As a family-owned business, we run our business in a way consistent with an agreed set of core values covering how we deliver value to shareholders and the wider community and how we interact with our stakeholders, including shareholders, employees, customers and suppliers. Accordingly, we have not applied a specific corporate governance code during 2020. The Board will monitor the development of private company corporate governance before deciding, in conjunction with the shareholders, whether it would be beneficial to formally adopt a specific corporate governance code such as the Wates Principles. Our corporate governance arrangements are as follows.
The Group’s mission statement was set by our founder’ Sir Arnold Clark and is “to provide exceptional value for money and the highest levels of customer service”.
The Board sets our overall strategy and values and formally meets on a quarterly basis to monitor performance against that strategy. The Group’s values are embedded in its operations and reinforced during induction for new employees and at regular Director led branch and departmental meetings across the Group. Employee feedback helped to create five core values: Family, Communication, Progression, Community and Recognition. These are the values that guide and inform everything we do and reflect our principles as a business. The Group has a zero-tolerance approach on bribery and corruption, tax evasion and modern slavery. Breach of the Group values is a disciplinary matter where appropriate. The Board holds regular meetings with groups of local managers to seek feedback on trading conditions and the effectiveness of the Group’s overall strategy.
As of August 2020, S Willis stepped down from his operational roles but remains a member of the Board in a non-executive capacity. This ensures that the knowledge and experience gained over 25 years in his sales role remains available to the Board. At this point, J A Clark was appointed to the role of Group Commercial Director and R E Borrie to Group Sales Director. K J McLean, who had also planned to step down from his executive role in August 2020, agreed to remain as an Executive Director given the unprecedented impact of Covid-19 on the business.
The Board are supported by an Operations Board made up of individuals with a wide range of backgrounds, skills and experience. Executive Directors hold regular operational meetings with their respective leadership teams and meet the Operations Board on a weekly basis to monitor business performance and agree required actions after which an informal meeting of Executive Directors considers appropriate responses and actions. The Board formally meets quarterly to discuss longer term strategy with additional bi-annual strategy meetings held with the Operations Board. However, reflecting the risks arising from Covid-19, the Executive Directors held a number of digital ad-hoc meetings, initially on a daily basis, to formulate and monitor the Group’s mitigation plans.
Appointments to the Board are discussed with the Chairwoman prior to any appointment being confirmed.
The Board seeks to ensure that the necessary financial, legal and human resources are in place for the Group to be able to meet its objectives, to review management performance and to ensure that its obligations to its shareholders are understood and met. All Directors have a clear understanding of their roles and have access to legal advice on their responsibilities or relevant regulation. This ensures the Board receives regular briefings on new regulations impacting the Group, including General Data Protection Regulation and the impact of adopting new accounting standards. The Board receive timely information regarding the performance of the business throughout the working day.
The Group seeks to provide competitive remuneration packages that will attract and retain executives of the calibre required to take forward the Group’s strategy. Remuneration comprises a base salary, bi annual discretionary bonus, dependent upon individual qualitative performance, and a competitive benefits package. The remuneration package of each Director is discussed and agreed by the Chief Executive and the Chairwoman, as the senior family representative on the Board. Discussions with the Chairwoman take into account business performance and the level of change to employee remuneration.
Recognising the potential impact of Covid-19 on the Group, the Executive Directors held daily meetings, digitally, to assess the potential risks and implement and monitor the various mitigating actions. The principal decisions taken are set out below and regular update calls were held with the Chairwoman to ensure her support for all of the actions taken. Uncertainties remain over the duration of the pandemic, the effectiveness of measures taken to contain it and the resultant impact on customer demand, workforce availability and cash flows. As a consequence, the Directors continue to monitor the situation, ensuring that differing Government requirements are understood and complied with and that working capital exposures are appropriate.
The far-reaching risks of climate change and its growing impact on both the environment and the global economy are well-documented and the Group recognises that the automotive sector has always been a significant contributor to global greenhouse gas emissions, especially through the growth in SUV use. The UK Government has confirmed its ambition to see the end of the sale of new petrol and diesel cars in the UK by 2030.
The Group’s position as a leading multi-franchise auto-retailer means it is ideally positioned to help drive significant change in the market. Board members continue to engage with manufacturer partners, investing in training of our staff in alternate fuel technology, and installing charging points at our sites where possible. The Directors Report contains commentary on the Group’s energy efficiency actions along with details of our greenhouse gas emissions.
The UK left the European Union on 31 January 2020 and the transition period ended on 31 December 2020. Throughout 2020, there remained significant uncertainty surrounding the terms of the ongoing relationship between the UK and the EU. Our Brexit risk principally arises around the impact on the supply chain and pricing for new vehicles and parts due to the effect of tariff and non-tariff barriers and the subsequent impact on retail prices in the UK. The Executive Directors maintained an open dialogue with our key manufacturers and distributors throughout 2020 to ensure we understand the actions they planned to take to implement any changes arising from the end of the transition period. The potential pricing and supply issues and subsequent impacts on the retail market were regularly discussed by the Board and specific strategies around inventory levels were agreed. The Board were pleased that the UK Government announced a Brexit deal on 24 December 2020 which allows for tariff free trade between the United Kingdom and the European Union.
Led by the Chairwoman, the Board is responsible for generating long-term shareholder value by setting the Group’s strategic direction. The Board is responsible for approval of the Group’s risk appetite, determining the nature and extent of significant risks the Group is willing to take to achieve its objectives. The Board has established delegated authorities and controls to ensure efficient management of the Group’s operations. The Group uses the Internal Audit and Group Risk functions to assist its monitoring of performance and risk. The Board consider the principal risks to be those that could cause the greatest damage if not effectively evaluated, understood and managed. These principal risks are considered to be:
Risk | Potential impacts | Mitigating actions |
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Failure to meet customer expectations |
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Failure to maintain relationships with manufacturers and finance providers |
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Adverse changes to manufacturer delivery systems that bypass the current dealer network |
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IT systems failure and data security |
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Failure to attract and retain our skilled workforce |
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Legislative, regulatory and environmental changes and major business interruption (including the risks arising from Covid-19 and Brexit) |
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The following disclosure describes how the Directors have had regard to the matters set out in Section 1720) (a) to (f) and forms the Directors’ statement required under Section 414CZA of The Companies Act 2006:
Stakeholder group | Why is it important to engage | How management and/or Directors engaged | What were the key topics of engagement | What was the impact of the engagement including any actions taken |
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Customers | Delivering exceptional customer service and genuine value for money is key to customer retention |
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Employees | Ensuring the business has the right culture and values is critical to the delivery of a first-class customer experience |
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Manufacturers | Access to vehicles on franchise terms is important for our franchise businesses as well as our Contract Hire and daily rental business |
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Finance providers | Access to affordable finance is essential to ensure the ongoing viability of our Contract Hire and Daily Rental businesses and to enable customers to finance vehicle purchases |
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Wider community | Giving back to the community is one of our core values |
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Regulators | Compliance with regulatory requirements is essential for the long-term benefit of the Group |
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The Board took the following principal decisions designed to mitigate the impact of Covid-19 on the business in order to protect the group’s cash position and to protect the health and safety of employees and other stakeholders:
Prior to the end of the transition period and following discussions with key manufacturers and distributors, the Board agreed to increase the level of certain parts stocks held. This was to mitigate any post transition availability issues.