The following section provides details of how SIG's Remuneration Policy was implemented during the financial year ended 31 December 2015 and how it will be implemented in 2016.
The Remuneration Committee
The key responsibilities of the Remuneration Committee are to:
- Determine the Remuneration Policy for Executive Directors and such other members of the Executive Management as it is designated to consider;
- Design specific remuneration packages which include salaries, bonuses, equity incentives, pension rights and benefits;
- Review the Executive Directors' service contracts;
- Ensure that failure is not rewarded and that steps are always taken to mitigate loss on termination, within contractual obligations;
- Review remuneration trends across the Group; and
- Approve the terms of and recommend grants under the Group's incentive plans.
The Committee's Terms of Reference, which are reviewed regularly, are set out on the Company's website www.sigplc.com.
As at 31 December 2015, the Committee comprised the five independent Non-Executive Directors of the Company, all of whom are considered to be independent within the definition set out in the Code.
|Chairman of the Committee||Members|
|Mr C.V. Geoghegan||Ms J.E. Ashdown, Mr M. Ewell,|
Mr J.C. Nicholls and Ms A. Abt
During the year the Committee met four times. Attendance by individual members of the Committee is disclosed in the Corporate Governance section of the Directors' Report in the Attendance at Board and Committee meetings table.
Only members of the Committee have the right to attend Committee meetings. The Chairman of the Board, Chief Executive, Group Human Resources Director and Company Secretary attend the Committee's meetings by invitation, but are not present when their own remuneration is discussed. The Committee also takes independent professional advice, on an ad hoc basis, as required. See External Advisors for more details.
The Committee reviews its own performance annually and considers where improvements can be made as appropriate.
Key Activities of the Committee in 2015
The Committee met four times in 2015. Its key activities included:
- Annual review of Executive Director salaries;
- Considering performance outcomes for the annual bonus and long-term incentives in respect of performance to31 December 2014 and 2015;
- Calibration of award levels and targets for the 2015 LTIP awards for the Executive Directors;
- Review of the Non-Executive Chairman's fees;
- Review of the Committee's Terms of Reference;
- Preparation of the 2014 and 2015 Directors' Remuneration Report;
- Implementation of clawback provisions in respect of the annual bonus scheme, deferred bonus scheme and LTIP;
- Review and approval of performance outcomes and vesting of LTIP awards granted in 2012;
- Review of the LTIP, consideration of potential revisions and related Shareholder consultation; and
- Preparation for the 2015 AGM.
Kepler (a brand of Mercer), an independent firm of remuneration consultants appointed by the Committee after consultation with the Board, continued to act as the remuneration advisor to the Committee during the year. Kepler attends Committee meetings and provides advice on remuneration for Executives, analysis on all elements of the Remuneration Policy and regular market and best practice updates. Kepler reports directly to the Committee Chairman and is a signatory to, and abides by the Code of Conduct for Remuneration Consultants of UK-listed companies (which can be found at www.remunerationconsultantsgroup.com). Kepler's parent, Mercer, does not provide any other services to the Company. The Committee is satisfied that the advice it receives from Kepler is independent. Kepler's fees for the year in relation to advice to the Committee were charged on a time and materials basis and totalled £10,750 (2014: £20,300).
Deloitte LLP, external Auditor to the Group, has, when requested, performed specific procedures on the LTIP calculations at the end of the respective performance periods. Deloitte LLP was asked to perform this service in 2015 and received fees for this service which totalled £2,000 (2014: £nil).
Shareholder Vote at THE 2015 AGM
The following table shows the results of the advisory vote on the Annual Report on Remuneration of the 2014 Directors' Remuneration Report at the 14 May 2015 AGM:
|For||Against||Total votes cast||Votes Withheld|
|Annual Report on Remuneration||Total number of votes||465,616,304||1,185,417||466,801,721||936,099|
|% of votes cast||99.7%||0.2%||100%||0.2%|
The current Remuneration Policy was approved by Shareholders with a 99.7% vote 'for' at the 2014 AGM.
