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Share-based payments | 12 Months Ended
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Dec. 31, 2022
Share-based payments |
Share-based payments | A11. Share-based payments Share-based compensation The Group operates one equity-settled share-based long-term incentive plan (LTIP). The economic cost of awarding shares and share options to employees is recognised as an expense in the income statement, equivalent to the fair value of the benefit awarded. The fair value is determined by reference to option pricing models, principally Monte Carlo and adjusted Black-Scholes models. The charge is recognised in the income statement over the vesting period of the award. At each balance sheet date, the Group revises its estimate of the number of shares that vest or options that are expected to become exercisable. Any revision to the original estimates is reflected in the income statement with a corresponding adjustment to equity immediately to the extent it relates to past service, and the remainder over the rest of the vesting period. Performance Share Plan The Company introduced a share-based performance plan in 2006 for senior managers worldwide. The main features of the scheme are as follows:
● | For awards made in 2020, 60% of the award is based on total shareholder return (TSR) and 40% is based on performance against certain strategic and financial measures over the vesting period.
● | For awards made in 2021, 50% of the award is based on TSR and 50% is based on performance against certain strategic and financial measures over the vesting period.
● | For awards made in 2022, 50% of the award is based on TSR and 50% is based on performance against certain strategic and financial measures over the vesting period.
● | The value of dividends paid during the vesting period is paid on the number of shares that ultimately vest in the form of additional shares. For awards that are nil-cost options, this is the value of dividends between grant and exercise.
The total net charge for the year relating to equity-settled share-based payment plans was £9m (2021: £10m; 2020: £6m). A summary of the number of shares in active share option plans is shown below: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Share options outstanding | ​ | Share options exercisable
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Shares | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Scheme | ​ | Shares | ​ | Shares | ​ | Shares | ​ | outstanding | ​ | Shares | ​ | Shares | ​ | Shares | ​ | Shares | ​ | Shares
Year | ​ | ​ | ​ | interest at | ​ | awarded | ​ | lapsed | ​ | vested | ​ | at | ​ | exercisable at | ​ | vested | ​ | exercised | ​ | lapsed | ​ | exercisable at
of | ​ | Vesting | ​ | 1 January | ​ | during | ​ | during | ​ | during | ​ | 31 December | ​ | 1 January | ​ | during | ​ | during | ​ | during | ​ | 31 December
grant |  | year |  | 2022 |  | 2022 |  | 2022 |  | 2022 |  | 2022 |  | 2022 |  | 2022 |  | 2022 |  | 2022 |  | 2022
2012 | ​ | 2015 | ​ | — | ​ | — | ​ | — | ​ | — | ​ | — | ​ | 168,551 | ​ | — | ​ | (168,426) | ​ | (125) | ​ | —
2013 | ​ | 2016 | ​ | — | ​ | 16,964 | ​ | — | ​ | (16,964) | ​ | — | ​ | 1,025,307 | ​ | 16,964 | ​ | (137) | ​ | — | ​ | 1,042,134
2014 | ​ | 2017 | ​ | — | ​ | 19,487 | ​ | — | ​ | (19,487) | ​ | — | ​ | 1,188,070 | ​ | 19,487 | ​ | (11,367) | ​ | (2) | ​ | 1,196,188
2015 | ​ | 2018 | ​ | — | ​ | 21,107 | ​ | — | ​ | (21,107) | ​ | — | ​ | 1,364,269 | ​ | 21,107 | ​ | (118,858) | ​ | — | ​ | 1,266,518
2016 | ​ | 2019 | ​ | — | ​ | 30,808 | ​ | — | ​ | (30,808) | ​ | — | ​ | 1,942,074 | ​ | 30,808 | ​ | (131,628) | ​ | (58) | ​ | 1,841,196
2017 | ​ | 2020 | ​ | — | ​ | 24,878 | ​ | — | ​ | (24,878) | ​ | — | ​ | 1,625,618 | ​ | 24,878 | ​ | (324,744) | ​ | (1,025) | ​ | 1,324,727
2018 | ​ | 2021 | ​ | 891,744 | ​ | 34,531 | ​ | (5,910) | ​ | (905,768) | ​ | 14,597 | ​ | 1,538,591 | ​ | 905,768 | ​ | (451,433) | ​ | (5,058) | ​ | 1,987,868
2019 | ​ | 2022 | ​ | 4,776,149 | ​ | 132,345 | ​ | (332,441) | ​ | (4,114,390) | ​ | 461,663 | ​ | — | ​ | 4,114,390 | ​ | (1,878,327) | ​ | (22,984) | ​ | 2,213,079
