REG - Rightmove Plc - Final Results <Origin Href="QuoteRef">RMV.L</Origin> - Part 8
24/02/2017 07:06
- Part 8: For the preceding part double click ID:nRSX7347Xg
- - (209) - (209)
Trade receivables(3) 19,040 5,266 24,306 2,188 - 139(4) 26,633
Other segment assets - - - - 33,753 68(5) 33,821
Segment liabilities - - - - (52,205) (207)(4)(5) (52,412)
Capital expenditure - - - - 1,759 - 1,759
Year ended
31 December 2015
Revenue 147,102 30,475 177,577 14,552 - - 192,129
Operating profit(1) - - - - 144,271 (7,096)(2) 137,175
Depreciation and amortisation - - - - (1,295) - (1,295)
Financial income - - - - 112 - 112
Financial expenses - - - - (183) - (183)
Trade receivables(3) 17,184 5,626 22,810 1,654 - 145(4) 24,609
Other segment assets - - - - 25,742 3(5) 25,745
Segment liabilities - - - - (43,569) (148)(4)(5) (43,717)
Capital expenditure - - - - 1,772 - 1,772
(1) Operating profit is stated after the charge for depreciation and amortisation.
(2) Operating profit does not include share-based payments charge of £4,142,000 (2015: £3,765,000) and NI on share-based
incentives charge of £451,000 (2015: £3,331,000).
(3) The only segment assets that are separately monitored by the Chief Operating Decision Maker relate to trade receivables
net of any associated provision for impairment. All other segment assets are reported on a centralised basis.
(4) The adjustments column reflects the reclassification of credit balances in accounts receivable made on consolidation
for statutory accounts purposes.
(5) The adjustments column reflects the reclassification of debit balances in accounts payable made on consolidation for
statutory accounts purposes.
Geographic information
In presenting information on the basis of geography, revenue and assets are based on the geographical location of
customers.
2016 2015
Group Revenue Trade receivables Revenue Trade receivables
£000 £000 £000 £000
UK 214,536 26,124 188,102 24,220
Rest of the world 5,457 509 4,027 389
219,993 26,633 192,129 24,609
6 Operating profit
2016 2015
£000 £000
Operating profit is stated after charging:
Employee benefit expense 27,443 23,464
Depreciation of property, plant and equipment 1,241 934
Amortisation of intangibles 378 361
Bad debt impairment charge 437 365
Operating lease rentals
Land and buildings 898 874
Other 549 537
Auditor's remuneration
2016 2015
£000 £000
Fees payable to the Company's auditor in respect of the audit
Audit of the Company's financial statements 18 15
Audit of the Company's subsidiaries pursuant to legislation 131 90
Total audit remuneration 149 105
Fees payable to the Company's auditor in respect of non-audit related services
Half year review of the condensed financial statements 18 15
Tax compliance services and advisory 1 14
All other services 2 1
Total non-audit remuneration 21 30
7 Employee numbers and costs
The average number of persons employed (including executive directors) during the year, analysed by category, was as
follows:
2016 2015
Number of employees Number of employees
Administration 448 391
Management 21 21
469 412
The aggregate payroll costs of these persons were as follows:
2016 2015
£000 £000
Wages and salaries 23,760 20,313
Social security costs 2,793 2,398
Pension costs 870 753
27,423 23,464
Social security costs do not include a charge of £451,000 (2015: £3,331,000) relating to NI on share-based incentives which
has been disclosed in the Statement of Comprehensive Income.
8 Financial income
2016 2015
£000 £000
Interest income on cash and money market balances 109 112
9 Financial expenses
2016 2015
£000 £000
Financial expenses 209 183
10 Income tax expense
2016 2015
£000 £000
Current tax expense
Current year 33,048 27,922
Adjustment to current tax charge in respect of prior years (407) (257)
32,641 27,665
Deferred tax credit
Origination and reversal of temporary differences (636) (105)
Adjustment to deferred tax in respect of prior years - (1)
Reduction in tax rate - 77
(636) (29)
Total income tax expense 32,005 27,636
Income tax credit recognised directly in equity
2016 2015
£000 £000
Current tax
Share-based incentives (441) (1,876)
Deferred taxShare-based incentives (refer Note 16) 436 (2,408)
Reduction in tax rate - 149
436 (2,259)
Total income tax credit recognised directly in equity (5) (4,135)
Total income tax recognised directly in equity in respect of the Company was a credit of £24,000 (2015: £2,482,000
credit).
