Corporate Governance

Warpaint London plc - Statement of Compliance with the QCA Corporate Governance Code

 

Chairman’s Statement

The board of directors is responsible for the long-term success of the Company and, as such, devises the Group strategy and ensures that it is implemented. The board is determined that the Company protects and respects the interests of all stakeholders and in particular, is very focused upon creating the right environment for its employees. We want a happy workplace and we want our employees to be fully and properly rewarded and to feel that they are an integral part of the Warpaint family. A reward structure is therefore in place, which includes the grant of share options, enabling members of staff to participate in the growth of the Company, as appropriate. We want our suppliers, who are an essential part of the Company, to also feel part of the Warpaint family and we work closely with them to ensure that this is the case. Above all, the Company wishes to ensure that shareholders obtain a good return on their investment and that the Company is managed for the long-term benefit of all shareholders and other stakeholders. Appropriate Corporate Governance procedures will ensure that that is the case and reduce the risk of failure.

 

Clive Garston

Chairman

 

Adoption of the Quoted Companies Alliance (QCA) Corporate Governance Code

 

As an AIM quoted company, the board recognise the importance of sound corporate governance in supporting and delivering the strategy of the Company and its subsidiaries (together the “Group”). This involves managing the Group in an efficient manner for the benefit of its shareholders and other stakeholders whilst maintaining a corporate culture which is consistent with our values. The Company adopted the QCA Corporate Governance Code (“QCA Code”) on 25 September 2018. The Board believes that this is the most appropriate Code for the Company to adopt at this stage in its development. The QCA Code is built around ten broad principles and a set of disclosures. The Board has considered each principle individually and the extent to which it is appropriate in the circumstances. This Corporate Governance Statement sets out in general terms how the Company complies with the ten principles of the QCA Code at present and any proposals for further compliance. Annual updates are provided on our compliance with the QCA Code and more information will be set out in the Company’s Annual Report for the year ended 31 December 2021.

 

Deliver Growth

 

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

 

Business Overview

 

The Company is a producer and supplier of colour cosmetics. We are extremely creative and design-focused, aiming to provide our customers with an extensive range of high-quality cosmetics at an affordable price, The Group is made up of two divisions.

 

The largest division sells own brand cosmetics under the lead brand names of W7 and Technic. W7 is sold in the UK primarily to retailers and internationally to local distributors or retail chains. The Technic brand is sold in the UK and continental Europe with a significant focus on the gifting market, principally to high street retailers and supermarkets. In addition, this division supplies own brand white label cosmetics produced for several major high street retailers. The Group also sells cosmetics using our other own brand names of Man’stuff, Body Collection, Vintage, Very Vegan, and Chit Chat.

 

The other division trades in close-out and excess inventory of branded cosmetics and fragrances from around the world.

 

Strategy

 

In early 2018, the board adopted a three-year strategic plan for the business. This is measured, monitored and reviewed annually and reset using market insight and trend information in line with the budget process, and was updated by the board in 2021 with a view to it forming the basis of the Group’s development through to the end of 2024. The plan is designed to drive shareholder value and has defined targets for sales, EBITDA, earnings per share and cash generation, with a particular emphasis on driving incremental EBITDA growth. The strategic plan comprises six key pillars:

 

·         Develop and build the Group’s brands and provide new product development that meets changing trend and consumer needs

The Group continues to review, evaluate and develop the Group’s portfolio of brands to ensure there  is a clear brand hierarchy; a clear proposition by brand; non-core brands and product stock are eliminated; and that the Group delivers new product development and gifting sets that meet customer needs.

 

·         Develop and nurture the current core business

A major objective of the business is to continue to develop and grow the presence of the Warpaint brands beyond their existing worldwide customer base. There is still however, significant potential to be realised in the current customer base and the Group is committed to ensuring this potential is maximised. The Group is focused on ensuring there is a clarity of product offering to each customer segment and to supporting its customers with relevant new products; by using appropriate marketing to draw consumers into customer stores; and by cross selling the Group’s brands where appropriate.

·         Grow Market Share in the UK

The business continues to focus on increasing the presence of the Group’s brands in channels that our consumers shop in, to increase accessibility and drive profitable market share growth. As a result of this strategy, the Group has successfully launched the W7 brand into Tesco and the Technic brand into wilko. It continues to have active discussions with other major retailers who are currently in channels that the Group is yet to materially supply to and expanding the UK customer base is a key focus of management. This is particularly opportune as retailers across all sectors are increasingly looking to provide quality products to their customers at affordable prices.

 ·         Grow market share in the USA and China

The USA and China continue to provide a major growth opportunity for the Group. In the USA, the Group continues to investigate the optimal route to market through established agency channels and/or direct to retailers, and is establishing a core product range for the USA with minimum margin requirements. In China the Group conducts business locally through its Chinese subsidiary Company. We are also continuing to register products for sale in China in order to grow our total offering and increase sales. This has led to the development of relationships with distributors in the region who have the capability to drive sales of the W7 brand there.

