Friday 16 November 2018

Greencore investors told to 'abstain' on executives' pay

Patrick Coveney, chief executive of Greencore – his total remuneration fell to £1.44m last year
Patrick Coveney, chief executive of Greencore – his total remuneration fell to £1.44m last year

Gretchen Friemann

ISS, a major proxy adviser, has urged investors in Greencore to withhold approval for the company's boardroom pay policy at its annual general meeting in Dublin today.

The decision is likely to ensure a less divisive gathering than last year, when 40pc of shareholders rejected the remuneration report. That revolt was kick-started in part because of a then doubling in the maximum, long-term share bonus of company chief executive Patrick Coveney.

ISS had then advised investors to oppose the executive pay structure as the increased rewards were not tied to more onerous targets.

While the firm, which advises large-scale fund managers, remains critical of Greencore's remuneration policy, the instruction to abstain rather than vote against the company's executive pay policy is likely to substantially weaken the level of shareholder dissent this year.

However in its report to clients, obtained by the Irish Independent, ISS said investors "may question the appropriateness of a maximum award" for 2018, given the 20pc slide in the share price.

The firm highlighted that such "awards appear to be coming off generously positioned salaries compared to similar-sized companies".

ISS's reservations come as the market braces for a trading update from Greencore.

The company - which yesterday announced that it was exiting its UK cakes and desserts business - has endured a turbulent year, as investors punished the stock after the loss of a Starbucks contract in the US, and anxieties persisted over the strength of its relationship with Tyson Foods.

In November, the group unveiled a 74pc slump in pre-tax profits after the group abandoned the roll-out of a software package across its systems, triggering a £29.7m (€33.7m) impairment charge.

But Greencore's $747m (€603m) acquisition of Peacock Foods in the US has opened up the group's access to that market.

In November Mr Coveney forecast "strong growth" in 2018 and stressed the group was "well positioned to drive improved profitability, cash flow and returns over the medium term".

As the Irish Independent reported last year, a succession of new contract deals with US heavyweights have also helped to boost sentiment.

It is understood technology giant Amazon, retailer Target and Kroger, the largest supermarket chain in the US, have all struck fresh agreements with Greencore in a move that will generate $50m in revenue in 2018. The new signings follow a lengthy period of acquisitions that has helped eliminate the group's free cashflow.

But Martin Deboo of Jeffries predicts that will change in 2018 and has pencilled in a figure of £70m next year as capital expenditure falls below £100m and investors begin to reap the benefits of the recent acquisition spree.

That prospective upswing in profits may appease dissent at the level of executive remuneration.

While Mr Coveney scrapped executive cash bonuses for the year to September 2017, the group's long-term bonus policy continues to fuel debate.

Glass Lewis, another influential advisory firm, pointed out the "long-term bonus payments is measured in the final year of the performance period only".

In its report ahead of the AGM, the firm urged Greencore to measure performance over the entire three-year performance period to ensure that executives "are being incentivised for long-term growth and not temporary spikes in performance". Mr Coveney's total remuneration fell to £1.44m last year from £2.42m for the previous year.

Irish Independent

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