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OcadoAnnouncement

10/02/2016 07:10

RNS Number : 5851O
Ocado Group PLC
10 February 2016
ANNUAL FINANCIAL REPORT
OCADO GROUP PLC
10 February 2016
Ocado Group plc
Annual Financial Report 2015
Ocado Group plc ("Ocado") has today submitted to the Financial Conduct Authority's national storage mechanism its annual report and accounts for the 52 weeks ended 29 November 2015 (as required by Listing Rules 9.6.1 and 9.6.3).
The annual report and accounts for the 52 weeks ended 29 November 2015 is available to view on Ocado's website:www.ocadogroup.com(in compliance with Disclosure and Transparency Rule 6.3.5(3)).
Ocado's annual report and accounts for the 52 weeks ended 29 November 2015 will also be available for viewing at the Financial Conduct Authority's national storage mechanism atwww.morningstar.co.uk/uk/NSM.
This announcement follows Ocado's announcement on 2 February 2016 of its preliminary results for the same period.A condensed set of Ocado's financial statements and information on important events that have occurred during the year and their impact on the financial statements and related party information were included in Ocado's preliminary results announcement.That information together with the information set out below is the information provided in satisfaction of the requirements ofDisclosure and Transparency Rule 6.3.5. The description of principal risks and uncertainties below is extracted in unedited full text from theannual report and accounts for the 52 weeks ended 29 November 2015. Reading this announcement and/or the preliminary results announcement should not be a substitute for reading the fullannual report and accounts for the 52 weeks ended 29 November 2015. This announcement and the preliminary results announcement areavailable to view on Ocado's website:www.ocadogroup.com.
Principal risks and uncertainties
We have identified 14 principal risks and uncertainties facing Ocado. These are considered by the Board to be material to the development, performance, position or future prospects of Ocado. These risks, mitigations and changes during the year are summarised in the table below. They are not set out in priority order. Further information on risk is set out on pages 38 to 41 of the annual report and accounts for the 52 weeks ended 29 November 2015.
Objective
Risks
Mitigation Action/Control 
Change During The Year
DRIVING GROWTH
Failure to maintain competitive pricing position
 Continuation of our LPP basket matching price comparison
 Maintaining a competitive number of promotional offers and increased availability of free delivery slots for price sensitive customers
 Creation of a choice of tiered price points within each category
Due to increased competition in the market

Risk of decline in high service levels
 Weekly monitoring of the key indicators and the underlying drivers against published targets

Failure to develop retail proposition to appeal to broader customer base and sustain growth rates
 Growth of the Ocado own label range alongside continued provision of the Waitrose range
 Growth of branded ranges and expansion of supplier base
 Alternative sourcing scenarios considered in the event that the Waitrose sourcing relationship terminates
 Continuation of investment and optimisation of the marketing channels to acquire new customers
 Continued improvement of webshop and apps

Failure to develop sufficient management and technology capability or bandwidth to deliver on all our strategic priorities
 Second and third overseas technology centres opened
 Improved IT prioritisation process 

Risk of not signing multiple OSP deals in the medium term
 Investment in our platform which enables OSP is also required for Ocado's expanding retail business. Initial deployment will be in CFC Andover and CFC Erith
 Impact of not signing multiple OSP deals in the medium term is restricted to the lost opportunity to increase our earnings from our Platform business
 The amount of capital invested in our platform is carefully controlled and we have the ability to reduce costs by scaling back the speed of the development
n
MAXIMISING EFFICIENCY
A risk of delays in the implementation of new capacity for both Ocado and Morrisons
 Dedication of resources to the modularisation of technology and logistics systems to enable faster replication
 New capacity in development at CFC Andover and CFC Erith
 Regular Executive Board steering and full Board reporting of new technology projects 
Future new capacity
is reliant on new, unproven technology
UTILISING PROPRIETARY KNOWLEDGE
Technological innovation supersedes our own and offers improved methods of food distribution to consumers
Failure to protect our IP
Failure to ensure that our technology can be freely operated without infringing a third party's IP
 Engagement with a wide number of international grocers to understand market needs
 Experienced teams in place who understand the current solutions and are aware of the global alternatives used in other industries 
 Processes to identify patentable inventions and to apply for patents
 Established Ocado Innovation Committee to review our patent portfolio and discuss other IP issues
 Conducting "freedom to operate" searches on selected technologies 
Multiple patents now filed although the value of IP has increased, so increasing the value to others
OPERATIONAL
A risk of a food or product safety incident
 Experienced legal, food and product technology professionals monitor compliance against policies against procedures
 Supplier approval and certification process
 Food and product safety policies and quality management with appropriate operational procedures 
Supplier and product numbers have increased and the market has become more sensitive to product 
issues

A risk of changes in regulations impacting our retail business model or the viability of OSP deals
 Regular monitoring of regulatory developments to ensure that changes are identified
 Monitoring operational performance to minimise environmental impact
 Regulatory due diligence carried out at appropriate stages in the OSP process

Risk of major cyber-attack or data loss
 IT systems are structured to operate reliably and securely
 Denial of service protection service is in place
 The security of our IT systems is regularly tested by third parties
 No customer payment card data is held on Ocado's databases
 Access to customer personal data is restricted to those who need this information as part of their job

Business interruption
 IT systems are structured to operate reliably and securely 
 Dedicated engineering teams on site with daily maintenance programmes to support the continued operation of equipment
 Insurers advise on engineering and risk management in the design and operation of the CFCs
 High level of protection for CFCs and equipment

A risk of unintentional infringement of competition legislation
 Issued a revised competition compliance policy in 2014
 Tailored learning tools rolled out (with annual refresher) for all personnel involved in accessing Morrisons data or providing services to Morrisons 
 Physical and technical firewalls installed to ensure Ocado's Retail business is protected and kept separate from the operational teams providing services to Morrisons
Key:  Risk has increased  Risk has decreased  No change n Not applicable
For further information on the financial risks see page 158 of the notes to the consolidated financial statements in the annual report and accounts for the 52 weeks ended 29 November 2015. 
Directors' Responsibility Statement
Ocado's annual report and accounts for the 52 weeks ended 29 November 2015contains the following statements regarding responsibility for the financial statements and the annual report in compliance with DTR 4.1.12. This responsibility statement is repeated here (below) solely for the purposes of complying with Disclosure and Transparency Rule 6.3.5. It is not connected to the extracted information presented in the preliminary results announcement or this announcement.
Each of the Directors who held office at the date of the approval of this Annual Report (whose names and functions are listed on pages 50 to 51 of this Annual Report) confirms, to the best of his or her knowledge, that:
 the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and
 the "management report" (as defined in the Directors' report on page 71) includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
The Directors of Ocado Group plc are listed in the annual report and accounts for the 52 weeks ended 29 November 2015 and are listed on the Ocado Group's corporate website:www.ocadogroup.com. The Directors of Ocado Group plc as at the date of this announcement are as follows:
Stuart Rose;
David Grigson;
Tim Steiner;
Neill Abrams;
Duncan Tatton-Brown;
Mark Richardson;
Ruth Anderson;
Robert Gorrie;
Jrn Rausing;
Alex Mahon; and
Douglas McCallum.
Enquiries
For further information contact:
Ocado Group plc
Company Secretary
Neill Abrams 
Titan Court
3 Bishops Square
Hatfield Business Park
Hatfield, Hertfordshire AL10 9NE
Fax: +44 (0)1707 227 997
email:company.secretary@ocado.com
Investor Relations
David Hardiman-Evans +44 1707 228 000 
investor.relations@ocado.com

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