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This report will describe the Ocado group Plc. It is one of the leading online grocery retailers in the world. The mission of the company and it’s global reach will also discuss in this report. The governance committees of the company and the purpose of these committees will discuss. This report will analyse the annual report of the company. The recent announcement of the company by the regulatory news service will be stated in the report. The depreciation policy of the company will identify and match with the depreciation policy under IFRS. Market risk of the company will be evaluated and how it affects the industry future. At the end of this report will inform you about the liquidity position of the company and liquidity risk.

About Ocado Group Plc

Ocado is a public limited company and it is one of the leading online grocery retailer platforms in the world. It is founded in 2000. Listed in London stock exchange in 2010. It is headquartered in Hatfield, England, UK. Company designs automation system, robotics and software for E- retailers who do online business. The mission of Ocado is to reshape the online grocery store through automation and innovative technology. There are 10 subsidiaries of Ocado Company that is kindred system Inc., Ocado retail limited, Haddington Dynamics Inc., Ocado innovation Limited, Ocado Holdings Limited, Jones Food Company Limited, Ocado solution Limited, MHE JV Co. limited, Ocado Cell In Altas Insurance Pcc Limited, and Ocado information technology limited (Mason, 2019)

Global Reach

Ocado confirms the agreement with a Japanese company that is Aeon. Aeon is Japan’s largest retailers. Ocado made an agreement with this retailer for developing a business of online grocery in Japan. Aeon retailer will set up an online business for the Japanese market. It is a big opportunity for Ocado. Ocado can sale their product in the Japanese market. They have also signed a promise with international companies such as Coles, it is a company in Australia. Ocado made a deal with Kroger a retail company in the US, for establishing 20 CFCs ( Customer fulfilment centres) by using the automated technologies of Ocado. In 2019 Ocado has announced a joint venture with marks and spencer. Ocado online retailing business and their software, technology is reaching to the whole world gradually (Ocado Group, 2020)

Company’s Governance Committees

There is three main governance committee of Ocado group are:

  • Audit committee: The chairperson of the audit committee is Julie Southern. Committee review the financial statements of the company. They monitor the financial statement integrity, which includes trading statements, half-yearly reports, annual reports and other reports which state the financial position of the company. They report to the board of directors and review the internal control & system of risk management so that the financial risk of the company can monitor and manage. How efficiently work the internal audit system, Effectiveness and independence of external auditor also reviewed by this committee.
  • Remuneration Committee: The Chairperson of the Remuneration Committee is Andrew Harrison. Committee ascertains the remuneration, arrangements of incentive, bonus, terms of the contract and other different types of benefits for Chairman, executive director and company secretary. They determine the policy regarding remuneration for supporting the strategy of the company and encourage the sustainable success of the company. The committee has the responsibility to report to the directors of the company about the remuneration policy.
  • Nomination Committee: The chairperson of the Nomination Committee is Lord Rose. This committee reviews succession planning. Committee gives surety about the board composition and membership is appropriate. They frequently review the composition, size and structure needed by the board. Provide recommendations regarding any changes in that. Review the company’s leadership needs both non-executive and executive to ensure that they can compete efficiently in the marketplace. They evaluate the independence, skills, diversity, experience and knowledge and then appoint will be made by the board of company (Ocado Group, 2020)

Financial Position of Company

  • The accounting equation of a company holds good when total assets and the total liability of the company is equal. The total assets of Ocado in 2020 is 4028.2 and the total liability of the company is also 4028.2.
  • Current Assets of Ocado in 2020:
  1. Asset held for sale: 4.2m
  2. Inventories: 61.6m
  3. Trade receivables: 200.6m
  4. Other financial Assets: 402m
  5. Cash and cash equivalents: 1706.8m
  6. Insurance reimbursement asset: 5.5m
  7. Contract assets: 0.1m
  8. Cost to obtain contract: 0.1m
  9. Derivative financial assets: 0.2m
  • Current Liability of company in 2020:
  1. Contract Liabilities: 284.9m
  2. Trade payables: 422.9m
  3. Provisions: 8.4m
  4. Lease liabilities: 48.1m
  5. Derivative financial liabilities: 0.3m
  • Non-current assets of company in 2020:
  1. Goodwill: 4.7m
  2. Other intangible assets: 239.5m
  3. Property, plant and equipment: 785m
  4. Right of use assets: 385m
  5. Investment in joint venture: 37.4m
  6. Investment in associate: 4.1m
  7. Other financial assets: 166.8m
  8. Contract assets: 0.3m
  9. Cost to obtain contracts: 0.7m
  10. Deferred tax assets: 23.6m
  • Non- current liability of company in 2020:
  1. Contract liabilities: 284.9m
  2. Provisions: 35.6m
  3. Borrowing. s: 997.4m
  4. Lease Liabilities: 359.7m
  5. Deferred tax liabilities: 19.3 (Robinson, 2020)

