Annual report on remuneration
The following section provides details of how SIG's Remuneration Policy was implemented during the financial year ended 31 December 2014 and how it will be implemented in 2015.
The Remuneration Committee
The key responsibilities of the 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 of 31 December 2014, the Committee comprised the following Non-Executive Directors: Mr. C. V. Geoghegan (who chairs the Committee); Ms. J. E. Ashdown; Mr. M. Ewell; and Mr. J. C. Nicholls, all of whom are considered independent within the definition set out in the Code. During the year the Committee met seven times. Attendance by individual members of the Committee is disclosed in the Corporate Governance section of the Directors' Report.
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 2014
The Committee met seven times in 2014. Its key activities included:
- annual review of Executive Director salaries;
- assessment and approval of performance outcomes for the annual bonus and long-term incentives in respect of performance to 31 December 2014;
- calibration of award levels and targets for the 2014 LTIP awards for the Executive Directors;
- review of the Non-Executive Chairman's fees;
- preparation of the 2013 and 2014 Directors' Remuneration Report;
- review of the LTIP, consideration of potential revisions and related Shareholder consultation; and
- preparation for the 2014 AGM.
Kepler Associates ("Kepler"), 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 the Code of Conduct for Remuneration Consultants of UK-listed companies (which can be found at www.remunerationconsultantsgroup.com). Kepler provides no other services to the Company and is therefore considered independent. Kepler's fees for the year were charged on a time and materials basis and totalled £20,300 (2013: £61,270).
Deloitte LLP, Auditor to the Group, has, when requested, performed specific testing on the LTIP calculations at the end of the respective performance periods. Deloitte LLP was not asked to perform this service in 2014 and therefore did not receive any fees for this service in 2014 (2013: £nil).
Shareholder Vote at the 2014 AGM
The following table shows the results of the binding and advisory votes on the Directors' Remuneration Policy and the Annual Report on Remuneration of the 2013 Directors' Remuneration Report, respectively, at the 16 May 2014 AGM:
|Directors' Remuneration Policy||Total number of votes||417,381,761||1,354,707||418,736,468||4,570,029|
|% of votes cast||99.7%||0.3%||100%||1.1%|
|Annual Report on Remuneration||Total number of votes||419,906,603||1,485,295||421,391,898||1,914,600|
|% of votes cast||99.6%||0.4%||100%||0.5%|
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 2014 and the prior year:
|S. R. Mitchell7||2014||550||21||83||314||–||–||968|
|D. G. Robertson||2014||331||26||50||189||50||–||646|
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.
- 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 2014 and 31 December 2013. For the 2014 figure, given that vesting occurs in April 2015, after the Directors' Remuneration Report is finalised, the figures are based on the average share price in the last three months of 2014 of 157.6p.
- Other: includes SIP, valued based on the face value of matching shares at grant.
- Appointed to the Board on 10 December 2012 and became Chief Executive on 1 March 2013.
- During 2014 Mr. C. J. Davies, who retired from the Board on 28 February 2013, received £85k in salary and £3k in benefits in the period to 28 February 2014.
Incentive Outcomes for 2014
Annual bonus in respect of 2014
In 2014, the maximum bonus opportunity for Executive Directors was 100% of salary. 80% of bonus was based on financial performance and 20% on the achievement of personal or strategic objectives. For the financial performance element, 65% of bonus was linked to underlying PBT and the remaining 15% of bonus to working capital improvement, as measured through cash generation.
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)
(% of salary)
|Working capital to sales (%)||Year to 30 Jun 14||5%||10.0%||9.5%||n/a||9.2%||5.0%|
|Year to 31 Dec 14||10%||9.7%||9.2%||n/a||8.1%||10.0%|
Personal element outcomes
|Executive Director||Personal objectives for the year||Payout (% of salary)|
|S. R. Mitchell||Target against the delivery of the key operating objectives, divided between a Health & Safety objective and the benefits targeted to be achieved from the four Strategic Initiatives||19.3% (out of 20%)|
|D. G. Robertson||Target against the delivery of the key operating objectives, divided between a Health & Safety objective and the benefits targeted to be achieved from the four Strategic Initiatives||19.3% (out of 20%)|
The Committee has approved a payout of 19.3% (out of a maximum of 20%) in respect of the personal element for both Executive Directors. This was awarded in the context of their exceptional personal performance during the year and significant progress made across a range of strategic initiatives, particularly in relation to health and safety.
