Governance

April 2018 QCA Code update

Chairman Statement

As Chairman of the Castleton Technology plc (the “Group”) Board, it is my responsibility to ensure that the Board is performing its role effectively and has the capacity, ability, structure and support to enable it to continue to do so. We believe that a sound and well understood governance structure is essential to maintain the integrity of the Group in all its actions, to enhance performance and to impact positively on our shareholders, staff, customers, suppliers and other stakeholders.

After due consideration, the Group has adopted the QCA Corporate Governance Code (“the Code”) as the benchmark for measuring our adherence to good governance principles. These principles provide us with a clear framework for assessing our performance as a Board and as a company, and the report below shows how we apply the Code’s ten guiding principles in practice. The board considers that it does not depart from any of the principles of the QCA Code. The Board will continue to develop its governance processes in the coming year.

David Payne
Chairman, Castleton Technology plc
Page last updated: 28 September 2018

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

The purpose of the group is become the supplier of choice for software and IT services in the social housing sector. The business model is to become a complete end to end hosted solution and the Group’s strategy is focused on selling multi-year annuity deals across its customer base and increasing the number of products and services each customer takes. This increase will result in organic growth which in turn increases shareholder value.
The key challenges in execution of the strategy are:
Market and the economy – Castleton could fail to understand and anticipate changes in the external environment, including customer needs, emerging market trends, competitor strategies and regulatory / legal requirements. Risk is mitigated by monitoring trading conditions, customer feedback sessions, detailed and comprehensive implementation processes to ensure customer needs are captured and product road map development to ensure products are legally compliant and provide improved functionality for customers.
Key personnel – Castleton may fail to attract and retain highly skilled and qualified personnel and to expand, train and manage its employee base. This is addressed by benchmarking of salaries and benefits, introduction of a LTIP during the financial year to March 2018 to further incentivise certain members of the Group’s senior management team, introduction of a SAYE scheme in August 2018 and monitoring and reporting of employee attrition.
Competition – Competitors could materially adversely impact both the scale of the Group’s revenues and its profitability. To address this risk, the Group has ongoing product roadmap development to stay ahead of the competition and additional development capability has been added during the year in India. We continually strive for business efficiencies which will not impact upon levels of service and there is continual monitoring of our competitors.
Technology – Castleton’s products may fail to stay ahead of the market and our competitors, also new products could fail to be commercially viable in the market. The Group manages this risk by participating in a number of industry-wide forums, adding significant resources to the development of new products and services, ensuring new technologies can be incorporated and integrated with the Group’s core services
Acquisition risk – The Group may not be able to fully achieve its strategic objectives and operating efficiencies in an acquisition, or these may take longer than anticipated. To minimise the risk, due diligence processes are in place to evaluate potential acquisitions. Also the Executive team has a proven track record in assessing potential acquisition targets and integration of acquired businesses.
Acquisition strategy and financing – Acquisitions could also require the Company to use substantial cash or other liquid assets or to incur debt. In such a case, it could become more susceptible to economic downturns and competitive pressures. The Group monitors cash flow and funding on a regular basis to mitigate this risk. This includes reviewing headroom against existing facilities and monitoring covenants.

 

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

Copies of the Annual Report and Accounts are issued to all shareholders and copies are available on the Group’s website www.castletonplc.com. The Half Year Report is also available on the Group’s website. The Group makes full use of its website to provide information to shareholders and other interested parties. The Company Secretary also deals with a number of written or e-mailed enquiries throughout the year.
Shareholders are given the opportunity to raise questions at the AGM and the Directors are available both prior to and after the meeting for further discussion with shareholders.
During the year, the Chief Executive Officer and the Chief Financial Officer met with institutional investors after the announcement of the interim and year-end results. Additional meetings were arranged during the year by the Group’s brokers, FinnCap Ltd. Feedback arising from these meetings was communicated to the Board and the Company Secretary also reported to the Board on feedback from shareholders. In addition, the company’s Chairman meets with shareholders on an ad hoc basis and will continue to do so in the coming year.
Phil Kelly, as Senior Independent Non-Executive Director, is available to shareholders if they wish to raise any matters that contact through the normal channels of Non-Executive Chairman, Chief Executive Officer, Chief Financial Officer or Company Secretary has failed to resolve or for which such contact is inappropriate.

