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 awards 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 nonmarket 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.

   2019
R’000		    2018
R’000		   
Share based payment expenses recognised for continuing operations:            
Bidvest Incentive Scheme (BIS) 11 416    23 001   
Bid Corporation Limited Share Appreciation Rights Plan (SARs) 61 577   45 212   
Bidcorp Conditional Share Plan (CSP) 41 475   31 023   
  114 468   99 236   

The Bidvest Incentive Scheme (BIS)

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

The original award price was not adjusted, but on exercise of the replacement right, the original award price is deducted from the combined value of Bidcorp share and The Bidvest Group share. The vesting date and lapse dates of the replacement rights are the same as that of the original awards. Awards vest in tranches after 3 years (50%), 4 years (25%) and 5 years (25%) respectively. Awards 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.

Award holders are only entitled to exercise their awards 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 share awards granted to staff are:

  2019   2018  
  Number 
of awards 		   Average
price
R		   Number 
of awards 		   Average
price
R		  
Beginning of the year 1 610 481    258,88   2 423 936    233,88  
Lapsed (36 750)   266,08   (94 250)   242,52  
Exercised (614 174)   258,05   (719 205)   218,88  
End of the year 959 557    259,14   1 610 481    258,88  
Share options outstanding at June 30 by year of grant are:                
2011 21 925    135,00   27 800    135,00  
2012 57 500    143,63   64 925    144,20  
2013 83 500    208,91   128 750    208,91  
2014 127 750    237,54   342 125    237,54  
2015 239 632    251,30   396 881    251,07  
2016 429 250    301,54   650 000    301,54  
  959 557    259,14   1 610 481    258,88  

The awards outstanding at June 30 2019 have an exercise price in the range of R135,00 to R301,54 (2018: R135,00 to R301,54) and a weighted average contractual life of 1,4 to 6,5 years (2018: 2,4 to 7,5 years). The fair value of services received in return for shares allotted is measured based on a binomial model. The contractual life of the award is used as an input into this model.

Bid Corporation Limited Share Appreciation Rights Plan (SARs)

SARs Participants were granted share awards (Awards) that vest in tranches after 3 years (50%), 4 years (25%) and 5 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 7 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:

  2019       2018      
  Number 
of awards 		   Average
price
R		   Number 
of awards 		   Average
price
R		  
Beginning of year 2 683 000    250,07   1 804 500    250,07  
Granted 897 000    257,48   920 500    242,17  
Exercised (148 000)   238,04   –    –  
Lapsed (41 186)   255,18   (42 000)   243,58  
End of year 3 390 814    250,52   2 683 000    250,07  
Share awards outstanding at June 30 by year of grant are:                
2016 749 314    238,04   916 500    238,04  
2017 830 000    263,42   846 000    263,43  
2018 914 500    242,20   920 500    242,17  
2019 897 000    257,48   –    –  
  3 390 814    250,52   2 683 000    247,46  

The awards outstanding at June 30 2019 have an exercise price in the range of R238,04 to R313,08 (2018: R238,04 to R286,72) and a weighted average contractual life of 4,0 to 7,0 years (2018: 5,0 to 7,0 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 21 2019   May 22 2018  
Fair value at measurement date (Rand) 84,38   79  
Exercise price (Rand) 254,75   238,30  
Expected volatility (%) 20,96   23,03  
Option life (years) 4,00 — 5,00   3,50 — 5,50  
Distribution yield (%) 2,45   2,36  
Risk-free interest rate (based on South African Government Bonds) (%) 7,36   7,49  

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

Bidcorp Conditional Share Plan (CSP)

The CSP awards executives of Bidcorp a conditional right to receive shares in Bidcorp free of any cost. Due to the unbundling, the 2016 CSP awards for executive directors were restructured into replacement conditional rights and each conditional right in terms of the 2016 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.

In addition, to these replacement conditional rights, executives have been awarded Bidcorp CSP share awards. The fair value of services received in return for these conditional share awards have 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.

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

  Balance at
July 1
2018		   CSP
replacement
rights
awarded		   Exercised    Closing
balance
June 30
2019		  
CSP replacement right awards                
Director                
   BL Berson 45 000   –   –    45 000  
   DE Cleasby 24 500   –   –    24 500  
   B Joffe 90 000   –   (45 000)   45 000  
  159 500   –   (45 000)   114 500  
CSP awards                
Director                
   BL Berson 180 000   98 000   –    278 000  
   DE Cleasby 61 000   38 000   –    99 000  
   B Joffe 72 500   –   (36 250)   36 250  
Senior management 65 000   70 000   –    135 000  
  378 500   206 000   (36 250)   548 250  

During the year, B Joffe exercised 81 250 of his replacement rights and CSP awards at an average price of R301,71 (2018: no cash benefits arose from CSP awards).

A total number of 573 060 of the 744 000 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. No conditional share awards or CSP replacement rights were forfeited (2018: 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 R212,37 per share (2018: R263,89 per share).
11.2 Remuneration of directors
  

The remuneration paid to executive directors during the year ended June 30 2019 can be analysed as follows:

  Remuneration and benefits paid to directors    
  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 15 700   259   253   16 919   33 131  
    DE Cleasby 5 873   193   469   6 913   13 448  
Total 21 573   452   722   23 832   46 579  

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

  Remuneration and benefits paid to directors    
  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  

The remuneration paid to non-executive directors during the year ended June 30 2019 is analysed as follows:

  2019      
  Director
fees
R’000		   Other
services
R’000		   Total
R’000		   2018
R’000		  
Non-executive director                
   PC Baloyi 696   –   696   564  
   DDB Band 868   –   868   705  
   B Joffe* 472   4 240   4 712   6 288  
   S Koseff 2 970   –   2 970   924  
   DD Mokgatle 430   –   430   445  
   NG Payne 954   –   954   800  
   H Wiseman** 1 371   514   1 885   1 625  
Total 7 761   4 754   12 515   11 351  
* B Joffe provided advisory consulting services for the year ended June 30 2019.
** H Wiseman provided services by 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.


