Skip to main content [Access key S]
Annual Report & Accounts 2007

Directors' statements

  print page     email page

Remuneration structure

  1. Base salary

    Each of the executive directors is paid a basic annual salary which is reviewed in January each year.

     
      Basic Salary
    1 January 2008
    £’000 p.a.     		Basic Salary
    1 January 2007
    £’000 p.a.
    D R Martin 480 465
    S P Lonsdale 312 302
    S J Clayton 280 271
    back to top

  2. Performance related bonus

    Each of the executive directors has the opportunity to earn an annual bonus of up to 100 per cent of basic annual salary of which 70 per cent of the potential award is determined by group financial performance, with the balance being determined by the performance of each director against qualitative objectives agreed at the beginning of the year.

    With regard to the group financial performance element, the target is group earnings per share before goodwill impairment and intangible asset amortisation calculated in accordance with International Financial Reporting Standards and adjusted for exceptional items (‘EPS’). The committee reviews annually the EPS target to ensure that it remains appropriate in the context of the group’s strategy and the delivery of sustained shareholder value. For 2007 the EPS element of the bonus arrangement was structured as follows:

     
    EPS Target
    (pence)     		Bonus as a
    per cent of Basic Salary
    42.0 Nil
    44.5 40
    47.0 70

    The qualitative element of directors’ bonus arrangements focuses on delivery of specific elements of strategy, environmental issues, organisational and management goals and the development of a high calibre management team.

    As a consequence of the EPS performance of the group for the year ended 31 December 2007 (46.5 pence), and the performance of each director against the qualitative targets agreed at the beginning of the year, bonus payments were made to each executive director in February 2008 as follows:

     
      Bonus for Year Ended
    31 December 2007
    £    		 Bonus for Year Ended
    31 December 2006
    £
    D R Martin 425,000 246,800
    S P Lonsdale 265,700 160,950
    S J Clayton 243,900 136,500
      934,600 544,250

    The non-executive directors do not participate in the performance related bonus scheme and no change to this policy is envisaged.

    back to top

  3. Long Term Incentive Plan (‘LTIP’)

    The LTIP is a share-based plan and comprises a conditional award of shares of a value equivalent to 200 per cent of the executive director’s basic salary as at the date of an award; awards are normally made each March following the announcement of the group’s preliminary results for the preceding financial year.

    The vesting of the shares conditionally awarded in 2005 had as the performance measurement period the three years ended 31 December 2007. The Total Shareholder Return target was met, however the EPS performance target required in order to trigger vesting was 52.6 pence.The actual EPS performance was 46.5 pence and, as a consequence, none of the shares conditionally awarded in 2005 will vest and the awards have therefore lapsed.

    Since 2006, awards have comprised a blend of two elements with each element providing the opportunity for each executive director to earn up to one half of the conditional share award. Each element operates as follows:

    1. Total Shareholder Return Element (‘TSR’)

      This element provides the opportunity to earn up to one half of the initial conditional award and is based on the group’s TSR performance when ranked against the TSR performance of those companies comprising a ‘peer comparator group’. For this purpose the peer comparator group consists of companies (excluding the company and investment companies) whose shares comprise the FTSE 250 at the beginning of each three-year measurement period.

      Performance is measured over three consecutive financial years (1 January – 31 December), the first year of the measurement period being the year in which the conditional share award is made. In order for shares to vest under this element, the TSR performance of the group must achieve, as a minimum, the median TSR performance of the peer comparator group; achievement of the median position will generate the vesting of 25 per cent of this element of the award, and this will increase on a linear basis to 100 per cent (of this element) on the achievement of upper quartile performance.

      The TSR performance is independently calculated and verified by Alithos Limited.

    2. The EPS Element

      This element also provides the opportunity to earn up to one half of the initial conditional award; vesting of the shares is on a linear scale with 10 per cent vesting if EPS increases to a level which is four per cent per annum in excess of the increase in the Retail Price Index over the three-year measurement period; vesting will increase on a linear scale to a maximum of 100 per cent (of this element) on EPS performance achieving or exceeding 13 per cent per annum in excess of the growth in the Retail Price Index.

      The company operates share retention guidelines which require each executive director to retain 50 per cent of any vested shares until such time as a holding equivalent in value to basic annual salary has been achieved.

      Awards made prior to 2006 limited the market value of any conditional share award to 100 per cent of the director’s basic salary as at the date of the award. Vesting was dependent on both the TSR performance when compared with that of the peer comparator group and also the group’s EPS performance when compared with the movement in the Retail Price Index. Irrespective of TSR performance, an award was not capable of vesting if the EPS performance target was not met.

      The non-executive directors do not participate in the LTIP, and no change to this policy is envisaged.