Reconciliation of effective tax rate
The Group's income tax expense for the year is lower in both years than the standard rate of corporation tax in the UK of
20.0% (2015: 20.3%). The differences are explained below:
2016 2015
£000 £000
Profit before tax 161,547 137,104
Current tax at 20.0% (2015: 20.3%) 32,309 27,764
Reduction in tax rate - 77
Non-deductible expenses 70 46
Share-based incentives 33 7
Adjustment to current tax charge in respect of prior years (407) (257)
Adjustment to deferred tax charge in respect of prior years - (1)
32,005 27,636
The Group's consolidated effective tax rate on the profit of £161,547,000 for the year ended 31 December 2016 is 19.8%
(2015: 20.2%).
The difference between the standard rate and effective rate at 31 December 2016 is attributable to a prior year adjustment
of 0.3% (2015: 0.2%) primarily in respect of research and development tax relief, offset by disallowable expenditure of
0.1% (2015: 0.1%)
11 Earnings per share (EPS)
Weighted average number of ordinary shares Total earnings Pence per share
£000
Year ended 31 December 2016
Basic EPS 93,960,353 129,542 137.87
Diluted EPS 94,967,543 129,542 136.41
Underlying basic EPS 93,960,353 134,135 142.76
Underlying diluted EPS 94,967,543 134,135 141.24
Year ended 31 December 2015
Basic EPS 96,014,753 109,468 114.01
Diluted EPS 97,097,566 109,468 112.74
Underlying basic EPS 96,014,753 116,564 121.40
Underlying diluted EPS 97,097,566 116,564 120.05
Weighted average number of ordinary shares (basic)
2016 2015
Number of shares Number of shares
Issued ordinary shares at 1 January less ordinary shares held by the EBT and SIP Trust 97,318,120 99,396,818
Less own shares held in treasury at the beginning of the year (2,322,314) (2,505,430)
Effect of own shares purchased for cancellation (1,069,275) (1,034,666)
Effect of share-based incentives exercised 34,560 158,344
Effect of shares purchased by the EBT (738) (313)
Issued ordinary shares at 31 December less ordinary shares held by the EBT and SIP Trust 93,960,353 96,014,753
Weighted average number of ordinary shares (diluted)
For diluted EPS, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
potentially dilutive shares. The Group's potential dilutive instruments are in respect of share-based incentives granted to
employees, which will be settled by ordinary shares held by the EBT, the SIP and shares held in treasury.
2016 2015
Number of shares Number of shares
Weighted average number of ordinary shares (basic) 93,960,353 96,014,753
Dilutive impact of share-based incentives outstanding 1,007,190 1,082,813
94,967,543 97,097,566
The average market value of the Group's shares for the purposes of calculating the dilutive effect of share-based
incentives was based on quoted market prices for the period during which the share-based incentives were outstanding.
Underlying EPS
Underlying EPS is calculated by taking basic earnings for the year and adding back the charge for share-based payments and
the charge for NI on share-based incentives but without any adjustment to the tax charge in respect of these items. A
reconciliation of the basic earnings for the year to the underlying earnings is presented below:
2016 2015
£000 £000
Basic earnings for the year 129,542 109,468
Share-based payments 4,142 3,765
NI on share-based incentives 451 3,331
Underlying earnings for the year 134,135 116,564
12 Dividends
Dividends declared and paid by the Company were as follows:
2016 2015
Pence per share £000 Pence per share £000
2014 final dividend paid - - 22.0 21,162
2015 interim dividend paid - - 16.0 15,307
2015 final dividend paid 27.0 25,442 - -
2016 interim dividend paid 19.0 17,764 - -
46.0 43,206 38.0 36,469
After the reporting date a final dividend of 32.0p (2015: 27.0p) per qualifying ordinary share being £29,696,000 (2015:
£25,547,000) was proposed by the Board of directors.
