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REGULAR UPDATES ON TOTAL SHAREHOLDER RETURN PERFORMANCE

TSR ANALYSIS

TOTAL SHAREHOLDER RETURN

PERFORMANCE MEASUREMENT

 

Total Shareholder Return (TSR) is a popular performance measure for senior executive share plans. Companies that use it need a service providing regular updates on performance against these TSR targets.

TSR measures the result of a hypothetical investment in a company’s shares over a period. It combines the movement in share price plus the effect of dividends declared during the period under review. These dividends are assumed to be reinvested into the company’s shares at the prevailing share price when shares go ‘ex-div’.

The challenge is how companies can assess their TSR performance to either ensure appropriate reserving, monitor the likely vesting of their awards or provide information to their participants to show how the company is performing against this target. 

 

​Howells’ TSR.Track service is designed to do this. 

 

Our services deal with such complexities as:

Exchanges & Currencies

Performance may be compared to a large grouping of companies, some may be quoted on different exchanges and in different currencies.

Averaging

Periods

Many companies average the TSR of the company and comparators for a period  before the start of the vesting period and through to the end.

Corporate Activity

There are mergers, takeovers and corporate failures to consider (in the 3 years to 31 Dec 2019, 60 of the original FTSE 350 no longer existed).

Number of Awards

There are typically three awards, per scheme, outstanding at any one time, all with different starting positions.

TSR Example

Note 

For the TSR element of the award the vest the company’s TSR must be at least the middle company in the FTSE 350. At this point 25% of the award vests. If the performance is at least better than 75% of the companies in the group, the award vests fully. Between these two levels the award vests on a straight-line basis.

TSR.Track

 

Our TSR.Track service provides our clients with a way through these complexities. 

 

It allows them to keep their participants regularly up to date on the TSR performance associated with each plan award. 

As part of our service we:

 

  • Review your share plan award terms to ensure we understood how the performance test works

  • Source and then analyse the data on your own and your comparator group’s performance

 

  • Agree a format of analysis and report with you that can be shared with your participants

 

  • Undertake adjustments as agreed where companies in your comparator group are no longer in existence.