Report of the Remuneration Committee on Directors' Remuneration

Composition and Role

The Remuneration Committee is comprised of six non-executive directors considered by the Board to be independent. The members of the Committee are Mr. McGann (Chairman), Mr. Brinsmead, Mr. Friel, Mr. Gray, Dr. Peter and Mr. Toomey. On 7 February 2012, Mr. Kells retired as a member of the Committee upon his retirement from the Board and Mr. Gray was appointed a member of the Committee.

 

The Chief Executive, Mr. FitzGerald, is not a member of this committee but may be invited to attend meetings however is not present when his own remuneration is discussed.

 

The Committee meets at least once a year. During the year under review the Committee met five times. Details of attendance at the meetings held during the year are set out here.

 

The Committee’s responsibilities include:

  • determining the Group’s policy on executive remuneration;
  • considering and approving the remuneration of the executive directors and certain senior group executives; and
  • reviewing the design of share incentive plans and approving the granting and vesting of awards under such schemes.

 

During the year the Committee reviewed executive remuneration arrangements to ensure that they continued to be aligned with shareholders’ interests and company strategy and also determined all aspects of executive remuneration, including the granting of awards under the Company’s Long Term Incentive Plan (LTIP). The Committee also approved the granting of awards under the Company’s Executive Share Option Plan (ESOP), reviewed the performance target of share options scheduled to vest and prepared this report on directors’ remuneration.

 

The Committee uses the services of external independent consultants to provide advice on compensation and remuneration matters as required. During the year the Committee engaged the London office of Deloitte LLP to provide advice on compensation and remuneration related matters, including advice on remuneration best practice developments, and additionally at the end of the 2012 financial year to undertake an Executive Remuneration Review. Following consideration of this and the Company’s remuneration policy, the Committee decided to implement changes to the remuneration arrangements for the 2013 financial year as set out below. The Committee was exclusively responsible for appointing and setting the terms of reference of the consultant. While Deloitte LLP provided additional services to the Group during the year, the Committee is satisfied that the value of the relevant services received is not material to either party and do not consider there to be any conflict of interest in this regard.

Remuneration policy

The Remuneration Committee aims to ensure that remuneration packages are competitive and that they will attract and retain individuals of the quality required and motivate them to perform in the best long term interests of shareholders.

 

Remuneration packages for executive directors generally consist of basic salary and benefits, performance related bonus, participation in the LTIP and pension benefits.

 

Share options are also granted under the ESOP to management, excluding participants in the LTIP, across the Group to encourage alignment with the long term interests of shareholders. An Employee Share Participation Scheme (ESPS) was also previously operated however this scheme is currently being wound down.

 

The Company believes that shareholders are entitled to have a ‘say on pay’ and, accordingly, the Report on Directors’ Remuneration is presented to shareholders each year at the Company’s Annual General Meeting for the purposes of an advisory vote.

 

Executive directors’ remuneration

Basic salary and benefits

The basic salaries of executive directors are reviewed annually having regard to personal performance, divisional and/or group performance, significant changes in responsibilities and competitive market practice in their area of operation. Employment-related benefits principally relate to the use of company cars and health benefits. No fees are payable to executive directors.

 

Performance related bonus

Annual bonuses are payable to the executive directors in respect of the financial year to 30 September, subject to the achievement of clearly defined performance targets. For 2012 and prior years the maximum bonus potential, as a percentage of basic salary, was 80% for the Chief Executive and 60% for the other executive directors.

 

The performance targets for each executive director, which are also set annually, incorporate targets for group profitability based upon a challenging budget approved by the Board and personal goals. The performance targets for Mr. Corbin and Mr. Ralph also incorporate targets for divisional profitability based on budget. The weighting of the performance targets varies. For the 2012 financial year, 50% to 66% of bonus potential was for divisional and/or group performance and 33% to 50% of bonus potential was for the achievement of personal goals. Personal goals are aligned to support the long term success of the Group and generally incorporate strategic, talent development and governance related objectives, which are also weighted to ensure further alignment with the requirements of the Group.

