Synthomer plc:
Innovative, sustainable solutions Annual Report 2022
Contents
STRATEGIC REPORT
2
Who we are and
what we do
We are a world-leading supplier
ofhigh-performance speciality
chemical products, and our strategy
and business structure enable us to
harness our focus on sustainability
andinnovation to serve customers
inhighly attractive end markets.
2 Our year at a glance
4 Chair’s statement
7 ChiefExecutiveOfficer’sreview
10 Our business model
12 Our strategy
14 Our new divisional structure
16 – Introducing: Coatings &
Construction Solutions
18 – Introducing: Adhesive Solutions
20 – Introducing: Health & Protection and
Performance Materials
22 Our key performance indicators
24 Innovation
27
Review of
the year
We describe the actions we have
takento strengthen our balance sheet
andrefresh our strategy, and we report
performance for the five divisions
inplace during 2022, prior to our
reorganisation on 1 January 2023.
28 Financial review: CFO’s introduction
30 Financial review
34 Divisional performance reviews
39
Synthomer and
sustainability
Sustainability is one of the critical
enablers of our strategy, and our
Vision2030 roadmap sets out how we
are delivering on our commitments on
environmental, social and governance
(ESG) issues.
40 Sustainability introduction
44 Our approach to sustainability
46 Products
53 Operations
63 People
73
Risk and other
disclosures
We have strengthened our risk governance,
reviewed our principal risks, and continued
to adapt our risk management framework
to ensure our business is protected
whilewe pursue our strategic objectives.
74 Managing risk
78 Principal risks and uncertainties
84 Task Force on Climate-related Financial
Disclosures (TCFD) report
90 Viability statement
90 Non-financialands.172disclosures
Synthomer plc Annual Report 2022
GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
91
92 Our Board of Directors
96 Our Executive Committee
98 Introduction from the Chair
99 Our governance structure
101 The Board’s year
105 Stakeholder engagement
(s.172compliance)
108 Audit Committee report
116 Nomination Committee report
120 Compliance with the Code
123 Directors’ remuneration report:
123 –IntroductionfromtheChair
126 – Remuneration at a glance
128 – Proposed new remuneration policy
138 – Annual report on remuneration
149 Directors’ report
152 Statement of Directors’ responsibilities
153
Group financial statements
154 Independent auditors’ report
161 Consolidated income statement
162 Consolidated statement of
comprehensiveincome
162 Consolidated statement of changes
inequity
163 Consolidated balance sheet
164 Consolidatedcashflowstatement
164 Reconciliationofnetcashflowfrom
operating activities to movement in
netdebt
165 Notes to the consolidated
financialstatements
Company financial statements
203 Companystatementoffinancialposition
204 Companystatementofchangesinequity
205 Notes to the Company
financialstatements
211
212 Environmental performance summary
216 Global Reporting Initiative (GRI)
contentindex
219 Glossary of terms
220 Historicalfinancialsummary
221 Advisers
Find our
previous reports at
:
www.synthomer.com/
investor-relations
STRATEGIC REPORT – Contents GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
1Synthomer plc Annual Report 2022
Our year at a glance
Our differentiated products play vital roles in key sectors such as coatings, construction,
adhesives,andhealthandprotection–growingmarketsthatservebillionsofconsumers
worldwide.FromourinnovationhubsandmanufacturingcentresinEurope,NorthAmerica
and Asia, we help more than 6,000 customers create new products and enhance existing
ones.Andwithourexpertteamsfocusedonsustainableinnovationtocontinuemeeting
customer and consumer demand for low-emission and low-environmental impact solutions,
wearepositionedtoleadthewayasaspecialitybusinesswhoseproductsenhancepeople’s
homesandcities,lifestyles,transportationandhealthcare.
We are:
c.5,200
employees at
41
production sites in
24
countries
We serve:
6,000+
customers through our
3
end-market focused
divisions
with
1,530+ktes
of products
In 2022 we delivered:
£2.6bn
Total Group revenue
£ 26 5 .1m
Total Group EBITDA
1
£(26.5)m
Total Group statutory
operating loss
20.6p
underlying EPS
50%
of new products with
sustainabilitybenefits
2 Synthomer plc Annual Report 2022
Who we are and what we do
In 2022 we:
Refreshed our strategy to
strengthen our focus on
specialist solutions for
attractive end markets, and
introduced a new market-
focused divisional structure
from1January2023.
Held the London Stock
Exchange Green Economy
Mark, awarded to companies
whoearnmorethan50%of
their revenue from products
and services that contribute
toenvironmentalobjectives.
Read more in our Review
oftheyearonpage27
Read more in our CEO’s
review on page 7
Read more in our
Financial review
on page 30
Read more in our
Sustainability review
on page 39
Strategically managed
ourportfolio,integrating
ournewadhesiveresins
businessanddivesting
ournon-corelaminates,
filmsandcoated
fabricsbusinesses.
Were upgraded from
‘A’to‘AA’inthelatest
assessment by MSCI,
puttingusinthetopquartile
for ESG performance in the
SpecialtyChemicalssector.
Took decisive action to
strengthen our balance
sheet and reduce our
leverage, focusing on
capitalallocationandcosts
inlightofthechallenging
tradingenvironment.
Further developed our
Vision 2030 sustainability
roadmap and accelerated
our decarbonisation plans,
including through alignment
withscience-basedtargets.
1
EBITDAiscalculatedasoperatingprofitbeforedepreciation,amortisationandSpecialItems.
Underlying performance statement
TheGroup’sperformancemanagementusesUnderlyingperformancetoplanfor,controlandassesstheperformanceoftheGroup.Underlying
performancediffersfromthestatutoryIFRSperformanceasitexcludestheeffectofSpecialItems,whicharedetailedinnote4tothefinancial
statements.TheBoard’sviewisthatUnderlyingperformanceprovidesadditionalclarityfortheGroup’sinvestorsandstakeholdersandsoitisthe
primaryfocusoftheGroup’snarrativereporting.Whereappropriate,IFRSperformanceinclusiveofSpecialItemsisalsodescribed.Referencesto
‘unitmargin’and‘margin’areusedinthecommentaryonUnderlyingperformance.
Unitmargin(ormargin)iscalculatedonsellingpricelessvariablerawmaterialandlogisticscosts.
FreeCashFlowisthemovementinnetdebtbeforefinancingactivities,foreignexchangeandthecashimpactofSpecialItems,assetdisposals
andbusinesscombinations.
Allstatisticsshownonpage2reflecttheTotalGroupduring2022.
STRATEGIC REPORT – Who we are and what we do GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
3Synthomer plc Annual Report 2022
Chair’s statement
In a challenging year for Synthomer,
the Board has focused on decisive
steps to strengthen the balance sheet
and on the refreshed strategy, which
will position the Group well as market
conditionsimprove.
Caroline Johnstone
Chair
This has been a tough year for Synthomer, for
ourpeople and for our shareholders. But we have
made progress on a number of fronts, embedding
a significant acquisition, overseeing a deep
review and refresh of our strategy which places
sustainability at its heart, completing a disposal
that shows our strategy in action and focusing on
decisive steps to strengthen the balance sheet –
all undertaken despite significant economic
headwinds and disruption in our markets.
A more focused business, with sustainable
innovation at its heart
I want to start by thanking everyone in Synthomer for
theirhardwork,dedicationandresiliencethisyear.
Throughout, our people have stayed close to our
customers, demonstrated our values and embodied
our purpose – creating innovative and sustainable
polymersolutionsforthebenefitofcustomersand
society.I’dalsoliketowelcomeournewcolleagues
whojoinedusinouradhesivesbusinesswhenwe
acquiredEastmanAdhesiveResinsinApril2022,
and to thank those colleagues who left Synthomer
whenwecompletedthedisposalofourLaminates,
Films and Coated Fabrics businesses in February
2023;wewishthemwell.
Who we are and what we do
4 Synthomer plc Annual Report 2022
ThiswasourCEOMichaelWillome’sfirstfullyear
inrole.Hebringshugeexperienceofthespeciality
chemicals industry, real commercial acumen and
atalentfordevelopingdiverseteams.Hehasa
compellingvisionforthebusiness.TheBoardandI
havebeenimpressedathowquicklyhesettledin,and
withthepaceandfocuswhichMichaelhasinjected
into the business – putting the building blocks in
place to deliver our strategy, at the same time as
respondingtotheverytoughmarketconditions.
Facing up to the challenges;
Buildingforthefuture
TheBoardhastakensomeverydifficultdecisions
through2022,allafterrigorousreviewanddebate.
We have focused on balancing the interests of all
our stakeholders and on the actions which will
deliver future sustainable value for our shareholders
andotherstakeholders.
Since2015,ourstrategyhasbeentopursue
bothorganicandinorganicgrowth,buildingan
increasingly global, speciality chemical solutions
business, with leading positions in attractive end
markets.Weappreciatedshareholders’supportforthis
strategy,acceptingelevatedlevelsofleveragewhilewe
embeddedacquisitionsanddeleveragedbacktoour
statednormof1to2xnetdebttoEBITDA–aswe
didfollowingtheOMNOVAtransactionin2020.
This year, however, has seen powerful and exceptional
headwinds.Weremainastrong,profitablebusiness,
withFY2022EBITDAof£265.1million,butthereis
nodoubtthatthebusinesshasfacedchallenges.
Following exceptional demand for our NBR nitriles
productsduringtheCOVID-19pandemic,2022saw
anunprecedenteddownturncausedbydestocking.
Whilethelong-termprospectsfornitrilesremainvery
attractive, we do not expect the period of low NBR
demand caused by this destocking to abate before the
endof2023.Atthesametime,theafter-effectsofthe
pandemic have disrupted supply chains, with some
rawmaterialpricesdoubling.Whilewehavebeenable
to pass through much of these costs, particularly in
our speciality businesses, they have led to higher
workingcapitallevelsthaninthepast.TheRussian
invasion of Ukraine compounded this supply chain
disruption and raised energy costs, while demand has
beendampenedbyrecessionarypressuresworldwide.
Turbulence in the UK economy has also affected
interestratesandexchangerates.Manyofthese
factors have also affected the demand environment in
ournewadhesiveresinsbusinessinthefinalquarter
oftheyear.Inaddition,thebusinesshasexperienced
supply chain and plant reliability challenges that are
being resolved, as well as lower-than-expected
productioncapacity.Whileweareconfidentthat
thisbusinessisastrongfitthathasahigh-quality
customer base, opens opportunities in attractive
marketsandexpandsourgeographicreach,the
Board has taken the decision to impair the goodwill
associatedwiththeacquisitionby£133.7million,as
describedintheFinancialreviewonpage 29.
Strengthening our balance sheet
These challenges have come while we were
leveragedfollowingouracquisition–soit
becameclearthatweneededtofocussharplyon
deleveraging, and build the platform to be stronger,
fitterandmorecompetitivewhenmarketconditions
improve.TheBoardhasbeencloselyinvolved,
supportingMichaelasheandtheExecutiveTeam
rapidly developed a concerted plan of detailed capex,
costcontrolandworkingcapitalactions.Wehave
alsosignificantlyimprovedourfinancingstructure
byenteringintonewbankfacilitiesandaUKExport
Finance facility, both of which have covenants with
increasedheadroomreflectingcurrentmarket
uncertainty.Wehaveusedtheproceedsofthe
Laminates, Films and Coated Fabrics disposal
receivedafteryearendtoreducedebt.
Wealsotooktheverydifficultdecisiontosuspendall
dividendswhilewedeleverage.Whilethisfollowed
historicallyhigh2021dividendsbasedonlastyear’s
exceptional results, we know that many shareholders
wereverydisappointedwiththisdecision.These
decisions were not taken lightly, as we discuss in
TheBoard’syearonpage101.
Our CFO, Lily Liu, whom we welcomed to Synthomer
inJuly,talksmoreaboutourbalancesheetplan,our
progress and our targets for 2023 in the Financial
review on page 28.TheBoardisconfidentthat
theactionswearetakingtostrengthenthebalance
sheet will give Synthomer the platform to deliver
onitsrefreshedstrategy–whichIwilldiscussnext.
A refreshed strategy, focused on
sustainability and opportunity
TheBoard’sconfidenceinthefutureprospectsofthe
business is underpinned by our refreshed strategy,
announced in October 2022, and the result of a
comprehensive review of Synthomer’s leadership
team and strategy that Michael began when he
joinedinNovember2021.
The strategy takes the needs of consumers and
customers in highly attractive, high-growth markets
as its starting point, and recognises that customer
and consumer demand for more sustainable
products is one of the most important tailwinds
drivingourbusiness.
STRATEGIC REPORT – Who we are and what we do GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
5Synthomer plc Annual Report 2022
Chair’s statement continued
It creates a clear path for us to become a speciality
solutions platform for the coatings and construction,
adhesives, and health and protection market
segments.Itisfocusedonendmarkets,innovation
and sustainability – making our business less
complex, focusing on our strengths and creating a
realplatformforthenextphaseofourgrowth.And
itistheblueprintforthenewdivisionalstructurewe
introducedinJanuary2023,describedonpage14.
The Board worked closely with Michael, his management
team and external advisers over many months
onthewide-rangingprocessofdevelopingthis
strategy.Itwasaninclusiveandrigorousprocess
but also involved some very tough conversations
anddecisions.Whatbecameclearwastheneed
topruneourgrowingbusinessthroughaportfolio
review process, and a much clearer focus on capital
allocation; we succeed when we focus on what we do
best.Michaeldescribesthestrategyinhisstatement
on page 7.Here,Iemphasisethatthisisastrategyfor
the long term, founded on our vision for the future of
thebusiness.IthasthefullsupportoftheBoard,
andwehavealreadyapprovedthefirststepsinits
implementation,withthedisposalofourLaminates,
FilmsandCoatedFabricsbusinesses.
A more diverse, inclusive Synthomer,
delivering on ESG issues
This year, our people have been outstanding, navigating
the ongoing challenges of the pandemic and supply
chain disruption, undertaking a large-scale
integration programme, contributing to the refreshed
strategy and preparing for a reorganisation – all in the
context of a cost-of-living crisis that has an impact
oneveryone.Supportforouremployeeshasbeen
akeyfocusoftheExecutiveTeamandBoard,
described in the People section on pages 67 to 68.
I’d like to highlight in particular the success we have
had in making Synthomer a more diverse and
inclusiveplaceforouremployeestowork.Diversity
and inclusion is one of the pillars of our refreshed
strategy, as well as an important element of our
Vision 2030 programme, which is our blueprint for
progress on environmental, social and governance
(ESG)issues.IamdelightedtosaythatMichaeland
histeamhaveachievedrealmomentuminthisarea.
