FREQUENTIS AG Remuneration Report 2023
Remuneration Report 2023
Remuneration of Supervisory Board members | 14 |
Other information and explanations | 16 |
Frequentis AG | ||
Remuneration Report 2023 | Introduction | 3 |
Introduction
Preparation of the remuneration report
This remuneration report covering the remuneration of the members of the Executive Board and Supervisory Board of Frequentis AG (subsequently referred to as "Frequentis" or "the company") was prepared by the company's Executive Board and Supervisory Board in compliance with Sections 78c and 98a of the Austrian Companies Act (AktG) to provide a full overview of the remuneration granted or owed to the members of the Executive Board and Supervisory Board in the 2023 financial year. In addition to the statutory requirements, the structure and content of the remuneration report 2023 are based, in particular, on the opinion issued by the Austrian Financial Reporting and Auditing Committee (AFRAC) on the preparation of remuneration reports in accordance with Section 78c AktG (AFRAC opinion no. 37, December 2020).
The remuneration report was examined by the Committee for Executive Board Issues in its function as remuneration committee and adopted by the Supervisory Board at its meeting on 27 March 2024. The remuneration report will be submitted to the next Annual General Meeting for approval in accordance with Section 78d (1) AktG. Such approval is by nature a recommendation.
At the company's Annual General Meeting on 1 June 2023, the remuneration report for the 2022 financial year was approved by 100% of the valid votes cast. In view of this result, the present remuneration report was prepared using the same system and principles as the remuneration report 2022.
Business performance of the Frequentis Group in the reporting period
In addition to the war in Ukraine, which started in February 2022 and is now entering its third year, Hamas' attack on Israel in October 2023 led to the outbreak of a new war with potentially global consequences. Moreover, there are longer-term crises such as the climate crisis and distortion and price volatility on the energy market. It is possible to talk about a polycrisis, where individual crises have a compound effect.
These crises affect Frequentis' internal and external stakeholders in many different ways. However, the wars had an indirect effect through higher prices, especially for electricity, gas, and fuel. Consequently, prices of other everyday products increased. Overall, inflation therefore rose sharply almost everywhere in the world and was well above the average for previous years in both 2022 and 2023. This resulted in the need to adjust prices for existing and new customer projects.
The inflation-related salary adjustments based on individual and collective salary agreements are reflected in the Frequentis Group's personnel expenses in both 2022 and 2023. Further cost rises are anticipated in 2024.
Order intake in the Frequentis Group was EUR 504.8 million in 2023, an increase of 24.7% (EUR 100.0 million) compared with 2022, when order intake was EUR 404.8 million. The distribution of order intake between the two segments in 2023 was as follows: Air Traffic Management 68% (EUR 345.4 million) compared with 68% in 2022 (EUR 275.4 million), Public Safety & Transport 32% (EUR 159.3 million), compared with 32% in 2022 (EUR 129.4 million).
Frequentis AG | ||||
4 | Introduction | Remuneration Report 2023 | ||
In 2023, revenues increased by 10.8% (EUR 41.5 million) to EUR 427.5 million (2022: EUR 386.0 million). Revenues in the Air Traffic Management segment grew by 13.8% to EUR 293.3 million. In the Public Safety & Transport segment, revenues increased by 4.8% to EUR 133.8 million. The revenue split between the Air Traffic Management and Public Safety & Transport segments was 69% : 31% in 2023 (2022: 67% : 33%).
The cost of materials and purchased services increased by 5.5% to EUR 104.7 million (2022: EUR 99.2 million), which was less than the rise in revenues. Personnel expenses rose 11.8% to EUR 227.9 million (2022: EUR 203.9 million), which was above the rise in revenues. This was attributable to the increase in the headcount, pay rises, which reflected the high inflation rate, and the acquisitions made in 2023.
The other operating expenses increased by 24.1% to EUR 62.4 million (2022: EUR 50.3 million), driven principally by higher travel and advertising expenses, for example for trade shows, the change in project provisions, and increased energy costs. Since the COVID-19 pandemic has subsided, allowing unrestricted travel, and air fares have risen, travel expenses increased by EUR 2.0 million year-on- year to EUR 12.7 million, which was 3.0% of revenues in 2023. In absolute terms, travel expenses were therefore higher than in 2019, before the pandemic, but relative to revenues they were lower than in 2019 (2019: EUR 11.9 million, which was 3.9% of revenues).
EBITDA (earnings before interest, taxes, depreciation, and amortisation) declined to EUR 44.2 million in 2023 (2022: EUR 45.6 million). The EBITDA margin (relative to revenues) was 10.3% in 2023, compared with 11.8% in 2022.
Depreciation and amortisation were almost unchanged at EUR 17.5 million (2022: EUR 17.5 million). No impairment losses were recognised in 2023.
