Our core values of investing in our people, systems and capacity remain as important to us today as they have been over the last 23 years. A culture of strong corporate governance is an essential element of that.
It is the Board’s role to ensure that the Group is managed for the long-term benefit of all of its stakeholders. We believe in effective and efficient decision-making in a manner that incorporates the needs of our many stakeholders. Corporate governance is one of the important parts of the Group’s strategy and our aim of continual improvement of our processes and risk management whilst supporting the continued growth of the business is vital in the ever-evolving corporate governance regime we adhere to.
Changes to the corporate governance regime
As an AIM-listed company, the Company is required to provide details of a recognised corporate governance code that the Board of Directors has decided to apply and explain how the Company complies with that code, and where it departs from its chosen corporate governance code provide an explanation of the reasons for doing so.
In considering its own arrangements for governance, the Company adopted the provisions of the Quoted Companies Alliance’s Corporate Governance Code (“the QCA Code”), published in April 2018. The key elements of the Company’s corporate governance arrangements are described below.
I am delighted to confirm that we comply with all the principles of the QCA Code, as well as elements of the UK Corporate Governance Code, published in July 2018. We will continue to adopt further elements of the UK Corporate Governance Code as appropriate.
A key element of the Company’s Corporate Governance strategy was the creation of the Audit and Remuneration Committees which each fulfil an important role as an independent check and balance to the executive decision-making process. Each of these Committees are composed of, and chaired by, the independent non-executive Directors of the Company. The Board conducts an annual review of the Company’s Corporate Governance Code to ensure it is reflective of, amongst other things: any recent legislative changes; the recommendations of the Quoted Companies Alliance and its Corporate Governance Code; the UK Corporate Governance Code; and the economic and social environment within which the Company operates.
We are confident that our proven approach to corporate governance will help to shape a robust and strong organisation as we deliver our strategic plan and take the business to the next phase of growth.
Willie MacDiarmid, Chairman
28 September 2018
Our corporate governance statement and information about our policies
Our business model
There are over 30 million premises in the UK representing c.53 million gas and electricity meters that will be changed during the smart meter programme due to run until 2020. Approximately 12.5m million had been exchanged by September 2018.
Our business model focusses on our strengths:
- People: The business has control over a directly employed dedicated installation field force, supported by an in-house training academy, with a highly-experienced senior management running the organisation.
- IT systems: We have significant IT software and data security capabilities and capacity, and the ability to develop new applications and technologies to the ongoing benefit of our customers.
- Customer relationships: The Group’s excellent customer service is underpinned by client and service provider collaboration in planning, forecasting and, most importantly, communication.
Our business model is to operate under a market-focused structure with three main service lines:
- Asset installation: Direct field force management and asset installation, targeting the domestic smart meter opportunity.
- Asset and data management: Investing in assets and providing remote reading solutions, focusing on increasing growth rate of meter assets portfolio and driving recurring revenue.
- Energy management: Providing energy-efficient strategies with key focus on cross-selling and establishing additional energy efficient products and services.
Our ability to provide both meter installation services and asset provision and management is a critical part of our value proposition:
- For investors: Growing revenue and profits, enabling us to pay a progressive dividend while retaining funds to invest for future growth.
- For customers: Provide an end-to-end service in all aspects of utility infrastructure, smart metering and energy management. This breadth of service makes us unique in our industry, with our expertise allowing our customers to have confidence that we will deliver an appropriate solution.
- For employees: Interesting and challenging careers in a growing business that offers them the chance to develop and reach their potential
We are positioned to own utility assets in a fast-moving market. We have an experienced in-house national workforce who undertake comprehensive meter installation replacement and safety review activity.
Relationship with shareholders
The Company values its dialogue with both institutional and private investors. Effective two-way communication with fund managers, institutional investors and analysts is actively pursued and this encompasses issues such as performance, policy and strategy.
Private investors are encouraged to participate in the Annual General Meeting at which the Chairman presents a review of the results and comments on current business activity. The Chairs of the Audit and Remuneration Committees are available at the Annual General Meeting to answer any shareholder questions.
The Board actively seeks dialogue with the market as understanding what analysts and investors think about the Group is a key part of driving the business forward. Discussions with the market provide the Board with the opportunity to understand analysts’ and investors’ views on the Company’s strategy and performance. The Board receives regular updates on the views of shareholders through briefings and reports from the Chief Financial Officer and the Group’s retained advisers. In addition, the Non-Executive Directors are available to meet shareholders if they wish to raise any issues separately.
