Statement of compliance with the UK Corporate Governance Code

We have agreed to report against the UK Corporate Governance Code and this report sets out in broad terms how we comply at this point in time. We will provide updates as things change. A full version of the Code is available from the Financial Reporting Council website at www.frc.org.uk.

Section A: Leadership

Role of the Board

Led by the Chairman, the Board’s principal responsibilities are:

  • to establish the vision, mission and values of the Group;
  • to set strategic objective and provide the leadership to put them into effect;
  • to monitor and assess financial performance;
  • to embed a framework of controls which allow for the identification, assessment and management of risk;
  • to ensure the Group fulfils its obligations to shareholders, employees, clients and other stakeholders.
  • the effective discharge of these responsibilities is intended to achieve high standards of governance within the Group.

Matters reserved for a decision of the Board include, inter alia, approval of the Group’s commercial strategy; annual operating and capital expenditure budgets; business plans; material acquisitions; significant contracts; annual reports and interim statements; and any significant funding and capital expenditure plans.

The Board meets regularly to discuss the various matters brought before it, including the trading results.

FD has a highly committed and experienced Board, supported by the senior management team, with the qualifications and experience necessary for the running of the Group. In addition to the Board meetings, there is regular communication between Executive and Non-Executive Directors, where appropriate, to update the Non-Executive Directors on matters requiring attention prior to the next Board meeting. In addition, the Chairman meets separately with the Non-Executive Directors to assess the effectiveness of the Board in discharge of its priorities.

 

Responsibilities of the Chairman and Chief Executive Officer

The code requires that there should be a clear division of responsibilities at the head of the company between the Chairmanship of the Board and the executive responsible for the running of the Company’s business, so as to ensure that no one person has unrestricted powers of decision. FD satisfies these requirements in full, the Chairman being fully independent with no connection to the Group prior to becoming a Director and subsequently Chairman of the Board.

The Chairman is responsible for the leadership of the Board, ensuring its efficient operation. The Chief Executive Officer is responsible for implementing the Group’s strategy.

 

Section B: Composition of the Board

The Code requires that the Board should contain a balance of skills, experience, independence and knowledge of the company. It should also include an appropriate combination of Executive and Non-Executive Directors and that there should be a formal, rigorous and transparent procedure when appointing new Directors to the Board.

The Board currently comprises a Non-Executive Chairman, Chief Executive Officer, Chief Financial Officer and three Non-Executive Directors.

Both at its periodic meetings and in separate briefing sessions between Non-Executive Directors and senior management (including Executive Directors), the Board is kept fully appraised of all material commercial and technological developments likely to affect the Group’s performance and prospects.

Updates dealing with changes in legislation and regulation relevant to the Group’s business are provided to the Board by the Company Secretary/Chief Financial Officer and through the Board Committees.

The Board is assisted in its duty to maintain its appropriate balance by a Nominations Committee, which consists of the Chairman and Non-Executive Directors. The Committee meets whenever necessary to consider succession planning for directors and other senior executives to ensure that requisite skills and expertise are available to the Board. As part of the evaluation process the Board is satisfied that each of the directors is able to allocate sufficient time to the Company to discharge their responsibilities effectively.

The terms of reference of the Nominations Committee are available on the company web site.

The Board has committed to undertaking a formal and rigorous annual annual evaluation of its own performance and that of its committees and individual directors and to publish details of how the evaluation has been conducted in the company’s annual report.

The Code states that Directors should offer themselves for re-election at regular intervals of no more than three years. The company goes beyond this requirement, with all Directors subject to re-election at each AGM.

 

Section C: Accountability

Financial and business reporting

The Code states that the directors should explain in the annual report their responsibility for preparing the annual report and accounts, and state that they consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to  assess the company’s position and performance, business model and strategy. These requirements are covered on page 30 of the latest annual report, which is available on the company’s web site.

The Code also states there should be a statement by the auditor about their reporting responsibilities, which is included in the Auditor’s report set out on pages 31-35 of the latest annual report.

The Code requires the inclusion of an explanation of the basis on which the company generates or preserves value over the longer term (the business model) and the strategy for delivering the objectives of the company. This is provided on pages 2 to 8 of the latest annual report. Risk factors and mitigation of them in achieving these strategic objectives are detailed on page 16. The company’s internal control procedures are detailed on page 22.

The Board has established an Audit Committee, chaired by Virginia Gambale and comprising Keith MacDonald and Seamus Keating, which has the requisite skills and experience detailed in the Code. The terms of reference of the Audit Committee are provided on the company web site. The latest report of the Audit Committee is contained in the company’s annual report.

 

Section D: Remuneration

The Board has established a Remuneration Committee, whose latest report is included in the company’s annual report on pages 25-27.

 

Section E: Relations with shareholders

The Board engages proactively with shareholders to promote understanding of the company’s objectives and business model and to ensure it understands the views of shareholders. The Chief Executive Officer and Chief Financial Officer have regular dialogue with shareholders and analysts to discuss strategic and other issues including the Group’s financial results. The Group also employs a head of investor relations who is tasked with ensuring effective communication with shareholders, the Group’s brokers and NOMAD, external advisers and other relevant parties. The company engages in full and open communication with both institutional and private investors and responds promptly to all queries received. In conjunction with the Company’s brokers and other financial advisers all relevant news is distributed in a timely fashion through appropriate channels to ensure shareholders are able to access material information on the Company’s progress.

 

Summary

The company has adopted the UK Corporate Governance Code as its governance framework. As detailed above, the company considers it has achieved compliance with the Code save that, while the Group has policies and procedures in place to ensure the integrity of its systems, it does not have an internal audit function. Instead:

  • The Group operates an audit programme which forms part of its Information Security certification. As part of this process FD undergoes a bi-annual assessment to ensure that all of its controls are robust and assets are appropriately protected. Information Security risks are assessed and reviewed regularly in IT steering meetings with the Group’s senior management.
  • FD also participates in additional third party assessments for private sector customers to ensure that associated security controls are effective and address any related risks. Through the various external audit activities and the close control of operations exercised by the Executive Directors as well as the centralisation of financial management in Newry, the Group does not require these activities to be separated into a standalone audit function.
  • The Audit Committee reviews enterprise risk on an annual basis and reviews the internal control framework and procedures on an ongoing basis, giving consideration to whether certain areas should be looked at more closely.

Taking all the above factors into consideration, the Audit Committee believes that management is able to derive assurance as to the adequacy and effectiveness of internal controls and risk management procedures, without the need for an internal audit function. The Audit Committee will continue to monitor whether there is a requirement for a dedicated internal audit function and report accordingly to the Board.

September 2018