Online delivery platform Just Eat (JE.) is under pressure from US shareholder Cat Rock Capital who is demanding immediate change to drive faster growth.
Cat Rock owns a 2% stake in Just Eat and wants the company to address several issues as the stock currently trades at the lowest valuation among comparable competitors globally.
In an open letter to the board, Cat Rock wants Just Eat to publicly announce its three-year financial targets and associated executive remuneration package within the next 30 days.
‘If management fails to commit to, and deliver on, the three-year financial plans and targets, we strongly believe the board should begin to consider strategic alternatives for the business’, says Cat Rock founder Alex Captain.
He argues that long-term, public targets will help management focus on execution and encourage accountability.
Shares in Just Eat have fallen by approximately a quarter in the last year to 579p as costs to establish a delivery service have been higher than expected, putting earnings under pressure.
‘TARGET 20% ORDER GROWTH’
Cat Rock says Just Eat should aim for ‘at least 20% organic order growth’, which doesn’t appear to be demanding as the company delivered 30% order growth in the first half of 2018.
Accountability should be encouraged by linking management’s remuneration with the 3-year plan with the investment firm blasting current targets as ‘remarkably undemanding.’
An example of this, according to Captain, is sales guidance this year of £660m to £700m which assumes no sales growth over Just Eat’s fourth quarter 2017 run rate including its acquisition of Hungryhouse.
The final point of contention for Cat Rock are significant non-core assets such as the iFood business in Brazil, which the investor thinks should be sold to boost Just Eat’s focus and return capital to shareholders.
At an estimated value of £650m, iFood could be a lucrative deal for Just Eat if it can sell the business for a fair price.
