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Corporate Governance Report


Until this year, Cohort has modelled its corporate governance, as far as practicable, on the 2013 Quoted Companies Alliance (QCA) Corporate Governance Code for Small and Mid-Size Quoted Companies, although we were not formally required under AIM Rules to do so.

On 8 March 2018, the London Stock Exchange issued revised rules for AIM–listed companies, within which was a requirement (Rule 26) for AIM companies to apply a recognised corporate governance code from 28 September 2018.

Cohort plc has chosen to apply the recently published (April 2018) QCA Corporate Governance Code (the Code) with immediate effect and this Corporate governance report for the year ended 30 April 2018 is based upon the Code.

The principal means of communicating our application of the Code are this Annual Report (pages 30-34) and our QCA Compliance Table.


As the Chairman of Cohort plc, I welcome the new QCA Corporate Governance Code as a useful guide to assist me and the Board of Cohort plc in articulating how we, at Cohort plc, approach and apply good corporate governance.

As Chairman, I am responsible for leading the Board so as to ensure that Cohort has in place the strategy, people, structure and culture to deliver value to shareholders and other stakeholders of the Group, as a whole, over the medium to long term.

In the remainder of this report, I have set out the Group’s application of the Code, including, where appropriate, cross reference to other sections of the Annual Report.

Where our practices depart from the expectations of the Code, I have clearly highlighted these and given an explanation as to why, at this time, it is appropriate for the Group to depart from the Code. The Code sets out ten principles in three broad categories, as follows:

Deliver growth

  1. Establish a strategy and business model which promote long-term value for our shareholders.
  2. Seek to understand and meet our shareholders’ needs and expectations.
  3. Take into account wider stakeholder and social responsibilities and their implications for our long-term success.
  4. Embed effective risk management, considering both opportunities and threats, throughout the Group.

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 Cohort plc is governed and is performing by maintaining a dialogue with our shareholders and other relevant stakeholders.

Deliver growth

Establish a strategy and business model which promote long-term value for our shareholders The Group’s business model is set out on page 8 with our strategy alongside on page 9. We believe this does promote long-term value for our shareholders as demonstrated by our five years’ financial performance and our key performance indicators on pages 10 to 11 which are shown for the last three years.

Our progressive dividend policy and share performance over the last five years are also indicators of long-term value for our shareholders with total shareholder return shown below:

We also believe that remaining on AIM is of long-term value to our shareholders as it offers a combination of access to capital markets, flexibility to make acquisitions, incentives and rewards to management through share schemes, and a regulatory environment appropriate to the size of the Company.

Seek to understand and meet our shareholders’ needs and expectations
Cohort places a great deal of importance on communication with all shareholders. The Company uses the Annual Report and Accounts, the AGM, the Interim Report, the website (, social media, webcasts and email news alerts to provide information to shareholders. The Company also meets with its institutional shareholders and analysts and receives feedback from its institutional shareholders, via its Nomad, Investec, on a regular basis.

The primary points of contact with the shareholders are myself, the Chief Executive and the Finance Director. Sir Robert Walmsley, the Senior Independent Director, is available to all shareholders should they have any concerns which the normal channels of Chairman, Chief Executive and Finance Director have failed to resolve, or for which contact through the normal channels would be inappropriate.

The Company receives every year, just prior to its AGM, voting guidance reports from organisations such as the Association of British Pension Funds. These highlight any areas of concern and invite the Company to comment prior to publication.

In the recent past, these concerns have been in respect of:

Not all of these involve non-compliance with the Code, but we have in this year’s Annual Report and Accounts addressed them all and either introduced changes or explained why we do not think it is in our shareholders’ interests to do so at this time.

Take into account wider stakeholder and social responsibilities and their implications for our long-term success Stakeholders other than shareholders include our employees, customers, partners, suppliers and neighbours. These are all key to our long-term success.

Our employees (see pages 26 to 27) are the key to our success. We are not a capital intensive business but depend upon the skills, capabilities and flexibility of our employees, and our business model depends upon us being agile and responsive.

The Group has formal arrangements in place to facilitate whistle-blowing by employees through a contract with a third-party service provider. If any call is made to this third party, either the Chief Executive or the Senior Independent Director is notified promptly of the fact and the content of the call, so that appropriate action can be taken.

Our customers and suppliers are in many instances long-term partners and an important part of our culture is to establish and maintain relationships of trust.

Embed effective risk management, considering both opportunities and threats, throughout the Group The Board and Group approach to risk is set out in the Audit Committee report on pages 35 to 36 and in the Risk management on pages 37 to 41.

The Board has overall responsibility for the system of internal control and for reviewing its effectiveness in managing the risks we face. Such systems are designed to manage rather than eliminate risks and can provide only reasonable and not absolute assurance against material misstatement or loss. Each year, on behalf of the Board, the Audit Committee reviews the effectiveness of these systems. This is achieved primarily by considering the risks potentially affecting the Group and from discussions with the external auditor.

