The following report summarises how the Remuneration Policy was applied in FY2018 and how the Committee intends to apply the policy for FY2019. The report will be subject to an advisory vote at the AGM in September 2018.
How the Remuneration Policy was implemented for executive directors in FY2018
The following information is audited.
Single total figure of remuneration
The following table sets out the single figure for total remuneration for executive directors for the FY2017 and FY2018 financial years:
- Paul Hayes joined the Company on 1 May 2017, therefore FY2018 is the first year in which he was remunerated.
- These awards are due to vest in June 2018 after the finalisation of this report. The shares estimated to vest have been valued based on the latest vesting forecasts, accrued dividends on shares and using the average share price during the final quarter of the financial year of £11.59.
- Valued using the share price on the date of vesting of £10.76. This award vested in full.
Notes to the table
The following paragraphs set out details of how the numbers included in the single figure table above have been prepared.
With effect from 1 August 2017, salaries for Jonathan Glenn (CEO) and Paul Hayes (CFO) were £496,350 and £320,000 respectively.
Benefits include a car allowance, life assurance, private medical insurance and personal health insurance. The CEO also receives a fuel card.
For FY2018 the annual bonus opportunity for the CEO and CFO was split between cash and deferred shares, as set out in the table below.
|Cash element –|
(% of salary)
|Deferred share element –|
(% of salary)
As in prior years, 80% of the cash element of the annual bonus was based on the reported underlying Profit Before Tax ("underlying PBT") performance for the financial year. The remaining 20% of the cash element and 100% of the deferred share element was based on the Committee's assessment of individual performance against strategically important goals at a corporate and personal level.
In addition, for the deferred share element, the following PBT hurdles needed to be achieved before shares were awarded.
|Profit before tax||Below|
|Equal to or above|
|Maximum deferred shares vesting|
(based on achievement of strategic targets)
|No deferred shares may be awarded||CEO – up to 7% of salary|
CFO – Up to 5% of salary
|CEO – up to 29% of salary|
CFO – Up to 20% of salary
|CEO – up to 50% of salary|
CFO – Up to 35% of salary
This combination of financial performance and strategic measures ensures that the overall level of bonus paid is appropriate and reflective of the Company's performance during the year.
As the underlying PBT was above the target of £36.6m, the deferred share element award will be up to a maximum up to 50% of salary for the CEO and up to 35% of salary for the CFO, as adjusted by the personal factors percentage set out below.
The table below shows the underlying PBT performance required.
% of max
|Underlying PBT||£32.9m||£36.6m||£38.4m||£38.2m||97% of|
For FY2018, the factors considered when assessing performance against objectives set for the CEO and CFO at the start of the year included the following:
|Objective||Overview of performance|
|CEO||Enhancement of key customer relationships|
- Managed relationships with key customers, to ensure the development programme timetable remains on track
- Outperformance on specific objectives that were set
|Collaboration between Bespak and Aesica|
- Objective was to advance the collaborative Bespak / Aesica pipelineto include at least one or more combined programmes this year
- A number of opportunities are currently under discussion with potential customers
|Mylan facility – fully operational|
- Ensured the Mylan facility was fully operational to support the launch of generic Advair
|Consider strategic investments|
- Continued to identify and evaluate potential acquisitions and investments that will generate long-term shareholder value
- Focus on enhancing the leadership teams and upskilling senior talent
- Key roles were successfully identified and recruited during the period
|CFO||Increase focus on cash generation|
- Cash generated from operations was £37.1m for FY18 and the Group balance sheet remains strong as demonstrated by Net debt to EBITDA of 1.7x
- These factors strengthen the Group's ability for future investment
|Finance function review|
- Successful ongoing development of the finance function driving performance whilst maintaining controls and risk management
|Strategy execution and investor engagement|
- Key role played in execution of various Group-wide strategic goals
- Lead role taken on management of investor and analyst relations and communication of strategy and results
- Review undertaken of all internal controls across the Group. Steps were taken to strengthen both controls and risk management processes
Taking into account the above factors, the Committee determined that the personal portion of the cash element should pay out at 80% of maximum for the CEO and 75% of maximum for the CFO. With regards to the deferred share element, awards of 80% of maximum for the CEO, and 95% of maximum for the CFO were approved.