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

To become the supplier of choice for software and IT services in the Social Housing market, the company identifies the importance of all its key stakeholders and the necessity of identifying their needs, interest and expectations for the company’s long term success.

Staff – The company recognises that employees are essential to the continued success of the business. The company values the talent, support and involvement of its employees which is why an ENPS survey has been undertaken recently. The feedback will help shape the enhancement of management practices and staff incentives.

Customers – Customer feedback is valued at Castleton as it shapes the Groups competitive advantage and helps the business fulfil client requirements. The Group collects customer feedback in a variety of ways such as customer roadshows, customer surveys and feedback time at customer training sessions. This insight helps to enhance our products and services.

Suppliers – To be able to provide a quality product and service, Castleton values the quality of its suppliers. The Group optimises systems and processes to simplify supplier work as much as possible. Feedback given by suppliers is taken into consideration and where possible our internal systems and processes will be updated.
Shareholders – as an AIM listed company we are dedicated to providing transparent, usable and balanced information to ensure support and confidence by our investors and the market. We do this by investor roadshows, monthly board meetings, AGM’s, annual and half year reports, keeping the investor relations section of the website up to date and publishing videos of investor presentations and interviews. This engagement has led to support for the group and a more diversified shareholder profile.
Community – Castleton has a ‘Social Responsibility Committee’ which meets regularly to assess charitable support applications from customers, staff and partners to further our work in supporting local communities and charities. We work with customers, partners and staff to support events/charities that help improve lives of those living within the local community and that help support those in need.
Environment – Our company recognises the need to protect the natural environment. Keeping our environment clean and unpolluted is a benefit to all. We’ll always follow best practices when disposing of rubbish and, apart from legal obligations, we will proactively protect the environment. Examples of relevant activities include; recycling, conserving energy and using environmentally-friendly technologies.

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

The Board has overall responsibility for the Group’s system of internal control and for reviewing its effectiveness. The implementation and maintenance of the risk management and internal control systems are the responsibility of the Executive Directors and senior management. The internal control system is designed to manage risk rather than eliminate it and can therefore only provide reasonable and not absolute assurance against material misstatement or loss. The Board confirms that there are on-going processes for identifying, evaluating and managing the significant risks faced by the Group.
The Group is committed to maintaining high standards of business conduct and operates under an established internal control framework covering financial, operational and compliance controls. This is achieved through an organisational structure that has clearly defined reporting lines and delegated authorities. Management monitors the risk and performance of the Group. In addition, the Group maintains written processes to control expenditure, authorisation limits, purchase ordering, sales order intake, project management, inventories and assets to the extent applicable given the changes in the Group’s activities during the year.
The Board receives monthly financial information which includes key performance and risk indicators and the Chief Executive Officer reports on significant changes in the business and the external marketplace to the extent they represent significant risk. There is an established budgetary system with an annual budget approved by the Board. The Board reviews the results monthly against budget and forecasts together with other business measures.

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

The board currently consists of two Executives and three Non-Executive directors with a gender balance of 100% male. There are currently no female directors. The board is confident both that the opportunities in the Company 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 three Non-Executive directors are considered independent as they have no financial dependence on the company and have never worked for the company in other roles.
Details of Directors and their time committees are set out under Principle 6 below.
There are three standing Board Committees: Audit, Nominations and Remuneration. Additional information and their defined terms of reference are set out under Principle 9 below. The number of board and committee meetings and attendance records of directors are also set out under Principle 9 below.