Since2019,thenumberofseniorleaderswhoare
womenhasrisenfrom9%to25%,andweareseeing
change across the career spectrum: women now
makeup33%ofourBoard,and56%ofournew
graduatesinthelastfouryearshavebeenwomen.
Our commitment to environmental sustainability
inourproductsandoperationsisabsolute–itisa
keyenablerofourstrategy.Aswellasaligningwith
ourpurpose,creatingsustainabilitybenefitsisan
important value driver for us, as we see increasing
demand for products that help our customers
reduce their own environmental impacts, particularly
incarbon.Ourownworkondecarbonisationcontinued
in 2022, developing science-based greenhouse gas
emissionstargets,andsettingourinternalcarbon
price, which are important milestones on our path
tonetzero.Read more in our Environment section
pages58to62.
Synthomer’s commitment to keeping our employees
saferemainsourhighestpriority.Whilesafety
performance at some sites has been world-class this
year,wearefocusedonbringingouracquiredbusinesses
in particular up to these levels; the Board supports and
monitors our safety, health and environment (SHE)
programme outlined on page54.
Our progress against all our Vision 2030 targets is
described in our Sustainability report on page 43,
and I discuss the Board’s leadership and oversight
of ESG matters on page 98.
Welcoming new directors
As well as welcoming our new CFO, Lily Liu, we also
welcomedIanTylertotheBoardinJune2022;
hiswealthofexperienceasanexecutiveand
non-executive director is already contributing
significantlytotheBoardandthebusiness,
havingtakenoverasChairoftheAudit
CommitteeinNovember2022.
Looking ahead
Macroeconomic conditions remain challenging, with
subduedlevelsofdemandinmanyofourmarkets
inearly2023,andsoakeyfocusfortheBoardis
strengtheningthebalancesheetinthenearterm.At
thesametime,weareconfidentthatourmarketswill
recoverovertime,andthereforewewillcontinueto
balanceourimmediateprioritieswithimplementationof
therefreshedstrategy.Fundamentally,wehaveastrong,
global business platform in attractive end markets with
excellentlong-termgrowthprospects.Welookforward
to harnessing the strength of our sustainable innovation
expertise and delivering our strategy to become a truly
global, highly-specialised chemicals business that is
readyfortheopportunitiesweseeahead.
Caroline Johnstone
Chair
28 March 2023
Who we are and what we do
6 Synthomer plc Annual Report 2022
Chief Executive Officer’s review
Focusing our business for future
opportunities
In more challenging times it is more important than
ever to be close to our customers, to focus on the
thingswedobestandtofollowaclearstrategy.
2022 has certainly seen its share of challenges for
Synthomer,forourpeopleandourwiderstakeholders.
Following the unprecedented demand for nitrile latex
in2020and2021,wehaveexperiencedaprolonged
destocking of medical gloves, which our customers
manufacture from our nitrile butadiene latex (NBR),
resultinginfarweakerlevelsofdemand.Thewarin
Ukraine,ongoingCOVID-19disruptionandbroader
recessionary pressures have all contributed to
economic volatility, including supply chain disruptions,
sustained higher raw material costs and energy price
hikes.Thecost-of-livingcrisishasaffectedanumber
of our markets, with demand deteriorating over the
courseofthesecondhalfoftheyear.Andduringthe
We have restructured our
business to be more end-
market focused, more agile,
and in a stronger position to
deliver value for our customers
by harnessing our expertise
in sustainability and
innovation.
Michael Willome
ChiefExecutiveOfficer
STRATEGIC REPORT – Who we are and what we do GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
7Synthomer plc Annual Report 2022
Chief Executive Officer’s review continued
fourthquarter,themacroeconomicenvironmentalso
began to affect demand in our Adhesive Technology
business, alongside the additional impact of supply chain
issues constraining access to raw materials and site
reliability challenges, which we are working to resolve,
aswellastheimpactoflower-than-expectedcapacity.
Wearegratefultoourpeople,whohavecontinued
to demonstrate real commitment to deliver for
ourcustomersaroundtheworldthroughoutthis
volatileperiod.TheTotalGrouprevenueof
£2.6billionandEBITDAof£265.1milliondeliveredin
2022wasasolidperformancegiventhechallenges
wehavefaced.Atthesametime,andcruciallyfor
the future of Synthomer, we have launched a
refreshed strategy and reorganised our business
– work that is centred on becoming a truly global
specialised chemical company, concentrated on
three attractive growth markets: coatings and
construction,adhesives,andhealthandprotection.It
gives us a clear pathway to emerge stronger and more
focused from these volatile times – and a platform from
whichtocreatesustainablevalueforallourstakeholders.
Towards specialised, high-performance,
high-growth markets
Our refreshed strategy and new structure make our
businesssimpler,moreefficientandmoresharply
focusedonareaswhereweaddmostvalue.Itwill
move us towards the more specialised, higher-
performance, higher-growth markets where we
knowwecanwin.Wearebecomingmoreend-
market focused, with sustainability and innovation
atthecentreofwhatwedo.Wearealsodrivinga
Group-wide emphasis on making our execution
bolderandfasterthroughbusinessexcellence.
Justasimportantly,thenewstrategyrenewsour
focusonorganicgrowthandportfoliomanagement.
Ourbusinesshasexpandedsignificantlythrough
acquisitionsinrecentyears,givingusgreaterreach
globally and particularly in North America, opening up
opportunities in attractive markets, reinforcing our
innovation capabilities and strengthening our leadership
positions.However,thatexpansionhasalsomade
our business more complex and taken us into some
non-core areas – perfectly strong and sound businesses
in themselves, but either more cyclical in nature or too
smallforustogeneratestrong,consistentgrowth.
Following a full evaluation of our portfolio we are
now allocating capital more effectively, applying
differentiated steering to invest in core areas where
itwillhavethemostimpact.Wearealsorationalising
our portfolio through the disposal of non-core
businesses.Wetookanimportantstepinthisprocess
when we announced the sale of the Laminates, Films
andCoatedFabricsbusinessesinDecember2022.
This sale, which completed on 28 February 2023,
increases the speciality weighting of our overall
portfolio and is margin accretive in line with our
strategy.The$267millioncashproceeds(including
$5millionpayablein2024)willalsohelpstrengthen
our balance sheet and support our drive to reduce our
leveragetoourmedium-termtargetofbetween1and
2xnetdebttoEBITDA–anotherkeystrategicfocus.
Our CFO Lily Liu describes this further on page 28,
alongside the work we are doing to improve our
workingcapitalpositionandoptimiseourcostbase.
Harnessing growth to sustainability
Our strategy aims to bring us closer to our
customers, immersing us in their markets so we
can identify the trends driving demand and develop
thesolutionstomeetthem.
Sustainability is one of the most important of these
trends.Regulationisdrivingtherequirementfor
cleaner, more environmentally friendly solutions,
andforrenewablerawmaterials.Asamarketleader
in water-based and emission-reducing polymers,
thatcreatesahugeopportunityforSynthomer.
We have a long track record of helping our
customerstowardstheirownsustainabilitygoals.
Our emission-reducing solutions and lower-carbon-
intensity operations all make a positive contribution
towardscustomers’Scope3carbonfootprints.Our
capabilities and products can help our customers in
multiple areas – whether that is replacing solvent-
based coatings with water-based alternatives,
developing water-based polymers and redispersible
powders for construction customers, or innovating
bio-based, low-carbon footprint and circular
solutionsforadhesives.
We are also making progress with our own
sustainabilityobjectives.OurVision2030ESG
programme, described on page 43, is a long-term,
embedded part of our business strategy – a key
part of ensuring we remain competitive, as well as
theresponsibleapproachtodoingbusiness.Weare
committed to science-based targets to navigate our
decarbonisation,andaretargeting60%ofournew
productstohavesustainabilitybenefitsby2030.We
havealreadydelivereda36%reductioninabsolute
This year we were upgraded
from an ‘A’ to a ‘AA’ ESG rating
by MSCI, putting us in the top
quartileofESGperformance
foroursector.
Who we are and what we do
8 Synthomer plc Annual Report 2022
Scope1and2emissionssince2019,andweare
activelyworkingonreducingScope3.In2022we
madeourdecarbonisationobjectivesmoreambitious
and focused on absolute reductions rather than
lowercarbonintensity,inalignmentwiththe2015
ParisAgreement.WeholdtheLondonStock
Exchange Green Economy Mark, awarded
tocompanieswhoearnmorethan50%oftheir
revenue from products that contribute to
environmentalobjectives.Thisyearwewere
upgraded from an ‘A’ to a ‘AA’ rating by MSCI,
puttingusinthetopquartileofESGperformance
fortheSpecialtyChemicalssector.
Diversity and inclusion:
at the heart ofourstrategy
The dynamism and resilience of any business is
created by the people who work there – and I strongly
believe that diverse teams help create better ideas
anddriveinnovationinwhatandhowwedeliver.
Diversity and inclusion forms a critical pillar of our
refreshed business strategy, and has been a focus
formefrommyfirstdayatSynthomer,becauseitis
vitaltodeliveringvalueforallourstakeholders.We
have made strong progress this year, particularly in
the leadership team, which has been transformed
by several appointments that have broadened the
range of backgrounds and experiences we can draw
on, and which now contains more women than ever
before.Ofcoursethereismorewecando,andto
ensure we maintain our recent momentum in this
areawehavecommittedtoachieving40%gender
diversity across senior management by 2030 as a
steppingstonetotruegenderbalance.
The evolution of our strategy does not mean a
change in our values however – among which
ourhighestpriorityremainssafety,healthand
environment(SHE).Weknowthatwehavemoreto
doonsafetyinparticular.Ourlegacybusinesseshave
benefitedovermanyyearsfromourSHEprogramme
andcontinuetoperformwell.Ournear-termobjective
istoensurethatnewlyacquiredbusinessesare
aligned to Synthomer standards within a three-year
cycle.Thatprocessisontrackatourformer
OMNOVA sites, which show good improvement
sinceacquisition;weareapplyingthesamerigour
totheadhesiveresinssitesacquiredin2022.
Positioning Synthomer for profitable growth
The actions that we have taken will enable
Synthomertonavigatethecurrentdifficultenvironment
and ensure that the Group is in a strong position to
make progress when macroeconomic conditions
improve.Lookingahead,wewillcontinuetoenhance
ourefficiencythroughassetoptimisationandby
improving cost control and capacity management
throughouttheGroup.InournewCoatings&
Construction Solutions division, our focus is on
drivingorganicgrowth.InAdhesiveSolutionswe
will increase operational and supply chain reliability,
reprioritising capital expenditure to support
debottlenecking and broaden raw material supply
while taking further steps to reduce working
capitaltotypicalGrouplevels.Wewillalso
benefitfromrecentorganisationalchangesand
theimplementationofSynthomer’soperational
excellencestandards.WithinHealth&Protection
and Performance Materials, we will continue to
strengthen our cost competitiveness and enhance
customer intimacy while reviewing opportunities
todivestothernon-corebusinesses.
Synthomerisonajourneytobecomeaglobal
specialised chemical company focused on three
core end markets, with excellence embedded
throughout our business and a sharp focus on
sustainableinnovation.Whileweareexperiencing
such a challenging point in the trading cycle for our
key markets we will continue to focus on generating
cashandstrengtheningourbalancesheet.But
cyclesmoveon,andIamconfidentthatourstrategy
is the right one – and that it will make us a trusted
and responsible player in our customers’ value
chains, meeting the needs of the end consumer
through sustainable innovation, so that we grow
back stronger and continue to deliver on our purpose
of creating innovative and sustainable polymer
solutionsforthebenefitofcustomersandsociety.
Outlook
Ouryeartodatetradingperformancereflectsthe
continuation of the challenging macroeconomic
conditionsinthefinalquarterof2022,withsubdued
levels of demand across most of our end markets
andgeographies.Weexpecttomakeprogressin
thesecondhalfof2023,reflectingthebenefitsof
our operational and cost actions, supplemented by
theanticipatedstartofanimprovementinmarket
conditions, although visibility of this is currently
limited.Aspreviouslyindicated,whileunderlying
end-market demand for medical gloves remains
robust, we do not expect the unprecedented period
of destocking, and hence low NBR production levels,
toabatebeforetheendof2023.
We have taken decisive actions to strengthen our
businessinthecurrentdifficultenvironmentand
positionourselvesforprofitablegrowthasdemand
recovers.Weremainconfidentinourabilityto
execute Synthomer’s refreshed strategy and deliver
the medium-term targets we set out in October 2022,
which were mid-single-digit growth in constant
currencyoverthecycle,EBITDAmarginsabove15%
andmid-teensreturnoninvestedcapital.
Michael Willome
ChiefExecutiveOfficer
28 March 2023
STRATEGIC REPORT – Who we are and what we do GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
9Synthomer plc Annual Report 2022
Our business model
Innovation, sustainability and end-market focus are at the
heartofourbusinessmodel,whichdrawsonourunique
teams and assets to deliver high-performance speciality
chemicalproductsandcreatevalueforallourstakeholders.
Global
demand...
Analysing risks
andopportunities
Focus on consumer
end-use demand
Understanding
the macro trends
Entrepreneurial people
and culture, underpinned
by our values
Integrated risk strategy and
risk management processes
Track record of integrating
acquisitions
Focus on execution,
efficiency,and
businessexcellence
Strong relationships with raw
materials suppliers and a
resilient supply chain
Strong relationships with
customers, and leadership
positions in highly differentiated,
attractive markets
Global technical services teams
Differentiated steering to grow
speciality platforms
…shapes our
strategy…
…for serving
attractive end-
markets through
three simplified
divisions…
…run by
expert teams
across three
continents…
…for lower-carbon,
more circular
products
…for construction
and urbanisation
…for health and
hygiene products
…for adhesives
andpackaging
Over 6,000
customersin:
Coatings &
Construction
Solutions
Adhesive
Solutions
Health & Protection
and Performance
Materials
To deliver
sustainedvalue
forallstakeholders
asaspeciality
solutionsplatform
forthecoatings
andconstruction,
adhesives and health
and protection market
segments
41 sites across the
Americas, EMEA and
Asia, including four
innovation Centres
ofExcellence as part
of an innovation hub
network comprising
23 sites
Who we are and what we do
10 Synthomer plc Annual Report 2022
Vision 2030, our
ESG roadmap and
alignment with science-
based targets for our
netzerocommitment
Formulations
designed for use in
customer-specificproducts
to meet consumer needs
Close technical services
partnerships with customers
toadviseonapplications,
sustainability and end use
Our values:
Safety, health and
environment
Accountability
Integrity
Teamwork
Innovation
London Stock Exchange
Green Economy Mark
Highly differentiated portfolio
Improved products
with improved margins
…and
fulfilling our
purpose…
…by making
specialist high-
performance
products…
…that add value
for customers…
…and create
value for all
stakeholders.
