Remuneration report

 

Remuneration philosophy and policy

Key tenets of our remuneration philosophy are that we act fairly and responsibly in our approach to employee remuneration and benefits at all times, ensuring our actions are sustainable, that they underscore our objective of being an employer of choice, and are aligned with the strategic and operational requirements of the business.

The objective of the group's remuneration policy is to ensure that we attract and retain employees of the right calibre and skills and motivate them to achieve exceptional performance aligned with our strategic priorities. We aim to reward employees fairly and equitably through both financial rewards and non-financial benefits such as performance recognition, development and career opportunities. We believe our employees and their representative trade unions, where relevant, value the consistency and predictability of how the terms and conditions of employment are determined, both in times of economic growth and in difficult economic conditions.

Total rewards are set at levels that are competitive within the gaming, entertainment and hospitality sectors and the group utilises market surveys to ensure that the components of the remuneration structure are appropriate. The fixed and variable element mix of the remuneration structure differ depending on the employee grade.

The remuneration committee considers each element of remuneration relative to the market and takes into account the performance of the group and the individual executive in determining both quantum and design. The remuneration committee also considers the total remuneration (fixed pay plus short-term and long-term incentives) that may be earned at various levels of performance.

Senior management and executive remuneration

Senior management and executive remuneration

Short-term incentives reflect a balance between annual financial performance and other specific strategic priorities over which the participant has influence in order to ensure that achievement of short-term financial performance is not at the expense of future opportunities. Performance is measured at Ebitda and adjusted earnings against budget to ensure that both trading and profit post the financing cost of capital allocation decisions are considered. Between 15% and 40% of the potential award is based on the achievement of non-financial strategic priorities dependent on the employee grade. Where relevant and if the information is publicly available, an additional 25% of the potential award is linked to the relative performance of a business unit against a regional or national market set.

The group seeks to ensure an appropriate balance between fixed and performance-related elements of remuneration, and those aspects of the package linked to short-term financial performance and to those linked to longer-term shareholder value creation. The combination of the components ensures that high pay is achieved only for high performance and high shareholder returns. Senior executives have a larger proportion of their potential total remuneration subject to the achievement of performance-based targets. Long-term incentives are either cash-settled, resulting in income statement volatility but no dilutionary impact to shareholders, or, in the case of nominated senior executives, structured as an interest-free facility for the purpose of acquiring shares in the company. The value for the executives arising from the facility is derived from the shares acquired in the market and there will not be a cash cost to the group, as per the existing share appreciation scheme, nor a dilutionary impact to shareholders.

        Fixed pay                       Short-term incentives     Long-term incentives
      Base salaries     Non-executive
directors’ fees
    Retirement benefits     Other benefits     Annual bonus plan     Executive facility and share appreciation plan
Share appreciation plan
      Provides a fixed level of earnings appropriate to the requirements of the role     Remunerates non-executive directors for their responsibilities and time commitment     Provides the basis for retirement savings     Provides benefits appropriate to the market and the role     Rewards the achievement of annual financial performance balanced with other specific strategic priorities and ensures that above-market pay cannot be achieved unless challenging performance targets are met. The non-financial element ensures that the achievement of short-term financial performance is not at the expense of future opportunities    

Long-term incentives are utilised to reward long-term sustainable group performance improvement, retain senior management expertise and ensure that executives and key talent share a significant level of personal risk and reward with the company's shareholders to align executive pay and long-term value creation for shareholders

      All employees     Non-executive directors     All employees entitled to benefits are required to belong to an approved pension/provident fund     All employees entitled to benefits are eligible for membership of an approved medical scheme and other benefits     All executives and senior management and selected middle management     Senior executives   Tsogo Sun and ex-Gold Reef (post-merger) executives and selected managers   Pre-merger Gold Reef executives and selected senior managers
      Base salaries
Base salaries are subject to annual review. Tsogo Sun's policy is to be competitive at the median level with reference to market practice in companies comparable in terms of size, market sector, business complexity and international scope. However, base salaries of individuals and incumbents in key roles are aligned with the upper quartile level of the market. Group performance, individual performance and changes in responsibilities are also taken into consideration when determining increases to base salaries
    Non-executive directors' fees
The fees for the nonexecutive directors have been recommended by the remuneration committee to the board for its approval, taking into account fees payable to non-executive directors of comparable companies and the importance attached to the attraction and retention of high-calibre individuals as non-executive directors. Levels of fees are also set by reference to the responsibilities assumed by the non-executive directors in chairing the board and in chairing or participating in its committees
    Retirement fund membership
Retirement funding for management, who are remunerated on a total package basis, is non-contributory and is included in their total cost of employment. For staff, retirement funding consists of employer and employee contributions dependent on fund membership. The group offers a pension fund (Tsogo Sun Group Pension Fund) and two provident funds (Alexander Forbes Retirement Fund (Provident Section) and Gold Reef Resorts Provident Fund). Other approved funds include union-negotiated funds and funds to which members have historically belonged
    Healthcare
The majority of employees with medical cover belong to the Tsogo Sun Group Medical Scheme, a restricted membership scheme administered by Discovery Health. The scheme offers hospital, chronic illness and day-to-day cover for
4 752 principal members
(10 419 beneficiaries)