      As at 31 December 2007 the interests of the executive directors in conditional share awards made under the LTIP were as follows:

       
          Movement in Conditionally Awarded Shares    
        Awards Subsisting at
      1 January 2007       		Awarded During Year Vested During Year    
        No. of
      shares       		Date
      Awarded       		Share
      Price at
      Date of
      Calculation
      of Award (p)       		No. of
      shares       		Date Share
      Price at
      Date of
      Calculation
      of Award (p)      		 No. of
      shares       		Date of
      Vesting       		Value of
      Shares at
      Date of
      Vesting (£)      		 Not
      Vested
      in Year       		Balance
      at
      31 Dec 2007
      D R Martin 61,682 8/3/04 374.5       35,874 7/3/07 261,880 25,808 -
        54,744 14/3/05 548.0               54,744
        159,785 17/5/06 544.0               159,785
              124,832 16/3/07 745.0         124,832
      Total 276,211     124,832     35,874     25,808 339,361
      S J Clayton 61,682 8/3/04 374.5       35,874 7/3/07 261,880 25,808 -
        45,620 14/3/05 548.0               45,620
        92,940 17/5/06 544.0               92,940
              72,752 16/3/07 745.0         72,752
      Total 200,242     72,752     35,874     25,808 211,312
      S P Lonsdale 60,280 8/3/04 374.5       35,058 7/3/07 255,923 25,222 -
        45,620 14/3/05 548.0               45,620
        103,663 17/5/06 544.0               103,663
              81,074 16/3/07 745.0         81,074
      Total 209,563     81,074     35,058     25,222 230,357
    back to top

  4. Share Option Schemes

    Since the introduction of the LTIP in 2000 none of the executive directors has participated in the company’s share option schemes and it is not anticipated that there will be any change to this policy. None of the executive directors has any residual interest in the share option schemes in respect of awards prior to 2000. The non-executive directors do not participate (and have not participated) in any of the company’s share option schemes.

    back to top

  5. Directors’ Remuneration details for the year ended 31 December 2007 (audited information)

     
      Emoluments  
      Fees
    £     		Salary
    £     		Performance
    Related
    Bonus
    £     		Benefits
    in Kind/
    Allowance £     		Total
    £     		Prior Year
    £
    Sir Richard Broadbent 120,000 -  -  - 120,000 120,000
    D R Martin - 465,000 425,000 27,197 917,197 679,113
    S J Clayton - 271,000 243,900 25,220 540,120 421,866
    S P Lonsdale - 302,000 265,700 21,227 588,927 471,540
    S G Batey 40,000 - - - 40,000 40,000
    N P Buckles 35,500 - - - 35,500 35,500
    A V M Palmer 35,500 - - - 35,500 35,500
    S G Williams 35,500 - - - 35,500 35,500
    R J Davies (retired April 2006) - - - - - 275,098
    Total 266,500 1,038,000 934,600 73,644 2,312,744 2,114,117

    Notes :

    1. Benefits in kind for each director comprise a company car or car allowance, fuel, medical insurance and telephone costs.
    2. A pension of £5,000 (2006: £5,000) was paid to a former director.

    back to top

  6. Non-executive directors’ fees

    Excluding the chairman, each of the non-executive directors is paid a basic annual fee of £32,500 together with an additional fee to reflect the responsibilities associated with chairing a Board committee or fulfilling the role of senior independent director. Fees for 2007 were paid as follows:

     
      Basic
    Annual Fee
    (£)     		Additional
    Annual Fee
    (£)     		Total
    (£)     		Additional
    Role
    Sir Richard Broadbent 120,000 - 120,000 chairman of Nomination Committee
    S G Batey 32,500 7,500 40,000 chairman of Audit Committee
    N P Buckles 32,500 3,000 35,500 chairman of Safety Committee until 5 September 2007;
    chairman of Remuneration Committee from
    5 September 2007
    A V M Palmer 32,500 3,000 35,500 chairman of Remuneration Committee until
    5 September 2007 ;
    chairman of Safety Committee from 5 September 2007
    S G Williams 32,500 3,000 35,500 senior independent director
      250,000 16,500 266,500  

    The fees payable to the non-executive directors were last reviewed in March 2005. A review conducted at the end of 2007 indicated that the fee levels in comparator companies had increased markedly and it was decided therefore to implement increases in January 2008, in the fees paid to the non-executive directors, as follows:

     
      Basic
    Annual Fee
    £     		Additional
    Annual Fee
    £     		Total
    £
    Sir Richard Broadbent 150,000 - 150,000
    S G Batey 40,000 10,000 50,000
    N P Buckles 40,000 5,000 45,000
    A V M Palmer 40,000 5,000 45,000
    S G Williams 40,000 5,000 45,000
      310,000 25,000 335,000

    The non-executive directors take no part in the process for establishing their individual fee level.

