Corporate Governance

We have chosen to report against the 2018 UK Corporate Governance Code (the “Code”) and this report sets out in broad terms how we have complied with the Code as at 31 December 2021.

A full version of the Code is available from the Financial Reporting Council website at www.frc.org.uk.

Board leadership and company purpose

The Role of the Board

The Board has overall responsibility for establishing the Group’s purpose, culture and strategy to deliver the long-term growth of the Group and generate value for shareholders. Good corporate governance facilitates clear delegation of authority from the Board through to our Executive Committee and Senior Leadership Group, and beyond, to promote clear disciplined decision-making and ensure the effective execution of our strategic priorities.

The Board assesses and monitors culture through our employee Net Promoter Score which measures satisfaction and is measured monthly. Deborah Kemp is the Non-Executive Director responsible for employee engagement and she has conducted meetings with the Company’s Senior Leadership Group which provided valuable feedback to the Board.

The Board and the Remuneration Committee continually review and improve the rewards and benefits offered to employees across the Group and during the year advance payments were paid to colleagues in respect of their 2021 discretionary bonus in early March 2021 with the balance settled in the normal manner.

The Group has also introduced an enhanced holiday scheme to give employees an extra day of annual leave for each year of service up to a maximum of five years. This is in addition to the buy and sell holiday scheme which is aimed at ensuring that employees get the right balance of time away from work. The Group’s Save As You Earn (“SAYE”) scheme is open to all UK based employees at a discount of 20% of the Company’s share price. These share options vest after three years to ensure that employees have a personal interest in the longer-term success of the Group.

Our purpose, vision and strategy

The Company has a clear purpose to provide the best possible care to animals and this is underpinned by the vision to be the veterinary company people most want to work for. CVS’s highly skilled and dedicated team of clinicians and support colleagues are at the centre of the Company’s strategy and the Company has committed to making CVS a great place to work and have a career. Our growth strategies also include recommending and providing the best clinical care, providing great facilities and equipment and taking our responsibilities seriously.

Shareholder engagement

Copies of the Annual Report and Financial Statements are issued to all shareholders where requested and copies are available on the Group’s website. The executive and Non-Executive Directors and the Company Secretary frequently engaged with shareholders during the course of the year and in addition, the CEO, COO and CFO have regular meetings with institutional investors, private client brokers, individual shareholders, fund managers and analysts to discuss performance made public by the Group.

The Chairman and the Non-Executive Directors are always available to shareholders on all matters relating to governance and strategy and can be contacted through the Company Secretary at company.secretary@cvsvets.com

Stakeholder engagement

The six key stakeholders identified by the Board are at the heart of what we do, being our employees, our customers, our shareholders, our industry bodies, our community and our suppliers. During the year the Board has met more frequently to focus on stakeholder needs, and in particular the needs of our customers and our colleagues during the COVID-19 pandemic.

Deborah Kemp is the dedicated Non-Executive Director for employee engagement and she consults with colleagues throughout the year on how the Board’s decisions affect them.

Effective control

The Board has delegated responsibility for overseeing the effectiveness of the Group’s internal controls and risk management systems to the Audit Committee. During the year, the Audit Committee reviewed the effectiveness of the Group’s internal controls and received reports from the Group’s internal audit function in respect of its programme of internal audit reviews.

The Group’s whistleblowing policy is reviewed by the Board annually. The policy sets out the procedures for employees or third parties to raise concerns about any suspected wrongdoing. Employees also have access to a wide range of alternative and informal routes through which to raise concerns. This reflects the open culture and strong internal communication channels of the Group, in line with our strategy and supports the formal whistleblowing policy we have in place. The Board receives a whistleblowing report at each Board meeting and will receive more detailed reports of any investigations that may take place. There were no issues reported to the Board under the whistleblowing policy during the year.

Conflicts of interest

The Board has a Conflicts of Interest Policy and reviews its conflicts of interest register on an annual basis in addition to ensuring that action is taken to identify and manage conflicts of interests during the course of the year. The Board is satisfied that no major shareholder presents a conflict of interest or exerts undue influence over the Board’s independent judgement.

Division of responsibilities

Division of responsibilities between the Chairman and Chief Executive Officer

There is a clear division of responsibilities between the Chairman and the Chief Executive Officer. The Chairman was independent on appointment to the Board and is responsible for running the business of the Board, ensuring the effectiveness of the Board and appropriate strategic focus and direction, promoting high standards of corporate governance and promoting a culture of openness and debate. The Chief Executive is responsible for proposing the strategic focus of the Board, the implementation and execution of strategy and leading the engagement of the Group through the Executive Committee.

Independence

Richard Connell has held the position of Chairman of the Board since September 2007 and therefore has served on the Board for more than nine years, which is an example in the Code of a circumstance in which a Non-Executive Director’s independence is likely to be, or could appear to be impaired. The Board of Directors believe that Richard’s knowledge of the veterinary sector and experience of private equity and corporate transactions has been invaluable in steering the Company through the ongoing COVID-19 pandemic. He has also personally overseen a major restructuring of the Board over the past three years, appointing Richard Fairman as CEO, Ben Jacklin as COO and Robin Alfonso as CFO, as well as strengthening the Board through the appointment of Richard Gray and David Wilton as additional Non-Executive Directors.

