Corporate Governance

Last updated 18 November 2019

STATEMENT OF COMPLIANCE WITH THE 2018 QCA CORPORATE GOVERNANCE CODE

Chairman’s Introduction

High standards of corporate governance are a key priority for the Board of Ultimate Sports Group Plc and, in line with the London Stock Exchange’s recent changes to the AIM Rules requiring all AIM-listed companies to adopt and comply with a recognised corporate governance code, the Board has adopted the 2018 Quoted Companies Alliance Corporate Governance Code (the “QCA Code”) as the basis of the Group’s governance framework. It is the responsibility of the Board to ensure that the Group is managed for the long-term benefit of all shareholders and stakeholders, with effective and efficient decision-making. Corporate governance is an important aspect of this, reducing risk and adding value to our business.

The Directors acknowledge the importance of the ten principles set out in the QCA Code and, in this section, the Group’s current approach to complying with those principles is set out.

R L Owen Chairman

The corporate governance framework which the Company operates is based upon practices which the Board believes are appropriate and proportional to the size and complexity of the Company and its business. The Board has chosen to adhere to the Quoted Companies Alliance Corporate Governance Code for small and mid-size quoted companies (“QCA code”).

The QCA code identifies 10 principles that they consider to be appropriate and asks companies to provide an explanation on how they meet those principles. The Board has considered these principles and how the Company meets them given the size of the Company. The results of our review are set our below. Over the period under review, the Company has not changed its strategic focus of developing the business of ESS and continuing to carefully appraise all acquisition opportunities. The Company has not yet progressed the latter and as such, does not propose to make amendments to the corporate governance framework it is operating.

These disclosures are set out on the basis of the current Company and the Board highlights where it has departed from the Code presently. The Board will continue to develop its governance processes in the coming year where appropriate.

  1. Establish a strategy and business model which promotes long-term value for shareholders:

Ultimate Sports Group Plc has a long-established reputation in the field of school sports coaching for children and related activities. It continues to seek ways of growing this business activity in and around London.

The Board has established a strategy which seeks to promote long-term value for shareholders and has identified the following key areas of operation to focus on improving on the Group’s performance going forward;

  • Enter into new agreements with schools in the London area
  • Generate operational efficiencies and synergies within ESS
  • Growth by expansion of business activities and acquisition

The Company’s strategy is to make investments in or to acquire early stage companies operating in the sectors of sport, technology and general investment, attracting businesses through our network of contacts (including current shareholders). Given the size of the Company and the historic limited cash resources, we believe the strategy and business model we have adopted is consistent with our goal of promoting long term value for shareholders, however expansion of business and assessments of acquisition opportunities can be time consuming, present challenges and can be costly.                                                                                                                                                                         

  1. Seek to understand and meet shareholder needs and expectations:

The Company recognises the importance of engaging with its shareholders and reports formally to them when its full-year and half-year results are published. The Chairman and Chief Executive Officer present the results to existing shareholders, potential investors, brokers and the media, where appropriate. The Non-Executive Directors are also available to discuss any matter with shareholders. There is no analyst coverage.

Meetings with these different groups are reported on at monthly board meetings by either the Chairman or the Chief Executive Officer to ensure that shareholders’ views are communicated to the Board as a whole. This process enables the Board to be kept aware of shareholders’ opinions on strategy and governance, and for them to understand any issues or concerns.

Shareholders are encouraged to attend the annual general meeting at which the Group’s activities and results are considered, and questions answered by the Directors. General information about the Group is also available on the Company’s website www.ultimatesportsgroup.me.

The Group has not historically announced the detailed results of shareholder voting to the market, however, the Board intends to do so going forward.

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

The Group is aware of its corporate social responsibilities and the need to maintain effective working relationships across a range of stakeholder groups, which include the Group’s employees, customers, suppliers, and regulatory authorities. The Group also encourages feedback from schools, pupils and parents of pupils through ongoing dialogue.

The Group’s operations take account of the need to balance the needs of all these stakeholder groups while maintaining focus on the Board’s primary responsibility to promote the success of the Group for the benefit of its shareholders.