The total bonuses awarded to the CEO and CFO were therefore as follows:
|CEO||659 (89% of max)||462||197|
|CFO||329 (93% of max)||222||107|
Long-term incentives – 2015 Awards vesting based on performance to FY2018
Performance Share Plan ("PSP") awards granted in 2015 were subject to Total Shareholder Return ("TSR") compared to the FTSE SmallCap excluding investment trusts and finance, property and insurance companies (50% of the award) and Earnings Per Share ("EPS") performance (50% of the award). The performance schedule was as follows:
(% of element)
|Less than the mean annualised comparator TSR||0%|
|Equal to the mean annualised comparator TSR||25%|
|TSR greater than the lower of:|
(i) mean annualised comparator TSR +7%; or (ii) upper quartile annualised comparator TSR
Note that this is the final award which applies to this vesting schedule. For awards granted from 2016, threshold vesting requires median performance with full vesting requiring upper quartile, which is more in line with conventional market practice.
|EPS (aggregate over the three-year performance period)||Vesting|
(% of element)
|Less than 153p||0%|
Cumulative EPS performance delivered over the period was 187.2p, which exceeds the stretch hurdle required for full vesting and therefore 100% of the EPS element is expected to vest. As the performance period for the TSR element runs until 18 June 2018, the final level of vesting has not yet been determined. However, based on annualised TSR performance to date of c. 10% p.a., c. 85% of the TSR element is expected to vest.
The final vesting outcome will be confirmed following the assessment of actual TSR performance at the end of the performance period. Given the strong performance of the business, as demonstrated by both the growth in EPS and share price performance over the period, the Committee is comfortable that a vesting level towards the upper end of the scale is fully warranted.
For the purpose of the single figure table, the value of the awards have been estimated based on overall vesting of 92.5% of maximum and the three-month average share price during the final quarter of the financial year (£11.59). The final vesting outcomes will be confirmed following the end of the performance period and suitably disclosed in due course.
Share awards granted during FY2018
The table below sets out details of the share awards made to the executive directors during FY2018. Details of the award levels and related vesting criteria for both the PSP and Deferred share awards were disclosed in last year's Annual Report on Remuneration.
|Face value2,3||Performance period|
|Type of award1||Date of grant||(£)||(% of salary)||TSR||EPS|
|Jonathan Glenn||PSP4||20 June 2017||484,258||100%||20 June 2017|
to 19 June 2020
|1 May 2017|
to 30 April 2020
|Deferred shares5||20 June 2017||168,447||35%||n/a||n/a|
|Paul Hayes||PSP4||20 June 2017||319,993||100%||20 June 2017|
to 19 June 2020
|1 May 2017|
to 30 April 2020
- All awards are granted in the form of nil cost options.
- Details of the number of shares granted are set out in scheme interests below. Dividend equivalents may also accrue in respect of awards which subsequently vest.
- The face value of PSP awards and deferred shares is calculated using the average price of the three days prior to the date of grant of £10.67 (15 June (£10.18), 16 June (£11.06) and 19 June (£10.76)).
- PSP awards will vest in June 2020 subject to the satisfaction of performance criteria. Awards are 50% subject to TSR performance compared to the FTSE SmallCap, excluding investment trusts, finance, property and insurance companies; and 50% subject to EPS performance. For threshold performance, 25% of the award may vest.
- Deferred Share awards are not subject to any further performance conditions and vest in June 2020.
How the Remuneration Policy will be applied to executive directors in FY2019 (unaudited)
Salary & Benefits
In the context of another strong year of performance, salaries for all employees within the Group will be increased by a total spend of 2.5% and it is expected that the same increase will apply to executive directors with effect from 1 August 2018. The CEO's salary will therefore be £508,760 and the CFO's salary will be £328,000.
Benefits for FY2019 will remain unchanged.
The maximum opportunities (as a percentage of base salary) for the executive directors are 150% for the CEO and 110% for the CFO. These remain unchanged from the prior year.
As noted in the statement from the Committee Chair, the presentation of the bonus structure has been simplified for FY2019. Instead of the award being split into two separate awards, a single combined annual bonus will be operated, with one-third deferred into shares. The proportion of the maximum delivered in cash and shares remains broadly unchanged from previous years.
