The Company has a number of share option schemes under which options to subscribe for the Company's shares have been granted to Directors and employees, details of which are illustrated in the tables below. Expected term of options represents the period over which the fair value calculations are based. The share-based payment charge for the year was £1.7m (2018: £0.3m). Share-based payments increased during the year; as new schemes have been issued to employees while in the prior-year it was concluded that a number of historic schemes would not meet scheme performance criteria resulting in a reversal of historic charges.

Company Share OPtion scheme (csop) - equity-settled

Under the CSOP Scheme, options granted will be subject to performance criteria. Options will vest if the average EPS growth for the three years following their grant is greater than 10% per annum.

Date of grantExpected term
of options
Exercisable
between
Exercise
price
2019
number
outstanding
July 20127 yearsJuly 2015 – July 2022£1.3691,896
July 20167 yearsAugust 2019 – July 2026£3.28149,429
August 20167 yearsAugust 2019 – August 2026£3.3717,784
August 20187 yearsAugust 2021 – August 2028£2.2059,085
August 20187 yearsAugust 2021 – August 2028£2.2031,815

Sharesave schemes - equity-settled

The Company operates sharesave schemes, which are available to all UK and Netherlands-based employees and full-time Executive Directors of the Company and its subsidiaries who have worked for a qualifying period.

Date of grantExpected term
of options
Exercisable
between
Exercise
price
2019
number
outstanding
August 20153 yearsOctober 2018 – March 2019£1.875,763
August 20163 yearsOctober 2019 – March 2020£2.6285,873
March 20173 yearsMay 2020 – October 2020£0.92880,304
August 20173 yearsOctober 2020 – March 2021£1.561,165,540
March 20183 yearsMay 2021 – October 2021£1.5893,064
August 20183 yearsOctober 2021 – March 2022£1.75572,327
March 20193 yearsMay 2022 – October 2022£0.99483,766

Employee stock purchase plan - equity-settled

The Company operates a stock purchase plan, which is available to all US-based employees who have worked for a qualifying period. All options are to be settled by equity. Under the scheme the following options have been granted and are outstanding at year end.

Date of grantExpected term
of options
Exercisable
in
Exercise
price
2019
number
outstanding
February 20191 yearFebruary 2020£1.06723,263

Incentive Stock Option scheme (ISO) - equity-settled

Under the ISO Scheme, options granted will be subject to performance criteria. Options will vest if the average EPS growth for the three years following their grant is greater than 10% per annum.

Date of grantExpected term
of options
Exercisable
between
Exercise
price
2019
number
outstanding
July 20167 yearsJuly 2019 – July 2026£3.26150,496
August 20187 yearsAugust 2021 – August 2028£2.229,016

Long-term Investment Plan schemes (LTIP) - equity-settled

The vesting condition for the award of the LTIP schemes, related to options granted July 2015 and July 2016 relates to growth in the Group's EPS over the performance period. If growth is equal to 25% or more per annum then 100% of the award will vest. If, however, growth is less than 9% per annum, none of the award will vest. Between these two points, vesting is determined on a straight-line basis.

Options granted on or after October 2017 have three separate vesting conditions as set out below:

  • 60% will vest based on achieving an increase in Group EPS of 9% over three years. If growth is equal to 20% or more per annum then 100% of the award will vest. If, however, growth is less than 9% per annum, none of the award will vest. Between these two points, vesting is determined on a straight-line basis.
  • 30% will vest based on achieving a cash conversion ratio1 expressed as a percentage over the measurement period of greater than 70% per annum on average. If cash conversion1 is greater than or equal to 80% per annum then 100% of the award will vest. If, however, cash conversion is less than 70% per annum, none of the award will vest. Between these two points, vesting is determined on a straight-line basis.
  • 10% will vest based on the Group's Total Shareholder Return (TSR) ranking when measured against the FTSE 250. If the Group's TSR is consistent with the median group, 20% of the award will vest; below this level, none of the award will vest. If the TSR is within the upper quartile or above, 100% of the award will vest; between the median and upper quartile, vesting is determined on a straight-line basis.
Date of grantExpected term
of options
Exercisable
between
Exercise
price
2019
number
outstanding
July 20163 yearsJune 2019 – August 2019nil*353,620
October 20173 yearsJune 2020 – August 2020nil*257,224
November 20173 yearsJune 2020 – August 2020nil*354,039
January 20183 yearsJune 2020 – August 2020nil*178,601
August 20183 yearsJune 2021 – August 2021nil*1,065,133

*The option exercise price is nil; however, £1 is payable on each occasion of exercise.

