Just Annual Report and Accounts 2019

JUST GROUP PLC Annual Report and Accounts 2019

Directors’ remuneration report continued

Short Term Incentive Plan (“STIP”) Page 91 details the targets and outcomes relating to 2019. For performance in 2019 the Committee approved awards for David Richardson at 83.1% of maximum. This payment reflects a discretionary downward adjustment on the outturn of the financial measure (representing two thirds of his bonus outturn) from 93.7% to 83.3% of maximum together with an assessment of personal performance of 82.5% (representing one third of his bonus outturn). In line with the Policy, two-thirds of David Richardson’s STIP was paid in cash and one-third was deferred into Just Group shares for three years. The table below illustrates the performance against the STIP performance measures. Details of key achievements are provided on page 91.

Illustration of vesting of the 2017 LTIP

Maximum

50% EPS

50% TSR

Actual

26.8% of face value at grant

Dividend equivalent

Share price movement

TSR performance

EPS performance

100

Discretion The Committee exercised its discretion in treating Rodney Cook as a good leaver. The rationale has already been explained earlier in this statement and details on these arrangements follow. The level of the 2019 LTIP award to David Richardson was maintained at 200% of salary in accordance with the Remuneration Policy, however the number of shares granted was calculated using a share price of £1.3620, being the share price used to determine the number of shares granted in 2018 rather that the price at the time of grant, which was £0.6501. This resulted in a reduction of approximately 50% in the number of shares being awarded, reflecting the fall in the share price since the last grant of awards. In determining the outturn of the Adjusted EPS performance measure within the 2017 LTIP, the Committee has taken into account the increased debt repayments and capital actions undertaken during the performance period, which were not foreseen at the time the targets were agreed. In approving the adjustments, the Committee was satisfied that on the adjusted basis, the targets were no less challenging than the original targets. The impact of this adjustment is shown on page 92. The Remuneration Committee selected the performance measure of “organic capital generation” within the 2019 STIP at the commencement of the year based on organic capital calculated as follows: change in Solvency II excess own funds, but excluding dividends, external capital injections and contributions from DB partnering and Group/HUB. During the year, having reviewed the regulatory landscape and following the sharpening of our strategic focus on capital, the decision was taken to adjust the capital measure. This decision was taken to ensure management can be rewarded for actions that ensure the efficient use of capital and that they are not rewarded or penalised for short-term market volatility or the timing of regulatory changes that are outside management’s control. The adjustments included removing the impact caused by regulatory changes and to remove the impact of external influences such as short-term fluctuations in interest rates and property price growth. The Remuneration Committee believes that the revised measure remains no less challenging compared to the original measure, but has the benefit of being an externally reported measure and is aligned to factors which are within the Executive Directors’ control and, as such, will be more effective in achieving progress in this area for both shareholders and the PRA. In determining the outturn of the 2019 STIP, the Remuneration Committee exercised its discretion to reduce the outturn of the financial scorecard from 93.7% of maximum to 83.3% of maximum, recognising that whilst performance in 2019 was strong, the Company is only part-way through a two year transformational programme.

Financial performance (67%)

IFRS adjusted operating profit

IFRS new business profit (12.5%) £182m 54%

Cost base reduction (25%) £33.8m 98%

Organic capital generation

(12.5%) £219m 100%

(50%) £36m 100%

Personal performance (33%)

David Richardson Deputy Group CEO, Interim CFO and Group CEO

82.5%

Total

David Richardson £680,000

The Committee is satisfied that this level of bonus payout appropriately reflects the financial performance delivered and the significant progress made against the Company’s strategic objectives, balanced with the significant external challenges. Long Term Incentive Plan (“LTIP”) Under our existing Policy, the normal LTIP award level for David Richardson, in his role as Interim Group Chief Executive Officer, would have been 200% of base salary. However, the Committee took into account the decline in share price at the time of award and determined that the level of the 2019 LTIP award should be determined by reference to the share price as used to calculate the 2018 LTIP award. This resulted in an actual grant in May 2019 over shares with a face value of 96% of base salary, being 52% fewer shares than would have been the case had the prevailing share price been used. The LTIP awards made in 2017 are due to vest in May 2020 with reference to performance to 31 December 2019. The threshold Total Shareholder Return (“TSR”) performance target was not achieved and the adjusted earnings per share (“EPS”) measure was achieved at maximum. The 2017 LTIP awards will vest at 50% in May 2020. Further detail can be found on page 91. The following chart illustrates the performance of the 2017 LTIP against the performance measures and the share price movements: • the proportion of the 2017 LTIP subject to the Adjusted EPS performance measure will vest in full; • the proportion of the 2017 LTIP subject to the TSR performance measure will lapse in full; • the share price movement between the share price at grant and at the end of the performance period, using the average share price from 1 October 2019 to 31 December 2019, has reduced the vesting value by 49.25%; and • dividend equivalents of £9,705 have accrued on vesting shares. This has resulted in the 2017 LTIP award vesting at 26.8% of the value at grant.