Remuneration Report

INTRODUCTION

Super Group’s remuneration philosophy is set with the intentions of ensuring the achievement of the Group’s performance objectives and the encouragement of sustainable long-term performance. The Remuneration Policy has a direct impact on employee behaviour, operational performance, Company culture and strategic alignment of the Group. The Remuneration Committee (Remco) addresses issues relating to the remuneration of directors and senior management and ensures that the remuneration levels are sufficient to attract, retain, motivate and reward directors and executives of the quality needed to run the Group successfully.

In keeping with good corporate governance practices, the CEO attends meetings by invitation only and is not entitled to vote. The CEO does not participate in discussions regarding his own remuneration.

Shareholder engagement

In terms of King IV™, the Company should obtain the endorsement of its shareholders pertaining to the Company’s Remuneration Policy and the implementation of this policy at the AGM. If more than 25% of the total votes cast by the shareholders, present and voting, be against either resolutions, the Company will issue an announcement on SENS inviting shareholders who voted against the resolutions to meet with the members of Remco. The process to be followed will be set out in a SENS announcement.

The Super Group Remuneration Policy received support from the shareholders who voted in favour of the policy at the most recent and prior AGMs and the results are indicated in the table below:

In response to receiving less than 75% support for the Remuneration Policy and the implementation of the Remuneration Policy, Super Group issued a SENS inviting shareholders who voted against the policies to provide comment to the Company. Three of Super Group’s major South African shareholders voted against the Remuneration Policy and the following feedback was received in relation to these votes:

1. The current incentive structure is well aligned with best practice principles. However, Remco was urged to reconsider the “Profit before tax” KPI and replace this with a cashflow generation KPI under the STI scheme.
2. A concern was expressed that the CEO and CFO did not hold fully vested shares in Super Group which does not promote alignment with long-term shareholder interests and executive retention.
3. Comment was received that incentives need to be stretched beyond current maximums in order to encourage executives to strive for maximum corporate earnings.
4. It was highlighted that the Remuneration Report did not include details of the “peer” or comparative businesses that were considered when benchmarking an executive director’s remuneration.

A major financial institution, which is not a shareholder of Super Group also confirmed that they would vote against all Remuneration Policies that did not contain a clawback provision in relation to incentives.

Remco has reviewed these recommendations and responded as follows:

1. The variable pay incentives for executive directors have been adjusted to exclude the “Profit before tax” KPI as an incentive measure. This measure has been replaced by a “Cash generated from operations” KPI.
2. Remco is considering a Deferred Share Plan (the DSP) which aims to incentivise Eligible Employees (as defined in the DSP), to better align the interests of Eligible Employees with the shareholders of the Company, and to attract and retain highly-skilled employees by, amongst others, deferring a portion of incentive remuneration earned into a scheme that is aligned to longer-term Company performance. The aim of the DSP will be to achieve a phased ownership of Super Group shares over a five-year period. Bowmans Inc. was consulted in terms of the DSP principles, benchmarking and implementation. The proposed DSP will be put to shareholders for endorsement at the AGM on Friday, 18 December 2020. The ordinary resolution number 8 and Annexure A with the full details of the DSP are set out in the Notice of AGM.
3. Remco was satisfied that KPI targets were adequately stretched between minimum and maximum levels as defined. In this regard, it is noted that between June 2011 and June 2020, growth in Profit before tax, HEPS, cash generated from operations and NAV grew at CAGR as indicated below:

Notes:
The CAGR indicated for June 2019 are well above the maximum KPI of 9% growth per annum. The financial performance for the year ended 30 June 2020 reflects the significantly negative impact of the Covid-19 pandemic.

7. Details have been provided in this report of the JSE-listed companies considered in the comparative benchmarking of an executive director’s remuneration.
8. Remco has introduced Malus and Clawback provisions as outlined below.

Malus and clawback clause

Malus is applicable to awards that have not yet vested, and where required, these will be cancelled. Clawback applies once an event occurs that triggers the repayment of the award.

If performance conditions are not satisfied, both STI and LTI allocations are forfeited. Remco has the discretion to claw back the pre-tax proceeds of any discretionary payment received by employees in the event of a trigger event as detailed below.

A trigger event may include, inter alia:

• the discovery of a material misstatement of performance that resulted in a variable reward made, which the Board is satisfied that the employee has contributed to and is responsible for;
• the discovery that the assessment of any KPI upon which the award was made was based on erroneous, inaccurate or misleading information; and/or
• the discovery that performance related to financial and non-financial targets was misrepresented and that such misstatement led to the over-payment of incentives.

