25. Authorised and issued share capital


	Equity ordinary shares		Nominal value £m
Authorised
At 1 January 2016		1,750,000,000		175.0
At 31 December 2016		1,750,000,000		175.0
At 31 December 2017		1,750,000,000		175.0
At 31 December 2018		1,750,000,000		175.0

Issued and fully paid
At 1 January 2016		1,329,366,024		132.9
Exercise of share options		2,514,706		0.3
At 31 December 2016		1,331,880,730		133.2
Exercise of share options		630,822		0.1
At 31 December 2017		1,332,511,552		133.3
Exercise of share options		166,675		–
At 31 December 2018		1,332,678,227		133.3

Company’s own shares

The Company’s holdings of own shares are stated at cost and represent shares held in treasury and purchases by the Employee Share Ownership Plan (‘ESOP’) trusts of shares in WPP plc for the purpose of funding certain of the Group’s share-based incentive plans.

The trustees of the ESOP purchase the Company’s ordinary shares in the open market using funds provided by the Company. The Company also has an obligation to make regular contributions to the ESOP to enable it to meet its administrative costs. The number and market value of the ordinary shares of the Company held by the ESOP at 31 December 2018 was 14,820,994 (2017: 14,232,910), and £125.5 million (2017: £190.9 million) respectively. The number and market value of ordinary shares held in treasury at 31 December 2018 was 70,854,553 (2017: 62,578,938) and £599.9 million (2017: £839.2 million) respectively.

Share options

WPP Executive Share Option Scheme

As at 31 December 2018, unexercised options over ordinary shares of 6,741 have been granted under the WPP Executive Share Option Scheme as follows:


Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
3,696		8.333		2015 - 2022
3,045		10.595		2016 - 2023

WPP Worldwide Share Ownership Programme

As at 31 December 2018, unexercised options over ordinary shares of 3,187,979 and unexercised options over ADRs of 466,559 have been granted under the WPP Worldwide Share Ownership Programme as follows:


Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
28,275		5.483		2012 - 2019
18,000		5.483		2013 - 2019
750		5.608		2012 - 2019
95,000		6.268		2014 - 2021
44,125		6.268		2015 - 2021
61,625		7.113		2013 - 2020
30,250		7.113		2014 - 2020
233,129		8.458		2015 - 2022
52,000		13.145		2017 - 2021
1,959,975		13.145		2017 - 2024
4,750		13.145		2018 - 2024
642,975		13.505		2016 - 2023
17,125		13.505		2017 - 2023


Number of ADRs under option	Exercise price per ADR ($)		Exercise dates
11,855		44.560		2012 - 2019
29,025		49.230		2014 - 2021
19,200		56.560		2013 - 2020
44,964		67.490		2015 - 2022
195,890		102.670		2017 - 2024
165,625		110.760		2016 - 2023

WPP Share Option Plan 2015

As at 31 December 2018, unexercised options over ordinary shares of 12,257,750 and unexercised options over ADRs of 1,286,670 have been granted under the WPP Share Option Plan 2015 as follows:


Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
23,750		8.372		2021 - 2025
4,053,925		8.372		2021 - 2028
23,875		13.085		2020 - 2024
3,245,325		13.085		2020 - 2027
66,125		15.150		2018 - 2022
2,211,900		15.150		2018 - 2025
5,750		15.150		2019 - 2025
15,875		17.055		2019 - 2023
2,611,225		17.055		2019 - 2026


Number of ADRs under option	Exercise price per ADR ($)		Exercise dates
439,205		53.140		2021 - 2028
340,225		88.260		2020 - 2027
282,115		105.490		2020 - 2026
225,125		115.940		2018 - 2025

The aggregate status of the WPP Share Option Plans during 2018 was as follows:

Movements on options granted (represented in ordinary shares)


	1 January 2018		Granted		Exercised			Lapsed			Outstanding 31 December 2018		Exercisable 31 December 2018
WPP		6,741		–		–			–			6,741		6,741
WWOP		6,375,750		–		(166,675	)		(688,301	)		5,520,774		5,520,774
WSOP		14,602,950		6,301,400		–			(2,213,250	)		18,691,100		3,403,650
		20,985,441		6,301,400		(166,675	)		(2,901,551	)		24,218,615		8,931,165

Weighted-average exercise price for options over


	1 January 2018		Granted		Exercised		Lapsed		Outstanding 31 December 2018		Exercisable 31 December 2018
Ordinary shares (£)
WPP		9.355		–		–		–		9.355		9.355
WWOP		12.195		–		7.064		12.473		12.290		12.290
WSOP		14.929		8.372		–		14.818		12.753		15.150
ADRs ($)
WWOP		94.752		–		57.031		99.731		95.453		95.453
WSOP		101.047		53.140		–		98.978		84.893		115.940

Options over ordinary shares

Outstanding

Range of

exercise

prices

Weighted average
exercise price

Weighted average
contractual life
Months

5.483 – 17.055

12.656

Options over ADRs

Outstanding

Range of

exercise

prices

Weighted average
exercise price

Weighted average
contractual life
Months

44.560 – 115.940

87.703

As at 31 December 2018 there was £8.5 million (2017: £9.0 million) of total unrecognised compensation costs related to share options. That cost is expected to be recognised over a weighted average period of 20 months (2017: 20 months).

Share options are satisfied out of newly issued shares.

The weighted average fair value of options granted in the year calculated using the Black-Scholes model was as follows:


	2018		2017		2016
Fair value of UK options (shares)		107.0p		112.0p		135.0p
Fair value of US options (ADRs)		$8.09		$9.40		$9.94
Weighted average assumptions:
UK Risk-free interest rate		0.78%		0.57%		0.44%
US Risk-free interest rate		2.74%		2.05%		1.60%
Expected life (months)		48		48		48
Expected volatility		24%		17%		16%
Dividend yield		3.5%		2.9%		2.8%

Options are issued at an exercise price equal to market value on the date of grant.

The average share price of the Group for the year ended 31 December 2018 was £11.56 (2017: £15.86, 2016: £16.45) and the average ADR price for the same period was $77.31 (2017: $101.86, 2016: $111.20).

Expected volatility is sourced from external market data and represents the historic volatility in the Group’s share price over a period equivalent to the expected option life.

Expected life is based on a review of historic exercise behaviour in the context of the contractual terms of the options, as described in more detail below.

Terms of share option plans

In 2015, the Group introduced the Share Option Plan 2015 to replace both the ‘all-employee’ Worldwide Share Ownership Plan and the discretionary Executive Stock Option Plan. Two kinds of options over ordinary shares can be granted, both with a market value exercise price. Firstly, options can be granted to employees who have worked at a company owned by WPP plc for at least two years which are not subject to performance conditions. Secondly, options may be granted on a discretionary basis subject to the satisfaction of performance conditions.

The Worldwide Share Ownership Programme was open for participation to employees with at least two years’ employment in the Group. It was not available to those participating in other share-based incentive programmes or to Executive Directors. The vesting period for each grant is three years and there are no performance conditions other than continued employment with the Group.

The Executive Stock Option Plan has historically been open for participation to WPP Group Leaders, Partners and High Potential Group. It is not currently offered to Parent Company Executive Directors. The vesting period is three years and performance conditions include achievement of various TSR (Total Shareholder Return) and EPS (Earnings Per Share) objectives, as well as continued employment. The terms of these stock options are such that if, after nine years and eight months, the performance conditions have not been met, then the stock option will vest automatically.

The Group grants stock options with a life of 10 years, including the vesting period.