Corporate Governance Statement
In accordance with the AIM Rules for Companies the Board formally adopted the Quoted Companies Alliance Corporate Governance Code 2023 (the “Code”) on 1st September 2024. The Code is based around 10 broad principles of good corporate governance. The correct application of the Code requires London Security plc to apply these 10 principles and to publish certain related disclosures on its website and in its Annual Report, including a clear explanation of how the Code has been applied.
The explanation below provides a summary of how London Security plc applies the 10 principles of the Code.
By way of background to the Board’s application of the Code, London Security plc is 80% owned by EOI Fire SARL ("EOI"). In the absence of a substantial third party shareholder, it is considered unnecessary and, to a large degree unrealistic, to separate the roles of Chairman and Chief Executive. All the Executive Directors are connected with EOI as are J-P Murray and M-C. Leon (Non-Executive Directors) and are therefore not considered to be independent.
To limit the effect of the majority shareholder, the Parent Company and EOI entered into a relationship agreement dated 10 December 1999 in which EOI provided certain assurances to the Parent Company with regard to its relationship with the Parent Company. The agreement confirms that the business and affairs of the Parent Company shall be managed by the Board in accordance with the Parent Company's Memorandum and Articles of Association and with applicable laws and all relevant statutory provisions for the benefit of the shareholders as a whole. Any transactions or other relationships between any member of the EOI Group and the Parent Company would be at arm's length and on a normal commercial basis. The Directors declare their interest and take no part in decisions where appropriate.
Whilst the ownership structure has undoubtedly influenced its governance, in particular with regard to Board membership, corporate governance should be for the benefit of all shareholders and one of the Board’s responsibilities is to ensure the imposition and maintenance of an appropriate corporate governance framework. Following the resignation of Henry Shouler the Board has appointed Andrew Kitchingman as independent non-executive director and as chairman of the audit committee and a member of the remuneration committee. Andrew was appointed to provide independent oversight of the Company and its performance and is available for shareholders to contact if they have concerns that may have not been fully resolved by the Board.
Membership of the Board, both executive and non-executive, has been very stable over recent years and this, along with the presence of a longstanding, substantive majority shareholder has provided the stable base and established management methodology from which London Security plc has been able to deliver an excellent track record of financial performance and shareholder returns and to be focussed on the medium to long term.
Code principles and application
1. Establish a purpose, strategy and business model which promote long-term value for shareholders
London Security plc is an investment holding company and its Board co-ordinates the Group’s activities. The principal activities of the Group are the manufacture, sale and rental of fire protection equipment and the provision of associated maintenance services.
The Group is a leader in Europe’s fire security industry. We provide fire protection through our local presence in the United Kingdom, Belgium, the Netherlands, Austria, France, Germany, Denmark and Luxembourg. More detail on our revenue streams can be found in the revenue recognition section of our accounting policies.
The Group’s services and products are commercialised through well and long-established brands such as Nu-Swift, Ansul, Premier and Master. The unique styling of our products makes them immediately recognisable to both the industry and customers alike.
The Group aims to achieve the highest levels of service and product quality through continued training of our employees to the most stringent servicing standards and the development of the highest performance-rated fire products. The Group’s activities are highly skilled and reliant upon the skills, dedication and passion of all our employees and contractors who are expected to meet our clients’ demand for quality and timely delivery. The Group continues to build on its reputation for service excellence and quality to develop a “safety solutions” business with a well-diversified and loyal customer base.
Shareholder value in the medium term to long term is intended to be delivered by driving operational excellence across the Group and growing within selected markets and geographies. The Board believes that the presence and requirements of a longstanding controlling shareholder helps focus the Company’s strategy on long-term shareholder value creation.
The Group’s strategy and business model is discussed, agreed and reviewed on a regular basis by the Board and is set out each year in the Company’s Annual Report with updates provided in the full year and half year financial results announcements. The Group’s financial statements can be found in the “Investors” section of the Company’s website. The presence and requirements of a longstanding majority shareholder has resulted in a strategy with the key aim of creating long–term shareholder value.
