Corporate governance

The Board has concluded that the Chair has met the independence criteria of the Code on appointment.

There is a clear division of responsibilities between the Chair and the Chief Executive.

The Chair is responsible for ensuring that the Board functions effectively. He sets the agenda for Board meetings and ensures that adequate time is devoted to discussion of all agenda items, particularly strategic issues, facilitating the effective contribution of all Directors and ensuring that the Board as a whole is involved in the decision-making process.

The Chief Executive has principal responsibility for all operational activities and the day-to-day management of the business, in accordance with the strategies and policies approved by the Board. The Chief Executive also has responsibility for communicating to the Group’s employees the expectations of the Board in relation to culture, values and behaviours.

The Senior Independent Director has an important role on the Board, providing a sounding board for the Chair, leading on corporate governance issues and serving as an intermediary for the other Directors. He is available to shareholders if they have concerns which contact through the normal channels of the Chair, Chief Executive or other Executive Directors has failed to resolve, or for which such contact is not appropriate.

Frank Nelson has served as Senior Independent Non-executive Director throughout the year.

All Non-executive Directors are required to allocate sufficient time to the Company to discharge their responsibilities effectively. The Non‑executive Directors act in a way they consider will promote the long-term sustainable success of the Group for the benefit of, and with regard to the interests of, its stakeholders.

The Nomination Committee leads the process for Board appointments and makes recommendations to the Board. Prior to appointment, Board members, in particular the Chair and the Non-executive Directors, disclose their other commitments and agree to allocate sufficient time to the Company to discharge their duties effectively and ensure that these other commitments do not affect their contribution.

The Executive Directors may accept an outside appointment provided that such appointment does not in any way prejudice their ability to perform their duties as Executive Directors of the Company. Darren Waters and Michael Scott do not currently hold any outside appointments.

The Non-executive Directors’ appointment letters anticipate a minimum time commitment of 20 days per annum, recognising that there is always the possibility of an additional time commitment and ad hoc matters arising from time to time, particularly when the Company is undergoing a period of increased activity. The average time commitment inevitably increases where a Non-executive Director assumes additional responsibilities such as being appointed to a Board Committee.

All new Non-executive Directors undergo an induction programme and as such spend considerably more than the minimum commitment during the course of a year. All Non-executive Directors are required to inform the Chair before accepting another position in order to ensure the Director has sufficient time to fulfil their duties.

The length of service on the Board is set out in the chart below:

The Company’s Articles of Association contain powers of removal, appointment, election and re-election of Directors and provide that all of the Directors must retire and may offer themselves for re-election at each Annual General Meeting (‘AGM’).

At the upcoming AGM, all the current Directors intend to offer themselves for election/re-election, with the exception of Frank Nelson who will step-down after nine years of service, in accordance with the Code. Following the conclusion of the Board evaluation process, the Board considers all the Directors to be effective, committed to their roles and to have sufficient time available to perform their duties.

The Board has a process in place to assess the current and future skills and experience needed by the Non-executive Directors against a matrix of requirements, through which it has determined that the Non-executive Directors are independent and that the Board, as a whole, has appropriate and complementary skills and experience.

In accordance with the Code, a formal evaluation of the Board’s performance, along with its committees, Chair and individual Directors was conducted during the year, with the results presented and discussed at the March 2024 Board meeting.

The external evaluation was performed by Emma Haddleton, of Haddleton Knight, who had no connection with the Company or any individual Director.

In addition to observing the December 2023 Board and Committee meetings, individual interviews were conducted with each Board member and the Group Company Secretary, all of whom fully engaged with the process and provided their qualitative feedback. The anonymity of respondents was ensured to promote an open and frank exchange of views.

The timing and methodology of the Board evaluation was primarily influenced by the continued changes to the Board during the year. During 2023, Iraj Amiri succeeded Frank Nelson as Chair of the Audit and Risk Committee, and Will Truman was appointed as a Non-executive Director, who represents the Board on the steering group in place to advise on new systems implementation.