When it comes to investment and the management of assets we believe communication is a key element in making the right decision when managing a portfolio. If investors have any matters that they wish to raise out with the timing of the Annual General Meeting these can be raised using the contact details on the Group’s website.
Engaging with our stakeholders strengthens our relationships and helps the business make better decisions that enable it to deliver on its 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 the business, and to enable the Board to understand and consider these issues in it decision making. In addition to our shareholders, supplier and customers, our employees are one of our most important stakeholder groups. The Board closely monitors and reviews the results of the all of its employee engagement as well as a number of any other feedback it receives to ensure alignment of interests.
The Group is committed to good environmental practice and places great importance on the impact of its operations on the environment. Our solutions enable us to have a significant overall positive environmental impact by influencing both our supply chain and customers in the energy and utility choices they make. We are proud that all of our contractors operate within our Environmental policy and contractor’s code of conduct before carrying out any work on behalf of the Group.
Diversity and human rights
The Group places considerable value on the involvement of its employees and continues to keep them informed of matters affecting them and the performance of the business. This is achieved through regular communications, briefings and formal and informal meetings.
The Group is an equal opportunities employer and our employees and applicants are treated fairly and equally regardless of their age, colour, creed, disability, full or part-time status, gender, marital status, national or ethnic origin, race, religion or sexual orientation.
We have an Anti-Corruption policy in place which relates to compliance with the Bribery Act 2010. We also provide a confidential whistleblower service. This is managed by a specialist third-party provider giving all colleagues across the Group the opportunity to raise concerns and can confidentially report any concerns or wrong doing. The outcome of any report or incident investigation is summarised and provided to the Audit Committee for its review.
Our commitment to diversity means creating a working environment that is respectful and engaging and that creates opportunities for all. We not only believe this is right thing to do but that it makes sound business sense as it helps to enhance productivity, quality and innovation.
The Company employed on average 791 people in the UK during the year to 31 December 2017. As at the financial year ended 31 December 2017 the Group employed 825 people. The gender breakdown at 31 December 2017 has been set out as follows:
Effective Risk Management and Internal Control
Effective risk management
The Board has overall responsibility for the Group’s system of internal control and risk management and for reviewing the effectiveness of this system. Such a system can only be designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can therefore only provide reasonable and not absolute assurance against material misstatement or loss.
Ownership of ordinary shares will involve a variety of risks which, if they occur, may have a material adverse effect on the Group’s business and financial condition and on the market price of the ordinary shares. We have a detailed and comprehensive risk management process, covering all aspects of business and operational risk.
Risk is managed at all levels within the business, with an ongoing process of risk identification and mitigation carried out.
The safety of everyone involved in or associated with our business is of the utmost critical importance We are proud of our assurance activities, which always ensure that health and safety is our top agenda item. However, we are not complacent and continue to invest and rigorously challenge, evaluate and assess the risks within our business to ensure that we are doing everything possible to ensure the safety of all of our stakeholders. This rigorous challenge, evaluation and assessment of risks applies equally to areas outside of health and safety and helps us to grow a stronger, well-managed business.
The internal audit function reviews different areas of risk as part of its internal audit work. Where improvements are identified in the risk profile of the Group internal audit work with the appropriate level of management to design and implement processes which will help to mitigate the risks identified.
Board Leadership and Board Structure
The Board currently comprises:
- Chairman, Willie MacDiarmid
- the Chief Executive, Alan Foy
- the Chief Financial Officer, David Thompson
- three Non-Executive Directors, Miriam Greenwood, Graeme Bisset and Kelly Olsen.
The details of each director are set out in the Board of Directors section of this website. Click here to see the biographies of the Board of Directors. The Board consider each of the non-executive directors and the Chairman to be independent.
Miriam Greenwood is the senior independent non-executive director.
The Board is responsible for formulating, reviewing and approving the Group’s strategy, budgets and corporate actions. Matters for review by the Board are communicated in advance of formal meetings.
There is a formal schedule of matters reserved for the Board, including approval of the Group’s annual budget, the Group’s strategy, acquisitions, disposals and capital expenditure or investment projects above certain thresholds, approval of the Annual Report, approval of any reports or information to be issued to shareholders of the Company, approval of the Company’s share dealing policy, the appointment of the Company’s independent auditors, the Company’s dividend policy, borrowing powers, approval of any material changes to the Company’s accounting policies or insurance policies, remuneration of directors, executive officers and senior employees, alterations to the constitutional documents of the Company, the adoption of any new or amendment of any major employee benefit plans, legal actions brought by or against the Group above certain thresholds, authorisation of political and charitable donations and the scope of delegations and appointments to Board committees and subsidiary boards. Responsibility for the development of policy and strategy and operational management is delegated to the executive directors and senior management team.
