This part of the Directors' Remuneration Report sets out the Directors' remuneration paid in respect of the 2015 financial year. It sets out the payments to Directors and details of the link between Company performance and remuneration of the Chief Executive Officer. This part, together with the "Description of the Remuneration Committee" section of the Directors' Remuneration Report constitutes the Annual Report on Remuneration, and will be subject to an advisory shareholder vote at the Company's AGM.
Highlights for 2015 (audited)
This table briefly summarises the highlights of the Directors' remuneration arrangements for the financial year.
|Base Pay and Benefits||Pension||AIP||Long-Term Incentives||All-Employee Schemes|
Base pay increase of 2% for the Executive Directors, in line with other employees.
No pay increases for the Non-Executive Directors in period.
No change to taxable benefits.
|Company contributions to pensions for Executive Directors in line with the Directors' Remuneration Policy.||Total bonus earned by Executive Directors for 2015 based on 65% to 67% of target achievement was £1,115,370 (2014: £912,415)|
Awards were granted under the LTIP.
100% of target achievement for the 2013 LTIP awards, which are due to vest in March 2016.
No awards or options vested under any all-employee share schemes during the period.
Certain options exercised under ESOS during period, where options were due to expire.
Ongoing participation in the SIP and Sharesave schemes.
|See Base Salary.||See Pensions.||See the Annual Incentive Plan (audited).||See LTIP.||See SIP (audited).|
Total Director Remuneration (audited)
The total remuneration paid to all of the Directors during the period was £13,205,000. The detailed remuneration breakdown for the Executive Directors and the Non-Executive Directors is set out separately.
Total Remuneration (audited)
The total remuneration for the period for each of the Executive Directors is set out in the table below. Total cash-based remuneration paid to the Executive Directors was £2,814,000 in 2015, which was 4.5% higher than in 2014 (£2,692,000). The prior year figure includes remuneration paid to former Executive Director Jason Gissing in that period (see note 3 to the Total Remuneration table).
|Tim Steiner||Neill Abrams||Duncan|
|Total Fixed Pay||646||595||313||306||365||357||374||365||1,698||1,623|
|Total Remuneration in cash||1,105||980||507||462||597||541||605||552||2,814||2,535|
|Share Plans – requiring investment|
|JSOS – theoretical gain||—||5,503||—||2,227||—||2,937||—||2,562||—||13,229|
|Share Plans – awards|
|Total for Share Plans||4,775||5,503||1,061||2,227||2,387||2,937||1,634||2,562||9,857||13,229|
|Recovery of sums paid||—||—||—||—||—||—||—||—||—||—|
- The value of LTIP awards for 2013 has been estimated based on 100% vesting and the three-month average share price from 1 September 2015 to 27 November 2015 of 348.02 pence per share, as these awards are not capable of vesting until after the end of the period, on 31 March 2016. This value assumes no dividends will be payable. The value assumes that the participant will not be required to pay an amount to acquire the conditional shares, being the nominal price of 2 pence per share. These estimated figures will be restated in next year's annual report.
- Tim Steiner's taxable benefits have been restated for 2014 in relation to the use of a chauffeur-driven car. Total remuneration for both Tim Steiner and the Executive Directors for 2014 has been restated accordingly.
- Former Executive Director Jason Gissing, who retired from the Board on 7 May 2014, received the following remuneration during the prior period which is not included in the table (£'000): salary - 144; taxable benefits - 1; pensions - 12; total fixed pay - 157; total remuneration in cash - 157; JSOS - theoretical gain - 3,669; total for share plans - 3,669; total remuneration - 3,826.
An explanation of each element of remuneration paid in the table is set out in the following section.
The Company has obtained a written confirmation from each Executive Director that they have not received any other items in the nature of remuneration from the Group, other than those already disclosed in this report.
Base Salary (audited)
During the period, the Remuneration Committee reviewed the salaries of the Executive Directors. After taking into account a number of relevant factors which are discussed in more detail below, the Remuneration Committee recommended that all basic salaries be increased. The following table shows the change in each Executive Director's salary.
|Tim Steiner||561,000||550,000||1 April 2015|
|Neill Abrams||290,700||285,000||1 April 2015|
|Mark Richardson||346,800||340,000||1 April 2015|
|Duncan Tatton-Brown||346,800||340,000||1 April 2015|
The changes to base salary were made in line with the Directors' Remuneration Policy. The Executive Directors received an increase in base pay of 2% which was in line with the percentage salary increases for the monthly paid employees of the Group in the period. The increases, which position the salaries broadly around the market median for a company of the Company's size and complexity, also aim to help retain the Executive Directors.
Taxable Benefits (audited)
The Executive Directors received taxable benefits during the period, notably private medical insurance, travel insurance and use of a chauffeur-driven car. The Executive Directors also received other benefits, which are not taxable, including income protection insurance, life assurance and Group-wide employee benefits, such as an employee product discount. The remuneration arrangements for the Executive Directors do not include a company car or car cash allowance, but the directors have access to a chauffeur-driven car. This service was used almost exclusively by Tim Steiner during the period and accordingly is shown as a taxable benefit in the Total Remuneration table.
The Company made pension contributions on behalf of the Executive Directors to the defined contribution Group personal pension scheme (which is administered by Standard Life). The employer contributions to the pension scheme in respect of each Executive Director are made in line with the Group personal pension scheme for all employees (the rates being, for employees and Executive Directors joining the pension scheme before May 2013, from 3% up to 8%, and for employees joining the scheme after May 2013, from 3% up to 6%, depending on the number of years the employee or Executive Director has participated in the scheme). The contributions during the period made on behalf of the Executive Directors were 8% of base salary, except in the case of Duncan Tatton-Brown, which was 7% of base salary up to 31 December 2015, in accordance with the rules of the scheme. These contributions were made in line with the Directors' Remuneration Policy which allows the Company to make employer contributions of up to 30% of base salary.