Single TOTAL Figure of Remuneration for Executive Directors (AUDITED)
The table below sets out the single total figure of remuneration received by each Executive Director for the year to 31 December 2015 and the prior year:
|Executive Director||Base salary1|
|Taxable Benefits2 |
|Mr S. R. Mitchell||2015||558||26||83||–||101||–||768|
|Mr D. G. Robertson||2015||336||29||50||–||59||–||474|
The figures in the table above have been calculated as follows:
- Base salary/fee: amount earned for the year.
- Benefits: comprising company car, medical and permanent health insurance.
- Pension: the Company's pension contribution during the year of 15% of salary, an amount of which was paid by salary supplement.
- Annual bonus: payment for performance during the year (including deferred portion).
- LTIP: the value at vesting of awards vesting on performance over the three year periods ended 31 December 2015 and 31 December 2014. For the 2015 figure, given that vesting occurs in April 2016, after the Directors' Remuneration Report is finalised, the figures are based on the average share price in the last three months of 2015 of 143.6p.
- Other: includes SIP, value based on the face value of matching shares at grant.
- During 2015 Mr C. J. Davies, who retired from the Board on 28 February 2013, received £65,000 on the exercise of his outstanding LTIP awards.
- Both S.R. Mitchell and D.G. Robertson have taken the decision to waive their entitlement to their 2015 annual bonuses.
Incentive Outcomes for 2015
Annual bonus in respect of 2015
In 2015, the maximum bonus opportunity for Executive Directors was 100% of salary. 90% of bonus was based on financial performance (of which 15% related to savings from the Group Strategic Initiatives), and 10% on Health & Safety. For the financial performance element, 55% of bonus was linked to underlying PBT, 20% of bonus to the Group's Return on Capital Employed ("ROCE") and 15% to savings from the Group Strategic Initiatives.
Further details of the bonuses paid, including Group and individual targets set and performance against each of the metrics, are provided in the tables below:
Financial element outcomes
(% of salary)
|Performance targets||Actual performance||Payout|
(% of salary)
|ROCE (%) Year to 31 Dec 15||20%||n/a||11.6%||n/a||9.3%||0%|
|Cumulative savings from the Group Strategic Initiatives||15%||£20.0m||£30.0m||n/a||£22.7m||7.7%|
Non-financial element outcomes
|Executive Director||Objectives for the year||Payout (% of salary)|
|Mr S. R. Mitchell||Target against the delivery of the Health & Safety objective||10% (out of 10%)|
|Mr D. G. Robertson||Target against the delivery of the Health & Safety objective||10% (out of 10%)|
The Committee reviewed Health & Safety performance during the year, focusing on the Group's Accident Incident Rate ("AIR") and Health & Safety initiatives, and determined that the targets were achieved in full, and 10% of bonus (out of a maximum of 10%) was payable.
Therefore, based on performance, an outcome of 17.7% (out of a maximum of 100%) in respect of both financial and non-financial elements was warranted for both Executive Directors.
The Executive Directors have taken the decision to waive their 2015 bonuses in light of Group financial performance.
Overall bonus outcomes
|Executive Director||Financial element bonus outcome (% of salary)||Personal element bonus outcome (% of salary)||Overall bonus outcome (% of salary)|
|Mr S. R. Mitchell||7.7%||10%||0% (waived)|
|Mr D. G. Robertson||7.7%||10%||0% (waived)|
As stated earlier, as a result of 2015 Group financial performance, both S.R. Mitchell and D.G. Robertson have taken the decision to waive their 2015 annual bonuses.