  ·         Develop the online/e-commerce strategy for brand development and profitable sales

The Group aims to grow its profitable sales across the Group’s online sales channels, ensuring the process is optimised and efficient. The Group continues to develop and build its brands by utilising brand ambassadors, influencers and make-up artists to engage actively with its target audience. The Group wants to ensure that consumers are adequately inspired and educated on how the Group’s products can be used to experiment and achieve different looks. The Group has launched a loyalty programme that creates a W7 community of customers to drive sales conversion on the Company’s website. The aim of these activities is to create an interactive community of consumers and drive recommendation. Developing the social media strategy also directly impacts the Groups online sales strategy. As an example, 45% of W7’s target customers are buying cosmetics online.

 

·         Develop the appropriate organisational structure, people strategy and organisational efficiency

The Company continues to review the businesses’ structures, resources and capabilities with the objective of delivering the strategic plan, communicating the plan to ensure that all employees are engaged, and rewarding employees suitably for doing a good job.

 

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

 

The Company remains committed to communicating openly with all of our shareholders, both private and institutional. This enables the Company to ensure that its strategy, business model and performance are clearly understood. It also enables the Company to appreciate the needs and expectations of shareholders and respond to queries promptly and comprehensively. The board did not recommend a final dividend for 2019, due to the uncertainty surrounding Covid-19 and the decision to preserve cash in the business. However, dividend payments were resumed at the interim stage in 2020 with payment of an interim dividend, together with a one-off additional dividend per share, to reflect that no final dividend was declared for 2019. In accordance with the Group's policy to pay appropriate dividends, the board recommended a final dividend for 2020.

 

All individual investor queries should be addressed to the Company Secretary at: investors@warpaintlondonplc.com

 

Private Investors

 

The Board recognises that the Annual General Meeting (“AGM”) is an important opportunity to meet private shareholders. Each substantially separate issue is the subject of a separate resolution at the AGM and all shareholders have the opportunity to put questions to the board. All board directors endeavour to attend AGMs and answer questions put to them which may be relevant to their responsibilities. In addition, the directors are available to listen informally to the views of shareholders immediately following the AGM. In the light of the public health restrictions associated with Covid-19, this was not possible for the 2020 or 2021 AGM. It will remain under review for the 2022 AGM which will be held in line with best practice and government guidelines.

For each vote, the number of proxy votes received for, against and withheld is announced at the meeting. The results of the AGM are published on the Company’s corporate website.

 

Institutional Shareholders

 

The Chief Executive Officer, the Managing Director and the Chief Financial Officer make presentations to institutional shareholders and participate in Investor Presentations both following the announcement of the full-year and half-year results and, at other times throughout the year. Not every executive officer participates in every investor presentation. The Chairman will participate in these presentations in future where appropriate and is always available to speak with shareholders. Dialogue with individual institutional shareholders also takes place in order to understand and work with these investors to seek to comply with their investor principles where practicable. The board responds to, and will take account wherever possible of, recommendations made by proxy adviser companies.

 

The Covid-19 pandemic largely prevented face to face communication during 2020 but this was maintained virtually through the year wherever possible with both private and institutional shareholders.

 

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

 

The key stakeholders for the Group are customers, distributors, suppliers, employees, shareholders and the community in which we live. Whilst interactions take place at all levels of the Group, the directors are aware of the importance of the relationships with key stakeholders and feedback is utilised wherever possible to sustain these relationships in order to drive the long-term success of the business. Face to face communications were largely curtailed in 2020 due to Covid-19, and many interactions with our stakeholders took place virtually. This has not only maintained, but in many instances enhanced our relationships with several of our key stakeholders and will be continued for the foreseeable future, irrespective of the restoration of face to face interaction.

 

Business relationships with the following stakeholders are described below.

 

·         Customers

Feedback with trade customers is initially directed through dedicated account managers followed by engagement with our administration teams. For end user customers feedback is garnered through the peer to peer review site Yotpo, and social media such as Facebook, Twitter, Instagram and Pinterest. The Group’s consumer customers frequently contact the Company by writing, by email, direct calls to the head office and through the website www.w7cosmetics.co.uk  where they are also able to leave comments. We endeavour to respond to all customers who contact us in a swift and efficient manner typically by email or direct calls with all responses followed up to seek to achieve a positive outcome. We have sought to support our trade customers wherever possible throughout the Covid-19 lockdowns. Trends in the cosmetic business are dynamic and swift reaction to feedback is also vital in introducing new products and updating our product range.

