Notes on the financial statements
32. Employee share-based payments continued continued
32. Employee share-based payments continuedcontinued
(iv) Performance Share Plan
This scheme applies to executive directors and senior executives. Shares granted under this arrangement vest subject to the attainment of performance conditions over the relevant three year performance period as set out below:
Award made
Maximum value of award as a % of base salary
02 June 2010 150 02 June 2011 150 02 June 2012 150 02 June 2013 150 Performance conditions
Total shareholder return (i)
Full vesting ≥ 75th percentile ≥ 75th percentile ≥ 75th percentile ≥ 75th percentile
25% vesting median median median median
Earnings per share (ii) Full vesting RPI + 8% RPI + 8% RPI + 8% RPI + 8%
25% vesting RPI + 2% RPI + 2% RPI + 2% RPI + 2%
Dividend per share growth (iii) Full vesting RPI + 6% RPI + 6% RPI + 6% RPI + 6%
25% vesting RPI + 2% RPI + 2% RPI + 2% RPI + 2% These awards will vest after three years to the extent that the relevant performance conditions are met.
(i) Total Shareholder Return (TSR) target relative to other FTSE100 companies and MSCI Europe Utilities (a dedicated peer group of UK and other European utilities) Index. Pro rata vesting will take place between the median and 75th percentile, with no vesting if the minimum target is not met.
(ii) Under the EPS performance condition, pro rata vesting between the lower and upper level above RPI, with no vesting if the minimum EPS growth target is not achieved. (iii) Under the Dividend per share growth performance condition, pro rata vesting between 2% and 6% above RPI, with no vesting if the minimum dividend per share growth target is
not achieved.
(v) Long Term Incentive Plan (LTIP)
This scheme applies to the Management Board (excluding Executive Directors). Shares granted under this arrangement vest subject to the attainment of performance conditions over the relevant performance period. The relevant performance period for this LTIP award is 1 April 2011 to 31 March 2016. The performance conditions are as set out below:
Performance conditions
Dividend per share growth (DPS) Full vesting RPI + 5%
40% vesting RPI + 2% Where DPS growth is between 2 and 5% above RPI, vesting will be calculated on a straight-line basis. Where DPS growth is less than RPI + 2% no vesting will occur.
A charge of £15.5m (2013 – £16.0m) was recognised in the Income Statement in relation to these schemes, £1.7m (2013 – £1.9m) of this was in relation to the Directors of the Company.
Financial Statements
Notes on the financial statements continued
for the year ended 31 March 2014
32. Employee share-based payments
32. Employee share-based payments continuedcontinued
Details used in the calculation of the costs of these schemes are as follows:
(i) Savings-related share option scheme
The movement in savings related share option schemes in the year were as follows:
Consolidated As at 31 March 2014 Award Date Option Price (pence) Outstanding at
start of year Granted Exercised Lapsed
Outstanding at end of year
Date from which
exercisable Expiry date (i)
10 July 2007 1,306 29,537 – (4,768) (24,769) – 1 October 2012 31 March 2013
17 July 2008 1,274 236,144 – (218,233) (2,129) 15,782 1 October 2013 31 March 2014
30 June 2009 1,042 15,430 – (4,813) (10,617) – 1 October 2012 31 March 2013
30 June 2009 1,042 492,411 – (9,781) (14,022) 468,608 1 October 2014 31 March 2015
30 June 2010 871 664,623 – (640,376) (8,968) 15,279 1 October 2013 31 March 2014
30 June 2010 871 2,656,395 – (27,488) (72,966) 2,555,941 1 October 2015 31 March 2016
29 June 2011 1,105 335,439 – (3,596) (25,112) 306,731 1 October 2014 31 March 2015
29 June 2011 1,105 655,098 – (3,328) (51,478) 600,292 1 October 2016 31 March 2017
29 June 2012 1,065 578,115 – (1,281) (72,495) 504,339 1 October 2015 31 March 2016
29 June 2012 1,065 589,568 (733) (56,691) 532,144 1 October 2017 31 March 2018
