Corporate Governance

Statement from the Chairman

Further to changes to the AIM Rules on 30 March 2018, the Board has decided to adopt the Quoted Companies Alliance (“QCA”) Corporate Governance Code for Small and Mid-sized Quoted Companies, issued in April 2018.

The Chairman of the Board of Directors has overall responsibility for corporate governance and the Board is committed to providing information on an open basis.  The Board understands the role that good corporate governance plays, particularly around the wider areas of culture and accountability and has overseen a number of changes over the recent past to drive improved performance and accountability, including:

  • The appointment of Jag Grewal as CEO on 18 January 2022
  • The appointment of Chris Lea as CFO on 30 August 2021
  • the appointment of Dr Simon Douglas as Non-Executive Chairman on 11 February 2021
  • the appointment of Jeremy Millard as a Non-Executive Director on 1 March 2019
  • the introduction of annual Group-wide staff surveys
  • the implementation of a set of new core values

The Board believes that the QCA Code is the more appropriate framework under which to operate for a company of our size whilst complying with the disclosure requirements of the new AIM Notice 50.

The size and structure of the Board and its committees are kept under review to ensure an appropriate level of governance operates throughout the year. The Board currently comprises two Non-Executive Directors and two Executive Directors who meet frequently during the year to discuss strategy and to review progress and outcomes against objectives. We have also taken steps recently to improve our engagement with shareholders and to try and communicate more effectively regarding our long-term growth drivers. We believe the Board has a good mix of skills and experience and a culture that easily enables the Non-Executive members of the Board to challenge and advise the Executive team as appropriate.

The QCA Code encompasses ten principles, against which, we are required to explain how we comply or explain why we feel it is appropriate to depart from those principles.  We now report against these principles as follows.

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

The Group is focused on selling a range of products in the in vitro diagnostics industry, principally to hospitals, laboratories and NGO networks and also into the consumer health and wellbeing space where we see significant growth opportunities.

In early 2022, we have implemented a revised strategy to reduce operating costs, exit the manufacturing of Covid-19 products and to invest in our Health & Nutrition business in order to drive growth. We have also indicated that we will seek to divest our VISITECT® CD4 business in next few months. We are now focused on creating value from:

  • Fully exiting the Alva site and further reducing operating costs and delivering operating efficiencies from our planned new site in Ely.
  • Divesting our VISITECT® CD4 Advanced Disease product for prioritising treatment for people living with HIV and for monitoring advanced HIV disease.
  • Increasing the footprint of our food intolerance products, particularly in the US and China, where we see opportunities for growth in direct-to-consumer market channels.
  • Increasing the range of products available in our Health & Nutrition division.

Our strategy is to deliver longer-term growth by adopting and implementing the following principles:

  • Revenue growth growing the revenue for our Health and Nutrition business.
  • One team ethos to improve collaboration between departments and implement our cultural beliefs.
  • Operational excellence to develop processes for continuous improvement, consistent quality culture and growth in gross margin.
  • Empowering our people to provide a framework where all staff can contribute to achieving the Company’s aim.

The key challenges we face are:

  • Increasing regulatory hurdles to achieve in-country product registration.  More and more countries now require individual product registration and in-country evaluations to be performed before a product can be sold in a territory and we are investing in more people with the regulatory skills needed to handle this increased workload.
  • Development risk. There is no guarantee that products in development will lead to a future market launch.  We have increased resource in project management skills that plans product development activities to minimise the risk of failure.
  • Technology risk. We closely monitor the market on a continual basis to see how we can maintain a competitive advantage against our peers.
  • Key employees. The Group undertakes a salary benchmarking exercise to ensure that we remain competitive and we have also increased resource into training more of our people throughout the Group so that they can more clearly see career development opportunities with the Group.

Seek to understand and meet shareholder needs and expectations

The responsibility for investor relations lies with the CEO, who is supported by the CFO.  The Group seeks to engage with shareholders on a number of occasions throughout the year to understand shareholders’ needs and expectations

The Company has recently expanded its communication strategy with shareholders, including hosting webinars on the Investor Meet Company platform and by providing video excerpts through BRR media which can be accessed from the Company’s website.

