Chairman's introduction to governanceThe Board recognises the importance of high standards of corporate governance for delivering long-term success to the Group and acknowledges its role in setting the culture, values and ethics of the Group (as outlined in Principle 8) and communicating these to all the Group's stakeholders. The Board meets regularly to discuss the monitoring and promotion of a healthy corporate culture. The Chairman has ultimate responsibility for corporate governance matters and has overseen the preparation of this governance statement accordingly.
In March 2018, AIM Rule 26 was amended to require all AIM companies to disclose details of a recognised corporate governance code that its Board of Directors has decided to apply, how the Group complies with that code and, where it departs from its chosen corporate governance code, an explanation of the reasons for doing so.
Since then and to assist the Board's aim to operate as effectively as possible, the Board has formally applied the principles of the Corporate Governance Code published by the Quoted Companies Alliance (the QCA Code) to ensure compliance with AIM Rule 26 and for the production of the Group's Annual Report and Accounts.
Board discussions are conducted openly and transparently, which creates an environment for sustainable and robust debate. In the year, the Board has constructively and proactively challenged management on Group strategies, proposals, operating performance and key decisions, as part of its ongoing work to assess and safeguard the position and prospects of the Group.
Key risks and uncertainties affecting the business are regularly assessed and updated. The Board challenges management to ensure appropriate risk mitigation measures are in place. The Board has completed a full, specific review of the Group's key risks and uncertainties (page 28 of the 2019 Annual Report), in light of the new and emerging risks or uncertainties arising from the Group's strategic growth plans and the wider economic, political and market conditions. As part of a critical review of the Group's procedures, a rolling risk review process has been developed which seeks to ensure that risks are constantly monitored, assessed and quantified, so that action may be prioritised by the Board accordingly.
Whilst the current composition of the Board demonstrates a wide balance of skills, our Nomination Committee has been working to further strengthen the balance of independent Non-Executives on the Board. This will allow us to address ongoing diversity issues in order to further progress towards achieving full compliance with the QCA Code.
Finally, the Board continues to engage with shareholders and welcomes ongoing dialogue throughout the year and as always, I welcome shareholder attendance and participation at the Annual General Meeting.
A statement of the Directors' responsibilities in respect of the accounts is set out on page 58 of the 2019 Annual Report.
On behalf of the Board
24 June 2019
Statement of corporate governance
This statement explains how D4t4 Solutions plc has applied the main and supporting principles of corporate governance and describes the Group's compliance with the provisions of the QCA Corporate Governance Code (2018).
For the purposes of clarity and candour, the description of how the group complies with the ten key principles of the QCA Code begins with a summary of the two areas where the Group does not yet fully comply, followed by a review of each of the principles in turn.
No significant corporate governance matters arose during the period covered by the 2019 Annual Report nor subsequently to the date of this statement on which it was considered necessary for the Board or any of its Committees to seek external advice.
The Board consults with its Nominated Adviser and other professional advisers on routine matters arising in the ordinary course of its business.
Exceptions to the application of the QCA Code
The following table summarises the specific areas within two of the principles where the Board considers that the Group does not fully comply, or may be perceived as not fully complying, with the QCA Code.
|Principle 5 (Maintain the Board as a well-functioning, balanced team led by the Chair)||Exceptions and explanations|
|Application: The Board should have an appropriate balance between Executive and Non-Executive Directors.||During the period covered by the 2019 Annual Report, the Board consisted of 9 members, 5 Executive and 4 Non-Executive. On 31 March 2019 R McDowell resigned from the Board which meant that at the year end the Board comprised 5 Executive and 3 Non-Executive members. Neither breakdown meets the general expectation that at least half of a Board should be independent Non- Executives. The Board has recognised this imbalance for some time and is currently undertaking a recruitment exercise to increase the number of Non- Executive Board members.|
|Application: The Board should have at least two independent Non-Executive Directors. Independence is a Board judgement.||Following the appointment made in July 2018 of P Whiting and year end resignation of R McDowell, the Board currently has three Non-Executive Directors. P Simmonds and P Whiting are deemed to be independent, and therefore this provision of the Code was met from July 2018.
J Lythall is not considered independent due to the fact that prior to 1 April 2016 he acted in the capacity of Chief Executive Officer. Consequently he is subject to a requirement to retire and offer himself for re-election on an annual basis, rather than on the basis of the general rotation of one-third of the Board annually.