Overall bonus outcomes
|Executive Director||Financial element bonus outcome|
(% of salary)
|Personal element bonus outcome|
(% of salary)
|Overall bonus outcome|
(% of salary)
|S. R. Mitchell||37.7%||19.3%||57.0%|
|D. G. Robertson||37.7%||19.3%||57.0%|
As stated in the policy table, for all current Executive Directors, one-third of the total annual bonus outcome for 2014 is deferred into SIG shares for three years, subject to clawback (i.e. forfeiture or reduction in exceptional circumstances). In the Committee's view, the level of bonus paid to Executive Directors appropriately reflects the individuals' and Group's performance in an exceptionally difficult environment.
Long-Term Incentive Plan: 2012 Awards
On 26 April 2012, Mr. D. G. Robertson received an award of 299,145 nil-cost options 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 overleaf:
ROCE element of the award (2/3rd)
Average ROCE 2012-2014
EPS element of the award (1/3rd)
Cumulative underlying EPS 2012-2014
For the ROCE element, if three year average ROCE over the three financial years ending 31 December 2014 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 2014 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 9.23% and cumulative underlying EPS was 32.0p, which resulted in the vesting of c.3.8% and c.6.7% of the maximum award respectively. 10.5% of the total award will therefore vest on 25 April 2015.
|Performance measure||Actual performance||Vesting outcome (% of maximum)|
|Three year average ROCE||9.23%||3.8%|
|Three year cumulative underlying EPS||32.0p||6.7%|
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.
Long-Term Incentive Plan: 2014 Awards
On 18 September 2014, Mr. S. R. Mitchell and Mr. D. G. Robertson were granted awards under the LTIP of 466,628 and 280,817 shares respectively; details are provided in the table below. The three year period over which performance will be measured will be 1 January 2014 to 31 December 2016. The award is eligible to vest in its entirety on the third anniversary of the date of grant (i.e. 17 September 2017), 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
|Market price at |
date of award
|Face value at date |
|Face value at date|
(% of salary)
|S. R. Mitchell||18 September 2014||466,628||176.8p||£825,000||150%|
|D. G. Robertson||18 September 2014||280,817||176.8p||£496,485||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 2014-2016
EPS element of the award (1/3rd)
Cumulative underlying EPS 2014-2016
For the ROCE element, if three year average ROCE over the three financial years ending 31 December 2016 is less than or equal to 9.2%, 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 2016 is less than or equal to 35p, no shares will vest. 25% of the award will vest for EPS of 35p, and the award will vest in full for cumulative EPS of 45p 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 at 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 2014 and the prior year:
|Base fee £000||Additional fees £000||Total fees £000|
|L. Van de Walle (Chairman)||164||162||–||–||164||162|
|J. E. Ashdown||47||46||–||–||47||46|
|C. V. Geoghegan||47||46||10||10||57||56|
|J. C. Nicholls||47||46||10||10||57||56|
No exit payment was made to any Director during the year.
Implementation of Remuneration Policy for 2015
The Committee approved the following salary increases from 1 January 2015. The average salary increase across each territory/business for 2015 is between 1.5% and 2.0%.
|Executive Director||2015 salary|
|S. R. Mitchell||558,250||550,000||1.5%|
|D. G. Robertson||335,955||330,990||1.5%|
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 2015 will remain unchanged from the opportunity in 2014 of 100% of salary.
Following a review of the bonus plan, the Committee made an evolutionary change to the mix of performance measures to better support the Company ethos of 'Stronger Together'. Therefore, in 2015 the bonus will be linked 55% to Group underlying PBT, 20% to ROCE, 10% to HS&E, and 15% to personal objectives (linked to Group Strategic Initiatives). 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 due course when they are no longer considered commercially sensitive. The Committee has further determined that, for 2015, financial performance in respect of the bonus will be measured based on budgeted exchange rates. This approach is in line with prevailing market practice and will be consistently applied in 2015 and future years. Financial performance in respect of 2014 was based on actual exchange rates during the year, in line with the previous approach. Financial performance in respect of the LTIP will continue to be based on actual exchange rates, in line with market practice.
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 2015, and will determine the appropriate measures and targets closer to the time and disclose them in the 2015 Annual Report on Remuneration.
Malus and clawback
As mentioned in the Chairman's Letter, the Committee notes the requirement for malus and clawback in incentives in the updated UK Corporate Governance Code, and is taking steps to implement the changes. The Company currently operates malus provisions and is additionally introducing clawback from the performance year ending 31 December 2015 (i.e. payments from 1 January 2016) in respect of the annual bonus, and from awards due to be made in Autumn 2015 in respect of the LTIP.
