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Corporate Governance Statement

The Board of H&T Group PLC (“H&T” or the “Company” or the “Group”) is responsible for the Group’s corporate governance policies and recognises the importance of high standards of integrity. H&T has adopted the Quoted Companies Alliance Code for Small & Mid-sized Quoted Companies 2018 (the “QCA Code”). The directors recognise the importance of good corporate governance practice in the best interests of all shareholders. In September 2018 the London Stock Exchange changed AIM rule 26 requiring AIM-listed companies to adopt and apply with a recognised corporate governance code. The directors assessed the merits of the available codes and decided the Corporate Governance Code of the Quoted Companies Alliance (QCA) was the best fit for the business. This corporate governance statement sets out how we have complied with the ten principles of the QCA code.

We will provide annual updates on our compliance with the QCA Code. 

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

 

The Board is responsible for the delivery of the Group’s long-term strategic objectives. Our high-level strategy is that “H&T will be the premier provider of alternative credit in the UK through a range of services that help our customers.” 

We are developing our capabilities to address a changing market and customer needs. We are focussed on maximising the potential from our core services while investing in the development of new products and channels.

Our network of stores supports this development. This real-world presence supported by an effective digital proposition creates an important distinction between H&T and a purely online business.

 

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

 

The Group is committed to engaging with its shareholders to ensure its strategy and performance is clearly understood. Feedback from investors is obtained through direct interaction between the CEO and Finance Director at one-to-one shareholder meetings following its full-year and half-year results and certain other ad-hoc meetings between executive management and shareholders that take place throughout the year. The voting record at the Company’s general meetings is monitored and we are pleased that all resolutions have been passed by shareholders. There is also regular investor dialogue through the medium of the Group’s corporate broker, Numis Securities, and the Group seeks to stay abreast of shareholder expectations and reactions through its regular investor roadshows and update meetings.

 

The Board recognises the importance of communications with shareholders. The Chief executive’s review on pages 9-12 include a detailed review of the business and future developments. There is a regular dialogue with institutional shareholders including presentations after the Group’s preliminary announcement of the year-end results and at the half-year results. During 2018 the Board consulted with larger shareholders to help establish the 2018/19 Performance Share Plan (PSP).


More information on those responsible for shareholder liaison and contact information can be found at https://handt.co.uk/about/investor-relations.

 

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

 

At H&T we believe that engaging with our stakeholders strengthens our relationships and helps us deliver our strategic goals whilst maintaining our values and delivering returns for all our stakeholders.


The fair treatment of our customers, whose interests are at the centre of all decisions and actions we carry out, is core to our long-term success. We have developed a diverse range of products to meet as best we can the unique needs of each customer. We offer a transparent, efficient and professional service and constantly review our service to identify areas for improvement.


Aside from our shareholders, suppliers and customers, and our regulator we believe that our employees are our single greatest asset and accordingly we endeavour to ensure our workforce are highly trained, motivated and feel valued.


Your Voice is a council-style meeting with employees from a variety of positions within the Group, and geographically from around the country. These provide a forum to discuss suggestions and ideas with senior management. The meetings are very productive as they allow direct feedback on any issues that arise in our stores or the wider organisation.

 
The Group has an innovations committee which reviews ideas and suggestions for changes to products, policies and procedures from its employees.


We strive to develop and retain our staff recognising that our people are our greatest asset. An important part of this is to provide opportunities within the Group where possible. We advertise positions weekly to every employee in order to help them to apply for these positions; where appropriate we use the management and star development programmes to help individuals progress. We endeavour to ensure our workforce are highly trained, motivated and rewarded. Training is key to delivery of a motivated and skilled workforce which is important in providing great service to our customers successfully across a large product range as well as protecting our customers and investors assets.  

 

The safety of our customers and employees is of paramount importance to the Group.  All employees complete annual training, and a programme of annual Health and Safety Risk Assessments is in place.   

Health and safety standards and benchmarks have also been established in the business and compliance is monitored by the Board.


