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Warpaint London plc - Statement of Compliance with the QCA Corporate Governance Code
Warpaint London plc - Statement of Compliance with the QCA Corporate Governance Code
Chairman’s Introduction
The Warpaint directors recognise and prioritise the importance of sound corporate governance in supporting and delivering the strategy of the Company and its subsidiaries (together the “Group”). This involves managing the Group in an efficient manner for the benefit of its shareholders and other stakeholders whilst maintaining a corporate culture which is consistent with our values.
The Company has adopted the QCA Corporate Governance Code (“QCA Code”) which the board believes that this is the most appropriate Code for the Company to adopt at this stage in its development. The Company will comply with the latest QCA Code issued in2023 (the “2023 Code”) and will be reporting against the 2023 Code in respect of the Group’s financial year ended 31 December 2024, in 2025. The QCA Code is built around ten broad principles and a set of disclosures and the board has considered each principle individually and the extent to which it is appropriate in the circumstances. This Corporate Governance Statement sets out in general terms how the Company complies with the ten principles of the QCA Code at present and any proposals for further compliance. Annual updates are provided on our compliance with the QCA Code and more information will be set out in the Company’s Annual Report for the year ended 31 December 2023 which will be available to download from the Company’s website when it has been made available to shareholders.
The board of directors is responsible for the long-term success of the Company and, as such, devises the Group strategy and ensures that it is implemented. The Board is also ultimately responsible for governance and is determined that the Company protects and respects the interests of all stakeholders and in particular is very focused upon creating the right environment for its employees. We want a happy workplace and we want our employees to be fully and properly rewarded and to feel that the yare an integral part of the Warpaint family. A reward structure is therefore in place, which includes the grant of share options, enabling members of staff to participate in the growth of the Company, as appropriate. We want our suppliers, who are an essential part of the Company, to also feel part of the Warpaint family and we work closely with them to ensure that this is the case. Above all, the Company wishes to ensure that shareholders obtain a good return on their investment and that the Company is managed for the long-term benefit of all shareholders and other stakeholders. Appropriate corporate governance procedures will ensure that that is the case and reduce the risk of failure. The board also seeks to ensure that there are effective internal controls, risk is properly managed and that the Group strategy is implemented.
This statement sets out our approach to governance and provides further information on the operation of the board and its committees and how the Group seeks to comply with the ten principles of the QCA Code.
Clive Garston
Chairman
Principle 1 – Establish a strategy and business model which promote long term value for shareholders
Business Overview
Warpaint sells branded cosmetics under the lead brand names of W7 and Technic. W7 is sold in the UK primarily to retailers and internationally to local distributors or retail chains. The Technic brand is sold in the UK and continental Europe with a significant focus on the gifting market, principally for high street retailer sand supermarkets. In addition, Warpaint supplies own brand white label cosmetics produced for several major high street retailers. The Group also sells cosmetics using its other brand names of Man’stuff, Body Collection and ChitChat.
Strategy
The Group’s strategy is reviewed each year by the board of directors, taking into account relevant market data, the Group’s track record, key strengths and experience, along with the Group’s aims. The strategy is targeted by year and measured monitored and reviewed as part of the board’s on-going business throughout the year.
The strategic plan, which comprises six key pillars, has been updated for 2023 forming the basis of the Group’s development through to 2025. It is designed to drive shareholder value and contains defined targets for sales, EBITDA, earnings per share and cash generation, with a particular emphasis on driving incremental EBITDA growth.
Further details of the Group’s strategy are set out in the strategy section of the Chief Executive’s statement in the Group’s Annual Reports and Accounts for the year ended 31 December 2022 which is available to download here.
Principle 2 – Seek to understand and meet shareholder needs and expectations
The Company remains committed to maintaining good communications and constructive dialogue with both its private and institutional investors. The interests of shareholders are considered paramount to the decision-making process and strategic direction of the Group and good communication allows the Company to convey its strategy, business model and performance to its investors and, to understand and respond to the needs and expectations of shareholders. The Board declared an interim dividend of 2.6p per share which was paid on 25 November 2022. In accordance with the Group’s policy to pay appropriate dividends, the board recommended a final dividend for2022 of 4.5p per share, making a total dividend for the year of 7.1p per share.
All individual investor queries should be addressed to the Warpaint company secretary at: investors@warpaintlondonplc.com or to the Company’s retained investor relations adviser, IFC Advisory Limited at: warpaint@investor-focus.co.uk
The means by which the Company communicates with its private and institutional shareholders are set out in Principle 10.
Principle 3 – Take into account wider stakeholder and social responsibilities and their implications for long-term success.
The Group has strong regard for the importance of its stakeholders including customers, distributors, suppliers, employees, shareholders, the environment and community in which we live. Information about how the Company engages with its stakeholders and the implications for long term success is contained in the Stakeholder Engagement and Section 172 Report in the Group’s Annual Reports and Accounts for the year ended 31 December 2022 which is available to download here.
