The value of shares held within the Employee Share Ownership Plan (Esop) of the listed brewer, EABL, has experienced a decline of Ksh340.6 million when comparing the current value to the acquisition cost. This decline is a reflection of the drop in the company’s share price over the past three years.
EABL’s annual report for the year 2023 reveals that it possesses 3.82 million shares under the Esop, also known as Treasury shares, which were initially acquired at a cost of Ksh836.8 million, averaging Ksh219.22 per share as seen in a report by the Business Daily.
At the company’s closing share price of Ksh130 per share on a Friday, the market value of these shares amounts to Ksh496.2 million.
According to EABL’s report, Treasury shares are shares in East African Breweries Plc held by the EABL Esop for the purpose of issuing shares under the Group’s share ownership scheme.
These Treasury shares are recognized at their purchase cost, determined as the buying price in an open market, such as the Nairobi Securities Exchange. Shares allocated to employees are accounted for on a first-in-first-out basis.
In the year ending June 2023, EABL added 224,735 shares to the Esop, incurring a cost of Sh35.96 million, translating to an average of Sh160 per share. In the preceding reporting period, the company acquired 793,700 units at a cost of Ksh126.93 million.
During this period, employees exercised their option on 27,332 shares valued at Ksh4.37 million, representing an increase from the previous year when they took up 23,170 units valued at Ksh3.64 million.
Esops are considered as supplementary benefits designed to enhance staff productivity, reward, retain, and attract talent. These are issued subject to approval from the Capital Markets Authority. Typically, companies with stock-based compensation schemes offer shares at a discount to eligible employees.
In contrast, some companies, like Safaricom, acquire shares from the open market and allocate them to staff at no cost.
EABL’s Esop, as outlined in the annual report, comprises three plans: an executive share option plan enabling employees to purchase units at a predetermined price on a future date; restricted share units, which are provided to employees free of charge upon grant; and an employee share save scheme allowing eligible employees to save a fixed amount over three years, with an option to purchase shares at a fixed price set at the grant date. The price of these shares is established at 80% of the market price on the grant date.
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The options have a vesting period of three years, after which employees can exercise them within seven years, without any performance conditions attached to the share plans.