Update on AGM and possible Board changes
29 May 2018
STOBART GROUP LIMITED
('Stobart Group' or 'the Company')
Update on Annual General Meeting and possible Board changes
On 25 May 2018 the Company announced that the Board has been advised by Andrew Tinkler, Executive Director, that he will be voting at the AGM against the re-election of Iain Ferguson, as a Director and Chairman of the Company.
The Company also announced that the Ongoing Board* confirmed that it had full confidence in Mr Ferguson, both as a Director and as Chairman, and would therefore be recommending to shareholders that they vote in favour of Mr Ferguson's re-election.
The Ongoing Board would like to provide shareholders with some context for this regrettable situation. It is committed to the highest standards of corporate governance and believes that challenge, scrutiny and robust debate in boardrooms are part of the effective oversight of management and the decision-making process.
Under this commitment the Board has been forced to address a number of challenges posed by Mr Tinkler in the recent past. The Board has, throughout these challenges, sought to balance the benefits of harnessing Mr Tinkler's entrepreneurial talent whilst maintaining strong corporate governance on behalf of, and in order to create significant shareholder returns for, all investors.
The Ongoing Board had considered it in the best interests of the Company and its shareholders as a whole, at least until Mr Tinkler's move against Mr Ferguson, to seek to resolve these challenges through negotiation and discussion. However, the Ongoing Board no longer considers, in light of Mr Tinkler's position, such a course of action to be possible. It deeply regrets that Mr Tinkler has destabilised the Group at this crucial time for the business by his stated intention to vote against the Chairman at the Annual General Meeting and urges all shareholders to support the re-election of Mr Ferguson at the forthcoming AGM.
Further, the Ongoing Board believes that a vote against the re-election of Mr Ferguson would weaken the Company's corporate governance and would not be in the best interests of shareholders:
· It would dilute the robustness and the diversity of opinion on the Board, which contains strong, varied expertise drawn from experience working with leading public and private companies;
· It would impact the Group's planned growth strategy and its ability to optimise shareholder returns;
· It would create instability. The Board had worked together effectively to provide a strong basis for growth, which is reflected in the Group's successful performance. During Mr Ferguson's chairmanship both Andrew Tinkler and Warwick Brady have benefitted from a stable platform that has allowed the Company to deliver a total shareholder return of 185% in the three years to 28 February 2018 and provide £74.1m to shareholders through dividends and buybacks in the financial year ended 28 February 2018.
Background to current composition of the Board
Between 2007 and 2013 Stobart Group received criticism for its corporate governance, principally in relation to engaging in perceived related party transactions. The Company also experienced a number of boardroom changes, in particular in relation to the role of Chairperson. Between 2007 and 2013 Stobart Group shares reached a peak price of 183p per share.
As a result the Company put in place a structure for improved governance and oversight:
• Mr Ferguson was appointed as Chairman and Andrew Wood as Non-Executive Director in 2013 and additional Non-Executive Directors, John Coombs and John Garbutt, were appointed in 2014;
• Mr Ferguson confirmed his remit with key shareholders before appointment which was to:
• regularise governance, particularly regarding related party transactions;
• fix the balance sheet;
• clarify the future strategy;
• plan management succession.
• In mid-2016 Mr Tinkler:
• advised Mr Ferguson he wanted to organise a successor CEO;
• requested Mr Ferguson to support a positive introduction into the business for Warwick Brady.
• In June 2017, and following six months as Deputy CEO, Mr Brady was appointed CEO, with the unanimous support of the Board.
• On Mr Brady's appointment, Mr Ferguson committed to Mr Brady and the Board to continue as Chairman until 2020 to ensure stability and a positive transition.
• He also supported Mr Tinkler's wish to remain as an Executive Director and to establish Stobart Capital as an independently owned business outside the Stobart Group, whilst harnessing Mr Tinkler's entrepreneurial skills for the benefit of the Group.
Management's achievements
• The Company has achieved much since the stabilisation of its governance arrangements:
• the structured sale of Eddie Stobart has resulted in cash proceeds to the Group so far of in excess of £300m over two partial disposals in 2014 and 2017, and gearing reducing significantly to stand at some 9% at 28 February 2018;
• £112.5m of dividends have been paid to shareholders since 1 March 2015;
• £74.1m has been returned to shareholders in the financial year ended 28 February 2018, including dividends of £58.1m and net share buybacks of £16.0m;
• the total shareholder return over the three years to 28 February 2018 is 185% including capital growth, dividends and share buy backs.
• Under Mr Brady, there is a clear strategy for growth:
• core focus on execution of the Energy Division business plan and the development of the Aviation Division, particularly London Southend Airport;
• both core operating divisions have ambitious growth plans beyond delivery of previous targets;
• the Board's ambition is to double the value of the business by 2022;
• divestment of non-core assets and investments over the next 18 months to support the dividend until they are replaced by cashflows from operating divisions.
• Professional management teams are in place at key operating divisions to drive the business forward.
Mr Tinkler
• The Board has been forced to address a number of challenges posed by Mr Tinkler in the recent past, including:
• settlement of contractual issues arising from a previous related party transaction when Mr Tinkler was CEO;
• a proposed selective buyback of part of his stake in the Company;
• a proposed additional ex-gratia bonus for him of shares then worth some £8m;
• a proposed buy-out of the Company when the share price was in the range of 100p to 120p;
• a proposed related party transaction associated with the recent aborted airline transaction.
• Mr Tinkler's threat to vote against the Chairman presents a number of serious risks:
• significant Board resignations, both Executive and Non Executive (Mr Wood and Mr Coombs have already confirmed that they will resign from the Board if Mr Ferguson is not re-elected);
• sponsor and independent broker resignation;
• operational management destabilisation and distraction;
• potentially weakened corporate governance;
• potential adverse market response and risk to shareholder value.
• Mr Tinkler is no longer key to delivery of the current management's operational strategy. His focus, during the 50% of his time which is committed to the Stobart Group, is on the non-operating divisions. The balance of his time is spent on his separate vehicle Stobart Capital, although:
• he is now in dispute with the co-founder of that business;
• in its first year Stobart Capital has so far not generated any significant transactions for Stobart Group.
Ongoing Board support for Mr Ferguson
As announced on 25 May 2018, all of the Ongoing Board confirm that they have full confidence in Mr Ferguson, both as a Director and as Chairman, and will therefore be recommending to shareholders that they vote in favour of Mr Ferguson's re-election.
Warwick Brady, CEO said: "Stobart Group now has a clear and focused strategy to drive growth in our core operating divisions in order to double the value of the business by 2022. The strategy was co-created between Andrew Tinkler and myself. I have been very clear that the Stobart Group needs a stable board and management team to support the execution of this plan, underpinned by strong and effective corporate governance.
On my appointment as CEO, as part of working with Andrew TinkIer, we all agreed that Iain Ferguson would remain in his role through to 2020, and our strategy for the growth of the business was unanimously validated by the Board. It's in the interest of the shareholders' that we continue to have stable leadership across the business and the ability to deliver our ambitions, as was the case when Andrew Tinkler was CEO."
*The Ongoing Board comprises all of the Directors other than Mr Tinkler who are offering themselves for election or re-election at the AGM. As announced in the 2018 Preliminary Statement of Results, John Garbutt, the other Non-Executive Director, had decided to step down at the AGM.
Enquiries:
Redleaf Communications +44 207 357 6880
Charlie Geller Stobart@redleafpr.com
Charles Ansdell
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