The Quoted Company Alliance (QCA) Code
The Quoted Company Alliance (QCA) Code
Application (as set out by QCA)
The Board must be able to express a shared view of the Company’s purpose, business model and strategy. It should go beyond the simple description of products and corporate structures and set out how the company intends to deliver shareholder value in the medium to long-term. It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the company from unnecessary risk and securing its long-term future.
What we do and why
National Milk Records Plc's mission, values, and business model is outlined on its website. The company's strategy is explained fully in the document titled 'Our Strategic Plan' which is provided to employees. This document is also available to business partners and other stakeholders.Our strategy, to deliver shareholder value, is focused around four pillars:
1. Focus on NMR's core business of milk testing and the provision of management information to the dairy supply chain
2. Grow NMR's suite of new milk-based tests
3. Drive food supply chain and provenance services
4. Identify opportunities for complementary step change
The capabilities necessary to deliver the strategy are routinely evaluated. The risks to the business and how these are mitigated are detailed in the 2022 Report and Accounts.
Application (as set out by QCA)
Directors must develop a good understanding of the needs and expectations of all elements of the company’s shareholder base.
The Board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions.
What we do and why
The Board encourages communication with its shareholders. NMR possesses a diverse shareholder base that may differ in attitude and objectives regarding their investment in the business. It is therefore seen as a priority to ensure the Non-Executive Directors in particular, are fully cognisant of these perspectives. To that end, the current Non-Executive Directors represent a range of business and industry backgrounds and, along with the Managing Director and Finance Director, maintain regular contact with the main shareholders.
The Board maintains contact with significant shareholders through the Executive Directors and designated Non-Executive Directors as appropriate. The Board welcomes questions and feedback from all shareholders at the Annual General Meeting. The Board invites feedback from investors following the announcement of financial results and at the Annual General Meeting.
The Executive Directors regularly attend investor briefings, including the Mello event this year held in Chiswick in May 2022 (see melloevents.com)
Application (as set out by QCA)
Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The Board needs to identify the company’s stakeholders and understand their needs, interests and expectations.
Where matters that relate to the company’s impact on society, the communities within which it operates or the environment have the potential to affect the company’s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the company’s strategy and business model.
Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups.
What we do and why
The Board fully recognises the importance of managing the business in a balanced and responsible manner with due regard to fairness and ethics.
NMR's core business is part of an extremely important and ever-changing national food supply chain. NMR takes very seriously the critical nature of all its various functions in ensuring that the integrity of that supply chain is maintained. NMR's systems are part of underwriting the individual animal health status of dairy herds across the United Kingdom as well as bulk ex-farm milk collections, which underwrite the safety and quality of the product and form the basis for calculating payments to the supplying producer.
In May 2022, NMR instigated its first client meetings since the Covid-19 pandemic, including representatives from 18 dairy companies covering c.90% of the UK Milk Pool. Issues discussed included methane, herd health and Johne’s disease, and contaminants in bulk milk including antibiotics.
The Board maintains intelligence on the latest market developments and stakeholders via members of the Executive Leadership Team (ELT), Non-Executive Directors and employees within the field.
During the year, NMR has developed The Sustainable Performance Index (SPI), which contributes to the sustainable future of the whole dairy industry of the UK. This development has been in conjunction with 26 stakeholder groups, representing interests up and down the UK dairy supply chain.
Our Employees are central to the provision of our services. Feedback is essential to the Board who routinely monitor employee Net Promoter Scores introduced in April 2021 as well as externally moderated Annual Employee Engagement survey. Since the Covid-19 pandemic, NMR has recognised the importance in our wellbeing and mental health awareness/support. We remind our employees regularly of the 24/7 Employee Assistance helpline providing them with support and counselling services. In addition, In July 2022 NMR signed an agreement with Westfield Health to provide all employees the option to enter a cash plan for essential healthcare to include dental treatment, physiotherapy and much more.
Application (as set out by QCA)
The Board needs to ensure that the company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the company’s supply chain, from key suppliers to end-customer.
Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take (risk tolerance and risk appetite).
