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In accordance with AIM rule 26, the Board have considered and adopted the QCA Corporate Governance Code for Small and Mid-size Quoted Companies (“the Code”).

The principles of good governance and compliance arrangements

The Board is committed to high standards of corporate governance. The adoption and maintenance of good governance is the responsibility of the Board as a whole, who in accordance with AIM rule 26 have considered and adopted the QCA Corporate Governance Code for Small and Mid-size Companies introduced in 2013 (“the Code”). The Code includes twelve principles of good practice, which have been developed to support the delivery of growth in long term shareholder value by maintaining a flexible, efficient and effective management framework within an entrepreneurial environment. The Board believes that by adopting these principles, which are appropriate to the size of the Group, the Company’s numerous and widespread shareholder base can expect the highest possible level of standards. The Directors are pleased to provide the following additional information with regard to compliance with these principles of the Code :

 

Setting out the vision and strategy

 Wynnstay is committed to sustained development within the agriculture sector and will strive for continued growth by acquisition and organic development of the business. In so doing, the Group will optimise the return to all stakeholders in the business. In order to achieve this ambition, the Group recognises that it must excel in terms of value, quality and the development of its products, services and people. The Group strives to become the “Supplier of Choice” for its customer base. Fuller details of the operational strategy of the business can be found in the latest published strategic report. Click here for the latest details.

 

Managing and communicating risk and implementing internal control

The Group adopts a risk approach appropriate to the business activities being conducted, and the Board retain responsibility for regularly reviewing risk management strategies. Risks and uncertainties for the business are classified into two main categories, Financial and Operational, and the Board monitor such risks having developed policies for managing the uncertainties they bring. The monitored risk categories and the main policies for their control can be found in our published Risk Management Statement here. Further relevant information can also be found in our Board sub-committee reports.

The Board of Directors has overall responsibility for the system of internal controls, including financial, operational and compliance, operated by the Group and for its effectiveness. Such a system can only provide reasonable and not absolute assurance against material misstatement or loss, as it is designed to manage rather than eliminate the failure to achieve business objectives. 

The key procedures within the control structure include:

  • Managers at all levels in the Group have clear lines of reporting responsibility within a clearly defined organisational structure;
  • Comprehensive financial reporting procedures exist, with budgets covering profits, cash flows and capital expenditure being prepared and adopted by the Board annually. Actual results are reported monthly to the Board and results compared with budgets and last year’s actual. Revised forecasts are prepared as appropriate; and
  • There is a structured process for appraising and authorising capital projects with clearly defined authorisation levels.

 

Articulating strategy through corporate communication and investor relations

The Board recognises the importance of communicating with its shareholders and maintains dialogue with institutional shareholders and analysts, and presentations are made when financial results are announced. The Group retains the services of a professional financial public relations company, who assist with ensuring the accurate and timely communication of relevant corporate, financial and other regulatory news. Mr P M Kirkham is the nominated independent non-executive Director who makes himself available to shareholders who may require independent Board contact. The Annual General Meeting is the principal forum for dialogue with private shareholders who are given the opportunity to raise questions at the meeting, and to meet directors and senior managers of the business who make themselves available after each meeting.  The Company aims to send out the notice of the Annual General meeting at least 21 working days before the meeting and publish the results of resolutions (which are usually voted on by a show of hands) in a Regulatory News Statement after the relevant meeting. Shareholders also have access to the Company’s website, click here.

 

Meeting the needs and objectives of shareholders

The Board appreciates that the diverse shareholder base of the Group may have differing objectives for their investment in the business, and therefore the importance of ensuring that non-executive directors (“NED”) have an up to date understanding of these perspectives is well recognised. Directors will therefore routinely engage with both institutional and private investors and will seek out opinions on unusual or potentially controversial matters before adopting policy changes or tabling shareholder resolutions. The Board will always review written feedback reports from investors following financial results “roadshows” and will always consider information received from institutional voter advisory firms. 

