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Corporate Governance

Chairman's Introduction

One of my key tasks is to ensure the Group maintains high standards of corporate governance and to review the corporate governance structures of the business, including the various board committees, to ensure they continue to be appropriate to the size and complexity of the Group as it evolves. In conjunction with this review and in line with the changing requirements of being an AIM listed Company, as a Board we have formally adopted the Quoted Companies Alliance corporate governance code (the “QCA Code”).

As Executive Chairman, I lead the Board of Directors and have primary responsibility to provide the necessary leadership, input and guidance to the Company and the Board in restoring the business to a level of sustainable profitability that creates long-term shareholder value. I also have responsibility for steering the Board agenda to ensure it focuses on the important operational and financial matters, and for ensuring the Executive Team are delivering on the turnaround strategy we have laid out to restore the business to long-term sustainable growth and profitability in line with our turnaround plans.

The Board has considered how we apply each of the ten principles and further detail is given below of the Company's approach in relation to each.

Ronald Series, Chairman

Principle 1: Establish a strategy and business model that promotes long-term value for shareholders

As announced in the Group’s interim results in March 2018, our turnaround plan is aimed at restoring the Group to sustainable and profitable growth within three years. At the core of our plan is a change in leadership style, operational strategy and culture that will help to reinvigorate the business and enable us to build on our existing market positions.

We have placed our depots and service centres at the heart of DX and have devolved accountability to our general and regional managers, giving them greater authority over, and responsibility for, their operations. This approach underpins our initiatives to improve sales, customer service processes and operations.

The turnaround of the Group’s performance is an incremental process, and we intend to progress steadily and sensibly, with further measures to be implemented in line with our overall plan.

Further details of our turnaround plan can be found in our announcement dated 29 March, 2018.

Principle 2: Seek to understand and meet shareholder expectations

DX places a great deal of importance on communication with all shareholders. There is regular dialogue with individual institutional shareholders throughout the year and formal presentations after the interim and preliminary results. The Chairman, Chief Executive Officer and the Chief Financial Officer are primarily responsible for maintaining dialogue with shareholders, supported by the Company’s broker and financial PR advisers.

The Board encourages dialogue between the Directors and investors and the Directors are available at each AGM to hear the views of all shareholders and to answer any questions about the business generally and about the resolutions proposed.

The principal methods of communication with private investors remain the Annual Report and Accounts, the interim statements and this website. This website is viewed as an efficient and cost-effective way to communicate widely with all shareholders and DX’s financial reports, publications and press releases can be viewed here together with corporate governance information, key dates in the financial year, and news about DX, its services and issues affecting the industry.

The Board also received shareholder feedback from finnCap (DX’s Nominated Adviser and Broker) during the course of the year which is reviewed and incorporated when structuring future announcements and investor presentations.

If you have any investor queries please contact Ronald Series, Chairman, or David Mulligan, CFO, on legalandregulatory@thedx.co.uk

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

Our Corporate Social Responsibility statement can be found here.

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

DX has in place a system of internal financial controls commensurate with its current size and activities.

The Board has overall responsibility for DX’s system of internal control to safeguard the Company’s assets and shareholders’ investments. The risk management process and systems of internal controls are designed to identify the main risks that the Group is exposed to, and ensure that appropriate policies and procedures are in place to minimise these risks to the Group, including the establishment of appropriate business continuity planning arrangements. The Company maintains a risk management register which is reviewed and discussed every six months with the Operating Board and the Chairman of the Audit & Risk Committee.

The Board reviews the effectiveness of the system of internal control each year and will continue to develop and implement internal control procedures appropriate to DX’s activities and scale.

The Board recognises that an essential part of its responsibility is the effective safeguarding of assets, the proper recognition of liabilities and the accurate reporting of results. The Group has a comprehensive system for regular reporting to the Board. This includes monthly management accounts and an annual planning and budgeting system. The financial reporting system compares against budget and prior year, and the Board reviews its financial year forecasts on a monthly basis.

The Board has established a formal policy of authorisation setting out matters which require its approval and certain authorities which are delegated to the Executive Directors.

Principle 5: Maintain the Board as a well-functioning team, led by the chair

The Board is responsible for insuring the highest standards of corporate governance at DX and promoting its longer-term success. The Board currently consists of three executives and three non-executive Directors and each of the Non-Executive Directors is considered independent of management and free of any relationship that could materially interfere with the exercise of their independent judgement.

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. Further detail of the board composition, independence, role, operation and details of its committees are outlined in detail in the Governance Report in the Company's Annual Report and Accounts which can be found here.

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

The biographical details for each member of the Board can be found here. The board has the appropriate blend of skills, capabilities and experience to deal with the challenges faced by the business. Industry knowledge, supported by financial and turnaround experience is particularly important for the Company at this time. The Nomination Committee recommends the appointment of Directors and is responsible for succession planning. Further details of the Nomination Committee's terms of reference can be found here.