 

For the 2012 financial year, the Committee has determined that the Group and divisional targets were substantially achieved. Personal performance targets were also generally met. However the level of achievement varied by individual and in accordance with the weighting of personal targets.

 

Share Incentive Scheme

The share incentive scheme was closed during 2010. The scheme was previously operated for executive directors and senior executives, excluding the Chief Executive. Under the terms of the scheme, the Committee could award shares, on a contingent basis, with a value of up to a maximum of 20% of basic salary where superior annually set financial targets were achieved. Shares which were awarded under the scheme were subject to restrictions, primarily the risk of forfeiture of the shares awarded, should the employee leave the Group within three years. The cost of this scheme has been recognised over the vesting period.

 

Long Term Incentive Plan

The LTIP, approved by shareholders at the Company’s 2010 Annual General Meeting, replaced the share incentive scheme and the Chief Executive’s former Long Term Incentive Plan. The scheme is designed to encourage alignment with the long term interests of shareholders. Awards are granted at the discretion of the Remuneration Committee and are subject to a vesting period and the satisfaction of challenging performance targets, the details of which are set out below. Under the Plan the market value of an award may not exceed 150% of a participant’s base salary in any plan year. During the 2012 financial year, in line with practice to date, the Chief Executive received an award equivalent to 75% of his base salary while the remaining executive directors received an award equivalent to 50% of their base salary. Awards will normally vest no earlier than the third anniversary of the award date and in the case of share options cannot normally be exercised later than the seventh anniversary of the award date. The cost of this scheme is recognised over the vesting period.

 

The LTIP rules provide for the granting of awards, up to a maximum of 10% of the Company’s issued share capital over a ten year period, taking account of any other share scheme operated by the Company and also provide for a claw back of awards by the Remuneration Committee in the event that within twelve months the basis on which awards were determined to vest is shown to be manifestly misstated.

 

Executive Share Option Plan/Executive Share Option Scheme

The ESOP, approved by shareholders at the Company’s 2010 Annual General Meeting, replaced the 2002 Executive Share Option Scheme (ESOS). Share options are granted under the ESOP to management across the Group, excluding participants in the LTIP, to encourage alignment with the long term interests of shareholders. Similar to the LTIP, share options are granted at the discretion of the Remuneration Committee and are subject to a vesting period and the satisfaction of challenging performance targets, the details of which are below. Share options granted will normally vest no earlier than the third anniversary of the award date and cannot normally be exercised later than the seventh anniversary of the award date.

 

Share options granted under the former ESOS have a vesting period of three years for Basic Tier share options and five years for Second Tier share options and are subject to meeting specific performance targets. Details of the ESOS performance targets are also set out in this report below.

 

The cost of the ESOP and ESOS are recognised over the vesting period.

 

The ESOP rules provide for the granting of awards, up to a maximum of 10% of the Company’s issued share capital over a ten year period, taking account of any other share scheme operated by the Company and also provide for a claw back of awards by the Remuneration Committee in the event that within twelve months the basis on which awards were determined to vest is shown to be manifestly misstated.

 

Pensions

All pension benefits are determined solely in relation to basic salary. Fees paid to non-executive directors are not pensionable.

 

Mr. Ralph participates in a defined benefit pension plan, which is accrued annually to provide up to 55% of his final pensionable salary at retirement. Mr. Corbin is a member of a defined contribution pension plan with contributions capped at the permitted level under UK tax legislation.

 

Following further changes in Irish and UK tax legislation during the prior year, Mr. Corbin, Mr. FitzGerald and Mr. McGrane accepted an alternative arrangement whereby they each receive a supplementary taxable non-pensionable cash allowance equal to the cost to the Group of their pension benefit foregone, further details of which are provided in note (i) to the directors remuneration table.

