Stuart-rose
"The Group completed another examination of Board composition and succession plans during the period."

Lord Rose
NOMINATION COMMITTEE CHAIRMAN

Dear Shareholder,

I am pleased to present the report of the Nomination Committee for the 53 weeks ended 3 December 2017.

After a number of Director changes in recent years, the Group completed another examination of Board composition and succession plans during the period, with a view to identifying the Board composition that might best support the Group's next phase of development. In reviewing Board composition it was noted that a number of Directors were approaching or had exceeded six years on the Board and accordingly some changes to the Board were likely in the medium term.

The review was facilitated externally by Calibro, an external and independent consultant (without any connections to the Company). Calibro carried out a detailed review of Board skills, composition and succession requirements, which included conducting interviews with all of the Directors and some members of senior management and reviewing the make-up and tenure of the current Board. The report contained findings on the current composition of the Board, its size, its diversity, its current capabilities, the Board culture and the leadership team. The report also identified areas where the Board should evolve both to meet the expected future needs of the business and to ensure appropriate successors for certain Director roles. The skill set of the Board, although relevant to the current needs of the business, which is primarily focused on grocery retail and e-commerce in the UK, would need to expand. In future, the business is expected to grow as a result of the Group's increasing focus on the Ocado Solutions business. Growing the Ocado Solutions business is likely to result in significant investment internationally and in the areas of technology and software development, robotics and manufacturing. Future leaders of the business will collectively need to reflect this broader capability, so that the Board skills meet the future strategic direction of the Group.

On 14 December 2017, following the period end, we announced the retirement of Alex Mahon from the Board with immediate effect. Alex was appointed Chief Executive of Channel 4 in autumn 2017. Her responsibilities in that position meant that she felt unable to dedicate enough time to her position as a Non-Executive Director of Ocado. We thank Alex for her valuable contribution during her five years with the Company and wish her well in the future.

Based on Alex's departure and the skill set analysis, the Board expects to meet in early 2018 to identify and agree some objectives and timing for planned changes to the Board. It is likely the Board will make a number of Non-Executive Director appointments in the next 24 months, both to prepare the Board for the departure of retiring Directors and to identify candidates meeting the identified skill sets. The Board concluded that because of these planned changes in the short term, an interim Senior Independent Director was not appointed following Alex Mahon's departure from the Board.

In addition to reviewing Board composition, the Nomination Committee oversees the process of succession and management development for the Executive Directors and the next layer of management, the Management Committee. The Nomination Committee reviewed these succession plans and discussed the areas identified where additional senior management experience would be helpful, particularly in relation to parts of the business experiencing significant expansion. In the period, Luke Jensen was recruited as Chief Executive Officer of Ocado Solutions, to assume management responsibility for this business and to drive its rapid expansion. Luke will join the Board on 1 March 2018 as the Directors believe that it is important to have the Solutions business represented at Board level.

With regard to the development of the management team, two senior managers regularly attend the Board meetings to report on their respective business areas, while the Board has exposure to other senior managers who present or report to the Board on their business areas or particular projects. The Nomination Committee is mindful that it could improve the extent of its exposure to the senior management and expects to expand on existing arrangements for building relationships between Non-Executive Directors and senior management outside of formal Board meetings.

The Nomination Committee is mindful of the corporate governance developments in the areas of diversity and gender balance including the changes to the Disclosure Guidance and Transparency Rules. The Board plans to review, in 2018, its existing policies and objectives for Board and management diversity and will report on this review in the next annual report.

For further information on Board composition, diversity and independence, see the Statement of Corporate Governance.

I will be available at the AGM to answer any questions about the work of the Nomination Committee.

Lord Rose
Nomination Committee Chairman
6 February 2018

Membership and Meetings

The membership and attendance of the Nomination Committee, together with the appointment dates, are set out below.

Stuart Rose

Lord Rose

Chairman

Nomination Committee member since 11 March 2013

Number of meetings: 2

Number attended: 2

Jorn Rausing

JÖrn Rausing

Nomination Committee member since 9 March 2010

Number of meetings: 2

Number attended: 2

Ruth Anderson

Ruth Anderson

Nomination Committee member since 9 March 2010

Number of meetings: 2

Number attended: 2

Douglas McCallum

Douglas McCallum

Nomination Committee member since 3 October 2011

Number of meetings: 2

Number attended: 2

Andrew Harrison

Andrew Harrison

Nomination Committee member since 1 March 2016

Number of meetings: 2

Number attended: 2

Emma Lloyd

Emma Lloyd

Nomination Committee member since 1 December 2016

Number of meetings: 2

Number attended: 2

As required under the terms of reference, the Nomination Committee has six members, all of whom are independent Non-Executive Directors, and holds a minimum of two meetings a year. Emma Lloyd became a member of the Nomination Committee on her appointment to the Board as Non-Executive Director on 1 December 2016. Alex Mahon was a member of the Nomination Committee until she retired from the Board on 13 December 2017. She attended all the Committee meetings in the year. The biography of each member of the Nomination Committee is set out in the Directors' Report. Other attendees at the Nomination Committee meetings include the Chief Executive Officer and the People Director. The Deputy Company Secretary is the secretary to the Nomination Committee.

Annual Review: In addition to its annual performance evaluation, discussed in the Statement of Corporate Governance, the Nomination Committee carried out a review of its terms of reference during the period. The review resulted in no changes to the terms of reference. The Committee's terms of reference can be found on ocadogroup.com.

Ocado reception