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 the system is to align the objectives of the company’s shareholders and management in order to increase shareholder value, promote executive management commitment and to offer them 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 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 new share-based incentive schemes for the Chief Executive Officer and other members of senior management. According to the decision, there will be separate schemes for the company's domestic operations and for the Qt business. These schemes will replace the previous share-based incentive scheme effective until 2016.

The domestic scheme comprises three earning periods, which are the calendar years 2015–2017. The earnings principles 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. The cash portion of the bonus will primarily be used to cover taxes and other comparable costs of the scheme. During the year, the total number of shares issued as share-based bonuses was 112,499.

The Qt scheme has one earning period running until March 2018. Bonus payable under the scheme is tied to Digia Plc share price development by the end of the said earning period. If the share price fully meets the objectives set in the scheme, the President and CEO and other key Qt employees included in the scheme will be entitled to a bonus equivalent to a maximum of 985,000 Digia Plc shares. The bonus payable under the scheme is paid half in shares and half in cash such that an amount will be paid in cash from which all taxes and other payments under applicable law will be paid, and the remainder of the bonus will be paid in shares. The Qt scheme contains an exceptional condition according to which the scheme will terminate upon the entry into force of the possible demerger of Digia and Qt. In this case, the employees included in the scheme will be paid a bonus on the basis of share price at the time of the demerger. During the year, the total number of shares issued as share-based bonuses was 195,000.

Digia's previous share-based incentive scheme covered the calendar years 2014–2016. The earnings principles were the consolidated earnings per share and consolidated net sales, according to formulae settled annually by the Board. A total of 87,749 shares were issued under this scheme as share-based bonuses in 2015.


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

Domestic scheme

 

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

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

2.0 2.0

Number of persons (31 December 2015)

1 8
* In addition to the bonus payment in shares, a cash bonus is paid to cover the cost of taxes and similar expenses.
 

Qt scheme

 

Qt's key personnel share-

based incentive scheme
2015–2018

 

 

Granting date

12 March 2015

Instrument

Shares and cash

Target group

CEO

Maximum number of shares *

985,000

Beginning of the earning period

12 March 2015

End of the earning period

12 March 2018

Vesting condition

Digia Plc share price development

Maximum validity, years

3.0

Remaining validity, years

2.3

Number of persons (31 December 2015)

2
* 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 2015 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 2015 fiscal year

Senior management

share-based

incentive scheme

2014–2016

Domestic

scheme

2015–2017

 Qt scheme

2015–2018

Gross amounts, 1 January 2015 **      
Outstanding at beginning of period 600,000 - -
       
Changes during the period      
Granted during the year

-

112,499 195,000
Forfeited during the year 512,251 - -
Exercised during the year 87,749 - -
       
Gross amounts, 31 December 2015 **      
Outstanding at end of period 0 112,499 195,000
Available for exercising at end of period 0 112,499 195,000
** 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 2015 income statement



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
         

Comparison data for 2014


Effect on earnings and financial position,

€ 000


Senior management share-

based incentive scheme

2014–2016

Share-based payment expense for the fiscal year

310

Share-based payments, shareholders' equity, 31 Dec 2014

185

Liabilities from share-based payments, 31 Dec 2014

125