AGM Information • Apr 1, 2021
AGM Information
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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in doubt as to what action you should take, you are recommended to seek your own financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other professional adviser authorised under the Financial Services and Markets Act 2000.
If you have sold or transferred all of your registered holdings of ordinary shares in Hostelworld Group plc (the "Company" or "Hostelworld" or the "Group") please forward this document, together with the Form of Proxy, as soon as possible to the purchaser or transferee or to the stockbroker, bank manager or other agent through whom the sale or transfer was effected for delivery to the purchaser or transferee.
(a public limited company incorporated in England and Wales with registered number 09818705)
and
Your attention is drawn to the letter from the Chairman of Hostelworld and the Chairman of the Remuneration Committee which contains the unanimous recommendation of the board of directors of the Company (the "Board") that you vote in favour of the ordinary resolutions (the "Resolutions") to be proposed at the General Meeting referred to below. Please read the whole of this document.
Notice of a General Meeting of Hostelworld Group PLC (the "General Meeting") to be held at Floor 2, One Central Park, Leopardstown, Dublin 18, Ireland at 12.30 p.m. on 26 April 2021 (or any adjournment thereof) is set out at the end of this document.
A Form of Proxy for use in connection with the General Meeting is provided. To be valid, any instrument appointing a proxy must be received by Computershare Investor Services PLC at P.O. Box 13030, Dublin 24, Ireland (if by post) or 3100 Lake Drive, Citywest Business Campus, Dublin 24 D24 AK82, Ireland (if by hand), as soon as possible but in any event so as to arrive no later than 12.30 p.m. on 22 April 2021. Alternatively, a proxy may be appointed electronically at www.eproxyappointment.com or if you hold shares in CREST, by using the CREST electronic proxy appointment service.
In light of the COVID-19 pandemic, and the Irish Health Service Executive's current guidance regarding social distancing and the prohibition of public gatherings, it is anticipated that the General Meeting will be held as a closed meeting, which members will not be permitted to attend. Members are therefore strongly encouraged to ensure that their votes are counted by appointing the Chairman of the General Meeting as their proxy.
A copy of this document is and will be available for inspection on the Company's website at www.hostelworldgroup.com from the time this document is published. For the avoidance of doubt, the content of any website referred to in this document is not incorporated into and does not form part of this document.
This document has not been examined or approved by the FCA or Euronext Dublin. This document is dated 1 April 2021.
(incorporated in England and Wales with registered number 09818705)
Michael Cawley (Non-Executive Chairman) Gary Morrison (Chief Executive Officer) Caroline Sherry (Chief Financial Officer) Éimear Moloney (Non-Executive Director) Carl G. Shepherd (Non-Executive Director) Evan Cohen (Non-Executive Director)
Directors: Registered office: Floor 2, 52 Bedford Row, London, United Kingdom, WC1R 4LR
1 April 2021
Dear Shareholder,
We are writing to you to: (i) explain the background to and reasons for a proposed amendment to the Directors' Remuneration Policy and a proposed amendment to the rules of the Company's Long Term Incentive Plan (the "LTIP Rules"); (ii) explain why the Board unanimously considers such proposed amendments to be in the best interests of the Company's shareholders ("Shareholders") as a whole; and (iii) recommend that you vote in favour of the Resolutions to be proposed at the General Meeting.
Details of the actions Shareholders should take, and the recommendation of the Board, are set out in paragraphs 10 and 11, respectively, of this letter.
As explained in detail in the 2020 Annual Report, published on 23 March 2021, 2020 was an exceptionally challenging year for Hostelworld and the global travel industry. As the COVID-19 pandemic spread, the Group refocused its priorities on (i) supporting employees, customers and hostel partners, (ii) increasing its liquidity and (iii) making progress, where possible, with its Roadmap for Growth strategy. Faced with an unprecedented set of circumstances, the management team worked tirelessly during the year to implement a number of mitigating actions to protect the business and conserve cash. Extra capital was raised in 2020 and, as announced on 19 February 2021, a €30 million five-year term loan facility has been signed.
During 2020, the Remuneration Committee (the "Committee") considered how best to incentivise, motivate and retain the Executive Directors and other members of the senior management team during a period of unprecedented disruption. As set out in detail in the 2020 Directors' Remuneration Report (the "2020 DRR"), included within the 2020 Annual Report, a programme of salary deferral was introduced for the Executive Directors and other senior executives during 2020, and the Committee decided to cancel the annual cash bonus scheme for the year. Accordingly, neither Executive Director (nor any other employees) received an annual bonus in respect of 2020. Mindful of the importance of ongoing equity incentivisation, the Committee agreed to grant an LTIP award in May 2020, full details of which are included in the 2020 DRR. Despite this, we have some very real concerns about the remuneration packages at Hostelworld being insufficient to retain key staff.