In addition, towards the end of the year, a search for a further Non-executive Director was commenced, to bring expertise to support the strategy of refocussing growth ambitions to the branch estate, which resulted in Angela Rushforth being appointed in February 2024.

The executive management team also experienced significant change in the year with Darren Waters taking over the role of Chief Executive in May 2023 and the more recent appointment of Cat Hambleton-Gray as the new People Officer in January 2024.

Furthermore, in November 2023, the Board undertook a thorough review of the Group’s strategy, led by the executive management team, at which opportunities for growth in turnover, margin and profit were reviewed, along with the effective management of cash flow, as key parts of the overall strategy. This strategy was a core point of reflection during the evaluation process as all Board members, within this context, identified how they could contribute to achieving this plan.

The evaluation identified several areas of strength and some areas for enhancement and, overall, concluded that:

• The Board operates in an effective and professional manner and has developed considerably over the last 12-18 months
• Governance processes are transparent and well run
• Risks are openly discussed with greater focus on health and safety
• There is scope, and a desire, from the Board to develop further.

In addition, the evaluation highlighted:

• Given the significant change in members over the last 18 months, the Board was continuing to gain familiarity with each other, which was seen as work inprogress with still more to achieve, and had not yet settled into being a team of players that all apply their individual skills fully
• The Board had successfully transitioned to more strategic, and proportionately less operational, updates at meetings and this would continue to improve the quality of the Board’s debate. Focus on cash management and overseeing the investment in support systems and other capital requirements was now a focus for the Board
• ESG, culture and people engagement had been given increased board focus in 2023, including the creation of a new Social Values and ESG Committee. Directors’ engagement with the workforce had continued with organised briefings that encouraged constructive feedback, for which all Non-executive Directors were scheduled to participate in 2024
• Greater Board visibility and interaction with the leadership team was to be encouraged and developed further.

Taking all the above into account, the Board is satisfied that the current composition of the Board, and its committees, provides an appropriate balance of skills, experience, independence and knowledge to allow the Board and its Committees to discharge their duties and responsibilities effectively and in line with the Code.

The duties to avoid potential conflicts and to disclose such situations for authorisation by the Board are the personal responsibility of each Director. All Directors are required to ensure that they keep these duties under review and to inform the Group Company Secretary of any change in their respective positions.

The Company’s conflict of interest procedures are reflected in its Articles of Association (‘Articles’). In line with the Companies Act 2006, the Articles allow the Directors to authorise conflicts and potential conflicts of interest, where appropriate. The decision to authorise a conflict can only be made by nonconflicted Directors.

The Board, and its Committees, considers conflicts or potential conflicts at each meeting and, where such instances are identified, takes appropriate action, usually by excluding the conflicted party from any related discussions/decisions.

The Articles require the Company to indemnify its officers, including officers of wholly-owned subsidiaries, against liabilities arising from the conduct of the Group’s business, to the extent permitted by law. The Group carries Directors’ and Officers’ liability insurance.

There were six full Board meetings held during 2023, four meetings of the Audit and Risk Committee, three meetings of the Remuneration Committee, two meetings of the Nomination Committee and one meeting of the Social Values and ESG Committee. All of these meetings were held in-person and were attended in full.

In addition, three virtual Board update meetings were held during 2023, in order to keep the Board fully updated on financial and operational matters. There was full attendance for all of these update meetings, with the exception of one director at one virtual meeting (due to a pre-existing engagement), which helped maintain a high level of Board awareness and support good governance.

Irrespective of their Committee membership, all members of the Board, including the Chair of the Board, Chief Executive and Chief Financial Officer, are invited to attend all Committee meetings, but are never involved in discussions and decisions regarding their own remuneration or appointment/replacement. In addition, the Audit and Risk Committee also meets with the external auditors without any Executive Directors being present.

The Group Company Secretary is also Secretary to the Audit and Risk, Remuneration, Nomination and Social Values and ESG Committees, and attends all meetings for this purpose.

Board packs are distributed in the week prior to each meeting to provide sufficient time for Directors to review their papers in advance. If Directors are unable to attend a Board meeting for any reason, they nonetheless receive the relevant papers and are consulted prior to the meeting and their views are made known to the other Directors.

