IFRS 2 paras 44-47, disclosures for equity settled share based payments

Greencore Group plc – Annual report – 29 September 2017

Industry: food and drink

  1. SHARE-BASED PAYMENTS

The Group operates a number of employee share option schemes which are equity settled share-based payments as defined in IFRS 2 Share-based payments. A recognised valuation methodology is employed to determine the fair value of options granted as set out in the standard. The charge incurred relating to these options is recognised within operating costs. Detail of each of the employee share option schemes operated by the Group are set out below:

ANNUAL BONUS PLAN

Senior Executives participate in the Annual Bonus Plan as outlined in the Report on Directors’ Remuneration. In accordance with this plan, a deferred share award equal to a proportion of the cash bonus is awarded to the participating executives, the number of shares is calculated at market value on the date of allocation, to be held by a trustee for the benefit of individual participants without any additional performance conditions other than three years of service. The shares vest after three years but are forfeit should an executive voluntarily leave the Group within the three year time period, subject to normal ‘good leaver’ provisions. The charge recognised in the Group Income Statement was £1.6m (2016: £1.1m). The fair value of the award is equal to the share price on the grant date. The share price on the grant date, for awards granted in December 2016, was £2.43.

On 1 December 2016 and 1 December 2015, 599,359 and 447,853 respectively, awards were granted to Senior Executives of the Group under the Annual Bonus Plan.

The following table illustrates the number of, and movements in, share awards during the year under the plan:

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  • The number of options outstanding and their exercise prices were adjusted for the effect of the rights issue so that holders of options remain in the same position as they would have been before the rights issue.

Awards will be granted to Senior Executives of the Group under the Annual Bonus Plan in respect of the year ended 29 September 2017. A charge amounting to £0.1m (2016: £0.1m) relating to awards to Executive Directors and £0.4m (2016: £0.2m) relating to awards to other Senior Executives has been included in the Group Income Statement in respect of the estimated 2017 charge. The total fair value of the awards will be taken as a charge to the Group Income Statement over the vesting period of the awards.

PERFORMANCE SHARE PLAN

Certain employees participate in a long-term incentive scheme, the Performance Share Plan. In accordance with this scheme, participants are awarded an allotment of shares which will vest over three years subject to vesting conditions for growth in Return on Invested Capital and in earnings per share. The number of shares granted is calculated based on the market value on the date of allocation. Share options are forfeit should an executive voluntarily leave the Group prior to the vesting date, subject to normal ‘good leaver’ provisions. The fair value of the award is equal to the share price on the grant date. Further description of the scheme can be found in the Report on Directors’ Remuneration. A charge amounting to £1.2m (2016: £2.5m) was included in the Group Income Statement in the 2017 financial year related to these awards.

The following table illustrates the number of, and movements in, share options during the year under the plan:

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  • The number of options outstanding and their exercise prices were adjusted for the effect of the rights issue so that holders of options remain in the same position as they would have been before the rights issue.

SHARESAVE SCHEMES

The Group operates savings-related share option schemes in both the UK and Ireland. Options are granted at a discount of between 20% and 25% of the market price at the date of invitation over three, five and seven year savings contracts and options are exercisable during the six month period following completion of the savings contract. The charge recognised in the Group Income Statement in respect of these options was £0.7m (2016: £0.7m). Grant date fair value was arrived at through applying a trinomial model, which is a lattice option-pricing model.

During the year ended 29 September 2017, ShareSave Scheme options were granted over 2,410,569 shares (UK) and 30,429 shares (Ireland), which will ordinarily be exercisable at an exercise price of £1.98 and €2.11 per share respectively, during the period 1 September 2020 to 28 February 2021. The weighted average fair value of share options granted during the year ended 29 September 2017 was £0.62 (UK) and £0.66 (Ireland).

During the year ended 30 September 2016, ShareSave Scheme options were granted over 1,062,107 shares (UK) and 23,618 shares (Ireland), which will ordinarily be exercisable at an exercise price of £2.64 and €3.14 per share respectively, during the period 1 September 2019 to 29 February 2020. The weighted average fair value of share options granted during the year ended 30 September 2016 was £0.86 (UK) and £0.96 (Ireland).

NUMBER AND WEIGHTED AVERAGE EXERCISE PRICE FOR THE UK SHARESAVE SCHEME (EXPRESSED IN STERLING)

The following table sets out the number and weighted average exercise prices (expressed in sterling) of, and movements in, share options during the year under the UK ShareSave Scheme:

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NUMBER AND WEIGHTED AVERAGE EXERCISE PRICES FOR THE IRISH SHARESAVE SCHEME (EXPRESSED IN EURO)

The following table sets out the number and weighted average exercise prices (expressed in euro) of, and movements in, share options during the year under the Irish ShareSave Scheme:

 

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EXECUTIVE SHARE OPTION SCHEME

The charge relating to the Executive Share Option Scheme recognised in the Group Income Statement for the year was £nil (2016: £nil). Grant date fair value was arrived at through applying a trinomial model, which is a lattice option-pricing model. To the extent that options have vested, they will ordinarily remain exercisable for a period up to ten years from the date of grant and are settled in equity through the issue of shares once exercised.

The general terms and conditions applicable to the share options granted by the Group are addressed in the Report on Directors’ Remuneration. All conditions are non-market based.

The Executive Share Option Scheme expired in 2011 and no further options have been granted under this scheme.

The following table illustrates the number and weighted average exercise prices (expressed in euro) of, and movements in, share options during the year under the plan:

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  • The number of options outstanding and their exercise prices were adjusted for the effect of the rights issue so that holders of options remain in the same position as they would have been before the rights issue.

The weighted average exercisable price does not include any options which have an exercise price in excess of the closing quoted Greencore plc share price as at 29 September 2017. 

RANGE OF EXERCISE PRICES FOR THE EXECUTIVE SHARE OPTION SCHEME

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WEIGHTED AVERAGE ASSUMPTIONS USED TO VALUE THE SHARE SCHEMES

The fair value of awards granted under the Annual Bonus Plan and the Performance Share Plan is equal to the share price on the grant date. The following tables show the weighted average assumptions used to fair value the equity settled options granted in the ShareSave Schemes.

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The average share price during the 2017 financial year was £2.38 (2016: £3.41).

The expected volatility is estimated based on the historic volatility of the Company’s share price over a period equivalent to the life of the relevant option. The risk-free rate of return is the yield on a government bond of a term consistent with the life of the option.

The range of the Company’s share price during the year was £1.87 – £2.77 (2016: £2.73 – £3.92).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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