    Under the terms of the Articles of Association the fees payable to the non-executive directors are limited to £400,000 per annum in the aggregate; this level was established following approval by shareholders at the Annual General Meeting held on 23 April 2004, and the Articles permit the directors to increase this cap annually in line with the increase in the index of UK wage inflation. As at 31 December 2007, in accordance with the indexation provisions, the cap on the aggregate level of non-executive directors’ fees was £456,800.

    Each non-executive director has been appointed for a fixed-term not exceeding three years and those appointments are normally renewable, with the agreement of both parties, for terms not exceeding three years.

    back to top

  7. Directors’ share interests

    The interests of the directors (including their relevant family interests) in the share capital of the company at the beginning and the end of the year and at the date one month prior to the notice of the Annual General Meeting were as follows:

     
      1 January
    2007     		31 December
    2007     		1 March
    2008
    Sir Richard Broadbent 27,246 27,246 27,246
    S J Clayton 80,000 80,000 80,000
    S P Lonsdale 314,831 314,831 314,831
    D R Martin 452,974 488,848 488,848
    S G Batey 7,268 7,268 7,268
    N P Buckles 5,000 5,000 5,000
    A V M Palmer Nil Nil Nil
    S G Williams 1,060 1,060 1,060
    back to top

  8. Pensions (audited information)

     
      D R Martin S J Clayton S P Lonsdale
    Scheme* 2 3 1
    Normal retirement age 65 65 65
    Director’s contribution Nil Nil Nil
    Increase in accrued pension during the year
    (allowing for indexation) (£ pa)     		101,758 9,444 18,741
    Gross increase in accrued pension (£ pa) 109,911 12,616 25,692
    Accrued pension at 31/12/2007 (£ pa) 300,554 100,697 218,775
    Accrued pension at 31/12/2006 (£ pa) 190,643 88,081 193,083
    Value of net increase in accrual over period (£) 1,435,226 99,137 161,839
    Transfer value of accrued pension at 31/12/2006 (£) 2,572,530 847,755 1,608,394
    Transfer value of accrued pension at 31/12/2007 (£) 4,281,623 1,056,898 1,992,137
    Total change in value during period (£) 1,709,093 209,143 383,743

    *1  Arriva Pension Scheme.
     2  ArrivaPassenger Services Pension Plan
     3  Arriva London North & Arriva London South Pension Scheme

    Since 1 January 2000 Messrs Martin, Clayton and Lonsdale have been accruing benefits in their respective schemes at 1/30th of basic annual salary; for service after 31 December 1999 bonus ceased to be taken into account when computing pension benefits.

    No future executive director external appointees to the Board will be eligible for a final salary based pension arrangement, but instead will receive a cash contribution equal to 25 per cent of basic salary.

    back to top

  9. Service contracts

    Each of the three executive directors has a service contract dated 19 April 2006; the contracts are subject to twelve months’ notice from the company and six months’ notice from the director. Each contract contains covenants restricting the ability of the director, within a period of six months from termination, from competing with the company. The contracts make specific provision with regard to termination payments which are quantified as the sum of:

    • The director’s basic pay at the date of termination;
    • The amount of bonus estimated to be payable in respect of the year in which notice is served, but in any event capped at maximum of 40 per cent of basic pay; and
    • The value of the benefits in kind.

    Additionally, in the case of termination by the company, the company will seek to procure that the director is credited with an additional 12 months’ service in his respective pension scheme.

    Should the director terminate the contract within six months of a change of control of the company he will receive a termination payment equal to 50 per cent of the termination payment described above.

    back to top

  10. External Board appointments

    The Board will permit executive directors to accept one appointment outside the company. Before accepting such appointments the director(s) involved must receive the prior approval of the Board. In considering such cases the Board will always satisfy itself, as far as is possible, that such appointments will not detract from the executive directors’ expected contribution to the company, nor that such appointment will create any conflict of interest; any fees earned by an executive director in such a capacity will be assigned to the company.

    back to top

  11. TSR graph

    In accordance with the provisions of schedule 7A to the Companies Act 1985, detailed below is a graph charting the performance of the company’s Total Shareholder Return (share value growth plus re-invested dividends over the past five years) compared with the most relevant comparator indices as follows:

    (a) The FTSE 250 and
    (b) The FTSE 350 Travel and Leisure Index

    TSR Chart

    View text only version

    back to top

  12. Remuneration report approval

    An ordinary resolution to consider and, if thought fit, approve this Remuneration Report will be proposed at the Annual General Meeting to be held on 23 April 2008.

    For and on behalf of the Board
    N P Buckles
    Chairman, Remuneration Committee
    5 March 2008

    back to top
Delivered by Investis and link to website (opens in a new window)