Corporate Governance

  Corporate Governance Report

In April 2018, the Quoted Companies Alliance (QCA) published an updated version of its Code which provides UK small and mid-sized companies with a corporate governance framework that is appropriate for a Company of our size and nature. The Board considers the principles and recommendations contained in the QCA Code are appropriate and have therefore chosen to apply the QCA Code. The updated 2018 QCA Code has 10 principles that should be applied.  Each principle is listed below together with an explanation of how the Company applies or otherwise departs from each of the principles.

The Company is subject to the City Code on Takeovers and Mergers.

 

Statement of compliance with the QCA Code and applying the principles of good governance

The Company is committed to meeting these principles as far as it reasonably can and the commentary below reflects the extent to which the Company has complied with the QCA Code during the period under review.

The QCA Code sets out 10 principles that should be applied.  These are listed below together with a short explanation of how the Company applies each of the principles:

 

Principle One

Business Model and Strategy

The Group has a 5-year growth strategy and is refined to reflect the learnings from our free piloting programme.

  • Significantly scaling M2G rental contracts in the UK.
  • Converting 30% of our P35/P40 to sales over the next 12 months.
  • Commercialising our Forensic Boiler Audit service.
  • Maintain a network of overseas distribution partners to deliver material revenue for the Group.
  • Maintain or exceed an installation capacity in line with company forecasts and to continue providing our clients and partners with a world class project management service and experience
  • Maintaining brand awareness and reputation of the Group

 

Principle Two

Understanding Shareholder Needs and Expectations

The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The Company has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company's Annual General Meeting. Investors also have access to current information on the Company though its website, www.sabien-tech.co.uk, and via Alan O’Brien, CEO and Edward Sutcliffe, Company Secretary who are available to answer investor relations enquiries.

 

Principle Three

Considering wider stakeholder and social responsibilities

The Board recognises that the long-term success of the Company is reliant upon the efforts of the employees of the Company and its contractors, suppliers, regulators and other stakeholders. The Board has put in place a range of processes and systems to ensure that there is close oversight and contact with its key resources and relationships. For example, a companywide internal information system shares live information on key suppliers, customers and projects, allowing the Company to efficiently fulfil customer requirements.  Furthermore, all employees of the Company participate in an annual assessment process which is designed to ensure that there is an open and confidential dialogue with each person in the Company to promote successful two-way communication with agreement on goals, targets and aspirations of the employee and the Company. These feedback processes help to ensure that the Company can respond to new issues and opportunities that arise to further the success of employees and the Company. The Company has close ongoing relationships with a broad range of its stakeholders and provides them with the opportunity to raise issues and provide feedback to the Company.

 

Principle Four

Risk Management

The Group places great importance on internal control and risk management. A risk-aware and control-conscious environment is promoted and encouraged throughout the Group. The Board, either directly or through its committees, sets objectives, performance targets and policies for management of key risks facing the Group.

The risks outlined below are not an exhaustive list of those faced by the Group and are not intended to be presented in any order of priority. The Group holds weekly management meetings at which, inter alia, business risks are reviewed and any areas that are causing concern are discussed. A plan of action to resolve issues is then put in place.

Activity

Risk

Impact

Control(s)

Management

Recruitment and retention of key staff

Reduction in operating capability

Stimulating and safe working environment

Balancing salary with longer term incentive plans

Regulatory adherence

Breach of rules

Censure or withdrawal of authorisation

Strong compliance regime instilled at all levels of the Company including regular review of any changes to current legislation

Strategic

 

 

 

Damage to reputation

 

 

 Inability to secure new capital or clients

 

Effective communications with shareholders coupled with consistent messaging to our customers

Robust compliance

 

 

Inadequate disaster recovery procedures

 

Loss of key operational and financial data

Secure off-site storage of data

 

Lack of recurring revenue

Over-reliance on capital sales which can be unpredictable

Development of rental model and Forensic Boiler Audit Service

Financial

 

Liquidity, market and credit risk

 

Inability to continue as going concern

 

Robust capital management policies and procedures

 

Inappropriate controls and accounting policies

 

Reduction in asset values

Incorrect reporting of assets

 

Appropriate authority and investment levels as set by Treasury and Investment Policies

Audit Committee

     

 

The Board of Directors has overall responsibility for the Group’s system of internal control and for reviewing its effectiveness. The purpose of the system of internal control is to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable, but not absolute, assurance against material misstatement or loss.

The Directors have established an organisational structure with clear operating procedures, and lines of responsibility. In particular, any capital investment requires a business case to be presented to and approved by the Board.  Financial reporting is carried out within a comprehensive financial planning and accounting framework with oversight by the audit committee. The Board has reviewed the need for an internal audit function and concluded that such a function is not currently appropriate given the size of the Group.

