Tristel plc

Chairman's Corporate Governance Report

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 are:

• An update to this Corporate Governance Report

• Consideration by the Nominations Committee of the desired make-up of the Board of Directors, the members of each committee to the Board and the level of independence held, resulting in Board changes

• A review and update to the Executive Management succession plan

• An update to the Group Risk Assessment with particular focus upon COVID-19

Corporate Governance Code

The QCA Code is based upon 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 the 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 September 2021 the primary goals were re-set, as:

Corporate

• Maximise Company’s value to all stakeholders

Medical device decontamination - Tristel:

• To develop our chlorine dioxide high-level disinfection process to be recognised as a gold standard, and deemed equivalent to any automated process

Healthcare surfaces disinfection - Cache:

• To become the global market leader in sporicidal surface disinfection

Secondary objectives, goals and “game changing plays” form part of the strategic plan and make an essential contribution to how the Company will deliver medium to long-term growth.

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 various sections of the Annual Report to ensure that Shareholders can see how the Board intends to deliver long term shareholder value.

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 us to hear investors’ views and answer their questions face to face. The Company’s NOMAD and public relations advisor 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.

The Board feels that the Company has achieved a very high level of shareholder engagement and continues to seek ways to 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 periodic engagement surveys, all-staff meetings, education sessions and social events ensure good relations with and between employees. These activities allow employees to share their views on ways in which the Company can improve products, processes and outcomes as well as the working environment for its employees. The Board’s assessment is that the Company’s culture is positive, engaged, and energetic, which is reflected in the achievement of its strategic goals.

An appropriate and positive relationship with suppliers and customers is a pre-requisite to 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 its good relations with those customers 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 and continues to be a key day to day function, 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 a key element of the “protective moat” referred to within the Company’s strategic plan. Post market surveillance and effective complaints and feedback handling are a pre-requisite of the Company’s quality accreditation.

As part of its day-to-day operation and via new product development, the Group has a clear commitment to reduce its environmental footprint. The Company has established a cross-department and Group-wide team of enthusiasts, branded “Tristel Hive” tasked with finding ways for the Company to improve its sustainability profile. During the year a number of activities were undertaken:

• The setup of a system to calculate the Company’s carbon emissions, enabling us to consider the appropriate time frame for us to target “net zero carbon” and “zero carbon”.

• Consideration of the carbon profile of its key products and research into alternative and environmentally friendlier packaging options for the Company’s products.

• Transfer of the Groups energy providers, wherever possible, to renewable energy tariffs, installation of LED lighting and implementation of other energy saving initiatives.

• Minimising and recycling of paper, plastics, and food waste within all offices, alongside reuse and repurpose activities.

• Staff activities designed to change mindsets and habits, leading to enhanced health and wellbeing and an environmentally friendly culture within the organisation.

The Group connects with the local community of its office locations, building relationships and giving support where appropriate. During the year the following activities were undertaken:

• “Making steps for charity” - during two month-long periods, a quarter of the Company’s staff walked almost 15 million steps, raising funds for local charities.

• Support of local small businesses, particularly those struggling during the COVID-19 pandemic, wherever possible.

• Supply of disinfectants to local communities free of charge during the height of the COVID-19 pandemic.

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 also 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 disaster recovery plan is in place and scenario planning events take place periodically, normally annually. Financial risks are considered by the Board at each Board meeting.

The COVID-19 pandemic presented both an opportunity and a risk to the business and its impact is constantly monitored. To protect staff physical distancing, one-way people flow, home working, attendance rotas, additional PPE, curtailment of external visitors and enhanced hygiene routines have been implemented within all the Company’s premises. A risk assessment has been completed and circulated to staff, and employee representatives have been appointed to act as liaison points between Management and staff in case required.

The opportunity derived from the COVID-19 outbreak relates to the increased potential for environmental hygiene products, sold into hospitals and beyond. This opportunity is being addressed via the Company’s range of surface disinfectants sold under the Cache brand. The risk reflects the impact upon sales of medical device disinfectants, sold under the Company’s Tristel brand, where use is directly connected to the number of hospital diagnostic procedures. In many countries such procedures have slowed during the pandemic due to re-positioned hospital resources.

The Board is provided with global sales information daily, allowing it to respond in fast-moving situations such as the COVID-19 pandemic.

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 each month. The information, which is always provided in a timely manner, 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. Tom Jenkins is the Senior Independent Non-Executive Director. Isabel Napper and Caroline Stephens are also Independent Non-Executive Directors, and Bruno Holthof, 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, however, he brings great entrepreneurial and analytical attributes to the Board, adding viewpoints and competencies that further enrich it.

