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Chairman's Introduction

Governance continues to be crucial to any company’s future development. The Board recognises that good governance can help create value by reducing the risks that we face as we seek to create value for our shareholders and can be used to support our values and behaviours.

A good governance framework can provide solid foundations from which to support leadership, accountability, transparency and disclosure. Strong systems and processes for informed decision-making ensures that the Board and its Committees are provided with clear agendas, timely information that is delivered through good quality briefing materials; and, which cover all relevant factors and that our deliberations consider the risks, as well as the opportunities, inherent in the topic before us.

Following the London Stock Exchange’s recent changes to the AIM Rules requiring all AIM-listed companies to adopt and comply with a recognised corporate governance code, the Board has adopted the Quoted Companies Alliance (QCA) Corporate Governance Code (the “QCA Code”). The following provides a general overview of how the Company complies with the QCA Code. The Board will provide annual updates on our compliance with the code each year in its Annual Report and Accounts.

David Cook
Chairman

Our governance principles

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

The Group’s proven business model allows it to benefit both from organic growth opportunities and from enhancing its growth rate through carefully selected acquisitions.

The Group’s product portfolio is a strategic mixture of bedrock products (which generate steady income with very little promotion) and growth products. We outsource capital-intensive activities such as manufacturing, warehousing and logistics to specialist providers, and focus on marketing and all the associated business and regulatory activities.

We distribute our products through wholesalers, retail pharmacies, hospitals and a well-respected international network of distributors.

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

The Company is committed to open communication with its shareholders to ensure that its shareholders clearly understand its business, strategy and performance.

The Board actively seeks dialogue with its shareholders via investor roadshows, capital market days, one to one meetings and regular reporting. The Board believes that open communication with investors and its analysts is the best way to ensure it understands what is expected of the Company in order to allow it to drive its business forward.

Throughout the year the CEO and CFO meet with the institutional shareholders who hold the majority of the shares and the Board is provided with feedback from all meetings and communications with shareholders. The Board is provided with an analysis of the investor base at each meeting and research notes by sell-side analysts are circulated to all Directors. Further information on investor sentiment is provided to the Board by the Company’s brokers and financial PR advisors.

The Group recognises the importance of retail shareholders and the Investor Relations section of the Group’s website is regularly updated with the aim of providing good information for all investors, but particularly retail shareholders. The website offers a facility to sign up for email alert notifications of Company news and regulatory announcements. In addition, the CEO and CFO regularly present at conferences attended by many potential and current retail investors and meet with specialist private client fund managers, following which feedback is given to the Board.

The AGM provides the main forum for face to face interaction between the Board and the Company’s retail shareholders. Shareholders are given notice of the AGM at least clear 21 days before the meeting. All Directors attend the AGM at which the Chairman presents a statement on current trading and there is an opportunity to ask questions formally.

Directors are available following the meeting for informal discussions. While voting at the AGM is on a show of hands, the proxy voting results (including any votes withheld) are announced at the meeting.

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

The Board values the opinions of the stakeholders in the business and regularly seeks to ensure that the views of its shareholders, suppliers and distributors are known and where relevant to the success of our business they are acted upon.

One of our most important stakeholder groups is our employees. The Company engages regularly with its employees and monitors closely the views and concerns raised. The Company carries out and the Board assesses and acts upon the Company annual employee engagement to ensure a positive outcome to the process – the results of the last survey showed that 80% of employees are positive and motivated in their work, with some aspects of the survey achieving levels of satisfaction exceeding 90%.

We continue to develop the vital relationships with our suppliers and distributors within our global network. Ensuring the day to day business operations can continue to develop and grow while working to extend the reach of our business to new territories and partners.

In keeping with the Company’s values, we oppose modern slavery. In the light of the Modern Slavery Act 2015 we regularly review our procedures to update where necessary how we operate to ensure that we can to prevent slavery and human trafficking in our businesses/supply chains. Our policy can we found here.

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

Audit, risk and internal control

The Board, assisted by the Audit and Risk Committee, is ultimately responsible for overseeing management’s activities in identifying, evaluating and managing the risks facing the Group. Where these risks are not ones which the Board is prepared to take, these are avoided, eliminated as far as possible and/or transferred to insurers. In 2017, the Group completed the development and introduction of a new process for the identification, assessment and management of risks in the business, which is driven and monitored by the Senior Leadership Team with the support of the Company Secretary.

