Corporate Report for the year ended 30 June 2022
Introduction and overview
Business performance
Governance and risk
Directors’ report
Remuneration report
Financial statements
Sustainability supplement
Security holder information
LTI outcomes Value of FY19 LTI plan performance awards vested and lapsed in FY22 The FY19 LTI plan performance awards, which were granted on 22 August 2018 and 19 October 2018 for the CEO, and covered the performance period from 1 July 2018 to 30 June 2021, vested on 20 August 2021. The overall vesting outcome of the performance tests was as follows:
LTI grants Performance awards granted in FY22 The Board approved to extend the performance period from three years to four years for LTI plans commencing 1 July 2021. To support the transition to a four-year performance period, the Board approved that the FY22 LTI plan will consist of two tranches. Tranche 1 (50% of awards granted) has a three-year performance period (1 July 2021 to 30 June 2024) and Tranche 2 (50% of awards granted) has a four-year performance period (1 July 2021 to 30 June 2025). As a result of the ongoing economic uncertainty relating to COVID-19, the Board decided to continue to test performance relative to TSR hurdles only, with no FCF hurdles applying to the FY22 LTI Plan. Looking ahead - performance awards to be granted in FY23 For LTI awards commencing 1 July 2022, the Board approved the reintroduction of FCF as the second performance hurdle. The FY23 LTI Plan will have a four-year performance period, with 50% subject to relative TSR and 50% subject to FCF (excluding Capital Releases) 1 per security growth rate.
The FY23 LTI Performance awards for the FCF tranche will have a compound annual growth rate (CAGR) 2 range of between 14% and 18%. The CAGR in FCF 1 per security will be calculated from a base of FY22 FCF 1 , being 38.3 cents per security. The target growth range is considered to be appropriately challenging for Management, taking into account the budget and forecast estimates of the Group over the four-year plan period. It should be noted that there are a number of potential sources of uncertainty such as unforeseen changes in traffic patterns, as well as macro-economic factors and potential new growth opportunities. Should Management achieve these outcomes and deliver growth in FCF 1 in line with the target range, the Board considers the outcomes for Management and security holders would be strongly aligned.
% of units vest
Test type Result of test
TSR
Transurban ranked 10th highest out of 29 companies (67.8 percentile) (3.1%) compound annual growth rate in FCF per security over the
85.6%
FCF
0.0%
performance period. Target
range was 5.5% to 7.5% FCF growth per security
Overall vesting
42.8%
Free Cash Flow measure The target range for the FCF measure in the LTI plans considers forecast financial performance over the three years in which the award is measured. This three-year forecast reflects near-term FCF growth generated by the business together with planned activities that deliver value over the longer term. The Free Cash growth per security target over the performance period of the FY19 LTI plan achieved an outcome of 0%. This was due to the significant impact of COVID-19 pandemic restrictions over more than 16 months of the three-year performance period. Value of FY20 LTI plan performance awards to vest/lapse in FY23 The FY20 LTI plan (1 July 2019 to 30 June 2022) is scheduled to vest in August 2022. Reduced traffic and toll revenue across all regions due to the COVID-19 pandemic have continued to significantly impact the FCF component of this plan, with calculations indicating that 35.7% of awards will vest for eligible participants, derived entirely from relative TSR. Details of vesting for each Executive KMP will be included in next year’s Remuneration Report.
Current on-foot LTI plans and associated performance parameters
Base 38.3 cents/Target 14–18% Compared to select ASX150
FY23 Plan 4
FY22 Plan 3
Compared to select ASX150
Compared to select ASX150
FY21 Plan 3
Base 59.0 cents/Target 5.5–7.5% Compared to select ASX150
FY20 Plan 4
FCF Performance
TSR Performance
Vested 42.8%
FY19 Plan
1 July 2018
1 July 2019
1 July 2020
1 July 2021
1 July 2022
30 June 2023
30 June 2024
30 June 2025
30 June 2026
1 References to FCF in relation to FY23 LTI Plan exclude Capital Releases 2 T he FCF per security target range is calculated by adding each of the FCF budget and forecasts over the four-year performance period, and determining the CAGR required to achieve the 4-year aggregate FCF 3 S ingle performance measure of Relative TSR for the FY21 and FY22 plans 4 F CF Target: compound annual growth rate range
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