During the year, the Company operated the Unapproved Share Option Scheme, the Approved Share Option Scheme, the Long Term Incentive Plan and the Save As You Earn (SAYE) Share Option Scheme as described below:
Unapproved and Approved Share Option Schemes
Under these Schemes, options are granted to certain Executives and employees of the Group (excluding Executive Directors) to purchase shares in the Company at a price fixed at the average market value over the three days prior to the date of grant. For the options to vest, there must be an increase in earnings per share of at least 12% above the growth in the UK Retail Prices Index (RPI) over a three year period. Once vested, options must be exercised within ten years of the date of grant.
Long Term Incentive Plan 2008
Vesting is dependent on two performance conditions which must be satisfied over a three year performance period commencing from the start of the financial year within which the award is granted. 50% of the award will vest dependent on the Company's TSR performance against an appropriate comparator group. 50% of the award will vest subject to a performance condition based on annual earnings per share targets. Each of the TSR and EPS elements is subject to an additional ROCE underpin. Unless the Company's ROCE is 10% or more in the final year of the performance period, the award will lapse in full.
SAYE Option Scheme
This scheme is open to all UK employees. Participants save a fixed amount of up to £500 per month for either three or five years and are then able to use these savings to buy shares in the Company at a price fixed at a 20% discount to the market value at the start of the savings period. Prior to 16 October 2012, participants were able to save for a seven year period. The SAYE options must ordinarily be exercised within six months of the completion of the relevant savings period. The exercise of these options is not subject to any performance criteria.
Long Term Incentive Plan 2017
(a) Long Term Incentive Plan Awards
Vesting is dependent on three performance conditions which must be satisfied over a three year performance period commencing from the start of the financial year within which the award is granted. One third of each award is subject to a performance condition based on the Company's TSR performance over the performance period relative to an appropriate comparator over the performance period. Two thirds of each award is subject to a performance condition based on the growth in the Group's underlying diluted EPS over the performance period. Both the TSR element and the EPS element are subject to an additional ROCE performance measure. Unless the Group's ROCE is 10% or more in the final year of the performance period, the awards will lapse in full regardless of TSR and EPS performance. For the purposes of this note they are detailed under the heading Long Term Incentive Plan.
(b) Qualifying LTIP Awards
In addition, awards can be structured as Qualifying LTIP Awards, consisting of a Company Share Option Plan (CSOP) option and a nil-cost LTIP award, with the ordinary award scaled back at exercise to take account of any gain made on exercise of the CSOP option. The Qualifying LTIP Awards are granted to the UK Senior Executive Team which includes the UK resident Executive Directors. The performance conditions are the same as those attached to the awards granted under Approved Share Option Schemes and Long Term Incentives Plan 2017. For the purposes of this note they are detailed under the heading Long Term Incentive Plan (Qualifying LTIP Awards).
(c) Market Value Options
Market value options may be granted under the LTIP 2017 as tax-advantaged CSOP options and as Unapproved share options. These options are granted to certain Executives and employees of the Group (excluding Executive Directors) to purchase shares in the Company at a price fixed at the average market value over the three days prior to the date of grant. For the options to vest, there must be an increase in earnings per share of at least 12% above the growth in the UK Retail Prices Index (RPI) over a three year period. Once vested, options must be exercised within ten years of the date of grant. For the purposes of this note they are detailed under the headings Unapproved and Approved Share Option Schemes.
