Kathmandu increases CEO incentive targets, citing company's weak performance

Thursday 19th November 2015

Kathmandu Holdings' board increased the compound annual earnings-per-share growth target for its chief executive's incentive scheme to a minumum of 17.5 percent at its annual meeting today, following unhappiness from shareholders about the scheme's initial, more generous settings.

The board released its initial proposed targets for new chief executive Xavier Simonet in mid-October, with his bonus to be dependent on both total shareholder return and earnings-per-share growth.

The total bonus available is $606,667 (A$546,000), 70 percent of Simonet's salary, with earnings-per-share growth the basis for 50 percent of this. The board's initial proposal was that if the company had a compound annual growth rate of 15 percent over a three-year period, Simonet would get 100 percent of the EPS-dependent bonus - just over $300,000. If growth was 10 percent, Simonet would get 50 percent of the EPS bonus; less than 10 percent, and he would get none.

On Monday, the board said it would exercise discretion and set the EPS growth target higher, "as FY2015 is an unusually low measurement base because of the under-performance of the company." This came after opposition from some shareholders that the targets were too low, given they would be measured against last year's low profit.

Now, Simonet's EPS bonus will not kick in unless the company sees earnings-per-share growth of at least 17.5 percent, at which point Simonet would get 50 percent. In order to get 100 percent of that bonus, the company's earnings-per-share growth would need to reach 22.5 percent.

Kathmandu, the outdoor clothing and equipment chain, posted a 2015 profit of $20.4 million, down from $42.2 million in 2014, and $44.2 million in 2013. It has forecast 2016 profit of $30.2 million.

The company's shares dropped 0.6 percent to $1.57 and have shed 27 percent so far this year.

BusinessDesk.co.nz

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