Statement of Compliance with the QCA Code


The Directors of Breedon Group plc recognise the value of strong corporate governance.  The AIM Rules require all AIM-listed companies to adopt and comply with a recognised corporate governance code.  The Board of Breedon has adopted the QCA Corporate Governance Code 2018 (“the QCA Code”) with effect from 1 January 2019.

The purpose of this statement is to set out in broad terms how we currently comply with the QCA Code. The Company will provide annual updates on its compliance with the QCA Code in its future annual reports, which will also be published on its website.

References below to the “2021 Annual Report” are to the Company’s Annual Report for the year ended 31 December 2021 which is available at: Breedon Group Annual Report 2021.  Pages 77 to 81 of the 2021 Annual Report includes details of the Group’s corporate governance practices.

Corporate Governance Code

A summary of our approach during 2021 is set out below.

 


Principle


What we did in 2021

1)  Establish a strategy and business model which promote long-term value for shareholders The Board held a Board Strategy Day in 2021 focused on the three priorities of its long-term growth strategy, particularly agreeing actions around divisional strategies, sustainable long-term growth, sustainability, a progressive dividend policy and a potential move to the main market in due course.
2)  Seek to understand and meet shareholder needs and expectations

During 2021 meetings and calls were held with shareholders and investors representing a significant proportion of the Group’s issued share capital. Due to the pandemic, the 2021 AGM was held as a closed meeting, therefore the Board set up a facility whereby questions could be asked directly by shareholders in advance of the AGM.

3)  Take into account wider stakeholder and social responsibilities and their implications for long-term success The Board appointed a new designated non-executive director for workforce engagement and carried out an employee engagement survey with follow-up focus groups. Sustainability targets were shared at our first Capital Markets Event. See pages 66 to 69 of the 2021 Annual Report on stakeholder activity in 2021.
4)  Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Board appointed an independent Internal Audit function in 2020 and has continued to embed the three lines of defence assurance model within the Group. The Board changed the Audit Committee to an Audit & Risk Committee, with terms of reference setting out more responsibility regarding Group risk.

5)  Maintain the Board as a well-functioning, balanced team led by the Chair The Board was complemented in 2021 with the appointment of two independent non-executives, one is an additional appointment whereas the second is a replacement. Both directors bring a wealth of experience and skills to complement those already on the Board. An annual evaluation of the Chairman was undertaken by the Senior Independent Director. 
6)  Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities During 2021, the Nomination Committee reviewed the current skills matrix and made recommendations on appointments in the year based on skills, experience and knowledge that would complement the Board.
7)  Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement

Following an externally facilitated review in 2020, the Board undertook a self- assessed effectiveness review in 2021 with notable strengths continuing to be identified together with some suggestions for continuous improvements. The Board completed all the material recommendations from the external review in 2020.

8)  Promote a corporate culture that is based on ethical values and behaviours The Board continued to embed culture and values throughout the Group during 2021, through seeking to embed the Group’s agreed values of keeping it simple, make it happen, strive to improve and showing we care.
9)  Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board The Board met six times formally in the year. The outcome of the self-assessed board effectiveness review was that the Board and its committees were all considered to be effective in 2021.
10)  Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders The Company published its full year and half year results together with a trading statement in November 2021 and held its first Capital Markets Event, which set out to investors, stakeholders and interested parties the Group’s growth and sustainability strategy and its financial framework.

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

The Board has established the Group’s strategy and regularly reviews progress towards the Group’s objectives. The strategy for sustainable long-term growth consists of three priorities governed by a disciplined financial framework. These are embedding a culture of sustainability – operating a sustainable business is our highest priority and the lens through which all strategic decisions must pass; optimising our business - we are a trusted and credible custodian of scarce reserves and resources, delivering continuous improvement to drive efficiencies of scale and increase utilisation of our assets; and expanding growth through multiple routes – we have a variety of routes to grow the business.

The Board ensures that the Group communicates its strategy to investors, colleagues and other stakeholders using means appropriate for each group.

Breedon’s sustainable long-term growth business model is highly cash generative, supporting the introduction of a progressive dividend. The Group provides essential construction materials into markets with multi-year growth tailwinds, particularly infrastructure and housebuilding which have long-term pipelines. Breedon’s high-quality earnings stream and disciplined risk framework offers significant growth.

The Group’s Strategy and Business Model, together with the key challenges faced by the Group in their execution, are described in more detail on pages 12 to 19, and 24 and 25 of the 2021 Annual Report.

Seek to understand and meet shareholder needs and expectations

The Board is committed to and actively encourages effective relationships and communication with the Company’s shareholders.

Members of the Board have meetings with representatives of institutional shareholders and potential investors to promote a greater understanding of the business, and the Board’s strategy for the continued long-term success of the business. Through these meetings, the Board gains a clear understanding of the views of the major shareholders, and the needs of potential shareholders. The executive directors play an important role in ensuring that shareholder views are communicated to the Board, and we believe that we have been successful in ensuring that all directors have a clear understanding of major shareholders’ views.

