Bodycote Incentive Plan (BIP)
The Company operates the BIP under which executive directors and senior executives received a conditional award of Bodycote shares up to a maximum of 175% of base salary. Vestings of awards are based upon two performance measures, over a three year period.
Fifty percent of the award is subject to a return on capital employed (ROCE) performance condition and fifty percent of the award is subject to an earnings per share (EPS) performance condition.
In the event that threshold performance for both EPS and ROCE is not achieved none of the conditional awards will vest.
Bodycote Co-Investment Plan (CIP)
The CIP permits executives to invest in shares up to a value equivalent to 40% of net basic salary. The CIP provides for the grant of awards of matching shares to participants on an annual basis in a maximum ratio of 1:1 to the gross investment made in deferred shares. Deferred shares must be held for three years and matching shares are subject to an absolute Total Shareholder Return (TSR) target. The threshold target for CIP matching awards is TSR growth of not less than 4% per annum compound in excess of growth in the Consumer Prices Index (CPI) for a threshold matching ratio of 1:2. Ten percent per annum compound growth in excess of growth in the CPI will be required for a vesting matching ratio of 1:1. No new CIP awards were granted in 2016.
The number of outstanding share awards is as follows:
| BIP
2016 | CIP
2016 | BIP
2015 | CIP
2015 |
|---|
| At 1 January | 2,003,996 | 165,240 | 2,322,260 | 186,791 |
| Granted during the year | 896,894 | – | 702,072 | 38,688 |
| Exercised during the year | (745,089) | (52,256) | (706,394) | (60,239) |
| Expired during the year | (95,231) | – | (313,942) | – |
| At 31 December | 2,060,570 | 112,984 | 2,003,996 | 165,240 |
| Average fair value of share awards granted during the year at date of grant (pence) | 543.3 | – | 723.3 | 331.0 |
| Fair value of awards granted during the year (£) | 4,873,094 | – | 5,078,087 | 128,057 |
Exercise Price = £nil.
The inputs to the Black–Scholes simulation model, used to determine the charge to the income statement for BIP, are as follows:
| | 2016 | 2015 |
|---|
| Weighted average share price | pence | 543.3 | 765.7 |
| Weighted average exercise price | pence | nil | nil |
| Expected life | years | 3.0 | 3.0 |
| Expected dividend yields | % | 1.9 | 1.9 |
The inputs to the Monte Carlo simulation model, used to determine the charge to the income statement for CIP, are as follows:
| | 2016 | 2015 |
|---|
| Weighted average share price | pence | – | 748.5 |
| Weighted average exercise price | pence | – | nil |
| Expected volatility | % | – | 26.0 |
| Expected life | years | – | 3.0 |
| Risk-free rate | % | – | 0.9 |
| Expected dividend yields | % | – | 1.9 |
The Group recognised a total charge to the income statement of £0.5m (2015: £0.4m credit) related to equity-settled share-based payment transactions.