Remuneration report
Introduction
The Remuneration report sets out the Group’s policy on the remuneration of Executive and Non-Executive Directors together with details of the Directors’ remuneration packages and service contracts. The report has been prepared in accordance with Schedule 8 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008 and the Listing Rules and describes how the Board has applied the principles relating to directors’ remuneration in the UK Corporate Governance Code. This report has been divided into separate sections for audited and unaudited information.
A resolution to approve this report was proposed at the Annual General Meeting (“AGM”) held on 21 March 2012.
Unaudited information
Remuneration Committee
Remuneration Committee
The Remuneration Committee (the “Committee”) comprised independent Non-Executive Directors and the Group Chairman throughout the year ended 31 October 2011, namely:
Committee members |
From | To |
Keith Edelman (Committee Chairman) |
11 December 2009 | to date |
Richard Grainger |
1 February 2007 | to date |
Alan Lewis |
23 March 2011 | to date |
No member of the Committee has any personal financial interest (other than as shareholders), conflicts of interest arising from cross directorships or day-to-day involvement in running the business. No Director plays a part in any discussion about his own remuneration. The remit of the Committee is limited to consideration of the remuneration of the Group Chairman (with the Group Chairman absent from such discussions), Executive Directors and certain members of the senior management team and to approve the long-term incentive awards granted under the schemes operated by the Group. The Committee’s terms of reference are available here. The Committee received advice from New Bridge Street during the year. Terms of reference for New Bridge Street, which provided no other services to the Company, are available on request from the Company Secretary.
Remuneration policy
The Board recognises that the Directors’ remuneration is of legitimate concern to shareholders and is committed to following current best practice. The Group operates within a competitive environment; performance depends on the individual contributions of the Directors and employees and the Group believes in rewarding vision and innovation.
When setting Executive Directors’ remuneration, the Committee endeavours to ensure that all Directors are provided with appropriate performance related and non-performance related pay to encourage enhanced performance and that they are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Group. The Committee also considers pay and conditions elsewhere in the Group, environmental, social and governance issues and risk when reviewing executive pay quantum and structure.
The policy of the Board is to provide executive remuneration packages designed to attract, motivate and retain Directors of the calibre necessary to maintain and improve the Group’s profitability and effectiveness and to reward them for enhancing shareholder value and return. To do this, it aims to provide a market competitive (but not excessive) package of pay and benefits. The Group’s general policy is to set basic salaries around mid-market levels and set performance pay levels which are at the upper quartile of market practice but with stretching goals, which accords with the Group’s general policy of seeking to make bonuses self-financing wherever possible. Remuneration packages will also reflect the Director’s responsibilities and contain incentives to deliver the Group’s objectives.
Basic salary and benefits
Basic salary is determined by reference to the individual’s experience, performance, responsibility and pay levels across the Group more generally. In addition, the Committee reviews periodically basic salary levels within similarly sized listed real estate and pan-sector companies although the Committee is careful not to place excessive reliance on the use of external comparator analysis. The Committee reviewed basic salary levels during the year. Current basic salary levels for Executive Directors effective 1 November 2011 and prior year salaries are presented below:
| From 1 November 2011 | From 1 November 2010 (or appointment to the Board if later) | ||
P D Gowers |
Chief Executive Officer | £325,000 | £315,000 |
R D Hodsden |
Chief Financial Officer | £216,000 | £210,000 |
| F Vecchioli | Executive Director | €206,000 | €200,000 |
The increases to base salaries were arrived at after careful consideration by the Committee of both Group and individual performance over the past year and after considering the increase awarded across the general workforce. Taxable benefits include a car allowance, life insurance, private medical and dental insurance.
Annual bonus
The Committee operated an annual bonus plan for Executive Directors during FY2011. The maximum bonus was set at 100% of basic salary with measurement based upon sliding scale EBITDA and personal objectives set at the start of each financial year, as set out below:
Measures |
Bonus potential |
EBITDA |
80% |
Personal objectives |
20% |
In addition to the above, EBITDA must be greater than the previous financial year for any bonus to be payable. Details of actual amounts paid to Executive Directors for the year ended 31 October 2011 are presented within the Directors' remuneration table below.
The FY2012 annual bonus plan for Executive Directors will be similar in design to the plan for FY2011, based on a combination of EBITDA and personal objectives in the ratio of 80:20 and the requirement to grow absolute EBITDA. The maximum bonus payable will remain at 100% of basic salary. Specific targets for FY2012 have not been disclosed as they are considered to be commercially sensitive, although the Committee is satisfied that they will be demanding and require performance significantly better than budget for full payout.