 

·         Distributors

We seek to strengthen our relationships with our distributors to garner feedback and provide support with regular meetings, attendance at trade shows (which, during 2020 were largely virtual) and by maintaining close contact with them through our sales representatives. During the Covid-19 pandemic we have maintained our relationships with our distributors and supported them wherever possible. Our distributors provide feedback on product suitability including in regions of the world such as the Middle East where there may be cultural sensitivities in the product packaging and branding. Different regions may also call for particular colour mixes and shades and such feedback enables us to optimise and tailor products in these regions.  The aim is to align the interests of the distributor with those of the Group.

·         Suppliers

Suppliers are visited at least annually and regular contact maintained at other times through trade shows, meetings and other close communications, which during 2020 were largely virtual. The Group’s principal suppliers are made to feel part of the organisation with an open and honest dialogue encouraged so that feedback can be communicated and a rapid response provided. The Group has an office in Hong Kong enabling more frequent visits and enhanced supplier contact. A strong relationship with the Group’s suppliers is vital to the long-term success of the Company.

 

·         Employees

The Group places enormous importance on the contributions of its employees and aims to keep them informed of developments in the Group through a combination of meetings and electronic communication. The Group operates an open-door policy, everyone is known by name to the senior managers and executive directors with the Chief Executive Officer and the Managing Director engaging daily with employees across the business. Communication is encouraged both on an informal basis and through regular departmental meetings, where input from colleagues is welcomed in any area. Communication channels within the business are key and the open-door policy and regular meetings aid this.

 

Where practicable, consideration is given to flexible working and this has become increasingly important to minimise the impact on our employees of the Covid-19 pandemic and lockdowns. Flexibility was offered wherever possible, with help with working from home and flexible working where practicable for mothers and fathers home schooling. All employees received 100% of their salaries when furloughed and safe working conditions were implemented. As always, the well-being of our staff is paramount and particularly so during the current climate.

 

·         Shareholders

The means of engagement with shareholders is detailed in Principle 2 above.

 

·         Community

Wherever possible we employ staff from the local area and encourage the use of car sharing and public transport to reduce the impact on local roads. We manage the times of our incoming and outgoing deliveries in order to limit any disturbance to residents in the local area. As a rule, we use local trade’s people for goods and services creating employment and income within the area. We often support local charities, including South Bucks Hospice and provide donations of our products for local school fairs and fetes, these requests coming via our local suppliers.  

·         Environment

The Group is focussed on the environmental impact of its products and has removed all plastics from the outer packaging of its gifting and all year-round products, and has virtually eliminated the use of single use packaging in its products completely. The Group’s product packaging therefore uses paper and cardboard wherever practicable, which enables the Group, the wholesaler and end user to recycle the waste effectively. This means that the business consumes considerable amounts of paper and cardboard, and the Group utilises a regular recycling collection service. This programme will be extended to utilise sustainable or recycled packaging where feasible, and the Group aims to be a market leader in this area. In terms of the Group’s product casings, the use of plastic is sometimes practically unavoidable but recyclable packaging is used wherever possible.

All new W7 brand products are being manufactured without parabens and the Company is reformulating existing products where feasible. The Group aims to be paraben free for W7 in the next 24/36 months and Technic/Badgequo products are already paraben free.

The environmental goals described above are embedded in the Group’s long-term strategy.

The Covid-19 pandemic necessarily resulted in a reduction of travel within the Group, with business being conducted with customers and others virtually, where practicable. This has had a positive impact on the Group with business and trading relationships improving as a result. Hence, travel, and particularly air travel, will be restricted in future with customer, supplier, management and employee meetings being held virtually where feasible. This will not detract from the need to hold face to face meetings where this is conducive to a more productive relationship.


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

 

The Company is exposed to a variety of risks that can have financial, operational and regulatory impacts on our business performance. The Board recognises that creating shareholder returns is the reward for taking and accepting risk. The effective management of risk is therefore critical to supporting the delivery of the Group’s strategic objectives.

 

Risk Management

 

The assessment and management of risk is primarily the function of the executive officers, most specifically the Chief Executive Officer for strategic and business risk and the Chief Financial Officer for financial risk. The Group maintains a formal risk register which is reviewed periodically and, where appropriate, matters of risk are referred to the board for consideration. The principal risks identified by the board are set out below:

 

·         Currency / Foreign Exchange (“FX”)

Due to the Group’s goods being manufactured overseas and its extensive export business, it both generates revenues and incurs manufacturing costs in foreign currencies. As a result, the Group is exposed to the risk that adverse exchange rate movements cause the value (relative to its reporting currency) of its revenues to decrease, or costs to increase, resulting in reduced profitability. We have improved our processes within our hedging policy to ensure it remains robust while we look to increase our international business. There is a Group FX committee made up of senior management who communicate regularly. Whenever possible FX is purchased (using foreign exchange forward options) at, or as close as possible to, the budget rate to cover the annual needs of the business.

