The following report summarises how the remuneration policy was applied in FY2017 and how the Committee intends to apply the policy for FY2018. The report will be subject to an advisory vote at the AGM in September 2017.
How the Remuneration Policy was implemented for Executive Directors in FY2017
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 FY2016 and FY2017 financial years:
- These awards are due to vest in June 2017. The shares estimated to vest have been valued based on the latest vesting forecasts and using the average share price during the final quarter of the financial year of £10.21. Richard Cotton's award lapsed in full following his departure and therefore a nil value is shown.
- Valued using the share price on the date of vesting of £9.95.
- Richard Cotton left the Company on 13 December 2016 and therefore the amounts for FY2017 have been pro-rated to reflect the period he was employed by the Company.
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 2016, salaries for Mr Glenn (CEO) and Mr Cotton (CFO until December 2016) were £484,260 and £314,675 respectively.
Benefits include a car allowance, life assurance, private medical insurance and personal health insurance. The CEO also received a fuel card.
The following section summarises the annual bonuses paid to the CEO based on performance delivered in FY2017. Due to his departure from the Company in December 2016, the CFO was not eligible for a bonus in FY2017.
The annual bonus opportunity for the CEO is split between cash and deferred shares, as set out in the table below.
|Cash element – |
maximum opportunity (% of salary)
|Deferred share element – maximum opportunity (% of salary)|
For 80% of the cash element of the annual bonus, the payout is based on the Company's Profit Before Tax ("PBT") performance during the financial year. The remaining 20% of the cash element and 100% of the deferred share element depend 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 must be achieved before shares are awarded.
|Profit before tax||Below £31.5m||£31.5m||Below £35m||Above £35m|
|Maximum deferred shares vesting|
(based on achievement of strategic targets)
shares may be awarded
up to 7%
up to 29%
up to 50%
This combination of financial performance and personal performance ensures that the overall level of bonus paid is appropriate and reflective of the Company's performance during the year.
The table below shows the PBT performance required in FY2017 for 80% of the cash element
|25% vests||80% vests||100% vests||FY2017 |
|Level of vesting – |
80% of cash element
(% of max)
|Profit before tax||£31.5m||£35.0m||£36.8m||£35.6m||86% of element|
As the PBT outcome exceeded £35m, a maximum up to 50% of salary could be awarded to the CEO for the deferred share element.
For FY2017, the factors considered when assessing performance against objectives set for the CEO at the start of the year included the following:
- EBIT margin improvement – the Group delivered improved EBIT margin in Aesica in line with guidance to shareholders (to reach at least 10% within two years)
- Launch of generic Advair - good progress has been made during the year to facilitate a successful launch of generic asthma treatments by Mylan (a global pharmaceutical company)
- Nicovations Voke device – despite progress made by the Company, British American Tobacco opted to terminate the agreement during the year
- People and development – excellent progress has been made on implementing succession plans for senior roles across the business and a number of key appointments have now been made to business critical roles
- Integration – the business continues to make strides towards further delivery of joint opportunities for drug device combinations between the Bespak and Aesica divisions
- Overall financial performance – despite challenging headwinds, the business delivered another strong year of financial results with outperformance of consensus forecasts
Taking into account the above factors, the Committee determined that the personal portion of the cash element and the deferred share element should each pay out at 70% of maximum.
The total bonuses awarded to the CEO was therefore as follows:
|Deferred share element |
(deferred until June 2020)
|CEO||569 (79% of max)||400||169|
LTIP Awards – 2014 Awards vesting based on Performance to FY2017
Long Term Incentive Plan ("LTIP") awards granted in 2014 were subject to Earnings Per Share ("EPS") performance (50% of the award) and Total Shareholder Return ("TSR") compared to the FTSE SmallCap excluding investment trusts and finance, property and insurance companies (50% of the award) in line with the following performance schedule:
(% 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||100%|
|EPS (aggregate over the three year performance period)1||Vesting|
(% of element)
|Less than 142.4p||0%|
- Adjusted to reflect the acquisition of Aesica. For full details see the FY2015 Annual Remuneration Report.
Cumulative EPS performance delivered over the period was 170.5p, 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 19 June 2017, the final level of vesting has not yet been determined. However, based on annualised TSR performance to date of c.14% p.a., the TSR element is also expected to vest in full.
Although this award is currently expected to vest in full, this 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 the three month average share price during the final quarter of the financial year (£10.21).
Share Awards Granted During FY2017
The table below sets out details of the share awards made to the executive directors during FY2017. Details of these awards were set out in last year's Annual Remuneration Report.
| || || ||Face value2,3||Performance period|
|Type of award1||Date of grant||(£000)||(% of salary)||TSR||EPS|
|Jonathan Glenn||PSP4||21 June 2016||472||100%||21 June 2016|
to 19 June 2019
|1 May 2016|
to 30 April 2019
|Deferred shares5||21 June 2016||177||38%||n/a||n/a|
(all awards lapsed on departure)6
|PSP4||21 June 2016||307||100%||21 June 2016|
to 19 June 2019
|1 May 2016|
to 30 April 2019
|Deferred shares5||21 June 2016||80||26%||n/a||n/a|
- All awards are granted in the form of nil cost options.