The Group receives anonymised feedback through its broker and financial PR organisation from attendees at all the above events and welcomes both positive feedback and constructive criticism.  This feedback has proved very useful in tailoring the content of subsequent presentations.

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

The Group seeks to ensure it has good relations with internal employees and external stakeholders including customers, suppliers, regulatory bodies and the wider community with which it interacts.

Employees

  • All employees are invited to participate in an annual survey on which they can give anonymised feedback on a range of issues.  The results are collated and presented to all employees along with actions taken by management to address the issues raised.
  • Senior management present business progress updates to all staff at different sites twice a year to keep them informed.  Feedback from staff indicates that this is a popular exercise undertaken by management.
  • All staff undergo performance and development reviews with their managers twice a year to ensure that everyone is prioritised and aligned with the Group’s main business objectives.  These sessions also allow for additional staff training needs to be addressed.

Customers

  • The Group surveys its customers on a regular basis by sending out an on-line survey for them to complete. The programme cycles through the Group’s customers so that each customer receives an invite to participate in the survey at least once every two years. A regular post market surveillance  regime is in place that follows up on every customer complaint and technical enquiry received and is an integral part of the Quality Management System. Customer feedback is also sought through formal and informal meetings during customer visits and exhibition meetings. These feedback interactions are documented and reviewed and any actions recorded.

Suppliers

  • Suppliers are evaluated as to the criticality and dependency of the materials or services they provide to the Group. Suitability to supply is determined either by completion of a supplier questionnaire or by supplier audit undertaken by one of the Group’s Quality team. Supplier performance is regularly measured, monitored and reviewed and any concerns are escalated through a well-defined process as part of the Quality Management System.

Regulatory bodies

  • The Group is regularly audited by several bodies including Lloyd’s Register for both ISO 9001:2015 and ISO 13485:2016 (last audits held August 2020).The Group is also regularly visited by regulatory bodies of overseas countries and these have included the regulatory agencies from Brazil, Korea and more recently the World Health Organization.

Community involvement

  • As part of our social commitment in Africa, we continue to support empowerment work where we can.  We have consistently supported local women through ordering batches of beaded pins for conferences and workshops that we attend.  These badges are made by different social entrepreneurial groups of women affected by HIV.   Through using their beading skills to handcraft bright, colourful AIDS ribbons, small figurines and badges, these women are able to sustainably make a living and support their families.  As the backbone of Africa, supporting groups of women working towards economic empowerment and wellbeing, is an important part of our social responsibility.

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

The two business units of Health and Nutrition and Global Health now have their own  senior management teams (“SMT”), which comprise Executive Directors, plus a number of senior managers across both functions of the Group. SMTs meet on a monthly basis to review key management objectives.  SMTs are also responsible for preparing a risk register which is also reviewed at these monthly meetings and analysed for changes using a scoring system of impact and probability, as well as the identification of new risks.

The annual report also includes an analysis of key risks along with mitigating actions. The most recent annual report for 2021 describes key risks on pages 17 to 19 and can be accessed from the following link:

Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2021

The independent auditor’s report has now been expanded to cover key risks from an audit perspective, auditor’s response to those risks and the auditor’s observations as reported to the audit committee. The 2021 audit report is contained within pages 33 to 39 of the annual report which can be accessed from the above link.

Maintain the board as a well-functioning, balanced team led by the chair

The Board members have a collective responsibility and legal obligation to promote the interests of the Group and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the Board.

The Board currently comprises the Non-Executive Chairman, one Non-Executive Directors and two Executive Directors who are the Chief Executive and the Chief Financial Officer.

Simon Douglas and Jeremy Millard are all considered by the Board to be independent. However, it is noted that Simon Douglas and Jeremy Millard have previously been granted share options as disclosed on page 29 of the 2021 Annual Report. 

