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. In 2019 we adopted the QCA Corporate Governance Code and strive to follow its guidance and principles, many of which flow throughout our business via our strategy, our business model and our stakeholder engagement.
I am pleased to share with you the key parts of our governance structure and how they align with the principles of the Code.
Interim Executive Chair, September 2022
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.
Further detail on the Group’s strategy and business model can be found on pages 8 to 13 of the Annual Report 2022 with the key challenges faced by the Company in achieving its goals set out on pages 14 to 16.
Principle 2: Seek to understand and meet shareholder needs and expectations
During the 2022 financial year, the CEO, CFO and Chair maintained regular contact with our institutional investors as can be seen in the timeline below:
20 April 2021: Trading Update
15 June 2021 – 21 June 2021: Full Year results announcement followed by investor meetings and calls
24 August 2021: Trading Update
20 September 2021: Annual General Meeting
26 October 2021: Trading Update
26-October 2021 – 29 October 2021: Various investor Meetings
23 November 2021 – 1 December 2021: Interim results announcement followed by investor calls
26 January 2022: Trading Update
26 January 2022 – 28 January 2022: Various Investor Meetings
Following investor meetings, the full Board receives feedback on the views and concerns of investors and regularly receives copies of investment reports from analysts.
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.
Further information can be found on pages 44 and 45 of the Annual Report 2022.
This year we placed particular importance on what we believed shareholders were saying to us regarding our remuneration practices. We reviewed key elements of the remuneration policy and appointed external remuneration consultants to provide regular advice and support to the Remuneration Committee. Our Remuneration Committee Chair then wrote to the main institutional investors to communicate our remuneration plans and explain how we had put shareholder views at the forefront of our decision-making. Further information on remuneration can be found on pages 65 to 73 of the Annual Report 2022.
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 pages 44 and 45 of the Annual Report 2022 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.
In the Annual Report 2022 there are many examples of stakeholder engagement:
• Employees – see pages 20 and 30 to 35
• Customers – see pages 11 to 13 and 49
• Communities – see page 35
• Suppliers – see pages 36 to 39 and 48
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Group operates a decentralised model where risk management is embedded within strategic and operational decision-making. An overarching role is played by the Group team and the Board to ensure oversight in the risk management process.
Design Group’s approach to risk management is bottom up, with each of our business units maintaining standardised risk registers for their territories, identifying key risks, monitoring them and determining mitigation plans for their businesses, whilst measuring against the Group’s risk tolerance level alongside their own tolerances. The risks are scored using a risk impact matrix which considers both financial and non-financial assessments to determine an overall score for each risk. Each principal risk is also evaluated against the Group’s risk appetite and considered in the context of the Group’s strategic objectives. All of this focuses the Group on where the higher risks sit and prioritises additional mitigation strategies that may be required.
The Group’s risk management framework operates within a ‘three lines of defence’ assurances model. The first line of defence lies with the operational owners and are the teams within the business managing and mitigating risks as part of their operational model. The second line of defence is internal and is corporate oversight, whereby individuals who are independent to the day-to-day operations perform a second layer review or verification of the mitigations and controls in place. The third line of defence is outsourced, providing the Audit Committee with independent assurance over the management of risks around the Group.
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.
Further detail on the risk management framework, the principal risks faced by the Group and the mitigating actions taken in respect of those risks can be found on pages 46 to 51 of the Annual Report 2022.
Principle 5: Maintain the Board as a well‑functioning, balanced team led by the Chair
The Board consists of the Chair (currently acting as Interim Executive Chair), three Executive Directors (one of which, the CEO role, is currently vacant) and four Non-Executive Directors. For the biographies of the Board see pages 52 and 53 of the Annual Report 2022 or they are on our website here.
During the 2022 financial year, one new Non-Executive Director joined the board: Claire Binyon (who joined on 1 June 2022) and one new Executive Director: Paul Bal (who joined on 1 May 2022). Both bring a wealth of experience and skills to complement those already on the Board.
The Board met thirteen times during the 2022 financial year with full attendance at all meetings by those Directors who were on the Board on the dates of the meetings.
The Audit Committee met seven times and the Remuneration Committee met six times, all were fully attended.
Further information on the operation of the Board and committees can be found under Principle 9 and also on pages 56 and 57 of the Annual Report 2022.
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 and the NOMAD about their duties and any updates 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.
The Board has access to external, specialist advice when necessary. This year, FIT Remuneration Consultants LLP were appointed as consultants to the Remuneration Committee on a retained basis and BDO LLP (‘BDO’) continued to provide business assurance support to the Audit Committee.
