PARIS (Reuters) - French spirits group Pernod Ricard (PA:PERP), which is being targeted by activist investor Elliott, vowed to improve profit margins and shareholders' returns in a new three-year strategy plan.
Pernod, the world's second-biggest spirits group behind Diageo (LON:DGE), also raised its profit growth outlook for the 2018/19 full year after first-half operating profits beat forecasts, helped by strong demand for premium cognac in China.
U.S. activist fund Elliott, which has built a stake of just over 2.5 percent in Pernod, has called on the family-backed group to raise profit margins to bring them more into line with Diageo. Elliott also wants Pernod to improve its corporate governance.
Pernod Ricard said on Thursday that its goal for the 2019-21 period was to lift operating profit margin by 50-60 basis points per year, provided it could deliver annual organic sales growth of 4-7 percent, having achieved 6 percent in the 2017/18 year.
The company also announced a new round of 100 million euros (£87.9 million) in cost savings, to drive this margin expansion.
Pernod added it would progressively raise its dividend payout ratio to 50 percent of net profit from recurring operations by 2020, compared to 41 percent at present.
For the current year ending June 30, 2019, Pernod Ricard is now targeting an organic rise of between 6-8 percent in profit from recurring operations, having achieved a forecast-beating 12.8 percent rise in those profits in the first-half which came in at 1.654 billion euros.
This compared to a previous forecast for 5-7 percent growth.