Statement of Compliance with the QCA Corporate Governance Code

 The QCA Corporate Governance Code (“QCA”) corporate governance standards that the Board has adopted are designed to ensure that the Company delivers long-term value to its shareholders and that shareholders have the opportunity to express their views and expectations for the Company in a manner that encourages open dialogue with the Board. The Board recognises that its decisions regarding strategy and risk will affect the corporate culture of the Company as a whole and in turn the performance of the Company. An integral part of the Company’s activities is centred upon open and respectful dialogue with investors, whether they beindividuals or corporate. Therefore, the importance of sound ethical values and behaviours is crucial to theability of the Company to achieve its corporate objectives. The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Company does.

The Board reviews investor engagement, public relations and health and safety performance as a routine part of every board meeting to ensure these cultural objectives and the principles defined in QCA code principles 2 – 4, 8 and 10 are being met.

The Board meets regularly throughout the year and during 2021 there were nine full Board meetings. The table below shows the number of meetings held and the individual Director attendance, with all Directors’ attending respective meetings.

Board Audit Committee Remuneration Committee Nominations Committee
J B Annear 6 1
C M Thomson 4 2 1
D Evans-Hughes 7
M Cubitt 9 3 2 2
M Adcock 4 1
B Salgat 9
J Martin 3
N Edington 2 1 1

 

 

 

Jane Annear resigned from the Board of Directors on 31st July 2021 and David Evans-Hughes resigned on 7th September 2021. Miles Adcock joined the Company and the Board of Directors on 21st June 2021 and was joined by Jonathan Martin on the Board of Directors on 1st August 2021. Nat Edington joined as a NonExecutive Director on 27th September 2021. Jonathan Martin resigned from the board on 21st February 2022.

The Board understands that good corporate governance is an important factor in creating a sustainable and efficient business and considers that it does not depart from any of the principles of the QCA.

Principle 1: Establish a strategy and business model which promote long term value for shareholders.

 The Group designs, manufactures, sells and supports high-end embedded computer products for use in a wide range of high-performance, long life cycle applications within the defence, telecommunications, security, telemetry, scientific and aerospace markets, including applications within extremely harsh environments. The computer products feature Intel® processors, including Intel® Core™ processors, Intel® Xeon® and Intel® Atom™ processors. The products are designed to be compliant with industry specifications and support many oftoday’s leading embedded operating systems. The products are sold world-wide.

The Strategic Report section of our annual Report and Accounts (page 1) explains the Group’s business model and strategy, including the key risks in execution and how we address those risks.

Our business model is designed to promote long-term profitable growth and cash generation. Our progressive dividend policy and total shareholder return over the last five years are also indicators of long-term value for our shareholders.

The Group’s growth strategy incorporates organic growth and market share gains together with expansion through acquisitions.

We also believe that remaining on AIM is of long-term value to our shareholders as it offers a combination of access to capital markets, flexibility to make acquisitions, incentives and rewards to Executive Directors and employees through share option schemes, and a regulatory environment appropriate to the size of the Company.

Principle 2: Seek to understand and meet shareholder needs and expectations.

 The Company places a great deal of importance on communication with all shareholders. The Company engages with its shareholders through meetings, informal communications and via stock exchange announcements. Both the CEO and CFO meet formally with institutional shareholders, usually after the interim and full year results announcements, presenting Company results, articulating strategy and updatingshareholders on progress. These meetings also discuss matters pertaining to business performance andgovernance and are used to receive shareholder feedback on any issues or concerns. The feedback received from shareholders has been supportive and positive about the Group strategy and performance.

Trading and other statements are made via the London Stock Exchange during the year. The Company holds its Annual General Meeting (AGM), at which all shareholders can attend and speak with any member of the Board. The CEO provides a business update at the AGM. At this update, shareholders are encouraged to give their views and ask questions.

Shareholders also communicate with the Company by completing an online form, emails and by telephone; we respond to their specific questions and inputs as required. Contact information is available on our website. Company contact details are also included in all announcements and these announcements are available on the Company website 

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

Stakeholders other than shareholders include our employees, customers, suppliers and advisors. These are all key to our short-term and long-term success. More details are provided in the following sections about these key resources and relationships:

Employees
We are not a capital-intensive business but depend upon the skills, capabilities and flexibility of our employees, and our business model depends upon us being agile and responsive.

