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Remuneration committee

2015/16 Remuneration Committee Chairman's Letter


Dear Shareholder

On behalf of your Board, I am pleased to present the Directors' Remuneration report for the period ended 2 April 2016.

Overview of remuneration strategy

The focus of our remuneration strategy is on rewarding performance – the majority of executive remuneration (approximately 70% at maximum) is variable and only payable if demanding performance targets are met. The performance measures are firmly linked to our strategy and ultimately aligned with shareholders’ interests to deliver earnings growth and improved shareholder value in the medium-term. The majority of variable pay is payable in the form of shares.

Further information on how executive remuneration links to our strategy and aligns with colleagues in the rest of the business is set out in the table below.


2015 AGM

Whilst overall the Directors' Remuneration report received strong support at the AGM in 2015, there was a 15% vote against (full details of the votes are provided on page 62 of annual report 2015/16). The reasons for this negative vote were discussed by the Committee and it was concluded that there were a number of contributory factors rather than a single significant issue. These included the award of a pro rata adjusted Long Term Incentive Plan (LTIP) award to the CFO following the change in the Company’s year end, a desire to see more detailed disclosure on the annual bonus performance outcome for the year and the high salary levels of executive directors compared with companies of a similar market capitalisation. Over the year we have taken into consideration shareholders' views and, where possible, sought to address them in this year’s report. One of the changes implemented is a change of the comparator group for the LTIP from the FTSE 250 to the FTSE All Share Index as this captures the performance of a broad spectrum of companies including the FTSE Small Cap Index.

Remuneration considerations for 2015/16

Following the approval of a new bonus scheme for management below Board level in April 2015 there have been no significant changes in remuneration arrangements over the year.

The Committee strengthened its recovery provisions with the approval of clawback arrangements in respect of the annual bonus plan for executive directors and the Executive Leadership Team designed to align, as closely as possible, with the recovery provisions already in place under the LTIP and Deferred Share Bonus Plan (DSBP). These apply over a two year period following the payment of a bonus in the event of a material misstatement of the Company’s financial results, an error in the amount awarded due to inaccurate or misleading information being provided to the Committee or in the event of fraud by a participant.

As disclosed in last year’s report the Committee determined that going forward the performance targets for the DSBP (which applies only to the CFO) will be aligned with those of the Annual Bonus plan. This simplifies arrangements whilst retaining the delivery of a significant proportion of any variable reward earned by the CFO in the form of shares, deferred for two years.

Following the Company’s change in year end in 2014 the comparative figures for 2014/15 in the Annual Report on Remuneration are on a 15 month basis versus 12 months for 2015/16. All payments to directors in the financial period and arrangements for 2016/17 are in accordance with our approved policy.

Performance outcome for 2015/16

The Committee reviewed the CEO’s and CFO’s performance over the financial period and assessed the extent to which their annual bonus targets had been achieved.

As highlighted in the Chairman's Statement on pages 4 and 5 of annual report 2015/16, the Company made encouraging progress in 2015/16 in delivering its growth strategy. Trading profit of £131.0m was in line with last year and our target. The Committee considered this to be a good performance taking into account the current deflationary market and the increase in investment made in the year which is crucial to support our future growth plans. This included a £3m increase in consumer marketing and significant incremental investment in people within our consumer insight, innovation, marketing and sales teams. There was also a significant reduction in net debt and successful delivery of financial savings targets. Details of performance against Strategic and Personal targets are set out on pages 54 and 55 of annual report 2015/16. As a result the Committee approved an award of 57.0% of total opportunity (£598,500) to Gavin Darby and 57.7% of total opportunity (£244,521) to Alastair Murray (for Alastair Murray this includes both annual bonus and DSBP). Gavin Darby has requested he receive his entire bonus in shares (net of income tax and employee national insurance).

In addition, the final tranche of Gavin Darby’s Co-Investment Award vested on 1 May 2016. No LTIP awards vested in the year.

Arrangements for the coming period

Targets for the annual bonus, DSBP and LTIP awards for 2016/17 have been set in the context of our recently announced accelerated growth plans and aligned with our increased guidance on sales growth of 2–4%.

A salary increase of 1%, in line with all colleagues not involved in collective bargaining, was approved for executive directors with effect from 1 April 2016. For a second year, Gavin Darby has elected not to take the increase and his salary therefore remains unchanged since his appointment in 2013.

The Director’s Remuneration Policy, which was approved in 2014, is required to be presented to shareholders for a binding vote every three years and will therefore be resubmitted at the AGM in 2017. The Committee will review the policy and whether any changes are required over the course of the year.

I look forward to your continuing support.

Jennifer Laing
Remuneration Committee Chairman
16 May 2016


Directors' Remuneration Policy and Annual Report on Remuneration 2015/16

Our Directors' Remuneration Policy was approved at the AGM on 29 April 2014 and took effect from that date. The Policy received approval from 99.05% of votes cast at the meeting.

You can find a copy of our Directors' Remuneration Policy along with the Annual Report on Remuneration for 2015/16 by following the links below.


Annual Report on Remuneration 2015/16

The full text of annual report 2015/16 can be downloaded from the results centre

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