While the Board remains hopeful of a gradual recovery to more normal trading conditions over time, the ongoing uncertainty caused by the pandemic means that we must continue with cash conservation measures into 2021. We have decided that, for 2021, it would again be prudent to cancel the cash bonus scheme. Furthermore, at this stage, we do not envisage being in a position to offer a cash bonus opportunity in 2022. In addition, with the exception of the February 2021 increase for the Chief Financial Officer explained in the 2020 DRR, we have implemented a salary freeze for the management team (including the Chief Executive Officer) for 2021. While these measures will have the benefit of conserving cash, they create reasonable concerns around retention for a management team which is working exceptionally hard in difficult circumstances, and a potential widening of the gap between what individuals may expect to earn under our policies and what is available in other segments of the online industry less affected by the pandemic than travel. While we intend to make a further grant under the Long-Term Incentive Plan ("LTIP") in 2021, as explained in more detail in paragraph 6 below, we believe that an additional equity-based award is necessary to help address the absence of an annual incentive.
Taking into account the matters set out above, and having considered in detail how best to incentivise and retain key talent within the organisation, the Committee wishes to grant a Restricted Share Award (the "Award") to selected employees, including the Executive Directors and members of the management team.
The Award is a simple, broad-based retention mechanism which is intended to mitigate the risk of attrition for senior executives and to lock in the Group's key talent for an extended period. This follows an exceptionally challenging year during which employees have seen no value arise from their existing performance-related incentives. The Award structure has been designed to be the same for all recipients of an Award, reflecting the Hostelworld culture of treating all participants consistently and fairly. An equitybased Award aligns the interests of a wide range of Hostelworld employees with those of Shareholders and helps to ensure a continued focus on rebuilding equity value.
We are acutely conscious of the need to manage costs, minimise cash outflow and retain talent following a period when remuneration received has been well below the average for the market and not reflective of the commitment and effort of senior leaders within the business. The Award helps the Group offer a meaningful reward proposition while at the same time conserving cash. As noted above, our current prediction is that no cash bonus opportunity will be available for 2022 as well as 2021, and so the Award is expected to cover two years of no bonuses.
In order for the Award to be made to Executive Directors it is necessary for Shareholders to approve an amendment to the Directors' Remuneration Policy as the proposed terms of the Award are not provided for under the current Policy approved by Shareholders at the Company's AGM in May 2019. This is because the current Policy anticipates that all share awards granted to Executive Directors under the LTIP will be granted with corporate performance conditions attached, a three-year vesting period and a two-year post-vesting holding period, without any flexibility to grant share awards on different terms if there is a commercial need to do so. As the Award is outside the Directors' Remuneration Policy, the proposed amendment to the Directors' Remuneration Policy to permit the Award requires approval by Shareholders at a general meeting under section 226B(1)(b) of the Companies Act 2006. Approval for the amendment to the Directors' Remuneration Policy will be sought by way of Resolution 1 at the General Meeting. The Directors' Remuneration Policy, as amended, is included for reference in Appendix A of this document.
There are no other changes to the Directors' Remuneration Policy and, as a result, all other aspects of the existing Policy will continue to operate for the financial year ending 31 December 2021. The Remuneration Committee intends to conduct a full review of the Directors' Remuneration Policy later in 2021 with a view to presenting a new Policy for Shareholder approval at the Company's annual general meeting in 2022. This review will encompass all aspects of Directors' remuneration, including those matters where Hostelworld is not currently fully compliant with the UK Corporate Governance Code.
For the purposes of section 226D of the Companies Act 2006:
In light of the ongoing COVID-19 pandemic and the anticipated attendance arrangements for the General Meeting, a Shareholder who would like to inspect this document must submit a request to do so to [email protected]. Any such inspection will be subject to health and safety requirements, any limits on gatherings, social distancing or other measures imposed or recommended by the UK and Irish Government.
In addition to the proposed amendment to the Directors' Remuneration Policy, the Company is seeking Shareholder approval for an amendment to the LTIP Rules by way of Resolution 2 at the General Meeting. The LTIP Rules were adopted by the Company prior to its IPO in 2015.
The purpose of the amendment is to remove the dilution limit which limits the issue of ordinary shares to satisfy awards granted under the LTIP and any other discretionary share scheme to 5 per cent of the Company's issued ordinary share capital over a rolling 10-year period. The full terms of the proposed amendment to the LTIP Rules to effect to the removal of this 5 per cent dilution limit (comprising the deletion of LTIP Rule 2.2) is included for reference in Appendix B of this document.
This change is being proposed to provide the Committee with a greater level of flexibility to manage potential dilution. It will ensure that the Company has appropriate headroom to settle the proposed Restricted Share Award and the LTIP grant to be made in 2021 using new issue shares. It is our intention that a relatively wide group of Hostelworld employees will benefit from the Restricted Share Award and the LTIP grant with these structures crucial to the retention and motivation of employees over the next three years.