The executive directors are primarily responsible for shareholder liaison and may be contacted via investors@breedongroup.com. Any individual can subscribe for the Group’s regulatory news and information via www.breedongroup.com.

All shareholders are actively encouraged to participate in the AGM. At general meetings the Company proposes separate resolutions on each substantially separate issue. The Company provides shareholders with the opportunity to appoint a proxy. In addition, proxy votes are counted, and the results announced.

The Chair of the Remuneration, Audit & Risk, Sustainability and Nomination Committees, the Senior Independent Director, and all other directors are normally available to answer questions at each AGM.

The Company arranges that notice of the AGM and related papers are sent to shareholders at least 20 working days before the meeting, giving time for all shareholders to consider resolutions properly.

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

We recognise the importance of balancing the interests of our key stakeholders – colleagues, customers, investors, suppliers, industry regulators and associations together with the wider communities in which we operate. Engaging with our stakeholders strengthens our relationships and helps us make better business decisions to deliver on our commitments. We have a non-executive director responsible for workforce engagement and recognise that the executive and senior managers of our businesses can support engagement with our stakeholders to ensure that the Board fully understands any concerns.

The Group has several policies in place including Biodiversity, Circular Economy, Diversity and Inclusion, Energy and Carbon, Health Safety and Wellbeing, Quality and Environment, Social Responsibility and Sustainability and these guide our behaviours in relation to our stakeholders.

The way in which the Board engages and takes into account stakeholder issues, together with the resultant impact is detailed on pages 66 to 69 of the 2021 Annual Report.

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

The Board recognises its responsibility for determining the nature and extent of the principal risks the Group has to take to achieve its strategic objectives and priorities, and maintains sound risk management and internal control systems to do so. The Board reviews and approves the Group’s risk appetite on an annual basis.

Risk management processes are embedded throughout the Group to help management identify and understand the risks that they face in delivering business objectives and the key controls to managing those risks. By identifying and managing those existing and emerging risks, the Board can focus on long-term business opportunities.

The Board is responsible for the Group’s systems of risk management and internal control, and reviewing their effectiveness. The Audit & Risk Committee reviews the suitability and effectiveness of risk management processes and controls on behalf of the Board.

Further details of the Group’s approach to risk management, together with a full description of the key risks faced by the Group, are set out in pages 58 to 64 of the 2021 Annual Report.

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

The Chair sets the Board’s agenda and the Board is provided with clear, regular and timely information on the financial performance of the businesses within the Group, and of the Group as a whole. In addition, other trading reports, contract performance and market reports and data, including reports on personnel-related matters such as health and safety and environmental issues, are provided. The Board has approved a schedule of matters reserved for the Board.

The Chair encourages and facilitates each directors contribution to ensure that no one individual can dominate its proceedings. All directors are encouraged to use their independent judgement and to challenge all matters, whether strategic or operational. The Senior Independent Director undertakes an evaluation of the Chair annually and the Board undertakes an external validation of its effectiveness every three years.

The Board has established Audit & Risk, Remuneration, Sustainability and Nomination Committees to support the Board in the performance of its duties, and the Board believes that the members of those committees have the appropriate skills and knowledge to perform the functions delegated to them. A review of the effectiveness of the committees is carried out annually.

The time commitment expected from Directors is set out in their service agreements or letters of appointment (as appropriate). Executive directors are required to work such hours as may be necessary for the proper performance of their duties. The Board has agreed that each executive director may take on one non-executive directorship of a public company outside of the Breedon Group.

Non-executive directors are expected to devote such time as is necessary for the proper performance of their duties, including in preparation for and attendance at Board, Committee and shareholder meetings. When accepting their appointment, each non-executive director confirms that they can allocate sufficient time to meet the expectations of their role.

The Board is satisfied that it has a suitable balance between independence on the one hand, and knowledge of the Group on the other, to enable the Board to discharge its duties and responsibilities effectively. The Board considers all of its non-executive directors, with the exception of the non-executive Chairman, to be independent in character and judgement.

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

The composition and performance of the Board, and the skills and experience of each director, are regularly evaluated, to ensure that they best fit the evolution of the Group’s business. The Nomination Committee regularly reviews the succession plan to ensure that when seeking to recommend new members to the Board, consideration of a range of relevant matters including the diversity of its composition is given.

The Board considers that each of the directors brings a senior level of experience and judgement to bear on issues of operations, finance, strategy, performance, resources (including key appointments) and standards of conduct. Directors are given regular access to the Group’s operations and personnel as and when required. Non-executive directors have a wealth and breadth of experience gained through their directorships on the Boards of other listed companies. The individual biographical details of directors including the skills, experience and contribution that they bring to the Board can be found on pages 72 and 73 of the 2021 Annual Report.

The roles of Non-executive Chairman and CEO are not exercised by the same individual and the division of responsibility is clear and set out on the Group’s website at www.breedongroup.com.

