Corporate Governance - Sep2023

Tristel plc

Chairman's Corporate Governance Report 2023

This Corporate Governance Report has been written with the Quoted Companies Alliance (“QCA”) Corporate Governance Code in mind.

As Chair of the Board of Directors, corporate governance is my responsibility. By following the QCA code, my Board colleagues and I seek to ensure that the Company operates efficiently and effectively and communicates well to promote confidence and trust in the Company’s Board and Management. The Board aims to balance the interests and expectations of the Company’s many shareholders and stakeholders by observing a transparent set of rules, practices and processes. I believe that by adhering to this clear set of guidelines which clarify authority and responsibility, requiring constant measurement and review, the Company is best placed to manage risk and achieve a high level of performance, both of which are pre-requisites to the Company’s long-term success.

Corporate Governance Review

The London Stock Exchange’s AIM Rule 26 requires all AIM quoted companies to give details of the corporate governance code that they have decided to apply, to explain how they comply with their chosen code, and, if they depart from the chosen code, to explain where and why. In the Board’s view, there are two obvious choices of code: the FRC’S UK Corporate Governance Code and the QCA’s Corporate Governance Code (the “QCA Code”). The latter has been drafted with SMEs in mind and we have chosen to apply it.

Each year the Board carries out a review of the requirements of the QCA Code and AIM Rule 26, with respect to both its governance arrangements and practices, and its reporting. The key changes that have resulted from this review during the year ended 30 June 2023, are:

An update to this Corporate Governance Report
Completion of a strategic review, in conjunction with the Company’s North American product launch, resulting in re-defined strategic objectives and financial goals
Consideration by the Nominations Committee of the desired make-up of the Board of Directors, ensuring a strong mix of skills, knowledge, experience and diversity; alongside a review of the members of each committee to the Board and the level of independence held. Changes to the Committee memberships have been made as a consequence
Completion of an external Board effectiveness review, and implementation of the resulting proposals
Setting of personal objectives for Executive Management
Further enhancement to Board reporting enabling improved insight into business activities
A review and update to the Executive Management succession plan
Formulation of an ESG strategy and setting of targets

Corporate Governance Code

The QCA Code is based on the principle that companies need to deliver growth in long-term shareholder value. This requires an efficient, effective, and dynamic management framework and should be accompanied by good communication which helps to promote confidence and trust. The QCA Code takes key elements of good governance and applies them in a manner which is workable for the different needs of growing companies. It is constructed around ten broad principles and a set of disclosures. Companies are asked to provide an explanation of how they are meeting the principles through the prescribed disclosures. Where a company departs from these principles the Board is asked to provide a well-reasoned explanation for doing so. The following section of this Corporate Governance Report seeks to provide this.

Principle 1 - Establish a strategy and business model which creates long-term value for shareholders

The Board reviews and re-sets the Company’s strategic goals annually. In July 2023 the primary goals were re-set, as:

Corporate:

Maximise Company’s value to all stakeholders

Medical device decontamination (Tristel brand):

Through technological innovation maintain our position as the gold standard manual process for High Level Decontamination of medical devices.

Healthcare surface disinfection (Cache brand):

To become the global market leader in sporicidal surface disinfection
Secondary objectives and goals form part of the strategic plan and make an essential contribution to how the Company will deliver medium to long-term growth.

ESG:

At the core of our mission lies the pursuit of creating a better and more sustainable business, avoiding harm, benefiting stakeholders and contributing to society. We believe that by leveraging our unique chemistry and innovative technologies, we can achieve these goals whilst simultaneously fostering an energetic, considerate and inclusive workplace. Operating in the Infection prevention arena enables us to say that we do the right thing, and by ensuring we have a genuine and steadfast focus on ESG we are also able to say that we do it in the right way.
We have set ourselves the following carbon emission targets:

To achieve net zero emissions for scopes 1 & 2 by 2030, and
To achieve net zero emissions for scopes 1, 2 & 3 by 2045 in line with the NHS’s net zero target,
both, in so far as we can exercise control over our emissions impact.

We have also set targets pertaining to health, safety and wellbeing; diversity, equality and inclusion; fair and decent work, which are detailed later within this report. We will be setting waste management targets during FY24.

Full details of our ESG strategy and targets can be found within the ESG report.