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

All five members of the board bring relevant sector, financial and market experience and believes that its blend of relevant experience, skills and personal qualities and capabilities is sufficient to enable it to successfully execute its strategy. Directors attend seminars and other regulatory and trade events to ensure that their knowledge remains current.

Dean Dickinson – CEO
Term of office: Appointed on 31 October 2016.
Background and suitability for the role: Dean was previously Managing Director of Advanced Business Solutions, part of Advanced Computer Software Group Limited (previously Advanced Computer Software plc (“ACS”)), where he led the impressive growth of the Public Sector and Enterprise division following the acquisition of COA Solutions in 2010. Dean was part of the senior management team that sold ACS to Vista Private Equity for £725 million in March 2015. Dean has over 30 years’ operational experience in the software industry and was one of four directors at Walker Inc responsible for an MBO backed by Alchemy Private Equity in 2002 to form a new business called Arelon. Arelon merged with Cedar in 2003 and was rebranded COA Solutions where he became Deputy Managing Director for the business as a whole.
Dean has over 30 years of software and managed services experience from both an operational and sales leadership experience which allows him to contribute to the growth strategy of Castleton.
Current external appointments: None
Time commitment: Full time

Haywood Chapman – Chief Financial Officer
Term of office: Appointed on 1 December 2014
Background and suitability for the role: Haywood has significant technology sector expertise in quoted and private equity backed companies. Prior to Castleton, Haywood held a number of senior finance positions at Northgate Information Solutions, Infinity SDC and Avnet Inc. Haywood is a Chartered Accountant, having trained at PwC, and gained M&A experience in their Transaction Services team.
Haywood has over 16 years of finance experience in rapidly growing technology companies allowing him to contribute to the growth of Castleton.
Current external appointments: None
Time commitment: Full time

David Payne – Non-Executive Chairman
Term of office: Appointed on 23 July 2001. David is the Chair of the Nomination Committee.
Background and suitability for the role: David Payne has a varied background in the leisure, computer and property industries. For 20 years after leaving university he worked for Juliana’s, a leisure company that floated on the London Stock Exchange in 1983. He was subsequently recruited, by a venture capital fund, to become Chairman of Virtuality, a company at the forefront of developing virtual reality. He oversaw the successful flotation of this company on the LSE in 1994 and then left to devote more time to the development of a quoted property company.
David has over 30 years of experience as a director, non-executive director and chairman of both fully listed and AIM companies; these companies have operated in the fields of technology, property and non-technology, giving him a broad spread of experience and expertise.
Current external appointments: None
Time commitment: 3 days per month

Phil Kelly – Non-Executive Director
Term of office: Appointed on 1 October 2014. Phil is the Chair of the Audit Committee and a member of the Remuneration and Nomination Committees
Background and suitability for the role: Phil brings a substantial track record of leading successful companies within the UK and US technology sector. He has served as the CEO of both private and public software businesses, and been responsible for the listing of a company on the London Stock Market and overseeing a public to private management buy-out with venture capital support.
Prior to entering the software sector Phil worked for the Digital Equipment Corporation and 3i Group. As a non-executive Phil has wide experience both within and outside the technology sector.
Phil has over 35 years of commercial and sales management experience that allows him to make a significant contribution to the Board.
Current external appointments: Non- Executive director of Systems Integration (Trading) Ltd, Nowcomm Ltd and First Payment Merchant Services Ltd. Director of Maxline Agencies Ltd.
Time commitment: 2 days per month

