QCA Code Statement

CORPORATE GOVERNANCE – Gamma Communications plc and subsidiaries (“Gamma”)

The information contained in this document was approved by the board on 3 September 2020.

Introduction

Gamma Communications plc adopted the Quoted Companies Alliance Corporate Governance Code (2018 edition) (the “QCA Code”) on the 23 May 2018; Gamma adopted the QCA Code as it feels it takes key elements of good governance and applies them in a manner which is workable for the different needs of growing companies. The correct application of the QCA Code requires Gamma to apply the ten principles contained in the Code and to publish certain related disclosures.

 

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

Gamma is a leading technology based provider of communication services to the business market in Western Europe. Gamma’s business model is to provide business communication products that solve customer problems and make their businesses more efficient. Gamma delivers these services from a scalable network in each country in which it operates and best in class operational and sales platforms which enables it to exploit a wide range of routes to market via indirect channel partners and direct sales teams. Gamma’s business model can be found on pages 4 and 5 of our Annual Report and Accounts 2019.

Gamma’s strategy for growth is to:

  • Evolve our strong cloud telephony position into the Unified Communications as a Service (UCaaS) market
  • Build on our fixed and mobile telecom strength to differentiate our proposition from pure OTTs
  • Continue to expand in Europe to gain continued growth and scale
  • Continue to build on our digital capabilities to assure agility and sustain competitiveness

Our engaging culture feeds directly into our strategy, which is being pursued both organically and, as opportunities arise, by relevant acquisitions of products or entry into adjacent markets. More detail on Gamma strategy can be found on pages 16 to 17 of our Annual Report and Accounts 2019 and on our website https://www.gammacommunicationsplc.com/investors/

 

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

Gamma is committed to listening and communicating openly with its shareholders to ensure that its strategy, business model and performance are clearly understood. Understanding what analysts and investors think about us, and in turn, helping these audiences understand our business, is a key part of driving our business forward and we actively seek dialogue with analysts, investors and potential investors. Communication with shareholders is undertaken through press releases, general presentations at the time of the release of the annual and interim results and face-to-face meetings.

Institutional shareholders

There is regular dialogue with institutional shareholders to ensure that the members of the Board develop an understanding of their views and concerns, including meetings after the announcement of the Group’s annual and interim results to the City. These meetings allow the Executive Directors to update shareholders on strategy, the Group’s performance and business evolution. The Chairman also meets with shareholders separately from the executive. All board members receive copies of feedback reports from the investor meetings which are compiled independently by Gamma’s Nominated Advisor, thus keeping them in touch with shareholder opinion.

Our Senior Independent Director is also available to meet with shareholders on request.

Private shareholders

The AGM is the main forum for dialogue with all investors and the Board. Copies of our annual report and the notice of AGM are sent to all shareholders at least 21 days before the meeting. Copies of these and other information for shareholders is provided on our website: https://www.gammacommunicationsplc.com/investors/. The Executive Directors, Chairman of the Board, together with all other Directors, routinely attend the AGM and are available to answer questions raised by shareholders. As soon as practicable after the AGM has finished, the results of the AGM are released through a regulatory news service. The announcement also provides, for information, details of the total number of votes in favour of each resolutions. At last year’s AGM, all resolutions put to shareholders were duly passed.

Gamma also retains the services of Progressive Equity Research who provide independent research and commentary on Gamma. This can be accessed by any private investor via Progressive’s website.

 

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

Gamma has identified its key customers, suppliers and other advisers and recognises that its staff have been instrumental in the growth and success of the business to date.

Customers (both direct and channel partners) are a key relationship for the Group and the Group prides itself on its high standard of customer service. Gamma uses the net-promoter score as a measure of customer satisfaction as well as engaging with customers for input and feedback.

The business relies on a number of suppliers to provide elements of its products and services and develops strong relationships with the suppliers. Gamma works closely with relevant regulatory bodies as they shape policy to prevent harms to consumers and businesses.

A high priority is placed on employee engagement, bi-monthly staff surveys are now performed, and the results reviewed and addressed. Gamma encourages development of existing staff and ensures that learning opportunities are available. The investment and focus on staff leads to low churn compared to the industry and enables us to offer good customer service through knowledgeable and experienced staff.

The Company is committed to engaging with the communities in which it operates, everyone at Gamma is entitled to additional leave each year to help a good cause or to work in the local community to give something back. As well as corporate support for organisations, Gamma also operates a “Double It” scheme. This is a scheme for Gamma employees, where money raised for a charity or good cause which is special to a particular employee is matched by Gamma.

The Board has regard to the feedback of relevant stakeholders in its decision-making and the formulation of strategy. It has just formed an ESG sub-committee to focus in more detail on these important areas.