Simon Douglas and Jeremy Millard act in the interests of the Company at all times and are not influenced by the factors pointed out above. The Board has a good mix of skills and experience and a culture that easily enables the Non-Executive members of the Board to challenge and advise the Executive team as appropriate.

The Board meets at regular intervals and has a schedule of matters reserved for the Board including setting corporate strategy, approving the annual budget, reviewing financial performance, agreeing the renewal of and any new banking/treasury facilities, approving major items of capital expenditure and reviewing and approving acquisitions. The Board is provided with appropriate information in advance of Board meetings to enable it to discharge its duties effectively and this includes a report from the Executive members of the Board, along with summary reports from senior managers providing updates on key issues.

The Non-Executive Chairman is committed to providing not less than 30 days annually to the Group and the Non-Executive Director is committed to providing not less than 18 days annually to the Group.  In reality, the Non-Executive Director consistently provides more than this minimum time requirement.  The Executive Directors are all full-time positions.

The Group also has an audit committee and a remuneration committee. The Remuneration Committee is chaired by Simon Douglas, Non-Executive Chairman and the Audit Committee is chaired by Jeremy Millard, Non-Executive Director.

The Board does not have a separate nominations committee due to its small size and the Board itself adopts a consensus-based approach in making changes to its composition.

For the last financial year ended 31 March 2021, the number of meetings held, and attendance by each Board member, is disclosed on page 25 of the 2021 annual report.

Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2021

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

The four members of the Board all have many years’ experience in the in vitro diagnostics industry with a number of public and private companies.  This experience includes areas of immunoassay development, operational supply and logistics, commercial and finance activities  Currently all members of the Board are male and two of them are chartered accountants. There are currently no female directors,  the board remains confident both that the opportunities in the Company are not excluded or limited by any diversity issues (including gender) and that the board nevertheless contains the necessary mix of experience, skills and other personal qualities and capabilities necessary to deliver its strategy. The Chairman fosters a culture during Board meetings that encourages debate and enables any Director to feel comfortable in communicating and explaining alternative viewpoints.  The Board is of the view that it has a balance of experience and skills to enable it to deliver on its strategy.  Directors ensure their skills and capabilities are kept up to date including:

  • Attending continuing professional development courses as part of a professional qualification.
  • Attending industry trade shows and exhibitions to remain up to date with competitor activities.

The Board seeks advice from external advisors where necessary. This includes its nominated advisor/broker in relation to compliance with the AIM Rules for Companies and advice regarding secondary fundraisings. The Board also regularly seeks legal advice in relation to commercial and property matters.

Dr Simon Douglas, PhD, MPhil, BSc (hons) -  Non Executive Chairman appointed to the Company on 11 February 2021.Chairman of the Remuneration Committee and Member of the Audit Committee.

Simon was appointed Chairman in February 2021.  He has over 30 years’ experience in the biotech industry, including 10 years working for Amersham International (now GE), ICI and Zeneca (now Astra Zeneca), in a variety of commercial and technical positions, and over five years with Tepnel Life Sciences plc (now Hologic Inc), a London Stock Exchange listed diagnostic company where he was Chief Executive. He has been the CEO/Executive Chairman on three other venture capital backed Life Science companies and headed up the trade sale of two of these. He is currently Chairman of Fusion Antibodies plc, an AIM listed CRO providing services for the discovery and development of antibody-based therapies, C-Major Medical, a venture capital backed Medical Device Company and Chairman of Cambridge start up, HexagonFab.

Jeremy Millard, BA (hons) M. Eng, FCA – Non-Executive Director appointed to the Company on 1 March 2019

Chairman of the Audit Committee and Member of the Remuneration Committee.

Jeremy has 20 years’ investment banking experience and was previously a partner at Smith Square Partners LLP where he provided strategic and corporate finance advice to clients in the science, technology and telecommunications sectors, prior to which he headed up the technology practice at Rothschild in London. Jeremy runs FCA-regulated corporate finance business Iridium Corporate Finance and is also currently a Non-executive Director and Chairman of the Audit Committee of AIM-listed Ilika Plc as well as sitting on the Boards of a number of other private UK companies.