 

Share ownership guidelines

To ensure continued alignment of executive director interests with those of shareholders, share ownership guidelines were formally established in December 2012. Under the share ownership guidelines, each executive director is encouraged to build, over a five year period, a shareholding in the Company with a valuation at least equal to their annual basic salary. The existing shareholdings held by the executive directors, as shown below, are predominantly substantially in excess of these guidelines.

 

Service contracts

Executive director service contracts can be terminated by the Company giving 12 months notice.

 

Non-executive directors’ remuneration

The remuneration of the non-executive directors is determined by the Board. The fees paid to non-executive directors are set at a level which will attract individuals with the necessary experience and ability to make a substantial contribution to the Group’s affairs and reflect the time and commitments of their board duties. A basic fee is paid to non-executive directors with additional fees paid to the members of committees, chairmen of committees and to the Chairman of the Board. The non-executive directors do not participate in the Company’s performance-related cash or equity incentive plans.

 

Directors’ remuneration

A pay freeze on executive director salaries and non-executive director fees was instituted in 2010 and continued in 2012. However during 2012 Mr. Corbin was awarded a 7% salary increase following a review of his role and responsibilities following significant growth in his division both organically and through acquisition.

 

Directors’ remuneration 2012

 

  Basic salary/fees Other fees Benefits in kind Cash performance bonus Pension contribution or equivalent(i) Sub-total LTIP expense(ii) ESOS expense(iii) Total 2012
  €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000

Executive directors

C. Corbin

344 - 49 189 175 757 92 (17) 832

L. FitzGerald

570 - 42 410 228 1,250 245 (51) 1,444

B. McGrane

304 - 23 164 122 613 87 (28) 672

A. Ralph

333 - 25 181 72 611 95 (31) 675

Sub-total

1,551 - 139 944 597 3,231 519 (127) 3,623

 

 

Non-executive directors

 

 

C. Brinsmead

48 9 - - - 57 - - 57

A. Flynn(iv)

48 30 - - - 78 - - 78

H. Friel

48 9 - - - 57 - - 57

P. Gray(v)

48 77 - - - 125 - - 125

R. Kells(v)

17 38 - - - 55 - - 55

G. McGann

48 19 - - - 67 - - 67

J. Peter

48 9 - - - 57 - - 57

P. Toomey

48 15 - - - 63 - - 63

Sub-total

353 206 - - - 559 - - 559

Total

1,904 206 139 944 597 3,790 519 (127) 4,182

 

On 19 November 2012, 26,994 shares awarded to Mr. Corbin under the share incentive scheme vested in accordance with the scheme rules and were released from trust.

 

Directors’ remuneration 2011

 

Basic salary/fees Other fees Benefits in kind Cash performance bonus Pension contribution or equivalent(i) Sub-total ESOS(ii) LTIP expense(iii) Total 2011

€’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000

Executive directors

C. Corbin

309 - 31 172 166 678 57 53 788

L. FitzGerald

570 - 41 405 207 1,223 78 142 1,443

A. Flynn(iv)

89 - 11 - 18 118 - 7 125

B. McGrane

304 - 22 135 111 572 41 50 663

A. Ralph

333 - 24 118 72 547 43 55 645

Sub-total

1,605 - 129 830 574 3,138 219 307 3,664

                 

Non-executive directors

C. Brinsmead

48 9 - - - 57 - - 57

A. Flynn(iii)

27 21 - - - 48 - - 48

H. Friel

48 9 - - - 57 - - 57

P. Gray

48 19 - - - 67 - - 67

R. Kells

48 109 - - - 157 - - 157

G. McGann

48 19 - - - 67 - - 67

J. Peter

48 9 - - - 57 - - 57

P. Toomey

48 9 - - - 57 - - 57

Sub-total

363 204 - - - 567 - - 567

Total

1,968 204 129 830 574 3,705 219 307 4,231

 

The following shares awarded under the share incentive scheme vested on 1 December 2010 in accordance with the scheme rules:

Mr. Corbin; 19,508, Ms. Flynn; 9,487, Mr. McGrane; 16,410 and Mr. Ralph; 11,026. These shares together with the 61,538 shares which vested on 22 December 2009 in accordance with the scheme rules to Mr. FitzGerald were released from trust on 14 March 2011.