- Details of the number of shares granted are set out on page 60. 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 £9.74 (16 June (£9.41), 17 June (£9.87) and 20 June (£9.95)).
- PSP awards will vest in June 2019 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 2019.
- Richard Cotton's awards lapsed following his departure from the Company in December 2016.
How the Remuneration Policy will be applied to Executive Directors in FY2018 (unaudited)
Salary and Benefits
It is expected that with effect from 1 August 2017, the CEO's salary will be increased by 2.5%, which is in line with the increases awarded to other employees within the Group. His salary will therefore be £496,350. The salary for the new CFO will be £320,000.
Benefits for FY2018 will remain unchanged.
The maximum opportunities (as a percentage of base salary) for the executive directors are 150% for the CEO (unchanged from FY2017) and 110% of salary for the newly appointed CFO (in line with the maximum for the previous CFO). These awards will be split between the cash element and the deferred share element as follows:
- For the cash portion of the bonus, 80% will continue to be based on underlying PBT (before special items) and 20% will be based on the Committee's assessment of success against personal strategic objectives. Awards under the deferred share element will continue to be subject to the Committee's assessment of performance against the Group's strategic goals, but subject to the achievement of underlying PBT (before special items) performance hurdles.
- 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 when taken together, the cash and deferred elements strengthen the alignment between shareholders' and executive directors' interests, and encourage a longer-term focus on shareholder value, by requiring a three-year deferral of a portion of the annual bonus which is payable in shares.
Note: The performance targets for the FY2018 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%).
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||Vesting |
(% 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 2017 awards are:
|Cumulative EPS between 1 May 2017 to 30 April 2020||Vesting |
(% 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, the Committee has determined that from FY2016, variable incentives will be subject to malus and clawback provisions, as described in the Policy Report.
Departure of Richard Cotton and Appointment of Paul Hayes
Richard Cotton ceased to be a director and employee in December 2016. He received salary and benefits up to this date. As noted above he did not receive an annual bonus in respect of the year ending 30 April 2017, and all outstanding share awards (deferred bonus and long-term incentives) lapsed in full on his departure from the Company. He did not receive any additional termination payments.
Paul Hayes was appointed as CFO with effect from 1 May 2017. His salary was set on appointment at £320,000 and he will not be eligible for a salary increase on 1 August 2017. He receives a pension allowance equivalent to 17.5% of salary (in line with the previous incumbent).
Paul Hayes will participate in the FY2018 annual bonus plan (maximum 110% of salary) and PSP (maximum 100% of salary), in line with the potential for the previous CFO. No share awards or buyouts were made to him on his appointment to the Company.
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 2017 were £25,833.
Statement of Directors' Shareholding 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) 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.
|Number of shares counting towards shareholding guidelines (as at 30 April)||Value of shares counting |
towards shareholding guidelines1
|Jonathan Glenn1||151,167||£1,572,136||200% of base salary|
|324% of salary|
|Richard Cotton2||51,315||£504,426||100% of base salary|
|160% of salary|
- Calculated based on the share price on 30 April 2017 of £10.40.
- Calculated as at 13 December 2016, the date Richard Cotton ceased to be a director of the Company. The share price on this date was £9.83.
The beneficial interests of the executive directors on 30 April 2017 (including beneficial interests of their spouses, civil partners, children and stepchildren) 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.
- As at 13 December 2016, the date Richard Cotton ceased to be a Director of the Company and all unvested long-term incentive and deferred bonus shares lapsed in full.
Between 30 April 2017 and 14 June 2017 Jonathan Glenn acquired 29 partnership shares 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 |
|Total Plan |
Shares held at 30/04/17²
|Market Price |
at date of
|19-Jun-2013||66,928||–||(66,928)||–||–||7.85||Jun 16||Jul 16|
|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 25|
|21-Jun-2016||48,491||–||–||48,491||9.74||Jun 19||Jun 26|
|Deferred Bonus Plan|
|19-Jun-2013||29,892||–||(29,982)||–||–||7.85||Jun 16||Jul 16|
|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|
|19-Jun-2013||43,468||–||(43,468)||–||–||7.85||Jun 16||Jul 16|
|20-Jun-2014||36,871||–||–||(36,871)||–||8.97||Jun 17||Jul 17|
|10-Jun-20154||32,043||–||–||(32,043)||–||9.26||Jun 18||Jun 25|
|21-Jun-2016||31,509||–||(31,509)||–||9.74||Jun 19||Jun 26|
|Deferred Bonus Plan||19-Jun-2013||11,685||–||(11,685)||–||–||7.85||Jun 16||Jul 16|
|20-Jun-2014||7,320||–||–||(7,320)||–||8.97||Jun 17||Jul 17|
|19-Jun-2015||10,272||–||–||(10,272)||–||9.26||Jun 18||Jul 18|
|21-Jun-2016||8,201||–||(8,201)||–||9.74||Jun 19||Jul 19|
- 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 2017.
