Gear4music (Holdings) plc
Gear4music (Holdings) plc
Gear4music (Holdings) plc
STATEMENT OF COMPLIANCE WITH THE QCA CORPORATE GOVERNANCE CODE
Chairman’s Introduction
It is the Board’s responsibility to ensure that Gear4music is managed for the long-term benefit of all shareholders. A corporate governance framework that is effective whilst dynamic is one of the foundations of a sustainable growth strategy and identifying, evaluating and managing risks and opportunities will underpin long-term value creation.
Quoted Companies Alliance Corporate Governance Code
The Directors apply the Quoted Companies Alliance Corporate Governance Code (the ‘QCA Code’), a proportionate, principles-based approach constructed around ten broad principles with accompanying guidance, and this section outlines how the Group operates in each of these key areas.
By following the QCA code, my Board colleagues and I seek to ensure that the Group operates efficiently and effectively and communicates well, to promote confidence and trust in the Group’s Board and management. The Board aims to balance the interests and expectations of the Group’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, the Group is well placed to deliver medium and long-term success.
Section 172: Duty to promote the success of the Company
Engaging with our stakeholders and acting in a way that promotes the long-term success of the Company, while taking into account the impacts of our business decisions on our stakeholders, are central to our strategic thinking and our statutory duties in accordance with Section 172(1) of the Companies Act 2006 (s.172). The content in this section constitutes our s.172 Statement, as required under the Companies (Miscellaneous Reporting) Regulations 2018.
Our impacts on, and engagement with, our key stakeholder groups are considered within the implementation of our Group strategy. The stakeholder groups are: employees, customers, our suppliers, the environment and our shareholders. How we engage with these groups is covered throughout the report.
The Board of Directors consider, both individually and together, that they have acted in the way that they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, having regard to the stakeholders and matters set out in s.172 (a-f of the Companies Act) in the decisions taken during the year. Our plan is designed to have a long-term beneficial impact on the Company and its stakeholders.
Ken Ford
Chairman and Non-Executive Director
24 June 2024
Gear4music is the largest UK based online retailer of musical instruments and music equipment, selling own-brand musical instruments and music equipment alongside premium third-party brands such as Fender, Yamaha and Roland, to customers ranging from beginners to musical enthusiasts and professionals, in the UK, Europe and the Rest of the World.
Our ambition is to become a leading global retailer of musical instruments and equipment. We will achieve this by making quality music gear more accessible and affordable for all musicians, through a progressive e-commerce strategy built around three pillars of growth:
The Group’s strategy is explained in detail in our Strategic Report on pages 20-21 of our 2023 Annual Report and Accounts available here: http://www.gear4musicplc.com/investors/results-reports-and-presentations/.
Our strategy is formally reviewed at least annually and the supporting tactical plans considered at every Board meeting.
The Group seeks to maintain a regular dialogue with both existing and potential investors to ensure that its strategy, business model and performance are clearly understood. Understanding what investors and analysts think and helping these audiences understand our business, is an important part of taking our business forward.
The Chief Executive Officer and Chief Financial Officer regularly meet with investors and analysts to provide them with updates on the Group’s business and to obtain feedback regarding the market’s expectations of the Group. The Group’s NOMAD and public relations advisor provide written feedback after these presentations and meetings, and this feedback is shared with the Board.
The Group invites all shareholders to attend its Annual General Meeting where they can meet and question the Directors, and express ideas or concerns. The Notice of the Meeting is sent to shareholders at least 21 days before the meeting and the chairs of the Board and all committees together with all other Directors, routinely attend the AGM and are available to answer questions raised by shareholders.
Where voting decisions are not in line with the Group’s expectations the Board will engage with those shareholders to understand and address any issues.
The Board receives copies of all articles relating to the Group that are published in the financial press, via its public relations advisors.
The Annual Report & Accounts is published on the Company’s investor website.
The Group is aware of its corporate social responsibilities and the need to maintain effective working relationships across a range of stakeholder groups, both internal (employees and shareholders) and external (customers, suppliers, and advisors etc.).