Pension contributions can be made to the Executive Directors (and any other employee) as a cash allowance where the Executive Director has reached either the HMRC annual limit or HMRC lifetime allowance limit for pension contributions as provided for in the Directors' Remuneration Policy. In accordance with this policy, Duncan Tatton-Brown has elected to receive his pension contributions as an equivalent cash allowance.
Annual Incentive Plan (audited)
The Remuneration Committee re-examines the design of the AIP each year to incentivise the delivery of key business objectives and individual performance for that financial year. The 2015 AIP was based on the performance targets and weightings set out below. Financial performance measures, namely Gross Sales (Retail) and EBITDA, were the primary targets, with 70% of the annual bonus being determined by performance against targets set by the Remuneration Committee at the start of the financial year, by reference to the Company's budget for the period. Of the balance, 30% related to individual objectives for each of the Directors, largely independent of the financial objectives. The weighting of the individual objectives increased from 20% in 2014 to 30% in 2015 in order to align incentives with the Company's increased emphasis on achieving certain strategic objectives. The Remuneration Committee has agreed "threshold" and "maximum" conditions that must be achieved. A bonus is not payable unless a "threshold" level of the performance condition has been achieved. At "threshold" performance for a financial performance measure, 8.75% of total bonus is payable and at "maximum" performance, 35% of total bonus is payable. A straight line sliding scale will apply in relation to the intermediate points between the "threshold" and "maximum". Each target was discrete and could be earned separately. The Chief Executive Officer had a maximum bonus opportunity of 125% of salary and the other Executive Directors had a maximum opportunity of 100% of salary.
|Tim Steiner||Duncan Tatton-Brown||Mark Richardson||Neill Abrams|
|EBITDA (% of total target)||35||35||35||35|
|Gross Sales (Retail) (% of total target)||35||35||35||35|
|(% of total target)||30||30||30||30|
|Examples of business area objectives||1.||Develop strategic plans under Ocado Smart Platform.|
|2.||Drive efficiency and progress key projects including new CFCs.||Prepare and execute financing strategy to include UK and international requirements.||Improve performance and capacity in line with annual order growth.||Develop Group's patent function.|
|3.||Develop and drive long term strategy.||Continue to operate an efficient and effective finance function.||Deliver Andover CFC ahead of its capacity being required and in line with budget.||Continue oversight of legal, HR, CR and Risk functions.|
Financial Targets and Individual Targets
Each Executive Director had between four and six individual objectives, with different weightings, under the plan. They related to specific programmes relevant to each Executive Director's business area for which they have primary responsibility. All of the Executive Directors had an individual objective which concerned the development of strategic plans for internationalising the business with the Ocado Smart Platform. The Remuneration Committee also considered environmental, social and governance issues when setting the individual objectives, in particular for Neill Abrams who has responsibility for the Group's CR policy. The Remuneration Committee reviewed the performance of each Executive Director against the measurable performance metrics and based their judgment on a report by the Chief Executive Officer and the Chairman.
The Group's Gross Sales (Retail) for the period were £1,115.7 million, which was above the ''threshold" of £1,104.6 million set under the 2015 AIP. The Group's EBITDA (pre-exceptional items) for the period was £81.5 million, which was above the "threshold" of £75.5 million set under the 2015 AIP.
The Remuneration Committee, in assessing performance, took into account the level of the Group's trading performance compared with UK grocery retail peers and the Group's progress against its strategic objectives. All Executive Directors met to some extent their individual objectives, with achievement between 75% and 80% of maximum.
|Financial Targets||Individual Objectives||Total Payment|
|Gross Sales (Retail)||EBITDA|
|Director||Threshold||Maximum||Actual||% bonus||% salary||Threshold||Maximum||Actual||% bonus||% salary||% bonus||% salary||% salary||£'000|
|Tim Steiner||£1,104.6m||£1,158m||£1,115.7m||14.2%||17.8%||£75.5m||£83.5m||£81.5m||28.7%||35.9%||Note 1||22.5%||26.9%||81.8%||£459|
|Duncan Tatton-Brown||£1,104.6m||£1,158m||£1,115.7m||14.2%||14.2%||£75.5m||£83.5m||£81.5m||28.7%||28.7%||Note 1||24.0%||24.0%||66.9%||£232|
|Neill Abrams||£1,104.6m||£1,158m||£1,115.7m||14.2%||14.2%||£75.5m||£83.5m||£81.5m||28.7%||28.7%||Note 1||23.8%||23.8%||66.7%||£194|
|Mark Richardson||£1,104.6m||£1,158m||£1,115.7m||14.2%||14.2%||£75.5m||£83.5m||£81.5m||28.7%||28.7%||Note 1||23.6%||23.6%||66.5%||£231|
- There is no threshold or maximum target set for the individual objectives. Each objective is weighted and scored to provide a total score out of 30. Performance may range from zero to 30.
- The applicable salary used for calculating the bonus payment under the rules of the 2015 AIP is the applicable base salary on the date of payment.
