CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT

Overview

As Chairman of the Board of Directors of Pelatro plc (Pelatro, We, or the Company/Group as the context requires), it is my responsibility to ensure that Pelatro has both sound corporate governance and an effective Board. As Chairman of Pelatro, my responsibilities include leading the Board effectively, overseeing the Company’s corporate governance model, and ensuring that good information flows freely between Executives and Non-Executives in a timely manner.

Pelatro has decided to adopt the Quoted Companies Alliance Corporate Governance (QCA Code) in line with the London Stock Exchange’s recent changes to the AIM Rules, requiring all AIM-listed companies to adopt and comply or explain non-compliance with a recognised corporate governance code. This report follows the structure of these guidelines and explains how we have applied the guidance. We will provide annual updates on our compliance with the QCA Code. The Board considers that the Group complies with the QCA Code so far as it is practicable having regard to current stage of change in the Company, and will disclose any areas of non-compliance in the text below.

Pelatro understands that application of the QCA Code supports the Company’s medium to long-term success whilst simultaneously managing risks and providing an underlying framework of commitment and transparent communications with stakeholders.

QCA Principles

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

The Pelatro Group was founded in March 2013 by Subash Menon and Sudeesh Yezhuvath with the objective of offering specialised, enterprise class software solutions for precision marketing campaigns principally to telcos who face a series of challenges including market maturity, saturation and customer churn. Pelatro provides its precision marketing software “mViva” for use by customers in B2C applications, and is well positioned in the Multi-Channel Marketing Hub space (MCMH) – this is technology that orchestrates a customer’s communications and offers to customer segments across multiple channels to include websites, social media, mobile, direct mail, email and others. Pelatro is expanding by a mix of organic and acquisition led growth.

The Board has concluded that the highest medium and long-term value can be delivered to its shareholders through continuation of its current business model of providing data analytics software to telco customers, positioning ourselves as a credible player in the Multichannel Marketing Hub space. The business will grow both organically and where appropriate by selective acquisitions.

The Company intends to deliver shareholder returns through capital appreciation and, in the future, distribution via dividends. Challenges to delivering strategy and long-term goals include rapid technological developments from competitors, and staff retention, which are outlined in the Risk Management section below, as well as steps the Board takes to protect the Company, mitigate these risks and secure a long-term future for the Company.

2. Seek to understand and meet shareholder needs and expectations

Pelatro places a great deal of importance on communication with its stakeholders and is committed to establishing constructive relationships with investors and potential investors in order to assist it in developing an understanding of the views of its shareholders. The Company seeks to provide effective communication through Interim and Annual Reports, along with Regulatory News Service announcements release to the London Stock Exchange and uploaded to the Company website.

Pelatro also maintains a dialogue with shareholders through formal meetings such as the AGM, which provides an opportunity to meet, listen and present to shareholders. The Company is open to receiving feedback from key stakeholders, and will take action where appropriate. I as Chairman am the key contact for shareholder liaison.

IFC Advisory assists the Company with shareholder communications, providing insight as and when required.

Information on the Investor Relations section of the Group’s website (www.pelatro.com) is kept updated and provides access to Company information, public announcements, published financial reports and contact details. All notices to shareholders and circulars are posted to the website and are kept there for at least five years to ensure communication with shareholders is available.

3. Consider wider stakeholder and social responsibilities and their implications for long-term success

The Board recognises that the long-term success of the Company is reliant upon the efforts of marketing and technical staff and other stakeholders. The Board has put in place a range of processes and systems to ensure that there is close oversight and contact with its key resources and relationships. The Company prepares a detailed annual budget and plan which takes into account a wide range of key resources.

All employees within the Group are valued members of the team, and the Company seeks to implement provisions to retain and incentivise its employees. The Group offers equal opportunities regardless of race, gender, gender identity or reassignment, age, disability, religion or sexual orientation.

The Company has close ongoing relationships with a broad range of its stakeholders and provides them with the opportunity to raise issues and provide feedback to the Company. The Company actively seeks feedback from customers.

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

The Board recognises its responsibility for the proper management of the Company and is committed to maintaining a high standard of corporate governance. The Directors recognise the importance of sound corporate governance commensurate with the size and nature of Pelatro and the interests of its shareholders.

