The worth of shares within the Employee Share Ownership Plan (Esop) of the publicly traded brewer EABL has decreased by Sh340.6 million when comparing their current value to their acquisition cost. This decline mirrors the drop in the company’s stock price over the preceding three years.
According to EABL’s 2023 annual report, the company possessed 3.82 million shares in the Esop, also referred to as Treasury shares. These were initially purchased at a total cost of Sh836.8 million, which equates to an average of Sh219.22 per share.
“Treasury shares are shares in East African Breweries Plc that are held by the EABL Esop for the purpose of issuing shares under the Group’s share ownership scheme…Treasury shares are recognised at cost where cost is determined to be the purchase price of the shares in an open market (Nairobi Securities Exchange). Shares issued to employees are recognised on a first-in-first-out basis,” EABL said in the report.
The twelve-month period
In the twelve-month period ending in June 2023, EABL increased its holdings in the Esop by acquiring an additional 224,735 shares, at a total expenditure of Sh35.96 million. This acquisition translated to an average cost of Sh160 per share. Comparatively, in the prior reporting period, the company had procured 793,700 shares at a total cost of Sh126.93 million.
During this period, employees exercised their option on 27,332 shares, amounting to a total value of Sh4.37 million. This marked an increase compared to the 23,170 units, valued at Sh3.64 million, that they had exercised in the year ending June 2022.
Employee Share Ownership Plans (Esops) are considered fringe benefits designed to enhance staff productivity, reward, retain, and attract talent. They are issued pending approval from the Capital Markets Authority.
Companies employing such stock-based compensation methods typically offer shares to eligible employees at a discounted rate. However, some companies, like Safaricom, acquire shares from the open market and distribute them to staff without charge.
EABL’s Esop, as outlined in the annual report, consists of three plans. Among them is an executive share option plan, which allows employees to purchase units at a predetermined price at a future date, set at the time when the option is granted.