J Lythall was re-elected at the Company's AGM held on 23 August 2018.
|Principle 6 (Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities)||Exceptions and explanations|
|Application: The Board should contain the necessary mix of experience, skills, personal qualities (including gender balance) and capabilities to deliver the Group's strategy over the medium to long term.||The male to female ratio on the Board is presently 7:1 and there are currently no female Non-Executive Directors. We believe that this reflects a strong gender bias in the technology industry as a whole, and the Board remains confident both that the opportunities in the Group are not excluded or limited by any diversity issues (including gender) and that the Board nevertheless contains the necessary mix of experience, skills and other personal qualities and capabilities necessary to deliver its strategy.|
The Principles of the QCA Code
Principle 1 - Establish a strategy and business model which promote long-term value for shareholders
The Board's shared view of the Group's purpose, business model and strategy, and the values underpinning them, are detailed in the Strategic Report within pages 8 to 25 of the 2019 Annual Report as follows:
- "What we do" (pages 8 to 13) explains what D4t4 Solutions' services and products are.
- "Vision and strategy" (pages 14 to 15) considers how D4t4 Solutions seeks to realise its' vision of earning high-margin, recurring revenues.
- "Business model" (pages 18 to 19) reviews D4t4 Solutions' key strengths, capabilities and values.
The Group's approach to delivering long-term value for shareholders is addressed in the Statement of the Chief Executive Officer on pages 4 to 7. Pages 24 to 25 set out the Group's three-pronged "Growth acceleration plan" and pages 28 to 30 ("Principal risks and uncertainties") detail the key risks faced by the business and how these continue to be addressed.
Principle 2 – Seek to understand and meet shareholder needs and expectations
Relations with shareholders and dialogue with institutional shareholders
The Board as a whole is responsible for ensuring that a dialogue is maintained with shareholders based on the mutual understanding of objectives.
Members of the Board meet with major shareholders on a regular basis, including presentations after the Group's announcement of the year-end results and at the half year.
In addition to regulatory news announcements the Directors have published the annual report and accounts, the annual results presentation, the half year results and announcements on new contract wins as they arise.
In the period from 1 April 2018 to the date of this corporate governance statement, the following activities and events with stakeholders were carried out with the view to:
- Communicating the Group's business model, strategy and values,
- Provide financial updates and explanations sought by shareholders, and
- Engage with shareholders to fully understand their needs and expectations.
|Date||Description of engagement||Group participants||Notes|
|June 2018||Preliminary results roadshow||P Kear, C Warren|
|August 2018||AGM||Directors||Shareholders invited to attend with Q&A session|
|November 2018||Interim results roadshow||P Kear, C Warren|
|February 2019||Technology Demo Day||M Tod, C Warren|
|June 2019||Preliminary results roadshow||P Kear, C Warren|
|August 2019||AGM (scheduled 22 August)||Directors||Shareholders invited to attend with Q&A session|
|Various||Shareholder / potential shareholder meetings|
The Board is kept informed of the views of shareholders and other stakeholders at each monthly Board meeting through a report from the Chief Executive Officer together with formal feedback on shareholders' views gathered and supplied by the Group's advisers. The views of private and smaller shareholders, typically arising from the AGM or from direct contact with the Group, are also communicated to the Board on a regular basis.
P Simmonds is available to shareholders if they have concerns where contact through the normal channel of Chief Executive Officer has failed to resolve or for which such contact is inappropriate. P Simmonds can be contacted through the UK head office contact information shown on our website.
Constructive use of the AGM
The Board uses the AGM to communicate with private and institutional investors and welcomes their participation. Eight members of the Board attended the Group's AGM held on 23 August 2018 and all Board members are expected to be in attendance at the meeting in August 2019.
P Simmonds as Chairman invites all shareholders to the AGM and ensures that he is available to meet them and answer their questions at this time.
At these meetings, shareholders are asked to confirm that their questions have been successfully answered. At the year end and interim presentations to shareholders, the Group's Nominated Adviser consults with attendees for feedback to ensure that future presentations encapsulate their requirements where possible.
Principle 3 – Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Board is fully aware that the long term success of the Group relies upon maintaining successful relationships with a range of different stakeholders, both internal and external. The table below identifies who the key stakeholders are and how we engage with them.
|Stakeholders||Reason for engagement||How we engage|
|Staff||Our ability to provide an industry leading software and services business is dependent upon good communications within our organisation.||We have identified our internal values in order to recruit and maintain talented and motivated staff. These values form the basis of all communications which are sought through internal appraisals and biweekly company informal meetings, which allow staff to engage with other parts of the organisation and recognise the successes of others. During the year, quarterly Group-wide meetings are held to provide staff with an operation and sales update on what is happening within the business. These meetings are followed by lunch.|
|Clients||Understanding current and emerging requirements of clients enables us to develop new and enhanced services, together with software to support the fulfilment of those services.||We have account managers and account directors whose primary responsibility is to engage with our clients to understand and develop our products and services so that we can work with them to exceed their requirements.
