19. Share-based payments

Notes to the Consolidated Financial Statements

19. Share-based payments  


The Group offers share-based bonuses as part of its key personnel commitment and incentive scheme. The purpose of this scheme is to align the objectives of the company’s shareholders and management in order to increase shareholder value, promote management commitment, and offer management a competitive incentive scheme based on shareholding in the company. The share-based bonus scheme offers the target group an opportunity to receive shares in Digia Plc shares as a reward for the achievement of specified goals set for an earning period. The Board of Directors decides the earning criteria for the scheme and specifies the targets, as well as the maximum remuneration for the earning period for each person belonging to the target group.

On 12 March 2015, Digia Plc's Board of Directors decided to establish a new share-based incentive scheme for the CEO and other members of the company’s senior management.

The scheme comprises three earning periods, which are the calendar years 2015–2017. The earnings criteria are the consolidated earnings per share and consolidated net sales, according to formulae settled annually by the Board. For each earnings period, the company CEO and other key personnel engaged in domestic business and included in the scheme are entitled to a reward whose value may not exceed the equivalent of 115,000 Digia Plc shares. Rewards under the scheme will be paid as a 50/50 combination of shares and cash. Primarily, the cash portion of the bonus will be used to cover taxes and other comparable costs arising from the scheme. During the year, the total number of shares issued as share-based bonuses was 112,499.


The basic details of the scheme are listed in the table below

 

President and CEO's
share-based incentive scheme

2015–2017

Key personnel's
share-based incentive scheme

2015–2017

 

 

 

Granting date

12 March 2015

12 March 2015

Instrument

Shares and cash Shares and cash

Target group

President & CEO Key personnel

Maximum number of shares*

50,000 65,000

Beginning of the earning period

1 Jan 2015 1 Jan 2015

End of the earning period

31 Dec 2015 / 31 Dec 2016 /

31 Dec 2017

31 Dec 2015 / 31 Dec 2016 /

31 Dec 2017

Vesting condition

Earnings per share and net sales Earnings per share and net sales

Maximum validity, years

2.8

2.8

Remaining validity, years

1.0 1.0

Number of persons (31 December 2016)

1 7
* In addition to the bonus payment in shares, a cash bonus is paid to cover the cost of taxes and similar expenses.
 

The items related to share-based incentive schemes in 2016 are given in the table below. Because the cash portion of the bonus payment is also recorded as a share-based expense, the sums below are gross, i.e. the bonuses include the shares and the equivalent cash sum.

Events in 2016 fiscal year

President and CEO's
share-based incentive scheme 2015–2017

Key personnel's
share-based incentive scheme 2015–2017

Gross amounts, 1 January 2016**    
Outstanding at beginning of period 50,000 62,499
     
Changes during the period    
Granted during the year

-

-
Forfeited during the year 8,667 25,595
Exercised during the year 41,333 36,904
     
Gross amounts, 31 December 2016**    
Outstanding at end of period 0 0
Available for exercising at end of period 0 0
** The amounts include the cash portion (in shares) granted according to the terms of the incentive scheme.
 

Determination of fair value

The fair value of share-based payments is determined on the day on which the scheme is agreed between the company and the recipient group. As the share-based bonus is paid as a combination of shares and cash, the determination of its fair value is divided into two parts in accordance with the IFRS 2 standard: the part settled in shares and the part settled in cash. The part settled in shares is recognised as shareholders’ equity and the part settled in cash as a liability. The fair value of the part settled in cash is revalued on each reporting date until the end of earning period, and thus the fair value of the liability changes in accordance with the price of the Digia share.


Expense effect of share-based incentive schemes on 2016 income statement



Effect on earnings and financial position,

€ 000

President and CEO's
share-based incentive scheme 2015–2017

Key personnel's
share-based incentive scheme 2015–2017


Total
Share-based payment expense for the fiscal year 128 118 247

Share-based payments, shareholders' equity,

31 Dec 2016

67 85 152

Liabilities from share-based payments,

31 Dec 2016

51 65 116
       

Comparison data for 2015



Effect on earnings and financial position,

€ 000

Senior management

share-based

incentive scheme

2014–2016

Domestic

scheme

2015–2017

Qt scheme

2015–2017


Total
Share-based payment expense for the fiscal year 92 451 299 842

Share-based payments, shareholders' equity,

31 Dec 2015

14 167 113 294

Liabilities from share-based payments,

31 Dec 2015

78 284 187 548