  • Irish and UK tax legislation impose penalty taxes on annual pension contributions and increases in pension fund values accruing to individual employees where proscribed maximum amounts are exceeded. As a result of legislative changes, the Remuneration Committee determined that impacted executive directors should either continue to accrue pension benefits as previously, or alternatively accept pension benefits limited by the revised proscribed maximum amounts and receive a supplementary taxable non-pensionable cash allowance equal to the cost to the Group of the pension benefit foregone.

    The alternative arrangements were accepted by Mr. FitzGerald and Mr. McGrane with effect from 8 December 2010 and by Mr. Corbin with effect from 5 April 2011. Mr. FitzGerald and Mr. McGrane were members of a defined benefit pension scheme therefore their existing pension fund values have been frozen at the permitted levels and they received a supplementary taxable non-pensionable cash allowance equal to the cost to the Group of the pension benefits foregone. The Remuneration Committee was advised independently on this matter by a firm of actuaries, Aon Hewitt, separately from the then ongoing advisers to the pension fund, Mercer. As an additional safeguard in setting the rate of the supplementary cash allowance, the Committee has retained the right to review the rate after five years, should market conditions such as long-term interest rates materially change this actuarial equivalence. Mr. Corbin is a member of a defined contribution scheme therefore his pension contributions are capped at the permitted level and he accrued a supplementary taxable non-pensionable cash allowance equal to pension contributions foregone.

    The amount of the allowance awarded to each director has been set by the Remuneration Committee such that there is no additional cost to the Group from the arrangement.

  • Vesting of awards granted under the LTIP is contingent upon the satisfaction of performance targets, which are set out below. The LTIP expense is calculated in accordance with IFRS 2 Share-based Payment.

  • Vesting of share options granted under the former share option scheme is contingent upon the satisfaction of performance targets, which are set out below. During the year the Remuneration Committee determined that the performance target for Basic Tier share options granted on 11 June 2009 had not been satisfied and that such share options had lapsed thereby resulting in a net credit to the income statement, calculated in accordance with IFRS 2 Share-based Payment.

  • Other fees earned by Ms. Flynn include €21,000 (2011: €16,000) for consultancy services provided to the Group. Ms. Flynn resigned as an executive director and was appointed a non-executive director on 7 March 2011.

  • Mr. Kells retired from the Board and Mr. Gray was appointed Chairman on 7 February 2012.

 

During the 2012 financial year, the Chief Executive, Mr. FitzGerald acted as a non-executive director for C&C Group plc and Warner Chilcott plc. Mr. FitzGerald retained fees totalling €84,238 (2011: €96,445) in respect of these appointments. Mr. FitzGerald was also granted 28,660 (2011: 10,100) share options in Warner Chilcott plc in respect of this position. Mr. FitzGerald held a total of 47,730 (2011: 19,070) share options in Warner Chilcott plc at 30 September 2012. Mr. FitzGerald resigned as a non-executive director of C&C Group plc on 29 February 2012.

 

Directors’ pension benefits

The pension benefits attributable to existing executive directors under the defined benefit pension scheme are as follows:

 

Increase in accrued pension during the year (excluding inflation) 2012 Transfer value of increase 2012 Accumulated accrued pension at year end 2012

€’000 €’000 €’000

L. FitzGerald

- - 211

B. McGrane

- - 115

A. Ralph

6 54 56

6 54 382

 

Increase in accrued pension during the year (excluding inflation) 2011 Transfer value of increase 2011 Accumulated accrued pension at year end 2011

€’000 €’000 €’000

L. FitzGerald

- - 211

A. Flynn

- - 62(i)

B. McGrane

- - 115

A. Ralph

8 58 51

8 58 439

(i) Represents accrued pension up to 7 March 2011.

