(Sigma Capital Group PLC “Sigma” or “Company” or Group”)
30 October 2020
The Board has adopted the Quoted Companies Alliance (QCA) Corporate Governance Code in line with the AIM Rules requiring all AIM-listed companies to adopt and comply with a recognized corporate governance code. This report follows the structure of these guidelines and explains how we have applied the guidance. The Board considers that the Company complies with the QCA Code in all respects.
The information in this statement will be reviewed annually and will include the date on which the information was last reviewed. Going forward this will be reviewed at the same time as the Annual Report and Accounts of the Company are prepared.
Sigma delivers private rented sector (PRS) housing in the UK in partnership with local authority and investor partners through its unique, contractual platform, with family homes its key target market. The Group’s PRS property platform brings together a network of formal and informal relationships which include construction partners, central government and local authorities. Sigma typically delivers a range of traditional housing through its platform partners, enabling the Company to cater for a broad spectrum of demand, including young couples as well as growing families.
Sigma established a closed ended real estate investment trust, The PRS REIT plc (the “REIT”), to invest in the private residential build to rent sector and provide shareholders with an attractive level of income together with the potential for capital growth and income. The REIT has been listed on the Specialist Fund Segment of the London Stock Exchange since 31 May 2017.
Sigma, has also launched a joint venture with EQT Real Estate, the real estate platform of global investment firm EQT, to deliver high quality, new-build homes for private rental in Greater London (the “Joint Venture” or the “JV”). The Joint Venture has been established to invest in new, high quality build-to-rent (“BTR”) residential apartment blocks and houses in more affordable parts of Greater London. They will be predominantly located in transport Zones 3-6 and in close proximity to transport links, including train access to central London.
Sigma generates income from three principal streams:
Sigma also generates income from two other sources:
Sigma’s growth strategy remains focused on extending its activities so as to be in a position to deliver homes across multiple regions in the UK through its PRS property platform. The strategy is explained in detail in the strategic report section in pages 19-30 of the Annual Report 2019.
The Board is committed to providing and encouraging, effective communication with the shareholders of the Company. The Board primarily reports to the shareholders through the publication of interim and final financial results. These and other significant developments and regulatory announcements are disseminated through the London Stock Exchange’s Regulatory News Service (RNS) and by way of timely updates of the Company’s website. The Company maintains regular news flow and includes contact details for the Company and its designated broker on all its news releases to enhance the information it shares and to ensure ongoing dialogue with shareholders.
The Annual General Meeting is a forum for communication between the Company and all its shareholders and the Board encourages and welcomes their participation in its agenda. The Executive and non-Executive directors attend the Annual General Meeting and are available to answer questions.
Enquiries from individual shareholders on matters relating to the business of the Company are welcomed. In addition, the Executive directors meet with major shareholders, as part of a bi-annual roadshow or on an ad-hoc basis if required, to discuss the progress of the Company and provide periodic feedback to the Board following meetings with shareholders.
The Company retains a PR company to assist in shareholder communications, (KTZ Communications) and shareholders can contact the Company directly using the following email address: [email protected].
In addition to shareholders, the Company has a large number of other stakeholders, including the wider community. The Company seeks to develop specifically targeted and helpful communications and relationships with neighbourhoods, employees, housebuilding partners, lettings partners, approved valuers, local authorities, shareholders of the REIT, brokers and tenants.
Sigma seeks to be a socially responsible Group which has a positive impact on the communities it creates and in which it operates. There is a well-documented shortage of good quality housing to rent in the UK providing security of tenure. Our institutional approach to investment means that good tenants can rent for as long as they like. This approach also benefits our local authority partners, where quickly delivered, well managed and maintained homes align with national policy and local housing targets. Sigma also organises community, charitable and educational events at the sites it manages to encourage integration and to help foster a sense of community. In addition to providing much needed housing, development creates economic benefits from local employment, apprenticeships and increased custom for local businesses.
