(Alliance News) - Drinks firm Stock Spirits Group PLC on Tuesday rebuffed claims by a shareholder it is carrying out an "erratic" strategy.
Stock Spirits shares were 0.7% higher on Tuesday afternoon in London at 216.48 pence each. The company owns a number of vodka, rum, and brandy labels in central and eastern Europe.
Portuguese investor Luis Amaral earlier Tuesday once again slammed the board of Stock Spirits, demanding the firm pay a special dividend. He also criticised the firm's M&A record.
"We have a strategy of both organic and M&A-driven growth which, as our recent full year results show, is driving a strong financial performance and is enabling us to pay consistently increasing dividends in line with our stated dividend policy," said Stock Spirits in a statement.
"There is nothing erratic about this policy. As we have consistently said, we continue to assess a range of more meaningful and value-creating M&A opportunities in both existing and new categories and markets, but if such opportunities are not realised then we will of course consider making additional shareholder distributions."
"It is our view that payment of a special dividend now would act as a significant constraint on our ability to execute on our strategy, which we firmly believe is the best way of improving returns for our shareholders," the company continued.
Western Gate Private Investments Ltd, which is owned by Amaral and holds 10% of Stock Spirits, has previously proposed a resolution for the drinks firm to pay a EUR0.1219 special dividend. Stock Spirits is holding its annual general meeting on February 6, when the resolution will be voted on.
Stock Spirits, by contrast, has proposed a final dividend of EUR0.0631 per share.
Stock Spirits does not have to pay the special dividend even if shareholders vote for it, the company has noted, adding such a payout would limit its ability to grow both organically and through acquisition.
However, Western Gate said Tuesday that Stock Spirits' cash conversion means leverage is at the bottom end of the firm's target, meaning it "clearly" has sufficient headroom to pay the special dividend.
The investment firm added: "Furthermore, given Stock Spirits' performance and after the payment of a special dividend, the company would still have EUR70 million available for new acquisitions. This demonstrates the company has comfortable headroom to reward shareholders and conduct meaningful M&A.
"Given the lack of meaningful progress in acquiring profitable assets since 2015, there is a case for the company to reward shareholders' patience and to re-set the capital structure. We believe the company should focus its capital allocation on shareholders, core markets, and products, rather than the current erratic acquisition track record."
Western Gate also has concerns over governance, saying it has found no evidence of a UK company ever saying it will not abide by a shareholder proposal no matter what the vote is.
Further, the investor has criticised director pay, saying remuneration at Stock Spirits has more than doubled since 2015, far ahead of peers such as Pernod Ricard SA, Brown-Forman Corp, and Berentzen-Gruppe AG.
"Western Gate is a long-term shareholder in Stock Spirits, and we are generally pleased with the improvement in the company's operational performance," it continued.
"However, for several years we have felt the company is being run in the best interest of the board rather than all shareholders. We are concerned with governance following the unprecedented response to resolution 20. We feel the board should recognise the lack of meaningful growth and the long-term nature of its acquisitions and return capital to shareholders".
By George Collard; georgecollard@alliancenews.com
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