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OcadoAnnouncement

06/02/2018 07:05

RNS Number : 9842D
Ocado Group PLC
06 February 2018
ANNUAL FINANCIAL REPORT
OCADO GROUP PLC
6 February 2018
Ocado Group plc
Annual Financial Report 2017
Ocado Group plc ("Ocado") has today submitted to the Financial Conduct Authority's national storage mechanism its annual report and accounts for the 53 weeks ended 3 December 2017 (as required by Listing Rules 9.6.1 and 9.6.3).
The annual report and accounts for the 53 weeks ended 3 December 2017 is available to view on Ocado's website:www.ocadogroup.com (in compliance with Disclosure Guidance and Transparency Rule 6.3.5(3)).
Ocado's annual report and accounts for the 53 weeks ended 3 December 2017 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 this morning 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 Guidance 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 53 weeksended 3 December 2017. Reading this announcement and/or the preliminary results announcement should not be a substitute for reading the fullannual report and accounts for the 53 weeksended 3 December 2017. This announcement and the preliminary results announcement areavailable to view on Ocado's website:www.ocadogroup.com.
Principal risks and uncertainties
We have identified 13 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 53 weeks ended 3 December 2017.
Strategic Objective
Risks
Mitigation Action/Control
Change During The Year
DRIVING GROWTH
Risk of decline in high service levels
 Weekly monitoring of the key indicators against published targets
 A number of planned initiatives are intended to improve operational performance

Failure to develop retail proposition to appeal to broader customer base and sustain growth rates
 Continuation of LPP basket matching price comparison and competitive pricing
 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 is not renewed when it expires in 2020
 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
 Increasing hiring of technology staff, including senior positions
 Regular review of IT prioritisation process
 Review of technology structures and processes to position the Group for delivering a larger number of complex projects
 Increased hiring of managers and subject matter experts in retail, operational and central support areas

Risk of not signing multiple Ocado Solutions deals in the medium term and not being able to execute effectively
 Investment in our platform which enables Ocado Solutions is also required for Ocado's expanding Retail business. Initial deployment is in Andover and Erith CFCs
 Impact of not signing multiple Ocado Solutions deals in the medium term is restricted to the lost opportunity to increase our earnings from our Solutions 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
 Resources and capabilities will be scaled and reallocated to help meet Ocado Solutions project deadlines. See above risk
n
A number of Ocado Solutions deals have been signed, leading to the challenge of implementing multiple international projects

Risk of negative implications caused by final Brexit terms such as increase in import costs or difficulty in hiring employees
 Regular monitoring of government reporting on Brexit negotiations to understand impact on the business including our ability to hire employees from the EU, an assessment of trade tariffs on imported goods and impact of disharmonisation of UK and EU regulatory standards in a range of areas
 Collaborating with trade organisations to follow developments and express our concerns to government
MAXIMISING EFFICIENCY
A risk of delays in the implementation of new capacity for both Ocado and Morrisons
 Dedicating resources to the modularisation of technology and logistics systems to enable faster replication
 New capacity in development at Andover CFC and Erith CFC
 Regular Executive Board steering and full Board reporting of new technology projects
UTILISING PROPRIETARY KNOWLEDGE
Technological innovation supersedes our own and offers improved methods of food distribution to consumers
 Engagement with a wide number of international grocers to understand market needs
 Experienced teams in place who understand the current solutions and are aware of global alternatives used in other industries
 Benefit to our UK business from examining the retail businesses of international grocers

Protecting our IP
 Ongoing effort to identify patentable inventions and to apply for patents, with an increased number of patent applications
 Ongoing review of our patent portfolio and discussion of other IP issues by the Ocado Innovation Committee
 Where necessary we take steps to protect our IP from unauthorised use

Infringing a third party's IP
 Conducting "freedom to operate" searches on selected technologies in selected jurisdictions
 Where appropriate, obtaining specialist or legal advice including to help ensure our ability to use our IP is not restricted by infringement claims
OPERATIONAL
A risk of a food safety or product safety incident
 Experienced legal, food and product technology professionals monitor compliance against policies and procedures
 Supplier approval and certification process
 Food and product safety policies and quality management with appropriate operational procedures

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

Risk of major cyber-attack or data loss
 IT systems are structured to operate reliably and securely
 The security of our IT systems is regularly tested by third parties; security monitoring capabilities have been expanded
 No customer payment card data is held in Ocado's databases
 Access to customer personal data is restricted to those who need this information as part of their job
 GDPR compliance programme is being carried out

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
 Disaster recovery testing and business continuity plans continue to be progressed and updated
 High level of protection for CFCs and equipment, combined with business interruption insurance to transfer residual risks
Key:Risk has increasedRisk has decreasedNo changenNot applicable
1. The risk described in the 2016 annual report as a "Failure to maintain competitive pricing position" has been deleted and included as a sub-set of the risk concerning "Failure to develop retail proposition to appeal to broader customer base and sustain growth rates".
2. The risk described in the 2016 Annual Report as "Risk of not signing multiple Ocado Solutions deals in the medium term" has been expanded to include the risk of not being able to execute the deals effectively.
For further information on the financial risks, see pages 161 to 163 of the notes to the financial statements.
Directors' Responsibility Statement
Ocado's annual report and accounts for the 53 weeksended 3 December 2017 contains the following statements regarding responsibility for the financial statements and the annual report in compliance with DTR 4.1.12. This responsibility statement is repeated here (below) solely for the purposes of complying with Disclosure Guidance and Transparency Rule 6.3.5. It is not connected to the extracted information presented in the preliminary results announcement or this announcement.
Each of the Directors who held office at the date of the approval of this Annual Report (whose names and functions are listed on pages 116 and 117 of this Annual Report but not including Alex Mahon) 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 111) 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 53 weeksended 3 December 2017and 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;
Tim Steiner;
Neill Abrams;
Duncan Tatton-Brown;
Mark Richardson;
Ruth Anderson;
Jrn Rausing;
Douglas McCallum;
Andrew Harrison; and
Emma Lloyd.
Enquiries
For further information contact:
David Shriver, Director of Communications
01707 228 000
investor.relations@ocado.com 
Person responsible for arranging the release of this announcement:
Neill Abrams
Group General Counsel & Company Secretary
Ocado Group plc
Buildings One & Two Trident Place
Mosquito Way
Hatfield
Hertfordshire
AL10 9UL
Fax: +44 (0)1707 227997
email: company.secretary@ocado.com
Ocado Group plc LEI: 213800LO8F61YB8MBC74


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