The Board further recognises the need for an effective and well-defined risk management process and it oversees and regularly reviews the current risk management and internal control mechanisms.

The Board is responsible for determining the nature and extent of major risks facing the Group and for establishing and maintaining a risk management framework and system of internal financial controls. The Audit Committee is responsible for ensuring that the financial performance of the Group is properly reported with particular regard to legal requirements, accounting standards and the AIM Rules.

The Audit Committee will maintain effective working relationships with the Board of Directors, management, and the external auditors, and will monitor the independence and effectiveness of the auditors and the audit. The Board reviews the mechanisms of internal control and risk management it has implemented on an annual basis, and assesses both for effectiveness. Through this process the Board can determine if the risk exposure has changed during the year.

The risk assessment matrix below sets out and categorises principal risks and uncertainties, and outlines the mitigations that are in place. This matrix is updated as changes arise in the nature of risks or the mitigating actions implemented, and the Board reviews risks on a regular basis. The following principal risks, uncertainties and mitigations have been identified:

Activity Risk Impact Mitigation
Business and Market Risks Winning new business in line with plan Central to our strategic growth plan is winning new mViva contracts. Failure to do so would directly impact our achievement of overall objectives or lengthen the period taken to achieve them. Specifically, failure to win new mViva contracts early enough in a financial year would jeopardise our ability to deliver the implementations and recognise the associated revenues in that financial year. We have strengthened our sales and marketing operations in order to build greater pipeline visibility and grow revenues faster. In addition to existing efforts In South and South-East Asia and Africa, and the US, we are concentrating our new sales investment in Central Asia where we see significant opportunity for new business and rapid growth. We continue to develop the mViva offering to extend market reach.
Business and Market Risks Product and service delivery failures Issues or failures with our software products or services could lead to failed implementations, project delays, cost overruns, data loss, security issues, customer dissatisfaction, early termination, service level breaches and contractual claims, all of which could adversely impact the Group’s revenues, earnings and reputation. Pelatro mitigates inherent product and service risks through robust quality assurance and project governance processes. Product releases are unit tested prior to delivery and subjected to further customer testing prior to first use. Customer testing and acceptance sign-offs are required prior to go-live.
Operational Risks Staff retention The success of Pelatro depends upon high-quality staff with the relevant expertise and experience to broaden and sell the Group’s products and solutions. Failure to attract and retain high calibre individuals into key roles will adversely affect the Group’s performance and profitability. The Group aims to provide a fulfilling and rewarding working environment, with strong culture and ethics. Key staff are identified through talent assessments and retention plans are implemented, particularly the encouragement of equity ownership by all employees. Security and access control systems, internal governance processes and compliance procedures are in place; furthermore, the Group has a policy of organising its research and development so that its projects are not dependent on any one individual.
Security Risks Cyber Security and data protection A significant IP loss, third party IP challenge, data loss, security breach or cyber-attack could significantly threaten Pelatro’s ability to do business, particularly in the short term, and could result in significant financial loss. We implement robust processes across IP and IT systems, which are overseen by the Head of Engineering.

An internal audit function is not yet considered necessary as day to day control is sufficiently exercised by the Executive Directors. However, the Board will keep the need for this function under review, having regard to the Company’s strategy and resources.

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

The Board comprises of 2 Independent Non-Executive Directors, Richard Day and Pieter Verkade, and 3 Executive Directors, Subash Menon, Sudeesh Yezhuvath and Nic Hellyer. Both of the Non-Executive Directors are considered independent of management and free of any relationship that could materially interfere with the exercise of their independent judgement. The Chairman was considered independent upon his appointment.

Meetings are open and constructive, with every Director participating fully. The Board aims to meet 6-8 times in the year. In order to be efficient, the Directors meet formally and informally both in person and by telephone. Board document authors are made aware of proposed deadlines and Board papers are collated, compiled into a Board Pack, and circulated with sufficient time before meetings, allowing time for full consideration and necessary clarifications before the meetings.

