CORPORATE GOVERNANCE
CORPORATE GOVERNANCE COMPLIANCE STATEMENT
The Company has complied throughout the financial year with the provisions set out in Section 1 of The Combined Code (2008) issued by the Financial Reporting Council in June 2008 (the ‘Combined Code’), except as explained below.
CORPORATE GOVERNANCE POLICY STATEMENT
The Board supports best practice in corporate governance and the policy of the Board is to manage the affairs of the Company in accordance with the principles of the Combined Code so far as the Board believes it is practical given the small size of the Company’s Board. This statement describes how the Company applies the principles of the Combined Code.
BOARD OF DIRECTORS AND COMMITTEE STRUCTURE
The composition of the Board has not changed during the course of the year.
The Board is responsible for setting the Company’s strategic objectives and managing the Company’s resources to enable those objectives to be met. The Board currently comprises the Non-executive Chairman, the Chief Executive, the Finance Director and three other Non-executive Directors. The Senior Independent Non-executive Director is John Barnes.
The division of responsibility between the Chairman and the Chief Executive is clearly defined and has been agreed by the Board. The Chairman is primarily responsible for the workings of the Board. The Chief Executive is responsible for running the Group’s business, for implementing Board strategy and policy and for shareholder communication. The Chairman also ensures that Directors maintain the appropriate skills and knowledge to fulfil their responsibilities and that the Company provides the necessary resources to Directors to enable this to be achieved. The Company Secretary advises the Chairman and the Board on all governance matters. The Company maintains insurance cover in respect of legal action against its Directors. Independent professional advice may be taken by the Directors as required.
The Board has in place a number of key processes designed to ensure that management responsibilities are clear. Executive Directors distribute relevant information and key financial reports to Board members in advance of each meeting, together with other materials required to facilitate proper consideration of business issues. A schedule of reserved matters for the Board has been established and communicated to the Senior Management teams.
The Board considers Piers Pottinger, John Barnes and Jon Holmes to be independent. As reported in note 25 of the Annual Report, certain transactions have been entered into with subsidiaries of Chime Communications Plc (Chime) of which the Non-executive Chairman, Piers Pottinger, is an Executive Director. The Board confirms that Piers Pottinger is not involved in either the management of the day-to-day relationships held by Chime with Sportech PLC or indeed influences the decisions made by the Sportech Executive Management team in their selection of advisers. Accordingly the Board considers Piers Pottinger to be independent.
The role of Company Secretary is joined with that of Finance Director. Whilst the Company recognises that the combining of such roles is not considered best practice, the Company considers that it is appropriate in this instance, due to the size of the Company. However, it is the intention of the Board, following the completion of the acquisition of SGR, to split the role of Company Secretary and Finance Director. The Company takes legal advice where appropriate to ensure compliance with best practice.
A Management Committee, chaired by the Chief Executive, oversees the detailed operations of the business. The Committee meets formally each month to review the performance of each business segment and progress against key operational targets.
The Committees of the Board are the Audit Committee, Remuneration Committee and the Nomination Committee. Each Committee has written terms of reference which are available on the Company’s website.
THE AUDIT COMMITTEE
The Audit Committee of the Board comprises the Non-executive Directors, excluding the Non-executive Chairman, and is chaired by John Barnes who is considered to have recent, relevant, financial experience. The Committee is scheduled to meet at least three times a year to consider aspects of internal control, accounting policies, audit planning and areas of critical judgement such as the carrying value of goodwill and intangible assets and both the interim and annual financial results. The Finance Director and other Senior Management are invited to attend the Committee as appropriate.
The Committee is responsible for the relationship with the external auditors. The Committee considers the nature and extent of non-audit services provided by the auditors in order to seek to balance the maintenance of objectivity, access to applicable technical expertise and value for money. Non-audit engagements are only awarded to the auditors with the agreement of the Committee. The auditors are also subject to professional standards that safeguard the integrity of their auditing role.
The Committee meets at least annually with the external auditors without the presence of the Executive Directors.
The Company has reached its decision to re-appoint the auditors on a recommendation by the Audit Committee.
THE REMUNERATION COMMITTEE
The Remuneration Committee of the Board comprises the four Non-executive Directors and is chaired by John Barnes. The purpose of the Committee is to ensure that the remuneration of Executive Directors and Senior Executives, together with their terms and conditions of employment, is sufficient to recruit and retain individuals of the calibre required to ensure profitable growth of the business. The Committee gives full consideration to the principles of the Combined Code. The Remuneration Report is set out on pages 27 to 32 of the Annual Report.