The clawback applies for two years after the discretionary incentive payment is made, or in the case of share schemes, two years after the awards have vested.

Activities undertaken by Remco during the year

During the year under review, Remco reviewed the Remuneration Policy to ensure that it is aligned with applicable regulation and remuneration principles contained in the Group’s value statement as well as corporate governance guidelines and input received from shareholders.

The Remuneration Report was aligned to King IV™ Principles to articulate and demonstrate the link between strategy, value creation, performance and remuneration.

Remco also reviewed the remuneration packages and structure of executive directors to ensure that they are competitive in the relevant market and are aligned with shareholders’ interest as well as with the Group’s strategy and performance.

Some of the initiatives undertaken is set out under shareholder engagement set out in the ESG Report on the website.

Outlook for 2021

Remco has identified the following key areas for the year ending 30 June 2021:

• Be the employer of choice in the industries in which Super Group operates.
• Develop and retain existing employees.
• Identify, develop and retain a skilled and knowledgeable workforce.
• Attract new talent and skills whilst addressing race and gender diversity.
• Executive and management alignment with shareholder objectives in terms of the proposed Deferred Share Purchase Scheme.

The following action items continue to be done to achieve the Group’s goals:

• Engagement with employees at all levels and across all geographies, in order to understand and consider the continuing impact of the Covid-19 pandemic.
• Creating an environment for all employees to develop themselves and to build future potential and succession plans.
• Develop relevant and meaningful internal and external development programmes.

SECTION A: REMUNERATION POLICY

Objectives of the Remuneration Policy

The overriding objective of the Group Remuneration Policy is to “pay for performance”.

The Group Remuneration Policy is designed to:

• Support and help execute the Group strategy by rewarding staff members for “performance” and for “living the values”.
• Build together with the performance management process, a culture of high performance by ensuring that “reward” encompasses the performance of both the individual and the business.
• Excellent performance will be rewarded (above the market average), which will ensure both the attraction and retention of key talent and high performers.
• Conversely, poor performance needs to be managed until a satisfactory level of performance is attained or the employee exits the business.

Key principles of the Remuneration Policy

The Group’s value statement governs the way employees conduct themselves in all interactions internally and externally. The value system is of such importance that a significant percentage of an individual’s bonus is linked to how they apply the Group’s value system.

The Group’s vision describes the feedback expected from customers, employers, the investment market, competitors and suppliers.

Paramount importance is placed on the vision and as a result, 90% of an employee’s bonus is based on the achievement of the overall Group vision. Every employee has a responsibility to the Group to assist in achieving this target.

While the policy pertains to monetary reward, it should be acknowledged that reward also encompasses learning and development opportunities (performance management; career development, succession planning) and work environment (leadership; culture; involvement; transformation; work/life balance).

Remuneration Policies for executive directors, executive managers and employees

Remuneration Policy for executive directors

The executive directors are appointed to the Board to bring to the Group the skills and experience appropriate to its needs. The guaranteed remuneration is based on the median of the market, with discretion to pay a premium (typically 10% to 20%) to the median for the attraction and retention of the executive directors.

Remco aims to align the directors’ total remuneration with shareholders’ interest by ensuring that a significant portion of their package is linked to the achievement of performance targets.

Executive directors’ salaries comprise a cash salary which is reviewed annually by Remco. Salaries are compared to pay levels of other JSE-listed South African companies, the list is provided below, to ensure sustainable performance and market competitiveness. The individual salaries of directors are reviewed annually in light of their own performance, experience, responsibility and Group performance. The Company makes contributions to defined contribution plans on behalf of the executive directors on the basis of a percentage of cash salary. Death and disability cover provided to executive directors reflects best practice among comparable employers in South Africa. Other benefits include car and travel benefits and cover on the Group’s medical healthcare scheme. These elements comprise the fixed remuneration component.

A review of the remuneration structures of a comparative group of companies was conducted during the year based on metrics including revenue, number of employees, industry and complexity.

Comparative companies/“peers”

This review was the basis of the current executive director’s salary, incentive and share scheme benchmarking and also influenced the introduction of the proposed Deferred Share Purchase Scheme.

Remuneration Policy for executive management and employees

The remuneration package splits are deemed as appropriate for the various levels of employees. The PE Survey (salary surveys conducted by P-E Corporate Services) is one benchmark that is used to assess the market/industry salaries. For highly specialised positions other surveys are used.