The Audit Committee, on behalf of the Board, reviews the risk environment faced by the Group on a regular basis and how the Group manages and mitigates these risks.

The key risks of the Group are presented on pages 37 to 41.

The Board is not aware of any significant failings or weaknesses in the system of internal control.

Embed effective risk management, considering both opportunities and threats, throughout the Group continued On the recommendation of the Audit Committee, the Board has determined that an internal audit function is not required due to the small size of the Cohort administrative function and the high level of Director review and authorisation of transactions. The Board will keep this matter under review as the Group develops.

A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. In addition, the Group conducts quarterly re-forecasts. The Group’s results, as compared against budget and the latest quarterly forecast, are reported to the Board on a monthly basis and discussed in detail at each meeting of the Board.

The subsidiary balance sheets are reviewed in detail on a quarterly basis by the Cohort Finance Director.

Maintain a dynamic management framework

The Board of Cohort plc is highly experienced in the defence market. Through the operation of the Board and the Group Executive, which comprises the subsidiary Managing Directors and the Cohort plc Executive Directors, the Board is able to monitor the business and respond in a timely manner to issues and opportunities as and when they arise.

Maintain the Board as a well-functioning, balanced team led by the Chair
The Board
As at 30 April 2018, the Board of Directors comprised the Chairman, Nick Prest CBE; two Executive Directors, Andrew Thomis and Simon Walther; and three Non-executive Directors, Stanley Carter, Jeff Perrin and Sir Robert Walmsley.

The Board considers that Sir Robert Walmsley and Jeff Perrin are independent. In Sir Robert’s case the Board has specifically considered his length of service on the Board and determined that in terms of interest, perspective and judgement he remains independent. The Board is therefore compliant with the Code in having two independent Non-executive Directors. Sir Robert Walmsley has been designated as the Senior Independent Director.

All Directors retire by rotation and are subject to election by shareholders at least once every three years. Any Non-executive Directors who are considered by the Board to be independent but who have served on the Board for at least nine years or in conjunction with an Executive Director for nine years or more, will be subject to annual re-election. In 2018 this applies to Sir Robert Walmsley.

The Board, as part of its continuing review of its composition and performance, is planning to add another independent Non-executive Director in the coming year.

Board Committees
The Board has established two Committees: Audit and Remuneration & Appointments, each having written terms of reference.

The reports of the two committees are reported separately on pages 35 to 36 for the Audit Committee and pages 44 to 47 for the Remuneration & Appointments Committee.

Up until the year ended 30 April 2018, the Audit Committee comprised all three Non-executive Directors, one of whom is not independent.

As from 27 June 2018, the Audit Committee will comprise only the two independent Non-executive Directors, Jeff Perrin (Chair) and Sir Robert Walmsley, in accordance with the Code. The Audit Committee’s role is set out on page 35 of the Audit Committee report.

The Remuneration & Appointments Committee comprises Sir Robert Walmsley (Chair), Jeff Perrin, Stanley Carter and me. The role of the Remuneration & Appointments Committee is to:

The composition of the Remuneration & Appointments Committee is not in accordance with the Code, which requires that only independent Non-executive Directors should sit on it. Cohort is not a large company and we want to make the best use of the skills we have. Both Stanley Carter and I have considerable experience in dealing with remuneration matters, as well as substantial shareholdings in the Company, and the collective view of the Board is that the present composition of the Committee benefits the Company and its shareholders.

At present, the formal role of Company Secretary is undertaken by Simon Walther, the Finance Director of Cohort plc. In practice the majority of the work is undertaken by the Deputy Company Secretary, who is a full time employee and acts as Secretary to the Board and its Committees and in this capacity deals directly with me and Board and Committee members as required. It may be appropriate at some time in the future to separate the Company Secretary role from the Executive, and we keep this under review.

Attendance at Board and Committee meetings
Board and Committee meetings are scheduled in advance for each calendar year. Additional meetings are arranged as necessary including meetings with subsidiary Managing Directors to review strategic and financial plans. The scheduled Board and Committee meetings and attendance during the year ended 30 April 2018 were as follows:

(10 formal
Audit Committee
(3 meetings)
Remuneration &
Appointments Committee
(2 meetings)
N Prest (Chairman)
S Carter (Non-executive Director)
Sir Robert Walmsley (Non-executive Director)
J Perrin (Non-executive Director)
A Thomis (Chief Executive)
S Walther (Finance Director and Company Secretary)

The Executive Directors and subsidiary Managing Directors all work full time for the Group.

The Non-executive Directors have commitments outside Cohort. These are summarised in the Board biographies. All the Non-executive Directors give the time to fulfil thoroughly their responsibilities to Cohort and as Chairman I monitor this.

Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
The Board undertook a formal evaluation of its performance in 2017. After considering different alternatives the Board made the decision to undertake the evaluation internally, using a process led by me.

