Directors' Remuneration Report

Introductory letter

Dear shareholder,

I am pleased to present the remuneration committee's report on directors' remuneration for 2013.

The Government has tabled proposals to reform the way directors' remuneration is voted upon and reported. The new legislative requirements will not come into effect until October 2013 but, although not mandatory for this report, the committee has decided to comply with a number of the new requirements early in the interests of best practice. Therefore, this report has been split into two sections, a remuneration policy report which sets out the policy on the remuneration of the executive and non-executive directors and an implementation report which discloses how the current remuneration policy has been implemented in the year ended 28 April 2013. We will be seeking your support for both parts of the report by way of a single advisory vote at the forthcoming AGM.

As reported last year, a guaranteed bonus was agreed for the then newly appointed Chief Operating Officer. The company recognises that offering a guaranteed bonus falls outside best corporate practice. However, when this was agreed by the board the company had recently announced a profit warning and recognised the need to strengthen the management team. The board had decided to appoint a COO to complement the skills of Julian Dunkerton, the Chief Executive Officer. At the final stages of the recruitment process Susanne Given became the preferred candidate but at this juncture had been offered a more lucrative compensation package by a European retailer. In order to attract Susanne at what was considered by the board a critical period of time the board agreed that it would not match this competing offer but would guarantee the first year's annual bonus. On this basis the board was able to recruit Susanne Given and all other terms were compliant with the company's remuneration policy.

The board has from the time of flotation of the company indicated that it would review the application of the remuneration policy as it applied to what has been referred to as the founder directors, Julian Dunkerton, the Chief Executive Officer and James Holder, the Brand and Design Director. It has now decided that in order to better align the executive directors that Julian and James should both be included in the annual bonus schemes but given their shareholdings it is not planned this year to include them in the Performance Share Plan. This will be kept under review on an annual basis.

Our philosophy for remuneration remains to attract and retain leaders who are focused and encouraged to deliver business transformation and develop an increasingly international business.

The committee takes the views of our shareholders very seriously and considers their feedback and guidance from shareholder representative bodies when setting executive remuneration policy. The 2012 Directors' Remuneration Report received a significant majority vote in favour at the 2012 AGM. We hope to receive your continued support at the forthcoming AGM.

Keith Edelman
Chairman of the Remuneration Committee

Policy report
Unaudited information

Remuneration policy

For executive directors the committee is of the view that the company's executive remuneration policies should encourage strong performance culture, strategy delivery and long-term shareholder value creation and be positioned competitively to enable it to recruit, retain and incentivise. To achieve this, the committee therefore aims to position their fixed pay competitively while operating a competitive suite of annual and share based long-term incentives so that a substantial proportion of total remuneration is performance linked and aligned with shareholders.

The table below summarises the executive director remuneration policy for financial year 2014:

Element of packagePurpose and link to strategyOperationMaximumPerformance targetsChanges from 2013
SalaryTo attract and retain key individuals.Reviewed annually by the committee, taking into account responsibilities, skills and experience of each individual, pay and employment conditions within the company, and salary levels within listed companies of a similar size.

Salaries are paid monthly in cash.
No change.
Annual bonusTo incentivise executives to achieve the key financial and strategic goals over the financial year.Operated for all executive directors.
The entire annual bonus is paid in cash.
Maximum bonus opportunity is 100% of base salary.Pre-set financial.The Chief Executive Officer and Brand and Design Director will participate from 2014.
Performance Share Plan ("PSP")To incentivise executives to deliver performance over the long-term.

To facilitate share ownership and provide greater alignment with shareholders.

EPS and relative TSR are considered the most appropriate measures of the long-term. Executives should be rewarded for delivering earnings growth, in addition to strong stock market performance against their peers.
Operated for the COO and CFO only.

The annual grant of conditional awards which normally vest on the third anniversary of grant, subject to performance and continued employment.
In line with the normal grant policy, PSP awards of 100% of salary will be granted to the COO and CFO in financial year 2014.