Performance Share Plan
The 2009 Performance Share Plan (“PSP”) is the Group’s primary long-term incentive arrangement. The key terms of the PSP are as follows:
— the PSP has a normal maximum annual limit of 150% of basic salary, with a 200% of basic salary annual limit in exceptional circumstances (such as recruitment or retention);
— awards are normally granted in February each year and the normal PSP grant policy is set at 125% of basic salary (although awards were reduced to 115% of salary in 2011 to reflect the reduction in the profit before tax earnings per share (“PBT-EPS”) growth targets). That said, as disclosed last year, to facilitate his recruitment, the Chief Executive received an award of 200% of salary in February 2011, reverting to the normal grant policy thereafter;
— participants benefit from the value of dividends paid over the vesting period to the extent that awards vest. This benefit is delivered in the form of cash or additional shares at the time that awards vest;
— two-thirds of awards granted in 2011 are subject to the PBT-EPS condition. 25% of this part of an award vests for PBT-EPS growth of RPI+2% per annum with full vesting of this part of an award for PBT-EPS growth of RPI+6% per annum. A sliding scale operates between these points;
— the remaining one-third of awards granted in 2011 are each subject to a total shareholder return (“TSR”) condition based on the Group’s performance against other FTSE SmallCap companies (excluding investment trusts) as at the date of grant. 25% of this part of an award vests if Safestore’s TSR is at a median of the ranking of the TSRs of the comparator group, with full vesting of this part of an award for upper quartile performance. A sliding scale operates between these points. In addition to the above, no part of the TSR awards will vest unless the Committee is also satisfied that the TSR performance of the Group is reflective of the Group’s underlying performance; and
— it is intended that PSP awards granted to Executive Directors in FY2012 will be granted on an identical basis to the 2011 awards.
The Remuneration Committee is satisfied that the combination of PBT-EPS and TSR targets provides an appropriate balance between: (i) incentivising and rewarding strong financial performance; and (ii) providing a strong and direct alignment with the interests of institutional shareholders by rewarding relative stock market performance.
Claw-back
If at any time following the payment of a bonus or vesting of PSP awards it becomes apparent to the Committee that the calculation of amounts paid or the calculation of the level of vesting was manifestly inaccurate, the Committee may require an individual to repay such amounts as the Committee considers to be appropriate to redress any overpayments made.
Shareholding guidelines
Consistent with best practice, the Committee operates shareholding guidelines for Executive Directors at a level equal to 100% of basic salary. Until such time as this level of shareholding is achieved, 50% of the net of tax value of awards which vest under the PSP will be required to be retained.
Sharesave scheme
A Sharesave scheme is open to all employees (including Executive Directors). The Sharesave scheme meets HM Revenue & Customs approval requirements, thereby giving all eligible employees the opportunity to acquire shares in the Company in a tax-efficient manner.
Pension arrangements
The Committee reviews the pension arrangements for the Executive Directors to ensure that the benefits provided are consistent with those provided by other similar companies. The Group does not offer a defined benefit pension scheme and instead it makes contributions to an approved personal pension scheme of the Executive Director’s choice, contributions under compulsory legislative pension arrangements, or payments to the Director in lieu of pension contributions because of individual circumstances. The Group contributes 15% of basic salary for the pension arrangements of Richard Hodsden and Peter Gowers, and, in line with the compulsory social security contribution requirements in France, an amount for Frederic Vecchioli which equated to 20% of base salary for the year ended 31 October 2011.
Service contracts
Executive Director service contracts contain a notice period of one year and do not contain contractual termination payments.
| Director | Date of current service contract |
Notice period | |
P D Gowers |
17 January 2011 | 12 months | |
R D Hodsden |
9 March 2007 | 12 months | |
| F Vecchioli | 25 September 2006 | 12 months |
Outside appointments
The Board allows Executive Directors to accept appropriate outside commercial non-executive director appointments provided the aggregate commitment is compatible with their duties as Executive Directors. The Executive Directors concerned may retain fees paid for these services, which will be subject to approval by the Board. No non-executive directorships were held by the Executive Directors during the year.
Non-Executive Directors
The Group’s policy is to appoint Non-Executive Directors to the Board with a breadth of skills and experience that is relevant to the Group’s business. Appointments are made by the Board upon the recommendations and advice from the Nomination Committee.
