Long Term Incentive Plan

RNS Number : 5285D

ASOS PLC

30 April 2013

 



30 April 2013

ASOS plc (the "Company")

ASOS Long Term Incentive Plan ("ALTIP")

Background

The Company's 2012 Annual Report and the Report and Accounts for the five months ended 31 August 2012 stated that the Company would establish a new long-term incentive plan for Executive Directors and Senior Management (the "ALTIP"). The Company is pleased to announce that, following consultation with some of its major shareholders, the implementation of the ALTIP has now been finalised. 

The purpose of the ALTIP is to support the published strategy and business plan for the next three years by incentivising and retaining the wider ASOS senior management team.   This team comprises a larger pool of participants when compared with the previous Management Incentive Plan, to reflect the strengthening of the management capabilities across all areas of the ASOS business over the last three years. The ALTIP has a performance period from 1 September 2012 to 31 August 2015 (the "Performance Period") and is measured on challenging earnings per share ("EPS") and total shareholder return ("TSR") targets which are aligned to the strategic plans of the Company and designed to ensure growth is delivered in a profitable way.

Structure of the ALTIP

Under the terms of the ALTIP, awards will be structured in one or both of two ways. 

The structure used depends upon whether the participants in the ALTIP make an investment equivalent to the tax fair value of all or part of their respective awards.

Executive Directors are required to make a minimum investment of their own money of at least one third of the tax fair value of their award.  Senior Management participants are invited to invest at their choosing, with a required minimum investment of one third of the tax fair value of their awards. All participants also have the opportunity to voluntarily increase the value of their investment up to 100% of the tax fair value of their award.

This upfront investment by the  ALTIP participants is designed to strengthen the link between their personal interests and those of the Company and its shareholders, providing a strong incentive to achieve the plan's performance targets.  In return, for that part of their award for which an investment is made, Capital Gains Tax (and potentially Entrepreneur's Relief) should be payable by a participant on any gain made at vesting, as the invested award is purchased at the tax fair value.  However, these investments will be forfeited if the performance conditions of the ALTIP are not met.

The proportion of any participant's award that is not covered by an upfront investment will be granted as conventional nil-cost options ("Option Scheme awards").  Should a member of Senior Management choose not to make the minimum investment of one third of the tax fair value of their award, the base value of their award will be reduced by 25%, to recognise the significantly lower risk profile, whilst still providing a market-competitive award value.

At the end of the three year Performance Period on 31 August 2015, awards under the ALTIP will vest, subject to the achievement of the performance conditions (which are set out in more detail below), in two tranches: Option Scheme awards will vest on 31 October 2015 up to a maximum value of 50% of a participant's total award; and the investment, together with any remaining Option Scheme award, on 31 October 2016.

The base value of each participant's award will be calculated as a set multiple of salary (as at 1 September 2012, or on joining, if later) and there is a maximum benefit restriction imposed on each participant.

Given that maximum benefit restriction, the Company expects the maximum dilution to existing shareholders to be approximately 1.3 million Ordinary Shares (or c.1.5% of issued share capital as at 31 March 2013).

Performance targets

The extent to which an award will vest will depend on interdependent EPS and relative TSR performance targets, measured over the performance period from 1 September 2012 to 31 August 2015.  While the performance targets will be tested separately, both hurdles must be achieved for the awards to vest.

There are three performance levels under the EPS performance target. The 'threshold' performance level, which delivers a 6.7% maximum vesting (subject to any scale back as a result of the TSR performance), will not be met unless the compound rate of growth in fully-diluted underlying EPS (before exceptional items, but after the cost of the ALTIP) equals 17% per annum over the three years ending 31 August 2015. This equates to fully-diluted EPS for the year to 31 August 2015 of 63.4p per share and implies sales of £0.9bn.

The 'target' performance level, which delivers a 70% maximum vesting (subject to any scale back as a result of the TSR performance), will not be met unless the compound rate of growth in fully-diluted underlying EPS (before exceptional items, but after the cost of the ALTIP) equals 23% per annum over the same period. This equates to fully-diluted EPS for the year to 31 August 2015 of 73.7p per share and implies sales of £1.0bn, providing direct alignment with our previously communicated strategy.

The 'stretch' performance threshold, which delivers a 100% maximum vesting (subject to any scale back as a result of the TSR performance), will not be met unless the compound rate of growth in fully-diluted underlying EPS (before exceptional items, but after the cost of the ALTIP) equals or exceeds 32% per annum over the same period. This equates to fully-diluted EPS for the year to 31 August 2015 of 91.1p per share and implies sales of £1.3bn.

The TSR performance condition requires the comparison of TSR on an investment in ASOS with TSR on a notional investment in a comparator group during the Performance Period. The comparator group comprises all of the companies in the FTSE All Share General Retailers Index, as constituted at the commencement of the Performance Period, plus Mulberry plc.  The TSR performance will be applied to the outturn from the EPS performance condition and may scale back (potentially to zero) whatever would have vested solely under the EPS condition.  There will no scale back to the EPS outturn if the TSR of ASOS is at the upper quartile or above.  The award will be scaled back progressively in the event that the TSR of ASOS is below upper quartile, such that there will be a scale back of up to one third if ASOS's TSR is at median.  There will be zero vesting if ASOS's TSR is below median.

Other incentive awards

Whilst participants of the ALTIP will not receive any awards under the Company's existing Performance Share Plan ("PSP") during the performance period of the ALTIP, the Company will ensure that all other employees are able to share in the continued success of ASOS by continuing to make grants under the PSP and Share Incentive plan ("SIP"), which offers a grant of free shares to all eligible employees.

Share ownership guidelines

To align further the interests of Executive Directors with those of the Company's shareholders, the ALTIP is also intended to be a mechanism to encourage Executive Directors to build and maintain a significant shareholding in the business. Accordingly shareholding guidelines have been introduced requiring Executive Directors to retain 50% of any shares acquired on vesting of the ALTIP and any subsequent share awards thereafter (net of tax) until the following shareholdings are achieved:

·      CEO: 5 x salary

·      Executive Directors: 2 x salary

For further information:

ASOS plc
Nick Robertson, Chief Executive Officer	Tel: [phone]
Nick Beighton, Chief Finance Officer
Greg Feehely, Head of Investor Relations
College Hill
Matthew Smallwood/Justine Warren/Jamie Ramsay	Tel: [phone]
JPMorgan Cazenove
Luke Bordewich / Gina Gibson	Tel: [phone]
Numis Securities
Alex Ham	Tel: [phone]

 

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