The Company is committed to the principles of corporate governance contained in the UK Corporate Governance Code 2014 (‘the Code’). The Company has applied the principles set out in the Code and has complied with the provisions set out in the Code throughout the year. An explanation of how the Code has been applied is set out here, in the Audit & Risk Committee report and in the Remuneration report.
The powers of the Directors are set out in the Company’s Articles of Association which are available on request. The Articles of Association may be changed by special resolution. The Directors also have responsibilities and duties under other legislation and in particular, the Companies Act 2006.
The Board has a Schedule of Matters specifically reserved to it for decision and has approved the written terms of reference of the various committees to which it has delegated its authority in certain matters. Matters reserved to the Board include:
- the recommendation or approval of dividends
- the approval of preliminary and interim financial statements
- the approval of major financial commitments
- the acquisition of significant companies or businesses
- appointments to the Board and its Audit & Risk, Remuneration and Nomination Committees
- the Company’s future strategy
- the Company’s internal controls.
The full schedule is available on our website.
The Board is made up of a balance of Executive Directors and independent Non-Executive Directors.
The Directors who held office during the year were:
John Michael Barry Gibson
Richard David Harpin
Martin John Bennett
Johnathan Richard Ford
Stella Julie David
Christopher Havemann (appointed 1 December 2015)
Benjamin Edward Mingay
Mark Christopher Morris
The Board is led by the Chairman, Barry Gibson. The Chairman’s responsibilities are clearly defined in a written specification agreed by the Board and which makes clear the division of responsibilities between the Chairman and the Chief Executive. They include the smooth running of the Board, effective communication between Executive and Non-Executive Directors and the general progress and long-term development of the Group.
During the year, in addition to the Chairman, four independent Non-Executive Directors (Messrs Havemann, Mingay and Morris and Mrs David) with extensive business, finance and marketing backgrounds, provided the Board with a breadth of experience and independent judgement. Mark Morris served as the Company’s independent Senior Non-Executive Director.
In accordance with the provisions of the Code, each Director is subject to election by the Company’s shareholders at the Annual General Meeting immediately following their appointment, and is subject to re-election every year thereafter.
Short biographies of each of the Directors including their membership of committees may be found on the previous page.
The beneficial interests of the Directors in the shares of the Company and the options held as at 31 March 2016 and 24 May 2016 are set out in the Remuneration report. None of the Directors serving at the year-end had a beneficial interest in the share capital of any subsidiary company.
There is a clear need to ensure that there is an appropriate pool of talented and capable individuals to fill senior roles and a succession planning process has been established across the Group to facilitate this. Each business and corporate function prepares and maintains succession plans with the support of local and Group HR and with input from the Group Chief Executive. The Executive Committee reviews the plans in detail twice a year and the Board reviews the high level plan at least annually.
The identification and development of our people remains a key focus across the Group.
The Board is committed to ensuring that it is appropriately diverse. It is supportive of the aspiration of the Davies Report to promote greater female representation on corporate boards. Although no target has been set in respect of the percentage of women on the Board, when seeking to recruit for Board positions we ensure that ‘long lists’ include women candidates.
The Board also believes that a diversity of experience and psychological profile is important around the board table. We seek to ensure that there is a balance of skills and experience and in respect of non-executive positions we ensure that candidates from a wider pool are considered, including those with little or no listed company board experience.
Up to eight regular meetings are held each year to review and monitor current and forecast performance. Regular reports on monthly performance and other matters of importance to the Group ensure that the Board is supplied in a timely manner with the information necessary to make informed judgements. In addition, the Board has an annual strategy meeting, also attended by senior operational management, to devise and discuss the Company’s medium and long-term strategic focus and management development strategy.
Regular formal and informal presentations are given and meetings held in order to inform Directors of issues of importance affecting the Group. Occasionally, meetings of the Board are held at the Company’s operating sites other than Walsall, in order to afford the Board, particularly the Non-Executive Directors, the opportunity to meet with local management. During FY16, the annual strategy meeting was held in the USA which provided the Board with an invaluable insight into that business and enabled the Directors to meet the entire senior management team.
