Investor Relations

Corporate Governance

NCC Group is committed and is accountable to shareholders for high standards of corporate governance.

NCC Group is committed and is accountable to shareholders for high standards of corporate governance. In respect of the year ended 31 May 2011, NCC Group has been in full compliance, other than as disclosed, with the provisions of the June 2008 (revised) Combined Code on Corporate Governance but has also chosen to measure its compliance against the Combined Code UK Corporate Governance Code (June 2010).

This statement describes how principles of corporate governance are applied to the Group.

The Board

The Board currently comprises of two Executive and three Non Executive Directors. The Board and Committee responsibilities are set out on page 33 of the Annual Report.

The Non Executive Chairman, Paul Mitchell, is responsible for the running of the Board and promoting a culture of openness and debate. Executive responsibility for the running of the Group's business rests with the Chief Executive Officer, who is supported in this by the Group Finance Director and the Operational Board of NCC Group.

During the year, James Wallace stood down as a Non Executive Director at the AGM on 21September 2010, with Debbie Hewitt replacing him as the Senior Independent Non Executive Director.

The role of the Senior Independent Director is to provide a sounding board for the Chairman and to serve as an intermediary for other Directors when necessary. Her main responsibility is to be available to the shareholders should they have concerns that they have been unable to resolve through normal channels or when such channels would be inappropriate.

John Gittins joined the Group as Group Finance Director on 20 September 2010 and left the business on 25 February 2011. Atul Patel joined the Group on 18 February 2011 as an Interim Finance Director and was appointed as the Group Finance Director on 19 April 2011. Both received a full and formal induction on joining the Board.

The Board normally meets on a monthly basis. During the year, the Board met on twelve scheduled occasions. The performance of the Board is a fundamental component of the Company’s success. During the year, each of the Board, Audit Committee and Remuneration Committee carried out an internal self-evaluation on their effectiveness and concluded that they continue to be effective and that no significant amendments are required to their operating procedures.

The Non Executive Directors met independently from the Executive Directors to discuss with the hairman the overall functioning of the Board and his contribution in making it effective.

The Non Executive Directors provide a strong independent element on the Board and are well placed to constructively challenge and help develop proposals on strategy. Between them they bring an extensive and broad range experience to the Group.

The attendance of individual Directors at the scheduled Board meetings is shown on page 34 of the Annual Report. The Non Executive Directors are contracted to spend a minimum of 18 days per annum on NCC Group affairs.

After careful review, the Board has again concluded that Debbie Hewitt and David McKeith are independent. In coming to this assessment the Board considered the character of the individuals concerned and the fact that none of them:

has ever been an employee of the Group;
has ever had a material business relationship with the Group;
receives any remuneration other than their fees;
has close family ties with advisors, other directors or senior management of the Group that could reasonably be expected to cause a conflict;
has significant links with other directors through involvement with other companies;
represents a significant shareholder; or
has served on the NCC Group Board for more than nine years.

The Board is responsible to shareholders for the proper management of the Group, for its system of corporate governance and for the long term success of the Company. It receives information on (at least) a monthly basis to enable it to review trading performance, forecasts and strategy and it has a schedule of matters specifically reserved for its decision. The most significant of these are:

changes to the structure, size and composition of the Board;
consideration of the independence of Non Executive Directors;
consideration of the balance of interests between shareholders, employees, customers, the community and the environment;
review of management structure and senior management responsibilities;
with the assistance of the Remuneration Committee, approval of remuneration policies across the Group;
approval of strategic plans, annual operating plans and budgets and any material changes to them;
oversight of the Group's operations ensuring competent and prudent management, sound planning, an adequate system of internal control and adequate accounting and other records;
reviewing the Group’s risk review and control process;
health and safety matters;
approval of corporate policies such as the code of ethics and open door policy;
approval of the Group’s professional advisors;
final approval of annual accounts and accounting policies;
approval of treasury and banking policies;
approval of the dividend policy;
changes to the Group’s capital structure;
major changes to the Group’s corporate structure or any change to its status as a public company;
approval of the acquisition or disposal of subsidiaries and major investments and capital projects;
delegation of the Board's powers and authorities, including the division of responsibilities between the Chairman, the Chief Executive and other Executive Directors; and
receiving reports on the views of the Company's shareholders and approval of all documents put to shareholders at a general meeting or circulated to shareholders.

