Annual Report and Accounts 2009

Notes to the Consolidated Financial Statements for the year to 31 December 2009

31. Share-based payments

Equity-settled share option plan

Details of all equity-settled share-based payment arrangements in existence during the year are set out in the paragraphs on 'Executive share-based reward' in the Directors' Remuneration Report.

  2009 2008
Schemes requiring consideration from participants: Options Weighted
average
exercise price
(in £)
Options Weighted
average
exercise price
(in £)
Outstanding at beginning of year 46,642,667 1.01 15,460,002 2.72
Granted during the year 19,276,238 0.39 42,697,752 0.69
Lapsed during the year (9,140,769) 1.32 (11,273,011) 2.07
Exercised during the year (101,330) 0.26 (242,076) 1.92
Cancellations during the year (6,609,462) 0.41
Open offer adjustment (1) 19,168,430 0.51
Outstanding at the end of the period 69,235,774 0.52 46,642,667 1.01
Exercisable at the end of the period 2,181,578 2.19 2,649,887 2.58

The weighted average share price at the date of exercise for share options exercised during the period was £0.41 (2008: £1.73). The options outstanding at 31 December 2009 had a range of exercise prices from £0.11 to £3.22 (2008: £0.16 to £4.57) and a weighted average remaining contractual life of 4.5 years (2008: 6.3 years).

Schemes not requiring consideration from participants include the George Wimpey Long Term Incentive Plan and the Performance Share Plans.

  2009 2008
Schemes not requiring consideration from participants: Options Weighted
average exercise
price
(in £)
Options Weighted
average exercise
price
(in £)
Outstanding at beginning of year 10,732,296 10,091,435
Granted during the year 8,756,641 9,695,831
Lapsed during the year (1,425,497) (9,047,250)
Exercised during the year (37,732) (7,720)
Cancellations during the year (24,351)
Open offer adjustment (1) 5,317,219
Outstanding at the end of the period 23,318,576 10,732,296
Exercisable at the end of the period 198,320 175,153

(1) On 1 June 2009 the Group undertook the placing and open offer, as detailed in Note 24. As a result all outstanding share based awards were adjusted by a formula approved by HM Revenue and Customs and agreed with the Groups Auditors.

The Conditional awards outstanding at 31 December 2009 had a weighted average remaining contractual life of 1.7 years (2008: 8.2 years).

For share plans with non-market conditions granted during the current and preceding year, the fair value of the awards at grant date was determined using the Binomial model. The inputs into that model were as follows:

  2009 2008
Weighted average share price £0.39 £0.38
Weighted average exercise price £0.39 £0.69
Expected volatility 57% 37%
Expected life 3/5 years 3/5 years
Risk free rate 3.1% 4.4%
Expected dividend yield 0.0% 0.5%

The weighted average fair value of share awards granted during the year is 21p (2008: 10p).

Expected volatility was determined by calculating the historical volatility of the Group's share price over the expected term.

For share awards with market conditions granted during the current year, the fair value of the awards was determined using the Monte Carlo simulation model. The inputs into that model were as follows:

  2009 2008
Weighted average share price £0.38 £0.69
Weighted average exercise price nil nil
Expected volatility 70% 40%
Expected life 3/7 years 3 years
Risk free rate 2.8% 4.3%
Expected dividend yield 0.0% 0.9%

The weighted average fair value of share options granted during the year is 27p (2008: 33p).

Expected volatility was determined by calculating the historical volatility of the Group's share price over the expected term, however due to the exceptional volatility in this financial year we have excluded the period between 1 May 2008 and 31 October 2008 as allowed by IFRS 2 Share-based payment. The expected life used in the model is based on historical exercise patterns.

The Group recognised total expenses of £1.0m and £6.0m related to equity-settled share-based payment transactions in 2009 and 2008 respectively. In 2008, £1.6m related to the accelerated vesting of share options held by employees of Taylor Woodrow Construction, which was disposed of on 9 September 2008, and which is included in profit from discontinued operations in the income statement.