The Combined Code
The Group is committed to applying the highest principles of corporate governance and, except where stated, has complied throughout the year to March 2011 with the Code provisions set out in Section I of the Combined Code (2008). The Group will look to implement the additional provisions incorporated in the UK Corporate Governance Code, issued in June 2010, during 2011 and has chosen to adopt at the 2011 Annual General Meeting, the requirement that all directors should be subject to annual re-election by shareholders. The Group also takes into account the corporate governance guidelines of institutional shareholders and their representative bodies.
The Board is accountable to the Group’s shareholders for good corporate governance. This report and the Directors’ Remuneration Report describe how the Group complies with the provisions of the Combined Code (2008) (the “Code”).
Board of Directors
Compliance
Helical has 26 employees in the UK, including five executive directors. It operates with a strong management team of senior decision-makers backed up by finance and other support staff. Given its size the Board do not consider it appropriate to operate both a main board and a separate executive committee, a structure commonly seen in larger companies.
However, despite its size, the Group is keen to promote exceptional talent to Board level at the earliest opportunity to expose such individuals to the broader issues facing the business, encourage their long term commitment to the Group and to provide for future succession. It is for these reasons that Helical’s Board of five executive directors’ is larger than those of other comparable listed real estate companies.
Code provision A.3 requires a Board to have a balance of executive and non-executive directors and A.3.2 stipulates that at least half the Board, excluding the Chairman, should comprise independent nonexecutive directors. In the Group’s view, this provision would, given the number of executive directors as noted above, create an unnecessarily large and unwieldy Board. Accordingly, it has long held the view that the appointment of non-executive directors should reflect a desire to add complementary skills and experience to the Board and not be driven by a requirement to match the number of executive directors, provided always that the interests of shareholders and other stakeholders are adequately protected.
In the Board’s view, the current composition of the Board meets the criteria that it is comprised of directors with the appropriate balance of skills, experience, independence and knowledge of the Group to enable it to discharge its duties and responsibilities effectively. However, given the requirements of A.3.2, the Group is actively seeking to further strengthen the Board and has appointed an independent search firm, Hanson Green, to assist in the recruitment of a new non-executive director.
Chairman and Chief Executive
The Chairman and the Chief Executive collectively are responsible for the leadership of the Company. The Chairman’s primary responsibility is for leading the Board and ensuring its effectiveness, whilst the Chief Executive is responsible for running the Company’s business. The division of responsibilities is clearly established at Helical, is set out in writing and approved by the Board. The Chairman of Helical is Giles Weaver and the Chief Executive is Michael Slade.
Board composition
The Board currently consists of a Chairman, six executive directors and four independent non-executive directors.
The Chairman, Giles Weaver, has been a non-executive director of Helical since 1993 and was appointed Chairman in July 2005. He is a Chartered Accountant by training and has had a career in the financial services sector, including as a current and former Chairman or director of several listed companies in that sector. The experience he brings to the Group and the skills of leadership and guidance shown in Board meetings, together with his detachment from day-to-day issues within the Group, provide the Board with the necessary comfort that despite his time as a non-executive director, he provides an independent approach to the role of Chairman of Helical. Giles Weaver is Chairman of the Nominations and Appointments Committee.
The Senior Independent Director is Antony Beevor who was first appointed to the Board in April 2000. He is a solicitor by training and worked in the City throughout his career, most recently as Head of Corporate Finance at Hambros Bank. A former Chairman of Croda International Plc, he is currently a Deputy Chairman of the Takeover Panel. He was awarded an MBE in January 2010 for services to Fairbridge youth charity.
Antony Beevor is Chairman of the Audit Committee and a member of the Remuneration and Nominations and Appointments Committees. He has served on the Board for more than nine years and accordingly the company has considered whether there are any reasons why he should not be regarded as independent. In the view of the Board, Antony Beevor continues to provide a robustly independent approach to his position as a non-executive director and to his roles as Senior Independent Director and Chairman of the Audit Committee. For this reason the Board continues to regard Antony Beevor as an independent non-executive director.
