Corporate Governance

Chairman’s Statement
Period from 1st November 2017 to 20th September 2018

All members of the Board believe strongly in the value and importance of good corporate governance and in our accountability to all of Velocity’s stakeholders, including investors, staff, customers and suppliers. In the statement below, we explain our approach to governance, and how the Board and its committees operate.

Changes to AIM rules on 30 March 2018 require AIM companies to apply a recognised corporate governance code by 28 September 2018. The Board has continued its previously made decision at IPO to adhere to the Quoted Companies Alliance (QCA) Corporate Governance Code for small and mid-size quoted companies (revised April 2018).

The corporate governance framework which the Group operates, including Board leadership and effectiveness, Board remuneration, and internal control is based upon practices which the Board believes are proportional to the size, risks, complexity and operations of the business and is reflective of the Group’s values.

Mark Mills, Executive Chairman, 21 September 2018


Corporate Governance and the QCA Code

The QCA Code is constructed around ten broad principles and a set of disclosures. The QCA has stated what it considers to be appropriate arrangements for growing companies and asks companies to provide an explanation about how they are meeting the principles through the prescribed disclosures. We have considered how we apply each principle to the extent that the board judges these to be appropriate in the circumstances, and below we provide an explanation of the approach taken in relation to each. The board considers that it does not depart from any of the principles of the QCA Code.

The ten Principles are grouped under three broad headings:

Deliver Growth
  1. Establish a strategy and business model which promote long-term value for shareholders.
  2. Seek to understand and meet shareholder needs and expectations.
  3. Take into account wider stakeholder and social responsibilities and their implications for long-term success.
  4. Embed effective risk management, considering both opportunities and threats, throughout the organisation.
Maintain A Dynamic Management Framework
  1. Maintain the Board as a well-functioning, balanced team led by the Chair.
  2. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities.
  3. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement.
  4. Promote a corporate culture that is based on ethical values and behaviours.
  5. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board.
Build Trust
  1. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

Corporate Governance Statement

The Code requires the Chair to provide a clear explanation of how the Company applies the Code in a corporate governance statement. It is recommended that the corporate governance statement is included both within the Company’s annual report and on its website. It is intended that the statement:

  • Clearly articulates the Chair’s role and demonstrates their responsibility for corporate governance;
  • Explains, at a high level, how the QCA Code is applied by the Company and how its application supports the Company’s medium to long-term success;
  • Explains, in a clear and well-reasoned way, any areas in which the Company’s governance structures and practices differ from the expectations set by the QCA Code; and
  • Identifies any key governance related matters that have occurred during the year, including any significant changes in governance arrangements.
  • The following paragraphs set out Velocity’s compliance with the ten principles of the QCA Code.

Principle 1 - Establish a strategy and business model which promote long-term value for shareholders

The purpose of the Group is “To be the supplier of choice to all high value composite manufacturers globally for value engineered raw materials” (Vision) and “To revolutionise aerospace and high value composite manufacturing by enabling our customers to eliminate waste whilst meeting increased global demand by creating a lean and scalable supply chain in a more for less era.” (Mission).

The key challenges we face include:

  • Maintaining consistently high levels of quality – very high standards are expected by the aircraft part manufacturers. We have implemented testing wherever possible, and our system-driven workflow management ensures that quality control is paramount in our processes.
  • Ensuring security of data – the safekeeping of data is of paramount importance. Our manufacturing facilities in Burnley and Fareham are audited for annual compliance with the requirements of Airbus, NADCAP and our customers.
  • Delivering continuous availability – a failure in the Group’s systems could lead to an inability to deliver kits. This is addressed by operating redundant systems and having a disaster recovery programme assigning staff from both UK facilities on different customer projects.
  • Recruiting and retaining suitable staff – the Group’s ability to execute its strategy is dependent on the skills and abilities of its staff. We undertake ongoing initiatives to foster good staff engagement and ensure that remuneration packages are competitive in the market.

We believe we have the right strategy and service in place to deliver strong growth in sales over the medium to long term. We expect the gross profit to improve in future periods as our nesting and kitting software are used to greater effect with the overall use of less composite material, which will result in improving EBITDA margins or provide us with scope for additional investment in new facilities, products and services. This will enable us to deliver sustainable shareholder value.


