Corporate Governance

Chairman’s Introduction

The Company is committed to maintaining high standards of corporate governance. It is the responsibility of the Board to ensure that the Company has in place the structure, strategy and people to deliver value to shareholders in the medium to long term. The Board recognises that an effective corporate governance framework is important to help achieve this aim.

As a result of changes to AIM Rule 26, the Company has taken the decision to adopt the Quoted Companies Alliance Corporate Governance Code 2018 (QCA Code).

I welcome the adoption of the QCA Code. The Company’s approach in relation to complying with each of the ten principles of the QCA Code is set out below. Further information on our compliance with the QCA Code will be provided in our next Annual Report.

Roger McDowell
Chairman

Deliver Growth

1. Establish a strategy and business model which promote the long-term value for shareholders

The Board has established a strategy and business model which seeks to promote long-term value for shareholders. The strategy and business model is set out within the Company’s Annual Report.

2. Seek to understand and meet shareholder needs and expectations

An important role of the Board is to represent and promote the interests of its shareholders as well as being accountable to them for the performance and activities of the Group. The Board believes it is important to engage with its shareholders and aims to do this through presentations, conference calls, face-to-face meetings and the Annual General Meeting. Following the announcement of the Group’s half-year and year-end results, presentations are made to analysts and major shareholders to update them on progress and invite them to ask questions.

The Board is updated on the latest shareholder information by the receipt of shareholder register movements, analyst reports and feedback from the Group’s brokers following investor road shows after half-year and year-end results.

All Directors attend the Annual General Meeting and engage in discussion with shareholders present.

The Company provides contact details on its investor relations page which investors can use to contact the Company.

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success

We recognise that our customers, suppliers and employees are crucial to our success. We have established long-term relationships with key customers and suppliers. We encourage feedback from our employees to improve the culture and working environment of the Company. The Group Chief Executive holds regular meetings with senior managers both to keep them informed of Board decisions and shareholder feedback but also to gather views and input from the business units. The senior managers then cascade that information down through the businesses through their reporting channels. Additionally, the Group’s intranet carries a range of statements and information updates which employees can access. There are specific information channels in respect of health & safety matters. The Group has a proactive approach to safety, health and the environment and is committed to the highest practicable standards of safety and health management and the minimisation of adverse environmental impacts (as further detailed below at “8. Promote a corporate culture that is based on ethical values”).

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Company’s approach to risk is set out within the Risk Management section on pages 12 to 15 of the latest Annual Report.

Management has considerable autonomy to run and develop the business of the Group. The Board believes that a well-designed system of internal reporting and control is necessary. The Board therefore continues to have overall responsibility to develop and strengthen internal controls. The Audit & Risk Committee, on behalf of the Board, has the responsibility for reviewing internal controls. The system is designed to provide reasonable, but not absolute, assurance that the assets of the Group are safeguarded, that proper accounting records are maintained, and that reliable financial information is produced.

All subsidiary undertakings are required to adhere to specified internal control procedures. The Audit & Risk Committee receives regular reports on internal control.

Monitoring of compliance with the Group’s system of internal control is undertaken by all levels of management and the internal audit function. This is reinforced by the role fulfilled by the Audit & Risk Committee (see below).

The Board

5. Maintain the Board as a well-functioning, balanced team led by the chair

The Board

The Group is headed by an effective Board, which controls and leads the Group.

The Board meets at least ten times per year, receiving appropriate information from management on a timely basis, and making further detailed enquiries where necessary to enable it to fully discharge its duties. The Board is collectively responsible for the long-term success of the Company and has ultimate responsibility for the management, direction and performance of the Group and its businesses. The Board is required to exercise objective judgment on all corporate matters and is accountable to shareholders for the proper conduct of the business.

All Directors have access to the advice and services of the Company Secretary who is a solicitor. The Company Secretary is responsible to the Board for ensuring that procedures are followed and for compliance with applicable rules and regulations.

