Shareholders approve Greencore sale but question strategy

Cantillon: Investors complain of lack of vision at egm to sanction sale of US business

Greencore CEO Patrick Coveney: not used to being on the back foot. Photograph: Cyril Byrne/The Irish Times

Greencore CEO Patrick Coveney: not used to being on the back foot. Photograph: Cyril Byrne/The Irish Times

 

The most pointed criticism directed at Greencore’s board at Wednesday’s extraordinary general meeting to sanction the sale of its US business was that it lacked a strategy.

Several investors complained about the tax implications of the company’s proposed £509 million dividend to shareholders, worth 72p per share, emanating from the sale.

But the board looked most discomfited by the suggestion that its move to unload much of the proceeds in the form of a dividend amounted to a lack of vision of where to go next. For chief executive Patrick Coveney, normally so bullish on the company’s prospects, this must have stung.

Greencore’s surprise move to exit the US market after 10 years of talking up its business stateside, and barely two years after its high-profile acquisition of Illinois-based Peacock Foods, has taken investors by surprise. It also amounts to a doubling down on the Brexit-bewitched UK market, which now accounts for 100 per cent of its customer base.

The company’s problems in the US have tempered ambitions and prompted a degree of soul-searching

Coveney is not used to being on the back foot like this, having presided over a period of rapid expansion in the business. Asked if the company might look at something outside of the UK, given the Brexit uncertainty, he said: “I don’t think we’ll look at anything outside of the UK.”

He also seemed to rule out expanding the business through acquisitions in the near term at least. “Clearly what we’re not going to do is to be bounced into doing things by virtue of the fact that we have more resources.”

Undoubtedly the company’s problems in the US, which triggered a profit warning in March, its first in 10 years, and a subsequent slump in its shares, have tempered ambitions somewhat and prompted a certain degree of soul-searching.

Coveney said, however, Greencore had learnt lessons from Peacock on how to drive a business more efficiently. Perhaps applying these lessons to its successful UK business is the best strategy for now.

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