Richard Curran: 'Has Glanbia bitten off more than it can chew with CEO pay rise?'

'Talbot (pictured) is in line for a 22pc pay rise under a three-year multimillion euro remuneration package.' Picture: Pat Moore
'Talbot (pictured) is in line for a 22pc pay rise under a three-year multimillion euro remuneration package.' Picture: Pat Moore
Richard Curran

Richard Curran

The 6pc fall in Glanbia's share price during the week coincided with news that more than a fifth of shareholders had voted against the new remuneration package for chief executive Siobhan Talbot and finance director Mark Garvey.

Talbot is in line for a 22pc pay rise under a three-year multimillion euro remuneration package. Tempting and all as it is to link the share price fall with the vote against the pay hike, things don't really work that way in the market.

Glanbia said after its annual general meeting that it "noted" the vote against the remuneration package but I'll bet it more than just "noted" the share price fall which was more likely triggered by market disappointment at the trading update issued.

The Kilkenny-based group has built up a solid US business with global potential in sports nutrition. It has mopped up a series of acquisitions at chunky prices which have delivered stellar growth as more health-conscious Americans buy protein bars and drink nutritional shakes.

But the first quarter trading update showed that without its latest acquisitions, mainly Slimfast, its performance nutritional division declined by 16.5pc. When Slimfast is included, the division showed constant currency revenues up 4.9pc. This was made up of a 3.4pc fall in pricing and a 16.5pc fall in volumes but a 24.8pc increase from Slimfast.

Glanbia has got in early to a growing market segment and has very strong positions in an exciting sector. The problem is that its so good, everybody wants a piece of it.

Tougher competition, price discounting and the need to constantly innovate and offer new products can take its toll. Glanbia spent $217m buying Think Thin, a US protein bar maker in 2015. In 2017 it bought Amazing Grass, a US firm that makes powder based nutrition products, and Body & Fit, an online seller of performance nutrition goods for €181m.

Its big high-profile deal last year was the €350m acquisition of Slimfast. Glanbia has continued to do well in a very competitive consumer market and Slimfast looks like being very successful for it.

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But the update raises questions about the growth trajectory of some of the other products. Think Thin is being rebranded as just Think.

Glanbia attributed some of the volume declines outside of Slimfast to supply chain configurations in non-US markets.

The company reiterated its guidance of a 5-8pc growth in adjusted EPS for this year on a constant currency basis. It believes growth is coming in the second half. And Glanbia's nutritionals division more than offset any slowdown elsewhere.

In the meantime, the remuneration publicity will be an unwelcome distraction. Some share advisory firms who opposed the remuneration package said it had been benchmarked against the market median in Europe and US.

Glanbia claimed that one of these firms, ISS, looked primarily at comparable salaries among client companies in Ireland and Europe. Glanbia itself looked at salaries in Ireland and US in determining pay because 80pc of its earnings are in US dollars.

All very well, but remuneration benchmarking is about what a person could earn doing a similar job elsewhere, partially to ensure they are not poached. Having earnings in dollars doesn't really impact the likelihood or not of losing your top executives to US companies.

Sunday Indo Business

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