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Remuneration report

This report sets out Italtile’s remuneration philosophy and policy for non-executive directors, executive directors and executive management.

This report is divided into three sections:

  1. Background statement
  2. Remuneration philosophy, policy and framework
  3. Remuneration disclosure

1. BACKGROUND STATEMENT

The members of the Remuneration Committee of the Group assist and advise the Board on matters relating to the remuneration of senior management. The Committee ensures that the remuneration philosophy and policy support the Group’s strategic objectives and allows for the recruitment, motivation and retention of senior executives, ultimately maximising shareholder value.

The Group sets performance targets in five categories, namely:

  • employee engagement;
  • financial performance;
  • customer satisfaction;
  • BBBEE;
  • cultural fit/values; and
  • progress against the strategic plan milestones.

The targets and the extent to which they are achieved directly impacts short-term incentives payable to executives through the Executive Profit Share Scheme.

Key decisions took during the year under review include:

  • approval of increases and adjustments for executives and senior management, as well as the framework for increases for all other employees; and
  • approval of short and long-term incentives for executives and senior management as well as the framework for all other employees.

Resolutions:

The following resolutions will be tabled for shareholder voting at the annual general meeting, details of which can be found in the annual general meeting notice:

  • binding vote on non-executive directors’ fees
  • advisory vote on remuneration policy

Composition and terms of engagement

The Remuneration Committee is a sub-committee of the Board. The Committee meets at least twice per annum. The Committee is chaired by an independent non-executive director and comprises three directors. The majority of directors on the Committee are independent. The current members of the Committee are:

Ms S M du Toit (Chairman), Mr G A M Ravazzotti and Mr S G Pretorius.

The Board considers the Committee’s composition to be appropriate in terms of the necessary knowledge, skills and experience of its members.

The Italtile Limited Group Company Secretary, E J Willis, attends all meetings of the Committee as secretary. The Chief Executive Officer and Chief Financial Officer attend all meetings by invitation in order to provide input and guidance with regard to executive director and senior management remuneration.

No attendee may participate in any discussion or decision regarding his or her own remuneration.

The Committee met twice during the year. Attendance at the meetings was as follows:

Members and invitees Attendance at meetings
S M du Toit 2/2
G A M Ravazzotti 2/2
S G Pretorius 2/2

Remuneration Committee – role and responsibilities

The Committee operates within a written terms of reference confirmed by the Board, which includes:

  • Assisting the Board in setting the Group’s remuneration policy;
  • Advising on the fees for non-executive directors;
  • Determining the total remuneration of the executive directors and executive management;
  • Reviewing and recommending short and long-term incentive policies for directors, executive management and staff; and
  • Reviewing and recommending performance management policies.

The Committee reviews and evaluates the contribution of each director and member of senior management and determines their salary adjustments on an annual basis. The Committee reviews remuneration and Board best practice reviews published by PwC, EY and the Institute of Directors.

Details of directors’ remuneration.

2. REMUNERATION PHILOSOPHY, POLICY AND FRAMEWORK

Philosophy and Policy

Italtile is committed to maintain pay levels that reflect an individual’s worth to the Group. The Group’s philosophy is to treat employees as business partners, developing a sense of ownership.

Our remuneration philosophy is governed by the principles of equity, fairness and affordability.

Remuneration policies are designed to attract, reward and retain the executives and employees needed to deliver on Italtile’s business strategy.

Italtile is cognisant of the ratio between the pay of the CEO and that of entry-level workers.

Remuneration Framework

Italtile has an integrated remuneration and reward model which includes guaranteed remuneration, short-term incentives (profit share) and long-term incentives.

Components of remuneration for employees

The components of total remuneration for permanent employees are fixed remuneration and variable remuneration.

Fixed remuneration comprises a basic salary and benefits, aligned to roles and performance. Variable remuneration comprises short-term incentives and long-term incentives, aimed at retention of critical employees. For employees, performance is measured against set performance indicators.

