The remuneration policy at Trifast seeks to attract, incentivise and retain those key executives who are critical to executing our business strategy"

Dear shareholder

Introduction

Jonathan Shearman

As Chairman of the Trifast Remuneration Committee (the 'Committee'), I am pleased to introduce our Remuneration report for 2015, which has been prepared by the Committee in accordance with the relevant legal and accounting regulations and approved by the Board.

The remuneration policy at Trifast seeks to attract, incentivise and retain those key executives who are critical to executing our business strategy. Within this, any structure will aim to deliver an appropriate mix of:

  • fixed and variable compensation
  • cash and equity components

The Committee believes that the current structure is in the best interests of shareholders, ensuring that strong year-on-year corporate performance is rewarded and the interests of executives are aligned with the interests of shareholders over the longer term.

Remuneration policy & structure

The current remuneration policy was approved by the majority of shareholders at the last AGM on 18 September 2014 and we have subsequently sought to engage with the two shareholders that cast the largest number of votes against its adoption. It is important to the Group that stability and momentum be maintained during this time of management transition. After examining market practice, and to complement the stability requirement, the Board will, at the forthcoming AGM, be proposing one amendment to the Remuneration Policy that allows a fixed twelve month notice period to be extended to all Executive Directors. This should ensure that Trifast is properly protected in the event that an Executive Director wishes to leave, and alleviate any issues with regard to external recruitment. The notice period for Non-Exectutive Directors will be unchanged. All other aspects of the remuneration policy remain the same, a summary of which can be found on the following page and a full copy in either of last year's accounts or via the Trifast website www.trifast.com.

Given the Board wide review completed during the prior year, no meaningful structural changes have been required and hence this has been a routine year.

Looking back

Turning to the financial performance of the Group, this has been an excellent year showing an increase in underlying diluted EPS of 45.9%.

This came via a mix of organic growth and a maiden contribution from VIC, our latest acquisition. When considering the bonus targets for the year to 31 March 2015, the Committee was keen that they were challenging yet achievable. As a result, to attain maximum payout, the Group needed to show year-on-year EPS growth of 25%. Within that, the stretch target required growth of some 17% over and above the threshold.

Against the 2015 remuneration structure, taking into account a ROCE of 18.6%, which is in excess of the required level (WACC +2%) and given the EPS outlined above, the Committee assessed that performance in the year to 31 March 2015 justified the maximum annual bonus possible (200%). This is for each Executive Director and is made up of a 100% cash bonus and a 100% equity award, the latter being deferred for three years.

Looking ahead

The Group remains committed to 'more of the same'; that is growth in earnings from both organic performance and any acquisitions that are made. The Executive team, NEDs and senior managers have all chosen to freeze their salaries in the coming year, preferring any increase to be shared amongst the employees, reflecting their contribution to performance.

With regard to the bonus scheme for the year to 31 March 2016, threshold performance will be in line with the remuneration policy. Thereafter, for maximum bonuses to be paid, Group EPS will once again need to be significantly in excess of the threshold level. This target has been set to reflect the prevailing economic environment. Whilst the actual level of EPS required is deemed commercially sensitive in the year in which it applies, we will, as in previous years, make it available in next year's accounts.

Reporting under the UK Department for Business, Innovation & Skills requirements, we welcome an appropriate amount of visibility and clarity, alongside remaining ever mindful of the opinions of our shareholders with regard to executive reward. The following pages contain the annual Remuneration report which shows in greater detail how we have applied our policy during the year under review.

In concluding, we have an excellent management team and it is appropriate that they feel motivated and rewarded. We believe that our approach will enable this and so look forward to your support in approving the relevant Remuneration report resolutions at September's AGM.

Jonathan Shearman

Chairman of the Remuneration Committee

15 June 2015

Directors' remuneration policy

This section of the Remuneration report contains details of the policy that will govern current and future remuneration. It has been developed to support the business strategy and was approved on 18 September 2014 by shareholders at the AGM.

The Remuneration Committee does not retain discretion with regard to any of the main components of the remuneration policy, unless otherwise indicated in the following table:

1) Policy tables — Executives

ElementExecutive team
Base salary from 1 April 2014Range of £180,000 to £250,000 in line with benchmarking and prevailing industry
Pension*20% of salary
Annual bonus — cashMaximum — 100%
On target — 50%
Threshold — 35%
Annual bonus measure — cashROCE hurdle of 200bps in excess of the Group's WACC
Thereafter, based on underlying diluted EPS performance
Reduction of up to 15% should personal objectives not be achieved
Annual bonus — deferred equityMaximum — 100%
On target — 100%
Threshold — 70%
Annual bonus measure — deferred equityROCE hurdle of 200bps in excess of the Group's WACC
Thereafter, based on EPS performance
Reduction of up to 15% should personal objectives not be achieved
Any shares awarded are deferred for three years
Shareholding requirementMinimum holding of 250,000 shares†
Malus and clawbackThe Committee would consider clawback of the equity portion should EPS growth on a rolling three year basis turn negative
Changes in policyNone

* Malcolm Diamond and Jim Barker do not participate in the Company pension plan.