Disclosure of Targets
Following a change in policy agreed by the Remuneration Committee, the threshold and maximum targets and achievement against the targets have been disclosed in respect of the financial targets for the AIP. A broad description of some of the Executive Directors' individual objectives has been provided, but specific details concerning the individual objectives and performance against them has not been disclosed in this report. Although the Remuneration Committee is conscious of the regulations and the Code requirement that performance targets should be transparent, it considers that the individual objectives were and remain commercially sensitive to the Company and if disclosed could damage the Company's commercial interests. These individual objectives mostly relate to important business plans and actions and consequently could hinder the progress of the business or the Group's competitive advantage if publicly disclosed. The Remuneration Committee does not expect to disclose this information at a later date. The Remuneration Committee believes that the targets were stretching and have been rigorously applied.
Summary of Bonus Earned
The Remuneration Committee has, in accordance with the Directors' Remuneration Policy and the rules of the 2015 AIP, recommended an aggregate bonus payment of £1,115,370 (2014: £912,415) under the plan for the period. The Remuneration Committee believes that this level of bonus payment appropriately reflects the performance of the business and individual performance during the period, which saw strong trading for the Group in a very competitive market. The table above summarises the bonus payments for each Executive Director for the 2015 AIP. The cash payments are expected to be made in February 2016. No amount has been deferred to a later date given that under the rules of the AIP deferral does not apply as all of the Executive Directors have met the minimum shareholding requirements under the Directors' Remuneration Policy.
Awards granted under long-term incentive plans only count towards the total remuneration figure for the period in which they vest or where achievement of performance targets is determined in the period. Awards under most of the Company's share plans are subject to three-year vesting periods and therefore awards made or exercised during the period will not necessarily be reflected in the total remuneration figure for this period. Further details on all the existing share incentives held by the Executive Directors are set out below.
There are no JSOS interests that vested during the period, therefore no value is shown in the total remuneration table for the period. The fourth and final tranche of JSOS shares vested on 1 January 2014. For a detailed description of the valuation of the JSOS in the 2014 column of the table, see the Directors' Remuneration Report of the 2014 annual report.
The LTIP is the primary long-term incentive for the Executive Directors. The LTIP awards help retain and reward the Executive Directors for the delivery of long-term business objectives.
The three year performance period for the 2013 LTIP award expired at the end of the Financial Year. The Remuneration Committee reviewed the performance against the 2013 LTIP performance target, which was the Group's earnings before interest and tax and pre-exceptional items and prior to the cost of the LTIP awards for management, for the financial year. As noted in the Consolidated Income Statement of this Annual Report, the Group's earnings before interest and tax and exceptional items for the period was £21.4 million, which was an increase of 28.9% on 2014. The performance target also takes into account the share based management incentive charges which were £7.8 million (see the Notes to the Consolidated Financial Statements). The Group's earnings before interest and tax and pre-exceptional items and before the LTIP award costs for management was £29.2 million, which exceeded the maximum performance target of £25.2 million for the 2013 LTIP awards. Accordingly, achievement against the performance condition was 100%. Details of performance against the EBIT target is set out in the table below. The value of the 2013 LTIP awards in the total remuneration table is estimated based on the average Company share price for the final three months of the period.
The expected vesting date of the 2013 LTIP award is 31 March 2016. Subject to the continued satisfaction of the award conditions, final vesting will be determined.
|Director||Threshold||Maximum||Actual||% of maximum|
- 25% of an award vests for threshold performance with full vesting for achieving or exceeding maximum performance. Vesting is a straight line between these two points.
- Details of the number of conditional shares awarded to each Director for the 2013 LTIP awards are shown in the table in the Directors' Remuneration Report.
Recovery of Sums Paid (audited)
No sums paid or payable to the Executive Directors were sought to be recovered by the Group.
Total Fees (audited)
The fees paid to the Non-Executive Directors and the Chairman during the period are set out in the remuneration table below. With the exception of the Chairman (who has received the Chairman's Share Matching Award, which is noted in the Directors' Remuneration Report) and Robert Gorrie (who receives other remuneration as set out below), the Non-Executive Directors received no remuneration from the Group other than their annual fee.
The remuneration arrangements for the Non-Executive Directors (except the Chairman) were reviewed by the Executive Directors and the Chairman during the period and remained unchanged.
The review was carried out by the Executive Directors and Chairman in accordance with the Directors' Remuneration Policy and accordingly took into account the responsibility and time commitments of the roles of the Non-Executive Directors and Board committee chairmen, the financial position and trading performance of the business, and the appropriate benchmark data (obtained from third party providers) for comparable roles for companies of equivalent size and complexity to the Group.
The Chairman's fees were not subject to review in 2015 as it was agreed on appointment that the Chairman's fee would not be reviewed by the Remuneration Committee for a minimum of three years from appointment.
Other Remuneration for the Non-Executive Directors (audited)
In addition to the fees, the Non-Executive Directors are entitled to a staff shopping discount in line with the Group's employees.
The Chairman received the Chairman's Share Matching Award on becoming Chairman in May 2013. The details of the award are outlined in the Directors' Remuneration Report.
Robert Gorrie chairs the meetings of the Ocado Council and occasionally provides advice on various employee matters, in addition to his role as a Non-Executive Director. He provides these services through Robert Gorrie Limited (of which he is the sole shareholder) and is paid a per diem fee for these services. These fees are included in the related party transactions with key management personnel in Note 5.4 to the consolidated financial statements.
The Company has obtained a written confirmation from each Non-Executive Director that they have not received any other items in the nature of remuneration from the Group, other than those already referred to in this report.
Recovery of Sums Paid (audited)
No sums paid or payable to the Non-Executive Directors were sought to be recovered by the Group.
