Chairman’s opening statement
The Board is focused on developing the Group for the long-term benefit of all shareholders, with well-informed and effective decision making. As part of this, the Board takes corporate governance seriously and has adopted the QCA Corporate Governance Code.
I am pleased to share with you our governance structure and the improvements that have taken place over the past year. For ease, we have structured this to align with the principles of the Code.
Chairman, September 2020
Principle 1: Establish a strategy and business model which promote long-term value for shareholders
The Group continues to operate under a governance structure, which is designed to be flexible and efficient in creating sustainable long term growth in shareholder value. Our key focus is to continue to drive the Group forward and keep us reaching for the high standards and targets we set ourselves. We do this by leveraging our strengths and the many opportunities to grow in the market.
Our strategy focuses on:
- Working with the winners – increasing revenue through growth with the winning retailers of the future, in the growing channels and product categories.
- Design & innovation – developing in new channels and adjacent product categories while increasing our share in the growing number of events celebrated throughout the year.
- Efficiency & scale – driving margins through investment in processes and people. Accretive M&A opportunities to unlock synergies and strengthening our ‘one-stop-shop’ position with customers.
In May 2019 we were pleased to be a winner of the Transatlantic Growth Awards 2019 in the category of ‘UK Launch or Expansion in the US’ following the acquisition of Impact Innovations Inc. The aim of the Transatlantic Growth Awards is to highlight and celebrate the commitment of businesses to trade, investment and jobs between the UK and US, showcasing the best examples of foreign direct investment going both ways across the Atlantic.
Further detail on the Group’s strategy and business model, as well as the key challenges faced by the Company in achieving its goals, can be found on pages 6 to 23 of the Annual Report 2020.
Principle 2: Seek to understand and meet shareholder needs and expectations
This year has been particularly noteworthy with the Group, as part of the acquisition of CSS, raising £120 million from investors to support the financing of the deal. This was significantly oversubscribed and a good indication of the strong relationship between the Company and its shareholders.
We continue to maintain a strong relationship with our Nomad and Broker, Canaccord Genuity (‘Canaccord’), who were a key player in running and executing the fundraising activities for the CSS acquisition. Canaccord has a wide international reach and is well placed to support the Group’s ambitions for growth in the future.
Our CEO, CFO and Chairman have maintained regular contact with our institutional investors as can be seen in the timeline below:
02 April 2019: John Charlton met with certain investors
15 April 2019: Trading Update
11-25 June 2019: Full Year results announcement followed by investor roadshows in London, Edinburgh and the US
22 August 2019: Investor Day
28 August 2019: Trading Update
04 September 2019: Investor Day
11 September 2019: Annual General Meeting
03 October 2019: Investor Day
08 October 2019: Investor Day
17 October 2019: Trading Update
26-29 November 2019: Interim results announcement followed by investor roadshows
03 December 2019: Investor Day
16 December 2019: Investor Day
08-15 January 2020: Investor Roadshow (Placing)
11 February 2020: General Meeting
04 March 2020: Trading Update
Following investor meetings, the full Board receives feedback on the views and concerns of investors and regularly receives copies of investment reports from analysts.
In addition to our focus on institutional investors, we aim to engage with individual and retail investors on a regular basis.
Our AGM gives us the ideal opportunity to meet with individual investors face to face. It is important that all investors have a platform to raise questions or make comments whilst also enabling us to give visibility of, and interaction with, the Board.
All our investors are regularly kept up to date with announcements, circulars, videos and reports, all of which are available on the Company’s website.
Nikky Geairns is primarily responsible for shareholder liaison and can be contacted at firstname.lastname@example.org. Contact details for the Company’s PR Advisers, Brokers and Registrars are also set out in the ‘Contact’ section of the Company’s website.
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success
In addition to our shareholders, all of our stakeholders – our employees, customers, suppliers and communities – are vital to the success of the Group. On page 8 of the Annual Report 2020 we set out our Section 172 statement as required by the Companies (Miscellaneous Reporting) Regulations 2018 showing how the needs of these important stakeholders are assessed and considered by the Board when making key decisions.
We invest in our people; from training and education offered throughout the Group, through to opportunities for career progression. The Group offers an environment in which our employees are encouraged to grow and deliver their very best. It is these same opportunities which allow the Group to attract and retain the brightest talent.