The Company has a clear strategic plan set by the Board, including financial performance targets, an approach to risk, and a vision of the values necessary and appropriate to achieve the plan. Via internal reporting and interaction between the Board, Management and staff, there is company-wide understanding of how shareholder value will be derived from these principles.

The business strategy, financial targets and key risks are clearly stated within our Annual Report to ensure that Shareholders can see how the Board intends to deliver long term shareholder value and security, whilst protecting it from unnecessary risk.

Principle 2 - Seek to understand and meet shareholder needs and expectations

The Chief Executive and Chief Financial Officer are the key shareholder liaison contacts alongside the company’s public relations advisors.

The Board actively engages with both institutional and private shareholders on at least four occasions each year, each in a forum which allows it to hear investors’ views and answer their questions face to face. The Company’s NOMAD and public relations advisors provide written investor feedback after all investor presentations and meetings, which are shared with the Board. Via communication with the Company’s NOMAD and analyst, together with Regulatory News Service announcements and the Company’s Annual Report, the Board gauges investor sentiment, sets expectations and communicates the Company’s intentions. The Board sees all write ups on the Company by the financial press, monitors popular online bulletin boards and has a series of online facilities in place that provide a conduit between the Company and its shareholders. AGM voting recommendations and trends are reviewed by the Board and actions taken when there is evidence that shareholders expectations are not being met.

The Board feels that it has achieved a high level of shareholder engagement and continually seeks ways to further enhance this.

Principle 3 - Take into account wider stakeholder and social responsibilities and their implications for long-term success

Management’s close day to day connection with employees combined with regular engagement surveys, staff meetings, education sessions and social events ensure good relations with and between employees. These activities allow employees to share their views on how the Company can ensure greatest chance of success for its products, processes and outcomes, as well providing a positive work environment. The Board’s assessment is that the Company’s culture is energetic, candid and considerate, which is reflected in the achievement of its strategic goals.

An appropriate and positive relationship with suppliers, advisors and customers is a pre-requisite of the successful operation of the Company and exists in all areas of the business. The Company seeks to find innovative solutions to issues presented by customers which not only strengthens their good relations but provides immediate feedback allowing the Company to continually re-evaluate its strategic positioning and product offering. Product design and development, which has been vital to the Company’s success, is at the heart of the business operation and is driven by the close understanding between Management and end users of the Company’s products.

The management team works closely with regulators, key opinion leaders and authors of clinical guidelines in all countries, seeking counsel and working in cohort when appropriate. Effective connections and relationships are key to the success of the business and via these networks the Company has built strong barriers to competition, consisting of the inclusion in guidelines, studies, published papers, and medical device manufacturer care cards. These relationships and their outcomes, combined with the Company’s proprietary formulation of chlorine dioxide and extensive patent protection, give the Board confidence that long term success can be achieved by the Company in accordance with its strategic plan.

Post market surveillance and effective complaints and feedback handling are a mandatory element of the Company’s quality accreditation and enable an invaluable feedback loop into future product development.

ESG

Full details of the Company’s ESG strategy, goals and activities can be found in the ESG report. In addition to the items outlined within the ESG report, the Company will continue its community and social activities, which currently include:

Support of local and small businesses
Sponsorship of local amateur and school sports teams
Support of charities connected to the company’s staff and its local community
Staff fundraising events
Walking and sports events for staff, friends and families

The Board is involved in setting the Company’s ESG strategy, has oversight on activities and receives regular reporting on KPIs and the achievement of goals. ESG is discussed in depth as part of the Board’s annual Strategy Day, during which it was agreed to:

Adopt the ESG strategy, goals and KPIs above
Consider which ESG accreditations and guidelines that it may seek to adopt, to further enhance the Company’s ESG profile.
Enhance the Annual report and Company website to provide clear updates to readers on the Company’s ESG activities.

Principle 4 - Embed effective risk management, considering both opportunities and threats, throughout the organisation

Business opportunities, wins, losses and threats are shared by the Management team with the Board. Risks and their mitigating factors are documented, with high-risk situations immediately acted upon. Health & safety risk assessments are a high priority given the nature of the business as a chemical manufacturer and are completed on a continual basis. Operational risks and uncertainties are discussed daily within the business in departmental meetings. A Business Continuity and Disaster Recovery plan has been updated in the year with scenario planning events taking place twice a year. Financial risks are considered by the Board at each Board meeting. The Board is provided with global sales and cash information daily, allowing it to quickly respond in fast-moving situations.