 

Principle Five

A Well-Functioning Board of Directors

As at the date hereof the Board comprised the Interim Non-Executive Chairman, John Taylor; the Chief Executive Officer, Alan O’Brien; and two Non-Executive Director, Dr Martin Blake. In addition, the Interim Finance Director, Edward Sutcliffe (non-statutory Director) attends all Board meetings. Biographical details of the current Directors are set out within Principle Six below.

Executive and Non-Executive Directors retire by rotation in accordance with the Company’s Articles of Association which prescribe that at every Annual General Meeting one third of the directors for the time being or, if their number is not a multiple of three, then the number nearest to but not exceeding one third, shall retire from office. Non-executive directors are initially appointed for a three year term but their appointment is terminable by either party on three months’ written notice.  The letters of appointment of all Directors are available for inspection at the Company's registered office during normal business hours. 

The Board meets at least six times per annum. It has established an Audit Committee and a Remuneration Committee, the particulars of which appear hereafter. The Board has agreed that appointments to the Board are made by the Board as a whole and so has not created a Nominations Committee.  The Chairman and the Non-Executive Directors are considered to be part time but are expected to provide as much time to the Company as is required. The Board considers that this is appropriate given the Company's current stage of operations. It shall continue to monitor the need to match resources to its operational performance and costs and the matter will be kept under review going forward.  Dr Martin Blake and Karl Monaghan are considered to be Independent Directors by the Board.  The Board notes that Martin and Karl both hold share options in Sabien, but these are not considered significant enough to affect decision making.  In addition, Karl has served on the board for 11 years, but the Board does not consider that this has affected his independence as he has regularly resigned by rotation and been re-appointed. The Board notes that the QCA recommends a balance between executive and non-executive Directors and recommends that there be two independent non-executives. The Board shall review further appointments as scale and complexity grows.

Attendance at Board and Committee Meetings

The Company shall report annually on the number of Board and committee meetings held during the year and the attendance record of individual Directors.  In order to be efficient, the Directors meet formally and informally both in person and by telephone.

 

Principle Six

Appropriate Skills and Experience of the Directors

The Board currently consists of four Directors and, in addition, the Group has employed the services of Edward Sutcliffe to act as the Company Secretary and Interim Finance Director (non-statutory). The Company believes that the current balance of skills in the Board as a whole, reflects a very broad range of commercial and professional skills across geographies and industries and each of the Directors has experience in public markets.

The Board recognises that it currently has a limited diversity and this will form a part of any future recruitment consideration if the Board concludes that replacement or additional directors are required.

The Board shall review annually the appropriateness and opportunity for continuing professional development whether formal or informal.

 

John Taylor

Chairman

Mr Taylor works with a group who assist small cap technology stocks with their development. Prior to that he spent eighteen months working in private equity backed portfolio companies, driving operational turnaround initiatives and implementing costing systems. He also spent over 20 years in the Army Air Corps, leaving in 2015 with the rank of colonel. Between 2013 and 2015 he was senior strategic communications officer for the Ministry of Defence. He joined the Board of Kin Group plc (subsequently renamed Bidstack Group plc) in November 2017.

Bruce chairs the Remuneration Committee and is a member of the Audit Committee.

 

Alan O’Brien

Chief Executive Officer

Alan has held a number of senior marketing management and commercial roles within the UK Energy and Telecom sectors including positions with TXU, KDDI, Eircom and Irish Life Plc. Most recently he was employed by E.ON (formerly Powergen UK) as Business Development Manager, where he was responsible for the group’s business development strategy and the development of key strategic alliances and partnerships within the UK and across Pan- European E.ON markets. Alan left E.ON in 2004 and subsequently founded the Sabien business. Alan holds a BA Hons in International Marketing and a Diploma in Direct Marketing. As Chief Executive of Sabien, Alan is responsible for Group strategy, client liaison and the identification of new business opportunities.

 

Dr Martin Blake

Non-executive Director

During his time at Royal Mail, Martin led the Social Responsibility and Sustainability Teams as well as designing and deploying an international award winning Carbon Management Programme to combat climate change. Prior to joining Royal Mail Martin spent over 20 years in the Middle East working first for an American Healthcare provider and later the largest oil company in the world ‘Saudi Aramco’.

Martin has over 25 years experience in business management, Corporate Social Responsibility and Sustainability. He holds an MBA in Organisational Analysis and Strategic Management and his Doctorate in Business (DBA) focused on Organisational Change. He is an Adjunct Professor of Sustainable Business Development at both Griffith University and the University of Southern Queensland. He is a non-executive director for one American company – ‘Ecologic’ (green transport and logistics) and two Australian companies – ‘In Good Company’ (full service CSR consultancy) and Carbon Zero Solutions (Sustainability and Carbon Management Consultancy).

He is a Member of the Institute of Directors and a Fellow of the Chartered Institute of Management.

