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RNS Number : 4282S
Pennon Group PLC
08 July 2020
FOR IMMEDIATE RELEASE
8 July 2020
PENNON GROUP PLC
Completion of Viridor Sale, Board Changes and Notice of AGM
Completion of Viridor Sale
Pennon Group plc ("Pennon") is pleased to announce that it has
completed the sale of Viridor to funds advised by Kohlberg Kravis
Roberts & Co. L.P. for an enterprise value of GBP4.2 billion.
As anticipated, the cash proceeds received by Pennon were GBP3.7
billion, after taking into account debt and debt-like items that
remained with Viridor and customary transaction costs.
With the disposal of Viridor, significant strategic value has
been realised and Pennon will now focus on its sector leading water
and wastewater businesses, whilst considering further growth
opportunities that create value for customers, employees and
shareholders.
As previously announced, Pennon will consider the best use of
net cash proceeds in terms of reducing Pennon's company borrowings
and pension obligations, retaining funds for opportunities and
making returns to shareholders.
Of the current GBP1.2 billion Pennon company borrowings, up to
GBP900 million will be retired in the months following completion.
GBP36 million will be injected into the Pennon Group pension
scheme, which will move the scheme closer to being fully funded on
a technical provisions basis.
Pennon will now review the most efficient and effective method
of returning value to shareholders, alongside considering earnings
accretive market opportunities. Any potential investment will be
assessed in terms of value creation and the impact on shareholder
returns, income and growth, as well as the impact on customers and
other stakeholders. Any use of capital to pursue an investment
opportunity will be compared with the alternative of returning that
capital to shareholders, maintaining our strong focus on financial
discipline. We aim to update shareholders on this review at
Pennon's half year results announcement in November 2020.
Board Changes
The success of the strategic review significantly changes the
structure of the Group. This impacts current leadership roles and
is also a natural point in time to enact the Board's internal
succession plan. Accordingly, Chris Loughlin, Group Chief Executive
Officer and the Chairman, Sir John Parker will not seek re-election
at the Annual General Meeting (AGM) on 31 July 2020. Sir John
Parker has been Chairman for five years, during which time he has
overseen the strategy to identify and create value for our
shareholders and improve service to our customers. Chris Loughlin
joined the Board in 2006 as Chief Executive of South West Water and
became Group Chief Executive Officer in 2016. The organisation has
been transformed under his leadership, marked by the delivery of
Pennon's strategy and the completion of the sale of Viridor. He has
led the establishment of South West Water as the leading regulated
water company, consistently delivering by some considerable margin,
sector leading performance. This outstanding transformation has
been recognised by the company being awarded fast track approval,
uniquely, in two consecutive price reviews.
The Pennon Board is pleased to announce the following
appointments:
-- At the close of the AGM on 31 July 2020, Sir John Parker will
stand down from the Board and Gill Rider will take over as Chair.
With extensive boardroom service and a wealth of experience across
several companies, Gill joined the Board in September 2012 and is
currently Senior Independent Director and Chair of the Remuneration
Committee. She was formerly Head of the Civil Service Capability
Group in the Cabinet Office, and prior to that held a number of
senior positions with Accenture LLP, culminating in the post of
Chief Leadership Officer for the global firm. Gill has a wealth of
experience in leadership and governance across a broad range of
sectors including professional services, education and
government.
-- Susan Davy becomes Chief Executive Officer of Pennon Group
plc. Susan was appointed to the Board as Chief Financial Officer in
February 2015, having joined the Group as Finance Director of South
West Water in 2007. Her knowledge of the industry, coupled with her
financial and regulatory expertise, has underpinned the development
of Pennon's strategy, which has included the value creating
acquisition of Bournemouth Water in 2015 and the successful Viridor
disposal process, both of which she led. In her 25 years experience
in the utility sector, Susan has also held a number of other senior
roles in the water sector, including at Yorkshire Water.
-- Paul Boote has been appointed to the Board as Group Finance
Director. Paul joined Pennon in 2010 and has held a range of senior
finance positions within the Group, most recently responsible for
Pennon's Group finance functions of treasury, tax, accounting and
pensions. In his 20 years in finance, Paul has accumulated a wealth
of experience, having worked across a range of sectors including
sport, construction and environmental infrastructure.
-- Jon Butterworth has been appointed to the Board as a
Non-Executive Director. Jon joined the Board of Pennon's subsidiary
South West Water in 2017. He has a distinguished track record
within the utility industry that spans over 40 years and is
currently Chief Executive Officer of National Grid Ventures and a
member of the National Grid Plc Executive Committee.
The appointments of all Directors will be subject to election by
shareholders at the Company's AGM on 31 July 2020.