Non-Executive Directors receive fixed fees agreed by the Executive Directors after reference to similar roles in an appropriate comparator group of companies and reimbursement of expenses incurred in attending Board and other meetings. It is the Board’s policy for Non-Executive Directors to be paid a level of fee that reflects the time commitment and responsibilities of the role and is sufficient to attract individuals with appropriate knowledge and experience. Non-Executive Directors do not receive an annual bonus, but may receive additional remuneration where the time commitment required due to unusual circumstances exceeds the normal commitments and responsibilities. The Non-Executive Directors received no other benefits in the year ended 31 October 2011 (FY2010: £nil). The Non-Executive Directors do not have service contracts but their appointments are subject to review every three years under the rotation provisions of the Company’s Articles of Association. They all have notice periods of three months.
Performance graph
As the Company is listed in the FTSE SmallCap Index and FTSE Real Estate Investment & Services Sector, the graph sets out a comparison of the Company’s TSR (i.e. share price movement plus dividends reinvested on the ex-dividend date) against the SmallCap and Real Estate Investment & Services Sector indices since flotation.
This graph shows the value, by 31 October 2011, of £100 invested in Safestore Holdings plc on 9 March 2007 (the Company’s flotation date) compared with the value of £100 invested in the FTSE SmallCap Index and the FTSE All Share Real Estate Investment & Services Index. The other points plotted are the values at intervening financial year ends.
Audited information
Directors’ remuneration
| Salary and fees £'000 |
Annual bonus £'000 |
Benefits £'000 |
Other payments £'000 |
Total 2011 £'000 |
Total 2010 £'000 |
|
Executive Directors |
||||||
P D Gowers 12 |
236 | 139 | 15 | — | 390 | — |
| R D Hodsden3 | 210 | 115 | 17 | — | 342 | 370 |
| F Vecchioli1,4 | 105 | 62 | 1 | — | 168 | — |
| S W Williams5 | 105 | — | 13 | 455 | 573 | 562 |
Non-Executive Directors |
||||||
R S Grainger6 |
115 | — | — | — | 115 | 90 |
A H Martin |
45 | — | — | — | 45 | 45 |
A S Lewis4 |
33 | — | — | — | 33 | 25 |
K G Edelman5 |
45 | — | — | — | 45 | 41 |
Former Directors |
— | — | — | — | — | 19 |
Total emoluments |
894 | 316 | 46 | 455 | 1,711 | 1,152 |
Notes
1 P D Gowers was appointed to the Board on 1 February 2011 (appointed Chief Executive on 1 March 2011). F Vecchioli was promoted to the Board on 23 March 2011.
2 P D Gowers received a bonus of £139,000 for the year ended 31 October 2011, comprising £97,000 in respect of performance against underlying EBITDA measures and £42,000 in respect of performance against personal objectives.
3 R D Hodsden received a bonus of £115,000 for the year ended 31 October 2011, comprising £86,000 in respect of performance against underlying EBITDA measures and £29,000 in respect of performance against personal objectives.
4 F Vecchioli received a bonus of £102,000 for the year ended 31 October 2011, comprising £71,000 in respect of performance against underlying EBITDA measures and £31,000 in respect of performance against personal objectives. The amounts shown in the table above relate to the period following Mr Vecchioli’s appointment as a Director.
5 S W Williams stepped down from the Board on 28 February 2011 and left the Company on 30 April 2011. Other payments relate to the payment of base salary, pension and benefits over the individual’s notice period in line with the individual leaving arrangements and contractual provisions, including £393,000 compensation for loss of office. No amounts were payable in relation to an annual bonus for the proportion of the 2011 financial year worked.
6 Consistent with the Non-Executive Director fee policy, which enables individuals to receive additional fees where the time commitment required exceeds normal circumstances, the Committee (with R S Grainger excluded) determined that R S Grainger should receive £25,000 in relation to significant additional time commitments surrounding the departure of S W Williams and recruitment of P D Gowers during the early part of 2011.
