It’s difficult to find an Irish company more beloved by stock analysts than the one that butters, fills and packages six out of every 10 sandwiches sold through UK grocers.
Greencore’s stock is rated a “buy” by the 12 main stockbrokerages that cover it, their enthusiasm having been bolstered recently by the group’s $747.5 million (€695.4m) purchase of US-based Peacock Foods.
The deal will quadruple sales and widen Greencore’s customer base in a market where it had been struggling with a lack of scale and volatile order patterns given its dependence on two dominant clients, Starbucks and the 7-Eleven convenience stores.
The stock has jumped as much as 11 per cent in the past two sessions in light of a well-received trading update this week. So you’d think that all would be rosy. Not so.
The group’s new remuneration package for chief executive Patrick Coveney – it doubles the maximum long-term, performance-based share bonus he may be entitled to to 200 per cent of salary – has irked many investors.
Some 40 per cent of shareholders who voted on the matter at an annual general meeting on Tuesday rejected the motion. While the vote was carried – and, indeed, the resolution had no practical significance as it was non-binding – the extent of the dissent is of concern. Even if you have 20 per cent of your shareholders voting against a compensation plan you have a problem.
It appears in Greencore’s case that many of the major shareholders canvassed back in August and September on the issue were on board. However, the Peacock Foods deal, mainly funded by a £439.4 million (€512.1m) share sale, brought in a whole group of new investors.
In addition, two major proxy advisory firms, Institutional Shareholder Services (ISS) and Manifest, expressed concerns about the new deal, with ISS going so far as to advise its clients – big investors who don’t bother to turn up at agms – to reject the resolution.
Greencore has acknowledged that the extent of the revolt will force chairman Gary Kennedy and chairman of the remuneration committee, Eric Nicoli, to re-engage with shareholders on the matter over the next 12 months. A wise move. It would be advised to avert a similar poor showing next year.
