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Village Roadshow (VRL) 2015 AGM Voting Intentions

Company/ASX Code : Village Roadshow Limited (VRL)
Registry : Computershare Services
Poll/Show of Hands : Show of hands
Webcast : No
Venue :
9am Village Cinemas Jam Factory
500 Chapel St, South Yarra
Melbourne, Victoria
Monitor : Mr Peter Saalmans
AGM Details / NoM : Thursday 19th November, 2015
ASA Position
Not Applicable
Item 1: Consideration of accounts and reports

Revenues in 2014/15 increased by 3.0% but earnings before interest, tax, depreciation and amortisation (EBITDA) were down by 3.0%. Profit after tax was $43.9 million, down by 4.0%, due to a fall in earnings of the Theme Parks business which was attributed to unusually bad weather affecting the Gold Coast and Sydney operations; these theme parks continue to incur increased depreciation and amortisation costs.

The Village Roadshow group consists of four core businesses which varied significantly in terms of their contributions to group profit in 2014/15 as indicated in the table: 



 



Village Roadshow’s financial report focusses mainly on consolidated results while presenting some financial details, such as EBITDA, depreciation, tax and other expenses, for the separate businesses. The report does not breakdown the assets by business, making it difficult for shareholders to assess the financial performance of the individual businesses in terms of, for example, return on investment.

Dividends paid per ordinary share increased by 3.7% to 28 cents.


ASA Position
For
Item 2(a): Re-election of Mr John Kirby as a Director

Village Roadshow’s financial report focusses mainly on consolidated results while presenting some financial details, such as EBITDA, depreciation, tax and other expenses, for the separate businesses. The report does not breakdown the assets by business, making it difficult for shareholders to assess the financial performance of the individual businesses in terms of, for example, return on investment.

Dividends paid per ordinary share increased by 3.7% to 28 cents.

Mr Kirby has been with Village Roadshow for 45 years and is currently Chairman of Village Roadshow Corporation Pty Ltd, the major shareholder of Village Roadshow Limited. He is deputy chairman of The Conversation Media Group and Director of the Sony Foundation. He is a former Chairman of Austereo Ltd. and former Deputy Chairman of the Interim Council of the National Film and Sound Archive. He has no company directorships outside the Village Roadshow group. His qualifications, track record with the company and industry experience justify his re-election.


ASA Position
For
Item 2(b): Re-election of Mr Robert Le Tet as a Director

Mr Le Tet has over 35 years’ experience in broadcasting, film and entertainment industries. He has been a member of the Village Roadshow board since 2 April 2007 and was previously a board member of the Australian Broadcasting Authority and chairman of its audit committee. He is chairman of Village Roadshow’s Audit & Risk Committee. He is also the executive chairman of a venture capital company, Questco Pty. Ltd. Apart from this position, he has no company directorships outside the Village Roadshow group. His qualifications and experience are highly relevant and warrant his re-election.


ASA Position
For
Item 3: Adoption of Remuneration Report

The remuneration report is detailed and comprehensive; it covers two executive directors, four senior executives and seven non-executive directors. There are a few changes to the previous year’s report.

The calculation of the two executive directors’ STIs has been changed and is now based on three equal components:

•    Cash flow return on investment (CFROI)

•    Achievement of 92.5% of budgeted Net Profit After Tax (NPAT) 

•    A sliding scale from 92.5% to 100% of achievement of budgeted NPAT

The maximum STI for the two executive directors has been increased from $500,000 to $750,000 (per director).

The calculation of the STIs for the four senior executives has also changed. 50% of the STIs for three of the four senior executives continues to be based on individual Key Performance Indicators as before, but the balance is now based on CFROI and budgeted NPAT as for the two executive directors. 

The STI for the remaining senior executive is now based entirely on his/her individual KPIs. Individual KPIs are not disclosed in the report and are understood to be based on individual personal job responsibilities. All STIs are paid in cash. Reference to the ASX 300 as a comparator group has been dropped. 

Although the two executive directors have only 7% and 27% of their total pay “at risk”, they are more than adequately exposed to VRL’s performance via their holdings in Village Roadshow Corporation. 

In his previous position as CEO, Mr Burke was granted 4.5 million share options with vesting subject to the CAGR (cumulative annual growth rate) of the company’s EPS and dividends. No comparator group is used; the hurdle is set at 4% of compound annual growth rate (CAGR) in EPS and DPS with the maximum LTI being awarded at 8% CAGR. No “re-testing” of LTIs is allowed.

For senior executives, the company operates an Executive Share Plan and Loan Facility. Under the current plan, one third of the shares allotted become exercisable at the end of 3 years from the issue date, another third at the end of 4 years and the remainder at the end of 5 years. The loans made for the purchase of these shares incur interest at 20 cents per share per annum. If an executive resigns or is dismissed, the loan must be repaid. However, where the market value of the shares is less than the amount owing on the loan, the company will buy back the shares and cancel them in repayment of the loan without further recourse to the employee. 

Allowing for the unusual characteristics of this company, the Remuneration Report is broadly consistent with AS’s voting guidelines. The lack of referral to a comparator group (such as the ASX 300) is a pragmatic decision in the absence of any Australian listed companies in a similar line of business. Attempts to compare VRL’s performance with overseas companies, for example, Disney and Warner Brothers, could be misleading.  The financial interests of Village Roadshow’s two co-CEOs are well aligned with shareholders’ interests, as are those of other senior executives. However, the ASA would like consideration given to including company shares in STIs, in order to align the interests of executives more closely with those of shareholders.



The individual involved in the preparation of this voting intention has not a shareholding in this company.


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