## Synthomer plc ## Annual Report 2021 ## Our products Packaging andtapes ## areallaround you. ## On your walls. ## In your car. ## Under your carpet and floor tiles – ## or wrapped around yourlunch. Decorative paints and ## They’re in the wires and cables that connect you to coatings ## theworld, in the clinics and hospitals that keep us all ## healthy, and in the factories, construction sites and ## officesthat drive our economy. ## And if you’re holding a printed copy of this report, ## theycould even be in your hands. ## Our teams of experts make many of the high-performance, ## highly specialised chemical products that bind themodern ## world together, using water-based solutions that eliminate ## carbon emissions. We serve customers in a huge range of ## markets, whose own end-products are a vital part of all our ## daily lives. And we’re growing fast, by fulfilling our purpose: ## creating innovative and sustainable polymer solutions for ## the benefit of customers and society. Strategic report Corporate governance Financial statements | Who we are and what we do Review of the year Business foundations | | | | Governance | | Group financial statements | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 84 Our Board of Directors | | 131 Independent auditors’ report | | | Our high-performance, differentiated | Our six-pillar strategy for organic | Synthomer and sustainability | Risk | 88 Our Executive Committee | | 137 Consolidated income statement | | | and highly specialised products, and | and inorganic growth has driven | Our Vision 2030 sustainability | Understanding and managing risk | 90 Introduction to corporate governance | | 138 Consolidated statement | | | | | | | 94 The Board’s year | | | ofcomprehensive income | | our leadership in sustainable water- | outstanding performance across | roadmap underpins our strategy. | enables the delivery of our strategy. | | | | | | | | | | 96 Stakeholder engagement | | 138 Consolidated statement | | | based polymer solutions, are at the | the Group. Record Group EBITDA | It harnesses our leadership in | Our risk management framework | | | | | | | | | | | (s.172compliance) | | ofchangesinequity | | heart of our strategy of driving | was underpinned by EBITDA | water-based polymer solutions | hascontinued to evolve in FY2021. | | | | | | | | | | 98 Audit Committee report | | 139 Consolidated balance sheet | | | long-term sustainable growth. | growth in all our business divisions | toset out our pathway to net zero, | | 106 Nomination Committee report | | 140 Consolidated cash flow statement | | | | in FY2021. | and is built on the foundation of | | 109 Compliance with the Code | | 140 Reconciliation of net cash flow from | | operating activities to movement in ### ourcommitment to Safety, Health Directors’ Remuneration report net debt ### and Environment (SHE), one of our 112 Remuneration Committee: 141 Notes to the consolidated ### core values. introduction from the Chair financialstatements 114 At a glance 116 Annual report on remuneration 02 Synthomer at a glance 20 – CFO’s introduction to 42 A sustainable agenda for 69 Risk report Company financial statements 127 Directors’ report 04 Our business model theFinancialreview agrowingbusiness 77 Task Force on Climate-related Financial 174 Company statement of financial 129 Statement of Directors’ 06 What we make – and who we 22 – Financial review 44 Our approach to sustainability Disclosures (TCFD) report position responsibilities | | makeitfor | | | 81 Viability statement | 175 Company statement of changes | | | --- | --- | --- | --- | --- | --- | --- | | | | Divisional reviews | 48 Products | | | | | 08 Chair’s statement | | | | 82 Non-financial disclosures and s.172 | | inequity | | | | 26 – Performance Elastomers | 48 – Innovating sustainable products | | | | | 10 Chief Executive Officer’s review | | | | | 176 Notes to the Company | | | | | 30 – Functional Solutions | 51 – Sustainable procurement | | | | | 14 Our new platform for growth: | | | | | | financialstatements | 34 – Industrial Specialities Ourplanned Adhesive 54 Operations 37 – Acrylate Monomers | | Technologiesdivision | | 55 – Health and safety | Other information | | --- | --- | --- | --- | --- | | 15 Synthomer strategy | | 38 Innovation | 58 – Environment | 182 Environmental performance summary | | 16 Our progress – KPIs | | | | 184 Global Reporting Initiative (GRI) | 62 People content index 63 – Our employees 186 Glossary of terms 67 – Our communities 187 Historical financial summary 188 Advisers Decorative laminates including luxury vinyltiles Mortar and other Non-woven construction nappies products Strategic report Governance Group financial statements Company financial statements Other information High-performance Paper and industrial paints filmiclabels ## Our specialised, ## emissions-reducing ## formulations help ## customers make Nitrile ## thousands of products medical Oil and gas gloves drilling products ## that bind the modern ## world together. Technical textiles Artificial turf including glass fibre eaves Carpets and foam Strategic report Corporate governance Financial statements | Who we are and what we do Review of the year Business foundations | | | | Governance | | Group financial statements | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 84 Our Board of Directors | | 131 Independent auditors’ report | | | Our high-performance, differentiated | Our six-pillar strategy for organic | Synthomer and sustainability | Risk | 88 Our Executive Committee | | 137 Consolidated income statement | | | and highly specialised products, and | and inorganic growth has driven | Our Vision 2030 sustainability | Understanding and managing risk | 90 Introduction to corporate governance | | 138 Consolidated statement | | | | | | | 94 The Board’s year | | | ofcomprehensive income | | our leadership in sustainable water- | outstanding performance across | roadmap underpins our strategy. | enables the delivery of our strategy. | | | | | | | | | | 96 Stakeholder engagement | | 138 Consolidated statement | | | based polymer solutions, are at the | the Group. Record Group EBITDA | It harnesses our leadership in | Our risk management framework | | | | | | | | | | | (s.172compliance) | | ofchangesinequity | | heart of our strategy of driving | was underpinned by EBITDA | water-based polymer solutions | hascontinued to evolve in FY2021. | | | | | | | | | | 98 Audit Committee report | | 139 Consolidated balance sheet | | | long-term sustainable growth. | growth in all our business divisions | toset out our pathway to net zero, | | 106 Nomination Committee report | | 140 Consolidated cash flow statement | | | | in FY2021. | and is built on the foundation of | | 109 Compliance with the Code | | 140 Reconciliation of net cash flow from | | operating activities to movement in ### ourcommitment to Safety, Health Directors’ Remuneration report net debt ### and Environment (SHE), one of our 112 Remuneration Committee: 141 Notes to the consolidated ### core values. introduction from the Chair financialstatements 114 At a glance 116 Annual report on remuneration 02 Synthomer at a glance 20 – CFO’s introduction to 42 A sustainable agenda for 69 Risk report Company financial statements 127 Directors’ report 04 Our business model theFinancialreview agrowingbusiness 77 Task Force on Climate-related Financial 174 Company statement of financial 129 Statement of Directors’ 06 What we make – and who we 22 – Financial review 44 Our approach to sustainability Disclosures (TCFD) report position responsibilities | | makeitfor | | | 81 Viability statement | 175 Company statement of changes | | | --- | --- | --- | --- | --- | --- | --- | | | | Divisional reviews | 48 Products | | | | | 08 Chair’s statement | | | | 82 Non-financial disclosures and s.172 | | inequity | | | | 26 – Performance Elastomers | 48 – Innovating sustainable products | | | | | 10 Chief Executive Officer’s review | | | | | 176 Notes to the Company | | | | | 30 – Functional Solutions | 51 – Sustainable procurement | | | | | 14 Our new platform for growth: | | | | | | financialstatements | 34 – Industrial Specialities Ourplanned Adhesive 54 Operations 37 – Acrylate Monomers | | Technologiesdivision | | 55 – Health and safety | Other information | | --- | --- | --- | --- | --- | | 15 Synthomer strategy | | 38 Innovation | 58 – Environment | 182 Environmental performance summary | | 16 Our progress – KPIs | | | | 184 Global Reporting Initiative (GRI) | 62 People content index 63 – Our employees 186 Glossary of terms 67 – Our communities 187 Historical financial summary 188 Advisers Synthomer plc ## Annual Report 2021 01 Who we are and what we do ## Synthomer at a glance ## We make high-performance, highly specialised ## chemical products to serve customers all over ## the world, and we’re aleadre a leading supplier of ## sustainable water-based polymer solutions ## which help eliminate harmful emissions. ## Through our differentiated portfolio, our ## widecustomer base, and our track record of ## outstanding innovation, we’re delivering on ## ourstrategy: drivinglong-termsustainable ## growthorganically andthrough acquisitions. | 021 | 021 £2.3 | | --- | --- | | 020 | 020 | | 019 | 019 | | 018 | 018 | | 021 £522.2 | | 021 | | --- | --- | --- | | 020 £259.4 | | 020 | | 019 | £177.9 | 019 | | 018 | £181.0 | 018 | | 021 £420.1 | | 021 £283.9 | | | --- | --- | --- | --- | | 020 £160.0 | | 020 £20.3 | | | 019 | £116.2 | 019 | £100.5 | | 018 | £135.1 | 018 | £120.3 | | 021 | | 021 | | | --- | --- | --- | --- | | 020 28.9 | | 020 0.7 | | | 019 | 25.3 | 019 | 21.5 | | 018 | 30.7 | 018 | 27.4 | | | 28.7 | | 20.3 | | 2021 Highlights | 021 £217.6 | | 021 | | --- | --- | --- | --- | | | 020 £167.6 | | 020 | | | 019 | £92.8 | 019 | | | 018 | £27.8 | 018 | * per 100,000 hours for employees and contractors Underlying performance statement The Group’s performance management uses Underlying performance to plan for, control and assess the performance of the Group. Underlying performance differsfrom the statutory IFRS performance as it excludes the effect of Special Items, which are detailed in note 4 to the financial statements. The Board’s view is that Underlying performance provides additional clarity for the Group’s investors and stakeholders and so it is the primary focus of the Group’s narrative reporting. Where appropriate, IFRS performance inclusive of Special Items is also described. References to ‘unit margin’ and ‘margin’ are used in the commentary on Underlying performance. Unit margin (or margin) is calculated on selling price less variable raw material and logistics costs. EBITDA is calculated as operating profit before depreciation, amortisation and Special Items. Free Cash Flow is the movement in net debt before financing activities, foreign exchange and the cash impact of Special Items, asset disposals and business combinations. * Underlying PBT EBITDA Free Cash Flow IFRS PBT Revenue Recordable accident case rate Sales volume from new products Volume IFRS EPS Underlying EPS ## 2 2 2 2 2 2 2 2 2 2 1,671.5ktes 48.3p 75.2p 24% 0.31 bn m m m m Synthomer plc | 2 2 2 2 2 2 2 2 2 2 | | | 1,638.2ktes | £1.6bn 0.36 22% | m m m m p p | | --- | --- | --- | --- | --- | --- | | | 02 | Annual Report 2021 | | | | | 2 2 2 2 2 2 2 2 2 2 | | | 1,465.7ktes | £1.4bn 0.20 22% | m m m m p p | | 2 2 2 2 2 2 2 2 2 2 | | | 1,517.6ktes | £1.6bn 0.23 21% | m m m m p p | | 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 | | | 1,443.8ktes | £130.0m £176.2m £81.5m £86.4m £1.4bn 0.13 20% | p p | Strategic report Governance Group financial statements Company financial statements Other information ## Our four divisions: ## Our global reach ## Performance Elastomers Delivering water-based Nitrile Butadiene Rubber latex (NBR) and Styrene Butadiene Rubber latex (SBR) products. A L K ## Functional Solutions Delivering acrylic and vinylic water-based J dispersions. ## Industrial Specialities Delivering speciality chemical additives and non-water-based chemistry for a broad range ### EMEA of applications as well as laminates & films. I ## Acrylate Monomers H Supplying acrylic monomers to our European Functional Solutions Division and to third- B party customers. ## G North America Share of revenue ## Asia byendmarket A 23.2% Health & Protection B 11.6% Carpet, Compounds & Foam C 6.3% Paper & Packaging D 14.3% Coatings F E 8.4% Construction C F 7.6% Technical Textiles G 6.1% Adhesives H 2.0% Oil & Gas I 8.5% Polymer Additives D J 6.3% Laminates & Films E K 1.7% Coated Fabrics L 4.0% Acrylate Monomers | £2.3bn | 4,600+ | 37 | | --- | --- | --- | | revenue | employees | production sites | | 2020: £1.6bn | 2020: 4,200+ | 2020: 38 | ## 6,000+ 12 34% ## customers principal end markets reduction in Scope 1 and 2 ### GHG emissions since 2019 | Successfully integrated | Launched our Vision | Announced proposed | | --- | --- | --- | | our OMNOVA acquisition | 2030 roadmap to a more | $1billion acquisition | | ahead of schedule | sustainable future | toform our Adhesive | ## Technologies division See page 21 See page 18 See page 14 Synthomer plc ## Annual Report 2021 03 Who we are and what we do ## Our business model ## Innovation, sustainability and customer service ## areat the heart of our business model, which ## draws on our unique teams and assets to deliver ## high-performance speciality chemical products ## and create value for all our stakeholders. ### Global demand... ### …for serving ### diverse global ### markets… ### …shapes our ### strategy… …through ### four divisions ### across three ### continents… ## …for lower- Over 6,000 ## carbon, more customers in: ### To drive long-term ## circular products • Health & Protection ### sustainable growth • Carpet, Compounds & Foam • Paper & Packaging ## organically and Performance ## …for construction • Coatings ### through acquisitions ## • Construction Elastomers ## and urbanisation ### through six priorities: • Technical Textiles ## • Adhesives Functional ## …for health and • Research and development • Oil & Gas ## and technical expertise to Solutions • Polymer Additives ## hygiene products exploit new consumer markets • Laminates & Films ## Industrial • Driving efficiency and • Coated Fabrics ## …for adhesives Specialities excellence through operations • Acrylate Monomers ## and packaging ## • Capacity utilisation Acrylate • Investment in capacity ## Monomers ### …by making …and create • Bolt-on acquisitions ### specialist, high- value for all • Transformational transactions ### performance stakeholders. ### products… Strong relationships with customers in highly Focus on consumer ### differentiated markets …and fulfilling Growing ### end-usedemand …that add value international breadth ### Global technical our purpose… ### Understanding the and reach, with for customers… servicesteams Entrepreneurial macrotrends increasingly balanced people and culture, sales across Americas, underpinned by our values EMEA and Asia Integrated risk strategy and risk management processes Focus on execution, Track record of integrating efficiency, and acquisitions business excellence Strong relationships with raw materials’ suppliers and a resilient supply chain Synthomer plc ## 04 Annual Report 2021 Strategic report Governance Group financial statements Company financial statements Other information ### …by making …and create ### specialist, high- value for all ### performance stakeholders. ### products… ### …and fulfilling ### …that add value ### our purpose… ### for customers… ## Over 14 product lines £522.2m 2020: £259.4m ### including: EBITDA • Water-based Nitrile latex and Performance Materials products ## 4,632 for thehealthcare, carpet, foam 2020: 4,601 employees and paper markets. Employees in 24 countries ### Responding to • Acrylic and vinylic water-based ## dispersions for the coatings, consumer needs £243.7m ## ...creating construction, technical textiles, 2020: £211.3m ### inthousands adhesives and oil&gasmarkets. payroll ## innovative and ### ofapplications • Speciality chemical ## sustainable £28.9m ### additivesand non-water- Outstanding global 2020: £25.8m ## polymer solutions basedchemistry for a ### and divisional R&D spend broadrangeofapplications ## for the benefit ### frompolymer additives innovation ## 43% ## of customers andpolymermanufacture of new products with | | toemergingmaterials. | Focusing on product | | | --- | --- | --- | --- | | and society | | | sustainability benefits | | | • Acrylate monomers that | sustainability benefits | | | | improve the performance | | £1.6bn | | | characteristics of polymer | | 2020: £1.2bn | | | formulations including | | spend with suppliers | latexandsolution copolymersand cross- ## £73.5m Global linkablepolymersystems. 2020: £12.8m Formulations leadership returned to shareholders designed foruse inwater-based incustomer- polymersolutions ## £86.4m specificproducts to meet Vision 2030, 2020: £31.4m consumer needs ourESGroadmap corporate tax paid Close technical services partnerships with customers Our to advise on applications, values sustainability and Highly Safety, health and end-use differentiatedportfolio environment Accessibility Improved products with Integrity improved margins Teamwork Innovation ### Global demand... ### …for serving ### diverse global ### markets… ### …shapes our ### strategy… …through ### four divisions ### across three ### continents… Synthomer plc ## Annual Report 2021 05 Who we are and what we do ## What we make – and who we make it for ## Differentiation. Specialisation. Sustainability. ## And high performance. We’re able to lead the way ## in water-based polymers because of the breadth ## and diversity of the end markets we serve, our ## strong relationships with more than 6,000 ## customers, and our commitment to innovate and ## deliver the high-performing products they need. ## We draw on our unique business strengths... ### Global leadership in ### water-based polymers ### which eliminate the need ### for the volatile organic ### compounds in solvent- ### based products ### Cutting-edge ### Powerful connections ### innovation focused on ### tocustomers through ### consumer needs including ### ourtechnical service and ### specialisation and ### research teams ### sustainability ### Worldwide reach ### through innovation ### andmanufacturing sites ### inAsia, EMEA and ### NorthAmerica Synthomer plc ## 06 Annual Report 2021 ### ...to serve over 6,000 customers ...by making speciality products ### in diverse, strategic end markets: used in thousands of applications ### that consumers use every day: Strategic report Governance Group financial statements Company financial statements Other information Health & We are a world leader in Acrylonitrile Butadiene Rubber (NBR • Medical and examination gloves Protection latex) for glove-dipping and associated healthcare industries. • Industrial and fabric-supported gloves 23.2% of revenue Gloves made from our speciality NBR latex ensure a combination • Medical devices and balloons of high tensile strength, good elongation and relaxation. | Carpet, | Our specialist High-Solid Styrene Butadiene (HS-SBR), Styrene | • Carpet | • Automotive carpets | | --- | --- | --- | --- | | Compounds & | Acrylic (SA) and SBR-compounded products provide high- | • Tufted carpets | • Gel foam elastomer | | Foam | performance binders for the backing of carpet and artificial turf, | • Woven carpets | backings | | 11.6% of revenue | and as gel foam elastomers for floor coverings, footwear and | • Needle felt carpets | • Bedding foam | | | mattresses. | | • Footwear foam | | Paper & | We are Europe’s largest manufacturer of SBR and SA high- | • Graphic paper | | | Packaging | performance binders for graphic, packaging and speciality paper | • Packaging | | | 6.3% of revenue | coatings. Our products help customers meet stringent regulatory | • Speciality paper | | | | requirements and comply with rules on food contact. | • Paper additives | | | Coatings | We develop speciality binders to meet the performance | • Architectural coatings | | --- | --- | --- | | 14.3% of revenue | andregulatory requirements of the architectural and | • Masonry coatings | | | industrialcoatings market, using acrylic and vinylic copolymer | • Intumescent coatings | | | dispersions that are low Volatile Organic Compounds (VOCs), | • Metal coatings | low odour and alkylphenol ethoxylate (APEO) free. | Construction | Our dry and liquid specialist polymers provide binding or | • Mortar modification | • Sport surfaces | | --- | --- | --- | --- | | 8.4% of revenue | bonding properties for many construction applications, | • Waterproofing | • Additives for | | | including mortar modification, liquid-applied waterproofing | • Flooring adhesives | construction | membranes, ceramic tile adhesives, and flooring adhesives. | Technical Textiles | Our products are used in a broad range of woven and | • Glass fibre | • Technical fibre | | --- | --- | --- | --- | | 7.6% of revenue | non-woven applications, including to bind mesh insulation | • Roofing | • Footwear | | | systems intechnical textiles, to provide the binder in distribution | • Decorative laminates | • Hygiene and wipes | layers innon-woven nappies, and in decorative laminates. | Adhesives | Our specialist polymers bond dispersions and bind industrial | • PSA packaging tapes | • Packaging | | --- | --- | --- | --- | | 6.1% of revenue | and consumer adhesives, meeting our customers’ stringent | • PSA speciality tapes | specialities | | | technical and regulatory requirements. | • PSA labels | • Release coatings | | | | • Caulks and sealants | • Tape saturants | Oil & Gas We are a global leader in speciality polymeric solutions that • Oil and gas cementing 2.0% of revenue promote wellbore stability and drilling efficiency in the most • Drilling fluid additives challenging high-temperature, high-pressure and high- differential pressure operating environments. | Polymer | We make a broad range of specialist polymer solutions, | • Elastomeric modifier for | | • Tyre cord | | --- | --- | --- | --- | --- | | Additives | including suspending agents for PVC manufacture, | thermoplastics and friction | | | | 8.5% of revenue | thermosetting polyester resins for powder coatings, | • Reinforcing resins for rubber | | | | | andthermal stabilisers in polyamide engineering plastics. | compounds | | | | Laminates & | We produce decorative laminates for residential | • Luxury flooring | • Durable surfaces for | | | Films | andcommercial interiors and recreational vehicles, | • Bathroom fittings | | retail and domestic | | 6.3% of revenue | andperformance films for luxury flooring, signage | • Kitchen fittings | | applications | | | andindustrial applications. | • Recreational vehicle fittings | | | Coated Fabrics We manufacture high-performance polyurethane and vinyl coated • Automotive and bus seating 1.7% of revenue fabrics used in seating and trims in cars, buses, boats and ships, • Marine seating and trim and in healthcare, hospitality, education and corporate offices. • Healthcare, hospitality, education Our range includes our industry-leading PreFixx protective finish. and corporate seating | Acrylate | We make acrylic acid and acrylate monomers which improve | • Compounds and curing pastes | | --- | --- | --- | | Monomers | the performance characteristics of thousands of polymer | • Monomers | | 4.0% of revenue | formulations including latex and solution copolymers and | • Antioxidants | cross-linkable polymer systems. Synthomer plc ## Annual Report 2021 07 Who we are and what we do ## Chair’s statement ## Our people have risen to the unique demands ## and delivered exceptional performance in 2021– ## the Board expected and planned for this, ## andithas allowed us to carefully invest for ## future growth, maintaining prudent leverage. ## ‘In 2021, the Board ## focused on the ## significant demands of ## the business as well as ## succession planning, ## business excellence ## anddelivering on the ## OMNOVA acquisition. ## The acquisition of ## Eastman’s Adhesive ## Resins business was a ## strategic and important ## step and we thank ## shareholders for their ## support.’ ### Caroline Johnstone Chair ### Exceptional performance, ### builton robust foundations Our business ended the year with record results, and with the foundations in place forgrowth that will enable us to create value intothe future. This was made possible by twothings: further delivering our consistent strategy of long-term sustainable growth organically and through acquisitions, including the $1 billion acquisition of Eastman’s Adhesive Resins business which is expected to complete in March 2022; and the resilience and skill of our employees, who have continued to put our values into practice despite the ongoing challenges of the Synthomer plc ## 08 Annual Report 2021 | COVID-19 pandemic. I would like to thank | commercial teams. The results also show that | and will be regularly revisiting and challenging | Strategic report Governance Group financial statements Company financial statements Other information | | --- | --- | --- | --- | | them all personally, and also on behalf of the | the integration ofOMNOVA – Synthomer’s | the targets, and where we can be bolder | | | Board. The safety of employees is our first | largest acquisition at the time – is complete, | andgo faster, in a balanced way. | | | priority and the Board oversaw progress | well ahead of schedule and is delivering | | | At the same time, we know that launching towards achieving top quartile performance higher synergies than originally announced. Vision 2030 is not an end in itself. We have more across all our sites during 2021. The synergies outlined have all been realised, to do in many areas – including one particularly despite the COVID-19 pandemic making it A smooth leadership transition, close to my heart, which is making our culture difficult for new teams to meet in person. andaconsistent strategy more diverse, inclusive, and supportive of the This is a tribute to everyone involved, In June, we announced the appointment of employees who drive our success, with further especially colleagues who have joined Michael Willome as our new Group Chief equality of career development opportunities. Synthomer from OMNOVA, the teams who Executive Officer, after Calum MacLean We have made progress in many areas – and made the transaction in the first place, and announced hisintention to step down at the there is a clear appetite from everyone inthe the management and finance teams start of the year. business to enhance our ability to plan and whooversaw the integration process. develop people’s careers to ensure I was delighted to welcome Michael in My second point is really a question. What is the theirengagement and success, and our November, following an extensive search purpose of growth? Synthomer does not seek business growth. process which identified him as a high- growth for its own sake. Of course, we want to calibre, proven business leader with Like every other aspect of our strategy, keep creating value for shareholders. But we experience in the global speciality chemicals Vision2030 must be underpinned by sound also want to embed sustainability intoevery industry and a strong track record of driving governance – and I talk more about this in my aspect of the business, to help Synthomer growth (see page 84 for details). The smooth introduction to the Governance report, on play a greater role in creating afairer, more transition since his appointment has page 90, where I also thank Dr Just Jansz for sustainable future and respond to the climate confirmed that Michael has the right his valued service to the Board, and welcome emergency. Growth, with the scale it brings, capabilities to lead Synthomer through the Roberto Gualdoni, who joined Synthomer as makes us more resilient. It enables us to invest next phase of its development. He has an Independent Non-Executive Director in in our people, our infrastructure, and our assets, already demonstrated his appetite fororganic July. and means we are better able to deliver on our and inorganic growth, a passion for building purpose of creating innovative and sustainable Dividend of 21.3 pence our teams and developing our people, and an polymer solutions for the benefit of customers The Board has recommended a final ordinary instinctive understanding of the importance of and society. That is why the Board spent a lot dividend of 21.3 pence (2020: 8.6 pence) per sustainability to our future. | | of time on another highlight of Synthomer’s | share, consistent with our dividend policy, this | | --- | --- | --- | | This seamless handover was due in no small | year – the launch of our Vision 2030 roadmap | exceptional increase reflecting the unique | | part to Calum, and on behalf of the Board | toamore sustainable business. | year of profitability. | Iwould like to thank him for his outstanding Regulatory fine Caroline Johnstone leadership over the past seven years. I extend During 2018, the European Commission (the Chair the same thanks to Stephen Bennett, our Commission) initiated an investigation into Chief Financial Officer, who in August 3 March 2022 practices relating to the purchase of styrene announced his intention to stand down. monomer by several companies, including As we discuss on page 107, we look forward Synthomer, operating in the European towelcoming Lily Liu this summer. Economic Area. The Company has and will | Calum and Stephen have helpedtransform | continue to fully co-operate with the | | --- | --- | | Synthomer into a diversified, differentiated, | Commission during its investigation. Based on | | global speciality chemicals business, and the | the information available and the resulting | | benefits can be clearly seen in the Company’s | assessment of the expected outcome of the | | performance. They have built a strong | investigation a provision of £57.2 million has | | platform for continued success, and leave | been made in relation to this case. | behind ahighlyexperienced leadership team. ## A more diverse, inclusive Synthomer, Looking ahead/ We wish them both the very best. underpinned by sound governance ## priorities for 2022 Growth that supports our purpose The full details of our Vision 2030 roadmap One of the most exciting developments of – which includes our commitment to net zero • Oversee the completion of our theyear was October’s announcement of our as well as expanding on Synthomer’s acquisition of Eastman’s Adhesive proposed acquisition of Eastman’s Adhesive longstanding work on safety, health and Resins to create our new Adhesive Resins, which will bring clear benefits, as environment (SHE) – canbe found in our Technologies division discussed on page 14. It is a great example Sustainability report on pages 42 to 68. • Ensure that Adhesive Technologies is ofSynthomer’s growth strategy in action, We have, for the first time, fully integrated this effectively integrated into Synthomer, andI’dlike to comment on two points. into our Annual Report so thatstakeholders and synergies are being captured can understand how sustainability is • Continue to focus on nitriles capacity First, the Company’s ability to deliver inextricably linked to our financial expansion and investment growth.The year’s results show that performance. • Oversee our leadership team transition acrossthe business, our teams have and succession planning workedsuperbly tocreate organic growth – Along with the rest of the Board, I • Further drive our Vision 2030 through innovation, capacity utilisation, anda wholeheartedly endorse Vision 2030. sustainability agenda and oversee continuous focus on meeting strong customer It isahuge step forward, strengthening progress on Task Force on Climate- demand. This was despite the challenges thebusiness and helping Synthomer meet related Financial Disclosures (TCFD) presented bydisruptions in the global supply therising expectations ofstakeholders over • Continue to engage with investors and chain, which were navigated withgreat skill the next decade. The Board has been fully all stakeholders by our procurement, operations,and involved in the development of Vision 2030 Synthomer plc ## Annual Report 2021 09 Who we are and what we do ## Chief Executive ## Officer’s review ## Exceptional results, built on a platform ## ofunderlying growth – and with great ## opportunities ahead. ## ‘When I look beyond the ## most obvious figures, ## Isee a more important ## narrative. That’s a story ## of consistent growth ## built on the core assets ## of this business.’ ### Michael Willome Chief Executive Officer Synthomer plc ## 10 Annual Report 2021 Building on an outstanding year sustainable products perform a vital role in The most significant strategic event in Strategic report Governance Group financial statements Company financial statements Other information people’s lives – and our strategy of investing 2021was our acquisition of the Eastman’s ### to consistently deliver growth in organic and inorganic growth in attractive Adhesive Resins business, which on ### and value end markets has consistently created value completion will create our new Adhesive Synthomer has delivered record results for all our stakeholders over several years, Technologies division. thisyear. But in a way, those results don’t and given usa platform to continue to deliver tellthe full story of our Company. When I look This is a highly complementary opportunity in the years ahead. | beyond the most obvious figures, I see a more | | with a strong focus on attractive end markets | | --- | --- | --- | | important narrative. That’s a story of consistent | Excellent EBITDA performance in all | such as packaging, hygiene, building and | | growth built on the core assets of this business. | divisions, creating a platform for the future | construction, and high-performance tyre | | Today Synthomer enjoys leadership positions | All our divisions have achieved record EBITDA | additives. It will enable us to further develop, | | ina wide range of attractive, global markets, | growth in 2021 as described in our divisional | manufacture and sell tackifying resins and | | based on a broad portfolio of differentiated | reports on pages 26 to 37. The strongest growth | additives for adhesive products and, | | speciality products. We have proven expertise | came from Performance Elastomers, which | aswedescribe on page 14, it will expand | | in acquiring and integrating new businesses. | grew EBITDA by 136.9%, mainly as aresult of | ourportfolio and our geographical reach, | | | the unprecedented, and one-off, demand for | especially in the US, one of our focus markets. | Furthermore, our powerful sustainability Nitrile latex caused by the COVID-19 pandemic credentials, including our leadership in People and teams making the difference in 2020 and 2021 – though other areas of the water-based polymers in our dispersions Everything we have achieved this year is division also grew their profitability. At the same business and our sustainability innovations in theresult of the agility, dedication and time, Functional Solutions grew by 49.8%, areas such as Nitrile latex for medical gloves, commitment of Synthomer people, all over and Industrial Specialities by 18.9%. or lower carbon footprint products in our the world. Acrylate Monomers has returned to profitability Functional Solutions division mean that we with £35.3 million EBITDA. Overall, Group It is one thing to invest in attractive markets are well positioned in this vitally important EBITDA grew by 109.8% to £522.2 million and technologies, as the business has done area. Our platform for future growth is strong. | | andresulted in an EBITDA margin of 22.4% | consistently over the years – but that does not | | --- | --- | --- | | The exciting thing for me is that there is more | ofnet sales (2020: 15.8%). | produce strong performance on its own. | | we can do in all these areas. The unique | | That isdown to people going the extra distance, | This outstanding performance meant we conditions of the past two years, and time and again, despite challenges such further strengthened our balance sheet. particularly those affecting our Performance asthe COVID-19 pandemic, or significant raw We successfully deleveraged to 0.3x EBITDA, Elastomers division, may not come back for a material and energy price increases, or supply through strong Free Cash Flow and the equity long time –but our underlying position means chain disruption, or unprecedented demand. placing, creating the conditions to pursue we will have the opportunity to strengthen our further inorganic and organic growth business further in the future. Our innovative, opportunities, and add further value. ### Robust investment case in line with global megatrends ### Globally Growing ### Strong organic Sustainable and ### differentiated proportion of Resilient Attractive ### and inorganic responsible ### chemical speciality demand financial metrics ### growth drivers operator ### company chemicals ### Accelerating Demographic and Climate change and Shifting economic ### urbanisation social change sustainability power Synthomer plc ## Annual Report 2021 11 Who we are and what we do ## Chief Executive Officer’s review continued I have met outstanding people and teams everywhere I have been – and I look forward toworking with them on future opportunities based on the success achieved so far. As a speciality chemicals player with 37 production sites worldwide, our first priority isto continue our journey towards becoming a top quartile work environment in terms of personal and process safety. We are on the right track, but we still have further to go toensure that our safety performance is consistent across the business, site by site. Safety remains both a core value and a strategic priority for Synthomer, and we discuss our performance in detail on pages54 to 57. I would also like to mention another priority,‘people development’. We will spendsignificant time and effort on this area,creating an excellent environment forallstages of people’s professional life, startingwith our well-established and highlysuccessful graduate programme, ourtalent development initiative for more experienced employees, and senior leadership development. Our aim is to createa culture which fosters trust, open andfast communication between people, unitsand regions, and strong performance forour customers. I would also highlight our need for more diversity of all kinds in our Company. As recent nominations to our Executive TM ## SyNovus Plus – sustainable innovation in action Committee show, we have already made firststeps on a journey that clearly builds TM Our specialised SyNovus nitrile products, and hygiene (all gloves used for medical value for the business, and we will continue widely used in latex glove manufacture, have applications have to be incinerated). itin 2022 and beyond. played an important part this year in the TM The way we make SyNovus Plus also Maintaining our strategic focus success of our Performance Elastomers enables our customers to reduce the Once again, our results demonstrate how division – and of Synthomer overall. carbon footprint of their gloves. Our Life critical it is to have leadership positions in our In 2021, teams at our Asia Innovation Cycle Assessment has demonstrated that markets. They have also shown how valuable Centrein Malaysia worked on making customers need less nitrile latex and can be it is to have a growing global footprint, which TM theSyNovus range even more attractive more energy efficient in their manufacturing is why we continue to address opportunities TM toourcustomers – and more sustainable because SyNovus Plus can be used in inthe US, South East Asia and China, as well –through developments in content and alow-energy cure process. as Europe. TM manufacture. They created SyNovus And by eliminating the use of rubber Above all, we need to make sure we are Plus,a new nitrile product that we will accelerators, which can leave residues always ‘market-orientated’ – which means launch in2022. thatcause reactions to people with latex always thinking about the end consumers TM High-performing. Recyclable. And with allergies, gloves made with SyNovus Plus who will ultimately benefit from our products. a lower carbon footprint. can be used by more professionals and What do they need from the buildings theylive TM SyNovus Plus provides the same consumers in our customers’ markets. or work in, or the surface coatings solutions high-performance barrier protection as TM we all need in daily life, or the health and We believe SyNovus Plus has the potential conventional nitrile latex, but has several hygiene products that serve them, or the to transform our approach to NBR latex critical differences – including the potential functional textiles, and automotive products – and shows that sustainable innovation TM for gloves made using SyNovus Plus to be thatsurround them? canbe good for customers, consumers, recycled into other products after they are and our business. We make specialised chemical products for worn for applications such as food handling our customers, who sell them to consumers – so understanding the consumer means we can serve our customers better. Synthomer plc ## 12 Annual Report 2021 We are also striving for innovation excellence, Strategic report Governance Group financial statements Company financial statements Other information always driven by consumer and customer demand illustrated by our new, patented ## £522.2m SyNovus™ Plus Nitrile latex for gloves combining exacting consumer requirements EBITDA and sustainability. Innovation continues to be a core pillar ofourgrowth strategy, helping us secure ## differentiated market positions and generate +10 9. 8 % added value for our customers. This year, the Increase in EBITDA vs 2020 full integration of OMNOVA has significantly strengthened our innovation pipeline, and our network of four global innovation centres of excellence supported by local application and technical service centres is a key strategic Looking ahead asset, as we describe on page 38. I would like to thank everyone at Synthomer | Inspired by our purpose, and committed | – and my predecessor, Calum MacLean, whose | | --- | --- | | to Vision 2030 | leadership over seven years at the company did | | The demand for more ‘sustainableproducts’ | so much to create the differentiated, global | | has never been so great. | business we are today – for their dedication | over the last year. Here, too, we are in a strong position for future | growth. Our expertise in water-based polymers, | Exceptional levels of profitability in 2021 have | | --- | --- | | which have a lower environmental impact than | enabled the Group to make major inorganic and | | solvent-based alternatives, makes us leaders | organic investments to significantly strengthen | | in many fields of specialised chemical products. | our platform for future growth. As set out in the | | This year, we were awarded the London Stock | February trading statement, Nitrile latex margins | | Exchange’s GreenEconomy Mark, given to | have normalised to pre-COVID levels and | | companies that derive more than 50% of their | theGroup does not expect any Nitrile latex | | revenues from sustainable solutions. We are | pandemic premium in 2022. Year-to-date, Nitrile | | closing thecoal-fired power station at Sokolov | latex demand remains subdued due to high | | (CzechRepublic), which ends our use of | inventory levels of medical gloves and reduced | | coalfor power generation across Synthomer, | demand due to the easing of the COVID-19 | | and we moved to electricity from renewable | pandemic. However, trading conditions in Nitrile | | sources in Europe and North America. And our | latex are expected to normalise by the end of | | Vision 2030 roadmap, aligned with the UN’s | H1 with market growth returning to 2019 levels | | Sustainable Development Goals and reported | in the second half. All other divisions have | | on in full for the first timeon page 18 of this | hadan encouraging start to the year, and the | | Annual Report, sets out our course to make | Group expects to make continued strategic, | | our business increasingly sustainable. It makes | commercial and operational progress in 2022. | | clear that our ESG priorities, beyond safety, | We have very limited exposure to Russia and | | remain combating climate change, becoming | Ukraine, with both countries accounting for less | | more diverse andinclusive, and developing | than 1% of Group revenue, and we continue to | | our supply chain assurance. | carefully monitor the situation and its potential | implications on our business. The acquisition We are well-embarked on this journey, but we of Eastman’s Adhesive Resins business is know we have much more to do because as expected to complete in Q1. The Group well as being the right thing to do, we know continues to look for further bolt-on acquisition that consumers, and therefore our customers, opportunities geared towards attractive will increasingly demand sustainable products, end-markets that are value accretive to and prefer companies that can produce them. Synthomer’s portfolio. The Board remains confident that the benefits of recent acquisitions and disciplined capital allocation focused on organic growth, inorganic growth and dividends will underpin growing sustainable profits and value creation in the coming years. Michael Willome Chief Executive Officer 3 March 2022 Synthomer plc ## Annual Report 2021 13 Who we are and what we do ## Our new platform for growth: Our planned Adhesive Technologies division ### At-a-glance: What Adhesive Technologies will add to Synthomer 1. Well-invested assets with a global leading position in adhesives 2. Around 650 talented employees worldwide, and a strong management team 3. Six plants with strong SHE standards and a track record of manufacturing excellence 4. More access to attractive end markets with resilient growth fundamentals 5. Greater scale and diversity to our portfolio, and greater geographic reach 6. Strong R&D, and opportunities for further innovation-led growth 7. A large and growing portfolio of sustainable products and alignment with our Vision 2030 sustainability goals 8. Potential synergies following integration 9. Compelling financial metrics with accretive unit gross margins Key product lines for Adhesive Technologies Hydrocarbon Resins (HCR) • Hydrogenated HCR (H HCR) 2 • Non-Hydrogenated HCR (Non-H HCR) 2 ## Our growth strategy in action • Pure Monomer Resins (PMR) Non-Hydrocarbon Resins (Non-HCR) ### Building on our success – Adhesive Technologies will have a strong • Amorphous Polyolefins (APO) focus on attractive end markets such as ### Adhesive Technologies • Oleo Chemicals, Rosins and Dispersions hygiene, packaging and high-performance On 17 December 2021, Synthomer (OCRD) tyre additives. On completion, it will mean shareholders approved the acquisition of we can extend and diversify our portfolio, Eastman’s Adhesive Resins. Subject to reach more customers in more end markets, regulatory approvals and customary closing and further expand our geographical reach. conditions, we intend to complete | thetransaction in March 2022, and | A platform for growth | | --- | --- | | createanew division for Synthomer: | The transaction is in line with our | | Adhesive Technologies. | conservative capital allocation policy, | andhas been enabled by the outstanding For details of the Eastman’s Adhesive performance of our existing divisions as Resins transaction, please see our investor wellas our effective integration of OMNOVA, presentation on Synthomer.com. ahead of schedule. Our track record and Speciality products that broaden our experience of integrating OMNOVA gives portfolio and extend our reach usconfidence that we have the people It is an exciting moment in our growth story, andskills to realise synergies through and a demonstration of our organic and thecreation of Adhesive Technologies. inorganic growth strategy in action. In the And withits alignment with our sustainability Increasing our reach in largest acquisition in our history, valued at objectives – including through a focus on attractive end markets $1bn on a cash/debt free basis, Synthomer renewable raw materials, circular economy • Tapes and labels will gain a US-based global business which approaches, and solvent-free product • Packaging develops, manufactures and sells tackifying lines– we believe Adhesive Technologies • Hygiene resins and additives foradhesive products, will provide us with a platform for further • Building and construction making us a global leader in the field. sustainable growth. • Tyres • Other, including woodwork, automotive,windows, rubber, foodandcare, and inks Synthomer plc ## 14 Annual Report 2021 Who we are and what we do ## Synthomer strategy Strategic report Governance Group financial statements Company financial statements Other information ## Our six-pillar strategy 1 Innovation and technical expertise to exploit new markets • Anticipate consumer market trends and customer requirements to deliver improved and differentiated products • Focus on development rather than pure research 2 Driving efficiency and excellence through operations • Operate continuous improvement across operations • Identify good practices and share throughout the business • Improve commercial, HR, IT and procurement functions 3 Capacity utilisation • Drive profitability through maximum utilisation of assets • Identify the causes of production bottlenecks and find innovative solutions 4 Investment in capacity • Seek to add capacity, particularly in high-growth attractive end markets 5 Bolt-on acquisitions • Actively seek opportunistic bolt-on M&A in similar chemistries 6 Transformational transactions • Not to occur before deleveraging to within the range of our strict capital policy • Transformational acquisitions not limited by geography or chemistry • Growth, stable EBITDA margins, and innovation are some of the target criteria Organic Our Vision 2030 roadmap sets us on the path to net zero M&A and contains a series of targets across three key areas: • Products • Operations • People (See page 48) (See page 54) (See page 62) Synthomer plc ## Annual Report 2021 15 Who we are and what we do ## Our progress – KPIs ## Measuring the progress ## ofourstrategy ## Financial | 021 £522.2 | | 021 £420.1 | | | --- | --- | --- | --- | | 020 £259.4 | | 020 £160.0 | | | 019 | £177.9 | 019 | £116.2 | | 018 | £181.0 | 018 | £135.1 | Strategy Strategy Definition Definition Operating profit before depreciation, amortisation Underlying profit before tax comprising IFRS profit before tax andSpecialItems. before charging/crediting Special Items. Comment Comment Group EBITDA increased 109.8% to £522.2 million, with strong Group underlying profit before tax increased 162.6% to growth across all four divisions. Performance Elastomers EBITDA £420.1 million, driven by strong growth in EBITDA across all grew by 136.9%. Functional Solutions EBITDA grew by 49.8%. four divisions. Industrial Specialities EBITDA grew by 18.9%. Acrylate Monomers EBITDA returned to profit, delivering £35.4 million. | 021 75.2 | | 021 £217.6 | | | --- | --- | --- | --- | | 020 28.9 | | 020 £167.6 | | | 019 | 25.3 | 019 | £92.8 | | 018 | 30.7 | 018 | £27.8 | Strategy Strategy Definition Definition Basic Underlying earnings per share before Special Items. Movement in net debt before financing activities, foreign exchange and the cash impact of Special Items, asset disposals and business combinations. Comment Comment The 160.2% increase in underlying EPS reflects the strong increase Free Cash Flow was driven by the rise in EBITDA and reflected the in underlying profit before tax, offset by a slight increase in the increase in activity levels and raw material prices which drove a first weighted average number of shares in issue. Figures previous to half 2021 net outflow, which was partly offset through working 2019 have been restated for the Rights Issue which completed in capital management in the second half of the year when raw July 2019. material prices remained high. Capital expenditure was £82.2 million (2020: £53.8 million) as the Company focused on organic growth projects, business system platforms and site sustenance expenditure. Underlying performance statement The Group’s performance management uses Underlying performance to plan for, control and assess the performance of the Group. Underlying performance differs from the statutory IFRS performance as it excludes the effect of Special Items, which are detailed in note 4. The Board’s view is that Underlying performance provides additional clarity for the Group’s investors and stakeholders and so it is the primary focus of the Group’s narrative reporting. Where appropriate, IFRS performance inclusive of Special Items is also described. References to ‘unit margin’ and ‘margin’ are used in the commentary on Underlying performance. Unit margin (or margin) is calculated on selling price less variable raw material and logistics costs. EBITDA is calculated as operating profit before depreciation, amortisation and Special Items. Free Cash Flow is the movement in net debt before financing activities, foreign exchange and the cash impact of Special Items, asset disposals Underlying EPS Free Cash Flow EBITDA Underlying PBT andbusinesscombinations. ## 2 2 2 2 m m m p Synthomer plc | 2 2 2 2 | | | | | m m m p | | --- | --- | --- | --- | --- | --- | | | 16 | Annual Report 2021 | | | | | 2 2 2 2 | | | | | m m m p | | 2 2 2 2 | | | | | m m m p | | 2017 2017 2017 2017 | | | £176.2m £130.0m £81.5m | 28.7p | | Link to strategy Innovation and technical expertise to exploit new markets Driving efficiency and excellence through operations Capacity Capacity utilisation Bolt-on acquisitions/Transformational transactions Strategic report Governance Group financial statements Company financial statements Other information ## Non-financial | 021 | 021 3.16 | | --- | --- | | 020 | 020 | | 019 | 019 | | 018 | 018 | | 017 | 017 | | Strategy | Strategy | Definition Definition Recordable injury rate for accidents involving more than first aid Metered Energy (GJ) (including gas, electricity, steam and fuel oil) treatment, expressed as accidents per 100,000 hours worked by used at each of our plants divided by the number of tonnes of employees and all contractors. product made. The energy excludes transport of goods to and from site and the movement of the associated vehicles on site, butinternal transport on site is included. Comment Comment Our Group recordable injury case rate (RCR) reduced to 0.31, COVID-19 continued to disrupt supply chains leading to inefficient largely due to improved performance at former OMNOVA sites, operations. Key energy efficiency processes were also delayed. which saw RCR fall from 0.64 in 2020 to 0.47 in 2021. The Group recorded 34 injuries in 2021, versus 37 in 2020. We reported no cases of disease caused by occupational factors and there were noaccidents that resulted in fatality or permanent disability. | 021 | 021 | | --- | --- | | 020 | 020 | | 019 | 019 | | 018 | 018 | Strategy Strategy Definition Definition Volume of our products sold in thousands of tonnes (ktes). Percentage of sales volume in the year that can be attributed to The volume is based on wet volumes – i.e. the volumes including new and patented products launched in the past five years. water content. Comment Comment The growth in our volumes was driven by the full-year benefits of Our strong performance in 2021 reflects our greater scale in our integration of OMNOVA (compared to months in 2020) and the innovation following the integration of OMNOVA, and the full increase in activity in Functional Solutions and Industrial Specialities opening of our new Asia Innovation Centre, demonstrating our markets. This is offset by lower Performance Elastomers volumes, continued investment in innovation. which reflect the rationalisation of our SBR business and lower nitriles volumes in H2 2021 caused by restrictions in output in Malaysia and lower levels of demand. | Recordable accident case rate Energy consumption per tonne | | | | | | | --- | --- | --- | --- | --- | --- | | Volume Sales volume from new products | | | | | | | 2 2 | | GJ/tonne | | 0.31 | | | 2 2 2 2 | 1,671.5 wet ktes | | 3.09 GJ/tonne | 24% | 0.36 | Synthomer plc | 2 2 2 2 | 1,638.2 wet ktes 3.08 GJ/tonne | 0.20 22% | | | | --- | --- | --- | --- | --- | | | | | Annual Report 2021 | 17 | | 2 2 2 2 | 1,465.7 wet ktes 2.47 GJ/tonne | 0.23 22% | | | | 2 2 2 2 | 1,517.6 wet ktes 2.51 GJ/tonne | 0.13 21% | | | | 2017 2017 | 1,443.8 wet ktes | 20% | | | Who we are and what we do ## Our progress – KPIs continued ## In July 2021, we set out our Vision 2030 roadmap as our starting point for ## realising our commitment to sustainability and toreaching net zero by 2050. ## Itincludes targets for each of the three key areas ofsustainability: products, ## operations andpeople, aligned with the seven UN’sSustainable Development ## Goals most material to our business. Here we set out ourfirst year of progress ## against these targets. We will continuously review the targets to ensure that ## they remain appropriately challenging. For more details, see pages 42 to 68. 43% 26% ### 2021 2021 ### 1. Products sources plus improving energy efficiency in all our operations | | | 2030 | 2030 | | --- | --- | --- | --- | | | Target | | Target | | 0.31 | 34% | | 80% | ### 2. Operations ### 2021 202 this figure may rise and fall between (vs 2019) now and 2030. PPAs will become increasingly important to our energy 0.16 2020 Sustainability Report, at all locations. Environment 40% reduction in Scope 1 and 2 GHG emissions intensity ### Target (vs 2019) 10% ### 2030 ### Target 34% 40% 70% Employee participation ### 2021 in our employee engagement surveys at a global and country level | 10% reduction in Scope 3 | | | | 2030 | | 2030 | 2030 | | --- | --- | --- | --- | --- | --- | --- | --- | | emissions intensity | | (vs 2019) | Target | | | Target | Target | | Externally assessed Scope 3 emissions Our Employees | | | | 70% | 20%* | | £1.0m+£0.93m | | data for 2021 was not available at time | 3. People | | | | | | | 70% Employee participation of publication, but our data pack can be ### in our employee engagement surveys 202 2021 downloaded via our website. For baseline Environment at a global and country level Scope 3 emissions data, please 40% reduction in Scope 1 and 2 Health & safety ### see our 2020 Sustainability Report, 2030 globally in 2021, not all participating GHG emissions intensity Recordable accident case rate (RCR) ### which can also be accessed on (vs 2019) Target countries reached 70% (per 100,000 hours for employees our website. 70% 73%* and contractors) ### 2030 | | | Target 2030 | | --- | --- | --- | | | The UN’s Sustainable Development Goals (SDGs) most relevant to our Vision 2030 goals | 2021 | | 80% of our Electricity from renewable | | 34% 40% | ### Target *While we exceeded our Your Voice target Our Employees 0.200.31 ### globally in 2021, not all participating 2021 countries reached 70%. ### 2021 | Environment 50% Gender diversity in new hires 10% reduction in Scope 3 | | | | | | | --- | --- | --- | --- | --- | --- | | Communities Health & safety | | | | | | | 40% reduction in Scope 1 and 2 in senior leadership, management emissions intensity Provide volunteer support and financial | Our targets are underpinned by a series of short-term objectives and are aligned with the UN’s SDGs thatare most material to our business. | | | | | | Recordable accident case rate (RCR) Process safety event rate (PSER) | | | | 90%* | | | Sustainable procurement GHG emissions intensity | | | | | | | New products and professional roles Water Externally assessed Scope 3 emissions contributions in excess of £1million a year | | | | | | | (per 100,000 hours for employees (per 100,000 hours for employees | | | | | | | 80% procurement spend with (vs 2019) Manage and minimise water | | | | | | | At least 60% of new products with data for 2021 was not available at time | | | | 73%* | | | and contractors) and contractors) | | | | | 1 | | a sustainability rating consumption | | | | | | | enhanced sustainability benefits. of publication, but our data pack can be | | | | | | | Introduce water management plans *Fluctuations in the EAC market mean downloaded via our website. For baseline | | | | 2030 2030 | | | | | Synthomer plc | | 50% 80% | 1 | | in water-stressed areas and highest Scope 3 emissions data, please | | | Target | 60% | | ### Target ## 2030 18 Annual Report 2021 2030 40% *While we exceeded our Your Voice target consumption sites see our 0.20 0.10 Target ### which can also be accessed on 2030 2030 10% ### our website. 2021 Target Target ### *females in senior leadership management approach 2021 2021 50% Gender diversity in new hires 10% reduction in Scope 3 | in senior leadership, management Process safety event rate (PSER) | | | | --- | --- | --- | | 80% of our Electricity from renewable emissions intensity | | (vs 2019) | | and professional roles (per 100,000 hours for employees | | | | sources | plus improving energy efficiency | | Externally assessed Scope 3 emissions ### and contractors) in all our operations 2030 data for 2021 was not available at time of | publication, but is available in our data pack, | | | Target | | | --- | --- | --- | --- | --- | | | | 2030 | | 2030 | | available to download on our website. For | 20%* 50% | | | | | | | Target | Target | | baseline Scope 3 emissions data, please 80% 90%* 0.100.16 see our 2020 Sustainability Report, which ### 2021 is also available on our website. ### *females in senior leadership 2021 2021 *Fluctuations in the EAC market mean this figure may rise and fall between 80% of our Electricity from renewable now and 2030. PPAs will become sources plus improving energy efficiency increasingly important to our energy in all our operations management approach ### 2030 ### Target 80% 90%* ### 2021 *Fluctuations in the EAC market mean this figure may rise and fall between now and 2030. PPAs will become increasingly important to our energy management approach. Strategic report Governance Group financial statements Company financial statements Other information Synthomer specialist polymers are used to bond and bind industrial and consumer adhesives fora wide range of applications. Packaging and speciality tapes, paper and filmic labels, contact adhesives and can sealings all rely on our superior products which deliver solutions to ourcustomers’ technical and regulatory requirements. ## Review ## of the year Synthomer plc ## Annual Report 2021 19 Review of the year ## Group financials ## CFO’s introduction to ## the Financial review ## 2021 has been a year of strong performance ## byallour divisions and a truly exceptional ## performance in our Nitriles business delivering ## arecord EBITDA of £522.2 million. ## ‘EBITDA grew in each ## ofour divisions. Our ## investment in organic ## growth, and our ## successful integration ## ofOMNOVA, has created ## a powerful platform for ## future growth.’ ### Stephen Bennett CFO Synthomer plc ## 20 Annual Report 2021 £139.2 million reflecting our stronger global reach Resins business, which was approved by our Strategic report Governance Group financial statements Company financial statements Other information Volume | | and increased market diversity following the | shareholders on 17 December 2021, and which | | --- | --- | --- | | | integration of OMNOVA, factors which also saw | supports our overall strategy for organic and | | | Industrial Specialities EBITDA grow by 18.9% to | inorganic investment. We expect the acquisition | | +2.0% | £47.8 million. Acrylate Monomers EBITDA grew | to complete in March 2022. | to £35.3 million, from a small loss in 2020. 2021: 1,671.5ktes 2020: 1,638.2ktes Reduced pension liabilities 2019:1,465.7ktes | | The growth across the business took place | As a result of more favourable market conditions | | --- | --- | --- | | EBITDA | against a backdrop of squeezed supply chains | and several years of work, including a detailed | | | – and is tribute to the work of our procurement | review of our pension investment strategy, | | | and customer service teams, who kept | ourpension liability has decreased to | | | meeting our customers’ needs. | £122.4 million from £221.4 million at | | +10 9. 8 % | | 31 December 2020. Strong asset returns, | Growth in gross margin per tonne 2021: £522.2m 2020: £259.4m 2019: £177.9m cashcontributions of £27.0 million and actuarial reflects increasing specialisation gains of £51.2 million have all contributed. | Underlying PBT | This long-term growth reflects the fact that | | | --- | --- | --- | | | ourdifferentiated portfolio contains many | Dividend of 21.3 pence | | | specialised, high-performance products. | The Board has recommended a final ordinary | | | This year, extraordinary demand for Nitrile latex | dividend of 21.3 pence (2020: 8.6 pence) per | | +16 2.6 % | products during the COVID-19 pandemic meant | share, this exceptional increase reflecting the | | 2021: £420.1m 2020: £160.0m 2019: £116.2m | that our Nitrile business in particular performed | unique year of profitability. | exceptionally and, even as this demand IFRS PBT Taken with the 2021 interim ordinary softened, in line with our expectations, our dividendof8.7 pence (2020: 3.0 pence) specialised portfolio will continue to benefit pershare, the total ordinary dividend is from the underlying market growth trend 30.0pence (2020: 11.6pence). ## +1,298.5% thatexisted before the pandemic. The total dividend for the year is in line with 2021: £283.9m 2020: £20.3m 2019: £100.5m One of the most pleasing aspects of our theGroup’s dividend policy with the dividend performance has been the consistent growth Underlying EPS representing 40% of the Underlying earnings in our gross margin per tonne over recent pershare. The final dividend per share is subject years, a trend which continued in FY21 and to shareholder approval at the Annual General not just attributable to the impact from the Meeting on 28 April 2022 and will be payable ## +16 0. 2 % Nitrile latex business. on5 July 2022 to those shareholders registered 2021: 75.2p 2020: 28.9p 2019: 25.3p Rapid integration of OMNOVA at the close of business on 6 June 2022. realises$42 million in synergies IFRS EPS Looking ahead Despite the pandemic, we completed the The exceptional performance in 2021 has integration of OMNOVA ahead of schedule. enabled the Group to deleverage quickly and The synergies we identified in our acquisition has paved the way for the $1 billion acquisition ## +6,800% investment case have also been realised faster of Eastman’s Adhesive Resins business, the than budgeted, and have created greater value, 2021: 48.3p 2020: 0.7p 2019: 21.5p largest acquisition in the Group’s history. with $42 million realised in the first 18 months Free Cash Flow | | ofintegration. This has strengthened the | The acquisition in the attractive adhesives | | --- | --- | --- | | | business, and built the acquisition and | marketprovides further differentiation and | | | integration skills of our teams. | diversification to the Group. | | +29.8% | Free Cash Flow up 29.8% to £217.6 million | Coupled with our continued organic growth | | 2021: 217.6m 2020: £167.6m 2019: £92.8m | Strong cash generation and the £203.1 million | investment programme, particularly in Nitriles, | | | equity placing ahead of our acquisition of | theGroup has created a powerful and multi- | | | Eastman’s Adhesive Resins business has helped | faceted platform to underpin future growth. | ### A proven strategy, good drive a rapid reduction of our net debt to ### execution and a strengthened Stephen Bennett £114.2 million leading to leverage of 0.3x EBITDA. ### balance sheet CFO This strengthened balance sheet underpinned Our performance this year is a tribute to thehard our proposed acquisition of Eastman’s Adhesive 3 March 2022 work of everyone at Synthomer, whoput in an extraordinary effort to meet theneeds of our customers. It also reflects the success of our strategy, as our investment in organic growth, 020 and our successful integration of OMNOVA, erformance Elastomers created a powerful platform for our performance. unctional Solutions | EBITDA reconciliation £m | Strong performance from all divisions | | | | --- | --- | --- | --- | | | despite global supply chain disruption | ndustrial Specialities | | | 2 | | | 259.4 | EBITDA grew in each of our divisions. crylate Monomers P Performance Elastomers EBITDA growth of 195.1 136.9% to £320.7 million reflected more than orporate F 47.6 thestrong demand for hygiene products, with improved demand and margins in Performance X I 7.8 Materials also making an important contribution. 021 A Functional Solutions EBITDA grew by 49.8%, to 37.6 C (3.2) Synthomer plc | F | (22.1) | | | | --- | --- | --- | --- | | | | Annual Report 2021 | 21 | | 2 | 522.2 | | | 500450400300 350100 200 250150500 Review of the year ## Group financials continued ## Financial review | Special Items | | | • Acquisition costs and related gains are | | --- | --- | --- | --- | | | 2021 | 2020 | | | | £m | £m | forthe acquisition of Eastman’s Adhesive | Resins business and comprise £15.0 million Amortisation of acquired intangibles (36.2) (30.9) of costs, mainly professional adviser fees, offset by a £3.1 million gain on a foreign Restructuring and site closure costs (29.7) (42.5) exchange derivative entered into in October Acquisition costs and related gains (11.9) (14.6) 2021 to hedge the acquisition price. Acquisition costs in 2020 related to the Sale of business (7.4) (6.6) acquisition of OMNOVA. • Sale of business mainly comprised a further Regulatory fine (57.2) – £7.1 million loss on the onerous contract for Impairment charge – (36.6) the disposal of Synthomer’s European Tyre Cord business as production is relocated to Total impact on operating profit (142.4) (131.2) Caojing (China) to enable the Marl 3 asset (Germany) to be fully closed. This is Fair value gain/(loss) on unhedged interest rate derivatives 6.2 (3.6) incremental to the charge taken in 2020. Loss on extinguishment of financing facilities – (4.9) • During 2018, the European Commission initiated an investigation into practices Total impact on profit before tax (136.2) (139.7) relating to the purchase of Styrene monomer by several companies, including Taxation Special Items 8.8 (4.9) Synthomer, operating in the European Economic Area. The Company has and Taxation on Special Items 11.8 20.5 willcontinue to fully cooperate with the Total impact on profit for the year (115.6) (124.1) Commission during its investigation. Based on the information available and The following items of income and expense have been reported as Special Items: theresulting assessment of the expected outcome of the investigation a provision | • Amortisation of acquired intangibles | mainly dependent on the characteristics of | of£57.2 million has been made in relation | | --- | --- | --- | | increased in 2021, reflecting the first | the customer relationships. | tothis case. | | fullyear charge since the acquisition of | • Restructuring and site closure costs | • In 2020, a £36.6 million impairment charge | | OMNOVA Solutions Inc on 1 April 2020. | in2021comprise: | was booked relating to four sites. | | The fair values of the intangible assets | – A £13.2 million charge in relation to the | • In July 2018 the Group entered into swap | | arising on the acquisition of OMNOVA | substantially completed integration of the | arrangements to fix Euro interest rates | | amounting to £330.1 million are being | OMNOVA acquisition net of a £1.2 million | onthe full value of the then €440 million | | amortised over a period of 9-11 years | pension curtailment credit in relation to | committed unsecured revolving credit | | | the French business; | facility. The fair value movement | | | – A £11.6 million charge to demolish and | of the unhedged interest rate derivatives | | Presentation of | rationalise assets at a small number of | relates to the movement in the mark-to- | | | sites, to bring them into line with our ESG | market of the swap at 31 December 2021 | ## financial results strategy; and inexcess of the Group’s current borrowings. – A further £4.9 million for the completion • Following the Group’s successful The Group has consistently used two ofthe rationalisation of the Group’s refinancing in 2020, capitalised debt significant Alternative Performance European Performance costsrelating to the 2018 refinancing Measures (APMs) since its adoption Materialsnetwork. andthe 2019 bridge to bond were written ofInternational Financial Reporting Restructuring and site closure costs in 2020 off, leading to a loss on extinguishment Standards (IFRS) in 2005: | | comprised £19.5 million for integration of | of£4.9 million. | | --- | --- | --- | | • Underlying performance, which excludes | OMNOVA, £20.9 million for the | • Taxation Special Items comprise the release | | Special Items from IFRS profit measures | rationalisation of the Group’s European | of uncertain tax provisions in relation to | | • EBITDA, which excludes Special Items, | Performance Materials network and | historical tax issues in France and Malaysia. | | amortisation and depreciation from IFRS | £2.1 million to rationalise the Acrylate | • Taxation on Special Items is mainly deferred | | operating profit. | Monomers’ site. | tax credits arising on the amortisation of | acquired intangibles and restructuring and The Board’s view is that Underlying site closure costs. performance provides additional clarity forthe Group’s investors and so it is the primary focus of the Group’s narrative reporting. Further information and the reconciliation to the IFRS measures areincluded in note 5 of the financialstatements. Synthomer plc ## 22 Annual Report 2021 | Finance costs | | | Underlying finance costs increased to | Strategic report Governance Group financial statements Company financial statements Other information | | --- | --- | --- | --- | --- | | | 2021 | 2020 | | | | | £m | £m | £30.8 million (2020: £29.6 million) and | | comprise interest on the Group’s financing Net interest payable (26.9) (24.3) facilities, interest rate swaps, amortisation of associated debt costs and IAS 19 pensions Net interest expense on defined benefit obligation (2.4) (3.7) interest costs in respect of our defined benefit Interest element of lease payments (1.5) (1.6) pension schemes. Underlying finance costs (30.8) (29.6) The rise in the net interest payable mainly reflects the higher interest rate on the Fair value gain/(loss) on unhedged interest derivatives 6.2 (3.6) €520 million, 3.875% senior unsecured loan notes due 2025 bond issued in June 2020, Loss on extinguishment of financing facilities – (4.9) refinancing the OMNOVA acquisition finance bridge, as offset by the lower level of Total finance costs (24.6) (38.1) borrowings in 2021 relative to 2020 as a result of the strong Free Cash Flow and the equity placing in anticipation of the acquisition of Eastman’s Adhesive Resins business. We have designed our new The Group’s committed unsecured facilities sustainability brand Lipolan™ TERRA comprise the $260 million term loan, the to help reduce the carbon footprint €520 million bond and the €460 million typically associated with making latex revolving credit facility. The revolving credit foam. facility was fully undrawn throughout 2021 | Our first product is called Lipolan™ TERRA | and, as a result, the interest rate derivatives | | --- | --- | | 2022F and is made using processes that | were fully unhedged and the full movement in | | can reduce that footprint by up to 60%. | fair value was taken to Special Items. | It also contains 70% total solids, making it Taxation more efficient to transport, which means we The Group’s effective tax rate is affected by can lower the associated logistics carbon the tax charge/credit of Special Items. It is footprint by up to 5%. This is just the start therefore helpful to consider the Underlying though – we’re now planning ways in which and Special Items tax rates separately: to use bio-based and recycled feedstock. • The effective tax rate on Underlying profit before tax for the year decreased to 22.5% (2020: 23.4%) due to the impact of COVID-19 on the geographical mix ofprofits. • The effective tax rate for Special Items was 15.1% (2020: 11.2%) and was driven by deferred tax credits on the amortisation of acquired intangibles and restructuring and site closure costs, and a current tax credit in relation to historical tax issues in France and Malaysia. Non-controlling interest The Group continues to hold 70% of Revertex(Malaysia) Sdn Bhd and its subsidiaries. These entities form a relatively minor part of the Group so the impact on Underlying performance from non-controlling interests is not significant. Earnings per share Earnings per share is calculated based on theaverage number of shares in issue during the year. The weighted average number of shares for 2021 increased to 432,290,000 (2020: 424,843,000) following the equity share placing on 28 October 2021 where 42,485,080 shares were issued raising net proceeds of £203.1 million. Underlying earnings per share for the year is75.2p, up from 28.9p in 2020, reflecting the exceptional performance in the year. The IFRS earnings per share is 48.3p (2020: 0.7p). Synthomer plc ## Annual Report 2021 23 Review of the year ## Group financials continued ## Financial review continued | Balance sheet | Cash performance | | | | --- | --- | --- | --- | | Net assets of the Group increased by | The Group’s primary focus is on managing net debt by maximising Free Cash Flow. The following | | | | 64.5%to £1,033.0 million, mainly reflecting | table summarises the movement in net debt and is in the format used by management: | | | | the£210.0 million profit for the year, the | | 2021 | 2020 | | £203.1 million share issue and actuarial gains | | £m | £m | | of£66.8 million offset by dividend payments | Opening net (debt)/cash (462.2) 20.7 | | | of £74.0 million. Provisions As a result of the regulatory fine and the Underlying operating profit (excluding joint ventures) 448.3 188.4 restructuring and site closure costs set Movement in working capital (82.8) 23.5 outabove, provisions have increased to£103.2 million (2020: £31.6 million). Depreciation of property, plant and equipment 64.2 64.9 The closing balance includes £57.2 million Amortisation of other intangible assets 7.1 4.9 forthe regulatory fine, £15.8 million and £1.0 million in relation to the rationalisation of Share-based payments charge 2.1 2.0 the Group’s European Performance Materials network in Marl and Oulu respectively and Capital expenditure (82.2) (53.8) £10.6 million in relation to the onerous Business cash flow 356.7 229.9 contract arising on the disposal of the European Tyre Cord business. Net interest paid (27.6) (14.0) In the year, a £5.1 million provision was Tax paid (86.4) (31.4) recognised for the closure of OMNOVA’s administrative and R&D site in Villejust Pension funding (27.0) (18.8) (France) and the site transformation Dividends received from joint ventures 1.9 1.9 inKluang(Malaysia) was completed. Free Cash Flow 217.6 167.6 A £11.6 million provision has been made to demolish and rationalise assets at a small Cash impact of restructuring and site closure costs (17.8) (25.3) number of sites, to bring them into line with our ESG strategy. Cash impact of acquisition costs (6.6) (7.4) Retirement benefit plans Purchase of business – (587.6) The Group’s principal funded defined benefit Sale of business 1.7 0.1 pension schemes are in the UK and the US and are both closed to new entrants and Proceeds on issue of shares 203.1 – future accrual. The Group also operates an unfunded defined benefit scheme in Germany Repayment of principal portion of lease liabilities (9.7) (9.7) and various other defined contribution Dividends paid (73.5) (12.8) overseas retirement benefit arrangements. The Group’s net retirement obligation Dividends paid to non-controlling interests (0.5) (3.1) decreased by 44.7% to £122.4 million Foreign exchange and other movements 33.7 (4.7) at31 December 2021 (31 December 2020: £221.4 million) and reflects the market Movement in net debt 348.0 (482.9) value of assets and the valuation of liabilities inaccordance with IAS 19. This £99.0 million reduction in the net retirement obligation Closing net debt (114.2) (462.2) isprincipally attributable to the conservative investment strategy, £66.8 million of actuarial Underlying operating profit more than doubled Capital expenditure increased to £82.2 million, gains and Group funding contributions to £448.3 million due to exceptionally strong recovering from the COVID-19 measures of£27.0 million. The actuarial gain arose trading but this was offset in part by an introduced in 2020 to preserve cash and duetoa £15.6 million return on assets, £82.8 million investment in working capital liquidity. Our Nitrile latex capacity expansion a£32.2 million impact from increases in mainly due to significant rises in raw material project in Malaysia is nearing completion, as discount rates, an £11.8 million gain from costs partially reflecting disruptions in raw is the project to replace the coal-fired power experience adjustments and a £7.2 million material supply chains. Working capital as station in Sokolov (Czech Republic). The Group gainon demographic assumptions. apercentage of sales – the key performance continues to invest in its Pathway Programme The most recent triennial valuation of the measure monitored by the Group – remains at systems transformation project, the first phase of UKscheme took place at April 2021 and around 10% in line with historical performance. which was successfully deployed in May 2021. isprogressing in line with expectations. Depreciation and amortisation of other Interest paid increased to £27.6 million The value of liabilities under this method intangibles are in line with the previous year. reflecting the first full period of additional differs slightly from IAS 19, but we expect borrowings drawn for the OMNOVA acquisition thefinalised valuation to result in an improved and the successful issue in June 2020 of the funding status relative to the 2018 valuation €520 million, 3.875% senior unsecured loan completed in 2019. notes due 2025, for which thefirst biannual interest payment was dueinJanuary 2021. Synthomer plc ## 24 Annual Report 2021 | Tax paid increased by £55.0 million to | Our debt is denominated in euros and dollars. | To reduce volatility which might affect | Strategic report Governance Group financial statements Company financial statements Other information | | --- | --- | --- | --- | | £86.4 million. The Group’s overall effective | The euro weakened relative tosterling during | theGroup’s cash or income statement, | | | taxrate reduced slightly, from 23.4% to | 2021, leading to a foreign exchange gain in | theGroup hedges net currency transaction | | | 22.5%, and the increase in cash payments | net debt. | exposures at the point of confirmed order, | | | ismainly due to higher profitability in 2021. | | using forward foreign exchange contracts. | | ### Currency The Group’s policy is, where practicable, The cash impact of restructuring and site The Group presents its consolidated financial tohedge all exposures on monetary assets closure costs was £17.8 million, which statements in sterling and conducts business and liabilities. | comprises £6.0 million of OMNOVA synergy | in many currencies. As a result, it is subject | | | --- | --- | --- | | costs, £10.5 million utilisation of restructuring | toforeign currency risk due to exchange | Financing and liquidity | | provisions and £1.3 million of other | ratemovements, which affect the Group’s | At 31 December 2021, the Group had net | | restructuring costs in the year. | translation of the results and Underlying net | debt of £114.2 million compared to net debt | | | assets of its operations. To manage this risk, | of£462.2 million at 31 December 2020. | The cash impact of acquisition costs was the Group uses foreign currency borrowings, The reduction in net debt reflects the £6.6 million, arising from the acquisition forward contracts and currency swaps to strongFree Cash Flow in the year and ofEastman’s Adhesive Resins business. hedge non-sterling net assets, which are theproceeds on the equity share placing. The 2020 net outflow of £7.4 million related predominantly denominated in euros, US This cash generation resulted in a tothe OMNOVA acquisition and comprised dollars and Malaysian ringgits. reductionin theGroup’s leverage, from £20.1 million of costs offset by a £12.7 million 1.8xat 31 December 2020 to 0.3x at cash gain on deal-contingent foreign In 2021, the Group experienced an overall 31 December 2021, leaving the Group exchange contracts. currency headwind with average FX rates wellplaced to finance the acquisition against our three principal currencies The 2020 cash outflow for the purchase ofEastman’s Adhesive Resinsbusiness. increasing by 3.4% to €1.165, 6.3% to $1.374 business related to OMNOVA. | | and 5.5% to 5.70 ringgits. This resulted | Ahead of the Eastman’s Adhesive Resins | | --- | --- | --- | | On 28 October 2021, the Group successfully | inanet £22.1 million translation headwind | acquisition, a new committed unsecured | | completed a share placing, raising £203.1 million, | inreported EBITDA. | $300 million loan facility was entered into | | net of issue costs, again relating to the financing | | on28 October 2021 which will be drawn, | Given the global nature of our customer and of the proposed acquisition of Eastman’s alongside a portion of the revolving credit supplier base, the impact of transactional Adhesive Resins business. facility on completion. An equity share foreign exchange can be very different from placing was also undertaken on 28 October Dividends paid in the year increased. The final translational foreign exchange. We are able 2021 raising £203.1 million net of issue dividend payment for 2020 was paid in July topartially mitigate the transaction impact costs. These proceeds were swapped into 2021, whereas the 2019 final dividend was bymatching supply and administrative cost US dollars on the day of the placing in order cancelled in order to preserve cash, liquidity currencies with sales currencies. to hedge against the dollar-denominated and balance sheet strength at theonset of the acquisition price. COVID-19 pandemic inMarch2020. While arranging the new $300 million loan facility the Group took the opportunity to transition the reference rates for $260 million Free Cash Flow Bridge (£m) term loan and non-Euro borrowings under the €460 million rolling credit facility away 450.0 259.9 (106.3) from inter-bank interest rate to risk- freerates. 400.0 At 31 December 2021, the Group 350.0 (28.4) hadcommitted borrowing facilities of 1.5 (13.6) 300.0 (55.0) approximately £1,250 million through until July 2024 with a single financial leverage | 250.0 | (8.2) | | | | | --- | --- | --- | --- | --- | | | | 0.1 | 217.6 | ratio covenant of 3.5x for 2022 and 3.25x | | 200.0 | | | | for2023 and 2024. | 167.6 150.0 100.0 50.0 0 | 2020 Underlying | | Movement | Capex OtherPension | Depreciation Interest | | Tax | | 2021 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | operating | in working | | | payments | payments | funding | | | | profit | capital | | | | | | | Synthomer plc ## Annual Report 2021 25 Review of the year ## Divisional reviews Main markets ### Health & protection ## Performance ### Carpet, compounds & foam ### Paper & packaging ## Elastomers Main product lines • Nitrile Butadiene Latex emulsion (NBR) ## A year of exceptional • Styrene Butadiene Latex emulsion (SBR) • Antioxidants • Speciality SBR ## growth–and clear • Performance Materials • Elastomeric Modifiers ## opportunities forthe future, 947 people in 12 plants in Europe, Middle East, South East Asia and China, and in two ## driven byinnovation and US plants we share with Functional Solutions. Our contribution to sustainability ## capacityexpansion. Performance Elastomers has a strong trackrecord of innovation, increasingly driven by consumers’ demand for products with reduced impact on the environment. In line with the Group’s 2030 target of more than 60% of new products having a positive ### ‘We’ve been able to meet sustainability impact, the division has anexciting innovation funnel in both ### the exceptional demand SBRand NBR which set the standards ### of 2020 and early 2021 forsustainability. ### because of the dedication ### of our people and our Highlights of our performance ### investment in innovation ### and increased capacity. ## That has created £320.7m ### significant value to EBITDA ### support Synthomer’s ### future growth.’ ### Neil Whitley ## +13 6 .9 % President, Performance Elastomers Division and Asia, M&A and HR in constant currency Synthomer plc ## 26 Annual Report 2021 Constant Strategic report Governance Group financial statements Company financial statements Other information currency ## 2021 2020 % % Divisional Safety (RCR) 0.11 0.31 (65) ## snapshot Volumes (ktes) 844.2 896.0 (5.8) Revenue (£m) 951.5 680.3 39.9 46.2 EBITDA (£m) 320.7 142.5 125.1 136.9 Operating profit – Underlying performance (£m) 294.9 116.8 152.5 166.0 Operating profit – IFRS (£m) 286.9 80.8 255.1 Putting aside the exceptional demand created ### This has been a record year by the pandemic, we intend to continue investing in Nitrile latex because we, along ### forEBITDA, and for me, with other industry experts, expect the ### three factors stand out about underlying growth in demand for Nitrile ### our very strong performance latexexperienced pre-pandemic to continue, given the global trends in the healthcare and ### across the division. hygiene product markets and the fact that nitrile latex is increasingly substituting PVC Dedicated people and strong teamwork and natural rubber in personal protective The first is that it was only possible because equipment. We have a very strong position of the commitment of our people and teams inthis market with a high market share, to working through challenges – whether industry-leading manufacturing technology those were the constraints imposed by and a track record of product innovation. COVID-19, which had a particular impact in There are exciting opportunities on the Malaysia and on the people working in our horizon and we will continue our focus NBR business, or the disruptions to global onproduct, process and application supply chains that affected the whole improvements. We are currently industry. Across the division, our teams kept commissioning our ‘JOB6’ expansion our manufacturing going throughout, working projectin Pasir Gudang, Malaysia, creating safely, and consistently going the extra mile 60ktes of additional Nitrile latex capacity tomeet the needs of our customers, resulting which will provide additional products for our instrong performances from both our NBR local and growing US customer bases. At the and SBR businesses. same time, we have carried out siting reviews Clear benefits from long-term in Asia to ensure that the required Nitrile latex investment capacity is available in the coming years to The second is that there was a clear link meet our customers’ continuing growth plans. between our consistent investment in organic Added to this, we have some of the most growth and capacity utilisation, and our ability innovative, highly-skilled people in the industry to meet demand, particularly for Nitrile latex – and the full opening this year of our Asian tosupport the healthcare sector during Innovation Centre (AIC) has enhanced theCOVID-19 pandemic. ourability to lead the way on innovations We know that extraordinary Nitrile latex in products and processes, many of which demand for glove manufacturing during the willhave defined sustainability benefits for pandemic resulted in exceptional earnings customers and consumers – including TM and cash generation this year, and we SyNovus Plus, described in the case expected conditions to normalise as supply studyon page 12. and demand became more balanced. That began to happen in H2 2021. Revenue EBITDA Volume 2021 2021 2021 951.5 320.7 844.2 Synthomer plc | 2020 2020 2020 | 680.3 142.5 896.0 | | | | | --- | --- | --- | --- | --- | | | | | Annual Report 2021 | 27 | | 2019 2019 2019 | 623.7 849.1 96.3 | | | | | 2018 2018 2018 | 704.5 107.9 859.5 | | | | | Lorem Lorem Lorem | 107.9 | 00 00 | | | Review of the year ## Divisional reviews continued ## Performance Elastomers continued | Ensuring we have the structure | Volumes | Revenue | | --- | --- | --- | | inplacefor future success | Performance Elastomers achieved overall | The division achieved revenues of £951.5 million | | While results this year have been strong, | volumes of 844.2ktes in FY21, a reduction | in FY21, with particularly strong demand, driven | | weneed to remain focused on staying | onthe exceptional volumes of 896.0ktes in | by the global COVID-19 pandemic, for Nitrile | | competitive in all our markets. This year, in | FY20, and in line with our FY19 performance | latex for a range of medical and industrial | | line with the findings of our review of our SBR | of849.1ktes. Within this overall figure, | gloves. Glove prices rose to record levels and | | business, we closed SBR facilities in Oulu, | volumesin our Nitrile latex business were | with demand for Nitrile latex exceeding supply in | | Finland, and Marl, Germany, shifting our | lower than in 2020. Nitrile latex performance | H1, margins rose well above normalised levels. | | production to our other sites, where we have | was affected by Emergency Movement | As demand reduced during H2 both glove and | | been able to focus on our strategic move | Control Orders put in place in Malaysia in | Nitrile latex prices reduced significantly, | | towards greater capacity utilisation. | response to the pandemic in Q3, as well | returning to historical levels since January 2022. | | | assome customer de-stocking in H2 2021 | Industry analysts forecast that demand for | Performance review that followed exceptional demand in FY20 Nitrile latex, the preferred material of choice for Safety and H1 2021. Our further investment in Nitrile medical gloves, will continue to grow strongly as Performance Elastomers achieved a latex capacity, including JOB6 and our glove usage per capita continues to increase recordable injury case rate of 0.11 in FY21, and announced plans for significant further indeveloping countries. Synthomer also has a process safety rate of 0.18. The three-year investment in South East Asia, demonstrate astrong product development pipeline arising average recordable injury case rate of 0.14 our long-term commitment tothe growing from our industry-leading Asia Innovation Centre illustrates consistent delivery of upper-quartile TM Nitrile latex market. inMalaysia, including SyNovus Plus, samples safety performance across all sites, with an of which were approved by customers in ongoing focus on slips, trips and falls which We closed our Performance Materials facility Q12022. | now account for most of the small number | in Oulu, Finland, inFebruary 2021, reducing | | --- | --- | | ofincidents each year. Our major nitrile project | SBR capacity by55ktes in FY21. Our oldest | | (JOB6) in Pasir Gudang achieved more than | SBR plant inMarlis closing and arange of | | 750,000 hours without a recordable accident. | products previously made at this plant are | | Significant management attention and | being successfully transferred across | | reporting focuses on further improving | thewider Synthomer network. This will | | processsafety performance, including leading | significantly improve the utilisation of the | | indicators for permit to work and management | Performance Elastomers Performance | | of change. We are launching behavioural | Materials assets in Europe. | safety programmes in 2022 todrive safety performance to industry-leading levels. Synthomer plc ## 28 Annual Report 2021 EBITDA Strategic report Governance Group financial statements Company financial statements Other information This was an exceptional year for the division, andwe achieved EBITDA of £320.7 million. This compares to divisional EBITDA of £142.5 million in FY20. The underlying margins within the NBR business were at exceptional levels as demand for Nitrile latex exceeded supply and record production rates for medical gloves continued in H1. Demand for Nitrile latex started to slow through H2, partly due tode-stocking, with margins reducing to more normal levels since January 2022. Performance Materials margins improved following our asset rationalisation programme, and helped by movement in raw materials through the year. ## Priorities for FY22 Our strategic priorities for FY22 include: • Commissioning our new plant capacity inMalaysia TM • Commercialising SyNovus Plus • Exploring further projects to bring on significant additional nitrile capacity ### Extending our SyNovus™ Harnessing the energy from • Exploring investment support to ### helpde-risk this investment in product range, building chemical reactions ### additionalcapacity ourcapacity and reducing While at all times ensuring that our nitriles • Innovation, with a continued focus on product maintains its high performance in ### energy use enhancing the sustainability of products our customers’ applications, our innovation We are proud of the innovation that goes into across the portfolio teams have adapted our systems to harness developing new products for our customers, • Maintaining our SHE focus the heat created by the chemical reactions especially those that support our – and our • Focusing on our people agenda and that lead to polymerisation, and used that customers’ – sustainability ambitions. career development to continue heat in the product process, reducing our recruiting and retaining the best talent. But innovation is equally important when need for steam. itcomes to our processes, supporting In the second year of a three-year programme ourstrategy by increasing our capacity, that has involved cooperation between our maintaining the high performance of our operations, commercial and technical support speciality products, and making us more teams in Malaysia, the project has boosted energy efficient. capacity by a further 10%, while reducing To support our family of patented SyNovus™ the energy consumption in use for both products, our new Asian Innovation Centre Synthomer and our customers. It has meant in Malaysia launched a process innovation we could increase our supply to customers at programme designed to further improve the a time of very high demand – and is creating way we make the NBR nitrile grades that opportunities to use the technology within arevital to the manufacture of thin latex other plants and product lines. examination gloves – a critical product tous,and to the healthcare sector during the COVID-19 pandemic. Synthomer plc ## Annual Report 2021 29 Review of the year ## Divisional reviews continued Main markets ### Coatings ## Functional ### Construction ### Technical Textiles ## Solutions Adhesives ### Oil & Gas Main product applications ## Building on our growth • Architectural paint • Intumescent paint ## platform through innovation • Wood and metal coatings • Tile and flooring adhesives • Speciality tapes ## and sustainability. • Sealants • Waterproofing • Repair mortar • Glass fibre scrim • Non-woven and woven textiles • Drilling additives • Cement enhancement 1,807 people in 16 plants in Europe, the USA, the Middle East, South East Asia and China. 11 technology and innovation centres. ### ‘Very strong demand Our contribution to sustainability ### across all end markets With a strong focus on its development pipeline, the division is making good ### served by Functional progress towards meeting the Group’s 2030 ### Solutions has led to target of more than 60% of new products having a positive impact on sustainability. ### robust business growth Many of Functional Solutions’ newly ### despite substantial developed products replace solvent with ### supply chain disruptions water, contribute to energy savings for thecustomer, reduce the use of materials ### in all regions.’ ofconcern or have a positive impact ### Rob Tupker onrecyclability. President, Functional Solutions and Europe Highlights of our performance ## £139.2m EBITDA ## +49.8% in constant currency Synthomer plc ## 30 Annual Report 2021 Constant Strategic report Governance Group financial statements Company financial statements Other information currency ## 2021 2020 % % Divisional Safety (RCR) 0.37 0.39 (5) ## snapshot Volumes (ktes) 655.9 591.2 10.9 Revenue (£m) 900.3 646.7 39.2 43.9 EBITDA (£m) 139.2 95.6 45.6 49.8 Operating profit – Underlying performance (£m) 111.1 69.1 60.8 65.6 Operating profit – IFRS (£m) 69.8 31.1 124.4 innovation centres are state-of-the-art ### Our extensive portfolio of facilities for all our main technology functions: polymer synthesis, materials characterisation, ### innovative and sustainable applications technology, technical service ### products are used in diverse andproduction scale-up. ### applications by our Synthomer people dedicated to meeting ### customers around the world. needs of customers in diverse markets An essential element in the division’s success | Though consumers will rarely see | this year has been the commitment of | | --- | --- | | Synthomer’s name on consumer products, | Synthomer people to meeting customer | | Functional Solutions’ wide range of products | needs. This takes many forms – keeping | | play a vital role in people’s lives, and with our | ourplants running through the COVID-19 | | leadership positions in sustainable, water- | pandemic, overcoming the disruptions in | | based dispersions and our broad customer | global supply chains, maintaining close | | base, wehave a clear platform for growth. | partnerships with customers when it comes | | Our commitment to innovation, capacity | to innovation and delivery. There is no doubt | | expansion and operational excellence ensures | that our strong performance is owed in large | | we stay ahead and remain one of the leaders | part to our people and teams, and to the | | in speciality dispersions, and this year helped | focus we have placed on both commercial | | drive an outstanding 49.8% growth in | and manufacturing excellence programmes | | EBITDA. Both top- and bottom-line growth | inrecent years. | were delivered despite a succession of This was especially important in the context disruptions to raw material supplies, including of recovering and rising demand. The year COVID-19-related supplier closures in Asia, saw a notable improvement in demand in the the Texas freeze in February 2021, and force Coatings, Adhesives, Sealants and Elastomers majeures in Europe. (CASE), and Oil & Gas segments, and | Harnessing innovation and sustainability | products that found their end-application | | --- | --- | | to drive growth | inconsumers’ houses performed very well, | | With more than 80% of our products | asso many people turned their hand to DIY | | consisting of water-based dispersions which | inthe pandemic. Investment in capacity over | | eliminate the VOCs associated with solvents, | the past few years served us well here, as | | Functional Solutions plays a key part in | ourWorms plant ran at increased capacity | | Synthomer’s Vision 2030 ambitions. | and allowed us to deliver differentiated | products across our European network, Demand from our more than 3,000 customers partof an overall increase in capacity in our across the world for sustainable polymer plant networks in Europe and North America solutions is growing, driven in many regions inparticular. byregulation as well as customers’ own sustainability objectives. At the same time, our innovation teams are working with customers to develop products that push thepossibilities further – meeting needs for formaldehyde-free, biocide-free or lower-VOC applications, and developing biodegradable, bio-based or industry-compostable products to support circular economy approaches tosustainability. Our 11 technology and Revenue EBITDA Volumes 2021 2021 2021 900.3 139.2 655.9 Synthomer plc | 2020 2020 2020 | 646.7 591.2 95.6 | | | | | --- | --- | --- | --- | --- | | | | | Annual Report 2021 | 31 | | 2019 2019 2019 | 612.8 487.4 69.9 | | | | | 2018 2018 2018 | 680.1 526.0 64.1 | | | | | Lorem Lorem Lorem | | 00 00 00 | | | Review of the year ## Divisional reviews continued ## Functional Solutions continued Delivering on the benefits of OMNOVA Performance review ### ‘This was a record year integration Safety Last year we completed the integration of Functional Solutions achieved a recordable ### forthe division, and OMNOVA, helping to increase the scale and injury case rate of 0.37 in FY21, and a process ### weachieved EBITDA of geographic diversity of our division. As well safety rate of 0.28. ### £139.2m. This compares asdelivering cost synergies, the successful Both metrics are higher than 2020, reflecting integration of the Functional Solutions’ ### to divisional EBITDA of the integration of former OMNOVA sites salesteam with that of the former OMNOVA forafull year. Our strong focus on safety ### £95.6m in FY20. Aided by business has opened up significant new sales transformation initiatives at key sites is already opportunities, many of which were realised ### strong cost control and beginning to show success, with all-injury during 2021. ### synergy realisation, all rates at an all-time low for the division. The integration significantly broadened our For 2022, we will focus on completing ### regions contributed to | | global reach as a division, with around a third | transformation initiatives at all Functional | | --- | --- | --- | | a46% growth in EBITDA.’ | of revenue now coming fromour Americas | Solutions’ sites as we push for world-class | | | and APAC markets. | safety rates across our whole site network. | | | It has also expanded our technological | Volumes | | | capability – so we can continue to innovate | Functional Solutions achieved overall | | | and meet the needs of our diverse | volumesof 655.9ktes in FY21, an increase | | | customerbase. | on591.2ktes in FY20, and substantially | greater than our FY19 performance There is still work to do to ensure that SHE of487.4ktes. performance is consistently high across thedivision including the heritage This strong overall performance reflects OMNOVAsites. robust demand in all our main markets as wellas the fact that we have grown as a division, including through the successful integration ofOMNOVA, which has created new sales opportunities as well as increased ourcapacity. In addition to an extra quarter of volumes from OMNOVA, the division benefited from growth in our CASE businesses in Europe and USA, offset in part by the impact of prolonged COVID-19 effects in South East Asia. Demand was particularly strong in construction and textiles. The Oil & Gas business also saw healthy growth, driven by increased drilling activity and higher oil prices. Revenue The Functional Solutions division achieved revenues of £900.3 million in FY21, a growth of 39.2% on FY20. The extra volumes noted above, both from the OMNOVA integration and organic growth, contributed to this increase, along with an improvement inunitmargins incertain segments. Another driver for the increase was the pass-through to customers of substantial increases in unit rawmaterialcosts. Synthomer plc ## 32 Annual Report 2021 EBITDA Strategic report Governance Group financial statements Company financial statements Other information This was a record year for the division, andwe achieved EBITDA of £139.2 million. This compares to divisional EBITDA of£95.6 million in FY20. Aided by strong cost control and synergy realisation, all regions contributed to a 45.6% growth in EBITDA. This excellent result was achieved despite significant prolonged US disruption from the‘Texas freeze’ and multiple force majeuresaffecting our key raw material suppliers inEurope. Functional Solutions delivered recordmargin growth, with all ourglobal businesses contributing. Volume increases, strong margin management in the face ofsteeply risingmonomer prices, cross-selling ofourspeciality product portfolio andtheongoing shift towards a more differentiated and sustainable product portfolio all contributed to this improved margin profile. ## Priorities for FY22 To build on the strong performance ofFY21, in FY22 we aim to: • Complete safety transformation programmes for major divisional sites particularly focusing on our heritage OMNOVA sites, to deliver further improvements in safety performance • Achieve top-line growth from new TM ## product launches, globalising our LITEX Shield technology – helping builders keep product portfolio and delivering on ## the weather out, more sustainably further revenue synergyopportunities • Continue strong margin management Energy-efficient housing is the future for increase their productivity and reduce their withafocus on commercial excellence builders and homeowners – and it is an energy consumption. And by helping people • Pursue organic and inorganic important focus for our sustainable insulate their buildings better, it contributes opportunities to expand our capacity to innovation programmes. to a lower energy consumption and carbon meet rising demand in our growth footprint for consumers, too. | markets | Our LITEX™ Shield XSBR technology | | | --- | --- | --- | | • Deliver a variety of innovation and capital | supports builders by improving the technical | Regular sales of LITEX™ Shield began | | projects to meet the rising demands | textiles they need in products such as glass | in2020 in Europe – and by 2021, following | | ofconsumers and our customers for | fibre and roofing felt, materials they use to | our launch in North America, global sales | | sustainable offerings and in support of | protect building interiors from the outside | reached €17 million in revenue. | | Group targets on energy consumption | temperature and rain. These materials need | | And in another example of our approach andemission reductions. to have mechanical stability, chemical tocommercialising successful innovations, resistance and water-proofing properties – wehave applied the formaldehyde-free XSBR all of which the LITEX™ Shield provides. technology that underpins LITEX™ Shield TM | But LITEX™ Shield goes much further | tonew products. REVACRYL | | Design | | | --- | --- | --- | --- | --- | | thancompetitor products. Thanks to | creates low-emission acrylics that are used | | | | | thework of our innovation teams in Marl, | inhousehold applications such as decorative | | | | | Germany, LITEX™ Shield technology is free | laminates for furniture and glass fibre | | | | | from formaldehyde – a critical competitive | wallcoverings. Sales began in 2020, and by | | | | | advantage in a market where regulations | 2021 had expanded to €2 million in revenue. | | | | | | | TM | | TM | | aredemanding ever-higher standards – and | Both REVACRYL | Design and LITEX | | Shield | | has low Volatile Organic Compound (VOC) | won categories in our annual Innovation | | | | | content. Fast-drying, it helps our customers | Awards in 2021. | | | | Synthomer plc ## Annual Report 2021 33 Review of the year ## Divisional reviews continued Main markets ### Polymer Additives ## Industrial ### Laminates & Films ### Coated Fabrics ## Specialities Main businesses • Laminates & Films • Coated Fabrics • Vinyl Polymers ## Driven by innovation, • Polybutadiene Lithene • William Blythe (speciality chemical ## delivering excellence products) • Speciality Additives • Powder Coatings ## andgrowth. 1,192 people in 8 plants in Europe, the USA, the Middle East, and South East Asia. Our contribution to sustainability The division is assessing a number of sustainability initiatives, including developing a pilot site for water metering at our Speciality Vinyl Polymers plant in Harlow (UK) and reviewing options for improved ### ‘The successful technology to help reduce waste at our ### integration of OMNOVA Speciality Additives plant in Ghent, Belgium. In addition, there are a number of active ### and excellent operating R&D projects across the division with ### performance across our sustainability as a core driver. ### highly-specialised ### product range has Highlights of our performance ### delivered strong business ### growth.’ ## £ 47. 6 m ### Ana Perroni Laloe President, Industrial Specialities EBITDA ## +18 . 9 % in constant currency Synthomer plc ## 34 Annual Report 2021 Constant Strategic report Governance Group financial statements Company financial statements Other information currency ## 2021 2020 % % Divisional Safety (RCR)* 0.40 0.36 11 ## snapshot Volumes (ktes) 115.5 91.1 26.8 Revenue (£m) 382.5 264.9 44.4 48.9 EBITDA (£m) 47.6 41.2 15.5 18.9 Operating profit – Underlying performance (£m) 33.9 29.0 16.9 20.3 *IS and AM are combined for operational reasons have done so while delivering our division’s ### Commercial and scientific best-ever process safety performance. Their commitment to safety, backed up by ### innovation is at the heart of ourconsistent investment in manufacturing ### ourbusiness. What does the excellence, has seen a 16% reduction in the ### end-consumer want? How recorded case rate since 2019. It means that we can point to examples such as our ### can we help our customers powder coating business in Italy, which has ### meet that demand in the now gone five years without a recordable incident, to drive further improvements ### many markets they serve? acrossthe division. ### Can we innovate to create Manufacturing excellence brings other ### new and better products benefits too: our ‘Value Gap’ programme ### – and how do we make our continues to deliver debottlenecking, cycle time improvements and additional capacity. ### operations even safer, more It has improved productivity, increased ### efficient and more utilisation, and helped identify opportunities ### sustainable, so we can tominimise our environmental profile and ## Priorities for FY22 reduce emissions. ### create further value? Responding to strong consumer and The keypriorities in FY22 are: This year’s growth in sales, volumes and customer demand across all end • Further embedding SHE practices in our EBITDA show that we are succeeding in markets surfaces plants, and continuing to drive finding answers to these questions. The seven Sales volumes across the division grew improved performance through businesses in our division supply specialised by26.8% as demand grew in all our main strengthening SHE processes and products for niche markets around the world markets, and particularly in the automotive practices in the chemicals plants from their manufacturing sites in Europe, the and consumer-facing industrial sectors. • Delivering further production capacity US and South East Asia. They have across the plants through Laminates & Films, and Vinyl Polymers have succeeded in meeting the diverse and debottlenecking projects and continued to grow significantly, as consumers specialist requirements of our global customer operational efficiency seek out high-performing products for the base, inthe context of a year in which we • Ensuring a continuous supply of raw furniture and floors of their kitchens and have had to address the twin challenges of materials to sites bathrooms, and where our teams are COVID-19 and disrupted raw material supply • Enhancing our customer services and succeeding through a winning blend of chains. That is tribute to the commitment and logistics processes to ensure the material performance and aesthetic design. talent of our 1,192 people – and shows that challenging logistical environment is Our relationships with major retail customers we have solid foundations for future growth. efficiently and effectively handled are critical here – and anticipating their needs and delivering with fast, effective service is • Growing sales volumes from additional Outstanding customer service and spurring our growth. production capacity, and continuing consistent, safe production todeliver GDP+ growth. Disruption across the industry has meant that The recovery in automotive demand has this year, more than ever, customers wanted benefited our Polybutadiene Lithene and to know that when they picked up the Powder Coatings businesses, which also telephone to their supplier, there would be serve the construction, rubber modification someone there going the extra mile to help and adhesives sectors. them. Our customer service, purchasing and logistics teams have done exactly that. We continue to see opportunities for all ourbusinesses, and we have set out further But of course, they could not meet customer investment for growth. demand without the dedication of the people in our operations who have kept our sites running throughout the pandemic – and who EBITDA Revenue Volumes 2021 2021 2021 382.5 115.5 47.6 Synthomer plc | 2020 2020 2020 | 264.9 41.2 91.1 | | | | | --- | --- | --- | --- | --- | | | | | Annual Report 2021 | 35 | | 2019 2019 2019 | 157.9 23.8 67.3 | | | | | 2018 2018 2018 | 164.1 20.0 70.7 | | | | | Lorem Lorem Lorem | | 00 00 00 | | | Review of the year ## Divisional reviews continued ## Industrial Specialities continued Leading innovation, and strengthened reach and scale The integration of OMNOVA has given our division further diversification, both in terms ofthe end markets we serve, and our geographical reach. We have really seen thebenefits this year, with cost synergies being realised and significant new sales opportunities, particularly in the US. It has also expanded our innovation capabilities, which remain a key focus inourability to meet end consumer and customer needs. Performance review Safety Industrial Specialities achieved a recordable case rate of 0.40 in FY21, and a process TM ## injury safety rate of 0.04. Tidal Wave – new technology keeping marine Across our chemicals plants, we have ## upholstery stain-free continued our sustained focus on strengthening practices and processes, particularly on permit ‘Pinking’ is a real problem for boat builders that stops the bacteria’s pink dye from to work and management of change system and owners. It appears as a red or pink spreading to the surface of the upholstery. improvements. The recordable injury case rate stain on vinyl marine upholstery caused TM Our new Tidal Wave marine vinyl across the chemicals plants inFY21 was 0.27, byaspecific strain of bacteria that thrives ® upholstery, sold in our Nautolex range, which is slightly above FY20 but comparable inmarine environments. There is usually means boat owners can keep their cushions to top quartile performance in the industry. noalternative but to replace the white – and creates savings and competitive upholsterycompletely. | The focus for our surfaces plants (Laminates | | advantage for our boat-building customers. | | | --- | --- | --- | --- | | &Films, and Coated Fabrics) has been on | | | TM | | | Thanks to innovation by our Coated Fabrics | Launched in 2018, Tidal Wave | had its | | improving occupational health and safety | technical teams in Columbus, US, and | best-ever year of sales in 2021, and was | | | performance by simplifying and embedding | Rayong, Thailand, we have developed a | recognised in our annual Innovation | | | fundamental SHE practices, with three of | new,patent-protected barrier technology | Awardsthis year. | | foursurfaces sites graduating from SHE ‘supported site’ status in FY21, and the remaining site expected to graduate in the | firstquarter of FY22. In FY21, the surfaces | Revenue | The Vinyl Polymers business had a resilient | | --- | --- | --- | | sites recorded their lowest-ever recordable | The division achieved revenues of £382.5 million | year, delivering strong volumes, but was | | injury case rate of 0.53, although we | inFY21, a significant increase on FY20. | adversely affected by weaker unit margins | | recognise there is much more still to | The increase in revenue was attributable | following unprecedented raw material price | | doandare committed to ensuring safety | toincreased volumes, consistent focus | increases and a weaker US dollar. With the | | remainsatthe heart of everything we | onproduct pricing and margin management, | recovery of unit margins during the second | | doforallemployees. | and the impact of the OMNOVAintegration. | half of the year following sales price | increases, this business is in a good Volumes EBITDA positionto deliver growth in FY22. | Industrial Specialities achieved overall | We achieved EBITDA of £47.6 million for | | | --- | --- | --- | | volumes of 115.5ktes in FY21, an increase | Industrial Specialities in FY21, compared to | The Polybutadiene Lithene business delivered | | onour volumes of 91.1ktes in FY20, and | divisional EBITDA of £41.2 million in FY20. | year-on-year growth through strong volumes, | | substantially greater than our FY19 | | partly helped by the recovery in the | Laminates & Films, integrated from OMNOVA, performance of 67.3ktes. automotive sector. continued to grow revenue in FY21 through | Robust demand in all our main markets | strong volumes and further market share | William Blythe delivered excellent year-on- | | --- | --- | --- | | drovethe strong volumes, while we have also | gains, following a very strong year in FY20. | year growth with strong underlying volumes | | grown as a division through the successful | The business continues to grow ahead of the | from existing and new product sales. | | integration of OMNOVA. Our reliability | market through substitution of the superior | | Our Speciality Additives business, which programme at Harlow, as well as smaller performance and lower cost of laminates and supplies speciality coatings, delivered an de-bottlenecking projects across other films compared to traditional wood and stone exceptional performance with record volumes plants,have also helped us increase capacity. materials. The business is well placed to and strong unit margins. The business also deliver another year of growth in FY22. benefited from the cost improvement plan The Coated Fabrics business also integrated delivered during FY21. since the acquisition of OMNOVA, benefited The Powder Coating business delivered from growth in the Asian automotive and strong volumes and unit margins, and motorcycle markets. The business experienced delivered a record EBITDA year. strong volumes during FY21, and delivered very strong year-on-year growth. Synthomer plc ## 36 Annual Report 2021 ## Acrylate ## Monomers Constant Strategic report Governance Group financial statements Company financial statements Other information currency ## 2021 2020 % % Divisional Safety (RCR)* 0.40 0.36 11 ## snapshot Volumes (ktes) 55.9 59.9 (6.7) Revenue (£m) 95.2 52.3 82.0 81.8 EBITDA (£m) 35.3 (2.4) Operating profit – Underlying performance (£m) 34.5 (5.6) Operating profit – IFRS (£m) 29.3 (26.3) *IS and AM are combined for operational reasons Continuing focus on safety ### Our Acrylate Monomers Improving safety performance is another central component of the transformation ### division operates from our oftheSokolov site. We have focused on ### production plant at Sokolov strengthening practice and processes ### (Czech Republic), which we including permit to work, management ofchange, and local involvement and ### share with the Functional accountability for driving SHE culture ### Solutions dispersion acrossthe site. ### business. We manufacture We will continue to invest in improved safety ### and supply monomer as part of our Group-wide commitment to SHE as a core Synthomer value, and of our ### products to Functional Vision 2030 sustainability roadmap. ### Solutions, as well asbeing a Performance review ### medium-sized supplier to the Safety Acrylate Monomers achieved a recordable SuezCanal, which began in March 2021. ### European Acrylatesmarket. case rate of 0.2 in FY21. This represents This temporary tightening of supply is asignificant decrease in the recordable injury expected to normalise over the course Set up as a division in early 2021, Acrylate case rate from FY20, when it was 0.42. ofFY22 as competitors restore levels of Monomers has made significant progress production and shipping constraints ease. | onits long-term transformation programme, | The division demonstrated significant | | | --- | --- | --- | | which set out to return the division to | improvement in a number of SHE focus areas | EBITDA | | profitability and establish a strong, | as part of our transformation programme at | The division delivered EBITDA of £35.3 million | | sustainable foundation for future growth. | the Sokolov site. The division also graduated | inFY21, compared to a small loss of £2.4 million | | Our ability to make good progress with the | from SHE ‘supported site’ status at the end | in FY20. This return to profit was primarily driven | | programme in 2021 reflects the commitment | ofFY21. No process safety events were | by a substantial increase in unit margins, as | | ofour people at Sokolov, who have driven | recorded in FY21, an improvement on the | aresult of the period of strong demand and | | itthrough while maintaining operations, | FY20 process safety rate of 0.10. | temporary tightening ofsupply in our markets, | | allinthe face of the disruptions caused | | described above. | Volumes byCOVID-19. Whilst the exceptional Acrylate Monomers achieved overall volumes In addition, Acrylate Monomers has delivered performance in 2021 is principally driven of55.9ktes in FY21, compared to volumes a number of cost savings in FY21 as part of bystrong unit margins brought about of59.9ktes in FY20. This decrease is partly our transformation programme, the full-year bydisruption in the monomers market, attributable to a change in product mix, benefits of which willbe realised during FY22. thetransformation projecthas undoubtedly supplying greater volumes to our Functional benefited the site and has placed it on Solutions dispersions business as well amoreresilient and sustainable footing. asthechallenging operational and raw ## Priorities for FY22 Ending coal use in Synthomer materialenvironment. A key element of our transformation Having restored the Acrylate Monomers Revenue programme at Sokolov, was beginning division to profitability in FY21 in part The division achieved revenues of theclosure of the site’s coal-fired power through delivering the site transformation £95.2 million inFY21, a significant increase station. This will mark the end ofcoal use project, our key priorities for FY22 include: onFY20. This increase reflects a substantial inSynthomer, contributing to our target to rise in sales prices due to strong demand, reduce GHG emissions by 40% bythe end • Continuing to strengthen SHE practices and thetemporary tightening of supply in of2030 (compared to 2019), andreinforcing andprocesses to drive improved both European and global markets in FY21. our strong commitment to reducing our performance at the plant Among the events which had an impact carbon footprint. Our investment at the site • Diversifying our product base by onsupply were a number of acrylic monomer will also reduce our site water requirements reviewingpotential options to produce supplier force majeures within Europe, the by 23%. otherproducts, including more USwinter storm and the blockage of the sustainableproducts. Revenue EBITDA Volumes 2021 2021 2021 95.2 35.3 55.9 Synthomer plc | 2020 2020 2020 | 52.3 (2.4) 59.9 | | | | --- | --- | --- | --- | | | | Annual Report 2021 | 37 | | 2019 2019 2019 | 64.7 61.9 1.0 | | | | 2018 2018 2018 | 70.2 61.4 3.5 | | | | Lorem Lorem Lorem | 00 00 00 | | | Review of the year ## Innovation ### Where we focus our ### innovationefforts ## Innovation: Innovating to support sustainable growth forSynthomer means adding distinctive, differentiated value for our customers, while making our own business more efficient ## creating value andeffective. New product innovation within our customer- facing innovation teams means tailoring ## forcustomers, solutions based on our current technologies to meet new customer needs, or in anticipation of consumer and market trends. To enable more game-changing innovations in the future we ## driving our growth have established a new Technology Platform Innovation team focused on investigating new chemistries designed to meet the changing needs of the market. ### ‘Our global innovation ### The three pillars of our ### network is at the heart of ### Technology Platform’s ### serving customer needs, ### innovation approach ### meeting our sustainability ### objectives and driving ## ourgrowth’. 1 ### Marshall Moore Sustainability Chief Technology Officer Supporting Synthomer’s Vision 2030 roadmap through technologies and products that: • Are based on more sustainable raw materials, including bio-based materials • Have lower environmental impacts when in use ### Why we innovate, what we • Have lower environmental impacts at the ### innovate – and how we do it end of their lives. Everyone working in innovation at Synthomer should have two words on their mind, every ## day: ‘specialisation’, and ‘sustainability’. 2 Whatever we are doing – investigating newtechnology platforms, designing new Enhanced performance products, researching new applications Expanding and diversifying Synthomer’s – wemust focus on what will drive growth portfolio by investigating new monomer and forthe business. That comes from customers polymer systems that perform better at: choosing our products – and more and more, • Binding, bonding and coating specialisation and sustainability are the • Improving adhesion, repellency, criteria they use to make that choice. oraesthetics Our strategic priorities reflect this. We have • Material and formulation efficiency. ## Highlights in 2021 introduced a target that 60% of new products should have a defined sustainability benefit | • Integrated innovation centres from | by2030, and we are aiming to ensure that | | 3 | | --- | --- | --- | --- | | OMNOVA into our three global divisions | newand protected products make up at least | | | | • New target of 60% of new products with | 20% of our sales volume (the NPP metric). | Formulation and process efficiency | | | sustainability benefits by 2030 | These are challenging goals – but I am | Developing efficient technical approaches | | | • Implemented our new Sustainability | convinced we have the right innovation | and methodologies that: | | | Impact Assessments | process, the right people, and the right | | | • Make us more efficient • Launched our Innovation Excellence spiritto achieve them. • Get our products to market quicker Framework • Enhance our product knowledge • Our new Asia Innovation Centre (AIC) • Give us a better return on investment. inMalaysia now fully operational • Achieved 24% NPP Across these pillars, we have developed a • Implemented annual Innovation Awards, new Innovation Excellence Framework to help presenting eight awards of which six had keep everyone in our teams focused on our a sustainability benefit. objectives. The framework gives us all six ‘ways of working’ – the principles that guide how we work every day. Synthomer plc ## 38 Annual Report 2021 Strategic report Governance Group financial statements Company financial statements Other information ## Innovation ## snapshot Our centres of Our market-specific excellence: technology centres: Akron, USA USA: Auburn, Chester, Harlow, UK Jeannette, Monroe, Marl, Germany Roebuck and Stafford AIC (Kulai), Malaysia Rayong, Thailand Sant’Albano, Italy Shanghai, China Sintra, Portugal Villejust, France Accrington, UK ### Global coverage – with direct ### Global Technology and Innovation ### links to manufacturing sites Worldwide, we have 16 innovation sites. ## Our four centres of excellence in the UK, 021 020 Germany, Malaysia, and the United States 019 provide leading research and development, 018 and capabilities to support product and 017 process innovation across all our divisions. 016 The other 12 are technical centres and pilot 015 lines located close to our manufacturing 014 sitesthat respond to market-specific customer needs. SHE Product Stewardship and Oversees occupational safety in our RegulatoryCompliance ### Putting innovation to work in innovation centres and labs, and our Ensures that the products we sell are ### every aspect of our business Responsible Care Management System. safeand compliant, and guides safe Each business unit within Performance product design. Intellectual Property and Knowledge Elastomers, Functional Solutions and Management Platform Technology and External Industrial Specialities has its own dedicated Protects our proprietary knowledge Innovations innovation team. Our Global Technology and andmaximises the value of inventions Innovates new technology platforms that Innovation function oversees our worldwide through patents. help us make differentiated products at innovation network, conducts research on scale to meet customer demand. new technology platforms and provides Material Characterisation centralised support for safety management, Builds understanding of materials at Sustainability material characterisation, process amolecular level to enable smarter Oversees our sustainability governance development, intellectual property productdesign. framework and sets goals to guide how andregulatory compliance. weinnovate and operate. Advanced Process Innovation Industrialises new innovations and engineers safer, more effective and efficient ways to manufacture our products. ## Our new Innovation Priorities for 2022 ### Excellence Framework gives • Implement global SHE standards ### us six ‘ways of working’ • Work towards 60% of new products withsustainability benefits • Maintain pace of new product 1. Clearly aligning innovation resources commercialisation to ensure > 20% NPP tothe business strategy • Build differentiated, value-adding 2. Fostering creativity within our team technologies that create profitable and andthrough collaborations sustainable new products 3. Incorporating process safety and • Implement additional elements of our sustainability into product design Innovation Excellence Framework to 4. Investing in people, working in teams improve innovation yield, accelerate 5. Delivering excellence in project and commercialisation, and develop our portfolio management innovation talent 6. Focusing on delivering results. Sales volume from new products • Attract, develop and retain innovative, collaborative scientists and engineers. | 2 | 24% | | | | | | --- | --- | --- | --- | --- | --- | | 2 | | 22% | | | | | 2 | | 22% | | | | | 2 | | 21% | | | | | 2 | | 20% | | Synthomer plc | | | 2 | | 20% | Annual Report 2021 | | 39 | | 2 | | 18% | | | | | 2 | | 16% | | | | Review of the year ## Innovation continued ### “Our new flagship facility ### leads our innovation in ### novelnitriles and ensures ### Synthomer stays at the ### forefront of nitrile latex ### product development and ### applications. It will also create ### the right environment to ### attract and retain the best ### talent in theindustry.” ## Our innovations are ### Gan Boon Teck ## Investing in innovation Vice President and General Manager of all around you... Performance Elastomers division in Asia ## in Asia to meet ### ...and you will find examples ### “This is the first phase ## customer needs ### throughout this report. ### ofwhat we expect to be Our Asia Innovation Centre (AIC) in Malaysia | | anongoing investment in | | TM | | --- | --- | --- | --- | | became fully operational in April 2021. | | SyNovus | Plus – sustainable | | The AIC is leading the way on research and | | innovation in action | | ### innovation in Asia, supporting development to support our Performance TM ### all divisions of the company. SyNovus Plus is our new nitrile product Elastomers and Functional Solutions that provides the same high- ### business units. As well as expanding our pilot performance barrier protection as ### 2 lab reactor capacity, we are conventional Nitrile latex while being We invested RM35 million in the 6,000m facility in the iPark near Senai Airport, Johor recyclable and reducing GHG emissions ### also investing in a new Bahru, as part of our commitment to meet – see page 12. ### robotic dipping arm to growing demand from customers for TM Lipolan TERRA – making latex ### product development and applications moreeffectively mimic foam more sustainable support. The AIC has accelerated innovation ### ourcustomers’ processes TM | in key markets such as Healthcare and | | Lipolan | TERRA is helping to reduce the | | --- | --- | --- | --- | | Protection (nitrile gloves) through state-of- | and accurately predict the | carbon footprint associated with making | | | the-art R&D reactor capabilities and | behaviour of our polymers.” | and transporting latex foam – see page 23. | | investment in new Application Technology Innovating our processes to deliver ### including a robotic glove-dipping laboratory. Dr Zhenli Wei TM SyNovus products Vice President of Innovation for Performance Elastomers division Our Asia Innovation Centre has launched a process innovation programme designed to further improve the way we ### Innovating sustainably We’ve created new benchmarks to assess make NBR nitrile grades – see page 29. We see sustainability as one of the main theimpact of our innovation projects against TM thegoals of Synthomer’s Vision 2030 LITEX Shield XSBR technology – drivers of innovation – and product and roadmap. We conduct Sustainability Impact supporting construction process innovation as an essential enabler for making our business both more sustainable, Assessments on all of our product innovation TM Our LITEX Shield XSBR technology and more competitive. Developing more projects, and we’re developing the capability supports builders by improving the sustainable products and processes is a toconduct life cycle assessments on technical textiles they need in products critical way we can add value for customers candidate products during the innovation such as glass fibre and roofing felt – –which is why we’ve set a target of 60% process. We’vedeveloped new capabilities seepage 33. ofnew products with defined sustainability toenable the design of biodegradable products, and we’re exploring how we can TM benefits, including: Tidal Wave – helping marine increase our use of bio-based raw materials. upholsterers combat ‘pinking’ • Eliminating ingredients of concern We already use them in several of our • Reducing energy consumption and Our new technology helps keep marine products and they could play a big part carbonemissions upholstery stain-free – see page 36. inourlower-carbon future. • Reducing water consumption ® | | | Suncryl | – bio-based and circular | | | --- | --- | --- | --- | --- | | • Reducing waste generation | At the same time, by optimising or | | | | | • Reducing or eliminating hazards in | redesigning our manufacturing processes, | | | ® | | | | Our new Suncryl | | HP 114 water-based | | ourproducts | wecan help make our plants safer and more | | | | polymer contains more than 56% • Improving product end-of-life management efficient while reducing greenhouse gas bio-based raw material – see page 50. • Enabling sustainability benefits in emissions. For more on our contribution, downstream use. seethe Sustainability section of this report, pages 42-68. Synthomer plc ## 40 Annual Report 2021 Synthomer Strategic report Governance Group financial statements Company financial statements Other information specialist polymers in liquid or dry form provide binding or bonding properties in a broad range of industrial and consumer construction applications. From mortar modification to liquid- applied waterproofing membranes, ceramic tile adhesives to flooring adhesives, our SBR and acrylic dispersions deliver excellent performance across the various technologies in use in the construction market. ## Business ## foundations Synthomer plc ## Annual Report 2021 41 Business foundations ## Synthomer and sustainability For many years, our speciality water-based polymers have helped replace solvent-based products that contain harmful volatile organic ## A sustainable compounds. However, if last year’s COP26 event proved anything, it is that society’s expectations of businesses like ours continue ## agenda for a to grow. As a speciality chemicals company, we recognise the role we must play, which is why in 2020 we announced our commitment to reach ## growing business net zero by 2050. We’ve since launched our Vision 2030 roadmap as our starting point for realising that commitment. This roadmap sets ## This has been an important out a series of sustainability targets, aligned with the UN’s Sustainable Development Goals, and reflects the issues we know matter most to ## year for Synthomer and our our stakeholders. Many of these targets are underpinned by short-term objectives, so thatwe can track and report progress over ## sustainability agenda. the coming decade. Taking action – and making progress Targets must be backed by action, and I’mpleased to say we’ve put a lot of wheels inmotion this year. For example, we’ve established a new sustainability governance structure, introduced new sustainability ### ‘As a speciality chemicals champions across key operations and ### company we recognise functions, and launched new scorecards ### that we have a role to toassessall new product development andlarge-scale capital projects against ### play in meeting society’s sustainability criteria. And so that stakeholders ### expectations for a more can better understand our financial and non-financial performance side-by-side, ### sustainable future. The we’veintegrated our sustainability reporting ### launch of our new Vision into our Annual Report. To coincide with the ### 2030 roadmap in 2021 is publication of this Annual Report, we will also publish a data pack on ourwebsite, giving our ### an important step. It will stakeholders easier, faster, more transparent ### help guide our actions access to our sustainability data. ### over the next decade as Meanwhile, we’ve also hit our interim renewable electricity objective ahead of ### we work towards our net schedule, published externally assessed ### zero ambitions.’ Scope3emissions for the first time, and established a new diversity and inclusion ### Tim Hughes steering committee, led by our Chair, Caroline President, Corporate Development Johnstone. I am also particularly pleased thatour commitment to sustainable products and services was externally recognised with anLSE Green Economy mark in July 2021. This isawarded to companies who earn morethan 50% of their revenue from environmental solutions. https://www.synthomer.com/company/ corporate-responsibility/ sustainability/?region=EUROPE Synthomer plc ## 42 Annual Report 2021 | We have continued to adapt to local regulations | risks anddeveloping one scenario analysis. | Strategic report Governance Group financial statements Company financial statements Other information | | --- | --- | --- | | throughout the pandemic, including having | During 2022, we will develop further scenario | | | fewer people on site and closing labs when | analyses inour key operations and supply | | ## 0 .15 3 | | | needed. Our customers have faced similar | chains todevelop our understanding of our | | --- | --- | --- | --- | | | | challenges. This is likely to have a short-term | climate opportunities and risks. | | tonnes of CO | 2 e Scope 1 and 2 GHG | | | impact on our innovation pipeline – but we’ve emissions per sales production tonne We’re now building on our TCFD work to made progress nonetheless. In 2021, we determine science-based targets, due for launched 14 new products, of which 43% completion in the coming year. See page 77 include a defined sustainability benefit. forour TCFD report. We also introduced new innovation awards, ## 34% which include a sustainability category. Starting the next decade from astrongplatform Going further on diversity and inclusion Our teams have achieved a great deal We also continued to embed our people thisyear, including ongoing work to ## reduction agenda, with a growing focus on key areas integrateOMNOVA in the face of COVID-19 such as diversity and inclusion, career vs 2019 baseline travel bansand operational restrictions. development and employee engagement. Once ourproposed acquisition of Eastman’s | We’re particularly pleased that we met our | Adhesive Resins is complete, and we create | | --- | --- | | 2021 objective of 20% of women in senior | ournew Adhesive Technologies division, | | leadership roles. In February 2022, Ana | we’llrealign our baseline sustainability | | Perroni Laloe was appointed President, | metrics. This will beabig task, but it’s also | | Industrial Specialities, joining our Executive | anopportunity toembed our sustainability | | Committee. The appointment of Lily Liu | agenda into ournewdivision from day one. | asour Chief Financial Officer will further Working in partnership to build a more accelerate our progress. Once Lily is sustainable world officiallyon board, womenwill make up This next decade will be crucial for the world’s 44%of ourBoard. ability to limit temperature rises and meet the | We have a good gender and ethnic split at | commitments set out under COP26. And, | | --- | --- | | agraduate level. And the global Engender | integrations aside, we will have our own | | women’s network had a busy first year. | challenges to address. Many of our chemical | | We also reviewed our recruitment processes | processes require heat, which we typically | | to keepimproving representation on our | generate with natural gas. And most of our | | candidate lists. | raw materials are made from fossil fuels. | Indeed, more than 90% of our Scope 3 Putting safety first – and responding Of course, diversity must be backed by emissions come from our supply chain. | toCOVID-19 | asense of belonging. I think the speed with | | | --- | --- | --- | | Of course, as a chemical manufacturing | which we completed the OMNOVA integration | So, while we continue to invest in our own | | business, safety must always be our first | is an example of our commitment to this, with | sites and processes, we know that we can’t | | priority and sits at the centre of our core | many OMNOVA leaders taking up senior | solve all these challenges on our own. We’re | | values (see page 55). We’re proud of our | positions in Synthomer. | going to need to forge new partnerships to | | long-term record and know we must maintain | | change the way we use energy and find more | But we have a lot more to do, and my our focus as we grow. We anticipate some sustainable ways to select our raw materials. Executive Committee colleagues and I are short-term fluctuation in our safety, health personally committed to encouraging greater We’re already working with our customers andenvironment (SHE) performance when diversity across Synthomer and to creating an tocreate innovative new products with better integrating new businesses like OMNOVA. environment where people see opportunities sustainability credentials. Now, we want to We allow three years from the date of a new to grow their career with us. increase the number of suppliers we work acquisition to help our new businesses to with who can provide the most sustainable meet our SHE standards and align with our Driving down emissions products and services, so that we can help sustainability goals. We are now almost two We’ve done a lot of work over the past drive down emissions across the whole years into that process with OMNOVA and fewyears to address our Scope 1 and 2 supply chain. | arestarting to see their efforts show in our | emissions. In 2021, we took a big step | | | --- | --- | --- | | results. This is thanks to the excellent | forward when we installed new gas boilers | Through our speciality chemicals, we can and | | workour SHE teams have done to help | toallow closure of our only coal-fired | do make a meaningful contribution to society. | | ournew colleagues introduce our tools | powerstation, and ensured that 90% | Our growing stature gives us the chance to | | andprocesses. | oftheelectricity we use at our sites came | play an even greater role in helping the world | | | from certified renewable sources. These are | tread a more sustainable, fairer path. We’ve | It’s impossible to talk about health and fantastic achievements, but our teams remain done a lot of work over the past couple of safetyand not mention the ongoing COVID-19 busy finding further ways to improve our years to put strong foundations in place. pandemic. Demand for our products has energy efficiency, source long-term There will be challenges as we move remained high and I would like to thank renewableelectricity and manage throughthis next decade, but there are everyone for continuing to protect one ourwaterand wastelevels. alsoopportunities. I know that our people another while keeping our sites running willrise to both. safely.I believe the dedication and care Meanwhile, we started work this year to they’ve shown are clear expressions of report in line with the recommendations of allourcore values in action. theTask Force on Climate-related Financial Disclosures (TCFD). This work focused onourgovernance, assessing our climate Synthomer plc ## Annual Report 2021 43 Business foundations ## Synthomer and sustainability continued ## Our approach to ## sustainability ### We want to embed ## Vision 2030: our roadmap to a more ### sustainability into every ## sustainablefuture ### aspectof our business, to ### helpus play a greater role We have developed our Vision 2030 roadmap to help guide our decisions over the next decade and set us on the path to net zero. It contains a series of targets across our three ### increating a fairer, more key areas: ### sustainable future and respond ### to the climate emergency. We will continue to increase the number of products we make that have sustainability benefits, and source more raw materials with ### Our commitment to net zero suppliers who have a sustainability rating and who share our ethical We made a public commitment in 2020 to standards: reach net zero by 2050, in line with the Paris Agreement. To achieve this, we are: • At least 60% of new products with enhanced sustainability benefits • 80% procurement spend with suppliers with a sustainability rating. • Using our innovation skills to develop new ### 1. Products products made with lower-carbon raw materials and more efficient manufacturing processes While aiming for zero harm, we will achieve top quartile performance • Ending coal use at our operations (seepage for personal and process safety. We will also drive down emissions 59 in our Operations section for more and minimise our broader environmental impact: information on how we achieved this | in2021) | | • Recordable injury case rate of no more than 0.20 per 100,000 | | --- | --- | --- | | • Starting work to define new science- | | hours foremployees and contractors | | basedtargets | | • Process safety event rate of no more than 0.10 per 100,000 hours | | • Using new sustainability scorecards to | 2. Operations | • 40% reduction in Scope 1 and 2 greenhouse gas emissions | | assess our innovation programmes and | | intensity (vs 2019) | | capital expenditure | | • 10% reduction in Scope 3 emissions intensity (vs 2019) | | • Establishing internal life cycle assessments | | • 80% of our electricity from renewable sources, plus improving | | to assess the viability and resource needs | | energy efficiency in all our operations | | of our products | | • Manage and minimise water consumption, and introduce water | | • Establishing partnerships with suppliers | | management plans in water-stressed areas and at the sites where | | todrive down emissions across our | | we use most water. | supplychain • Addressing end-of-life product We will become a more diverse and inclusive company, find new management across our markets ways to listen to our employees, and increase our support • Working to incorporate a carbon price into forlocalcommunities: our capital planning. • 50% gender diversity in leadership, management and professional And, as we grow and acquire new new hires businesses, this approach is part of how • 70% participation in our employee engagement surveys at global welook to integrate them into Synthomer. ### 3. People and country levels We introduce our tools and processes into • Provide volunteer support and financial contributions in excess new acquisitions to help them meet our of£1 million a year for local education, public health, diversity and sustainability objectives, which we expect environmental projects. them to do within three years of acquisition. In considering our approach, we concentrate The UN’s SDGs most relevant to our Vision 2030 goals on the issues where we can have the most impact and that are most material to our stakeholders. This year, we reorganised our priorities, moving from our six pillars to three key areas: Our targets are underpinned by a series of short-term objectives and 1. Products are aligned with the UN’s Sustainable Development Goals (SDGs) that 2. Operations are most material to our business. We outline these objectives and 3. People describe our approach to each of our material issues across pages 48to 68. Over time, and where appropriate, we will look to update andadd new short-term objectives as we move towards 2030. Synthomer plc ## 44 Annual Report 2021 Membership of industry associations Strategic report Governance Group financial statements Company financial statements Other information ### Governing our sustainability approach We work closely with the main sector groups in our industry, including the Chemical Industries How we oversee progress Association (CIA) in the UK, the European Over the past three years, we have evolved our governance structure to ensure sustainability Polymer Dispersion and Latex Association is discussed at the highest levels of the company, and to help further embed sustainability (EPDLA) in the EU, the American Chemistry into every aspect of our business. Council (ACC) in the USA, and theMalaysian Rubber Glove Manufacturers Association (MARGMA) and Malaysian Rubber Products ### Board of Directors Manufacturers Association (MRPMA) inMalaysia. In many cases, this work includes Responsibilities taking a seat on the sustainability committees Oversees our Group-level sustainability agenda. and actively participating in sustainability Actions workshops within these groups. Reviews sustainability topics at Board meetings, with particular focus on our most material issues. ### ‘Our commitment to ### sustainability can be seen ### at all levels of Synthomer ### Executive Committee Steering Group ### – from engagement with Responsibilities ### our Board and Executive Our CEO is responsible for delivering our sustainability agenda ### and meeting policy commitments on behalf of the Board, and leads Committee, to our frontline ### the Executive Committee Steering Group. employees. Finding ways ### Approves all sustainability-related strategic planning, including on climate-related issues. to help our business and Actions ### the products we make Reviews sustainability topics monthly/quarterly. ### creates a positive impact ### on the world around us. ### And ourteam of dedicated ### Sustainability Steering Committee ### sustainability specialists Responsibilities ### is growing across our This cross-functional group of senior leaders defines our sustainability targets and roadmap. ### global business, too.’ Coordinates sustainability activities across the business. Reports directly to the Executive Committee Steering Group. ### Susana Carvalho Actions Group Sustainability Director Our Sustainability Director hosts quarterly meetings of the committee to monitor progress across our business. ### Sustainability Delivery Board Responsibilities This Board consists of our Group-wide network of sustainability champions who manage cross-functional sustainability projects and programmes. Actions Our Sustainability Director hosts monthly meetings with this Board to discuss projectprogress. Synthomer plc ## Annual Report 2021 45 Business foundations ## Synthomer and sustainability continued ## Approach to sustainability continued Our materiality assessment ### Materiality assessment chart We assess our material issues every two years to ensure we report on those that matter most to our stakeholders. 7 13 We carried out our latest assessment in April 8 20 | 2021, speaking to a range of stakeholders, | | 19 | | 24 | | | --- | --- | --- | --- | --- | --- | | including customers, employees, shareholders | | | | 4 | | | | Very importantImportant | 12 | | | | | | | | 15 | | 9 | and legislators. During thisprocess we: 22 5 • Incorporated ‘Quality’ into ‘Customer 10 satisfaction and engagement’ and added 14 16 2 11 three new topics 1 • Focused on ‘Communication and training’, 23 3 to ensure clear understanding of our 6 17 procedures, targets and achievements 18 during our integration with OMNOVA • Introduced ‘Digitalisation’ to reflect new 21 opportunities to use digital technology toreduce our carbon footprint • Incorporated product life cycle Importance to stakeholders intoanew‘Circular economy’ topic. We sent an online sustainability survey to400people from our main stakeholder groups. We received feedback from 37%, which confirmed that these topics remain material. Our Sustainability Steering Committee reviewed concerns and suggestions raised by the survey to identify Important Very important potential areas for action. While we have Importance to company made no significant changes, we will give greater attention to ‘Community engagement’ and ‘Circular economy’. Materiality assessment Understanding our climate-related risks and opportunities Products Climate-related risks have always been 1 Sustainable procurement page 51 embedded in the principal risks of our Group | risk framework. During the last quarter of 2021, | 2 Technology and innovation page 48 | | --- | --- | | we expanded the framework to consider | 3 Manufacturing excellence page 54 | | abroader scope of climate-related risks as a | 4 Product safety page 50 | result of the work carried out to report against 5 Customer satisfaction and engagement page 50 TCFD. This helps us better understand what 6 Circular economy page 48 impact the climate emergency might have on Operations our business and ensure we remain resilient 7 Occupational health and safety pages 54 and 55 toclimate change. See our Risk report on pages 69 to 76. 8 Process safety page 56 9 Energy management and reduction page 59 In 2021, we met our objective, set out in our 10 Water stewardship page 60 Sustainability Report 2020, to begin reporting | against TCFD. This will help usassess any | 11 Greenhouse gas emissions reduction page 60 | | | --- | --- | --- | | future impact on our business arising from | 12 Waste generation and minimisation page 61 | | | technology changes and the financial impact | | People | | of carbon pricing. See pages 77 to 80 for our | 13 Ethics and integrity page 66 | | TCFDreport. 14 Communication and training pages 65 and 66 15 Employee conditions page 63 16 Diversity and inclusion pages 63 and 64 17 Talent development page 65 18 Community engagement pages 67 and 68 Strategy and governance 19 Sustainable growth pages 26 to 40 20 Risk management pages 69 to 76 21 Digitalisation page 66 22 Responsible and involved management from pages 83 to 129 23 Stakeholder involvement andengagement pages 96 and 97 24 Compliance pages 83 to 129 Synthomer plc ## 46 Annual Report 2021 Strategic report Governance Group financial statements Company financial statements Other information ### External benchmarking and accreditation ## Our approach ## to reporting and We obtain independent assurance of our sustainability practices and performance – andbenchmark ourselves against our peers so we can better understand our progress and ## assurance opportunities for improvement. We do this through voluntary participation in several external programmes (such as CDP) and by reviewing our ratings on several recognised indices such In past years, we have published a asISS ESG. separate Sustainability Report – the mostrecent being that for the fiscal year We engage with, and are assessed by, key sustainability ratings organisations: 2020, published in July 2021. Given the | We have reported our climate change performance to CDP since | importance of sustainability issues, and | | --- | --- | | 2013 and water management performance since 2015. In2021, | their relevance to our overall business | | weretained our B- score in both categories. | performance, this year we decided to | incorporate our Sustainability Report CDP – D to A (maximum) intothe Annual Report, with supporting technical information published as data We submit annual data to the EcoVadis platform and use its downloads on our website. assessment to identify ways to improve. In 2021, we improved This Annual Report, together with those ourscore from 58 to 63 and retained our silver status. We also downloads, meet the requirements of the usethe platform to understand the sustainability rating of existing Global Reporting Initiative (GRI). We have and future suppliers. prepared them to comply with GRI’s ‘core’ EcoVadis – scale 0-100, medals, bronze to platinum option, and the topics we cover are those we and our stakeholders have identified as the most material. The details of specific We have been a member of this organisation since 2004. In 2021, GRI disclosures can be found in the annex our overall score was 3.6. We remain committed to our membership on pages 184 and 185. and aim to improve our overall rating as we grow. FTSE4Good – scale 0 to 5 ISS Corporate Solutions uses a data-driven scoring system and screening analysis to evaluate our sustainability agenda. Our 2021 overall score was C-. This is the same as our 2020 score and continues to place us well above average in our peer group. ISS – D- to B- (maximum for our industry sector) MSCI measures our resilience to long-term, financially relevant sustainability risks. In 2021, we scored an ‘A’. This reflects our growing commitment to continuously improve our sustainability practices. MSCI – CCC to AAA (maximum) We were recognised with a London Stock Exchange Green Economy mark in July 2021. This is awarded to companies who earn more than 50% of their revenue from environmental solutions. It is designed to recognise both green technology companies and businesses across all industries that are making a significant contribution to the transition to a more sustainable, low-carboneconomy. October 2020 ## Green Economy Mark 1.0 Why has it been created? A growing number of companies generate commercial revenues from products and services that contribute to positive environmental outcomes, for example: renewable energy helps to mitigate climate change; recycling technologies reduce waste such as plastics; zero Synthomer plc emission vehicles contribute to improved air quality. ## Factsheet Green Economy Mark Annual Report 2021 47 8 October 2019 Asset owners and managers increasingly seek to deploy capital into these areas, based on expectations of investment returns being driven by trends such as changing consumer appetites, evolving technologies and financial risks relating to changing growth models. The Green Economy is diverse. Companies and investment vehicles of all sizes, in all geographies and across every industry are part of it. The Green Economy Mark (above) identifies London-listed companies and funds that generate between 50% and 100% of total London Stock Exchange’s Green Economy Mark harnesses the annual revenues from products and services that contribute to the diversity and breadth of commercial activity in the green economy. global green economy. Being cross-sector, no single, specific industrial classification is relevant. The underlying methodology is the Green Revenues taxonomy developed by FTSE Russell as part of the FTSE Environmental The Green Economy Mark enables investors to identify an investible Markets Classification System. It identifies industrial sectors and sub- universe of ‘green economy’ equities, enabling a broad exposure, sectors that are contributors to a greener, more sustainable economy rather than a focus on one area, such as renewable energy such as climate change mitigation and adaptation, water, resource infrastructure. Less obvious environmental solutions are more visible extraction, pollution and sustainable agriculture. and able to attract green or climate aware investors and capital. The 50%+ threshold for the Mark recognises businesses who have a material revenue contribution from the Green Economy. In this way it includes but also looks beyond ‘pure-play’ green or clean technology 2.0 How does it work? companies to highlight those of all sizes, across all industries, driving the transition to a sustainable, low carbon economy. London Stock Exchange’s Green Economy classification and Mark is available to all equity issuers on all segments of the Main Market and AIM that meet the criteria outlined below. It facilitates visibility and Through its consistent application across London Stock Exchange’s investment by addressing the information gap around what markets and segments, the Green Economy Mark and Green constitutes commercial activity relating to environmental solutions. Revenue tracking improves visibility to investors and other stakeholders that are interested in Green Economy activities. 1 Business foundations ## Synthomer and sustainability continued ## Products ### Delivering products that meet ## Innovating ### the ever-changing needs of ### ourcustomers and the markets ## sustainable ### they serve is essential for ### thesuccess of our business. ## products ### It hasalways been our goal ### tomake them using efficient As a leading supplier of water-based ## polymers, we have always been proud Our progress ### manufacturing processes ofourability to make products that have ## against2030targets ### andin ways that ensure sustainability benefits built into them. Our speciality chemical products provide ### theyare safe for people • At least 60% of new products with essential building blocks to support modern enhancedsustainability benefits. ### andthe environment. life.For decades, we have made most ofthem ina way that uses water rather than Now more than ever we strive to design solvents in their manufacturing and in their products and processes that are less energy end-use. This helps keep harmful volatile ### intensive, generate fewer carbon emissions, 2021 organic compounds (VOCs) out of the use fewer resources, eliminate substances atmosphere. It istestament to the talent in our ofconcern, and support a more circular innovation team that we continue to find ways economy. And we want to source theraw toadapt our existing portfolio while designing materials that we use to make those products ### new products with even greater benefits. Our short-term objectives from more sustainable sources. It iswhat ### ourcustomers are asking for, and our 2022 Product sustainability performance in 2021 otherstakeholders expect. Increasingly, In July 2021, we received the London Stock sustainability will become the benchmark • Technology platform to develop Exchange’s Green Economy Mark, which bywhich we assess every aspect of our products that contain a minimum of 20% acknowledges the fact that more than 50% productpipeline and supply chain. raw materials that come from low- ofour revenues come from environmental carbon sources. solutions. We are proud ofthisrecognition, but we know there is plenty more to do. It is our aim | to deliver an ever-more sustainable portfolio, | Setting a new baseline to track | | --- | --- | | so we have set a product sustainability target | ourprogress | | as part ofour Vision 2030roadmap. | Innovation is one of our five core values and | isan essential part of our plans to achieve We made good progress in our innovation ### ‘We made good progress our2030 targets. To track our progress over pipeline in 2021, launching 19 new products, the next decade, we need to understand our ### in our innovation pipeline of which 43% included a defined sustainability baseline. So we used our new sustainability ### in 2021, despite ongoing benefit. We also introduced new innovation scorecard to assess all our existing products awards, including a sustainability category. ### challenges related to and our development pipeline. See page 33 for more information on our Shield ### COVID-19 and global XSBR technology, which won this award in 2021 This exercise showed that across our byreducing exposure to substances of concern. business, 57% of all the new products in ### supply chain problems. ourpipeline today will deliver a net positive Our central innovation team also introduced ### For example, we’re sustainability benefit. Of those, 50% will asustainability scorecard to assess new improve carbon emissions or have a positive ### making new products to product ideas, and is developing in-house impact on the environment, 35% will reduce ### replace additives that capabilities to conduct life cycle assessments the use of hazardous ingredients, and 15% on existing and new products. This will help ### contain volatile organic will help create a more circular economy. us improve the way we report on the profile Many of these products will offer more ### compounds.’ ofour products and allow us to develop new thanone sustainability benefit. products with reduced carbon emissions. ### Marshall Moore Chief Technology Officer Synthomer plc 60%43% ## 48 Annual Report 2021 ### 2030 ### Target We know we will need to move at Strategic report Governance Group financial statements Company financial statements Other information rapidpaceto meet our 2030 target. Ongoing COVID-19 restrictions and global supply chain problems affected scheduling ofthe scale-up of new products in our plants and the ability of ourcustomers to evaluate them during 2021,resulting in a slower pace ofcommercialisation that will carry into 2022. But these delays have not halted progress altogether. We have a strong base on which to build, and our integration with OMNOVA has increased our capacity to design new products by 50%. Innovative products for a more sustainable future We continued to progress our innovation pipeline in 2021, designing and making products that replace ingredients of concern, have a lower carbon footprint, and help support a more circular economy. For example, we continued developing new products for water-based paints that remove the need for certain additives. While these additives help paint spread across a surface, they typically produce VOCs. Replacing those ## additives therefore means we can prevent even Our sustainability scorecard criteria more VOCs from entering the atmosphere. We now assess all the products in our innovation pipeline under four key areas: We are also making products that help support a more circular economy, such as TM Raw materials Eliminating ‘ingredients of concern’ (listed as high hazard or of our new SyNovus Plus product line, which ishelping to recycle rubber gloves into new regulatory concern) applications, including soles for safety shoes. Using raw materials from lower-carbon sources See page 12 for a case study. In addition, our central innovation group Manufacturing Ability to reduce energy consumption carried out initial research in 2021 to evaluate processes Ability to reduce water consumption abroad range of low-carbon-impact raw materials. This led to a shortlist of raw Ability to reduce waste in our manufacturing processes materialcandidates with potential for further development. Our divisional innovation teams Product safety and Product hazard classification (whether a product contains regulated are now exploring technically and support for circular hazardous ingredients) commercially viable opportunities. economy End-of-life management (e.g. longer product life cycle, better recycling Introducing our new product or biodegradable properties) sustainabilityscorecard | In 2021, we rolled out a new sustainability | Benefit to supply | Customers able to eliminate ingredients of concern or lower their | | --- | --- | --- | | scorecard to assess our innovation pipeline | chain and | product hazard classification | | against nine sustainability criteria (see box). | customers | | Helping customers use less energy or water, lower carbon emissions The scorecard is designed to give us a qualitative or waste, support the circular economy, or otherwise meet their indication of the net impact that a product may sustainability goals. have on our overall sustainability performance. Products are scored on a scale from -5 to +5 | (with +5 indicating a highly positive impact) in | Developing in-house life cycle assessment | out a cradle-to-grave life cycle assessment | | | --- | --- | --- | --- | | each area. Projects that have a negative | | | TM | | | We run our major product lines and strategic | onour SyNovus | Plus products. | | sustainability impact score are re-assessed | new products through external life cycle | | | These external assessments are useful, toidentify approaches to improve the score. assessment to help us understand their butthe cost and time needed make them sustainability benefits and identify areas As well as helping us set the baseline for our impractical for evaluating each product of forimprovement. In 2020, for example, the 2030 target, we are now using the scorecard interest. We have begun a project to develop European Polymer Dispersion and Latex toidentify opportunities to improve the new in-house life cycle assessments, starting Association’s cradle-to-grave life cycle sustainability credentials of existing and new with a handful of our biggest-selling products. assessment showed that our key emulsion products, compare them against alternatives, These assessments will improve our own polymers (typically used to make awide and share their benefits with our customers. understanding so we can report against range of products, including coatings, We have also introduced a similar scorecard to ourproducts’ sustainability credentials on adhesives, construction and non-wovens) help our sites assess the potential environmental anongoing basis and continue to develop perform better than the benchmark in all impact of large-scale capital projects (see page new products with even greater benefits. categories. Bureau Veritas has also carried 42 for more information on this scorecard). Synthomer plc ## Annual Report 2021 49 Business foundations ## Synthomer and sustainability continued ## Products continued Product safety The majority of our products are notclassified as hazardous, in accordance withthe Globally Harmonised System of Classification and Labelling, as they do not haveany components or additives that require labelling atthe concentration in which we use them. However, asmall proportion of what wesell contains hazardous materials, includingacrylic monomers. We provide customers with up-to-date, legally compliant safety data sheets for all products in all the markets wherewe operate. In 2021, we had no reportedincidents of non-compliance regarding our product safety information, labelling or marketing. ® ## Bio-based and circular: Suncryl HP-114 Less than 2% of our products contain | substances of high concern at a concentration | | | ® | | | --- | --- | --- | --- | --- | | | “Our Suncryl | | HP 114 water-based polymer | morerecyclable. In certain applications like | | higher than 0.1%. Wherever possible, we look | contains more than 56% bio-based raw | | | papertape, it can even be re-pulped and | | for ways to avoid using them at all. For example, | materials, making it a fantastic example of | | | reused in new paper products. So, it has | | in 2021 we completed the reformulation of our | how we can replace chemicals made from | | | real potential to help support a more circular | | sustainable coated fabric product line typically | fossil fuels with lower-carbon options. | | | economy. We’re so excited about that | | used in healthcare, office and hospitality | | ® | | | | | Suncryl | HP 114 is used inwater-based | | potential thatwe’re now exploring its use in | | furniture, to eliminate ingredients that we know | release coatings on paper or plastic | | | other applications, like variable information | | regulators are increasingly concerned about. | packaging tape (tocreate a non-adhesive | | | print labels, which can be customised | | To maintain our focus in this area, eliminating | surface that means the tape can beeasily | | | ondemand for fast foodorders or | | ingredients of concern isone of the nine | pulled free) and replaces traditional | | | warehouse shipments.” | | criteriain our product innovation | solvent-based release coatings. In other | | | | | sustainabilityscorecard. | applications, it can be used to replace | | | | | | release coatings that traditionally contain | | | Dr Carla McBain | Our statement on substances of very high concern can be found at www.synthomer.com silicone. This makes the final product, Vice President of Innovation suchas a self-wound adhesive label, forFunctional Solutions Following the UK’s transition out of theEuropean Union, Synthomer UK has completed the grandfathering of its existing EU | REACH registrations into the UK programme. | Europe, evaluating a new coating line and | We introduced several measures to | | --- | --- | --- | | We submitted more than 500 downstream user | transferring our technology from the USA | improveperformance at some of our sites. | | import notifications to the UK Health and Safety | toour Sokolov site in the Czech Republic. | For example, we rolled out our ‘problem grade | | Executive before its 28 October 2021 deadline. | | methodology’ to all our new sites. This helps | We track customer complaints as a The products thatwe make and/or import into sites fix the root causes of recurrent product measureof our reputation and success the UK now comply with UK REACH. orprocess quality issues. inthemarket. In 2021, we defined a new We also conducted a due diligence exercise ‘customer complaint rate’ baseline, to include We also established a ‘site-supported’ to ensure the products we make in the UK our legacy OMNOVA sites within our Group modelfor sites that need specific help. comply with EU REACH. This process and divisional performance metrics. This increased support from our central confirmed that all the ingredients in these functions that helps sites understand the root While the COVID-19 pandemic and products are either sourced directly causes of specific issues and provides more globalsupply chain difficulties continued fromtheEuropean Economic Area frequent monitoring of site performance and tochallenge our manufacturing teams, we orareregistered by Synthomer’s progress against agreed corrective actions. significantly improved our customer complaint OnlyRepresentative. This model has helped improve one site’s performance (number of complaints per right-first-time percentage by 10%, and an All legal requirements regarding provision of 1,000deliveries). We achieved this thanks overall Group-level improvement of 0.4%. safety information have been complied with, toseveral improvement programmes, including and we have had no reported incidents of adopting new hygiene best practice guidance non-compliance regarding product safety and performing specific process confirmations information, labelling or marketing. for critical-to-quality steps at some of our sites. As a result, our global complaint rate in 2021 Customer satisfaction was 4.1. This is more than 30% lower when Our innovation and manufacturing technology compared to 2020. teams and sales teams work closely with our | customers to understand the technical and | We also assess our manufacturing | | --- | --- | | sustainability challenges they face in their own | effectiveness via a ‘right-first-time’ rate | | manufacturing processes. This helps us keep | andscored 97.4% in 2021. This represents | | improving the products we make for them. | the percentage of products that are made to | | For example, we worked with a USA label | their correct specification inthe first instance. | | manufacturer to develop grades for clear | Here, too, we set new baselines in 2021 to | | filmic labels for use in the USA. We also | include our legacy OMNOVA sites in our | | helped them expand their business into | performance metrics. | Synthomer plc ## 50 Annual Report 2021 | | Our specialist procurement teams around the | 2021, andnow have 26% of our spend covered | Strategic report Governance Group financial statements Company financial statements Other information | | --- | --- | --- | --- | | Sustainable | world work with thousands of suppliers, and | byarating – some way ahead of our 2022 | | | | in 2021 we spent approximately £1.5 billion | objective. This is the first time we have | | | | with third parties. | beenable to assess our spend in this way. | | ## procurement In order to move these supplies, as well The platform also gives us an important asour products, around the world, we have newtool to assess potential suppliers to buy a range of logistics services across duringa competitive tender process and allforms of transport, including shipping, review our existing suppliers against externally railandroad. As well as the large, bulk recognised sustainability criteria. ### We are part of a global, highly shipments, we also buy and sell many raw ### complex supply chain. We rely In future, we plan to use the sustainability ratings materials and products at different quantities, platform to help influence and encourage our ### on our suppliers to provide including what is known as intermediate bulk, important suppliers to identify areas to improve or in drums and small packaging. ### high-quality raw materials, their performance and sustainability rating. Our factories rely on machinery to operate It will also help us identify suppliers who do ### goods and services, such safely and we need spare parts and site notmeet our minimum requirements. ### aspetrochemical monomers services to keep them in good working order. In the same way, our customers are using ### (including styrene, butadiene, As a large, multinational business we also similar ratings platforms to assess us and we need to buy corporate services such as ### butyl acrylate and acrylonitrile), are currently looking for opportunities to keep travel, IT, financial and, where necessary, improving our business. ### additives, packaging, weappoint specialist partners to help us. Addressing the carbon footprint ### machinery parts, gas and Our progress in 2021 ofourraw materials This year, we have achieved our commitment ### electricity to runour plants One of the most significant ways in which tobuy renewable electricity through a ### andensure our products wecan address the climate change impact combination of having renewable sources ofour products is through the raw materials ### meetthe standards our innew supply contracts, on-site or off-site that we use to make them. But this is also power purchase agreements (PPAs), ### customers expect. oneof our toughest challenges, since many andthrough the purchase of certificates. ofthese are derived from oil and natural gas. As aresult, 90% of all the electricity our As a result, more than 90% of all our GHG manufacturing sites and offices use comes emissions come from ourupstream supply from renewable sources, marking a significant chain. However, we arelooking for ways step forward in driving down our operational toidentify and source more sustainable greenhouse gas emissions (GHG). rawmaterials. See page 59 in Operations for more For example, our innovation and procurement information on whywe expect to see some teams are working together to identify and fluctuation in ourrenewable electricity ## Our progress source alternative raw materials that have a statistics over the next decade. lower carbon footprint. These could be made ## against2030 targets We also set important new sustainable from renewable sources, such as wood procurement targets and short-term objectives waste, be manufactured in a more energy • 80% procurement spend with as part of our Vision 2030 roadmap. efficient way, be sourced closer to our asustainability rating factories or contain recycled content. For the purposes of disclosure and reporting, | | we gather our Scope 1, 2 and 3 emissions | We can introduce some of these raw | | --- | --- | --- | | | data together in our Operations section | materials without significant investment. | | 2021 | onpage 60. We provide more detailed | One of the first steps we can take is to track | | | information on the work our procurement | theamount of raw materials with a lower | | | teamdid in 2021 to achieve 90% of our | impact in our supply chain using accounting | | | sitesbeing supplied by renewable electricity | principles and external auditing. For example, | | | onpage 60. | if we buy10% of a raw material with a lower | carbon footprint, we can state that 10% ### Our short-term objectives Tracking supplier sustainability ratings content in our products. This is often referred with new tools ### 2022 toas a ‘mass balance’ approach. In the past two years, we have taken steps to | • Audit five key suppliers’ sites | strengthen our focus on sustainability within | This is becoming an area of increasing | | --- | --- | --- | | • Ensure that all our highest risk suppliers | our procurement processes, including our | innovation, with growing interest from our | | adhere to our Supplier Code of Conduct | sustainable procurement policy, launched | customers and society in general, and it is | | or equivalent standards | in2020, and our conflict minerals policy. | something that our teams are working on | | • 20% of procurement spend covered | | closely with our suppliers and customers. | This year, we invested in a sustainability rating bya sustainability rating and platform to help us identify sustainability risk in One example of using this mass balance improvement plan our supply chain and we have started to track approach is the opportunity to buy a certain and report how much of our procurement amount of butadiene made from recycled ### 2025 | | spend is covered by a sustainability rating. | orbio-based sources, instead ofvirgin, | | --- | --- | --- | | • 50% of procurement spend covered | We have also revised our supplier risk | fossil-fuel-based sources. We plan touse | | bya sustainability rating and | assessment processes to include sustainability | thisbutadiene to manufacture our HSSBR | | improvement plan | risk so that we canuse the platform in the most | polymers, tomake foam for bedding. | effective way. We began using the platform in 80%26% Synthomer plc ## Annual Report 2021 51 ### 2030 ### Target Business foundations ## Synthomer and sustainability continued ## Products continued | This process is monitored and certified | In October 2021, our procurement leadership | We want to continue to improve our risk | | --- | --- | --- | | bytheInternational Sustainability and Carbon | team took part in a dedicated sustainable | assessment process and are exploring | | Certification forBiomass and Bioenergy, | procurement workshop to reassess the policy | waystocreate stronger connections between | | under its ISCCPLUS programme. | and set new performance measures that will | our Group and local site risk assessments. | | | help us realise our Vision 2030 targets. | This will allow us to better understand the | Once in full production, our customers will be supply chain risks we face at a local level, and able to declare a lower carbon footprint for Read our full sustainable procurement policy online at https://www.synthomer.com/fileadmin/ our central procurement team is now working their own products, using the same or similar files/company/group_policies/English/ closely withour sites on this issue. certification programme. Synthomer_Procurement_Strategy.pdf Taking a lead on sustainability issues It will take some years for alternative lower- Understanding the risks and inoursupply chain creates competitive carbon raw materials to become available opportunities in our supply chain advantage. Like us, our customers are atthe required scale and cost to transform our As Synthomer continues to grow in a lookingfor suppliers who are committed supply chains. And it is likely that governments dynamicenvironment, we need to stay tosustainability. That is why our innovation, will introduce further legislation, taxation and alerttochanges in the risks and opportunities manufacturing and procurement teams are incentives to drive future innovation and inour supply chain. Every year, we carry focusing on areas where we can increase growth, for example carbonpricing. outdue diligence to manage the risks related ourproduct sustainability and energy tobribery and corruption when working with Updating our policies to set clear efficiency, and lower our carbon footprint. third parties. | expectations | | The improvements we are making in the way | | --- | --- | --- | | We will only work with suppliers who act | In 2020, we asked external advisers to carry | we collect and analyse our sustainability data | | inaccordance with our new Supplier Code | out an independent assessment of our most | and use that information to make decisions | | ofConduct or who have their own codes | material sustainability risks. The assessment | will help us demonstrate progress and build | | andpolicies with equivalent standards. | identified carbon emissions and energy | our reputation. | | Our suppliers must also make sure that | use,waste generation, and logistics (e.g. | | Upholding human rights in our theirsubsidiaries and sub-contractors road transport, rail and shipping) as our top supplychain dothesame. three material sustainability risks. Our existing We believe everyone has the right to be treated measures and tools systematically identify, Our Supplier Code of Conduct sets out our with dignity and we respect and recognise control and mitigate these risks. For example, minimum acceptable standards on issues human rights for all as outlined in the we have processes in place to ensure we such as conflicts of interest, bribery and International Bill of Human Rights. We are also have alternative suppliers or substitute doing business in sanctioned countries. committed to acting in a way that meets the UN materials should we face any issues with We recognise that our position in our supply Guiding Principles on Business and Human existing orders. When a supply risk occurs chains means that we have the opportunity Rights. Our Group-wide diversity, human rights weidentify it as an incident and manage our and responsibility to work in partnership with and equal opportunity policy isaligned with responses appropriately. We then apply any suppliers, peers and customers to create a the UN’s Sustainable Development Goal 8. lessons learned from the incident to help more sustainable supply chain. And as we reduce the risk of it occurring again. We have We work in parts of the world where the continue to grow, we will use our global scale integrated the assessment’s findings into riskof human rights abuses is higher than and increased influence to make an even ourexisting risk governance processes by others. These risks are also higher in certain greater impact and reduce risk further. incorporating our largest waste and logistics sectors, such as road transport logistics, As well as our Supplier Code of Conduct, we suppliers into our sustainability ratings. construction and temporary sitework. have also published a sustainable procurement We also started using a sustainability policy, which we developed after completing risk-scanning tool in 2021 that helps us our last materiality assessment. The policy identify existing supply chain risks using brings together our expectations and targets in criteria such as geography and industry type. important sustainability areas that are directly This tool helps us spot broader sustainability relevant to our suppliers, such as safety, health risks in our supply chain, such as exposure to and environmental management, diversity bribery and corruption and human rights risk. andinclusion, and quality management. It alsosets out a series of objectives, such ascommunicating the policy to our procurement team and stakeholders, whichwehave achieved. Synthomer plc ## 52 Annual Report 2021 We do not tolerate modern slavery Strategic report Governance Group financial statements Company financial statements Other information andhuman trafficking in any part of our business or supply chain, as outlined in our 2021 Modern Slavery statement. We expect our suppliers to comply with all domestic employment legislation. They should also follow the International Labour Organization (ILO) conventions and protocols and the United Nations’ Universal Declaration of Human Rights that are relevant to their activities. These include: • Not using forced or slave labour, or anyother form of involuntary labour • Complying with all child labour laws, andbeyond that, not employing anyone under the age of 15 • Not allowing any activity that restricts freemovement. In 2020, we rolled out an updated due diligence process to a small number of our suppliers in China. In future, all new suppliers in China will have to complete this due diligence in order to work with us. | As part of our ongoing work to standardise | Our commitment to avoid using | | --- | --- | | the way we qualify new suppliers, we moved | conflictminerals | | our North America processes onto our global | Our conflict minerals policy commits us | | qualification platform in 2021. This platform | toavoiding the use of conflict minerals in | | contains a standard set of qualification and | allouractivities. This is relevant for gold, | | due diligence questions plus supporting | tin,tantalum and tungsten, known as 3TG | | evidence that the procurement team can | minerals, which can be mined in parts ofthe | | useto review and qualify suppliers. In all, | world where armed conflict and human rights | | 31sites now use the platform, and we have | abuses are known to take place. | plans forthe remaining seven to join within We continually assess our 3TG minerals. the next two years. This includes tin, which we use in one of Read our Modern Slavery statement online at ourmanufacturing processes and is also https://www.synthomer.com/fileadmin/files/ presentin other materials that we use, company/group_policies/English/Modern%20 suchas catalysts. Slavery%20Statement%202020.pdf Our policy also outlines our expectations of our suppliers, which includes conducting their ### ‘The steps we are own due diligence to verify the origin of their materials and provide certification under ### takingwill make recognised initiatives. ### sustainability part of ### everything we do in the Read our full conflict minerals policy online at: ### procurement function. https://www.synthomer.com/fileadmin/files/ company/group_policies/English/Conflict%20 ### This is transforming Minerals%20Policy%20Statement%20 Dec%202019.pdf ### theway we do business ### and will help to lower ### thecarbon impact ### ofoursupply chain ### ontheplanet.’ ### Dr Steve Blackburn Vice President, Group Procurement Synthomer plc ## Annual Report 2021 53 Business foundations Synthomer and sustainability continued # Operations We strive to make our products in ways that keep our employees, contractors and communities safe. Our ultimate goal is to have zero accidents and no adverse impact on the health of our employees or the people who live near our sites. It is also our goal to minimise the environmental burden of our activities and to reduce the consumption of resources. As the world responds to the climate emergency, it is more urgent than ever that we play our part and address the environmental impact of our operations. So, while we continue to use our innovation skills to make ever more sustainable products, we are also optimising our manufacturing processes to lower our carbon, water and waste footprint. We look an important step in 2020 when we announced our commitment to reach net zero by 2050, in line with the Paris Agreement. Now, our Vision 2020 roadmap, launched in 2021, sets out the path we will take to turn that commitment into a reality. The roadmap is made of a series of targets and short-term objectives, and our SHE-specific targets can be found in their relevant sections. ## Embedding SHE at every level of the business At Synthomer, everyone is responsible for SHE and we want everyone who works with us to feel able to speak up if they see unsafe or harmful behaviour. All our sites must align their processes and policies with our Group-wide Safety, Health and Environment Management System (SHEMS). Our President, Operations is responsible for internal SHE performance and management at an executive committee level. He is supported by a Global SHE Director and a small global team, as well as a SHE network that includes heads for each division. This network also supports site leaders and local SHE teams. ## Working with suppliers to meet operational SHE standards We expect our suppliers to work in a way that complies with our Group SHE policy and requirements, as set out in our sustainable procurement policy. This includes making sure suppliers have effective health, safety and environment management systems in place that are appropriate to the nature and scale of their business. We are also starting to gather data that will help us consider the carbon footprint of suppliers' products and processes when making our procurement decisions. Read our full sustainable procurement policy online at https://www.synthomer.com/fileadmin/files/company/group_policies/English/Synthomer_Procurement_Strategy.pdf See page 51 for more information on working with suppliers. ## Our SHE management systems We certify our management systems against several externally recognised standards and initiatives: - **ISO 14001:** today, all our operating sites are either covered by the Group's ISO 14001 certification or have site-specific certificates in place. - **ISO 50001 Energy Management System:** our UK, German, Czech and Le Havre, France sites are accredited to this standard. We continue to apply the lessons we have learned from this structured approach to other sites around the world. - **ISO 45001:** two of our sites in Italy and one in the Czech Republic comply with this standard to meet legal requirements. - **ISO 9001:** 93% of our sites are covered by the Group's ISO 9001 certification. Our SHE management systems, including those aspects linked to ISO 9001 and ISO 14001, cover common areas found within ISO 45001. Given that our internal audit processes look at all aspects of SHE management and the confidence we have in these processes, we do not intend to certify the Group to the ISO 45001 standard. We align our management systems with the global chemical industry's voluntary Responsible Care® programme to drive continuous improvement in safe chemicals management. In addition, seven sites in the US are conforming to the requirements of the American Chemistry Council's RCMS®. We are also a long-term signatory of the UK Chemical Industries Association's (CIA) sustainable development guiding principles. 54 Synthomer plc Annual Report 2021 Strategic report Governance Group financial statements Company financial statements Other information ## Health and ## safety Keeping our people and contractors safe is our highest priority. It is enshrined in our core SHE value that states ‘we always have time towork safely’. And it is the most mature aspect of all our sustainability activities: ourglobal employee survey tells us that employees understand our safety messages and their responsibilities (see page 65 for more onemployee engagement). We have incorporated occupational health and processsafety targets within our Vision2030roadmap. ## Our progress ## against2030 targets Continuing to support our employees recent years, we must continue to improve through COVID-19 toreach our ultimate aim of ‘zero’. Recordable accident case rate Throughout 2021 we adapted to living with 0.20 per 100,000 hours for employees In 2021, our recordable injury case rate (RCR) COVID-19, managing occupational health andcontractors fell to 0.31. This is largely due to improved bycontinuing to operate in line with local performance at our former OMNOVA sites, guidelines. In countries where employees which saw RCR fall from 0.64 in 2020 to 0.47. could return to our offices, we put in In all, we recorded 34 injuries in 2021, versus additional measures, such as one-way 37 in 2020. | | 0.31 | systems at our sites, temperature screening, | | | --- | --- | --- | --- | | | | limits on the number of people in common | During the year, we reported no cases | | | | areas and more frequent cleaning of common | ofdisease caused by occupational factors | | | | contact points, such as door handles. | and there were no accidents resulting in | | Process safety event rate (PSER) | | At ouroperational sites, we continued to | fatality or permanent disability. | | (per100,000 hours for employees | | carryout COVID-19 risk assessments and | | Our occupational safetyperformance andcontractors) routine testing. Recordable accident case rate This was particularly important in Malaysia, Accidents per 100,000 hours where infection rates rose quickly across thecountry and at our sites. We introduced 0.16 weekly PCR testing at all our sites and distributed face masks to all employees everyFriday for use outside work. We alsoprovided extra disinfection andhygiene products on site, and every ### Our short-term objectives twoweeks handed out products to take | 2022 | home. As aresult, our COVID-19 infection | We track our recordable accident case rate | | --- | --- | --- | | • A recordable injury case rate of 0.30 | numbers inMalaysia fell steadily throughout | (RCR) forinjuries that need more than first aid | | • A process safety event rate of 0.14 | theyear. | treatment. Our figures include employees and | contractors working at our sites, as well as Later in the year, we participated in short-stay visitors, such as truck drivers and thegovernment’s national vaccination cleaners. While our metrics are in line with the programme, and 100% of our Malaysia USA OSHA standard, wereport our RCR per employees were fully immunised. This allowed 100,000 working hours, instead of the OSHA us to increase employee capacity at our sites, standard of 200,000. This isforhistorical inline with ongoing national rules. reasons linked to UK HSE reportingmetrics. Occupational safety We want our employees to go home safely at the end of every day. While we have reduced 2021 0.31 the number and severity of injuries over | 2020 | | 0.36 | | | | | --- | --- | --- | --- | --- | --- | | 2019 | 2030 2030 | 0.20 | | | | | | Target | | | Synthomer plc | | | 2018 | Target | 0.23 | | | | | | | | Annual Report 2021 | | 55 | | | 0.20 0.10 | | | | | | 2017 | | 0.13 | | | | | Synthomer acquired OMNOVA in 2020 | 2021 2021 | | | | | Business foundations ## Synthomer and sustainability continued ## Operations continued Throughout 2021, we used our process safety confirmation routines to help assure ourselves that employees who carry out critical operations have the correct knowledge and understanding of what they should be doing and how to respond to abnormal situations. We ran Group process safety training courses at our legacy OMNOVA sites in theUSA and Portugal, to explain the fundamentals of our process safety standard, principles and golden rules. We also worked with site teams to identify the barriers they have in place to prevent, control and mitigate identified potential major accident scenarios. We also carried out a review of our data relating to flammable losses of containment and tracked what are known as ‘weak signal’ PSEs, including reports of mischarge, high pressure, loss of cooling and failed reactions. These signals indicate weaknesses in our barriers that could lead toa significant PSE. After analysing mischarge events in 2021 ## Integrating a new business during a pandemic within one business division, we developed aself-assessment questionnaire tool. “Integrating a new business under normal would be working on site with our new This isnow being used by all our sites to circumstances involves a lot of time and colleagues to help embed our SHE culture. identify possible weaknesses in engineering, care. It’s not just about introducing new Throughout the year, the corporate team organisational or procedural controls that policies and processes, although that is an delivered hundreds of hours of virtual increase the risk of mischarge and action plans important partof the process. We also want training and support to sites globally, and in are being developed to close these gaps. | to help our new colleagues understand why | November we held a global ‘virtual’ SHE | | | --- | --- | --- | | our standards are so important to us so that | conference with well over 150 attendees to | Our 2021 process safety performance | | we can create a drumbeat of safety and a | share good practice and improvement goals | Process safety event rate | | consistent culture across our sites, so that | for 2022. It has been a challenge for | Events per 100,000 hours | | everyone is working towards our 2030 | everyone, but I think we’ve achieved ahuge | | | target for top-quartile performance. | amount under very difficult circumstances.” | | This work has been even more challenging Phil Wrigley during our integration with OMNOVA, since President, Operations and SHE ithas taken place in the middle of the COVID-19 pandemic. Ordinarily, our teams We record, rate and track our PSEs using a four-tier Process safety Synthomer monitors, reports and investigates scoring system. Tiers 1 and 2 (with tier 1 being more It is essential that we keep our equipment and all spills, ranking any loss against the severe) meet the International Council of Chemical Associations’ (ICCA) definition of a ‘reportable PSE’. plants in good working order to help prevent associated hazard of the material involved, process safety related incidents. We also aswell as quantity spilled, where the spill Tracking and auditing SHE performance strive to prevent the unexpected release of occurs and its actual impact. We collect, analyse and report on industry- dangerous chemicals in our manufacturing recognised leading and lagging indicators, Preventing and managing the loss of any processes. To that end, we carry out routine such as recordable injuries, reportable material (hazardous or otherwise) is an inspections and maintenance at all our sites process safety events andnear misses. important part of our SHE approach, which that help us spot warning signs so we can We record all incidents inour Group-wide iswhy we include it in our key performance address problems before they occur. accident and incident management system indicators. We analyse the root causes, such database. And we track our near misses on Our process safety event rate (PSER) as human factors or types of mechanical amonthly basis. This is astandard measure roseto0.16 in 2021 (versus 0.10 in 2020). failure, to identify appropriate site, business in our industry and one we use to identify In our legacy Synthomer businesses, our orGroup-level actions to reduce the potential occupational and process safety issues PSER rose to 0.13 (2020: 0.11) and at our for recurrence. before they become significant events former OMNOVA sites we saw a rate of 0.23. | | In 2021, we recorded 23 spills in our top | sothatwe can continue to improve our | | --- | --- | --- | | All of our reportable PSEs this year were | twotiers (covering reportable PSEs, high- | processes and barriers. | | releases which we contained on site. None of | scoring loss of containment and reportable | | While COVID-19 made it difficult to carry out them caused injury, damage or environmental environmental losses). None of these in-person site audits, we were able to carry harm. One-third of our PSEs occurred at one spillshadan impact on the environment. out remote auditing at eight sites, using digital site in the USA. In 2022, we will introduce a collaboration tools to work with sites and transformation project to help the site rapidly review their systems and documentation. improve its performance. Towards the end of 2021, we reintroduced face-to-face audits at three of our sites. 2021 0.16 2020 0.10 Synthomer plc | 2019 | | | 0.11 | | --- | --- | --- | --- | | | 56 | Annual Report 2021 | | | 2018 | | | 0.14 | | 2017 | | | 0.19 | Sharing lessons learned across Strategic report Governance Group financial statements Company financial statements Other information ## Synthomer Managing health and safety with strong Our 2021 global employee survey continued ## systemsand behaviours to demonstrate that our safety messages arewell understood across the business. Safe operations rely on clear processes and systems, and responsible behaviours. (Seepage 65 in our People section for Everyone at Synthomer is accountable for keeping themselves and others safe – from moreon our 2021 Your Voice survey). ourleaders to our site operators – and anyone can lead by example, regardless ofseniority. Sharing knowledge, tools and processes The combination of our SHEMS, safety leadership training and employee engagement help isanessential part of how we make sure us stay vigilant: wecontinuously improve in safety. That includes creating an open culture inwhich our employees Action Our expectations What we did in 2021 feel able to discuss data and progress. 1. A strong SHEMS Every site must align their standards and Carried out 11 Group In 2021, we introduced new measures to help policies against SHEMS. SHE audits, 8 remotely our leaders and operational teams learn from due to travel restrictions one another. We introduced new regional We conduct Group SHEMS audits over and 3 in person. Two process safety networks which meet on a athree-year cycle and expect sites to SHE audits were carried monthly basis to discuss performance and self-assess against changes and report out on our behalf in exchange good practices. Additionally, we non-conformance. China by a third party. have rolled out our ‘Yellow Book’ of common injuries across all our sites and continue to | share root causes of high-profile incidents | 2. Great leaders | Our leaders must commit to our targets, | To increase our focus on | | --- | --- | --- | --- | | internally, as well as lessons learned from | who are | demonstrate key safety behaviours and be | safety we carried out | | major industry incidents. | accountable for | open to change. | competence assurance | | | people, | | for two-thirds of our new | Other regular knowledge-sharing activities equipment and site leaders. include ‘code red’ calls for site leadership the environment teams which take place after any significant incident or series of related events, and our 3. Employee Everyone is accountable for safety at We introduced two new annual global health and safety conference. engagement Synthomer and we expect our employees to shopfloor engagement We also look for opportunities to share good andtraining identify and address specific risks and tools at our sites: practice with our industry peers. For example, adopt key behaviours. Workplace engagement we shared some of the tools we have developed Employees must follow our 10 SHE checklist to identify and to manage the COVID-19 pandemic, such as principles and our golden rules. address specific on-site on-site lateral flow testing programmes, with occupational health Chemical Industry Association members via Site leaders must host quarterly safety hazards. their weekly COVID-19 operational calls. committee meetings with employees to discuss local safety issues. Embedded process Maintaining our focus as we grow safety confirmation As we grow and integrate new businesses, routines to provide we want to ensure that we continue to embed assurance that consistent, high-quality safety standards and procedural and processes across the Company. But this organisational barriers takes time, and we expect our metrics to against major accident fluctuate over the next few years as we carry hazards remained robust. out this work. While our Vision 2030 targets represent top-quartile industry performance, they also reflect this expectation. We are particularly pleased with progress atone We are now using the lessons we have of our sites in Portugal, which had theworst learned from Portugal and our broader We have seen this most recently during occupational safety performance anywhere integration work to create a more structured theOMNOVA integration. While our 2021 SHE inSynthomer, with eight recordable injuries safety programme to help new and existing incident rates are higher than expectations, in2020 alone. As well as the dashboard and sites that require specialist support. This will we have reduced the gap, thanks to our SHE training, we established a dedicated SHE be important in the coming months as we experts and legacy OMNOVA colleagues. transformation team, deploying on-site integrate the Eastman’s Adhesive Resins Together, they havefast-tracked gap analysis resources to help develop and introduce 90-day acquisition and begin the process of and action plans andintroduced a new targeted improvement plans. These plans cover embedding all our SHE standards and dashboard, which we will complete in 2022, all aspects of occupational and process safety, processes into our newest sites. to track progress againstnine core safety and included implementing new systems for elements, includingcompetence, legal permit to work and management of change, compliance, employeeengagement and carrying out process hazard assessments process safety.We also carried out site and reviewing risk assessments. The team leadership competency assurance for also strengthened existing workplace two-thirds of our new leaders to ensure they engagementactivities and introduced have the knowledge and understanding of the newones. As a result, the site experienced major hazard risks and required controls to one recordable injury in2021. keep our plants safe while we keep improving our performance. We will assess the rest ofour new site leaders during 2022. Synthomer plc ## Annual Report 2021 57 Business foundations ## Synthomer and sustainability continued ## Operations continued ## Environment Our water-based polymers help keep harmful ## 2021 environment Our progress volatile organic compounds (VOCs) out of the atmosphere. However, the raw materials and ## highlights against2030 targets manufacturing processes we use to make them can have a negative impact on the • Installed new gas boilers to allow closure 40% reduction in Scope 1 and 2 GHG environment – with more than 90% of all of the coal-fired power station emissions intensity (vs 2019) ouremissions coming from our supply chain. • 90% of total electricity used at our sites | is now renewable | | | We rely on monomers to make our products. | | --- | --- | --- | --- | | • Total CO | 2 equivalent emissions | | These molecules are traditionally made from | | decreased by 34% vs 2019 | | Target: | fossil fuels, which requires a significant amount | | | | 34% 40% | of energy in the conversion process. As the | energy still mainly comes from non-renewable sources, our monomers carry associated carbon emissions along the value chain. We also use a lot of water in our products andprocesses and require energy to transport 10% reduction in Scope 3 our products around the world. emissions intensity (vs 2019) | Externally assessed Scope 3 | We must find ways to address all these areas | | --- | --- | | emissions data for 2021 was not | ifwe are to realise our net zero ambitions. | | available at time of publication, but | It isalso good business: our customers are | | our data pack can be downloaded via | increasingly interested in the sustainability | | our website. For baseline Scope 3 | benefits of our products. | emissions data, please see our 2020 More information on how we are improving Sustainability Report, which can also the sustainable benefits of our products can be accessed on our website. be found on pages 48-53. Defining our ambitions ### Target: This year, we set new environmental targets in 10% areas where we can make the biggest impact, which includes water as well as carbon. These targets are part of our Vision 2030 roadmap and are supported by short-term objectives to help us track our progress 80% of our Electricity from (details can be found in the relevant sections). renewable sources plus improving energy ### 2030 efficiency in all our operations In 2022, we will also complete the work to ### Target: determine new science-based targets in line ### 2030 34% 40% with the objectives we set ourselves in our ### Target: 2020 Sustainability Report. 80% 90%* ### 2021 We laid a lot of groundwork in 2021 to ### 2021 improve how we track and report our 10% reduction in Scope 3 environmental data, as well as continuing | emissions intensity | (vs 2019) | | | | --- | --- | --- | --- | | | | this figure may rise and fall between | todevelop projects that help tackle our | | Externally assessed 2021 Scope 3 | | now and 2030. PPAs will become | environmental footprint. For example we: | | data is not available on time for the | | increasingly important to our energy | | • Met our objective to introduce a new publication of this report. For sustainability scorecard to help sites reference our 2019 Scope 3 upstream assessthe potential environmental emissions baseline is 1.79 tonnes impactof large-scale capital projects ### CO2e /produced tonne. Our short-term objectives 2022 • Launched a new environmental dashboard Please see our online data pack. | • Reduce Scope 1 and 2 intensity by 20% | to provide more accurate, frequent | | --- | --- | | • At least 50% of total electricity | environmental data at Group, divisional | | consumption from renewable sources | andsite levels | | • Improve specific energy efficiency by 5% | • Began assessing options to develop our | | • Evaluate Scope 3 emissions from three | own internal product life cycle assessment | | suppliers of our four main raw materials | (LCA) programme. | • Define medium- and long-term plan to reduce Scope 1 and 2 emissions 2030 *Fluctuations in the EAC market mean Synthomer plc ## 2030 58 Annual Report 2021 2030 Target: 10% management approach. 2021 10% reduction in Scope 3 emissions intensity (vs 2019) Externally assessed 2021 Scope 3 data is not available on time for the publication of this report. For reference our 2019 Scope 3 upstream emissions baseline is 1.79 tonnes CO2e /produced tonne. Please see our online data pack. 80% of our Electricity from renewable sources plus improving energy efficiency in all our operations 2030 Target: 80% 90%* 2021 *Fluctuations in the EAC market mean this figure may rise and fall between now and 2030. PPAs will become increasingly important to our energy management approach. | Introducing our project | Other factors also affected our 2021 | | Strategic report Governance Group financial statements Company financial statements Other information | | --- | --- | --- | --- | | sustainabilityscorecard | performance, including higher than average | ‘This year has been about | | | Following on from the successful roll out ofour | demand for our products in some countries. | | | ### setting ourselves new product sustainability scorecard (seepage 49), Keeping our plants full can typically lead to ### environmental targets we have introduced a similar scorecard to greater energy efficiency. However, the need ### assess capital projects. We will now review new tomaximise production at one of our sites and laying important projects against six criteria, including energy, meant we hadto introduce more intensive ### foundations. Now we emissions and water, scoring each criteria -5 to cooling, and,therefore, higher relative energy ### +5 (+5 representing the biggest positive impact). use, toreduce cycle times in our reactors. must get to work to Projects with higher scores will be considered Meanwhile, our operations were affected ### achieve those targets.’ more favourably during our screening and byongoing COVID-19 restrictions in countries Guy Scudder approval processes. In 2022, we will also look such as Malaysia and Vietnam and the Sustainability Manager, Group Operations | at incorporating a carbon price into this | Texaspower crisis in February 2021, | | --- | --- | | process to help align our projects with our | whichled to supply chain difficulties | | Vision 2030 targets and net zero ambition. | andstop/start operations. | | Updating our reported environmental data | As well as our project to install new gas | | This year, we are reporting metered electricity | boilers at our plant in Sokolov, we expect | See annex on pages 182-183 for our instead of primary electricity. several other projects to help reduce our UK-specific energy use data. energy use by at least 3% during 2022. We have amended our 2019 baseline values We are also planning to carry out detailed Metered energy use by division toreflect changes in our Company. In the first energy diagnostic work and develop site-level GJ/tonne quarter of 2021, we sold one site, stopped decarbonisation roadmaps, both of which production at a second and closed an office. willhelp us identify further opportunities We have removed associated data from our forimprovement. calculations to provide a more accurate | comparison. We have also made some minor | In future, we will expect our suppliers to | | --- | --- | | modifications due to reporting mistakes during | provide us with carbon metrics associated | | 2019 and 2020. The impact is limited (between | with their products so that we can report | | 1-3% depending on theKPI). | onthe carbon footprint we are passing on | toour customers. Our energy use and carbon footprint | Our absolute and specific energy | See pages 51-53 in our Products section | | --- | --- | | consumption rose this year by 4.7% and | formore information on the work our | | 2.4%respectively versus our 2020 numbers. | procurement teams are doing to help us | | While our energy performance is not yet | address Scope 3 emissions and support | | where we would like to be, we have, however, | amore sustainable supply chain. | made excellent progress in reducing our While we no longer include VOCs in our GHG GHGemissions. At the end ofthe year, calculations, we do continue to monitor them. wecompleted the installation ofnew highly We aggregate our number on a Group basis efficient gas boilers at our plantin Sokolov, and convert them to a carbon dioxide Czech Republic. Commissioning began equivalent (CO 2 e), using a factor of 11 – a inDecember 2021 with full operation figure used by UK CIA member companies inFebruary 2022, allowing us to close since 2005. CO 2 e emissions associated with ourcoal-fired power station. This eliminates VOCs in2021 were 6,548 tonnes (18% coalas an energy source from all our global increase vs2020). operations and willsignificantly reduce ourScope 1 emissions in 2022. We collect data on the release of refrigerant gases and aggregate these tocreate a Group Our second milestone saw a dramatic fall total. We convert each reported release into inour Scope 2 emissions – testament to aCO 2 e value using therelevant DEFRA GHG thework from our procurement teams to factor for the refrigerant inquestion. These buycertified renewable electricity. We now are included as Scope 1 emissions. In 2021, have 90% of renewable electricity usage they accounted for 1,805 tonnes, a 7% inour sites. This is well ahead of our increase versus 2020 and 30% reduction short-term2022 target to reach 50%. versus our 2019 baseline. The increase in both absolute and specific Total metered energy use energy consumption compared with the Gigajoules (GJ) per sales production tonne previous year is related in part to changes inproduct mix, with increased production ofsome higher-energy-intensive products. Several of these products have downstream sustainability benefits for our customers. Meanwhile, our laminates and films sites sawincreased demand, which led to higher energy consumption, and on the Group-wide intensity metric, a poorer performance. | 2021 | 3.16 | | | | | --- | --- | --- | --- | --- | | Performance Elastomers | 1.96 | | | | | 2020 | 3.09 | | | | | Functional Solutions | 2.28 | | Synthomer plc | | | 2019 | 3.08 | | | | | | | Annual Report 2021 | | 59 | | Industrial Specialities | 10.68 | | | | | 2018 | 2.47 | | | | (includes Acrylate 2017 Monomers) 2.51 Business foundations ## Synthomer and sustainability continued ## Operations continued | Scope 1 and 2 emissions (hybrid approach) | | | ways in which we are increasing the amount | | | --- | --- | --- | --- | --- | | Tonnes CO | 2 equivalent released per sales | | of renewable electricity at our sites. We have | Our progress | | production tonne (includes CO | | 2 from energy | also set up new supply contracts and on- and | | ## against2030 targets generation and use), and refrigerant losses. off-site power purchase agreements (PPAs), with solar panels installed at several of our • Manage and minimise water sites around the world and a long-standing consumption at all locations. PPA at our site in Stallingborough, UK. Introduce water management plans in EACs are a significant part of our short-to water-stressed areas and highest medium-term energy plans but, as a traded consumption sites. commodity, their price may rise and it may become more difficult to buy them in future ### Our short-term objectives | Scope 1 and 2 emissions by division | | as more companies enter the market. | | | --- | --- | --- | --- | | tonnes CO | 2 e/per sales production tonne | Fluctuations in the EAC market mean that | 2022 | | | | while we hit our 2030 target this year, we | • Maintain water consumption at 2019 | | | | anticipate seeing this figure rise and fall | levels | | | | between now and 2030. That is why, in the | • Carry out gap analysis of water and | | | | longer term, PPAs will become increasingly | effluent monitoring abilities at key sites. | important to our energy management approach. But they will take time to set up. We agreed a new Group-wide water Scope 1 and 2 – location-based and market- policywith our Sustainability Committee, Replacing natural gas is harder, since we based – GHG emissions have been verified whichwas approved by our Board needit to generate the heat required to bya third party. inDecember 2021. powersome of our chemical processes. See page 183 for information on our reporting We do have an advantage, since our Our water policy can be found online at https://www.synthomer.com/company/ methodology. processes run at relatively modest corporate-responsibility/group-policies/ temperatures. Here, too, we have the Scope 3 emissions optionin future to switch to renewable To address present and future challenges, we In 2021, we worked with a third-party electricity. Some options, such as electric carried out third-party-assisted assessments specialist to establish our Scope 3 emissions boilers, could involve significant capital at two of our seven sites located in water- forthe whole Group. This involved analysing 15 investment, however. stressed areas. These assessments explored categories that contribute to these emissions. the potential to introduce more extensive Given the diversity in application and end In the meantime, we are exploring possible water and automated metering and markets for our products, we do not have options that could help us capture and use infrastructure monitoring, as well as sufficient visibility of the emissions associated more of the excess heat that is a by-product in optionstoassess the sites against the with processing our products andtheir our exothermic reaction processes, and setting Alliance for Water Stewardship framework. end-of-life treatment. up projects to improve our energy efficiency. For example, at our largest site in Malaysia, We will continue this work throughout 2022, Preliminary data from this assessment projects are underway to optimise the way exploring options at some of our other key sites, indicates that, overall, in 2021, our Scope 3 weuse our chillers through improved data as well as developing upgrade proposals and emissions were up to 10%* lower versus our monitoring and process control, with the aim assessing water balances and opportunities 2019 baseline. This is largely due to reduced ofmaking them 5-10% more energy efficient. to reduce and reuse water. carbon intensity in the mix of monomers we used during the year. We also have an opportunity to become Our water performance in 2021 muchmore energy efficient as we grow. Overall, we saw an 8.6% increase Scope 3 emissions account for more than 90% Integration allows us to improve production intotalwater withdrawal at our sites. of Synthomer’s total emissions and of those, processes or upgrade equipment at new sites, Overall production rose 2.2%, which led more than 90% come from the goods and while introducing our standard tools, policies toa6.2% increase in specific water use services we buy. Which means that upstream and processes to embed Synthomer’s culture in2021 versus 2020, and 8.6% versus our categories are most relevant to our business. of manufacturing excellence. All our existing 2019 baseline. Our water withdrawal statistics Our innovation and procurement teams are sites in theUSA have signed up to the rose in 2021, with our most significant actively looking for alternatives that could help Department ofEnergy’s ‘Better Climate’ increases occurring because of specific rapidly reduce our Scope 3 emissions. | | pledge to reduce emissions and improve | events at some of our Synthomer sites. | | --- | --- | --- | | Read our full Scope 3 emissions report in our | energy efficiency by25% over the next | For example, in France and the UK, we saw | | online data pack. | 10years. | rises at two of our sites due to the impact | oflow rainfall on our reserves and the need * The actual percentage will be subject to change Water when presented in the data pack. toensure we had water available for water We need a significant amount of water to make treatment and effluent dilution. We saw our polymers, which help avoid more harmful Changing our approach to energy ourmost significant increase at one of our solvents entering the atmosphere. We also use toaddress future emissions German sites, which is currently using river a lot of water in our manufacturing processes, Renewable energy attribute certificates water for ‘once-through’ cooling. A 13% rise such ascoolingand steam generation. (EACs) are traded on the open market and in production combined with relatively warm Given ourconsiderable reliance on water, helpcompanies like ours prove that our temperatures meant the site had to increase wehave a particular responsibility to use electricity is made from renewable sources. its water withdrawal by 25% to meet its thisnatural resource carefully. While buying certificates in this way is a cooling needs. The site has now set up a well-established process, it is just one of the project to assess alternative, more efficient options for cooling. | 2021 | | | 0.153 | | --- | --- | --- | --- | | Performance Elastomers | | | 0.079 | | 2020 | | | 0.216 | | Functional Solutions | | Synthomer plc | 0.102 | | 2019 | | | 0.232 | | | 60 | Annual Report 2021 | | | Industrial Specialities | | | 0.610 | | 2018 | | | 0.195 | (includes Acrylate 2017 Monomers) 0.201 | At our legacy OMNOVA sites, a combination | Our waste performance in 2021 | | Strategic report Governance Group financial statements Company financial statements Other information | | --- | --- | --- | --- | | ofhigher production (compared with 2020) | We made changes to our 2019 baseline and | Our short-term | | | meant that our absolute volume increased. | our 2020 numbers to remove waste figures | | | ## objective to reduce However, some sites saw a double-digit from sites that have been closed and sold in improvement in their specific water use. As a the first quarter of 2021. This resulted in a ## waste: whole, these sites saw a 4.9% improvement reduction of about 1.1%. Our 2019 baseline in water withdrawal compared to 2020. and 2020 data also reflect corrections to ### 2022 reported data. This includes one significant We estimate that leaks in our water lines • 12% reduction of waste to landfill per waste stream inChina, which we previously accounted for 10-15% of our net additional produced tonne reported as wastebut was, in fact, recycled water withdrawal this year. As part of our at our site. This reduced our waste figure commitment to our new water policy, we byafurther 1.7%. Waste disposal to landfill arelooking to improve the way we monitor Kg waste per sales production tonne | sites and establish more effective leak | Our total waste in 2021 was higher than 2020, | | --- | --- | | management programmes. Together, this | due, in part, to a 2.2% increase in production | | should help reduce the risk of leaks as well | across the Group. We saw a particular rise in | | asminimising their impact in future. | total hazardous waste because of two one-off | events – the disposal of old contaminated soil Total water withdrawal and raw materials, and the disposal of used 3 m per sales production tonne solvent from one of our sites after we were unable to identify a secondary buyer. We also | saw an increase at one of our sites in the USA | Total waste and waste to landfill by | | --- | --- | | after we identified gaps in our historical waste | division | | tracking amounting to 850 tonnes total waste | Kg per sales produced tonne | and 500 tonnes of additional landfill waste. With more robust measurement, tracking and analysis of our data now in place, we do not Water withdrawal and consumption expect to identify errors of this kind in future. Functional Solutions bydivision 3 m per sales production tonne Overall, the outlook against our 2019 baseline remains positive, with total waste around 15% lower on an absolute and per tonne intensity basis. Meanwhile, waste to landfill is down 17% per tonne ahead of our 2022 objective Functional Solutions of12%. This overall trend reflects product quality improvements at a number of sites, aswell as greater re-use of by-products that we would previously have disposed, and projects to reduce solid waste generated byour wastewater treatment plants. Waste Total waste Our sites look for ways to reduce waste at Kg per sales production tonne source. For example, our site in Le Havre, France, reduced material out of specification by morethan 350 tonnes compared to 2020. Sites also look for opportunities to support amore circular economy, by recycling and recovering waste where possible or finding potential buyers for waste streams. We are also developing several projects to identify ways in which we might reduce and treat thethree most significant hazardous waste streams within our Industrial Specialities division, which account for more than one-third of our Group total. | | | 10.53 2.33 | | | | | | --- | --- | --- | --- | --- | --- | --- | | Performance Elastomers Performance Elastomers | | | | | | | | | | 1.11 0.96 | | | | | | | | 23.39 5.45 | | | | | | 2021 2021 2021 | | 6.28 4.39 | 23 | | | | | | | 11.63 0.80 | | | | | | 2020 2020 2020 Industrial Specialities Industrial Specialities | | 5.96 4.13 | 22 | | | | | | | 70.59 9.02 | | | Synthomer plc | | | (includes Acrylate (includes Acrylate 2019 2019 2019 | | 7.58 4.04 | 27 | | | | | | | 2.72 9.83 | | Annual Report 2021 | | 61 | | Monomers) Monomers) | | | | | | | | 2018 2018 2018 | | 5.08 3.90 | 22 | | | | | 2017 2017 2017 | Withdrawal Consumption Total waste Waste to landfill | 3.57 3.79 | 19 | | | | Business foundations ## Synthomer and sustainability continued ## People one with a clear set of shared values; where ### Our success relies on ### every employee feels engaged, empowered ‘Our goal is to establish ### ourtalented employees. and valued, and sees opportunities to ### an inclusive culture where ### We willneed plenty more develop their career. We are focused on ### our people feel valued, building a diverse talent pipeline, developing ### oftheir skillsand experience ### leadership skills, creating efficient and engaged, empowered and ### aswe continue to grow, effective organisational structures and ### able to use their strengths processes, and creating a winning culture. ### integrating new businesses ### This will take time, and to support our work to help Synthomer to ### likeOMNOVA andEastman’s we have incorporated two of our employee ### thrive. Our core values are ### Adhesive Resins. targets into our Vision 2030 roadmap. ### our guiding compass: they These acquisitions are changing Synthomer’s At the same time, we want to take a ### describe what we aspire | scope and scale. Indeed, once the transaction | morestrategic approach to our community | | | --- | --- | --- | | with Eastman is complete, 25% ofall our sales | engagement, applying lessons learned from | to as a company and what | | willbe based in the USA and our global | ourSynthomer Foundation to the way in | | ### is expected of each of us.’ workforce will be three times largerthan which we provide funding and support for ### itwasjust six years ago. local community activities. Here, too, we Matt Freeland haveset a community-based target as part Group HR Director If we are to take full advantage of our new ofVision 2030. scope and scale, we need to ensure we have a consistent culture across the Company – People at a glance ## Our values In 2020, we launched our five core values, designed to support our purpose ## 4,632 employees Accountability ## 1.21% turnover Innovation Integri t y ## SHE ## 13.2% new hires Teamwork ## 67% | under collective bargaining agreements | Safety, health and environment | Integrity | | --- | --- | --- | | | – we always have time to work safely | – we act with integrity and show respect | | | Innovation | Accountability | | 60 | – we welcome change and new ideas | – we deliver on our promises | | number of years the Synthomer Foundation | Teamwork | | | has supported local communities | – we are stronger as one team | | To help teams get to know the core values, we have rolled out a structured workshop and discussion guide across Synthomer. And our values are now embedded in ourannual performance cycle, with all employees expected to assess their work against them. Synthomer plc ## 62 Annual Report 2021 Strategic report Governance Group financial statements Company financial statements Other information ## Our Our core employee objectives ## employees ### 1. Build a sustainable, diverse talent pipeline Continuously improve our development programmes and ensure we have the right people with the right skills in the right job at the right time. ### 2. Strengthen leadership capability at all levels This was another busy year for our employees. Demand for our products was Help our leaders become role models, coach and develop their teams and lead the way high,especially in healthcare. And once insuccessfully driving our business strategy. again, our teams worked tirelessly to protect ### themselves and each other, and keep our 3. Drive organisational effectiveness sites running safely throughout the COVID-19 pandemic (see page 55 for more on our Strengthen our ability to manage business transformation in an agile way. COVID-19 safety and health measures). ### 4. Establish a winning workplace culture Nevertheless, we continued to make progress against our longer-term employee agenda, Where our people feel valued, engaged and empowered to use their strengths including the ongoing roll-out of our diversity tohelpSynthomer thrive. and inclusion vision and action plan, and the launch of our second Your Voice global employee survey. We also introduced new tools and processes tocreate a more structured approach to We have learned a great deal throughout ## thepast two years and are now developing Our progress career development – focusing particularly onearly careers, functional career paths, and along-term supportive workplace programme ## against2030 targets leadership skills to help develop our leaders to take usbeyond the pandemic. This includes of the future. And to ensure we have robust assessing employee data andemployee • 50% gender diversity in new hires in succession plans in place at all levels of the feedback on their needs andexpectations, leadership, management and business, we continued to develop our global examining our current resources and professional roles. talent toolkit and review process. identifying gaps, and benchmarking ourapproach against ourcompetitors. Supporting employee wellbeing | duringthe pandemic | Building a diverse, inclusive workplace | | | Target: | | --- | --- | --- | --- | --- | | COVID-19 has challenged everyone’s physical | Building a more diverse and inclusive business | | 20%* | | | and mental health over the past two years. | is key to our growth ambitions and our ability | | | | | Whether working from home or on site at one | to attract and retain the best people. In 2020, | | 2021 | | | ofour plants, our employees have had to | we launched our diversity and inclusion vision, | | | | | juggle everything from family care to health | and this year incorporated our gender target | | | | | worries to feelings of isolation. We are | as part of our Vision 2030 roadmap. This year | | | | | awarethat all these issues can have | has been about raising awareness to help | Our short-term objectives: | | | | repercussions on individual performance. | employees understand why it matters and | | | | ### 2022 therole they have to play. To continue supporting our employees’ mental We had an early opportunity to do this in • 25% female senior leaders health in 2021, we set up a number ofcountry- specific programmes, including a new March 2021 with a series of events around ### 2025 well-being hub for UK employees located the world to mark International Women’s Day. In June, we celebrated Pride month and have • 33% female senior leaders onour Syntranet. The hub provides since set up a new LGBT employee group. • 20% senior leaders from ethnically information on Company-led programmes and And in December, we marked International diverse backgrounds resources, including our Employee Assistance Programme, as well as advice on issues Day of Persons with Disability, publishing likeresilience, healthy shift working newguidance on our Syntranet tohelp andasking for help. employees support their disabled colleagues, and sharing two new videos frommanagers Also in the UK, we ran a well-being calendar living withdisabilities. ofmonthly activities to highlight issues such | as fighting fatigue, personal fitness and | In November, our executive sponsor for | | --- | --- | | hydration. In Malaysia, we marked mental | diversity and inclusion, Rob Tupker, and | | health month with a series of talks to help | Group HR Director, Matt Freeland, launched | | employees identify ways to deal with stress, | anew global awareness campaign, hosting | | anxiety and burnout in the workplace. | aseries of calls with our top 100 leaders to | | Almost 100 employees attended the | discuss their role in supporting ourvision. | sessions. We also offered employees who came into contact with the virus access to counselling to talk to professionals about thechallenges they faced, and get medical advice and emotional support. 2030 50% Synthomer plc ## Annual Report 2021 63 *females in senior leadership Business foundations ## Synthomer and sustainability continued ## People continued Gender diversity ### ‘We know that diverse ### thinking and inclusive ### cultures create ### tremendous business ### value. It powers innovation ## and performance and 21% ### itwill drive Synthomer’s ### success in the future.’ ## Engender: our first Caroline Johnstone Chair of Synthomer’s Diversity and Female 976 ## employee group Inclusion Steering Committee Male 3,656 Total 4,632 “I’m proud to be part of Synthomer’s first employee group. We set up ENGENDER – our women’s network – to create a safe Gender diversity environment for discussion on issues that women face in the workplace and to help As part of the campaign we also shared support one another through our careers. additional tools and materials on topics such We’re delighted with the support received as unconscious bias and self-awareness via in organising a number of events on topics aSyntranet hub to help leaders support their such as imposter syndrome, and voice work to share our diversity and inclusion vision. and power for women in business. We are ## equally happy to have some men join our Meanwhile, we have started using a new 33% sessions, too. diversity and inclusion dashboard to track progress, spot gaps and improve succession Our first year was very busy, with regional planning. And we have established a new groups starting activities in the US and diversity and inclusion governance structure Asia, catering for local discussions and toensure we stay on course and embed face-to-face networking opportunities. Female 3 accountability for diversity and inclusion Male 6 One of our highlights was having Caroline across all levels of the business. The structure Total 9 and Holly, Synthomer’s Chair and one of includes a steering committee comprising our female Non-Executives respectively, Synthomer’s Chair of the Board, diversity andinclusion Executive Committee sponsor Gender diversity attend one of our panel sessions. It was afantastic opportunity for our network and Group HR Director, as well as a regional tohear about their career stories first network ofdiversity and inclusion champions. hand. We hope more people will sign Looking ahead, our plans for 2022 include upand help us spread the word.” newinterviewing skills and inclusive | Ana Perroni Laloe | recruitment training for hiring managers, | | | --- | --- | --- | | President, Industrial Specialities | inclusive leadership training and a new | | | | ambassador programme designed to create | 20% | opportunities for employees to share their personal diversity and inclusion stories. Our Board and Executive Committee will be involved and will regularly review progress. | Our diversity and inclusion | Female 10 | | --- | --- | | performancein2021 | Male 39 | | We are pleased that we met our 2021 | Total 49 | objective of 20% of women in senior leadership roles, finishing the year at 20.4%. In all, we saw a5%rise in the number of women in senior leadership versus 2020. We also appointed Lily Liu as our new Chief Financial Officer who will join Synthomer no later than 1 July 2022. Once Lily is officially | | Our diversity and inclusion vision | onboard, women will make up 44% of our | | --- | --- | --- | | | We value the difference everyone brings | Board. In February 2022,we also appointed | | | towork and are committed to creating a | Ana Perroni Laloe asPresident, Industrial | | | diverse and inclusive workplace, where | Specialities and she has now joined our | | Senior management Board All employees | people are supported to make their best | Executive Committee. We also met the | | | contribution in creating a vibrant and | expectations laid out in the Parker Report, | | | successful business. | byhaving at least one Board member from | anethnically diverse background. Synthomer plc ## 64 Annual Report 2021 | Employee engagement | We saw a rise in positive responses | | Strategic report Governance Group financial statements Company financial statements Other information | | --- | --- | --- | --- | | Listening to our employees helps us | inmanyareas, including diversity and | Our progress | | | understand what is working well and tells | inclusion, (12%), career progression (9%) | | | ## against 2030 targets uswhere we have more to do. But we need andcommunication (7%). We also continued tohear from everyone, so, as part of our tosee strong results in health and safety, • 70% employee participation in our Vision 2030 roadmap, we set a 70% target ethics, and values. All these results reflect the employee engagement surveys at forparticipation in our global Your Voice work we have done in the past few years to aglobal and country level. survey. We introduced our first survey in 2019. raise awareness on these important issues. With 63% taking part, it revealed areas of Our employees told us that they want tohear strength, such as our commitment to safety, more about the Your Voice results andwhat and areas for improvement, such as Target: we plan to do in response to their feedback. communication and knowledge sharing. 70% 73%* To this end, we are working with leaders in Good communication has become even our divisions and functions to provide relevant 202 moreimportant over the past two years data so that they can share and discuss withthe pandemic keeping many people specific topics with their teams. globally in 2021, not all participating athome, andrestricting our numbers on site. As part of our Board employee voice To help people feel connected and ensure activities, one of our Non-Executive Directors, they understand our priorities, we launched Alexander Catto, met groups of employees new quarterly (virtual) global townhalls personally in the UK and by video conference Early careers: helping graduates flourish during2021 hosted bysenior leaders. in Germany and the USA throughout the year. atSynthomer Around 1,000 employees attended each Discussions and feedback covered a range of Since 2018 we have expanded and improved townhall. We ensured employees could ask topics such as Company strategy, leadership, our graduate recruitment programme, looking questions before and during the calls and COVID-19, flexible working, diversity and at everything from when we recruit to how submit those questions anonymously if communication issues. wemake an offer. In that time, we have hired theywished. Employees were keen to hear around 50 new graduates, largely in Europe more on a number of issues, including our We look for other opportunities to hear from and Asia, with a 50:50 gender split and sustainability agenda, diversity and inclusion our employees. For example, we ran a survey avariety of ethnic backgrounds. | plans, and flexible working. While our leaders | in March and December 2021 asking our UK | | | --- | --- | --- | | answered questions duringthe calls, we also | employees what they thought of our support | We have also created a blended development | | intend tofeed some ofthese topics into future | for them during the pandemic. Most feedback | plan, providing graduates with a combination | | communications tocontinue raisingawareness. | was positive: 65% said they had attended one | of mentoring programmes, and on-the-job | | | of our resilience workshops, and more than | and workshop-style training in areas such | We also relaunched our internal Syntranet half said they would do something different asnetworking, managing others and site, creating one global site for all our based on what they had learned. However, a businessacumen. employees. It contains news and key minority told us that they want us to do more information on important areas such as Functional excellence: consistent on flexible working. This is something we are ourstrategy, Code of Conduct and policies pathways for all assessing as part of our supportive tohelp ensure everyone has access to a Our Group HR team is also working with workplace programme. consistent set of messages and guidelines. ourfunctions to develop new ‘excellence’ Career development and training frameworks that set out clear career What we heard from employees in 2021 We have a good record of attracting new pathways through each of the functions Our second Your Voice survey ran in talent. Fairness in progression and promotion andthe standard of skills we expect. A new December 2021. We were very pleased isessential, so at a corporate level we are Functional Excellence Steering Committee is thatwe exceeded our 2030 target at a global introducing new digital tools and processes, coordinating this work across the Company. level, with an overall response rate of 73% including a new global HR information Our manufacturing and commercial functions fromour employees. This was achieved by system.We also continued our global talent were the first to launch their frameworks in anextensive multi-channel communication review in 2021. As part of that review, we 2021. Our commercial function appointed a campaign delivered across the business, introduced a new ‘talent toolkit’ to help our dedicated excellence director and ran its first which included manager briefings, messaging leaders and managers assess gaps and training sessions on contract management via our Syntranet and poster campaigns. opportunities in areas such as succession viaa new academy. Not all countries achieved a 70% response planning and personal development plans. rate and that will remain a focus forfuture We want to do more to help retain a larger surveys. The survey included some new percentage of our graduates and address questions on topics such as our core YourVoice feedback, which tells us values,to help us learn how well employees employees want to see more opportunities understand them. incareer planning and development. We are currently focusing on three key areas to help our people make progress: early careers, functional excellence and leadership. 2030 1 Synthomer plc ## Annual Report 2021 65 *While we exceeded our Your Voice target countries reached 70%. Business foundations ## Synthomer and sustainability continued ## People continued | Leadership: training the leaders | Ethics and compliance | Our anti-bribery, corruption and competition | | --- | --- | --- | | oftomorrow | We published our current Code of Conduct | law policies are important parts of our Code | | Because we are growing so quickly and | in2018. It is available in 14 languages, both | and the scenario-based workshops and | | integrating new acquisitions, different | online and in print. We plan to review and | e-learning that we run as part of our Code | | leadership styles, approaches, and even | refresh the Code later in 2022 and launch | ofConduct training. We will continue to | | language, can become part of daily business | anupdated version in 2023. | support employees who are more exposed | | life. This can make it difficult for newer leaders | | tocompetition law risk with additional, | Our 2021 Your Voice survey showed that 87% to know what is expected of them. To address specific e-learning modules and of employees understand how the Code this, in 2019 we introduced six leadership face-to-face/online workshops. applies to their job, while 81% know how to attributes, including inspiring vision and report suspected unethical and/or unlawful In 2021, we launched a short campaign to purpose, settingstandards and dealing business practices. remind employees of our policy on gifts and withambiguity, to provide a common hospitality as set out in our Code. As part of language and consistent behaviours for We promote our Ethics Helpline across this, we rolled out revised standard-form gifts allleaders at every level of our business. thebusiness, including through our Code. and hospitality registers. | Alongside our core values, we are also | In 2021, we launched a new ‘protection from | | | --- | --- | --- | | usingour leadership attributes as a way | retaliation’ policy to continue encouraging | We also published new internal guidance | | ofassessing potential newrecruits. | anopen and transparent culture within | onhow to respond to, and manage, | | | Synthomer. We also updated the investigation | unannounced inspections from regulators | | | process that supports our helpline to ensure | (so-called ‘dawn raids’), which will be supported | | | clear lines of responsibility and that reports | by a phased roll-out of training, starting in 2022. | | | are followed up in an appropriate manner. | And we ran our first campaign on the United | Nations Anti-Corruption Day, which included Continuing to provide anarticle onour Syntranet and on social media. compliancetraining | During 2021, we continued to develop our | Making changes to support our | | --- | --- | | e-learning offer, which included the launch | compliance programme | | ofrefreshed modules on anti-bribery and | We appointed a Global Compliance | | corruption and anti-competitive practices. | Managerin 2021 to help us navigate the | | Our Learning Management System helps | changing regulatory landscape as we | | ustrack training completion and escalate | grow.The manager will lead our Group | | instances when required training is not | legaland compliance team’s compliance | | completed in a timely manner. In 2022, | work. Their initial focus in 2022 will be to | | weplan to introduce new e-learning modules | enhance our risk assessment and third-party | | for our Code of Conduct and GDPR/data | due diligence processes. | protection, which will replace our existing In December 2021, we established a new face-to-face and online training. compliance brand called ‘Syntegrity’, which aligns with our value of integrity. We are now ## Embracing digital using the brand to support our compliance initiatives. This includes a new quarterly ## resources to ## Our short-term ethics compliance blog for all senior leaders that ## support leadership willaim to communicate new compliance ## and compliance initiatives, remind employees about existing ## development policies and requirements and share lessons ## objectives: learned from recent reported cases. The blog “We believe in continuous conversations will also provide compliance topics for ### 2022 asakey driver for employee engagement. discussion at team meetings. | In that spirit, we expect our leaders to | • Deliver a plan to continuously improve | | | --- | --- | --- | | become coaches for ongoing staff | our compliance framework | See page 51–53 for more information on how | | development, providing regular feedback | • Enhance our risk assessment processes | we work with our suppliers to ensure high | | opportunities to their teams. Wehave | • Further enhance our compliance training | ethical standards, including respecting human | | launched a new leadership development | • Review our Code of Conduct for | rights. | | portal, which contains awealth of useful | 2023relaunch | | resources and tools. The next generation ofSynthomer leaders will particularly benefit from our ‘first-time leader’ roadmap, which provides practical guidance on coaching others. Our learninganddevelopment team heldaseries of global briefing calls to help leaders at all levels start using the portal.” Christoph Bartels Director Talent Development Synthomer plc ## 66 Annual Report 2021 In the 60 years since it was first created, the Strategic report Governance Group financial statements Company financial statements Other information ## Our Foundation has changed hands – and name ‘Sixty years is an amazing, – several times, but its mission remains the ### notable achievement; same: to support non-profit organisations ## communities andwe look forward who provide programmes and services that ### enhance the quality of lifefor those in need. tocontinuing this great At least 50% of annual funding is dedicated ### legacy of supporting toeducation initiatives, with the rest ### supporting arts, civic, health andhuman ourcommunities for We want the local communities who live service organisations. ### many years to come.’ nearour sites to see us as a good neighbour. While we have always looked for ways to Since acquiring OMNOVA, the Foundation has Theresa Carter support local projects, our acquisition of sparked a lot of interest from our employees in Synthomer Foundation President | OMNOVA has given us the opportunity | other parts of the world whowant to be more | | --- | --- | | toreassess our approach to | involved in their local communities. With more | | communityengagement. | than 40 sites and sales offices across the | globe today – and more to come as we Since 1961, the Synthomer Foundation continue to grow – Synthomer has an (formerly the OMNOVA Foundation) has acted opportunity, therefore, todraw on the One of the Foundation’s largest single as an independent endowment, providing Foundation’s experience to expand our donations wentto the American Institute essential funding for local community community engagement. ofChemical Engineers, which will receive projects, primarily in Ohio, USA. Over the around £70,000 over the next four years. years, the Foundation has broadened its And we want to take a more strategic This money will helptwo students attend a remitto support projects across the USA. approach to reflect our growth ambitions. Historically BlackCollege or University and So,we have set a community target as part participate ina leadership development ofour Vision 2030 roadmap. programme. Supporting communities – growing our Our annual highlight: Synthomer network in 2021 Caresweek To help us take a more strategic approach, This year, we ran our first Synthomer weused the Foundation’s governance Caresweek in May 2021, based on a structure to set up a new Synthomer-wide conceptfirst developed by our OMNOVA global volunteering network in February 2021. colleagues. During the week, employees That network includes a community around the world get involved in activities champion at each site, as well as three toraise funds, support local communities regional coordinators who meet quarterly andfeel connected to one another. todiscuss project proposals. Funding is approved by our executive sponsor after In the USA, for example, employees in ## Our progress | | aproposal from our Sustainability Director. | Ohiohelped sortdonated clothes and pick | | --- | --- | --- | | against2030 targets | In thisfirst year, the coordination group | uplitter for ahomeless shelter, while in South | | | identified site-level champions and aligned | Carolina, employees donated personal care | | • Provide volunteer support and financial | activities around our priority themes, | items toa women’s shelter. And employees | | contributions in excess of £1 million a | developing the tools to support the network | inPennsylvania donated just under 230kg | | year to advance education, public | ofvolunteers and capture their activities with | offood to a local food bank. | | health, diversity and environmental | neighbouring communities. | | In Malaysia, 43 employees took part in stewardship. | | In 2022, the network will prioritise local projects | acharity run during Synthomer Cares | | --- | --- | --- | | A significant proportion of this funding will | that support education. For example, in Vietnam | weektoraise money forCOVID-19 care kits | | be provided by the Synthomer Foundation | we are collaborating with several partners, | for20 less fortunate families. Support for the | | for community projects in the USA. | including the Ministry of Labour and Vietnam | runners was so positive that in the end they | | Based on the Foundation’s performance | Bank for Social Policies, to help poor and | raised enough to buy kits for 30 families. | | inrecent years, we expect that | disabled children continue their education. | The top five runners were also given | | contribution to be at least £850,000. | In Portugal, some of our employees are running | adonation to share with the charity | | | ‘lessons’ at local schools to help children learn | oftheirchoice. | more about our business. And in the UK, we Employees in Italy and Portugal maintained took part in British Science Week, hosting thatsense of connection later in the year, workshops for schoolchildren to help inspire £0.93m during a two-week exercise challenge. an interest in chemistry from an early age. Individuals recorded the time they spent Synthomer Foundation will continue running, walking or cycling via an app which tosupport more than 10 universities and Synthomer then converted into donations. colleges such as the University of Akron Participating employees could then choose andthe University of Wisconsin. which social organisation would receive the | Synthomer Foundation support in 2021 | funds. The winning teamwas given a 25% | | --- | --- | | Of the £930,000 that the Synthomer | bonus to donate totheir organisation. In all, | | Foundation gave in 2021, 56% of the funds | the two teams completed 1,093 hours of | | went to education programmes. The rest was | exercise and travelled a total of five million | | split between projects that support arts | steps, raising £1,560 in the process. | andculture, civic activities, and health andhuman services. ### 2030 ### Target Synthomer plc ## £1.0m+ Annual Report 2021 67 ### 2021 Business foundations ## Synthomer and sustainability continued ## People continued ### A snapshot of community activities at our sites While the COVID-19 pandemic meant we were unable to run community activities in some countries, such as Vietnam and China, many of ourcommunity teams around the world have continued to support local projects and organisations, while our employees have helped raise essential funds. Location Activity UK In December 2021, the operational team donated Christmas presents to a local school. Germany – Marl In November 2021, our site team provided volunteer support to help cleaning and rebuilding houses following devastating floods across Germany earlier in the year. Czech Republic – Sokolov Members of the operational team participated in Open Doors Daystohelp students understand more about our work at Sokolov. This included an on-site session for careers counsellors and chemistryteachers. France Three sites each donated €1,000 to Fondation de France to help families and schoolchildren particularly affected by the pandemic. Portugal We continued to play a role on the board of Grace, a non-profit association that promotes social responsibility and sustainability within companies. We also participated in working groups for the Portuguese Charter for Diversity and Inclusion, including helping to develop asocial responsibility good practice guide. Malaysia – Pasir Gudang Employees auctioned their skills, such as baking and painting, to their colleagues to raise money for Calvary Homes, an organisation that helps people who have been abused and abandoned by their families or face serious disadvantages. Together with matched funding from Synthomer, they raised £1,000. Malaysia – Kuala Lumpur Our community team ran activities to raise awareness about food waste and to support The Lost Food Project. As well as a talk from the organisation’s chief executive, employees took part in a challenge to reduce their own food waste. With matched funding from Synthomer, theyalso helped raise just over £1,000 for the project. USA – Akron and Mogadore 38% of the employees from these two sites have joined the initiative ‘Candy gram fundraiser’, raising more than $300 and providing 266 meals to people in need around the site. USA – Auburn Our colleagues in Auburn held an internal ‘corn hole’ throwing tournament to raise funds for Haven Heroes, a local organisation that supports educational success in primary schoolchildren. USA – Beachwood A colleague through the Employee Community Leadership Award raised funds for Pink Ribbon Girls who provide a range of support for breast and gynaecological cancer patients and their families. In total we donated $500. ## Building our volunteer ## network in Asia “In 2021, we took our first steps tomaking our communities network presence in Asia more prominent. There is still so muchto do, but we haveput some strong foundations inplace to continue on our journey ofgiving and contributing to the communities who live near our sites. Our position as a market leader in Asia allows us to be closely engaged with the communities, especially at the sites in Malaysia. I am grateful to everyone who has helped us get this far, but this is only thebeginning and we will aim togo further in future!” Emidiyana Ahmad Talent Development Executive and Asia CSR coordinator Synthomer plc ## 68 Annual Report 2021 Business foundations ## Risk management Strategic report Governance Group financial statements Company financial statements Other information ## Risk report ## Synthomer’s strategic objectives can only ## beachieved by taking anappropriate level ## ofriskinaccordance with ourriskappetite. How we manage risk We use leading risk management techniques which help us make good decisions about HighLikelihood + VelocityLow business opportunities while protecting oursites, systems, employees and other keystakeholders. Principal risk Trend 9 Volatility and see page 1 competition 72 Innovation & | | | see page | | 7 | | | --- | --- | --- | --- | --- | --- | | 2 | intellectual | | | | | | | | | 72 | | 6 | 1 property 11 Change see page 8 3 | programmes | | 73 | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | 5 | | | 10 | | | | | | 3 | 2 | | | Mergers & | see page | | | | | | 4 acquisitions 73 4 see page 5 People & talent 73 Loss or failure of see page 6 a Synthomer site 74 see page 7 IT security 74 Impact – Reputational/Financial HighLow Safety, health see page 8 & environment 75 The heatmap illustrates the relative positioning of our principal risks. This is based on the residual (net) ratings after taking into account any mitigating controls in place. The heatmap | | Security | see page | | | | --- | --- | --- | --- | --- | | 9 | | | | illustrates our principal risk positioning based on the three dimensions we use to assess our | | | of supply | | 75 | | risks: the likelihood of the risk materialising; its potential impact; and its velocity – the time between the risk crystallising and the impact being