05 July 2013 1,197 – 764,187 – (53,940) 710,247 1 October 2016 31 March 2017
05 July 2013 1,197 – 508,865 (41) (37,211) 471,613 1 October 2018 31 March 2019
6,252,760 1,273,052 (914,438) (430,398) 6,180,976 As at 31 March 2013 Award Date Option Price (pence) Outstanding at
start of year Granted Exercised Lapsed
Outstanding at end of year
Date from which
exercisable Expiry date (i)
11 July 2006 999 26,772 – (3,671) (23,101) – 1 October 2011 31 March 2012
10 July 2007 1,306 247,611 – (210,405) (7,669) 29,537 1 October 2012 31 March 2013
17 July 2008 1,274 92,487 – (1,210) (91,277) – 1 October 2011 31 March 2012
17 July 2008 1,274 245,672 – (1,672) (7,856) 236,144 1 October 2013 31 March 2014
30 June 2009 1,042 276,846 – (255,314) (6,102) 15,430 1 October 2012 31 March 2013
30 June 2009 1,042 513,404 – (1,597) (19,396) 492,411 1 October 2014 31 March 2015
30 June 2010 871 702,312 – (9,197) (28,492) 664,623 1 October 2013 31 March 2014
30 June 2010 871 2,762,353 – (4,621) (101,337) 2,656,395 1 October 2015 31 March 2016
29 June 2011 1,105 386,019 – (1,429) (49,151) 335,439 1 October 2014 31 March 2015
29 June 2011 1,105 711,871 – (516) (56,257) 655,098 1 October 2016 31 March 2017
29 June 2012 1,065 – 611,099 – (32,984) 578,115 1 October 2015 31 March 2016
29 June 2012 1,065 – 622,647 – (33,079) 589,568 1 October 2017 31 March 2018
5,965,347 1,233,746 (489,632) (456,701) 6,252,760
As share options are exercised continuously throughout the period from 1 October to 31 March, the weighted average share price during this period of 1,455p (2013 – 1,433p) is considered representative of the weighted average share price at the date of exercise. The weighted average share price of forfeitures is simply the option price to which the forfeit relates.
32. Employee share-based payments
32. Employee share-based payments continuedcontinued
Company As at 31 March 2014 Award Date Option Price (pence) Outstanding at
start of year Granted Exercised
Outstanding at end of year
Date from which
exercisable Expiry date
30 June 2009 1,042 1,253 – – 1,253 1 October 2014 31 March 2015
30 June 2010 871 413 – – 413 1 October 2013 31 March 2014
30 June 2010 871 283 – – 283 1 October 2015 31 March 2016
1,949 – – 1,949 As at 31 March 2013 Award Date Option Price (pence) Outstanding at
start of year Granted Exercised
Outstanding at end of year
Date from which
exercisable Expiry date
30 June 2009 1,042 1,253 – – 1,253 1 October 2014 31 March 2015
30 June 2010 871 413 – – 413 1 October 2013 31 March 2014
30 June 2010 871 283 – – 283 1 October 2015 31 March 2016
1,949 – – 1,949
No options were forfeited in the year.
(i) Options may remain exercisable beyond the published expiry date due to individuals taking advantage of the right to a payment holiday during the term of the scheme.
The fair value of these share options at the measurement date, calculated using the Black-Scholes model, and the assumptions made in that model are as follows:
July 2007 July 2008 July 2009 July 2010 July 2011 July 2012 July 2013
3 Year 5 Year 3 Year 5 Year 3 Year 5 year 3 year 5 Year 3 year 5 Year 3 year 5 year 3 year 5 year Fair value of option 287p 313p 304p 339p 244p 269p 231p 246p 171p 163p 182p 159p 194p 168p
Expected volatility 25% 25% 28% 28% 35% 35% 19% 19% 18% 18% 18% 18% 15% 15%
Risk free rate 5.8% 5.7% 4.9% 5.0% 2.7% 2.9% 1.4% 2.2% 1.2% 2.1% 0.4% 0.9% 0.7% 1.4% Expected dividends 5.3% 5.2% 4.1% 4.2% 4.1% 4.2% 1.7% 2.2% 6.1% 6.1% 5.9% 5.8% 5.9% 5.9% Term of the option 3 yrs 5 yrs 3 yrs 5 yrs 3 yrs 5 yrs 3 yrs 5 yrs 3 yrs 5 yrs 3 yrs 5 yrs 3 yrs 5 yrs Underlying price at
grant date 1,460p 1,460p 1,397p 1,397p 1,139p 1,139p 1,089p 1,089p 1,393p 1,393p 1,391p 1,391p 1,579p 1,579p Strike price 1,306p 1,306p 1,274p 1,274p 1,042p 1,042p 871p 871p 1,105p 1,105p 1,065p 1,065p 1,197p 1,197p Expected price volatility was determined by calculating the historical volatility of the Group’s share price over the previous 12 months.