The Committee is conscious of the importance that Shareholders attach to dilution and remains committed to managing the allocation of employee share awards carefully over the lifetime of the LTIP. For the avoidance of doubt, there is no change to the maximum dilution limit in the LTIP which limits the issue of ordinary shares to satisfy awards granted under the LTIP and any other employee share scheme operated by Hostelworld to 10 per cent of the issued ordinary share capital over a rolling 10-year period.
As disclosed in the 2020 DRR, the Committee has decided not to increase the basic salary of the Chief Executive Officer for 2021. His salary therefore remains at €443,600. As also disclosed in the 2020 DRR, the basic salary of the Chief Financial Officer was increased to €275,000 with effect from 1 February 2021 in recognition of her exceptional performance since being appointed to the role.
The Committee intends to make a new grant under the LTIP shortly after the General Meeting (the "2021 LTIP Grant"). The purpose of the 2021 LTIP Grant will be to incentivise performance over the longer-term and set solid foundations for a return to growth in a post-COVID environment. The Committee has decided to apply performance conditions to the grant which differ from those used for prior year grants. One half of the award will vest subject to the achievement of targets linked to Adjusted EBITDA performance, and the other half will require critical strategic objectives to be met over the three-year performance period. These measures are all central to the success of the business as it emerges from the current depressed trading levels. The use of different performance conditions does not require a change to the Directors' Remuneration Policy.
The specific Adjusted EBITDA targets are based on levels of Adjusted EBITDA being achieved in the financial year ending 31 December 2023. The targets are considered challenging in the context of Hostelworld's business plan for the coming years and internal expectations of performance in a post-COVID trading environment.
Adjusted EBITDA is one of the Group's Key Performance Indictors used by the Board to assess the performance of the business, and is a metric closely followed by the market. The specific Adjusted EBITDA targets are currently considered commercially confidential by the Board given that the Group is not providing forward-looking guidance to the market. However, in recognition of the importance that Shareholders attach to having visibility on targets for long-term incentive schemes, we commit to publishing the targets once normal trading conditions resume and the Group is in a position to provide general guidance to the market. At this stage it is too early to say when this might be, but we expect to publish the details before the performance conditions are tested after the end of the 2023 financial year.
For the half of the award which will vest subject to the achievement of critical strategic objectives, we have set targets based around two key areas of focus. The first area involves assessing the improvement in new customer value compared to customer acquisition cost for paid channels (on a constant currency basis). This is linked to the Group's stated goal of optimising paid spend based on predicted new customer value versus acquisition cost. The second area is based around the successful adoption of Hostelworld's Counter technology by a targeted number of our hostel accommodation partners. This is in line with the longer-term growth strategy of increasing adoption of the Group's hostel management software technology and integrating the Group's technology into our core platform offering for hostel partners. The precise details of the targets we have set for measuring these objectives are currently considered commercially confidential but will be set out in full in the 2023 Directors' Remuneration Report when the level of vesting of the 2021 LTIP Grant will be disclosed.
The 2021 LTIP Grant will be made at a level of 125 per cent of basic salary for the Chief Executive Officer and 100 per cent of basic salary for the Chief Financial Officer. This is equivalent to the levels of award granted in 2019 and is lower than the levels of award granted in 2020. The 2021 LTIP Grant will also be made to other members of the senior management team and other key employees. Although the LTIP grant size (as a percentage of basic salary) varies between employees, the same performance conditions will apply to all participants.
For Executive Directors, as prescribed by the Directors' Remuneration Policy, the 2021 LTIP Grant will be made with a requirement that any shares which vest after the end of the three-year performance period must be held for a further two years before they can be sold (subject to any sales required for tax purposes).
In advance of finalising the above proposals, the Committee wrote to Shareholders holding approximately 70 per cent in aggregate of the issued ordinary share capital as well as the major proxy advisors and institutional investor representative bodies explaining the rationale for the proposals and inviting comments. We also communicated our intention to make the 2021 LTIP Grant using the performance conditions as set out above. We subsequently had productive meetings with a number of Shareholders and received feedback from others. We were encouraged that the majority of those consulted engaged with us, had an appreciation of the specific circumstances faced by Hostelworld and expressed their support for our proposals.
The proposed amendments to the Directors' Remuneration Policy and the LTIP Rules require the approval by Shareholders of the Resolutions at the General Meeting. The Resolutions to be proposed at the General Meeting approve such amendments. The Resolutions are proposed as ordinary resolutions and for each Resolution to be passed, more than half of the votes cast must be in favour of the relevant Resolution.