Principle 2 - Seek to understand and meet shareholder needs and expectations

Responsibility for investor relations rests with the CEO, supported by the CFO. During the period under review the following activities were pursued to develop a good understanding of the needs and expectations of all constituents of the Group’s shareholder base:

Date Description Participants Comments
Apr 17 / May 17 Presentations to potential investors regarding IPO MM, JB, AK Successful completion of IPO
Jun 17 Interim results roadshow MM, JB, AK
Jul 17 Media training MM, JB, AK
Aug 17 Media & investor meetings; Investor site visit to Burnley JB, AK
Sep 17 Investor meetings; Analyst site visit to Fareham MM, JB, AK
Oct 17 Investor site visit to Fareham MM, JB, AK
Dec 17 Investor meeting AK
Jan 18 Year end results roadshow MM, JB, AK
Feb 18 AGM MM, JB, AK, PT All shareholders invited to attend
Mar 18 Investor site visit to Burnley JB, AK
Apr 18 Investor meetings JB, AK
Jun 18 Interim results roadshow JB, AK

Key: MM: Mark Mills (Non Executive Chairman until 04 September 2018; Executive Chairman from 05 September 2018); PT: Peter Turner (Non Executive Director, resigned 02 August 2018; JB: Jonathan Bridges (Chief Executive Officer until 04 September 2018); AK: Alan Kershaw (Chief Financial Officer).

The Group is committed to communicating openly with its shareholders to ensure that its strategy and performance are clearly understood. We communicate with shareholders through the Annual Report and Accounts, full-year and half-year announcements, trading updates and the annual general meeting (AGM), and we encourage shareholders’ participation in face-to-face meetings. A range of corporate information is also available to shareholders, investors and the public on our website.

Private shareholders: The AGM is the principal forum for dialogue with private shareholders, and we encourage all shareholders to attend and participate. The Notice of Meeting is sent to shareholders at least 21 days before the meeting. All directors whenever possible, attend the AGM and are available to answer questions raised by shareholders. Shareholders vote on each resolution, by way of a poll. For each resolution we announce the number of votes received for, against and withheld.

Institutional shareholders: The directors actively seek to build a mutual understanding of objectives with institutional shareholders. Our CEO and CFO make presentations to institutional shareholders and analysts immediately following the release of the full-year and half-year results. We communicate with institutional investors frequently through a combination of formal meetings, roadshows and informal briefings with management. The majority of meetings with shareholders and potential investors are arranged by the broking team with the Group’s Nominated Advisor. Following meetings, the broker provides anonymised feedback to the board from all fund managers met, from which sentiments, expectations and intentions may be gleaned. In addition, we review analysts’ notes to achieve a wide understanding of investors’ views. This information is considered by the Board and has contributed to the preparation of the Group’s investor relations strategy which was approved in March 2018.


Principle 3 – Take into account wider stakeholder and social responsibilities and their implications for long-term success
Stakeholder Reason for engagement How we engage
Staff – our ability to fulfil client services and develop and enhance the cloud software platforms on which they depend relies on having talented and motivated staff. Good two-way communication with staff is a key requirement for high levels of engagement, fostering a culture of innovation. Monthly staff briefings, emails and a quarterly staff newsletter.
Invitation to staff to ask questions of management that are answered in the briefings.
Proposed annual engagement survey.
These initiatives have provided insights that have led to enhancement of management practices and staff incentives.
Clients – our success and competitive advantage are dependent upon fulfilling client requirements, particularly in relation to quality of service, its speed of delivery and security. Understanding current and emerging requirements of clients enables us to develop new and enhanced services. Seek feedback on services.
Obtain requests for new services and service enhancements.
These have led to the Group securing approvals with a number of large aircraft parts’ manufacturers.
Suppliers – a key supplier group is the manufacturers of the composite and consumable materials. Manufacturers will provide similar services to other organisations, including our competitors, so we must ensure they are available to us and accommodating. We optimise our systems to simplify the work of manufacturers as much as possible, including in relation to administration of projects.
We operate systems to ensure that supplier invoices are processed and paid promptly.
These have led to a large, growing and supportive manufacturer network.
Shareholders – as a public company we must provide transparent, easy-to-understand and balanced information to ensure support and confidence. Meeting regulatory requirements and understanding shareholder sentiments on the business, its prospects and performance of management. Regulatory news releases.
Keeping the investor relations section of the website up to date.
Participation at investor events.
Annual and half-year reports and presentations.
AGM.
Capital markets events.
We believe we have successfully engaged with our shareholders over the past 12 months.
Industry bodies – the services we provide must meet certain requirements. The views of certain industry groups, including the NADCAP and NWAA are influential in the way the group is perceived by certain clients. Membership of NWAA and approval by NADCAP and participation in security programs.
Annual audit of security.
These have resulted in audit reports that have led to certain clients commencing engagement.
Communities– what we do impacts communities in the places where we operate and elsewhere. It is important to be perceived as a reputable business that makes a positive contribution to local economies and is attractive as an employer and partner. Participation in apprenticeship and other schemes to support and provide opportunities to young people.

