Remuneration report

Dear Shareholder

I am pleased to present the Remuneration report for the year ended 31 March 2016.

Performance and reward

The Group has delivered good customer and profit growth in FY16. Particularly pleasing has been the step change in the USA where the business has delivered 89% profit growth, added 2.8m new partner households and entered into an agreement to acquire Utility Service Partners Inc. which will extend the household reach in the USA to 42m.

The stretching commercial and customer targets for the Group have been met with improved performance in respect of customer satisfaction and complaints. In the UK, the cash target was not met and the target in respect of core renewable customers was only partially met. The other commercial and customer objectives were met in full.

In respect of longer-term performance, the LTIP awards granted in 2012 vested in full during the year with HomeServe’s TSR at the end of the performance period being 217.9% compared to the FTSE 250 Index TSR of 80.6%. Based on TSR performance to 31 March 2016, which is 70% above the FTSE 250 Total Return Index it is expected that the awards granted in 2013 will also vest in full.

The Committee is satisfied that the remuneration paid to the Executive Directors in the year fairly reflects both corporate and individual performance during the year.

Remuneration policy FY16

The remuneration policy was approved at the 2014 AGM and payments made in FY16 were in line with the policy. Some operational changes in respect of how the policy was applied were made during the year. These related primarily to the performance conditions and grant levels in respect of the LTIP and were described in last year’s report. Details are also included in this report.

The Committee’s activities during the year are described in more detail later in this report.

Remuneration policy FY17

No changes are being made to the policy in FY17. In line with the policy and the award levels granted last year, the FY17 Performance Share award for Executive Directors will be at 200% of salary. We consider that granting an award at the maximum policy level continues to remain appropriate given the stretching performance conditions applied and the desire to maintain the current momentum in the delivery of our strategic plan.

Performance conditions in respect of the initial 150% of salary will be the same as last year but a more stretching EPS target will apply to the additional 50% of salary. The additional 50% of salary will only vest in full if annual EPS growth of 20% per annum is achieved over the three year performance period.

We have consulted with our major shareholders in advance of making this change.

A two year post vesting holding period will apply to the FY17 grants, providing a 5 year perspective to the incentive programme. In addition, the Executive Directors are also subject to a requirement to build and maintain shareholdings in the Company equivalent to 200% of salary.

Recovery and withholding policies are in place and we are comfortable that our approach is robust and workable should these provisions ever need to be operated.

There are no significant changes to the other elements of the remuneration policy. Salaries will increase by 1.25% with effect from 1 July 2016 in line with the average increase for the UK workforce and the maximum bonus opportunity remains unchanged at 100% of salary. The performance measures in respect of the bonus scheme have been reviewed and reduced in order to simplify the scheme but the bonus remains strongly linked to customer measures in line with the business strategy, subject to affordability underpins. Details of the performance targets used and performance against them will be disclosed in next year’s report.

The Remuneration Committee is satisfied that the remuneration policy continues to work effectively and supports our strategy as an entrepreneurial, customer focused business.

Stella David
Chairman of the Remuneration Committee
24 May 2016

This report has been prepared in accordance with the new disclosure requirements for directors’ pay – Schedule 8 of the Large and Medium Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The report also satisfies the relevant requirements of the Listing Rules and describes how the Board has applied the principles and complied with the provisions relating to directors’ remuneration in the UK Corporate Governance Code.

The Directors’ remuneration policy was approved by shareholders at the 2014 AGM and is not subject to a shareholder vote this year. The policy is set out below for information only. In order to assist shareholders, the remuneration scenario charts later in the report have been updated to reflect the proposed remuneration levels for FY17 and we have added additional commentary, where relevant, to explain how the policy will be operated in FY17.

Remuneration policy

The Committee’s remuneration policy for the remuneration of Executive Directors and other senior Executives is based on the following principles:

  • to align rewards with the Group’s financial and operational performance
  • to ensure that remuneration, in particular, variable pay, supports the Group’s strategy as a customer focused operation
  • to provide a remuneration package that is sufficient, but no more than necessary, to attract, retain and motivate high calibre executives.

To that end, the Committee structures executive remuneration in two distinct parts: fixed remuneration of basic salary, pension and benefits and variable performance-related remuneration in the form of a cash bonus and long-term incentive arrangements. Remuneration for Executive Directors is structured so that the variable pay element forms a significant portion of each Director’s package.

The Committee is satisfied that neither the structure of the remuneration packages, with the high weighting on variable pay, nor the performance measures targeted under the annual bonus and long-term incentive arrangements, encourages inappropriate risk taking. The remuneration arrangements are designed so as to provide a strong alignment of interest between the Executives and shareholders and to support the growth and performance aspirations of the Company. The Committee is satisfied that the current arrangements meet these objectives. Furthermore, a clawback provision to annual bonuses and long-term incentive awards was introduced in 2011 which helps to guard further against excessive risk taking.

Summary of components of Executive Directors’ remuneration

The table below summarises the Committee’s policy for the remuneration of Executive Directors which was approved by shareholders at the 2014 Annual General Meeting.

Element Purpose and link
to strategy
Performance
Period
Operation (including performance measures and
maximum limits)
Basic salary To reflect the particular skills and experience of an individual and to provide a competitive base salary compared with similar roles in similar companies. Usually reviewed annually, with any changes normally taking effect from 1 July each year.

Individual pay is determined by the Committee taking into account the role, responsibilities, performance and experience of the individual and market data on comparable roles. Consideration is also given to overall business performance and pay and employment conditions elsewhere in the Company when determining any increases to base salary levels for the Executive Directors.

When reviewing salary increases, the Committee also takes into account the impact of any increase to base salaries on the total remuneration package.

Details of the current salaries of the Executive Directors are set out in the Annual Report on Remuneration.

Performance related bonus The annual bonus is designed to drive and reward the short-term operating performance of the Company and encourage the delivery of consistently good customer outcomes. Annual (determined after the year end)

Annual bonuses are determined by reference to performance against a mix of customer, commercial and personal objectives. Before any bonus is payable a minimum level of both customer and financial performance must be achieved.

Bonuses are based on Group performance and, if relevant, the specific territory for which an Executive Director is responsible. Individual performance accounts for no more than 20% of the overall bonus opportunity.

The maximum potential quantum is 100% of salary and assuming their personal objectives are met in full, the normal ‘on-target’ bonus is 60% of basic salary.