Accordingly, you will find set out at the end of this document at pages 8 to 10 a notice convening a General Meeting to be held at Floor 2, One Central Park, Leopardstown, Dublin 18, Ireland at 12.30 p.m. on 26 April 2021 (or any adjournment thereof) and the full text of the Resolutions, the Directors' Remuneration Policy (as amended) and the LTIP Rule to be deleted by way of the amendment.
We are continuing to closely monitor the Coronavirus (COVID-19) situation. The Board takes its responsibility to safeguard the health of its shareholders, stakeholders and employees very seriously and so the following measures will be put in place for the General Meeting in response to the COVID-19 pandemic.
To safeguard the well-being of our shareholders and employees it is intended that the General Meeting will be attended only by the minimum number of persons required to satisfy the legal requirements to hold the General Meeting. On the basis of the current restrictions and guidance in place, shareholders and any other attendees will not be permitted entry to the General Meeting. Shareholders are therefore strongly encouraged to vote on the resolutions in advance of the General Meeting by appointing a proxy and to appoint the Chair of the General Meeting as their proxy (either electronically or by post) with their voting instructions. Further details regarding the process to vote by proxy are set out in the "Action to be taken" section below. At the moment, appointing the Chair of the General Meeting as your proxy is the only way to ensure that your vote is exercised at the General Meeting as other proxies may not be granted access to the meeting.
The Company will continue to closely monitor the latest UK and Irish Government guidance and restrictions, and how this may affect the arrangements for the General Meeting. If it becomes necessary or appropriate to revise the current arrangements for the General Meeting, further information will be made available on our website at www.hostelworldgroup.com, by RIS announcement and by any other means legally required at that time.
Despite these exceptional circumstances, we are, as always, committed to engagement with our shareholders. In order to facilitate this, if you are a Shareholder and would like to ask the Board a question on the formal business of the AGM, please email your question to [email protected] by 12.30 p.m. on 22 April 2021. Responses will be made via return of email or published on our website at www.hostelworldgroup.com as deemed appropriate by the Board.
Hostelworld is seeking approval of the Resolutions at the General Meeting. Your support is important to us. Please vote on the Resolutions. As mentioned above, please read the notes to the Notice of General Meeting at pages 9 and 10 of this document for an explanation of how to appoint a proxy to attend and vote on your behalf.
You will find enclosed a Form of Proxy for the General Meeting. You are requested to complete the Form of Proxy in accordance with the instructions printed on it and return it as soon as possible and in any case so as to be received by the Company's Registrar, Computershare Investor Services (Ireland) Limited, 3100 Lake Drive, Citywest Business Campus, Dublin 24, D24 AK82, Ireland, no later than 12.30 p.m. on 22 April 2021 (or, if the General Meeting is adjourned, not later than 48 hours before the time appointed for the adjourned meeting).
Alternatively, you may wish to register your proxy vote online; to do so, visit www.eproxyappointment.com. The Control Number, Shareholder Reference Number and PIN shown on the Form of Proxy will be required to complete the procedure. Details of the process for registering online are also set out in the Form of Proxy. The deadline for receipt of electronic proxies is 12.30 p.m. on 22 April 2021.
If you hold your ordinary shares in CREST, you may appoint a proxy by completing and transmitting a CREST Proxy Instruction form so that it is received by Computershare (under CREST participant ID 3RA50) by no later than 12.30 p.m. on 22 April 2021. The time of receipt will be taken to be the time from which Computershare is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. If a Shareholder believes they have a market claim they will need to contact their counterparty and settle bi-laterally.
If you have any questions about this document or the General Meeting, or are in any doubt as to how to complete the Form of Proxy, please call Computershare between 8.30 a.m. and 5.30 p.m. (London time) Monday to Friday (except public holidays in England and Wales) on (00) 353 1 447 5566. Please note that calls may be monitored or recorded, and Computershare cannot provide legal, tax or financial advice or advice on the merits of the proposed amendments to the Directors' Remuneration Policy and LTIP Rules.
The Board believes the proposed amendments to the Directors' Remuneration Policy and LTIP Rules are in the best interests of the Company and the Shareholders as a whole and recommends unanimously that Shareholders vote in favour of the Resolutions at the General Meeting, as the Directors intend to do in respect of their own beneficial holdings of 254,754 ordinary shares, representing approximately 0.2 per cent of the Company's existing ordinary share capital as at 29 March 2021, being the latest practicable date prior to the publication of this document.
Yours faithfully
Michael Cawley Chairman
Carl G. Shepherd Chairman of the Remuneration Committee
NOTICE IS HEREBY GIVEN that a GENERAL MEETING of Hostelworld Group PLC (the "Company") will be held at Floor 2, One Central Park, Leopardstown, Dublin 18, Ireland on 26 April 2021 at 12.30 p.m. (or any adjournment thereof) for the purposes of considering and, if thought fit, passing the following ordinary resolutions of the Company (the "Resolutions"), in connection with the Award to be made by the Company, as defined and described in the circular to the Company's shareholders dated 1 April 2021 (the "Circular"). For the purposes of this notice, capitalised terms used but not defined herein shall (unless the context otherwise requires) have the same meaning as ascribed to them in the Circular of which this notice forms part.
