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Corporate Governance
Compliance with the QCA Corporate Governance Code
Chairman’s statement
The Board is responsible for maintaining a high level of corporate governance across the group, which I believe is an essential foundation in allowing our business to deliver on its strategy of building a Group of cyber security, managed security and professional advisory companies with a leading product, solution or service capability whose full potential can be unlocked through active management and capital investment. I believe that good governance facilitates effective communication, provides clear direction on the execution of the Group’s strategy which will drive sustainable growth and achieve value for stakeholders.
The Board is responsible for setting the Group’s goveranance policy, which looks to support the creation of opportunities for growth, driving value for shareholders whilst balancing an acceptable risk profile.
Operating Responsibly
I would like to thank our people for their continued commitment to the Group. In addition to extending my thanks to our customers, supplier, shareholders and all stakeholders for their support.
The Company’s strategy and business model is designed to promote long-term value for the Company’s shareholders by providing the Company’s shareholders with exposure to a large and rapidly growing sector through a portfolio approach, which aims to balance risk and return in a highly dynamic and often unpredictable operating environment. The Company’s strategy and business model, as well as the key challenges faced by the business, are explained in detail on pages 14-16 of the annual report and accounts for the year ended 31 March 2022 which can be found here.
The Company remains committed to listening and communicating openly with its shareholders to ensure that its strategy, business model and performance are clearly understood, and the Company actively engages in dialogue with shareholders. The Directors meets regularly with institutional shareholders, including after the announcement of full-year and half-year results, and are responsible for ensuring that their expectations are understood by the Board. The AGM also provides an opportunity for dialogue with shareholders. The notice of AGM is sent to the shareholders at least 21 days before the meeting and the directors routinely attend the AGM to be available to answer questions raised by shareholders.
In addition, the company periodically arranges online investor engagement events which provide platforms for all shareholders to engage with, and ask questions of, the directors.
David Williams, Chairman, is primarily responsible for shareholder liaison, and can be contacted c/o Alma PR at shearwater@almapr.co.uk or on +44 (0) 20 3405 0205.
The Board considers the interests of shareholders and all relevant stakeholders in line with section 172 of the Companies Act 2006. Engaging with our stakeholders strengthens our relationships and helps us make better business decisions to deliver on our commitments. The Board is regularly updated on wider stakeholder engagement feedback to stay abreast of stakeholder insights into the issues that matter most to them and our business, and to enable the Board to understand and consider these issues in decision-making. Details of how we seek to understand and meet shareholder needs and expectations are set out at Principle 2, above.
For customers:
- we appropriately engage in formal and informal dialogue to garner feedback from customers to understand the challenges they face which allows us to develop effective solutions to fit our customers needs.
- have implemented a Code of Conduct for all our employees across the Group to ensure that they act in the best interests of the Company
- invested in our portfolio company websites and internal customer relationship management system
We engage actively with our supplier chain network, fostering long term collaborative relationships to ensure that together we support the end Customers’ needs and are aligned to the Company aims in delivering high quality products and services.
We could not deliver our digital resilience offering without our employees therefore they are one of our most important stakeholder groups in addition to our shareholders, suppliers and customers. The Board therefore closely monitors and reviews the results of the Company’s engagement with employees as well as a number of any other feedback it receives to ensure alignment of interests. We hold employee meetings whereby all employees are kept abreast of Group developments and are provided a route to raise and discuss any areas of interest or concern they may have. We seek to create a motivational and supportive work environment to promote high performance and low turnover. All UK employees have the option to share in the creation of long term shareholder value through participation in the Group’s share save (Save as you earn) plan.
In the wider community, we actively support a number of charitable organisations directly and indirectly. We are also conscious of our impact on the environment and have an active carbon offset programme in place.
Further details of how the board considers the interests of shareholders and all relevant stakeholders can be found in the Company’s latest Annual Report on page 26.
The Board has established a risk management process for identifying, assessing and mitigating the principal risks and uncertainties facing the Group. Individual companies consider material strategic, operational and financial risks at their monthly business review meeting. Those risks are considered by the Company’s executive leadership team and where it is considered appropriate to do so, included on the Group’s risk register and allocated to a member of the Company’s senior leadership team who is then responsible for monitoring that risk and developing suitable mitigation actions. The Company’s risk register is considered by the Board on a quarterly basis, with ad hoc reviews conducted as required. More detail about the identified principal risks and uncertainties can be found on pages 39-43 of the Annual Report.