The Board ensures the risk management and related control systems are effective through internal review and assessment, which is part of its continuous improvement strategy.

Principle 5 - Maintain the Board as a well-functioning, balanced team led by the Chair

In addition to daily access to sales numbers and the cash position of the Company, the Board receives detailed information and reporting from every geographical and functional part of the business, direct from the responsible individuals. The information is high quality and comprehensive, ensuring that the Board is well informed and has the tools to facilitate proper assessment of matters which require its insight and decision making.

The Board believes that there is an appropriate balance between Executive and Non-Executive Directors on the Board. Isabel Napper is the Senior Independent Non-Executive Director, Tom Jenkins and Caroline Stephens are Independent Non-Executive Directors, and Bruno Holthof who is the Non-Executive Chair of the Board is also independent. David Orr is not considered to be independent by virtue of his directorship and shareholding in Manor packaging, a supplier of cardboard to the Company. David will step down from the Board at the end of his 9 year tenure, during 2024.

The Board complies with the QCA Code’s requirement that at least half of the Board should be independent Non-Executive Directors. It is believed that the mix of non-independent directors bring great specialist, analytical and entrepreneurial attributes to the Board, adding viewpoints and competencies that further enrich it.

The Executive team consists of Tristel’s Chief Executive Paul Swinney and Chief Financial Officer Liz Dixon, who are married, and Bart Leemans. Bart is an Executive Director, alongside his role managing the Group’s French and Belgian operations.

All Directors are encouraged to foster an attitude of independence of character and judgement. The relevant experience, skills, and personal qualities that each Director brings to the Board are detailed within the Directors Biographies, published within the Remuneration Report. Each Director keeps their skillset up to date by reading relevant publications and attending external training and personal development courses and workshops.

Each Non-Executive Director is expected to give at least 16 days per annum to the Company’s business.

Principle 6 - Ensure that the Directors collectively have the appropriate skills, capabilities and experience

The Board consists of individuals with backgrounds and experience in publicly and privately-owned healthcare, commerce, finance, legal and manufacturing organisations. Collectively, the Board’s members have a wide range of experience, personal qualities, and capabilities.

The Board contains three Executive Directors, two male and one female, and of five Non-Executive Directors, two are female and three male. In all new appointments the Board aims to appoint candidates who bring new and diverse attributes to its complexion.

In accordance with the QCA Code Non-Executive Directors are only eligible to serve for up to 9 years. At each Annual General Meeting, at the discretion of the Nominations Committee, all directors are put forward for re-election.

Principle 7 - Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement

The performance and effectiveness of the Board, its committees and individual Directors is reviewed by the Chair and the Board an ongoing basis. Training is available should a Director request it or if the Chair feels it is necessary.

The performance of the Board was measured during the year in conjunction with an external consultancy; alongside the Chair’s own assessment, in part via reference to the Company’s achievement of its strategic goals. The performance of the Chair is assessed

annually by the Senior Independent Non Executive Director. The performance of the CEO and CFO is assessed annually by the Chair. The performance of other Executive Directors is assessed annually by the CEO. And the performance of the NEDs is assessed annually by the Chair.

Actions that have resulted from the Board review include:

In addition to regular reviews, specific in-depth appraisals to be included in the FY24 Board agenda on matters of current significance such as risks, overseas expansion plans and ESG actions
Specific succession planning actions
Meetings to be arranged between the Chair and investors during FY24
More Board interaction and communication to be scheduled in-between Board meetings

The Board has in place a short-term plan to be instigated in the event of the loss or incapacity of the key roles of Chief Executive or Chief Financial Officer. The Board continually assesses the candidacy of staff with respect to succession planning, both within the Company and for future Executive Management vacancies. Senior Managers are invited to attend Board meetings to both observe, present, and discuss topics in their area of responsibility. A talent development and succession plan has being formulated to ensure that the loss of any of the Executive Directors will not negatively impact the business.

Principle 8 - Promote a corporate culture that is based on ethical values and behaviour

The Board promotes a corporate culture that is based on sound ethical values and behaviour through their own actions and words, and ensures that these are apparent and understood in every part of the business.

