Last reviewed on 17 September 2019

The Group is committed to maintaining high standards of corporate governance. The Board recognises the importance of good corporate governance under AIM Rule 50 and is accountable to the Company’s shareholders and stakeholders for its adoption throughout the Group. To facilitate this, we have adopted the Quoted Companies Alliance Corporate Governance Code 2018 (QCA Code).

This statement describes how the Group has complied with the ten high level principles set out in the QCA code.

1. Establish a strategy and business model which promote the long-term value for shareholders

The Board has established a core strategy to buy and build engineering companies in niche markets where we see consolidation opportunities; a strategy we call Pinpoint-Invest-Exit (“PIE”) which seeks to promote long-term value for shareholders.

2. Seek to understand and meet shareholder needs and expectations

The Board attaches a high level of importance to maintaining good relationships with shareholders, whether they are institutions or private investors and all stakeholders and representing and promoting their interests, as well as being accountable to them for the performance and activities of the Group. The Board believes it is important to engage with its shareholders and aims to do this through presentations, conference calls, face-to-face meetings and the Annual General Meeting. Following the announcement of the Group’s half-year and year-end results, presentations are made to analysts and major shareholders to update them on progress and invite them to ask questions.

The Board is updated on the latest shareholder information by the receipt of shareholder register movements, analyst reports and feedback from the Group’s brokers, following investor road shows after half-year and year-end results.

The Board encourages all Directors to attend the Annual General Meeting as an opportunity to communicate directly with investors and actively encourages participative dialogue.

The Company provides contact details on its investor relations page on the Company’s corporate website:  www.avingtrans.plc.uk.

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success

The Board recognise that our customers, suppliers and employees are crucial to the Group’s success. The Group’s responsibilities, policies and controls on Health, Safety and Environment (HSE) and Social Responsibility are set in the latest annual report.

We have established long-term relationships with key customers and suppliers. We encourage feedback from our employees to improve the culture and working environment of the Company and holds regular meetings to keep them informed on matters affecting them directly and on financial and broader economic factors affecting the Group. There are specific information channels in respect of health & safety matters. The Group has a proactive approach to health, safety and the environment and is committed to the highest practicable standards of safety and health management and the minimisation of adverse environmental impacts.

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Board’s approach to risk is intended to protect the interests of our shareholders and other stakeholders whilst allowing the business to develop. Our risk appetite depends on the nature of an individual risk and it is considered in Board discussions and also as part of our risk review process in the Audit Committee. From time to time, we obtain advice from third party experts, in a cost effective manner, to complement in-house knowledge.

The long-term success of the Group relies, in part, on managing the risks to our business. Whilst the Group has risk management policies and practices in place, which address and monitor risk, we seek to improve those practices each year. The Chief Financial Officer is responsible for risk management on behalf of the Board and the Audit Committee reviews the risk register on a regular basis. Ultimately, our aim is to ensure that risk management is embedded within the core processes of our business units.

The Group uses a risk register to help coordinate its risk management process. The risk register identifies the key business risks and documents the policies and practices in place to mitigate those risks.

We classify the principal risks to the business into three groups, namely, strategic risk, operational risk and financial risk. The principal risks identified by the Directors under these groups are set out in the latest annual report. The risks considered during the Group-wide risk management process cover a wider range of issues than the key risks.

The Board, through the Audit Committee, reviews the operation and effectiveness of the systems of internal control throughout the accounting year and the period to the date of approval of the financial statements, although it should be understood that such systems are designed to provide reasonable, but not absolute assurance against material misstatement or loss. The Group’s system of controls includes:

  • A comprehensive budgeting system with annual budgets approved by the Directors. Monthly monitoring of actual results against budget and regular review of variances.
  • Close involvement of Directors, who approve all significant transactions.
  • Internal management rules which include financial and operating control procedures for all management of the Group.
  • Identification and appraisal by the Board of the major risks affecting the business and the financial controls.
  • Bank facilities and other treasury functions, which are monitored and policy changes approved by the Board.

The Board has considered the need for an internal audit function and concluded that this would not be appropriate at present due to the size of the Group.

