Remuneration committee report

The Chairman’s statement

The board and remuneration committee are pleased to present the remuneration report, which sets out our remuneration philosophy, policy and the outcomes for executive and non-executive directors. This report is aligned to best practice, taking into account King IV™ and the JSE Listings Requirements.

We have presented the remuneration report in three parts with part one being the chairman’s statement providing context to decisions taken by the remuneration committee; part two setting out the remuneration policy and philosophy; and part three providing details of actual remuneration for the year under review.


The past 18 months have seen significant organic and acquisitive growth in Stor-Age’s portfolio, and our position as sector specialists remains critical if we are to achieve our future growth ambitions. In light of this, we recognise the importance of ensuring competitive remuneration structures to attract and retain talented employees with the appropriate skills to execute our business strategy.

During the year, the remuneration committee:

  • considered salary levels against the market, as well as company and individual performance, and approved salary increases;
  • reviewed non-executive director remuneration (to be approved by shareholders);
  • reviewed and approved the 2018 remuneration report;
  • considered the concept of fair and responsible remuneration and its application within Stor-Age;
  • considered methods for the investigation and rectification of pay disparities within Stor-Age, as well as the result of equal pay for work of equal value;
  • conducted total remuneration benchmarking for executive directors; and
  • commenced with a review of the remuneration mix, looking specifically at the introduction of variable remuneration and alternative long-term incentive schemes.

The remuneration committee mandated management to obtain the support, advice and opinion of PwC as an external adviser on various remuneration-related matters during the period under review. The assistance of PwC in this regard was satisfactory, and the remuneration committee is of the view that they operated independently.

Forward-looking considerations

We are of the view that Stor-Age is now entering a new phase of managing its growth trajectory and is maturing as a listed company.

Since listing in November 2015, Stor-Age has consistently delivered strong trading results. The current executive directors, being the founders of the business, have played a significant role in this growth. Over the past three years, the executive directors have received a basic salary with no variable remuneration, and received a modest 6.0% increase in the year under review despite an exceptional performance. Further, no increase was awarded in 2016. Executive director remuneration is considerably lower when compared to our peers in the REIT sector.

Stor-Age’s future success depends on attracting and retaining talented, experienced and motivated individuals. Outside of the executive directors, we have assembled a senior management team equally fundamental to maximising shareholder value and ensuring sustainable growth. The development and retention of this talent, particularly the specialist skills specific to the self storage sector, are critical to realising long-term value creation.

It is therefore necessary for us to enhance our remuneration structures with a variable portion, including both short- and long-term incentives, which retains, motivates and rewards employees appropriately. The remuneration committee is subsequently reviewing the current remuneration structure against best practice and, where appropriate, will consult with shareholders regarding future proposals.


We express our gratitude for the continued support received from our shareholders and are committed to upholding the trust earned among our stakeholders.

At the annual general meeting (“AGM”) held in 2017, Stor-Age received an 83.6% non-binding advisory vote in favour of our remuneration policy.

In line with King IV™, Stor-Age will table the remuneration policy and implementation report for two separate non-binding advisory votes at the AGM. If shareholders do not approve both by more than 75%, the board will institute a formal engagement process with interested shareholders to assess their views and determine the actions needed to resolve concerns.

Stor-Age has delivered another set of pleasing results in 2018. We look forward to embarking on a journey to better align our remuneration practices with our strategy, and to ensure our remuneration policies and practices are transparent and fair. We trust our efforts will be welcomed by shareholders and reflect, yet again, a favourable outcome at the AGM.

Gareth Fox

Remuneration committee Chairman

11 July 2018

The remuneration policy

This remuneration policy is subject to an advisory vote by shareholders at the AGM to be held on 23 August 2018.

Remuneration governance

The remuneration committee was appointed by the board and has delegated authority to review and make decisions regarding Stor-Age’s remuneration policy and the implementation thereof. The remuneration committee is governed by its terms of reference as formally adopted by the board. Its responsibilities include, among other things:

  • overseeing the board’s formulation, review and approval of the remuneration policy for employees and executive directors in line with Stor-Age’s strategic goals;
  • assisting the board to ensure that executive directors are remunerated fairly and responsibly and in line with remuneration for employees throughout Stor-Age;
  • recommending to the board the proposed allocations of Stor-Age’s share purchase and option scheme;
  • approving the executive directors’ basic salary and increases thereto, as well as approving the increases for employees throughout Stor-Age; and
  • approving remuneration payable to non-executive directors in their respective roles as members of the board or its subcommittees.

The remuneration committee members and their meeting attendance are set out in corporate governance. Other board members, external consultants and key individuals may attend remuneration committee meetings by invitation and contribute to remuneration-related matters. However, they may not vote on any matters.