Note: All the amounts in £m

  • Unfamiliar with contract liability and contract assets:

Contract assets is a right of an entity to pay for the product, services, which has already, transfer to the customer, and the right of payment must be conditional.

Contract liability is an obligation of an entity for transferring product and services to the customer when he prepaid the amount of product or service (Ocado Group, 2020)

Credit Sale

Days of sales outstanding: DSO states about how many days it takes for converting credit sales into cash or how many days it takes by the company for collection of Account receivables. Formula of DSO: Account Receivables/net credit sales*number of days in a year

Note: Credit sales amount is not available in Annual report of company so cost of sales use in this formula instead of credit sales.

Trade receivables in 2020 = 104.5

Trade receivables in 2019 = 67.5

Trade receivables in 2018 = 52.4

Cost of sales in 2020 = 1517.9

Cost of sales in 2019 = 1164.8

Cost of sales in 2018 = 1051.3

Days in 2020 = 366

Days in 2019 = 365

Days in 2018 = 365

DOS in 2020 = 104.5/1517.9*366 = 25 days

DOS in 2019 = 67.5/1164.8*365 = 21 days

DOS in 2018 = 52.4/1051.3*365 = 18 days

As per the comparison of DOS between 2018, 19 and 20. The DOS of 2018 is lesser than other years' DOS. It means the company converts cash earlier in 2018 as compared with 2019 and 2020.

Total revenue in 2019 is 1756.6m

Total revenue in 2020 is 2331.8m

Total revenue in 2018 is 1598.8m

As there is a positive relation in revenue and DOS. There is higher revenue in 2020 and DOS is also highest in 2020 which means more revenue more credit sales and takes more days to convert credit sales into cash (Mulyono 2018)

Regulatory news service announcement:

RNS transmits the non-regulatory and regulator information that is published by the organizations or companies. It complies with market transparency law. London stock exchange owned RNS and they transmit 70% of news of UK companies.

The recent announcement by Regulatory news service regarding Ocado group Plc is that company inform that application is made to London stock exchange and financial conduct authority for the admission of 710000 ordinary shares of company to trade in the key market for the listed security. It includes a premium section of the FCA official list. The shares of company will rank at the same rate as the already issued company’s ordinary shares.

It is a block listing application, which means shares of the company will be booked under block listing which is connected with LTIP (Long-term incentive plan) of the company. The shares of the company will be an issue at different time, which satisfy the option of LTIP.

This company announcement has made as per the Listing Rule 3.5.5. Shares admission was expected to do on 12th march 2021 (Ocado Group, 2020)

Depreciation policy

As per the IAS 16 depreciation, means allocate the depreciable amount systematically. Depreciable amount means asset cost less value of residual. Depreciation is not a loss of an asset. It is a technique of accrual accounting that allocate an asset’s depreciable amount to the period of using assets. IAS 16 states that the depreciation amount must be recognized in the profit and loss statement as an expenditure. There are two methods of allocating depreciation: The diminishing balance method and the straight-line method.

Assessing residual value and useful life of assets is subjective and it will be known at the time of selling assets that’s why IAS 16 states that estimate of residual value and useful life must be reviewed at the end of a reporting period.

The company policy of depreciation: Depreciation on plant, property and equipment is computed on the straight-line method. Depreciation charged and recognized as administrative expense or distribution cost as per the nature of particular assets. Useful lives of Freehold buildings is 30 years, Fixture and fittings are 5 to 10 years, Plant and machinery are 3 to 20 years, Motor vehicles is 2 to 7 years.

Expected useful lives and residual values are reviewed by the company and adjust accordingly at the end of the reporting period every year. Company policy regarding depreciation of Plant, property and equipment matches with the depreciation policy according to IFRS (Kirli, 2018)

Market Risk

Unrivalled spending on the distribution: Ocado company warehouses use robotic technology to fill the customers’ orders and human workers also involved in the process of delivery. It delivers more orders so in the U.S it is possible to deliver more orders. The cost of a US warehouse will be high than the normal distribution centre in the US. This is a challenge that is faced by Ocado Group Plc.