They are embodied in three words which describe the core values of the Company:

No-nonsense
Considerate
Energetic

These values are applied consistently to employee personal development and training programs and form a central part of the Company’s day to day operation.

By adhering to these values, the Board believes that the Company will maintain a healthy corporate culture, focusing upon what is important, whilst taking a balanced approach to achieving its goals.

Infection prevention is a vital yet complex area of healthcare, and healthcare providers can be reluctant to change and put their trust in new products. The Board feels that if an honest and straightforward approach is taken, whilst supporting customers through the process of adopting new products, the Company can best achieve its goals.

The relatively flat structure of the Company means that the Board can assess the state of Company’s culture easily, which it currently considers to be strong, positive, and spirited, despite the uncertainties affecting the world and felt by us all.

Principle 9 - Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

Given that one of the Company’s core values is “no-nonsense”, the Board seeks to strike a balance between maintaining adequate governance without imposing structures that slow or weaken decision making and progress. The Company’s governance structures are fluid and have by necessity adapted over time, hand in hand with the changes to the business.

The Board’s members are well informed, have access to all parts of the business and are appropriately equipped through their own skills, experience, and personality to make good, and where appropriate fast, business decisions.

At each Board meeting the Key Performance Indicators (KPIs) considered most relevant to the business are presented and discussed. Such KPIs are continually developed to ensure that the Board is kept adequately informed and able to take the appropriate actions. The KPI reporting include a number of measures, focussing upon operational performance, financial performance, Quality Management System adherence and ESG targets. Periodically, normally annually, a corporate risk register is presented to the Board and mitigating actions agreed.

Principle 10 - Communicate how the Company is governed and is performing by maintaining dialogue with Shareholders and other relevant stakeholders

This Corporate Governance Report is included within the Company’s annual report and the Corporate Governance section of the Tristel website. It is reviewed and updated regularly. In addition, the Board regularly enters dialogue with shareholders who have an interest in matters of governance, diversity and ethics in order that shareholders views can be properly voiced and brought to bear within the business.

Board of Directors

The Company is controlled by the Board of Directors, which comprises three Executives, one of whom is the Chief Executive Officer, and five NEDs. The role of the Chief Executive Officer and Chair are separate. The Executive Directors are full time employees of the Company; the NEDs are part time employees who are required to give at least 16 days per annum to their role.

All Directors can take independent advice to assist them in their duties if necessary.

The Board is responsible to shareholders for the proper management of the Company and meets formally at least six times a year to set the overall direction and strategy of the Company, to review operating and financial performance and to consider and advise on senior management appointments. The Board also monitors and approves financial policy and budgets, including capital expenditure. All key decisions are subject to Board approval.

The Company Secretary is responsible for ensuring that Board procedures are followed and that all applicable rules and regulations are complied with. The Company Secretary, Heidi Allard, is supported and guided in her role by the Company’s legal advisors.

Board and committee attendance

The Board met eight times during the 2022-23 financial year and its committees met a further three times in accordance with their terms of reference. The attendance of the Directors at these meetings is detailed below.

On the occasions when a Director is unable to attend a meeting, any comments he or she has arising from the information pack circulated prior to the meeting are provided to the Chair.

2022-2023	Eligible to attend	Attended
Bruno Holthof	9	9
Paul Swinney	8	8
Elizabeth Dixon	7	7
Bart Leemans	7	7
David Orr	9	9
Tom Jenkins	11	11
Isabel Napper	11	10
Caroline Stephens	11	11

Committees Of The Board:

Remuneration Committee

The Remuneration Committee operates under terms of reference which are reviewed annually, meeting at least once per year, and comprises all Independent Non-Executive Directors chaired by Isabel Napper SINED.

It reviews, inter alia, the performance of the Executive Directors and sets the scale and structure of their remuneration and basis of their service agreements, having due regard to the interests of the shareholders. The Remuneration Committee also determines the allocation of share options to Executive Directors. No Director has a service agreement exceeding one year. One of the policies of the Remuneration Committee is that no individual participates on discussions or decisions concerning his/her own remuneration. The Directors’ Remuneration Report is set out in the Annual Report where the work carried out during the past year is detailed.

Audit Committee

The Audit Committee operates under terms of reference which are reviewed annually and comprises all Independent Non-Executive Directors except the Chair of the Board, in line with QCA guidelines.

