2019

Integrated Annual Report

Implementation report

PART 2

EXECUTIVE COMPENSATION

The following table provides a breakdown of the annual remuneration (excluding LTIs) of directors and prescribed officers for the year ended 30 September:

  2019 2018
  Salary
R
Short-term
employee
benefits
R
Annual
incentive
bonus
R
Total
R
  Salary
R
Short-term
employee
benefits
R
Annual
incentive
bonus
R
Total
R
EXECUTIVE DIRECTORS                  
Sean Doherty* 944 338 153 119 833 333 1 930 790  
Ronen Goldstein** 1 576 575 184 857 700 000 2 461 432   1 719 900 201 663 1 102 500 3 024 063
Mark Herskovits 2 478 398 424 734 3 194 745 6 097 877   2 320 484 412 310 2 530 628 5 263 422
David Hurwitz 3 687 729 584 627 3 501 816 7 774 172   3 320 046 563 914 3 501 816 7 385 776
Jonathan Jawno 1 311 813 213 237 4 500 000 6 025 050   1 327 341 197 709 4 500 000 6 025 050
Michael Mendelowitz 1 311 813 213 237 4 500 000 6 025 050   1 292 885 232 165 4 500 000 6 025 050
PRESCRIBED OFFICERS                  
Terry Kier 3 229 775 2 209 440 3 152 470 8 591 685   3 012 417 2 223 361 3 244 395 8 480 173
David McAlpin 3 319 126 328 099 2 626 190 6 273 415   3 049 257 309 719 2 477 538 5 836 514
TOTAL 17 859 567 4 311 350 23 008 554 45 179 471   16 042 330 4 140 841 21 856 877 42 040 048
* Sean Doherty was appointed as an executive director with effect from 1 June 2019.
** Ronen Goldstein resigned as an executive director with effect from 31 May 2019.

COST TO COMPANY

The remuneration committee believes that the CTC is fair in light of the outcomes of the benchmarking undertaken and relative market norms.

SHORT-TERM INCENTIVES

All quantitative performance metrics set for the group and the divisions were achieved in the 2019 financial year. In addition, the following qualitative initiatives were achieved:

The rationale and context for the remuneration of executive directors are as follows:

CHIEF EXECUTIVE OFFICER
David Hurwitz

David Hurwitz’s incentive bonus for 2019 comprised:

Portion Amount   Rationale
QUANTITATIVE R2 801 453
(8 months)
  Growth of the group’s core HEPS and core return on equity achieved.
QUALITATIVE R700 363
(2 months)
 
  • Overall improvement in the state of the group during 2019.
  • The finalisation of the integration of the acquisitions completed in 2017.
  • The execution and finalisation of the SA Taxi ownership transaction with SANTACO.
  • Progress achieved in implementing the group’s strategic objectives, including stringent capital management in a challenging trading environment, and establishing TC Global Finance and TC Specialised Finance.
DISCRETIONARY Nil    
TOTAL R3 501 816    

CHIEF FINANCIAL OFFICER
Sean Doherty

Sean Doherty’s incentive bonus for 2019 comprised:

Portion Amount   Rationale
QUANTITATIVE R666 667
(8 months apportioned for period of employment)
  Growth of the group’s core HEPS and core return on equity achieved.
QUALITATIVE R166 666 (2 months apportioned for period of employment)  

Improvement in the state of the financial, risk and reporting structures of the group.

