Investor accuses Pernod Ricard of setting ‘modest goals’

Activist investor Elliott Management has maintained its tough stance with Pernod Ricard, stating the group’s financial objectives “could be more ambitious”.

Jameson maker Pernod Ricard remains under pressure from activist investor Elliott Management

Elliott revealed it had built a stake of more than 2.5% in the French drinks giant at the end of last year, and called for better governance and margins.

Yesterday (7 February) Pernod announced that it had increased its organic profit forecast for FY19 to between +6% and +8% following a 7.8% organic sales growth in H1 to €5.18 billion (US$5.87bn) and an organic profit gain of 12.8% to €1.7bn (US$1.9bn).

The firm also said the first semester of its new ‘Transform & Accelerate’ plan, a three-year programme that aims to improve operational leverage, had been “very strong”. Under the plan, Pernod is working to save €100m (US$113m) by the end of its 2021 fiscal year.

Elliott said Pernod’s H1 results “confirmed the strong growth potential and solid financial performance” of the company, and showed it had taken a “first small step” to address its “shortcomings in operational efficiency”.

However, Elliott called for greater ambition in the group’s strategy, which it claimed set “modest goals” and lacked “specificity and clarity”.

The American hedge fund also said “necessary enhancements” to Pernod’s board of directors “have yet to be addressed”. Elliott had previously accused Pernod of “inadequate” corporate governance due to a “lack of outside perspectives”.

At the end of last month, Pernod named former Christie’s CEO Patricia Barbizet as its lead independent director, as the same time as the firm’s former CEO, Pierre Pringuet, stepped down from his role as vice-chairman of the board of directors.

Elliott’s statement continued: “Elliott trusts that Pernod’s management will continue to engage in a mutually constructive dialogue to deliver much needed additional improvements while capturing the strong growth of the company’s underlying markets.”

While Pernod is establishing change, CEO Alexandre Ricard previously insisted the group’s strategy for growth “is the right one”.

In response to Elliott’s latest criticism, Pernod Ricard said in a statement: “Our results announced yesterday prove once again the effectiveness of our strategy and its ability to deliver sustainable and profitable growth for all our stakeholders. We remain focused on executing our three-year Transform & Accelerate strategic plan.

“We continue our regular dialogue with our shareholders and have no other comments to make at this stage.”

The founding family of Pernod Ricard remains its largest shareholder with a 14.2% stake. Belgian investment firm Groupe Bruxelles Lambert owns a 7.5% stake in the group.