Wilf Weeks has been a non-executive director of Helical since April 2005. A former Chairman of European Public Affairs at Weber Shandwick he provides the Board with an in-depth understanding of central and local government and the Civil Service. He is a member of the Audit, Remuneration and Nominations and Appointments Committees.
Andrew Gulliford has been a non-executive director of Helical since March 2006. A former Deputy Senior Partner of Healey & Baker (now Cushman & Wakefield) he headed up their Investment Group. He is Chairman of the Remuneration Committee and a member of the Audit and Nominations and Appointments Committees.
Michael O’Donnell was appointed to the Board in June 2011. Michael is a former Managing Director of LGV Capital (formerly Legal & General Ventures), a private equity firm where he was responsible for a number of successful investments in fast growing businesses, often with a significant property element. In 2009 he established Ebbtide Partners, a consultant to, and investor in, private companies. He is Chairman of Ocean Media Group and a Non-Executive Director of Jeyes, the household products business. He is a member of the Audit, Remuneration and Nominations and Appointments Committees.
Board responsibilities
The Group supports the concept of an effective Board leading and controlling the Group. The Board provides entrepreneurial leadership of the Group within a framework of prudent and effective controls which enables risk to be assessed and managed.
The Board sets the Group’s strategic aims, ensures that the necessary financial and human resources are in place for the Group to meet its objectives and reviews management performance. The Board sets the Group’s values and standards and ensures that the Group’s obligations to its shareholders and others are understood and met.
The members of the Board, and the roles of each director are given in the biographical details of the directors on the Board of Directors section of this website.
All directors take decisions objectively in the interests of the Group. As part of their roles as members of the Board, non-executive directors constructively challenge and help develop proposals on strategy and the risk appetite of the Group. Non-executive directors scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance. They satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are robust and defensible. They are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing and, where necessary, removing executive directors, and in succession planning. In addition to Boardroom discussions, the Chairman contacts other non-executive directors by telephone and, if appropriate, will hold meetings with the non executive directors without the executive directors present.
In addition to ad hoc meetings arranged to discuss particular transactions and events and the 2010 AGM, the full Board met on five occasions during the year to March 2011.
The Board has a schedule of matters specifically reserved to it for decision. The Board controls the business but delegates day-to-day responsibility to the executive management. However, there are a number of matters which are required to be or, in the interests of the Group, should only be decided by the Board of Directors as a whole. A summary of the decisions reserved for the Board is set out below:
Schedule of matters reserved for the Board:
Strategy and management – responsibility for the overall management of the Group; approval of the Group’s long-term objectives and commercial strategy; approval of annual administration budgets; oversight of the Group’s operations; extension of the Group’s activities into new business areas; any decision to cease to operate all or any material part of the Group’s business.
- Structure and capital – changes to the Group’s capital structure; major changes to the Group’s corporate structure; changes to the Group’s management and control structure; changes to the Group’s listing or plc status.
- Financial reporting and controls – approval of interim and preliminary announcements; approval of annual report and accounts, including the corporate governance statement and the directors’ remuneration report; approval of dividend policy; approval of significant changes in accounting policies or practices; approval of treasury policies.
- Internal controls – ensuring maintenance of a sound system of internal control and risk management.
- Communication – approval of resolutions and documentation to be put to shareholders in general meeting; approval of press releases concerning matters decided by the Board.
- Board membership and other appointments to senior management.
- Both the appointment and removal of the Company Secretary.
- Corporate governance matters including directors’ performance evaluations.
- Approval of policies including code of conduct incorporating whistle-blowing procedures; share dealing code; health and safety policy; environmental and corporate social responsibility policy; implementation of procedures required by the Bribery Act 2010 and equal opportunity policy.
Directors – information and professional development
The Board is supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties and its directors are free to seek any further information they consider necessary.