 

Meeting stakeholder and social responsibilities

The Directors recognise the importance of managing the business in a responsible, fair and ethical manner, and strive to engender such values in every aspect of the Group’s operations. Social, environmental and sustainable considerations are taken into account in the formulation of polices in the following areas of activity:

Human resources

The relationship nature of much of the Group’s trading activities makes it heavily dependent on the quality and efficiency of the personnel involved in the business. People management and development is therefore critical to the success of the Company, and considerable effort and investment is put into the recruitment, training, welfare and support of all staff. The Group is committed to creating a fair, enjoyable and fulfilling work environment and has policies in place to create opportunity, prevent discrimination, encourage engagement and keep staff informed on aspects of the business. All eligible employees are offered the opportunity to become shareholders in the business through regular invitations to join sharesave schemes. The Board believes that these taxes effective and relatively risk free arrangements are an ideal way of aligning staff interests with those of other stakeholders.

Modern slavery & human trafficking

Following the introduction of the Modern Slavery Act 2015, the Group has prepared and published annual statements on this issue, the latest of which can be accessed here.  

This statement confirms the Board’s commitment to preventing modern slavery and human trafficking acts within its corporate activities and its national and international supply chains, and sets out Wynnstay's current approach to understanding the potential risks of such abuses, and the steps in place and to be implemented, to prevent modern slavery or human trafficking events occurring within its own activities.

Health and safety

The Group takes the health and safety of its staff, customers and everyone else involved with its activities very seriously. All staff receive basic training and where individual roles require, additional specialist support is provided. Occupational health specialists are utilised to screen employees who operate in environments with an added risk of exposure to noise, vibration or other hazards that may cause harm. The Group and subsidiary Boards routinely consider health and safety matters and ensure adequate resources are in place to enable all personnel to fulfil their obligations in this regard. The Audit Committee considers an annual report on safety, risk and compliance management and will require appropriate action be taken where areas of concern are identified. Reportable injuries (Riddor) during the last financial year numbered 4 across the Group, which was a reduction on the previous year when there were 5 incidents.   

Sustainability and limiting environmental impact

The Group seeks to operate all activities in a sustainable manner, and management are actively encouraged to consider and minimise the environmental impact of their operations. Energy usage is recorded across the Group and reported centrally for monitoring, with individual departments tasked with efficiency improvement targets on a unit productivity basis. The Group continues to act on improvement opportunities identified from the audits conducted in compliance with the “Energy Savings Opportunity Scheme” managed by National Resources Wales. Over the course of the next year a significant capital project is planned at Carmarthen to improve waste water management on the site, which will include improved water treatment facilities and a water recycling lorry wash. Recycling processes operate across the Group for plastics, paper, cardboard, metal, wood, electrical equipment and used oils. Fuel efficiency is paramount in vehicle investment decisions, and mileage management is a key task for all fleet responsible personnel. 

Supporting the community

Making a positive difference to the communities in which the business operates is important to the Group. An active part in communities surrounding our stores and business offices is encouraged, with support for various local events, fundraising activities and community groups evident. Offering support to educational establishments such as schools, colleges and universities in the form of donations, group visits and support with research projects is of particular importance as we recognise the significance of the future generation within the industry. Alongside this we support the Royal Agricultural Benevolent Institution (R.A.B.I) and local Young Farmers Clubs in all regions as our nominated charities, with donations to these organisations last year amounting to £5,912. Additional community support has been planned to recognise the Group’s centenary year in 2018, with employees participating in additional charity fundraising events and a substantial donation made to community facilities in Llansantffraid.