† by 31 March 2019.

Year-end decisions made
Salary review 1 April 2015 — Executives0%
Bonus outcome year to 31 March 2015
Salary %100%^
Maximum %100%^
Fees review 1 April 2015 — Non-Executives0%

^ Before any deductions with regard to personal objectives.

2) Contracts

During the year all Executive Directors had rolling service contracts. Details of each Board member's contract are as detailed below:

ExecutivesNotice periodDate of signing
MM Diamond12 months26 July 2012
JC Barker12 months26 July 2012
MR Belton6 months¶26 July 2012
GP Budd6 months¶26 July 2012
GC Roberts6 months¶26 July 2012
Non-ExecutivesNotice periodDate of signing
NS Chapman3 months*†26 July 2012
NW Warner3 months*^16 June 2015
JPD Shearman3 months*26 July 2012
SW Mac Meekin3 months*25 April 2013

¶ To be extended to 12 months subject to shareholder approval at the forthcoming AGM

* 12 months in the event of a change in control

† Resigning on 16 June 2015

^ To be appointed on 16 June 2015

A minimum of one third of all Directors need to be re-elected on an annual basis and all Directors in their first year of appointment. The Directors up for re-election at the AGM on 16 September 2015 are: Malcolm Diamond, Neil Warner, Jonathan Shearman and Scott Mac Meekin.

The Directors' contracts are kept at the Company's Registered Office.

Annual report on remuneration — audited information

This section of the Remuneration report contains details as to how the Company's remuneration policy was implemented during the year ended 31 March 2015.

1) Executive Director single figure for remuneration

Annual bonus3
Salary
£000
Cash
£000
Deferred equity (face value)
£000
Taxable
benefits1
£000
Pensions2
£000
Total
£000
MM Diamond20020020019619
Prior year19015219013545
JC Barker25025025016766
Prior year22518022513643
MR Belton2002002001340653
Prior year1701361701334523
GP Budd1901901901538623
Prior year1651321651333508
GC Roberts1801801801636592
Prior year1401121401328433
Totals1,0201,0201,020791143,253
Prior Year Totals89071289065952,652
  1. Taxable benefits consisted of the cost of providing a Company car (or car allowance), private medical insurance and critical illness cover
  2. Mark Belton, Geoff Budd and Glenda Roberts are members of the Company's non-contributory pension plan (2014: Mark Belton, Geoff Budd and Glenda Roberts) This is an HMRC approved defined contribution scheme. The rate of Company contribution to this scheme is 20% of base salary
  3. See additional details for variable pay element of remuneration below:

Additional details for variable pay element of remuneration: annual bonus

A portion of the annual bonus for the year ended 31 March 2015 has been paid in cash following the publication of the annual results and the remainder deferred in equity for three years. In accordance with the Directors' Remuneration Policy, all five Executive Directors have been awarded a cash bonus and deferred equity bonus as a percentage of base salary of 100% and 100% respectively (2014: 80% and 100%).

The number of shares needed to award the face value of the deferred equity bonus is based on the average share price from 1 January to 31 March. In 2015 this was 980,390 shares and 104p (2014: 1,098,767 and 81p).

The annual IFRS2 charge relating to the Board deferred equity bonuses given in 2014 and 2015 was £0.51m (2014: £nil).

The performance targets, actual performance achievement and resulting annual bonus as a percentage of the base salaries of the Executive Directors are summarised below for the year to 31 March 2015:

Performance
measure
WeightingThreshold performance
target
Maximum performance
target*
Actual EPSBonus achieved^
CashDeferred
Group EPS†100%6.3p incorporating a
bonus of 105% of
salary (35% cash;
70% deferred equity)
7.4p incorporating a
bonus of 200% of
salary (100% cash;
100% deferred equity)
8.7p100%100%

* On target performance is deemed commercially sensitive and therefore not stated. Maximum performance PBT is stated after the deduction of any incremental bonus payments

^ As percentage of salary

† Underlying diluted EPS

Historic long term incentive awards

The options that were agreed with shareholders and granted on the change of management in 2009, requiring a three month average share price greater than 51p, combined with a ROCE in excess of 10%, vested during the year ended 31 March 2013. 2,000,000 of the options granted to the Board remain outstanding at 31 March 2015 (2014: 5,400,000).

