This part of the Directors' Remuneration Report sets out implementation of the Directors' remuneration for 2018.
Summary of Changes for Executive Directors
This table briefly summarises the proposals for the Directors' remuneration arrangements for 2018 when compared to the arrangements for the period.
|Base Salary and Benefits||Pension||AIP||Long-Term Incentives||All-Employee Schemes|
|Base salary will be subject to annual review.||No changes proposed.||No change to the maximum opportunity or structure of the 2018 AIP. A change to the measures of the 2018 AIP.||No change to the maximum opportunity for the 2018 LTIP awards.|
A change to the measures.
|Ongoing participation in the SIP and Sharesave.|
Base Salary and Benefits
The Remuneration Committee expects to finalise its annual review of the Executive Directors' base salaries later in 2018, in line with the timing of pay reviews for all of the Group's employees.
The benefits in kind offered to the Executive Directors are expected to remain unchanged.
No changes are proposed to the pension contributions for Executive Directors for 2018, which are expected to remain at the levels provided in the current period.
The Remuneration Committee approved the implementation of an AIP for the Executive Directors applicable to the 2017/18 financial year. This plan is in line with the Directors' Remuneration Policy.
The bonus potential for the Executive Directors is 100% and for the Chief Executive Officer is 125% of base salary for "maximum" performance, which is the same as the 2017 AIP.
There will be four objectives in the 2018 AIP, with the weighting as 25% for each of a Gross Sales (Retail)A target, a Group EBITDAA target, an Ocado Solutions target, and performance measured against role-specfic objectives. The rationale for setting the performance measures was considered by the Remuneration Committee, which introduced a fourth performance measure, an Ocado Solutions target, to align the performance measures for the plan with the evolving Group strategy concerning the Ocado Solutions business.
The Remuneration Committee has agreed "threshold" and "maximum" conditions that must be achieved. A bonus is not payable unless a "threshold" level of the performance condition has been achieved. At "threshold" performance for a financial performance measure, 6.25% of total bonus is payable and at "maximum" performance, 25% of total bonus is payable. A straight-line sliding scale will apply in relation to the intermediate points between the "threshold" and "maximum". Each target was discrete and could be earned separately. The Chief Executive Officer had a maximum bonus opportunity of 125% of salary and the other Executive Directors had a maximum opportunity of 100% of salary.
The actual performance targets are not disclosed due to their commercial sensitivity on the basis that if disclosed it would likely damage the Company's commercial interests. The Company will disclose achievement against the targets after the end of the performance period, provided such disclosure is not considered commercially sensitive at the time.
2018 LTIP Awards
The Remuneration Committee approved the making of awards under the LTIP for the Executive Directors for the 2017/2018 financial year. The amount of the LTIP awards is based on a percentage of salary, expected to be in line with the percentages agreed for the 2017 LTIP awards and in line with the Directors' Remuneration Policy.
The Remuneration Committee proposes to make 2018 LTIP award grants subject to revenue and retail EBIT performance conditions in respect of the retail business for the 2019/2020 financial year. The other two performance targets relate to the platform business. The first of these is linked to the efficiency of the platform solution for the 2019/2020 financial year. The second of the platform business targets will be focused on expanding the Ocado Solutions business and specifically generating sales revenue for the 2019/2020 financial year. The 2018 LTIP award targets differ from the 2017 awards firstly, in that the new retail profitability measure will be aligned with the Group's new segmental reporting and secondly by including capital efficiency (together with operational efficiency) when measuring performance of the platform business. These changes to the LTIP performance targets reflect the Board’s focus on rewarding the delivery of sales of the platform solution to new customers and continuing to incentivise improvements in efficiency, while rewarding the profitable growth of the retail business. Each performance condition will have a 25% weighting.
The actual performance targets are not disclosed due to their commercial sensitivity on the basis that if disclosed it would likely damage the Company's commercial interests. The Company will disclose achievement against targets after the end of the performance period, provided such disclosure is not considered commercially sensitive at the time.
The Executive Directors are expected to continue their participation in the SIP scheme in 2018.
Changes for Non-Executive Directors and Chairman
The review of remuneration of the Non-Executive Directors and the Chairman will be finalised in line with the timing of pay reviews for all of the Group's employees.
Shareholder Approval and Votes at AGM
The 2017 Directors' Remuneration Report will be subject to a shareholder vote at the AGM. Entitlement of a Director to remuneration is not made conditional on this resolution being passed.
The Remuneration Committee Chairman is committed to ongoing shareholder dialogue on Directors' remuneration and takes an active interest in voting outcomes. In the event of a substantial vote against a resolution in relation to the Directors' Remuneration Report, the Directors' Remuneration Policy or a new share scheme, the Company would seek to understand the reasons for any such vote and would detail in the announcement of the results of voting any actions it intends to take to understand the reasons behind the vote result and also note this in the next annual report. The Remuneration Committee considers that a vote against that exceeds 20% should be considered significant and requires explanation.
The table below sets out the actual voting in respect of resolutions regarding remuneration at the three previous annual general meetings.
|Resolution Text||Votes For||% For||Votes Against||% Against||Total Votes||Votes Withheld|
|Approve the 2017 Directors' Remuneration Policy||416,068,306||93.75||27,747,647||6.25||448,607,479||4,791,526|
|Approve the 2016 Directors' Remuneration Report||413,472,812||93.16||30,342,020||6.84||448,607,479||4,792,647|
|Approve the 2015 Directors' Remuneration Report||314,587,371||91.48||29,304,819||8.52||345,048,769||1,156,579|
|Approve the 2014 Directors' Remuneration Report||377,215,710||80.61||90,709,506||19.39||476,384,487||8,459,271|
Basis of Preparation and Audit
This report is a Directors' Remuneration Report for the 53 weeks ended 3 December 2017, prepared for the purposes of satisfying section 420(1) and section 421(2A) of the Companies Act. It has been drawn up in accordance with the Companies Act and the Code, the Regulations, the Listing Rules and the Disclosure Guidance and Transparency Rules.
In accordance with section 497 of the Companies Act and the Regulations, certain parts of this Directors' Remuneration Report (where indicated) have been audited by the Company's auditors, Deloitte LLP.
A copy of this Directors' Remuneration Report will be available on the Company's corporate website.
This Directors' Remuneration Report is approved by the Board and signed on its behalf by:
Remuneration Committee CHAIRMAN
Ocado Group plc
6 February 2018
See Alternative Performance Measures