STATEMENT ON APPLICATION OF THE COMBINED CODE
THE DIRECTORS
THE AUDIT COMMITTEE
THE REMUNERATION COMMITTEE
DIRECTOR’S REMUNERATION
CHAIRMAN’S AND CHIEF EXECUTIVE’S RESPONSIBILITIES
ACCOUNTABILITY AND AUDIT
SHAREHOLDER RELATIONS
COMPLIANCE STATEMENT
Listed companies are required to conform to the Listing Rules of the UK Listing Authority. This includes the Combined Code on Corporate Governance (“the Code”), which sets out fourteen Principles of Good Governance. A statement on how the Company has applied these Principles and a statement explaining the extent of compliance with the provisions of the Code appears below.
The Company is controlled by the Board of Directors, comprising an Executive Chairman, Chief Executive, and Finance Director, and three independent non-Executive Directors. The non-Executive Directors are Gordon Crawford, Edward Astle, and Roger McDowell, who was appointed on 5 September 2002 on the retirement of the previous Director, Dr. Ceri James. The Board meets monthly to discuss and agree on the various matters brought before it through a comprehensive briefing document prepared by the Executive Directors and senior managers from all principal functions of the business. The three non-Executive Directors, who are all shareholders, are considered to be independent of management, as defined in Section A3.2 of the Code. They have been appointed for specified terms, and provide the necessary balance to the Executive Directors as a result of their outside expertise. All Directors have substantial experience in relevant positions and in the management of Listed companies of significant size.
The Board has a formal schedule of matters reserved to it for decision. The Board formally reviews all matters affecting the Company, including strategy, acquisitions, disposals, budgets, business development, investor relations, product development goals, and senior appointments. In its review the Board also monitors the company’s exposure to key business risks. All Directors have access to the advice and services of the Company Secretary and to other senior managers, and may take independent professional advice on any matter which they believe warrants it at the Company’s expense. All Directors are required to submit themselves for re-election under the retirement by rotation provisions in the Company’s Articles of Association if they have held office for more than 30 months since their appointment or last re-appointment. Both Mike Frayne and John Arbuthnott will submit themselves for re-election at the forthcoming Annual General Meeting. The unexpired term of both their service contracts is two and a half months. The Board has established an Audit Committee and a Remuneration Committee. Each committee operates within defined terms of reference. There is no Nomination Committee as the Board as a whole formally considers the necessity for the appointment of additional Directors at regular intervals in the light of the Company’s development.
The Audit Committee is chaired by Roger McDowell. Its other members are Edward Astle and Gordon Crawford. It meets at least once a year. The Committee has responsibility for, among other things, reviewing the Company’s annual report and accounts, its quarterly reports, and the involvement of the Company’s auditors in that process. The Committee reviews compliance with legal requirements, accounting standards and the rules of the UK Listing Authority, the scope, objectivity and cost-effectiveness of the audit process, and helps ensure that an effective system of internal financial control is maintained. The ultimate responsibility for reviewing and approving the annual report and accounts and the quarterly reports remains with the Board as a whole.
The Remuneration Committee, which meets at least twice a year, is charged with setting the levels and conditions for Directors’ pay, bonuses and all other benefits, including compensation payments. The Remuneration Committee is chaired by Edward Astle and its other members are Roger McDowell and Gordon Crawford. The primary responsibilities of the committee are:
- making recommendations to the Board on the Company’s policy on Directors’ and senior staff remuneration;
- to set remuneration at a level appropriate to the responsibility and experience of the Directors;
- to ensure that remuneration is adequate to attract and retain Directors and staff of the required calibre; and
- that remuneration is in line with current industry practice, and set in light of pay and conditions of other staff within the group.
A significant element of Directors’ remuneration can be in the form of annual bonuses, linked closely to the Company’s turnover and EBITDA performance. The Remuneration Committee sets policy on bonuses and objectives. The committee also takes account of the Combined Code’s recommendation on the length and conditions for Service Contracts for Directors. The Report by the Board to shareholders on Directors’ remuneration can be found here.
The Chairman is responsible for the running of the Board and for major non-operational matters such as developing the Group strategy and overseeing merger and acquisition activity. The Chief Executive is charged with the management of the Company’s business activities to meet the objectives set out by the Board. Meetings of the Group’s senior management team take place at regular intervals, with Divisional Managers and other senior staff reporting formally to the Board on activities, budgets and objectives to ensure an appropriate level of control and information exchange is maintained.
The Directors are responsible for preparing the financial statements which are presented on pages 31 to 55 A statement of Directors’ responsibilities is presented on page 29. Half year and quarterly reports are also presented in a timely fashion, in compliance with Listing Authority requirements and to meet accepted best-practice market standards.
The Directors, having made suitable enquiries and analysis of the accounts, consider that the Group has adequate resources to continue in business for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing financial statements.