 

·         Reliance on Key Suppliers

In 2020 one key supplier from China was responsible for approximately 19% (2019: 15%) of the Group’s brand ranges of colour cosmetics. If there were some catastrophic event that reduced or stopped the supply from this key supplier then the directors are able to place orders with other existing suppliers. However, this would take several months to implement and such an event would therefore have a material adverse effect on the Group’s financial position, results of operations and future prospects. Management retain close relations with suppliers with relatively short lead times, and the Group typically holds four to six months of stock at any one time, nevertheless the sourcing of new suppliers in a wider geographic location is ongoing.

 

The vast majority of the Group’s colour cosmetics are manufactured in China. Currently there is a possibility that global tensions between countries in the region could lead to a trade war, new tariffs or price increases. The identification of new low priced, but high quality, suppliers in other geographic locations remains under review on an ongoing basis. Any increased costs or duty would be passed on to the consumer where possible.

 

Our supply base in China was temporarily affected by the Covid-19 virus at the start of 2020 with all our suppliers closed for a month. Whilst causing some initial delays to deliveries normal operating levels were soon resumed and there was no material impact on our inventory levels.

 

·         Product Liability

All products are manufactured in facilities approved by relevant authorities. The ingredients in each product are compliant with and meet the relevant standards required by the markets to which the products will be sold into. There is however always the risk that an end user could have an allergic or other reaction to an individual product leading to the possibility of compensation claims and potentially damaging the good reputation of the Group’s brands. The directors have every colour cosmetic ingredient independently checked by a qualified chemist for compliance with UK, EU and when necessary and any other relevant legislation, including in the USA, and maintain adequate product and public liability insurance so as to ensure that any claims have little impact on the Group’s profitability.

 

·         Significant Customers

The Group has one customer in Denmark with over 240 stores across Denmark, Norway, Sweden, Holland and France. In 2020 this customer represented 9.7% (2019: 7.7%) of own brand and close-out revenues, we currently have an excellent working relationship with this customer. Significant goodwill in our own brands has been built up by this customer. The directors believe that, should the customer decide not to sell our brands, a large amount (if not all) of the existing business will be taken up by other retailers in Denmark, Norway, Sweden, Holland and France.

 

·         Location

The Group has the majority of its operations and assets split across two locations in Iver and Silsden in the UK; if a fire were to befall either of the premises occupied by the Group, a significant amount of assets might be destroyed or damaged and – although the Group has insurance cover in place – the Group’s business, financial results and prospects might be negatively affected by such an event. Fire alarm systems are tested weekly, smoke detectors inspected quarterly, fire extinguishers tested annually, and trained fire marshals are onsite. Staff have regular fire drills and fire risk assessments are carried out to ensure compliance with fire regulations.

 

·         Brexit

In December 2020 Brexit was finalised. From 1 January 2021 new terms of trading with our EU customers have been in place using internationally recognised INCO terms. There is now an extra layer of cross border compliance and paperwork required which we are well prepared for having taken expert advice from customs experts and shippers. We have made good use since the start of 2021 of our wholly owned subsidiary Warpaint Cosmetics (ROI) Limited in the Republic of Ireland specifically to help protect us against any UK/EU cross-border disruption, and to serve our European customers from a Euro Hub in order to provide an alternative supply route. The Group is closely watching developments in the movement of goods within the EU and adapting its strategy as the full effect of Brexit becomes clearer.

 

·         Cyber Attacks

There is an increasing risk that cybercrime will cause business interruption, loss of key systems, loss of online sales, theft of data or damage to reputation. The Group regularly review and invest in the development and maintenance of our IT infrastructure, systems and security. We have in place disaster recovery and business continuity plans that are tested annually.

 

·         Covid-19 Pandemic

Covid-19 or another similar virus pandemic will cause major disruption to the business. Staff will be absent either through illness or from isolation measures, the business strategy will be affected, delayed and perhaps will require reassessment, capital markets and foreign exchange markets will become volatile, and the supply chain and our customer base may temporarily close down. In a pandemic situation we will follow Government guidelines and enable staff to work remotely where possible, until such time that they can return to work with new workplace safety measures in place, we will explore and examine liquidity continuity measures and implement business continuity plans. The business protects against foreign exchange and credit risk through various financial instruments such as the forward purchase of foreign exchange and credit insurance of certain customer receivable balances, particularly those deemed higher risk. Our initial response to Covid-19 was to enhance our review of risks facing the group and focus on cash spend and ensure there was sufficient cash resource to secure the long term finances of the Group. A committee made up of the Chief Executive Officer, the managing director of Retra and Keith Sadler, a non-executive director has been formed to formulate and implement a Group wide response in the event of a further pandemic or other similar disruptive event.

