STATEMENT OF COMPLIANCE WITH QCA CORPORATE GOVERNANCE CODE

As an AIM quoted company, we recognise the importance of applying sound governance principles in the successful running of the Group. Although not required to do so, in the past we sought to embrace the principles contained in the UK Corporate Governance Code (2016) where appropriate. We are mindful of the changes to the governance requirements for AIM quoted companies and, given the size and nature of the Company and composition of the Board, we have formally adopted the QCA Corporate Governance Code for Small and Mid-Size Quoted Companies (the QCA Code) and will report annually on our compliance with the QCA Code in our Annual Report.

The sections below set out how we currently comply with the ten principles of the QCA Code.

1. Establish a strategy and business model which promote long-term value for shareholders

The strategy and business operations of the Group are set out in the Strategic Report on pages 6 to 46 of the Group’s Annual Report 2018.

The Chief Executive is responsible for the leadership and day-to-day management of the Group. This includes formulating and recommending the Group’s strategy for Board approval and then executing the approved strategy.

Our straightforward business model has consistently delivered value to our shareholders.

2. Seek to understand and meet shareholders needs and expectations

The Group seeks regular dialogue with both existing and potential new shareholders, ensuring our strategy, business model and performance are clearly understood as well as to understand the needs and expectations of shareholders.

The Chief Executive and Group Financial Director meet regularly with investors and analysts via investor roadshows, attending investor conferences and hosting tours of our development sites in order to provide them with updates on the Group’s business and obtain feedback regarding the market’s expectations of the Group.

The Board invites communication from its private investors and encourages participation by them at the Annual General Meeting (AGM). All Board members present at the AGM are available to answer questions from shareholders. Notice of the AGM is in excess of 21 clear days and the business of the meeting is conducted with separate resolutions, voted on initially by a show of hands and with the result of the voting being clearly indicated. The results of the AGM are subsequently published on the Company’s corporate website and are announced through a regulatory information service.

Our Senior Independent Director is available to shareholders where concerns have not been resolved through the normal channels of communication with the Board and for when such contact would be inappropriate.

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success

We are committed to using land, design and development solutions to create a legacy of high-quality sustainable homes and places. We have for the first time produced a stand-alone Sustainability Report 2018 which details the Company’s sustainability strategy ‘Building a Living Legacy’.

The Group is mindful of its corporate social responsibilities and the need to build and maintain strong relationships across a range of stakeholder groups is a key principle in what we do. Engaging with our stakeholders allows us to create a positive legacy and create strong stakeholder relationships. Our project teams engage with stakeholders throughout the development life cycle to help enrich communities.

Our employees are at the heart of our business and we consistently strive to ensure they have the opportunity to develop in a job they enjoy. In November 2017, we were named a top 50 UK employer by Building magazine, where we were noted for our employee retention, leadership and overall employee satisfaction.

The Board closely monitors the results of the Company’s Employee Engagement Survey to address where possible any concerns raised and ensure the alignment of interests between the Company and that of our employees.  

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Board is responsible for the Group’s system of internal controls and for reviewing its effectiveness. Such a system is designed to mitigate the risk of failure to achieve business objectives and can only provide reasonable, but not absolute, assurance against material misstatement or loss.

There is an ongoing process for identifying, evaluating and managing the Group’s significant risks and is regularly reviewed by the Board.

The internal control procedures are delegated to Executive Directors and senior management in the Group, operating within a clearly defined departmental structure. The Board regularly reviews the internal control procedures in light of the ongoing assessment of the Group’s significant risks.

On a monthly basis, management accounts, including a comprehensive cash flow forecast, are reviewed by the Board in order to provide effective monitoring of financial performance. At the same time the Board considers other significant strategic, organisational and compliance issues to ensure that the Group’s assets are safeguarded and financial information and accounting records can be relied upon. The Board formally monitors monthly progress on each development.

A summary of the principal risks and uncertainties facing the Group, as well as mitigating actions, are set out on pages 36 to 38 of the Group’s Annual Report 2018.

5. Maintain the Board as a well-functioning, balanced team led by the Chair

The Company and Group are managed by a Board of directors chaired by Andrew Wiseman. The Board is responsible for taking all major strategic decisions and also addressing any significant operational matters. In addition, the Board reviews the risk profile of the Group and ensures that an adequate system of internal control is in place. Management information systems are in place to enable the Board to make informed decisions to properly discharge their duties. A formal schedule of Matters Reserved for the Board was adopted as at 31 March 2018 and will be reviewed annually.

