Action Hotels

The Board has established an Audit Committee and Remuneration Committee with formally delegated duties and responsibilities.

As an AIM-listed Company, Action Hotels intends to adopt as far as possible the principles of the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”). The QCA Code identifies ten principles to be followed for companies to deliver growth in long term shareholder value, encompassing and efficient, effective and dynamic management framework accompanied by good communication to promote confidence and trust.

Vision, Strategy & Company Values

We have a clear vision which reflects our well-diversified portfolio; strong relationships with the right partners; a healthy development pipeline of hotels already under construction plus a clear plan for future developments and a clear strategy to create and deliver value for our shareholders.

The creation of Action Hotels was the result of careful planning. Our focus is to provide quality accommodation at exceptional value in central and convenient locations in under-supplied markets. Our partnership with international hotel brands and operators allows us to diversify our portfolio of hotels and develop the most suitable properties in each of our markets.

OUR VISION

Our primary objective for Action Hotels is to be the leading economy and midscale hotel business in the Middle East. We may also identify additional projects outside the Middle East where we see significant upside potential, such as Australia.

OUR STRATEGY

We intend to build on our successful track record and established network to grow the number of hotels we operate, to increase profitability through successful revenue growth and cost management, and to maximize the benefits from the partnership with our global operators as the driver to market our business.

OUR COMPANY VALUES

We understand that in order to build a successful and sustainable business model we must ensure that our business adheres to strong corporate values. As such, we are committed to fostering a working environment based on trusted relationships, respect, teamwork, enthusiasm, commitment and care. These criteria have therefore been adopted as our values.

Principles and Approach of the Board

Action Hotels is committed to achieve and maintain high standards of governance. As such, the Board has chosen to adopt the Quoted Companies Alliance Corporate Governance Code for Small and Mid-Size Quoted Companies 2018 (“the QCA Code”).

Detailed below is how the Board applies the 10 principles of Corporate Governance, which form part of the QCA code.

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

The strategy and business operations of the Group are set out in the Strategic Report on pages 11 to 13 of the Group’s 2017 Annual Report and Accounts.

The Group’s strategy and business model and amendments thereto, are developed by the Chief Executive Officer and his senior management team and approved by the Board. The management team, led by the Chief Executive Officer, is responsible for implementing the strategy and managing the business at an operational level.

The Group’s overall strategic objective is to be a leading owner, developer, and asset manager of branded three and four-star hotels in the Middle East and Australia. The Group has a balanced portfolio of 3 and 4-star hotels in the Middle East and Australia currently in operation and a pipeline of development of two hotels in the Middle East.

In executing the Group’s strategy and operational plans, management will typically confront a range of day-to-day challenges associated with these key risks and uncertainties and will seek to deploy the identified mitigation steps to manage these risks as they manifest themselves.

2. Seek to understand and meet shareholder needs and expectations

The Group seeks to maintain a regular dialogue with both existing and potential new shareholders to communicate the Group’s strategy and progress and to understand the needs and expectations of shareholders.

Beyond the Annual General Meeting, the Chief Executive Officer, Chief Financial Officer and, where appropriate, other members of the senior management team either meet or have interactive conference calls regularly with investors and analysts to provide them with updates on the Group’s business and to obtain feedback regarding the market’s expectations of the Group.

The Group’s investor relations activities encompass dialogue with both institutional and private investors.

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

The Group is aware of its corporate social responsibilities and the need to maintain effective working relationships across a range of stakeholder groups. These include the Group’s employees, partners, suppliers, regulatory authorities and the guests of hotels.

The Group’s operations are managed by leading hotel industry operator management companies with long term hotel management agreements of typically 10-20 years. Their working methodologies take account of the need to balance the needs of all, not only the hotel guest, but all these stakeholder groups while maintaining focus on the Board’s primary responsibility to promote the success of the Group for the benefit of its members as a whole. The Group endeavours to take account of feedback received from stakeholders, making amendments to working arrangements and operational plans where appropriate and where such amendments are is consistent with the Group’s longer-term strategy.

The Group takes due account of any impact that its activities may have on the environment and seeks to minimize this impact wherever possible. The Corporate Social Responsibility report on page 37 of the Group’s 2017 Annual Report and Accounts details areas where Action Hotels contributes to the responsible growth of the hospitality industry and the sustainability of the social and environmental aspects of the markets we operate in. Responsible business practices always play a part in our strategic decisions and we continue to look at new ways to go above legal compliance to create an environment of sustainable growth and contribute to a better society.