Long-term Incentive Plan: 2013 Awards
On 18 April 2013, Mr S. R. Mitchell and Mr. D. G. Robertson received an award of 363,036 and 214,191 nil-cost options respectively under the 2004 LTIP. Vesting of the award was dependent on three year average ROCE, defined as underlying operating profit after tax divided by average net assets plus average net debt (representing two-thirds of the award), and three year cumulative underlying EPS performance (representing the remaining one-third of the award). There was no re-testing of performance. The performance targets are illustrated below:
ROCE element of the award (2/3rd)
Average ROCE 2013-2015
(operating profit after tax divided by the sum of total equity plus net debt)
EPS element of the award (1/3rd)
Cumulative underlying EPS 2013-2015
For the ROCE element, if three year average ROCE over the three financial years ending 31 December 2015 is less than or equal to 9%, no shares will vest. Awards vest in full for ROCE of 13% or higher and vesting is on a straight line basis between these two points.
For the EPS element, if cumulative underlying EPS over the three financial years ending 31 December 2015 is less than or equal to 30p, no shares will vest. Awards vest in full for cumulative EPS of 40p or higher and vesting is on a straight line basis between these two points.
Actual average ROCE was 9.47% and cumulative underlying EPS was 33.5p, which resulted in the vesting of c. 7.78% and c. 11.67% of the maximum award respectively. 19.5% of the total award will therefore vest on 18 April 2016, subject to continued employment.
|Performance measure||Actual performance||Vesting outcome (% of maximum)|
|Three year average ROCE||9.47%||7.78%|
|Three year cumulative underlying EPS||33.5p||11.67%|
As disclosed in the Remuneration Policy, the Company has established the principle of requiring Executive Directors to build up and maintain a beneficial holding of shares in the Company equivalent to a minimum of 200% of base salary. Under normal circumstances it is expected that this should be achieved within five years of appointment. It is anticipated that the satisfaction of this target will be mainly achieved by the vesting of shares through the Company's share plans. Executive Directors' current holdings as measured against the guideline is disclosed in Directors' Shareholding (Audited).
Long-term Incentive Plan: 2015 Awards
On 17 September 2015, Mr S. R. Mitchell and Mr D. G. Robertson were granted awards under the LTIP of 455,838 and 274,323 shares respectively; details are provided in the table below. The three year period over which performance will be measured will be 1 January 2015 to 31 December 2017. The award is eligible to vest in its entirety on the third anniversary of the date of grant (i.e. 16 September 2018), subject to ROCE and EPS performance. Executive Directors will additionally be required to hold any vested awards for a further two year period, to encourage long-term decision-making and further improve shareholder alignment.
|Executive Director||Date of grant||Awards made|
during the year
at date of award
at date of award
at date of award
(% of salary)
|Mr S. R. Mitchell||17 September 2015||455,838||183.7p||£837,375||150%|
|Mr D. G. Robertson||17 September 2015||274,323||183.7p||£503,932||150%|
These awards will vest based on three year average ROCE (representing two-thirds of the award) and three year cumulative underlying EPS (representing one-third of the award). The performance targets are illustrated below:
ROCE element of the award (2/3rd)
Average ROCE 2015-2017
(operating profit after tax divided by the sum of total equity plus net debt)
EPS element of the award (1/3rd)
Cumulative underlying EPS 2015-2017
For the ROCE element, if three year average ROCE over the three financial years ending 31 December 2017 is less than or equal to 11%, no shares will vest. Awards vest in full for ROCE of 14% or higher and vesting is on a straight line basis between these two points.
For the EPS element, if cumulative underlying EPS over the three financial years ending 31 December 2017 is less than or equal to 38p, no shares will vest. 25% of the award will vest for EPS of 38p, and the award will vest in full for cumulative EPS of 48p or higher; vesting is on a straight line basis between these two points.
As in previous years, the ROCE and EPS targets have been calibrated with reference to analysis based on internal and external data and the Committee's view of what it believes will provide an appropriate level of stretch.
In order to ensure targets remain commensurately stretching with what was intended at the outset, and also to ensure a fair outcome for both participants and Shareholders, the Committee has discretion to adjust the targets as appropriate, e.g. to reflect changes in capital, merger and acquisition activity, and any other reason the Committee determines in its absolute discretion. Further, if such discretion is exercised, the Committee undertakes to disclose the rationale for its decision in the Annual Report on Directors' Remuneration the following year.