Board activities are structured to develop the Group’s strategy and to enable the Board to support management on the delivery of the Group’s strategy within a transparent governance framework. The Board also regularly discussed governance, risk and reputation management and financial performance.
The Chairman and non-executive Directors have other third-party commitments including directorships of other companies. The Company is satisfied that these associated commitments have no measurable impact on their ability to discharge their responsibilities effectively. The executive directors have no third-party commitments.
The Company has directors’ and officers’ liability insurance in place.
The Board of Directors and Senior management are listed on our website.
The roles within the Board are set out under principle 9. below including the role of the Company Secretary and the Senior Independent Non-executive Director.
All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense.
All directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that Board procedures are followed, and that applicable rules and regulations are complied with. In addition, the Company Secretary will ensure that the Directors receive appropriate training where necessary. The appointment and removal of the Company Secretary is a matter for the Board as a whole. All Directors are supplied with information in a timely manner in a form, and of a quality, appropriate to enable them to discharge their duties.
The Company has implemented a formal process of annual performance evaluation for the Board, its Committees and individual Directors. The year to 31 December 2018 will be the first year of this process.
The intention is that a performance evaluation of the Board, the Board Committees and individual Directors will be conducted annually and the method for such review will continue to be reviewed by the Board in order to optimise the process.
As part of the annual performance evaluation of the Board, the intention is for the non-executive Directors to meet, led by the Senior Non-executive Directors, without the Chairman present to appraise the Chairman’s performance, and on other occasions as necessary.
The results of the evaluation will be published in the annual report for the year to 31 December 2018, along with the details of any external evaluator used and any connection it has with the company or individual Directors. The Board are committed to acting on the results of the evaluation and taking the appropriate action where any development needs have been identified.
No particular targets have been set for developing a diverse pipeline, but the Nomination Committee fully recognises the benefits of greater diversity and will continue to take account of this when considering any particular appointment. It will continue to ensure that the best people are appointed for the relevant roles.
All Directors will be consulted on the composition of the Board, as to the size, the appropriate range of skills and the balance between Executive and Non-executive Directors, as part of the Board evaluation process to be undertaken in 2018.
Succession planning is a matter reserved for the executive Directors and the non-executive Directors. A paper covering the subject is produced and reviewed by both the Nomination and Remuneration Committees when carrying out succession planning. The Board’s policy is for the Board to have a broad range of skills, background and experience.
The annual report will describe the work of the Nomination Committee and include an update on the matters noted above.
Various indicators are used to monitor and provide insight into the Group’s culture, including employee engagement, health, safety and wellbeing measures and diversity indicators. The state of the Group’s culture is assessed through compliance reviews, internal audit and formal and informal channels for employees to speak up. The Company ensures action is taken to address behaviour that falls short of the Company’s expectations. The Board believes that in fast growing business like the Group, both in terms of employee numbers and the growth in the size of the business, the mix of informal and informal channels provides a faster and more robust feedback loop to address the matters raised by the workforce.
Where Directors have concerns about the operation of the Board or the management of the Company that cannot be resolved, their concerns are recorded in the minutes of the Board meetings. On their resignation, a non-executive Director is expected to provide a written statement to the Chairman, for circulation to the Board, if they have any concerns about the operation of the Board or the management.
People management and development
Our people are our biggest asset. Learning and development continues to be an area of focus for us, as we firmly believe that investment in our employees has a direct and positive impact on our employee retention rates and the engagement levels of our staff. Each part of the business has training programmes in place to provide our employees with the necessary skills to perform their role; training is a combination of on-the-job learning and specific skill development through training courses. Our in-house, fully accredited training academy means that we have the ability to recruit and train our own workforce.
With further investment we are increasing capacity and capability
Many of our training programmes are tailored specifically for our employees and utilise real-life scenarios. This approach results in standardised training programmes and which reinforce our core values, creating a workforce that represents the high levels of performance the business demands.
Health and safety
Protecting the health and safety of our people, customers, suppliers and members of the public is a core priority for the Group. We remain committed to being a safe, secure and reliable organisation and act diligently to protect our employees’ health and safety. Our emphasis on safety training cannot be overstated and our vision is that together we will create an injury-free workplace where everyone goes home safe and healthy every day of their working life.
