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30. Share-based payments Executive share scheme The Group has a long-term share-based performance incentive scheme targeted at selected employees (invited to participate at the discretion of the Company) most able to influence the results of the Group. The long-term share scheme allows scheme participants to acquire shares in the Company at market price, funded by an interest-free loan from the Group. The scheme participants are entitled to vote on the shares and to receive cash dividends, the proceeds of which are used to reduce the loan. The shares are held in trust for the scheme participants by the Trustee, Fletcher Building Share Schemes Limited. For shares granted in and prior to 2016 vesting of half of any entitlement under the executive long-term share scheme is dependent upon the Group achieving a total shareholder return (TSR) that is equal to the TSR of the comparator group of companies at the point that the cumulative market capitalisation of that comparator group exceeds 50% of the total market capitalisation of the comparator group TSR index over a three year restricted period. Vesting of the other half of any entitlement is dependent upon the Group achieving an earnings per share target. However, for shares granted in 2017 all of the entitlement under the scheme is dependent upon the Group's TSR exceeding the 51st percentile of the TSR of the comparator group over a three year restricted period. Additionally, in respect of the entitlement which is dependent on the Group's TSR, the three year restrictive period is automatically extended for an additional year if the minimum vesting threshold is not met. Scheme participants can elect to extend the restrictive period for an additional year if the Group's TSR means that the vesting level is between the 51st and 75th percentile of the comparator group. No extension is permitted for the entitlement that is dependent upon achieving an earnings per share target. At the end of the restrictive period or any extension, the Group will pay a bonus to the executives to the extent that performance hurdles have been met, the after-tax amount of which will be generally sufficient for the scheme participants to repay the balance of the loan in respect of the shares which are to be transferred. Owing to the integrated nature of the scheme, for accounting purposes the Group accounts for the incentive scheme as being equity-settled. If the performance hurdles are not met or are only partially met, the trustee will acquire the beneficial interest in some or all of the relevant shares. The loan provided in respect of those shares which do not transfer to the scheme participants (the forfeited shares) will be novated to the trustee and will be fully repaid by the transfer of the forfeited shares. The Group will recognise an expense in earnings, with a corresponding increase in the share-based payments reserve, over the restrictive period. If the performance hurdles based on TSR are not met and the shares do not transfer to the scheme participants, the amount in the share-based payments reserve will remain in equity and will not be released to earnings. If the performance targets based on earnings per share are not met and the shares do not transfer, the amount in the share-based payments reserve will be released to earnings. The Group accounts for the share schemes under the treasury stock method. The receivable owing from the scheme participants, representing the shares held in the Company, is deducted from the Group’s paid up capital. The shares are deducted from equity until the end of the restrictive period, at which point they transfer to scheme participants or beneficial ownership of the shares transfers to the trustee.
99 Fletcher Building Limited Annual Report 2018
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