This statement describes our corporate governance structures and procedures, the work of the Board, its Committees and management, and how we have applied our chosen corporate governance code, the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”).
The Board as a whole recognises the importance of good corporate governance to promote the long-term success and sustainability of the business for the benefit of our shareholders and wider stakeholders. As Chairman of the Board, I am responsible for ensuring that the Company has corporate governance arrangements in place which are appropriate for the size and complexity of the Company. Following the changes to the Alternative Investment Market (AIM) rules which now require AIM-listed businesses to adopt a recognised corporate governance code, we have chosen to apply the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”) and have complied with all principles of the QCA Code throughout the year. We are committed to delivering growth in the long term, building trust through open dialogue and maintaining a dynamic management framework.
In applying the QCA Code, we have sought to ensure that we have a dynamic governance environment which allows the business the opportunity to thrive in the long term, where the Group works towards its agreed strategy mindful of its impact on others and the threats and opportunities faced but is confident in its robust system of risk management and internal control. An environment where open dialogue is encouraged to ensure the legitimate motivations and expectations of both shareholders and stakeholders are recognised and met and where a diverse, skilled Board sets the culture of the Company by supporting the Group’s vision and values.
The approach to our corporate governance arrangements is forward looking. Whilst we have chosen to apply the QCA Code, we also continue to have regard to the UK Corporate Governance Code 2016 (the “UK Corporate Governance Code”) as best practice guidance and seek to comply with the UK Corporate Governance Code wherever this is appropriate for the Company. We also note the emphasis being placed on the Board’s role in setting and monitoring the Company’s culture to ensure that behaviours align with our purpose, values and strategy. We believe that an appropriate culture is vital for continuing success and so have a number of policies and procedures in place to ensure the culture the Board wants to foster is embedded throughout the business. Further information can be found within the Corporate Responsibility section on pages 23 to 25 of the Report and Accounts for 2018. A healthy corporate culture is promoted within the business in various ways including by linking employees’ appraisal objectives and reward and recognition schemes to our vision and values. The Board assesses the culture of the Company through engagement with employees and other stakeholders (further details can be found in the stakeholder engagement section on pages 29 and 30), the monitoring of the development of risks to the business and the external awards and accreditations we receive from organisations such as Investors in People. The Board is satisfied that a culture of openness, honesty and integrity exists within the business. Furthermore, we are confident that our culture is consistent with our vision to be a leading force in the global homeware sector because achieving our strategy through the implementation of our business model and mitigation of our principal risks relies on positive relationships with key stakeholders which can only occur if a culture of openness and integrity exists.
There have been no significant corporate governance challenges in 2018. We do, however, keep our governance arrangements under constant review and as a result we are pleased to welcome Angela Luger to the Board. Angela’s appointment will strengthen our expertise in marketing and digital online retailing in line with our plans for growth.
As explained fully within our Strategic Report on pages 1 to 25 of the Report and Accounts for 2018, our strategy is focused around five key areas: profitable sales growth, new product introduction, developing our brands, enhancing our operational efficiency and capability and supporting this with complementary strategic acquisitions. How the Company’s corporate governance arrangements support our strategy is detailed within the Our Strategy section on pages 10 and 11. Information on our Business Model can be found on pages 8 and 9.
Risk management and internal controls
As with all companies, the Group faces challenges in the execution and delivery of its strategy and business model. The environment in which the Company operates is continually changing and evolving which presents both opportunities and risks. To ensure the Company can capitalise on these developments whilst protecting the Group from significant risk, the Company has a comprehensive risk management and internal control system in place. Details of the Group’s principal risks and how these are addressed can be found on pages 18 and 19 of the Strategic Report.
The process by which the Board identifies, assesses and mitigates external business risks and principal internal control risks and how the Board gains assurance that the risk management system is effective is detailed in the Risk Management section on page 18.
