Defined contribution plans
The Group operates a number of defined contribution pension plans, which include stakeholder pension plans whose assets are held separately from those of the Group, in independently administered funds.
The total expense relating to these plans in the current year was £1.80m (2016: £1.61m) and represents contributions payable by the Group to the funds.
At the end of the financial year, there were outstanding pension contributions of £0.12m (2016: £0.12m), which are included in creditors.
Share based payments
The Group Share Options (including SAYE plans) provide for an exercise price equal to the average quoted market price of the Group shares on the date of grant. In the case of SAYE, this price is discounted in line with HMRC limits. The vesting period is generally three, five or seven years. The options expire if they remain unexercised after the exercise period has lapsed. Furthermore, options are forfeited if the employee leaves the Group before the options vest, unless for retirement, redundancy or health reasons. The options are equity settled.
The number and weighted average exercise prices of share options are as follows:
|Options||Weighted average exercise price||Options||Weighted average exercise price|
|Outstanding at beginning of year||3,486,706||0.35||3,567,961||0.26|
|Granted during the year||438,175||1.07||495,264||1.05|
|Forfeited/lapsed during the year||(141,909)||0.47||(32,068)||0.91|
|Exercised during the year||(2,496,555)||0.14||(544,451)||0.33|
|Outstanding at the end of the year||1,286,417||1.00||3,486,706||0.35|
|Exercisable at the end of the year||—||—||2,024,685||0.09|
The options outstanding at 31 March 2017 had a weighted average remaining contractual life of 1.7 years (2016: 2.8 years) and exercise prices ranging from £0.25 to £1.07 (2016: £0.085 to £1.05).
The weighted average share price at the date of exercise for share options exercised in 2017 was 173.00p (2016: 114.30p).
The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on Black Scholes, Binomial Lattice and Monte Carlo models. The contractual life of the option is used as an input into this model.
Board deferred equity bonus shares
The Board deferred equity bonus shares have been discussed in more detail in the Remuneration report.
The number of deferred equity bonus shares is as follows:
|Deferred equity bonus shares|
|Outstanding at beginning of year||3,372,922|
|2017 deferred equity bonus shares awarded||499,900|
|2014, 2015, 2016 Accelerated deferred equity bonus shares exercised*||(1,050,044)|
|Outstanding at end of year||2,822,778|
* The accelerated deferred equity bonus shares exercised were for J Barker and T Tan in line with their good leaver statuses on retirement
The above includes 95,354 shares for 2016, 144,943 for 2015 and 185,282 for 2014 for T Tan relating to his employment as TR Asia MD. He did not sit on the main plc Board prior to retirement on 31 December 2015.
These nil cost options are subject to a three year service period and the fair value has been calculated using the Discounted Dividend model. This is based on expected dividends over the three year term. They are equity settled shares.
The weighted average share price at the date of exercise for share options exercised in 2017 was £1.35 (2016: no shares exercised).
The options outstanding at 31 March 2017 had a weighted average remaining contractual life of 1.6 years (2016: 2.2 years).
Senior manager deferred bonus shares
The number of deferred bonus shares is as follows:
|Deferred bonus shares|
|Outstanding at beginning of year||—|
|Granted during the year||1,744,094|
|Outstanding at end of year||1,744,094|
This is a new nil-cost option scheme implemented in the year. The shares granted in the year are subject to a base award and a multiplier award. The base award requires a three year service period to be achieved and is also subject to personal performance conditions being met during the performance period. The multiplier award is determined by a non-market performance condition. This requires the Group's underlying organic profit before tax in the financial year 2019 to be £18.5m (representing a compound annual growth rate of 5.0% from 31 March 2016) for the total payout to be 1.5x the base award. A maximum payout of 2.0x the base award can be achieved if this metric is £21.3m (representing a compound annual growth rate of 10.0% from 31 March 2016). If it falls between £18.5m and £21.3m the multiplier applied is calculated on a straight line basis to determine the number of awards. If it is below £18.5m the multiplier used is 1.0x.
The awards were granted on 30 December 2016 and are due to vest in December 2019. The method of settlement for these shares are a mixture of equity and cash settled. The fair value has been calculated using the Discounted Dividend model. This was at grant date for the equity settled awards. The fair value for the cash settled awards are remeasured at the reporting date.