Principle 4 – Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Board has prepared a risk register for the Group that identifies key risks in areas including strategy, financial, customers and staff. The register is reviewed periodically and is updated as and when necessary.

Within the scope of the annual audit, specific financial risks are evaluated in detail, including in relation to foreign currency, interest rates, liquidity and credit.

Staff are reminded on a regular but infrequent basis that they should seek approval from the CFO if they, or their families, plan to trade in the Group’s shares.


Principle 5 - 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 Group and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the Chair.

The QCA Code requires that the Board of an AIM company has an appropriate balance between executive and non-executive directors of which at least two should be independent. The Board consists of six directors of which three are executive and three are independent non-executives. During the period, one non-executive retired on 02 August 2018 and another was appointed in his place during the period. On 05 September 2018 the Chief Executive Officer took over a new role of Chief Technical Officer, and the Non Executive Chairman moved to become Executive Chairman on an interim basis. The Chief Financial Officer announced an intention to leave the business once a successor was identified. An additional Non Executive Director was appointed as set out below.

The Board changes in August 2018 resulted in the appointment of Brian Tenner as an independent non-executive director. Brian is a chartered accountant and a highly experienced commercial, operational and financial professional with over 25 years industry experience. Most recently Brian was CFO of the Main Market listed NCC Group Plc. Prior to that he was Group Finance Director at Renold plc from 2010 – 2016, Scapa Group plc from 2007 – 2010 and BNFL plc from 2003 – 2007. Brian started his career at PwC in Audit and Business Advisory Services. Brian holds a LLB (Hons) degree in Law from Edinburgh University, is a Chartered Accountant and completed an Advanced Management Programme at INSEAD in 2006.

Following his appointment, Brian has assumed the role of chair of the Audit Committee and member of the Remuneration Committee. He joins the Chair as the Group’s second independent non-executive director replacing Peter Turner who retired with effect from the same date.

The Board changes in September 2018 resulted in the appointment of Meera Parmar as an independent Non Executive director to the Board. She is a Chartered Accountant (ICAEW) and qualified tax practitioner, and brings over 28 years' audit and finance experience to the Company. She started her career at KPMG and during her 10-year tenure fulfilled various roles in the tax and audit practices, before joining Lathams as a Senior Tax Manager. Between 2003 and 2013, Meera worked at Cowgill Holloway LLP and in 2007 became a Tax Partner and lead advisor in Transaction Tax and Private Client Tax; encompassing M&A tax advisory, raising capital, restructuring, exit strategy planning and business & share valuations amongst other functions. More recently, Meera has built up a business consultancy practice advising owners of SMEs across a wide range of industry sectors on business strategy and turnaround, capital raising, accessing SME tax incentives and wider financial matters. Meera holds a BSc. degree in Economics from London School of Economics and Political Science. Meera will Chair the Remuneration Committee.

The Board is supported by two committees: audit and remuneration as well as nomination. All members of the Board are involved in the appointment of new directors. The Board intends to appoint an additional non-executive director as its business expands.