 

Accrued pension shown is that which would be paid annually on normal retirement date.

 

 

Share incentive scheme

Details of outstanding shares awarded under the share incentive scheme are set out below.

  1 October 2011 number Vested in year number 30 September 2012 number

 
C. Corbin 26,994 - 26,994

26,994 - 26,994

 

26,994 shares were awarded to Mr. Corbin in recognition of the performance by the Sales, Marketing & Medical division in respect of the 2009 financial year. 17,804 shares were acquired from market on 19 November 2009 at a price of €2.30 per share. As reported above, the 26,994 shares vested in accordance with the scheme rules and were released from trust on 19 November 2012.

 

LTIP

Details of outstanding share options granted under the LTIP to directors are set out below.

  1 October 2011 number Granted in year number 30 September 2012 number Weighted average option price of share options outstanding at 30 September 2012
         

C. Corbin

137,617 77,832 215,449 0.05

L. FitzGerald

373,544 185,869 559,413 0.05

B. McGrane

132,815 66,086 198,901 0.05

A. Ralph

145,266 72,282 217,548 0.05

789,242 402,069 1,191,311

 

  Share options Exercise price Performance period Vesting date Expiry date(i) Market price
of award(ii)
  number      
             

Chris Corbin

77,832 0.05 1 October 2011 - 30 September 2014 24 May 2015 23 May 2019 2.30

66,088 0.05 1 October 2010 - 30 September 2013 20 May 2014 19 May 2018 2.31

1,599 0.05 1 October 2009 - 30 September 2012 14 June 2013 13 June 2017 2.12(iii)

69,930 0.05 1 October 2009 - 30 September 2012 14 June 2013 13 June 2017 2.32

215,449

           

L. FitzGerald

185,869 0.05 1 October 2011 - 30 September 2014 24 May 2015 23 May 2019 2.30

185,064 0.05 1 October 2010 - 30 September 2013 20 May 2014 19 May 2018 2.31

4,213 0.05 1 October 2009 - 30 September 2012 14 June 2013 13 June 2017 2.12(iii)

184,267 0.05 1 October 2009 - 30 September 2012 14 June 2013 13 June 2017 2.32

559,413

           

Barry McGrane

66,086 0.05 1 October 2011 - 30 September 2014 24 May 2015 23 May 2019 2.30

65,800 0.05 1 October 2010 - 30 September 2013 20 May 2014 19 May 2018 2.31

1,498 0.05 1 October 2009 - 30 September 2012 14 June 2013 13 June 2017 2.12(iii)

65,517 0.05 1 October 2009 - 30 September 2012 14 June 2013 13 June 2017 2.32

198,901

           

Alan Ralph

72,282 0.05 1 October 2011 - 30 September 2014 24 May 2015 23 May 2019 2.30

71,969 0.05 1 October 2010 - 30 September 2013 20 May 2014 19 May 2018 2.31

1,638 0.05 1 October 2009 - 30 September 2012 14 June 2013 13 June 2017 2.12(iii)

71,659 0.05 1 October 2009 - 30 September 2012 14 June 2013 13 June 2017 2.32

217,548


(i) Awards will lapse at close of business on the expiry date.

(ii) Represents market value of share price on date immediately preceding grant date.

(iii) Represents dividend equivalent award, which was calculated in accordance with the rules of the LTIP.

 

 

The vesting of awards granted under the LTIP is subject to the satisfaction of the following performance targets:

 

  • Total Shareholder Return (TSR) performance target

    Up to 50% of the award will vest depending upon the Company’s TSR over the three-year performance period compared with the TSR of constituents of the FTSE 250 Index (2011: constituents of the MSCI Europe Health Care Index).