The 2015 final dividend paid on 3 June 2016 was £25,442,000 being a difference of £105,000 compared to that reported in the
2015 Annual Report, which was due to a decrease in the ordinary shares entitled to a dividend between 31 December 2015 and
the final dividend record date of 6 May 2016.
The 2016 interim dividend paid on 4 November 2016 was £17,764,000 being a difference of £172,000 compared to that reported
in the 2016 Half Year Report, which was due to a decrease in the ordinary shares entitled to a dividend between 30 June
2016 and the interim dividend record date of 7 October 2016.
The terms of the EBT provide that dividends payable on the ordinary shares held by the EBT are waived. No provision was
made for the final dividend in either year and there are no income tax consequences.
13 Property, plant and equipment
Group Office equipment, Computer equipment Leasehold improvements Total
fixtures & fittings £000 £000 £000
£000
Cost
At 1 January 2016 769 5,823 451 7,043
Additions 58 1,223 - 1,281
Acquired through a business combination 2 7 - 9
At 31 December 2016 829 7,053 451 8,333
Depreciation
At 1 January 2016 (586) (4,010) (208) (4,804)
Charge for year (92) (1,091) (58) (1,241)
At 31 December 2016 (678) (5,101) (266) (6,045)
Net book value
At 31 December 2016 151 1,952 185 2,288
At 1 January 2016 183 1,813 243 2,239
Group Office equipment, Computer equipment Leasehold improvements Total
fixtures & fittings £000 £000 £000
£000
Cost
At 1 January 2015 713 4,286 451 5,450
Additions 56 1,537 - 1,593
At 31 December 2015 769 5,823 451 7,043
Depreciation
At 1 January 2015 (506) (3,214) (150) (3,870)
Charge for year (80) (796) (58) (934)
At 31 December 2015 (586) (4,010) (208) (4,804)
Net book value
At 31 December 2015 183 1,813 243 2,239
At 1 January 2015 207 1,072 301 1,580
The Company had no property, plant or equipment in either year.
14 Intangible assets
Group Goodwill £000 Computer software £000 Asset in progress £000 Market appraisal algorithm£000 Total £000
Cost
At 1 January 2016 732 4,364 - - 5,096
Additions - 275 - - 275
Internally generated - - 203 - 203
Acquired through a business combination 1,733 - - 309 2,042
At 31 December 2016 2,465 4,639 203 309 7,616
Amortisation
At 1 January 2016 - (3,713) - - (3,713)
Charge for year - (318) - (60) (378)
At 31 December 2016 - (4,031) - (60) (4,091)
Net book value
At 31 December 2016 2,465 608 203 249 3,525
At 1 January 2016 732 651 - - 1,383
Goodwill acquired of £1,733,000 relates to the goodwill recognised on the acquisition of The Outside View Analytics Limited
('Outside View'), being intangible assets that are not separately identifiable under IFRS 3. The goodwill represents value
arising from the skills and knowledge of Outside View's workforce as well as the ability to develop an enhanced product and
service offering that the Board believe will drive an increase in the quantity and quality of predictive analytical data
services provided to customers.
The asset in progress consists of capitalised development costs for a significant upgrade to a customer facing software
application used by our Data Services business. The market appraisal algorithm relates to the intangible asset recognised
on acquisition of Outside View.
Group Goodwill Computer software Total
£000 £000 £000
Cost
At 1 January 2015 732 4,185 4,917
Additions - 179 179
At 31 December 2015 732 4,364 5,096
Amortisation
At 1 January 2015 - (3,352) (3,352)
Charge for year - (361) (361)
At 31 December 2015 - (3,713) (3,713)
Net book value
At 31 December 2015 732 651 1,383
At 1 January 2015 732 833 1,565
The Company had no intangible assets in either year.
Impairment testing for cash generating units containing goodwill
For the purpose of impairment testing, goodwill is allocated to the Group's Agency segment which represents the lowest
level within the Group at which goodwill is monitored for internal management purposes, which is not higher than the
Group's operating segments as reported in Note 5.