(ii) Share Incentive Plan
Matching Shares
Consolidated Company
2014 2013 2014 2013
Shares
Weighted average
price (pence) Shares
Weighted average
price (pence) Shares
Weighted average
price (pence) Shares
Weighted average price (pence) Outstanding at start of year 2,126,456 1,240 1,899,009 1,219 1,044 1,240 1,008 1,091
Granted during the year 667,644 1,470 610,162 1,395 168 1,484 216 1,393
Forfeited during the year (110,504) 1,383 (90,652) 1,263 – – – –
Exercised during the year (138,685) 1,239 (96,718) 1,255 (357) 1,268 – –
Transfer to pool during the year (256,782) 1,262 (195,345) 1,506 (147) 1,287 (180) 1,507
Outstanding at end of year 2,288,129 1,297 2,126,456 1,240 708 1,195 1,044 1,240
Exercisable at end of year 729,988 1,150 645,462 1,301 288 1,148 414 1,301
Financial Statements
Notes on the financial statements continued
for the year ended 31 March 2014
32. Employee share-based payments
32. Employee share-based payments continuedcontinued
The fair value of shares in the share incentive plan is not subject to valuation using the Black-Scholes model. However, the fair value of shares granted in the year is equal to the weighted average price and is based on the price paid for the shares at the grant date as shares are acquired out of the market as at that date to satisfy awards made under the scheme.
Free Shares
Consolidated Company
2014 2013 2014 2013
Shares
Weighted average
price (pence) Shares
Weighted average
price (pence) Shares
Weighted average
price (pence) Shares
Weighted average price (pence)
Outstanding at start of year 92,864 1,417 262,277 1,187 30 1,417 90 1,098
Forfeited during the year (150) 1,059 – – – – – –
Exercised during the year (5,244) 1,404 (22,682) 1,432 – – – –
Transfer to pool during the year (87,470) 1,408 (146,731) 1,474 (30) 1,408 (60) 1,474
Outstanding at end of year – 1,408 92,864 1,417 – 1,408 30 1,417
Exercisable at end of year – 1,408 92,864 1,417 – 1,408 30 1,417
The fair value of these shares is not subject to valuation using the Black-Scholes model. However, the fair value of shares granted in the year is equal to the weighted average price and is based on the price paid for the shares at the grant date as shares are acquired out of the market as at that date to satisfy awards made under the scheme.
(iii) Deferred Annual Incentive Scheme
Consolidated Company
2014 2013 2014 2013
Shares
Weighted average
price (pence) Shares
Weighted average
price (pence) Shares
Weighted average
price (pence) Shares
Weighted average price (pence)
Outstanding at start of year 346,214 1,257 395,755 1,198 54,350 1,229 68,208 1,177
Granted during the year 123,028 1,496 95,681 1,383 6,880 1,496 9,210 1,383
Forfeited during the year (4,086) 1,208 (18,434) 1,196 – – – –
Exercised during the year (134,610) 1,183 (126,788) 1,177 (28,482) 1,119 (23,068) 1,174
Outstanding at end of year 330,546 1,409 346,214 1,257 32,748 1,381 54,350 1,229
Exercisable at end of year 2,298 1,327 2,298 1,327 – – – –
The fair value of the annual incentive scheme shares is not subject to valuation using the Black-Scholes model. However, the fair value of shares granted in the year is equal to the weighted average price and is based on the price paid for the shares at the grant date as shares are acquired out of the market as at that date to satisfy awards made under the scheme.
(iv) Performance Share Plan
Consolidated Company
2014 2013 2014 2013
Shares
Weighted average
price (pence) Shares
Weighted average
price (pence) Shares
Weighted average
price (pence) Shares
Weighted average price (pence) Outstanding at start of year 1,909,567 1,246 2,040,423 1,185 755,696 1,236 854,380 1,177
Granted during the year 587,256 1,496 656,437 1,383 131,841 1,496 212,490 1,383
Forfeited during the year (517,495) 1,140 (738,000) 1,204 (280,645) 1,779 (311,174) 1,174
Exercised during the year (363,913) 1,079 (49,293) 1,174 (68,824) 1,496 – –
Outstanding at end of year 1,615,415 1,408 1,909,567 1,246 538,068 1,347 755,696 1,236
Of the outstanding options at the end of the year, none were exercisable.
The fair value of the performance share plan shares is not subject to valuation using the Black-Scholes model. The fair value of shares granted in the year is equal to the closing market price on the date of grant.
32. Employee share-based payments
32. Employee share-based payments continuedcontinued
(v) Long Term Incentive Plan
2014 2013
Shares
Weighted average
price (pence) Shares
Weighted average price (pence)
Outstanding at start of year 246,867 1,350 225,687 1,342
Granted during year – – 50,986 1,383
Forfeit during year – – (29,806) 1,342
Outstanding at end of year 246,867 1,350 246,867 1,350
No award was granted during the year.
Of the outstanding options at the end of the year, none were exercisable. The company has no employees in the LTIP.
The fair value of the long-term incentive plan shares is not subject to valuation using the Black-Scholes model. The fair value of shares granted in the year is equal to closing market price on the date of grant.