Investor Presentaiton

166 Notes to the Consolidated Financial Statements 6.2 Share-based payments and share schemes (continued) RELATIVE TOTAL SHAREHOLDER RETURN (TSR)¹ A summary of the LTI plan performance hurdles for all outstanding grants is as follows: GRANT YEAR F213 F224 F234 1 SALES PER SQUARE METRE (SQM)/REPUTATION 2 RETURN ON FUNDS EMPLOYED (ROFE) 2 VESTING PERIOD WEIGHTING (YEARS) (%) HURDLE/ RANGE (PERCENTILE) WEIGHTING (%) Three 33.34 50th - 75th 33.33 Three Three 40.00 40.00 50th 75th 20.00 50th - 75th 20.00 6.2 Share-based payments and share schemes (continued) Other 6 167 Annual Report 2023 Woolworths Group RECOGNITION SHARE PLAN The performance rights sub-plan has also been used to reward employees of the Group. Participants are required to meet a service condition to gain access to the performance rights. MOVEMENTS IN OUTSTANDING PERFORMANCE RIGHTS The following table summarises the movements in outstanding performance rights for all of the above plans: 1 WEIGHTING (%) 33.33 40.00 40.00 Outstanding at start of period Granted during the period Vested during the period. Lapsed during the period The Group's share price reset lower on 24 June 2021 to reflect the demerger of Endeavour Group which was implemented on 1 July 2021. In these circumstances, an adjustment factor was applied by the ASX to historical share prices to recognise the impact of the demerger from a share price perspective. Accordingly, the Group has made no change to the TSR performance hurdle ofthe impacted F21 LTI plan. 2 Hurdle/range not published for sales per SQM, reputation and ROFE as the Group does not provide market guidance onthese metrics and the targets are commercially sensitive. The LTI targets and performance will be published following the end of the performance period. 3 The TSR component vests progressively, where TSR equals or exceeds the 50th percentile of the comparator group upto the full 33.34% vesting, where TSR equals the 75th percentile of the comparator group. SQM and ROFE components vest progressively, uponattaining certain hurdles, to a maximum weighting of 33.33%. 4 The TSR component vests progressively where TSR equals or exceeds the 50th percentile of the comparator group upto the full 40% vesting, where TSR equals the 75th percentile of the comparator group. Reputation and ROFE components vest progressively, upon attaining certain hurdles, to a maximum weighting of 20% and 40% respectively. The reputation non-market based performance condition is only applicable to the F22 and F23 LTI plans and measures brand reputation across four key metrics. The variables in the table below are used as inputs into the model to determine the fair value of performance rights. 2023 2022 F23 WISP F22 WISP Grant date¹ 1 Jul 2022 1 Jul 2021 Performance period start date 1 Jul 2022 1 Jul 2021 Exercise date 1 Jul 2025 1 Jul 2024 Expected volatility2 22.0% Expected dividend yield 4.0% Risk-free interest rate 3.10% 17.0% 4.0% 0.20% Weighted average fair value at grant date $29.35 $31.70 1 Grant date represents the date on which there is a shared understanding of the terms and conditions of the arrangement. 2 The expected volatility is based on the historical implied volatility calculated based on the weighted average remaining life of the performance rights adjusted for any expected changes to future volatility due to publicly available information. Share-based payments expense for the period was $113,425,421 (2022: $139,325,271). Outstanding at end of period 2023 2022 NO. OF RIGHTS NO. OF RIGHTS 11,925,879 11,873,338 4,634,582 5,125,637 (3,521,977) (3,707,696) (1,664,303) (1,365,400) 11,374,181 11,925,879 highlights Performance 2 Business review 3 Significant Accounting Policies Share-based payments Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at grant date. The fair value excludes the effect of non-market based vesting conditions. The fair value of instruments with market-based performance conditions is calculated at the grant date using a Monte Carlo simulation model. The probability of achieving market-based performance conditions is incorporated into the determination of the fair value per instrument. The fair value of instruments with non-market-based performance conditions, service conditions and retention rights is calculated using a Black-Scholes option pricing model. The fair value determined at grant date is expensed on a straight-line basis over the vesting period based on the number of equity instruments that will eventually vest. At each reporting period, the Group revises its estimate of the number of equity instruments expected to vest based on its assessment of the non-market based vesting conditions. Any change in the original estimates are recognised in Consolidated Statement of Profit or Loss with a corresponding adjustment to reserves. Report Directors' 4 Report Financial LO 5 Other information DEFERRED SHORT-TERM INCENTIVE (DEFERRED STI) The performance rights sub-plan has also been used to make offers of Deferred STI which have the following features: For the F21, F22 and F23 Deferred STI plan, a one-year performance measure linked to sales, EBIT, working capital, customer satisfaction, and safety; and • . If the performance hurdles are met, participants are required to remain employed for a further two years to gain access to the performance rights, or otherwise forfeit the performance rights unless the Board exercises its discretion in accordance with the performance rights sub-plan rules. SIGN-ON AND RETENTION RIGHTS The performance rights sub-plan has also been used to compensate new hires for foregone equity, and ensure that key employees are retained to protect and deliver on the Group's strategic direction. It has been offered to: Executives of newly acquired businesses in order to retain intellectual property during transition periods; or Attract new executives. Sign-on and retention rights generally do not have performance measures attached to them due to the objective of retaining key talent and vest subject to the executive remaining employed by the Group, generally for two or more years. 6.2.2 Share schemes The total shares purchased during the year were 3,377,355 (2022: 3,874,029) at an average price per share of $37.73 (2022: $35.28) to satisfy the vesting of share rights and allocation of shares under the Group's employee share plans. No additional expense is recognised in relation to the shares purchased under the Employee Share Purchase Plan and the shares issued under the Non-executive Director Equity Plan as they are acquired out of salary sacrificed remuneration. EMPLOYEE SHARE PURCHASE PLAN (SPP) The SPP provides permanent full-time and part-time employees who are Australian tax residents and are aged 18 years or over with the opportunity to purchase shares from pre-tax income via salary sacrifice. The Group pays the associated brokerage costs. NON-EXECUTIVE DIRECTOR EQUITY PLAN The Non-executive Director Equity Plan allows non-executive directors to acquire share rights through a pre-tax fee sacrifice plan.