"I have assumed the role of Chairman in what has been a truly transformational year for the Group."

Dear Shareholder,

On behalf of the Board, may I present Ocado Group plc's Annual Report and Accounts for the 52 weeks ended 1 December 2013.

A transformational year

I have assumed the role of Chairman in what has been a truly transformational year for the Group. The expansion of our offer into the non-food sector took a leap forward in January 2013 with the opening of a dedicated Non-Food Distribution Centre and again in June, with the launch of an online pet store, Fetch. February saw the completion and opening of our second Customer Fulfilment Centre at Dordon, Warwickshire ("CFC2"). The initial phase of this project ultimately costing over £230 million, was delivered on time and on budget, and will eventually increase capacity by around 180,000 orders per week. This increase in potential capacity was instrumental in securing another milestone event, the signing of the agreement with Wm Morrison Supermarkets plc ("Morrisons") to provide the technology and logistics for their online grocery offering. The deal is part of the Group's wider strategy to commercialise our industry-leading know-how and intellectual property through agreements with strategic customers in the UK and worldwide. Further detail on the Morrisons transaction can be found under Utilising Knowledge: Morrisons and in the Morrisons case study.

Strong financial and operational performance and balance sheet

I am also pleased to report the Group's strong financial performance. The rate of sales growth increased year-on-year and EBITDA increased 35.1% to £45.8 million for the period (2012: £33.9 million)1. Operational efficiency levels continued to improve over the financial year as the utilisation of CFC2 increased.

The Group's financial position improved markedly following the sale to and lease back from Morrisons of the land and buildings at CFC2 and a 50% interest in the related mechanical handling equipment, allowing the full repayment of approximately £85 million of outstanding debt and creating a significant cash reserve.

Despite making a loss before tax for the period of £(12.5) million (2012: 53 week basis: loss of £(0.6) million) our shareholders have recognised the Company's overall improved performance and position, given that total shareholder returns for the Company increased by more than 450% over the past 12 months2. Further detail on the Group's financial position and performance can be found in the Chief Financial Officer's Review.

Customers and suppliers

It was an exciting year for the Group and its suppliers, with the expansion into non-food, significant growth of our grocery product range by about 6,000 products including continued increase in the Ocado own-label range. This range growth provides opportunities for more suppliers and greater choice for our customers. Our continued rapid growth suggests that our focus on improving our offer to customers through broader product range, better pricing initiatives, enhanced online usability and maintaining the reliability of our service, is meeting a growing group of customers' expectations.

Corporate governance

One of the Board's responsibilities is ensuring that the Group applies good corporate governance to facilitate effective management of the Company. As the Company's new Chairman I am pleased to note that the Group is fostering an environment of innovation and progress in a framework of strong governance and risk management. A detailed statement on corporate governance can be found in the Chairman's Governance Introduction and the Statement of Corporate Governance.

The Ocado family

Our success this year would not have been possible without the passion and commitment of our outstanding employees. On behalf of the Board, I would like to thank all members of the Ocado family for their contribution in making this an outstanding year for the Group.

I am very proud to report that during the last year Ocado has created over 1,000 new jobs in the UK, through the opening and expansion of CFC2 and Non-Food Distribution Centre in Welwyn Garden City ("NFDC"), the significant growth of our head office in Hatfield, and growth at all nine of our spoke sites in England. At the end of the period we employed over 6,700 people in the UK.

Looking to the future

With the first orders under the Morrisons deal being fulfilled in January this year, the Group has entered the next phase of its development. Looking to the future, the Group intends to make greater investment in the innovation and development of its intellectual property and technology. The Board remains committed to finding further strategic customers, monetising our intellectual property and to supporting and overseeing the executive team in driving growth and the creation of further long-term shareholder value in our business.

Sir Stuart Rose
Chairman
Ocado Group plc

Notes

  1. Financial performance compared to 52 weeks in 2012.
  2. Total shareholder return is the increase in the Company's share price in the 12 months up to 4 March 2014 (being the last practical date prior to publication of this Annual Report). The Company did not pay any dividends in that period.