Sigma has developed a number of key relationships over several years that comprise the basis of its PRS platform. It has contractual agreements and processes in place with its approved contractors, approved lettings agents and valuers for the procurement, delivery and management of PRS units for Sigma. These include framework agreements that secure identified sites for acquisition and development by Sigma on its own account or for its partners such as the REIT. The Executive directors meet regularly with representatives of its partners to discuss any issues that arise and any recommendations for improvements to working practices. It is a key part of the business strategy that these partner arrangements work for all parties to make them successful.
As Investment Adviser to the REIT, the Company:
The Board also considers that employees are fundamental to the Group’s success and is committed to the involvement and development of staff at all levels. The Group continues to keep its employees informed on matters affecting them as employees and on the various factors affecting the performance of the Group. This is achieved effectively through regular informal meetings. In addition, all employees undergo an annual appraisal to assess and agree performance/personal development targets and to allow employees the opportunity to raise issues and/or to suggest improvements to working practices. There is an employee share option scheme which is open to all employees at the discretion of the Board.
The Board is ultimately responsible for identifying and managing areas of significant business risk and ensuring that effective risk management systems are in place. There are detailed reviews of risk at full year and half year points in the Board calendar, and risk also forms an agenda item at each Board meeting. The following risk categories are explained in more detail in pages 40-44 of the Annual Report 2019:
In connection with its appointment as Investment Adviser to the REIT, the Company has also procured the appointment of G10 Capital Limited (G10) to provide inter alia risk management and portfolio services to the REIT. G10 is part of the Lawson Conner Group and is a leading provider of regulatory infrastructure and managed compliance services.
The QCA Code recommends that the Board should have an appropriate balance between executive and non-executive directors and at least two independent non-executive directors. As at the date of this statement the Sigma Board composition complies with the QCA Code and each independent director has been assessed and is considered to be independent by the Board. Biographical details of the directors can be found on page 45 of the Annual Report 2019.
The Board considers that continuity and experience add significantly to the strength of the Board and, as such, does not impose an overall length of service of any of the directors. While serving on the Board for more than nine years is relevant to determining the independence of any non-executive director, it is also recognised that continued office can bring considerable stability to the Board and that there are significant benefits from the presence of non-executive directors who have, over time, gained valuable insight into the Group and its markets.
Following a rigorous assessment, the Board is satisfied that David Sigsworth and Jim McMahon, who have been non-executive directors for over nine years, remain independent in character and judgement and continue to present an objective and constructive challenge to the Board. The Board is satisfied that there are no other relationships or circumstances affecting their independence.
The QCA code guides that non-executive directors should not normally participate in performance-related remuneration schemes or have a significant interest in a company share option scheme. It also states that where performance-related remuneration is under consideration, it should be proportionate, shareholders must be consulted and their support obtained.
Following his appointment, the Chairman, Ian Sutcliffe, purchased 1m of shares in Sigma and the Board granted options of a similar amount exercisable at the mid-market closing price on the day before grant. The options vest in 3 years and lapse 10 years following the date of grant, with 25% of the options exercisable if the SGM share price reaches £1, 50% where it reaches £1.20 and 100% where it reaches £1.40.
Based on its own appraisal and the advice of its Nominated Advisor, the Board is satisfied that this option award is proportionate and in line with QCA guidance, and that shareholders are supportive particularly given the broad experience that the Chairman brings to the Board.
|Director||Position||Status||Audit Committee||Remuneration Committee||Nominations Committee|
|Graham Barnet||Chief Executive Officer||Not Independent||-||-||-|
|Mike McGill||Chief Financial Officer||Not Independent||-||-||-|
|David Sigsworth||Senior Independent Director||Independent||Member||Member|
|Duncan Sutherland||Regeneration Director||Not Independent||-||-||-|
|Gwynn Thomson||Property Investment Director||Not Independent||-||-||-|
|Jim McMahon||Non-Executive Director||Independent||Member (Chair)||Member||Member|
All Directors are expected to devote the necessary time commitments required by their position and are expected to attend at least four Board meetings each year. The Board meets formally at least 4 times per annum. However, the Board meets more frequently than this on an ad hoc basis. Formal agendas, papers and reports are sent to the directors in a timely manner, prior to the Board meetings.
