materials handling
robotics company.
Approved increased investment in Oxbotica, an
autonomous vehicle software company, and Inkbit,
a 3D printing company.
Approved a role change for Executive Director Mark
Richardson to lead a newly-created and resourced business
to extend our product offering into new market sectors.
Performance
and operations
Received reports from the CEO and CFO at every Board
meeting, including progress against strategic objectives,
and throughout the year from business areas, including
Ocado Retail, on trading, business performance, financing
and strategy implementation.
Received regular reports on OSP partner operations and the
implementation of CFC projects, and progress updates on
the project to migrate UK partners to OSP.
Reviewed and approved the annual Group budget, business
plan and individual capital expenditure projects.
Risk management
and internal control
Completed the annual review of principal and emerging
risks and consideration of the risk appetite.
Reviewed the effectiveness of the Group’s systems
of internal control and risk management framework.
Reviewed updates on cybersecurity, including risks
and mitigation and the Group’s cybersecurity program.
Considered the impact on supply chains as a result of the
Russian invasion of Ukraine and sanctions on Russia.
People Suppliers
Investors Environment, Society and Community
Partners Regulatory Bodies
Board Leadership
and Company
Purpose
Division of
Responsibilities
Composition,
Succession
and Evaluation
Audit, Risk and
Internal Control
Remuneration
A. Effective Board
page 113
F. Board roles
page 119
J. Appointments to
the Board
page 122
M. Effectiveness of external
auditor and internal audit
and integrity of accounts
page 141
P. Linking remuneration
with purpose and
strategy
page 149 and 151
B. Purpose, strategy,
values and culture
page 113
G. Independence
page 120
K. Board composition
page 123
N. Fair, balanced, and
understandable
assessment of
Company prospects
page 104
Q. A formal and
transparent procedure
for developing policy
page 149
C. Prudent and effective
controls and Board
resources
page 115
H. External commitments
and conflicts of interest
page 120
L. Annual Board
evaluation
page 125
O. Internal financial
controls and risk
management
page 140
R. Independent judgement
and discretion
page 162
D. Stakeholder
engagement
page 115
I. Board efficiency
page 111
E. Workforce policies
and practices
page 116
1. Grow our revenue
2. Optimise OSP economics
3. Deliver transformational technology
4. Deliver on our client commitments
5. Responsible business approach
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Key Board activities continued
Link to
strategy
Stakeholders
considered
Leadership
and people
Approved the reorganisation of the Group to ensure it is
structured to deliver the five-year plan and strategic
priorities, including the development of the client success
function to focus on Client Partner success through
specialised ongoing support.
Reviewed and discussed the outcomes of externally-
facilitated Board evaluation and reviewed progress
against the 2021 Board evaluation action plan.
Considered the composition and effectiveness of the Board,
including approval of the appointment of Julia M. Brown
and changes to Committee membership.
Reviewed the people experience materiality review and EY
Global Equality Standard report, including planned actions,
and received updates on progress.
Monitored the payroll improvement project implemented
to reduce payroll issues for employees.
Governance and
corporate
responsibility
Reviewed various ESG-related matters including the annual
stakeholder analysis and corporate responsibility update.
Reviewed the ESG objectives for the year and progress
against the ESG strategy, including reporting on the Task
Force on Climate-related Financial Disclosures
recommended disclosures.
Reviewed and approved corporate statements
including the Gender Pay Gap Statement, Modern
Slavery Act Statement and GHG Assurance and Basis
of Reporting 2022.
GOVERNANCE
Board Leadership and Company Purpose
continued
Effective Board
The primary role of the Board is to
promote the long-term sustainable
success of the Group, to generate
and preserve value for investors and
other stakeholders and to contribute
to the wider society. The Ocado
Board defines the Group’s purpose
and strategy and ensures that the
business model remains capable
of delivering on the Group’s
strategic priorities to generate
sustainable growth.
The Board understands the
importance of clearly-defined
roles and responsibilities and
recruits and develops Directors who
will provide a positive contribution
as the business evolves. The Board
operates through strong governance
which relies on an open and inclusive
environment where all Directors
feel able to provide constructive
challenge. The Board recognises
the importance of monitoring and
reviewing the independence, skills,
knowledge and diversity of the
Board as a whole and ensuring
that, as a Board, it truly understands
the Group’s business model.
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, are essential
for the Group’s long-term
sustainability and success.
The strategy of the Group, set
by the Board and subject to an
in-depth annual review, is designed
to create long-term sustainable
growth and the ability of the Group
to deliver on strategic priorities is
continuously monitored.
The strategy is reviewed to ensure
it is able to deliver our purpose in
line with our values. The five-year
financial plan approved by the Board
this year provides a framework to
monitor progress in the medium term
against strategic and financial goals.
Our purpose and strategy are key
considerations in the actions and
decision-making of the Board and
the oversight of the implementation
of these by the business. The
decision to undertake a capital
raise and enter into a new revolving
credit facility and the reorganisation
of the Group were taken to ensure
the business is suitably resourced
to deliver on the strategic objectives.
The link between the Group strategy
and the Board’s actions and decisions
this year is shown in the Key Board
activities table on pages 111 and 112.
Examples include the development of
the client success function to provide
specialised resources to focus
on ongoing partner success that
supports our strategic objective to
deliver on client commitments and the
entry into two new OSP partnerships,
which furthers our strategic objective
to grow our revenue.
Our values guide how the Board and
workforce behave, individually and
collectively, and underpin our culture.
Our people are key to realising our
purpose and through our values of
innovation, inclusivity and support,
and pride in delivering great service
we are able to deliver on our strategy
and ultimately meet our purpose to
solve complex problems through
efficient solutions.
Our values are reflected in our
culture, which is open and collegiate,
engaged, innovative and
entrepreneurial. Our culture enables
us to find new solutions to challenges
and pursue opportunities with
innovative thinking. The benefits of
embedding our values and an
entrepreneurial culture were
demonstrated this year with the
launch of Ocado Re:Imagined, seven
key OSP innovations that will support
our Client Partners’ growth and the
long-term success of the Group.
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. 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.
The Board monitors the culture of
the Group through engagement with
the workforce, reporting on employee
matters, compliance and health and
safety, and the review of policies and
procedures. Together with reports
regarding our partners, suppliers
and other external stakeholders this
allows the Board to assess the culture
and ensure it aligns with our values.
Our increasingly global workforce and
the reorganisation of the Group this
year provided challenges to ensuring
the culture is embedded across the
Group. To support this there was a
focus on channels of communication,
to provide information from the Board
and senior management and support
collaboration and connection across
the business, and consideration of
the changes in the review of policies
and procedures.
The table on the following page
demonstrates how the Board
monitored and assessed the culture
of the Group this year.
1. Grow our revenue
2. Optimise OSP economics
3. Deliver transformational technology
4. Deliver on our client commitments
5. Responsible business approach
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People Suppliers
Investors Environment, Society and Community
Partners Regulatory Bodies
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Our culture and decision-making
Board action Link to culture
Provided with updates from the People team on
employee matters including engagement, recruitment,
retention, diversity and mental wellbeing.
Provided information on recruitment and retention
and feedback from employees through the Peakon
listening tool regarding the employee experience at
Ocado to enable a broad assessment of the culture in
line with our values.
Reviewed the people experience maturity assessment
and EY Global Equality Standard report, both
undertaken this year, and progress updates
on actions taken.
Enabled oversight of the assessment of the current
culture in terms of diversity and inclusion and areas
where greater focus should be placed for
development to further our value of inclusivity.
Reviewed and approved workforce-related policies,
including updated policies on fraud, anti-tax
evasion and conflicts of interest and the updated
Code of Conduct.
Enabled assessment and oversight to ensure the
policies continue to reflect our values and the
desired behaviours that help to embed the culture.
The Designated Non-Executive Director for workforce
engagement reported to every Board meeting on
workforce issues raised, initiatives being undertaken
and other matters from his engagement across
various employee platforms.
Provided direct updates on concerns and issues
raised by employees to assist in monitoring the
culture, including the cost of living crisis, payroll
administration and health and wellbeing at work.
Reviewed quarterly compliance reports including
statistics on compliance training completion, use of
compliance tools, and whistleblowing reports received
through the ‘Speak Up’ hotline or management.
Provided information on workforce engagement
with the regulatory requirements and compliance,
including risks and concerns identified across the
workforce.
Reviewed health, safety and wellbeing metrics and
reports including injury rates, safety incidents,
and risk assessment results.
Enabled the assessment of the effectiveness of
safety practices and behaviours and possible risks,
and any actions required.
Reviewed and approved the Gender Pay Gap
Statement and the Remuneration Committee reviewed
the annual Group-wide report on remuneration,
including share plans and benefits.
Enabled oversight to ensure remuneration reflects
and supports a culture where our people feel valued
and motivated to achieve our objectives.
Reviewed and approved the Group’s Modern
Slavery Act Statement.
Provided oversight of steps taken to prevent modern
slavery and human trafficking within the Group and
our supply chain.
The People Committee received reports on senior
management and leadership development, including
training on diversity and inclusion-related matters.
Enabled assessment of the support provided to
management to enable them to take an appropriate
lead on the expected behaviours that promote a
culture that reflects our values.
Reviewed the report and recommendations from
the Board effectiveness review undertaken by
an external evaluator.
Enabled assessment of the Board in fulfilling its role to
lead by example to promote a positive culture in line
with our values.
GOVERNANCE
Prudent and effective controls
and Board resources
Good governance is essential to be
able to deliver the Group strategy and
to ensure that the business is run well
for the benefit of all stakeholders.
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.
Our governance framework, as
detailed on page 118, provides
the structure to make decisions
and achieve our strategic objectives
within an established framework
of prudent and effective controls.
Our values are embedded into the
policies and processes of the Group,
which therefore helps to strengthen
the corporate culture and enable
risk to be assessed and managed.
The framework of Board and
governance 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
and ensures responsibilities are clear.
There is a strong flow of information,
which means that the Board is well
informed and also that strategic
priorities and relevant information to
enable decision-making are clearly
articulated through the business.
The Board maintains a formal
schedule of matters reserved for the
Board, including decisions regarding
strategy, financing, capital structure
and risk appetite, and a delegations
of authority policy. During the year,
the Board reviewed and approved
an updated Schedule of Matters
Reserved for the Board. There is a
robust risk management and internal
control system in place which allows
the Board to assess and manage risks
to the business.
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 all areas of the
business are provided at Board
meetings to update the Board and
enable effective discussion.
The Chair is responsible for ensuring
that 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, Directors receive appropriate
information, including briefing papers
distributed in advance of the Board
meetings. The Directors access Board
papers and other relevant documents
using a secure electronic platform.
Board materials, the quality of
information and resources as a whole
are reviewed each year as part of the
annual effectiveness review.
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.
During the year, no Director raised
any concerns about the operation
of the Board or the management
of the Company.
Stakeholder engagement
The Board recognises the role of
investors and other key stakeholders
in the long-term success of the Group
and undertakes an annual review of
stakeholder engagement to ensure it
remains effective. The engagement
mechanisms used are assessed
to ensure that they provide
opportunities for a two-way dialogue,
for example through participation in
stakeholder events where the Group
is able to provide updates on the
business and listen to and discuss
stakeholder views. In addition, it is
considered whether the outcome
of engagement, both direct and as
reported from across the business,
provides the Board with a good
understanding of the views of
a wide range of stakeholders.
Information regarding stakeholder
engagement and the consideration
of stakeholders in Board activities
can be found in the Stakeholder
Engagement section on pages 16 to
22, the Section 172(1) statement on
pages 23 to 25 and the Key Board
activities on pages 111 and 112.
Board Leadership and Company Purpose
continued
Contents
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115
Employee engagement
The Board understands the
central role our people have in the
long-term success of the business
and is committed to ensuring that
it understands the composition
and views of employees. The range
of direct and indirect engagement
methods used and the consideration
of employee interests by the Board
in its discussions and decision-making
is detailed in the Stakeholder
Engagement section on pages 16 and
17, the Key Board activities on pages
111 and 112 and the Section 172(1)
statement on pages 23 to 25.
The Board continues to consider
the Designated Non-Executive Director
for workforce engagement, currently
Andrew Harrison, as the most
appropriate method of workforce
engagement. The responsibilities of
the role are set out in the Board’s
Division of Responsibilities and the
DNED reports to the Board on
employee feedback and issues and
concerns are raised as a standing item
at every Board meeting. Through active
engagement with a range of employee
forums and the People team the DNED
is an important link between the
Board and the wider workforce.
Workforce policies
and practices
The Board takes responsibility for
all workforce policies and practices
to ensure they are consistent with
the Group’s values and support its
long-term sustainable success.
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. More
information on the Group’s investment
in our people is included in the Our
People and Skills for the Future
section on pages 38 to 45.
The Board reviews and approves all
significant policies that impact our
workforce to ensure that policies
and practices support the Group’s
purpose and reflect our values.
This year in response to feedback
from employees the flexibility and
choice of our benefits package was
enhanced and our health and
wellbeing provision was further
developed. 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 Group’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, where
reports can be made anonymously.
The Board receives quarterly reports
on submissions through the system,
and raised outside the system through
management, including the issues
raised, investigations undertaken and
outcomes including actions taken.
Engagement with suppliers,
customers and others
Delivering our strategy requires
strong mutually beneficial
relationships with all of our
stakeholders and in particular our
partners, suppliers and customers.
Our engagement with suppliers
and partners and the Board’s
consideration of these business
relationships in discussions and
decision-making is detailed in the
Stakeholder Engagement section
on pages 19 and 20, the Section
172(1) statement on pages 23 to 25
and the Key Board activities on
pages 111 and 112.
The global supply chain challenges
and the effect on our suppliers has
been a significant consideration in
Board discussions this year. With
more Client Partners going live with
operations, a key focus this year
has been the provision of suitable
support to enable growth and
optimal use of the OSP platform,
which resulted in the development
of our client success function.
Engagement with investors
The Board is committed to engaging
with investors to inform and aid
understanding of our business and
strategy and, through dialogue, to
understand the views and concerns of
investors. More detail on the Board’s
direct and indirect engagement with
investors and the impact of this
engagement on decision-making is
provided in the Stakeholder
Engagement section on page 18, the
Section 172(1) statement on pages 23
to 25 and the Key Board activities on
pages 111 and 112.
Key investor questions
– The implications of Ocado
Re:Imagined on future expenditure
for Ocado Group and our Client
Partners.
– Prospects of new OSP partnerships
and further orders from current
Client Partners.
– The impact of the cost of living
crisis on Ocado Retail Limited
and Ocado Group.
– Opportunities for Ocado within
non-grocery markets.
– Actions being taken and planned
regarding climate issues.
– The Group’s approach to improving
diversity and inclusion.
2023 Annual General Meeting
The Ocado Group 2023 Annual
General Meeting will be held in
person. The AGM gives shareholders
the opportunity to engage with the
Group and the Board regarding
the matters before the meeting.
Shareholders can also submit
questions electronically in advance
of the meeting.
GOVERNANCE
Board Leadership and Company Purpose
continued
Shareholder voting at the
2022 Annual General Meeting
At the 2022 Annual General Meeting,
all resolutions were passed with
votes in support ranging from
70.73% to 99.98%.
There was a significant minority vote
against two resolutions: Resolution 2
(Directors’ Remuneration Policy) and
Resolution 20 (Amendments to the
Value Creation Plan). The Company
understands that this outcome was
broadly attributable to concerns
around the non-standard nature of the
Value Creation Plan (“VCP”) and the
approach to executive remuneration.
Prior to the meeting, the Chair of the
Remuneration Committee engaged
extensively with major shareholders
and the Committee made changes
to the proposals to reflect feedback
received. However, it was apparent
from the consultation exercise that
shareholders held divergent views
on our proposals and some did not
feel able to support them. In February
2022, the Chair again wrote to
shareholders to solicit any further
feedback but shareholders indicated
they had registered their views fully
in the earlier consultation. This
extensive shareholder consultation
process means the Remuneration
Committee understands the voting
outcomes and the reasons why some
shareholders were unsupportive of
these resolutions. The Remuneration
Committee will continue to engage
with shareholders and keep our
executive remuneration structures
under review.
In keeping with the Investment
Association guidance, an update
statement on the Company’s
response to the outcome of the 2022
Annual General Meeting significant
votes against was sent to the
Investment Association and can be
found on the corporate website,
www.ocadogroup.com.
Shareholders by geography
1. United Kingdom 89.6%
2. Europe 0.06%
3. United States 0.04%
4. Rest of the world 10.3%
*Figures show % of total share capital held
Shareholders by type
1. Private shareholders 0.4%
2. Nominee companies 73.8%
3. Bank and bank nominees 9.4%
4. Limited companies 10.2%
5. Other institutions 6.2%
Investor activity this year
January
Launch of Ocado Re:Imagined
Throughout
the year held
one-to-one and
group meetings
and calls and
hosted group
investor tours
around UK CFCs
February
Full Year 2021 results presentation followed by
a series of one-to-one and group meetings with
over 200 institutional investors, including all top
20 Ocado Group institutional shareholders
April
North American live roadshows including New
York, Baltimore, Montreal, Toronto, Denver, San
Francisco and Los Angeles; participated in
Berenberg and Goldman Sachs-hosted
conferences; Chair-hosted governance breakfast
May
Annual General Meeting; Ocado Group Modelling
Seminar; Financial Capital Markets Day
June
Presented at the Exane and Deutsche Bank
conferences in Paris
July
FY22 Half Year results presentation followed by a
virtual roadshow including one-to-one meetings
and group calls
September
Scandinavian live roadshows including
Stockholm, Oslo and Helsinki; participated in
DNB TMT & Consumer and Bernstein Pan
European Strategic Decisions conferences
November
Ocado Group Cash Flow Seminar
2
1
4
3
1
3
4
5
2
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117
GOVERNANCE
Division of Responsibilities
The role descriptions
for the CEO, Chair,
Senior Independent
Director and
Designated Non-
Executive Director for
workforce engagement
are set out in writing
and provide a system
of checks and
balances to ensure
no individual has
unfettered decision-
making power.
The Board is responsible for providing leadership to the Group. The structure of the Board, 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.
Governance framework
Governance Committees
The governance committees 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 and reviews compliance
with the Treasury Policy, concerning
cash and deposits, investments,
foreign exchange and interest rates.
Global HSE Committee
Oversees the Group’s health, safety
and environment standards and
systems and monitors compliance.
Disclosure Committee
Assists the Board in discharging its
obligations under the Market Abuse
Regulation and Listing Rules with
regard to the disclosure of inside
information, and ensures timely and
accurate disclosure of all trading and
financial statements.
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.
IT Operating Committee
Oversees the work of, and provides
a strategic steer to, the Group IT
function.
ESG Committee
Defines the Group’s strategy relating
to ESG matters and is responsible for
governance over its ESG programme
and for implementing the ESG strategy.
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 at least weekly. The
Executive Group is also supported by the Technology Solutions Leadership Group which is responsible for running the
Technology Solutions segment of the business.
Board Committees
The Board Committees consist of Non-Executive Directors; each Committee Chair 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 of each Board Committee are given in this Annual Report.
Audit Committee Remuneration Committee People 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 Chair, 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. Oversees senior
management succession planning
and people engagement issues.
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, which may exercise all of the powers of the Company. The Board has a formal schedule of matters reserved
for the Board’s decision-making. 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 Roles
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 Chair regularly without Executive Directors present
– Oversee the appointment and removal of Executive Directors
Executive Group
– Day-to-day management of the Group’s operations
– Executes the strategy once agreed by the Board
– Undertakes certain detailed aspects of the Board’s responsibilities as delegated
to the Executive Group
– The Executive Group carries out some of these responsibilities through
Executive-led Committees
Chair
– 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 Chair
– Available to the shareholders
Designated Non-Executive Director for Workforce Engagement
– 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
Indicates
delegation
Indicates
Board
support
Contents
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119
GOVERNANCE
Division of Responsibilities
continued
Conflicts of interest
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.
The Board has established formal
procedures, detailed in the Director
Conflicts of Interest and Related
Party Transactions Policy, for
the declaration, review and
authorisation of any conflicts
of interest of Board members.
As part of the induction process, a
newly appointed Director completes
a questionnaire that requires them
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.
Whenever a Director seeks to take
on additional external responsibilities,
the Director will discuss the potential
position with the Chair and approval
will only be given once the Chair is
satisfied and the Director confirms
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 Chair and the Company Secretary
as and when they arise.
No Directors declared to the
Company any actual or potential
conflicts of interest between any of
their duties to the Company and their
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 Stephen Daintith are
Ocado appointed directors on the
Ocado Retail Limited (“ORL”) board.
Notwithstanding ORL’s Companies
Act 2006 duties and obligations under
the Articles, both directors are subject
to the provisions of the ORL articles
of association and to the provisions
within the ORL shareholders
agreement on conflicts of interest
and related party matters. For more
information about the governance
framework of ORL, see page 25.
Board and Committee
meetings and attendance
During the year, the Board and its
Committees conducted meetings in
person, providing video conference
facilities if required by any Director,
with some ad hoc meetings added to
the Board schedule to discuss and
make time sensitive decisions taking
place remotely. 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.
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 19 years, 12
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 Jörn’s
continuing directorship to benefit the
Group and support the principles of
the Code. His 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 as the Group continues to
expand globally. 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.
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 Chair 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 Chair 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
106 to 109. There have been a
number of changes to the Directors’
external appointments during the
period, as set out in the table below.
Prior to approving the new
appointments, consideration was
given to the additional time
commitments of the roles and the
Chair (and Board regarding the
Chair’s new role) was satisfied they
would still have sufficient time to fulfil
their obligations to the Company.
Board independence
At the end of the financial year,
the Board comprised 13 Directors,
including seven Non-Executive
Directors, excluding the Chair (who
was independent on appointment),
all determined by the Board to be
independent, and five Executive
Directors. This complies with the
Code recommendation that
independent non-executive directors
should make up at least half of the
Board, excluding the Chair. 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
People Committee, Audit Committee
and Remuneration Committee
complied in all respects with the
independence provisions of the Code
during the period.
Executive Director 5
Chair 1
Non-Executive Director 7
Figures as at 27 November 2022
Change in Directors’ commitments
Director Change in commitment Effective date of change
John Martin Resigned as non-executive director and
interim CEO of Countryside Properties plc
12 July 2022
Julie Southern Appointed as non-executive director
of RWS Holdings plc
27 July 2022
Luke Jensen Resigned as non-executive director
of ASOS plc
31 October 2022
Rick
Haythornthwaite
Appointed as non-executive chair of Railsr 31 August 2022
John Martin Appointed as CFO of Vertical Aerospace 20 February 2023
(after period end)
* Emma Lloyd ceased to be a member of the Audit Committee on 22 July 2022. Michael Sherman
and Nadia Shouraboura joined as members of the Audit Committee on 22 July 2022.
Director Board
Audit
Committee
People
Committee
Remuneration
Committee
Rick Haythornthwaite (Chair) 12 12 – 4 4 –
Tim Steiner 12 12 – – –
Stephen Daintith 12 12 – – –
Mark Richardson 11 12 – – –
Luke Jensen 10 12 – – –
Neill Abrams 12 12 – – –
Andrew Harrison 12 12 7 7 4 4 6 6
Jörn Rausing 12 12 – 4 4 –
John Martin 12 12 7 7 4 4 –
Julie Southern 11 12 7 7 4 4 6 6
Emma Lloyd 11 12 5 5
*
3 4 5 6
Michael Sherman 11 12 2 2
*
4 4 –
Nadia Shouraboura 11 12 2 2
*
4 4 –
Board and Committee meetings and attendance
Meetings attended/possible meetings the Director could have attended
5
1
7
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Composition, Succession
and Evaluation
GOVERNANCE
Appointments to the Board
The People 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.
Both appointments and succession
plans are based on merit and
assessed against objective criteria
with the promotion of diversity as a
central consideration. The formal
procedure for Board appointments
and succession planning is detailed
in the People Committee Report on
pages 127 to 131.
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 2022 Annual
General Meeting, all the Directors
stood for appointment or
re-appointment, and were duly
elected or re-elected with majorities
ranging from 93.16% to 99.39% of the
votes cast.
At the AGM, all of the current
Directors, except Julia M. Brown, will
submit themselves for re-election by
shareholders. Julia is subject to
appointment by shareholders, having
joined the Board on 1 January 2023.
This report, and in particular the
Board biographies on pages 106 to
109, sets forth the contribution of
each Director on the Board to the
Company and on this basis the Board,
and specifically the Chair, believes
each Director proposed for election
or re-election at the AGM should be
appointed or reappointed.
The Board has based its
recommendations for election or
re-election, in part, on its review of
the results from the Board evaluation
process outlined on pages 125 and
126, on the reviews of the Executive
Directors conducted at meetings of
the Non-Executive Directors, the
Chair’s review of individual Directors
and that 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 19 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).
Board composition
The composition of the Board and
Board Committees is continually
assessed by the Chair and kept
under review by the People
Committee, to ensure an appropriate
balance of skills and experience is
maintained, and more formally
annually by the People Committee
and as part of the Board evaluation
process. For more information see
the People Committee Report on
pages 127 to 131. Each Board member
is asked to identify their own skills,
experience and diversity
characteristics annually as part of
the year-end process. The results
for 2022 are shown on page 124.
Board induction, training and
professional development
On joining the Board, it is the
responsibility of the Chair 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 either in person or, if
appropriate, virtual standard employee
onboarding to provide first hand
experience of the introduction
provided to all new employees.
Employee onboarding covers a vast
array of topics from the history of the
Group, to the joint venture with
Marks & Spencer, the investment in
technology and the OSP platform,
through to our values, diversity and
inclusion and the Ocado culture.
Board diversity
The Board believes that diversity,
of gender, ethnicity and social
backgrounds, leads to better
outcomes and improved decision-
making and is committed to improving
diversity on the Board and for senior
management. For more information on
the Board’s approach to diversity,
including the Board Diversity Policy,
see the People Committee Report
on pages 130 and 131. For more
information as to how the Group
as a whole considers diversity and
inclusion see the Our People and Skills
for the Future section on pages 41 and
42 or have a look at the corporate
website www.ocadogroup.com/
diversity-and-inclusion
The next phase of the induction
programme focuses on the incoming
Director getting to know and
understand the full business of the
Group. They meet with the Executive
Director or appropriate senior
management from each area
of the business.
Each new Board member is
given training on the role and
responsibilities of a Director
including, but not limited to,
the following:
– Duties under the Companies
Act 2006 and compliance with
the Code, Listing Rules and
other regulatory framework
considerations.
– Market Abuse Regulation including
their responsibilities as a person
discharging managerial
responsibilities (“PDMR”) and other
matters pertaining to the Ocado
Share Dealing Code and
insider dealing.
– Investor relations and
understanding our investor
base and share register.
– Board policies including: Anti-
Bribery; Anti-Money Laundering;
Fraud Prevention; Whistleblowing
and Conflicts of Interest and
Related Parties.
– Board and Committee procedures
and constitutional documents
including Matters Reserved for
the Board and Committee Terms
of Reference.
Ongoing training needs are assessed
as part of the Board effectiveness
process and any training is typically
arranged by the Company Secretary
in consultation with the Chair or
relevant Board Committee Chair.
The Remuneration Committee
received updates from the
Committee’s remuneration advisers
including on governance and the
market for executive remuneration.
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 also received briefings
from external advisers on a range
of strategic matters detailed in the
Board development table on the
previous page.
Board development
During the year, the Board members enhanced their professional
development with the following training and development opportunities.
March April
The Group’s external legal advisers
conducted a session with the Board on
cybersecurity, including legal, regulatory
and director duty considerations and real life
experiences of a cyber attack. Ocado
management also joined to discuss the
cyber and data resilience of the Group.
An external legal
adviser and ESG
consultant provided
a session on ESG,
climate change and
corporate reputation.
July October November
Senior management
provided a session for
the Non-Executive
Directors on Ocado’s
technology, including
current technology,
strategy and future
initiatives.
Senior management
provided a second
session for the Non-
Executive Directors on
Ocado’s technology,
including a deep dive
into current areas
of focus for the
technology business.
An external legal
adviser and ESG
consultant provided
a session on the
Task Force on
Climate-related
Financial Disclosures
recommendations.
Length of Tenure of Chair and
Non- Executive Directors
*
Years
0-3
3-6
6-10
10+
4
2
2
1
Senior Management
Gender Diversity
**
34
19
Board Gender Diversity
*
10
4
* Figures as at 1 January 2023
** Figures as at 31 October 2022
Female Male
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14
14
9
4
1
9
2
2
1
8
6
6
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Composition, Succession and Evaluation
continued
Combination of skills and experience as identified by the Board*
2022 Evaluation process
Board diversity characteristics
*
The Board participated in a process to identify their own diversity characteristics taking
into account less tangible factors, such as life experience and personal attitudes
Review of Board effectiveness
The Board undertakes an annual
review of its own and its Committees’
performance, with a formal
externally-facilitated effectiveness
review carried out at least every three
years in compliance with the Code.
Last year’s evaluation was carried out
internally. The last external
performance review was in 2020.
The Directors consider the evaluation
of the Board and its Committees and
members to be an important aspect
of corporate governance and it was
agreed that the 2022 Board
evaluation process should be
externally facilitated, to provide an
in-depth independent review of how
the Board has evolved since the
appointment of Rick Haythornthwaite
as Chair and its current performance.
External Board evaluation
results 2022
Key observations
The findings of the independent
performance review were positive.
They found that the Ocado Board was
functioning well, with strong Board
dynamics. The Board was found to be
open, collegiate, supportive and
engaged, with a clear vision and
purpose and strong leadership.
Significant time was spent by
Non-Executive Directors on Ocado
business between formal meetings
to ensure that the Board is adding
as much value as possible. The
culture was entrepreneurial,
innovative, can-do, positive,
supportive and engaging.
There was agreement around the
immediate strategic priorities, top of
the list being helping existing OSP
clients succeed and improving OSP
economics. Also other strategic
priorities including the development
of the non-grocery product range
and market entry.
The Committees were working well,
with enthusiasm for the new People
Committee which would address key
people topics that would benefit
from more attention in addition
to the more normal duties of a
Nomination committee.
There was clarity and alignment
on the role of the Board in the next
phase of Ocado’s development.
All Directors wanted to focus on
the most important issues, including
delivery of objectives and notably
the profit and cash flow commitments
made to shareholders. Alongside
this was more focus on the customer
experience, organisation structure
and capability, succession, talent and
culture plus important governance
topics such as risk management,
ESG and diversity and inclusion.
Chairship
Number of Directors Number of Directors
Risk management
Climate governance
Workforce engagement
International board experience
Prior FTSE board experience
Technology
Financial acumen
Investor relations
Retail industry
Marketing
Governance
Grocery industry
Business development
Change management
Operations management
1 7
5 6
1 5
6 7
9 5
4 2
7 6
3 7
3 5
4 4
2 5
7 5
3 5
8 3
4 8
5 7
1.
2.
4.
Review and discussion of the report, and
recommended actions
The findings of the evaluation were presented to the full Board ahead
of its November 2022 meeting. MSP joined that meeting where it
discussed the results of the report with the Board as a whole, and also
privately with the Chair and Non-Executive Directors only. A concrete
action plan was presented to address highlighted matters and agree
priority actions.
3.
Selection of the independent provider
Several independent providers were invited to submit proposals as
to how they would approach the 2022 Board effectiveness review.
Meetings were held between each of the proposed evaluators and
the Chair. Each of the proposals was reviewed and discussed by the
Chair and the Company Secretary, Chief Compliance Officer and
Senior Independent Director. Manchester Square Partners (“MSP”)
was selected based on its approach, cost and prior knowledge and
experience of Ocado Group, as it previously carried out the external
evaluations in 2020 and 2019. MSP is independent of and has no
other links with the Company or its Directors.
Design of the review
MSP met with each of the Chair, the CEO and the SID to discuss the
context for work and to finalise the approach for the review. The
evaluation would be interview based, using a framework of questions
to ensure objectives were met. Following the individual discussions,
the Board would be observed in action, and MSP would also have
sight of past Board agendas, papers and minutes.
Review process
Individual interviews were held with each Director, and with the CEO
of Ocado Technology, the Chief People Officer and the Chief
Compliance Officer. This was followed up with attendance at a full
meeting of each of the Audit and Remuneration Committee, and of
the Board in September 2022. Access was provided to Board and
Committee papers for the prior 12 months, including the 2022 Board
offsite strategy meetings.
Disability
Sexual
orientation
Age
Ethnic group
Age
41–55
56–70
Ethnic group
White
Mixed/Multiple ethnic groups
Black/African/Caribbean/
Black British
Other ethnic group
Competent
Highly competent Competent
Sexual orientation
Heterosexual/Straight
Disability
No
Highest level of
educational attainment
Level 6 – Bachelor’s
degree
Level 7 – Master’s
degree
Level 8 – Doctorate
Were you educated
outside of the UK?
Yes
No
Were you
educated
outside of
the UK?
Highest level
of educational
attainment
* Figures as at 1 January 2023
8
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People Committee Report
Dear Shareholder
On behalf of the Board, I am pleased to present the report
of the People Committee (the “Committee”) for the 52
weeks ended 27 November 2022. This is my first report
as Chair of the Committee. My predecessor Rick
Haythornthwaite stepped down in July but remains a
member of the Committee.
This year we undertook a comprehensive review of the
composition of the Board and Committees, taking into
account the skills, experience, diversity and tenure of
our Directors. This forms the basis of our succession and
recruitment planning. As the Group continues to grow and
develop it is vital the Board possesses the knowledge and
skills required to provide effective leadership and deliver
our strategy, as well as reflecting the diversity of our people
and communities. We undertook a thorough search process
for a new Non-Executive Director, resulting in the
appointment of Julia M. Brown, agreed and announced
on 20 October 2022, with effect from 1 January 2023.
Julia brings a wealth of experience in strategic procurement
across diverse consumer products and significant
leadership experience in global supply chain operations
at multinational consumer-facing companies. The
appointment of Julia as an additional international Director
on the Board reflects our continuing global outlook.
The change in name of the Committee from the
Nomination Committee to the People Committee reflects
the decision taken this year to expand the remit of the
Committee. The Committee’s responsibilities now include
people engagement issues for the whole Group, which
provides greater oversight of the workforce and the
culture of the Group. The Committee is able to discuss
wider workforce views and priorities and bring to the
attention of the Board important issues raised. My
appointment as Chair of the People Committee provides
an opportunity to further develop the role of Designated
Non-Executive Director, which I also hold, and strengthen
the link between the Board and our people.
The priorities of the Committee in 2023 are to embed the
expanded remit of the Committee and provide effective
oversight of the engagement with the workforce. The
Committee will also prioritise consideration of ways to
improve diversity on the Board and meet the targets set in
the Board’s Diversity Policy, as well as monitoring initiatives
to increase diversity and inclusion across the organisation.
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 People Committee.
Andrew Harrison
Chair
28 February 2023
Committee membership
The membership of the People Committee, together
with the dates of their appointment to the Committee,
are set out below:
Andrew Harrison
Committee Chair
Date of appointment:
1 March 2016
Date of appointment
as Committee Chair:
22 July 2022
Independent:
Yes
John Martin
Date of appointment:
1 June 2019
Independent:
Yes
Jörn Rausing
Date of appointment:
9 March 2010
Independent:
Yes
Emma Lloyd
Date of appointment:
1 December 2016
Independent:
Yes
Rick Haythornthwaite
Date of appointment:
1 January 2021
Independent:
Yes
Julie Southern
Date of appointment:
1 September 2018
Independent:
Yes
Michael Sherman
Date of appointment:
5 October 2020
Independent:
Yes
Nadia Shouraboura
Date of appointment:
1 September 2021
Independent:
Yes
Julia M. Brown*
Date of appointment:
1 January 2023
Independent:
Yes
“ It is vital the Board possesses the
knowledge and skills required to
provide effective leadership and
deliver our strategy.”
Andrew Harrison, Chair
* Julia M. Brown joined the People Committee in January 2023 after the
end of the financial year.
Composition, Succession and Evaluation
continued
Board Committees
The evaluation of Board Committee
performance found that all
Committees were considered to be
well chaired and operating effectively.
Further details of the composition,
role and activities of each Committee
can be found within pages 127 to 170.
Chair evaluation
MSP and the SID reviewed the Chair’s
performance as part of the 2022
externally-facilitated evaluation.
Observations were as discussed on
page 125 to 126.
Identified actions for 2023
The following outcomes arose from the 2022 external Board performance
review and were identified as recommended actions:
Strategy Whilst strategy was a key theme of Board meetings,
more time should be spent on strategic matters.
This included reviewing, testing and revisiting
strategic plans, with more external input, carrying
our performance reviews in relation to the Group’s
five-year plan, and carrying out more client visits.
Governance
and meetings
Board papers could be further improved with tighter
summaries highlighting key points for discussion.
Comments and questions should be encouraged
ahead of meetings, together with provision of better
off cycle information between meetings.
Culture The remit of the People Committee had been
expanded to cover wider people matters, and it
should be used to address not only succession and
diversity and inclusion but also how the organisation
and culture needed to evolve to ensure success.
Progress against 2021 Board evaluation actions
The 2021 performance review was facilitated internally, conducted by the
Chair, with the support of the People Committee and the Company Secretary,
and included individual discussions with each Director. The key actions
identified were as set out below. Progress taken to address these points
can be found within this Report as indicated:
Greater diversity of
ethnicity and thought
at Board level
See pages 127 to 131 regarding the appointments
of Nadia Shouraboura and Julia M. Brown.
Consideration of Board
and Board Committee
agendas coverage to
reflect the changing
dynamics of the business
See pages 111 and 112 which details the matters
considered by the Board and its activities during
the year.
More focus on executive
succession
See pages 127 to 131 which details the activities
of the People Committee during the year.
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People Committee Report
continued
GOVERNANCE
Key responsibilities
Board composition
– Review the structure, size and composition of the Board
and its Committees.
– Evaluate the combination of skills, experience, diversity,
independence and knowledge on the Board and its
Committees.
Succession planning
– Review the leadership needs of the organisation,
both executive and non-executive.
– Give full consideration to succession planning for
the Board and senior management and oversee the
development of a diverse pipeline for succession.
– Identify and nominate potential candidates for
Board vacancies as and when they arise, in line with
succession planning.
Board effectiveness
– Review the independence and time commitment of
the Non-Executive Directors.
– Review and act upon the results of the Board
performance evaluation process and assess
how effectively members work together
to achieve objectives.
Group workforce matters
– Consider people engagement related issues for
the Group.
– Support workforce initiatives that promote a culture
of diversity and inclusion.
Membership
As required under the Terms of Reference, the Committee
comprises all of the Non-Executive Directors and the
Chair of the Board, and holds a minimum of two meetings
a year. The Committee formally met four times. Andrew
Harrison became Chair of the Committee on 22 July 2022
and Julia M. Brown became a member of the Committee
upon joining the Board on 1 January 2023. The biography
of each member of the Committee is set out on pages
106 to 109. The Chief Executive Officer and the Chief
People Officer attend meetings by invitation when
appropriate. The Deputy Company Secretary acts as
secretary to the Committee.
Board composition and succession planning
The Committee seeks to ensure that the Board’s
composition, and that of its Committees, is appropriate to
discharge its duties effectively and lead the Group to
deliver our strategic objectives. During the year, the
Committee undertook a thorough review of the Board’s
composition. This review took into account various
considerations including the tenure of Directors,
independence and diversity. A detailed skills matrix,
supported by a self-assessment analysis completed by
each Director, was also reviewed to examine current
Board knowledge, experience and skills and any perceived
gaps. This informed the criteria set for the recruitment of
an additional Non-Executive Director, which resulted in
the appointment of Julia M. Brown, announced on
20 October 2022, with effect from 1 January 2023.
How the Committee spent its
time during the year
The principal matters that the Committee considered
during the year were as follows.
Board composition
Review of Board and Committee composition, taking into
account diversity and independence.
Review of Board skills and competencies.
Committee composition and tenure review, resulting in the
change of People Committee chair, the planned transition to
new chairs of the Audit and Remuneration Committees, and
the appointment of Nadia Shouraboura and Michael Sherman
to the Audit Committee.
Overseeing the recruitment process for a new
Non-Executive Director, resulting in Julia M. Brown’s
appointment to the Board.
Review of the new Listing Rule, applicable to the Company in
the next financial year, on diversity disclosure, setting a plan
for compliance and disclosure and the review and approval
of the updated Board Diversity Policy.
Succession planning
Considering the desired framework for Board composition and
immediate succession priorities for moving towards this, with
regard to the Listing Rule diversity targets and disclosure
requirements, the skills and expertise on the Board and areas
of growing strategic importance for the Group.
Review of management succession planning to meet the
needs of the Group following organisational changes and
support the development of a diverse pipeline.
Board effectiveness
Overseeing the externally-facilitated Board effectiveness
review, including the tender process to select an external
evaluator. Details of the process are included in the Review
of Board effectiveness section on pages 125 and 126.
Group workforce matters
Considering and agreeing the extension of the Committee’s
remit to broader people and workforce issues predominantly
in the area of employee engagement, including the review
and approval of amended Committee Terms of Reference
to reflect the broader remit.
Review of the gender balance of senior management with
consideration of the new disclosure requirements for the next
financial year.
Review of the EY Global Equality Standard assessment,
completed by external consultants, particularly the strategic
priority areas and actions identified to support and enable
diversity, equity and inclusion across the Group, and review
of ongoing progress reports on actions taken.
Updates on work undertaken and planned with regard
to engagement and recruitment in the Logistics business.
The Committee engaged Heidrick & Struggles, an
executive search agency, to assist with Julia’s
appointment. The Company and the Directors have no
other connection with Heidrick & Struggles. Heidrick &
Struggles was requested to undertake a broad search to
allow for a wider pool of potential candidates that would
provide greater diversity. The recruitment process was
overseen by the Committee. International experience in
supply chain and procurement at a complex multinational
company was identified as a key requirement for the role,
with increasing diversity on the Board an important
consideration. Following a thorough search, nine
candidates were interviewed by a combination of the
Chair, People Committee members, Executive Directors,
the CEO and senior management. Julia was recommended
by the Committee as her capabilities and skills fulfilled the
requirements set for the role.
Board appointment process
Role requirements
Evaluate the combination of skills, experience, knowledge and diversity of the Board and the strategic
priorities of the business. Prepare a set of objective criteria for the role, including the capabilities,
experience and personal attributes required.
Candidate search
Facilitate the search by instructing external advisers. Identify a long-list of potential candidates based
on the role criteria, with consideration of the Board’s Diversity Policy.
Interview process
Narrow down to a short-list of candidates and undertake an interview process facilitated by a
combination of the Chair, Non-Executive and Executive Directors and senior management as
appropriate.
People Committee approval
The People Committee reviews potential candidates, considering whether the required criteria are
met, feedback from the interview process, due diligence results and suitability for the business,
culture and Board. The Committee then 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.
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People Committee Report
continued
GOVERNANCE
The review of the composition and tenure of the Board
Committees resulted in several changes to refresh the
membership and support the development of our
Directors and the Board as a whole. Michael Sherman
and Nadia Shouraboura joined the Audit Committee
with Emma Lloyd stepping down. With increasing
responsibilities for the Audit Committee the larger size of
the Committee will help to ensure these are met, as well
as bringing fresh opinions and thought. Andrew Harrison
was appointed chair of the People Committee. The plan to
appoint John Martin as chair of the Audit Committee and
Julie Southern as chair of the Remuneration Committee
was announced in October 2022, to take effect in May
2023, to allow for a smooth succession. This will provide
fresh leadership across the Board Committees.
The Committee oversees succession planning
for Directors and senior management, as well as broader
consideration of the leadership needs of the business
and senior management development. The Committee
undertook a detailed review of the Executive Director and
senior management succession pipeline and talent at the
start of the year, with ongoing discussions on succession
planning and updates from the Chief People Officer at
each meeting. The succession plan includes monitoring
internal succession candidates and their level of readiness
for the role and the broader talent pool for future
consideration within the Group and setting priorities for
leadership development. The importance of diversity in
the succession pipeline is supported through the Group’s
leadership diversity initiative which has been further
developed this year including the implementation of
an Equity Monitoring Programme.