The performance metrics will be as follows:
- 60% will be based on underlying PBT (before special items) and 40% will be based on the Committee's assessment of performance against the Group's strategic goals, tailored by individual. Awards will be subject to an underpin based on underlying PBT (before special items). Compared to prior years, there has been a small increase to the proportion of the award based on underlying PBT (from just below 55%, to 60% for FY2019)
- The strategic measures for the bonus have been selected on the basis that they represent areas that are important for the long-term success of the Group
The Committee considers that this combination of measures provides an appropriate balance of focus on improving financial performance and wider business strategic goals. The Committee considers that the bonus strengthens the alignment between shareholders' and executive directors' interests, and encourages a longer-term focus on shareholder value, by requiring a three-year deferral of one-third of the annual bonus which is payable in shares.
Note: The performance targets for the FY2019 annual bonus have not been disclosed on a prospective basis as they are considered by the Board to be commercially sensitive as they could reveal details of our budgeting and our strategic goals to competitors. The Committee will seek to provide expanded retrospective disclosure in due course.
Long-term incentives – Performance Share Plan
Awards to executive directors will remain unchanged at 100% of salary. The awards will continue to be subject to TSR performance (50%) and EPS performance (50%). For 2018 grants, awards will be subject to a two-year holding period.
TSR will be measured against the TSR performance compared to the FTSE SmallCap, excluding investment trusts, finance, property and insurance companies.
|Consort's relative TSR performance –|
over three years following grant date
(% of element)
|Less than median TSR of the Comparator Group||0%|
|Equal to median TSR of the Comparator Group||25%|
|Equal to upper quartile TSR of the Comparator Group||100%|
EPS will continue to be measured on a cumulative basis. The targets for 2018 awards are:
|Cumulative EPS between|
1 May 2018 to 30 April 2021
(% of element)
|Less than 207p||0%|
The Committee believes this combination of measures continues to provide an appropriate balance between measuring performance against the Company's peers and incentivising management to grow earnings for shareholders over the long term.
Exceptionally, the Committee may make adjustments to the calculation of performance measures (e.g. following a transaction or for currency movements) to ensure performance is measured on a fair and consistent basis.
In line with best practice, variable incentives are subject to malus and clawback provisions, as described in the Directors' Remuneration Policy Report.
With the specific approval of the Board in each case, executive directors may accept external appointments as non-executive directors of other companies. The directors are entitled to keep the fees from external appointments.
During the year, Jonathan Glenn undertook the role of non-executive director for Tissue Regenix Group PLC and his fees for the year to 30 April 2018 were £30,000.
Statement of directors' shareholdings and share interests (audited section)
Executive directors are expected to accumulate and maintain a significant shareholding. The vesting of awards from the Company's various equity-related incentive arrangements can provide a means to develop this shareholding. Only ordinary shares that are beneficially held by the executive director (or their spouses, civil partners, children and stepchildren, as applicable) count towards the shareholding guideline.
The CEO and CFO are expected to accumulate shares worth 200% and 100% of salary respectively over a period of five years. The CEO has met his shareholding guideline. The CFO was appointed in 2017 and will therefore be expected to build his holding over the course of his tenure.
|Number of shares counting towards shareholding guidelines|
(as at 30 April)
|Value of shares counting towards shareholding guidelines1||Shareholding|
|Jonathan Glenn||152,673||£1,832,076||200% of base salary|
|369% of salary|
|Paul Hayes||8,118||£97,416||100% of base salary|
|30% of salary|
- Calculated based on the share price on 30 April 2018 of £12.00.
The beneficial interests of the executive directors on 30 April 2018 (including beneficial interests of their spouses, civil partners, children and stepchildren, as applicable) in the ordinary shares of the Company are shown below:
|Shares||Long-term incentives1||SAYE2||Deferred bonus shares3||Total|
- PSP awards and awards under the Company's previous long-term incentive plan (the LTIP) are structured as nil-cost options and remain subject to performance conditions.
- SAYE is the Company's Save As You Earn employee share option scheme. These options are not subject to performance conditions. This is an all-employee share scheme governed by specific tax legislation.
- Deferred bonus shares are subject to continued employment only.
Between 30 April 2018 and 13 June 2018 Jonathan Glenn and Paul Hayes acquired 25 and 26 partnership shares respectively through payroll deductions under the all-employee Share Incentive Plan. There were no other changes in share interests.