Remuneration philosophy

Stor-Age’s remuneration policy seeks to attract and retain high-calibre and appropriately skilled employees and executive directors. Stor-Age’s philosophy is that employees should be fairly remunerated and rewarded for their contribution. An integral part of this philosophy is to align the interests of employees with those of Stor-Age’s shareholders by providing meaningful equity participation.

Historically, Stor-Age has provided executive directors with a basic salary. As founders of the business, the remuneration philosophy reflected the executive directors’ commitment to its long-term success and, to a large extent, their desire to prove the sustainability of the business model in the initial years post the listing.

As Stor-Age has matured and grown its portfolio, this philosophy should adapt in line with the next phase of Stor-Age’s life cycle. As set out in the chairman’s statement, the remuneration committee and management are currently working together to determine the appropriate remuneration structures for this next phase.

Basic salary

Taking into account market trends and competitiveness, the remuneration committee and the board regularly review the appropriate remuneration mix to ensure it supports Stor-Age’s strategic objectives. Currently, the remuneration mix for executive directors consists of a basic salary only.

The basic salary is a pre-determined cash amount without any further benefits. The basic salary paid to the executive directors is set out in note 26.4 of the annual financial statements. The annual increase to the basic salary of executive directors is determined alongside the increases for basic salaries of employees throughout Stor-Age.

Benchmarking exercises are conducted to analyse the market-relatedness and competitiveness of the basic salary and the remuneration mix as a whole. In 2018, the remuneration committee appointed an external consultant, PwC, to benchmark executive director remuneration. The results thereof were taken into account to determine the increase to the basic salary of executive directors for the year ending 31 March 2019.

Short-term incentives

As mentioned above, executive directors do not currently participate in any short-term incentive schemes.

Share purchase and option scheme

Stor-Age introduced a share purchase and option scheme (“share purchase scheme”) on listing. This serves as a mechanism to create ownership opportunities for the executive directors and selected senior and middle management employees (including store operations managers). Selected individuals are offered the opportunity to acquire Stor-Age shares by way of an interest-bearing loan. To be eligible, these individuals must be employed by Stor-Age for more than one year and have an above-average performance rating.

The share purchase scheme provides for the grant of options and for the purchase of shares on market-related terms. No options have been granted to date.

The share purchase scheme is aligned with our Core Value of Sustainability. Broadening employee participation in the share purchase scheme further supports the board’s objective of building a sustainable organisation. It enables employees to share in Stor-Age’s success and creates alignment between employees and shareholders to maximise shareholder value. No non-executive directors have participated in the share purchase scheme and, in line with best practice, participation will not be extended to non-executive directors.

Post the finalisation of Stor-Age’s year-end results, the executive directors make an annual recommendation to the remuneration committee to allocate shares to new and existing participants. The remuneration committee evaluates the merits of the recommendation and, where appropriate, approves the allocation of shares.

The share purchase scheme is essentially a ‘management buy-in’ plan and exposes participants to real financial risk of share price growth and the repayment of the full loan for the purchase of the shares. This includes instances where the share price decreases from purchase date.

The features of the share purchase scheme are as follows:

  • Ownership of the share purchase scheme shares vest immediately.
  • The shares are pledged as security against the loan.
  • The loan bears interest at a fixed interest rate per annum, compounded monthly and capitalised to the loan. The interest rate is determined by reference to the forecast annual distribution per share, expressed as a percentage of the share price, at the time of the award.
  • Dividends received on the shares held by the beneficiaries are applied to the interest payable.
  • The maximum period for the repayment of the loan is ten years. The loan is repayable in cash.

During the year under review, 3 510 000 shares were issued to participants under the share purchase scheme. Further details are set out in note 4 of the annual financial statements. At 31 March 2018, 15 589 440 shares were issued under the share purchase scheme. This represents 5.1% of total shares in issue at the date of this report.

All employee remuneration

All employees receive a basic salary at a level appropriate for the role and responsibilities. Stor-Age regularly reviews the basic salary of all employees to ensure it remains market related. Employee salaries (excluding directors) are reviewed annually, taking account of individual and overall company performance, as well as an employee’s experience, qualifications and responsibilities.

Store-based operations employees are paid commission in addition to their basic salaries. This is based on performance relative to their budgets and achieving pre-defined targets. Other permanent employees (excluding directors) receive a component of variable remuneration dependent on their respective employment grade and individual performance.

Fair and responsible remuneration

Stor-Age is committed to fair and responsible pay practices in line with its duty to remain a responsible corporate citizen. Various factors are taken into account when considering fair and responsible pay practices, such as sustainability and Stor-Age’s strategic objectives. Internal pay levels are reviewed on an ongoing basis to ensure alignment with the principle of equal pay for work of equal value. Furthermore, the remuneration committee is mandated to ensure that executive director remuneration is justifiable against remuneration levels of employees throughout the company.