All our business units provide relevant and up-to-date training for employees. The Design Group Academy operating in our Celebrations business in Europe continues to be a powerful tool to train employees in the skills needed for their roles, as well as rolling out key compliance initiatives. The purpose built classroom provides a relaxed and comfortable environment in which employees can focus on their learning away from their usual work stations. In addition, this year has seen the launch of the self-titled Design Group University which invites employees to attend evening sessions, with presentations from external speakers on a variety of inspirational topics. Two events have taken place so far with 40 attendees at each and the feedback has been very positive.
In Australia, HR employees have been reallocated to fully concentrate on training and workers’ compensation. In addition to using information already gathered as part of the annual review process regarding training, they are adding in annual training reviews with each business leader as well as compliance obligations. This is a continually developing area with the next step to develop a skills matrix to assist in the training programme.
Our ‘Stars of the Future’ programme initially identified 20 ‘stars’ across the Group. The intention is for each person to have a personalised development programme, sponsored by the leader of each business.
In the UK we run a twelve month development programme in conjunction with an external provider for individuals who demonstrate the desire and capability for future promotion. This is a tailored training programme which also includes a dedicated mentor from the senior leadership team and one-to-one coaching.
Our business units use a variety of methods to enable effective two-way communication with employees. These range from semi-annual all-employee meetings (with video conference facilities for remote team members) to smaller scale weekly catch ups. Comment boxes and staff surveys are also used and various alternatives in between.
Each location recognises birthdays and service anniversaries. The US holds employee picnics and monthly employee events often linked to key celebrations in that month e.g. Super Bowl and Valentine’s day in February. Similar events are held in Australia where teams within the business are tasked with running the special events to ensure that everyone is involved.
In the UK, this year, the business started running a calendar of wellbeing events, including Healthy Eating, Know Your Numbers and Safety During the Festive Season. They supported the Mental Health World campaign and will continue to communicate important wellbeing initiatives across the business to promote a positive work environment.
Furthermore, during the challenges presented by Covid-19, the Group has always prioritised the health and safety of employees. In all locations procedures and communication have been put in place to ensure that our teams observed the necessary social distancing protocols required.
Through recognising that each of our customers is unique and so requires a different service to satisfy their needs and expectations, we work hard to build deep and lasting relationships with our customers.
An example of this during the year was in America where we engaged with Kroger in creating an ‘impulse’ programme consisting of pallet displays in prominent store locations with new products which are updated regularly throughout the year. This has been a successful collaboration involving Kroger’s buying and product planning team in conjunction with DG America’s Sales Lead, Creative Director and Product Development manager. The programme is in 1,448 stores across the US, with a view to potentially growing this to more stores in 2021.
We are committed to engaging with our suppliers fairly and lawfully and that we source responsibly. We expect our supply base to do the same.
Our businesses meet with our key suppliers periodically to maintain a regular open dialogue and to share priorities both from the Group’s perspective but also those of our suppliers. Our Purchasing Managers have daily interaction with our supplier base covering a variety of topics such as quality, service levels, sourcing of raw materials etc.
This year saw the creation of a new Third Party Due Diligence Policy and accompanying processes to ensure that we are engaging with legally and financially compliant third parties.
Our businesses throughout the world undertake a variety of local initiatives to support their local communities and national charities. See our social responsibility section on pages 56 and 57 of the Annual Report 2020 for some examples.
Further detail on how our business model identifies the key resources and relationships on which the business relies can be found on pages 6 and 7 of the Annual Report 2020.
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management systems, policies and procedures are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits.
With the recent corporate acquisitions the Group has made, we are cognisant of the challenges that a larger Group faces and we will be reviewing our governance structures over the next year to ensure they remain fit for purpose.
Risk management processes are reviewed regularly by the Audit Committee to reflect changes in market conditions and the Group’s activities. The Board’s oversight covers all controls, including financial, operational and compliance controls and general risk management. It is based principally on reviewing reports from management to consider whether significant risks are identified, evaluated, managed and controlled and whether any significant weaknesses are promptly remedied and indicate the need for more extensive monitoring.
