Oasis Management, the investment fund agitating for change at Premier Foods, has embarked on one of the most public campaigns of criticism of a UK food CEO in recent times.
Nevertheless, for all Oasis’ frustrations – and some of them do hold water – Premier chief executive Gavin Darby looks set to stay in his job when he stands for re-election later this month.
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However, even if enough of Premier’s share roster does back Darby at the company’s AGM on 18 July, the scrutiny of the company’s chief executive and its performance only looks set to intensify in the coming quarters.
Oasis, Premier’s second-largest shareholder, argues Darby, has “failed miserably” in running the Mr Kipling maker and has “badly mismanaged” its brands.
It is five years since Darby took the helm at Premier, joining a company that had already had more than a share of its ups and downs under his predecessors. But Oasis insists five years is “more than sufficient time” to have turned the business around.
“The poor performance on his watch makes the continuation of the status quo a deeply unattractive prospect,” Oasis wrote in a letter to Premier’s pension trustees on Monday (2 July). “Enough is enough.”
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By GlobalDataOasis has also called on Premier to sell one of its growing assets, soup-and-noodles business Batchelors, to pay down the company’s debt, strengthen its pension position and invest in the remaining parts of its portfolio.
So far, three investor advisory groups – ISS, Pirc and Glass Lewis – have recommended Premier’s shareholders stand by its CEO (That said, after ISS issued its backing for the re-election of Darby, Oasis sought to point out the advisory firm had, in the fund’s words, given “qualified support” for the Premier boss).
Meanwhile, the company itself has talked up its performance under Darby’s tenure. Premier has also issued endorsements of Darby from former Tesco chairman Ian MacLaurin and ex-Waitrose MD Mark Price (the latter also defended Darby on Twitter this week).
Equally, so far, Premier’s largest shareholder, the Japan-based noodle maker Nissin Foods Holdings, has not made its position public. Oasis has urged Nissin to abstain on 18 July, pointing out the Japanese group’s commercial tie-up with the UK firm. When we approached Nissin this week, the company declined to comment.
It would, however, be a surprise if shareholders voted to oust Darby. For all the criticism levelled at Darby – and some of it is valid – it looks as though the Premier CEO will get through the vote.
That said, going forward, Premier will only come under closer examination.
Under Darby, Premier’s performance has been chequered. There have been some welcome moves, including the spinning off its bread business, the reduction of Premier’s debt pile and some success in getting some of its brands growing.
However, there remain questions over Premier’s dismissal of the takeover interest from US group McCormick & Co. in 2016, while debt as a proportion of earnings has grown. Moreover, for all the recent growth of brands like Batchelors, there are likely to be some in the market reluctant to call a sustained turnaround in the company’s performance.
In May, Premier recorded its fastest pace of annual revenue growth in five years, a stark contrast to the disappointing results unveiled by Darby in 2017.
In the decade your correspondent has been writing about the industry, it’s been clear Premier’s portfolio has hardly been positioned in the buoyant parts of the sector. Darby, to his credit, has managed to get parts of the business growing.
Nevertheless, there have been times in the recent past, including during Darby’s tenure, when Premier has appeared to have turned the corner before sales regressed and questions returned about its performance.
Some of Premier’s brands remain under pressure and some in the City also argue Batchelors needs to deliver another period of growth before even that part of the company’s portfolio can be said to have returned to form.
However, even if Premier gets another year of growth from Batchelors, should the company listen to Oasis’ urging and sell one of its most buoyant assets? Would that be wise for the business? It is, at the very least, a point of debate.
All told, it would be a surprise if the vote on 18 July goes against Darby but, even if he is re-elected, Oasis has brought to the fore concerns about Premier’s performance and the market will be watching closely as the company moves forward.
