Trafalgar New Homes Ltd (formerly Combe Bank Homes) and Trafalgar Retirement+ Ltd (formerly Beaufort Homes) are  trading entities and wholly owned subsidiaries of Trafalgar Property Group Plc .
For information about Combe Bank Homes / Trafalgar New Homes Ltd: www.trafalgarnewhomes.co.uk      For information about Beaufort Homes / Trafalgar Retirement+ Ltd: www.trafalgarretirement.plus

+44 732 700 000

info@trafalgarproperty.group

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Corporate Governance Statement

The Board considers that the Company’s existing strategy and business model demonstrates its commitment to the QCA Code’s principles underlying delivery of growth and promotion of long-term value for shareholders.  The strategy and business model set out in section 1 below reflect the Company’s approach to the principal risks and challenges that the Company can influence, and recognise those market challenges to which the Company may need to react.

The size of the Company and its shareholder profile has meant that certain of the QCA Code principles have not been the subject to formal procedures.  There is no formal procedure for the Company to obtain feedback from shareholders; the Company is nonetheless receptive to shareholder feedback.  There is no formal evaluation of board performance, but the size of the Company and its internal structures affords sufficient transparency for an informal approach to be taken on these matters.

In relation to the QCA Code, the terms of appointment of the chairman reflect the responsibility to ensure that the principles of corporate governance are adhered to.

The role of the chairman, in addition to that of a non-executive director, is set out in the chairman’s terms of appointment:

• chair Board and general meetings
• set the Board’s agenda, primarily focused on strategy, performance, value creation and accountability, and ensure that adequate time is available for discussion of agenda items
• set clear expectations concerning the Company’s culture, values and behaviours and the style and tone of Board discussions
• ensure the Board determines the nature and extent of the significant risks that the Company is willing to embrace in implementing its strategy
• ensure that the Board has effective decision-making processes and applies sufficient challenge to major proposals
• ensure that Board committees are properly structured with appropriate terms of reference
• encourage Board members to engage in Board and committee meetings and draw on their skills, experience, knowledge and, where appropriate, independence
• develop productive working relationships with all executive directors and the Chief Executive
• demonstrate ethical leadership and promote the highest standards of integrity, probity and corporate governance throughout the Company and particularly at Board level
• ensure that the Board receives accurate, timely and clear information
• ensure effective communication with shareholders and other stakeholders and that directors are made aware of the views of those who provide the Company’s capital
• promote a culture of mutual respect, openness and debate by facilitating the effective contribution of non-executive directors in particular and by ensuring constructive relations between executive and non-executive directors
• ensure that new directors participate in a full, formal and tailored induction programme
• regularly review and agree with each director their training and development needs
• ensure that the performance of the Board, its committees and individual directors is evaluated at least once a year and act on the results of the evaluation

In the year ended 31 March 2018 no key governance related matters have occurred, and no significant changes in governance arrangements have occurred:

James Dubois
Chairman

CORPORATE GOVERNANCE

AIM companies are, with effect from 28 September 2018, required to provide details of a recognised corporate governance code that the board of directors has decided to apply, how the AIM company complies with that code and, where it has chosen to depart from that code, an explanation of the reasons for doing so.

The following information was last reviewed on 27 September 2018.

The Directors have decided to apply the QCA Corporate Governance Code published in April 2018 (QCA Code), which provides that:

• the chair should provide a Corporate Governance Statement, being a clear explanation of how the company applies the QCA Code
• certain disclosures may be contained on the company’s website
• certain disclosures may be set out in the company’s annual report and accounts

The disclosures required under the QCA Code are all set out in (or linked from) this part of the Company’s website.  The Company does not currently intend to include QCA Code disclosures in its annual report and accounts, as it believes it more comprehensible to have them in one location as set out below.  This approach will be kept under review.

QCA Corporate Governance Code

Disclosures

The QCA Code is centred around ten principles identified by the QCA that focus on the pursuit of medium to long-term value for shareholders without stifling entrepreneurial spirit.  Each of these principles is set out below.  The accompanying disclosures set out how the Company complies with these principles and, where relevant, an explanation of the reasons for departing from the QCA Code:

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

The Company’s business model and strategy, including key challenges in their execution (and how those challenges will be addressed):

The Company’s business is, through its subsidiaries, to acquire land for development.  Following the acquisition of TR+ in March 2018, the Company has two divisions:

• residential developments – comprising individual properties and small developments of up to 20 homes
• assisted living scheme developments – comprising typically 50-80 units on a long leasehold ownership model with service charges to cover the costs of domiciliary services

Strategy and business model

Residential developments

Trafalgar New Homes Limited (TNH) identifies suitable sites, mostly through referrals from estate agents, land consultants, contacts in the property development industry, and personal contacts of Directors.  Having acquired properties, the Company then outsources the design, planning and construction process, almost exclusively on a fixed price basis.  The purpose of this is to protect the Group from design and construction risks arising from cost overruns and delays.

