Annual Report and Accounts - Hemscott IR

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Directors’ Remuneration Report take into account remuneration elsewhere in the Group when setting pay for senior executives. A key principle applied for directors and colleagues throughout the Group is that base salaries should be competitive and set at the median for the relevant comparator group. Appropriate levels of incentives are just as important. External guidance received indicates that over the longer term, more than 50% of total remuneration should be performance related. The framework we now have in place means that if all incentives vested at their maximum, 80% of total remuneration would be performance related. In determining our policy, all associated risks are considered, so that the overall remuneration structure and targets in incentive schemes do not give rise to any undue risk taking. We believe that it is important for all our most senior executives to build up a shareholding in the Company and so going forward we are increasing this requirement for Executive Directors to two times basic salary. Participation in our long term incentive schemes will be restricted or withdrawn if the required shareholding is not acquired and maintained. At 31 December 2012 all senior executives had exceeded their target level of holdings. We take into account a number of factors when setting targets for our incentive schemes. Taken together, they represent a balance that means executives should not be unduly rewarded for one-off, short term factors. Instead, performance over and above stretching targets should result in greater shareholder value and, in turn, higher rewards for executives. Remuneration elsewhere in the Group The Committee takes into account remuneration packages available to all colleagues when considering executive pay. As with many companies, senior management participate in a wider rage of incentives than the majority of colleagues. We recognise that we have to operate on this basis to attract and retain high-quality managers. All colleagues are entitled to a competitive remuneration package that includes basic pay, bonus, pension, Sharesave, Buy as You Earn shares, colleague discount, a range of ‘voluntary benefits’, taxefficient childcare vouchers and paid annual leave. We have recently taken steps to ensure that all colleagues will have life insurance cover in 2013. The Group operates a number of pension schemes and is in the process of streamlining these arrangements as pensions autoenrolment approaches. Over 10,000 colleagues are active members of a Group pension scheme. Contribution rates made by the Group range from 1% to 20% of salary under the defined contribution scheme whilst over 2,400 colleagues are active members of a defined benefit scheme where company contribution rates will be 10.3% for the BSS Group scheme and 13.1% for the Travis Perkins scheme. None of the executive directors are active members of a company pension scheme, primarily as a consequence of recent changes in tax rules. Instead, the Company pays a gross cash allowance at 25% of salary. As this allowance is fully taxed, unlike the contributions to an approved pension scheme, the equivalent net benefit for executive directors is currently 12% of salary. Key elements of remuneration Purpose and link to strategy Operation Performance metrics Base salary Core element of total package, essential to support recruitment and retention of top quality executives. Reviewed annually as at 1 January. Factors influencing decisions include: · Role, experience and individual performance; · Total group salary budgets; · Pay awards elsewhere in the Group; · External market; · General economic environment. Benchmarked against FTSE 75-125 companies and sector. None. Benefits Maintain competitive package with range of benefits for the director and their family Directors are entitled to: · Private medical insurance ; · Income protection; · Annual leave – 28 days; · Fully expensed company car, or cash alternative; · Life insurance at 5 times salary. None. Pension Help executives provide for retirement. Aids retention. No director actively participates in a defined benefit pension scheme. A cash allowance at 25% (gross) of base salary is paid to each director. This is subject to statutory deductions and results in a net benefit of 12% of salary. None. 66
TRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012 Purpose and link to strategy Operation Performance metrics Deferred share bonus plan Rewards achievement of annual financial and key business strategy objectives. Rewards personal performance measured against key objectives. Deferred element encourages longer term shareholding. Clawback and forfeiture provisions discourage excessive risk taking and short term outlook ensuring that executive and shareholder interests are aligned. Targets are set annually in line with the performance metrics (see aside). Relative weighting of metrics subject to discretion of Committee annually. Total bonus level is determined after the year end, based on achievement of targets. 50% of the total bonus will be paid in cash within 4 months of the year end. Remainder of total bonus deferred in share bonus bank. No withdrawals from bonus bank until after year 2. From year 3, annual withdrawal of 50% of shares held in bonus bank. Shares in bonus bank subject to clawback and forfeiture. For 2013 the maximum opportunity will be CEO 180% DCEO 150% GFD 150% There will be no increases to these percentages in future years without prior shareholder approval. Bonus measures and weightings: EPS 50% ROCE 30% Business strategy 20% Financial targets based on group Annual Operating Plan (‘AOP’) with no bonus paid if outcome is less than 95% of AOP. The target bonus levels are 50% of the maximum. Shares held in the bonus bank are subject to forfeiture if target share prices are not achieved. Target share prices are based upon the average share price during the bonus year inclusive of a compounded long-term equity rate of return (currently 8%). The banked shares are split into two equal tranches. Tranche 1 vests if after one year, by comparison to the highest 30 day average share price during the period, the target share price is met. If the target share price is not met 50% of tranche 1 is forfeited. Tranche 2 vests if after two years, by comparison to the highest 30 day average share price during the period, the target share price is met. If the target share price is not met at the end of two years 50% of tranche 2 is forfeited. In determining achievement of target share prices dividends paid per share during the period will be added. Performance share plan Incentivises participants to deliver key financial targets over a longer term. Helps retain top quality executives. Share matching scheme Awards, in the form of nil-cost options, are made annually to participants. Awards vest after 3 years subject to achievement of performance measures (see aside). Participants will only participate if they meet the shareholding requirements set by the Committee. The maximum annual award for all executive directors is 150% of salary. Performance measures and weightings are: EPS growth 40% Aggregate cashflow 40% Relative TSR 20% Cashflow targets are set for each award based on the Group’s projections for the next 3 years. From 2013 TSR awards made will be measured against the FTSE 50 to 150 index better reflecting the position of the business. EPS growth has to be a minimum of 3% p.a. in addition to RPI over 3 years with full vesting at 10% p.a. plus RPI. GOVERNANCE Encourages participants to build up a shareholding in the company. Incentivises participants to deliver key financial targets over a longer term. Helps retain top quality executives. Participants are invited to participate annually. Each participant buys shares from their own resources with a value of up 50% of their post-tax base salary. Matching share award on a 2:1 basis made to each participant. Matching share award is in the form a nil-cost option which will vest after 3 years subject to achievement of performance target (see aside). Performance target is Cash Return on Capital Employed (CROCE). Vesting range is based on company’s projections for next 3 years. Shareholding requirements Aligns the interests of executives and shareholders. Formal requirements (not voluntary guidelines) apply to directors and senior executives. Participation in long-term incentives will be scaled back, or withheld, if the requirements are not met and maintained. From 2013, executive directors are required to hold shares valued at two times salary within 5 years. None. 67
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TRAVIS PERKINS PLC Travis Perkins T
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T R A V I S P E R K I N S A N N U A
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Five Year Record Consolidated incom
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140 Shareholder Notes
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Annual Report and Accounts - Hemscott IR

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