- 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 2017, there were 298,888 shares in the Company's share ownership trust (2016: 301,521).
Further disclosures – in line with the relevant regulations, the following information is unaudited
Change in Remuneration of the CEO between FY2016 and FY2017
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 FY2016 and FY2017 on a consistent basis.
|% change |
|% change |
|% change in annual bonus|
|All Group employees||2.7%||2.0%||(11.4%)|
- The actual annual increase given in FY2017 was 2.5% (which moved the base salary from £472,450 to £484,260 as disclosed in FY2016 Annual Remuneration Report), which was in line with the average for the rest of the Group's employees for FY2017.
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, whilst 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 (£'000's)||733||872||1,041||1,861||1,619||1,910||1,816||1,777|
|Annual bonus payout (% of maximum)||100%||79%||96%||83%||67%||98%||82%||79%|
|LTIP vesting (% of maximum)||0%||0%||0%||100%||100%||92%||100%||100%|
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 FY2017 and FY2016.
Total employee pay includes wages and salaries, social security costs, pension costs and share-based payments for employees in continuing operations. Further details are provided in note 4 to the accounts.
During FY2016, distributions to shareholders included a dividend of £5,702,989.60 paid on 23 October 2015 and £3,295,944.61 paid on 12 February 2016. For FY2017, distributions to shareholders included an aggregate dividend of £6,142,407.96 paid on 21 October 2016 and £3,467,701.49 paid on 17 February 2017. It is proposed that a dividend of 13.21p per share be paid on 27 October 2017. Further details are provided in note 12.
PBT before special items has been shown in the table above as it forms the basis on which the cash portion of the bonus is calculated.
Remuneration of non-executive directors (audited)
Fees Paid to Non-executive Directors in FY2017
The following table sets out the single figure of remuneration for non-executive directors for FY2016 and FY2017:
|Fees paid in |
|Fees paid in|
|Dr Peter Fellner (Chairman)||130,000||130,000|
|Dr William Jenkins||53,500||53,500|
|Dr Andrew Hosty||38,500||38,500|
The fees for the Chairman and non-executive directors were last increased effective 1 May 2013. Following a recent review of fees, it was decided that with effect from 1 July 2017 the basic fee for the Chairman will be increased to £140,000 and the basic fee for non-executive directors will be increased to £42,000.
Shares held by non-executive directors at 30 April 2017 (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 2017 (including the benefits interests of their spouses, civil partners, children and stepchildren) in the ordinary shares of the Company are shown below:
|Shares owned outright at |
30 April 2017
|Shares owned outright at|
30 April 2016
|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 2017 and 14 June 2017.
None of the directors had a material interest at any time during FY2017 in any contract of significance, other than a service contract, with the Company or any of its subsidiaries.
Non-executive Director Letters of Appointment (unaudited)
The following table provides details of the non-executive directors' service contracts:
|Name||Effective date of appointment||Expiry of appointment|
|Dr Peter Fellner||14 November 2005||14 November 2017|
|Dr William Jenkins||6 May 2009||5 May 2018|
|Steve Crummett||13 June 2012||12 June 2018|
|Ian Nicholson||13 June 2012||12 June 2018|
|Dr Andrew Hosty||14 July 2014||13 July 2017|
|Charlotta Ginman||11 February 2015||10 February 2018|
The Remuneration Committee
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 the 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 LTIP award vesting and consideration of LTIP performance criteria
- Granting of share awards and setting performance targets for awards
- Corporate Governance updates
- Committee terms of reference and
- Directors' Remuneration Report
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)|
|Dr Andrew Hosty||Member (since 14 July 2014)|
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 has 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 partner and 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 £18,500.
The Committee also received advice in relation to its share schemes from the Company's lawyers, Eversheds Sutherlands LLP and Ashurst LLP.
The table below sets out the results of the most recent votes on the Remuneration Policy and Annual Remuneration Report:
3 September 2015)
7 September 2016)
|Votes in favour||38,315,706||94.93||39,757,973||99.58|
The Committee was pleased that changes made in relation to bonus target disclosure and the operation of the TSR performance measure during FY2016 were received positively by shareholders, as demonstrated by the improved voting outcome for the Annual Remuneration Report at the 2016 AGM.
The Annual Remuneration Report was approved by the Board and signed on its behalf.
DR WILLIAM JENKINS
Chairman of the Remuneration Committee
14 June 2017