The Company has an Audit Committee, a Remuneration Committee and a Nomination Committee. Terms of reference for each of the Company’s Committees are published on the Group’s website, www.pelatro.com. The Committees have the necessary skills and knowledge to discharge their duties effectively. As with Board papers, Committee papers are drafted and circulated to members of the Committee with sufficient time before the meeting.

The Board is responsible for setting strategy, performance and for the stewardship of the Group within the framework of effective controls which enable risk to be assessed and managed. Importance is placed on maintaining a robust control environment. The Directors of the Company are committed to sound governance of the business and each devotes sufficient time to ensure this happens.

For the year ending 31 December 2017, there were 5 scheduled board meetings. There were also two ad-hoc Board meetings convened in relation to the placing and admission to AIM announced in December 2017. A schedule of attendance is detailed below:

Director Board meetings attended in 2017
Richard Day 5/5
Nic Hellyer 5/5
Subash Menon 4/5
Pieter Verkade 4/5
Sudeesh Yezhuvath 3/5

During 2017, the Audit, Remuneration and Nominations Committees did not meet (as the Company was only admitted to trading from 19 December 2017).

The Board comprises a balanced mix of Independent and Non-Independent Directors with a combination of relevant skills and experience, designed to ensure there is effective leadership of the Group. All Directors are encouraged to use their independent judgement and to challenge all matters, whether strategic or operational, enabling the Board to discharge its duties and responsibilities effectively.

Directors’ conflict of interest

The Company has effective procedures in place to monitor and deal with conflicts of interest. The Board is aware of the other commitments and interests of its Directors, and changes to these commitments and interests are reported to and, where appropriate, agreed with the rest of the Board.

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

The Board comprises a balanced mix of Executive and Non-Executive Directors with a combination of relevant skills and experience, designed to ensure there is effective leadership of the Group. The Non-Executive Directors both have a depth of skills and technical experience, enabling them to provide the necessary guidance, oversight and advice to operate the Board effectively. Two of the Executive Directors have a combined broad sector experience, and the Finance Director is a Chartered Accountant. The Board assesses the experience, knowledge and expertise of potential Directors before any appointment is made and adheres to the principle of establishing a Board comprising Directors with a blend of skills, experience and attributes appropriate to the Group and its business. The Non-Executive Directors maintain ongoing communications with Executives between formal Board meetings.

Biographical details of the Directors can be found on the Company’s website.

The Directors are able to take independent legal advice at the Company’s expense if so required and in addition to their general Board responsibilities, Non-Executive Directors are encouraged to be involved in specific workshops or meetings, in line with their individual areas of expertise.

The Board shall review annually the appropriateness and opportunity for continuing professional development, whether formal or informal. In line with future Board evaluations, Board reviews will include the identification of any training needs for the Directors.

The Board will seek to take into account any Board imbalances for future nominations, with areas taken into account being Executive appointments and gender balance.

7.Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement

The Board is committed to undertaking reviews of Board and Committee performance and of individual Board members every year. The Board believes that, in addition to dealing with any matters as they arise, it is appropriate to carry out a formal evaluation of the performance of the Board each year. This is intended to ensure that the Board remains effective, well-informed and able to make high quality and timely decisions for the benefit of all stakeholders in the Company. Having floated on the AIM public market in December 2017, the Board is still considering the best method in carrying out the Board evaluation.

The Board believes that there is a good mix of skills on the current Board from a corporate governance point of view, albeit this does not provide any natural succession for Non-Executive Directors.

As is common with many small companies, the Company does not have internal candidates to succeed existing Directors, but this will be kept under review.

Being a small company, members of the Board are able regularly to interface with employees across the Group and key advisers. They also review progress with all customers at each Board meeting.

The Board are actively involved in and discuss the strategic direction of the Company at Board meetings and at other times.

It was recognised that there continues to be more regulation of which Directors need to be aware. The Board will continue to ensure that Directors receive appropriate support to keep them up-to-date.

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

The Board recognises that its decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and that this will impact the performance of the Company. The Board is 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. The corporate governance arrangements that the Board has adopted are designed to ensure that the Company delivers long term value to its shareholders, and that shareholders have the opportunity to express their views and expectations for the Company in a manner that encourages open dialogue with the Board.