The Board complies with the QCA Code’s requirement that at least half of the Board should be independent Non-Executive Directors.

The Executive team consists of Tristel’s Chief Executive Paul Swinney and Chief Financial Officer Liz Dixon, who are married, and Bart Leemans who 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 All 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 is measured by the Chair with reference to the Company’s achievement of its strategic goals.

Over the course of the past three years the Board has grown from five to eight members. This is considered necessary as the Company has increased in size and complexity and a larger Board allows a deeper mix of backgrounds, views, and capabilities, whilst still small enough to be dynamic and effective.

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 formal talent development and succession plan is being formulated.

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.

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 put their trust in new products and change. 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. Periodically 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. Liz Dixon, who is also the Chief Financial Officer, performs the role of Company Secretary, providing an internal advisory role to the Board. The QCA’s guidelines state that the role of Company Secretary should not be held by an Executive Director, and as such the Company does not comply with this requirement. It is the Board’s view that the size and complexity of the business does not necessitate a separate role of Company Secretary. Liz Dixon is supported and guided in this role by the Company’s legal advisors.

Board And Committee Attendance

The Board met eight times during the 2020-21 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 she has arising from the information pack circulated prior to the meeting are provided to the Chair.

     2020-2021 Eligible to attend Attended
Bruno Holthof 11 9
Paul Swinney 8 8
Elizabeth Dixon 8 8
Bart Leemans 8 8
David Orr 9 9
Tom Jenkins 11 11
Isabel Napier
11 11
Caroline Stephens
5 4
Paul Barnes
6 6


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 Non-Executive Directors chaired by Isabel Napper INED.

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 Non-Executive Directors except the Chair of the Board in line with QCA guidelines. The Audit Committee is chaired by Tom Jenkins SINED. It meets at least twice a year and, amongst other duties, overviews the monitoring of the Company’s risk profile, internal 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 2020-21 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

• Approve the appointment of KPMG, as 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 and comprises all Non-Executive Directors and the CEO.

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.

The Board does not engage external consultants to evaluate the effectiveness of the Board; instead it carries out an ongoing review of the Board’s collective performance and that of the individual Directors, based upon the following criteria:

• Strategy design, debate and decision making

• Leadership style and technique

• Goal setting, assignment of roles, responsibilities, and resources

• Monitoring, risk management and oversight

During the year the Chair carried out an internal Board functioning review. The significant actions arising were:

• Heads of business units and subsidiaries will be asked to join Board meetings on a rolling, periodic basis, to present to the Board.

• When the time comes to discuss Executive Management succession, business unit and subsidiary heads’ candidacy should be considered as part of the process.

• NEDs will seek to raise their industry awareness level via increased interactions with EDs and senior staff.

• The Board will conduct an annual review of its performance.

• No consultants will be employed to participate in the Board review.

• Whilst recognising that it is not best practice, the Company Secretary role will, remain with Liz Dixon for now.

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 2020-21 year these were:

• To meet the Company’s profit target - which was not achieved.

• To increase sales by between 10% 15% per annum on average over the three years to 30 June 2022. This goal has not yet reached its end point. Sales growth is slightly below the lower end of the target range at the end of year two of three.

• To increase the Company’s value to shareholders - market capitalization increased by £107m, from £193m to £300m during the 2020-21 year. This goal has been achieved.

Despite the Company failing to reach all its goals due to a particularly challenging year, the Chair concludes that the Board has performed effectively during 2020-21.

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, when conditions allow. 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.tristel.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.

Risk Management

The Group employs Directors and senior personnel with the appropriate knowledge and experience for a business engaged in activities in its field of operations and undertake regular risk assessments and reviews of its activities.

Financial Information

The Company prepares detailed budget and working capital projections, which are approved annually by the Board and are maintained and updated regularly throughout the year. Detailed management accounts and cash flows are prepared monthly, as is a written commentary giving a comparison to budgets and prior years, identifying, and explaining any significant variances.

Management Of Liquid Resources

The Board is risk averse when investing any surplus cash funds. It considers that a minimum cash balance of £4 million is appropriate - providing adequate protection against unexpected events - for the current size of the business and seeks to adhere to this wherever possible and practicable. Cash exceeding this level, which cannot be used for earnings enhancing investment purposes, may be returned to shareholders in the form of a special divided.

Bruno Holthof

Non-Executive Chair

November 2021

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