The Board has an established internal control system for identifying internal control risks. As might be expected in a group of this size, a key control procedure is the day to day supervision of the business by the Executive Directors, supported by the senior managers with responsibility for key operations. The Executive Directors are involved in the budget setting process, constantly monitor key performance indicators and review management accounts on a monthly basis, noting and investigating major variances. Where a new risk is identified, it will be assessed and then mitigated through the implementation of an appropriate control. The adequacy of the systems for internal control is reviewed at every Board meeting. Furthermore, the Audit Committee reviews the adequacy and effectiveness of the Group’s internal controls and reports its findings to the Board on an annual basis. During the course of these reviews in 2018, no failings or weaknesses were identified nor have any been advised to the Board which the Board has determined to be significant.
The Group’s system of internal control is designed to identify fraud or material error and manage, rather than eliminate, the risk of failure to achieve business objectives, and so can only provide reasonable and not absolute assurance against material misstatement or loss.
The Board has considered the impact of the values and culture of the Group and ensures that, through staff communication and training, the Board’s expectations and attitude to risk and internal control are embedded in the business.
Understanding the motivations and expectations of our shareholders and stakeholders is imperative. The Board acknowledges that effective engagement can only be realised through:
- the presentation of a fair, balanced and understandable assessment of the Group’s position and prospects; and
- the opportunity for all shareholders and stakeholders to feed back their views to the Company based upon their understanding of the Group’s strategy and objectives.
A programme of two-way communication with both institutional and private investors takes place each year.
The Group provides information about its progress and strategy through its Annual and Interim Reports and Accounts, trading updates, results presentations and investor roadshows. Investor site visits allow shareholders to learn more about the operation of the business. Key announcements are made through the London Stock Exchange Regulatory News Service and on the Announcements section of our Investor Relations website.
The Chairman, with the support of the Group Finance Director, is responsible for shareholder liaison. The Chairman talks regularly with the Group’s major shareholders and ensures that their views are communicated fully to the Board. The Chairman writes annually to significant institutional shareholders offering a meeting to discuss corporate governance matters. No concerns were raised following this communication in 2018. The Non-executive Directors are also offered the opportunity to attend meetings with major shareholders.
The Board recognises the Annual General Meeting (AGM) as an important opportunity to meet private shareholders and, as such, all Directors are and will be in attendance. The Directors are available to listen to the views of shareholders informally immediately following the AGM. If voting decisions at the AGM are not in line with the Company’s expectations the Board will engage with those shareholders to understand and address any issues. The Chairman and the Company Secretary are the main points of contact for such matters. At the AGM held on 17 May 2018, all resolutions were passed with a significant majority.
The Board understands that a key expectation of our shareholders is a progressive dividend policy. The Board is committed to providing this and aims to maintain a sustainable and appropriate level of dividend cover.
Our programme of stakeholder engagement is designed around our assessment of the materiality and impact of our stakeholders on the achievement of the Company’s strategy. Our key stakeholders have been identified via an assessment of the Group’s Business Model (further details can be found on pages 8 and 9 of the Report and Accounts for 2018) and Principal Risks and Uncertainties (page 19).
|Stakeholder||Why they are important||Stakeholder expectations||How we have engaged||Engagement outcomes|
|Employees||Our people deliver the high quality products and exceptional service that we are renowned for.||
As a direct result of feedback from employees, the Board has approved a project to overclad the majority of the roof of our factory and offices in Stoke-on-Trent during 2019.
Improvements in health and safety through addressing near miss reporting.
|Sourced product suppliers||In 2018, 51% of our products were sourced from third parties. We need to ensure security of supply and that all products are manufactured to our exacting quality standards.||
||The Group worked collaboratively with suppliers to plan future orders to assist with capacity planning.|
|Customers||Our customers are at the heart of our operations. The longevity of the business can only be secured through maintaining and expanding our customer base.||
||Feedback from customers has led to the creation of customised product offerings.|
|Finance provider||Cash flow and opportunities for investment.||
The Board is responsible for the overall leadership and management of the Group. The Board determines the Group’s strategy, approves major capital expenditure projects, the annual and interim results, annual budgets, dividend policy and Board structure. It monitors the Company’s exposure to risk and reviews the strategic direction of all trading subsidiaries, their annual budgets, their performance and their capital expenditure.