The Board strives to balance the needs of all of these stakeholder groups while maintaining focus on the Board’s primary responsibility to promote the success of the Group and deliver long-term shareholder value.
Internal – Our People
We know that the foundations of a successful business are built on the hard-work of a team of talented and motivated individuals.
We strongly believe in growing our talent by recruiting only the best people, identifying individual strengths, and providing development opportunities with the scope for career progression as a result.
We conduct annual appraisals with reference to specific, measurable, pre-agreed goals and the Group’s values and behaviours that are consistent across all of its team.
Our flat management structure and close day to day interactions across the business aids open communication and fosters good relations with and between employees. The Board’s assessment is that the Group’s culture is positive, engaged and energetic, which is reflected in its achievement of its strategic goals. We know there is more we can do and we retain employee engagement as an on-going priority.
Launch of intranet
We continually strive to improve the communication we have with our people, and significant progress was made in May 2021 with the introduction of a new intranet.
This medium quickly and easily shares information about recent company news including policy updates, new starter welcomes, and internal promotions and changes. Every department has its own dedicated page for resources, helping support cross-departmental working. A new organisational chart and structure with photos will help our colleagues to better understand ‘who is who’ as the business grows in size.
Recruitment and Retention
We need to attract talent into our business to support our growth plans and offer competitive salaries and a range of benefits to help attract and retain great people (https://www.gear4music.com/careers/why-gear).
As at 31 March 2021, 55 employees are participating in Group share option plans in recognition of their contribution to the continuing success of the business.
We continue to create job opportunities in our communities, and in FY21 our average headcount increased by 11% from 466 to 519, and our retention levels are good.
Mental Health
Gear4music has signed the Charter for Employers Positive about Mental Health. This means we are committed to creating a supportive and open culture where colleagues feel able to talk about mental health confidently, and aspire to appropriately support the mental wellbeing of all staff – we are proud to be classified as a ‘Mindful Employer’.
In FY22 we will double the number of certified Mental Health First Aiders we have across the business to over 20. This will provide Managers across all our UK sites with additional tools, resources and knowledge to support their people better.
Our Employee Assistance Programme remains a highly utilised support tool, providing all employees with access to online resources, 24/7 helpline and counselling services. We continue to support our employee’s wellbeing with our Mental Health and Wellbeing Policy in place.
External
Environment
We recognise our responsibility to reduce our environmental impact, and can achieve this through technology, continuous improvements in operational efficiency, and doing things in new ways.
Our carbon intensity is reported in the Directors report on page 41, and improved in the year due to COVID-19 related office homeworking. Initiatives in FY21 included adding electric car charging points at our Head Office.
Initiatives started in FY20 have enjoyed a full-year benefit in FY21, including our revamped packaging to provide more secure shipping solutions and reduce our usage of packaging materials to block and brace the product, a new void fill solution made from near 100% recycled materials, and reduced paper use from paperless trade integrations with couriers and paperless invoicing.
Charitable partnerships
Changing Lives
Music can make a real difference to people’s wellbeing and we’re supporting the Changing Lives charity by donating musical instruments to people in need.
COVID-19 has impacted all of our lives, and the need to stay at home has transformed how we live. Dealing with the implications of the pandemic is not easy, particularly for the most vulnerable and socially excluded. Not only do they deal with the stress of their circumstances, the opportunity for relief might not always be available. But light relief is an important element in preserving mental wellbeing.
Changing Lives is a charity that operates in the north of England and the Midlands. It provides compassionate shelter, support, and other services, with more than 100 projects in the UK. Having been in operation for over 50 years, Changing Lives aims to help with homelessness, employment, women/children’s support, and drug/alcohol dependency.
Their shelters are an essential part of people being able to build a future for themselves. Finding the roots of strengths and talents in their residents, Changing Lives combines recovery with building esteem and skills. Using the “Theory of Change’’ process, Changing Lives gives people the chance to change their lives for the better. Almost 20% of staff at Changing Lives have also been through the process themselves.
