EABL’s employee share values drop by as stock price declines

KENYA- The East African Breweries Limited (EABL), a leading brewer in East Africa, has reported a significant decrease in the value of shares held under its Employee Share Ownership Plan (ESOP).

According to the company’s annual report for 2023, the value has dropped by US$2.3 million compared to the acquisition cost, reflecting a three-year decline in the company’s share price.

EABL holds 3.82 million shares under its ESOP, also known as Treasury shares, which were acquired at a total cost of US$5.6million.

The acquisition averaged out to (Sh219.22) per share. However, based on the recent closing price of Sh130 per share, the market value of these shares now stands at US$3.3 million.

“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,” EABL explained in their annual report.

“Treasury shares are recognized 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 recognized on a first-in-first-out basis.”

During the fiscal year ending in June 2023, EABL added 224,735 shares to the ESOP, spending US$244,542 for the purchase, which averaged Sh160 per share. In the preceding reporting period, the company had acquired 793,700 units at a cost of US$863,175.

In the same fiscal year, EABL employees exercised their option on 27,332 shares, valued at US$29,717. This marked an increase from the 23,170 units valued at US$24,753 that employees had taken up in the year ending June 2022.

Employee Share Ownership Plans (ESOPs) are seen as valuable fringe benefits aimed at boosting staff productivity, rewarding, retaining, and attracting talent. They are typically issued at a discount to qualifying employees and require approval from the Capital Markets Authority.

EABL’s ESOP, as detailed in their annual report, consists of three plans which includes an executive share option plan, which allows employees to purchase units at a future date at a fixed price, determined when the option is granted.

The reports also consist of the restricted share units, offered to employees for free on the grant date and an employee share save scheme, in which eligible employees save a fixed amount over a three-year period and are then given the option to buy shares at a future date at a fixed price set at the grant date.

The price of these shares is fixed at 80 percent of the market price at the grant date.

The vesting period for these options is three years, after which employees can exercise the option within seven years, with no performance conditions attached to the share plans.

As the value of EABL’s ESOP shares continues to fluctuate with the market, employees and investors will closely monitor future developments in the company’s stock price and its impact on the ESOP’s overall value.

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