Explanation of JSOS: The JSOS amounts set out in the total remuneration table represent a theoretical gain on interests in the fourth tranche of JSOS shares purchased by the Executive Directors. None of the Executive Directors have realised any of their JSOS share interests and therefore no money has been received by any of the Executive Directors in this regard.
The JSOS scheme which was put in place prior to the Company's Admission in 2010, involves the Executive Directors investing their own funds to purchase a shared interest in the Company's shares at the market value at that time. These investments were made in 2010 (in the case of Tim Steiner, Neill Abrams and Mark Richardson) and in 2012 (in the case of Duncan Tatton-Brown and Mark Richardson again). The Executive Directors invested from their own resources. The purchased interests entitle the Executive Directors to a return only if, in the future, the share price exceeds the relevant hurdle rate. If the share price remains below the hurdle until the end of the scheme, the Executive Directors will lose their investment. For a detailed description of the JSOS scheme refer to pages 249 to 252 of the Prospectus.
The fourth and final tranche of JSOS shares vested in the period, on 1 January 2014. The calculation of the amount shown in the total remuneration table is based on the Company's share price on the next trading day, 2 January 2014, being 447 pence per share. This price was above the hurdle price of 228 pence per share for the fourth tranche (and above the hurdle price of 180 pence per share in respect of the additional fourth tranche held by Mark Richardson and Duncan Tatton-Brown) of JSOS share interests. Consequently, amounts of JSOS remuneration for 2014 are shown in the total remuneration table. This compares to zero in 2013 in respect of the third tranche of JSOS share interests, as on the equivalent vesting date in 2013 (being 2 January 2013) the Company's share price was 84.75 pence per share, below the hurdle price of 208 pence per share for the third tranche (and below the hurdle price of 170 pence per share in respect of the additional third tranche held by Mark Richardson and Duncan Tatton-Brown) of JSOS share interests. The third tranche of JSOS share interests at the 2013 vesting date had a value of zero and would have been rendered worthless had the share price remained at that level until the end of the scheme. Consequently no remuneration is shown for JSOS in 2013 in the total remuneration table.
An explanation of each element of remuneration paid in the table is set out in the following section.
The Company has obtained a written confirmation from each Executive Director that they have not received any other items in the nature of remuneration from the Group, other than those already disclosed in the total remuneration table.
Base Salary (audited)
During the period, the Remuneration Committee reviewed the salaries of the Executive Directors. After taking into account a number of relevant factors which are discussed in more detail below, the Remuneration Committee recommended that all basic salaries (other than Jason Gissing's) be increased. The following table shows the change in each Executive Director's salary.
|Tim Steiner||550,000||450,000||1 April 2014|
|Neill Abrams||285,000||275,000||1 April 2014|
|Mark Richardson||340,000||330,000||1 April 2014|
|Duncan Tatton-Brown||340,000||330,000||1 April 2014|
- Jason Gissing received no increase in base salary in light of his retirement on 7 May 2014.
The changes to base salary were made in line with the Directors' remuneration policy. The Executive Directors (except the Chief Executive Officer) received an increase in base pay of £10,000 each which was in line with the percentage salary increases for the monthly paid employees of the Group in the period. The Remuneration Committee decided to increase the base salary of the Chief Executive Officer more significantly than this after taking into account the changes in the complexity and scale of the role due to the transaction with Morrisons, which was completed in July 2013. The increases, which position the salaries broadly around the market median for a company of the Company's size and complexity, also aim to help retain the Executive Directors.
Taxable benefits (audited)
The Executive Directors received taxable benefits during the period, notably private medical insurance. The Executive Directors also received other benefits, which are not taxable, including life assurance and Group-wide employee benefits, such as an employee product discount. The remuneration arrangements for the Executive Directors do not include a company car or car cash allowance.
The Company made pension contributions on behalf of the Executive Directors to the defined contribution Group personal pension scheme (which is administered by Standard Life). The employer contributions to the pension scheme in respect of each Executive Director are made in line with the Group personal pension scheme for all employees (the rates being, for employees and Executive Directors joining the pension scheme before May 2013, from 3% up to 8%, and for employees joining the scheme after May 2013, from 3% up to 6%, depending on the number of years the employee or Executive Director has participated in the scheme). The contributions during the period made on behalf of the Executive Directors were 8% of base salary, except in the case of Duncan Tatton-Brown, which was 6% of base salary during the period, and has subsequently increased to 7% effective from January 2015, in accordance with the generally applicable rules of the scheme.
These contributions were made in line with the Directors' remuneration policy which allows the Company to make employer contributions of up to 30% of base salary.
During the period the Remuneration Committee reviewed this policy and the Company's pension arrangements, including the employer contribution rates for the Executive Directors. The market data illustrated that the existing Company pension contributions are materially below the market median rate when compared with similar senior executive roles in companies of a similar size and complexity to the Company.
The Remuneration Committee recommended to the Board that all pension contribution rates for the Executive Directors not be changed. In reaching its decision the Remuneration Committee took into account the Director's remuneration policy, relevant market data (presented by Deloitte), the overall remuneration package of the Executive Directors (presented by management) and the recent changes made to the remuneration of the Executive Directors, including the introduction of long-term incentive arrangements. The Company's overall policy is to seek to position a larger proportion of the remuneration package as equity-based and performance-related in order to support the Company's strategic objectives of high growth and expansion and to create shareholder alignment. The recent introduction of the LTIP and the GIP supports this emphasis in the policy. So while the alignment of the Company's pension arrangements with the market may become crucial in future to ensure the Company remains competitive, an increase in pension contributions for the Executive Directors was not considered appropriate at this time.
During the period, the Remuneration Committee agreed to allow pension contributions to be made to the Executive Directors as a cash allowance where the Executive Director has reached either the HMRC annual limit or HMRC lifetime allowance limit for pension contributions. Such change was provided for in the Directors' remuneration policy.
Annual Incentive Plan (audited)
The Remuneration Committee re-examines the design of the AIP each year to incentivise the delivery of key business objectives and individual performance for that financial year. The 2014 AIP was based on the performance targets and weightings set out below.Financial performance measures, namely Gross sales and EBITDA, were the primary targets, with 80% of the annual bonus being determined by performance against targets set by the Remuneration Committee at the start of the financial year, by reference to the Company's budget for the period. Of the balance, 20% related to individual objectives for each of the Directors, largely independent of the financial objectives. Each target was discrete and could be earned separately. The Chief Executive Officer had a maximum bonus opportunity of 125% of salary and the other Executive Directors had a maximum opportunity of 100% of salary.