 

Maintain a Dynamic Management Framework

 

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

 

Composition, Roles and Responsibilities

 

The board is responsible for the long-term success of the Company. This includes formulating, reviewing and approving the Group’s strategy, budgets, major items of capital expenditure and acquisitions and, reporting to the shareholders.

 

The board currently comprises of the Chairman, Clive Garston one non-executive director, Keith Sadler, and five executive directors, Sam Bazini, Eoin Macleod, Neil Rodol, Paul Hagon and Sally Craig, who is also the Company Secretary.

 

From 1 January 2020 the positions of the two joint Chief Executives were split, Sam Bazini remained as Chief Executive Officer and Eoin Macleod was appointed to the newly created position of Managing Director, reflecting his more operational focus.

 

There were no changes to the responsibilities of the non-executive directors during the year to 31 December 2020. However, as announced by the Company on 6 February 2020, Ward & Hagon Management Consulting LLP ("Ward & Hagon") was appointed to provide additional strategic resource and to assist the Company in implementing its strategic growth plans. Paul Hagon, then a non-executive director, is a partner of Ward & Hagon and as part of the Ward & Hagon appointment, he fulfilled the role of Interim Strategy and Business Development Director, a non-board role for an initial period of one year. During that period, he remained a non-executive member of the board, but was not independent. On 17 November 2020, the Company announced its intention to renew the contract with Ward & Hagon for a further 12 months. As a result of this, Paul Hagon would no longer be a non-executive director and his position changed to that of an executive director with effect from 1 January 2021, the effective date of the renewal of the Ward & Hagon contract. Although the UK Corporate Governance Code 2018 does not apply to the Company, under this code the Chairman would not be deemed independent and the board has therefore decided that only the non-executive director, Keith Sadler, is presently independent. No single director is dominant in the decision-making process.

 

The Company has commenced a search for an additional independent non-executive director and hopes to make this appointment in the first half of 2021. Subject to this, the board considers its composition to be appropriate at this stage of the Company’s development, but this remains constantly under review as the Group grows in size. At this stage in the Company's development the board does not consider that having a senior independent director is appropriate, but this will also remain under review.

 

Board Operation

 

There is a formal schedule of matters reserved to the board for its decision. These include formulating, reviewing and approving the Group’s strategy, budgets, major items of capital expenditure and acquisitions, and reporting to the shareholders.

 

The board aims to meet ten times each year for regular board meetings, which are scheduled prior to the commencement of each financial year. These meetings are scheduled to coincide with the announcement of the Company’s annual and half yearly accounts and throughout the remainder of the year at regular monthly intervals. These are supplemented by additional meetings where required for business including informal business reviews, to review budgets and focus on strategy. Dialogue occurs regularly between directors outside of scheduled meetings.

 

A formal agenda is produced for each meeting and for in person board meetings which includes the review and approval of minutes recorded, matters arising, a review of material operational matters relating to Group’s businesses and other special items for discussion or consideration. Board papers are circulated to board and committee members in advance to allow directors adequate time for consideration.  Any specific actions arising from such meetings are agreed by the board or relevant committee, circulated after the relevant meeting by the Company Secretary and then followed up by the Company’s management.

 

Board Meetings

 

The board met 16 times during the financial year ended 31 December 2020, with two in person board meetings and 14 virtual board meetings. It is intended that the board will meet at least ten times a year to review, formulate and approve the Group’s strategy, budgets, corporate actions and oversee the Group’s progress towards its goals with at least one meeting on the premises of its subsidiary Retra, providing the board an opportunity to meet with its senior management and be involved with the business of the wider Group. The on-site Retra board meeting did not take place in 2020, primarily due to the Covid-19 restrictions. In addition, the board held a focused, dedicated meeting on strategy on 27 January 2020 and intends to schedule similar meetings annually. The strategy meeting for 2021, was held on 8 February 2021.

 

In the event that directors are unable to attend a meeting, their comments on papers submitted may be discussed in advance with the Chairman enabling their contribution to be included in the wider board discussion.

 

Board and Committee Meeting attendance for the year ended 31 December 2020

 

The following table shows directors’ attendance at all board and committee meetings during the year.

 

 

Board

Audit

Remuneration

Insider

Clive Garston

16/16

2/2

2/2

1/1

Sam Bazini

16/16

n/a

n/a

1/1

Eoin Macleod

16/16

n/a

n/a

n/a

Neil Rodol

16/16

n/a

n/a

1/1

Sally Craig

16/16

n/a

n/a

n/a

Paul Hagon

16/16

2/2

1/2

n/a

Keith Sadler

16/16

2/2

2/2

n/a

 

 

The following directors are each required to commit at least the following number of days per week to their roles: The Chief Executive Officer and Managing Director, five days; the Chief Financial Officer, four days and the General Counsel & Company Secretary, three days (26 hours). Paul Hagon, executive director, and the non-executive directors are required to provide such time as is required to fully and diligently perform their duties. All board members are expected to attend all meetings of the board and the committees on which they sit, wherever possible.