DISCRETIONARY Nil    
TOTAL R833 333    

EXECUTIVE DIRECTOR: CAPITAL MANAGEMENT
Mark Herskovits

Mark Herskovits’s incentive bonus for 2019 comprised:

Portion Amount   Rationale
QUANTITATIVE R1 950 884
(8 months)
  Growth of SA Taxi’s core HEPS and core return on equity achieved.
QUALITATIVE R243 861
(1 month)
 
  • Progress achieved in implementing the group’s strategic objectives, including stringent capital management in a challenging trading environment and supporting SA Taxi’s strategic initiatives.
DISCRETIONARY R1 000 000
(4.1 months)
 
  • The execution and finalisation of the SA Taxi ownership transaction with SANTACO.
TOTAL R3 194 745    

PRESCRIBED OFFICERS
Terry Kier

Terry Kier’s incentive bonus for 2019 comprised:

Portion Amount   Rationale
QUANTITATIVE R2 865 882
(10 months)
  Growth of SA Taxi’s core headline earnings and return on equity achieved.
QUALITATIVE R286 588
(1 month)
 
  • Overall improvement in the state of SA Taxi during 2019.
  • The execution and finalisation of the SA Taxi ownership transaction with SANTACO.
  • Progress achieved in implementing SA Taxi’s strategic objectives.
DISCRETIONARY Nil  
TOTAL R3 152 470    
David McAlpin

David McAlpin’s incentive bonus for 2019 comprised:

Portion Amount   Rationale
QUANTITATIVE R1 313 095
(4.5 months)
  Growth of TCRS’s core headline earnings.
QUALITATIVE R1 313 095
(4.5 months)
 
  • Overall improvement in the state of TCRS during 2019.
  • The finalisation of the integration of the acquisitions completed in 2017.
  • Progress achieved in implementing TCRS’s strategic objectives, including the growth in purchased book debt acquisitions and establishing TC Global Finance and TC Specialised Finance.
  • Maintaining Transaction Capital Recoveries’ B-BBEE rating at Level 2*.
DISCRETIONARY Nil  
TOTAL R2 626 190    
* Note that TCRS achieved a B-BBEE Level 1 rating subsequent to year-end.


 
FOUNDERS
Jonathan Jawno

Jonathan Jawno’s incentive bonus of R4 500 000 for 2019 comprised:

  • A quantitative bonus for the growth of the group’s core HEPS.
  • A qualitative bonus for his specific role in the management of risk and capital.
Michael Mendelowitz

Michael Mendelowitz’s incentive bonus of R4 500 000 for 2019 comprised:

  • A quantitative bonus for the growth of the group’s
    core HEPS.
  • A qualitative bonus for his specific contribution toward
    capital deployment as well as strategic and acquisitive
    opportunities, in particular:
    • The execution and finalisation of the SA Taxi
      ownership transaction with SANTACO.
    • Establishing TC Global Finance and TC Specialised
      Finance.

Future focus areas, which will inform STIs for executive directors in the next financial year, are as follows:

LONG-TERM INCENTIVES

CONDITIONAL SHARE PLAN

The remuneration committee approved the following criteria for all CSP awards that commenced in June 2019:

VESTING PERIOD

  • 100% of the CSP award is based on meeting the performance criteria (as determined below) to vest as follows:
    • Year three: 33.3%.
    • Year four: 33.3%.
    • Year five: 33.3%.
  • No portion of the CSP award is based on continued employment alone, and all are subject to the performance criteria detailed below.

PERFORMANCE CRITERIA

The following performance criteria have been set (per division for divisional executives, and on a consolidated basis for group executives):

Continuing core HEPS
growth over vesting period*
% of CSP to be awarded
CPI 20%
CPI + 5% (South Africa) 100%
CPI + 2% (Australia) 100%
* Growth levels between bands will be vested on a proportionate basis.

As detailed previously, super-performance is to be rewarded, where select executives (as approved by the remuneration committee on every CSP issuance) will receive an additional component equal to 25% of their CSP settlement value, should predetermined stretch performance criteria be met, as set out in the table below:

  Target (annualised core  
HEPS growth)*
Group >17.5%  
SA Taxi >20.0%  
TCRS >15.0% 
* If minimum targets are not achieved, there will be no additional settlement.

 

It is the view of the remuneration committee that LTI awards promote long-term equity value creation for employees and shareholders alike, while STI awards serve to reward superior financial and operational performance for the past financial year. As the value of the CSP on vesting is based on the equity valuation of each division (and Transaction Capital group for group employees), employees are rewarded for the quality and sustainability of earnings over the long term, thus aligning their interests with the group’s shareholders. As a result, the growth hurdle of the CSP is viewed to be appropriate.

