Cash-settled – Tsogo Sun Group Long-term Incentive Scheme

The Tsogo Sun Group Long-term Incentive Scheme is a bonus scheme whereby participants receive cash bonuses, the amounts of which are determined with reference to the growth in Tsogo Sun Holdings’ share price. Participants under this bonus appreciation plan are not entitled to take up shares or options whatsoever. Allocations vest in full three years after date of allocation.

The fair value is expensed over the period as services are rendered by the employees. In terms of the rules, the fair values of the payments are determined using the seven-day volume weighted average trading price of the company’s share prior to the determination of the fair value of the long-term incentive bonus. The following is pertinent to this bonus plan:

The group recognised a debit of Rnil million (2019: R3.5 million credit) related to this bonus appreciation plan during the year and at 31 March 2020 the group had recorded liabilities of Rnil million (2019: R34.7 million) in respect of this plan. The current portion of this liability is Rnil million (2019: R29.1 million).

Equity-settled – Tsogo Sun Hotels SAR Plan

Hotel employees who participated in the Tsogo Sun Group Long-term Incentive Scheme (‘Tsogo Sun LTIP’) (refer note 37.1) were given the option to: (a) accelerate the vesting of their notional shares held under the Tsogo Sun LTIP and receive settlement in cash, or (b) to elect to convert their notional shares held under the Tsogo Sun LTIP to share appreciation rights (‘SAR’) administered in terms of the equity-settled Tsogo Sun Hotels SAR plan (‘SAR plan’). The conversion calculation was done on a basis which ensured that participants received SARs under the SAR plan that equated to the same fair value of their notional shares previously held under the Tsogo Sun LTIP on the conversion date (12 June 2019). The conversion was completed on 12 August 2019 and will ensure that hotel employees are incentivised based on the performance of the company’s share price moving forward and will consequently, align their interests more closely with those of the company’s shareholders. On conversion of the scheme the long-term incentive liability balance of R35 million was transferred to the share-based payments reserve.

A Black-Scholes valuation model was applied in determining the fair value of the SARs to be issued under the SAR plan and the valuation assumptions and inputs to this model are set out below:

The long-term incentive expense relating to the SAR plan will continue over the SAR vesting periods according to the terms of the SAR plan rules. The long-term incentive expense will increase by new grants made to employees and decrease by employee forfeitures. Included in the employee cost as disclosed in note 10 is an income statement charge of R17 million relating to the share appreciation right for the 2020 financial year.

Set out below are summaries of options granted under the plan:

Appreciation rights outstanding at the end of the year have the following expiry dates and exercise price: