11. STAFF REMUNERATION
11.1 Share-based payments
 

The Bidvest Incentive Scheme (BIS), share appreciation rights (SARs) and conditional share plan (CSPs) grant awards (options) of the holding company, Bidcorp, to executive directors, management and staff. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. All Bidcorp share-based payment schemes are treated as equity-settled share-based payment schemes at a group and subsidiary level. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options.

The fair value of the options is measured using a binomial model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the number of awards for which related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

  2018
R’000		   2017
R’000		  
Share-based payment expenses recognised for continuing operations:        
Bidvest Incentive Scheme (BIS) 23 001   48 812  
Bid Corporation Limited Share Appreciation Rights Plan (SARs) 45 212   27 127  
Bidcorp Conditional Share Plan (CSP) 31 023   18 174  
  99 236   94 113  

The Bidvest Incentive Scheme (BIS)

BIS participants, on the unbundling of Bidcorp from The Bidvest Group Limited, who were granted options and had not exercised their options at the unbundling date, exchanged one of their Bidvest Group Limited options for one right over one Bid Corporation Limited share and one The Bidvest Group Limited share (replacement right).

The original option price was not adjusted, but on exercise of the replacement right, the original option price is deducted from the combined value of Bidcorp share and The Bidvest Group Limited share. The vesting date and lapse dates of the replacement rights are the same as that of the original options. Options vest in tranches after three years (50%), four years (25%) and five years (25%) respectively. Options not exercised within a 10-year period following the award date, lapse. The scheme has been classified as an equity-settled scheme, and therefore an equity-settled share-based payment reserve has been recognised.

Option holders are only entitled to exercise their options if they are in the employment of the Bidcorp Group in accordance with the BIS scheme rules, unless otherwise recommended by the remuneration committee.

The number and weighted average exercise prices of options granted to staff are:

  2018   2017  
  Number Average
price
R		   Number Average
price
R		  
Beginning of the year  2 423 936  246,01     3 133 225  233,88    
Lapsed  (94 250) 242,52     (53 289) 239,56    
Exercised  (719 205) 218,88     (656 000) 187,92    
End of the year  1 610 481  258,88     2 423 936  246,01    
Share options outstanding at June 30 by year of grant are:                   
2011  27 800  135,00     41 675  135,00    
2012  64 925  144,20     167 625  134,56    
2013  128 750  208,91     344 625  208,91    
2014  342 125  237,54     556 750  237,54    
2015  396 881  251,07     632 261  250,73    
2016  650 000  301,54     681 000  301,54    
   1 610 481  258,88     2 423 936  246,01    

The options outstanding at June 30 2018 have an exercise price in the range of R135,00 to R301,54 (2017: R135,00 to R301,54) and a weighted average contractual life of 2,4 to 7,5 years (2017: 3,4 to 8,5 years). The fair value of services received in return for shares allotted is measured based on a binomial model. The contractual life of the option is used as an input into this model.

Bid Corporation Limited Share Appreciation Rights Plan (SARs)

SARs participants were granted share awards that vest in tranches after three years (50%), four years (25%) and five years (25%) respectively. The exercise price for the SAR award, is determined using the closing price of the Bid Corporation Limited share on the Johannesburg Stock Exchange, for the business day immediately preceding the award date up to a maximum discount of 10%. Awards not exercised within a seven-year period following the award date, lapse. The scheme has been classified as an equity-settled scheme, and therefore an equity-settled share-based payment reserve has been recognised. Award holders are only entitled to exercise their awards if they are in the employment of the Bidcorp Group in accordance with the terms of the SAR plan rules, unless otherwise recommended by the remuneration committee.

