Huge reward for CEO as FTSE 250 company grows threefold

His company has grown spectacularly since the pandemic, but does the boss of this business deserve such a generous pay deal? A FTSE 100 dividend stock also hosts shareholders soon.

Running the Mr Kipling business Premier Foods (LSE:PFD) is to become more lucrative after the FTSE 250 company revealed a “material” increase in potential incentive payments.

Chief executive Alex Whitehouse got the maximum £2.45 million in 2022/23, but a new remuneration policy tabled before this month’s AGM, reveals his bonus opportunity is going from 125% to 150% of salary and long-term incentives from 150% to 200%.

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The company’s remuneration committee admits the changes are significant but points out that Premier’s £1 billion market capitalisation is three times the level seen at the last policy review in 2020/21, and that rewards had fallen behind the market norm.

United Utilities

When: 11am, Friday 21 July.

Where: The Food Hall Building, Lingley Mere Business Park, Lingley Green Avenue, Great Sankey, Warrington WA5 3LP.

How to participate: The meeting is being held for the first time at the group’s main offices in Warrington. As very few shareholders used the virtual links for the last two meetings, United Utilities Group Class A (LSE:UU.) is reverting to an in-person AGM in a move that reduces both the complexity and cost associated with running a hybrid meeting. Responses to questions received before the close of business on Monday 10 July will be made by the following Monday, ahead of the proxy voting deadline of 11am, Wednesday 19 July. More AGM details can be found here.

Who’s in the chair? David Higgins, the former chief executive of Network Rail, the Olympic Delivery Authority and English Partnerships, was appointed in May 2019.

How did the company do in the year to 31 March? Lower consumption resulted in a 2.1% fall in revenues to £1.82 billion, while the impact of inflationary increases in electricity and chemicals also contributed to a 27.7% fall in underlying operating profit to £440.8 million. The loss per share was 1.3p compared with an underlying earnings per share of 53.8p the previous year, reflecting the exposure of index-linked debt. A final dividend of 30.34p a share is due to be paid on 1 August, resulting in a 4.6% increase for the year to 45.51p. 

How have shares performed? Down 7% at 1,060p (947.2p on Thursday).

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How much is the boss paid? The salary of Louise Beardmore, who became chief executive on 1 April, has been set 12.7% below that of her predecessor at £690,000. For 2023/24, the maximum bonus opportunity will remain at 130% of base salary with an award of long-term incentive shares worth 130% of salary. At least 30% of the performance-related pay schemes set this year will be based on performance against environmental measures.

How much did the former CEO get? Steve Mogford, who led the business for 12 years, received £2.28 million in 2022/23 compared with £3.2 million the previous year.  This included an annual bonus of £426,000 based on 41.4% of maximum opportunity and the 68.8% vesting of November 2020 incentives which generated an estimated £886,000.

Why was variable pay reduced? Performance-related pay outcomes were cut by around 25% after the executive directors waived eligibility for environmental-based elements. They said this was in recognition of their personal commitment “to a reset across the sector”. This affected the Better Rivers component of the annual bonus, despite all milestones being achieved, and five of the measures in the customer basket component of the long term plan. 

How did last year’s AGM go? The annual remuneration report was backed with 93.94% of votes in favour, while the new three-year remuneration policy got 99.02% support.

What’s happening with the remuneration policy? Recognising Ofwat’s expectation that performance-related pay policies should be aligned with the 2025-2030 price review period, the committee is planning to accelerate its next review of the remuneration policy and to submit this for shareholder approval at the 2024 AGM.

What’s the view of voting agencies? Glass Lewis recommends shareholders vote in favour of the annual remuneration report.

How’s the company doing on diversity? The company is one of the best in the FTSE in terms of women in leadership. On 31 March 44% of the board were female, including in two senior board positions. One member of the board was from a minority ethnic background.

Premier Foods

When: 11am, Thursday 20 July.

Where: Premier House, Centrium Business Park, Griffiths Way, St Albans, Hertfordshire AL1 2RE.

How to participate: A videocast is available but does not enable shareholders to submit votes live at the AGM. The deadline for questions in advance of the meeting is 11am, Monday 17 July with proxy voting instructions due the following day. More AGM details can be found here.

Who’s in the chair? Colin Day, who is the former chief executive of Essentra and chief financial officer of Reckitt Benckiser, was appointed in August 2019.

