Section 172(1) Statement – Companies Act
Table of Contents
This report sets out how the Directors comply with the requirements of Section 172 Companies Act 2006 and how these requirements have impacted the Board’s decision making throughout the year.
The Role of the Board
The Board’s primary role is to promote the long-term success of the Company, by creating and delivering sustainable shareholder value through the provision of high-quality services and jobs that sustain and enhance communities by ensuring they operate effectively and affordably. This relies on a number of factors, including maintaining positive relationships with a wide range of stakeholders.
A formal schedule of reserved matters is set out and reviewed regularly to ensure it remains fit for purpose. This will include decisions on the ongoing strategic direction of the group, approval of the business plan and budget, the acquisition or disposal of assets, entry into major new contracts and changes in key policies.
The Board also monitors the effectiveness of the Group’s internal controls, governance, and risk management processes.
The Board delegates the day-to-day running of the business to the Group Chief Executive, who is supported by members of the Executive Committee. It also delegates certain responsibilities to the Audit Committee and Remuneration Committee. These committees are made up of Non-Executive Directors and provide the Board with independent oversight.
Back in 2020 we updated our approach to reflect changes in the reporting requirements, most notably the 2018 UK Corporate Governance Code and The Companies (Miscellaneous Reporting) Regulations 2018.
We continue to apply the Wates Corporate Governance Principles for Large Private Companies for the year ended 31 March 2022, which allow us to reflect on where we have done well, and where we can learn from best practice to raise our corporate governance standards to a higher level.
The Principles also support directors in meeting the requirements of Section 172 with guidance on the following areas:
- Purpose and leadership;
- Board composition;
- Director responsibilities;
- Opportunity and risk;
- Remuneration; and
Our Corporate Governance Statement, which is set out in the Group’s statutory financial statements, sets out how the Group has applied these principles.
Board Activity during the year
The strategy and strategic priorities of the Group were set out in a Business Plan (FY20-FY22), which was signed off by our shareholders in Jan 2019. In approving the plan, the Directors also consider external factors such as the market and our competitors, as well as economic and political conditions.
We provide quarterly reviews to staff on our progress against the plan, and any changes to our strategic direction where relevant.
During the year, the Directors made the following key decisions:
- Following the commitment at the end of FY21 to grow the business both through strategic acquisition as well as organically, the board agreed the acquisition of two complimentary businesses which both completed in FY22:
- AM Services Group, which not only expands our nationwide facilities management footprint, but also facilitates our entry into a dynamic b2b marketplace focussed on privately-owned buildings and infrastructure. It has also given us access to new market segments including shopping centres, manufacturing sites and the commercial office space.
- Orchard & Shipman Group to enhance our lettings and management capability, and to bring a second For Profit Registered Provider (Orchard & Shipman Homes Ltd) into the group, enabling us to work with a range of institutional investors by offering a dynamic mix of operating models to best match their own funding and structural requirements.
- To enter into a 7-year contract (with potential for 3 x 1 year extensions) with the Defence Infrastructure Organisation to manage 49,000 service family homes across the UK. Working closely with Pinnacle supply chain partners, the DIO and DIO procured Repairs and Maintenance (RAMS) contractors, mobilisation activity commenced in Q2 FY22, with contracts going live on 1/4/22.
- As part of our ESG strategy, we confirmed and published our Carbon Reduction Plan, detailing how the business plans to minimise direct and indirect emissions over the next decade. The report can be found on our group website at: (https://www.pinnaclegroup.co.uk/wp-content/uploads/2022/02/PPN-0621_Carbon-Reduction-Plan-Pinnacle-Group.pdf)
The Board is acutely aware of recessionary forces post COVID-19, and therefore has considered that FY23 should be a year of consolidation with no new major initiatives planned until the future political and economic landscape has more certainty. However, the business will look to continue to develop and pursue growth opportunities consistent with our vision and purpose.
It is the Board’s priority to ensure that Directors have acted in the way that they consider, in good faith, would most likely to promote the success of the company and its members as a whole. This includes the matters set out in paragraphs a-f of Section 172 of the Companies Act 2006, as follows:
a) The likely consequences of any decision in the long term
- Decisions to enter new customer contracts follow a robust Investment Committee (IC) process.
- Decisions to enter any new Key Supplier arrangements are taken to and approved by ExCom.
- Decisions to make any material changes to Employee T&Cs, Pension Scheme arrangements, the Business Plan (and budget), dividends to parent companies, etc. are all reviewed at ExCom.