Principle 4 – Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Company is exposed to a variety of risks that can have financial, operational and regulatory impacts on the Group’s business performance. The board recognises that creating shareholder returns is the reward for taking and accepting risk. The effective management of risk is therefore critical to supporting the delivery of the Group’s strategic objectives.
Internal Control and Risk Management
The board is responsible for establishing and maintaining the Group’s system of internal controls and reviewing its effectiveness. The procedures, which include financial, compliance and risk management, are reviewed on an on-going basis. The internal control system can only provide reasonable and not absolute assurance against material misstatement or loss. The board has considered the need for an internal audit function, but does not consider it necessary at the current time with the current controls in place and the relative complexity of the business. The board considers that the internal controls in place are appropriate for the size, complexity and risk profile of the Group.
The assessment and management of risk is primarily the function of the executive officers, most specifically the Chief Executive Officer for strategic and business risk and the Chief Financial Officer for financial risk. The Group maintains a formal risk register which is reviewed periodically and, where appropriate, matters of risk are referred to the board for consideration.
The principal risks identified by the board are setout in the Risk Management section of the Strategic Report in the Group’s Annual Reports and Accounts for the year ended 31 December 2022 which is available to download here.
Principle 5 – Maintain the board as a well-functioning, balanced team led by the Chair
The board currently comprises of the Chairman, Clive Garston three non-executive directors, Keith Sadler, Indira Thambiah and Sharon Daly and five executive directors, Sam Bazini, Eoin Macleod, Neil Rodol, Paul Hagon and Sally Craig, who is also the Company Secretary.
The board is responsible for the long-term success of the Company. This includes formulating, reviewing and approving the Group’s strategy, budgets, major items of capital expenditure and acquisitions and, reporting to the shareholders.
Further information about the roles and responsibilities of board members, the operation of the board and its committees, the numbers of board meetings held and the time committed by each board member to the Group’s business may be found in the Corporate Governance Report in the Group’s Annual Reports and Accounts for the year ended 31 December 2022 which is available to download here.
Principle 6 – Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
The Board retains a range of financial, commercial and entrepreneurial experience and there is a good balance of skills, independence, diversity and knowledge of both the Company and the sectors in which it operates including cosmetics, retailing, finance and computing, innovation, international trading, e-commerce, marketing and public markets. Non-executive directors are appointed on merit and for their specific areas of expertise and knowledge. This enables them to bring independent judgement on issues of strategy and performance and to debate matters constructively.
The biographies of each of the directors, including the committees on which they serve and chair and the skills brought to the board, any external advice sought and the board’s internal advisory responsibilities are shown in the section headed Board of Directors and the Corporate Governance Report in the Group’s Annual Reports and Accounts for the year ended 31 December 2022 which is available to download here and in the Board of Directors section of the website here.
The Board is satisfied that, between the directors, it has an effective and appropriate balance of skills, knowledge, experience and time committed to enable it to deliver the strategy of the Group, it is nevertheless mindful of the need to continually review the needs of the business to ensure that this remains true. Involvement with a variety of other boards allows the members to witness alternative approaches to similar business issues and to benefit from the advice of more than just the Group’s advisers.
Principle 7 – Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
The Group’s performance is reported monthly against headline performance and agreed budgets and reviewed by the board (as a minimum) at each monthly board meeting. The board challenges the executive directors and senior management on performance against budgets, forecasts and key business milestones and have adopted a set of KPI’s against which the performance of the Company and therefore the board, may be measured.
The Company is yet to adopt a formal performance evaluation procedure for the board and directors individually. This will remain under review and the board will consider the implementation of performance evaluations facilitated by external advisers for the board, both individually and as a group, to ensure the efficient and productive operation of the board. As the business of the Group grows, the expertise required at management level is expanded and developed although there are no prescribed procedures for succession planning at board level.
Principle 8 – Promote a corporate culture that is based on ethical values and behaviours
The board maintains a corporate culture consistent with the Group’s strategic objectives which aims to promote an ethical and responsible business, and which is monitored by the Chief Executive Officer who appraises the board of any issues arising.
The board is equally committed to maintaining appropriate standards for all the Company’s business activities and ensuring that these standards are set out in written policies and procedures to support these standards.
The Group’s Social Impact and its approach to the Environment and Sustainability can be found below:
Environment and Sustainability
In addition to the Group’s Social Impact and its approach to the Environment and Sustainability, further information on the Group’s corporate culture and key policies may be found in the Environmental Social and Governance (“ESG”) Report in the Group’s Annual Reports and Accounts for the year ended 31 December 2022 which is available to download here.