Under the direction of the Chairman, the Company Secretary’s responsibilities include ensuring good information flows within the Board and its Committees and between senior management and non-executive directors, as well as facilitating induction and assisting with professional development as required. The Company Secretary is responsible for advising the Board through the Chairman on all governance matters.
The Board ensures that directors, especially non-executive directors, have access to independent professional advice at the Group’s expense where they judge it necessary to discharge their responsibilities as directors. Training is available for new directors and other directors as necessary.
All directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that board procedures are complied with.
The Group has arranged appropriate insurance cover in case of legal action against its directors.
Directors – performance evaluation
The Chairman is responsible for the annual evaluation process, and will act on its outcome. This process involves each director submitting an appraisal to the Chairman in respect of the performance of the main Board, of each member of the Board and in respect of each Board Committee of which they are a member.
The non-executive directors, led by the Senior Independent Director, are responsible for the performance evaluation of the Chairman, taking into account views of executive directors. Each director completes an evaluation of the Chairman’s performance and provides this evaluation to the senior independent non-executive director.
During the year to March 2011 the Board undertook a formal evaluation of its own performance and that of its Committees and individual directors in the period and the Chairman reported the results of that evaluation process to the Board. There were no significant matters arising out of the annual evaluation process which required action by the Board.
The Senior Independent Director reported that there were no matters arising from the evaluation of the Chairman that necessitated any action or required a meeting to be held without the Chairman present.
Relations with shareholders
The Group values the views of its shareholders and recognises their interest in the Group’s strategy and performance, Board membership and quality of management. It therefore holds regular meetings with, and presentations to, its institutional shareholders to discuss its objectives.
The Group also regularly meets, with the help of its brokers, institutions that do not currently hold shares in the Group to inform them of its objectives.
During the year to March 2011 Antony Beevor and Andrew Gulliford met with shareholders to discuss certain matters relating to the Group.
The AGM is used to communicate with private investors and they are encouraged to participate. The members of the Audit, Remuneration and Nominations and Appointments Committees are available to answer questions. Separate resolutions are proposed on each issue so that they can be given proper consideration and there is a resolution to consider the annual report and accounts. The Group counts all proxy votes and will indicate the level of proxies lodged on each resolution, after it has been dealt with by a show of hands.
The Group communicates with all shareholders through the issue of regular press releases and through the press releases section of this website. The Group receives regular reports from sector analysts and its investor relations advisors on how it is viewed by its shareholders.
Nominations and Appointments Committee
The terms of reference of the Nominations and Appointments Committee are available by request and are included on this website.
The membership of the Committee is as follows:
Giles Weaver (Chairman)
Antony Beevor
Wilf Weeks
Andrew Gulliford
Michael O’Donnell
Directors – appointments to the Board
Appointments are made on merit and against objective criteria. Care is taken to ensure that appointees have enough time available to devote to the job.
The Nominations and Appointments Committee controls the process for Board appointments and makes recommendations to the Board.
Directors’ re-election
The Board has decided to fulfil the requirement of Code Provision B.7.I of the UK Corporate Governance Code, issued in June 2010 and applicable in full for all accounting periods beginning on or after 29 June 2010. This provision requires all directors of FTSE350 companies to be subject to annual re-election by shareholders. Whilst the Company is no longer in the FTSE350 the Board has chosen to comply with this provision as it accepts that shareholders should annually have the right to vote on each director’s re-election to the board. The Nominations and Appointments Committee confirms to shareholders that, following the annual formal performance evaluation, these directors continue to be effective and demonstrate commitment to their roles.
The work of the Nominations and Appointments Committee
The Committee met once during the year to March 2011 and a record of attendance at this meeting is shown on page 45 of the 2011 report and accounts. During this meeting the Committee resolved that Giles Weaver, Antony Beevor, and Gerald Kaye be recommended to shareholders for re-appointment as directors at the 2010 AGM.
Accountability and audit
Financial reporting
The Board presents a balanced and understandable assessment of the Group’s position and prospects. It seeks to do so in all published information and in particular in interim and preliminary announcements and other price-sensitive reports and reports to regulators as well as in the information required to be presented by statutory requirements.