...creating
innovative and
sustainable
polymer solutions
for the benefit
of customers
and society
Responding to
consumer needs
inthousandsof
applications
Outstanding product
and process innovation
Focusing on
sustainabilitybenefits
for our customers
andendusers
£ 26 5 .1m
Total Group EBITDA
5,200
Employees in
24countries
(2021:4,600employees)
£ 26 6.1m
wages and salaries
(2021:£243.7m)
£33.7m
R&D spend
(2021:£28.9m)
50%
of new products with
sustainability benefits
£1.9bn
spend with suppliers
(2021:£1.6bn)
£99.5m
returned to shareholders
(2021:£73.5m)
£65.6m
corporate tax paid
(2021:£86.4m)
Focused on
sustainable,
emissions-reducing
chemistries including:
Acrylic and vinylic
water-based
dispersions
Adhesive tackifying
products
Speciality chemical
additives and
non-water-based
chemistry
Acrylate monomers
Water-based nitrile
butadiene latex
andperformance
materials
NoteallfiguresforTotalGroupfortheyearto31December2022.
STRATEGIC REPORT – Who we are and what we do GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
11Synthomer plc Annual Report 2022
Our strategy aims to drive Synthomer forward as a speciality
solutions platform for the coatings and construction, adhesives,
and health and protection market segments in order to create
sustainedvalueforallourstakeholders.
Everything we do is underpinned by sustainability,
end-marketfocusandinnovation.
How have we chosen our end markets?
Our strategy takes the consumer as the starting
point, anticipating global megatrends and identifying
sectors where we can get closer to our customers
inattractiveendmarketswhereSynthomerhasthe
products,skillsandleadershippositionstowin.
Coatings, construction and adhesives are all
marketsprojectedtogrowataround4-5%over
thecycle,drivenbystrongdemandforsustainable
products – and the health and protection markets
areforecasttogrowat6%+.Aswedescribeon
page14,inJanuary2023wereorganisedour
business to create three new divisions targeted at
these markets: Coatings & Construction Solutions
(CCS),AdhesiveSolutions(AS),andHealth
&ProtectionandPerformanceMaterials(HPPM).
Why focus on speciality platforms?
Specialisation creates access to GDP+ growth,
driven by global megatrends – climate change and
sustainability, urbanisation, demographic changes
and the continuing shift in economic activity to
Asia.Basechemicalbusinessescanstillbehighly
successful but are more cyclical, with volumes
subjecttofluctuatingsupplyanddemand.
So we are applying rigorous portfolio management
as a pillar of our strategy, ensuring we focus on
businesseswherewecanwin.Thiswillmean
divestment of non-core businesses, organic growth
of our core businesses, and – when the time and
opportunityisright–strategicacquisitions.Weare
also focused on differentiated steering – allocating
talent and capital to driving growth in our speciality
platforms,andtocashgenerationinourbaseplatforms.
Our strategy
Who we are and what we do
12 Synthomer plc Annual Report 2022
A new strategy to drive value
Synthomer is a speciality solutions platform
forcoatingsandconstruction,adhesives,and
health and protection market segments
Organic growth in
attractive end markets
Rigorous and consistent
portfolio management to build
focused, leading positions
Operational and
commercial excellence in
howwe run our business
Differentiated steering
in how we allocate
capital and talent
Diversity, equity and
inclusion and holistic
people development
End-market
orientation
ineverything
we do
Innovation as a
critical enabler
See page 24
Sustainability
as a value driver
and a principle
for how we run
ourbusiness
See page 39
Objective:
Speciality chemicals
company focused
on select attractive
end markets
STRATEGIC REPORT – Who we are and what we do GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
13Synthomer plc Annual Report 2022
Our new divisional structure
We have changed the way we do business so
we are closer to consumers, more embedded
inourcustomers’markets,andbetterableto
deliver the sustainable innovations that will
driveoursuccess.Asof1January2023
*
we
have three new, market-focused divisions with
strongcommercialpositionsandglobalreach.
Coatings & Construction
Solutions
Our specialist polymers enhance the
sustainable performance of a wide
range of coatings and construction
products.Weworkacrossarchitectural
and masonry coatings, mortar
modification,waterproofingand
flooring,fibrebonding,andenergy
solutions.Read more on page 16
2022 revenue
£996.1m
2021:£920.2m
2022 EBITDA
£120.8m
2021:£141.1m
Adhesive Solutions
Our adhesive solutions bond, modify
and compatibilise surfaces and
components for products including
tapes and labels, packaging, hygiene,
tyresandplasticmodification,helping
improve permeability, strength,
elasticity, damping, dispersion
andgrip.Read more on page 18
2022 revenue
£572.9m
2021:£155.5m
2022 EBITDA
£67.2m
2021:£22.5m
Health & Protection and
Performance Materials
We help enhance protection and
performance in a wide range of
industries including medical glove
manufacture, speciality paper,
foodpackaging,carpetand
artificialturf,gelfoamelastomers,
andvinyl-coatedseatingfabrics.
Readmore on page 20
2022 continuing revenue
£814.9m
2021:£1,068.5m
2022 continuing EBITDA
£81.9m
2021:£355.0m
*Wereportinlinewiththefivedivisionsthatwereinplaceduringthereportingperiodto31December2022inourReviewoftheyearpages 28 to 38 and Financial statements pages161to202.
Who we are and what we do
14 Synthomer plc Annual Report 2022
Health &
Protection
and Performance
Materials
Adhesive
Solutions
Coatings
& Construction
Solutions
Functional
Solutions
Industrial
Specialities
Acrylate
Monomers
Adhesive
Technologies
Performance
Elastomers
£127.8 m
£120.8m
£67.2m
£81.9m
£39.5m
£31.8m
£49.1m
£21.7m
Our locations
Coatings & Construction
Solutions
Adhesive Solutions
Health & Protection and
Performance Materials
Ourcentresofexcellence
2022 EBITDA contribution under old and new divisional structures
*
*£20.7millionincorporatecostsnotallocated.
Old divisional structure New divisional structure
STRATEGIC REPORT – Who we are and what we do GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
15Synthomer plc Annual Report 2022
Introducing: Coatings &
Construction Solutions
Main markets
Architectural and
masonry coatings
Waterproofing
andflooring
Fibre bonding
Energy solutions
Addressable market
£8bn+
Why is the division focused on the coatings
andconstruction markets?
Ana Perroni Laloe Acceleratingurbanisationis
oneofthebiggestmegatrendsaroundtheworld.
People will always need a place to live!
Whether we are serving customers who are engaged
inbuildingwholenewcities,orcustomerswho
supply you and me with the materials to repaint
ourownhouses,there’saclearopportunityfor
innovative,sustainableproductstomeetdemand.
Both markets demonstrate GDP+ growth, and both
requirespecialised,highlydifferentiatedproducts
withsustainabilitybenefits–theproducts
Synthomerdoesbest.We’vefocusedthedivision
ongettingclosertotheseendmarkets,andcloser
tocustomers.Wehavereallytalentedpeopleacross
the division, experienced and knowledgeable teams
andstronggeographiccoverage.
Our Coatings & Construction Solutions
division(CCS)wascreatedinJanuary
2023, bringing together a range of
Synthomer businesses focused on two
end markets where we have leadership
positionsandpotentialforgrowth.
President, Coatings & Construction
Solutions Ana Perroni Laloe describes
theopportunitiesaheadforherdivision.
1,900
employees
in17plants
Who we are and what we do
16 Synthomer plc Annual Report 2022
Where do you see your biggest opportunities?
AP Incoatings,wealreadyhaveacompetitive
advantagebecauseofthesustainabilitybenefits
ofourwater-basedtechnologiesinapplications
such as architectural coatings, coatings for wood
andmetal,andautomotive.Thesewillcontinue–
consumerswantthesebenefits,andregulations
increasinglyrequirethem.Weseetheopportunity
todomoreinindustrialcoatingsinparticular,
whereourinnovationgivesusapotentialedge.
There is a particular opportunity in insulation, where
our specialist products are used to coat the glass
fibreininsulationsystems–wecanallseeinsulation
growing strongly as consumers and governments
respond to the climate crisis and energy prices
(seecasestudy,below).
Construction generally is similar in that sustainability
is a big driver – customers value products that
supporttheirownnetzeroambitions,andwecan
reallyhelpwiththat.
What might surprise people about the division?
AP Oneareawhereweareverystrong,butwhich
peoplemaynotknowabout,isinEnergySolutions.
Ontheonehandouradvancedliquidanddry
cementing products – and high-performance
drillingfluidadditives–areusedinchallenging
operationalenvironmentsaroundtheworld.But
what is very exciting at the moment is our water-
based anode binders that help deliver high charge
capacity, reliability and long life in lithium-ion
batteries for electric vehicles, energy storage
andotherdevices–supportingthetransitiontoa
decarbonisedworld.Styrenebutadienerubber(SBR)
has become the most widely used lithium-ion anode
binder because of its balance of versatility and
electrochemicalperformance.OurSBRbindershave
been engineered to meet cell manufacturers’ needs
andcanfitstraightintotheirexistingmanufacturing
processesanddeliverexcellentbatteryperformance.
Sustainability is clearly a focus – how do you
support customers with their sustainability goals?
AP Wecandeliversustainabilitybenefits
throughoutthevaluechain.Thefirstbenefitisthat
our water-based and powder-based solutions each
reduceemissions,indifferentways.Wecanhelp
customers reduce or eliminate substances of
concern, such as formaldehyde, and help reduce the
needforenergyintheirprocesses,supportingtheir
ambitionsonScope3carbonemissions.
What are you focusing on in your first year?
AP Safetyisalwaysthehighestpriority.Wewant
the same standard of excellence across the division
– and that links to the connected goal of ensuring
oursitesarereliableandefficient,sowecanfocus
on delivering what our customers want now, and
whatthey’llwantinthefuture.Sustainability
benefitswillplayabigpartinthat,sowearereally
drivinginnovation.Together,thesewillhelpputus
on the path to the growth we know can be unlocked
inourendmarkets.
QuickShield: energy-saving
innovation in the growing
insulation market
Energy prices and the drive to tackle the climate
crisis have meant that consumers and governments
are increasingly focused on one of the best ways to
conserve energy: quality insulation.
That’s created a surge in demand in the Glass EIFS
(Exterior Insulation and Finishing Systems) sector,
which is growing faster than GDP. As the leading
supplier of resins for EIFS bonding in Europe,
insulation is one of the markets where our
leadership position and specialist product
offergiveus a great opportunity to expand.
We offer state-of-the-art XSBR (crosslinked styrene-
butadiene rubber) products to bond the glass fibres
together to create the mesh structure that gives EIFS
mechanical and structural stability. At the same time,
our new QuickShield system uses a patented heat
cure mechanism to help glass mesh producers to
cure their products below the traditional temperature
profile, saving energy in the process.
STRATEGIC REPORT – Who we are and what we do GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
17Synthomer plc Annual Report 2022
Introducing:
Adhesive Solutions
What does the division do – and where does
it fit into Synthomer’s business?
Toby Heppenstall Inanutshell,wedevelop,
manufacture and sell tackifying resins and
polymersthatareusedprimarilyinadhesives,
butalsoasmodifiersofrubberandplastic.
Helping automotive customers cut
carbon and increase recyclability
The automotive sector is a hugely attractive end market for
Adhesive Solutions, with tyre additives alone representing an
estimated $0.9 billion addressable market that we rate as GDP++.
It is also an area where our leadership in sustainable products
isa key competitive advantage.
For example, upgrading tyre performance contributes to
fuelefficiency – a key opportunity for our resins. Our Impera
Performance resins enable the creation of high-performance
tyres with low rolling resistancewhile still offering high wet and
dry grip. At the same time, gum rosin-based plasticisers for
tread compounds are bio-based.
Elsewhere in the car, our speciality tapes help keep
increasingly complex electronics neat and tidy, and our
dispersions, tackifiers and lithene products all contribute to
sound damping, an important focus forelectric car makers.
Our recently launched High Heat Amorphous Polyolefins
(APOs), meanwhile, are helping car makers advance the
light-weighting and recyclability of their car interiors.
Adhesive Solutions (AS) was created in
January2023.Itbringstogetherseveral
Synthomer businesses focused on
adhesives, including our former Adhesive
Technologies division, which integrated
ouracquisitionoftheAdhesiveResins
business of Eastman Chemical Company
in2022.President,AdhesiveSolutions,
Toby Heppenstall describes what his
divisiondoes–andwhereitisgoing.
Who we are and what we do
18 Synthomer plc Annual Report 2022
Main markets
Tapes and labels
Packaging
andhygiene
Tyres and plastic
modification
Addressable market
£6bn+
Much of the division is formed of our adhesive
resinsacquisitioncompletedon1April2022.Our
rationaleforthetransactionwasthatwehadlong
identifiedadhesivesasaveryattractivegrowth
market.Itoffersincreasedspecialisationandis
margin accretive, and supports our sustainability
goals by offering renewable products and exciting
circularityoptions.Thebusinessisalsovery
end-market focused – we have strong exposure to
attractive end markets covering growth areas such
ashygiene,packagingandtyres.NowSynthomer
has the broadest offering in the industry, with leading
positions in EMEA and the Americas across all
tackifierproductgroups.
Theintegrationalsoidentified$25-30millionin
potential synergies, and we are making progress
towards those – which is all thanks to the people
from every function in the division who are going
theextramiletomakeitwork.
What are the applications for your products?
TH Therearelots,becauseourproductscando
three important things: bonding, modifying and
compatibilising.Forexample,inyourcaraloneyou
couldfindourproductsinthesounddamping,the
carpet backing, and the tyre tread, where our Impera
resinsareamarketleader.Inyourshoppingbasket
youmightfindthemincardboardandplasticfood
packaging, nappies, carton-closing mechanisms,
adhesivetapes,labelsormetallisedfilm.
Some of these are products that have been around
for many years, playing a critical role in the supply
chain.Butthankstocontinualinnovationwealso
have within our speciality portfolio many newer,
high-margin products playing in smaller, high-value,
high-growthmarkets.
Where do you see your biggest opportunities?
