CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 31 MARCH 2022
The Board has determined that the Quoted Companies Alliance’s (“QCA”) Corporate Governance Code for small and mid-size quoted companies (revised in April 2018 to meet the new requirements of AIM Rule 26) would be the most appropriate for the Group to adhere to. The information on corporate governance is set out below.
The QCA Code is constructed around ten broad principles and a set of disclosures. The QCA has stated what it considers to be appropriate arrangements for growing companies and asks companies to provide an explanation about how they are meeting the principles through the prescribed disclosures. We have considered how we apply each principle to the extent that the Board judges these to be appropriate in the circumstances, and below we provide an explanation of the approach taken in relation to each. The Board considers that it does not depart from any of the principles of the QCA Code during the period under review.
The following paragraphs set out the Group’s compliance with the ten principles of the QCA Code. Further details are available at www.grafenia.com.
- ESTABLISH A STRATEGY AND BUSINESS MODEL WHICH PROMOTE LONG TERM VALUE FOR SHAREHOLDERS
Our vision was first shared with our shareholders at our 2017 AGM. It puts customers and brand partners at the centre of our focus in a relentless drive to exceed customer expectations, and is as follows:
“To be the world’s leading network of web, design, sign and print studios. Known as the local place for business, where business happens. Where customer experience is our priority. Where we deliver compelling value and reliable service every time. So we are rooted in every team member’s and partner’s success.”
Our strategy to achieve this is to build our network of studios, buy businesses to accelerate our growth, and license our intellectual property both in the UK and overseas.
Our strategy and business operations are set out more fully in the Strategic Report section of the Group’s Annual Report. Further information in respect of our acquisition strategy can be found on our website and in our Half Year Report released on 22 November 2021. In the summer and early autumn of 2022, the Board will run a strategy exercise to explore the right operating model for the group going forward. That will likely result in an updated Vision and Mission framework to be communicated in due course.
The Group’s principal risks and uncertainties and the systems and internal controls developed to mitigate them are set out in the disclosure to principle 4 of the code.
- SEEK TO UNDERSTAND AND MEET SHAREHOLDER NEEDS AND EXPECTATIONS
The Company believes strongly in transparency and an open door policy towards shareholder communications. It aims to provide fair and objective reporting and seeks to ensure its strategy, business model and performance are clearly communicated and understood through its half year and full year reports. Past and present versions are published on the Company’s website.
Given the stage of the Company’s development its AGM provides the key opportunity for dialogue with shareholders. All members of the Board attend the AGM. A Notice of AGM is circulated to all shareholders on the register at least 21 days in advance of the AGM. The post AGM presentation has necessarily taken on a virtual format in recent years because of the Pandemic. This year it will revert to an inclusive, informative and fun ‘in person’ format and we hope to welcome as many shareholders as possible
The Chairman and Company Secretary go to additional lengths to identify and communicate with major shareholders whose holding is via nominee accounts and encourage voting and shareholder feedback and engagement.
The number of proxy votes received for each vote are announced at the AGM and the results of the AGM are announced and published on our website.
The Company does not presently have significant representation from traditional institutional investors. However, at an appropriate juncture it will seek to develop this area with the support of its broker Allenby Capital.
- TAKE INTO ACCOUNT WIDER STAKEHOLDER AND SOCIAL RESPONSIBILITIES AND THEIR IMPLICATIONS FOR LONG- TERM SUCCESS
The Company actively seeks to engage with its wider stakeholder base in order to maximise decision making, ensure alignment of interests and balance the needs of all stakeholders, whilst meeting its primary responsibility to promote the success of the Company for the benefit of its members as a whole via the execution of its strategy and business model set out in the disclosures to principle 1 of the code.
The Company regularly engages with its employees via a number of practices and procedures. Team members are able to give valued feedback on the working environment and other stakeholder insights through, for example:
- w3pin the Company’s on-line message board and forum as well as third party applications and business communication platforms. Use of such platforms came into sharp focus during the pandemic and continued support of homeworking;
- regular virtual meetings bringing together our customer facing operational senior management and team leaders.
The Company is an advocate of apprenticeships and goes beyond its legal obligations such as the payment of the apprentice levy in its commitment to this stakeholder group. In the last Financial Year 9 placements were provided under the Government Kick Start scheme from 16 to 24 year olds on Universal Credit.
Customers and Suppliers
The Company invests in customer service software and infrastructure to support feedback from these stakeholder groups and monitors and measures internal targets for response times and quality.