All employees share in Group profits, based on an individual’s contribution to the Group.

Executive directors’ and key management remuneration

For executives and key management, remuneration is structured to include guaranteed remuneration, and short-term and long-term incentives to drive performance. The short-term incentive component rewards executives and key management for achieving or exceeding financial performance targets, agreed on at the beginning of each financial year.

Executive and key management performance management

Executive and key management’s performance is measured in five categories, with specific performance targets/indicators per category:
employee engagement, financial performance, customer satisfaction, BBBEE, cultural fit/values and progress against the strategic plan milestones.

Composition of executive directors’ remuneration

Composition of executive directors’ remuneration comprises:

Short-term

  • Policy on short-term incentives (variable remuneration)
    Executives take part in the Executive Profit Share Scheme. The scheme sets profit targets and drives a high performance culture.

Long-term

  • Policy on long-term incentives
    There are three long-term incentive schemes within the Italtile Group, each rewarding performance in an appropriate manner, designed to reward and retain key personnel. The long-term incentives include the Italtile Long-Term Incentive Plan, the Share Appreciation Scheme and the Executive Retention Plan.
    • Long-Term Incentive Plan
      In accordance with the Long-Term Incentive Plan (“LTIP”), selected directors and employees of the Group are entitled to receive conditional notional Italtile Limited share awards. 25% of the awards vest after three years from grant date, and the balance (75%) after five years. There is no strike price attached to these awards, and the exercise price is defined as the volume weighted average price of Italtile Limited shares as traded on the JSE over the 10 trading days preceding and including the vesting date.
    • Share Appreciation Rights Scheme
      In accordance with the Share Appreciation Rights Scheme (“SARS”), selected directors and employees of the Group are entitled to a conditional share award linked to the value of notional Italtile Limited shares (“shares”). 25% of the awards vest after three years from grant date, and the balance (75%) after five years. The value of an award is equal to the increase in the value of the shares between grant date and vesting date (the value at the latter date is defined as the volume weighted average price of Italtile Limited shares as traded on the JSE over the 10 trading days preceding and including the vesting date).
    • Executive Retention Plan
      The Executive Retention Plan is an additional mechanism, over and above the existing Italtile Limited Share Appreciation Rights Scheme and Italtile Limited Long-Term Incentive Plan, to retain and reward selected employees and directors in line with the Group’s values and remuneration philosophy of partnership. Italtile selectively enters into Retention Plan agreements with employees and directors in terms of which retention payments are made to them in conjunction with awards in terms of the Share Scheme. The payment of a Retention Award to an employee or director is subject to such employee or director remaining with the Group for a period of at least three years. The award made in the current year has a retention period of five years. The employee or director shall be the registered and beneficial holder of the shares acquired pursuant to the retention award from the date of transfer of such shares.

Awards from these three schemes are to be applied towards the obligatory subscription and/or purchase of Italtile Limited ordinary shares.

Details of share incentive schemes are set out in this report.

Non-executive directors’ fees

Non-executive director remuneration is fee-based and not linked to the share price of Italtile Limited.

The Remuneration Committee takes cognisance of market norms and practices when setting non-executive director fees.

Italtile Limited’s non-executive directors do not receive short-term incentives, or share options to ensure actual and perceived independence. However, it should be noted that Mr S I Gama participates in the Group’s BEE transaction.

The recommendation of the Remuneration Committee on the proposed fees is submitted to the Board for consideration before being proposed to shareholders for consideration and approval at the annual general meeting (“AGM”). If approved, the fees become effective in the month following the AGM.

The following fixed fees were in place for the year under review:

   
Basic annual fee R50 000
Board meeting fee R22 300
Committee fee R19 000
Chairman of committee R23 000
Strategy session fee R24 300
Hourly rate for ad hoc work, not exceeding R3 020
100 hours a year per hour
Chairman of the Board R1 113 000