The ability for the Group to continue to deliver the high-quality goods and services to its customer base is heavily reliant on the staff we employ. To this end, the Group understands the importance of hiring and retaining a highly skilled workforce and keeping employee satisfaction high through several initiatives. A few examples of these initiatives are:

  • competitive remuneration package
  • health benefits
  • paid annual leave
  • a defined contribution pension scheme
  • share options scheme
  • long-service awards

The Company has a Public Interest Disclosure Policy in place to facilitate “whistle-blowing” by employees which protects employees who report wrongdoing within the workplace. This includes the disclosure of information that relates to danger, fraud or other unethical conduct in the workplace. The aim of this Policy is to ensure that as far as possible our employees can communicate wrongdoing at work which they believe has occurred or is likely to occur.

Customers
We are committed to continually striving to improve the quality of service we deliver to our customers. As a specialist high-technology engineering company, we add value by developing and maintaining in depth understanding of our customers’ needs. In most instances long-term relationships are an important part of our culture to establish and maintain relationships of trust.

The Company has a system of monitoring customer comments to assess our performance in satisfying their requirements. Customer feedback informs our decisions on the product portfolio. In addition, we regularly meet our key customers to identify their future requirements and to put to them our ideas on future products that would provide them, and us, with improved Returns on Investment (RoI). This has enabled us to develop the world-leading engineering products we now have, and to put in place longer-term engineering plans.

Suppliers
Given the nature of our supply chain, we must keep in regular contact with key suppliers. This is to allow the Group to be actively connected to our main suppliers’ high technology trends and to ensure continued component delivery to our elevated standards of quality. Supplier relationships are managed across many levels of the Group with regular communication on both strategic matters and day-to-day engagement. The Group prides itself on the longevity of many of these relationships and the key position it holds in the commercial operation of its suppliers.

Advisors
The Board maintains a regular dialogue with the Company’s:

  • Nominated Advisor
  • Stock Brokers
  • Lawyers
  • Financial Advisors

These dialogues help ensure compliance with the AIM Rules, governance requirements and other rules and regulations.

Shareholders
As a publicly listed company, we must provide transparent and easy-to-understand information to ensure that all shareholders understand the Company in which they are invested. We are mandated to adhere to regulatory requirements and this includes:

  • Regulatory News Releases on key events
  • Maintaining an up-to-date website
  • Annual reports and accounts posted to all shareholders
  • AGMs

We maintain close relations with investors by meetings and other general communications. As noted above in Principle 2, regular feedback is obtained from shareholders.

Legislative issues

On the legislative side we ensure that we meet relevant regulatory requirements. Given the nature of our products we have in place procedures to ensure that we are compliant with the RoHS (Restriction of Hazardous Substances), COSHH (Control of Substances Hazardous to Health), DSEAAR (Dangerous Substances and Explosive Atmospheres Regulations) and GDPR (General Data Protection Regulation). In addition, the Company has a policy to maintain a “Conflict Free Material” supply chain, (as outlined in the USA’s Dodd-Frank Act 2010). Data provided by our supply chain is reviewed to ensure, as much as is reasonably practicable, that our products do not contain conflict materials from conflict regions. We buy components either direct from the manufacturer or through manufacturers’ authorised distributors or recognised sourcing agents.

The Group cooperates openly and fully with Government authorities and agencies. All recommendations of such authorities and agencies are implemented as soon as reasonably possible.

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

 The Board has ultimate responsibility for the Group’s system of internal controls and for reviewing its
effectiveness. However, any such system of internal control can only provide reasonable, but not absolute, assurance against material misstatement or loss. The Board considers that the internal controls that are in place, which include various policies and ISO 9001 quality systems, are appropriate for the size, complexity and risk profile of the Group.

The Audit Committee, on behalf of the Board, reviews the risk environment faced by the Group on a regular basis and how the Group manages and mitigates these risks. The Board has effective risk management embedded throughout the organisation which includes approval limits, internal policies, codes of conduct, health and safety and IT controls.

The Board receives an assessment of risks from the Executive Directors. This assessment is reviewed at Board meetings. In addition, the Audit Committee also considers the quality and effectiveness of the Group’s risk management procedures.