     

    The extent of the award, subject to the TSR performance target, vesting will be determined as follows:

     

    Company’s TSR ranking

    Proportion vesting

    Below median

    0%

    At median

    25%

    Between median and upper quartile

    25% to 100% pro-rata

    At or above upper quartile

    100%

     

    TSR is based upon the return that a company has provided for its ordinary shareholders, reflecting share price movements and assuming reinvestment of dividends.

     

    The Committee may from time to time and at their discretion modify the peer group. Following review and in consultation with Deloitte LLP, during the year the Committee amended the peer group from the MSCI Europe Health Care Index to the FTSE 250 Index, commencing with the award granted during the 2012 financial year, as it was determined to be a more appropriate peer group.


  • Cash flow performance target

    Up to 50% of the award will vest depending upon the Company’s aggregate cash flow performance over the three-year performance period.

     

    The extent of the award, subject to the cash flow performance target, vesting will be determined as follows:

     

    Aggregate cash flow performance

    Proportion vesting

    Below 80% EBIT conversion rate

    0%

    At 80% EBIT conversion rate*

    25%

    Between 80% and 90% conversion rate*

    25% to 100% pro-rata

    At or above 90% EBIT conversion rate*

    100%

    * vesting under the cash flow performance target is also contingent on an aggregate minimum cash flow generation by the Company of €200 million (2011: €200 million) over the three-year performance period.

     

    At 30 September 2012 senior executives, excluding the executive directors, had options to subscribe for 312,996 (2011: 177,812) shares in accordance with the terms of the LTIP. The share-based payment expense recognised in the income statement in respect of these share options amounted to €132,035 (2011: €67,490).

 

 

ESOP/ESOS

A summary of share options outstanding to directors and the secretary, including family interests, under the former ESOS and current ESOP is set out below. Share options have not been granted to directors under the ESOP as directors participated in the LTIP. Details of the executive share option schemes are set out in this report and in note 27.

 

Share options exercised during year
  1 October 2011 number Granted in year number Exercised in year number Lapsed in year(i) number 30 September 2012 number Weighted average option price of share options outstanding at 30 September 2012 Weighted average exercise price Weighted average market price at date of exercise

     

Basic Tier share options

               

C. Corbin(ii)

524,000 - (52,500) (200,500) 271,000 3.16 1.90 2.15

L. FitzGerald

790,400 - (105,000) (297,400) 388,000 3.25 1.90 2.30

B. McGrane

487,100 - (52,500) (158,600) 276,000 3.14 1.90 2.16

A. Ralph

419,500 - - (173,500) 246,000 3.09 - -

K. Geoghegan (Company Secretary)

50,000 - - (25,000) 25,000 4.06 - -

2,271,000 - (210,000) (855,000) 1,206,000      

             

Second Tier share options

               

C. Corbin(ii)

402,500 - (105,000) - 297,500 3.28 1.90 2.15

L. FitzGerald

440,000 - (140,000) - 300,000 3.63 1.90 2.30

B. McGrane

215,000 - (35,000) - 180,000 3.55 1.90 2.27

A. Ralph

197,500 - (17,500) - 180,000 3.59 1.90 2.13

K. Geoghegan (Company Secretary)

10,000 - - - 10,000 3.95 - -

1,265,000 - (297,500) - 967,500

               

ESOP share options

               

C. Corbin(ii)

20,000 70,000 - - 90,000 2.14 - -

K. Geoghegan (Company Secretary)

20,000 40,000 - - 60,000 2.17 - -

40,000 110,000 - - 150,000

 

  • During the year the Remuneration Committee determined that the performance target for Basic Tier share options granted on 11 June 2009 had not been satisfied and that such share options had lapsed.
  • Includes family interests, Mr. Corbin was not personally granted any share options under the ESOP.

 

The closing share price at 30 September 2012 was €2.95. At 30 September 2012, the number of share options outstanding, including unvested share options, with an exercise price below €2.95 were: Mr. Corbin; 291,000, Mr. FitzGerald; 148,000, Mr. McGrane; 131,000, Mr. Ralph; 131,000 and Ms. Geoghegan; 60,000.