In the case of members of unions, their pay is based on the agreements concluded by the Road Freight Bargaining Council.

Guaranteed pay (or base pay) may be inclusive of any benefits that the individual employee may receive. Super Group strives to provide its employees with a benefit offering that is competitive with the local or regional market offering for that level of employee at a cost-to-company level.

Remuneration package structure

The remuneration package percentage split between the guaranteed and variable pay needs to be appropriate to the level of accountability carried by the individual employee and their “line of sight” in the business (i.e. the ability to affect the results). The guiding principle is that the greater the level of accountability and the closer the “line of sight”, the greater the risk portion of an employee’s remuneration package. The risk portion of remuneration ranges from 75:25 to 50:60 fixed to variable.

Guaranteed pay

Guaranteed pay is that remuneration which is contractually guaranteed to the employee and is generally paid to the employee on a monthly basis.

At a total annual guaranteed salary level (variable pay excluded), Super Group offers market-related salaries. At a total annual salary level (guaranteed and variable pay), Super Group strives to be a superior payer, the underlying philosophy being that when the Company and the individual achieve a high level of performance, the overall reward is superior to that of the average market offering.

The business units are responsible to ensure that individual employees are correctly positioned in the market from a guaranteed pay perspective and to this end must conduct regular market surveys and benchmarking studies. At a minimum this must be done on an annual basis but, where necessary, should be done to correct any imbalances. These studies use data that is accurate, relevant and up to date and take into consideration local market conditions as well as inflation trends.

Salary increases and salary reviews

There are three forms of salary increases that can be given, namely:

1. Performance-based salary increase;
2. Merit increases; and
3. Salary adjustments.

Performance-based salary increases are awarded in recognition of an individual employee’s achievement and level of performance relative to their role in the organisation and the delivery against KPIs set in their performance review.

Merit increases are awarded in recognition of consistent, exceptional performance by an individual employee whose delivery and achievements surpass that which is normally and/or reasonably expected of an employee in that role or may be awarded as a result of a promotion or job role change.

Salary adjustments are awarded to ensure that an individual employee is adequately compensated for the job that they do and/or their knowledge or skills relative to the market value of that job and/or knowledge or skills. Adjustments are made to ensure that no employee is de-incentivised to perform.

All salary increases are subject to the approval of the relevant line managers and must be submitted and actioned in accordance with the processes and procedures established by the Group approvals framework.

Variable pay (STI)

Variable pay is that remuneration which is not guaranteed to the employee and which payment is dependent on the achievement of specified criteria at an individual employee level and/or a collective business level. This form of remuneration is also known as “at risk” pay.

Variable pay or “at risk” pay takes the form of bonuses or commission, with the latter being applicable generally to sales (quota-bearing) staff.

Generally, an employee’s variable pay is in the form of a bonus and is split into a “business performance bonus” portion and a “discretionary performance bonus” portion. The targets and bonus achievement splits for the executive directors and senior executives are set out below.

Although commission is, by definition, also a form of “at risk” or variable pay in that it is not guaranteed to the employee, the criteria on which commission are earned are fundamentally different to those applied to bonus earnings.

The targets for the executive directors are as follows:

The targets for F2020 have been amended from F2019 with the substitution of the “Cash generated from operations growth” KPI as opposed to “Profit before tax”.

The targets for the senior executives are as follows:

Senior executives can achieve bonuses of between 50% and 100% of their guaranteed pay depending on their role within the Group and the achievement of their targets. Bonuses are not earned should profit before or after taxation achievement be less than 50% of the targets. For achievement against target between 50% and 100%, the bonuses paid are pro-rated. The target for F2020 has been amended from the 2019 measure with the introduction of the cash generated from operations metric and reduction in profit before taxation weighting to 60%.

Certain employees receive a bonus equivalent to approximately one month’s salary provided the Group has met its targets.

Long Term Incentives (LTI)

The Group’s LTI programme is the Share Appreciation Rights Scheme (SARS). Senior managers within the Group are eligible to participate in the scheme.

The scheme supports the principle of aligning management and shareholder interests. Performance conditions governing the vesting of these rights are intended to be stretching but achievable. The performance conditions are related to headline earnings per share increasing by 2% per annum above the Consumer Price Inflation Index over the three-year performance period following the award. The grants are conditional upon the participant remaining employed during the performance period.

Remco approves the award of the grants and certifies the achievement of the three-year target prior to the grants vesting.

