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OUR PERFORMANCEFINANCIAL STATEMENTS GOVERNANCE OUR BUSINESS
67
ANNUAL REPORT AND FINANCIAL STATEMENTS 2015
PERFORMANCE SHARE PLAN CONTINUED
PSP AWARDS TO BE MADE IN 2015/16
Subject to shareholder approval of the
replacement Plan at the forthcoming AGM,
awards of nil-cost options/conditional
shares will be made in July 2015.
As described earlier, following a thorough
review of the directors’ remuneration
arrangements during the year, the
Committee concluded that no signifi cant
changes to the current Plan were required.
Awards will continue to be assessed against
a number of measures and the maximum
value of awards at the time of grant will
remain at 30 0% of salar y.
The Committee will continue to reference
awards at 250% of salar y and it is intended
that executive directors will receive awards
in 2015/16 of 250% of salary.
Performance measures have historically
been set as those which appropriately
reflect the key drivers of the strategic plan
which takes into account shareholder value
as well as bottom-line and top-line growth.
During its review, the Committee
determined that EPS and ROCE
performance measures continue to
appropriately refl ect the key drivers of
shareholder value for M&S and as such no
changes to the measures and weightings
have been proposed; 70% of awards made
in 2015/16 will continue to be measured
against stretching EPS and ROCE targets.
The remaining 30% of awards will be set
against a fi nancial strategic scorecard of
measures designed to drive growth in key
areas for the business. Measurement of
performance against International and
M&S.com sales will be retained as before,
as M&S continues to grow these areas of the
business. This focus will continue to support
the delivery of the strategy to be a leading
international, multi-channel retailer. Sales
grow th targets for awards to be made in
2015/16 have been calibrated to be as
challenging as the equivalent revenue
targets for 2014/15.
During the review process, the Committee
determined that the inclusion of two
additional, equally weighted performance
measures would further enhance the
alignment between the PSP and the
business’s current strategic priorities. As
such, three-year cumulative free cash fl ow
and UK GM gross margin targets are being
introduced in the 2015/16 Plan. These
measures refl ect the increased importance
of cash generation and the desire to return
cash to shareholders in addition to the
absolute importance of long-term
improvements in GM for the sustainable
success of the Company. The four targets
of International and M&S.com sales, UK GM
gross margin and three-year cumulative
free cash fl ow are consistent with the top
four strategic priorities communicated to
shareholders for the coming year.
As with all other PSP measures, targets for
cash fl ow and gross margin have been set
such that they are stretching yet achievable
for the delivery of consistent, ambitious
long-term performance.
Measures and targets for the 2015/16 PSP
awards are disclosed in the table below. At
this time, targets rel ating to UK GM gross
margin are deemed by the Board to be
too commercially sensitive to disclose.
All targets, including GM gross margin will
be fully retrospectively disclosed in the
report relating to the end of the relevant
three-year performance period.
At the end of the performance period,
Committee judgement will be applied in
determining overall vesting on the four
measures comprising the strategic
fi nancial scorecard element of the PSP.
The Committee, in using its judgement,
will take into account the extent of
outperformance or underperformance
of the targets, their relative importance in
the circumstances, and any other matters
it sees fi t.
FIGURE 17: PERFORMANCE TARGETS 2015/16
% vesting1
Annualised
EPS growth
(%)
ROCE
(%)
Financial strategic scorecard
International
sales growth2
(%)
M&S.com
sales growth3
(%)
UK GM
gross margin
Cumulative
free cash fl ow4
% of award 50% of award 20% of award 7.5% of award 7.5% of award 7.5% of award 7.5% of award
Threshold performance 20% 5.0% 15.0% 5.0% 11.0% – £1,350m
Maximum performance 100% 12.0% 16.5% 15.0% 18.0% – £1,650m
1. Vesting is a straight line between ‘threshold’ and ‘maximum’ performance.
2. Excluding M&S.com/including Republic of Ireland.
3. Net of VAT and post store returns.
4. Pre dividends and returns.
EXECUTIVE DIRECTORS’ REMUNERATION CONTINUED