Remuneration

Remuneration policy

The Supervisory Board of Hydratec Industries N.V. applies a remuneration policy to the Management Board of the company that is based on the following:

• Remuneration of the Management Board must enable good managers to be recruited and retained.

• The remuneration policy must be consistent with the company’s corporate governance policy.

• Remuneration may not contain any incentives that serve the recipient’s own interests and which conflict with the company’s interests.

• Remuneration must reflect the strategic and financial targets and must be performance-based, with a good balance between short and long-term results and targets.

The remuneration policy for Hydratec Industries’ Management Board was approved by the General Meeting of Shareholders held on 26 June 2020. The actual remuneration of the Management Board is determined by the Supervisory Board. Management Board salaries depend partly on the operating result, through a performance-based remuneration scheme payable in due course and compiled as follows:

Performance-based remuneration

• the decision to award the performance-based remuneration is taken in March when the annual figures are discussed.

• The performance-based remuneration is capped at 50% of the fixed salary and calculated as follows:

• • 50% of performance-based remuneration is dependent on personal targets. The targets are focused on both the company’s and the relevant board member’s long-term development, as well as on increasing contract quality and added value and raising awareness across the segments. No predefined KPIs have been adopted. KPIs for the awarding of variable remuneration are adopted at the discretion of the Supervisory Board;

  • 50% of performance-based remuneration is dependent on the consolidated operating result (EBIT). The following ranges apply here:
    
    

  • • In case of an EBIT <5% there is no bonus payment.

    • In case of an EBIT of more than 7%, the maximum performance-based remuneration is paid.

    • In the case of an EBIT between 5% and 7%, this is determined proportionally.

After the bonus is awarded, the Management Board has the option of converting half of the performance-based remuneration into Hydratec Industries shares as part of the shareholding programme. If the Management Board decides to do so, the performance-based remuneration is increased by 25% as an incentive to bind the Management Board to the company for the longer term. The shares are then issued on conversion at the average price during January and February and may not be sold for a period of three years.

Remuneration payable in due course

The remuneration payable in due course is a Stock Appreciation Right (SAR) where the Management Board receives remuneration based on the increased value of Hydratec over a period of at least five years. The entry value is set at 5x EBIT 2021. Up to 0.5% of the company’s value will be granted annually in the years 2022, 2023, 2024, 2025 and 2026. The value of the company is based on 5 times the average EBIT over the last 3 financial years. The amount of the annual allocation is based on performance criteria to be assessed by Hydratec’s supervisory board. For 2022, 0.5% has been allocated. The SAR can only be exercised once within a period of one month after Hydratec’s consolidated annual figures have been approved by the auditor, and no sooner than after the year 2026. The SAR is also exercised if more than 50% of Hydratec’s shares are transferred to a third party. The exit value in that case is the higher of 5 times the average EBIT over the last 3 financial years and the value based on the sale price. The probability of this occurring is less than 50% and has therefore not been measured in accordance with IFRS 2. If significant acquisitions or sales are made during the term of the SAR, the SAR will be reasonably recalibrated to take this into account.

The SAR lapses if the employment relationship between Hydratec and a board member ends before exercise of the scheme, unless employment was terminated by death or pursuant to Article 7:669(3)(a) and (b). In that case, the board member is entitled to 33.3% of the amount.

Any severance payments comply with the requirements of the Dutch Corporate Governance Code and will therefore not amount to more than one year’s salary. The pension plan for the Management Board includes a threshold amount above which members are required to make a personal contribution. The Supervisory Board regularly assesses the Management Board’s actual salaries against the remuneration policy and makes adjustments where necessary. The 2022 remuneration policy will be submitted for adoption to the shareholders’ meeting in 2023.

Remuneration report

The objective of the total remuneration package is that the total remuneration is commensurate with the level and complexity of the responsibilities. It must also be sufficiently competitive. The remuneration package should be based on the duties and responsibilities that the board under the articles of association and its members have towards the company. The internal wage structure is used as a reference and the outcome is compared with the external market. For this purpose, the Supervisory Board compared the remuneration with that of Dutch listed companies of a similar size and complexity. Given the differences between companies, the Supervisory Board determined the remuneration autonomously.

The Management Board members’ annual fixed salary in 2022 was based on the principles above. The fixed salaries are periodically index-linked to inflation. No loans were issued or severance payments made in 2022, nor were there any clawbacks of previously awarded performance-based remuneration.
The 2021 remuneration report was approved by a majority of votes at the General Meeting of Shareholders on 25 May 2022.

This 2022 remuneration report will be submitted to the 2023 General Meeting of Shareholders for an advisory vote. This will provide accountability for the implementation of the remuneration policy in the 2022 financial year. The Supervisory Board will take this advisory vote into account and will make an announcement in the 2023 remuneration report.

The Management Board’s total remuneration is shown on the next page. The Supervisory Board expressed its view that the Management Board achieved positive results in 2022 and successfully guided the company through the further course of the crisis. The Management Board has stated an intention to join the share participation plan.

In determining the variable income for 2022, the Supervisory Board considered the following:

• Despite the challenging conditions in the year, Hydratec performed well and showed good growth.

• The companies’ supply chain has been further improved, resulting in higher added value.

• Economic and strategic challenges have been appropriately mitigated to strengthen margins in 2022 and the coming years and increase awareness within the segments.

The ratio of the average full-time salary for management relative to that for Hydratec Industries employees is 12.4 (2021: 8.4).

Remuneration of members of the Management Board

The Management Board under the articles of association receives employment terms appropriate to the position and responsibilities. In general, the other terms of employment of the Management Board are in the same range as those of other employees, such as the company car scheme. The entire remuneration policy was discussed and considered when the remuneration was being set. The ratio of the Management Board’s remuneration compared to employees increased due to the award of remuneration payable in due course.

As at the balance sheet date, Mr Aangenendt held 71,844 shares and Ms Slijkhuis held 560 shares. This number includes shares subject to a 3-year lock-up period.

The table below shows the salaries of the Management Board in the last five years in relation to the revenue, the operating result, the number of FTEs and the average salary of all employees in the group:

Remuneration of the Supervisory Board

The remuneration of the Supervisory Board is approved by the General Meeting of Shareholders. The remuneration is not dependent on the company’s results and the members of the Supervisory Board are not paid in shares or share options. The General Meeting of Shareholders set this remuneration at €30 thousand a year for each member of the Supervisory Board on 26 May 2021. The change in remuneration took effect from July 2021. The remuneration of the Supervisory Board in the last 5 years was as follows:

As at the balance sheet date, Mr Ten Cate held 7,130 shares. The other members did not hold any shares at the balance sheet date.

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