I am pleased to update you on the Remuneration Committee's activities in Vesuvius' first full year as an independent public company.
I took over as Chair of the Committee from John Sussens, and I am grateful to him and Jan Oosterveld (who both left the Committee at the 2013 AGM), for their expertise and judgement. Nelda Connors joined the Committee on 1 March 2013. The Committee has a broad, diverse and balanced set of skills to meet its ongoing requirements.
The Annual Report on Remuneration provides further detail about the work of the Committee in 2013. During the year we laid the groundwork for Vesuvius' remuneration arrangements as a stand-alone company, whilst maintaining overall continuity with the previous executive remuneration policy. As a result, the remuneration policy (detailed later) is substantially similar to that adopted by the Committee at the demerger, with the exception of the elements highlighted below.
During the year, the key elements that the Committee debated were:
- Changing the measurement of the Vesuvius Share Plan EPS growth to compare to nominal global Gross Domestic Product growth, rather than an absolute target, thus reflecting the Company's strategy and growth ambition (see Vesuvius Share Plan and Selection of Performance measures for further details);
- Agreeing that our Group Executive Committee, who are central to delivering the ongoing success of the Company, are included in the Vesuvius Share Plan;
- The payment of incentive awards in shares rather than cash to senior managers in the Medium Term Plan ("MTP");
- The agreement of financial targets for the 2014 annual incentive (though we will not disclose targets set until after the relevant performance period because of commercial sensitivities); and
- The adoption of a longer-term horizon (of 2-3 years) for base salary increases for senior executives and Executive Directors to evaluate and reward performance over the medium term.
Clearly, it must be recognised that, when base salary rises are awarded under the new salary approach, they may be substantially higher than if made on an annual basis. In line with this new approach, the Executive Directors requested that no increase in salary be awarded to them for 2014.
As described elsewhere in the Strategic Report, and in the financial highlights, the Company has enjoyed a successful year. The annual incentive awards based upon Group Headline Earnings per share of 125% and 100% of base salary for the Chief Executive and CFO, respectively, reflect this solid trading performance. In 2012 no performance-related annual incentives were paid. The long term incentive awards made in 2011 under the Cookson LTIP matured at the end of 2013. Under this plan, performance is measured equally in TSR relative to the FTSE 250 (excluding Investment Trusts) and headline EPS over a three year period. Relative TSR performance was between median and upper Quintile, resulting in a performance share award of 28.4% (out of a maximum 50%) and matching share awards of 1:0.621. However, the EPS target for the three year period was not met and therefore none of the element of the award related to EPS performance vested. In confirming the vesting of the relative TSR performance portion of the award, noted above, we reviewed the underlying performance of the Company to satisfy ourselves that the numerical outcome was justified.
The previous Committee Chairman and I talked with major shareholders to address any questions they had arising from the change of leadership, and as noted above, the proposed change of the Vesuvius Share Plan EPS growth measure. I remain keen to hear shareholder views on remuneration matters and look forward to a continued dialogue.
The remuneration policy we propose is not materially different to the remuneration approach applied to Executive Directors in 2013.
Finally, I am delighted to present our first Remuneration Policy to our shareholders for a binding vote, and our Annual Report on Remuneration, as before, for an advisory shareholder vote. The Committee recommends both elements to you for approval. We look forward to another year of support from our investors.
Chair, Remuneration Committee
4 March 2014