The purpose of this statement is to describe the Parent Company's approach to corporate governance and, in particular, to explain, review and report upon the effectiveness of how the Group and Parent Company has applied the ten principles set out in Section 3 of the Quoted Companies Alliance ("QCA") Corporate Governance Code issued in 2018.
The Board is composed of a mixture of Executive and Non-Executive members in order to provide the division of responsibilities and balance which are considered appropriate to the Parent Company's individual circumstances. The majority of the Board has been actively involved in the fire protection industry for more than 20 years. The Directors’ biographies and skill sets are detailed in Annual Report.
The Group and Parent Company is 80% owned by EOI Fire SARL ("EOI"). In the absence of a substantial third party shareholder, it is considered unnecessary and, to a large degree unrealistic, to separate the roles of Chairman and Chief Executive. All the Executive Directors are connected with EOI as are J-P Murray and M-C. Leon (Non-Executive Directors) and are therefore not considered to be independent.
To limit the effect of the majority shareholder, the Parent Company and EOI entered into a relationship agreement dated 10 December 1999 in which EOI provided certain assurances to the Parent Company with regard to its relationship with the Parent Company. The agreement confirms that the business and affairs of the Parent Company shall be managed by the Board in accordance with the Parent Company's Memorandum and Articles of Association and with applicable laws and all relevant statutory provisions for the benefit of the shareholders as a whole. Any transactions or other relationships between any member of the EOI Group and the Parent Company would be at arm's length and on a normal commercial basis. The Directors declare their interest and take no part in decisions where appropriate.
H. Shouler is recognised as the Senior Independent Non-Executive Director. If he feels it appropriate, the Senior Non-Executive Director is encouraged to seek external professional advice at the Group’s expense.
The Board meets on two occasions each year. All directors receive a pre-meeting briefing package and post meeting minutes and appropriate attachments. As a number of the Board’s Directors are based overseas, it is not appropriate for all Directors to attend all meetings. Where a Director cannot attend, they can give their contributions in advance to an attending Director or the Company Secretary and relay any comments concerning the Board minutes before they are adopted. Should there be anything that requires to be discussed further, an all parties telephone Board meeting is convened.
All directors receive appropriate monthly management information and have the opportunity to discuss this with the Managing Director or any member of his team or the Board. In addition, Board approval is sought for all material acquisitions or any activities that are of material importance to the Group. Due to the small size of the Board and close involvement of the majority shareholder, the Directors have no current intentions to appoint another Independent Non-Executive Director.
Due to the relatively small size of the Group and the nature of its businesses, the Executive Directors are more directly involved in the day-to-day activities than would be the case in a larger more diversified organisation.
Shareholder value in the medium term to long term is intended to be delivered by driving operational excellence across the Group and growing within selected markets and geographies. The Board believes that the presence and requirements of a longstanding controlling shareholder helps focus the Group’s strategy on long-term shareholder value creation.
The Group’s strategy and business model is discussed, agreed and reviewed on a regular basis by the Board and is set out each year in the Group’s Annual Report with updates (as appropriate) provided in the full year and half year financial results announcements. The Group’s financial statements can be found on the Group’s website.
The full Board regularly reviews current trading and makes key operational and strategic decisions. It has access to detailed information and to management accounts and other reports that are circulated on a monthly basis.
A schedule is maintained of matters specifically reserved for decision by the full Board, which includes matters of business strategy, business acquisitions, business disposals, approval of budgets and approval of financial statements. Interim meetings or appropriate sub-committees are established when decisions are required between scheduled meetings.
All Directors have access to the Company Secretary who is responsible to the Board for ensuring that all applicable procedures and regulations are complied with. Each Director has the right to take independent professional advice in connection with his or her duties at the Parent Company's expense.
The Board is measured primarily with reference to Group’s financial performance and the suitability of the Group to deliver strong results in the future. In recent years the financial performance of the Group has been strong which has encouraged the Board to believe that its membership is appropriate. The Board also consider that the stability of its membership over recent years has been a major contributor to the Company’s success.
The Vice Chairman evaluates the Board performance informally on a regular basis and formally at least twice per year.
The Board maintains two standing committees. Both committees have written constitutions and terms of reference.
The remuneration committee comprises H. Shouler and J-J. Murray. The committee is chaired by H. Shouler. The remuneration committee reviews the performance of Executive Directors and sets the scale and structure of their remuneration and the basis of their service agreements with due regard to the interests of the shareholders. No Director is permitted to participate in decisions concerning his own remuneration. Details of Directors' remuneration are set out in the Directors' Remuneration Report in the Annual Report.
The audit committee currently comprises H. Shouler and J-J. Murray. H. Shouler is independent of management and EOI Fire SARL. The committee is chaired by H. Shouler. The audit committee is responsible for ensuring that the financial performance of the Group is properly monitored, controlled and reported on. It meets regularly and meets the auditors to discuss the audit approach and the results of the audit.