In relation to our own IP products we seek formal and informal feedback on product roadmap and enhancements via our support offering and annual user group meetings.
|Suppliers||Our relationships with our suppliers are key to the core success of our business.||We treat all suppliers as individuals, build long term collaborative relationships and where possible work within the local community. Our partnership and purchasing teams seek to build ongoing communication with our suppliers so that feedback can be received and acted upon. We seek to ensure that supplier invoices are processed and paid promptly.|
|Shareholders||As a public company it is vital that we build relationships with our shareholders so that we can both inform them of our successes and listen to their guidance.||This is achieved in several ways:
|Industry bodies||Information security is fundamental to our business, clients, partners, suppliers and associated data subjects and so we ensure that our policies and procedures provide a cohesive approach to this important area.||We have an established information security management system which encompasses independently audited ISO27001 and PCI DSS controls, industry best practices, as well as latest regulatory requirements including General Data Protection Regulations (GDPR) and the UK Data Protection Act (2018). Our experienced Information Security Committee ensure that governance, risk and compliance is actively managed and that our policies and procedures evolve to meet ongoing requirements.|
|Communities||We consider that it is important to be a business that makes a positive contribution to local economies and is attractive as an employer and partner.||We look to recruit locally experienced staff and through the local universities, both in the UK and India. We employ local suppliers where possible and throughout the year, we encourage staff to identify charities that they have an affiliation with for the Group as a whole to support.|
Principle 4 – Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Directors and operating Company management have a clear responsibility for identifying risks facing each of the businesses and for putting in place procedures to mitigate and monitor risks. To this end the Board has established a Risk sub-Committee, reporting directly to the Board, consisting of one Non-Executive Director, one Executive Director, a senior member of the finance team and a senior member of the Operations team (the Information Security and Process Manager); other members of the Company can be seconded to the Committee as required.
The remit of the Committee is to examine the vulnerability of the Group to all types of risk, the mitigation of such risks, maintain the risk register to properly reflect this and to report back to the Board with any changes in, or new areas of, vulnerability to risks and recommendations for mitigation.
This is done at three levels:
- A review of the risk register is included in the monthly Board pack.
- A quarterly report provided to the Board.
- A formal assessment of risks during the annual budget process.
Principle 5 – Maintain the Board as a well-functioning, balanced team led by the Chair
Directors' biographies are shown both in the 2019 Annual Report on pages 32 to 33 and on the Group website.
Following the resignation of R McDowell on 31 March 2019, the Board comprises eight members, made up of five executive directors and three non-executive directors.
At the date of this corporate governance statement, the following Non-Executive Directors are considered to be independent:
- P Simmonds (Chair)
- P Whiting
Please see the "Exceptions" section above for details of why J Lythall, the Board's other Non-Executive Director, is not considered to be independent.
The Board does not presently consider it necessary to appoint an independent Director to a Senior Independent Director role but will keep the appropriateness of this position under review.
All Directors are subject to election by shareholders at the first AGM immediately following their appointment and thereafter are subject to re-election at intervals of no more than three years. All Non-Executive Directors are appointed for fixed terms in line with corporate governance requirements, although those Non-Executive Directors whose independence may be called into question are subject to re-election annually. The Non-Executive Director currently subject to annual re-election is J Lythall, as described in the "Exceptions" section above.
All of the Executive Directors are full-time employees of the D4t4 Solutions plc.
Operation of the Board
The Board is responsible to shareholders for the proper management of the Group. A statement of the Directors' responsibilities in respect of the financial statements is set out on page 58 and a statement of going concern is given on page 54.
The Board normally meets once a month. The formal schedule of matters specifically reserved to it for decision was reviewed and adopted by the Board on 25 April 2019 and will be reviewed annually (see website). Other matters are delegated to the Executive Directors, supported by policies for reporting to the Board. Presentations are made to the main Board at each monthly meeting by the Executive Directors and also on regular occasions by operational management.
The Company Secretary is responsible to the Board for ensuring that Board procedures are followed, and that applicable rules and regulations are complied with and for advising the Board, through the Chairman, on corporate governance matters. The Group maintains appropriate insurance cover in respect of any legal action against the Group's Directors and the Company Secretary, but no cover exists if a Director is found to have acted fraudulently or dishonestly.
The Non-Executive Chairman and the Non-Executive Directors are able to meet without Executives present prior to each Board meeting. The agenda and relevant briefing papers are distributed in advance of each Board meeting.