The Audit Committee is chaired by Caroline Stephens and is supported by Tom Jenkins, both INEDs. Tom is a qualified Accountant and as such has the relevant knowledge and experience required to facilitate the proper functioning of the Committee. The Committee meets twice a year and, amongst other duties, overviews the monitoring of the Company’s risk profile, internal financial controls, accounting policies and financial reporting, and provides a forum through which the external auditors report. It meets at least once a year with the external auditors.

The Company does not comply with the QCA’s requirement to publish a separate Audit Committee Report as it believes that the information provided within this Corporate Governance Report gives shareholders adequate information on the committee’s activities.

During the 2022-23 year the Audit Committee met on two occasions to:

Discuss findings and hear recommendations arising from the annual audit
Discuss with the Company’s external auditors matters such as compliance with accounting standards
Monitor the external auditor’s compliance with relevant ethical and professional guidance on the rotation of audit partners, the level of fees paid by the Company and other related requirements
consider the performance and value for money of the Company’s external auditors
Approve the appointment of the Company’s external auditors, including their terms of engagement and fees.

The Audit Committee reported formally to the Board on proceedings after each meeting.

Nominations Committee

The Nominations Committee operates under terms of reference which are reviewed annually, comprises all Non-Executive Directors and the CEO and is chaired by Bruno Holthof, Non Executive Chair of the Board.

The Nominations Committee considers the performance and effectiveness of the Board and its Directors; whether Directors retiring by rotation should be put forward for re-election at the Annual General Meeting; to consider succession planning for Directors and other senior executives; and to identify and nominate for the approval of the Board candidates to fill Board vacancies as and when they arise.

During the year the significant actions arising from the Committee were:

Implementation of a Board review and implementation of resulting actions
Refining of the CEO succession plan

External consultants Nurole were appointed during the year to complete a review of the effectiveness of the Board and that of the individual Directors, in relation to the following categories:

Strategy and business
Risk management and ESG
Composition and Diversity
Board dynamics and process

All directors were provided with qualitative feedback to further enhance their contribution to Board functioning.

The performance of the Board and its individual Directors is also viewed in the context of the Company’s achievement of its strategic goals. During the 2022-23 year these were:

To meet the Company’s profit target.
To increase sales by between 10% and 15% per annum.
To increase the Company’s value to shareholders.

All three objectives were achieved during the year.

Directors are subject to election by shareholders at the first opportunity after their appointment. In addition, all Board members retire at each Annual General Meeting, and at their own request alongside the recommendation of the Nominations Committee, are put forward for re-election.

Relations with Shareholders

The Board recognises the importance of effective communication with shareholders and encourages regular dialogue with both institutional and private investors. The Board responds promptly to communications received verbally or in writing. Directors regularly attend meetings with both private and institutional shareholders throughout the year. Shareholders are given at least 21 days’ notice of the Annual General Meeting held in December and are invited to attend a Shareholder Open Day held in July each year. At all investor meetings shareholders are given the opportunity to discuss the development and performance of the Company with Management and the Group’s senior team.

The Company’s website www.tristelgroup.com and Twitter feed @TristelGlobal contain details of its products, promotional activities, investor relations events, share price details and Regulatory News Service (RNS) announcements.

Maintenance of a sound system of internal control

The Directors have overall responsibility for ensuring that the Company maintains a system of internal control to provide them with reasonable assurance that the assets of the Company are safeguarded, and that shareholders' investments are protected. The system includes internal controls appropriate for the Company’s size, and covers financial, operational, compliance (including health and safety) and risk management areas. There are limitations in any system of internal control, which can provide reasonable but not total assurance with respect to the preparation of financial information, the safeguarding of assets and the possibility of misstatement or loss.

The Board continually considers its policies regarding internal control, risk management and business reporting with respect to the major areas of the business and methods used to monitor and control them. In addition to financial risk, the reviews cover operational, commercial, regulatory and health and safety risks. Internal audit activities are currently limited to the Company’s Quality Management System controls. An expansion of this activity to include accounting processes and corporate governance will be considered as the Company develops.

The key procedures designed to provide an effective system of internal controls that are operating up to the date of sign-off of this report are set out below.

Control environment

There is an organisational structure with clearly defined lines of responsibility and delegation of accountability and authority.

Bruno Holthof
Non Executive Chair