TH Demandisdrivenbymajormegatrends–most
ofwhichareinsomewayunderpinnedbysustainability.
Ourportfolioisuniquelypositionedtohelp
drivecircularsolutions–includingthrough
theintroductionofcircularfeedstocks.Our
high-performance water-based polymers can
alsodisplacesolvent-borneadhesives–atrend
thatplaystoourleadershipininnovation.
One example is ‘sustainable convenience’ – the drive
to keep making convenient packaging for consumers,
butwithreducedenvironmentalimpacts.Adhesives
have a key role to play here in helping customers
createlighter,morerecyclablepackaging.
Another is ‘sustainable mobility’ – especially cars, where
wecanhelpcarmakersboostfuelefficiency,recyclability
andlight-weighting(seecasestudy,below,left).
Who – and where – are your customers?
TH Wehaveover300customers–manyofthem
blue chip – and our products are sold in more than
600locationsaroundtheworld.
In fact our customer base is a particular strength of
thedivision.Wehavestrongrelationshipswithmany
ofthem,onaveragefor15yearsandinmanycases
much longer than that, and those relationships are
based on us listening and understanding their
needs.That’swhywehavealarge,technically
capable, customer-facing team that helps our
customersdevelopsolutions.
What are you focusing on in your first year?
TH Wewillcontinuetofocusonsafetyasapriority.
Synthomer has industry-leading SHE standards and
we are integrating our new businesses into our SHE
programmes, while at the same time recognising
that the chemistries and processes we use in
AdhesiveSolutionsareinherentlyhigher-hazard.
Beyond safety, our main focus is on completing the
integrationoftheacquiredadhesiveresinsbusiness
fully into Synthomer, increasing its operational
stability and broadening the raw material supply
chain.Thiswilllaythefoundationforustograsp
thelong-termopportunitiesweseeaheadfor
thisimportantpartofourrefreshedstrategy.
600
employees
in 6 plants
STRATEGIC REPORT – Who we are and what we do GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
19Synthomer plc Annual Report 2022
Introducing:
Health & Protection and
Performance Materials
Main markets
Medical glove
manufacture
Speciality paper
and food
packaging
Addressable market
£4bn+
Why is Synthomer focused on the health and
protection market?
Rob Tupker Long-termdemandforhealth
andprotectionproductsisoneofthestrongest
megatrendsunderpinningSynthomer’sstrategy.
Thenitrilebutadienelatex(NBR)marketisalready
a$3billionaddressablemarket,andwebelieveitis
settocontinuetogrowatarateof6+%perannum
duringthecomingyears.Weareaworldleaderin
NBR,whichourcustomersuseforglove-dipping.
The gloves our customers make are used in a wide
range of healthcare settings, and they’re also
increasingly used in many other sectors – food
preparationandhospitality,forexample.
The growth in urbanisation and healthcare in emerging
marketsisaparticularopportunity.Around400billion
gloves are already used each year worldwide, but they
are disproportionately used in developed markets –
per capita use in the USA is 200 compared to around
100inEurope,andmuchlowerindevelopingregions.
Webelievethatgapwillcloseovertime.Sowhile
compared to the rest of Synthomer you could describe
this division as a ‘base’ rather than ‘speciality’ business,
it is focused on a very high-growth market – meaning
thatHealth&Protectionisverymuchacorebusiness.
Our Health & Protection and Performance
Materials (HPPM) division was created in
January2023,bringingtogetherourNBR
business, the second-largest in the world,
with a range of non-core performance
materials businesses with leadership
positionsinthepaperandcarpetmarkets.
President, HPPM, Rob Tupker describes
theopportunitiesaheadforhisnewdivision.
1,300
employees
in14plants
Who we are and what we do
20 Synthomer plc Annual Report 2022
What gives the division competitive advantage
in this sector?
RT First,productquality.Glovesmadefromour
speciality NBR ensure a combination of high tensile
strength,goodelongationandrelaxation.
Thatproductqualityisdrivenbyoursecond
competitive advantage: process and product
innovation.Thejewelinthecrownofourinnovation
resources is our Asia Innovation Centre (AIC) in
Malaysia.TheAIChasstate-of-the-artR&Dreactor
capabilities and application technology, including a
roboticglove-dippinglaboratory.Itgivesusareal
edge, having such great capabilities located so
closetomanyofourcustomers.
Animportantthirdfactorisourscale.Wearethe
second-largest player in the NBR market, and we are
competitiveoncost.Andanincreasinglyimportant
factor is our work on sustainability – another
megatrendthatwillshapethesectorinthefuture.
How are you making the NBR business
moresustainable?
RT Wecanhelpcustomerscreatemoresustainable
glovesinanumberofways.Oneisbyimproving
ourprocessestomakethemmoreenergyefficient.
Another is by improving the product so that
customerscanimprovetheenergyefficiencyof
theirownprocesses.Thirdly,weareincreasingour
collaboration with customers and other partners
across the whole chain to improve the overall
carbon footprint of the glove lifecycle, with
severalinitiativesfocusedonrecyclabilityand
bio-degradability.Theindustryfacesasignificant
challenge as well as opportunity here, given that
most gloves used in healthcare have to be
incineratedforsafetyreasons.
SyNovus™ is our latest innovation platform for
developingsustainableNBRforglovemanufacturing.
It enables customers to use lower curing temperatures
in their process, reducing their energy costs and carbon
footprint.We’vealsodevelopedSyNovus™Plus,which
is accelerator-free and has a reduced chemical loading,
minimisingtheriskofsomeallergies.Glovesmade
with SyNovus™ Plus are readily recyclable into new
rubberproducts,suchassolesforshoes.
What other sectors does the division compete in?
RT Health&Protectionisthelargestpartofthe
division, but we have a number of smaller niche
performance materials businesses focused on markets
including paper, carpet, acrylate monomers, speciality
vinylpolymers,elastomericmodifiersandinorganic
specialities.Whiletheseareattractivebusinesses
where we have leadership positions, they have been
assessedasnon-coretothewiderGroupstrategy.
What are your priorities for 2023?
RT Weneedtomaintainourfocusonsafetyasa
priority.OurNBRbusinesshasanexcellentsafety
record and we want the whole division to meet
thosestandards.Wealsoneedtoremaincost-
competitive, focusing on process innovation while
developingfurtherlifecyclesustainabilitybenefits
forourproductsandgettingclosertoourcustomers.
Supporting
customersthrough
customer service
andsustainability
Getting close to our customers and
meeting their needs – including for
moresustainable products – is central
toour approach. So we were proud to be
recognised this year by Ansell, a global
leader in protection solutions and a
market-leading glove manufacturer.
AtAnsell’s Supplier Summit in
February2023, Synthomer received
anOutstanding Performance Award,
recognising the contribution our teams
had made in 2022 to ensuring Ansell had
the nitrile latex supplies they needed to
meet high demand, and in supporting
their sustainability ambitions through
our work and transparency around our
Scope 1 and Scope 2 emissions.
STRATEGIC REPORT – Who we are and what we do GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
21Synthomer plc Annual Report 2022
Our key performance indicators
Measuring the delivery of our strategy.
Financial
Revenue
2022 £ 2 ,58 5 .1m
2021 £2,329.5m
2020 £1,644.2m
2019 £1,4 59.1m
2018 £1,618.9m
Strategy
Definition
Revenue is recognised at the point when control of our products
istransferredtocustomers.
Comment
Revenuein2022increasedby11.0%to£2,585.1m,principallyreflecting
nine months of revenues from our new adhesive resins business,
offset by a substantial reduction in revenue from our Performance
Elastomers division when compared to the exceptional performance
of2021,largelydrivenbyunprecedenteddestockingofnitrilegloves.
EBITDA %
2022 10.3%
2021 22.4%
2020 15.8%
2019 12.2%
2018 11.2%
Strategy
Definition
EBITDA as a percentage of revenue
Comment
While speciality businesses were largely successful in passing through
substantial increases in raw material and energy costs, margins were
reducedinbasebusinesses.
EBITDA
2022 £265.1m
2021 £522.2m
2020 £259.4m
2019 £177.9 m
2018 £181.0m
Strategy
Definition
Operatingprofitbeforedepreciation,amortisationandSpecialItems.
Comment
GroupEBITDAof£265.1mreducedby50.8%comparedtothe
exceptionalperformanceof2021.ReducedEBITDAfromPerformance
Elastomers and weakening demand in the second half in our other
businesseswaspartiallymitigatedbyrobustpricemanagement.
Underlying EPS
2022 20.6p
2021 75.2p
2020 28.9p
2019 25.3p
2018 30.7p
Strategy
Definition
BasicUnderlyingearningspersharebeforeSpecialItems.
Comment
ThereductioninunderlyingEPSreflectsincreasedinterestcosts
followingouracquisitionofournewadhesivesbusiness,alongside
reducedEBITDA.
KPI.AllperformanceKPIsareshownfortheTotalGroupas
operatedintheyear.Wesetoutourperformanceagainstallofour
Vision 2030 sustainability targets on page 43.Wenolongerreport
volumesorunderlyingprofitbeforetaxasKPIs.Allperformance
KPIsareshownfortheTotalGroupasoperatedintheyear.
As part of our strategy refresh in 2022, we also reviewed our KPIs
to ensure they continued to measure our performance and provide
valuableinsighttousandourstakeholders.Tofullyreflectourfive
strategic pillars, we added return on invested capital (ROIC), revenue
andgenderdiversityasKPIs.WenowreportabsoluteScope1and
Scope 2 carbon emissions, replacing our previous energy intensity
Link to strategy
Organicgrowthinattractiveendmarkets
Rigorousandconsistentportfoliomanagementtobuildfocused,leadingpositions
Operationalandcommercialexcellenceinhowwerunourbusiness
Differentiatedsteeringinhowweallocatecapitalandtalent
Diversity,equityandinclusion,andholisticpeopledevelopment
Who we are and what we do
22 Synthomer plc Annual Report 2022
Financial KPIs continued
Non-financial
Free Cash Flow
2022 £69.2m
2021 £217.6 m
2020 £167.6m
2019 £92.8m
2018 £27.8m
Strategy
Definition
Movementinnetdebtbeforefinancingactivities,foreignexchange
and the cash impact of Special Items, asset disposals and
businesscombinations.
Comment
FreeCashFlowof£69.2min2022reflectsanoutflowof£(62.0)min
H1,drivenlargelybysignificantrawmaterialspriceincreases,andan
improvementof131.2minH2,astheGrouptookactiontofocuson
cashasmacroeconomicconditionsdeteriorated.
% New and protected products (NPP)
2022 20%
2021 24%
2020 22%
2019 22%
2018 21%
Strategy
Definition
Percentage of sales volume in the year that can be attributed to
patentedproductsandproductslaunchedinthepastfiveyears.
Comment
ThedecreaseinNPPreflectedtheongoingeffectsofCOVID-19,which
slowedthecommercialisationofsomenewproductsinearly2022,
andtheintegrationofournewadhesivesbusiness.
Scope 1 & 2 emissions ktes CO2e
*
2022 338
2021
*
275
2020
*
379
2019
532
Strategy
Definition
Scope1–directGHGemissionsfromtheactivitiesofSynthomer
orunderitscontrol.
Scope 2 – indirect GHG emissions from the generation of purchased
energyconsumedbySynthomer.
Comment
Thesignificantreductioninabsoluteemissionsversus2019hasthree
majorcomponents:productionvolumes;progressintransitionto
renewableelectricityandtheclosureoftheSokolovsite’scoal-fired
powerstation.In2022thiswaspartiallyoffsetbytheacquired
adhesive resins business, which is higher energy intensity compared
withtherestoftheGroup.
* Excluding Adhesive Technologies
ROIC
2022 7.6%
2021 26.1%
2020 13.2%
2019 13.0%
2018 15.0%
Strategy
Definition
Underlyingoperatingprofitaftertaxdividedbyaverageinvested
capitalatstartandendofyear(comprisingequity,netdebt,
post-retirementbenefitobligationsandleaseliabilities).
Comment
2022ROICwaslowerthanboththeexceptional2021leveland
previousyears,reflectingtheloweroperatingprofitandthecapital
deployedfortheadhesiveresinsacquisition.
Recordable case rate
2022 0.34
2021 0.31
2020 0.36
2019 0.20
2018 0.23
Strategy
Definition
Recordablecaserateforaccidentsinvolvingmorethanfirstaid
treatment,expressedasaccidentsper100,000hoursworkedby
employeesandallcontractors.
Comment
Businessesacquiredin2020and2022increasedourrecordablecaserate
relativetothelegacyportfoliowhichhavebenefitedovermanyyearsfrom
ourSHEprogramme.Weaimtoensurethatnewlyacquiredbusinesses
arefullyalignedtoSynthomerstandardswithinathree-yearcycle.
Gender diversity in senior management
Female Male
2022
25.4%
2021
20.0%
Strategy
Definition
Proportion of women in the senior management population
(membersoftheExecutiveTeamandtheirdirectreports).
Comment
Since2019thenumberofseniorleaderswhoarewomenhasrisen
from9%to25%.Wehavecommittedtoachieving40%gender
diversity across senior management by 2030 as a stepping stone
totruegenderbalance.
STRATEGIC REPORT – Who we are and what we do GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
23Synthomer plc Annual Report 2022
Innovation
At the heart of our
strategy for specialisation
Focused innovation that meets
customers’needs
End-market focus, sustainability and innovation –
these are the three enablers of Synthomer’s
strategy for becoming a speciality chemicals
company, as described on pages12and13.Soit
makes sense that our innovation has sustainability
and end markets constantly in mind – because
everything we do should bring us closer to
ourcustomers’needs,includingtheirneedfor
moresustainable,morespecialisedproducts.
Our work on new product design, process
improvements, and new application development
aims to deliver more sustainable innovations and
offer value-added performance to our customers,
whiledrivingSynthomer’sgrowth.Weapplythe
principles of the three pillars of our Technology
Platforms approach – sustainability, enhanced
performance,andformulationandprocessefficiency–
while identifying innovation opportunities through
marketresearchandcollaborationswithcustomers.
We measure our progress towards two important
targets.Ourfirstgoalisthat60%ofnewproducts
shouldhaveadefinedsustainabilitybenefitby2030.
At the same time, we are aiming to ensure that new
andprotectedproductsmakeupatleast20%ofour
sales volume – the NPP metric
*
–overthelongterm.
* Percentage of sales volume in the year that can be attributed to patented
productsorproductslaunchedinthepastfiveyears.
Innovation is a key enabler
of Synthomer’s refreshed
business strategy, driving
specialisation, sustainability
andgrowth.