The composition of senior leadership and the succession
pipeline was a key focus this year due to the
reorganisation of the Group. The Committee focused on
the need to ensure that the leadership and the structure
of the organisation remain appropriate to match the
current needs of the business and be able to drive the
business forward. With regard to the development of
the management team, three senior managers regularly
attend 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 Committee
receives regular updates on initiatives to support
leadership development such as the Leadership Academy,
annual executive talent reviews and Ionic Learning Live,
a quarterly leadership development event.
Board diversity
The Committee recognises the importance of diversity and
inclusion, both in the boardroom and throughout the
organisation. Inclusivity is one of our core values as enabling
our people to feel a sense of belonging as part of a team
empowers them to deliver on our objectives. A diverse
Board, with diversity of experience and thought, offers wider
perspectives, which leads to improved decision-making.
The Ocado Board considers diversity to include a broad
range of factors including skills, background, gender, race,
age, knowledge, experience, sexual orientation, socio-
economic background and disability.
This year the Board Diversity Policy was reviewed and
updated to reflect the new Listing Rule requirements for
increased disclosure on diversity, applicable for financial
years beginning after April 2022. The Committee also
reviewed the current data collection processes and
considered plans to ensure that the required data is
available for reporting. The objectives have been set to
enable increased diversity on the Board and to support
greater diversity and inclusion across the Group. The
pursuit of greater diversity will open up a wider pool of
talent and a more diverse Board and workforce will lead
to more innovation and new ways of thinking that will
support the delivery of our strategic objectives and
our purpose to solve complex problems. The updated
objectives are set out in the table opposite with details
of the current progress against these. The new Listing
Rule requirements are not applicable for this year but we
note that further improvement is required in order for us
to be compliant going forward.
The charts on page 123 detail the gender diversity of the
Board and senior management and the breakdown of gender
diversity of all employees is shown on page 41. In addition,
information on the Board members’ self-identified diversity
characteristics is detailed on page 124.
Board Diversity Policy
Objective Progress
Ensure Board composition is sufficiently
diverse and reflects an appropriate
balance of skills, knowledge,
independence and experience to enable
it to meet its responsibilities, duties and
strategic objectives effectively.
The Committee undertakes an annual review of the composition of the
Board and its Committees, with further discussions during the year. An
assessment of the Board, including skills, knowledge, independence and
experience, and the strategic objectives of the Group, informs the criteria
for any new appointment to the Board. This year the criteria for a new
Non-Executive Director included supply chain and international experience
and the need to increase diversity on the Board, resulting in the
appointment of Julia M. Brown.
Both appointments and succession
plans should be based on merit and
objective criteria and, within this
context, should promote diversity of
gender, social and ethnic backgrounds,
cognitive and personal strengths and
the Board aims that:
a. at least 40% of the individuals on its
Board are women;
b. at least one Board member is from a
minority ethnic background; and
c. at least one senior Board position
(being the Chair, CEO, CFO and/or
SID) is held by a woman.
Appointments to the Board are made on merit with an objective set of
criteria based on the needs of the Board and the business, and the value
and importance of increased diversity on the Board.
Currently 28% of the Directors on the Board are women. The last two
appointments to the Board were women and the Board intends to continue
recruiting female directors in the short term to help address the shortfall in
female Board representation.
There are currently five Directors that self-identify as a minority ethnic
background, including Julia M. Brown who joined the Board on 1 January 2023.
None of the listed senior Board positions are currently held by a woman.
This has been identified as an issue to address and factors into discussions
on succession planning and the development of Directors.
The current size of the Board provides a challenge to increasing diversity
through new appointments and the Committee has acknowledged and
discussed this with regard to succession planning and tenure review.
The Board will always seek to appoint the
best qualified candidate, but between
two candidates of equal merit the Board
intends that, in recognition of any
disproportionate under-representation of
gender diversity on the Board, preference
is given to a female candidate when
making future appointments.
The Committee is committed to applying this principle. The Committee did
not have to apply this with regard to the appointment to the Board this year,
since Julia M. Brown was the selected candidate based on merit.
When seeking to appoint a new director,
the search pool will be wide and where
executive search firms are used, Ocado will
only engage with those that have adopted
the Voluntary Code of Conduct for
Executive Search Firms or equivalent code.
This year the Committee engaged Heidrick & Struggles to assist in recruiting
a new Non-Executive Director and specifically requested a wide search to
provide a broader range of candidates. The recruitment process considered a
long-list of 64 candidates, which was then reduced to a short-list of nine
candidates involved in the interview process. Heidrick & Struggles has
adopted the Voluntary Code of Conduct for Executive Search Firms.
The Board will support workforce
initiatives that promote a culture of
diversity and inclusion.
This year an audit and maturity assessment of the Group’s approach to
diversity, equity and inclusion in accordance with the EY Global Equality
Standard was undertaken. The Board reviewed the results and actions
planned based on the recommendations in the report, including improving
data insight and shaping inclusive ways of working, and continues to
monitor progress.
The Board is closely connected to the Global Culture and Inclusion team and
supports the initiatives being undertaken to promote inclusivity and
diversity, including three Directors sitting on the Strategy and Advisory
Board that is focused on diversity and inclusion.
The Board will support the Committee in
identifying women and other
underrepresented groups for promotion
into senior management roles.
The Committee reviewed and discussed the current talent and succession
pipeline and the Group’s plans and outcomes regarding learning and career
development programmes designed to build a pipeline of diverse individuals
in leadership and senior management positions. Committee members also
met with female leaders and emerging female talent within the business.
For more information on diversity in respect of all the Group’s employees, see pages 41 and 42.
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Audit Committee Report
Audit, Risk and Internal Control
Dear Shareholder
I am pleased to present the report of the Audit Committee
(the “Committee”) for the 52 weeks ended 27 November
2022. This report is intended to provide shareholders with
an understanding of the Committee’s role and the work we
have done during the year.
This year marks my last full financial year as Chair of
the Committee. Following the conclusion of the
forthcoming 2023 AGM, I will be succeeded as Chair
of the Committee by John Martin. John qualified as a
Chartered Accountant, has extensive financial experience
and expertise, has served on the Committee for three years
and is therefore suitably qualified to discharge the role.
I will continue to serve as a member of the Committee.
The Committee works to a structured agenda linked to
events in the Group’s financial reporting calendar and
we play a key role in overseeing the integrity of the
Company’s financial statements and the robustness
of its internal control and risk management systems.
Areas of focus and activities in 2022
Our primary focus was, and continues to be, the integrity
of the Group’s financial reporting activities. In considering
the financial statements for 2022, the Committee
considered whether suitable accounting policies had been
adopted and applied consistently, whether management
had made appropriate accounting judgements and
disclosures, viability disclosures and the Group’s ability to
continue as a going concern. For 2022, some of the key
areas of focus were the management judgements
concerning the joint venture contingent consideration
payment, the accounting for Solutions revenue and the
impairment of Solutions contracts.
We are pleased with the progress in the control
environment that has been made this year, evidenced by a
much smoother close process. Following the identification
of a number of control deficiencies in the financial reporting
and closing process for the 2021 financial year and a
Finance transformation programme, which included the
implementation of Oracle Fusion, management introduced
several improvement initiatives to address these issues.
These included the Evolve programme and the pay
improvement plan. A key area of focus during the year
was monitoring the Evolve programme of work, to ensure
progress in improving the consistency and rigour of the
control environment in key areas. The Committee also
oversaw a major pay remediation programme set up in
October 2021 to improve and control pay impacting
processes and improve pay accuracy both in the UK
and overseas. During the year, risks were identified
and mitigation work carried out to increase compliance
to a satisfactory level.
The Board and Audit Committee ensure the
appropriateness and rigour of our climate risk
management framework and approach. The Committee
has continued to monitor the Group’s progress towards
reporting on TCFD disclosures, as required by the Listing
Rules, providing guidance where necessary. The
Committee also reviewed and approved a strategic
approach to energy management and long-term energy
Committee membership
The membership of the Audit Committee, together
with their dates of appointment to the Committee, are
set out below:
Julie Southern
Committee Chair
Date of appointment:
1 September 2018
Independent:
Yes
John Martin
Date of appointment:
1 June 2019
Independent:
Yes
Andrew Harrison
Date of appointment:
1 March 2016
Independent:
Yes
Nadia Shouraboura
Date of appointment:
22 July 2022
Independent:
Yes
Michael Sherman
Date of appointment:
22 July 2022
Independent:
Yes
“ Our primary focus was, and
continues to be, the integrity of the
Group’s financial reporting activities.”
Julie Southern, Chair
GOVERNANCE
procurement to ensure that the Group’s energy buying
was optimised, following the significant increases in
electricity prices from autumn 2021. The Internal Audit
programme has also been reviewed, approved and
monitored. The Committee oversaw the transition to
the newly reorganised Internal Audit function, which
was restructured to better align with the Group’s
principal risks and compliance aims.
Priorities for 2023
The Committee is cognisant of the proposed overhaul
of the UK Corporate Governance Code and audit reform.
The Committee will continue to monitor guidance as it
evolves. Preparations for the potential impact of the
provisions of the draft Audit Reform Bill on the Company
and its external audit, together with any other regulatory
changes which may impact auditing and reporting
requirements, will remain a priority for the Committee
throughout next year.
Committee changes during the year
Finally, there have been changes to the Committee’s
composition during the year. I would like to thank Emma
Lloyd, who stepped down from the Committee in July, for
her invaluable contribution to the Committee and to
welcome Nadia Shouraboura and Michael Sherman, who
joined in July 2022.
I hope that you find this report informative. I will be
available at the AGM to answer any questions about
our work.
Julie Southern
Chair
28 February 2023
Key responsibilities
– Monitoring the integrity of the Financial Statements
of the Company and Group.
– Reviewing announcements relating to financial
performance.
– Reviewing the Company’s internal control and risk
management systems.
– Monitoring and reviewing the effectiveness of the
Company’s Internal Audit function.
– Reviewing the effectiveness of the external audit process.
– Advising the Board on the appointment, reappointment
and removal of the external auditor.
– Agreeing the external auditor’s terms of engagement.
– Developing and implementing policies on the engagement
of the external auditor to supply non-audit services.
– Monitoring and reviewing the external auditor’s
independence and objectivity.
– Ensuring the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable.
– Reviewing any disclosures made by the Company in
relation to the Task Force on Climate-related Financial
Disclosures and climate-related emerging risks.
Membership
The 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. The biography of each member
of the Committee is set out in the Board biographies on
pages 106 to 109. All members have recent and relevant
corporate financial experience and the Committee as a
whole has competence relevant to the sectors in which
the Company operates, notably the retail and technology
sectors. 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. Michael
Sherman and Nadia Shouraboura joined the Committee
on 22 July 2022 and Emma Lloyd retired as a Committee
member on the same date.
Meetings
The Committee holds a minimum of three meetings
annually, as required under its Terms of Reference.
During the 2022 financial year, it held seven meetings.
Attendance at each Committee meeting is set out in the
table on page 121.
The timing of meetings coincides with key intervals in the
Group’s reporting and audit cycle. The Chair of the
Committee reports at each Board meeting on the business
conducted at the previous Committee meeting, any
recommendations being made by the Committee and the
discharge of its responsibilities, as set out in this report.
Regular attendees at Committee meetings include the
Chief Financial Officer, the Group General Counsel
and Company Secretary, Finance Directors, the Head of
Internal Audit and the external auditor. Other attendees
who attend as required include the Chief Executive
Officer, the Chair of the Board, 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 Committee.
Committee evaluation
The Committee’s performance was reviewed during the
year as part of the 2022 external Board evaluation process.
The Committee was found to be operating effectively.
Further information on our Board evaluation can be found
on pages 125 and 126.
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Changes were made to more closely align the
Committee’s Terms of Reference with the model terms
published by the Chartered Governance Institute earlier
in the year. The Committee sets an annual work plan,
developed from its Terms of Reference, with standing
items that the Committee considers at each meeting,
in addition to areas of risk identified for detailed review
and any matters that arise during the year.
How the Committee spent its time
during the year
The responsibilities of the Committee are set out
in its Terms of Reference, which are available on the
Corporate website. The terms were last reviewed and
updated by the Committee and approved by the Board
in September 2022.
The main matters that the Committee considered during the year are set out below:
Topic Activity
Q1
Meetings
held in Jan
2022 (2)
Q2
Meeting
held in Apr
2022
Q3
Meetings
held in Jun/
Jul 2022 (2)
Q4
Meetings
held in Sep/
Oct 2022 (2)
Financial reporting
Monitoring of integrity of financial statements ● ● ● ●
Review of the Annual Report and assessment of whether
it is fair, balanced and understandable
●
Review of work around the Group financial year-
end process, including key accounting judgements
and estimates
● ●
Review of financial results presentations to shareholders ● ●
Review of progress of accounting matters conducted for
the half year
●
Review of progress of programme Evolve ● ● ●
Review of impairment of CGUs ●
Review of process for tracking spares accounting ● ●
Review of share scheme accounting, including accruals
and NIC liabilities
● ●
Ocado Solutions revenue recognition ●
Review of process of capitalisation of internal
development costs
●
Risk and Viability
Statement
Review of going concern and viability, including key
underlying assumptions
● ●
Recommendation to Board for approval of the
Going Concern and Viability Statement in the 2021
Annual Report
●
Approval of Principal Risks statement for 2021
Annual Report
●
Internal control and
risk management
Assessment of the Group’s risk management and internal
control system
●
Review of principal and emerging risks and risk
monitoring approach
●
Review of financial risk register ●
Internal audit
Review of the Group audit plan for 2022, and monitoring
of progress of key programmes
●
Receipt and discussion of reports from Internal Audit
covering Internal Audit reviews
● ● ●
Review of results of SOC II audit ●
Review of the Internal Audit Charter ● ●
Review of effectiveness of Internal Audit ●
Review of proposed Internal Audit plan for 2023 ●
External audit
Consideration of 2022 audit plan and/or fees ● ●
Receipt of external update from Deloitte on progress
of audit work
● ● ●
Annual assessment of external auditor and
recommendation to the Board for its reappointment at the
AGM, and approval of its remuneration
●
Review of policy on auditor’s appointment, independence
and provision of non-audit services
●
Preparation for transition to new lead audit partner ●
Private session with Deloitte without management
present
●
GOVERNANCE
Audit Committee Report
continued
Topic Activity
Q1
Meetings
held in Jan
2022 (2)
Q2
Meeting
held in Apr
2022
Q3
Meetings
held in Jun/
Jul 2022 (2)
Q4
Meetings
held in Sep/
Oct 2022 (2)
Tax and treasury
matters
Tax update and review of Group Tax risks and strategy ● ●
Review of electricity procurement strategy ● ●
Review of treasury risk framework and treasury policy ●
Governance and
compliance matters
Review and approval of the framework and annual
plan for governance, risk and compliance
●
Review of progress on TCFD reporting ● ●
Receipt of compliance activities update, including
policy roll-outs and employee survey results ● ● ●
Review of Committee Terms of Reference ● ●
Consideration of status of audit reform and
other relevant regulatory developments ●
Other
Review of business continuity and disaster
recovery capabilities ●
Review of payroll process and improvement plan ● ● ●
Private session with management without
Deloitte present ● ●
Private session with Finance team ●
The form and content of the Annual Report and Financial
Statements was reviewed and approved, and the
preparation and verification process determined to be
thorough and robust. Consistency of narrative within
the document was confirmed. Following review, the
Committee advised the Board that it was satisfied that
the 2022 Annual Report and Financial Statements, taken
as a whole, met its objectives and supported the Board
in making its Statement on page 178. For information
concerning the process followed by the Company in
preparing this Annual Report see pages 104 and 105
of the Corporate Governance Report. The 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 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. The Committee also
reviewed the evaluation of complex accounting matters.
This section outlines those significant issues which
received particular focus from the Committee in relation
to the Financial Statements for the period and how these
issues were addressed.
There is an additional layer of review and oversight that
occurs in the Ocado Retail business, which has its own
board and audit committee, comprising Ocado Retail
management and representatives from the Group and
Marks and Spencer. That audit committee receives
reports from Group Internal Audit on assurance reports on
the Ocado Retail business and from the external auditor,
as well as from the Ocado Retail management and finance
function. In turn, the Committee has visibility of this
largely via reports from Group management and reports
from Internal Audit and the external auditor.
Financial Statements and Reporting: The 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 Committee reviewed this Annual
Report, various management reports 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
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 Committee plays an important
role in assisting the Board in reaching those conclusions.
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Major Audit Committee judgements and estimates during the period
Area of focus
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
Consolidation
of Ocado Retail
Ocado Retail, in which the Group holds 50%
of the voting rights, requires management to
exercise judgement on whether the rights
granted to the Group under the Ocado Retail
shareholders agreement give the Group
control under IFRS 10.
The Committee reviewed
and agreed with management’s
assessment that the Group still
retained control of Ocado Retail.
Under the Group accounting
policies, the dispute resolution
procedures (in relation to approval
of the business plan and
appointment and removal of the
Ocado Retail CEO) in the
shareholders' agreement grants
the Group determinative rights.
This agreement remains unchanged
and there are no other indicators
that control has changed. This was
supported by management reports
and reports from the external
auditor on its audit procedures in
this review area.
Ocado Retail 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.
Revenue
recognition
– Solutions
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 Committee reviewed and
agreed with management’s
proposed accounting treatment and
policies, reviewing each Solutions
customer individually in light of IFRS
15 guidance.
The accounting
treatment is included in
the Consolidated Income
Statement on page 192
and Note 2.1 to the
Consolidated Financial
Statements.
Provisions,
contingent
liabilities and
contingent
assets
– Solutions
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 milestones 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.
The 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.
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.
Provisions,
contingent
liabilities and
contingent
assets
– Litigation
AutoStore has filed several patent infringement
claims against Ocado Group and action is in
process to defend these claims.
Ocado has filed several patent and IP
infringement actions against AutoStore.
The Committee considered the
management reports on the status
of litigation and costs incurred in
defending these claims.
In March 2022, the US ITC found in
favour of Ocado, confirming the
preliminary opinion handed down in
December 2021. AutoStore has
appealed the decision, and the
appeal is likely to be heard in 2023.
The UK High Court trial was heard in
March and April 2022 and a
judgement is awaited. Prior to the UK
trial, AutoStore withdrew two of the
three patent families from the
infringement proceedings. The many
EPO oppositions continue with so far
one AutoStore patent having been
revoked in its entirety, irrevocably.
There is no impact to the
Financial Statements and
no additional disclosures
for the period. See Note
3.14 to the Consolidated
Financial Statements.
GOVERNANCE
Audit Committee Report
continued
Area of focus
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
Provisions,
contingent
liabilities and
contingent
assets
– Litigation
continued
AutoStore has filed several patent
infringement claims against Ocado Group
and action is in process to defend these
claims.
Ocado has filed several patent and IP
infringement actions against AutoStore.
Ocado continues to have confidence
in the merits of its position and to
actively to pursue its claims against
AutoStore for infringement of
Ocado’s patents in both the United
States and Europe. The trial of the
claim against AutoStore in New
Hampshire, USA is scheduled for
December 2023. Hearings are
scheduled in the German
proceedings in May 2023, although
the preliminary opinion of the German
Patent Office is that Ocado’s IP rights
are valid.
Litigation costs incurred on patent
infringement litigation between the
Group and AutoStore Technology
AS (“AutoStore”) amounted to
£26.4m.
Consistent with the treatment
applied in prior periods, due to the
material nature of the expenditure
and potential income of this
litigation, costs and income arising
are being treated as Exceptional
Items. However, given the ongoing
nature of this litigation, the outcome
is uncertain, and so the Group has
not recognised a contingent asset
or liability in these Financial
Statements in respect of this action.
There is no impact to the
Financial Statements and
no additional disclosures
for the period. See Note
3.14 to the Consolidated
Financial Statements.
Capitalisation
of internal
development
costs
The capitalisation of internal costs of product
development requires judgement in
determining that the costs meet the
necessary criteria for capitalisation under
IAS 38.
The Committee considered the
management report concerning the
judgements, processes and controls
in place with regard to
the capitalisation of internal
development costs, and agreed
with the conclusion that costs are
capitalised appropriately.
See Note 3.3 to the
Consolidated Financial
Statements.
Fair value
measurement
of contingent
consideration
The payment of the remaining contingent
consideration on the part disposal of Ocado
Retail in August 2019, totalling £190.7m in
cash, is contingent on certain contractually
defined Ocado Retail performance measures
being achieved during the FY23.
Management judgement is applied in
determining the fair value which has been
estimated using the expected present value
technique and is based on a number of
probability-weighted possible scenarios.
Management considered a range of
scenarios reflecting current market
uncertainty, the impact of likely adjustments
to the performance target and Ocado Retail’s
current trading performance. Management
determined that the fair value of the
contingent consideration due to M&S as at
the reporting date is £95.0m, which is a
reduction in fair value from prior periods.
The Committee reviewed
management reports on the fair value
of contingent consideration, including
the assessment of Ocado Retail’s
expected future performance and the
feasibility of the potential adjustments
to the performance target. In this
context, the Committee took into
account the review undertaken by the
external auditors of the value of the
contingent consideration.
The Committee agreed with the
conclusion that a probability-
weighted approach to assessing
the fair value of the contingent
consideration was appropriate,
given there is a possibility that the
performance of the Retail business
may result in the contingent
consideration not being paid. The
Committee also reviewed the
proposed financial statement
disclosures and in particular that they
sufficiently explained the estimation
uncertainty and that the ultimate
consideration received may be
materially different to the fair value
reported.
See Note 3.7 to the
Consolidated Financial
Statements for the fair
value applied to the
contingent consideration.
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Area of focus
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
Impairment
assessment for
goodwill and
other fixed
assets
The performance of the Group’s impairment
assessments requires management to make
judgements in determining whether a cash
generating unit (‘CGU’) shows any indicators
of impairment that would require an
impairment test to be carried out as well as
identifying the relevant CGUs to be assessed.
Management determined that assets directly
associated with individual International
Solutions contracts (i.e. partner by partner)
represent the lowest level group of assets
at which impairment can be assessed.
The performance of impairment testing
requires management to make a number of
estimates and assumptions in determining
the recoverable amount of the CGUs. These
include forecast future cash flows estimated
based on management-approved financial
budgets and plans, long-term growth rates,
and post-tax discount rate as well as an
assessment of the expected growth profile
of the respective CGU.
The sensitivity to changes in key
assumptions is also considered to determine
at what level any headroom is eroded.
The Committee reviewed
management reports concerning
the annual impairment assessment
of goodwill and the review of
customer contract CGUs for
indicators of impairment and
impairment testing, together with
the disclosures in the notes to the
financial statements.
The Committee, in agreeing with
management’s approach and
conclusions with respect to the
annual impairment assessment of
goodwill, scrutinised the underlying
assumptions including the module
ramp-up profile over the relevant
contract life.
The Committee agreed with
management’s approach in
identifying indicators of impairment
for International Solutions contract
CGUs as well as the approach,
conclusions and disclosures with
regard to the impairment review and
considerations of changes in key
assumptions.
See Notes 3.2 and 3.4
to the Consolidated
Financial Statements for
details of impairment
reviews undertaken and
the impairment charge
recorded in the year.
Exceptional
items
Management believes that separate
presentation of the exceptional items
provides useful information in the
understanding of the financial performance
of the Group and its businesses.
Management exercises judgement in
determining the classification of certain
transactions as exceptional items by
considering the nature, occurrence and
the materiality of the amounts involved in
those transactions.
The Committee reviewed
management’s periodic reports
on amounts being treated as
exceptional items and agreed with
the treatment of those amounts
as exceptional.
See Note 2.6 to the
Consolidated Financial
Statements.
GOVERNANCE
Audit Committee Report
continued
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 Committee. 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 183 to 185 of the Independent Auditor’s Report.
The Committee reviewed and evaluated during the year
the clarity of disclosures and compliance with financial
reporting standards and relevant financial and governance
reporting requirements and guidelines, including the
European Securities and Markets Authority Guidelines
on Alternative Performance Measures. The Committee
considers that the Company has adopted appropriate
accounting policies and made appropriate estimates
and judgements.
Reporting segments
Consistent with prior years, the Committee reviewed the
management determination of the reporting segments of
the Group, being “Retail”, “UK Solutions and Logistics” and
“International Solutions”, noting this still appropriately
reflected the structure of the Group’s activities.
Going Concern and Viability assessments
The Committee and the Board reviewed the Group’s Going
Concern and Viability Statements (as set out on page 98)
and the assessment reports prepared by management in
support of such Statements. The report on the Viability
Statement included revised downside scenarios reflecting
the current risks posed to the business, which the
Committee considered were appropriate. The Committee
gave careful consideration to the period of assessment
used for the Viability Statement. It took into account a
wide range of factors (see page 96) and, given the
rapid pace of the development of the business, both
strategically and technologically, concluded the time
period of three years remained appropriate.
The external auditor discussed the Statements with
management and, as outlined in its audit report, has
nothing to report in respect of the conclusions reached
by management regarding going concern and viability.
The Board was comfortable with the disclosure set out in
this Annual Report, including the explanation of some of
the key assumptions and its linkages to the Group’s
Principal Risks Statement.
Tax review
During the year, the Committee reviewed and approved
the Group’s Tax Risk standard, which provides a framework
for defining and measuring tax and risk, and outlines
responsibilities, people, policies and processes in place for
managing risk. Current tax risks were considered, including,
those arising from changes to the business, international
operations and changes to international and local tax
legislation and practice.
The Group’s tax strategy was also reviewed by the
Committee during the year and approved by the Board.
The strategy, which can be found at the corporate website
– www.ocadogroup.com, is based around four
fundamental principles:
1
to comply with applicable tax obligations and laws in all
jurisdictions;
2
to pay the right amount of tax at the right time in the
relevant jurisdiction;
3
to ensure that the Company meets both its legal and
moral obligations when optimising gains for
shareholder returns; and
4
to ensure a transparent and open relationship with all
tax authorities.
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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 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 and other areas of the
business and an annual assessment report provided by
Governance, Risk and Compliance. In addition, the
Committee Chair 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 132, the 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 build on the Group’s underlying
control environment.
The Group continued its plan to evolve and mature the
financial control environment, with the launch of the second
phase of its maturity plans, called the Evolve programme.
Having transitioned to the new financial reporting systems
in late 2021, the Finance function set about further
embedding this new system, enhancing the reporting
and controls environment and supporting the business
with the cultural and processes changes required. The
additional rigour and robustness of the financial control
environment is important given the international expansion
and growing complexity of the Group. The second part of
the programme has been planned to run until 2024. One
key part of improving the control environment is the pay
remediation programme, which addresses the varied pay
processes and controls required for a global organisation.
The Committee received regular update reports from
management on these programmes. The Committee
discussed the progress made on key workstreams and the
steps being taken by management to bring about business
and culture changes necessary to support the finance
transformation of the Group.
During the period, the Group continued to monitor the
regulatory environment and will continue to take a proactive
response to the audit and finance regulatory reforms as
they emerge.
Every year the Committee focuses its attention on risk
areas of particular importance, including those linked to
the Group’s principal risks. The Committee spent some time
reviewing tax and treasury management, and the Group’s
business continuity plans. The Group’s approach to
managing treasury and tax risks continues to mature
with the expansion of the policies and processes and
strengthening of resources in these areas. The treasury
policy was updated to include the new risk mitigations for
energy procurement, which was a particularly important
change given the escalating energy costs in 2022.
Group compliance programme: At the start of the year,
the Committee considered and approved the 2022 annual
plan for the Group compliance programme. The prior year
was focused on consolidating the progress made since
2020 and continuing to evolve governance and controls
to meet the changing shape of the organisation and to
respond to emerging risks. Priority efforts during 2022
included the expansion of the fraud compliance
framework, and update of the Anti-Tax Evasion Policy
and Conflicts of Interest Policy.
2022 compliance objectives were focused on supporting
the business with both functional and organisational
objectives, with progress on compliance activities such
as use of compliance tools and increased knowledge and
awareness of compliance topics, tracked and reported
with measurable KPIs. Goals included evolving the
compliance framework with a targeted training and
communications plan as well as maturing aspects of
our existing programme.
The Group’s global privacy and cyber programmes were
completed by the end of 2022 and the expansion of OSP
and key transactions supported in a timely way. SOC II
audits were carried out during the year. The Committee
continues to monitor the implementation, enhancement
and effectiveness of the Group compliance programme.
The Committee pays careful attention to management
reporting in these areas given that they play an important
role in supporting a robust overall risk and control
environment for the Group.
The Group’s compliance programme is explained in
more detail in the Responsible Business section on
pages 60 and 61.
GOVERNANCE
Audit Committee Report
continued
Internal audit
The Internal Audit function is responsible for providing
independent and objective assurance to the Committee.
It helps the Group accomplish its objectives by bringing
a systematic and disciplined approach to evaluating the
design and effectiveness of the Group’s systems of
internal control, risk management and governance
processes through a risk-based approach.
The Head of Internal Audit has invested in initiatives
through the course of the year to improve its effectiveness
and skill base. During the year, the Committee approved
the appointment of a new Head of Internal Audit. The
Internal Audit function was reorganised and reduced in
size to reflect a more targeted assurance service needed
by the business, with a view to building and maintaining
an appropriate mix of core audit and specialist skills to
meet stakeholder expectations and the changing needs
of the Group.
The Committee reviewed and approved the Internal Audit
Charter and plan in January 2022. For 2022, Internal
Audit’s approach to setting the Internal Audit plan was to
use a combination of stakeholder meetings, internal
papers, external briefing papers from industry, regulatory
and technical bodies, and results from previous audit work
to update the audit universe. Internal Audit then met with
mission owners or their direct reports to discuss business
objectives and associated risks and to get feedback on
possible audit activities. Audits performed in 2022
included reviews covering Finance and Operations,
Technology and Programme Assurance across Ocado
Technology, Ocado Retail, Ocado Logistics, Platform
Implementation and Client Services. Internal Audit carried
out reviews across these missions to provide coverage
against the principal risks. It does this in order to add
value by providing risk-based and objective assurance,
advice and insight over the operational systems and
processes adopted by management to ensure the Group’s
assets are safeguarded and data integrity is maintained.
The Committee has a standing agenda item to cover
Internal Audit-related topics. This includes reviewing
progress against the agreed plan, approving subsequent
changes to the plan throughout the year, including the
prioritisation of audit work, and reviewing the reports
issued by Internal Audit. This allows the Committee to
consider the issues and risks arising from reviews through
discussions on key findings, recommendations and plans
by management to address any areas of weakness.
Progress on management action plans is tracked and the
status of these actions is reviewed. During the period, the
Committee met with the Head of Internal Audit without
management present.
2022 Internal Audit effectiveness review: Internal Audit
is usually subject to an external effectiveness review every
three years, and an annual internal review each year.
An external effectiveness assessment of the Internal
Audit function was conducted for 2020 and an internal
assessment was carried out at the start of 2022 relating
to 2021. Throughout the year a number of informal
discussions on effectiveness took place. Time was spent
discussing the coverage of the audit plan and its linkage
to the key areas in the business, as well as the content
and usefulness of the Internal Audit reports and the
system for enforcing and following-up actions. Given the
reorganisation of the Internal Audit team under a new Head
of Internal Audit during the year, it was agreed that it would
be better to carry out a follow-on formal review during
2023, once the reshaped team had settled into its role.
External auditor
The Committee has primary responsibility for managing
the relationship with the external auditor, including
assessing its performance, effectiveness and
independence, recommending to its Board its
reappointment or removal and agreeing terms of
engagement. Deloitte was reappointed as external auditor
of the Group at the 2022 Annual General Meeting. Deloitte
has been the external auditor for six 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, being ten years after the original
appointment. The Committee believes conducting the
competitive tender process then to be in the best interests
of the Company. In making this decision, the Committee
took into account the ongoing effectiveness and
independence of the external auditor (discussed in detail
below), the benefits of maintaining continuity with the
same audit team during a period of significant change in
the Group and the fact that the Deloitte audit partner was
rotated at the end of five years, as required by regulation.
A new lead audit partner, Dave Griffin, was appointed at
the end of the 2021 audit, with his first audit being for the
2022 financial year.
Assessing the effectiveness of the external audit
process and the external auditor: In assessing the
effectiveness of the external auditor the 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 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. The Committee reviewed the audit
plan and was content that the plan was sufficient to
support a robust and quality audit of the year-end
Financial Statements. In reviewing the audit plan the
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 from page 180.
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141
The Committee also considered the approach to reviewing
the Group control environment, review of IT controls,
the proposed audit scope and materiality threshold, as
well as the responses of the auditor to questions from
the Committee.
The Chair meets with the external auditor prior to every
Committee meeting and the Committee meets 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 is seen as an
important opportunity to check in with the auditor to
assess achievement of key deliverables in the audit and
ensure that the audit remains on track. To further facilitate
open dialogue and assurance, the Committee also meets
with the external auditor without management present.
2022 External audit effectiveness review:
Step 1
The Committee, the Executive team, and members of
management from across Group Finance, Retail, Internal
Audit, Governance, Risk and Compliance, IT and Commercial
Finance completed an external audit effectiveness review
questionnaire. The questionnaire asked respondents to
consider the robustness of the audit process and the quality
of delivery, reporting, people and service.
Step 2
The Committee reviewed and discussed the results of the
questionnaire. To assist the Committee with taking a view
on the external auditor’s effectiveness, it also received a
report on audit effectiveness from management and the
external auditor and met with management, without
Deloitte present, to listen to their views.
Result of review
The Committee concluded that Deloitte delivered a robust
and quality audit, with effective challenge and providing
the appropriate resources to the Company in the period
and that, therefore, Deloitte had remained effective in
their role.
Independence and objectivity: The 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 Committee monitored compliance with the
Group’s policy on the employment of former Deloitte
employees. The 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 Committee conducted its annual review of the
Policy on Auditor Appointment and Independence, which
includes the Policy on non-audit services.
Approval thresholds
for non-audit work Approver
Over £10,000 and up to
£30,000 per engagement
Chief Financial Officer
Over £30,000 and up to
£100,000 per engagement
Chief Financial Officer and
Audit Committee Chair
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
Audit Committee
An additional protection is provided by way of a non-audit
services fee cap. The 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 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 209. The non-audit service fees of £242,000
(2021: £506,000) paid to Deloitte during the period related
solely to audit-related assurance services. All non-audit
work engagements were approved in accordance with
the requirements of the policy. The Committee received
a regular report from management regarding the extent
of non-audit services performed by the external auditor.
The external auditor provided a report to the 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 Committee was satisfied this
was the case and so concluded that the auditor’s
independence from the Group was not compromised.
GOVERNANCE
Audit Committee Report
continued
Audit fees: The Committee spent time discussing the level
of audit fees. The Committee was satisfied that the level of
audit fees payable in respect of the audit services provided
(excluding non-audit fees for assurance services), being
£2.2m (2021: £1.8m), 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 audit work
needed to cover the Ocado Retail business and the work
needed to review the migration to the new finance system.
The existing authority for the 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 2022. At the 2022 Annual General
Meeting, 99.95% of votes cast by shareholders were in
favour of granting the Directors this authority.
Reappointment of external auditor: The Committee
is satisfied that the external auditor remains fully
independent, objective and effective and that there are
no contractual restrictions of the Company’s choice of
external auditor. Deloitte has expressed its willingness to
continue as auditor of the Company. Separate resolutions
proposing Deloitte’s reappointment and the determination
of its remuneration by the Audit Committee will be put to
shareholders at the AGM.
Statement of Compliance with the Competition
and Markets Authority Order
The Company confirms that it has complied with The
Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender
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.
This Audit Committee Report is approved by the Board
and signed on its behalf by:
Julie Southern
Audit Committee Chair
Ocado Group plc
28 February 2023
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Directors’ Remuneration Report
Letter from the Chair of the
Remuneration Committee
Dear Shareholder
I am pleased to present the Directors’ Remuneration
Report for the year ended 27 November 2022 on behalf
of the Remuneration Committee (the “Committee”).
The Company’s Directors’ Remuneration Policy
was approved at the 2022 Annual General Meeting
following an extensive review to ensure the Company’s
remuneration incentives continued to be appropriate for
the Company in the medium to long term. The Directors’
Remuneration Report for the year ended 27 November
2022 will be put to an advisory shareholder vote at the
AGM on 2 May 2023. I look forward to your continued
support at the upcoming AGM.
Despite a difficult external environment, the Group continued
to see the expansion of the Solutions business, having
signed its 11th and 12th agreements to develop OSP in
Poland and South Korea during the year, with revenue for the
International Solutions segment increasing by 121.9% as the
global roll-out of OSP continued. The Retail business also
achieved strong customer growth for the year, with more
than 940,000 active customers, but this growth was offset
by customer behaviour returning to pre-pandemic patterns,
resulting in a 4% decrease in revenue for Ocado Retail.
The Committee has worked to ensure the Company’s
leadership remains motivated to successfully implement
the Company’s strategy and guide Ocado through a
challenging global environment, and that we can attract
the best talent globally to achieve our future plans.
Cost of living
The Committee has been mindful of the impact of the
increase in the cost of living on individuals throughout the
organisation, and this has been a regular item of discussion
for the Committee. The Committee remains committed to
keeping this front of mind when making decisions on pay as
we head into the next financial year, and to ensuring our
people are rewarded fairly and competitively for their
contribution to our success and that they feel supported in
a holistic way, not just in their rate of pay.
We launched a specific campaign and dedicated resources
to ensure that as many of our employees were aware of and
could access all products and services available to them.
You can read more about these initiatives on page 160.
Relationship between pay and performance
2022 Annual Incentive Plan
Although we performed well across the majority of our KPIs,
some fell short of the challenging targets we set and hence
we approved bonus payments to the Executive Directors of
between 55% and 58% of maximum, based on achievement
against objectives under the Annual Incentive Plan (“AIP”) for
the period. The Committee carefully considered the outcome
under the AIP measures, assessing the extent to which the
measures reflect the underlying performance of the
business – further information on the 2022 AIP outturn can
be found on pages 162 and 163.
Committee membership
The membership of the Remuneration Committee,
together with the dates of appointment to the
Committee, are set out below:
Andrew Harrison
Committee Chair
Date of appointment:
1 March 2016
Independent:
Yes
Julie Southern
Date of appointment:
1 June 2019
Independent:
Yes
Emma Lloyd
Date of appointment:
2 February 2021
Independent:
Yes
Julia M. Brown
Date of appointment:
1 January 2023
Independent:
Yes
The Committee was pleased that the Company’s
increased attention on ESG was reflected in the
achievement of these measures under the AIP. This focus
will continue in the coming financial year as direct ESG
measures will comprise a greater proportion of the award.
2019 Value Creation Plan (“VCP”)
The third Measurement Date for the VCP was 10 March
2022. The Measurement Price (£12.86) was below the
minimum Hurdle/Threshold Total Shareholder Return
(“TSR”) for Tranches 1 or 2 required to bank awards and
therefore no nil-cost options were banked by the Executive
Directors in 2022. As the TSR underpin was not met, no
previously banked options were capable of vesting.
Due to the capital raise that was undertaken by the
Company in June 2022, a third Tranche of award under
the VCP was established to ensure that the management
team neither unduly benefit nor is penalised as a result of
the capital raise. This is consistent with both the plan rules
and the previous approach adopted when we raised
capital in 2020.
The fourth VCP Measurement Date will be in March 2023.
Based on where our share price is at the time of writing, it
is expected that no nil-cost options will be banked under
any of Tranches 1, 2 or 3 at the fourth Measurement Date.
Further information on the VCP can be found on pages
160 and 161.
2022 Annual General Meeting voting
At our 2022 Annual General Meeting all resolutions were
successfully passed with the requisite majority, although
the Committee notes the outcome of the shareholder
votes against the resolutions in respect of the Directors’
Remuneration Policy and the amendments to the VCP.
The Committee understands the concerns of some
shareholders around the non-standard nature of the VCP,
which was reflected in the votes against these resolutions.
The Committee will keep the operation of the VCP and
all other aspects of executive remuneration under review
and will continue to engage positively with shareholders
to understand their perspectives and concerns. The
Committee continues to believe that the changes approved
offer the best way to drive sustainable growth and align
with the Company’s remuneration policy to offer substantial
comparative award for transformational performance.
Changes to the implementation of the
Policy in 2023
There are no material changes to how salary, benefits
and pension will be implemented in 2023.
The objectives for the AIP will be streamlined by moving
to a single corporate scorecard model. The Executive
Directors will be judged against the same measures that
align to the Company’s overall strategic priorities. Where
the participant is one of the key drivers of an objective,
the weighting of that goal will be proportionally increased
for that participant. This ensures our AIP remains fully
aligned to our strategy and rewards progress against the
stretching financial and non-financial goals within it.
Further information on the operation of the AIP in 2023
can be found on pages 150 and 151.
Changes to base salaries from April 2023
Changes to base salaries for the Executive Directors were
agreed to take effect from 1 April 2023. The increases
were considered holistically, taking into account the cost
of living and inflationary challenges faced by the business
and our employees. The Committee determined that the
base salary increase for the Executive Directors would be
4%, which is lower than the budgeted increase for the
wider workforce. The Committee’s philosophy remains
that Executive Director salaries be positioned around the
lower quartile of the market.
Changes to Non-Executive Director
remuneration
Changes to fees (including Non-Executive Director base
fees, Committee Chair and membership fees, and fees for
the Senior Independent Director) for the Non-Executive
Directors were agreed by the Executive Directors and Chair
in February 2023. Changes to Chair fees were also agreed
by the Committee. The increases were below those
budgeted for the wider workforce.
Committee changes
I would like to extend a warm welcome to Julia M. Brown,
who was appointed as an independent Non-Executive
Director with effect from 1 January 2023 and will also
serve as a member of the Remuneration Committee.
Details of the remuneration arrangements on Julia’s
appointment can be found on page 165.
Finally, as announced on 14 July 2022, this year marks
my last full financial year as Chair of the Remuneration
Committee. Following the conclusion of the forthcoming
AGM, I will be succeeded as Chair of the Committee by
Julie Southern. Julie, who has served on the Committee
for over three years, has the requisite experience and
is well qualified to discharge this role. It has been a
privilege to serve as Committee Chair and I welcome
the opportunity to continue to serve as a member of
the Committee.
I will be available at the AGM to answer any questions
about the work of the Remuneration Committee.
Andrew Harrison
Remuneration Committee Chair
28 February 2023
“ The Remuneration Committee is
committed to ensuring the Company’s
leadership is motivated to deliver
long-term sustainable growth through
successful implementation of the
Company’s strategy.”
Andrew Harrison, Chair
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Directors’ Remuneration Report
continued
Description of the Remuneration Committee
This section of the Directors’ Remuneration Report
describes the membership of the 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 its Terms of Reference, the Committee
has at least three members, all of whom are Independent
Non-Executive Directors, and holds a minimum of two
meetings a year.
Other attendees at Committee meetings during the
year included the Chair of the Board, the Chief Executive
Officer, the Chief Financial Officer, the Group Chief
People Officer and the external adviser to the Committee.
The Chair, Executive Directors and other attendees are
not involved in any decisions of the Committee and are
not present at any discussions regarding their own
remuneration. The Deputy Company Secretary is
secretary to the Committee.
External advice
During the period, the 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
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 Chair remuneration.
Other services
provided by PwC
Other PwC advisory teams advised
the Group on a range of matters during
the period including deal support, tax
structuring, ESG matters, accounting
and overseas tax advice. PwC also
provide independent SOC assurance
reports for the Group’s OSP services.
PricewaterhouseCoopers LLP
reappointment and review
The Committee carried out an annual review of and
considered the reappointment of PricewaterhouseCoopers
LLP. This review took into account PwC’s effectiveness,
independence, period of appointment and fees. PwC was
initially appointed by the Committee in 2017 following a
tender process and has been reappointed each year since.
This period the Committee reviewed the performance of
PwC based on feedback from members of the Committee
and senior management. The criteria for assessing PwC’s
effectiveness included its understanding of business
issues and risks, its knowledge and expertise, and its
ability to manage expectations. The Committee concluded
that the performance of PwC remained effective.
The Committee considered the independence and
objectivity of PwC. PwC has assured the Committee that
it has effective internal processes in place to ensure that
it is able to provide remuneration consultancy services
independently and objectively. PwC confirmed to the
Company that it remains a member of the Remuneration
Consultants Group and as such, operates under the code
of conduct in relation to executive remuneration
consulting in the UK. Following its annual review, the
Committee remains satisfied that PwC has continued to
maintain independence and objectivity.
For the period, £92,000 (2021: £263,251) in fees were paid
or payable to PwC for advisory services provided to the
Committee. The basis for this is a fixed retainer fee and a
time-based fee for additional work.