The Directors, who are responsible for the Group’s system of internal control, have established systems to ensure that an appropriate and reasonable level of oversight and control is provided. These systems are reviewed for effectiveness not less than annually by the Audit Committee and the Board, and include financial, operational, compliance and risk management controls.
The Directors have reviewed the effectiveness of internal control of the Group in the period under consideration, and have taken into account any material developments which have taken place since 30 September 2002 up to the date of approval of the Annual report, the procedures and systems set out above, and the reports provided by individual managers. Such a system can only provide a reasonable and not absolute level of assurance against material misstatement or loss. A formal process for identifying, evaluating and managing the significant risks faced by the Group has remained in place up to the approval date of the annual report and accounts. That process is formally reviewed by the Board on an annual basis, is monitored regularly by the Executive Directors, and accords with the publication by the Turnbull working party on guidance for directors on internal control – Internal Control: Guidance for Directors on the Combined Code.
Financial results with comparison to budgets and latest forecasts are reported on a monthly basis to the Board by the relevant senior managers across the Group, together with a report on operational achievements, objectives and issues encountered. Managers are supplied with detailed information on budget performance and variances to allow them to prepare their reports and address any problems. Detailed annual budgets are reviewed and approved by the Board. Budgets and objectives are updated regularly in the light of market developments and Company progress. Any significant variances from budgets are discussed at monthly Board meetings and actions set in place to address them.
Operating and regional units formally report to the Board at monthly intervals on all non-financial matters, such as customer account management across all regions, sales performance, research and development project progress, product quality and customer support metrics, marketing programmes, IT systems, internal service level agreements and human resources issues.
Risk management is applied through a systematic process of:
- identification of risk sources by senior managers;
- assessment of the effects of risk;
- formulation of strategies to address each risk; and
- inclusion of appropriate contingency provision in budgets if required.
All senior managers of key operational areas of the business compile a list of significant risks, rank each risk for likelihood and impact, and set out plans for their management and mitigation, in light of the relative impact and costs. This information is reviewed monthly and summarised into a Risk Report which is reviewed by the main Board on a half yearly basis.
During 2002 Intec initiated a programme to achieve compliance with the standard known as TL9001, a formal quality standard for the telecommunications industry equivalent in scope to ISO9001. Product quality is measured quantitatively on an ongoing basis, in terms of outstanding known issues, with a defined escalation and rectification process that recognises the importance of any problems to customers. The Company employs a full-time compliance manager at Woking who, with quality representatives in our major offices, maintains and monitors compliance with a library of formal quality and process procedure documents covering all aspects of Intec’s operations, which are held and accessible to all staff on the Company’s intranet. The compliance manager in conjunction with the Board agrees an annual audit programme, which he undertakes assisted by nominated experts in the organisation covering all geographies and operational areas of business.
The requirement for Compliance with relevant Listing Authority provisions, such as staff share dealing and external communications, is communicated regularly to staff and actively monitored and regulated by the Company Secretary. An understanding of compliance and regulatory issues is now a part of staff induction training, is set out in the Company Handbook, and forms part of the terms and conditions of employment. Staff are notified on a regular basis of any applicable closed periods or other restrictions on dealing or external communications consequent on working for a Listed company. Only specific senior staff are authorised to comment externally on matters which might be considered to be share price sensitive information, and a Board-level process exists for determining which events or information should be considered price sensitive.
The Group uses computer systems for the majority of its financial control and record-keeping purposes. These systems are regularly reviewed for their ability to provide the security, accuracy and availability of information required to manage and control the business. The Group has established controls and procedures over the off-site storage of data held on computers, has a defined and monitored information security policy for all staff, maintains appropriate measures against deliberate external attack, regularly audits all computers for legal compliance and educates all staff in these matters. Security systems have been reviewed and upgraded during the current year to deal with perceived changes to the risk of loss, damage or information corruption through internal and external factors.
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. The Group’s Annual and Interim reports are circulated to all shareholders on record and other interested parties, and may also be requested through a number of channels operated by World Investor Link. An investor relations web site has been established which contains all publicly available financial information and news on the Company. The Company received a techMARK award from the London Stock Exchange for the best Investor Relations web site in 2002. The Company also monitors the opinions of shareholders and the research published by market analysts in so far as this is practicable, and responds to concerns when appropriate. The Company reports quarterly on its performance, holding publicly accessible conferences or teleconferences where investors may question the Directors on any aspect of its business or related matters. All shareholders have at least twenty-one working days’ notice of the Annual General Meeting, which is held at a convenient location with adequate facilities for the expected audience. The Directors and committee chairs are available for questions at the Annual General Meeting. The Company meets all provisions of the Combined Code in respect of Proxy voting arrangements and Resolutions.
The Listing Rules require the Board to report on compliance with the forty-five Code provisions throughout the year ended 30 September 2002. Save for the limited exception outlined below, the Board believes that the Company has complied throughout the financial year with the provisions set out in Section 1 of the Combined Code:
A.2.1 The Board has not identified a senior non-Executive Director, as the governance of the Company is considered to be a matter for the Board as a whole.
|
