Annual Report and Accounts - Hemscott IR

More documents

Recommendations

Info

Directors’ Remuneration Report FOR THE YEAR ENDED 31 December 2012 Introduction This report sets out the Group’s remuneration policies for its directors and senior executives and describes how those policies are applied in practice. Unaudited information Remuneration committee chairman’s statement Dear Shareholder, As an introduction to our remuneration report, I want to highlight the key features of our remuneration policy and describe how these relate to the strategic achievements of the Group. This executive summary will fall into three parts; the context of our remuneration approach, including strategic goals; pay and incentive challenges and outcomes in the year; and future priorities. Context We remain committed to a remuneration policy that provides value for shareholders whilst retaining and motivating top quality executives: • Remuneration should be competitive and contribute to the delivery of short and long-term shareholder value; • Remuneration should contain significant performance related incentive elements; • All colleagues should be able to share in the success of the Group through participation in both annual bonus schemes and longer term share plans. The key strategic achievements which have driven the share price from around £2.23 on 5 December 2008 to £12.52 at the time of writing this report were: • Decisive and robust implementation of an emergency plan to manage costs and trading margins through the worst downturn in construction in living memory; • Transformation of the Group, through acquisitions and superior organic growth, to become the largest UK distributor and retailer of building materials from its previous number 3 position in the market; • Development of a balanced business model, selling all main material types to all main customer types, reducing segment risk; • Creation of market leading propositions in our trading businesses, leading to market outperformance and providing a platform for growth through network expansion; • Development of online trading capabilities through acquisition and expansion of the fastest growing national lightside multi-channel business, and use of this model to accelerate the multi-channel propositions of core businesses; • Creation of value adding shared central functions that support our trading businesses, capturing synergies across category management, buying, finance, supply chain and technology; • Strengthening management capabilities through the recruitment and development of members of the Group’s Executive Committee and middle management; • Adjusted EPS growth of 2.1%; • Free Cash flow generation of £242m. Our short and long term incentive performance measures are directly linked to driving and rewarding strategic growth initiatives and include the following; EPS, TSR, Cashflow, ROCE, and broader goals such as market share and health & safety. During the past 5 years, the basic salary increase of the executive committee and executive directors (other than through promotion ) has averaged 2% p.a, in line with all other colleagues in the business. Over the same period only 37% of variable pay potential has been triggered, despite our management team’s superior performance relative to competitors, which reflects the depressed state of the construction market. Pay and incentive challenges and outcomes 2012 was a very busy year for the Remuneration Committee. The full review of executive remuneration I mentioned in my statement last year was completed. As a result a number of changes were contemplated and we undertook an extensive consultation exercise with all our major shareholders. Further information on these proposals is attached in the separate letter from our Chairman. In addition, the Remuneration Committee needed to consider and determine the appropriate salary increase to reflect the promotion of John Carter to Deputy Chief Executive as well as remuneration arrangements for Tony Buffin, our new Group Finance Director who joins in 2013, replacing Paul Hampden Smith who will retire from the Group in September 2013. Again, we consulted with our major shareholders on both matters and the outcomes are described below. Deputy Chief Executive Officer As indicated in last year’s report, we commissioned specific external benchmarking work to assist us in determining an appropriate remuneration package for John Carter’s new role. The Committee considered a number of factors including external market data from independent experts and agreed that his base salary should increase to £500,000 per annum with effect from the date of his appointment. The structure of his total remuneration package will remain unchanged. We consulted with our major shareholders on this matter and again, we were pleased that a majority supported this decision. New Group Finance Director Tony Buffin is due to join the company on 8 April 2013 as Group Finance Director. He was previously employed by a company in Australia and had significant awards of earned, but deferred, cash compensation which he forfeited when he resigned. The structure