Following the review by the Committee, it was agreed that
PwC should be reappointed.
Other support for the Remuneration Committee
In addition to the external advice received, the Committee
consulted and received reports from the Company’s Chief
Executive Officer, the Chief Financial Officer, the Chair,
the Group Chief People Officer and the Deputy Company
Secretary. The 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.
How the Committee spent its time in 2022
The Committee has, under its Terms of Reference, been
delegated responsibility for setting remuneration for all of
the Executive Directors, the Chair, the Company Secretary
and senior management. In line with its Terms of Reference,
the Committee’s work during the period is set out on the
next page.
GOVERNANCE
Key agenda items
– Receiving a report on output from shareholder
consultation meetings in late 2021.
– Approving the Directors’ Remuneration Report for FY21.
– Approving the Annual General Meeting explanatory
notices and incentive plan rules.
– Reviewing a response statement regarding the
shareholder consultation following the 2022 Annual
General Meeting.
– Approving the Group’s Gender Pay Gap Report for FY21.
– Receiving a report from the CEO and Chair on
performance and remuneration of the Executive Directors.
– Setting the Executive Director and Chair pay increases.
– Reviewing performance under the FY21 AIP
and consideration of any bonuses payable.
– Reviewing performance under the VCP as at the third
Measurement Date and approving the creation of a third
tranche of award under the VCP as a result of the capital
raise in June 2022.
– Approving the FY22 AIP performance targets and
reviewing the design/measures for the FY23 AIP.
Remuneration summary
Executive pay at Ocado
The components of remuneration
The different components of remuneration in this report are as follows:
Fixed Variable
Salary
Reflects the value
of the individual,
their role, skills,
experience and
contribution to the
business
Benefits
Aligned with all
other employee
arrangements
Pension
Provides an
appropriate level of
retirement benefits.
All Executive
Directors are
aligned with
employee pension
contributions
AIP cash +
deferred bonus
Incentivises
achievement of
annual objectives
and aligns Director
and shareholder
interests by
delivering a
proportion in
AIP shares
Value Creation
Plan
Motivates key
individuals to
achieve long-term
targets and
exceptional levels
of performance
Total
remuneration
Sum of the fixed
and variable
components of
remuneration
Single figure for FY22
The table below provides a summary total single figure of remuneration for 2022. Further details are set out on page 159
in the Annual Report on Remuneration.
Executive Director
Total 2022
(£’000)
Total 2021
(£’000)
Tim Steiner 2,004 1,968
Stephen Daintith 1,391 861
Mark Richardson 1,151 1,043
Neill Abrams 1,181 1,053
Luke Jensen 1,161 1,039
– Receiving regular reports on Group-wide remuneration
for FY22 and reports from the DNED on workforce
remuneration arrangements and issues.
– Receiving a report on the Group’s share schemes
and plans for FY23.
– Approving incentive payments and salary changes
for senior management.
– 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 management pay, market
themes and trends and new governance requirements.
– Reviewing the performance of advisers.
– Reviewing Committee composition, Terms of Reference
and performance.
The Executive Directors and the Chair reviewed the
remuneration arrangements of the Non-Executive Directors.
Contents
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147
Directors’ Remuneration Report
continued
Outcomes for FY22
Fixed components
Tim
Steiner
CEO
Stephen
Daintith
CFO
Mark
Richardson
CEO Ocado
ASRS
Neill Abrams
Group GC &
CoSec
Luke
Jensen
CEO Ocado
Solutions
Salary (£’000) 755 563 462 462 462
Benefits (include car allowance, private
medical and other benefits) (£’000) 1 1 1 1 8
Pension – up to 7% of salary (£’000) 53 39 32 32 32
Total (£’000) 809 603 495 495 502
Pay for performance at a glance
2022 AIP
Under this plan, the CEO had a maximum bonus opportunity of 275% of salary, and the other Executive Directors had
a maximum opportunity of 250% of salary. A summary of the outcomes is as follows:
Weighting of
measure
Outturn
(as a % of
maximum)
Outcome
(% total
award)
Transformational Technology 20% 85% 17
UK Client Delivery – Ocado Retail Segment EBITDA 10% 0% 0
UK Client Delivery – UK Customer Pilot roll-out of OSP Platform 5% 20% 1
Deliver the Client Promise – Achieving Customer Satisfaction Scores 7.5% 85% 6.4
Deliver the Client Promise – Achieving Customer SLAs 7.5% 100% 7.5
Efficiency of OSP – % Improvement of Q4 Solutions Average Weekly
Engineering Cost Per Module 10% 79% 7.9
Selling Solutions – Module Capacity Ordered for New CFCs 10% 0% 0
Selling Solutions – Q4 Weekly Eaches Via OSP Platform 10% 0% 0
Individual Objectives (see further detail on page 163) 20% 83.6% 15.6-18.6
Total 55.4-58.4
2022 AIP
Outcome
(% of max)
Outcome
(£’000)
Tim Steiner 56.72 1,191
Stephen Daintith 55.36 788
Mark Richardson 55.90 652
Neill Abrams 58.40 682
Luke Jensen 56.16 655
VCP
The third Measurement Date under the VCP was 10 March 2022. No nil-cost options were banked by Executive
Directors on the third Measurement Date. The following table sets out the number of awards granted on the first
to third Measurement Dates under the VCP:
Number of nil-cost options granted
Measurement
Date
Hurdle Price/
Threshold TSR
Measurement
Price
Tim
Steiner
Stephen
Daintith
Mark
Richardson
Neill
Abrams
Luke
Jensen
12 March 2020 £15.16 £11.23 0 0 0 0 0
11 March 2021 Tranche 1: £16.68
Tranche 2: £21.06
Tranche 1: £23.28
Tranche 2: £23.28
2,059,123 0 514,780 514,780 514,780
10 March 2022 Group 1 –
Tranche 1: £23.28
Tranche 2: £23.28
Group 2 –
Tranche 1: £18.34
Tranche 2: £23.16
Group 1 –
Tranche 1: £12.86
Tranche 2: £12.86
Group 2 –
Tranche 1: £12.86
Tranche 2: £12.86
0 0 0 0 0
(1) Tim Steiner, Neill Abrams, Mark Richardson and Luke Jensen are all “Group 1” participants, as they joined the VCP prior to the second Measurement Date. As Stephen
Daintith joined the Board in March 2021, following the second Measurement Date, he joined the VCP as a Group 2 participant.
GOVERNANCE
Annual Report on Remuneration – Implementation of Policy for 2022 and Future Policy
Link to Purpose and Strategy
Details of how the 2022 Remuneration Policy links to the Company’s strategy and purpose can be found in the
Remuneration Policy on the corporate website – www.ocadogroup.com – and on page 178 of last year’s report.
The Committee considers that the principles under which the 2022 Remuneration Policy were developed continue
to be appropriate.
Summary of policy table for Executive Directors and implementation
This section provides a summary of the key elements of the 2022 Remuneration Policy for Executive Directors approved
by shareholders at our 2022 Annual General Meeting on 4 May 2022. In addition, we have set out how the Remuneration
Policy was operated in 2021/22 and how it is intended to be operated in 2022/23. Details of how the Remuneration
Policy was designed and developed and the full Policy can be found on the corporate website – www.ocadogroup.com
– and on pages 177 to 200 of last year’s annual report.
Base salary
Minimum level of pay to attract and retain the right calibre of senior executives required to support the long-term
interests of the business. We continue to aim to position salaries towards the lower quartile of the market.
Element
22/23
23/24
24/25
25/26
26/27
27/28
Operation Opportunity
Operation in the
year ended
27 November 2022
Operation in the
year ending
3 December 2023
Base salary
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; and
– an individual’s contribution to the
Group.
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.
Where appropriate and
necessary, larger increases
may be awarded in
exceptional circumstances,
for example if the role has
increased significantly in
scope or complexity.
Larger increases may also
be considered appropriate
and necessary to bring
a recently-appointed
executive in line with
the market and the other
executives in the Company
where their salary at
appointment has been
positioned below the market.
As at 1 April 2022:
– Tim Steiner (CEO):
£763,830
– Stephen Daintith
(CFO): £569,250
– Mark Richardson
(CEO Ocado ASRS):
£466,785
– Neill Abrams
(Group GC &
CoSec): £466,785
– Luke Jensen (CEO
Ocado Solutions):
£466,785
As at 1 April 2023
salaries will increase
as follows:
– Tim Steiner (CEO):
£794,383
– Stephen Daintith
(CFO): £592,020
– Mark Richardson
(CEO Ocado ASRS):
£485,456
– Neill Abrams
(Group GC &
CoSec): £485,456
– Luke Jensen (CEO
Ocado Solutions):
£485,456
These reflect an
increase of 4% which
is lower than the
budgeted increases
for the wider UK
employee population.
Benefits
To attract and retain the right calibre of senior executives required to support the long-term interests of the business.
Element
22/23
23/24
24/25
25/26
26/27
27/28
Operation Opportunity
Operation in the
year ended
27 November 2022
Operation in the
year ending
3 December 2023
Benefits
Benefits provided are aligned with
those provided to all employees
under our flexible benefits policy.
The Company provides Directors’
and officers’ liability insurance
and may provide an indemnity to
the fullest extent permitted by the
Companies Act.
Benefits are set at a level
which is considered to be
appropriate against market
data for comparable roles
for companies of equivalent
size and complexity in
similar sectors and
geographical locations to
the Company.
Includes car
allowance, private
medical insurance,
life assurance and
other discounts.
Any business travel
costs will be paid
by the Company.
Additional benefits
or payments in lieu
of benefits may also
be provided in certain
circumstances,
if required for
business needs.
No planned change.
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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.
Element
22/23
23/24
24/25
25/26
26/27
27/28
Operation Opportunity
Operation in the
year ended
27 November 2022
Operation in the
year ending
3 December 2023
Pension
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.
Maximum contribution
of 7% of salary.
In order to ensure
continued alignment
between Executive
Director and wider
workforce pension
contributions, the
contribution rate for
UK-based Executive
Directors is 7% of
salary, in line with
the workforce.
For any Executive
Directors outside the
UK, provision for an
executive pension
will be set taking
into account local
market rates.
No planned change.
Annual Incentive Plan (“AIP”)
To provide a direct link between measurable and predictable annual Company and/or role specific performance
and reward.
To incentivise the achievement of outstanding results aligned to the business strategy.
To support long-term shareholder alignment through deferral into shares and holding periods.
Element
22/23
23/24
24/25
25/26
26/27
27/28
Operation Opportunity
Operation in the
year ended
27 November 2022
Operation in the
year ending
3 December 2023
Annual Incentive Plan
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 to
the extent that they vest until the
end of any relevant post-vesting
holding period.
Maximum opportunity
of 275% of salary.
Maximum potential
for FY22 (as %
of salary):
– CEO: 275%
– Other Executive
Directors: 250%
AIP was measured
against the following
performance
measures:
– Transformational
Technology (20%)
– Ocado Retail
EBITDA (10%)
– UK OSP
Customer Pilot
Implementation
(5%)
– Achieving
Customer
Satisfaction (7.5%)
– Achieving
Customer
SLAs (7.5%)
– Q4 Solutions
Average Weekly
Engineering Cost
Per Module (10%)
– Module Capacity
Ordered for New
CFCs (10%)
– Q4 Weekly
Eaches Via OSP
Platform (10%)
– Individual
Objectives (20%)
The Corporate
Scorecard will be
measured against the
following strategic
pillars:
- UK Client Delivery
(20%)
- Environmental,
Social and
Governance (10%)
- Partner Success
(30%)
- Costs (30%)
- New Business (10%)
- Legal (Neill Abrams
only)
Further information on
the corporate
measures can be
found overleaf.
The measures are
individually weighted
by Director. For
further information
please see page 151.
GOVERNANCE
2023 AIP – Corporate Scorecard of performance measures
Following the Committee’s annual review of the AIP’s incentive measures, the objectives for the 2023 AIP will be
streamlined by moving to a single corporate scorecard model, applicable to all participants and no longer segmenting
by corporate and individual objectives. Weightings for each AIP objective will be determined based on its strategic
importance to the Group, and this overall weighting will apply to the CEO.
This weighting will then be pro-rated to 70% for all other Executive Directors. The remaining 30% of the award will be
based on adjusting the weighting of the core targets, where the Executive Director can directly impact the outcome
of the target as a key driver of that goal. This approach ensures that 30% of the outcome of the award is strategically
targeted to the individual. The below table outlines the 2023 AIP measures and the individual weighting for each
Executive Director.
The specific performance targets for the AIP are not disclosed for the 2023 financial year on the basis the 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 in greater detail at the end of the 2023 financial year.
The ESG metrics included reflect key areas of the business’s ESG strategy and focus over the coming year, and
comprise a greater proportion of the award than previously was the case.
Corporate Measure
Weighting
(Tim Steiner)
Weighting –
other EDs (70%)
Luke
Jensen
Stephen
Daintith
Neill
Abrams
Mark
Richardson
UK Client
Delivery
Ocado Retail EBITDA 7.5% 5.25% 5%
Ocado Retail revenue 7.5% 5.25%
UK OSP
implementation
5% 3.5%
Environmental,
Social and
Governance
Environmental
roadmap
5% 3.5% 5% 5%
People Engagement
Net Promoter Scores
5% 3.5%
Partner Success Client cost per order 10% 7% 7.5 %
Total live modules 10% 7% 7.5 %
Modules ordered 10% 7% 7.5%
Costs CFC capital
expenditure cost
10% 7% 5%
Direct operating costs 10% 7%
Group operating costs 10% 7% 15% 5%
New Business Non-grocery
deals signed
5% 3.5% 5% 30%
Solutions deals signed 5% 3.5% 7.5%
Legal Success in corporate
litigation
– – 15%
Total 100% 70% 30% 30% 30% 30%
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Directors’ Remuneration Report
continued
Value Creation Plan (“VCP”)
To attract, retain and incentivise senior executives.
To align the interests of senior executives and shareholders, by incentivising senior executives to deliver substantial and
sustained Total Shareholder Return “TSR”) over the long term.
Element
22/23
23/24
24/25
25/26
26/27
27/28
Operation Opportunity
Operation in the
year ended
27 November 2022
Operation in the
year ending
3 December 2023
Value Creation Plan
Under the VCP approved in 2019
and amended in 2022, from the 2023
Annual General Meeting onwards
Executive Directors have the
opportunity to share in up to 3.25% of
the total value created for
shareholders above a 10% p.a. TSR
hurdle over an eight-year
performance period.
Vesting schedule for extended VCP:
– 50% of the cumulative number
of share awards vest following
the fourth, fifth, sixth, seventh
and eighth Measurement Dates.
– 100% of the cumulative number
of share awards vest following
the eighth Measurement Date.
Vesting of awards is also subject
to a minimum return of 10% TSR p.a.
For further information about the
VCP, see pages 160 and 161.
The maximum number of
share awards that may vest
under the VCP is 3.25% of
the issued share capital.
The maximum allocation
that can be granted to any
one individual is 1.25%.
The current Executive
Directors’ allocations are
fixed until the fifth
measurement date in 2024;
however, these may be
reviewed ahead of the
three-year extension.
Awards are subject to an
annual cap on the value
on vesting of:
– CEO: £20m
– Other Executive
Directors: £5m
The limits for the Executive
Directors will be reviewed
prior to the start of the
extended period in 2025.
For Executive
Directors, the
following maximum
limits will continue
to apply:
– CEO: 1% of the
total value created
above the hurdle
– Other Executive
Directors: 0.25% of
the value created
No planned change to
individual VCP limits.
Currently each Executive
Director’s award relates
to a five-year period
although shareholder
approval was obtained at
the May 2022 Annual
General Meeting to
extend the VCP for a
further three years.
Decisions on which VCP
participants will
participate in the VCP
extension will be made
by the Committee during
FY2023.
Shareholding requirements
To align Executive Directors and shareholders.
Element
22/23
23/24
24/25
25/26
26/27
27/28
Operation Opportunity
Operation in the
year ended
27 November 2022
Operation in the
year ending 3
December 2023
Shareholdings
Shareholding requirement for
Executive Directors:
– CEO: 400% of salary
– Other Executive Directors:
300% of salary
Post-cessation shareholding
requirement of 100% of pre-cessation
shareholding requirement for 24
months from leaving the Company.
No change to minimum
shareholding requirements.
See page 166 for
Director
shareholdings.
To enforce the
post-cessation
requirement, the
Executive Director will
sign a certificate of
compliance agreeing
to retain the required
number of shares for
24 months.
The required number
of shares will be fixed
based on the share
price at the date of
cessation.
Other remuneration
During the period, the Executive Directors continued their participation in the all-employee Sharesave and
Share Incentive Plan schemes. It is expected that in 2023, the Executive Directors will carry on their participation
in the schemes.
GOVERNANCE
How does our target total remuneration compare to our peers?
The following chart shows the Company’s comparative positioning of total remuneration (on a forward-looking basis)
against the FTSE 100 (data as at September 2022). Our philosophy on pay positioning aims to set fixed pay towards the
lower quartile of the market and offer substantial comparative reward only for transformational performance.
Note: Total target remuneration figures for Ocado are based on current salaries and target AIP and include pension
contributions. The value of the VCP shown is the IFRS 2 fair value, which has been annualised.
Base salary Total Remuneration
CEO CFO COO CEO OS Group GC
and CoSec
Top quartile
2nd quartile
1st quartile
Bottom quartile
Salary
CEO COO CEO OS Group GC
and CoSec
Top quartile
2nd quartile
1st quartile
Bottom quartile
Total remuneration
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 2021/22, 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 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.
2021/22
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)
Tim Steiner 2,004 19,668,651 19,795,014 359,740 128,627 (231,113)
Stephen Daintith 1,391 188 13,427 3 87 84
Mark Richardson 1,151 1,450,390 1,451,108 26,528 9,429 (17,099)
Neill Abrams 1,181 3,670,345 3,683,642 67,131 23,936 (43,195)
Luke Jensen 1,161 267,491 268,209 4,892 1,743 (3,149)
(1) Stephen Daintith joined the Board with effect from 22 March 2021 and hence has had less time than the other Executive Directors to build up his shareholding.
The closing market price of the Company’s shares as of 25 November 2022, being the last trading day in the period
ended 27 November 2022, was 650 pence per ordinary share (2021: 1,829 pence), and the share price range applicable
during the period was 393 pence to 1,834 pence per ordinary share.
Chair and Non-Executive Fees
The remuneration arrangements for the Non-Executive Directors (except the Chair) were reviewed by the Executive
Directors and the Chair in February 2023. From 1 April 2023, the basic fees for Non-Executive Directors, the fee for
chairing a Committee, the fee for the role of Senior Independent Director and the fee for being a member of the
Remuneration Committee or the Audit Committee will increase by 4%.
In February 2023, the Remuneration Committee reviewed the Chair of the Board’s fees and approved an increase of 4%
from 1 April 2023. In addition, the Chair is entitled to receive an expense allowance each year in respect of office
support costs, which will also increase by 4%.
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Directors’ Remuneration Report
continued
Annual Report on Remuneration – 2022
Introduction
This part of the Directors’ Remuneration Report sets out the Directors’ remuneration paid in respect of the 2022
Financial Year. It details the payments to Directors and the link between Company performance and remuneration
of the Chief Executive Officer. This part, together with the ‘Description of the Remuneration Committee’ section on
pages 146 and 147 and the ‘Implementation of Policy for 2022’ section on pages 149 to 153, constitutes the Annual
Report on Remuneration, and will be put to an advisory shareholder vote at the Company’s AGM.
Wider workforce considerations and our approach to fairness
We are committed to ensuring our people are rewarded fairly and competitively for their contribution to our success and
that they feel supported in a holistic way, not just in their rate of pay.
In Logistics, we have invested in the package, recognising the pressures in the labour market and the challenges our
employees were facing. For 2022, the average hourly paid pay award by site was 7.61%, although this incorporates a
wide range of award levels across multiple CFCs, Spokes and LGV. Within our hourly paid population, our LGV, the
majority of our CSTMs and our Personal Shoppers in Bristol earn over the Living Wage. Within our wider CSTM and
Personal Shopper population, whilst the base hourly rate does not exceed the Living Wage, all employees are generally
given the opportunity to earn above it via incentives and premiums. We also made significant investments in pay for
employees in our UK Tech Solutions business with average salaries rising by 7% year on year. In contrast, Executive
Director salary increases in FY2022 were significantly lower at 3.5%.
We launched a specific campaign and dedicated resources to ensure that as many of our employees were aware of and
could access all products and services available to them:
– We rolled out an advanced salary product allowing all eligible employees to withdraw 50% of their earned basic pay
up to three times over the course of one payroll period. This gives employees greater autonomy over finances – ‘your
pay, your way’.
– All our major sites were given access to a lift share app in order to reduce commuting costs which has been well
utilised since its launch. We estimate that over a 12 month period it will save:
– Commute costs of ~£2.9m across the population
– 2,512 tonnes of CO
2
reduction
– 11,393,943 miles saved (by sharing the commute)
– Continued roll-out of our Benefits+ platform across a number of different countries which allows employees to select
the products that matter most to them. In addition, we have also rolled out our Discounts+ product in markets outside
the UK and USA, which helps our employees save money on everything from bills to household necessities and
lifestyle products.
– We continue to promote our retail discount in the UK on Ocado.com, and internationally we use local relationships to
deliver retail discounts where possible.
– Our Company Shop Group is the UK’s leading redistributor of surplus food and household products. Employees can
shop products from well-known brands at amazing prices, helping stretched budgets go further. Membership is
available to all colleagues and stores are located across the UK.
– We launched the role of Mental Wellbeing Champion to provide an added layer of support for our employees – as well
as a voice that can help to cascade the messaging and focus we have centrally. Over 50 Champions have been
trained to support our employees by providing a safe, unbiased and confidential space. This was in addition to our
existing wellbeing support package which included access to digital support to help people self-manage their mental
health, access to our Employee Assistance phone line and training for all managers on how to support mental health
in the workplace.
Group-wide remuneration report
The 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 for workforce engagement
(“DNED”) is Andrew Harrison. The DNED advocates and directly represents the employee voice during Board and
Committee discussions. The DNED reports to the Committee on insights from activities undertaken across the year with
regard to DNED responsibilities. For more details of what the DNED has done in 2022, see page 116. The Committee
carefully considers the relevant parts of these reports when making decisions on executive remuneration.
GOVERNANCE
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 employees in the Group receive share incentives. All UK employees are eligible to participate in the
Group’s Share Incentive Plan and Sharesave plan and employees located outside the UK are eligible to participate in
the international equivalent share schemes. Application periods for joining and benefiting from participation in the
all-employee plans were shortened during the year; however, some of the Executive Directors entered into irrevocable
agreements in order to participate in the Company’s Sharesave scheme.
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 Code, the current Remuneration Policy ensures that pension
contributions for existing and any future Executive Directors are fully 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.
The all-employee remuneration report produced by the Company is considered by the 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, which reflects our commitment to create a diverse workforce,
environment and pay strategy that support all individuals irrespective of their gender, age, race, disability,
sexual orientation or religion.
Gender pay gap
Ocado is committed to pay parity and aims to ensure we provide equal opportunity for all. We are proud of the work
we have done in diversity and inclusion during the year and want to continue 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. Our 2022 results continue to show a balanced position, with the headline
metric (median pay gap) fractionally favouring women by 0.2%, having slightly favoured men in 2021. The mean gender
pay gap continues to show a slight gap in favour of female employees (2.5%).
We are committed to paying fairly and we are focused on providing an equal opportunity for all employees. 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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Directors’ Remuneration Report
continued
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:
– The 2021, 2020, and 2019 pay ratio.
– This year’s 2022 pay ratio.
The CEO pay ratio, when calculated in line with the Regulations, is broadly in line with the figures for 2021 (81:1 versus
82:1 last year). This is due to the fact that as was the case in FY2021, there were no long-term incentive awards vesting
during FY2022; at the third VCP Measurement Date the 10% CAGR TSR underpin was not met hence no banked nil-cost
options were capable of vesting. The next potential vesting date under the VCP will be in March 2023. No Long-Term
Incentive Plan (“LTIP”) grants were made after 2018 and the last LTIP award has now vested.
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. Details on the differences between the remuneration of Executive
Directors and the wider workforce can be found on page 158. The Committee is satisfied that its policies on reward
drive the right behaviours at Ocado and ensure that our employees are rewarded fairly and competitively for their
contribution to our success. Therefore, the Committee believes that the median pay ratio is consistent with the Group’s
pay, reward and progression policies.
Year Method
CEO
remuneration
(£’000)
25th
percentile
pay ratio
Median
pay ratio
75th
percentile
pay ratio
2021/22 – reported figures Option B 2,004 85:1 80:1 68:1
2020/21 – reported figures Option B 1,968 88:1 82:1 67:1
2019/20 – reported figures – restated Option B 6,211 283:1 278:1 217:1
2018/19 – reported figures – restated Option B 59,038 2,834:1 2,619:1 2,349:1
2018/19 – without GIP payment – restated Option B 4,918 236:1 218:1 196:1
(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 gap at each of the 25th, 50th and 75th percentiles, 20 employees were identified as comparators
and their remuneration calculated (the remuneration figures for each employee were determined with reference to the financial year ended 27 November 2022).
The median remuneration for each group of 20 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.
Chief Executive Officer UK employees (full-time equivalents)
Total pay and benefits (£’000) Salary (£’000)
Year
Total pay and
benefits
(£’000)
Salary
(£’000)
25th
percentile Median
75th
percentile
25th
percentile Median
75th
percentile
2021/22 2,004 755 23.6 25.1 29.5 22.8 24.3 28.5
GOVERNANCE
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 incentive payout as a percentage
of maximum opportunity for the current period and the previous ten financial years.
Year
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)
2022 – Tim Steiner 2,004 56.7 1,191 –
2021 – Tim Steiner 1,968 57. 9 1,175 –
2020 – Tim Steiner 6,211 94.2 1,865 79.9
2019 – Tim Steiner 59,038 57.0 1,074 94.5
2018 – Tim Steiner 3,996 70.5 539 50
2017 – Tim Steiner 1,337 41.8 310 33.4
2016 – Tim Steiner 1,141 43.6 315 43.2
2015 – Tim Steiner 5,098 65.0 459 90.8
2014 – Tim Steiner 6,483 56.0 385 100
2013 – Tim Steiner 1,011 98.3 528 –
(1) From 2010, the Company had the JSOS as the main form of long-term incentive plan. For the 2013 financial year, 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 2019, the VCP is now the main form of long-term incentive plan.
(2) The total remuneration amounts shown above are the amounts restated to account for the final vesting of each of the LTIP awards.
(3) The 2017 LTIP vested at 46.1% of maximum and the GIP vested at 100% of maximum. The 2019 long-term Incentive value is a weighted average of the 2017 LTIP
and the GIP.
(4) 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.
(5) There was no vesting capable of occurring in the second year of the VCP in March 2021 and the 2018 LTIP was the last award under this scheme, therefore, the 2021
long-term incentive value is N/A.
(6) Vesting was capable of occurring during the third year of the VCP in March 2022. However, the minimum TSR underpin was not met for either Tranches 1 or 2 and
therefore no nil-cost options vested in 2022.
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
500
1,000
1,500
2,000
2,500
3,000
3,500
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 26 Nov 2021 25 Nov 2022
Ocado TSR FTSE 100 TSR FTSE 250 TSR
TSR performance of an investment of £100
Contents
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156
OCADO GROUP PLC Annual Report and Accounts 2022
GOVERNANCE
OCADO GROUP PLC Annual Report and Accounts 2022
157
Directors’ Remuneration Report
continued
Director salary/fee percentage change versus employees of Group
The table below shows how the percentage increase in each Director’s salary/fees, taxable benefits and annual
incentive plan between FY21 and FY22 compares with the average percentage increase in each of those components
of pay for the UK-based employees of the Group as a whole. For the third year, disclosure for all Directors in addition
to the CEO has been included; 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.
Year-on-year increase in pay for Directors compared to the average employee increase:
2021/22 2020/21 2019/20
Director Salary/Fees
Taxable
benefits AIP Salary/Fees
Taxable
benefits AIP Salary/Fees
Taxable
Benefits AIP
Tim Steiner 3.5% (35.6)% 1% 2.5% (83)% (37)% 7% (33)% 74%
Stephen Daintith 3.5% (20.1)% 69% N/A N/A N/A N/A N/A N/A
Mark Richardson 3.5% (20.1)% 17% 2.5% – (38)% 7% – 82%
Neill Abrams 3.5% (20.1)% 20% 2.5% – (28)% 12% – 72%
Luke Jensen 3.5% 51.3% 20% 2.5% (50)% (38)% 12% (29)% 68%
Rick Haythornthwaite 2.3% – – N/A N/A N/A N/A N/A N/A
Jörn Rausing 5.2% – – 7% – – 10% – –
Andrew Harrison 12.6% – – 12.5% – – 21% – –
Emma Lloyd 4.6% – – 21% – – 15% – –
Julie Southern 6% – – 30% – – 6% – –
John Martin 6% – – 13% – – 12% – –
Michael Sherman 9% – – 9% – – N/A – –
Nadia Shouraboura 9% – – N/A N/A N/A N/A N/A N/A
Average percentage increase
for UK employees 5.7% (3.1)% – 2.5% (2.1)% (27.8)% 3% 5% 100%
(1) The change in salary data for the Group’s employees is on a per capita basis. The increase of 5.7% is the change in average percentage increase for UK employees as
at 1 April 2022 to allow a direct comparison with the Executive Directors at a single point in time. It is not the year on year change in base pay which was higher as set
out on page 154.
(2) The change in salary for the Executive Directors is based on the base salary review set out on page 149.
(3) The change in taxable benefits for the Executive Directors is as set out on pages 149 and 150.
(4) The change in fees for the Non-Executive Directors is based on the change in total fees during the period, as set out on page 164; where a Director has not served
a full prior year, the comparison is based on an annualised monthly fee.
(5) UK employees have been chosen as the majority of our workforce is UK based.
(6) Stephen Daintith, Rick Haythornthwaite and Nadia Shouraboura were appointed to the Board on 22 March 2021, 1 January 2021 and 1 September 2021 respectively.
The Committee monitors the changes year-on-year between our Director pay and the average employee increase,
shown in the table. For FY22 salary increases for the Executive Directors were below those received by the wider
workforce. See page 154 for further details.
Relative Importance of Spend on Pay
The following table shows the Company’s loss 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 or
previous year. The information shown in this table is:
– Loss – Group loss before tax as set out in the Consolidated Income Statement on page 180.
– 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 on page 197.
Year ending
27 November
2022
(£m)
28 November
2021
(£m)
Loss before tax (500.8) (176.9)
Total gross employee pay 872.0 788.2
GOVERNANCE
Executive Directors
Total remuneration (Audited)
The total remuneration for the period for each of the Executive Directors is set out in the table below.
Director Tim Steiner Stephen Daintith Mark Richardson Neill Abrams Luke Jensen Total
2022
£’000
2021
£’000
2022
£’000
2021
£’000
2022
£’000
2021
£’000
2022
£’000
2021
£’000
2022
£’000
2021
£’000
2022
£’000
2021
£’000
Salary 755 732 563 367 462 447 462 447 462 447 2,704 2,440
Taxable benefits 1 2 1 1 1 1 1 1 8 6 12 11
Pensions 53 51 39 26 32 31 32 31 32 31 188 170
Total fixed pay 809 785 603 394 495 479 495 479 502 484 2,904 2,621
Variable pay
AIP 1,191 1,175 788 467 652 556 682 567 655 547 3,968 3,312
ESOS and 2014 ESOS – – – – – – – – – – – –
SIP 4 8 N/A N/A 4 8 4 7 4 8 16 31
Sharesave – – – – – – – – – – – –
VCP – – – – – – – – – – – –
Total variable pay 1,195 1,183 788 467 656 564 686 574 659 555 3,984 3,343
Recovery of sums paid – – – – – – – – – – – –
Total remuneration 2,004 1,968 1,391 861 1,151 1,043 1,181 1,053 1,161 1,039 6,888 5,964
(1) Under the Share Incentive Plan, awards of Free Shares and Matching Shares became unrestricted during the period. These awards are explained on page 168 of this report.
(2) Taxable benefits includes one or more of: private healthcare; life assurance; or a car allowance.
(3) Up to 50% of the AIP payment is paid in cash (up to a maximum of 100% of salary) and at least 50% will be 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, only service conditions.
(4) No figures are stated for the VCP to show that i) there was no expected value for the 2021 financial year as vesting was not capable of occurring during that financial year
and ii) 2022 marked the first potential vesting date for the VCP; however, the minimum TSR underpin was not met and hence no nil-cost options vested in March 2022.
(5) Stephen Daintith joined the Board with effect from 22 March 2021.
An explanation of each element of total remuneration paid in the table above is set out in the following section.
Base salary (Audited)
During the year, the Committee reviewed the salaries of the Executive Directors. After taking into account a number of
relevant factors which are discussed in more detail below, the Committee recommended that all basic salaries be
increased. The following table shows the change in each Executive Director’s salary.
Year
Salary 2022
(£)
Salary 2021
(£)
Effective
from
Tim Steiner 763,830 738,000 01/04/2022
Stephen Daintith 569,250 550,000 01/04/2022
Mark Richardson 466,785 451,000 01/04/2022
Neill Abrams 466,785 451,000 01/04/2022
Luke Jensen 466,785 451,000 01/04/2022
The changes to base salary were made in line with the Directors’ Remuneration Policy. The Executive Directors received
an increase in base pay of 3.5% (rounded accordingly), which was below the overall percentage salary increases for
FY22 for monthly paid employees.
Taxable benefits (Audited)
The Executive Directors received taxable benefits during the period, notably private medical 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 159 include a car allowance for Luke Jensen. These benefit arrangements were made in line with the
Directors’ Remuneration Policy which allows the Company to provide a broad range of employee benefits.
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OCADO GROUP PLC Annual Report and Accounts 2022
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OCADO GROUP PLC Annual Report and Accounts 2022
159
Directors’ Remuneration Report
continued
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 have received a
contribution rate of 7% of salary since April 2020.
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, Stephen Daintith and Neill Abrams have elected to receive part of their pension
contributions as an equivalent cash allowance.
Value Creation Plan (Audited)
Value Creation Plan (“VCP”) awards were granted in May 2019, and an amendment to the VCP was approved in 2022.
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”).
Currently each Executive Director’s award relates to a five-year period although shareholder approval was obtained at
the May 2022 Annual General Meeting to extend the VCP for a further three years. Decisions on which VCP participants
will participate in the VCP extension will be made by the Committee during FY23. At each Measurement Date from 2023
onwards, up to 3.25% 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 current Executive Directors’ allocations of 1.00% for the CEO and 0.25%
for the other Executive Directors, remains the same as at the time of the initial grant. The Executive Directors’
allocations may be reviewed ahead of the three-year extension in 2025.
The initial price for the VCP is £13.97 for Tranche 1 (being the average price over the 30-day period prior to the
2019 Annual General Meeting), £19.60 for Tranche 2 (being the price at which equity was raised by the Company
on 10 June 2020) and £7.95 for Tranche 3 (being the price at which equity was raised by the Company on 20 June
2022). The Executive Directors will receive the right at the end of each year of the performance period to share awards
with a value proportionate to the difference between the Company’s Total Shareholder Return (“Measurement TSR”)
and 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 at which the individual banked awards; and
– the Initial Price (£13.97 for Tranche 1, £19.60 for Tranche 2 and £7.95 for Tranche 3) 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 for the original five-year VCP 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. The revised vesting
schedule for the extended VCP allows for 50% of the cumulative number of share awards to vest following the third to
seventh Measurement Dates (inclusive), with 100% of the cumulative number of share awards vesting following the
eighth Measurement Date in 2027. At each vesting date, vesting of awards is subject to:
– a minimum TSR underpin of 10% Compound Annual Growth Rate being maintained;
– any shares vesting cannot be sold prior to the fifth anniversary from grant;
– an annual cap on vesting of £20m for the CEO and £5m for other Executive Directors; and
– 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, second and third VCP Measurement Dates were 12 March 2020, 11 March 2021 and 10 March 2022, 30 days
after the publication of the FY19, FY20 and FY21 financial results respectively.
Following the capital raise 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). Further details on this approach are set out in the 2020
report on page 165.
GOVERNANCE
A second capital raise was undertaken by the Company in June 2022 and as a result, a third Tranche of award under the
VCP was created. The newly issued equity (Tranche 3) was also created at the date that the equity was raised and its
initial price is the share price at which the equity was issued (£7.95). Noting the price at which the Company raised
equity in June 2022, when approving the creation of Tranche 3 the Committee agreed that it would review overall
business performance at the point of any future banking or vesting of awards under Tranche 3. Specifically, the
Committee would take into considerations factors such as (but not limited to):
– changes in Ocado shareholder value over the period;
– broader changes in the technology market; and
– underlying business performance as context for deciding whether any banking or vesting of awards under the new
Tranche is appropriate.
For both Tranches 2 and 3, the newly issued equity must be grown at the same rates (10% p.a.) at each corresponding
Measurement Date as the initial equity (Tranche 1).
For all three Tranches, VCP participants will be entitled to the same share of the new equity as the initial equity, above
a Threshold TSR. Performance will be tested for all Tranches at the same date. 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 following table sets out the number of nil-cost options that were granted to Executive Directors in office at the first,
second and third Measurement Dates under the VCP.
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 first vesting date under the plan in March 2022, the 10% CAGR TSR underpin
was not met for either Tranches 1 or 2 and therefore no vesting occurred. The granted nil-cost options did not lapse
and will be capable of vesting on the fourth Measurement Date in March 2023, again subject to the 10% CAGR TSR
underpin being met. The 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.
Year Year 1 Year 2 Year 3
Tranche 1 Tranche 2 Tranche 1 Tranche 2
Cumulative
total
Measurement Date 12 March
2020
11 March
2021
10 March
2022
10 March
2022
–
Threshold TSR (per share) £10.6 billion
£(15.16)
£11.9 billion
£(16.68)
£0.71 billion
£(21.06)
Group 1:
£16.7 billion
£(23.28)
Group 2:
£13.2 billion
£(18.34)
Group 1:
£0.78 billion
£(23.28)
Group 2:
£0.78 billion
£(23.16)
–
Measurement TSR (Measurement Price) £7.9 billion
£(11.23)
£16.6 billion
£(23.28)
£0.78 billion
£(23.28)
£9.2 billion
£(12.86)
£0.43 billion
£(12.86)
–
Aggregate number of nil-cost options (“NCOs”)
granted to Executive Directors
– 3,547,602 55,861 – – 3,603,463
Tim Steiner (NCOs granted) – 2,027,202 31,921 – – 2,059,123
Stephen Daintith (NCOs granted) – 0 0 – – 0
Mark Richardson (NCOs granted) – 506,800 7,980 – – 514,780
Neill Abrams (NCOs granted) – 506,800 7,980 – – 514,780
Luke Jensen (NCOs granted) – 506,800 7,980 – – 514,780
(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, £23.28 and £12.86 for the first, second, and third Measurement Dates respectively.
(2) For Tranche 1 the Threshold TSR is the higher of the highest previous Measurement Price at which the individual banked awards under this Tranche and the Initial
Price compounded by 10% p.a. between 1 May 2019 and 10 March 2022, being the start of the VCP performance period and the third Measurement Date. For Tranche
2 the Threshold TSR is the higher of the highest previous Measurement Price at which the individual banked awards under this Tranche and the Placing Price (£19.60)
compounded by 10% p.a. between 10 June 2020 and 10 March 2022, being the date of the capital raise and the third Measurement Date.
(3) Tim Steiner, Neill Abrams, Mark Richardson and Luke Jensen are all ‘Group 1’ participants, as they joined the VCP prior to the second Measurement Date. As
Stephen Daintith joined the Board in March 2021, following the second Measurement Date, he joined the VCP as a Group 2 participant. The threshold TSR for
Group 1 participants is the second Measurement Price of £23.28 at which they banked awards in March 2021. Group 2 participants are not subject to the threshold
of £23.28 at which Group 1 participants banked awards in the second year of the VCP.
Contents
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GOVERNANCE
OCADO GROUP PLC Annual Report and Accounts 2022
161
Directors’ Remuneration Report
continued
Annual Incentive Plan (“AIP”) (Audited)
The 2022 AIP was based on the performance targets and weightings set out below. The Chief Executive Officer had a
maximum bonus opportunity of 275% of salary and the other Executive Directors had a maximum opportunity of 250%
of salary.
Annual bonus value achieved (£’000)
Performance conditions
Weighting
of each
condition
Performance
targets
required
Actual
performance
Percentage
of maximum
performance
achieved
Tim
Steiner
Stephen
Daintith
Mark
Richardson
Neill
Abrams
Luke
Jensen
(1) Transformational
Technology
20% See below 7 out of 8
priorities
delivered
17% 357 242 198 198 198
(2) UK Client Delivery –
Ocado Retail EBITDA
10% Min: £90m
Max: £133m
£(30)m 0% – – – – –
(3) UK Client Delivery –
Implementation of UK
Customer Pilot Roll-out
of OSP
5% See below See below 1% 21 14 12 12 12
(4) Customer Satisfaction
Scores
7.5% Min: 6.0
Max: 7.0
6.8 6.4% 134 91 75 75 75
(5) Customer SLA targets 7.5% Min: 95%
Max: 99%
99.5% 7.5% 158 107 88 88 88
(6) Efficiency of OSP – Q4
Solutions Average Weekly
Engineering Cost Per
Module (% improvement)
10% Min: 25%
Max: 100%
79.2% 7.9% 166 112 92 92 92
(7) Selling Solutions –
Modules Ordered for New
CFCs
10% Min: 50
Max: 70
20.5 modules 0% – – – – –
(8) Selling Solutions – Q4
Weekly Eaches Through
OSP Platform
10% Min: 43m
Max: 58m
20m 0% – – – – –
(9) Individual Objectives 20% As agreed 355 222 187 217 190
Total 100% 1,191 788 652 682 655
(1) The applicable salary used for calculating the bonus payment under the rules of the 2021 AIP is the applicable base salary on the date of payment.
Performance under the 2022 AIP was measured against nine performance measures over the 2021/22 financial year.
Of the nine measures, six (measures 2, 4, 5, 6, 7 and 8) have quantifiable performance targets with ‘minimum’ and
‘maximum’ conditions. 25% of an award vests for minimum performance rising on a straight-line basis to 100% for
maximum performance.
Measure 1 (Transformational Technology) requires an assessment of both completion and timeliness of completion.
Targets for this measure were set at the start of the year based around the delivery of eight different technology priorities
that were identified as being central to the ongoing success of Ocado. Overall, six of the eight priorities were completed
on time. One of the eight priorities was not achieved. The eighth priority – timing of the grid delivery measure – was
achieved above its target but delivered late due to supply chain issues. The Committee determined that although the
target for this priority wasn’t met on time, the achievement was significant and the teams had managed to recover lost
time, and so this priority should payout at target. The overall outcome is that seven out of eight priorities were achieved.
Measure 3 (Implementation of UK Customer Pilot Roll-out of OSP) requires an assessment of the following elements in
respect of the OSP: development, testing, launch, deployment across target population and timeliness. The Committee
determined that whilst the solution was developed and tested, it hadn’t been deployed on time and so a substantial
portion of this measure was missed and hence an outturn of 1 out of 5 was appropriate.
The ninth measure (individual objectives) does not have threshold or maximum targets. Each objective is weighted and
scored to provide a total score out of 20. Performance ranges from zero to 20. Further details can be found on page 163.
Overall this resulted in bonus payments to Executive Directors based on 55% – 58% achievement. The Committee
carefully discussed the outcome of each AIP measure, assessing business factors and broader considerations outside
of Ocado, and is confident that outcomes are consistent with the underlying performance of the business.
GOVERNANCE
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 2022 AIP
The 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 Chair.
Objective Achievement
%
Achievement
Tim Steiner
– Ensure successful launch of transformational technology
initiatives and projects.
– Successfully chair the ORL board, with business
performing to expectations or beyond.
– Ensure robust ESG strategy is created and key
deliverables for carbon reduction are aligned across the
business with appropriate communications plans for
investors, clients and employees.
– Manage any legal issues to avoid disruption.
– Drive improvements in employee engagement scores.
– Successful product launches with positive market and
client reactions.
– Strong performance as Chair of the ORL board during
2022, overseeing a successful CEO transition.
