64 Franchise Brands plc Annual Report and Accounts 2018 NOTES FORMING PART OF THE FINANCIAL STATEMENTS continued For year ended 31 December 2018 7 Share-based payments continued The fair value of the options granted is estimated at the date of grant using a Black-Scholes model, after taking into account the terms and conditions upon which they were granted. For options outstanding at the end of the period the range of exercise prices was 33p-69p (2017: 33p-67p), and the weighted average remaining contractual life was 8.8 years (2017: 9.3 years) Black-Scholes option pricing model 11 December 2018 12 December 2017 31 March 2017 Closing stock price, £ 0.69 0.50 0.88 Exercise price, £ 0.69 0.50 0.88 Risk-free interest rate 0.75% 0.46% 0.46% Expected life of option (years) 6.5 6.5 6.5 Volatility 33.2% 37.8% 37.8% Dividend yield 1% 1% 1% 8 Finance expense 2018 £’000 2017 £’000 Interest element of hire purchase agreements 5 4 Loan interest 305 273 310 277 9 Income tax 2018 £’000 2017 Restated £’000 Current tax expense 215 Current tax on profits for the period (14) Adjustment for prior period (7) (34) Deferred tax expense 328 Origination and reversal (see Note 18) 91 Total tax expense 536 43 Accounting profit multiplied by the UK statutory rate of corporation tax 544 (17) Expense not deductible for tax purposes (1) 94 Adjustment for prior period (7) (34) Total tax expense 536 43 Effective tax rate 19% (51%) The current rate of UK corporation tax is 19%. A reduction in the UK corporation tax rate from 20% to 19% (effective from 1 April 2018) and to 17% (effective from 1 April 2020) was substantively enacted in October 2015 and has therefore been considered when calculating deferred tax at the reporting date. 10 Earnings per share Basic earnings per share amounts are calculated by dividing profit for the year attributable to Ordinary equity holders of the Parent by the weighted average number of Ordinary shares outstanding during the year. Diluted earnings per share are calculated by dividing the profit attributable to Ordinary equity holders of the Parent by the weighted average number of Ordinary shares outstanding during the year plus the weighted average number of Ordinary shares that would have been issued on the conversion of all dilutive potential Ordinary shares into Ordinary shares at the start of the period or, if later, the date of issue. 2018 £’000 2017 Restated £’000 Profit/(loss) attributable to owners of the Parent 2,332 (128) Non-recurring items gross (Note 5) – 2,194 Tax on non-recurring – (345) Adjusted profit attributable to owners of the Parent 2,332 1,721 Number Number Basic weighted average number of shares 77,687,101 69,553,746 Dilutive effective of share options 1,100,364 741,726 Diluted weighted average number of shares 78,787,465 70,295,472