Corporate Governance

The Company has adopted a governance framework that reflects the principles of the Code.

There is a formal schedule of matters reserved for the board’s decision and there is a clear division of the respective responsibilities of the chairman and chief executive. The board has delegated to the chief executive wide powers for the day-to-day management of the Company. It has also delegated to committees of the board the duty to advise and make recommendations to the full board in specialised areas these are: the Audit committee, the remuneration committee, the nominations committee and the Finance committee. The role, duties and responsibilities of these board committees are clearly defined in their respective terms of reference.

• How does the Company maintain adequate systems of internal control?
• Is there a risk evaluation process?
• Who is responsible for internal control?
• What type of control environment does the Group maintain?
• When was the last risk evaluation exercise undertaken by management?
• Does the Group have an internal audit function?
• Does the Group have an effective system of internal control?
• How does the Company communicate with its shareholders?

How does the Company maintain adequate systems of internal control?

The board maintained the procedures necessary to comply with the requirements of the existing code relating to internal control as described in the October 2005 publication entitled 'Internal Control: Revised Guidance for Directors on the Combined Code' (Turnbull Guidance). In relation to Code provision C.2.1, the board reports below on the procedures that have been applied in reviewing the effectiveness of the system of internal control.

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Is there a risk evaluation process?

The board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. The process has been in place throughout the year and up to the date of approval of this year's annual report. It is regularly reviewed by the board and accords with the guidance set out in the Turnbull Guidance.

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Who is responsible for internal control?

The directors acknowledge that they are responsible for the Group's system of internal control, for setting policy on internal control and for reviewing the effectiveness of internal control. The role of management is to implement board policies on risk and control. The system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable, and not absolute, assurance against material misstatement or loss.

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What type of control environment does the Group maintain?

Considerable importance is placed on maintaining a strong control environment. In particular, there is a simple organisational structure with clearly drawn lines of accountability and delegation of authority, adherence to specified codes of conduct is required at all times and the board actively promotes a culture of quality and integrity.

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When was the last risk evaluation exercise undertaken by management?

Following a number of changes to the membership of the executive committee, during the year a further detailed risk assessment process was undertaken which identified the key strategic, operational, financial and compliance risks that the business faces and which included an analysis of the likelihood and impact for each of the risks identified. This was reviewed by the Audit committee in December 2008. For the key risks identified, action plans have been developed and are regularly monitored by the executive committee as part of management's procedures. As part of the risk management process, the Audit committee and the board are provided with a report detailing significant risks facing the Group.

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Does the Group have an internal audit function?

The Group has an internal audit function that reports to the finance director. Detailed control procedures exist throughout the operations of the Group and compliance is monitored by management, internal auditors and, to the extent they consider necessary to support their audit report, the external auditors. Additionally, a separate compliance function monitors day-to-day adherence to the provisions of the Gambling Act 2005 and other licensing obligations. During the year, reports were submitted to the Audit committee from the internal audit team summarising the work planned and undertaken, recommending improvements and describing the actions taken by management. The risk-driven annual internal audit plan was also presented for approval by the Audit committee.

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Does the Group have an effective system of internal control?

The Audit committee has reviewed the effectiveness of the system of internal control during the year ended 31 December 2008. This has included consideration of the Group-wide risk assessment and the reports from the Group's internal audit function. The Audit committee has also considered reports from the external auditors. The Audit committee has reported the results of its work to the board. The board has considered these reports when undertaking its review of the effectiveness of the Group’s system of internal control.

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How does the Company communicate with its shareholders?

The Company maintains an active dialogue with its institutional shareholders and city analysts through a planned programme of investor relations and regular meetings are held with principal shareholders. The outcome of these meetings is reported to the whole board to ensure that it keeps in touch with shareholder opinion. The programme includes formal presentations of the interim and the full-year results. All shareholders are welcome to attend the Annual General Meeting and private investors are encouraged to take advantage of the opportunity given to ask questions. The chairmen of the audit, remuneration and nominations committees attend the Meeting and are available to answer questions, as appropriate. A summary presentation of the Group’s results and development plans is given by the chief executive at the Annual General Meeting prior to the commencement of the formal business of that meeting. Electronic communication is becoming an important medium for shareholders, providing ready access to shareholder information and reports (‘Shareholder Information’) which has the additional benefit of reducing both cost and environmental burden. Shareholders may choose to receive electronic notification of publication of Shareholder Information on the Company’s website instead of receiving printed copies. Shareholders may also, by electronic means, vote and appoint a proxy to vote on their behalf at the annual and other general meetings of the Company. In November, the Company wrote to shareholders advising them that it intended making Shareholder Information available on its website as its default method of publication, save in relation to those shareholders who request in writing to receive such information in paper form.

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