The carrying value of £2,465,000 goodwill, comprises £732,000 of purchased goodwill arising pre-transition to IFRS and
£1,733,000 on acquisition of the Outside View. Goodwill arising from the acquisition of the Outside View has been allocated
to the Agency segment as the revenue expected from the Outside View product is attributable to Agency customers.
Given the low level of significance of the total goodwill balance and strong growth in the Agency segment revenue in the
year, with no impairment indicators present, the disclosures as required by IAS 36 Impairment of Assets have not been
made.
15 Investments
The subsidiaries of the Group as at 31 December 2016 are as follows:
Company Nature of business Country of incorporation Holding Class of shares
Rightmove Group Limited Online property advertising England and Wales 100% Ordinary
The Outside View Analytics Ltd Property analytics services England and Wales 100% Ordinary
Rightmove.co.uk Limited Dormant England and Wales 100% Ordinary
Rightmove Home Information Dormant England and Wales 100% Ordinary
Packs Limited
All the above subsidiaries are included in the Group consolidated financial statements. The registered office for all
subsidiaries
of the Group is Turnberry House, 30 Caldecotte Lake Drive, Caldecotte, Milton Keynes, MK7 8LE.
Company 2016 2015
£000 £000
Investment in subsidiary undertakingsAt 1 January 544,464 542,804
Additions - subsidiary share-based payments charge (refer Note 23) 1,738 1,660
At 31 December 546,202 544,464
In 2008, the Company became the holding company of Rightmove Group Limited (formerly Rightmove plc, Company no. 3997679)
and its subsidiaries pursuant to a Scheme of Arrangement under s425 of the Companies Act 1985 by way of a share-for-share
exchange. Following the Scheme of Arrangement, the Company underwent a court-approved capital reduction. The consolidated
assets and liabilities of the Group immediately after the Scheme were substantially the same as the consolidated assets and
liabilities of the Group immediately prior to the Scheme.
Following the capital reconstruction in 2008 all employees' share-based incentives were transferred to the new holding
company, Rightmove plc. In addition certain directors' contracts of employment were transferred from Rightmove Group
Limited to Rightmove plc, whilst all other employees remained employed by Rightmove Group Limited. Accordingly the
share-based payments charge has been split between the Company and Rightmove Group Limited with £1,738,000 (2015:
£1,660,000) being recognised in the Company accounts as a capital contribution to its subsidiary.
16 Deferred tax asset
Deferred tax is presented net on the balance sheet in so far as a right of offset exists. The net deferred tax asset is
attributable to the following:
Group Company
Share-based incentives£000 Property, plant and equipment£000 Provisions£000 Market appraisal algorithm£000 Total£000 Share-based incentives£000
At 1 January 2016 6,509 179 103 - 6,791 3,581
Arising on business combination - - - (49) (49) -
Recognised in income 531 73 22 10 636 346
Recognised directly in equity (436) - - - (436) (170)
At 31 December 2016 6,604 252 125 (39) 6,942 3,757
At 1 January 2015 4,224 197 82 - 4,503 2,667
Recognised in income 26 (18) 21 - 29 (86)
Recognised directly in equity 2,259 - - - 2,259 1,000
At 31 December 2015 6,509 179 103 - 6,791 3,581
The increase in the deferred tax asset relating to share-based incentives at 31 December 2016 is due to fewer exercises of
shares options in 2016 which together with the number of new share scheme awards has outweighed the reduction in the
Company's share price from £41.25 at 31 December 2015 to £39.03 at 31 December 2016.
16 Deferred tax asset (continued)
A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantively enacted on
2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively
enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on
6 September 2016. This will reduce the Group's future current tax charge accordingly. The deferred tax asset at
31 December 2016 has been calculated at the rate of 19% which represents the average expected rate at which the net
deferred tax asset will reverse in the future.
17 Trade and other receivables
Group 2016 2015
£000 £000
Trade receivables 27,061 25,055
Less provision for impairment of trade receivables (428) (446)
Net trade receivables 26,633 24,609
Prepayments 2,826 2,529
Accrued income 338 301
Interest receivable - 25
Other debtors 127 59
29,924 27,523
Exposure to credit and currency risks and impairment losses relating to trade and other receivables are disclosed in Note
26.