Further information on the directors’ skills and experience can be found on pages 52 and 53 of the Annual Report 2022.
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
In March 2022 the Board conducted a self-assessment of its performance. As in previous years, the Directors were asked to complete a questionnaire based on the ten principles of the QCA Corporate Governance Code and answer additional questions allowing Directors to give their views on the main achievements of the Board over the past twelve months, and the Board’s main strengths and weaknesses. The results were initially reviewed by the Chair and Company Secretary and then shared and discussed with the full Board.
In November 2021 the Remuneration Committee and the Audit Committee conducted a self-assessment of their performance. The Remuneration Committee used the same questionnaire as last year which incorporated the guidance contained in the QCA Remuneration Committee Guide. Similarly, the Audit Committee used the same questionnaire as its previous self-assessment. Members were asked to rate the performance of each 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 the previous year’s results. Noticeable improvements for the Audit Committee were in three areas: i) overseeing financial reporting; ii) overseeing risk management and internal control; and iii) overseeing business assurance. All three of these areas received Committee focus this year, including input from PricewaterhouseCoopers LLP (‘PwC’) and BDO LLP (‘BDO’).
It is worth noting that all three evaluations covered a time period in which the Board went through quite a significant change in membership (including changes in Chairs of the Board and the Remuneration Committee) meaning like-for-like comparisons with previous years were difficult to make.
Evaluation of the Chair and the Non-Executive Directors:
Mark Tentori, Senior Independent Director, met with the Board members (excluding Stewart Gilliland) to obtain feedback on Stewart’s performance in his first year as Chair. The feedback was extremely positive, with each member confirming their full support for the Chair. Stewart met with each Director individually to discuss their individual contributions to the Board, assessing their effectiveness and highlighting any areas of improvement. It has been good to see the widening of the overall skill set and experience on the Board with the addition of the new Directors. The Board is in a strong position to drive the Group forward and bring about improvements in its performance.
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 corporate culture initiative is called #Be EPIC – Ethical, Passionate, Inspiring and Creative. This is used for the entire employment life cycle from recruitment, performance management to reward and recognition. They include 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 online team appraisal system.
Our performance management systems and processes are designed to direct and influence behaviours.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
Ordinarily, there is a distinct division of responsibilities between the Chair and the CEO. The Chair 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. Since 1 March 2022 we have been without a CEO and as of June 2022 Stewart Gilliland stepped into the role of Interim Executive Chair for a temporary period. He is overseeing the recruitment process for a new CEO and will revert to his role as Non-Executive Chair once that appointment is in place.
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 for the Board for approval. These can be found here.
The Board has three committees – Remuneration, Audit and Nomination. Other than me (in my current role as Interim Executive Chair), each of these committees is comprised solely of independent Non-Executive Directors, with Executive Directors being invited to meetings as appropriate. For the membership of each committee, including its Chair, see pages 52 and 53 of the Annual Report 2022.
The Nomination Committee is responsible for regularly reviewing the structure, size and composition (including the skills, knowledge, experience and diversity) of the Board and other senior executives, and making recommendations to the Board with regard to any changes. It also keeps under review the leadership needs of the organisation, to ensure succession plans are in place, with a view to ensuring the continued ability of the organisation to compete effectively in the marketplace. Further information can be found on pages 63 and 63 of the Annual Report 2022.
The Audit Committee satisfies itself on the integrity of financial information and ensures the 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 auditors. 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 auditors report to the Board. Further details about the activities undertaken by the Audit Committee this year can be found on pages 59 to 61 of the Annual Report 2022.
The Remuneration Committee assists the Board in fulfilling its responsibilities to shareholders to ensure that: (i) the remuneration policies and practices of the Company are designed to promote the long-term success of the Company, and are aligned with the Company’s strategy and values, having regard to all statutory and regulatory requirements and to the views of stakeholders; and (ii) senior executives are provided with fair and sustainable remuneration which is linked to the delivery of strong personal and corporate performance. Further details about the activities undertaken by the Remuneration Committee this year can be found on pages 65 to 73 of the Annual Report 2022.
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 2022, 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 acquisitions, capital expenditure 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 auditors;
• approval of the strategy, plans and budget;
• review of the Group risk register including assessing the Board’s risk appetite.
• approval of changes to key personnel including their remuneration;
• approval of the cancellation of the Value Creation Scheme;
• approval of annual bonus targets for the following financial year;
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.
Our historical Annual Reports and notices of general meeting, along with all other documents sent to shareholders, can be found here.