The Board is responsible for establishing and maintaining the Company’s system of internal financial controls and the Audit Committee assists the Board in discharging its duties relating to internal financial controls. Internal financial control systems are designed to meet the particular needs of the Company and the risk to which it is exposed, and by its very nature can provide reasonable, but not absolute, assurance against material misstatement or loss. During the financial year, the Directors enhanced the Group’s finance function with a number of new hires, including the appointment of a Head of Finance, who is responsible for the day-to-day management of all finance aspects of the business. As part of this process, the Directors have also implemented a more formal system of internal financial control which includes the introduction of a purchase to pay system which enhances the internal control environment.
Such internal financial controls include strategic planning, approval of annual budgets, regular monitoring of performance against budget (including full investigation of significant variances), control of capital expenditure and ensuring proper accounting records are maintained. The Directors have reviewed the effectiveness of the procedures presently in place and consider that they are appropriate to the nature and scale of the operations of the Company. The Directors will continue to reassess internal financial controls as the Company expands further.
The Board also engages independent professional advice on risk assessment matters where appropriate. It is the Board’s policy to ensure that the management structure and the quality and integrity of the personnel are compatible with the requirements of the Group.
The Board consists of the Chairman, the Chief Executive Officer, the Chief Financial Officer and three Non-Executive Directors. The biographical details of the Board members can be found here.
The Board has determined that Robin Southwell, Stephen Ball and Giles Willits are independent in character and judgment and satisfy the independence criteria under the QCA Code. Stephen has been appointed as the senior independent Non-Executive Director of the Company. Robin joined the Board on 10 October 2016, Stephen on 24 October 2016 and Giles on 9 December 2016, and prior to this none had any association with the Company.
The Board meets formally at least six times throughout the year in order to, amongst other things, approve financial statements, dividends and significant changes in accounting practices and key commercial matters, such as decisions to be taken on whether to take forward or to cancel a material collaboration project or commercial agreement. There is a formal schedule of matters reserved for decision by the Board in place. The Directors commit the requisite amount of time to their respective roles to ensure that they discharge their individual and collective responsibilities in an effective manner. The Company has effective procedures in place to monitor and deal with conflicts of interest. The Board is aware of the other commitments and interests of its directors, and changes to these commitments and interests are reported to and, where appropriate, agreed with the rest of the Board.
The Board considers its overall size and current composition to be suitable and have an appropriate balance of sector, financial and public markets skills and experience as well as an appropriate balance of personal qualities and capabilities. The Nomination Committee is responsible for reviewing the structure, size and composition of the Board based upon the skills, knowledge and experience required to ensure the Board operates effectively. The Nomination Committee is expected to meet when necessary to do so. The Nomination Committee also identifies and nominates suitable candidates to join the Board when vacancies arise and makes recommendations to the Board for the re-appointment of any Non-Executive Directors. The Nomination Committee will make recommendations to the Board based on a number of factors including the skills necessary for execution of the company strategy and diversity.
In order to develop their skills and keep up to date with market developments and corporate governance matters, the Board receives training from the Company’s Nominated Adviser. All directors are also able to take independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense.
Biographies for each of the directors, including details on their experience and skills, are set out on the Company’s website.
The Board’s effectiveness and the individual performance of Directors are considered regularly by the Board on an informal basis, via feedback to the Chairman. Directors are encouraged to provide feedback on all areas of the board efficacy, having due regard to the balance of skills, experience, independence and knowledge contributed by members of the Board, as well as the successful operation of the Board as a unit, its diversity and other factors relevant to its effectiveness. Over the next 12 months, the Nominations Committee intends to conduct a more formal review of the performance of the Board to ensure that the members of the Board collectively function in an efficient and productive manner.
The results of the Board evaluation process will be used by the Nominations Committee to inform its approach to succession planning, which has to date been undertaken informally.
Our values and culture are the foundation of our strategy and are adopted by all members of our Group. Morality and ethics are central to our values. They are a clear statement of our commitment to excellence and define the approach we take in our interaction with customers, shareholders and each other.
As a team we:
- Do what we saySupport pioneering development
- Deliver focussed performance
- Encourage entrepreneurial spirit
- Show excellence in all we do
- Value people and teamwork
- Deliver customer satisfaction
- Behave ethically
This is underpinned by our dedication to safety and security.