The Company has no trade and other receivables in either year.
18 Cash and deposits
Group 2016 2015
£000 £000
Cash and cash equivalentsMoney market deposits 13,7494,026 8,418
4,000
17,775 12,418
Cash balances with an original maturity of less than three months were held in current accounts during the year and
attracted interest at a weighted average rate of 0.4% (2015: 0.5%).
The cash at bank balance includes £1,848,000 which is restricted to use in accordance with the deeds of the EBT.
Money market deposits with an original maturity of more than three months and less than a year, attracted interest at a
weighted average rate of 0.7% (2015: 0.8%).
The Company had cash and cash equivalent balances at 31 December 2016 of £180 (2015: £148).
19 Trade and other payables
Group Company
2016 2015 2016 2015
£000 £000 £000 £000
Trade payables 1,266 592 - -
Trade accruals 7,644 7,336 4,835 4,721
Other creditors 46 69 - -
Other taxation and social security 9,172 7,428 - -
Deferred revenue 17,668 16,193 - -
Inter-group payables - - 25,317 31,908
35,796 31,618 30,152 36,629
Exposure to currency and liquidity risk relating to trade and other payables is disclosed in Note 26.
20 Loans and borrowings
The agreement with HSBC for a £10,000,000 committed revolving loan facility expired on 9 February 2017. This has been
replaced with a new 12 month agreement with Barclays Bank Plc for a £10,000,000 committed revolving loan facility that
expires on 12 February 2018. No amount has been drawn under either facility in either year.
The Company had no loans and borrowings in either year.
21 Provisions
2016 2015
Dilapidations provision£000 Other£000 Total£000 Dilapidations provision£000 Total£000
At 1 January 236 - 236 200 200
Charged in the year 36 88 124 36 36
At 31 December 272 88 360 236 236
Current 185 - 185 - -
Non-current 87 88 175 236 236
The lease dilapidations provision is charged throughout the lives of the leases and is based on an estimated cost to make
good per square foot multiplied by the floor area of each of the premises.
The Company had no provisions in either year.
22 Share capital
2016 2015
Amount£000 Number of shares Amount£000 Number of shares
In issue ordinary shares of £0.01 each
At 1 January 977 97,741,977 1,000 99,993,317
Purchase and cancellation of own shares (22) (2,251,711) (23) (2,251,340)
At 31 December 955 95,490,266 977 97,741,977
The authorised share capital is 300,000,000 ordinary £0.01 shares in both years.
All issued shares are fully paid. The holders of ordinary shares are entitled to receive dividends as declared from time to
time and are entitled to one vote per ordinary share at general meetings of the Company.
In June 2007, the Company commenced a share buyback programme to purchase its own ordinary shares. The total number of
shares bought back in 2016 was 2,251,711 (2015: 2,251,340) representing 2.4% (2015: 2.4%) of the ordinary shares in issue
(excluding shares held in treasury). All of the shares bought back in both years were cancelled. The shares were acquired
on the open market at a total consideration (excluding costs) of £88,083,000 (2015: £76,071,000). The maximum and minimum
prices paid were £42.50 (2015: £41.44) and £33.11 (2015: £21.18) per share respectively. Share-related expenses in relation
to stamp duty charges and broker expenses were £617,000 (2015: £533,000).
Included within shares in issue at 31 December 2016 are 343,275 (2015: 386,057) shares held by the EBT, 50,150 (2015:
37,800) shares held by the SIP and 2,271,725 (2015: 2,322,314) shares held in treasury.