There is a clearly defined division of responsibilities between the Chairman and the Group Chief Executive. The Chairman is primarily responsible for the leadership and effective working of the Board. This is achieved by:

  • chairing Board meetings, setting the agendas in consultation with the Group Chief Executive and Company Secretary and encouraging the Directors to actively participate in Board discussions;
  • leading the performance evaluation of the Board, its Committees and individual Directors;
  • promoting high standards of corporate governance;
  • ensuring timely and accurate distribution of information to the Directors and effective communication with shareholders;
  • periodically holding meetings with the Non-Executive Directors without the Executive Directors present; and
  • establishing an effective working relationship with the Group Chief Executive by providing support and advice whilst respecting executive responsibility.

The Group Chief Executive is responsible for the executive management of the Group and for ensuring the implementation of Board strategy and policy within approved business plans, budgets and timescales.

Further details of the composition of the Board and Director’s attendance at Board and Committee meetings are set out on pages 16 to 19 of the Company’s Annual Report.

Non-Executive Directors

Non-Executive Directors bring a wide range of experience to the Group and are considered by the Board to be independent.

Conflicts of interest

The Articles of Association enable the Directors to authorise any situation in which a Director has an interest that conflicts or has the potential to conflict with the Company’s and Group’s interests and which would otherwise be a breach of the Director’s duty under section 175 of the Companies Act 2006. The Board has a formal system in place for Directors to declare such situations to be considered for authorisation by those Directors who have no interest in the matter being considered. The Nominations Committee will review conflicts of interests when considering new Board appointments.

6. Ensure that between them the directors have the necessary up-to-date experience and capabilities

All new Directors receive a full, formal and tailored induction on joining the Board, including meetings with senior management and advisers and visits to the Group’s operational locations. The Board calendar is planned to ensure that Directors are briefed on a wide range of topics throughout the year and are given the opportunity to visit sites and discuss aspects of the business with employees. The Board recognises that the Directors have a diverse range of experience, and encourages them to attend external seminars and briefings that will assist them individually.

Directors have access to independent professional advice at the Group’s expense where they judge this to be necessary to discharge their responsibilities as Directors. All Directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that Board procedures are complied with.

7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement.

To further strengthen Group compliance, the Board undertakes an annual performance review that reviews and measures its effectiveness and that of its Committees. Each Board/Committee member completes an assessment, which provides numeric scoring against specific categories. Each Board/Committee member also provides recommendations for improvement of the effectiveness of the Board/Committee.

The assessments provide an effective platform for reviewing performance and, over time, there has developed a greater focus on particular recommendations, which has prompted fruitful discussions among the Board and influenced its operation.

The criteria for effectiveness includes assessing:

  • key Board/Committee functions;
  • Board/Committee composition (including succession planning);
  • external reporting and information flows;
  • Board/Committee culture;
  • Board/Committee information for meetings and the meetings themselves; and
  • Board development.

Alongside this review, each Director receives an appraisal. The Chairman conducts appraisals in respect of the Group Chief Executive and Non-Executive Directors; the Non-Executive Directors (following discussions with the other Directors) conducts the Chairman’s appraisal; and the Group Chief Executive conducts appraisals in respect of the other Executive Directors.

For details regarding succession planning and the process for senior management appointments, please refer to the section entitled “Nominations Committee” below.

8. Promote a corporate culture that is based on ethical values

Culture

The Company has a strong ethical culture based upon its Code of Ethics. The Company’s reputation is built on our values as a company, the values of our employees, and our collective commitment to acting at all times with integrity.

Part of the work of the Audit & Risk Committee involves reviewing the Group Whistle-Blowing Policy by which employees of the Group may, in confidence, raise concerns about possible financial or other improprieties.

The appropriateness of the Board’s corporate governance structures are reviewed as part of the Board and Committee effectiveness process described above.

Compliance with laws

The Group has systems in place designed to ensure compliance with all applicable laws and regulations and conformity with all relevant codes of business practice.

Compliance with the Bribery Act 2010 involves an Anti-Corruption Policy and a Group Whistle-blowing Policy. Training is given to all appropriate employees through the use of online tools to ensure that there is full understanding of the Bribery Act 2010 and awareness of the consequences of not adhering to Group policies.

The Group has taken the appropriate steps to comply with the provisions of the Market Abuse Regulation and the Modern Slavery Act. The Group has also taken appropriate steps to comply with the General Data Protection Regulation (GDPR) and has appointed a Data Protection Officer who is responsible for managing information governance and implementing the requirements of GDPR.