Paul Gibson – Non-Executive Director
Term of office: Appointed 18 July 2017. Paul is chairman of the Remuneration committee and a member of the Audit and Nominations Committee.
Background and suitability for the role: Paul has had a highly successful career in the TMT sector, most recently as Chief Operating Officer of Advanced Computer Software Plc (“ACS”) prior to its acquisition by Vista Equity Partners for £725 million. In his five years at ACS Paul oversaw a period of exceptional value creation and transformation, with responsibility for driving both organic and acquisitive growth. Prior to ACS, Paul held a number of senior roles in both financial and operational capacities, latterly as finance director of Redac Limited, the Alchemy backed turnaround that was subsequently sold to ACS for £100 million. The foundations of Paul’s career were built at Unigate GrandMet (now Diageo) and Oracle.
Paul has over 25 years’ software specific operational, financial, commercial and M&A experience. This experience allows him to provide substantial insight in to the discussions of the Board and its Committees.
Current external appointments: Non-Executive director of Tax systems plc and Enable business solutions ltd. Operating partner at MXC Capital Limited
Time commitment: 2 days per month

Helen Griffiths – Company Secretary (non Board)
Term of office: Appointed 19 April 2018
Background and suitability for the role: Helen joined Castleton Technology plc in March 2018 as Group Financial Controller, taking on the Group Company Secretary role from April 2018. She has 16 years’ finance experience across listed and private equity backed businesses having gaining her accounting qualification within Assurance and Advisory at Deloitte. Previous roles include four years at Wolseley UK, providing financial expertise and business partnering across large IT projects and five years at Mitchells & Butlers plc as Head of Financial Accounting.
Current external appointments: None
Time commitment: Full time

External advisors to the board include Financial advisors/brokers used for current market data and solicitors for any legal advice needed.

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

All Directors are subject to appraisal by the Board. The Senior Non-Executive Director is responsible for the evaluation of the Chairman.
The Group reviews regularly the effectiveness of the board’s performance as a unit, as well as that of its committees and individual directors. We will be considering the use of external facilitators in future board evaluations.

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

Castleton is a responsible business that endeavours to meet the highest standards of ethics and professionalism which is required to meet the company’s long term goals. We recognise that our activities and services have a significant impact on the wider social, environmental and economic well-being in the UK, and so continuously strive to improve the quality and performance of our core organisational processes and responsibilities.
By embracing Corporate Social Responsibility (CSR) we will actively look for opportunities to improve our working practices and environment that contribute to the well-being of the communities in which we operate. Castleton’s social responsibility values include a commitment to ensuring we carry out our business in a fair, lawful and ethical manner and that our work in the community preserves and promotes community values, human rights, helps communities and protects our natural environment.
Our Corporate Social Responsibilities include:
Protecting the environment – Our company recognises the need to protect the natural environment. Keeping our environment clean and unpolluted is a benefit to all. We’ll always follow best practices when disposing of rubbish and, apart from legal obligations, we will proactively protect the environment. Examples of relevant activities include; Recycling, conserving energy and using environmentally-friendly technologies
Protecting people – We will ensure that we don’t risk the health and safety of our employees and community, and that we support diversity and inclusion.
Human rights – Our company is dedicated to protecting human rights. We are a committed equal opportunity employer and will abide by all fair working practices. We will ensure that our activities do not directly or indirectly violate human rights in any country (e.g. forced labour).
Social Interaction Support & Giving – Castleton has a ‘Social Responsibility Committee’ which meets regularly to assess charitable support applications from customers, staff and partners to further our work in supporting local communities and charities. We work with customers, partners and staff to support events/charities that help improve lives of those living within the local community and that help support those in need.
The company culture is introduced to employees via employee training and retained in all our locations by senior members of the leadership team setting an example. An open plan office helps to align the company culture with our strategy by creating an open environment for giving feedback and suggesting improvements.
The board monitors the corporate culture through employee surveys (ENPS). The findings are reviewed by the Board and determines if any action is required.

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

The Board considers and reviews the trading performance of the Group at each meeting. The Board has a formal written schedule of matters reserved for its review and approval. These include the approval of resolutions to be put forward at AGM’s, approval of the annual budget, major capital expenditure, investment proposals, changes to board or corporate structure, the interim and annual results, long term objectives and commercial strategy and a review of the overall system of internal control and risk management.
Authority for the execution of the approved policies, business plan and daily running of the business is delegated to the Executive Directors.