The number and weighted average exercise prices of share awards granted to staff are:

  2018   2017  
  Number Average
price
R		   Number Average
price
R		  
Beginning of the year  1 804 500  250,07     949 500  238,04    
Granted  920 500  242,17     855 000  263,44    
Lapsed  (42 000) 243,58     –       
End of the year  2 683 000  247,46     1 804 500  250,07    
Share awards outstanding at June 30 by year of grant are:                   
2016  916 500  238,04     949 500  238,04    
2017  846 000  263,43     855 000  263,44    
2018  920 500  242,17     –       
   2 683 000  247,46     1 804 500  238,04    

The awards outstanding at June 30 2018 have an exercise price in the range of R238,04 to R286,72 (2017: R238,04 to R263,91) and a weighted average contractual life of 5,0 to 7,0 years (2017: 6,0 to 6,9 years). The fair value of services received in return for shares allotted is measured based on a binomial model.

The fair value of the SARs allotted on the below mentioned dates and the assumptions used are:

  May 22 2018   June 5 2017  
Fair value at measurement date (Rand) 79,32   90,07  
Exercise price (Rand) 238,30   263,91  
Expected volatility (%) 23,03   22,59  
Option life (years) 3,5 – 5,5   3,5 – 5,5  
Distribution yield (%) 2,36   2,06  
Risk-free interest rate (based on South African Government Bonds) (%) 7,49   7,18  

The volatility is based on the recent historic volatility of Bid Corporation Limited and The Bidvest Group Limited shares.

Bidcorp Conditional Share Plan

The conditional share plan awards executives of Bidcorp a conditional right to receive shares in Bidcorp free of any cost. Due to the unbundling, the 2015 CSP awards for executive directors were restructured into replacement conditional rights and each conditional right in terms of the 2015 awards was exchanged for a right over a Bid Corporation Limited share. CSP replacement rights are subject to revised performance conditions for the period starting July 1 2016 and ending June 30 2019.

These CSP share awards do not carry voting rights attributable to ordinary shareholders. The fair value of services received in return for the conditional share awards has been determined by multiplying the number of conditional share awards expected to vest, by the share price at the date of the award discounted by anticipated future distribution flows.

A total number of 402 055 of the 538 000 CSP awards are expected to vest, taking into account the performance of the group to date and forecasts to the end of the performance period, against the targets set at the time of the award.

The number of conditional share awards in terms of the conditional share award scheme are:

  Balance at
July 1
2017		   CSP
replacement
rights
awarded		 Forfeited Closing
balance
June 30
2018		  
CSP replacement right awards            
Director            
   BL Berson 45 000   – – 45 000  
   DE Cleasby 24 500   – – 24 500  
   B Joffe 90 000   – – 90 000  
  159 500   – – 159 500  
  Balance at
July 1
2017		   CSP
awarded		 Forfeited Closing
balance
June 30
2018		  
CSP awards            
Director            
   BL Berson 90 000   90 000 – 180 000  
   DE Cleasby 26 000   35 000 – 61 000  
   B Joffe 72 500   – – 72 500  
Senior management –   65 000 – 65 000  
  188 500   190 000 – 378 500  

No conditional share awards or CSP replacement rights were forfeited (2017: nil) as a result of performance conditions not being met. The average discounted share price used in the calculation of the share-based payment charge on the conditional share awards allotted during the year is R263,89 per share.
11.2 Remuneration of directors
 

The remuneration paid to executive directors during the year ended June 30 2018 can be analysed as follows:

  Basic
remuneration
R’000		 Other
benefits
and costs
R’000		 Retirement/
medical
benefits
R’000		 Cash
incentives
R’000		 Total
emoluments
R’000		  
Director            
   BL Berson 14 847 253 249 16 240 31 589  
   DE Cleasby 5 457 193 441 6 642 12 733  
Total 20 304 446 690 22 882 44 322  

B Joffe relinquished his role as an executive director of Bidcorp on June 30 2017. His non-executive director and other related fees for the year ended June 30 2018 have been disclosed under non-executive director fees and other services.