2. Promote a corporate culture that is based on ethical values and behaviours
The culture of the business is one of support and inclusiveness with the aim of ensuring our business is sustainable in the long run. We aim to be an equal opportunities employer and deal fairly with all stakeholders. Robust procedures are in place for conflict resolution.
The Group has a long-established heritage and reputation based on sound ethical values and the Board considers this to be of great ongoing value. Many companies within our market sector envy our reputation and we frequently optimise this commercially and by attracting new staff. Our employees are vital in delivering the highest levels of service in order to mitigate the downward pressure on prices in our market. We involve and listen to employees to maintain strong employee engagement and retain talented people. We have a number of employee representative groups across Europe to facilitate this.
The Directors recognise the need to foster business relationships with suppliers and customers. We aim to have an open, constructive and effective relationship with all suppliers, including site visits by our staff to ensure supply chain sustainability, responsible sourcing and supply chain resilience.
The Directors consider the impact of the Group’s operations on the environment. In recent years many of our product innovations have been focused on limiting our environmental impact. We have a long list of accreditations, including ISO 9001 and ISO 14001.
The interests of different stakeholders may not always be totally compatible. Therefore, the Group has to weigh up the needs and requirements of all stakeholders and attempt to find the right balance where decisions may affect more than one stakeholder. The Group remains ethical in its dealings with stakeholders and attempts to keep stakeholders informed of relevant business decisions. The likely consequences of all our long-term decision making is part of our ongoing management process.
We pride ourselves in providing our staff with a good working environment within a strong ethical culture. The Group’s HR policies are regularly reviewed by the operations team, are provided to all staff both on commencement of employment and are available at all times. The Group has a large number of long serving staff members, many with 30 years plus service, which is a testament to our working culture.
3. Seek to understand and meet shareholder needs and expectations
As outlined in the Corporate Governance Statement, London Security plc has a controlling 80.44% shareholder which has a number of representatives on the Board.
The Company monitors its share register and ensures that dialogue is entered into with other shareholders as appropriate. The Executive Chairman and the Managing Director respond to all enquiries made of them by shareholders and Andrew Kitchingman, the Independent Non-Executive Director, not only provides an independent view of the Group but is also a point of shareholder access which is independent of the executive team or the majority shareholder.
The Board recognises the importance of communication with the Company’s shareholders. The corporate website www.londonsecurity.org, aims to provide shareholders with the required information to fully understand the business. The Annual Report and the Half Year Accounts and related announcements are made available promptly on the Company’s web site in accordance with the AIM Rules.
All shareholders are invited to attend and will receive at least 21 clear days’ notice of the Company’s Annual General Meeting (“AGM”). The notice includes details of the resolutions to be proposed and voted on at the AGM. The AGM includes a question and answer session and Directors make themselves available to meet with shareholders following the meeting.
4. Take into account wider stakeholder interests, including social and environmental responsibilities and their implications for long-term success
The Group has identified the following stakeholders.
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Customers
We service our customers to the highest relevant standards to ensure customers are safe and comply with legislation. We actively participate in Trade Associations who lobby for high levels of Fire Protection Industry Standards and drive positive change in our industry.
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Employees
The Group recognises the need to ensure effective communications with employees to encourage involvement in the Group’s performance and achieve a common awareness of factors affecting that performance. Policies and procedures have been developed to suit the needs of each subsidiary undertaking, which take into account factors such as numbers employed and location, and include newsletters and communication meetings.
We engage in appropriate liaison with employees and employment bodies such as unions and Worker’s Councils.
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Employment of disabled persons
The Group is committed to employment policies that follow best practice based on equal opportunities for all employees and offer appropriate training and career development for disabled staff. If members of staff become disabled, the Group continues employment wherever possible and arranges retraining if required.
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Suppliers
Where appropriate, the Group asks for Method Statements and proof that suppliers comply with ethical environmental and other quality standards.