Action Hotels is also a firm believer in investing in its employees and their development, offering extensive training and career development opportunities. Many of our hotels take part in various initiatives throughout the year to achieve this, with each hotel making its contribution to the local market and community.

Through the various procedures and systems, the operator management companies operate, the Group ensures full compliance with health and safety and environmental legislation relevant to its activities.

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

The Board is responsible for the systems of risk management and internal control and for reviewing their effectiveness. The internal controls are designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material misstatement or loss. Through the activities of the Audit Committee, the effectiveness of these internal controls is reviewed twice a year.

A summary of the principal risks and uncertainties facing the Group, as well as mitigating actions, are set out on pages 38 and 39 of the Group’s 2017 Annual Report and Accounts.

A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. The Group’s results, compared with the budget, are reported to the Board monthly.

The Group maintains appropriate insurance cover in respect of actions taken against the Directors because of their roles, as well as against material loss or claims against the Group and its assets. The insured values and type of cover are comprehensively reviewed on a periodic basis.

The senior management team meet at least twice monthly to consider new risks and opportunities presented to the Group, making recommendations to the Board and/or Audit Committee as appropriate.

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

The Company currently has six Directors, four of whom are non-executive (including the Chairman, Sheikh Mubarak). Three of the Directors, Prof. Stefan Allesch-Taylor CBE, Raymond Chigot and John Johnston, are regarded by the Company as being independent of management and free from any business or other relationship that could materially interfere with the exercise of their independent judgement.

Four of the Directors, being Andrew Lindley, Prof. Stefan Allesch-Taylor CBE, Raymond Chigot and John Johnston, are independent of Action Group Holdings. The Board will have responsibility for Action Hotels’ strategic and financial policies and intends to meet no less than 5 times a year.

All the Directors have access to the advice and services of the Company Secretary and will be able to gain access to external independent advice should they wish to do so. An appropriate balance of executive and non-executive members of the Board will be maintained and the Board will be supplied with regular and timely information concerning the activities of Action Hotels in order to enable it to exercise its responsibilities and control functions in a proper and effective manner. The Company has also adopted a share dealing code which is appropriate for an AIM quoted company and is in accordance with Rule 21 of the AIM Rules.

Directors’ biographies are set out here…

http://www.actionhotels.com/management/board-of-directors/

The Board is responsible to the shareholders for the proper management of the Group and meets at least five times a year to set the overall direction and strategy of the Group, to review development of the pipeline assets, operational and financial performance and to advise on other key matters. All key financial, operational and investment decisions are subject to Board approval.

A summary of the Committees is set out on page 48 in the Group’s Remuneration Committee Report of the 2017 Annual Report and Accounts.

The Board considers itself to be sufficiently independent. The QCA Code suggests that a board should have at least two independent Non-executive Directors. All the Non-executive Directors who currently sit on the Board of the Company are regarded as independent under the QCA Code’s guidance for determining such independence.

On 17 December 2013, the Company entered into the Relationship Agreement with AGH and Sanlam Securities revised and amended to WHIreland on 29 March 2018. The Relationship Agreement contains, inter alia, provisions to allow Action Hotels to operate independently of Action Group Holdings (“AGH” the major Shareholder), provides that all arrangements between it and Action Hotels will be on arm’s length terms and on a normal commercial basis, prohibits AGH from competing with the business of Action Hotels and generally prohibits AGH from voting in favour of any resolution to cancel the Company’s admission to AIM.

Non-executive Directors receive their fees in the form of a basic monthly cash fee. The current remuneration structure for the Board’s Non-executive Directors is deemed to be proportionate and was subject to a shareholder consultation process prior to its implementation.

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

The Board considers that all of the Non-executive Directors are of sufficient competence and calibre to add strength and objectivity to its activities, and bring considerable experience in hospitality, construction and real estate financing, business structure and financial market experience.

The Directors’ biographies are set out here…

http://www.actionhotels.com/management/board-of-directors/

The Chairman, in conjunction with the Company Secretary and the NOMAD, ensures that the Directors’ knowledge is kept up to date on key issues and developments pertaining to the Group, its operational environment and to the Directors’ responsibilities as members of the Board. During the year, Directors received updates from the Company Secretary and various external advisers, including the NOMAD on a number of corporate governance matters.

