Far away from the carnage in the iron ore sector, directors at select Western Australian companies in the gold, oil and gas and engineering sectors are being handsomely rewarded through the exercise of share options and the vesting of performance rights.
WA Business News’ research has identified more than 25 Perth company directors who have reaped big rewards through these equity incentive schemes over the past two months.
In most of these cases, the value of the equity instruments has proved to be far greater than estimated at the time they were granted, as a result of rising profits and soaring share prices.
Equally, there have been many other company directors whose share options had a lucrative valuation at the time of issue but have subsequently become worthless.
The big winners include the directors of gold miner Northern Star Resources, a runaway success story that continues to deliver.
The latest beneficiary was non-executive director Michael Fotios. In his capacity as a director of Delta Resource Management, he exercised 5 million 10 cent share options earlier this month.
With the shares now trading at $1.15, Mr Fotios has made an immediate paper profit of $5.25 million on this transaction.
That is many times greater than the $168,630 valuation that Northern Star put on all of the options granted to Mr Fotios at the time of their grant.
In the interim, of course, the company has become a lucrative money spinner and its share price has risen accordingly.
Northern Star chairman Christopher Rowe and managing director Bill Beament have also benefited far more than anticipated when they were granted options.
Last month, Mr Beament converted 6.5 million 10 cent incentive options into 5.8 million shares. The balance was held by an employee share trust to enable cashless exercise of the options.
With the shares worth 96.5 cents at the time, the transaction delivered a paper profit of $5.05 million.
This week’s Directors’ Interests table lists six company directors who have reaped instant paper profits from the exercise of in-the-money share options and the vesting of performance rights.
Peet managing director Brendan Gore, for instance, acquired 434,561 shares in the land developer at zero cost, after the vesting of performance rights.
The vesting occurred because Mr Gore achieved agreed performance targets. His reward was small fry compared with other company directors, such as Cash Converters International managing director Peter Cumins.
The Cash Converters business, which has morphed from a pawnshop chain into a high-interest ‘pay-day’ lender, achieved its best ever profit last year.
That has been good news for Mr Cumins, who was already a big shareholder in the company, but in addition was granted 10 million “executive performance rights”.
Each performance right gives him the ‘right’ to acquire a Cash Converters share at zero cost, subject to the company achieving its budgeted net profit.
So far, Mr Cumins has exercised 4 million rights, which means he has acquired shares worth $3.1 million for zero cost.
At the time they were issued, the 4 million rights had a “fair value” of $2.2 million.
US-focused gas producer Aurora Oil & Gas has been another very strong performer this year, to the benefit of all shareholders.
Directors Jonathan Stewart and Ian Lusted have had an added reward, courtesy of performance rights that vested last month.
Mr Stewart was able to acquire 900,000 shares worth $3.2 million at zero cost, while Mr Lusted was able to acquire 390,000 shares worth $1.3 million at zero cost.
Other directors to benefit from the conversion of performance rights include Macmahon Holdings’ Nick Bowen and Lycopodium’s Peter de Leo.
The big winners from share options include RCR Tomlinson’s Paul Dalgleish and Mermaid Marine’s Jeff Weber.