Responsible lending


The Group recognises that most people will require financial help at some point in their lives and we believe that everyone should have a choice in how to meet that need. As a responsible lender, we will do our utmost to try to help, whilst at the same time ensuring our customers do not become unduly burdened. It is our priority to carry out a number of stringent checks on all customers prior to loan approval. These checks are centred on understanding our customers financial circumstances, ensuring that our loans are affordable for them and any signs of financial vulnerability are investigated prior to making lending decisions. Our loan approval processes and procedures are subject to regular review and update. We complete root cause analysis in response to any customer complaints and adapt our processes and procedures in response. To drive a consistency in our approach to assessing affordability all of our loans are underwritten centrally by a team of highly trained underwriters, their performance and outcomes for our customers are regularly audited.  For Pawnbroking Loans, this includes identity confirmation and valuation of the asset that you are using to secure the loan. For Personal Loans this will include identity confirmation, credit checks, Income confirmation and affordability assessments. More information can be found at https://handt.co.uk/about/responsible-lending

Modern slavery 


The Group is opposed to slavery and human trafficking. The Group will not knowingly support or do business with any organisation involved in slavery or human trafficking. We have established policies to ensure that we are conducting business in an ethical manner and address the risk of Slavery and Human Trafficking in our supply chain. These include; Recruitment Policy, Purchasing Policy and internal Whistle-Blowing Policy. Our full statement can be found at  https://handt.co.uk/about/anti-slavery-and-human-trafficking-statement-for-financial-year-2017.


In the community


We encourage community engagement and support a variety of local and national charities through events, fun days and fundraising. We have raised thousands of pounds and collected thousands of gifts for a number of organisations, including:

 

  • Macmillan Cancer Research UK
  • Beatson Cancer Charity
  • The Children’s Trust

 

For more details of our Corporate and Social Responsibility see https://handt.co.uk/about/investor-relations/corporate-social-responsibility.

 

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

 

The Board has well established Audit and Risk Committees which have the responsibility of managing the Company’s internal control environment and risk framework. The Risk Committee comprises four independent non-executive directors and is responsible for reviewing and reporting to the Board on:

 

  • the Group’s risk appetite and framework (the extent and categories of risk which the Board regards as acceptable for the Company to bear);
  • the Group’s risk management and internal controls framework (it’s principles, policies, methodologies, systems, processes, procedures and people); and
  • in respect of the processes and procedures, the arrangements for the identification, assessment, monitoring management and oversight of risk.

 

The Board owns the Group’s Risk Appetite Statement which sets out the Group’s attitude to risk and the ranges and limits of acceptable risk taking. The Risk Committee establishes the high-level qualitative Risk Appetite Statement for the Group, the quantitative Risk Appetite Statement and the Key Risk Indicators used to measure risk exposure. The statement is subject to annual review by the Risk Committee and the Board. The Risk Committee is responsible for the Risk Framework in place for identification of enterprise level risks (top down approach) and identifying risks that occur in the day to day processes and operations of the business (bottom-up approach).

 

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

 

The Board comprises the Non-Executive Chairman, two Executive Directors and three Non-Executive Directors. During 2018 Malcolm Berryman retired from the Board and stepped down as the Chair of the Risk and Remuneration Committees (14 August 2018) with Elaine Draper taking over the Chair of the Risk Committee and Mark Smith as Chair of the Remuneration Committee. Mark Smith and Elaine Draper were appointed as a Non-Executive Directors (1 May 2018).


The Board considers, after careful review, that the Non-Executive Directors bring sufficient independent judgement to the Group. The Board has satisfied itself that it has a suitable balance between independent and Executive Directors, to enable it to discharge its duties and responsibilities effectively. All Directors use their independent judgement and to challenge all matters, whether strategic or operational. The Chairman holds regular update meetings with each Director to ensure they are performing as they are required. The Board appointed James Thornton as Senior Independent Director on 20 September 2018. 


