Hovis Holdings Limited
Statement of Corporate Governance
September 2020
The Board of Hovis Holdings Limited (the “Company”) recognises the importance of sound corporate governance and has decided to apply the Corporate Governance Code published by the Quoted Companies Alliance (the “QCA Code”). The Code was chosen as the most appropriate framework for the Company and its subsidiaries (together, the “Group”), having regard to its strategy as well as its size, nature and resources.
This report sets out, in broad terms, how we comply at this point in time. Going forward, we will provide annual updates on our compliance with the code.
Principle 1: Establish a strategy and business model which promotes long-term value for shareholders
The Group’s strategy and business model are developed by the CEO and his executive management team and approved by the Board. The executive management team, led by the CEO, is responsible for implementing the strategy and managing the business at an operational level.
The Group’s immediate key strategic priorities to drive sustainable future growth are:
- making and distributing the best quality bread possible;
- launching key new products in line with evolving consumer needs;
- investing in upgrading the supply chain footprint to deliver capacity and growth;
- developing our people;
- maintaining the highest levels of food hygiene and health & safety across all our Sites;
- reducing waste;
- creating a sustainable and strong financial position; and
- ensuring mutually positive relationships with suppliers and customers.
The strategy sets the overall priorities for the Group, which are subsequently implemented via functional business plans and, at an individual level, personal objectives.
Principle 2: Seek to understand and meet shareholder needs and expectations
The Board has two directors from each of its two shareholders.
In addition to the regular Board programme, the Group maintains a regular dialogue with its Shareholders and, where appropriate, updates them on significant one off issues impacting the Group.
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success.
The Board is regularly updated on wider stakeholder engagement and feedback in order to stay abreast of customers, suppliers and employees’ insights into the issues that matter most to them and our business.
Our commercial team build strong relationships with our customers, which are underpinned by regular dialogue. The Commercial Director attends all Board meetings to share key insights and feedback from these customers with the Board.
Our procurement team engage closely with key suppliers, with the aim of ensuring that suppliers meet the Group’s compliance policies on ethical trading, health & safety, anti- bribery, competition law compliance and anti-slavery.
Our employees are a key ingredient to our success. We hold regular management briefings and encourage staff feedback through employee surveys. Staff recruitment, development, retention and reward are critical. The focus on talent and development has led to the Group developing and rolling out a comprehensive apprenticeship programme covering Logistics, Engineering and Central Functions. In the past 12 months, the Group has further enhanced its learning and development programme, by adding employee “self-serve” online learning content and has also extended its performance development platform by adding a new career development module. Outstanding performance by our employees is recognised through our employee awards programme.
We oppose modern slavery in all its forms and encourage anyone who has any suspicions of modern slavery in our business or our supply chain to raise their concerns without delay. The Group has partnered with Stronger Together, who rolled out training on tackling modern slavery in UK business across key teams in the business during 2019. The Group has also established a new Ethical Standards Committee, with the remit to review all the Group’s actions and delivery of its commitments in this regard.
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board acknowledges its responsibility for reviewing the effectiveness of the systems that are in place to manage risk and to provide reasonable assurance with regard to the safeguarding of the Group’s assets against misstatement.
The key elements of the system of internal control are:
- clear definition of delegated authorities;
- preparation of annual budgets for Board approval;
- risk review process with the top 30 senior employees in the business;
- close involvement of senior management in the day-to-day business of the Group; and
- periodic reporting of business performance to the Board and the review of results against budget.
The Board has approved a number of mandatory ethical policies, which underpin the day to day running of the business. These policies cover competition law compliance, anti-bribery compliance, employment law, data protection, IS security, ethical trading, human rights, food safety, health & safety, anti-facilitation of tax evasion and regulatory affairs compliance.
The Group has an approval system in place, with senior approval required for significant customer investment, capital expenditure and other purchases. Material contracts are reviewed by the legal team, with external support as required, and must be approved by the CEO.
Principle 5: Maintain the Board as a well-functioning, balanced team led by the chair
The Board comprises the CEO and four non- executive directors from the Groups’ primary shareholders. In 2019, these were Fernando Goni and John Danner representing Gores Group; and Alexander Whitehouse and Duncan Leggett representing Premier Foods plc.
