Archive | Sanford

2 listed companies introduce quite different CEO incentive plans

2 NZX-listed companies, Sanford Ltd & Restaurant Brands NZ Ltd, introduced the latest in executive incentive plans yesterday.

The 2 schemes are markedly different from each other. Sanford’s matches earnings against the cost of capital while Restaurant Brands’ has a share price target.

The Sanford scheme looks long-termish (5 years), but the company hasn’t mentioned what happens after the first payout period. The Restaurant Brands scheme gives the chief executive 3 years to achieve the target, with a big one-off prize for success – not really a long-term incentive, although it might take him some time to ramp the share price up through better operations.

The Sanford long-term incentive plan is based on lifting the underlying operating profit to a set percentage of the company’s weighted average cost of capital. In contrast, the typical property sector incentive of the past (and for some, present) was based on lifting gross assets.

This new scheme works in shareholders’ interests by raising profit over costs, whereas the property sector scheme had no relationship to shareholder interests.

Sanford chairman Jeff Todd said the objective of the incentive plan for its chief executive, Volker Kuntzsch, was to offer performance share rights for progressively improving Sanford’s underlying operating profit to a level approximating 130% of its weighted average cost of capital over a 5-year period.

To start the scheme, Sanford has granted Mr Kuntzsch 53,097 performance share rights, each entitling him to one ordinary share in Sanford on exercise. For him to exercise these rights:

  • Sanford’s average return on funds for the 2014, 2015 & 2016 financial years must achieve certain predetermined levels in relation to the 5-year objective, and
  • Mr Kuntzsch must remain employed by Sanford for 3 years.

Mr Kuntzsch won’t have to pay anything when these shares are allotted to him. Mr Todd said the benefits provided under the plan were capped at 30% of Mr Kuntzsch’s fixed annual remuneration, which was set at market levels.

The other novelty is that, whereas most executive share schemes pay out with dilutive newly issued shares, Sanford will establish a trust which will acquire shares on market to meet the share obligations under the plan.

Mr Todd said Mr Kuntzsch had agreed that, following exercise of the performance share rights and for so long as he remained employed by Sanford, he would only sell the number of shares necessary to satisfy his tax obligations on exercise of the performance share rights, unless the board of directors specifically agreed otherwise.

Restaurant Brands’ board announced its incentive scheme for chief executive Russel Creedy after completing a review of his remuneration package.

Under the terms of the scheme if, in the 2-year period starting on 25 July 2015, Restaurant Brands’ closing share price is at or exceeds $4 for 40 consecutive trading days, Mr Creedy will be paid a one-off $1 million net cash bonus. He has to stay for the next 6 months to get it.

The share price hasn’t been anywhere near $4 lately. Back at the end of July 2012 it was at $2.12, and in May last year it went over $3. Since then it’s meandered in a 65c range, hitting $3.34 in June, dropping back to $3.14 last Friday. Today it picked up 6c to $3.20.

There are enough sub-clauses in the Restaurant Brands plan to make a payout – or non-payout – contentious enough for the company & its No 1 employee to spend the $1 million arguing over what should be taken into account.

Mr Creedy will be entitled to payment of the bonus if a full takeover offer (or analogous transaction) is successful at or above $4/share during the 2-year assessment period, but again, he has to stay on for the next 6 months (subject to certain exceptions).

The board may exclude or adjust closing share prices if it considers it necessary to “fairly & equitably address any exceptional or unusual circumstances”. In addition, the board must make any adjustments to the scheme which it considers necessary to fairly & equitably take into account certain corporate actions such as variations to Restaurant Brands’ share capital and material business acquisitions or sales.

Attribution: Company releases.

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Research project to transform mussel farming

Published 16 November 2012

Sanford Ltd said a research project announced in Nelson yesterday would bring a fundamental change to the value of the mussel industry. Sanford will be the commercial partner behind a $26 million, 7-year innovation contract to selectively breed greenshell mussels for the first time.

The contract between the Ministry for Primary Industries and Shellfish Production & Technology NZ Ltd (SPATnz) includes commercial partner Sanford and research partners the Cawthron Institute and Plant & Food Research. The commercial & public investments in the research will be $13 million from each side.

The first marine farms were established in the 1970s and Sanford is in its second year of an export push into China, which has grown by 30%.

Sanford managing director Eric Barratt said farmed mussels had been grown from wild spat. Commercialising techniques to selectively breed & grow spat for their taste & size profiles would transform the market.

Construction will start in Nelson early next year on a hatchery building, nursing building & 3 ponds, each about 1500m². The first significant quantities of commercially bred mussels are planned for 2015.

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Attribution: Company release, story written by Bob Dey for the Bob Dey Property Report.

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Sanford agrees $137 million purchase of Simunovich

Sanford Ltd reached agreement with Simunovich Fisheries Ltd today to buy most of Simunovich’s fishing assets, comprising fishing & scampi quota, vessels, equipment, workshop facilities & other operational assets, for $137 million.Acquisition of some of the quota is subject to Fisheries Act approvals & Commerce Act clearance, which Sanford will seek next week.Those assets able to be transferred legally on 1 October will be settled immediately in cash. Financial settlement for the remaining fishing assets will be made progressively by further cash payments. In the meantime, Sanford will be able to fish the annual catch entitlement from these remaining fishing assets during the 2004-05 year.


Earlier story:


22 September 2004: Sanford buys Simunovich, invests in China

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Sanford buys Simunovich, invests in China

Sanford Ltd said today it was in the closing stages of arrangements to buy most of the fishing assets of Auckland-based fishing company Simunovich Fisheries Ltd.


In a 2nd announcement today, Sanford said it was investing in a Korean-owned Chinese fish-processing business.


Sanford managing director Eric Barrattt said the Simunovich assets being bought included fishing & scampi quota, vessels, equipment, workshop facilities & other operational assets. Staff associated with these & other assets will be offered ongoing employment in similar positions within Sanford, but Mr Barratt said some senior positions would be lost.He expected the purchase would be completed & be effective from the new fishing year starting on 1 October, and said it would prove highly complementary to a broad range of Sanford’s existing activities.The purchase doesn’t include Simunovich’s Market Place processing facility, but processing staff there will be offered continuing employment at the Sanford plant in nearby Jellicoe St. Sanford will consider options to use the Simunovich facility under a possible lease or use arrangement.


Simunovich Fisheries is a privately owned fishing company established in 1960. It’s been at the forefront of the development of scampi fishing in New Zealand. Sanford is New Zealand’s only listed fishing company.


Chinese investment


In his 2nd announcement, on the Chinese investment, Mr Barratt said Sanford had concluded a 25% investment in a wholly foreign-owned seafood-processing company, Weihai Dong Won Foods Ltd (WDWF), based in Weihai in the north-east of Shandong province.


It’s majority-owned by Dong Won Fisheries Co Ltd of Korea, but has other Korean shareholder. The Sanford investment is part of an increase in the company’s capital, for expansion purposes, from $US5 million to $US7.2 million.Mr Barratt said the investment was part of Sanford’s long-term strategic goals of securing the full benefits through a limited seafood supply chain to high-value worldwide seafood customers.Weihai Dong Won Foods was established in 1998 to meet increased demand for new seafood products in Japan & elsewhere. Some of its products come from New Zealand. It processes seafood into more highly valued finished products which are then exported.Sanford & Dong Won operate the San Won Ltd cold storage business in Timaru which has a sister-city relationship with Weihai. Sanford also charters 3 Dong Won fishing vessels in New Zealand.


Company websites: Simunovich


Sanford


Dong Won

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