THE NOMINATION COMMITTEE
The Board has determined that it is appropriate for matters that would normally be delegated to a Nomination Committee to be referred to the full Board. The Board, acting as a Nomination Committee, meets as appropriate to carry out the selection process for new Board members and to propose any new appointments to the Board, whether Executive or Non-executive.
The terms of reference of the Audit, Remuneration and Nomination Committees are available on request from the Company Secretary
and are available on the corporate website, www.sportechplc.com.
BOARD AND COMMITTEE MEMBERS
Main |
Audit |
Remuneration |
Nomination |
|
Board |
Committee |
Committee |
Committee |
|
| Number of meetings held in year | 8 |
2 |
2 |
— |
| Executive Directors | ||||
| Ian Penrose | 8 |
— |
— |
— |
| Steve Cunliffe | 7 |
— |
— |
— |
| Non-executive Directors | ||||
| Piers Pottinger | 8 |
0 |
0 |
— |
| John Barnes | 7 |
2 |
2 |
— |
| Kathryn Revitt | 8 |
2 |
2 |
— |
| Jon Holmes | 8 |
2 |
2 |
— |
All eight of the main Board meetings held in the year were scheduled Board meetings.
BOARD PERFORMANCE EVALUATION
The Board does not currently undertake formal annual evaluation processes to evaluate its own performance, the performance of the Board Committees or the performance of individual Directors. Given the size of the Group and the composition of the Board, the Board considers that such formal evaluation is not necessary.
INVESTOR RELATIONS
There is regular dialogue with shareholders through a planned programme of investor relations which includes formal presentations of the Company’s results by the Chief Executive and Finance Director. Meetings also take place with institutional investors and analysts on a regular basis and there is regular communication with shareholders through the Annual and Interim Reports and a corporate website
(www.sportechplc.com). They are also available at other times, outside close periods, to enter into dialogue with these shareholders. All shareholders have the opportunity to question the Board at the AGM both formally and informally. The Non-executive Directors have taken steps to develop an understanding of the views of the major shareholders about the Company through face to face contact and analyst and broker briefings.
The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. All subsidiary companies utilise the services of a common accounting centre and Group services function and all companies in the Group adhere to a common standard of control. Controls are monitored by management review.
The Board meets regularly and its agenda includes an item on governance, which includes consideration of points regarding risk and control. The emphasis is on obtaining the relevant degree of assurance and not merely reporting by exception.
The Board has put in place an organisational structure with clearly defined lines of responsibility and delegation of authority. Authorisation procedures in respect of matters such as treasury transactions, investments and capital expenditure are clearly defined.
The Group does not have an internal audit function. The Audit Committee has considered the use of an internal audit function during the year but considered that due to the size and nature of the Group there is not a requirement for such a function. The Audit Committee will review the requirements for the use of an internal audit during 2010.
The Audit Committee reviews the effectiveness of the internal control environment of the Group. It receives reports from the external auditors, which include recommendations for improvement. The Audit Committee’s role in this area is confined to a high-level review of the arrangements for internal control. Significant risk issues are referred to the Board for consideration. The high-level risks relating to the Gaming businesses are controlled centrally via an ongoing process for identifying, evaluating and managing the Group’s significant risks. The Group employs a Director of Corporate Affairs, one of whose roles is to ensure compliance with the terms and conditions of the Group’s gambling licences. In addition, the Group employs a Security and Compliance Manager whose primary function is to ensure that customers are treated fairly, the Group’s advertising is compliant with codes, the young and vulnerable are prevented from accessing the Group’s products and that abuse and illegal behaviour are identified and stopped. A Schedule of Strategic Risks is produced, maintained and presented to the Audit Committee and Board.
To manage lower level risks, a risk management programme is in place, supported by a business control and risk self-assessment process and a business continuity plan. The risk management programme places responsibility on managers to identify risks facing each business unit and for implementing procedures to mitigate these risks. The risk appraisal process has been reviewed by the Board and accords with the Turnbull Guidance. The Audit Committee and Board have reviewed the effectiveness of the internal controls of the Group for the year ended 31 December 2009 up to the date of approval of the Accounts and this review covered financial, operational, risk management and compliance controls.
WHISTLEBLOWING POLICY
The Combined Code states that the Audit Committee should review arrangements by which staff of the Group may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. An appropriate policy in respect of this has been in place throughout the year.
MONTHLY FINANCIAL REPORTING
The Group performs an annual strategy and budgeting process and the Board approves the annual Group budget as part of its normal responsibilities. The Group results are reported monthly to the Board. Revised forecasts are produced for the Board whenever significant financial trends are identified.
By order of the Board
STEVE CUNLIFFE
COMPANY SECRETARY
25 MARCH 2010
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