Service agreements, retention strategy and termination arrangements

The executive directors are permanent employees and their employment contracts include a two-month notice period, with no restraints of trade. There are no contractual obligations to the executive directors in respect of separation or termination payments.

Non-executive directors’ remuneration

Non-executive directors do not hold contracts of employment with Stor-Age and do not participate in any short-term or long-term incentives. Remuneration for non-executive directors comprises an annual retainer. Disbursements for reasonable travel and subsistence expenses are reimbursed to non-executive directors in line with the reimbursement policy for employees.

Remuneration for non-executive directors is reviewed on an annual basis taking into account the responsibilities borne by non-executive directors, as well as relevant external market data. Fees are benchmarked against a peer group of JSE-listed companies in the REIT sector.

The remuneration committee recommends the non-executive directors’ remuneration structure to the board for approval. This remuneration structure is further recommended to shareholders for approval at the AGM.

The remuneration to be paid to the non-executive directors for the year ending 31 March 2019 was approved at the AGM held on 24 August 2017 and is set out below. The proposed remuneration for the year ending 31 March 2020, contained within the notice of the AGM, is set out below:

The proposed increases to non-executive director remuneration are considered against the average increase levels approved across Stor-Age, as well as against the results of benchmarking performed.

The implementation report

This implementation report is subject to an advisory vote by shareholders at the AGM to be held on 23 August 2018.

Company performance versus average growth in executive directors’ remuneration

Stor-Age was incorporated on 25 May 2015. On 16 November 2015, its shares were listed and began trading on the JSE. The table below compares certain performance measures against the average executive directors’ basic salary increase percentages over the past two years.

HEPS – headlines earnings per share
NAV – net asset value

Basic salary

Executive director salaries are reviewed annually. For the year ending 31 March 2018, the remuneration committee approved an increase of 6.0% for executive directors. This was lower than the average increase for other employees. During the year, the remuneration committee engaged PwC to prepare an external benchmarking report, and used the result as a reference point to determine the quantum of the increase for the year ending 31 March 2019. After careful consideration, the remuneration committee approved an average basic salary increase of 17.5% for executive directors for the year ending 31 March 2019.

The remuneration committee approved an average basic salary increase of 7.5% for other employees on 30 September 2017. A similar average increase in basic salaries is expected at the next annual review date, i.e. 30 September 2018.

In line with Stor-Age’s commitment to fair and responsible remuneration, the remuneration committee carefully considered the increase levels of executive directors against the increase levels throughout the company and they are satisfied that it is in line with Stor-Age’s policy. It should also be noted that no salary increases were accepted by the executive directors in 2016 and 2017, reflecting their commitment to the long-term success of the company.

Executive director remuneration

In line with the requirements of King IV™ and the JSE Listing Requirements, the table below sets out the total remuneration on a single-figure basis received by executive directors in 2017 and 20181. Currently, Stor-Age does not have a short-term incentive in place. Shares awarded to the executive directors under the share purchase scheme are not considered to be remuneration. No other remuneration or benefits were paid to executives during the year.

1 While it is recommended practice to insert a pay mix chart showing the allocation of total guaranteed package and short-term and long-term incentives, we have chosen to exclude this as total remuneration comprises salary only, as evident in the table above.

Directors’ interests in shares acquired in terms of the share purchase and option scheme

While the share purchase scheme provides for the award of options, no options have been awarded to date. Selected participants of the share purchase scheme acquired shares on the basis of an offer to purchase Stor-Age shares by way of an interest-bearing loan to build up a shareholding and share in the success of the company.

Although the awarding of shares is not considered to be remuneration, it does impact the executive directors’ shareholding in Stor-Age and ensures alignment with shareholders. We have therefore chosen to include these details in the remuneration report.

The table below provides details of the current shareholding, outstanding loan and the fair value of the shares relating to the executive directors under the share purchase scheme. The value to the executive directors is equal to the fair value of the shares less the outstanding balance of the loan.

31 March 2018

31 March 2017

Further details relating to the share purchase scheme and the shareholding of the executive directors are set out in note 4 and 26.3 of the annual financial statements.

Non-executive director remuneration

The table below sets out the remuneration paid to non-executive directors:

The remuneration to be paid to the non-executive directors for the year ending 31 March 2019 (approved at the AGM held on 24 August 2017), as well as the proposed remuneration for the year ending 31 March 2020 (to be approved by shareholders at the forthcoming AGM), is set out in the remuneration report.

This report was approved by the remuneration committee and the board. Both are satisfied that there were no material deviations from the existing remuneration policy during the 2018 financial year.