Jag Grewal, BSc Hons, MSC, MBA – Chief Executive appointed to the Company on 30 June 2011

Jag joined Omega in June 2011 as Group Sales and Marketing Director. He has worked in the medical diagnostics industry for over 25 years having started out as a Clinical Biochemist in the NHS. In 1995 he joined Beckman Instruments where he developed a career spanning 15 years in sales and marketing holding a variety of positions in sales, product management and marketing management. In 2009 he left his position of Northern Europe Marketing Manager to join Serco Health, where he helped create the first joint venture within UK pathology between Serco and Guy’s and St Thomas’ Hospital. He is also past Chairman and current Treasurer of the British In Vitro Diagnostics Association (BIVDA).

Jag was appointed as CEO in January 2022, replacing Colin King.  Prior to this appointment, Jag was responsible for managing the Health and Nutrition division.

Chris Lea, BSc Hons, ACA – Chief Financial Officer and Company Secretary appointed to the Company on 30 August 2021.

Chris joined Omega on 30 August 2021 as Chief Financial Officer and Company Secretary. He is responsible for finance, tax, auditing, company secretarial and supporting the CEO with investor relations. He was previously CFO of two other AIM-listed companies, IndigoVision Group plc and Superglass Holdings PLC, both of which were successfully turned around under Chris’ management and were subsequently acquired by larger corporations.  IndigoVision was one of the larger independent, end-to-end CCTV system manufacturers, operating worldwide from its Edinburgh HQ and was acquired by Motorola Solutions, Inc in June 2020.  Prior to its sale in 2016, Superglass was the UK’s only independent manufacturer of glass wool insulation and is now part of TechnoNICOL International, a leading producer of construction materials.

Prior to his public company roles, Chris was CFO of Aviagen Europe, the world’s largest poultry breeding company, where he helped grow Aviagen’s European business five-fold over a 10-year period, through a combination of organic growth and multiple strategic acquisitions.  Chris spent 15 years with KPMG, holding various roles in their audit and corporate finance business.  He holds a BSc (Hons) in Physics from Nottingham University and is a member of the Institute of Chartered Accountants in England and Wales.

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

The Board has not undertaken any formal external review of its members’ performance to date.  Beneath Board level, members of the senior management team are included in the twice-yearly review process which is carried out across the entire Group.

In reviewing its own performance, the Board is aware of its perception amongst shareholders, both through formal face-to-face meetings and subsequent feedback from these, along with informal discussions which take place from time to time.As Chair, Simon Douglas invites all Board members to suggest any candidates who they feel may be capable of adding value to the Board as a whole.

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

of the Group has adopted the following core values:

  • Accountability
    • Ask what more I can do
    • Take ownership
  • Collaboration
    • Actively support your colleagues
    • Be clear in communication
    • Celebrate success and have fun together
  • Respect
    • Treat others as we would wish to be treated
    • Respect the environment we work and live in
  • Honesty
    • Aspire to be open and transparent
    • Take pride in building trust between ourselves and others
  • Customer focus
    • Customer satisfaction is not a department, everyone is responsible
    • Listening to customers drives improvement

The Executive members of the Board are very aware of the importance in living to these core values and in setting examples for all staff to follow.

The core values are highly visible throughout the organisation and are branded on the walls of the buildings as well as being used on Company notebooks and pens.

The core values that the organisation promotes are included within recruitment processes as well as within the personal development reviews which all staff undergo twice a year.

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

The Board is collectively responsible for defining and implementing a strategy to deliver long-term value to shareholders but which operates within a framework of good corporate governance and in line with the Board’s assessment of risk.

The roles and responsibilities of the various Board positions are as follows:

Chairman – has responsibility for leading an orderly and effective Board and providing overall guidance to other members of the Board to ensure it delivers on its stated strategy.  The chair also attends some results presentations demonstrating a level of commitment which is visible to shareholders. The chair is also responsible for overseeing the Group’s corporate governance practices to ensure they remain relevant for an organisation of our size.

