The Principles of Good Governance
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 have considered the twelve principles of good practice published in the QCA Corporate Governance Guidelines for Smaller Companies introduced in 2013. The Board believes that it has incorporated these principles in formulating a Corporate Governance policy appropriate to the size of the Group, and which can provide comfort for the Company’s numerous and widespread shareholder base who have the right to expect the highest possible level of standards. The Directors are pleased to provide the following information:
The Board of Directors
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. 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 Guidelines. Mr P M Kirkham, having been appointed in April 2013 is deemed the Senior independent non-executive. 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. A formal schedule of matters requiring Board approval is maintained, and covers such areas as Group strategy, approval of financial budgets and results, Board appointments, approval of major capital expenditure and dividend policy. The Board normally meet once a month with additional meetings as necessary. 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. 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 QCA 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 Director’s Remuneration Statement.
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; and
- Ensuring the business operates within all applicable legislation and uses best practice wherever possible.
The Audit Committee met three times during the 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.
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 year and all committee members attended.
This Committee of the Board currently consists of Mr J J McCarthy, Mr K R Greetham 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 year and all committee members attended.
Relations with Shareholders
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. Mr P M Kirkham is the nominated independent non-executive Director who makes himself available to shareholders who may require independent Board contact, and has done so, with a number of institutional and other shareholders during the year.
The Annual General Meeting is the principal forum for dialogue with private shareholders who are given the opportunity to raise questions at the meeting. The Company aims to send out notice of the Annual General meeting at least 21 working days before the meeting. Shareholders also have access to the Company’s website at www.wynnstay.co.uk.
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.
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.
Corporate Social Responsibility
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 tax effective and relatively risk free arrangements are an ideal way of aligning staff interests with those of other stakeholders.
Modern slavery and human trafficking – following the introduction of the Modern Slavery Act 2015, the Group prepared an initial statement, published in December 2016, regarding the procedures in place to limit the risk of slavery or human trafficking events occurring within its business and supply chain. This statement set 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 business and associated supply chains. This statement relates to intentions and actions taken during the financial year, and the future development of procedures for identifying risks and preventing abuses. An updated statement is currently under preparation.
The Wynnstay Board has committed to preventing modern slavery and human trafficking acts within its corporate activities, and to ensure that its national and international supply chains are free from such abuses. Where possible the organisation prefers to build long standing relationships with our suppliers, where through a strengthening of trading commitments, we can make clear our expectations of business behaviour. A review of primary trading partners has been completed with a view to identifying relationships where a risk may exist. This categorisation approach is intended to allow the Company to prioritise its limited resources initially to any areas of perceived highest threat. Engagement with these suppliers has not identified any substantial risks to date. Procurement policies have been updated to include ethical and supplier codes of conduct where appropriate, in addition to any usual commercial contract terms. This process is intended to be rolled out to all appropriate supply relationships. Our procurement policy is intended to comply with the Modern Slavery Act 2015 and incorporates a risk assessment protocol which identifies and assesses potential risk within that particular supply chain. Appropriate investigative and auditing processes commensurate to the scale of the enterprise and risk, are intended to be executed as necessary. Our staff will be provided with sufficient training enabling them to identify risk and ensure the expectations of the procurement policy and its associated processes are understood at all levels across the Group. All suspected cases of modern slavery and human trafficking are requested to be reported to the Head of Procurement, and any such report will be investigated on a case by case basis, with appropriate remedial action taken immediately. The Board also recognise that concerns about modern slavery are not just limited to the Company’s supply chains, but may also be a risk within the Group’s own employment environment, and particularly with regard to temporary or agency staff use. A review of such hiring practises has taken place, and a list of approved providers is maintained.
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 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. During the year the Group has acted upon a number of the improvement opportunities identified from the full audit conducted in 2016 to comply with the Energy Savings Opportunity Scheme managed by National Resources Wales. LED lighting has been installed in at least 7 locations during the year, and a number of electrical motors have been replaced in manufacturing plants to reduce electricity consumption. Replacement compressors have been installed in the Carmarthen feed mill and new molasses storage equipment commissioned at the Llansantffraid plant, all designed to reduce environmental risks. 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 we operate is important to the Group. We play an active part in communities surrounding our stores and business offices by supporting local events, fundraising activities and community groups. 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 Information and 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 is currently being collated towards complying with the new Reporting on Payment Practise Regulations for which the Company will become obliged to comply with in 2018. System and process reviews are well under way for the implementation of the General Data Protection Regulations (GDPR) in May 2018, with all appropriate staff currently receiving initial training.
The Board is satisfied that KPMG 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.
By order of the Board
30 January 2018