Annual report on remuneration
This part of the report has been prepared in accordance with Part 3 of The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 as amended and 9.8.8R of the Listing Rules. The following report will be subject to an advisory shareholder vote at the 2021 AGM, which is scheduled to be held on 4 November 2021. The information on pages 109 to 118 has been audited where indicated.
How will the Remuneration Policy be implemented in the year ending 31 May 2022? Executive Directors’ base salaries
The Committee has decided to award a salary increase to the Chief Executive Officer of 3%, which is in line with the average increase for the workforce of 3.1%. As set out in the Annual Statement, the base salary of the Chief Financial Officer is significantly below the market level for comparable roles and a base salary increase of approximately 4.9% above the level of the workforce with effect from 1 June 2021. The table below details the Executive Directors’ salaries as at 31 May 2021 and salaries which took effect from 1 June 2021: Base salary at 31 May Base salary at 1 June
2021 £000 451 285
2021 £000 465 308
% change
3% 8%
Chief Executive Officer Chief Financial Officer
Pension and benefits There will be no changes to benefits provision. Effective 1 December 2021, and conditional on the approval of the Directors’ Remuneration Policy at the 2021 AGM, the CEO’s and CFO’s pension provision will reduce from 5% of base salary and 10% of base salary, respectively, to the level of the wider workforce, which is currently 4.5%. These contributions are cash payments in lieu of formal pension contributions. Annual bonus The annual bonus maximum for the Chief Executive Officer and the Chief Financial Officer in 2021/22 will be 100% of salary with 75% based on the achievement of certain Adjusted operating profit and revenue targets and 25% based on the achievement of strategic targets as outlined on page 102. A financial underpin will apply to the revenue and non-financial bonus targets. To the extent they are no longer commercially sensitive, these targets will be disclosed in next year’s report. In addition, to ensure that this bonus opportunity results in shareholder alignment and provides greater retention value, 35% of any bonus payment will be deferred into nominal cost share options for two years. The bonus, nominal cost share options and associated dividend equivalents are also subject to malus and clawback provisions. Long Term Incentive Plan (LTIP) Subject to approval of the new Remuneration Policy it is intended that awards with a maximum value of 175% and 150% of base salary to the CEO and CFO respectively will be made under the LTIP shortly following the 2021 AGM. These will be subject to a two year post-vesting holding period for the Executive Directors. As well as the holding period, the executives have to achieve a shareholding requirement of 200% of salary (post shares sold to cover any tax) before they can sell any shares that vest, with these awards also counting towards the post-employment shareholding requirement. The awards are also subject to malus and clawback provisions. The vesting of these LTIP awards will be based on earnings per share (60%), a cash flow metric (30%) and a relative total shareholder return metric (10%). 15% of each element will vest at the threshold performance level, rising to 100% vesting at maximum. The proposed targets are as follows:
Metric
Weight
Threshold (15% vests)
Maximum (100% vests)
Earnings per share growth
60%
9% p.a.
22.5% or higher
Average cash conversion
30%
70%
80% or higher
Relative TSR vs FTSE 250 (excluding investment trusts)
10%
Median
Upper quartile or above
For performance between threshold and maximum, awards vest on a straight-line basis. The Committee believes that these three measures are transparent, easy to understand, easy to track and communicate, cost effective to measure and fundamentally aligned to the Group’s strategic goals.
NCC Group plc — Annual report and accounts for the year ended 31 May 2021
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