Following the successful roll out of the Code of Business Conduct, Anti-bribery & Corruption policy and Whistleblowing policies to all employees in 2019, attention has turned to the on-boarding of third party suppliers. A new Third Party Due Diligence Policy has been adopted by the Board and is gradually being introduced across the business. It is accompanied by an online on-boarding tool which defines the engagement, reasons for termination, time lines, life cycle, contacts and owners of third parties. Importantly the tool also allows us to screen and continuously monitor third parties for adverse media, sanctions lists, politically exposed persons, beneficial ownership and government watch lists.
Further detail on the principal risks faced by the Group and the mitigating actions taken in respect of those risks can be found on pages 46 to 52 of the Annual Report 2020.
Principle 5: Maintain the Board as a well‑functioning, balanced team led by the Chair
The Board consists of three Executive Directors and four Non-Executive Directors (including the Chairman). For the biographies of the Board see page 59 of the Annual Report 2020. There were no changes to the composition of the Board during the year.
The Board met formally ten times during the 2020 financial year. Lance Burn was absent for two meetings and Elaine Bond was absent for one meeting but otherwise all Directors were present.
The Audit Committee met four times and the Remuneration Committee met three times, all were fully attended.
Anders Hedlund, who founded our Group, is a Nominee Non-Executive Director. Mr Hedlund is considered not to be independent, because as founder, he has served on the Board since the Company’s inception, his family hold significant interests in the shareholding of the Company and he also fulfils a consultancy role within one of the Group’s businesses. As reported in the financial statements, there are also some related party transactions between certain of the subsidiaries within our Group and companies under the ultimate control of the Hedlund family.
Following a review by the Board, all of the other Non-Executive Directors are considered to be independent.
Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
The Board is kept informed on a regular basis by the Company Secretary about their duties and any update in relation to legal and governance requirements for the Group.
In addition, the Board has access to the Deloitte Academy which gives each Director (Executive and Non-Executive) access to a wide-ranging programme of technical briefings, education, bespoke training and peer-to-peer networking opportunities. This is a useful resource to ensure that they keep abreast of market trends in board governance, legislative reform and keep their skills up to date.
The Board has access to external, specialist advice when necessary. An example of this is when the Remuneration Committee recently appointed Deloitte LLP and MM&K Limited to provide advice on LTIP schemes.
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
In November 2019 the Remuneration Committee conducted a self-assessment based on an external template which was adapted to incorporate the guidance contained in the QCA Remuneration Committee Guide. Members were asked to rate the performance of the Remuneration Committee based on their own perceptions of the Committee as a whole. Topics covered were:
• roles and responsibilities;
• terms of reference and planning;
• meetings – content and running of;
• skill set of members; and
• shareholder interaction.
Responses were collated, reviewed and compared with last year’s results – no significant concerns were raised.
In February 2020 the Board conducted a self-assessment. The questionnaire was split into ten sections with each section based on the principles set out in the QCA Corporate Governance Code. There was an additional section allowing the Directors to give their thoughts on areas such as the main achievements of the Board over the previous twelve months, and the main strengths and weaknesses of the Board. The results of this review will be discussed later in the year.
Principle 8: Promote a corporate culture that is based on ethical values and behaviours
The Board desires to promote a culture of respect, integrity, openness, honesty and fulfilment within each of the businesses in our Group. We believe strongly in these objectives and we endeavour to practise these in the way that we communicate with our customers, suppliers, shareholders, advisers and of course all our teams employed in the Group.
Feedback from all stakeholders in the business, as set out in Principle 3, allows the Board to assess the state of its corporate culture, as well as performance against the Group’s internal targets.
The Group Values Statement is as follows:
- To strive for excellence in all we do
- To behave ethically and with integrity
- To focus on our customers and to ‘go the extra mile’
- To be open to feedback, ideas and to positive change and promote fulfilment and fun
- To be good ‘citizens’ within our communities and take responsibility for our impact on our planet
- To be innovative and entrepreneurial
- To treat everyone with dignity and respect
- To be a team that succeeds together and aims to be an ‘employer of choice’
In recognising the decentralised structure of our international Group, we do not seek to impose strict guidelines around the adoption of a specific corporate culture but instead allow each business to adapt the principles as is most appropriate to them. For example:
In Australia the newly established corporate culture initiative is called #Be EPIC – Ethical, Passionate, Inspiring and Creative. This will be used for the entire employment life cycle from recruitment, performance management to reward and recognition. They are including it in the on-boarding process and have developed videos to promote the key aspects of the programme. The plan further expands this by ensuring staff ‘make their mark’ on the organisation. Asking staff to assess how they ‘made their mark’ on the business allows for praise and constructive self reflection and management feedback.