Marshall Moore
ChiefTechnologyOfficerandPresident,Americas
Highlights in 2022
Completed the commercial
launchofSyNovus™Plus
Integrated the global Technology
& Innovation team from our new
adhesive resins business
Updated our sustainability assessments
to capture downstream sustainability
benefitsforcustomers
Several new-product-launch teams honoured
at our Synthomer Innovation Awards
Who we are and what we do
24 Synthomer plc Annual Report 2022
form our Adhesive Solutions division
willnotonlysupportourNPPmetric,
butwillalsoalignwellwithouroverall
sustainabilityobjectives.
At the same time, product development
across the Group recovered momentum
in the second half of 2022, as customers
returnedtoassessingandqualifyingnew
products.Oneofthesignificantnew
productstobenefitfromthisrecovery
isSyNovus™Plus,ournewproductfor
medical glove-makers that provides
thesamehigh-performancebarrier
protection as conventional nitrile latex
while being recyclable and reducing GHG
emissions.SyNovus™Plusexperienced
delaysincustomerqualificationinearly
2022asaresultofCOVID-19restrictions
in Malaysia, but following successful
commercial trials later in the year, it is
now positioned for full commercial
adoptionin2023.Itwillbeanimportant
product for us, and demonstrates many
elements of our new strategy – an
innovationwithsustainabilitybenefits,
targeting the attractive health and
protectionendmarket.
Sustainably innovating
specialistsolutions
Thisyearweachieved50%ofnew
productswithasustainabilitybenefit.
Weconductsustainabilitybenefit
assessments on all our product
innovationprojects,andwe’veintroduced
new people and tools to conduct lifecycle
assessments on candidate products
duringtheinnovationprocess.We’vealso
developed our assessments this year to
includethedownstreambenefitsrealised
by our customers or end users – adding
value for our customers and helping them
meettheirownsustainabilitytargets.
We are focused on three main ways
toimprovethesustainabilityofour
products: reducing or eliminating
ingredients of concern, enabling circularity,
and carbon emission reduction in our
operationsand/orinuse.Wedescribethis
work in more detail in the Sustainability
section of this report, on pages 46 to 49
– where we also discuss the important
progress we are making on increasing
ouruseofbio-basedrawmaterials,
whichhavethepotentialtoenablefurther
sustainabilitybenefitsforourcustomers
in the future, particularly when it comes
tocarbon-footprintreduction.
Robust pipeline of innovations
despite disruptions
In2021theongoingeffectsofCOVID-19
slowed the commercialisation of some
ofournewproducts,animpactthatwas
stillbeingfeltinearly2022.Thisyearwe
also integrated our new adhesive resins
business, which under previous ownership
historically focused innovation efforts
onprocessefficiencyratherthannew
products.Theshort-termeffectisa
modest decrease of our Group NPP to
20%,justatourgrouptarget.However,
recent investments in the adhesives
business in differentiated product
innovation, such as the introduction
ofAerafinamorphouspolyolefins,have
laid the foundations for an increase
insalesfromnewproducts.Other
adhesivesprojectsfocusonimproved
productquality,circularapproachesand
theuseofsustainablerawmaterials.So
in the future, the businesses that now
Sustainability
Supporting Synthomer’s Vision
2030roadmap through
technologiesand products that:
Are based on more
sustainablerawmaterials,
including bio-based materials
Have lower environmental
impacts when in use
Have lower environmental
impactsattheendoftheirlives.
Enhanced
performance
Expanding and diversifying
Synthomer’s portfolio by
investigating new product
technologies that performbetter at:
Binding, bonding and coating
Improving adhesion, repellency,
or aesthetics
Improve productivity and
durability.
Formulation and
processefficiency
Developing efficient
technicalapproaches
andmethodologies that:
Makeusmoreefficient
Get our products to market
quicker
Enhance our product knowledge
Give us a better return on
investment.
The three pillars of our Technology Platforms innovation approach
STRATEGIC REPORT – Who we are and what we do GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
25Synthomer plc Annual Report 2022
Innovation continued
Priorities for 2023
Continue improvement in SHE at our technical centres
Continueourworktowards60%ofnewproductswithsustainabilitybenefits
NPPscoreabove20%followingtheintegrationofnewassets
Seek to commercially launch new products with bio-based or circular raw materials
Develop a process technology strategy to help deliver decarbonisation of our
manufacturing plants
Attract, develop and retain innovative, collaborative scientists and engineers
Innovation continued
Aerafin230:aninnovative
adhesive for the automotive
industry
We set out to innovate new products which offer
customers in attractive markets high performance
alongside sustainability benefits, including the
elimination of undesirable chemicals. This year,
ouradhesives teams launched Aerafin 230, which
customers use to formulate hot melt laminating
adhesives that are used by the automotive industry
when building car and vehicle interiors.
Technically known as a high-heat amorphous
polyolefin (APO), and part of our wider Aerafin range,
Aerafin 230 helps auto-makers replace adhesives
based on polyurethane reactive technology. This
provides a non-hazardous alternative to the use of
isocyanate crosslinkers, a raw material which many
customers are seeking to replace. There will be
benefits at the end of the vehicle’s lifecycle, too,
asthe use of Aerafin 230 will make disassembly
forrecycling easier.
Close to our customers – all over the world
We have a network of 20 innovation sites around the
world.Theseincludeourfourcentresofinnovation
excellence, in the UK, Germany, Malaysia and the USA,
which provide product and process innovation across
allourdivisions.Theother16sitesaretechnicalcentres
and pilot lines located close to our manufacturing sites
or the markets they serve, where they can respond to
market-specificcustomerneeds.Thesenowincludelines
atJeffersonandLongviewintheUSA,andMiddelburgin
theNetherlands,whichalljoinedournetworkfollowing
theintegrationoftheadhesiveresinsbusiness.
Our centres
ofexcellence
Akron, USA
Harlow, UK
Marl, Germany
AIC, Malaysia
Our market-specific
technology centres
USA: Auburn, Chester,
Jeannette,Jefferson,
Longview, Monroe,
Roebuck,Stafford.
Rayong, Thailand
St.Albano,Italy
Shanghai, China
Sintra, Portugal
Villejust,France
Accrington, UK
Middelburg, the Netherlands
Who we are and what we do
26 Synthomer plc Annual Report 2022
Our acrylic and vinylic
copolymer dispersions
are low-VOC, low-odour
and APEO-free, supplying
customers and end users
in the architectural and
industrial coatings markets
with binders that meet
increasingly demanding
environmental standards.
Review of
the year
28 Financial review: CFO’s introduction
30 Financial review
34 Performance reviews for divisions
asat31December2022
STRATEGIC REPORT – Review of the year GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
27Synthomer plc Annual Report 2022 27Synthomer plc Annual Report 2022
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE REPORTSTRATEGIC REPORT – Review of the year
Financial review:
ChiefFinancialOfficer’sintroduction
A strong balance sheet
isessentialtodelivering
ourrefreshedstrategy.
Lily Liu
ChiefFinancialOfficer
operating environment well positioned for future
success.Itisalsoclearthatinordertodothat,weneed
a strong balance sheet – which continues to be my top
priorityasCFO.Sobeforediscussingthedetailsofour
performance this year I will start by outlining some of
the actions we have taken to improve our balance sheet
andcreatetheplatformforthedeliveryofourstrategy.
Portfolio management to focus on core,
speciality businesses
Our refreshed strategy is focused on attractive
endmarketswhereourexpertiseinsustainable
innovation will give us competitive advantage;
ithasresultedinourreorganisationintothree
market-focused divisions and helped us to
identifythecoreandnon-core,specialityand
basechemicalelementsofourportfolio.
While our portfolio management remains strategic rather
than driven by cash considerations, making the right
divestmentsnaturallyimprovesourbalancesheet.In
December 2022, we agreed the sale of our non-core
Laminates, Films and Coated Fabrics businesses for
netcashproceedsof$267million.Thesale,which
completed in February 2023, increases the speciality
weighting of our overall portfolio in line with our strategy,
and the proceeds have been used to strengthen our
Strengthening the balance sheet
asaplatform for delivering our strategy
ThechallengesSynthomerhashadtoaddressin2022
havealreadybeendescribedelsewhere.Whathasbeen
cleartomeinmyfirstfewmonthsattheCompanyis
that despite those headwinds, Synthomer has a strong
underlying business, and has the strategy, structure
and people in place to emerge from the current
Continuing revenue
£2,383.9m
2021:£2,144.2m
Continuing EBITDA
£249.2m
2021:£498.0m
Underlying EPS (Total Group)
20.6p
2021:75.2p
Free Cash Flow:
£69.2m
2021:£217.6m
Review of the year
28 Synthomer plc Annual Report 202228 Synthomer plc Annual Report 2022
Review of the year
financialposition.Wehaveidentifiedothernon-core
businesseswhichwearereviewingforpotentialdisposal.
In the future we expect our portfolio management to
includebolt-onacquisitionsalignedtoourspeciality
focus–butonlywhenthebalancesheetallowsit.
Our new divisional structure also enables differentiated
steeringinourallocationoffinancialandoperational
resources,includingcapitalallocation.Weintendto
allocatec.75%ofcapitaltoourCoatings&Construction
SolutionsandAdhesiveSolutionsdivisionsandc.25%
toHealth&ProtectionandPerformanceMaterials.
Delivering on working capital, headroom
andcosts
Given the deteriorating macroeconomic environment
during the second half, we decided to scale back
capitalexpenditurein2022fromc.£150millionto
£91million,andexpectittobemodestlyloweragain
in2023.Wearealsosimplifyingourorganisationand
scrutinising cost across the business to drive further
efficiencies.Wealsotookthedecisiontosuspend
dividend payments for a time while we focus on
reducing leverage towards our medium term target
ofbetween1and2xnetdebttoEBITDA.
Ourstrongfocusoncashflowinthesecondhalf
resultedintheH1freecashoutflowof£62.0million
reversingtoa£131.2millioninflowinH2,including
anewreceivablesfactoringprogramme.Wewilltake
a tactical approach to working capital, and in particular
therearefurtherbenefitstobesecuredfromimproving
theworkingcapitalpositionoftherecentlyacquired
adhesiveresinsbusiness.Overallwearetargeting
£150to£200millionofcashsavingsrelativetoour
previousplansbytheendof2023.
Meanwhile, in October 2022 we secured additional
headroom when we reached agreement with our
banking syndicates to widen debt covenants and
significantlyimprovedourfinancingstructurebysigning
afive-year,£450millionfacilitywithUKExportFinance.
TheUKExportFinancefacility,80%guaranteedbythe
government, is designed to promote business success,
innovationandsustainabilityintheUK.
After the year end, the Group agreed a new
$480millionrevolvingcreditfacilitywhichextendsthe
durationofourfinancingandincludesprudentlevels
of covenant headroom given the current challenging
marketconditions.
Solid performance in a challenging year
Although we reorganised into three new divisions in
January2023,wearereporting2022performance
under the former divisional structure, which was in
placeuptotheendof2022.Theincreasingheadwinds
we faced particularly as the second half of the year
wentonareclearlyreflectedintheseresults,which
alsosufferbycomparisontotheexceptional2021
performance.Nonethelessthesolidperformance
ofmanyofouroperationssupportsmybeliefthat
Synthomer is a fundamentally strong business with
considerablevaluecreationopportunitiesahead.Thisis
atributetotheworkofteamsthroughouttheGroupto
meetourcustomers’needsinverychallengingtimes.
RevenueforthecontinuingGroupincreasedby9.7%
in constant currency, with the contribution of the
acquiredadhesiveresinsbusinessandan8.4%benefit
fromrobustprice/mixoffsettinga17.0%reduction
involume.EBITDAforthecontinuingGroupin2022
was£249.2million(2021:£498.0million).Functional
SolutionsEBITDAof£127.8million(2021:£139.2million)
andIndustrialSpecialitiesEBITDAof£31.8million(2021:
£23.4million,excludingthediscontinuedLaminates,
FilmsandCoatedFabricsbusinesses)bothreflected
relativelyrobustperformancesinthefirsthalffollowed
by a progressively more challenging second half as the
macroeconomic cycle turned and reduced end-user
demand.Inthefourthquarter,theseheadwindsalso
began to affect demand for Adhesive Technologies’
products(EBITDAsince1April2022acquisition:
£39.5million).Thedivisionalsoexperiencedanumber
of reliability and supply chain issues which we are in the
process of addressing, as well as lower-than-expected
capacityacquired.Asaresultwetooka£133.7million
non-cash impairment charge to write-off substantially all
oftheadhesiveresinsacquisitiongoodwill.Performance
ElastomersEBITDAwas£49.1million–asignificant
reduction from its unprecedented performance of
£320.7millionin2021,whichwasdrivenbypandemic-
relatedmedicalglovedemand.Themagnitudeofthe
equallyunusualdestockingcyclethatfollowedis
demonstrated by comparing the division’s 2022 outturn
withitspre-pandemic2019EBITDAof£96.3million.
AcrylateMonomersEBITDAof£21.7million(2021:
£35.3million)continuestonormalisefromthevery
stronglevelsachievedin2021asaresultofan
extremesupply/demandimbalanceinthatyear.
Setting out our medium-term targets
We described our medium-term targets for the business
aspartofthestrategyrefreshinOctober2022.Inline
withthegrowthweanticipateinourmarkets,weexpect
mid-single-digit growth over the cycle on a constant
currencybasis.WeaimtobringourEBITDAmargin
above15%,drivenbysustainableinnovationandbetter
product mix, and supported by streamlining and
simplifying our manufacturing operations and supply
chains.Andovertimeweexpectourbusinesstodeliver
return on invested capital (ROIC) in the mid-teens,
underpinned by our working capital and capital allocation
discipline.Whilestrengtheningourbalancesheet
remains my top priority, we are also implementing the
longer-term changes to our strategy and business which
will deliver against these targets and sustainably create
valueforourshareholdersandotherstakeholders.
Lily Liu
ChiefFinancialOfficer
28 March 2023
STRATEGIC REPORT – Review of the year GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
29Synthomer plc Annual Report 2022
Financial review
Discontinued operations
On 28 February 2023, the Group completed the sale of its Laminates, Films and Coated Fabrics businesses to Surteco North
America,Inc.followingsatisfactionoftheconditionstothetransactionannouncedon13December2022.Thefinalnetcash
proceedsreceivedatcompletionamountedto$262millionaftertransactionexpensesandadjustmentsforworkingcapital,
debtanddebt-likeitems,withafurther$5millionreceivableincashonthe13-monthanniversaryofcompletion.Thenetcash
proceedshavebeenusedtoreducetheGroup’sdebt.TheLaminates,FilmsandCoatedFabricsbusinessesarereported
asdiscontinuedoperationsintheseresults.
