Statement on Application of the Combined Code
Listed companies are required to conform to the listing rules of
the Financial Services 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 is set
out below.
The Board of Directors
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 Edward Astle, Roger McDowell and Thomas Ivarson
who was appointed on 30 September 2003 upon the retirement of
Gordon Crawford. 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. 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 they
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. None
of the Executive Directors are required to submit themselves
for re-election at the forthcoming Annual General Meeting.
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.
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.
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The Audit Committee
The Audit Committee is chaired by Roger McDowell. Its other
members are Edward Astle and Thomas Ivarson. It met three
times during the 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.
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The Remuneration Committee
The Remuneration Committee is chaired by Edward Astle and its
other members are Roger McDowell and Thomas Ivarson. Further
information on the Committee’s responsibilities is disclosed in the
Directors’ Remuneration Report.
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Chairman’s and Chief Executive’s Responsibilities
The Executive 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.
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Accountability and Audit
Financial Reporting
The Directors are responsible for preparing the financial
statements which are presented here.
A statement of Directors’ responsibilities is presented here.
Half year and quarterly reports are also presented in a timely fashion, in
compliance with Listing Authority requirements and to meet best-practice
market standards.
Going Concern Statement
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.
Internal Control and Risk Management
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 2003 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 Control
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.
Approval levels for authorisation of expenditure are at set levels
and cascaded through the regional management structure with
any expenditure in excess of £25,000 requiring approval from
the Executive Board. All commercial contracts of business require
review by the in-house legal department and, in the case of
sales contracts, a contract approval process is in place.
Operational Control and Risk Management
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.
Quality Compliance
During 2003 Intec succeeded in its objective of achieving
compliance with the standard known as TL9000, 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
accessible by 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.
External Communications and Price Sensitive Information
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. All material external communications are subject to formal
Board approval and to appropriate external advisers if relevant.
Information Management and Security
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
regularly during the current year to deal with perceived changes to
the risk of loss, damage or information corruption through internal
and external factors.
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Shareholder Relations
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.
An investor relations web site has been established which contains
all publicly available financial information and news on the Company.
Investors or others may subscribe through the web site to an
electronic news service which provides automated circulation of
all regulatory announcements.
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. 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.
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Compliance Statement
The Listing Rules require the Board to report on compliance
with the forty-five Code provisions throughout the year ended
30 September 2003. 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 Independent Director,
as the governance of the Company was considered to be a
matter for the Board as a whole. Identification and appointment
will be considered for 2004.
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Corporate Governance