The maximum individual annual grant limit is 200% of salary. In exceptional circumstances, this may be increased to 300% of salary.
70% of the awards are subject to an earnings per share ('EPS') performance condition and 30% of awards are subject to a relative total shareholder return ('TSR') performance condition.Following their respective recruitment awards in 2012, award levels in 2013 will be granted in line with the normal grant policy.
PensionTo aid retention and to remain competitive in the marketplace.Only the COO and CFO receive pension contributions.
The COO and CFO must contribute 5% of salary to receive company contributions.
Company contributions of 7.5% of salary, subject to executives' contribution.No change.
BenefitsTo aid retention and to remain competitive in the marketplace.Medical and life insurance.
A car allowance for certain executive directors.
Relocation/accommodation allowances where appropriate.
No change.
Shareholding guidelinesTo further align the interests of executive directors to those of shareholders.Executive directors not holding shares worth at least 100% of their base salary will be expected to retain 50% of any PSP awards which vest (net of tax) until such time as this level of holding is met.No change.

Remuneration scenarios for executive directors

The charts below show how the composition of the executive directors' remuneration packages for financial year 2014 varies at three performance levels, namely, at below threshold, target and maximum levels, under the policy set out in the table above.

Note that only charts for the COO and CFO have been presented as the founding directors have to date not received any variable pay.

Remuneration-exec-directors.jpg

How executive directors' remuneration policy relates to the wider Group

There are differences in salary levels and in the levels of potential reward depending on seniority and responsibility, although a key reference point for executive salary increases is the average increase across the general workforce. Generally, the more senior the employee, the higher the proportion of the remuneration package is delivered through performance-related pay, which has a greater linkage to the results of the Group.

All eligible employees may participate in a Sharesave scheme, under which all employees may save up to £250 per month over a three year period.

How shareholders' views are taken into account

The remuneration committee encourages dialogue with shareholders and considers their feedback and guidance from shareholder representative bodies as part of any executive remunerative review and when formulating any material changes to the remuneration policy.

Base salary and benefits

Executive directors' base salaries are reviewed annually by the committee, taking into account the responsibilities, skills and experience of each individual, pay and employment conditions within the company and the Group, and salary levels within listed companies of a similar size. Following a review of executive salaries in March 2013 against benchmark data for comparable companies it was agreed not to increase salaries. Current base salary levels are as follows:

From 29 April 2013From 30 April 2012
Julian DunkertonChief Executive Officer£400,000£400,000
Susanne GivenChief Operating Officer£350,000£350,0001
James HolderBrand and Design Director£300,000£300,000
Theo KarpathiosChief Executive Officer – Wholesale and Internationaln/a£300,0002
Shaun WillsChief Financial Officer£250,000£250,0003
  1. From appointment on 10 April 2012.
  2. Resigned on 14 August 2012.
  3. From appointment on 23 April 2012.

Taxable benefits for 2013 related to the provision of medical and life insurance and, to certain executive directors, a car allowance. In addition, the Chief Operating Officer and Chief Financial Officer may reclaim relocation and accommodation costs incurred, up to pre-agreed limits.

Pension

The Chief Operating Officer and Chief Financial Officer are eligible to participate in the company's Group Personal Pension Scheme ("GPPS") whereby for an executive contribution of 5% of base salary, the company contributes 7.5% of base salary.

Annual bonus

An annual bonus arrangement was introduced for 2013 for the COO and CFO although as disclosed last year, the COO's payout was guaranteed as part of her joining arrangements. The committee agreed to a guaranteed bonus for the COO recognising that whilst this is not generally best practice, it was necessary in the specific circumstances to enable the business to be able to secure this particular individual. The maximum bonus opportunity will continue to be 100% of base salary for 2014 and payouts will be based on the achievement of challenging financial metrics. In addition to the COO and CFO, the Chief Executive Officer and Brand and Design Director will participate from 2014 onwards. Specific targets have not been disclosed as they are considered to be commercially confidential but they are considered by the committee to be demanding.

Long-term incentives

The SuperGroup Performance Share Plan enables the company to incentivise and reward participants appropriately for contributing to the delivery of the company's strategic objectives and to provide an appropriate level of long-term performance pay.

Under the PSP, each year individuals may receive awards of shares in the company which will normally vest three years after they are awarded, subject to the satisfaction of sliding scale performance conditions measured over a three year period and continued service.

