The Group’s remuneration policy aims to promote a strong and sustainable performance culture, to incentivise high growth and to align the interests of Executive Directors and other senior managers with those of shareholders. In promoting these objectives, the policy has been structured so as to adhere to the principles of good corporate governance and appropriate risk management.
In determining remuneration levels, the Committee has taken account of market conditions, the performance of the Group and its responsibility to shareholders.
Performance and reward in relation to the 52 weeks ended 1 July 2017
The Group made good progress on its strategic objectives with like-for-like sales growth of 1.5 per cent, the opening of six new venues in the year that are trading well, and the five new openings of the prior year proven to be delivering excellent returns on investment. However, financial performance has been constrained by the discovery that the Group’s accounting policies and practices have not historically been applied in accordance with best practice. Consequently, a number of prior period adjustments have been made to the consolidated financial statements which have reduced the previously reported results of those prior periods and the correct application of those accounting policies and practices have suppressed profits in the reporting period under review relative to market expectations at the beginning of the year. Performance against the adjusted EBITDA and adjusted profit before tax bonus threshold targets were not met and no bonuses are payable to any of the Executive Directors or to senior management.
The Committee also decided that due to the shortfall in underlying profitability relative to market expectations as at the beginning of the period and the reduction in prior period profits, it was not appropriate to undertake salary reviews in July 2017 for the Executive Directors or Senior Management Team.
The Committee was required to determine the package afforded to Chris Chambers who commenced work with the Group on 31 August 2016. His salary on appointment was agreed at £245,000 with the remainder of his package set in line with our policy.
Mike Foster, who was immediately available, initially joined the Group on a short term contract in March 2017 as interim Finance Director to enable the Group to conduct a proper search of the market for a suitable replacement for the Chief Financial Officer position. However, given the accounting matters that came to light shortly after Mike Foster’s interim appointment, culminating in the market announcement and given the approach from Stonegate Pub Company Limited (“Stonegate”) to potentially make an offer for the Group, we moved quickly to secure Mike Foster’s services on a permanent basis. The terms agreed with Mike Foster are in certain respects less than our stated remuneration policy for new directors but were considered appropriate given that he did not have significant experience as a Chief Financial Officer of a listed business and also because the approach had already been received from Stonegate to potentially make an offer for the Group. Permission to appoint Mike Foster to the Board had to be sought from and was granted by the Takeover Panel as it could potentially have been regarded as a frustrating action under the Takeover code. The terms were agreed with that in mind. For the same reason, no awards were made to Mike Foster under the Long Term Incentive Plan.
The Committee has also met to consider whether outstanding awards under the Long Term Incentive Plan should vest contingent upon the Board recommended offer for the Group from Stonegate. The Committee has confirmed that time pro-rating will be applied and will be calculated on a monthly basis in each case in accordance with the rules of the relevant employee scheme plan and, performance conditions will be applied. All performance conditions are to be tested in accordance with their terms. On this basis, the Group currently forecasts that 62,222 options will vest should the Stonegate offer complete at the offer price of 203 pence per share.
The Committee welcomes any feedback on this report and the remuneration policy in general. On behalf of the Board, I would like to thank shareholders for their continued support and I look forward to your approval of our report at the 2017 AGM.
Chairman of the Remuneration Committee
3 October 2017
Disclosure in accordance with section 430(2B) of the Companies Act 2006
The Group’s remuneration policy aims to promote a strong and sustainable performance culture.
Michael Shallow - Chairman of the Remuneration Committee