What we do and why
The principal Group risks and uncertainties are monitored by the Board.
The Board considers risks to the business at every Board meeting. The Company formally reviews and documents the principal risks to the Group at least annually. New inclusions this year include risks associated with property and physical security, together with share price liquidity.
Both the Board and senior management are responsible for reviewing and evaluating risk and the Executive Directors review ongoing trading performance, discuss budgets and forecasts and new risks associated with ongoing trading. Senior management are responsible for identifying and managing risks material to their individual business area and to referring these to Group management.
The group strategy has been formulated to reflect the risk appetite of the Group.
The significant inflationary pressures seen in energy and consumer prices, together with pressures in the labour market present a number of fast moving risks to NMR operations. These risks and mitigating tactics to minimise them are managed by the Executive Leadership Team on a daily basis with regular updates for the NMR Board.
Application (as set out by QCA)
The Board members have a collective responsibility and legal obligation to promote the interests of the company and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the Board.
The Board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.
The Board should have an appropriate balance between Executive and Non-Executive Directors and should have at least two independent Executive Directors. Independence is a Board judgement.
The Board is supported by committees (e.g. Audit, Remuneration and Nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively.
Directors must commit the time necessary to fulfil their roles.
What we do and why
The Company is led by the Board of Directors. The Chairman is responsible for the running of the Board and the Managing Director has primary responsibility for running the Group’s business and implementing Group strategy. The Board comprises two Executive Directors and three Non-Executive Directors. The Board considers that all Non-Executive Directors are independent, notwithstanding their varying lengths of service. All the Directors commit the time necessary to fulfil their roles, which can vary on a month by month basis.
All Directors receive regular and timely information regarding the Group’s operational and financial performance. Comprehensive financial reporting procedures exist and budgets covering profits, cash flows and capital expenditure are prepared and then adopted by the Board annually. Actual results are reported monthly to the Board and results then compared against budgets and prior year actuals. Further in depth analysis occurs regarding any specific item should any need arise.
Relevant information is circulated to the Directors in advance of meetings. From time to time, senior managers are invited to attend and present at Board meetings. All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense.
During and subsequent to the Covid-19 pandemic the Board has complied with the changing Covid-19 regulations and organised a blend of virtual and physical meetings.
Audit Committee Report - The Audit Committee in conjunction with the main board has reviewed and updated our risk register to ensure it reflects the changing market environment.
Remuneration Committee Report – On 23rd December 2021, a new LTIP has been established to incentivise Executive Directors and Senior Managers to deliver long-term value creation for shareholders and ensure alignment with shareholder interests. The Remuneration Committee have based the LTIP on market standard awards to incentivise management to drive shareholder returns. The performance targets included in the plan include growth in revenue and earnings before interest, taxation, depreciation and amortisation ("EBITDA"), and the delivery of strategic personal objectives.
Application (as set out by QCA)
The Board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The Board should understand and challenge its own diversity, including gender balance, as part of its composition.
The Board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a Board.
As companies evolve, the mix of skills and experience required on the Board will change, and Board composition will need to evolve to reflect this change.
What we do and why
The Nomination Committee of the Board oversees the selection process for, and makes recommendations to the Board on, all new Board appointments. Where new Board appointments are considered the search for candidates is conducted, and appointments are made, on merit, against objective criteria and with due regard for the benefits of diversity on the Board, including gender. The Nomination Committee also considers succession planning.
The HR Director supports the Chairman in addressing the training and development needs of Directors.
Brief biographies of the Directors can be found on the website and in the annual report. The Executive Directors have considerable experience in their roles. The Non-Executive Directors possess a range of industry, business, financial, strategic and commercial expertise which brings both balance and relevance to the Board.
Application (as set out by QCA)
The Board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual Directors.
The Board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual Directors or the wider senior management team.
It is healthy for membership of the Board to be periodically refreshed. Succession planning is a vital task for Boards. No member of the Board should become indispensable.