Board composition and roles
The Board comprises four Executive Directors and four Non-executive Directors. Biographies of all the Directors.
Dick Steele, the Non-executive Chairman, is responsible for leadership of the Board and ensuring its effectiveness in all aspects of its role. The Board has not appointed a Senior Non-executive Director. The Board believes that, given its size, there is sufficient opportunity for shareholders to raise any concerns they may have with the Non-executive Chairman, the Chief Executive, the Group Finance Director, the other three Non-executive Directors or the Company Secretary.
The Board delegates day to day responsibility for managing the business to the Executive Directors and the senior management team. Lawrence Bryan, the Chief Executive, has executive responsibility for running the Group’s business and implementing Group strategy. To ensure suitably defined separation of the responsibilities of the Board and the running of the Group’s business, the Board has a formal schedule of matters reserved to it. The schedule is reviewed annually and updated when necessary to ensure its appropriateness.
The Board has three Committees which assist in the discharge of its responsibilities – the Audit, Remuneration and Nomination Committees. The terms of reference for each Committee are reviewed annually and are available here.
During the year, the Nomination Committee considered the time required from the Non-executive Directors to perform their duties, the results of the Board performance evaluation process that related to the composition of the Board, the need for a Senior Non-executive Director, the election and re-election of Directors and reviewed the succession planning arrangements for the Directors and other senior managers.
The Nomination Committee regularly reviews the structure, size and composition (including the skills, knowledge, experience and diversity) required of the Board compared to its current position and makes recommendations to the Board with regard to changes. As part of the Committee’s approach to succession planning for Directors and other senior managers, it takes into account the challenges and opportunities facing the Group, and what skills and expertise are therefore needed on the Board in the future. Prior to any appointment being made by the Board, the Committee evaluates the composition of the Board and, in light of this evaluation, prepares a description of the role and capabilities required for the appointment. In identifying suitable candidates, the Committee uses open advertising or the services of external advisers to facilitate the search and considers candidates on merit and against objective criteria. The Committee recognises the value of a diverse Board and will consider all candidates with the necessary capabilities in accordance with the Company’s policies on equal opportunities, diversity and inclusion.
The expertise and wealth of experience from across different industries which is brought by our longer serving Non-executive Directors is considered invaluable to the Company. The Board, after careful review, considers that each Non-executive Director brings an unbiased critical insight, gained from their experience in high performing companies completely distinct to our own, to bear notwithstanding their length of service. The Board has considered the need for progressive refreshing of the Board in formulating this view. All Non-executive Directors have contracts which expire on the completion of one year’s notice. These are available for inspection at the Company’s registered office and at the AGM. The Company’s Articles of Association require that all Directors retire no later than at the third Annual General Meeting of the Company after the general meeting at which he/she was appointed or last reappointed.
The Board has decided to adopt voluntarily the practice that all continuing Directors stand for re-election on an annual basis in line with recommendations of the UK Corporate Governance Code. All Directors undergo a performance evaluation before being proposed for election/re-election to ensure that their performance is and continues to be effective, that where appropriate they maintain their independence and that they are demonstrating continued commitment to the role. Further details of the Board evaluation process can be found below.
For a Board to be successful, it must make decisions which are in the best interests of the Company without reference to the interests of the Directors. In line with the requirements of the Companies Act 2006, the Directors have put in place a policy and process for notifying and recording the nature and extent of their interests, together with those of connected persons, in organisations and companies outside the Group. Each Director must formally notify the Company if there is potential for these interests to conflict with their duties as a Director of the Company. All such notifications are regularly reviewed by the Board.
