Punch Taverns plc 2011 Annual Report

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Punch Taverns plc
Annual Report and Financial Statements 2011
Report on Directors’ remuneration continued
Long Term Incentive Plan 2008 (‘LTIP’)
Awards made in 2009 and 2010 under the LTIP have the following features:
• performance shares;
• vesting is dependent on total shareholder return (TSR) performance and continued service (this is pro-rated for good leavers);
• maximum annual award levels continue to be 200% of base salary (face value); and
• performance and vesting periods are normally three years.
There are two TSR peer groups: 50% of an award is measured against a peer group of six UK listed pub companies (Enterprise Inns,
Fuller, Smith & Turner, Greene King, JD Wetherspoon, Marston’s and Mitchells & Butlers) with the other 50% of an award measured
against the FTSE 250 Index (excluding investment trusts) as follows:
Name Pub company group FTSE 250 Index % of total award
Below median / index 0% 0% 0%
Median / index 1 12.5% 12.5% 25%
Upper quartile (median / index + 5% p.a.) 1 50% 50% 100%
1
Straight-line vesting between points
In addition to the TSR targets above, the Committee will consider, inter alia, the Group’s like-for-like sales performance, underlying
profit performance and debt levels when determining whether the Group’s financial performance is consistent with the level of
vesting suggested by the relative TSR targets.
These performance conditions were selected by the Committee as they are important measures of the comparative value delivered
to shareholders.
With the exception of Ian Dyson, who received an LTIP award of shares worth 200% of salary as part of his joining arrangements
(in addition to the recruitment award detailed below), Executive Directors were granted awards of 125% of salary in November 2010.
All outstanding LTIP awards (including Ian Dyson’s recruitment award set out below) were adjusted at demerger to keep individuals
whole. Total shareholder return targets will continue to apply, with performance post demerger relating to Punch’s (share price plus
any dividends) performance only.
For the LTIP awards intended to be granted in November 2011, performance will continue to be based on relative total shareholder
return. Reflecting the dilution constraints faced by the Company given its low market capitalisation relative to the size of the business
and the adjustment to the annual bonus potential, LTIP award levels for Executive Directors will be reduced to an annual grant policy
of 50% of salary for 2011.
The split between short- / long-term incentives will be reviewed annually by the Committee.
Ian Dyson recruitment award
As disclosed last year, Ian Dyson was granted a share award on 13 October 2010 in accordance with Listing Rule 9.4.2(2) and will
normally be released between 5 May 2013 and 4 May 2020 subject to continued employment and to the extent that TSR targets are
met. Consistent with the 2010 LTIP awards described above, the vesting of the award is split equally according to the TSR performance
of the Company against the two different comparators. 12.5% of the award will be released for achievement of the median position
against the pub sector group, and 12.5% for matching the TSR of the FTSE 250 Index. The award will vest in full if the Company’s
annualised TSR exceeds the median of the pub sector group, and the FTSE 250 Index TSR, by five percentage points per annum.
Straight-line vesting will occur between these two points.
Spirit Value Growth Plan (SVGP)
As reported previously, a specific long-term incentive plan was approved by the Committee for Mike Tye (Managing Director –
Punch Pub Company until demerger) in June 2008. This was implemented in accordance with Listing Rule 9.4.2(2), to facilitate
the recruitment of Mike Tye and provide a direct alignment between the performance of the Punch Pub Company business and
his remuneration to assist in driving the performance of this business and its value to shareholders. Consistent with the terms of the
arrangement, the award lapsed upon demerger as a result of the performance hurdle not being met. No payout was therefore earned.
Share Bonus Plan
The Share Bonus Plan enables the Committee to award part or all of any annual bonus in the form of the Company’s shares, which
the recipient is not permitted to sell during a restricted period (normally two years). As stated above, the current deferral policy is for
one-third of any bonus paid to be deferred into Company shares for a two-year period.