Franchise Brands plc Annual Report and Accounts 2018 63 Financial Statements Governance Strategic Report No non-audit services were provided on a contingent fee basis. In 2017, the Group incurred significant costs which management believed due to both their one-off nature and magnitude should be brought to the attention of users of the accounts as non-recurring items; these included the costs of acquiring Metro Rod, the transitional costs related to the set-up of a standalone IT environment for Metro Rod, and a provision which was established following the liquidation of Carillion plc. There have been no such items during the course of 2018. 2018 £’000 2017 £’000 Cost of acquisition of subsidiaries – 1,144 Cost of transitioning acquisitions – 734 Provision for bad debt of Carillion plc – 316 – 2,194 6 Staff costs 2018 £’000 2017 £’000 Wages and salaries 4,789 3,628 Social security costs 429 343 Defined contribution pension cost 70 47 Share-based payment expense 138 58 5,426 4,076 The average monthly number of persons (including Directors) employed by the Group was: Administration 110 139 Sales 12 13 Operations 24 23 Directors 10 12 156 187 Directors’ remuneration 2018 £’000 2017 £’000 Directors’ emoluments 690 484 Share-based payment expense 92 31 782 515 The highest paid Director’s remuneration was £129,000 (2017: £125,000). The Board of Directors are considered to be the key management personnel. Their cost to the Group is £835,000 (2017: £565,000), after including employer’s National Insurance. The Company had no employees (other than the Directors) or staff costs in either year. Directors’ emoluments include £30,000 (2017: £77,000) paid to companies controlled by Directors (see Note 22). 7 Share-based payments The Company has established a LTIP in the form of an equity settled share option scheme. Awards are granted and approved at the discretion of the Remuneration Committee. Awards vest on or after the third anniversary of their issue, based on compound growth in the underlying earnings per share of the Group for the three-year period. If the compound annual growth rate is below 8%, then none of these options will vest. Between 8% and 15% growth then a proportion of these options will vest on a straight-line basis. Currently, 128 members of staff hold options for shares in the Company under the scheme. The share-based payments expense recognised in respect of employee services received during the year ended 31 December 2018 was £138,000 (2017: £58,000). This all arises on equity-settled share-based payment transactions. 2018 Weighted average exercise price 2017 Weighted average exercise price Outstanding at the beginning of the period 3,467,747 43p 1,628,788 33p Granted during the period 1,308,132 69p 2,545,172 57p Forfeited during the period (242,349) 45p (706,213) 41p Exercised during the period – – – – Outstanding at the end of the period 4,533,530 51p 3,467,747 43p Exercisable at the end of the period – – – –