Bonuses are payable in cash but may be deferred into shares under the matching element of the LTIP.

Long-term incentives To drive long-term delivery of the Group’s objectives, to align Directors’ interests with those of the Company’s shareholders and to encourage exceptional performance. Three years

Awards of performance and matching shares are granted under the Long Term Incentive Plan (which was approved by shareholders in 2008).

The maximum limit is 200% of salary for performance share awards (currently, awards of 150% of salary are made to the Executive Directors) and a maximum 2:1 match on voluntary investment of bonus into shares. The maximum amount of bonus that may be invested is set at 75% of the maximum bonus potential (i.e. 75% of salary). If the bonus earned is less than 25% of salary, then the executive may invest the equivalent of 25% of salary, from their own money, in shares to receive a matching award. In determining the number of matching awards to be granted, the investment is deemed to be made gross of tax.

Both performance and matching awards are subject to the same performance condition which was relative Total Shareholder Return in FY15 (subject to satisfactory underlying earnings performance). Performance is measured over a performance period of at least three years.

Changes to operation in FY16 and FY17
An Earnings Per Share performance condition was reintroduced for performance and matching share awards in FY16 and this will also be applied in FY17. Performance awards were granted at the policy maximum of 200% in FY16 and will be again in FY17. Further details are provided later in this report.
Pension To provide benefits comparable with similar roles in similar companies. N/A

Richard Harpin participates in the Water Companies Pension Scheme (a defined benefit scheme which is closed to new members). The other Executive Directors receive a 20% contribution to the HomeServe Money Plan (a defined contribution scheme). The key features of these schemes are set out beneath this policy table.

Retirement benefits under both schemes are restricted by a notional earnings cap (£133,324 for FY16). An unapproved pension contribution equal to 20% of the amount by which basic salary exceeds the notional cap is paid annually. Executives may choose to have this amount paid directly into their pension or may receive it as cash.

As an alternative to the above arrangements, the Committee may also permit the pension allowance (up to 20% of salary) to be taken solely as a cash allowance.

Other benefits Provides a competitive package of benefits to assist with recruitment and retention of staff. N/A Other benefits comprise a fully expensed car (or cash alternative), fuel allowance, private health cover (for the individual, partner and dependant children), death in service benefits (up to 5 x salary) and permanent health insurance for members of the HomeServe Money Plan. There is no maximum limit on the value of the benefits provided but the Committee monitors the total cost of the benefit provision.
Save As You Earn Scheme To encourage employee share ownership. N/A The Executive Directors may participate in the Group’s Save As You Earn Scheme. The Scheme is subject to limits on the level of individual participation as set by HMRC. No performance conditions are attached to this Scheme.
Chairman and Non-Executive Directors’ fees To attract and retain Non-Executive Directors of the right calibre. N/A

Non-Executive Director fees are determined by the Board. The fees for the Chairman are determined by the Remuneration Committee taking into account the views of the Chief Executive. The Chairman excludes himself from such discussions.

The fee levels are reviewed periodically and are set to reflect the responsibilities and time commitment of the role and the experience of the individual. Fee levels are set by reference to rates in companies of comparable size and complexity. The fees for the Non-Executive directors comprise a basic Board fee, with additional fees paid for chairing a Committee or for the Senior Independent Directorship. The Chairman receives an all encompassing fee for his role.

In exceptional circumstances, additional fees may be payable to reflect a substantial increase in time commitment. The fees are paid monthly in cash.

Rationale behind performance metrics and targets

The Remuneration Committee works hard to ensure that the remuneration policy for the Executive Directors supports the business strategy, and that the level of remuneration received is reflective of the overall business performance and the returns received by shareholders. A significant proportion of the remuneration package comes from variable pay (c.60% at target performance) with careful consideration given to the choice of performance metrics to ensure that the executives are not encouraged to take inappropriate risks.

Annual Bonus

The annual bonus is designed to drive and reward excellent short-term operating performance of the Company and encourage real year-on-year growth in profitability. No annual bonus is paid unless a very high level of performance is achieved. The Committee reviews the bonus plan measures annually in order to ensure that they are aligned with the Group’s strategy and so that bonus arrangements are consistent amongst the senior executive team. Performance targets are set at the start of the financial year and are linked to the Group’s strategic and operational objectives. The transition to a more customer focused culture across our business is reflected in the use of customer metrics in the annual bonus scheme. These are based on measures relating to customer complaints and customer satisfaction. This is balanced by the use of commercial and personal objectives to reflect other strategic priorities. The commercial objectives included metrics relating to profit before tax and the number of core renewable customers.

The Committee retains the discretion to alter the choice and weighting of the metrics for future bonus cycles to reflect the changing needs of the business. The payment of any bonus is at the discretion of the Committee and bonuses will only be paid once a minimum level of customer and financial performance is achieved.

Changes to operation in FY16 and FY17

Targets relating to net debt and employee engagement were introduced to the bonus for FY16. These operated alongside the customer and commercial measures and the personal performance objectives.

For FY17, the number of measures will be reduced with employee engagement being removed and the customer measure being customer satisfaction only (rather than customer satisfaction and complaints).

LTIP

Long-term incentive awards will be granted in accordance with the rules of the shareholder approved HomeServe 2008 Long-Term Incentive Plan (LTIP) and the discretions contained therein. The performance measures for the matching and performance awards are set using a sliding scale of targets and no more than 25% of the award (under each measure) will vest for achieving the threshold performance hurdle.

The current performance measure used for LTIP awards is relative total shareholder return performance (TSR). The performance period runs for three years and requires HomeServe’s TSR to match that of the FTSE 250 Index for 25% of the shares to vest, rising on a straight-line basis so that full vesting requires out-performance of the Index by 15% per annum. TSR is deemed to be the most appropriate metric to measure sustained long-term performance, is aligned with shareholder interests and does not encourage inappropriate risk taking. However, the Committee retains the discretion to set different measures for future LTIP awards as set out below.

Some past LTIP awards have been subject to a performance condition requiring growth in earnings per share (EPS) (in excess of inflation) over the performance period (with 50% of the award subject to the EPS condition and 50% to the TSR condition). A split EPS and TSR condition may be reintroduced for future LTIP grant cycles, if a suitably robust earnings growth measure can be determined and the Committee considers it is appropriate to do so. The Committee would inform its major shareholders in advance of such a measure being set but considers that this would not constitute a change in policy, and therefore would not require a revised vote on the policy report.

