135 / 198
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
For the year ended 31 May 2016
133
BLUE LABEL INTEGRATED ANNUAL REPORT 2016
4.
Non-financial instruments
continued
4.5 Provisions continued
Onerous contracts
The onerous contracts related to line subscriptions for which the Group was contracted to incur unavoidable charges
that were expected to exceed the related economic benefits to be received. A provision was raised due to the
uncertainty associated with the amount of net outflow for each subscription.
As at 31 May 2016, the Group holds no line subscriptions that give rise to onerous contracts.
Retail platform clawback provision
The retail platform clawback provision represents the estimated value payable as a clawback on deficient debtors for
amounts already received on goods sold through a third-party platform provider.
The provision will be utilised within nine months of the following financial year per the contractual terms of the
clawback arrangement.
5.
Employees
5.1 Equity compensation benefit
During the year 2 591 066 (2015: 2 937 836) forfeitable shares were granted to Executive Directors and qualifying
employees (participant). The participant will forfeit the forfeitable shares if he/she ceases to be an employee of an
employer company before the vesting date or if the specified performance conditions have not been met, unless
otherwise specified by the rules or determined by the Board. In the event that the participant is not in the employ
of the Group, or the performance conditions are not met, the shares allocated to the participant will be forfeited and
will either be sold on the open market by the escrow agent and the proceeds will be returned to the participating
employer, or may be retained by the Group for future awards.
Dividends declared in respect of these forfeitable shares are held in escrow until such time as the performance
conditions are met and the shares have vested. Shares forfeited during the vesting period will forfeit any dividends
pertaining to such shares. A dividend of 31 cents (2015: 27 cents) per ordinary share was declared on 18 August
2015 (2015: 19 August 2014).
The performance condition of the forfeitable shares for the fifth, sixth, seventh and eighth award vesting on
31 August 2015, 31 August 2016, 31 August 2017 and 31 August 2018 respectively are as follows:
•
40% of the awards are allocated towards retention. In order to receive this portion of the allocation the employee
is required to be employed within the Group at the vesting date.
•
60% of the awards are allocated on the basis of 50% for growth in core headline earnings per share and 10%
for shareholder returns.
The 50% for growth in core headline earnings will be based on the following achievements:
•
If growth is 5% above CPI over three years, 20% of the 50% will vest.
•
If growth is 10% above CPI over three years, an additional 50% (i.e. a total of 70%) of the 50% will vest.
•
If growth is 25% above CPI over three years, a further 30% (i.e. a total of 100%) of the 50% will vest.
The 50% for growth in core headline earnings in respect of the seventh and eight awards has been amended to
include growth in core headline earnings at subsidiary level with regards to qualifying employees.
The 10% for shareholder return will be based on a 10% compounded growth in the share price over the three-
year vesting period measured with reference to the weighted average price per share during the month of the
commencement of the allocation and the weighted average share price for the month during which the vesting
takes place, plus dividends over the three-year period.
In November 2015 a decision was made to accelerate the vesting of all qualifying employees in Velociti Proprietary
Limited in anticipation of the disposal of this Group company. The expense that would have been recognised over
the vesting period has been recognised in the income statement in the current year.
Critical accounting estimates and assumptions
In determining the number of forfeitable shares that will vest due to performance conditions being met,
management assesses the attrition rates of staff based on the grades of staff that have been granted awards
as well as the historic staff turnover.