The Group agrees payment terms with all suppliers when they enter into binding purchase contracts. The Group seeks to abide by the payment terms agreed with suppliers whenever it is satisfied that the supplier has provided the goods or services in accordance with the agreed terms and conditions. The Group does not follow any standard or external code which deals specifically with the payment of suppliers. We actively engage with suppliers in order to develop and source market leading fire protection products.
The Group has considered sustainability.
The escalating effects of climate change on global markets demand increased transparency and anticipatory planning in our financial reporting. We are fulfilling our reporting obligations as mandated by the Companies Act Climate-related Financial Disclosure (CFD) regulation. Our aim is to provide our stakeholders with a detailed evaluation of the potential risks and opportunities climate change poses to our operations. As an international organisation, acknowledging and addressing the effects of climate change on our business is essential.
The CFD framework is comprised of eight specific disclosure mandates, centred around the four areas of governance, strategy, risk management, and metrics and targets. This framework covers the disclosure of both physical and transition risks linked to climate change, guiding us in reporting governance structures, strategic responses, risk management processes, and climate-related metrics and targets. By implementing CFD practices, we can strengthen our defences against climate-related risks whilst harnessing climate-related opportunities, fostering transparency with our stakeholders. This approach not only supports informed decision-making but also promotes sustainable practices.
Through the development of this CFD disclosure, we have gained valuable insights into the importance and relevance of climate-related risks and opportunities to the Group. During previous reporting years, we deemed climate-related risks as insignificant to the Group, resulting in the Board not reviewing them within the current risk management framework. Formal roles for climate risk and opportunity identification, consideration and management have not yet been defined, and frequency of climate meetings has also not yet been determined. However in 2023 we have made significant progress by appointing Richard Pollard, our Company Secretary, to lead our climate change policy initiatives. This marks an important step towards integrating climate considerations into our strategic planning.
We recognise the potential for improvement in our approach; in 2024 we will make steps towards creating a dedicated committee made up of individuals in differing roles throughout the Group, who will have responsibility for the identification, assessment, and management of climate-related risks and opportunities. This committee will be responsible for keeping the Board informed, ensuring that climate-related risks and opportunities are eventually integrated into our risk management framework and business strategy. Details on the frequency and delivery method of the committee’s outcomes to the Board for consideration are currently still being determined.
5. Embed effective risk management, internal controls and assurance activities, considering both opportunities and threats, throughout the organisation
The Board has overall responsibility for the oversight of risk as well as maintaining a robust risk management framework and internal control system with the Audit Committee reviewing its effectiveness. Our risk management framework is designed to ensure the Board can clearly identify our risks and ensure these risks are being managed and mitigated effectively. The Group’s principal risks, and plans to mitigate these risks, are identified and set out in the Company’s Annual Report within the Strategic Report section.
The Directors have considered the effectiveness of the Group's system of internal controls. The Directors have continued to report upon internal financial controls in accordance with the ICAEW's guidance "Internal Control and Financial Reporting" (the Rutteman guidance), and to report non-compliance with "Internal Control: Guidance for Directors on the Combined Code" (the Turnbull guidance).
Key elements of the Group's system of internal financial controls are as follows:
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Control environment
The Directors have put in place an organisational structure with clearly defined lines of responsibility and delegation of authority. This is reinforced by the direct supervision of the Executive Directors supported by appropriate policy statements.
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Risk management
The Executive Directors are responsible for identifying risks facing the business and for putting in place procedures to mitigate and monitor risks. Risks are assessed and monitored at Board level on an ongoing basis, as well as during the annual business planning process.
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Information systems
The Group has a comprehensive system of financial reporting. The annual budget is approved by the Board. Actual results and variances compared with the budget are reported to the Board monthly, supported by detailed management commentaries. Revised forecasts for the period are prepared and reported to the Board each quarter.