The table below provides details of outstanding awards under share incentive plans:
|Date of grant||Plan|
shares at 01/05/17
shares held at 30/04/182
at date of
|Earliest date of|
|20 Jun 2014||56,725||3,551||(60,276)||–||–||8.97||Jun 17||Jul 17|
|19 Jun 20154||49,308||–||–||–||49,308||9.26||Jun 18||Jun 28|
|21 Jun 2016||48,491||–||–||–||48,491||9.74||Jun 19||Jun 29|
|20 Jun 2017||–||45,385||–||–||45,385||10.67||Jun 20||Jun 27|
|Deferred Bonus Plan|
|20 Jun 2014||16,333||1,040||(17,373)||–||–||8.97||Jun 17||Jul 17|
|19 Jun 2015||22,581||–||–||–||22,581||9.26||Jun 18||Jul 18|
|21 Jun 2016||18,166||–||–||–||18,166||9.74||Jun 19||Jul 19|
|20 Jun 2017||–||15,787||–||–||15,787||10.67||Jun 20||Jul 20|
|20 Jun 2017||–||29,990||–||–||29,990||10.67||Jun 20||Jun 27|
- For awards granted in prior years, this relates to dividend equivalent shares.
- None of the plan shares held at the year-end have vested as at 14 June 2018.
- Calculated using the three-day average share price prior to the date of grant.
- 2015 awards were originally granted in June 2015 under the terms of the 2005 LTIP. Following shareholder approval of the 2015 PSP, they were replaced with equivalent awards under the new plan. The PSP awards are over the same number of shares and subject to the same performance conditions as the original LTIP awards. The share price is therefore the three-day average prior to the original date of grant (19 June 2015). Further details are provided in the FY2016 Directors' Remuneration Report.
At 30 April 2018, there were 300,579 shares in the Company's share ownership trust (2017: 298,888).
Further disclosures – in line with the relevant regulations, the following information is unaudited
Change in remuneration of the CEO between FY2017 and FY2018
The table below illustrates the percentage change in salary, benefits and annual bonus for the CEO compared to other Group employees (including other senior executives) between FY2017 and FY2018 on a consistent basis.
|% change in annual bonus|
|All Group employees||3.6%||3.5%||7.4%|
Historic TSR performance and the remuneration outcomes for the CEO
The graph compares the TSR (based on a notional investment of £100) of Consort Medical against the FTSE Healthcare Sector and the FTSE SmallCap for an eight-year period, calculated on a spot basis. The FTSE Healthcare Sector has been chosen due to sector relevance, while the FTSE SmallCap has been chosen so as to provide a wider market comparator constituting companies of an appropriate size.
The table below illustrates the CEO single figure for total remuneration, annual bonus payout and LTIP vesting as a percentage of maximum opportunity for the same eight-year period.
|CEO single figure of remuneration (£'000s)||872||1,041||1,861||1,619||1,910||1,816||1,811||1,825|
|Annual bonus payout (% of maximum)||79%||96%||83%||67%||98%||82%||79%||89%|
|Long-term incentive vesting (% of maximum)||0%||0%||100%||100%||92%||100%||100%||92.5%|
Relative importance of spend on pay
The table below illustrates the year-on-year change in total remuneration compared to distributions to shareholders and profit before tax for FY2018 and FY2017.
|Distributions to shareholders||Total employe pay||Underlying|
Total employee pay includes wages and salaries, social security costs, pension costs and share-based payments for employees. Further details are provided in note 4 to the accounts in the Notes to the Consolidated Accounts.
During FY2018, distributions to shareholders included a dividend of £6.5m paid on 27 October 2017 and £3.6m paid on 16 February 2018.
In FY2017, distributions to shareholders included a dividend of £6.1m paid on 21 October 2016 and £3.5m paid on 17 February 2017. It is proposed that a dividend of 13.56p per share be paid on 26 October 2018. Further details are provided in note 12 in the Notes to the Consolidated Accounts.
Underlying PBT has been shown in the table above as it forms the basis on which 80% of the cash element of the bonus is calculated.
Non-executive director letters of appointment (unaudited)
The following table provides details of the non-executive directors' service contracts:
|Dr Peter Fellner||14 November 2005||14 November 2018|
|Dr William Jenkins||6 May 2009||5 May 2019|
|Steve Crummett||13 June 2012||12 June 2021|
|Ian Nicholson||13 June 2012||12 June 2021|
|Dr Andrew Hosty||14 July 2014||13 July 2020|
|Charlotta Ginman||11 February 2015||10 February 2021|
Remuneration of non-executive directors (audited)
Fees paid to non-executive directors in FY2018
The following table sets out the single figure of remuneration for non-executive directors for FY2017 and FY2018:
|Fees paid in respect of FY2018|
|Fees paid in respect of FY2017|
|Dr Peter Fellner (Chairman)||138,333||130,000|
|Dr William Jenkins||56,417||53,500|
|Dr Andrew Hosty||41,417||38,500|
The fees for the Chairman and non-executive directors were last increased effective 1 July 2017. Full details were provided in last year's Remuneration Report.
