The Board of Directors is committed to maintaining strong corporate governance for the benefit of the Group’s shareholders, employees and other stakeholders. The Directors believe that the long term success of the Company is underpinned by effective governance, so enabling it to achieve its strategy and growth aims for the future. The Board has decided to continue to follow the UK Corporate Governance Code published by the Financial Reporting Council (the ‘Code’) and this statement explains how the Company applies the principles of the Code and indicates the extent to which the Company complies with the Code provisions.
The role of the Board
The role of the Board is to provide entrepreneurial leadership and the Directors are collectively responsible for the long term success of the Group. The Board also acts as custodian of the Company’s values and of its long term vision and provides strategic direction and guidance for the Group.
In discharging its responsibilities, the Board seeks to set, promote and demonstrate adherence to the Group’s values and ethical standards. It remains mindful of the need for the Directors to observe their legal duties, as well as to promote the success of the Group in a sustainable way – not only for shareholders, but also for other stakeholders, including employees, customers, suppliers and the wider community.
The Board leads a strong governance framework throughout the business, supported by the Audit, Remuneration and Nominations Committees.
The Chair is responsible for the leadership of the Board and ensuring its effectiveness. He is also responsible for creating the right Board dynamic and for promoting a culture of openness and debate, in addition to ensuring constructive and productive relations between Executive and Non-executive Directors. The Chair acts as an ambassador for the Company to its stakeholders, and in particular, works to ensure there is sufficient and effective communication with shareholders and to understand their issues and concerns.
The CEO, with the senior management team, is responsible for running the business.
The Non-executive Directors are responsible for exercising independent and objective judgement in respect of Board decisions, developing corporate strategy with senior management, and for scrutinising and constructively challenging the actions of senior management.
Philip Rogerson is the Senior Independent Non-Executive Director, to whom concerns may be conveyed by shareholders if they are unable to resolve them through existing routes for investor communications or where such channels are inappropriate.
The Company Secretary is responsible for advising the Board on corporate governance matters, among other things.
Structure and composition
The Board currently comprises two Executive Directors and four Non-executive Directors.
The Directors have a range of complementary skills to support the strategic and operational direction of the Group. The Board recognises the benefits of diversity at all levels within the organisation, including the Board. The Directors have knowledge and experience from a variety of business backgrounds, including international expertise. The Board has not committed to any specific targets in relation to diversity, including gender diversity. The Board will continue to pursue a policy of appointing talented people at every level to deliver high performance. Therefore, when reviewing Board composition, consideration is given to the skills required by the Board at the time and the need to address longer term succession and business priorities.
Further information on the number of men and women in the Group’s workforce is provided in the Corporate Social Responsibility and Sustainability Report in the annual report.
The Directors ensure the effectiveness of the Board through regular meetings and by having open lines of communication between Board members at all times.
On joining the Board, new Directors are provided with a tailored induction programme. They are given background information describing the Group and its activities. Meetings with advisors are also arranged as appropriate.
Details of attendance at scheduled Board and Board Committee meetings from 1 July 2017 to 30 June 2018 are as follows:
|Board||Audit Committee||Remuneration Committee||Nominations Committee|
|Eligible to attend||Attended||Eligible to attend||Attended||Eligible to attend||Attended||Eligible to attend||Attended|
|Patrick Clawson (resigned 4 September 2017)||4||4||–||–||–||–||–||–|
|Matt Jones (appointed 28 March 2018)||2||2||–||1*||–||1*||–||–|
*Attended by invitation
If Directors are unable to attend Board or Committee meetings, they review the relevant papers and provide comments to the Board or Committee Chair.
The Board has agreed a schedule of matters reserved specifically for its decision, which includes:
- Overall strategy and objectives.
- Approving interim and annual financial statements.
- Approving annual budget and medium term projections.
- Reviewing operational and financial performance.
- Significant acquisitions and disposals.
- Approval of major contracts.
- Major divestments and capital expenditure.
- Ensuring maintenance of a sound system of internal control and risk management by the Group.
- Approving appointments to the Board and the appointment of the Company Secretary.
The Board is supplied in a timely manner with the appropriate information to enable it to discharge its duties, including providing constructive challenge to and scrutiny of management. Procedures are in place for Directors to take independent professional advice, if necessary, at the Company’s expense.
Directors’ conflicts of interest
Under the Companies Act 2006, a Director must avoid a situation where they have, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the Company’s interests. The Company’s articles authorise the Directors to approve any such situational conflicts which may arise, should they consider it appropriate to do so.
The Group maintains a record of the Directors’ business interests. This is kept up-to-date and is reviewed at the beginning of each Board meeting. Where an actual or potential conflict arises, the Directors who are independent of the conflict will determine whether or not to authorise it.
Board performance and evaluation
A formal board evaluation was not carried out during the 2018 financial year due to the appointments of the new CEO and CFO during and after the end of the year, respectively. It is anticipated that an evaluation will be carried out during the next year.
