Remuneration report
Remuneration report (audited)
The remuneration report is set out under the following main headings:
A Principles used to determine the nature and amount of remuneration;
B Details of remuneration;
C Service agreements and
D Share‑based compensation.
The information provided under headings A‑D outlines the director and executive remuneration of the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. It also provides the remuneration disclosures required by paragraphs Aus 29.4 to Aus 29.7.2 of AASB 124 Related Party Disclosures. For the purposes of this report Key Management Personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Parent Company.
A Principles used to determine the nature and amount of remuneration
Remuneration Policy
The Group policy is to remunerate staff in accordance with market rates in alignment with the individual’s duties, responsibilities and performance. The process also accesses comparative market information. At Salmat, we have a team of executives, staff and associates with considerable experience and expertise across our businesses. Our achievements are in no small measure due to their hard work and diligence.
The remuneration strategy is overseen by the board through the remuneration and compensation committee. The committee consults directly with external advisers on best practice and appropriate market benchmarks, covering the level of remuneration, split between fixed and variable components and both short and long term incentives.
Remuneration and compensation committee
The remuneration and compensation committee is a committee of the board. The charter adopted by the board is displayed on the Salmat Limited website www.salmat.com.au.
Committee membership consists of the four independent non‑executive directors of Salmat Limited. The chairman of the committee is Mr Ian Elliot.
The responsibilities of the committee are as follows:
Review overall remuneration policies and ensure they are in accordance with current best practice.
Determine the remuneration arrangements for the chief executive officer, including his short and long term incentives.
Review and approve the chief executive officer’s recommendations for the other senior executives.
Set and review the performance targets for the chief executive officer. Review and approve the recommended performance targets for other senior executives.
Review succession plans of the chief executive officer and senior executives.
Oversee the Company’s compliance with occupational health and safety legislation.
Oversee the Company’s compliance with ASX Corporate Governance Guidelines on Diversity.
The committee has retained independent advisers to provide information on current best practice (including remuneration levels) for director and executive remuneration. The committee reviews this external remuneration advice in the light of the various individuals’ performance. The chief executive officer attends committee meetings to review and recommend remuneration levels for other senior staff.
Non‑executive director remuneration
The remuneration policy for non‑executive directors is designed to remunerate them at market levels for their time, commitment and responsibilities. The Company is cognisant that it needs to attract and retain well qualified and experienced directors. In the light of the increased time and legal liability imposed upon directors arising from developments in corporate governance, corporate law and the expectations of shareholders generally, the remuneration and compensation committee uses external advice to set an appropriate level of external director fees.
Non‑executive directors are paid a director’s fee and prior to the legislative changes around share based payments introduced in July 2009 participated in a deferred share scheme benefit which vested after serving at least five years as a non‑executive director of the Company. The non‑executive directors do not receive any retirement or performance related benefits.
Non‑executive directors’ fees are reviewed annually in June.
The remuneration details of the board for the financial year are as follows:
The Chairman received $257,816.
Each of the five other non‑executive directors received $133,765.
All director’s fees are inclusive of superannuation entitlements.
The board has increased the fees for the chairman and non‑executive directors by 3% effective 1st July 2012.
In 2009, shareholders resolved that the aggregate maximum amount payable to non‑executive directors would be $1.2 million per annum.
Senior executive remuneration
The remuneration packages of the chief executive officer and executives are constructed to deliver performance and commitment to the Company whilst being in line with market for the relevant positions.
Each of these packages include the following:
A fixed component, which may be allocated to cash, benefits (on a fully absorbed cost to Company basis) or superannuation.
An amount is also allocated to short‑term incentives (STIs) based on key performance indicators (KPIs) set for the financial year. The KPIs comprise various measurable goals. The percentage allocated to this component varies according to the relevant position. STI’s are generally linked to financial and strategic outcomes aligned with shareholder returns. These are agreed between the executive and their manager to ensure they are in line with the business targets and goals for the period under review.
A long term incentive (LTI) component via deferred shares and performance rights, as noted below, is another element considered on an annual basis. The LTI grant is to encourage Company growth along with retention of key executives.
The terms of the LTI are as follows:
All LTI shares do not vest for three years from issue;
50% of the shares are subject to achieving a total shareholder return in excess of the small industrials index for a three year period; and
50% of the shares are subject to achieving an earnings per share (“EPS”) target set by the board.
In designing the STIs and LTIs, a link is established between the individual’s performance and the Company’s goals. In the case of STIs, the key performance indicators (KPIs) on which they are measured are set to encourage achievement of the company’s budget and corporate goals. It would be usual for 50% of the KPIs to be based on financial targets over which individuals have influence. The remaining 50% concentrates on the achievement of goals which impact the company’s performance and reputation in different ways such as safety and culture related initiatives which drive productivity. In the case of the LTIs, the performance measures set are aligned to the risks to which shareholders are exposed, namely total shareholder return and earnings per share. A new measure introduced in 2012/13, discussed later in this report, also introduces the achievement of company goals.
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Financial statements
Consolidated
Notes 2012
$’000 2011
$’000
Revenue from continuing operations 3 823,879 863,922
Employee benefits expense (398,214) (435,324)
Depreciation and amortisation expense 4 (35,235) (33,024)
Freight, distribution and communication expense (155,041) (142,070)
Materials usage (52,032) (58,901)
Property related expenses (34,609) (39,259)
Equipment related costs (44,329) (45,109)
Other expenses from ordinary activities (39,181) (41,779)
Finance costs 4 (21,396) (17,758)
Share of net loss of associates and joint ventures accounted for using the equity method 38 (1,866) (183)
Profit before income tax 41,976 50,515
Income tax expense 5 (11,628) (14,561)
Profit for the year 30,348 35,954
Cents Cents
Earnings per share for profit from continuing operations attributable
to the ordinary equity holders of the parent entity:
Basic earnings per share 41 19.2 22.7
Diluted earnings per share 41 19.0 22.5
The above income statement should be read in conjunction with the accompanying notes....
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