 

Using cost effective and value added arrangements

 The Board have adopted policies in regard to various regulatory, compliance and control issues, and will always seek to ensure that such policies are operated in a cost effective manner while ensuring effective achievement of the respective objective. As the Group operates across a number of different markets in both its Agricultural and Specialist Retail segments, strong internal controls are required to ensure the business is not exposed to financial irregularities or losses that are not readily identifiable. Such controls include policies for the proper authorisation of the procurement of all products and services, and the sanctioning of expense expenditure and employment costs. These policies are principally controlled by the Management Boards of the operating subsidiaries of the Group, who meet on a regular routine basis. The Group Chief Executive and Finance Director attend all these meetings and undertake business and financial reviews of subsidiary activity with particular attention paid to the monitoring of actual performance against budget.  

The Board of Directors has overall responsibility for the system of internal controls, including financial, operational and compliance, operated by the Group and for its effectiveness.  Such a system can only provide reasonable and not absolute assurance against material misstatement or loss, as it is designed to manage rather than eliminate the failure to achieve business objectives. 

  • The key procedures within the control structure include: Managers at all levels in the Group have clear lines of reporting responsibility within a clearly defined organisational structure.
  • Comprehensive financial reporting procedures exist with budgets covering profits, cash flows and capital expenditure being prepared and adopted by the Board annually. Actual results are reported monthly to the Board and results compared with budgets and last year’s actual. Revised forecasts are prepared as appropriate; and there is a structured process for appraising and authorising capital projects with clearly defined authorisation levels. 

 

Developing structures and processes

 The Board regularly reviews the structured process and processes used to manage the business, and takes advice from appropriate retained professionals, including its nominated financial advisor and corporate lawyers. The Board normally meet once a month with additional meetings as necessary. Minutes are maintained of all Group and subsidiary Board meetings, and all senior management sessions. Records are maintained of everyone present at such meetings and arrangements are in place for updating any relevant personnel who may have been absent. Directors are able, if necessary, to take independent professional advice in furtherance of their duties, at the Company’s expense. All directors and some senior members of staff have adopted a set of guidelines in regard to their responsibilities for the management and conduct of the Company.

 

Being responsible and accountable

The Board operates a policy of collective responsibility with regard to its decision making, with the Chairman being responsible for the smooth functioning of its activities. The Chairman will ensure that each member of the Board is given fair and equal opportunity to clearly express their respective views on all matters, and that the executive directors are adequately able to communicate reasonable commercial views on matters under debate. A formal schedule of matters requiring Board approval is maintained, and includes :

  • Group strategy control, including approval of principal activities description and periodic corporate plans.
  • Board appointments, including structure and composition, casual and expansionary appointments, retirement policies and rotation selection, and election of Chairman, Vice Chairman and other delegated roles.
  • Corporate governance matters, including relevant code adherence, corporate social responsibility matters and statements, and approval of any political support or financial contributions.
  • Financial control, specifically approval of Group financial & capital budgets, approval of Group financial results, and approval of Group financial indebtedness commitments in excess of a total of £500,000.
  • Capital expenditure confirmation of projects, which are budget approved and exceed an expenditure limit of £100,000 or non budget approved above an expenditure limit of £50,000.
  • Share capital matters with regard to, the allotment of new shares, the market purchase of existing shares, the cancellation of any existing shares, and the dividend policy of the Group, and approval of Interim & Final dividends.

 

 Having balance on the Board

The Board currently comprises seven directors, three of whom are executive and four non-executives. The roles of Chairman and Chief Executive are separated. The Chairman is non-executive and is elected by the whole Board on an annual basis, with Mr J J McCarthy originally appointed to this role in November 2013. A Senior Independent Director has been appointed, who carries out the important function of acting as a confidential “sounding board” for other directors, and who has been nominated as the person available to shareholders who may require independent Board contact. The Board believes that this structure, together with the operation of its sub-committees described below, satisfies the flexible and effective management elements of the Code guidelines. Certain relevant details of the contracts of employment for the executive directors, and the letters of appointment for the non-executive directors are disclosed in the annual Director’s Remuneration Statement. The circumstances of all non-executive directors, including the Chairman, have been considered against the guidelines laid out in section B.1.1 of the UK Corporate Governance Code, and the general concept of independence of character and judgement, as of July 2018. The conclusions of these reviews were that all non-executives were deemed Independent under the Effectiveness principles of the Code. However the following points were considered worthy of further disclosure with regard to each non-executive director :

