Punch Taverns plc 2011 Annual Report

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Punch Taverns plc
Annual Report and Financial Statements 2011
Notes to the financial statements continued
for the 52 weeks ended 21 August 2011
27 Share-based payments
The Company has five share incentive schemes by which Directors and employees are able to acquire shares in the Company.
All of these schemes are equity-settled schemes. IFRS 2 has been applied to all grants of equity-settled awards after 7 November 2002
that had not vested before 1 January 2005.
Discretionary Share Plan
The first scheme is a Discretionary Share Plan (DSP) whereby options are granted to senior management over ordinary shares in the
Company, at the prevailing market price at time of grant. These options vest after a three-year performance period, with performance
targets set by the Remuneration Committee, and are then exercisable for a period of between seven and ten years. Performance
targets for options granted on 31 January 2006 and 16 November 2005 are set on a sliding scale of earnings per share growth with
40% of options vesting on growth of RPI +8% per annum up to 100% vesting on growth of RPI +10% per annum. Performance
targets for options granted on 17 November 2004 are set on a sliding scale of earnings per share growth with 40% of options
vesting on growth of RPI +8% per annum up to 100% vesting on growth of RPI +12% per annum. Performance targets for
options granted on 2 March 2004 are set on a sliding scale of earnings per share growth with 40% of options vesting on growth
of RPI +12% per annum up to 100% vesting on growth of RPI +15% per annum. No options have been granted under this scheme
since 31 January 2006.
Long Term Incentive Plan
The second scheme is a Long Term Incentive Plan (LTIP) whereby senior management will receive conditional rights over ordinary shares
in the Company. Eligible employees are awarded rights to the issue of a maximum number of shares at the beginning of a three-year
period, a proportion of which they will be entitled to receive at the end of that period depending on the extent to which the
performance conditions set by the Remuneration Committee at the time the allocation is made are satisfied. Further information on
the performance conditions of the Long Term Incentive Plan are shown in the Report on Directors’ remuneration on pages 32 to 43.
The scheme was reviewed by management at the point of demerger and no material modifications were identified that would lead
to additional charges over the remaining lives of the awards. At 20 August 2011 eligible employees held rights over ordinary shares
that may result in the issue of 2,282,964 shares on 10 November 2011, 25,757 shares on 11 May 2012 and 2,936,518 shares on
16 October 2012 and 3,436,578 shares on 19 November 2013.
Deferred Share Bonus Plan
The third scheme is a Deferred Share Bonus Plan (DSB) whereby senior management receive part of their post-tax annual bonus
in shares. During the period, 57,774 shares were released and no further shares are held in trust.
Share Bonus Plan
The fourth scheme is a Share Bonus Plan (SBP) whereby, at the discretion of the Board, certain employees of the Group, who are
eligible for an annual bonus, are entitled to participate. Eligible employees are awarded rights to the issue of a maximum number of
shares at the beginning of a two-year period, which they will be entitled to receive at the end of that period if the eligibility condition
set by the Remuneration Committee at the time the allocation is made is satisfied. The performance criteria for the awards issued in
November 2008 were satisfied in November 2010 and the shares were released. There were no awards made in relation to the SBP
during the current or previous period.
Share Incentive Plan
The fifth scheme is a Share Incentive Plan (SIP) open to all eligible employees, whereby proceeds contributed by employees are used
to buy shares in the Company at prevailing market values. These shares are called Partnership Shares and are held in a trust on behalf
of the employee. For every Partnership Share bought by the employee the Company will give the employee one share free of charge
(‘Matching Share’). The employees have to take their shares out of the plan on leaving the Group and will not be entitled to the
Matching Share if they leave within three years of buying the Partnership Shares. If the Company awards dividends to its shareholders,
the employee will receive a dividend on each of the Partnership and Matching Shares they hold. The Company arranges for the
dividends to be used to buy extra shares (‘Dividend Shares’). Dividend Shares must be held in the plan for three years before they can
be removed, unless the employee leaves the Group, in which case they must be taken out. The scheme was introduced in June 2004
with shares being acquired at market values on an annual or monthly basis. As at 20 August 2011 2,023,918 shares (August 2010:
1,585,892 shares) had been issued by the Company to the trust at par value. The par value of the shares issued that has been deducted
from reserves is negligible. The market value of these Punch Taverns plc and Spirit Pub Company plc shares at 20 August 2011 was
£1.1m (August 2010: £2.0m).
Fair value of share awards
The fair value is measured using the valuation technique that is considered to be the most appropriate to value each class of award.
Discretionary Share Plan
There were no awards made in relation to the Discretionary Share Plan during the current or the previous period.