Directors’ service contracts or appointment letters make provision for a Director to seek personal advice in furtherance of his or her duties and responsibilities, normally via the Company Secretary.

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

The Board currently does not have a process for evaluation of its own performance, that of its committees and individual Directors, including the Chairman. This process is under review and would be proposed to be conducted biennially. The Board will review the services of an independent third party organisation to manage the evaluation process, analyse the results and report back to the Board for subsequent follow-up. Evaluation criteria will include Controls and Procedures, Strategic Aims, Entrepreneurial Leadership and Communications and Relationships.

The Board may utilise the results of the evaluation process when considering the adequacy of the composition of the Board and for succession planning.

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

The Board seeks to maintain the highest standards of integrity and probity in the conduct of the Group’s operations. These values are enshrined in the written policies and working practices adopted by all employees in the Group. An open culture is encouraged within the Group, with regular communications to staff regarding progress and staff feedback regularly sought. The Executive Committee regularly monitors the Group’s cultural environment and seeks to address any concerns that may arise, escalating these to Board level as necessary.

The Group is committed to providing a safe environment for its staff and all other parties for which the Group has a legal or moral responsibility in this area.

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

The Board has overall responsibility for promoting the success of the Group. The Executive Directors have day-to-day responsibility for the operational management of the Group’s activities. The Non-executive Directors are responsible for bringing independent and objective judgment to Board decisions.

There is a clear separation of the roles of Chief Executive Officer and Non-executive Chairman. The Chairman is responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board’s decision-making and ensuring the Non-executive Directors are properly briefed on matters. Chairman has overall responsibility for corporate governance matters in the Group and in support of independence and diversity has delegated the chair of the Audit Committee to the Deputy Non-Executive Chairman and the chair of the Remuneration Committee to the Independent Non-Executive Director. The Chief Executive Officer has the responsibility for implementing the strategy of the Board and managing the day-to-day business activities of the Group. The Company Secretary is responsible for ensuring that Board procedures are followed, and applicable rules and regulations are complied with.

The Board has established an Audit Committee and Remuneration Committee with formally delegated duties and responsibilities. Prof. Stefan Allesch-Taylor CBE chairs the Audit Committee and John Johnston chairs the Remuneration Committee.

Audit Committee

The Audit Committee will comprise Prof. Stefan Allesch-Taylor CBE (who will chair the committee), John Johnston and Raymond Chigot and will meet at least two times a year. The committee will assist the Board in meeting its responsibilities for ensuring that Action Hotels’ financial systems provide accurate and up to date information on its financial position and that the published financial statements represent a true and fair reflection of this position. It will also assist the Board in ensuring that appropriate accounting policies, internal financial controls and compliance procedures are in place. In addition, the committee will also monitor compliance with the Group’s anti-corruption and fraud policy. The auditors will be able to attend its meetings and will provide reports to the committee as required, as will the Company Secretary who will have direct access to the chairman of the committee.

Remuneration Committee

The Remuneration Committee will comprise John Johnston (who will chair the committee), Prof. Stefan Allesch-Taylor CBE and Raymond Chigot. The committee will advise the Board on an overall remuneration policy and will meet at least twice a year. The committee will also determine, on behalf of the Board, and with the benefit of advice from external consultants, the remuneration packages of the executive Directors. The Board will determine the remuneration of the non-executive Directors.

The Remuneration Committee report for the year ended 31 December 2017 is set out on page 47 and 48 of the Group’s 2017 Annual Report and Accounts. The Directors’ Remuneration Report is set out on pages 47 of the Annual Report.

The Directors believe that the above disclosures constitute sufficient disclosure to meet the QCA Code’s requirement for a Remuneration Committee Report.

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

The Group places a high priority on regular communications with its various stakeholder groups and aims to ensure that all communications concerning the Group’s activities are clear, fair and accurate. The Group’s website is regularly updated, and users can register to be alerted when announcements or details of presentations and events are posted onto the website.

The Group’s financial reports can be found here…

http://www.actionhotels.com/investor-relations/reports-and-results/

Notices of General Meetings of the Company can be found here...

http://www.actionhotels.com/investor-relations/regulatory-news/

The results of voting on all resolutions in future general meetings will be posted to the Group’s website, including any actions to be taken as a result of resolutions for which votes against have been received from at least 20 per cent of independent shareholders

Annual Report and Accounts 2017

http://www.actionhotels.com/cms/resources/ir-reports/annual-report-accounts-2017.pdf