Time commitments and meetings
All Non-executive Directors are expected to devote such time as is necessary for the proper performance of their duties. This includes considering all relevant papers before each meeting and attendance at a minimum of five Board meetings per year, the AGM and such other meetings which are necessary. The Nomination Committee annually reviews the time required from Non-executive Directors which includes assessing whether sufficient time is being spent by the Non-executive Directors to fulfil their duties.
All Directors receive regular and timely information on the Group’s operational and financial performance. Relevant information is circulated to the Directors in advance of meetings. In addition, minutes of the meetings of the Directors of the main operating UK subsidiary, Portmeirion UK, are circulated to the Board.
Skills and experience
Details of each Director’s skills and experience can be found in the biographies of the Directors on pages 26 and 27 of the Report and Accounts for 2018. The requirement for the Board to have an appropriate mix of personal qualities (including gender balance) and capabilities is considered in respect of new Board appointments (further details can be found in the Nomination Committee section above), as part of the Board evaluation process and when addressing training and development needs of Directors.
All Directors have direct access to the advice and services of the Company Secretary and are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense. The Company Secretary’s role includes providing guidance to the Board on its duties and ensuring that the Board complies with relevant legislation and the Articles of Association of the Company.
External advice was not sought in relation to any significant issue of strategic importance during 2018. The Board did, however, seek external advice in relation to operational matters.
Each year the Board carries out an evaluation of its own performance in the first quarter looking at performance in the prior year. Any recommendations arising from previous Board evaluations have been addressed.
As part of the evaluation of 2018 performance, each Director reviewed Board performance against set criteria covering areas such as the Board’s approach to risk, the effectiveness of each Director, Board communication and the adequacy of information provided to the Board. Combined feedback was discussed by the Board and actions were agreed.
Specific actions arising from the evaluation were:
(i) the production of a succession planning matrix to support existing succession planning and enhanced management development;
(ii) review of future Board pack content; and
(iii) a Board meeting to be held at Wax Lyrical premises during 2019 to enhance Non-executive Director understanding of the home fragrance business.
As part of the evaluation it was identified that although the Board had performed effectively it could further benefit from the appointment of a new Non-executive Director with marketing and digital online retailing experience. Following a comprehensive recruitment process, Angela Luger was appointed to the Board on 1 March 2019.
Each year, the Board also considers the need for an external evaluation of its performance. No external evaluation was conducted in 2018.
The Audit Committee, Remuneration Committee and Nomination Committee’s performance is considered annually as part of the Board evaluation process outlined above. Furthermore, the terms of reference for each Committee are reviewed on an annual basis against good practice and appropriate guidelines. As part of this review, the Committees assess their performance to ensure they have fulfilled the responsibilities outlined in the terms of reference. Each Committee concluded that it had performed effectively during the year and there were no specific actions arising from the evaluations.
Induction, training and development
Key to the effectiveness of Board decision making is a detailed understanding of the homeware market, our history and products, the operating environment, relevant legislation and regulation to which the Group is subject and the challenges the Company faces.
All new Directors undertake a comprehensive induction process following their appointment to the Board. The induction would usually consist of main factory and distribution centre tours, full briefings on the operation and history of the business, the role of the Director and the operation of the Board together with meetings with the senior management team and Executive Directors.
Existing Directors are provided with ongoing training, as necessary, by the Company to ensure they have the requisite skills to discharge their duties. During 2018, the Board received updated anti-corruption and bribery training and training on the implementation of the General Data Protection Regulation. Tailored Director briefing notes are provided throughout the year. All Directors are encouraged to attend relevant external training, seminars and conferences to facilitate their continuing professional development. Where specific training needs are identified including as a result of the Board evaluation process and individual Director appraisals, the Company will organise the relevant training. The Company Secretary supports the Chairman in addressing the training and development needs of Directors.