2020 |  | 2023 |  | 3,471,012 |  | — |  | (284,625) |  | — |  | 3,186,387 |  | — |  | — |  | — |  | — |  | —
2021 | ​ | 2024 | ​ | 4,137,673 | ​ | — | ​ | (339,688) | ​ | — | ​ | 3,797,985 | ​ | — | ​ | — | ​ | — | ​ | — | ​ | —
2022 |  | 2025 |  | — |  | 4,964,496 |  | (118,596) |  | — |  | 4,845,900 |  | — |  | — |  | — |  | — |  | —
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Share options outstanding | ​ | Share options exercisable
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Shares | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Scheme | ​ | Shares | ​ | Shares | ​ | Shares | ​ | outstanding | ​ | Shares | ​ | Shares | ​ | Shares | ​ | Shares | ​ | Shares
Year | ​ | ​ | ​ | interest at | ​ | awarded | ​ | lapsed | ​ | vested | ​ | at | ​ | exercisable at | ​ | vested | ​ | exercised | ​ | lapsed | ​ | exercisable at
of | ​ | Vesting | ​ | 1 January | ​ | during | ​ | during | ​ | during | ​ | 31 December | ​ | 1 January | ​ | during | ​ | during | ​ | during | ​ | 31 December
grant |  | year |  | 2021 |  | 2021 |  | 2021 |  | 2021 |  | 2021 |  | 2021 |  | 2021 |  | 2021 |  | 2021 |  | 2021
2012 |  | 2015 |  | — |  | — |  | — |  | — |  | — |  | 179,519 |  | — |  | (10,968) |  | — |  | 168,551
2013 |  | 2016 |  | — |  | 12,073 |  | — |  | (12,073) |  | — |  | 1,085,178 |  | 12,073 |  | (71,944) |  | — |  | 1,025,307
2014 |  | 2017 |  | — |  | 13,693 |  | — |  | (13,693) |  | — |  | 1,200,990 |  | 13,693 |  | (26,613) |  | — |  | 1,188,070
2015 |  | 2018 |  | — |  | 15,831 |  | — |  | (15,831) |  | — |  | 1,398,235 |  | 15,831 |  | (49,797) |  | — |  | 1,364,269
2016 |  | 2019 |  | — |  | 22,920 |  | (15) |  | (22,905) |  | — |  | 2,052,013 |  | 22,905 |  | (131,521) |  | (1,323) |  | 1,942,074
2017 |  | 2020 |  | — |  | 19,720 |  | (85) |  | (19,635) |  | — |  | 1,784,890 |  | 19,635 |  | (171,187) |  | (7,720) |  | 1,625,618
2018 |  | 2021 |  | 6,024,191 |  | 164,397 |  | (1,066,488) |  | (4,230,356) |  | 891,744 |  | — |  | 4,230,356 |  | (2,691,765) |  | — |  | 1,538,591
2019 |  | 2022 |  | 4,993,019 |  | 33,885 |  | (250,755) |  | — |  | 4,776,149 |  | — |  | — |  | — |  | — |  | —
2020 |  | 2023 |  | 3,561,710 |  | 754 |  | (91,452) |  | — |  | 3,471,012 |  | — |  | — |  | — |  | — |  | —
2021 |  | 2024 |  | — |  | 4,228,162 |  | (90,489) |  | — |  | 4,137,673 |  | — |  | — |  | — |  | — |  | —
​ The fair value of the 2022 awards made under the Performance Share Plan is charged to the income statement over the vesting period based on values derived from a Monte Carlo model prepared by external remuneration consultants. This is a closed-form solution which takes account of the correlation between share price performance and the likelihood of a TSR performance condition being met. For the shares awarded in March 2022, the significant inputs into the model were a share price of 480.5p (2021: 495.7p), an expected share price volatility of 23.9% (2021: 23.2%), a median share price correlation between the companies in the comparator group of 84.0% (2021: 91.0%), and an expected life commensurate with the three-year performance/vesting period. The share price volatility assumption is based on analysis of historical daily share prices. As the awards are nil-cost (i.e. there is no exercise price), the assumed risk-free rate of return has minimal impact on the fair value of the awards. Similarly, as dividend equivalents are paid on the vesting portion of awards, the fair value of these awards is not reduced to reflect dividends paid during the vesting period. The fair value of awards granted during 2022 was £19m (2021: £16m) and the weighted average fair value per award granted during the year was 385.9p (2021: 371.7p). The weighted average share price for options exercised in the year was 499.9p (2021: 505.6p) and the weighted average contract term remaining on shares unexercised at the year end was 527 days (2021: 450 days). In addition to the Performance Share Plan there was a transfer of existing long-term incentive plans in Terminix that were expensed during the period totalling £9m.

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