GlaxoSmithKline PLC Adjusted Free Cash Flow Performance Measure (7999U)
01 August 2015 - 2:22AM
UK Regulatory
TIDMGSK
RNS Number : 7999U
GlaxoSmithKline PLC
31 July 2015
GlaxoSmithKline plc
(the 'Company')
Adjusted Free Cash Flow Performance Measure for 2015-17
awards
under GlaxoSmithKline Share Plans
GSK has today set out the Adjusted Free Cash Flow (AFCF)
Performance Measures for the conditional award of shares under the
Group's Performance Share Plan and Deferred Annual Bonus Plan for
the period 2015-2017. Conditional awards are subject to the
achievement of three equally weighted performance measures:
1) Total Shareholder Return (TSR)
2) R&D new product performance
3) Adjusted Free Cash Flow (AFCF)
The use of cash flow as a performance measure is intended to
recognise the importance of effective working capital management
and of generating cash to fund the Group's operations, investments,
and ordinary dividends to shareholders.
Details of the TSR and R&D new product performance measures
were set out in an announcement on 12 February 2015 and in the
company's Annual Report. At the time of the grant it was determined
that, given the transformational nature of the three-part
transaction with Novartis, the AFCF measure and associated vesting
levels would be established following the completion of the
transaction.
In considering the AFCF performance measures for the period
2015-17, the Remuneration Committee has considered GSK's future
business performance and the scale of restructuring triggered by
the Novartis transaction across the Group's three businesses.
As a result, the Remuneration Committee has determined a
threshold performance level for AFCF of GBP11.5 billion over the
period 2015-17. This level reflects an estimated reduction of
GBP2.2 billion due to currency movements for the period 2015-17
compared to 2014-16.
In addition, in order to fully assess disciplined use of
restructuring funds over the period 2015-2017, the Remuneration
Committee has decided to exclude the costs and associated capital
expenditure for the Group's restructuring and integration
programmes, triggered by the Novartis transaction, from the AFCF
used to set the performance measures. The Committee has set a
specific target of GBP3.3 billion for this restructuring and
capital expenditure.
The vesting schedule is as outlined below:
Performance Level Adjusted Free Cash Proportion Vesting
Flow (GBPbillions) %
------------------- -------------------- -------------------
Below threshold <11.5 0%
------------------- -------------------- -------------------
Threshold 11.5 25%
------------------- -------------------- -------------------
11.9 50%
------------------- -------------------- -------------------
13.0 75%
------------------- -------------------- -------------------
Maximum 13.6 100%
------------------- -------------------- -------------------
V A Whyte
Company Secretary
31 July 2015
This information is provided by RNS
The company news service from the London Stock Exchange
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