Year ended 30 June 2019
| Exercise
Period | Exercise
price
per share
Pence | At
1 July
2018
Number | Exercised
Number | Granted
Number | Lapsed
Number | At
30 June
2019
Number |
|---|
| Unapproved Share Option Scheme | | | | |
| 10 October 2008†* | 2011–2018 | 364.63 | 2,722 | – | – | (2,722) | – |
| 30 March 2009†* | 2012–2019 | 381.15 | 8,709 | (6,532) | – | (2,177) | – |
| 1 March 2010†* | 2013–2020 | 418.81 | 2,177 | — | – | – | 2,177 |
| 28 February 2011†* | 2014–2021 | 461.97 | 3,221 | (3,221) | – | – | – |
| 10 September 2012† | 2015–2022 | 541.00 | 13,000 | (13,000) | – | – | – |
| 16 September 2013† | 2016–2023 | 721.00 | 6,765 | (3,765) | – | – | 3,000 |
| 11 September 2014† | 2017–2024 | 763.00 | 14,341 | (7,341) | – | – | 7,000 |
| 15 September 2015† | 2018–2025 | 975.00 | 41,255 | (22,436) | – | 164 | 18,983 |
| 18 March 2016† | 2019–2026 | 1118.00 | 950 | (475) | – | – | 475 |
| 19 September 2016 | 2019–2026 | 1369.00 | 78,352 | – | – | (6,000) | 72,352 |
| 2 March 2018 | 2020–2028 | 2506.00 | 112,310 | – | – | (13,671) | 98,639 |
| 26 October 2018 | 2021–2028 | 2166.00 | – | – | 130,209 | (10,173) | 120,036 |
| | | 283,802 | (56,770) | 130,209 | (34,579) | 322,662 |
| Approved Share Option Scheme | | | | |
| 16 September 2013† | 2016–2023 | 721.00 | 500 | – | – | – | 500 |
| 11 September 2014† | 2017–2024 | 763.00 | 4,659 | (2,659) | – | – | 2,000 |
| 15 September 2015† | 2018–2025 | 975.00 | 13,440 | (12,485) | – | – | 955 |
| 18 March 2016† | 2019–2026 | 1118.00 | 5,050 | (5,050) | – | – | – |
| 19 September 2016 | 2019–2026 | 1369.00 | 9,148 | – | – | – | 9,148 |
| 2 March 2018 | 2021–2028 | 2506.00 | 9,190 | – | – | (1,197) | 7,993 |
| 26 October 2018 | 2021–2028 | 2166.00 | – | – | 4,291 | (1,385) | 2,906 |
| | | 41,987 | (20,194) | 4,291 | (2,582) | 23,502 |
| Long Term Incentive Plan | | | | | |
| 15 September 2015 | 2018–2019 | – | 155,834 | (155,834) | – | – | – |
| 22 March 2016 | 2019 | – | 8,786 | (5,857) | – | (2,929) | – |
| 19 September 2016 | 2019–2020 | – | 149,463 | – | – | (5,494) | 143,969 |
| 10 October 2016 | 2019–2020 | – | 5,319 | – | – | (5,319) | – |
| 7 March 2017 | 2019 | – | 21,033 | (21,033) | – | – | – |
| 2 March 2018 | 2020–2021 | – | 28,240 | – | – | – | 28,240 |
| 26 October 2018 | 2021–2022 | – | – | – | 124,268 | (25,589) | 98,679 |
| | | 368,675 | (182,724) | 124,268 | (39,331) | 270,888 |
| Long Term Incentive Plan (Qualifying LTIP Awards) | | | | | |
| 2 March 2018 | 2021-2028 | 2506.00 | 7,530 | – | – | (2,394) | 5,136 |
| 2 March 2018 | 2020–2021 | – | 74,281 | – | – | (25,064) | 49,217 |
| 26 October 2018 | 2021-2028 | 2166.00 | – | – | 1,350 | – | 1,350 |
| 26 October 2018 | 2021-2022 | – | – | – | 3,115 | – | 3,115 |
| 1 March 2019 | 2022-2029 | 2429.00 | – | – | 1,235 | – | 1,235 |
| 1 March 2019 | 2022-2023 | – | – | – | 4,940 | – | 4,940 |
| | 81,811 | – | 10,640 | (27,458) | 64,993 |
| SAYE Option Scheme | | | | | | |
| 7 April 2014 | 2017–2019 | 552.00 | 20,101 | (18,471) | – | (1,630) | – |
| 13 October 2014 | 2017–2020 | 614.00 | 16,378 | (431) | – | (2,528) | 13,419 |
| 12 October 2015 | 2018–2021 | 792.00 | 79,761 | (63,536) | – | (852) | 15,373 |
| 13 October 2016 | 2019–2022 | 1095.00 | 42,484 | (519) | – | (2,773) | 39,192 |
| 12 October 2017 | 2020–2023 | 1646.00 | 69,548 | (355) | – | (7,617) | 61,576 |
| 29 November 2018 | 2021-2024 | 1974.00 | – | – | 34,527 | (1,138) | 33,389 |
| | | 228,272 | (83,312) | 34,527 | (16,538) | 162,949 |
| Total | | | 1,004,547 | (343,000) | 303,935 | (120,488) | 844,994 |
| Weighted average exercise price* | | 759.65p | 360.10p | 958.52p | 772.84p | 994.14p |
* Adjusted to reflect the bonus element of the Rights Issue — there has been no impact on the overall fair value of options in issue.
