27. Employee share scheme

Share options

The Group operates share award schemes whereby awards are granted to employees to acquire shares in Consort Medical plc at no cost, subject to the achievement by the Group of certain specified performance targets. It also offers savings-related share option schemes. Following the formal approval of the Performance Share Plan 2015 ("PSP") at the Annual General Meeting in September 2015, no further awards will be made under the 2005 Long Term Incentive Plan ("LTIP"). In June, August and September 2015, awards were made under the PSP.

Grants of share options are normally exercisable at the end of the three-year vesting/performance period. Grants under savings-related share option schemes are normally exercisable after three years' saving. Grants under share option schemes are normally exercisable between three and ten years from the date of grant. Options under the share option schemes are normally granted at the market price ruling at the date of grant. The majority of options under the savings-related share option schemes are now granted at the market price ruling at the date of grant.

Share options awarded to the directors are subject to performance criteria as laid out in the Remuneration Report.

2016
£000
2015
£000
Staff costs (note 4)1,7921,557
1,7921,557

Option pricing

For the purposes of valuing options to arrive at the share-based compensation charge, the Black–Scholes option pricing model has been used. The assumptions used in the model are as follows:

SAYE
scheme
2016
Risk-free interest rate0.9%
Dividend yield2.1%
Volatility26.0%
Expected lives of options granted under:
Savings-related share option schemes3 years
Weighted average share price for grants in the year:
Savings-related share option schemes — market and option price908p

The expected volatility is based on historical volatility over the last three years. The expected life is the average expected period to exercise. The risk-free rate of return is the yield on zero-coupon UK Government bonds of a term consistent with the assumed option life.

Options outstanding

Save As You Earn Share Option Scheme

20162015
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
Outstanding at 1 May222,119783.3p149,335693.5p
Granted114,068908.0p89,248871.0p
Rights issue adjustment24,312783.3p
Exercised(56,018)614.0p(25,408)559.1p
Forfeited(18,394)878.3p(15,368)707.5p
Outstanding at 30 April261,775848.4p222,119783.3p
Exercisable at end of year

Company Share Option Scheme

20162015
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
Outstanding at 1 May40,162689.5p73,029634.9p
Granted
Rights issue adjustment5,026689.5p
Exercised(21,670)550.0p(31,575)446.0p
Forfeited(6,845)746.4p(6,318)717.1p
Outstanding at 30 April11,647785.0p40,162689.5p
Exercisable at end of year

Executive Share Option Scheme

20162015
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
Outstanding at 1 May12,375509.0p
Exercised(12,375)509.0p
Outstanding at 30 April
Exercisable at end of year

Outstanding options granted under all schemes are as follows:

Options grantedWeighted average remaining
contractual life (years)
Options granted2016201520162015Price at
grant date
Savings-related share option schemes
July 201256,3680.3702.0p
July 201376,79278,3340.31.3744.0p
July 201481,45587,4171.32.3871.0p
July 2015103,5282.3908.0p
Total261,775222,1191.41.4848.4p
 
Company and executive share option schemes
June 2012CSOS24,1900.1626.5p
June 2013CSOS11,64715,9720.11.1785.0p
Total11,64740,1620.10.5785.0p

In June 2013, share options were granted under the Company Share Option Plan ("CSOP") in tandem with grants under the LTIP. The cumulative economic effect of these awards for both participants and the Company is identical to that for performance shares, and as such the fair value of these awards has been calculated on the same basis. See below for further details on performance share plans.

Performance Share Plan (LTIP)

The Group operates Performance Share Plans whereby awards are granted to directors and senior management at no cost. The percentage of each award that vests is based upon the performance of the Group over a three-year measurement period.

Number of shares issuable2016
Number
2015
Number
Performance shares
At 1 May734,049736,361
Granted51,546235,331
Rights issue adjustment146,742
Exercised(278,419)(330,949)
Forfeited(96,849)(53,436)
At 30 April410,327734,049

Performance Share Plan (PSP)

Number of shares issuable2016
Number
2015
Number
Performance shares
At 1 May
Granted252,514
Forfeited(7,400)
At 30 April245,114

Performance shares are issued at nil cost to the employee. There were no performance shares exercisable at the end of the year (2015: nil). The weighted average remaining contractual life of the performance shares in issue was 18 months (2015: 18 months).

The majority of the awards granted in the year were made in the form of an award of performance shares.

Deferred Bonus Plan (DBP)

The Group operates a Deferred Bonus Plan whereby awards are granted to directors and senior management at no cost. The percentage of each award that vests is based upon the performance of the Group over a three-year measurement period.

Number of shares issuable2016
Number
2015
Number
Deferred bonus plan shares
At 1 May147,198138,220
Granted56,35535,287
Rights issue adjustment25,736
Exercised(73,517)(52,045)
At 30 April130,036147,198

Deferred bonus plan shares are issued at nil cost to the employee. There were no deferred bonus plan shares exercisable at the end of the year (2015: nil). The weighted average remaining contractual life of the performance shares in issue was 18 months (2015: 18 months).

During the year awards under the LTIP and DBP were granted to a number of employees. The fair value per share under award at grant has been calculated using a Monte Carlo share pricing model. The assumptions used in the calculation are as follows:

Number of shares issuableFY2016
Share price at grant date872.5p
Shares under option349,218
Vesting period3 years
Volatility26.0%
Risk-free rate0.90%
Fair value per performance share — TSR criteria872.5p
Fair value per performance share — EPS criteria490.0p

The expected volatility is based on historical volatility over the last three years. The expected life is the average expected period to exercise.