of his remuneration package with Travis Perkins will be the same as other executive directors. The only addition will be a special, one-off award of deferred shares granted to him because they were vital in securing his services. He will be required to invest from his own resources £500,000 in the Company’s shares and will, in return, receive a share award on a 2:1 basis, half of which will vest after 1 year from the award date and the balance vesting 2 years from the award date, subject to continuing employment and performance targets in relation to his function being met. Other terms of the award, which will be granted pursuant to the authority contained in Listing Rule 9.4.2 R(2), will reflect the terms of the 2007 Share Matching Scheme. Full details of the award, as required by Listing Rule 9.4.3, will be disclosed in the next year’s Directors’ Remuneration Report. It is important to note that this one-off award only partially compensates Mr. Buffin for the awards he has forfeited. Major 64
TRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012 shareholders consulted on this matter were generally very supportive of this arrangement. Other In line with all other colleagues at management grades in the group, Executive Directors were not awarded an increase in basic pay in January 2013. This means that for the sixth successive year the same basic salary increase percentage has been applied to all management levels. The Remuneration Committee has agreed to review the position again in July 2013, when all management may become entitled to an increase of 1.5%, being the award given to colleagues below management grades in January 2013. Any increase made during the year will not be backdated. The Committee is delighted that more than 1,300 colleagues benefited from another pay-out under the Group’s Sharesave Scheme. In addition to this, executives benefited from the partial vesting of awards under the Performance Share Plan (‘PSP’) and, for the first time, full vesting of awards under the Share Matching Scheme (‘SMS’). Our executive directors are entitled to awards of up to 27% of their maximum opportunity under the Annual Bonus Plan as a result of the Group partially meeting the targets set for 2012 (which are described in more detail later in this report). These targets were set at a more stretching level in 2012, evaluated by considering the likely value of risks and opportunities pertaining to the Group’s annual budget. In 2012, the net risks were valued at the outset of the year at a higher level than in previous years. In 2013, the level of stretch has increased yet further. • Annual bonuses for Executive Directors are linked to performance on EPS, ROCE and strategic developments. The relevant strategic achievements during 2012 were: Successful delivery against plans for the second year of integration of the BSS businesses, including over achievement of synergy targets and design and initial implementation of new IT systems based on Travis Perkins’ proven merchanting technology; • Continued growth and roll out of the Toolstation business and branch network following acquisition of the remaining 70% of Toolstation’s equity in January 2012; • Further growth and deployment of Category Management, Global Sourcing and Supply Chain activities, achieving gross margin benefits ahead of plan, offsetting some margin pressure from an increasingly tough trading environment as the year progressed; • Development of strategic partnerships and investment in activities to position the Group strongly as a provider of sustainable building retrofit solutions ahead of the launch of the ‘Green Deal’; • Successfully trialling and launching a pilot for co-ordinated national, regional and area distribution facilities to support the phased introduction of multi-channel trading for all Group businesses. A proportion (20% of total bonus opportunity) of Executive Directors’ and other senior managers’ bonuses are based on achievement of quantified targets on a balanced scorecard covering financial metrics, relative performance on sales, market share and returns, potential for growth, business capabilities and business quality. This scorecard identifies annual targets that lead to a five-year ambition for development and performance of the business. The Remuneration Committee judged that management achieved performance on this scorecard at 60% of potential, with particular shortfalls against stretching targets on metrics for health and safety, and cash flow return on invested capital. Executives are awarded a bonus within the range determined by the Remuneration Committee, with the position in the range determined by the behaviour and attitude displayed by each individual, as assessed by their superior and reviewed by the CEO, Deputy CEO and Group HR Director. Future priorities We intend to maintain a strong correlation between the strategic drivers for shareholder value creation and the metrics used for long term and short term incentive schemes. We will continuously seek to improve our communication with shareholders both through learnings and guidance from the final BIS proposals