LONDON (Alliance News) - Western Gate Private Investments Ltd on Monday accused Stock Spirits PLC of "trying to avoid answering difficult questions", after the Eastern European spirits producer cancelled its investor day.
But Stock Spirits hit back later in the day, accusing Western Gate of digging for "commercially sensitive" information and claiming the "vast majority" of its investors are "happy" with the level of its disclosure of its financial and operational performance.
Western Gate is an investment vehicle of the family office of Luis Amaral and the largest shareholder in Stock Spirits with a 9.7% stake. Amaral is also the largest shareholder in Eurocash, one of Stock Spirit's largest customers in Poland.
Relations between Western Gate and Stock Spirits have been strained of late, following a tough 2014 and 2015, when Stock Spirits saw its market share in its key Polish market slump, resulting in a series of profit warnings.
Ahead of the investor day, Western Gate sent Stock Spirits a list of questions to be answered by October 28, asking it to provide an outline of the company's organisational structure, justification of management roles and costs of non-executive roles, updates on product initiatives, information on trends in market share development, and an outline of its strategy, as well as other issues.
Western Gate said it received no response to the questions, but instead received notice that the investor day had been cancelled.
Stock Spirits' reasoning for cancelling the investor day was that it "decided that such an event is unnecessary at the present time.
"This is due to the fact that, having had extensive engagement with our shareholders since the company's interim results in August, we have received the feedback that our strategy and investment case are well understood. In light of this, and considering the substantial investment and resources that go in to preparing for and holding an event of this kind, we have decided that it would not currently be the best use of management's time".
But Western Gate said on Monday it does not consider Stock Spirits' engagement with shareholders to have been "extensive", nor does it "have a feel" for current trading, while it "does not understand how shareholders will derive value from the strategy".
"By cancelling its investor day, we wonder whether Stock Spirits is trying to avoid answering difficult questions from shareholders about the conduct of the company and its performance," Western Gate's Amaral said in a statement.
"Shareholders deserve transparency and clear communication from the company, so once again we ask them to respond to all our questions," Western Gate said.
In a statement issued later Monday, Stock Spirits argued that "we are in constant communication with our shareholders, and the vast majority of our investors are happy with the level of disclosure that the company gives around its financial and operational performance.
"None of our investors would expect us to give selective disclosure of this kind, and particularly not when the information is of a commercially sensitive nature and would be provided to a shareholder who is also a valued customer of Stock Spirits."
Western Gate also claimed that Stock Spirits has "ignored shareholders' express wishes" by "excluding" the two new non-executive directors appointed in May from joining any of the four board committees.
The two directors appointed in May were Alberto da Ponte and Randy Pankevicz. Western Gate had requested the pair be appointed to the board, saying this would help to improve the company's performance. The shareholder had already successfully pushed for the removal of former Chief Executive Chris Heath.
However, last week, Stock Spirits announced the appointment of a further three non-executive directors - Tomasz Blawat, Diego Bevilacqua and Mike Butterworth - which Western Gate said confirmed that da Ponte and Pankevicz had not been allowed to join any of the four board committees.
"Despite this clear mandate for change, both directors have been prevented from joining any of the four board committees. This ignores the express wishes of shareholders that the new directors play a full role in helping to turn the company's fortunes around," Western Gate said on Monday.
In its own statement, Stock Spirits said "the Western Gate appointees are not excluded from attendance or participation in any of the board meetings or committees.
"Since their appointment they have been invited to all board committee meetings, and are playing an active role in all of the board's decision-making and discussions."
According to Western Gate, Stock Spirits' board now stands at nine members, including the latest three additions, which the shareholder commented last week is "just two short of Diageo", the drinks giant which is "some 180 times larger" than Stock Spirits.
Western Gate estimates the salaries for the non-executive directors to exceed GBP550,000 in 2017, which is a 60% increase on 2015, 108% above the median of its peer group, and 107% above the average. It added that the board will cost GBP1.4 million a year.
"These costs are excessive and only add to the EUR16 million of costs associated with the UK-based head office," Western Gate said on Monday.
Hitting back, Stock Spirits said it has only appointed one additional non-executive director, as two of them replaced Mirek Stachowicz and Andrew Cripps. Stachowicz is now the group's chief executive, while Cripps has left the board.
When it announced the appointments last week, Stock Spirits had said Cripps would be replaced as the senior independent non-executive director by existing board member John Nicolson.
"All of our major shareholders, apart from Western Gate, have welcomed the addition of further experience being added to the board," Stock Spirits said on Monday.
Stock Spirits said non-executive director fees total GBP511,000, including GBP92,000 for the pair appointed by Western Gate.
"Western Gate looks forward to the company's November third-quarter trading update, so that shareholders can judge the impact of its turnaround programme for the core Polish business. Shareholders will have waited two years for this turnaround since the company's first disastrous profit warning on November 5, 2014. We also ask that the update explains what the company is doing to address its excessive head office costs, which if anything look to be increasing now the board has been expanded to nine people," Western Gate's Amaral said.
Shares in Stock Spirits were trading up 0.6% at 158.50 pence on Monday.
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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