Source: attachments/ticket-MC-3288/Safops_LTIS_4_Agreement_20251124.docx
Sender: Pieter Richards · Headline change: KPI 4 now uplifts to 150%; rest is "clarity".
TL;DR
- Material change (KPI 4 / clause 1.3.4): 25% allocation tied to cumulative 3-year EBIT ≥ R2.1bn now prorates upward for over-performance, capped at 150%. Previously a binary hit-or-miss vesting.
- Clarity edits: EBIT definition tightened (Capital Structure Neutrality, pre-IFRS 16 leases, Baseline Accounting Policies), Bonus Amount fixed at 2028 CTC (not later increases), 150% cap language harmonised across all KPIs.
- No structural changes to scheme period (2026-2028), payment dates (50% post-2028 audit, 50% on 31 Jan 2030), forfeiture, confidentiality, retrenchment treatment.
Scheme structure (unchanged)
| Item |
Value |
| Scheme Commencement |
1 Jan 2026 |
| Scheme Period |
FY2026, FY2027, FY2028 |
| Bonus Amount |
Multiplier × CTC at 31 Dec 2028 (fixed at that date) |
| Annual EBIT Threshold |
R 370m per year (gating) |
| Pay 1 |
50% after 2028 audit signoff |
| Pay 2 |
50% on 31 Jan 2030 |
KPI vesting matrix
| KPI |
Weight |
Trigger |
Cap |
| 1.3.1 — 2026 EBIT |
25% |
≥6% EBIT/turnover AND ≥R370m |
150% (prorated above target) |
| 1.3.2 — 2027 EBIT |
25% |
≥6% EBIT/turnover AND ≥R370m |
150% |
| 1.3.3 — 2028 EBIT |
25% |
≥6% EBIT/turnover AND ≥R370m |
150% |
| 1.3.4 — Cumulative |
25% |
Cumulative 3-yr EBIT ≥ R2.1bn (R370m gates don't apply here) |
150% — NEW: prorates upward on excess |
KPI 1.3.4 mechanics (clauses 1.3.4 + 1.4):
- < R2.1bn cumulative → 0% on this slice (no prorating downward).
- ≥ R2.1bn → full 25% Vests; excess prorates upward subject to 150% cap.
- For 1.3.4 only, annual R370m gate is ignored — all three years count regardless of individual misses.
Key clarity items worth flagging
- EBIT definition (clause 020): Capital Structure Neutrality — post-1-Jan-2026 financing-driven interest income/expense is excluded. Protects participants from cap-structure changes (debt raises, refinancings) eroding EBIT.
- Baseline Accounting Policies (clause 023-024): Locks in pre-IFRS 16 aircraft lease treatment (full lease expense as opex, not depreciation + interest). Stops accounting policy shifts moving the goalposts.
- Bonus Amount fixed at 2028 CTC (clause 015): Annual increases between 31 Dec 2028 and payment dates do not uplift the bonus. Worth noting if CTC inflation expected.
- Self-funding clause: Bonus must be fully provided in accounts — payment can be postponed if liquidity test not met.
Risks / things to push back on (optional)
- 150% cap on KPI 1.3.4 prorating — clause 036 says excess prorates "in accordance with clause 1.4". Clause 1.4 example is annual (4/6 of target). Mechanics for cumulative excess aren't spelled out as an explicit formula — open to interpretation. Suggest asking Pieter for the exact prorating formula on cumulative EBIT > R2.1bn (e.g. linear to R3.15bn = 150%?).
- Capital Structure Neutrality is one-directional — only changes after 1 Jan 2026 excluded. Confirm no existing capital structure (e.g. shareholder loans) is being layered into the EBIT baseline.
- Pre-IFRS 16 baseline — pegs the policies to management accounts. If management reporting framework shifts, downstream ambiguity. Could request "as published at execution date" snapshot.
Recommendation
Sign-off candidate after one clarifying question to Pieter:
"Confirm the prorating formula for cumulative EBIT > R2.1bn in clause 1.3.4 — is it linear (e.g. R3.15bn cumulative = 150%) or does it inherit the per-year 4/6-style example from clause 1.4?"
Otherwise change is participant-favourable (uplift potential, tighter EBIT definition) and acceptable.