Introduction
This report has been prepared in accordance with the Directors’
Remuneration Report Regulations 2002 which introduced new
statutory requirements for the disclosure of directors’
remuneration in respect of this financial year.
The report also meets the relevant requirements of the Listing
Rules of the Financial Services Authority and describes how the
board has applied the Principles of Good Governance relating
to directors’ remuneration. As required by the Regulations, a
resolution to approve the report will be proposed at the Annual
General Meeting of the company at which the financial
statements will be approved.
The regulations also require the auditors to report to the
company’s members on certain information within this report and
to state whether in their opinion that part of the report has been
properly prepared in accordance with the Companies Act 1985
(as amended by the Regulations). The report is therefore divided
into separate sections for audited and unaudited information
Unaudited Information
Remuneration Committee
The company has a Remuneration Committee which is
constituted in accordance with the recommendations of the
Combined Code. The Committee is chaired by Edward Astle and
its other members are Roger McDowell and Thomas Ivarson.
Gordon Crawford was also a member of the Committee until his
retirement on 30 September 2003 upon which Thomas Ivarson
was appointed as his replacement.
None of the Committee has any personal financial interests (other
than as shareholders), conflicts of interests arising from cross-directorships
or day-to-day involvement in running the business.
No Director plays a part in any discussion about his or her own
remuneration.
The Remuneration Committee met three times during the
financial year. It has responsibility for making recommendations
to the Board on the Company’s policy on staff remuneration and
for the determination, within agreed terms of reference, of
specific remuneration packages for each of the Executive
Directors and senior management (including pension rights
and any compensation payments).
| The primary responsibilities of the Committee are to: |
 |  | make recommendations to the Board on the Company’s policy
on Directors’ and senior staff remuneration, and to oversee
share option schemes; |
| | set remuneration at a level appropriate to the responsibility
and experience of the Directors; |
| | ensure that such remuneration is adequate to attract and
retain Directors and staff of the required calibre; and |
| | ensure that remuneration is in line with current industry
practice, and set in light of pay and conditions of other staff
within the Group. |
Remuneration Policy |
| Executive remuneration packages are: |
| | designed to attract, motivate and retain Directors of the calibre
needed to maintain the Company’s position as a market leader
within the IT and telecoms industry; |
| | designed to align the interests of executives with shareholders;
and |
| | constructed with a substantial performance-related element
set against appropriately demanding targets. |
The performance measurement of the Executive Directors and
key members of senior management, and the determination
of their annual remuneration packages, are undertaken by the
Committee. The remuneration of the non-Executive Directors
is determined by the Board. In determining the directors’
remuneration for the year the Committee consulted the
Executive Directors about its proposals.
There are four main elements of the remuneration package for
Executive Directors:
| (a) | | basic salary; |
| (b) | | flexible benefits (including pension arrangements). |
| (c) | | annual bonus payments which cannot exceed 100% of basic salary; and |
| (d) | | share option incentives. |
The company’s policy is that a substantial proportion of the
remuneration of the Executive Directors should be performance
related. As described below, Executive Directors may earn annual
incentive payments of up to 100% of their basic salary together
with the benefits of participation in share option schemes.
Basic Salary
An Executive Director’s basic salary is normally reviewed annually,
and paid as a fixed cash sum monthly. The Remuneration
Committee, in determining salary adjustments, considers
increased responsibilities such as the size of the Group, individual
performance and contribution, and pay market pressures. No
increases in basic salary arrangements have been made for the
current or preceding financial year.
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Flexible Benefits (Including Pension Arrangements)
Intec operates a flexible benefits scheme for all staff and
Directors, under which they may choose how a benefits
allowance of 24 per cent of salary is allocated towards a range
of employee benefits, including holiday (ten days maximum) in
excess of the statutory minimum of twenty days and voluntary
contributions to a personal pension scheme. Any unallocated
amounts will be paid monthly in cash. Outside of the flexible
benefits scheme, all staff and the Directors are also entitled to
private medical insurance and death in service benefit. These
benefits are consistent with the preceding financial year.