The following table shows the CSP position of executive directors and prescribed officers at 30 September 2019:

             
  Component Present value
of CSP
awards
CSP awards Vesting
period
CSP awards
exercised
during the year
Gains on
CSP awards
exercised
during the year
EXECUTIVE DIRECTORS            
DAVID HURWITZ Group          
Granted on 22 November 2016   1 280 512 101 063 2 to 4 30 758 554 259
Granted on 22 November 2017   1 665 106 132 186 2 to 5
Granted on 20 November 2018   2 990 230 183 554 2 to 5
Granted on 26 November 2019   3 632 316 191 007 3 to 5    
SEAN DOHERTY Group          
Granted on 19 June 2019   5 568 168 323 668 3 to 5
Granted on 26 November 2019   1 634 558 85 954 3 to 5    
MARK HERSKOVITS SA Taxi          
Granted on 22 November 2016   953 889 122 649 2 to 4 37 328 408 099
Granted on 29 May 2017   1 267 210 164 824 2 to 4 50 164 557 483
Granted on 22 November 2017   839 072 94 480 2 to 5
Granted on 20 November 2018   1 286 537 130 059 2 to 5
Granted on 26 November 2019   1 688 093 120 492 3 to 5    
PRESCRIBED OFFICERS            
DAVID McALPIN TCRS          
Granted on 22 November 2016   5 550 636 1 231 535 2 to 4 72 282 457 276
Granted on 22 November 2017   5 689 807 1 181 474 2 to 5
Granted on 25 March 2019   11 460 166 2 196 837 2 to 4

Ronen Goldstein (who resigned as an executive director effective 31 May 2019) gained R3 035 082 from the exercise of CSPs in the 2019 financial year.

Jonathan Jawno, Michael Mendelowitz and Terry Kier do not participate in the CSP.

Refer to note 24.2 in the group’s 2019 consolidated annual financial statements for further details on the CSP.

SHARE APPRECIATION RIGHTS PLAN

All SAR plan awards were approved by the remuneration committee. No SARs have been awarded since 25 November 2015. In previous years, executives were awarded SARs based on executive performance, potential, tenure, job grade, current fixed compensation and STIs relative to market benchmarks; the recommendation of the CEO; and the reasonably expected growth in Transaction Capital’s share price.

The following table shows the SAR position of executive directors and prescribed officers at 30 September 2019:

  Present
value of
SARs
R
SARs
Number
Vesting
period
Years
SARs vested
during the
year and not
exercised
Number
SARs exercised
during the year
Number
Gains on SARs
exercised
during the year
R
 EXECUTIVE DIRECTORS            
DAVID HURWITZ            
Granted on 25 November 2014 4 300 000 3 775 524
Granted on 26 November 2015 830 000 250 000 4
MARK HERSKOVITS            
Granted on 25 November 2014 4 250 000 3 146 270
Granted on 26 November 2015 498 000 150 000 4
 PRESCRIBED OFFICERS            
DAVID McALPIN            
Granted on 25 November 2014 4 751 685 8 262 568
Granted on 26 November 2015 664 000 200 000 4

Ronen Goldstein (who resigned as an executive director effective 31 May 2019) gained R2 818 590 from the exercise of SARs in the 2019 financial year.

Jonathan Jawno, Michael Mendelowitz and Terry Kier do not participate in the SAR plan.

Refer to note 24.1 in the group’s 2019 consolidated annual financial statements for further details on the SAR plan.

DIRECT INVESTMENT

Terry Kier (CEO of SA Taxi) holds a direct investment in SA Taxi Holdings Proprietary Limited, incentivising him and directly aligning his long-term interests with those of SA Taxi, Transaction Capital and its shareholders.

