Corporate Governance

"As a Board, our principal purpose is to provide a balanced perspective on matters that are material to the Company's stakeholders. In fulfilling this purpose, we strive to promote a culture of good governance throughout the business and to ensure that effective internal control and risk management measures are in place"

Dr Peter Fellner

Chairman's Introduction

The Board acknowledges its key role in establishing the culture, values and ethics of the Company. We believe that it is important that the Board sets the correct "tone from the top" and that directors should lead by example and ensure that good standards of behaviour are embedded throughout all levels of the organisation. During the year we have made progress with embedding our values Group-wide, further details of which can be found within the Corporate Responsibility Report.

As a Board, we are responsible for determining the strategy of the Group and for ensuring we have the best team in place to achieve this. Following the appointment of a new non-executive director last year, Charlotta Ginman, we have further strengthened our Board and ensured we have significant experience in finance, manufacturing, pharmaceuticals, business development and mergers and acquisitions, all of which are key areas within our business. Our team has been further enhanced with the appointment of John Ilett as Group General Counsel and Company Secretary.

As mentioned in last year's report and following the UK Corporate Governance Code's recommendation to put the external audit contract out to tender at least every ten years, the Audit Committee conducted a tender process and in November 2015 we announced the appointment of KPMG LLP as the Group's auditors for the financial year commencing on 1 May 2015. A resolution to confirm this appointment will be proposed at the forthcoming AGM.

The changes in the Financial Reporting Council's updated UK Corporate Governance Code are effective for 2015/16. We report against these new requirements on this page.

Our AGM will be held on 7 September 2016, and as always we are pleased to receive feedback from our shareholders and I encourage you to attend our AGM.

Finally, as we move into the coming financial year I believe that the Board has the right range and mix of skills and experience to fully discharge its duties and responsibilities and to keep delivering and developing our strategy.

Dr Peter Fellner
Chairman

The UK Corporate Governance Code

The Group is committed to practising good corporate governance of its affairs as part of its management of relationships with its shareholders and other stakeholders. The Group seeks to uphold and to report on compliance in accordance with best practice in corporate governance.

Compliance Statement

The directors are satisfied that the Group has complied with the principles and provisions set out in the UK Corporate Governance Code (the "Code") which was published in September 2014 (available from www.frc.org.uk) as updated and was compliant throughout the financial year under review.

The principles of the Code cover five areas: leadership, effectiveness, accountability, remuneration and relations with shareholders. With the exception of the directors' remuneration (which is dealt with separately under the Remuneration Report), the following sets out how the Board has applied the principles.

The Board is committed to establishing and maintaining high standards of corporate governance. Its policy is to appoint directors with appropriate skills who have sufficient time to carry out their duties adequately. The Board provides opportunities through site visits and regular access to senior management to permit directors to familiarise themselves with the Company and the markets in which it operates.

Governance Structure

Leadership

The Role of the Board

The Board is responsible for the long-term success of the Company. Individual members of the Board have equal responsibility for the overall stewardship, management and performance of the Group and for the approval of its long-term objectives and strategic plans.

Division of Responsibilities

There is a clear division of responsibilities between the role of the Chairman and that of the Chief Executive of the Company and the roles are clearly set out in writing and regularly reviewed by the Board.

Board Responsibilities

RoleNameResponsibility
ChairmanDr Peter Fellner
Appointed Chairman on 1 May 2009
  • Leadership of the Board
  • Setting the Board's Agenda, style and tone of discussions
  • Ensuring the Board's effectiveness in all aspects of its role
  • Facilitating active engagement by all members
  • Participating in shareholder communications
  • Promoting high standards of corporate governance
Chief ExecutiveJonathan Glenn
  • Developing Group Strategy for consideration and approval by the Board
  • Leading the senior management team in delivering the Group's strategic and day-to-day operational objectives
  • Leading and maintaining communications with all stakeholders
Non-executive directorsSteve Crummett
Charlotta Ginman
Dr Andrew Hosty
Ian Nicholson
  • Constructively challenging and contributing to the development of Group Strategy
  • Monitoring the integrity of financial information, financial controls and systems of risk management to ensure they are robust
  • Reviewing the performance of executive management
  • Formulating executive director remuneration
Senior Independent DirectorDr William Jenkins
Appointed Senior Independent Director on 1 September 2011
  • Acting as an intermediary for other directors when necessary
  • Available to meet with shareholders and aid communication of shareholder concerns when normal channels of communication are inappropriate
  • Holding meetings with other non-executive directors without the Chairman present to appraise the Chairman's performance