Shares held by non-executive directors at 30 April 2018 (audited)
Non-executive directors are not paid in shares nor are there formal shareholding guidelines; however, they are encouraged to hold shares in the Company.
The beneficial interests of non-executive directors on 30 April 2018 (including the benefits interests of their spouses, civil partners, children and stepchildren, as applicable) in the ordinary shares of the Company are shown below:
|Shares owned outright at|
30 April 2018
|Shares owned outright at|
30 April 2017
|Dr Peter Fellner (Chairman)||6,500||6,500|
|Dr William Jenkins||1,625||1,625|
|Dr Andrew Hosty||1,579||1,579|
There have been no changes in share interests between 30 April 2018 and 13 June 2018.
None of the directors had a material interest at any time during FY2018 in any contract of significance, other than a service contract, with the Company or any of its subsidiaries.
The Remuneration Committee role
The Remuneration Committee's principal role is to determine and make recommendations to the Board regarding the policy for the remuneration of the Chairman, the CEO, the executive directors, the Company Secretary and other members of the senior executive management of the Group. It also determines the policy for, and scope of, pension arrangements and approves the design of performance-related pay schemes, sets the targets for such schemes, and approves payments under such schemes.
The Committee reviews the design of all share incentive plans for the approval of the Board and the shareholders. It determines each year whether awards will be made and, if so, the overall amount of such awards, the individual awards to be made to executive directors and other senior executives, and the performance targets to be used. The terms of reference of the Remuneration Committee are published on the Company's website.
Activities during the year
The Remuneration Committee met four times during the year. Details of attendance at the meetings are shown in the table in Corporate Governance. The key matters discussed at these meetings included:
- remuneration of executive directors and senior executives;
- determining bonus payouts and setting bonus targets;
- determining PSP award vesting and consideration of PSP performance criteria;
- granting of share awards and setting performance targets for awards;
- Corporate Governance updates;
- Remuneration Committee terms of reference; and
- Directors' Remuneration Report including review of Remuneration Policy.
In discussing the above matters, the Remuneration Committee considered the remuneration policies of the Company as a whole.
The Remuneration Committee comprises the following independent non-executive directors:
|Dr William Jenkins||Chairman (since 1 March 2013)|
|Steve Crummett||Member (since 6 November 2012 until Feb 2018)1|
|Dr Andrew Hosty||Member (since 14 July 2014)|
|Charlotta Ginman||Member (since 25 April 2018)|
|Ian Nicholson||Member (since 25 April 2018)|
- Steve Crummett attended the February 2018 meeting and stepped down prior to the April 2018 meeting.
The Chairman, the CEO, the Director of Human Resources, and the Company Secretary were invited to attend some or all of the meetings to provide advice to the Committee. They did not attend when any matter related to their own remuneration was discussed.
During the period, the Committee received advice from its independent remuneration advisers, Deloitte LLP ("Deloitte"). Deloitte were appointed by the Committee. The Remuneration Committee considers that the advice provided by Deloitte is objective and independent. Deloitte is a founding member of the Remuneration Consultants Group and adheres to its Code in relation to executive remuneration consulting in the UK. The Committee is comfortable that the Deloitte engagement team that provide remuneration advice to the Committee do not have connections with Consort Medical that may impair their independence.
Separate teams within Deloitte also provided the Company with advice on the valuation of share awards for IFRS 2 purposes and in connection with the Company's risks and controls. Total fees for advice provided to the Committee during the year under review amounted to £29,400.
The Committee also received advice in relation to its share schemes from the Company's lawyers, Ashurst LLP and Pinsent Mason LLP.
The table below sets out the results of the most recent votes on the Remuneration Policy and Annual Remuneration Report:
(vote on 3 September 2015)
|Annual Remuneration Report|
(vote on 6 September 2017)
|Votes in favour||38,315,706||94.93||38,621,619||99.50|
The Annual Remuneration Report was approved by the Board and signed on its behalf.
Dr william jenkins
Chairman of the remuneration committee
13 June 2018