Special Items – continuing operations
Full year ended 31 December
2022
£m
2021
£m
Amortisation of acquired intangibles (44.8) (30.1)
Impairment charge (133.7) –
Restructuring and site closure costs (19.2) (29.7)
Acquisition costs and related gains (6.5) (11.9)
Sale of business (0.3) (7.4)
Regulatory fine 21.5 (57.2)
Total impact on operating loss (183.0) (136.3)
Fair value gain on unhedged interest derivatives 25.1 6.2
Total impact on loss before taxation (157.9) (130.1)
Taxation Special Items 3.6 8.8
Taxation on Special Items 39.3 11.5
Total impact on loss for the year – continuing operations (115.0) (109.8)
ThefollowingitemsofincomeandexpensehavebeenreportedasSpecialItems–continuingoperations:
Amortisationofacquiredintangibles
increasedin2022,reflectingthe
amortisation on the customer lists,
patents, trademarks and trade secrets
arisingontheacquisitionofEastman’s
adhesiveresinsbusiness.Thefairvalue
of the intangible assets arising on the
acquisition,amountingto£273.2million,
are being amortised over a period of
8-20years.
A£133.7millionnon-cashimpairment
charge was taken in the year, relating to
theAdhesivesTechnologiesdivision.This
reflectedreliabilityandsupplychainissues,
which we are working to resolve, and
lower-than-expectedcapacityacquired,
reducing the forecast earnings from the
adhesiveresinsacquisitionusedfor
impairmenttesting.
Restructuring and site closure costs in
2022comprisea£9.3millioncharge
inrelationtotheongoingintegrationof
theacquiredadhesiveresinsbusiness
intotheGroup,a£3.2millionchargein
relation to closure of one of the smaller
sites in Malaysia; and a further
£6.7millioninrelationtofurther
demolition and site rationalisation costs,
as well as costs in relation to the strategy
refresh and alignment of the business
intoitsnewdivisionseffectivein2023.
Restructuring and site closure costs in
2021comprised£13.2millionof
OMNOVA integration costs following its
acquisitionin2020,an£11.6million
charge to demolish and rationalise assets
at a small number of sites to bring them
into line with our sustainability strategy,
andafurther£4.9milliontocompletethe
rationalisation of the Group’s European
PerformanceMaterialsnetwork.
Acquisitioncostsandrelatedgainsare
fortheacquisitionoftheadhesiveresins
businessandcomprise£11.9millionof
costs, mainly professional adviser fees,
offsetbya£5.4milliongainonaforeign
exchange derivative entered into in October
2021tohedgetheacquisitionprice.
Acquisitioncostsin2021alsorelated
totheacquisitionofadhesiveresins.
In2021saleofbusinesscompriseda
£7.1millionlossontheonerouscontract
for the disposal of Synthomer’s European
TyreCordbusinessin2020.
During2018,theEuropeanCommission
initiated an investigation into styrene
monomer purchasing practices of
anumberofcompanies,including
Synthomer, operating in the European
EconomicArea.TheCompanyhas
fullycooperatedwiththeCommission
throughouttheinvestigation.In2021,
based on the information available and
Review of the year
30 Synthomer plc Annual Report 2022
Underlyingfinancecostsincreasedto
£45.8million(2021:£30.4million)and
compriseinterestontheGroup’sfinancing
facilities, interest rate swaps, amortisation
ofassociateddebtcostsandIAS19
pension interest costs in respect of our
definedbenefitpensionschemes.
The rise in the net interest payable mainly
reflectstheadditionaldebtutilisedto
financetheadhesiveresinsacquisition,
which completed in April 2022, as well as
higherbaserates.
The Group’s borrowings under the
committed unsecured €460 million
revolving credit facility remained below
the total of the related interest rate
derivative contracts and as a result the
unhedged portion of the interest rate
derivatives resulted in a gain which
wasrecognisedintheincomestatement
asaSpecialItem.
Taxation
The Group’s effective tax rate is affected
bythetaximpactofSpecialItems.Itis
therefore helpful to consider the Underlying
and Special Items tax position separately:
Underlying tax charge was
£28.1million(2021:£94.5million),
representing an effective tax rate on
Underlyingprofitbeforetaxforthe
yearof22.5%(2021:22.5%),reflecting
thegeographicalmixofprofits.
Taxation for Special Items was
£42.7million(2021:£20.6million),or
an effective tax rate for Special Items
of24.7%(2021:15.1%).Theincrease
was driven by deferred tax credits
ontheamortisationofacquired
intangibles and on the impairment of
the goodwill relating to the adhesive
resinsacquisition.
Non-controlling interest
TheGroupcontinuestohold70%of
Revertex (Malaysia) Sdn Bhd and its
subsidiaries.Theseentitiesforma
relatively minor part of the Group, so the
impact on underlying performance from
non-controllinginterestsisnotsignificant.
the resulting assessment of the expected
outcome of the investigation, Synthomer
madeaprovisionof£57.2million.In
2022, the Commission concluded its
investigation,resultinginafineof
£38.5million,tobepaidinQ32023,
resulting in a credit to the P&L via
SpecialItemsin2022.
InJuly2018theGroupenteredintoswap
arrangementstofixeurointerestrateson
the full value of the then €440 million
committed unsecured revolving credit
facility.Thefairvaluemovementofthe
unhedged interest rate derivatives relates
to the movement in the mark-to-market
of the swap in excess of the Group’s
borrowingsintheyear.
Taxation Special Items comprised a
priorperiodadjustmentinrelationto
ahistoricaltaxissueinMalaysia.
Taxation on Special Items is mainly
deferred tax credits arising on the
amortisationofacquiredintangibles
andrestructuringcosts.
£14.9millionofSpecialItems–discontinued
operations(2021:£5.8million)werealso
recognised,including£6.1million(2021:
£6.1million)ofamortisationofacquired
intangibles,£0.3millioninrestructuring
andsiteclosurecosts,and£8.3million
relatedtothecosts,primarilyprofessional
fees,incurredinconjunctionwiththesale
of the Laminates, Films and Coated
FabricsbusinessestoSurteco.
Finance costs
Full year ended 31 December
2022
£m
2021
£m
Net interest payable 43.2 26.9
Net interest expense on defined benefit obligation 1.2 2.0
Interest element of lease payments 1.4 1.5
Underlying finance costs 45.8 30.4
Fair value gain on unhedged interest derivatives (25.1) (6.2)
Total finance costs 20.7 24.2
Earnings per share
Earnings per share is calculated based
on the average number of shares in issue
duringtheyear.Theweightedaverage
number of shares for 2022 increased
to467,311,000(2021:432,290,000).
Underlying earnings per share is
20.6pencefortheyear,downfrom
75.2pencein2021,reflectingthelower
earnings relative to the prior year and
highernumberofshares.Thestatutory
earningspershareis(7.0)pence
(2021:48.3pence).
Balance sheet
Net assets of the Group decreased by
0.2%to£1,031.0million,mainlyreflecting
the£33.0millionlossfortheyear,dividend
paymentsof£99.5millionoffsetbygain
of£99.1millionontranslationof
foreigncurrency.
Provisions
Asaresultoftheregulatoryfineprovision
unwind and other movements, provisions
havedecreasedto£54.0million
(2021:£103.2million).
STRATEGIC REPORT – Review of the year GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
31Synthomer plc Annual Report 2022
Financial review continued
Theclosingbalanceincludes£15.0million
in relation to the rationalisation of sites
around the Group, most notably in Marl
andVillejust,£6.8millioninrelationtothe
onerous contract arising on the disposal
of the European Tyre Cord business, and
£9.6milliontodemolishassetsatasmall
numberofsites.
In the year, two new provisions were
recognisedonacquisitionofthe
adhesiveresinsbusinessfromEastman.
£9.9millionwasrecognisedinrelationto
environmentalremediationworkrequired
attheJeffersonandMiddelburgsites,
andafurther£9.9millionwasrecognised
for the demolition and disposal of unused
equipmentandvacanttanksatthe
JeffersonandLongviewsitesinorderto
bringtheminlinewithourESGstrategy.
During 2022, the European Commission
concluded its investigation into styrene
monomer purchasing practices, and the
finalsettlementamountof£38.5million,
to be paid in Q3 2023, was transferred to
otherpayables.
Cash performance
The following table summarises the movement in net debt and is in the format used by management:
Full year ended 31 December
2022
£m
2021
£m
Underlying operating profit (excluding joint ventures) 169.5 448.3
Movement in working capital 19.1 (82.8)
Depreciation of property, plant and equipment 86.0 64.2
Amortisation of other intangible assets 7.9 7.1
Share-based payments charge 0.7 2.1
Capital expenditure (90.8) (82.2)
Business cash flow 192.4 356.7
Net interest paid (38.2) (27.6)
Tax paid (65.6) (86.4)
Pension funding (21.3) (27.0)
Dividends received from joint ventures 1.9 1.9
Free Cash Flow 69.2 217.6
Cash impact of restructuring and site closure costs (25.9) (17.8)
Cash impact of acquisition costs 1.7 (6.6)
Proceeds on sale of business 0.3 1.7
Purchase of business (759.6) –
Share issue proceeds – 203.1
Repayment of principal portion of lease liabilities (10.1) (9.7)
Dividends paid (99.5) (73.5)
Dividends paid to non-controlling interests – (0.5)
Foreign exchange and other movements (86.8) 33.7
Movement in net debt (910.7) 348.0
Closing net debt 1,024.9 114.2
Review of the year
32 Synthomer plc Annual Report 2022
At31December2022,netdebtwas
£1,024.9million(2021:£114.2million),
principallyreflectingtheadditional
borrowingsdrawnforthe£759.6million
acquisitionoftheadhesiveresins
businessinApril2022.
Underlyingoperatingprofitreducedto
£169.5millionreflectingthetrading
performancedescribedabove.Thenet
workingcapitalincreaseof£128.0millionin
thefirsthalfoftheyearwasfollowedinthe
secondhalfbyareleaseof£147.1million.
This was as a result of active inventory and
account management, lower activity levels,
moderating raw materials pricing and a
factored receivables facility put in place in
December2022,describedbelow.Over
thefullyear,£19.1millionwasreleased
fromworkingcapital.
Inordertomanagethesignificantincrease
inworkingcapitalrequirementsoverthe
last year and optimise cash generation, the
Group put in place two-year, non-recourse
factored receivables facilities in December
2022 for a maximum aggregate amount
of€200million.Factoredreceivables
assigned under the facilities amounted
to£82.7millionnetat31December2022.
Under the facilities, all the risks and
rewards of ownership are transferred
totheassignees.
Depreciation and amortisation of other
intangibles increased due to the Adhesive
Technologiesnon-currentassetsacquired.
Capitalexpenditurewas£90.8million
(2021:£82.2million),lowerthanthe
c.£150millionplansoutlinedatthestart
ofthefinancialyear,reflectingtheGroup’s
actionstooptimisecashflow.TheGroup
continues to invest principally in its
Pathway Programme systems
transformationproject,recurring
SHEandsustenanceexpenditure.
Interestpaidincreasedto£38.2million
reflectingtheadhesiveresinsacquisition
debt.Taxpaiddecreasedto£65.6million
reflectingloweroperatingprofit,higher
payments on account as a result of the
highprofitabilityofthenitrilebusinessin
2021andsettlementofahistoricaltax
caseinH12022.
The cash impact of Special Items
including restructuring and site closure
costsandacquisitioncostsandrelated
gainswasanoutflowof£24.2million.
Dividendspaidincreased,reflectingthe
2021finaldividendpaidinthesecond
halfof2022.
Our debt is denominated in euros and
dollars.Boththeeuroandthedollar
strengthenedsignificantlyrelative
tosterlingduring2022,leadingto
aforeignexchangelossinnetdebt.
Retirement benefit plans
TheGroup’sprincipalfundeddefined
benefitpensionschemesareintheUK
and the US and are both closed to new
entrantsandfutureaccrual.TheGroup
alsooperatesanunfundeddefined
benefitschemeinGermanyandvarious
otherdefinedcontributionoverseas
retirementbenefitarrangements.
The Group’s net retirement obligation
decreasedby£49.0millionto£73.4million
at31December2022(31December2021:
£122.4million)andreflectsthemarketvalue
of assets and the valuation of liabilities in
accordancewithIAS19,includinganasset
of£5.9millionfortheUKscheme.This
reductionlargelycomprised£21.3million
of cash contributions and actuarial gains
of£34.1million.Thisactuarialgainarose
duetothe£201.2millionimpactof
changes in discount rates which was
offsetby£167.1millionreductioninthe
expectedreturnonplanassets.
Currency
The Group presents its consolidated
financialstatementsinsterlingand
conductsbusinessinmanycurrencies.
Asaresult,itissubjecttoforeigncurrency
risk due to exchange rate movements,
which affect the Group’s translation of the
results and Underlying net assets of its
operations.Tomanagethisrisk,theGroup
uses foreign currency borrowings, forward
contracts and currency swaps to hedge
non-sterling net assets, which are
predominantly denominated in euros,
USdollarsandMalaysianringgits.
In 2022 the Group experienced no overall
currency translation impact effect on
EBITDA, with average FX rates against
ourthreeprincipalcurrenciesof€1.17,
$1.24andMYR5.43tothepound.
Given the global nature of our customer
and supplier base, the impact of
transactional foreign exchange can be
very different from translational foreign
exchange.Weareabletopartially
mitigate the transaction impact by
matching supply and administrative
costcurrencieswithsalescurrencies.
Toreducevolatilitywhichmightaffectthe
Group’s cash or income statement, the
Group hedges net currency transaction
exposuresatthepointofconfirmed
order, using forward foreign exchange
contracts.TheGroup’spolicyis,where
practicable, to hedge all exposures on
monetaryassetsandliabilities.
Financing and liquidity
Asat31December2022,theGroup
hadnetdebtof£1,024.9million
comparedtonetdebtof£114.2millionat
31December2021.Asat31December
2022 committed borrowing facilities
compriseda$260milliontermloan,
a$300milliontermloan,a€460million
revolvingcreditfacility,five-year
€520million3.875%seniorloannotes
and UK Export Finance (UKEF) facilities
of€288millionand$230million.The
Group's net debt: EBITDA for the
purposes of the leverage ratio covenant
increasedfrom0.3xat31December
2021to3.7xat31December2022due
primarilytotheacquisitionofthe
adhesiveresinsbusinessin2022.
