TIDMWYG
RNS Number : 2269X
WYG Plc
27 August 2015
WYG plc
("WYG" or "the Group")
27 August 2015
Update on Strategic Review, Board Changes and Proposed New
Management Incentive Arrangements
On 9 June 2015 WYG announced that the strategic review commenced
earlier in the year was complete and that, having tested the scale
of the opportunity available to the Group, the Board had concluded
that an appropriately funded independent Group represented the best
route to optimising value for all shareholders.
The Company also announced the acquisition of FMW Consultancy
Limited, a specialist transport and infrastructure consultancy, the
fourth such acquisition that the Group has completed in the past 24
months and that, subject to legal formalities, we would enter into
a new GBP25 million five-year committed facility with HSBC. I am
pleased to confirm that the legal agreement with HSBC was completed
on 17 July 2015.
The Board has also said that it would take the opportunity to
challenge and test the suitability of its board structure to
deliver the next phase of growth. The process of recruiting an
additional non-executive director with the talents, skill sets and
connections the Company needs to be more closely aligned to its
markets is progressing and WYG hopes to make an announcement in due
course. On the basis of the progress made to date, Robert Barr,
WYG's senior independent non-executive director, who will shortly
complete the maximum nine years' service on the Board to be deemed
an independent non-executive director under the Code, has confirmed
(as announced on 9 June 2015) that he will retire from the Board at
the conclusion of the AGM and will not be seeking re-election.
The Board also considered how best to empower the business to
make it more agile and responsive to help deliver the Board's
growth ambitions in the next phase of the Group's development. As a
result of those discussions, Graham Olver, the Group's Chief
Operating Officer, has decided to step down from the Board with
immediate effect. Graham was appointed in 2009 and has played a key
role in the turnaround of WYG, putting in place improved
governance, structures, processes and a culture that have all been
crucial to the transformation of the business. Graham, who would
otherwise have been retiring from the Board by rotation at the
forthcoming AGM, will not seek reappointment. We will not be
seeking to replace the role of Chief Operating Officer; instead we
will create a more streamlined reporting structure and enhance the
role of the Major Projects Unit. On behalf of the Board, I would
like to thank Graham for the very significant contribution he has
made to WYG and the positive legacy he leaves behind.
Finally, the Board said that taking account of shareholder
feedback it had become evident that the structure of the current
long-term management incentive scheme was an impediment to
optimising shareholder value. Accordingly, WYG is today publishing
its notice of Annual General Meeting which inter alia sets out
detailed proposals for revised share incentive arrangements.
Proposals for revised share incentive arrangements for WYG
Background
In WYG's results announcement on 9 June 2015 the Company stated
that, following feedback from the Company's shareholders, it
intended to bring forward new incentive proposals for management
with the twin objectives of retaining and incentivising existing
talent and providing the opportunity to recruit the new talent that
will support anticipated growth opportunities. The Board also
stated that the guiding principle of any new incentive scheme would
be to align the interests of shareholders, key employees and the
wider stakeholder base.
Proposed new incentive arrangements
In summary the proposed new incentive arrangements will involve
three elements:
-- revised annual bonus arrangements, which will include
significant elements of bonus deferral in the form of cash and
Shares;
-- a new Performance Share Plan ("PSP") covering the senior
executive and leadership teams only; and
-- a Restricted Share Plan ("Restricted Share Plan") covering other key senior employees.
Taken together, the arrangements are intended to provide the
Company with the facility to retain and incentivise its current
senior management team and to attract new recruits.
In outline:
-- the revised annual bonus plan will have an increased annual
maximum potential cash entitlement (CEO 150% of base salary; CFO
100% of base salary; others 75% of base salary) together with a
deferred share-based award under the Deferred Annual Bonus Share
Plan ("DABS Plan") equivalent to half of the annual cash bonus
award;
-- payments under the revised annual bonus plan will be subject
to the achievement of demanding performance targets determined
annually by the Remuneration Committee. In respect of the first
year of operation of the revised annual bonus plan, 75% of
individual bonus entitlements will be determined by reference to
PBT (adjusted for separately disclosed items) and 25% by reference
to the cash conversion ratio on operating profits;
-- in total, two thirds of annual bonus outcomes will be
deferred for a period of three years. One third will be deferred in
the form of cash and one third in the form of a Share award (which
will be awarded under the DABS Plan). Vesting of Share awards under
the DABS Plan will be contingent on continued employment;
-- executive directors who participate in the DABS Plan and the
PSP will be required to meet minimum shareholding requirements.
These will require a participant to build and retain a holding of
vested awards or Shares equal in value to the participant's maximum
annual cash bonus potential. For example, the CEO will be required
to retain Shares equal in value to 150% of base salary. The minimum
shareholding requirement may be satisfied by Shares (however
acquired) or vested Share awards acquired under any share incentive
arrangements, including the TIP;
-- except to exercise awards in the form of options granted
under the new incentive arrangements and to sell the Shares
acquired on such exercise to meet liabilities to tax arising from
such exercise, the executive directors will generally not be
permitted to deal in any Shares arising under the DABS Plan or PSP
unless the minimum shareholding requirement is met and will
continue to be met after the relevant dealing;
-- it is intended to make awards under the PSP on a regular
annual basis, and for the vesting of these awards to be subject to
challenging three year performance targets;
-- vesting of initial PSP awards will be determined in equal
measure by the achievement of absolute EPS growth targets and
relative TSR targets, with TSR measured against a comparator group
of support services companies drawn from the FTSE SmallCap, FTSE
Fledgling and AIM indices. The targets are summarised as
follows:
Performance level Potential vesting TSR attainment EPS attainment
of each part of (3 year growth)
the award (50%
subject to TSR;
50% subject to
EPS)
------------------ -------------------- ---------------- -------------------
Maximum 100% Upper Quartile 50% or more growth
or above
------------------ -------------------- ---------------- -------------------
Intermediate Between 25% and Median to Upper Between 25% and
100% on a straight Quartile 50% growth
line basis
------------------ -------------------- ---------------- -------------------
Threshold 25% Median 25% growth
------------------ -------------------- ---------------- -------------------
-- the initial PSP awards for the executive directors will be
over Shares having a grant date value as follows: CEO: 150% of base
salary per annum; CFO: 100% of base salary per annum; and
-- the Restricted Share Plan is an arrangement focused on the
retention of selected key staff. It is not intended that executive
directors will participate in this plan. Awards under this plan
will normally vest after three years subject to continued
employment. The plan may also be used flexibly to provide, for
example, like for like buy-out awards for new recruits (although
such awards would only be made in an exceptional case and would
take into account the performance vesting and time vesting
requirements of any awards with a previous employer which are being
forfeited on joining WYG).
Interaction with TIP
It is proposed as a pre-condition to entry into the new plans
that individual participants surrender all unvested TIP awards
currently in existence except for unvested TIP awards in respect of
approximately 1.9 million Shares in aggregate. The net effect will
be that of the current unvested TIP awards in respect of 14.0
million Shares, awards in respect of 12.1 million shares will be
surrendered (equivalent to 17.7% of the current issued share
capital of 68.4 million Shares).
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