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 “2020 Annual Report” are to the Company’s Annual Report for the year ended 31 December 2020 which is available at: https://www.breedongroup.com/images/uploads/articles/Breedon_Group_2020_ARA.pdf.  Pages 64 to 70 of the 2020 Annual Report includes details of the Group’s corporate governance practices.

Corporate Governance Code

A summary of our approach during 2020 is set out below.

 


Principle


What we did in 2020

Establish a strategy and business model which promote long-term value for shareholders As part of the Group’s growth strategy, the Board oversaw the completion of the CEMEX Acquisition during the year.
Seek to understand and meet shareholder needs and expectations

During 2020 over 100 meetings were held with shareholders, mainly consisting of calls, due to COVID-19. This equates in the period to the Executive team having contact with shareholders holding over 70 per cent of the Group’s issued share capital. The Remuneration Committee consulted with shareholders proposed changes to the Group’s remuneration practice.

Due to the pandemic, the 2020 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.
Take into account wider stakeholder and social responsibilities and their implications for long-term success The Board designated a non-executive director for workforce engagement and a non-executive director for sustainability. The Board supported the appointment of a Head of Sustainability and during the year have approved new policies including Circular Economy, Social Responsibility, Energy & Carbon, Biodiversity, Quality, and Environment.
Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Board, through the Audit Committee, has agreed that the Group should have an Internal Audit function, to be independent of its internal controls and which is in line with the three lines of defence model.

The Audit Committee has appointed an independent external provider for the services of internal audit.
Maintain the Board as a well-functioning, balanced team led by the Chair The Board has been complemented in 2020 with the further appointment of an independent non-executive, following the two appointments made in 2019. The new Director brings a wealth of experience and skills to complement those already on the Board. An evaluation of the Chairman was undertaken by the Senior Independent Director and a new comprehensive Board induction plan was put in place.
Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities The Nomination Committee reviewed the current skills matrix and made recommendations on four appointments in the year based on skills, experience and knowledge that would complement the Board.
Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement The Board undertook a triennial board effectiveness review with notable strengths identified together with some suggestions which the Board have committed to action.
Promote a corporate culture that is based on ethical values and behaviours The Board led on a process to identify a new culture and values to be embedded throughout the Group during 2020, to make a material difference to the lives of our colleagues, customers and communities.
Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board The Board met ten times formally in the year and moved to an electronic format of receiving papers to ensure timely delivery in advance of meetings. The outcome of the 2020 triennial effectiveness review was that the Board and each of the supporting Board committees were considered to be effective.
Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders The Company has published four trading statements in the year in addition to its full year and half year results together with statements relating to the impact of the pandemic on the Group. The Group has kept shareholders and stakeholders updated with eight statements relating to the CEMEX Acquisition.

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. This strategy consists of three pillars which are underpinned by robust corporate governance and conservative financial management. These are: Sustain, operate with a clear purpose and a duty to run our business as sustainably as possible for the benefit of all our stakeholders. Optimise, a culture of operational and commercial excellence to maximise the value of every tonne of material that we quarry. And, Expand, continue to re-invest in the business to deliver long-term growth.

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

We have a fully vertically-integrated business model which gives us significant economies of scale, a high level of self-sufficiency and tight control over our costs. The objective of our business model is to extract maximum value from every tonne of aggregates we quarry and every tonne of cement we produce, through the efficient manufacture and sale of a wide range of downstream products and associated services.

The Group’s Business Model and Strategy, together with the key challenges faced by the Group in their execution, are described in more detail on pages 12 and 13, and 16 and 17 of the 2020 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.

We are committed to maintaining good communications with our 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 is also able to gain feedback to have a clear understanding of the views of the major shareholders, and the needs of potential shareholders. The Group Chief Executive plays an important role in ensuring that all views of shareholders are communicated to the Board as a whole, and we believe that we have been successful in ensuring that all Directors have a clear understanding of major shareholder’s 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 Company’s 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 and Nomination Committees, the Senior Independent Director, and all other Directors are available to answer questions at each AGM of the Company.

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 and 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. To this end, the Board has put in place a non-executive director responsible for workforce engagement and a non-executive director with responsibility for sustainability. These roles support engagement with our stakeholders to ensure that the Board fully understands any concerns.

The way in which the Board engages and takes into account stakeholder issues, together with the resultant impact is detailed on pages 58 to 60 of the Stakeholders report of the 2020 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 is willing to take in achieving its strategic objectives and priorities and maintains sound risk management and internal control systems. The Board reviews and approves the Group’s risk appetite on an annual basis.

Risk management processes are embedded throughout the Group to assist management in identifying and understanding the risk that they face in delivering business objectives and the key controls that they have in place to manage 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 for reviewing their effectiveness. The Audit 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 20 to 23 of the 2020 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. Also provided are other trading reports, contract performance and market reports and data, including reports on personnel-related matters such as health and safety and environmental issues. The Board has approved a schedule of matters reserved for the Board.

The Chair encourages and facilitates the contribution of each of the Directors 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, Remuneration 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. All 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 and experience they bring to the Board can be found on pages 62 and 63 of the 2020 Annual Report.

The roles of Non-executive Chairman and Group Chief Executive are not exercised by the same individual and the division of responsibility is clear and set out on the Group’s website.

The primary role of the Chair 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 Chief Executive 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 Services Director, 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 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.

Through our Visible Felt Leadership programme, our leaders ensure that there is a culture of safe behaviour through interactions which allow 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 Group Chief Executive 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 and Corporate Policies.

The Board is supported by the Audit, Remuneration 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, Remuneration and Nomination Committees during 2020 are described on pages 71 to 88 of the 2020 Annual Report.

The executive and management teams, who are overseen by the Group Chief Executive 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 Group communicates with our shareholders through the Annual Report and Accounts, trading announcements, the AGM and in the manner set out in the commentary in relation to Principle 2.

We also 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 Group 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 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 meetings and consultations. Analysts notes are also reviewed and discussions held with the Company’s brokers to maintain a broad understanding of varying investor views.

Updated as at 19 March 2021

Product calculator icon Product calculator icon hover