When Directors have concerns which cannot be resolved about the running of the Group or a proposed action, these concerns are recorded in Board minutes. Upon resignation, a Non-Executive Director is required to provide a written statement to the Chairman for circulation to the Board if there are any such concerns.
All Directors are expected to attend the monthly meeting of the full Board, or to make themselves available to join the meeting by telephone, and to attend all meetings of any Committee(s) of which they are members. In addition, the Directors are expected to attend strategy and business planning meetings each year. The Non-Executive Directors are expected to make themselves available at all reasonable times for consultation by other members of the Board.
Prior to each monthly Board meeting the Directors receive a detailed pack which includes:
- Board meeting agenda
- Minutes from previous Board meeting
- Board pack which includes financial summary, update on each part of the business, strategy execution update and risk assessment update
- Papers as required for additional items requiring Board attention.
Meetings and attendance
The following table summarises the number of Board, Audit Committee, Remuneration Committee and Nomination Committee meetings held during the period covered by the 2019 Annual Report and the attendance record of individual Directors at those meetings:
|RS McDowell (resigned 31 March 2019)||10/12||1/2||4/4||2/3|
|PF Whiting (appointed 2 July 2018)||8/9||1/1||3/3||2/2|
Principle 6 – Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
The 2019 Annual Report includes, at pages 32-33, particulars of the Directors who held office throughout the financial year to 31 March 2019 (apart from R McDowell who resigned on 31 March 2019).
It is Board policy that Executive Directors receive suitable training for their position, which is considered as part of the appraisal process.
The Chairman ensures that Directors update their skills and knowledge required to fulfil their roles on the Board and Committees. Ongoing training is provided as necessary and includes updates from the Company Secretary on changes to the AIM rules, requirements under the Companies Act and other regulatory matters. Directors may consult with the Company Secretary at any time on matters related to their role on the Board. More detail on the experience and capability of the Directors is included in their biographies on the corporate website.
On 2 July 2018 P Whiting was appointed as an additional independent Non-Executive Director and as a member of the Board's Remuneration and Nomination Committees. His biography can be found in the 2019 Annual Report on page 33 and on the Group website.
No significant matters of a corporate governance nature arose during the period covered by the 2019 Annual Report nor subsequently to the date of this statement on which it was considered necessary for the Board or any of its committees to seek external advice, although the Board consults with its Nominated Adviser and other professional advisers on routine matters arising in the ordinary course of its business.
Principle 7 – Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
The Board annually informally reviews the effectiveness of itself, its Committees and the individual Directors in the following manner:
- The role of the Committees is considered by the Executive Directors without the presence of the Non-Executive Directors.
- The Chairman and CEO examine the contribution and effectiveness of the individual Directors with regard to their line role and contribution at Board meetings.
- The whole Board examines its purpose and effectiveness with regard to identified key areas.
- The whole Board considers its structure, size and composition with particular regard to the skills, knowledge and experience of its members and otherwise as advised by the Nomination Committee.
In addition, a formal Board effectiveness evaluation process was introduced during the year ended 31 March 2019. The process involves all Directors completing a detailed individual evaluation of Board performance on a biennial basis. The evaluations cover effectiveness in several areas including Board composition, Board information, Board process, internal control and risk management, Board accountability, CEO/Senior management and Standards of conduct.
The results of these biennial evaluations are interpreted by an independent Non-Executive Director, with support from the Chairman, and outputs plus any associated recommendations are reviewed by the Board as a whole at an offsite Board strategy meeting. The results of the first evaluation, carried out during the summer of 2018, were interpreted by P Whiting and his recommendations were presented to the Board at the strategy meeting held in October 2018. The 2018 evaluation resulted in a number of areas being identified for improvement, action or closer monitoring, with the establishment of a separate (sub-Board) Risk Committee, which held its first meeting in March 2019, being a key outcome and updates on progress towards the objectives in each area being included in the information circulated to directors prior to each monthly Board meeting.
As the business expands and as part of succession planning, the Executive Directors will be challenged to identify potential internal candidates who could potentially occupy Board positions and set out development plans for these individuals.
Principle 8 – Promote a corporate culture that is based on ethical values and behaviours
Our long-term growth strategy incorporates our objectives and the business model set out in the strategic report. It is also underpinned by our core values, which were redefined following a staff consultation process and are split between client and internal values.
D4t4 Solutions is dedicated to the development of innovative technology that provides insight into your business, drives value from your data and pragmatically addresses your challenges.
D4t4 Solutions' advanced technology collects, manages and enables analysis of your data, supporting it with the utmost care for its security.
D4t4 Solutions takes pride in its relationships with clients, working hard to understand your business needs and developing trust through professional and responsive service provision.
