2020 AGM - Revised Remuneration Policy

Following a comprehensive review of the current Remuneration Policy and a consultation exercise with PayPoint’s major investors (the top 15) and the main representative bodies, the Remuneration Committee is proposing to make a number of changes to the Remuneration Policy at the 2020 AGM, with the main proposal being a switch from LTIP awards to granting Restricted Share Awards (RSAs) under a Restricted Share Plan.

The proposed switch from LTIPs to RSAs is being suggested for the following reasons:

• the Committee is attracted to the simplicity of Restricted Share Awards compared with LTIPs;
• rewards will be much less volatile and therefore significantly more effective over time;
• it will achieve the desirable aim of internal alignment - you may recall that shareholder approval was obtained for a below Board Restricted Share Plan at the 2019 AGM receiving 99.74% support).

In addition, given challenges facing all companies in respect of setting long-term targets in respect of COVID-19, this feels now feels like an appropriate time to make the change.

A summary of the proposed Policy changes are set out below. Full details of the proposed changes, and how the Policy will be implemented during 2020/21 is set out in the 2019/20 Directors' Remuneration Report contained in the Annual Report 2020.

The Policy changes being proposed are as follows:

LTIP awards will be replaced by Restricted Share Awards (“RSAs”). The ability to grant LTIP awards, up to 300% of salary, will therefore be removed from the Policy. Following the 2020 AGM, and then annually thereafter, Executive Directors may receive RSAs:

• of up to 75% of salary for the CEO role and up to 62.5% of salary for the CFO. This represents a c.60% reduction for the CEO role’s LTIP (175% of salary) and a 50% reduction to the CFO’s normal LTIP award level (125% of salary);
• which will normally vest 50% after three years from grant, 25% after four years from grant and 25% after five years from grant, subject to: (i) continued employment; (ii) satisfactory personal appraisals during the relevant vesting periods; and (iii) a positive assessment of performance against an underpin (see below); and
• which, once vested, may not be sold until at least five years from the grant date (other than to pay relevant taxes).

Underpin: For RSAs granted to Executive Directors to vest, the Committee must be satisfied that PayPoint’s underlying performance and delivery against its strategy and plans is sufficient to justify the level of vesting having regard to such factors as the Committee considers to be appropriate in the round (including revenue, earnings and share price performance) and the shareholder experience more generally (including the risk of windfall gains)

Other: Conventional best practice share plan provisions regarding dividend equivalents, leaver and change of control arrangements will operate.

• The maximum pension contribution rate of 20% of salary will be removed. Going forwards, pension provision for Executive Directors and employees promoted to the Board will be aligned, in percentage of salary terms, to the general workforce contribution rate (currently 5% of salary);
• The CFO role’s shareholding guideline will be increased from 150% to 200% of salary, in line with that operated for the CEO. In addition, the guidelines will be amended to include unvested non-performanced share awards on a net of tax basis (as per the IA’s recent update to its Remuneration Principles);
• A post cessation shareholding guideline will be introduced. Going forward, Executive Directors will need to retain shares equal to 100% of the shareholding guideline (or the actual number of shares held against the guideline if the guideline is not met at cessation) up until the first anniversary of cessation, reducing to 50% of the guideline (or 50% of the actual number of shares held against the guideline if the guideline is not met at cessation) between the first and second anniversary. Own shares purchased, shares acquired through buyout awards and share awards granted prior to the 2020 AGM will be excluded from the post cessation guideline; and
• While no changes are being made to annual bonus provision (currently set at 106% of salary maximum, compared to the Policy maximum of 150% of salary), to the extent that bonus potential is increased to 150% of salary during the Policy Period (with appropriate investor consultation), on-target bonus potential will be set at 50% of the maximum.
• Malus and clawback provisions will be enhanced (corporate failure and insolvency triggers will be added).

Given the above, in addition to seeking shareholder approval for the new Policy, approval will also be sought to amend the rules of the 2019 Restricted Share Plan to enable Executive Directors to receive RSAs on the terms permitted within the proposed Remuneration Policy.