Part 2: Disclosure of the Implementation of the policies for the period under review
Key remuneration decisions taken during the year
The remuneration committee discussed the following matters during 2015:
- Approval of the long-term incentive awards, inclusive of the mix of instruments to be used and company performance conditions relating thereto
- Approval of the targets and weighting of the performance measures of the short-term incentive plan
- Approval of executive salary increases
- Approval of the short-term incentive payments
- Reviewed personal scorecard objectives of the executives and included separate targets and weighting on diversity and inclusion
- Reviewed and selected appropriate peer group companies for benchmarking in 2016
- Reviewed and approved the company’s remuneration report and policy
- Reviewed and recommended increases to non-executive director fees
- Reviewed King III principles and alignment of remuneration approach to best practice guidelines
- Reviewed global and national developments in respect of executive remuneration
- Reviewed the remuneration committee terms of reference
- Reviewed and considered executive shareholding requirements
- Reviewed pay equity trends in the group.
Guaranteed package/base salary adjustments
On the recommendation of management and endorsed by the remuneration committee, no increases to basic salaries for executive directors and executive committee members were made as part of the annual review cycle on 1 October 2015. This decision was taken in light of the fact that challenging trading conditions are expected to prevail in 2016 and the executive team decided to lead by example in maintaining tight cost control into the new financial year.
Certain businesses in South Africa did not increase salaries for supervisory and management level employees on 1 October 2015, while other businesses processed increases in the 4% to 7% range on average. Higher average increases were applicable to the lower paid workers. The company will continue to review the pay differential between the highest and lowest paid employees.
Details of the basic salary and guaranteed packages (basic salary plus benefits) paid to each of the executive directors and prescribed officers during the 2015 financial year are set out below.
2015 Short-term incentive outcomes
Performance against group financial targets
| Operating profit | Return on equity | Headline earnings per share | Cash flow | ||||||||
This exceeded threshold but fell short of target approved by the remuneration committee. |
Group ROE of 10.9% did not meet the threshold target. |
This met the target but fell short of stretch target approved by the remuneration committee. |
This performance did not meet the threshold target. |
Clive Thomson (chief executive) and Don Wilson (finance director) were measured against group financial targets.
Performance against divisional financial targets
Specific divisional financial targets for operating profit, ROE and cash flow are approved by the remuneration committee for the divisional executive directors and prescribed officers. However, group HEPS is also used as one of the targets in view of their group-wide responsibility as members of the Barloworld executive committee.
Peter Bulterman’s responsibilities include Equipment southern Africa, Iberia and Russia and he was therefore measured against divisional financial targets weighted appropriately for all three businesses.
John Blackbeard’s responsibilities include Handling and Power Systems and his operating profit targets therefore include an appropriate weighting for these two businesses.
Dominic Sewela was measured against targets set for Equipment southern Africa, Viktor Salzmann against targets set for Equipment Iberia and Keith Rankin against targets set for the Automotive division.
Martin Laubscher was CEO for the combined Automotive and Logistics business until his retirement on 28 February 2015 and was measured against the consolidated financial targets for these two businesses. He received a pro rata bonus up until his date of retirement.
The divisional performances were as follows:
- Equipment southern Africa slightly exceeded threshold for operating profit but missed the threshold for both cash flow and ROE
- Equipment Russia exceeded threshold for operating profit and exceeded stretch target for cash flow. For ROE the business did not meet the threshold
- Equipment Iberia exceeded target for operating profit and exceeded threshold for ROE. For cash flow the business did not meet the threshold
- Handling did not meet threshold for operating profit, cash flow and ROE while the Power System business exceeded threshold for operating profit
- Automotive exceeded target for ROE and cash flow, while exceeding threshold for operating profit
- Logistics exceeded threshold for operating profit and ROE but missed threshold for cash flow.
STI payments
Annual bonus payments are paid in cash following finalisation of the company’s audited financial results for the year in question, and are not deferred.
Annual bonus payments made to executive directors and prescribed officers are disclosed below.
