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Corporate governance

Chairman's Introduction

Dear Shareholder

I am pleased to present my second corporate governance report to you and to explain how your Board has used the authority and trust you place in it to drive your Company forward as it strives to deliver sustainable shareholder value.

Now more than ever good corporate governance will play a key part in the long term success of any business. The UK’s decision to leave the EU has created great uncertainty, not only in the UK but more widely. Whilst I cannot predict what may happen in the future, I can assure you that we have a strong business led by an equally strong and talented Board. The Board is continually monitoring events and will make decisions based on firm facts to ensure that it exploits opportunities as they arise.

Good corporate governance is more than simply adhering to the principles of the UK Corporate Governance Code: it is the basis of good management practice. We are focused on ensuring that good governance is embedded in our culture across disciplines and all areas of the business, in order to create a stable foundation upon which our business and long term success is built. The Board takes time to receive regular updates on changes in corporate governance and best practice and strives to adopt the spirit, in addition to the letter of the regulations or best practice provisions.

Together with overseeing a strong financial performance, the following key changes have been addressed by the Board during the year:

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Board Changes

David Thomas took over as Chief Executive from Mark Clare on 1 July 2015 and retained the position of Group Finance Director until Neil Cooper joined as Chief Financial Officer on 23 November 2015. On 19th January 2017 the Board announced that Neil Cooper has left the company by mutual agreement, effective immediately. David Thomas will reassume temporary responsibility for the finance function supported by both Philip Schumacher and John Flynn, the Group Financial Controller and Housebuilding Financial Controller respectively. Deputy CEO and Chief Operating Officer, Steven Boyes, will continue to support David with his ongoing executive responsibilities. The Board is launching a search for a new CFO and a further announcement will be made in due course.

Mark Rolfe, after eight years of service, has decided to stand down after the 2016 AGM. Mark is a highly valued member of the Board and during his tenure has contributed greatly to the Company’s success.

We undertook a full and formal process to find a new Non-Executive Director (more information is available on page 64) and we are pleased to have secured the services of Jock Lennox. Jock joined the Board on 1 July 2016 and will take over as Chair of the Audit Committee following the 2016 AGM. His biography can be found on page 47 and details of his induction can be found on page 59.

Changes to Regulation

Numerous changes have taken place to the regulatory framework within which we operate. The Board took time to discuss and consider each of these in detail. Particular areas of focus were:

Long term viability statement

The Audit Committee robustly assessed the internal control and principal risks of the business on behalf of the Board. It also considered the period over which the viability of the Company should be assessed and analysed the outcome of the assessment of long term viability over that timescale. The results of this assessment can be seen on page 43 of the Strategic Report.

Modern Slavery Act

During the year, the Company assessed the effect of the Modern Slavery Act (‘MSA 2015’) on its processes, procedures and contracts in addition to our relationships with suppliers and contractors. The Modern Slavery Act Statement as required by MSA 2015 is currently being prepared and will be published on our website, following approval by the Board, no later than 31 December 2016.

Market Abuse Regulation

The Board reviewed the impact of the Market Abuse Regulation including its treatment of inside information; the relationship with our brokers and analysts; the obligations of Persons Discharging Managerial Responsibilities; and the Company’s Share Dealing Code. Following its review and in accordance with best practice, the Board approved the establishment of a Disclosure Committee, adopted a revised Share Dealing Code and updated its procedures and processes to ensure the Company's compliance with the new regulations.

Auditor independence and non-audit fees policy

During the year the Audit Committee reviewed the policy on auditor independence and non-audit fees to take into account the prescribed prohibited non-audit services with effect from June 2016. A cap on fees for permissible non-audit services of 70% (based on the average of the previous three years of audit fees) has been imposed and will be effective from the year commencing 1 July 2019. Further information is contained on page 72.

FY17

Our areas of focus during FY17, amongst other matters, will be:

  • to continually assess the impact on the business of the decision to leave the EU and flex our strategy accordingly;
  • to assess and fully comply with the principles and provisions of the UK Corporate Governance Code issued in 2016;
  • to implement the recommendations arising from the 2016 externally facilitated Board effectiveness review (see page 56); and
  • to conduct a formal process to tender our external audit and taxation services.

You have a strong and experienced Board managing your Company through these uncertain times. The actions that they take over the coming months will be in line with good governance and, in the opinion of the Board, in your best interests.

Our governance structures, processes and the work undertaken by the Board and its Committees during FY16 are set out in pages 48-104 in the 2016 Annual Report and Accounts.

John Allan
Chairman
6 September 2016