Other Remuneration Disclosures
Executive Directors' Service Contracts (audited)
Each of the Executive Directors has a service contract with the Group. The terms of these contracts are consistent with the Directors' Remuneration Policy, though the contracts provide for payment in lieu of notice of one times basic salary only (and do not include other fixed elements of pay, which are permitted by the policy). The service contracts for each of the Executive Directors are continuous until terminated by either party (on 12 months' notice if terminated by the Company, or six months' notice if terminated by the Director).
Non-Executive Directors' Letters of Appointment (audited)
The Chairman and the Non-Executive Directors do not have service contracts and were appointed by letter of appointment for an initial period of three years, subject to annual reappointment at the annual general meeting. There are no provisions in the letters of appointment for payment for early termination. A Non-Executive Director appointment may be terminated on one month's notice, except in the case of the Chairman, which requires six months' notice. A copy of a pro forma Non-Executive Director letter of appointment is available on the Company's corporate website. Copies of the letters of appointment and the service contracts of the Executive Directors are available for inspection at the Company's registered office.
Deferral or Holding Periods (audited)
The Executive Director share schemes do not contain any requirements for share deferral or additional holding periods except the Company operates deferred remuneration under the AIP to the extent that the minimum shareholding requirement for the Director has not been met. However, the Remuneration Committee feels that their absence is materially mitigated by the existing large shareholdings held by the Executive Directors in the Company and by the lengthy five-year vesting period that applies to the GIP. Such factors help create a longer term focus from the Executive Directors and strong alignment with shareholders, as envisaged by Code principle D.1.
Director Retirement Arrangements (audited)
As noted in the Audit Committee Report, David Grigson will retire from the Board at the Company's AGM on 4 May 2016. As announced on 28 January 2016, it was determined in accordance with the Directors' Remuneration Policy that the arrangements set out below should apply in relation to David Grigson's remuneration on retirement.
|Element of Remuneration||Treatment|
|Remuneration Payments||All outstanding fees will be paid up to 4 May 2016 in accordance with the terms of David Grigson's letter of appointment.|
No payments are expected after the date of retirement.
|Payment for Loss of Office||No payment for loss of office or other remuneration payment was made or is expected to be made.|
|Share Schemes||David Grigson has never participated in a Group share scheme.|
Director Appointment Arrangements (audited)
As announced on 28 January 2016, Andrew Harrison was appointed to the Board as a Non-Executive Director with effect from 1 March 2016. Andrew Harrison's remuneration is in line with the approved recruitment policy detailed in the Directors' Remuneration Report. On appointment, Andrew Harrison's basic annual fee is £48,000. Andrew Harrison will not receive any other benefits or payments in line with the Directors' Remuneration Policy.
Payments to Past Directors
The Company does not have any arrangements for payments to any former Directors of the Company.
Enforcing the Directors' Remuneration Policy
The Company has not made any payments to a Director outside of the Directors' Remuneration Policy. All of the Remuneration decisions regarding executive remuneration for the period have been made in line with the Directors' Remuneration Policy.
No Director has options over Company shares outside one of the Company's recognised share schemes.
External Remuneration for Executive Directors
As at the date of this Annual Report:
- In addition to his role as Executive Director of the Company, Neill Abrams is an alternate non-executive director of Mr Price Group Limited, listed on the Johannesburg Stock Exchange. The role does not involve any remuneration paid or payable to Neill.
- In addition to his role as Executive Director of the Company, Duncan Tatton-Brown is an independent non-executive director, senior independent director and audit committee chairman of Zoopla Property Group plc, listed on the London Stock Exchange. For his services to Zoopla Property Group plc Duncan is paid a fee of £62,500 per annum.
- In addition to his role as Executive Director of the Company, Mark Richardson is a non-executive director of Paneltex Limited. This role does not involve any remuneration paid or payable to Mark.
Director Shareholdings (audited)
The beneficial interests in the Company's shares of Directors serving at the end of the period, and their connected persons, as shareholders and as discretionary beneficiaries under trusts, were:
|Ordinary Shares of 2 Pence|
each held at 29 November 2015
|Ordinary Shares of 2 Pence|
each held at 30 November 2014
|Director||Direct Holding||Indirect Holding||Direct Holding||Indirect Holding|
- The indirect holding for Neill Abrams includes holdings of Caryn Abrams (wife of Neill Abrams) who holds 79,745 (2014: 79,745) ordinary shares, and as a discretionary beneficiary of a trust holding 133,100 (2014: 133,100) ordinary shares.
- The indirect holding for Duncan Tatton-Brown includes a holding by Kate Tatton-Brown (wife of Duncan Tatton-Brown) who holds 60,000 (2014: 60,000) ordinary shares.
- There have been no changes in the Directors' interests in the shares issued or options granted by the Company and its subsidiaries between the end of the period and the date of this Annual Report, except shares held pursuant to the SIP, as set out in the Directors' Remuneration Report. There have been no changes in the Directors' beneficial interests in trusts holding ordinary shares of the Company.
- No Director had an interest in any of the Company's subsidiaries at the beginning or end of the period.
- On 17 May 2013, in respect of various contracts for the transfer of shares (as described in the Prospectus), Tim Steiner and Neill Abrams delayed the date on which completion under the contracts for transfer would take place to 30 June 2016, or such later date as the parties may agree.
- Where applicable, the above indirect holdings include SIP Partnership Shares held under the SIP, which are held in trust.