23 Reconciliation of movement in capital and reserves
Group
Own shares held - £000
EBT shares reserve£000 SIP shares reserve£000 Treasury shares£000 Total£000
Own shares held as at 1 January 2015 (2,906) - (11,917) (14,823)
Shares purchased for SIP (507) - - (507)
Shares transferred to SIP 863 (863) - -
Share-based incentives exercised in the year 378 - 856 1,234
SIP releases in the year - 11 - 11
Increase in shares released from EBT due to rolled up dividend payments 7 - 16 23
Own shares held as at 31 December 2015 (2,165) (852) (11,045) (14,062)
Own shares held as at 1 January 2016 (2,165) (852) (11,045) (14,062)
Shares purchased for SIP (751) - - (751)
Shares transferred to SIP 517 (517) - -
Share-based incentives exercised in the year 107 - 232 339
SIP releases in the year - 17 - 17
Increase in shares released from EBT due to rolled up dividend payments 1 - 9 10
Shares held as at 31 December 2016 (2,291) (1,352) (10,804) (14,447)
Own shares held - number
EBT shares reservenumber of shares SIP shares reservenumber of shares Treasury sharesnumber of shares Totalnumber of own shares held
Own shares held as at 1 January 2015 596,499 - 2,505,430 3,101,929
Shares purchased for SIP 12,700 - - 12,700
Shares transferred to SIP (38,300) 38,300 - -
Share-based incentives exercised in the year (181,552) - (199,751) (381,303)
Reduction in shares released due to net settlement (refer Note 24) - - 19,930 19,930
SIP releases in the year - (500) - (500)
Increase in shares released from EBT due to rolled up dividend payments (3,290) - (3,295) (6,585)
Own shares held as at 31 December 2015 386,057 37,800 2,322,314 2,746,171
Own shares held as at 1 January 2016 386,057 37,800 2,322,314 2,746,171
Shares purchased for SIP 20,250 - - 20,250
Shares transferred to SIP (12,950) 12,950 - -
Share-based incentives exercised in the year (49,985) - (48,750) (98,735)
SIP releases in the year - (600) - (600)
Increase in shares released from EBT due to rolled up dividend payments (97) - (1,839) (1,936)
Shares held as at 31 December 2016 343,275 50,150 2,271,725 2,665,150
23 Reconciliation of movement in capital and reserves (continued)
(a) EBT shares reserve
This reserve represents the cost of own shares acquired by the EBT less any exercises of share-based incentives. An
additional 97 shares were issued as a result of rolled up dividend payments in relation to performance shares
At 31 December 2016, the EBT held 343,275 (2015: 386,057) ordinary shares in the Company of £0.01 each, representing 0.4%
(2015: 0.4%) of the ordinary shares in issue (excluding shares held in treasury). The market value of the shares held in
the EBT at 31 December 2016 was £13,398,000 (2015: £15,925,000).
(b) SIP shares reserve (Group and Company)
In November 2014, the Company established the Rightmove Share Incentive Plan Trust (SIP). This reserve represents the cost
of acquiring shares less any exercises or releases of SIP awards. Employees of the Group were offered 50 free shares (2015:
50), subject to a three year service period, with effect from 3 January 2017 (4 January 2016). 600 (2015: 500) shares were
released by the SIP during the year in relation to good leavers and retirees. 12,950 (2015: 38,300) shares were transferred
to the SIP reserve from the EBT.
At 31 December 2016 the SIP held 50,150 (2015: 37,800) ordinary shares in the Company of £0.01 each, representing 0.05%
(2015: 0.04%) of the ordinary shares in issue (excluding shares held in treasury). The market value of the shares held in
the SIP at 31 December 2015 was £1,957,000 (2015: £1,559,000).
(c) Treasury shares (Group and Company)
This represents the cost of acquiring shares held in treasury less any exercises of share-based incentives. These shares
were bought back in 2008 at an average price of £4.76 and may be used to satisfy certain share-based incentive awards. An
additional 1,839 shares were issued as a result of rolled up dividend payments in relation to performance shares.
Other reserves
This represents the Capital Redemption Reserve in respect of own shares bought back and cancelled. The movement of £22,000
(2015: £23,000) is the nominal value of ordinary shares cancelled during the year.
Retained earnings
The gain on the exercise of share-based incentives of £7,000 (2015: £867,000 loss) is the difference between the value that
the shares held by the EBT, SIP and treasury shares were originally acquired at and the exercise price at which share-based
incentives were exercised or released during the year. Details of share buybacks and cancellation of shares are included in
Note 22.