There are risk registers in place at a departmental and functional level. Risks are identified and assessed by the likelihood of them occurring and their potential impact on the business. These are then categorised to identify those that can be effectively managed at a functional or departmental level and those that need to be addressed at a cross-functional business level. Existing mitigations are considered for each risk and the residual levels of exposure assessed. Each risk is allocated a business owner, who is responsible for implementing the mitigating actions and reporting on progress with those improvements and the status of the risk to the Senior Leadership Team. The Senior Leadership Team reviews all identified risks on a quarterly basis, with the principal risks being monitored monthly and, in the case of principal risks and uncertainties, such risks are reported to and reviewed by the Audit and Risk Committee and the Board.

The environment in which we operate is constantly evolving and can be affected by externalities that are outside of our control and which may impact on us operationally. As new risks arise, the potential impact of known risks may increase or decrease, and/or our assessment of these risks may need to change. We continue to monitor our risk management systems and they will evolve as and when they are deemed to need refreshing.

Other internal controls

The Group maintains systems of internal control appropriate to a business of this size and complexity and which includes taking into account the applicable requirements of pharmaceutical regulators in the various markets in which the business operate. The key components of the current system of internal control are:

  • Setting and communicating clear strategic goals;
  • Developing business plans and budgets in line with strategy, supported by intra-year forecasting;
  • Regular reporting of actual performance relative to those strategic goals, plans, budgets and forecasts;
  • Working within a defined set of delegated authorities approved by the Board to the CEO, and through him, to the Senior Leadership Team and their delegates through authorisation registers managed at a departmental and functional level;
  • Creating an appropriate structure of responsibility and accountability, including segregation of duties, appropriate reporting lines for key managers and regular line management communications and 1:1 meetings where performance is discussed, supported by an appraisal process; and
  • The Audit and Risk Committee reviews the systems of internal control for the Group alongside the Group's process for risk management and reports its findings to the Board.

Standards and policies

The Board is committed to maintaining appropriate standards for all the Company’s business activities and ensuring that these standards are set out in written policies. Key examples of such standards and policies include the ‘Anti-Bribery Policy’ and ‘Anti Modern Slavery Policy’. All of the Company’s policies incorporate and work alongside, to the extent applicable, our Company values.

Approval process

All material contracts are required to be reviewed and approved by both the Head of Legal and an Executive Director of the Company.

Code of Conduct

Our Code of Conduct includes guidance on anything that could get our employees into trouble, (including business integrity, anti-bribery, gifts, intellectual property and design rights) they are sent to everyone in the Group and are visible in all workplaces. Every year senior managers and above declare compliance to this code.

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

The Board currently comprises six Directors, being the Chairman, two Executive Directors and four Non-executive Directors (including the Chairman). The Board keeps under review its current balance of composition, which provides a sufficiently wide range of skills and experience to enable it to pursue its strategic goals and to address anticipated issues in the foreseeable future. Its deliberations are not dominated by one person or a group of people. Having considered the guidelines on independence, on appointment as Chairman, David Cook was independent and continues to be regarded by the Board as independent alongside each of Nigel Clifford, Jo LeCoulliard and Richard Jones.

The Board is comfortable with the current composition of the Board however it will continue, with the advice of the Nomination Committee, to consider any additions to the Board to further broaden the experience and effectiveness of the Board as the Group continues to grow. As part of this process the Board has also considered and concluded that the appointment of Senior Independent Director was not necessary at this time but keeps this issue under review.

The Board is responsible to the Company’s shareholders for:

  • Setting the Group’s strategy;
  • Maintaining the policy and decision-making process through which the strategy is implemented;
  • Checking that necessary financial and human resources are in place to meet strategic aims;
  • Providing entrepreneurial leadership within a framework of good governance and sound risk management;
  • Monitoring performance against key financial and non-financial indicators;
  • Overseeing the systems of risk management and internal control; and
  • Setting values and standards in corporate governance matters.

There is a formal list of matters reserved for the Board, which may only be amended by the Board.

Directors’ conflict of interest

The Company has effective procedures in place to monitor and deal with conflicts of interest. The Board is fully aware of the other commitments and interests of its Directors, and changes to these commitments and interests are reported to and, where appropriate, agreed with the rest of the Board.

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

The Board actively evaluated its composition and the experience, skills and capabilities which it has as part of the process which saw each of Jo LeCouilliard and Richard Jones appointed to the Board from 1 January 2019 to enhance its collective experience in pharmaceutical marketing, capital markets and equity finance. Notwithstanding, the Board is currently satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience, including in the areas of pharmaceuticals (commercialisation and regulation), finance, international trading and marketing.