Board Rotation

The Articles of Association of the Company (the “Articles”) require that one-third of the directors must stand for re-election by shareholders annually in rotation and that any new directors appointed during the year must stand for re-election at the AGM immediately following their appointment. Directors are required to seek re-election once every three years.

 

Principle 6 - Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities

 

Board Skills and Expertise

 

The board retains a range of financial, commercial and entrepreneurial experience and there is a good balance of skills, independence, diversity and knowledge of both the Company and the sectors in which it operates including cosmetics, retailing, finance and computing, innovation, international trading, e-commerce, marketing and public markets. The non-executive director has been appointed on merit and for his specific areas of expertise and knowledge. This enables him to bring independent judgement on issues of strategy and performance and to debate matters constructively. The appointment of an additional non-executive director will be made upon the same grounds.

 

The skills brought to the board are as follows:

 

Clive Garston (Chairman)

Corporate finance, legal, public companies and markets, corporate governance

Sam Bazini (Chief Executive Officer)

Co-Founder of W7, entrepreneurship, industry knowledge and experience

Eoin Macleod (Managing Director)

Co-Founder of W7, entrepreneurship, industry knowledge and experience

Neil Rodol (Chief Finance Officer)

Financial skills, industry and public company experience

Sally Craig (General Counsel & Company Secretary)

Legal, company secretarial and public company experience

Paul Hagon (Executive Director)

Retail and wholesale business experience and strategic planning  

Keith Sadler (Non-Executive Director)

Financial skills, communications and public company experience

 

Directors attend seminars and other regulatory and trade events where appropriate to ensure that their knowledge and industry sector contacts remain current.

 

External and Internal Advice

 

The board seeks external advice from time to time to enable it to effectively perform its duties including from its lawyers, accountants, nominated adviser and corporate broker, financial PR advisers and insurance brokers. During the financial year ended 31 December 2020, advice was provided by BDO LLP in connection with the introduction in May 2020, of the Warpaint London plc Company Share Option Plan.

 

All directors have access to the advice and services of the General Counsel & Company Secretary, who is responsible for ensuring that board procedures are followed and that the Company complies with applicable rules, regulations and obligations.

 

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

 

The Group’s performance is reported monthly against headline performance and agreed budgets and reviewed by the board (as a minimum) at each monthly board meeting. The board challenges the executive directors and senior management on performance against budgets, forecasts and key business milestones. The board have adopted a set of KPI’s against which the performance of the Company and therefore the board, can be measured.

 

The Company remains at a relatively early stage in its development as a quoted company and is yet to adopt a formal performance evaluation procedure for the board and directors individually. This will remain under review and the board will consider the implementation of performance evaluations facilitated by external advisers for the board, both individually and as a group, to ensure the efficient and productive operation of the board. As the business of the Group grows, the expertise required at management level is expanded and developed although there are no prescribed procedures for succession planning at board level.

 

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

 

The board maintains a corporate culture consistent with the Group’s strategic objectives which aims to promote an ethical and responsible business.

 

The corporate culture is monitored by the Chief Executive Officer who appraises the board of any issues arising. The culture is implemented through a number of policies on Anti-Bribery, Whistleblowing and Modern Slavery. These policies, along with the Group’s approach to employees and equal opportunities, the environment, product testing, manufacture and materials and charitable causes  are regularly reviewed, and are described below:

 

·         Anti-Bribery

The Group has in place an anti-bribery and anti-corruption policy which sets out its zero-tolerance position and provides information and guidance to those working for the Group on how to recognise and deal with bribery and corruption issues. During the period to 31 December 2020, there were no incidents for consideration.

 

·         Whistleblowing

The Group’s ’whistleblowing’ procedures ensure that arrangements are in place to enable employees and suppliers to raise concerns about possible improprieties on a confidential basis. Any issues raised are investigated and appropriate actions are taken. Should any significant issues arise they are highlighted to the board.

 

·         Modern Slavery and Human Trafficking

The Group has relationships with businesses around the world and is opposed to modern slavery and human trafficking wherever it may occur. The Group’s processes and supply chains are examined and reviewed at least annually to ensure that slavery and human trafficking are prevented in its business and supply chains. Compliance with the Modern Slavery Act 2015 or equivalent anti-slavery, human trafficking laws are mandatory in all supply contracts. The Group’s statement pursuant to the Modern Slavery Act 2015 which contains further information, is available here [Perry please link to the Modern Slavery statement]

 

·         Employees and Equal Opportunities

The well-being of our staff is paramount and particularly so during 2020 where it was vital to minimise the impact on our employees of the Covid-19 pandemic and lockdowns. All employees received 100% of their salaries when furloughed and safe working conditions were implemented. Where practicable, assistance is given to flexible working and this was increasingly important in 2020. Flexibility was offered wherever possible, with help with working from home and flexible working where practicable for mothers and fathers home schooling.