– Integrated ESG reporting initiated, fully compliant with
Task Force on Climate-related Financial Disclosures
(“TCFD”) requirements, with links to KPIs and
management of principal risks.
– Litigation proceedings successfully managed.
– Continued increase in Employee Net Promoter Scores.
Overall performance against individual strategic objectives (maximum opportunity: 20%) 84.6%
Stephen Daintith
– Successfully execute OSP business plans including
a new strategy around proactive investor relations.
– Optimise payroll and accounts payable processes.
– Build a high-performing, engaged Finance team with
focus on talent and succession planning.
– Ensure high-quality narrative on the Ocado Group ESG
Strategy with a particular focus on TCFD requirements.
– Robust management of Group’s costs.
– Drive improvements in employee engagement scores.
– Re:Imagined launch, and seminars on modelling and
cash flow held successfully with positive market
feedback.
– Significant improvement in payroll process but further
optimisation required for accounts payable
– Key roles in Finance team filled with strong talent,
regular sessions held to develop talent and build a
structured succession plan.
– Integrated ESG reporting initiated, fully compliant with
TCFD requirements, with links to KPIs and
management of principal risks.
– Reduction in Group Operations costs.
– Continued increase in Employee Net Promoter Scores.
Overall performance against individual strategic objectives (maximum opportunity: 20%) 7 7.8%
Mark Richardson
– Reduce build times for OSP.
– Improve key elements of Ocado Logistics – build
IT/data team, produce business roadmap and reduce
labour turnover.
– Professionalise Platform Implementation.
– Create a baseline measure for the carbon footprint
of our warehouses and develop a plan to improve.
– Drive improvements in employee engagement scores.
– Reduction in OSP build times.
– Ocado Logistics IT team appointed, roadmap
partially developed.
– Roll-out of enterprise management tools in Platform
Implementation completed.
– Baseline estimate created with scenarios to drive
further reduction.
– Continued increase in Employee Net Promoter Scores.
Overall performance against individual strategic objectives (maximum opportunity: 20%) 80.5%
Neill Abrams
– Ensure compliance with TCFD requirements, production
of ESG report and improvement in external ratings.
– Manage any legal issues to avoid disruption.
– Robust management of Group’s costs.
– Drive improvements in employee engagement scores.
– Integrated ESG reporting initiated, fully compliant
with TCFD requirements, with links to KPIs and
management of principal risks.
– Litigation proceedings successfully managed.
– Reduction in Group Operations costs.
– Continued increase in Employee Net Promoter Scores.
Overall performance against individual strategic objectives (maximum opportunity: 20%) 93.0%
Luke Jensen
– Successful production and launch of new set of products.
– Specific objectives with regard to commercial pipeline.
– Build profile and reputation of Ocado Solutions and develop
an ESG communication strategy for our clients and
prospects.
– Continue to support integration of new channels and
deliver relevant stretching financial targets within them.
– Drive improvements in employee engagement scores.
– New products launched to Client Partners.
– Continued advancement of discussions with retailers
globally.
– Strong expansion of Ocado Solutions profile, positive
press reaction to Ocado’s ESG story.
– Delays impacted the speed of progression of new
channel delivery.
– Continued increase in Employee Net Promoter Scores.
Overall performance against individual strategic objectives (maximum opportunity: 20%) 81.8%
Contents
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GOVERNANCE
162
OCADO GROUP PLC Annual Report and Accounts 2022
GOVERNANCE
OCADO GROUP PLC Annual Report and Accounts 2022
163
Directors’ Remuneration Report
continued
Share Incentive Plan
The 2019 award of Free Shares made under the Share Incentive Plan (“SIP”) became unrestricted during the period on
19 September 2022. 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 Chair during the period ended 27 November 2022 and the period
ended 28 November 2021 are set out in the table below.
Fees
Taxable
benefits
Pension
entitlements
Annual
bonus
Long-term
incentives
Recovery of
sums paid
Total
remuneration
Non-Executive Director
2022
£’000
2021
£’000
2022
£’000
2021
£’000
2022
£’000
2021
£’000
2022
£’000
2021
£’000
2022
£’000
2021
£’000
2022
£’000
2021
£’000
2022
£’000
2021
£’000
Rick Haythornthwaite 384 232 – – – – – – – – – – 384 232
Jörn Rausing 76 72 – – – – – – – – – – 76 72
Andrew Harrison 132 117 – – – – – – – – – – 132 117
Emma Lloyd 88 85 – – – – – – – – – – 88 85
Julie Southern 104 98 – – – – – – – – – – 104 98
John Martin 83 79 – – – – – – – – – – 83 79
Michael Sherman 79 72 – – – – – – – – – – 79 72
Nadia Shouraboura 79 19 – – – – – – – – – – 79 19
Total 1,025 774 – – – – – – – – – – 1,025 774
(1) Nadia Shouraboura joined the Board with effect from 1 September 2021.
Non-Executive Directors receive a basic fee and additional fees for chairing the People Committee, the Remuneration
Committee or the Audit Committee, for being a member of the Remuneration Committee or the Audit Committee, or
holding the position of Senior Independent Director. There is currently no additional fee payable to the Designated
Non-Executive Director for Workforce Engagement. The Chair also receives an expense allowance.
The remuneration arrangements for the Non-Executive Directors (except the Chair) were reviewed by the Executive
Directors and the Chair during the period and the basic fees for Non-Executive Directors were increased to £76,600
(2021: £74,000), whilst the fee for chairing a Committee was increased to £20,700 (2021: £20,000). The fee for the
role of Senior Independent Director was also increased to £20,700 (2021: £20,000) and the fee for being a member of
the Remuneration Committee or the Audit Committee was increased to £7,800 (2021: £7,500). A fee for chairing the
People Committee was introduced this year, in line with the Directors’ Remuneration Policy, reflecting the newly
expanded remit of this Committee.
The Remuneration Committee reviewed the Chair of the Board’s fees during the period, increasing the annual fee
to £388,125 (2021: £375,000). In addition, he is entitled to receive an expense allowance of £51,750 (2021: £50,000)
per annum in respect of office support costs.
Other remuneration for the Non-Executive Directors (Audited)
In addition to their 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.
GOVERNANCE
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:
Executive Director Position
Effective date
of contract
From
Company
From
Director
Tim Steiner Chief Executive Officer 23 June 2010 12 months 6 months
Stephen Daintith Chief Financial Officer 22 March 2021 12 months 12 months
Mark Richardson CEO Ocado ASRS 27 February 2012 12 months 6 months
Neill Abrams Group General Counsel and Company Secretary 23 June 2010 12 months 6 months
Luke Jensen CEO Ocado Solutions 30 January 2017 12 months 6 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).
Non-Executive Directors’ letters of appointment
The Chair 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
Date of original
appointment
Date of
re-appointment
Notice
period
Expiry of
nine-year term
Rick Haythornthwaite 1 January 2021 4 May 2022 6 Months January 2030
Andrew Harrison 1 March 2016 4 May 2022 1 Month March 2025
Emma Lloyd 1 December 2016 4 May 2022 1 Month December 2025
Jörn Rausing 13 March 2003 4 May 2022 1 Month N/A
Julie Southern 1 September 2018 4 May 2022 1 Month September 2027
John Martin 1 June 2019 4 May 2022 1 Month June 2028
Michael Sherman 5 October 2020 4 May 2022 1 Month October 2029
Nadia Shouraboura 1 September 2021 4 May 2022 1 Month September 2030
Julia M. Brown 1 January 2023 N/A 1 Month January 2032
Director retirement arrangements and payments for loss of office (Audited)
No Directors left during the year.
Director appointment arrangements (Audited)
As announced on 19 October 2022, Julia M. Brown was appointed to the Board as a Non-Executive Director with effect
from 1 January 2023. Julia M. Brown’s remuneration was agreed by the Committee in line with the Directors’ Remuneration
Policy. On appointment, Julia M. Brown’s basic annual fee was £76,600 which was in line with the other Non-Executive
Directors. As a member of the Remuneration Committee, Julia will also receive a membership fee of £7,800 in line with
the other Committee members. Julia M. Brown will not receive any other benefits or payments, in line with the Directors’
Remuneration Policy.
Payments to past Directors (Audited)
None.
External Remuneration for Executive Directors
As at 27 November 2022:
– 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 company listed on the Johannesburg Stock Exchange. Neill does not receive any
remuneration for carrying out this role.
– In addition to his role as Executive Director of the Company, Mark Richardson is a non-executive director of
Paneltex Limited. Mark does not receive any remuneration for carrying out this role.
– In addition to his role as Executive Director of the Company, Luke Jensen is a non-executive director of Hazel
Parentco SAS (parent company of Hana Group), registered in France. During the period, Luke was also a non-
executive director of ASOS plc, a company listed on the Main Market of the London Stock Exchange. Luke
stepped down from this role on 31 October 2022. During the financial year, Luke received board attendance
fees of €30,000 for his role at Hana Group and £56,127 for his role at ASOS.
– In addition to his role as Executive Director of the Company, Stephen Daintith is a non-executive director of 3i Group
plc, listed on the Main Market of the London Stock Exchange. During the financial year, Stephen received £83,405
for his role at 3i Group.
Contents
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164
OCADO GROUP PLC Annual Report and Accounts 2022
GOVERNANCE
OCADO GROUP PLC Annual Report and Accounts 2022
165
Directors’ Remuneration Report
continued
Director shareholdings (Audited)
The table below shows the beneficial interests in the Company’s shares of Directors serving during the period, and their
connected persons, as shareholders and as discretionary beneficiaries under trusts. The table also shows compliance
with the Director shareholding requirements in the Directors’ Remuneration Policy as at 27 November 2022.
Name
Ordinary shares
of 2 pence each held at
27 November 2022
Ordinary shares
of 2 pence each held at
28 November 2021
Minimum
shareholding
requirement
(% of Base
Salary or Fee)
Met
minimum
shareholding
requirement?
Direct
holding
Indirect
holding
Direct
holding
Indirect
holding
Executive Directors
Tim Steiner 19,785,745 9,269 19,659,959 8,692 400 Yes
Stephen Daintith 12,579 848 – 188 300 N/A
Mark Richardson 1,427,774 23,334 1,427,774 22,616 300 Yes
Neill Abrams 2,114,848 1,568,794 2,102,269 1,568,076 300 Yes
Luke Jensen 172,700 95,509 161,449 94,791 300 Yes
Non-Executive Directors
Rick Haythornthwaite 22,075 – 9,475 100 N/A
Jörn Rausing – 83,879,642 – 75,234,216 100 Yes
Andrew Harrison 18,166 – 18,166 – 100 No
Emma Lloyd 17,300 – 17,300 – 100 Yes
Julie Southern 5,493 – 4,738 – 100 No
John Martin 3,859 – 3,859 – 100 Yes
Michael Sherman – – – – 100 N/A
Nadia Shouraboura – – – – 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 the 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 168.
(3) Tim Steiner entered into various contracts for the transfer of shares on 21 June 2010, as described on page 238 of the Prospectus issued by the Company on 6 July
2010. As previously reported on 20 May 2022, the parties agreed again to extend the date for completion for the third contract to 24 July 2023, or other such date
as the parties may agree.
(4) Stephen Daintith was appointed on 22 March 2021. Executive Directors (excluding the CEO) are expected to hold shares equivalent to 300% of salary. This holding
can be built up over five years from appointment. Therefore, while Stephen Daintith does not hold the requisite number of shares to comply with the shareholding
requirement currently, he is compliant with the Policy.
(5) Michael Sherman, Rick Haythornthwaite and Nadia Shouraboura were appointed on 15 October 2020, 1 January 2021 and 1 September 2021 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
Michael Sherman, Rick Haythornthwaite and Nadia Shouraboura do not hold the requisite number of shares to comply with the shareholding requirement currently,
they are compliant with the Policy.
(5) Although Andrew Harrison and Julie Southern held shares during the year in excess of the guidelines, the fall in the Company share price meant that, at the end of the
financial year, their shareholdings were below the guideline.
(6) The assessment for shareholding compliance is based on the current annualised salary or fee (as set out on pages 159 and 164) which applied on 27 November 2022
and the higher of the original purchase price(s) or the current market price (being 650 pence per share on 27 November 2022) 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 (2021: 79,609) ordinary shares, is a discretionary
beneficiary of a trust holding 74,100 (2021: 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 (2021: 1,363) ordinary shares, Mia Abrams (daughter of Neill Abrams) holds
2,143 (2021: 2,143) ordinary shares, and Joshua Abrams (son of Neill Abrams) holds 2,143 (2021: 2,143) ordinary shares.
(9) The indirect holding for Luke Jensen includes a holding by Sandrine Jensen (wife of Luke Jensen) who holds 92,250 (2021: 92,250) 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.
GOVERNANCE
Director interests in share schemes (Audited)
Annual Incentive Plan (“AIP”) (Audited)
At least 50% of the AIP payout is deferred into shares. At the end of the period, interests in shares held by the Executive
Directors under the AIP were as follows:
Director Type of interest
Date of
grant
Number
of share
options
Face value
(£’000)
Date of
vest
Share price
used for grant
calculations
Tim Steiner Deferred
bonus
20/03/20
19/03/21
17/03/22
37,107
55,711
49,128
590
1,145
587
20/03/23
19/03/24
17/03/25
£15.89
£20.56
£11.96
Stephen Daintith Deferred
bonus
17/03/22 19,512 233 17/03/25 £11.96
Mark Richardson Deferred
bonus
20/03/20
19/03/21
17/03/22
17,163
22,591
23,245
274
464
278
20/03/23
19/03/24
17/03/25
£15.89
£20.56
£11.96
Neill Abrams Deferred
bonus
20/03/20
19/03/21
17/03/22
15,940
19,237
23,699
253
395
283
20/03/23
19/03/24
17/03/25
£15.89
£20.56
£11.96
Luke Jensen Deferred
bonus
20/03/20
19/03/21
17/03/22
18,249
21,671
22,896
289
445
274
20/03/23
19/03/24
17/03/25
£15.89
£20.56
£11.96
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 Measurement Price at the second Measurement Date (£23.28) was higher than the Threshold Total Shareholder
Return for both Tranches 1 and 2 (£16.68 and £21.06 respectively). As such, Executive Directors (excluding Stephen
Daintith who joined the Company after the second Measurement Date) were eligible to bank awards at the second
VCP Measurement Date. The number of the nil-cost options that were awarded to Executive Directors in respect of
the second VCP Measurement Date on 11 March 2021 is set out below.
No nil-cost options were awarded to the Executive Directors in respect of the third Measurement Date on 10 March
2022. This is because the Measurement Price at the third Measurement Date (£12.86) was below the Threshold Total
Shareholder Return for both Tranche 1 and 2 for all participants.
The VCP vesting schedule provides that the first point at which banked awards could have vested was following the
third Measurement Date on 10 March 2022. Given that the minimum TSR underpin of 10% CAGR was £18.34 and £23.16
for Tranches 1 and 2 respectively and the Measurement Price was £12.86, no awards banked under Tranche 1 or
Tranche 2 were capable of vesting on 10 March 2022.
Total number of nil-cost options awarded
(banked) to date
Individual Tranche 1 Tranche 2 Total
Tim Steiner 2,027,202 31,921 2,059,123
Stephen Daintith 0 0 0
Mark Richardson 506,800 7,980 514,780
Neill Abrams 506,800 7,980 514,780
Luke Jensen 506,800 7,980 514,780
(1) Stephen Daintith joined the Board with effect from 22 March 2021. He was not eligible to participate in the VCP at the second measurement date.
Contents
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166
OCADO GROUP PLC Annual Report and Accounts 2022
GOVERNANCE
OCADO GROUP PLC Annual Report and Accounts 2022
167
Directors’ Remuneration Report
continued
Executive Share Option Scheme (“ESOS”) 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
Type of
interest
Date of
grant
Number
of share
options
Exercise
price (£)
Face value of
grant
(£)
Exercise
period
Luke Jensen Option 15/03/17 11,709 2.562 29,998 15/03/20 – 14/03/27
Share Incentive Plan (“SIP”) (Audited)
At the end of the period, interests in shares held by the Executive Directors under the SIP were as follows:
Director
Partnership
Shares
acquired in
the year
Matching
Shares
awarded in
the year
Free Shares
awarded in
the year
Total face
value of Free
Shares and
Matching
Shares
awarded in
the year
(£)
Total SIP
shares held
27/11/2022
SIP shares
that became
unrestricted
in the period
Total
unrestricted
SIP shares
held at
27/11/2022
Tim Steiner 203 29 346 3,853 9,270 290 8,580
Stephen Daintith 203 29 428 3,854 848 – 236
Mark Richardson 203 29 486 3,857 9,417 290 8,573
Neill Abrams 203 29 486 3,857 8,636 290 7,794
Luke Jensen 203 29 486 3,855 3,878 290 3,034
(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 middle market quotation of a share 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 2021 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.
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 14 February 2023, 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
Partnership
Shares
acquired
Matching
Shares
awarded
Free Shares
awarded
Total face
value of Free
Shares and
Matching
Shares
(£)
Total SIP
shares
held at
14/02/2023
Tim Steiner 42 6 0 349 9,318
Stephen Daintith 42 6 0 349 896
Mark Richardson 42 6 0 349 9,465
Neill Abrams 42 6 0 349 8,684
Luke Jensen 42 6 0 349 3,926
(1) The value of the share awards made under the SIP is based on the middle market quotation of a share 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 page 164.
GOVERNANCE
Sharesave scheme (Audited)
At the end of the period, the Executive Directors’ option interests in the Sharesave scheme were as follows:
Director
Type of
interest
Date of
grant
Number
of share
options
Exercise
price
(£)
Face value
(£) Exercise period
Neill Abrams Options 27/08/19 1,610 11.17 17,991 01/12/22 – 01/05/23
Tim Steiner Options 17/03/22 1,500 12.00 18,000 01/05/25 – 01/11/25
Stephen Daintith Options 17/03/22 1,500 12.00 18,000 01/05/25 – 01/11/25
Luke Jensen Options 17/03/22 1,500 12.00 18,000 01/05/25 – 01/11/25
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).
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 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 14 February 2023, 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.
Actual
Limit
All share plans Executive share plans
5.03%
10%
Actual
Limit
3.07%
5%
Contents
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168
OCADO GROUP PLC Annual Report and Accounts 2022
GOVERNANCE
OCADO GROUP PLC Annual Report and Accounts 2022
169
Directors’ Remuneration Report
continued
Shareholder approval and votes at the AGM
The 2022 Directors’ Remuneration Report will be subject to a shareholder vote at the AGM on 2 May 2023. 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 the resolutions regarding the Remuneration Report and
Remuneration Policy last year.
Votes
for
%
for
Votes
against
%
against
Total
votes
Votes
withheld
2022 Annual General Meeting
Approve the 2021 Directors’ Remuneration Report 611,544,200 97.12 18,113,437 2.88 629,657,637 2,268,081
2022 Annual General Meeting
Approve the 2022 Directors’ Remuneration Policy 446,931,547 70.73 184,973,188 29.27 631,904,735 20,983
(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.
Shareholder consultation and 2022 Annual General Meeting voting
The Committee notes that at our 2022 Annual General Meeting all resolutions were successfully passed with the
requisite majority, although there were significant minority votes against Resolution 2 (Approval of the Directors’
Remuneration Policy) and Resolution 20 (Approval of amendments to the Ocado Group 2019 Value Creation Plan).
Prior to the meeting, the Chair of the Remuneration Committee engaged extensively with major shareholders and
the Committee made changes to the proposals to reflect the feedback received. However, it was apparent from the
consultation exercise that some shareholders had divergent views on our proposals and some did not feel able to
support them. Further details on this consultation process were published in the 2021 Annual Report on page 179.
In February 2022, the Chair wrote to shareholders to solicit any further feedback but shareholders indicated their
views had already been registered fully. This extensive consultation process meant the Committee fully understood
the voting outcomes and the reasons why some shareholders were unsupportive of these resolutions. The Committee
will continue to engage with shareholders and keep the Company’s remuneration structures under review.
Alignment of 2022 Remuneration Policy with the Requirements Under the UK Corporate
Governance Code 2018
In its work, the Remuneration Committee considers the elements under Provision 40 of the 2018 Code of clarity,
simplicity, risk, predictability, proportionality and alignment to culture. When establishing the 2022 Remuneration Policy
in FY21, the Remuneration Committee ensured that it took all of these elements into account. The Committee also
considered these factors when applying the 2022 Policy to Executive Directors during FY22.
For full details of how the Committee considered its responsibilities under Provision 40 of the 2018 Code when putting
in place the 2022 Policy, see page 183 of the 2021 Annual Report and Accounts.
Basis of preparation and audit
This report is a Directors’ Remuneration Report for the 52 weeks ended 27 November 2022, 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 2018 UK Corporate Governance Code, the Regulations and the Listing Rules.
In accordance with Section 497 of the Companies Act 2006 and the Regulations, certain parts of this Dirctors’
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 Chair
Ocado Group plc
28 February 2023
GOVERNANCE
Directors’ Report
Introduction
This Directors’ Report should be read in conjunction
with the Strategic Report (pages 1 to 99), which includes
Responsible Business (pages 36 to 61), and the Corporate
Governance Statement (page 110), which are incorporated
by reference into this Directors’ Report.
Directors’ Report disclosures
The Company has chosen in accordance with Section 414C
(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.
Topic Section of the Report Page
Fair review of the
Company’s business
Management Report,
as defined in the
Directors’ Report
1 to 170
Principal risks and
uncertainties
Management Report,
as defined in the
Directors’ Report
86 to 95
Strategy Strategic Report 26 to 35
Business model Strategic Report 14 to 15
Gender breakdown Our People and Skills
for the Future
41
Important events
impacting the business
Strategic Report 1 to 99
Likely future developments Strategic Report 1 to 99
Financial key
performance indicators
Key Performance
Indicators
62 to 65
Non-financial key
performance indicators
Key Performance
Indicators
62 to 65
Financial instruments Note 4.4 to the
Consolidated
Financial Statements
239
Environmental matters Environment and
Natural Resources
46 to 57
Employees with disabilities Directors’ Report 177
Employee engagement Our People and Skills
for the Future
38 to 45
Stakeholder
Engagement
16 to 17
Section 172(1)
statement
23 to 25
Corporate
Governance Report
116
Engagement with suppliers,
customers and others in a
business relationship with
the Company
Corporate
Governance Report
Stakeholder
Engagement
Section 172(1)
Statement
116
19 to 20
23 to 25
Social, community and
human rights issues
Responsible Business 36 to 61
Natural Resources Environment and
Natural Resources
46 to 57
Board activity and culture Corporate
Governance Report
111 to 114
Board diversity Corporate
Governance Report
People Committee
Report
123
130 to 131
Directors’ induction
and training
Corporate
Governance Report
122 to 123
Information required by Listing Rule 9.8.4 (R)
Topic Section of the Report Page
Directors’ Interests
in Shares
Directors’
Remuneration Report
166
Going Concern and
Viability Statements
Strategic Report 96 to 98
Long-term incentive
schemes
Directors’
Remuneration Report
160 to 163
Information required by Listing Rule 9.8.6(8)
Topic Section of the Report Page
Climate-related disclosures Strategic Report 47 to 55
Information has been disclosed under Listing Rule 9.8.6(9)
(although this rule does not yet apply to the Company for
this reporting period) regarding the Company’s compliance
with diversity requirements under that rule, as set out on
page 131.
Information required by Disclosure Guidance
and Transparency Rule 7.2
Topic Section of the Report Page
Corporate Governance
Statement
Corporate Governance
Report
110
Other disclosures
Topic Section of the Report Page
In accordance with Provision
31 of the UK Corporate
Governance Code 2018 –
Long-term Viability
Strategic Report 96 to 98
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 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.
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171
The information that fulfils the strategic report requirements
is set out in the Strategic Report on pages 1 to 99.
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.
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 106 to 109.
During the period Julia M. Brown became an independent
Non-Executive Director on 1 January 2023.
Details of Directors’ beneficial and non-beneficial interests
in the shares of the Company are shown on page 166.
Options granted to Directors under the Save As You Earn
(“SAYE”) and Executive Share Option Schemes are shown
on pages 168 and 169.
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, which 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.
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.
Share capital
The Company’s authorised and issued ordinary share
capital as at 27 November 2022 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 14 February 2023, being the last practicable date
prior to publication of this report, the Company’s issued
share capital consisted of 826,029,395 issued ordinary
shares, compared with 751,599,463 issued ordinary
shares per the 2021 Annual Report. Details of movements
in the Company’s issued share capital can be found in
Note 4.6 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 4.7 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.
Directors’ Report
continued
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.
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 themselves if any call
or sum then payable by themselves 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
27 November 2022, 564,988 (2021: 564,988) were held by
Wealth Nominees Limited and 9,873,087 (2021: 9,889,160)
were held by Numis Nominees (Client) Ltd, both on behalf
of Ocorian Limited (formerly known as 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 9,873,087 of these ordinary shares,
although it may at the request of a participant vote in
respect of 564,988 ordinary shares which have vested
under the JSOS and remain in the trust at period-end. The
total of 10,438,075 ordinary shares held by the EBT Trustee
are treated as treasury shares in the Group’s Consolidated
Balance Sheet in accordance with IAS 2 Financial
Instruments: Presentation. As such, calculations of earnings
per share for Ocado exclude the ordinary shares held by
the EBT Trustee. Note 4.7 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 their 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 page 166 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 at the 2022
Annual General Meeting on 4 May 2022 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.
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Powers for the Company to issue its shares
The Directors were granted authority at the 2022 Annual
General Meeting on 4 May 2022 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 2023 AGM (or, if earlier, until 4 August 2023).
The Directors were also granted authority at the 2022
Annual General Meeting to disapply pre-emption rights.
This resolution 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 in
accordance with the guidance issued by the Pre-Emption
Group. The Company sought similar authorities at the 2021
Annual General Meeting.
The Company will, at the 2023 AGM, seek authority to
allot shares on the basis of the new guidance issued by
the Pre-Emption Group to disapply pre-emption rights over
10% of the Company’s issued ordinary share capital and a
further 2% follow-on offer. A further authority will be sought
to disapply pre-emption rights for an additional 10% for
certain acquisitions or specified capital investments and
a further 2% follow-on offer. 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.
Significant shareholders
During the period, the Company has received notifications, in accordance with DTR 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
Date of notification
of interest
Generations Investment Management LLP (direct/indirect holding) 38,446,6554 5.11% 19 May 2022
The London & Amsterdam Trust Company Limited (direct/indirect holding) 119,799,456 14.53% 23 June 2022
The Capital Group Companies (indirect holding) 84,259,954 10.22% 27 June 2022
Baillie Gifford & Co Ltd (indirect holding) 98,985,951 12.00% 10 August 2022
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 DTR 5.1.2R in the period between 27 November 2022 and
14 February 2023.
American Depositary Receipt programme
The Company has a sponsored level 1 American
Depositary Receipt (“ADR”) programme 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.
Directors’ Report
continued
Convertible bonds due 2025 listed on the
unregulated open market of the Frankfurt
Stock Exchange (Freiverkehr)
The Company issued £600m 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 Ocado Group.
The 2025 Bonds were issued at par and carry a coupon
of 0.875% per annum payable semi-annually in arrears
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 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, 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.
Senior unsecured notes due 2026 listed on the
Irish Stock Exchange
On 8 October 2021, the Company issued £500m of senior
unsecured notes due 2026 (the “Notes”) listed on the Irish
Stock Exchange and trading on the Global Exchange
Market, which is the exchange regulated market of the Irish
Stock Exchange. The ISIN of the Notes under Reg. S is
XS2393761692 and under 144A is XS2393969170. Interest
on the notes is payable semi-annually in arrears. The Notes
will mature on 8 October 2026. In addition to funding the
redemption of the 2024 senior secured notes, the net
proceeds of the 2026 Notes will be used by the Company
to fund capital expenditure in relation to Ocado Solutions’
commitments and general corporate purposes. The 2026
Notes are currently guaranteed by certain members of
Ocado Group.
The Company may redeem the Notes in whole or in part at
any time on or after 8 October 2023, in each case, at the
redemption prices set out as part of the offering. Prior to
8 October 2023, the Company is 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 8 October 2023, the Company is also able to, at its option,
and on one or more occasions, redeem up to 40% of the
original aggregate principal amount of the Notes with the net
proceeds from certain equity offerings at a redemption price
as set out in the offering. 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.
Convertible bonds due 2027 listed on the
unregulated open market of the Frankfurt
Stock Exchange (Freiverkehr)
The Company issued £350m 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 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, 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.
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Capital Raise
On 20 June 2022, Ocado Group plc successfully completed
the placing of 72,327,044 new ordinary shares of 2 pence
each (the “Placing Shares”) at a price of £7.95 per Placing
Share (the “Placing Price”), with existing and new
institutional investors. In addition, retail investors
subscribed for a total of 246,405 new Ordinary Shares at
the Placing Price (the “Retail Offer Shares”) and certain
members of the senior management team subscribed for
an aggregate of 150,944 new ordinary shares at the
Placing Price (the “Subscription Shares”).
In aggregate, the Placing Shares, the Retail Offer Shares
and the Subscription Shares comprised 72,724,393 new
Ordinary Shares, which raised gross proceeds from the
Capital Raise of approximately £578m.
The Placing Price of £7.95 per Placing Share represented
a discount of approximately 9.41% to the closing share
price of £8.776 pence on 20 June 2022. The Placing
Shares, the Retail Offer Shares and the Subscription
Shares represented approximately 9.7% of the existing
issued ordinary share capital of the Company prior to the
Placing, the Retail Offer and the Subscription.
The Placing Shares, the Retail Offer Shares and the
Subscription Shares are credited as fully paid and rank
pari passu in all respects with the existing Ordinary Shares
of Ocado Group. This includes the right to receive all
dividends and other distributions declared or paid in
respect of such ordinary shares.
Revolving credit facility
On 20 June 2022, the Company entered into a £300,000,000
committed, multi-currency revolving credit facility, provided
by a syndicate of leading international banks (the “RCF”).
Interest is payable on loans made pursuant to the RCF at a
rate of SONIA (or EURIBOR or SOFR, for EUR or USD) plus a
margin. The RCF expires in June 2025, with an option to
extend, subject to bank agreement, to up to June 2027. The
RCF is currently guaranteed by certain members of Ocado
Group. As at 27 November 2022, the RCF was undrawn.
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, Alcampo, Auchan Retail
Poland, Bon Preu, Coles, Groupe Casino, ICA, Kroger, Lotte
Shopping, Ocado Retail and Sobeys.
Under those agreements (save for those with Ocado
Retail and Kroger), the retailer is generally 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, including for
access to certain elements of the OSP platform. 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).
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.
Directors’ Report
continued
Senior unsecured notes due 2026: 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 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.
Revolving credit facility: Following a change of control of the
Company, no lender under the RCF is obliged to fund further
utilisations of the facility. Each lender will have the right to
cancel its commitment and declare its participation in all
loans and accrued interest pursuant to the facility
immediately due and repayable.
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 methodology
To calculate our greenhouse gas (“GHG”) 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 (“WBCSD/WRI”). The following
sources of information have been considered: government
GHG conversion factors for company reporting, published
by the Department for Business, Energy & Industrial
Strategy (2021 and 2022); IPCC fourth assessment report:
climate change 2007; IPCC guidelines for national
greenhouse gas inventories: reference manual (2006);
US Environmental Protection Agency emissions and
generation resource integrated database (“eGRID”)
(2021 and 2022); Environment Canada National Inventory
Report, Greenhouse Gas Sources and Sinks in Canada:
1990-2020 (2022); European Commission (2021)
Integrating renewable and waste heat and cold sources
into district heating and cooling systems; United Nations
(2022) UN Statistics Division; Energy Balance
Visualizations and EPA (2022) GHG Emission Factors Hub;
Centre for Corporate Climate Leadership (2022).
Details regarding the Group’s carbon emissions, energy
consumption and energy efficiency are included in the
Strategic Report on pages 46 to 57. We also include more
information on our carbon emission calculations in our
Basis of Reporting document, which can be found on
our corporate website.
Future developments of the business
The Group’s likely future developments including its
strategy are described in the Strategic Report on
pages 26 to 35.
Statement of engagement with employees
Refer to page 116 for the detailed statement. Further
details on engagement with employees by the Board
and the Group and the mechanisms employed to consult
and communicate with employees can be found in the
Stakeholder Engagement section on pages 16 and 17
and Our People and Skills for the Future section on
pages 38 to 45.
Employees with disabilities
Applications for employment by people with disabilities
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 non-disabled person.
Statement of engagement with suppliers,
customers and others
Refer to page 116 for the detailed statement. Further
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 Stakeholder Engagement
section on pages 16 to 22, the Section 172(1) statement
on pages 23 to 25 and the Key Board activities on
pages 111 and 112.
Profit/loss and dividends
The Group’s results for the period are set out in the
Consolidated Income Statement on page 192. The
Group’s loss before tax for the period amounted to
£500.8m (2021: £176.9m). The Directors do not propose
to pay a dividend for the period (2021: £nil).
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Branches
There are no branches of the Company.
Post balance sheet events
See Note 5.5 on page 261 for details of post-balance
sheet events.
Political donations
No donations were made by the Group to any political party,
organisation or candidate during the period (2021: nil).
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 106 to 109)
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 (“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
IFRSs 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 106 to 109 confirms, to the best
of their 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 171) 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’ Report is approved by the Board and
signed on its behalf by:
Neill Abrams
Group General Counsel and Company Secretary
28 February 2023
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
Directors’ Report
continued
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FINANCIAL STATEMENTS
Group
Independent Auditor’s Report 180
Consolidated Income Statement 192
Consolidated Statement of
Comprehensive Income 193
Consolidated Balance Sheet 194
Consolidated Statement
of Changes in Equity 196
Consolidated Statement
of Cash Flows 197
Notes to the Consolidated
Financial Statements 198
Company
Company Balance Sheet 262
Company Statement of
Changes in Equity 263
Company Statement of Cash Flows 264
Notes to the Company
Financial Statements 265
Additional information
Glossary 275
Alternative Performance Measures 279
Five-Year Summary 282
Shareholder Information 283
Financial
Statements.
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3. Summary of our audit approach
Key audit matters The key audit matters that we identified in the current year were:
– Capitalisation of staff costs
– Valuation of contingent consideration receivable from Marks and Spencer
Group plc (“M&S”)
– Commercial income: promotional allowances and volume-related rebates
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality The materiality that we used for the group financial statements was £25.0m, which was
determined on the basis of an asset metric, which equates to 0.5% of total assets excluding
goodwill as the primary benchmark.
Scoping The scope of the group audit includes the significant trading companies in the UK, and the
performance of specified audit procedures on certain balances in the Solutions entities
including capitalised staff costs, revenue and contract liabilities. When taken together the
results of these entities account for over 99% of the group’s revenue and 98% of the group’s
property, plant and equipment, right-of-use assets and intangible assets excluding goodwill.
We have performed analytical procedures on the remaining entities.
Significant changes
in our approach
In the current period we have identified two new key audit matters: the capitalisation of
staff costs, and the valuation of contingent consideration receivable from M&S. Refer
to pages 183 and 184 respectively for further detail.
Accounting for Solutions contracts revenue has not been identified as a key audit matter in
the current period, having previously been considered a key audit matter, because we are
satisfied there is limited scope for management manipulation or error relating to the timing
of the go-live of Customer Fulfilment Centres. Impairment of capitalised project costs has
also not been identified as a key audit matter this year because the judgement relating to
the impairment process is not significant in the current period.
We have revised our assessment of the primary benchmark used to determine materiality.
In the current period we have used an asset metric, rather than revenue, as a more
appropriate primary benchmark because we consider that such a basis provides a good
reflection of the expansion of the Solutions business, which in turn is a key driver of future
revenue growth.
Report on the audit of the financial statements
1. Opinion
In our opinion:
– the financial statements of Ocado Group plc (the ‘parent company’) and its subsidiaries (the ‘group’) give a true and
fair view of the state of the group’s and of the parent company’s affairs as at 27 November 2022 and of the group’s
loss for the 52-week period then ended;
– the group financial statements have been properly prepared in accordance with United Kingdom adopted
international accounting standards;
– the parent company financial statements have been properly prepared in accordance with United Kingdom
adopted international accounting standards and as applied in accordance with the provisions of the Companies
Act 2006; and
– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
– the consolidated income statement;
– the consolidated statement of comprehensive income;
– the consolidated and parent company balance sheets;
– the consolidated and parent company statements of changes in equity;
– the consolidated and parent company cash flow statements; and
– the related notes 1.1 to 5.5 of the consolidated financial statements and 1.1 to 5.2 of the parent company
financial statements.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom
adopted international accounting standards and, as regards the parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
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 parent company in accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘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 and parent company for the year
are disclosed in note 2.4 to the financial statements. We confirm that we have not provided any non-audit services
prohibited by the FRC’s Ethical Standard to the group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
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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 of the current 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 thereon, and we do not provide a separate opinion on these matters.
5.1. Capitalisation of staff costs
Key audit matter
description
The group continues to invest in the development of the Ocado Smart Platform and
associated software, as well as in establishing Customer Fulfilment Centres (“CFCs”) for
Solutions customers. In doing so significant internal labour costs are incurred, which are
capitalised as internally-generated intangible assets or capitalised as a component of
property, plant and equipment as directly attributable costs. As described in note 3.3 and
3.4 to the financial statements £117.5m (2021: £95.6m) and £63.9m (2021: £35.0m) of
internal labour costs were capitalised in the period as intangible assets and property, plant
and equipment respectively.
Determining whether the cost of internal labour meets capitalisation criteria requires
significant judgement based on the requirements of IAS 38 Intangible Assets and IAS 16
Property, Plant and Equipment. The amount being capitalised has increased since the prior
period largely due to the development of new technologies and the increase in the number
of CFCs being constructed for customers.
In addition, as EBITDA is an alternative performance measure of interest to the users of
the financial statements, there is a potential incentive for management to exhibit bias in
considering whether to capitalise staff time given that the amortisation and depreciation of
such costs are excluded from this key metric, and items which are not capital in nature must
be expensed as costs are incurred. We therefore consider the inappropriate capitalisation
of labour costs to be a potential fraud risk as well as a key audit matter. Further information
related to this area is set out in the Audit Committee report on page 137, and in notes 3.3
and 3.4 to the group financial statements.
How the scope of our
audit responded to the
key audit matter
To address the risk that capitalised staff costs are overstated due to inappropriate
capitalisation, our audit procedures included:
– obtaining a detailed understanding of relevant controls, such as those which are designed
to ensure that only staff costs that meet capitalisation criteria under IAS 38 or IAS 16 are
approved as capital in nature;
– selecting a sample of internal projects with capitalised staff time and challenging whether
these projects meet the requirements of IAS 38 or IAS 16, including obtaining a detailed
understanding of the nature of the sampled projects, their purpose and benefits;
– for each selected project, tracing a sample of employees from timesheet records to
payroll reports to assess whether the labour cost capitalised appropriately correlates
to the costs incurred by the business; and
– enquiring with a sample of individuals who have charged time to the projects to
understand the nature of their tasks and activities within the selected projects and
evaluating whether these meet capitalisation criteria under IAS 38 or IAS 16.
Key observations We are satisfied that the capitalisation of staff costs during the period is appropriate.
Independent Auditor’s Report
continued
INDEPENDENT AUDITOR’S REPORT
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going
concern basis of accounting included:
– understanding the detailed steps of the forecasting process through enquiries with management and inspection of
the underlying models, including obtaining a detailed understanding of key controls over the budget and forecast;
– assessing the arithmetic accuracy of the models used to prepare the group’s base case forecast and
related scenarios;
– challenging the reasonableness of the detailed assumptions underpinning the group’s forecasts including considering
the current economic environment;
– comparing and assessing the historical accuracy of forecasts against previous performance;
– assessing management’s considerations of reasonably possible scenarios and their impact on the group’s forecasts
and performing additional sensitivity scenario analysis;
– assessing the level of resources available to the group as a result of the equity raise and revolving credit facility
entered into during the year;
– considering the timing of repayments for existing bonds;
– considering the impact of potential mitigating actions available, such as reducing capital expenditure; and
– assessing the sufficiency of the group’s disclosure concerning going concern and potential uncertainties arising.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the group’s and parent company’s ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the group has applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
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5.3. Commercial income: promotional allowances and volume-related rebates
Key audit matter
description
As described in note 2.4 of the financial statements, the UK retail business has agreements
whereby promotional allowances and volume-related rebates are received from suppliers in
connection with the purchase of goods for resale, which are recorded as deductions to cost
of sales.
Identifying the performance conditions and determining the appropriate accounting for
such agreements is a complex exercise due to the variety of terms and volume of
transactions. Judgement is therefore required in determining when income should be
recognised, which gives rise to the potential for manipulation and bias. This could also
affect the accrued income positions in the last quarter of the period. As such we have
identified this as a key audit matter and a potential fraud risk.
How the scope of our
audit responded to the
key audit matter
To address the risk that promotional allowances and volume-related rebates have not been
appropriately and accurately recorded, our procedures included:
– obtaining a detailed understanding of relevant controls in the commercial income process;
– independently requesting a sample of supplier confirmations to validate the amounts
recorded throughout the period and on the balance sheet at period end. Where
responses were not received, we performed alternative procedures including inspecting
management’s correspondence with the supplier, recalculating the amount of commercial
income from the arrangement, and assessing the volume and value of credit notes raised
post-period end;
– testing a sample of amounts transferred from accounts receivables to accounts payable
during the netting process to assess whether the group have obtained the rights to
settlement;
– assessing the recoverability of a sample of unsettled balances included on the balance
sheet for valuation and allocation; and
– conducting enquiries with senior personnel outside the finance function, for example legal
counsel, on matters relating to compliance with the Groceries Supply Code of Practice
(“GSCOP”) and controls in the commercial income process, in order to identify any areas
where further investigation may be required.
Key observations We are satisfied that the promotional allowances and volume-related rebates have been
accounted for appropriately.
Independent Auditor’s Report
continued
INDEPENDENT AUDITOR’S REPORT
5.2. Valuation of contingent consideration receivable from M&S
Key audit matter
description
As described in note 3.7 to the financial statements, the sale of 50% of Ocado Retail Limited
(“ORL”) to M&S in August 2019 included deferred consideration of £156.3m plus interest that
is contingent on ORL achieving certain performance targets in the financial year to
November 2023 (FY23). This is based on the contractual terms and the outcome is binary:
if the measure is not met or exceeded, no amount is payable by M&S to the group. In
accordance with IFRS 9 Financial Instruments, the financial asset is measured at fair value.
This reflects the value a third party would pay to receive the benefit of the contract. The
contractual terms with M&S also allow for adjustments to the conditions based on actions
taken by ORL subsequent to the agreement of the performance conditions in 2019.
The group has valued the receivable at £95.0m (2021: £152.6m).
In valuing the receivable, the group has considered the requirements of IFRS 13 Fair Value
Measurement and has developed a scenario-based model that results in an expected value
of the asset, which has then been discounted to allow for the expected period of time until
the cash may be received from M&S. The scenarios contemplated a number of different
outcomes of both business performance and adjustments made to the performance target.
The recent economic environment has resulted in increased levels of complexity and
judgement in determining the fair value, compared with prior periods, and we consider there
to be a risk of fraud given the potential incentive for management to overstate their
expected outcome, which may seek to influence any future negotiations with M&S regarding
the settlement of this contingent consideration.
Further information related to this area is set out in the Audit Committee report on page 137,
and in notes 1.4 and 3.7 to the group financial statements.
How the scope of our
audit responded to the
key audit matter
To address the risk that the contingent consideration receivable is inappropriately valued,
our procedures included:
– obtaining a detailed understanding of the relevant controls over management’s
estimation methodology;
– inspecting the terms of the share purchase agreement and shareholders’ agreement
to identify clauses that would be relevant to determining a fair value for the contingent
consideration receivable;
– holding partner-led enquiries with senior management and the group’s external legal
advisors to enhance our understanding and interpretation of the contracts, and to search
for evidence that may be contradictory to the judgements adopted by management;
– involving valuations specialists, and considering appropriate valuation techniques in order
to challenge the methodology adopted by management;
– with the support of valuation specialists, developing an independent auditor range
through the design and development of an option pricing model and comparing this with
the group’s valuation. In doing so, we have considered the possible scenarios modelled by
management, and exercised professional scepticism, given the degree of subjectivity in
the determination of the post-adjustment performance measure; and
– assessing the group’s disclosures, in particular with reference to the requirements relating
to estimation uncertainty in IAS 1 and the fair value disclosures required under IFRS 13.