Non-executive directors are required to attend Board and Board Committee meetings and to be available at other times as required for face-to-face and telephone meetings with the Executive Team and investors.

Meetings held during the period under review and the attendance of directors is summarised below:

Board meetings Audit Committee Remuneration Committee
Possible Attended Possible Attended Possible Attended
Executive Directors
Jonathan Bridges 10 10 0 0 0 0
Alan Kershaw 10 10 0 0 0 0
Non-Executive Directors
Mark Mills 10 10 3 3 0 0
Peter Turner 9 9 3 3 0 0
Brian Tenner 1 1 0 0 0 0
Meera Parmar 1 0 0 0 0 0

The Board has a schedule of regular business, financial and operational matters, and each board committee has compiled a schedule of work to ensure that all areas for which the board has responsibility are addressed and reviewed during the course of the year. The chairman is responsible for ensuring that, to inform decision-making, directors receive accurate, sufficient and timely information. The company secretary compiles the board and committee papers which are circulated to directors prior to meetings. The Company Secretary provides minutes of each meeting and every director is aware of the right to have any concerns minuted and to seek independent advice at the Group’s expense where appropriate.


Principle 6 – Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

All four members of the Board bring relevant experience to their roles, three have previous public markets experience and two are chartered accountants. The Board believes that its blend of relevant experience, skills and personal qualities and capabilities is sufficient to enable it to successfully execute its strategy. Directors attend seminars and other regulatory and trade events to ensure that their knowledge remains current.

Mark Mills, Executive Chairman
Term of office
Appointed as Chairman on 10 February 2016; became Executive Chairman with effect from 05 September 2018 until a new Chief Executive Officer is appointed; and a member of the Audit and Remuneration Committees. For this purposes of this disclosure, whilst Mark fulfils the role of Executive Chairman, references to Chief Executive Officer will be undertaken by the Executive Chairman.
Background and suitability for the role
Mark joined Velocity Composites as a Non-Executive Director in January 2015 and became Chairman in February 2016. From 2013 to 2017, Mark was non-executive Chairman of Mini Cam Enterprises Limited, a Lloyds Development Capital backed company that manufactures drainage and sewerage inspection systems in the UK and exports to over 30 countries worldwide. From 1999 to 2007, Mark was (the founder and) Chief Executive Officer of Cardpoint plc, an AIM quoted deployer of cash machines. Prior to founding Cardpoint, Mark successfully started, developed, acquired and subsequently sold a number of businesses with multiple site operations.
Current external appointments
Advisor to two manufacturing companies which are UK based. One is an exporter of passenger lifts around the world and the other is fabricator of windows and doors supplying the UK trade.
Time commitment
Minimum of four days per month.
Brian Tenner, Independent Non-Executive Director
Term of office
Joined as Non-Executive Director on 2 August 2018; Chair of the Audit Committee and member of the Remuneration Committee.
Background and suitability for the role
Brian joined Velocity in August 2018 as an Independent Non-Executive Director. He is a highly experienced commercial, operational and financial professional with over 25 years industry experience. Brian is currently CFO of Nanoco plc. Prior to this he has been CFO of NCC Group Plc from 2017 - 2018, Group Finance Director at Renold plc from 2010 – 2016, Scapa Group plc from 2007 – 2010 and BNFL plc from 2003 – 2007. Brian started his career at PwC in Audit and Business Advisory Services. Brian holds a LLB (Hons) degree in Law from Edinburgh University, is a Chartered Accountant and completed an Advanced Management Programme at INSEAD in 2006.
Time commitment
One to two days per month.
Meera Parmar, Independent Non-Executive Director
Term of office
Joined as Non-Executive Director on 05 September 2018; Chair of the Remuneration Committee and member of the Audit Committee.
Background and suitability for the role
Meera joined Velocity in September 2018 as an Independent Non-Executive Director. She is a Chartered Accountant (ICAEW) and qualified tax practitioner, with over 28 years’ audit and finance experience. Meera’s career started at KPMG where she fulfilled various roles before joining Lathams as Senior Tax Manager, and then until 2013 at Cowgill Holloway LLP ultimately as Tax Partner. More recently, Meera has built up a business consultancy practice advising owners of SMEs across a wide range of industry sectors on business strategy and turnaround, capital raising, accessing SME tax incentives and wider financial matters. Meera holds a BSc. degree in Economics from London School of Economics.
Time commitment
One to two days per month.
Jonathan Bridges, Chief Technical Officer
Term of office
A co-founder from the Group’s inception in 2007, appointed CEO in June 2016, and became Chief Technical Officer on 05 September 2018.
Background and suitability for the role
Jon co-founded Velocity Composites in October 2007. Jon has over 25 years’ experience within the advanced composites industry and is an experienced composite engineer. Previously, Jon was an Aerospace and Lean Solutions Specialist at Cytec Process Materials where he was responsible for direct sales support of UK and European based clients. From 2003 to 2005 Jon was a manufacturing engineer for Safran Nacelles where he was responsible for the manufacturing function for a growing, highly loaded aerospace unit supplying multiple assembly lines. Jon was appointed Chief Executive Officer in June 2016, and became Chief Technical Officer in September 2018.
Time commitment
Full time.
Alan Kershaw, Chief Financial Officer and Company Secretary
Term of office
Appointed as Chief Financial Officer and Company Secretary on 31 October 2016.
Background and suitability for the role
Alan joined Velocity Composites in March 2016 having previously held senior roles in other AIM quoted companies. Alan was finance director of Ultrasis plc from June 2014 to October 2015 and Finance & Operations director of WH Ireland Group plc from 2010 to 2014. Alan qualified with PricewaterhouseCoopers as a Chartered Accountant in England and Wales (ICAEW).
Current external appointments
Trustee of registered charity West Lancashire Crisis and Information Centre (also known as The Birchwood Centre) and Chair of Audit Committee for the Methodist Church in Great Britain.
Time commitment
Full time.