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Annual Bonus Payments
The Directors believe that retaining a workforce which is
motivated to achieve the Group’s objectives is fundamental to its
continued prosperity. Accordingly, Executive Directors are eligible
to participate in a performance related annual bonus scheme. The
maximum potential bonus for any individual, together with the
associated performance measures and targets, are set by the
Remuneration Committee.
The 2003 Directors’ bonus plan payout is based on stepped
achievement of group earnings before interest, tax and goodwill
amortisation “EBITA”(including the bonus charge). For the year
ended 30 September 2002, EBITA was £2.2 million. The 2003
EBITA targets were set at challenging levels to promote real
growth within the business and are as follows:
As EBITA was £5.4m for the year ended 30 September 2003
(2002: £2.2 million), 100% of potential bonus is payable to the
Executive Directors and bonuses have therefore been earned this
year for the first time since the company’s financial year ended 30
September 2000.
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Share Options
The Group operates the Intec Company Share Option Scheme
(“Company Scheme”) which is constituted by rules, and includes
a section which has been approved by the Inland Revenue under
the Income and Corporation Taxes Act 1988 (“UK Approved
Section”). The Remuneration Committee may select eligible
employees and full-time Directors of the Company and its
participating subsidiaries, nominated by the Directors, to receive
options over Ordinary Shares in the Company.
During the year options were granted to directors amounting to
1.2x basic salary. The options are exercisable over a three year
period from the date of announcement of the 2003 results and
vest according to achievement of earnings as follows:
The exercise price of all options under current option schemes is
equal to the market value of the Company’s shares at the time
when the options were granted.
The rationale behind the grant of such options is to incentivise
as well as to strengthen the links between the interests of the
option holders and those of the shareholders. Whilst the
normal ABI guidelines recommend that options are linked
to performance over a three year period, the Intec plan is
comparable to US high tech sector companies and such a
plan is required to ensure international competitiveness.
The company does not operate any long-term incentive schemes.
No significant amendments are proposed to be made to the
terms and conditions of any entitlement of a director to share
options.
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Directors’ Contracts
The Directors’ service contracts are terminable on 12 months’
prior written notice by either party, but the Company has the
option to terminate the agreement immediately at any time on
making a payment of salary in lieu of the notice period. Copies of
Directors’ service contracts will be available for inspection at the
Annual General Meeting.
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Non-Executive Directors
Each of the non-Executive Directors (Mr Roger McDowell, Mr Edward Astle and Mr Thomas Ivarson) is engaged on letters of
appointment. Thomas Ivarson’s appointment is subject to re-appointment by the Board at the next AGM. Appointments are terminable
on three months’ prior written notice or in the event that the non-Executive Director ceases to be a Director of the Company. Each
non-Executive Director receives annual fees of £25,000. Non-Executive Directors are entitled to directors’ and officers’ liability insurance
cover under any scheme established by the Company.
Non-Executive Directors do not participate in share option or bonus schemes.
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Performance Graph
The following graph shows the Group’s total shareholder return compared to the performance of the FTSE Software and Services Index
for the year ended 30 September 2003.
Intec Telecom Systems vs Index (Total Return) – one year
In addition the following graph shows the company’s performance, measured by total shareholder return, compared with the
performance of the FTSE Software and Services Index for the period since the company floated in June 2000:
Intec Telecom Systems vs Index (Total Return) – since June 2000
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Audited Information
Table A — Emoluments of the Directors
There have been no increases in Directors’ salaries during the current year. Performance related bonuses are determined by the Board,
after recommendation by the Remuneration Committee, and are based on the performance targets described earlier in this report.
The Group has achieved performance levels at which 100% of the bonus entitlement for 2003 became payable.
Table B — Interests of the Directors
The interests of the Directors and their immediate families, both beneficial and non-beneficial, in the ordinary shares of the Company
were as follows:
The above interests are in the ordinary share capital of the Company. No Director had any beneficial interest in any share capital of
other Group companies or in any debenture of any Group company. As at 24 November 2003 there were no changes to the interests
of the Directors as stated above.
Table C — Share Options
Options to subscribe for or acquire ordinary shares of the Company were held by the following Directors during the year:
Edward Astle
Chairman, Remuneration Committee
24 November 2003
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Directors’ Remuneration Report