Key observations We are satisfied that the group’s valuation of contingent consideration receivable
is materially appropriate. We consider that the disclosures made around the level
of uncertainty appropriately reflect reasonably possible future changes to the
estimated valuation.
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Independent Auditor’s Report
continued
INDEPENDENT AUDITOR’S REPORT
7. An overview of the scope of our audit
7.1. Identification and scoping of components
The scope of our group audit was largely consistent with the prior period, covering all significant trading companies
in the UK, including ORL, which is controlled and consolidated by the group. Furthermore, we performed specified
audit procedures on certain balances in the Solutions entities including capitalised staff costs, revenue and contract
liabilities. The results of these entities account for over 99% of the group’s revenue and 98% of the group’s property,
plant and equipment, right-of-use assets and intangible assets excluding goodwill.
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 audit work relevant to the group audit was conducted by the group and ORL audit teams based in London. The group
audit partner attended key meetings with the ORL audit team and ORL management.
7.2. Our consideration of the control environment
We have tested and relied on the relevant manual and automated controls in the inventory process of ORL. Members
of the ORL audit team visited three CFCs and one General Merchandise Distribution Centre (GMDC) to test controls
relevant to grocery inventory existence, and we involved IT specialists to evaluate controls over the key warehouse IT
systems. There have been improvements to IT controls during the period, to address deficiencies identified in 2021,
which enabled us to obtain reliance over specific automated controls which address the existence of grocery inventory.
We also involved IT specialists to test the general IT controls over key financial reporting systems such as Oracle R12,
Oracle Fusion and Webshop.
We have tested the key manual controls over UK retail revenue recognition, but have not tested automated controls
in this process as a result of known general IT control deficiencies. We did not plan to take a controls reliant approach
on any balance or business cycle other than grocery inventory existence this year given the programme of on-going
system and control remediation in respect of certain financial reporting programmes and processes. Further details
on the Evolve programme are included in the Audit Committee report on page 132.
7.3. Our consideration of climate-related risks
In planning our audit we considered management’s assessment of climate change on the operations of the group and
the potential impact on the group’s financial statements. The risk consideration process management have undertaken
is set out in the Environment and Natural Resources section of the strategic report (see pages 46 to 57). In conjunction
with our climate risk specialists we have held discussions with management to understand and evaluate their process
for determining the impact of these risks on the group and its financial statements, management’s consideration is
included within note 1.4. We assessed the completeness of the risks identified.
We have involved climate change specialists in reading the disclosures made in relation to climate change in the
other information within the Annual Report, and considered whether they are materially consistent with the financial
statements and our knowledge from our audit. Our responsibility over other information is further described in the
“Other information” section of our report. We have not been engaged to provide assurance over the accuracy
of these disclosures.
8. Other information
The other information comprises the information included in the annual report, other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
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 thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of 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
this gives rise to a material misstatement in the financial statements themselves. 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.
We have nothing to report in this regard.
6. Our application of materiality
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:
Group financial statements Parent company financial statements
Materiality
£25.0 million (2021: £20.0 million) £22.5 million (2021: £18.0 million)
Basis for
determining
materiality
We determined materiality based on an asset
metric, which equates to 0.5% of total assets
excluding goodwill as the primary benchmark.
We also considered revenue as a supporting
benchmark. For the 2021 year end, materiality
was determined based on 0.8% of revenue and
materiality represented 0.5% of total assets
excluding goodwill.
Parent company materiality is determined on
the basis of net assets, which is capped at 90%
(2021: 90%) of group materiality.
Rationale for the
benchmark
applied
We determined materiality principally based
on an asset metric as we consider this the most
relevant proxy for the expansion and roll-out
of the Solutions business. However, we also
considered revenue as a supporting benchmark
as this measure reflects current group
performance – in particular, the performance
of the ORL business. The overall increase in
materiality compared to the prior year is as a
result of this change, in particular the increase
in capital expenditure in the Solutions business.
The parent 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.
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 financial statements Parent company financial statements
Performance
materiality
65% (2021: 65%) of group materiality 65% (2021: 65%) of parent company materiality
Basis and
rationale for
determining
performance
materiality
In the current period we determined that maintaining performance materiality at 65% of group
materiality was appropriate by considering:
– management’s continued willingness to investigate and correct misstatements identified in the
audit; and
– the ongoing finance transformation programmes implemented by management to enhance the
quality, consistency and rigour of the control environment.
See further detail in the Report of the Chair of the Audit Committee on page 132.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of
£1.25 million (2021: £1.0 million), 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.
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Independent Auditor’s Report
continued
INDEPENDENT AUDITOR’S REPORT
We also obtained an understanding of the legal and regulatory framework that the group operates in, focusing 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.
In addition, we considered provisions of other laws and regulations that 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. The key laws and regulations we considered in this context are the Groceries Supply Code of Practice.
11.2. Audit response to risks identified
As a result of performing the above, we identified the following key audit matters related to the potential risk of fraud: 1)
capitalisation of staff costs, 2) valuation of contingent consideration receivable from M&S, and 3) commercial income:
promotional allowances and volume-related rebates. The key audit matters section of our report explains the matters in
more detail and also describes the specific procedures we performed in response to those key audit matters.
In addition to the above, our procedures to respond to 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 and in-house and external legal counsel 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;
– challenging management’s assessment that no contingent liability or asset should be recognised, including in relation
to claims filed by AutoStore, (our work included holding detailed discussions with group General Counsel and external
legal counsel, and performing procedures to consider whether there was any contradictory evidence); and
– in 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.
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 parent 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 parent 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.
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.
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
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;
– the group’s own assessment of the risks that irregularities may occur either as a result of fraud or error;
– 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 of the ORL
businesses, and the Audit Committee at group and at ORL about their own identification and assessment of the risks
of irregularities;
– the changes to the control environment resulting from the group’s continued transformation agenda;
– the ongoing series of claims filed by AutoStore Technology AS and the counter-claims filed by the group referred to in
the Finance Review on pages 70 to 85 and in note 3.14 to the financial statements;
– any matters we identified having obtained and reviewed the group’s documentation of their policies and procedures
relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of
non-compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or
alleged fraud;
– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; and
– the matters discussed among the group and ORL audit engagement teams involving relevant internal specialists,
including IT, tax, impairment and fraud 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: inappropriate capitalisation of staff costs,
commercial income: promotional allowances and volume-related rebates and valuation of the contingent consideration
receivable from M&S. In common with all audits under ISAs (UK), we are also required to perform specific procedures to
respond to the risk of management override.
Contents
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FINANCIAL STATEMENTS
190
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
191
Independent Auditor’s Report
continued
INDEPENDENT AUDITOR’S REPORT
14. Matters on which we are required to report by exception
14.1. 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
– 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 parent company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. 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.
15. Other matters which we are required to address
15.1. 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 52-week period ending 3 December 2017 and subsequent financial periods. The
period of total uninterrupted engagement including previous renewals and reappointments of the firm is 6 years,
covering the 52-week period ending 3 December 2017 to 27 November 2022.
15.2. 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).
16. 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 the company’s members as a
body for our audit work, for this report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R, these
financial statements form part of the European Single Electronic Format (ESEF) prepared Annual Financial Report filed
on the National Storage Mechanism of the UK FCA in accordance with the ESEF Regulatory Technical Standard (‘ESEF
RTS’). This auditor’s report provides no assurance over whether the annual financial report has been prepared using the
single electronic format specified in the ESEF RTS.
David Griffin FCA (Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
28 February 2023
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.
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 financial year 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. Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that
part of the Corporate Governance Statement relating to the group’s compliance with the provisions of the UK Corporate
Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent with the financial statements and our knowledge obtained
during the audit:
– the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting
and any material uncertainties identified set out on 98;
– the directors’ explanation as to its assessment of the group’s prospects, the period this assessment covers and
why the period is appropriate set out on page 98;
– the directors’ statement on fair, balanced and understandable set out on page 178;
– the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out
on pages 86 to 95;
– the section of the annual report that describes the review of effectiveness of risk management and internal control
systems set out on page 140; and
– the section describing the work of the audit committee set out on pages 132 to 143.
Contents
Contents
FINANCIAL STATEMENTS
192
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
193
FINANCIAL STATEMENTS
Consolidated Income Statement
for the 52 weeks ended 27 November 2022
52 weeks ended
27 November 2022
52 weeks ended
28 November 2021
Notes
Results
before
exceptional
items
A
£m
Exceptional
items
A
(note 2.6)
£m
Total
£m
Results before
exceptional
items
A
£m
Exceptional
items
A
(note 2.6)
£m
Total
£m
Revenue 2.1 2,513. 8 – 2,513. 8 2,498.8 (0. 5 ) 2,498.3
Cost of sales (1 ,549. 5 ) – (1 ,549 .5 ) (1 ,562.9 ) (2. 6 ) (1 ,565 .5 )
Gross profit 964. 3 – 964.3 935.9 (3. 1 ) 932.8
Other income 2.3 100 .7 7 3.8 1 74 . 5 104. 1 82.3 186.4
Distribution costs (830 .2 ) (1 .6 ) (831. 8 ) (666. 7 ) (7 .2 ) (673.9 )
Administrative expenses (656. 1 ) (102. 1 ) (758.2 ) (548.4 ) (29.2 ) (577 .6 )
Operating (loss)/profit before results
of joint ventures and associate (421 . 3 ) (29 .9 ) (451 .2 ) (175 . 1 ) 42.8 (132.3 )
Share of results of joint
ventures and associate 3.6 (1 .4 ) – (1. 4 ) (2.3 ) – (2.3 )
Operating loss (422.7 ) (29. 9 ) (452.6 ) (177 .4 ) 42.8 (134. 6 )
Finance income 2.7 4 1.8 – 41.8 10.0 – 1 0.0
Finance costs 2.7 (90 . 0 ) – (90.0 ) (52. 3 ) – (52.3 )
(Loss)/profit before tax (470 .9 ) (29. 9 ) (500. 8 ) (219.7 ) 42.8 (176 .9 )
Income tax credit/(charge) 2.8 1 8.7 0.8 1 9.5 (8. 3 ) (0. 5 ) (8.8 )
(Loss)/profit for the period (452.2 ) (29. 1 ) (481. 3 ) (228. 0 ) 42.3 (185. 7 )
Attributable to:
Owners of Ocado Group plc (455.5 ) (223.2 )
Non-controlling interests 5.2 (25 . 8 ) 3 7. 5
(481 .3 ) (185.7 )
Loss per share pence pence
Basic and diluted loss per share 2.9 (58 .93 30. 18
Earnings before interest, taxation, depreciation, amortisation, impairment and exceptional items (EBITDA)
A
Notes
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Operating loss (452.6 ) (134. 6 )
Adjustments for:
Exceptional items
A
2.6 29. 9 (42.8 )
Amortisation of intangible assets 3.3 114.7 78.0
Impairment of intangible assets 3.3 3 .6 1 .1
Depreciation of property, plant and equipment 3.4 154.4 84.4
Impairment of property, plant and equipment 3.4 9. 3 9.3
Depreciation of right-of-use assets 3.5 66.0 65.6
Impairment of right-of-use assets 3.5 0.6 –
EBITDA
A
(74. 1 ) 6 1. 0
A
See Alternative Performance Measures on pages 279 and 281
Consolidated Statement
of Comprehensive Income
for the 52 weeks ended 27 November 2022
Notes
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Loss for the period (481 .3 ) (185.7 )
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent periods:
(Loss)/gain arising on cash flow hedges 4.3 (1 . 1 ) 0.4
Foreign exchange gain/(loss) on translation of foreign subsidiaries and joint venture 4.6 6 9 .1 (10 .5 )
Share of change in net assets of associate through other comprehensive income 3.6 0.4 –
Foreign exchange gain on translation of foreign joint venture reclassified to profit or loss 4.6 – 0.8
Net other comprehensive income/(expense) that may be reclassified to profit or loss in
subsequent periods 68.4 (9 .3 )
Items that will not be reclassified to profit or loss in subsequent periods:
Gain/(loss) on equity investments designated as at fair value through other comprehensive
income 4.4 33.3 (3.9 )
Income tax relating to items that will not be reclassified subsequently to profit or loss 2.8 (7 .2 ) –
Net other comprehensive income/(expense) that will not be reclassified to profit and loss in
subsequent periods 2 6 .1 (3.9 )
Other comprehensive income/(expense) for the period, net of income tax 94.5 (13.2 )
Total comprehensive expense for the period (386. 8 ) (198 .9 )
Attributable to:
Owners of Ocado Group plc (361 .0 ) (236.4 )
Non-controlling interests 5.2 (25. 8 ) 3 7. 5
(386. 8 ) (198 .9 )
Contents
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FINANCIAL STATEMENTS
194
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
195
FINANCIAL STATEMENTS
Consolidated Balance Sheet
as at 27 November 2022
Notes
27 November
2022
£m
28 November
2021
£m
Non-current assets
Goodwill 3.2 164.7 144.8
Other intangible assets 3.3 377 .2 345.2
Property, plant and equipment 3.4 1 ,777 .8 1,257 .8
Right-of-use assets 3.5 493.9 494. 6
Investment in joint venture and associate 3.6 1 5.6 2 6.5
Other financial assets 3.7 181 .6 211 .4
Trade and other receivables 3.10 – 0.5
Costs to obtain contracts – 0.7
Deferred tax assets 2.8 1. 9 7. 2
Derivative financial assets 4.3 27 .4 9.6
Current assets
Other financial assets 3.7 3 .8 1. 2
Inventories 3.9 106 . 8 8 6.7
Trade and other receivables 3.10 329. 3 323.9
Cash and cash equivalents 3.11 1, 328. 0 1 ,468. 6
Contract assets 2.1 – 0.3
Costs to obtain contracts – 0 .1
Derivative financial assets 4.3 0.8 0.3
Asset held for sale 3.8 4. 4 4. 2
Total assets 4, 813.2 4, 383. 6
Current liabilities
Contract liabilities 2.1 (29. 1 ) (21 . 8 )
Trade and other payables 3.12 (506 .3 ) (393.2 )
Borrowings 4.1 (10.2 ) –
Provisions 3.13 (1. 0 ) (1. 0 )
Lease liabilities 3.5 (58.6 ) (51 .0 )
Derivative financial liabilities 4.3 (1 .6 ) –
(606. 8 ) (467 .0 )
Notes
27 November
2022
£m
28 November
2021
£m
Net current assets 1 , 166. 3 1,418 . 3
Non-current liabilities
Contract liabilities 2.1 (393.8 ) (356.7 )
Provisions 3.13 (25.4 ) (48.7 )
Borrowings 4.1 (1, 362. 6 ) (1, 300 .0 )
Lease liabilities 3.5 (473. 7 ) (477.4 )
Trade and other payables 3.12 (1 .9 ) –
Deferred tax liabilities 2.8 (14.7 ) (24 .4 )
(2,272. 1 ) (2,207 .2 )
Net assets 1 ,934.3 1 ,7 09.4
Equity
Share capital 4.6 1 6.5 15.0
Share premium 4.6 1,939 . 3 1 ,372. 0
Treasury shares reserve 4.6 (112.9 ) (113. 0 )
Other reserves 4.6 164.0 69. 9
Retained earnings (169. 0 ) 2 44. 3
Equity attributable to owners of Ocado Group plc 1,837 .9 1 ,588.2
Non-controlling interests 5.2 96 .4 121 .2
Total equity 1,934.3 1,7 09.4
The consolidated financial statements on pages 192 to 261 were authorised for issue by the Board of Directors
and signed on its behalf by:
Tim Steiner Stephen Daintith
Chief Executive Officer Chief Financial Officer
28 February 2023
Consolidated Balance Sheet continued
as at 27 November 2022
Contents
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FINANCIAL STATEMENTS
196
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
197
FINANCIAL STATEMENTS
Consolidated Statement of Changes in Equity
for the 52 weeks ended 27 November 2022
Equity attributable to owners of Ocado Group plc
Notes
Share
capital
£m
Share
premium
£m
Treasury
shares
reserve
£m
Other
reserves
£m
Retained
earnings
£m
Total
£m
Non-
controlling
interests
£m
Total
equity
£m
Balance at 29 November 2020 1 5.0 1, 3 61. 6 (113.2 ) 76. 9 421.4 1,7 6 1.7 71.4 1,833.1
(Loss)/profit for the period – – – – (223.2 ) (223.2 ) 3 7. 5 (185. 7 )
Other comprehensive expense – – – (13.2 ) – (13.2 ) – (13.2 )
Total comprehensive (expense)/income for the
period – – – (13.2 ) (223.2 ) (236 .4 ) 3 7. 5 (198.9 )
Transactions with owners
– Issue of ordinary shares 4.6 – 1. 9 – – – 1.9 – 1. 9
– Allotted in respect of share option schemes 4.6 – 8.5 – – – 8.5 – 8.5
– Disposal of treasury shares on exercise
by participants 4.6 – – 0 .1 – 0 .1 0. 2 – 0.2
– Disposal of unallocated treasury shares 4.6 – – 0 .1 – (0. 1 ) – – –
– Share-based payments charge 4.7 – – – – 3 6.0 36. 0 – 3 6.0
– Tax on share-based payments charge 2.8 – – – – 0.5 0.5 – 0.5
– Acquisition of Haddington Dynamics Inc. 3.1 – – – 6. 2 – 6. 2 – 6. 2
– IFRS 3 portion of the rollover shares issued for
the purchase of Kindred Systems Inc. 3.1 – – – – 1.9 1.9 – 1. 9
– Additional investment in Jones Food Company
Limited 5.2 – – – – 7. 7 7. 7 12.3 2 0.0
Total transactions with owners – 10.4 0.2 6. 2 4 6 .1 62.9 12.3 75. 2
Balance at 28 November 2021 1 5.0 1, 372. 0 (113. 0 ) 69. 9 24 4.3 1, 588.2 121.2 1,7 09.4
Loss for the period – – – – (455. 5 ) (455.5 ) (25.8 ) (481 .3 )
Other comprehensive income – – – 9 4 .1 0.4 94. 5 – 9 4.5
Total comprehensive income/(expense) for the
period – – – 9 4 .1 (455. 1 ) (361. 0 ) (25. 8 ) (386. 8 )
Transactions with owners
– Issue of ordinary shares 4.6 1.5 565.0 – – – 566.5 – 566.5
– Allotted in respect of share option schemes 4.6 – 2.3 – – – 2 .3 – 2 .3
– Disposal of unallocated treasury shares 4.6 – – 0 .1 – (0. 1 ) – – –
– Share-based payments charge 4.7 – – – – 42.0 42.0 – 42.0
– Tax on share-based payments charge 2.8 – – – – 0.9 0. 9 – 0. 9
– Reduction in investment in Jones Food Company
Limited 5.2 – – – – (1 .0 ) (1 .0 ) 1. 0 –
Total transactions with owners 1. 5 567 .3 0 .1 – 4 1.8 610. 7 1.0 611. 7
Balance at 27 November 2022 16. 5 1 ,939 . 3 (112.9 ) 164.0 (169. 0 ) 1,837 .9 96.4 1,934.3
Consolidated Statement of Cash Flows
for the 52 weeks ended 27 November 2022
Notes
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Cash (used in)/generated from operations 4.9 (4. 0 ) 15.0
Insurance proceeds relating to business interruption and stock losses 54.3 30.0
Corporation tax received/(paid) 13.4 (26.2 )
Interest paid (55. 8 ) (34 .8 )
Net cash flow from/(used in) operating activities 7. 9 (16 .0 )
Cash flows from investing activities
Insurance proceeds regarding Erith claim 2.5 2 .0
Insurance proceeds relating to rebuilding Andover CFC 54.5 –
Net cash outflow from disposal of Speciality Stores Limited (“Fetch”), net of cash sold 2.6 – (0.4 )
Acquisition of subsidiaries, net of cash acquired 3.1 (5.5 ) (189 .7 )
Purchase of intangible assets (137 . 1 ) (131 .8 )
Purchase of property, plant and equipment (648. 8 ) (558.9 )
Dividend received from joint venture 3.6 8.0 7. 7
Proceeds from disposal of other treasury deposits – 37 0.0
Purchase of unlisted equity investments – (11.4 )
Loans paid to joint ventures, associates and investee companies (0.6 ) (12.5 )
Interest received 9.6 1.0
Net cash flow used in investing activities (717 .4 ) (524. 0 )
Cash flows from financing activities
Proceeds from issue of ordinary share capital 566. 5 1.9
Proceeds from allotment of share options 0.8 8. 5
Proceeds from disposal of treasury shares on exercise by participants – 0. 2
Proceeds from interest-bearing loans and borrowings 4.2 4 0.6 500. 0
Transaction costs on issue of borrowings 4.1 (3.4 ) (8.4 )
Repayment of borrowings 4.2 – (225 .0 )
Repayment of principal element of lease liabilities (57 .4 ) (48.6 )
Net cash as a result of additional investment in Jones Food Company Limited by NCI 5.2 – 20.0
Cash received in respect of contingent consideration receivable – 33.9
Net cash flow from financing activities 547 . 1 282.5
Net decrease in cash and cash equivalents (162.4 ) (257 .5 )
Cash and cash equivalents at beginning of period 1 ,468. 6 1, 70 6 .8
Effect of changes in foreign exchange rates 2 1.8 1 9.3
Cash and cash equivalents at end of period 3.11 1, 328. 0 1,468 . 6
Contents
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FINANCIAL STATEMENTS
198
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
199
FINANCIAL STATEMENTS
Notes to the consolidated financial statements
for the 52 weeks ended 27 November 2022
Section 1 – Basis of preparation
1.1 General information
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,
subsidiaries (hereafter the ‘Group’) (see Note 5.1 for a full list of the subsidiaries). The financial period represents the
52 weeks ended 27 November 2022. The prior financial period represents the 52 weeks ended 28 November 2021.
The principal activities of the Group are described in the Strategic Report on pages 1 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 UK-adopted International Financial
Reporting Standards (‘IFRS’), including the interpretations issued by IFRS Interpretation Committee (‘IFRIC’). The
accounting policies applied are consistent with those described in the Annual Report and Accounts for the 52 weeks
ended 27 November 2022 of the Group, unless otherwise stated.
The financial statements are presented in pounds sterling, rounded to the nearest hundred thousand unless otherwise
stated, and 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
The Group has considered the following new standards, interpretations and amendments to published standards
that are effective for the Group for the period beginning 29 November 2021, 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:
Effective date
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 4 and IFRS 16) 1 January 2021
IFRS 4 Extension of the Temporary Exemption from Applying IFRS 9 1 January 2021
IFRS 16 Covid-19-Related Rent Concessions beyond 30 June 2021 1 April 2021
New standards, amendments and interpretations not yet adopted by the Group
The following new standards, interpretations and amendments to published standards and interpretations that are
relevant to the Group have been issued but are not effective for the period beginning 29 November 2021, and have not
been adopted early:
Effective date
IAS 16 Property, Plant and Equipment – proceeds of intended use 1 January 2022
IAS 37 Onerous Contracts – costs of fulfilling a contract 1 January 2022
IFRS 3 Reference to the Conceptual Framework 1 January 2022
Annual Improvements to IFRS, 2018-2020
Cycle Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 1 January 2022
IFRS 17 Insurance Contracts 1 January 2023
IAS 1 Classification of Liabilities as Current or Non-Current 1 January 2023
IAS 1 Disclosure of Accounting Policies (amendments) 1 January 2023
IAS 8 Disclosure of Accounting Estimates (amendments) 1 January 2023
IAS 12
Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (amendments) 1 January 2023
IFRS 10 Consolidated Financial Statements (amendments) Deferred
IAS 28 Investments in Associates and Joint Ventures (amendments) 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 accounts 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 accounts 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.
All subsidiaries have a reporting date of 27 November 2022 except for the following:
Reporting date
JFC Hydroponics Ltd 30 April
Jones Food Company Limited 30 April
Haddington Dynamics II LLC 31 December
Kindred Inc. 31 December
Kindred Systems II Inc. 31 December
Myrmex Inc. 31 December
Ocado Bulgaria EOOD 31 December
Ocado Solutions (US) ProCo LLC 31 December
Ocado Spain S.L.U. 31 December
Ocado US Holdings Inc. 31 December
All these companies have prepared additional financial information for the 52 weeks ended 27 November 2022 to
enable consolidation.
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.
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.
Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into functional currency at the rates of
exchange quoted at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a
foreign currency are translated using the exchange rates as at the dates of the initial transactions.
Transactions in foreign currencies are recorded in the functional currency at an average rate for the period in which
those transactions take place, which is used as a reasonable approximation to the exchange rates prevailing at the
dates of the transactions. Translation differences on monetary items are taken to the Consolidated Income Statement.
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Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
1.3 Basis of consolidation continued
A number of subsidiaries within the Group have a non-sterling functional currency. The financial performance and end
position of these entities are translated into sterling in the consolidated financial statements. Balance sheet items are
translated at the closing rate at the date of the balance sheet. Income and expenses are translated using an average
rate for the month in which they occur.
Exchange differences arising on the translation of the net investment in overseas subsidiaries are recorded through
other comprehensive income. On disposal of the net investment, the cumulative exchange difference is reclassified
from equity to operating profit. All other currency gains and losses are dealt with in the income statement.
1.4 Critical accounting judgement and key sources of estimation uncertainty
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. Judgements and estimates are evaluated
regularly, and represent management’s best estimates based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. However, events or actions
may mean that actual results ultimately differ from those estimates, and the differences may be material.
Critical accounting judgements
Critical accounting 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.
Area Judgement Notes
Consolidation of Ocado Retail
Limited (“Ocado Retail”)
Management reviews if the Group continues to have control over Ocado Retail in
accordance with IFRS 10. Management has concluded that the Group controls 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.
5.1
Revenue from contracts with
customers
Due to the size and complexity of some of Ocado Solutions’ contracts, there are
significant judgements that must be made. The identification of performance obligations
in a contract is a significant judgement, since it determines when revenue is recognised.
Management has judged that each fulfilment channel is independent of each other and
the provision of the use of the Ocado Smart Platform (“OSP”) in each fulfilment channel
represents a separate performance obligation, and that revenue should begin to be
recognised when a working solution relevant to the fulfilment channel 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 upfront fees are
recognised as revenue. Alternative judgements would result in different amounts of
revenue being recognised at different times.
2.1
Capitalisation of
internal development costs
The Group capitalises internal costs directly attributable to the development of both
intangible and tangible assets. Management judgement is exercised in determining
whether the projects meet the criteria for capitalisation. During the period, the Group has
capitalised internal development costs amounting to £117.5m and £63.9m on intangible
and tangible assets respectively.
3.3
3.4
Provisions, Contingent
Liabilities and Contingent
Assets – Solutions
Determined from assessments of progress against agreed milestones to highlight if any
financial penalties might be incurred in case of delay or non-performance of milestones,
in which case provisions are made in accordance with IAS 37.
3.13
Exceptional items Management believes that separate presentation of the exceptional items provides useful
information in the understanding of the financial performance of the Group and its
businesses. Management exercises judgement in determining the classification of certain
transactions as exceptional items by considering the nature, occurrence and the
materiality of the amounts involved in those transactions. Note 2.6 provides information
on amounts disclosed as exceptional items in the current and comparative financial
statements together with the Group’s definition of exceptional items. These definitions
have been applied consistently over the periods.
2.6
Key estimation uncertainties
Key areas of estimation uncertainty are the key assumptions concerning the future and other data points 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.
Area Estimation uncertainty Notes
Fair value measurement –
contingent consideration
due from M&S
At the reporting date, the fair value of contingent consideration recognised was £98.3m.
The majority of this relates to an amount due from Marks and Spencer Holdings Limited
(“M&S”), agreed on the part disposal of Ocado Retail Limited (“Ocado Retail’s”) in August
2019. The payment of the contingent consideration totalling £190.7m in cash is contingent
on certain contractually defined Ocado Retail performance measures being achieved
during the 2023 financial year. The outcome is a binary one, meaning should the
performance measures be achieved, this will trigger the payment in full of £156.3m plus
£34.4m of interest whereas should the performance measures not be achieved, no
consideration would be payable by M&S.
The fair value of the contingent consideration has been estimated using the expected
present value technique and is based on a number of probability-weighted possible
scenarios and applying an appropriate discount rate to reflect the time value of the possible
payment. The Group considered a range of scenarios reflecting current market uncertainty,
the impact of likely adjustments to the performance target and Ocado Retail’s current
trading performance. Management determined that the fair value of the contingent
consideration due from M&S as at the reporting date is £95.0m.
The fair value measurement of the asset at the reporting date is considered principally to
be sensitive to reasonably possible changes in the target performance measure. To
illustrate this sensitivity, if the performance measure was £25m higher or lower than
assumed in the valuation approach, the fair value of the asset based on period end
valuation model would increase by £13.0m or decrease by £14.6m respectively
3.7
4.4
Impairment assessment –
goodwill , property, plant
and equipment and other
intangible assets
The performance of the Group’s impairment assessments requires management to make
judgements in determining whether an asset or cash generating unit (‘CGU’) shows any
indicators of impairment that would require an impairment test to be carried out. The
performance of impairment testing requires management to make a number of estimates
and assumptions in determining the recoverable amount of the CGUs. These include
forecast future cash flows estimated based on management-approved financial budgets
and plans, long-term growth rates, and post-tax discount rate as well as an assessment
of the expected growth profile of the respective CGU. Key estimates used in impairment
tests and sensitivities are disclosed in the relevant notes.
3.2
3.3
3.4
Climate-related risks
The Group has considered the impact of climate-related risks, as set out on pages 50 and 51, on its financial
performance and position, for example those that might have an effect on forecast cash flows for the purposes of going
concern, viability and impairment assessments, or the useful lives of certain assets. Given the early stages of our plans
and our overall climate-related strategy, and the expected timing of our roadmap to Net Zero targets, we have not
identified a material impact on the financial reporting judgements and estimates.
1.5 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.
In assessing going concern, the Directors take into account the financial position of the Group, its cash flows, liquidity
position and borrowing facilities, which are set out in the Finance Review on pages 70 to 85. In addition, the Directors
consider the Group’s business activities, together with factors that are likely to affect its future development and
position, as set out in the Strategic Report on pages 1 to 99, and the Group’s principal risks and the likely effectiveness
of any mitigating actions and controls available to the Directors as set out on pages 86 to 95.
At the reporting date, the Group had cash and cash equivalents of £1,328.0m (2021: £1,468.6m), external gross debt of
£1,887.6m (2021: £1,794.4m) (excluding lease liabilities payable to MHE JVCo Limited of £17.5m (2021: £34.0m)) and net
current assets of £1,166.3m (2021: £1,418.3m). The Group has a mixture of medium-term financing arrangements,
including £600.0m of senior unsecured convertible bonds due in 2025, £500.0m of senior unsecured notes due in 2026,
and £350.0m 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, as well as maintaining sufficient liquidity over the forecast period.
Having had consideration for these areas, the Directors have concluded that it is appropriate to continue to adopt the
going concern basis in preparing the financial statements. Further details of the Group’s considerations are provided in
the Viability Statement and Going Concern Statement on page 98.
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203
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
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 that 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. Revenue is presented 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 Ocado Smart Platform (“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 that 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 In Store Fulfilment (“ISF”) 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.
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 performance 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 each performance obligation based on the
stand-alone selling price.
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FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
205
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
2.1 Revenue continued
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. As international Solutions contracts are in the early stages of operation, 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.
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:
– 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.
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.
Capitalised costs to obtain contracts are reviewed for impairment 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.
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Retail 2,203.0 2,289.9
UK Solutions & Logistics 802.7 710.4
International Solutions 147.8 66.6
Other 0.8 0.4
Group eliminations (640.5) (568.5)
Revenue 2,513.8 2,498.8
Timing of revenue recognition
At a point in time 2,179.9 2,289.9
Over time 333.9 208.9
2,513.8 2,498.8
Revenue split by geographical area
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
UK 2,366.0 2,432.2
Overseas 147.8 66.6
2,513.8 2,498.8
Contract balances
27 November
2022
£m
28 November
2021
£m
Trade receivables 59.6 50.8
Accrued income 14.2 5.5
Contract assets – current – 0.3
Contract liabilities – current (29.1) (21.8)
Contract liabilities – non-current (393.8) (356.7)
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OCADO GROUP PLC Annual Report and Accounts 2022
207
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
2.1 Revenue continued
Contract liabilities
The contract liabilities relate primarily to consideration received from Solutions customers in advance, for which
revenue is recognised as the performance obligation is satisfied. The movement in contract liabilities during the current
and prior period is:
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Balance at beginning of period (378.5) (299.3)
Amount invoiced (69.1) (94.4)
Amount recognised as revenue 24.7 15.2
Balance at end of period (422.9) (378.5)
£24.7m (2021: £15.2m) of revenue recognised during the period was included in contract liabilities at the beginning of
the period.
The transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) are
expected to be recognised as revenue as follows:
27 November
2022
£m
28 November
2021
£m
Within one year 355.1 258.6
In between one and five years 2,127.2 1,643.5
In more than five years 4,827.9 4,016.3
Total transaction price 7,310.2 5,918.4
The total transaction price includes £1,972.1m (2021: £1,812.6m) 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, given the early stage of customer contracts, 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 and where a significant
reversal of revenue will not occur. 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).
2.2 Segmental reporting
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.
The CODM, who is responsible for allocating resources and assessing performance of the operating segments,
has been identified as the Board.
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 Ocado Retail Limited. The UK Solutions & Logistics segment provides the IT platform, CFCs
and logistics for customers in the United Kingdom (Wm Morrison Supermarkets Limited 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 that 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.
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.
The Group is not currently reliant on any major customer for 10% or more of its revenue.
Segmental revenue
A
and segmental EBITDA
A
for the period are as follows:
Retail
£m
UK Solutions
& Logistics
£m
International
Solutions
£m
Other
£m
Group
eliminations
£m
Total
£m
52 weeks ended 27 November 2022
Segmental revenue
A
2,203.0 802.7 147.8 0.8 (640.5) 2,513.8
Segmental EBITDA
A
(4.0) 67.2 (113.2) (21.9) (2.2) (74.1)
52 weeks ended 28 November 2021
Segmental revenue 2,289.9 710.4 66.6 0.4 (568.5) 2,498.8
Segmental EBITDA 150.4 68.5 (119.3) (37.5) (1.1) 61.0
A
See Alternative Performance Measures on pages 279 and 281
No measure of total assets and total liabilities is reported for each reportable segment, as such amounts are not
provided to the chief operating decision maker.
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.
Notes
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Rental income 13.4 13.2
Media and other income 87.3 90.8
Exceptional insurance reimbursement income 2.6 73.8 80.6
Income from litigation settlement 2.6 – 1.8
Other income 174.5 186.4
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 that are
driven by the volume of sales of specific products or product groups, including the branding and sourcing fees payable
to M&S, adjustments to inventory, payment processing charges 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 the cost of sales. For the period, promotional allowances represent 88% (2021: 82%) of commercial income,
with rebates representing 12% (2021: 18%).
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 that 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.
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OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
209
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
2.4 Operating expenses continued
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 and call centre costs. These include costs incurred on behalf of Wm Morrison
Supermarkets Limited (“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.
Operating expenses include:
Notes
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Cost of inventories recognised as an expense
1
1,650.9 1,671.4
Employment costs 2.5 690.6 644.2
Amortisation of intangible assets 3.3 114.7 78.0
Impairment of intangible assets 3.3 3.6 1.1
Depreciation of property, plant and equipment 3.4 154.4 84.4
Derecognition of previously capitalised costs in relation to SaaS arrangements 3.4 – 13.3
Impairment of property, plant and equipment 3.4 9.3 9.3
Impairment of property, plant and equipment – Erith assets 3.4 – 2.1
Depreciation of right-of-use assets 3.5 66.0 65.6
Impairment of right-of-use assets 3.5 0.6 –
Increase in expected credit loss of trade receivables 3.10 3.8 2.4
Expense relating to short-term leases and leases of low-value assets 3.5 3.2 0.4
Net foreign exchange loss 1.4 0.9
1 This amount is included within the Cost of sales.
During the period, the Group paid the following to its auditor:
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Audit of the Company’s annual financial statements 0.1 0.1
Audit of the Company’s subsidiaries 2.1 1.7
Total audit fees 2.2 1.8
Audit-related assurance services 0.2 0.6
Other assurance services – 0.3
Total non-audit fees 0.2 0.9
Total fees 2.4 2.7
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. Contributions are charged to the Consolidated Income Statement in the period to
which they relate.
Notes
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Wages and salaries 759.9 666.3
Social security costs 73.0 61.1
Defined contribution pension costs 23.2 19.0
Share-based payment charge
1
4.7 15.9 41.8
Gross employment costs 872.0 788.2
Staff costs capitalised as intangible assets 3.3 (117.5) (109.0)
Staff costs capitalised as property, plant and equipment 3.4 (63.9) (35.0)
Employment costs 690.6 644.2
Average monthly number of employees (including Executive Directors) by function
Operational staff 16,712 16,098
Support staff 4,687 4,034
21,399 20,132
1 Included in the share-based payment charge is an equity-settled charge of £42.0m (2021: £35.5m) and a net release of provisions of £26.1m (2021: £6.3m net
increase in provisions) for the payment of amounts due to participants in the Retail VCP, and for the payment of employer’s National Insurance contributions
on taxable employee incentive schemes.
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FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
211
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
2.6 Exceptional items
A
Accounting policies
Exceptional items, as disclosed on the face of the Consolidated Income Statement, are items that are considered to be
significant due to their size/nature, not in the normal course of business or are consistent with items that were treated
as exceptional in the prior periods or that may span multiple financial periods. They have been classified separately
in order to draw them to the attention of the readers of the financial statements, and facilitate comparison with prior
periods to assess trends in the financial performance more readily. The Group applies judgement in identifying the
items of income and expense that are recognised as exceptional.
Ref.
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Andover CFC A
– Insurance reimbursement income 67.4 78.6
– Other exceptional costs (3.4) (5.6)
64.0 73.0
Erith CFC B
– Insurance reimbursement income 6.4 2.0
– Other exceptional costs – (10.1)
6.4 (8.1)
Litigation costs C (26.5) (28.9)
Litigation settlement C – 1.8
Ocado Group Finance transformation and SaaS implementation costs D (7.0) (13.3)
Ocado Retail IT systems transformation E (4.0) (4.6)
(Loss)/gain on disposal of Speciality Stores Limited (“Fetch”) F (1.4) 1.0
Gain on disposal of investment in Infinite Acres Holding B.V. G – 5.0
Change of fair value of contingent consideration receivable H (58.4) 16.9
Organisational Restructure I (3.0) –
Net exceptional (expense)/income (29.9) 42.8
A
See Alternative Performance Measures on pages 279 and 281
A. 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 were formally accepted by the insurers.
Insurance reimbursement comprises reimbursement for the costs of rebuilding the CFC and business interruption
losses. The reimbursement has been recognised as other income.
During the period, the Group reached an agreement with the insurers for the final settlement of the insurance claim for
a total of £273.8m, which resulted in an additional insurance reimbursement income of £67.4m in the period. This has
then concluded the Andover insurance fire claim.
Other exceptional costs include, but are not limited to, write off of certain assets, professional fees relating to the
insurance claims process, business rates, temporary costs of transporting employees to other warehouses to work and
redundancy costs. The cumulative exceptional costs recognised to date, across all prior periods, amount to £124.9m.
B. Erith CFC
In July 2021, a fire destroyed part of the Erith CFC, including some machinery and inventory held on site. The Group has
comprehensive insurance and claims were formally accepted by the insurer.
During the period, an agreement was reached with the insurers for the final settlement in respect of the claims relating
to the Erith fire for a total of £8.3m. A final payment of £6.4m was received during the period and was recognised as an
insurance reimbursement income in FY22. The receipt of the £6.4m has concluded the Erith fire claim.
Other exceptional costs include, but are not limited to, stock write-offs, customer goodwill refund, impairment of certain
fixed assets and labour costs. The cumulative exceptional costs expensed to date amount to £10.1m.
C. Litigation costs and litigation settlement
Litigation costs are primarily costs incurred on patent infringement litigation between the Group and AutoStore
Technology AS (“AutoStore”). Further details are provided in Note 3.14. The costs during the period amount to £26.5m
(FY21: £28.9m). The prior year litigation costs also include costs of legal proceedings brought by the Group against
certain former employees and Project Today Holdings Limited (“T0day”), in relation to misappropriation and unlawful
use of the Group’s confidential information and intellectual property, which was settled in 2021. The Group received
£1.8m as part of the settlement which was recognised as an exceptional income in FY21. The net cumulative costs to
date amount to £57.6m.
D. Ocado Group Finance transformation and SaaS implementation costs
As part of the Group’s Finance transformation programme, the Group implemented various SaaS solutions, primarily
Oracle Fusion, which went live in FY21, across the business. Following the IFRIC agenda decision, in FY21, the Group
updated its accounting policy for the treatment of SaaS configuration and customisation related costs under IAS 38
Intangible Assets. The cumulative finance transformation and SaaS implementation costs expensed to date amount to
£28.6m and include £7.0m in FY22.
These amounts have been disclosed as exceptional items in both FY21 and FY22 because they are material and
arise both from a strategic project that is not considered by the Group to be part of the normal operating costs
of the business.
The finance transformation programme will continue through to, and will complete in, FY23 with a focus on optimising
and enhancing the SaaS solutions and related finance processes to improve efficiency across the business.
Incremental costs incurred in relation to the ongoing programme will continue to be disclosed as exceptional items.
Ongoing licence fees for SaaS arrangements and the cost of business as usual finance activity do not form part of the
exceptional items.
E. Ocado Retail IT systems transformation
In FY21, Ocado Retail initiated its IT Roadmap programme, which focuses on delivering IT systems and services that
will enable Ocado Retail to meet its obligation to transition away from Ocado Group IT services, tools and support. The
IT Roadmap programme, which is expected to run until FY23, includes the development of both on-premises and SaaS
solutions. IT Roadmap programme costs that meet assets recognition criteria will be recognised as intangible assets
and implementation costs that do not meet assets recognition criteria will be expensed. The cumulative costs expensed
to date amount to £8.6m.
F. (Loss)/gain on disposal of Speciality Stores Limited (“Fetch”)
On 31 January 2021, Ocado Retail completed the sale of the entire share capital of Speciality Stores Limited, its wholly-
owned pets business trading as Fetch, to Paws Holdings Limited (“Paws Holdings”), resulting in a gain on disposal of
£1.0m in FY21.
During the period, a provision of £1.4m was made against the deferred consideration based on the likelihood of receipt.
G. Gain on disposal of investment in Infinite Acres Holding B.V. (“Infinite Acres”)
In October 2021, the Group sold its 33.3% interest in Infinite Acres Holding B.V. (“Infinite Acres”) to 80 Acres Urban
Agriculture Inc. (“80 Acres”) in exchange for 2.5% of 80 Acres’ issued share capital, resulting in a gain on disposal
of £5.0m.
H. Change in fair value of contingent consideration
In 2019, the Group sold Marie Claire Beauty Limited (“Fabled”) to Next plc and 50% of Ocado Retail to Marks and
Spencer Group plc (“M&S”). Part of the consideration 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. A loss on
revaluation of £58.4m (FY21: £16.9m gain) is reported through exceptional items, primarily driven by the reduction
in the contingent consideration receivable from M&S. Refer to Note 3.7 for details.
I. Organisational restructure
During the period, the Group undertook a partial reorganisation of its head office functions resulting in redundancies
and related costs of £3.0m. Further organisational restructures are planned for FY23 and are expected to toal £7.0m.
Tax impacts on exceptional items
The change in fair value of contingent consideration receivable is not subject to tax. The remaining exceptional items
are taxable or tax deductible and give rise to a tax credit of £0.8m (FY21: tax charge £0.5m). A further tax charge of
£6.4m (FY21: charge of £3.7m) has not been recognised as it relates to tax losses which are not recognised for deferred
tax purposes.
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FINANCIAL STATEMENTS
212
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
213
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
2.7 Finance income and costs
Accounting policies
Borrowing costs
Borrowing costs, which are directly attributable to the acquisition or construction of qualifying assets, are capitalised.
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 nil (2021: £2.1m). The rate used to determine the amount of finance
costs capitalised during the prior period was 3.9%.
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.
