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Samantha McCaughren: 'Coveney's pay hard to swallow as Greencore growth dries up'

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Greencore CEO Patrick Coveney’s pension is worth €315,000, which has raised eyebrows

Greencore CEO Patrick Coveney’s pension is worth €315,000, which has raised eyebrows

Greencore CEO Patrick Coveney’s pension is worth €315,000, which has raised eyebrows

Sandwich maker Greencore said last week it would look at its remuneration policy after a third of shareholders voted against its executive pay policy. This follows concerns raised by proxy advisers who flagged chief executive Patrick Coveney's pension contribution of 35pc of salary.

It is worth €315,000 and was described as "out of step" with the market's direction of travel.

"We engaged very proactively with our shareholders. We contacted about 70pc of them and we had dialogue with about 50pc, so it is good to see that the policy was actually approved," chairman Gary Kennedy said after last week's AGM.

This is not the first time shareholders have sent a message regarding pay to Greencore, however.

Back in 2017, four out of 10 Greencore shareholders voted to reject a new pay deal for Coveney and his executives.

In its pre-AGM note last month, proxy adviser ISS said that pay remained an issue.

"The overall positioning of fixed pay at Greencore remains an ongoing area of concern," it said.

After the vote last week, Kennedy said there was "a very definite message there". Let's see if the message gets though this time.

While a sizeable block of shareholders share in the ISS view of directors' pay at Greencore, a majority were happy to back the company.

Perhaps the performance of Greencore's share price has kept further dissatisfaction at bay.

Last year, the company's shares were up around 50pc to close 2019 at £2.82 (€3.35), although they are now down to £2.40.

However, some in the investment community are questioning what comes next for Greencore and are unconvinced that a big growth story lies ahead.

The company has experienced significant strategic reversals, the most notable one being its withdrawal from the US. To date, management have come through unscathed.

Around half of Greencore's sales come from sandwiches, which is a maturing business. What it is now offering up is a broadening of its food-to-go portfolio.

This would see the company move into higher-growth areas such as salads, sushi, chilled snacking, breakfasts and hot food.

However, higher-value food is a fickle business. And Greencore will need new opportunities of scale.

Fads change. Greencore could strike it lucky by investing in food products with a long future ahead.

But the risk is that the company would gear up to supply products that go out of fashion.

There would also be supply chain challenges. For a basic sandwich, there is a very reliable, well-developed supply chain. Some of the more sophisticated food offerings, such as sushi, have a far more complex and risky supply chain.

If this food-to-go story isn't convincing enough, what is left behind? A steady sandwich business with limited growth potential isn't going to get equity investors terribly excited.

On the other hand, it could whet the appetite of private equity funds such as Lion Capital and Bain, which specialise in maturing food businesses.

A decision by Irish Life and Aviva to mark down their Irish commercial property funds last week was viewed as a potential red flag by some in the investment and financial services industry.

Although Irish Life brushed the move aside by saying that "the pricing basis of property funds can change from time to time", it certainly raised eyebrows among seasoned observers.

As I reported on Friday, the development was sparked by investors withdrawing from the funds, which means the funds are now operating on a disposal rather than acquisitions basis.

Aviva subsequently moved to stop investors from cashing in its property funds for six months.

The last time investors were stopped from withdrawing their money from such funds was at the height of the crash. In the UK, some funds last suspended withdrawals in 2016 after the Brexit vote.

The Irish funds had been seeing more money go out than come in. It was not just a handful of retail investors cashing in.

The increase in withdrawals was of enough scale to spark this action at both Aviva and Irish Life.

Many believe that prime Irish commercial property has a bright future ahead of it, given the strength of the Irish economy. But we must be aware that a growing number of investors, brokers and intermediaries believe Irish commercial property has topped out after eight years of strong growth.

Given Ireland's experiences with property over the past 15 years, it is imperative we are alert to changes such as this in the market - which many are hoping are just false alarms.

Sunday Indo Business