Ocado directors to share £5.5m bonus pot despite widening losses last year

Four executive directors at Ocado will enjoy a £5.5m share bonus this year despite revealing widening losses at the online grocer on Tuesday.

Jason Gissing, Ocado's commercial director and co-founder, will not share in the bumper bonus after announcing his intention to leave the company in May to spend more time with his four children and to work on environmental and social causes. He owns a 2.95% stake in Ocado worth about £90m.

Gissing's exit leaves only chief executive Tim Steiner of the three former Goldman Sachs bankers who founded the online grocery firm 14 years ago.

Gissing leaves Ocado on a relative high after strong Christmas sales and the successful launch of its distribution deal with Morrisons. The shares have risen five-fold in the last year as investors believe the deal to run the supermarket's online operation has transformed Ocado's prospects.

However, shares in the company dipped 2.6% to 510p on Tuesday as Ocado, which has never made a pretax profit, revealed pretax losses had deepened to £12.5m in the year to last December from £0.6m in 2012 despite a 17.2% rise in gross sales. "We struggle to think what the annual incentives would have been if Ocado had made a profit," said Clive Black, an analyst at Shore Capital.

The company insisted it was on track to move into the black in 2014. Steiner said: "Analysts are expecting us to make a profit this year and that's what we think is going to happen."

He added: "The stakeholders in this business, some of which own a large chunk, are not focused on 2014 profitability they are focused on 2020 and 2030. They want to position for the long term, if that delays or reduces profitability now that's what they are focused on."

Gissing, Steiner and Jonathan Faiman founded Ocado in 2000 at the peak of the dotcom boom. Gissing, a former member of the Bullingdon Club at the University of Oxford, served as Ocado finance director for 10 years but has concentrated on employee relations, pricing, buying and corporate responsibility matters since 2010.

Steiner said Gissing, who earned £330,000 in 2012, had resigned and would receive no payoff.

"Jason will be paid as normal. There is no funny money for the boys. We haven't made him resign or fired him and he is not entitled to a severance payment and nor would he want one."

Steiner said he expects more deals with partner retailers in the next few years, although nothing short term, and were working on technology to expand internationally but that no deal was imminent. He said building up the Morrisons operation was the main job for this year and that they expected to open a third giant warehouse in 2014.

Ocado also expects to open a second specialist non-food site this year and a couple next year with health & beauty, home and kitchenware and babycare items likely to be top of the list. These are more likely to be standalone businesses than tie-ups with a partner.

Steiner said the UK grocery market was at an "inflexion point" with shoppers moving online rapidly, as demonstrated by Ocado's sales and the rise in supermarket internet sales over Christmas.

But he said Ocado's lead on service and accuracy was unmatchable because it had invested while the big supermarkets were slow off the mark.

"If one of them had a time machine and went back 10 years and decided to focus on this they could catch us up. They ridiculed us and have found themselves behind in a very important part of the market."

But some analysts remain sceptical about the market's newfound enthusiasm for Ocado.

John Ibbotson, an analyst at the consultancy Retail Vision, said he thought Ocado would struggle to turn a profit.

"Despite these results, I suspect the Ocado share price will keep on rising, fuelled by speculation that Amazon or Boots will buy it for its state-of-the-art technology, or that it can license its technology to others abroad. It's all wishful thinking and has echoes of the dotcom boom," he said.