Monday 24 October 2016

Aryzta bosses awarded €8m of shares as bonus scheme pays out

Questions raised over remuneration, communications and corporate governance issues

Published 11/10/2015 | 02:30

Aryzta's chief executive Owen Killian
Aryzta's chief executive Owen Killian

Aryzta chief Owen Killian and his close-knit executive team reaped the benefits of an €8m share-based bonus payout last year. The baked-goods company's share price slumped by a third during its last financial year.

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Investors have raised questions about Aryzta's corporate governance, investor relations and the company's extremely lucrative bonus schemes.

French bank Societe Generale said - in a note to investors - that it was "hard to imagine that investor sentiment could get much worse on Aryzta".

It added that the company would "no longer be given the benefit of the doubt" and needed to prove "that Aryzta is run for the benefit of its shareholders".

Aryzta's recently issued annual report shows that Killian and his three most senior executives exercised 173,359 shares awarded under the company's 'Executive Management Matching Plan' in its 2015 fiscal year, ending July 31, 2015.

Aryzta shares closed at €46.50 on the Irish Stock Exchange that day, valuing the award at about €8m.

Killian picked up the largest windfall, exercising 66,676 shares worth €3.1m at the end of July.

Chief financial officer Patrick McEniff bagged 53,341 shares worth about €2.5m on the same date.

General counsel Pat Morrissey and Americas CEO Pat Yamin both got 26,671 shares, worth around €1.2m each.

Aryzta's weaker-than-expected performance meant that the executives did not receive the full amount achievable under the complex bonus scheme. They missed out on a payout of a further 216,641 shares, worth around €12.2m, altogether because they failed to reach certain performance criteria.

Killian and his executive team also look certain to miss out on a potentially huge payout under another long-term bonus scheme. The four executives were conditionally awarded 980,000 shares during the 2015 financial year as part of its 'Executive Management Option Equivalent Plan'.

However, these shares carried an exercise price of €67.11 - so the executives would only have benefited from any upside between the exercise and actual share price. They ended up missing out on the bonus completely, because the company failed to reach performance targets.

"The possibility of these awards becoming eligible to vest is considered remote," said the annual report.

However, 1,460,000 shares in the same bonus plan did vest during the year, carrying an exercise price of around €36. Based on the difference between this price and Aryzta's closing price last Friday (€42.63), Killian and his team are sitting on paper profits of €9.7m on these shares.

The executives did not receive a cash bonus in 2015, compared to the cash bonus of €3,234,000 they received in 2014, where €1,277,000 went to Owen Killian alone.

Aryzta was created in 2008 when the Irish Agricultural Wholesale Society (IAWS) group merged with Swiss-based Hiestand. The IAWS boss - Roscommon man Owen Killian - became the chief executive of the new entity and remains in charge today.

He is one of Ireland's highest-paid company bosses. Between 2009 and the end of 2014, Aryzta's share price sustained a more or less untrammelled upward trend as the business continued to expand through acquisitions. Now the Zurich-headquartered company is facing the most sustained share price drop in its history.

Analysts have questioned the company's recent decision to plough €446.6m into a 49pc stake in high-end French frozen retailer Picard. The deal followed on from Aryzta cutting its stake in agri-services group Origin Enterprises.

Detailed questions about remuneration submitted to Aryzta last Tuesday were dismissed as being "sensationalist" and "ridiculous" and were not answered.

Sunday Indo Business

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