Terry Kier disposed of 0.5% of his shareholding to Transaction Capital on 1 December 2018 for total proceeds of R28 million. Terry’s shareholding was further diluted following SA Taxi’s ownership transaction with SANTACO.

At 30 September 2019, Terry Kier held a direct investment of 1.2% (2018: 2%) in SA Taxi Holdings Proprietary Limited. This shareholding was valued at R121 million.

Terry Kier owed a wholly-owned subsidiary of Transaction Capital an amount of R25 million at 30 September 2019. The loan was granted on an interest-free basis and will be repaid upon certain pre-determined events. Appropriate fringe benefits tax has been levied on the interest-free loan, the benefit of which is included in the executive compensation table.

Terry Kier does not participate in the SAR or CSP plans.

SHAREHOLDING

The remuneration committee continually assesses whether those executives charged with setting and implementing group strategy are meaningfully invested in Transaction Capital, by way of direct investment and/or through the CSP. As mentioned previously, the remuneration committee has set an executive investment policy that mandates that key executives should hold a meaningful interest in Transaction Capital, with a minimum target exposure to Transaction Capital’s equity value maintained at three times annual CTC (held directly or indirectly). Where the equity value of a key executive of the group is determined to be low, accelerated annual LTI awards or once-off LTI awards may be awarded.

The executive directors of the group hold the following direct or indirect equity value in Transaction Capital Limited at 30 September 2019, aligning their interests with the broader shareholder base:

  Notes Shares held
Number
Valuation of
shares at closing
share price on
30 September
2019
R
SAR
position at
30 September
2019*
R
CSP
position at
30 September
2019*
R
Total equity value
to the group
R
Cover
of annual
CTC
Times
EXECUTIVE DIRECTORS              
Sean Doherty 1 7 169 246 7 169 246 <3
Mark Herskovits   1 471 444 32 592 485 1 764 000 8 238 273 42 594 758 >3
David Hurwitz 2 4 982 841 110 369 928 2 940 000 9 232 186 122 542 114 >3
PRESCRIBED OFFICERS              
Terry Kier 3  
David McAlpin   2 352 000 33 411 332 35 763 332 >3
FOUNDERS              
Jonathan Jawno 4 59 333 333 1 314 233 326 1 314 233 326 >3
Michael Mendelowitz 5 59 333 333 1 314 233 326 1 314 233 326 >3
TOTAL   125 120 951 2 771 429 065 7 056 000 58 051 037 2 836 536 102  
* SAR/CSP valuations are determined on current share prices and are prior to any tax payable.
1. Sean Doherty joined Transaction Capital as an executive director in June 2019. The minimum target exposure to Transaction Capital’s equity value will be built up over the next three to five years.
2. Shares are held by David Hurwitz in his personal capacity and by the Dovie Trust, in which David Hurwitz is a discretionary beneficiary. The total above
includes both David Hurwitz’s direct and indirect holdings.
3. The Empire Trust, of which Terry Kier is a discretionary beneficiary, owns 1.2% of SA Taxi Holdings (Pty) Ltd.
4. Pilatucom Holdings Limited owns 59 333 333 shares in Transaction Capital Limited. All the shares of Pilatucom Holdings Limited are held by trusts in which
Jonathan Jawno is a discretionary contingent beneficiary.
5. The Rutland Trust, of which Michael Mendelowitz is a discretionary contingent beneficiary, owns 59 333 333 shares in Transaction Capital Limited.

NON-EXECUTIVE DIRECTORS’ FEES

Fees paid to non-executive directors are for directorship and membership of committees, with no additional meeting attendance fees paid. This is due to board members providing input to the company on an ongoing basis, and is thus not limited to the attendance of meetings.

The fees paid to non-executive directors have been determined on a market-related basis, as recommended by the remuneration committee and the board, and approved by shareholders at the AGM. As from 1 June 2017, VAT is payable on non-executive directors’ fees, where appropriate.

