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Ocado: Buy two problems get one free

Investors now have a third worry – the exit of finance director Andrew Bracey – to add to their existing concerns about the business model and the workload of co-founder Tim Steiner

Investors have had two worries about Ocado. One is basic – whether the model of delivering groceries from giant warehouses will ever produce a decent return on capital. The other is that Tim Steiner, one of the three founders, is juggling too many balls as chief executive. Neither concern will be eased by news that finance director Andrew Bracey, who lately had become the other face of Ocado in the City, is quitting to join recruitment firm Michael Page.

Bracey was – and says he still is – a true believer in the Ocado way. He piled into the shares heavily in the weeks after flotation in 2010, accumulating much of his holding of 820,000 at 150p – a chunky investment even for a chap who had spent 18 years in private equity and investment banking. In the later role, he had advised Ocado almost since its creation a decade ago. Finance directors don’t normally quit the companies they think will make them rich and, with the share price now below 100p (versus a float price of 180p), Bracey’s exit hadn’t seemed a risk. After all, he’s been finance director for little more than two years and had seemed the type to stay until his belief in Ocado was reflected in results and the share price. His resignation halted the mini-revival in the share price that followed last week’s Christmas trading statement – the price was down 2% at 85p on Monday morning.

Naturally, Bracey was expressing the usual sentiment about an opportunity that’s too good to turn down. Recruitment is not everybody’s idea of excitement but it’s true that Michael Page is a more global business than Ocado ever will be. If you’re an ambitious numbers man who doesn’t want to be pigeon-holed as such – which seems to be a fair description of the 44-year-old Bracey – having an international employer on your CV could be seen as sensible. Even so, it still looks a strange move. Still, at least he says he won’t be selling his Ocado shares.

What about the worry that Ocado rests too heavily on Steiner? The company itself seems to acknowledge the problem. Mark Richardson, head of technology (a crucial job at Ocado), is being promoted to the board as operations director. More intriguingly, Jason Gissing, the other remaining member of the founding trio, is switching from the curious role of “director of people, culture and communications” to be commercial director, which is definitely a hands-on job.

Is that what Gissing really wants? Last summer he told the FT (paywall) he was taking stock of his life after spending 20 years being “a hamster on a wheel” at Goldman Sachs and Ocado. Now he’s firmly back on the spinning wheel – “at the heart of our retail development,” as the company puts it. The aim, it adds, is to “allow Tim Steiner greater freedom to drive Ocado’s strategy forward”. One can understand why Steiner requires a lighter load, but is he shedding the right responsibilities? Shouldn’t the top operative be concentrating on the essential job of ensuring the Hatfield warehouse runs smoothly, which it didn’t last autumn? Isn’t Ocado’s strategy – open another warehouse in Warwickshire – set in stone?

We shall see. As ever with Ocado, the numbers are everything. If proper bottom-line profits finally appear this year, internal management dynamics won’t seem remotely important. In the short-term, though, Ocado looks more mysterious to outsiders than it did. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds