Part 3: Implementation report
| Financial information |
| Cash package adjustments |
| Short-term incentive: Annual bonus scheme awards for 2017/18 |
| Long-term incentives |
| Single figure of remuneration (R000) |
In this part of the report, details are provided of the remuneration paid to executive and non-executive directors for the financial year ended 31 March 2018. The Remco considers that these payments are in line with the company’s remuneration policy.
Financial information
The financial details relating to the directors and prescribed officers’ emoluments are disclosed here and here.
Cash package adjustments
In determining the cash package increases for the CEO and CFO in 2017/18, the Remco considered relevant market survey data from several independent consultancies. Periodically, including in 2017/18, executive remuneration is benchmarked against companies of comparable size and complexity with reference to market capitalisation, turnover, profitability, number of employees and sector.
In 2017/18 (and 2016/17), the CEO elected to receive a 0% increase. The Remco approved a 6,5% increase on cash pay for the CFO in 2017/18. In 2018/19 the Committee approved an increase to the cash pay of both the CEO and CFO of 7%.
Short-term incentive: annual bonus scheme awards for 2017/18
No bonuses were paid to the CEO, CFO, executives and senior management for the 2017/18 year due to the headline earnings threshold of R800 million not being met.
Long-term incentives
Awards made in 2017/18 financial period
SARS
| Performance condition | Target/vesting potential |
| HEPS | Growth of greater than CPI over 3 years +6% for 100% vesting and 0% if below the pre-determined threshold of CPI over 3 years -6%, with linear vesting in between. |
The awards made during the year are disclosed in the Share Appreciation Right Scheme tables here and here.
LTIP
| Performance condition | Target and potential vesting outcome |
| TSR (40% weighting) Peer group: AECI Limited, Astral Foods Limited, AVI Limited, Clover Industries Limited, Crookes Brothers Limited, Nampak Limited, Omnia Holdings Limited, Oceana Group Limited, Pioneer Food Group Limited, RCL Foods Limited, Sappi Limited, and Tiger Brands Limited |
Three-year TSR vesting scale, smoothed using TSR data for the6 months preceding 31 March 2017 and the 6 months preceding31 March 2020, for a population of 12 other companies against which Tongaat Hulett competes, with a graduated vesting scale. |
|
ROCE (40% weighting) |
Below lower limit - 0% |
| Lower limit - 30% | |
| Upper limit - 100% | |
| Between lower and upper limits - linear vesting | |
| Sugar Production (20% weighting) |
Between lower and upper limits: 30% - 100% |
The awards made during the year are disclosed in the Long-term Incentive Plan tables here and here.
LTI vesting outcomes
The awards that vested in 2017/18 were made in 2014 and the performance conditions (measured at 31 March 2017) and vesting outcome is reflected below:
SARS
| Performance condition | Target | Vesting period | Vesting achieved in 2017/18 |
| HEPS | Growth of greater than CPI +6% over 3 years for 100% vesting and 0% if below the pre-determined threshold, with linear vesting in between. | 3 years | Zero |
LTIP
| Performance condition | Target | Vesting outcome | Achievement and vesting outcome in 2017/18 | |
| TSR (25% weighting) Peer group: AECI Limited, Astral Foods Limited, AVI Limited, Bidvest Group Limited, Clover Industries Limited, Illovo Sugar Limited, Mondi Limited, Nampak Limited, Omnia Holdings Limited, Oceana Group Limited, Pioneer Food Group Limited, RCL Foods Limited, Sappi Limited, and Tiger Brands Limited |
Three-year TSR vesting scale for a population of 14 other companies against which Tongaat Hulett has competed. |
|
100%
Linear |
Illovo Sugar Limited delisted in 2016 and was excluded from the peer group. The company ranked position 9 out of 14, resulting in a 50% vesting of the portionof the LTIP award linked to TSR.