Principle 7 – Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

A Board and management evaluation process led by the Chairman took place in March 2018. All the current directors and managers began by communicating about the effectiveness of the business and their own contributions which were provided to the Chairman. The Chairman then reviewed this information and used it as the basis for an individual discussion with each director, followed by a collective discussion with the Board about the managers’ input (on a non-attributable basis).

A number of refinements in working practices were identified as a result of this exercise and have since been adopted. We will be considering the use of external facilitators in future board evaluations. As the business expands, the executive directors will be challenged to identify internal candidates who could potentially occupy board positions and set out development plans for these individuals.


Principle 8 – Promote a corporate culture that is based on ethical values and behaviours

Our long-term growth is underpinned by our seven core values, which were defined following a staff consultation process in 2009. They are:

  1. We place our staff first, putting ourselves in their shoes to understand the current and future needs of those who work with us.
  2. We value our customers determining how to anticipate their current and future needs and how to exceed their expectations.
  3. We place importance on our suppliers and and pay invoices promptly, are clear in negotiations and have an ongoing dialogue.
  4. We communicate with our shareholders and explain our strategy clearly and the challenges Velocity faces.
  5. We are team players who recognise that Velocity is a company worth much more than the sum of its parts and we are committed to learning from one another.
  6. We are committed to innovation in what we do and how we do it, and to working smarter rather than harder to reduce costs, increase efficiency and help aircraft parts’ manufacturers to increase build rates.
  7. We respect one another and are courteous, honest and straightforward in all our dealings, we honour diversity, individuality and personal differences, and are committed to conducting our business with the highest personal, professional and ethical standards.

The culture of the Group is characterised by these values which are communicated regularly to staff through internal communications and forums. The core values are communicated to prospective employees in the Group’s recruitment programmes and are considered as part of the selection process.

The Board believes that a culture that is based on the seven core values is a competitive advantage and consistent with fulfilment of the Group’s mission and execution of its strategy.


Principle 9 – Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

The Board provides strategic leadership for the Group and operates within the scope of a robust corporate governance framework. Its purpose is to ensure the delivery of long-term shareholder value, which involves setting the culture, values and practices that operate throughout the business, and defining the strategic goals that the Group implements in its business plans. The Board defines a series of matters reserved for its decision and has approved terms of reference for its Audit and Remuneration committees to which certain responsibilities are delegated. The chair of each committee reports to the Board on the activities of that committee.