Under the rules of the plan, the Committee has the discretion to adjust the targets applying to existing awards in exceptional circumstances providing the new targets are no less challenging than originally envisaged. The Committee also has the power to adjust the number of shares subject to an award in the event of a variation in the capital of the Company.

Awards under the LTIP may be granted as conditional allocations or nil (or nominal) cost options with, or as, forfeitable shares. The Committee may also decide to grant cash based awards of an equivalent value to share based awards or to satisfy share based awards in cash, although it does not currently intend to do so. Awards are satisfied through a mixture of either market purchase or new issue shares. To the extent new issue shares are used, the 2008 LTIP will adhere to a 5% in 10 year dilution limit.

Changes to operation in FY16 and FY17

To support the strategy of sustainable long-term earnings growth, an Earnings Per Share (EPS) performance condition was re-introduced (alongside TSR) for the FY16 awards. This approach will also be applied in FY17.

In addition, a post vesting holding period was introduced for awards granted in FY16 onwards. There will be a minimum period of five years from the date of grant of an award before shares can be sold. To the extent that nil cost options are exercised after the three year vesting point, but before five years, the net of tax value of the vested shares must continue to be held. The dividend roll up on unexercised nil cost options will continue until five years from grant. This five year view provides a longer-term perspective to the incentive programme than the three year performance period.

Clawback

The Committee has the power to reclaim some, or all, of a cash bonus and vested LTIP awards (performance and matching) in exceptional circumstances, such as misstatement of financial results, an error in assessment of performance, the use of misleading information and/or gross misconduct on the part of the individual.

Legacy arrangements

Details of the outstanding share awards held by directors are set out in the annual report on remuneration. These include vested but unexercised awards granted to Richard Harpin under the Executive Share Option Plan (ESOP) and Deferred Bonus Plan (DBP) (which may be exercised at any time until the tenth anniversary of grant) and unvested awards granted to the Executive Directors under the LTIP (which for the 2011 awards, include an earnings per share performance condition for 50% of the awards). No further awards may be granted under the ESOP or DBP.

For the avoidance of doubt, these outstanding share awards will be allowed to be paid out under the approved policy providing that the terms on which the awards have been granted are satisfied.

FY16 Update

Any remaining outstanding legacy share awards were exercised during FY16.

Pensions

Executive Directors currently participate in one of two pension schemes (with benefits limited to their notional capped salary). An unapproved pension contribution is paid in respect of basic salary above the cap.

The Water Companies Pension Scheme A funded, HMRC approved occupational defined benefit scheme

Members Richard Harpin
Main features
  • pension at normal retirement age of one-half of final pensionable salary and a tax free lump sum of one and a half times final pensionable salary on completion of 40 years’ service at an accrual rate of 80ths plus 3/80ths cash;
  • life assurance of five times basic salary;
  • pension payable in the event of ill health; and spouse’s pension on death;
  • normal retirement at age 60.
Special features Non-contributory
The HomeServe Money Plan A funded, HMRC approved occupational defined contribution scheme

Members Martin Bennett
Johnathan Ford
Main features
  • employer contributions of 20%;
  • life assurance of five times basic salary;
  • permanent health insurance;
  • spouse’s pension on death;
  • normal retirement at age 60.
Unapproved pension provision

A notional earnings cap restricts the benefits provided to members of the Water Companies Pension Scheme and the HomeServe Money Plan. An unapproved pension contribution, equal to 20% of the amount by which basic salary exceeds the notional cap is paid annually. Executives may choose to have this amount paid directly into their pension or may receive it as cash.

The notional cap is indexed in line with earnings inflation.
For FY16 the notional cap was £133,324.

Shareholding guidelines

It is the Board’s policy that Executive Directors and certain members of the Company’s senior management build up and retain a minimum shareholding in the Company. Each Executive Director is encouraged to hold shares of at least equal value to their annual basic salary.

If the holding guideline has not been fulfilled at the point of exercise of any option or the vesting of any other long-term incentive award, the Director must retain 50% of the net proceeds in the Company’s shares until the holding requirement is achieved. Details of the current shareholdings of the Executive Directors are provided later in this report.

Changes to operation in FY16 and FY17

The shareholding guideline was increased in FY16 to two times annual basic salary.

How employees’ pay is taken into account

The remuneration policy for the Executive Directors is designed with regard to the policy for employees across the Group as a whole. Our ability to meet our growth expectations and compete effectively is dependent on the skills, experience and performance of all of our employees. Our employment policies, remuneration and benefit packages for employees are regularly reviewed.

There are some differences in the structure of the remuneration policy for the Executive Directors and senior management team compared to other employees reflecting their differing responsibilities, with the principal difference being the increased emphasis on performance related pay for the more senior executives within the organisation. However, there are many common themes. For example, the structure of the annual bonus, with the focus on customer, commercial and personal performance is the same for employees at management grade and above (albeit with a higher weighting on personal performance at less senior grades).

Employee share ownership is encouraged and facilitated through extending participation in the LTIP to other senior leaders within the business and all UK based employees are able to participate in the Save as You Earn Scheme (subject to meeting the minimum service requirement).

Although the Committee does not consult directly with employees on directors’ pay, the Committee does take into consideration the pay and employment conditions of all employees when setting the policy for directors’ remuneration. In terms of comparison metrics, the Committee takes into account the average level of salary increase being budgeted for the UK workforce when reviewing the salary levels of the Executive Directors. The Committee is also mindful of any changes to the pay and benefit conditions for employees more generally when considering the policy for directors’ pay.

How shareholders’ views are taken into account

The Committee considers shareholder feedback received regarding the Remuneration report annually and guidance from shareholder representative bodies more generally. These views are key inputs when shaping remuneration policy. The Committee consults with shareholders when considering changes to remuneration arrangements.

Overall balance of measures for variable pay for FY16

Remuneration scenarios for Executive Directors

The chart below details the composition of each Executive Director’s remuneration package and how it varies at different levels of performance under the policy set out above. It demonstrates the balance between fixed and variable pay at threshold, on-target and maximum performance levels under the normal remuneration policy for the Executive Directors.

Assumptions

Fixed fixed pay only (salary plus benefits plus pension).
On target target annual bonus of 60% of salary plus target LTIP awards of 120% of salary plus matching awards of 60% of salary.
Maximum maximum annual bonus of 100% of salary plus maximum LTIP awards of 200% of salary plus matching awards of 150% of salary.

