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QCA

THE PRINCIPLES OF THE QUOTED COMPANY ALLIANCE (QCA) CODE
Filtronic plc ("The Company") QCA Code Disclosures

 

DELIVER GROWTH

 
QCA Code Principle   Application (as set out by the QCA)   What we do and why
         
1. Establish a strategy and business model which promote long-term value for shareholders  

The Board must be able to express a shared view of the Company’s purpose, business model and strategy.

 

It should go beyond a simple description of products and corporate structures and set out how the company intends to deliver shareholder value in the medium term and long term.

 

It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the company from unnecessary risk and securing its long-term future.

  The Filtronic Group’s strategy is explained within the Objective and Strategy section of the 2018 Annual Report and Accounts.

 

Our core objective is to grow our business profitably and this is to be achieved by;

 

(i) offering a growing range of technically advanced antennas, filters and mmWave transceivers and associated products;

(ii) expanding our customer base within our target markets; and

(iii) widening the number of markets that we address.

         
         

2. Seek to understand and meet shareholder needs and expectations.

 

Directors must develop a good understanding of the needs and expectations of all elements of the company’s shareholder base.

 

The Board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions.

  The Board places great value on maintaining open relationships with shareholders and the primary point of contact in the Company for this function is the CEO, supported by the FD, both of whom undertake an extensive programme of meetings with shareholders at least twice a year, following the announcement of the financial results. The Chairman is available to speak with shareholders at their request.

 

Presentations are also made to analysts at these times to present the Group’s results. This assists with the promotion of knowledge of the Group in the investment marketplace and with shareholders.

 

The Board believes that the Annual General Meeting provides an excellent opportunity to communicate directly with shareholders.

 

Where voting decisions are not in line with the Company’s expectations, the Board will engage with those shareholders to understand and address any issues. The Company Secretary is the main point of contact for such matters.

 

We also aim to communicate with smaller shareholders by making copies of investor presentations available on our website. In addition, we have launched a YouTube Channel, where video presentations of our results and strategy are available to view.

         
         
3. Take into account wider stakeholder and social responsibilities and their implications for long-term success.   Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The Board needs to identify the company’s stakeholders and understand their needs, interests and expectations.

 

Where matters that relate to the company’s impact on society, the communities within which it operates, or the environment have the potential to affect the company’s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the company’s strategy and business model.

 

Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups.

  Acting with integrity and behaving responsibly is central to the execution of our strategy and underpins our business model.

 

Care for our employees, the environment, our customers, our supply chain and the communities in which we operate is integral to the way Filtronic operates.
Please see further details in the Corporate Social Responsibility Report section of the 2018 Annual Report and Accounts

 

The main direct stakeholders of Filtronic are our employees, shareholders, customers and suppliers.

 

Filtronic holds staff communications sessions throughout the Group on a regular basis, where management meet employees face to face or via Skype to update them on developments relating to the business and where there is an opportunity to take questions, as well as to explore and address issues, large and small, that crop up from time to time. The CEO also circulates a bi-monthly blog to inform employees on developments and updates in the business.

 

Please see the previous website disclosure in relation to communications with shareholders.

 

Filtronic supplies customers (or their specified contract partners) directly with its products. The products are frequently custom built to customer specifications. The nature of the supply relationship requires a close relationship between the customer and Filtronic throughout the product development and supply phases. In parallel Filtronic nurtures close relationships with its own suppliers reflecting the standards required by our customers. Because of Filtronic’s close relationships with its customers, there is a flow-down of the latest regulatory requirements, including those relating to environmental, packaging and other matters from customer to Filtronic and into the supply chain thus improving the quality of the supply chain over time.

         
         
4. Embed effective risk management, considering both opportunities and threats throughout the organisation.   The Board needs to ensure that the company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the Company’s supply chain, from key suppliers to end-customer.

 

Setting strategy includes determining the extent of exposure to the identified risks that the Company is able to bear and willing to take (risk tolerance and risk appetite).

  The Board recognises that risk is inherent in any business and seeks to manage risk in the Group in a controlled way.

 

The Risk management section of the 2018 Annual Report and Accounts sets out the key risks facing the business, the nature of those risks, the mitigation systems and actions that have been put in place.

 

The directors have established a continuous process for identifying evaluating and managing the significant risks faced by the Company and in addition regularly review the effectiveness of the Group’s system of internal controls.

         
         
5. Maintain the Board as a well- functioning, balanced team, led by the Chair.   The Board members 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 Chair of the Board.

 

The Board (and any Committees) should be provided with high-quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.

 

The Board should have an appropriate balance between Executive and Non-Executive Directors and should have at least two independent Non-Executive Directors. Independence is a Board judgement.

 

The Board should be supported by Committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively.

 

Directors must commit the time necessary to fulfil their roles.

