1) Old performance rights
The topic of performance rights is fresh in my mind right now having just discussed last years’ 15 million performance rights. I trust I explained them satisfactorily.
http://hotcopper.com.au/threads/ann-quarterly-cashflow-report.2629375/page-26?post_id=16298370
Note the same are mentioned in yesterday’s announcement
http://hotcopper.com.au/threads/ann-quarterly-cashflow-report.2629375/?post_id=16296026
It is mentioned there that the 15 million performance rights have a minimum vesting period of Aug 20 2017.
Here is an explanation of vesting period
http://www.investopedia.com/terms/v/vesting.asp
Excerpts – “To entice this valued employee to remain with the company for the next five years, the stock vests according to the following schedule: 25 units in the second year after the bonus, 25 units in year three, 25 units in year four and 25 units in year five. If the employee leaves the company after year three, only 50 units would be vested while the other 50 are forfeited.”
To the best of my knowledge (I’m not fully sure and we will see in time), I think it means that if an employee leaves before the performance rights vest, then they forfeit the rights. This might mean that Michael Brady has forfeited his 2 million performance rights and any rights that directors are also receiving now would be subject to similar terms. Like I said earlier, I’m not 100% sure but this has relevance for the rest of my comment, and I shall operate on that assumption (which could very well be wrong)
2) New performance rights
Since the topic is fresh in my mind, let me run through the new rights too
Here is the relevant announcement that discusses it
http://hotcopper.com.au/threads/ann-notice-of-general-meeting-proxy-form.2597955/?post_id=16019219
@earlyrise has just mentioned that new ones were just approved by shareholders recently and have yet to be issued. Today, I’ll discuss these new ones (refer above meeting announcement for details on them as I’ll give relevant page no.)
I’ve discussed the management before in case anyone who has not met management, wants to have a look
http://hotcopper.com.au/threads/management-the-abc-of-ton.2566452/?post_id=15750015
3) Chris Catlow (PG 20)
He seems to be getting
3.5 million performance rights.
Note that they have
Aug 20, 2017 vesting period. I already explained my best understanding of vesting period above.
Note that they
expire on Aug 20 2018, which mean that if vesting conditions are not satisfied, then to the best of my knowledge, he gets no rights.
So what are the conditions?
5 day VWAP of at least 40c - 1 million, at least 60 c – 1 million, at least 75 cents - 1 million and AUD 1 – 500,000
On pg 21, it is mentioned that his director fees is 70,000, superannuation is AUD 6650 and total financial benefit is 773,400. This includes performance rights of 3.5 million discussed above worth AUD 696,750. There is a working (schedule 2) on Pg 44 where they explain the basis
For simplicity sake, can we just take 3.5 million shares at current share price of approx. 20 cents which will give us approx. AUD 700,000 worth of rights?
Let us have a recap now –
a) Chris’s
main salary this year to the best of my understanding seems to be mainly the performance rights which are currently costing around AUD 700,000, and other small amounts. Fairly reasonable amount for a person of his experience.
b) TON saves in terms of lower cash outflow as
director fee is basic amount
c) If my understanding of vesting period is right, he will
not get anything if he leaves before Aug 2017
d) His interests are directly aligned with ours in
ensuring that share price goes materially up as mentioned in above schedule
e) Is it really unreasonable for shareholders buying now at 20cents to grudge his future performance rights if share price goes to AUD 1 which will give us a 5 bagger at this rate?
Only issue for shareholders that I can see is if share price does indeed cross AUD 1 for a while and then comes crashing back to 20 cents. Otherwise, it is a win-win for CC and TON
4) Alan Jenks (Pg 22)
Pg 24 – 500 thousand rights with VWAP of AUD 1
Director fees and superann of 54,750 (Pg 25)
Performance rights AUD 77050. Taking simple calculation of 20 cents like I did for CC, we get approx. AUD 100,000 at current share price.
Recap
a)Very
low director fees
b)
Experienced cornerstone investor familiar with company since past many years
c)
Very reasonable performance rights taking all into consideration
d) Will need AUD 1 share price (5 bagger from this point) to vest
Win-win for TON and AJ
5) Alf Gillman (Pg 27)
Terms similar to AJ (PG 28) – 500,000 performance rights with VWAP AUD 1 as vesting condition
Director fees – 345,000; Super ann – 32,775; Performance rights – AUD 77,050. (similar reasoning to that explained for AJ above)
Once more – not entirely unreasonable and similar to AJ.
Alf would have a higher director fees compared to AJ as Alf is an executive director concerned with day to day operations,and is the technical director
http://www.investopedia.com/terms/n/non-executive-director.asp
Reasonable enough again and win-win for TON and Alf
6) Brad Boyle (Pg 30)
Vesting condition of VWAP of AUD 1 again (PG 31)
Director fees AUD 474 K; superann of AUD 30 K and performance rights of AUD 77 K.
Can we really grudge Brad for getting shares later on (currently worth around AUD 100000) if we too will get a 5 bagger by then? Win – win for BB and TON
7) Paula Ferreira (Pg 34)
2.5 million performance rights (Pg 35)
5 day VWAP of 40 c (600000 shares), 60 cents (700000 shares), 75 cents (700000 shares), AUD 1 (50000 shares)
She seems to be getting director fees of AUD 50000 and superann of AUD 5 K.
Fantastic addition to board as discussed earlier, and like Chris Catlow, her goals are aligned with ours.
8) Conclusion
There is that saying of “Pay peanuts and you get monkeys”
I think the new performance rights seem reasonable, taking into consideration current conditions.
I did not analyse in detail once it came out as thought it not very relevant but thought of doing one today as I’m sure this too will be made into an issue in the time to come.
I don’t bother too much about trivial issues as we lose focus from what is really important. Assume that you have to give an important presentation in London, to convince a client on something. That is the real goal. And then someone scares you that when you step out you can get robbed; when you walk on the road, you can meet with an accident; when you fly, the plane can crash, etc. Yeah sure – all that can happen but what should our real focus be – convincing the client in the presentation. Too much focus on trivial issues and you lose sight of the bigger picture.
What are our real issues -
IMO funding, cash management, insto support, preparing for broader macro risks are the main focus areas. I’ve always highlighted these genuine issues right from from my 1
st and early analysis. I’m not surprised that these are still the main issues right now too, and these are where management should focus IMO.
I don’t think the management can do anything different / better on the operational front but yes, they definitely have to put in a massive effort to get instos on board.
... hard to believe Oz but true, .. so when you post the info, you would be do'n it for that poor lonely soul with jph on his ignore list ...
(20min delay)