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Authorised and issued share capital

12 Months Ended

Dec. 31, 2019

28. Authorised and issued share capital


	Equity ordinary shares			Nominal value £m
Authorised
At 1 January 2017		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
At 31 December 2019		1,750,000,000			175.0

Issued and fully paid
At 1 January 2017		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
Exercise of share options		75,625			-
Share cancellations		(4,586,039	)		(0.5	)
At 31 December 2019		1,328,167,813			132.8

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 2019 was 9,219,837 (2018: 14,820,994), and £98.3 million (2018: £125.5 million) respectively. The number and market value of ordinary shares held in treasury at 31 December 2019 was 70,787,730 (2018: 70,854,553) and £755.0 million (2018: £599.9 million) respectively.

Share options

WPP Executive Share Option Scheme (WPP)

As at 31 December 2019, 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 (WWOP)

As at 31 December 2019, unexercised options over ordinary shares of 2,757,654 and unexercised options over ADRs of 388,854 have been granted under the WPP Worldwide Share Ownership Programme as follows:


Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
82,650		6.268		2014 - 2021
36,500		6.268		2015 - 2021
53,150		7.113		2013 - 2020
25,750		7.113		2014 - 2020
194,079		8.458		2015 - 2022
43,000		13.145		2017 - 2021
1,739,050		13.145		2017 - 2024
4,375		13.145		2018 - 2024
564,975		13.505		2016 - 2023
14,125		13.505		2017 - 2023


Number of ADRs under option	Exercise price per ADR ($)		Exercise dates
24,550		49.230		2014 - 2021
16,530		56.560		2013 - 2020
39,184		67.490		2015 - 2022
166,655		102.670		2017 - 2024
141,935		110.760		2016 - 2023

WPP Share Option Plan 2015 (WSOP)

As at 31 December 2019, unexercised options over ordinary shares of 13,413,425 and unexercised options over ADRs of 1,396,745 have been granted under the WPP Worldwide Share Ownership Programme as follows:


Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
18,250		8.372		2021 - 2025
3,406,900		8.372		2021 - 2028
15,500		9.600		2022 - 2026
2,863,975		9.600		2022 - 2029
19,250		13.085		2020 - 2024
2,785,100		13.085		2020 - 2027
55,500		15.150		2018 - 2022
1,952,200		15.150		2018 - 2025
5,375		15.150		2019 - 2025
12,375		17.055		2019 - 2023
2,279,000		17.055		2019 - 2026


Number of ADRs under option	Exercise price per ADR ($)		Exercise dates
347,660		53.140		2021 - 2028
347,105		62.590		2022 - 2029
276,790		88.260		2020 - 2027
236,265		105.490		2020 - 2026
188,925		115.940		2018 - 2025

The aggregate status of the WPP Share Option Plans during 2019 was as follows:

Movements on options granted (represented in ordinary shares)


	1 January 2019		Granted		Exercised			Lapsed			Outstanding 31 December 2019		Exercisable 31 December 2019
WPP		6,741		–		–			–			6,741		6,741
WWOP		5,520,774		–		(71,475	)		(747,375	)		4,701,924		4,701,924
WSOP		18,691,100		4,615,000		(4,150	)		(2,904,800	)		20,397,150		5,249,075
		24,218,615		4,615,000		(75,625	)		(3,652,175	)		25,105,815		9,957,740

Weighted-average exercise price for options over


	1 January 2019		Granted		Exercised		Lapsed		Outstanding 31 December 2019		Exercisable 31 December 2019
Ordinary shares (£)
WPP		9.355		–		–		–		9.355		9.355
WWOP		12.290		–		6.888		12.027		12.421		12.421
WSOP		12.753		9.600		8.372		12.405		12.121		16.164
ADRs ($)
WWOP		95.453		–		47.388		91.622		96.744		96.744
WSOP		84.893		62.590		53.140		82.290		79.798		115.940

Options over ordinary shares

Outstanding


Range of exercise prices £	Weighted average exercise price £		Weighted average contractual life Months
6.268 – 17.055		12.171		90

Options over ADRs

Outstanding


Range of exercise prices $	Weighted average exercise price $		Weighted average contractual life Months
49.230 – 115.940		83.488		89

As at 31 December 2019 there was £7.3 million (2018: £8.5 million) of total unrecognised compensation costs related to share options. That cost is expected to be recognised over a weighted average period of 19 months (2018: 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:


	2019		2018		2017
Fair value of UK options (shares)		117.0p		107.0p		112.0p
Fair value of US options (ADRs)		$8.49		$8.09		$9.40
Weighted average assumptions:
UK Risk-free interest rate		0.57%		0.78%		0.57%
US Risk-free interest rate		1.61%		2.74%		2.05%
Expected life (months)		48		48		48
Expected volatility		24%		24%		17%
Dividend yield		3.8%		3.5%		2.9%

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 2019 was £9.39 (2018: £11.56, 2017: £15.86) and the average ADR price for the same period was $59.93 (2018: $77.31, 2017: $101.86).

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.