Operational management of the Group is delegated to the Operational Board of NCC Group.

Procedures exist to allow the directors to seek independent legal and professional advice in respect of their duties at the Company's expense where the circumstances are appropriate. The Directors were last reminded of their responsibilities, as well as to the changes made by the Companies Act 2006 in 2008 but all directors have access to the Company Secretary or our external legal advisors for advice.

All Directors will submit themselves for re-election at the AGM every year.

The following formally constituted committees deal with specific aspects of the Group's affairs in accordance with their written terms of reference, which are reviewed regularly.

Audit Committee

The Audit Committee, which is chaired by James Wallace, who is a member and former Chairman of other plc audit committees, comprises the three independent Non Executive Directors and meets at least three times a year. The Chairman, Chief Executive, Finance Director and external auditors attend these meetings as required by the Committee.

The purpose of the Committee is to assist the Board in the discharge of its responsibilities for financial reporting and corporate control and to provide a forum for reporting by the external auditors. The responsibilities of the Committee include:

to consider liquidity risk and the going concern of the Group
to monitor the integrity of the financial statements and review significant financial reporting judgements contained in them;
to review the Company's internal financial control system and risk management systems;
to make recommendations to the Board in relation to the appointment of the external auditor and to approve the remuneration and terms of engagement of the external auditors;
to oversee the relationship with the external auditors including, but not limited to, independence, objectivity and effectiveness;
to develop and implement policy on the engagement of the external auditors to supply non-audit services;
to monitor the Company’s whistle-blowing procedures;
to review the Company’s procedures for detecting fraud and the systems of control for the prevention and detection of bribery; and
to review regularly the need for an internal audit function.

The attendance of individual Committee members at Audit Committee meetings is shown on page 37 of the Annual Report.

During the year, the Audit Committee considered the following issues:

tax planning issues;
the areas of judgement in the financial statements including the valuation of intangible assets andgoodwill impairment;
the requirement for a formal internal audit function;
review of the financial procedures manual and the open door policy;
the independence and level of fees to Rickitt Mitchell as corporate finance advisors;
the level of fees payable to KPMG Audit plc in respect of non-audit work;
the separation of the audit, non audit and tax work and appointment of the appropriate advisors; and
corporate governance issues including a review of terms of reference.

The Group again formally considered the need for an Internal Audit function, but was satisfied that the acquisition integration team could conduct this role on an ad-hoc basis if the need arose. Further, the internal controls and the Quality and Security procedures that are in place to support the regular internal and external audits that are conducted under the Group’s ISO 9001 accredited quality assurance process, provides a good degree of comfort. These current arrangements are deemed sufficient given the structure of the Group’s accounting function and the size of the Group, but it will be reviewed each year.

Remuneration Committee

The Remuneration Committee, which is chaired by Debbie Hewitt and comprises the Non Executive Directors, meets at least three times a year and additionally as required. It is responsible for reviewing remuneration arrangements for members of the Board and other senior employees of the Group and for providing general guidance on aspects of remuneration policy throughout the Group.

The attendance of individual Committee members at Remuneration Committee meetings is shown on page 37 of the Annual Report.

The Directors' Remuneration Report is set out on pages 41 to 48 of the Annual Report.

Nomination Committee

The Nomination Committee is chaired by Paul Mitchell and comprises the Chairman, the Chief Executive and the Non Executive Directors. The Committee is responsible for proposing candidates to the Board, having regard to the balance and structure of the Board. The Committee met once to discuss and approve the appointment of the new Finance Director and to update the Board on the progress with the recruitment of new Non Executive Directors.

The Group recognises that the Non Executive Chairman is not independent and that the committee contains the Chief Executive who is an Executive Director, but in the event of an even number of votes being cast the Senior Independent Non Executive Director has the casting vote.