Attendance at meetings
All Directors are expected to attend all Board and relevant committee meetings. Details of attendance by Directors at meetings during the year are set out in the table below. Directors who were unable to attend specific meetings reviewed the relevant papers and provided their comments to the Chairman of the Board or Committee. Any Director who misses a meeting will, as a matter of course, receive the minutes of that meeting for reference.
||Audit & Risk
|Number of meetings held
|R D Harpin
|M J Bennett
|J M B Gibson
|C Havemann 1
1 Chris Havemann was appointed on 1 December 2015.
The Board actively encourages all Directors to deepen their knowledge of their roles and responsibilities and to gain a clear understanding of the Group and the environment in which it operates and has adopted a formal policy on the induction and training of Directors. Newly appointed Board members are required to undergo an induction programme, which includes obtaining a thorough understanding of the Group’s various operations and to this end, Chris Havemann has commenced a programme of activity. Board members also have the opportunity to receive formal training from external providers if they wish.
During the year, the Non-Executive Directors have met with various members of the Group’s management teams and external advisers.
The Board has implemented a formal process for reviewing its own effectiveness, that of its Remuneration and Audit & Risk committees and its individual members. In addition, it continued to ensure that regular meetings of the Non-Executive Directors were held without the Executive Directors, and at least once a year, without the Chairman present, in order to evaluate his performance.
An external Board evaluation process was completed during FY15 by Lintstock Limited. Directors completed evaluation questionnaires and these were followed up by individual interviews with Lintstock who then compiled a formal written report summarising the Directors’ views and containing recommendations to improve the effectiveness of the Board further. This report was followed up in FY16 by an evaluation questionnaire, also facilitated by Lintstock Limited, which was discussed by the Board in February 2016.
The Board concluded that it was operating effectively with the relationships between the Board members being particularly highly rated. The atmosphere in the boardroom in terms of encouraging equal contribution, candid discussion and critical thinking was also positively rated. It was agreed that following the successful visit to the USA in FY16, it would be beneficial to visit the other key countries and as a result, it has been agreed that the annual strategy meeting in FY17 should be held in France.
The Board operates a number of committees to which it has delegated certain specific responsibilities, each of which has formally adopted terms of reference. These comprise the Nomination, Audit & Risk and Remuneration Committees. The terms of reference of each of the Board’s committees are available on request from the Company Secretary and are on the Company’s website. The membership and activities of the Audit & Risk Committee and Remuneration Committee are detailed in the reports of those committees.
J M Barry Gibson (Chairman)
The primary responsibilities of the Committee are to:
- make recommendations to the Board on the appointment of Directors
- review the size, structure and composition of the Board
- consider succession planning arrangements for Directors and other Senior Managers.
Key issues considered during the year
The Committee met informally on a number of occasions during the year to consider the appointment of a new Non-Executive Director. The Executive Directors were also given the opportunity to meet with the shortlisted candidates. Following this, a recommendation was made to the Board and the final decision to appoint Chris Havemann was taken by the Board as a whole.
The Committee draws on the advice of such professional advisers as it considers necessary and did so during the year in respect of the appointment made.
The day to day running of the business rests with the Group Chief Executive, Richard Harpin. The Executive Committee assists the Chief Executive in the performance of his duties including:
- the development and implementation of strategy, operational plans, policies, procedure and budgets
- the monitoring of operating and financial performance
- the prioritisation and allocation of resources and
- the oversight of group wide initiatives and investments.
Other members of the Executive Committee are Martin Bennett, Johnathan Ford, Tom Rusin, Chief Executive Officer of HomeServe USA, Stephen Phillips, Chief Executive Officer of Reparalia in Spain and Guillaume Huser, Chief Executive Officer of HomeServe France.
The Committee has adopted formal terms of reference.
A Group Risk Committee, comprising the Executive Directors and other representatives of each business, operates across the Group and is chaired by Johnathan Ford. Its terms of reference have been approved by the Board and its purpose is to advise the Audit & Risk Committee in respect of the Group’s risk appetite, to evaluate the risk registers compiled by each of its businesses, to monitor the effectiveness of action plans for the mitigation of those risks, and to report thereon to the Audit & Risk Committee and thereafter to the Board, which retains responsibility for the overall evaluation of the Group’s risk management processes.
Directors’ indemnities and insurance
The Company has made qualifying third party indemnity provisions for the benefit of its Directors which were in place during the year and remain in force at the date of this report. The Company maintains directors’ and officers’ liability insurance for its Directors and officers.