Our vision is to be rooted in every team member’s and partner’s success. To that end the Company regularly engages with its partner network through events such as the Company’s Grapalooza and other virtual events (held in in place of roadshows and conferences since the onset of the pandemic), w3pin and on-line polls and votes, the responses to some of which have shaped key strategic and operational decisions around important aspects of our business, ranging from pricing to environmental policies and considerations.
The Company is conscious of the environmental impact of the industry that it operates in. We seek to mitigate and minimise the Company’s impact on the environment through practices and procedures including the supply and promotion of biodegradable products and adoption of technologies to reduce the Company’s energy consumption. All of our matt and gloss laminated print for example is produced using a biodegradable film and more recycled options were added during the year. The Company also previously invested in voltage optimisation equipment.
- EMBED EFFECTIVE RISK MANAGEMENT, CONSIDERING BOTH OPPORTUNITIES AND THREATS, THROUGHOUT THE ORGANISATION
Principal risks and uncertainties faced by the Group are set out in the Financial Review.
The Board is responsible for establishing and maintaining the Company’s system of internal control, which is designed to meet the particular needs of the Company and mitigate the risks to which it is exposed. Such a system is designed to manage these risks, to provide reasonable, but not absolute, assurance against material misstatement or loss, and to maintain proper accounting records to ensure the integrity of the financial information used within the business and for external publication.
The Board reviews the effectiveness of the system of internal control and considers whether the Company’s internal controls processes would be significantly enhanced by an internal audit function and has taken the view that at the Company’s current stage of development, this is not required. The Board will continue to review this matter each year.
The Board considers that the internal controls in place are appropriate for its size and resources, its activities and the risk profile. The key elements of the control system in operation are:
- The Board meets regularly to consider matters reserved to it and has put in place an organisational structure with clear lines of defined responsibility and with appropriate delegation of authority to manage risk.
- Following the onset of Covid-19 the executive members of the Board have met on a weekly and, at key times, daily basis to consider the opportunities and threats facing the Company. This weekly meeting schedule remains in place.
- The senior management team meets every Monday providing an opportunity to consider operational risks faced and provide stakeholder feedback from across the Group’s operations.
- An organisational structure exists with defined roles and accountability and a culture is fostered which encourages entrepreneurial decision making while minimising risks. A key component of this is our Leadership Values book which sets out nineteen things we look for and measure our people on and ask them to hold their peers, colleagues and leaders to account over.
- GrafOS (hosted on w3p, the Platform that manages our entire organisation) provides mechanisms for peer-to-peer evaluation and continuous 360 degree feedback, it’s essentially an early warning system for undesirable behaviour.
- w3pedia (also hosted on w3p) sets out the written operating procedures for all aspects of our business together with our staff handbook which contains policies providing guidance on things that could get our employees into trouble (including anti bribery, data protection, use of mobile phones whilst driving and much more).
- The Company has information systems for monitoring its financial performance against approved budgets and forecasts.
- Documented quality systems include comprehensive health and safety policies and procedures, reviewed and updated on an ongoing basis by the Company’s Health & Safety Officer, which encompass all aspects of the Group’s day-to-day operations. The Executive management team reports to the Board on any health and safety issues at every Board meeting.
- The Audit Committee receives reports from the external auditors on a regular basis and from executive directors of the Company. The Board receives periodic reports from all Committees.
- The Group retains an insurance broker and maintains appropriate insurance cover in respect of actions taken against Directors and in respect of materials loss or claims against the group and the risks it faces. The types of cover and insured values are reviewed annually.
- MAINTAIN THE BOARD AS A WELL-FUNCTIONING, BALANCED TEAM LED BY THE CHAIR
The make-up of the Board is reviewed on an ongoing basis in light of the Company’s development, requirements and resources.
The Board currently comprises three Non-Executive Directors (including the Chairman) and three Executive Directors.
All of the Directors are subject to election by shareholders at the first Annual General Meeting after their appointment and the article 32 of the Company’s articles of association requires anyone who has been in office for three years without re appointment to seek re-election.
The Non-Executive Directors are considered by the Board to be independent under the QCA Code’s guidance for determining such independence. All Non-Executives receive a fixed fee for their services and do not participate in any performance-related remuneration schemes, or have any interest in a company share option scheme.
