Rapport du Directoire AGE 2016 _V11_CLEAN_EN

THE MANAGEMENT BOARD’S REPORT TO THE
EXTRAORDINARY GENERAL MEETING OF 7 MARCH 2016
Dear Shareholders,
We convened you as an Extraordinary General Meeting, in accordance with laws and regulations and with
the Bylaws of Saft Groupe (the “Company”), in order to submit the two following resolutions for your
approval.
Agenda
1.
Authorisation to be given to the Management Board to make free allotments of preference shares of
the Company to eligible employees and/or officers of the Company and those of the affiliated
companies, pursuant to Articles L. 225-197-1 et seq. of the French Commercial Code;
2.
Creation of preference shares convertible into ordinary shares, subject to the realisation of the
performance conditions and correlative amendment of the Company’s Bylaws.
Presentation of the Group’s affairs
The annual results of Saft Groupe (the "Group") for the year ended 31 December 2015 will be published on
18 February 2016. Therefore, as of today, the Company cannot comment the Group activity and
performance for 2015 financial year beyond what we have already communicated on 23 October, date at
which we have announced Saft Groupe revenue for the third quarter ended September 2015. Likewise, we
cannot further discuss the Group’s perspective for 2016 before 18 February 2016.
As you also certainly know, on November 18, 2015, Saft’s management launched and presented the “Power
2020” plan which includes an update of its strategic priorities and new operational initiatives. This
transformation plan is structured around the following three pillars:
•
Increase market focus to ensure profitable growth;
•
Differentiate through superior tailored solutions for customers;
•
Deliver with excellence in operations.
The transformation plan “Power 2020” is supported by a new customer-centric organization. The reporting
structure evolves as well, with four new divisions – Civil Electronics, Industrial Standby, Space & Defence,
Transportation, Telecom & Grid – replacing the former Industrial Battery Group and Specialty Battery Group
(IBG and SBG).
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Convening brochure – Extraordinary General Meeting - 7 March 2016
Structured around the Company’s main customer segments, this new organization will foster greater
authority, responsibility, and accountability in each division. It will also enable sharing of best practices and
implementation of economies of scale across operations. It will allow a more results-oriented culture in each
division with vertical alignment of resources and goals. In addition, a new human resources management
approach will be put in place to foster mobility, further develop our employees’ skills and empower talents.
Of course, the Management board will keep you regularly informed, as from 18 February 2016, of the
evolution in the implementation of this plan.
Presentation of the resolutions
As part of the policy to motivate and maximise the loyalty of the Group’s employees, since 2005, the
Management Board has been implementing stock option allotment plans to enable certain executives and
senior managers of the Company and its subsidiaries to profit financially from the Group’s growth. Six such
plans have been implemented, the most recent of which (plan No. 6) was implemented in July 2012, i.e.
nearly four years ago. These plans are described in the reference document published each year by the
Company. The Company has also set up a profit-sharing agreement, for which all of its employees and the
employees of its French subsidiaries are eligible.
The Management Board wishes to continue this policy while reconciling the interests of employees (namely,
by associating them in the Group’s growth in a tax-friendly manner) and the interests of the Company’s
shareholders (by maximising the Company’s long-term performance, reducing the cost to the Company of
the instruments used to motivate employees and controlling the dilutive effect for shareholders).
Accordingly, this year, the Management Board, in accord with your Supervisory Board, suggests to you that
you authorise it to set up a long-term profit-sharing mechanism in favour of certain executives and senior
managers, pursuant to the provisions of Articles L. 225-197-1 et seq. of the French Commercial Code, as
amended by the “Macron Law” of 6 August 2015, which consists of freely allotting preference shares to be
issued, which shall be convertible in future, subject to the satisfaction of performance conditions that are
presented below, into ordinary shares of the Company (the “Plan”).
st
As regards the 1 resolution, you are asked to grant the Management Board an authorisation to freely allot
up to 4,700 preference shares, convertible into a maximum of 470,000 ordinary shares subject to the
satisfaction of performance conditions. This authorisation would be granted for a term of eighteen months
nd
from this General Meeting and would be subject to the approval of the 2 resolution.
