Appointments and re-elections to the Board
The Chairman and the other non-executive directors are
appointed for an initial period of three years which, with the
approval of the Nominations Committee and the Board, would
normally be extended for a further three years. In exceptional
circumstances, appointments of non-executive directors may be
extended beyond six years, with the approval of the Nominations
Committee, the Board and the individual director concerned, if it
is in the interests of the Group to do so.
Under the Company’s Articles of Association, each director is
required to be re-elected at the third Annual General Meeting
following that at which he or she was last elected or re-elected.
John Potter and Gareth Rhys Williams will retire and will be
proposed for re-election at the 2005 Annual General Meeting.
Two new non-executive directors were appointed during the
year, Nigel Moore, on 1 March 2004 and Michael Harper on 14
June 2004. Mr Moore was appointed as a member of the Audit
Committee and he took over the chairmanship of that
Committee on 31 August 2004. Mr Harper took over as
Chairman when Alison Carnwath stepped down at the end of
October 2004. Mr Moore’s appointment was approved by
shareholders at the 2004 Annual General Meeting. Mr Harper
will be proposed for election at the 2005 Annual General
Meeting.
Mr Potter has now completed six years service as a nonexecutive
director. He has significant business experience and
detailed knowledge of the Group and has been asked, and has
agreed, to continue in his current role for a further period. At the
appropriate time, the Nominations Committee will undertake a
search for his successor.
Relations with Shareholders
The Board recognises the importance of maintaining regular
contact with its shareholders to ensure that its businesses,
strategy and remuneration policies are understood and that any
concerns are addressed in a constructive way. The Board
communicates with its shareholders through a combination of
public announcements through the Stock Exchange, analyst
briefings and press interviews at the time of the announcements
of the interim and the full year results and, when appropriate, at
other times in the year. The executive directors and the
Chairman also meet with investors from time to time during the
year. The annual general meeting offers a further opportunity for
the directors to meet with shareholders.
At meetings of shareholders, the level of proxy votes received,
together with the numbers of votes in favour, against and
withheld, is announced after each resolution has been dealt with
on a show of hands. Separate resolutions are proposed for each
issue upon which shareholders are asked to vote. The Group’s
website is being expanded to contain details of the resolutions
and the voting thereon.
The Company has complied with the requirement set out in the
Code in respect of shareholders’ meetings to send the notice of
annual general meeting and related papers at least 20 working
days before the meeting. It will continue to comply with the
requirement.
Internal control and risk management
The Board is responsible for the Group’s system of internal
control to safeguard shareholders’ investment and the
Company’s assets. As part of its responsibility, the Board
regularly, and at least annually, reviews the effectiveness of its
internal controls. The Group has systems and procedures for
internal control that are designed to provide reasonable control
over the activities of the Group and to enable the Board to fulfil
its legal responsibility for the keeping of proper accounting
records, safeguarding the assets of the Group and detecting
fraud and other irregularities. However, it is recognised that it is
in the nature of any business that business and commercial
risks must be taken and that for a business to succeed,
enterprise, initiative and the motivation of employees are key
elements that must not be unduly stifled. It is not the intention
of the Group to avoid all commercial risks and commercial
judgements will have to be made in the course of the
management of the business.
The Board has adopted a risk-based approach to establishing
the system of internal control. The application, and the process,
followed by the Board in reviewing the effectiveness of the
system of internal control during the year are as follows:
- operating company management is charged with the ongoing
responsibility for identifying risks facing each of the businesses
and for putting in place procedures to monitor and manage
risks.
- the responsibilities of the chief executive officer and chief
financial officer at each operating unit to manage risks within
their businesses are periodically reinforced by Group executive
management.
- major commercial, technological and financial risks to the
Group are formally assessed during the annual long-term
business planning process around mid-year. These plans and
the attendant risks to the Group are reviewed and considered
by the Board.
- large capital projects, product development projects and
acquisitions and disposals require Board approval.
- the process by which the Board reviews the effectiveness of
internal control has been agreed by the Board and
documented. This involves regular reviews by the Board, of
the major business risks of the Group together with the
controls in place to manage those risks as reported to the
Board by the chief executives of each division. In addition,
each year businesses formally review, in detail, all of their
business risks and their internal controls, including finance,
cash, IT, sales, purchasing and logistics. They then prepare
statements that describe the extent of their compliance with
control objectives. These statements are approved by the chief
executive officer and chief financial officer of each operating
unit and submitted to Group executive management for
review. Any significant matters arising from this review are
formally reported to the Board by the Finance Director. The
risk and control identification and certification process is
monitored and periodically reviewed by Group financial
management.
- A centralised database of risks facing the Group, as well as
each individual business, and an evaluation of the impact and
likelihood of those risks is maintained and updated regularly.
- The Board has established a control framework within
which the Group operates. This contains the following
key elements:
- organisational structure with clearly defined lines
of responsibility, delegation of authority and
reporting requirements.
- defined expenditure authorisation levels.
- on-site and telephone conferencing operations reviews
covering all aspects of each business are conducted by
Group executive management on a regular basis throughout
the year.
- comprehensive system of financial reporting. The annual
budget and long term plan of each operating company are
reviewed in detail and approved by the executive directors.
The Board approves the overall Group’s budget and plans.
Monthly actual results are reported against prior year and
monthly budgets. Forecasts are revised where necessary but
formally at least once every quarter. Any significant changes
and adverse variances are questioned by the Group
executive directors and remedial action is taken where
appropriate. Group tax and treasury is co-ordinated
centrally. There is weekly cash and treasury reporting to
Group financial management and periodic reporting to the
Board on the Group’s tax and treasury position.
The Board considers that it has fully complied with the Code
during the year and up to the date of approval of the annual
report and accounts and that it accords with Turnbull guidance.
The Group does not have an internal audit function. However,
the need for such a function is regularly reviewed. The current
conclusion of the Board is that an internal audit function is not
required given the scale, diversity and complexity of the Group’s
activities. Where required, third party audit consultants,
independent from the companies’ external auditors, are used on
specific assignments. The Company believes it can access
professional internal audit support in the relevant country more
effectively than by having an internal department. Three such
outsourced audits took place in 2004.
Going concern
The directors have made appropriate enquiries and consider
that the Group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, the
directors continue to adopt the going concern basis in preparing
the accounts.
Statement of directors’ responsibilities
Company law requires the directors to prepare financial
statements for each financial year which give a true and fair
view of the state of affairs of the Company and of the Group and
of the profit or loss for that period. In preparing those financial
statements, the directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable and
prudent;
- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company and
the Group will continue in business.
The directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the company and to enable them to ensure
that the financial statements comply with the Companies Act
1985. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.