 

The Group has an extremely loyal work force with a low staff churn rate, promoting from within, offering staff mobility from the warehouse floor to administrative roles and managerial positions. A reward structure is in place, which includes the grant of share options, enabling members of staff to participate in the growth of the Company, as appropriate.

 

Employee communication is encouraged throughout the Group both on an informal basis and through regular departmental meetings, where input from colleagues is welcomed in any area. Communication is key and the open-door policy operated by the Group and regular meetings aid this.

 

The Group’s employment policy is set out in the Directors’ Report. At senior management level there are 13 female managers and 9 male managers, excluding the board. Throughout the Group, the proportion of female to male employees is approximately 67% to 33%.

 

·         Environment

The Group is focused on the environmental impact of its products and has removed all plastics from the outer packaging of its gifting and all year-round products, and has virtually eliminated the use of single use packaging in its products completely. The Group’s product packaging therefore uses paper and cardboard wherever practicable, which enables the Group, the wholesaler and end user to recycle the waste effectively. This means that the business consumes considerable amounts of paper and cardboard, and the Group utilises a regular recycling collection service. This programme will be extended to utilise sustainable or recycled packaging where feasible, and the Group aims to be a market leader in this area. In terms of the Group’s product casings, the use of plastic is sometimes practically unavoidable but recyclable packaging is used wherever possible.

All new W7 brand products are being manufactured without parabens and the Company is reformulating existing products where feasible. The Group aims to be paraben free for W7 in the next 24/36 months and Technic/Badgequo products are already paraben free.

The Covid-19 pandemic necessarily resulted in a reduction of travel within the Group, with business being conducted with customers and others virtually, where practicable. This has had a positive impact on the Group with business and trading relationships improving as a result. Hence, travel, and particularly air travel, will be restricted in future with customer, supplier, management and employee meetings being held virtually where feasible. This will not detract from the need to hold face to face meetings where this is conducive to a more productive relationship.

·         Product Testing, Manufacture and Materials

The Group does not test any of its cosmetic products on animals and animal testing of cosmetics has been banned in Europe since 2013. The board is aware that in other parts of the world there is still a requirement to test on animals. Wherever and whenever the Group comes across this requirement and are given no choice, it withdraws from sales activity in the territory concerned. The board is keen for cruelty free alternatives to animal testing to become compulsory and animal testing overall to be ceased globally.

 

Suppliers provide Good Manufacturing Practice Certificates for all of the factories used in the manufacture of the Group’s goods. The Group’s main suppliers also produce for worldwide brands, and comfort is taken from the public ethical and sustainability stance around the world of these brands. The Group’s suppliers are encouraged to share with the Group the results of their BSCI and Sedex audits when they have taken place.

 

Heavy metals such as TBTO (preservative) and other ingredients of concern are not added to the Group’s colour cosmetic products and we ensure all raw materials comply with the strict regulations applicable in the EU, USA and Canada.

 

·         Charitable Causes

Along with local charities and events, the Company supports a number of national charities. We invite our employees to choose charities and events that are close to their hearts and we collaborate with them. These events are often put out on our social media and are linked to the charity to raise their profile. In 2020 the number of charity events available to support was fewer than in previous years, but the Group supported several local charities and Save The Children - Christmas Jumper Day, nationally. A number of Retra employees have participated in the Yorkshire Marathon raising funds for a local hospice.

 

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

 

The Group’s governance structures have been reviewed in the light of the QCA Code. The board believes them to be in accordance with best practice as adapted to best comply with the Group’s circumstances and stage of development.

 

The board has overall responsibility for implementing the Group’s strategy and promoting the long term success of the Group. The executive directors have overall responsibility for managing the day to day operational, commercial and financial activities. The non-executive directors are responsible for bringing independent and objective judgement to board decisions.

 

The board is responsible for the long-term success of the Company. There is a formal schedule of matters reserved to the board for its decision. These include formulating, reviewing and approving the Group’s strategy, budgets, major items of capital expenditure and acquisitions, and reporting to the shareholders.

 

The board aims to meet ten times each year for regular board meetings, which are scheduled prior to the commencement of each financial year. These meetings are scheduled to coincide with the announcement of the Company’s annual and half yearly accounts and throughout the remainder of the year at regular monthly intervals. These are supplemented by additional meetings where required for business including informal business reviews, to review budgets and focus on strategy. Dialogue occurs regularly between directors outside of scheduled meetings.

 

A formal agenda is produced for each meeting and for in person board meetings which includes the review and approval of minutes recorded, matters arising, a review of material operational matters relating to Group’s businesses and other special items for discussion or consideration. Board papers are circulated to board and committee members in advance to allow directors adequate time for consideration. Any specific actions arising from such meetings are agreed by the board or relevant Committee, circulated after the relevant meeting by the Company Secretary and then followed up by the Company’s management.