A large part of the Company’s activities are centred upon an open and respectful dialogue with staff, customers, investors 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 Directors consider that at present the Company has an open culture facilitating comprehensive dialogue and feedback and enabling positive and constructive challenge.

The Company has adopted a code for Directors’ and employees’ dealings in securities which is appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of the Market Abuse Regulations which came into effect in 2016. The Directors seek to align their interests with shareholders.

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

The Board is committed to, and ultimately responsible for, high standards of corporate governance, and has chosen to adopt the QCA Code. We review our corporate governance arrangements regularly and expect to evolve these over time, in line with the Company’s growth. The Board delegates responsibilities to Committees and individuals as it sees fit.

The Chairman is responsible for the leadership of the Board, ensuring its effective operation, setting the agenda and ensuring that the Company and its Board are acting in the best interests of shareholders. His leadership of the Board is undertaken in a manner which ensures that the Board retains integrity and effectiveness, and includes creating the right Board dynamic and ensuring that all important matters, in particular strategic decisions, receive adequate time and attention at Board meetings. The Chairman is the key contact for shareholder liaison and any other key stakeholders.

The Board has formally adopted appropriate delegations of authority setting out matters reserved to the Board, with matters including the following:

  • the Group’s strategy and vision;
  • performance and for the stewardship of the Group;
  • maintaining a framework of effective controls;
  • interim and full year financial statements and reports;
  • corporate governance; and
  • appointment of new Directors

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 Committees meet independently of Board meetings.

Audit Committee

The Audit Committee has two members, Richard Day (Chair) and Pieter Verkade. The Committee is responsible for reviewing and reporting to the Board on financial reporting, internal control and risk management, and for reviewing the performance, independence and effectiveness of the external auditors in carrying out the statutory audit. The Committee advises the Board on the statement by the Directors that the Annual Report when read as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy.

The Committee’s main responsibilities can be summarised as follows:

  • to review the Company’s internal financial controls and risk management systems;
  • to monitor the integrity of the financial statements and any formal announcements relating to the Group’s financial performance, reviewing significant judgements contained in them;
  • to make recommendations to the Board in relation to the appointment of the external auditors and to recommend to the Board the approval of the remuneration and terms of engagement of the external auditors;
  • to review and monitor the external auditors’ independence and objectivity, taking into consideration relevant UK professional and regulatory requirements;
  • to develop and implement policy on the engagement of the external auditors to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external auditors; and
  • to report to the Board, identifying any matters in respect of which it considers that action or improvement is needed, and to make recommendations as to steps to be taken.

The Audit Committee meets not less than twice a year.

Remuneration Committee

The Remuneration Committee has two members, Richard Day (Chair) and Pieter Verkade. The Remuneration Committee is responsible for determining the remuneration policy for the Executive Directors and other members of senior management, and for overseeing the Company’s long-term incentive plans. The Board as a whole is responsible for determining Non-Executive Directors’ remuneration.

The Remuneration Committee meets not less than twice a year.

Nomination Committee

The Nomination Committee Board has two members, Pieter Verkade (Chair) and Richard Day. The Nomination Committee is responsible for reviewing the structure, size and composition of the Board and identifying and nominating, for the approval of the Board, candidates to fill vacancies on the Board as and when they arise.

The Chair and the Board continue to monitor and evolve the Company’s corporate governance structures and processes, and maintain that these will evolve over time, in line with the Company’s growth and development.

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

The Board is committed to maintaining effective communication and having constructive dialogue with its shareholders and other relevant stakeholders. The Company intends to have ongoing relationships with both its private and institutional shareholders (through meetings and presentations), and for them to have the opportunity to discuss issues and provide feedback at meetings with the Company. The Company regularly monitors it shareholder bulletin boards for feedback.

In addition, all shareholders are encouraged to attend the Company’s Annual General Meeting. The Company’s 2017 AGM resolutions were passed by large majorities. Going forward, the result of all AGM and General Meetings will be posted on the Company website.

The latest Corporate Documents (including Annual Report and Admission Document) can be found on the Company’s website which is kept updated and provides access to Company information, public announcements, published financial reports and contact details.

 

Articles of Association Pelatro Plc