For comparative purposes the remuneration paid to the executive directors during the year ended June 30 2017 can be analysed as follows:

  Basic
remuneration
R’000		 Other
benefits
and costs
R’000		 Retirement/
medical
benefits
R’000		 Cash
incentives
R’000		 Total
emoluments
R’000		  
Director            
BL Berson 14 754 262 359 17 904 33 279  
DE Cleasby 4 461 278 385 6 017 11 141  
B Joffe 13 032 637 454 16 479 30 602  
Total 32 247 1 177 1 198 40 400 75 022  

The remuneration paid to non-executive directors during the year ended June 30 2018 is analysed as follows:

  2018      
  Director
fees
R’000		 Other
services
R’000		 Total
R’000		   2017
R’000		  
Non-executive director            
   PC Baloyi 564 – 564   572  
   DDB Band 705 – 705   634  
   B Joffe* 2 288 4 000 6 288   –  
   S Koseff (appointed August 16 2017) 924 – 924   –  
   DD Mokgatle (appointed October 4 2016) 445 – 445   226  
   NG Payne 800 – 800   771  
   CWL Phalatse (resigned November 11 2016) – – –   141  
   H Wiseman** 1 136 489 1 625   1 625  
Total 6 862 4 489 11 351   3 969  
* B Joffe provided advisory consulting services for the year ended June 30 2018.
** H Wiseman provided other services chairing the quarterly Bidcorp divisional audit and risk committee meetings.

Prescribed officers

Due to the nature and structure of the group and the number of executive directors on the board of the company, the directors have concluded that there are no prescribed officers of the company.

  2018
R’000		   2017
R’000		  
Share-based payment expense per director        
   BL Berson 12 831   7 050  
   DE Cleasby 4 865   2 637  
   B Joffe 10 149   8 486  
Total 27 845   18 173  

For the year ended June 30 2018 no benefits arose from the CSP awards (F2017: nil).
  2018
R’000		     2017
R’000		  
11.3 Post-retirement obligations          
  Post-retirement assets          
      Defined benefit pension assets  (19 380)       (17 134)   
   Post-retirement obligations  48 489        41 657    
      Defined benefit pension obligations  34 754        31 038    
      Unfunded defined benefit early retirement plan  13 735        10 619    
      29 109        24 523    
   Pension and provident funds                
   The group provides retirement benefits for its permanent employees through pension funds with defined benefit and defined contribution categories and defined contribution provident funds or appropriate industry funds.                
   There are also a number of small funds within various subsidiaries of the group. All funds are administered independently of the group and are subject to the relevant pension fund legislation.                
   The defined benefit funds operated by the group are The Bidvest South Africa Pension Fund in South Africa and Angliss Hong Kong Food Service Limited Retirement Benefit Plan.                
   Employer contributions to defined contribution funds are set out in note 4.2                
   Summarised details of the defined benefit pension funds                
   Defined benefit pension (assets) obligations of the various funds                
   The Bidvest South Africa Pension Fund in South Africa  (19 380)       (17 134)   
   Angliss Hong Kong Food Service Limited Retirement Benefit Plan  34 754        31 038    
      15 374        13 904    
   Contributions to the funds                
      Employer contributions  11 120        12 678    
      Employee contributions  105        98    
   Total pension fund asset (unfunded pension liability)                
      Fair value of plan assets  164 575        141 421    
      Actuarial present value of defined benefit obligations  (178 627)       (153 086)   
      Net deficit in the plans  (14 052)       (11 665)   
      Amounts not recognised due to ceiling adjustments and other limitations  (1 322)       (2 239)   
      (15 374)       (13 904)   
   Movement in the liability for defined benefit obligations                
      Balance at beginning of year  (153 086)       (154 824)   
      Benefits  6 740        2 284    
      Risk premiums and expenses  63        60    
      Current service costs  (14 534)       (16 102)   
      Interest  (2 392)       (1 813)   
      Member contributions  (105)       (98)   
      Actuarial losses  (6 339)       (2 593)   
      Exchange rate adjustments on foreign plans  (8 974)       20 000    
      Balance at end of year  (178 627)       (153 086)   
  Movement in the plans’ assets          
     Balance at beginning of year  141 421        133 768    
      Contributions paid into the plans  11 225        12 776    
      Benefits  (6 740)       (2 284)   
      Risk premiums and expenses  (410)       (528)   
      Interest income  3 979        3 087    
      Return on plan assets in excess of interest  7 942        9 889    
      Exchange rate adjustments on foreign plans  7 158        (15 287)   
      Balance at end of year  164 575        141 421    
   The plans’ assets comprise                
      Cash  31 610        27 011    
      Equity securities  81 083        73 976    
      Bills, bonds and securities  50 486        39 706    
      Other  1 396        728    
      164 575        141 421    
   Amounts recognised in the statement of profit or loss                
      Current service costs  14 534        16 102    
      Interest on obligations  2 392        1 813    
      Interest on assets  (3 979)       (3 087)   
      Interest on assets ceiling adjustments and other limitations  222        62    
      Risk premiums and expenses  347        82    
      Loss arising from settlements, plan amendments and curtailments  –        386    
      13 516        15 358    
   Amounts recognised in other comprehensive income                
      Return on plan assets in excess of interest income  (7 942)       (9 889)   
      Actuarial losses  6 339        2 593    
      Ceiling adjustments and other limitations  (1 112)       1 536    
      (2 715)       (5 760)   
   Key actuarial assumptions used in the actuarial valuations:                
   The Bidvest South Africa Pension Fund in South Africa                
      Number of in service members June 30  2        2    
      Discount rate (%) 9,7        9,9    
      Inflation rate (%) 6,2        6,8    
      Salary increase (%) 7,2        7,8    
      Pension increase allowance (%) 4,3        4,8    
   Angliss Hong Kong Food Service Limited Retirement Benefit Plan                
      Number of in service members June 30  230        260    
      Discount rate (%) 1,2        1,2    
      Salary increase (%) 5,0        5,0    
   Date of valuation of all funds  June 30 2018        June 30 2017    
 