Attendance at Board and committee meetings:

 

Board

Audit

Remuneration

Risk

Nomination

Peter McNamara

9(9)

3(3)

5(5)

3(3)

1(1)

James Thornton

9(9)

3(3)

5(5)

3(3)

1(1)

Malcolm Berryman

5(6)

2(2)

3(3)

2(2)

1(1)

Mark Smith

6(6)

2(2)

3(3)

2(2)

N/A

Elaine Draper

6(6)

2(2)

3(3)

2(2)

N/A

John Nichols

9(9)

N/A

N/A

N/A

N/A

Stephen Fenerty

8(9)

N/A

N/A

N/A

N/A

 

 

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

 

John G Nichols

Chief Executive, 68

Appointed: 08/09/2004

Committees: None


Profile: After an early career in the RAF, John entered the leisure industry with the Rank Organisation where he held several senior executive positions. John joined H&T as Managing Director in 1997 and subsequently became Chief Executive. He has been instrumental in developing and implementing the business strategy and delivering growth in stores, revenues and profitability. John has extensive pawnbroking experience ‘unparalleled’ within industry and demonstrated staff leadership ability.


External appointments: Director, The National Pawnbrokers Association


Stephen A Fenerty

Finance Director, 46

Appointed: 28/02/2005

Committees: None


Profile: Stephen trained with KPMG’s banking and finance team and since then he has pursued a variety of management roles in the alternative credit sector. Stephen joined H&T in February 2005 as Commercial Director before taking on the role as Finance Director in December 2013. Stephen has direct responsibility for finance, IT, unsecured lending, acquisitions, compliance and credit risk. He is a member of the Institute of Chartered Accountants in England and Wales.


External appointments: None


Peter D McNamara

Non-Executive Chairman, 67

Appointed: 25/04/2006

 

Committees: Audit Committee, Nominations Committee (Chair), Risk Committee, Remuneration Committee


Profile: Peter spent the majority of his career with Lloyds Bank plc, as chief manager for strategic planning, mergers and acquisitions, and then as the managing director of personal banking. He subsequently served as Group managing director of the Alliance & Leicester plc and chief executive of Wesleyan Assurance Society, a mutual life insurance business. In 2002 he left to become chairman and subsequently executive chairman of Moneybox plc, the leading ATM deployer operating in the UK, Germany and the Netherlands, which he led to flotation on AIM. In 2006 he set up a new ATM business, Notemachine Ltd and is the CEO. Peter is a Director of Eurochange Limited. Peter therefore brings very relevant financial and retail expertise to the Board.


External appointments: Director and shareholder of the Corsair Mint Limited Group of companies, Partner of KRF Farms LLP.


James F Thornton

Non-Executive Director, 61

Senior Independent Director

Appointed: 30/11/2012

Committees: Senior Independent Director, Audit Committee (Chair), Nominations Committee, Risk Committee, Remuneration Committee


Profile: James has lengthy experience in UK financial services organisations, initially at Morgan Stanley and most recently as a director at Hannam & Partners from 2009-2015. He was head of finance for financial services at BAT Industries, Group deputy finance director and UK finance and corporate governance director at Old Mutual plc and head of foreign exchange at IFX plc. He was also finance director of AIM listed Global Health Partner plc. James is a fellow of the Institute of Chartered Accountants in England and Wales and a Harvard MBA. Senior finance director roles in major PLCs overseeing multiple financial services subsidiaries provides value in financial analysis and Audit Chair role and is coupled with a corporate finance background.


External appointments: Director at Dunster 22 Limited


Elaine F Draper

Non-Executive Director, 55

Appointed: 01/05/2018

Committees: Audit Committee, Nominations Committee, Risk Committee (Chair), Remuneration Committee

Profile: Elaine sat on the National Executive Committee of LINK between 2008 and 2011, Bank of England’s Strategic Cash Group between 2009 and 2011 and was an Advisory Board Member in 2016/17 for Centre for Ageing Better – Inequalities in later life review.  From 2015 to August 2017, Elaine was a Non-Executive-Director (NED) of the £35m UK Government funded Credit Union Expansion programme, looking at the ways in which Credit Unions could expand their services. Through her work at Barclays latterly leading the vulnerable customer agenda and her NED role with Cornerstone Mutual, Elaine has a particular interest in supporting under-served/marginalised customers. Her understanding of regulatory risk as it relates to lending to customers is an important aspect of her work as Chair of Risk Committee.


