Fair and responsible remuneration

Our performance and pay outcomes in FY23

The Group maintained strong operational and financial performance during FY23. Pursuant to our Strategic Review process seeking to unlock value for shareholders, we sold Analysys Mason in September 2022 and returned the sale proceeds to shareholders by means of a special dividend of US$158 million.

The performance of Westcon International during FY23 was excellent representing a continuation of the impressive turnaround and development of the business which has been achieved since the sale of Westcon Americas in 2018.

• Executives received no increase in guaranteed pay for FY23
• Likewise, non-executive directors' fees were not increased
• STIs earned for FY23 reduced compared to FY22 primarily because the uEPS target was not met
• The Westcon International Equity Appreciation Plan ("EAP") crystallised in March 2023 with significant reward for Westcon International management and the Datatec executive directors
• The CSP awards granted in May 2020 with a performance period that ended 28 February 2023 vested at 100%, because TSR and uEPS growth target performance conditions were achieved

These principles are enshrined in the three main elements of remuneration:

The STI is calculated in relation to base salary as follows:

Base salary x on-target STI percentage x [(personal score x personal weighting) + (corporate score x corporate weighting)]

For executive directors and some senior management:

• 75% corporate, 25% personal weighting
• Changed slightly for FY24 to 80% corporate and 20% personal weighting because of the addition of a 5% working capital metric for Logicalis LATAM added to the corporate component

Other senior management:

• 50% corporate, 50% personal (with exceptions where appropriate as agreed by the Remuneration Committee) weighting

Shareholder engagement

The Remuneration Committee maintains a programme of shareholder consultation to ensure shareholders' views on remuneration are properly addressed by the committee and considered in the Group's remuneration policy and implementation practices.

During FY23, consultation was held in January/February 2023 with Maya Makanjee, Chair of the Board; Stephen Davidson, Chair of the Remuneration Committee; and Deepa Sita, independent non-executive director and member of the Remuneration Committee visiting investment managers to address remuneration-related issues among other ESG matters.

The FY22 remuneration policy was put before shareholders for an advisory vote at the AGM on 27 July 2022 and received support from 95.6% of shares voted (2021: 93.0%). The FY22 remuneration implementation report was put before shareholders for an advisory vote at the AGM on 27 July 2022 and received support from 96.2% of shares voted (2021: 64.7%).

Other topics of discussion with shareholders during the consultation process included the development of fair and responsible pay reporting and the South African Companies Act amendments currently under consideration and their potential impact on remuneration committees and reporting of remuneration.

Shareholders and the committee both value the consultation process which has been continuing for a number of years now and will continue with further engagement in the next financial year.

Future focus areas

The committee intends to continue the consultation process with shareholders and discuss the continuing evolution of the remuneration policy focusing on ESG and inclusion of environmental metrics in remuneration. The committee will continue to focus its oversight on fair and responsible pay, diversity, equity and inclusion and talent management throughout the Datatec Group.

The Chair of the Remuneration Committee is very pleased to welcome the appointment of Dina Knight as Datatec Group Chief People Officer in February 2023 and look forward to her professional support of the committee's work.

FY24 metrics

The corporate financial goals constitute 80% of the total STI for FY24. These targets include underlying earnings per share and EBITDA (with the relative weighting amended as described above). Also included are cash management/working capital targets with separate metrics for Westcon International, Logicalis International and Logicalis LATAM which match the working capital metrics included in the STI of management of the three divisions.

FY24 STI structure

1) Underlying earnings per share			US cents	Bonus		Target
Lower guard-rail		-12%		40%		35%
On target		Budget		100%
Upper guard-rail		12%		160%

2) Adjusted EBITDA			US$ million	Bonus		Target
Lower guard-rail		-14%		40%		30%
On target		Budget		100%
Upper guard-rail		14%		160%

3a) Westcon International working capital – net working capital days			Days	Bonus		Target
Lower guard-rail		10%		40%		5%
On target		Target		100%
Upper guard-rail		-10%		160%

3b) Logicalis International working capital – operating cash conversion			US$ million	Bonus		Target
Lower guard-rail		-20%		40%		5%
On target		Target		100%
Upper guard-rail		20%		160%

3c) Logicalis LATAM working capital – operating cash conversion			US$ million	Bonus		Target
Lower guard-rail		-20%		40%		5%
On target		Target		100%
Upper guard-rail		20%		160%

4) Personal KPIs – CEO and CFO
ESG – predominantly E – environmental – 10%			20%
Reduce structural discount/strategic review – 10%
Total on-target bonus			100%

The FY24 targets for uEPS, adjusted EBITDA and working capital metrics based on budget are not shown as this is commercially sensitive information but will be fully disclosed next year in the Implementation section of the FY24 remuneration report.

The personal KPIs agreed by the committee for the executive directors for FY24 are as follows:

• ESG – predominantly E – environmental to be assessed by achievement against the responsible business development timeline planned achievements for FY24.
• Reduce structural discount/strategic review – initiatives to achieve value generation during FY24.