  • James John McCarthy – currently served seven years on the Board and been Chairman since 2013. He is also the Chairman of two other listed UK companies.
  • Philip Michael Kirkham – currently served five years on the Board and been Vice Chairman since 2015 and nominated as Senior Independent Director. He is a director of M & R Kirkham & Sons Limited, a mixed farming business in the West Midlands, which is a customer of the Group, who during the last financial year purchased £314,000 of goods on an arms length basis from the Company.
  • Howell John Richards - currently served four years on the Board. Prior to his appointment he had served for a number of years as a paid sales consultant to the business, but has not received any additional income for such services since being appointed to the Board. He is a director of Cwrt Malle Limited, a farming business in South Wales, which is a customer of the Group, who during the last financial year purchased £2,705,000 of goods on an arms length basis from the Company.
  • Stephen Ellwood - currently served two years on the Board. He is a director of a number of other businesses operating in the broader agricultural sector, including NIAB, to whom the Group pays DEFRA regulated seed crop registration fees. These amounted to £30,000 during the last financial year.

 

Having Appropriate skills and capabilities on the Board

Brief biographies of the directors can be found here. The executive directors all have considerable experience in the agricultural supply industry and have spent much of their careers with the Group, providing a significant degree of management continuity. The non-executives bring a range of business and commercial expertise to the Board, including direct agriculture and specialist retail skills, and are all deemed independent under the Code as described above. The Board operate Code recommended Audit, Remuneration and Nomination sub-committees and details are provided in the section below.  

Board Committees :

Audit Committee

This Committee currently consists of three non-executive directors: Mr P M Kirkham, Mr H J Richards and is chaired by Mr S J Ellwood, who through his previous banking experience satisfies the guideline requirement for a financially qualified member of an audit committee. The Committee normally meets three times a year as required. The Committee has standard terms of reference which have been formally approved by the Board, and which include the supervision of the external audit process and the effectiveness of the internal financial controls. The terms of reference further task the Committee with identifying and evaluating significant internal and external risks faced by the Company, and then making recommendations to the Board on appropriate strategies for effectively managing these risks. Such risks include:

  • The reliability of internal and external reporting systems
  • The safeguarding of assets from inappropriate use, loss and fraud
  • Identifying and properly managing liabilities
  • Compliance with relevant taxation legislation and ensuring the Group acts in accordance with its published tax strategy
  • Ensuring the business operates within all applicable legislation and uses best practice wherever possible

The Audit Committee met three times during the last financial year and all committee members attended. The Committee agreed the nature and scope of the audit with the auditor and monitored their findings. The Committee organise internal audit assignments to test the operating effectiveness of internal systems and controls. These assignments are not completed by specific internal audit employees, but appropriate members of staff. The Committee has procedures in place to enable it to meet with the auditor without the presence of the Company’s management and it formulates and oversees the Company policy on maintaining auditor objectivity and independence in relation to non audit services. The policy is to ensure that the nature of the non audit services performed or the fee income relative to the audit does not compromise the auditors’ independence, objectivity or integrity and complies with ethical standards. Details of such services and fees are provided in note 6 to the accounts.

The terms of reference of the Committee can be found here.

Remuneration Committee

This Committee of the Board consists of Mr J J McCarthy and Mr H J Richards and is chaired by Mr P M Kirkham. The Committee meets at least once a year and has standard terms of reference in place which have been formally approved by the Board. These terms of reference include the formulation of remuneration policies for executive directors and senior managers, and the supervision of employee benefit structures throughout the Company. The Remuneration Committee met twice during the last financial year and all committee members attended.