Relief from the pressures of difficult times can be hard to find. We believe that learning to play music enriches people’s lives, improves confidence, relieves stress, and helps build bonds between people. While there is no one-size-fits-all way to improve mental wellbeing, music has seen some strong scientific evidence for its ability to help improve mental health. This is something that we’re well positioned to help with, and we’re delighted to lend our support.
Jessie’s Fund
Jessie’s Fund enables thousands of children with life limiting illnesses or serious disabilities to be heard through the language of music. By providing opportunities for them to access music therapy and to participate in musical activities, children who have few ways communicating are given a voice.
Jessie's Fund was founded in memory of a bright and musical little girl who died at the age of nine. Based in her home city of York, the award-winning charity benefits children in hospices, special schools and hospitals all over the UK.
Gear4music is delighted to be in a supportive partnership with Jessi’s Fund: as two York-based organisations, both with music at their core, and both with a wide geographical reach, we have much in common. With our help Jessie’s Fund will be able to reach many more children for whom music can feel like a lifeline.
Music for All
We continue to support our friends @ Music for all – a charity that has a primary focus of making more musicians by supporting musical education as well as helping individuals and community projects within the UK.
The Board is responsible for the Group’s system of internal controls and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.
The Group highlights potential financial and non-financial risks which may impact on the business as part of the monthly management reporting procedures. The Board receives these monthly management reports and monitors the position at Board meetings.
An Operational Board comprising the three Executive Directors and the four further directors of the trading subsidiary, meets regularly to analyse and discuss operational and commercial matters, and identifies any material matters to escalate to the Plc Board. The Operational Board formally met nine times in the financial year.
The Board confirms that there are ongoing processes for identifying, evaluating and mitigating the significant risks faced by the Group.
The Group’s internal financial control and monitoring procedures include:
The Audit Committee on behalf of the Board reviews reports from the external auditor together with management’s response regarding proposed actions. In this manner they have reviewed the effectiveness of the system of internal controls for the period covered by the accounts.
Code of Conduct
Our ‘Employee Handbook’ includes guidance on all risk matters facing our employees, including business integrity, anti-bribery, gifts, intellectual property and design rights.
Contingency planning
A disaster recovery plan is in place and reviewed annually. The Group maintains appropriate insurance cover to protect against material loss or claims against the Group. The insured values and type of cover are comprehensively reviewed on an annual basis in conjunction with the Group’s insurance broker.
The Group is controlled by the Board of Directors. The Board is headed by the Chairman, comprises six Directors, of which three are Executive and three are Non-Executive, meeting the QCA code’s guidance that a board should have at least two independent Non-Executive Directors. It is recognised that the CEO, being a major shareholder, risks individual dominance of the Board but the Board’s view is that the independent NEDs and committees mitigate this risk.
The Board is satisfied that the six directors collectively provide a broad range of relevant skills and experiences, and that the composition strikes a good balance between independence and knowledge of the business, to enable it to effectively discharge its duties and responsibilities.
The division of responsibilities between the Chairman and the Chief Executive Officer is clearly defined. The Chairman is responsible for ensuring the effectiveness of the Board and setting its agenda. The Chairman is not involved in the day-to-day running of the business. The Chief Executive Officer has direct charge of the Group on a day-to-day basis, and the Executive team has collective responsibility for the implementation of the Group’s strategies and is accountable to the Board for the financial and operational performance of the Group.
There are certain matters that are reserved for the Board’s consideration and these include, but are not limited to matters of strategy, key commercial developments, risk management, the consideration and approval of budgets, significant capital expenditure and recruitment, acquisitions and disposals, and the approval of financial statements.
Conflicts of Interest
The Non-Executive Directors have no personal financial interest in the Group except for fees in relation to their holding of office and their shareholdings as disclosed, with no potential conflict of interests and no day-to-day involvement of the Group.
The Group has effective procedures in place to monitor and deal with conflicts of interest. The Board is aware of the other commitments and interests of its Directors, and changes to these commitments and interests are reported to and agreed with the rest of the Board.