TNH recognises that the price paid for sites drives the profitability of each development, and focuses on buying sites with a view to (a) achieving a 20% margin on gross development value and (b) enhancing the planning status where possible.

Residential developments are financed through a mixture of TNH’s own resources, secured banking loans and loans from individuals, primarily Christopher Johnson.  Subject to valuation, TNH’s bankers usually provide at least 60% of the value of the land, and 60% of the build costs.

Assisted living scheme developments

Trafalgar Retirement + Limited (TR+) identifies suitable sites, approaches the owners and seeks to enter into options to acquire sites, subject to gaining appropriate planning permissions.  The option agreements are entered into for a nominal consideration.  This approach aims to minimise financial and other risks to the Group if market conditions falter or if planning permission is not received.

Key challenges and how they are addressed

The key challenges facing this division are considered by the Directors to be:

• access to capital and reliance on existing banking facilities
• competitive market place
• cost of materials and labour
• reliance on key personnel
• severe weather conditions
• operational risk
• housing market conditions
• macroeconomic risk
• availability and costs of mortgages
• availability of land
• illiquidity of the property market
• construction and development risks
• planning permission
• law and regulation
  
  

The steps taken to address certain key challenges are described in section 4 below.  A number of the challenges set out above (including for example housing market conditions and availability of land) are outside the control of the Company, and the Company would have to react to such challenges as they arose.

2. Seek to understand and meet shareholder needs and expectations

How the Company seeks to engage with shareholders and how successful this has been; including information on those responsible for shareholder liaison or specification of the point of contact for such matters:

• the Company issues trading update announcements when appropriate
• the Directors are available to answer queries at general meetings

Given its size and available resources:

• the Company does not undertake formal shareholder engagement activities
• the Company does not have a person specifically appointed as a point of contact for shareholder liaison; any shareholder queries would be dealt with by Christopher Johnson, Chief Executive, or James Dubois, Chairman, as appropriate
  
  

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success

How the business model identifies the key resources and relationships on which the business relies:

• the Company’s stakeholders include (internal) staff and (external) estate agents, banks, building contractors, planning consultants and purchasers

How the Company obtains feedback from stakeholders and the actions that have been generated as a result of this feedback:

• the Company does not have formal means of seeking feedback from stakeholders, but recognises the importance of maintaining good relationships with stakeholders, reacting to feedback and improving its offering wherever possible
• the Company seeks to provide good working conditions for its staff
• the Company’s residential properties are designed to enhance their neighbourhood and to provide for a good quality of build
  
  

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

How the board has embedded effective risk management in order to execute and deliver strategy; including what the board does to identify, assess and manage risk and how it gets assurance that the risk management and related control systems in place are effective:

• residential developments are assessed at the outset to ensure that an acceptable profitability level can be achieved; and TNH also focuses on acquiring land where enhancing the planning status is possible
• the financial risks on residential developments are managed by the Company outsourcing the design, planning and construction process, almost exclusively on a fixed price basis, which reduces risks from cost overruns and delays
• finance for each residential development is provided through banking loans (from a range of banks) secured on the individual development site, and from TNH’s own resources including loans from individuals
  
  

5. Maintain the board as a well-functioning, balanced team led by the chair

Each director who is considered to be independent; including an explanation where there are grounds to question the independence of a director, through length of service or otherwise:

• James Dubois was appointed to the Board in May 2012, and holds 1,500,000 shares (0.35% of the issued ordinary shares) in the Company.  This small a percentage is not considered to affect his independence.  He is the beneficiary of the DFM Pension Scheme, which made a loan of £300,000 to TNH in April 2012, but is nevertheless considered independent.
• Norman Lott was appointed to the Board in January 2012, and holds 500,000 (0.12% of the issued ordinary shares) shares in the Company.  This small a percentage is not considered to affect his independence; he is considered independent.
  
  

The time commitment required from directors (including non-executive as well as part-time executive directors):

• each of the executive directors has entered into a full-time commitment
• James Dubois has entered into a letter of appointment that anticipates that he will need to commit at least 15 days per year, as a non-executive director and chairman
• Norman Lott has entered into a letter of appointment that anticipates that he will need to commit at least 10 days per year as a non-executive director
  
  

The number of meetings of the board (and of any committees) during the year, with the attendance record of each director:

• Over the year ended 31 March 2018, there have been 4 quarterly board meetings and 2 meetings of the audit committee, attended as follows:

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

James Dubois:

• James is a chartered accountant with c50 years’ experience of public practice, with consultancy experience in a wide range of property-related companies.  He is also a non-executive director on various boards as well as being chairman of two pension trustees boards.

Christopher Johnson:

• Christopher qualified as a solicitor in 1970, and has more than 30 years’ experience in the residential development business through both private and public companies at board level.  Christopher keeps up to date with market developments through market contacts and research.

