Chapters
Annual Report 2018

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.

Long-term incentive plan (LTIP)

In the years before the listing of the Company's shares, eligible participants were granted a combination of phantom shares and phantom options. Upon the moment of listing in 2015, the majority of these plans were converted to equity-settled long-term incentive plans. Since the listing of the Company’s shares, only equity-settled conditional share and option awards have been granted to eligible participants.

LTIP awards can exist 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 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.

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.

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 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 2017

216

23,481

12,294

Charges to Income Statement

76

10,259

939

Settlements/ Vesting

- 292

- 24,707

- 6,017

Exchange differences

-

18

-

At 31 December 2017

-

9,051

7,216

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

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.

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.

No new shares were issued in 2018 (2017: none) related to the settlement of awards under the share-based-payment plans. The number of participants of the share-based payment plans per year-end 2018 is 163 (2017: 154).

The phantom plans issued in 2011, 2012, 2013 and 2014 were converted from cash-settled to equity-settled long-term incentive plans on the listing of GrandVision N.V. on Euronext Amsterdam in 2015. The phantom plans issued in 2009, 2010 and certain but limited plans relating to 2012, 2013 and 2014 remained cash-settled.

The equity and phantom plans are no longer granted since the listing of the Company's shares. Only share and option awards under the long-term incentive plans are being awarded since then.

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 conversion and grant date

Black-Scholes-Merton option model

Share price at grant date

Outstanding awards

The table below shows the movements in the number of shares of the equity plan for (former) key management and employees.

P.J. de Castro Fernandes
(CFO)

Th. A. Kiesselbach (former CEO)

Employees

Total

At 1 January 2017

125,510

12,000

927,042

1,064,552

Settled

- 125,510

- 12,000

- 467,292

- 604,802

At 31 December 2017

-

-

459,750

459,750

At 1 January 2018

-

-

459,750

459,750

Settled

-

-

- 314,340

- 314,340

At 31 December 2018

-

-

145,410

145,410

Until February 2018, Th. A. Kiesselbach was the CEO of GrandVision and until April 2018, a Management Board member.

Of those shares outstanding under the equity plan at 31 December 2018, for 145,410 shares (2017: 168,930 shares) the vesting period has ended. In 2018, the shares that were vested and unrestricted have been settled.

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

S. Borchert
(CEO)

P.J. de Castro Fernandes
(CFO)

Th. A. Kiesselbach (former CEO)

Employees

Total LTIP awards

At 1 January 2017

160,620

234,892

1,903,329

2,298,841

Granted

-

63,433

-

564,362

627,795

Settled

-

- 138,462

- 69,744

- 1,292,324

- 1,500,530

Forfeited

-

-

-

- 161,403

- 161,403

At 31 December 2017

-

85,591

165,148

1,013,964

1,264,703

At 1 January 2018

-

85,591

165,148

1,013,964

1,264,703

Granted

120,538

75,589

10,396

553,051

759,574

Settled

-

- 16,719

- 152,419

- 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

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 2017

1,243,200

1,055,641

10.33

-

Granted

264,474

363,321

25.43

-

Settled

- 785,097

- 715,433

6.59

-

Forfeited

- 106,893

- 54,510

24.53

-

At 31 December 2017

615,684

649,019

21.71

-

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

The weighted average share price used for the exercise of the option awards during 2018 was €19.42 (2017: €23.12).

Of those option awards outstanding at 31 December 2018, none were exercisable (2017: 139,736). As of 31 December 2018 the weighted average remaining contractual life for outstanding option awards was 3.4 years (2017: 3 years).

As a result of LTIP plans being settled, 286,321 shares were delivered to participants or became unrestricted in 2018 (2017: 1,291,032).

Fair value measurement

Most of the option awards related to 2011, 2012 and 2013 were converted to equity-settled on the listing. 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

144,174

259,515

256,228

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

1.37

2.37

3.37

4.37

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.

The GrandVision NV - LTIP 2018 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 22,000 with an expected remaining option life of 3.36 years, share price and excercise price of €165.94 and €242.43 respectively, as well as assumptions on certain future performance conditions. The share price and exercise prices represent those of the underlying subsidiary.

The weighted average fair value of the option awards granted at corporate level in 2018 at grant date is €3.32 (2017: €3.20). The weighted average fair value of the option awards granted at subsidiary level in 2018 at grant date is €333.73 (2017: none).

The weighted average fair value of the share awards granted in 2018 at grant date is €20.80 (2017: €23.50).

Key management

The following tables summarize the status of the outstanding LTIP plans during 2018 for the individual (former) Management Board members.

Outstanding share-based awards

Award

Awards per
1 January 2018

Granted in 2018

Settled in 2018

Awards per
31 December 2018

Exercise price option awards

Fair value
at grant

Share price at vesting

S. Borchert (CEO)

GrandVision NV - LTIP 2018

Shares

-

56,481

-

56,481

-

20.80

-

GrandVision NV - LTIP 2018

Options

-

64,057

-

64,057

20.61

3.32

-

Total

-

120,538

-

120,538

Outstanding share-based awards

Award

Awards per
1 January 2018

Granted in 2018

Settled in 2018

Awards per
31 December 2018

Exercise price option awards

Fair value
at grant

Share price at vesting

P.J. de Castro Fernandes (CFO)

GrandVision NV - LTIP 2015

Shares

11,578

5,141

- 16,719

-

-

22.76

20.80

GrandVision NV - LTIP 2016

Shares

10,580

-

-

10,580

-

23.32

-

GrandVision NV - LTIP 2017

Shares

11,530

-

-

11,530

-

23.50

-

GrandVision NV - LTIP 2017

Options

51,903

-

-

51,903

25.43

3.20

-

GrandVision NV - LTIP 2018

Shares

-

6,391

-

6,391

-

20.80

-

GrandVision NV - LTIP 2018

Options

-

64,057

-

64,057

20.61

3.32

-

Total

85,591

75,589

- 16,719

144,461

Outstanding share-based awards

Award

Awards per
1 January 2018

Granted in 2018

Settled in 2018

Forfeited in 2018

Awards per
31 December 2018

Exercise price option awards

Fair value
at grant

Share price at vesting

Th. A. Kiesselbach (former CEO)

GrandVision BV - LTIP 2012

Options

58,961

-

- 58,961

-

-

5.98

13.81

23.32

GrandVision BV - LTIP 2013

Options

59,650

-

- 59,650

-

-

6.66

12.81

23.60

GrandVision NV - LTIP 2015

Shares

23,412

10,396

- 33,308

-

-

-

22.76

20.80

GrandVision NV - LTIP 2016

Shares

23,125

-

-

- 23,125

-

-

23.32

-

Total

165,148

10,396

- 151,919

- 23,125

-

The vested option awards under GrandVision BV - LTIP 2012 and GrandVision BV - LTIP 2013 were exercised in 2017, resulting in the delivery of 79,964 shares. The vesting of the share awards under the GrandVision BV - LTIP 2015 in 2018, resulted in the delivery of 50,526 shares.

Outstanding share-based awards

Award

Status per
31 December 2018

Vesting
year

Holding
period end

Performance conditions

GrandVision NV - LTIP 2015

Shares

Conditional

2018

2020

0-150% on Rev/EPS 2015-2017

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

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