felt. Pages 72 to 76 provide more detailon Ethics and | | | see page | | our principal risks, activities undertaken in 2021 and planned for 2022, and the riskmovement | | --- | --- | --- | --- | --- | | 10 | regulatory | | | | | | | | 76 | in the year. | compliance see page 11 Financial risks 76 Synthomer plc ## Annual Report 2021 69 Business foundations ## Risk management continued ## Risk report continued ### Risk management framework ### Board of Directors Risk and Assurance Sets the risk culture and risk appetite. Has overall responsibility for • Establishes the risk reviewing and approving the principal risks. management framework • Provides guidance and ### Top-down challenge to divisional and ### Principal risks Audit Committee functional risk owners Supports the Board in monitoring risk exposure. Reviews principal • Aggregates risk information and emerging risks and the effectiveness of risk management and and assists management in internal control processes. Provides challenge to Executive identifying principal risks Management where appropriate. ### Executive Committee Reports on principal and emerging risks to the Audit Committee andBoard. Conducts top-down risk identification and review. Ensures risk management policy is implemented and embedded in the business, and appropriate responses are taken to manage risks. ### Bottom-up ### Risk assessment Division and functional risk owners Divisional and functional Responsible for risk identification, management and controls within their division and function. Identify and assess risks, determine and monitor risk responses and ensure operating effectiveness of key controls and progress of actions to manage risk. Risk governance and oversight reviews were also undertaken, these included Executive Committee Synthomer plc Board IT & Cyber Security, Innovation & Intellectual The Executive Committee is responsible for the The Board has overall responsibility for Property, Plant Control Systems, Business identification and management of our strategic, ensuring that risk is effectively managed Continuity Planning, and Pensions. The Audit operational, compliance and financial risks across the Group and for creating the Committee also reviews summaries of the using the risk management framework, and framework for the Group’s risk management work undertaken by the Internal Audit team, for ensuring risk management policy is tooperate effectively. The Board continues which operates a risk-based audit plan. implemented and embedded in the business. toset the risk culture and the risk appetite it The risk management system, Audit Division and functional risk owners isprepared to accept to achieve the Group’s Committee deep dives, and associated We have a structured risk management objectives, and the wider risk tolerance within assurance work are designed to ensure framework operated at division and which it empowers the Executive Committee thatrisk is managed within Synthomer’s Groupfunctional level. We use a standard to manage the business. In 2021, the Board riskappetite, rather than to eliminate risk methodology to quantify risk, with a risk completed a review and refresh of its appetite completely, and the Audit Committee and assessment matrix to ensure risks are by mapping its principal risks against a sliding other assurance reviews provide reasonable assessed consistently. scale from ‘risk-averse’ to ‘risk-neutral’, to assurance in line with good practice. ‘risk-taking’. This is now embedded in our risk management framework. ### Audit Committee Risk management methodology On behalf of the Board, the Audit Committee reviews and assesses the effectiveness of the Group’s risk management and internal control processes and monitors the Group’s risk exposure. In 2021, the Audit Committee continued its programme of deep dives Assess Monitor intoour risk management process, giving Determine Identify and and management the opportunity to explain response evaluate report directly to the Audit Committee the assessedrisks, associated controls in place,and any further planned mitigating actions. The AuditCommittee carried outdeep dive risk reviews for each of the Group’s divisions. Specialist functional risk Synthomer plc ## 70 Annual Report 2021 Our risk management methodology was Our key risks Strategic report Governance Group financial statements Company financial statements Other information Climate change reviewed and refreshed this year. The risk matrix We categorise our risks, taking into account We assess climate change risk as an previously considered two risk dimensions: the effectiveness of mitigating actions and integral part of our risk management the likelihood of the risk materialising, and its controls, in the following areas: processes. We have integrated climate- potential impact. In 2021, we updated the • Strategic risks that could prevent us related risks, including physical risks matrix to include a third dimension: risk velocity. fromachieving our strategic objectives. (primarily the potential impact of droughts Risk velocity considers the time between the • Operational risks which, if not successfully and flooding on business operations) and risk crystallising and the impact being felt. managed, would threaten our viability. transitional risks (primarily thepotential Divisions and functional departments conduct These relate to our ability to operate impacts of carbon taxes, market changes, their own bottom-up assessment of risks and asustainable and safe business. and environmental policy changes), into our record them in a risk register using the • Compliance risks where a breach of wider risk framework. They are reviewed in Group’s standard risk management regulations or laws could lead to fines from line with the Synthomer riskmanagement methodology. They assess risks at both an regulators, and reputational risk that may framework and governanceprocesses. inherent (gross) level and a residual (net) level, affect our standing in the investor and wider Having completed a thorough review of taking into account the mitigating controls in community in a disproportionate manner to climate risks and opportunities, we have place. Risk owners also identify any additional the size of the event leading to such damage. concluded that these risks would be most activities that could further mitigate the risk in • Financial risks relating to the funding and appropriately managed by including their line with our risk appetite, accepting that fiscal security of the Group. impact within existing principal risks, rather some level of risk-taking is necessary. | | During 2021, the Executive Committee and | than defining a separate climate change | | --- | --- | --- | | Three lines of defence – assurance | the Board carried out a robust assessment of | principal risk. We have therefore taken | | Synthomer operates a ‘three lines of defence’ | Synthomer’s principal risks and uncertainties. | theopportunity to update the definitions | | assurance model. As our first line of defence, | Following this review, we can confirm there | toinclude the impact of climate change | | our operational management and employees | are no changes proposed to our principal | inthefollowing principal risks: | | have a responsibility to manage day-to-day | risks. | | • Volatility and competition in chemicals riskin their own areas, guided by Group policies, The table on pages 72 to 76 provides more and polymers market procedures and control frameworks. Our second detail on our principal risks identified at the end • Innovation and intellectual property line of defence includes our Group Risk function, of 2021. Our Board and management consider • Mergers and acquisitions who develop and manage the risk management that these pose the greatest threats to our • Change programmes framework and engage with management to business and they score highest on our risk • Loss or failure of Synthomer site identify, agree and update risk information. assessment matrix. They fall into categories • Security of supply of raw materials, It also includes other compliance and assurance that relate closely to our business model. goods and services functions, for example Group Safety, Health Not all risks facing Synthomer are listed and • Ethics and regulatory compliance and Environment (SHE), Regulatory Affairs the risks are not listed in any order of priority. • Financial and ISO audits, who reviewthe effectiveness of mitigating actions and controls. The nature of risk changes over time with Throughout 2022, we will continue newrisks emerging and the impact of todevelop our approach to climate risk Our Internal Audit team provides our third line otherschanging. Our risk management reporting, to ensure the risk management of defence, providing independent assurance andassurance programme can only provide framework continues to address all on internal controls and risk management reasonable, not absolute, assurance that key relevant requirements of the Task Force processes. External assurance is provided risks are managed to an acceptable level, and onClimate-related Financial Disclosures byour statutory auditors, in respect of the therefore cannot provide absolute assurance (TCFD), which are discussed further on financial statements, and also by an external against misstatement or loss. pages 77 to 80. Failure to effectively specialist in respect of ISO standards. respond to this risk may compromise our Emerging risks Assessment of principal risks reputation and strategy for growth, so we In addition to known risks, we identify Risks affect us in many ways. Across our are closely monitoring this risk and will andanalyse emerging risks and the need business, we identify the likelihood, potential continue toevaluate whether this should formitigation as part of our existing risk impact and velocity of risks through our formal be considered a principal risk in the future. management processes. Emerging risks are twice-yearly risk assessment submissions by events that present uncertainty. They may divisions and Group functions. Management is potentially affect us in the longer term, but we also empowered and actively manages and do not currently have sufficient information to reacts to risks as part of normal day-to-day COVID-19 understand and assess the likelihood, impact decision making. We use the Group’s risk At the time of writing, the COVID-19 pandemic or velocity of the risk, ortodefine an methodology to assess the risks in all significant continues to impact the global economic, appropriate risk response. We continue to projects, including change programmes and social and political landscape. We will embed emerging risks inourrisk programme the integration of acquisitions. These reviews, continue to remain agile in managing the toensure they are appropriately considered together with our three lines of defence model, risksthat this presents. and monitored. In some cases, emerging enable us to establish effective controls to risks are superseded by others or cease to be We have reviewed the impact of the pandemic manage these uncertainties. | relevantas the environment in which we | on our principal risks to identify new | | --- | --- | | operate evolves and changes. We continue | opportunities or material changes to existing | | toreview and identify new emerging risk | principal risks. As with our assessment | | trends to evaluate theimpact and effect | ofclimate risks, our review concluded that | | theywould have, including any changes | COVID-19 would be more appropriately | | toour principal risks. | managed by including its impact within existing | principal risks rather than defining aseparate COVID-19 risk. We also took thisapproach in2020. We will keep this riskunder review. Synthomer plc ## Annual Report 2021 71 Business foundations Link to strategy Capacity Innovation and technical ## Risk management continued expertise to exploit new markets Capacity utilisation ## Risk report continued Driving efficiency and Bolt-on acquisitions/ excellence through operations Transformational transactions ## Strategic risks ### Principal risks and uncertainties Volatility and competition in chemicals Innovation and intellectual property This table shows the most significant risks and polymers market The Group could lose market share to other that affect our business. There are other, The markets we operate in are inherently producers of speciality chemicals if we fail lower-level risks that can have an impact volatile due to global macroeconomic and toinnovate new products that meet market onthe Group’s performance: these are political uncertainty, and we expect this needs and stakeholder expectations with alsoactively managed through our risk volatility to continue in 2022. Such volatility respect to differentiated performance management framework. may affect our raw material costs, volumes orsustainability. Shareholder value is and margins, potentially adversely affecting alsodependent on our ability to identify the results of the Group. The introduction of andprotect our own intellectual property acarbon tax could further affect margins. andensure we do not breach third parties’ intellectual property rights, which could lead The Group could lose market share to other to reputational damage and additional costs. producers of speciality chemicals if we fail toremain competitive. Link to strategy Link to strategy Change in risk No change Change in risk No change 2021 response 2021 response • The Group continued to maintain a largely • We enhanced our entrepreneurial, differentiated portfolio of products serving a customer-focused approach to innovation wide range of diverse global end markets. by implementing a Group-wide portfolio The successful integration of OMNOVA management process focused on significantly increased our presence in key alignment to business strategy, value North American and China markets. delivery, and sustainability goals. • Segment performance at business unit level • The global pandemic and supply chain is closely monitored and we take corrective disruptions posed a challenge to the launch of actions as necessary to mitigate the risk as new products. In the face of this challenge, our far as reasonably practicable. teams learned new ways of working remotely • We continued to review costs in our key and in hybrid work environments which has sites to ensure we can price our products strengthened collaboration between our competitively. innovation centres around the world. • A new central team was formed with the charter to investigate new product chemistries focused on climate change, sustainability, step-change performance enhancement, and inherently safer and more efficient processes. • We implemented new policies and enhanced procedures to ensure new innovations and trade-secret knowledge is protected and readily accessible for future innovation. 2022 plans 2022 plans • New product development and our • We will implement new elements of our acquisition strategy will continue to Innovation Excellence Framework which furtherdiversify the Group’s risk, including: establishes best practices for opportunity – The completion of the acquisition of identification, employee development, Eastman’s Adhesive Resins business, intellectual property and knowledge which will further add to our differentiated management, teamwork, product portfolio of products and global stewardship and laboratory safety. endmarkets • We will increase our focus on new TM – The roll out of SyNovus Plus will processes with the formation of an enhance our competitive advantage Advanced Process Innovation team intheNBR market. whichwill investigate step changes inprocess efficiency and sustainability. • Through these initiatives, we aim to increase the success rate of innovation programmes, accelerate the time to market,and deliver new levels of product performance alongside sustainability improvements inboth products andprocesses. Synthomer plc ## 72 Annual Report 2021 Strategic report Governance Group financial statements Company financial statements Other information ## Strategic risks Mergers and acquisitions (M&A) Change programmes People and talent retention The Group’s strategic plan continues to Poor execution of change programmes, People are a key asset for Synthomer include significant M&A to further grow, including capacity expansion projects, indriving our Company strategy to grow differentiate and diversify our business. thedelivery of streamlined and efficient andenabling us to operate in our diverse There is a risk that we fail to identify and standardised processes through our Pathway marketswhile complying with regulations secure any targets or identify the wrong programme, the rollout of our shared service andcorporate responsibility. If we are unable targets, pay too high a price, fail to integrate centres, and our ESG programmes, could toattract, retain and build our people acquired assets and drive planned synergies, affect our ability to deliver our strategy. resources, this could adversely affect the or encounter performance, funding, cash delivery of the Group’s strategic priorities. flow, or climate-related and environmental issues and potentially unknown liabilities. Link to strategy Link to strategy Link to strategy Change in risk No change Change in risk No change Change in risk No change 2021 response 2021 response 2021 response | • We successfully completed the central | • Continued commitment to our Project | • We deployed a standardised global talent | | --- | --- | --- | | integration activities related to the OMNOVA | Excellence methodology and robust capital | management process, and held talent and | | transaction in Q3 2021, delivering synergies | appraisal process have delivered a well- | succession reviews at division, function, | | ahead of plan and properly incorporating | controlled portfolio of capital investments. | Executive Committee and Board level. | | ‘the Synthomer Way’ into processes | • We have begun the migration of local entity | • We implemented Workday as a new | | andculture. | transactional finance activities into | globalHR Information System including | | • In October 2021, we announced the | centralised shared services and are | recruitment, learning, and talent | | proposed acquisition of Eastman’s | developing our business partnering | management modules with enhanced | | Adhesives Resins business and have begun | talenttomeet business needs. | employee data reporting and analysis | | working through the carveout separation | • We have successfully deployed our | capability. | | tofacilitate a close in Q1 2022. Integration | Pathway global template processes and | • We rolled out our Your Voice employee survey. | | planning for this acquisition is underway. | systems at our wave 1 sites in 2021. | • We launched an internal communication | | | • We have developed a mechanism to | improvement plan and recognition scheme | | | monitor progress against our ESG agenda | to drive increased employee engagement. | | | and goals. | • Our long-term incentive plan was extended | to former OMNOVA employees. • A single global LinkedIn contract was implemented with enhanced career page, functionality and recruitment tools, and a globalised talent acquisition process. 2022 plans 2022 plans 2022 plans | • The Group’s M&A activity and the | • We will complete our NBR capacity | • We will launch a standardised global | | --- | --- | --- | | completion of the Eastman’s Adhesives | increase expansion in Q1 2022 in Malaysia | performance management process to improve | | Resins acquisition and subsequent | and continue to develop our plans for | the consistency and quality of performance | | integration will continue to be closely | further NBR expansion in South East Asia | management, coaching and development. | | scrutinised by the Board. | and other territories. | • Work will continue on functional excellence | | • External advice will continue to be used to | • We will complete the migration of all local | with a specific ongoing focus on | | help identify targets, prepare bids, conduct | entity transactional finance activities to | commercial excellence. | | due diligence, and assess progress against | centralised shared services. | • We will deploy the 2022 Diversity | | integration plans and synergies. | • We will roll out our Pathway solution to | andInclusion (D&I) global action plan | | | further sites according to our deployment | witharange of initiatives and workstreams | | | strategy. | designed to increase D&I and therefore | | | • As part of our ESG agenda, we will develop | ourability to attract and retain talent. | | | science-based targets and track delivery | • We will use the results of the 2021 Your | | | against published goals. | Voice survey to develop and deliver an | action plan. Synthomer plc ## Annual Report 2021 73 Business foundations Link to strategy Capacity Innovation and technical ## Risk management continued expertise to exploit new markets Capacity utilisation ## Risk report continued Driving efficiency and Bolt-on acquisitions/ excellence through operations Transformational transactions ## Operational risks | Loss or failure of a Synthomer site | IT security | | --- | --- | | Risk events, including natural disasters (physical | An IT security breach that has an adverse | | chronic or acute climate change or | impact on our systems, including Enterprise | | environmental factors), pandemics (including | Resource Planning (ERP), SHE databases, | | COVID-19), safety incidents, failure of key | communications and industrial control | | suppliers or the supply chain, sabotage and | systems, may affect our ongoing operations | | cyber-attack, would have an adverse impact on | and result in a loss of intellectual property | | operations and business unit profitability. | orregulatory fines which might undermine | | There is a risk that our response does not | ourcompetitive position and cause | | ensure the site is able to return to its operational | reputational damage. | capacity in the planned time frame and that we suffer losses and reputational damage. Link to strategy Link to strategy Change in risk No change Change in risk No change 2021 response 2021 response • We have continued to use our crisis • We have continued to enhance our IT management procedures and COVID-19 security defences, including: response protocols to operate consistently – End of Life/unsupported hardware across our 37 manufacturing sites replacement throughout 2021, despite the ongoing – Multi-factor authentication with increased pandemic. security standards – USB mass storage device controls embedded to prevent data loss – Upgraded password standards – Anti phishing/fraud awareness campaign enhancing user awareness and response to phishing and social engineering attacks – Enhanced back-up and recovery standards across the Group – SAP disaster recovery testing programme executed – Firewall roll-out programme completed – Integration and standardisation of IT security across the enlarged Group. 2022 plans 2022 plans | • We expect to continue our COVID-19 | • We will continue to enhance our security | | --- | --- | | protocols into 2022. | defences through further security | | • Crisis management procedures are | investment and the ongoing implementation | | maintained throughout our operating | of the Group security risk reduction plan. | | network and we will implement them on day | Planned activities include: | one of our Eastman’s Adhesive Resins – Further enhancements to privileged acquisition. account management (PAM) • Continue to enhance business continuity – Training programme to increase plans. awareness of upgraded Group Acceptable Use Policy – Enhanced reporting against IT security key risk indicators – Additional crisis response plan scenario simulation and testing – Rolling out our DMARC anti-fraud email tool to authenticate email traffic. Synthomer plc ## 74 Annual Report 2021 Strategic report Governance Group financial statements Company financial statements Other information ## Operational risks Safety, Health and Environment (SHE) Security of supply of raw materials Our industry is inherently dangerous, involving goods and services the transport, storage and manufacture of A disruption in the supply of key raw materials hazardous chemicals. There is a risk that a or services to a manufacturing site could significant accident or environmental incident potentially affect our ability to make and deliver leads to injury to staff or local communities, products to customers, leading to interruption reputational damage, fines and loss of in supply, lost revenue and damage to our permissions to operate reputation as a reliable supplypartner. Potential factors which couldcontribute to such an impact include market shortages, short-term and/or long-term physical climate-related disruption of upstream supply chains, or disruption dueto global events. | Link to strategy | Link to strategy | | --- | --- | | Change in risk No change | Change in risk Increase | | 2021 response | 2021 response | | • We have continued to develop a central | • Our programme to diversify our supply base | | safety audit function dedicated to SHE | and reduce supply chain risk has enabled | | issues and provided support, advice and | us to respond to the challenges presented | | monitoring of all global sites. | by very high demand for many of our key | | Three additional specialist resources have | raw materials and supply chain disruption, | | been recruited into the central team to | and meant we could frequently approve | | support the organisation’s growth. | and access alternative sources when | | • We have completed nine SHE audits in | required. An active risk-based approach to | | 2021 using a mixed model of site visits and | diversifying our supply base remains a | | remote review due to COVID-19 restrictions. | strategic priority for our procurement team. | | • The OMNOVA site integration has | • We have standardised and strengthened | | progressed throughout the year with the | our supply risk tools for our important raw | | majority completing the integration process | materials, prioritised based on EBIT impact | | and moving towards normal operation. | at site level. In addition, we have integrated | | • SHE improvement plans have been completed | the findings of a sustainability materiality | | with all 290 major actionscompleted. | assessment, to ensure that we now include | | • The Group has continued to improve its | impacts such as climate change, and | | SHE performance with a 11% reduction | adopted the use of a full supply base | | ininjuries. | scanning tool for sustainability risk. | • We completed awareness training on our 2022 plans sustainable procurement policy and strategy within the procurement team. • We have specific 2022 SHE improvement • We have started to use a sustainability plans for the Group, for each business, and ratings tool to assess our high sustainability for all sites and labs. risk suppliers. • As part of an updated SHE strategy, we will implement a further detailed approach to 2022 plans operational safety with increased focus | and transparency of major risk controls | • We will use our risk assessment tools to | | --- | --- | | at key sites. | continue the programme to diversify our | | • We will launch an annual Site Health Check | supply base and reduce supply chain risk. | | process to assess key SHE performance | We will increase our focus on, and approval | | and processes at each site. This will be | of, alternative sources of raw materials. | | linked to a new Group Site Recognition | • Continuous review and improvement of the | | Award to encourage world-class | risk assessment process and adoption of | | achievement. | the sustainability risk ratings tool. | | • We will deliver a SHE integration of our new | • Develop a strategy for supplier audit and | | Adhesives Technologies division, with | assessment, and consider the adoption of | | planned actions to deliver a top quartile | any industry programmes and best practices. | | SHE performance within three years. | • Focus on Vision 2030 goal of ensuring 80% | of procurement has a sustainability rating. Synthomer plc ## Annual Report 2021 75 Business foundations Link to strategy Capacity Innovation and technical ## Risk management continued expertise to exploit new markets Capacity utilisation ## Risk report continued Driving efficiency and Bolt-on acquisitions/ excellence through operations Transformational transactions ## Ethics and regulatory compliance risks Financial risks Ethics and regulatory compliance Financial risks A failure to prevent anti-competitive practices, personal data breaches, bribery, tax evasion, As a UK-registered Group with a diverse product regulatory violations, other regulatory breaches or unethical behaviour could lead to presence across the world, we continue to substantial penalties, withdrawal of operating licences and reputational damage that could beexposed to financial volatility from foreign adversely affect the Group’s ability to pursue its strategy. exchange risks, credit markets, and also funding risks relating to our defined benefit A failure to proactively address ESG goals, mandates and regulations may result in future pension plans. These risks could significantly penalties, loss of competitiveness and reduced shareholder value. affect the results of the Group. They have been heightened by global economic uncertainty resulting from COVID-19 and maybe further affected by the potential introduction of a carbon tax. Link to strategy Link to strategy Change in risk No change Change in risk No change 2021 response 2021 response • We have continued to enhance our ethics and regulatory compliance through: • The Group hedges significant foreign – Starting to implement the action plan agreed in response to the 2021 internal audit of exchange exposure, borrowing a proportion Synthomer’s compliance framework, including the appointment of a Global Compliance of its funding in overseas currencies to manager. hedge net assets held in those currencies. – Further publicising our Ethics Helpline, refreshing the procedure for conducting corporate • The Group swapped the proceeds of the investigations and updating the process to reflect EU Whistleblowing Directive changes. £203m share placing into US dollars on the – Publishing a new Protection from Retaliation Policy. dayof the placing in anticipation of the – Completing the integration of OMNOVA into the Synthomer compliance framework. acquisition of the Eastman’s Adhesive | – Corporate support for UN Anti-Corruption Day – including a news article on our intranet | Resinsbusiness in Q1 2022. | | --- | --- | | and social media activity. | • The implementation of global and regional | | – Developing our compliance key risk indicators. | Pension and Benefits Governance | | – Launching our new compliance e-learning content and face-to-face training, and our | Committees to enhance pension risk | | escalation policy for managing non-completion. | oversight and management. | – The creation and communication of our new Dawn Raid Policy on how to respond toanunannounced inspection from a regulator. – Continued development of our approach to modern slavery compliance. – The creation of new gift and hospitality registers, and communicating these to our business areas. – Enhancing our global capability in product stewardship and regulatory compliance by integrating a global team with stronger regional presence which includes new dedicated resources on regulatory intelligence, trade compliance and toxicology. – Establishing an ESG Governance framework, setting our Vision 2030 goals and 2022 targets, increasing external communications on our achievements, and implementing aproject sustainability assessment tool to guide priorities. 2022 plans 2022 plans • Deliver a compliance plan, including continued implementation of the 2021 audit • Currency risks will continue to be hedged in recommendations. line with Group policy. • Develop a compliance brand to support continuous communications and awareness of • Our global pensions team will continue to compliance areas. monitor pension risks through active • Implement our compliance integration plan for newly acquired businesses. scheme management, including the • Enhance our risk assessment processes, incorporating third-party due diligence. implementation of investment strategies • Migrate our compliance training to a new learning management system, and create new in line with the maturity of each of our compliance training offerings including GDPR and Code of Conduct training. pension schemes. • Commence the review and refresh of our Code of Conduct. • The Group’s funding arrangements will • Report against TCFD in 2021 and develop science-based targets. continue to be reviewed in light of market • Increase our focus on product and process innovations that deliver sustainability benefits. conditions and tenure of existing financing • Further strengthen product regulatory governance through quantitative performance facilities. management of regulatory work processes. Synthomer plc ## 76 Annual Report 2021 In the coming year, we have four priorities Strategic report Governance Group financial statements Company financial statements Other information fordeveloping our understanding of climate risk and opportunity which we will report ## TCFD report onin2022: • Review our 2030 GHG targets and apply forthem to be confirmed as science-based; • Extend our quantitative scenario analysis beyond Europe to include products from sites in Asia and the USA; ## Climate change, with itsmany associated • Develop our climate-related metrics and targets, including setting an internal carbon ## environmental impacts, isone of the price to stress test the resilience of key ## biggest and most urgent challenges product lines and investment projects; • Develop decarbonisation plans for our ## facingthe world today. Itposes risks for keysites and longer-term renewable energyarrangements to reduce our ## allof us,and Synthomer is no different in climate-related risks. ## thatrespect. What really matters, though, is what all this means in practice for developing the products the world needs for a low-carbon, circular economy – and, indeed, creating the environment that will enable such an economy to evolve. There is no immediate technological solution that will switch the world over from a fossil fuel economy. Butwhere we are different isin the In summary Moving to renewable energy through the opportunities it presents us as a speciality Overall, we are pleased with the workwe supply chain is one of the big transitions chemicals company, a producer of water- have done, and how it has contributed thatmust occur. Decarbonising industrial based polymers, whose benchmark for toourunderstanding of climate risk and processes and products is another challenge. newproducts is their sustainability opportunities, and that it has enabled us And these can only be achieved by working (seepages48). toreport our compliance against all 11 ina collaborative way with consumers, requirements of TCFD.The enhancements The new requirement to report against customers andsuppliers, with technical togovernance andrisk management we theTask Force on Climate-related Financial partners, with the wider industry, and with havemade give us confidence that we are in Disclosures (TCFD) this year has been a policy makers. This partnership approach will a good position to embed an understanding catalyst for further action. It made us think be the real focus for us in the coming years. of climate change in our decision making, ina more collective, joined-up and holistic both at Group level and across the business. way about what climate change and | thetransition to a low-carbon world may | The qualitative and quantitative scenario | | --- | --- | | bringforSynthomer, and to accelerate | analysis we have carried out so far, modelled | | thedevelopment of a Group-wide approach | on one of our product lines from one of our | | tointegrating climate thinking into our | European Functional Solutions sites, has | | business at every level in the short, medium | given us useful insights into the potential | | andlong term. To this end, in April 2021, | impacts – both positive and negative – we | | weengaged aspecialist adviser to analyse | may see from the transition to a low-carbon | | our current position against the requirements | economy, and the reality of living in awarmer | | of TCFDandto workwith us to develop | world. However, we have more to do, by | | andimplement a plan, including qualitative | modelling further product lines in other | | and quantitative scenarios, that would ensure | geographies, to ensure the scenario analysis | | we are taking climate changeproperly into | is thorough and robust enough to be | | account in our planning and operations. | representative of Synthomer as a whole. | | With this being our first report against | On metrics and targets, we are already in a | | TCFD,we felt it would be most useful for | good position with our existing environmental | | stakeholders to include it as a standalone | reporting, and with our 2030 environmental | | section within our Annual Report. To avoid | targets (including applying for their verification | | unnecessary repetition, however, we have | as science-based, due in 2022). We are also | | summarised our approach and progress | looking at possibilities for building on these | | under each of the four categories of | targets to help us manage climate risk and | | TCFDhere – governance, strategy, risk | opportunity as the world evolves. | management, and metrics and targets – withcross-references to more details elsewhere in the report as appropriate. Synthomer plc ## Annual Report 2021 77 Business foundations TCFD report continued # Governance - Principle 1: Describe the Board's oversight of climate-related risks and opportunities - Principle 2: Describe management's role in assessing and managing climate-related risks and opportunities Climate change has been a key focus for the Board, which has been actively involved in considering the business approach to climate-related opportunities and roles during the year. Nonetheless, the 2021 review revealed opportunities for improving governance at executive level, so during the year we determined that the CEO would be responsible for climate change on behalf of the Board. We also established an Executive Sustainability Steering Committee, chaired by the CEO, which now meets quarterly (as of January 2022) and is attended by the full Executive Committee and the Group Sustainability Director. Each of our Vision 2030 sustainability goals is owned and sponsored by an executive member who is responsible for ensuring we have the right plans in place to deliver within the timeframe. Overall, the Committee will enable the CEO to carry out his responsibility on behalf of the Board by: - Ensuring that our plans for climate change are aligned across the Group, and are properly resourced and coordinated. - Ensuring that our climate-related metrics and targets are managed effectively. For more on governance, see our Governance report, pages 84-129. # Including climate-related targets in remuneration We have reflected the importance of making progress on climate-related targets in our Executive Committee's remuneration. As of 2020, 10% of executives' annual Performance Share Plan award has been based on the reduction of Scope 1 and Scope 2 carbon dioxide equivalent emissions. For more on remuneration, see our Remuneration report, pages 113-120. # Next steps To improve our governance still further, we are looking at developing new roles throughout the business dedicated to assessing and managing climate-related risks and opportunities. # Strategy - Principle 3: Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long term - Principle 4: Describe the impact of climate-related risks and opportunities on the Company's businesses, strategy, and financial planning - Principle 5: Describe the resilience of the Company's strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario Our strategy for a robust, resilient growth business has been built on how we can differentiate our products through their impact on the environment. Over the years, through our water-based polymers, we have helped customers avoid the use of considerable amounts of carbon and solvents, and our 2030 targets include that at least 65% of new products launched each year must have enhanced sustainability benefits, and that 80% of procurement spend must have a sustainability rating. During that time, we have also focused on manufacturing and operational efficiency, namely minimising resources for maximum output. In the past year, the world has become increasingly aware of the risks posed by climate change, with more frequent severe weather events affecting more parts of the world. And, in the run-up to COP26 in November 2021, we have seen greater urgency to address those risks. This also presents us with opportunities, because people are increasingly looking for products that will help to mitigate the negative impacts of climate change – namely those like ours with lower carbon emissions that eliminate the use of solvents and encourage a circular economy. For more on our business strategy, see page 19. # Determining our climate-related risks and opportunities under 1.5°C, 2°C and 3°C scenarios Reporting against TCFD has given us the impetus to quantify the opportunities and risks presented by climate change, such that we can use real data to help us focus our strategy. To understand the potential opportunities and impacts of physical climate risks and the transition to a low-carbon economy, our specialist adviser carried out qualitative and quantitative analyses for three different climate scenarios: a rise in temperature of 1.5°C, 2°C and 3°C over short- (to 2025), medium- (to 2035) and long-term (to 2050) horizons. In determining financial materiality, we used the same approach as we do for all financial risks – the likelihood of the hazard occurring and the nature and magnitude of its impact on the business. To perform their analysis, our adviser looked at the impact of these scenarios on one product line – styrene acrylic water-based emulsion, a Functional Solutions product made in our Worms, Germany plant. We chose this product with the aim of covering as many variables as possible. The product uses two of our top raw materials, styrene and butyl acrylate; it is used in many applications from coatings to industrial textiles to construction; and it travels by water and by road. We recognise that the results from this single product are not sufficient to enable us to extrapolate the financial impact of the various climate scenarios on the Group as a whole. Indeed, doing so would no doubt be misleading. We will therefore be expanding the scenarios beyond Europe to include a wider range of products from the USA and Asia. Nonetheless, the results from this year's work are a useful indication of the risks and opportunities we should consider. # Potential physical and transition risks The physical risks identified by the study were determined as being more frequent extreme weather events such as floods or droughts which could affect our plants' ability to operate efficiently, and which could increase costs from our supply chain. The transition risks were determined as being the potential of global or regional carbon taxes, and market and environmental policy changes. Both types of risk were present in all temperature scenarios and under all timeframes, but their relative severity and impact on our business, and our resilience, is likely to vary between timeframes, as discussed below. 78 Synthomer plc Annual Report 2021 Potential opportunities events, with a corresponding impact on our Next steps Strategic report Governance Group financial statements Company financial statements Other information The opportunities for Synthomer, under all customers, our supply chain and our costs. To embed climate thinking more deeply in our temperature scenarios and timeframes, were business strategy, in the coming year we will: Business resilience: considering the determined as: | | impact of climate-related risks and | • Develop a plan for how scenario analysis | | --- | --- | --- | | • Growth in demand for products and services | opportunities over all timeframes | will feed into our annual strategy-setting | | that will service a low-carbon or circular | In the short to medium term (to 2025 and | process | | economy in various markets and regions | 2035), transition risks, particularly global or | • Extend our quantitative scenario analysis | | • Cost savings and market growth through the | regional carbon taxes, are most likely to affect | toinclude products from sites in Asia and | | early adoption of low-carbon technologies, | us. The physical risks of climate change, while | the USA. | | for example using renewable energy or | already starting to occur in the form of more | | ### Risk management | switching to renewable raw materials | frequent extreme weather in more parts of the | | | --- | --- | --- | | • Our network of sites across the world | world, are likely to increase and therefore | – Principle 6: Describe the | | makes us a more reliable supplier: it is seen | become more costly over the medium to | | ### Company’s processes for as a competitive advantage, meaning we long term (2035 and 2050). ### are more resilient to physical operational identifying and assessing More specifically, in the short term (to 2025), risks, since we can service customers from ### under a 1.5ºC temperature rise scenario, from climate-related risks a variety of plants. our analysis we estimate that around 75% ### – Principle 7: Describe the The potential impact of these opportunities on ofthe impact of the risks from climate change ### the strategy and performance of the business willcome from transitioning to a low-carbon, Company’s processes is discussed below. circular economy (notably higher costs), ### formanaging climate- withjust 25% coming from physical risks Results by temperature scenario ### (more extreme weather events affecting our relatedrisks To summarise: in both the 1.5°C and 2°C operations). In that context however, in the futures, the biggest risks come from the ### event that there is global coordination of – Principle 8: Describe how transition to a low-carbon, circular economy, ### carbon pricing and environmental taxes then processes foridentifying, but this transition also presents significant it is likely that we would be able to pass most ### opportunities for Synthomer. Under a 3°C assessing, and managing climate-related cost through to our customers. future, while the opportunities remain, the ### At the same time, with increasing awareness climate-related risks physical risks are much more severe, ofclimate-related issues, we expect to see ### primarilythe impacts on our sites of areintegrated into growing demand from our customers and their droughtand flooding. | | consumers for products like ours which offer | theCompany’s overall | | --- | --- | --- | | • If we see globally coordinated carbon pricing, | lower carbon or circularity benefits. Both of | riskmanagement | | we may achieve a 1.5°C future: in this | these give aconsiderable measure of | | Our philosophy, approach and processes scenario, Synthomer could face higher prices resilience toourbusiness. relating to risk management are set out from transition costs. However, demand for inourRisk report on pages 69-76. It is difficult to look beyond 2025 with any low-carbon and ‘circular’ products could degree of certainty, because much depends Given the wide-ranging potential impacts of increase, leading to new, low-carbon market on the political will to act now in accordance climate change, during 2021 we considered opportunities, while government purchasing with the conclusions reached at COP26, to all our principal risks in that context, and agreements could put pressure on consumers bring in the measures such as coordinated revised them where necessary to take into in our end markets to decarbonise, leading carbon taxation and environmental regulation account the physical and transition risks of to greater demand for our products. that would enable the world to constrain the climate change. We also established in our • Without globally coordinated carbon pricing, temperature increase. Should these measures analysis the timeframe over which we expect a 1.5°C future becomes far less likely, and, occur, in the short term Synthomer would these risks to occur. The principal risks that under a 2°C future, Synthomer could face face higher carbon pricing as noted above, now include the impact of climate change are different operating costs in different markets, but should be able to pass the costs on; as follows – for more details see pages 72-76: for example, high carbon costs in the EU, however such measures should mean a and a patchwork of regulations across USA • Volatility and competition in chemicals and 1.5ºCtemperature rise remains possible states. This kind of lack of coordination polymers market andtherefore the physical risks to Synthomer drives market volatility, so it could also result • Innovation and intellectual property in the medium to long term would decrease. | in erratic changes in costs in the supply | | • Mergers and acquisitions | | --- | --- | --- | | chain. All of Synthomer’s operational sites | Should these measures not occur, or occur | • Change programmes | | would be more vulnerable to the physical | too slowly, then a 2°C or even 3+°C | • Loss or failure of Synthomer site | | risks of climate change under this than | temperature rise becomes increasingly likely, | • Security of supply of raw materials goods | | under the 1.5°C scenario. | and with it an increase in physical risks over | and services | | • Should a 3+°C future become a reality, due | the medium to longer term. We are, however, | • Ethics and regulatory compliance | | to the greater physical risks, our river-based | in a relatively strong position to withstand the | • Financial. | | sites could flood regularly, while our coastal | impact of these risks, because our network of | | From 2022, we will review the risks associated locations in Asia and North America could manufacturing sites across the world is wider, with climate change every six months as part be affected by storm surges, and it could meaning we can supply customers from an of our regular risk management process. be difficult to find alternatives given that alternative site if one is affected by extreme asignificant number of sites would be weather. Moreover, our strategy is to broaden Next steps affected simultaneously. Overall, markets our footprint in speciality chemicals through In the coming year, we will continue to could become severely unstable given the organic and acquisitive growth, which means develop our understanding of climate-related likelihood of social and economic upheaval that in the future, our network is likely to be risks and their potential impact on our resulting from widespread, severe weather wider still, thus rendering us more resilient toclimate change. Synthomer plc ## Annual Report 2021 79 Business foundations ## TCFD report continued | financial performance. Aside from the further | Our Vision 2030 sustainability metrics and | | --- | --- | | scenario analysis described above under | targets, which we aim to have certified as | | Strategy, we will develop our understanding | science-based during 2022, have a strong | | of potential financial impact of the physical | focus on climate. We have published our | | and transition risks and opportunities of | ambition to reach net zero by 2050, and | | climate change. | our2030 targets towards this aim include: | | Metrics and targets | • At least 60% of new products with | enhanced sustainability benefits ### – Principle 9: Disclose (seepage48) ### themetrics used by • 80% procurement spend with suppliers with a sustainability rating (see page 51) ### theCompany to assess • 40% reduction in Scopes 1 and 2 GHG ### climate-related risks emissions intensity, vs 2019 (see page 58) ### andopportunities in line • 10% reduction in Scope 3 GHG emissions intensity, vs 2019 (see page 58) ### withitsstrategy and risk • 80% of electricity from renewable sources, ### management processes plus improving energy efficiency in all our operations (see page 58) ### – Principle 10: Disclose • Manage and minimise water consumption, and introduce water management plans in ### Scope 1, Scope 2, and, water-stressed areas and at the sites where ### ifappropriate, Scope 3, we use most water (see page 60). ### greenhouse gas (GHG) Achieving our Scope 1 and 2 emission ### emissions, and the targetsis factored into Executive Committee annual Performance Share Plan awards, as ### relatedrisks described in the remuneration section above. ### – Principle 11: Describe For more on our sustainability metrics and targets, including performance, see the ### thetargets used by the Sustainability section on pages 42-68. ### Company to manage Next steps ### climate-related risks We are looking into defining further metricsand targets, aligned with TCFD’s ### andopportunities and recommendations of October 2021, that ### performance against targets would help us better measure climate risk andour resilience to it. This will include The metrics we use to assess climate-related setting an internal carbon price to stress risks and opportunities are: testthe resilience of key product lines. • The proportion of new products we makethat have sustainability benefits (seepage48) • Proportion of raw material procurement spend covered by a sustainability rating and improvement plan (see page 51) • Energy consumption and usage of renewable energy (see page 58) • GHG emissions, including Scopes 1 and 2 and related risks (see page 58); for Scope 3 emissions, (see page 58) • Water usage (see page 61) Synthomer plc ## 80 Annual Report 2021 Strategic report ## Viability statement | In accordance with the requirements of the UK | A sensitivity analysis has been undertaken, | None of these scenarios individually, or | Governance Group financial statements Company financial statements Other information | | --- | --- | --- | --- | | Corporate Governance Code (‘the Code’), the | focusing on the impact of the principal risks | whencombined, threaten the Group, and | | | Directors have assessed the viability of the | (detailed above on pages 72-76) over the | thecombined impact of these scenarios | | | Group over a five-year period to December | five-year period and the availability and likely | hasbeen evaluated as the most severe stress | | | 2026, being the period covered by the Group’s | effectiveness of mitigating actions. The risks | scenario. No mitigating actions have been | | | approved strategic plan. This plan is updated | have been assessed for their potential impact | included for any of the scenarios and, should | | | annually, in a process led by the Executive | on the Group’s business model, future trading | it need to, the Group could take action quickly | | | Committee with input from the respective | and funding structure. | to significantly reduce costs and cash outflows | | | businesses and functions. It includes analysis | | as demonstrated during the course of the | | The sensitivity analysis has considered a of product and profit performance, cash COVID-19 pandemic in 2020. number of severe but plausible scenarios, flow,investment programmes and returns linked to the risks considered to have the While this sensitivity analysis did not consider all toshareholders. The plan is presented to most significant financial impact. In all cases, ofthe risks that the Group may face, the Directors theBoard each year as a part of its annual the impact was considered on both liquidity consider that it is reasonable in the circumstances strategic review. and the borrowing covenant. of the inherent uncertainty involved. The Directors consider five years to be an The scenarios included: Based on the analysis, the Directors have appropriate time horizon for the strategic plan, areasonable expectation that the Group will being the period over which the Group actively • Trading downturns as a result of increased be able to continue in operation and meet its focuses on its long-term product development competition or lack of demand liabilities as they fall due over the five-year and capital expenditure investments. A period • Delays in project delivery period of their assessment. above five years is considered by the Directors • Failure to successfully commercialise to be too long, given the uncertainties that new products exist beyond this time frame. • The temporary loss of a major manufacturing site In making their assessment, the Directors • Significant foreign exchange rate have considered the diverse activities and appreciation against sterling. product offering of the Group in terms of geographies, chemistry and end markets. The Directors have also considered the Group’s current strong financial position, including the existing and future committed financing facilities, which have been assumed to be refinanced at maturity. Synthomer plc ## Annual Report 2021 81 Business foundations ## Non-financial disclosures and section 172 statement ### Non-financial information statement The table below summarises where key elements of our governance reporting (including non-financial matters as required by theNon-Financial Reporting Directive) can be found, some of which are integrated into other sections of our Annual Report. Reporting requirement Relevant policies and standards that govern our approach Where to read more in this report | Environmental matters • Code of Conduct | | • Risk assessment page 69 to 71 | | --- | --- | --- | | | • Group SHE Policy | • Health and safety page 55 | | | • Sustainable Procurement Policy and Strategy | • Sustainable procurement page 51 | | | • Taskforce on Climate-related Financial Disclosures (TCFD) | • TCFD report pages 77-80 | | Employees • Our values | | • Our values page 62 | | | • Code of Conduct | • Gender pay gap page 113 | | | • Group SHE Policy | • Section 172 page 97 | • Health and safety page 55 | Social matters • Responsible Care Principles | | • Section 172 page 97 | | --- | --- | --- | | | • Synthomer Cares | • Our communities page 67 | | Respect for Human Rights • Code of Conduct | | • Upholding human rights page 52 | | | • Modern Slavery Act Statement | • Ethics and compliance page 66 | | | • Conflict Minerals Policy Statement | • Sustainable procurement page 51 | • Sustainable Procurement Policy and Strategy Anti-corruption and • Code of Conduct • Ethics and compliance page 66 anti-bribery • Ethics Helpline • Our values page 62 • Core values Our business model • How it links to strategy and delivers value to stakeholders • Our business model page 15 Principal risks and • Risk assessment • Managing risk page 69 to 76 uncertainties Non-financial KPIs • Relevant key performance indicators • Key performance indicators page 17 Section 172(1) statement and stakeholder engagement We value our engagement with all our stakeholders, including our key stakeholders: customers, employees, communities, suppliers, shareholders, and governments and authorities. Our section 172(1) statement is on pages 96-97. It describes how the Directors have had regard to stakeholders’ interests and other matters when discharging Directors’ duties set out in section 172 of the Companies Act 2006. It includes examples of how stakeholders’ interests were considered during principal decisions taken during the year. The Strategic Report was approved by order of the Board. R Atkinson Company Secretary 3 March 2022 Synthomer plc ## 82 Annual Report 2021 ## Governance Synthomer offers an extensive range of binders specifically developed to meet the performance and regulatory requirements of the architectural and industrial coatings market. Our acrylic and vinylic copolymer dispersions are low Group financial statementsGovernanceStrategic report Company financial statements Other information VOC, low odour and APEO free to meet the increasingly demanding environmental standards without compromising application properties or durability. Synthomer plc ## Annual Report 2021 83 Corporate Governance ## Our Board of Directors | Caroline A Johnstone | | Michael Willome | Stephen G Bennett | | --- | --- | --- | --- | | Chair | | Chief Executive Officer | Chief Financial Officer | | N | D | D | D | | Nationality: British | | Nationality: Swiss | Nationality: British | | Position and date of appointment | | Position and date of appointment | Position and date of appointment | | Chair of the Board and the Nomination and | | Chief Executive Officer since November 2021; | Chief Financial Officer since May 2015; | | Disclosure Committees. Caroline joined the | | member of the Disclosure Committee. | member of the Disclosure Committee. | Board in March 2015 and was appointed Chair Key appointments Key appointments in December 2020 having previously been Chair Michael is a Non-Executive Director of No external appointments. of the Audit Committee and a member of the Glaston Oyj (Nasdaq Helsinki) and sits on Nomination and Remuneration Committees. Skills and experience subsidiary boards of the Indutrade Group. Stephen was previously at INEOS where he Key appointments Skills and experience had been chief financial officer at Petroineos Caroline is a Non-Executive Director and chair Michael is an established public market CEO Refining since 2006. Stephen was also CFO of the employee engagement committee of with a track record of driving performance of INEOS Upstream Limited, a start-up oil Spirax-Sarco Engineering plc, and a Non- through strong operational management and andgas exploration business, and of INEOS Executive Director and chair of the audit strategic actions, including M&A. He was Olefins and Polymers South and INEOS committee of Shepherd Building Group previously CEO of Conzzeta AG, Zurich, Phenol. He joined Coopers & Lybrand in Limited, a private company which owns (nowBystronic AG), aglobal industrial 1986and is a qualified chartered accountant. Portakabin Limited. She has an honorary role company listed on the SIX Swiss exchange. He was at Full Circle Industries plc as on the board of the University of Manchester. | | Prior to Conzzeta, Michael spent 18 years | company secretary and group controller | | --- | --- | --- | | Skills and experience | with Clariant, leading its global Industrial & | before moving to PricewaterhouseCoopers | | Caroline has nearly 40 years’ experience | Consumer Specialities division from 2010 | (PwC) in 1997 as a Director in | | ofworking with large global organisations | to2015. This followed 13 years in leadership | transactionservices. | | inthe chemicals sector and other industries. | roles in Asia Pacific, based in Hong Kong, | | | Her experience includes delivering value from | Canada and Turkey. | | M&As, turnaround, culture change and cost optimisation. She was a partner in and sat onthe board of the Assurance practice of PricewaterhouseCoopers (PwC) with responsibility for all people matters. Caroline is a chartered accountant andamember of the Institute of CharteredAccountants of Scotland. Synthomer plc ## 84 Annual Report 2021 Board committee key A Audit Committee R Remuneration Committee N Nomination Committee D Disclosure Committee Committee Chair GovernanceStrategic report Group financial statements Company financial statements Other information | The Hon. Alexander G Catto | Brendan WD Connolly | | | | Cynthia S Dubin | | | | --- | --- | --- | --- | --- | --- | --- | --- | | Non-Executive Director | Senior Independent Director | | | | Independent Non-Executive Director | | | | N | A | R | N | D | A | R | N | | Nationality: British | Nationality: British | | | | Nationality: American and British | | | | Position and date of appointment | Position and date of appointment | | | | Position and date of appointment | | | | Non-Executive Director since 1981. | Independent Non-Executive Director since | | | | Independent Non-Executive Director since | | | | Member of Nomination Committee and | January 2014; Chair of the Remuneration | | | | July 2020; Chair of the Audit Committee | | | | designated Non-Executive Director to lead | Committee; member of the Audit, Disclosure | | | | anda member of the Nomination and | | | | workforce engagement. | and Nomination Committees. Senior | | | | Remuneration Committees. | | | Independent Director since April 2015. Key appointments Key appointments Alexander is managing director of CairnSea Key appointments Cynthia is a Non-Executive Director of the Investments Limited, a private investment Brendan is a Non-Executive Director of Competition and Markets Authority, where company, and a Non-Executive Director of Victrex PLC, Pepco Group NV and Applus, sheis chairof the audit, risk and assurance several early stage companies that have been and two private equity backed companies, committee, an independent Non-Executive backed by CairnSea. one of which he chairs. Director and member of the audit committee ofHurco Companies Inc, anindependent Skills and experience Skills and experience Non-Executive Director, andmember of the Prior to the establishment of CairnSea, Brendan has over 30 years’ experience in the audit and risk committee ofICE Futures Alexander was a Director of Morgan Grenfell oil and gas industry. Until June 2013 Brendan Europe, a subsidiary ofIntercontinental & Co and then Lazard Brothers & Co. was a senior executive at Intertek Group plc Exchange, and an independent Non- and had previously been chief executive Executive Director, chair ofthe audit officer of Moody International (which was committee and a member of the acquired by Intertek in 2011). Prior to Moody, compensation committee of Franchise he was managing director of Atos Origin UK, Group,Inc. and spent more than 25 years of his career with Schlumberger in senior international Skills and experience roles over three continents. Brendan has Cynthia has served in senior finance and previous experience as chairman business roles in the power, oil, gas and oftheremuneration committee broader clean energy technology sector, ofaUK-listedcompany. having started her career in the banking industry in New York specialising in advising and lending to large energy projects before relocating to London in 1992. Synthomer plc ## Annual Report 2021 85 Corporate Governance ## Our Board of Directors continued | Roberto Gualdoni | | | Dato’ Lee Hau Hian | Holly A Van Deursen | | | | --- | --- | --- | --- | --- | --- | --- | | Independent Non-Executive Director | | | Non-Executive Director | Independent Non-Executive Director | | | | A | R | N | N | A | R | N | | Nationality: German and Italian | | | Nationality: Malaysian | Nationality: American | | | | Position and date of appointment | | | Position and date of appointment | Position and date of appointment | | | | Independent Non-Executive Director since | | | Non-Executive Director since 2002; first | Independent Non-Executive Director since | | | | July 2021; member of the Audit, | | | joined the Board in 1993 and stood down | September 2018; member of the Audit, | | | | Remuneration and Nomination Committees. | | | in2000 to become an Alternate Director. | Nomination and Remuneration Committees. | | | Member of Nomination Committee. Key appointments Key appointments Roberto is chair of CABB Group and Key appointments Holly is a Non-Executive Director of Kimball amember of the board of directors of Hau Hian is a Director of Kuala Lumpur Electronics Inc, where she chairs the AerogelCorporation. Kepong Bhd and is the president of the Perak Compensation & Governance Committee. Chinese Maternity Association. He also She serves as a Non-Executive Director of Skills and experience serves as a Director of Yayasan De La Salle. Albermale Corporation and as a member of Roberto has over 25 years’ chemical sector the Executive Compensation and Capital experience at BASF where he held senior Skills and experience Investment Committees. | operational roles covering international sales, | Hau Hian is the Managing Director of Batu | | | --- | --- | --- | | marketing, procurement and M&A and served | Kawan Bhd, a listed Malaysian investments | Skills and experience | | on a number of joint venture boards. His final | holding company, with interests in plantations | Until 2005, Holly was group vice president, | | role at BASF was as president of its Styrenics | and chemicals manufacturing. He has | Petrochemicals, at BP. She has worked in the | | business, which was carved out as part | experience in organisational transformations, | global chemical industry for over 25 years and | | ofajoint venture as Styrolution, and which | acquisitions, chemical and manufacturing | held senior positions across North America, | | Roberto led as chief executive for three years | operations and sustainability issues. | Europe and Asia. In addition, Holly has since | | until 2014. Roberto has previous board-level | | 2006 held Non-Executive Director roles for | | experience in Saudi Arabia, Finland | | global companies headquartered in the USA | | andBelgium. | | and spent 12 years on the board of a | Norwegian-listed company. Synthomer plc ## 86 Annual Report 2021 Board committee key A Audit Committee R Remuneration Committee N Nomination Committee D Disclosure Committee Committee Chair GovernanceStrategic report Group financial statements Company financial statements Other information International = 9 Senior Management = 9 Strategy = 9 ### Richard Atkinson M&A = 9 Chief Counsel and Company Secretary Finance = 3 Commercial = 3 Innovation = 2 Operations = 3 People = 4 Position and date of appointment Technology = 1 Company Secretary since 1998; Group Chief Counsel. Key appointments No external appointments. Other Executive responsibilities Member of the Executive Committee Sustainability Steering Group; deputy chair ofthe boards of the Group’s Middle Eastern joint venture companies; trustee of the UK pension scheme. Skills and experience Richard qualified as a solicitor in 1988 and worked in private practice as a corporate and banking lawyer before moving into industry as Our two non-Independent Board members an in-house lawyer working in the USA and The Board recognises the unusual nature of having two non-Independent members. UK. He has extensive M&A experience and This isa voluntary arrangement that has been in place for 40 years. led on the legal aspects of all the Group’s Dato’ Lee Hau Hian is the Board’s representative for our largest shareholder, Kuala Lumpur acquisitions over the last 20 years. He has a Kepong Bhd (21.3%) which provided financial support for our recent acquisitions, via share law degree from the University of Birmingham. placing and a rights issue with his extensive leadership experience in chemical ### Individual Directors’ skills manufacturing. He offers the Board and Executive Committee invaluable insights when making business decisions as well as a perspective on the Malaysian and southeast Asian business landscape. The Hon. Alexander Catto is a member of Synthomer’s founding family. Today, the Catto Chemicals and engineering = 9 family ownsa5% shareholding. Some of our investors continue to vote against Alexander’s International = 9 Board membership, but we believe he provides deep knowledge of Synthomer’s past and a ### Individual Directors’ skills unique long-term shareholder perspective. His background in investment banking and time Senior Management = 9 on other boards also give him extensive business, finance, investor engagement and Strategy = 9 governance experience. M&A = 9 Finance = 3 Chemicals and engineering = 9 Commercial = 3 Innovation = 2 Operations = 3 People = 4 Technology = 1 Synthomer plc ## Annual Report 2021 87 ### Individual Directors’ skills Chemicals and engineering = 9 International = 9 Senior Management = 9 Strategy = 9 M&A = 9 Finance = 3 Commercial = 3 Innovation = 2 Operations = 3 People = 4 Technology = 1 Corporate Governance ## Our Executive Committee Biographies for Michael Willome, Stephen Bennett and Richard Atkinson can be found on pages 84 and 87. | Rob Tupker | Neil Whitley | Ana Perroni Laloe | | --- | --- | --- | | President, | President, | President, | | Functional Solutions and Europe | Performance Elastomers Asia | Industrial Specialities | | Nationality: Dutch | Nationality: British | Nationality: Brazilian | | Position and date of appointment | Position and date of appointment | Position and date of appointment | | President, Functional Solutions and Europe | President, Performance Elastomers Asia | President, Industrial Specialities since | | since September 2018. | since January 2021. President, Global HR | February 2022. | since 2015. Other Executive responsibilities Other Executive responsibilities Executive sponsor of Diversity and Inclusion Other Executive responsibilities Ana is the driving force in the team that Leadership Committee, Member of Executive HR, member of the Executive Committee founded and have been leading our Committee Sustainability Steering Group, and Sustainability Steering Group and the ENGENDER women’s network. Pathway programme Steering Committee. Pathway programme Steering Committee. Skills and experience | Skills and experience | Skills and experience | Ana joined Synthomer in March 2018 as | | --- | --- | --- | | Rob was previously with Honeywell, where | Since joining Synthomer in 2015, Neil has | Global Business Development Manager in | | heheld a variety of senior business leadership | hadresponsibility for the Industrial Specialities | ourIS Division. She holds a BSc in Chemical | | positions in the performance materials and | and Acrylate Monomers divisions and led | Engineering from IMT in Sao Paulo. | | home and building technologies divisions. | theintegration of the OMNOVA acquisition. | She started her career at Ciba Specialty | | Prior to Honeywell, he worked with Süd- | Neil was previously with Johnson Matthey | Chemicals in Brazil, followed by commercial | | Chemie (now Clariant) and Unilever’s/ICI’s | where he was a member of their executive | roles in the UK, Brazil again and Switzerland. | | (nowGivaudan’s) flavour and fragrance | management committee and division director | She then took a career break and founded | | division. Rob worked and lived for seven | of the process technologies catalyst and | and ran a small business as she started | | yearsin Asia Pacific, five years in the USA | chemicals refining divisions. Prior to Johnson | afamily before joining Synthomer. | | and20 years across Europe. He hasa | Matthey, Neil worked in business, finance and | | | chemical engineering degree from Eindhoven | HR roles at ICI. He is an economics graduate | | | Technical University, an MSc from MIT and | from Leeds University and analumnus of | | | anMBA fromINSEAD. | INSEAD’s Advanced LeadershipProgramme. | | Synthomer plc ## 88 Annual Report 2021 Board committee key A Audit Committee R Remuneration Committee N Nomination Committee D Disclosure Committee Committee Chair GovernanceStrategic report Group financial statements Company financial statements Other information | Marshall Moore | Philip Wrigley | Tim Hughes | | --- | --- | --- | | Chief Technology Officer and President, | President, | President, | | Americas | Operations and SHE. | Corporate Development | | Nationality: American | Nationality: British | Nationality: British | | Position and date of appointment | Position and date of appointment | Position and date of appointment | | Chief Technology Officer and President, | President Operations and SHE since | President, Corporate Development since | | Americas since April 2020. | May2021. | 2018. Tim joined Synthomer in June 2009 | and became a member of the Executive Other Executive responsibilities Other Executive responsibilities Committee in 2013. Chairman of the Synthomer Foundation Member of the Executive Committee Board of Trustees and a member of the Sustainability Steering Group. Other Executive responsibilities Executive Committee Sustainability Steering Member of the Executive Committee Skills and experience Group. Sustainability Steering Group. Phil joined Synthomer in March 2019 and | Skills and experience | waspreviously Vice President, Operations | Skills and experience | | --- | --- | --- | | Marshall was previously chief technology | forFunctional Solutions. Prior to Synthomer, | Tim was previously group managing director, | | officerand senior vice president of operations | Phil worked in the chemical industry for | Urethane Technologies, Chemtura Inc having | | with OMNOVA Solutions. He has35 years | morethan 30 years across speciality and | previously led the Urethane Speciality | | ofexperience in polymers andspeciality | commodity sectors for Venator, Huntsman, | Chemicals joint venture between Chemtura | | chemicals, working with Borden Chemicals, | RioTinto Alcan, Rohm and Haas, Hickson | andCroda plc since 1998. Prior to Chemtura, | | GEPlastics and Chemtura, prior tojoining | andWelch and ICI. He has significant | Tim spent 14 years with Courtaulds plc in | | OMNOVA in 2015. Assignments have | experience of global operational and | business leadership and marketing roles in | | includedleadership positions in technology | SHEimprovement programmes. He is the | the speciality chemicals and fibres divisions. | | andinnovation, quality assurance and process | operational lead for due diligence, integration | During his career at Synthomer he has been | | excellence, operations, government affairs | and synergy delivery for several large | responsible for the Industrial Specialities | | andadvocacy, marketing, and information | acquisitions at Synthomer. Phil is also a | division and the Americas, Middle East | | technology. He holds a degree inchemistry | chartered engineer and member of I.Mech.E. | andAfrica region. | andis a certified Six Sigma BlackBelt. Synthomer plc ## Annual Report 2021 89 Corporate Governance ## Introduction to corporate governance ## Introduction from the Chair ### Overseeing ambition, ### supportinggrowth The Executive changes saw us welcoming Michael Willome as our new Group Chief Executive Officer and Lily Liu, who will join usby July 2022, as our new Chief Finance Officer. We describe the search processes that led to their recruitment – along with that of our new Independent Non-Executive Director, Roberto Gualdoni – on page 107. Here, I would like to repeat the Board’s warm welcome to them, and to say how pleased we are to have found people whose skills, mindsets and personalities will add huge value and diversity to Synthomer. Scrutinising decisions andmonitoringprogress As well as guiding strategic recruitment, in2021 the Board oversaw two significant decisions that will shape the future of our business for years to come. The first, in the Board priority area of environment, society and governance (ESG), was the development and launch of Synthomer’s Vision 2030 sustainability roadmap. The Board engaged indetailed discussions of the appropriate ## Even for a business as dynamic as targets for Vision 2030, taking a long-term ## Synthomer, 2021 was notable as a year view of the interests of the business and its ability to deliver on our purpose. We were ## inwhich the Board oversaw Executive pleased to approve the final version which gives us a clear direction to steer in the ## andBoard appointments, major strategic decade ahead. We will continue to review Synthomer’s ESG targets and challenge ## activity and monitored significant progress theExecutive team to ensure they remain asstretching as possible. For more detail ## against our key priorities. onVision 2030, see page 18. The second significant decision concerned our proposed acquisition of Eastman’s Adhesive Resins business. This very significant transaction – the largest in our history – was the subject of detailed Board oversight, planning and discussion over muchof 2021. Synthomer plc ## 90 Annual Report 2021 As well as discussions with Synthomer teams, I am also developing the Board agenda with ### Changes to our | we sought expert inputs on market dynamics, | the help of my Board colleagues. We have | | | --- | --- | --- | | prospects and pricing, the acquisition process, | included thematic deep dives for the Board | governancereporting | | and the likely transition. We considered the | tostrengthen focus on strategic priorities. | We have changed the way in which we | | impact of the acquisition on our full range of | We had sustainability as a Board meeting | report on governance this year to make | | stakeholders through a detailed section 172 | standing item in 2021, to drive our progress | the information more accessible. The main | | process, concluding that the transaction | inthis area. During the year, we expanded the | body of the report (see ‘The Board’s year’) | | served all their interests – andstrengthened | opportunities for strategic discussion, debate | sets out key activities that our Board | | our ability to offer a broaderportfolio of | and expert input at Board meetings – for | members have undertaken during 2021. | GovernanceStrategic report products with sustainability benefits. example, by hearing from external specialists We have also developed a new, separate on our ESG priorities while we considered We also continued to ensure that Synthomer’s compliance section, set out on pages Vision 2030. This is something we want to approach to risk evolved with the changing 109-110, which describes how we have domore of. We also intend to increase our circumstances we face. As part of this effort, complied with UK Corporate Governance engagement with stakeholders, now that led by our Group Internal Audit and Risk Code (2018 version), with emphasis on COVID-19 restrictions are lifting. I am Director and following discussion with how we have applied its principles. particularly keen to heighten our engagement external consultants, we made important with employees at former OMNOVA sites, I hope that I will meet shareholders at the adaptations to our risk management which have been difficult to visit during AGM and I am always happy to hear from Group financial statements Company financial statements Other information framework. We re-assessed our Board the pandemic. and speak with shareholders at any time. appetite for our significant business and | strategic risks. In addition, the Board will | Following our 2020 external evaluation of | | --- | --- | | nowconsider the speed at which a risk might | theBoard and Committees, this year we | | occur, as well as its probability and impact. | conducted an internal review. The feedback | | For more details, see our Audit Committee | suggests that we have made good progress | | report on page 98. | on all our 2021 priorities. | | In a year of growth and high performance, | Having had two closed Annual General | | theBoard was also closely involved in a wide | Meetings due to COVID-19, I am particularly | | range of major projects, receiving regular | looking forward to meeting more shareholders | | updates on ongoing programmes such as | than I was able to during 2021 at our coming | | Synthomer’s capacity expansion in nitriles, | AGM. We aspire towards making our AGMs | | the OMNOVA integration, the new Asian | more inclusive by adopting virtual attendance | | Innovation Centre in Malaysia, and the | mechanisms. However, for the time being, | | business process and system transformation | wewill monitor how market practice develops | | Pathway programme. | and this coming meeting will be solely | physical. We will continue to invite questions Continuous improvement for the Board to be submitted in advance of the meeting. We continued to act on, and benefit from, thelearnings of our external 2020 Board evaluation. As the Board continues to evolve Caroline Johnstone to serve the business, we focused on our Chair of the Board priorities in the crucial areas of succession 3 March 2022 planning and diversity and inclusion. Having compared our skills with those ofother leading companies in 2020, we concluded that we have a strong blend ofskills and experience, but wanted to add toour industry, innovation and European experience – and this guided us in our NED recruitment in 2021. Recently, we undertook adeeper review of skills and experience of the Board moving into 2022 and this guided our succession planning. We have very strong international representation, for instance, and will look to deepen our UKpublic company experience in futurerecruitment. We also made progress in our drive to have amore diverse and inclusive leadership team; setting a goal of 50% gender diversity in new hires to senior roles by 2030. We got off to agood start by reaching our first milestone – 20% of women in such positions – by the end of 2021. More details on our succession planning are on page 106. Synthomer plc ## Annual Report 2021 91 Corporate Governance ## Introduction to corporate governance continued ### Our governance structure The governance structure is designed to ensure that the Board focus is on strategy, monitoring performance and ensuring appropriate risk appetite, risk management and controls. ### Board • Responsible for Synthomer’s long-term success and setting the Group’s purpose, values and culture, and strategic direction • Oversees Group strategy and risk assessment • Responsible for corporate governance and overall financial performance The Company Secretary provides advice to the Board and its Committees and supports the Chair in all governance matters. ### Audit Nomination Remuneration Disclosure ### Committee Committee Committee Committee • Monitors integrity of financial • Reviews size, skills, diversity, • Sets, reviews and • Monitors compliance with statements experience and Board recommends remuneration disclosure controls and • Oversees internal controls composition policy for the Chair, procedures for material and risk management • Leads process to appoint Executive Directors, and information process new Directors and senior Executive Committee • Responsible for identifying • Manages relationship with management succession • Ensures the Remuneration inside information external auditor, including planning Policy is properly recommendations to Board • Oversees development implemented and shareholders on ofaBoard and • Reviews the design and appointment and seniormanagement approves targets of reappointment successionpipeline performance-related • Keeps non-executive and payschemes executive leadership needs • Reviews workforce under review remuneration and • Oversees the Board relatedpolices evaluation processes Read more on page 98 Read more on page 106 Read more on page 112 ### Executive Committee ### Chief Executive Officer Chief Company President, President, President, President, President, Chief Financial Secretary Performance Functional Industrial Corporate Operations Technology Officer and Chief Elastomers/ Solutions/ Specialities Development Officer/ Counsel President President, President, Asia and Europe Americas Global HR In 2018, Synthomer formed a cross-functional Sustainability Committee comprising representatives from all the key functions and businesses, aswell as divisional presidents. The Committee meets quarterly and is chaired by the Group Sustainability Director who reports directly to the Executive Committee. This ensures Synthomer’s sustainability agenda is aligned with Group strategy and helps to embed sustainability issues within our businesses. See page 42 for more information on our approach to sustainability including sustainability governance. See page 111, Compliance with the Code, for more information on the division of responsibilities. Synthomer plc ## 92 Annual Report 2021 ### Board and Committee meeting attendance The table below outlines all Board and Committee meeting attendance. When a Director is unable to attend, their views are sought in advance and incorporated into discussions. Non-Executive Directors must disclose to the Board other significant commitments before their appointment. Any proposed new significant commitments require Board approval before they are accepted. Board Nomination Audit Remuneration Disclosure Total number of scheduled meetings 20 10 6 5 5 GovernanceStrategic report Members Attended Attended Attended Attended Attended Caroline Johnstone 20 10 5 Calum MacLean – stepped down in November 2021 18 (18) 4 (4) Michael Willome – joined Synthomer in November 2021 2 (2) 1 (1) Stephen Bennett 19 5 Group financial statements Company financial statements Other information Brendan Connolly 19 10 6 5 5 Lee Hau Hian – joined the Nomination Committee in March 2021 19 8 (8) Alexander Catto – joined the Nomination Committee in March2021 20 8 (8) Holly Van Deursen – joined the Nomination Committee in March 2021 20 8 (8) 6 5 Cynthia Dubin 18 10 6 5 Roberto Gualdoni – joined Synthomer in July 2021 7 (7) 3 (3) 3 (3) 3 (3) Just Jansz – joined the Nomination Committee in March2021, stepped down inSeptember 2021 13 (13) 7 (7) 3 (3) 4 (4) For Directors who only served for part of the year, the numbers in brackets indicate how many meetings they were eligible to attend. Synthomer plc ## Annual Report 2021 93 Corporate Governance ## The Board’s year We created a comprehensive induction ### This has been an exceptional year for Synthomer with a heavier programme for Michael, which is set out in ### than usual workload for the Board. Due to COVID-19, the majority our Nomination Committee report on page ### of its 20 meetings were held online. In December 2021, the 108. Details of Michael’s reward package areset out on page 112 of our Remuneration ### Board held its first full face-to-face meeting, with only one Non- Committee report. ### Executive Director attending virtually due to illness. In light of CFO: selecting a candidate