The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience, including in the areas of e-commerce, retailing, procurement, software development, marketing, and finance.
An up to date outline of the relevant skills and experience that each Director brings to the Board is detailed within the Director Biographies on page 42-43 of our 2020 Annual Report and Accounts. Each Director keeps their skillset up to date by attending external training, interactions with experts in their field, and reading relevant publications.
Director performance is reviewed through an annual appraisal process. The Chief Executive Officer is appraised by the Chairman, the Executive Board members by the Chief Executive Officer, and the Non-Executive Board members by the Chairman. Each Director has access to the services of the Company Secretary if required.
All Directors retire by rotation at regular intervals in accordance with the Company’s Articles of Association, with one-third (or whole number less than one-third) retiring at each Annual General Meeting. In addition, new Directors are subject to re-election at the Annual General Meeting following their appointment.
A Nomination Committee will be formed ahead of any new Board appointments, to ensure that the search for candidates is conducted, and appointments are made, on merit, against objective criteria and with due regard for the benefits of diversity on the Board.
The Board and its committees seek external expertise and advice where required.
Independent advice
All Directors are able to take independent professional advice in the furtherance of the duties, if necessary, at the Group’s expense.
The Board considers evaluation of its performance and that of individual directors to be an integral part of corporate governance to ensure it has the necessary skills, experience and abilities to fulfil its responsibilities. The goal of the Board evaluation process is to identify and address opportunities for improving the performance of the board.
The performance of the Board is evaluated on an ongoing basis with reference to achievement of its strategic goals, and the way in which it operates including, but not limited to, the appropriateness of its skill level, the way its meetings are conducted and administered (including the content of those meetings), the effectiveness of the various Committees, whether Corporate Governance issues are handled in a satisfactory manner, and whether there is a clear strategy and objectives.
Training is available should a Director request it, or if the Chairman or CEO consider it necessary.
All Directors stand for re-election on a biennial basis.
The Group aims to conduct its business in an ethical, professional and responsible manner, treating our employees, customers, and suppliers with courtesy and respect at all times.
The Board promotes a corporate culture that is based on sound ethical values and behaviour and aims to lead by example to ensure that these values are apparent and understood in every part of the business. We support these values in the annual appraisal process with performance measured relative the values and behaviours we expect of our team, as well as with reference to pre-agreed goals.
Our size and flat management structure helps the Board immerse itself in the Group’s culture, which it considers to be positive, engaged and energetic at present. An open culture is encouraged within the Group.
The Board sets the Group’s strategy and ensures that resources are in place in order for the Group to meet its objectives. The Board takes responsibility for the performance of the Group and delegates operational management to the Executive Directors, Operational Board and other senior management. As outlined in Section 5 above, there are specific matters reserved for the attention of the Board.
The Board seeks to achieve good and effective governance through structures and processes that are flexible enough to promote strong, timely decision making. This is achieved by the Directors being sufficiently well informed and appropriately equipped through their skills, experiences and personality to make good business decisions.
Our Corporate Governance report on pages 38-41 of our 2020 Annual Report and Accounts details the Group’s governance structures and why the Board considers it appropriate and suitable for the Group.
Board operation
The Board meets at least eight times each year in accordance with a scheduled meeting calendar. These meetings are supplemented by additional meetings as and when required, and weekly KPI reporting to provide early insight into evolving trends in the business.
The Board receives appropriate and timely information prior to each meeting including a formal agenda, minutes of the previous meeting, and an Executive’s report outlining the key commercial, operational, and financial matters for consideration. The Chief Executive Officer reports to the Board on issues, progress and recommendations for change.
Decisions are taken democratically after discussion and any concerns remaining unresolved are noted in the minutes of the meeting, which are circulated to all Directors. Actions agreed in the meetings are recorded and followed up.
The Board is supported by Audit and Remuneration committees. Each committee has access to such resources, information and advice as it deems necessary, at the cost of the Group, to enable the committee to discharge its duties.