Our values are incorporated in all our operating procedures and define our management approach and Group culture. The Board ensures that ethical behaviours are expected and followed by approving a set of internal policies on matters such as anti-bribery and whistleblowing, and by ensuring that appropriate systems and controls are in place to ensure compliance with those policies. Feedback from all stakeholders, as described in further detail in relation to principle 3, allows the Board to monitor the Company’s corporate culture and its consistency with Company objectives, as well as ethical values and behaviours within the business.
Whilst the Board is collectively responsible for defining corporate governance arrangements, the Chairman is ultimately responsible for corporate governance. The governance structures within the Company have been assessed by the Board and are considered appropriate for the size, complexity and risk profile of the Company. This will be reviewed by the Board to ensure governance arrangements continue to be appropriate as the Company changes over time. The Board meets formally at least six times throughout the year. The Board and its Committees receive appropriate and timely information prior to each meeting: a formal agenda is produced for each meeting, and Board and committee papers are distributed several days before meetings take place. Any director may challenge Company proposals and decisions are taken democratically after discussion. Any director who feels that any concern remains unresolved after discussion may ask for that concern to be noted in the minutes of the meeting, which are then circulated to all directors. Any specific actions arising from such meetings are agreed by the Board or relevant Committee and then followed up by the Company’s management.
There is a formal schedule of matters reserved for the decision of the Board that covers the key areas of the Company’s affairs. The schedule includes:
- approval of the annual operating and capital expenditure budgets and any material changes to them;
- oversight of the Group’s operations ensuring competent and prudent management, sound planning, an adequate system of internal control, adequate accounting and other records and compliance with statutory and regulatory obligations;
- review of performance in the light of the Group’s strategic aims, objectives, business plans and budgets and ensuring that any necessary corrective action is taken;
- approval of the annual report and accounts, including the corporate governance statement and remuneration report;
- approval of the half-yearly report and interim management statements;approval of any significant changes in accounting policies or practices;
- ensuring maintenance of a sound system of internal control and risk management including: (i) approving the Group’s risk appetite statements; (ii) receiving reports on, and reviewing the effectiveness of, the Group’s risk and control processes to supports its strategy and objectives; (iii) approving procedures for the detection of fraud and the prevention of bribery; (iv) undertaking an annual assessment of these processes; and (v) approving an appropriate statement for inclusion in the annual report;
- approval of major capital expenditure projects, contracts entered into by the Group that are material strategically or by size, contracts entered into by the Group not in the ordinary course of business, or major investments by the Group including acquisitions or disposal of interests of more than 3 per cent in voting shares;
- approval of resolutions and corresponding documentation to be put forward to shareholdersat a general meeting, and any circulars, or admission documents; and
- other matters including health and safety policy, insurance and legal compliance.
The Chairman, Chief Executive and Senior Independent Director have clearly defined roles and responsibilities. The role of the Chairman is to lead the Board and ensure it is operating effectively in approving and monitoring the strategic direction of the Company. The role of the Chief Executive is to propose strategic direction to the Board and to execute the approved strategy by leading the executive team in managing the Company’s business. The role of the Senior Independent Director is to act as a sounding board for the Chairman and a source of reciprocal feedback for other members of the Board and shareholders, where required.
The Board is supported by an Audit Committee, Remuneration Committee, Nominations Committee and Advisory Panel, further details of which are set out on the Company’s website, including the terms of reference for these committees.
The Company produces formal Audit Committee, Remuneration Committee and Nominations Committee reports which are included in the annual report.
The Company is committed to open communications with all its shareholders. Communication is primarily through the Company’s website, the annual report and accounts, announcements, the AGM and one-to-one meetings with large existing or potential new shareholders and ‘meet the company’ presentation platform for smaller retail investors. All shareholders will receive a copy of the annual report (where shares are purchased through a nominee the nominee receives a copy of the annual report) and an interim report at the half year is available on the Company’s website. Copies of historical annual reports (including the Independent Auditors Report, the Directors’ report and details of directors’ remuneration) and notices of general meetings covering the period since the shares of the Company were admitted to trading on AIM are also available on the Company’s website. The Company reports on the responsibilities and activities of each of the Committees in the annual report.
The Company’s Board promote transparent communication with all stakeholders. The Board adopt an open-door policy to all employees. In addition, the executive team receive feedback from the local company MD’s, leadership teams, HR and other subject matter experts which include external advisors.