The non-executive directors

Independence

Each of the non-executive directors (other than Ian Nicholson, who acts as a consultant in addition to his role as a non-executive director but including Dr Peter Fellner, who has now served on the Board for 11 years) are free from any relationship with the executive management of the Company and are free from any business or other relationship that could affect or appear to affect the exercise of their independent judgement. The Board considers that all of the Company's non-executive directors including Dr Peter Fellner and Ian Nicholson are independent directors, in both character and judgement, in accordance with the recommendations of the Code.

The Chairman, Dr Peter Fellner, was considered independent on his appointment.

The Operation of the Board

Reserved Matters and Delegated Authorities

The Board has the authority for ensuring that the Group is appropriately managed and achieves the strategic objectives it sets. To achieve this, the Board reserves certain matters for its own determination including matters relating to:

  • Group strategy
  • approval of interim and annual financial results
  • dividend policy
  • major capital expenditure
  • treasury policy
  • risk management
  • the effectiveness of the systems of internal control
  • shareholder communications and
  • amendments to the structure and capital of the Group

The full schedule of matters reserved to the Board is published on the Company's website.

The Board performs its responsibilities through an annual programme of meetings, and by continuous monitoring of the performance of the Group as a whole.

Matters considered by the Board in FY2016 include:

  • health, safety and well-being
  • the annual budget
  • approval of the appointment of KPMG LLP as external auditors subject to shareholder approval
  • the appointment of the Company Secretary
  • the Board Evaluation review
  • renewal of the Group's Insurance programme
  • strategic plans
  • the adoption of a Performance Share Plan
  • strategic business opportunities and
  • senior executive recruitment

The Board also delegates a number of its responsibilities to committees and management as described below.

Board Meetings and Attendance

The Board has eight scheduled meetings per year, with other meetings convened for specific matters. The attendance of each of the directors, whether in person or by telephone, at the scheduled Board meetings, is shown below:

NameBoard
meetings
P. Fellner18/8
W. Jenkins8/8
C. Ginman8/8
S. Crummett27/8
I. Nicholson8/8
A. Hosty27/8
J. Glenn8/8
R. Cotton8/8
  1. During the year, Dr Peter Fellner has attended all of the Board's meetings and continues to commit substantial time to fulfilling his role. His other significant commitments are listed in his biography in Board of Directors.
  2. Mr Steve Crummett and Dr Andrew Hosty were each unable to attend one Board meeting due to a conflicting commitment.

In addition, the Board held a Strategy meeting during the year attended by members of the Executive Committee and senior management team.

The Company also operates a Corporate Responsibility Committee, a Group Executive Committee, a Risk Committee and divisional operating boards. For details please see the Corporate Responsibility Committee.

Effectiveness

The Board's Composition

As of 30 April 2016, the Board of the Company consisted of the non-executive Chairman, two executive directors and five non-executive directors. The profiles of the Board members are set out in the Board of Directors. No individual or group of individuals dominates the Board's decision-making process. The non-executive directors occupy, or have occupied, senior positions in industry and together they constitute a valuable body of relevant industry experience and expertise.

Board Diversity

The Board believes in the importance of diversity (including but not limited to gender) and the benefits that it can bring to the operation of an effective Board. The female representation on the Board constitutes 12.5%.

Appointments to the Board continue to be made on merit.