Although founder directors are eligible to participate in the PSP, the committee believes that their significant shareholdings in the company are sufficient to incentivise them and align interests with longer term company performance at the current time. Therefore, awards under the PSP for 2013 will be restricted to the Chief Operating Officer, Chief Financial Officer and below board senior executives ("senior executives").

The PSP's individual annual limit is a maximum of 200% of an individual's base salary with scope to grant up to 300% of base salary in exceptional circumstances (e.g. on recruitment).

For 2013, the normal grant policy for executive directors (excluding founder directors) will be 100% of salary. Actual award levels to senior executives are generally significantly below the maximum levels.

Consistent with the 2012 awards, performance will be 70% based on sliding scale EPS and 30% based on TSR relative to a selected group of companies as measured over a three year period to the end of financial year 2016. Performance targets have yet to be determined for the 2013 awards which will be granted later in the year although full disclosure of the targets will be provided in the London Stock Exchange announcement which will be published shortly after the awards will be granted.

The remuneration committee is comfortable that the blend of EPS and TSR targets provides a balance between incentivising and rewarding strong financial performance while creating a strong alignment with the interests of institutional shareholders by rewarding stock market outperformance.

Executives may benefit, in the form of additional cash or shares, from the value of dividends paid over the vesting period, to the extent that awards vest.

Targets for 2012 award

Seventy per cent of the 2012 PSP award is subject to an EPS performance condition: 25% of this element of the award will vest for average annual EPS growth of 12% in excess of RPI, increasing on a straight-line basis to 100% vesting for EPS growth of at least 18% per annum in excess of RPI. The remaining 30% of the 2012 PSP award is subject to a TSR performance condition, measuring the company's TSR against a comparator group comprising FTSE All-Share companies in the following subsectors: Apparel Retailers, Broadline Retailers, Clothing and Accessories, Furnishings, Home Improvement Retailers, Recreational Products & Services, Restaurants & Bars, Specialty Retailers and Toys. Twenty-five per cent of this part of the award will vest if the company's TSR is ranked at the median of the comparator companies, increasing on a straight-line basis to 100% vesting if the company's TSR is ranked at the upper quartile of the comparator group.

Performance graph

The following graph shows the company's total shareholder return ("TSR") compared with the TSR of the FTSE 250 (excluding Investment Trusts) over the period from flotation to 28 April 2013.

Tsr-graph-2013.jpg

Dilution

In accordance with shareholder guidelines, the committee applies a limit on the amount of shares that can be issued to satisfy employee share plan awards of 10% of the company's issued share capital in any rolling ten year period. Of this 10%, only half can be issued to satisfy awards under the discretionary arrangements (i.e. the PSP). Since flotation in 2010, the company has not issued any shares to satisfy employee share plan awards.

Sharesave scheme

Under the Sharesave scheme, all eligible employees, including executive directors, are invited to participate, saving up to a maximum of £250 each month for a fixed period of three years. At the end of the savings period, individuals may use their savings to buy ordinary shares in the Group at a discount capped at up to 20% of the market price, set at the launch of each scheme.

Service contracts

The executive directors' service agreements are terminable on 12 months' notice, by either the company or the executive giving written notice to the other, or at the sole discretion of the company, on the payment in lieu of the executive's basic salary due for the remainder of the notice period. The service agreements contain provisions on non-competition, non-solicitation and non-dealing.

ProvisionDetailed terms
Contract datesJulian Dunkerton – 12 March 2010
Susanne Given – 19 March 2012
James Holder – 12 March 2010
Theo Karpathios – 12 March 2010 (left the Group on 14 August 2012)
Shaun Wills – 19 March 2012
Notice period12 months
Termination paymentBase salary
Good leaver provisionsA pro rata bonus may be payable and for COO and CFO only, pro-rata vesting for outstanding PSP awards (subject to performance).

Save for certain investment purposes only, the executive directors must obtain board approval in order to be involved in any business other than that of the company, or engage in any other activity which the company considers may impair their performance.

The non-executive directors were appointed for an initial period of three years. This was renewed for a further three year period with effect from 29 January 2013 for three individuals. The appointment may be terminated by either the company or the relevant director giving three months' notice, or in the case of the Chairman 12 months' written notice. Save in respect of retirement by rotation, a non-executive director being removed from office will be entitled to compensation equal to the fee due during the notice period.