† Total share options exercisable at 30 June 2019 are 35,090.
Year ended 30 June 2018
| Exercise
Period | Exercise
price
per share
Pence | At
1 July
2017
Number | Exercised
Number | Granted
Number | Lapsed
Number | At
30 June
2018
Number |
|---|
| Unapproved Share Option Scheme | | | | |
| 2 April 2008†* | 2011–2018 | 336.15 | 3,266 | (3,266) | – | – | – |
| 10 October 2008†* | 2011–2018 | 364.63 | 2,722 | – | – | – | 2,722 |
| 30 March 2009†* | 2012–2019 | 381.15 | 8,709 | – | – | – | 8,709 |
| 1 March 2010†* | 2013–2020 | 418.81 | 2,177 | – | – | – | 2,177 |
| 28 February 2011†* | 2014–2021 | 461.97 | 3,221 | – | – | – | 3,221 |
| 10 September 2012† | 2015–2022 | 541.00 | 26,000 | (13,000) | – | – | 13,000 |
| 16 September 2013† | 2016–2023 | 721.00 | 17,765 | (11,000) | – | – | 6,765 |
| 11 September 2014† | 2017–2024 | 763.00 | 44,009 | (25,668) | – | (4,000) | 14,341 |
| 15 September 2015 | 2018–2025 | 975.00 | 48,060 | (2,000) | – | (4,805) | 41,255 |
| 18 March 2016 | 2019–2026 | 1118.00 | 950 | – | – | — | 950 |
| 19 September 2016 | 2019–2026 | 1369.00 | 88,852 | – | – | (10,500) | 78,352 |
| 2 March 2018 | 2020–2028 | 2506.00 | – | – | 114,113 | (1,803) | 112,310 |
| | | 245,731 | (54,934) | 114,113 | (21,108) | 283,802 |
| Approved Share Option Scheme | | | | |
| 2 April 2008†* | 2011–2018 | 336.15 | 1,088 | (1,088) | – | – | – |
| 1 March 2010†* | 2013–2020 | 418.81 | 466 | (466) | – | – | – |
| 28 February 2011†* | 2014–2021 | 461.97 | 44 | (44) | – | – | – |
| 16 September 2013† | 2016–2023 | 721.00 | 3,249 | (2,749) | – | – | 500 |
| 11 September 2014† | 2017–2024 | 763.00 | 10,991 | (6,332) | – | – | 4,659 |
| 15 September 2015 | 2018–2025 | 975.00 | 13,440 | – | – | – | 13,440 |
| 18 March 2016 | 2019–2026 | 1118.00 | 5,050 | – | – | – | 5,050 |
| 19 September 2016 | 2019–2026 | 1369.00 | 9,148 | – | – | – | 9,148 |
| 2 March 2018 | 2020–2028 | 2506.00 | – | – | 10,387 | (1,197) | 9,190 |
| | | 43,476 | (10,679) | 10,387 | (1,197) | 41,987 |
| Long Term Incentive Plan | | | | | |
| 15 September 2014 | 2017–2018 | – | 195,258 | (195,258) | – | – | – |
| 15 September 2015 | 2018–2019 | – | 155,834 | – | – | – | 155,834 |
| 22 March 2016 | 2019–2019 | – | 8,786 | – | – | – | 8,786 |
| 19 September 2016 | 2019–2020 | – | 149,463 | – | – | – | 149,463 |
| 10 October 2016 | 2019–2020 | – | 5,319 | – | – | – | 5,319 |
| 7 March 2017 | 2018 | – | 21,033 | (21,033) | – | – | – |
| 7 March 2017 | 2019 | – | 21,033 | — | – | – | 21,033 |
| 2 March 2018 | 2020–2021 | – | — | — | 28,240 | – | 28,240 |
| | | 556,726 | (216,291) | 28,240 | – | 368,675 |
| Long Term Incentive Plan (Qualifying LTIP Awards) | | | | | | |
| 2 March 2018 | | 2021–2028 | 2506.00 | – | – | 7,530 | – | 7,530 |
| 2 March 2018 | | 2020–2021 | – | – | – | 74,281 | – | 74,281 |
| | – | – | 81,811 | – | 81,811 |
| SAYE Option Scheme | | | | | | |
| 13 December 2010* | 2013–2017 | 375.64 | 4,542 | (4,542) | – | – | – |
| 16 October 2012 | 2015–2018 | 471.00 | 7,576 | (7,576) | – | – | – |
| 7 April 2014 | 2017–2019 | 552.00 | 22,383 | (2,282) | – | – | 20,101 |
| 13 October 2014 | 2017–2020 | 614.00 | 100,129 | (82,034) | – | (1,717) | 16,378 |
| 12 October 2015 | 2018–2021 | 792.00 | 82,804 | (997) | – | (2,046) | 79,761 |
| 13 October 2016 | 2019–2022 | 1095.00 | 49,429 | – | – | (6,945) | 42,484 |