Audit Committee
The Audit Committee has formally delegated duties and responsibilities and has written terms of reference. The main responsibilities are outlined on page 40 of our 2020 Annual Report and Accounts and include:
Dean Murray is the Chairperson of the Committee and Ken Ford is the other member. Both are independent Non-Executive Directors and have wide experience in regulatory and risk issues.
Meetings of the Committee are held at least twice per year and the auditor is invited to these meetings. The Committee receives reports on the effectiveness of the system of internal controls and a report from the external auditors documenting matters arising during the course of the audit.
Remuneration Committee
Ken Ford is the Chairperson of the Committee and Dean Murray is the other member. The Committee reviews the performance of the Executive Directors and makes recommendations to the Board on matters relating to remuneration, terms of service, granting of share options and other equity incentives. The Committee meets at least twice a year.
A Nomination Committee will be formed ahead of any new Board appointments, to ensure that the search for candidates is conducted, and appointments are made, on merit, against objective criteria and with due regard for the benefits of diversity on the Board.
Shareholder engagement
The Group seeks to maintain a regular dialogue with both existing and potential investors to ensure that its strategy, business model and performance are clearly understood. Understanding what investors and analysts think and helping these audiences understand our business, is an important part of taking our business forward.
The Chief Executive Officer and Chief Financial Officer regularly meet with investors and analysts to provide them with updates on the Group’s business and to obtain feedback regarding the market’s expectations of the Group. The Group’s NOMAD and public relations advisor provide written feedback after these presentations and meetings, and this feedback is shared with the Board.
The Group invites all shareholders to attend its Annual General Meeting where they can meet and question the Directors, and express ideas or concerns. The Notice of the Meeting is sent to shareholders at least 21 days before the meeting and the chairs of the Board and all committees together with all other Directors, routinely attend the AGM and are available to answer questions raised by shareholders.
Where voting decisions are not in line with the Group’s expectations the Board will engage with those shareholders to understand and address any issues.
The Board receives copies of all articles relating to the Group that are published in the financial press, via its public relations advisors.
The Annual Report & Accounts is published on the Company’s investor website.
Employee engagement
We know that the foundations of a successful business are built on the hard-work of a team of talented and motivated individuals. We strongly believe in growing our talent by recruiting only the best people, identifying individual strengths, and providing development opportunities with the scope for career progression as a result.
Through COVID-19 the safety and wellbeing of our colleagues has been of paramount importance, and we’ve worked tremendously hard together across the year to keep our operation running smoothly. We introduced many measures to keep our workplaces safe and COVID-secure, examples including contactless entry system to all our UK sites with FaceStation technology, temperature testing in entrance halls, and rapid flow self-testing kits available for staff to collect from Gear4music premises from April 2021 to support the Government COVID testing scheme.
We continue to invest in our facilities to make our office a great place to work and collaborate once it is safe for everyone to fully return. Improvements in the year were largely COVID-19 focused but also include onsite electric car charging points and a licenced extension to the on-site café facility.
As a thank you for the collective efforts of our amazing teams, we took the decision to pay a one-off discretionary bonus in the month of March, equivalent to 1.5% of basic annual salary.
We continually strive to improve the communication we have with our people, and significant progress was made in May 2021 with the introduction of a new intranet. This medium quickly and easily shares information about recent company news including policy updates, new starter welcomes, and internal promotions and changes. Every department has its own dedicated page for resources, helping support cross-departmental working. A new organisational chart and structure with photos will help our colleagues to better understand ‘who is who’ as the business grows in size.
Customer engagement
Effective communication with our customers is central to understanding their needs and wants, and developing our customer proposition. We monitor and respond to Trustpilot reviews, and look to learn from things that didn’t meet the customer’s expectation.
We invest significant resource in generating high quality engaging content, in terms of product descriptions, and studio quality photographic and video content.
Improving customer experience is a one of the key objectives when designing and implementing software development projects.
Supplier engagement
We work closely with our suppliers in a transparent way, operating on shared values and high standards, enabling our suppliers to participate in our success as we grow.
We pay our suppliers to agreed terms to given them the certainty they require.