Relations with shareholders
The Board is committed to maintaining good communications with shareholders. The Chair is available to discuss the Company’s corporate governance arrangements with shareholders as well as any other matters which they may wish to raise. Other than during closed periods, the CEO and CFO maintain a regular dialogue with institutional shareholders throughout the year and give presentations to institutional shareholders and analysts immediately after the announcement of the Group’s half year and full year results. The Group also encourages communications with private shareholders throughout the year and welcomes their participation at shareholder meetings.
The Group maintains a corporate website (www.blancco.com), which complies with AIM Rule 26 and contains a range of information of interest to institutional and private investors including the Group’s annual and half year reports, trading statements, press releases and all regulatory announcements relating to the Group.
Constructive use of the AGM
The Board wishes to encourage the constructive use of the Company’s AGM for shareholder communication. The Board and Committee Chairs will be available to answer questions at the meeting.
The Remuneration Committee is chaired by Philip Rogerson. The other members are Frank Blin, Tom Skelton and Rob Woodward. The Executive Directors may be invited to attend meetings but are not present when their own remuneration is discussed. The terms of reference of the remuneration committee are available on the Company’s website.
During the year the Remuneration Committee approved the adoption of a new performance share plan to incentivise the executive directors and senior management. Although as an AIM company, the Company is not required to seek formal shareholder approval for such a plan, the remuneration committee consulted the Company’s major institutional shareholders before the plan was adopted. Deloitte LLP were appointed by the Remuneration Committee as consultants to advise on the new plan. They have no other connection with the Company.
Further details of the new plan and the work of the Remuneration Committee are set out in the Directors’ Remuneration Report in the annual report. The terms of reference of the Remuneration Committee are available on the Company’s website.
The Nominations Committee is chaired by Rob Woodward. Frank Blin, Philip Rogerson and Tom Skelton are also members. The CEO may be invited to attend meetings. During the financial year the committee considered the appointment of the new CEO and CFO. Russell Reynolds was engaged to assist with the recruitment of the CEO and Independent Search Partnership was engaged to assist with the recruitment of the CFO. Neither firm has any other connection with the Company.
The terms of reference of the Nominations Committee are available on the Company’s website.
The Audit Committee is chaired by Frank Blin. The other members are Philip Rogerson, Tom Skelton and Rob Woodward. The Directors consider that Frank Blin has recent and relevant financial experience. The Executive Directors attend meetings of the Audit Committee by invitation. The Committee meets with the external auditor without any Executive Directors present whenever this is considered appropriate and at least once a year.
The report of the Audit Committee is set out in the annual report. The terms of reference of the Audit Committee are available on the Company’s website.
Internal controls and risk management
The Board is responsible for maintaining a sound system of internal control to safeguard shareholders’ interests and the Group’s assets. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss.
Blancco is committed to conducting its business responsibly and in accordance with all applicable laws and regulations. Employees are encouraged to raise concerns about fraud, bribery and other matters. The Audit Committee is notified of any whistleblowing incidents.
The Group’s financial reporting processes are regularly reviewed. The detailed reporting is reviewed at least monthly by the Group Financial Controller and members of the Group Finance team, highlighting areas of concern in checking and confirming that the reasons for variations are valid. Quarterly reviews of each of the businesses are performed by the CFO covering both historic and forthcoming financial and business performance, as well as anticipating key future events.
Remuneration policy – supplementary disclosure
2018 Performance Share Plan Awards
Following the publication of the 2017/18 Annual Report the Remuneration Committee has reviewed the remuneration policy in relation to the Performance Share Plan and awards were made on 5 November 2018 to members of the senior management team.
It remains the intention that in normal circumstances, the maximum award level under the plan will be set at 100% of base salary. However, in light of Matt Jones’ exceptional calibre and experience and the ambitious nature of our strategy the Committee has decided that it is appropriate that Matt should be provided with higher PSP awards over the next two years. This is to ensure he is fully aligned with shareholders during the early stage of his tenure as we execute our strategy.
On 5 November 2018, Matt was granted a PSP award with a value of 150% of base salary. This award will vest based on the invoiced revenue and adjusted operating cash flow growth targets over the three years to 30 June 2021 year end outlined below. The Committee believes these targets are stretching and if achieved will represent exceptional business performance. The targets are measured on a constant currency basis.
(% growth from 2018)
|Adjusted Operating Cash Flow|
(% growth from 2018)
It is further intended that Matt’s PSP award for 2019 will be at the level of 130% of base salary. From 2020 the intention is that awards will be 100% of base salary per annum. The Committee will, however, keep this policy under review.
These award levels were agreed recently by the Committee and therefore this detail was not reflected in the Directors’ Remuneration Report in the annual report for the year ended 30 June 2018 which was published on 2 November 2018.
7 November 2018