Corporate governance statement
The Board is committed to achieving high standards of corporate governance, integrity and business ethics for all of the activities of the Group.
Under the rules of AIM, the Group is not required to comply with the UK Corporate Governance Code 2016 (‘the Code’). Nevertheless, the Board has taken steps to comply with the Code insofar as it can be applied practically and appropriately, given the size of the Group and the nature of its operations. The main ways in which it does this are described below.
The Board currently comprises two Executive and three Non-Executive Directors. The names of the Directors together with their roles and biographical details are set out on the Board of Directors and Company Secretary page. The roles of Chairman and Chief Executive are separated, clearly understood and have been agreed by the Board. The Chairman is responsible for the Board. The Chief Executive is responsible for the operating performance of the Group. A formal schedule of matters requiring Group Board approval is maintained and regularly reviewed, covering such areas as Group strategy, approval of budgets, financial results, Board appointments and dividend policy. The Board normally meets once a month and additional meetings are called when required. Comprehensive briefing papers are sent to all Directors prior to each scheduled Board meeting. Directors are able, if necessary, to take independent professional advice in the furtherance of their duties at the Company’s expense.
Due to the infrequency of senior appointments, the Board does not maintain a standing Nomination Committee but will form one as appropriate if required. The current Chief Executive’s and Group Finance Director’s appointments were approved by the Board, after receiving a recommendation from a committee of the Board, consisting of the Non-Executive Directors, that was formed specifically for that purpose. The committee undertook a comprehensive recruitment process and was assisted by independent external recruitment consultants.
The Board regularly conducts an appraisal of its own performance and that of each Director consisting of individual assessments using prescribed questionnaires that are completed by all Directors. The results are reviewed, and individual feedback is given, by an independent Non-Executive Director in respect of assessments of the Chairman and by the Chairman in respect of assessments of each of the other Directors and of the Board as a whole.
All Directors are subject to retirement by rotation in accordance with the Articles of Association.
The service contracts of Executive Directors require one year’s notice or less.
The Audit Committee consists of all three Non-Executive Directors and is chaired by Yvonne Monaghan, an independent Non-Executive Director. The Audit Committee met on two occasions during the year and all members attended. The operations of the Audit Committee are set out in the separate Audit Committee Report on pages 28 to 29 of the Annual Report and Accounts 2016.
The Remuneration Committee consists of all three Non‑Executive Directors and is chaired by Philip Acton, an independent Non-Executive Director. The Remuneration Committee met on a number of occasions during the year. Its remit is to determine, on behalf of the Board, appropriate short and long-term total reward packages for the Executive Directors will also satisfy itself that good practices apply to all Group employees through the relevant management structures. Its terms of reference will be made available at the AGM and on this website.
Each of the Directors is subject to election by the shareholders at the first Annual General Meeting after their appointment. Thereafter, all Directors are subject to retirement by rotation in accordance with the Articles of Association. Biographical details of all Directors are set out on the Board of Directors and Company Secretary page. Sir Mark Hudson KCVO will retire in accordance with the UK Corporate Governance Code, having served as Chairman for more than nine years. Philip Acton and Yvonne Monaghan will retire by rotation in accordance with the Articles. All three shall be offering themselves for re-election at the 2016 AGM.
The Non-Executive Directors have received appointment letters setting out their terms of appointment. All Non-Executive Directors are appointed for one year with renewal for further one-year terms if performance is satisfactory. The Chairman has served for more than nine years on the Board, which does not comply with the Code’s definition of independence. However, the Board considers that his experience is invaluable to the Group. The Board considers that the other two Non‑Executive Directors meet the independence tests. The terms and conditions of appointment of the Non-Executive Directors are available for inspection at the Company’s registered office.
The appointment of new Non-Executive Directors to the Board is considered by the whole Board.
The Board has overall responsibility for ensuring that the Group maintains a system of internal control, to provide it with reasonable assurance regarding the reliability of financial information that is used within the business and for publication and the safeguarding of assets. There are inherent limitations in any system of internal control and accordingly even the most effective system can provide only reasonable, and not absolute, assurance against material misstatement or loss. Some examples of internal controls operated by the Group are given below and elsewhere in this statement.
The Group’s organisational structure has clear lines of responsibility. Operating and financial responsibility for subsidiary companies is delegated to operational management.
The Group’s risk management programme, which assesses key risks and the required internal controls that are delegated to Directors and managers at all levels in the Group, is reviewed regularly in order to ensure that it continues to meet the Board’s requirements.
The Chairman and the Non-Executive Directors will always make themselves available to meet with shareholders. Each AGM is a particular opportunity for this. Normal relationships with shareholders are maintained by the Executive Directors who brief the Board on shareholder issues and who relate the views of the Group’s advisors to the Board. The Board believes that the disclosures set out on pages 4 to 23 of the Annual Report and Accounts 2016 provide the information necessary for shareholders to assess the Company’s performance, business model and strategy.
Details of the Company’s share capital can be found in the ‘Takeover Directive requirements’ section of the Directors’ Report and in note 22 of the Group financial statements.
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Group Financial Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are also described in the Group Financial Review. In addition, note 20 of the Group financial statements includes the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of financial instruments and hedging activities and its exposure to price, interest rate, credit and liquidity risk. Accordingly, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future based on the following factors:
- The Group has committed bank facilities to October 2019 with The Royal Bank of Scotland Group totalling £65.0 million. There is significant headroom both in terms of covenant compliance and funding availability. Undrawn facilities at 31 May 2016 were £36.3 million (2015: £48.2 million).
- The Group has prepared financial projections to 31 May 2018 which project positive earnings and demonstrate covenant compliance at all quarterly covenant test dates.
- Calculations to support covenant compliance are prepared and reviewed on a quarterly basis.
- The Group monitors capital risk on the basis of net debt/EBITDA ratio, which at 31 May 2016 was 0.8x (2015: 0.5x).
On the basis of the above, the Directors continue to adopt the going concern basis of accounting in preparing the annual financial statements.