All the Directors have access to the advice and services of the Group Company Secretary. The Group Company Secretary has responsibility for ensuring that all Board procedures are followed and for advising the Board, through the Chair, on all governance matters. The Group Company Secretary provides updates to the Board on regulatory and corporate governance issues, new legislation, and Directors’ duties and obligations. The appointment and removal of the Group Company Secretary is one of the matters reserved for the Board.

Paul Walker has served as Group Company Secretary throughout the year.

Whenever necessary, Directors may take independent professional advice at the Company’s expense. Board Committees are provided with sufficient resources to undertake their duties, including the option to appoint external advisers when they deem it appropriate.

Following appointment, a new Director undergoes an induction programme, which includes a teach-in from Executive Committee members on key aspects of the business, including the background to our industry and markets, as well as the Company’s strategy, commercial approach, manufacturing and logistics operations, administrative functions and culture.

Summary of induction programme:

Individual development and training needs are identified through the Board evaluation process and through individual reviews between the Directors and the Chair.

The Board acknowledges its responsibility for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives, and for the Group’s system of internal control.

The Board has carried out a review of the effectiveness of the Group’s risk management and internal control systems. This included a review of current and emerging risks, along with a review of financial, operational and compliance controls, for the period covered by this Annual Report.

The Strategic Report comments in detail on the nature of the principal risks and uncertainties facing the Group; in particular those that would threaten our business model, future performance, solvency or liquidity and the measures in place to mitigate them. In conducting its review, the Board has included a robust assessment of these risks and the effectiveness of mitigating controls.

The Audit and Risk Committee Report describes the internal control system and how it is managed and monitored. As described in last year’s report, the cyber incident in 2022 was not the result of a breakdown in internal controls. Our investments over the last several years in cyber security played a major role in identifying the incident, enabling core systems to be restored quickly and mitigating the overall impact on the Group. Throughout 2023, we have continued to invest in enhancing our cyber security to provide further resilience in this area.

The Board confirms that no significant failings or weaknesses were identified in relation to the review. The Board also acknowledges that such systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

Engagement with our shareholders and wider stakeholder groups plays a vital role across the Group, including at Board level. One of the primary areas of focus for the Board at any time is the impact its decisions or actions may have on key stakeholder groups represented within the Board’s duty under s172 of the Companies Act 2006.

The Board is mindful of the levels of engagement with key stakeholder groups and how their respective views may be incorporated into relevant decision making. Board discussions therefore seek to appropriately consider the impact of its decisions and views of key stakeholder groups thereon, whilst always ensuring the need to promote the success of the Company for the benefit of its members as a whole.

In doing so, s172 requires the Directors to have regard (amongst other matters) to:

• The likely consequences of any decision in the long term
• The interests of the Company’s employees
• The need to foster the Company’s business relationships with suppliers, customers and others
• The impact of the Company’s operations on the community and the environment
• The desirability of the Company maintaining a reputation for high standards of business conduct
• The need to act fairly as between members of the Company.

The Board considers information from across the organisation to help understand the impact of its operations and decisions, and the interests and views of our key stakeholders. This includes reviews of strategy, financial and operational performance, as well as information covering areas such as key risks, and legal and regulatory compliance.

This information is provided to the Board, and its Committees, through reports sent in advance of each meeting, and through in-person presentations, where appropriate. As a result of these activities, the Board has developed a good understanding of the interests and views of all stakeholders, and other relevant factors, which enables the Directors to comply with the requirements of section 172 of the Companies Act 2006.

The table below sets out the Board’s approach to stakeholder engagement, why stakeholders matter and some key decisions made during 2023. The Board will sometimes engage directly with certain stakeholders on certain issues, but the size and distribution of our stakeholders and of the Eurocell Group dictate that stakeholder engagement often takes place at an operational level.

We recognise that our colleagues underpin the performance and success of our business and active engagement has never been more important in the current social, economic and political environment.

