Chapters
Annual Report 2019

26. Share-based Payment Plans

Accounting Policy
Certain members of senior management participate in share-based payment plans. The Group operates two types of share-based payment plans.

Equity plan

The equity plan provides for the purchase of shares in the Company by eligible participants and is subject to a vesting term and holding conditions. Vesting of awards made under the equity plan is subject to a service condition that can vary between 3-5 years following the date of grant. The plan has been classified as an equity-settled share-based payment arrangement.

The equity plans are no longer granted since the listing of the Company’s shares. In 2019 the last outstanding shares have been settled and became unrestricted.

Long-term incentive plan (LTIP) – cash settled

In 2018, a new cash-settled plan was issued in a subsidiary to qualifying employees, representing conditional option awards. These option awards are in the form of cash-settled share appreciation rights, meaning that at exercise the participant receives cash which is in total equal in value to the total value of the exercised options.

For cash-settled share-based payment transactions, the fair value of the liability for the awards made is measured at each reporting date and at the settlement date. The fair value is recognized over the vesting period. The amount of expense recognized takes into account the best available estimate of the number of equity instruments expected to vest under the service and performance conditions underlying each share and option award granted.

Long-term incentive plan (LTIP) – equity settled

LTIP awards can consist of shares and/or options, which contain a service condition of 3-5 years and can contain additional performance conditions based on the results of certain predetermined Group related financial performance targets, which are treated as non-market vesting conditions. The option awards have a maximum term of 5-6 years.

The long-term incentive plan (LTIP) represents conditional share and option awards. Option awards are in the form of equity-settled share appreciation rights, meaning that at exercise the participant receives shares which are in total equal in value to the total value of the exercised options.

The fair value at grant date of equity-settled share-based payment transactions is expensed over the vesting period with a corresponding increase in equity, taking into account the best available estimate of the number of shares expected to vest under the service and performance conditions.

The table below shows the total expense of the share-based payment plans as well as the movements in liability and equity.

in thousands of EUR

Long-term incentive plan

Equity plan

Liability

Equity

Equity

At 1 January 2018

-

9,051

7,216

Charges to Income Statement

760

2,720

290

Settlements/ Vesting

-

- 6,230

- 4,977

Exchange differences

26

- 5

-

At 31 December 2018

786

5,536

2,529

At 1 January 2019

786

5,536

2,529

Charges to Income Statement

- 609

5,636

-

Settlements/ Vesting

-

- 2,913

- 2,529

Exchange differences

17

- 10

-

At 31 December 2019

194

8,249

0

The number of participants of the share-based payment plans per year-end 2019 is 160 (2018: 163).

The table shows the valuation method of the Group's share-based payment plans:

Classification

Share awards

Option awards

Equity plan

Cash-settled

Share price at 31 December

Black-Scholes-Merton option model

n/a

Equity-settled

Share price at grant date

Black-Scholes-Merton option model

Share price at grant date

Equity plan

The table below shows the movements in the number of shares of the equity plan:

Employees

At 1 January 2018

459,750

Settled

- 314,340

At 31 December 2018

145,410

At 1 January 2019

145,410

Settled

- 145,410

At 31 December 2019

-

Long-term incentive plan (LTIP)

The plan includes a clause governing the consequences of a change of control event: If a fundamental change takes place in the management and structure of GrandVision, due to a merger, acquisition, sale or similar transaction, the awards shall vest on a pro rata basis for the period from the commencement of the LTIP until the date that the transaction is completed definitely. Following the announced acquisition of GrandVision shares by EssilorLuxottica the company applied this clause to the non-vested LTIP, resulting in additional expenses in 2019 of €1,379.

