WYG Regulatory News (WYG)

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 £25 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:

· 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).

The partial retention of unvested TIP awards is seen as an important transitional arrangement to retain the goodwill of key employees by bridging TIP and the new Plans. The TIP awards being retained represent, on average, approximately 25% of individuals' Tranche 2 awards (125p targets). Retained TIP awards must either vest or lapse by July 2016. The proposed levels of Tranche 2 awards to be retained by the executive directors are set out below.

At the time of the 2011 placing and re-financing, two one-off share-based awards were made to Mike McTighe as Chairman. Mr McTighe will not be participating in the new incentive arrangements and accordingly the unvested portions of these awards (575,162 shares equivalent to Tranche 2 and Tranche 3 under the TIP - 0.84% of issued share capital) will remain unchanged and will either vest or lapse by 12 July 2016. Mr McTighe already holds vested but unexercised options over 787,581 Shares.

Share plans dilution

It is the Board's intention that a new "10% in 10 years dilution" aggregate limit will apply to all awards in respect of new issue Shares made under the new PSP, the Restricted Share Plan and the DABS Plan. This limit will look forward from the 2015 AGM and will exclude dilution from any awards made under TIP. In order to minimize dilution, the Company intends to use market purchased shares to satisfy share awards to the extent appropriate to do so. The Board acknowledges that proposing a new dilution limit that only looks forward, and which excludes previous TIP awards, is not a standard position. However, they believe that it is both consistent with the exceptional nature of the TIP as a turnaround incentive and with their stated objective of retaining and motivating key employees.

Conclusion

The proposed new incentive arrangements seek to strike an appropriate balance of rewards between on the one hand the executive directors, the global leadership team and other senior executives within the Company; and on the other hand shareholders who provide the capital which is necessary to sustain and grow the business.

The directors estimate that the impact of adopting the new bonus arrangements (including the deferred elements) will be a charge to the Company's adjusted profit before tax in the current financial year of approximately £600,000, rising to £1.0 million in FY18. They further estimate that, in isolation, the impact of these charges can be fully absorbed within existing market forecasts of the Company's future performance, other than the charge in respect of the current financial year. The directors emphasise that this statement does not constitute, and should not be construed as, a forecast of the Company's financial performance for the current or any future accounting period. They expect the IFRS 2 charge in relation to these new schemes to be significantly less than that in previous years and this will be finalised through a detailed valuation exercise. The IFRS 2 charge will continue to be included within separately disclosed items in future statements of the Company's financial results.

WYG confirms that a circular incorporating formal Notice of the Annual General Meeting of WYG plc, which includes items of special business including the adoption of the new share incentive plans referred to above, has today been published and can be downloaded from the Company's website http://www.wyg.com/investors.

Contacts:

WYG plc Tel: 0113 278 7111

Paul Hamer, Chief Executive Officer

Sean Cummins, Group Finance Director

MHP Communications Tel: 020 3128 8100

John Olsen / Katie Hunt / Ollie Hoare

N+1 Singer Tel: 020 7496 3000

Sandy Fraser / Nick Owen

WH Ireland Limited Tel: 0113 394 6600

Andrew Kitchingman / Liam Gribben