Company
Reverse acquisition reserve
This reserve resulted from the acquisition of Rightmove Group Limited by the Company and represents the difference between
the value of the shares acquired at 28 January 2008 and the nominal value of the shares issued.
Other reserves
Awards relating to share-based incentives made to Rightmove Group Limited employees have been treated as a deemed capital
contribution. The principal movement in other reserves for the year comprises £1,738,000 (2015: £1,660,000) in respect of
the share-based incentives charge for employees of Rightmove Group Limited.
In addition other reserves include £339,000 (2015: £317,000) of Capital Redemption Reserve. A movement of £22,000 (2015:
£23,000) has been recorded in relation to the nominal value of ordinary shares cancelled during the year.
24 Share-based payments
The Group and Company operate a number of share-based incentive schemes for executive directors and employees.
All share-based incentives are subject to a service condition. Such conditions are not taken into account in the fair value
of the service received. The fair value of services received in return for share-based incentives is measured by reference
to the fair value of share-based incentives granted. The estimate of the fair value of the share-based incentives is
measured using either the Monte Carlo or Black Scholes pricing model as is most appropriate for each scheme.
The Group recognised a total share-based payments charge for the year of £4,142,000(2015: £3,765,000) with a Company charge
for the year of £2,404,000 (2015: £2,105,000), as set out below:
Group Company
2016£000 2015 £000 2016£000 2015 £000
Sharesave Plan 204 157 4 5
Performance Share Plan (PSP) 2,755 2,553 1,879 1,580
Deferred Share Bonus Plan (DSP) 884 917 521 519
Share Incentive Plan (SIP) 299 138 - 1
Total share-based payments charge 4,142 3,765 2,404 2,105
NI on applicable share-based payment schemes at 13.8% 451 3,331 232 2,605
A 2% reduction or increase in the employee leaver assumption (excluding executive directors) for the DSP and the PSP would
have increased/decreased the share-based payments charge in the year by £36,000 (2015: £49,000).
Approved and Unapproved Plans
There has been no award of share options for Approved and Unapproved Plans since 5 March 2010.
2016 2015
Group Number Weighted average exercise price Number Weighted average exercise price
(pence) (pence)
Outstanding at 1 January 546,527 307.42 663,131 369.53
Exercised - - (116,604) 660.65
Outstanding at 31 December 546,527 307.42 546,527 307.42
Exercisable at 31 December 546,527 307.42 546,527 307.42
The weighted average market value per ordinary share for options exercised in 2016 was nil (2015: £37.39).
The options outstanding at 31 December 2016 have an exercise price in the range of £2.24 to £6.66 in both years and a
weighted average contractual life of 2.1 years (2015: 3.1 years).
24 Share-based payments (continued)
Sharesave Plan
The Group operates an HMRC Approved Sharesave Plan under which employees are granted an option to purchase ordinary shares
in the Company at up to 20% less than the market price at invitation, in three years' time, dependent on their entering
into a contract to make monthly contributions into a savings account over the relevant period. These funds are used to fund
the option exercise. No performance criteria are applied to the exercise of Sharesave options. The assumptions used in the
measurement of the fair value at grant date of the Sharesave Plan are as follows:
Grant date Share Exercise price (pence) Expected volatility (%) Option Risk free rate Dividend yield Employee turnover before vesting/ Fair value per option (pence)
price at life (years) (%) (%) non-vesting condition (%)
grant
date
(pence)
1 October 2012 1577.00 1295.00 34.8 3.0 0.5 1.3 25.0 475.00
1 October 2013 2371.00 1896.00 27.3 3.0 0.7 1.1 25.0 659.00
1 October 2014 2144.00 1972.00 25.3 3.0 1.0 1.4 25.0 430.00
1 October 2015 3639.00 2960.00 24.7 3.0 0.8 1.0 25.0 933.00
1 October 2016 4293.00 3315.00 27.8 3.0 0.4 1.1 25.0 1233.00
Expected volatility is estimated by considering historic average share price volatility at the grant date.