In this context, STIs, represented as a percentage of basic salary for the year ended 30 September 2015, were calculated as follows, displayed against the potential maximum bonus which each executive could receive:
| Financial metric component (% of basic salary) | ||||||||
| Personal and diversity scorecard component (% of basic) |
Operating profit (30%) |
ROE (20%) |
Cash flow (20%) |
HEPS (30%) |
Total bonus as % of basic |
Potential maximum bonus as a % of basic |
||
| CEO | ||||||||
| CB Thomson | 25.0 | 17.9 | 0.0 | 0.0 | 22.6 | 65.5 | 150.0 | |
| Executive directors | ||||||||
| PJ Blackbeard | 15.2 | 11.5 | 0.0 | 0.0 | 18.1 | 44.8 | 125.0 | |
| PJ Bulterman | 29.0 | 13.6 | 1.6 | 3.4 | 18.1 | 65.7 | 125.0 | |
| M Laubscher | 26.0 | 14.0 | 13.7 | 10.0 | 18.1 | 81.8 | 125.0 | |
| D Sewela | 28.6 | 11.6 | 0.0 | 0.0 | 18.1 | 58.3 | 125.0 | |
| DG Wilson | 26.5 | 14.7 | 0.0 | 0.0 | 18.1 | 59.3 | 125.0 | |
| Prescribed officers | ||||||||
| K Rankin | 26.0 | 15.2 | 16.7 | 15.0 | 18.1 | 91.0 | 125.0 | |
| V Salzmann | 24.6 | 21.6 | 10.8 | 0.0 | 18.1 | 75.1 | 125.0 | |
Note: The actual short-term incentive rand amount expressed as a percentage of the basic salary may differ slightly with the above percentages owing to exchange rate fluctuations during the year on offshore salaries, where applicable.
2015 Total remuneration outcomes
The composition of remuneration outcomes in 2015 for executive directors and prescribed officers is represented below.
| 2015 | Salary R000 |
Retirement and medical contributions R000 |
Car benefit R000 |
Other benefits R000 |
Guaranteed package R000 |
Bonus R000 |
Total 2015 R000 |
|
| Executive directors Residents | ||||||||
| PJ Bulterman | 5 100 | 822 | 251 | 47 | 6 220 | 3 294 | 9 514 | |
|---|---|---|---|---|---|---|---|---|
| M Laubscher (retired | ||||||||
| 28 February 2015)* | 2 425 | 584 | 108 | 1 540 | 4 657 | 1 954 | 6 611 | |
| CB Thomson | 7 988 | 1 496 | 266 | 50 | 9 800 | 5 081 | 14 881 | |
| DG Wilson | 4 111 | 965 | 246 | 27 | 5 349 | 2 364 | 7 713 | |
| DM Sewela** | 3 860 | 628 | 268 | 1 711 | 6 467 | 2 251 | 8 718 | |
| Non-resident | ||||||||
| PJ Blackbeard# | 6 452 | 856 | 217 | 5 | 7 530 | 3 268 | 10 798 | |
| Total executive directors | 29 936 | 5 351 | 1 356 | 3 380 | 40 023 | 18 212 | 58 235 | |
| Prescribed officers | ||||||||
| PK Rankin | 3 396 | 639 | 134 | 65 | 4 234 | 3 366 | 7 600 | |
| Non-resident | ||||||||
| V Salzmann# | 3 980 | 165 | 4 145 | 3 361 | 7 506 | |||
| Total prescribed officers | 7 376 | 639 | 299 | 65 | 8 379 | 6 727 | 15 106 | |
| Grand total | 37 312 | 5 990 | 1 655 | 3 445 | 48 402 | 24 939 | 73 341 |
* Included in other benefits is a retirement payment in terms of an existing scheme.
** Included in the other benefits is a once-off retention payment in terms of a 2012 programme.
# PJ Blackbeard is based in the UK and his remuneration is paid in pounds sterling while Viktor Salzmann is based in Spain and his remuneration is paid in
Euro. Due to the sharp depreciation of the rand against the pound and euro during the year, the rand salaries disclosed above will reflect a much higher
increase year on year in rand terms than the underlying increases in hard currency.