Risk and insured benefits Arising through membership of the group''s pension and provident funds, competitive death, disability and funeral benefits are made available to employees

Long-service awards
Full-time employees of the organisation receive long-service awards calculated based on the tenure of the employee linked to their guaranteed package. Employees receive an award for every 10 years of continued service with the group
    Annual cash incentive Potential bonus earnings are reviewed periodically by the remuneration committee with minimum and maximum bonus percentages of total package set for each broadband level for the achievement of 'threshold', 'on-target' and 'stretch target' performance, based on or above the median being paid in the marketplace. Financial 'threshold' target is set at 90% of target with a payout of 0%, 'stretch target' is set at 115% of target with a payout of 100%, with interpolation between the points. Bonus awards are based on individual ratings achieved against the targets set for financial performance, relative growth against the market, where relevant, and personal performance against non-financial strategic priorities. The remuneration committee approves the scheme's targets and hurdles annually     Executive facility A R200 million facility was made available in 2014 to senior executives for the sole purpose of acquiring shares in the company at R25.75 per share. The shares were acquired on 12 August 2014

The board determined the
allocation of the facility as follows:
MN von Aulock   R86 million
J Booysen   R47 million
RB Huddy   R27 million
FV Dlamini   R20 million
GD Tyrrell   R20 million

The facility is interest-free and has no fixed repayment date but must be repaid if the shares are sold or if the executive leaves the employ of the company. The executives are subject to fringe benefits tax on the facility

The executives are not eligible for any new allocations under the existing share appreciation scheme until the loan is repaid in full. Allocations of appreciation units made prior to the provision of the facility remain unaffected
  Tsogo Sun, and historically Gold Reef (in addition to the equity-settled share scheme), have in operation phantom share schemes with cash settlement designed to align the interests of participants with those of the company's shareholders. The essential elements of these schemes are that the plan is essentially a 'phantom' version of a share scheme where each unit (whether an appreciation unit, performance unit or a bonus unit) is in effect linked to an underlying share in Tsogo Sun
Appreciation units
Annual allocations of appreciation units at market price are made to executives and selected managers. They are available to be settled on the third anniversaries of their allocation, but must be exercised by the sixth anniversary, or they will lapse. On settlement, the value accruing to participants will be the full appreciation of Tsogo Sun's share price over the allocation price plus dividends declared and paid post-grant date, which value will be settled in cash.

Vesting and encashments during the 2016 financial year resulted in a charge of R18 million with a R1 change in the Tsogo Sun share price impacting the charge by R25 million
  Share appreciation units and Gold Reef Share Scheme
The pre-merger Gold Reef long-term incentive plans are in the process of winding down. No options have been granted to existing executive directors or key management

The liability for the share appreciation units as at 31 March 2016 is reflected on page 74. Refer to note 36.2 on page 57 of the annual financial statements for further information on this scheme

All of the options in terms of the Gold Reef Share Scheme were exercised by 31 March 2015. Refer to note 36.1 on page 56 of the annual financial statements for more information on this scheme

Long-term incentive liability – cash-settled

The following table reflects the liability for long-term incentives and summarises details of the bonus units awarded to participants per financial year, the units vested at the end of the period and expiry dates of each allocation for the Tsogo Sun Share Appreciation Bonus Plan:

Tsogo Sun Share Appreciation Bonus Plan

  Appreciation units granted
and still outstanding
  Strike
price(1)
  Appreciation units vested
and still outstanding
      Liability
2016
Rm
  Liability
2015
Rm
 
Grant date 2016   2015   R   2016   2015   Expiry date      
1 April 2010   935 811   15.08     935 811   31 March 2016     52  
1 April 2011 2 838 644   3 403 053   15.06   2 838 644   3 403 053   31 March 2017   50   53  
1 October 2011 1 677 345   1 783 841   18.78   1 677 345   1 783 841   30 September 2017   22   20  
1 April 2012 5 445 352   7 245 201   17.66   5 445 352   7 245 201   31 March 2018   77   89  
1 October 2012 169 964   253 678   19.71   169 964     30 September 2018   2   2  
1 April 2013 7 324 946   7 964 198   24.56   7 324 946     31 March 2019   49   25  
1 October 2013 205 800   221 480   25.51       30 September 2019   1   1  
1 April 2014 8 203 713   8 903 555   25.72       31 March 2020   26   8  
1 October 2014 135 396   154 738   25.85       30 September 2020   *   *  
1 April 2015 7 112 025     26.54       31 March 2021   7    
1 October 2015 125 262     23.95       30 September 2021   *    
Liability at 31 March                         234   250  
Gold Reef Share Appreciation Bonus Plan                         3   8  
Total long-term incentive liabilities as at 31 March                         237   258  
Share price utilised to value the liability at 31 March                         28.60   27.60  

(1) Grants prior to merger (24 February 2011) converted based on swap ratio of 3.553 Gold Reef shares for each TSH share
* Amount less than R1 million


Composition of total remuneration package – executive directors

The charts below provide an indication of the remuneration outcomes for the executive directors and the GEC (excluding the executive directors) showing potential total remuneration of maximum, on target, and minimum performance levels.

