Introductory notes from the Compensation Committee

10 min.

dormakaba posted strong growth despite external headwinds for financial year 2021/22. Growth was most pronounced in the Regions Asia Pacific and Americas, but also good in Europe & Africa. In Key & Wall Solutions, growth picked up in the second half-year as Movable Walls started to convert part of its Covid-related project backlog into sales. External headwinds such as shortages of electronic components, labor, and building materials in general prevented even better growth.

dormakaba increased net sales by 10.3% to CHF 2,756.9 million in 2021/22 (previous year: CHF 2,499.7 million), organic sales increased by 7.7%. Adjusted EBITDA increased by 2.8% to CHF 372.3 million (previous year: CHF 362.0 million), whereas the adjusted EBITDA margin at 13.5% was below the previous year’s level of 14.5%. Net profit at CHF 122.5 million (previous year: CHF 193.3 million) was impacted by the divestment of the Mesker business (CHF 61.4 million) mainly due to the recycling of goodwill (for more information please see the Consolidated Financial Statements, chapter 4.3) in mid-June 2022 as well as expenses linked to the implementation of the new strategy Shape4Growth.

The Board of Directors has decided to exclude the effect for Mesker in the dividend payout calculation because the transaction has no material impact on the company’s cash flow. Consequently, the BoD also decided to exclude the Mesker effect from the management compensation.

The Nomination and Compensation Committee (NCC) performed its regular activities throughout the financial year, such as the propositions of compensation for the members of the BoD and EC, as well as the preparation of the Compensation Report and the binding say-on-pay votes at the AGM.

The NCC periodically reviews the BoD compensation program to ensure market competitiveness and appropriate fit for the company. During the past financial year, the NCC conducted a new benchmark analysis of BoD compensation levels based on a revised peer group. As a result of this analysis, the NCC recommended a reduction in the annual retainer for the Board Chair role. This change takes effect during the term of office starting with the AGM 2022. No other changes will be made to the BoD compensation program. More information is provided later in this report.

In addition, as announced in the 2020/21 Compensation Report, the NCC conducted a thorough review of the compensation program to ensure that it remains aligned with the strategic direction of the company in the context of the new strategy Shape4Growth for the period 2022 to 2027. Further to this analysis, the NCC decided to implement several changes to the incentive programs, which apply to EC members and will come into effect as of the financial year 2022/23:

  • Short-term incentive (STI): a target-based approach will replace the current profit-share approach. A target STI amount will be determined for each EC member (corresponding to the amount to be paid if all performance objectives are met) and will be multiplied by a performance factor between 0% and 200% based on the achievement of the pre-defined performance objectives. The performance objectives will include organic sales growth, unadjusted EBITDA margin, and ROCE/NWC at Group and/or regional or business level (for EC members responsible for a Region or Key and Wall Solutions) and may include clearly measurable functional objectives (for EC members responsible for a Function);
  • Long-term incentive (LTI): the LTI grant size will be determined as a monetary amount based on the organizational level of the role instead of the current set of criteria.

Further details on these changes can be found in the New Compensation Architecture section at the end of this Compensation Report.

At the upcoming AGM, our shareholders will be asked to prospectively approve the aggregate maximum amounts of compensation of the BoD for the period until the following AGM and of the EC for the financial year 2023/24. Further, our shareholders will have the opportunity to express their opinion about our compensation system and the compensation awarded to the BoD and to the EC by way of a consultative vote on the Compensation Report 2021/22.

At the AGM 2021, binding votes were conducted on the aggregate maximum compensation amounts for the BoD and for the EC, as well as a consultative vote on the Compensation Report. The shareholders approved the maximum compensation amounts for both the BoD and the EC with approval rates of 98%, and the consultative vote on the Compensation Report received an approval rate of 87%. This positive voting outcomes show that the active dialogue engaged with investors was fruitful and that shareholders endorse the compensation system in place at dormakaba. We would like to thank investors for their trust and support.

The NCC trusts that this Compensation Report is informative and would like to thank our shareholders for their valuable feedback on our approach to executive compensation.

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