He chairs the ‘PostEurop’ (45 European postal authorities) sustainability committee and is a member of many government and non-government advisory panels on sustainability and climate change. Dr Blake chairs and advises a multitude of strategic groups, all focused on the development and deployment of low carbon infrastructure, including board directorships of Fuel Cell Europe and the Scottish Hydrogen Fuel Cell Association.

Dr Blake is also a strategic advisor to Bovis Lend Lease (UK) and the Scottish Government Hydrogen group and a Trustee of PURE a UK charity specializing in Socially Responsible Carbon Offset.

Dr Blake is a member of the Remuneration and the Audit Committees.

  

Principle Seven

Evaluation of Board Performance

Internal evaluation of the Board, and individual Directors will be undertaken on an annual basis in the form of peer appraisal and discussions to determine the effectiveness and performance as well as the Directors' continued independence.

The results and recommendations that come out of the appraisals for the directors shall identify the key corporate and financial targets that are relevant to each Director and their personal targets in terms of career development and training. Progress against previous targets shall also be assessed where relevant.

 

Principle Eight

Corporate Culture

The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and that this will impact the performance of the Company. The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the Company as a whole and the way that employees behave. The corporate governance arrangements that the Board has adopted are designed to ensure that the Company delivers long term value to its shareholders and that shareholders have the opportunity to express their views and expectations for the Company in a manner that encourages open dialogue with the Board.  A large part of the Company's activities is centred upon what needs to be an open and respectful dialogue with employees, clients and other stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate objectives. The Board places great import on this aspect of corporate life and seeks to ensure that this flows through all that the Company does.  The directors consider that at present the Company has an open culture facilitating comprehensive dialogue and feedback and enabling positive and constructive challenge. The Company has adopted, with effect from the date on which its shares were admitted to AIM, a code for Directors' and employees' dealings in securities which is appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of the Market Abuse Regulation which came into effect in 2016.

 

Principle Nine

Maintenance of Governance Structures and Processes

Ultimate authority for all aspects of the Company's activities rests with the Board, the respective responsibilities of the Chairman and Chief Executive Officer arising as a consequence of delegation by the Board. The Board has adopted appropriate delegations of authority which set out matters which are reserved to the Board. The Chairman is responsible for the effectiveness of the Board, while management of the Company's business and primary contact with shareholders has been delegated by the Board to the Chief Executive Officer.

Audit Committee

During the financial year ended 30thJune 2018 the Audit Committee was chaired by Karl Monaghan who was supported by Dr Martin Blake and Bruce Gordon. Since 21st December 2018 the Audit Committee has been chaired by John Taylor on an interim basis and supported by Martin Blake. This committee meets no less than twice a year. It is responsible for making recommendations to the Board on the appointment of auditors and the audit fee, for reviewing the conduct and control of the annual audit and for reviewing the operation of the internal financial controls. It also has responsibility for the reporting of the financial performance of the Group and for reviewing financial statements prior to publication.

Remuneration Committee

During the financial year ended 30thJune 2018, the Remuneration Committee was chaired by Bruce Gordon who was supported by Dr Martin Blake and Karl Monaghan. Since 21st December 2018 the Remuneration Committee has been chaired by John Taylor on an interim basis and supported by Martin Blake. The Remuneration Committee meets as required during each financial year. It is responsible for reviewing the performance of the executive directors and setting the scale and structure of their remuneration and the basis of their service agreements with due regard to the interest of shareholders. The Remuneration Committee shall also determine the allocation of share options to employees. It is a rule of the Remuneration Committee that a Director shall not participate in discussions or decisions concerning his/her own remuneration.

Nominations Committee

The Board has agreed that appointments to the Board will be made by the Board as a whole and so has not created a Nominations Committee.

Non-Executive Directors

The Board has adopted guidelines for the appointment of Non-Executive Directors which have been in place and which have been observed throughout the year. Non-Executive Directors retire by rotation in accordance with the Company’s Articles of Association which prescribe that at every Annual General Meeting one third of the directors for the time being or, if their number is not a multiple of three, then the number nearest to but not exceeding one third, shall retire from office. Non-executive directors are initially appointed for a three year term but their appointment is terminable by either party on three months’ written notice.

In accordance with the Companies Act 2006, the Board complies with: a duty to act within their powers; a duty to promote the success of the Company; a duty to exercise independent judgement; a duty to exercise reasonable care, skill and diligence; a duty to avoid conflicts of interest; a duty not to accept benefits from third parties and a duty to declare any interest in a proposed transaction or arrangement.

 

Principle Ten

Shareholder Communication

The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The Company has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company's Annual General Meeting.

Investors also have access to current information on the Company though its website, though its website, www.sabien-tech.co.uk, and via Alan O’Brien, CEO and Edward Sutcliffe, Company Secretary who are available to answer investor relations enquiries.

The Company shall include, when relevant, in its annual report, any matters of note arising from the audit or remuneration committees.