  2019    
  Share-
based
payment
expense
R’000		   Benefit
arising
from
exercise
of awards
R’000		   Gross
benefit
R’000		   Previous 
share- 
based 
payment 
expense 
R’000 		   Actual
long-
term
incentive
benefit
R’000		   2018
R’000		  
Summary of directors’ long-term incentives                        
   BL Berson 18 061   –   18 061   –    18 061   12 831  
   DE Cleasby 6 910   –   6 910   –    6 910   4 865  
   B Joffe 8 753   24 514   33 267   (18 636)   14 631   10 149  
Total 33 724   24 514   58 238   (18 636)   39 602   27 845  

During the year, B Joffe exercised 81 250 of his replacement rights and CSP awards at an average price of R301,71 (2018: no cash benefits arose from the CSP awards).
    2019 
R’000 		     2018 
R’000 		  
11.3 Post-retirement obligations          
   Post-retirement assets          
     The Bidvest South Africa Pension Fund in South Africa (20 928)     (19 380)  
   Post-retirement obligations 59 117      48 489   
     Angliss Hong Kong Food Service Limited Retirement Benefit Plan 43 947      34 754   
     Unfunded defined benefit early retirement plan 15 170      13 735   
    38 189      29 109   
  Defined benefit pension 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.          
  All funds are defined benefit pension funds 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 (20 928)     (19 380)  
     Angliss Hong Kong Food Service Limited Retirement Benefit Plan 43 947      34 754   
    23 019      15 374   
  Contributions to the funds          
     Employer contributions 14 384      11 120   
     Employee contributions 113      105   
  Total pension fund asset (unfunded pension liability)          
     Fair value of plan assets 173 454      164 575   
     Actuarial present value of defined benefit obligations (195 929)     (178 627)  
     Net deficit in the plans (22 475)     (14 052)  
     Amounts not recognised due to ceiling adjustments and other limitations (544)     (1 322)  
    (23 019)     (15 374)  
  Movement in the liability for defined benefit obligations          
     Balance at beginning of year (178 627)     (153 086)  
     Benefits 7 424      6 740   
     Risk premiums and expenses 65      63   
     Current service costs (16 501)     (14 534)  
     Interest (4 360)     (2 392)  
     Member contributions (113)     (105)  
     Actuarial losses 721      (6 339)  
     Exchange rate adjustments on foreign plans (4 538)     (8 974)  
     Balance at end of year (195 929)     (178 627)  
  Movement in the plans' assets          
     Balance at beginning of year 164 575      141 421  
     Contributions paid into the plans 14 497      11 225  
     Benefits (7 424)     (6 740)  
     Risk premiums and expenses (647)     (410)  
     Interest income 5 709      3 979   
     Return on plan assets in excess of interest (6 904)     7 942   
     Exchange rate adjustments on foreign plans 3 648      7 158   
     Balance at end of year 173 454      164 575   
  The plans' assets comprise          
     Cash 41 084      31 610   
     Equity securities 74 888      81 083   
     Bills, bonds and securities 56 865      50 486   
     Other 617      1 396   
    173 454      164 575   
  Amounts recognised in the statement of profit or loss          
     Current service costs 16 501      14 534   
     Interest on obligations 4 360      2 392   
     Interest on assets (5 709)     (3 979)  
     Ceiling adjustments and other limitations 128      222   
     Risk premiums and expenses 582      347   
    15 862      13 516   
  Amounts recognised in other comprehensive income          
     Return on plan assets in excess of interest income 6 904      (7 942)  
     Actuarial losses (721)     6 339   
     Ceiling adjustments and other limitations (906)     (1 112)  
    5 277      (2 715)  
  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 (%) 9,3      9,7   
     Inflation rate (%) 5,6      6,2   
     Salary increase (%) 6,6      7,2   
     Pension increase allowance (%) 3,9      4,3   
  Angliss Hong Kong Food Service Limited Retirement Benefit Plan          
     Number of in service members June 30 206      230   
     Discount rate (%) 1,4      1,2   
     Salary increase (%) 4,5      5,0   
  Date of valuation of all funds June 30 2019      June 30 2018   
 

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 		  
2019        
The Bidvest South Africa Pension Fund in South Africa        
   Discount rate – 1%  1 485     (2 075)   
   Salary increase – 1%  (1 109)    818    
Angliss Hong Kong Food Service Limited Retirement Benefit Plan             
   Discount rate – 0,25%  2 842     (3 022)   
   Salary increase – 0,25%  (2 607)    2 547    
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    

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.

  2019    2018   
Number of members at June 30 345    330   
  R’000    R’000   
Movement in the liability for unfunded defined benefit early retirement plan        
   Balance at beginning of year  13 735    10 619   
   Interest expense  338    287   
   Risk premiums and expenses  1 798    2 222   
   Actuarial adjustments recognised in other comprehensive income  980    58   
   Settlement  (1 641)   (422)  
   Exchange rate adjustments on foreign plans  (40)   971   
   Balance at end of year  15 170    13 735   
Key actuarial assumptions         
   Discount rate (%) 0,77    1,45   
   Inflation rate (%) 1,00    1,5   
   Salary increase rate (%) 2,25    2,55   
   Date of valuation  June 30 2019    June 30 2018