Director Shareholding Requirement (audited)
The table below shows current compliance with the Director shareholding requirements in the Directors' Remuneration Policy as at the date of this Annual Report. All Directors comply with the Director shareholding requirements.
|Director||Minimum Shareholding Requirement (% of Base Salary or Fee)||Complied with Shareholding Requirement||Basis for Compliance|
|Tim Steiner||150||Yes||Indirect and direct shareholdings|
|Duncan Tatton-Brown||100||Yes||Indirect and direct shareholdings|
|Neill Abrams||100||Yes||Indirect and direct shareholdings|
|Mark Richardson||100||Yes||JSOS and SIP interests|
|Lord Rose||100||Yes||Direct shareholdings|
|Robert Gorrie||100||Yes||Direct shareholdings|
|Douglas McCallum||100||Yes||Direct shareholdings|
|Ruth Anderson||100||Yes||Direct shareholdings|
|David Grigson||100||Yes||Direct shareholdings|
|Alex Mahon||100||Yes||Direct shareholdings|
|Jörn Rausing||100||Yes||Indirect shareholdings|
The assessment for compliance is based on the current annualised salary or fee (as set out in the total remuneration tables) which applied on 20 January 2016 (being the last practicable date prior to the publication of this Annual Report) and the higher of the original purchase price(s) or the current market price (being 265 pence per share on 20 January 2016), of the relevant shareholdings.
Director Interests in Share Schemes (audited)
At the end of the period the Executive Directors' interests in ordinary shares in the Company pursuant to the Group's JSOS were as follows:
|Director||Type of interest||Date of issue||Number of|
|Tim Steiner||Joint interest in shares||03/02/10||2,513,100||1.73||01/01/11|
|Joint interest in shares||03/02/10||2,513,100||1.91||01/01/12|
|Joint interest in shares||03/02/10||2,513,100||2.08||01/01/13|
|Joint interest in shares||03/02/10||2,513,000||2.28||01/01/14|
|Neill Abrams||Joint interest in shares||03/02/10||1,017,200||1.73||01/01/11|
|Joint interest in shares||03/02/10||1,017,200||1.91||01/01/12|
|Joint interest in shares||03/02/10||1,017,200||2.08||01/01/13|
|Joint interest in shares||03/02/10||1,017,100||2.28||01/01/14|
|Duncan Tatton-Brown||Joint interest in shares||01/11/12||365,000||1.70||01/01/13|
|Joint interest in shares||01/11/12||1,100,000||1.80||01/01/14|
|Mark Richardson||Joint interest in shares||03/02/10||223,300||1.73||01/01/11|
|Joint interest in shares||03/02/10||223,300||1.91||01/01/12|
|Joint interest in shares||03/02/10||223,300||2.08||01/01/13|
|Joint interest in shares||03/02/10||223,200||2.28||01/01/14|
|Joint interest in shares||30/11/12||711,975||1.70||01/01/13|
|Joint interest in shares||30/11/12||776,700||1.80||01/01/14|
Granted: No awards of JSOS shares interests were made during the period. The Remuneration Committee does not, as at the date of this Annual Report, have any intention of making a further award of share interests under the JSOS scheme to the Executive Directors. The JSOS scheme which was put in place prior to the Company's Admission in 2010, involves the Executive Directors investing their own funds to purchase a shared interest in the Company's shares at the market value at that time. These investments were made in 2010 (in the case of Tim Steiner, Neill Abrams and Mark Richardson) and in 2012 (in the case of Duncan Tatton-Brown and Mark Richardson again). The Executive Directors invested from their own resources. The purchased interests entitle the Executive Directors to a return only if, in the future, the share price exceeds the relevant hurdle rate. The Executive Directors would lose their investment if the share price were not to exceed the hurdle price. For a detailed description of the JSOS scheme refer to in the Prospectus.
Vested: No JSOS share interests vested during the period.
Sold: No JSOS share interests have been sold by an Executive Director since inception of the scheme.
Lapsed: No JSOS share interests lapsed during the period.
At the end of the period the Executive Directors' total LTIP awards were as follows:
|Director||Type of Interest||Date of Grant||Basis on|
is made (% of
|Face Value |
|Expected Vesting Date|
|Tim Steiner||Conditional shares||23/07/13||400||1,371,951||1,800,000||29/11/15||31/03/16|
|Mark Richardson||Conditional shares||23/07/13||280||469,512||616,000||29/11/15||31/03/16|
|Neill Abrams||Conditional shares||23/07/13||200||304,878||400,000||29/11/15||31/03/16|
|Duncan Tatton-Brown||Conditional shares||23/07/13||300||685,975||900,000||29/11/15||31/03/16|
- The LTIP awards are conditional awards under the rules of the LTIP, which is a right to receive free shares in the Company, subject to the achievement of performance conditions over a three-year performance period.
- The 2013 LTIP award was determined based on a price of 131.2 pence per share. The 2013 LTIP awards have one performance condition which is the Company's earnings before interest and tax ("EBIT") pre-exceptional items for the financial year ended 29 November 2015. At "threshold" performance, 25% of an LTIP award will vest and at "maximum" performance, 100% of an LTIP award will vest. Vesting will be on a straight-line basis between the "threshold" and the "maximum".
- The 2014 LTIP award was determined based on a price of 515.5 pence per share. The 2014 LTIP award is subject to two equally weighted performance conditions, which are the levels of diluted and adjusted earnings per share and Group Revenue, for the 2015/2016 financial year. At "threshold" performance, 25% of an LTIP award will vest and at "maximum" performance, 100% of an LTIP award will vest. Vesting will be on a straight-line basis between the "threshold" and the "maximum".
- The 2015 LTIP award is outlined below.
- The 2013 LTIP awards are not capable of vesting until after the end of the period, on 31 March 2016.