Sir John Parker commented:
"Given the changing structure of the Group, following the
successful disposal of Viridor, it is an appropriate time to
refresh the Board. I would like to thank Chris Loughlin for his
dedicated service, firstly as CEO of South West Water and more
recently as the Group CEO of Pennon. As a Board, we acknowledge his
significant commitment, long service, and contribution to the
success of the Group. We wish him well for his future endeavours. I
am confident that the appointments of Gill Rider, as the new Chair
and Susan Davy, as the new Chief Executive Officer, together with
the rest of the Board, will serve Pennon well for the future. It
has been an honour to have served as the Chairman of such a great
company, with a talented Board, that has delivered such significant
shareholder value."
Gill Rider added:
"The sale of Viridor is the culmination of the transformation of
the business that Sir John has overseen in just 5 years at Pennon.
He has seen the company into the FTSE100 and leaves behind a strong
and focused Board team. I would like to thank Sir John for his
support and leadership of the Board and it's been a privilege to
have worked alongside him during his Chairmanship of Pennon. We now
have a diverse and talented Board, thanks to his commitment, and I
am extremely proud to succeed him, and to work alongside Susan
Davy, Pennon's first female Chief Executive Officer, who has
impressed the Board, not just for her role as Chief Financial
Officer but for her leadership across a number of strategic
projects and in her dealings with shareholders, stakeholders and
regulators. I'm looking forward to ensuring Pennon continues to
deliver the best outcomes for our customers, employees and
shareholders ."
Chris Loughlin commented:
"Given the sale of Viridor and the start of the new five-year
regulatory cycle, it is the appropriate time to step down as the
Group Chief Executive of Pennon. It has been an honour and a
privilege to have led the organisation for so many years. During
this time the organisation has been transformed through the focus
on delivering true value to all our stakeholders, including our
shareholders and of course the customers and communities we
serve.
I would like to thank all the friends and colleagues within the
group who, like me, should be incredibly proud of our many
achievements. I am very confident that Pennon will have a
prosperous future focussing on the water sector and am delighted to
hand over to Susan, who I have worked with for so many years. I am
certain she will be a great success."
Susan Davy added:
"I am honoured to be taking on the role of Chief Executive
Officer, following the success of Pennon under Chris' and Sir
John's leadership, and am excited by the appointment of Gill as
Group Chair. With our renewed focus on excellence in the water and
wastewater sector it is an incredibly exciting time for the Group
as we forge ahead with our 'New Deal' plans for the 2020-25 period.
We've set ourselves ambitious targets, but I am confident we can
build on past progress and can deliver for our customers and
stakeholders, further cementing our leadership within the UK water
sector while working in ever more innovative and sustainable
ways."
Board Changes
-- Sir John Parker, Chairman, will step down from Pennon Group
plc and not seek re-election at the AGM on 31 July 2020
-- Chris Loughlin, Group Chief Executive Officer, will step down
from Pennon Group plc and not seek re-election at the AGM on 31
July 2020
Non-Executive
-- Gill Rider, Senior Independent Director, Pennon Group plc,
will succeed Sir John Parker as the new Chair of Pennon Group
plc
-- Neil Cooper, Independent Non-Executive Director, Pennon Group
plc, will become Senior Independent Director and will remain as
Chair of the Audit Committee
-- Iain Evans, Independent Non-Executive Director, Pennon Group
plc, will remain as Chair of the Sustainability Committee
-- Claire Ighodaro, Independent Non-Executive Director, Pennon
Group plc, will become Remuneration Chair and seek election at the
Pennon AGM on 31 July 2020
-- Jon Butterworth, currently Independent Non-Executive
Director, South West Water, has been appointed to the Board and
will seek election as an Independent Non-Executive Director at the
Pennon AGM on 31 July 2020
Executive
-- Susan Davy, Chief Financial Officer, Pennon Group plc, will
succeed Chris Loughlin as the new Chief Executive Officer of Pennon
Group plc
-- Paul Boote, Director of Treasury, Tax and Group Finance,
Pennon Group plc, has been appointed to the Board and will take up
his role as Group Finance Director of Pennon Group plc on 31 July
2020. He will seek election at the Pennon AGM on 31 July 2020.
It is confirmed that there are no details to be disclosed under
Listing Rule 9.6.13 R.
A copy of this announcement has been posted on the Company's
website at www.pennon-group.co.uk/investor-information/ .
