Remuneration in detail

7 Directors’ remuneration

7.1

The aggregate directors’ emoluments during the year amounted to £2,274,000 (2008: £3,604,000) analysed as follows:

Director’s name	Salary 1 £000	Annual cash bonus £000	Benefits in kind £000	Performance Share Plan dividends £000	2009 Total £000	2008 Total £000
Executive directors
Peter Crook	587	–	39	92	718	1,284
Andrew Fisher	419	–	44	72	535	959
Chris Gillespie	404	–	35	69	508	915
Total	1,410	–	118	233	1,761	3,158

Director’s name	Fees £000	Annual cash bonus £000	Benefits in kind £000	Performance Share Plan dividends £000	2009 Total £000	2008 Total £000
Reflects salary sacrifice arrangement in respect of the director’s contribution to the pension scheme since 1 April 2009. In respect of the period from 2 March 2009 to 31 December 2009. In respect of the period 1 January 2009 to 6 May 2009.
Chairman
John van Kuffeler	265	–	40	–	305	285
Non-executive directors
Rob Anderson 2	50	–	–	–	50	–
Manjit Wolstenholme	60	–	1	–	61	58
Robert Hough	60	–	7	–	67	52
John Maxwell 3	21	–	9	–	30	51
	191	–	17	–	208	161
Total	1,866	–	175	233	2,274	3,604

8 Share option schemes

8.1

Directors’ share options at 31 December 2009 were as follows:

8.2

Directors’ share options at 31 December 2009 are shown in the table in paragraph 8.1 above. Share options granted under the LTIS are shown separately in the table in paragraph 9.1.

8.3

The performance condition which applied to the exercise of executive share options granted in 2006 under the ESOS required annual earnings per share growth to be equal to or greater than RPI plus 3% measured over a three-year period for 25% of the shares under option to vest. The option became fully exercisable at annual earnings per share growth equal to or greater than RPI plus 6% measured over the three-year period. These options vested in full on 7 June 2009.

8.4

The company’s highest paid director in 2009 was Peter Crook, whose emoluments amounted to £718,000 (2008: Peter Crook £1,284,000). His notional gain (representing the difference between the exercise price and the market price of the shares at the date of exercise) on the exercise of share options amounted to £676,925 (2008: Peter Crook £nil).

8.5

The aggregate notional gain (representing the difference between the exercise price and the market price of the shares at the date of exercise) made by all the directors on the exercise of share options during 2009 amounted to £1,261,540 (2008: £nil).

8.6

The mid-market closing price of the company’s shares on 31 December 2009 was 928p. The range during 2009 was 751.5p to 971.5p.

8.7

No consideration is payable on the grant of an option.

8.8

There were no changes in directors’ share options between 1 January 2010 and 2 March 2010.

8.9

None of the directors has notified the company of an interest in any other shares, transactions or arrangements which requires disclosure.

9 Long Term Incentive Scheme

9.1

Awards under the LTIS in 2006, which were granted as nil cost options, were as follows:

9.2

Awards under the LTIS in 2007, 2008 and 2009, which were granted as conditional share awards, were as follows:

9.3

No consideration is payable on the award of options or conditional shares.

9.4

There were no changes in directors’ options or conditional share awards between 1 January 2010 and 2 March 2010.

9.5

Details of conditional share awards outstanding on 31 December 2009 are shown in the table in paragraph 9.2.

9.6

None of the directors has notified the company of an interest in any other shares, transactions or arrangements which requires disclosure.

9.7

Kleinwort Benson (Jersey) Trustees Limited, as trustee of the EBT, subscribed for 883,931 ordinary shares in May 2009 for the purpose of satisfying the 2009 awards made pursuant to the LTIS. The trustee transferred the beneficial ownership (subject to the performance conditions set out in paragraph 6.14) in 328,474 of the shares for no consideration to the executive directors on 22 June 2009. The trustee has entered into a dividend waiver in respect of all the shares it holds in the company at any time.

9.8

The executive directors have waived an entitlement to any dividend in respect of the conditional shares during the vesting period. To the extent an award vests at the end of the performance period, additional ordinary shares in the company or a cash amount equivalent to the dividends that would have been paid on the vested awards from the date of grant, will be paid to the executive directors when the award vests.

9.9

The 2006 options, which vested in full on 1 June 2009, required the company’s TSR over a consecutive three-year performance period, when measured against a comparator group of companies, to be at least median (25% vesting), rising on a straight-line basis, with full vesting if the company’s TSR exceeded the TSR of the comparator group by 8.5%.

9.10

The 2007 and 2008 conditional share awards require the annualised company TSR over a consecutive three-year performance period, when measured against the annualised Index TSR (being the FTSE 250 Index), to be at least median (25% vesting), rising on a straightline basis, with full vesting if the annualised company TSR exceeds the annualised Index TSR, by 8.5% on a multiplicative basis. No award will vest if the annualised company TSR is below the annualised Index TSR. The 2009 conditional share awards require the company’s annualised growth in earnings per share to be equal to or greater than the annualised growth in RPI plus 8% over a period of three consecutive financial years for 50% of the award to vest (12.5% of the award will vest if the company’s annualised growth in earnings per share over a period of three consecutive financial years is equal to the annualised growth in RPI plus 3% with vesting on a straight-line basis in between these levels) and the remaining 50% of the award vests if the company’s annualised TSR is at least 15% measured over a period of three consecutive financial years (12.5% of the award will vest if the company’s annualised TSR is at least 10% measured over a period of three consecutive financial years, with vesting on a straight-line basis in between these two levels).

9.11

There has been no variation in the terms and conditions of the participants’ interests in the LTIS or the PSP (as referred to in paragraph 10 below) during the year.

