Notes to the Consolidated Financial Statements

20. Share-based payments  

The Group offers share-based bonuses as part of its key personnel commitment and incentive scheme. 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 19 December 2013, Digia Plc's Board of Directors decided to establish a new share-based incentive scheme for the Chief Executive Officer and other members of senior management. The purpose of the system is to align the objectives of the company’s shareholders and management in order to increase shareholder value, promote management commitment and to offer management a competitive incentive scheme based on shareholding in the company.

The scheme comprises three earning periods, which are the calendar years 2014–2016. The earnings principles are the consolidated earnings per share and consolidated net sales, according to formulae settled annually by the Board.

According to the scheme, rewards totalling a maximum value equivalent to 200,000 shares will be paid for each earning period. Of the rewards paid, one half will be awarded to the CEO, and one half will be divided between other people included in the scheme. The reward will be paid as a 50/50 combination of shares and cash. The cash portion of the bonus will primarily be used to cover taxes and other comparable costs of the scheme.

Digia's previous share-based incentive scheme covered the period from 2010 to 2013 and included the CEO and other members of the Group Management Team. No rewards were paid out under this scheme in 2014.


The basic details of the schemes are listed in the table below.

 

Senior management

share-based

incentive scheme

2014–2016

Management group

share-based

incentive scheme

2010–2013

 

 

 

Granting date

6 June 2014

27 May 2010

Instrument

 Shares and cash
Shares and cash

Target group

CEO and senior management
Management group

Maximum number of shares *

 600,000
 640,000

Beginning of the earning period

 6 June 2014

28 May 2010

End of the earning period

31 Dec 2014 /
31 Dec 2015 /
31 Dec 2016

31 March 2011 /
31 March 2012 /
31 March 2013 /
31 March 2014

Vesting condition

Earnings per share and net sales

Earnings per share, net sales growth and employment requirement

Maximum validity, years

2.6

3.2

Remaining validity, years

2.0

-

Number of persons (31 December 2014)

10

-

* 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 2014 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 2014 fiscal year

Senior management

share-based

incentive scheme

2014–2016

Management group

share-based

incentive scheme

2010–2013

 Total
Gross amounts, 1 January 2014 **      
Outstanding at beginning of period 600,000 200,000 800,000
       
Changes during the period      
    Forfeited during the year - 200,000 200,000
    Exercised during the year - - -
       
Gross amounts, 31 December 2014 **      
    Outstanding at end of
    period
600,000 0 600,000
    Available for exercising at
    end of period
600,000 0 600,000
** 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 2014 income statement



Effect on earnings
and financial position,

€ 000

Senior management

share-based

incentive scheme

2014–2016

Management group

share-based

incentive scheme

2010–2013


Total
Share-based payment expense for the fiscal year 310 0 310
Share-based payments, shareholders' equity,
31 Dec 2014
185 0 185
Liabilities from share-based
payments, 31 Dec 2014
125 0 125
       

Comparison data for 2013


Effect on earnings
and financial position,

€ 000

Management group

share-based

incentive scheme

2010–2013

 Key personnel

share-based

incentive scheme

2009–2012


Total

Share-based payment expense for the fiscal year

286

6

292

Share-based payments, shareholders' equity, 31 Dec 2013

0

0 0

Liabilities from share-based payments, 31 Dec 2013

0 0 0