The Group endeavours to take account of feedback received from stakeholder groups, making amendments to working arrangements and operational plans where appropriate and where such amendments are consistent with the Group’s long-term strategy.

The Group considers its actions and likely impact that they may have on the environment and seeks to mitigate any negative impact wherever practicable. Through the various procedures and operating systems, the Group complies with health and safety and environmental legislation relevant to its activities.

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

The Board has overall responsibility for the Group’s internal control systems and for monitoring their effectiveness. The Board, with the assistance of the Audit Committee, maintains a system of internal controls to safeguard shareholders’ investment and the Group’s assets, and has established a continuous process for identifying, evaluating and managing the significant risks the Group faces.

The directors are responsible for the Group’s system of internal control. Although no system of internal control can provide absolute assurance against material misstatement or loss, the Group’s system is designed to provide the directors with reasonable assurance that problems are identified on a timely basis and dealt with appropriately. The key procedures that have been established and which are designed to provide effective internal control are as follows:

  • management structure – the Board meets regularly and minutes of its meetings are maintained;
  • financial reporting – budgets are prepared and then presented to and, if appropriate, approved by, the Board. Any material variances from budgeted to actual results are investigated; and
  • investment appraisal – the Company has a clearly defined framework for capital expenditure requiring approval the Board where appropriate.

Further details of the business risks and how they are mitigated as far as possible are contained in The Strategic Report in the 2018 Annual Report. Both the Board and senior management are responsible for reviewing and evaluating risk on an ongoing basis and the Executive Directors regularly review trading performance, discuss budgets and forecasts and any new risks associated with trading, the outcome of which is reported to the Board.

Staff (including those of the subsidiary) are also reminded on an annual basis that they should seek approval from the Chairman or Chief Executive Officer if they, or their families, plan to trade in the Company’s shares

  1. Maintain the Board as a well-functioning, balanced team led by the Chair:

The members of the Board have a collective responsibility and legal obligation to promote the interests of the Company and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the Chairman of the Board.

The QCA Code requires that the Boards of AIM companies have an appropriate balance between executive and non-executive directors of which at least two should be independent. The Board has considered its current establishment – being two non-executive directors (both independent), and three executive directors – and is satisfied it meets this requirement. The Board is supported by one committee, the Audit committee.

The Chairman, Richard Owen, is responsible for leadership of the Board, ensuring its effectiveness on all aspects of its role, setting its agenda and ensuring that the Directors receive accurate, timely and clear information. The Chairman also ensures effective communication with shareholders and facilitates the effective contribution of the other Non-Executive Directors. The Company is satisfied that the current Board is sufficiently resourced to discharge its governance obligations on behalf of all stakeholders.

Non-executive directors are required to attend all Board and Board Committee meetings convened each year and to be available at other times as required for face-to-face and telephone meetings with the executive team and investors.

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 Board and Committee meetings. All Directors have access to the advice and services of David Hillel who is both the Finance Director and the Company Secretary and is responsible for ensuring that the Board procedures are followed and that applicable rules and regulations are complied with. In addition, procedures are in place to enable the Directors to obtain independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense.

Meetings held during the period under review (year ended 31 December 2018) and the attendance of Directors is summarised below:

Richard Owen

Geoffrey Simmonds

David Hillel

John Zucker

David Coldbeck

Board meetings (10 held in a year)

8/10

10/10

10/10

8/10

8/10

Audit Committee (1 held in a year)

N/A

N/A

N/A

1

1

Time commitment

Full time

Full time

Part time:-three to four days per month

One to two days per month

One to two days per month

The Board is responsible to the shareholders and sets the Group’s strategy for achieving long-term success. It is ultimately responsible for the management, governance, controls, risk management, direction and performance of the Group. Further details of the composition of the Board is given in the Directors Report.

  1. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities:

The Board currently comprises three Executive and two Non-Executive Directors with an appropriate balance of sector, financial and public market skills and experience. The experience and knowledge of each of the Directors gives them the ability to constructively challenge the strategy and to scrutinise performance. The Board also has access to external advisors where necessary. Further details of the Board are included 2018 Annual Report.

