Monday, June 21, 2021

Ocado bosses pocket shares worth £116m amid pandemic home deliveries boom | Ocado

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Four Ocado bosses are being handed shares worth £116m after its stock market value soared on the back of the pandemic boom in grocery home shopping.

The company’s chief executive, Tim Steiner, is the biggest winner from the controversial bonus scheme which attracted a backlash from investors when it was first introduced.

The plan is described as giving directors the opportunity to share in “value created for shareholders”. It is pegged to a share price which has more than doubled in the past year, boosting the value of the company which has never turned a profit to £20.2bn.

Steiner will be granted 2.45m shares, worth £66.2m at the current share price, next month according to an estimate in the company’s annual report, published on Tuesday. The Ocado co-founder also owns a stake in the company worth close to £600m.

The group’s chief operating officer, Mark Richardson; Luke Jensen, who runs its tech business, Ocado Solutions; and Neil Abrams, the company secretary, will also each receive 600,000 shares, worth £16.2m under the so-called “value creation plan”. It is a five-year scheme and shares awarded to executives cannot be sold until 2022 at the earliest.

The report, which revealed Steiner earned £7m last year, was published on the same day as annual results which showed the group made a small loss of £44m in the year to 29 November. That compares with a pre-tax loss of £214.5m in 2019.

As part of its plan to “retain the right calibre of senior executives” the board of the FTSE 100 company has also upped Steiner’s salary from £720,000 to £738,000 for this year. His 2020 pay packet was a big step down from last year when he earned close to £60m after a previous bonus scheme windfall.

Minerva, a shareholder adviser, said the scheme could transfer significant equity value to the chief executive and considering Steiner was already a significant shareholder it was hard to accept it was there to “attract, recruit and retain”.

Successive UK lockdowns and the switch to working from home has seen the online grocery market double in size to 14% of the UK total since the start of the pandemic. Retail sales at Ocado, which delivers Marks & Spencer groceries, jumped 35% to £2.2bn.

Investors are closely watching the progress being made by Ocado Solutions, which sells its grocery-picking expertise to foreign supermarkets and has been likened to the “Microsoft of retail”. The promise being shown by both sides of the business has propelled the share price from around £12 a year ago, to £27.

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The pay gap between the Ocado chief executive and the company’s median employee is already the widest of any company in the FTSE 100, said Luke Hildyard of the High Pay Centre, who suggested the disparity might anger some shoppers.

Hildyard added: “The size of these payouts will prompt debate about governance reforms such as profit sharing schemes or worker representation on boards that would enable some of the company’s 17,000 delivery drivers, warehouse operatives and administrative staff to win a share of the tens of millions lavished on directors.”

Steiner expects the online grocery market to continue growing even after the pandemic is over and shot down the notion of an online sales tax which is being mooted as part of the reform of business rates.

“We already have sales tax in the UK, it is called VAT,” said Steiner, who said there was no outcry when retailers moved from operating in high street locations to cheaper out of town retail parks and malls.

“I don’t think it is appropriate to put a sales tax on a retailer because they operate from a different type of premises or are a more efficient operator,” he said. “The growth in online is being driven by the consumer. It is what the consumer wants.”

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