The Executive Directors have overall responsibility for health and safety and our commitment to health and safety is reflected in our Health and Safety policy.
Our Executive Directors are supported by the Head of Group Safety and Health Executive., whose responsibility is to ensure that the Health and Safety policy, standards and procedures are effective and implemented throughout the Group. Our customers can be assured that we the meet highest of industry standards, codes and practices, ensuring that any work we carry is out is of the utmost safety and quality.
Division of responsibilities
The responsibilities of the roles within the Board are set out as below:
|Chairman||Responsible for leading the Board, its effectiveness and governance, setting the agenda to take full account of the issues and concerns of the Directors and ensuring the links between the shareholders, Board and management are strong|
|Chief Executive Officer||Responsible for the day-to-day leadership, management and control of the Group, for recommending the Group strategy to the Board and ensuring that the strategy and decisions of the Board are implemented via management.|
|Chief Financial Officer||Responsible for the day-to-day financial management and sustainability of the Group and providing general support to the Chief Executive Officer including the financial and operational performance of the business.|
|Senior Independent Director||Provides a sounding board for the Chairman, acts as an intermediary for the other Directors when necessary and is available to meet with shareholders.|
|Independent Non-executive Directors||Constructively challenge the Executive Directors and monitor the delivery of the Group strategy within the risk and control environment set by the Board.|
|Company Secretary||Supports the Chairman and Chief Executive Officer and is available to all Directors for advice and support. Informs the Board and Committees on governance matters and is responsible for development.|
Board Meetings and attendance
Board meetings are scheduled to be held ten times each year. Between these meetings, as required, additional Board meetings (and/or Board committee meetings) may be held to progress the Company’s business. A part of each Board meeting is dedicated to the discussion of specific strategy matters. Any conflicts of interest are declared at the start of each Board meeting and appropriate action is taken where necessary to ensure independent judgement is not overridden. Half of the Board, excluding the Chairman, are considered independent, which helps to address any conflicts of interest that may arise.
In 2017, the Board held ten scheduled meetings. At each meeting the Board received reports from:
- the Chief Executive Officer on health and safety, strategic, operational and business developments, and investor relations;
- the Chief Financial Officer on the financial performance of the business, budget, funding and capital; and
- each of the Board Committees on matters discussed at their meetings.
Board activities are structured to develop the Group’s strategy and to enable the Board to support management on the delivery of the Group’s strategy within a transparent governance framework. The Board also regularly discussed governance, risk and reputation management and financial performance.
In advance of all Board meetings the directors are supplied with detailed and comprehensive papers covering the Group’s operating functions.
The Company Secretary is responsible to the Board for the timeliness and quality of information provided to it.
The Chairman holds meetings with the non-executive directors during the year without the executive directors being present.
The list below sets out a non-exhaustive list of the key areas of focus for the Board’s activities and topics discussed during the year to 31 December 2017:
- Fit for growth – 2018 budget, equity placement and debt facility, business development opportunities and product strategy.
- Performance – at every Board meeting discussed the Chief Executive’s report on performance of operations, regular review of the Chief Financial Officer’s report on financial performance and quarterly market metrics.
- Governance – full year preliminary results, Annual Report, notice of AGM and final dividend recommendation, half-yearly results and interim dividend recommendation, Modern Slavery Act, matters reserved for the Board, Committees’ terms of reference, Board effectiveness review and gender pay gap.
- Risk and regulatory – annual compliance and risk reports and year-end assessment of internal control systems, presentation on GDPR, risk tolerance and risk.
The attendance of directors at scheduled Board and Committee meetings is disclosed in the annual report and accounts each year.
Composition, succession and evaluation
During the year the Audit Committee comprised Graeme Bissett (Chair), Miriam Greenwood and Willie MacDiarmid. All three members of the Audit Committee and considered to be independent non-executive directors. Graeme Bisset is an experienced corporate financier and qualified chartered accountant and Miriam Greenwood has qualifications as a barrister and in corporate finance. The Chief Financial Officer and Head of Internal Audit also attended the meetings by invitation.
The Audit Committee meets at least three times in each financial year and has unrestricted access to the Group’s external auditor.
The Company has an internal audit function consisting of full-time dedicated members of staff. The Audit Committee will review the effectiveness of the internal audit function and its terms of reference on an annual basis and recommend to the Board any changes required as a result of the review. Reports from internal audit are considered at each meeting and, as part of its deliberations, the Committee will actively engage in selecting areas to be audited.
The main roles and responsibilities of the Audit Committee are set in its Terms of Reference.