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

The QCA code recommends that an assessment of the board's effectiveness is undertaken regularly. A formal assessment by questionnaire of the Board’s effectiveness was undertaken in August 2019, led by Paul Goodson. The results were discussed by the Board in September 2019 with any recommendations to be enacted in the coming months.

The key recommendations from the assessment included: the Chairman to ensure that all Directors are given the opportunity to request items for inclusion on the agenda as appropriate; the Chairman to ensure the meetings are suitably timetabled to allow sufficient time to debate and discuss all matters; Non-executive Directors to meet once a year without the Executive Directors present; the Chairman to ensure the board agenda evolves to include more discussion of strategic issues as the operational and financial turnaround of the business becomes more established; and to increase the use of appropriate KPIs to help focus the Board’s review of operational issues.

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

Critical to delivery of the turnaround plan is ensuring we have the right culture in the business. At the heart of the plan is local responsibility and accountability for the performance of each depot and service centre, and a commitment to deliver the changes to the business to return it to longer term, sustainable profitability. The Board and senior management help to support and reinforce this culture through their own personal behaviour and commitment, by being highly visible in the business, by making timely and informed decisions and by adopting an attitude of continuous improvement.

In addition, it is our policy to conduct all of our business in an honest and ethical manner. We take a zero-tolerance approach to bribery and corruption and are committed to acting professionally, fairly and with integrity in all our business dealings and relationships. We have a clear Anti-Corruption and Bribery Policy to provide information and guidance to colleagues, individuals and companies working with or for us to ensure the highest standards of behaviour.

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

The Board has delegated certain responsibilities to the Nomination Committee, the Audit & Risk Committee and the Remuneration Committee. Each Committee operates according to its own terms of reference. These terms of reference also include matters reserved for the board.

The Audit & Risk Committee has primary responsibility for monitoring the quality of internal controls, ensuring that the financial performance of DX is properly measured, ensuring the integrity of the financial statements, and reporting and reviewing reports from DX’s auditor relating to DX accounting and internal controls, in all cases having due regard to the interests of shareholders. The Remuneration Committee determines remuneration for the Executive Directors and senior managers in the Group. The Nomination Committee recommends the appointment of Directors and is responsible for succession planning. Further information on each Committee is set out below under the heading "Board Committees".

Board Roles and Responsibilities

The roles of the Executive Chairman and Chief Executive Officer are separate with each having clearly defined duties and responsibilities.

The Executive Chairman provides leadership to the Board. He is responsible for chairing the Board meetings and for setting the agenda for the Board meetings (in consultation with the Chief Executive Officer) and ensuring that the Board has sufficient time to discuss issues on the agenda, especially those relating to strategy. The Executive Chairman is also responsible for ensuring that the Directors receive all of the necessary information and reports. He is also responsible for ensuring the market and regulators are kept appraised in a timely manner of any material events and developments, and along with the Chief Executive Officer that the appropriate standards of corporate governance are effectively communicated and adhered to throughout the business.

The Chief Executive Officer is responsible for leadership of the DX management and its employees on a day-to-day basis. In conjunction with the Operating Board, the Chief Executive Officer is responsible for the execution of the turnaround strategy approved by the Board in March 2018 and the implementation of Board decisions.

As a result of senior management changes in the year, David Mulligan is currently Company Secretary as well as Chief Financial Officer. An individual has been identified to take on David’s company secretarial responsibilities and is undertaking the necessary training to take on this role. It is the Board’s intention to make this change during the coming year.

Board Committees

Audit & Risk Committee

Ian Gray is the Chairman of the Audit & Risk Committee, and has primary responsibility for monitoring the quality of internal controls, ensuring that the financial performance of DX is properly measured and reported on, and reviewing reports from DX's auditors relating to DX accounting and internal controls, in all cases having due regard to the interests of Shareholders. The Audit & Risk Committee will meet at least twice a year. Paul Goodson is the other member of the Audit & Risk Committee.

Nomination Committee

Ron Series is the Chairman of the Nomination Committee, and will identify and nominate candidates for the approval of the Board to fill Board vacancies as and when they arise. The Nomination Committee will meet at least once a year. Russell Black is the other member of the Nomination Committee.

Remuneration Committee

Paul Goodson is the Chairman of the Remuneration Committee, and will review the performance of the executive Directors and determine their terms and conditions of service, including their remuneration and the grant of options, having due regard to the interests of Shareholders. The Remuneration Committee will meet at least once a year. Russell Black is the other member of the Remuneration Committee.

No member of the Audit, Nomination and Remuneration Committees has any potential conflicts of interest between any of their duties to the Company and their private interests and/or other duties.

The total amount set aside or accrued by the Company to provide pension, retirement or similar benefits to the members of the Audit, Nomination and Remuneration Committees is nil.

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

The work of each board committee undertaken during the course of the year can be found in the Governance Report in the Company's Annual Report and Accounts, which can be found here.

Outcomes of shareholder votes are announced and can be found under our Regulatory News feed. The result of the shareholder vote of our most recent general meeting can be found here.

Notices of all general meetings for the past five years can be found here.