The Audit Committee monitors the integrity of financial statements, [oversees risk management and control, monitors the effectiveness of the internal audit function] and reviews external auditor independence.

The Remuneration Committee sets and reviews the compensation of executive directors including the setting of targets and performance frameworks for cash-based and share-based awards.

The Executive, consisting of the executive directors and certain other senior executives, operates as a management committee, chaired by the CEO, which reviews operational matters and performance of the business, and is responsible for significant management decisions while delegating other operational matters to individual managers within the business.

The Chairman has overall responsibility for corporate governance and in promoting high standards throughout the Group. He leads and chairs the Board, ensuring that committees are properly structured and operate with appropriate terms of reference, ensures that performance of individual directors, the Board and its committees are reviewed on a regular basis, leads in the development of strategy and setting objectives, and oversees communication between the Group and its shareholders.

The CEO provides coherent leadership and management of the Group, leads the development of objectives, strategies and performance standards as agreed by the Board, monitors, reviews and manages key risks and strategies with the Board, ensures that the assets of the Group are maintained and safeguarded, leads on investor relations activities to ensure communications and the Group’s standing with shareholders and financial institutions is maintained, and ensures that the Board is aware of the views and opinions of employees on relevant matters.

The Executive Directors are responsible for implementing and delivering the strategy and operational decisions agreed by the Board, making operational and financial decisions required in the day-to-day operation of the Group, providing executive leadership to managers, championing the Group’s core values and promoting talent management.

The Independent Non-Executive Directors contribute independent thinking and judgement through the application of their external experience and knowledge, scrutinise the performance of management, provide constructive challenge to the executive directors and ensure that the Group is operating within the governance and risk framework approved by the Board.

The Company Secretary is responsible for providing clear and timely information flow to the Board and its committees and supports the Board on matters of corporate governance and risk.

The matters reserved for the Board are:

  1. Setting long-term objectives and commercial strategy.
  2. Approving annual operating and capital expenditure budgets.
  3. Changing the share capital or corporate structure of the Group.
  4. Approving half-year and full-year results and reports.
  5. Approving dividend policy and the declaration of dividends.
  6. Approving major investments, disposals, capital projects or contracts.
  7. Approving resolutions to be put to general meetings of shareholders and the associated documents or circulars.
  8. Approving changes to the Board structure.
  9. The Board has approved the adoption of the QCA Code as its governance framework against which this statement has been prepared and will monitor the suitability of this code on an annual basis and revise its governance framework as appropriate as the Group evolves.

Principle 10 - Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

We have made significant efforts to ensure effective engagement with both institutional and private shareholders. In addition to the roadshows held for investors following the release of full year and interim results, we have actively promoted our AGM as a forum to present to and meet with investors.

The Board has ultimate responsibility for reviewing and approving the Annual Report and Accounts and it has considered and endorsed the arrangements for their preparation, under the guidance of the Audit Committee. The Directors confirm that the Annual Report and Accounts, 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.

In addition to the investor relations activities described above, the following audit and remuneration committee reports are provided.

Audit Committee Report

During the year, the Audit Committee has continued to focus on the effectiveness of the controls throughout the group. The Audit Committee consisting of Peter Turner as Chair, and Mark Mills met twice in the period, and the external auditor, CEO and CFO were invited to attend these meetings. Consideration was given to the auditor’s pre- and post-audit reports and these provide opportunities to review the accounting policies, internal control and the financial information contained in both the annual and interim reports. The committee also met with the auditors with no executives present.

Remuneration Committee Report

The remit of the Remuneration Committee is to determine the framework, policy and level of remuneration, and to make recommendations to the Board on the remuneration of executive directors. In addition, the committee oversees the creation and implementation of all-employee share plans. The Remuneration Committee consisted in the period of Mark Mills as chair, and Peter Turner. The committee did not meet.

In setting future remuneration packages the committee will ensure that individual compensation levels, and total board compensation, will be comparable with those of other AIM-listed companies.