  The Board of directors is responsible for promoting the success of the Company within a responsible governance framework. Details of that framework, the Board’s composition, its Committees, their function and the remit of each is set out in the Governance Framework section of the Governance report in the 2018 Annual Report and Accounts.
The terms of reference for each of the Board’s Committees can be found at: www.filtronic.com/investors/corporate-governance

 

         
         
6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities.   The Board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The Board should understand and challenge its own diversity, including gender balance, as part of its composition.

 

The Board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a Board.

 

As companies evolve, the mix of skills and experience required on the Board will change, and Board composition will need to evolve to reflect this change.

  The Board undertakes an evaluation of its performance annually. The evaluation is based on the FRC’s guidance on Board effectiveness.
The Chairman is supported by the Company Secretary in addressing the development and training needs of the Board and of individual members.

 

Succession planning and the process of appointments to the Board is overseen by the Nominations Committee and is led by the Chairman.

 

Where new appointments are considered, the search and the appointment are made on merit against objective criteria and with due regard to the benefits of diversity.

         
         

MAINTAINING A DYNAMIC FRAMEWORK

         
QCA Code Principle   Application (as set out by the QCA)   What we do and why
         
7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement.   The Board should regularly review the effectiveness of its performance as a unit, as well as that of its Committees and the individual directors.

 

The Board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual directors or the wider senior management team.

 

It is healthy for membership of the Board to be periodically refreshed. Succession planning is a vital task for Boards. No member of the Board should become indispensable.

  The Board carries out an evaluation of its performance annually (as well as that of its committees and of individual directors) in the light of the Financial Reporting Council’s Guidance on Board Effectiveness.

 

The Board evaluation process is directly linked to succession planning and all directors undergo performance evaluation before being proposed for re-election to ensure that their performance continues to be effective and demonstrate their continued commitment to the role.

 

Appraisals are conducted annually with the Executive Directors where objectives are set to align with the Company’s objective and strategy.

 

Please refer to the Governance framework section of the Governance report in the 2018 Annual Report and Accounts.

         
         
8. Promote a corporate culture that is based on ethical values and behaviours   The Board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage.

 

The policy set by the Board should be visible in the actions and decisions of the Chief Executive and the rest of the management team. Corporate values should guide the objectives and strategy of the Company.

 

The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the Company.

 

The corporate culture should be recognisable throughout the disclosures in the Annual Report, website and any other statements issued by the Company.

  The Company has in place a comprehensive suite of Group policies that are endorsed by the Board and communicated to all employees. This is done, firstly, as part of the employee’s initial induction process and subsequently as each new policy is adopted. These policies are available to view and download on the Company’s website at: www.filtronic.com/investors/corporate-governance/group-policies. The policies are infused with the core values of Filtronic: Integrity, respect for others, seeking to always deliver quality products (and services) that meet and exceed customer expectations. Additionally, the Company has adopted a Procedures and Authorisations Manual (“PAM”) (updated when required) which sets out among other matters the approved authority levels within the Filtronic Group.

 

To reinforce the values and cultures of Filtronic, training on the Group policies and PAM is periodically provided at all sites where each employee is reminded of the essence of each policy and its objective. During the most recent training sessions, employees were reminded of the existence of the whistleblowing policy so that employees who have concerns about ethical issues or matters of integrity can raise their concerns in confidence directly to Board Members.

 

To emphasise to all employees the central role that the policies play in the day to day management and operation of the business, employee handbooks are being amended across the Group to identify the key role the policies play in the culture of the Company, the Group and its business enterprises.

 

The Company continues to challenge itself as to the best way to determine that ethical values and behaviours are recognised and respected.

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

The Company should maintain governance structures and processes in line with its corporate culture and appropriate to its:

 

• size and complexity; and
• capacity, appetite and tolerance for risk.

 

The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the Company.

  The Filtronic Group Governance Report in the 2018 Annual Report and Accounts sets out the Company’s governance framework and why it is appropriate for Filtronic, at present.
         
         

BUILD TRUST

         
QCA Code Principle   Application (as set out by the QCA)   What we do and why
         
10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.  

A healthy dialogue should exist between the board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the Company.

 

In particular, appropriate communication and reporting structures should exist between the Board and all constituent parts of its shareholder base. This will assist:

 

• the communication of shareholders’    views to the Board; and
• the shareholders’ understanding of the unique circumstances and constraints faced by the Company.

 

It should be clear where these communication practices are described (Annual Report or website).

  The Filtronic Group encourages two-way communication with shareholders (both private and institutional) and responds quickly to the inputs received.

 

The Chairman talks to the Group’s major shareholders and ensures that their views are communicated to the Board.

 

The Board recognises that the AGM is an important opportunity to meet private shareholders. The directors are available to listen to the views of shareholders informally immediately following the meeting.

 

The results of all general meeting resolutions are announced promptly after the meeting has taken place. The results of all general meeting resolutions (as well as the corresponding notice of general meeting/annual general meeting) issued in the last five years are available on the Company’s website at: www.filtronic.com/investors/announcements.

 

Historical Annual Reports and the unaudited half year results for the past five years are available on: www.filtronic.com/investors/reports