What we do and why
The Board carries out an evaluation of its performance and the performance of its committees and the individual Directors. The Chairman is accountable for Board performance and gathers feedback from other Directors and the Executive Leadership Team to assess Board performance and relevance. NMR has introduced a process of 360-degree appraisal for the Executive Directors and Executive Leadership Team. The project to quantitatively assess board performance as a whole has been delayed by focus on the strategic plan as we emerge from Covid-19 and navigate significant inflation. It is intended to commence this work in 2023.
The Board periodically reviews the relevance and level of information being considered at Board meetings
The Nomination Committee is responsible for overseeing succession planning requirements, including the identification and assessment of potential Board candidates and making recommendations to the Board for its approval.
At least every three years the board members are proposed for re-election to the board at AGM. This is an annual process for the Chairman.
Application (as set out by QCA)
The Board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage.
The policy set by the Board should be visible in the actions and decisions of the chief Executive and the rest of the management team.
Corporate values should guide the objectives and strategy of the company.
The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the company.
The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company.
What we do and why
The Board of NMR operates a policy of collective responsibility with regard to all decision making, with the Chairman being responsible for the smooth functioning of its activities. NMR's values are centred around trust:
- Open and purposeful
- Expert and accountable
- Can do and collaborative
NMR's mission is to be the 'partner' of choice for the nation’s milk producers, veterinary surgeons, processors and retailers.
We seek to help 'assure' the health of our customers' herds, safeguard and validate their hygiene and, in so doing, look after the nation's health.
We are committed to 'serve and support' our customers as our core aim, with our high service level seen as our first and foremost barrier to competition. Our hard-earned reputation for that trust, and service level, is then at the vanguard of our growth strategy.
NMR is making its second 3-year greenhouse gas emission report in the 2022 Report and Accounts, which continues to show improvements in the businesses emissions.
The NMR Brand refresh was developed during the fourth quarter of the financial year, culminating with the new website launched in August 2022. The essence behind the brand tries to capture the pioneering spirit of the Human Genome project at the Wellcome collection, and includes a new tagline, “Decoding milk data, building robust insights’.
Application (as set out by QCA)
The company should maintain governance structures and processes in line with its corporate culture and appropriate to its:
• size and complexity; and
• capacity, appetite and tolerance for risk.
The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the company.
What we do and why
The Chairman is responsible for the Company’s governance and provides oversight of the Board. Three Committees exist to provide governance to the Board:
- The Audit Committee, chaired by a Non-Executive Director experienced in audit and financial reporting, ensures appropriate conduct of financial reporting and audit.
- The Remuneration Committee reviews and approves compensation packages for the Executive Directors.
- The Nomination Committee, chaired by the Company Chairman, meets as required to review the need for, and consider, Board appointments.
In addition, the Strategy Committee is chaired by a Non-Executive Director and meets separately from Board meetings. The committee consists of the members fo the NMR Board and members of the senior management team.
The Board are satisfied that the current governance structures and processes are appropriate for its size, complexity and appetite to risk. This judgement will require an ongoing appraisal as the business develops over time and as such the Board will regularly monitor developments in Corporate Governance regulations and processes with regard to the suitability of the QCA Code.
Application (as set out by QCA)
A healthy dialogue should exist between the Board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the company.
In particular, appropriate communication and reporting structure should exist between the Board and all constituent parts of its shareholder base. This will assist:
• the communication of shareholders’ views to the Board; and
• the shareholders’ understanding of the unique circumstances and constraints faced by the company.
It should be clear where these communication practices are described (annual report or website).
What we do and why
The Company encourages two-way communication with both its institutional and private investors and responds quickly to all reasonable queries received. The Managing Director and Finance Director talk regularly with the Group’s shareholders and ensures that their views are communicated fully to the Board.
The Board recognises the AGM as an important opportunity to meet private shareholders. The Directors and Senior Managers are available to listen to the views of shareholders informally immediately following the formal business of the AGM.
After each AGM, the Company informs the Aquis Stock Exchange regarding the outcome of the resolutions. Suitable explanations of any actions undertaken as a result of any significant votes against resolutions shall also be disclosed on the Company’s website.
A close relationship is maintained with the company's corporate advisor who is able to facilitate further opportunities for stakeholder engagement.