Appointment of non-executive directors

Non-executive directors are appointed to the Board following a formal, rigorous and transparent process, involving external recruitment agencies, to select individuals who have a depth and breadth of relevant experience, thus ensuring that the selected candidates will be capable of making an effective and relevant contribution to the Board. The process for the appointment of non-executive directors is managed by the Nomination Committee, whose responsibilities are outlined in the Nomination Committee section.

Terms of Appointment and Time Commitment

All non-executive directors are appointed for an initial term of three years subject to satisfactory performance. After this time they may serve additional three year terms following review by the Board. All non-executive directors are expected to devote such time as is necessary for the proper performance of their duties. Directors are expected to attend all Board meetings and committee meetings of which they are members and any additional meetings as required. Further details of their terms and conditions are summarised in the Remuneration Report and the terms and conditions of appointment of the non-executive directors are available at the Company's Registered Office.

Induction and Professional Development

Upon joining the Board, newly appointed directors receive a tailored induction comprising site visits, background information on the operation and activities of the Group, the role of the Board and its committees and those matters reserved for the Board's decision, and the latest financial information on the Group. Training and development needs of directors are reviewed regularly. The directors are kept apprised of developments in legal, regulatory and financial matters affecting the Group from the Chief Financial Officer, the Company Secretary, and the Group's external auditors and advisors.

Information and Support

Board members are provided with all relevant documentation in advance of each Board and committee meeting. Senior executives are invited to attend Board meetings periodically for the purpose of making presentations on their areas of responsibility. In addition to formal Board meetings, the Chairman and Chief Executive meet frequently and make regular contact with other Board members. The Board and the senior executives meet formally once during each financial year to discuss corporate strategy.

Independent Professional Advice

The Board has approved a procedure whereby directors may consult the Company's advisers and, if necessary, take independent professional advice at the Company's expense, although not in respect of a director's personal interests. Before seeking advice, the director concerned must notify the Chairman, or in his absence, the Senior Independent Director. No such advice was sought by any director during the year.

Company Secretary

Board members have access to the Company Secretary, who attends all Board meetings. The appointment and removal of the Company Secretary is subject to the approval of the Board.

The Group General Counsel and Company Secretary, John Ilett, joined the Company on 2 November 2015.

Board Evaluation

A Board evaluation was carried out during the year ended 30 April 2016. A rigorous and formal review required completion of a questionnaire relating to the performance of the Board and its committees and with regard to compliance with the Code. The evaluation was wide ranging and focused on the various aspects of the Code. The results of the questionnaire were reported to the Board in a manner that did not identify any individual responses. The evaluation concluded that there were no areas of significant weakness and that overall the Board and its Committees were operating effectively.

Election and Re-election of Directors

The Company's Articles of Association require all directors to retire and submit themselves for re-election at the first AGM after appointment and thereafter at least every three years. The Notice of AGM will give details of those directors seeking re-election.

Meetings of non-executive directors

Led by the Senior Independent Director, the non-executive directors meet informally, without the Chairman being present, principally to appraise the Chairman's performance and to review his remuneration. The Chairman holds meetings at least annually with the non-executive directors without the executive directors present.

Board Committees

The Board has the three main committees listed below. The current terms of reference of each committee may be obtained from the Company's website.

Remuneration Committee

During the year members of this Committee were:

  • Dr William Jenkins (Chairman)
  • Steve Crummett
  • Dr Andrew Hosty

The Chairman is invited to attend all meetings, but does not attend any part of any meeting at which his own terms of appointment are discussed. The Chief Executive attends by invitation where appropriate except where his own remuneration is being considered.

The Remuneration Committee is primarily responsible for determining the structure, components (including pension rights and compensation payments) and level of the remuneration packages of the Chairman, the executive directors and designated members of the senior management team. Details of the role of the Remuneration Committee are set out in the Annual Remuneration Report. The Remuneration Committee met four times during the year and members' attendance at the meetings is shown below:

NameRemuneration
Committee
meetings
W. Jenkins4/4
S. Crummett4/4
A. Hosty4/4

The activities of the Committee during the year are set out in the separate Directors' Remuneration Report.

