Ocado Group plc Annual Report and Accounts www.ocadogroup.com for the 53 weeks ended 3 December 2017 Stock code: OCDO Annual Report and Accounts plc Group AnnualOcado Report for the 53 weeks endedfor 3 December weeks 2017 the 53 www.ocadogroup.com Stock code: OCDO
25615 Proof 8 6 February 2018 1:07 AM 25615 Proof 8 6 February 2018 1:07 AM CHANGING THE WAY THE World Shops
Established in 2000 to revolutionise the way customers do their shopping, Ocado is the world's largest dedicated online grocery retailer.
PURPOSE Changing the way the world shops.
MISSION Powered by fresh thinking, we strive for new and improved ways to deliver the world’s most advanced end-to-end online shopping and delivery solutions. We are built for this – nobody does it better.
STRATEGY To deliver long-term shareholder value by:
DRIVING GROWTH MAXIMISING EFFICIENCY UTILISING OUR PROPRIETARY Continually enhancing the value of Harnessing our years of learning we KNOWLEDGE our proposition for our retail and continually strive to innovate and develop Utilising our IP to create competitive corporate customers our technology and operations to advantages in our Retail business and to consistently improve our economic monetise IP through our Solutions and operating performance business
Read more about Driving Growth on Read more about Maximising Efficiency Read more about Utilising Proprietary pages 24 and 25 on pages 26 and 27 Knowledge on pages 28 and 29
Ocado Brands and Partners
OCADO RETAIL OCADO SOLUTIONS
Ocado Group plc | Annual Report and Accounts for the 53 weeks ended 3 December 2017
25615 Proof 8 6 February 2018 1:07 AM 25615 Proof 4 6 February 2018 1:07 AM OUR Story Contents
OVERVIEW Innovation is Part of Our DNA Why People Invest In Us 02 Ocado has a proven track record as a disruptor within the grocery market. We Progress in 2017 03 have transformed the way the nation can shop for groceries by developing a CEO Q&A 04 unique model based on highly efficient, fully automated, Customer Fulfilment Chairman’s Statement 05 Centres (CFCs), flexible and easy-to-use customer software, and friendly and STRATEGIC REPORT timely last mile delivery. This model delivers to our customers wider and Our Business Model 08 fresher product ranges, competitive prices, and highly attractive service which, Our Platform 10 in turn, gives us a unique advantage in the UK grocery retail market to grow Innovation – Developing solutions for all our customers 11 our customer base and take market share. Evidencing Efficiency Improvements 14 The fact that we have consistently improved our efficiency metrics while Ocado Retail 16 growing both revenue and market share is testament to our ability to Ocado Solutions 18 consistently adapt technology to meet customer needs better. Ocado Within the Marketplace 20 Our Strategy 22 We aim to commercialise our technical capabilities and proprietary Our Strategic Objectives: Driving Growth 24 technology through our Ocado Solutions business to help retail partners Our Strategic Objectives: Maximising Efficiency 26 internationally launch and develop their own profitable and growing Our Strategic Objectives: Utilising Proprietary Knowledge 28 online operations. Key Performance Indicators 30 Chief Financial Officer’s eviewR 32 More information about the progress we have made from innovations can be found in Innovation – Developing solutions for all our customers How We Manage Our Risks 38 section on pages 11 to 13 Corporate Responsibility 42 Our People 46 What this means today OUR GOVERNANCE Chairman’s Governance Overview 50 The UK grocery market is undergoing rapid and profound change. Channel Board of Directors 52 shift from traditional full-service supermarkets to online continues to build Statement of Corporate Governance 54 momentum and online is forecast to be the fastest growing channel in Leadership and Effectiveness – Nomination Committee Report 62 UK grocery over the next five years, according to the Institute of Grocery Accountability – Audit Committee Report 64 Distribution (IGD), with similar trends being seen across the globe. The UK online sales value is forecast to increase from £10.4 billion in 2017 to DIRECTORS’ REMUNERATION REPORT £16 billion in 2022, a 54% increase worth £5.6 billion (IGD). Annual Statement from the Remuneration Committee Chairman 70 IGD expects the value of the world’s grocery market to increase by $2.4 trillion Description of the Remuneration Committee 72 between 2016 and 2021. Grocery retail internationally is in a period of Remuneration Policy Report 74 significant change driven by the adoption of digital technologies. This offers Annual Report on Remuneration – 2017 91 us huge market opportunities on a global scale. Annual Report on Remuneration – Implementation Ocado is a catalyst for channel shift and our Retail and Solutions businesses of Policy for 2018 107 are both well placed to take advantage of the changes which channel Directors’ Report 110 shift brings. OUR FINANCIALS (GROUP) Independent Auditor' Report 120 More information on trends in the grocery industry can be found within the Marketplace section on pages 20 and 21 Consolidated Income Statement 127 Consolidated Statement of Comprehensive Income 128 Consolidated Balance Sheet 129 What this means in the future Consolidated Statement of Changes in Equity 130 Consolidated Statement of Cash Flows 131 Innovation is part of our DNA and our continued investment and thought- Notes to the Consolidated Financial Statements 132 leading research into disruptive capabilities such as artificial intelligence, robotics and the Internet of Things provide an opportunity to create a OUR FINANCIALS (COMPANY) 178 sustainable competitive advantage which will allow us to deliver long-term Company Balance Sheet 180 shareholder value. Company Statement of Changes in Equity 181 Company Statement of Cash Flows 182 More information on Innovation – Developing solutions Notes to the Company Financial Statements 183 for all our customers can be found on pages 11 to 13 ADDITIONAL INFORMATION Glossary 194 Alternative Performance Measures 196 Five Year Summary 197 Financial Calendar 198 Company Information 198
Stock Code: OCDO | www.ocadogroup.com 01
25615 Proof 8 6 February 2018 1:07 AM WHY PEOPLE Invest In Us
Largest dedicated online Significant market opportunity grocery supermarket in in grocery, the largest retail the world segment
More information on the IFC and page 01 More information on pages 20 and 21
Ideally positioned to benefit from Proprietary intellectual property continuing channel shift to online creating significant competitive advantages
More information on pages 08 to 10 More information on pages 10 to 15
Commercialising intellectual property End-to-end operating model offering significant opportunities for provides structural advantages Solutions business
More information on pages 18 and 19 More information on pages 14 to 15
Superior customer offering with Operational leverage and leading service, range and price virtuous cycle of growth, proposition drives growth investment and innovation
More information on pages 16 and 17 More information on page 10
Proven and invested Actively promoting responsible management team driving business behaviour strategy and execution
More information on pages 52 and 53 More information on pages 42 to 45
02 Ocado Group plc | Annual Report and Accounts for the 53 weeks ended 3 December 2017
25615 Proof 8 6 February 2018 1:07 AM Overview PROGRESS In 2017
Strategic Highlights • Signed our first two* international Ocado Solutions partnerships to enable • Launched the first instance of our Ocado Solutions store picking capability our partnerʼs online operations with Morrisons.com
• Continued to scale our latest CFC in Andover, UK, which utilises the first • Developed new technology and IP, with multiple patent applications filed installation of our proprietary equipment solution and granted Operational Highlights ACTIVE CUSTOMER BASE AVERAGE ORDER SIZE (£)