Granted: LTIP awards were made in respect of 2015 of up to 150% of annual base salary and in the case of the Chief Executive Officer, an LTIP award with a total market value of 200% of annual base salary. Such awards were made in accordance with the Directors' Remuneration Policy. The number of shares subject of an LTIP award was determined based on a price of 378 pence per share, being the volume weighted average price of the Company's ordinary shares on the three trading days prior to 13 March 2015 (being the LTIP grant date).
The 2015 LTIP awards are conditional awards under the rules of the LTIP, which are a right to receive free shares in the Company, subject to the achievement of four equally weighted performance conditions for the 2016/2017 financial year, being the third year of a three-year performance period. The performance metrics relate to the retails business and the platform business. The Remuneration Committee believes that these performance conditions encourage the delivery of crucial strategic objectives of the Group, and provide a better basis for assessing performance for the performance period than the two measures that were used for the 2014 LTIP awards. The performance conditions concerning the financial performance of the Group, both earnings before tax and revenue, will be focused on the Group's retail business performance and will be weighted 25% each. The new proprietary infrastructure solution performance conditions will each have a 25% weighting. The first concerns the operational efficiency of the Andover CFC in the 2016/2017 financial year and the second concerns the capital cost for an Ocado Smart Platform module.
The rationale for, and basis of measurement of, the performance metrics was as follows:
|Performance target||Commercial rationale||Basis of measurement|
|Retail business (50%)||Rewards top line sales growth for the retail business in line with the Group's strategy and the creation of financial returns to shareholders.||Group Revenue and earnings before tax for the retail business for the 2016/2017 financial year.|
|Platform business (50%)||Rewards progress and achievement with the proprietary infrastructure solution, which is a key strategy objective.||Operational efficiency of Andover CFC and the capital cost per Ocado Smart Platform modules for the 2016/2017 financial year.|
The Remuneration Committee has agreed "threshold" and "maximum" conditions that must be achieved. No LTIP award will vest unless a "threshold" level of the performance condition has been achieved. At "threshold" performance for a performance target, 6.25% of an LTIP award will vest and at "maximum" performance, 25% of an LTIP award will vest. Vesting will be on a straight-line basis between the "threshold" and the "maximum". Each target is discrete and can be earned separately. Full vesting will only occur where exceptional performance levels have been achieved and significant shareholder value created.
The performance conditions for the 2015 LTIP awards will be tested in relation to the financial year ending in 2017 to determine what percentage of the LTIP awards has been achieved, and will vest during 2018 to the extent that the performance conditions have been achieved.
The specific performance conditions are not disclosed due to their commercial sensitivity on the basis that if disclosed it would be likely to damage the Company's commercial interests. The Company will disclose the performance conditions after the end of the performance period, to the extent that the targets are not considered commercially sensitive at the time.
Vested: No awards under the LTIP vested during the period, though the performance period for the 2013 LTIP awards finished (as noted above).
Sold: As no awards under the LTIP have vested, no shares held under the LTIP have been sold by an Executive Director.
Lapsed: No LTIP awards lapsed during the period.
At the end of the period the Executive Directors' total GIP awards were as follows:
|Director||Type of interest||Date of|
|Face value |
|Tim Steiner||Option with nil exercise price||08/05/14||4,000,000||12,744,000||08/05/19||08/05/19 – 31/05/24|
|Mark Richardson||Option with nil exercise price||08/05/14||1,000,000||3,186,000||08/05/19||08/05/19 – 31/05/24|
|Duncan Tatton-Brown||Option with nil exercise price||08/05/14||1,000,000||3,186,000||08/05/19||08/05/19 – 31/05/24|
- The face value of the options which are the subject of a GIP award was determined based on a price of 318.60 pence per share. A condition of vesting is that each participant holds, and retains throughout the performance period, shares in the Company. The Chief Executive Officer is required to hold shares equivalent, at the date of the award, to the value of his annual salary. Both other participants are required to hold shares equivalent, at the date of the award, to the value of half of their annual salary. The GIP award is subject to the achievement of a single performance condition to be satisfied over five years commencing on the date of grant of the awards. The share price of the Company is the sole performance measure, and will be assessed relative to the growth of the FTSE 100 Share Index over that period assessed using a three-month averaging period. The performance schedule is set out in the table below:
|Performance target||Percentage of award|
|Growth of less than the FTSE 100 Share Index +5% p.a.||0|
|Growth in the FTSE 100 Share Index +5% p.a.||25|
|Growth in the FTSE 100 Share Index +10% p.a.||50|
|Growth in the FTSE 100 Share Index +15% p.a.||75|
|Growth in the FTSE 100 Share Index +20% p.a. (or more)||100|
Granted: No awards under the GIP were granted during the period.
Vested: No awards under the GIP vested during the period. The awards are expected to vest in May 2019 (if and to the extent that the vesting criteria are met).
Sold: No awards under the GIP have been exercised or sold by an Executive Director.
Lapsed: No awards under the GIP lapsed during the period.
At the end of the period, the Executive Directors held options under the ESOS as follows:
|Date of Grant||Number of|
|Mark Richardson||Option||31/05/09||70,000||1.20||84,000||31/05/12 – 30/05/19|
|Duncan Tatton-Brown||Option||12/08/13||9,923||3.02||29,967||08/07/16 – 07/07/23|
Granted: The Remuneration Committee does not, as at the date of this Annual Report, have any intention of making a further award of options under the ESOS scheme to the existing Executive Directors. Existing options held by the Executive Directors under the ESOS were granted prior to the Company's listing in 2010 (except those granted in 2013 to then new appointee Director, Duncan Tatton-Brown). None of the grants of ESOS options to the Executive Directors are subject to performance conditions.