The Board’s process for appointment of a new Non Executive is led by the Non Executive Chairman and for executive positions by the Chief Executive. Candidates are recommended by third party advisors and where appropriate through assessment of internal candidates. The Committee recognises the benefits of having a balance of skills, experience, independence and knowledge, and recognises the benefits of diversity.

Recommendations are then formally considered by the Nomination Committee.

Internal control

The Board is responsible for establishing and maintaining the Group’s system of internal control. Internal control systems are designed to meet the particular needs of the Group and the risks to which it is exposed. By their nature however, internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss.

Key elements of the internal control system are described below. These have all been in place throughout the year and up to the date of this report and are reviewed regularly by the Board:

clearly defined management structure and delegation of authority to Committees of the Board, subsidiary boards and associated business units;
clearly documented internal procedures set out in the Group’s ISO 9001:2008 accredited quality manual;
high recruitment standards and formal career development and training to ensure the integrity and competence of staff;
regular and comprehensive information provided to management, covering financial performance and key performance indicators, including non-financial measures;
a detailed budgeting process where business units prepare plans for the coming years and rolling three year
strategic plans, which are approved by the Board;
procedures for the approval of capital expenditure and investments and acquisitions;
monthly monitoring and re-forecasting of results against the annual operating plan, with major variances followed
up and management action taken where appropriate;
regular internal audits of key processes and procedures under the Group’s ISO 9001 accredited quality assurance process;
on-going procedures to identify, evaluate and manage significant risks faced by the business and procedures to monitor the control systems in place to reduce these risks to an acceptable level; and
formal consideration of progress made against significant business risks at monthly operational board meetings.

Auditor independence

The Company operates a rigorous policy designed to ensure that the auditors’ independence is not compromised by their undertaking inappropriate non-audit work and the Audit Committees approval is needed for any fees paid to the Auditors for non audit work in excess of £25,000 in any twelve month period.

The choice of external auditor will be reviewed every five years or sooner if the Board considers it appropriate. All significant pieces of non audit work are put to informal tender to suitable parties, this includes if appropriate the auditors. Upon review as to suitability and price, the work will then be placed to the provider recommended after approval by the Audit Committee. The Audit Committee has delegated the placing of financial non audit work under £25,000 to the discretion of the Executive Directors, which the Executives as a matter of course review on a case by case basis and award to the most suitable provider.

During the year the Audit Committee approved fees payable to Ernst & Young as the Group’s tax advisors, fees payable to Deloitte in respect of transaction and international tax services and corporate finance fees to Rickitt Mitchell. As reported to the Audit Committee £nil non-audit work was undertaken by the external auditors in 2011 (2010: £nil) thereby satisfying the Committee that there is no effect on the auditors independence.

Going concern

The Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future, a period of not less than 12 months from the date of this report. For this reason, they continue to adopt the going concern basis in preparing the financial statements. See page 65 of the Annual Report for the note on the Basis of Preparation.

Communication with shareholders

The Company values the views of shareholders and recognises their interests in the Group’s strategy and performance. It holds briefings with institutional fund managers, analysts and other investors, including staff shareholders, primarily following the announcement of interim and preliminary results, as well as at other times during the year as may be appropriate.

The Company’s programme of investor relations activities is designed to ensure that the investing community receives a balanced and consistent view of the Group’s performance. All shareholders are welcomed to the Annual General Meeting, at which the Board of Directors are available to answer questions from shareholders.

Communication is also provided through the Annual Report, the Interim Report and the Investor Relations area on the Company’s website, www.nccgroup.com on which financial and other information is available and regularly updated.
The Board receives reports from the Group’s broker twice a year that communicate feedback from institutional shareholders, reviews analyst coverage of the Group every month and receives reports twice a year from its financial public relations advisors regarding the views of analysts.

During the year Debbie Hewitt met or teleconferenced with the Group’s five largest shareholders following her appointment as the Senior Independent Non Executive in September 2010 and the Non Executive Chairman, Paul Mitchell had teleconferences with a number of the investors regarding the departure of the then Finance Director in February 2011.

By order of the Board.