- Final approvals for making any changes to the corporate structure / material changes to the Business Plan, and entering into major contracts, settling any material disputes or litigation are matters reserved to the Pinnacle Group board, and the shareholders.
b) The interests of the company’s employees
- The Directors recognise that our staff remain the lifeblood of the business and are essential to its long-term success. The Group is certified to Silver standard by Investors in People, and continually strives to improve the way it interacts with its staff.
- We have continued to embrace and embed hybrid working practices. At the same time as significantly reducing our office footprint, we have invested significantly in high quality spaces, with collaborative working (both internal and external) at the heart of the design, whilst providing private spaces for more focussed individual work. Feedback from staff has been extremely positive, and we will continue to roll out this approach when the opportunity arises. Going forward we encourage all our managers to engage with their teams and discuss how work can best be organised to meet the needs of individuals and the required contract deliverables, with flexibility at the heart of those discussions.
- The health & safety of staff remains a top priority, and the Directors review the performance in this area at each meeting.
- During the year, we have launched and developed our ESG Framework, with a number of commitments made in relation to Our People. A new “Managing the Pinnacle Way” Intranet site was designed and published, we continued to roll out “Your Voice” engagement surveys, and developed our strategies in terms of Recruitment, Development and Recognition.
- See our Corporate Governance Statement for further details.
c) The need to foster business relationships with suppliers, customers and others
- The Board regularly reviews how the Group maintains positive relationships with all key stakeholders.
- During the year, we maintained our ISO44001 accreditation, and continue to embed collaborative working arrangements with stakeholders into our contract mobilisation and contract management processes.
- Please also refer to our ESG framework and 2021 Year in Review report (https://www.pinnaclegroup.co.uk/esg/).
- A number of customer engagement surveys were carried out during the course of the year across our portfolio of Housing contracts – the results of these surveys are reported back through the Shareholder Control Group forum. Furthermore, we are a corporate member of the Institute of Customer Service and continue to work with the institute and other members to enhance the customer experience.
- We have rigorous processes in place to ensure that our suppliers are paid promptly, in accordance with contract terms. Quarterly reviews with key suppliers provide the mechanism for jointly seeking opportunities to develop our contractual arrangements for the benefit of both parties.
d) The impact of our operations on the community and the environment
- The Directors are committed to providing a secure, safe and healthy environment for all our stakeholders.
- During the year, we have maintained our ISO14001 accreditation, are ESOS compliant, and made good progress towards our challenging strategic target to achieve Net Zero on direct emissions by 2025 (Scope 1 and 2) and full emissions by 2035 (Scope 3), embarking on a number of exciting initiatives including Project Switch and Project Electrify. Our environmental targets are reviewed on an annual basis.
- Please also see sections on streamlined energy and carbon reporting.
- We have continued to take an active role in the communities we serve. Our staff are fully empowered to work with local stakeholders and provide added value so we can have the biggest impact possible in the areas we work. From giving thousands of hours of our time volunteering to help local causes, to launching and running community employability programmes through to raising awareness and funds for charitable causes.
- The Group continued with its strategy for engaging with local supply chain partners on major contracts.
- Please also see more detail on our Community Impact and Protecting our Planet as set out in our ESG Framework and 2021 Year in Review report (https://www.pinnaclegroup.co.uk/esg/).
e) Desirability of the company to maintain a reputation for high standards of business conduct.
- The reputation of the Group is of upmost importance to our Directors, and this is not just limited to financial and operational performance. To that end, the Board has approved the Group’s policies on Modern Slavery, and Anti-Bribery and Corruption.
- We monitor compliments and complaints from our customers, our key suppliers are signed up to a Code of Conduct, and all staff must adhere to our Core HR Policies and our staff handbook, which incorporates a section on “Living the Values”.
- The Board has also considered the findings of our Gender Pay Gap report, including areas to focus going forward.
f) The need to act fairly between members of the company.
- The shareholders and Board are committed to setting targets for and developing all the main areas of the group. This is reinforced through their approval of the annual budget.
- Decisions from the Board are filtered down through ExCom, whose membership includes all the statutory directors for the two largest operating businesses, Pinnacle Housing Ltd and Pinnacle FM Ltd.
- Group companies where Pinnacle Group does not have 100% ownership (e.g. Pinnacle Power Ltd), operate their own statutory boards whose makeup reflects the relevant shareholdings in those businesses, and decision making reflects the shareholder agreements in place.