There are three key elements of my role as Chairman:
- To lead the Board ensuring its effective management of the Group's operations.
- To meet major Shareholders and take on board their concerns.
- To oversee the adoption, delivery and communication of the Group's corporate governance model.
This final element is vitally important as it underpins all our activities; without effective corporate governance we are considerably hampered in achieving our goals.
We welcome the recent requirement for all AIM companies to adopt a corporate governance code and believe that the QCA Code best suits Flowtech Fluidpower plc at this stage in our development.
We have aspirations, at some future point, to join the main market and, as such, we will be working hard to meet the requirements of the UK Corporate Governance Code.
We reported our adoption of the QCA Code in September. At this time we were pleased to note that the cornerstones of good corporate practice were firmly in place, and had been since we came to the market in 2014. We also recognised the need to demonstrate this by improving our documentation of processes as well as communicating ever more effectively with stakeholders.
We have a clear strategy and business model, focused risk management, an effective and experienced Board, appropriate governance structures and good dialogue with our major Shareholders. We will continue to develop our culture and our dialogue with the wider stakeholder interests as well as all classes of Shareholder.
We need to enhance our processes to ensure the effectiveness of the Board, not least being a formal assessment of my own performance. We have found, however, that with a small, tightly knit and enthusiastic Board, the openness and desire to contribute have led to almost constant suggestions for improvement. Examples of this have included:
- A clear focus on talent management and putting in plans to develop not only the leaders of our business right now but those who will be able to develop into such roles in the future.
- The establishment of a number of subcommittees to focus on a broad range of areas including product quality, business continuity, health & safety, IT steering and financial control.
- An assessment performed by external advisers as to the degree to which our staff are engaged with our management in each of our businesses. While the results overall are pleasing it is very encouraging to see actions being put in place to address any development points which have arisen as a result of this exercise.
The Board aims to promote and maintain a culture of integrity across all businesses within the Group.
All new Companies joining the Group are integrated quickly, removing any administrative burden, and enabling each company to focus on maximising commercial gain. A specific 100-day plan is rolled out by the Acquisitions Team which aims to streamline accounting, payroll, HR, systems and health and safety processes. Standard Practice Instructions (SPIs) help guide personnel and ensure consistency across the Group. These SPIs include chapters on business ethics and focus on the high standards expected as part of the Group. They are supplemented by a Group Employee Handbook, and are accessible to all employees either in written or electronic formats.
An open culture is encouraged within the Group, with regular communications to employees regarding progress and business updates. Employee feedback is encouraged through line management and committee discussions.
The Group places significant emphasis on developing talent from within, continually evaluating employee performance and supporting training requirements through a flexible appraisal process driven at 'local' level, which will add value for the business and its long-term goals.
Over the last year the restructuring of the executive team, our focus on people and talent management, the regular PCD conferences and training events have provided additional opportunities to promote and monitor a healthy corporate culture. The regular contact between the PCDs and the executive team, along with the employee engagement and satisfaction surveys provide important feedback to the Board as to the current state of the Group's culture.
Other than the changes to the Board and senior management described elsewhere, there have been no significant changes to our governance arrangements. A key objective of our IT strategy is to improve control and efficiency by centralising routine accounting and administrative procedures. During the year an interface design to transfer data regarding inventory purchase invoices from seven profit centres to the central payments system, despite assurances from our IT contractors, was found not to be working as intended. More labour-intensive manual procedures were implemented to replace the interface but there were backlogs in processing and reconciliation activities. Processing delays were eliminated quickly and most reconciliations had been completed by the commencement of the year-end audit. Unfortunately, some reconciliations took longer than expected to complete. This resulted in additional efforts for the central finance team and required extended audit procedures by Grant Thornton causing slippage in the overall audit timetable. All reconciliations were completed satisfactorily and procedures are now in place to prevent a recurrence of the situation. Further implementation in controls are planned before half year.
I am pleased that we have been able to start a programme whereby the operation of basic, but important, controls is tested on a regular basis.
We have made significant investment in the central team with recruitment into areas such as finance, internal audit, business processing and credit control. We believe we now have the foundations which see the Group well placed to control the operations we have today as well as those which we develop into in future years.
I believe that the current Board has an appropriate balance of sector specific and public market skills and experience to add strength and objectivity to the pursuit of our strategic goals. As the Group develops the composition of the Board will be reassessed regularly to ensure that its skills and experience remain appropriate.