2) Non-Executive Director single figure for remuneration

Core fee
£000
Chairing of Audit or Rem Committee
£000
Committee membership
£000
Senior Independent Director
£000
Total
£000
NS Chapman4055555
Prior year366648
JPD Shearman405550
Prior year36642
SW Mac Meekin40545
Prior year36642
Totals12010155150
Prior Year Totals108186132

3) Payments to past Directors and for loss of office

There were no such payments made during the year under consideration (2014: £nil).

4) Statement of Directors' shareholdings

Shareholding requirementCurrent
beneficial
holding*
Vested but
unexercised
options^
Deferred shares without performance measuresCurrent
shares which
count toward
shareholding
requirements†
Unvested SAYE optionsTotal of all interests at 31 March 2015Shareholding requirement met?
Executive Directors
Malcolm Diamond250,000553,8001,000,000426,8011,980,60118,0001,998,601Yes
Jim Barker250,000573,2291,000,000518,0702,091,2992,091,299Yes
Mark Belton250,000250,000402,110652,11018,000670,110Yes
Geoff Budd250,000550,000386,326936,326936,326Yes
Glenda Roberts250,000150,000345,850495,850495,850Yes
Non-Executive Directors
Neil Chapman1,507,5001,507,5001,507,500N/A
Jonathan ShearmanN/A
Scott Mac MeekinN/A

^Granted 30 September 2009.

†Total of current beneficial holding, vested but unexercised options and deferred equity awards.

*Including options exercised in the year

Deferred equity bonus shares:

Name20142015Total
Number of sharesFace valueNumber of sharesFace valueNumber of sharesFace value
Executive Directors
Malcolm Diamond234,568190,000192,233200,000426,801390,000
Jim Barker277,778225,000240,292250,000518,070475,000
Mark Belton209,877170,000192,233200,000402,110370,000
Geoff Budd203,704165,000182,622190,000386,326355,000
Glenda Roberts172,840140,000173,010180,000345,850320,000

* Outside of the malus and clawback noted in policy table 1, the deferred equity bonus shares have no further performance measures once awarded. A service condition of three years, with a good leaver clause applies

The number of shares needed to award the face value of the deferred equity bonus is based on the average share price from 1 January to 31 March. In 2015 this was 980,390 shares and 104p (2014: 1,098,767 and 81p).

2009 share options:

NameOptions^
Outstanding at
1 April
2014
ExercisedOutstanding at 31 March
2015
Executive Directors
Malcolm Diamond2,000,000(1,000,000)1,000,000
Jim Barker2,000,000(1,000,000)1,000,000
Mark Belton500,000(500,000)
Geoff Budd500,000(500,000)
Glenda Roberts250,000(250,000)
Non-Executive Directors
Neil Chapman150,000(150,000)
Jonathan Shearman
Scott Mac Meekin

^Excluding SAYE plans (see previous table).

The aggregate gains made on exercising share options in the year totalled £3,697,000 (2014: £nil).

There have been no changes in the interests of any Directors between 31 March 2015 and 15 June 2015.

Annual report on remuneration — Unaudited information

The graph below sets out the Total Shareholder Return performance of the Company compared to the FTSE Small Cap Index and FTSE All-Share Industrial Engineering Index over a six year period from 31 March 2009. The Remuneration Committee believes it is appropriate to monitor the Company's performance against these indices as the Company is a constituent of both.

5) Performance graph

In June 2014, TR was promoted from the fledgling to the FTSE Small Cap and All-Share indicies.

6) Performance and pay

The table below shows the single figure remuneration and levels of bonus payout for the Group CEO during the past six years:

YearTotal Remuneration £000Annual cash bonus payout against maximumEquity award payout against maximum
2015766100%100%
201464380%100%
20131,26330%100%*
201232735%N/A*
201126545%N/A*
2010176N/AN/A*

* This was a year considered as part of the performance period for the 2009 option scheme.