Each Director is given an opportunity of identifying where training and development could assist them in the performance of their duties. The Chairman and the Company Secretary support training needs as and when the need arises, or as part of the Board evaluation process, by identifying when updates and/or presentations should be provided to the Board to ensure skills and knowledge is kept up to date. For example, this may include meetings or updates to improve the understanding of the business or matters relating to legal and regulatory changes.

The Directors are provided with monthly information on the Group’s operational and financial performance, with detailed information being provided in a timely fashion prior to each monthly Board meeting. The business reports monthly on the Group’s performance against budget.

Directors contracts/appointment letters are available for inspection at the AGM. All Directors retire by rotation in accordance with the Company’s Articles of Association.

Appointment, removal and re-election of Directors

The role of the Nomination Committee is to review the structure, size and composition of the Board (including in terms of skills, knowledge, experience and diversity) and to identify and nominate candidates to fill Board vacancies. The Committee also reviews the leadership needs of the organisation and monitors succession planning for both Board and senior executive roles. The terms of reference of the Nomination Committee are available here. During the year, in addition to its general role, the Nomination Committee undertook and managed the succession planning process, as part of which it carried out an internal and external review of potential candidates for the position of Chair of the Board.

The Company’s Articles of Association require that one-third of the Directors must stand for re-election by shareholders annually on rotation; that all Directors must stand for re-election at least once every three years; and that any new Directors appointed during the year must stand for election at the AGM immediately following their appointment.

Independent advice

All Directors are able to take independent professional advice in the respect of their duties, if necessary, at the Company’s expense. In addition, the Directors have direct access to the advice and services of the Head of Legal and Company Secretary.

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

It is the Company’s policy that a Board effectiveness review is undertaken biennially, with the last one having been conducted in December 2018. Generally, such review is done in the form of a structured questionnaire circulated to all Directors, asking them to rate the Board’s performance in a number of strategically important areas and provide a rationale for their view. Results and outcomes are analysed by the Company Secretary and Chairman and any key themes are reported and discussed with the Board. Any recommendations arising from such review which are designed to specifically address any issues identified are implemented by the Board.

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

The Board aims to lead by example and do what is in the best interests of the Company. Our PRAISE values remain at the forefront of our minds as the Board guides the business forward.

We also drive engagement by working together to achieve more for others. Through a range of endeavours we continue to raise funds for our people’s chosen charity. It is this level of engagement that powers Alliance.

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

The respective responsibilities of the Chairman and CEO are very clearly understood. The Chairman is responsible for leading the Board, facilitating the effective contribution of all members and ensuring that it operates effectively in the interests of the shareholders.

The CEO is responsible for the leadership of the business and implementation of the strategy.

Non-executive Directors

The role of our Non-executive Directors is to:

  • Challenge constructively and help develop proposals on strategy;
  • Satisfy themselves as to the integrity of the financial reporting systems and the information they provide;
  • Satisfy themselves as to the robustness of the internal controls;
  • Ensure that the systems of risk management are robust and defensible; and
  • Review corporate performance and the reporting of such performance to shareholders.

Committees

The Board has delegated and empowered an Audit and Risk Committee, a Nomination Committee and a Remuneration Committee, each of which is accountable to the Board on all matters within its remit. Each Committee has written terms of reference, which are available on the Company’s website.

Each of the Independent Non-executive Directors sits on the Nomination and Remuneration Committees, enabling them to have a role in determining the pay and benefits of the Executive Directors and to play a key role in planning Board succession including the appointment and, if necessary, removal of Executive Directors.

In addition, each Independent Non-executive Director sits on the Audit and Risk Committee, enabling them to review internal control and financial reporting matters at first hand, and have a direct relationship with the external auditors.

Board and Committee meetings and attendance

The Board and its Committees meet regularly on scheduled dates, including a two-day strategy meeting each year which is also attended by senior executives of the Group, the purpose of which is to review progress in delivering agreed plans and to develop and settle the Group’s business plans and long-term strategic targets and set the framework for the achievement of those goals.

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

The Company communicates with shareholders through the Annual Report and Accounts, full-year and half-year announcements, the AGM and one-to-one meetings with existing or potential new shareholders. Such Reports as well as other relevant announcements and related information are all available on the Company's corporate website.

Furthermore, analysts’ notes and brokers’ briefings received and considered by the Board in order to ensure, as far as possible, that a clear and up-to-date understanding of investors’ views. The Company completes regular annual employee surveys to maintain an open dialogue with employee and holds a monthly breakfast briefing to all staff around the world where the Company’s performance, targets and key objectives are communicated and discussed.