Throughout their period in office the Directors are continually updated on the Group’s business environment in which it operates, corporate social responsibility matters and other changes affecting the Group by briefings and meetings with senior personnel. They are reminded by the Company Secretary of these duties and are also updated on changes to the legal and governance requirements of the Group, and upon themselves as Directors, on an ongoing and timely basis.

The Company's Nominated Adviser (“NOMAD”) assists with AIM matters and ensures that all Directors are aware of their responsibilities. The Directors also have access to the Company’s lawyers and auditors as and when required and are able to obtain advice from other external bodies when necessary.

Board composition is always a factor for contemplation in relation to succession planning. The Board will seek to take into account any Board imbalances for future nominations, with areas taken into account including board independence. The Company considers that at this stage of its development and given the current size of its Board, it is not necessary to establish a formal Nominations Committee. Instead, appointments to the Board are made by the Board as a whole. This position, however, is reviewed on a regular basis by the Board.

  1. Evaluate Board performance based on clear and relevant objectives, seeking

continuous improvement:

Given the small size and complexity of the Company and the limited resources, the Board has not appointed external consultants to evaluate the performance of the directors and board overall. The Board acknowledges that it is non-compliant with its processes to evaluate the performance of the Board.

In view of the size of the Group, decisions that would fall within the scope of Nomination or Remuneration Committees are dealt with by the full Board.

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

The Board seeks to maintain the highest standards of integrity in the conduct of the Group’s operations. An open culture is encouraged within the Group, with communications to staff regarding the Group’s progress when appropriate.

The Group is committed to providing a safe environment for its staff and all other parties for which the Group has a legal or moral responsibility.

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

The Chairman also ensures effective communication with shareholders. Matthew Farnum-Schneider is the group’s Chief Executive Officer and is responsible for the operational management of the Group and the implementation of Board strategy and policy. By dividing responsibilities in this way, no one individual has unfettered powers of decision-making.

The appropriateness of the Board’s composition and corporate governance structures is reviewed on an ad hoc basis by the Chairman together with the other Directors, and these will evolve in parallel with the Group’s objectives, strategy and business model as the Group develops.

Board Committees

The Board has established an Audit Committee. Functions that would otherwise be carried out by Nomination and Remuneration Committees are dealt with by the Board as a whole.

The Audit Committee comprises the two non- executive directors John Zucker and David Coldbeck. Its primary responsibility is to monitor the quality of internal controls, ensuring that the financial performance of the Group is properly measured and reported on, and for reviewing reports from the Group’s auditors relating to the Group’s accounting and internal controls, in all cases having due regard to the interests of shareholders.

The Audit Committee meets at least once a year to review the Group’s interim and final results and liaises with the Group’s Auditors.

In view of the size of the Group, decisions that would fall within the scope of a Remuneration Committee are dealt with by the full Board which includes setting the level of remuneration for both Directors and Key management personnel, determine terms and conditions of service, including the grant of share options, having due regard to the interests of shareholders.

  1. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders:

Aside from the distribution to shareholders of an Annual Report and an Interim Report at the half year, shareholders are invited to attend an annual general meeting each year and other meetings where their input and approval is required. The company website is regularly updated for announcements and information and is easily accessible on- line www.ultimatesportsgroup.me. Comments and written communications from Shareholders and other stakeholders are welcome.

The Board has ultimate responsibility for reviewing and approving the Annual Report and Financial Statements and it has considered and endorsed the arrangements for their preparation, under the guidance of its Audit Committee. The directors confirm that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy.

Audit Committee Report

The Audit Committee consists of John Zucker and David Coldbeck. The Committee meets at least once a year and more frequently if required. The Committee is responsible for monitoring the quality of internal controls, ensuring the financial performance of the Company is being properly measured and reported on, meeting with the auditors and reviewing reports from the auditors relating to accounting and internal controls.

Aside from the distribution to shareholders of an Annual Report and an Interim Report at the half year, shareholders are invited to attend an annual general meeting each year and other meetings where their input and approval is required.

The company website is regularly updated for announcements and information and is easily accessible on- line.

Comments and written communications from Shareholders and other stakeholders are welcome.