7) Percentage change in CEO remuneration

The table below compares the percentage increase in the CEO's total pay with that of the UK division which is the most appropriate allowing a consistent tax regime and inflationary environment. In both cases, salaries are reviewed annually in April:

2015
£000
2014
£000
Change
Group CEOSalary25022511.1%
Jim BarkerTaxable benefits161323.1%
Annual bonus — cash25018038.9%
Annual bonus — deferred25022511.1%
UK employeesSalary9,5629,3632.1%
Taxable benefits3313106.8%
Annual bonus89970627.3%

8) Relative importance of spend on pay

The following table shows the relative spend on pay during the past two financial years when compared to other disbursements from profit:

 Disbursements
from profit
during year to
31 March 2015
Disbursements
from profit
during year to
31 March 2014
Change
Dividend distributions£1.57m£0.87m80.5%
Group spend on pay (including Directors)£22.05m£19.53m12.9%
Other payroll costs£7.60m£6.31m20.4%

9) Implementation of policy in the coming year

The remuneration policy's implementation for the forthcoming year is summarised as follows:

ElementPolicy
StructureThe main elements of Executive remuneration are:
  • Base salaries as follows:

    Malcolm Diamond (Executive Chairman) — £200,000

    Jim Barker (Chief Executive Officer) — £250,000

    Mark Belton (Group Finance Director) — £200,000

    Geoff Budd (TR Europe Managing Director) — £190,000

    Glenda Roberts (Group Sales Director) — £180,000

  • Annual bonus scheme where maximum opportunity is 200% of base salary (100% cash;

    100% equity deferred for three years) for each of the Executive Directors based on:

    Initial ROCE hurdle of WACC +2% (to be met before any bonus will be payable)

    Threshold of underlying diluted EPS growth of RPI + 5% (required as the minimum performance for any bonus to be paid)

    Any bonus awarded will be reduced by up to 15% should personal objectives, set so as to support the ongoing business strategy, not be achieved. Given their nature, objectives are commercially sensitive for both the year in question and subsequent years.

  • Non-Executive Directors fees

    Neil Chapman — £55,000 (retiring 16 June 2015)

    Jonathan Shearman — £50,000

    Scott Mac Meekin — £45,000

    Neil Warner — £55,000 (to be appointed 16 June 2015)

Pay for performanceThe key principle for incentives is to provide a strong link between reward and Group performance to align the interests of Executives with those of shareholders.

10) Functioning of Remuneration Committee

The objective of the Remuneration Committee is to develop a remuneration policy for the Executive Directors and other key Executives that attracts, incentivises and retains them. Within this, the Committee has and will attempt to reward exceptional performance, defined as significant growth in EPS. This policy is reviewed on an annual basis.

The Committee is composed entirely of Non-Executive Directors. Members have no day-to-day involvement in the running of the business. Jonathan Shearman (Chairman) and Scott Mac Meekin have no personal financial interest in the Company. Neil Chapman (Senior Independent Director) is a shareholder as detailed in the tables above. No Executive Director sits on the Committee. The Remuneration Committee is formally constituted with written Terms of Reference. A copy of the Terms of Reference is available to shareholders by writing to the Company Secretary, whose details are set out on the inside back cover of this publication.

The Committee had four meetings during the year. All members of the Committee attended each of these meetings. On most occasions, the Executive Chairman and CEO were both invited to attend to ensure the Committee was in possession of all the relevant facts. During these meetings the Committee initially confirmed the remuneration structure for the year to 31 March 2015 and then considered any appropriate changes for the year to 31 March 2016 and beyond, including reflecting on shareholder feedback.

Alongside this, the Committee had additional meetings with PwC in their continued role as independent external advisors to seek their guidance on remuneration matters, including best practice with regard to any changes being considered and feedback from shareholders. The Committee continues to be pleased with the service offered by PwC which during the year cost the Group £0.02m. The Group also retains PwC with regard to taxation services and consulting services in the ordinary course of business of Trifast. The Committee believes that this does not create a conflict of interest and the advice they receive is independent and objective.

The Committee consults with the Company Secretary regarding issues on areas of remuneration and Corporate Governance. With regard to senior Executives in the Company (excluding Board Directors), the Committee also takes advice from the Executive Board.

11) Statement of AGM voting

The Group is committed to ongoing shareholder dialogue and takes an active interest in voting outcomes. Where there are substantial votes against resolutions in relation to Directors' remuneration, the reasons for any such vote will be sought and any actions in response detailed in the Chairman's letter.

The table below shows the actual voting on the 2014 Remuneration Report at the AGM held on 18 September 2014:

Votes for%Votes against%Votes withheld
2014 Remuneration Report51,220,85478.014,414,58421.924,330

The following table sets out actual voting in respect of the approval of the 2014 remuneration policy at the AGM held on 18 September 2014:

Votes for%Votes against%Votes withheld
2014 remuneration policy48,308,78573.614,611,42222.22,739,561

This report was approved by the Board of Directors and signed on its behalf by:

Jonathan Shearman

Chairman of the Remuneration Committee

15 June 2015