In line with the recommendation under the QCA code, the roles of Chair and CEO are separate. Fernando Goni, the non-executive Chair, is responsible for the running of the Board and Nish Kankiwala, the CEO, has executive responsibility for running the Group’s business and implementing Group strategy.
All directors are encouraged to use their independent judgement and to challenge all matters, whether strategic or operational.
The Group holds regular Board meetings, planning to meet at least eight times a year and each director is asked to disclose any conflicts of interest in line with the Company’s constitution.
The Group’s external audit partner attends at least one Board meeting a year to present the annual audit report to the directors.
Principle 6: Ensure that, between them, the directors have the necessary up-to-date experience, skills and capabilities
The Board is satisfied that, between the directors, it has an effective and appropriate balance of skills and experience and time to perform its duties.
The directors have a diverse set of skills and experiences. Between them they have worked across various industry sectors and businesses, from high growth private equity backed groups, through to global listed companies. Their functional expertise spans finance, supply chain and commercial.
The directors receive regular and timely information on the Group’s operational and financial performance with information being circulated to the directors in advance of meetings. The business reports monthly on its headline performance against its agreed budget.
All directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense. In addition, the Directors have direct access to the advice and services of the Company Secretary and Finance Director.
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
An informal evaluation process for Board performance has been followed to date. The Company will in the near term seek to formalise the assessment of the Board.
Principle 8: Promote a corporate culture that is based on ethical values and behaviours
Although this is the first year that a Code has formally been adopted, the Group has always strived for a culture based on a high standard of ethical conduct, in line with its Corporate Social Responsibility Policy. Examples of the pillars of this Policy in action during 2019 include:
“Pillar 3: We shall support and encourage our employees to help local community organisations and activities in our region, particularly our employee chosen charities.”
In 2019, we raised £15,000 for our chosen national charity, The Alzheimers Society.
“Pillar 6: We shall provide, and strive to maintain, a clean healthy and safe working environment in line with our Health and Safety policy and safe systems of work”.
KPIs are reviewed weekly by the executive management team and any non-compliance is investigated in full, with timely follow up with the Board.
“Pillar 7: we shall develop Environmental policies and objectives as part of the business planning cycle”.
During 2019, Hovis continued its agreement with Terracycle to support the recycling of bread bags; ran a successful trial of low emission bio diesel, which it will roll out to the majority of its fleet in 2020; and ran a small fleet of electric delivery vans and company cars and continues to do so.
These core beliefs are reinforced by senior management throughout the year at Town Halls and other meetings.
Senior management participate in bonus arrangements which are linked to both the financial performance of the Company and personal performance in achieving these results the right way. Payment of any bonus is at the discretion of the Board and is contingent upon the continued application of the desired ethical behaviours across all levels of the Group.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision making by the Board
The Board meets at least eight times each year in accordance with its scheduled meeting calendar.
The Board is responsible for the long-term success of the Company. It is responsible for overall Group Strategy and approval of the Strategic Plan and Annual Operating Plan. These plans cover all aspects of the business, including capital expenditure, operating and marketing expenses and organisational costs.
All directors receive regular and timely information on the Group’s operational and financial performance. Relevant information is circulated to the directors in advance of meetings. 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 meeting.
The Executive Team consists of the CEO, Commercial Director, Supply Chain Director, Finance Director and Human Resources Director. They are responsible for formulation of the proposed strategic focus for submission to the Board, the day-to-day management of the Group’s business and its overall trading, operational and financial performance in fulfilment of that strategy, as well as plans and budgets approved by the Board. The Board also manages and oversees key risks, management development and corporate responsibility programmes.
The Board is supported by the Internal Audit Committee which meets quarterly. The Internal Audit Committee is responsible for monitoring the integrity of the Company’s financial statements, reviewing significant financial reporting issues, reviewing the effectiveness of the Company’s internal control and risk management systems and overseeing the relationship with the external auditors. The Board also monitors the need for an internal audit function. The external auditor attends meetings as required by the Committee to consider any issues arising from the Internal Audit Committee and its work.
Principle 10: Communicate how the company is governed and is performing by maintaining dialogue with shareholders and other relevant stakeholders
As noted above, the shareholders take an active management of the business through the four non-executive directors that sit on the Board.