| 12 October 2017 | 2020–2023 | 1646.00 | – | – | 73,108 | (3,560) | 69,548 |
| | | 266,863 | (97,431) | 73,108 | (14,268) | 228,272 |
| Total | | | 1,112,796 | (379,335) | 307,659 | (36,573) | 1,004,547 |
| Weighted average exercise price* | | 430.64p | 270.69p | 1405.23p | 1251.43p | 759.65p |
* Adjusted to reflect the bonus element of the Rights Issue — there has been no impact on the overall fair value of options in issue.
† Total share options exercisable at 30 June 2018 are 56,094.
The weighted average exercise price of options eligible to be exercised at 30 June 2019 was 862.72p (2018: 596.85p). For options exercised during the year, the weighted average market price at the date of exercise was 2,365.36p (2018: 2,142.35p). The weighted average remaining contractual lives of options outstanding at the Consolidated Statement of Financial Position date was 4.3 years (2018: 3.8 years).
Outstanding options on all Long Term Incentive Plan, Approved and Unapproved plans prior to 30 June 2018 were exercisable at 30 June 2019. No options issued under SAYE plans were exercisable at 30 June 2019 (2018: nil).
The fair values for shares granted under the Unapproved, Approved and SAYE Option Schemes have been calculated using the Black–Scholes option pricing model. The fair values of shares awarded under the Long Term Incentive Plan have been calculated using a Monte Carlo simulation model which takes into account the market-based performance conditions attaching to those shares. The assumptions used in calculating fair value are as follows:
Long Term Incentive Plan
| Date of grant | 07/03/17 | 10/10/16 | 19/09/16 | 22/03/16 | 15/09/15 |
| Number of shares awarded | 21,033 | 5,319 | 149,463 | 8,786 | 220,621 |
| Share price at date of grant | 1652p | 1389p | 1379p | 1200p | 990p |
| Exercise price | Nil | Nil | Nil | Nil | Nil |
| Expected life | 2 years | 3 years | 3 years | 3 years | 3 years |
| Risk-free rate | 0.12% | 0.12% | 0.12% | 0.46% | 0.68% |
| Volatility | 22% | 22% | 22% | 22% | 22% |
| Dividend yield | 1.54% | 1.54% | 1.54% | 1.61% | 0.54% |
| Fair value per share | 1500p | 1108p | 1108p | 1021p | 764p |
Unapproved and Approved Share Option Schemes
| Date of grant | 26/10/18
& 01/03/19 | 02/03/18 | 19/09/16 | 18/03/16 | 15/09/15 |
| Number of shares awarded | 6,876 | 17,917 | 106,000 | 6,000 | 74,000 |
| Share price at date of grant | 2188p | 2548p | 1379p | 1185p | 990p |
| Exercise price | 2166p | 2506p | 1369p | 1188p | 975p |
| Expected life | 6.5 years | 6.5 years | 6.5 years | 6.5 years | 6.5 years |
| Risk-free rate | 1.05% | 1.20% | 0.47% | 1.02% | 1.47% |
| Volatility | 28% | 23% | 26% | 26% | 27% |
| Dividend yield | 0.90% | 1.91% | 1.54% | 1.62% | 0.54% |
| Fair value per share | 596p | 521p | 305p | 273p | 284p |
Long Term Incentive Plan 2017
| Valuation date | 26/10/18 & 01/03/19 |
| Award date | 26/10/18 & 01/03/19 |
| Vesting date | 30/09/21 |
| Expected exercise | 30/09/21 |
| Type of awards | Standalone
Nil-cost options | Conditional
share awards | Nil-cost options
(CSOP linked and standalone options) | Market value options |
|---|
| Holding period restriction | 2 years | 2 years | N/A | N/A |
| Number of awards at grant | 23,919 | 47,838 | 4,815 | 9,629 | 15,374 | 30,748 | 130,209 |