1 April 2021
Registered office Floor 2 2 Bedford Row London United Kingdom WC1R 4LR
Registered in England and Wales No. 09818705
by the CREST applications host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to a proxy appointed through CREST should be communicated to him by other means.
In light of the ongoing COVID-19 pandemic and the anticipated attendance arrangements for the General Meeting, a shareholder which would like to inspect any of these documents in person must submit a request to do so to [email protected]. Any such inspection will be subject to health and safety requirements, any limits on gatherings, social distancing or other measures imposed or recommended by the UK and Irish Government.
to communicate with the Company for any purposes other than those expressly stated.
Included in this Appendix is the Directors' Remuneration Policy (the "Policy"), as included in the 2018 Annual Report and as approved by Shareholders at the AGM on 31 May 2019, updated to reflect the proposed amendment to the Policy for which Shareholder approval is being sought by way of Resolution 1 at the General Meeting. The changes are set out in bold underline. It should also be noted that since 2021 is the final full financial year covered by the current Policy, a new Directors' Remuneration Policy will be tabled to Shareholders at the 2022 AGM which, subject to Shareholder approval, will determine the payments in respect of the 2022 financial year.
The Policy wording below excludes certain references which were specific to the version included in the 2018 Annual Report, such as details of the changes to the Policy from the Policy approved by Shareholders in 2016. In addition, certain details have been updated, for example to reflect the current composition of the Board. The section "Illustrations of the Application of the Remuneration Policy" has been updated to relate to the 2021 financial year and therefore includes the proposed Restricted Share Award and excludes the annual cash bonus scheme.
The Remuneration Committee has designed the policy around the following key principles:
The Remuneration Committee reviews annually the remuneration arrangements for the Executive Directors and key senior management, taking into consideration:
The following table sets out each element of remuneration and how it supports the Company's short and long term strategic objectives.
Element and link to Performance metrics, our strategic objectives Operation Opportunity weighting and assessment Base Salary Provides a base level of remuneration to support recruitment and retention of Executive Directors with the necessary experience and expertise to deliver the Company's strategy. Salaries are reviewed annually and any changes are effective from 1 January in the financial year. When determining an appropriate level of salary, the Remuneration Committee considers: • remuneration practices within the Company; • the performance of the individual Executive Director; • the individual Executive Director's experience and responsibilities; • the general performance of the Company; Base salaries will be set at an appropriate level within a comparator group of comparably sized listed companies and will normally increase in line with increases made to the wider employee workforce. Individuals who are recruited or promoted to the Board may, on occasion, have their salaries set below the targeted policy level until they become established in their role. In such cases subsequent increases in salary may be higher than the average until the target positioning is achieved. None
Provides a market competitive level of benefits to support recruitment and retention of Executive Directors with the necessary experience and expertise to deliver the Company's strategy.
The Executive Directors receive benefits which include, but are not limited to, family private health cover and life assurance cover (including tax if any).
• salaries within the ranges paid by the companies in the comparator group used
for remuneration benchmarking; and
• the economic environment.
The Remuneration Committee recognises the need to maintain suitable flexibility in the determination of benefits that ensure it is able to support the objective of attracting and retaining personnel.
Accordingly, the Remuneration Committee would expect to be able to adopt other benefits including (but not limited to) relocation expenses, tax equalisation and support in meeting specific costs incurred by Directors
The maximum will be set at the cost of providing the benefits described. None
Provide market competitive retirement benefits to support recruitment and retention of Executive Directors with the necessary experience and expertise to deliver the Company's strategy.
The Remuneration Committee maintains the ability to provide pension funding in the form of a salary supplement, which would not form part of the salary for the purposes of determining the extent of participation in the Company's incentive arrangements.
For existing Executive Directors, the maximum pension contribution as a percentage of basic salary is 10%.
For new Executive Directors appointed after approval of this policy, the maximum pension contribution will be in line with the contribution level provided to the majority of the workforce.
The Annual Bonus Plan provides an incentive to the Executive Directors linked to achievement in delivering goals that are closely aligned with the Company's strategy and the creation of value for shareholders.
In particular, the Plan supports the Company's objectives allowing the setting of annual targets based on the business' strategic objectives at that time, meaning that a wide range of performance metrics can be used.
The Remuneration Committee will determine the bonus payable after the year end based on performance against targets.
Annual bonuses are paid in cash after the end of the financial year to which they relate.
On change of control, the Remuneration Committee may pay bonuses on a pro rata basis measured on performance up to the date of change of control.