To enable the Board to discharge its duties, all Directors have full and timely access to all relevant information. A rolling programme of Board meetings is maintained throughout the year together with adhoc meetings as the Company’s requirements demand. The director’s attendance records in the year under review (excluding directors who have ceased to be directors in the period), is as follows:
|Number held||Board meetings
|Audit committee meetings
|Remuneration Committee meetings
|Jan-Hendrik Mohr (Chairman)||5||2||1|
|Conrad Bona (Non-Executive Director)||5||2||1|
|Simon Barrell (Non-Executive Director) – audit since becoming non exec||5||2||1|
|Gavin Cockerill (Acting CEO)||5||–||–|
|Richard Lightfoot (Director & Company Secretary)||5||–||–|
|Iain Brown (Group Finance Director) –since election||5||–||–|
In the past Board meetings and the Company’s AGM have been held at various Group premises giving, in particular the Non-Executive Directors, access to different operations and the opportunity to develop a wide understanding of the Group’s activities. Since the onset of COVID-19, Board meetings have necessarily been held remotely a return to some ‘in person’ meetings is planned for the forthcoming year.
The Company Secretary reports directly to the Chairman on governance matters. The Board believes that Richard Lightfoot’s appointment as Director and Company Secretary is appropriate at this stage of the Company’s development and given its requirements and resources. This arrangement is assessed on an ongoing basis and separation of duties will be implemented as appropriate.
- ENSURE THAT BETWEEN THEM THE DIRECTORS HAVE THE NECESSARY UP-TO-DATE EXPERIENCE, SKILLS AND CAPABILITIES
The Board considers that all of its directors are of sufficient competence and calibre and between them provide an appropriate and effective balance of skills and experience, including in the areas of retailing, wholesaling, marketing, print production, software development, ecommerce, finance and mergers and acquisitions. Directors’ biographies are set out on the website and the names, qualifications and backgrounds of each of the directors are disclosed within the Directors section of this annual report.
The Directors all ensure that their skills are kept up to date by the attendance of courses, briefings from professional advisors and reading relevant industry and professional publications.
The Board is supported where necessary by its external professional advisers. The Board continually reviews the performance of third party advisers to ensure they are the most effective business partners for the Group. Our Auditors were last changed in July 2017.
Directors have access to advice and services of the Company Secretary and there is a procedure for all Directors, in furtherance of their duties, to take independent professional advice, if necessary, at the expense of the Group.
Whilst the Board presently consists of one German national and one member with both Canadian and British citizenship we are mindful of the absence of ethnic diversity and gender balance. The Board is committed to continual assessment of its composition as the Company evolves.
The Company Secretary provides Directors with updates on key developments relating to the Company and legal and governance matters including advice from the Company’s nomad, lawyers and other advisors.
- EVALUATE BOARD PERFORMANCE BASED ON CLEAR AND RELEVANT OBJECTIVES, SEEKING CONTINUOUS IMPROVEMENT
The Chairman assesses the individual contributions of each of the members of the team to ensure that:
- they are performing their roles and carrying out their responsibilities to the highest standards;
- their contribution is relevant and effective;
- where relevant, they have maintained their independence.
Appraisals are carried out each year for all Executive Directors and to assess overall Board composition. The appraisal process is an ongoing consideration of the Board as a whole.
The Chairman Jan Hendrik Mohr conducts an annual review of the Board’s effectiveness, in accordance with Principle 7 of our Corporate Governance Statement. The objective of this evaluation process is to bring to light possible changes which could make the Board’s activities and administration more effective and efficient.
The Board Evaluation covered the following areas:
- the manner in which the Board is run, and operates as a team;
- the skills, experience and independence of the Board;
- the strategy of the business;
- the risks of the business;
- the Company’s ethical values and behaviours; and
- engagement with shareholders and other stakeholders.
The exercise identified a number of positive areas particularly relating to the skills and experience and independence of the Board and the level of engagement with shareholders. The main area for improvement identified in the previous evaluation was formal succession planning and lack of diversity. A process to address is ongoing and will be a central part of the forthcoming strategy exercise, where we perform a full leadership and operating model review, including external advisors, in the summer and early autumn.
|Manner in which the board is run||The level of engagement between NEDs and executives is high. The Board drastically increased the cadence of meetings during the pandemic to a weekly schedule which proved to be informative and allow for quick decision making. More recently Board cadence has reverted to fewer, but more in-depth sessions to allow for complex discussions.|
|Skills, independence and experience||The current membership of the Board reflects a broad perspective of different skills.