As a result of all the changes outlined above, EBIT increased to EUR 26.6 million in 2023 (2022: EUR 25.0 million). The EBIT margin (relative to revenues) was 6.2%, compared with 6.5% in 2022.
Profit before tax was EUR 26.4 million in 2023 (2022: EUR 24.7 million). Income tax expense was
EUR 6.4 million (2022. EUR 5.9 million), giving a tax rate of 24.4% (2022: 23.7%).
The profit for the period increased to EUR 20.0 million in 2023 (2022: EUR 18.9 million). Basic
earnings per share were EUR 1.39 in 2023 (2022: EUR 1.41) and diluted earnings per share were
EUR 1.38 (2022: EUR 1.41).
Frequentis AG | ||
Remuneration Report 2023 | Remuneration of Executive Board members | 5 |
Remuneration of Executive Board members
Principles of the remuneration policy and remuneration components
The remuneration policy of relevance for the members of the Executive Board of Frequentis AG in the reporting period was adopted by the Annual General Meeting of Frequentis AG on 14 May 2020 on the basis of the proposal submitted by the Supervisory Board and contains the following objectives and principles.
The objective of the remuneration policy is to ensure that the overall remuneration of the members of the Executive Board is commensurate with the company's economic situation, creates incentives for behaviour that encourages sustainable development of the company, and supports the company's business strategy and long-term development. The remuneration policy also takes into account the size of the company, its international focus, the business model of Frequentis AG, and the tasks and qualifications of the Executive Board members.
The remuneration policy is structured to ensure that it is possible to attract and retain suitably qualified persons for the tasks of a listed company with global operations. Therefore, the total remuneration must be competitive and market-oriented, as well as being commensurate with the usual remuneration at comparable companies.
The remuneration is therefore commensurate with the overall responsibility associated with the role of the Executive Board, as well as reflecting the individual responsibility of each Executive Board member as derived from the allocation of functions. Other key factors are length of service with the company and, where relevant, the assumption of the function of spokesperson or chairperson of the Executive Board.
The total remuneration of the members of the Executive Board of Frequentis AG comprises the following components:
- Fixed remuneration components that are not performance-related
- Variable performance components that are dependent on the achievement of specific performance criteria.
Fixed remuneration components
The fixed remuneration comprises a base salary, benefits in kind, other perquisites, and social security and pension contributions.
The base salary is principally intended as remuneration for taking on a position on the Executive Board and the associated overall responsibility of the individual Executive Board members, but also takes into account the individual responsibilities of each member, which are derived from the areas of responsibility allocated to them. This results in differentiated base salaries which reflect their strategic and operational functions. In addition, the level of the annual base salary reflects the customary market rates of remuneration of executive board members at comparable companies. In keeping with common practice in Austria, the base salary is paid retrospectively in fourteen monthly instalments. In addition to overtime and other services that go beyond the normal working hours of salaried employees, it covers the assumption of positions on governance bodies within the Group.
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6 | Remuneration of Executive Board members | Remuneration Report 2023 | ||
In the reporting period, the base salaries of all Executive Board members together totalled EUR 1,225 thousand. This amount was split as follows among the individual Executive Board members:
Base salary | ||
(gross, excluding payroll-related costs) | ||
in EUR thousand (rounded) | 2023 | 2022 |
Norbert Haslacher | ||
(Chairman of the Executive Board) | 405 | 360 |
Monika Haselbacher | ||
(Member of the Executive Board | ||
since 1 January 2023) | 270 | - |
Hermann Mattanovich | 280 | 280 |
Peter Skerlan | 270 | 270 |
Total | 1,225 | 910 |
The benefits in kind and other perquisites granted to the Executive Board members in the reporting period comprised collective accident and death insurance and directors' and officers' liability insurance (D&O insurance). The premiums for these policies are paid by the company. Further, the provision of company cars (including for private use, together with fully comprehensive motor insurance, driver's/passenger insurance), and other incidental benefits such as a mobile phone and communications media and subsidised use of the Frequentis staff restaurant.
The pension benefits are secured by a reinsurance policy and comprise a retirement pension and surviving dependants' pension for the present members of the Executive Board and two former members of the Executive Board. The claims under the reinsurance policy have been pledged to the beneficiaries. In the reporting period, premiums of EUR 200,000.00 were paid for this pension reinsurance.
In the reporting period, pension benefits totalling EUR 123,502.40 (gross, excluding payroll-related costs) were paid to former Executive Board members Sylvia Bardach and Dr. Christian Pegritz (EUR 34,801.20 to Sylvia Bardach and EUR 88,701.20 to Dr. Christian Pegritz). In the reporting period, the company received this amount from the reinsurance taken out in connection with these pension commitments.