The Group organises a number of colleague engagement initiatives to complement the existing team briefings, continuous improvement workshops and health and safety forums currently in place, including:

• The newly launched EPiC staff magazine (‘Eurocell People in Communication’) which regularly covers all aspects and activities of the Group with an emphasis on colleague engagement and information-sharing
• Regular colleague focus groups with the designated Non-executive Director, Alison Littley, to ensure workforce views are heard by the Board
• Departmental listening groups to allow colleagues to give direct feedback from which appropriate action plans can be formulated
• Group-wide ‘Pulse’ staff surveys, to provide invaluable insight into how our colleagues feel
• Review of retention and recruitment challenges, to identify areas for improvement and ensure we remain competitive in the labour market
• Enhancement of the induction processfor new colleagues, to help address short-term staff turnover
• More flexible approaches to working, including hybrid working where appropriate
• Enhancement of colleague facilities and rest-room arrangements, as part of overall staff welfare improvements
• Continued opportunity for all colleagues to become shareholders via the Save As You Earn scheme, to share in the Group’s success.

In addition, the Board assesses and monitors culture through:

• Reviews of staff survey results and response rates
• Reviews of staff turnover rates
• Reviews of health and safety data, including near misses
• Reviews of employee whistleblowing cases
• Interaction with senior management and workforce
• Observation of attitudes towards regulators such as HMRC and HSE, as well as internal and external auditors.

Executive remuneration has been, and continues to be, aligned with the wider company pay policy through the implementation of consistent annual salary reviews, annual bonus target-setting and benefit entitlement. As a result, it has not been considered necessary to engage with employees on this matter.

The Board is satisfied the above practices and behaviours throughout the Group are developing well to support improved employee engagement. In addition, as set out in ‘People First’ on pages 38 to 41, we have a number of in-progress and planned initiatives to improve our employee value proposition and retention rates, and drive down labour turnover.

This Corporate Governance Statement, together with the Nomination Committee Report, the Audit and Risk Committee Report and the Remuneration Committee Report, provide a description of how the principles and provisions of the Code have been applied during 2023.

It is the Board’s view that, during 2023, Eurocell plc was in compliance with the relevant provisions set out in the Code in all material respects except for Provision 38 for the period up to Mark Kelly’s retirement on 11 May 2023.

Provision 38 provides that Executive Director pension contribution rates (or payments in lieu) should be in line with those available to the workforce. For the period from 1 January 2023 up to his retirement at the AGM on 11 May 2023, Mark Kelly’s pension contribution rates did not match the wider workforce during that period.

However, from 11 May 2023 onwards, all pension contributions for the Executive Directors were in line with those available to the workforce and therefore were compliant with the Code and in line with the Investment Association’s guidance.

This statement complies with subsections 2.1, 2.2(1), 2.3(1), 2.5, 2.7 and 2.10 of Rule 7 of the Disclosure Rules and Transparency Rules of the Financial Conduct Authority.

Our AGM will be held at our Head Office on 16 May 2024.

The notice of our AGM, together with the Directors’ voting recommendations on the resolutions to be proposed, is included on a separate circular to shareholders and will be dispatched at least 21 clear days before the meeting. The notice will be available to view at investors.eurocell.co.uk.

All Directors intend to attend the AGM, including the Chairs of the Audit and Risk, Remuneration, Nomination and Social Values and ESG Committees, who are available to answer questions. The Board welcomes questions from shareholders who have an opportunity to raise issues informally or formally before or during the meeting.

For each proposed resolution, the proxy appointment forms provide shareholders with the option to direct their proxy vote either for or against the resolution or to withhold their vote. The proxy form and any announcement of the results of a vote make it clear that a ‘vote withheld’ is not a vote in law and will not be counted in the calculation of the proportion of the votes for and against the resolution.

All valid proxy appointments are properly recorded and counted by Equiniti, the Company Registrars. Information on the number of shares represented by proxy, the proxy votes for and against each resolution, and the number of shares in respect of which the vote was withheld for each resolution, together with the proxy voting result, are given at the AGM. The total votes cast, including those at the AGM are published on our website (investors.eurocell.co.uk) immediately after the meeting.