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Interest income on cash balances 12.5 1.0
Interest income on loans receivable 1.0 0.6
Gain on revaluation of equity investments designated at FVTPL 11.9 8.4
Net foreign exchange gain 16.4 –
Finance income 41.8 10.0
Interest expense on borrowings (61.3) (52.7)
Interest expense on lease liabilities (28.3) (18.0)
Interest expense on provisions (0.4) (0.9)
Foreign exchange gain/(loss) – 19.3
Finance costs (90.0) (52.3)
Net finance cost (48.2) (42.3)
2.8 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 or
substantively 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 it is
considered probable that there will be a future outflow of funds to a tax authority. The provisions are based on
management’s best judgement.
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 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. The recognition of deferred tax assets is supported by
management’s forecast of the future profitability of the relevant countries. Judgement is used when assessing the
extent to which deferred tax assets should be recognised, and the final outcome of some of these judgements may give
rise to material profit and loss and/or cash flow variances. 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.
Factors that may affect future tax charges
Factors that may affect future tax charges include the level and mix of profitability in different countries, changes in tax
legislation and tax rates and transfer pricing regulations.
Income tax – Consolidated Income Statement
The major components of income tax (credit)/charge are as follows:
52 weeks ended 27 November 2022 £m 52 weeks ended 28 November 2021 £m
United
Kingdom Rest of world Total
United
Kingdom Rest of world Total
Current tax
Current year (8.0) 0.8 (7.2) 7.3 0.7 8.0
Current tax credit on exceptional items (0.8) – (0.8) 0.5 – 0.5
Adjustment in respect of prior years 0.4 (0.6) (0.2) (0.1) – (0.1)
Total current tax (8.4) 0.2 (8.2) 7.7 0.7 8.4
Deferred tax
Origination and reversal of temporary differences (13.2) (0.8) (14.0) 8.8 (10.2) (1.4)
Effect of change in tax rate – 0.1 0.1 1.6 – 1.6
Adjustments in respect of prior years (1.2) 3.8 2.6 0.2 – 0.2
Total deferred tax (14.4) 3.1 (11.3) 10.6 (10.2) 0.4
Total tax (credit)/charge (22.8) 3.3 (19.5) 18.3 (9.5) 8.8
The tax on the Group’s loss before tax differs from the theoretical amount that would arise using the UK tax rate
as follows:
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Loss before tax (500.8) (176.9)
Effective tax credit at United Kingdom tax rate of 19.0% (2021: 19.0%) (95.2) (33.6)
Effect of:
Joint venture and associate income reported net of tax – 0.5
Differences in overseas tax rates 0.3 (2.9)
Losses arising in period on which no deferred tax is recognised 38.7 44.7
Temporary differences on which no deferred tax is recognised 16.0 20.8
Recognised tax losses from prior periods (0.4) (14.2)
Permanent differences 33.5 (8.3)
UK rate change (14.9) 1.6
Adjustments in respect of prior periods 2.5 0.2
Income tax (credit)/charge (19.5) 8.8
The adjustments in respect of prior periods arise from revising the prior period’s tax provision to reflect the tax returns
subsequently filed.
Income tax – Consolidated Balance Sheet
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Deferred tax assets 1.9 7.2
Deferred tax liabilities (14.7) (24.4)
Net deferred tax liabilities (12.8) (17.2)
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FINANCIAL STATEMENTS
214
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
215
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
2.8 Income tax continued
The major deferred tax assets/(liabilities) recognised by the Group and movements thereon during the current and prior
financial years are as follows:
Tax losses
carried
forward
£m
Accelerated
capital
allowances
£m
Intangibles
£m
Share-based
payments
£m
Other
short-term
temporary
differences
£m
Total
£m
Balance at 29 November 2020 2.1 12.5 (19.3) 7. 9 1.1 4.3
Foreign exchange movements 0.6 (0.4)
– – –
0.2
Effect of change in rate of UK Corporation Tax 0.6 1.8 (7.2) 2.8 0.3 (1.6)
Credited/(charged) to Consolidated
Income Statement 27.2 (11.9) (2.4) (5.0) (6.6) 1.2
Credited to equity – – – 0.5 – 0.5
Acquisitions/disposals – – (21.8) – – (21.8)
Balance at 28 November 2021 30.5 2.0 (50.7) 6.2 (5.2) (17.2)
Foreign exchange movements 0.8 – (1.8) 0.1 – (0.9)
Effect of change in rate of UK Corporation Tax (1.4) 1.3 – – – (0.1)
Credited/(charged) to Consolidated
Income Statement 30.5 (28.7) 10.3 (5.1) 4.4 11.4
Charged to Other Comprehensive Income – – – – (7.2) (7.2)
Charged to equity – – – 0.9 – 0.9
Acquisitions/disposals 0.3 – – – – 0.3
Balance at 27 November 2022 60.7 (25.4) (42.2) 2.1 (8.0) (12.8)
Other short-term timing differences include temporary differences in respect of provisions and fair value of
investments.
Deferred tax has been recognised at 25%, as this is the rate the UK corporation tax rate will rise to with effect from
1 April 2023.
At the reporting date, the Group had approximately £973.9m of unutilised tax losses (2021: approximately £677.7m)
available to offset against future profits. Deferred tax assets of £60.7m (2021: £30.5m) have been recognised in respect
of £244.2m (2021: £119.7m) 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.
In addition, the Group had approximately £374.0m (2021: £352.8m) of other gross deductible temporary differences
for which no deferred tax asset is recognised.
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. With the exception of £33.7m which expire
in 2041 and £3.6m which expire in 2042, 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 £1.9m
(2021: £7.2m).
The amount of temporary differences associated with overseas subsidiaries for which no deferred tax has been
provided is not material.
Deferred tax assets of £4.2m (2021: £6.2m) have been recognised in countries that reported a tax loss in either the
current or preceding year. The majority arises overseas (2021: the majority arose overseas).
Changes in tax law or its interpretation
Ocado Group plc is aware of the upcoming GloBE model rules in relation to BEPS Pillar II. The United Kingdom has not
yet substantively enacted the rules, but they are expected to apply from January 2024, at which time the Group is
expected to fall within scope. To date, Ocado Group plc does not materially operate in low tax jurisdictions and will
continue to monitor application of the rules and the potential impact on the Group.
2.9 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 Ocado Group Value
Creation Plan (“Group 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 five classes of instruments that are
potentially dilutive: share options; share interests held pursuant to the Group’s JSOS; linked JOE awards under the
Group VCP; shares under the Group’s staff incentive plans; and convertible bonds.
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 has been calculated as follows:
52 weeks
ended
27 November
2022
million
52 weeks
ended
28 November
2021
million
Weighted average number of shares at end of period 772.9 739.5
£m £m
Loss attributable to owners of the Company (455.5) (223.2)
pence pence
Basic and diluted loss per share (58.93) (30.18)
Section 3 – Assets and liabilities
3.1 Business combinations
Accounting policies
The acquisition method of accounting is used for the acquisition of businesses. 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 and are included
in administrative expenses.
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.
Business combinations in the current period
Myrmex Inc.
On 6 June 2022, the Group acquired 100% of the issued share capital of Myrmex Inc. (“Myrmex”), a materials handling
robotics start-up incorporated in the US that combines the use of intelligent robotics to industry standard assets to
enhance order fulfilment. The Group previously acquired a 12.2% minority stake in Myrmex in October 2020 and appointed
them to design and develop a proprietary solution that automates the loading of totes containing customer orders onto
frames ready for dispatch (“Auto Frame Load” or “AFL”). The acquisition of Myrmex will enable faster roll-out of AFL across
Ocado Group’s global CFC footprint, as well as open up new opportunities for the development of bespoke automation
solutions for the Ocado Smart Platform.
The total net consideration was £7.3m (€8.3m). The fair value of previous equity interests was £0.9m. Goodwill represents
the future benefit of new technology, combined talent and future cost saving synergies.
Consideration transferred
£m
Cash paid 5.9
Deferred consideration
1
1.4
7.3
1. Deferred consideration represents cash consideration withheld to cover potential indemnity claims under the terms of the acquisition agreement and will be
released within 2 years.
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FINANCIAL STATEMENTS
216
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
217
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
3.1 Business combinations continued
Fair value of assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of Myrmex Inc. as at the date of acquisition were:
£m
Assets
Intangible assets 1.6
Property, plant and equipment 0.1
Deferred tax assets 0.4
Trade and other receivables 0.2
Cash and cash equivalents 0.4
2.7
Liabilities
Trade and other payables (0.2)
(0.2)
Total identifiable net assets at fair value 2.5
Consideration transferred 7.3
Fair value of investment previously held at FVTPL 0.9
Less fair value of identifiable net assets (2.5)
Goodwill 5.7
Acquisition-related costs
A total of £0.3m acquisition-related costs were incurred for the acquisition of Myrmex Inc. which has been recognised
within administrative expenses in the Consolidated Income Statement.
Contribution to Consolidated Income Statement
The contribution of the business to revenue and loss before tax was £0.1m and £nil respectively. If the acquisition had
occurred at the start of the current period the Group’s revenue and loss before tax would have increased by £0.2m and
£0.1m respectively.
Analysis of cash flow on acquisition of Myrmex Inc.
£m
Consideration paid (5.9)
Cash acquired with subsidiary (included in cash flows from investing activities) 0.4
Net cash flow on acquisition (5.5)
Cash flows in relation to acquisition costs have been recognised in operating cash flows.
Business combinations in the prior period
Kindred Systems Inc.
On 15 December 2020, the Group acquired 100% of the issued share capital of Kindred Systems Inc. (“Kindred
Systems”), a company incorporated in Canada with its principal operations in the US that designs, supplies and services
sophisticated piece-picking robots for ecommerce and order fulfilment for total consideration of £189.0m (US$251.8m).
Haddington Dynamics Inc.
On 21 December 2020, the Group acquired 100% of the issued share capital of Haddington Dynamics Inc. (“Haddington
Dynamics”), an advanced research and development company incorporated in the US that specialises in the design and
manufacture of highly dextrous, lightweight, low-cost robotic arms for total consideration of £11.0m (US$14.9m).
Kindred Systems and Haddington Dynamics together contributed an EBITDA loss from trading of £8.5m for the period
ended 28 November 2021. Non-trading losses of £6.7m in the period have been presented in the ‘Other’ segment.
Fair value of assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of Kindred Systems and Haddington Dynamics as at the dates of
acquisitions were:
Kindred
Systems Inc.
£m
Haddington
Dynamics Inc.
£m
Total fair
value on
acquisition
£m
Assets
Fixed assets 9.1 – 9.1
Cash and cash equivalents 2.2 – 2.2
Investments 0.9 – 0.9
Working capital 2.7 0.1 2.8
Intangible assets 65.7 9.0 74.7
80.6 9.1 89.7
Liabilities
Trade and other payables (7.2) (0.5) (7.7)
Deferred tax liabilities (19.9) (1.9) (21.8)
(27.1) (2.4) (29.5)
Total identifiable net assets at fair value 53.5 6.7 60.2
Consideration transferred 189.0 11.0 200.0
Less fair value of identifiable net assets (53.5) (6.7) (60.2)
Goodwill 135.5 4.3 139.8
Deferred consideration and replacement share awards
Deferred cash consideration of £2.6m is payable to key members of the Kindred Systems management team and will be
treated as an employment cost.
In addition, £7.9m of Rollover Options (Replacement Share Awards) were awarded to key management personnel of
Kindred Systems as part of the acquisition transaction and will be treated as a share based payments employment cost.
Refer to Note 4.7 for further details.
For Haddington Dynamics, £6.9m of deferred shares were awarded to key management personnel as part of the
transaction and will be treated as a share based payments employment cost. Refer to Note 4.7 for further details.
3.2 Goodwill
Accounting policies
Goodwill arises on the acquisition of a business when the fair value of the consideration exceeds the fair value attributed
to the net assets acquired (including contingent liabilities). Goodwill is not amortised but subject to annual impairment
reviews. Goodwill generated from an acquisition is allocated to and monitored at an operating segment level.
Following initial recognition, goodwill is stated at costs less any accumulated impairment losses. Goodwill is reviewed
annually for impairment and the recoverability of goodwill assessed by comparing the carrying amount of the CGU with
the expected recoverable amount. Impairment is recognised where there is a difference between carrying value of the
CGU and the estimated recoverable amount of the CGU to which that goodwill has been allocated. Impairment is
recognised immediately in the income statement and is not subsequently reversed.
Impairment loss is first allocated to the carrying value of the goodwill and then to the other assets within the CGU.
Recoverable amount is defined as the higher of fair value less costs of disposal and value in use at the date the
impairment review is undertaken. Fair value is the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date.
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FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
219
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
3.2 Goodwill continued
Carrying amount of goodwill as at 27 November 2022 is as follows:
Goodwill
£m
Cost
At 29 November 2020 4.7
Additions 139.8
Effect of changes in foreign exchange rates 0.3
At 28 November 2021 144.8
Additions 5.7
Effect of changes in foreign exchange rates 14.2
At 27 November 2022 164.7
Accumulated amortisation –
At 29 November 2020 –
Charge for the period –
At 28 November 2021 –
Charge for the period –
At 27 November 2022 –
Net book value
At 28 November 2021 144.8
At 27 November 2022 164.7
Goodwill – Impairment testing
Goodwill generated from an acquisition is allocated to and monitored at an operating segment level. An analysis of
goodwill by operating segment is:
Retail
£m
International
Solutions
£m
UK Solutions
& Logistics
£m
Goodwill
£m
At 28 November 2021 – 104.0 40.8 144.8
Additions – 4.1 1.6 5.7
Effect of changes in foreign exchange rates – 10.2 4.0 14.2
At 27 November 2022 – 118.3 46.4 164.7
The recoverable amounts of these CGUs are the higher of fair value less costs of disposal (“FVLCD”) and value in use.
Management concluded that FVLCD was more appropriate for determining the recoverable amount of the CGUs
because the Group’s cash flows are mainly based on future growth expectation from CFC commitments / expected
capital investments.
FVLCD has been estimated using present value techniques using a discounted cashflow method. The fair value method
relies on inputs not normally observable by market participants and is therefore categorised at Level-3 in the fair value
hierarchy.
The key assumptions used by management in estimating FVLCD were:
– Discount rates – based on the Weighted Average Cost of Capital (WACC) of a typical market participant. The post tax
discount rate used 11.0% (FY21: 7.2%). The discount rate has increased reflecting market volatility in risk free rate and
equity risk premium inputs.
– Forecast cash flows – based on assumptions from the approved budget and 5-year plan, with projections extending
to 10 years for International Solutions. The projections, which incorporate our best estimates of future cash flows and
take into account future growth and price increases, have proved to be reliable guides in the past and the Directors
believe the estimates are appropriate.
– Long-term growth rates – A long-term growth rate of 2.0% (FY21: 2.0%) was used for cash flows outside the plan
projections. This long term growth rate is conservative and is considered to be lower than the long-term historic
growth rates in the underlying territories in which the CGUs operate and the long-term growth rate prospects of the
sectors in which the CGUs operate.
No impairment has been recognised. For UK Solutions and Logistics, a 1.5ppt increase in discount rate would result in
£132.0m of headroom being fully eroded. The CGU has a carrying value of £531.9m.
3.3 Other intangible assets
Accounting policies
Other intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses. Other
intangible assets are amortised using the straight-line method over the useful lives from the time they are first available
for use. The estimated useful lives vary according to the specific assets, but are typically:
Internally generated intangible assets 3 – 15 years
Other intangible assets 3 – 15 years
Amortisation periods and methods are reviewed annually and adjusted if appropriate.
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. 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. Examples of research costs include 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.
Internally generated intangible assets consist primarily of costs relating to intangible assets that 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 an intangible asset. 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 will be 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, useful life is based on historical experience with
similar products as well as anticipation of future events that may affect their useful life, such as changes in technology.
Impairment of intangible assets
For intangible assets the Group performs impairment testing where indicators of impairment are identified. Impairment
testing is performed at the individual asset level. Where an asset does not generate cash flows that are separately
identifiable from other assets, the Group estimates the recoverable amount of the CGU to which the asset belongs.
The recoverable amount is the higher of fair value less costs of disposal, and value in use. When the recoverable
amount is less than the carrying amount, an impairment loss is recognised immediately in the Consolidated
Income Statement.
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.
Contents
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FINANCIAL STATEMENTS
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FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
221
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
3.3 Other intangible assets continued
Carrying amount of other intangible assets as at 27 November 2022 is as follows:
Internally
generated
intangible
assets
£m
Other
intangible
assets
£m
Total
£m
Cost
At 29 November 2020 357.5 63.9 421.4
Additions 7.6 14.8 22.4
Internal development costs capitalised 95.6 – 95.6
Recognised on acquisition of subsidiaries (Note 3.1) 64.6 10.1 74.7
Disposals (73.6) (10.0) (83.6)
Effect of changes in foreign exchange rates 0.4 – 0.4
At 28 November 2021 452.1 78.8 530.9
Additions 24.2 3.2 27.4
Internal development costs capitalised 116.4 1.1 117.5
Recognised on acquisition of subsidiaries (Note 3.1) 1.6 – 1.6
Relassification (3.6) 0.8 (2.8)
Disposals (0.1) – (0.1)
Effect of changes in foreign exchange rates 0.3 7.6 7.9
At 27 November 2022 590.9 91.5 682.4
Accumulated amortisation
At 29 November 2020 (165.6) (24.6) (190.2)
Charge for the period (63.4) (14.6) (78.0)
Impairment charge – (1.1) (1.1)
Disposals 73.6 10.0 83.6
At 28 November 2021 (155.4) (30.3) (185.7)
Charge for the period (98.2) (16.5) (114.7)
Impairment charge (3.4) (0.2) (3.6)
Effect of changes in foreign exchange rates – (1.2) (1.2)
At 27 November 2022 (257.0) (48.2) (305.2)
Net book value
At 28 November 2021 296.7 48.5 345.2
At 27 November 2022 333.9 43.3 377.2
Included within intangible assets is capital work-in-progress for internally generated intangible assets of £72.8m
(2021: £39.7m) and £4.1m (2021: £6.2m) for other intangible assets.
3.4 Property, plant and equipment
Accounting policies
Property, plant and equipment (excluding land) are stated at cost, less accumulated depreciation and impairment
losses. 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.
Depreciation is provided to write off the cost of property, plant and equipment less estimated residual value, on a
straight-line basis over their estimated useful lives, 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 up to 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.
Estimation of useful life
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. The useful lives and residual values 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. Increasing
an asset’s expected life or its residual value would result in a reduced depreciation charge in the Consolidated
Income Statement.
Management also assesses the useful lives based on historical experience with similar assets, as well as anticipation of
future events that 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.
Impairment of property, plant and equipment
For property, plant and equipment the Group performs impairment testing where indicators of impairment are identified.
Impairment testing is performed at the individual asset level. Where an asset does not generate cash flows that
are separately identifiable from other assets, the Group estimates the recoverable amount of the CGU to which the
asset belongs.
The recoverable amount is the higher of fair value less costs of disposal, and value in use. When the recoverable amount
is less than the carrying amount, an impairment loss is recognised immediately in the Consolidated Income Statement.
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.
Contents
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OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
223
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
3.4 Property, plant and equipment continued
Land and
buildings
£m
Fixtures,
fittings,
plant and
machinery
£m
Motor
vehicles
£m
Total
£m
Cost
At 29 November 2020 89.8 920.7 11.0 1,021.5
Additions 32.8 489.9 0.1 522.8
Internal development costs capitalised – 35.0 – 35.0
Recognised on acquisition of subsidiaries – 9.1 – 9.1
Disposals – (24.7) (2.3) (27.0)
Effect of changes in foreign exchange rates – 1.9 – 1.9
At 28 November 2021 122.6 1,431.9 8.8 1,563.3
Additions 92.5 494.4 1.6 588.5
Internal development costs capitalised – 63.9 – 63.9
Recognised on acquisition of subsidiaries – 0.1 – 0.1
Reclassifications 1.3 0.6 0.9 2.8
Disposals (3.7) (7.5) – (11.2)
Effect of changes in foreign exchange rates 0.1 39.4 – 39.5
At 27 November 2022 212.8 2,022.8 11.3 2,246.9
Accumulated depreciation
At 29 November 2020 (7.3) (220.1) (9.1) (236.5)
Charge for the period (2.2) (81.0) (1.2) (84.4)
Impairment charge – (9.3) – (9.3)
Impairment of Erith assets (see Note 2.6) – (2.1) – (2.1)
Disposals – 24.5 2.3 26.8
At 28 November 2021 (9.5) (288.0) (8.0) (305.5)
Charge for the period (5.7) (148.5) (0.2) (154.4)
Impairment charge (0.1) (9.2) – (9.3)
Disposals – 2.2 – 2.2
Effect of changes in foreign exchange rates – (2.1) – (2.1)
At 27 November 2022 (15.3) (445.6) (8.2) (469.1)
Net book value
At 28 November 2021 113.1 1,143.9 0.8 1,257.8
At 27 November 2022 197.5 1,577.2 3.1 1,777.8
Included within property, plant and equipment is capital work-in-progress for land and buildings of £84.5m
(2021: £24.4m), fixtures, fittings, plant and machinery of £382.0m (2021: £412.0m), and motor vehicles of £1.0m
(2021: £nil).
Impairment assessment – PPE and intangible assets
The Group has determined that assets directly associated with individual International Solutions contracts (i.e. partner
by partner) represent the lowest level group of assets at which impairment can be assessed. The Group has undertaken
a review for indicators of impairment for each solution contract and, where indicators of impairment exist, a full asset
impairment review was carried out comparing carrying value to fair value less cost to dispose (FVLCD).
The key inputs and assumptions in arriving at the FVLCD are:
– expected future cash flows from the contract – based on management forecasts for a ten year period, including an
assessment of ramp up of capacity, ongoing operating costs and associated increase in fees and capital expenditure
– discount rate that specifically takes into account the risk pertaining to the customer specific cash flows – 10.8%
– long-term growth rate to reflect growth outside of the forecast period – 2.0%
Based on the outcome of the assessment, no impairment has been recognised. For one CGU (a single partner contract
with currently just one live CFC), a 25% reduction in the FY23 to FY30 forecasted module ramp-up profile would result in
£8.1m of headroom being fully eroded as a result of reduction in anticipated future cash flows. Any further reductions in
ramp-up profile would lead to an impairment. The CGU has a carrying value of £53.2m.
3.5 Right-of-use assets and Lease Liabilities
Accounting policies
The Group leases properties, vehicles and other items of equipment. The leases have varying terms, escalation clauses
and renewal rights. 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 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 term.
Right-of-use-assets
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.
Lease Liabilities
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.
An analysis of the Group’s right-of-use assets and lease liabilities are as follows:
Right of Use Assets
Land and
buildings
£m
Fixtures,
fittings,
plant and
machinery
£m
Motor
vehicles
£m
Total
£m
Cost
At 29 November 2020 354.1 213.8 79.9 647.8
Additions 152.0 – 30.8 182.8
Disposals (35.0) (76.1) (5.7) (116.8)
At 28 November 2021 471.1 137.7 105.0 713.8
Additions 43.4 2.2 24.9 70.5
Disposals (5.8) (0.8) (4.7) (11.3)
At 27 November 2022 508.7 139.1 125.2 773.0
Accumulated depreciation
At 29 November 2020 (58.2) (173.5) (31.1) (262.8)
Charge for the period (31.5) (14.6) (19.5) (65.6)
Disposals 27.6 75.9 5.7 109.2
At 28 November 2021 (62.1) (112.2) (44.9) (219.2)
Charge for the period (32.8) (11.8) (21.4) (66.0)
Impairment charge (0.6) – – (0.6)
Disposals 1.8 0.7 4.2 6.7
At 27 November 2022 (93.7) (123.3) (62.1) (279.1)
Net book value
At 28 November 2021 409.0 25.5 60.1 494.6
At 27 November 2022 415.0 15.8 63.1 493.9
Contents
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FINANCIAL STATEMENTS
224
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
225
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
3.5 Right-of-use assets and Lease Liabilities continued
Lease liabilities
Total
£m
At 29 November 2020 407.8
Additions 176.9
Terminations (7.7)
Interest 18.0
Payments (66.6)
At 28 November 2021 528.4
Additions 64.2
Terminations (2.9)
Interest 28.3
Payments (85.7)
At 27 November 2022 532.3
27 November
2022
£m
28 November
2021
£m
Disclosed as:
Current 58.6 51.0
Non-current 473.7 477.4
532.3 528.4
External obligations under lease liabilities are £514.8m (2021: £494.4m), excluding £17.5m (2021: £34.0m) payable
to MHE JVCo Limited, a company incorporated in England and Wales in which the Group holds a 50% interest.
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:
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Short-term leases 3.2 0.2
Leases of low-value items – 0.2
3.2 0.4
3.6 Investment in joint venture and associate
Accounting policies
The Group’s share of the results of joint ventures and associates is included in the Consolidated Income Statement, and
is accounted for 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 entity,
less any impairment in value. On transfer of assets to joint ventures and 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 of a joint venture or associate equals or exceeds its 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.
Investment in joint venture and associate
The Group’s principal joint ventures and associates are:
Nature of
relationship Year end
Business
Activity
% of interest
held (FY22)
% of interest
held (FY21)
Country of
incorporation
Principal area
of operation
MHE JVCo Limited Joint Venture 27 Nov
Lessor of
assets to the
Group 50.0% 50.0%
United
Kingdom
United
Kingdom
Karakuri Limited Associate 31 Mar
Development
and building of
robots 26.3% 26.3%
United
Kingdom
United
Kingdom
During the prior period, the Group disposed of its 33.3% interest in Infinite Acres Holding B.V. (‘Infinite Acres’). For more
details on the disposal, see Note 2.6.
The Group holds a 25% interest investment in Paneltex Limited that has not been treated as an associate since the
Group does not have significant influence over the company. Further detail is disclosed in Note 3.7.
The carrying amounts of the investments at the beginning and end of the period can be reconciled as follows:
MHE JVCo Infinite Acres Karakuri Total
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Investment at beginning
of period 23.0 30.4 – 7.0 3.5 4.1 26.5 41.5
Additional investment
during period – – – 0.1 – – 0.1
Allocation of initial
acquisition price to
warrants1 – – – – (1.9) – (1.9) –
Share of change in net
assets through other
comprehensive income – – – – 0.4 – 0.4 –
Share of total
comprehensive (expense)
/ income attributable
to Group (0.2) 0.2 – (1.9) (1.2) (0.6) (1.4) (2.3)
Foreign exchange
difference recognised
in other comprehensive
income – 0.1 – – – – – 0.1
Dividend received (8.0) (7.7) – – – – (8.0) (7.7)
Disposal during period – – – (5.2) – – – (5.2)
Investment at end
of period 14.8 23.0 – – 0.8 3.5 15.6 26.5
1. During the period, the Group allocated £1.9m of Karakuri’s initial acquisition price to warrants. This has reduced the carrying value of the investment by £1.9m. Refer
to Note 4.3 for further details on the carrying value of the warrants.
Contents
Contents
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226
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
227
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
3.6 Investment in joint venture and associate continued
The tables below provide summarised financial information of the Group’s joint ventures and associates.
The information disclosed reconciles the amounts presented in the financial statements of the relevant
joint ventures and associates with the Group’s share of those amounts.
MHE JVCo Infinite Acres Karakuri Total
27 November
2022
£m
28 November
2021
£m
27 November
2022
£m
28 November
2021
£m
27 November
2022
£m
28 November
2021
£m
27 November
2022
£m
28 November
2021
£m
Non-current assets 15.0 27.1 – – 2.2 2.3 17.2 29.4
Current assets
– Cash and cash
equivalents 3.5 1.7 – – 2.9 6.9 6.4 8.6
– Other current assets 14.2 18.3 – – 0.2 0.2 14.4 18.5
Current liabilities
– Other current liabilities (3.2) (1.0) – – (0.4) (0.2) (3.6) (1.2)
Non-current liabilities
– Non-current financial
liabilities (excluding
trade and other
payables) – – – – (6.9) (7.0) (6.9) (7.0)
– Other non-current
liabilities – – – – – – – –
Net assets 29.5 46.1 – – (2.0) 2.2 27.5 48.3
Share of net assets
attributable to Group 14.8 23.0 – – (0.5) 0.5 14.3 23.5
Legal costs capitalised on
acquisition – – – – 0.1 0.1 0.1 0.1
Implicit goodwill – – – – 1.2 2.9 1.2 2.9
Investment at end
of period 14.8 23.0 – – 0.8 3.5 15.6 26.5
MHE JVCo Infinite Acres* Karakuri Total
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Revenue – – – 2.9 0.4 0.1 0.4 3.0
Cost of sales – – – (4.6) – – – (4.6)
Gross profit – – – (1.7) 0.4 0.1 0.4 (1.6)
Administrative expenses (0.1) – – (2.9) (2.0) (2.4) (2.1) (5.3)
Depreciation, amortisation
and impairment charges (1.6) (1.7) – (0.4) (3.3) (0.1) (4.9) (2.2)
Interest income 1.3 2.1 – (0.2) - – 1.3 1.9
Interest expense – – – (0.4) - (0.2) – (0.6)
Income tax expense – – – – – 0.3 – 0.3
Profit/(loss) and total
comprehensive income/
(expense) for the period (0.4) 0.4 – (5.6) (4.9) (2.3) (5.3) (7.5)
Share of total
comprehensive income/
(expense) attributable
to Group (0.2) 0.2 – (1.9) (1.2) (0.6) (1.4) (2.3)
Foreign exchange loss
recognised in other
comprehensive income – 0.1 – – – – – 0.1
Dividend received 8.0 7.7 – – – – 8.0 7.7
* The Group disposed of its holding in Infinite Acres on 28 October 2021. The results above represent the Group’s share of results up until this date.
The joint ventures and associates have no significant contingent liabilities to which the Group is exposed. The Group
does not have any commitments that have been made to the joint ventures or associates and not recognised at the
reporting date.
There are no significant restrictions on the ability of joint ventures and associates to transfer funds to the owners, other
than those imposed by the Companies Act 2006 or equivalent local regulations.
3.7 Other financial assets
Accounting policies
Other financial assets comprise contingent consideration receivable, unlisted equity investments, loans receivable, and
contributions towards dilapidations costs receivable.
Contingent consideration receivable is initially measured at the fair value at the date of disposal of the Group’s
shareholdings and is re-measured to fair value at each reporting date with the changes in fair value recognised in profit
or loss.
Where unlisted equity investments represent strategic investments that the Group intends to hold indefinitely, they have
been designated as at fair value through other comprehensive income (“FVTOCI”). They are held 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
the Income Statement. All other unlisted equity investments are held at fair value through profit or loss (“FVTPL”).
Loans receivable held at FVTPL were initially recognised at the amount of cash lent. Accrued interest is added to the
carrying amount. They are held at fair value and revalued at each reporting date.
Loans receivable held at amortised cost were initially recognised at the fair value of the cash lent. Accrued interest is
added to the carrying amount. They are held at amortised cost, reduced by appropriate provisions for estimated
irrecoverable amounts.
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OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
229
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
3.7 Other financial assets continued
Notes
27 November
2022
£m
28 November
2021
£m
Contingent consideration receivable 98.3 156.7
Unlisted equity investments held at FVTOCI 69.8 30.4
Unlisted equity investment held at FVTPL – 1.0
Loans receivable held at FVTPL 5.4 2.4 10.9
Loan receivable held at amortised cost 5.4 14.2 12.1
Contributions towards dilapidations costs receivable 0.7 1.5
Other financial assets 185.4 212.6
Disclosed as:
Current 3.8 1.2
Non-current 181.6 211.4
185.4 212.6
Contingent consideration receivable
Total contingent consideration receivable at the balance sheet date is £98.3m (2021: £156.7m), and comprises two
amounts: £95.0m (2021: £152.6m) due from Marks and Spencer Holdings Limited (“M&S”) relating to the part-disposal
of Ocado Retail Limited (“Ocado Retail”) in August 2019; and £3.3m (2021: £4.1m) due from Next Holdings Limited
(“Next”) relating to the disposal of Marie Claire Beauty Limited (“Fabled”) in July 2019. Refer to Note 1.4 for details on
the estimation uncertainty in relation to the fair value measurement of contingent consideration receivable and Note 4.4
for changes in the fair value during the period.
Contingent consideration due from M&S
Under the terms of the part-disposal of Ocado Retail during 2019, there is a contingent consideration due from M&S to
Ocado Group of £190.7m that is payable in cash by no later than August 2024. This payment is dependent on certain
contractually defined Ocado Retail performance measures (“the Target”) being achieved during the 2023 financial year.
The outcome is a binary one, meaning should the Target be achieved, this will trigger the payment in full of £190.7m
(£156.3m plus £34.4m of interest, due no later than August 2024). Conversely, should the Target not be achieved, no
consideration would be payable by M&S. The contractual arrangement with M&S expressly provides for the Target to be
adjusted by the shareholders for actions taken since the part-disposal was effected.
Whilst the contractual outcome is binary, the Group is required, under IFRS 9 Financial Instruments, to determine the fair
value of the contingent consideration receivable from M&S. The outcome of this determination is a fair value at the period
end of £95.0m, which is a reduction of £57.6m from the fair value of £152.6m recorded at the end of the prior period.
The fair value of £95.0m has been estimated using the expected present value technique and is based on a number of
probability-weighted possible scenarios and applying an appropriate discount rate to reflect the timing of the possible
payment. We have considered a range of scenarios reflecting current market uncertainty, the impact of likely adjustments
to the performance measures target and Ocado Retail’s current trading performance. A discount rate of 10.0% was used.
There is significant uncertainty in this estimate of fair value and given the binary nature of the contractual agreement it is
reasonably possible that the actual amount received at the point of settlement will be materially different to the fair value
currently recorded. Given there is a degree of subjectivity in the determination of the post-adjustment performance
measure, there is also a possibility that the contingent consideration may be agreed through a negotiated settlement
between the two shareholders.
Contingent consideration due from Next
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 £3.7m (2021: £5.1m), payable in tranches in March and
September each year.
Unlisted equity investments held at FVTOCI
% of share of capital held Carrying amount
Company Principal activity Country of incorporation
27 November
2022
28 November
2021
27 November
2022
£m
28 November
2021
£m
80 Acres Urban
Agriculture Inc.
Vertical farming United States of America 2.5% 2.5% 10.2 11.1
Oxbotica Limited1 Autonomous vehicle technology England and Wales 8.8% 8.8% 36.8 10.3
Paneltex Limited Manufacturing refrigerated
vehicles
England and Wales 25.0% 25.0% 7.6 6.1
Inkbit Corporation 3D printing United States of America 5.5% 5.5% 3.5 2.9
Sanctuary Cognitive
Systems Corporation
Artificial intelligence Canada 1.6% – 1.0 –
Wayve Technologies
Limited2
Autonomous vehicle technology
England and Wales
2.6% – 10.7 –
Unlisted equity investments held at FVTOCI 69.8 30.4
1 The fair value of equity investment in Oxbotica Limited (“Oxbotica”) increased as a result of the company successfully completing a series C fundraise
2 During the period, Wayve Technologies Limited (“Wayve”), successfully completed its Series B Fundraising resulting in the Group’s convertible loan note converting
into equity.
The investment in Paneltex Limited 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.
Loans receivable held at FVTPL
Carrying amount
Borrower Principal amount Coupon rate Repayment due
27 November
2022
£m
28 November
2021
£m
Wayve Technologies Limited £10.0m – August 2024 – 8.8
Karakuri Limited £1.7m 8% October 2023 1.8 1.9
Myrmex Inc. €0.2m 5% July 2022 – 0.2
Inkbit Corporation US$0.6m 6% November 2024 0.6 –
Loans receivable held at FVTPL 2.4 10.9
Loans receivable held at FVTPL includes a convertible loan to Karakuri. Interest is chargeable on the £1.7m 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 interest. The fair
value of the loan receivable at 27 November 2022 is £1.8m (2021: £1.9m).
Loan receivable held at amortised cost
The loan receivable held at amortised cost is a USD15m loan to Infinite Acres Holding B.V. In October 2021, following the
Group’s divestment in Infinite Acres, 80 Acres Urban Agriculture, Inc. (“80 Acres”) became a guarantor to the loan.
Interest is chargeable on the USD15.0m principal at 5% per annum to December 2021, and 7% thereafter. The loan is
repayable in full in September 2024, along with any unpaid accrued interest.
Contributions towards dilapidations costs receivable
Contributions towards dilapidation 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.
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OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
231
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
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 one year from the date of classification.
Where there are events or circumstances that extend the period to complete the sale beyond one year, and those
events or circumstances are beyond the Group’s control, the Group will continue to classify an asset or disposal group
as held for sale where there is sufficient evidence that the Group remains committed to its plan to sell the asset or
disposal group.
Asset held for sale
The asset held for sale of £4.4m (2021: £4.2m) 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 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 and consumables (including fuel). Inventories are valued at the lower of
cost (using the first-in-first-out basis) and net realisable value. Costs include all direct expenditure and other
appropriate attributable costs incurred in bringing inventories to their present location and condition. 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.
During the period, the Group adopted a new inventory accounting policy for its low-value spares (items below £500).
Under the new accounting policy, low-value spares will be recognised initially in inventory and expensed as used.
In prior years, the Group recognised low-value spares as an expense upon purchase. This was accounted as such as the
aggregate amount of those items have historically not been material. The Group has adopted the inventory accounting
policy for low value spares as outlined above as it expects the purchase of low-value spares to increase in line with the
growing number of CFCs and the aggregate value of these spares to become more significant.
This is a new accounting policy for an area that was previously immaterial and as such has been applied prospectively
from the beginning of the period in accordance with the requirements of IAS 8 – Accounting Policies, Changes in
Accounting Estimates and Errors. Consequently, £7.3m which would have been otherwise expensed on purchase has
been recognised within inventories at the period end. No adjustment has been made for the prior period.
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.
27 November
2022
£m
28 November
2021
£m
Goods for resale 89.2 81.8
Consumables 1 7.6 4.9
Inventories 106.8 86.7
The provision for slow-moving, obsolete and defective stock has increased by £2.5m from the prior period (2021: £2.9m
increase) and the corresponding loss 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
expected credit loss (“ECL”).
Other receivables are also not interest bearing and are recognised initially at their transaction price, and subsequently
at amortised cost, reduced by appropriate ECL.
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.
Provision for expected credit loss (“ECL”)
The Group applies the simplified approach to measuring ECL, segmenting its trade receivables based on shared
characteristics and recognising a loss allowance for the lifetime ECL for each segment of trade receivables.
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.
27 November
2022
£m
28 November
2021
£m
Trade receivables, net of ECL allowance 124.2 124.6
Other receivables 82.7 61.4
Prepayments 76.5 69.4
Accrued income 45.9 69.0
Trade and other receivables 329.3 324.4
Disclosed as:
Current 329.3 323.9
Non-current – 0.5
329.3 324.4
At 27 November 2022, the Group had an ECL allowance of £15.5m (2021: £3.9m) against an outstanding trade
receivable balance of £139.7m (2021: £128.5m). The increase in ECL allowance is primarily in relation to a minor
contractual dispute regarding specific terms, which are under negotiation at the end of the period. Of the £11.6m net
increase in ECL provision during the period, £7.8m was recorded against revenue and the remaining amounts were
recorded in operating expenses.
Movements in the provision for ECL of trade and other receivables are as follows:
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Balance at beginning of period (3.9) (2.6)
Provision for expected credit loss of receivables (12.0) (2.4)
Uncollectible amounts written off – 0.6
Recovery of amounts previously provided for 0.4 0.5
Balance at end of period (15.5) (3.9)
Included in trade receivables and accrued income is £59.6m and £14.2m respectively (2021: £50.8m and £5.5m) relating
to contract balances outstanding for Solutions contracts. See Note 2.1 for more detail.
Included in trade receivables is £52.5m (2021: £50.9m) due from suppliers in relation to commercial and media income.
As at 29th January 2023, £49.0m had been received.
Included in accrued income is £12.5m (2021: £9.0m) to be invoiced to suppliers in relation to supplier-funded promotional
activity, and £6.2m (2021: £10.8m) to be invoiced to suppliers in relation to volume-related rebates. At 29th January 2023,
£16.6m of accrued income had been invoiced.
Refer to Note 5.4 for details on related party balances within trade and other receivables.
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232
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
233
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
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 of the reporting date 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.
27 November
2022
£m
28 November
2021
£m
Cash at bank and in hand 304.3 362.1
Money market funds 623.7 596.5
Short-term treasury deposits 400.0 510.0
Cash and cash equivalents 1,328.0 1,468.6
Included in cash at bank and in hand are customers’ credit card payments of £21.9m (2021: £34.9m) received within five
working days of the reporting date.
Of the Group’s cash and cash equivalents, £1.4m (2021: £1.8m) is held by the Group’s captive insurance company to
maintain its solvency requirements. A further £1.5m (2021: £2.6m) 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.
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.
27 November
2022
£m
28 November
2021
£m
Trade payables 176.9 93.6
Taxation and social security 32.5 10.9
Accruals and other payables 287.8 274.6
Deferred income 11.0 14.1
Trade and other payables 508.2 393.2
Disclosed as:
Current
506.3 393.2
Non-current 1.9 –
508.2 393.2
Accruals and other payables includes £65.0m of employment cost accruals (2021: £34.5m), £58.1m goods received not
invoiced (2021: £49.4m) and £42.4m of capital project accruals (2021: £30.8m).
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.
3.13 Provisions
Accounting policies
Provisions 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 outflow of resources will be required to settle the obligation,
and the amount can be estimated reliably.
The amount recognised as provisions are management’s best estimate of the consideration required to settle the
present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation and
historical experience. Provisions are determined by discounting the expected future cash flows by a rate that reflects
current market assessments of the time value of money and the risks specific to the liability. The unwinding of the
discount is recognised as a finance cost in the Consolidated Income Statement.
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 future expected costs required to restore the Group’s leased buildings and vehicles to
their fair condition at the end of their lease terms.
Leases for CFCs expire up to 2092, the GMDC leases between 2027 and 2033, head office leases between 2022 and
2029, and with leases for the spokes expiring up to 2038. 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.
Employee incentives schemes
Provisions for employee incentive schemes relate to employer’s NIC on taxable equity-settled schemes and the Ocado
Retail Value Creation Plan (“Retail VCP”). For all taxable schemes and the Retail VCP, the Group is liable to pay
employer’s NIC upon exercise of the share awards.
Taxable schemes are the unapproved Executive Share Option Scheme (“ESOS”), the Ocado Group Value Creation Plan
(“Group VCP”), the Long-Term Operating Plan, the Annual Incentive Plan (“AIP”) and the Restricted Share Plan (“RSP”).
For more details on these schemes, refer to Note 4.7.
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OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
235
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
3.13 Provisions continued
Insurance reimbursement
Following the fire that destroyed the Andover CFC in February 2019 (Note 2.6), the Group recognised an insurance
reimbursement asset and a corresponding provision representing the obligation to reinstate the building. The obligation
was fulfilled in the prior period.
Insurance
claims
£m
Dilapidations
£m
Employee
incentive
schemes
£m
Other
£m
Total
£m
Balance at 29 November 2020 0.3 14.7 23.5 5.5 44.0
Charged to Consolidated Income Statement
– Additional provision 0.2 – 6.3 – 6.5
– Unwinding of discounting – 0.8 – – 0.8
Recognition of right-of-use assets – 6.0 – – 6.0
Used during period – – (2.1) (5.5) (7.6)
Balance at 28 November 2021 0.5 21.5 2 7.7 – 49.7
Charged to Consolidated Income Statement
– Additional provision – – 0.6 – 0.6
– Unwinding of discounting – 0.4 – – 0.4
– Unused amounts reversed – (2.9) (26.6) – (29.5)
Recognition of right-of-use assets – 5.3 – – 5.3
Recognised on acquisition – – – 0.2 0.2
Used during period (0.1) – (0.2) – (0.3)
Balance at 27 November 2022 0.4 24.3 1.5 0.2 26.4
27 November 2022
Insurance
claims
£m
Dilapidations
£m
Employee
incentive
schemes
£m
Other
£m
Total
£m
Current 0.4 0.3 0.3 – 1.0
Non-current – 24.0 1.2 0.2 25.4
0.4 24.3 1.5 0.2 26.4
28 November 2021
Insurance
claims
£m
Dilapidations
£m
Employee
incentive
schemes
£m
Other
£m
Total
£m
Current 0.5 0.1 0.4 – 1.0
Non-current – 21.4 27.3 – 48.7
0.5 21.5 2 7.7 – 49.7
Insurance claims
The calculation of this provision involves estimating a number of variables, principally the level of claims that may be
received and the level of any compensation that may be payable. Uncertainty associated with these factors may result
in the ultimate liability being different from the reported provision.