NameDate of
appointment or
reappointment
Expected
date of expiry
of current term
Peter Bamford29 January 201328 January 2016
Keith Edelman29 January 201328 January 2016
Steven Glew5 February 2010N/A
Indira Thambiah12 February 2010N/A
Ken McCall29 January 201328 January 2016
Minnow Powell1 December 201230 November 2015
Euan Sutherland1 December 201230 November 2015

Non-executive directors' fees

The remuneration arrangements of the non-executive directors (a matter for the Chairman and executive members of the board) and the non-executive Chairman (a matter for the remuneration committee) are reviewed from time to time with regard to the time commitment required and the level of fees paid in comparable companies. Non-executive directors do not receive benefits from their office other than fees and reasonable expenses. They do not receive pension or performance-related pay from the company. Having reviewed the time commitment involved with the Chairman, the chairmen of the committees and the Senior Independent Director, it was agreed to increase their fees with effect from 1 May 2013.

Current fee levels are as follows:

NameBase feeAudit/
remuneration
committee
chairmanship
Senior
Independent
Director
From
1 May 2013
2013
Peter Bamford£165,000£165,000£150,000
Keith Edelman£50,000£10,000£10,000£70,000£62,500
Minnow Powell£50,000£10,000£60,000£57,500
Ken McCall£50,000£50,000£50,000
Euan Sutherland£50,000£50,000£50,000

Implementation report

Remuneration committee

The remuneration committee consists of three independent non-executive directors. The members of the remuneration committee are Keith Edelman (committee chairman), Minnow Powell and Euan Sutherland. Indira Thambiah and Steven Glew were also members of the remuneration committee during the year until they stepped down from the board in February 2013.

The remuneration committee meets at least three times per annum but more frequently if required. Membership of the committee during the financial year ended 28 April 2013 is detailed in the table below and attendance is shown in the table in the Corporate Governance Statement.

NameRemuneration committee member
FromTo
Keith Edelman (committee chairman)30 April 2012to date
Minnow Powell1 December 2012to date
Euan Sutherland1 December 2012to date
Indira Thambiah30 April 201211 February 2013
Steven Glew30 April 20124 February 2013

None of the remuneration committee members have any personal financial interest (other than as shareholders), or conflicts of interests arising from cross-directorships or day-to-day involvement in running the business. Directors are not involved in discussions about their own remuneration.

Executives may attend committee meetings by invitation of the committee, except where their own remuneration is being discussed. Julian Dunkerton (Chief Executive Officer), Susanne Given (Chief Operating Officer), Shaun Wills (Chief Financial Officer) and Andrea Cartwright (Director of HR) attended committee meetings during the period under review and provided advice to assist the committee.

The main responsibilities of the remuneration committee include:

  • determining and agreeing with the board the remuneration policy for the Chairman, executive directors and senior management;
  • setting individual remuneration arrangements for the Chairman and executive directors;
  • recommending and monitoring the remuneration of senior management; and
  • approving the service agreements for the Chairman, and executive directors, including termination arrangements.

The remuneration of the non-executive directors is a matter for the Chairman and executive directors.

The role of remuneration committee secretary is fulfilled by the Company Secretary. The terms of reference of the remuneration committee are available at www.supergroup.co.uk.

External advisors

The remuneration committee is responsible for appointing external independent consultants to advise on executive remuneration matters. New Bridge Street ("NBS"), part of Aon plc, were retained by the remuneration committee during the year to advise on executive remuneration matters. NBS is a member of the Remuneration Consultants Group and is a signatory to its Code of Conduct. The terms of engagement between the company and NBS are available from the Company Secretary on request. NBS (or any other part of Aon) provides no other services to the company.