Assumptions regarding future mortality are based on published statistics and mortality tables.

Sensitivity analysis

The table below summarises the impact that a reasonably possible change in the respective assumption, occurring at the end of the year, would have, by increasing (decreasing) the net deficit in the plans, while holding all the other assumptions constant.

  Impact of
an increase
in assumption
R’000		   Impact of
a decrease
in assumption
R’000		  
2018        
The Bidvest South Africa Pension Fund in South Africa        
   Discount rate – 1%  790     (1 846)   
   Salary increase – 1%  (949)    103    
Angliss Hong Kong Food Service Limited Retirement Benefit Plan             
   Discount rate – 0,25%  2 767     (2 850)   
   Salary increase – 0,25%  (2 561)    2 501    
2017             
The Bidvest South Africa Pension Fund in South Africa             
   Discount rate – 1%  1 055     (1 837)   
   Salary increase – 1%  (993)    455    
Angliss Hong Kong Food Service Limited Retirement Benefit Plan             
   Discount rate – 0,25%  2 098     (2 153)   
   Salary increase – 0,25%  (1 897)    1 859    

The sensitivity analyses presented above may not be representative of the actual change in the net deficit in the plans as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Unfunded defined benefit retirement plans

Distrubuzione Alimentari Convivenze SPA (Italian subsidiary) provides a retirement plan for its employees. The liability recognised is based on the actuarial valuation performed as at June 30.

  2018
Number		   2017
Number		  
Number of members at June 30 330   314  
  2018
R’000		   2017
R’000		  
Movement in the liability for unfunded defined benefit early retirement plan        
   Balance at beginning of year  10 619    13 884   
   Interest expense  287    144   
   Risk premiums and expenses  2 222    –   
   Actuarial adjustments recognised in other comprehensive income  58    (633)  
   Settlement  (422)   (1 395)  
   Exchange rate adjustments on foreign plans  971    (1 381)  
   Balance at end of year  13 735    10 619   
Key actuarial assumptions           
Discount rate (%) 1,5    1,5   
Inflation rate (%) 1,5    1,5   
Salary increase rate (%) 2,55    2,55   
Date of valuation  June 30 2018    June 30 2017