A core area of improvement in the board is diversity. The current board doesn’t appropriately reflect the level of diversity we have in our organisation and future recruiting decisions should clearly take diversity into consideration.
There is no formal succession policy which is a deficiency. A process to address this is ongoing and is centred around the current CEO transition.
|Strategy of the business||In August 2020, the Board started a dedicated “Post-Covid” evaluation of strategy to ensure viability of the business model even in significantly reduced sales environments. Ultimately we took the decision to market our manufacturing business, Works Manchester, and that culminated in its sale to PFI Group on 31 May 2022. Our strategy remains to “build, buy and license” but with a renewed focus on acquiring and developing our software business.|
|Risk of the business||Risk of the business is evaluated in-lieu of strategy as the board perceives risk to be a core influence on strategy. When setting strategy, we reflect on the interdependencies for our risk appetite.|
|Ethical values and behaviours||Critical developments are monitored in the risk awareness section of every board meeting. The Company maintains a peer review mechanism for all employees (GrafOS) that allows for flagging of misconduct and feedback mechanism.|
|Engagement with shareholders||The board keeps an open and constructive dialogue with its shareholders. In particular, the largest 5-6 shareholders engage in fairly frequent discussions after RNS announcements. We have used our AGM as a platform to communicate strategy and invite shareholders to ask questions in a friendly, constructive and inclusive environment.|
Presently no formal Nomination Committee exists in view of the stage of growth of the Company. Appointments to the Board and succession planning are considered by the Board as a whole and are made on merit against objective criteria relating to the skills, knowledge and expertise required, and with due regard for the benefits of diversity on the Board and requirements of the Company.
- PROMOTE A CORPORATE CULTURE THAT IS BASED ON ETHICAL VALUES AND BEHAVIOURS
The Board firmly believes that culture is driven from the top and through sound Corporate governance, it takes ultimate responsibility for the culture that is developed and evolves under its leadership and guidance. That’s why we developed our Leadership Values which sit at the centre of GrafOS.
GrafOS is our operating system for people. Each role in our business is part of a career storyline with required “Intelligence” levels. Team members collect badges as they acquire competences. We encourage team members to ‘catch colleagues doing things right’ and leave positive feedback against specific Leadership Values they’ve observed. Likewise, if they spot someone behaving contra to our Leadership Values, they can share a private ImproveNote with the individual and their leader. It’s all designed to encourage and deliver ethical and entrepreneurial behaviour.
The Company’s staff manual sets out whistleblowing policy and procedures.
- MAINTAIN GOVERNANCE STRUCTURES AND PROCESSES THAT ARE FIT FOR PURPOSE AND SUPPORT GOOD DECISION- MAKING BY THE BOARD
The Board is responsible to shareholders for the proper management of the Group. The Board is responsible for overall Group strategy, approval of major capital expenditure projects and consideration of significant financing matters and approval of Annual and Interim results and budgets.
The Executive Directors have responsibility for the day-to-day operational management of the Group’s activities. The Non-Executive Directors are responsible for bringing independent objective judgement to Board decisions.
All directors are supplied with the Company’s Continuing Obligations memorandum which is reviewed and updated as required. The memorandum sets out and explains the Director’s responsibilities and obligations under the AIM Rules, the Market Abuse Regulation and other wider applicable legislation.
A formal schedule of all matters reserved for Board decision is maintained and reviewed regularly (last update February 2017) covering:
- Setting and Review of Strategy and Performance;
- Structure and Capital;
- Maintenance of Financial Reporting and Controls;
- Maintenance of Internal Control and Risk Management systems;
- Material Contracts;
- Investor Relations and Regulatory communications;
- Constitution of Board Membership and other appointments;
- Setting of Directors and Senior Management Remuneration;
- Delegation of Authority amongst the Board and its Committees;
- Implementation of Corporate Governance;
- Approval of Policies.
The Board maintains a rolling scheduled programme of Board meetings each year aligned with relevant events in the Company’s financial and trading calendar. Additional meetings are held as and when required.
A formal agenda is prepared for each meeting noting any unresolved matters from prior meetings, Board papers including a CEO’s report and KPIs, and FD’s report are circulated in advance and minutes are circulated following each meeting recording actions arising.
Non Board members are also invited to attend on occasion to participate in relevant Board discussions.
Chairman and Chief Executive Officer
The differing roles of Chairman and Chief Executive are acknowledged and there is a clear division of responsibility at the head of the Company.