External appointments: None.


Mark J Smith

Non-Executive Director, 60

Appointed: 01/05/2018

Committees: Audit Committee, Nominations Committee, Risk Committee, Remuneration Committee (Chair)


Profile: Mark is an experienced business leader who has operated at Board and Executive Committee level for over 25 years in major UK banks. He now runs his own advisory business providing services to major consulting organisations and client businesses, and since May 2017 has been a Non-Executive Director at GKBK Limited where he also chairs the Risk Committee. Mark is a Fellow of the Chartered Institute of Bankers, Fellow of the `Chartered Banker Institute and holds a degree in Business Studies as well as an MBA. Mark brings significant understanding of effective operations and IT to his role with detailed and up to date understanding of the underlying risks.


External appointments: Director at GKBK Limited.


Independent advice


All Directors are able to 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 Finance Director.  It is the intention of the Board to separate the role of Company secretary from Executive Director.

 

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

 

The Board recognises that regular performance evaluation is crucial for effective governance and the long-term success of the Group. Following internal reviews and succession planning discussions the Board added two new Non-Executive Directors in May 2018. These appointments strengthen the Board and support the strategic aims of the Group. An internal review of the performance of the board is currently taking place.

 

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

 

Our corporate culture and ethical values are key to delivering the Group’s objectives and strategic goals. The Board and management team work to ensure this culture is pervasive within the Group and all of our employees share our collective values. Ensuring compliance with our processes, procedures and values is core to the Group’s operation; our area managers are in our stores on a weekly basis promoting the culture and values we all stand for, our internal audit team visit our stores at least twice a year and we have a comprehensive schedule of mystery shopping. The Group holds an annual strategy day meeting which involves the whole management team. Board meetings are regularly held at our Loan and Jewellery centres allowing Executive and Non-Executive Directors to meet and discuss issues with all levels of staff. NEDs visit stores and departments throughout the year and will attend long-service award dinners. All of these together allow the Board to monitor that our ethical values and behaviours are recognised and respected.

 

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

 

The Board

The Board comprises two Executive directors and four Non-Executive Directors. A review of these shows a range of experience and expertise sufficient to bring independent judgement on issues of strategy, performance, resources and standards of conduct which is vital to the success of the Group. The three NEDs each hold shares as disclosed in the Annual Report and Accounts. However, because the number of shares held is small, there is no entitlement to share options for NEDs, and there are no cross directorships between Executive and Non-Executive Directors; the NEDs are considered to be independent.

Board meetings

The Board is responsible to the shareholders for the proper management of the Group.

The Board meets 9 times during the year. To enable the Board to discharge its duties, all directors receive appropriate and timely information. Briefing papers are distributed to all directors in advance of the Board meetings. There is a formal schedule of matters reserved to the Board which include the determination of strategy, approval of new stores and acquisitions, approval of budget and major capital expenditure.

At Board meetings, the standing agenda normally comprises a review of the management financial statements, a CEO review of operations, a review of new store proposals and potential acquisitions and an update on the progress of the Group’s other strategic objectives. During the year, the Board hears from departmental managers and asks questions on their progress, issues and prospects.

The Board meetings in August and March cover the approval of the interim and preliminary financial results respectively and the November meeting deals with the approval of the annual budget.