With respect to the 2
nd
resolution, we propose to you to decide to create a new class of shares, namely,
preference shares governed by the provisions of Articles L. 228-11 et seq. of the Commercial Code, which
can only be issued as part of a free allotment of preference shares in favour of eligible employees and
officers of the Company and the companies that are associated with it, and to correlatively amend the
Company’s Bylaws.
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This is why the 2
nd
resolution is also subject to the condition precedent to the approval of the first resolution.
This resolution contains the characteristics of the preference shares, which will appear in the Company’s
Bylaws. However, amendments to the Bylaws shall only take effect following the acquisition period of the
preference shares (two years after the launch of the Plan) when the latter will be issued by the Company.
Maximum allotment and increase of the share capital
Within the scope of the authorisation that you are asked to grant to the Management Board, the latter could
freely allot up to 4,700 preference shares, which shall be convertible into a maximum of 470,000 ordinary
shares (without including the number of shares to be issued, if applicable, for the adjustments made to
preserve the rights of the beneficiaries of the free allotments of preference shares), subject to the attainment
of the objectives stipulated by the performance criteria.
For example, based on share capital comprised of 26,501,372 ordinary shares on the date of this report, the
issuance of the maximum number of ordinary shares upon the conversion of the freely allotted preference
shares would represent 1.77% of the Company share capital.
In addition, the Company has not made any free allotment of shares or allotment of stock options during the
last three years ended. Accordingly, if the plan is launched in 2016, the average of the Company’s annual
burn rate would be 0.59% on 31 December 2016, which is consistent with the average rate observed in the
industrial sector in France.
The issuance of the preference shares, which would only take place at the end of the Acquisition Period,
would occur via the incorporation of reserves, after the Management Board has formally noted the existence
of sufficient reserves.
As regards the ordinary shares that will be made available, if applicable, upon the conversion of the
preference shares, the Management Board would have full power to determine if all or some of the ordinary
shares shall be new shares to be issued (in the case of capital increases made via the incorporation of
reserves) or existing treasury shares (acquired pursuant to Article L. 225-208 of the Commercial Code,
and/or as part of a share buyback program).
The authorisation granted by the General Meeting to the Management Board would automatically entail, in
favour of the beneficiaries of preference shares, a waiver by the shareholders of their preferential right to
subscribe to the freely allotted preference shares based on this authorisation and on the ordinary shares that
would be issued at the time of the conversion of said preference shares.
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Structure of the Plan
The Plan would be structured as follows:
•
A total period of three years at the end of which the performance criteria shall be assessed and
following which the conversion ratio of the preference shares into ordinary shares (the “Conversion
Ratio”) shall be determined. This period shall be comprised:
− of a first period of two years beginning on the date of the allotment of the preference shares (the
“Acquisition Period”), at the end of which the preference shares shall be permanently acquired by
each beneficiary if the beneficiary is still an employee of the Group during this period (save for legal
exceptions to this condition of being an employee of the Group);
− of a second period of one year commencing at the end of the Acquisition Period (the “Holding
Period”), during which the preference shares cannot be sold and must be kept in registered form by
each beneficiary.
However, the Management Board can adjust the term of the Acquisition Period and the Holding Period
for those beneficiaries having a tax domicile outside France, in order to comply with local laws and
regulations, in particular, local tax laws and regulations, applicable to the allotment. Regardless of the
circumstances, all of the Group’s beneficiaries shall be subject to the same conditions of
presence and performance criteria that will be observed over a period of three years.
The allotment date of the preference shares shall be defined by the Management Board, which has
undertaken to consult the Supervisory Board beforehand on this point.
•
An additional thirteen-month period, commencing on the expiry date of the Holding Period, during
which the preference shares can be converted into ordinary shares, at the request of their holder, by
applying the Conversion Ratio (the “Conversion Period”). Those preference shares that have not been
the subject of a conversion request during this period shall be automatically converted into ordinary
shares the day after the end of the Conversion Period.
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The Conversion Ratio shall be calculated by the Management Board on the first day of the Conversion
Period based on the degree of satisfaction of each of the performance criteria.