Alexander Johnson:

• Alexander was an estate agent for 12 years, gaining a detailed knowledge of the property market, and has 14 years’ experience at board level in property companies; he focuses on engagement with building contractors, and on the marketing and sales of completed residential developments.

Daniel Stocks:

• Daniel is a chartered surveyor; he spent four years as an estate agent where he managed a portfolio of up to £20m of properties before joining a large firm of surveyors where his responsibilities included procuring and awarding large JCT Design and Build contracts for new build and refurbishment developments.

Norman Lott:

• Norman is a chartered accountant and holds non-executive roles in a number of companies, including public companies.

All the Directors are expected to maintain their professional skills as needed and in accordance with the requirements of their professional institutes.

The Board considers that it requires skills and experience from its executive directors covering all practical aspects of property acquisition, development and sales, and knowledge of the property market, and from its non-executive directors covering accounting, corporate and public company governance, City practice and the property development industry sector.

The Board considers that, as a whole, it has the necessary mix of experience, skills, personal qualities and capabilities to deliver the strategy of the Company for the benefit of shareholders over the medium to long-term.  The Board is not currently “gender balanced”, but this is not considered material to the strategy of the Company.  Any appointment to the Board would be made with a view to an applicant’s skills and experience regardless of gender.

Upon appointment to the Board, new directors receive a memorandum on their responsibilities as directors and as directors of a company whose securities are admitted to a trading facility.  They also receive a presentation on the AIM Rules from the Company’s nominated adviser.

During the year ended 31 March 2018, external advice has been sought by the Board from its nominated adviser and lawyers in relation to the acquisition of TR+.  The Board has also sought advice from its nominated adviser on a regular basis in relation to the Company’s compliance with the AIM Rules.  During that period, external advice has not been sought by board committees, although the audit committee holds regular discussions and meetings with the auditors as appropriate.

Advice and support is available to the Board on matters of corporate governance from the company secretary.

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

High-level explanation of the board performance effectiveness process:

• given the size of the Company, no formal procedures have been adopted to evaluate the performance of the Board, its committees or the Directors.  The Directors meet sufficiently frequently for an assessment of their performance and their committees (and any improvements considered appropriate) to be made by the Chairman on an informal and continuing basis and at least annually, evaluating directors’ contributions and added value against their individual skills and specialities
• for the year ended 31 March 2018, no formal board performance evaluation has taken place

Succession planning:

• the Company is aware of the need to review board composition and succession; it has not adopted formal evaluation and appointment processes but intends to in the near future

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

How the board ensures that the Company has the means to determine that ethical values and behaviours are recognised and respected:

• the Board considers that it is aware of the ethical values and behaviours that are appropriate to its activities, and its small number of Directors and staff have a good day to day knowledge of the activities in their office; there are relatively few transactions entered into, and all transactions are signed off by executive directors
• the Board monitors and promotes its corporate culture informally through day to day contact and discussion between staff and directors

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

High level explanation of the application of the QCA Code:

• this is set out in the Chairman’s corporate governance statement – click here

Roles and responsibilities of the chair, chief executive and any other directors who have specific individual responsibilities:

• these are set out on our Directors’ web page – click here; also see the Chairman’s corporate governance statement for role and responsibilities of the Chairman – click here

Roles of committees, including terms of reference:

• the Board has established an audit committee, which is responsible for monitoring the quality of internal controls and ensuring that the financial performance of the Group is properly measured and reported on; it reviews the interim and annual accounts
• the Board has established a remuneration committee, which is responsible for reviewing the performance of executive directors and making recommendations to the Board on matters relating to their remuneration and terms of employment
• for board committee terms – click here

Matters reserved for the board:

 the Board is responsible for formulating, reviewing and approving the Group’s strategy, budgets and corporate actions.

Evolution of the corporate governance framework:

• the Board will keep the Company’s corporate governance framework under periodical review, and recognise that the governance framework will need to evolve as the Company grows.

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

The outcome of all shareholder votes should be disclosed in a clear and transparent manner:

• click here to see the results of shareholder votes

Where a significant proportion of votes are cast against a resolution in general meeting, the Company should include an explanation of what actions it intends to take to understand the reasons behind that vote result, and any action it will take as a result of that vote:

• as approximately 88% (as at 27 September 2018) of the Company’s issued ordinary share capital is held by Directors (and a subsidiary director), it is not anticipated that a significant proportion of votes would be cast against a resolution in general meeting, and the Board does not consider it necessary to establish a specific action plan for such an event

The work of board committees during the year:

• the audit committee has met twice through the year ended 31 March 2018; no committee report has been published
• the remuneration committee has held no meetings through the year ended 31 March 2018, and no committee report has been published.  The remuneration committee will now meet annually.

Include historical annual reports and other governance-related material, including notices of general meetings over the last five years:

• for annual reports – click here
• for board committee terms – click here
• for notices of general meetings – click here