| |
During the year, 7 985 185 (2022: 8 717 136) 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. No dividend was declared during the current or prior year.
The performance conditions as at 31 May 2023 for the thirteenth and fourteenth award grants, vesting on
31 August 2023 and 31 August 2024 respectively, and for the twelfth award grant that vested on 31 August 2022
are as follows:
| |
|
Group long-term incentive (LTI) metrics* |
Core HEPS (30%)
(compounded cumulatively
over three years) |
Group |
CPI + 5% |
CPI + 10% |
CPI + 15% |
| Vesting % |
21.6% |
30.0% |
42.0% |
| Total shareholder return
(TSR) (30%) |
Group |
Greater than or
equal to JSE
Capped |
JSE Capped
All Share Index |
JSE Capped
All Share Index |
| (performance against JSE
Capped All Share Index) |
|
All Share Index |
Return +
CPI +5%
(average not
compounded over
three years) |
Return +
CPI +15%
(average not
compounded over
three years) |
| |
Vesting % |
21.6% |
30.0% |
42.0% |
| Return on capital employed
(ROCE)** (20%) |
Group |
ROCE greater than
or equal to WACC
over three years |
ROCE greater than
or equal to
WACC +2.5% over
three years |
ROCE greater than
or equal to
WACC +5% over
three years |
| (compared to weighted
average cost of capital
(WACC) over the three-year
period not compounded) |
Vesting % |
14.4% |
20.0% |
28.0% |
| Environmental, social and
governance (ESG) (20%) |
Group |
Specific ESGs
selected |
Specific ESGs
selected |
Specific ESGs
selected |
| (specific ESG metrics) |
Vesting % |
14.4% |
20.0% |
28.0% |
| * |
Remco may review metrics and targets post-FY2023 for new awards to ensure that they are relevant. The LTI is calculated per objective.
Values awarded will be a weighted average of scores attained versus target and pro-rated as the case may be. |
| ** |
ROCE is calculated using the following formula:
ROCE = Net operating profit (EBIT)/Capital employed. Capital employed = total assets – current liabilities (excluding interest-bearing
borrowings).
The Remuneration Committee will review any prior year impairments to assess if adverse outcomes have occurred, and if so, make the
necessary adjustments to the capital employed number such that the average performance is a more accurate indication to shareholders
over the measurement period. |
| |
The Remuneration Committee will review any prior year impairments to assess if adverse outcomes have occurred, and if so, make the
necessary adjustments to the capital employed number such that the average performance is a more accurate indication to shareholders
over the measurement period. |
The performance conditions as at 31 May 2023 for the fifteenth award grant vesting on 31 August 2025 are
as follows:
| |
|
Group long-term incentive (LTI) metrics* |
Core HEPS (30%)
(compounded cumulatively
over three years) |
Group |
80% of target |
CPI + 7.5%** |
125% of target |
| Payout % |
21.6% |
30.0% |
45.0% |
| Total shareholder return
(TSR) (30%) |
Group |
80% of target |
Performance equal
to three to
five-year SARB
nominal long bond
rate +7.5%*** |
125% of target |
| (performance against long
bond compounded over
three years plus spread) |
Payout % |
21.60% |
30.0% |
45.0% |
| Return on capital employed
(ROCE)** (20%) |
Group |
ROCE greater than
or equal to WACC
over three years |
ROCE greater than
or equal to WACC
+2.5% over three
years |
ROCE greater than
or equal to WACC
+5% over three
years |
| (compared to WACC over
the three-year period not
compounded) |
Payout % |
14.40% |
20.0% |
30.0% |
| Environmental, social and
governance (ESG) (20%) |
Group |
Pro rata of target |
Specific |
No stretch |
| (specific ESG metrics*****) |
Payout % |
14.4% |
20.0% |
20.0% |
| * |
Remco may review metrics and targets post-FY2023 for new awards to ensure that they are relevant. The LTIP is calculated per metric.