There are three standing Board Committees and the chair of each reports the activities to the board:
1. Audit Committee – has the responsibility for the recommendation, appointment, re-appointment and removal of the external auditors, the review of the scope and results of the interim review and external annual audit by the auditors, their cost effectiveness, independence and objectivity. The Audit Committee also reviews the nature and extent of any non-audit services provided by the external auditors. In addition, the Audit Committee reviews the effectiveness of internal controls, considers the need for an internal audit function and considers any major accounting issues and reports on such matters to the Board.

  1. The Audit Committee reviews the integrity of the financial statements and formal announcements.
    Terms of Reference – Audit committee
  2. Remuneration Committee – sets and reviews the compensation of executive directors and the senior leadership team including the setting of targets and performance frameworks for cash- and share-based awards.
    Terms of Reference – Remuneration committee
  3. Nominations Committee – meets as and when necessary to consider the appointment of new Executive and Non-Executive Directors.
    Terms of Reference – Nominations committee

The Chairman has overall responsibility for implementing, maintain and communicating effective corporate governance and in promoting high standards throughout the group. The Chairman leads and chairs the board, and is responsible for the overall effectiveness in directing the company and fulfilment of the company duties to shareholders. He is responsible for ensuring correctly structured committees which operate with appropriate terms of reference, ensures that performance of individual directors, the board and its committees are reviewed on a regular basis and leads in the development of strategy and setting objectives.
The CEO provides leadership and management of the group by setting strategy and direction, leads the development of culture, values, objectives, strategies and performance standards as agreed by the board and acts as the main point of contact between the board and cooperate operations.
The Executive Directors are responsible for the day to day operations of the company which involves implementing and delivering the strategy and operational decisions agreed by the board.
The Non-Executive Directors contribute independent scrutiny of management performance and provide constructive challenges to the executive directors through the application of their external experience and knowledge.
The Company Secretary is responsible for providing clear and timely information flow to the board and its committees and supports the board on matters of corporate governance and risk.
The board has approved the adoption of the QCA Code as its governance framework against which this statement has been prepared and will monitor the suitability of this code on an annual basis and revise its governance framework as appropriate as the group evolves.

Attendance record of board meeting and committees for financial year ending 2018

 

 

 

 

 

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

The board is committed to maintaining high levels of corporate governance which is why the Executive Directors meet at least twice a year with the main shareholders, to provide updates on financial results and progress within the company. In addition, the Chairman is available on request for individual shareholder meetings. In keeping with maintaining a transparent dialogue with relevant stakeholders, going forward the AGM results will disclose proxy voting information.

Audit committee report
The Audit Committee consisted of Phil Kelly (Chairman) and Paul Gibson (appointed to Audit Committee from 1 August 2017).
The Chief Financial Officer monitors the level and nature of non-audit services and specific assignments are flagged for approval by the Audit Committee as appropriate. The Audit Committee reviews non-audit fees and considers implications for the objectivity and independence of the relationship with the external auditors. The Board is satisfied that the Chairman of the Audit Committee has recent and relevant financial experience. The Audit Committee met on three occasions during the year, with no absences from the meetings.
During the year, the Audit Committee participated in a best practice review with other quoted companies. Following this, recommendations for minor improvements have been implemented.

Remuneration committee report
The Remuneration Committee consisted of Phil Kelly and Paul Gibson (appointed as Chairman effective from 1 August 2017). During the year, the Remuneration Committee met formally on two occasions. There were no absences from the formal meetings.
During the year the committee considered a range of issues including the following:
• the overall remuneration packages of the Executive Directors
• the framework, performance measures and weightings for the bonus scheme and determining any awards made under it
• all awards made under the LTIP scheme.

Annual reports, other governance related material and outcomes of votes can be found in the investor section of the company website for all relevant stakeholders to view.