Greencore to consult shareholders after revolt over chief’s pay

Greencore has signalled it will re-engage with investors on the remuneration of chief executive Patrick Coveney, after 40 per cent of those who voted on the matter at a meeting on Tuesday rejected the company's move to double the maximum long-term share bonus he may be entitled to.

While the non-binding motion was carried by a majority of 60 per cent at the convenience foods group’s annual general meeting in Dublin, chairman Gary Kennedy said the extent of the vote against the plan would prompt it to consult again with investors over the next 12 months.

This will particularly be the case for new shareholders who backed a £439.4 million (€512.1 million) share sale in December to partly fund Greencore's purchase of US good group Peacock Foods, he said.

Conditions

One of the world’s leading proxy advisory firms, Institutional Shareholder Services (ISS), advised investors ahead of the AGM to vote against the new remuneration plan to double the amount that could be granted to Mr Coveney (46) under a so-called performance share plan, to 200 per cent of salary, for the year to September. ISS told large shareholders it advises on corporate governance issues that the additional potential compensation, which also benefits the chief financial officer, “has not brought on any increased stretch in performance conditions”.

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The company has argued that the new share bonus plan is in line with the median compensation plan for FTSE companies ranked between 150 and 250 in the mid-caps index, while Mr Kennedy said the chief executive’s performance had been “exceptional”. He also said the maximum share bonus is set against “pretty onerous” targets of achieving 15 per cent growth in earnings per share and return on invested capital.

Still, Mr Coveney told reporters after the meeting that as investors would be asked to vote on remuneration again next year, “I think the board would prefer to have a higher level of support than they had on that one”.

Shares in Greencore jumped 8.1 per cent on Tuesday as analysts welcomed a strong trading statement from the group for its financial first quarter to the end of December, issued before the meeting.

Revenue

In the 13 weeks to December 30th, Greencore reported revenue of £417 million (€485 million), up 17.1 per cent on the previous year, or 9.1 per cent on a like-for-like basis and excluding currency fluctuations.

The group reported strong growth in its convenience foods division, on the back of its food-to-go business, with first-quarter revenue up 16.4 per cent to £401.6 million, or 8.9 per cent on a like-for-like basis.

In the US, Greencore said first-quarter revenue was up 31.2 per cent, and up 8.0 per cent on a like-for-like basis, driven largely by the addition of operations in Seattle. The Peacock deal, finalised at the end of December, is set to quadruple the group’s US sales.

While inflation in raw materials and packaging prices as well as labour costs is expected to increase for the remainder of the year, Greencore signalled it planned to ease the impact by “a combination of supply-chain, purchasing and pricing initiatives”.

Workforce

Meanwhile, Mr Kennedy told shareholders that the UK’s immigration policy following Brexit could have a “big impact on our labour force in the UK” in the medium term and drive costs higher.

Mr Coveney said told reporters after the meeting that about 35 per cent of the group’s UK workforce is comprised of non-British EU nationals.

“Overall, we consider today’s strong set of results, together with the reassuring commentary around input costs, as extremely encouraging,” said Goodbody Stockbrokers analyst Jason Molins. “Our positive view on the stock is underpinned by a well-positioned UK food-to-go division and the Peacock Foods acquisition that will transform its presence in the US.”

Greencore’s stock is rated “buy” or an equivalent by the 12 main analysts who cover the company.