Single TOTAL Figure of Remuneration for Non-Executive Directors
The table below sets out the single total figure of remuneration received by each NED for the year to 31 December 2015 and the prior year:
|Base fee £'000||Additional fees £'000||Total fees £'000|
|Mr L. Van de Walle (Chairman)||167||164||–||–||167||164|
|Ms A. Abt (appointed 12 March 2015)||38||–||–||–||38||–|
|Ms J. E. Ashdown||48||47||–||–||48||47|
|Mr M. Ewell||48||47||–||–||48||47|
|Mr C. V. Geoghegan||48||47||10||10||58||57|
|Mr J. C. Nicholls||48||47||10||10||58||57|
No exit payment was made to any Director during the year (2014: £nil).
Payments TO FORMER DIRECTORS
During 2015, Mr C.J. Davies, who retired from the Board on 28 February 2013, received £65,000 on the exercise of his outstanding LTIP awards. These awards vested on 26 April 2015 based on performance over the three year performance period pro-rated to his period of service.
In 2014, Mr C.J. Davies received £85,000 in salary and £3,000 in benefits in the period to 28 February 2014.
Implementation of Remuneration Policy for 2016
The Committee agreed that base salaries for the Chief Executive, Group Finance Director and Senior Leadership Team ("SLT") would remain unchanged and would not increase for 2016. The average salary increase across the remainder of the Group for each territory/business for 2016 is 1.5%.
|Executive Director||2016 salary|
|S. R. Mitchell||558,250||558,250||0%|
|D. G. Robertson||335,955||335,955||0%|
Pension and benefits
The Executive Directors will continue to receive pension contributions of 15% of base salary and receive benefits in line with the policy.
The maximum annual bonus opportunity for Executive Directors in 2016 will remain unchanged from the opportunity in 2015 of 100% of salary.
As in 2015, the 2016 bonus will be linked 55% to Group underlying PBT, 20% to ROCE, 15% to savings from the Group Strategic Initiatives and 10% to Health & Safety. As was the case last year, the Committee has determined that performance targets will not be disclosed on a prospective basis for reasons of commercial sensitivity, but will be disclosed on a retrospective basis in the following year's report. In 2016, financial performance objectives in respect of the bonus, will be measured based on budgeted exchange rates at the start of the year. This approach is in line with prevailing market practice, was applied in 2015 (in respect of financial performance) and will be consistently applied in 2016 and future years. Financial performance in respect of the LTIP will continue to be based on actual exchange rates, in line with market practice.
As in 2015 and in line with the Remuneration Policy, one-third of the annual bonus will be deferred in SIG shares for a period of three years.
As set out in last year's report, malus and clawback provisions apply to the annual bonus from the performance year ending 31 December 2015 (i.e. payments from 1 January 2016).
In advance of each LTIP cycle, the Committee reviews the performance measures and corresponding targets to ensure they are appropriately stretching over the performance period. The Committee intends to make LTIP awards in September 2016, and will determine the appropriate measures and targets closer to the time and disclose them in the 2016 Annual Report on Remuneration.
Malus and clawback
As mentioned in the Chairman's Letter, the Committee last year noted the requirement for both malus and clawback provisions to be included in incentives under the updated UK Corporate Governance Code. The Committee took action in 2015 in order to implement clawback provisions in the Company's incentive schemes. Malus and clawback provisions are in place for awards made in and after September 2015 in respect of the LTIP, and for awards made on or after 1 January 2016 in respect of the Deferred Share Bonus Plan ("DSBP") and annual bonus.
Chairman and Non-Executive Director fees
With effect from 1 May 2015, the fee payable to the Chairman of the Board is £168,000 p.a. and the basic fee payable to each Non-Executive Director is £48,204 p.a. The fees payable for chairing the Audit and Remuneration Committees are £10,000 and £8,000 p.a. respectively. The additional fee paid for being Senior Independent Director is £2,000 p.a. Non-Executive Director fees are reviewed in May each year.
