Disposal with retained controlling interest, IFRS 12 para 7 significant judgements, IFRS 12 paras 12, B10, significant subsidiaries with NCI, cash flow and SOCIE

Ocado Group plc – Annual report – 1 December 2019

Industry: retail; distribution

1.4 Significant Accounting Policies and Critical Estimates, Judgements and Assumptions (extract)
Critical Accounting Judgements: (extract)


5.1 Subsidiaries
In accordance with Section 409 of the Companies Act 2006, a full list of related undertakings, the country of incorporation and the effective percentage of equity owned, as at 1 December 2019 is disclosed below. All undertakings are indirectly owned by Ocado Group plc unless otherwise stated.


† Interest held directly by Ocado Group plc.
The registered offices of the above companies are as follows:
(1) Oude Delft 128, 2611 CG Delft, Netherlands
(2) Phase 2 Celsius Parc, Cupola Way, Scunthorpe, England, DN15 9YJ, United Kingdom
(3) 14 Amherst Avenue, London, England, W13 8NQ, United Kingdom
(4) Buildings One & Two, Trident Place, Mosquito Way, Hatfield, Hertfordshire, AL10 9UL, United Kingdom
(5) 17 Henrik Ibsen Street, Lozenets District, Sofia 1407, Bulgaria
(6) ul. Rakowicka 7, 31-511, Krakow, Poland
(7) Apollo Court, 2 Bishop Square, Hatfield Business Park, Hatfield, Hertfordshire, AL10 9EX, United Kingdom
(8) Level 9, 63 Exhibition Street, Melbourne, VIC 3000, Australia
(9) TMF Canada Inc, Suite 900, Purdy’s Wharf Tower One, 1959 Upper Water Street, Halifax, N.S., B3J 3N2, Canada
(10) TMF Pôle, 3-5 rue Saint-Georges, 75009 Paris, France
(11) TMF Sweden, Sergels Torg 12, Stockholm, Sweden
(12) 12 Timber Creek Lane, Newark, Delaware 19711, United States of America
(13) Av. Josep Tarradellas 38, Planta 8a, 08029, Barcelona, Spain
(14) Drottning Kristinas Väg 53, 114 28, Stockholm, Sweden
(15) 1209 Orange Street, Wilmington, Delaware 19801, United States of America
(16) Paneltex House, Somerden Road, Hull, HU9 5PE, United Kingdom

In accordance with the exemption under Section 479A of the Companies Act, the standalone financial statements for a subsidiary, Paws & Purrs Limited (registration number 07538307), will not be audited for the period ended 1 December 2019, but are included in the Group’s consolidated financial statements for the period.

The Group owns 50.0% of the equity shares of Ocado Retail. However, management has determined that the Group controls Ocado Retail. This is on the basis that the Group has certain tie-breaking rights in relation to any deadlock matter which arises in respect of the approval of Ocado Retail’s business plan and budget and the appointment or removal of the chief executive officer of Ocado Retail.

The Group has effective control over the financial and operating activities of the Ocado Cell in Atlas Insurance PCC Limited, an insurance company incorporated in Malta and therefore consolidates the Ocado Cell in its financial statements in accordance with IFRS 10 “Consolidated Financial Statements”. The Group uses the Ocado Cell to provide self-insurance for its vehicle fleet and public and product liability claims.

5.2 Non-Controlling Interests
Accounting Policies
Non-controlling interests (“NCI”) are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

Non-Controlling Interests
The following table summarises the financial information for each subsidiary that has non-controlling interests, before any intra-Group eliminations, as at 1 December 2019:


No dividends were paid to the NCI during the year (2018: nil).

In August 2019, the Group disposed of a 50.0% interest in Ocado Retail. The fair value of the consideration received was £735.9 million (including a £9.9 million purchase price adjustment) and the carrying amount of Ocado Retail Limited’s net assets in the Group’s consolidated financial statements on the date of disposal was £12.1 million. The Group also incurred transaction costs of £19.2 million that were directly attributable to the transaction. Accordingly, the Group recognised an increase in non-controlling interests of £6.0 million and an increase in equity attributable to owners of Ocado Group plc of £710.7 million. The effect on the equity attributable to the owners of Ocado Group plc is summarised as follows:


2.7 Exceptional Items (extract)


Joint venture with Marks & Spencer (“M&S”)
In August 2019 the Group completed the creation of a new 50:50 joint venture with M&S. The joint venture comprises Ocado’s grocery retail business in the United Kingdom supported by a new partnership for Solutions services underpinned by Ocado Smart Platform and the provision of branding and sourcing from M&S. M&S products will be available on Ocado.com by September 2020, replacing Ocado’s current sourcing agreement with Waitrose Limited. M&S has paid Ocado £562.5 million cash upfront and has agreed to a deferred cash payment of £187.5 million five years after completion
dependent on the satisfaction of certain financial and operational conditions. The difference between the fair value of the identifiable net assets of Ocado Retail and the fair value of the consideration received has been recognised directly in equity and attributed to the owners of the Group (see note 5.2). The contingent consideration receivable has been recognised as a financial asset at fair value through profit or loss (see note 3.5).

While certain costs relating to the transaction are permitted to be accounted for directly within equity, there are others that do not meet the requirements and as a result have been reported as exceptional costs. These include, but are not limited to, legal fees for advice relating to TUPE regulations, contractors’ fees incurred relating to transitional arrangements and accelerated share-based payment expenses for those employees who transferred to the new joint venture.

Consolidated Statement of Cash Flows
for the 52 weeks ended 1 December 2019


Consolidated Statement of Changes in Equity
for the 52 weeks ended 1 December 2019