May 10, 2013 7:22 pm

Ocado hit by large protest vote over executive pay

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Ocado, the lossmaking online grocer, was dealt a fresh blow on Friday after it suffered one of the largest protest votes over executive pay this year.

Almost a quarter of the votes cast at its annual meeting, which was barred to the press, failed to support Tim Steiner, chief executive, receiving four times his salary in shares in “exceptional circumstances”, without disclosing what these would be.

Some 23.46 per cent of the votes cast were against the remuneration report, which had been “red topped” by the Association of British Insurers, its highest level of alert. However, the vote was carried after 76.5 per cent of the votes cast were in favour. About a third of the shares are held by the founding shareholders or directors of Ocado.

Almost 17 per cent of the votes cast were against Sir Stuart Rose, who became non-executive chairman yesterday, receiving a golden hello of shares worth £400,000, now valued at more than £1m after the recent share price rise.

Ocado declined to comment on the outcome.

Former chairman Lord Grade previously said: “Ocado has consulted in detail with major shareholders who have indicated their support for this proposal.”

The protest failed to dent Ocado’s share price, which touched its highest level for more than two years, after it said it remained in talks on a tie-up with Wm Morrison, and Goldman Sachs, joint broker, upgraded the shares.

Ocado insisted a distribution deal with Morrison would not jeopardise its existing agreement with upmarket supermarket Waitrose.

“Any such agreement would be complementary to Ocado’s existing partnership with Waitrose, which would be unaffected by any potential agreement with Morrison,” Ocado said.

However, Mark Price, managing director of Waitrose, said: “We have not seen the contract. We have not seen any of the detail behind what is being proposed. If a deal is done, we will want to look very closely at the contract to ensure there is no breach of our agreement with Ocado in the UK.”

Waitrose is understood to be unhappy that Ocado is considering partnering with a rival, as it has an exclusivity contract with the delivery group. According to people familiar with the situation, Mr Price has had contact with Mr Steiner and Lord Grade, and is expected to have lawyers look at the contact once any Morrison deal is done.

Ocado shares rose 8 per cent to 224.6p, having earlier hit a two-year high.

Philip Dorgan, analyst at Panmure Gordon, and a longstanding critic of Ocado, also raised his price target from 50p – struck before Ocado’s December 2011 profit warning – to 130p. However, he retained a sell rating, saying: “We believe that the business will continue to lose market share to its multi-channel operators and we don’t expect it to generate sufficient cash flow to be able to justify its current share price.”

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