We are focused on providing clear reporting on past remuneration and future policy, and we welcome your feedback.
On behalf of the Board, I am pleased to present the Directors' Remuneration Report for 2015.
We believe that the remuneration of the Executive Directors appropriately and fairly reflects the performance of the Group. In 2015, the retail business grew formidably in a turbulent retail environment. The business performance is aligned with the relatively high achievement in the period against the AIP objectives and over the previous three years for the LTIP objectives.
Relationship Between Pay and Performance
We have, in accordance with the Directors' Remuneration Policy and the rules of the 2015 AIP, recommended a bonus payment based on 65% to 67% achievement against objectives under the plan for the period. This echoes the strong growth of the retail business, with the Group's Gross Sales (Retail) for the period increasing 14.7% and the Group's EBITDA increasing 13.8%.
During the period, we reviewed the performance against the 2013 LTIP awards, which had a performance period ending at the end of the financial year. Based on the 2015 results, the Directors achieved 100% against the performance condition, EBIT. The Group's earnings before interest and tax and exceptional items for the period was £21.4 million, an increase of 28.9% on 2014. The 2013 LTIP awards are expected to vest in March 2016.
Key Changes to Executive Director Remuneration
We believe that our remuneration framework helps support and drive our strategy, and ensures the Group retains a management team with the skills and expertise necessary to deliver our long-term commercial priorities. In addition to determining fixed elements of remuneration, we seek to ensure that the AIP, the LTIP and the GIP contain specific performance measures that support the strategy and objectives of high business growth.
Base salaries of the Executive Directors were reviewed and increased by 2% in April 2015 which is in line with employee salary increases.
During the financial year, we undertook a review of the Executive Director AIP structure and concluded that the financial measures of EBITDA and Gross Sales (Retail) remained aligned with the Company's strategy and should be retained for 2016 in order to encourage continued strong retail business growth. The proportion allotted to individual objectives for the 2015 AIP has been maintained at 30%, to reflect the increased importance of delivering key strategic objectives in 2016, notably the Ocado Smart Platform.
The performance measures for the 2015 and 2016 LTIP awards are intended to reward financial performance through the financial targets, but also to reward delivery of economic efficiency of the new proprietary infrastructure solution. The Board is looking to drive the cost and operational efficiency of the new infrastructure solution to help support the success of the Ocado Smart Platform business over the coming years.
Changes to Non-Executive Director Remuneration
The Non-Executive Directors' annual fees were reviewed and remained unchanged from the previous year.
Directors' Remuneration Policy
The Directors' Remuneration Policy was approved by shareholders at the annual general meeting which took place on 7 May 2014 and will continue in force until 2017. There are no proposals to amend the Directors' Remuneration Policy at the present time as we believe that the policy continues to remain both appropriate and effective. All of our decisions regarding executive remuneration for the period have been made in line with the policy.
Shareholder Feedback and Remuneration Disclosure
Each year, we review how shareholders voted on the remuneration report, together with any feedback received. We are aware of shareholders' concerns regarding transparency of performance-related remuneration given that to date, this has not been published. To enhance our reporting of performance we have included in this year's report actual performance targets for incentive schemes.
We are focused on providing clear reporting on past remuneration and future policy, and we welcome your feedback. I will be available at the AGM to answer any questions about the work of the Remuneration Committee.
Remuneration Committee Chairman
2 February 2016
Read theChairman's Governance Introduction
Read theStatement of Corporate Governance