A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. The Group’s results, as compared against budget are reported to the Board monthly and discussed in detail at each meeting of the Board. The Group uses a system which includes strategic planning, annual budgets, monthly reviews, KPI (Key Performance Indictors) reporting and forecast updates. Areas covered by this system include revenue, profit, working capital, capital investment and quality. On the recommendation of the Audit Committee, the Board has determined that an internal audit function is not required due to the small size of the Company’s administrative function and the high level of Director review and authorisation of transactions. The Board will keep this matter under review as the Group develops. The principal elements of the Group’s internal control system include:

  • close management of the day-to-day activities of the Group by the Executive Directors
  • an organisational structure with defined levels of responsibility, which promotes entrepreneurial decision making and rapid implementation while minimising risks
  • a comprehensive annual budgeting process producing a detailed Group profit and loss account and
    associated balance sheet, which is approved by the Board
  • detailed monthly reporting of performance against budget
  • central control over key areas such as capital expenditure authorisation and banking facilities
  • extensive ISO 9001 quality system

The Board is not aware of any significant failings or weaknesses in the system of internal control. However, as part of the 2021 audit a historic consolidation error came to light that has required a restatement to prior years in respect of a £0.3m understatement of profit and net assets. Investigations are ongoing to determine the cause and periods impacted

Principle 5: Maintain the Board as a well-functioning, balanced team led by the Chair.

The Board is highly experienced in the markets it addresses. Through the operation of the Board and the subsidiaries’ President, the Board can monitor the business and respond in a timely manner to issues and opportunities as and when they arise.

The Board considers that Mark Cubitt (Chairman) and Nat Edington, who joined the Board during the year, are both independent. Apart from receiving Directors’ remuneration as disclosed in the Report and Accounts, neither of them receives any performance related remuneration or is entitled to participate in any share option scheme or has any other pecuniary relationship or has had in the period under review any transaction with the Company or any of its subsidiaries or its directors or senior management or associates which might in any way affect their judgement as to what is right and proper in performing their duties and responsibilities as Directors of the Company. The Board considers that the Chairman and the other non-Executive Director have both demonstrated their independence of character and judgment over the full period of their association with the Company. Neither the Chairman nor the other non-Executive Director represents the interests of any other shareholders.

Executive Directors work full time in the business and have no other outside business commitments.

All Directors retire and submit themselves for re-election at the Company’s Annual General Meeting on a rotating basis and no Director can hold office for more than three years without being re-elected.

The Board is satisfied that it has a suitable balance between independence and knowledge of the business to allow it to discharge its duties and responsibilities effectively.

 Details of attendance at the Board meetings and the various Committees by Directors are available on page 9 of the Annual Report. This report also details the key experience of each Director on page 7. Between them, the Directors have substantial experience in all aspects of the business: engineering, sales, marketing, support, manufacturing, production, finance and city relations.

Principle 6: Ensure that between them the Directors have necessary up-to-date experience, skills and capabilities.

Each Board member brings a different mix of capabilities, which blend well into a successful and effective team. The Board is satisfied that, between the Directors, it has an effective balance of skills and experience. For example, specialist embedded computing technology and broad experience in sales, operations, international expansion, finance, legal, information technology and capital markets. Board members maintain their skill sets through practice in day-to-day roles, enhanced with attending specific training where required.

All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense. In addition, the Directors have direct access to the advice and services of the Company Secretary.

Board composition is kept under review and the Board is committed to ensuring diversity of skills, experience and gender balance.

Biographies for each Board member are published both on the Company’s website at Biographies and in the Annual Report and Accounts – see Annual Reports.

The Directors receive updates from the Company Secretary and also from various external advisers (including the Auditor, NOMAD and legal advisors) on a number of corporate governance, accountancy and regulatory issues.

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

The ultimate measure of the effectiveness of the Board is the Company’s progress against the long-term strategy and aims of the business. This progress is reviewed in Board meetings. The review takes into consideration various criteria such as the effectiveness of the composition of the Board, the Board’s approach to its work, its culture and dynamics, its structure and processes, its accessibility to information, its success in achieving its goals and the need for succession planning.