After year end, the Group agreed a new
$480millionrevolvingcreditfacility
maturing31May2025andhasrepaid
andcancelledthe$260millionand
$300milliontermloansinpartusingthe
proceeds received from the sale of the
Laminates, Films and Coated Fabrics
businesses.Thenewrevolvingcredit
facilityissubjecttooneleverageratio
covenant.Forprudenceinlightofcurrent
market conditions, this has been set at
6xinJune2023,5xinDecember2023,
4.25xinJune2024and3.5xthereafter,
and the UKEF covenant has been aligned
totheselevels.TheGroupexpectsnet
financingcostsofapproximately
£65-70millionin2023asaresultofthe
higher net debt and other changes to
theGroup'sfinancingarrangements.
Post-balance sheet events
New$480millionrevolvingcreditfacility
agreementsigned20March2023.
Sale of Laminates, Films and Coated
Fabrics to Surteco North America,
Inc.completed28February2023.
STRATEGIC REPORT – Review of the year GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
33Synthomer plc Annual Report 2022
Divisional performance reviews
On 1 January 2023, Synthomer reorganised into three new, market-focused
divisions, described on page 14. The following pages report the performance
ofthe five divisions that were in place during the reporting year to
31 December 2022.
Functional Solutions
Functional Solutions achieved a robust
commercial performance in 2022,
although demand weakened and
inflationary pressures increased over
the course of the year. Under our new
divisional structure, the majority of
Functional Solutions moved to the new
Coatings & Construction Solutions
division, with the adhesive dispersions
business moving to the new Adhesives
Solutions division.
Safety
Functional Solutions achieved a recordable
caserateof0.44in2022.Thiswashigher
thantarget,andwehavespecific
programmes in place for those sites which
requireadditionalsupportthroughout
2023.Ourzeroharminitiative,whichis
designed to strengthen our Safety, Health
and Environment (SHE) culture, was piloted
at seven of our European sites throughout
2022.Theprocesssafetyeventratewas
0.28,inlinewith2021.Deliveringastrong
SHE performance at all our sites will
continue to be our top priority within our
newdivisionalstructure.
Volumes
Functional Solutions achieved overall
volumesof592.7ktesin2022,areduction
of10%from2021.Whileoverallvolumes
werestronginthefirsthalfoftheyear,
wesawsomesofteningofdemandand
reduced volumes during the second half
of the year as macroeconomic conditions
startedtodeteriorate.
The reductions in coatings volumes were
primarily due to softening demand in
EuropeandtheUSA,COVID-19lockdowns
in Asia and our strategic reduction in
tolledvolumesintheUSA.Theeffectsof
COVID-19inAsiaalsoresultedinaslight
reduction in adhesives volumes, offset by
astrongperformanceintheUSA.
Our Fibre Bonding business (previously
Textiles),wherevolumeswereflatyear
on year, experienced good growth in
hygiene and in USA construction-facing
applications.TheConstructionbusiness
was similarly strong in the USA, but
volumes were down overall because
oflowervolumesinEurope.
The Energy Solutions business, which
has a large exposure to the oil and gas
industry, performed strongly throughout
2022anddeliveredsignificantvolume
growthcomparedto2021.
Revenues and EBITDA
Functional Solutions delivered a resilient
commercial performance in 2022, with
higher revenues, driven by increasing
inflationarypressuresandstrongmargin
management.Thedivisiondelivered
revenuesof£1,001.3millionin2022,an
11%increaseon2021.Thedivisionwas
abletopassonsignificantincreasesin
raw materials prices in most markets
andregions,despiteunitmaterialcosts
reachingrecordlevelsinsomecases.Our
focus on more differentiated products and
robust pricing management contributed to
asolidperformanceinmostofourmajor
businesses,particularlyintheUSA.
The Coatings business was most affected
by the softening of demand during the
second half of the year, with the other
businessesnotexperiencingassignificant
animpact.TheEnergySolutionsbusiness
performedverystronglythroughouttheyear.
This helped the division deliver an EBITDA of
£127.8million,an8%decreasecomparedto
theverystrongperformanceof2021.
Sustainability highlights
Sustainability is a critical value driver for
FunctionalSolutions,with45%ofournew
products introduced in the last year having
atleastonedefinedsustainabilitybenefit.
We have division-wide programmes aimed
atdeliveringenergyefficienciesand,
ultimately,decarbonisation.Thisincludes
deliveringdecarbonisationplansatsitelevel.
Progress against FY 2022 priorities
Continued to pivot towards speciality
products, moving away from
low-value-addtollingactivities.
45%ofnewproductslaunchedhad
anetpositivesustainabilityimpact.
Reduced complexity through the
closure of the Quality Polymer site in
Malaysia, and continued rationalisation
ofourproductportfolio.
Stepped up efforts in commercial
excellence to become a more
end-marketfocusedorganisation.
Responded to market conditions by
focusing on margin preservation and
working capital control in the face of
substantial raw material cost
fluctuationsandrapidlyescalating
energycosts.
Full year ended 31 December
2022
£m
2021
£m
Change
%
Constant
currency
1
%
Safety (RCR) 0.44 0.37 18.9
Revenue 1,001.3 900.3 11.2 8.5
Volumes (ktes) 592.7 655.9 (9.6)
EBITDA 127.8 139.2 (8.2) (9.4)
EBITDA % of revenue 12.8% 15.5%
Operating profit (underlying performance) 101.1 111.1 (9.0) (10.0)
Operating profit – statutory 69.8 69.8 –
1 UnderlyingConstantcurrencyrevenueandprofitretranslatecurrentyearresultsusingtheprioryear’saverageexchangerates.
Review of the year
34 Synthomer plc Annual Report 2022
Continuing operations,
Full year ended 31 December
2022
£m
2021
£m
Change
%
Constant
currency
1
%
Safety (RCR)
2
0.31 0.40 (22.5)
Revenue 233.9 197.2 18.6 18.7
Volumes (ktes) 65.9 75.7 (12.9)
EBITDA 31.8 23.4 35.9 36.8
EBITDA % of revenue 13.6% 11.9%
Operating profit (underlying performance) 25.5 15.8 61.4 62.0
Operating profit – statutory 22.7 7.8 191.0
1 UnderlyingConstantcurrencyrevenueandprofitretranslatecurrentyearresultsusingtheprioryear’saverageexchangerates.
2 IndustrialSpecialitiesandAcrylateMonomersarecombinedforoperationalreasons.
Revenues and EBITDA
Despite the lower volumes, Industrial
Specialities delivered a strong
commercial performance in 2022, with
higher revenues than the prior year driven
byincreasinginflationarypressuresand
the highly-specialised nature of our
products, which supported our focus on
pricingandoverallmarginmanagement.
Thiswasparticularlyreflectedinour
Vinyl Polymers, Lithene and William
Blythe businesses, which all delivered
verystronggrowthcomparedto2021.
Overall, the division achieved continuing
revenuesof£233.9millionin2022,19%
upon2021,andcontinuingEBITDAof
£31.8millionin2022,wellabovethe
2021EBITDAof£23.4million.
The Laminates, Films and Coated Fabrics
businesses were divested on 28 February
2023.LaminatesandFilmsexperienced
deteriorating macroeconomic conditions
during the second half of 2022, which led
toreduceddemand.TheCoatedFabrics
business, however, performed robustly
throughout 2022 as the economy of
Thailand recovered from the impact of
COVID-19andmarginsbenefitedfrom
falling resin prices and normalising
freightcosts.
Sustainability highlights
We continue to explore opportunities for
business excellence, whether in the areas
of sustainability, logistics or operational
efficiency.Forexample,atourSant
Albano site (Italy), we have reduced water
extractionby30%byreconfiguringour
boreholemanagementprocess.During
H12022,ourPolybutadieneLithene
Industrial Specialities
Industrial Specialities delivered a strong
performance in the face of inflationary
pressures and weakening demand,
growing EBITDA from the strong 2021
reporting period, and increasing
revenues. Under our divisional
restructure in January 2023, the
majority of Industrial Specialities moved
to our new Health & Protection and
Performance Materials division. This
includes our Laminates & Films and
Coated Fabrics businesses, which have
since been divested on 28 February
2023. The Speciality Additives and the
Powder Coatings businesses moved to
our Coatings & Construction Solutions
division, and the Lithene business
moved to Adhesives Solutions.
Safety
Industrial Specialities achieved a
recordablecaserateof0.31in2022,
demonstrating continued improvement
insafetyacrossthedivision.Onesite
graduated from our SHE ‘supported site’
statusinQ12022,meaningthatthe
division had no remaining sites in the
programme.Ourchemicalssitescontinued
toachievetopquartileperformanceby
industrystandardsin2022.Ourprocess
safetyeventratewas0.16.
Volumes
Industrial Specialities achieved overall
volumesof65.9ktesin2022,13%below
2021volumes,aresultoflowerdemand
in our Speciality Additives and Powder
Coatingsbusinesses.
business also successfully delivered
ade-bottleneckingprojectatits
Stallingborough plant (UK), which
increasedcapacity.
Progress against FY 2022 priorities
Further embedded SHE practices in
our surfaces plants, and continued
to drive improved performance
through strengthening SHE
processes and practices in the
chemicals plants, evidenced by
theimprovedsafetyperformance
ofthedivisionduringtheyear.
Delivered further production capacity
throughdebottleneckingprojects
andoperationalefficiency,including
the successful debottlenecking
projectatourStallingboroughsite.
Ensured a continuous supply
ofrawmaterialstositesdespite
supplychainchallenges.
Enhanced our customer services
and logistics processes to ensure
the challenging logistical
environmentwasefficiently
andeffectivelyhandled.
STRATEGIC REPORT – Review of the year GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
35Synthomer plc Annual Report 2022
Divisional reviews continued
9 months ended 31 December
2022
£m
Safety (RCR) 0.32
Revenue 391.3
Volumes (ktes) 138.5
EBITDA 39.5
EBITDA % of revenue 10.1%
Operating profit (underlying performance) 22.5
Operating profit – statutory (146.8)
aresultofsomeassetreliabilityand
supply chain issues which we are
addressing, the impact of European gas
prices and other feedstock cost dynamics,
and weakening end-market demand in the
lastquarter,aswellaslower-than-
expectedproductioncapacity.
Revenues and EBITDA
Adhesive Technologies delivered
revenuesof£391.3millionandEBITDAof
£39.5millionduringtheperiodfollowing
acquisitioninApril2022.Although
partially offset by delivery of the expected
cost synergies, this performance was
lowerthanprojected,principallyinthe
fourthquarteroftheyear.A£133.7million
non-cash impairment charge to write-off
substantially all of the adhesive resins
acquisitiongoodwillwastakenasaresult.
Sustainability highlights
In the year we launched our high heat APO,
Aerafin230,whichallowscarmakersto
formulate hot melt laminating adhesives
for automotive interior applications,
replacingreactivePURadhesives.
Aerafin-basedadhesiveseliminatethe
use of isocyanate crosslinkers that have
to be used with the PUR, a substance
thatisincreasinglyregulated.
Also in the area of automotive
sustainability, we developed a new
modifiedsilaneresinwhichhelpsa
tyre-making customer improve wet and
dry grip for tyres while reducing rolling
resistance,improvingfuelefficiency.
We also launched a new platform
technology enabling better recyclability and
reducingrawmaterialvolumeinpackaging.
Adhesive Technologies
We created the Adhesive Technologies
division on 1 April 2022, following the
completion of Synthomer’s acquisition
ofEastman’s adhesive resins business. It
operated as a division until 31 December
2022, when it became the core of the
new Adhesive Solutions division.
The integration proceeded to plan,
withexit from almost all the Eastman
transition service agreements (TSAs)
and supported systems at the end of
November 2022. Synergy delivery was
also on target thanks to decisive early
action and rapid organisational
redesign, and trading in the first two
quarters of ownership was in line with
our expectations. However, in the fourth
quarter volume and EBITDA deteriorated
due to a number of macro- and
company-specific factors, resulting
inanon-cash impairment of the
acquisition goodwill.
Safety
Safety performance overall was in line
with recent years of operation under
Eastman’s ownership, with an improved
recordablecaserateof0.32(2021:0.56)
and a slightly reduced process safety
eventrateof0.59;differencesin
calculation methods mean that these
figuresareforguidance,ratherthana
directcomparison.
Volumes
Adhesive Technologies delivered overall
volumesof138.5ktesin2022.Thisis
asolidperformance,butbelowthe
historical run rate of the business,
Priorities and progress
The clear priority for the division and
ourpeopleduringthemajorityof2022
wasexecutingtheintegration.Thetimely
exitfromTSAscoveringdozensof
business processes across all functions
inNovember2022wasanimportant
milestone, as was the integration of
newpeopleintoSynthomerandbuilding
relationships with our customers and
suppliers.Acriticalprioritygoingforward
is the stabilisation and optimisation of
end-to-end supply chain processes in the
new Synthomer system environment and
the broadening of feedstock options
which will help to increase production
output in readiness for returning
marketdemand.
Review of the year
36 Synthomer plc Annual Report 2022
Full year ended 31 December
2022
£m
2021
£m
Change
%
Constant
currency
1
%
Safety (RCR) 0.19 0.11 72.7
Revenue 659.7 951.5 (30.7) (31.4)
Volumes (ktes) 645.3 844.2 (23.6)
EBITDA 49.1 320.7 (84.7) (84.2)
EBITDA % of revenue 7.4% 33.7%
Operating profit (underlying performance) 19.5 294.9 (93.4) (92.6)
Operating profit – statutory 17.6 286.9 (93.9)
1 UnderlyingConstantcurrencyrevenueandprofitretranslatecurrentyearresultsusingtheprioryear’saverageexchangerates.
Volumes
Performance Elastomers achieved
overallvolumesof645.3ktesin2022,
a24%reductionon2021.
The exceptional global demand for NBR
glovesduringtheCOVID-19pandemic
resulted in a record performance for
PerformanceElastomerslastyear.We
reported at the interim stage that
destocking of nitrile gloves meant that
demand had softened substantially,
resulting in lower NBR volumes, revenues
and EBITDA compared to the exceptional
performanceof2021.Duringthesecond
half of 2022 this destocking continued,
withproductionvolumesfurtherreduced.
While underlying end-customer demand
for medical gloves remains similar to
pre-COVID levels and we see favourable
growth trends in the medium term, the
current destocking impact is not expected
toabatebeforetheendof2023.Chinese
glove manufacturers also raised output
in2022,puttingadditionalstrainonglove
prices and plant utilisation of glove
producersinMalaysiaandelsewhere.