Salary levels (on which other elements of the packages are calculated) are based on those applying from July 2016.
The value of taxable benefits is based on the actual values paid in FY16.

Richard Harpin participates in a defined benefit scheme which has been valued according to BIS regulations. The other Executives participate in a defined contribution scheme, receiving 20% of basic salary as pension provision. The Executive Directors may participate in all-employee share schemes on the same basis as other employees. The value that may be received under these schemes is subject to tax approved limits. For simplicity, the value that may be received from participating in these schemes has been excluded from the above chart. The chart excludes the impact of share price growth.

Executive Directors’ service agreements and policy on payments for loss of office

Under the Executive Directors’ service contracts twelve months’ notice of termination of employment is required by either party (reduced to six months if following a prolonged period of incapacity).

Dates of current contracts are summarised in the table below:

Name Date of contract
R Harpin 18 January 2002
M Bennett 1 January 2013
J Ford 1 October 2012

Should notice be served, the Executives can continue to receive basic salary, benefits and pension for the duration of their notice period. The Company may require the individual to continue to fulfil their current duties, or may assign a period of garden leave. The Company applies a general principle of mitigation in relation to termination payments and supports the use of phased payments.

Outplacement services may be provided where appropriate, and any statutory entitlements or sums to settle or compromise claims in connection with a termination (including, at the discretion of the Committee, reimbursement for legal advice) would be paid as necessary. The service contracts also enable the Company to elect to make a payment in lieu of notice equivalent in value to twelve months’ base salary, benefits and pension (and full bonus in the case of Richard Harpin).

In the event of cessation of employment, the executives may still be eligible for a performance related bonus for the period worked. Different performance measures may be set to reflect changes in the director’s responsibilities until the point of departure.

The rules of the LTIP set out what happens to outstanding share awards if a participant leaves employment before the end of the vesting period. Generally, any outstanding share awards will lapse when an Executive leaves employment, except in certain circumstances. If the Executive leaves employment as a result of redundancy, death, ill-health, injury, disability, retirement, transfer of employment or any other reason at the discretion of the Committee, then they will be treated as a ‘good leaver’ under the plan rules.

For a good leaver, any outstanding unvested LTIP awards will vest on the normal vesting date subject to an assessment of performance, with a pro-rata reduction to reflect the proportion of the vesting period served. The Committee may dis-apply the time pro-rating requirement if it considers it appropriate to do so. In the case of cessation due to death, the Committee can determine that the awards vest early. Outstanding vested but not exercised awards can be exercised by a good leaver until the expiry of the normal exercise period (or within 12 months in the case of death).

In determining whether an Executive should be treated as a good leaver and the extent to which their award may vest, the Committee will take into account the circumstances of an individual’s departure.

The treatment of share awards on a change of control is the same as that set out above in relation to a good leaver (albeit with the vesting period automatically ending on the date of the change in control).

Recruitment Policy

Base salary levels will be set in accordance with HomeServe’s remuneration policy, taking account of the executive’s skills, experience and their current remuneration package. Where it is appropriate to offer a lower salary initially, a series of increases to the desired salary positioning may be given over subsequent years subject to individual performance. Benefits will generally be provided in accordance with the approved policy, with relocation expenses and/or an expatriate allowance paid for if necessary. For an overseas appointment (which may include the relocation of an existing Director), the benefit and pension arrangements may be tailored to reflect local market practice (subject to the overall maximum limits on pension set out in the policy table).

The structure of the variable pay element will be in accordance with HomeServe’s policy as detailed above. The maximum permitted variable pay opportunity under the Plan rules is 450% of salary (100% of salary bonus + 200% of salary LTIP + 150% of salary matching award). However, the normal award limits are a bonus of 100% of salary, a performance share award of 150% of salary and up to a 150% of salary matching award. In the case of the matching awards, a new recruit may invest up to 25% of salary from their own funds in the first year in order to receive a matching award (in determining the number of matching awards to be granted, the investment is deemed to be made gross of tax).

The performance and matching awards would be granted on a consistent basis to the other Executive Directors. In the case of the annual bonus, different performance measures may be set for the first year, taking into account the responsibilities of the individual and the point in the financial year at which they joined. If it is necessary to buy-out incentive pay (which would be forfeited on leaving the previous employer) in order to secure the appointment, this would be provided for taking into account the form (cash or shares), timing and expected value (i.e. likelihood of meeting any existing performance criteria) of the remuneration being forfeited. The LTIP permits the grant of restricted share awards to Executive Directors in the case of recruitment to facilitate this, although awards may also be granted outside of this scheme if necessary, and as permitted under the Listing Rules.

The service contract for a new appointment would be in accordance with the policy for the current Executive Directors and in line with the contract for Johnathan Ford (which is the most recent).

In the case of an internal hire, any outstanding variable pay awarded in relation to the previous role will be allowed to pay out according to its terms of grant.

Fees for a new Chairman or Non-Executive Director will be set in line with the approved policy.

Non-Executive Directors’ letters of appointment

Non-Executive Directors serve under letters of appointment for periods of three years. The Non-Executive Directors (including the Chairman) have a notice period of three months but no liquidated damages are payable.

Fees are determined by the Executive Directors within the limits set by the Articles of Association, and are based on information on fees paid in similar companies and the skills and the expected time commitment of the individual concerned. Non-Executive Directors are not entitled to bonus payments or pension arrangements, nor do they participate in the Company’s long-term incentive plans.

Details of their current three year appointments are as follows:

Name Date of contract
J M B Gibson 1 April 2016
S David 23 November 2013
C Havemann 1 December 2015
B Mingay 1 January 2015
M Morris 27 February 2015

Outside Appointments

Executive Directors may hold one outside appointment and can retain any fees received.

Annual Report on Remuneration

This part of the report has been prepared in accordance with Part 3 of the revised Schedule 8 set out in The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, and 9.8.6R of the Listing Rules. The annual report on remuneration will be put to an advisory shareholder vote at the 2016 Annual General Meeting.

Remuneration Committee Members
Stella David (Chairman)
JM Barry Gibson
Mark Morris
Ben Mingay

All of the members are independent Non-Executive Directors. The Board determined that the Company Chairman, Barry Gibson, should remain a member of the Committee taking account of the fact that he was considered to be independent on appointment and also that, as a former Chairman of the Remuneration Committee, his knowledge of the development of the remuneration policy and practices at HomeServe is invaluable. He takes no part in discussions relating to his own remuneration.

