Note 19: Share-based payments
The Group uses a Black Scholes model to calculate the fair value of options on grant date. At each year end the
cumulative expense is adjusted to take into account any changes in estimate of the likely number of options expected
to vest. Details of the relevant option schemes are given in note 20. All the share-based plans are subject to non market performance conditions such as earnings per share targets and continued employment. All schemes are equity settled. The key inputs are listed below and market price on any given day is obtained from external, publicly available sources.
|
2007 |
|
2006 |
|
|
| Risk free rate |
4.40% |
|
4.40% |
|
| Dividend Yield |
1.50% |
|
2.48% |
|
|
| Volatility1 |
33% |
|
33% |
|
|
1 Volatility is based on the Group’s share price movement between January 2003 and July 2007. In the opinion of the directors, this period is appropriate, given the Group’s history of growth and acquisitions, and external industry factors.
The Group recognised expenses of £262,000 in 2007 (2006: £229,000).
Movement on options granted (represented in ordinary shares)
|
Outstanding
1 August
2006 |
Granted |
Lapsed |
Exercised |
Outstanding
31 July
2007 |
|
Exercisable
31 July
2007 |
|
|
| Executive share option scheme |
4,645 |
- |
478 |
2,397 |
1,770 |
|
484 |
|
| Long-Term Incentive Plan |
381 |
1311 |
173 |
16 |
323 |
|
- |
|
| Long-Term Incentive - performance shares |
890 |
453 |
43 |
- |
1,300 |
|
- |
|
| Stock Unit Agreement |
167 |
- |
- |
84 |
83 |
|
- |
|
|
|
6,083 |
584 |
694 |
2,497 |
3,476 |
|
484 |
|
|
| Weighted-average exercise price (p) |
36.64 |
13.87 |
46.34 |
38.16 |
29.78 |
|
42.32 |
|
A total of 2,497,000 shares were exercised during the year ended 31 July 2007 at a weighted average share price of
84.62p.
1 During the year 131,000 share options were granted under the LTIP scheme of which 108,000 remain outstanding at 31 July 2007. 23,000 share options lapsed during the year as a result of the cessation of employment by one scheme member.
| Options over ordinary shares outstanding |
|
|
| Range of exercise prices (p) |
23.50-215 |
|
| Weighted average exercise price |
29.78 |
|
| Weighted average contractual life (months) |
11 |
|
|
The fair value of options granted in the year calculated using the Black Scholes model
| |
2007 |
|
|
| Fair value of options granted under the LTIP |
15p |
|
| Fair value of performance shares granted under the LTIP |
50p |
|
| Risk free rate |
4.40% |
|
| Expected life (years) |
5 |
|
| Expected volatility |
33% |
|
| Dividend yield |
1.50% |
|
|