Going concern
The directors have reviewed the current and projected financial position of the Group making reasonable assumptions about future trading performance.
The key areas of sensitivity are:
- timing and value of property sales
- availability of loan finance and related cash flows
- future property valuation and its impact on covenants and potential loan repayments
- committed future expenditure
- future rental income and potential bad debts
- repayment timing and value of trade receivables
The forecast cashflows have been sensitised to eliminate those cash inflows which are less certain and to take account of a further deterioration of property valuations. From their review the directors believe that the Group has adequate resources to continue to be operational as a going concern for the foreseeable future.
Audit Committee and auditors
The terms of reference of the Audit Committee are available by request and are included on this website.
The membership of the Committee is as follows:
Antony Beevor (Chairman)
Wilf Weeks
Andrew Gulliford
Michael O’Donnell
The Committee endorses the principles set out in the FRC Guidance on Audit Committees.
The Board has formal and transparent arrangements for considering how it applies the Group’s financial reporting and internal control principles and for maintaining an appropriate relationship with its auditors.
Whilst all directors have a duty to act in the interests of the Group, the Audit Committee has a particular role, acting independently from the executive, to ensure that the interests of shareholders are properly protected in relation to financial reporting and internal control.
The work of the Audit Committee
The Audit Committee met twice during the year to March 2011. A record of attendance at these meetings is shown on page 45 of the 2011 report and accounts. The Audit Committee met the external auditors on both occasions to discuss matters arising from the annual and interim audits, and with the executive board members and Chairman, reviewed and approved:
- the financial statements of the Group and the Preliminary Announcement of the annual results to 31 March 2010 and the Interim Statement on the half year results to 30 September 2010;
- the re-appointment of the Group’s external auditors; and,
- the external auditors independence and the provision of non-audit services by the external auditors.
Appointments to the Audit Committee are made by the Board on the recommendation of the Nominations and Appointments Committee in consultation with the Audit Committee Chairman.
It is common practice at Helical for Audit Committee meetings to be attended by all Board members who are available, whether or not they are members of the Audit Committee so that their input may be obtained.
Internal control
The Board is responsible for maintaining a sound system of internal control to safeguard shareholders’ investment and the Group’s assets.
Such a system is designed to manage, but cannot eliminate, the risk of failure to achieve business objectives. There are inherent limitations in any control system and, accordingly, even the most effective system can provide only reasonable, and not absolute, assurance against material misstatement or loss.
The key features of the Group’s system of internal control are as follows:
- clearly defined organisational responsibilities and limits of authority. The day-to-day involvement of the executive directors in the running of the business ensures that these responsibilities and limits are adhered to;
- financial controls and review procedures;
- financial information systems including cash flow, profit and capital expenditure forecasts. The Board receives regular and comprehensive reports on the day-to-day running of the business;
- an Audit Committee which meets with the auditors and deals with any significant internal control matter. In the year to March 2011 the Committee met with the Auditors on two occasions.
Internal audit
The Board reviewed its position during the year to 31 March 2011 and reaffirmed its stance that in view of the relatively small size of the Group it does not consider that an Internal Audit function would provide any significant additional assistance in maintaining a system of internal controls.
Audit independence
A policy of reviewing audit independence has been adopted whereby non-audit services undertaken by the auditors are approved prior to work being carried out. During the year to March 2011 under review non-audit services comprised a review of financial performance as required by the Group’s Performance Share Plan. The audit committee considers the external auditors to be independent and has satisfied itself of the effectiveness of the external auditors.
The Group’s policy on awarding non-audit work to its auditors is designed to ensure that the Group receives the most appropriate advice without compromising the independence of the auditors. Whilst no fee caps or limits have been set by the Committee, the level of fees would be a factor in considering whether the auditors’ independence could be affected by the award of non-audit work.
Giles Weaver
Chairman, on behalf of the Board
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