Malus will apply up to the date of the bonus determination and clawback will apply for two years from the date of bonus determination.
The maximum bonus opportunity as a % of base salary is 100%.
Bonus payouts are determined on the satisfaction of a range of key financial and non-financial objectives set annually by the Remuneration Committee.
None
In addition, the payment of any bonus will require the Remuneration Committee determining that the Company has delivered an acceptable level of performance during the year.
The Remuneration Committee retains discretion in exceptional circumstances to change performance measures and targets and the weightings attached to performance measures part-way through a performance year if there is a significant and material event which causes the Remuneration Committee to believe the original measures, weightings and targets are no longer appropriate. Discretion may also be exercised in cases where the Remuneration Committee believes that the bonus outcome is not a fair and accurate reflection of business performance.
Awards are designed to incentivise the Executive Directors to maximise returns to shareholders by successfully delivering the Company's objectives over the long term.
Awards are granted annually to Executive Directors under the LTIP. These vest at the end of a three-year period, normally subject to:
The Remuneration Committee may award dividend equivalents on awards to the extent that they vest.
Awards granted from 2019 onwards which vest after the end of the three-year performance period will be subject to an additional twoyear holding period. During this period the shares cannot be sold (other than as required for tax purposes).
The LTIP rules contain standard provisions to satisfy awards/dividend equivalents in shares.
Malus will apply for the threeyear period from grant to vesting with clawback applying for the two-year period post vesting.
Awards may be made up to 150% of base salary.
If exceptional circumstances arise, including (but not limited to) the recruitment of an individual, the Remuneration Committee may grant awards outside this limit up to a maximum of 200% of a participant's annual basic salary.
No more than 25% of the award will vest for threshold performance. 100% of the award will vest for maximum performance.
LTIP awards vest subject to the achievement of challenging performance conditions set by the Remuneration Committee prior to each grant. Awards granted in 2019 and 2020 were subject to performance measures based on Adjusted EPS and absolute TSR performance.
The Remuneration Committee may change the balance of the measures, or use different measures for subsequent awards during the policy period, as appropriate. No material change will be made to the type of performance conditions without prior shareholder consultation.
The Remuneration Committee retains discretion in exceptional circumstances to change performance measures and targets and the weightings attached to performance measures part way through a performance period if there is a significant and material event which causes the Remuneration Committee to believe the original measures, weightings and targets are no longer appropriate.
Discretion may also be exercised in cases where the Remuneration Committee believes that the vesting outcome is not a fair and accurate reflection of business performance.
The Restricted Share Award will operate as a retention mechanism in place of the 2021 annual cash bonus.
The Restricted Share Award will vest in two equal tranches, the first after the end of the 2021 financial year and the second after the end of the 2022 financial year. Vesting will be dependent on continued employment at the date of vesting and satisfactory personal performance. There will be no requirement to satisfy other performance conditions.
To the extent that the Restricted Share Award vests, it will not be subject to a twoyear post-vesting holding period.
The Remuneration Committee may award dividend equivalents on awards to the extent that they vest.
The LTIP rules contain standard provisions to satisfy awards/dividend equivalents in shares.
Malus will apply for the period from grant to vesting with clawback applying for the two-year period post vesting.
To encourage share ownership among Hostelworld employees and increase the alignment with shareholders.
The plan permits employees to purchase shares at the end of a three-year period at a discount of up to 20% of the market value of the shares at grant.
The maximum participation limit is as set out in the relevant legislation.
None (as is the norm for approved all-employee plans).
Shareholding Requirement
To support long term commitment to the Company and the alignment of Executive Director interests with those of shareholders.
The Remuneration Committee has adopted formal shareholding guidelines that will encourage the Executive Directors to build up and then subsequently hold a shareholding equivalent to 200% of their base salary. Adherence to these guidelines is a condition of continued participation in the equity incentive arrangements.
200% of salary None
The maximum grant level under the Restricted Share Award to be granted in 2021 is 112% of base salary.
N/A
The Company provides a level of fees to support recruitment and retention of Non-Executive Directors with the necessary experience to advise and assist with establishing and monitoring the Company's strategic objectives.
The Board as a whole is responsible for setting the remuneration of the Non-Executive Directors, other than the Chairman whose remuneration is considered by the Remuneration Committee and recommended to the Board.
Non-Executive Directors are paid a base fee and additional fees for acting as Senior Independent Director and as Chairperson of Board committees (or to reflect other additional responsibilities and/or additional/unforeseen time commitments).
Non-Executive Directors do not participate in any of the Company's incentive arrangements.
The base fees for Non-Executive Directors are set at an appropriate rate. None
In general, the level of fee increase for the Non-Executive Directors will be set taking account of any change in responsibility and will take into account the general rise in salaries across the workforce.