LTI vesting outcomes
Historic and outstanding awards
The table below provides an overview of the actual vesting and likelihood of vesting of historic and outstanding awards made under the SAR and FSP
| Award | SAR | FSP | |
| 2009 | 100% (A) | ||
| 2010 | N/A | 100% (A) | |
| 2011 | 100% (A) | 100% (A) | |
| 2012 | 100% (A) | 84% (A) | |
| 2013 | 100%# | 71.7%%# | |
| 2014 | 100% (L) | 58.2% (L) |
(Actual (A), proportion likely to vest (L))
# Final calculated vesting percentage, subject to formal approval by remuneration committee below.
Awards with a performance period ending during the 2015 financial year
The vesting profile for awards made during 2013 with a performance period ending 30 September 2015, vesting during March 2016 are as follows:
| FSP performance conditions for the 2013 award | Achievement of performance conditions* |
| TSR | 55.82% |
| HEPS | 100% |
| RONOA | 48% |
| Resultant vesting | 71.7% |
| SAR performance conditions for the 2013 award | Achievement of performance conditions* |
| HEPS | 100% |
| Resultant vesting | 100% |
* Subject to final approval.
LTI award made during the year
2015 FSP awards
FSP awards were granted on 30 March 2015 and the vesting period will expire on 30 March 2018. The following performance targets, weighting and performance periods were applicable to the number of shares awarded and are tested over a three-year performance period. Linear vesting on a sliding scale will be applied between threshold and target performance:
| Performance condition | Weighting of performance conditions (%) |
Below threshold (vesting %) |
Threshold (vesting %) | Target (vesting %) | |
| TSR | 20 | 0 | 4.50 | 15.0 | |
| HEPS | 30 | 0 | 6.75 | 22.5 | |
| RONOA# | 50 | 0 | 11.25 | 37.5 | |
| Maximum vesting | 100 | 0 | 22.50 | 75.0 |
# Return on net operating assets.
The following targets were set for the respective performance conditions, and are considered by the remuneration committee to be stretching in the context of the company’s business strategy and the market conditions. Linear vesting applies between threshold and target performance.
| Condition | Threshold (30% vesting) | Target (100% vesting) | |
| TSR | Median of peer group | Upper quartile of peer group* | |
| HEPS | 0% real growth | 15% real growth | |
| RONOA | 15% | 22% |
* The following comparator group was set for the 2015 TSR condition:
- Aveng Limited
- Bell Equipment Limited
- Bidvest Group Limited
- Eqstra Holding Limited
- Imperial Holdings Limited
- Murray and Roberts Holdings Limited
- Nampak Limited
- Remgro Limited
- Reunert Limited
- Steinhoff International Holdings.
2015 SAR awards
SAR awards were granted on 30 March 2015 and a third of the SARs will vest on the third, fourth and fifth anniversary of the grant date, respectively. The following performance targets, weighting and performance periods were applicable to the number of shares awarded and are tested over a three-year performance period. Linear vesting on a sliding scale will be applied between threshold and target performance:
| Condition | Threshold (25% vesting) | Target (100% vesting) | |
| Real growth in HEPS | 0% real growth | 6% real growth |
Total LTI awards
The total interests of executive directors and prescribed officers of the company in share options, FSPs and SARs are disclosed in detail in the consolidated annual financial statements.
Non-executive directors’ fees for 2015
Fees for NEDs during the current financial year are set out in the consolidated annual financial statements, as approved by the remuneration committee and by the board, on authority granted by shareholders at the annual general meeting held on 4 February 2015.
Proposed non-executive director fees for 2016
Refer to special resolution 1 set out in the notice of annual general meeting for approval by shareholders in terms of section 66 of the Companies Act in the AGM booklet.
SB Pfeiffer
Chairman of the remuneration committee
4 December 2015