The directors of CVS Group plc (the Group) are committed to maintaining high standards of corporate governance and, have adopted the UK Corporate Governance Code. This report has been prepared on 27 September 2019 and will be reviewed on a regular basis and at least annually.
The Board of Directors consists of five members, including a Non-Executive Chair and two other Non-Executive Director, with a balance between executive directors and independent non-executive directors (excluding the Chairman). The Board presents a wide range of experience including customer-facing multi-site companies, mergers and acquisitions, financial, operational and organisational, and no one individual or small group of individuals dominates the Board’s decision-making process. The Company achieves shareholder returns through growth both organically and through the acquisition of practices, laboratories and crematoria.
The Code requires the annual report to identify each non-executive director it considers to be independent. The Company considers the Chair and both non-executive directors to be independent, those being respectively Richard Connell, Mike McCollum and Deborah Kemp and that all three have been so since appointment.
During the year on 1 October, Richard Fairman took over as Finance Director, replacing Nick Perrin. Richard has brought a wealth of experience to the group, acquired during senior financial positions for RAC, Virgin Money and Central Trust Plc.
The business of the Company and its subsidiaries is the combined responsibility of the Board, which is responsible for controlling and leading the Group. The Board’s responsibilities include:
All Directors are able to take independent professional advice on the furtherance of their duties if necessary. They also have access to the advice and services of the Company Secretary and, where it is considered appropriate and necessary, training is made available to Directors. All Directors receive updates on the duties and responsibilities of being a director of a listed company. This covers legal, accounting and tax matters, as required. The Company maintains appropriate insurance cover in respect of any legal action against its Directors. The level of cover is currently £50.0m for any one claim.
The Board identifies Mike McCollum as the Senior Independent Non-Executive Director and he is available to shareholders to discuss any matters relating to the Chair. Although Richard Connell has served as Chair for more than ten years, he continues to act in an independent manner and to challenge the Executive Directors.
Richard Connell was appointed on 1 August 2018 and has accordingly has served more than 10 years. The Code indicates that one of several examples which may affect independence is if a non-executive Director has served for more than nine years from the date of appointment. It also recognises that the period can be extended for a limited time, particularly in those cases where the chair was an existing non-executive director on appointment. The Non-Executive Directors continue to review the Chair’s performance of his roles and responsibilities and believe that the skills, knowledge and experience that Richard Connell brings to the role mean he is suitable to continue as Chair of the Board. The Board has concluded that Richard Connell continues to demonstrate objective judgment and promotes a culture of openness and debate. The ongoing review of the Chair’s performance and independence will continue throughout the current financial year.
The non-executive directors confirm that they have sufficient time to devote to meet their board responsibilities. In addition to the 11 scheduled board meetings and committee meetings, the non-executive directors make themselves available for ad-hoc meetings and board calls to deal with specific projects or matters arising during the year.
The non-executive directors also visit the practices, labs and crematoria independently to meet with the workforce and develop their understanding of the business operations and are invited to attend the annual conference and take the opportunity to meet colleagues
The Board has appointed three Committees: the Audit Committee, the Remuneration Committee and the Nominations Committee. All operate within defined terms of reference. Details of the Committees are set out below.
The Committee consists of three Non-Executive Directors, Richard Connell, Mike McCollum and Deborah Kemp. Richard Connell is a Chartered Accountant and Mike McCollum has worked previously as the CFO for a FTSE 250 business. Although the Chair of the Board is a member and Chair of the Audit Committee, his significant recent financial experience and, as a smaller company, the Company is only required to have two members on the Audit Committee.
The Board considers that members of the Audit Committee have significant financial expertise.
The Audit Committee’s duties primarily concern financial reporting, internal control and risk management systems, whistleblowing procedures and internal audit and external audit arrangements (including auditor independence).
The Committee is responsible for ensuring that the financial performance of the Group is properly monitored and reported on, for meeting with the external auditor and for reviewing its reports relating to financial statements and internal control matters. The Chief Executive and the Finance Director are invited to attend such meetings, but the Committee also meets with the auditor without the Chief Executive and the Finance Director being present at least once annually. Other members of management are invited to present such reports as are required for the Committee to discharge its duties.
The agenda of each meeting is linked to the reporting requirements of the Group and the Group’s financial calendar. Each Audit Committee member has the right to require reports on matters relevant to its terms of reference in addition to the regular items.
In the year ended 30 June 2019 and up to the date of this report the actions taken by the Audit Committee to discharge its duties included:
The external auditor was appointed for the year ended 30 June 2018 and our performance is assessed through discussion with and feedback from members of the senior finance team involved in the audit process. The appointment is reviewed and subject to a shareholder vote at the AGM on an annual basis. The Company has adopted a policy of not using the external auditor for non-audit work. Details of the fees paid to Deloitte during the financial year are set out in the notes to the annual report and accounts.
In 2016 an internal audit function was created with a mandate to review the practice division in the first instance. Reporting directly to the audit committee and through the finance director the internal audit function provides reassurance over the financial operations of the practices in particular. The function continues to develop and refine processes and with a plan to increase the scope of audit work across the more business units.
The members of the Audit Committee have reviewed the financial statements and the content of the draft Annual Report to ensure that it is fair, balanced and understandable and, accordingly the Audit Committee resolved to recommend that the Board makes the statement set out on page 57 of the 2019 Annual Report.
The Chair of the Remuneration Committee is Mike McCollum and its other members are Richard Connell and Deborah Kemp.
The Remuneration Committee has delegated responsibility for designing and determining remuneration for the Chair, Executive Directors and next level of senior management, as well as the Company Secretary.
The Chief Executive and the Finance Director are invited to attend meetings as appropriate but are not permitted to participate in discussions relating to their own remuneration.
The Remuneration Committee Report can be found on pages 48 to 55 of the 2019 Annual Report.
The Chair of the Nominations Committee is Deborah Kemp and its other members are Richard Connell and Mike McCollum. It meets at least once annually. The Nominations Committee is responsible for reviewing the structure, size and composition, including skills, knowledge and experience, of the CVS Board. It is also responsible for the co-ordination of the annual evaluation of the performance of the Board and of its Committees.
The Committee is responsible for making recommendations to the CVS Board on all CVS Board appointments and on the succession plans for both Executive Directors and Non-Executive Directors.
During the year the Nominations Committee has been involved with the appointment of appointment of Richard Fairman.
The Board recognises the importance of a diverse board and workforce and encourages reviewing ways of working to ensure candidates from all backgrounds can apply. Each appointment of a board member or senior executive is made on merit and the best candidate will be appointed. The Board recognises that further steps can be taken to improve the diversity of the group at all levels and across all business streams.
The Company Secretary is responsible for ensuring that board procedures are complied with, advising the board on all governance matters, supporting the Chair and helping the board and its committees to function efficiently.
The Company Secretary is also the Group’s Data Protection Officer and is a qualified Data Practitioner.