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Control procedures
Policies and procedures manuals are maintained at all significant business locations. In particular, there are clearly defined policies for capital expenditure including appropriate authorisation levels. Larger capital projects and major investments and divestment decisions require Board approval.
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Monitoring systems
Internal controls are monitored by management review.
The Board routinely consider the effectiveness of the Company’s system of internal controls. The Board has established an Audit Committee. The Audit Committee considers risk and internal control as a fundamental part of its responsibilities. The Directors confirm that they have reviewed the effectiveness of the system of risk management and internal control.
The Board reports upon internal financial controls in accordance with the ICAEW’s guidance “Internal Control and Financial Reporting”.
6. Establish and maintain the Board as a well-functioning, balanced team led by the chair
The Board consists of 6 members, led by Jean-Jacques Murray, the Chairman. He manages and provides leadership to the Board to ensure that it is effective in its task of setting and implementing the Company’s direction and strategy. The Chairman is also responsible for ensuring the Board and broader management framework is established, operates effectively and is compliant with relevant statutory codes and Company policies and for the regular assessment of the effectiveness of the Board and its committees. Due to the relatively small size of the Group and the nature of its businesses, the Executive Directors are more directly involved in the day-to-day activities than would be the case in a larger more diversified organisation.
The Board is composed of a mixture of three Executive and three Non-Executive members in order to provide the division of responsibilities and balance which are considered appropriate to the Parent Company's individual circumstances. The Non-Executive Directors have particular responsibility in ensuring that the strategies proposed by executive management are fully challenged. The majority of the Board has been actively involved in the fire protection industry for more than 20 years. The Directors’ biographies and skill sets are detailed in Annual Report.
The Group and Parent Company is 80% owned by EOI Fire SARL ("EOI"). In the absence of a substantial third party shareholder, it is considered unnecessary and, to a large degree unrealistic, to separate the roles of Chairman and Chief Executive. All the Executive Directors are connected with EOI as are J-P Murray and M-C. Leon (Non-Executive Directors) and are therefore not considered to be independent. Andrew Kitchingman is recognised as the Independent Non-Executive Director.
A schedule is maintained of matters specifically reserved for decision by the full Board, which includes matters of business strategy, business acquisitions, business disposals, approval of budgets and approval of financial statements. Interim meetings or appropriate sub-committees are established when decisions are required between scheduled meetings. All Directors have access to the Company Secretary who is responsible to the Board for ensuring that all applicable procedures and regulations are complied with. Each Director has the right to take independent professional advice in connection with his or her duties at the Parent Company's expense.
The Board meets on two occasions each year. All directors receive a pre-meeting briefing package and post meeting minutes and appropriate attachments. As a number of the Board’s Directors are based overseas, it is not appropriate for all Directors to attend all meetings. Where a Director cannot attend, they can give their contributions in advance to an attending Director or the Company Secretary and relay any comments concerning the Board minutes before they are adopted. Should there be anything that requires to be discussed further, an all parties telephone Board meeting is convened.
All directors receive appropriate monthly management information and have the opportunity to discuss this with the Chairman or any member of his team or the Board. In addition, Board approval is sought for all material acquisitions or any activities that are of material importance to the Group. Due to the small size of the Board and close involvement of the majority shareholder, the Directors have no current intentions to appoint another Independent Non-Executive Director.
The Non-Executive Directors provide oversight and scrutiny of the performance of the executive team to ensure that the Company’s key strategic objectives are met, as well as representing the shareholders of the Company. None of the Non-Executives Directors participate in any performance related remuneration / share option schemes.
Annually all Directors will resign and stand for re-election.
7. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
The Board is considered to comprise individuals with a good blend of relevant experience in the Company’s sector, the financial and the public markets and with the necessary experience and strategic and operational skills required to drive the Group forward.
The Directors’ biographies and skill sets are detailed in Annual Report and on the Directors section of the Company’s website.
