dormakaba made good progress on the execution of its Shape4Growth strategy and related transformation program while delivering a strong financial performance for 2023/24. Organic net sales growth was at 4.7%, driven both by pricing and volume. There was a significant profitability improvement, with the adjusted EBITDA margin expanding by 120bps to 14.7%. Return on capital employed (ROCE) increased substantially by 390bps to 29.0% profiting from improved average net working capital and increased adjusted EBIT. The strong results were completed by a solid free cash flow and an improved net debt profile. dormakaba’s strong performance in financial year 2023/24 is reflected in the STI payout ratio.
The NCC meets at least three times per reporting period or more frequently if required per reporting period. Actual meetings held and attendance for the financial year 2023/24 are disclosed in the governance report. Regular activities include proposing compensation for the members of the BoD and EC, as well as preparing the Compensation Report and the binding say-on-pay votes at the Annual General Meeting (AGM).
Following the Board of Directors’ approval, the NCC implemented the following changes to the variable compensation structure of the EC with effect of the reporting period:
‒ The Short-Term Incentive (STI) performance indicator framework has been simplified to include the same three group financial objectives for all EC members, including the CEO. This change rewards collaborative over individual or unit performance and aligns with the Shape4Growth strategy. Furthermore, the booster introduced for the 2022/23 performance period has been discontinued as planned effective as of the FY 2023/24.
‒ The Long-Term Incentive (LTI) compensation includes Environmental, Social and Governance (ESG) targets, and the Performance Share Unit (PSU) grant size is no longer linked to the individual performance of the prior year.
The STI and LTI programs are described in detail in the section “Compensation Architecture for the EC” of this Compensation Report.
For the financial year 2024/25, the BoD decided to apply the same performance indicator framework to measure EC performance under the STI as well as for the 2024 LTI grant, and no major adjustments are planned.
At the AGM 2023, 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 the BoD with 98% (prior year: 91%) and the EC with 98% (prior year: 97%). The consultative vote on the Compensation Report received an approval rate of 85% (prior year: 94%). The NCC reviewed the compensation programs for EC members to ensure that they best align with the strategic direction of the company and considered shareholders' feedback based on a targeted engagement outreach in 2023. Furthermore, the level of transparency on the disclosure of STI and LTI objectives and the respective performance outcomes was enhanced.
The table below summarizes the main concerns raised by shareholders and the actions dormakaba has taken to address them.
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Concern raised |
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Our response |
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Insufficient ex-post disclosure of STI targets and achievement levels. |
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Disclosure was enhanced by defining each KPI and its weighting. The applicable payout curve and performance achievement against targets are described in sections "Overview of short-term incentive performance objectives and respective weightings for FY 2023/24". |
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Discretionary adjustments made by the BoD to the group EBITDA margin and ROCE metrics under the STI without providing a detailed explanation |
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Alternative performance measures (APM) may be used to measure financial performance. These include adjustments for items affecting comparability (IAC). APM and IAC are defined in the consolidated financial statements and clear reference to these is included in the STI section of this report. |
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Initial LTI grants appear to involve an element of discretion |
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The consideration of the previous year individual performance for determining the EC members’ LTI grant has been removed. As from the grant cycle 2023, the LTI grant size is solely calculated based on the target amount attributed to each role. |
At the upcoming AGM, all 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 2025/26. The shareholders will have the opportunity to express their opinion about the compensation system and the compensation awarded to the BoD and to the EC by way of a consultative vote on the Compensation Report 2023/24 at the AGM 2024.