The total expense included within employee benefits expense from continuing operations in respect of equity-settled share-based payments was £4.4 million (2013: £1.7 million) and £nil (2013: £0.2 million) in respect of cash-settled share-based payments, plus a £0.1 million accrual of national insurance contributions (2013: £0.3 million).
The company operates several share option schemes.
Long Term Plan (LTP)
The LTP is the principal long-term incentive plan for executives and eligible senior leaders. Awards vest based on company performance over a three-year performance period and continued employment. An additional two-year holding period applies for executive directors.
Deferred Bonus Plan (DBP)
Under the DBP, executives are required to defer part of their bonus for three years, to be settled in shares. Vesting is not dependent on any service or performance conditions; however, malus provisions apply.
Further details of the LTP and DBP are given in the Directors' remuneration report.
Performance Share Plan (PSP)
The PSP was the principal long-term incentive plan for executives and senior leaders prior to 2013. Nil-cost options were granted and will vest based on company performance over a three-year performance period and continued employment. The nil-cost options accrue dividend equivalents.
Matching Share Award Plan (MSAP)
Prior to 2013, executives could voluntarily defer part of their bonus into shares under the MSAP. Matching shares (up to a one-for-one match) in the form of nil-cost options were awarded subject to company performance over a three-year performance period and continued employment. The matched shares accrue dividend equivalents.
There is no intention to grant future awards under the PSP or MSAP. Further details of the PSP and MSAP are given in the Directors' remuneration report.
Deferred Share Award Scheme (DSAS)
The DSAS is used as a retention mechanism for certain key employees below board level on a discretionary basis. Shares are released after a three-year holding period and are conditional on satisfactory job performance and continued employment during this time. The nil-cost options accrue dividend equivalents.
Matched Share Investment Scheme (MSIS)
One-off matched share investment awards for the directors were made on their appointments. Under this scheme, the directors bought company shares and were awarded a conditional one-for-one matched award of shares. Shares under this scheme will be transferred to the CEO on 5 January 2016 and the CFO on 1 October 2015, subject to them still being employed by the group and retaining their original investment. The matched shares accrue dividend equivalents.
Company Share Option Scheme 1999 (CSOS)
The CSOS 1999 is for senior executives (excluding, with effect from the introduction of the group's long-term incentive plan, executive directors and other executives participating in that plan and its successor, the PSP). Options under the CSOS 1999 are exercisable in a period beginning no earlier than three years and ending no later than ten years from the date of grant.
Although the LTP, DBP and DSAS give the company the option to settle in cash, the intention is to settle in shares.
The following tables show the inputs to the model used to calculate the fair value of equity-settled share awards granted during the years ended 31 March 2014 and 31 March 2013. A Monte Carlo simulation model was used to calculate the fair value of awards with Total Shareholder Return (TSR) performance conditions. The fair value of the awards with operational performance conditions or no performance conditions is equal to the market share price at the grant date.
|Year ended 31 March 2014||Long term |
|Weighted average exercise price (£ per share)||–||–|
|Vesting period (years)(2)||3.0||3.0|
|Expected volatility (%)||17.1||17.1|
|Risk-free rate (%)||0.6||–|
|Expected dividend yield (%)||–||–|
|Fair value (£ per share)||2.81||7.14|
- Awarded in July 2013.
- The vesting period for the directors' awards is 4.7 years.
|Year ended 31 March 2013||Performance|
|Weighted average exercise price (£ per share)||–||–||–||–||–||–|
|Vesting period (years)||2.6||2.6||2.8||2.8||2.8||2.8|
|Expected volatility (%)||17.2||17.2||17.5||17.5||17.5||17.5|
|Risk-free rate (%)||0.2||–||0.3||–||0.3||–|
|Expected dividend yield (%)||–||–||–||–||–||–|
|Fair value (£ per share)||4.33||7.19||3.30||6.63||3.30||6.63|
- Awarded in August 2012.
- Awarded in June 2012.
The expected volatility is based on the historical volatility of the company's share price over the expected life of the award.
The weighted average share price at date of exercise and the contractual remaining life of total outstanding options is provided below:
share award scheme
|Weighted average share price at date of exercise|
|31 March 2014||7.87||7.87||7.15||n/a||n/a|
|31 March 2013||6.91||6.91||6.48||n/a||6.63|
|Contractual remaining life|
|31 March 2014||0.5 years||0.6 years||1.3 years||1.7 years||n/a|
|31 March 2013||1.2 years||1.6 years||0.9 years||2.7 years||n/a|
None of the share options identified above as outstanding at 31 March 2014 had vested at that date.