The terms of reference of the Committee can be found here.

Nomination Committee

This Committee of the Board currently consists of Mr J J McCarthy, Mr G W Davies and is chaired by Mr P M Kirkham. The Committee meets at least once a year and has standard terms of reference in place which have been formally approved by the Board. The Committee is tasked with reviewing the leadership needs of the Company and making recommendations to ensure the continuity of such leadership through the identification, evaluation and appointment of both executive and non-executive directors. The Nomination Committee met once during the last financial year and all committee members attended.

The terms of reference of the Committee can be found here.

 

Evaluating Board performance and development

The Chairman is responsible for the periodic performance reviews of the Board, its sub-committees and non-executive directors. In June 2017, the senior independent non-executive conducted a Board evaluation exercise, considering the structure, governance, operating dynamics and the risk management processes currently in place. The conclusions of this exercise were considered by the whole Board and deemed satisfactory, with areas for improvement scheduled for further review. Towards the end of the last financial year, the Nomination Committee conducted a review of the succession planning requirements for the position of Group Chief Executive Officer following indication from Mr Kenneth Richard Greetham that he intended to retire. This review resulted in a thorough recruitment process to identify suitable internal and external candidates for a replacement, and resulted in the announcement of the 8th May 2018 of the successful appointment of Mr Gareth Wynn Davies as Chief Executive Designate.

Providing information and support

The formal schedule of matters reserved for Board approval has been described above and acts as the main guide for any specific information provided to directors. Additionally, as a matter of routine, directors receive papers relating to each Board meeting at least seven days in advance, and which also include :

  • Group monthly and year to date management accounts with variances reported against prior year comparisons and budgets.
  • Executive director commercial reports on segmental trading and financial issues.
  • A report on any health and safety matters or issues.
  • A report on any environmental matters or issues.
  • Any relevant industry or competition news.

All directors have access to the Company Secretary to arrange the inclusion of any matter they wish to table for Board discussion or to receive additional information on any Company matter that they feel is relevant. As previously highlighted directors are able, if necessary, to take independent professional advice in furtherance of their duties, at the Company’s expense, and are able to commission appropriate external support for any Board Committee responsibilities. 

 

ADDITIONAL INFORMATION

Going concern and long term viability - The Group works within a corporate plan to ensure clear direction and focus for the strategic development of the business. This corporate plan is regularly reviewed and updated appropriately for commercial and economic circumstances. Annual budgets are set in line with corporate goals in the plan, but which recognise specific market conditions at the time. The Directors have prepared the financial statements on a going concern basis, having satisfied themselves from a review of internal budgets, forecasts and current bank facilities that the Group has adequate resources to continue in operational existence for the foreseeable future.

New Developments

The Board regularly monitors developments to Corporate Governance regulations and processes appropriate to entities of its size. The requirements of the new Anti Money Laundering Directive have been noted and the Company has now created a Register of People with Significant Control, although as at the date of this report, the Register contains only the prescribed statement A that “The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company.” The Group published a Tax Strategy document in October 2017 in accordance with new HMRC requirements, and the Board fully supports such disclosure principles. Data has been reported for the relevant subsidiary in relation to new regulations in 2018 including, the “Reporting on Payment Practise Regulations” and the “Gender Pay Gap Regulations”. Appropriate policies were reviewed and amended appropriately ahead of the implementation of the General Data Protection Regulations (GDPR) in May 2018, with all appropriate staff receiving training. 

Auditor Independence

The Board is satisfied that BDO LLP has adequate policies and safeguards in place to ensure that auditor objectivity and independence is maintained. The Company meets its obligations for maintaining the appropriate relationship with the external auditors through the Audit Committee whose terms of reference include an obligation to consider and keep under review the degree of work undertaken by the external auditor, other than the statutory audit, to ensure such objectivity and independence is safeguarded.

 

 

B P Roberts

Company Secretary

21 August 2018