Responsibilities

The primary responsibilities of the Committee are to:

  • determine the Group’s overall remuneration strategy
  • determine the remuneration packages of the Executive Directors and other members of the Executive Committee
  • approve the grant and exercise of executive long-term incentive arrangements and oversee the operation of other share-based plans across the Group.

In determining remuneration policy, the Committee is free to obtain such professional advice as it sees fit, and it periodically monitors both the policies of comparator companies and current market practice in order to ensure that the packages provided are sufficient to attract and retain Executive Directors of the necessary quality.

The Committee aims to develop and recommend remuneration strategies that drive performance and reward it appropriately. In determining its policy, the Committee has paid regard to the principles and provisions of good governance contained in the Code and the guidelines issued by institutions such as the Investment Association, ISS and the NAPF. The Committee operates under the delegated authority of the Board and its terms of reference are available on the website.

The remuneration of Non-Executive Directors is a matter for the Board. No Director is involved in determining his or her own remuneration.

The Committee has also agreed and implemented a procedure for reviewing and assessing its own effectiveness.

Advisers

During the year New Bridge Street (’NBS‘), a firm of independent remuneration consultants, served as advisers to the Committee. NBS also provided technical implementation and accounting advice in relation to the administration of the Company’s share schemes. Other than in relation to advice on remuneration, NBS has no other connections with the Company. NBS is a trading name of Aon Hewitt Ltd, the ultimate parent company of which is Aon plc. Aon UK Ltd (another Aon company) provides insurance broking services to HomeServe. The Remuneration Committee is comfortable that this does not present a conflict of interest as Aon Benfield and NBS operate entirely independently of one another. The fees paid to NBS during the year for services to the Committee were £57,000.

The Committee has also received assistance from Richard Harpin, Group Chief Executive, Emma Thomas, Group Legal and HR Director and Anna Maughan, Company Secretary, all of whom attended meetings of the Committee as required. No Executive took part in discussions in respect of matters relating directly to their own remuneration.

Remuneration for the year under review (Audited)

Year Salary
and Fees
£000
Taxable
Benefits3
£000
Pension4
£000
Bonus
£000
LTIP5
£000
Other6
£000
Total
2016
£000
Total
2015
£000
Executives                
R Harpin 2016 550 26 113 539 2,127 - 3,355  
2015 546 25 101 528 - - 1,200
M Bennett 2016 406 20 81 350 1,240 - 2,097  
2015 400 20 80 384 - - 884
J Ford 2016 363 17 73 368 - 10 831  
2015 314 18 63 312 - - 707
Non-Executives
J M B Gibson 2016 230 - - - - - 230  
2015 230 - - - - - 230
I Chippendale 1 2016 - - - - - - -  
2015 68 - - - - - 68
S David 2016 63 - - - - - 63  
2015 50 - - - - - 50
C Havemann 2 2016 18 - - - - - 18  
2015 - - - - - - -
B Mingay 2016 53 - - - - - 53  
2015 50 - - - - - 50
M Morris 2016 71 - - - - - 71  
2015 60 - - - - - 60
Total 2016 1,754 63 267 1,257 3,367 10 6,718
Total 2015 1,718 63 244 1,224 - - 3,249

1 Ian Chippendale stepped down on 31 March 2015.
2 Chris Havemann was appointed on 1 December 2015.
3 Benefits comprise company car, fuel allowance and medical insurance.
4 Details of pension benefits and contributions can be found later on in the report.
5 No LTIPs vested in FY15 as the performance conditions were not met. The 2012 awards vested in full in FY16.
6 ‘Other’ represents the value of any sharesave options exercised.

Details of variable pay earned in the year (Audited)

Annual Bonus

For FY16, the annual bonus was based on the following stretching targets:

Bonus targets for Richard Harpin (CEO)
and Johnathan Ford (CFO)
Weighting % Payable
at
Threshold
Threshold Target/
Stretch
Actual % Payable
Commercial objectives Group adjusted profit before tax 20% 25% £87.97m £92.6m £93.0m 100%
Group net debt1 5% - - £184m £169.5m 100%
Group core renewable customers 15% 0% 6.594m 6.941m 6.944m 100%
Customer objectives Group customer complaints as a percentage of customers (based on weighted average reduction across UK, US, France, Spain and Italy)2 15% 0% See note 2 below 2.37% 1.94% 100%
Reduction in customer dissatisfaction (measured as a weighted average level of customer dissatisfaction across UK, US, France, Spain and Italy)2 15% 0% See note 2 below 7.8% 7.2% 100%
Increase in Group employee engagement1 10% - - 80% 81% 100%
Personal objectives Mr Harpin’s objectives related to strategic development, talent management and innovation (specifically including the acceleration of digital activity). 20%         90%
Mr Ford’s objectives related to efficiency initiatives, driving a cash focused culture, underwriting strategy and the effectiveness of decision making. 20%         90%

1 No bonus was payable for below target performance.

2 Payments were calculated on a straight line basis between 80% and 100% achievement of the target.

Bonus targets for Martin Bennett (UK CEO) Weighting % Payable
at
Threshold
Threshold Target/
Stretch
Actual % Payable
Commercial objectives Group adjusted profit before tax 10% 25% £87.97m £92.6m £93.0m 100%
UK adjusted operating profit before tax 15% 25% £54.91m £57.8m £58.0m 100%
UK net cash1 5% - - £14.2m £11.3m 0%
Core renewable customers2 10% 0% 2.019m 2.125m 2.090m 67%
Customer objectives UK customer complaints as a percentage of customers3 15% 0% See note 3 below 4.8% 4.27% 100%
Reduction in customer effort in UK (measured as a reduction in 'high effort')4 15% 0% See note 4 below <6.2% 6.17% 100%
Increase in UK employee engagement1 10% - - 80% 82% 100%
Personal objectives Mr Bennett’s objectives related to underwriting, business development, innovation, efficiency and delivery of key IT programmes. 20%         70%

1 No bonus was payable for below target performance.
2 The actual number of customers excludes the 0.095m of customers added through the acquisition of Home Energy Services Limited.
3 At the start of the year customer complaints had been expected to increase as a result of increased activity, in particular in relation to service delivery in respect of gas policies. The measure was designed to limit the level of increase. Payments were calculated on a straight line basis between 80% and 100% achievement of the target.
4 In addition to a reduction in customer effort, to align with the other businesses, no bonus was payable unless customer dissatisfaction was 6.0% or lower.