Advice for Directors
The Board has established a formal procedure for Directors wishing to seek independent legal and other professional advice and all members of the Board have access to the advice, and services of the Company Secretary.
Relationships with shareholders
The Board, on the Company’s behalf, recognises the need to maintain an active dialogue with its shareholders. The Chief Executive and Chief Financial Officer meet regularly with institutional investors and analysts to discuss the Company’s performance and all shareholders have access to the Chairman and independent Senior Non-Executive Director, who are available to discuss any questions which they may have in relation to the running of the Company.
The Board encourages shareholders to attend the Annual General Meeting and is always willing to answer questions, either in the meeting itself or, more informally, afterwards. In addition, shareholders may contact HomeServe direct, either through the website or by telephone.
The Board recognises the need to ensure that all Directors are fully aware of the views of major shareholders. Copies of all analysts’ research relating to the Company are circulated to Directors upon publication. The Board receives a monthly Investor Relations report which includes an analysis of the Company’s shareholder register as well as any feedback received from shareholders and analysts.
Viability statement and going concern
The viability statement and going concern are contained within the Strategic report.
The Board has overall responsibility for the Group’s system of internal control and for reviewing its effectiveness. The Audit & Risk Committee has a key role to play in overseeing internal controls and advising the Board thereon. More detail in respect of the role of the Audit & Risk Committee is provided in the report of that committee.
The Board has delegated the day-to-day management of the Company to the Group Chief Executive and the other Executive Directors. The system of internal control is designed to manage and mitigate rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.
The Board confirms that there is an ongoing process for identifying, evaluating and managing the risks faced by the Company. This has been in place for the year under review and up to the date of approval of this Annual Report and Accounts. The process is regularly reviewed by the Board and accords with the Turnbull Guidance. The key elements of the control framework and review processes in place across the Group are as follows:
- The Group’s strategy is set by the Board and three year business plans, annual budgets and investment proposals for each business are formally prepared, reviewed and approved by the Board.
- The Group’s management operates a formal process for identifying, managing and reporting on operational and financial risks faced by each of the Group’s businesses. Risks are reviewed in detail at local risk committees and, on an overall basis, by the Group Risk Committee and the Audit & Risk Committee.
- The Group Risk Committee meets three times a year and reviews a register summarising the significant risks faced by the businesses or the Group as a whole, the likelihood of those risks occurring and the steps being taken to minimise or otherwise manage those risks. Regular updates are provided to the Audit & Risk Committee and the Board.
- The Audit & Risk Committee meets three times a year and reviews the risk registers in order to advise the Board on current risk exposures and future risk strategy. More detail is provided in the report of the Audit & Risk Committee.
- A clearly defined organisation structure is in place with clear lines of accountability and appropriate division of duties. The Group’s financial regulations specify authorisation limits for individual managers and for local Boards of management, with all material transactions being approved by the Board.
- Regular telephone meetings of the Executive Committee monitor day to day performance, and full Executive Committee meetings are held at least eight times a year at which the Directors report on the progress of the companies or discipline for which they are responsible and share best practice.
- Consolidated financial results, including a comparison with budgets and forecasts, are reported to the Board on a monthly basis, with variances being identified and understood so that mitigating actions can be implemented, where appropriate.
- The consolidated accounts are reviewed by the Executive Directors and verified by the finance team. The accounts are then considered by the Audit & Risk Committee which makes a recommendation in respect of their approval to the Board. The Board then reviews and approves the accounts prior to the announcement of the half year and annual results.
- At the end of the year, the Executive Directors compile a report identifying the key risks faced by the Group. This report is considered by the Audit & Risk Committee and by the Board before the Annual Report and Accounts is approved.
- The Group has a dedicated Internal Audit function and a formal audit plan is in place to address the key risks across the Group.
- Appropriate treasury policies are in place.
- A whistle blowing policy allows employees, franchisees and sub-contractors who wish to raise any issues of concern relating to the Group’s activities to do so on a confidential basis by contacting an external hotline.
- A mechanism exists to extend the Group’s formal risk management processes to any significant new business acquired or established immediately upon acquisition or start-up. In this way, the Board is able to confirm that the necessary process has been operated by the Group for the whole of the year.
As required by the Turnbull Guidance, the Board, supported by the Audit & Risk Committee, carries out an annual assessment of the effectiveness of the system of internal controls.
By Order of the Board
JM Barry Gibson
24 May 2016