Restricted State Unit schemes (RSU) - equity-settled

Options granted related to the RSU schemes on or after October 2017 have three separate vesting conditions as set out below:

  • 60% will vest based on achieving an increase in Group EPS of 9% over three years. If growth is equal to 20% or more per annum then 100% of the award will vest. If, however, growth is less than 9% per annum, none of the award will vest. Between these two points, vesting is determined on a straight-line basis.
  • 30% will vest based on achieving a cash conversion ratio1 expressed as a percentage over the measurement period of greater than 70% per annum on average. If cash conversion1 is greater than or equal to 80% per annum then 100% of the award will vest. If, however, cash conversion is less than 70% per annum, none of the award will vest. Between these two points, vesting is determined on a straight-line basis.
  • 10% will vest based on the Group's Total Shareholder Return (TSR) ranking when measured against the FTSE 250 (excluding investment trusts). If the Group's TSR is consistent with the median group, 20% of the award will vest; below this level, none of the award will vest. If the TSR is within the upper quartile or above, 100% of the award will vest; between the median and upper quartile, vesting is determined on a straight-line basis.

The options are to be settled in equity.

Date of grantExpected term
of options
Exercisable
between
Exercise
price
2019
number
outstanding
November 20173 yearsJune 2020 – August 2020£0.01199,635
January 20183 yearsJune 2020 – August 2020£0.0120,058
August 20183 yearsJune 2021 – August 2021£0.01227,501

Deferred share scheme - equity-settled

Date of grantExpected term
of options
Exercisable
between
Exercise
price
2019
number
outstanding
July 20182 yearJune 2020 – August 2028nil*10,993

*The option exercise price is nil; however, £1 is payable on each occasion of exercise.

Phantom schemes - cash-settled

Phantom schemes were used on a temporary basis during the year ended 31 May 2017 to allow the grant of LTIPs to members of the Executive Committee based in certain overseas locations at a time when the Group's Option Scheme rules were not structured to allow overseas grants. This was remedied in the prior year and no further grants of Phantom Options are expected. The vesting conditions for the award of the Phantom schemes, related to options granted in August 2016, relates to growth in the Group's EPS over the performance period. If growth is equal to 25% or more per annum then 100% of the award will vest. If, however, growth is less than 10% per annum, none of the award will vest. Between these two points, vesting is determined on a straight-line basis.

Options granted on or after October 2017 have three separate vesting conditions as set out below:

  • 60% will vest based on achieving an increase in Group EPS of 9%. If growth is equal to 20% or more per annum then 100% of the award will vest. If, however, growth is less than 9% per annum, none of the award will vest. Between these two points, vesting is determined on a straight-line basis.
  • 30% will vest based on achieving a cash conversion ratio1 expressed as a percentage over the measurement period of greater than 70% per annum on average. If cash conversion1 is greater than or equal to 80% per annum then 100% of the award will vest. If, however, cash conversion is less than 70% per annum, none of the award will vest. Between these two points, vesting is determined on a straight-line basis.
  • 10% will vest based on the Group's Total Shareholder Return (TSR) ranking when measured against the FTSE 250 (excluding investment trusts). If the Group's TSR is consistent with the median group 20% of the award will vest; below this level, none of the award will vest. If the TSR is within the upper quartile or above, 100% of the award will vest; between the median and upper quartile, vesting is determined on a straight-line basis.
Date of grantExpected term
of options
Exercisable
between
Exercise
price
2019
number
outstanding
August 201613 yearsJune 2019 – August 2020nil*18,276
October 20173 yearsJune 2020 – October 2021nil*113,120
November 20173 yearsJune 2020 – November 2021nil*8,189

*The option exercise price is nil; however, £1 is payable on each occasion of exercise.

Measurement of fair values

The fair value of services received in return for share options is calculated with reference to the fair value of the award on the date of grant. The fair value is spread over the period during which the employee becomes unconditionally entitled to the award, adjusted to reflect actual and expected levels of vesting. Black Scholes and Binomial models have been used to calculate the fair values of options on their grant date for all options issued after 7 November 2002, which had not vested by 1 January 2005. The LTIPs and RSUs granted in the current year have introduced a market-based performance criteria of 9%; the Monte Carlo model has been used to calculate the fair value of this proportion of the grant.