The Audit Committee meets at least two times a year but may meet more frequently regarding the Company’s audit.
The Remuneration Committee meets at least once a year.
The Nominations Committee meets periodically to evaluate the balance of skills, experience, independence and knowledge on the Board.
The Company will report annually on the number of Board and committee meetings held during the year and the attendance record of individual Directors. This information is disclosed in the Company’s Annual Report and Accounts. The terms of reference for each of the Company’s committees is available at the bottom of this page.
The Directors have both the breadth and depth of skills and experience to fulfil their roles. Full biographical details of the directors and their skills and experience can be found at https://www.sigmacapital.co.uk/investor-relations/board-of-directors
The Directors who have been appointed to the Company have been chosen because of the range of skills and experience they offer and which are appropriate for the strategy and objectives for the Company. The Nominations Committee assists the Board in determining the composition and make-up of the Board. It is responsible for periodically evaluating the balance of skills, experience, independence and knowledge of the Board.
The Board recognises that its membership currently has limited diversity and this will continue to form a part of any future recruitment consideration
The Company encourages continuing education of its directors, officers and employees where appropriate in order to ensure that they have the necessary skills and knowledge to meet their respective obligations to the Company. In addition, the Company’s brokers and advisers are periodically invited to attend board meetings to discuss/present topics of relevance to the Board (e.g. directors’ duties and responsibilities, Market Abuse Regulations etc).
Malcolm Briselden is the Company Secretary who is responsible for ensuring Board procedures are followed, as well as helping the Chairman maintain high standards of corporate governance. Following the appointment of Ian Sutcliffe as Chairman, David Sigsworth has taken on the role of Senior Independent Director.
The Company’s main strategic advisors can be found at www.sigmacapital.co.uk/investor-relations/ir-contacts-advisors-analysts/.
Sigma reviews Board, Committee and individual director performance on an on-going basis in the context of its contribution to the Company’s financial performance. The Board undertook an internal Board evaluation process in 2019 against specific criteria agreed by the Board. The results of the internal review were considered carefully by the Chairman and the wider Board which will implement changes to improve the effectiveness of the Board moving forward. It was a wide ranging review covering: the Board and committees; the balance of the board and succession planning; culture and board discussions; approach to risk management; strategy and stakeholders. Some areas for improvement were identified including formalising procedures, diversity, succession planning, and specific training requirements. All the issues identified are being addressed on an ongoing basis.
The articles of association provide that:
The Company has not adopted term limits for directors on the Board or other mechanisms of Board renewal but will periodically consider whether term limits or other mechanisms of Board renewal should be adopted and will implement changes when appropriate.
It is the Board’s view that Sigma’s corporate culture is consistent with its objectives, strategy and business model. The Board is also aware that the tone and culture set by the Board will greatly impact all aspects of the Company as a whole and the way that employees behave. A large part of the Company’s activities are centred upon what needs to be an open and respectful dialogue with employees, partners and other stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate objectives.
The Company operates a whistleblowing policy to facilitate the reporting by employees of suspected misconduct, illegal acts, or failure to act within the Company. The aim of this policy is to encourage employees and others who have serious concerns about any aspect of the Group’s work to come forward and voice those concerns. The Company also has a range of further policies including anti-bribery and corruption, and a share dealing code. The policies are all being updated and included in a handbook provided to all employees.
