Remuneration Committee Chairman's Letter

Dear shareholder

On behalf of the Board, I am pleased to present Consort Medical's FY2017 Directors' Remuneration Report.

This report details the remuneration outcomes in respect of FY2017 and outlines how we intend to apply the remuneration policy in FY2018.

FY2017 incentive outcomes

The business continued to deliver underlying growth during FY2017 and made progress towards certain key strategic priorities. Further details are set out in the Strategic Report. Profit before tax and special items increased by 10.4% to £35.6m. Taking into account performance against targets at the start of the year, the Committee determined that the annual incentive scheme for the CEO would pay-out at 79% of maximum. As Paul Hayes was appointed at the start of FY2018 he will not receive a bonus for FY2017.

Over the last three years, the Company has delivered sizeable returns for shareholders and the Company's TSR has significantly outperformed the FTSE SmallCap over the period. This has been delivered alongside strong financial performance, with EPS growth of 36% over the last three years. Although the performance period for the 2014 share awards is not yet complete at the time of writing, the current expectation is that this award will vest in full.

Taking into account the sustained strong company and share price performance, the Committee is confident that these outcomes are fully justified.

Board changes during FY2017

After four years of service, Richard Cotton left Consort Medical during the year.

In line with best practice, all of Richard Cotton's outstanding share awards, including his deferred bonus awards, lapsed on his departure from the Company. He also did not receive any additional termination payments and he was not eligible for a bonus for FY2017.

Paul Hayes joined the Company as CFO on 1 May 2017. His salary will be £320,000, which reflects his experience as a CFO, and his proven track record of delivering profitable growth and leading commercial, well controlled finance functions. His incentive opportunities are consistent with his predecessor.

Approach for the coming year

In last year's remuneration report we set out certain changes which were made in response to shareholder feedback. It was pleasing to see that this approach subsequently received strong support from our shareholders at the 2016 AGM.

The overall remuneration structure continues to provide an effective link between pay, performance and the experience of shareholders. The Committee has therefore concluded that no major changes are proposed for the coming year.

The key points to note in respect of the pay arrangements for the coming year are:

  • The CEO's salary will be increased by 2.5% in line with employees in the wider organisation
  • Maximum incentive opportunities for the annual and long-term incentives will remain unchanged
  • The 2017 awards under the Performance Share Plan will continue to be based on TSR and EPS

The Company's Directors' Remuneration Policy was last approved by shareholders at the 2015 AGM, and is therefore next due for renewal in 2018.

Over the coming year, the Committee will consider whether changes are required as part of the new 2018 policy. The Committee is mindful of evolving market and best practice and intends to take these into account as part of the review. This review will include consideration of alternative incentive structures which have been debated by many stakeholders over recent months. Ultimately, the policy will need to be aligned with both the needs of the business and shareholders' interests.

The Committee will seek to appropriately consult with shareholders regarding any changes which are subsequently proposed.

I trust you will find this report informative and I look forward to receiving your support.

DR WILLIAM JENKINS
Chairman of the Remuneration Committee