The assumptions used in the model are illustrated in the table below:

Grant dateFair value at measurement dateExercise priceExpected volatilityOption expected termRisk-free interest rate
CSOP schemeJuly 2012£0.35£1.3635%7 years2.75%
CSOP schemeJuly 2015£1.45£2.46103%7 years2.75%
CSOP schemeJuly 2016£0.65£3.2831%7 years1.50%
CSOP schemeAugust 2016£0.66£3.3731%7 years1.50%
CSOP schemeAugust 2018£0.63£2.2048%7 years1.50%
CSOP schemeAugust 2018£0.43£2.2048%7 years1.50%
Sharesave schemeAugust 2015£1.53£1.87103%3 years2.75%
Sharesave schemeAugust 2016£0.95£2.6231%3 years1.50%
Sharesave schemeMarch 2017£0.43£0.9246.6%3 years1.50%
Sharesave schemeAugust 2017£0.88£1.5647.5%3 years1.96%
Sharesave schemeMarch 2018£0.76£1.5847.8%3 years2.20%
Sharesave schemeAugust 2018£0.75£1.7548%3 years1.50%
Sharesave schemeMarch 2019£0.67£0.9953.2%3 years1.50%
ESPP schemeFebruary 2018£0.40£1.6932.4%1 year1.82%
ESPP schemeFebruary 2019£0.31£1.0648.3%1 year1.50%
ISO schemeAugust 2015£1.45£2.46103%7 years2.75%
ISO schemeFebruary 2016£1.91£3.24103%7 years2.75%
ISO schemeJuly 2016£0.64£3.2631%7 years1.50%
ISO schemeAugust 2018£0.65£2.2248.4%7 years1.50%
LTIPJuly 2014£1.92£nil*32%3 years2.75%
LTIPJuly 2015£2.14£nil*103%3 years2.75%
LTIPJuly 2016£2.75£nil*31%3 years1.81%
90% of LTIP under Black ScholesOctober 2017£2.22£nil*47.5%3 years1.96%
10% of LTIP under Monte CarloOctober 2017£2.20£nil*47.5%3 years1.96%
90% of LTIP under Black ScholesNovember 2017£2.18£nil*47.6%3 years1.96%
10% of LTIP under Monte CarloNovember 2017£2.16£nil*47.6%3 years1.96%
90% of LTIP under Black ScholesJanuary 2018£1.98£nil*47.7%3 years2.00%
10% of LTIP under Monte CarloJanuary 2018£1.98£nil*47.7%3 years2.00%
90% of LTIP under Black ScholesAugust 2018£2.09£nil*48%3 years1.50%
10% of LTIP under Monte CarloAugust 2018£2.09£nil*48%3 years1.50%
90% of RSU under Black ScholesNovember 2017£2.17£0.0147.6%3 years1.96%
10% of RSU under Monte CarloNovember 2017£2.16£0.0147.6%3 years1.96%
90% of RSU under Black ScholesJanuary 2018£2.16£0.0147.7%3 years2.00%
10% of RSU under Monte CarloJanuary 2018£2.16£0.0147.7%3 years2.00%
90% of RSU under Black ScholesAugust 2018£2.09£0.0148.1%3 years1.50%
10% of RSU under Monte CarloAugust 2018£2.09£0.0148.1%3 years1.50%
Deferred shares July 2016July 2016£3.14£nil*31%2 years1.81%
Deferred shares July 2018July 2018£1.90£nil*55%2 years1.50%
PhantomAugust 2016£2.75£nil*31%3 years1.81%
90% of Phantom under Black ScholesOctober 2017£2.22£nil*47.5%3 years1.96%
10% of Phantom under Monte CarloOctober 2017£2.20£nil*47.5%3 years1.96%
90% of Phantom under Black ScholesNovember 2017£2.18£nil*47.6%3 years1.96%
10% of Phantom under Monte CarloNovember 2017£2.16£nil*47.6%3 years1.96%

*The option exercise price is nil; however, £1 is payable on each occasion of exercise.

The expected volatility has been based on an evaluation of the historical volatility of the Company's share price, particularly over the historical period commensurate with the expected term. The expected term of the instruments has been based on historical experience and general option holder behaviour. For the options granted in the year ended 31 May 2019, dividend yield assumed at the time of option grant is 2.6% (2018: 2.0%).

