Annual Report & Accounts 2014 - NOTES TO THE COMPANY FINANCIAL STATEMENTS
9. ShaRe option SCheme continued
note d: These options were granted to third parties as part of the Sportingbet acquisition following underwriting commitments
made at the time. The awards vested on the grant date and the options have the exercise price reduced by the value of any
dividends declared up to the point of exercise.
note e: These options were granted to certain Directors and employees. The awards will vest in full (and become exercisable)
on the share price being equal to or exceeding £6.00 per share for a continuous period of 90 calendar days at any time from
the date of grant. If there is a change of control, the awards will vest in full immediately unless the share price is less than
£5.00 per share, in which case the Awards will lapse in full. The awards have been treated as vesting over a 3 year period. Of
the awards granted on 2 June 2014, 350,000 were issued as cash settled options under the same terms as the equity settled
The charge to the consolidated income statement in respect of these options (excluding bought out options) in 2014 was
€736,000 (2013: €736,000) and a credit to the income statement of €nil (2013: €6,000) in respect of the bought out options.
Of the 2014 charge €552,000 related to equity settled options and €184,000 to cash settled options.
9.1 Weighted average exercise price of options
The number and weighted average exercise prices of share options is as follows:
exercise number exercise number
price of options price of options
2014 2014 2013 2013
Outstanding at the beginning of the year 191p 3,801,667 171p 3,698,180
Granted during the year 1p 3,450,000 233.5p 500,000
Exercised during the year 184p (369,720) 84p (296,513)
Bought out in the year 213p (75,000) 1p (100,000)
Outstanding at the end of the year 94p 6,806,947 171p 3,801,667
Exercisable at the end of the year 3,356,947 3,135,000
The options outstanding at 31 December 2014 had a weighted average contractual life of 5.9 years (2013: 4.7 years).
9.2 Valuation of options
The fair value of services received in return for share options granted were measured by reference to the fair value of share
options granted. With the exception of the options granted in 2014 the estimate of the fair value of the services received is
measured on a Binomial valuation model. The contractual life of the option (10 years) is used as an input into this model.
Expectations of early exercise are incorporated into the Binomial model. The option exercise price for all individuals was the
average market price on grant date, with the exception of the options granted to third parties as part of the Sportingbet
acquisition. These were priced at the amount the Group offered as consideration for the purchase.
The 2014 options were valued using a Monte Carlo model due to the performance conditions associated with the options.
Fair value of share options and assumptions:
Share price at Exercise Expected Fair value at
date of grant* price Expected Expected dividend Risk free measurement
Date of grant (in £) (in £) volatility multiple yield rate** a date
21 May 10 1.85 2.13 60% 2 17% 2.75% 0.39
21 May 10 1.85 0.01 60% 2 17% 2.75% 0.05
21 May 10 1.85 1.50 60% 2 17% 2.75% 0.59
28 Jan 12 1.67 1.5479 58% 2 20% 2.19% 0.33
16 Jan 13 2.335 2.335 60% 2 12.15% 0.572% 0.58
01 Feb 13 2.635 2.335 60% 2 12.15% 0.572% 0.76
28 Jan 13 2.375 2.335 60% 2 12.15% 0.572% 0.61
02 Jun 14 4.49 0.01 24% n/a 10.00% 1.425% 0.41
* This is the bid price, not the mid-market price, at market close, as sourced from Bloomberg.
** The measurement of the risk-free rate was based on rate of UK sovereign debt prevalent at each grant date over the expected term of
The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the
share options), adjusted for any expected changes to future volatility due to publicly available information. There are no
market conditions associated with the share option grants with the exception of those issued in 2014 as noted above.
ANNUAL REPORT 2014 76
noteS to the Company FinanCial StatementS continued
for the year ended 31 December 2014