Variable remuneration components
The variable remuneration components are incentives to ensure the sustained development of the company and avoid a focus on merely short-term effects. When defining financial and non-financial performance criteria, attention is paid to avoiding enticements to take risks and an excessive focus on short-term profits. Ambitious targets should be set to provide an incentive for exceptional performance and to encourage implementation of the strategy of Frequentis AG. By including non- financial performance criteria, the aim is, in particular, to support the social and strategic alignment of the company. The overriding aim is the positive long-term development of the company. Accordingly, the variable remuneration is divided into short-term and long-term components.
With the approval of the full Supervisory Board, in exceptional circumstances Executive Board members may also be granted special bonus payments (for example, a sign-on bonus in the event of relocation or a retention bonus). The amount of the special bonus must be commensurate with the specific circumstances and may not exceed 50% of the member's (gross) annual base salary.
Frequentis AG | ||
Remuneration Report 2023 | Remuneration of Executive Board members | 7 |
Short-term variable remuneration components
The short-term variable remuneration components are based primarily on the achievement of short- term financial targets for the company.
Achievement of the targets is measured by an indicator of earnings before interest and taxes as stated in the consolidated financial statements in accordance with IFRS (IFRS EBIT), provided that the earnings before tax reported in the financial statements of Frequentis AG in accordance with the Austrian Commercial Code (UGB EBT) after provisions for short-term variable remuneration reach a defined minimum for the relevant financial year. If the UGB EBT after provisions for the short-term variable remuneration of all Executive Board members (including statutory payroll-related costs) drops below the defined minimum amount, the short-term variable remuneration of all Executive Board members will be reduced by the same percentage until the planned minimum UBG EBT is reached. A minimum level is set for the IFRS EBIT. If this is not achieved, the short-term variable remuneration (for this criterion) is not payable. A target achievement range of between 0% and 100% is set for exceeding the minimum target level.
In addition to these financial targets, the short-term variable remuneration for one or more Executive Board members may be based on individually agreed targets. The quantitative performance criterion "IFRS EBIT / UGB EBT" must have a weighting of at least 60%.
Overall, even in the event of over-achievement of all agreed performance targets, the short-term variable remuneration is capped at 100% of the (gross) annual base salary of the respective Executive Board member.
The short-term variable remuneration for a financial year is payable as soon as the basis and amount have been determined by the Committee for Executive Board Issues on the basis of the audited financial statements for the company and the audited consolidated financial statements.
Subject to the adoption of the annual financial statements for 2023 in accordance with Section 96 AktG, the Executive Board members have earned the following entitlements to short-term variable remuneration for the reporting period:
Short-term variable remuneration | ||
(gross, excluding payroll-related costs) | ||
in EUR '000 (rounded) | 20231 | 20222 |
Norbert Haslacher | ||
(Chairman of the Executive Board) | 228.9 | 309.2 |
Monika Haselbacher | ||
(Member of the Executive Board | ||
since 1 January 2023) | 147.1 | - |
Hermann Mattanovich | 152.6 | 205.5 |
Peter Skerlan | 147.1 | 198.2 |
Total | 675.5 | 712.9 |
- Provisions are established for the amounts stated on the basis of the target achievement assumptions for the reporting period.
- The amounts stated are the final entitlement for the relevant financial year and were paid out to the Executive Board members in the reporting period.
Frequentis AG | ||||
8 | Remuneration of Executive Board members | Remuneration Report 2023 | ||
Long-term variable remuneration components (share-based payment)
The company may grant a long-term variable remuneration component, structured as a share-basedLong-Term Incentive Plan (LTIP), to one or more members of the Executive Board on a one-off or repeated basis.
The LTIP is based, in particular, on sustainable, long-term, and multi-year performance criteria, including non-financial criteria. It is not possible to change the performance criteria retrospectively.
An LTIP may be granted at annual or multi-year intervals and must be adopted by a resolution of the General Meeting based on a proposal submitted by the Supervisory Board. The LTIP defines the maximum number of shares that may be allocated to an Executive Board member under the plan. In accordance with C rule no. 27 of the Austrian Code of Corporate Governance, the maximum limit for the amount of the LTIP that may be paid out in the form of shares in the company is set at 200% of the (gross) annual base salary of the respective Executive Board member.
Current LTIPs
Frequentis AG has currently agreed three long-term incentive plans with the Chairman of the Executive Board, Norbert Haslacher (LTIP 2021, LTIP 2022, and LTIP 2023, referred to together as "LTIPs").
The participant in the plans is not required to make a personal investment in Frequentis AG shares. From the grant date, in each calendar year the Chairman of the Executive Board can sell a maximum of one third of the shares awarded under the LTIPs. However, he may only sell the number of shares awarded under the LTIPs if, at all times, he holds at least 7,000 of the shares awarded under a long- term incentive plan ("minimum shareholding").