The following table shows the fees paid to non-executive directors for the year ended 30 September 2019:

  C Seabrooke1
R
P Langeni
R
R Rossi2
R
K Pillay
R
O Ighodaro3
R
P Miller
R
D Radley4
R
B Hanise5
R
TOTAL
BOARD MEMBERS                  
Board chairman (including committee attendance) 1 636 667 1 636 667
Board director 382 083 382 083 382 083 61 833 382 083 382 083 289 333 2 261 581
Audit, risk and compliance committee (chairperson) 66 250 342 625 408 875
Audit, risk and compliance committee (member) 163 667 26 500 123 917 314 084
Asset and liability committee (member) 21 200 131 167 99 367 251 734
Remuneration committee (chairperson) 273 167 273 167
Remuneration committee (member) 131 167 131 167
Nominations committee (member) 131 167 131 167 262 334
Social and ethics committee (chairperson) 273 167 273 167
Social and ethics committee (member) 131 167 131 167
TOTAL ANNUAL FEES 1 636 667 818 917 513 250 917 584 149 283 513 250 882 375 512 617 5 943 943
1. Christopher Seabrooke is also the chairperson of the nominations committee and a member of the remuneration committee, audit, risk and compliance committee, and asset and liability committee.
2. In addition to the fees reported above, Roberto Rossi received R1 096 667 for consulting services and R7 000 000 for corporate finance and legal services rendered to the group.
3. Resigned as a non-executive director effective 30 November 2018.
4. Appointed as chairperson of the audit, risk and compliance committee effective 1 December 2018. In addition to the fees reported above, Diane Radley received directors’ fees of R323 000 excluding VAT for acting as an independent non-executive director of SA Taxi Holdings (Pty) Ltd and Transaction Capital Risk Services Holdings (Pty) Ltd.
5. Appointed as a non-executive director effective 1 January 2019.

The following table shows the fees paid to non-executive directors for the year ended 30 September 2018:

  C Seabrooke1
R
P Langeni2
R
R Rossi3
R
K Pillay4
R
O Ighodaro
R
P Miller5
R
D Radley6
R
TOTAL
BOARD MEMBERS                
Board chairman (including committee attendance) 1 552 500 1 552 500
Board director 362 250 362 250 362 250 362 250 362 250 77 292 1 888 542
Audit, risk and compliance committee (chairperson) 388 125 388 125
Audit, risk and compliance committee (member) 155 250 33 125 188 375
Asset and liability committee (member) 124 200 26 500 150 700
Remuneration committee (chairperson) 258 750 258 750
Remuneration committee (member) 114 200 114 200
Nominations committee (member) 124 200 124 200 248 400
Social and ethics committee (chairperson) 258 750 258 750
Social and ethics committee (member) 114 200 114 200
TOTAL ANNUAL FEES 1 552 500 776 250 486 450 859 400 874 575 476 450 136 917 5 162 542
1. Christopher Seabrooke is also the chairperson of the nominations committee and a member of the remuneration committee, audit, risk and compliance committee, and asset and liability committee.
2. In addition to the fees reported above, Phumzile Langeni received directors' fees of R117 700 for acting as an independent non-executive director of Transaction Capital Risk Services Holdings (Pty) Ltd and SA Taxi Holdings (Pty) Ltd. Phumzile resigned as a director from the Transaction Capital Risk Services Holdings (Pty) Ltd board effective 28 March 2018 and the SA Taxi Holdings (Pty) Ltd board effective 31 July 2018.
3. In addition to the fees reported above, Roberto Rossi received R1 096 667 for consulting services and R4 500 000 for corporate finance and legal services rendered to the group.
4. Appointed as a member of the social and ethics committee effective 1 November 2017.
5. Appointed as a member of the remuneration committee effective 1 November 2017.
6. Appointed as a non-executive director effective 15 July 2018. In addition to the fees reported above, Diane Radley received directors' fees of R65 250 excluding VAT for acting as an independent non-executive director of SA Taxi Holdings (Pty) Ltd and Transaction Capital Risk Services Holdings (Pty) Ltd.