The Board is small and focused on implementing the Company’s strategy. However, given the size and nature of the Company, the Board does not consider it appropriate to have a formal performance evaluation procedure in place, as described and recommended in the Code. However, assessment is done on an ongoing and ad-hoc basis. Assessments of all members of the Board are ongoing to ensure that:

  • they are committed to the progress and long-term success of the Group
  • their contribution is meaningful and effective
  • they are progressing within their role
  • high standards of ethics and compliance within the regulatory framework are met
  • if relevant, they maintain their independence

Succession planning is a matter considered by the whole Board from their various points of view (risk, experience, incentivisation etc.). Primary responsibility for developing a succession planning policy currently rests with the Board but most of the responsibility has migrated to the Nominations Committee.

Succession planning processes are under review. Where possible, the Group seeks to promote staff internally but where internal promotion is not possible, the Group uses external advisors to seek appropriately qualified candidates.

Principle 8: Promote a corporate culture that is based on ethical values and behaviours.

The Board is committed to promoting a strong ethical and values driven culture throughout the Group. During 2021 the Group agreed and promoted a new Mission statement:

To excite our Customers, Colleagues and Communities

This is supported by our Vision:

To provide powerful Processor Solutions for your Critical Applications

At the same time our values were restated to all employees:

Improve, Evolve and Grow

We work to improve, evolve and grow our talent and business
Continuous improvement is our norm
Performance and development is at the heart of what we do

Collaborate with Candour

We collaborate with feedback, internally and externally
We act authentically
We challenge the status quo
We have different opinions and embrace them

Enjoy each day

We look after our well-being which enables us to have fun at work
We look out for and support each other
We are excited to come to work

Our values are always communicated to new employees via induction sessions, training and our employee handbook.

We understand that people need to enjoy what they do, and so we recognise those who demonstrate our values both informally and through annual staff appraisals and recognition schemes.

We see a company as a closely knit social unit with an economic output and the success of our social unit depends on the values of honesty, trust, loyalty and working together, with a healthy balance of competition and cooperation, just as in any other unit of society. We try to run our businesses this way.

The Board takes a forward-looking, proactive approach to culture within the Group to achieve a level of
discipline that aids the management and oversight of risk of the business. There are several values that are important to the Group including:

  • promoting a culture of respect and tolerance: team members work well together across a broad range of projects; being a team player, “honesty” and straightforwardness in the office and among employees are values that are highly regarded
  • importance of the customer: the Company recognises that the business would fail without the loyalty of our customers. Overall customer satisfaction is monitored through customer satisfaction surveys,
    enabling us to note areas of strength and improve areas of weakness
  • innovation: there is a very strong research and development theme in the Group in order to continue to develop new products and technologies for our customers

The Group has various other ethical policy and procedures, and these include:

Anti-bribery and Corruption Policy

The Group is committed to the prevention, deterrence and detection of fraud, bribery and all other corrupt business practices and so has an Anti-Bribery and Corruption Policy. It is the policy of the Group to conduct all of its business activities with honesty, integrity, and the highest possible ethical standards. This Policy is reviewed regularly and was last updated in March 2018.

Cyber risk
The Group has a Network/Computer Security Policy which covers physical and cyber security of its assets, employees and information. The Group’s Security Policy is frequently reviewed, taking account of best practice and requirements in government and industry, and was last updated in August 2018. The Company is Cyber Essential certified which demonstrates that the Company has methods in place to provide protection against a wide variety of the most common cyber-attacks. Cyber Essential is backed by the UK Government’s National Cyber Security Centre.

The Group has undertaken a full review of its requirements under the General Data Protection Regulation (GDPR), implementing appropriate policies and procedures to ensure compliance.

Group-Wide Dealing Policy
The Group has a Group-Wide Dealing Policy which imposes restrictions on transactions in the Company’s securities beyond those imposed by law. Its purpose is to ensure that Directors, employees and other restricted persons do not abuse, and do not place themselves under suspicion of abusing, inside information that they may be thought to have, especially in periods leading up to an announcement of the Company’s results.

Disaster Recovery
The Company and its subsidiary in the US have Disaster Recovery Plans in place.