with a strong ### changing work practices, the Board will now hold two of its record in growth ### scheduled meetings virtually from 2022. To help us identify our new CFO, we carried out a thorough search across several key ### As well as the major areas highlighted below, we established candidate groups, including sitting CFOs in other FTSE 250 companies. We announced ### longer-term succession planning for key roles and were therefore Lily Liu’s appointment in November 2021, ### well prepared when our Chief Financial Officer (CFO), Stephen andshe will join the Company no later than July 2022. For more information on Lily’s ### Bennett, announced his decision to step down in August 2021. appointment, see page 107 in our Nomination ### The Board also approved ongoing site transformation projects, Committee report and pages 112 to 113 in our ### including closing our only coal-fired power station at our site in Remuneration Committee report. ### Sokolov, Czech Republic (see page 59 in our Sustainability report NED: bringing wide experience of the chemical sector and board membership ### for more information). It also approved the financial plan to We appointed Roberto Gualdoni as a new ### transfer production from our Marl 3 site in Germany, which we Non-Executive Director to replace Just Jansz, who retired in 2021 having completed his ### are closing, to our location in Austria. nine-year tenure. Roberto has extensive knowledge of the international chemical Transition to a new managementteam industry and a wealth of board-level ### “The induction process This year, we carried out an extensive experience. Information about Roberto’s recruitment process to hire a new Chief induction can be found in our Nomination ### was very thorough and Executive Officer (CEO), a new Chief Financial Committee report on page 108. ### comprehensive and Officer (CFO) and anew Independent Eastman’s Adhesive Resins acquisition ### helped me to get under Non-Executive Director(NED). We met regularly throughout 2021 to ### the skin of the business.” We appointed recruitment specialists Egon discussprogress, due diligence and our own Zehnder to help us search for our CEO and business core assessment of the proposed Michael Willome, CEO NED. Meanwhile, we hired Spencer Stuart acquisition. The Board worked with both tohelp us recruit a new CFO. Both agencies Calum and Michael to ensure we considered helped us create clear role and candidate all opportunities and risks of the transaction specifications. They were asked to consider and that everyone was aligned. We carefully diversity in its widest sense when developing considered the timing of the proposed long- and shortlists of candidates for all roles. acquisition alongside the senior management transaction – the whole of the executive team As stated in our Annual Report 2020, joined the Board discussions and showed, EgonZehnder led our Board skills review with their experience, support and planning andan external evaluation of Synthomer’s for the integration of the acquisition. Board and Committees in 2020. This work aside, the Company and its Directors do not Knowing that our new CEO was in place and have any connection with Egon Zehnder nor supportive, and given the compelling business Spencer Stuart. case, we concluded that his acquisition was inthe interests of all stakeholders. CEO: comprehensive selection process | andinduction | Training and development | | --- | --- | | We selected Michael Willome as our new | We are committed to providing relevant, | | CEO following a comprehensive search | ongoing training for our Board members | | across more than 100 companies in a range | tohelp them strengthen their understanding | | of sectors, including speciality chemicals | of key governance issues. Every year, our | | andother industrial businesses. | Remuneration Committee asks an external | specialist to provide updates on market Michael joined Synthomer in November practice, remuneration trends and corporate 2021and brings established public market governance developments at its August experience and a strong performance track meeting. That meeting is attended by record, including in M&A. He also has a deep thewhole Board. In 2021, the Board understanding of speciality chemicals and our alsoundertook workshops and training end markets. onreporting requirements under the TCFD and the UK’s Department for Business, Energy and Industrial Strategy (BEIS) white paper Restoring Trust in Audit and Corporate Governance. See our Audit Committee report Synthomer plc ## 94 Annual Report 2021 | on page 102 for more information on the | Board engagement: strengthening | See page97 for more information on Board | | --- | --- | --- | | actions we have taken as a result of the | stakeholder connections | engagement, in oursection 172 statement. | | whitepaper. The Board also received | Understanding the needs and expectations | | Strengthening our focus refresher training on Directors’ duties and ofour stakeholders is an important part of onsustainability responsibilities as part of our Eastman’s ensuring Synthomer’s success. The Board In 2021, Synthomer introduced its new Adhesive Resins acquisition work. has a role to play in this and members Vision2030 roadmap, outlining a series makethemselves available to stakeholders Outcomes of our 2021 internal ofsustainability targets in three key areas: throughout the year. Our Executive Directors Boardreview products, operational health, safety and play an important role in engaging with our We hold external evaluations of the Board environment, and people. GovernanceStrategic report shareholders and report back to the Board everythree years, with internal reviews in the after results presentations. Our brokers The Board held numerous discussions intervening years. In 2021, we held an internal provided insights and feedback from withthe Executive Committee to agree evaluation, with the main points for follow up shareholders throughout the year and thesetargets, which are supported by relating to enhancing our strategy process; asweannounced our acquisition of aseries ofshort-term objectives to guide maintaining our culture of learning lessons from Eastman’s Adhesive Resins business. theCompany through the next decade. past experiences; and further development of Those conversations ensured that our new our stakeholder engagement and succession Our employees are one of our most important commitments provide Synthomer with a pans. We have a clear action plan for 2022. stakeholder groups. In 2021, the Board cleardirection for the next decade while Group financial statements Company financial statements Other information assessed its employee engagement Making progress against our 2020 recognising that there will be more to approach against FRC guidance. Boardevaluation doalong the way. We appointed Deloitte This demonstrated that we have important We implemented actions from our latest tohelpus prepare to report on TCFD strengths, such as a clearly designated external Board and Committee evaluation in requirements. As part of that work, the firm Non-Executive Director who acts as the 2020 (facilitated byEgon Zehnder) reviewing interviewed all our Non-Executive Directors Board’s ‘employee voice’; and a flexible key areas such as Board processes and toget their views on the subject. Deloitte also structure that allows employees to raise composition, succession planning, provided progress reports on this work at issues. It also showed we have more work stakeholder relationships and quality several Board meetings throughout the year. todo in some areas, such as in letting ofdiscussion. Meanwhile, the Board continues to receive employees know how the Board has reports on Synthomer’s occupational health | Key recommendations from | | usedtheir feedback to make decisions. | | | --- | --- | --- | --- | | our 2020 evaluation Actions we took in 2021 | | | and safety, and process safety performance | | | | Ways that we take the pulse of our culture | for discussion at every Board meeting. | | Strengthen focus on | A series of special | | | Employee engagement is one of the key Board agenda topics and deep See pages 42-68 in the Strategic report for waysthe Board fulfils its responsibilities to priorities dives were agreed as more information on our sustainability agenda setSynthomer’s cultural tone and assess and part of the Board and targets. monitor adherence to our values. The Board annual planner. is particularly aware that it needs to increase Risk management and internal control its engagement with employees at former The Board of Directors has ultimate Enhance learning We increased the OMNOVA sites – which has proved difficult responsibility for the Group’s systems of risk opportunities number of externally during the pandemic – and has plans to management and internal control and for supported dosoin 2022. The Board will also engage reviewing their effectiveness and sets workshops and with employees transferring from the appropriate policies to ensure that the Code training sessions that Eastman’sAdhesive Resins acquisition requirements are met. The Group’s internal the Board receives. onceithas completed. controls over the financial reporting and Further develop We increased the consolidation processes are designed under During the year, although COVID-19 Board dynamics regularity of our the supervision of the Chief Financial Officer restrictions hampered plans for face-to-face Chair’s one-to-one to provide reasonable assurance regarding contact, Alexander Catto, our designated discussions with our the reliability of financial reporting and the Non-Executive Director for workforce Non-Executive preparation and fair presentation of the engagement, was able to meet employees Directors and Group’s published financial statements for atour site in Harlow, in the UK. Holly Van Executive Directors. external reporting purposes in accordance Deursen, one of our Independent Non- with IFRS. | Drive progress in | We added | Executive Directors, is now supporting | | | --- | --- | --- | --- | | sustainability | sustainability as a | Alexander in his engagement role. During the | The Group risk management framework is set | | | standing item at | year, they joined employees in Germany and | out on pages 70-71. Risks associated with | | | each Board meeting. | the USA in virtual meetings. Their findings | safety, health and the environment are, by the | | | | were discussed by the Board at our | nature of the Group’s business, always of the | | | | December meeting. | utmost concern and the sustainability report | on pages 55-57 reviews the Group’s current Board members also took part in other year performance. employee activities. For example, Caroline | Johnstone and Holly Van Deursen engaged | The Board confirms that a robust assessment | | --- | --- | | with Synthomer’s new Engender women’s | of the emerging and principal risks facing the | | network. Brendan Connolly also hosted | Group has been carried out and that it has | | twoemployee sessions on executive | monitored and reviewed the effectiveness of | | compensation. The Board continued to assess | the Group’s risk management and internal | | employee opinions by drawing on such inputs | control systems in 2021. | as employee survey data, the use of our ethics helpline, progress against environmental targets, and health and safetydata. Synthomer plc ## Annual Report 2021 95 Corporate Governance ## Stakeholder engagement (s.172 compliance) Principal decisions in 2021 ## Understanding the issues that are This was a particularly busy year for the Board, with several changes in Synthomer’s Executive ## important to our stakeholders is essential Committee, our proposed acquisition of Eastman’s Adhesive Resins business and the ## to the way in which we develop and launch of the Company’s new Vision 2030 ## execute our business strategy. It is also sustainability roadmap and targets. Below we set out two examples of the Board’s principal ## critical to our long-term success. decisions in2021 and how it considered section 172 matters in the process. Acquiring Eastman’s Adhesive Resinsbusiness To carry out our acquisition of Eastman’s Adhesive Resins business, we had to raise additional finance. We canvassed opinion Our approach to section 172 stakeholders, as well supporting discussion from key shareholders to ensure we had Our section 172 statement describes the on relevant issues. It also helps the Board theirsupport and determined that it was ways in which the Board has carried out its choose the course of action that best leads inthe best interests of the business and responsibility to promote the success of the tohigh standards of business conduct and ourinvestors to raise both our borrowing Company, recognising that the key decisions success for Synthomer in the long term. restriction from £1.5 billion to £2 billion and it makes today will affect long-term Stakeholder engagement in 2021 additional equity through a £200 million performance. The statement considers There were no changes to the Board’s equityplacing. That placing was heavily paragraphs A to F of the Companies Act identified key stakeholders, as listed in the oversubscribed. The Board also considered 2006 and includes details on how the table opposite. In carrying out its duties, the the acquired business’s impact on the Boardhas considered and engaged Board continued to ensure it understands, environment, requesting appropriate withstakeholders. and considers, the issues that matter most information from Eastman’s management. When making decisions, the Board considers tothese stakeholder groups, particularly The acquisition aligns with our sustainability the needs of our different stakeholder groups when making material decisions. roadmap, with many of its products being as well as the likely consequences that any used in the making sustainable adhesives. The pandemic continued to have an impact on action taken might have on Synthomer’s the Board’s engagement with stakeholders in For our employees the Board was of the reputation. To help, the Board receives papers 2021. For example, the full Board was unable to viewthat the acquisition would bring a that include a table setting out section 172 carry out site visits and physical meetings with number of career and training advantages information. It uses this information to inform employees. Instead, members received regular and opportunities. strategic discussions, including implications for updates on how employees across the Group the resilience of our business and the potential In December 2021, we put the borrowing were coping and how Synthomer helped them impact on our community and environment. restriction to a vote at an Extraordinary General manage the ongoing operational, physical and It is the Chair’s responsibility to ensure that Meeting and received 99.80% approval. mental demands associated with running our the Board considers section 172 when We also put the proposed acquisition to a vote plants and businesses under COVID-19-related making itsdecisions. at the same meeting and received 99.98% constraints. Management provided feedback approval. We are very pleased with by the When making decisions, the Board and onhow teams met strong demand from our level of support from investors, including itsCommittees consider the interests customers, particularly those involved in the Kuala Lumpur Kepong Bhd. | ofouremployees. We primarily engage | manufacture of nitrile latex gloves. We were, | | --- | --- | | withemployees via Alexander Catto, | however, able to go ahead with our twice-yearly | | ourdesignated Non-Executive Director | materiality assessment, when we appraise what | | forworkforce engagement. However, other | sustainability issues matter most to our | | Board members met with employees during | stakeholders. During the April 2021 | Vision 2030 2021 to discuss executive pay and diversity assessment, we spoke to a range The Board spent several months engaged and inclusion. More information about how ofstakeholders, including customers, indetailed discussions with the Executive we engage with employees can be found in employees, shareholders and legislators. Committee to set appropriate targets as part our sustainability report on pages 62-68. Their feedback led us to make a number of of the Vision 2030 roadmap. (See page 18 for revisions to our approach. For more details, Board members make themselves available more details.) During these discussions, the seepage 46 of the strategic report. | to investors. In 2021, however, most direct | | Board interrogated and challenged the planned | | --- | --- | --- | | engagement was carried out by our CEO | For the second year running, it was necessary | targets and considered the views and | | andCFO and reported back to the Board. | to hold our AGM as a closed meeting, due to | expectations of a range of stakeholders, | | | the UK Government’s COVID-19 regulations | including our employees, shareholders, | We recognise that it is not always possible which prevented shareholders from attending customers and suppliers. It also took a toprovide a positive outcome for most a physical meeting. We did, however, long-term view of the business and its ability to stakeholders and that sometimes the Board putmeasures in place that allowed deliver on our purpose. The Board reviewed the has to make decisions based on competing shareholders to submit questions short-term objectives which were put forward priorities. The Board regularly assesses the inadvanceof the meeting. by the Executive Committee to underpin the outcomes of its decisions and is available delivery of the 2030 targets. They considered totalk to stakeholders when needed. their alignment with matters of most concern This engagement helps the Board better to our stakeholders and most material to our understand what matters most to our business – carbon and climate change, diversity and inclusion, and supply chain assurance. Synthomer plc ## 96 Annual Report 2021 ### Stakeholder groups How the Board engaged in 2021 | | • The Executive Committee attended all | • Since all areas of the business have seen | | --- | --- | --- | | | scheduled Board meetings with divisional | very strong demand, the Board has stayed | | Customers | Presidents providing additional customer- | abreast of operational issues, such as plant | | We work with more than 6,000 customers | related context when needed. | capacity and shift planning to meet the | | | • The Board discussed the exceptional demand | additional demand. | worldwide, providing the products they from our nitrile glove customers, including • Historically, the Board receives ad hoc need to address technical and sustainability managing supply and pricing and reports on product quality. However, it has challenges intheir ownmanufacturing consideringthe next phase of our asked for a more formal process of regular, GovernanceStrategic report | processes. | nitrilecapacity expansion. | periodic reporting from 2022. | | --- | --- | --- | | | • The Board received three presentations on | • The Board reviewed plans for 2021 | | | employee engagement in 2021, including a | Employee Voice engagement in April, | | Employees | proposal for a second Your Voice survey and | although these had to be amended because | | Our success relies on the talent of our | initial survey findings later in the year. | of the pandemic. Nonetheless, Alexander | | | The Board received a full report on the survey | Catto visited employees at our Harlow, UK, | employees. We want them to feel part ofa | | results and follow-up action plans in Q1 2022. | site in Q2 and held two virtual meetings with | | | --- | --- | --- | --- | | culture that values diversity and inclusion, | • The Board continued to monitor the impact of | Holly Van Deursen for employees in | | | fairness and transparency. | COVID-19 at every Board meeting, receiving | Germany and the USA in Q4. The Board | Group financial statements Company financial statements Other information | | | statistics on employee infection rates, testing | received feedback on these meetings | | | | regimes, number of employees isolating and | inDecember 2021. | | working from home and the subsequent impact on operations. | | • In September, the Board approved a proposal | • In future, the Board will receive regular | | --- | --- | --- | | | to adapt the Synthomer Foundation’s | reports from the Executive Committee on | | Communities | governance model to create a new global | progress against our Vision 2030 targets. | | We want the communities wholivenear our | volunteering network. See page 67 of our | | sustainability report for more information. sites to see us asagood neighbour. | | • In January and March, the CEO reported to | • In June, the Vice President of Procurement | | --- | --- | --- | | | the Board on the impact that the end of the | and the Procurement Director for Strategic | | Suppliers | Brexit transition period had on our operations, | Raw Materials presented to the Board on | | Our suppliers deliver the raw materials and | including on freight and logistics. | supply challenges over the past 18 months | | | • Our Vice President of Procurement and the | caused by exceptional supply and demand | services we need to make our products. Director of Procurement Excellence presented volatility and extremely high demand for our We look for ways to workin partnership with their work to create a more sustainable supply products. The presentation demonstrated suppliers to create a more sustainable chain, including a new global procurement how the procurement team had overcome supply chain. excellence network and sustainable these challenges, using the Group’s procurement policy. expertise and relationships with its suppliers. See page 51 of our sustainability report for more information on how we work with suppliers. | | • The CEO and CFO provide updates on their | • Each Board pack includes analysts’ | | --- | --- | --- | | | meetings with investors, and our President | forecasts and consensus for financial | | Shareholders | ofCorporate Development shares investor | performance, as well as a summary of the | | As a public company listed on the London | relations developments at every Board | externally prepared shareholder analysis | | | meeting. | report. This shows our top 20 shareholders | Stock Exchange and included inthe FTSE and their movements alongside top buyers | 250 index, we have a responsibility to deliver | | and sellers. Analysts’ reports and notes are | | --- | --- | --- | | value for ourshareholders. | | shared with the Board as they are issued. | | | • Our Chair of the Board corresponded with the | • The Board indirectly engaged with the | | | Financial Reporting Council (FRC) to answer | FRC’s waiver of the non-audit fee cap via | | Governments and authorities | questions about closing our Sokolov | our auditor, PwC. | | As a member of the chemical industry and | coal-fired plant following the FRC’s thematic | • The Board received reports on the changing | | | review of IAS 37 ‘Provisions, Contingent | regulatory landscape, including the BEIS | scientific community, it is important we Liabilities and Contingent Assets’. consultation, TCFD reporting and corporate engage on issues such as policy, governance. compliance and collaboration. • The Board receives a report three times a year on legal compliance with operational laws and regulations at our sites. • During the year, Synthomer’s previous CEO chaired a committee of the Chemical Industries Association which engaged with the Cabinet Office on post-Brexit issues affecting the UK chemical industry. Synthomer plc ## Annual Report 2021 97 Corporate Governance ## Audit Committee report ## Audit Committee: an ## introduction from the Chair As a Board member, I have a fundamental duty to help recruit new members of the management team. And, as Audit Committee Chair, I was particularly keen to ensure werecruited a new chief executive who understands that, done well, risk management and audit are essential tools tohelp a business make better decisions. I am pleased we have found that person inMichael. A year of progress I was also personally very pleased that Synthomer began rolling out the new Pathway business transformation programme to our first sites in 2021. This has been a big capital-intensive project that will help standardise and digitalise the way we manage core business processes, such as inventory management, invoicing and procurement. During the year, the Audit Committee focused on several key areas, including testing the financial robustness of our new acquisition from PLACEHOLDER IMAGE Eastman, strengthening our risk management framework and reviewing our Internal Audit function and environmental reporting ## My first full year as Chair of Synthomer’s methodology. We also considered more routine, but important, areas such asresponding to ## Audit Committee has been a busy one, with regulatory changes andadjusting our approach to Committee meetings to make best use of ## new arrivals, a major acquisition and everybody’s time. ## developments in the way we track and Oversight of our proposed acquisition The announcement of Synthomer’s plans to ## manage our risks. acquire Eastman’s Adhesive Resins business in October 2021 marked a big step forwards in our growth ambitions. I am pleased with how well we have worked with our auditor, PwC, this year. The level of diligence exercised on the reporting accountant workfor the Eastman deal, for example, wasexceptional and I am particularly grateful toour new lead audit partner, David Beer, andhis team for their hard work. The proposed acquisition required PwC to request the Financial Reporting Council (FRC) for a second waiver to allow them to breach their cap on fees to auditors for non-audit- related services. While the FRC approved ourrequest, they made it clear they would notapprove a further waiver request for at least two years. I am, however, satisfied that we did everything possible to avoid making the request and, on page 105, we explain our reasoning and the steps we’re taking to avoid a recurrence. Synthomer plc ## 98 Annual Report 2021 | Improving our risk and audit processes | The FRC’s May thematic review on interim | | --- | --- | | External consultants worked with us on | reporting was another of this year’s regulatory | | important changes to our risk management | developments. We moved quickly, mapping | | framework. In particular, they helped the | our 2021 half-year results work against the | | Board and management team understand | review and applying the lessons learned to | | good practice when defining risk appetite. | this Annual Report. | As part of that work we have added a third I started this introduction by saying that dimension to our risk framework: we now thishas been a busy year – it’s also been consider the speed at which a risk might arewarding one. As a committee we’ve GovernanceStrategic report occur as well as its probability and impact. continued to work well, albeit virtually, and Our Group Internal Audit and Risk Director, Iam pleased with how we adapted some Ginette Grant, has made great progress ofour meetings to enable thematic deep inherfirst full year at Synthomer. As well divesessions with more time for questions asreviewing our risk management strategy, and answers. processes and team structure, Ginette It’s been a pleasure to work with hasbeen very proactive with the Board, colleaguesacross Synthomer who bring interviewing individual members to diverse thinking, respect and even passion Group financial statements Company financial statements Other information understand their audit priorities for 2022. forrisk management and audit to the | Supporting Synthomer’s | table.I would like to thank everyone for | | --- | --- | | sustainabilityagenda to meet | theirdedication in such a busy year. I look | | stakeholders’ expectations | forward to continuing that work in 2022 | | To reflect the growing significance of | andbeyond. | sustainability and the need to track progress against our Vision 2030 targets, our Internal Audit team will begin reviewing aspects Cynthia Dubin ofSynthomer’s environmental reporting Chair methodology. We, as a Board, are now 3 March 2022 reviewing all our capital allocation plans withsustainability in mind. Responding to regulatory developmentsand reviews Addressing sustainability is just one way wecan meet society’s expectations of us asaresponsible business. We must remain proactive in other key areas, such as public trust, which regulators are looking at very closely. In 2021 the UK’s Department for Business, Energy and Industrial Strategy (BEIS) held a consultation on this subject and, while final recommendations are due in 2022, with companies expected to implement them in the coming years, the direction of travel is clear: businesses like ours must be prepared for the introduction of some new Sarbanes- Oxley-like regulation. We have begun building a roadmap that will put us in a good position whatever the outcomes. Synthomer has adistinct advantage since our acquired OMNOVA business, being originally an American company, has an internal control environment and processes which were compliant with Sarbanes-Oxley. Synthomer plc ## Annual Report 2021 99 Corporate Governance ## Audit Committee: How the committee operates | Audit Committee role | Committee meetings andoperation | Correspondence with the FRC | | --- | --- | --- | | We assist the Board’s oversight of our | Other Board members have a standing | In December 2020 the FRC advised us | | financial systems and reporting, and the | invitation to attend our meetings, unless | thatSynthomer had been selected for | | adequacy and effectiveness of our internal | notified otherwise. We are very pleased that | thethematic review into IAS 37 ‘Provisions, | | controls and risk management. We also lead | our CEO and CFO attend our Committee | Contingent Liabilities and Contingent Assets’ | | the oversight of both external and internal | meetings, often with the rest of the Board. | in the Annual Report and Accounts for the | | audit. Our full terms of reference, reviewed | Our programme of risk reviews and updates | year ended 31 December 2020. | | and updated during the year, are available | has also allowed us to invite high-potential | | Subsequently, in October 2021 the FRC atwww.synthomer.com. and diverse members of the management asked us to explain whether we were obliged team to attend. These include senior Group Committee members to decommission our coal-fired utility plant finance team members, the Group Internal The Committee comprised four members inthe Czech Republic and to confirm the Audit and Risk Director, and PwC, led by untilJuly 2021 when Roberto Gualdoni joined amount was included in provisions for the audit partner David Beer. | the Committee (and the Board) bringing it up | | expected outflows. We clarified that the | | --- | --- | --- | | to five members. The Committee reverted | The Committee meets regularly with PwC | restructuring charge and provision included | | tofour members on the resignation of | andwith the Group Internal Audit and Risk | the estimated cost to meet the legal obligation | | JustJanszin September 2021. Roberto | Director without management present. | to decommission the plant. We explained | | undertook a rigorous induction on his | The Chair also liaises with Brendan Connolly, | thatthe amount was not material to the Group | | appointment, meeting with members of the | the Senior Independent Non-Executive | but acknowledged, with hindsight, that the | | Executive Committee, senior members of the | Director and Chair of the Remuneration | disclosure would havebeen improved | | finance team, Group Internal Audit and Risk | Committee, to discuss matters such | ifithadstated that therestructuring | | Director,and the lead external audit partner. | assetting Executive Director | chargeandprovision included the | | | compensationtargets. | decommissioningcosts. | The Board considers that each member is | independent within the definition of the Code. | Outside formal meetings, the Chair meets | | --- | --- | | Our Committee Chair, Cynthia, has recent | regularly on a one-to-one basis with the CEO, | | andrelevant financial experience in line with | the CFO, Group finance team members, the | | Provision 24 of the Code. She has had a long | Group Internal Audit and Risk Director and | | career in finance, including having been CFO | PwC, to develop the Committee’s programme | | of a premium-listed LSE company and a | of work and to review progress in actions we | | member and chair of audit committees at | have agreed. This enables us to explore and | | bothNasdaq- and NYSE-listed companies. | understand key issues as they arise and | | Together, Committee members have a wide | toensure we have appropriate information | | range of financial, operational and commercial | prepared for, and sufficient time to address, | | experience across the chemicalsand | key issues in Committee meetings. | engineering sectors. The skills and experience ofCommittee members aresetout on pages84-87. Synthomer plc ## 100 Annual Report 2021 ### Activities during the year To address our core remit in 2021, we: Integrity of corporate • Reviewed and approved the Group’s annual and interim financial statements, including preliminary results and financial announcement reporting, significant • Reviewed and approved significant accounting policies, estimates and judgements and reported alternative judgements and performance measures estimates • Reviewed and challenged the assumptions and sensitivities in the scenarios modelled to support the preparation ofthe accounts on a going concern basis and in assessing the longer-term viability of the Group • Reviewed the FRC guidance for 2021 covering interim reporting, annual accounts and corporate governance GovernanceStrategic report reporting, along with a summary ofthe management’s approach to implementation • Assessed the processes for assuring the Board that the 2021 Annual Report and Accounts, when taken together, isfair, balanced and understandable • Regularly reviewed the Group’s material litigation and concluded, in the February 2022 Committee meeting, that the provisions are appropriate • Reviewed the UK payment practices report, discussed the underlying data and challenged management on certain aspects of the report External audit • Approved the external audit plan for 2021; discussed the experience and expertise of the key members of the Group financial statements Company financial statements Other information engagement team, in the light of a mainly remote audit; and approved the audit fee • Carried out a review of the auditor’s reports, including PwC views on significant accounting judgements, estimates and the internal control environment • Reviewed compliance with the FRC’s Ethical Standard for auditors and the restrictions on auditors in providing non-audit services. Approved the provision of certain permissible non-audit services by PwC (for detail, see page 105) • Considered and confirmed PwC’s independence (see page 104). Monitored PwC’s work as reporting accountants onthe acquisition of Eastman’s Adhesive Resins business and the subsequent year-end audit, to ensure there was noimpact ontheirindependence • Reviewed and assessed the performance of PwC and our lead audit partner • Considered the need to put the external audit out to tender. After discussion and challenge, we recommended PwC’s reappointment Internal audit, risk • Reviewed risk processes across the business to identify and mitigate risks management and • Implemented changes to our risk management framework, adding an additional dimension of the speed at which internal controls therisk might occur to probability and impact • Continued our programme of deep dive reviews on the risk management of our global businesses and functions. Alongside our reviews of Performance Elastomers, Functional Solutions, Industrial Specialities and Acrylate Monomers, we also considered pensions, tax, Group-wide cyber security, the security and reliability ofour industrial automation andcontrol systems, and strategic sourcing operations • Drafted a detailed delivery plan to build the content of the Audit and Assurance Policy and developed a high-level assurance map • Received updates at each meeting on ongoing and completed internal audits and actions arising • Considered the results of the 2021 controls assurance internal audits and IT audits, the self-assessment process andthe adequacy and speed of management’s response to matters raised • Reviewed and approved the 2022 internal audit plan and ensured there is sufficient resource to deliver it Governance • Reviewed the corporate governance reporting and whether, as part of the Annual Report, it was fair, balanced andunderstandable • Reviewed the effectiveness of the Group’s anti-bribery and anti-fraud procedures – Discussed the effectiveness of the Group’s Code of Conduct and Ethics Helpline – Received reports on the independent investigations conducted in response to concerns raised under the whistleblowing policy and reported to the Board that we were satisfied with the outcomes – Met with Group Internal Audit and Risk Director and the external auditor without management onseveraloccasions – Undertook a Committee effectiveness review, assessed the results and concluded that the Committee was operating effectively – Reviewed the Committee’s terms of reference to ensure our role and responsibilities are aligned with the Code. Synthomer plc ## Annual Report 2021 101 Corporate Governance ## Audit Committee: How the committee operates continued BEIS consultation paper Going concern and viability statements Fair, balanced and understandable The Board received a presentation from To enable the Board and Committee The work undertaken by management external consultants at its June meeting, toassess going concern and viability, (andreviewed by the Committee) to outlining the key topics raised in the BEIS management sets out its assumptions supportthe Board’s statement on our consultation paper, Restoring Trust in Audit andthe potential risks to the business and AnnualReport being ‘fair, balanced and and Corporate Governance, and rating each possible mitigations, together with economic understandable’ includes: topic on the impact on the Group and and business scenarios. During the year, • Establishing a working group of itsurgency. there was a particular focus on the impact appropriately qualified Group people to ofthe proposed acquisition of Eastman’s Executive management assessed how the oversee the drafting of the Annual Report Adhesive Resins business and the expected Group could best respond to each topic and and Accounts. This group met regularly to reduction in Performance Elastomers’ 2022 presented its findings to the Committee in ensure that disclosures were appropriate profitability. The process – conducted August. A number of projects were initiated, for all stakeholders and that drafting was bymanagement, and reviewed bythe inline with the likely outcomes of the progressing well Committee to support the Board’s consultation, each with a project lead/owner. • Engaging a corporate communications statement– included: We receive updates on project progress at andreporting adviser, to assist each Committee meeting. • Reviewing the Group’s sources of funding indrafting,editing and proof-reading and, in particular, testing the leverage theAnnual Report The largest project relates to internal covenant in our financing arrangements • Ensuring that the FRC’s October 2021 controls.This aims to ensure that our control and assessing available headroom guidance, along with other relevant environment is sufficiently robust to be • Reviewing the short-, medium- and guidance, were taken intoaccount audit-ready, for any new regulation, and for long-term cash flow forecasts in various • The CEO and CFO confirming that, in Directors to be able continue to attest to its severe but plausible scenarios, as well as theiropinion, the Annual Report was fair, effectiveness. Our acquisition of OMNOVA reverse stress testing forecasts. balanced and understandable brought us a business which was Sarbanes- • Assessing the Group’s current and forecast • Requesting that certain key contributors, Oxley (SOX) compliant and had never activities and factors likely to affect its for example, Presidents and Finance reported a material deficiency. The former future performance and financial position. Directors of our global divisions, sign Chief Accounting Officer and his deputy, who adeclaration confirming the accuracy have remained with us, have experience of The Committee discussed the going oftheirinformation SOX implementation and of maintaining and concernand viability statements at the February • Arranging for our remuneration reporting on a SOX environment. They will 2022 Committee meeting and recommended consultantsto review the Directors’ lead this project. that the Board provide the statement set out on Remuneration report page 128 and page 81, respectively. • An audit trail being completed by the VP,Group Finance for material data underpinning non-financial information inthe Annual Report • Circulating drafts of the Annual Report toPwC, the Committee and the Board forreview • Discussing material disclosures at their February 2022 Committee meeting The Committee discussed the fair, balanced and understandable statement at their February 2022 Committee meeting and, inlight of the above, recommended that theBoard provide the statement as set out onpage 129. Synthomer plc ## 102 Annual Report 2021 ### Significant areas of judgement and estimate The Committee’s review, challenge and conclusion Taxation The Group Tax Director presented to the Board and the Committee The Group holds total tax provisions of £23.7 million relating during the year. In assessing the year-end judgements for 2021, she tomatters raised by tax authorities in several jurisdictions. reported on the basis for calculating the effective tax rate of 22.5% and Significant judgement has to be exercised by management, the reconciliation to the statutory tax rates of the Group. She provided withadvice from tax advisers, todetermine tax provisions, as the regular updates on interactions with tax authorities that regulate the finaltax outcome is uncertain andmay not be known for several jurisdictions in which we operate, setting out management’s detailed years. The scale of the Group’s uncertain tax provisions has rationale and judgement for each current tax liability. The Committee reduced significantly over recent years as various long outstanding challenged management’s judgements to ensure that they were GovernanceStrategic report tax matters have been settled, both for and against theGroup. alignedwith our Group tax strategy. The Committee concluded that the estimates and disclosures wereappropriate. PwC presented its findings on management’s judgements, using tax specialists as required, and provided the Committee with its assessment of their appropriateness. Pensions Our Group Pensions and Benefits Director regularly attended the The Group operates a number of defined benefit schemes Committee in 2021 to provide updates on our pension arrangements. (predominantly in the UK, USA and Germany) which have significant The Group continues to review our pension scheme investment liabilities, as outlined in note 26 to the Group financial statements. advisers and investment strategies to ensure we have a lower risk, Group financial statements Company financial statements Other information Although the UK and USA schemes are closed to new entrants liability-driven investment approach, as well as undertaking a review andto future accrual, theassessment of liabilities of each of the ofmajor scheme documentation to ensure it is up to date. schemes is sensitive to changes in actuarial assumptions. We received a report from management setting out the key assumptions and rationale in valuing the liabilities of the main plans inthe UK, USA and Germany. The Group uses appropriately qualified external actuarial advisers to help establish the assumptions used inthevaluation of theGroup’s pension liabilities. PwC evaluated theassumptions and methodologies used by our actuarial advisers andmanagement and assessed whether their assumptions were appropriate and not materially different from external benchmarks forsimilar schemes. The Committee reviewed the assumptions and methodology used bymanagement, including comparisons to those of other companies, andconcurred with the conclusions. PwC reported that they were satisfied with the assumptions used and the way the schemes had been accounted for. Other areas of judgement Alternative performance measures – Special Items The Committee regularly challenges management on what is The Group discloses Special Items separately, to provide a considered Special Items. It reviews in detail every such item which clearerindication of underlying performance. Special Items are isexcluded or separated from reported Underlying profit and takes eitherirregular, and therefore their inclusion in the assessment intoconsideration guidance from the FRC and the external auditors. ofasegment’s performance would distort trends, or are technical The Committee is satisfied that it is helpful to a reader of the financial adjustments which ensure the Group’s financial statements are statements to report Underlying profit, together with IFRS profit, incompliance with IFRS, but do not reflect the year’s operating without Special Items and that all Special Items reported met with performance; or both. An example of the latter is the amortisation theGroup’s definition of such items. ofacquired intangibles, which principally relates to acquired customer relationships. The Group incurs costs, recognised asanexpense in the income statement, in maintaining these customerrelationships. The Group considers that the exclusionofthe amortisation charge onacquired intangibles fromUnderlyingperformance avoids the potential double- countingofsuch costs and therefore excludes itasaSpecial ItemfromUnderlying performance. European Commission investigation During 2018, the European Commission (the Commission) initiated During the course of this ongoing investigation the Committee aninvestigation into practices relating to the purchase of Styrene received from management regular updates on the facts and monomer by companies, including Synthomer, operating in the circumstances inrelation to this investigation along with the European Economic Area. The Company has and will continue associatedaccounting analysis. PwC reported that they were tofullycooperate with the Commission during its investigation. satisfiedwith the judgements and related disclosures made by In prior years given the ongoing investigation and the inherent management. The Committee discussed the matter and concurred uncertainties associated with it, it was not possible to determine withthe conclusions made. whether or not a liability existed. Similarly, given the many variables in the Commission’s fining framework and accordingly the range of possible outcomes, the Directors were not able to reliably estimate any potential possible liability. Therefore a contingent liability was disclosed in each set of financial statements. Now based on the information available and the resulting assessment of the expected outcome of the investigation a provision of £57.2 million has been made in relation to this case. Synthomer plc ## Annual Report 2021 103 Corporate Governance ## Audit Committee: How the committee operates continued | Risk management and internal | Internal audit and risk | Auditor independence and | | --- | --- | --- | | control environment | management function | objectivity and auditor-provided | | Each year, the Board is required to conduct | The Group Internal Audit and Risk Director has | non-audit services | | areview of the effectiveness of the Group’s | a direct reporting line to the Audit Committee | The Committee has a clear policy on the | | systems of risk management and internal | Chair and provides an independent assessment | provision of non-audit services by the | | control. The Board’s statement relating to this | of our internal control and risk management | externalauditor and has defined the very | | review is set out on page 95. At its February | processes’ effectiveness; highlights key issues; | limited non-audit services they can provide. | | 2022 meeting, the Committee reviewed | makes recommendations; and monitors | Services can only be provided if approved by | | management’s assessment of the key | implementation of mitigations and | the Committee and they are subject to a cap | | elements of these systems and confirmed | recommendations. We have a dedicated | of 70% of the average of audit fees for the | | their overall effectiveness. Their conclusion | in-house Internal Audit function, which draws | preceding three years. All engagements for | | drew on the following: | on specialist resources as required. At each | non-audit services with an external audit firm | | | meeting, the Committee reviewed progress | must be pre-approved by the Committee to | • The internal audit programme completed against the Internal Audit annual plan and ensure that as many firms as possible would during 2021 and progress in implementing explored areas identified for action. We also be independent in an audit tender. Details of resulting actions reviewed completed audit reports, focusing on audit and non-audit fees paid to the auditor • Our programme of risk reviews and recurring themes, which might require Group in2021 are set out in note 7 on page 149. discussions with senior managers and other actions, and areas where there was divergence staff across the Group throughout the year PwC produced a report setting out how from self-assessments. Developments in our • Ongoing management assurance (via theyassessed themselves as independent. internal audit arrangements are set out in my Committee papers, Board and Committee This referred to reporting accountant work introduction on pages 98 to 99. | presentations and discussions) to review | | undertaken as part of the acquisition of | | --- | --- | --- | | the Group’s key financial controls to ensure | External audit | Eastman’s Adhesive Resins business. | | they support our continued growth | We reappointed PwC as our external auditor | PwC confirmed thatthey remained | | • The key controls questionnaire, which is | in 2016, following a full re-tender process. | independentin respect ofthe 2021 audit. | | completed and signed by each Group | The firm has been the Group’s auditor | | The Committee concluded that PwC’s operating unit each quarter since2012. independence and objectivity were not • Representations to the CFO from the The Committee discussed the 2021 audit compromised by providing these services divisions’ financial and commercial process at its December 2021 and February and that, due to their knowledge of the management that the financial information 2022 meetings. During the year, the Groupand its financial statements, it was reported to the Group has been prepared Committee Chair was in regular discussion inSynthomer’s interests to engage PwC. inaccordance with our accounting policies with PwC’s lead audit partner to discuss the Having considered the steps taken by and that all relevant information has been progress of the audit. The Committee met PwCtopreserve their independence and provided for the preparation of the PwC without management being present theapproach to non-audit services set out Group’sAnnual Report and Accounts. after the February 2022 Committee meeting. above,the Committee concluded that PwC These representations are made twice No significant issueswere raised. continues to demonstrate appropriate eachyear in line with our external independence and objectivity. reportingtimetable. December 2021 Outcome/action taken by the Committee PwC’s audit risk assessment – set out on PwC undertook a detailed risk assessment, setting out their view of the significance of key risks pages 131 to 132 and the potential risk ofmaterial mis-statement. Following discussion, the Committee agreed with PwC that climate change, whilst not an area at significant risk, should be considered in the overall context of their audit opinion. Materiality level forthe audit (page133) PwC proposed an audit materiality level of £11.6 million, based on 5% of Underlying profit before tax of the average Underlying profit before tax for the last three years, rather than just for the year ended 31 December 2021. It did so on the basis that current year profits were above a ‘normal’ recurring level. After debating this with PwC and Executive Management, the Committee felt it was an appropriate methodology for 2021. PwC’s audit plan We reviewed the audit coverage and agreed scope (set out on page 131 to 134) in detail and agreed they were appropriate. We asked PwC to perform work on the cut-over procedures used in implementing the Pathway programme and to perform on-site fraud assessment work in some smaller entities where they are not the statutory auditor. The Committee noted and approved the continued high level of coverage. PwC’s resources We reviewed and discussed PwC’s resources with the firm, particularly the experience and tenure of their audit partners in our key overseas territories. The Chair and Executive Management interviewed the proposed audit partner for Malaysia, where the existing partner had completed their tenure. Audit fee and terms of engagement The Committee reviewed PwC’s fee proposal in light of the risks identified and proposed scope and approved the proposed fee of £1.6 million, compared to £1.8 million in 2020. Synthomer plc ## 104 Annual Report 2021 February 2022 Outcome/action taken by the Committee Confirmation of PwC’s audit plan PwC confirmed no material changes to the agreed plan. Audit findings, These were discussed with PwC and management – the work of the Committee is set out on significant issuesandother accounting the previous pages. judgements (pages132 to 133) Management representation letter The Committee reviewed and approved this. PwC’s independence and objectivity and The Committee evaluated and confirmed PwC’s independence, objectivity and quality control quality control procedures procedures. GovernanceStrategic report Audit quality – how we reviewed PwC’s performance During the year, the Committee evaluated the performance and effectiveness of the external auditor, PwC and our audit partner, David Beer in the following ways: External evidence The Committee reviewed the FRC’s 2020 Audit Quality Inspection Report covering its conclusions from a review of a selection of PwC audits which showed an improvement yearonyear. David Beer shared details of actions taken by PwC in response to this report. Management evidence At our request, management sought feedback from people across the business who were Group financial statements Company financial statements Other information involved in working on the year end with PwC teams. The feedback was positive to all questions asked and indicated that PwC had performed their audit well with particularly highratings were for planning and quality of people and service. Audit Committee evidence David Beer attended all Committee meetings during the year and was involved as the Group undertook the acquisition of Eastman’s Adhesive Resins business acting in the capacity of Reporting Accountant. He has demonstrated in Committee meetings how he has challenged management in relation to significant accounting judgements and estimates and also worked with management to ensure that the relevant guidance from the FRC issued in the year was incorporated into both the Interim and Annual Reports. Use of PwC as reporting accountants for the acquisition of Eastman’s Adhesive Resins business | Reasoning | Steps to avoid a recurrence | How we assured independence | | --- | --- | --- | | The Group was in a bilateral negotiation with | As part of the planning for a Group audit | The Committee challenged judgements | | Eastman in relation to its Adhesive Resins | tender in 2025 we are monitoring all non-audit | made by management and asked PwC | | business, in an exceptionally buoyant M&A | work given to the large and challenger audit | toconfirm that they complied with their | | market and the timetable setby the seller | firms. We will seek, as far as is practicable, to | commitment to the FRC by having the work | | was short. As PwC performed similar work | concentrate all work that would impact these | on the 2021 audit reviewed by an internal | | for the Company inrespect of the OMNOVA | firms’ ability to bid for the audit, or provide | technical panel. The Committee also | | acquisition in2019, and in respect of | other independent assurance services, into | confirmed with management and PwC that | | theissue of aS144a bond in June 2020, | as few firms as possible to ensure we have | all fees relating to the reporting accountant | | theyhave astrong understanding of our | the biggest selection available from which to | work were paid before the audit opinion on | | processes, systems and people. However, | choose. We will select a firm as a potential | the 2021 financial statements was signed. | | we proactively sought to engage another | partner for future reporting accounting work | | | audit firm to undertake this work. Other large | that includes those areas of work subject to | | | and challenger firms were approached but | the Ethical Standards fee cap and invest | | | were conflicted due to other work they carry | inmaking the chosen firm familiar with | | | out for the Group, or did not have theskills | theGroup to allow them to operate | | | or resources available to meet our timetable. | asourreporting accountant on any | | futureacquisition. Synthomer plc ## Annual Report 2021 105 Corporate Governance ## Nomination Committee report ## Nomination Committee: ## introduction from the Chair Succession planning forcontinued growth Ensuring that we have future leaders with theright skills, experience and mindset is asimportant as having the right people in place today. Succession planning continued to beastrong focus throughout the year for theNomination Committee and the wider Board,as we worked to embed the ongoing development of a strong talent pipeline into the way we operate. In late 2021, we built on the previous year’s independent skills review – which assessed our Board’s capabilities against other plc companies to help identify and address gaps – by looking at the functional skills the Board will need to stay competitive in the future. The crucial skills identified included marketing, digitalisation and sustainability. As part of this process, all Board members assessed themselves against these skills. We will feed the intelligence gained, and those from our Board evaluation, into short-term recruitment and longer-term succession planning for the Board, as well as emergency succession planning for the CEO and CFO. ## This has been a significant year Our succession planning draws not only onnecessary skills but also on our strategy ## forSynthomer – and the Nomination and direction, which we discussed at length in January 2021 in setting the scene for the ## Committee – with a new CEO starting 2021 CEO and NED searches, in alliance withEgon Zehnder. Our ability to move fast ## on1November, a new CFO being torecruit a new CFO in November 2021, when Stephen Bennett announced his attention ## appointed shortly afterwards, and tostep down in August, reflected the ## anewNon-Executive member joining proactive work we werealready doing in long-term executive succession planning ## theBoard in July. withsearch experts Spencer Stuart. The Board and Nomination Committee’s ### The Committee – which expanded this year toinclude all our succession planning focus extends to Executive Committee members. Our new CEO ### Non-Executive Directors –was closely involved with each of started reviewing the skills and scope ofthe ### these appointments and in planning inductions for our new Executive team soon after he joined. We are ### Directors. Committee members have also been involved in supporting him as he develops a blueprint to strengthen and support the current team and ### discussions around Synthomer’s gender target and in further will develop longer-term succession plans for ### strengthening our succession planning. each of the Executive roles. Setting the tone on diversity andinclusion from the top Diversity is as fundamental as skill and experience in a strong leadership team. Reflecting the society in which we operate isboth the right thing to do and – research shows – the best thing for business. Diversity of thought and inclusive cultures drive innovation and lead to better business outcomes. For all these reasons, in 2021 we strove to ensure that our current and future leaders are truly diverse. Synthomer plc ## 106 Annual Report 2021 ### The process for appointing ournew CEO and NED. ## CEO CFO NED | Setting role | Following Calum’s decision to step | We implemented succession | Following the retirement of Just | | | --- | --- | --- | --- | --- | | requirements | down, the Nomination Committee | planning for key roles, including the | Jansz in2021, with the completion of | | | | and the Board worked closely with | CFO, early in 2021 and that allowed | his nine-year tenure, the Nomination | | | | the Senior Independent Director, | us to accelerate our recruitment | Committee, the Board, our Senior | | | | HRPresident and Group HR | process, working on this occasion | Independent Director, HR President | GovernanceStrategic report | | | Director, and recruitment specialists | with search company Spencer | andGroup HR Director worked with | | | | Egon Zehnder to develop aclear | Stuart. We wanted someone with | Egon Zehnder to develop a clear role | | | | roleand person specification | animpressive track record and | and person specification for our new | | | | forournewCEO. | experience of working in a complex, | Non-Executive Director. | | international business. Identifying In January 2021, the Board Early in 2021, we appointed Spencer Egon Zehnder developed long and candidates confirmed its strategy of organic Stuart to develop our succession shortlistslists of NED candidates. Group financial statements Company financial statements Other information andinorganic growth and that set planning for key roles, including In doing so,they considered the abackdrop to the CEO recruitment. theCFO. They developed a role broadest definition of diversity. Egon Zehnder then interviewed all specification, with input from all members of the Board, and the members of the Board. Nomination Committee debated andagreed a detailed candidate specification, with clear skills, experience and attributes against which to assess potential candidates. | Process A significant number of internal and | | Spencer Stuart considered over | Egon Zehnder interviewed and | | --- | --- | --- | --- | | | external candidates were initially | 300candidates and reduced this | assessed some 20 candidates and | | | assessed by Egon Zehnder against | toa shortlist of seven internal and | the Chair met with seven potential | | | the agreed criteria. They presented | external candidates who were | candidates. The most suitable | | | the most suitable candidates through | assessed by Spencer Stuart against | candidates were then presented | | | aprocess of interview, discussion | the required criteria, and then | tothe Senior Independent Director | | | and assessments. Five candidates | interviewed by the Chair and | and then all other members of the | | | met with all members ofthe Board | incoming CEO. Three candidates | Board. Having reviewed the process | | | and, afterdetailed debate and further | where taken forward forfurther | and evaluated the candidates, | | | discussions with the final two | assessment by members of the | theNominations Committee | | | candidates, the Nomination | Nominations Committee and two | unanimously agreed to | | | Committee unanimously agreed | final candidates were interviewed | recommendRoberto Gualdoni. | | | torecommend Michael Willome. | byallmembers of the Board. | | The Nominations Committee reflected and debated the feedback and unanimously agreed to recommend Lily Liu. | Recruitment After an extensive search process, | | In November, we announced that Lily | Roberto Gualdoni joined the Board | | --- | --- | --- | --- | | | weannounced Michael Willome’s | Liu would be our new CFO, joining us | inJuly 2021 and is a member | | | appointment in July 2021. | no later than July 2022. | ofourAudit, Remuneration and | NominationCommittees. Synthomer plc ## Annual Report 2021 107 Corporate Governance ## Nomination Committee report continued Setting a new 2030 gender target The Committee designed a tailored induction ## Board diversity In 2021, Synthomer took an important step for Michael that included: bysetting a target of 50% gender diversity • Working with Calum, the Committee innew hires in leadership, management and ## and tenure at designed a two-week programme of professional roles as part of our Vision 2030 introductions to help Michael get up to roadmap. Agreeing our Vision 2030 targets speed quickly on our most important ## aglance involved a great deal of discussion between activities the Executive Committee and Board during • Meetings with the Executive Committee for the first half of 2021. Diversity is particularly briefings on their businesses and functions important for Nomination Committee • Meetings with external advisers and our top discussions around succession planning, institutional shareholders to hear their andwe pushed the Executive Committee views on Synthomer toset the bar high. It’s important to get the • A workshop hosted by a partner from both right balance between challenge and delivery KPMG and Herbert Smith Freehills on and I think we achieved that. (See page 44 Directors’ duties and the UK listing regime. inthe Strategic report for more information Roberto also attended this workshop on the Vision 2030 roadmap.) • First site visits to meet employees in the ## 1/3 Our target is underpinned by several short-term UK, Germany and the USA. objectives, including 20% of women in senior Representation of women While Roberto hasn’t yet been able to roles by the end of 2021. I am pleased to see on the Synthomer Board makeany site visits, he plans to do so that we met this objective, finishing the year at in2022. | Female 3 | 20.4%. In all, we saw a 5% rise in the number | | | --- | --- | --- | | Male 6 | of women in senior leadership versus 2020. | Our priorities for 2022 | | | One-third of Board members are now women | Our priorities for the coming financial | | | and one member is from an ethnically diverse | yearinclude identifying a suitable successor | | | background, in line with the Hampton- | for Brendan Connolly when he steps down | | | Alexander and Parker reviews respectively. | asour Senior Independent Director and | Remuneration Committee Chair at our 2023 Encouraging greater diversity Annual General Meeting. We will also be beyondgender developing emergency succession plans Nevertheless, Synthomer needs to do forour new CEO and CFOand embedding alotmore to address diversity across the long-term succession planning for their roles business, including making more progress for the future. As Michael develops his team, onethnic diversity. Here, too, we have set we will also bereviewing the skills, balance ashort-term objective to have 20% of senior and experience of the Executive Committee. leaders from ethnically diverse backgrounds Another important priority will be establishing by 2025. a comprehensive, bespoke induction New governance to track our progress on programme for Lily, and continuing diversity and inclusion tosupport Michael’s immersion As Chair of Synthomer’s new Diversity and inthebusiness. Inclusion Steering Committee, it was also my A year of progress pleasure to host panel sessions, alongside I am pleased with the progress we’ve made * Roberto Gualdoni holds dual German and Italian Holly Van Deursen, organised by Synthomer’s citizenship as a Committee this year. We have continued Engender women’s network. | ** Cynthia Dubin holds dual citizenship | | to work well despite ongoing COVID-19 | | --- | --- | --- | | | For more information on the progress | restrictions. We’ve had some challenging | | | Synthomer has made and our plans to | conversations along the way, but challenge | | | continue focusing on diversity and inclusion, | ishow we help the Company make progress. | | | see pages 62-66 of the Strategic report. | I look forward to working alongside our new | | | We have the vision, processes and tools in | Directors as well as my fellow Committee | | | place. We must now embed diversity and | members to support Synthomer as it grows | | | inclusion into our everyday thinking. | in size and ambition. | A comprehensive induction programme An induction programme is an essential part Caroline Johnstone Gender ofa new Director’s first weeks and months at Chair of the Nomination Committee Synthomer. It is a structured way of ensuring they receive the information and support they 3 March 2022 need to take on their new role quickly and confidently. I know from my own experience ofjoining Synthomer and then stepping up asChair of the Board how helpful this process is. Nationality | British | 4 | | --- | --- | | Swiss | 1 | | Board tenure Malaysian | 1 | Synthomer plc | Ethnicity American 0-5 years | | | 4 1 | | --- | --- | --- | --- | | | 108 | Annual Report 2021 | | | German/Italian* 5-10 years White | | | 08 1 3 | | Asian >10 years American/British** | | | 01 2 1 | Corporate Governance # Compliance with the Code For the year ended 31 December 2021, we are pleased to report that we have applied the principles and complied with the provisions of the 2018 UK Corporate Governance Code (the Code). The full Code is available on the FRC's website, www.frc.org.uk. ## 1. Board leadership and Company purpose | **A. Board's role** | The Board sets the Company's purpose, values and standards, establishes overall policies and long-term objectives and approves strategic aims and goals. It is responsible for the Company's long-term success, and for how opportunities and risks are assessed in relation to this. The Board establishes, communicates and reviews the corporate governance framework under which the Company operates. There is a formal schedule of matters reserved for the Board which is reviewed annually to ensure an appropriate delegation of duties to the CEO is maintained. An annual Board planner is prepared at the start of each year to ensure important and relevant topics are discussed at Board meetings throughout the year. For more details about 2021 activity see The Board's year section on page 94. | | --- | --- | | **B. Purpose and culture** | The Board adopted the Company's statement of its purpose in 2020 and worked with management during 2021 to develop and launch our Vision 2030 roadmap, which will underpin the delivery of our purpose over the coming decade. Management have rolled out a programme to embed our new Core Values since their launch in 2020, with alignment with our culture being monitored and assessed by the Board using the tools described on page 62. The Board was mindful of maintaining the Company's strategic direction in the appointment process for our new CEO. | | **C. Resources and controls** | Strategic projects and priorities are considered and monitored at each Board meeting with, as part of that process, members receiving and considering reports on developments and progress against plans and resourcing. Financial and operational performance against budget and KPIs is reported at each Board meeting. The Board has designated Synthomer's CEO responsible for developing and preparing the Group strategy, business plan and annual budget for recommendation to the Board. The CEO is also responsible for all aspects of day-to-day operational control and for executing Group strategy. The CEO is chair of the Executive Committee (which includes the CFO, the Chief Counsel and Company Secretary, and operational and functional Group presidents), and meets once a month. The CFO shares a monthly management report with all Directors, containing business, financial, and health, safety and environmental reviews. | | **D. Stakeholder engagement** | The Board fully consider shareholders' and wider stakeholders' views when making strategic decisions. Further information can be found on pages 96 and 97. | | **E. Workforce engagement** | Alexander Catto, Non-Executive Director, is the Board's designated employee voice. In this role, he is supported by Holly Van Deursen, one of our other NEDs. Other workforce engagement is undertaken directly by the Board, such as via our new Engender women's network. | ## 2. Division of responsibilities | **F. Role of the Chair** | The Chair's responsibilities include: • Leading an effective Board • Promoting a culture of openness and debate • Coordinating performance evaluation of the CEO and individual Non-Executive Directors • Holding meetings with and without Executive Directors present • Leading on all aspects of corporate governance • Setting the agenda and managing meeting timetables and encouraging open and constructive dialogue and challenge. | | --- | --- | | **G. Composition of the Board** | The composition of the Board is set out in Our Board of Directors section on page 84. Half of the Board, excluding the Chair, are independent NEDs, with that independence being assessed annually. This ensures no one person or group of interests can dominate Board decision making or debates. We document the roles of the Board, Board Committees, Chair and CEO in the Introduction to corporate governance on page 92. We have a clear division of responsibilities between the Board and Executive leadership, with a list of matters reserved for the Board. | Strategic report Group financial statements Company financial statements Other information Synthomer plc | 109 Annual Report 2021 Corporate Governance Compliance with the Code continued | **2. Division of responsibilities continued** | | | --- | --- | | **H. Role of the non-executive directors** | The main responsibilities of our NEDs are to provide constructive challenge and scrutiny; to hold management and individual Executive Directors to account against agreed performance objectives, and to oversee employee engagement. In addition, our Senior Independent Director acts as a sounding board to the Chair; is an alternative contact for the other Directors and shareholders; leads an annual meeting process to evaluate and feed back on the Chair's performance, and provides constructive challenge, strategic guidance and specialist advice. We assess on appointment whether a candidate has sufficient time to be a NED, with any proposed significant external appointment requiring the Board's agreement. | | **I. Role of the Company Secretary** | Our Company Secretary's main remit is to advise the Board on all governance matters and on important legal and regulatory issues and to ensure it has the necessary policies, processes, information, time and resources to function effectively and efficiently. | | **3. Composition, succession and evaluation** | | | **J. Appointments to the Board and succession planning** | Our Nomination Committee is responsible for assessing the composition of the Board, making recommendations for new appointments, and succession planning. In making recommendations for appointments to the Board, the Committee considers the balance of skills, experience and knowledge needed to enhance the Board and support the Company in the execution of our strategy. For more details, see our Nomination Committee report on page 106. | | **K. Skills, experience and knowledge of the Board** | The Nomination Committee ensures the Board has an appropriate mix of skills, experience and knowledge, with due regard for the benefits of all types of diversity. This year we built on our 2020 skills review – which assessed our Board's capabilities against other plc companies to help identify and address gaps – by looking at the functional skills we will need to stay competitive. All Board members assessed themselves against the crucial skills, which included marketing, digitalisation and sustainability. We will feed the intelligence gained, and those from our Board evaluation, into short-term recruitment and longer-term succession planning for the Board, along with emergency succession planning for the CEO and CFO. | | **L. Board evaluation** | Our last external Board evaluation, facilitated by Egon Zehnder, was undertaken during 2020. An internal review, focusing on recommendations stemming from the 2020 evaluation, was carried out in 2021. See page 91 for actions taken. | | **4. Audit, risk and internal control** | | | **M. Internal and external audit** | The Audit Committee is responsible for reviewing the relationship and independence of the Group's external auditor, PwC, and for overseeing the independence and effectiveness of internal audit. In 2021, the Committee oversaw Synthomer's granted application to the FRC for a second waiver to breach the cap on fees to auditors for non-audit related services, to progress our plans to buy Eastman's Adhesive Resins business. For more details see page 98. | | **N. Fair, balanced and understandable** | The Board considers this 2021 Annual Report is fair, balanced and understandable and that it provides information necessary for shareholders to assess the Company's performance, business model and strategy. We enabled this by such means as having a dedicated working group overseeing drafting; ensuring that FRC guidance was observed; requiring key contributors to confirm the accuracy of their information; and circulating drafts to PwC, Committee chairs and the Board for review. | | **O. Risk management and internal control framework** | The Board sets the company's risk appetite and annually reviews the effectiveness of the company's risk management and internal control systems. A description of the principal risks facing the company is set out on pages 69-76. | | **5. Remuneration** | | | **P. Remuneration policies and practices** | Synthomer aims to reward employees fairly. Our Remuneration Policy is designed to promote the long-term success of the Company while aligning the interests of the Directors and shareholders. The policy was last approved by investors at our 2020 AGM. A summary of the latest Executive Director Remuneration Policy can be found on page 114. | | **Q. Executive remuneration** | The Remuneration Committee is responsible for setting the remuneration for all Executive Directors and the Executive Committee. No Director is involved in deciding their own remuneration arrangements or outcomes. | | **R. Remuneration outcomes and independent judgement** | Details of the work of the Remuneration Committee are set out in the Directors' Remuneration report on pages 112 to 126. | 110 | Synthomer plc^{}[] Annual Report 2021 ### Division of responsibilities The table below provides a summary of the main responsibilities of our Board and CEO. Position: Responsibilities include: Chair • Leading an effective Board • Promoting a culture of openness and debate • Coordinating performance evaluation of the CEO and individual Non-Executive Directors • Holding meetings with and without Executive Directors present GovernanceStrategic report • Leading on all aspects of corporate governance Chief Executive Officer • Operational management of the Group • Developing, preparing and implementing Group strategy, as approved by the Board • Communicating Group culture and values • Communicating Group financial performance to investors alongside the CFO • Keeping the Board informed on material issues Senior Independent Director • Being a sounding board to the Chair Group financial statements Company financial statements Other information • Alternative contact for the other Directors and shareholders • Leading an annual meeting process to evaluate and feed back on the Chair’s performance • Providing constructive challenge, strategic guidance and specialist advice Non-Executive Directors • Constructive challenge and scrutiny to hold management and individual Executive Directors to account against agreed performance objectives • Employee engagement Company Secretary and • Advising the Board on all governance and compliance matters ChiefLegal Counsel • Ensuring the Board has the necessary policies, processes, information, time and resources to function effectively and efficiently • Advising the Board on important legal and regulatory matters Synthomer plc ## Annual Report 2021 111 Corporate Governance Directors' remuneration report # Remuneration Committee: introduction from the Chair ![img-0.jpeg](img-0.jpeg) **While 2021 was a busy year for the Remuneration Committee, much of our attention was focused on two key issues: agreeing remuneration for our new CEO and CFO and completing our work to align Executive Directors' pensions with that of the UK workforce.** ## Agreeing the right packages for our new CEO and CFO Designing a new Director's remuneration package is one of the Committee's more important tasks. It involves working closely with the Group HR Director to create an offer that rewards a new recruit's skills and experience while remaining consistent with the terms of our Directors' Remuneration Policy. It must also reflect the fact that Synthomer is growing, and will continue to grow, in size and complexity. ## CEO: higher base salary plus covering relocation costs The package we have designed for Synthomer's new CEO, Michael Wilborne, takes all of this into account. So while it is in line with previous CEO arrangements, it includes a 9% higher base salary at £650,000. This figure is lower than Michael's salary was at Bystronic AG (formerly Conzette AG) and takes into account the larger Group size following the acquisition of Eastman's Adhesive Resins business. Michael will be eligible for a maximum annual bonus of 150% of base salary and a PSP award of 200% of salary per year. He will also be required to build a shareholding equal to 220% of his annual/basic salary. Since Michael has moved from Switzerland to the UK, Synthomer also agreed a monthly relocation allowance for the next four years. We paid Michael a one-off payment of £100,000 for the loss of pension-related compensation he would have received had he served out his full notice period at Bystronic. This amount is no greater than that he forfeited. He also received a pro-rated Performance Share Plan (PSP) award for 2021. Given that he joined towards the end of the financial year, Michael did not receive a bonus in 2021. In my introduction to last year's report, I said we intended to align our new CEO's pension with the workforce rate of 7%. And we have done exactly that with Michael's pension. We will do the same in 2022 for Lily Liu as our incoming CFO. ## CFO: higher salary to reflect growing ambitions While Lily does not officially join us until the 2022 financial year, we announced her appointment and remuneration package at the end of November 2021. As such, Lily will receive a base salary of £440,000. This is 16% higher than the previous CFO salary, in line with Synthomer's policy and growing stature, taking into account the 112 | Synthomer plc Annual Report 2021 | futureadditional size and complexity of the | The overall vesting was therefore 64% of the | Discussing executive pay | | --- | --- | --- | | organisation and the increasing regulatory | maximum. The Committee considered that this | with employees | | environment. Lily will be eligible for a | outcome was a fair reflection of performance | While there is considerable interest in | | maximum annual bonus of 150% of base | and the shareholder experience and therefore | remuneration, it is, in my experience, a | | salary and a PSP award of 150% of salary | no discretion has been exercised. | misunderstood subject, particularly around | | peryear. Lily will participate in both plans, | | executive liabilities and responsibilities. | The Committee discussed the £57.2 million inline with ourpolicy. She will be required So,inDecember 2021, we held two virtual provision recognised in respect of the tobuild ashareholding that is equal to 200% employee events, open to everyone, to EuropeanCommission Styrene investigation. | of herannual basic salary. This exceeds the | | explain how it works and to ask for people’s | | | --- | --- | --- | --- | | | The Committee will consider the implications | | GovernanceStrategic report | | guideline for the current CFO of 175% of | | opinions. I was pleased to note that many of | | of the outcome of the investigation once it has salary. For more details see page 122. theemployees who joined the sessions are been concluded. aware that executive pay is publicly available Arrangements for Synthomer’s Performance measures for variable information and we received no suggestions departing CEO elements of executive pay in 2022 on how to do things differently. Of course, new arrivals mean the Committee The Committee aims to ensure that executive also has a role in agreeing terms with departing Staying on top of key stakeholder issues remuneration matches Synthomer’s underlying directors. While Calum stepped down as CEO To help the Committee stay informed on performance. We set annual bonuses using | at the start of November 2021, as he provided | | theremuneration issues that matter to our | | | --- | --- | --- | --- | | | three measures – Underlying profit before tax | | Group financial statements Company financial statements Other information | | a full handover to Michael, he did not formally | | stakeholders, I ask our remuneration adviser | | (80%), safety, health and environment targets leave Synthomer until January 2022. This meant to provide the Committee with training every (10%), and strategic personal targets (10%). he was entitled to an annual bonus for 2021. August. This year, we focused on the policies Our 2022 measures will reflect the above and We also treated him as a ‘good leaver’ for and approaches disliked by institutional those for 2021. | thepurpose of his remaining share awards. | | investors, and to consider any new guidance | | --- | --- | --- | | These awards will vest at the normal time | For the 2022 PSP awards, the measures will | from investors, the Investment Association | | andwill be pro-rated to 31 December 2021. | be split as follows: | and proxy agencies. | Though not subject to post-employment • 30% – relative total shareholder return Continuing to address our gender pay gap shareholding, as he resigned prior to the • 30% – earnings per share (EPS) growth We were pleased to show a reduction in both implementation of the policy Calum will still • 20% – cost efficiencies as a result of the our mean and median pay gaps in our 2021 hold shares due to past and current bonus Eastman’s Adhesive Resins acquisition UK gender pay gap report, with our median andPSP plans. For more details, see page 123. | | • 20% – strategic, of which half will be a | pay gap having consistently improved over | | --- | --- | --- | | Fee increase for Synthomer’s Chair | sustainability measure. | the last three years. We recognise that our | | toreflect a more complex landscape | | continuing gender pay gaps are primarily | EPS is an important part of our PSP, since As of 1 January 2022, we increased related to the lower number of women than itacts as a performance incentive for our CarolineJohnstone’s fee to £235,000 men in our senior leadership population and executives and the 80 or so participants in the ayearto reflect the greater time the role we set out how we are addressing this in the PSP. It remains a useful tool for retaining senior requires, and the fact that both Synthomer sustainability section of the strategic report. talent in a currently very competitive market. and the external governance landscape are In 2021, Synthomer delivered a record EPS Extra Committee meetings and adjusting becoming more complex. We also found of75.2p, due to an exceptional increase in to a post-pandemic world thatCaroline’s fee was below the lower margins in its Nitrile latex business servicing Given the amount of work involved in market quartile. In future, she will be eligible the medical gloves industry. Holding senior arranging pay for two incoming Directors, for increases in line with our employees. | | executives to that level in 2022 would make the | theCommittee held two extra sessions | | --- | --- | --- | | Near-maximum bonuses paid in 2021 but | 2022-24 PSP unachievable. For the purpose | in2021. Meetings remained mainly virtual in | | a mixed LTIP outcome | ofsetting targets for the 2022 PSP award the | 2021 due to the ongoing COVID-19 pandemic. | | Both the CEO and CFO achieved 95% of | Committee therefore considered that it was | | Preparing for changes in 2023 maximum bonus outcomes in 2021 as did the appropriate to re-base EPS performance for My tenure as Senior Independent Director wider organisation, in an extraordinary year 2021 to remove the impact of the exceptional and, therefore, Chair of this Committee, will with exceptional results on the back of the margins experienced during the year. end at the 2023 AGM when I will retire from Covid-related lift in Nitrile latex (Performance The target growth ranges applied to this the Board. I am now working with Caroline Elastomers) serving the medical gloves industry. rebased EPS remain unchanged, with 4.5% toidentify my replacement and ensure we have Even without this uplift to performance, and per annum growth required for threshold a smooth handover plan in place. And, of normalising the results, the full financial goal vesting and 10% per annum growth required course, we will need to update and share our (Adjusted PBT) would have been achieved. formaximum vesting. new Remuneration Policy in time to put it to The Committee therefore considered that this Applying these growth rates to the re-based EPS ashareholder vote at the 2023 AGM. I look payout level was appropriate. The only shortfall for 2021 of 40.9p gives an EPS target for 2024 forward to sharing more details on both issues against targets set was the SHE process safety of 46.7p for threshold performance and 54.4p in what will be my final report next year. metric which was missed by 0.03 while the for maximum performance. The Committee recordable injury case rate (RCR) metric was My sincere thanks to all involved in the considers that these targets are stretching for met, as were the strategic goals. No discretion Remuneration Committee in 2021. It has a normalised price environment. The intention is has been exercised in relation to incentive indeed been a busy year. that this rebasing will apply for one year only and outcomes. For the 2019 PSP, Relative TSR was we will return to our normal methodology in 2023. at the median level, reflecting the end of year | share price volatility, but EPS growth was fully | As I reported last year, we added a new | | Brendan Connolly | | --- | --- | --- | --- | | achieved. As with the PBT, on a normalised | sustainability measure to the PSP in March | | Chair of the Remuneration Committee | | basis the EPS would have been fully | 2021, which is a 25% reduction in CO | 2 . | | 3 March 2022 metirrespective of the Nitrile latex uplift. This will continue to be a feature of our PSP The strategicmeasures were broadly met. going forward, with a 40% reduction target forthe 2022 PSP. Synthomer plc ## Annual Report 2021 113 Corporate Governance ## Directors’ remuneration report continued ## At a glance ### Policy for Executive Directors Base salary The table below summaries the policy Generally reviewed annually. Following the appointment of the new CEO and CFO for 2022, approved by the shareholders at the AGM on Executive Director salaries are as follows: 29 April 2020. This is valid until a new policy is approved at the 2023 AGM. | | CEO £650,000 | Incoming CFO £440,000 | | --- | --- | --- | | Synthomer’s full remuneration policy can be | (no increase in 2022 on 2021 salary of | pro-rated (no increase as joining the | | found online – https://www.synthomer.com/ | £650,000) | Company during 2022). | fileadmin/files/ir/governance/Synthomer_plc_ Remuneration_Policy_2019.pdf Benefits This includes reference to our joiners and Includes private health insurance, life insurance, car allowance and costs related to business leavers policy, which has been particularly moves (relocation) or international assignments. The CEO will also receive a housing relevant this year due to Executive Director allowance for a four-year period. changes. Pension In setting Executive Director remuneration the Cash allowance of 7% of base salary for new CEO and incoming CFO, which is aligned with Committee takes account of pay and that of the UK workforce. conditions throughout the Group to ensure that arrangements are appropriate in the Annual bonus context of internal pay ratios. Maximum up to 150% of base salary. At least 70% assessed against Underlying profit before tax (80% in 2022), with up to 30% assessed against strategic and operational measures (20% in 2022). Awards in relation to financial performance of: | 0% | 50% | 100% | | --- | --- | --- | | of maximum for | of maximum for target | of maximum for out | | threshold | performance | performance. | A proportion of the bonus earned is deferred for two years. For current Executive Directors this is one third of any bonus. Performance Share Plan (PSP) Shares awarded may not exceed 200% of salary, for 2022 annual maximum awards are 200% of base salary for the CEO and 150% for the CFO. Vesting based on performance of three years, with at least 80% based on financial measures and up to 20% on performance measures linked to the delivery of the business strategy. No single measure will constitute more than 50% of an annual award. There is a two-year post-vesting holding period requirement. For 2022 awards, performance measures will be: | 30% | 30% | 20% | 20% | | --- | --- | --- | --- | | relative TSR | EPS | cost efficiencies related to | strategic, of which half is a | | | | the Eastman’s Adhesive | sustainability measure | Resins business Maximum of 25% for each element will vest for threshold performance. Shareholding requirements CEO 220% and incoming CFO 200% of base salary. Requirements to be built up over five years. Synthomer plc ## 114 Annual Report 2021 ## 2021 performance ### Annual bonus Actual performance against the three elements of the annual bonus are set out below. As noted in the Chair's introduction, Michael Willome was not awarded a bonus during 2021 as he did not start until the beginning of November 2021. | | Weighting | Threshold | Target | Maximum | Actual | | --- | --- | --- | --- | --- | --- | | Underlying PBT | 80% | 100% | 100% | 100% | €453.0m | | SHE (recordable injuries) | 10% | | 0.33 or less | | 0.31 | | SHE (process safety) | 10% | | 0.33 or less | | 0.16 | | Individual strategic and operational goals | 10% | See page 117 | | | 10% | | Total outcome | 100% | | | | 95% | ### Performance share plan (PSP) – 2019 award Actual performance against the three elements of the annual bonus are set out below. Michael Willome did not receive a 2019 award as he did not start until the beginning of November 2021. | | Weighting | Threshold | Target | Actual | | --- | --- | --- | --- | --- | | Relative TSR | 40% | 100% | 100% | 50th percentile | | EPS growth | 40% | 40% | 40% | 75.2p | | Strategic measures | 20% | See page 118 | | 14.0% | | Total outcome | 100% | | | 64.0% | Strategic report Financial statements Group financial statements Company financial statements Other information Spethomer plc | Annual Report 2021 | 115 Corporate Governance ## Annual report on ## remuneration ### Single figure of remuneration for Executive Directors (audited) | | Base | | | | | | Total fixed | | Annual | | Long-term | | Total variable | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | salary | | Benefits | | Pension | | remuneration | | bonus | | incentives | 3,4 | remuneration | | Total | | Year | | £ | | £ | | £ | | £ | | £ | | £ | | £ | £ | Executive Directors 1 M Willome 2021 108,333 31,692 107,583 247,608 – – – 247,608 2020 – – – – – – – – 2 CG MacLean 2021 495,627 11,000 114,909 621,536 706,268 703,638 1,409,906 2,031,442 2020 558,735 13,200 137,891 709,826 838,103 257,518 1,095,621 1,805,447 SG Bennett 2021 378,052 13,349 75,610 467,011 538,724 381,851 920,575 1,387,586 2020 355,158 13,530 71,032 439,720 532,737 128,711 661,448 1,101,168 Notes: 1. M Willome joined Synthomer as CEO on 1 November 2021. He received a one-off payment of £100,000 in compensation for the loss of pension-related pay from his previous employer which is no greater than the amount he would have received had he served out his full notice period. M Willome also received £52,500 for services prior to his appointment as a Director. 