Safety, health and environment

The Group has a proactive approach to Safety, Health and the Environment and is committed to the highest practicable standards of safety and health management and the minimisation of adverse environmental impacts.

The Board ensures that Health and Safety issues for employees, customers and the public are of foremost concern in all Group activities. The Group Chief Executive, supported by external advice, is charged with overall responsibility. The Group encourages both internal and external training through a formal network of full-time officers and Health and Safety nominated "champions" at all levels. Statistical analysis is used to highlight any areas where additional training or improved working practices would be beneficial, and positive action is promptly implemented. All divisions have formulated safety management systems.

9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

The Board

Please see details above at “5. Maintain the Board as a well-functioning, balanced team led by the chair”.

The Board has a schedule of matters which are specifically reserved for its decision.

Board Committees

The Board has three Committees that assist in the discharge of its responsibilities:

  • Remuneration;
  • Audit & Risk; and
  • Nominations.

Remuneration Committee

The Remuneration Committee is responsible for making recommendations to the Board on the Group's framework of executive remuneration and its cost. The Committee determines the contract terms, remuneration and other benefits for each of the Executive Directors, including performance-related bonus schemes, pension rights and compensation payments. The Board itself determines the remuneration of the Non-Executive Directors. The Remuneration Committee comprises the Non-Executive Directors. Further details on the composition and work of the Remuneration Committee are set out on pages 23 to 25 of the Remuneration Report in the latest Annual Report.

Remuneration Committee: Terms of Reference 

Audit & Risk Committee

The Audit & Risk Committee comprises the Non-Executive Directors. The Committee meetings are also attended, by invitation, by the Chief Executive and Group Finance Director. The Committee meets not less than three times annually.

The Committee is responsible for reviewing a wide range of financial reporting and related matters including the half-year and annual accounts before their submission to the Board. The Committee is required to focus in particular on critical accounting policies and practices adopted by the Group, and any significant areas of judgment that materially impact reported results. It is also responsible for monitoring the internal controls that are operated by management to ensure the integrity of the information reported to the shareholders. An internal audit function, which reports directly to the Chair of the Audit & Risk Committee, supports the Audit & Risk Committee in this process.

The Committee provides a forum for reporting by the Group's external auditors, and advises the Group Board on the appointment, independence and objectivity of the external auditors and on their remuneration both for statutory audit and non-audit work. It also discusses the nature, scope and timing of the statutory audit with the external auditors. The Committee also reviews the appropriateness of the annual internal audit programme for the Group, and ensures that the business risk management and internal audit functions are adequately sponsored and resourced. Further details on the composition and work of the Audit & Risk Committee are set out on pages 20 to 21 of the Annual Report.

Audit & Risk Committee: Terms of Reference

Nominations Committee

The Nominations Committee is responsible for reviewing the structure, size and composition required of the Board when compared to its current position, and it makes recommendations to the Board with regard to any changes. It considers and reviews succession planning for Board Directors, taking into account the challenges and opportunities facing the Company. It identifies and nominates for Board approval suitable candidates to fill Board vacancies as and when they arise, and it keeps under review both the Executive and Non-Executive leadership needs of the Company to enable the Company to compete effectively in the marketplace.

The Nominations Committee also has responsibility for evaluating the performance of Non-Executive Directors, recommending as appropriate re-appointment of Non-Executive Directors at the end of their specified terms of office, and overseeing the re-election by shareholders of any director under the ‘retirement by rotation’ provisions in the Company’s articles of association.

Further details on the composition and work of the Nominations Committee are set out on pages 20 to 21 of the Annual Report.

Nominations Committee: Terms of Reference

Evolution of governance framework

The Board continuously monitors its composition and governance framework taking into account effectiveness and the Company’s plans for future growth.

Build Trust

10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and relevant stakeholders

The work of the Remuneration Committee, Audit & Risk Committee and Nominations Committee is detailed on pages 20 to 25 of the Annual Report.

The report to shareholders of the Remuneration Committee is set out on pages 23 to 25 of the Annual Report.

The results of the proxy votes for the Company’s previous Annual General Meeting on 30 October 2018 can be found here.

 

Roger McDowell

Chairman

30 October 2018