Values awarded will be a weighted average of scores attained versus target. All metrics will be assessed and vest on a pro rata basis
applying linear interpolation basis, save for the ESG metric which will be assessed on a binary basis. |
| ** |
The rationale for using a spread above CPI of 7.5%, which is lower than the spread being applied for the STIP, is that the LTIP is
assessed on a forward looking three-year basis while the STIP only looks to performance in the next 12 months. |
| *** |
In setting the TSR target, consideration was given to utilise a risk-free rate that is aligned with a typical vesting and performance period
of the award, consequently a 3-5 SARB nominal long bond rate was applied as the anchor in setting TSR targets, with an appropriate
spread applied to this anchor in order to set realistic but stretching targets. In addition, TSR will be assessed based on growth in
market cap as well as dividends distributed to shareholders over the performance period. |
| **** |
ROCE is calculated using the following formula:
ROCE = Net operating profit (EBIT)/Capital employed. Capital employed = total assets – current liabilities (excluding interest-bearing
borrowings). The Remuneration Committee will review any prior year impairments to assess if adverse outcomes have occurred, and if
so, make the necessary adjustments to the capital employed number such that the average performance is a more accurate indication
to shareholders over the measurement period. |
| ***** |
Remco removed the stretch component of the ESG KPIs in the LTIP as these measures are assessed on a binary basis and only provide
for the achievement of target performance, with threshold performance being assessed on a pro rata basis relative to target. |
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.
Movements in the number of forfeitable shares outstanding during the year are as follows:
| At 31 May 2021 |
|
|
|
|
34 291 029 |
114 692 |
| 10th award |
|
|
|
3 871 851 |
27 722 |
| 11th award |
|
|
|
15 956 835 |
40 691 |
| 12th award |
|
|
|
14 462 343 |
46 279 |
|
|
|
|
|
|
| Granted during the year |
|
|
|
8 717 136 |
55 964 |
| 14th award |
|
6 April 2022 |
31 August 2024 |
8 717 136 |
55 964 |
| Shares forfeited during the year |
|
|
|
(5 245 249) |
(25 594) |
| 11th award |
|
|
|
(2 419 789) |
(17 326) |
| 12th award |
|
|
|
(1 190 058) |
(3 035) |
| 13th award |
|
|
|
(1 635 402) |
(5 233) |
| Shares vested during the year |
|
|
|
(1 452 062) |
(10 396) |
| 11th award |
|
|
16 March 2022 |
(1 452 062) |
(10 396) |
|
|
|
|
|
|
| At 31 May 2022 |
|
|
|
36 310 854 |
134 666 |
| 12th award |
|
|
|
14 766 777 |
37 656 |
| 13th award |
|
|
|
12 826 941 |
41 046 |
| 14th award |
|
|
|
8 717 136 |
55 964 |
|
|
|
|
|
|
Granted during the year
|
|
|
|
7 985 185 |
49 907 |
| 15th award |
|
1 September 2022 |
31 August 2025 |
7 985 185 |
49 907 |
|
|
|
|
|
|
Awarded during the year – achievement of stretch targets
|
|
|
|
1 997 945 |
5 094 |
| 12th award |
|
|
|
1 997 945 |
5 094 |
|
|
|
|
|
|
| Shares forfeited during the year |
|
|
|
(2 282 379) |
(10 764) |
| 12th award |
|
|
|
— |
— |
| 13th award |
|
|
|
(1 207 545) |
(3 864) |
| 14th award |
|
|
|
(1 074 834) |
(6 900) |
| Shares vested during the year |
|
|
|
(16 764 722) |
(42 750) |
| 12th award |
|
|
31 August 2022 |
(16 764 722) |
(42 750) |
| At 31 May 2023 |
|
|
|
27 246 883 |
136 153 |
| 13th award |
|
|
|
11 619 396 |
37 182 |
| 14th award |
|
|
|
7 642 302 |
49 064 |
| 15th award |
|
|
|
7 985 185 |
49 907 |
|
|
|
|
|
|
Refer to note 5.2 for the expense recognised in the income statement relating to the equity compensation benefits.
The fair value of the shares is based on the open market closing price at grant date.
The total number of forfeitable shares issued to Executive Directors during the period is 2 213 125 (2022: 2 032 567).
The share-based payment expense in relation to these Executive Directors is R23.8 million (2022: R11.2 million).
Refer to note 5.3 for details of awards per Director.
|