The requirement that an employee has to save in order to purchase shares under the Sharesave Plan is a non-vesting
condition. This feature has been incorporated into the fair value at grant date by applying a discount to the valuation
obtained from the Black Scholes pricing model. The discount has been determined by estimating the probability that the
employee will stop saving based on expected future trends in the share price and past employee behaviour.
2016 2015
Group Number Weighted Number Weighted
average exercise average exercise
price price
(pence) (pence)
Outstanding at 1 January 104,019 2273.13 116,032 1733.49
Granted 43,451 3315.00 35,794 2960.00
Forfeited (9,939) 2695.91 (16,406) 1932.63
Exercised (20,598) 1809.87 (31,401) 1244.84
Outstanding at 31 December 116,933 2712.71 104,019 2273.13
Exercisable at 31 December 4,601 1896.00 2,211 1295.00
The weighted average market value per ordinary share for Sharesave options exercised in 2016 was £38.34 (2015: £37.27).
The Sharesave options outstanding at 31 December 2016 have an exercise price in the range of £18.96 to £33.15
(2015: £12.95 to £29.60) and a weighted average contractual life of 2.3 years (2015: 2.4 years).
24 Share-based payments (continued)
Performance Share Plan (PSP)
The PSP permits awards of nil cost options or contingent shares which will only vest in the event of prior satisfaction of
a performance condition.
89,041 PSP awards were made on 1 March 2016 (the grant date) subject to EPS and TSR performance. Performance will be
measured over three financial years (1 January 2016 to 31 December 2018). The vesting in March 2019 (vesting date) of 25%
of the 2016 PSP award will be dependent on a relative TSR performance condition measured over a three year performance
period and the vesting of the 75% of the 2016 PSP award will be dependent on the satisfaction of an EPS growth target
measured over a three year performance period. PSP award holders are entitled to receive dividends accruing between the
grant date and the vesting date and this value will be delivered in shares.
The PSP awards have been valued using the Monte Carlo model for the TSR element and the Black Scholes model for the EPS
element and the resulting share-based payments charge is being spread evenly over the period between the grant date and the
vesting date. The assumptions used in the measurement of the fair value at grant date of the PSP awards are as follows:
Grant date Share Exercise price (pence) Expected volatility (%) Option Risk free rate Dividend yield Employee turnover before vesting/ Fair value per option (pence)
price at life (years) (%) (%) non-vesting condition (%)
grant
date
(pence)
8 March 2013 1781.00 nil 27.3 3.0 0.4 0.0 4.8 1003.00
(TSR dependent)(1)
8 March 2013 1781.00 nil n/a 3.0 0.4 0.0 4.8 1781.00
(EPS dependent)(1)
3 March 2014 2688.00 nil 25.3 3.0 1.0 0.0 4.8 1219.00
(TSR dependent)(1)(2)
3 March 2014 2688.00 nil n/a 3.0 1.0 0.0 4.8 2688.00
(EPS dependent)(1)(2)
2 March 2015 3044.00 3044.00 nil nil 24.7 n/a 3.0 3.0 0.8 0.8 0.0 0.0 5.2 5.2 2258.00 3044.00
(TSR dependent)(1)2 March 2015
(EPS dependent)(1)
1 March 2016 4069.00 4069.00 nil nil 27.8 n/a 3.0 3.0 0.4 0.4 0.0 0.0 4.4 4.4 1985.00 4069.00
(TSR dependent)(1)1 March 2016
(EPS dependent)(1)
(1) For details of TSR and EPS performance conditions refer to the Directors' Remuneration Report on pages 53 to 84.
(2) Both the TSR and EPS performance conditions for PSPs with a grant date of 3 March 2014 have been met in full and 100%
of the awards are expected to vest in March 2017.
Expected volatility is estimated by considering historic average share price volatility at the grant date.
Group 2016 2015
Number Number
Outstanding at 1 January 388,002 438,365
Granted 89,041 129,645
Forfeited (22,688) -
Exercised (51,403) (180,008)
Outstanding at 31 December 402,952 388,002
Exercisable at 31 December 82,467 23,953
The weighted average market value per ordinary share for options exercised in 2016 was £38.86 (2015: £35.19). The
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