Corporate governance

The following statement is updated with effect from 10th December 2018.

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 Colin King as CEO in December 2017
  • 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 one Non-Executive Director and three Executive Directors who meet frequently during the year to discuss strategy and to review progress and outcomes against objectives. The Company is currently in the process of recruiting at least one additional Non-Executive Director. 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 and laboratories and also into the consumer health and wellbeing space where we see significant growth opportunities.

We have recently undertaken a strategic review to slim down parts of the business, by closing operations in India and Germany, so that we are now focused on creating value from:

  • Commercialising our two VISITECT® CD4 products for prioritising treatment for people living with HIV and for monitoring advanced HIV disease.
  • Selling our allergy range of products through our global partner, IDS.
  • 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.

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

  • One Company where all employees are aligned with the goals of the business and committed to a process of continuous improvement.
  • Execute and deliver to develop efficient, effective and compliant processes across all areas of our business.
  • Employees are our greatest asset to provide a framework where all employees can contribute to the business through effective management and leadership.
  • Customer focus to maintain customers at the heart of the organisation.

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.  

In the previous twelve months, the Group has been involved in the following series of meetings with shareholders:

Meetings with institutional shareholders

Date

Reason

Board members present

Comments

26/27/28 June 2017

Announcement of results for year ended 31 March 2017 and proposed fundraising

Colin King

Kieron Harbinson

Jag Grewal

Meetings with institutional shareholders and fundraising that included an open offer element which was taken up by 67.4% of qualifying shareholders

14/15/18/19 December 2017

Announcement of interim results for six months ended 30 September 2017

David Evans

Colin King

Kieron Harbinson

Meetings held to discuss interim results and to explain the change in CEO

11/12/30 April 2018

Engagement with shareholders following the announcement of a strategic review

Colin King

Kieron Harbinson

The strategic review was itself conducted following feedback from shareholders.  The meetings enabled the Group to articulate a new focus on its key growth opportunities

6/7/8/9/22 August 2018

Announcement of results for year ended 31 March 2018

Colin King

Kieron Harbinson

The meetings provided the opportunity for management to update shareholders on progress of its strategic review including confirmation over the sale of the legacy infectious disease business

 

Meetings with institutional shareholders

Date

Reason

Board members present

Comments

21 May 2018

Engagement with shareholders following the announcement of a strategic review

Colin King

Kieron Harbinson

Jag Grewal

This was the first of a planned series of meetings to hold an evening presentation, open to all private shareholders to give them an opportunity to meet and question the management team

6 August 2018

Announcement of results for year ended 31 March 2018

Colin King

Kieron Harbinson

Jag Grewal

This was the second evening presentation to which private shareholders were invited to hear an update on progress of the Group’s strategic review

3-6 December 2018

Announcement of interim results for six months ended 30 September 2018

Colin King

Kieron Harbinson

Meetings held to discuss interim results and update on strategic review

 

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 LRQA for ISO 9001:2015 (last audit held September 2017) and ISO 13485:2012. The transition to ISO 9001:2016 will take place in October 2018. The Group is also regularly visited by regulatory bodies of overseas countries and these have included the regulatory agencies from Saudi Arabia and South Korea over the past year.

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 senior management team (“SMT”), which comprises the three Executive Directors, plus a number of senior managers across all functions of the Group, meet on a monthly basis to review key management objectives.  The SMT is 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 2018 describes key risks on pages 10 and 11 and can be accessed from this link.

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 2018 audit report is contained within pages 22 to 27 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.

Following the resignation of David Evans on 10 December 2018, the Board currently comprises one Interim Non-Executive Chairman and three Executive Directors who are the Chief Executive, the Chief Financial Officer and the Commercial Director. The Board is in the process of recruiting at least one additional Non-Executive Director and will provide details as soon as possible.

It is noted that William Rhodes, Interim Non-Executive Chairman has previously been granted share options as disclosed on page 19 of the 2018 annual report. However, he is considered by the Board to be independent in character and judgement and it is our objective for the Board to regain 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 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, both of which are chaired by Bill Rhodes, the Interim Non-Executive Chairman.  The committees will be expanded as soon as the Company appoints a new 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 2018, the number of meetings held, and attendance by each Board member, is disclosed on page 16 of the annual report.

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 one of them is a chartered accountant. There are currently no female directors.  The Board remains confident that the opportunities in the Company are not excluded or limited by any diversity issues (including gender) and that the Board nevertheless contains a 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 needs to recruit at least one more Non-Executive Director to have 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.

Bill Rhodes, BS, MSIB – Non Executive Director appointed to the Company on 1 May 2013.

Chairman of the Audit Committee and Remuneration Committee

During his 14-year career with Becton, Dickinson and Co., one of the world’s leading suppliers of medical, diagnostic and life science research products, Bill held a number of senior leadership positions and, until the end of 2012, was BD’s Senior Vice President, Corporate Strategy and Development, being responsible for BD’s worldwide mergers and acquisitions and corporate strategies. Previously, he was Worldwide President of BD Biosciences, a business segment with turnover of over US$1.0 billion, including the provision of flow cytometry instruments and their associated reagents for CD4 testing used in a wide range of laboratory settings. Prior to working for BD, Bill held senior business development positions with Pfizer Inc. and Johnson and Johnson. 

Colin King, MBA – CEO appointed to the Company on 3 August 2015

Colin joined Omega in August 2015 as Chief Operating Officer. He has worked in the medical diagnostics industry for 23 years, previously working for Axis-Shield. He joined them in 1995 and held a number of positions encompassing planning, supply chain, project management and operations and, ultimately, from 2007 was Managing Director of the Laboratory division. During his time as Managing Director he was responsible for leading its diversification strategy, which was successful in maintaining revenues despite retiring two key product revenue lines. Colin was appointed Chief Executive Officer on 14 December 2017, with key responsibility for implementation of the recent strategic review.

