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On 1 January 2014, the group implemented a long-term employee incentive scheme (the conditional share plan (CUP)), which consists of two components – performance shares and retention shares. Both the performance and the retention components of the scheme are settled in Hyprop shares.
In terms of the CUP, fully paid awards are made on an annual basis, comprising performance shares and retention shares. The split between performance and retention shares is 70%:30% for all participants.
The performance conditions for the shares allocated as performance shares are as follows:
- Growth in distribution per share relative to the peer group (weighting 40%)
- Share price performance relative to the peer group (weighting 40%)
- A strategic component, which is determined by the remuneration committee in line with the prevailing circumstance and projects at the time of the award (weighting 20%).
Each of the performance conditions is measured over a three-year performance period. Participants must be employed until the end of the vesting period to be eligible for the award.
Retention shares vest after five years, provided the participant is still employed by the group.
| Reconciliation of shares allocated in terms of the CUP |
Number of
performance
shares |
|
Number of
retention
shares |
|
| Unvested at 30 June 2016 |
283 588 |
|
121 539 |
|
| Granted |
86 961 |
|
36 063 |
|
| Forfeited |
(3 368) |
|
(405) |
|
| Vested |
(106 370) |
|
(3 591) |
|
| Unvested at 30 June 2017 |
260 811 |
|
153 606 |
|
| Granted |
84 840 |
|
35 114 |
|
| Forfeited |
(15 446) |
|
(5 588) |
|
| Vested |
(94 390) |
|
(1 312) |
|
| Unvested at 30 June 2018 |
235 815 |
|
181 820 |
|
| 2017 – weighted average remaining vesting period (years) |
1,0 |
|
2,5 |
|
| 2018 – weighted average remaining vesting period (years) |
1,1 |
|
2,0 |
|
The weighted average share price of the shares that vested during the year was R105,99 (2017: R123,46).
The fair value of share options granted was determined using the Black Scholes model using a volatility metric of 20%. Expected dividends were incorporated into the valuation based on the historical dividend yield. The inputs used in the valuation, as well as the fair value arrived at, are detailed below.
| Unvested equity instruments |
|
Retention
shares |
|
| Tranche 1 |
|
|
|
|
| Grant date |
|
|
1 January 2014 |
|
| Vesting period ends |
|
|
31 December 2018 |
|
| Fair value of the share option at grant date |
|
|
R57,98 |
|
| Share price at grant date |
|
|
R76,50 |
|
| The inputs used in the measurement of the fair value at grant date were as follows: |
|
|
|
|
| Expected life |
|
|
5 years |
|
| Risk-free rate after taxation |
|
|
5,75% |
|
| Dividend yield (historic) |
|
|
5,54% |
|
| Tranche 1 of the performance shares vested during the prior year at a fair value of R123,46 per share. |
|
|
|
|
| Tranche 2 |
|
|
|
|
| Grant date |
|
|
1 July 2014 |
|
| Vesting period ends |
|
|
30 June 2019 |
|
| Fair value of the share option at grant date |
|
|
R59,08 |
|
| Share price at grant date |
|
|
R79,51 |
|
| The inputs used in the measurement of the fair value at grant date were as follows: |
|
|
|
|
| Expected life |
|
|
5 years |
|
| Risk-free rate after taxation |
|
|
5,88% |
|
| Dividend yield (historic) |
|
|
5,94% |
|
| Tranche 2 of the performance shares vested during the current financial year at a fair value of R105,99 per share. |
|
|
|
|
| Tranche 3 |
|
|
|
|
| Grant date |
1 July 2015 |
|
1 July 2015 |
|
| Vesting period ends |
30 June 2018 |
|
30 June 2020 |
|
| Fair value of the share option at grant date |
R105,76 |
|
R96,68 |
|
| Share price at grant date |
R121,00 |
|
R121,00 |
|
| The inputs used in the measurement of the fair value at grant date were as follows: |
|
|
|
|
| Expected life |
3 years |
|
5 years |
|
| Risk-free rate after taxation |
5,97% |
|
5,97% |
|
| Dividend yield (historic) |
4,49% |
|
4,49% |
|
| Tranche 4 |
|
|
|
|
| Grant date |
1 July 2016 |
|
1 July 2016 |
|
| Vesting period ends |
30 June 2019 |
|
30 June 2021 |
|
| Fair value of the share option at grant date |
R112,56 |
|
R102,32 |
|
| Share price at grant date |
R129,89 |
|
R129,89 |
|
| The inputs used in the measurement of the fair value at grant date were as follows: |
|
|
|
|
| Expected life |
3 years |
|
5 years |
|
| Risk-free rate after taxation |
6,26% |
|
6,26% |
|
| Dividend yield (historic) |
4,77% |
|
4,77% |
|
| Tranche 5 |
|
|
|
|
| Grant date |
1 January 2017 |
|
1 January 2017 |
|
| Vesting period ends |
31 December 2019 |
|
31 December 2021 |
|
| Fair value of the share option at grant date |
R100,11 |
|
R90,07 |
|
| Share price at grant date |
R117,31 |
|
R117,31 |
|
| The inputs used in the measurement of the fair value at grant date were as follows: |
|
|
|
|
| Expected life |
3 years |
|
5 years |
|
| Risk-free rate after taxation |
6,43% |
|
6,43% |
|
| Dividend yield (historic) |
5,28% |
|
5,28% |
|
| Tranche 6 |
|
|
|
|
| Grant date |
1 July 2017 |
|
1 July 2017 |
|
| Vesting period ends |
30 June 2020 |
|
30 June 2022 |
|
| Fair value of the share option at grant date |
R97,66 |
|
R86,70 |
|
| Share price at grant date |
R116,76 |
|
R116,76 |
|
| The inputs used in the measurement of the fair value at grant date were as follows: |
|
|
|
|
| Expected life (years) |
3 |
|
5 |
|
| Risk-free rate after taxation (%) |
6,4 |
|
6,4 |
|
| Dividend yield (historic) (%) |
6,0 |
|
6,0 |
|
| The executive directors were allocated the following percentages of the total shares allocated: |
|
Laurence Cohen
(FD)
% |
|
| Tranche 1 |
|
|
|
|
| Retention shares |
19 |
|
10 |
|
| Tranche 1 of the performance shares vested during the prior financial year |
|
|
|
|
| Tranche 2 |
|
|
|
|
| Retention shares |
20 |
|
11 |
|
| Tranche 2 of the performance shares vested during the current financial year |
20 |
|
11 |
|
| Tranche 3 |
|
|
|
|
| Performance shares |
20 |
|
11 |
|
| Retention shares |
20 |
|
11 |
|
| Tranche 4 |
|
|
|
|
| Performance shares |
20 |
|
11 |
|
| Retention shares |
21 |
|
11 |
|
| Tranche 6 |
|
|
|
|
| Performance shares |
20 |
|
11 |
|
| Retention shares |
21 |
|
11 |
|
The charge to the statement of profit or loss and other comprehensive income for the year ended 30 June 2018 amounted to R10,9 million (2017: R12,7 million). As the above are equity-settled shared-based payments, the accounting treatment recognises the share-based payments in profit or loss on a straight-line basis over the vesting period, with a corresponding credit to equity.
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