Remuneration committee letter

J shearman letter

June 2017

Trifast plc
Trifast House,
Bellbrook Park, Uckfield,
East Sussex, TN22 1QW
Tel: +44 (0)1825 747366
Fax: +44 (0)1825 747368

email: corporate.enquiries@trifast.com

Website: www.trifast.com

"From a broader business context, despite now having many years of continuous EPS improvement ‘under our belt’, we push on, committed to the delivery of further growth from both organic and acquisitive sources. We believe the Executive team is in place for the job at hand and that they are suitably motivated."

Dear Shareholder

Introduction

As Chairman of the Trifast plc Remuneration Committee (the ‘Committee’), I am pleased to introduce our remuneration report for FY2018 which has been prepared by the Committee in accordance with the relevant legal and accounting regulations, then approved by the Board.

The role of the Committee is to ensure that the remuneration provided to our Executive Directors motivates them, aligns them with delivering our strategy and creates shareholder value in a sustainable manner. In addition, it is our task to ensure that the remuneration received by the Executive Directors is proportionate to the performance achieved and the returns received by you as shareholders.

Subsequent to last year’s review of the Directors’ remuneration Policy (‘Policy’), the Committee was delighted that, following the consultation exercise, shareholders showed a high level of support for the Policy at the 2017 AGM (94.8% vote in favour of the Policy). The new Policy was operated for the first time in FY2018.

Company performance

Trifast has performed well this year, including progress when considering our strategy, taking into account a need to balance growth and investment in the business for future growth. Some business highlights include:

  • Revenue grew by 6.0%
  • Underlying Group profit before tax grew by 8.5% slightly ahead of expectations
  • We delivered a 7.5% improvement in underlying diluted Earnings per Share
  • Major capital investment programmes have been successfully implemented or commenced

The Group’s balance sheet continues to be robust with the capacity to fund both our organic and acquisition growth and although there are macroeconomic challenges that we cannot fully mitigate, we remain confident in our growth prospects and the Executives’ ability to execute the long-term strategy.

The positive business performance during the year together with the future strategy has helped frame decisions and outcomes in relation to current and future remuneration. Further details of which are provided below.

Key FY2018 remuneration outcomes

Annual bonus

In arriving at the annual bonus for FY2018, the Committee assessed the achievement of the Group’s financial performance targets (75% weighting) and the Executive team’s performance against the strategic and operational measures (25% weighting) that were set at the beginning of the year:

  • In line with the pay-out schedule, the Company’s organic EPS growth of 7.49% contributed 59.7% of maximum for this element and was also sufficient (above threshold) for the strategic & operational measures elements to be considered
  • The Committee established four strategic and operational measures for FY2018, as set out below, and the Committee determined that 100% of maximum for this element was achieved (see page 92 for full details):
  • ROCE: minimum of 15%
  • Growth strategy: establish a fully functional acquisition team Customer satisfaction: construct a detailed Strategic Account Management (SAM) structure, identify personnel gaps and infill as appropriate
  • Risk mitigation: undertake a full initial scoping of the Group’s MIS, IT infrastructure and underlying business processes; ensure the correct team (internal and external) and Board approved budget is in place to outwork any resulting project(s).

Following the assessment of the financial performance targets and the strategic and operational measures, the Committee determined that a total annual bonus of 87.25% of salary was warranted, equating to 69.8% of the maximum bonus opportunity. The Committee is comfortable that the FY2018 annual bonus outcome reflects the underlying performance of the Company and is commensurate with the shareholder experience in FY2018. No discretion was exercised by the Committee when determining the bonus outcomes.

As the annual bonus is less than 100% of the Executives’ base salary, and in accordance with the approved Policy, the amount will be paid in cash and there is no deferred component.

Long-Term Incentive Plan

We made our first LTIP award to Executives during FY2018 and the vesting of these awards will be assessed over the three year performance period beginning 1 April 2017. As such, the Committee was not required to assess the vesting of any LTIP awards during the year.

Implementation of Policy for FY2019

The Executive team recognises that FY2019 will be another year of investment for Trifast and on this basis requested that the Committee freeze their salaries for FY2019 instead of receiving the inflation based increase provided to the wider UK workforce. As a result, there was no salary increase awarded to the Executive Directors.

In line with the commitment made last year, the fees for our Non-Executive Chairman, Malcolm Diamond, have reduced from £150,000 to £125,000 effective 1 April 2018. All other Non-Executive fees remain unchanged.

This coming financial year will be another one during which the Board seeks to balance current growth and investment for the future, the annual bonus and LTIP targets alongside the strategic and operational measures have been set with this in mind. As a result, the EPS targets for the annual bonus and LTIP remain unchanged as does the relative total shareholder return (TSR) target in the LTIP (see page 97 for details). Strategic and operational measures remain an important component of the annual bonus and will ensure that the Executive team’s pay is aligned with the successful execution of the strategic imperatives for FY2019.

Changes to the Executive Directors

On 29 March 2018, the Group announced that Geoffrey Budd, Commercial Director and European Managing Director stepped down from the Main Board. Although Geoff has decided to relinquish his Board duties he will remain an employee working with the operational team at TR Fastenings with responsibilities for the commercial and technical aspects of the business in the UK, Europe and Asia. Details on Geoff’s remuneration are set out on page 94.

Activities of the Committee

During the year, the main activities of the Committee during the three meetings held were as follows:

  • Consideration of the implementation of the new Director’s Remuneration policy that was approved at the 2017 AGM
  • Determination of the final remuneration outcomes for the year to 31 March 2018
  • Consideration of the appropriate targets for the year to 31 March 2019
  • Geoff Budd’s remuneration arrangements on stepping down from the Main Board
  • Consideration of our gender pay reporting summary

Looking ahead

We are fully committed to embracing new developments in regulation and best practice, such as the proposed revisions to the FRC Corporate Governance Code and will take the latter into consideration once the new Code is finalised. However, the Company already operates in line with many of the principles of fairness and workforce engagement which are likely to form part of the new Code.

We continue to be committed to creating an inclusive working environment and to rewarding all our employees in a fair manner and believe they should be able to share in the success of the Company. For example, we operate a very popular Save As You Earn (“SAYE”) share plan which is open to all UK employees and our intention is to continue with this.

From a broader business context, despite now having many years of continuous EPS improvement ‘under our belt’, we push on, committed to the delivery of further growth from both organic and acquisitive sources. We believe the Executive team is in place for the job at hand and that they are suitably motivated. We look forward to shareholders’ continued support.

Jonathan Shearman

Chairman of the Remuneration Committee

11 June 2018