 

At each meeting the board considers directors’ conflicts of interest. The Company’s Articles provide for the board to authorise any actual or potential conflicts of interest.

 

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 scheduled meeting. The board challenges the executive directors and senior management on performance against budgets, forecasts and key business milestones. Monthly updates on performance are reviewed at each formal board meeting. The board have adopted a set of KPI’s against which the performance of the Company and therefore the board, can be measured.

 

Roles of the Chairman, Chief Executive Officer, Managing Director, Chief Financial Officer and General Counsel & Company Secretary

 

The Chairman is responsible for running the business of the board and for ensuring appropriate strategic focus and direction. The Chief Executive Officer is primarily responsible for implementing and driving the Group strategy once it has been approved, investor relations and overseeing the management of the Company through the executive team. The Managing Director is responsible for driving sales operations and profitability.

 

The Chief Financial Officer works closely with the Chief Executive Officer and Managing Director and is responsible for all the financial affairs of the Group. In particular, the oversight of cash flow, the provision of monthly financial information to the board, control of working capital, overseeing the audit and preparation of all Group company statutory accounts and consolidated Interim Statements along with the overall financial management of the Group and its processes. The executive officers are responsible for formulation of the Group strategy for submission to the board, the day-to-day management of the Group’s businesses and its overall trading, operational and financial performance in fulfilment of that strategy, as well as plans and budgets to be approved by the board of directors.

 

The General Counsel & Company Secretary is responsible for the oversight of legal issues and regulatory compliance along with executive share schemes, investor queries, insurances and policy implementation. In addition, she assists the Chairman and other committee chairs in ensuring all meetings of the board and committees are informed and effective.

 

Audit, Remuneration and Insider Committees

The board has established the Audit Committee, Remuneration Committee and Insider Committee with formally delegated duties and responsibilities and with written terms of reference. The full terms of reference of each committee can be found as follows:

 

Audit Committee

Remuneration Committee

Insider Committee

 

The Audit Committee and the Remuneration Committee each comprises two non-executive directors: Keith Sadler (Chair) and Clive Garston. During the year ended 31 December 2020, Paul Hagon was a member of both committees but stepped down as Chairman of the Remuneration Committee. He subsequently ceased to be a member of these committees on becoming an executive director with effect from 1 January 2021. The new non-executive director, proposed to be appointed will become a member of both the Audit Committee and the Remuneration Committee. The Insider Committee comprises one non-executive director and two executive directors: Clive Garston (Chair), Sam Bazini and Neil Rodol.

During the financial year ended 31 December 2020, the Audit Committee met twice, the Remuneration Committee twice and the Insider Committee met once. From time to time separate committees are set up by the board to consider specific issues when the need arises.

Due to the size of the Group, the directors have decided that issues concerning the nomination of directors will be dealt with by the board rather than a committee, but will regularly reconsider whether a Nominations Committee is required. In November 2020 the board formed an ad hoc nomination subcommittee comprising of Keith Sadler (Chair), Sam Bazini and Clive Garston, to identify and make a recommendation to the board for a candidate for a new non-executive director.


Build Trust

 

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

 

The Company’s principal means of communication with shareholders is through the Annual Report and Financial Statements, the full-year and half-year announcements and the AGM.

 

The board recognises that the AGM is an important opportunity to meet private shareholders. Each substantially separate issue is the subject of a separate resolution at the AGM and all shareholders have the opportunity to put questions to the board. All board directors endeavour to attend AGMs and answer questions put to them which may be relevant to their responsibilities. In addition, the directors are available to listen informally to the views of shareholders immediately following the AGM. For each vote, the number of proxy votes received for, against and withheld is announced at the meeting. The results of the AGM are published on the Company’s corporate website. In the light of the public health restrictions associated with Covid-19, this was not possible for the 2020 or 2021 AGM. This will remain under review for the 2022 AGM which will be held in line with best practice and government guidelines.

 

The board receives regular updates on the views of shareholders through briefings and reports from the executive directors, the Company’s brokers and PR advisers. The Chief Executive Officer, the Managing Director and the Chief Financial Officer make presentations to institutional shareholders and participate in Investor Road Shows both following the announcement of the full-year and half-year results and, at other times throughout the year. Not every executive officer participates in every investor presentation. The Chairman will participate in these presentations in future where appropriate and is always available to speak with shareholders.

 

Investor queries may be addressed to the Company Secretary at investors@warpaintlondonplc.com A range of corporate information (including all Company announcements) is also available to shareholders, investors and the public here

 

Dialogue with individual institutional shareholders also takes place in order to understand and work with these investors to seek to comply with their investor principles where practicable.

This Statement was updated on 23 July 2021.