In the UK, the team have developed their ‘4 Ps’ framework: Purpose, Pace, Passion and People. These core principles guide the way they do business and help define what the UK business stands for as the company grows and develops. The ‘4 Ps’ have been incorporated into the behavioural competencies to be factored into the new online team appraisal system.
Our performance management systems and processes are designed to direct and influence behaviours.
We encourage our employees to get involved in local community initiatives – see page 57 of the Annual Report 2020 for some great examples.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
There is a distinct and defined division of responsibilities between the Chairman and the CEO.
The Chairman is primarily responsible for the effective working of the Board in conjunction with management, and the CEO is responsible for the operational management of the business and for the implementation of the strategy agreed by the Board.
The Board is responsible for setting the vision and strategy for the Group, working closely with the executive management team to deliver a successful business model for our shareholders and other stakeholders.
The Group Delegation of Authority policy sets out the matters that are reserved to the Board for approval. These include:
• matters relating to the Company’s legal purpose and position and its status as a public listed company;
• changes in governance, strategy and significant changes in internal controls; and
• significant financial or contractual commitments and decisions.
The Board has three committees – Remuneration, Audit and Nomination. Each of these committees comprises the Non-Executive Chairman and our two independent Non-Executive Directors; Elaine Bond and Mark Tentori. Elaine chairs the Remuneration Committee, Mark the Audit Committee, and John Charlton the Nomination Committee.
The Nomination Committee is responsible for filling Board vacancies, reviewing the Board composition and the roles of Board members.
The Audit Committee satisfies itself on the integrity of financial information and that controls and risk management systems within our businesses are robust and defensible. The Committee meets as required during the year and at least twice with the Group’s external auditor. Its role is to review the interim and final financial statements for approval by the Board, to ensure that operational and financial controls are functioning properly, and to provide the forum through which the Group’s external auditor reports to the Board. Further details about the activities undertaken by the Audit Committee this year can be found on pages 68 to 70 of the Annual Report 2020.
The Remuneration Committee determines appropriate levels of remuneration and compensation for Executive Directors. The Committee meets as required during the year and is closely involved in agreeing the positions within our senior management team that should participate in our Long Term Incentive Plan (‘LTIP’), together with the level of awards. The Remuneration Committee is also responsible for agreeing the performance criteria for annual bonuses and LTIP for Executive Directors and senior management. Further details about the activities undertaken by the Remuneration Committee this year can be found on pages 71 to 76 of the Annual Report 2020.
The Board keeps all aspects of corporate governance under review, with the governance framework developing further as the Group continues to grow.
Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
During 2020, the Board (itself or via the Board committees) worked hard to strike that essential balance between achieving the Group’s short term objectives and longer term growth and development. Key activities included:
- monitoring and review of the financial performance of the Group on an ongoing basis including capital expenditure proposals and significant projects;
- review of the interim and annual results including supplementary papers;
- review of the effectiveness of the Group’s internal financial controls, general internal controls and risk management systems;
- monitoring and review of the effectiveness of the Business Assurance function;
- overseeing the relationship with the external auditor;
- approval of the strategy, three year plans and budget;
- review of the Group risk register;
- approval of changes to remuneration for the Chairman, CEO and CEO direct reports;
- approval of 2019-2022 LTIP scheme;
- approval of annual bonus payments and targets for the following financial year;
- assessing and approving the acquisition of CSS; and
- approval of the bank refinancing arrangement.
The Annual Report is a key tool for demonstrating to shareholders how the Group is governed and provides an overview of core activities over the past financial year. In our Annual Report for 2020, we describe the high level work of our Committees and provide Audit Committee and Remuneration Committee reports which go into further detail.
Our historical Annual Reports and notices of general meeting, along with all other documents sent to shareholders, can be found here.