In addition to the above, minimum customer and financial (PBT) performance levels had to be achieved before any bonuses could be paid. These were both achieved.

Following the strong performance of the business in the year and in particular, reflecting the robust customer and profit growth, the following bonuses were payable:

Name Bonus
£
%
of salary
R Harpin 539,000 98.0
M Bennett 349,656 85.7
J Ford 367,500 98.0

Long-term Incentive Plan

Details of the performance conditions for the 2012 and 2013 LTIP awards are set out below.

2012 awards (vested during FY16)

The 2012 LTIP awards were granted on 27 June 2012. The performance condition for these awards was as follows:

Condition Performance
period
Threshold
target
Stretch
target
Actual
performance
Vesting
TSR (underpinned by underlying financial performance) 3 years to 27 June 2015 TSR equal to the FTSE 250 index (25% vests) TSR exceeds the index by an average of 15% p.a. (100% vests) HomeServe TSR of 217.9% compared to Index TSR of 80.6%. 100% vesting

2013 awards (due to vest in FY17)

The 2013 LTIP awards were granted on 24 June 2013. The performance condition for these awards is as follows:

Condition Performance
period
Threshold
target
Stretch
target
Actual
performance
Vesting
TSR (underpinned by underlying financial performance) 3 years to 24 June 2016 TSR equal to the FTSE 250 index (25% vests) TSR exceeds the index by an average of 15% p.a. (100% vests) Performance period not yet ended -

Based on performance to 31 March 2016, which is 70% above the FTSE 250 Index, the 2013 awards are likely to vest in full. The value of the awards on vesting will be included in remuneration for FY17.

Summary of outstanding awards (Audited)

LTIP

Details of the maximum number of shares receivable from awards made under the LTIP are as follows:

31 March
2016
Awarded
during
year
Lapsed
during
year
Vested
during
year
31 March
2015
Date
granted
Type of
award
R Harpin - - - 344,822 344,822 27.6.12 Performance
- - - 163,563 163,563 27.6.12 Matching
289,528 - - - 289,528 24.6.13 Performance
282,464 - - - 282,464 24.6.13 Matching
247,301 - - - 247,301 23.6.14 Performance
247,298 - - - 247,298 23.6.14 Matching
251,774 251,774 - - - 25.6.15 Performance
188,135 188,135 - - - 25.6.15 Matching
M Bennett - - - 293,448 293.448 27.6.12 Performance
202,630 - - - 202,630 24.6.13 Performance
192,038 - - - 192,038 24.6.13 Matching
184,615 - - - 184,615 23.6.14 Performance
175,958 - - - 175,958 23.6.14 Matching
186,770 186,770 - - - 25.6.15 Performance
136,825 136,825 - - - 25.6.15 Matching
J Ford 152,310   - - 152,310 24.6.13 Performance
75,457   - - 75,457 24.6.13 Matching
130,096 - - - 130,096 23.6.14 Performance
130,094 - - - 130,094 23.6.14 Matching
171,664 171,664 - - - 25.6.15 Performance
111,171 111,171 - - - 25.6.15 Matching

The performance conditions are as follows:

  • 2012, 2013 and 2014 awards – 100% comparative TSR (FTSE 250 Index + 15% per annum for maximum vesting)
  • 2015 awards – 25% comparative TSR (FTSE 250 Index + 15% per annum for maximum vesting) and 75% compound annual EPS growth (15% for maximum vesting)

Further details on awards granted in the year.

On 25 June 2015, the following performance and matching share awards were granted to the Executive Directors under the LTIP:

Performance share awards

Date of
grant
Number of
shares
Share price
used to
determine
awards
Award size
(% salary)
Face value
£
% that
vests at
threshold
R Harpin 25.6.15 251,774 £4.369 200% 1,100,000 25%
M Bennett 25.6.15 186,770 £4.369 200% 815,998 25%
J Ford 25.6.15 171,664 £4.369 200% 750,000 25%

Matching share awards

Date of
grant
Number of
Investment shares
purchased
Award Size Number of
shares subject
to Matching
Award
Share price
used to
determine
awards
Face value
£
% that
vests at
threshold
R Harpin 25.6.15 49,856 2:1 match 188,135 £4.3546 819,252 25%
M Bennett 25.6.15 36,259 2:1 match 136,825 £4.3546 595,818 25%
J Ford 25.6.15 29,460 2:1 match 111,171 £4.3546 484,105 25%

Both the performance and matching awards are subject to two conditions. 25% of the award is subject to a relative total shareholder return performance condition that requires HomeServe’s TSR to match that of the FTSE 250 Index over a three year performance period for threshold vesting, increasing on a straight-line basis to Index + 15% pa. for full vesting. The other 75% of the award is subject to an earnings per share condition that requires compound annual EPS growth of 6% to 15% per annum. 6% growth would result in threshold vesting, increasing on a straight-line basis to full vesting if growth of 15% is achieved.

Vesting in respect of both conditions is subject to underlying financial performance.

Further details on awards vested in the year

Performance and matching awards granted on 27 June 2012 vested in full during the year. Awards were structured as nil cost options.

Date of
grant
Type of Award Date of
exercise
Number of
shares
Share price at
exercise
Face value at
exercise £
R Harpin 27.6.12 Performance 6.7.15 344,822 £4.184 1,442,735
27.6.12 Matching 6.7.15 163,563 £4.184 684,347
M Bennett 27.6.12 Performance 3.7.15 293,448 £4.224 1,239,524

Deferred Bonus Plan (DBP)

The DBP was introduced in 2005. Under its terms, Executive Directors were able to invest some, or all, of their annual bonus into shares and defer receipt for three years. Matching shares could be earned if the TSR of the Company exceeded the median of the FTSE 350 Index of companies (excluding investment trusts). Richard Harpin elected to convert his 2005 award into a nil cost option at the end of the performance period. The option (over 256,995 shares) can be exercised at any time up until the tenth anniversary of grant (2 August 2015).

31 March
2016
Granted
during year
Lapsed
during
year
Exercised
during year
31 March
2015
Option
price
Date
granted
R Harpin - - - 256,995 256,995 £1.922 2.8.05

The option was exercised on 19 June 2015. The share price on that day was £4.265.