  • Chief Executive Ocer – value of package in Rand (million)
  • Chief Executive Ocer – composition of package in Rand (%)
  • Chief Financial Ocer – value of package in Rand (million)
  • Chief Financial Ocer – composition of package in Rand (%)
  • Group executive committee  value of package in Rand (million)
  • Composition of total remuneration package  executive directors

The scenario charts assume:
Guaranteed package – fixed pay and benefits for the year ended 31 March 2016
Short-term incentives – based on scheme rules with maximum bonus paid at maximum performance and nil bonus below threshold performance
Long-term incentives – excluded from the charts as issued at market price and participants rewarded through variable share price increases

Employment agreements

There are no contracts with senior executives with fixed durations.

Non-executive directors

Non-executive directors receive fees for services on board and board committees. Non-executive directors do not receive short-term incentives and do not participate in any long-term incentive scheme.

Any increases will be presented to the shareholders at the company's AGM and reflect the market dynamics and the increasingly heavy demands being made on the individuals. Proposed non-executive directors' fees, for shareholder approval, appear in the table below:

  Actual
2015/2016
R’000
  Proposed
2016/2017
R’000
 
Chairman of the board 905   965  
Lead independent non-executive director and member of all board committees n/a   570  
Chairman of the audit and risk and social and ethics committees 535   570  
Chairman of the remuneration committee 400   426  
Non-executive director and member of a board committee 330   351  
Non-executive director 260   277  

Non-executive directors’ remuneration for the year ended 31 March

Fees and services Directors'
fees
R'000
  2016
Total
R'000
  Directors'
fees
R'000
  Other
benefits
R'000
  2015
Total
R'000
 
Paid by subsidiaries                    
JA Copelyn 868   868   814     814  
J Davidson(1)     145     145  
JA Mabuza(1)       28 198   28 198  
BA Mabuza(2) 315   315   135     135  
MJA Golding 310   310   234     234  
JS Wilson(1)     115     115  
VE Mphande 249   249   234     234  
MI Wyman(1)     115     115  
RG Tomlinson 501   501   468     468  
JG Ngcobo 315   315   295     295  
Y Shaik 381   381   356     356  
  2 939   2 939   2 910   28 198   31 109  
(1) Resigned 28 August 2014
(2) Appointed 3 June 2014

Directors and senior management

Executive directors’ remuneration for the year ended 31 March

  Basic
remuneration
R’000
  Benefits
R’000
  Short-term
incentives(1)
R’000
  Long-term
incentives
R’000
  2016
Total
R’000
 
Paid by subsidiaries                    
MN von Aulock 5 497   1 120   2 253   6 179   15 049  
RB Huddy 2 849   637   1 161   2 404   7 051  
  8 346   1 757   3 414   8 583   22 100  

  Basic
remuneration
R’000
  Benefits
R’000
  Short-term
incentives(2)
R’000
  Long-term
incentives
R’000
  2015
Total
R’000
 
Paid by subsidiaries                    
MN von Aulock 5 114   1 100   4 768   7 877   18 859  
RB Huddy 2 663   610   2 033   4 649   9 955  
  7 777   1 710   6 801   12 526   28 814  
(1) Short-term incentives paid relate to the achievement against target for 2015
(2) Short-term incentives paid relate to the achievement against target for 2014

Other key management and prescribed officers' remuneration for the year ended 31 March Basic

  Basic
remuneration
R’000
  Benefits
R’000
  Short-term
incentives(1)
R’000
  Long-term
incentives
R’000
  2016
Total
R’000
 
Paid by subsidiaries                    
J Booysen 3 342   951   1 013   1 166   6 472  
RF Weilers 3 720     718   5 150   9 588  
  7 062   951   1 731   6 316   16 060  

  Basic
remuneration
R’000
  Benefits
R’000
  Short-term
incentives(2)
R’000
  Long-term
incentives
R’000
  2015
Total
R’000
 
Paid by subsidiaries                    
J Booysen 3 139   899   2 085   2 255   8 378  
RF Weilers 4 078   915   1 700   6 289   12 982  
  7 217   1 814   3 785   8 544   21 360  
(1) Short-term incentives paid relate to the achievement against target for 2015
(2) Short-term incentives paid relate to the achievement against target for 2014

IFRS 2 Share-based Payment charge expensed during the year ended 31 March

  2016
R’000
  2015
R’000
 
Charge expensed in subsidiaries        
MN von Aulock   53 859  
J Booysen   26 348  
RB Huddy   15 415  
GD Tyrrell   13 118  
FV Dlamini   9 060  
    117 800  

Refer note 36.1 on page 57 of the annual financial statements for further information.