The audit committee considers the need to introduce an internal audit function each year. After taking into consideration the current size and complexity of the Group, the committee believes that it would not be cost effective to have an internal audit function and the committee feels that sufficient comfort is obtained through the scope and quality of management's ongoing monitoring of risks.
Due to the small size of the Board, the Directors consider that a nomination committee need not be established.
On an annual basis, following the Annual General Meeting, the Board reviews the performance of its’ two committees.
The appointment of Directors involves selection by the full Board and Directors so appointed must be re-elected at the following Annual General Meeting (“AGM”). All Directors are subject to retirement by rotation and at least one third of Directors must offer themselves for re-election at each Annual General Meeting. The rotation is structured so that all Directors submit themselves for re-election at least every three years.
The removal of Board members, and the Company Secretary, is a matter for the Board as a whole.
The relationship between the Company and its majority shareholder is discussed above.
The Company monitors its share register to ensure that dialogue is entered into with other shareholders as appropriate. All proxy votes are counted and the results are announced in respect of each resolution at the AGM.
The Company engages with Shareholders at the AGM and via its website, Annual Report and Accounts, Interim Statement and Stock Exchange Announcements.
The Group has identified the following stakeholders.
We service our customers to the highest relevant standards to ensure customers are safe and comply with legislation. We actively participate in Trade Associations who lobby for high levels of Fire Protection Industry Standards and drive positive change in our industry.
The Group recognises the need to ensure effective communications with employees to encourage involvement in the Group’s performance and achieve a common awareness of factors affecting that performance. Policies and procedures have been developed to suit the needs of each subsidiary undertaking, which take into account factors such as numbers employed and location, and include newsletters and communication meetings.
We engage in appropriate liaison with employees and employment bodies such as unions and Worker’s Councils.
- Employment of disabled persons
The Group is committed to employment policies that follow best practice based on equal opportunities for all employees and offer appropriate training and career development for disabled staff. If members of staff become disabled, the Group continues employment wherever possible and arranges retraining if required.
Where appropriate, the Group asks for Method Statements and proof that suppliers comply with ethical environmental and other quality standards.
The Group agrees payment terms with all suppliers when they enter into binding purchase contracts. The Group seeks to abide by the payment terms agreed with suppliers whenever it is satisfied that the supplier has provided the goods or services in accordance with the agreed terms and conditions. The Group does not follow any standard or external code which deals specifically with the payment of suppliers.
We actively engage with suppliers in order to develop and source market leading fire protection products.
The maintenance and improvement of working standards to safeguard the health and wellbeing of staff and customers alike is a continuing priority. Health and Safety Officers are appointed at each Group location and they receive periodic training to keep abreast of both legislative requirements and technological advances.
The Group has a long-established heritage and reputation based on sound ethical values and the Board considers this to be of great ongoing value. Many companies within our market sector envy our reputation and we frequently optimise this commercially and by attracting new staff.
In recent years many of our product innovations have been focussed on limiting our environmental impact. We have a long list of accreditations, including ISO9001 and ISO14001.
We pride ourselves in providing our staff with a good working environment within a strong ethical culture. The local staff handbooks are regularly reviewed by the senior operations teams, are provided to all staff both on commencement of employment and are available at all times via a Company Intranet site. The Group has a large number of long serving staff members, many with 30 years plus service, which is a testament to our working culture.
The Directors have considered the effectiveness of the Group's system of internal controls. The Directors have continued to report upon internal financial controls in accordance with the ICAEW's guidance "Internal Control and Financial Reporting" (the Rutteman guidance), and to report non-compliance with "Internal Control: Guidance for Directors on the Combined Code" (the Turnbull guidance).
Key elements of the Group's system of internal financial controls are as follows:
- Control environment – the Directors have put in place an organisational structure with clearly defined lines of responsibility and delegation of authority. This is reinforced by the direct supervision of the Executive Directors supported by appropriate policy statements.
- Risk management – the Executive Directors are responsible for identifying risks facing the business and for putting in place procedures to mitigate and monitor risks. Risks are assessed and monitored at Board level on an ongoing basis, as well as during the annual business planning process.
- Information systems – the Group has a comprehensive system of financial reporting. The annual budget is approved by the Board. Actual results and variances compared with the budget are reported to the Board monthly, supported by detailed management commentaries. Revised forecasts for the period are prepared and reported to the Board each quarter.
- Control procedures – policies and procedures manuals are maintained at all significant business locations. In particular, there are clearly defined policies for capital expenditure including appropriate authorisation levels. Larger capital projects and major investments and divestment decisions require Board approval.
- Monitoring systems – internal controls are monitored by management review.
The Board routinely consider the effectiveness of the Company’s system of internal controls. The Board has established an Audit Committee, further details of which are set out below. The Audit Committee considers risk and internal control as a fundamental part of its responsibilities. The Directors confirm that they have reviewed the effectiveness of the system of risk management and internal control.