French drinks group Pernod Ricard needs to be more ambitious: Elliot Management

Elliot is pushing Pernod Ricard to boost its margin and growth potential and come on par with its British rival Diageo; it also wants better corporate governance from the group.

Despite stating that French drinks group Pernod Ricard’s results were good, activist hedge fund Elliott Management, kept up the pressure on Pernod Ricard saying, it wants more in terms of corporate governance and steps to boost growth.

Elliott has already built up a stake of more than 2.5% in Pernod; it has called on the family-backed group to raise its profit margins and bring them in line with its British peer Diageo; it has also demanded better corporate governance.

“Pernod’s half-year earnings announcement confirmed the strong growth potential and solid financial performance of the company. It also reflected a first small step in starting to address the company’s shortcomings in operational efficiency,” said Elliott in a statement.

Elliott nevertheless added it felt Pernod’s strategy plans could be “more ambitious.”

Elliott stated, for Pernod, which is targeting a savings of 100 million euros and a margin step-up of 50-60 basis points per year over the period FY19-21 were “modest goals” given that its EBIT (earnings before interest and tax) is around 2.5 billion euros and operates at close to a 5 percentage points EBIT margin discount to its closest peer.

“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,” said Elliott.

In January, Pernod Ricard took a step toward improving its governance, naming Patricia Barbizet to the newly created role of lead independent director.

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