The Notice of the AGM is being dispatched to shareholders today
and is available on the Company's website. In compliance with
Listing Rule 9.6.1, the Notice of AGM has also been submitted to
the Financial Conduct Authority electronically via the National
Storage Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Contacts:
+44 (0)1392 443
Pennon Group plc 168
Paul Boote Group Finance Director
Jennifer Cooke Investor Relations Manager
Media Enquiries +44 (0)207 251 3801
James Murgatroyd Finsbury
Harry Worthington
Barclays Bank PLC, acting through its Investment Bank - Joint financial
adviser and joint sponsor to Pennon
+44 (0) 20 7623
Iain Smedley / Osman Akkaya / Vera Kaufmann 2323
Morgan Stanley & Co. International plc - Joint financial adviser,
corporate broker and joint sponsor to Pennon
+ 44 (0) 20 7425
Andrew Foster / Francesco Puletti / Matthew Jarman 8000
Important information relating to the joint financial advisers
and joint sponsors
Barclays Bank PLC, acting through its Investment Bank
("Barclays"), which is authorised by the Prudential Regulation
Authority and regulated in the United Kingdom by the Financial
Conduct Authority and the Prudential Regulation Authority, is
acting exclusively for Pennon and no one else in connection with
the Transaction and will not be responsible to anyone other than
Pennon for providing the protections afforded to clients of
Barclays nor for providing advice in relation to the Transaction or
any other matter referred to in this announcement.
Morgan Stanley & Co. International plc ("Morgan Stanley"),
which is authorised by the Prudential Regulation Authority and
regulated by the Financial Conduct Authority and the Prudential
Regulation Authority in the United Kingdom, is acting exclusively
as sponsor, financial adviser and corporate broker to Pennon and
for no one else in connection with the Transaction and will not be
responsible to anyone other than Pennon for providing the
protections afforded to clients of Morgan Stanley or for providing
advice in relation to the Transaction, the contents of this
announcement or any transaction, arrangement or other matter
referred to in this announcement.
Cautionary statement
Certain statements in this announcement are forward-looking
statements relating to the Group's operations, performance and
financial position based on current expectations of, and
assumptions and forecasts made by, management. They are subject to
a number of risks, uncertainties and other factors that could cause
actual results, performance or achievements of the Group to differ
materially from any outcomes or results expressed or implied by
such forward-looking statements.
The Group's principal risks are described in the 2020 Pennon
Group plc Annual Report which can be viewed online at
http://annualreport.pennon-group.co.uk/. Such forward looking
statements should therefore be construed in light of such risks,
uncertainties and other factors and undue reliance should not be
placed on them. They are made only as of the date of this
announcement and no representation, assurance, guarantee or
warranty is given in relation to them including as to their
accuracy, completeness, or the basis on which they are made. No
obligation is accepted to publicly revise or update these
forward-looking statements or adjust them as a result of new
information or for future events or developments, except to the
extent legally required. Nothing in this Statement should be
construed as a profit forecast
ADDITIONAL INFORMATION
Remuneration Disclosure
Remuneration arrangements for Susan Davy and Paul Boote will be
consistent with the Remuneration Policy to be presented to
shareholders for approval at the 2020 AGM.
On appointment as Chief Executive Officer, Susan Davy will
receive a base salary of GBP475,000 per annum. Paul Boote will
receive a base salary of GBP300,000 per annum. Following
appointment to their new roles, both Executive Directors will be
entitled to a pension contribution of 10% of salary. Executive
Directors will participate in the annual bonus scheme and Long-Term
Incentive Plan subject to the limits set out in the Remuneration
Policy.
In line with the shareholder approved Remuneration Policy, the
Remuneration Committee has approved good leaver status for Chris
Loughlin. Chris will step down from the Board following the AGM. In
line with his contractual terms, Chris will be entitled to a
payment in lieu of salary and benefits for the balance of his
12-month notice period from 8 July. All share awards will be
treated in accordance with the plan rules. Annual bonuses for
2020/21 and unvested awards under the Long-Term Incentive Plan will
be subject to time pro-rating, with performance outcomes assessed
at the end of the normal performance period. Chris will also be
expected to retain sufficient interest in shares for two years
following departure in order to meet the requirements of the new
post-employment shareholding guideline.
Gill Rider will receive an annual fee of GBP225,000 as Chair.
Sir John Parker will step down from the Board at the AGM and waives
his contractual right to payment of a six-month period of
notice.
Pennon Company Debt
At 31 March 2020, Pennon company net debt was GBP0.8 billion and
has since increased to around GBP1.1 billion (gross debt of GBP1.2
billion, less cash of GBP0.1 billion) following the repayment of
the GBP0.3 billion perpetual capital securities in May 2020. To
efficiently manage the finance costs of Pennon and optimise the
company's capital structure following the sale of Viridor the Group
plans to retire and repay up to GBP900 million of these debt
facilities over the coming months. Following these repayments,
Pennon's company debt would be around GBP300 million, of which a
fixed rate bond of GBP100 million will mature during 2021/22
resulting in a sustainable Pennon company debt level of around
GBP200 million for the Continuing Group.
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END
DISSSMFEAESSESW
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