NCC Group plc Annual Report 2022

Remuneration Committee report continued Annual Report on remuneration continued

Annual bonus The annual bonus maximum for the Chief Executive Officer and the Chief Financial Officer in 2022/23 will be 125% 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 112. Awards will also be subject to he Committee’s assessment of the overall financial health of the business. 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) It is intended that awards with a maximum value of 175% and 150% of base salary to the incoming CEO and the CFO respectively will be made under the LTIP in September/October 2022. 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 (20%) and a relative total shareholder return metric (20%). 15% of each element will vest at the threshold performance level, rising to 100% vesting at maximum. As explained in the Annual Statement, the Committee has reviewed the targets and weightings to ensure they remain aligned with NCC’s growth strategy. As a result, the weightings will be changed to focus on growth by reducing the weighting on cash conversion and increasing the weighting on relative TSR. Cash conversion targets will be raised from the previous range of 70–80%, to a higher target of 80–90%. In addition, EPS targets will be set using the more exacting CAGR approach; the stretch target will be substantially above the consensus forecast and remain above the previous stretch level before LTIP award sizes were increased. The proposed targets are as follows:

Metric

Weight

Threshold (15% vests)

Maximum (100% vests)

Earnings per share growth

60%

6% CAGR

18% CAGR

Average cash conversion

20%

80%

90%

Relative TSR vs FTSE 250 (excluding investment trusts)

20%

Median

Upper quartile or above

For performance between threshold and maximum, awards vest on a straight-line basis. 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. These targets may be subject to amendment prior to the grant of awards in autumn 2022, if there is any significant change in outlook. Statement of shareholder voting The following votes were received from the shareholders in respect of the Directors’ Remuneration Report and in respect of the Remuneration Policy:

Remuneration Report (2021 AGM)

Remuneration Policy (2021 AGM)

% of votes cast

Total number of votes

For 1

229,989,664

93.00

217,981,169

87.43

Against

17,300,604

7.00

31,344,728

12.57

Total votes cast (for and against excluding withheld votes)

247,290,268

249,325,897

5,332,201

3,296,572

Votes withheld 2

Total votes cast (including withheld votes)

252,622,469

1 Includes Chair’s discretionary votes. 2 A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast “for” and “against” a resolution.