Employee incentive schemes
During the period, an additional provision of £0.6m (2021: £1.3m) has been recognised in relation to employers NIC on
taxable equity-settled schemes and £0.2m (2021: £2.1m) has been utilised as a result of exercises of taxable equity-
settled share awards. Releases in the period of amounts previously provided include £7.0m in relation to employers NIC
on the Ocado VCP (2021: £0.7m additional provision) and £19.0m for the Retail VCP following the cancellation of the
scheme during the period (2021: £5.0m additional provision).
The provision will be utilised once the share awards under each of the schemes have vested and been allotted
to participants on exercise. Vesting will occur between 2023 and 2027, and allotment will take place between
2023 and 2032. Refer to Note 4.7 for further details.
3.14 Contingent liabilities
Accounting policies
Contingent liabilities are potential future cash outflows, where the likelihood of payment is considered more than remote
but is not considered probable or cannot be measured reliably.
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, filed patent infringement claims
against the Group in the High Court in England, the United States International Trade Commission (“US ITC”), and the
United States District Court for the Eastern District of Virginia. 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.
Ocado 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, Ocado has alleged, based on the evidence
available, that the AutoStore patents on which AutoStore has based its case were procured fraudulently from the United
States Patent and Trademark Office. Additionally, Ocado has brought infringement proceedings against AutoStore in
Germany under its Utility Model rights. Furthermore, there are numerous EPO Opposition proceedings in progress with
both Ocado as proprietor and opponent.
In March 2022, the US ITC found in favour of Ocado. AutoStore has appealed the decision, and the appeal is likely to be
heard in 2023. The UK High Court trial was heard in March and April 2022 and a judgement is awaited. It should be
noted that prior to the UK trial AutoStore withdrew two of the three patent families from the infringement proceedings.
Hearings are scheduled in the German proceedings in May 2023, although the preliminary opinion of the German Patent
Office is that the Utility Model rights are valid. The many EPO oppositions continue with so far one AutoStore patent
having been revoked in its entirety, with no appeal now possible.
Ocado has been very clear that it does not believe it has infringed any valid rights of AutoStore.
Legal and other costs have been incurred to defend against AutoStore’s claims and to file the Group’s claims.
Given the ongoing nature of this litigation and its multiple forums, the outcome is uncertain and the financial impact is
not currently quantifiable, and so the Group has not recognised a contingent asset nor a contingent 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 insurance or will not have a material effect on the Group’s financial
statements.
Subsidiary audit exemptions
The following UK subsidiary undertakings are exempt from the requirements of the Companies Act 2006 (the Act)
relating to the audit of individual accounts by virtue of section 479A of the Act.
– Ocado Ventures Holdings Limited (09887250)
– Ocado Ventures (80 Acres) Limited (12075378)
– Ocado Ventures (Myrmex) Limited (12774138)
– Ocado Ventures (Inkbit) Limited (12103334)
– Ocado Ventures (Oxbotica) Limited (12796767)
– Ocado Ventures (JFC) Limited (12035120)
– Ocado Ventures (Wayve) Limited (13536254)
– Ocado Ventures (Karakuri) Limited (11512054)
– Ocado Finco 1 Limited (12996937)
– Ocado Finco 2 Limited (13007767)
Ocado Group plc will guarantee all outstanding liabilities that these subsidiaries are subject to as at the financial year
ended 27 November 2022 in accordance with section 479C of the Act, as amended by the Companies and Limited
Liability Partnerships (Accounts and Audit Exemptions and Change of Accounting Framework) Regulations 2012. In
addition, Ocado Group plc will guarantee any contingent and prospective liability that these subsidiaries are subject to.
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OCADO GROUP PLC Annual Report and Accounts 2022
237
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
Section 4 – Capital structure and financing costs
4.1 Borrowings
Accounting policies
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.
27 November
2022
£m
28 November
2021
£m
Senior unsecured convertible bonds 835.9 805.3
Senior unsecured notes 496.3 494.6
Revolving credit facility 10.0 –
Other borrowings 30.6 0.1
Borrowings 1,372.8 1,300.0
Disclosed as:
Current 10.2 –
Non-current 1,362.6 1,300.0
1,372.8 1,300.0
Senior unsecured convertible bonds and senior unsecured notes
Carrying amount
Facility Inception
Coupon
rate Final payment due
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
£600m senior unsecured convertible bonds December 2019 0.875% December 2025 540.7 522.0
£350m senior unsecured convertible bonds June 2020 0.750% January 2027 295.2 283.3
£500m senior unsecured notes October 2021 3.875% October 2026 496.3 494.6
The £600.0m of senior unsecured convertible bonds were issued in December 2019, raising £592.1m, net of transaction
fees. At the date of issue, the liability component was valued at £485.0m, with the remaining £107.1m recognised in the
convertible bonds reserve.
The £350.0m of senior unsecured convertible bonds were issued in June 2020, raising £343.4m, net of transaction
fees. At the date of issue, the liability component was valued at £266.0m, with the remaining £77.4m recognised in the
convertible bonds reserve.
The £500.0m of senior unsecured notes were issued in October 2021, raising £491.6m, net of transaction fees. Part of
the proceeds were used to repay the £225m senior secured notes early. The senior secured notes were issued in June
2017, raising £250.0m, and £25.0m had been repaid in 2019. Unamortised borrowing costs of £3.2m were written off at
the time of repayment.
Revolving credit facility
In June 2022, the Group entered into a three-year multi-currency Revolving Credit Facility (“RCF’’) of £300m with a
syndicate of international banks. The RCF is due to mature on 20 June 2025. As at 27 November 2022, the facility
remains undrawn. Interest is payable on the amounts drawn down at a margin of 2.25% plus the applicable reference
rate depending on the currency of the amounts drawn down. The Group is subject to certain financial covenants under
this facility.
Transaction costs of £3.4m relating to the RCF have been capitalised and are being amortised in the Income Statement
on a straight-line basis over the term of the RCF.
The Group had an existing RCF of which £10.0m was drawn at year end.
Other borrowings
Other borrowings include a shareholder loan of £30.0m provided to Ocado Retail from the non-controlling interest in
November 2022. The loan has a termination date of August 2039 and incurs interest at SONIA + 4% per annum.
27 November 2022
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
Total
£m
Senior unsecured convertible bonds – – 835.9 – 835.9
Senior unsecured notes – – 496.3 – 496.3
Revolving credit facility 10.0 – – – 10.0
Other borrowings 0.2 0.1 0.3 30.0 30.6
Borrowings 10.2 0.1 1,332.5 30.0 1,372.8
28 November 2021
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
Total
£m
Senior unsecured convertible bonds – – 522.0 283.3 805.3
Senior unsecured notes – – 494.6 – 494.6
Other borrowings – 0.1 – – 0.1
Borrowings – 0.1 1,016.6 283.3 1,300.0
The Group reviews its financing arrangements regularly. The senior unsecured notes and senior unsecured convertible
bonds contain typical restrictions concerning dividend payments and additional debt and leases.
4.2 Movements in net (debt)/cash
Non-cash movements
Notes
28 November
2021
£m
Cash flows
£m
Net new lease
liabilities
£m
Foreign
exchange
£m
Unwinding
of interest
£m
27 November
2022
£m
Cash and cash equivalents 3.11 1,468.6 (162.4) – 21.8 – 1,328.0
Liabilities from financing activities:
Borrowings 4.1 (1,300.0) (40.6) – – (32.2) (1,372.8)
Lease liabilities 3.5 (528.4) 57.4 (61.3) – – (532.3)
(1,828.4) 16.8 (61.3) – (32.2) (1,905.1)
Net debt (359.8) (145.6) (61.3) 21.8 (32.2) (577.1)
Non-cash movements
Notes
29 November
2020
£m
Cash flows
£m
Net new lease
liabilities
£m
Foreign
exchange
£m
Unwinding
of interest
£m
28 November
2021
£m
Other treasury deposits 3.6 370.0 (370.0) – – – –
Cash and cash equivalents 3.10 1,706.8 (257.5) – 19.3 – 1,468.6
2,076.8 (627.5) – 19.3 – 1,468.6
Liabilities from financing activities:
Borrowings 4.1 (997.4) (266.5) – – (36.1) (1,300.0)
Lease liabilities 3.5 (407.8) 48.6 (169.2) – – (528.4)
(1,405.2) (217.9) (169.2) – (36.1) (1,828.4)
Net debt 671.6 (845.4) (169.2) 19.3 (36.1) (359.8)
At the reporting date, the Group had net debt of £559.6m (2021: £325.8m), excluding lease liabilities of £17.5m
(2021: £34.0m) payable to MHE JVCo Limited (Note 5.4). As detailed in Note 3.11, £2.9m (2021: £4.4m) of the Group’s
cash and cash equivalents is considered to be restricted, and is not available to circulate within the Group on demand.
Contents
Contents
FINANCIAL STATEMENTS
238
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
239
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
4.3 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 27 November 2022 and 28 November 2021, the Group’s derivative financial instruments consisted of
warrants to subscribe for additional shares of investee companies and 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.
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.
27 November
2022
£m
28 November
2021
£m
Non-current assets
Warrants 27.4 9.6
Current assets
Commodity swap contracts 0.8 0.3
Current liabilities
Commodity swap contracts (1.6) –
Net derivative assets 26.6 9.9
Commodity swap contracts
The Group uses commodity swap contracts to hedge the cost of future purchases of diesel fuel to be used in the
logistics business. The cash flows are expected to occur within one year of the reporting date, and hedges cover 50% to
80% of expected risk.
The notional principal amounts of the outstanding commodity swap contracts were £13.4m (2021: £8.1m). The weighted
average strike price of the outstanding commodity swap contracts relating to the future purchase of fuel at the
reporting date was 66.13 pence per litre of diesel (2021: 36.9 pence per litre of diesel). The hedged highly probable
forecast transactions are expected to occur at various dates during the next 12 months. A cumulative net loss of £1.1m
(2021: £0.4m net gain) has been recognised in the hedging reserve through other comprehensive income. This gain/
(loss) will be recognised in profit or loss in the periods during which the hedged forecast transactions affect the
Consolidated Income Statement.
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.
Warrants
Carrying amount
Investee company Expiry date
27 November
2022
£m
28 November
2021
£m
Oxbotica Limited April 2024 19.5 5.9
80 Acres Urban Agriculture, Inc. September 2026 4.0 –
Karakuri Limited April 2024 2.1 1.9
Wayve Technologies Limited
1
January 2026 1.8 1.8
Warrants 27.4 9.6
Warrants are measured at fair value each year end, taking into account a variety of inputs, sensitivities and probabilities
based on underlying forecasts and financial information of the investee company. Any fair value gains or losses on
remeasurement are recognised through the Income Statement.
4.4 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. Financial instruments are derecognised from the Consolidated
Balance Sheet when the contractual cash flows expire or when the Group no longer retains control of substantially all
the risks and rewards under the instrument.
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.
Refer to Note 3.10 for the Group’s accounting policy for expected credit losses.
Financial liabilities are measured at amortised cost, except for derivatives that 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:
27 November 2022 Notes
Amortised
cost
£m
FVTPL
£m
FVTOCI
£m
Total
£m
Financial assets
Other financial assets 3.7 14.9 100.7 69.8 185.4
Trade receivables 3.10 124.2 – – 124.2
Other receivables and accrued income 3.10 128.6 – – 128.6
Cash and cash equivalents 3.11 1,328.0 – – 1,328.0
Derivative assets 4.3 – 28.2 – 28.2
Total financial assets 1,595.7 128.9 69.8 1,794.4
Financial liabilities
Trade payables 3.12 (176.9) – – (176.9)
Accruals and other payables 3.12 (287.8) – – (287.8)
Borrowings 4.1 (1,372.8) – – (1,372.8)
Lease liabilities 3.5 (532.3) – – (532.3)
Derivative liabilities 4.3 – (1.6) – (1.6)
Total financial liabilities (2,369.8) (1.6) – (2,371.4)
Contents
Contents
FINANCIAL STATEMENTS
240
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
241
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
4.4 Financial instruments continued
28 November 2021 Notes
Amortised
cost
£m
FVTPL
£m
FVTOCI
£m
Total
£m
Financial assets
Other financial assets 3.7 13.6 168.6 30.4 212.6
Trade receivables 3.10 124.6 – – 124.6
Other receivables and accrued income 3.10 130.4 – – 130.4
Cash and cash equivalents 3.11 1,468.6 – – 1,468.6
Contract assets 2.1 0.3 – – 0.3
Derivative assets 4.3 – 9.9 – 9.9
Total financial assets 1,737.5 178.5 30.4 1,946.4
Financial liabilities
Trade payables 3.12 (93.6) – – (93.6)
Accruals and other payables 3.12 (285.5) – – (285.5)
Borrowings 4.1 (1,299.9) – – (1,299.9)
Lease liabilities 3.5 (528.4) – – (528.4)
Total financial liabilities (2,207.4) – – (2,207.4)
Derivative financial instruments are held at FVTPL, but where they are hedging instruments, related gains and losses
are recognised in other comprehensive income.
Fair value measurement of financial assets and liabilities
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:
27 November 2022 28 November 2021
Notes
Carrying
amount
£m
Fair value
£m
Carrying
amount
£m
Fair value
£m
Financial assets
Other financial assets 3.7 185.4 185.4 212.6 212.6
Trade receivables 3.10 124.2 124.2 124.6 124.6
Other receivables and accrued income 3.10 128.6 128.6 130.4 130.4
Cash and cash equivalents 3.11 1,328.0 1,328.0 1,468.6 1,468.6
Contract assets 2.1 – – 0.3 0.3
Derivative assets 4.3 28.2 28.2 9.9 9.9
Total financial assets 1,794.4 1,794.4 1,946.4 1,946.4
Financial liabilities
Trade payables 3.12 (176.9) (176.9) (93.6) (93.6)
Accruals and other payables 3.12 (287.8) (287.8) (285.5) (285.5)
Senior unsecured notes 4.1 (496.3) (392.5) (494.6) (488.1)
Senior unsecured convertible bonds 4.1 (835.9) (700.4) (805.3) (1,067.4)
Other borrowings 4.1 (40.6) (40.6) – –
Lease liabilities 3.5 (532.3) (532.3) (528.4) (528.4)
Derivative liabilities 4.3 (1.6) (1.6) – –
Total financial liabilities (2,371.4) (2,132.1) (2,207.4) (2,463.0)
The fair values of other financial assets, trade receivables, other receivables and accrued income, cash and cash
equivalents, trade payables and accruals and other payables are assumed to approximate to their carrying values but
for completeness are included in the above analysis.
The fair values of the senior unsecured notes and senior unsecured convertible bonds are determined based on the
quoted price in the active market.
The fair values of all other financial assets and liabilities have been calculated using discounted cash flows or the
venture capital method.
Financial assets and liabilities held at fair value have been valued as follows:
27 November 2022 Notes
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Financial assets held at fair value
Contingent consideration receivable 3.7 – – 98.3 98.3
Unlisted equity investments 3.7 – – 69.8 69.8
Convertible loan to associate 3.7 – – 2.4 2.4
Derivative assets 4.3 – 0.8 27.4 28.2
Total financial assets held at fair value 0.8 197.9 198.7
Financial liabilities held at fair value
Derivative liabilities 4.3 – (1.6) – (1.6)
Total financial liabilities held at fair value – (1.6) – (1.6)
28 November 2021 Notes
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Financial assets held at fair value
Contingent consideration receivable 3.7 – – 156.7 156.7
Unlisted equity investments 3.7 – – 31.4 31.4
Convertible loan to associate 3.7 – – 10.9 10.9
Derivative assets 4.3 – 0.4 9.6 10.0
Total financial assets held at fair value – 0.4 208.6 209.0
Financial liabilities held at fair value
Derivative liabilities 4.3 – – – –
Total financial liabilities held at fair value – – – –
Changes in the fair values of financial instruments categorised in level 3 are as follows:
Notes
Contingent
consideration
receivable
£m
Unlisted
equity
investments
£m
Loans
receivable
£m
Derivative
assets/
liabilities
£m
Total
£m
Balance at 29 November 2020 173.6 12.7 1.7 – 188.0
Recognised during the period – 11.2 – – 11.2
Cash paid/(received) (33.8) 11.4 10.3 – (12.1)
Gains/(losses) recognised in profit or loss 2.4, 2.6 16.9 – (1.3) 9.6 25.2
Interest recognised in finance income 4.5 – – 0.2 – 0.2
Losses recognised in other comprehensive income 4.9 – (3.9) – – (3.9)
Balance at 28 November 2021 156.7 31.4 10.9 9.6 208.6
Recognised/derecognied during the period – 8.9 (9.0) 1.9 1.8
Cash paid – – 0.5 – 0.5
Gains/(losses) recognised in profit or loss (58.4) (3.8) (0.2) 15.9 (46.5)
Interest recognised in finance income – – 0.2 – 0.2
Gains recognised in other comprehensive income – 33.3 – – 33.3
Balance at 27 November 2022 98.3 69.8 2.4 27.4 197.9
Contents
Contents
FINANCIAL STATEMENTS
242
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
243
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
4.4 Financial instruments continued
The following table provides information about how the fair values of financial instruments categorised in level 3
are determined:
Description Valuation techniques and key inputs
Significant unobservable
inputs Sensitivity of the fair value measurement to input
Contingent
consideration
receivable
Expected present value technique
Expected cash in-flows are
estimated based on the terms of
the share purchase agreements
and the probability weighting of
possible scenarios of meeting
financial and operational targets.
Discount rate of
10.0%
Expected cash
in-flows of £194.4m
The fair value is considered principally to be
sensitive to reasonably possible changes in the
target performance measure. To illustrate this
sensitivity, if the performance measure was £25m
higher or lower than assumed in the valuation
approach, the fair value of the asset based on
period end valuation model would increase by
£13.0m or decrease by £14.6m respectively.
Unlisted equity
investments and
derivative assets
(warrants)
– Oxbotica Limited
Probability weighted expected
return method (“PWERM”)
Forecasted revenue, revenue
multiples, exit date, discount rate
and probabilities
Probabilities of
expected revenue
in five different
scenarios
An increase in probability percentage of 5%
spread across the higher case scenarios and
decrease of the same percentage in the lower
case scenario would increase the fair value of
unlisted equity investments and derivative assets
by £18.9m and £15.1m, respectively.
Derivative assets
(warrants)
– Karakuri Limited
Probability weighted expected
return method (“PWERM”)
Forecasted revenue, revenue
multiples, exit date, discount rate
and probabilities
Probabilities of
expected revenue
in three different
scenarios
An increase in probability percentage of 5%
spread across the higher case scenarios and
decrease of the same percentage in the lower
case scenario would increase the fair value of
derivative assets by £0.1m.
Unlisted equity
investments and
derivative assets
(warrants)
– 80 Acres Urban
Agriculture, Inc.
– Wayve
Technologies
Limited
Option pricing model.
Volatility, risk free interest rate
and exit date.
Breakpoint option
value of shares
- 80 Acres Urban Agriculture, Inc: An increase of
5% in volatility will decrease unlisted equity
investment and increase derivative financial
assets by £0.1m and £0.1m respectively.
- Wayve Technologies Limited An increase of 5%
in volatility will increase unlisted equity
investment by £0.3m.
Unlisted equity
investments
– Inkbit Corporation
Probability weighted expected
return method (“PWERM”)
Forecast revenue, revenue
multiples, exit date, discount rate
and probabilities
Probabilities of
expected revenue in
different scenarios
A decrease in discount rate of 3% and a 5%
increase in the probability of fund raise would
increase the fair value of unlisted equity by
£0.2m.
Unlisted equity
investments
– Paneltex Limited
Discounted cash flow and Market
approach were used to derive
Enterprise Value used for
calculating equity value along
with a capitalisation of earnings
approach
Forecasted EBITDA, EBITDA
multiples and discount rates
Discount rate of
19.9%, long-term
growth rate of EBITDA
of 2.0%
An increase in the EBITDA multiple of 0.3x and 5%
increase in forecasted EBITDA would increase the
fair value by £0.3m.
Loans receivable
– Karakuri Limited
Probability-weighted expected
return method
Conversion/exercise dates,
discount rate and probabilities
Probabilities of
conversion dates
in four different
scenarios and
discount rate
A decrease in discount rate of 3% and a 5%
increase in the probability of fund raise 1 would
increase the fair value of the loans receivable,
unlisted equity investment and derivative assets
aggregating to £7.1m.
For more details on the other financial assets and derivative financial assets, refer to Notes 3.7 and 4.3 respectively.
4.5 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 4.4, 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 amounts due from solutions customers and monies due
from suppliers in relation to commercial and media income, which are considered of a good credit quality, as well as VAT
receivable. The Group provides for doubtful receivables in respect of amounts due from customers and monies
due from suppliers.
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
provides for 30% of amounts due from suppliers that are between 61 and 360 days overdue, and 100% of amounts more
than 360 days overdue. It provides for 100% 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’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.
Refer to Note 3.10 for movements in the provision for ECL of trade and other receivables during the period.
Contents
Contents
FINANCIAL STATEMENTS
244
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
245
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
4.5 Financial risk management continued
Liquidity risk
The Group has adequate cash resources to manage the short-term working capital needs of the business. In June 2022,
the group raised an additional c.£878m of gross liquidity through a c.£575m equity placing, c.£3m from a retail offering
and subscription by senior management and a new £300m revolving credit facility. The Group regularly reviews its
financing arrangements. For further details of the review see the Viability Statement on page 98.
The Group monitors its liquidity requirements to ensure it has sufficient cash to meet operational needs. For further
details, see Note 4.8.
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 contractual cash flows are gross and undiscounted, and include
future interest payments, so will not necessarily reconcile to the carrying amounts.
Contractual cash flows
27 November 2022 Notes
Carrying
amount
£m
Total
£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
Trade payables 3.12 176.9 176.9 176.9 – – –
Accruals and other payables 3.12 287.8 287.8 287.8 – – –
Borrowings 4.1 1,372.8 1,640.6 40.7 29.8 1,511.3 58.8
Lease liabilities 3.5 532.3 779.9 84.1 72.1 165.3 458.4
2,369.8 2,885.2 589.5 101.9 1,676.6 517.2
Contractual cash flows
27 November 2021 Notes
Carrying
amount
£m
Total
£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
Trade payables 3.12 93.6 93.6 93.6 – – –
Accruals and other payables 3.12 285.5 285.5 285.5 – – –
Borrowings 4.1 1,300.0 1,585.9 27.3 27.4 1,179.1 352.1
Lease liabilities 3.5 528.4 781.8 73.8 69.2 162.8 476.0
2,207.5 2,746.8 480.2 96.6 1,341.9 828.1
Currency risk
The Group has exposure to foreign currency risk through trade receivables, trade 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 and foreign
currency trade payables arise principally on purchases of plant and machinery. Trade receivables and payables arise
principally in Australian dollars, Canadian dollars, euros, Japanese yen, 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, salaries and purchases of plant and equipment.
The table below shows the Group’s sensitivity to changes in foreign exchange rates on its financial instruments
denominated in foreign currencies:
27 November 2022 28 November 2021
Increase/
(decrease)
in income
£m
Increase/
(decrease)
in equity
£m
Increase/
(decrease)
in income
£m
Increase/
(decrease)
in equity
£m
10.0% appreciation of above foreign currencies against sterling 14.7 – 35.3 –
10.0% depreciation of above foreign currencies against sterling (14.7) – (35.3) –
During the period, the currencies to which the Group is exposed appreciated and depreciated against sterling
by between 10.1% and (10.3)%. Given these historical movements, a 10.0% appreciation or depreciation of foreign
currencies is deemed reasonably likely to occur, 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.
At the reporting date, the interest rate profile of the Group’s interest-bearing financial instruments was as follows:
27 November
2022
£m
28 November
2021
£m
Fixed rate instruments
Financial assets 414.2 523.2
Financial liabilities (1,865.1) (1,828.4)
Variable rate instruments
Financial assets 928.0 945.4
Financial liabilities (40.0) –
Sensitivity analysis
Based on the Group’s variable rate interest-bearing borrowings and cash and cash equivalents existing at the end of the
period, a 2% increase in interest rates (2021: 1% increase) would affect equity and profit or loss by the amounts shown
below.
27 November
2022
£m
28 November
2021
£m
Increase in profit 17.8 9.5
Increase in equity – –
Contents
Contents
FINANCIAL STATEMENTS
246
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
247
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
4.6 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 share premium
At the reporting date, the number of ordinary shares available for issue under the Block Listing Facilities was 9,447,982
(2021: 7,259,291). 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
Share
capital
£m
Share
premium
£m
Balance at 29 November 2020 748.1 15.0 1,361.6
Issue of ordinary shares 1.4 – 1.9
Allotted in respect of share option schemes 1.9 – 8.5
Balance at 28 November 2021 751.4 15.0 1,372.0
Issue of ordinary shares 73.9 1.5 565.0
Allotted in respect of share option schemes 0.6 – 2.3
Balance at 27 November 2022 825.9 16.5 1,939.3
In June 2022, Ocado Group plc successfully completed the placing of 72,327,044 new ordinary shares of 2 pence each
(the “Placing Shares”) at a price of £7.95 per Placing Share (the “Placing Price”), with existing and new institutional
investors. In addition, retail investors subscribed for a total of 246,405 new Ordinary Shares at the Placing Price (the
“Retail Offer Shares”) and the Group CEO, CFO and GC subscribed for an aggregate of 150,944 new ordinary shares at
the Placing Price (the “Subscription Shares”).
In aggregate, the Placing Shares, the Retail Offer Shares and the Subscription Shares comprise 72,724,393 new
Ordinary Shares, which raised proceeds of £564.1m net of qualifying transaction costs directly related to the issuance
of shares amounting to £14.1m, which were deducted from the share premium.
Included in the total number of ordinary shares outstanding above are 10,438,075 (2021: 10,454,148) ordinary shares
held by the Group’s Employee Benefit Trust (see Note 4.7). 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 Ocado
Group Value Creation Plan (“Group 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 2.9, since the basic loss per share is calculated
using the weighted average number of ordinary shares in issue during the period, excluding treasury shares.
Treasury shares reserve
The treasury shares reserve arose when the Group issued equity share capital under its JSOS. In 2019, the Group
issued share capital relating to the linked jointly owned equity (“JOE”) awards under the Group 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 Group VCP. Participants’ interests in unexercised shares held by participants are
not included in the calculation of treasury shares. See Note 4.7 for more information on the JSOS and VCP.
Other reserves
The movements in other reserves are set out below:
Other reserves
Reverse
acquisition
reserve
£m
Convertible
bonds
reserve
£m
Merger
reserve
£m
Translation
reserve
£m
Fair value
reserve
£m
Hedging
reserve
£m
Total
£m
Balance at 29 November 2020 (116.2) 184.5 – (1.3) 10.0 (0.1) 76.9
Gain arising on cash flow hedges – – – – – 0.4 0.4
Foreign exchange loss on translation of foreign
subsidiaries and joint venture – – – (10.5) – – (10.5)
Foreign exchange gain on translation of foreign
joint venture reclassified to profit or loss – – – 0.8 – – 0.8
Loss on equity investments designated as at fair
value through other comprehensive income – – – – (3.9) – (3.9)
Acquisition of Haddington Dynamics Inc. – – 6.2 – – – 6.2
Balance at 28 November 2021 (116.2) 184.5 6.2 (11.0) 6.1 0.3 69.9
Loss arising on cash flow hedges – – – – – (1.1) (1.1)
Foreign exchange gain on translation of foreign
subsidiaries and joint venture – – – 69.1 – – 69.1
Gain on equity investments designated as at fair
value through other comprehensive income – – – – 33.3 – 33.3
Tax on gain on equity investments – – – – (7.2) – (7.2)
Balance at 27 November 2022 (116.2) 184.5 6.2 58.1 32.2 (0.8) 164.0
Reverse acquisition reserve
The acquisition by the Company of the entire issued share capital in 2010 of Ocado Holdings 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 27 November
2022 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.
Refer to Note 4.1 for further details on the senior unsecured convertible bonds issued by the Group.
Merger reserve
The merger reserve comprises shares issued as consideration for Haddington Dynamics Inc.
Translation reserve
The translation reserve comprises cumulative foreign exchange differences on the translation of foreign subsidiaries.
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 4.3).
Contents
Contents
FINANCIAL STATEMENTS
248
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
249
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
4.7 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, including the cost of associated employer NIC on certain taxable equity-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 service and 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 associated employer taxes 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 elapsed, 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.
Share options and other equity instruments
The total expense for the period relating to all share-based payment transactions is as follows:
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Executive Share Option Scheme 1.3 2.4
Joint Share Ownership Scheme – –
Sharesave Scheme 3.1 2.0
Long-term Incentive Plan – 0.4
Share Incentive Plan 2.2 1.9
Ocado Group Value Creation Plan 11.3 21.0
Ocado Retail Value Creation Plan (19.0) 5.0
Long-term Operating Plan – 0.7
Annual Incentive Plan 2.6 2.2
Employee Share Purchase Plan 0.2 0.5
Ocado Restricted Share Plan 11.6 1.7
Consultant Option Plan 0.2 0.6
Deferred Consideration Shares 2.4 3.4
Total expense 15.9 41.8
Of which:
Equity settled expense 42.0 35.5
Cash-settled expense (26.1) 6.3
Total expense 15.9 41.8
The Group had the following schemes in operation during the financial period:
(a) Executive Share Option Scheme (ESOS)
The Group’s ESOS was established in 2001 and 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 and also under the terms of the
Internal Revenue Service which are both qualified and non-qualified. 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.
Under the ESOS, the Group or the trustees of an employee trust may grant options over shares of the Company to
eligible employees and may impose performance targets or any further conditions 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.
With the exception of replacement options, 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).
In the prior period, on acquisition of a subsidiary, its existing unvested options were cancelled and replaced by options
of the Company granted under the ESOS. Replacement options shall vest in three equal instalments on the first three
anniversaries of the closing date of acquisition, subject to the option holder’s continued employment within the Group.
Details of the movement of the number of share options outstanding during each period are as follows:
52 weeks ended
27 November 2022
52 weeks ended
28 November 2021
Number
of share
options
Weighted
average
exercise
price (£)
Number
of share
options
Weighted
average
exercise
price (£)
Outstanding at beginning of period 2,074,654 7.43 1,965,039 5.96
Granted during period 275,528 12.04 649,047 10.09
Forfeited during period (164,020) 11.51 (173,891) 8.40
Exercised during period (255,807) 2.97 (365,541) 3.78
Outstanding at end of period 1,930,355 8.34 2,074,654 7.43
Exercisable at end of period 1,083,446 5.25 1,105,599 3.44
At the reporting date, the Group had 1,440,504 (2021: 1,369,887) approved options outstanding and 489,851
(2021: 704,767) unapproved options outstanding. At the end of the period, the range of exercise prices for approved
options outstanding was £1.28 to £25.08 (2021: £0.85 to £25.08) and for unapproved options outstanding was £2.56 to
£14.47 (2021: £1.05 to £20.84).
The weighted average remaining contractual life for the ESOS share options outstanding as at 27 November 2022
was 6.1 years (2021: 6.4 years).
For exercises during the period, the weighted average share price at the date of exercise was £11.77 (2021: £20.77).
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:
27 November
2022
28 November
2021
Weighted average share price £12.04 £21.10
Weighted average exercise price £12.04 £10.09
Expected volatility 50.0% 34.0%
Weighted expected life, years 3.00 2.32
Weighted average risk-free interest rate 1.3% 0.0%
Expected dividend yield 0.0% 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.
Contents
Contents
FINANCIAL STATEMENTS
250
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
251
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
4.7 Share options and other equity instruments continued
(b) Joint Share Ownership Scheme (JSOS)
The JSOS is an executive incentive scheme that was introduced to incentivise and retain the Executive Directors and
senior managers of the Group (“Participants”). It is a share ownership scheme permitting a Participant to benefit from
the increase (if any) in the value of a number of ordinary shares of the Company (“Shares”) over specified threshold
amounts. To acquire an interest a Participant enters into a joint share ownership agreement with Ocorian Limited,
Trustee of the Employee Benefit Trust (“Trustee”), whereby 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.
At the reporting date the Participants and Trustee held separate beneficial interests in 1,192,474 (2021: 1,208,547)
ordinary shares, which represents 0.1% (2021: 0.2%) of the issued share capital of the Company. Of these shares,
627,486 (2021: 643,559) are held by the Employee Benefit Trust on an unallocated basis.
Details of the movement of the number of allocated Interests in shares during the current and prior periods are
as follows:
52 weeks ended
27 November 2022
52 weeks ended
28 November 2021
Number of
interests in
shares
Weighted
average
exercise
price (£)
Number of
interests in
shares
Weighted
average
exercise
price (£)
Outstanding at beginning of period 564,988 2.24 646,339 2.26
Exercised during period – – (81,351) 2.36
Outstanding at end of period 564,988 2.24 564,988 2.24
Exercisable at end of period 564,988 2.24 564,988 2.24
(c) Sharesave Scheme
The Sharesave Scheme (“SAYE”) is a HMRC-approved scheme that is open to all employees of the Group. 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% of the market value at launch date.
At the reporting date, employees of the Company’s subsidiaries held 4,394 (2021: 4,671) contracts in respect of options
over 2,114,080 shares (2021: 1,970,813).
Details of the movement of the number of Sharesave options outstanding during the current and prior periods
are as follows:
52 weeks ended
27 November 2022
52 weeks ended
28 November 2021
Number
of share
options
Weighted
average
exercise
price (£)
Number
of share
options
Weighted
average
exercise
price (£)
Outstanding at beginning of period 1,970,813 15.10 3,049,851 7.73
Granted during period 1,887,609 12.00 783,704 23.46
Forfeited during period (1,725,049) 15.44 (320,662) 15.78
Exercised during period (19,293) 5.53 (1,542,080) 4.62
Outstanding at end of period 2,114,080 12.14 1,970,813 15.10
Exercisable at end of period 12,191 12.39 16,327 4.57
(d) Long-Term Incentive Plan
The Group’s equity-settled long-term incentive plans (“LTIP”) awarded shares conditionally to Executive Directors and
certain senior managers calculated as a percentage of the participants’ salaries. The awards vested over a three year
period subject to continued employment and the achievement of certain performance conditions. All awards vested, or
were forfeited, in the prior period.
Outstanding share awards under the LTIP at the beginning and end of the period can be reconciled as follows:
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Outstanding at beginning of period – 813,935
Forfeited during period – (173,661)
Vested during period – (640,274)
Outstanding at end of period – –
Exercisable at end of period – –
(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 Solium Trustee (UK) Limited.
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:
Partnership
Shares
Matching
Shares
Free
Shares Total
Outstanding at 28 November 2021 388,285 54,749 1,045,977 1,489,011
Awarded during period 268,140 37,743 640,043 945,926
Forfeited during period – (8,091) (84,311) (92,402)
Released during period (86,586) (3,772) (105,730) (196,088)
Outstanding at 27 November 2022 569,839 80,629 1,495,979 2,146,447
Unrestricted at 27 November 2022 569,839 34,225 691,525 1,295,589
Partnership
Shares
Matching
Shares
Free
Shares Total
Outstanding at 29 November 2020 370,750 52,559 1,126,148 1,549,457
Awarded during period 100,435 13,529 183,239 297,203
Forfeited during period – (4,438) (103,162) (107,600)
Released during period (82,900) (6,901) (160,248) (250,049)
Outstanding at 28 November 2021 388,285 54,749 1,045,977 1,489,011
Unrestricted at 28 November 2021 388,285 32,412 640,171 1,060,868
Contents
Contents
FINANCIAL STATEMENTS
252
OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
OCADO GROUP PLC Annual Report and Accounts 2022
253
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
4.7 Share options and other equity instruments continued
(f) Ocado Group Value Creation Plan
Under the Ocado Group 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. Participants will
receive the right at the end of each year of the five-year 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.
At each Measurement Date, up to 3.25% (FY21: 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 Threshold Total Shareholder Return or hurdle that 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% per annum (Initial Price – Tranche 1 £13.97; Tranche 2 £19.60; Tranche 3 £7.95).
If the value created at the Measurement date does not exceed the hurdle, nothing will accrue in that year under the VCP.
At the first Measurement Date in March 2020, no nil-cost options were banked. At the second Measurement Date in
March 2021, 4,839,781 nil-cost options were banked. At the third measurement date in March 2022, 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% 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:
a. A minimum TSR of 10.0% CAGR being maintained:
– Where the TSR has been achieved at the third Measurement Date, 50% 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% 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% 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 £20m 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.
Valuation of awards
In 2019, 2.55% of the original maximum 2.75% was awarded in total to participants, of which 0.25% lapsed and 0.25%
was subsequently granted during prior periods. In the current period, a further 0.10% lapsed and 0.2% was awarded to
participants. Also, in FY20, Tranche 2 of the VCP award was created following the June 2020 Capital Raise and in the
current period Tranche 3 was created following the June 2022 Capital Raise. As such, Tranche 1 is based on the total
number of shares in issue, less the number of shares under Tranche 2 and Tranche 3. Tranches 2 and 3 are based on
the total number of shares issued in the June 2020 and June 2022 Capital Raise respectively.
The fair value of awards granted under the VCP to date is £71.9m (2021: £65.2m) spread over the five-year period. In
determining the fair value of the VCP awards granted in the current and prior period, a Monte Carlo model was used
with the following inputs:
Tranche 1 Tranche 2 Tranche 1 Tranche 2 Tranche 3(G1) Tranche 3(G2)
Date of grant 22.03.2021 22.03.2021 04.08.2022 04.08.2022 07.09.2022 07.09.2022
Portion of VCP granted 0.25% 0.25% 0.20% 0.20% 2.55% 0.20%
Share price at grant £20.60 £20.60 £9.40 £9.40 £7.34 £7.34
Initial price £13.97 £19.60 £13.97 £19.60 £7.95 £7.95
Exercise price – – – – – –
Expected volatility 34.0% 34.0% 50.0% 50.0% 50.0% 50.0%
Expected life from date of grant – years 1.0/2.0/3.0 1.0/2.0/3.0 2.6/3.6/4.6 2.6/3.6/4.6 0.5/1.5 2.5/3.5/4.5
Risk-free interest rate 0.1% 0.1% 1.8% 1.8% 3.0% 2.9%
Expected dividend yield 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
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 Ocorian 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 Retail Value Creation Plan
The Ocado Retail Value Creation Plan (Retail VCP) was established in 2019 for the senior leadership team of ORL. Grants
under the Retail VCP will be settled in cash and include a market-based performance condition relating to the value of
the ORL. 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 ORL, 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 4.0% of value above the hurdle, of which 3.9% has been allocated to
employees/secondees.
At each reporting date the accounting cost will be trued up to reflect the expected payout under the scheme based on
the current performance of ORL. During the period, the decision was taken to cancel the Retail VCP on the basis that
valuation at the first measurement date indicated no amounts would vest. As such, amounts previously recognised have
been released (refer to Note 3.13).
(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.
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255
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
4.7 Share options and other equity instruments continued
Outstanding share awards under the Long-Term Operating Plan at the beginning and end of the period can be
reconciled as follows:
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Outstanding at beginning of period 179,815 179,815
Released during period (55,617) –
Outstanding at end of period 124,198 179,815
Exercisable at end of period – –
(i) Annual Incentive Plan
Under the Annual Incentive Plan (“AIP”), awards are granted annually in the form of nil-cost options over shares of the
Company to the Executive Directors and selected members of senior management. The number of options granted is
dependent on performance against targets and subject to threshold and maximum conditions (refer to the
Remuneration Report on pages 144 to 170). The awards will vest in full three years from grant date, with a further
two-year holding period for the Executive Directors only, during which time they cannot be sold. 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:
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Outstanding at beginning of period 365,552 150,035
Granted during period 251,286 215,517
Lapsed during period (17,612) –
Outstanding at end of period 599,226 365,552
Exercisable at end of period – –
The expense recognised in a given financial year relates to all unvested AIP awards granted in prior periods, and also
to awards yet to be granted for the current period. The performance period for the 2022 AIP is the 52 weeks ended
27 November 2022. The expectation of meeting the 2022 AIP performance targets was taken into account when
calculating this expense.
(j) Employee Share Purchase Plan
The Employee Share Purchase Plan (“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% of
the market value on the date of grant or at the end of the offering period, whichever is lower. During the period,
employees purchased 352,517 (2021: nil) shares of the Company at an exercise price of £4.25.
At the reporting date, employees of the Group held 906 (2021: 963) contracts in respect of granted SPP Options.
There were nil SPP Options exercisable at the reporting date (2021: nil).
(k) Ocado Restricted Share Plan
The Ocado Restricted Share Plan (“RSP”) is used for two key 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 Free Share Awards are conditional awards of shares granted to eligible non-UK employees, as a proportion of their
annual base pay. Eligible employees are those with six month’s service at the grant date. Awards are subject to a three
year vesting period.
RSP Discretionary Awards can either be nil-cost options over shares of the Company or conditional awards of shares.
These awards may be granted subject to performance conditions, and an additional holding period following vesting.
The vesting period and profile is award specific.
Unvested RSP awards will lapse immediately upon a participant ceasing to hold office or employment within the Group.
Outstanding share awards under the RSP at the beginning and end of the period can be reconciled as follows:
52 weeks ended 27 November 2022 52 weeks ended 28 November 2021
RSP Free
Shares
RSP
Discretionary Total
RSP Free
Shares
RSP
Discretionary Total
Outstanding at beginning of period 34,846 351,808 386,654 11,698 25,145 36,843
Granted during period 127,056 2,592,352 2,719,408 26,294 377,929 404,223
Forfeited during period (13,668) (209,998) (223,666) (3,146) (49,707) (52,853)
Exercised during period – (162,377) (162,377) – (1,559) (1,559)
Outstanding at end of period 148,234 2,571,785 2,720,019 34,846 351,808 386,654
There were no awards exercisable as at 27 November 2022.
(l) Consultant Option Plan
Under the rules of the Consultant Option Plan, options over shares of the Company can be granted to non-employees,
both individuals and companies engaged to provide services to the Group.
The option exercise price is determined with reference to the closing share price of the shares on the day, or day prior
to issuance. The options vest over a range of 18 months to three years depending on the award, and may be exercised
once and in full anytime during a three year exercise period.
Any unvested options will lapse on cessation of the engagement to provide services to the Group.
Outstanding share awards under the Consultant Option Plan at the beginning and end of the period can be reconciled
as follows:
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Outstanding at beginning of period 225,000 185,000
Granted during period 240,000 40,000
Outstanding at end of the period 465,000 225,000
Exercisable at end of period 185,000 185,000
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257
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
4.7 Share options and other equity instruments continued
(m) Deferred Consideration Shares
In the prior period, shares were issued to select employees of a subsidiary on acquisition. These shares will be held in
trust until such time as the agreement allows the shareholders to access them. On each of the first three anniversaries
of the closing date of acquisition, one third of these shares will be released from transfer restrictions subject to
achievement of performance conditions and continued employment.
Outstanding consideration shares at the beginning and end of the period can be reconciled as follows:
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Outstanding at beginning of period 294,472 –
Granted during period – 294,472
Released during period (98,153) –
Outstanding at end of the period 196,319 294,472
Unrestricted at end of period – –
4.8 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 debt
A
.
Net debt
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
£1,934.3m (2021: £1,709.4m), and it had net debt
A
of £577.1m (2021: net debt £359.8m).
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.
In June 2022, the Group successfully completed a capital raising generating £564.1m to fund growth (refer to Note 4.6
for details) and secured additional liquidity through a three-year multi-currency Revolving Credit Facility (“RCF’’) of
£300.0m with a syndicate of international banks.