Each Director keeps up to date with their specialist experience and knowledge by following relevant information and publications. From time to time this is supported by the Company’s advisors and specialist consultants. All Directors have access to the Company Secretary who is responsible to the Board for ensuring that all applicable procedures and regulations are complied with. Each Director has the right to take independent professional advice in connection with his or her duties at the Parent Company's expense.
The Board is supported by two standing committees. Both committees have written constitutions and terms of reference.
The remuneration committee comprises Andrew Kitchingman and Jean-Jacques Murray. The committee is chaired by Andrew Kitchingman. The remuneration committee reviews the performance of Executive Directors and sets the scale and structure of their remuneration and the basis of their service agreements with due regard to the interests of the shareholders. No Director is permitted to participate in decisions concerning his own remuneration. Details of Directors' remuneration are set out in the Directors' Remuneration Report in the Annual Report.
The audit committee currently comprises Andrew Kitchingman and Jean-Jacques Murray. Andrew Kitchingman is independent of management and EOI Fire SARL. The committee is chaired by Andrew Kitchingman The audit committee is responsible for ensuring that the financial performance of the Group is properly monitored, controlled and reported on. It meets regularly and meets the auditors to discuss the audit approach and the results of the audit. It considers and ensures the auditor’s independence.
The audit committee considers the need to introduce an internal audit function each year. After taking into consideration the current size and complexity of the Group, the committee believes that it would not be cost effective to have an internal audit function and the committee feels that sufficient comfort is obtained through the scope and quality of management's ongoing monitoring of risks.
Due to the small size of the Board, the Directors consider that a nomination committee need not be established.
On an annual basis, following the Annual General Meeting, the Board reviews the performance of its’ two committees.
8. Evaluate Board Performance based on clear and relevant objectives, seeking continuous improvement
The Board is measured primarily with reference to Group’s financial performance and the suitability of the Group to deliver strong results in the future. In recent years the financial performance of the Group has been strong which has encouraged the Board to believe that its membership is appropriate. Given the straightforward nature of the business, the Company’s Directors are of the opinion that the analysis of revenue, operating profit and earnings per share are the appropriate KPIs for an understanding of the development and performance of the business. The analysis of these KPIs is included in the Chairman’s Statement and the Financial Review in the Annual Report.
The Board also consider that the stability of its membership over recent years has been a major contributor to the Company’s success.
The Chairman evaluates the Board performance informally on a regular basis and formally at least twice per year.
9. Establish a remuneration policy which is supportive of long term value creation and the Company’s purpose, strategy and culture
The Company’s remuneration policy is to provide a core level of reward for the completion of Director’s duties, set at a level that allows us to attract and retain employees of the calibre required to drive the Company’s success. There is no maximum salary limit. When considering salary levels, the Remuneration Committee will consider the specific nature and responsibilities of the role and the capabilities and experience of the individual.
The Remunerations Committee meets at least once a year to review the performance of the Directors and set the scale and structure of their remuneration and the basis of their service agreements with due regard to the interests of the shareholders. The Remuneration Committee comprises Jean-Jacques Murray (Chairman) and Andrew Kitchingman (Independent Non-Executive. Director). Details of the Directors’ remuneration are set out in the Directors’ Remuneration Report in the Annual Report.
The Remuneration Report is subject to a shareholder vote at the AGM.
10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other key stakeholders
During 2024 the Board completed a gap analysis against the new 2023 QCA code and has updated its Corporate Governance Statement. A new independent director, Andrew Kitchingman, has been appointed following the decision by Henry Shouler to retire in August 2024.
The Company reports on its financial performance and updates on its corporate governance at least two times each year, at the half year and full year financial results. The financial results are also communicated to the stock market via RNS announcements.
These reports and announcements are available on the “Investors” section of the Company’s website. Copies of previous years’ reports since 2002 are also on the Company’s web site.
The Board pays particular attention to the votes cast by the shareholders at the AGM. In the event that a significant proportion (>20% including proxies) of independent votes are cast against a resolution at a General Meeting of the Company, the Board intends, on a timely basis, to explain any action it has taken or will take as a result of that vote.