The Company will pay reasonable vouched expenses incurred by the Chairman and Non-Executive Directors, together with other benefits where considered necessary (and any related tax that may be payable).
Each year, the Remuneration Committee will choose the appropriate performance measures and targets to apply to the annual bonus scheme and LTIP. The measures will be closely aligned with Hostelworld's strategy and business priorities at the time.
Malus and clawback provisions within the annual bonus scheme and the LTIP apply in the following circumstances:
The Remuneration Committee has discretion in several areas of policy as set out in this report. The Remuneration Committee may also exercise operational and administrative discretions under relevant plan rules approved by shareholders as set out in those rules. In addition, the Remuneration Committee has the discretion to amend the policy with regard to minor or administrative matters where it would be, in the opinion of the Remuneration Committee, disproportionate to seek or await shareholder approval.
The Group aims to provide a remuneration package for all employees that is market competitive and operates the same reward and performance philosophy throughout the business. As with many companies, the Group operates variable pay plans primarily focused on mid to senior management level. In some cases, incentive structures and performance conditions apply which are different to those used for Executive Directors. The Remuneration Committee takes into account workforce remuneration and related policies when setting the policy for Executive Directors' remuneration.
The approach when setting the remuneration of any newly recruited Executive Director will be assessed in line with the same principles for the Executive Directors, as set out above. The Remuneration Committee's approach to recruitment remuneration is to pay no more than is necessary to attract candidates of the appropriate calibre and experience needed for the role from the market in which the Company competes. The Remuneration Committee is mindful that it wishes to avoid paying more than it considers necessary to secure the preferred candidate and will have regard to guidelines and shareholder sentiment regarding enhanced short term or long term incentive payments made on recruitment and the appropriateness of any performance measures associated with an award. Subject to the paragraph below, the incentive awards that can be received in any one year will not exceed the maximum individual limits as set out in the Remuneration Policy Table.
The Remuneration Committee's policy is not to provide sign-on compensation. In addition, the Remuneration Committee's policy is not to provide buyouts as a matter of course. However, should the Remuneration Committee determine that the individual circumstances of recruitment justified the provision of a buyout, the equivalent value of any incentives that will be forfeited on cessation of a director's previous employment will be calculated. This will take into account, among other things, the performance conditions attached to the vesting of these incentives, the likelihood of vesting and the nature of the awards (cash or equity). The Remuneration Committee may then grant a buyout up to the same value as the lapsed value, where possible, under the Company's incentive plans. To the extent that it is not possible or practical to provide the buyout within the terms of the Company's existing incentive plans the Remuneration Committee may in exceptional circumstances consider it appropriate to grant an award under a different structure to facilitate a buyout of outstanding awards held by an individual on recruitment.
Where an existing employee is promoted to the Board, the policy set out above would apply from the date of promotion but there would be no retrospective application of the policy in relation to subsisting incentive awards or remuneration arrangements. Accordingly, prevailing elements of the remuneration package for an existing employee would be honoured and form part of the ongoing remuneration of the person concerned. These would be disclosed to shareholders in the Annual Report on Remuneration for the relevant financial year.
The Company's policy when setting fees for the appointment of new Non-Executive Directors is to apply the policy which applies to current Non-Executive Directors.
Each of the Executive Directors has entered into a service contract with the Company.
| Date of service | Notice period by | Notice period by | ||
|---|---|---|---|---|
| Name | Position | agreement | Company (months) | Director (months) |
| Gary Morrison | Chief Executive Officer | 11 June 2018 | 12 | 12 |
| Caroline Sherry | Chief Financial Officer | 01 December 2020 | 6 | 6 |
The Non-Executive Directors have each entered into letters of appointment with the Company. Each independent Non-Executive Director's term of office runs for an initial period of three years unless terminated earlier upon written notice or upon their resignations. Non-Executive Directors are also subject to re-election at each AGM.
The date of appointment of each Non-Executive Director is set out below:
| Effective Date of | Notice period by | Notice period by | |
|---|---|---|---|
| Name | appointment | Company (months) | Director (months) |
| Michael Cawley | 14 October 2015 | 1 | 1 |
| Carl G. Shepherd | 1 October 2017 | 1 | 1 |
| Éimear Moloney | 27 November 2017 | 1 | 1 |
| Evan Cohen | 14 August 2019 | 1 | 1 |
The Remuneration Committee will honour Executive Directors' contractual entitlements. Service contracts do not contain liquidated damages clauses. If a contract is to be terminated, the Remuneration Committee will determine such mitigation as it considers fair and reasonable in each case. There are no contractual arrangements that would guarantee a pension with limited or no abatement on severance or early retirement. There is no agreement between the Company and its Executive Directors or employees providing for compensation for loss of office or employment that occurs because of a takeover bid. The Remuneration Committee reserves the right to make additional payments where such payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation); or by way of settlement or compromise of any claim arising in connection with the termination of an Executive Director's office or employment; or in relation to the provision of outplacement or similar services.
