Remuneration committee letter

J shearman letter

June 2016

Trifast plc
Trifast House,
Bellbrook Park, Uckfield,
East Sussex, TN22 1QW
Tel: +44 (0)1825 747366
Fax: +44 (0)1825 747368

email: corporate.enquiries@trifast.com

Website: www.trifast.com

Dear Shareholder

Introduction

As Chairman of the Trifast Remuneration Committee (the 'Committee'), I am pleased to introduce our Remuneration report for 2016, 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 team members who are critical to executing our business strategy. Within this, any structure will aim to deliver a fitting mix of:

  • fixed and variable compensation
  • cash and equity components

The Committee appreciates the importance of ensuring that strong year-on-year corporate performance is rewarded whilst aligning the interests of executives and shareholders over the longer term.

Looking back

Considering the financial performance of the Group, this has been a good year. Underlying diluted EPS increased by 15.1% and ROCE remained healthy at 18.5%. Considering strategic issues, it was another significant year which saw Jim Barker retire from the position of Chief Executive Officer and the completion of another acquisition which supports value creation for shareholders. The details with regard to Jim's remuneration during the year can be found in the Remuneration Report. In accordance with the Rules of the deferred equity scheme, Jim was deemed to be a good leaver and given his service and commitment to the Company the Committee exercised its discretion to allow early vesting of previously deferred shares.

When considering the bonus targets for the year to 31 March 2016, the Committee was conscious of making them challenging yet achievable. As a result, threshold growth was, in line with policy, set at RPI + 5% (after adjusting for a full year contribution from VIC), whilst, to attain maximum pay-out, the Group would have needed to show year-on-year EPS growth of 23%.

Against this bonus structure, taking into account the ROCE hurdle (group WACC +2%) and given the EPS outlined above, the Committee assessed that performance in the year to 31 March 2016 justified an annual bonus of 150% being 75% of the maximum bonus potential. This is for each Executive Director and made up of a 50% cash bonus and a 100% equity award, the latter being deferred for three years. The Committee was satisfied with personal performance against pre-determined individual objectives and that there was no requirement to apply a reduction to the formulaic corporate bonus outturn.

Remuneration policy

The current remuneration policy was approved by the majority of shareholders at the last AGM on 16 September 2015 and we again sought to engage with shareholders who cast a meaningful number of votes against its adoption.

It has been important to the Group that stability and momentum be maintained during a time of management transition and the Committee has remained mindful of that in considering its approach. Whilst the current policy has served the Group well, the Committee believes that it will be appropriate to formulate a new policy in the short term, particularly the aspects that consider longer term remuneration. Consideration of a suitable policy has commenced and shareholders will be consulted before the end of this financial year.

Looking ahead

The Group remains committed to continued growth in earnings from both organic performance and acquisitions. For the most part, the Executive team and NEDs have again chosen to freeze their salaries in the coming year. In the case of Glenda Roberts and Geoff Budd, salaries have been increased, by 11% and 5% respectively, in line with the policy and to reflect increased responsibilities. 

With regard to the bonus scheme for the year to 31 March 2017, threshold performance will be set in accordance with the current Remuneration Policy. For maximum bonuses to be paid, Group EPS will once again need to demonstrate significant year-on-year growth. 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.

The following contains a summary of the Remuneration Policy a full copy of which can be found via the Company website. The pages thereafter, contain the Remuneration Report which shows in greater detail how we have applied the current 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 enables this and so look forward to your support in approving the relevant resolution at July's AGM.

Attendance in
2015/2016
Jonathan Shearman (Chairman)3
Neil Warner — appointed 16 June 20152
Scott Mac Meekin3
Neil Chapman — retired 16 June 20151

Jonathan Shearman
Chairman of the Remuneration Committee
13 June 2016