The holders of preference shares shall only receive ordinary shares upon the conversion of their
preference shares if they are employees of the Group at the end of the Holding Period, i.e. at the
end of the three-year total period from the allotment date of the preference shares.
However, exceptionally, the Management Board, after the authorisation of the Supervisory Board, can
decide to maintain all or some of the rights in favour of a holder who is no longer an employee of the
Group on the expiry date of the Holding Period.
In the event that, on the first day of the Holding Period, the number of ordinary shares to which the
preference shares held by all or some of the holders gives the right by conversion is equal to zero, the
Company, at its exclusive initiative, shall buy back said preference shares at their unit nominal value with
a view to cancelling the latter.
The Plan’s Beneficiaries
The preference shares can be freely allotted to certain eligible employees and/or officers of the Company
and/or of the companies or groupings that are linked to it as defined in Article L. 225-197-2 of the
Commercial Code.
The total number of the preference shares allotted to the Company’s officers cannot, regardless of the
circumstances, represent more than 30% of the total preference shares allotted.
In addition, the Supervisory Board decided, during its meeting held on 7 January 2016, that if the resolutions
covered in this report are approved by the shareholders and if officers of the Company (namely, one or more
members of the Management Board) are beneficiaries of the plan, the latter should keep in registered form,
until the end of their terms of office as company officers, 15% of the number of the ordinary shares that
would be allotted to them upon the conversion of the preference shares they hold.
Performance criteria
The Conversion Ratio shall be known by the Company and the beneficiaries on the first day of the
Conversion Periods, namely, at the end of the three-year period following the launch of the Plan by the
Management Board, depending on the degree of satisfaction of each of the four performance criteria
described below (the “Performance Criteria”).
Each freely allotted preference share would give the right to a maximum number of 100 ordinary shares.
Each individual performance criterion would make it possible to obtain a maximum number of 25 ordinary
shares.
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The Performance Criteria suggested in this Plan shall be reproduced in the Company’s Bylaws.
Such Performance Criteria consist in three internal criteria and one external criterion (the share price):
•
the Group’s turnover for the year ended 31 December 2018 (“2018 turnover”);
•
the Group’s EBITDA for the year ended 31 December 2018, as adjusted prior to the inclusion of the
“IFRS 2” charges, a non-cash expense intended to reflect of the cost of the services rendered to the
Group by the employees who are beneficiaries of the free allotments of preference shares convertible
into ordinary shares (“2018 EBITDA”); EBITDA is defined as operating profit, before depreciation (net of
the depreciation of deferred subsidies on assets), restructuring costs and other operating income and
expenses.
•
the Group’s return on capital employed for the year ended 31 December 2018 (“2018 ROCE”); ROCE is
defined as the ratio between:
-
EBIT which is the operating profit before restructuring costs and other income and expenses and,
-
the sum of (i) non-current assets excluding investments in joint undertakings and net of deferred
grants related to assets and (ii) operating working capital measured as inventories plus accounts
receivable less accounts payable.
•
SAFT GROUPE SA’s weighted average share price during the 60 trading days preceding the first day of
the Conversion Period (the “Average Share Price”).
These are objective and measurable criteria allowing to assess the Group’s performance over the
contemplated period (three years), as well as to reflect the increase of the Company’s value and shares
price for the shareholders.
The internal Performance Criteria are in line with the objectives of the “Power 2020” strategic plan launched
by the Group in November 2015 and the financial objectives announced at that time. They are particularly
ambitious, as they make the allotment of the maximum number of ordinary shares on conversion of the
preference shares conditional upon the attainment or exceeding, on 31 December 2018, of the announced
objectives for the year that will end on 31 December 2019, i.e. one year prior to the end of the “Power 2020”
plan.
