Unga Group #ticker:UNGA CEO Nicholas Hutchinson got a 54.4 per cent pay rise in the year ended June when the human and animal feed miller slipped into a Sh32.2 million loss, the company’s latest financial report shows.
The Unga board also got an aggregate pay increase of 49.5 per cent while employees’ salaries rose by a relatively modest margin of 14 per cent, the firm says in disclosures that are expected to give shareholders insight into the company’s cost structure.
The debate on management and board pay is expected to increasingly come to the fore following an August legislation requiring more detailed reporting and disclosure for listed firms.
Mr Hutchinson’s salary – his only entitlement besides a variable bonus — jumped to Sh1.26 million per month in the review period, from Sh820,000 the prior year.
“Unga’s aim is to achieve an integrated approach to reward, linking company strategy in the form of the achievement of corporate objectives and individual performance to salary increases and bonus awards,” the miller says in the report.
The CEO may get a bonus if the miller attains 85 per cent of the target profit before tax, with the amount paid in cash soon after approval by the board.
Other directors saw their fees – their only entitlement — rise by a range of 26.4 per cent to 64.4 per cent over the same period.
Andrew Ndegwa, whose family has a controlling stake in the miller, had the largest pay bump of 64.4 per cent to Sh229,583 per month.
The money was, however, not paid to him personally but to First Chartered Securities – the Ndegwas’ investment holding company — which nominated him to Unga’s board.
Fees paid to the miller’s chairperson, Isabella Ochola-Wilson, rose 44.9 per cent to Sh321,250 while Patrick Obath’s earnings jumped 41.8 per cent to Sh199,167 per month.
Alan McKittrick’s fees increased 36.8 per cent to Sh197,917 while Jinaro Kibet’s compensation rose by a third to Sh196,250. Shilpa Haria, who joined the board in September last year, earned an average of Sh105,417 for each of the 10 months ended June. She was appointed to replace Mary M’Mukindia who resigned in April last year.
Ms M’Mukindia earned an average of Sh53,750 for each of the 10 months she served to her departure. Unga says the across-the-board pay hikes came after a remuneration survey and a job evaluation conducted in the previous year.
Their implementation, however, coincided with a rare loss in the company’s recent history driven by what the firm termed operational challenges and a troubled acquisition.
The miller descended from a net profit of Sh508.8 million in the previous year to report the Sh32.2 million net loss in the review period. It lost Sh118.9 million in its Ugandan operation, which it closed indefinitely.
Its investment in Ennsvalley Bakery was also hit by the financial troubles facing its key distributor, Nakumatt Holdings. This saw the miller write down the value of the subsidiary – in which it initially acquired a 52 per cent stake for Sh465.2 million — by Sh151 million.
Unga, however, doubled down and acquired the 48 per cent it did not already own in the bakery by buying out the minority investors for Sh70 million.
The non-controlling interests apparently took a major haircut in the second transaction, allowing the miller to book a gain of Sh153 million in the deal.