as well as the open dialogue with shareholders which has been very helpful in shaping our thinking over the last 12 months. Following the successful integration of the BSS group of companies, it was necessary to plan for the next stage of our development to ensure that remuneration continues to support our aim to build sustainable shareholder value and give our senior managers opportunities to share in our success. After a period of extensive consultation both internally and externally with our major shareholders, the eventual proposal was as follows: “One change is proposed for variable pay. We plan to replace the current Annual Deferred Bonus Plan with a revised plan which does not increase the level of cash bonus potential, but provides an opportunity for an increased deferred share bonus. A material further condition that would be applied is that if the total shareholder return fails to meet future targets, that part of the bonus being delivered as a deferred share award would be subject to forfeiture conditions. Under our proposal, the executives cannot benefit from this element of annual bonus unless shareholders have the opportunity to benefit at the same time. We believe that these proposals represent a significantly more stringent and shareholder-oriented approach than found elsewhere. The remainder of the remuneration package will remain unchanged, although a significantly increased shareholding requirement for the executive directors is proposed of two times basic salary up from the current one times salary policy.” The full remuneration package is detailed in the policy table shown on pages 66 and 67. The Committee believes that the proposals, outlined above and in full detail in the separate Chairman’s letter, will support the Company achieving its goals and we are pleased that a majority of the shareholders we consulted gave their support. In all, we had 30 discussions (either in person or teleconference) with 14 major shareholders and representative bodies. Our remuneration policy Our Remuneration Policy is first and foremost designed to support the group goal of creating shareholder value through consistently outperforming in our markets. With this in mind, we continue to focus our efforts on achieving the right blend of fixed and variable remuneration and ensuring that our senior executives are paid at a level appropriate to the size of our group. We are mindful of our responsibilities to other stakeholders, especially employees, and GOVERNANCE 65
Page 1 and 2:
TRAVIS PERKINS PLC Travis Perkins T
Page 3 and 4:
T R A V I S P E R K I N S A N N U A
Page 5 and 6:
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16: T R A V I S P E R K I N S A N N U A
Page 17: T R A V I S P E R K I N S A N N U A
Page 20 and 21: Chairman’s Statement FOR THE YEAR
Page 22 and 23: Chief Executive’s Review of the Y
Page 24 and 25: C H I E F E X E C U T I V E ’ S R
Page 30 and 31: Post year end acquisition We expect
Page 32 and 33: Deputy Chief Executive’s Review o
Page 34 and 35: D E P U T Y C H I E F E X E C U T I
Page 40 and 41: Finance Director’s Review of the
Page 42 and 43: F I N A N C E D I R E C T O R ’ S
Page 44 and 45: F I N A N C E D I R E C T O R ’ S
Page 46 and 47: Statement of Principal Risks and Un
Page 48 and 49: Environmental Report FOR THE YEAR E
Page 50 and 51: E N V I R O N M E N T A L R E P O R
Page 52 and 53: Health and Safety Report FOR THE YE
Page 54 and 55: H E A L T H A N D S A F E T Y R E P
Page 56 and 57: Directors Robert Walker Geoff Coope
Page 58 and 59: Corporate Responsibility Statement
Page 60 and 61: Corporate Governance Board committe
Page 62 and 63: Corporate Governance Audit committe
Page 64 and 65: Audit Committee Report • The effe
Page 68 and 69: Directors’ Remuneration Report ta
Page 70 and 71: Directors’ Remuneration Report Re
Page 72 and 73: Directors’ Remuneration Report Ex
Page 74 and 75: Directors’ Remuneration Report Tr
Page 76 and 77: Directors’ Remuneration Report Ex
Page 78 and 79: Directors’ Report FOR THE YEAR EN
Page 80 and 81: Directors’ Report listed on the L
Page 82 and 83: Statement of Directors’ Responsib
Page 84 and 85: Income Statements FOR THE YEAR ENDE
Page 86 and 87: Balance Sheets As at 31 December 20
Page 88 and 89: Consolidated Statement of Changes i
Page 90 and 91: Cash Flow Statements FOR THE YEAR E
Page 92 and 93: NOTES TO THE FINANCIAL STATEMENTS
Page 94 and 95: NOTES TO THE FINANCIAL STATEMENTS D
Page 96 and 97: NOTES TO THE FINANCIAL STATEMENTS 4
Page 116 and 117:
NOTES TO THE FINANCIAL STATEMENTS 2
Page 118 and 119:
Page 120 and 121:
Page 122 and 123:
Page 124 and 125:
Page 126 and 127:
Page 128 and 129:
Page 130 and 131:
Page 132 and 133:
Five Year Record Consolidated incom
Page 134 and 135:
Notice of Annual General Meeting No
Page 136 and 137:
Notes to the Notice of Annual Gener
Page 138 and 139:
Directions to the Annual General Me
Page 140 and 141:
Other Shareholder Information recei
Page 142 and 143:
140 Shareholder Notes
Page 144:
TRAVIS PERKINS PLC Travis Perkins p
show all

Annual Report and Accounts - Hemscott IR

Create successful ePaper yourself

Delete template?

Save as template?