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, and cash and cash equivalents were as follows:
Notes
27 November
2022
£m
28 November
2021
£m
Total facilities available 2,381.9 2,041.6
Facilities drawn down (2,022.9) (1,978.6)
Undrawn facilities 359.0 63.0
Cash and cash equivalents 3.11 1,328.0 1,468.6
Undrawn facilities, cash and cash equivalents and other treasury deposits 1,687.0 1,531.6
4.9 Cash generated from operations
A reconciliation from profit before tax to cash generated from operations is as follows:
Notes
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Cash flows from operating activities
Loss before tax (500.8) (176.9)
Adjustments for
– Revenue recognised from long-term contracts 2.1 (24.7) (15.2)
– Depreciation, amortisation and impairment charges 2.4 348.6 238.4
– Property, plant and equipment write off 10.8 –
– Insurance reimbursement recognised as other income 2.6 (73.8) (80.6)
– Non-cash exceptional items 2.6 59.8 (7.5)
– Share of results of joint ventures and associate 3.6 1.4 2.3
– Movement of provisions (26.2) 4.2
– Net finance cost 2.7 48.2 42.3
– Share-based payments charge 4.7 42.0 35.5
Changes in working capital
– Movement in contract assets 0.3 0.1
– Movement of contract liabilities 78.7 107.0
– Movement of inventories (10.9) (55.2)
– Movement of trade and other receivables (50.7) (77.6)
– Movement of trade and other payables 93.3 (1.8)
Cash (used in)/generated from operations (4.0) 15.0
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259
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
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.
Name Country of incorporation Principal activity Share class
% of share
capital held
Haddington Dynamics II LLC United States of America
13
Holding company Ordinary shares 100.0%
JFC Hydroponics Ltd United Kingdom
1
Non-trading company Ordinary shares 48.1%
Jones Food Company Limited United Kingdom
1
Vertical farming Ordinary shares 48.1%
Karakuri Limited United Kingdom
2
Robotics Preference shares 26.3%
Kindred Inc. United States of America
13
Holding company Ordinary shares 100.0%
Kindred Systems II Inc.
†
Canada
9
Holding company Ordinary shares 100.0%
Last Mile Technology Limited United Kingdom
3
Non-trading company Ordinary shares 100.0%
MHE JVCo Limited United Kingdom
3
Leasing “B” shares 50.0%
Myrmex Inc United States of America
13
Technology Ordinary shares 99.9%
O’Logistics SAS France
14
Business services Ordinary shares 50.0%
Ocado Bulgaria EOOD Bulgaria
4
Technology Ordinary shares 100.0%
Ocado Central Services Limited United Kingdom
3
Business services Ordinary shares 100.0%
Ocado Finco 1 Limited
†
United Kingdom
3
Financing Ordinary shares 100.0%
Ocado Finco 2 Limited
†
United Kingdom
3
Financing Ordinary shares 100.0%
Ocado Holdings Limited
†
United Kingdom
3
Holding company Ordinary shares 100.0%
Ocado Innovation Limited
†
United Kingdom
3
Technology Ordinary shares 100.0%
Ocado Operating Limited United Kingdom
3
Logistics and distribution Ordinary shares 100.0%
Ocado Polska Sp. z o.o. Poland
6
Technology Ordinary shares 100.0%
Ocado Retail Limited United Kingdom
7
Retail Ordinary shares 50.0%
Ocado Solutions Australia Pty Limited Australia
8
Business services Ordinary shares 100.0%
Ocado Solutions Canada Inc. Canada
5
Business services Ordinary shares 100.0%
Ocado Solutions France SAS France
10
Business services Ordinary shares 100.0%
Ocado Solutions Japan K.K. Japan
11
Business services Ordinary shares 100.0%
Ocado Solutions Limited
†
United Kingdom
3
Business services Ordinary shares 100.0%
Ocado Solutions Polska sp z.o.o. Poland
17
Business services Ordinary shares 100.0%
Ocado Solutions Spain S.L. Spain
18
Business services Ordinary shares 100.0%
Ocado Solutions Sweden AB Sweden
12
Business services Ordinary shares 100.0%
Ocado Solutions (US) ProCo LLC United States of America
13
Business services Ordinary shares 100.0%
Ocado Solutions USA Inc. United States of America
13
Business services Ordinary shares 100.0%
Ocado Spain S.L.U. Spain
18
Technology Ordinary shares 100.0%
Ocado Sweden AB Sweden
15
Technology Ordinary shares 100.0%
Ocado US Holdings Inc.
†
United States of America
13
Holding company Ordinary shares 100.0%
Ocado Ventures Holdings Limited
†
United Kingdom
3
Holding company Ordinary shares 100.0%
Ocado Ventures (80 Acres) Limited United Kingdom
3
Non-trading company Ordinary shares 100.0%
Ocado Ventures (Inkbit) Limited United Kingdom
3
Holding company Ordinary shares 100.0%
Ocado Ventures (JFC) Limited United Kingdom
3
Holding company Ordinary shares 100.0%
Ocado Ventures (Karakuri) Limited United Kingdom
3
Holding company Ordinary shares 100.0%
Ocado Ventures (Myrmex) Limited United Kingdom
3
Holding company Ordinary shares 100.0%
Ocado Ventures (Oxbotica) Limited United Kingdom
3
Holding company Ordinary shares 100.0%
Ocado Ventures (Wayve) Limited United Kingdom
3
Holding company Ordinary shares 100.0%
Oxford US LLC United States of America
13
Non-trading company Ordinary shares 100.0%
Paneltex Limited United Kingdom
16
Manufacturing Ordinary shares 25.0%
† Interest held directly by Ocado Group plc.
The registered offices of the above companies are as follows:
1 Phase 2 Celsius Parc, Cupola Way, Scunthorpe, United Kingdom, DN15 9YJ
2 Unit 2 Hammersmith Studios, 55a Yeldham Road, London, United Kingdom, W6 8JF
3 Buildings One & Two Trident Place, Mosquito Way, Hatfield, Hertfordshire, United Kingdom, AL10 9UL
4 7th Floor, 13 Henrik Ibsen Street, Lozenets District, Sofia 1407, Bulgaria
5 Suite 1300, 1969 Upper Water Street, McInnes Cooper Tower-Purdy Wharf, Halifax, NS B3J 3R7, Canada
6 High5ive Building, Pawia 21st, 31-154, Kraków, Poland
7 Apollo Court 2 Bishop Square, Hatfield Business Park, Hatfield, Hertfordshire, United Kingdom, AL10 9EX
8 Level 9, 63 Exhibition Street, Melbourne, VIC 3000, Australia
9 Suite 1700, Park Place, 666 Burrard Street, Vancouver BC, V6C 2X8, Canada
10 TMF Pole, 3-5 Rue Saint-Georges, 75009 Paris, France
11 Hibiya Fort Tower 10F, 1-1-1 Nishi Shinbashi, Minato-Ku, Tokyo, Japan
12 Mätarvägen 30, 196 37 Kungsängen, Sweden
13 251 Little Falls Drive, New Castle, Wilmington, DE, 19808, United States of America
14 1 cours Antoine Guichard, 42000 Saint-Etienne, France
15 Mälarvarvsbacken 8, 117 33, Stockholm, Sweden
16 Paneltex House, Somerden Road, Hull, United Kingdom, HU9 5PE
17 ul. Gryzbowska 2 Lok 29, 00-131, Warsaw, Poland
18 calle Badajoz 112, 08018, Barcelona, Spain
Refer to Note 1.4 for management’s conclusion to consolidate Ocado Retail Limited.
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
The proportion of equity interest held by non-controlling interests is provided below:
Name Country of incorporation
27 November
2022
%
28 November
2021
%
Ocado Retail Limited (“Ocado Retail”) United Kingdom 50.0% 50.0%
Jones Food Company Limited (“Jones Food Company”) United Kingdom 51.9% 48.2%
In January 2022, Jones Food Company issued additional shares to three individuals, which resulted in the Group’s
shareholding in Jones Food Company decreasing to 48.1%. However, the Group has existing warrants (potential voting
rights), which entitles the Group to acquire 2.3 million shares and therefore, the Group’s shareholdings on a fully diluted
basis amounts to 52.4%. As such, the Group retains control of Jones Food Company.
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.
52 weeks ended 27 November 2022
Ocado Retail
£m
Jones Food
Company
£m
Total
£m
Non-current assets 615.1 17.0 632.1
Current assets 247.3 6.3 253.6
Current liabilities (276.5) (1.0) (277.5)
Non-current liabilities (415.9) (0.4) (416.3)
Net assets at end of period 170.0 21.9 191.9
Non-controlling interests at end of period 85.0 11.4 96.4
Revenue 2,203.0 0.8 2,203.8
Loss and total comprehensive expense for period (47.9) (3.7) (51.6)
Share of total comprehensive expense attributable to non-controlling interests (23.9) (1.9) (25.8)
Net increase in cash and cash equivalents (108.0) (12.3) (120.3)
No dividends were paid to non-controlling interests during the current or prior period.
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261
Notes to the consolidated financial statements
continued
FINANCIAL STATEMENTS
5.3 Commitments
Capital commitments
Contracts placed for future capital expenditure but not provided for in the financial statements are as follows:
27 November
2022
£m
28 November
2021
£m
Land and buildings 0.4 0.2
Property, plant and equipment 275.1 374.0
Capital commitments 275.5 374.2
Of the total capital expenditure committed at the end of the period, £232.4m relates to new CFCs (2021: £348.9m),
£1.3m to existing CFCs (2021: £1.0m), £7.6m to fleet costs (2021: £7.7m) and £26.5m to technology projects
(2021: £6.9m).
5.4 Related party transactions
Key management personnel
Only members of the Board (the Executive and Non-Executive Directors) are recognised as being key management
personnel. It is the Board that has responsibility for planning, directing and controlling the activities of the Group.
The aggregate emoluments of key management personnel are as follows:
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Salaries and other short-term employee benefits 5.8 5.0
Post-employment benefits 0.2 0.2
Share-based payments 11.4 16.2
Aggregate emoluments 17.4 21.4
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 144 to 170.
Due to restrictions in place during the Covid-19 pandemic, chartered flights were required on a small number of
occasions in order for key management personnel to be able to visit the Group’s global sites and undertake client
meetings. The Group chartered aircraft through accessing flying hours owned by a family member of one of the key
management personnel. The price paid was at the open market rate and amounted to £32,100 (2021: £72,000). At the
end of the period, no amounts were owed in relation to the purchase of these flights.
Other related party transactions with key management personnel made during the period amounted to £nil (2021: £nil).
All transactions were on an arm’s length basis. At the reporting date, no amounts were owed by key management
personnel to the Group (2021: £nil). 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.
Joint venture
MHE JVCo Limited
The following transactions were carried out with MHE JVCo:
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Dividend received from MHE JVCo 8.0 7.7
Supplier invoices paid on behalf of MHE JVCo 1.1 2.5
Capital element of lease liability instalments paid to MHE JVCo 15.1 14.2
Capital element of lease liability instalments due to MHE JVCo 1.4 1.4
Interest element of lease liability instalments accrued or paid to MHE JVCo 1.3 2.1
During the period, the Group incurred lease instalments (including interest) of £17.8m (2021: £17.7m) to MHE JVCo.
Of the lease instalments incurred, £8.2m was recovered directly from Wm Morrison Supermarkets Limited in the form of
other income (2021: £9.0m).
Included within trade and other receivables is a balance of £2.3m due from MHE JVCo (2021: £0.2m) which primarily
relates to capital recharges.
Included within trade and other payables is a balance of £1.8m due to MHE JVCo (2021: £1.8m).
Included within lease liabilities is a balance of £17.5m due to MHE JVCo (2021: £34.0m).
Associate
Karakuri Limited
During a prior period, the Group lent £1.7m to Karakuri. The loan was recognised within other financial assets, and its
carrying amount was £1.8m (2021: £1.9m) at the reporting date. During the period, £0.2m (2021: £0.1m) of interest
was recognised within finance income. Karakuri also issued warrants to Ocado to subscribe for additional shares in the
future. The warrants expire in 2024. 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.
No other transactions that require disclosure under IAS 24 “Related Party Disclosures” have occurred during the period.
5.5 Post-Balance Sheet events
Exercise of warrants in Oxbotica Limited
On 1st December 2022, Oxbotica Limited (“Oxbotica”), a company in which the Group holds a minority interest,
successfully completed its Series C Fundraising. This resulted in the Group’s warrants being exercised to acquire 21,934
B shares. Following exercise of the warrants and the Series C fundraising, the Group holds a 12.5% interest in Oxbotica.
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263
FINANCIAL STATEMENTS
Company Balance Sheet
as at 27 November 2022
Notes
27 November
2022
£m
28 November
2021
£m
Non-current assets
Investments 3.1 850.5 815.8
Amounts due from subsidiaries 3,286.2 1,589.3
4,136.7 2,405.1
Current assets
Other receivables 3.2 3.5 0.3
Cash and cash equivalents 3.3 7. 5 879.2
11.0 879.5
Total assets 4,147.7 3,284.6
Current liabilities
Trade and other payables 3.4 (291.1) (7.2)
Provisions 3.5 (0.2) (0.4)
(291.3) (7.6)
Net current (liabilities)/assets (280.3) 871.9
Non-current liabilities
Provisions 3.5 (1.1) (8.2)
Borrowings 4.1 (1,332.2) (1,300.0)
(1,333.3) (1,308.2)
Net assets 2,523.1 1,968.8
Equity
Share capital 4.7 16.5 15.0
Share premium 4.7 1,939.3 1,372.0
Merger reserve 6.2 6.2
Convertible bonds reserve 184.5 184.5
Retained earnings 376.6 391.1
Total equity 2,523.1 1,968.8
The Company’s loss for the period was £56.5m (2021: £47.4m).
The notes on pages 265 to 274 form part of these financial statements.
The Company financial statements on pages 262 to 274 were authorised for issue by the Board of Directors and signed
on its behalf by:
Tim Steiner Stephen Daintith
Chief Executive Officer Chief Financial Officer
Ocado Group plc
Company number: 07098618 (England and Wales)
28 February 2023
Company Statement of Changes in Equity
for the 52 weeks ended 27 November 2022
Notes
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Convertible
bonds
reserve
£m
Retained
earnings
£m
Total
£m
Balance at 29 November 2020 15.0 1,361.6 – 184.5 403.0 1,964.1
Loss for the period – – – – (47.4) (47.4)
Total comprehensive expense
for the period – – – – (47.4) (47.4)
Transactions with owners
– Issue of ordinary shares 4.7 – 1.9 – – – 1.9
– Allotted in respect of share
option schemes 4.7 – 8.5 – – – 8.5
– Share-based payments charge 4.8 – – – – 35.5 35.5
– Acquisition of Haddington
Dynamics Inc. – – 6.2 – – 6.2
Total transactions with owners – 10.4 6.2 – 35.5 52.1
Balance at 28 November 2021 15.0 1,372.0 6.2 184.5 391.1 1,968.8
Loss for the period – – – – (56.5) (56.5)
Total comprehensive expense
for the period – – – – (56.5) (56.5)
Transactions with owners
– Issue of ordinary shares 4.7 1.5 565.0 – – – 566.5
– Allotted in respect of share
option schemes 4.7 – 2.3 – – – 2.3
– Share-based payments charge 4.8 – – – – 42.0 42.0
Total transactions with owners 1.5 567.3 – – 42.0 610.8
Balance at 27 November 2022 16.5 1,939.3 6.2 184.5 376.6 2,523.1
The notes on pages 265 to 274 form part of these financial statements.
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OCADO GROUP PLC Annual Report and Accounts 2022
FINANCIAL STATEMENTS
Company Statement of Cash Flows
for the 52 weeks ended 27 November 2022
Notes
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Cash flows from operating activities
Loss before tax (56.5) (47.4)
Adjustments for
– Net finance cost 55.2 48.5
– Movement of provisions – (1.8)
Changes in working capital
– Movement of amounts due from subsidiaries (1,692.5) 519.4
– Movement of other receivables (0.1) 1.3
– Movement of trade and other payables 284.4 (13.1)
Cash generated from / (used in) operating activities (1,409.5) 506.9
Interest paid (27.4) (16.5)
Net cash flow from / (used in) operating activities (1,436.9) 490.4
Cash flows from investing activities
Proceeds from other treasury deposits – 150.0
Purchase of equity investments – (191.6)
Interest received 1.0 –
Net cash flow from / (used in) investing activities 1.0 (41.6)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 566.5 1.9
Proceeds from allotment of share options 0.8 8.5
Proceeds from issue of borrowings – 500.0
Transaction costs on issue of borrowings (3.4) (8.4)
Repayment of borrowings – (225.0)
Net cash flow from financing activities 563.9 2 7 7.0
Net (decrease) / increase in cash and cash equivalents (872.0) 725.8
Cash and cash equivalents at beginning of period 879.2 158.2
Effect of changes in foreign exchange rates 0.3 (4.8)
Cash and cash equivalents at end of period 3.3 7.5 879.2
The notes on pages 265 to 274 form part of these financial statements.
Notes to the Company financial statements
for the 52 weeks ended 27 November 2022
Section 1 – Basis of preparation
1.1 General information
Ocado Group plc (“Company”) is incorporated in England and Wales. The Company is 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 27 November 2022. The prior financial period
represents the 52 weeks ended 28 November 2021.
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 UK-adopted International Financial Reporting Standards.
The financial statements are presented in pounds sterling, rounded to the nearest million 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.
Further details of the Group’s considerations are provided in the Group Viability Statement and Going Concern
Statement on page 98.
The Directors have taken advantage of the exemption available under section 408 of the Companies Act 2006 and not
presented an income statement or a statement of comprehensive income for the Company alone.
Exemptions
New standards, amendments and interpretations adopted by the Group
The Company has considered the following new standards, interpretations and amendments to published standards
that are effective for the Company for the period beginning 29 November 2021, 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:
Effective date
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 4 and IFRS 16) 1 January 2021
IFRS 4 Extension of the Temporary Exemption from Applying IFRS 9 1 January 2021
IFRS 16 Covid-19-Related Rent Concessions beyond 30 June 2021 1 April 2021
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 Company have been issued but are not effective for the period beginning 29 November 2021, and have
not been adopted early:
Effective date
IAS 16 Property, Plant and Equipment – proceeds of intended use 1 January 2022
IAS 37 Onerous Contracts – costs of fulfilling a contract 1 January 2022
IFRS 3 Reference to the Conceptual Framework 1 January 2022
Annual Improvements to IFRS,
2018-2020 Cycle Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 1 January 2022
IFRS 17 Insurance Contracts 1 January 2023
IAS 1 Classification of Liabilities as Current or Non-Current 1 January 2023
IAS 1 Disclosure of Accounting Policies (amendments) 1 January 2023
IAS 8 Disclosure of Accounting Estimates (amendments) 1 January 2023
IAS 12
Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (amendments) 1 January 2023
IFRS 10 Consolidated Financial Statements (amendments) Deferred
IAS 28 Investments in Associates and Joint Ventures (amendments) Deferred
These standards, interpretations and amendments to published standards and interpretations are not expected to have
a material effect on the Company’s financial statements.
Contents
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267
Notes to the Company financial statements
continued
FINANCIAL STATEMENTS
1.2 Basis of preparation continued
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.
1.3 Critical accounting judgement and key sources of estimation uncertainty
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. Judgements and estimates are evaluated
regularly, and represent management’s best estimates based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. However, events or actions
may mean that actual results ultimately differ from those estimates, and the differences may be material.
Key estimation uncertainties
Key areas of estimation uncertainty are the key assumptions concerning the future and other data points 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.
Area Estimate Note
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.
3.2
Impairment of
investments
The Company considers impairment of its investments in subsidiaries by estimating the recoverable
amounts of its investments. The impairment review for the Company’s investments was performed using
the same projections used in the impairment review in relation to the Group’s goodwill. Details of the
goodwill impairment review are disclosed in note 3.2 of the consolidated financial statements.
3.1
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 £0.1m (2021: £0.1m).
2.3 Employee information
The Company does not incur direct staff costs as the Group’s employees are employed by its subsidiaries.
See note 4.8 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 an indication of impairment, and at least once a year.
27 November
2022
£m
28 November
2021
£m
Cost 674.3 674.3
Contributions to subsidiaries
– Novation of derivative liability in respect of warrants issued by Ocado Holdings Limited 1.1 1.1
– Group share-based payments 175.1 140.4
Investments 850.5 815.8
Investments represent investments in subsidiaries, Kindred Systems II Inc., Ocado Holdings Limited, Ocado Innovation
Limited, Ocado FinCo 1 Limited (“Finco 1”), Ocado FinCo 2 Limited (“Finco 2”), Ocado Solutions Limited, Ocado Ventures
Holdings Limited and Ocado US Holdings Inc. A list of subsidiaries held by the Company is disclosed in note 5.1 to the
consolidated financial statements.
During the prior period, the Company subscribed for shares aggregating to £185.9m in Finco 1, Finco 2, Canada
Holdings Inc. and US Holdings Inc. in order to facilitate the acquisition of 100% of the issued shares of Kindred Systems
and 100% of the issued share capital of Haddington Dynamics Inc.
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 that have increased the Company’s investments,
see note 4.7 to the consolidated financial statements.
During the annual impairment review as at the reporting date, no indicators of impairment were identified.
3.2 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.
27 November
2022
£m
28 November
2021
£m
Other receivables 3.5 0.3
3.3 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.
27 November
2022
£m
28 November
2021
£m
Cash at bank and in hand 7.5 187.6
Short-term treasury deposits – 470.1
Money market funds – 221.5
Cash and cash equivalents 7.5 879.2
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Notes to the Company financial statements
continued
FINANCIAL STATEMENTS
3.4 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.
27 November
2022
£m
28 November
2021
£m
Amounts due to subsidiaries 285.8 1.5
Accruals and other payables 5.3 5.7
Trade and other payables 291.1 7.2
3.5 Provisions
Accounting policies
Employee incentive schemes
Provisions for employee incentive schemes relate to employer’s NIC on taxable equity-settled schemes. For all taxable
schemes, the Company is liable to pay employer’s NIC upon exercise of the share awards.
Taxable schemes are the unapproved Executive Share Option Scheme (“ESOS”), the Ocado Group Value Creation Plan
(“Group VCP”), the Long-Term Operating Plan, the Annual Incentive Plan (“AIP”) and the Restricted Share Plan (“RSP”).
For more details on these schemes, refer to note 4.7 of Consolidated financial statements.
Employee
incentive
schemes
£m
Balance at 29 November 2020 9.5
Charged to Income Statement
– Additional provision 1.2
Used during period (2.1)
Balance at 28 November 2021 8.6
Charged to Income Statement
– Additional provision 0.6
– Unused amounts reversed (7.7)
Used during period (0.2)
Balance at 27 November 2022 1.3
Provisions for employee incentive schemes as at 27 November 2022 can be analysed as follows:
£m
Current 0.2
Non-current 1.1
1.3
Provisions for employee incentive schemes as at 28 November 2021 can be analysed as follows:
£m
Current 0.4
Non-current 8.2
8.6
Employee incentive schemes
During the period, an additional provision of £0.6m (2021: £1.2m) has been recognised in relation to employers NIC
on taxable equity-settled schemes and £0.2m (2021: £2.1m) utilised in the period as a result of exercises of taxable
equity-settled share awards. Releases in the period of amounts previously provided include £7.0m for employers NIC
on the Ocado Group VCP (2021: £0.7m additional provision).
The provision will be utilised once the share awards under each of the schemes have vested and been allotted
to participants on exercise. Vesting will occur between 2023 and 2027, and allotment will take place between
2023 and 2032.
Section 4 – Capital structure and financing costs
4.1 Borrowings
Carrying amount
Facility Inception
Coupon
rate Maturity
27 November
2022
£m
28 November
2021
£m
£0.3m chattel mortgages January 2019 8.800% January 2023 – 0.1
£600m senior unsecured convertible bonds December 2019 0.875% December 2025 540.7 522.0
£350m senior unsecured convertible bonds June 2020 0.750% January 2027 295.2 283.3
£500m senior unsecured notes October 2021 3.875% October 2026 496.3 494.6
Borrowings 1,332.2 1,300.0
Disclosed as:
Non-current 1,332.2 1,300.0
Please refer to note 4.1 of the Consolidated Financial Statements for details.
4.2 Movements in net (debt)/cash
A
Non-cash movements
Notes
28 November
2021
£m
Cash flows
£m
Foreign
exchange
£m
Unwinding
of interest
£m
27 November
2022
£m
Cash and cash equivalents 3.3 879.2 (872.0) 0.3 – 7.5
Liabilities from financing activities:
Borrowings 4.1 (1,300.0) – – (32.2) (1,332.2)
(1,300.0) – – (32.2) (1,332.2)
Net (debt)/cash
A
(420.8) (872.0) 0.3 (32.2) (1,324.7)
Non-cash movements
Notes
29 November
2020
£m
Cash flows
£m
Foreign
exchange
£m
Unwinding
of interest
£m
28 November
2021
£m
Other treasury deposits 150.0 (150.0) – – –
Cash and cash equivalents 3.3 158.2 725.8 (4.8) – 879.2
308.2 575.8 (4.8) – 879.2
Liabilities from financing activities:
Borrowings 4.1 (997.2) (266.5) – (36.3) (1,300.0)
(997.2) (266.5) – (36.3) (1,300.0)
Net (debt)/cash
A
(689.0) 309.3 (4.8) (36.3) (420.8)
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271
Notes to the Company financial statements
continued
FINANCIAL STATEMENTS
4.3 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 that 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:
Amortised cost
Notes
27 November
2022
£m
28 November
2021
£m
Financial assets
Amounts due from subsidiaries 3,286.2 1,589.3
Other receivables 3.2 3.5 0.3
Cash and cash equivalents 3.3 7. 5 879.2
Total financial assets 3,297.2 2,468.8
Financial liabilities
Accruals and other payables 3.4 (291.1) (7.2)
Chattel mortgages 4.1 – (0.1)
Senior unsecured notes 4.1 (496.3) (494.6)
Senior unsecured convertible bonds 4.1 (835.9) (805.3)
Total financial liabilities (1,623.3) (1,307.2)
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 unsecured convertible
bonds and senior unsecured 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:
27 November 2022 28 November 2021
Notes
Carrying
amount
£m
Fair value
£m
Carrying
amount
£m
Fair value
£m
Financial assets
Amounts due from subsidiaries 3,286.2 3,286.2 1,589.3 1,589.3
Other receivables 3.2 3.5 3.5 0.3 0.3
Cash and cash equivalents 3.3 7.5 7.5 879.2 879.2
Total financial assets 3,297.2 3,297.2 2,468.8 2,468.8
Financial liabilities
Accruals and other payables 3.4 (291.1) (291.1) (7.2) (7.2)
Chattel mortgages 4.1 – – (0.1) (0.1)
Senior unsecured notes 4.1 (496.3) (392.5) (494.6) (488.1)
Senior unsecured convertible bonds 4.1 (835.9) (700.4) (805.3) (1,067.4)
Total financial liabilities (1,623.3) (1,384.0) (1,307.2) (1,562.8)
The fair values of cash and cash equivalents, amounts due from subsidiaries, other receivables and accruals and other
payables are assumed to approximate to their carrying values but for completeness are included in this analysis.
4.4 Credit risk
The Company’s exposures to credit risk arise from holdings of cash and cash equivalents and amounts due from
subsidiaries.
Exposure to credit risk
The carrying value of financial assets, as set out in note 4.3, 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.
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273
Notes to the Company financial statements
continued
FINANCIAL STATEMENTS
4.5 Liquidity risk
The Company has adequate cash resources to manage the short-term working capital needs of the business. 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 4.8 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.
Contractual cash flows
27 November 2022 Notes
Carrying
amount
£m
Total
£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
Accruals and other payables 3.4 (291.1) (291.1) (291.1) – – –
Senior unsecured notes 4.1 (496.3) (577.6) (19.4) (19.4) (538.8) –
Senior unsecured convertible bonds 4.1 (835.9) (980.8) (7.9) (7.9) (965.0) –
(1,623.3) (1,849.5) (318.4) (27.3) (1,503.8) –
Contractual cash flows
28 November 2021 Notes
Carrying
amount
£m
Total
£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
Accruals and other payables 3.4 (7.2) (7.2) (7.2) – – –
Chattel mortgages 4.1 (0.1) (0.1) – (0.1) – –
Senior unsecured notes 4.1 (494.6) (596.9) (19.4) (19.4) (558.1) –
Senior unsecured convertible bonds 4.1 (805.3) (988.9) (7.9) (7.9) (621.0) (352.1)
(1,307.2) (1,593.1) (34.5) (27.4) (1,179.1) (352.1)
4.6 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. These financial assets are exposed to interest rate risk as the Company holds
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.
At the reporting date, the interest rate profile of the Company’s interest-bearing financial instruments was as follows:
27 November
2022
£m
28 November
2021
£m
Fixed rate instruments
Financial assets – 470.1
Financial liabilities (1,332.2) (1,300.0)
Variable rate instruments
Financial assets 7.5 409.1
Financial liabilities – –
Sensitivity analysis
Based on the Company’s variable rate interest-bearing borrowings and cash and cash equivalents existing at the end of
the period, a 2% increase in interest rates (2021: 1% increase) would affect equity and profit or loss by the amounts
shown below.
27 November
2022
£m
28 November
2021
£m
Increase in income 0.2 4.1
Increase in equity – –
4.7 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 10,438,075 (2021: 10,454,148) ordinary shares
held by the Group’s Employee Benefit Trust (see note 4.7 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 Ocado Group Value Creation Plan (“Group 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 2.9 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 9,447,982
(2021: 7,259,291). 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
Share
capital
£m
Share
premium
£m
Balance at 29 November 2020 748.1 15.0 1,361.6
Issue of ordinary shares 1.4 – 1.9
Allotted in respect of share option schemes 1.9 – 8.5
Balance at 28 November 2021 751.4 15.0 1,372.0
Issue of ordinary shares 73.9 1.5 565.0
Allotted in respect of share option schemes 0.6 – 2.3
Balance at 27 November 2022 825.9 16.5 1,939.3
4.8 Share-based payments
For more information on the Group’s share schemes, see note 4.7 to the consolidated financial statements.
4.9 Capital management
The Board’s objectives and policies for the Company are consistent with those of the Group. Full details are provided
in note 4.8 to the consolidated financial statements.
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275
Notes to the Company financial statements
continued
FINANCIAL STATEMENTS
Section 5 – Other notes
5.1 Related party transactions
Key management personnel
Only members of the Board (the Executive and Non-Executive Directors are recognised as being key management
personnel. It is the Board that 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 144.
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 £0.8m (2021: £4.1m) was charged on these loans during the
period. All intra-Group loans and balances are unsecured and repayable on demand.
Transactions with subsidiaries
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Group share-based payments 42.0 35.5
Increase/(decrease) in amounts due from subsidiaries 1,696.9 (510.8)
Increase/(decrease) in amounts due to subsidiaries 284.3 (11.2)
Balances with subsidiaries
27 November
2022
£m
28 November
2021
£m
Amounts due from subsidiaries 3,286.2 1,589.3
Amounts due to subsidiaries (285.8) (1.5)
5.2 Post-Balance Sheet events
No significant events affecting the Company have occurred since the reporting date.
Glossary
2019 Directors’ Remuneration Policy
or 2019 Policy – means the Directors’
Remuneration Policy which was
approved by shareholders at the 2019
Annual General Meeting.
Active customer (ORL) – means a
customer who has shopped at Ocado.
com within the previous 12 weeks.
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 2 May 2023 at 2.30 pm at
Numis Securities Ltd, 45 Gresham
Street, London, EC2V 7BF.
AIP – means the Annual Incentive
Plan for the Executive Directors and
selected senior managers.
Alcampo – means Alcampo S.A., a
company incorporated in Spain under
registered company number C.I.F.
A-28581882 whose registered office
is at Madrid, c/ Santiago Compostela
Sur, s/n (Edificio de Oficinas la
Vaguada) CP.28029 Madrid.
American Depositary Receipts
– 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.
ASRS – mean Automated Storage
Retrieval Systems.
Auchan Polska – means Auchan
Polska Sp. z.o.o., a company
incorporated in Poland, whose
registered office is at ul. Puławska 46,
05-500 Piaseczno.
AutoStore – means AutoStore
Technology AS, a company
incorporated in Norway, whose
registered office is at
Stokkastrandvegen 85, 5578,
Nedre Vats, Rogaland, Norway.
Average basket value – means the
average amount spent by shoppers in
one transaction.
Average orders per week (ORL)
– means the average number of Orders
per week processed within CFCs.
Average selling price – means gross
sales divided by total eaches.
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.
Client Partner – means a client of
Ocado Group that has purchased the
Ocado Smart Platform Solution or
part of the OSP Solution to deliver
their operations.
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.
Covid-19 – means the disease caused
by Severe Acute Respiratory Syndrome
Coronavirus 2, which has caused the
ongoing global pandemic.
CR – means Corporate Responsibility.
Customer Fulfilment Centre or CFC
– means a dedicated, highly-
automated warehouse used for the
operation of the business.
DEI – means Diversity, Equity and
Inclusion.
Deloitte – means Deloitte LLP, the
Group’s statutory auditor and advisor
in respect of non-audit services.
Direct Operating Cost (% of site
sales) – means the direct costs of
running our CFCs (legacy & OSP)
estate within Technology Solutions
and includes On-site Operational
costs, Allocation of Remote Support
Costs, Cloud Costs, Direct
Technology Costs (on call labour).
Directors – means the Directors of
the Company, whose names and
biographies are set out on pages
106 to 109, 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.
ADDITIONAL INFORMATION
Contents
Contents
ADDITIONAL INFORMATION
Glossary
continued
DNED – means the Designated
Non-Executive Director for workforce
engagement.
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.
EBT Trustee – means the Trustee
from time to time of the Employee
Benefit Trust established for the
purposes of the JSOS, currently
Ocorian Limited.
eNPS – means employee Net
Promoter Score.
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, Stephen Daintith, 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.
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).
Lotte – means Lotte Shopping Co.,
Ltd, a company incorporated and
registered in the Republic of Korea
with registered number 5298500774
whose registered office is at Lotte
World Tower, 26th floor, 300, Olympic
Street, Songpagu, Seoul, Republic
of Korea.
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.
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.
Gross Liquidity – means cash and cash
equivalents plus unused availability of
revolving credit facility.
Group – means Ocado Group plc, its
subsidiaries, significant undertakings
and affiliated companies under its
control or common control.
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 His Majesty’s
Revenue and Customs.
IAS – means International
Accounting Standards.
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.
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
pages 106 to 109.
Notice of Meeting – means the notice
of the Company’s AGM.
NPS – means net promoter score.
Number of modules live – means
modules that are fully installed and
available for use by our partners.
Number of modules ordered – means
the number of modules contractually
ordered by our partners.
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 Re:Imagined or Re:Imagined
– means a series of innovations and
changes to the technology powering
our Ocado Smart Platform (OSP).
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.
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 Unit 2 Hammersmith Studios,
55a Yeldham Road, London, England,
W6 8JF.
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 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 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.
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.
ADDITIONAL INFORMATION
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277
Contents
Contents
ADDITIONAL INFORMATION
Alternative Performance Measures
The Group assesses its performance using a variety of alternative performance measures that 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;
– External gross debt; and
– International Solutions fees invoiced.
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 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 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.
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 192.
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.
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
£500m senior secured notes due
2026. For more details, see pages
175 and 236.
Senior unsecured convertible bonds
or convertible bonds – means the
Company’s offerings of £600m senior
unsecured convertible bonds due
2025 at a coupon of 0.875% and an
issue price of 100.0%, and of £350m
senior unsecured convertible bonds
due 2027 at a coupon of 0.750% and
an issue price of 100.0%. For more
details, see pages 175 and 236 to 206.
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.
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.
SOC – means System and
Organisation Controls, as defined
under the Association of International
Certified Professional Accountants
Trust Services Principles and Criteria.
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.
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.
Webshop – means the customer-
facing internet-based virtual shop
accessible via the website
www.ocado.com.
Glossary
continued
ADDITIONAL INFORMATION
278
OCADO GROUP PLC Annual Report and Accounts 2022
ADDITIONAL INFORMATION
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279
Contents
Contents
Alternative Performance Measures
continued
ADDITIONAL INFORMATION
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Reported distribution costs 830.2 666.7
Reported administrative expenses 656.1 548.4
Reported distribution costs and administrative expenses 1,486.3 1,215.1
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” 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 4.2 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 the joint
venture 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:
27 November
2022
£m
28 November
2021
£m
Gross debt 1,905.1 1,828.4
Less: Lease liabilities payable to joint venture (17.5) (34.0)
External gross debt 1,887.6 1,794.4
International Solutions fees invoiced
International Solutions fees invoiced is used as a key measure of performance of the International Solutions business as
an alternative to revenue and represent design and capacity fees invoiced during the period for existing and future CFC
and in-store fulfilment commitments.
Segmental gross profit
Segmental gross profit is a measure that 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
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Retail gross profit 657.9 737.5
UK Solutions & Logistics gross profit 802.7 710.4
International Solutions gross profit 144.9 57.5
Other gross profit (0.7) (1.0)
Group eliminations gross profit (640.5) (568.5)
Reported gross profit 964.3 935.9
Segmental other income
Segmental other income is a measure that 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
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Retail other income 82.0 84.8
UK Solutions & Logistics other income 3.6 3.5
International Solutions other income 0.2 0.6
Other income 14.9 15.2
Reported other income 100.7 104.1
Segmental distribution costs and administrative expenses
Segmental distribution costs and administrative expenses is a measure that 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
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
Retail distribution costs and administrative expenses 743.9 671.9
UK Solutions & Logistics distribution costs and administrative expenses 739.1 645.4
International Solutions distribution costs and administrative expenses 258.3 177.4
Other distribution costs and administrative expenses 34.8 49.4
Group eliminations distribution costs and administrative expenses (638.4) (567.4)
Depreciation, amortisation, impairment and other central costs 348.6 238.4
Reported distribution costs and administrative expenses 1,486.3 1,215.1
ADDITIONAL INFORMATION
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OCADO GROUP PLC Annual Report and Accounts 2022
ADDITIONAL INFORMATION
OCADO GROUP PLC Annual Report and Accounts 2022
281
Contents
Contents
ADDITIONAL INFORMATION
Shareholder Information
Analysis of share register at 27 November 2022
By type of holder Total no. of holdings Percentage of holders Total no. of shares
Percentage of issued
share capital
Individual 1,001 49.02 3,313,824 0.40
Institutions and others 1,041 50.98 822,565,667 99.60
By size of holding
1-500 619 30.31 111,633 0.01
501-1,000 209 10.24 159,552 0.02
1,001-10,000 598 29.29 2,178,371 0.26
10,001-100,000 359 17.58 13,148,570 1.59
Over 100,000 257 12.59 810,281,365 98.11
Total 2,042 100.0 825,879,491 100.0
AGM
The AGM will be held at Numis Securities Limited, 45 Gresham Street, London, EC2V 7BF at 2.30 pm on 2 May 2023.
Further details can be found in the Notice of Meeting sent to shareholders, which is also available at
www.ocadogroup.com.
Shareholder Queries
Please contact our Registrar, Link Group, directly for all enquiries about your shareholding:
Online: www.ocadoshares.com (you will need your shareholder reference number which can be found on your
share certificate)
By telephone: 0345 608 1476. (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 9.00
am to 5.30 pm, Monday to Friday excluding public holidays in England and Wales.)
By post: Link Group, 10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL.
Electronic Shareholder Communication
We encourage our shareholders to opt for electronic communications as opposed to hardcopy documents by post.
This has a number of advantages for the Company and its shareholders. Increased use of electronic communications
will deliver savings to the Company in terms of administration, printing and postage costs, as well as increasing the
speed of communication and provision of information in a convenient form. Less paper also reduces our impact on the
environment.
If you would like to receive notifications by email, you can register your email address via the Share Portal
www.signalshares.com or by writing to Link Group FREEPOST SAS, 10th Floor, Central Square, 29 Wellington Street,
Leeds, LS1 4DL. No stamp or further address detail is required, please write in BLOCK CAPITALS as required. Please
note that if you hold your shares corporately or in a CREST account, you are not able to use the Share Portal to inform
us of your preferred method of communication and should instead write to Link Group at FREEPOST SAS, 10th Floor,
Central Square, 29 Wellington Street, Leeds, LS1 4DL.
Warning about Share Fraud
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/scamsmart/share-bond-boiler-room-scams, 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.
Share Price Information
The Company’s ordinary shares are listed on the London Stock Exchange. The price of the Company’s shares is
available on the Corporate Website at www.ocadogroup.com. This is supplied with a 15 minute delay to real time.
Five-Year Summary
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
52 weeks
ended
2 December
2018
£m
Revenue 2,513.8 2,498.8 2,331.8 1,756.6 1,598.8
Gross profit 964.3 935.9 800.0 5 97.3 547.5
EBITDA
A
(74.1) 61.0 73.1 43.3 59.5
Adjusted operating (loss)/profit
1
(421.3) (175.1) (94.9) (93.5) (33.0)
1 Adjusted to exclude exceptional items
A
and share the results of joint ventures and associates.
52 weeks
ended
27 November
2022
£m
52 weeks
ended
28 November
2021
£m
52 weeks
ended
29 November
2020
£m
52 weeks
ended
1 December
2019
£m
52 weeks
ended
2 December
2018
£m
Active customer base 940,000 832,000 680,000 795,000 721,000
Average orders per week
5
377,000 357,000 334,000 325,000 296,000
Average basket value (£)
2,3
118.46 129.08 137.19 106.30 106.85
CFC efficiency (UPH)
4
175 170 169 161 163
DPV per week 176 177 184 196 194
Product waste (%) 0.9 0.6 0.4 0.7 0.8
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 basket value excludes destination sites from 2014 onwards; prior to this, destination sites were not material.
4 Mature CFC operations (CFC is considered mature if it has been open 12 months by the start of the half year reporting period). Bristol is now included (with Hatfield,
Dordon, Erith) as a mature CFC operation in FY22 numbers.
5 2018-2020 includes orders for Fetch.co.uk, Sizzle.co.uk and Fabled.com. 2021 includes Fetch.co.uk up to disposal in January 2021.
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OCADO GROUP PLC Annual Report and Accounts 2022
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283
Contents
Contents
ADDITIONAL INFORMATION
Donating shares to charity – ShareGift
Small numbers of shares, which may be uneconomic to sell, can be donated to ShareGift, the share donation charity.
ShareGift transfers these holdings into their name, aggregates them, and uses the proceeds to support a wide range of
UK charities. If you would like further details about ShareGift, please visit www.Sharegift.org, email help@sharegift.org
or telephone them on 020 7930 3737.
ADR administration
Ocado Group plc operates an American Depositary Receipts programme. ADRs are traded on the over-the-counter market
under the symbol OCDDY. One ADR represents two ordinary Ocado shares. BNY Mellon maintains the Company’s ADR
register. If you have any enquiries about your holding of Ocado ADRs, you should contact BNY Mellon by post at 240
Greenwich Street, Floor 8W New York, NY 10286.
Financial Calendar
*
28 March 2023 Q1 Trading Statement
2 May 2023 Annual General Meeting
18 July 2023 Half Year Results Announcement
19 September 2023 Q3 Trading Statement
16 January 2024 Q4 Trading Statement
29 February 2024 Final Results Announcement
* Dates are provisional
Company Information
Registered office: Buildings One & Two
Trident Place
Mosquito Way
Hatfield
Hertfordshire
United Kingdom
AL10 9UL
Company number: 07098618
Company Secretary: Neill Abrams
Independent Auditor: Deloitte LLP
1 New Street Square
London
EC4A 3HQ
Forward-looking Statements
Certain Statements made in this Annual Report are Forward-looking Statements. Such Statements are based on current
expectations, forecasts and assumptions and are subject to a number of risks and uncertainties that could cause actual
events or results to differ materially from any expected future events or results expressed or implied in these Forward
looking Statements. They appear in a number of places throughout this Annual Report and include Statements
regarding the intentions, beliefs or current expectations of the Directors concerning, amongst other things, the Group’s
results of operations, financial condition, liquidity, prospects, growth, objectives, strategies and the business. Nothing in
this Annual Report should be construed as a profit forecast. All Forward-looking Statements in this Annual Report are
made by the Directors in good faith based on the information and knowledge available to them as at the time of their
approval of this Annual Report. Persons receiving this report should not place undue reliance on Forward-looking
Statements. Unless otherwise required by applicable law, regulation or accounting standard, the Group does not
undertake any obligation to update or revise publicly any Forward-looking Statements, whether as a result of new
information, future events, future developments or otherwise.
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, for good” is a trademark of Ocado Group plc.
ADDITIONAL INFORMATION
284
OCADO GROUP PLC Annual Report and Accounts 2022
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Contents
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