Executive Share Option Plan (ESOP)

The ESOP was approved by shareholders in 2001. Options were granted on an annual basis and became exercisable between three and ten years from the date of grant subject to the achievement of stretching performance criteria based on EPS growth. The option price was the market price on the last dealing day prior to the date of grant.

31 March
2016
Granted
during year
Lapsed
during
year
Exercised
during year
31 March
2015
Option
price
Date
granted
R Harpin - - - 255,000 255,000 £1.922 28.6.05

The option was exercised on 19 June 2015. The share price on that day was £4.265.

Save as you earn (Sharesave) schemes

31 March
2016
Granted
during year
Lapsed
during
year
Exercised
during year
31 March
2015
Option
price
Date
granted
Date
exercisable
from
R Harpin 8,152 - - - 8,152 £1.84 19.12.11 1.3.17
M Bennett 8,152 - - - 8,152 £1.84 19.12.11 1.3.17
J Ford - - - 4,591 4,591 £1.96 17.12.12 1.3.16

SAYE options are exercisable for a six month period from the date shown. Mr Ford exercised his option on 1 March 2016. The share price on that day was £4.102.

Shareholding Guidelines (Audited)

It is the Board’s policy that Executive Directors and certain members of the Company’s senior management build up and retain a minimum shareholding in the Company. With effect from FY16, each Executive Director has been encouraged to hold shares of at least equal value to 200% of his annual basic salary and a guideline holding of 200% of fees was introduced for Non-Executive Directors.

If the holding guideline has not been fulfilled at the point of exercise of any option or the vesting of any other long-term incentive award, the Director must retain 50% of the net proceeds in the Company’s shares until the holding requirement is achieved. Details of the current shareholdings of the Executive Directors are in the table below.

The beneficial interests of Directors who served at the end of the year, together with those of their families, in the shares of the Company are as follows:

Number of shares owned Other interests in shares
31 March
2016
Holding
post
consolidation
on
20 July 20151
31 March
2015
Outstanding
LTIP
Awards
Outstanding
Share
Options
Total
31 March
2016
Value of
shares
counting
towards
guideline
holding (as a
% of salary)2
Guideline met?
R Harpin3 38,519,655 38,519,655 40,412,474 1,506,500 8,152 40,034,307 30,157% Yes
M Bennett 352,094 352,094 187,740 1,078,836 8,152 1,440,082 372% Yes
J Ford 82,525 77,934 54,471 487,957 570,482 95% No
J M B Gibson 126,070 116,070 75,000 - - 126,070 236% Yes
S David 26,128 26,128 17,688 - - 26,128 188% No
C Havemann4 - - - - - - - No
B Mingay 37,142 37,142 20,000 - - 37,142 320% Yes
M C Morris 30,468 30,468 17,500 - - 30,468 194% No

1HomeServe plc shares were consolidated on a 13 for 14 basis on 20 July 2015.
2Calculated using the share price on 31 March 2016 of £4.306 divided by the Executive’s salary or Non-Executive’s fee on that date.
3Includes an indirect interest of 28,500.
4Chris Havemann was appointed on 1 December 2015.

There were no changes in the Directors’ interests in shares between 31 March and 24 May 2016.

Directors’ pensions (Audited)

Members of the Water Companies Pension Scheme

Details of the calculation of the single figures relating to Richard Harpin’s individual pension entitlements in the HomeServe plc Section of the Water Companies Pension Scheme, as required under Schedule 8 of the Large Companies Regulations and the Listing Rules, are shown below:

2016
£000
2015
£000
Accrued pension per annum at end of period1 55 52
Accrued lump sum at end of period1 165 157
Director’s contributions in the period - -
Single figure of pension remuneration attributable to the Scheme2 30 18
Unapproved pension contributions paid as cash 83 83

1The accrued pension and lump sum figures are the leaving service benefits to which the Director would have been entitled had they left the Section at the relevant date.
2This is calculated as 20 times the increase in the accrued pension over the period after allowing for CPI inflation plus the increase in accrued lump sum (also after allowing for CPI inflation), less the contributions made by the Director over the period.

Members of the HomeServe Money Plan

Martin Bennett and Johnathan Ford were members of the Company’s money purchase pension scheme. Contributions paid by the Company into the Plan were as follows:

2016
£000
2015
£000
M Bennett 27 26
J Ford 27 26

In addition, the following unapproved pension contributions were paid in respect of earnings in excess of the notional earnings cap:

2016
£000
2015
£000
M Bennett1 55 54
J Ford2 46 37

1Mr Bennett chose to have his unapproved contributions paid partly into the Plan and partly as cash in FY15 and as cash only in FY16.
2Mr Ford chose to take his unapproved contributions as cash in both years.

Performance graph

The graph below shows the Company’s performance, measured by TSR, compared with the performance of the FTSE-250 Index (also measured by TSR) for the seven years ended 31 March 2016. This comparator has been chosen as it is a broad equity index of which the Company is a constituent and it is also the one used in assessing relative TSR performance under the LTIP.

Chief Executive’s remuneration

The total remuneration figures for the Chief Executive during each of the last seven years are shown in the table below. The figures include the annual bonus based on that year’s performance and the matching awards plus the LTIP awards based on the three year performance period ending in the relevant year. The annual bonus and long-term incentive award vesting level as a percentage of the maximum opportunity are also disclosed below:

2010 2011 2012 2013 2014 2015 2016
Total remuneration (£000s) 1,030 953 559 953 1,212 1,200 3,355
Annual Bonus 100% 87% 0% 75% 100% 96% 98%
LTIP awards vesting 21%1 51%2 60% 0% 0% 0% 100%

1No LTIPs were due to vest in FY10. The ESOP awards granted in 2006 lapsed as the performance conditions were not met. Awards made under the Deferred Bonus Plan vested on the basis of 1.19 shares out of a maximum of 3.
2No LTIPs were due to vest in FY11. The ESOP awards granted in 2007 lapsed as the performance conditions were not met. Awards made under the Deferred Bonus Plan vested on the basis of 2.48 shares out of a maximum 3.

Percentage change in Chief Executive’s remuneration

The table below shows the percentage change in the Chief Executive’s total remuneration (excluding the value of any pension, matching awards and performance awards receivable in the year) between FY15 and FY16 compared to the average for all employees of HomeServe plc.