The Nomination Committee is chaired by Willie MacDiarmid and also comprises Miriam Greenwood, Graeme Bissett and Alan Foy. Willie MacDiarmid, Miriam Greenwood and Graeme Bisset are considered to be independent non-executive directors.
The Nomination Committee considers the selection and re-appointment of Directors. It identifies and nominates candidates to fill Board vacancies and regularly reviews the structure, size and composition (including the skills, knowledge and experience) of the Board and makes recommendations to the Board with regard to any changes.
At present all directors are appointed for a period of three years. As the Company continues to grow significantly in a very active market the retention of high-performing directors to lead the Company is seen as essential in delivering share-holder value and developing the maturity and governance of the Company through a period of significant growth.
The Remuneration Committee is responsible for reviewing and making recommendations to the Board on the total remuneration for the Executive Directors and senior management. The Remuneration Committee oversees the Group’s remuneration policy, strategy and implementation to ensure that the policy delivers on the key objectives of growing earnings and delivering strong returns, in alignment with external shareholders.
The Remuneration Committee comprises Miriam Greenwood (Chair), Willie MacDiarmid and Graeme Bissett. The Remuneration Committee meets a minimum of twice a year.
The Remuneration Committee reviews the performance of the Executive Directors and makes recommendations to the Board on matters relating to their remuneration and terms of service.
The Remuneration Committee also makes recommendations to the Board on proposals for the granting of share options and other equity incentives pursuant to any employee share option scheme or equity incentive plans in operation from time to time.
The Committee’s remit is as follows:
- Determine and agree with the Board the policy for total remuneration of the Executive Directors.
- Agree KPIs for the Executive Directors and senior management team.
- Determine the level of any payment made to the Executive Directors or members of the senior management team by way of compensation for, or otherwise in connection with, loss of office or employment.
- Approve the design of, and determine targets for, performance related pay schemes operated by the Group and approve the total annual payments made under such schemes.
- Review the design of all share incentive plans for approval by the Board and shareholders. For any plan, to determine each year the overall amount of awards and the individual awards to Executive Directors and the senior management.
- Review Group-wide salary increases.
- Review any major changes in employee benefits structures throughout the Group.
The levels of remuneration for the Chairman and all of the non-executive Directors reflect the time commitment and responsibilities for the roles held. The remuneration is salary only with no share options or other performance-related elements.
Where a remuneration consultant is appointed by the Remuneration Committee the remuneration consultant will be identified in the annual report. All future annual reports will clearly report whether the remuneration consultant has any connection with the company of individual directors.
The remuneration schemes have been designed to promote long-term shareholdings by the executive directors that are aligned with the interests of long-term shareholders. All of the current share award schemes currently in place have a vesting period of 5 years.
The Remuneration Committee confirm that only the basic salary is pensionable, and the contribution rate available to executive directors is aligned to that of the workforce.
All of the Directors are subject to election by shareholders at the first AGM after their appointment to the Board and to re-election by shareholders at least once every three years. In addition, any non-executive Director who has served on the board for more than nine years will be subject to annual re-election.
It is the Company’s policy to provide for twelve months’ notice for termination of employment for Executive Directors, to be given by either party. For Executive Directors who have been newly recruited from outside the Group, the period would normally be six months, increasing to twelve months after twelve months’ service.
As set out above the Board as an Audit Committee, Remuneration Committee and Nomination Committee. The work of each these Committees is set out in their report in the annual report and accounts.
Financial results and other notable news releases such as contract wins and changes to the Group’s strategy are published via the London Stock Exchange’s Regulatory News Service (RNS). The Chief Executive and Chief Financial Officer have regular discussions with and briefings for analysts, investors and institutional shareholders. The Chief Executive and Chief Financial Officer normally meet with major shareholders twice annually in order to develop an understanding of their views and brief the next Board meeting on their discussions. All Directors have the opportunity to attend these meetings.
Notice of the Annual General Meeting is posted as an enclosure of the Annual Report and included on our website along with the notices of the Annual General Meeting from 2012 to date. The results of the resolutions voted on in for the years ending 31 December 2016 and 31 December 2017 are included out website. Click here to go the Annual General Meeting section of our website.
To date no vote by shareholders has resulted in 20% or more of votes being cast against a Board recommendation. In the event of such a result occurring the Company would explain, when announcing its results, what actions it intends to take to consult with shareholders on the reasons behind the result as well as publishing on its website within 6 months from the shareholder meeting the views received and the actions taken.