Remuneration Committee


The Remuneration Committee comprises independent Non-Executive Directors of the Company. The members of the Committee are:

Peter D McNamara

James F Thornton

Elaine F Draper

Mark J Smith (Chair)


The Committee meets at least twice in each year and at such other times as the Chairman of the Committee sees fit. The Chairman of the Committee is appointed by the Board on the recommendation of the Nomination Committee. The quorum for the Committee is two. The duties of the Committee are to:

 

  • determine and agree with the Board the framework or broad policy for the remuneration of the Chairman, Executive Directors and any employees that the Board delegates to it;
  • within the terms of the agreed policy, determine individual remuneration packages including bonuses, incentive payments, share options, pension arrangements and any other benefits;
  • determine the contractual terms on termination and individual termination payments, ensuring that the duty of the individual to mitigate loss is fully recognised;
  • in determining individual packages and arrangements, give due regard to the comments and recommendations of the Code;
  • be told of and be given the chance to advise on any major changes in employee benefit structures in the Company;
  • recommend and monitor the level and structure of remuneration for senior managers below Board level as determined;
  • agree the policy for authorising claims for expenses from the Chief Executive and from the Chairman of the Board; and
  • recommend an annual report for the Board to put to Shareholders on executive remuneration compliant with relevant legal and regulatory provisions.

 

The Committee is authorised by the Board to:

 

  • seek any information it requires from any employee of the Group in order to perform its duties;
  • be responsible for establishing the selection criteria and then for selecting, appointing and setting the terms of reference for any remuneration consultants providing advice to the Committee, at the Group’s expense; and
  • obtain, at the Group’s expense, outside legal or other professional advice where necessary in the course of its activities.

 

Audit Committee

 

The Audit Committee comprises independent Non-Executive Directors of the Company. The members of the

Committee are:

 

James F Thornton (Chair)

Peter D McNamara

Elaine F Draper

Mark J Smith


The Audit Committee reviews each year the arrangements for safeguarding auditor objectivity and independence. The Audit Committee reviews the scope, results and cost-effectiveness of internal and external audit, and has delegated power from the Board to exercise the power from shareholders to agree fees for external auditors. The Audit Committee is responsible for satisfying itself on the independence and objectivity of external auditors and the independence of internal auditors.


As directed by the Audit Committee, the principal function of the Group’s internal audit team is to verify the physical presence and control procedures surrounding the cash, pledge and inventory balances within stores and the Group’s Jewellery Centre. The internal audit team report to the Audit, Security and Compliance executive meetings and the Audit Committee reviews those minutes.


The Committee reviews the operation of internal controls and reports to the Board on the annual review of the internal control and risk management.


Nomination Committee


The Nomination Committee comprises independent Non-Executive Directors of the Company.


The members of the Committee are:

Peter D McNamara (Chair)

James F Thornton

Elaine F Draper

Mark J Smith


The function of the Nomination Committee is to provide a formal, rigorous and transparent procedure for the appointment of new Directors to the Board. In carrying out its duties, the Nomination Committee is primarily responsible for:

 

  • identifying and nominating candidates to fill Board vacancies;
  • evaluating the structure and composition of the Board with regard to the balance of skills, knowledge and experience and making recommendations accordingly;
  • reviewing the time requirements of Non-Executive Directors;
  • giving full consideration to succession planning; and
  • reviewing the leadership of the Group.

 

Risk Committee 


The Risk Committee comprises independent Non-Executive Directors of the Company. The members of the Committee are:


Peter D McNamara

James F Thornton

Elaine F Draper (Chair)

Mark J Smith


The Risk Committee is responsible for reviewing and reporting to the Board on:

 

  • the Group’s risk appetite (the extent and categories of risk which the Board regards as acceptable for the Group to bear);
  • the Group’s risk management and internal controls framework (its principles, policies, methodologies, systems, processes, procedures and people); and
  • in respect of the processes and procedures, the arrangements for the identification, assessment, monitoring management and oversight of risk.

 

The Risk Committee reviews the regular reports of the Head of Audit & Compliance to oversee the operational management of the compliance framework.

 

The Committee makes recommendations to the Board in respect of all risks faced by the Company outside of its declared risk appetite.

 

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

 

Audit Committee Report

The Audit Committee monitors the integrity of the financial statements of the Group and any formal announcements relating to financial performance, reviewing and challenging where necessary the consistency of accounting policies, and the application of critical accounting policies and practices and any changes to them. The Audit Committee reviews the scope, results and cost-effectiveness of internal and external audit, and has delegated power from the Board to exercise the power from shareholders to agree fees for external auditors. It is responsible each year for satisfying itself on the independence and objectivity of external auditors and the independence of internal auditors.  The Audit Committee meets at least three times a year.