Reconciliation of outstanding share options

The options outstanding at 31 May 2019 have an exercise price in the range of £nil to £3.37 (2018: £nil to £3.37) and a weighted average contractual life of three years (2018: three years). The weighted average share price at the time the share options were exercised in the year was £2.01 and the weighted average share price at the time the share options were forfeited in the year was £1.67.

SchemeNumber of instruments as at 1 June 2018Instruments granted during the yearOptions exercised in the yearForfeitures in the yearNumber of instruments as at 31 May 2019
CSOP scheme July 201298,924(7,028)91,896
CSOP scheme August 2015303,135(303,135)
CSOP scheme July 2016195,366(45,937)149,429
CSOP scheme August 201659,280(41,496)17,784
CSOP scheme August 201863,630(4,545)59,085
CSOP scheme August 201831,81531,815
Sharesave scheme August 2015485,578(116,157)(363,658)5,763
Sharesave scheme August 2016185,425(99,552)85,873
Sharesave scheme March 2017961,485(81,181)880,304
Sharesave scheme August 20171,879,497(39,854)(674,103)1,165,540
Sharesave scheme March 2018136,087(43,023)93,064
Sharesave scheme August 2018712,561(140,234)572,327
Sharesave scheme March 2019486,914(3,148)483,766
ESPP scheme February 2018351,035(7,505)(343,530)
ESPP scheme February 2019723,263723,263
ISO scheme January 201320,338(20,338)
ISO scheme August 2015129,940(129,940)
ISO scheme February 201619,476(19,476)
ISO scheme July 2016202,709(52,213)150,496
ISO scheme August 201813,524(4,508)9,016
LTIP July 2015378,289(378,289)
LTIP July 2016368,808(15,188)353,620
LTIP October 2017349,626(92,402)257,224
LTIP November 2017427,004(72,965)354,039
LTIP January 2018178,601178,601
LTIP August 20181,093,172(28,039)1,065,133
RSU November 2017208,053(8,418)199,635
RSU January 201820,05820,058
RSU August 2018227,501227,501
Deferred shares July 201627,183(27,183)
Deferred shares July 201810,99310,993
Phantoms August 201619,779(1,503)18,276
Phantoms November 2017113,120113,120
Phantoms October 20178,1898,189
SchemeNumber of instruments as at 1 June 2017Instruments granted during the yearOptions exercised in the yearForfeitures in the yearNumber of instruments as at 31 May 2018
Approved EMI scheme August 200710,908(10,908)
Approved EMI scheme February 20082,862(2,862)
CSOP scheme July 2012110,780(11,856)98,924
CSOP scheme July 201314,252(1,589)(12,663)
CSOP scheme August 2015325,401(22,266)303,135
CSOP scheme July 2016234,820(39,454)195,366
CSOP scheme August 201659,28059,280
Sharesave scheme August 2014683,424(670,774)(12,650)
Sharesave scheme August 2015614,751(413)(128,760)485,578
Sharesave scheme August 2016440,094(254,669)185,425
Sharesave scheme March 20171,057,848(96,363)961,485
Sharesave scheme August 20171,883,769(4,272)1,879,497
Sharesave scheme March 2018136,087136,087
ESPP scheme February 2017592,592(451,721)(140,871)
ESPP scheme February 2018351,035351,035
ISO scheme January 201320,33820,338
ISO scheme January 201430,074(30,074)
ISO scheme January 201550,000(50,000)
ISO scheme August 2015129,940129,940
ISO scheme February 201619,47619,476
ISO scheme July 2016202,709202,709
LTIP July 2014308,625(308,625)
LTIP July 2015378,289378,289
LTIP July 2016377,586(8,778)368,808
LTIP October 2017349,626349,626
LTIP November 2017439,853(12,849)427,004
LTIP January 2018178,601178,601
RSU November 2017208,053208,053
RSU January 201820,05820,058
Deferred shares July 201537,869(37,869)
Deferred shares July 201627,18327,183
Phantoms August 201619,77919,779
Phantoms November 2017113,120113,120
Phantoms October 20178,1898,189
  1. See note 3 for an explanation of Alternative Performance Measures (APMs) and adjusting items. See note 3 for a reconciliation to statutory information.