7 A S Lewis’ fees were paid to Bridgepoint Capital Limited until 19 January 2011.
Company contributions to the money purchase pension arrangements/payments in lieu of pension contributions for individual Executive Directors were as follows:
2011 £'000 |
2010 £'000 |
|
| P D Gowers | 35 | — |
| R D Hodsden | 32 | 30 |
| F Vecchioli | — | — |
S W Williams |
24 | 45 |
| 91 | 75 |
Performance Share Plan
Executive Directors’ interests under the PSP are as follows:
| Date of grant | Share price on grant |
As at 1 November 2009 |
PSP awards granted |
As at 31 October 2011 |
Vesting date | |
P D Gowers |
||||||
| 2 February 2011 | 142.0p | — | 439,791 | 439,791 | 2 February 2014 | |
| — | 439,791 | 439,791 | ||||
R D Hodsden |
||||||
| 27 March 2009 | 55.0p | 405,603 | — | 405,603 | 27 March 2012 | |
| 24 February 2010 | 136.0p | 183,823 | — | 183,823 | 24 February 2013 | |
| 2 February | 142.0p | — | 168,586 | 168,586 | 2 February 2014 | |
| 589,426 | 168,596 | 758,012 | ||||
F Vecchioli |
||||||
| 27 March 2009 | 55.0p | 326,462 | — | 326,462 | 27 March 2012 | |
| 24 February 2010 | 136.0p | 141,092 | — | 141,092 | 24 February 2013 | |
| 2 February 2011 | 142.0p | — | 137,747 | 137,747 | 2 February 2014 | |
| — | 137,747 | 605,301 | ||||
S W Williams* |
||||||
| 27 March 2009 | 55.0p | 608,407 | — | 608,407 | 27 March 2012 | |
| 24 February 2010 | 136.0p | 275,735 | — | 275,735 | 24 February 2013 | |
| 884,142 | — | 884,142 | ||||
* Following his departure, PSP awards held by S W Williams will vest at the normal vesting date, subject to performance conditions.
The PSP awards are subject to continued service over three years and the following performance targets:
— 2009 and 2010 Awards: Two-thirds of an award is subject to a PBT-EPS condition. 25% of this part of an award vests for PBT-EPS growth of RPI+3% per annum with full vesting of this part of an award for PBT-EPS growth of RPI+8% per annum. A sliding scale operates between these points.
— 2011 Awards: Two-thirds of an award is subject to a PBT-EPS condition. 25% of this part of an award vests for PBT-EPS growth of RPI+2% per annum with full vesting of this part of an award for PBT-EPS growth of RPI+6% per annum. A sliding scale operates between these points.
— 2009, 2010 and 2011 awards: The remaining one-third of an award is subject to the TSR condition based on the Group’s performance against other FTSE SmallCap companies (excluding investment trusts) as at the date of grant. 25% of this part of an award vests if Safestore’s TSR is at a median of the ranking of the TSRs of the comparator group, with full vesting of this part of an award for upper quartile performance. A sliding scale operates between these points. In addition to the above, no part of the TSR awards will vest unless the Committee is also satisfied that the TSR performance of the Group is reflective of the Group’s underlying performance.
Safestore Bonus Share Plan
The first and only grant under the Safestore Bonus Share Plan (“SBSP”) was made in January 2008. As a result of the performance condition not being met (the average PBT-EPS for the three financial years following FY2007 being not less than the FY2007 PBT-EPS), all SBSP outstanding awards lapsed on 31 January 2011.
| As at 1 November 2010 |
Shares lapsed |
As at 31 October 2011 |
Vesting date | |
S W Williams |
171,779 | 171,779 | — | 31 January 2011 |
R D Hodsden |
89,979 | 89,979 | — | 31 January 2011 |
Sharesave
| As at 31 October 2010 |
Granted/lapsed during the year |
As at 31 October 2011 |
Exercise price |
Exercise period |
|
S W Williams |
13,745 | 13,745 | — | 118.4p | 1 September 2013 to 28 February 2014 |
| R D Hodsden | 11,139 | 11,139 | — | 147.0p | 1 September 2012 to 28 February 2013 |
| P D Gowers | — | 8,677 | 8,677 | 104.0p | 1 September 2012 to 28 February 2015 |
R D Hodsden |
— | 8,677 | 8,677 | 104.0p | 1 September 2012 to 28 February 2015 |
No consideration was payable in respect of the grant of options under the Sharesave scheme. Options expire at the end of the
exercise period shown in the table above. No options held by Executive Directors were exercised or expired during the financial year
ended 31 October 2011. The mid-market price of the shares at 31 October 2011 was 103.5 pence and the range during the year was
93.25 pence to 157.0 pence.
Unaudited information
Interests in shares
The interests of the Directors in the shares of the Company were:
The Company – ordinary shares of 1 pence |
25 January 2012 Number |
31 October 2011 Number |
31 October 2010 Number |
Executive Directors |
|||
| P D Gowers | 100,000 | 100,000 | n/a |
| R D Hodsden | 3,364,988 | 3,364,988 | 3,364,988 |
F Vecchioli |
1,151,331 | 1,151,331 | n/a |
S W Williams |
n/a | n/a | 8,427,579 |
Non-Executive Directors |
|||
R S Grainger |
100,833 | 100,833 | 100,833 |
| A H Martin | 20,000 | 20,000 | 20,000 |
| A S Lewis | — | — | — |
K G Edelman |
— | — | — |
All Directors’ interests are beneficially held.
This report was approved by the Remuneration Committee and signed on its behalf by:
K G Edelman
Chairman of the Remuneration Committee
26 January 2012