As directed by the Audit Committee, the principal function of the Group’s internal audit team is to verify the physical presence and control procedures surrounding the cash, pledge and inventory balances within stores and the Group’s Jewellery Centre. The internal audit team report to the Audit, Security and Compliance executive meetings and the Board and Audit Committee reviews those minutes.

The Audit Committee reviews the operation of internal controls and reports to the Board on the annual review of the internal control and risk management and the effectiveness of the financial reporting policies and systems.

Significant issues and areas of judgement considered by the Audit Committee

The significant issues and areas of judgement considered by the Audit Committee in relation to the Annual Report and Financial Statements 2018 are outlined below. We discussed these with the external auditor during the year and, where appropriate, these have been addressed as areas of audit focus as outlined in the independent auditor’s report, see https://handt.co.uk/about/investor-relations/reports/annual-reports.

 

Issue

Judgement

Role of the Committee

Impairment of personal loan receivables

Personal loan receivables are impaired based on the number of payments missed based on the original loan agreement with the customer.

Impairment is calculated using historical payment performance to estimate the value and timing of future payments for each level of customer arrears.

 

The key judgements in respect of the impairment calculation are:

·        The point at which to impair a loan account; and

·        Whether historical performance provides a suitable method to project future cash flows.

 

This is a key audit matter for our external auditors and is detailed in their Independent Auditor’s Report.

Reviews analysis and recommendations produced by the executive team in respect of the required impairment.

Reviews the methodology used and the performance of the models versus the actual result of prior periods.

Consideration of the potential impact on future performance of factors such as:

·        Rapid growth of the product

·        A range of external economic factors including consumer indebtedness

·        Changing business mix for product type and channel

 

Reviewed the analysis in respect of the implementation of IFRS 9 in 2018.

 

 

 

 

Recognition of revenue and the associated revenue accrual in respect of pawnbroking

Interest income is recognised when it has been paid, or is expected to be paid by the customer.

The interest accrual is calculated by using estimates for the expected redemption profile of pawnbroking loans based on a range of historical performance data.

The key judgement in respect of the interest accrual is the determination of the correct redemption profile to use in the model.

This is a key audit matter for our external auditors Deloitte and is detailed in their Independent Audit Report.

 

Reviews the application of the agreed methodology and supporting calculations.

Considers the impact and validity of any changes to the basis of the redemption predictions.

Considers the impact of changing redemption trends and outcomes over time and how to implement them in the model.

 

 

 

Issue

Judgement

Role of the Committee

Impairment of goodwill

The Group historically acquired a number of businesses and must consider whether goodwill requires impairment.

The impairment is based on the future cash flows generated by each individual cash generating unit (CGU).  Expected cash flows are based on the Group operating budget for the next year and assumptions for growth or decline in revenues and costs in future years.

The key judgement is in respect of the forecast cash flows for the CGUs.

 

 

 

Reviews the application of the agreed methodology and supporting calculations.

Considers factors that may impact the future performance of the CGUs and whether that should be reflected in the forecast.

Considers the sensitivity of the projections and the amount of headroom available before impairment is required.

 

 

 

Provisions relating to store lease commitments

 

The Group operates the store estate on a leasehold basis.  Provisions are required in respect of the costs of reinstatement of the premises at the end of the lease and potentially future lease costs in the case of underperforming stores.

 

The key judgement in respect of reinstatement is its cost and timing.

 

The key judgement for the onerous lease provision is the determination of future cash flows from the store.

 

Reviews the application of the agreed methodology and supporting calculations.

 

Considers factors that may impact the future performance of the stores and whether that should be reflected in the forecast.

 

Considers the sensitivity of the projections to changes in the inputs.

 

 

 

Provisions relating to inventories and pawnbroking loans

The Group has significant pledge and inventory balances whose value is supported by precious metals and tradeable assets.  The Group considers the need to recognise a provision in respect of these balances if the net realisable value (NRV) falls below cost.