The vesting outcome was 12,5% (50% x 25% weighting) |
|
ROCE |
Below lower limit | 0% |
ROCE was 10,5% The vesting outcome was zero |
|
| Lower limit | 12,9% = 30% | |||
| Upper limit | 15% = 100% | |||
| Linear vesting in between | ||||
| Sugar production (25% weighting) |
Between 1,48 and 1,7 million tons sugar. |
30% to 100% | Linear vesting between these points | Sugar production was 1,056 million tons
The vesting outcome was zero |
| Three-year large land deals (25% weighting) |
Between R300 - R 600 million | 30% to 100% | Linear vesting between these points | Large land deals exceeded R600 million resulting in a 100% vesting of this portion of the LTIP
The vesting outcome was 25% (100% x 25%) |
The overall LTIP vesting was thus 37,5%
Single figure of remuneration (R000)
| Cash package | Retirement and medical aid | Cash bonus1 | LTI reflected 2,3,4,5 | Total single figure remuneration | |
| 2018 | |||||
| PH Staude | 8 799 | 1 308 | - | 3 421 | 13 528 |
| MH Munro | 5 197 | 779 | - | 1 260 | 7 236 |
| 13 996 | 2 087 | - | 4 681 | 20 764 | |
| 2017 | |||||
| PH Staude | 8 799 | 1 276 | 6 626 | 3 338 | 20 039 |
| MH Munro | 4 880 | 727 | 2 884 | 1 306 | 9 797 |
| 13 679 | 2 003 | 9 510 | 4 644 | 29 836 |
| 1. | Bonuses are reported to match the performance and quantum earned to the applicable financial period. |
| 2. | The value of the SARS and LTIP awards made on 26 May 2014 with a performance period ending on 31 March 2017 is reflected in the 2017 single figure of remuneration. As the performance condition of the SARS was not met, it is reflected as zero. The LTIP is included at the 20 day VWAP of R128,39 as at 31 March 2017 and an achievement of performance conditions of 37,5%. |
| 3. | The value of the DBP award made on 6 June 2016 is reflected in the 2017 single figure of remuneration. |
| 4. | The value of the SARS and LTIP awards made on 28 May 2015 with a performance period ending on 31 March 2018 is reflected in the 2018 single figure of remuneration. As the performance condition of the SARS was not met, it is reflected as zero. The LTIP is included at the 20 day VWAP of R102,52 as at 31 March 2018 and an achievement of performance conditions of 27,03%. |
| 5. | The value of the DBP award made on 29 May 2017 is reflected in the 2018 single figure of remuneration. |
Executive Directors’ Remuneration (R000)
Table of estimated fair values of the executive directors' unvested long-term incentive awards at year end.1
| PH Staude | MH Munro | |||||
| 31 March 2018 | 31 March 2017 | 31 March 2018 | 31 March 2017 | |||
| Share Appreciation Right Scheme 2 | ||||||
| 31 May 2010 | 2 296 | 730 | ||||
| 31 May 2011 | 3 318 | 347 | 1 089 | |||
| 29 May 2012 | 1 197 | 408 | ||||
| 28 May 2015 | 2 504 | 1 060 | ||||
| 6 June 2016 | 2 073 | 2 596 | 926 | 1 160 | ||
| 29 May 2017 | 1 756 | 776 | ||||
| Long-term incentive plan 3 | ||||||
| 26 May 2014 | 2 366 | 983 | ||||
| 28 May 2015 | 1 293 | 2 911 | 547 | 1 232 | ||
| 6 June 2016 | 2 374 | 2 896 | 1 060 | 1 294 | ||
| 29 May 2017 | 2 525 | 1 116 | ||||
| Deferred Bonus Plan 3 | ||||||
| 26 May 2014 | 2 241 | 711 | ||||
| 28 May 2015 | 1 374 | 1 673 | 422 | 513 | ||
| 30 May 2016 | 927 | 1 130 | 308 | 376 | ||
| 29 May 2017 | 1 930 | 646 | ||||
| Total | 14 252 | 25 128 | 6 148 | 9 556 | ||
| 1. | Depending on the vesting date, awards are included at the intrinsic value or an indicative fair value as at 31 March 2017 and 31 March 2018. These values are based on the 20 day VWAP as at the relevant year end and the estimated achievement of performance conditions. |
| 2. | SARS awards vest on the third anniversary of the grant date and lapse on the seventh anniversary of the grant date. |
| 3. | LTIP and DBP awards vest on the third anniversary of the grant date. |
Further information pertaining to unvested awards, gains on awards vested during the year, award vesting dates and fair value of awards on the grant date, are detailed here.
Termination contracts and termination of office payments
There are no long-term contracts in place for executives and no termination of office payments were made during the 2017/18 year.
Non-executive director fees
The Remco recommended an increase in the non-executive director fees of 6,5% in 2017/18 which was approved at the 2017 AGM and has proposed an increase of 6% for 2018/19.
The details relating to the non-executive directors’ fees for the year ended 31 March 2018 are disclosed here.
Voting statement (Non-binding advisory vote on the implementation report)
This report is subject to an advisory vote by shareholders at the forthcoming AGM. Shareholders are requested to cast an advisory vote on the remuneration implementation report as contained in part 3 of this remuneration report.
Approval of remuneration report by the board of directors
This remuneration report was approved by the Board of directors of Tongaat Hulett on 24 May 2018.