5. Maintain the Board as a well-functioning, balanced team led by the chair

The Board of Avingtrans plc comprised two Executive Directors and three Non-executive Directors for the majority of the year following the resignation of E Lloyd-Baker (30 November 2018). The Board is chaired by R S McDowell and assisted by the Senior Independent Non-executive Director G K Thornton, who have primary responsibility for running the Board.

S McQuillan, has executive responsibilities for the remaining operations, results and strategic development of the Group. S M King is Chief Financial Officer and Company Secretary. The Board structure ensures that no individual or group dominates the decision making process.

The Non-executive Directors are considered to be independent of management and from any business relationship which could materially interfere with their independent judgement. The Senior Independent Non-executive Director is available to shareholders if they have concerns.

The Board meets regularly with no less than ten such meetings held in each calendar year rotating locations around different business units. There is a formal schedule of matters specifically reserved to the Board for its decision to enable it to manage overall control of the Group’s affairs. Management has an obligation to provide the Board with appropriate and timely information to enable it to discharge its duties. The Chairman ensures that all Directors are properly briefed on issues arising at Board meetings.

The Nominations Committee is responsible for monitoring and reviewing the membership and composition of the Board, including the decision to recommend the appointment, or to re-appoint a director.

The Company’s Articles of Association ensure Directors retire at the third Annual General Meeting after the Annual General Meeting at which they were elected and may, if eligible, offer themselves for re-election.

R S McDowell chairs the Nominations Committee, L J Thomas chairs the Audit Committee and G K Thornton chairs the Remuneration Committee. The Non-executive Directors including J S Clarke and the Chairman are members of all the above committees.

6. Ensure that between them the directors have the necessary up-to-date experience and capabilities

The Board reviews its configuration to ensure it has the skills and oversight capability in key markets on a regular basis, strengthening our ability to leverage shareholder value via the PIE strategy.

All new Directors receive a full, formal and tailored induction on joining the Board, including meetings with senior management and advisers and visits to the Group’s operational locations. Training requirements are reviewed periodically and appropriate refreshers scheduled.

The Board calendar is planned to ensure that Directors are briefed on a wide range of topics throughout the year and meetings are rotated around business units, to ensure the Non-Executive Directors have the opportunity to visit sites and discuss aspects of the business with employees.

All Directors have access to the services of the Company Secretary and may take independent professional advice at the Group’s expense in the furtherance of their duties.

7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement.

The Chairman reviews the Board’s annual performance and measures its effectiveness and that of its Committees. Each Board/Committee member completes an assessment, which provides numeric scoring against specific categories. Each Board/Committee member also provides recommendations for improvement of the effectiveness of the Board/Committee.

The criteria for effectiveness include assessing:

  • Board/Committee composition (including succession planning);
  • Board/external reporting and information flows;
  • Board Process, Internal Control & Risk Management
  • Board Accountability
  • Executive management effectiveness;
  • Standards of Conduct

Alongside this review each Director receives an appraisal. The Chairman conducts appraisals in respect of the Group Chief Executive and Non-Executive Directors; the Non-Executive Directors (following discussions with the other Directors) conducts the Chairman’s appraisal; and the Group Chief Executive conducts appraisals in respect of the other Executive Directors.

8. Promote a corporate culture that is based on ethical values

Culture

The Company has a strong ethical culture based upon its Code of Ethics and the Company values Integrity, Quality, Agility. The Company’s reputation is built on our values as a company, the values of our employees, and our collective commitment to acting at all times with integrity.

Part of the work of the Audit & Risk Committee involves reviewing the Group Whistle-Blowing Policy, by which employees of the Group may, in confidence, raise concerns about possible financial or other improprieties.

The Board’s corporate governance structures are reviewed as part of the Board and Committee effectiveness process described above.

Compliance with laws

The Group has systems in place designed to ensure compliance with all applicable laws and regulations and conformity with all relevant codes of business practice.

Compliance with the Bribery Act 2010 involves an Anti-Corruption Policy and a Group Whistle-blowing Policy. Training is given to all appropriate employees through the use of online tools, to ensure that there is full understanding of the Bribery Act 2010 and awareness of the consequences of not adhering to Group policies.