The table below shows the movements in the long-term incentive plan (equity settled) for (former) key management and employees:

Management Board

Management Board
(former members)

Employees

Total LTIP awards

At 1 January 2018

-

250,739

1,013,964

1,264,703

Granted

120,538

85,985

553,051

759,574

Settled

-

- 169,138

- 163,106

- 332,244

Forfeited

-

- 23,125

- 236,944

- 260,069

At 31 December 2018

120,538

144,461

1,166,965

1,431,964

-

-

At 1 January 2019

120,538

144,461

1,166,965

1,431,964

Granted

60,421

-

395,779

456,200

Settled

-

- 7,935

- 112,354

- 120,289

Forfeited

-

- 136,526

- 211,046

- 347,572

At 31 December 2019

180,959

-

1,239,344

1,420,303

The table below shows the movements in the number of awards of the long-term incentive plan:

Share
awards

Option
awards

Weighted average
exercise price in
EUR per share (equity settled)

Weighted average
exercise price in
EUR per share (cash settled)

At 1 January 2018

615,684

649,019

21.71

-

Granted

415,289

344,285

20.61

242.43

Settled

- 192,508

- 139,736

6.37

-

Forfeited

- 142,109

- 117,960

22.77

242.43

At 31 December 2018

696,356

735,608

24.05

242.43

At 1 January 2019

696,356

735,608

24.05

242.43

Granted

456,200

-

-

-

Settled

- 120,289

-

-

-

Forfeited

- 115,651

- 231,921

24.45

247.09

At 31 December 2019

916,616

503,687

23.87

247.09

In 2019 no option awards have been exercised. The weighted average share price used for the exercise of the option awards during 2018 was € 19,42. Of those option awards outstanding at 31 December 2019, none were exercisable (2018: none).

As at 31 December 2019 the weighted average remaining contractual life for outstanding option awards was 2.4 years (2018: 3.4 years). No option awards are granted from 2019 onwards.

As a result of LTIP plans being settled, 270,507 shares were delivered to participants or became unrestricted in 2019 (2018: 286,321).

Fair value measurement

The fair value of the option awards is based on the Black-Scholes-Merton option pricing model. The following assumptions were used:

Option awards

LTIP 2015
(equity settled)

LTIP 2016
(equity settled)

LTIP 2017
(equity settled)

LTIP 2018
(equity settled)

Number of options outstanding

53,691

96,116

155,709

192,171

Exercise price in EUR

24.59

27.47

25.43

20.61

Share price in EUR

22.72

23.32

23.50

20.80

Volatility

24.0%

25.2%

24.1%

23.7%

Dividend yield

1.4%

1.6%

1.7%

1.9%

Expected remaining option life in years

0.37

1.37

2.37

3.37

Annual risk-free interest rate %

0.15%

-0.36%

-0.28%

-0.07%

The option awards can only be exercised at vesting and at distinct moments 1 and 2 years after vesting. Therefore, no impact of early exercise is included in the valuation model. Volatility is determined by calculating a weighted average of historical volatility of closing prices of the company itself and, due to limited historical share price data of GrandVision N.V., its peer group.

In 2019 no new option awards have been granted at corporate level. The weighted average fair value of the option awards granted at corporate level in 2018 at grant date is €3.32. The weighted average fair value of the option awards granted at subsidiary level in 2018 at grant date is €333.73.

The weighted average fair value of the share awards granted in 2019 at grant date is €19.30 (2018: €20.80).

The cash-settled option awards relate to a share-based payment plan of a subsidiary of the Group. The main inputs used in the fair value measurement include the number of options outstanding of 6,000 with an expected remaining option life of 2.36 years, share price and exercise price of €275,06 and €247,09 respectively, as well as assumptions on certain future performance conditions. The share price and exercise prices represent those of the underlying subsidiary.

The table below shows the terms and conditions of outstanding share-based awards:

Outstanding share-based awards

Award

Status per 31 December 2019

Vesting year

Holding
period end

Performance conditions

GrandVision NV - LTIP 2016

Shares

Conditional

2019

2021

0-150% on Rev/EPS 2016-2018

GrandVision NV - LTIP 2017

Shares

Conditional

2020

2022

0-150% on Rev/EPS 2017-2019

GrandVision NV - LTIP 2017

Options

Unconditional

2022

-

No

GrandVision NV - LTIP 2018

Shares

Conditional

2021

2023

0-150% on Rev/EPS 2018-2020

GrandVision NV - LTIP 2018

Options

Unconditional

2023

-

No

GrandVision NV - LTIP 2019

Shares

Conditional

2022

2024

0-150% on Rev/EPS 2019-2021

The option awards under GrandVision NV - LTIP 2018 and GrandVision NV - LTIP 2017 are not conditional on meeting performance targets.