The primary role of the Chairman is to ensure the Board is effective in setting and implementing the Group’s direction and strategy and the operation of the Company’s governance structures. He is responsible for leadership of the Board and ensuring that the Group maintains an appropriate level of dialogue with its shareholders. The role of the CEO is to oversee the operational management of the Group’s businesses, and the role of the Senior Independent Director is to act as a sounding board for the Chairman and other members of the Board and to be an alternative point of access for shareholders for matters that they do not wish to raise through other channels.

The Board considers and reviews the requirement for continued professional development and each director is encouraged to reflect on their own individual needs. The Board seeks to ensure that their awareness of developments in corporate governance and the regulatory framework is current, as well as remaining knowledgeable of any industry-specific updates. The Group General Counsel, the Group’s Nominated Adviser and other external advisers serve to strengthen this development by providing guidance and updates as required.

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

The Board regularly reviews its own effectiveness and considers whether the Board comprises the appropriate skills to meet the needs of the business. The Chairman is in regular contact with each member of the Board to ensure that any concerns are identified and acted upon. The Senior Independent Director undertakes an annual performance review of the Chairman.

The Board carries out an externally facilitated Board Effectiveness Review every three years and welcomes input as part of the process from stakeholders outside of the Board. The Board also conducts an internal review of its effectiveness during the intervening period. The Board is committed to actioning any suggestions or recommendations that are made to improve its effectiveness.

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

All Group colleagues are expected to maintain an appropriate standard of conduct in all of their activities, and the Directors seek to set the tone for such behaviour through their own actions.

To promote a common culture across the organisation, we have defined a clear purpose and set of values that support the successful delivery of our strategy. Led by the Board and Executive Committee, the Group is embedding the purpose ‘to make a material difference to the lives of our colleagues, customers and communities’ to create a workplace where people feel safe, proud and motivated to do their best. The values at the heart of our business: keep it simple; make it happen; show you care; and strive to improve, will drive the performance of the business, motivating and engaging colleagues, building customer loyalty and strengthening our relationship with local communities.

The Group has established a robust compliance framework to regulate its activities in respect of inter alia business conduct, modern slavery, competition law compliance, anti-bribery and corruption, data protection, whistleblowing, non-facilitation of tax evasion and conduct of suppliers and closely monitors compliance with these. The Group has a Diversity and Inclusion Policy which the Board oversees adherence to.

Through our VFL programme, our leaders ensure that there is a culture of safe behaviour, by allowing an exchange of views in an open and honest environment.

Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

The Board meets at least six times per year in accordance with its scheduled meeting calendar. The Board receives appropriate and timely information prior to each meeting, a formal agenda is produced, and these papers are distributed in good time before each meeting. At the start of each meeting, the Board considers any Directors’ Conflicts of Interest.

The Board is responsible for the long-term success of the Group. It is responsible for overall Group strategy, approval of annual budgets, annual and interim results, dividend policies and approval of major investments, including long-term contracts, acquisitions or large capital items. However, the Board recognises that governance is not just about compliance. The Board strives for good and effective governance, with informed and transparent decisions contributing to the delivery of the Group strategy.

The Chairman is responsible for maintaining strategic focus and direction and the CEO is responsible for implementing the strategy and overseeing the management of the Group through the executive and management teams.

There is a formal schedule of matters reserved to the Board which includes strategy and management, structure and capital, financial reporting and controls, internal controls, contracts, communication, board membership and other appointments, remuneration, governance, sustainability and corporate policies.

The Board is supported by the Audit & Risk, Remuneration, Sustainability and Nomination Committees. Terms of reference of each Board committee, and the schedule of matters reserved to the Board are set out on the Group’s website at www.breedongroup.com. The activities of the Audit & Risk, Remuneration and Nomination Committees during 2021 are described on pages 82 to 104 of the 2021 Annual Report.

The executive and management teams, which are overseen by the CEO with input from the individual business managing directors, are responsible for day- to-day management of the Group’s business and its overall trading, operational and financial performance.

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

We are committed to maintaining good communications with our shareholders, and have put in place appropriate processes and structures to allow that to happen. The Company communicates with our shareholders through the Annual Report and Accounts, trading announcements, the AGM, the Capital Markets Event and in the manner set out in the commentary in relation to Principle 2.

We maintain a dedicated email address which current or potential investors can use in order to communicate with the Group’s investor relations team (investors@breedongroup.com).

The Company announces the result of the proxy votes cast for each resolution proposed at each general meeting of the Company immediately after such meeting, and a range of corporate information (including all historical annual reports and notices of meetings, announcements, dividend information and presentations) is made available on the Group’s website at www.breedongroup.com.

The Board receives regular updates on the views of shareholders through reports from its brokers and from directors following shareholder engagement. Analysts notes are reviewed and discussions held with the Company’s brokers to maintain a broad understanding of varying investor views.

Updated as at 21 March 2022

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