When determining any loss of office payment for a departing individual the Remuneration Committee will always seek to minimise cost to the Company whilst seeking to address the circumstances at the time.
| Remuneration element | Treatment on exit | |
|---|---|---|
| Salary, benefits and pension | Salary, benefits and pension will be paid over the notice period. The Company has discretion to make a lump sum payment on termination equal to the salary, value of benefits and value of company pension contributions payable during the notice period. In all cases the Company will seek to mitigate any payments due. |
|
| Annual Bonus Plan | Good leaver reason – pro-rated to time and performance for year of cessation. |
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| Other reason – no bonus payable for year of cessation. | ||
| LTIP | Good leaver reason – Pro-rated to time and performance (where applicable) in respect of each subsisting LTIP award. |
|
| Other reason – Lapse of any unvested LTIP awards. | ||
| The Remuneration Committee has the following elements of discretion: |
||
| • to determine that an executive is a good leaver. It is the Remuneration Committee's intention to only use this discretion in circumstances where there is an appropriate business case which will be explained in full to shareholders; |
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| • to measure performance (where applicable) over the original performance period or at the date of cessation. The Remuneration Committee will make this determination depending on the type of good leaver reason resulting in the cessation; |
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| • The Remuneration Committee's policy is generally to pro rate to time from the date of grant to the date of cessation. It is the Remuneration Committee's intention to only use its |
discretion to adopt a different approach to pro-rating in circumstances where there is an appropriate business case which will be explained in full to shareholders.
A good leaver reason may include cessation in the following circumstances:
Cessation of employment in circumstances other than those set out above is cessation for other reasons.
The Remuneration Committee's policy on the vesting of incentives on a change of control is summarised below:
| Name of Incentive Plan | Change of Control | Discretion |
|---|---|---|
| Annual Bonus Plan | Pro-rated to time and performance to the date of the change of control. |
The Remuneration Committee has discretion to continue the operation of the Plan to the end of the bonus year. |
| LTIP | The number of shares subject to subsisting LTIP awards vesting on a change of control will be pro-rated to time and performance (where applicable). |
The Remuneration Committee retains absolute discretion regarding the proportion vesting, taking into account time and performance (where applicable). |
| Options to the extent vested may be exercised at any time during the period of six months following the change of control and if not so vested will lapse at the end of such period unless the Remuneration Committee determines that a longer period shall apply. |
There is a presumption that the Remuneration Committee will pro-rate to time. The Remuneration Committee will only waive pro-rating in exceptional circumstances where it views the change of control as an event which has provided a material enhanced value to shareholders which will be fully explained to shareholders. In all cases the performance conditions (where applicable) must be satisfied. |
The charts below illustrate the remuneration that would be paid to each of the Executive Directors, based on current salaries, under three different performance scenarios: (i) Minimum; (ii) On-target; and (iii) Maximum. The elements of remuneration have been categorised into three components: (i) Fixed; (ii) Restricted Share Award; and (iii) LTIP, with the assumptions set out below:
| Element | Minimum | On-Target | Maximum |
|---|---|---|---|
| Salary, benefits and pension | Included | Included | Included |
| Restricted Share Award | 112% of salary | 112% of salary | 112% of salary |
| LTIP | No LTIP vesting | 62.5% of maximum | CEO: 125% of salary* |
| opportunity | CFO: 100% of salary* |
*Illustration based on the size of the proposed 2021 LTIP Grant for the Directors.
Dividend equivalents have not been added to the Restricted Share Award or the LTIP award. In line with UK reporting regulations, the maximum column has been extended to reflect the potential impact of 50% share price appreciation on the LTIP shares which vest.
The Remuneration Committee considers pay and employment conditions across the Company when reviewing the remuneration of the Executive Directors and other senior employees. In particular, the Remuneration Committee considers the range of base pay increases across the Group as well as wider workforce remuneration and related policies.
The Remuneration Committee takes the views of shareholders seriously and these views are taken into account in shaping remuneration policy and practice. Shareholder views are considered when evaluating and setting remuneration strategy and the Remuneration Committee commits to consulting with key shareholders prior to any significant changes to its remuneration policy.
Subject to Shareholder approval of Resolution 2 contained within the Notice of General Meeting, the Directors propose to delete the following Rule 2.2 from the rules of the Long-Term Incentive Plan, and to make any consequential amendments to the rules as may be required to reflect the deletion of Rule 2.2.
An Award may not be granted if the result of granting the Award would be that the aggregate number of Plan Shares issued or committed to be issued in the preceding 10 year period under:
would exceed 5 per cent of the Company's issued ordinary share capital at that time.
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