Nomination Committee

Members during the year were:

  • Dr Peter Fellner (Chairman)
  • Steve Crummett
  • Charlotta Ginman
  • Jonathan Glenn
  • Dr Andrew Hosty
  • Dr William Jenkins
  • Ian Nicholson

The Nomination Committee is primarily responsible for reviewing the membership of the Board and identifying suitable candidates for appointment and reappointment as directors. In addition, the Board has delegated responsibility to the Nomination Committee for succession planning both at Board and senior management level. The inclusion of the Chief Executive in the membership of the Nomination Committee ensures that a balanced view is taken regarding the needs of the Group as a whole. The Committee ensures that the search for Board members is undertaken against objective criteria and with due regard to the benefits of diversity, including gender. Appointments are made on merit, taking into account the importance of maintaining a balance of skills, experience, independence and knowledge. No meetings were held during the year.

Audit Committee

The Audit Committee is comprised entirely of independent non-executive directors. Members during the year have been:

  • Steve Crummett (Chairman)
  • Charlotta Ginman
  • Dr Andrew Hosty

Both Steve Crummett and Charlotta Ginman are considered by the Board to have recent and relevant financial experience. Both are qualified Chartered Accountants.

The external auditors' lead partner and the Chief Financial Officer attend each meeting as requested by the Committee. The Chief Executive attends the interim and year end meetings.

The Audit Committee met three times during the year. At each meeting the members of the Committee took the opportunity of meeting the external auditors without management being present. Members' attendance at the meetings is below:

NameAudit
Committee
meetings
C. Ginman3/3
S. Crummett3/3
A. Hosty12/3
  1. Dr Andrew Hosty was unable to attend one Committee meeting due to a conflicting commitment.

The activities of the Committee during the year are set out in the separate Audit Committee Report.

Other Committees

The Executive Committee

This Committee is responsible for the executive management of the Group. It comprises the Chief Executive, the Chief Financial Officer, the Group General Counsel and Company Secretary, the Managing Director of Bespak, the Managing Director of Aesica and the Director of Human Resources. This Committee meets regularly to review and make decisions on operational matters not reserved for Board decisions.

The Corporate Responsibility Committee

The Corporate Responsibility Committee is responsible for reviewing and prioritising the Group's corporate responsibility activities, further details of which can be found in the Corporate Responsibility Review of this report. The Committee is chaired by non-executive director Ian Nicholson. Other members include the Chief Executive, the Managing Director of Bespak, the Managing Director of Aesica, the Director of Human Resources and the Bespak Continuous Improvement Director. The Company Secretary acts as secretary to the Committee.

Risk Committee

The role and responsibilities of the Risk Committee are outlined under the Risk Management section.

Accountability

Internal Controls Review

The Board acknowledges that it is responsible for the Group's system of internal controls and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable, but not absolute assurance against material misstatement or loss. The Board has received regular reports on areas of any significant risk and on the related internal controls. The Board reviews the framework of internal controls annually and has reviewed the effectiveness of its internal systems of control as they have been operated within the year in accordance with the Turnbull Guidance, updated by the FRC in 2005. This system has been in place for the year under review and up to the date of approval of the Annual Report and Accounts.

The review covers all material controls including financial and financial reporting processes, operational, compliance and risk management systems.

Controls over the financial reporting process and preparation of the consolidated accounts consist of extensive reviews by qualified and experienced individuals that ensure that all elements of the financial statements and appropriate disclosure are considered and accurately stated.

Risk Management

The Board accepts responsibility for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives.

There is an ongoing internal process for identifying, evaluating and managing significant risks faced by the Company that is regularly reviewed by the Risk Committee, the Executive Committee and then by the Board. This process has been in place throughout the year and up to the date of this report.

The Risk Committee is responsible for advising the Executive Committee on the co-ordination and prioritisation of risk management issues throughout the Group and developing a risk management strategy; ensuring that the Board's risk policy is implemented throughout the Group through effective development and review of risk registers, mitigation plans and insurance policies; and promoting risk awareness at all levels.