FY23 bonus outcome

For the CEO:

• ESG – during FY23 the Group expedited its responsible business programme to drive improvements particularly in the environmental and social aspects of ESG. The progress made is reflected in the Group's Integrated Report. Notable achievements include: EcoVadis assessment, UN Global Compact; TCFD supporter; GRI and JSE Gap Analysis; CDP reporting of all entities in the Group; Net Zero Commitment (SBTi). The committee considered that the CEO's direction and close involvement in championing responsible business merits an achievement of 12% for this KPI (target 10%).
• Leadership (operational and organisational) – the Remuneration Committee considered how the CEO has led the Group while promoting its values and Code of Conduct. This was done utilising a Culture Scorecard which allowed quantitative assessment of five components:
  • Behaviour
  • Proportion of employees who completed training in ethics
  • Proportion of employees who completed training in cyber security
  • Safety and cyber metrics
  • People
    • Turnover rate of direct reports/leadership team
    • Employee engagement survey/employee pulse

The overall assessment of the Leadership category was determined to be 5.52%, above the target of 5%.

• Reduce structural discount – progress on the Strategic Review announced in August 2021 was assessed during FY23. The sale of Analysys Mason and consequent special dividend distributing US$158 million to shareholders was a significant value realisation event and the committee considered this metric to have been overachieved and awarded a 16% rating (target 10%).

For the CFO:

• ESG – the CFO's role in ESG has been to support the CEO in leading the responsible business process and the committee concluded an achievement of 12% for this KPI was merited (target 10%).
• Leadership (operational and organisational) – the Remuneration Committee considered how the achievement of the CEO against the Culture Scorecard metrics noted above should translate to the CFO in assessing how he has led the finance teams across the Group while promoting its values and Code of Conduct. This was assessed to be 5.44% (target 5%).
• Reduce structural discount – the committee assessed that the CFO's input on the Strategic Review has been highly effective in support of the CEO especially in relation to the Analysys Mason sale transaction and therefore the same achievement of 16% (target 10%) for this metric is merited.

FY23 bonus outcome

1) Underlying earnings per share		US cents	Bonus			Target		Outcome CEO		Outcome CFO
Actual		7.9	0%
Lower guard-rail		15.0	40%			35%		0.0%		0.0%
On target		17.4	100%
Upper guard-rail		19.0	160%

2) Adjusted EBITDA		US$ million	Bonus			Target		Outcome CEO		Outcome CFO
Lower guard-rail		163	40%			30%		29.1%		29.1%
Actual		188	97%
On target		190	100%
Upper guard-rail		216	160%

Note: Budget and actual figures have been adjusted by adding Analysys Mason adjusted EBITDA in H1.

3a) Logicalis working capital - operating cash conversion		US$ million	Bonus			Target		Outcome CEO		Outcome CFO
Lower guard-rail		67	40%
On target		84	100%			5%		6.0%		6.0%
Actual		101	120%
Upper guard-rail		105	160%

3b) Westcon working capital - net working capital days		Days	Bonus			Target		Outcome CEO		Outcome CFO
Lower guard-rail		21	40%			5%		8.0%		8.0%
On target		19	100%
Upper guard-rail		17	160%
Actual		12.1	160%

4) Personal KPIs - CEO and CFO					Target		Outcome CEO		Outcome CFO
ESG			10%
Leadership (operational and organisational)			5%		25%		33.5%		33.4%
Reduce structural discount			10%
Total on-target bonus					100%		76.6%		76.5%

The achievement of the targets translated into the following bonus payment for FY23:

Executive director		Base salary (A)	On-target bonus rate (B)	Weighted corporate score (target 75%) (C)	Weighted personal score (target 25%) (D)	Final STI (A x B x (C + D))
Jens Montanana (CEO)		1 200 000	175%	43.1%	33.5%	1 608 275
Ivan Dittrich (CFO)		530 000	95%	43.1%	33.4%	385 200

The targets and outcomes of the annual bonuses of the executive directors for FY23, shown as a percentage of base salary and split by the bonus elements, are illustrated below.

Please refer to the remuneration report in the Datatec 2023 Annual Report for information on non-executive directors' fees.

Single figure remuneration of executive directors

The following tables show the composition of a single figure of remuneration for the executive directors:

			CEO		CFO
Component			FY23 US$'000	FY22 US$'000	FY23 US$'000	FY22 US$'000
LTI		CSP	2 256	372	797	131
		WI EAP	6 600	–	3 300	–
Total LTI			8 856	372	4 097	131
STI		Cash	1 136	1 953	300	494
		Deferred	473	624	85	124
Total STI			1 609	2 577	385	618
Pension			214	214	84	84
Benefits			49	59	50	49
Base salary			1 200	1 200	530	530
Guaranteed package			1 463	1 473	664	663
			11 928	4 422	5 146	1 412

LTI
CSP

The remuneration from the CSP shown for FY23 is the fair value of the award expected to vest because the performance conditions for the June 2020 CSP grant are expected to be met. The CSP remuneration shown for FY22 arises from the vesting of 25% of the June 2019 CSP in June 2022 following achievement of the ROIC threshold. Fair value is calculated using the 30-day vwap of Datatec shares as at 28 February in each year.

DBW

The value of the SARs granted by the Company in respect of FY23 and FY22 bonuses deferred by the directors is not included in the single figure remuneration table. The intrinsic value of these SARs will be reported in the single figure remuneration table for the financial year preceding their vesting.

Westcon International EAP

The value of the payment to the executive directors due in FY24 from the crystallisation of the Westcon International EAP based on the valuation of Westcon International at 28 February 2023 is included in their FY23 LTI in the single figure remuneration table.

STI

The STI shown above is split between the element deferred into the DBW and the element paid in cash after publication of the Group results.

Please refer to the remuneration report in the Datatec 2023 Annual Report for more information.