Corporate Governance
The Company is committed to applying the highest principles of corporate governance commensurate with its size. The Company is not required to apply the Combined Code. However, it has used the Code as a guide.
The Board
The Board of the Company meets formally twelve times a year and the Non-Executive Director can attend all meetings.
In the year each Executive Director attended at least nine Board meetings. The Board has a formal schedule of matters reserved to it for decision. At each Board meeting, the Board has available the monthly performance reports of each subsidiary and the Board monitors these results against the budgets for each subsidiary. Major developments are communicated to all Board members if they occur between regular meetings if in the judgment of the Executive Directors this is warranted.
The Directors may take independent professional advice, if appropriate, at the Company's expense.
All Directors are subject to re-election at the first Annual General Meeting after appointment and thereafter every three years.
The Board has an Audit Committee and Remuneration Committee, of which Mr JP Pither and MR AF Lamb, Non-Executive Directors, were members during the year. The terms of reference of the Audit Committee include keeping under review the scope and results of the external audits and their cost effectiveness. The Audit Committee reviews the independence and objectivity of the external auditors. This includes reviewing the nature and extent of non-audit services supplied by the external auditors to the Group, seeking to balance objectivity and value for money.
During the year the Company has not appointed a Nominations Committee for the purpose of Board appointments. It is considered that the composition and size of the Board does not warrant the appointment of a Nominations Committee and appointments are dealt with by the whole of the Board.
Going Concern
After making appropriate enquiries, the Directors have a reasonable expectation that the Group and Parent Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Group's and Parent Company's financial statements.
Corporate Risk Management
The following key procedures have operated during the year and a full risk and control assessment has been undertaken.
The Board recognises its obligations on behalf of shareholders to manage business risk and has established a Risk Assessment Committee, chaired by an Executive Director and supported by senior management and external specialists as appropriate, to advise on the management of significant business risk.
The Committee is responsible for the identification, analysis and prioritisation of significant business risk and for agreeing control strategies, standards and guidelines both at Group and subsidiary level.
Risk significance is determined by the potential financial impact on the trading activities of the business and represents the aggregation of each operating subsidiary's individual risk tolerance considered in the context of the overall Group objectives.
Risks identified include the potential loss or change in profile of key customers (addressed by commitment to continuing to provide high levels of service) and the risk associated with niche products (addressed by pro-active consideration of changing customer and market needs).
The Committee has established a system of Group and subsidiary Key Risk Indicators which it reviews regularly. These include strategic, financial and operational risks. Group Key Risk Indicators are reviewed by the Executive Directors. Such a system can only provide reasonable and not absolute assurance against material misstatement or loss.
Risk information is communicated to employees, who have a responsibility to co-operate with management initiatives and to carry out their duties avoiding excessive risk. Appropriate training and support is provided.
The Board has considered the need for internal audit, but has decided that because of the size of the Group it cannot be justified at present. The Board will review this decision annually.
Internal Control
The Board is responsible for maintaining a sound system of internal control to safeguard shareholders' investments and the Group's assets.
The Board has undertaken a review during the year of the Group's system of internal control covering financial, operational and compliance controls and risk. As part of this process the Group has established an ongoing process for identifying, evaluating and managing the key risks as set out above.
The system of internal control can only provide reasonable and not absolute assurance against material misstatement or loss.
Key Processes
The key processes used by the Board to review the effectiveness of the system of internal control include:
- established control environment with organisational structure which has clear lines of responsibility and supervision;
- regular meetings with local management;
- formal accounting policies and procedures and standard financial control procedures in place which are applicable to all areas of the Group;
- review of the operation of internal controls at each subsidiary by the Group financial controller.
Key Aspects
Key aspects of the system of internal control include the following:
- comprehensive budgeting and financial reporting system involving review and approval of budgets by the Board, monthly monitoring of performance against these budgets and full investigation of variances;
- annual cash flow statements prepared underpinned by more detailed rolling three month forecasts to address resources and funds. Group cash flow monitored on daily basis compared to forecast;
- established procedures for authorisation of capital expenditure;
- the Board has communicated ethical policies to all personnel through training and procedures;
- health and safety procedures in place;
- disaster recovery plans in place.
The Board believes that its systems of internal control are appropriate for the size and nature of its operations, and will continue to review potential improvements to the systems on a regular basis.