Frank Nelson our Senior Non Executive Director and Chairman of the Audit Committee resigned and left the Board on the 3rd October 2018. The Board is mindful that it no longer complies with the QCA Code requirement for a minimum of two Independent Non Executive Directors and will therefore be seeking a suitable replacement without delay. The following interim measures have been put in place until such time as an additional appropriate person is identified and appointed:

  • Jane Earl has been appointed interim Independent Senior Non Executive Director and Chair of the Audit Committee; and
  • Andrew Wiseman has been appointed interim member of the Remuneration and Audit Committees.

The Board currently consists of six Executive Directors and one Independent Non Executive Director, Jane Earl, who is considered by the Board to be independent of management and free from any business or other relationship that could materially interfere with the exercise of her independent judgement in accordance with the QCA Code.

The Board believes it is appropriate to have a Senior Independent Non Executive Director and Jane Earl now fulfils this role. Jane Earl is available to shareholders where concerns have not been resolved through the normal channels of communication with the Board and for when such contact would be inappropriate.

The Board has sufficient members to contain the appropriate balance of skills and experience to effectively operate and control the business. No one individual has unfettered powers to make decisions.

Roles of the Chairman and the Chief Executive are separate, with their roles and responsibilities clearly defined and set out in writing. The Chairman’s main responsibility is the leadership and management of the Board and its governance. He meets regularly and separately with the Chief Executive and the Non Executive Director to discuss matters for the Board.

The Chief Executive is responsible for the leadership and day-to-day management of the Group. This includes formulating and recommending the Group’s strategy for Board approval and executing the approved strategy.

The Board meets regularly, at least 12 times a year and more frequently if necessary. In addition to this the Board attends an annual strategy meeting. Details of directors’ attendance at scheduled Board and committee meeting during the year can be found on page 53 of the Group’s Annual Report 2018.

6. Ensure that between them, the directors have the necessary up-to-date experience, skills and capabilities

The Board considers that the skills, experience and knowledge of each director gives them the ability to constructively challenge strategy and decision making and scrutinise performance. Their biographical details are set out here.

As the business has developed, the composition of the Board has been under constant review to ensure that it remains appropriate to the managerial requirements of the group. One third of the directors retire annually in rotation in accordance with the Company’s Articles of Association. This enables the shareholders to decide on the election of the Company’s Board.

The Board takes decisions regarding the appointment of new directors as a whole and this is only done following a thorough assessment of a potential candidate’s skills and suitability for the role.

During the course of the year, directors received updates from the Company Secretary and external advisers, where relevant, on corporate governance matters.

Directors have access to independent professional advice at the Company’s expense. In addition, they have access to the advice and services of the Company Secretary who is responsible to the Board for advice on corporate governance matters.

7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement

The Board is formulating the process and procedure for conducting an evaluation of its own performance and that of its principal committees and individual directors. How the evaluation was conducted, its results and recommendations will be reported in our Group’s Annual Report 2019. The effectiveness of the Board and its committees will be kept under review in accordance with corporate governance best practice and at a minimum on an annual basis.

8. Promote a corporate culture that is based on ethical values and behaviours

We recognise that it’s our people that make us different, and we strive to recruit, retain, engage and develop the best. We continue to encourage our unique and supportive culture, which we believe sets us apart from other housebuilders.

Our culture is built on some core ‘Telford Homes behaviours’, and last year we took all employees through a behaviours training session to ensure that everyone understood what our core behaviours look like in practice. Our behaviours now form an integral part of our induction, appraisal and performance processes and are a key consideration when assessing an individual for promotion.

The Board actively promotes a positive health and safety culture within the business and ensures that this is reflected in all of our policies and procedures, as well as in our approach to the training and development of the people involved in our operations. Health and safety is the first agenda item at monthly Board meetings.

Our comprehensive set of policies and procedures cover all of our operations. They are constantly updated and communicated to relevant employees and everyone else working on our sites.

 9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

The Board has an Audit Committee and a Remuneration Committee to oversee and consider issues of policy outside main Board meetings. The Board does not consider it necessary to have a separate Nominations Committee and any future recommendations for appointments to the Board will be considered by the Board as a whole.

Each of the Audit and Remuneration Committee has written terms of reference setting out its duties, authority and reporting responsibilities:

Audit Committee terms of reference

Remuneration Committee terms of reference

During the year, the Chairman of each committee provided the Board with a summary of key issues considered at the committee meetings. Board committees are authorised to engage the services of external advisers as they deem necessary in the furtherance of their duties at the Company’s expense. Details concerning the composition and meetings of the committees are contained in the Annual Report.

 10. Communicate how the Group is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

Communications with shareholders is through the Annual Report and Accounts, full-year and half-year announcements, periodic market announcements (as appropriate), the AGM, one-to-one meetings and investor road shows.

The Group’s corporate website www.telfordhomes-ir.london is regularly updated and users can register to be alerted via email when announcements or details of presentations and events are posted on the website. Annual reports and notices of meetings for at least the last five years can be found on the Group’s website.

October 2018

 

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