What’s behind Qld boss giving up $2.6m bonus?
THE boss of debt chasing agency Collection House says he will forego two-thirds of his bonus stock worth almost $2.6 million, as part of a commitment to shareholders.
The catch is that the long-term bonus for managing director Anthony Rivas is being triggered because Collection House is measuring performance on "statutory" - or accounting standard -profits. These include earnings from special deals the Brisbane-based company has recently done.
He may have not have received all those 2 million bonus stock anyway, had Collection House calculated targets on "normalised" earlier profit figures.
Collection House maintained the performance targets had always been based on statutory earnings and the new deals form an ongoing part of the business.
Collection House chases owed money for institutions such as big banks, or buys chunks of debt and reaps the profits itself.
Its earnings have been reinvigorated in recent years.
But Collection House's remuneration report last year received a 57 per cent protest vote from shareholders.
Mr Rivas on Monday revealed he would forgo 2 million of his 3 million potential bonus shares, that he was potentially entitled to receive after three years in the job by June 2019.
The move was not related to any concerns about a second-strike against the remuneration report, which could result in the board being rolled, he said.
"It's the right thing to do for our shareholders," said Mr Rivas, who started in July 2016.
Mr Rivas also flagged an intention to stay beyond his initial three year stint, and rejecting the bonus shares showed he was "not going to run away with the money". "I'm really interested in seeing growth in the company," he said.
HOW BONUS WORKS
The bonus works the following way: 1 million shares if Collection House's earnings per share (EPS) growth surpassed 5 per cent annually after three years from 2016. It then operated on a sliding scale, with main targets being 2 million shares for growth above 7.5 per cent and 3 million shares if growth surpasses 10 per cent.
Collection House has already told the market that fiscal 2019 EPS should hit between 19.2c and 19.5c. Based on statutory figures, annualised growth from 14cps in 2016 would be above 11 per cent so Mr Rivas would be eligible to pocket the whole bonus.
Those earnings includes a new "portfolio enhancement programme" started under Mr Rivas. That included Collection House last year transferring the next five years' of cash flows from a debt ledger - worth up to $39.5 million - to US private equity group Balbec. Balbec gives Collection House $19.5 million upfront.
The deal boosted profits by $4.9 million and Collection House reinvests cash into new debt ledgers.
Using Collection House's own "normalised" EPS result from 2016 of 15.7c, the growth to 2019 would be between 6.94 per cent and 7.49 per cent. That would suggest Mr Rivas would not have gotten near receiving all 3 million shares, but was closer to receiving 2 million shares.
If the new "enhancement" transactions are excluded, Collection House's EPS is tipped to hit between 15.2c and 15.5c in fiscal 2019. That means the annual growth since 2016 would only be between 2.8 per cent and 3.45 per cent, in which case Mr Rivas would receive no bonus shares.
But Mr Rivas said the new enhancement transactions were not one-off deals and would become an ongoing part of the business.
The 1 million potential bonus shares he is so far hanging on to are worth $1.3 million.
Collection House shares closed up 3.5c at $1.63.