D4t4 Solutions augments its own technology by collaborating with industry partners that provide further opportunities for engendering the long-term success of your operation.
D4t4 Solutions will be a Group in which we can be proud of our achievements, delivering the highest standards of quality and being confident in our ability to satisfy our clients' needs.
D4t4 Solutions will acknowledge the value of all employees and recognise their contribution to the Group's ongoing success.
D4t4 Solutions will create an environment of innovation in which we work together as a team to develop pioneering technology that solves our clients' challenges.
D4t4 Solutions will be a workplace in which all employees are engaged with our business and are empowered to get involved with our communications and decisionmaking processes.
The culture of the Group is characterised by these values which are communicated regularly to staff through internal communications and forums. These core values are also communicated to prospective employees in the Group's recruitment programmes and are further embedded within the induction process.
The Board believes that a culture that is based on the core values is a competitive advantage and consistent with fulfilment of the Group's mission and execution of its strategy.
The Board has a high proportion of Executive Director representation which means communication and feedback between the business and the Board is very well established. Recognition and respect of appropriately ethical values and behaviours within the organisation is therefore both well monitored and promoted. Engagement between the Board and the organisation via these Executive Directors is therefore deemed to be all-inclusive.
Ethical business practices
The Group is committed to corporate sustainability and to applying the highest standards of ethical conduct and integrity to its business activities in the UK and overseas. The Group does not tolerate any form of bribery: the Directors and senior management are committed to implementing and enforcing effective systems throughout the organisation to prevent bribery in accordance with its obligations under the Bribery Act 2010.
Principle 9 – Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
Roles and Responsibilities of Directors
The 2019 Annual Report includes, at pages 32 to 33, descriptions of the individual roles and responsibilities of the Chairman, Chief Executive Officer and other Directors.
The Board and its Committees
The Board is currently comprised of the Non-Executive Chairman, five Executive Directors and two Non- Executive Directors.
The roles of Chairman and Chief Executive Officer are distinct, set out in writing and agreed by the Board. The Chairman is responsible for the effectiveness of the Board Chief Executive Officer is accountable for the management of the Group.
Non-Executive Directors constructively challenge and assist in the development of strategy. They scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance.
The Board has not appointed a Senior Independent Non- Executive Director, but currently this role is performed by the Chairman.
The Company Secretary is J Thorne, a solicitor of over 25 years standing, who was appointed to the role on 27 July 2017. He is not a Director of the Group.
To deal with specific aspects of the Group's affairs, the Board has formed certain Committees. Each of these Committees is governed by terms of reference available upon request from the Company Secretary.
Details of the membership, roles, responsibilities and activities of the Audit, Remuneration and Nomination Committees are described in more detail in the individual Committee reports commencing on page 46 of the 2019 Annual Report. The Chair of each Committee reports to the Board on the activities of that Committee.
The terms of reference for each of the Audit, Remuneration and Nomination Committees can be found in the Annual Report on pages 46 to 48 and on the Group website.
Evolution of governance framework
In March 2018 the QCA Code was formally selected as the appropriate recognised corporate governance code to be applied for the purposes of AIM Rule 26. The Board will monitor the requirements of this code on an annual basis and revise its governance framework as appropriate as the Group evolves.
As part of ongoing governance efforts, the Group decided in the year ended 31 March 2019 that an extra Committee should be formed to review risk throughout the organisation. In March 2019, the first sitting of this Risk Committee took place. The Committee was formed to establish and review that the Group are performing risk management throughout the organisation (and, to emphasise the point, not trying to perform the risk management itself).
As the Group continues to grow the Board fully recognises both the importance and the need of the governance framework to continue to evolve, as evidenced in matters reserved for the Board, the newly created Risk Committee and external advice being sought to assist the Remuneration Committee in making its decisions. Consideration of the need to further enhance the governance framework will attract ongoing focus with the Group.
Principle 10 – Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
A range of fora exist at which the functioning of the Group is critically appraised and where opportunities exist for stakeholders to challenge management and hold them to account for the Group's performance.
A description of the work of the Board''s Committees in the financial year to 31 March 2019, including a report from each of the Audit, Remuneration and Nomination Committees, is set out at pages 46 to 48 of the 2019 Annual Report.
The work of the Nomination Committee resulted in the appointment on 2 July 2018 of Peter Whiting as an independent Non- Executive Director. This Committee continues to actively seek new Non-Executive appointments.
Votes at General Meetings
All resolutions put to the AGM held on 23 August 2018 were passed by majorities of not less than 90% of the votes cast.
The most recent results for the Group, together with Annual Reports for the preceding ten years and notices of all General Meetings, can be found on the Group's website.