Principle 9 – Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
The Group’s governance structures are regularly reviewed in the light of the QCA Code. The board believes them to be in accordance with best practice as adapted to best comply with the Group’s circumstances and stage of development.
The board is responsible for implementing the Group’s strategy and promoting the long-term success of the Company. The executive directors have overall responsibility for managing the Group’s day to day operational, commercial and financial activities supported by senior management. The non-executive directors are responsible for bringing independent and objective judgement to board decisions.
The business reports monthly on its headline performance against its agreed budget, and the Board reviews the monthly update on performance and any significant variances are reviewed at each scheduled meeting. The Board challenges the executive directors and senior management on performance against budgets, forecasts and key business milestones. Monthly updates on performance are reviewed at each formal board meeting.
At each meeting the board considers directors’ conflicts of interest. The Company’s Articles provide for the board to authorise any actual or potential conflicts of interest.
The board is confident that its governance structures and processes are consistent with its current size and complexity of the business. The board is mindful of the appropriateness of the Group’s governance structures and practices which are continually reviewed to take account of further developments of accepted best practice and the development of the Company.
The matters reserved for the board and the directors’ roles and responsibilities are outlined in Principle 5 of the Corporate Governance Report in the Group’s Annual Reports and Accounts for the year ended 31December 2022 which is available to download here.
Audit, Remuneration and Insider Committees
The board has established the Audit Committee, Remuneration Committee and Insider Committee with formally delegated duties and responsibilities and with written terms of reference. The full terms of reference of each committee are available below:
The Audit Committee and the Remuneration Committee each comprises three non-executive directors: Keith Sadler (Chair of both committees), Indira Thambiah and Sharon Daly. The Insider Committee comprises one non-executive director and two executive directors: Clive Garston (Chair), Sam Bazini and Neil Rodol.
Due to the size of the Group, the directors have decided that issues concerning the nomination of directors will be dealt with by the Board rather than a committee, but will regularly reconsider whether a Nominations Committee is required.
Principle 10 – Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The Company’s principal means of communication with shareholders is through the Annual Report and Financial Statements, the full-year and half-year announcements and the Annual General Meeting (“AGM”).The board receives regular updates on the views of shareholders through briefings and reports from the executive directors, the Company’s brokers and PR advisers and responds to and will take account, wherever possible, of recommendations made by proxy adviser companies.
Private Investors
The board recognises that the AGM is an important opportunity to meet private shareholders. Each substantially separate issue is the subject of a separate resolution at the AGM and all shareholders have the opportunity to put questions to the board. All board directors endeavour to attend AGMs and answer questions put to them which may be relevant to their responsibilities. In addition, the directors are available to listen informally to the views of shareholders immediately following the AGM, allowing all shareholders an opportunity to ask questions or represent their views
For each vote, the number of proxy votes received for, against and withheld is announced at the meeting. The Company releases the voting results for the AGM and other General Meetings by RNS and the results of the AGM are published on the Company’s website.
The Chief Executive Officer, Managing Director and Chief Financial Officer attended and presented at Mello 2022 in May 2022, an important event enabling private investors to engage with and gain information about the strategy and performance of the Group.
The Chief Executive Officer has taken part in several online conferences and Q and A sessions for private and retail investors, in conjunction with the Company’s PR advisers.
Corporate information, including Company announcements and presentations, are also available to shareholders, investors and the public on the Group’s websitewww.warpaintlondonplc.com The Company’s contact details and email address for investor queries, and correspondence address are listed on the website and the website offers a facility to sign up for email alert notifications of the Company’s news and regulatory announcements.
Institutional Shareholders
The Chief Executive Officer, the Managing Director and the Chief Financial Officer make presentations to institutional shareholders and participate in Investor Roadshows both following the announcement of the full-year and half-year results and, at other times throughout the year. Not every executive officer participates in every investor presentation. The Chairman participates in these presentations where appropriate and is available to speak with shareholders. Dialogue with individual institutional shareholders also takes place in order to understand and work with these investors to seek to comply with their investor principles where practicable.
In 2022, after the announcement of the Company’s Interim Results for the six months ended 30 June 2022, Warpaint’s management hosted an online presentation and Q&A session, which was open to all existing and prospective shareholders.
Investor queries may be addressed to the Company Secretary at investors@warpaintlondonplc.com. A range of corporate information (including all Company announcements) is also available to shareholders , investors and the public on the Company’s website www.warpaintlondonplc.com.
The Company’s means of communicating with its other stakeholders are set out in the Stakeholder Engagement and ESG sections of the Strategic Report and the Section 172 Report in the Group’s Annual Reports and Accounts for the year ended 31 December 2022 which is available to download here.
The Reports of the Audit Committee and the Remuneration Committee contained in the Group’s Annual Reports and Accounts describe the responsibilities of those committees and the work undertaken throughout the year.
Updated 4 January 2024