A risk management strategy encompassing risk assessment and risk treatment has been adopted with the key objective to ensure that risk management is an integral part of the strategic and operational management decision-making, planning and implementation process. Risk appetite and tolerance has been reviewed and agreed by the Board and will be considered annually and monitored as appropriate.

The Company's strategic plan is reviewed annually at an off-site meeting involving the Board and the Executive Committee. An annual budget is prepared by each of the operating divisions of the Company and this is consolidated into a Group Plan, which is reviewed and approved by the Board.

Further information on how we manage our business risks is set out in the Risk section, which contains a list of the principal risks and uncertainties.

Control Procedures

Progress against budget is monitored at operating business and Group levels throughout the Company via monthly reporting of actual financial performance against budget and prior period actual results. The Executive Committee also reviews the key measures of operating performance.

The Group has clear authority limits deriving from the list of matters reserved for decision by the Board, including capital expenditure approval procedures.

Viability Statement

In accordance with provision C2.2 of the UK Corporate Governance Code, the directors have assessed the viability of the Company over the three year period to 30 April 2019. The directors have determined that a three year period to 30 April 2019 constitutes an appropriate period over which to provide its viability statement as this is the period focused on during the strategic planning process (see Risk Management section above for further details). The Group's strategic plan considers the Group's profit and loss, cash flows, debt and other key financial ratios over the period.

A robust assessment of the principal risks facing the Company as well as the controls and mitigating actions to address these are set out in the Risk section on pages 26 to 28. The viability assessment takes into account the potential impact of each of these principal risks arising over the assessment period. Furthermore, it's considered severe but plausible scenarios which illustrate the potential impact of a combination of these risks crystallising during the period. A number of reasonable assumptions are included within these assessments including:

  • the assumption that funding facilities will continue to be available and that the facility which expires in September 2019 will be renewed on the same or a similar basis
  • the assumption that in the event of several risks occurring simultaneously and having a severe impact on the Group, all potential mitigating actions including adjusting capital management to preserve cash would be taken on a timely basis and
  • the assumption that implausible scenarios where multiple risks occur all at the same time or are unable to be appropriately mitigated do not occur

The result of this analysis has allowed the directors to reasonably conclude that the risk to the Group's viability is low.

Therefore, the directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due in the three-year period of assessment to 30 April 2019.

Financial Reporting

The directors' responsibility for preparing the accounts is set out in the Statement of Directors' Responsibilities.

Going Concern

The directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future as the Group has net debt of £97.0m at 30 April 2016 (2015 £99.2m) and total banking facilities (including available overdrafts and using year end exchange rates) of £161.2m of which £46.7m is undrawn as at 30 April 2016 and available up to September 2019. The Company has therefore adopted the going concern basis in preparing the accounts.

Remuneration

Our Remuneration Report describes the level and components of the remuneration of the directors.

Relations with Shareholders

The Board regards relationships with shareholders as very important and it aims to encourage open dialogue with them through regular meetings with the Group's institutional shareholders, including regular meetings following the announcement of the Company's interim and annual results. Meetings are also held at other times with institutional investors and other shareholders at their request. Shareholders may meet with any new non-executive director if they wish. The Chairman ensures that views expressed at these meetings are reported to the Board as a whole. The Company's brokers also attend Board meetings at the request of the Chairman to provide feedback on shareholder opinion.

Presentations given to analysts are available on the Company's website.

The Senior Independent Director is available to meet with shareholders as required.

The Annual General Meeting

All shareholders have the opportunity of discussing the Group's performance and development at its AGM, which provides a forum for shareholders to raise issues with the Board. Members of the Remuneration, Nomination, Audit and Corporate Responsibility Committees will also be available at the AGM so that shareholders may discuss any queries they may have.

Our previous AGM was held at the offices of FTI Consulting in London on 3 September 2015 and the full voting results on each of the resolutions are published on our website. Our 2016 AGM will be held on 7 September 2016 at the Company's registered address in Hemel Hempstead. The Notice of the Meeting sets out each of the resolutions to be proposed and a copy of the Notice can be downloaded from the Company's website at www.consortmedical.com.