Criterion 1: 2018 Turnover
Thresholds
2018 turnover ≤
€ 834M
€ 834 M < 2018 turnover <
€ 854M
Number of ordinary
shares for one
preference share
0
20 shares at most
(prorated)
€ 854M < 2018 turnover <
€ 900M
+ 5 additional shares at
most
(prorated)
2018 turnover ≥ €
900M
25
Criterion 2: 2018 EBITDA
Thresholds
EBITDA ≤ € 129M
€ 129M < EBITDA < € 133M
Number of ordinary
shares for one
preference share
0
20 shares at most
(prorated)
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€ 133M < EBITDA < €
144M
+ 5 additional shares at
most
(prorated)
Convening brochure – Extraordinary General Meeting - 7 March 2016
EBITDA ≥ € 144M
25
Criterion 3: 2018 ROCE
Thresholds
Number of ordinary
shares for one
preference share
ROCE ≤ 12.3%
12.3% < ROCE < 13.0%
0
20 shares at most
(prorated)
13.0% < ROCE < 14.0%
+ 5 additional shares at
most
(prorated)
ROCE ≥ 14.0%
25
Criterion 4: The Company’s share price
Thresholds
Average Share Price
≤
Lower Limit
Lower Limit < Average Share Price < Upper
Limit
Average Share Price
≥
Upper Limit
Number of ordinary
shares for one
preference share
0
Number of shares calculated on a prorated
basis
25
It being stipulated that:
−
“Lower Limit” means SAFT GROUPE SA’s average weighted share price during the 60 trading days
preceding the Management Board’s decision to launch the Plan;
−
“Upper Limit” means 150% of the Lower Limit.
Characteristics of the preference shares
•
Nominal value: The preference shares shall have a nominal value equal to that of the Company’s
ordinary shares, i.e. a unit nominal value of one euro.
•
Listed: They shall not be admitted for trading on the Euronext Paris regulated market.
•
Stripping of shares: The shares cannot be stripped by agreement.
•
Rights attached to the preference shares:
− Each preference share shall grant its owner a right to the liquidation surplus in proportion to the
percentage of the share capital it represents. However, said preference share shall not give rise to
the right to distributions of dividends or to reserves of the Company.
− The preference shares shall be devoid of the right to vote at ordinary and extraordinary general
meetings. However, the holders of preference shares shall be entitled to vote at a special general
meeting of the holders of preference shares.
− The preference shares shall be devoid of preferential subscription rights as regards any increase of
the share capital or any transaction with a preferential right to subscribe to the ordinary shares and
shall not benefit from capital increases via a free allotment of new shares or by an increase of the
nominal amount of the existing ordinary shares made via the incorporation of reserves, profits,
premiums or other amounts the capitalisation of which is allowed, or from free allotments of
negotiable securities giving access to shares, made in favour of holders of ordinary shares.
− In the event of a change or amortisation of the share capital and in the case of the taking of control of
the Company or change of control of the Company as defined in Article L. 233-3 of the Commercial
Code, the rights of the holders of preference shares shall be adjusted or modified by the
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Management Board, in accordance with the conditions provided for in the Plan’s rules, so as to
preserve their rights.
•
Special general meetings:
− The holders of preference shares shall be convened as a special general meeting for any planned
modification of the rights attached to the preference shares. Collective decisions for which the
Company’s ordinary general meeting or extraordinary general meeting are competent shall not be
submitted to the special general meeting for approval.
− The following is a non-exhaustive list of the points that shall not be submitted to the special general
meetings of the holders of existing preference shares:
the conversion of the preference shares pursuant to the Bylaws;
transactions involving the amortisation or modification of the share capital, in particular, share
capital increases via the issuance of ordinary shares, preference shares, or any negotiable
securities giving access to the share capital, whether or not the latter include preferential
subscription rights;
buybacks and/or cancellations of shares that are part of (i) a buyback by the Company of the
preference shares, pursuant to the Bylaws, (ii) the implementation of the ordinary share buyback
programmes in the conditions defined by Articles L. 225-209 et seq. of the Commercial Code
and (iii) a public offer to buy back the ordinary shares or any class of preference shares.
− In accordance with the provisions of Article L. 228-17 of the Commercial Code, the following shall be
submitted for approval to any relevant special general meeting: any planned merger or demerger of
the Company within the framework of which the preference shares could not be exchanged against
shares entailing equivalent specific rights.
***
Your Management Board asks you, after the reading of the reports presented by the statutory auditors and
by the specific advantages auditor, to approve all of the resolutions it is submitting to you for a vote.
Ghislain Lescuyer
Chairman of the Management Board
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