 

The key judgement in respect of the inventory provision is the calculation of NRV.  NRV is based on the precious metal value where available or an estimate of the achievable sales price based on the age of the piece.

The key judgements in respect of the pledge provision are: the NRV; the likelihood of the item not being redeemed and whether the item is likely to be retailed or scrapped.

In both the inventory and pledge provision consideration is also given to specific provisions and to the estimated losses since the last physical audit in store.

Reviews the application of the agreed methodology and supporting calculations.

Considers the overall adequacy of the provisions based on historical performance and changes in asset balances.

Considers changes in the business or external environment which may impact on the recoverability, particularly gold price and redemption trends.

 

 

 

Risk Committee Report

The Risk Committee is responsible for reviewing and reporting to the Board on:

  • the Group’s risk appetite and framework (the extent and categories of risk which the Board regards as acceptable for the company to bear);
  • the Group’s risk management and internal controls framework (it’s principles, policies, methodologies, systems, processes, procedures and people); and
  • in respect of the processes and procedures, the arrangements for the identification, assessment, monitoring management and oversight of risk.

 

The Risk Committee owns the Group’s Risk Appetite Statement which sets out the Group’s attitude to risk and the ranges and limits of acceptable risk taking. The Committee establishes the high-level qualitative Risk Appetite Statement for the Group, the quantitative Risk Appetite Statement and the Key Risk Indicators used to measure risk exposure. The statement is subject to annual review by the Risk Committee and the Group Board.

The Risk Committee is responsible for the Risk Framework in place for identification of enterprise level risks (top down approach) and identifying risks that occur in the day to day processes and operations of the business (bottom up approach). The risks identified are recorded in the Corporate Risk Register and reviewed by the Committee on a biannual basis.

The Risk Committee reviews the regular reports of the Head of Audit and Compliance to oversee the operational effectiveness of the risk management framework and the current risk exposure measured through the Key Risk Indicators.

 The Committee should make recommendations to the Board in respect of all risks faced by the Company outside of its declared risk appetite.

Nomination Committee Report

The function of the Nomination Committee is to provide a formal, rigorous and transparent procedure for the appointment of new Directors to the Board. In carrying out its duties, the Nomination Committee is primarily responsible for:

  • identifying and nominating candidates to fill Board vacancies;
  • evaluating the structure and composition of the Board with regard to the balance of skills, knowledge and experience and making recommendations accordingly;
  • reviewing the time requirements of Non-Executive Directors;
  • giving full consideration to succession planning; and
  • reviewing the leadership of the Group.

INTERNAL CONTROL

The Board acknowledges that it is responsible for the Group’s system of internal control and for the continuing process of reviewing the effectiveness of the internal controls. Internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The directors confirm that they have reviewed the effectiveness of the systems of internal control that have been in operation during the year. The Group operates a three lines of defence model, the first line being the systems and controls in place to prevent and detect errors, the second provided by compliance monitoring and oversight and the third by internal audit.

 

Internal control: financial

The internal control process has been reviewed and its main features are:

  • Financial reporting: there is a comprehensive budgeting system with an annual budget approved by the Board. Monthly trading results are reported against the corresponding figures for the budget and previous year. The Board also reviews re-forecasts on a regular basis.
  • Capital expenditure: there is a comprehensive budgeting system for capital expenditure with an annual budget approved by the Board. The Finance Director authorises individual items of capital expenditure and material items are also authorised by the Board or CEO.
  • Cash flow: an annual cash flow forecast is drawn up and approved by the Board and actual cash flow is reviewed monthly against this forecast.
  • Organisational structure: a clear organisational structure with defined responsibilities and clear authority levels has been set.
  • Store audits: a store audit function exists to ensure that Group procedures regarding cash, pledges and stock-handling are being adhered to. On average the internal audit visits to stores are performed biannually.
  • Corporate audits: the Internal Audit Department has a defined audit universe and conducts risk based audits in line with the annual plan to address all other risks not covered within store audits, the universe and plan is approved by the Audit Committee.

March 2019