In line with IFRS2 the amount recognised as an expense has been adjusted to reflect the number of awards for which the service and non-market performance conditions are expected to be met.
|No. out- standing on 31 March|
|Share price on date of grant|
|Risk- free rate|
|Expected annual dividend|
|01/10/2010||SAYE 7 Year||Black Scholes||6,490||0.370||0.250||47.86||7.00||7.00||2.43||1.36||0.20|
|01/10/2011||SAYE 7 Year||Black Scholes||7,920||0.410||0.450||47.63||7.00||7.00||0.56||0.00||0.19|
|01/10/2012||SAYE 5 Year||Black Scholes||47,139||0.460||0.350||48.08||5.00||5.00||1.37||1.09||0.21|
|01/10/2012||SAYE 7 Year||Black Scholes||5,280||0.460||0.350||48.08||7.00||7.00||1.93||1.09||0.24|
|01/10/2013||SAYE 5 Year||Black Scholes||21,000||0.680||0.500||46.06||5.00||5.00||1.55||1.19||0.31|
|01/10/2014||SAYE 3 Year||Black Scholes||204,120||1.050||1.000||35.76||3.00||3.00||1.23||1.33||0.26|
|01/10/2014||SAYE 5 Year||Black Scholes||111,201||1.050||1.000||35.76||5.00||5.00||1.73||1.33||0.33|
|01/10/2015||SAYE 3 Year||Black Scholes||336,304||1.140||1.050||35.20||3.00||3.00||0.77||1.84||0.28|
|01/10/2015||SAYE 5 Year||Black Scholes||120,562||1.140||1.050||34.60||5.00||5.00||1.17||1.84||0.33|
|01/10/2016||SAYE 3 Year||Black Scholes||366,580||1.720||1.070||33.83||3.00||3.00||0.40||1.63||0.68|
|01/10/2016||SAYE 5 Year||Black Scholes||59,821||1.720||1.070||32.80||5.00||5.00||0.70||1.63||0.71|
|Total Share Options||1,286,417|
|18/09/2014||Board deferred equity||DDM^||820,989||1.050||n/a||n/a||2.79||2.79||n/a||1.33||1.02|
|09/09/2015||Board deferred equity||DDM^||740,098||1.160||n/a||n/a||3.79||3.79||n/a||1.81||1.11|
|15/07/2016||Board deferred equity||DDM^||761,791||1.350||n/a||n/a||4.00||4.00||n/a||2.07||1.28|
|31/03/2017*||Board deferred equity||DDM^||499,900||2.140||n/a||n/a||4.00||4.00||n/a||1.40||2.05|
|30/12/2016||SM deferred bonus equity||DDM^||1,641,732||2.050||n/a||n/a||3.00||3.00||n/a||1.46||1.96|
|30/12/2016||SM deferred bonus cash||DDM^||102,362||2.050||n/a||n/a||3.00||3.00||n/a||1.40||2.05|
^ Discounted Dividend model
* Final date of grant will be date of formal agreement
Expected volatility was determined by calculating the historic volatility of the Group's share price over one, two and three years back from the date of grant. The expected life used in the model has been adjusted, based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations.
The Group recognised total charges of £1.51m and £1.69m in relation to share based payment transactions in 2017 and 2016 respectively. Of this, £16,412 (2016: £nil) relates to cash settled awards to which a liability is recognised on the balance sheet. The remaining amount relates to equity settled awards.
As at 31 March 2017, outstanding options to subscribe for ordinary shares of 5p were as follows:
|Grant date/employees entitled||Number of instruments||Contractual life of options|
|01/10/12/SAYE||52,419||Oct 2017, 2019|
|01/10/14/SAYE||315,321||Oct 2017, 2019|
|01/10/15/SAYE||456,866||Oct 2018, 2020|
|01/10/16/SAYE||426,401||Oct 2019, 2021|
|Total outstanding options||1,286,417|
|Board deferred equity bonus shares||2,822,778||Sep 2017, 2018, 2019, Jul 2020|
|Senior manager deferred bonus shares||1,744,094||Dec 2019|
All options require continued employment from grant date to the later of vesting date or exercise date.