The Board is responsible for approving the Company strategy and policies, for safeguarding the assets of the Company, and is the ultimate decision-making body of the Company in all matters except those that are reserved for specific shareholder approval. Matters that are specifically reserved for the Board’s decision include business acquisitions or disposals, material contractual arrangements, changes to the Company’s capital structure, setting policies for the conduct of business, approval of budgets, remuneration policy of Directors and senior management, taking on debt and the approval of financial statements. Other matters are delegated to the Committees of the Board and Executive Directors, supported by policies for reporting to the Board.
The Chairman is responsible for the leadership of the Board and ensuring its effectiveness in all aspects of its role. The Chairman is also responsible for the Company’s corporate governance framework. He is also responsible for creating and managing appropriate Board dynamics to ensure that all important matters, in particular strategic decisions, receive adequate time, discussion and attention at Board meetings. The Executive Directors are responsible for the day-to-day running of the business and developing corporate strategy, while the Non-Executive Directors are tasked with constructively reviewing and challenging the decisions of Executive Management. The document setting out the roles of the Chairman and the Chief Executive Officer can be found at the bottom of this page.
The role of the Senior Independent Director (‘SID’) is to serve as a sounding board for the Chairman and act as an intermediary for other directors. The SID as also available to shareholders if they have reason for concern that contact through the normal channels of the Executive Directors has failed. The SID is responsible for holding annual meetings with Non-Executives, without the Chairman present, to appraise the Chairman’s performance.
The Board has adopted appropriate delegations of authority which sets out matters which are reserved to the Board.
The Board delegates authority to three committees to assist in meeting its business objectives whilst ensuring a sound system of internal control and risk management.
The Company’s Audit Committee is responsible for ensuring that the financial performance of the Company is properly monitored and reported on and in this capacity interacts as needed with the Company’s External Auditors. The Committee also considers risk management and internal financial controls. The Audit Committee comprises Non-Executive Directors: Jim McMahon (Chairman), David Sigsworth and Ian Sutcliffe The Chief Financial Officer is invited to and attends the audit committee meetings to provide his skills and knowledge in audit committee matters.
The Company’s Remuneration Committee is responsible for making recommendations to the Board on the remuneration of the Directors and senior executives. It comprises Non-Executive Directors: David Sigsworth (Chairman) Jim McMahon and Ian Sutcliffe.
The Nomination Committee assists the Board in determining the composition and make-up of the Board. It is responsible for periodically evaluating the balance of skills, experience, independence and knowledge on the Board. It comprises Non-Executive Directors, Ian Sutcliffe (chairman), David Sigsworth and Jim McMahon.
Terms of reference for each of the Committees can be found at the bottom of this page.
The Board will assess the need to improve the Company’s corporate governance structures and policies annually or, following a significant change to the businesses or the Board’s strategy, will consider any changes required to Group structure or personnel.
The QCA Code states 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.
The Board attaches great importance to providing shareholders, employees and other stakeholders with clear and transparent information on the Company’s activities, strategy and financial position. The Board believes that transparency in its dealings offers a level of reassurance to stakeholders and an understanding that their views will be taken into account. Details of all shareholder communications are provided on the Company’s website. The Board holds meetings with significant shareholders and regards the annual general meeting as a good opportunity to communicate directly with all shareholders. The Company lists contact details on its website and on all announcements released should shareholders wish to communicate with the Board. The Company also provides a detailed s.172 stakeholder engagement disclosure statement in the annual financial statements.
Sigma announces significant developments which are disseminated via various outlets including, the London Stock Exchange’s Regulatory News Service (RNS) and updates of the Company’s website.
The Board announces the results of resolutions through a news announcement distributed through the channels above. Where any resolution has a significant portion of votes cast against it the Company will investigate and engage in direct dialogue with the relevant shareholders, to understand the reasons behind any vote against and to investigate safeguards that can be put in place to obtain shareholder support.
The Company has an area of its website dedicated to shareholder information:
The Company website hosts a range of useful data for shareholders including and not exclusively, historical financial and operational reports, significant corporate governance, contact details for shareholder services and stock information.