The service period for the fulfilment of the targets has been set at three years for each LTIP. The targets for the key indicators were set by the Supervisory Board. On the settlement date (at the earliest three years after the grant date), assuming 100% target achievement, a maximum of 17,000 shares (LTIP 2021) or a maximum of 18,000 shares (LTIP 2022 and 2023) - in all cases gross, i.e., before deduction of taxes and fees - but no more than 200% of the beneficiary's annual gross base salary will be granted. Settlement is effected by transferring the number of shares corresponding to the net amount of the award to the CEO's securities account.
The entitlement to the maximum number of shares arises at 100% target achievement. A lower target achievement level will result in a proportionate reduction in the entitlement. No shares will be allocated if target achievement is less than 50%.
Apart from the achievement of the targets, the Executive Board member does not have to provide any consideration for the shares awarded under these programmes.
The following table summarises the main conditions for the share-based payment granted in the reporting period:
Frequentis AG | ||
Remuneration Report 2023 | Remuneration of Executive Board members | 9 |
LTIP 2023 | LTIP 2022 | LTIP 2021 | |
Start of plan | 1 Jan. 2023 | 1 Jan. 2022 | 1 Jan. 2021 |
Date of approval by General Meeting | 1 June 2023 | 2 June 2022 | 20 May 2021 |
Grant date | 1 June 2023 | 2 June 2022 | 15 June 2021 |
End of service period | 31 Dec. 2025 | 31 Dec. 2024 | 31 Dec. 2023 |
Vesting date | 30 Apr. 2026 | 30 Apr. 2025 | 30 Apr. 2024 |
Expected target achievement | 86.5% | 67% | 119% |
Expected no. of shares | 15,570 | 12,060 | 17,000 |
Maximum no. of shares | 18,000 | 18,000 | 17,000 |
Bonus shares allocated | None | None | None |
The agreed targets are measured against the following performance indicators:
LTIP 2023 | LTIP 2022 | LTIP 2021 |
Total shareholder return (TSR) | Total shareholder return (TSR) | Total shareholder return (TSR) |
Orders on hand / book-to-bill ratio | Revenue growth | Increase in operating performance |
through key accounts | ||
Order intake from selected Group | Earnings increase | Growth through new business |
companies | development | |
Increase in operating performance | Employee satisfaction | - |
in the PST segment | ||
Trainee programmes in the areas of - | - | |
sales, project management, and/or | ||
systems engineering |
Of the expected total future expense relating to the LTIPs, the portion already earned as at the reporting date is recognised in shareholders' equity. This is based on the fair value on the grant date. The total expected expense for the LTIP obligation is measured at the fair value of the share relative to the share price on the date of the agreement, multiplied by the number of shares granted and the expected target achievement.
For the LTIP 2021, the LTIP 2022, and the LTIP 2023, it is assumed that both the market-oriented targets and the non-market-oriented targets will be achieved so the effect of the market-oriented targets must be reflected in the expected level of target achievement and not in the fair value of the shares.
The Supervisory Board has decided to modify the peer group used to calculate the total shareholder return for the LTIPs 2021, 2022, and 2023. The background is the de-listing in May 2023 of shares in CS Communication et Systemas AS ("CS"). Since the peer group should still comprise seven companies, CS has been replaced by IVU Traffic Technologies AG. Since OHB SE Group has publicly announced that it is to be de-listed in 2024, the Supervisory Board has decided that for the LTIPs 2022 and 2023, it will be replaced by Fabasoft AG.
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10 | Remuneration of Executive Board members | Remuneration Report 2023 | ||
End of LTIP 2020
The LTIP 2020 agreed by Frequentis AG with the CEO ended on 31 December 2022. The agreed targets for this LTIP were total shareholder return (TSR), orders on hand, order intake from new countries, and inorganic growth through M&A transactions in the performance period (1 January 2020 to 31 December 2022).
In the reporting period, the company's Supervisory Board - represented by the Committee for Executive Board Issues - determined the target achievement for the LTIP 2020 to be 100% overall so under the LTIP 2020 the CEO is entitled to receive 17,000 shares (gross) in Frequentis AG. Taking into account the applicable tax rates, 7,925 shares (net number of shares after taxes) were therefore transferred to the CEO on 8 May 2023 from the company's treasury shares (net theoretical value EUR 235,372.50). The theoretical value of the gross number of shares was EUR 504,900 (based on the opening share price on the Vienna stock exchange on 8 May 2023).
Special bonus payments
No special bonuses were granted in the reporting period.
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Frequentis AG published this content on 09 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 April 2024 10:36:06 UTC.