Non-Executive Director – has responsibility to be independent in judgement and thought and for scrutinising and, if necessary, challenging the Chief Executive and Executive Directors to ensure the Group delivers its strategy whilst maintaining acceptable levels of risk. The NED also provides a sounding block for the Chairman as and when necessary.

Chief Executive – has responsibility for leading the organisation and implementing the Group’s objectives in line with its agreed strategy, assessing risks to ensure they are managed and mitigated, safeguarding the Group’s assets with appropriate policies and controls, leading an investor relations programme to ensure effective communication with shareholders and to ensure effective communication and reporting between the Executive members of the Board to the Non-Executive members.

Executive Director – the CFO has responsibility for safeguarding the Group’s assets with appropriate policies and controls and supporting the CEO in promoting the interests of the Company.  The CFO supports the CEO in day-to-day operational, finance and commercial issues, providing support and leadership to the senior management team and support in the delivery of the organisation’s strategic plan.

The Board has a schedule of matters which it reserves for its review including:

  • setting corporate strategy
  • approving the annual budget
  • reviewing financial performance
  • agreeing the renewal of and any new banking/treasury facilities
  • approving major items of capital expenditure
  • reviewing and approving acquisitions

The Board delegates authority to two committees which operate under terms of reference and include:

The Audit Committee

The Audit Committee is comprised of Jeremy Millard as Chairman and Simon Douglas and has primary responsibility for monitoring the quality of internal controls, ensuring that the financial performance of the Group is properly measured and reported on, and for reviewing reports from the Group’s auditors relating to the Group’s accounting and financial reporting, in all cases having due regard to the interests of shareholders. The Committee shall also review preliminary results announcements, summary financial statements, significant financial returns to regulators and any financial information contained in certain other documents, such as announcements of a price-sensitive nature.

The Committee considers and makes recommendations to the Board, to be put to shareholders for approval at the Annual General Meeting, in relation to the appointment, re-appointment and removal of the Group’s external auditors. The Committee also oversees the relationship with the external auditors including approval of remuneration levels, approval of terms of engagement and assessment of their independence and objectivity. In so doing, they take into account relevant UK professional and regulatory requirements and the relationship with the auditors as a whole, including the provision of any non-audit services. Ernst & Young LLP have been auditors to Omega Diagnostics Limited (ODL) since 2000 and were appointed as auditors to the Group following completion of the reverse takeover of ODL in September 2006.

The Committee has reviewed the effectiveness of the Group’s system of internal controls and has considered the need for an internal audit function. At this stage of the Group’s size and development, the Committee has decided that an internal audit function is not required, as the Group’s internal controls system in place is appropriate for its size. The Committee will review this position on an annual basis.

The Committee also reviews the Group’s arrangements for its employees raising concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The Committee ensures that such arrangements allow for independent investigation and follow-up action.

The Remuneration Committee

The Remuneration Committee is comprised ofSimon Douglas as Chairman and Jeremy Millard, and has primary responsibility for determining and agreeing with the Board the remuneration of the Company’s Chief Executive, Chairman, Executive Directors, Company Secretary and such other members of the Executive management as it is designated to consider. The remuneration of the Non-Executive Directors shall be a matter for the Chairman and the Executive Directors of the Board. No Director or manager shall be involved in any decisions regarding their own remuneration.

Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Company has not previously issued an Audit Committee Report but does include a Remuneration Report in the Annual Report.  The Remuneration Report for the most recent financial year can be accessed from page 28 and 29 of the 2021 annual report.

Omega Diagnostics Group PLC Annual Report and Group Financial Statements 2021

The Group publishes an annual report in hard copy which is sent to all shareholders on the register as well as publishing current and historical annual reports on its website.

In addition, the Group publishes current and previous shareholder presentations on its website which may be accessed from the following link:

https://www.omegadx.com/Investor-Relations/Corporate-Information/Corporate-Results-Presentations