Ocado use artificial intelligence and other software to deliver grocery to the customer but it is not able to reach in small areas of the country as the cost will be high in that area, distribution centre could not be developed in that areas.

Global market risk is that if a relation with other countries will bad then it is difficult to do business in that country and all the profits come from that country converts into a loss or no profit from that country. Import and export duty will be increased by both countries. So it is a risk from Ocado.

In the future, these challenges and risk affect a lot. If the company develop their distribution centre in small areas of the country then cost will be high in that area and profit will decrease. Soon the company cannot take market share of small areas.

Market risk of bad relation with the countries. The UK is now dealing with a Japanese company and making good relating to japan but there is a possibility for bad relation with that country due to any reason. It results in a loss to the company.

The liquidity position of the company

  1. The liquidity position of the company can be identified through the current ratio, quick ratio & operating cash flow ratio of the company.

Current ratio of company in 2020: Current Assets/ current liability

= 2381.1/ 494.1

= 4.81

Current ratio in 2019

= 1009.2/460.3

= 2.19

Quick ratio of company in 2020: Current assets – Inventory/ current liability

= 2381.1-61.6/494.1 /

= 4.69

Quick ratio in 2019:

= 1009.2- 52.3/460.3

= 2.07

Operating cash flow ratio of company in 2020: Cash flow from operations/ Current liabilities.

= 225.4/494.1

= 0.45

In 2019:

= 51.7/ 460.3

= 0.112

As per the liquidity ratio analysis liquidity position of company is better in 2020 as compared to 2019 as the current ratio, quick ratio and operating cash flow ratio of 2020 is greater than in 2019.

b. Debt- equity ratio in 2020: Total Liabilities/ Shareholder’s equity

= 2191/ 1837.2

= 1.19

As total debts are more than equity and company have to repay debt shortly.

c. The Ocado group has enough cash resources for managing their needs of working capital and short term obligations. The company issues an unsecured convertible bond of £600m in December 2019 and £350m in June 2020. They also issued ordinary shares of £657.1m in June 2020. In October 2020 Credit facility of £100m has been terminated. Ocado group frequently review their financial arrangements. They also monitor the liquidity requirements to get to know about enough cash to meet the need for operating activities. Company’s liquidity position is good as the company have adequate cash resource as there is less liquidity risk to the company (Baraja & Yosya, 2019)


This report described Ocado Group Plc, which has headquartered in the UK and, is listed on the London stock exchange. Now the company agreed with a Japanese company so that company take some share of the foreign market. The company’s annual report has analysed in this report. As per the analysis, the liquidity position of company is good and have less liquidity risk. The depreciation policy of the company has been also discussed in this report. The depreciation policy of the company matches with the policy of depreciation under IFRS. The market risk is facing by the company has been discussed in this report. The recent announcement by the regulatory new service regarding block listing application has been described in this report.


  • Baraja, L. & Yosya, E.A., 2019. Analysis the Impact of Liquidity, Profitability, Activity and Solvency Ratio on Change in Earnings. Indonesian Management and Accounting Research17(1), pp.1-17.
  • Kirli, M., 2018. Comparison of Depreciation Methods in" International Accounting Standard 16 Property, Plant and Equipment" and an Application. Annals of the University Dunarea de Jos of Galati: Fascicle: I, Economics & Applied Informatics24(3).
  • Mason, R., 2019. Developing a profitable online grocery logistics business: Exploring innovations in ordering, fulfilment, and distribution at ocado. In Contemporary Operations and Logistics (pp. 365-383). Palgrave Macmillan, Cham.
  • Mulyono, S., Djumahir, D. & Ratnawati, K., 2018. The effect of capital working management on the profitability. Jurnal Keuangan dan Perbankan22(1), pp.94-102.
  • Ocado Group, 2020. Annual Report. [online] Available at: [Accessed 23 Mar. 2021].
  • Ocado Group, 2020. Corporate governance. [online] Available at: [Accessed 23 Mar. 2021].
  • Ocado Group, 2020. Regulatory News. [online] Available at: [Accessed 23 Mar. 2021].
  • Robinson, T.R., 2020. International financial statement analysis. John Wiley & Sons.
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