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Dear fellow shareholder,
It is my pleasure to present the Directors’ remuneration report for
the year ended 30 September 2013.
Due to the timing of its financial year end, Sage is among the first
companies required to comply with the new legislation regarding the
disclosure of executive directors’ remuneration. It is my hope that you
find this a clear and comprehensive report and I look forward to hearing
the views of our investors on the information presented here over the
coming months. We will carefully monitor emerging practice in this area
as well as guidance from investor representative groups.
We operate a simple remuneration structure made up of base salary
and benefits, a bonus plan and a single long-term incentive plan,
which provide a clear link between pay and our key strategic priorities.
Activities of the Remuneration Committee
The main activities of the Committee since the last report were as
follows:
– Assessed performance of executive directors and determined annual
bonuses for 2013;
– Established the executive directors’ bonus arrangements for 2014;
– Set bonus targets for the executive directors for 2014;
– Approved share awards for 2013;
– Reviewed remuneration benchmarking and set base salaries for
executive directors;
– Considered remuneration market trends and corporate
governance developments; and
– Reviewed the revised remuneration reporting regulations and
prepared the Directors’ remuneration report.
Directors’ remuneration report
Remuneration for 2013
Details of the remuneration decisions for 2013 are set out in the Directors’
annual remuneration report below. In summary, for the year ended
30 September 2013 underlying pre-tax profit was £360.5m and Group
organic revenue growth was 4%, reflecting good acceleration in growth
on the prior year. In addition, EBITA margin was maintained at 27%, with
continued investment in growth.
The Group made good progress against its strategic objectives including
driving actions to improve Net Promoter Scores throughout the business,
pricing strategy, investing in cloud product strategy and improving cloud
unit sales. This resulted in a total 72% of the Chief Executive’s bonus
(90% of salary) paying out for 2013.
Performance share awards granted in 2011 were based on EPS growth
above UK inflation (RPI) and relative TSR performance. EPS growth over
the period, as defined for remuneration purposes, was 17%, relative TSR
performance was just below median and UK RPI was 11%. Therefore,
underlying EPS growth over the period for these purposes was below
the minimum required, and the awards will not vest.
Key remuneration decisions for 2014
The Remuneration Committee has set the Chief Executive’s base salary
at £780,000 with effect from 1 January 2014, an increase of 8%.
Guy Berruyer was promoted to the role in 2010 and his base salary was
set at a level significantly below that of his predecessor, in recognition
of his level of experience in the role.
The Committee determined that it was now appropriate to revise his
salary to reflect his emergence as a fully-fledged Chief Executive and
the progress evidenced in this Annual Report & Accounts.
In addition, we are delighted that Steve Hare will be joining as Chief
Financial Officer from 3 January 2014. Details of his remuneration are
set out on page 84.
Remuneration disclosure
This report complies with the requirements of the Large and Medium-sized
Companies and Groups Regulations 2008 as amended in 2013, the
provisions of the UK Corporate Governance Code (September 2012)
and the Listing Rules.
The report is in two sections:
– The Directors’ remuneration policy report (pages 76 to 79). This section
contains details of the remuneration policy that we propose will apply
from the 2014 AGM (6 March 2014) subject to obtaining shareholder
approval at the AGM; and
– The Directors’ annual remuneration report. This section sets out
details of how our remuneration policy was implemented for the
year ended 30 September 2013 and how we intend for the policy
to apply for the year ended 30 September 2014.
At the AGM in March 2014:
– The Directors’ remuneration policy report will be put to a binding
shareholder vote; and
– The Directors’ annual remuneration report will be put to an advisory
shareholder vote.
Ruth Markland,
Chairman of the Remuneration Committee
74 The Sage Group plc | Annual Report & Accounts 2013