| Share price at date of grant | 2188p | 2188p | 2188p | 2188p | 2188p | 2188p | 2188p |
| Exercise price | Nil | Nil | Nil | Nil | Nil | Nil | 2166p |
| Expected life | 2.93 years | 2.93 years | 2.93 years | 2.93 years | 2.93 years | 2.93 years | 2.93 years |
| Risk-free rate | 0.75% | 0.75% | 0.75% | 0.75% | 0.75% | 0.75% | 1.05% |
| Volatility | 27.95% | 27.95% | 27.95% | 27.95% | 27.95% | 27.95% | 27.95% |
| Dividend yield | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% |
| Fair value per share | 943p | 1939p | 943p | 1939p | 1036p | 2131p | 596p |
Long Term Incentive Plan 2017
| Valuation date | 02/03/18 |
| Award date | 02/03/18 |
| Vesting date | 30/09/20 |
| Expected exercise | 30/09/20 |
| Type of awards | Nil-cost options
(CSOP linked) | Conditional
share awards | Nil-cost options
(CSOP linked and standalone options) | Market value options |
|---|
| Holding period restriction | 2 years | 2 years | N/A | N/A |
| Number of awards at grant | 20,459 | 40,918 | 4,033 | 8,066 | 9,682 | 19,363 | 114,113 |
| Share price at date of grant | 2506p | 2506p | 2506p | 2506p | 2506p | 2506p | 2506p |
| Exercise price | Nil | Nil | Nil | Nil | Nil | Nil | Nil |
| Expected life | years | years | years | years | years | years | years |
| Risk-free rate | 0.82% | 0.82% | 0.82% | 0.82% | 0.82% | 0.82% | 1.20% |
| Volatility | 23.21% | 23.21% | 23.21% | 23.21% | 23.21% | 23.21% | 23.21% |
| Dividend yield | 1.91% | 1.91% | 1.91% | 1.91% | 1.91% | 1.91% | 1.91% |
| Fair value per share | 1979p | 22.50p | 19.79p | 22.50p | 21.33p | 24.25p | 522p |
Save As You Earn Option Scheme
| Date of grant | 29/11/18 | 12/10/17 | 13/10/16 | 12/10/15 |
| Number of shares awarded | 34,527 | 73,108 | 52,877 | 101,513 |
| Share price at date of grant | 2136p | 2175p | 1370p | 930p |
| Exercise price | 1974p | 1646p | 1095p | 792p |
| Expected life | | | | |
| – three year scheme | 3.4 years | 3.25 years | 3.25 years | 3.25 years |
| – five year scheme | 5.4 years | 5.25 years | 5.25 years | 5.25 years |
| Risk-free rate | | | | |
| – three year scheme | 0.77% | 0.54% | 0.22% | 0.83% |
| – five year scheme | 0.91% | 0.79% | 0.44% | 1.17% |
| Volatility | | | | |
| – three year scheme | 27.94% | 21.6% | 22% | 22% |
| – five year scheme | 25.09% | 22.2% | 24% | 26% |
| Dividend yield | 0.95% | 1.91% | 1.51% | 0.53% |
| Fair value per share | | | | |
| – three year scheme | 485p | 551p | 302p | 215p |
| – five year scheme | 530p | 587p | 346p | 283p |
Expected volatility was determined by calculating the historical volatility of the Group's share price over its entire trading history.
National Insurance contributions are payable by the Company in respect of some of the share-based payments. These contributions are payable on the date of exercise based on the intrinsic value of the share-based payments and are therefore treated as cash settled awards. The Group had an accrual at 30 June 2019 of £1.0 million (2018: £1.4 million), of which £0.2 million (2018: £0.2 million) related to vested options. The total charge to the Consolidated Income Statement within administrative expenses in respect of share-based payments was:
| 2019
£m | 2018
£m |
|---|
| Equity settled share-based transactions | 2.3 | 2.4 |
| Cash settled share-based transactions | 0.1 | 0.9 |
| 2.4 | 3.3 |