Chairman and Non-Executive Director fees
With effect from 1 May 2014, the fee payable to the Chairman of the Board is £165,000 p.a. and the basic fee payable to each Non-Executive Director is £47,484 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 Senior Leadership team ("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 2014 and 2013 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||Other |
|% change||% change|
|Annual performance bonus (including deferred element)||314||333||(5.7)%||66.5%|
- Based on the sum of remuneration paid to Mr. C. J. Davies up to and including 28 February 2013 and to Mr. S. R. Mitchell from 1 March 2013.
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 2013 to the financial year ended 31 December 2014.
|Distribution to Shareholders||26.0||20.4||27.5%|
The Directors are proposing a final dividend for the year ended 31 December 2014 of 2.98p per share (2013: 2.4p).
The graph opposite 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 2014. 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 opposite 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 six years to 31 December 2014.
|Incumbent||C. J. Davies||C. J. Davies||C. J. Davies||C. J. Davies||C. J. Davies1||S. R. Mitchell2||S. R. Mitchell|
|Chief Executive single figure of remuneration (£000)||1,354||1,087||1,065||1,024||1,031||987||968|
|Annual bonus outcome (% of maximum)||45%||59%||96%||54%||50%||60.5%||57.0%|
|LTIP vesting outcome (% of maximum)||0%||0%||0%||0%||0%||n/a||n/a|
- The figures shown (as set out in the Single Total Figure of Remuneration table shown earlier in the report) pertain to the period 1 January 2013 to 31 December 2013 (including 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.
Directors' Interests in SIG Shares (audited)
The interests of the Directors in office at 31 December 2014 and their families in the ordinary shares of the Company at the dates below were as follows:
|J. E. Ashdown||21,700||21,700|
|C. V. Geoghegan||40,000||40,000|
|J. C. Nicholls||14,220||14,220|
|S. R. Mitchell||165,460*||164,545*|
|D. G. Robertson||61,489*||60,566*|
|L. Van de Walle||50,000||30,000|
* Includes shares purchased under the SIG plc SIP.
There have been no changes to shareholdings between 1 January 2015 and 11 March 2015 save that on 15 January 2015 Mr. S. R. Mitchell and Mr. D. G. Robertson acquired a further 91 shares each under the SIG plc Share Incentive Plan ("SIP"), and on 16 February 2015 Mr. S. R. Mitchell and Mr. D. G. Robertson acquired a further 79 shares each under the SIG plc 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 2014:
|Shares held||Nil-cost options held|
|S. R. Mitchell||165,460||–||–||829,664||55,292||200||52||No|
|D. G. Robertson||61,489||–||–||794,153||77,160||200||32||No|
|J. E. Ashdown||21,700||80|
|C. V. Geoghegan||40,000||148|
|J. C. Nicholls||14,200||53|
|L. Van de Walle||50,000||53|
* Based on SIG share price of 174.3p as at 31 December 2014.
Directors' Interests in SIG Share and Option Plans (AUdited)
|Date of |
|Face value |
|Performance period||Exercise |
|S. R. Mitchell||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|
|D. G. Robertson||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|
|26/04/2012||105.3p||299,145||315,000||01/01/2012 – 31/12/2014||26/04/2015 – 25/04/2022|
|Deferred Bonus Plan|
|S. R. Mitchell||31/03/2014||201.1p||55,292||111,192||n/a||31/03/2017 – 30/03/2024|
|D. G. Robertson||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|
|30/03/2012||117.95p||8,673||10,230||n/a||30/03/2015 – 29/03/2022|
Under the SIG 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 2014. Mr. C. J. Davies, who retired from the Board on 28 February 2013, participated in the SIP up to his date of retirement from the Company on 28 February 2014.
The market price of the shares at 31 December 2014 was 174.3p and the range during 2014 was 144.8p to 214.4p.
There were no options exercised by the Directors in 2014 (2013: nil) and the aggregate of the total theoretical gains on options exercised by the Directors during 2014 amounted to £nil (2013: £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.
Approval of the directors' remuneration report
The Directors' Remuneration Report was approved by a duly authorised Committee of the Board of Directors on 11 March 2015 and signed on its behalf by Chris Geoghegan, the Chairman of the Remuneration Committee.
Chairman of the Remuneration Committee
11 March 2015