Vested: No awards under the ESOS vested during the period. Accordingly, no value is shown in the total remuneration table for the period.
Sold: Tim Steiner and Neill Abrams exercised ESOS options during the period. Had the options not been exercised they would have expired at the end of the exercise period, on 15 May 2015. Both Directors also sold sufficient of the resulting shares to cover the cost of the exercise and the tax liabilities due. The details of each ESOS option exercise and resulting share sale are set out below.
|Director||Date of Grant||Number of Options|
|Shares Sold on|
Lapsed: No options under the ESOS lapsed during the period.
2014 ESOS (audited)
No awards have been granted to the Executive Directors under the 2014 ESOS, and the Remuneration Committee does not have any intention of making an award of options under the 2014 ESOS scheme to the Executive Directors. Accordingly, no value is shown in the total remuneration table for the period.
At the end of the period interests in shares held by the Executive Directors under the SIP were as follows:
|Total Face Value of|
Free Shares and
Awarded in the Year (£)
|SIP Shares |
in the Period
- Unrestricted shares are those which have been held beyond the three-year forfeiture period.
- The value of the share awards made under the SIP is based on the middle market quotation of a share on the trading day immediately preceding the date of grant.
Granted: The Directors continued their SIP participation during the period. The SIP scheme is made available to all employees. The SIP allows for the grant of a number of different forms of awards.
An award of free shares was made to the Executive Directors in September 2015 under the terms of the SIP and the Directors' Remuneration Policy. "Free shares" are where up to £3,600 of ordinary shares may be allocated to any employee in any year. Free shares are allocated to employees equally on the basis of salary, as permitted by the relevant legislation.
An award of matching shares was made to those Executive Directors who purchased partnership shares (using deductions taken from their gross basic pay) under the terms of the SIP and in accordance with the Directors' Remuneration Policy. "Partnership shares" are where employees are invited to purchase ordinary shares directly from their earnings. The market value of such partnership shares which an employee can purchase in any tax year currently may not exceed £1,800 (or 10% of the relevant employee's remuneration, if lower). "Matching shares" are additional free shares which may be allocated to an employee who purchases partnership shares. The rules of the SIP reflect current UK legislation and allow for a maximum match of two to one. The matching ratio adopted by the Company for the SIP during the period was a ratio of one matching share for every seven partnership shares purchased, considerably lower than the maximum permitted ratio.
There are no performance conditions attached to awards made under the SIP, although free and matching shares are subject to a three-year forfeiture period. Partnership shares are purchased by the employees and therefore forfeiture does not apply. Free and matching shares awarded under the SIP are subject to a holding period of no less than three years but no more than five years. Partnership shares purchased by employees will not be subject to a holding period.
The Executive Directors continued their membership in the SIP after the end of the period and were therefore awarded further matching shares pursuant to the SIP rules. Since the end of the period and 20 January 2016, being the last practicable date prior to the publication of this Annual Report, the Executive Directors acquired or were awarded further shares under the SIP as set out in the table below:
|Total face value of free shares|
shares held at
Vested: No awards under the SIP vested during the period. Free and matching shares awarded under the SIP are subject to a three-year forfeiture period starting from the date of grant. This means that if an Executive Director ceases to be employed by the Group during the three-year period, the free and matching shares will be forfeited. As 2015 was the second year of operation for the SIP, no such forfeiture period had expired in respect of free or matching shares awarded to the Executive Directors. Partnership shares purchased under the SIP are not included in the total remuneration table as these are purchased by the Executive Directors from their salary, rather than granted by the Company as an element of remuneration. Accordingly, no value is shown in the total remuneration table for the period.
Sold: No shares held under the SIP have been sold by an Executive Director.
Lapsed: No shares held by an Executive Director under the SIP lapsed during the period.
Sharesave scheme (audited)
At the end of the period the Executive Directors' option interests in the Sharesave scheme were as follows:
|Director||Type of Interest||Date of Grant||Number of share options||Exercise Price|
|Tim Steiner||Options||01/10/13||2,987||3.01||8,997||01/12/16 – 31/05/17|
|Options||01/04/15||2,777||3.24||8,998||01/05/18 – 01/11/18|
|Neill Abrams||Options||01/10/13||2,987||3.01||8,997||01/12/16 – 31/05/17|
|Options||01/04/15||2,777||3.24||8,998||01/05/18 – 01/11/18|
|Duncan Tatton-Brown||Options||01/10/13||2,987||3.01||8,997||01/12/16 – 31/05/17|
|Options||01/04/15||2,777||3.24||8,998||01/05/18 – 01/11/18|
|Mark Richardson||Options||01/04/15||5,555||3.24||17,998||01/05/18 – 01/11/18|
Granted: The Executive Directors elected to participate in the 2015 invitation under the Ocado Sharesave Scheme, where the Directors were granted options to purchase ordinary shares of 2p each in the Company on the same terms as all other employees, at an exercise price of £3.24 per ordinary share, as set out in the table above.
Vested: No awards matured under the Sharesave scheme during the period. Accordingly, no value is shown in the total remuneration table for the period.
Exercised: No awards under the Sharesave were exercised or sold by the Executive Directors during the period.
Lapsed: No Sharesave awards lapsed during the period.