The key functions of the Chairman are, to oversee the adoption, delivery and communication of the Company’s Corporate Governance model, the effective conduct of Board Meetings and meetings of shareholders, to ensure that all Directors are properly briefed in order to take a full and constructive part in Board discussions, and to ensure the Group has appropriate strategic focus and direction.
The Chief Executive has responsibility for leading the implementation of agreed strategy and managing the day-to-day operations of the Group.
The Board has established an Audit Committee and a Remuneration Committee. In view of the stage of growth of the Company there are no formal Nomination Committee or Corporate Governance Committees, however these arrangements will remain under review.
The Audit Committee and Remuneration Committee presently comprise of Jan-Hendrik Mohr (Chairman), Conrad Bona (Non- Executive Director) and Simon Barrell (Non- Executive Director), the Company’s present policy is for any new Non-executive Directors to join both Committees.
The Audit Committee’s principal tasks are to review the scope of external audit, to receive regular reports from the auditors, and to review the half-yearly and annual accounts before they are presented to the Board, focusing in particular on legal requirements and accounting standards as well as areas of management judgement and estimation.
The Audit Committee is responsible for monitoring the controls which are in force to ensure the integrity of the information reported to the shareholders. The Audit Committee acts as a forum for discussion of internal control issues and contributes to the Board’s review of the effectiveness of the Group’s internal control and risk management systems and processes.
The Audit Committee meets at least twice a year including immediately before the submission of the Annual and Interim Financial Statements to the Board.
The Audit Committee also undertakes a formal assessment of the auditors’ independence each year which includes:
- a review of the non-audit services provided to the Company and related fees;
- discussion with the auditors of a written report detailing all relationships with the Company and any other parties that could affect independence or the perception of independence;
- A review of the auditors’ own procedures for ensuring the independence of the audit firm and partners and staff involved in the audit, including the regular rotation of the audit partner;
- Obtaining written confirmation from the auditors that, in their professional judgement, they are independent.
An analysis of the fees payable to the external audit firm in respect of both audit and non-audit services during the year is set out in the Group’s Annual Report.
The Audit Committee advises the Board on the appointment of external auditors and on their remuneration for both audit and non-audit work.
Ultimate responsibility for reviewing and approving the Annual and Interim financial statements remains with the Board and a statement of directors’ responsibilities in respect of the accounts is set out in the Group’s Annual Report.
The Remuneration Committee is responsible for making recommendations to the Board on the Company’s framework of Executive remuneration and its cost. The Committee determines the contract terms, remuneration and other benefits for each of the Executive Directors, including performance related bonus schemes, pension rights and compensation payments. It also considers and oversees the implementation of any share incentive schemes.
The Board itself determines the remuneration of the Non-Executive Directors.
The Remuneration Committee meets at least once a year.
A Directors’ Remuneration report is set out in the Group’s Annual Report.
- COMMUNICATE HOW THE COMPANY IS GOVERNED AND IS PERFORMING BY MAINTAINING A DIALOGUE WITH SHAREHOLDERS AND OTHER RELEVANT STAKEHOLDERS
The Board places a high priority on clear, fair and objective reporting with its various stakeholder groups.
The Company is presently of a size that doesn’t support having a dedicated investor relations department, however the CEO’s mobile phone number is provided on all announcements and the Company Secretary’s contact details are set out on the website for shareholder enquiries. The Chairman also talks on an adhoc basis with major shareholders and provides feedback to the Board.
We are conscious that, given its present size, the Company attracts limited analyst attention. To that end the CEO maintains strong links with relevant industry media and seeks to articulate Company strategy consistently through them. Calls with journalists are also held to coincide with the release of the Group’s Annual Report.
|The result of voting in the 2022 AGM is presented as follows:
|1. To receive the Company’s Annual Accounts||46,361,494||19,988||26,784|
|2. To re-elect Jan Hendrik-Mohr as a Director||46,358,266||50,000||0|
|3. To re-elect Conrad Christian Bona as a Director||
|4. To re-elect RSM UK Audit LLP as auditors of the Company||46,408,266||0||0|
|5. To authorise the Company to replace the existing authority to allot shares and to grant rights to subscribe for or convert any security into such shares||46,358,266||50,000||0|
|6. To disapply statutory pre-emption rights||
|7. To authorise the Company to make market purchases of its own shares||
* including any votes giving discretion to the Chair.
14nd September 2022