2568.11 kb - Compass Group

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76 Compass Group PLC Annual Report 2007Notes to the consolidated financial statementsfor the year ended 30 September 200725 Reconciliation of movements in equity continuedThe analysis of other reserves is shown below:Share-basedEquityadjustmentpayment Merger Translation Hedging for put Total otherreserve reserve reserve reserve options reservesOther reserves £m £m £m £m £m £mAt 1 October 2005 105 4,170 16 1 (155) 4,137Total recognised income and expense – – (11) (1) – (12)Fair value of share-based payments 25 – – – – 25Settled in cash or existing shares (purchased in market) – – – – – –Transfer on exercise of put options – – – – 138 138At 30 September 2006 130 4,170 5 – (17) 4,288At 30 September 2006 130 4,170 5 – (17) 4,288Total recognised income and expense – – 1 – – 1Fair value of share-based payments 25 – – – – 25Settled in cash or existing shares (purchased in market) (11) – – – – (11)Transfer on exercise of put options – – – – 9 9At 30 September 2007 144 4,170 6 – (8) 4,312The merger reserve arose in 2000 following the demerger from Granada Compass plc. The equity adjustment for put options arose on accountingfor the options held by the Group’s minority partners requiring the Group to purchase those minority interests.26 Share-based paymentsShare optionsFull details of the Compass Group Share Option Plan (‘Option Plan’), the Management Share Option Plan (‘Management Plan’) and the SavingsrelatedShare Option Scheme can be found in the Directors’ remuneration report.The following tables illustrate the number and weighted average exercise prices of, and movements in, share options during the year.2007 2006Number Weighted average Number Weighted averageof share exercise price of share exercise priceExecutive and management schemes options (pence) options (pence)Outstanding at 1 October 129,018,281 321.25 140,634,118 330.33Granted 4,463,879 334.26 7,813,300 210.67Exercised (8,946,120) 283.31 (600,725) 229.09Forfeited (14,036,513) 350.13 (18,759,168) 346.29Expired (245,092) 379.22 (69,244) 310.29Outstanding at 30 September 110,254,435 321.05 129,018,281 321.25Exercisable at 30 September 62,610,104 364.63 55,215,845 380.21The balance above includes options over 29,711,766 shares (2006: 36,367,195 shares) that were granted on or before 7 November 2002 andhad vested by 1 October 2004. These options have not been subsequently modified and therefore do not need to be accounted for in accordancewith IFRS 2 ‘Share-based Payment’.2007 2006Number Weighted average Number Weighted averageof share exercise price of share exercise priceEmployee savings-related schemes – options options (pence) options (pence)Outstanding at 1 October 8,463,978 236.51 12,191,328 242.24Granted – – – –Exercised (639,141) 236.82 (48,937) 179.20Forfeited (1,741,974) 227.34 (2,797,940) 231.14Expired (1,011,214) 377.34 (880,473) 336.00Outstanding at 30 September 5,071,649 211.55 8,463,978 236.51Exercisable at 30 September 614,111 305.45 1,023,142 376.32The balance above includes options over 89,086 shares (2006: 744,709 shares) that were granted on or before 7 November 2002 and had vested by1 October 2004. These options have not been subsequently modified and therefore do not need to be accounted for in accordance with IFRS 2.
77 Compass Group PLC Annual Report 200726 Share-based payments continued2007 2006Number Weighted average Number Weighted averageof share exercise price of share exercise priceEmployee savings-related schemes – share appreciation rights options (pence) options (pence)Outstanding at 1 October 9,595,916 220.56 15,140,626 235.29Granted – – – –Exercised (56,267) 191.27 (3,354) 179.20Forfeited (2,613,234) 220.02 (3,545,071) 244.30Expired (82,757) 436.00 (1,996,285) 290.20Outstanding at 30 September 6,843,658 218.40 9,595,916 220.56Exercisable at 30 September 2,196,771 274.89 84,571 436.00Options granted under the international savings-related schemes represent appreciation rights over the number of shares shown. When exercised,holders receive a number of shares calculated by reference to the increase in the market price at that time over the option price (as shown in thetable above). Any remaining share appreciation rights are shown in the table above as expired.Information relating to all option schemesThe weighted average share price at the date of exercise for share options exercised during the year was 345.64 pence (2006: 263.80 pence).The options outstanding at the end of the year have a weighted average remaining contractual life of 5.5 years (2006: 6.4 years) for executiveand management schemes and 1.5 years (2006: 2.5 years) for employee schemes.For 2007, options were granted on 30 March 2007 and 28 September 2007. The estimated fair value of options granted on those dates was90.97 pence and 62.10 pence respectively. For 2006, options were granted on 14 December 2005 and 12 June 2006. The estimated average fairvalue of these options was 41.97 pence and 45.88 pence respectively.Fair values for the executive and management schemes were calculated using a binomial distribution option pricing model so that proper allowanceis made for the presence of performance conditions and the possibility of early exercise. In addition, a Monte Carlo simulation model was used toestimate the probability of performance conditions being met. Fair values for options granted under employee savings-related schemes werecalculated using the Black-Scholes option pricing model. The inputs to the option pricing models are reassessed for each grant.The historical volatility is calculated with reference to weekly movements in the Compass share price over the three years prior to the grant date.The following assumptions were used in calculating the fair value of options granted under executive schemes:Assumptions – options 2007 2006Historical volatility 28.0% 31.6%Risk free interest rate 5.2% 4.3%Dividend yield 3.0% 4.6%Expected life 6.0 years 7.0 yearsWeighted average share price at date of grant 337.74p 211.59pWeighted average option exercise price 334.26p 210.67pLong-term incentive planFull details of the Compass Group Long-Term Incentive Plan (‘LTIP’) can be found in the Directors’ remuneration report.The following table shows the movement in share awards during the year.2007 2006NumberNumberLong-term incentive plan of shares of sharesOutstanding at 1 October 6,183,127 5,669,951Awarded 2,041,940 3,189,460Exercised (253,526) (90,750)Forfeited or waived (1,486,193) (1,629,107)Lapsed (925,349) (956,427)Outstanding at 30 September 5,559,999 6,183,127Exercisable at 30 September – 253,626Vesting of LTIP awards made before September 2005 and 50% of LTIP awards made in the years to 30 September 2006 and 2007 are dependenton the Group’s performance relative to a comparator group of companies comprising the FTSE 100 Index. This is treated as a market-basedcondition for valuation purposes and an assessment of the vesting probability was built into the grant date fair value calculations. This assessmentwas calculated using a Monte Carlo simulation option pricing model.
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