 

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

The Board has ultimate responsibility for the Group’s system of internal controls and for reviewing its effectiveness. Gamma operates a robust and well-established structure for risk management in each area of the business which is designed to identify actual and potential risks that may impact the Group’s strategy and the daily operation of the business.

This process includes the identification, evaluation and scoring of risks based on the likelihood of occurrence, the potential impact, and the adequacy of the mitigation or control actions in place. Our Annual Report and Accounts 2019 pages 22 and 23 provides further details on this process.

The Business’s principal risks are listed with a short description of their potential impact and what is being done to mitigate them on pages 24 to 27 of our Annual Report and Accounts 2019. This is not an exhaustive list as the risk profile of the business is constantly evolving.

The Company has an established framework of internal financial controls, the effectiveness of which is reviewed by the Audit Committee, the Board and the Leadership team.

Financial controls

The Board is responsible for reviewing and signing off the overall Company strategy, including approving revenue, profit and capital budgets. A detailed monthly board pack is provided to and discussed by the Board, which includes amongst other things:

  • the financial results of the Group (income statements, cash flows, capital expenditure and balance sheets)
  • monthly variances to budget and prior year. Forecasts for the current financial year are regularly revised and presented to the Board, typically on a quarterly basis, in light of actual performance to ensure that information is up to date and any risks in meeting year-end numbers can be identified and mitigated as soon as possible

The Audit Committee assists the Board in discharging its duties regarding the financial statements, accounting policies and the maintenance of proper internal business, operational and financial controls.

The Executive Directors and Leadership team undertake a number of reviews on a weekly, monthly and quarterly basis, including performance against KPIs and other business measures.

Non-financial controls

The principal elements of the Group’s internal non-financial controls include:

  • close management of the day-to-day activities of the Group by the Executive Directors and the Leadership team;
  • an organisational structure with defined levels of responsibility, which promotes entrepreneurial decision-making and rapid implementation while minimising risks;
  • A comprehensive annual budgeting process producing a detailed integrated profit and loss, balance sheet and cash flow, which is approved by the Board; and
  • the Company maintains a business risk register. Risks facing the business are continually re-assessed, and mitigating actions are considered and implemented when necessary to help protect the business.

 

Principle 5 – Maintain the board as a well-functioning, balanced team led by the chair

Independence

The Board comprises eight Directors, two of whom are Executive Directors and six of whom are Non-Executive Directors, reflecting a blend of different experience and backgrounds. Of the Non-Executive Directors, the Group regards Richard Last, Alan Gibbins, Martin Lea and Henrietta Marsh as Independent Non-Executive Directors within the meaning of the UK Corporate Governance Code 2018. Further details on the Board of Directors including their skills and experience are available in the Annual Report and Accounts 2019 pages 48 and 49. Details on the Board and Committee meetings held in 2019 and the attendance at these meetings are available in the Annual Report and Accounts 2019 page 52.

Directors’ conflict of interest

The Company has effective procedures in place to monitor and deal with conflicts of interest. The Board is aware of the other commitments and interests of its Directors, and changes to these commitments and interests are reported to and, where appropriate, agreed with the rest of the Board.

 

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

Gamma has an experienced Board which blends industry expertise with public company experience. The Board also has a good knowledge of our product set and high level relationships with our key customers and suppliers. The members of the board bring with them different experience, skills and personal qualities. The board recognises that it needs to improve its diversity and this will be addressed through succession planning and future appointments. Further information on the Board can be found on pages 48 to 49 of our Annual Report and Accounts 2019.

All Directors can take independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense. In addition, the Directors have direct access to the advice and services of the Company Secretary and Nominated Advisor.

 

Principle 7 – Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

Board performance effectiveness process

The Company has a formal process of annual performance evaluation for the Board, its Committees and individual Directors. The Board and its Committees are satisfied that they are operating effectively.

Performance evaluations will continue to be conducted annually and the method for such reviews will continue to be reviewed by the Board to optimise the process.

The review is based on a template covering key areas: Board composition, Board information, Board process, internal control and risk management, Board accountability, CEO and top management and Standards of conduct. These areas are scored by all members and reviewed by the Chairman and Company Secretary and compared against previous evaluations before being discussed.

Approach to succession planning

Succession planning is regarded by the board as vitally important to the continued success of the business. Through regular reviews and management discussions, the Company’s future business leaders are identified and personal development plans are put in place to harness their potential and plan for job growth and career progression.

Where a new appointment to the Board is required, the nomination committee (which is chaired by the Chairman) considers the balance of skills, knowledge and experience on the board and makes appropriate recommendations for consideration by the whole board. Other senior appointments (which are not Board positions but which are vital to the running of the business) are made by the chief executive in discussion with the chairman.

