31. Share-based payments

The Group operates two equity-settled share option schemes under which certain employees have been issued with share options as described below.

The Performance Share Plan (PSP) is the active plan under which option awards may be granted. Details of the award and vesting conditions are set out in the Report of the Remuneration Committee. Vesting is contingent on market conditions such as total shareholder return and non-market conditions such as earnings per share, free cash flow and return on average capital employed. During the year 1,120,500 (2019: 782,500) options were granted under the PSP with a vesting period of three years.

The 2009 Share Option Plan remains in place with respect to outstanding grants made prior to 2016 but no new grants will be made following the adoption of the PSP. The number of shares over which options may be granted may not exceed 10 per cent of the shares of the Company in issue.

Options are forfeited where the grantee ceases employment with the Group unless retention, is permitted by the Remuneration Committee under good leaver rules. The Scheme Rules allow for the early exercise of outstanding options upon a change in control of the Company.

The number and weighted average exercise price of share options granted under the above plans is as follows:

In settlement of the options exercised during the year the Company issued 131,000 (2019: 55,000) new ICG Units with the balance settled through market purchase.

The exercise prices of options outstanding at 31 December are as follows:

Notes on vesting conditions

1. The performance conditions relating to these options were determined by the Remuneration Committee to have been achieved and a decision to vest these options was made post the balance sheet date.
2. Vesting of options under the PSP are contingent on the achievement of certain market and non-market performance hurdles set out in the Report of the Remuneration Committee.

Under Group equity-settled share-based payment schemes the maximum life of a share option is 10 years, these are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. Fair value was measured using the binomial option pricing model for options granted prior to 31 December 2018. For options granted after 1 January 2019, fair value has been estimated using Monte-Carlo simulation modelling. The Directors consider the change in valuation technique better reflects the underlying features of the PSP. Previous estimates of fair value have not been modified as the effects were not considered material. The expected life used in the model has been adjusted, based on management’s best estimates, for the effects of non-transferability, exercise restrictions and behavioural considerations.

Outstanding options had been granted on 26 March 2012, 1 September 2014, 5 March 2015, 9 March 2018, 8 March 2019 and 6 March 2020. The estimated fair values of the options are as follows:

The inputs into the model in the respective years of grant were as follows:

Expected volatility was determined by calculating the historical volatility of the Company’s share price. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the shares that will eventually vest, and adjusted for the effect of non-market based vesting conditions.

In 2020, the share-based payment expense recognised in the Consolidated Income Statement was €1.9 million (2019: €2.1 million) and in the Income Statement of the Company was €0.9 million (2019: €1.0 million).

The share-based payment expense has been classified in the Consolidated Income Statement as follows:

Share-based payment expense of €715,000 (2019: €901,000) relates to the Directors of the Company. The balance on the share option reserve in the Consolidated Statement of Financial Position at 31 December 2020 is €5.1 million (2019: €5.9 million).