 

Exercise dates

Currently Within Between Between

exercisable 1 year 1-2 years 2-5 years

Basic Tier share options

       
C. Corbin (i) 76% 24% - -

L. FitzGerald

74% 26% - -

B. McGrane

82% 18% - -

A. Ralph

82% 18% - -

K. Geoghegan (Company Secretary)

- 100% - -

       

Second Tier share options

       

C. Corbin(i)

32% 68% - -

L. FitzGerald

8% 92% - -

B. McGrane

14% 86% - -

A. Ralph

14% 86% - -

K. Geoghegan (Company Secretary)

- 100% - -

       

ESOP share options

       

C. Corbin(i)

- 22% - 78%

K. Geoghegan (Company Secretary)

- 33% - 67%

 

(i) Includes family interests, Mr. Corbin was not personally granted any share options under the ESOP.

 

These share options are exercisable for a period of either:

  • seven years from the third anniversary of the date on which the share options were granted (Basic Tier share options);
  • five years from the fifth anniversary of the date on which the share options were granted (Second Tier share options); or
  • four years from the third anniversary of the date on which the share options were granted (ESOP share options).

 

None of the share options expire prior to 1 July 2013.

 

At 30 September 2012 management, excluding the executive directors and family interests, had options to subscribe for a maximum of 8,184,500 (2011: 7,026,000) shares in accordance with the terms of the ESOS and ESOP. The share-based payment expense recognised in the income statement in respect of these share options totalled €208,861 (2011: €520,892).

 

The vesting of share options is subject to the following performance targets:

 

Share options granted after 13 February 2002 and up to and including 8 February 2010:

  • Basic Tier share options are exercisable only when EPS growth exceeds the growth of the Irish Consumer Price Index by 5% compounded, over a period of at least three years subsequent to the granting of the share options.
  • Second Tier share options are exercisable only when EPS growth exceeds the growth of the Irish Consumer Price Index by 10% compounded, over a period of at least five years subsequent to the granting of the share options. In addition to this requirement, Second Tier share options may only be exercised if EPS growth over the same period places the Company:
    1. In the top 25% of companies listed on the ISEQ index, in which case these share options may be exercised in their entirety;
    2. In the midpoint position of companies listed on the ISEQ index, in which case half of the share options may be exercised;
    3. Between the midpoint and the top 25% of companies listed on the ISEQ index, in which case the proportion of the share options which may be exercised increases on a straight line basis;
    4. Below the midpoint position of companies listed on the ISEQ index, in which case no share options may be exercised.

     

Share options granted after 8 February 2010 are exercisable if:

  • EPS growth is not less than the movement in the Irish Consumer Price Index, plus 3%, compounded, over the performance period.

 

Details of all share options outstanding to directors and the secretary, including family interests, will be available for inspection at the Company’s forthcoming Annual General Meeting.

 

Directors’ interests in share capital

The beneficial interests, including family interests, of the directors and secretary in office at 30 September 2012 in the ordinary share capital of the Company were as follows:

 

30 September 2012 1 October 2011

number number

C. Brinsmead

15,000 15,000

C. Corbin

1,862,681 1,862,681

L. FitzGerald

812,017 787,017

A. Flynn

184,733 184,733

H. Friel

21,435 20,775

P. Gray

100,000 20,000

G. McGann

8,177 8,177

B. McGrane

805,167 748,091

J. Peter

5,000 5,000

A. Ralph

107,588 97,588

P. Toomey

84,334 84,334

K. Geoghegan (Company Secretary)

14,990 14,990

 

The directors and secretary have no beneficial interests in any Group subsidiary or joint venture undertakings.

 

On 19 November 2012, Mr. Corbin sold 26,994 shares at Stg£2.33 per share following the vesting and release from trust of such shares under the Company’s former share incentive scheme. On 23 November 2012 Mr. McGrane exercised 56,000 share options at €1.99 per share option and subsequently sold 45,000 shares on 26 November 2012 at Stg£2.36 per share.