The evaluation involved both a numeric and discursive self-assessment by each Board member, in response to a questionnaire, on the role and functioning of the Board and its members and Committees. The results of the review were broadly satisfactory but a number of actions emerged from it, as follows:

  1. A comprehensive review of the legal and regulatory environment applying to Cohort, intended to ensure that our policies and procedures address comprehensively these obligations.
  2. Following on from this, the production of a Company manual codifying all our policies and procedures, known as the Cohort plc Corporate Governance Handbook.
  3. An expanded review of the Group’s business risks and mitigations, led by the Audit Committee Chairman.

A programme to ensure a good level of contact between the Board, and Non-executive Directors in particular, and subsidiaries through visits and meetings with subsidiary Managing Directors.

Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
The Board has a broad range of skills, with particularly deep experience in the defence sector. The balance of skills and experience of the Board is summarised as follows:

Financial General
Other public
(board level)
Public sector
N Prest
A Thomis
S Walther
Sir Robert Walmsley
S Carter
J Perrin

The Board biographies give an indication of the breadth of skills and experience. Each member of the Board takes responsibility for maintaining his skill set, which includes roles and experience with other boards and organisations as well as formal training and seminars.

I am fully aware that a Board comprising six men and no women does not reflect current views of best practice and carries some risks in terms of the breadth of capability and views brought to the table. An issue in the defence industrial sector is that, for a variety of reasons, there are not many women in senior positions and our policy so far has been to appoint Board members who have, alongside their other skills, defence experience. We continue to keep the issue under review.

Promote a corporate culture that is based on ethical values and behaviours
The Group has a strong ethical culture, supported by our ethical policy as published on our website ( We see a company as a social unit with an economic output and the success of our social unit depends on the values of honesty, trust, loyalty and working together, with a healthy balance of competition and cooperation, just as in any other unit of society. We try to run our businesses this way.

The Board, through the Group Executive, undertakes regular reviews and audits in certain specific areas of risk, namely:


The Group has an anti-bribery policy and each of its businesses has implemented that policy and adequate procedures described by the Bribery Act 2010 (the Act) to prevent bribery. Each business within the Group reports annually to the Board on its compliance with the policy and procedures. The Cohort Chief Executive is the Board member responsible for the Group’s compliance. As part of its procedures, the Group has implemented training in respect of compliance with the Act for its employees.

The Group’s anti-bribery policy is reviewed at least every two years or more often if necessary. The policy was last reviewed and updated in March 2018, following an external independent review.

Cyber risk

The Group has a Security Policy Framework which covers physical and cyber security of its assets, employees and information, including third-party information, as well as business continuity and disaster recovery procedures. Each business within the Group reports annually to the Board on the applicability of and its compliance with the Group’s Security Policy Framework.

The Group’s Security Policy Framework is frequently reviewed, taking account of best practice and requirements in government and industry, and was last updated in March 2016. The Group has undertaken a full review of its requirements under the General Data Protection Regulation (GDPR), implementing appropriate policies, procedures and training to ensure it was compliant from 25 May 2018. As a result of GDPR, the Group will implement a new Information Security Policy (ISP) to replace its current Security Policy Framework in the coming year.

This new ISP will encompass our responsibilities in respect of GDPR as well as other non-personal information we handle.

The new ISP will include annual (internal) audits of our implementation of this policy.

Other areas reflecting our ethical values and behaviour include:

Modern slavery

The Group has an anti-slavery policy to address the aspects of modern slavery as set out in the Modern Slavery Act 2015 (the MSA). In accordance with the requirements of the MSA, the Group and each UK member of the Group have published a statement on their respective websites setting out the steps the Group and they have taken to ensure that slavery and human trafficking are not taking place in their respective businesses and supply chains. A copy of the statement can be found in the Corporate governance section of the Cohort website ( The Group’s Portuguese subsidiary, EID, has in place an anti-slavery policy which is aligned with the Group’s policy.

The Group’s anti-slavery policy was first adopted in April 2016 and will be reviewed at least every two years or more often as necessary.

Maintain governance structures and processes that are fit for purpose and support good decision making by the Board
The Board discharges its duties through the following management structure:

Group management

The Cohort Board meets at least seven times per calendar year, in addition to business and strategic reviews which are not recorded as formal Board meetings. The Board also holds regular ad hoc discussions to consider particular issues. We aim as a Board to visit each of the subsidiaries at least once a year, and I and individual Non-executive Directors also make visits to keep up to date with business issues at the subsidiaries. This is important in a decentralised group like Cohort. I and the Non-executive Directors meet at least once a year without the Executive Directors present.

Subsidiary management

Build trust

The Board communicates how the Company is governed and how it is performing by maintaining a dialogue with shareholders and other stakeholders through the mechanisms described on page 31.

Board Committees
The reports to shareholders of the Audit and Remuneration & Appointments Committees are on pages 35 to 36 and 44 to 47 respectively.

The Board welcomes considered enquiries from shareholders and other stakeholders at any time.

Nick Prest