Chairman's Share Matching Award (audited)
At the end of the period, the Chairman's Share Matching Award was as follows:
|Director||Type of Interest||Date of Grant||Number of|
|Face Value |
|End of Vesting|
|Lord Rose||Restricted shares||17/05/13||452,284||400,000||10/05/2016|
- The face value of the award has been calculated using a price of 88.44 pence per share, being the volume weighted average share price of the Company's ordinary shares on the three trading days prior to 22 January 2013 (the date of the announcement of the Chairman's appointment). The basis for the award was to match up to £400,000 of Company shares where such shares were acquired by the Chairman.
- The award is not subject to any performance conditions other than continued service.
Awards granted under the Company's Sharesave, ESOS, 2014 ESOS and SIP schemes are met by the issue of new shares when the options are exercised or shares granted. The allocation of awards under the JSOS were met by the subscription for new shares by the participant and the EBT. Awards granted under the LTIP and GIP may be met by the issue of new shares, the transfer of shares from treasury, or the purchase or transfer of existing shares by the EBT. The Chairman's Share Matching Award was met by the new issue of shares on the date of grant. The share deferral provisions in the AIP have not been approved by shareholders and accordingly awards will be satisfied only by the purchase of existing shares by the EBT until such shareholder approval is obtained.
There are limits on the number of shares that may be allocated under the Company's share plans. These dilution limits were recommended by the Remuneration Committee and incorporated into the rules of the various share schemes, which have been approved by the Company's shareholders.
The dilution limits restrict the commitment to issue new ordinary shares or reissue treasury shares under all share schemes of the Group to 10% of the nominal amount of the Company's issued share capital and under the JSOS, the LTIP and the GIP (and any other selective share scheme) to 5% of the nominal amount of the issued share capital of the Company in any rolling ten-year period. These limits are consistent with the guidelines of institutional shareholders.
The JSOS rules have additional overriding limits on the number of shares that may be allocated under the JSOS. Up to 7.5% of the Company's ordinary issued share capital may be held under the JSOS.
Impact on Dilution
The Company monitors the number of shares issued under these schemes and their impact on dilution. The charts below show the Company's commitment, as at the last practical date prior to the publication date of this Annual Report being 20 January 2016, to issue new shares in respect of its share schemes assuming all performance conditions are met, all award holders remain in employment to the vesting date and all awards are settled in newly issued shares. For these purposes, no account is taken of ordinary shares allocated prior to the Company's Admission.
All Share Plans
Discretionary Share Plans
Review of Changes in Remuneration and Company Performance
This part of the report provides some context for the Directors' remuneration arrangements including information concerning the Company's performance, shareholder returns and the Group's total expenditure on employee pay.
Chief Executive Officer Historical Remuneration
The table below summarises in respect of the Chief Executive Officer the single figure of total remuneration, the AIP or bonus plan payment as a percentage of maximum opportunity, and the long-term incentives as a percentage of maximum opportunity for the current period and the previous five financial years.
|Year||Chief Executive Officer Total Remuneration (including JSOS) (£'000)||AIP or Bonus Payment as a Percentage of Target Achievement (%)||Value of AIP or Bonus Payment (£'000)||Long-Term Incentives as a Percentage of Maximum Opportunity (%)|
- The Chief Executive Officer total remuneration figures prior to the 2013 period represent the previously presented audited information with necessary adjustments for amounts required to be included in the single total figure of remuneration (such as pension amounts).
- From 2010, the Company had the JSOS as the main form of long-term incentive plan. For the 2012 and 2013 financial years, the JSOS interests did not have any value at the vesting date. In 2014, the final tranche of JSOS shares vested in that period (the value of such remuneration is noted in the single total figure of remuneration table). In 2011, the first tranche of JSOS shares vested in that period. The LTIP was implemented in 2013 but the first award has a performance period ending in 2015 and a vesting date in 2016 so is estimated for the 2015 Total Remuneration table. The GIP and SIP were both implemented in 2014, but have vesting dates in 2019 and 2017 respectively.
- For an explanation of JSOS and the theoretical remuneration represented in the Chief Executive Officer's total remuneration, see the 2014 Directors' Remuneration Report.
Chief Executive Officer percentage change versus representative employee group
To put the Directors' remuneration into context, the table below sets out the change in salary, benefits, and bonus of the Chief Executive Officer and of all of the Group's UK employees from the preceding period to the current period.
|Chief Executive Officer||All UK employees|
|Percentage change in salary from 2014 to 2015||2%||2.4%|
|Percentage change in taxable benefits from 2014 to 2015||18.9%||14.7%|
|Percentage change in AIP earned from 2014 to 2015||19.2%||0%|
- Most of the Group's employees are not entitled to earn an annual bonus payment as part of their remuneration.
- The change in salary data for the Group's UK employees is on a per capita basis.
Relative Importance of Spend on Pay
The following table shows the Company's profit and total Group-wide expenditure on pay for all employees for the period and last financial year. The Company has not paid a dividend or carried out a share buyback in the current year or previous year. The information shown in this chart is:
|29 November 2015 (£m)||30 November 2014 (£m)|
|Profit before tax||11.9||7.2|
|Total gross employee pay||239.9||190.5|
Company Share Price
The closing market price of the Company's shares as at 27 November 2015, being the last trading day in the period ended 29 November 2015, was 366.50 pence per ordinary share (2014: 325.00 pence) and the share price range applicable during the period was 312.60 pence to 470.80 pence per ordinary share.
Total Shareholder Return
The following graph shows the TSR performance of an investment of £100 in the Company's shares from its Admission to the end of the period compared with an equivalent investment in the FTSE 250 Index (which was chosen because it represents a broad equity market index of which the Company is a constituent). The TSR was calculated by reference to the movements in share price. The Company has not paid a dividend since its Admission so the Company's TSR does not factor in dividends reinvested in shares.