Percentage Change in Chief Executive Remuneration
The table below shows the percentage change in the Chief Executive's remuneration from the prior year compared to the average percentage change in remuneration for all other employees being the SLT. To provide a meaningful comparison, the analysis includes only salaried employees and is based on a consistent set of employees, i.e. the same individuals appear in the 2015 and 2014 populations.
Given that the Company operates across a number of diverse economies with pay levels and structures reflecting local market conditions, the Committee believes that using the SLT as a subset for purposes of comparing Chief Executive pay against wider employee pay provides a more meaningful comparison than using pay data for all employees.
|Chief Executive £'000||Other|
|2015||2014||% change||% change|
|Annual performance bonus (including deferred element)||–||314||(100.0)%||(71.7)%|
1 The Chief Executive will not receive a salary increase for 2016.
Relative importance of spend on pay
The table below shows the percentage change in total employee pay expenditure and Shareholder distributions (i.e. dividends and share buybacks) from the financial year ended 31 December 2014 to the financial year ended 31 December 2015.
|Distribution to Shareholders||27.6||26.0||6.2%|
The Directors are proposing a final dividend for the year ended 31 December 2015 of 2.91p per share (2014: 2.98p).
The graph overleaf shows the Company's Total Shareholder Return ("TSR") performance (share price plus dividends paid) compared with the performance of the FTSE All Share Support Services Index over the six year period to 31 December 2015. This index has been selected because the Company believes that the constituent companies comprising the FTSE All Share Support Services Index are the most appropriate for this comparison as they are affected by similar commercial and economic factors to SIG. The table below details the Chief Executive's single figure of remuneration and actual variable pay outcomes over the same period.
Historical TSR performance
Growth in value of a hypothetical £100 holding over the seven years to 31 December 2015.
|Incumbent||C.J. Davies||C.J. Davies||C.J. Davies||C.J. Davies||C.J. Davies1||C.J. Davies||C.J. Davies||S.R. Mitchell2||S.R. Mitchell||S.R. Mitchell3|
|Chief Executive single figure of remuneration (£000)||1,354||1,087||1,065||1,024||1,031||88||n/a||987||968||768|
|Annual bonus outcome (% of maximum)||45%||59%||96%||54%||50%||n/a||n/a||60.5%||57.0%||0%|
|LTIP vesting outcome (% of maximum)||0%||0%||0%||0%||0%||0%||10.5%||n/a||n/a||10.5%|
- The figures shown pertain to the period 1 January 2013 to 31 December 2013 (includes remuneration in lieu of salary, pension and other benefits after 1 March 2013).
- Mr S. R. Mitchell was appointed to the Board on 10 December 2012 and became the Chief Executive on 1 March 2013. The 2013 figure pertains to the period 1 January 2013 to 31 December 2013.
- Mr S.R. Mitchell has taken the decision to waive his entitlement to the 2015 annual bonus.
Directors' Interests in SIG Shares (audited)
The interests of the Directors in office at 31 December 2015, and their families, in the ordinary shares of the Company at the dates below were as follows:
|31 December |
2015 or date of appointment
|Ms A. Abt (appointed 12 March 2015)||8,500||—|
|Ms J. E. Ashdown||33,450||21,700|
|Mr M. Ewell||16,450||8,600|
|Mr C. V. Geoghegan||40,000||40,000|
|Mr J. C. Nicholls||14,200||14,200|
|Mr S. R. Mitchell||176,474*||165,460*|
|Mr D. G. Robertson||112,586*||61,489*|
|Mr L. Van de Walle||75,000||50,000|
* Includes shares purchased under the SIP.
There have been no changes to shareholdings between 1 January 2016 and 8 March 2016 save that on 15 January 2016 when Mr S. R. Mitchell and Mr D. G. Robertson acquired a further 111 shares each under the SIG plc Share Incentive Plan ("SIP"), and on 15 February 2016 when Mr S. R. Mitchell and Mr D. G. Robertson acquired a further 119 shares each under the SIP.