The Board
The Directors recognise the importance of sound corporate governance and the Company complies with the principles and minimum disclosures of the QCA Code. The main features of the Existing Group’s corporate governance arrangements are:
- The Board intends to meet at least six times per year for formal Board meetings. It will approve financial statements, dividends and significant changes in accounting practices and key commercial matters, such as decisions to be taken on whether to take forward or to cancel a material collaboration project or commercial agreement. There is a formal schedule of matters reserved for decision by the Board in place.
- Currently, the Board includes three Non-Executive Directors who are considered by the Directors to be independent for the purposes of the QCA Code, Robin Southwell, Stephen Ball and Giles Willits. Robin joined the Board on 10 October 2016 and prior to this had no association with the Company. Stephen joined the Board on 24 October 2016 and prior to this had no association with the Company. Giles joined the Board on 9 December 2016 and prior to this had no association with the Company. Accordingly, the Directors consider that Robin, Stephen and Giles satisfy the independence criteria based on the judgement of the Board, with Stephen appointed the senior independent Non-Executive Director of the Company.
Board Committees
Audit Committee
The Audit Committee’s principal functions include ensuring that the appropriate accounting systems and financial controls are in place, monitoring the integrity of the financial statements of the Company, reviewing the effectiveness of the Company’s accounting and internal control systems, reviewing reports from the Group’s auditors relating to the Company’s accounting and internal controls, and reviewing the interim and annual results and reports to Shareholders, in all cases having due regard to the interests of Shareholders. The Audit Committee meets at least two times a year, with regard to the reporting and audit cycle. Giles Willits has recent and relevant financial experience through his role as CFO of other UK listed companies and acts as Chairman. David Williams and Stephen Ball are the other members of the Audit Committee.
Remuneration Committee
The Remuneration Committee is responsible for determining and agreeing with the Board the framework for the remuneration packages for Directors. The Remuneration Committee considers all aspects of the Executive Directors’ remuneration, including pensions, bonus arrangements, benefits, incentive payments and share option awards, and the policy for, and scope of any termination payments. The remuneration of the Non-Executive Directors is a matter for the Board. The Remuneration Committee meets at least twice a year and at such other times as may be deemed necessary. No Director may be involved in discussions relating to their own remuneration. David Williams acts as Chairman of the Remuneration Committee and Robin Southwell is the other member of the Remuneration Committee.
Nomination Committee
The Nomination Committee is responsible for reviewing the structure, size and composition of the Board based upon the skills, knowledge and experience required to ensure the Board operates effectively. The Nomination Committee is expected to meet when necessary to do so. The Nomination Committee also identifies and nominates suitable candidates to join the Board when vacancies arise and makes recommendations to the Board for the re-appointment of any Non-Executive Directors. David Williams acts as Chairman of the Nomination Committee with Stephen Ball as the other member of the Nomination Committee.
The Board are in the process of introducing a formal internal evaluation of its own members and each of its subcommittees. The Board have noted that its’ diversity does not reflect the position across the Group and will continue to look to address this. Succession planning has been informally discussed by the Board however no formal plans have been drawn up as yet owing to the relatively short length of tenure of both existing executives. The Board, through the nomination committee will look to complete a formal succession plan in the next twelve months.
Internal Financial Control
The Board is responsible for establishing and maintaining the Company’s system of internal financial controls. Internal financial control systems are designed to meet the particular needs of the Company and the risk to which it is exposed, and by its very nature can provide reasonable, but not absolute, assurance against material misstatement or loss. During the period, the Group commenced implementation of a Group wide purchase to pay system which will consolidate the Groups purchasing as well as enhance the internal control environment. The Directors continue to review the Group’s systems of internal financial control as it grows to ensure that they are appropriate to the size of business. The Directors have reviewed the effectiveness of the procedures presently in place and consider that they are appropriate to the nature and scale of the operations of the Company. The Directors will continue to reassess internal financial controls as the Company expands further.
Annual Report & Accounts Disclosure
- Within the corporate governance report, reflect on challenges experienced in the year and signpost to how these were addressed at the board and whether any changes were made to board structure or process.
- Include an audit committee report (or equivalent report if such committee is not in place).
- Include a remuneration committee report (or equivalent report if such committee is not in place).
- If the company has not published one or more of the disclosures set out under Principles 1-9 the omitted disclosures set out under Principles 1-9, the omitted disclosures must be identified and the reason to their omission explained