 

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

The board promotes a corporate culture that is based on sound ethical values and behaviours. The board has a clear understanding of the business’s culture and works to ensure that these sound ethical values are reflected throughout the organisation.

Gamma’s culture is described by four aims for each employee –

  • Stronger together
  • Aim high
  • Consider others
  • Think differently

Regular communication from the CEO via e-mail, video-conference and “town hall” meetings sets the agenda for behaviour in the business.

Gamma is committed to protecting the environment and was the first network in the UK to be certified as Carbon Neutral.

Gamma has policies in place covering key matters such as bribery, protection of intellectual property and sensitive information, diversity & anti-discrimination and whistleblowing. These are rigorously enforced.

Gamma runs programmes to encourage women to develop and reach their full potential in an industry which has historically been male dominated. Gamma also runs an apprenticeship programme which encourages applications from young people of all backgrounds.

The policies set by the board in this area are reflected in the actions and decisions of the chief executive and the rest of the leadership team.

 

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

Board of Directors

The role of the Board of Directors is to promote the long term success of the Company and sustainably grow shareholder value. The Board has responsibility for the management, direction and performance of the Group and for ensuring that appropriate resources are in place to achieve its strategy. The Board directs and reviews the Group’s operations within an agreed framework of controls. This allows risk to be assessed and managed within agreed parameters. There is a clear division of responsibility across the Board:

  • the Chairman is responsible for running the business of the Board and for ensuring appropriate strategic focus and direction; and
  • the Chief Executive Officer is responsible for proposing the strategic focus to the Board, implementing it once it has been approved and overseeing the management of the Company through the CFO and senior management team

The Board has established audit, nomination, remuneration, risk and ESG committees with formally delegated duties and responsibilities.

Roles of the committees

Audit committee: The Committee works within a framework of approved terms of reference. Its key objectives are to provide effective governance over Gamma’s financial reporting, including the adequacy of disclosures made in the financial statements; to review the performance of the external auditors; to provide oversight of the Group’s systems of internal financial control; and to report to the Board on these matters. Further details can be found on pages 56 to 58 of our Annual Report and Accounts 2019.

Risk Committee: The Risk Committee focuses on “non-financial” risks that are not normally within the remit of the Audit Committee. It is primarily responsible for ensuring that: Management has implemented an appropriate and effective risk management and internal control system; There is a system in place to scan the environment for new risks; The nature and extent of the principal risks faced is understood and that they are effectively managed and mitigated; and an appropriate risk management culture exists within the organisation. Further details can be found in our Annual Report and Accounts 2019 on page 59.

Remuneration Committee: The Committee is primarily responsible for determining and making recommendations to the Board on the policy for the remuneration and employment terms of the Executive Directors, Chairman and other senior executives, and for the effective implementation of that policy. Further details can be found in our Annual Report and Accounts 2019 on pages 60 to 72.

Nomination Committee: The Nomination Committee assists the Board in discharging its responsibilities relating to the composition and make-up of the Board and any Committees of the Board. It is primarily responsible for evaluating the balance of skills, knowledge and experience of the Board; Evaluating the size structure and composition of the Board and Committees of the Board; Retirements and appointments of additional and replacement Directors and Committee members; and Making appropriate recommendations to the Board on such matters. Further details can be found in our Annual Report and Accounts 2019 on page 55.

ESG Committee: The main purpose of the Committee is to represent the board in defining the Company’s strategy relating to ESG matters and in reviewing the practices and initiatives of the Company relating to ESG matters ensuring they remain effective and up to date. It oversees the development of the Group’s ESG strategy and makes recommendations to the board regarding it. It also oversees the establishment of policies and codes of practice and their effective implementation. As it is a new committee, further details will be published in the next Annual Report.

Matters reserved for the board

There is a formal schedule of matters reserved for the board. The board is responsible for overall group strategy and management, financial reporting and controls, group structure and capital, corporate governance, board membership and other appointments.

Plans for evolution of the governance framework

There are no current plans for the evolution of the governance framework.

 

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

The Company communicates with shareholders through the Annual Report and Accounts, full-year and half-year announcements, the AGM, and one-to-one meetings with large existing or potential new shareholders. A range of corporate information (including all Company announcements and presentations) is also available to shareholders, investors and the public on the Company’s corporate website,

Historical annual reports and other governance- related material

A report from the Remuneration Committee, Audit Committee and Risk Committee is contained in the annual report and accounts for the 2019 financial year. Historic reports and accounts, along with all notices and circulars from October 2014, are available on the website https://www.gammacommunicationsplc.com/investors/.

Disclosure of AGM voting outcome

As soon as practicable after the AGM has finished, the results of the meeting are released through a regulatory news service. The announcement also provides, for information, details of the total number of votes in favour of each resolutions. At the most recent AGM, held 05 June 2020, all resolutions put to the shareholders were passed.