How did the company do in the year to 1 April? Revenues at the Mr Kipling and Batchelors business rose 11.8% to £1 billion, with adjusted profits 13% higher at £137.2 million and earnings per share up 12.7% at 12.9p. A much stronger balance sheet as the ratio of net debt to adjusted earnings reduced to 1.5 times enabled a 20% increase in the final dividend to 1.44p a share for payment on 28 July.

How have shares performed? Up 6% to 122p (126.1p on Thursday).

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How much is the boss paid? Chief executive Alex Whitehouse’s base salary increased in July by 5% to £535,500. His single figure remuneration for 2022/23 amounted to £2.45 million, which included a maximum annual bonus of £661,407 and the 100% vesting of long-term incentives granted in June and September 2020 worth a total of £1.2 million.

How did last year’s AGM go? The directors’ remuneration report was approved with 99.31% of votes in favour. The last binding vote on the remuneration policy in August 2020 was approved with 96.65% support.

What’s in the new remuneration policy? A strong operational performance over the last three years means a market capitalisation of over £1 billion is more than three times larger than the start of 2020/21 when Premier last reviewed its policy. The CEO’s maximum bonus opportunity is set to increase from 125% to 150% of salary, with long-term incentives going from 150% to 200% of salary. The remuneration committee admits the increases are material but said rewards for executives had fallen behind market practice for the size and scope of its organisation and that the changes are more in line with FTSE 250 norms. 

What’s the view of voting agencies? Glass Lewis recommends shareholders support the annual remuneration report and the binding vote on the new three-year remuneration policy.

How’s the company doing on diversity? The percentage of female directors stood at 36% on 1 April, compared with the 40% threshold that Premier has pledged to have by the end of 2025. None of the four senior posts were held by a woman. The board meets the Parker Review recommendation to have at least one director from an ethnic minority background.

FirstGroup

When: 2.30pm, Friday 21 July.

Where: Queen Elizabeth II Centre, Broad Sanctuary, Westminster, London, SW1P 3EE.

How to participate: This year’s FirstGroup (LSE:FGP) AGM will be held as an in-person meeting. Questions in advance should be sent to companysecretariat@firstgroup.co.uk, with the deadline for proxy voting instructions 2.30pm, Wednesday 19 July. More AGM details can be found here.

Who’s in the chair? David Martin, the former chief executive of Arriva, was appointed in 2019.

How did the company do in the year to 25 March? Growth at First Bus in the second half of the year and the outperformance of open access rail operations resulted in adjusted profit more than doubling to £82.1 million. Earnings per share of 10.6p rose from 1.6p, although the basic figure fell to 11.8p from 60.2p due to the impact of discontinued operations. A final dividend of 2.9p a share is due to be paid on 18 August, with the total for the year of 3.8p up from 1.1p in 2021/22.

How have shares performed? Down 10% at 101.2p (144.8p on Thursday).

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How much is the boss paid? Graham Sutherland, who was appointed in May 2022, received a 3% pay rise in April, taking his base salary to £566,500. Single figure remuneration for his period as chief executive in 2022/23 amounted to £1.19 million, which included cash and deferred shares worth £682,000 based on 94% of the maximum opportunity. Finance boss Ryan Mangold got a total of £3.07 million, including £1.88 million from the 88.4% vesting of long-term incentives granted in September 2020.

How was discretion used? A 10% downward adjustment to Mangold’s long-term incentive outturn was made to reflect the potential for windfall gains in light of Covid disruption and the plans to divest the North American operation. This was despite the remuneration committee saying the formulaic vesting outcome represented “genuine out‐performance” against peers and had been underpinned by strong underlying financial performance.

What about the TransPennine Express (TPE) franchise? The contract loss followed a decline in service levels that FirstGroup said was largely due to circumstances out of its control in the current industrial relations climate. No payments under the annual bonus scheme were made to any participant for operational performance in TPE. Annual bonus targets for 2024 had already been set prior to the Department for Transport’s decision, with these including a full year earnings and cash flow contribution from TPE. The remuneration committee has decided not to revisit the targets, meaning executives will have to recover these earnings elsewhere.

How did last year’s AGM go? The annual remuneration report was approved with 84.16% of votes in favour.

What’s the view of voting agencies? Glass Lewis recommends shareholders vote in favour of the annual remuneration report.

How’s the company doing on diversity? The gender split of the board is unchanged at 44%. One member of the board is from a minority ethnic background.