The Group has taken the appropriate steps to comply with the provisions of the Market Abuse Regulation and the Modern Slavery Act. The Group has also taken appropriate steps to comply with the General Data Protection Regulation (GDPR) and has appointed a Data Protection Officer, who is responsible for managing information governance and implementing the requirements of GDPR.

Safety, health and environment

The Group has a proactive approach to Safety, Health and the Environment and is committed to the highest practicable standards of safety and health management and the minimisation of adverse environmental impacts.

The Board ensures that Health and Safety issues for employees, customers and the public are of foremost concern in all Group activities. The Group Chief Executive, supported by external advice, is charged with overall responsibility. The Group encourages both internal and external training through a formal network of full-time officers and Health and Safety nominated “champions” at all levels. Statistical analysis is used to highlight any areas where additional training or improved working practices would be beneficial, and positive action is promptly implemented. All divisions have formulated safety management systems.

Insider trading

The Board has appropriate policies and procedures in place to guard against insider trading by employees including Directors.  Appropriate clearances are required in order that trades can be made and all applicable employees are made aware of relevant close periods prior to financial results being announced.

9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

The Board

Please see details above at “5. Maintain the Board as a well-functioning, balanced team led by the chair” and has a schedule of matters which are specifically reserved for its decision.

Board Committees

The Board has three Committees that assist in the discharge of its responsibilities:

  • Remuneration;
  • Audit & Risk; and
  • Nominations.

Remuneration Committee

The Remuneration Committee is responsible for making recommendations to the Board on the Group’s framework of executive remuneration and its cost. The Committee determines the contract terms, remuneration and other benefits for each of the Executive Directors, including performance-related bonus schemes, pension rights and compensation payments. The Board itself determines the remuneration of the Non-Executive Directors. The Remuneration Committee comprises the Non-Executive Directors.

Audit & Risk Committee

The Audit & Risk Committee comprises the Non-Executive Directors. The Committee meetings are also attended, by invitation, by the Chief Executive and Group Finance Director. The Committee meets not less than two times annually.

The Committee is responsible for reviewing a wide range of financial reporting and related matters including the annual accounts before their submission to the Board. The Committee is required to focus in particular on critical accounting policies and practices adopted by the Group, and any significant areas of judgment that materially impact reported results. It is also responsible for monitoring the internal controls that are operated by management to ensure the integrity of the information reported to the shareholders

The Committee provides a forum for reporting by the Group’s external auditors, and advises the Group Board on the appointment, independence and objectivity of the external auditors and on their remuneration both for statutory audit and non-audit work. It also discusses the nature, scope and timing of the statutory audit with the external auditors.

Nominations Committee

The Nominations Committee is responsible for reviewing the structure, size and composition required of the Board when compared to its current position, and it makes recommendations to the Board with regard to any changes. It considers and reviews succession planning for Board Directors, taking into account the challenges and opportunities facing the Company. It identifies and nominates for Board approval suitable candidates to fill Board vacancies as and when they arise, and it keeps under review both the Executive and Non-Executive leadership needs of the Company to enable the Company to compete effectively in the marketplace and to ensure it has the skills and oversight capability in our key.

The Nominations Committee also has responsibility for overseeing the re-election by shareholders of any director under the ‘retirement by rotation’ provisions in the Company’s articles of association.

Executive Management Committee

The Board is supported by Executives, who meet at least quarterly to review performance and governance for the Group and regularly perform site visits.

Evolution of governance framework

The Board continuously monitors its composition and governance framework, taking into account effectiveness and the Company’s plans for future growth.

10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and relevant stakeholders

The corporate governance principles are set out in this statement governance above and the performance of the Company is set out in the latest annual report.

The Board maintains an active dialogue with both its institutional and private investors and stakeholders through the Annual Report, full-year and half-year announcements, the Annual General Meeting, General Meetings and one-to-one meetings with larger existing, or potential new shareholders.

The Board encourages all Directors to attend the Annual General Meeting as an opportunity to communicate directly with investors and actively encourages participative dialogue.

The Company provides a full range of corporate information (including all Company announcements, Annual and half year Statements and presentations, contact details) to shareholders, investors and the public on the Company’s corporate website:  www.avingtrans.plc.uk.