10 Performance Share Plan

10.1

Awards held under the Provident Financial Performance Share Plan are as follows:

10.2

There are no further performance conditions attaching to the basic award since this award of shares is in lieu of the bonus waived as part of the bonus deferral that is required for participation in the PSP. For awards granted in 2008, the matching award will vest only if the company’s average annual percentage growth in earnings per share is equal to or greater than the average annual increase in RPI plus 3% measured over a period of three consecutive financial years, the first of which is the financial year starting immediately before the grant date of the matching award. Although basic earnings per share is generally used for the performance calculation, for 2006 awards earnings per share before Yes Car Credit closure costs was used as the starting point to avoid participants benefiting from a low start point due to the impact of the closure of the Yes Car Credit business. Following shareholder approval at the AGM on 6 May 2009, the committee amended the rules of the PSP to allow the grant of matching awards on the basis of up to two shares for each share acquired by a participant pursuant to their basic award. Such awards in 2009 are subject to more stretching performance targets and will only vest in full if the company’s average annual percentage growth in earnings per share is equal to or greater than the average annual percentage growth in RPI plus 7% measured over a period of three consecutive financial years. If the company’s average annual percentage growth in earnings per share is equal to the average annual percentage growth in RPI plus 3% measured over a period of three consecutive financial years, then a matching award granted on a two-for-one basis (as described above) will only vest as to 50% of the shares subject to the award (which will be the equivalent of receiving a matching award on a one-for-one basis (as described above). A sliding scale of vesting (on a straight-line basis) will apply between these lower and upper targets. For awards made in 2010 the performance target has been stretched to RPI plus 8%.

10.3

The dividends payable on the basic and matching award shares are paid to the directors. The gross amounts received in 2009 were: Peter Crook £91,658 (2008: £33,017), Andrew Fisher £71,885 (2008: £27,405), and Chris Gillespie £69,553 (2008: £26,853). These figures have been included in the table of directors’ remuneration in paragraph 7.1.

11 Pensions and life assurance

11.1

There are three directors (2008: three) for whom retirement benefits are accruing under the cash balance section of the Provident Financial Staff Pension Scheme ('the pension scheme’). The pension scheme is a defined benefit scheme, with two sections: cash balance and final salary. Details of the cash balance section are set out in paragraph 11.2.

11.2

Peter Crook, Andrew Fisher and Chris Gillespie are members of the cash balance section of the pension scheme and are provided with a pension credit of 35% of their basic salary each year to a retirement account. Directors contribute at the rate of 5% of basic salary through a salary sacrifice arrangement (since 1 April 2009). Currently, the pension credit increases each year by the lower of the increase in RPI plus 1.5% and 6.5%. At retirement up to 25% of the total value of the director’s retirement account can be taken as a lump sum, with the balance used to purchase an annuity. If the director dies in service, a death benefit of six times salary plus the value of the retirement account is payable.

11.3

Details of the pension entitlements earned under the cash balance section of the pension scheme are set out in paragraph 11.5 below.

11.4

John van Kuffeler has a defined contribution personal pension arrangement. A life assurance benefit is also provided by the pension scheme. During 2009, the company contributed £29,900 (2008: £29,900) to his pension arrangements. He is also eligible for a lump sum death benefit of four times salary at date of death.

11.5

Details of the pension entitlements earned under the cash balance section of the pension scheme are set out below:

12 Directors’ service agreements

12.1

John van Kuffeler, Peter Crook and Robert Hough are offering themselves for reappointment at the AGM to be held on 5 May 2010.

12.2

Details of the service agreement of each director with the company or letter of appointment, as relevant, are set out in paragraphs 12.2.1 to 12.2.4 below.

12.2.1

Peter Crook, Andrew Fisher and Chris Gillespie each has a service agreement which requires one year’s notice of termination to be given by the company and one year’s notice of termination to be given by the director. No notice of termination has been given by either the company or any of the directors and thus in each case the unexpired term is one year. Each service agreement terminates on the date of the director’s sixty-fifth birthday. There are no provisions for compensation payable upon early termination of any of the agreements. However, in the event that a director is not reappointed at an AGM of the company, the agreement is automatically terminated and this is treated as a breach by the company. The dates of the service agreements are as follows: Peter Crook 27 April 2006 (amended by letter of variation on 1 February 2007); Andrew Fisher 1 January 2008 and Chris Gillespie 31 May 2007.

12.2.2

The Chairman, John van Kuffeler, has a service agreement dated 29 January 2002 (amended by letters of variation on 24 December 2003, 17 January 2007, 30 January 2007 and 4 July 2007) which requires one year’s notice of termination to be given by the company and six months’ notice of termination to be given by him. No notice of termination has been given by either party and thus the unexpired term is one year.

12.2.3

Each of the non-executive directors has a letter of appointment. Each director is appointed for a fixed period of three years, subject to appointment by shareholders. The initial three-year period may be extended by one further three-year period (and, in exceptional cases, further extended) subject to reappointment by shareholders. The dates of the letters of appointment and the unexpired terms are as follows: Robert Hough 18 October 2006 (amended by letter of variation on 24 February 2010) unexpired term: to 31 January 2013; Manjit Wolstenholme 1 June 2007 unexpired term: to 31 July 2010; Rob Anderson 27 February 2009 unexpired term: to 30 March 2012.

12.2.4

In accordance with his letter of appointment, John Maxwell’s term of appointment expired on 31 May 2009.

13 Audit

The elements of the directors’ remuneration (including pension entitlements and share options set out in paragraphs 7.1 and 8 to 11 of this report) which are required to be audited, have been audited in accordance with the Companies Act.

This report has been approved by the remuneration committee and the board and signed on its behalf.

Robert Hough
Chairman, remuneration committee
2 March 2010

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