% Change from FY15 to FY16
Salary Benefits Annual Bonus
Chief Executive Officer 0% 4% 2%
Average of other HomeServe plc employees 15% 5% 9%

Relative importance of spend on pay

The following table shows the Company’s actual spend on pay (for all employees) relative to dividends, tax and retained profits:

FY15
£m
FY16
£m
% change
Staff costs (£m) 163.2 190.5 17
Dividends (£m) 36.9 37.6 2
Tax (£m) 20.6 21.0 2
Retained profits (£m) 56.1 61.6 10

£6.5m of the staff costs figures relate to pay for the Executive Directors. This is different to the aggregate of the single figures for the year under review due to the way in which the share based awards are accounted for.

The dividends figures relate to amounts payable in respect of the relevant financial year.

Loss of Office Payments (Audited)

No payments have been made for loss of office in the year.

Application of the remuneration policy for FY17

Basic salary

Basic salary for each Executive Director is determined by the Remuneration Committee taking into account the roles, responsibilities, performance and experience of the individual. Salary levels are determined taking into account pay and employment conditions of employees elsewhere in the Company and market data on salary levels for similar positions at comparable companies in the FTSE 250.

Salaries are normally reviewed in July each year (unless responsibilities change). This year salaries will increase by 1.25% which is in line with the average increase for the UK workforce.

The salaries for the Executive Directors effective from 1 July 2016 will therefore be as follows:

Name of Director Salary as at
1 July 2015
Salary as at
1 July 2016
Increase %
R Harpin £550,000 £556,875 1.25%
M Bennett £408,000 £413,100 1.25%
J Ford £375,000 £379,688 1.25%

Fees for the Chairman and Non-Executive Directors

As detailed in the remuneration policy, the Company aims to set remuneration for Non-Executive Directors at a level which is sufficient to attract and retain Non-Executive Directors of the right calibre. The fees paid to the Chairman and the Non-Executive Directors are reviewed periodically. The fees for the Non-Executive Directors were last reviewed during FY15. The Chairman’s fee was reviewed in FY16 and it was increased from £230,000 to £250,000 with effect from 1 April 2016.

Details of the current fees are detailed in the table below.

Chairman’s fees £250,000
Senior Independent Director additional fee £7,500
Non-Executive Directors’ base fee £55,000
Chair of Remuneration or Audit Committee £10,000

Annual bonus performance targets

The annual bonus plan for FY17 will operate on a similar basis to FY16 and is consistent with the policy detailed earlier in this report. The Committee was of the view that the bonus plan had become overly complex. Having taken advice, it was agreed that the number of performance measures should be reduced for FY17. A significant part of the bonus will remain subject to non-financial measures reflecting the strong customer focus in the business.

The bonus measures will be as follows:

Financial objectives
(30% of bonus)
Non-financial
objectives
(50% of bonus)
Personal objectives
(20% of bonus)
  • Profit before tax (25%)
  • Net debt (5%)
  • Core renewable customers (25%)
  • A reduction in customer dissatisfaction (25%)
  • Up to five stretching personal objectives

The financial and non-financial objectives for Richard Harpin and Johnathan Ford will be based on Group performance. The financial objectives for Martin Bennett will be based on Group and UK performance and the non-financial objectives will be based on UK performance. The Committee considers the forward looking performance targets to be commercially sensitive but more detailed disclosure will be provided in next year’s remuneration report.

The Committee will have discretion to scale back any bonus payments if it is deemed appropriate.

Long-term incentives

Performance criteria

Our long-term incentive plan is a mix of a Performance Share award (up to 200% of salary) and a Matching Share award (2:1 match on up to 75% of salary bonus invested in shares).

In line with the policy and the award levels granted last year, the FY17 Performance Share award for Executive Directors will be at 200% of salary. We consider that granting an award at the maximum policy level continues to remain appropriate given the stretching performance conditions applied and the desire to maintain the current momentum in the delivery of our 5 year strategic plan.

Last year, we reintroduced earnings per share targets as the core performance measure for our LTIP awards. 75% of the Performance and Matching Share awards were based on challenging earnings per share (EPS) targets with 25% of awards based on relative Total Shareholder Return (TSR). This approach will continue for FY17 supporting our growth strategy.

For Performance Share awards up to 150% of salary and all Matching Share awards, the performance targets for FY17 grants will be:

FY17 weighting 3 year performance target Change from FY16
75% based on EPS 6% to 15% per annum EPS growth (for 25% to 100% vesting). No change
25% based on
relative TSR
25% vesting for TSR equal to that of the FTSE 250 Index increasing on a straight-line basis to full vesting for out-performance of the Index by 15% per year or more No change

For Performance Share awards between 150% and 200% of salary the performance targets for FY17 grants will be:

FY17 weighting 3 year performance target Change from FY16
100% based on EPS 15% to 20% per annum EPS growth (for 0% to 100% vesting). More challenging performance targets applied to top-slice of the performance share awards, with focus on earnings, reflecting our profit growth ambitions.

When setting the EPS target range for the FY17 grants, the Committee took into account internal projections and external forecasts. Having considered these projections and forecasts, the Committee believes that the EPS targets are appropriately stretching.

Holding period for vested shares

The net of tax value of any share vesting under the LTIP must be held for a further two years, providing a long-term perspective to the incentive programme.

Shareholding guidelines

The minimum required shareholding for each Executive Director will continue to be two times annual basic salary. Executives will be required to retain no less than 50% of the net of tax value of shares from vested awards until this new threshold is exceeded. Shareholding guidelines at two times their fee will also apply to Non-Executive Directors.

Shareholder voting at the 2015 Annual General Meeting

At last year’s Annual General Meeting held on 17 July 2015, the following votes from shareholders were received:

Remuneration report
Total number of votes % of votes cast
For 242,904,666 98%
Against 4,597,545 2%
Total votes cast (for and against excluding withheld votes) 247,502,211 100%
Votes withheld 1,251,070  
Total votes (including withheld votes) 248,753,281

General

The market price of the Company’s shares at 31 March 2016 was £4.306 (2015: £3.826). During the year the price ranged from £3.632 to £4.432.

The shares required for share options and awards under any of the long-term incentive schemes described above may be fulfilled by the purchase of shares in the market by the Company’s Employee Benefit Trust (EBT). As beneficiaries under the EBT, the Directors are deemed to be interested in the shares held by the EBT which at 31 March 2016 amounted to 19,538 ordinary shares. Shares may also be fulfilled through newly issued shares, subject to the dilution limits within each scheme (which are fully compliant with investor guidelines).

By Order of the Board

Stella David
Chairman of the Remuneration Committee
24 May 2016