These changes have delivered improved performance and a substantial increase in shareholder value in the past twelve months.  Deborah Kemp, Richard Gray and David Wilton are considered to be independent by the Board and, following the shareholder consultation after the 2020 AGM, Richard Connell stood down from all Committees.

Board composition

The Board is currently composed of the Chairman, three Executive Directors (the CEO, CFO and COO) and three Non-Executive Directors, all of whom are considered to be independent. During the course of the year, Mike McCollum the Board’s Senior Non-Executive Director and Chair of the Audit Committee stepped down from the Board on 23 September 2021 and was replaced by David Wilton. David has taken over the role of Chair of the Audit Committee and Deborah Kemp was appointed as Senior Non-Executive Director following Mike’s departure.

Non-Executive Directors

The Non-Executive Directors scrutinise and constructively challenge management’s performance in the execution of our strategy, provide sound independent judgement to Board discussions and protect long-term shareholder value. Deborah Kemp is the Senior Independent Director and is a trusted intermediary for other Non-Executive Directors. During the year, the Chairman met with the Non-Executive Directors without the Executive Directors being present.

Information and support

The Directors have access to the advice and services of the Company secretary, who is responsible for ensuring that all Board procedures have been complied with. The appointment and removal of the Company Secretary is a matter reserved for the Board as a whole. Individual Directors are also able to take independent legal and financial advice at the Group’s expense when necessary to support the performance of their duties as Directors.

Composition, succession and evaluation

The Nomination Committee

The Nomination Committee is comprised of three independent Non-Executive Directors. The Committee monitors and reviews Board composition, leads the process of Director appointments, carries out succession planning and scrutinises the performance of the Executive Directors. The Nomination Committee also reviews the other commitments of Directors and is satisfied that all Directors devote appropriate time to the Company’s affairs. External search consultancies are used for the appointment of Non-Executive Directors and during the year, the Chief Officers Group assisted with the appointment of David Wilton to the Board.

Re-election to the board

All of our Directors stand for re-election annually at the Company’s annual general meeting (“AGM”). The Board unanimously agrees that the contribution of all Directors who stood for re-election at the Company’s AGM on 24 November 2021 continues to be effective.

Board effectiveness review

Given the size of the Group and the Company’s AIM listing, the Board does not believe external evaluation to be appropriate. All Directors engage in an internal board effectiveness review on an annual basis and appropriate action is taken in light of the assessment.

Audit, risk and internal control

Audit Committee

The Audit Committee is responsible for ensuring that the financial performance of the Group is properly monitored and reported, for meeting with the external auditor and for reviewing its reports relating to financial statements and internal control matters. The Committee also reviews the effectiveness of the Group’s internal controls and receives reports from the Group’s internal audit function in respect of its programme of internal audit reviews.

All Non-Executive Directors are members of the Committee, apart from the Chairman, Richard Connell who stood down from the Committee on 30 April 2021. Mike McCollum was Chair of the Audit Committee until 23 September 2021 when he stepped down and was replaced by David Wilton.

The CEO, COO and the CFO are invited to attend meetings of the Audit Committee, but the Committee also meets with the auditor without the CEO, COO and CFO being present at least once annually.

Financial and business reporting

The Directors’ Responsibilities Statement is set out on page 80 and the Viability Statement and Statement of Going Concern can be found on page 79 of the Company’s 2021 Annual Report.

External audit

The Company’s external auditor, Deloitte LLP, was appointed with effect from the year ended 30 June 2017 giving a current tenure of five years. A tender process was carried out prior to this change. From the year ending 30 June 2022, in line with guidance from the Auditing Standards Board, there will be an audit partner rotation and a new audit engagement partner. The appointment is reviewed and subject to shareholder vote at the AGM on an annual basis.

Risk Management and Internal Control

The Board has delegated responsibility for overseeing the effectiveness of the Group’s internal controls and risk management systems to the Audit Committee. The Group’s internal audit function provides independent assurance as to the adequacy and effectiveness of the Group’s internal controls and risk management systems. The Company’s principal risks and uncertainties can be found on pages 50 to 57 of the 2021 Annual Report.

Remuneration

The Remuneration Committee seeks to develop the Company’s executive remuneration arrangements appropriately taking due account of matters specified in the UK Corporate Governance Code and the Investment Association Principles of Remuneration in the light of the Company’s growth and its status as an AIM 50 company.

The Committee is comprised of three independent Non-Executive Directors and is responsible for assisting the Board in ensuring appropriate remuneration policies are in place for the Group, ensuring Executive Director remuneration is aligned to the strategic priorities of the Group and its performance and making recommendations regarding Long Term Incentive Plan terms, conditions and awards.

 

Jenny Farrer
Group Company Secretary
16 December 2021