2. CG MacLean stepped down as a Director on 1 November 2021. His remuneration disclosed here has been pro-rated to reflect this period. 3. For 2021 the values relate to awards granted under the 2011 PSP in 2019 which vest on 11 March 2022. Further information about the level of vesting is provided in this report. As these awards have not yet vested they have been valued based on the average share price for the period 1 October 2021 to 31 December 2021 of 466.3p, along with accrued dividends from the date of grant. There was no share price appreciation that affected the value of the award and so Remuneration Committee did not exercise discretion in respect of the share price changes. 4. 2018 PSP awards vested on 8 March 2021. For the purpose of the 2020 single figure these awards were valued based on the average share price for the period 1 October 2020 to 31 December 2020 of 403.8p. These awards have been re-valued based on the share price on the date of vesting of 459.6p. The values disclosed in the 2020 single figure were: CG MacLean, £241,326 and SG Bennett, £120,617. The share price used to value the awards on the date of grant of 8 March 2018 was 488.4p. The share price used to value the PSP for single figure purposes of 459.6p represents a decrease of 28.8p per share. The proportion of the PSP value disclosed in the single figure attributable to share price movement was therefore a reduction of 5.9%. The Remuneration Committee did not exercise discretion in respect of the share price changes. ### Additional information for single figure remuneration Benefits Car expenses/ benefit Others Total £ £ £ 1 M Willome 2,200 29,492 31,692 CG MacLean 11,000 – 11,000 SG Bennett 12,500 849 13,349 Note: 1. Since M Willome has moved from Switzerland to the UK, he will receive a monthly relocation allowance for the next four years. This allowance will be £7,800 per month for the first year then £5,000 per month for the following three years, and will be grossed up for tax. Annual bonus 2021 award For 2021 the Company operated a cash bonus plan for the Executive Directors related to the achievement of Underlying profit before tax targets, SHE targets and individual strategic and operational goals. The achievement of the Underlying profit before tax target represented up to 80% of the maximum bonus opportunity achievable of 150% of annual basic salary for CG MacLean and SG Bennett. The SHE targets were given a 10% weighting of the maximum achievable, with the balance of 10% relating to individual strategic and operational goals. Bonus for the year ended 31 December 2021 Maximum bonus Total bonus as a Total bonus Executive Directors as a % of salary % of maximum £ CG MacLean 150 95 706,268 SG Bennett 150 95 538,724 2021 saw performance that was ahead of financial targets and meaningful progress and achievements against individual strategic and operational goals. The recordable injury portion of the SHE target was met but the process safety portion was missed. This 2021 bonus outcome of 95% of maximum is reflected across the wider organisation. 2021 was an extraordinary year, partly due to the Covid-related lift in nitriles margins. Even without this uplift to performance, the full PBT target would have been achieved. The Committee therefore considered that this payout level was appropriate. Synthomer plc ## 116 Annual Report 2021 Further information on the three elements of the bonus is as follows: # **1. Underlying profit before tax (80%)** The Underlying profit before tax targets set and achievement are set out below: | | Threshold | Target | Maximum | Achieved | | --- | --- | --- | --- | --- | | Level of award (% of element) | 0% | 50% | 100% | 261% | | Underlying profit before tax* | £165.0m | £173.7m | £191.1m | £453.0m | Notes: 1. Targets are set by reference to the Board-approved internal budget for the Group and measured on a constant currency basis. 2. For the purposes of calculating achieved Underlying profit before tax, adjustments were made for currency. # **2. SHE (10%)** Targets with an aggregate weighting of 10% related to improvements in recordable injury and process safety. | | Recordable injury (measured as injury rate) | Process safety (measured as process safety event rate) | | --- | --- | --- | | Target | 0.33 or less | 0.13 or less | | Level of award | 0% for a rate greater than 0.33 5% for a rate less than 0.33 | 0% for a rate greater than 0.13 5% for a rate less than 0.13 | | Rate achieved | 0.31 | 0.16 | | Award outcome | 5% | 0% | Further details of the definition and measurement of the recordable injury rate and the process safety event rate are given on page 55. # **3. Individual strategic and operational goals (10%)** Individual goals and achievements against them considered by the Remuneration Committee with an aggregate weighting of 10% included | | Chief Executive Officer | Chief Financial Officer | | --- | --- | --- | | Target | 1. Drive development of a five-year NBR investment plan 2. Review profitability at site level and create an action plan 3. Develop and lead business-wide ESG strategy | 1. Review and make recommendations in respect of the control environment 2. Roll out planned implementation phases of the Pathway programme 3. Oversee tax review of the OMNOVA acquisition and NBR investment plan | | Level of award | Up to 10% | Up to 10% | | | Chief Executive Officer | Chief Financial Officer | | Performance against targets | Drive development of a five-year NBR investment plan • The CEO led a team through 2021 which considered all aspects of this potential investment, including demand and supply, location comparatives and options and timing. The team reported to the Board regularly through 2021, which had detailed discussions on various aspects of the potential investment and agreed further work to be undertaken. The CEO guided the team and still had the lowest on the strategic aspects and personally led some specific aspects of the thinking as well as leading discussions with potential partners and investors. Review profitability at a site level and create an action plan • In 2021, there were a number of projects where the CEO oversaw substantial progress in planning for transformation, including the closure of Marl 3 (and transformation of the Marl site generally), the Le Havre site transformation, the Solvay site transformation (and closure of the site's cost-fired power station) and Oulu site closure. A strong team was guided and led in addressing the various aspects and considerations – the complexity of product and site interactions was particularly important to address. The team presented to the Board on several occasions and addressed the Board's questions and suggestions, leading to approval of the proposals. Develop and lead business-wide ESG strategy • The business had undertaken a lot of work 'under the order' ahead of 2021, and Calum led the team in developing Vision 2000 and debating and proposing key targets in the main ESG priorities for Synthomer. He empowered the team to develop the plan and showed leadership in debating some quite new areas of focus for the business. His investor communications instilled a level of confidence in Synthomer's sustainability position in water based polymers. | Review and made recommendations in respect of the control environment • The CEO led his team in reflecting on the changing environment, the growth in the scale of the Group as well as the potential changes which might arise from the 2021 audit and assurance SEIS consultation. As well as Board training sessions in April and June 2021, the CEO and the team engaged KPMG to advise on implementing an Audit and Assurance Policy and developing a plan for putting in place an Assurance Map. He also engaged Deloitte to advise on climate change and T2PO reporting. His team then developed plans to ready the controls environment for any Seltzeres Oxley type audit requirements leveraging the skills of members of the former OMNOVA Finance team. A clear assessment of impact and urgency of actions was produced. Roll-out planned implementation phases of the Pathway programme • The Pathway programme was resigned in 2020, during the pandemic and the CEO has overseen the team as they worked through to the successful go-live of the first sites in 2021. The business is now moving forward with the next phase. Oversee tax review of the OMNOVA acquisition and NBR investment plan • The CEO oversaw significant progress was made in tax matters and investment in tax resources during 2021. The Board received regular updates on the potential tax implications of the proposed NBR investment. | | Award outcome | 10% | 10% | Strategic report General Group financial statements Company financial statements Other information Synthomer plc | Annual Report 2021 | 117 Corporate Governance Annual Report on Remuneration continued # **Additional information for single figure remuneration (audited)** # **Long-term incentives - Performance share plan** The awards made on 11 March 2019 for CG MacLean and for SG Bennett under the PSP were subject to a relative total shareholder return (TSR) performance condition, an absolute Underlying earnings per share performance condition and a strategic measures condition, as follows: | Market SBI position | EPS position | | | | --- | --- | --- | --- | | Company relative TSR performance against the FTSE 250 Index (excluding investment trusts and financial services companies) over a three-year period ended 31 December 2021 | EPS for the 2021 financial year | Percentage of award that vests | Performance achieved | | Upper quartile | 41.0p or more | 40% | EPS of 75.2p gives full 40% vesting of the award. TSR performance at the 50th percentile gives vesting of 10.0% of award. | | Between median and upper quartile | Between 35.2p and 41.0p | On a straight-line basis between 10% and 40% | | | Median | 35.2p | 10% | | | Below median | Less than 35.2p | 0% | | # **Note** 1. The targets have been adjusted to take account of the bonus factor of 1.0713 for the rights issue in 2019 and additional OMNOVA earnings from 1 April 2020. A further 20% of the award was subject to three equally weighted strategic measures: - Percentage of Group sales (by volume) in the 2021 financial year derived from new products launched in the last five years and patented products. | New product percentage | Percentage of award that vests | Percentage achieved | | --- | --- | --- | | < 15% | 0% | 24% gives full vesting of 6.6% of award. | | 15% - 20% | 1.65% - 6.6% | | | > 20% | 6.6% | | # **Note** 1. Excluding volume attributable to Monomers, where there is no scope for new product development. - Cumulative Underlying profit before tax (PBT) added through acquisitions for the three years ended 31 December 2021. | Cumulative PBT added through acquisitions | Percentage of award that vests | Percentage achieved | | --- | --- | --- | | < £30.0m | 0% | £39.4m gives vesting of 3.2% of award. | | £30.0m - £60.0m | 1.65% - 6.6% | | | > £86.9m | 6.6% | | - Return on Invested Capital (ROIC) target tracks three growth projects commissioned in 2019 that were expected to impact the Group in the 2021 financial year. The three projects selected were JOBS in Malaysia, Worms in Germany and Roebuck in the USA. An overall ROIC threshold was set at 18.3%, based on the weighted average of the three individual project targets. Given the greater importance of the larger projects, the ROIC part of the award was weighted at 50% for JOBS, 25% for Worms and 25% for Roebuck. The award started to vest for each individual project at 80% of the anticipated ROIC, based on the original investment cases that were brought before the Board at the time the projects were approved. The overall ROIC on these projects was 57.0% which exceed the threshold of 18.3%. Of the individual projects, JOBS and Roebuck reached the vesting threshold attaining 523.3% and 85.9% of their targets. This led to 61.7% vesting of the ROIC portion and therefore 4.2% of the overall award. In aggregate, 64.0% of the 2019 award vested, and the Committee did not exercise any discretion with the level of vesting. The 2019 award will vest for CG MacLean and SG Bennett in March 2022 as follows: | | No. of shares in original award | No. of shares that lapse* | No. of shares that vest | Estimated value of shares that vest | | --- | --- | --- | --- | --- | | CG MacLean | 336,089 | 94,097 | 140,972 | £703,838 | | SG Bennett | 119,536 | 43,033 | 76,503 | £381,851 | # **Note** 1. Number of shares in original award were adjusted to take account of the bonus factor of 1.0713 for the rights issue in July 2019. Overall, the Committee considers that the Remuneration Policy has operated as it intended during 2021 and that the pay outcomes are aligned with the experience of shareholders and other stakeholders. 118 | Synthomer plc Annual Report 2021 Pension entitlements (audited) Both Executive Directors receive a cash allowance in lieu of pension contributions as outlined above. No additional benefit is receivable in the event of a Director retiring early. Single figure of remuneration for Non-Executive Directors (audited) Committee membership Committee Non-Executive Directors Base fee fee Chair fee Total CA Johnstone 2021 189,500 – – 189,500 2020 46,367 15,000 4,783 66,150 GovernanceStrategic report The Hon. AG Catto 2021 43,500 – – 43,500 2020 41,571 – – 41,571 1 BWD Connolly 2021 48,500 15,000 5,000 68,500 2020 45,731 15,000 5,000 65,731 Cynthia Dubin 2021 43,500 15,000 5,000 63,500 2020 18,965 6,935 217 26,117 2 RC Gualdoni 2021 20,815 7,177 – 27,992 2020 – – – – Group financial statements Company financial statements Other information 3 Dr JJC Jansz 2021 32,625 11,250 – 43,875 2020 40,742 15,000 – 55,742 Dato’ Lee Hau Hian 2021 43,500 – – 43,500 2020 41,849 – – 41,849 HA Van Deursen 2021 43,500 15,000 – 58,500 2020 40,742 15,000 – 55,742 Notes: 1. Base fee includes an amount of £5,000 per annum for role as Senior Independent Director. 2. Appointed to the Board on 8 July 2021. 3. Resigned on 29 September 2021. Directors’ shareholding and share interests (audited) Total | | | | | Vested | | unfettered | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Interests in | | unexercised | | | interests in | | | Unvested | | | | | | | | | Interests in | | | | Company | | performance | | | shares and | | performance | | | Share options | | | | | Share | | shares at | | | | | shares | related options | | vested options | | | related options | | | | exercised | | | ownership | | | 31 December | | | | 31 December | | 31 December | | 31 December | | | 31 December | | | | | during | requirements | | | | | 2021 | | Directors | | 2021 | | 2021 | | | 2021 | | | 2021 | 1 | | 2021 | (% of salary) | | | 2 | (% of salary) | | M Willome – – – 198,295 – 220% 0% 3 CG MacLean 1,060,347 – 1,060,347 512,067 56,031 n/a n/a SG Bennett 195,817 – 195,817 426,467 36,660 175% 209% The Hon. AG Catto 1,649,239 7,072,441* BWD Connolly 6,000 CS Dubin – RC Gualdoni 20,000 Dato’ Lee Hau Hian 148,453 CA Johnstone 24,131 4 Dr J J C Jansz 12,500 HA Van Deursen 11,000 Notes: * Non-beneficial interest. 1. Unvested performance related options comprise: (i) the awards made under the PSP in 2019, which were adjusted to take account of the bonus factor of 1.0713 for the rights issue in 2019 and (ii) the awards made under the PSP in 2020 and 2021. Details of the performance conditions attaching to the 2019 awards are set out on page 118; 2020 and 2021 awards are set out below. 2. Until this requirement is met, no sales of shares that vest under long-term incentive plans are permitted other than to satisfy tax liabilities that arise on the exercise of share awards under such plans. The Committee considers that unfettered unexercised vested nil-cost awards are economically equivalent to shares and as such that they should count (on a net of tax basis) toward compliance with the share ownership guidelines. 3. The figures for CG MacLean reflect his shareholding and time pro-rated share interests on 1 November 2021, the date that he stepped down as a Director. 4. The figure for JJC Jansz reflect his shareholding on 29 September 2021, the date that he stepped down as a Director. There have been no changes in the interests of the Directors in shares between 31 December 2021 and 3 March 2022. Synthomer plc ## Annual Report 2021 119 Corporate Governance Annual Report on Remuneration continued # **2020 award (audited)** The awards made on 12 March 2020 to CG MacLean and SG Bennett were as follows: | | Scheme | Basis of award | Number of shares | Face value | Percentage wetting of financial performance | Performance period end date | | --- | --- | --- | --- | --- | --- | --- | | CG MacLean | PSP – nil-cost options | 150% of salary | 321,524 | £827,346 | 25% | 31/12/2022 | | SG Bennett | PSP – nil-cost options | 120% of salary | 163,500 | £420,718 | 25% | 31/12/2022 | The face value of the awards was calculated using a share price of 257.32p per share, the average share price on the five dealing days prior to the date of grant. Further awards were made on 6 May 2020 to CG MacLean and SG Bennett, following the approval of the Directors' Remuneration Policy at the AGM held on 29 April 2020, as follows: | | Scheme | Basis of award | Number of shares | Face value | Percentage wetting of financial performance | Performance period end date | | --- | --- | --- | --- | --- | --- | --- | | CG MacLean | PSP – nil-cost options | 25% of salary | 49,780 | £197,891 | 25% | 31/12/2022 | | SG Bennett | PSP – nil-cost options | 15% of salary | 18,985 | £52,588 | 25% | 31/12/2022 | The face value of the awards was calculated using a share price of 273p per share, the average share price on the five dealing days prior to the date of grant. Therefore, the total awards for CG MacLean and SG Bennett in 2020 was: | | Scheme | Basis of award | Number of shares | Face value | Percentage wetting of financial performance | Performance period end date | | --- | --- | --- | --- | --- | --- | --- | | CG MacLean | PSP – nil-cost options | 175% of salary | 371,304 | £965,237 | 25% | 31/12/2022 | | SG Bennett | PSP – nil-cost options | 135% of salary | 182,485 | £473,306 | 25% | 31/12/2022 | 1. CG MacLean left Synthomer on 15 January 2022 triggering a time-approved lapse of 160,005 shares leaving a balance of 221,299 shares. The 2020 awards under the PSP are subject to the following performance conditions: | Relative PSP condition | EPS condition | Synergies delivered from the OMNOVA acquisition | | | --- | --- | --- | --- | | Company relative PSP performance against the FTSE 500 index excluding investment trusts and financial services (companies over three-year period ending 31 December 2022) | EPS for the 2022 financial year | Syringe delivery run rate by 31/12/2022 | Percentage of award that will cost | | Upper quartile | 33.8p or more | $29.6m or more | 30% | | Between median and upper quartile | Between 29.0p and 33.8p | Between $25.0m and $29.6m | On a straight-line basis between 7.5% and 30% | | Median | 29.0p | $25.0m | 7.5% | | Below median | Less than 29.0p | Less than $25.0m | 0% | 1. The targets were adjusted to take account of the additional OMNOVA earnings from 1 April 2020. A further 10% of the award is subject to a strategic measure relating to a 10% reduction of carbon dioxide equivalent emissions over the performance period, excluding additional emissions from the acquired OMNOVA business. 120 | Synthomer plc Annual Report 2021 2021 awards (audited) The awards made on 11 March 2021 to CG MacLean and SG Bennett were as follows: Percentage vesting at Number of threshold Performance Scheme Basis of award shares 1 Face value performance period end date CG MacLean PSP – nil-cost options 200% of salary 261,039 £1,189,476 25% 31/12/2023 SG Bennett PSP – nil-cost options 150% of salary 124,446 £567,063 25% 31/12/2023 1. CG MacLean left Synthomer on 13 January 2022 triggering a time-apportioned lapse of 190,540 shares leaving a balance of 70,499 shares. GovernanceStrategic report The face value of the awards was calculated using a share price of 455.67p per share, the average share price on the five dealing days prior to the date of grant. The award made on 8 November 2021 to M Willome was as follows: Percentage vesting at Number of threshold Performance Scheme Basis of award shares Face value performance period end date M Willome PSP – nil-cost options 200% of salary 198,295 £1,011,106 25% 31/12/2023 Group financial statements Company financial statements Other information The face value of the awards was calculated using a share price of 509.9p per share, the average share price on the five dealing days prior to the date of grant. This award was time-apportioned from M Willome’s starting date. Relative TSR condition EPS condition Company-relative TSR performance against EPS for the 2023 financial year Percentage of award that will vest the FTSE 250 Index (excluding investment trusts and financial services companies) over three-year period ending 31 December 2023 Upper quartile 38.5p or more 40% Between median and upper quartile Between 33.0p and 38.5 pence On a straight-line basis between 10% and 40% Median 33.0p 10% Below median Less than 33.0p 0% A further 20% of the award is subject to strategic measures comprising: a 15% reduction of carbon dioxide equivalent emissions compared to the 2019 baseline and greater than 15% of 2023 sales volume to come from new products launched in the five years to December 2023. Synthomer plc ## Annual Report 2021 121 Corporate Governance Annual Report on Remuneration continued # **Annual Report on Remuneration for the year ended 31 December 2021** # **Operation of the Executive Director Remuneration Policy for 2022** The current policy has been in force since 29 April 2020. The specific remuneration arrangements for 2022 are described below. | Base salary | A salary increase was awarded with effect from 1 January 2022 of 3.0% for the current Chief Financial Officer in line with that for the average of the UK workforce. The Chief Executive Officer did not receive a salary increase for 2022. 2022 salaries are as follows: • M Willome: £850,000 • SG Bennett: £389,394 • L Liu: £440,000 | | --- | --- | | Pension and benefits | Pension contributions for new directors are aligned with that of the UK workforce. Executives receive a cash allowance in lieu of pension contributions, car allowance and private health insurance. Since M Willome has moved from Switzerland to the UK, the Company also agreed a monthly relocation allowance for the next four years. This allowance will be £7,500 per month for the first year then £5,000 per month for the following three years, and will be grossed up for tax. 2022 cash allowances in lieu of pension contributions are: • M Willome: 7% of salary • SG Bennett: 20% of salary • L Liu: 7% of salary | | Annual bonus | For 2022, performance under the annual bonus will be measured on the following basis: • 80% subject to performance against Underlying profit before tax targets • 10% subject to performance measures against key SHE targets • 10% subject to performance against individual strategic and operational goals • Targets and objectives for 2022 are, by their financial and commercial nature, considered by the Board to be unsuitable for disclosure in advance. However, the Committee will provide information on targets and objectives retrospectively. 2022 maximum award opportunity: • M Willome: 150% of salary • SG Bennett: 150% of salary • L Liu: 150% of salary | | Performance share plan | For awards to be made in 2022, performance will be measured as follows: • 30% based on relative TSR performance versus FTSE 250 (excluding investment trusts and financial services companies) – 25% of this element will vest for median performance – 100% vesting for upper-quartile performance – Vesting on a straight-line basis between these points • 30% based on Underlying EPS growth – 25% of this element will vest for EPS growth of 4.5% per annum – 100% vesting for EPS growth of 10% per annum – Vesting on a straight-line basis between these points – This target range was set following consideration of the long-term strategy and the outlook for the markets in which we operate – 2021 EPS has been rebased for target setting purposes, to take account of the exceptional margins in Nitrile latex. See page 115. • 20% based on cost efficiencies as a result of the Eastman's Adhesive Resins business • 20% based on strategic targets, of which half will be a sustainability measure linked to a reduction in CO₂ emissions of up to 40% from the 2019 baseline and half will be linked to the introduction of new and protected products. 2022 maximum award opportunity: • M Willome: 200% of salary • SG Bennett: 150% of salary • L Liu: 150% of salary | | Shareholding guidelines during employment | The Chief Executive Officer and the current Chief Financial Officer are expected to build interests in shares of at least 220% and 175% of salary respectively. L Liu will be expected to build interests in shares of at least 200% of salary. | | Chair and Non-Executive Directors | The fees to be paid in 2022 to the Chair and the Non-Executive Directors were reviewed in December 2021 and as a result: • The Chair's fee was increased from £189,500 to £235,000 per annum with effect from 1 January 2022 to reflect the greater time commitment that the role requires and its increased complexity. • The fees for Non-Executive Directors were increased in line with the average pay increase for the Group's UK workforce with effect from 1 January 2022. | 122 | Synthomer plc Annual Report 2021 ### Payments to past directors (audited) While CG MacLean stepped down as CEO at the start of November 2021, his agreed formal leaving date was 13 January 2022, meaning he was entitled to an annual bonus for 2021. The bonus payment will be paid entirely in cash on the normal bonus payment date and will be subject to the Remuneration Committee's right under the Rules to apply malus and clawback provisions. He will not be eligible to receive any bonus in respect of the financial year ending 31 December 2022. The Remuneration Committee determined that, taking into account the circumstances of the departure, the transition between the leadership of the Company and CG MacLean's contribution to the business during his tenure, he would be treated as a 'good-leaver' for the purpose of his unvested awards under the Performance share plan. In line with the approved policy, the awards will be reduced on a time apportioned basis, which will be calculated to 31 December 2021. Awards will be subject to the relevant performance conditions which will be measured at the normal time. | Award date | Number of shares subject to award | Pro-rated maximum number of shares which could end | Visiting date | | --- | --- | --- | --- | | 2019 | 235,868 | 220,269 | 11 March 2022 | | 2020 | 371,304 | 223,299 | 12 March 2023 | | 2021 | 261,039 | 70,499 | 11 March 2024 | Any dividend equivalents accrued in respect of these awards would be paid in cash following vesting and will be pro-rated in line with the level of vesting of the relevant PSP award. Any shares acquired on the exercise of the awards will be subject to the Remuneration Committee's right under the PSP to apply clawback provisions. Details of the vesting of the award made to CG MacLean in 2019 together with all other remuneration paid to CG MacLean in 2021 are contained in this report. The Synthomer post-employment shareholding guidelines which came into effect in April 2021 have not been applied as CG MacLean gave notice of termination before they were introduced. He is, however, contractually bound to hold Synthomer's shares post-employment as follows: | Shares | Ending date shares can be sold | | --- | --- | | 6,311 shares deferred from 2019 bonus paid in March 2020 | 28 March 2022 | | 17,316 shares from vesting of 2017 PSP award in May 2020 | 4 May 2022 | | 31,979 shares deferred from 2020 bonus paid in March 2021 | 26 March 2023 | | 95,031 shares from vesting of 2018 PSP award in March 2021 | 8 March 2023 | ### Payments for loss of office (audited) No payments for loss of office were made during the year. Strategic report Summary Group financial statements Company financial statements Other information Synthomer plc | 123 Annual Report 2021 Corporate Governance ## Annual Report on Remuneration continued ### Performance graph and table The graph and table below allow comparison of the TSR of the Company and the Chief Executive Officer remuneration outcomes over the last 10 years. ### TSR chart 50 0 | December | December | | December | December | | December | December | December | December | December | December | December | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2011 | 2012 | | 2013 | | 014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | | Synthomer plc | | FTSE 250 (excluding investment trusts) | | | | | | | | | | | The graph above compares the TSR performance of the Company with that of the FTSE 250 (excluding investment trusts). This is considered to be the most appropriate index against which to make a comparison and was chosen because it represents a broad equity market index of which the Company is a constituent. 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Chief Executive Officer total single figure of remuneration (£’000) 1,487 923 967 1,246 1,218 2,516 1,807 893 1,805 2,279 Bonus (% of maximum awarded) 27.0 0.0 57.3 96.7 100.0 100.0 76.5 20.0 100.0 95.0 PSP (% of maximum vesting) 100.0 50.0 0.0 n/a n/a 96.3 86.2 10.0 31.8 64.0 The Chief Executive Officer total single figure of remuneration includes salary, benefits and pension contributions paid in the year, together with bonuses and long-term incentive awards which vested based on performance in the year. The 2021 single figure comprises the figure for CG MacLean, which covers the period to 31 October and the figure for M Willome, which covers the period from 1 November to 31 December 2021. ### Chief Executive Officer to all employee pay ratio The following table provides pay ratio data in respect of the Chief Executive Officer’s total remuneration compared to the 25th, median and 75th percentile employee. 25th percentile 75th percentile Financial year Method pay ratio Median pay ratio pay ratio 2021 Option B 54:1 44:1 31:1 2020 Option B 37:1 28:1 22:1 2019 Option B 28:1 23:1 16:1 The employees used for the purposes of compiling the table above were identified on a full-time equivalent basis at the pay period during which 5 April 2021 fell. Option B, which involves identifying the employees at the 25th, 50th and 75th percentile from our gender pay gap report, was chosen as the calculation methodology. 400 Option B is considered to be the most simple and accurate way of identifying the relevant employees. Using this methodology we were able to 350 identify specific employees to make the required comparisons. The ratio has increased for 2021 chiefly due to the increase in the PSP outcome. 300 250 200 150 100 Synthomer plc ## 124 Annual Report 2021 The definition of pay used included the following: • Annual salary • Car allowances • All other cash allowances • All bonuses and incentive scheme payments for services delivered in the year • Private medical insurance value The following table provides salary and total remuneration information in respect of the employees at each quartile. | Financial year | Element of pay | 25th percentile employee | | 75th percentile employee | | | --- | --- | --- | --- | --- | --- | | | | Employee | Median employee | Employee | Median employee | | 2021 | Salary | 36,394 | 43,425 | 57,790 | | | | Total remuneration | 42,277 | 52,342 | 72,622 | | Our Chief Executive Officer pay is made up of a higher proportion of incentive pay than that of the majority of our employees. This is likely to introduce more variability in the Chief Executive Officer total compensation. The Board have confirmed that the ratios are consistent with the Company's wider policies on employee pay, reward and progression. #### Percentage change in remuneration of the Directors The table below sets out the increase in salary, benefits and annual bonus of the Directors compared with a selected group of employees. The parent company, Synthomer plc, does not have any direct employees so a comparator group of employees of the Group's main UK trading subsidiary has been used, comprising 465 employees. The Directors consider that this employee population is the most relevant for comparison purposes, taking into account geographical location and remuneration structure. | | 2021 | | | 2020 | | | | --- | --- | --- | --- | --- | --- | --- | | | Salary and fee % increase | Benefits % increase (decrease) | Annual bonus % increase | Salary and fee % increase | Benefits % increase (decrease) | Annual bonus % increase | | M Willome^{1} | n/a | n/a | n/a | n/a | n/a | n/a | | CG MacLean | 2.5 | – | 1.1 | 1.3 | – | 507.8 | | SG Bennett | 2.5 | (1.3) | 1.1 | 1.3 | (24.1) | 560.7 | | CA Johnstone | 2.5 | n/a | n/a | n/a | n/a | n/a | | The Hon. AG Catto | 5.6 | n/a | n/a | 0.9 | n/a | n/a | | BWD Connolly | 5.4 | n/a | n/a | 1.1 | n/a | n/a | | C Dubin | 3.1 | n/a | n/a | n/a | n/a | n/a | | RC Gualdoni^{1} | n/a | n/a | n/a | n/a | n/a | n/a | | Dr JJC Jansz | 3.6 | n/a | n/a | 1.3 | n/a | n/a | | Dato^{1} Lee Hsu Hian | 2.8 | n/a | n/a | 1.6 | n/a | n/a | | HA Van Deursen | 3.6 | n/a | n/a | 1.3 | n/a | n/a | | Average change for employees | 2.6 | 3.2 | 36.5 | 1.4 | (4.4) | 622.7 | Note: 1. M Willome and R Gualdoni were appointed to the Board in 2021. #### Relative importance of spend on pay The table below shows the relative importance of the Group's all employee remuneration expense compared with returns to shareholders by way of dividends. | | 2021 £m | 2020 £m | % change | | --- | --- | --- | --- | | Dividends paid | 73.5 | 12.8 | 474.2 | | Total employee remuneration | 243.7 | 211.3 | 15.3 | Dividends are the dividends paid in the year. The final 2019 dividend was cancelled at the onset of COVID-19 in March 2020. Total employment remuneration is the consolidated salary and bonus cost for all Group employees. Strategic report Financial report Group financial statements Company financial statements Other information Synthomer plc Annual Report 2021 | 125 Corporate Governance Annual Report on Remuneration continued # **External appointments** Executive Directors are permitted to accept external appointments with the prior approval of the Board, provided that there is no adverse impact on their role and duties to the Company. Any fees arising from such appointments may be retained by the Executive Directors where the appointment is unrelated to the Group's business. M Willome has been a non-executive director of Glaston Oyj (Nasdaq Helsinki) since May 2020 and received a Board membership fee of EUR 35,000 in 2021. M Willome has sat on European subsidiary boards of Indutrade AB since 2013 and received a board membership fee of CHF 30,000 in 2021. SG-Bennett does not currently hold any external appointments. # **Remuneration Committee** Remuneration Committee membership since 1 January 2021: Brendan Connolly (Chair) Cynthia Dubin Roberto Gualders (from 6 July 2021) Just Janaz (to 20 September 2021) Holly A Van Deursen Attendance at Committee meetings is set out on page 93. # **Key duties of the Committee** During 2021 the Committee was responsible for determining, in agreement with the Board, the Company's policy on executive remuneration and the specific remuneration for the Chair and each of the Executive Directors, including pension rights, within the terms of the agreed policy. The Committee was also responsible for the specific remuneration of the Executive Committee and for reviewing remuneration elsewhere in the Group. # **Advisers** The Chief Executive Officer, Company Secretary and Group HR Director are invited to attend Committee meetings to contribute to the Committee in its deliberations. However, no individual is involved in discussions, or is part of any decisions, relating to their own remuneration. The Committee received independent advice from Deloitte LLP (Deloitte) which was appointed as the Committee's independent remuneration adviser in April 2013. During the year, Deloitte provided advice on governance and market trends and other remuneration matters that materially assisted the Committee. The fees paid to Deloitte in respect of the work were charged on a time and expenses basis and totalled £13,000 for advice in 2021. The Committee is comfortable that the Deloitte engagement team that provides remuneration advice to the Committee do not have connections with the Company or its Directors that may impair their independence. The Committee reviewed the potential for conflicts of interest and judged that there were appropriate safeguards against such conflicts. Deloitte also provided tax services to part of the Group and advice on implementation of TCFD to the Board in the year. The Committee was satisfied that this did not compromise the independence of the advice received. Deloitte is a founding member of the Remuneration Consultants Group and adheres to its Code of Conduct. Deloitte was appointed directly by the Committee, and the Committee is satisfied that the advice received was objective and independent. # **Statement of voting at the AGM** The table below sets out the results of the votes on the Directors' remuneration at the 2021 AGM (Annual Report on Remuneration) and the 2020 AGM (Directors' Remuneration Policy). | | Votes for | | Votes against | | Votes withheld reached | | --- | --- | --- | --- | --- | --- | | | Number | % of vote | Number | % of vote | | | 2021 Annual Report on Remuneration | 341,442,799 | 96.55 | 12,278,209 | 3.47 | 26,048 | | 2020 Directors' Remuneration Policy | 322,152,827 | 91.98 | 28,090,122 | 8.02 | 28,501 | By order of the Board **R Atkinson** Company Secretary 03 March 2022 126 | Synthomer plc Annual Report 2021 Corporate Governance ## Directors’ report | The Directors submit their Annual Report and | Results and dividends | Share capital and control | | --- | --- | --- | | the audited consolidated financial statements | The profit attributable to shareholders for | On 28 October 2021 the Company | | for the year ended 31 December 2021. None | theyear was £208.7 million. An interim | completedaplacing of 42,485,080 | | of the matters required to be disclosed by | dividend of 8.7 pence per share was paid | newordinary shares of 10 pence each. | | Listing Rule 9.8.4R apply to the Company, | on4 November 2021. The total dividend paid | This represented approximately 10% of the | | except for the following: | for the year was£73.5 million. The Directors | Company’s issued share capital immediately | | | recommend afinal ordinary dividend of 21.3 | before the placing and was connected to | • The amount of capitalised interest – pence per share payable on 5 July 2022 to thefinancing of the acquisition of Eastman’s seeFinancial statements note 2 | | those shareholders registered at the close | Adhesive Resins business, which was | | | --- | --- | --- | --- | | • Details of long-term incentive programmes | | | GovernanceStrategic report | | | ofbusiness on 6 June 2022. A dividend | announced that day. During 2021 no shares | | – see Directors’ Remuneration report on reinvestment plan is available to shareholders were purchased. A total of 99,927 shares pages 112-126 and this alternative will continue to be offered were purchased on the open market on • Shareholder waiver of dividends – until further notice. behalf of the shareholders who elected to seeFinancial statements note 31. participate in the dividend reinvestment plan. Acquisitions and disposals The Directors’ report is covered on pages On 7 April 2021 the Company completed the The Company’s Articles of Association set 126-128 as well as in the following sections of sale of Synthomer Thailand Limited to Rimrise outthe rights and obligations attached to the Annual Report: FZE. On 28 October 2021 the Company agreed theCompany’s ordinary shares, being the Group financial statements Company financial statements Other information | | | | to acquire Eastman’s Adhesive Resins business | only class of issued share capital, alongside | | --- | --- | --- | --- | --- | | | Location in Annual | | for$1 billion. | thepowers of the Company’s Directors. | | Item | | Report | | Copies can be obtained from Companies | Directors House or downloaded from the Company’s Statement of Directors’ Page 129 All the Directors will retire and seek election website: www.synthomer.com. There are responsibilities orre-election at the forthcoming AGM. norestrictions on the voting rights attached | Financial risk management Financial | | | None of the Directors seeking re-election | tothe Company’s ordinary shares or on | | --- | --- | --- | --- | --- | | | statements – | | hasa service contract except Michael | thetransfer of securities in the Company. | | | | note22 | Willome and Stephen Bennett, who both have | No person holds securities in the Company | | | | | aservice contract that contains a 12-month | that carry special rights with regard to the | | Present Board | Pages 84-87 | | | | | | | | notice period. Stephen Bennett gave notice of | control of the Company. The Company is not | membership | | | termination on 4 August 2021 and has agreed | aware of any agreements between holders | | --- | --- | --- | --- | | | | a termination date with the Company of | ofsecurities that may result in restrictions on | | Corporate Governance | Pages 90-97 | | | | | | 4 November 2022. | the transfer of securities or on voting rights. | report Unless expressly specified to the contrary Director indemnity provisions Strategic report (including Inside inthe Company’s Articles of Association, Under the Company’s Articles of Association, principal activities) front cover those Articles of Association may be the Directors of the Company have the benefit to page 82 amended by special resolution of the of a qualifying third-party indemnity provision. Company’s shareholders. This means the Company indemnifies them Management of risk and Pages 69-81 against certain liabilities, as permitted by Other than in relation to its borrowings, viability statement | | | Sections 232 and 234 of the Companies Act | whichbecome repayable on a takeover | | --- | --- | --- | --- | | Employee engagement Pages 62-66 | | 2006, and against costs incurred by them in | unless certain conditions are satisfied, | | | | relation to any liability for which they are | theCompany is not party to any significant | | Directors’ remuneration | Pages 112-126 | | | | | | indemnified. The Company has purchased | agreements that would come into effect, | report and maintains insurance against Directors’ alteror terminate upon a change of control and officers’ liabilities in relation to prompted by a takeover bid. The Company Share capital Financial theCompany. does not have agreements with any statements – Directoror employee that would provide note 27 compensation for loss ofoffice or Greenhouse gas emissions Pages 182-183 employment resulting from atakeover. All of the Company’s share programmes Sustainability report Pages 42-68 contain provisions relating to a change of control. Outstanding options and awards would normally vest and become exercisable on a change of control, subject to the satisfaction of any performance conditions atthat time. Synthomer plc ## Annual Report 2021 127 Corporate Governance ## Directors’ report continued Major shareholdings Cautionary statement Other than the shareholdings disclosed as Directors’ interests in the Directors’ remuneration The purpose of this report is to provide report as at 18 February 2022, the Company had been notified under Section 5 of the information to the members of the Company. Disclosure and Transparency Rules of the UK Listing Authority of the following significant It contains certain forward-looking statements holdings of voting rights in its ordinary shares: with respect to the operations, performance and financial condition of the Group. By their Percentage of nature, these statements involve uncertainty, | | Ordinary shares | | ordinary shares in | | | | --- | --- | --- | --- | --- | --- | | | | (number) | | issue Nature of holding | since future events and circumstances | | Kuala Lumpur Kepong Bhd 99,745,012 21.34 Direct interest | | | | | cancause results and developments to | differmaterially from those anticipated. Jupiter Fund Management plc 24,965,862 5.34 Indirect interest The forward-looking statements reflect Ameriprise Financial Inc 21,103,757 4.52 Direct and indirect interest knowledge and information available at Aegon Asset Management UK PLC 12,425,941 2.66 Direct and indirect interest thedate of preparation of this report and theCompany isunder no obligation to updatethese forward-looking statements. Employment policies and employee Subsidiaries Nothing inthis report should be construed involvement All the Group’s subsidiaries, joint ventures asa profit forecast. | The Group gives every consideration | and related undertakings are listed on pages | | | --- | --- | --- | | tojobapplications from disabled people. | 179 -180. | Independent auditors | | Employees who become disabled are | | A resolution to appoint | Statement as to disclosure of givenevery opportunity to continue working PricewaterhouseCoopers LLP as the information to auditor forSynthomer under normal terms and Company’s auditor will be proposed at the Each Director of the Company confirms conditions with appropriate training, career next AGM. that,tothe best of their knowledge, the development and promotion wherever Company’s auditor is aware of all relevant Annual General Meeting possible. The Group seeks to achieve audit information. Each Director also confirms The AGM will be held at the offices of the equalopportunities in employment that he or she has taken all necessary steps Company at 45 Pall Mall, London SW1Y 5JG throughrecruitment and training policies. as a Director to make themselves aware of on 28 April 2022 at 11.00 am. The Group encourages employee involvement any relevant audit information and to establish By order of the Board in its affairs. The Company regularly engages that the information has been shared with with employees to make them aware of the theCompany’s auditor. For these purposes, financial and economic factors affecting relevant audit information means information Richard Atkinson Group performance. Performance-related needed by the Company’s auditor in Company Secretary | bonus programmes are in operation | connection with preparing its report on | | | --- | --- | --- | | throughout the Group. Alexander Catto | pages131-136. This confirmation is given | 3 March 2022 | | isthedesignated Non-Executive Director | andshould be interpreted in accordance | | | responsible for gathering the views of the | withsection 418 of the Companies Act 2006. | | workforce. Further information on the Board’s Going concern workforce engagement methods can be The Directors have acknowledged the latest found on pages 95 to 97. The Group’s guidance on going concern and in reaching approach to diversity and inclusion is their conclusions have taken into account explained on pages 42 and 63-65. factors that include: Authority to purchase own shares • A $260 million term loan and a €460 million The Company has a general authority to revolving credit facility with five-year terms make market purchases of not more than ending on3 July 2024 42,485,096 of the Company’s ordinary • A €520 million bond due 2025 shares, in accordance with the terms of the • The new committed $300 million term special resolution passed at the 2021 AGM. loanfacility entered into on 28 October This expires at the conclusion of the 2022 2021 in connection with the financing AGM. A resolution will be tabled at the 2022 oftheacquisition of Eastman’s Adhesive AGM to renew this authority for an amount Resins business. representing approximately 10% of the Company’s issued share capital as at After making enquiries and taking account 2 March 2022. ofreasonably possible changes in trading performance, the Directors are satisfied Political donations that,at the time of approving the financial No political donations were made in the year. statements, it is appropriate to adopt the UK pension funds going concern basis in preparing the The trustees have reviewed the independent financialstatements ofboth the Group investment management of the assets of andthe Company. theCompany’s UK pension schemes and assured themselves of the security and controls in place. In particular, it is the trustees’ policy not to invest in Synthomer plc shares nor lend money to the Company. Synthomer plc ## 128 Annual Report 2021 Corporate Governance ## Statement of Directors’ responsibilities The Directors are responsible for preparing The Directors are responsible for the Annual Report and the financial safeguarding the assets of theGroup and statements in accordance with applicable Company and hence for taking reasonable lawand regulation. steps forthe prevention and detection of fraud and other irregularities. Company law requires the Directors to prepare | financial statements foreach financial year. | The Directors are also responsible for keeping | | | --- | --- | --- | | Under that law the Directors have prepared | adequate accounting records that are | | | theGroup financial statements in accordance | sufficient to show and explain the Group and | | | with UK-adopted international accounting | Company’s transactions and disclose with | GovernanceStrategic report | | standards and the Company financial | reasonable accuracy atanytime the financial | | | statements in accordance with UK Generally | position of the Group and Company and | | | Accepted Accounting Practice (UK Accounting | enable them to ensure that the financial | | | Standards, comprising FRS 101 Reduced | statements and the Directors’ remuneration | | | Disclosure Framework, and applicable law). | report comply with the Companies Act 2006. | | The Group has also prepared the financial The Directors are responsible for the statements in accordance with IFRSs adopted maintenance and integrity of the Company’s pursuant to Regulation (EC) No 1606/2002 website. Legislation in the UK governing the Group financial statements Company financial statements Other information asit applies in the European Union. preparation and dissemination of financial Under company law the Directors must statements may differ from legislation in notapprove the financial statements unless otherjurisdictions. they are satisfied that they give a true and ### Directors’ confirmations fairviewof the state of affairs of the Group The Directors consider that the Annual and Company and oftheprofitor loss of Reportand Accounts, taken asa whole, theGroup and Company for that period. isfair, balanced and understandable and In preparing the financial statements, provides the information necessary for theDirectors are required to: shareholders to assess the Group and • Select suitable accounting policies and Company’s position and performance, thenapply them consistently business model and strategy. • State whether applicable UK-adopted Each of the Directors, whose names and IFRSs and IFRSs adopted pursuant to functions are listed in the Directors’ report Regulation (EC) No 1606/2002 as it applies confirm that, to the best of their knowledge: in the European Union have been followed | for the Group financial statements and UK | • the Group financial statements, which | | --- | --- | | accounting standards, comprising FRS 101 | havebeen prepared inaccordance with | | have been followed for the Company | UK-adopted international accounting | | financial statements, subject to any material | standards IFRSs as adopted pursuant to | | departures disclosed and explained in the | Regulation (EC) No 1606/2002 as it applies | | financial statements | in the European Union; | | • Make judgements and accounting estimates | • the Company financial statements, which | | that are reasonable and prudentand | have been prepared inaccordance with | | • Prepare the financial statements on the | UKaccounting standards, comprising | | going concern basis unlessit is | FRS101 givea true and fair view of the | | inappropriate to presume that the Group | assets, liabilities andfinancial position | | and Companywill continue in business. | oftheCompany; and | • the Directors’ report includes a fair review ofthe development and performance of thebusiness and the position of the Group andCompany, together with a description of the principal risks anduncertainties that it faces. By order of the Board M Willome Chief Executive Officer SG Bennett Chief Financial Officer Synthomer plc ## Annual Report 2021 129 ## Group ## financial ## statements Our specialist high solid SBR and SA and SBR compounded products provide high performance binders for the backing of carpet and artificial turf and as gel foam elastomers for floor coverings, footwear and mattresses. In alltypes of carpet (from wovens to automotive) and artificial turf we provide compounded products with technical service and support to optimise the performance of the floorcovering. Synthomer plc ## 130 Annual Report 2021 Group financial statements # Independent auditors' report to the members of Synthomer plc ## Report on the audit of the financial statements ### Opinion In our opinion: - Synthomer Plc's Group financial statements and Company financial statements (the "financial statements") give a true and fair view of the state of the Group's and of the Company's affairs as at 31 December 2021 and of the Group's profit and cash flows for the year then ended; - the Group financial statements have been properly prepared in accordance with UK-adopted International Accounting Standards; - the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 "Reduced Disclosure Framework", and applicable law); and - the financial statements have been prepared in accordance with the requirements of the Companies Act 2095. We have audited the financial statements, included within the Annual Report, which comprise: the Consolidated balance sheet and Company statement of financial position as at 31 December 2021; the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated cash flow statement, the Consolidated and Company statements of changes in equity, and Reconciliation of net cash flow from operating activities to movement in net debt for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies. Our opinion is consistent with our reporting to the Audit Committee. ### Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. ### Independence We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC's Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC's Ethical Standard were not provided. In August 2021, we applied to the FRC for a one-year waiver in respect of the UK non-audit services fee cap for our audit of Synthomer Plc's financial period ending 31 December 2021. The waiver was in respect of fees relating to private reporting in relation to the Eastman's Adhesive Resins business acquisition and followed a similar waiver request in 2020. The application was approved as the exceptional circumstances test was met, with mitigations put in place by us and the Company to manage the risks to auditor independence. Other than those disclosed in note 7 to the consolidated financial statements, we have provided no non-audit services to the Company in the period under audit. ## Our audit approach ### Context In planning and executing our audit we have considered the Group's climate risk assessment process (as described in the Sustainability report and TCFD report). This, together with discussions with our own climate change specialists, provided us with a good understanding of the potential impact of climate change on the financial statements. Management consider that the impact of climate change does not give rise to a material financial statement impact. We used our knowledge of the Group to evaluate management's assessment. The Group is targeting net zero carbon emissions by 2050, and with Vision 2030 they are working on their pathway towards this. The Group has started to quantify some of the impacts that may arise on this pathway and we have discussed with management and the Audit Committee that the estimated financial impacts of climate change will need to be frequently reassessed and our expectation that climate change disclosures will continue to evolve as greater understanding of the actual and potential impacts on the Group's future operations are obtained. We considered how climate change risks would impact the assumptions made in the forecasts prepared by management used in their impairment analyses and going concern. We also considered the consistency of the disclosures in relation to climate change made in the other information within the Annual Report with the financial statements and our knowledge from our audit. ### Overview #### Audit scope - Audit procedures provide coverage of 84% of revenue and 93% of underlying operating profit. - Audit scope covers 8 countries, performing procedures over 14 components. - Financially significant components in the USA, Germany and Malaysia. #### Key audit matters - Uncertain Tax Provisions (Group) - Valuation of defined benefit pension liabilities and level 3 assets (Group) - Presentation and quantum of Special Items (Group) - Recoverability of investment in, and amounts owed by, Group undertakings (Company). #### Materiality - Overall Group materiality: £11,605,000 (2020: £7,900,000) based on approximately 5% of three-year average of underlying profit before taxation (2020: underlying profit before taxation). - Overall Company materiality: £10,444,000 (2020: £18,680,000) based on 1% of total assets capped at 90% of Group materiality. - Performance materiality: £8,703,000 (2020: £5,925,000) (Group) and £7,830,000 (2020: £2,250,000) (Company). #### The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. Strategic report Governance Risk management Company financial statements Other information Synthomer plc | 131 Annual Report 2021 Group financial statements # Independent auditors' report continued to the members of Synthomer plc # Key audit matters Key audit matters are those matters that, in the auditors' professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit. Presentation of special items is a new key audit matter this year. The impact of the COVID-19 pandemic and OMNOVA acquisition accounting, which were key audit matters last year, are no longer included because of the ability of the Group to continue to generate profits and operate despite disruption related to the COVID-19 pandemic, and the accounting related to the OMNOVA acquisition being finalised in the prior year. Otherwise, the key audit matters below are consistent with last year. # Key audit matter # Uncertain Tax Provisions (Group) The Group has a wide geographical footprint and is subject to a range of tax laws in a number of different tax jurisdictions. As set out in Note 10, the Group has a number of uncertain tax provisions totalling £33.7m (2020: £45.3m) as at 31 December 2021. By nature, uncertain tax positions require a significant element of judgement to determine an appropriate provision. As such, we have assessed that a significant risk exists in relation to valuation and presentation and disclosure assertions to ensure that provisions made are appropriate. # Valuation of defined benefit pension liabilities and level 3 assets (Group) As set out in note 26, the Group had £122.4m (2020: £221.4m) net liabilities as at 31 December 2021 in relation to defined benefit pension schemes. These primarily represent the Yule Catto Group retirement benefits scheme in the UK, the OMNOVA Solutions Consolidated Pension Plan in the US and an unfunded scheme in Germany, which account for £4.8m, £27.7m, and £74.7m respectively of the net pension deficit. The Group uses third party actuaries to calculate the pension liabilities. The valuation of these liabilities is based on a number of assumptions and the calculation is highly sensitive to small changes in the assumptions. For instance, changes in inflation, mortality tables and discount rate can have a significant impact on the valuation of the liability recorded. The pension asset also contains level 3 and other complex assets (complex PWs where assets are not traded on Recognised Investment Exchanges (RIE) totalling £359m as at 31 December 2021 (31 December 2020: £320m), which are complex in nature to value and therefore we deem there to be a risk with respect to the valuation of these assets. # How our audit addressed the key audit matter In order to assess the valuation and appropriateness of presentation and disclosure we: - Engaged our tax specialists (including transfer pricing specialists) to assess the level of provision held against various tax exposures was materially appropriate. In our assessment we had regard to the nature of individual exposures, including their origin, and any developments in the year to assess the rationale for their continued validity at the current year end. - Inspected correspondence with tax authorities and the Group's tax advisors to evaluate valuation and completeness of provisions. - Challenged judgements made by management by assessing individual provisions against our expectations of potential exposures, having regard to the facts of each case. - Considered the adequacy of disclosure in the annual report. No significant issues arose from this work to suggest that the judgements made, amounts provided or disclosures were inappropriate. In order to assess the identified risks we: - We reviewed external actuarial reports of the UK and German schemes which set out the calculations and assumptions underpinning the year end pension scheme liabilities valuation and our US component team reviewed an external actuarial report for the US scheme. - We (and PwC US) held discussions with the external actuaries and were satisfied that the scope of their work was such that we could use this work to provide evidence for the purpose of our audit. - We assessed the competency and objectivity of the external actuaries commissioned by the Group to perform the year end calculations by considering their technical expertise and independence from the Group. - We used our own specialist actuarial team to evaluate the key assumptions used in each of the three schemes by comparing these assumptions to our expectations for similar schemes as at the year end. - With respect to the level 3 and other more complex assets, we tested values through a combination of the following procedures: reviewed audited accounts of pooled investment vehicles; reviewed internal controls reports of the service provider responsible for the valuation of the fund, including obtaining bridging letters where the control report does not cover the current financial period of Synthomer plc; obtained fund transactions close to the year end (where available), and obtained third party confirmation from the investment managers. - We also considered the appropriateness of the disclosures within the financial statements We found management's assumptions to be within an acceptable range. We identified no concerns over their competency or objectivity. 132 Synthomer plc Annual Report 2021 Key audit matter How our audit addressed the key audit matter Strategic report Governance Group financial statements Company financial statements Other information Presentation and quantum of Special Items We considered the appropriateness of amounts classified as Special items. To do this (Group) weconsidered: The Group presents two measures of • The Group’s accounting policy on special items; and Pronouncements by the Financial performance in the income statement; Reporting Council on this matter. statutory and underlying, the latter after • We challenged management on the appropriateness of the classification of such Special adjusting for certain items of income or items, being mindful that classification should be even-handed between gains and losses, expenses as management believes these the basis the classification should be clearly disclosed and a clear reconciliation to measures provide additional useful information statutory measures provided and applied consistently one year to the next. on the underlying trends, performance and • We challenged management on the quantum of the elements of the Special items, and position of the Group. the estimates underpinning some of them, including discussions with the Group’s legal The determination of which items of income advisors where appropriate. orexpense are classified as Special items Our work highlighted certain items that management had classified as special items which issubject to judgement and therefore were judgemental. Having considered the nature and quantum of these items, overall we are usersofthe financial statements could be satisfied that the presentation of special items in the financial statements for the year ended misled ifamounts are not classified or 31 December 2021 is appropriate. calculatedappropriately. Description of the amounts presented as Special items are included in note 4 to the financial statements. Recoverability of investment in, and amounts Our procedures included the following: owed by, Group undertakings (Company) • Evaluating management’s assessment of whether any indicators of impairment existed. As disclosed in Note 3 of the Parent Company • Assessing the recoverable value by reference to the net assets of the underlying financial statements, the Company held an subsidiaries and amounts owed by Group undertakings with reference to the Director’s investment in subsidiaries of £536.7m intentions for the settlement of Group-wide intercompany balances. (2020: £370.5) and amounts owed by Group • Verifying that the recoverable values of the investment was consistent with the recoverable undertakings of £1,275m (2020: £1443.4m) value of the CGU tested for goodwill impairment purposes, leveraging the audit work at31 December 2021. undertaken as part of the Group audit. The assessment of the recoverability of these Based on the procedures performed, we noted no material issues from our work. assets required the application of management judgement, particularly in determining whether any impairment indicators have arisen that trigger the need for a formal impairment assessment and in assessing whether the carrying value of each investment and amounts owed by Group undertakings are recoverable. As changes to these judgements and estimates could have a material impact on the Company financial statements, we consider this to be akeyaudit matter. How we tailored the audit scope Where work was performed by component auditors, we determined We tailored the scope of our audit to ensure that we performed the level of involvement we needed to have in the audit work at those enough work to be able to give an opinion on the financial statements reporting units to be able to conclude whether sufficient appropriate as a whole, taking into account the structure of the Group and the audit evidence had been obtained as a basis for our opinion on the Company, the accounting processes and controls, and the industry Group financial statements as a whole. During the audit, senior inwhich they operate. members of the Group team held a number of meetings with the audit teams from key reporting units in the UK, Germany, Malaysia and the As set out in note 5 ‘Segmental analysis’, the Group reports its results USA, and reviewed the work performed by these teams over those as four segments: ‘Performance Elastomers’, ‘Functional Solutions’, areas of higher audit risk. ‘Industrial Specialities’ and ‘Acrylate Monomers’. The Group financial statements are a consolidation of reporting units, being holding Materiality companies, intermediate holding companies and operating The scope of our audit was influenced by our application of materiality. companies, across 24 countries. Three countries, being the USA, We set certain quantitative thresholds for materiality. These, together Germany and Malaysia, account for the majority of the Group’s results. with qualitative considerations, helped us determine the scope of our We accordingly focused our work on three of the reporting units in audit and the nature, timing and extent of our audit procedures on these countries, which were subject to audits of their complete individual financial statement line items and disclosures and in financial information. In addition, to increase our coverage of the evaluating the effect of misstatements, both individually and in Group’s revenue and underlying profit before tax we performed full aggregate on the financial statements as a whole. scope audit procedures at an additional eleven reporting units located in the UK, Italy, Germany, Malaysia, the Czech Republic, Austria and France. These components accounted for 84% of the Group’s revenue, 93% of the Group’s underlying operating profit. Synthomer plc ## Annual Report 2021 133 Group financial statements # Independent auditors' report continued to the members of Synthomer plc Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: | | Financial statements – Group | Financial statements – Company | | --- | --- | --- | | **Overall materiality** | £11,608,000 (2020: £7,960,000) | £10,444,500 (2020: £18,660,000) | | **How we determined it** | approximately 5% of three-year average of underlying profit before taxation (2020: underlying profit before taxation). | Based on 1% of total assets capped at 90% of Group materiality. | | **Rationale for benchmark applied** | Underlying profit before taxation, being profit before tax adjusted for special items, is a key metric for investors and is used by the Board in measuring the Group's financial performance. | Total assets is the primary measure used by the shareholders in assessing the performance of the Company, and is a generally accepted benchmark. The value is capped at 90% of the Group overall materiality. | For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was between £1,300,000 to £10,706,500. Certain components were audited to a local statutory audit materiality that was also less than our overall Group materiality. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2020: 75%) of overall materiality, amounting to £9,703,000 (2020: £5,825,000) for the Group financial statements and £7,838,000 (2020: £2,250,000) for the Company financial statements. In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £580,000 (Group audit) (2020: £395,000) and £522,000 (Company audit) (2020: £395,000) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. ### Conclusions relating to going concern Our evaluation of the members' assessment of the Group's and the Company's ability to continue to adopt the going concern basis of accounting included: - We reviewed the Directors' model supporting their going concern assumption. We discussed with management the assumptions applied in the going concern review so we could understand and challenge the rationale for those assumptions, using our knowledge of the business. We tested the model's mathematical accuracy and considered the reasonableness of the revenue and cost assumptions made and the available headroom throughout a period of at least twelve months from the date of approval of the financial statements. - We reviewed management's sensitivity scenarios including their severe but plausible downside. We considered potential mitigating actions available to the Group that are achievable and within management's control. We then assessed the availability of liquid resources under the different scenarios and the associated covenant tests applicable; and - We also assessed additional downside sensitivities and considered the impact on covenants and liquidity headroom. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's and the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In auditing the financial statements, we have concluded that the members' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group's and the Company's ability to continue as a going concern. In relation to the members' reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the members' statement in the financial statements about whether the members considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the members with respect to going concern are described in the relevant sections of this report. ### Reporting on other information The other information comprises all of the information in the Annual Report other than the financial statements and our auditors' report thereon. The members are responsible for the other information, which includes reporting based on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. With respect to the Strategic report and Directors' Report, we also considered whether the disclosures required by the UK Companies Act 2008 have been included. Based on our work undertaken in the course of the audit, the Companies Act 2008 requires us also to report certain opinions and matters as described below. ### Strategic report and Directors' Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors' Report for the year ended 31 December 2021 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. 134 | Synthomer plc Annual Report 2021 In light of the knowledge and understanding of the Group and We have nothing to report in respect of our responsibility to report Strategic report Governance Group financial statements Company financial statements Other information Company and their environment obtained in the course of the audit, when the members’ statement relating to the Company’s compliance wedid not identify any material misstatements in the Strategic report with the Code does not properly disclose a departure from a relevant and Directors’ Report. provision of the Code specified under the Listing Rules for review by the auditors. Directors’ Remuneration In our opinion, the part of the Annual Report on Remuneration to Responsibilities for the financial statements and the audit beaudited has been properly prepared in accordance with the Responsibilities of the members for the financial statements Companies Act 2006. As explained more fully in the Statement of Directors’ responsibilities, the members are responsible for the preparation of the financial Corporate governance statement statements in accordance with the applicable framework and for The Listing Rules require us to review the members’ statements in beingsatisfied that they give a true and fair view. The members relation to going concern, longer-term viability and that part of the arealso responsible for such internal control as they determine corporate governance statement relating to the Company’s compliance isnecessary to enable the preparation of financial statements that with the provisions of the UK Corporate Governance Code specified for arefree from material misstatement, whether due to fraud or error. our review. Our additional responsibilities with respect to the corporate governance statement as other information are described inthe In preparing the financial statements, the members are responsible Reporting on other information section of this report. forassessing the Group’s and the Company’s ability to continue as agoing concern, disclosing, as applicable, matters related to going Based on the work undertaken as part of our audit, we have concern and using the going concern basis of accounting unless the concluded that each of the following elements of the corporate members either intend to liquidate the Group or the Company or to governance statement is materially consistent with the financial cease operations, or have no realistic alternative but to do so. statements and our knowledge obtained during the audit, and we havenothing material to add or draw attention to in relation to: Auditors’ responsibilities for the audit of the financialstatements • The members’ confirmation that they have carried out a robust Our objectives are to obtain reasonable assurance about assessment of the emerging and principal risks; whetherthefinancial statements as a whole are free from material • The disclosures in the Annual Report that describe those principal misstatement, whether due to fraud or error, and to issue an auditors’ risks, what procedures are in place to identify emerging risks and report that includes our opinion. Reasonable assurance is a high anexplanation of how these are being managed or mitigated; levelof assurance, but is not a guarantee that an audit conducted in • The members’ statement in the financial statements about whether accordance with ISAs (UK) will always detect a material misstatement they considered it appropriate to adopt the going concern basis of when it exists. Misstatements can arise from fraud or error and are accounting in preparing them, and their identification of any material considered material if, individually or in the aggregate, they could uncertainties to the Group’s and Company’s ability to continue to do reasonably be expected to influence the economic decisions of so over a period of at least twelve months from the date of approval userstaken on the basis of these financial statements. of the financial statements; • The members’ explanation as to their assessment of the Group’s Irregularities, including fraud, are instances of non-compliance and Company’s prospects, the period this assessment covers and withlaws and regulations. We design procedures in line with our why the period is appropriate; and responsibilities, outlined above, to detect material misstatements • The members’ statement as to whether they have a reasonable inrespect of irregularities, including fraud. The extent to which our expectation that the Company will be able to continue in operation procedures are capable of detecting irregularities, including fraud, and meet its liabilities as they fall due over the period of its isdetailed below. assessment, including any related disclosures drawing attention Based on our understanding of the Group and industry, we identifiedthat toany necessary qualifications or assumptions. the principal risks of non-compliance with laws and regulations related Our review of the directors’ statement regarding the longer-term to breaches of environmental, health and safety and competition viability of the Group was substantially less in scope than an audit regulations, tax legislation and equivalent local laws and regulations andonly consisted of making inquiries and considering the directors’ applicable to significant component teams, and we considered the extent process supporting their statement; checking that the statement to which non-compliance might have a material effect on the financial isinalignment with the relevant provisions of the UK Corporate statements. We also considered those laws and regulations that have Governance Code; and considering whether the statement is a direct impact on the financial statements such as the Companies Act consistent with the financial statements and our knowledge and 2006. We evaluated management’s incentives and opportunities for understanding of the Group and Company and their environment fraudulent manipulation of the financial statements (including the risk obtained in the course of the audit. of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase revenue and In addition, based on the work undertaken as part of our audit, we management bias in accounting estimates. The Group engagement team have concluded that each of the following elements of the corporate shared this risk assessment with the component auditors so that they governance statement is materially consistent with the financial could include appropriate audit procedures in response to such risks statements and our knowledge obtained during the audit: in their work. Audit procedures performed by the Group engagement • The members’ statement that they consider the Annual Report, team and/or component auditors included: taken as a whole, is fair, balanced and understandable, and • Discussions with management and internal audit, including provides the information necessary for the members to assess the consideration of known or suspected instances of non-compliance Group’s and Company’s position, performance, business model with laws and regulations and fraud; and strategy; • Evaluation of management’s controls designed to prevent and • The section of the Annual Report that describes the review of detect irregularities; effectiveness of risk management and internal control systems; and • The section of the Annual Report describing the work of the AuditCommittee. Synthomer plc ## Annual Report 2021 135 Group financial statements ## Independent auditors’ report continued to the members of Synthomer plc ### • Challenging assumptions and judgements made by management Other matter intheir significant accounting estimates, in particular in relation to As required by the Financial Conduct Authority Disclosure Guidance and provisions for uncertain tax positions, the European Commission Transparency Rule 4.1.14R, these financial statements form part ofthe provision and the valuation of defined benefit scheme liabilities. ESEF-prepared annual financial report filed on the National Storage Where we considered appropriate, we held discussions with the Mechanism of the Financial Conduct Authority in accordance with Group’s legal advisors. theESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ • Identifying and testing journal entries, in particular any journal report provides no assurance over whether the annual financial report entries posted with unusual account combinations (for example has been prepared using the single electronic format specified in the credit to revenue with a debit entry to an unexpected account) or ESEF RTS. journals posted by senior management. There are inherent limitations in the audit procedures described above. David Beer (Senior Statutory Auditor) We are less likely to become aware of instances of non-compliance for and on behalf of PricewaterhouseCoopers LLP with laws and regulations that are not closely related to events and Chartered Accountants and Statutory Auditors transactions reflected in the financial statements. Also, the risk of not Watford detecting a material misstatement due to fraud is higher than the risk 3 March 2022 of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items fortesting, rather than testing complete populations. We will often seek totarget particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable usto draw a conclusion about the population from which the sample is selected. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditors’ report. Use of this report This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. ### Other required reporting Companies Act 2006 exception reporting Under the Companies Act 2006 we are required to report to you if, in our opinion: • we have not obtained all the information and explanations we require for our audit; or • adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or • certain disclosures of members’ remuneration specified by law are not made; or • the Company financial statements and the part of the Annual Report on Remuneration to be audited are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Appointment Following the recommendation of the Audit Committee, we were appointed by the members on 12 July 2012 to audit the financial statements for the year ended 31 December 2012 and subsequent financial periods. The period of total uninterrupted engagement is10years, covering the years ended 31 December 2012 to 31 December 2021. Synthomer plc ## 136 Annual Report 2021 Group financial statements # Consolidated income statement for the year ended 31 December 2021 | | Note | 2021 | | | 2020 | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Underlying performance £m | Special items £m | IFRS £m | Underlying performance £m | Special items £m | IFRS £m | | **Revenue** | 5 | **2,329.5** | – | **2,329.5** | 1,644.2 | – | 1,644.2 | | Company and subsidiaries operating profit before Special Items | | **448.3** | – | **448.3** | 188.4 | – | 188.4 | | Amortisation of acquired intangibles | 4 | – | (36.2) | (36.2) | – | (30.9) | (30.9) | | Restructuring and site closure costs | 4 | – | (29.7) | (29.7) | – | (42.5) | (42.5) | | Acquisition costs and related gains | 4 | – | (11.9) | (11.9) | – | (14.6) | (14.6) | | Sale of business | 4 | – | (7.4) | (7.4) | – | (6.6) | (6.6) | | Regulatory fine | 4 | – | (57.2) | (57.2) | – | – | – | | Impairment charge | 4 | – | – | – | – | (36.6) | (36.6) | | Company and subsidiaries | | **448.3** | (142.4) | **305.9** | 188.4 | (131.2) | 57.2 | | Share of joint ventures | 18 | 2.6 | – | 2.6 | 1.2 | – | 1.2 | | **Operating profit/(loss)** | 6 | **450.9** | (142.4) | **308.5** | 189.6 | (131.2) | 58.4 | | Interest payable | 9 | (27.9) | – | (27.9) | (25.5) | – | (25.5) | | Interest receivable | 9 | 1.0 | – | 1.0 | 1.2 | – | 1.2 | | Fair value gain/(loss) on unhedged interest rate derivatives | 4 | – | 6.2 | 6.2 | – | (3.6) | (3.6) | | Loss on extinguishment of financing facilities | 4 | – | – | – | – | (4.9) | (4.9) | | Net interest expense on defined benefit obligations | 9 | (2.4) | – | (2.4) | (3.7) | – | (3.7) | | Interest element of lease payments | 9 | (1.5) | – | (1.5) | (1.6) | – | (1.6) | | **Finance costs** | | **(30.8)** | **6.2** | **(24.6)** | (29.6) | (8.5) | (38.1) | | **Profit/(loss) before taxation** | | **420.1** | (136.2) | **283.9** | 180.0 | (139.7) | 20.3 | | Taxation | 10 | (94.5) | 20.8 | (73.9) | (37.4) | 15.8 | (21.8) | | **Profit/(loss) for the year** | | **325.8** | (115.6) | **210.0** | 122.6 | (124.1) | (1.5) | | Profit/(loss) attributable to non-controlling interests | | 0.4 | 0.9 | 1.3 | (0.3) | (4.3) | (4.6) | | Profit/(loss) attributable to equity holders of the parent | | 325.2 | (116.5) | 208.7 | 122.9 | (119.8) | 3.1 | | | | **325.6** | (115.6) | **210.0** | 122.6 | (124.1) | (1.5) | | **Earnings per share** | | | | | | | | | – Basic | 13 | 75.2p | (26.9)p | 48.3p | 28.9p | (28.2)p | 0.7p | | – Diluted | 13 | 74.9p | (26.8)p | 48.1p | 28.9p | (28.1)p | 0.7p | Strategic report Governance Budget financial statements Company financial statements Other information Spothomer plc Annual Report 2021 | 137 Group financial statements ## Consolidated statement of comprehensive income for the year ended 31 December 2021 | | Note | 2021 | | | 2020 | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Equity holders of the parent Em | Non-controlling interests Em | Total Em | Equity holders of the parent Em | Non-controlling interests Em | Total Em | | **Profit/(loss) for the year** | | **208.7** | **1.3** | **210.0** | 3.1 | (4.6) | (1.0) | | Actuarial gains/(losses) | 26 | 66.8 | - | 66.8 | (7.6) | - | (7.6) | | Tax relating to components of other comprehensive income | 16 | (11.8) | - | (11.8) | 3.5 | - | 3.5 | | **Total items that will not be reclassified to profit or loss** | | **55.0** | **-** | **55.0** | (4.1) | - | (4.1) | | Exchange differences on translation of foreign operations | 27 | 2.8 | (0.2) | 2.8 | (37.5) | (0.3) | (37.8) | | Exchange differences recycled on sale of business | 27 | 0.3 | - | 0.3 | - | - | - | | Fair value gain/(loss) on hedged interest derivatives | 27 | 3.4 | - | 3.4 | (0.8) | - | (0.8) | | Gains on net investment hedges taken to equity | 27 | 3.3 | - | 3.3 | 15.9 | - | 15.9 | | **Total items that may be reclassified subsequently to profit or loss** | | **9.8** | **(0.2)** | **9.6** | (22.4) | (0.3) | (22.7) | | **Other comprehensive income/(expense) for the year** | | **64.8** | **(0.2)** | **64.6** | (25.5) | (0.3) | (26.8) | | **Total comprehensive income/(expense) for the year** | | **273.5** | **1.1** | **274.6** | (23.4) | (4.9) | (28.3) | ## Consolidated statement of changes in equity for the year ended 31 December 2021 | | Note | Share capital Em | Share premium Em | Capital redemption reserve Em | Hedging and translation reserve Em | Retained earnings Em | Total equity holdings of the parent Em | Non-controlling interests Em | Total equity Em | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | At 1 January 2021 | | 42.5 | 421.1 | 0.9 | (41.9) | 192.4 | 615.0 | 13.1 | 628.1 | | Profit for the year | | - | - | - | - | 208.7 | 208.7 | 1.3 | 210.0 | | Other comprehensive income for the year | | - | - | - | 9.8 | 55.0 | 64.8 | (0.2) | 64.6 | | **Total comprehensive income for the year** | | **-** | **-** | **-** | **9.8** | **263.7** | **273.5** | **1.1** | **274.6** | | Dividends | 12 | - | - | - | - | (73.5) | (73.5) | (0.5) | (74.0) | | Issue of shares | 27 | 4.2 | 198.9 | - | - | - | 203.1 | - | 203.1 | | Share-based payments | | - | - | - | - | 1.2 | 1.2 | - | 1.2 | | **At 31 December 2021** | | **46.7** | **620.0** | **0.9** | **(32.1)** | **383.8** | **1,019.3** | **13.7** | **1,033.0** | | | Note | Share capital Em | Share premium Em | Capital redemption reserve Em | Hedging and translation reserve Em | Retained earnings Em | Total equity holdings of the parent Em | Non-controlling interests Em | Total equity Em | | At 1 January 2020 | | 42.5 | 421.1 | 0.9 | (19.5) | 204.4 | 649.4 | 21.1 | 670.5 | | Profit/(loss) for the year | | - | - | - | - | 3.1 | 3.1 | (4.6) | (1.5) | | Other comprehensive expense for the year | | - | - | - | (22.4) | (4.1) | (26.5) | (0.3) | (26.8) | | Total comprehensive expense for the year | | - | - | - | (22.4) | (1.0) | (23.4) | (4.9) | (28.3) | | Dividends | 12 | - | - | - | - | (12.8) | (12.8) | (3.1) | (15.9) | | Share-based payments | | - | - | - | - | 1.8 | 1.8 | - | 1.8 | | **At 31 December 2020** | | **42.5** | **421.1** | **0.9** | **(41.9)** | **192.4** | **615.0** | **13.1** | **628.1** | 138 | Synthomer plc Annual Report 2021 Group financial statements # Consolidated balance sheet as at 31 December 2021 | | Note | 2021 £m | 2020 £m | | --- | --- | --- | --- | | **Non-current assets** | | | | | Goodwill | 14 | 487.0 | 493.4 | | Acquired intangible assets | 15 | 297.6 | 341.0 | | Other intangible assets | 16 | 46.4 | 36.6 | | Property, plant and equipment | 17 | 508.3 | 521.8 | | Deferred tax assets | 11 | 29.2 | 23.8 | | Investment in joint ventures | 18 | 7.4 | 6.6 | | **Total non-current assets** | | **1,375.9** | **1,423.2** | | **Current assets** | | | | | Inventories | 19 | 253.7 | 170.3 | | Trade and other receivables | 20 | 312.8 | 262.4 | | Cash and cash equivalents | 21 | 505.3 | 201.8 | | Derivative financial instruments | 22 | 3.2 | 1.4 | | **Total current assets** | | **1,075.0** | **635.9** | | **Total assets** | | **2,450.9** | **2,050.1** | | **Current liabilities** | | | | | Borrowings | 21 | – | (20.1) | | Trade and other payables | 24 | (414.2) | (334.1) | | Lease liabilities | 23 | (8.8) | (10.6) | | Current tax liabilities | 10 | (45.2) | (58.5) | | Provisions for other liabilities and charges | 25 | (85.2) | (25.7) | | Derivative financial instruments | 22 | (10.1) | (19.4) | | **Total current liabilities** | | **(563.5)** | **(468.4)** | | **Non-current liabilities** | | | | | Borrowings | 21 | (619.5) | (643.9) | | Trade and other payables | 24 | (2.3) | (3.7) | | Lease liabilities | 23 | (34.7) | (44.4) | | Deferred tax liabilities | 11 | (57.5) | (43.3) | | Retirement benefit obligations | 26 | (122.4) | (221.4) | | Provisions for other liabilities and charges | 25 | (15.0) | (5.8) | | **Total non-current liabilities** | | **(854.4)** | **(962.6)** | | **Total liabilities** | | **(1,417.9)** | **(1,431.0)** | | **Net assets** | | **1,033.0** | **628.1** | | **Equity** | | | | | Share capital | 27 | 46.7 | 42.5 | | Share premium | 27 | 620.0 | 421.1 | | Capital redemption reserve | | 0.9 | 0.9 | | Hedging and translation reserve | 27 | (32.1) | (41.8) | | Retained earnings | 27 | 383.8 | 192.4 | | **Equity attributable to equity holders of the parent** | | **1,019.3** | **615.0** | | **Non-controlling interests** | | **13.7** | **13.1** | | **Total equity** | | **1,033.0** | **628.1** | The financial statements on pages 137 to 172 were approved by the Board of Directors and authorised for issue on 3 March 2022. They are signed on its behalf by: **M Willome** Director **S G Bennett** Director Strategic report Governance Long financial statements Company financial statements Other information Synthomer plc | 139 Annual Report 2021 Group financial statements # Consolidated cash flow statement for the year ended 31 December 2021 | | Note | 2021 | | 2020 | | | --- | --- | --- | --- | --- | --- | | | | £m | £m | £m | £m | | **Operating** | | | | | | | Cash generated from operations | 28 | | 387.5 | | 232.2 | | Interest received | | 1.0 | | 1.2 | | | Interest paid | | (27.1) | | (13.6) | | | Interest element of lease payments | | (1.5) | | (1.8) | | | Net interest paid | | | (27.6) | | (14.0) | | UK corporation tax paid | | – | | – | | | Overseas corporate tax paid | | (86.4) | | (31.4) | | | Total tax paid | | | (86.4) | | (31.4) | | **Net cash inflow from operating activities** | | | **273.5** | | **186.8** | | **Investing** | | | | | | | Dividends received from joint ventures | 18 | | 1.9 | | 1.9 | | Purchase of property, plant and equipment and intangible assets | | | (82.2) | | (53.8) | | Purchase of business | | | – | | (314.0) | | Proceeds from sale of business | | | 1.7 | | 0.1 | | **Net cash outflow from investing activities** | | | **(78.6)** | | **(365.8)** | | **Financing** | | | | | | | Dividends paid | 12 | | (73.5) | | (12.8) | | Dividends paid to non-controlling interests | | | (0.5) | | (3.1) | | Proceeds on issue of shares | 27 | | 203.1 | | – | | Settlement of equity-settled share-based payments | | | (0.8) | | (0.2) | | Repayment of principal portion of lease liabilities | | | (9.7) | | (9.7) | | Repayment of borrowings | | | – | | (718.3) | | Repayment of borrowings on acquisition | | | – | | (273.6) | | Proceeds of borrowings | | | – | | 1,290.9 | | **Net cash inflow from financing activities** | | | **118.5** | | **273.2** | | **Increase in cash, cash equivalents and bank overdrafts during the year** | | | **313.4** | | **94.2** | | Cash, cash equivalents and bank overdrafts at 1 January | 21 | | 191.3 | | 103.6 | | Foreign exchange and other movements | 21 | | 0.8 | | (6.5) | | **Cash, cash equivalents and bank overdrafts at 31 December** | 21 | | **505.3** | | **191.3** | # Reconciliation of net cash flow from operating activities to movement in net debt for the year ended 31 December 2021 | | Note | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Net cash inflow from operating activities | | 273.5 | 186.8 | | Add back: dividends received from joint ventures | 18 | 1.9 | 1.9 | | Less: net capital expenditure | | (82.2) | (53.8) | | Less: purchase of business | | – | (587.6) | | Add back: proceeds from sale of business | | 1.7 | 0.1 | | | | 194.9 | (452.6) | | Ordinary dividends paid | 12 | (73.5) | (12.8) | | Issue of shares | 27 | 203.1 | – | | Dividends paid to non-controlling interests | | (0.5) | (3.1) | | Settlement of equity-settled share-based payments | | (0.8) | (0.2) | | Repayment for principal portion of lease liabilities | | (9.7) | (9.7) | | Foreign exchange and other movements | 21 | 34.6 | (4.5) | | Decrease/(increase) in net debt | | 348.0 | (482.0) | 140 | Synthomer plc Annual Report 2021 Group financial statements ## Notes to the consolidated financial statements 31 December 2021 1 General information Basis of consolidation Strategic report Governance Group financial statements Company financial statements Other information Synthomer plc (the ‘Company’) is a public limited company The consolidated financial statements incorporate the financial incorporated and domiciled in the United Kingdom under the statements of the Company and entities controlled by the Company Companies Act. The address of the registered office is given on (its subsidiaries) made up to 31 December each year. Control is page188. The Company is listed on the London Stock Exchange. achieved when the Company: The principal activities of the Company and its subsidiaries • has the power over the investee; (the‘Group’) and the nature of the Group’s operations are set out • is exposed, or has rights, to variable returns from its involvement inthe Strategic Report. with the investee; and • has the ability to use its power to affect its returns. The consolidated financial statements are prepared in pounds sterling, the functional currency of the Company. Foreign operations are Consolidation of a subsidiary begins from the date the Company included in accordance with the policies set out in note 2. obtains control and ceases from the date the Company loses control. Where necessary on obtaining control, adjustments are made to the New and amended standards adopted by the Group financial statements of subsidiaries to bring the accounting policies There are no standards or interpretations that are not yet effective into line with those used by the Group. andthat would be expected to have a material impact on the entity inthe current or future reporting periods and on foreseeable The results of joint ventures are accounted for using equity accounting. futuretransactions. Non-controlling interests in subsidiaries are identified separately fromthe Group’s equity therein. Subsequent to the date on which ### 2 Significant accounting policies theCompany obtains control, the carrying amount of non-controlling Basis of preparation interests is the amount of those interests at initial recognition plus On 31 December 2020, IFRS as adopted by the European Union thenon-controlling interests’ share of subsequent changes in equity. atthat date was brought into UK law and became UK-adopted International Accounting Standards, with future changes being All intra-group assets and liabilities, equity, income, expenses and subjectto endorsement by the UK Endorsement Board. The Company cash flows relating to transactions between members of the Group transitioned to UK-adopted International Accounting Standards in its areeliminated on consolidation. consolidated financial statements on 1 January 2021. This change Business combinations constitutes a change in accounting framework. However, there is Acquisitions of subsidiaries and businesses are accounted for using noimpact on recognition, measurement or disclosure in the period the acquisition method. The consideration transferred in a business reported as a result of the change in framework. combination is measured at fair value, which is calculated as the sum These consolidated financial statements have been prepared in of the acquisition date fair values of assets transferred by the Group, accordance with UK-adopted International Accounting Standards liabilities incurred by the Group to former owners of the acquiree and andwith the requirements of the Companies Act 2006 as applicable the equity interest issued by the Group in exchange for control of tocompanies reporting under those standards. theacquiree. Acquisition related costs are recognised in profit or lossas incurred. The financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments that are At acquisition date, the identifiable assets acquired and the liabilities measured at fair value at the end of each reporting period, as assumed are recognised at their fair value, except that: explained in the accounting policies below. • deferred tax assets or liabilities are recognised and measured in The principal accounting policies adopted are set out below. accordance with IAS 12 Income Taxes; • liabilities or assets related to employee benefit arrangements are Going concern recognised and measured in accordance with IAS 19 Employee The Group meets its day-to-day working capital requirements through Benefits; and its bank facilities. The current economic conditions continue to create • assets (or disposal groups) that are classified as held for sale in uncertainty, particularly over the level of demand for the Group’s accordance with IFRS 5 Non-Current Assets Held for Sale and products. The Group’s forecasts and projections take account of Discontinued Operations are measured in accordance with reasonably possible changes in trading performance and a severe but thatstandard. plausible downside scenario has been prepared, linked to our principal risks. This scenario does not threaten the Group’s ability to operate If the initial accounting for a business combination is incomplete within the level of its current facilities. No mitigating actions have been bytheend of the reporting period in which the combination occurs, included for any of the scenarios and, should it need to, the Group the Group reports provisional amounts for the items for which the could take action quickly to significantly reduce costs and cash accounting is incomplete. Those provisional amounts are adjusted outflows as demonstrated during the course of the COVID-19 during a measurement period (see below), or additional assets or pandemic in 2020. liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, Having assessed the principal risks and the other matters discussed ifknown, would have affected the amounts recognised as of that date. inconnection with the viability statement (see page 81), the Directors considered it appropriate to adopt the going concern basis of A measurement period is the period from the date of acquisition accounting in preparing its consolidated financial statements. tothedate the Group obtains complete information about facts and Further information on the Group’s borrowings is given in note 21. circumstances that existed as of the acquisition date and is subject toa maximum of one year. If a business combination is achieved in stages, the Group’s previously held interest in the acquired entity is remeasured to its acquisition date fair value and the resulting gain or loss, if any, is recognised in profit orloss. Synthomer plc ## Annual Report 2021 141 Group financial statements ## Notes to the consolidated financial statements continued 31 December 2021 ### 2 Significant accounting policies continued The majority of rebate programmes are aligned with the Group’s Goodwill financial year end, providing certainty around how much should be Goodwill is measured as the excess of the consideration transferred recognised in the financial statements. over the Group’s interest in acquisition-date identifiable assets Other acquired less liabilities assumed. The Group does not have any contracts where the period between Goodwill is not amortised but is reviewed for impairment at least thetransfer of promised goods to the customer and payment by the annually. For the purpose of impairment testing, goodwill is allocated customer exceeds one year. As a consequence, the Group applies to each of the Group’s cash generating units expected to benefit from thepractical expedient in IFRS 15 and does not adjust any of the the synergies of the combination. Cash generating units are defined as transaction prices for the time value of money. our reportable segments: Performance Elastomers, Functional Foreign currencies Solutions, Industrial Specialities and Acrylate Monomers. In preparing the financial statements of the individual companies, Cash generating units to which goodwill has been allocated are tested transactions in currencies other than the entity’s functional currency for impairment annually, or more frequently when there is an indication are recognised at the rates of exchange prevailing on the dates of that the unit may be impaired. If the recoverable amount of the cash thetransactions. At each balance sheet date, monetary assets and generating unit is less than the carrying amount of the unit, the liabilities that are denominated in foreign currencies are retranslated impairment loss is allocated first to reduce the carrying amount of any atthe rates prevailing on the balance sheet date. Non-monetary goodwill allocated to the unit and then to the other assets of the unit assets and liabilities carried at fair value that are denominated in pro-rata on the basis of the carrying amount of each asset in the unit. foreign currencies are translated at the rates prevailing at the date An impairment loss for goodwill is not reversed in a subsequent period. when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are On disposal of a subsidiary, associate or joint venture, the attributable notretranslated. amount of goodwill is included in the determination of the profit or loss on disposal. Exchange differences are recognised in profit or loss in the period in which they arise except for: Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amounts subject to being • exchange differences on transactions entered into to hedge certain tested for impairment at that date. Goodwill written off to reserves foreign currency risks (see below under ‘hedge accounting’); and under UK GAAP prior to 1998 has not been reinstated and is not • exchange differences on monetary items receivable or payable to included in determining any subsequent profit or loss on disposal. aforeign operation for which settlement is neither planned nor likely tooccur in the foreseeable future (therefore forming part of the net Joint ventures investment in the foreign operation), which are recognised initially in Joint ventures are accounted for using the equity method of other comprehensive income and reclassified from equity to profit accounting. Under the equity method, interests in joint ventures are orloss on disposal of the net investment. initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements On consolidation, the assets and liabilities of the Group’s non-Sterling in other comprehensive income. operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average Revenue exchange rates for the period. Exchange differences arising, if any, General arerecognised in other comprehensive income and accumulated in Synthomer manufactures and sells mainly water-based polymers aseparate component of equity. across a diverse range of end use applications. Our products are predominantly sold in liquid form, in bulk containers. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity Revenue is measured based on the consideration to which the and translated at the closing rate. The Group elected to treat goodwill Groupexpects to be entitled in a contract with a customer when and fair value adjustments arising on acquisitions before the date of performance obligations are satisfied. Revenue is recognised transition to IFRS as sterling-denominated assets and liabilities. atthepoint in time when control of the product is transferred fromSynthomer to the customer. Operating profit Operating profit represents profit from continuing activities before The customer is deemed to obtain control of the resultant asset in line financing costs and taxation. with the Incoterms under which it is sold. The significant majority of Synthomer’s products are sold under Carriage Paid To (CPT) and Taxation Carriage and Insurance Paid (CIP) International Commercial Terms. The tax expense represents the sum of the tax currently payable and Under these terms, control of the product is transferred when the goods deferred tax. reach their destination. At this point the risks of obsolescence and loss Current tax have been transferred and there is no unfulfilled obligation that could The tax currently payable is based on taxable profit for the year. affect the customer’s acceptance of the product. A receivable is Taxable profit differs from profit before tax as reported in the income recognised at this point in time as consideration isunconditional and statement because it excludes items of income or expense that are only the passage of time is required before payment is due. taxable or deductible in other years and it further excludes items that Rebates are never taxable or deductible. The Group’s liability for current tax is Synthomer may grant customers rebates if the goods purchased by calculated using tax rates that have been enacted or substantively the customer exceed a contractually defined threshold within the enacted by the balance sheet date. specified period. Rebates are usually deducted from the amounts A provision is recognised for those matters for which the tax payable by the customer. Depending on the terms of the underlying determination is uncertain but it is considered probable that there contract, Synthomer uses either the expected value or the most likely willbe a future outflow of funds to a tax authority. The provisions are amount to estimate the variable consideration for expected future measured at best estimate of the amount expected to become payable. rebates. Historical, current and forecast information is considered The assessment is based on the judgement of tax professionals within when calculating rebates. the Company supported by previous experience in respect of such activities and in certain cases based on specialist independent tax advice. Synthomer plc ## 142 Annual Report 2021 Deferred tax Property, plant and equipment Strategic report Governance Group financial statements Company financial statements Other information Deferred tax is the tax expected to be payable or recoverable on Property, plant and equipment is stated at cost, less accumulated differences between the carrying amounts of assets and liabilities in depreciation and any recognised impairment loss. Cost comprises the financial statements and the corresponding tax bases used in the original purchase price and the costs attributable to bringing the asset computation of taxable profit and is accounted for using the balance to its working condition for its intended use, including, where sheet liability method. Deferred tax liabilities are generally recognised appropriate, capitalised finance costs. for all taxable temporary differences and deferred tax assets are Freehold land is not depreciated. recognised to the extent that it is probable that taxable profits will beavailable against which deductible temporary differences can Depreciation is recognised so as to write-off the cost of assets less beutilised. their residual values over their useful lives, using the straight-line method, on the following bases: Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments Freehold buildings – 50 years in foreign operations where the Group is able to control the reversal of Leasehold land and buildings – the lesser of 50 years and the the temporary differences and it is probable that the differences will not period of the lease reverse in the foreseeable future. Plant and equipment – between 3 and 15 years The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer Assets in the course of construction are carried at cost, less any probable that sufficient taxable profits will be available to allow all recognised impairment loss. Finance costs directly attributable to the orpart of the asset to be recovered. acquisition or construction of qualifying assets are capitalised as part of the cost of those assets. Depreciation of these assets commences Deferred tax is calculated at the tax rates that are expected to apply when the assets are ready for their intended use. inthe period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, The estimated useful lives, residual values and depreciation method exceptwhen it relates to items charged or credited directly to other are reviewed at the end of each reporting period, with the effect of any comprehensive income, in which case the deferred tax is also dealt changes in estimate accounted for on a prospective basis. within other comprehensive income. Acquired intangible assets The measurement of deferred tax liabilities and assets reflects the tax Intangible assets acquired in a business combination are initially consequences that would follow from the manner in which the Group recognised at their fair value at the acquisition date, which is regarded expects, at the end of the reporting period, to recover or settle the as their cost. Where necessary the fair value of assets at acquisition and carrying amount of its assets and liabilities. their estimated useful lives are based on independent valuation reports. Deferred income tax assets and liabilities are offset when there is a Acquired intangible assets are carried at cost less accumulated legally enforceable right to offset current tax assets against current tax amortisation and accumulated impairment losses. Amortisation is liabilities and when the deferred income tax assets and liabilities relate recognised on a straight-line basis over estimated useful lives, on the to income taxes levied by the same taxation authority on either the following bases: taxable entity or different taxable entities where there is an intention Customer relationships – between 5 and 15 years tosettle the balances on a net basis. Other intangibles – up to 10 years Leases The Group assesses whether a contract is or contains a lease, Assets with an indefinite life are not subject to amortisation. atinception of the contract. The lease term is determined from the Acquired intangible assets are derecognised upon reaching the end of commencement date of the contract and covers the non-cancellable their useful lives. term. If considered reasonably certain, extension or termination options are included in the lease term. Other intangible assets Other intangible assets that are not acquired through a business At the commencement date, a lease liability is recognised, measured combination are initially measured at cost and amortised on a at the present value of the future lease payments and discounted straight-line basis over their estimated useful lives of up to ten years. using the Group’s incremental borrowing rate. Subsequently, the lease liability is adjusted by increasing the carrying amount to reflect interest An internally generated intangible asset arising from development (or on the lease liability, reducing the carrying amount to reflect the lease from the development phase of an internal project) is recognised only if payments made and remeasuring the carrying amount to reflect any all of the following conditions have been demonstrated: reassessment or lease modifications. • the technical feasibility of completing the asset; At the commencement date, a right of use asset is recognised, • the intention to complete the intangible asset and use or sell it; measured at an amount equal to the lease liability plus any lease • the ability to use or sell the asset once development has been payments made before the commencement date and any initial direct completed; costs, less any lease incentive payments. An estimate of costs to be • the probability that the asset created will generate future economic incurred in restoring an asset, in accordance with the terms of the benefits; lease, is also included in the right of use asset at initial recognition. • the availability of adequate technical, financial and other resources Subsequently, right of use assets are measured in accordance with to complete the development; and the accounting policy for property, plant and equipment and are • the asset created can be separately identified and the development depreciated over the shorter period of lease term and the useful life cost can be measured reliably. ofthe underlying asset. Any adjustments to the corresponding lease liability are reflected in the corresponding right of use asset. Short-term leases and low value leases are not recognised as lease liabilities and right of use assets, but are recognised as an expense straight-line over the lease term. Synthomer plc ## Annual Report 2021 143 Group financial statements ## Notes to the consolidated financial statements continued 31 December 2021 ### 2 Significant accounting policies continued Financial assets and liabilities measured at amortised cost The amount initially recognised for internally generated intangible Financial assets measured at amortised cost include cash and assets is the sum of the expenditure incurred from the date when cashequivalents and trade and other receivables. Cash and cash theintangible asset first meets the recognition criteria listed above. equivalents comprise cash held in bank accounts with no access Where no internally-generated intangible asset can be recognised, restrictions, bank term deposits repayable on demand or maturing development expenditure is recognised as an expense in the period within three months of inception. inwhich it is incurred. At each reporting date the Group recognises a loss allowance for Impairment of property, plant and equipment and intangible expected credit losses on financial assets measured at amortised assets excluding goodwill cost. In establishing the appropriate amount of loss allowance to At each balance sheet date, the Group reviews the carrying amounts berecognised, the Group applies either the general approach or the ofits plant, property and equipment and intangible assets to simplified approach, depending on the nature of the underlying class determine whether there is any indication that those assets have of financial assets: suffered an impairment loss. If any such indication exists, the • Under the general approach, the Group recognises a loss allowance recoverable amount of the asset is estimated in order to determine for a financial asset at an amount equal to the 12 month expected theextent of the impairment loss (if any). Where the asset does not credit losses, unless the credit risk on the financial asset has generate cash flows that are independent from other assets, the increased significantly since initial recognition, in which case a loss Group estimates the recoverable amount of the cash generating allowance is recognised at an amount equal to the lifetime expected unittowhich the asset belongs. credit losses. The recoverable amount is the higher of fair value less costs of • The simplified approach is applied to the impairment assessment disposal and value in use. In assessing value in use, the estimated oftrade and other receivables. Under this approach, the Group future cash flows are discounted to their present value using a pre-tax recognises expected lifetime losses upon initial recognition. discount rate that reflects current market assessments of the time Financial liabilities measured at amortised cost include trade and other value of money and the risks specific to the asset for which the payables, lease liabilities and borrowings. Borrowings are measured at estimates of future cash flows have not been adjusted. amortised cost unless they form part of a fair value hedge relationship. If the recoverable amount of an asset (or cash generating unit) is The difference between the initial carrying amount of borrowings and estimated to be less than its carrying amount, the carrying amount the redemption value is recognised in the income statement over the ofthe asset (or cash generating unit) is reduced to its recoverable contractual terms using the effective interest rate method. amount. An impairment loss is recognised in the income statement. Financial assets and liabilities held at fair value When an impairment loss subsequently reverses, the carrying amount Financial assets and liabilities are measured at fair value through of the asset (or cash generating unit) is increased to the revised profitor loss when they do not meet the criteria to be measured at estimate of its recoverable amount to the extent that the increased amortised cost or at fair value through other comprehensive income. carrying amount does not exceed the carrying amount that would Financial assets and liabilities at FVTPL are measured at fair value have been determined had no impairment loss been recognised in atthe end of each reporting period with fair value gains or losses prior years. A reversal of an impairment loss is recognised immediately recognised in profit or loss to the extent they are not part of a in the income statement. designated hedging relationship (see below). Inventories Derivative financial instruments Inventories are stated at the lower of cost and net realisable value. The Group enters into a variety of derivative financial instruments to Cost comprises direct materials and, where applicable, direct labour manage its exposure to interest rate and foreign exchange rate risk, costs and those overheads that have been incurred in bringing the including foreign exchange forward contracts, interest rate swaps and inventories to their present location and condition. Cost is calculated foreign currency options. Further details of derivative financial using the weighted average method. Net realisable value represents instruments are set out in note 22. the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Provision is Derivatives are initially recognised at fair value at the date the derivative made for obsolete, slow-moving or defective items where appropriate. contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or Financial instruments lossis recognised in the income statement immediately unless the Financial assets and financial liabilities are recognised when the Group derivative is designated and effective as a hedging instrument, in becomes a party to the contractual provisions of the instrument. which event the timing of the recognition in the income statement The Group classifies its financial instruments in the depends on the nature of the hedge relationship. followingcategories: Hedge accounting • financial assets and liabilities at amortised cost (AC); To mitigate foreign currency and interest rate risk, the Group • financial assets and liabilities at fair value through profit and loss designates certain derivatives as hedging instruments in fair value (FVTPL); and hedges, cash flow hedges, or hedges of net investments in foreign • financial assets and liabilities at fair value through other operations as appropriate. comprehensive income (FVTOCI). At the inception of the hedge relationship, the Group documents Financial assets and liabilities are initially measured at fair value therelationship between the hedging instrument and the hedged including, where permitted, any directly attributable transaction costs. item,along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception All recognised financial assets are subsequently measured in of the hedge and on an ongoing basis, the Group documents whether theirentirety at either amortised cost or fair value, depending the hedging instrument is effective in offsetting changes in fair value or ontheirclassification. cash flows of the hedged item attributable to the hedged risk. On adoption of IFRS 9, the Group elected to continue to apply the hedge accounting requirements of IAS 39 as permitted by the standard. Synthomer plc ## 144 Annual Report 2021 Fair value hedges Past service cost is recognised when the plan amendment or Strategic report Governance Group financial statements Company financial statements Other information The Group only applies fair value hedge accounting for foreign curtailment occurs. currency risk. Net interest expense is recognised within finance costs and is calculated The fair value change on qualifying hedging instruments is recognised by applying a discount rate to the net defined benefit liability. in the income statement and is recognised in the same line as the Remeasurement comprising actuarial gains and losses and the return hedged item. on scheme assets (excluding interest) are recognised immediately in Cash flow hedges the balance sheet with a charge or credit to the statement of other The effective portion of changes in the fair value of derivatives that are comprehensive income in the period in which they occur and are not designated and qualify as cash flow hedges is recognised in other subsequently reclassified to profit and loss. comprehensive income and accumulated under the heading of cash Provisions flow hedging reserve, limited to the cumulative change in fair value of Provisions are recognised when the Group has a present obligation the hedged item from inception of the hedge. (legal or constructive) as a result of a past event, it is probable that the Gains or losses relating to an ineffective portion are recognised Group will be required to settle that obligation and a reliable estimate immediately in the income statement. can be made of the amount of the obligation. Provisions are measured as the best estimate of the expenditure required to settle the obligation Amounts previously recognised in other comprehensive income and at the balance sheet date and are discounted to present value where accumulated in equity are reclassified in the income statement in the the effect is material. periods when the hedged item affects profit or loss, in the same line asthe recognised hedged item. However, when the hedged forecast Provisions for restructuring costs are recognised when the Group transaction results in the recognition of a non-financial asset or a hasa detailed formal plan for the restructuring that has been non-financial liability, the gains and losses previously recognised in communicated to affected parties. other comprehensive income and accumulated in equity are removed Share-based payments from equity and included in the initial measurement of the cost of the The Group issues equity-settled share-based payments to certain non-financial asset or non-financial liability. employees. These are measured at the fair value of the equity Hedge accounting is discontinued when the Group revokes the instruments at grant date. The fair value excludes the effect of hedging relationship, the hedging instrument expires or is sold, non-market-based vesting conditions. The fair value determined terminated or exercised, or no longer qualifies for hedge accounting. atthegrant date of the equity-settled share-based payments is Any gain or loss accumulated at that time in equity is recognised expensed on a straight-line basis over the vesting period, based on whenthe forecast transaction is ultimately recognised in profit or loss. theGroup’s estimate of equity instruments that will eventually vest. When a forecast transaction is no longer expected to occur, the At each balance sheet date, the Group revises its estimate of the cumulative gain or loss in equity is recognised immediately in profit number of equity instruments expected to vest as a result of the effect orloss. of non-market-based vesting conditions. The impact of the revision ofthe original estimates, if any, is recognised in profit or loss such Hedges of net investments in foreign operations thatthe cumulative expense reflects the revised estimate, with a Hedges of net investments in foreign operations are accounted for corresponding adjustment to equity reserves. The Group will on similarly to cash flow hedges. Any gain or loss on the hedging occasion, at its own discretion, settle these share-based payments instrument relating to the effective portion of the hedge is recognised incash rather than equity. in other comprehensive income in the foreign currency translation reserve. The gain or loss relating to the ineffective portion is For cash-settled share-based payments, a liability is recognised for recognised immediately in the income statement. the goods or services acquired, measured initially at the fair value of the liability. At each balance sheet date until the liability is settled, and Gains and losses on the hedging instrument relating to the effective at the date of settlement, the fair value of the liability is remeasured, portion of the hedge accumulated in the foreign currency translation with any changes in fair value recognised in profit or loss for the year. reserve are reclassified to profit or loss on the disposal of the foreignoperation. Alternative Performance Measures The Group has consistently used two significant Alternative Retirement benefit costs Performance Measures (APMs) since its adoption of IFRS in 2005: Payments to defined contribution retirement benefit schemes are recognised as an expense when employees have rendered service • Underlying performance, which excludes Special Items from IFRS entitling them to the contributions. Payments made to state-managed profit measures; and retirement benefit schemes are treated as payments to defined • EBITDA, which excludes Special Items, amortisation and contribution schemes where the Group’s obligations under the schemes depreciation from IFRS operating profit. are equivalent to those arising in a defined contribution scheme. The Board’s view is that Underlying performance provides additional For defined benefit schemes, the cost of providing benefits is clarity for the Group’s investors and so it is the primary focus of the calculated using the projected unit credit method, with actuarial Group’s narrative reporting. It is not intended to be a superior measure valuations carried out at the end of each reporting period. to IFRS, however, these measures are used internally to manage thebusiness. Defined benefit costs are split into three categories, namely: Further information and the reconciliation to the IFRS measures are • service costs, which includes current service cost, past service cost included in notes 4 and 5. and gains and losses on curtailments and settlements; • net interest expense; and • remeasurements. The Group presents service costs within cost of sales and administrative expenses in its consolidated income statement. Synthomer plc ## Annual Report 2021 145 Group financial statements ## Notes to the consolidated financial statements continued 31 December 2021 ### 2 Significant accounting policies continued 3 Adoption of new and revised standards Critical accounting judgements and estimates No new or revised accounting standards were adopted in the year. In the application of the Group’s accounting policies, the Directors are In April 2021, the IFRS Interpretations Committee issued a new required to make judgements (other than those involving estimations) interpretation in relation to accounting for customisation and that have a significant impact on the amounts recognised and to make configuration costs of cloud computing arrangements. Following estimates and assumptions about the carrying amounts of assets and adetailed review, it was confirmed that the new interpretation does liabilities that are not readily apparent from other sources. materially impact the accounting treatment for costs incurred on the The estimates and associated assumptions are based on historical Group’s Pathway programme. experience and other factors that are considered to be relevant. Actual results may differ from these estimates. There are a number of other amendments and clarifications to IFRS, effective in future years, which are not expected to significantly impact The estimates and underlying assumptions are reviewed on an the Group’s consolidated results or financial position. ongoing basis. Revisions to accounting estimates are recognised in ### the period in which the estimate is revised if the revision affects only 4 Special Items that period, or in the period of the revision and future periods if the IFRS and Underlying performance revision affects both current and future periods. The IFRS profit measures show the performance of the Group asawhole and as such include all sources of income and expense, Key sources of estimation uncertainty including both one-off items and those that do not relate to the The key assumptions concerning the future, and other key sources of Group’s ongoing businesses. To provide additional clarity on the estimation uncertainty at the reporting date that may have a significant ongoing trading performance of the Group’s businesses, management risk of causing a material adjustment to the carrying amounts of assets uses ‘Underlying’ performance as an Alternative Performance and liabilities within the next financial year are discussed below. Measure to plan for, control and assess the performance of the The assumptions for each estimate are set out in the relevant note segments. Underlying performance differs from the IFRS referenced below. measuresasit excludes Special Items. • Defined benefit obligation (note 26): Special Items Calculation of the Group’s defined benefit obligation includes a Special Items are disclosed separately in order to provide a clearer number of assumptions which impact the carrying value of the indication of the Group’s Underlying performance. obligation. • Valuation of goodwill and intangible assets on acquisition: Special Items are either irregular, and therefore including them in In a business combination, intangible assets are identified and theassessment of a segment’s performance would lead to a distortion recognised at fair value. The assumptions involved in valuing these of trends, or are technical adjustments which ensure the Group’s intangible assets require the use of estimates that may differ from financial statements are in compliance with IFRS but do not reflect the the actual outcome. These estimates cover future growth rates, operating performance of a segment in the year, or both. An example expected inflation rates and the discount rate used. Changing the of the latter is the amortisation of acquired intangibles, which assumptions selected by management could significantly affect the principally relates to acquired customer relationships. The Group allocation of the purchase price paid between goodwill and other incurs costs, which are recognised as an expense in the income acquired intangibles. statement, in maintaining these customer relationships. The Group • Current tax liability and deferred tax (notes 10 and 11): considers that the exclusion of the amortisation charge on acquired The Group annually incurs significant amounts of income taxes intangibles from Underlying performance avoids the potential double payable to various jurisdictions around the world and it also counting of such costs and therefore excludes it as a Special Item recognises significant changes in deferred tax assets and from Underlying performance. deferredtax liabilities, all of which are based on management’s The following are consistently disclosed separately as Special interpretations of applicable laws, regulations and relevant Itemsinorder to provide a clearer indication of the Group’s courtdecisions. Underlyingperformance: Critical judgements in applying the Group’s accounting • Restructuring and site closure costs; policies • Sale of a business or significant asset; During 2018, the European Commission (the Commission) initiated • Acquisition costs; aninvestigation into practices relating to the purchase of Styrene • Amortisation of acquired intangible assets; monomer by companies, including Synthomer, operating in the • Impairment of non-current assets; European Economic Area. The Company has and will continue to • Fair value adjustments in respect of derivative financial instruments fullycooperate with the Commission during its investigation. In prior where hedge accounting is not applied; years given the ongoing investigation and the inherent uncertainties • Items of income and expense that are considered material, either by associated with it, it was not possible to determine whether or not a their size and/or nature; liability existed. Similarly, given the many variables in the Commission’s • Tax impact of above items; and fining framework and accordingly the range of possible outcomes, • Settlement of prior period tax issues. theDirectors were not able to reliably estimate any potential possible liability. Therefore a contingent liability was disclosed in each set of financial statements. Now based on the information available and the resulting assessment of the expected outcome of the investigation aprovision of £57.2 million has been made in relation to this case. There are no other critical judgements, apart from those involving estimations (which are discussed above), that the Directors have made in the process of applying the Group’s accounting policies. Synthomer plc ## 146 Annual Report 2021 | Special Items comprise: | | | | Strategic report Governance Group financial statements Company financial statements Other information | | --- | --- | --- | --- | --- | | | | 2021 | 2020 | | | | Note | £m | £m | | Amortisation of acquired intangibles 15 (36.2) (30.9) Restructuring and site closure costs (29.7) (42.5) Acquisition costs and related gains (11.9) (14.6) Sale of business (7.4) (6.6) Regulatory fine (57.2) – Impairment charge – (36.6) Total impact on operating loss (142.4) (131.2) Finance costs Fair value gain/(loss) on unhedged interest rate derivatives 9 6.2 (3.6) Loss on extinguishment of financing facilities 9 – (4.9) Total impact on profit before taxation (136.2) (139.7) Taxation Special Items 10 8.8 (4.9) Taxation on Special Items 10 11.8 20.5 Total impact on profit for the year (115.6) (124.1) Amortisation of acquired intangibles increased in 2021, reflecting the first full year charge since the acquisition of OMNOVA Solutions Inc on 1 April 2020. The fair value of the intangible assets arising on the acquisition of OMNOVA amounting to £330.1 million are being amortised over aperiod of 9–11 years mainly dependent on the characteristics of the customer relationships. Restructuring and site closure costs in 2021 comprise: • A £13.2 million charge in relation to the substantially completed integration of the OMNOVA acquisition net of a £1.2 million pension curtailment credit in relation to the French business; • A £11.6 million charge to demolish and rationalise assets at a small number of sites, to bring them into line with our ESG strategy; and • A further £4.9 million for the completion of the rationalisation of the Group’s European Performance Materials network. Restructuring and site closure costs in 2020 comprised £19.5 million for integration of OMNOVA, £20.9 million for the rationalisation of the Group’s European Performance Materials network and £2.1 million to rationalise the Acrylate Monomers site. Acquisition costs and related gains are for the acquisition of Eastman’s Adhesive Resins business and comprise £15.0 million of costs, mainly professional adviser fees, offset by a £3.1 million gain on a foreign exchange derivative entered into in October 2021 to hedge the acquisition price. Acquisition costs in 2020 related to the acquisition of OMNOVA. Sale of business mainly comprised a further £7.1 million loss on the onerous contract for the disposal of Synthomer’s European Tyre Cord business as production is relocated to Caojing (China) to enable the Marl 3 asset (Germany) to be fully closed. This is incremental to the charge taken in 2020. During 2018, the European Commission initiated an investigation into practices relating to the purchase of Styrene monomer by companies, including Synthomer, operating in the European Economic Area. The Company has and will continue to fully cooperate with the Commission during its investigation. Based on the information available and the resulting assessment of the expected outcome of the investigation a provision of £57.2 million has been made in relation to this case. In 2020, a £36.6 million impairment charge was booked relating to four sites. In July 2018 the Group entered into swap arrangements to fix Euro interest rates on the full value of the then €440 million committed unsecured revolving credit facility. The fair value movement of the unhedged interest rate derivatives relates to the movement in the mark-to-market of the swap at 31 December 2021 in excess of the Group’s current borrowings. Following the Group’s successful refinancing in 2020, capitalised debt costs relating to the 2018 refinancing and the 2019 bridge to bond were written off, leading to a loss on extinguishment of £4.9 million. Taxation Special Items comprised the release of uncertain tax provisions in relation to historical tax issues in France and Malaysia. Taxation on Special Items is mainly deferred tax credits arising on the amortisation of acquired intangibles and restructuring and site closurecosts. Synthomer plc ## Annual Report 2021 147 Group financial statements # Notes to the consolidated financial statements continued 31 December 2021 ## 5 Segmental analysis The Group's Executive Committee, chaired by the Chief Executive Officer, examines the Group's performance. The Group's reportable segments are as follows: ### Performance Elastomers Performance Elastomers is focused on healthcare, paper, carpet, compounds and foam markets through our Nitrile Butadiene Rubber latex (Nitrile latex) and Styrene Butadiene Rubber latex and Elastomeric Modifiers businesses (Performance Materials). ### Functional Solutions Functional Solutions is focused on coatings, construction, adhesives and technical textiles markets through our water-based acrylic and vinylic based dispersions products. ### Industrial Specialities Industrial Specialities is focused on speciality chemical additives and non-water-based chemistry for a broad range of applications from polymer additives, coated fabrics, and laminates and films to emerging materials and technologies. ### Acrylate Monomers Acrylate Monomers is focused on the production of acrylate monomers which are sold to external customers in European markets as well as our European Functional Solutions dispersions business. The Group's Executive Committee is the chief operating decision maker and primarily uses a measure of earnings before interest, tax, depreciation and amortisation (EBITDA) to assess the performance of the operating segments. No information is provided to the Group's Executive Committee at the segment level concerning interest income, interest expense, income tax or other material non-cash items. No single customer accounts for more than 10% of the Group's revenue. A segmental analysis of Underlying performance and Special items is shown below. | | 2021 | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | Performance Elastomers £m | Functional Solutions £m | Industrial Specialities £m | Acrylate Monomers £m | Corporate £m | Total £m | | **Revenue** | | | | | | | | Total revenue | 951.5 | 900.3 | 382.5 | 110.3 | – | 2,344.6 | | Inter-segmental revenue | – | – | – | (15.1) | – | (15.1) | | | 951.5 | 900.3 | 382.5 | 95.2 | – | 2,329.5 | | **EBITDA** | 320.7 | 139.2 | 47.6 | 35.3 | (20.6) | 522.2 | | Depreciation and amortisation | (25.8) | (28.1) | (13.7) | (0.8) | (2.9) | (71.3) | | **Operating profit/(loss) before Special Items** | 294.9 | 111.1 | 33.9 | 34.5 | (23.5) | 450.9 | | Special Items | (8.0) | (41.3) | (14.1) | (5.2) | (73.8) | (142.4) | | **Operating profit/(loss)** | 286.9 | 69.8 | 19.8 | 29.3 | (97.3) | 308.5 | | Finance costs | | | | | | (24.6) | | **Profit before taxation** | | | | | | 283.9 | | | 2020 | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | Performance Elastomers £m | Functional Solutions £m | Industrial Specialities £m | Acrylate Monomers £m | Corporate £m | Total £m | | **Revenue** | | | | | | | | Total revenue | 680.3 | 646.7 | 264.9 | 64.4 | – | 1,655.3 | | Inter-segmental revenue | – | – | – | (12.1) | – | (12.1) | | | 680.3 | 646.7 | 264.9 | 52.3 | – | 1,644.2 | | **EBITDA** | 142.5 | 95.6 | 41.2 | (2.4) | (17.5) | 259.4 | | Depreciation and amortisation | (25.7) | (26.5) | (12.2) | (3.2) | (2.2) | (69.6) | | **Operating profit/(loss) before Special Items** | 116.8 | 69.1 | 29.0 | (5.6) | (19.7) | 189.6 | | Special Items | (36.0) | (38.0) | (10.2) | (20.7) | (26.3) | (131.2) | | **Operating profit/(loss) – IFRS** | 80.8 | 31.1 | 16.8 | (26.3) | (46.0) | 58.4 | | Finance costs | | | | | | (38.1) | | **Profit before taxation** | | | | | | 20.3 | Finance costs for the period include a £6.2 million gain in Special Items (2020: £6.5 million loss) as set out in note 4. 148 | Synthomer plc Annual Report 2021 ## Geographical information The Group's revenue from external customers and its non-current assets (excluding deferred tax) by geographical location are detailed below: | | Permanent destination | | Non-current assets | | | --- | --- | --- | --- | --- | | | 2021 £m | 2020 £m | 2021 £m | 2020 £m | | UK | 103.6 | 75.6 | 154.8 | 140.6 | | Germany | 257.2 | 183.2 | 188.4 | 194.6 | | Italy | 102.9 | 63.2 | 33.9 | 52.7 | | Netherlands | 81.4 | 57.5 | 10.9 | 15.1 | | France | 97.2 | 64.6 | 99.2 | 111.4 | | Belgium | 49.2 | 36.0 | 62.3 | 70.2 | | Other Europe | 389.6 | 293.4 | 75.8 | 78.8 | | Malaysia | 392.4 | 304.5 | 170.5 | 162.7 | | China | 145.9 | 93.3 | 22.3 | 22.3 | | Other Asia | 205.5 | 144.2 | 22.5 | 30.3 | | USA | 399.6 | 254.6 | 497.5 | 514.1 | | Rest of World | 105.0 | 74.1 | 7.6 | 6.6 | | | **2,329.5** | **1,644.2** | **1,346.7** | **1,399.4** | ## 6 Operating profit | | Note | 2021 £m | 2020 £m | | --- | --- | --- | --- | | **Revenue** | | **2,329.5** | **1,644.2** | | Cost of sales | | **(1,620.3)** | **(1,206.8)** | | **Gross profit** | | **709.2** | **437.4** | | Sales and marketing costs | | **(55.8)** | **(53.9)** | | Administrative expenses | | **(133.8)** | **(125.3)** | | Share of joint ventures | 18 | **2.6** | **1.2** | | **EBITDA** | | **522.2** | **259.4** | | Depreciation and amortisation – Underlying performance | | **(71.3)** | **(69.8)** | | **Operating profit – Underlying performance** | | **450.9** | **189.6** | | Special items | | **(142.4)** | **(131.2)** | | **Operating profit – IFRS** | | **308.5** | **55.4** | | | Note | 2021 £m | 2020 £m | | Operating profit is stated after charging the following: | | | | | Amortisation of acquired intangibles | 15 | **36.2** | **30.9** | | Amortisation of other intangibles | 16 | **7.1** | **4.9** | | Depreciation of property, plant and equipment | 17 | **54.4** | **54.0** | | Depreciation of right of use assets | 17 | **9.8** | **10.9** | | Research and development expenditure | | **28.9** | **25.5** | | Net loss/(gain) on foreign exchange | | **0.7** | **(1.0)** | ## 7 Auditors' remuneration | | 2021 £'000 | 2020 £'000 | | --- | --- | --- | | Fees payable to the Company's auditors for: | | | | audit of the Company's annual financial statements and the consolidated annual financial statements | **332** | **222** | | Fees payable to the Company's auditors and their associates for other services to the Group: | | | | audit of the Company's subsidiaries' annual financial statements | **1,291** | **1,594** | | **Total audit fees** | **1,823** | **1,816** | | Audit related assurance services | **42** | **40** | | Other assurance services | **1,582** | **567** | | **Total non-audit fees** | **1,824** | **607** | Details of the Company's policy on the use of auditors for non-audit services, the reasons why the auditors were used rather than another supplier and how the auditors' independence and objectivity was safeguarded are set out in the Audit Committee section of the Corporate Governance report on page 101. No services were provided pursuant to contingent fee arrangements. Synthomer plc Annual Report 2021 149 Group's report Governance B.A.T. Industries Limited Company financial statements Other information Group financial statements # Notes to the consolidated financial statements continued 31 December 2021 # **8 Staff costs** | | 2021 | 2020 | | --- | --- | --- | | **The average monthly number of employees during the year by segment was:** | | | | Performance Elastomers | 944 | 893 | | Functional Solutions | 1,826 | 1,656 | | Industrial Specialities | 1,176 | 963 | | Acrylate Monomers | 344 | 351 | | Corporate | 324 | 321 | | | **4,614** | **4,184** | | | **2021** | **2020** | | | **£m** | **£m** | | **The aggregate remuneration of all Group employees comprised:** | | | | Wages and salaries | 243.7 | 211.3 | | Social security costs | 26.5 | 25.6 | | Other pension costs | 13.9 | 14.0 | | Share-based payments | 2.1 | 2.0 | | | **286.2** | **252.9** | Directors' emoluments are disclosed in the Directors' Remuneration report on pages 112 to 126. # **9 Finance costs** | | 2021 | 2020 | | --- | --- | --- | | | £m | £m | | Interest payable on bank loans and overdrafts | 27.9 | 25.5 | | Less: interest receivable | (1.0) | (1.2) | | Net interest expense on defined benefit obligations | 2.4 | 3.7 | | Interest element of lease payments | 1.5 | 1.6 | | Underlying finance costs | 30.8 | 29.8 | | Fair value (gain)/loss on unhedged interest derivatives | (6.2) | 3.6 | | Loss on extinguishment of financing facilities | - | 4.9 | | **Finance costs** | **24.6** | **38.1** | # **10 Taxation** | | 2021 | 2020 | | --- | --- | --- | | | £m | £m | | **Current tax** | | | | UK corporation tax | 0.3 | - | | Overseas tax | 89.0 | 39.9 | | | **89.3** | **39.9** | | **Deferred tax** | | | | Origination and reversal of temporary differences | 5.2 | (2.5) | | | **94.5** | **37.4** | | **Special Items** | | | | *Current tax:* | | | | Historical issues | (8.8) | 4.9 | | Purchase and sale of business | (0.2) | (0.2) | | Restructuring and site closure costs | (4.2) | (0.2) | | *Deferred tax:* | | | | Restructuring and site closure costs | (6.1) | (10.5) | | Amortisation of acquired intangibles | (6.9) | (10.7) | | Acquired tax attributes | 5.6 | - | | Other deferred tax on acquisition of business | - | 1.1 | | | **(20.6)** | **(15.6)** | | **Total tax on profit before taxation** | **73.9** | **31.8** | UK corporation tax is calculated at 19.0% (2020: 19.0%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. 150 | Synthomer plc Annual Report 2021 ### Reconciliation of tax expense to profit before taxation The differences between the total tax charge shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax is as follows. | | 2021 £m | 2020 £m | | --- | --- | --- | | Profit before taxation | **283.9** | 30.3 | | Tax on profit before taxation at standard UK corporation tax rate of 19.0% (2020: 19.0%) | **53.9** | 3.9 | | Effects of: | | | | Expenses not deductible for tax purposes | **16.7** | 5.8 | | Tax incentives and items not subject to tax | **(0.6)** | (0.6) | | Higher tax rates on overseas earnings | **16.6** | 6.0 | | Other deferred tax asset not recognised less amounts now recognised | **(7.6)** | 7.2 | | Adjustments to tax charge in respect of prior periods | **(7.5)** | 3.3 | | Effect of change of rate on deferred tax | **2.4** | (0.8) | | **Tax charge for year** | **73.9** | 21.8 | | **Tax relating to components of other comprehensive income** | | | | Current tax credit in respect of actuarial losses | **1.4** | 1.3 | | Deferred tax (charge)/credit in respect of actuarial movements | **(13.2)** | 2.2 | | **Total tax (charge)/credit in respect of actuarial movements** | **(11.8)** | 3.5 | | **Current tax liabilities** | | | | Current tax liabilities | **(45.2)** | (58.5) | The expenses not deductible for tax purposes includes a disallowance of the £57.2 million in relation to the European Commission Sturene investigation. ### 11 Deferred taxation Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets to the extent that it is probable that these assets will be recovered. The movements in deferred tax assets and liabilities are shown below. #### Deferred tax liabilities 2021 | | Accelerated tax depreciation £m | Acquired intangibles £m | Sub-total £m | Right of Offset £m | Total £m | | --- | --- | --- | --- | --- | --- | | At 1 January | **(32.8)** | **(81.6)** | **(114.4)** | **71.1** | **(43.3)** | | (Charged)/credited to income statement | **(1.2)** | **6.9** | **5.7** | | | | Exchange adjustment | **0.8** | **1.2** | **2.0** | | | | **At 31 December** | **(33.2)** | **(73.5)** | **(106.7)** | **49.2** | **(57.5)** | 2020 | | Accelerated tax depreciation £m | Acquired intangibles £m | Other £m | Sub-total £m | Right of Offset £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | | At 1 January | (17.9) | (11.8) | (1.1) | (30.8) | – | (30.8) | | Purchase of business | (10.0) | (76.0) | – | (86.0) | | | | (Charged)/credited to income statement | (6.2) | 10.7 | 1.1 | 6.6 | | | | Exchange adjustment | 0.3 | (4.5) | – | (4.2) | | | | **At 31 December** | **(32.8)** | **(81.6)** | **–** | **(114.4)** | **71.1** | **(43.3)** | #### Deferred tax liabilities not recognised No deferred tax liability has been recognised on temporary differences relating to unremitted earnings of overseas subsidiaries of £71.7 million (2020: £35.5 million), as the Group is able to control the timing of the reversal of the temporary differences and it is not probable that the differences will reverse in the foreseeable future. Strategic report Governance Risk / financial statements Company financial statements Other information Synthomer plc Annual Report 2021 | 151 Group financial statements ## Notes to the consolidated financial statements continued 31 December 2021 ### 11 Deferred taxation continued Deferred tax assets 2021 Right of Losses Pension Restructuring Other Sub-total Offset Total £m £m £m £m £m £m £m At 1 January 29.0 37.2 10.5 18.2 94.9 (71.1) 23.8 (Charged)/credited to income statement (3.1) (3.4) 6.1 (3.1) (3.5) Charged to statement of other comprehensive income – (13.2) – – (13.2) Exchange adjustment 0.2 (0.6) (0.5) 1.1 0.2 At 31 December 26.1 20.0 16.1 16.2 78.4 (49.2) 29.2 2020 Right of Losses Pension Restructuring Other Sub-total Offset Total £m £m £m £m £m £m £m At 1 January 2.2 18.7 – 1.9 22.8 – 22.8 Purchase of business 26.5 18.9 – 10.1 55.5 Credited/(charged) to income statement 2.9 (1.9) 10.5 4.5 16.0 Credited to statement of other comprehensive income – 2.2 – – 2.2 Exchange adjustment (2.6) (0.7) – 1.7 (1.6) At 31 December 29.0 37.2 10.5 18.2 94.9 (71.1) 23.8 Tax losses not recognised The amounts of tax losses for which no deferred tax asset has been recognised at the balance sheet dates are as follows: 2021 2020 £m £m Tax losses 53.4 110.3 53.4 110.3 All of the unrecognised tax losses set out above can be carried forward indefinitely. ### 12 Dividends | | 2021 | | | 2020 | | | --- | --- | --- | --- | --- | --- | | | Pence | 2021 | | Pence | 2020 | | per share | | £m | per share | | £m | Interim dividend 8.7p 36.9 3.0p 12.8 Proposed final dividend 21.3p 99.5 8.6p 36.6 30.0p 136.4 11.6p 49.4 The proposed final dividend is subject to approval by shareholders at the AGM and has not been included as a liability in these financial statements. Dividends paid 2021 2020 £m £m Interim dividend 36.9 12.8 Prior year final dividend 36.6 – 73.5 12.8 The proposed final 2019 dividend was suspended and subsequently cancelled to preserve cash, liquidity and balance sheet strength at the onset of COVID-19 in March 2020. ### 13 Earnings per share 2021 2020 Underlying Special Underlying Special performance Items IFRS performance Items IFRS Earnings Profit/(loss) attributable to equity holders of the parent £m 325.2 (116.5) 208.7 122.9 (119.8) 3.1 Number of shares Weighted average number of ordinary shares — basic ’000 432,290 424,843 Effect of dilutive potential ordinary shares ’000 1,654 2,505 Weighted average number of ordinary shares — diluted ’000 433,944 427,348 Earnings per share Basic earnings per share pence 75.2 (26.9) 48.3 28.9 (28.2) 0.7 Diluted earnings per share pence 74.9 (26.8) 48.1 28.8 (28.1) 0.7 Synthomer plc ## 152 Annual Report 2021 | 14 Goodwill | | | Strategic report Governance Group financial statements Company financial statements Other information | | --- | --- | --- | --- | | | 2021 | 2020 | | | | £m | £m | | Cost At 1 January 508.8 338.5 Measurement period adjustment 2.1 – Purchase of business – 180.2 Exchange adjustments (8.5) (9.9) At 31 December 502.4 508.8 Accumulated impairment losses At 1 January 15.4 14.1 Impairment charge – 1.3 At 31 December 15.4 15.4 Net book value At 31 December 487.0 493.4 Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. In March 2021, a £2.1 million measurement period adjustment was recognised, relating to the acquisition of OMNOVA Solutions Inc. The allocation of the carrying value of goodwill is represented below: | Net book | | | | | | | | | Net book | | | | | | | Net book | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | value at | | | | | | | | | value at | | Measure- | | | | | value at | | | 1 January | | Purchase of | | | | Exchange | | 31 December | | | ment period | | Exchange | | 31 December | | | | | 2020 | business | | Impairment | | adjustments | | | | 2020 | adjustment | | adjustments | | | | 2021 | | | £m | | £m | | £m | | £m | | | £m | | £m | | £m | | | £m | Performance Elastomers 119.0 – – 4.2 123.2 – (5.9) 117.3 Functional Solutions 180.0 138.0 – (11.6) 306.4 1.9 (1.4) 306.9 Industrial Specialities 24.1 42.2 – (2.5) 63.8 0.2 (1.2) 62.8 Acrylate Monomers 1.3 – (1.3) – – – – – Total 324.4 180.2 (1.3) (9.9) 493.4 2.1 (8.5) 487.0 The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amounts for CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are the discount rate, profitability and growth rate. These assumptions have been revised in the year in light of the current economic environment. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the Group. The discount rate is based on the Group’s weighted average cost of capital adjusted, where appropriate, for the risk premium attributable to a particular CGU’s activities and geography of operation. A pre-tax discount rate of 10.2% has been used in the above calculations for each CGU (2020: 9.7%). The Group prepares cash flow forecasts for each CGU, derived from the most recent five-year business plans approved by the Board. The final year cash flow is then assumed to apply into perpetuity with estimated annual growth rates of 3.1%, 1.9% and 2.0% for Performance Elastomers, Functional Solutions and Industrial Specialities respectively (2020: 1.7%, 1.6% and 1.6% for Performance Elastomers, Functional Solutions and Industrial Specialities respectively). These rates do not exceed average long-term growth rates for relevant markets. A sensitivity analysis has been undertaken on these impairment tests, with scenarios covering increased cost of capital, the impact of potential carbon taxes, reduced margins and reduction in customer demand. For each CGU, the Directors believe that there is no reasonably possible change in the key assumptions on which the recoverable amount is based that would cause the aggregate carrying amount to exceed the aggregate recoverable amount of the CGU. Synthomer plc ## Annual Report 2021 153 Group financial statements # Notes to the consolidated financial statements continued 31 December 2021 # 15 Acquired intangible assets | | Customer relationships £m | Other acquired intangibles £m | Total £m | | --- | --- | --- | --- | | **Cost** | | | | | At 1 January 2021 | 373.2 | 21.6 | 394.8 | | Derecognition of fully amortised assets | (3.1) | – | (3.1) | | Exchange adjustments | (8.4) | (0.5) | (8.9) | | **At 31 December 2021** | **361.7** | **21.1** | **382.8** | | **Accumulated amortisation and impairment** | | | | | At 1 January 2021 | 48.8 | 5.0 | 53.8 | | Amortisation charge for the year | 34.1 | 2.1 | 36.2 | | Derecognition of fully amortised assets | (3.1) | – | (3.1) | | Exchange adjustments | (1.3) | (0.4) | (1.7) | | **At 31 December 2021** | **78.5** | **6.7** | **85.2** | | **Net book value** | | | | | **At 31 December 2021** | **283.2** | **14.4** | **297.6** | | | Customer relationships £m | Other acquired intangibles £m | Total £m | | **Cost** | | | | | At 1 January 2020 | 71.3 | 9.1 | 80.4 | | Purchase of business | 316.8 | 13.2 | 330.1 | | Derecognition of fully amortised assets | (0.9) | – | (0.9) | | Exchange adjustments | (14.1) | (0.7) | (14.8) | | **At 31 December 2020** | **373.2** | **21.6** | **394.8** | | **Accumulated amortisation and impairment** | | | | | At 1 January 2020 | 20.8 | 2.8 | 23.6 | | Amortisation charge for the year | 29.0 | 1.9 | 30.9 | | Impairment charge | 0.1 | – | 0.1 | | Derecognition of fully amortised assets | (0.9) | – | (0.9) | | Exchange adjustments | (0.2) | 0.3 | 0.1 | | **At 31 December 2020** | **48.8** | **5.0** | **53.8** | | **Net book value** | | | | | **At 31 December 2020** | **324.4** | **16.6** | **341.0** | 154 | Synthomer plc Annual Report 2021 ## 16 Other intangible assets | | Other intangible assets £m | Assets under construction £m | Total £m | | --- | --- | --- | --- | | **Cost** | | | | | At 1 January 2021 | 14.8 | 29.9 | 44.7 | | Additions | 9.5 | 6.4 | 15.9 | | Transfers | 36.1 | (36.1) | – | | Exchange adjustments | 1.4 | (0.2) | 1.2 | | **At 31 December 2021** | **61.8** | **–** | **61.8** | | **Accumulated amortisation and impairment** | | | | | At 1 January 2021 | 8.1 | – | 8.1 | | Amortisation charge for the year | 7.1 | – | 7.1 | | Exchange adjustments | 0.2 | – | 0.2 | | **At 31 December 2021** | **15.4** | **–** | **15.4** | ### Net book value | | Other intangible assets £m | Assets under construction £m | Total £m | | --- | --- | --- | --- | | **Cost** | | | | | At 1 January 2020 | 8.2 | 17.9 | 26.1 | | Additions | 1.4 | 12.4 | 13.8 | | Purchase of business | 5.7 | – | 5.7 | | Transfer | 0.2 | (0.2) | – | | Disposals | (0.8) | – | (0.8) | | Exchange adjustments | 0.1 | (0.2) | (0.1) | | **At 31 December 2020** | **14.8** | **29.9** | **44.7** | | **Accumulated amortisation and impairment** | | | | | At 1 January 2020 | 4.1 | – | 4.1 | | Amortisation charge for the year | 4.9 | – | 4.9 | | Impairment | 0.1 | – | 0.1 | | Disposals | (0.8) | – | (0.8) | | Exchange adjustments | (0.2) | – | (0.2) | | **At 31 December 2020** | **8.1** | **–** | **8.1** | | **Net book value** | | | | | **At 31 December 2020** | **6.7** | **29.9** | **36.6** | Expenditure on research activities is recognised as an expense in the period in which it is incurred. As disclosed in note 2, there are various conditions required by IAS 38 for an internally generated intangible asset to be recognised. During the year the Group invested a further £12.9 million in its Pathway programme (2020: £12.2 million). This programme is designed to deliver a unified operating model on a single set of integrated systems to improve the efficiency and effectiveness of the Group. The investment in this programme was shown as an asset under construction until the deployment phase began. Strategic report Governance Risk / financial statements Company financial statements Other information Spothomer plc | Annual Report 2021 | 155 Group financial statements # Notes to the consolidated financial statements continued 31 December 2021 # 17 Property, plant and equipment | | Owned assets | | | | Right of use assets | | Total £m | | --- | --- | --- | --- | --- | --- | --- | --- | | | Freehold land and buildings £m | Leasehold land and buildings £m | Plant and equipment £m | Assets under construction £m | Land and buildings £m | Plant and equipment £m | | | **Cost** | | | | | | | | | At 1 January 2021 | 181.4 | 8.7 | 739.4 | 25.1 | 36.9 | 29.4 | 1,020.9 | | Additions | 6.0 | – | 48.5 | 13.4 | 1.6 | 2.1 | 71.6 | | Sale of business | (3.6) | – | (3.6) | – | – | – | (7.2) | | Disposals | (1.1) | – | (9.9) | – | (1.7) | (8.0) | (20.7) | | Transfer from assets under construction | 0.2 | – | 9.9 | (10.1) | – | – | – | | Exchange adjustments | (4.2) | – | (23.3) | (0.5) | (0.2) | (0.5) | (28.7) | | **At 31 December 2021** | **178.7** | **8.7** | **761.0** | **27.9** | **36.6** | **23.0** | **1,035.9** | | **Accumulated depreciation and impairment** | | | | | | | | | At 1 January 2021 | 59.0 | 5.1 | 417.8 | – | 6.0 | 11.2 | 499.1 | | Depreciation charge for the year | 16.6 | 0.1 | 37.7 | – | 3.6 | 6.2 | 64.2 | | Sale of business | (2.4) | – | (3.6) | – | – | – | (6.0) | | Disposals | (0.7) | – | (9.6) | – | (0.9) | (4.9) | (16.1) | | Exchange adjustments | (1.9) | – | (12.6) | – | 0.7 | 0.2 | (13.6) | | **At 31 December 2021** | **70.6** | **5.2** | **429.7** | **–** | **9.4** | **12.7** | **527.6** | | **Net book value** | | | | | | | | | **At 31 December 2021** | **108.1** | **3.5** | **331.3** | **27.9** | **27.2** | **10.3** | **508.3** | | | | | | | | | | | | Owned assets | | | | Right of use assets | | Total £m | | | Freehold land and buildings £m | Leasehold land and buildings £m | Plant and equipment £m | Assets under construction £m | Land and buildings £m | Plant and equipment £m | | | **Cost** | | | | | | | | | At 1 January 2020 | 106.1 | 8.7 | 636.7 | 13.4 | 21.5 | 24.4 | 810.8 | | Additions | 7.9 | – | 9.0 | 19.8 | 1.6 | 2.9 | 41.2 | | Purchase of business | 68.2 | – | 87.2 | 8.2 | 15.0 | 5.9 | 184.5 | | Disposals | (0.1) | – | (10.3) | – | (0.9) | (4.5) | (15.8) | | Transfer from assets under construction | 1.5 | – | 14.1 | (15.6) | – | – | – | | Exchange adjustments | (2.2) | – | 2.7 | (0.7) | (0.3) | 0.7 | 0.2 | | **At 31 December 2020** | **181.4** | **8.7** | **739.4** | **25.1** | **36.9** | **29.4** | **1,020.9** | | **Accumulated depreciation and impairment** | | | | | | | | | At 1 January 2020 | 40.5 | 4.9 | 353.5 | – | 2.4 | 4.6 | 405.9 | | Depreciation charge for the year | 7.7 | 0.2 | 46.1 | – | 4.5 | 6.4 | 64.9 | | Impairment | 9.7 | – | 23.1 | – | – | 0.7 | 33.5 | | Disposals | (0.1) | – | (8.1) | – | (0.9) | (0.8) | (10.9) | | Exchange adjustments | 1.2 | – | 4.2 | – | – | 0.3 | 5.7 | | **At 31 December 2020** | **59.0** | **5.1** | **417.8** | **–** | **6.0** | **11.2** | **499.1** | | **Net book value** | | | | | | | | | **At 31 December 2020** | **122.4** | **3.6** | **321.6** | **25.1** | **30.9** | **18.2** | **521.8** | Freehold land is not depreciated and is held at historical cost. At 31 December 2021, the Group's freehold land was recognised at £50.4 million (31 December 2020: £54.3 million). At 31 December 2021 the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to £18.8 million (2020: £18.9 million). 156 | Synthomer plc Annual Report 2021 ## 18 Investment in joint ventures Details of the Group's joint ventures are as follows: | Name of entity | Place of Incorporation | Ownership | Principal activity | Segment | | --- | --- | --- | --- | --- | | Synthomer Middle East Company Ltd | Saudi Arabia | 49% | Manufacture and sale of acrylic and vinyl resin emulsions | Functional Solutions | | Synthomer Functional Solutions FZCO | UAE | 49% | Trading in adhesives and oilfield chemicals | Functional Solutions | | Synthomer FZCO | UAE | 49% | Sales and marketing support for Synthomer companies | Functional Solutions | | Super Sky Ltd | UK | 50% | Non-trading | Corporate | Joint ventures are accounted for using the equity method in these financial statements. The ownership of entities has not changed since the prior year. Summarised financial information in respect of the joint ventures is set out below. This information represents amounts in the joint ventures' financial statements prepared in accordance with IFRS. ### Summarised balance sheet (100%) | | 2021 £m | 2020 £m | | --- | --- | --- | | Non-current assets | 6.4 | 4.6 | | Cash and cash equivalents | 2.6 | 4.2 | | Other current assets | 24.5 | 14.6 | | Total current assets | 27.1 | 18.8 | | Other current liabilities | (18.5) | (9.9) | | Total current liabilities | (18.5) | (9.9) | | Net assets | 15.0 | 13.5 | | Group share: | 2021 £m | 2020 £m | | Total assets | 16.5 | 11.5 | | Total liabilities | (9.1) | (4.9) | | Net assets | 7.4 | 6.6 | ### Summarised statement of comprehensive income (100%) | | 2021 £m | 2020 £m | | --- | --- | --- | | **Revenue** | **61.8** | **39.4** | | Operating profit | 5.4 | 2.7 | | Taxation | – | (0.3) | | Profit for the year | 5.4 | 2.5 | | Exchange differences on translation | 0.2 | (0.4) | | Total comprehensive income | 5.6 | 2.1 | | Dividends paid | (3.9) | (3.8) | | Movement in retained earnings | 1.7 | (1.7) | | Group share: | | | | Profit for the year | 2.6 | 1.2 | | Exchange differences on translation | 0.1 | (0.2) | | Dividends paid | (1.9) | (1.9) | Strategic report Governance Key financial statements Company financial statements Other information Synthomer plc | Annual Report 2021 | 157 Group financial statements # Notes to the consolidated financial statements continued 31 December 2021 # **18 Investment in joint ventures continued** The following table reconciles the summary information above to the carrying amount of the Group's interest in the joint ventures: # **Investment in joint ventures** | | 2021 £m | 2020 £m | | --- | --- | --- | | At 1 January | 6.6 | 7.5 | | Profit from continuing operations | 2.6 | 1.2 | | Exchange differences on translation | 0.1 | (0.2) | | Dividend paid | (1.9) | (1.9) | | At 31 December | 7.4 | 6.6 | # **19 Inventories** | | 2021 £m | 2020 £m | | --- | --- | --- | | Raw materials and consumables | 120.4 | 78.9 | | Finished goods | 133.3 | 91.4 | | | 253.7 | 170.3 | | Stock written off during the year | 5.9 | 0.5 | | Cost of inventory recognised as an expense and included in cost of sales | 1,338.4 | 926.2 | The nature of the chemical reaction necessary to produce finished goods from raw materials is such that 'work in progress' is not a material part of the Group's inventory at any given point of time. # **20 Trade and other receivables** | | 2021 £m | 2020 £m | | --- | --- | --- | | Trade receivables | 275.1 | 229.3 | | Other receivables | 25.4 | 23.6 | | Prepayments | 12.3 | 9.5 | | | 312.8 | 262.4 | The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. Before accepting a new customer, the Group uses appropriate procedures to assess the potential customer's credit quality in order to set a credit limit. The Group applies a simplified approach to measure the loss allowance for trade receivables classified at amortised cost, using the lifetime expected loss provision. The expected credit loss on trade receivables is estimated using a provision matrix by reference to past default experience and credit rating, adjusted as appropriate for current observable data. The Group has no significant concentration of credit risk, with exposure spread over a large number of customers. The following table details the risk profile of trade receivables based on the Group's provision matrix. | 2021 | Trade receivables – days past due | | | | | | --- | --- | --- | --- | --- | --- | | | Not yet due £m | < 60 £m | 61–120 £m | > 120 £m | Total £m | | Gross carrying amount | 249.3 | 25.3 | 0.3 | 1.7 | 276.6 | | Expected credit loss rate | | | | | 0.06% | | Lifetime expected credit loss | | | | | (1.5) | | **Total** | | | | | **275.1** | | 2020 | Trade receivables – days past due | | | | | | --- | --- | --- | --- | --- | --- | | | Not yet due £m | < 60 £m | 61–120 £m | > 120 £m | Total £m | | Gross carrying amount | 214.1 | 15.1 | 0.3 | 1.7 | 231.2 | | Expected credit loss rate | | | | | 0.12% | | Lifetime expected credit loss | | | | | (1.9) | | **Total** | | | | | **229.3** | 158 | Synthomer plc Annual Report 2021 The following table shows the movement in the lifetime expected credit loss that has been recognised for trade receivables in accordance with Strategic report Governance Group financial statements Company financial statements Other information the simplified approach set out in IFRS 9: 2021 2020 £m £m At 1 January 1.9 0.9 Exchange adjustments (0.1) (0.1) Acquisition of business – 1.4 Transfer (from)/to credit impaired (0.2) 0.1 Uncollectable amounts written off or recovered (0.1) (0.4) At 31 December 1.5 1.9 ### 21 Cash and borrowings | | | | Cash | Exchange | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | 1 January | | inflows/ | | and other | | 31 December | | | | 2021 | (outflows) | | movements | | | 2021 | | | £m | | £m | | £m | | £m | Bank overdrafts (10.5) 10.5 – – Current borrowings (9.6) – 9.6 – Current liabilities (20.1) 10.5 9.6 – Bank loans (186.2) – (1.7) (187.9) €520m 3.875% senior unsecured loan notes due 2025 (457.7) – 26.1 (431.6) Non-current liabilities (643.9) – 24.4 (619.5) Total borrowings (664.0) 10.5 34.0 (619.5) Cash and cash equivalents 201.8 302.9 0.6 505.3 Net debt (462.2) 313.4 34.6 (114.2) Capitalised debt costs shown in the tables above, which have been recognised as a reduction in borrowings in the financial statements, amounted to £9.9 million at 31 December 2021 (31 December 2020: £11.2 million). Analysis of net debt by currency: 2021 2020 | Cash and | | | | Cash and | | | 2020 | | --- | --- | --- | --- | --- | --- | --- | --- | | | cash | | Total | | cash | | Total | | equivalents | | borrowings | | equivalents | | borrowings | | | | £m | | £m | | £m | | £m | Sterling 211.5 – 12.5 – Euro 50.7 437.3 38.8 484.7 US dollar 124.8 192.1 54.1 190.5 Malaysian ringgit 51.0 – 61.0 – Other 67.3 – 35.4 – Total 505.3 629.4 201.8 675.2 The principal features of the Group’s borrowings are as follows: The Group has committed unsecured borrowing facilities comprising a $260 million term loan, a €460 million revolving credit facility both of which have terms ending July 2024. The Group also has a $300 million term loan with a term ending in October 2024 and €520 million 3.875% unsecured senior loan notes due in June 2025. Changes in liabilities arising from financing activities The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows are classified in the Group’s consolidated cash flow statement as cash flows from financing activities. Non cash changes | | | Financing | | | | Exchange | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 1 January | | | cash | | | and other | | 31 December | | | | 2021 | outflows | | Acquisitions | | movements | | | 2021 | | | £m | | £m | | £m | | £m | | £m | Borrowings (653.5) – – 34.0 (619.5) Lease liabilities (55.0) 9.7 – 1.8 (43.5) Total (708.5) 9.7 – 35.8 (663.0) Synthomer plc ## Annual Report 2021 159 Group financial statements ## Notes to the consolidated financial statements continued 31 December 2021 ### 22 Financial instruments The table below sets out the Group’s accounting classification of each class of financial assets and liabilities: 2021 2020 | | | | | | | | Carrying | | | | | | | Carrying | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Valuation | | | | | | | amount | | | | | | amount within | | | | | | category in | | Fair value | | Carrying | | within scope | | | | | Carrying | | | scope of | | | | | accordance | | hierarchy | | amount | | | of IFRS 7 | | Fair value | | amount | | | IFRS 7 | | Fair value | | | with IFRS 9 | 1 | | level | | £m | | | £m | | £m | | £m | | | £m | | £m | Trade receivables AC Level 2 275.1 275.1 275.1 229.3 229.3 229.3 Other receivables AC Level 2 25.4 15.0 15.0 23.6 13.9 13.9 Cash and cash equivalents AC Level 2 505.3 505.3 505.3 201.8 201.8 201.8 Derivatives – no hedge accounting FVTPL Level 2 3.2 3.2 3.2 1.4 1.4 1.4 Total assets 809.0 798.6 798.6 456.1 446.4 446.4 Borrowings AC Level 2 (619.5) (619.5) (629.4) (664.0) (664.0) (675.2) Trade and other payables AC Level 2 (416.5) (404.6) (404.6) (337.8) (324.9) (324.9) Derivatives – no hedge accounting FVTPL Level 2 (10.1) (10.1) (10.1) (19.4) (19.4) (19.4) Total liabilities (1,046.1) (1,034.2) (1,044.1) (1,021.2) (1,008.3) (1,019.5) Note: 1. AC: amortised cost; FVTPL: fair value through profit or loss; a more detailed description of the categories can be found in note 2. The fair value of the Group’s borrowings at 31 December 2021 was £629.4 million (31 December 2020: £675.2 million). Financial risk management The Group’s policies, approved by the Board, provide written principles on financial risk management and the use of financial derivatives. These risks include market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Group has a policy of hedging significant foreign exchange transactional exposure at operating company level. The Group regularly reviews its net assets and borrowing currency exposures, borrowing in overseas currencies in order to hedge the net assets held in those currencies as appropriate. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. Currency risk The Group presents its consolidated financial statements in sterling and conducts business in many currencies. As a result, it is subject to foreign currency risk due to exchange rate movements, which will affect the Group’s transactions and the translation of the results and underlying net assets of its operations. To manage the currency risk the Group uses foreign currency borrowings, forward contracts and currency swaps to hedge overseas net assets, which are predominantly denominated in Euros, US dollars and Malaysian ringgits. Profit translation exposures are not hedged. The Group hedges currency transaction exposures at the point of confirmed order, using forward foreign exchange contracts. The Group’s policy is, where practicable, to hedge all exposures on monetary assets and liabilities. Consequently, there are no material currency exposures to disclose (2020: none). Interest rate risk The Group has an exposure to interest rate risk, arising principally on changes in US dollar and Euro interest rates. To manage interest rate risk, the Group manages its proportion of fixed to floating rate borrowings, and utilises interest rate swaps. These practices aim to minimise the Group’s net finance charges with acceptable year-on-year volatility. At 31 December 2021 the Group had in place swap arrangements to fix interest rates on €440 million of borrowings. The Group’s interest rate derivatives are designated as fair value hedges with fair value movement on the hedged portion recognised in equity. Interest paid on these derivatives is recognised in the income statement, within Underlying interest costs. Fair value movement in the unhedged portion is also recognised in profit and loss, as a Special Item. After taking account of interest rate swaps, the Group’s currency and interest rate exposure as at 31 December 2021 was: 2021 2020 Floating rate Fixed rate Total Floating rate Fixed rate Total borrowings borrowings borrowings borrowings borrowings borrowings £m £m £m £m £m £m Euro – 437.3 437.3 10.3 474.4 484.7 US dollar 192.1 – 192.1 190.5 – 190.5 Total 192.1 437.3 629.4 200.8 474.4 675.2 Synthomer plc ## 160 Annual Report 2021 ### Market risk sensitivity analysis The Group's main exposure to market risk is in the form of interest rate risk and foreign currency risk. The Group uses a sensitivity analysis that estimates the impacts on the consolidated income statement and other comprehensive income of either an instantaneous increase or decrease of 1.0% in market interest rates or a 10% strengthening or weakening in sterling against all other currencies, from the rates applicable at 31 December 2021 and 31 December 2020 with all other variables remaining constant. The sensitivity analysis excludes the impact of market risks on the net post employment benefit liabilities and assets, and corporate tax payable. This analysis is for illustrative purposes only, as interest and foreign exchange rates rarely change in isolation. There has been no change to the Group's exposure to market risks or the manner in which these risks are managed and measured. | | 2021 | | | 2020 | | | | --- | --- | --- | --- | --- | --- | --- | | | Income statement | | Equity | Income statement | | Equity | | | Underlying -/+ £m | IFRS -/+ £m | IFRS -/+ £m | Underlying -/+ £m | IFRS -/+ £m | IFRS -/+ £m | | Interest rate sensitivity analysis | | | | | | | | UK interest rate +/- 1.0% | 2.1 | - | - | - | - | - | | Euro interest rate +/- 1.0% | 0.5 | 4.4 | - | 0.4 | 4.4 | - | | US interest rate +/- 1.0% | 0.7 | - | - | 1.4 | - | - | | Foreign currency sensitivity analysis | | | | | | | | Sterling -/+ 10% | 19.9 | 19.9 | 23.0 | 3.4 | 3.4 | 31.3 | | Euro exchange rate -/+ 10% | 1.0 | 1.0 | 10.0 | 2.8 | 2.8 | 7.6 | | US dollar exchange rate -/+ 10% | 19.6 | 19.6 | 11.6 | 1.0 | 1.0 | 21.5 | | Malaysian ringgit exchange rate -/+ 10% | 0.5 | 0.5 | - | - | - | - | The interest rate sensitivity analysis has been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming that the amount of liability outstanding at the balance sheet date was outstanding for the whole year. For interest rate derivatives the mark-to-market adjustment, and amount recognised in equity as part of a hedging arrangement, is estimated using the interest rate sensitivity against the nominal amount. The foreign currency sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or borrower. #### Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises on cash balances, derivative financial instruments and credit exposures to customers. The carrying amount of financial assets represents the Group's exposure to credit risk at the balance sheet date as disclosed at the start of this note. A financial asset is in default when the counterparty fails to pay its contractual obligations. Financial assets are written off when there is no reasonable expectation of recovery. Credit risk is managed separately for financial and business-related credit exposures. #### Financial credit risk Synthomer aims to minimise its financial credit risk through the application of risk management policies approved and monitored by the Board. Counterparties are predominantly limited to major banks and financial institutions with a credit rating of investment grade and the policy restricts the exposure to any one counterparty by setting credit limits. The Group's policy is designed to ensure that individual counterparty limits are adhered to and that there are no significant concentrations of credit risk. The Board also defines the types of financial instruments which may be transacted. Synthomer annually reviews the credit limits applied and regularly monitors the counterparties' credit quality, reflecting market credit conditions. #### Business related credit risk Trade and other receivables exposures are managed locally in the operating units where they arise and active risk management is applied, focusing on country risk, credit limits, ongoing credit evaluation and monitoring procedures. There is no significant concentration of credit risk with respect to receivables as the Group has a large number of customers which are internationally dispersed. See note 20 for information on credit risk with respect to trade and other receivables. #### Liquidity risk Liquidity risk is the risk that Synthomer is unable to meet its payment obligations when due, or that it is unable, on an ongoing basis, to borrow funds at an acceptable price to fund actual or proposed commitments. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of assets and liabilities. Strategic report Governance Plan of financial statements Company financial statements Other information Synthomer plc | Annual Report 2021 | 161 Group financial statements ## Notes to the consolidated financial statements continued 31 December 2021 ### 22 Financial instruments continued The following tables provide an analysis of the anticipated undiscounted contractual cash flows including interest payable for the Group’s financial liabilities and derivative instruments. The liquidity analysis for lease liabilities is included in note 23. Where interest payments are calculated at a floating rate, rates of each cash flow until maturity of the instruments are calculated based on the forward yield curve prevailing at the respective year ends. Derivative contracts are presented on a net basis. 2021 2020 Amount due Amount due | | between | | between | | | between | | between | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | within | | 1 and | | 2 and | within | | 1 and | | 2 and | | 1 year | 2 years | | | 5 years | 1 year | 2 years | | 5 years | | | £m | | £m | | £m | £m | | £m | | £m | Overdrafts – – – (10.5) – – Financial liabilities in trade and other payables (402.3) (1.5) (0.8) (321.2) (2.0) (1.7) Bank loans – principal – – (192.1) – – (190.2) €520m 3.875% senior unsecured loan notes due 2025 – – (437.3) – – (464.9) Interest payments on borrowings (20.5) (20.5) (27.5) (22.1) (22.0) (60.0) Total non-derivative financial liabilities (422.8) (22.0) (657.7) (353.8) (24.0) (716.8) 2021 2020 Amount due Amount due | | between | | between | | | between | | between | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | within | | 1 and | | 2 and | within | | 1 and | | 2 and | | 1 year | 2 years | | | 5 years | 1 year | 2 years | | 5 years | | | £m | | £m | | £m | £m | | £m | | £m | Currency forwards 3.2 – – 1.4 – – Total derivative financial assets 3.2 – – 1.4 – – Interest rate swaps (4.0) (4.0) (7.1) (4.2) (4.3) (11.5) Currency forwards (1.2) – – (0.8) – – Total derivative financial liabilities (5.2) (4.0) (7.1) (5.0) (4.3) (11.5) The financial covenant at 31 December 2021 for the RCF is that net debt must be less than 4.0 times EBITDA. At 31 December 2021 the actual covenant for the net debt was 0.3 times EBITDA. Any non-compliance with covenants underlying Synthomer’s financing arrangements could, if not waived, constitute an event of default with respect to any such arrangements, and any non-compliance with covenants may, in particular circumstances, lead to an acceleration of maturity on certain borrowings and the inability to access committed facilities. Synthomer was in full compliance with its financial covenants in respect of its borrowings throughout each of the years presented. At the year end, Synthomer had undrawn committed bank facilities as follows: 2021 2020 | Expiring | | | Expiring | | | | --- | --- | --- | --- | --- | --- | | between | | | between | | | | 2and 5 | | | 2and 5 | | | | | years | Total | | years | Total | | | £m | £m | | £m | £m | Unsecured €460m multi-currency RCF expiring 3 July 2024 373.3 373.3 397.0 397.0 Unsecured $300m Term Loan Facility expiring 28 October 2024 221.7 221.7 – – 595.0 595.0 397.0 397.0 Fair value measurement Certain of the Group’s financial instruments are held at fair value. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the balance sheet date. As prescribed by IFRS 13 Fair Value Measurement, fair values are measured using a hierarchy where the inputs are as follows: • Level 1 – quoted prices in active markets for identical assets or liabilities. • Level 2 – not level 1 but are observable for that asset or liability either directly or indirectly. • Level 3 – not based on observable market data. Interest rate swaps and foreign currency forwards and swaps are valued using discounted cash flow techniques. These techniques incorporate inputs such as foreign exchange rates and interest rates, which are used in a discounted cash flow calculation incorporating the instrument’s term, notional amount and discount rate, and taking credit risk into account. As significant inputs to the valuation are observable in active markets, all of the Group’s financial instruments are classified as level 2 financial instruments. The fair value of forward foreign exchange contracts, interest rate swaps and currency swaps is estimated by discounting the future contractual cash flows using forward exchange rates, interest rates and prices at the balance sheet date. There were no transfers of any financial instrument between the levels of the fair value hierarchy during the current or prior year. Synthomer plc ## 162 Annual Report 2021 ## Hedge relationships The Group targets a one-to-one hedge ratio. Strengths of the economic relationship between the hedged item and the hedging instrument is analysed on an ongoing basis. Ineffectiveness can arise from subsequent change in the forecast transactions as a result of timing, cash flows or value except when the critical terms of the hedging instrument and hedged item are closely aligned. The change in the credit risk of the hedging instruments or the hedged items is not expected to be the primary factor in the economic relationship. The notional amounts, contractual maturities and rates of the hedging instruments designated in hedging relationships as of 31 December 2021 by the main risk categories are as follows: | | Hedged risk | Notional amount | Mutuality | Range of hedged rates | | --- | --- | --- | --- | --- | | **2021** | | | | | | **Cash flow hedges** | | | | | | Interest rate swap | Interest rate | Up to €440m | 28/08/2018 – 28/08/2025 | 0.517% to 0.535% fixed | | **Net investment hedges** | | | | | | Net investment | Currency | Up to €560m | 01/04/2020 – present | 1.11 – 1.20 | | Net investment | Currency | Up to $370m | 01/04/2020 – present | 1.33 – 1.42 | | **2020** | | | | | | **Cash flow hedges** | | | | | | Interest rate swap | Interest rate | Up to €440m | 28/08/2018 – 28/08/2025 | 0.517% to 0.535% fixed | | **Net investment hedges** | | | | | | Net investment | Currency | Up to €560m | from 01/04/2020 | 1.08 – 1.15 | | Net investment | Currency | Up to $370m | from 01/04/2020 | 1.23 – 1.37 | Where hedge accounting is applied, hedges are documented and tested for effectiveness on an ongoing basis. The ratio for hedging instruments designated in both net investment and cash flow hedge relationships was 1:1. Ineffectiveness could occur on either hedging relationship due to significant changes in counterparty credit risk or a reduction in the notional amount of the hedged item during the designated hedging period. ## Cash flow hedges The Group designated as a cash flow hedge the interest rate swaps used to manage interest rate risk on its Euro borrowings. In 2021 a gain of £3.4 million (2020: £3.8 million loss) was recognised in the cash flow hedge reserve in respect of these derivatives. At 31 December 2021 the cash flow hedge reserve includes a cumulative loss of £10.0 million (2020: loss of £13.4 million), all of which relates to continuing cash flow hedges. The cash flows are expected to occur between 2022 and 2025. In the year, the Group's borrowings fell below the total of the interest rate derivative contracts, leading to a reduction in the balance designated as a cash flow hedge. The change in fair value relating to the unhedged portion of the interest rate swaps was a gain of £5.2 million (2020: loss of £3.6 million) which was recognised in the income statement within finance costs as a Special Item. ## Capital management The Board is committed to enhancing shareholder value in the long-term, both by investing in the business so as to deliver continued improvement in the return from those investments and by managing the capital structure. Synthomer manages its capital structure to achieve capital efficiency and to provide flexibility to invest through the economic cycle and give efficient access to debt markets at attractive-cost levels. This is achieved by targeting a net debt to EBITDA ratio between 1.0 and 2.0. In order to finance acquisitions, the Group may increase the ratio to 3.0, with deleveraging within 12-24 months. As at 31 December 2021 the net debt to EBITDA ratio was 0.3 times (2020: 1.8 times). The Board maintains a dividend policy to 2.5 times earnings cover. Should excess capital not be deployed for acquisitions or capital expenditure, the Board will periodically consider one-off capital returns to shareholders in order to maintain an efficient balance sheet. ## 23 Lease liabilities The Group has a portfolio of leases mainly comprising land and buildings, chemical storage tanks and vehicles. Further details are given in note 2. Information in respect of right of use assets, including the carrying amount, additions and depreciation, are set out in note 17 to these financial statements. Information in respect of the carrying value is set out below and information in respect of interest arising on lease liabilities is set out in note 9. Synthomer also enters into short-term leases and low value leases which are not recognised as right of use assets and lease liabilities. The expense recognised in the year in relation to these leases is not material. Synthomer has no material exposure to variable lease payments, extension options or committed leases not yet commenced. The total cash outflow for leases in the year was as follows: | | 2021 £m | 2020 £m | | --- | --- | --- | | Payments for the principal portion of lease liabilities | 9.7 | 9.7 | | Payments for the interest portion of lease liabilities | 1.5 | 1.6 | Synthomer plc | 163 Annual Report 2021 Strategic report Governance The Financial statements Company financial statements Other information Group financial statements ## Notes to the consolidated financial statements continued 31 December 2021 ### 23 Lease liabilities continued Lease liabilities included in the balance sheet are as follows: | 31 December | | 31 December | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Current 8.8 10.6 Non-current 34.7 44.4 43.5 55.0 The following table details the maturity of contractual undiscounted cash flows for lease liabilities: 2021 2020 £m £m Less than one year 9.4 11.2 Between one and two years 8.1 10.5 Between two and five years 11.3 17.1 More than five years 17.0 19.0 ### 24 Trade and other payables 2021 2020 £m £m Amount due within one year Trade payables 264.0 204.6 Other payables 50.8 40.5 Accruals 99.4 89.0 414.2 334.1 Amount due after one year Accruals 2.3 3.7 2.3 3.7 Average trade payable days in 2021 was 60 (2020: 64). This figure represents trade payable days for all trading operations within the Group, calculated as a weighted average based on cost of sales. The Directors consider that the carrying amount of trade payables, other payables and accruals approximates to their fair value. ### 25 Provisions for other liabilities and charges Restructuring Regulatory & site closure fine Total £m £m £m At 1 January 2021 31.6 – 31.6 Charged to the income statement 26.9 57.2 84.1 Utilised during the year (10.5) – (10.5) Exchange adjustments (2.0) – (2.0) At 31 December 2021 46.0 57.2 103.2 Analysis of provisions | 31 December | | 31 December | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Non-current 18.0 5.9 Current 85.2 25.7 103.2 31.6 Synthomer plc ## 164 Annual Report 2021 | Analysis of charge to the income statement | | | Strategic report Governance Group financial statements Company financial statements Other information | | --- | --- | --- | --- | | | 2021 | 2020 | | | | £m | £m | | Underlying performance – – Special Items 84.1 27.0 84.1 27.0 The closing balance includes £57.2 million for the European Commission fine, £15.8 million and £1.0 million in relation to the rationalisation of the Group’s European Performance Materials network in Marl and Oulu respectively and £10.6 million in relation to the onerous contract arising on the disposal of the European Tyre Cord business. In the year, a £5.1 million provision was recognised for the closure of OMNOVA’s administrative and R&D site in Villejust (France). A £11.6 million provision was recognised to demolish and rationalise assets at a small number of sites, to bring them into line with our ESG strategy. ### 26 Retirement benefit obligations The Group operates a variety of retirement benefit arrangements, covering both defined contribution and defined benefit schemes. Defined contribution schemes The Group operates a number of defined contribution schemes for its employees. Costs recognised in respect of defined contribution pension plans across the Group for the year ended 31 December 2021 were £10.9 million (2020: £9.2 million). The risk relating to benefits to be paid to the dependants of scheme members (widow and orphan benefits) is re-insured with an external insurance company. Multi-employer schemes The Group participates in several tariffs of the Pensionskasse Degussa in Germany, which is a multi-employer pension scheme. Regular contributions are payable to the scheme by each participating employer for new benefits accruing. The assets of all participating employers are pooled, and contributions are calculated based on aggregated demographic experience. Therefore sufficient information is not available to identify the Group’s share of the assets on a consistent and reliable basis and the Group accounts for the scheme on a defined contribution basis. The Group expects to make a regular contribution of £2.4 million to the scheme in 2022. To the extent that there is underfunding in the scheme, deficit contributions are payable based on an actuarial assessment of each participating employer’s share of the future benefit accrual. At 31 December 2021 there is no indication of any commitment for additional deficit contributions in excess of regular contributions. Defined benefit schemes UK The Group’s UK defined benefit scheme is administered by a fund that is legally separate from the Company. The trustees of the pension fund are required by law to act in the interest of the fund and of all relevant stakeholders in the scheme. The trustees of the pension scheme are responsible for the investment policy with regard to the assets of the fund. The scheme was closed to future accrual in 2009 and all retirement benefits since that time are provided by way of a defined contribution scheme. The assets of the scheme are held separately from those of the companies concerned. A triennial actuarial valuation of the scheme was undertaken in 2021 and is in the process of being finalised by the trustees of the scheme and the Company. USA The Group’s US defined benefit scheme was acquired as part of the OMNOVA acquisition and is administered by a fund which is legally separate from OMNOVA Solutions Inc. The fiduciary committee is required by law to act in the interest of the fund and is responsible for the investment policy with regard to the assets of the fund. The scheme was closed to future accrual in 2011 and all retirement benefits since that time are provided by way of a defined contribution scheme. The assets of the scheme are held separately from those of the companies concerned and a formal valuation is undertaken on an annual basis. Germany The Group operates a number of defined benefit schemes in Germany. These schemes are closed to new members. In line with common practice, these schemes are unfunded and liabilities are settled on a cash basis as they fall due. At each balance sheet date, obligations are calculated by external actuaries. Other The Group operates a number of smaller overseas pension and retirement benefit schemes. For the funded schemes, assets are held separately from those of the Group. The aggregated pension disclosures for the other defined benefit schemes have been compiled from a number of actuarial valuations at 31 December 2021. Synthomer plc ## Annual Report 2021 165 Group financial statements # Notes to the consolidated financial statements continued 31 December 2021 ## 26 Retirement benefit obligations continued ### Retirement benefit risks Defined benefit schemes expose the Group to a number of risks, the most significant of which are detailed below: | Asset return risk | The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform this yield, this will increase the deficit. | | --- | --- | | Interest rate risk | A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plan assets in bond holdings. | | Longevity risk | The majority of the plans' obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans' liabilities. | Changes to the income statement in respect of the Group's defined benefit pension schemes are as follows: | | 2021 | | | | | 2020 | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | UK £m | USA £m | Germany £m | Other £m | Total £m | UK £m | USA £m | Germany £m | Other £m | Total £m | | Service cost | 0.9 | 1.7 | 0.4 | – | 3.0 | 1.6 | 1.6 | 0.6 | 1.0 | 4.8 | | Net interest expense | 0.6 | 1.0 | 0.6 | 0.2 | 2.4 | 1.0 | 1.4 | 1.0 | 0.3 | 3.7 | | | 1.5 | 2.7 | 1.0 | 0.2 | 5.4 | 2.6 | 3.0 | 1.6 | 1.3 | 8.5 | Amounts recognised in the statement of comprehensive income are set out below: | | 2021 | | | | | 2020 | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | UK £m | USA £m | Germany £m | Other £m | Total £m | UK £m | USA £m | Germany £m | Other £m | Total £m | | Return on plan assets excluding amounts included in interest expense | (3.1) | 19.5 | – | (0.8) | 15.6 | 32.0 | 33.1 | – | 0.6 | 65.7 | | Gains/(losses) from changes in assumptions | 34.5 | 7.2 | 6.9 | 2.6 | 51.2 | (43.3) | (20.8) | (7.6) | (1.6) | (73.3) | | **Actuarial gains/(losses)** | **31.4** | **26.7** | **6.9** | **1.8** | **66.8** | **(11.3)** | **12.3** | **(7.6)** | **(1.0)** | **(7.6)** | Amounts included in the Group's consolidated balance sheet arising from the Group's defined benefit scheme obligations are: | | 2021 | | | | | 2020 | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | UK £m | USA £m | Germany £m | Other £m | Total £m | UK £m | USA £m | Germany £m | Other £m | Total £m | | Present value of defined benefit obligations | (410.1) | (206.2) | (77.6) | (24.9) | (718.8) | (495.4) | (220.3) | (91.0) | (30.0) | (797.7) | | Fair value of schemes' assets | 405.5 | 178.5 | 2.9 | 9.5 | 596.4 | 404.1 | 158.5 | 3.2 | 10.5 | 576.3 | | **Net liability arising from defined benefit obligations** | **(4.6)** | **(27.7)** | **(74.7)** | **(15.4)** | **(122.4)** | **(52.3)** | **(61.8)** | **(87.8)** | **(19.5)** | **(221.4)** | Fair value of the schemes' assets are set out below: | | 2021 | | | | | 2020 | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | UK £m | USA £m | Germany £m | Other £m | Total £m | UK £m | USA £m | Germany £m | Other £m | Total £m | | **At 1 January** | **404.1** | **158.5** | **3.2** | **10.5** | **576.3** | **366.5** | **–** | **3.1** | **9.0** | **378.6** | | Interest income | 5.7 | 2.4 | – | – | 8.1 | 7.2 | 2.8 | – | – | 10.0 | | **Amounts recognised in income in respect of defined benefit schemes** | **5.7** | **2.4** | **–** | **–** | **8.1** | **7.2** | **2.8** | **–** | **–** | **10.0** | | Remeasurement: | | | | | | | | | | | | Return on plan assets excluding amounts included in interest income | (3.1) | 19.5 | – | (0.8) | 15.6 | 32.0 | 33.1 | – | 0.6 | 65.7 | | **Amounts recognised in the statement of comprehensive income** | **(3.1)** | **19.5** | **–** | **(0.8)** | **15.6** | **32.0** | **33.1** | **–** | **0.6** | **65.7** | | Contributions: | | | | | | | | | | | | Employers | 16.9 | 10.0 | – | 0.6 | 27.5 | 16.5 | 0.4 | – | 0.7 | 17.6 | | Payments from plans: | | | | | | | | | | | | Benefit payments | (18.1) | (13.9) | – | (0.2) | (32.2) | (18.1) | (11.5) | – | (0.8) | (30.4) | | | (1.2) | (3.9) | – | 0.4 | (4.7) | (1.6) | (11.1) | – | (0.1) | (12.8) | | Plan assets from acquired entities | – | – | – | – | – | – | 148.8 | – | 0.5 | 149.1 | | Exchange adjustments | – | 2.0 | (0.3) | (0.6) | 1.1 | – | (14.9) | 0.1 | 0.5 | (14.3) | | **At 31 December** | **405.5** | **178.5** | **2.9** | **9.5** | **596.4** | **404.1** | **158.5** | **3.2** | **10.5** | **576.3** | 166 | Synthomer plc Annual Report 2021 Plan assets for the principal schemes comprised: | | 2021 | | | 2020 | | | | --- | --- | --- | --- | --- | --- | --- | | | UK £m | USA £m | Germany £m | UK £m | USA £m | Germany £m | | Heilige funds | 17.5 | – | – | 29.8 | – | – | | Equities | 96.5 | 97.2 | 1.5 | 107.2 | 88.8 | 1.6 | | Debt instruments | 270.1 | 98.8 | 1.4 | 258.3 | 49.1 | 1.6 | | Property | 9.2 | 24.5 | – | 8.8 | 20.6 | – | | Annuity assets | 3.1 | – | – | 5.2 | – | – | | Cash | 9.1 | – | – | 3.8 | – | – | | Fair value of schemes' assets | 405.5 | 178.5 | 2.9 | 404.1 | 158.5 | 3.2 | All investments in equities, bonds and property are quoted. Present value of defined benefit obligations comprised: | | 2021 | | | | | 2020 | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | UK £m | USA £m | Germany £m | Other £m | Total £m | UK £m | USA £m | Germany £m | Other £m | Total £m | | **At 1 January** | **(456.4)** | **(220.3)** | **(91.0)** | **(30.0)** | **(797.7)** | **(422.2)** | **–** | **(79.3)** | **(17.1)** | **(518.6)** | | Current service cost | (0.8) | (1.7) | (0.4) | (1.2) | (4.2) | (0.8) | (1.6) | (0.5) | (1.0) | (3.9) | | Paid service cost | – | – | – | 1.2 | 1.2 | (0.8) | – | (0.1) | – | (0.9) | | Interest expense | (6.3) | (3.4) | (0.6) | (0.2) | (10.5) | (8.2) | (4.2) | (1.0) | (0.3) | (13.7) | | **Amounts recognised in income in respect of defined benefit schemes** | **(7.2)** | **(5.1)** | **(1.0)** | **(0.2)** | **(13.5)** | **(9.8)** | **(5.8)** | **(1.6)** | **(1.3)** | **(18.5)** | | Remeasurement gains/(losses) from: | | | | | | | | | | | | changes in financial assumptions | 14.3 | 10.9 | 7.0 | – | 32.2 | (43.3) | (19.6) | (7.6) | (1.8) | (72.3) | | changes in demographic assumptions | 6.4 | (0.3) | – | 1.1 | 7.2 | – | – | – | 0.3 | 0.3 | | experience adjustments | 13.8 | (3.4) | (0.1) | 1.5 | 11.8 | – | (1.2) | – | (0.1) | (1.3) | | **Amounts recognised in the statement of comprehensive income** | **34.5** | **7.2** | **6.9** | **2.6** | **51.2** | **(43.3)** | **(20.8)** | **(7.6)** | **(1.8)** | **(73.3)** | | Contributions: | | | | | | | | | | | | Employers | 0.9 | – | 2.2 | 0.6 | 3.7 | 0.8 | 2.0 | 2.1 | 0.3 | 5.2 | | Payments from plans: | | | | | | | | | | | | Benefit payments | 18.1 | 13.9 | – | 0.2 | 32.2 | 18.1 | 11.5 | – | 0.8 | 30.4 | | | 19.0 | 13.9 | 2.2 | 0.8 | 35.9 | 18.9 | 13.5 | 2.1 | 1.1 | 35.6 | | Scheme liabilities from acquired entities | – | – | – | – | – | – | (228.7) | – | (10.2) | (238.9) | | Disposals of subsidiary | – | – | – | 0.2 | 0.2 | – | – | – | – | – | | Exchange adjustments | – | (1.9) | 5.3 | 1.7 | 5.1 | – | 21.5 | (4.6) | (0.9) | 16.0 | | **At 31 December** | **(410.1)** | **(206.2)** | **(77.6)** | **(24.9)** | **(718.8)** | **(456.4)** | **(220.3)** | **(91.0)** | **(30.0)** | **(797.7)** | The Group remains committed to funding the deficits for the UK and US defined benefit schemes. Following the 2018 triennial valuation of the UK scheme, which completed in 2019, the Company committed to paying contributions for the period to 5 April 2023, increasing from £16.4 million in the year commencing 6 April 2019 to £18.2 million for the year commencing 6 April 2022. Contributions from the sponsoring companies are expected to be £17.9 million in 2022. The 2021 triennial valuation will be completed in 2022. The defined benefit obligation of the US scheme was £73.4 million on acquisition. This has reduced to £27.7 million at 31 December 2021. The Group is currently contributing $6 million per annum to help reduce this deficit. The Group's other defined benefit schemes are largely unfunded, with minimal plan assets. Liabilities from these schemes are settled on a cash basis as they fall due. Strategic report Governance Plan & financial statements Company financial statements Other information Synthomer plc | Annual Report 2021 | 167 Group financial statements # Notes to the consolidated financial statements continued 31 December 2021 ## 26 Retirement benefit obligations continued ### Actuarial assumptions The major assumptions used for the purposes of the actuarial valuations were as follows: | | 2021 | | | | 2020 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | UK % | USA % | Germany % | Other % | UK % | USA % | Germany % | Other % | | Rate of increase in pensions in payment | 3.20 | 0.00 | 1.00 | 2.80–3.40 | 2.80 | 0.00 | 1.00 | 1.90–2.75 | | Rate of increase in pensions in deferment | 2.90 | 0.00 | 2.50 | 2.80–3.40 | 2.20 | 0.00 | 2.50 | 1.50–2.75 | | Discount rate | 1.80 | 2.66 | 1.20 | 0.27–2.48 | 1.40 | 2.19 | 0.70 | (0.88)–1.94 | | Inflation assumption | 3.40 | 0.00 | 1.75 | 1.20–2.00 | 2.90 | 0.00 | 1.75 | 1.00–2.00 | Assumptions regarding future mortality are based on actuarial advice in accordance with published statistics. Mortality assumptions are based on country-specific mortality tables and, where appropriate, include an allowance for future improvements in life expectancy. In addition, where credible data exists, actual plan experience is taken into account. The Group's most substantial pension liabilities are in the UK, the US and Germany where, using the mortality tables adopted, the expected lifetime of average members currently at age 65 and average members at age 65 in 20 years' time is as follows: | | 2021 | | | | | | 2020 | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Retiring today | | | Retiring in 20 years | | | Retiring today | | | Retiring in 20 years | | | | | UK | USA | Germany | UK | USA | Germany | UK | USA | Germany | UK | USA | Germany | | Male | 87.2 | 86.4 | 85.5 | 88.8 | 87.4 | 88.2 | 87.3 | 86.4 | 85.3 | 88.9 | 87.3 | 88.1 | | Female | 89.5 | 87.5 | 88.9 | 90.9 | 88.5 | 91.1 | 89.5 | 87.4 | 88.8 | 91.4 | 88.4 | 91.0 | The weighted average duration of the benefit obligation at the end of the reporting period is 14.9 years for the UK scheme (2020: 16.2 years), 10.7 years for the US scheme (2020: 11.3 years) and 17.2 years for the German schemes (2020: 18.4 years). ### Sensitivity analysis Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate and mortality. The sensitivity analysis below has been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, assuming that all other assumptions are held constant: | | Increase in scheme liabilities | | | | --- | --- | --- | --- | | | UK £m | USA £m | Germany £m | | Discount rate (decrease of 1%) | 72 | 23 | 14 | | Future mortality rate (one year increase in expectancy) | 19 | 7 | 3 | The above sensitivities are based on a change of assumption while holding all other assumptions constant. In practice this is unlikely to occur and changes in some of the assumptions may have some correlation. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the balance sheet. ## 27 Share capital and reserves ### Share capital | | 2021 Number | 2020 Number | 2021 £m | 2020 £m | | --- | --- | --- | --- | --- | | **Ordinary shares of 10 pence** | | | | | | Shares in issue at 1 January | 424,850,961 | 424,850,961 | 42.5 | 42.5 | | Issued in year | 42,485,080 | - | 4.2 | - | | **Shares in issue at 31 December** | **467,336,041** | **424,850,961** | **46.7** | **42.5** | Ordinary shares carry no right to fixed income. On 28 October 2021 the Group completed a share placing, resulting in the issue of 42,485,080 ordinary shares at 485 pence per share. ### Share premium | | 2021 £m | 2020 £m | | --- | --- | --- | | Balance at 1 January | 421.1 | 421.1 | | Premium arising on issue of shares | 201.7 | - | | Expenses of issue of shares | (2.8) | - | | **Balance at 31 December** | **620.0** | **421.1** | The share premium account represents the difference between the issue price and the nominal value of shares issued. 168 | Synthomer plc Annual Report 2021 | Retained earnings | | | Strategic report Governance Group financial statements Company financial statements Other information | | --- | --- | --- | --- | | | 2021 | 2020 | | | | £m | £m | | Balance at 1 January 192.4 204.4 Dividends paid (73.5) (12.8) Net profit for the year 208.7 3.1 Actuarial gains/(losses) recognised in other comprehensive income 66.8 (7.6) Tax relating to components of other comprehensive income (11.8) 3.5 Charge to equity for equity-settled share-based payments 1.2 1.8 Balance at 31 December 383.8 192.4 Hedging and translation reserve Cash flow hedging Translation reserve reserve Total £m £m £m Balance at 1 January 2021 (13.4) (28.5) (41.9) Exchange differences on translation of foreign operations – 2.8 2.8 Gains on net investment hedges taken to equity – 3.3 3.3 Gain recognised on cash flow hedges: Interest rate swaps 3.4 – 3.4 Reclassification to profit or loss: Exchange difference recycled on sale of business – 0.3 0.3 Balance at 31 December 2021 (10.0) (22.1) (32.1) Balance at 1 January 2020 (12.6) (6.9) (19.5) Exchange differences on translation of foreign operations – (37.5) (37.5) Gains on net investment hedges taken to equity – 15.9 15.9 Loss recognised on cash flow hedges: Interest rate swaps (0.8) – (0.8) Balance at 31 December 2020 (13.4) (28.5) (41.9) Cash flow hedging reserve The hedging reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in cash flow hedges. The cumulative deferred gain or loss on the hedging instrument is recognised in profit or loss only when the hedged transaction impacts the profit or loss, or is included as a basis adjustment to the non-financial hedged item, consistent with the applicable accounting policy. Translation reserve Exchange differences relating to the translation of the net assets of the Group’s foreign operations, which relate to subsidiaries only, from their functional currency into the parent’s functional currency, being sterling, are recognised directly in the translation reserve. Gains and losses on hedging instruments that are designated as hedges of net investments in foreign operations are included in the translation reserve. Synthomer plc ## Annual Report 2021 169 Group financial statements # Notes to the consolidated financial statements continued 31 December 2021 # **28 Reconciliation of operating profit to cash generated from operations** | | 2021 £m | 2020 £m | | --- | --- | --- | | **Operating profit – continuing operations** | **308.5** | **58.4** | | Less: share of profits of joint ventures | (2.6) | (1.2) | | | **305.9** | **57.2** | | Adjustments for: | | | | Depreciation of property, plant and equipment | 54.4 | 54.0 | | Depreciation of right of use assets | 9.8 | 10.9 | | Amortisation of other intangibles | 7.1 | 4.9 | | Share-based payments | 2.1 | 2.0 | | Special items | 142.4 | 131.2 | | Cash impact of restructuring and site closure costs | (17.8) | (25.3) | | Cash impact of acquisition costs and related gains | (8.6) | (7.4) | | Pension funding in excess of service cost | (27.0) | (18.8) | | Movement in working capital | (82.8) | 23.5 | | **Cash generated from operations** | **387.5** | **232.2** | | **Reconciliation of movement in working capital** | | | | (Increase)/decrease in inventories | (87.7) | 17.1 | | (Increase)/decrease in trade and other receivables | (64.8) | 19.1 | | Increase/(decrease) in trade and other payables | 69.7 | (12.7) | | Movement in working capital | (82.8) | 23.5 | # **29 Related party transactions** Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not included in this note. Transactions between the Company and its subsidiaries are disclosed in the Company's financial statements where appropriate. The UK defined benefit scheme is a related party; see note 26. A summary of the key management compensation relates to the Directors and members of the Executive Committee, is set out below: | Key management compensation | 2021 £m | 2020 £m | | --- | --- | --- | | Short-term employee benefits | 8.3 | 9.1 | | Pension costs | 0.5 | 0.4 | | Share-based payments | 2.1 | 2.0 | | | **10.9** | **11.5** | # **30 Contingent assets, contingent liabilities and guarantees** Guarantees and contingent liabilities of the Group amount to £2.5 million (2020: £2.7 million) and relate to an environmental liability in France. The Company and its subsidiaries have, in the normal course of business, entered into guarantees and counter-indemnities in respect of performance bonds, relating to the Group's own contracts. 170 | Synthomer plc Annual Report 2021 31 Share-based payments Strategic report Governance Group financial statements Company financial statements Other information Performance Share Plan The Group’s Performance Share Plan is described in the Directors’ Remuneration report on pages 112 to 126. In addition to the two Executive Directors, it is available to other senior management. Movement in the options held under the scheme are defined as follows: | | | Weighted av. | | | | Weighted av. | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | exercise | | | | exercise | | Options | | | price (£) | | Options | | price (£) | | | 2021 | | | 2021 | 2020 | | 2020 | | number | | | number | | number | | number | Outstanding at 1 January 2,551,622 – 1,936,998 – Granted during the year 875,330 – 1,134,333 – Exercised during the year (214,389) – (40,146) – Lapsed during the year (821,270) – (479,563) – Outstanding at 31 December 2,391,293 – 2,551,622 – Exercisable at 31 December 22,367 – 49,554 – The outstanding share options were all issued under the Performance Share Plan. As at 31 December 2021 the following options wereoutstanding: Number Exercisable between 2016 and 2023 8,316 Exercisable between 2017 and 2024 6,945 Exercisable between 2018 and 2025 7,106 Exercisable between 2022 and 2029 729,704 Exercisable between 2023 and 2030 954,432 Exercisable between 2024 and 2031 684,790 2,391,293 The total exercise price for all the above grants is £nil. For options outstanding as at 31 December 2021, the exercise price was £nil and the weighted average remaining contractual life was 4.95 years (2020: 5.16 years). The weighted average share price at the date of exercise was £4.64 (2020: £2.83). The weighted average fair value of the options at the measurement date granted during the year was £3.60 (2020: £1.94). The valuation was based on the following inputs and assumptions, using a Monte Carlo simulation model: 2021 2020 Weighted average share price (£) 4.68 2.59 Option price (£) – – Value of optionality nil nil Vesting assumption 77% 75% The vesting assumption is the estimate at the measurement date of the percentage of the options that will ultimately vest and is based on market conditions and management’s assessment of the likelihood of achievement of the performance criteria. The Group also operates a cash-settled share-based payment scheme for which there was an expense in the year of £1.8 million (2020: £2.4 million) and for which there was a liability at the year end of £4.0 million (2020: £2.9 million). The Synthomer Employee Benefit Trust The Company established a trust, formerly the Yule Catto Employee Benefit Trust, on 17 July 1996 to distribute shares to employees enabling the obligations under the Yule Catto Longer-Term Performance Share Plan and the Yule Catto Longer-Term Deferred Bonus Plan to be met. The Trust is managed by the RBC Trustees (Guernsey) Limited, an independent company located in Guernsey. At 31 December 2020, the Trust held 2,547 (2020: 8,939) ordinary shares in the Company with a market value of £0.0 million (2020: £0.0 million). The dividends on these shares have been waived. All of the shares are under option. Costs are amortised over the life of the plans. ### 32 Share price information The middle market value of the listed ordinary shares at 31 December 2021 was 399.6 pence (31 December 2020: 449.6 pence). During theyear,the market price ranged between 388.6 pence and 564.0 pence. The latest ordinary share price is available ontheGroup’swebsite, www.synthomer.com Synthomer plc ## Annual Report 2021 171 Group financial statements ## Notes to the consolidated financial statements continued 31 December 2021 ### 33 Audit exemptions The following subsidiaries have taken advantage of the exemption from an audit for the year ended 31 December 2021 available under S479a of the Companies Act 2006, as the Company has given a statutory guarantee of all of the outstanding liabilities of these subsidiaries as at 31 December 2021. Company Company registration Dimex Limited 01763129 Ecatto Limited 00978441 Harlow Chemical Company Limited 00778831 OMNOVA Performance Chemicals Limited 03734749 OMNOVA UK Holding Limited 07682224 PolymerLatex Limited 03439041 Revertex Limited 00873653 Super Sky Limited 02021871 Synthomer Overseas Limited 06349474 Temple Fields 510 01415496 Temple Fields 514 Limited 04541637 Temple Fields 515 Limited 00692510 Temple Fields 522 Limited 05516912 Temple Fields 523 Limited 05516913 Temple Fields 530 Limited 00831113 Synthomer plc ## 172 Annual Report 2021 Strategic report Governance Group financial statements Company financial statements Other information Synthomer is a global leading supplier of Acrylonitrile Butadiene Rubber (NBR latex) for glove dipping andassociated healthcare industries. These products are designed to meet the highest performance requirements of medical and industrial glove manufacturers, providing high flexibility and comfort as well as a high barrier protection for the end user. Gloves manufactured from Synthomer’s speciality NBR latex ensure a combination of high tensile strength, good elongation and relaxation to cater to the specific needs of medical, examination, clean room, food handling, medical drug handling and chemical laboratory applications ## Company ## financial ## statements Synthomer plc ## Annual Report 2021 173 Company financial statements # Company statement of financial position as at 31 December 2021 | | Note | 2021 £m | 2020 £m | | --- | --- | --- | --- | | **Non-current assets** | | | | | Property, plant and equipment | 4 | 4.4 | 5.6 | | Other intangible assets | 5 | 41.5 | – | | Investment in subsidiaries and joint ventures | 3 | 537.9 | 370.8 | | Deferred tax assets | | 1.8 | – | | **Total non-current assets** | | **585.6** | **376.4** | | **Current assets** | | | | | Other debtors | 6 | 1,279.7 | 1,445.6 | | Cash and cash equivalents | | 248.9 | 42.6 | | Derivative financial instruments | 9 | 3.0 | 1.4 | | **Total current assets** | | **1,531.6** | **1,489.6** | | **Current liabilities** | | | | | Borrowings | 8 | (10.4) | (44.0) | | Other payables | 7 | (180.8) | (164.8) | | Provisions | | (57.2) | – | | Derivative financial instruments | 9 | (9.1) | (18.8) | | Lease liabilities | | (0.7) | (0.7) | | **Total current liabilities** | | **(258.2)** | **(228.3)** | | **Net current assets** | | **1,273.4** | **1,261.3** | | **Total assets less current liabilities** | | **1,859.0** | **1,637.7** | | **Non-current liabilities** | | | | | Borrowings | 8 | (619.5) | (643.9) | | Lease liabilities | | (1.7) | (2.3) | | **Total non-current liabilities** | | **(821.2)** | **(646.2)** | | **Net assets** | | **1,237.8** | **991.5** | | **Equity** | | | | | Share capital | 10 | 46.7 | 42.5 | | Share premium | 10 | 620.0 | 421.1 | | Revaluation reserve | | 0.8 | 0.8 | | Capital redemption reserve | | 0.9 | 0.9 | | Retained earnings | | 569.4 | 526.2 | | **Total equity** | | **1,237.8** | **991.5** | As disclosed in note 2, the Company's profit for the year was £112.1 million (2020: £193.5 million). The notes on pages 176 to 180 are an integral part of these financial statements. The financial statements of Synthomer plc (registered number 98381) on pages 174 to 180 were approved by the Board of Directors and authorised for issue on 3 March 2022. They are signed on its behalf by: **M Willome** **S G Bennett** Director Director 174 | Synthomer plc Annual Report 2021 Company financial statements # Company statement of changes in equity for the year ended 31 December 2021 | | Share capital £m | Share premium £m | Revaluation reserve £m | Capital redemption reserve £m | Retained earnings £m | Total equity £m | | --- | --- | --- | --- | --- | --- | --- | | At 1 January 2021 | 42.5 | 421.1 | 0.8 | 0.9 | 526.2 | 991.5 | | Profit for the year | - | - | - | - | 112.1 | 112.1 | | **Total comprehensive income for the year** | - | - | - | - | 112.1 | 112.1 | | Issue of shares | 4.2 | 198.9 | - | - | - | 203.1 | | Dividends | - | - | - | - | (73.5) | (73.5) | | Share-based payments | - | - | - | - | 1.2 | 1.2 | | Fair value gain on hedged interest rate derivatives | - | - | - | - | 3.4 | 3.4 | | **At 31 December 2021** | **46.7** | **620.0** | **0.8** | **0.9** | **569.4** | **1,237.8** | | | Share capital £m | Share premium £m | Revaluation reserve £m | Capital redemption reserve £m | Retained earnings £m | Total equity £m | | At 1 January 2020 | 42.5 | 421.1 | 0.8 | 0.9 | 344.6 | 809.9 | | Profit for the year | - | - | - | - | 193.5 | 193.5 | | **Total comprehensive income for the year** | - | - | - | - | 193.5 | 193.5 | | Dividends | - | - | - | - | (12.8) | (12.8) | | Share-based payments | - | - | - | - | 1.8 | 1.8 | | Fair value loss on hedged interest rate derivatives | - | - | - | - | (0.9) | (0.9) | | **At 31 December 2020** | **42.5** | **421.1** | **0.8** | **0.9** | **526.2** | **991.5** | Strategic report Governance Group financial statements Banking financial statements Other information Synthomer plc | Annual Report 2021 | 175 Company financial statements # Notes to the Company financial statements 31 December 2021 ## 1 Significant accounting policies The separate financial statements of the Company are presented as required by the Companies Act 2006. The Company meets the definition of a qualifying entity under FRS 100 'Application of Financial Reporting Requirements' issued by the FRC. Accordingly, these financial statements were prepared in accordance with FRS 101 'Reduced Disclosure Framework'. As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to share-based payments, financial instruments, capital management, presentation of a cash flow statement, standards not yet effective and certain related party transactions. Where required, equivalent disclosures are given in the consolidated financial statements. The financial statements have been prepared on the historical cost basis except for the remeasurement of certain financial instruments that are measured at fair values at the end of each reporting period. The basis of accounting and the principal accounting policies adopted are the same as those set out in note 2 to the consolidated financial statements except as noted below. Investments in subsidiaries and joint ventures are stated at cost less, where appropriate, provisions for impairment. The carrying amounts of the Company's investments are reviewed at each reporting date to determine whether there is an indication of impairment. If such an indication exists, then the asset's recoverable amount is estimated. Losses are recognised in the income statement and reflected in an allowance against the carrying value. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through the income statement. Intercompany balances are shown gross unless a right of set-off exists. Balances are valued at fair value at inception and are repayable on demand. All intercompany loans are repayable on demand and the Company has the ability to refinance any of its subsidiaries using equity allowing the subsidiary to repay any receivables owed to Synthomer plc. Dividend distributions to the Company's shareholders are recognised as a liability in the Company's financial statements in the period in which the dividends are approved by the Company's shareholders. There are no significant accounting judgements and estimates applied in preparing the Company's account except for the impairment testing of amounts owed by subsidiary undertakings. When measuring the potential impairment of receivables from subsidiaries, forward-looking information based on assumptions for the future movement of different economic drivers are considered. ## 2 Profit for the year As permitted by Section 408 of the Companies Act 2006, no separate profit and loss account or statement of comprehensive income is presented for Synthomer plc. The Company reported a profit of £112.1 million for the year ended 31 December 2021 (2020: profit of £193.5 million). Auditor remuneration for audit and other services is disclosed in note 7 to the consolidated financial statements. The Company had no employees during the current or prior year. ## 3 Investment in subsidiaries and joint ventures | | 2021 | | | 2020 | | | | --- | --- | --- | --- | --- | --- | --- | | | Subsidiaries £m | Joint ventures £m | Total £m | Subsidiaries £m | Joint ventures £m | Total £m | | **Cost** | | | | | | | | At 1 January | 370.5 | 0.5 | 371.0 | 284.3 | 0.5 | 284.6 | | Additions | 167.1 | – | 167.1 | 106.2 | – | 106.2 | | **At 31 December** | **537.6** | **0.5** | **538.1** | **370.5** | **0.5** | **371.0** | | **Provisions** | | | | | | | | At 1 and 31 December January | – | (0.2) | (0.2) | – | (0.2) | (0.2) | | **Net book value** | | | | | | | | **At 31 December** | **537.6** | **0.3** | **537.9** | **370.5** | **0.3** | **370.6** | Details of the Group's subsidiaries and joint ventures are included in note 12 on pages 179 and 180. In March 2021 the Company capitalised a loan receivable from Temple Fields 514 Limited. The Directors consider the value of investments to be supported by underlying assets. 176 | Synthomer plc Annual Report 2021 #### 4 Property, plant and equipment | | 2021 | | | | 2020 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Right of use buildings £m | Freehold land and buildings £m | Plant and equipment £m | Total £m | Right of use buildings £m | Freehold land and buildings £m | Plant and equipment £m | Total £m | | **Cost** | | | | | | | | | | At 1 January | 4.1 | 3.0 | 0.8 | 7.7 | 4.1 | 3.0 | – | 7.1 | | Additions | – | – | 0.1 | 0.1 | – | – | 0.6 | 0.6 | | Transfers to other intangible assets | – | – | (0.6) | (0.6) | – | – | – | – | | **At 31 December** | **4.1** | **3.0** | **0.1** | **7.2** | **4.1** | **3.0** | **0.6** | **7.7** | | **Accumulated depreciation** | | | | | | | | | | At 1 January | 1.2 | 0.9 | – | 2.1 | 0.6 | 0.9 | – | 1.5 | | Charge for the year | 0.7 | – | – | 0.7 | 0.6 | – | – | 0.6 | | **At 31 December** | **1.9** | **0.9** | **–** | **2.8** | **1.2** | **0.9** | **–** | **2.1** | | **Net book value** | | | | | | | | | | **At 31 December** | **2.2** | **2.1** | **0.1** | **4.4** | **2.9** | **2.1** | **0.6** | **5.6** | Freehold land amounting to £1.8 million (2020: £1.8 million) has not been depreciated. #### 5 Other intangible assets | | 2021 £m | 2020 £m | | --- | --- | --- | | **Cost** | | | | At 1 January | – | – | | Additions | 2.1 | – | | Transfers from Group undertakings | 40.9 | – | | Transfers from property, plant and equipment | 0.6 | – | | **At 31 December** | **43.6** | **–** | #### Accumulated depreciation | At 1 January | – | – | | --- | --- | --- | | Charge for the year | 2.1 | – | | **At 31 December** | **2.1** | **–** | #### Net book value | **At 31 December** | **41.5** | **–** | | --- | --- | --- | The first phase of the Group's Pathway Programme systems transformation project was successfully deployed in May 2021. Now that the system is operational, costs have been transferred to the Company. In April 2021, the IFRS Interpretations Committee issued a new interpretation in relation to accounting for customisation and configuration costs of cloud computing arrangements. Following a detailed review, it was confirmed that the new interpretation does materially impact the accounting treatment for costs incurred on the Group's Pathway programme. #### 6 Debtors | | 2021 £m | 2020 £m | | --- | --- | --- | | Amounts owed by Group undertakings | 1,275.0 | 1,443.4 | | Other receivables | 0.6 | 1.1 | | Prepayments and accrued income | 4.1 | 1.1 | | | **1,279.7** | **1,445.6** | Amounts owed by Group undertakings are valued at fair value at inception and are repayable on demand. Of the Company's amounts owed by Group undertakings, £149.0 million is impaired (2020: £149.0 million). Future expected credit losses on amounts receivable from subsidiaries are immaterial. Strategic report Governance Group financial statements Balance at financial statements Other information Synthomer plc | 177 Annual Report 2021 Company financial statements ## Notes to the Company financial statements continued 31 December 2021 ### 7 Other creditors 2021 2020 £m £m Amounts owed to Group undertakings 142.5 148.2 Other creditors 3.5 4.2 Accruals and deferred income 34.8 12.4 180.8 164.8 Amounts owed to Group undertakings are valued at fair value at inception and are repayable on demand. ### 8 Borrowings 2021 2020 £m £m Current borrowings Overdrafts 10.4 34.4 Current borrowings – 9.6 10.4 44.0 Non-current borrowings Bank loans 187.9 186.2 €520m 3.875% senior unsecured loan notes due 1 July 2025 431.6 457.7 619.5 643.9 Details of borrowings are provided in note 21 to the consolidated financial statements. ### 9 Financial instruments The fair value of the financial instruments disclosed in the Company’s statement of financial position are as follows: 2021 2020 | | | | | | | | Carrying | | | | | | | Carrying | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Valuation | | | | | | | amount | | | | | | amount within | | | | | | category in | | Fair value | | Carrying | | within scope | | | | | Carrying | | scope of IFRS | | | | | | accordance | | hierarchy | | amount | | | of IFRS 7 | | Fair value | | amount | | | | 7 | Fair value | | | with IFRS 9 | 1 | | level | | £m | | | £m | | £m | | £m | | | £m | | £m | Other receivables AC Level 2 1,279.7 1,275.6 1,275.6 1,445.6 1,445.6 1,445.6 Cash and cash equivalents AC Level 2 248.9 248.9 248.9 42.6 42.6 42.6 Derivatives – no hedge accounting FVTPL Level 2 3.0 3.0 3.0 1.4 1.4 1.4 Total assets 1,531.6 1,527.5 1,527.5 1,489.6 1,489.6 1,489.6 Borrowings AC Level 2 (629.9) (629.9) (639.8) (687.9) (687.9) (699.1) Trade and other payables AC Level 2 (180.8) (180.6) (180.6) (164.8) (164.0) (164.0) Derivatives – no hedge accounting FVTPL Level 2 (9.1) (9.1) (9.1) (18.8) (18.8) (18.8) Total liabilities (819.8) (819.6) (829.5) (871.5) (870.7) (881.9) 1. AC: amortised cost; FVTOCI: fair value through other comprehensive income; FVTPL: fair value through profit or loss. Further disclosures on financial instruments are included in note 22 of the consolidated financial statements. ### 10 Share capital and share premium Details of the Company’s share capital and share premium are shown in note 27 of the consolidated financial statements. ### 11 Guarantees and other financial commitments The Company has provided financial guarantees amounting to £20.1 million (2020: £31.9 million) in respect of bank and other facilities of subsidiaries and joint ventures. Synthomer plc ## 178 Annual Report 2021 | 12 Subsidiaries and joint ventures | | | | | | | | Strategic report Governance Group financial statements Company financial statements Other information | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Principal | Ownership | | | Principal | Ownership | | | | Country of incorporation and registered address | activity | | % | Country of incorporation and registered address | activity | | % | | | United Kingdom | | | | Egypt | | | | | | Central Road, Harlow, Essex, CM20 2BH | | | | Industriel Zone 1-B, 10th of Ramadam City, Sharkiya | | | | | | Dimex Limited Holding Company 100 | | | | Synthomer SAE Trading 88 | | | | | | | | | 3 | Finland | | | | | Ecatto Limited Holding Company 100 2 PO Box 175, Oulu, FI 90101 Harlow Chemical Company Limited Holding Company 100 | OMNOVA Performance Chemicals Limited Dormant 100 | | Synthomer Finland Oy Dormant 100 | | --- | --- | --- | | OMNOVA UK Holding Limited Dormant 100 | | France | | PolymerLatex Limited Holding Company 100 | | 14 avenue des Tropiques, Z.A. de Courtaboeuf 2, Villejust, 91955 | | | 3 | OMNOVA Solutions France Holding SAS Holding Company 100 | Revertex Limited Dormant 100 3 OMNOVA Solutions International SAS Holding Company 100 S.A. (300) Limited Holding Company 100 Star Pharma Limited Dormant 100 OMNOVA Solutions SAS Trading 100 1,3 704 rue Pierre et Marie Curie, Ribécourt-Dreslincourt, 60170 Super Sky Limited Holding Company 50 Synthomer (UK) Limited Trading 100 Synthomer France SAS Trading 100 3 6 Place de la Madelaine, Paris, 75008 Synthomer Holdings Limited Holding Company 100 3 Yule Catto International SA Non-Trading 100 Synthomer Overseas Limited Holding Company 100 Temple Fields 510 Dormant 100 Germany 3 Werrastrasse 10, Marl, 45768 Temple Fields 514 Limited Holding Company 100 Temple Fields 515 Limited Holding Company 100 Synthomer Deutschland GmbH Trading 100 3 Temple Fields GmbH Non-Trading 100 Temple Fields 522 Limited Holding Company 100 3 Yule Catto Holdings GmbH Holding Company 100 Temple Fields 523 Limited Holding Company 100 | Temple Fields 530 Limited Holding Company 100 | | India | | --- | --- | --- | | William Blythe Limited Trading 100 | | 1001, Meadows, Sahar Plaza, Andheri-Kurla Road, Andheri East, | | 45 Pall Mall, London, SW1Y 5JG | | Mumbai 400059 | | Synthomer Trading Limited Trading 100 | | OMNOVA India Trading LLP Trading 100 | | 44 Esplanade, St Helier, Jersey, JE4 9WG | | Italy | | | 3 | Via delle Industrie 9, Filago, BG, 24040 | Synthomer Jersey Limited Dormant 100 | Australia | Synthomer S.r.l. Trading 100 | | --- | --- | | 58 Gipps Street, Collingwood, Victoria, 3066 | Via Morozzo 27, Sant’Albano Stura, CN, 12040 | | Synthomer Australia Pty Limited Trading 100 | Synthomer Specialty Resins S.r.l. Trading 100 | | Austria | Piazza Cavour 3, Milano, MI, 20121 | | Industriepark, Pischelsdorf, 3435 | UQUIFA Italia S.r.l. Non-Trading 100 | | Synthomer Austria GmbH Trading 100 | Malaysia | | China | Unit 16-2, Wisma Uoa Damansara II, 6 Changkat Semantan, Damansara | Heights, Kuala Lumpur, 50490 Building 53-55, 1000 Zhangheng Road, Zhangjiang Hi-Tech Park, Desa Baiduri Sdn Bhd Property Letting 70 Pudong, Shanghai, 201203 Kind Action (M) Sdn Bhd Trading 70 Shanghai Synthomer Chemicals Co Ltd Trading 100 PolymerLatex Sdn Bhd Trading 100 8 Hua Jing Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, | 200131 | Quality Polymer Sdn Bhd Trading 70 | | --- | --- | | OMNOVA Performance Chemicals Trading | Revertex (Malaysia) Sdn Bhd Trading 70 | | (Shanghai) Co Ltd Trading 100 | Rexplas Sdn Bhd Dormant 70 | | 210 Zhou Gong Road, Shanghai Chemical Industry Park, Shanghai | Synthomer Sdn Bhd Trading 100 | 201507 Terra Simfoni Sdn Bhd Holding Company 100 OMNOVA Shanghai Co Ltd Trading 100 Mauritius 308 Jiangbin Road, Xiaogang United Development Zone, Ningbo c/o Citco (Mauritius) Limited, Tower A, 1 Cybercity, Ebene Economic & Technical Development Zone, Ningbo, 315803 OMNOVA Asia Pacific Corp Holding Company 100 OMNOVA Ningbo Co Ltd Trading 100 Standard Charted Tower, 19 Cybercity, Ebene 55 Xi Li Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, OMNOVA Holding Limited Holding Company 100 200131 Eliokem Trading (Shanghai) Co Ltd Trading 100 Czech Republic Tovární 2093, Sokolov, 356 01 Synthomer AS Trading 100 V Celnici 1031/4, Prague, 110 00 Synthomer Holdings (CZE) SRO Non-Trading 100 Synthomer plc ## Annual Report 2021 179 Company financial statements ## Notes to the Company financial statements continued 31 December 2021 ### 12 Subsidiaries and joint ventures continued | | Principal | Ownership | | | Principal | Ownership | | | --- | --- | --- | --- | --- | --- | --- | --- | | Country of incorporation and registered address | activity | | % | Country of incorporation and registered address | activity | | % | | Netherlands | | | | Thailand | | | | | Ijsselstraat 41, Oss, 5347 KG | | | | 111/7 Moo 2, Nikompattana District, Rayong, 21180 | | | | | Synthomer BV Trading 100 | | | | OMNOVA Engineered Surfaces (Thailand) Co | | | | | Yule Catto BV Non-Trading 100 | | | | Ltd Trading 100 | | | | | Yule Catto Nederland BV Non-Trading 100 | | | | UAE | | | | | Speltdijk 15704Rj Helmond | | | | Building 2101, Office S10122A2, Jabel Ali Free Zone, Dubai | | | | 1 Xyntra Investments BV Non-Trading 33 Synthomer Functional Solutions FZCO Trading 49 Portugal East Wing 2, Office 201, Po Box 54645, Dubai Airport Free Zone, Dubai 1 | Rua Francisco Lyon de Castro, 28, 2725-397 Mem Martins | | Synthomer FZCO Trading 49 | | --- | --- | --- | | OMNOVA Solutions Portugal SA Trading 100 | | USA | | Lyon28 – Imobiliario SA Non-Trading 100 | | 1201 Peachtree Street NE, Atlanta, GA, 30361 | | Saudi Arabia | | Synthomer LLC Trading 100 | | 27 Street, 2nd Industrial City, Dammam, 31472 | | Yule Catto Inc Non-Trading 100 | | | 1 | 160 Greentree Drive, Suite 101, Dover, DE, 19904 | Synthomer Middle East Company Ltd Trading 49 | Singapore | Synthomer USA LLC Trading 100 | | --- | --- | | Ocean Financial Centre, 10 Collyer Quay, 049315 | 25435 Harvard Road, Beachwood, Ohio 44122-6201 | | OMNOVA Performance Chemicals Singapore | Decorative Products Thailand Inc Holding Company 100 | | Pte Ltd Trading 100 | OMNOVA Overseas Inc Non-Trading 100 | | Spain | OMNOVA Solutions Inc Trading 100 | | Camino de Sangroniz 8, Sondika, 48150 | OMNOVA Wallcovering (USA) Inc Holding Company 100 | | Synthomer Asua SL Trading 100 | Synthomer NBR Solutions LLC Dormant 100 | | Paseo de la Castellana 177, Madrid, 28046 | Vietnam | | OMNOVA Solutions (Espana) SL Non-Trading 100 | 8, 6th Street, Song Than Industrial Park, Di An | | Rambla de Catalunya 53, Barcelona, 08007 | Synthomer Vietnam Co Ltd Trading 60 | Yule Catto Spain SL Non-Trading 100 Notes Sweden 1. Joint ventures. 2. Harlow Chemical Company Limited is incorporated in UK but is resident in Netherlands. Tostarpsvagen 11, Kavlinge, 244 32 3. Shares directly held by Synthomer plc. Synthomer Speciality Additives AB Trading 100 Synthomer plc ## 180 Annual Report 2021 Strategic report Governance Group financial statements ## Other ## information Synthomer’s Laminates & Films business provides decorative laminates for residential and commercial interior environments. The products include innovative, durable surfaces for a wide range of applications from kitchen to bathroom, retail to recreational vehicles, and performance films for luxury flooring, signage and industrial applications. Other informationCompany financial statements Synthomer plc ## Annual Report 2021 181 Other information # Environment performance summary$^{10}$ | | 2021 | 2020 | 2019 | 2021 vs 2020 | 2021 vs 2019 | | --- | --- | --- | --- | --- | --- | | **Energy consumption – metered (GJ)^{1}** | | | | | | | **Total** | | | | | | | Enlarged Group | **5,662,464** | 5,410,255 | 5,466,905 | 4.66% | 3.56% | | UK only | **338,554** | 340,477 | 329,741 | -0.56% | 2.67% | | **Energy consumption by source** | | | | | | | Gas | **2,574,818** | 2,422,543 | 2,479,253 | 6.29% | 3.85% | | Light and Heavy Oils | **26,297** | 26,364 | 30,354 | -0.26% | -13.37% | | Steam and hot water (metered) | **892,030** | 836,485 | 933,895 | 6.38% | -4.48% | | Electricity (metered) | **1,418,872** | 1,426,718 | 1,420,687 | -0.55% | -0.13% | | Coal | **750,448** | 696,145 | 602,716 | 7.80% | 24.51% | | **Specific energy consumption (GJ/tonne production)** | | | | | | | Enlarged Group | **3.16** | 3.09 | 3.08 | 2.38% | 2.67% | | UK only | **4.31** | 3.95 | 4.22 | 9.00% | 2.13% | | **Refrigerant Releases – HCFC and others** | | | | | | | Total refrigerant releases (tonne) | **1,805** | 1,687 | 2,581 | 7.01% | -30.08% | | Specific refrigerant releases (kg/tonne production) | **0.0010** | 0.0010 | 0.0015 | 4.66% | -30.69% | | **Greenhouse Gas emissions (tonne CO_{2}e)^{2,3,4,5}** | | | | | | | **Total Scope 1 emissions** | | | | | | | Enlarged Group | **211,205** | 200,856 | 198,786 | 5.15% | 6.25% | | UK only | **12,721** | 12,867 | 12,429 | -1.13% | 2.35% | | **Total Scope 2 emissions – Hybrid approach** | | | | | | | Enlarged Group | **63,352** | 178,017 | 213,258 | -64.41% | -70.29% | | UK only | **5,893** | 6,266 | 5,308 | -5.96% | 11.01% | | **Total Scope 2 emissions – Market Base** | | | | | | | Enlarged Group | **69,914** | 182,701 | 227,400 | -61.73% | -69.26% | | UK only | **5,893** | 6,266 | 5,308 | -5.96% | 11.01% | | **Total Scope 2 emissions – Location Base** | | | | | | | Enlarged Group | **211,059** | 222,317 | 225,542 | -5.06% | -6.42% | | UK only | **7,826** | 8,785 | 8,367 | -10.91% | -6.46% | | **Total GHG emissions** | | | | | | | Enlarged Group | **274,557** | 378,873 | 412,044 | -27.53% | -33.37% | | UK only | **18,613** | 19,133 | 17,737 | -2.72% | 4.94% | | **Specific GHG emissions (tonne CO_{2}e/tonne production)** | | | | | | | Enlarged Group | **0.153** | 0.216 | 0.232 | -29.12% | -33.95% | | UK only | **0.237** | 0.222 | 0.227 | 6.64% | 4.39% | | **Greenhouse Gas emissions by source (tonne CO_{2}e)** | | | | | | | From energy^{2} | **269,536** | 373,984 | 403,570 | -27.93% | -33.21% | | From refrigerant releases | **5,021** | 4,887 | 8,474 | 2.72% | -40.76% | | **Other emissions to air** | | | | | | | Sulphur Dioxide (SO_{2}) (tonne) | **122,202** | 132,312 | 126,322 | -7.64% | -3.26% | | Kilos SO_{2}/tonne production | **0.068** | 0.070 | 0.071 | -9.67% | -4.11% | | Nitrous Oxides (NO_{2}) (tonne)^{2} | **239,822** | 236,186 | 207,396 | 1.54% | 15.63% | | Kilos NO_{2}/tonne production | **0.134** | 0.135 | 0.117 | -0.69% | 14.63% | | Volatile Organic Compounds (VOCs) (tonne) | **595,286** | 504,932 | 515,008 | 17.89% | 15.59% | | Kilos VOCs/tonne production | **0.332** | 0.288 | 0.290 | 15.31% | 14.58% | 182 | Synthomer plc Annual Report 2021 | | 2021 | 2020 | 2019 | 2021 vs 2020* | 2021 vs 2019* | | --- | --- | --- | --- | --- | --- | | **Water Usage** | | | | | | | **Total water withdrawal (m³)** | **7,862,459** | 7,241,228 | 7,177,835 | 8.58% | 9.54% | | **Water usage by source (m³)** | | | | | | | Public Roader Supply | 1,712,967 | 1,683,337 | 1,811,592 | 1.76% | -5.44% | | Raw Water from River | 3,357,138 | 2,978,227 | 2,791,844 | 12.72% | 20.25% | | Raw Water from Borehole | 1,358,196 | 1,172,020 | 1,200,902 | 15.89% | 13.10% | | Raw Water from Canal | 115,771 | 106,553 | 107,642 | 8.65% | 7.55% | | Raw Water from Other | 1,318,387 | 1,301,091 | 1,265,856 | 1.33% | 4.15% | | **Specific water withdrawal (m³/tonne production)** | | | | | | | Enlarged Group | 4.39 | 4.13 | 4.04 | 6.20% | 8.58% | | **Waste Management** | | | | | | | **Total Hazardous Waste (tonne)** | **24,110** | 22,116 | 23,909 | 9.01% | 0.84% | | **Hazardous waste by source (tonne)** | | | | | | | Recycled – energy recovery | 2,931 | 3,244 | 3,777 | -9.67% | -22.41% | | Recycled – separated – reprocessed | 5,065 | 6,418 | 5,959 | -21.09% | -15.00% | | Incinerated – no energy recovery | 2,738 | 1,611 | 1,430 | 69.94% | 91.47% | | Disposed by landfill | 3,235 | 2,276 | 1,643 | 42.16% | 96.91% | | Other | 10,141 | 8,567 | 11,100 | 18.38% | -8.64% | | **Specific hazardous waste (kg/tonne production)** | **13.46** | 12.63 | 13.47 | 6.62% | -0.04% | | **Total Non-Hazardous Waste (tonne)** | **17,128** | 16,783 | 24,310 | 2.04% | -29.55% | | **Non-hazardous waste by source (tonne)** | | | | | | | Recycled – energy recovery | 4,278 | 4,475 | 8,176 | -4.41% | -47.88% | | Recycled – separated – reprocessed | 2,836 | 2,377 | 2,275 | 19.32% | 24.66% | | Incinerated – no energy recovery | 22.31 | 17.03 | 186.00 | 30.97% | -88.01% | | Disposed by landfill | 8,011 | 8,170 | 11,808 | -1.95% | -32.16% | | Other – municipality | 1,979 | 1,745 | 1,865 | 13.44% | 6.11% | | **Specific non-hazardous waste (kg/tonne production)** | **9.56** | 9.58 | 13.70 | -0.20% | -30.17% | | **Total Waste (tonne)** | **41,235** | 35,900 | 48,219 | 6.00% | -14.48% | | **Specific total waste (kg/tonne production)** | **23.03** | 22.21 | 27.16 | 3.68% | -15.23% | | **Total waste to landfill (kg)** | **11,246** | 10,445 | 13,451 | 7.66% | -16.39% | | **Specific waste to landfill (kg/tonne production)** | **6.28** | 5.96 | 7.58 | 5.30% | -17.12% | | **Production volume (tonne)** | **1,790,719** | 1,751,406 | 1,775,592 | 2.24% | 0.88% | Footnote: 1. Data relates to site usage of all fuels, excluding transport of goods to and from site and the movement of these vehicles on site. Internal transport on site is included. 2. Emissions to all have been calculated from the usage of all fuels, excluding transport fuel. They therefore include both direct emissions and indirect emissions related to bought-in electricity, steam, compressed air, cooling water etc., with the exception of transmission and distribution losses for electricity (these losses are in Scope 3, this report is for Scope 1 and 2). 3. CO₂ equivalent emissions include contributions from OIL and NO₂ associated with combustion. 4. All direct energy production from fossil fuels has been aggregated on a Group-wide basis and converted to CO₂e by using the appropriate emissions factors. No allowance has been made for possible country to country variation in calorific value or CO₂ emission factors for primary fuels. Electricity has been converted to CO₂e on a country-by-country basis. Scope 2 emissions have been calculated using three different approaches: Market Base: using market-based emissions factors for electricity from suppliers of standard grid fuel mix tariffs. In case of suppliers emissions factors not available, the residual mix was used for the EU sites and Location Base approach for non-EU sites. Location Base: using emissions factors from DEPAK (dancer) published in June 2021 were used for UK grid electricity and for overview grid electricity from the relevant EIA (International Energy Authority) World CO₂ Emissions from Fuel Combustion databases. In accordance with UK Government guidance, factors used for 2021 reporting are based on 2019 validated data. Hybrid Approach: using Location Base info except for sites within the Group that purchase renewable energy attribute certificates. Electricity for these locations has been given a CO₂ emissions factor of zero in calculating energy-related emissions totals. The hybrid approach is the approach that has been used by the Group in previous years to establish the baseline and the targets. In order to be able to compare historical performance year to year, the total emissions (Scope 1 and 2) have been calculated using the hybrid approach. 5. The total CO₂e figure is the total of the CO₂ equivalent from energy and the refrigerant contribution. 6. NO₂ emissions are predominantly those from combustion processes. The CO₂ equivalent Global Warming Potential contribution from these releases is already included in the GO₂ from the energy figure values. 7. 2020 data has been modified according to the details provided in the Environment section. 8. Percentage changes are calculated from the base data and may differ slightly from changes calculated from the data in the tables because of rounding. 9. Our Muffingtonough site in the UK shows electricity from an adjacent waste incinerator. But since the waste is both renewable and non-renewable, the site has some associated emissions. In 2021, the emissions from the electricity were 5.408kg CO₂e per kWh, based on our determination of the factors used for the Climate Change Agreement submission. 10. Environmental performance data covers all manufacturing operations and major office/technical centres. It excludes all non-treating and office/sales-related subsidiaries and joint ventures listed on pages 179 and 180 of this Report. Strategic report Governance Group financial statements Company financial statements Company financial statements Financial statements Synthomer plc Annual Report 2021 | 183 Other information ## GRI Content Index GRI Standard Disclosure Page GENERAL DISCLOSURES Organisational profile GRI 102-1 Name of the organisation front cover GRI 102-2 Activities, brands, products, and services 3-7 GRI 102-3 Location of headquarters back cover GRI 102-4 Location of operations 3, 26, 30, 34, 39 GRI 102-5 Ownership and legal form 127-128 GRI 102-6 Markets served 6-7 GRI 102-7 Scale of the organisation 2-5 GRI 102-8 Information on employees and other workers online data pack GRI 102-9 Supply chain 51-53 GRI 102-10 Significant changes to the organisation and its supply chain 9, 22 GR I 10 2-11 Precautionary principle or approach 69-80 GRI 102-12 External initiatives 44, 47, 54 GRI 102-13 Membership of associations 45 Strategy GRI 102-14 Statement from senior decision-maker 8-13 Ethics and integrity GRI 102-16 Values, principles, standards, and norms of behaviour 62, 65-67 Governance GRI 102-18 Governance structure 45, 84-93 Stakeholder engagement GRI 102-40 List of stakeholder groups 46, 96-97 GRI 102-41 Collective bargaining agreements 62 GRI 102-42 Identifying and selecting stakeholders 46, 96-97 GRI 102-43 Approach to stakeholder engagement 46, 96-97 GRI 102-44 Key topics and concerns raised 46, 96-97 Reporting practice GRI 102-45 Entities included in the consolidated financial statements 179-180, 183 GRI 102-46 Defining report content and topic Boundaries 179-180, 183 GRI 102-47 List of material topics 46 GRI 102-48 Restatements of information 59, 61,183 GRI 102-49 Changes in reporting 59, 61,183 GRI 102-50 Reporting period 47 GRI 102-51 Date of most recent report 47 GRI 102-52 Reporting cycle 47 GRI 102-53 Contact point for questions regarding the report 188 GRI 102-54 Claims of reporting in accordance with the GRI Standards 47 GRI 102-55 GRI content index 184-185 GRI 102-56 External assurance 47 SPECIFIC DISCLOSURES Strategy and Business GRI 103-1 Explanation of the material topic and its Boundary 44 GRI 103-2 The management approach and its components 44 GRI 103-3 Evaluation of the management approach 44 Risk Management GRI 102-15 Key impacts, risks, and opportunities 46, 69-80 Governance and Compliance GRI 103-1 Explanation of the material topic and its Boundary 45, 66, 81 GRI 103-2 The management approach and its components 45, 66, 92 GRI 103-3 Evaluation of the management approach 45, 66 Responsible and involved management GRI 102-20 Executive-level responsibility for economic, environmental, and social topics 45 Stakeholder involvement GRI 102-21 Consulting stakeholders on economic, environmental, and social topics 46, 97 Compliance GRI 205-2 Communication and training about anti-corruption policies and procedures 66 Synthomer plc ## 184 Annual Report 2021 | GRI Standard | Disclosure | Page | | --- | --- | --- | | **Ethics and Integrity** | | | | GRI 102-17 | Mechanisms for advice and concerns about ethics | 66 | | **People** | | | | GRI 103-1 | Explanation of the material topic and its Boundary | 62-63 | | GRI 103-2 | The management approach and its components | 62-63 | | GRI 103-3 | Evaluation of the management approach | 62-64 | | **Employment conditions** | | | | GRI 401-1 | New employee hires and employee turnover | 62 | | **Employees diversity and inclusion** | | | | GRI 405-1 | Diversity of governance bodies and employees | 64 | | **Employees development, training and education** | | | | GRI 404-1 | Average hours of training per year per employee | online data pack | | GRI 404-3 | Percentage of employees receiving regular performance and career development reviews | online data pack | | **Communities support** | | | | GRI 413-1 | Operations with local community engagement, impact assessments, and development programs | 67-68 | | **Safety** | | | | GRI 103-1 | Explanation of the material topic and its Boundary | 54 | | GRI 103-2 | The management approach and its components | 54 | | GRI 103-3 | Evaluation of the management approach | 55-57 | | **Occupational Health and Safety** | | | | GRI 403-1 | Occupational health and safety management system | 57 | | GRI 403-2 | Hazard identification, risk assessment, and incident investigation | 55-57 | | GRI 403-4 | Worker participation, consultation, and communication on occupational health and safety | 54-57 | | GRI 403-5 | Worker training on occupational health and safety | 55-57 | | GRI 403-6 | Promotion of worker health | 55 | | GRI 403-8 | Workers covered by an occupational health and safety management system | 54-57 | | GRI 403-9 | Work-related injuries | 55 | | GRI 403-10 | Work-related ill health | 55 | | **Environment** | | | | GRI 102-1 | Explanation of the material topic and its Boundary | 54, 58 | | GRI 103-2 | The management approach and its components | 58-59 | | GRI 103-3 | Evaluation of the management approach | 58-61 | | **Energy** | | | | GRI 302-1 | Energy consumption within the organisation | 182 | | GRI 302-3 | Energy intensity | 58, 182 | | GRI 302-4 | Reduction of energy consumption | 59-60, 182 | | **Water** | | | | GRI 303-3 | Water withdrawal | 60-61, 183 | | GRI 303-5 | Water consumption | 60-61 | | **Emissions** | | | | GRI 305-1 | Direct (Scope 1) GHG emissions | 182 | | GRI 305-2 | Energy indirect (Scope 2) GHG emissions | 182 | | GRI 305-4 | GHG emissions intensity | 60, 182 | | GRI 305-5 | Reduction of GHG emissions | 60, 182 | | GRI 305-7 | Nitrogen oxides (NO_{x}), sulphur oxides (SO_{x}), and other significant air emissions | 182 | | GRI 306-2 | Waste by type and disposal method | 61, 183 | | **Sustainable Value Chain** | | | | GRI 103-1 | Explanation of the material topic and its Boundary | 51 | | GRI 103-2 | The management approach and its components | 51-53 | | GRI 103-3 | Evaluation of the management approach | 51-53 | | **Procurement** | | | | GRI 308-1 | New suppliers that were screened using environmental criteria | 51 | | GRI 414-1 | New suppliers that were screened using social criteria | 51 | | **Product Safety** | | | | GRI 416-1 | Assessment of the health and safety impacts of product and service categories | 50 | | GRI 416-2 | Incidents of non-compliance concerning the health and safety impacts of products and services | 50 | | GRI 417-1 | Requirements for product and service information and labeling | 50 | | GRI 417-2 | Incidents of non-compliance concerning product and service information and labeling | 50 | | GRI 417-3 | Incidents of non-compliance concerning marketing communications | 50 | | Strategic report | Governments | Group financial statements | Company financial statements | Subsidiaries | | --- | --- | --- | --- | --- | Synthomer plc Annual Report 2021 | 185 Other information ## Glossary of terms | AC Amortised Cost | | | IFRS International Financial Reporting Standards | | --- | --- | --- | --- | | ACC American Chemical Council | | | IS Industrial Specialities | | AGM Annual General Meeting | | | ISA International Standards of Auditing | | AIMS Accident and Incident Management System | | | KPIs Key Performance Indicators | | AM Acrylate Monomers | | | ktes Kilotonne or 1,000 tonnes (metric) | | APMs Alternative Performance Measures | | | LIBOR London Inter-Bank Offer Rates | | BAME Black, Asian and Minority Ethnic | | | LMS Learning Management System | | C&C Construction and Coatings | | | LTA Lost Time Accident | | C&F Carpet and Foam | | | LTIP Long-Term Incentive Plan | | Capital | | Net assets excluding third party net debt | M&A Mergers and Acquisitions | | employed | | | ManEx Manufacturing Excellence | | CASE Coatings, Adhesives, Sealants and Elastomers | | | MCO Movement Control Order | | CDP Carbon Disclosure Project | | | MOC Management of Change | | CGU Cash Generating Unit | | | MYR Malaysian Ringgits | | CH | 4 | Methane | N O Nitrous Oxide | 2 | CHP Combined Heat and Power | | | NBR Nitrile Butadiene Rubber | | | | --- | --- | --- | --- | --- | --- | | CIA Chemical Industries Association | | | NED Non-Executive Director | | | | CO | 2 | Carbon Dioxide | Net debt Cash and cash equivalents together with short- and | | | | CO | 2 e Carbon Dioxide equivalent | | | | long-term borrowings | | Constant | | Reflects current year results for existing business | NO | x | Nitrogen Oxides | | currency | | translated at the prior year’s average exchange rates, | OEM Original Equipment Manufacturer | | | and includes the impact of acquisitions Operating Operating profit represents profit from continuing CRM Customer Relationship Management system profit activities before finance costs and taxation CSR Corporate Social Responsibility PBT Profit Before Tax DEFRA Department for Environment, Food and Rural Affairs PE Performance Elastomers EBITDA EBITDA is calculated as operating profit before PHA Process Hazard Assessment depreciation, amortisation and Special Items PPE Property, Plant and Equipment EGM Extraordinary General Meeting PSA Pressure Sensitive Adhesive EPDLA European Polymer Dispersion and Latex Association PSE Process Safety Events EPS Earnings Per Share PSP Performance Share Plan ERP Enterprise Resource Planning PTW Permit to Work ESG Environmental, Social and Governance PVC Polyvinyl Chloride EUUS Europe, Middle East, Africa and Americas R&D Research and Development FEED Front End Engineering Design RC Responsible Care FP Functional Polymers ROIC Return on Invested Capital is calculated as Group FRC Financial Reporting Council Underlying operating profit as a percentage of Group Free Cash The movement in net debt before financing activities, capital employed Flow foreign exchange and the cash impact of Special SBR Styrene Butadiene Rubber Items, asset disposals and business combinations SD Sustainable Development FRS Financial Reporting Standard SDG Sustainable Development Goals FS Functional Solutions SEC Specific Energy Consumption FVTOCI Fair Value Through Other Comprehensive Income SHE Safety, Health and Environment FVTPL Fair Value Through Profit or Loss SHEMS Safety, Health and Environment Management GDP Gross Domestic Product System GDPR General Data Protection Regulation SOFR Secured Overnight Financing Rate GHGs Greenhouse Gases SONIA Sterling Overnight Index Average GJ Gigajoule STEM Science, Technology, Engineering and Mathematics GRI Global Reporting Initiative TCFD Taskforce on Climate-related Financial Disclosures GTI Global Technology and Innovation The Code The UK Corporate Governance Code GWP Global Warming Potential TSR Total Shareholder Return H&P Health & Protection UK GAAP UK Generally Accepted Accounting Practice HR Human Resources Underlying Underlying performance represents the statutory HSSBR High Solids Styrene Butadiene Rubber performance performance of the Group under IFRS, excluding IAS International Accounting Standard Special Items IBORS Inter-Bank Offered Rates VOCs Volatile Organic Compounds ICCA International Council of Chemical Associations Synthomer plc ## 186 Annual Report 2021 Other information # Historical financial summary | | 2021 £m | 2022 £m | 2023 £m | 2024 £m | 2025 £m | 2026 £m | 2027 £m | | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue | **2,329.5** | 1,644.2 | 1,459.1 | 1,615.9 | 1,480.2 | 1,045.7 | 870.1 | | **Underlying performance** (a) | | | | | | | | | EBITDA (b) | **522.2** | 259.4 | 177.8 | 181.0 | 176.2 | 160.1 | 125.0 | | Operating profit (c) | **450.9** | 189.6 | 125.8 | 142.1 | 139.0 | 130.2 | 102.9 | | Finance costs | **(30.8)** | (29.6) | (9.6) | (7.0) | (9.0) | (8.0) | (7.6) | | Profit before taxation | **420.1** | 160.0 | 116.2 | 135.1 | 130.0 | 122.2 | 95.3 | | Basic earnings per share (f) | **75.2p** | 28.9p | 25.3p | 30.7p | 28.7p | 26.4p | 20.1p | | Dividends per share (f) | **30.0p** | 11.6p | 4.0p^{(e)} | 12.2p | 11.4p | 10.5p | 8.0p | | Dividend cover | **2.5** | 2.5 | 6.3 | 2.5 | 2.5 | 2.5 | 2.5 | | **IFRS** | | | | | | | | | Operating profit (c) | **308.5** | 58.4 | 110.6 | 128.7 | 95.4 | 144.7 | 90.3 | | Finance costs | **(24.6)** | (38.1) | (10.1) | (8.4) | (9.0) | (8.0) | (7.8) | | Profit before taxation | **283.9** | 20.3 | 100.5 | 120.3 | 86.4 | 136.7 | 72.5 | | Basic earnings per share (f) | **48.3p** | 0.7p | 21.5p | 27.4p | 20.3p | 30.3p | 16.6p | | Dividends per share (f) | **30.0p** | 11.6p | 4.0p^{(e)} | 12.2p | 11.4p | 10.5p | 8.0p | | Dividend cover | **1.6** | 0.1 | 5.4 | 2.2 | 1.8 | 2.8 | 2.1 | | Net debt (d) | **(114.2)** | (462.2) | 20.7 | (214.0) | (180.5) | (150.3) | (80.1) | | Capital expenditure (e) | **62.2** | 53.8 | 69.1 | 75.7 | 60.3 | 45.6 | 22.8 | Notes: (a) As presented in the consolidated income statement on page 137. (b) As defined in the accounting policies note and recirculated in note 9. (c) As defined in the accounting policies note on page 142. (d) As recirculated in note 21. (e) As presented on the consolidated cash flow statement. (f) Dividends and earnings per share figures for 2018 and prior have been restated to reflect the bonus factor of 1.5719 arising from the rights issue which completed on 29 July 2018. (g) The proposed final 2019 dividend was cancelled to preserve cash, liquidity and balance sheet strength at the onset of COVID-19 in March 2020. Strategic report Overmades Group financial statements Company financial statements Other information Senthomer plc | 187 Annual Report 2021 ![img-1.jpeg](img-1.jpeg) Other information ## Advisers | Registered office | Registrars | | --- | --- | | Synthomer plc | Computershare Investor Services plc | | Temple Fields | Lochside House | | Harlow | 7 Lochside Avenue | | Essex | Edinburgh Park | | CM20 2BH | Edinburgh | | Registered number 98381 | EH12 9DJ | | Company Secretary | Independent auditors | | Richard Atkinson | PricewaterhouseCoopers LLP | Chartered Accountants and Statutory Auditors Bankers London Barclays Bank plc Citibank Solicitors Commerzbank AG Herbert Smith Freehills LLP HSBC Bank plc Squire Patton Boggs (UK) LLP Santander Goldman Sachs SEB Joint stockbrokers Barclays Bank plc and Numis Securities Ltd Synthomer plc ## 188 Annual Report 2021 Synthomer plc 45 Pall Mall London SW1Y 5JG United Kingdom www.synthomer.com