Kieron Harbinson, FCCA – CFO and Company Secretary appointed to the Company on 19 September 2006 and associated with Omega since 2002.

Kieron joined Omega in August 2002 as Finance Director. He has broad experience in technology and related businesses. He started his career with Scotia Holdings PLC in 1984 and remained with the company for 14 years, occupying various senior finance roles. These roles enabled him to acquire experience in corporate acquisitions, disposals and intellectual property matters. In addition, he gained experience in various debt and equity transactions, and was involved in raising over £100 million for the company. He then joined Kymata Limited, a start-up optoelectronics company, as Finance Director. Over a period of 18 months, he was involved in raising approximately US$85 million of venture capital funding. Kieron is responsible for finance, tax, auditing, company secretarial and supporting the CEO with investor relations.

Jag Grewal, BSc Hons, MSC, MBA – Commercial Director 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 22 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 is responsible for the commercial strategy and development of the Group driven through sales and marketing, product management, business development and customer service to drive business growth and market share.

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.  Whilst the Board informally self-reviews its performance on an ongoing basis it is currently reviewing how it may increase its compliance with this principle.  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.

The chair of the Board led the discussion and process which led to the creation and appointment of a new position for Chief Operating Officer (“COO”) which was filled by the original appointment of Colin King in August 2015.  This process was itself part of a longer succession planning for the role of CEO and led to Colin stepping up to the CEO role in December 2017.  Feedback from shareholders has been positive regarding the strategic review undertaken by Colin since his appointment.

As chair, William Rhodes 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

Prior to taking on the CEO role, Colin King led an internal exercise with the senior management team to identify and implement a set of core values that could be consistently adopted throughout the entire Group.  These values were then presented to all staff and have led to the adoption of 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 Directors – which currently comprise the positions of CFO and Commercial Director have responsibility for safeguarding the Group’s assets with appropriate policies and controls and supporting the CEO in promoting the interests of the Company.  Executive Directors support 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 currently comprised of William Rhodes as Chairman 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 will be expanded as soon as the Company appoints a new Non-Executive Director. 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 of William Rhodes as Chairman 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 Committee will be expanded as soon as the Company appoints a new Non-Executive Director. 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 18 of the 2018 annual report.

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 this link.

The most recent Company AGM was on 14 September 2018 and the votes cast at the meeting were as follows:

Resolution

For

Against

Discretion to Chairman

Percentage of Voting Rights

Withheld

Total

01

62,335,340

3,117,647

614

0.0005%

Nil

65,453,601

02

65,452,987

Nil

614

0.0005%

Nil

65,453,601

03

65,452,987

Nil

614

0.0005%

Nil

65,453,601

04

65,422,573

Nil

614

0.0005%

30,414

65,453,601

05

60,271,357

5,180,380

1,864

0.0015%

Nil

65,453,601

     

Total Voting Rights

126,959,060

   

 

Where the resolutions voted on were as follows:

1. To receive and adopt the reports of the Directors and the auditors and the audited accounts for the year ended 31 March 2018. 

2. To re-appoint Ernst & Young LLP as auditors of the Company to hold office until the conclusion of the next general meeting at which accounts are laid before the Company and that their remuneration be fixed by the Directors. 

3. To re-elect Mr Colin King as a Director of the Company.

4. That, in accordance with section 551 of the Companies Act 2006, the Directors be generally and unconditionally authorised to allot shares in the Company or grant rights to subscribe for or convert any security into shares in the Company (“Rights”) up to an aggregate nominal amount of £1,692,787.44 ordinary shares of 4 pence each (“Ordinary Shares”), provided that this authority shall, unless renewed, varied or revoked by the Company, expire on the conclusion of the next Annual General Meeting of the Company or, if earlier, on 31 October 2019 save that the Company may, before such expiry, make an offer or agreement which would or might require shares to be allotted or Rights to be granted and the Directors may allot shares or grant Rights in pursuance of any such offer or agreement notwithstanding that the authority conferred by this resolution has expired. This authority is in substitution for all previous authorities conferred on the Directors in accordance with section 551 of the Companies Act 2006, but without prejudice to any allotment already made or to be made pursuant to such authority. 

Resolution 5 is proposed as a special resolution. 

5. That, conditional upon the passing of resolution 4 above, and in accordance with section 570 of the Companies Act, the Directors be generally empowered to allot equity securities (as defined in section 560 of the Companies Act 2006) pursuant to the authority conferred by resolution 4 as if section 561(1) of the Companies Act 2006 did not apply to any such allotment, provided that this power shall be limited to: 

5.1 the allotment of equity securities in connection with an issue in favour of the holders of Ordinary Shares where the equity securities respectively attributable to the interests of all holders of Ordinary Shares are proportionate (as nearly as may be) to the respective number of Ordinary Shares held by them but subject to such exclusions or arrangements as the Directors may deem necessary or expedient to deal with fractional entitlements arising or any legal or practical problems under the laws of any overseas territory or the requirements of any regulatory body or stock exchange; and 
5.2 the allotment of Ordinary Shares otherwise than pursuant to subparagraph 5.1 above up to an aggregate nominal amount of £253,918.12, and provided that this power shall, unless renewed, varied or revoked by the Company, expire on the conclusion of the next Annual General Meeting of the Company or, if earlier, 31 October 2019, save that the Company may, before such expiry, make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that the power conferred by this resolution has expired.