Punch Taverns plc 2011 Annual Report

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Punch Taverns plc
Annual Report and Financial Statements 2011
Report on Directors’ remuneration
Dear Shareholder
I am pleased to present the remuneration report for the year ended 20 August 2011, for which we will be seeking approval from
shareholders at the 2011 AGM.
As this is the first remuneration report for Punch following the demerger of the Spirit business to Spirit Pub Company plc on
1 August 2011, the key points with respect to the impact of the demerger on the executive remuneration policy are summarised below:
At demerger:
• base salaries were adjusted to reflect the new responsibilities of the post-demerger Chief Executive Officer and Finance Director;
• annual bonus plans continued to operate until the year end, including bonus deferral;
• awards granted under the Punch Taverns plc Long Term Incentive Plan 2008 (‘LTIP’), the Company’s primary long-term arrangement,
and Ian Dyson’s recruitment award were adjusted to keep individuals whole. Awards will continue to run until the normal vesting
dates and the total shareholder return targets will continue to apply, although post demerger performance will relate only to
Punch’s share price (i.e. it will exclude the share price performance of Spirit). Historic dilution was shared between Punch and Spirit
based on whether award-holders were employed by Punch or Spirit post demerger; and
• the Spirit Value Growth Plan (‘SVGP’), a cash-based long-term incentive arrangement introduced for Mike Tye in July 2008,
lasped at demerger as a result of the performance hurdle not being met. No payout was therefore earned under this arrangement.
Following demerger:
• given the focus on short-term improvement of the business and the constraints around the use of equity given the Company’s
current market capitalisation relative to the size of the business, annual bonus potential was increased from 150% of base salary
to 250% of base salary for the Chief Executive Officer and to 200% of base salary for the Finance Director for 2011/12. Targets will
continue to be primarily based on profit metrics and a third of any bonus will continue to be deferred into shares with a clawback
provision operated; and
• LTIP award levels will reduce from 200% of base salary (2010: 125%) to 50% of salary given current dilution constraints.
Given the difficulty in setting long-term financial-based performance metrics at the current time, relative total shareholder return
will continue to be operated as the sole performance measure.
The Company’s largest investors and representative bodies were consulted in advance of the changes set out above and were
generally supportive. The Committee has given a commitment to review the split between cash / shares and short- / long-term
incentives on an annual basis.
During 2010/11, the Committee also dealt with the following Board changes unrelated to the demerger:
• the departure of Giles Thorley and appointment of Ian Dyson as Chief Executive Officer on 6 September 2010; and
• the resignation of Phil Dutton (Finance Director) on 17 December 2010 and appointment of Steve Dando as Acting Finance Director
(subsequently appointed Finance Director on 10 May 2011).
Further details on the above are set out within the report which follows.
The Committee unanimously recommends that shareholders vote to approve the Report on Directors’ remuneration.
On behalf of the Board
Mark Pain
Remuneration Committee Chairman