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

 The Board typically meets at least seven times per annum and further meetings are held by telephone as necessary. There were nine meetings in 2021. The Company Secretary also attends, and full minutes are taken. For these meetings reports are produced in relation to finance, sales, marketing, engineering and operations.

The CEO and Chairman have a standing call every two weeks to discuss current issues with a wide variety of topics covered in 2021.

A formal Board programme is agreed before the start of each financial year. This is structured, as far as possible, to align with the Group’s annual financial programme.

A business update is made available to all Board members in advance of scheduled meetings, covering both operational and strategic matters.

The Board is responsible for the long-term performance of the Group. Specific matters are reserved for the Board. These include Group strategy, corporate and capital structures, approval of key financial matters (annual and interim results, budgets, dividend policy) and Board membership and remuneration.

The Board is supported by the Audit, Remuneration and Nomination Committees. Each Committee has access to the resources, information, and advice that it deems necessary, at the Group’s expense, to enable the Committee to discharge its duties.

The Board has established the following Committees with formally designated rules and responsibilities. The majority of the members of each committee are Non-Executive Directors. The Committees are:

  • Remuneration committee: The function of this Committee is to review and recommend compensation
    strategies to recruit and retain Executive Board members of a sufficient calibre to deliver the Group’s plan. Members are Mark Cubitt (Chairman) and Nat Edington, both of whom are independent non-Executive Directors. The Terms of Reference for this Committee can be seen here.
  • Audit committee: The function of this Committee is to review the audited financial statements and the
    report of the Group’s appointed auditors, and to oversee the procedures relating to risk reduction. They oversee the effectiveness of resultant corrective and/or preventative measures. Members are Mark Cubitt (Chairman) and Nat Edington, both of whom are independent non-Executive Directors. The executive member of the committee is Miles Adcock (CEO). The Terms of Reference for this Committee can be seen here.
  • Nominations and Governance committee: This Committee’s remit is to meet as necessary to consider appointments to the Board of Directors and to co-ordinate succession planning. Members are Mark Cubitt (Chairman) and Nat Edington, both of whom are independent non-Executive Directors. The Terms of Reference for this Committee can be seen here.

The roles of the Chairman, CEO and Company Secretary are as follows:

Chairman: The Chairman has overall responsibility for corporate governance and promoting high standards throughout the Group. Leading and chairing the Board is another key responsibility by ensuring that the Committees are properly structured, quorate and have the appropriate information and resources with which to perform their functions. The Chairman is instrumental in developing strategy and setting objectives for the Group and overseeing communication between the Group and its shareholders.

CEO: the Chief Executive Officer provides leadership and management to the Group. The CEO pushes the development of objectives, strategies and performance standards whilst also overseeing and managing key risks that may be present and also keeps the Board updated on employee and other key stakeholders on relevant matters. Investor relations are another key role to ensure that communications with the Group’s existing shareholders and financial institutions is maintained.

Company Secretary: The Company Secretary is responsible for providing a clear and timely information flow to the Board and its Committees and supports the Board on matters of corporate governance and risk. This role is fulfilled by Cargil Management Services Ltd. The Company Secretary is responsible for ensuring that Board procedures are followed, and applicable rules and regulations are complied with. In addition, they can act as a link between the Company and shareholders on matters of governance and investor relations ensuring that the Board is kept informed of their opinions.

The Board is committed to an improvement in its governance approach and aims to enhance and develop compliance with best practice as appropriate for the size of the Company

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

The Group communicates with shareholders through the Annual Report and Accounts, Interim Accounts, the AGM and one-to-one meetings with certain existing or potential new shareholders. A report from the Remuneration Committee is set out within the Annual Report and Accounts which can be viewed at Annual Reports.

The results of the voting at the AGM held on 15 June 2021 can be seen on the Company’s website at AGM Voting Results. All the resolutions proposed at the last AGM passed.

The Company’s website includes historic annual accounts and AGM notices for the last five years – see Annual Reports.

In formally adopting the Code as its governance framework, the Board has reviewed all aspects of compliance and has acted to improve disclosures on its website.

All trademarks, registered trademarks and trade names used in this statement are the property of their respective owners.

The above information is provided for the purpose of Rule 26 of the “AIM Rules for Companies”.

Last Updated: 22 August, 2022