Remuneration arrangements amendments for 2013

In 2012 the Company took some significant strategic steps and also delisted from Dublin making London its primary trading market and will subsequently be included in the FTSE 250 Index with effect from 24 December 2012.

 

Against this background, the Committee, with support from Deloitte LLP, undertook a review of remuneration arrangements to ensure that they continued to meet the aim of the remuneration policy. The Committee concluded that the level of variable remuneration awards being offered by the Company was significantly below that of comparative companies and that the arrangements did not sufficiently incentivise out-performance of the Company’s key performance metrics; earnings and cash generation.

 

Amendments to the executive directors’ 2013 remuneration arrangements were therefore approved by the Committee as set out below however the pay freeze on executive director salaries, which has largely been in place since 2010, will remain for the 2013 financial year, other than the salary of Mr. Ralph, which will be reviewed upon his appointment as Chief Financial Officer in June 2013.

 

Performance Related Bonus

For the Chief Executive, the maximum bonus potential, as a percentage of basic salary, will increase from 80% to 100% but the maximum bonus for “on target” performance will reduce from 80% to 70%. In addition, whereas previously 50% of bonus potential was based on personal goals, and 50% on financial goals, for 2013 personal goals will accrue a maximum of 20%. For other executive directors the maximum bonus potential will increase from 60% to 100% but the reward for “on target” performance will remain 60%. Similar to the arrangements for the Chief Executive, the majority of the incentive will be based on the achievement of financial goals, and the element attributed to personal goals will be smaller than heretofore. The increased bonus potential for all executive directors will only be earned through achievement of a stretch target based on out-performance over a challenging group, and where applicable, divisional target.


LTIP

Under the LTIP approved by shareholders at the Company’s 2010 Annual General Meeting, the market value of an award may not exceed 150% of a participant’s base salary in any plan year. The LTIP award for the 2013 financial year, as a percentage of base salary, will increase from 75% to 100% for the Chief Executive and from 50% to 100% for the other executive directors. As per previous LTIP awards, 50% of the award will require the achievement of a TSR performance target and 50% of the award will require achievement of a cash flow performance target.

 

The increased TSR stretch element will be subject to the pro-rata performance target as per the award granted in the 2012 financial year. However it will only be earned, if additionally, an underpin requiring that EPS growth is not less than the movement in the Irish Consumer Price Index, plus 3%, compounded, over the performance period, is achieved.

 

The cash flow target will require 100% (previously 90%) EBIT cash conversion for maximum vesting to be achieved, with pro-rating of the award vesting adjusted accordingly. In addition, the cash flow underpin will increase to €264 million, excluding acquisition cash flows (previously €200 million).

 

The Committee believes these amendments to the remuneration arrangements will ensure that the Company retains and attracts talent critical to the Company’s continued growth, internationalisation and achievement of strategic goals, are sufficiently stretching, provide an appropriate balance between fixed and variable remuneration and are in the best interests of shareholders.

 

Also following review, the Committee determined that the LTIP award for the 2013 financial year should be made during the grant period following the release of the Company’s 2012 final results, accordingly, the following LTIP award of nominal value share options was granted on 7 December 2012: Mr. Corbin; 107,462, Mr. FitzGerald; 172,563 and Mr. Ralph; 100,661. The ESOP award for the 2013 financial year was also granted on 7 December 2012 with Ms. Geoghegan receiving an award, subject to similar performance conditions to the prior year ESOP award, of 30,200 share options with an exercise price of Stg£2.68.

 

 

Other than as set out in this report, there have been no further changes in the interests of the directors, the secretary and their families in the share capital of the Company or group companies between 30 September 2012 and 17 December 2012.

On behalf of the Remuneration Committee

G. McGannP. Gray
DirectorDirector