Statement of shareholder voting at AGM

At last year's AGM, the Directors' Remuneration Report received the following votes from shareholders:

NameForAgainstVotes castVotes withheld
Total number of votes57,921,62110,305,30768,226,9281,236,733
% of votes cast84.9%15.1%100%

Audited information

Directors' emoluments

The emoluments of the directors were as follows:

NameDirectors'
salaries/fees
Taxable
benefits1
Other
payments
Pension
contributions2
Annual
bonus3
Total to
28 April
2013
Total to
29 April
2012
Executive directors
Julian Dunkerton£400,000£19,406£419,406£419,463
Susanne Given£350,000£47,635£26,250£350,000£773,885£21,230
James Holder£300,000£15,629£315,629£315,432
Theo Karpathios4£85,386£5,504£334,6164£425,506£315,863
Shaun Wills£250,000£76,166£17,188£75,000£418,354£6,101
Non-executive directors
Peter Bamford£150,000£150,000£150,000
Keith Edelman£62,500£62,500£62,500
Steven Glew5£44,802£44,802£57,500
Indira Thambiah6£37,917£37,917£50,000
Ken McCall£50,000£50,000£50,000
Minnow Powell£23,958£23,958
Euan Sutherland£20,833£20,833
Former directors7£345,266
Total£1,775,396£164,340£334,616£43,438£425,000£2,742,790£1,793,355
  1. Benefits comprised a car allowance and medical insurance for all the executive directors and a relocation allowance for the COO and the CFO.
  2. The Chief Operating Officer and Chief Financial Officer are eligible to participate in the company's Group Personal Pension Scheme ("GPPS") whereby for an executive contribution of 5% of base salary, the company contributes 7.5% of base salary.
  3. The annual bonus paid to Susanne Given is consistent with her joining arrangements which were disclosed last year. The annual bonus paid to Shaun Wills equated to 30% of salary following the committee's assessment of the performance targets.
  4. Theo Karpathios stepped down from the board on 14 August 2012, see below for details of payments made in this regard.
  5. Steven Glew resigned as a director on 4 February 2013.
  6. Indira Thambiah resigned as a director on 11 February 2013.
  7. Chas Howes stepped down from the board on 23 April 2012 and consistent with his contractual provisions was paid his normal salary of £225,676 until his notice period expired on 26 April 2013.

Directors' interests under the PSP

Outstanding share awards granted under the PSP were as follows:

As at
29 April
2012
Awards
granted
during
year
Awards
vested
during
year
Awards
lapsed during
year
As at
28 April
2013
Date of grantShare
price
at grant
(pence)
Vesting
date
Susanne Given241,615241,61516 August 2012434.57516 August 2015
Shaun Wills115,054115,05416 August 2012434.57516 August 2015

Directors' interests under the Sharesave scheme

As at
29 April
2012
Awards
granted
during
year
Awards
vested
during
year
Awards
lapsed during
year
As at
28 April
2013
Exercise price (p)Exercise
period
Shaun Wills1,7341,734519.003 years

Executive directors leaving during 2012/13

A payment of £334,616 was made to Theo Karpathios following his resignation from the board on 14 August 2012 in accordance with the terms of his contract of employment. This payment reflected 12 months' salary and an amount in relation to holidays which had been accrued but not taken.

Interests in shares

The interests of the directors and their families in the shares of the company were as follows:

Legally owned
(number of shares)
Subject to
performance
conditions
under the PSP
Subject to
vesting under
the Sharesave
scheme
Total as at
28 April 2013
Shareholding
guideline
met
28 April 201329 April 2012
Executive directors
Julian Dunkerton26,088,94426,088,944nilnil26,088,944Yes
Susanne Givennilnil241,615nil241,615No
James Holder11,850,00311,850,003nilnil11,850,003Yes
Shaun Wills1,2541,254115,0541,734118,042No
Non-executive directors
Peter Bamford6,0006,000nilnil6,000n/a
Keith Edelman4,0004,000nilnil4,000n/a
Ken McCall5,0005,000nilnil5,000n/a
Minnow Powell1,496n/anilnil1,496n/a
Euan Sutherland1,496n/anilnil1,496n/a

There have been no other changes in the interests set out above between 28 April 2013 and 10 July 2013.

This report has been prepared on behalf of the board by the remuneration committee. In addition to incorporating a number of the new BIS disclosures, it has been prepared in accordance with the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008 (the "Regulations") issued under the Companies Act 2006 (the "Act") and meets the requirements of the Financial Services Authority's Listing Rules. A resolution to approve the report will be proposed at the 2013 Annual General Meeting of the company at which the financial statements will be approved. The report has been divided into separate sections for audited and unaudited information.

Keith EdelmanRemuneration Committee Chairman
10 July 2013