None of the Directors had an interest in the shares of any subsidiary undertaking of the Company or in any significant contracts of the Group. Details of Directors' interests in shares and options under SIG long-term incentives are set out below.
Directors' Shareholding (audited)
The table below shows the shareholding of each Director against their respective shareholding requirement as at 31 December 2015:
|Shares held||Nil-cost options held|
|Owned outright or vested||Vested but subject to holding period||Vested but not exercised||Unvested and subject to performance conditions||Unvested and subject to deferral||Shareholding required (% basic salary)||Current shareholding/|
(% of basic salary/basic fee)
|S. R. Mitchell||176,474||–||–||1,285,502||106,938||200||45||No|
|D. G. Robertson||112,586||–||–||769,331||99,568||200||48||No|
|J. E. Ashdown||33,450||100|
|C. V. Geoghegan||40,000||120|
|J. C. Nicholls||14,200||42|
|L. Van de Walle||75,000||64|
* Based on SIG share price of 143.6p as at 31 December 2015.
Directors' Interests in SIG Share and Option Plans (Audited)
|Mr S. R. Mitchell||17/09/2015||183.7p||455,838||837,375||01/01/2015 – 31/12/2017||17/09/2020 – 16/09/2025|
|18/09/2014||176.8p||466,628||825,000||01/01/2014 – 31/12/2016||18/09/2019 – 17/09/2024|
|18/04/2013||151.5p||363,036||550,000||01/01/2013 – 31/12/2015||18/04/2016 – 17/04/2023|
|Mr D. G. Robertson||17/09/2015||183.7p||274,323||503,932||01/01/2015 – 31/12/2017||17/09/2020 – 16/09/2025|
|18/09/2014||176.8p||280,817||496,485||01/01/2014 – 31/12/2016||18/09/2019 – 17/09/2024|
|18/04/2013||151.5p||214,191||324,500||01/01/2013 – 31/12/2015||18/04/2016 – 17/04/2023|
|Deferred Bonus Plan|
|Mr S. R. Mitchell||31/03/2015||202.3p||51,646||104,499||n/a||31/03/2018 – 30/03/2025|
|31/03/2014||201.1p||55,292||111,192||n/a||31/03/2017 – 30/03/2024|
|Mr D. G. Robertson||31/03/2015||202.3p||31,081||62,889||n/a||31/03/2018 – 30/03/2025|
|31/03/2014||201.1p||32,078||64,509||n/a||31/03/2017 – 30/03/2024|
|18/04/2013||149.95p||36,409||54,594||n/a||18/04/2016 – 17/04/2023|
Under the SIP, the Company matches up to the first £20 of savings made each month by the employee which is used to purchase matching shares on a monthly basis. Mr S. R. Mitchell and Mr D. G. Robertson participated in the SIP in 2015.
The market price of the shares at 31 December 2015 was 143.6p and the range during 2015 was 119.0p to 211.2p.
There were 40,083 options exercised by the Directors in 2015 (2014: nil) and the aggregate of the total theoretical gains on option exercised by the Directors during 2015 amounted to £68,141 (2014: £nil). This is calculated by reference to the difference between the closing mid-market price of the shares on the date of exercise and the exercise price of the options, disregarding whether such shares were sold or retained on exercise, and is stated before tax.
Mr D. G. Robertson was appointed a Non-Executive Director of HSS Hire Group plc on 12 January 2015. He receives a fee of £50,000 per annum which he retains. Mr S.R. Mitchell does not receive a fee for his position of Non-Executive Director with Enactus UK.
Approval of the directors' remuneration report
The Directors' Remuneration Report was approved by the Board of Directors on 8 March 2016 and signed on its behalf by Chris Geoghegan, Chairman of the Remuneration Committee.
Chairman of the Remuneration Committee
8 March 2016