Share option and incentive scheme grants

Executive directors participate in the Group’s share option and incentive schemes, which are designed to recognise the contributions of senior staff to the growth in the value of the Group’s equity and to retain key employees. Within the limits imposed by the Company’s shareholders, options are allocated to the directors and senior staff in proportion to their contribution to the business as reflected by their seniority and the Company’s performance. The options, which are allocated at a price determined by Remco, in terms of a resolution and the applicable JSE Listings Requirements, vest after stipulated periods and are exercisable after a three-year period in terms of the scheme rules.

Share option allocations are considered at least annually and are recommended by Remco and approved by the Board. The underlying principle of these schemes is to provide direct linkage between the interests of shareholders and the efforts of executives or managers.

Targets are linked where applicable to the Group’s medium-term business plan, over rolling three-year performance periods. The SARS incorporates performance target requirements which must be met before the exercise of the share grants is permitted. Certain executive directors have an interest in the various share incentive schemes of the Group. The performance targets are set by Remco and may be varied from time to time.

Directors trading in Company securities

All directors are required to obtain clearance prior to trading in Company securities. Such clearance must be obtained from the Chairman of the Company or in his absence from a designated director. The Chairman consults the CEO and Group Company Secretary prior to his trading in the Company’s securities. Directors are required to inform their portfolio/investment managers not to trade in the securities of the Company unless they have specific written instructions from that director to do so. Directors also may not trade in their shares during closed periods. Directors are further prohibited from dealing in the Company’s shares at any time when they are in possession of unpublished price-sensitive information in relation to those securities, or otherwise where clearance to deal is not given.

Directors’ service contracts

Peter Mountford, the CEO, has a written letter of appointment which endures indefinitely and is subject to termination on one month’s notice. Colin Brown, the CFO, has a written letter of appointment which endures indefinitely and is subject to termination on two months’ notice. Both executives have change of control clauses included in their letters of appointment. The contractual relationship between the Company and its executive directors is controlled through Remco which comprises non‑executive directors only.

These contracts are formulated in a manner which is consistent with the provisions of the Basic Conditions of Employment Act.

Beneficial and non-beneficial shareholding

The directors of the Company that hold beneficial or non-beneficial shareholding in the issued shares of the Company as at 30 June 2020 are disclosed in Section B of this report.

Interest of directors in contracts

Fluxmans Inc, a director-related entity up until end of February 2020, assists Super Group with corporate law advisory services in respect of various transactions and several other corporate and labour matters. During the year the Group paid Fluxmans Inc. R6.0 million (2019: R6.2 million) for general legal services.

The directors have certified that they were not materially invested or held a material interest in any transaction of material significance and which significantly affected the business of the Group, with the Company or any of its subsidiaries. Accordingly, no conflict of interest with regard to directors’ interests in contracts exists. There have been no material changes in the aforegoing between 30 June 2020 and 6 November 2020.

SECTION B: DIRECTORS’ REMUNERATION AND FEES

Executive directors’ remuneration, STI and LTI allocations

The achievement of targets for the executive directors for FY2019 is as follows:

The targeted increase in HEPS for the award of the 2017 share options was 17.3% (2016: 20.1%). The actual decrease in HEPS over the period was 47.2% (2019: increase of 30.1%).

The annual remuneration (excluding equity awards) of directors for the year ended 30 June 2020:

Notes

The annual remuneration (excluding equity awards) of directors for the year ended 30 June 2019:

Notes

Executive directors’ share option and incentive scheme grants

Analysis of directors’ share option entitlements as at 30 June 2020:

Notes

Share option gains after tax

Non-executive directors’ fees

Non-executive directors generally receive fixed fees for service on the Board and Board committees. Non-executive directors do not receive short-term incentives nor do they participate in any long-term incentive schemes. The fees paid to non-executive directors were approved by Remco, the Board and shareholders at the AGM.

Notes

Interests of directors in the share capital of Super Group

The aggregate beneficial holdings of the directors of the Company and their immediate families in the issued ordinary shares of the Company are detailed below. There have been no changes in these shareholdings to the date of approval of this report. There are no associate interests for the above directors and also no non-beneficial shareholdings.

Directors trading in Company securities

On 20 October 2020, Peter Mountford acquired 17 000 shares at an average weighted price of R18.79 per share. No other director has traded in any shares between 30 June 2020 and the date of this Integrated Report.

On behalf of the Remuneration Committee

Valentine Chitalu
Remuneration Committee Chairman

9 November 2020