Stocks Spirits backer orders another round of changes

Portuguese cash-and-carry magnate Luis Amaral's Western Gate Private Investments, which owns a 10% stake in Stock Spirits, has demanded the removal of chairman David Maloney and senior independent director John Nicolson, together with a bigger dividend.

In a statement published on Monday, Western Gate pointed to declines in market share in Poland, Italy and Czech Republic as evidence that the London-listed vodka manufacturer continued to “suffer from the board’s lack of clear growth strategy with no M&A completed in 2018 and weak total shareholder return”.

Following a meeting between Western Gate and Maloney, the Amaral vehicle said its concerns "have been left un-addressed", principally the lack of growth strategy despite low leverage and good cash generation.

It added that in light of the strong cash generation but "unconvincing" growth strategy and "one of the lowest cash return to shareholders amongst its peers", Western Gate called upon the board to increase the dividend and/or pay a special dividend.

In December, Stock Spirits reported proforma volume growth of 2.8% to 13.3m cases, with revenue up 9% to €282.4m and profits growing 14% to €33.2m. After generating free cashflow of €47.9m in the nine months to 30 September an "enhanced" final dividend of 6.01 cents per share was proposed, giving a total dividend in respect of the nine-month fiscal year of 8.51 cents per share, an increase of 5.1%.

FIGHTING SPIRIT

“Both David Maloney and John Nicolson continue to have the unanimous support of their colleagues on the board,” Stock Spirits said in is own statement on Monday.

Addressing the other concerns raised, the statement said that the board has "made it clear that M&A is an integral part of our growth strategy, and we continue to assess a range of opportunities in order to enhance shareholder value", while adding that the proposed final dividend "represents a continuation of our progressive dividend policy, while also allowing us to retain a strong balance sheet in order to carry out M&A activity".

"More broadly, we believe that our recent financial results in December clearly demonstrate that the refreshed strategy is working. In our core market of Poland we have now delivered 20 consecutive months of profitable year on year market share growth.”

Since the bust-up receded in October 2016, Stock Spirits shares doubled to a peak above 310p in early 2018 before losing almost a third of that last year, but still standing 50% higher than in early April 2016, when Amaral, whose Eurocash business has been Stock Spirits' largest customer, called for the removal of then chief executive, Chris Heath, and nominated two new independent non-executive directors to join a board that it said had "run out of ideas".

In April 2016, Heath then decided to take early retirement and was replaced on an interim basis by former non-executive Mirek Stachowicz in August that year, who has since taken up the role permanently.

Western Gate then took aim at the "poor corporate governance" of the company, highlighting the size and cost of the company's nine-man board, though two of these were its own nominations. Stock Spirits highlighted at the time that the majority of investors were happy with corporate governance.