Notes to the financial statements

for the year ended 31 March 2012

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13 Share-based payments

The Group had five share-based payment schemes (2011: five) in existence during the year ended 31 March 2012. The Group recognised a total charge of £3,191,000 (2011: £2,586,000) in the year relating to equity settled share-based payment transactions.

Details of each of the schemes are provided below.

Share options and Long Term Incentive Scheme (LTIS)
Share options including LTIS (issued after 7 November 2002)
Options Weighted
average
exercise
price
(pence)
Outstanding at the beginning of year and end of year 42,189 Nil

The share options, including LTIS, outstanding at 31 March 2012 had a weighted average exercise price of Nil pence and a weighted average remaining contractual life of Nil years (the Directors have assumed all shares will vest at the earliest available date). Options were granted at £Nil cost for this equity settled scheme. No options were granted in the year ended 31 March 2012. The options become exercisable between three and ten years from grant date, provided that the employee remains in employment. Out of the 42,189 outstanding options (2011: 42,189), all were exercisable at 31 March 2012.

The assumptions used in the Monte Carlo model for the options outstanding at the beginning of the year are as follows:

2006
grant
2005
grant
2004
grant
2003
grant
Share price (on date of official grant) (pence) 65.9 60.4 64.8 54.3
Exercise price (pence) Nil Nil Nil 56.8
Expected dividend payments (%) 2 1 Nil Nil
Expected term (years) 3 3 3 6.5

Share Incentive Plan (SIP)

The SIP is open to all employees and offers partnership, matching and free shares (the basis depends on the individual’s contribution into the scheme). No performance criteria are attached to these matching shares other than an employee must remain employed by the Group for five years from the date of grant to be able to have their free and matching shares. In 2011/12, 1,403,047 (2011: 1,114,173) matching shares were granted during the year.

Number Weighted
average
exercise
price
(pence)
Outstanding at the beginning of year 8,373,651 Nil
Granted during the year 1,403,047 Nil
Lapsed during the year (2,042,935)
Outstanding at the end of the year 7,733,763 Nil

Long-Term Co Investment Plan (LTCIP)

Directors were required to hold or subscribe monthly at market rate for investment shares and depending on meeting performance criteria up to four matching shares are awarded for each investment share. 75% of performance is based on relative Total Shareholder Return (TSR) measured over three years and 25% is based on compound annual share price growth over a three, four and five-year period. The notional amount of matching shares awarded during the year are as follows:

Number of EPS CAGR Relative TSR
participants Number FV (pence) Number FV (pence) Total
Outstanding at the beginning of the year 3 1,863,410 0.051 5,590,229 0.231 7,453,639
Lapsed (230,136) 0.05 (407,450) 0.23 (637,586)
Outstanding at the end of the year 3 1,633,274 0.05 5,182,779 0.23 6,816,053

1. Average FV (pence).

The above shares are subject to forfeiture under certain circumstances. For further information see the Remuneration report.

None of the above share awards were exercisable at the year end.

As both parts of the awards made under this plan are subject to a market-based performance condition under IFRS 2, the awards have been valued using a Monte Carlo simulation model.

The average assumptions used are as follows:
Share price at date of grant (pence) 29
Exercise price (pence) Nil
Volatility (%) 40.44
Risk free rate (%) 3.66
Dividend yield (%) 8.00

Smart421 Incentive Scheme (SIS)

The Smart421 Incentive Scheme is an equity settled share-based payment scheme open to senior management in the Smart421 brand. The awards were granted at nil cost on 1 August 2011 and vest dependent on specific non-market performance conditions over a three-year performance period. The plans performance target measures annual and cumulative profit before tax of Smart421 Limited for 2012, 2013 and 2014 financial years.

Number Weighted
average
exercise
price
(pence)
Outstanding at the beginning of year Nil
Granted during the year 1,500,000 Nil
Lapsed during the year Nil
Outstanding at the end of the year 1,500,000 Nil

None of these awards were exercisable at the year end.

The awards have been valued using a Black Scholes model.

The average assumptions used are as follows:
Share price at date of grant (pence) 84
Exercise price (pence) Nil
Volatility (%) 50
Risk free rate (%) 2.00
Dividend yield (%)

Executive Incentive Plan (EIP)

A participant is granted a conditional right to a number of ordinary shares in the Company which vest after three years to the extent that the associated performance condition is met. EIP awards vest at 10% for a Total Shareholder Return (TSR) (measured as share price plus dividends) of 45 pence and vest in full for a TSR of 100 pence. Certain elements of the award were granted under a Company Share Option Plan (CSOP) and an unapproved option to provide a tax effective reward to senior management. For further information see the Remuneration report.

As at 31 March 2012, 69% (2011: 40%) of the EIP shares had potentially vested. The Group has not issued or purchased shares in respect of this given the conditional nature of any potential vesting.

Award date Vesting
release date
Number of
participants
Number at
date of grant
Outstanding at the
beginning and
end of the year
FV (pence)
EIP awards
24/07/2009 24/07/2011 1 5,041,520 5,041,520 11
24/07/2009 24/07/2012 1 2,438,480 2,438,480 12
24/07/2009 24/07/2012 3 3,630,000 3,033,832 11
24/07/2009 24/07/2013 3 1,815,000 1,440,239 11
24/07/2009 24/07/2014 3 1,815,000 1,394,218 11
19/11/2009 19/11/2012 17 3,038,364 2,546,829 27
19/11/2009 19/11/2013 17 1,519,182 1,258,723 26
19/11/2009 19/11/2014 17 1,519,182 1,249,906 25
CSOP and unapproved
25/02/2010 25/02/2013 17 591,636 493,809 32
25/02/2010 25/02/2014 17 295,818 245,901 31
25/02/2010 25/02/2015 17 295,818 245,301 30
Total 22,000,000 19,388,758

None of these awards were exercisable at the year end. The awards have been valued using a Monte Carlo simulation model.

The weighted average exercise price of these awards is £Nil (2011: £Nil).

The weighted average assumptions used during the year are as follows:
Share price at valuation date (pence) 33
Exercise price (pence) 3
Expected volatility (%) 51.00
Risk free rate (%) 2.43

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