Volumes in our Paper, Carpet, Compounds
and Foam business were also down, by
21%,againstastrongcomparativeperiod.
Revenues and EBITDA
The division delivered revenues of
£659.7millionin2022,comparedto
£951.5millionin2021.Itachieved
EBITDAof£49.1millionin2022,down
fromtheexceptional£320.7million
achievedin2021.
As well as the impact of glove destocking
on NBR demand described above, the
Performance Materials business also saw
Performance Elastomers
Destocking of medical gloves and
weakening demand in paper and carpet
markets in 2022 meant that volumes and
revenues for Performance Elastomers
were substantially lower than the
exceptional performance of 2021. The
business focused on positioning itself
for the return of long-term demand, with
short-term actions concentrated on cost
and margin improvement. Under our
divisional reorganisation of January 2023,
the majority of Performance Elastomers
moved to the new Health & Protection
and Performance Materials division,
with consumer-focused foams moving
to Coatings & Construction Solutions.
Safety
Performance Elastomers achieved a
recordablecaserateof0.19in2022,
aheadofthetargetof0.21andthe
division’s rolling three-year case rate of
0.20.Theprocesssafetyeventratewas
0.05in2022,anexcellentachievement.
There were some notable SHE milestones
deliveredin2022,includingzeroaccidents
for the recently-commissioned NBR reactor
in Pasir Gudang (Malaysia) with more than
750,000hoursworked,100%completionof
all Safety Improvement Plan actions across
allsitesinthedivision,a60%reductionin
the number of losses of containment of
flammablesubstances,andmaintaining
an internal safety audit rate of double the
targets.AfireatourFilago,Italysitein
September 2022 was swiftly contained
andcausednoinjuries;wehavestudied
the incident and applied the lessons
learned to other similar operations, in
accordancewithourSHEframework.
reduced demand from the middle of the
year onwards following downstream
destocking, although cost-saving initiatives
helpedtooffsettherevenueimpact.
We believe that underlying demand
fornitrilegloveswillcontinuetogrow
withbroaderapplicationsincatering,
entertainment, security and health-related
industries.Thebusinessiswell-positioned
tocapturethislong-termopportunity.
Sustainability highlights
A high proportion of our new products have
sustainabilitybenefits,andweareseeing
good progress from our world-leading nitrile
gloveR&DcentreinMalaysia.Industrial
trials of our new SyNovus™ Plus product
have continued, involving production runs
on selected customer lines to demonstrate
the product’s potential energy and carbon
savingsforcustomers.Trialresults
demonstrate that with SyNovus™ Plus,
glove-making customers can potentially
reduce their operating temperature by 20°C,
whichisequivalentto2kgofCO2 emission
per1,000pieces.Thenewproductlinealso
enables an accelerator-free and sulfur-free
formulation, reducing skin sensitivity for
users of the gloves and eliminating sulfur
dioxide emissions when medical gloves
arerequiredtobeincinerated.
Progress against FY 2022 priorities
The Pasir Gudang 60ktes plant was
commissionedontimeinQ12022.
Trials of SyNovus™ Plus have
continued with multiple potential
customers.
Given the slowdown in the nitrile
market, we have delayed investment
in further capacity while continuing
to develop expansion plans (including
investment grant and tax support
from national and local governments)
to bring on additional capacity when
appropriate, as well as process and
productinnovationinitiatives.
STRATEGIC REPORT – Review of the year GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
37Synthomer plc Annual Report 2022
Divisional reviews continued
Full year ended 31 December
2022
£m
2021
£m
Change
%
Constant
currency
1
%
Safety (RCR)
2
0.31 0.40 (22.5)
Revenue 97.7 95.2 2.6 2.5
Volumes (ktes) 50.8 55.9 (9.1)
EBITDA 21.7 35.3 (38.5) (39.1)
EBITDA % of revenue 22.2% 37.1%
Operating profit (underlying performance) 20.6 34.5 (40.3) (40.9)
Operating profit – statutory 20.6 29.3 (29.7)
1 UnderlyingConstantcurrencyrevenueandprofitretranslatecurrentyearresultsusingtheprioryear’saverageexchangerates.
2 IndustrialSpecialitiesandAcrylateMonomersarecombinedforoperationalreasons.
Revenues and EBITDA
Acrylate Monomers delivered a robust
performance on revenues, slightly ahead
ofthepreviousrecordin2021.Itachieved
revenuesof£97.7millionin2022,a
2.6%increaseon2021,reflectingour
consistentfocusonproductportfolio.
EBITDAof£21.7millionin2022compares
toour2021EBITDAof£35.3million,
reflectingtheprocessofnormalisationof
unit margins in 2022 from the exceptional
levelsin2021,whichweredrivenbya
number of supply constraints affecting
themarket.Significantinflationary
pressures related to the war in Ukraine,
particularly energy prices, were also a
factor in 2022, while additional supply
from regions outside Europe reduced our
ability to maintain the strong unit margins
oftheprioryear.
Sustainability highlights
A key element of our transformation
programme at Sokolov was the closure
ofthesite’scoal-firedpowerstationin
April2022.Thismarkedtheendofdirect
coal use in Synthomer, reinforcing our
strong commitment to reducing our
carbonfootprint.Sharply-escalatinggas
prices triggered by Russia’s invasion of
Ukraine meant we needed to make a
short-term switch to importing steam
from a local coal-powered station at
times in 2022, but our long-term
commitment remains to a permanent
moveawayfromcoal.
Our investment at the site will also reduce
oursitewaterrequirementsandCO2
emissionsbyapproximatelyaquarter.
Acrylate Monomers
Our Acrylate Monomers division
achieved record revenues and strong
volumes in the face of significant
headwinds including unprecedented
energy cost inflation and a weak
economic environment in the second
half of 2022. While profitability
decreased compared to the exceptional
performance of 2021, it compares
favourably to prior years. Under our
divisional restructure, Acrylate
Monomers moved to our new Health &
Protection and Performance Materials
division in January 2023. Acrylate
Monomers continues to operate from a
single site at Sokolov, Czech Republic.
Safety
Acrylate Monomers achieved a
recordablecaserateof0.31in2022
comparedto0.40in2021,thanksto
continuedprogressonourinjuryrate
reductionplan.
Disappointingly, there were three process
safetyeventsrecordedin2022.Thisis
asetbackafterthepreviousfouryears,
which had seen steadily improving
process safety, with no process safety
eventsin2021.Weremaincommitted
toourprocesssafetyimprovementplan.
Volumes
Overallvolumeswere50.8ktesin2022,
aslightreductioninvolumescomparedto
2021duetoachangeinproductmixand
plannedmaintenanceoutagesonourlines.
Progress against FY 2022 priorities
Continued to strengthen SHE
practices and processes to drive
improvedperformanceattheplant.
Continued to review potential options
for new products, including
successful testing of more
sustainable products produced at
lab-scalewithseveralcustomers.
We are also exploring collaboration
with potential partners on developing
new bio-based products which
would support our customers in
achievingtheirnetzeroaspirations.
Review of the year
38 Synthomer plc Annual Report 2022
Our specialist polymers are used to bond and
bind industrial and consumer adhesives for a
wide range of applications, including packaging
and speciality tapes, paper and filmic labels,
contact adhesives and can sealings.
Synthomer
andsustainability
40 Sustainability introduction
44 Our approach to sustainability
46 Products
47 – Innovating sustainable products
50 – Sustainable procurement
53 Operations
54 – Health and safety
58 – Environment
63 People
64 – Our employees
71 – Our communities
STRATEGIC REPORT – Synthomer andsustainability GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
39Synthomer plc Annual Report 2022 39Synthomer plc Annual Report 2022
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE REPORTSTRATEGIC REPORT – Synthomer andsustainability
Introduction
Encouraging progress
inthefaceofavolatile
businessenvironment
The way we manage key
sustainability priorities is
maturingrapidly,withreal
momentum in areas such as
diversity and inclusion, our
commitment to sustainable
innovation, and making strides
onthepathtonetzero.
Marshall Moore
ChiefTechnologyOfficerandPresident,Americas
It has been a challenging, yet rewarding year for our
sustainabilityagenda.Thebusinessenvironment
has undoubtedly created performance challenges in
some areas – but the way we address, monitor and
report on key sustainability priorities is maturing
rapidly, with real momentum in areas such as our
diversity and inclusion programme, our commitment
to sustainable innovation, and making strides on
thepathtonetzero.We’vealsoupdatedourVision
2030 roadmap to be more precise and aspirational,
yetpractical,inourtargets.(Seepage 43 for more
detailedinformationonthosechanges.)
This momentum is best seen in our work to develop
science-based greenhouse gas emissions targets –
acommitmentwemadewhenwefirstlaunched
Vision2030.Aswellasincreasingourtargetsin
Scopes1,2and3,wearenowreportingonabsolute
emissionsratherthanintensity.Ouremissions
targets are now awaiting approval and validation
bytheScienceBasedTargetsinitiative.
Wealsosetaninternalcarbonpriceof£85pertonne
ofcarbondioxideequivalent.Wenowusethatprice
toassessallmajorcapitalinvestmentprojects
ofmorethan£1million.Thiswillhelpguideour
engineering teams and business leaders towards
lower-carbonengineeringsolutions.
These are important milestones, but they also
createnewhurdlesforustoovercome.Forexample,
wewillneedtomakesignificantadvancesinour
manufacturing technology and work more closely
with suppliers, customers and experts to get a
clearer understanding of the indirect emissions data
in our supply chain (our Scope 3 emissions, which
wediscussonpage 48) so that we can work to
reducethem.Butsustainabilityandinnovationremain
central enablers of Synthomer’s refreshed business
strategy,sowearefullycommittedtofindingsolutions.
That commitment can also be seen in our ongoing
work to disclose our climate-related risks and
opportunities.Thisyear,weexpandedourscenario
analysis to cover a broader range of geographies,
products and physical risks in our Task Force on
Climate-relatedFinancialDisclosures(TCFD)report.
Synthomer and sustainability
40 Synthomer plc Annual Report 2022
Synthomer and sustainability
Growing momentum in diversity and inclusion
We have continued to make excellent progress in
creatingamorediverseandinclusiveSynthomer.
This year, the percentage of women in senior
managementrolesroseto25.4%–upfrom
20%in2021,andfrom9%justthreeyearsago.
Meanwhile,weofficiallywelcomedLilyLiuasour
newChiefFinancialOfficerinJuly2022,which
meanswomencontinuetomakeup33%ofour
Board.Weareseeingchangeattheotherendof
thecareerspectrum,too,where56%ofournew
graduatesoverthepastfouryearsarewomen.
We want to keep that momentum going, which is
why we’ve set a new, more focused gender diversity
targetof40%seniormanagementby2030.Thiswill
helpusembedgreaterdiversityatthehighestlevels
oftheCompany.Itisalsowhydiversity,equity,
inclusion and holistic employee development form
oneofthepillarsofourrefreshedstrategy.Delivering
thatstrategyrequiresanewkindofculture,drivenby
innovation,collaborationandsharedresponsibility.
Our employees are key to helping us deliver our
diversity and inclusion ambitions and I’m delighted
to see our network of employee resource groups
growing.Thisyear,weestablishedTHRIVE,our
LGBTQ+ employee resource group, and EMPOWER,
agroupthatcelebratesculturaldiversity.Theyjoin
ourwomen’snetwork,ENGENDER.
It is also our employees who make our community
programme so successful, and this year has seen a
welcome return to local activities after two years of
COVID-19restrictions.AtaGrouplevel,ourSynthomer
Cares week returned for its second year, with more
than500employeesacross16countriesclocking
up29,000kilometresinaglobalcharityrun.
Through our Synthomer Foundation in the USA
andsite-levelcommunityactivitiesaroundthe
world,wecontributed£1.25milliontocausesthat
support underserved communities, education and
publichealth,includinga£100,000donationtothe
RedCross/RedCrescentUkraineCrisisAppeal.
Sustainable products, driven by innovation
AsSynthomer’sChiefTechnologyOfficer,Iam
especially pleased with our progress against our
sustainableproductstargetthisyear,reflectingour
strategiccommitmenttosustainableinnovation.
Thisyear,50%oftheproductswelaunchedhave
definedsustainabilitybenefits–upfrom43%in
2021.Thisisinspiteofchallengeswe’vefaced
running production trials for new products at our
ownandourcustomers’plants,causedbyCOVID-19
and supply chain disruption, which meant some
customers were unable to test and validate our
newproductsuntillaterintheyear.Thesedelays
affected our new SyNovus™ Plus nitrile glove line,
althoughthatvalidationworkpickedupspeedinthe
second half of the year and we are now on track for
fullcommercialadoptionin2023.
Our innovation team also made great strides in the
investigation of new bio-based product chemistry
platforms–andweareincreasinglyconfidentabout
theirfuturecommercialopportunities.Wealsosee
opportunities to learn from our new adhesives
colleagues to drive sustainable innovation that
couldsupportamorecirculareconomy.
50%
of new products launched
with sustainability
benefits.
STRATEGIC REPORT – Synthomer andsustainability GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
41Synthomer plc Annual Report 2022
Introduction continued
Progress challenged by strong headwinds
Risingcosts,fluctuatingdemandandchanges
inourproductmixhaveaffectedperformance
incertainareasthisyear.Forexample,talent
shortages at some sites affected production
availabilityatourplants,whileournewacquisitions
havehadanimpactonourhealthandsafetymetrics.
We are working with our newest sites to ensure that
the management systems and safety culture they
haveinplacemeetSynthomer’sstandards.
Ourabsoluteemissionshavegonedown,mainlyasa
result of lower production, and we have made good
progressonreducingourScope1emissionsintensity,
reflectingthefactthatwemovedawayfromcoalto
gas-firedpoweratourplantinSokolov,CzechRepublic.
Onwaste,asignificantnumberofone-timedisposals
affected our performance and as such we did not
achieveourobjectivetoreducewastetolandfillby12%.
Some of our results have been affected by our
worktodevelopmorematuredatacollectionand
reportingmechanisms.Forexample,wehaverefined
thewaywemeasurewaterconsumption.This
hasresultedinanincreaseinourreportedwater
withdrawalpertonnethatisaround15%higherthan
2019(excludingournewestadhesiveresinssites).
Giventhatwehavedevelopedmoreaccuratewater
balance models, plus the large variation versus
2019,wedecidedtoremoveourshort-term
objectiveofmaintainingwaterintensityat2019
levels.Instead,wewillfocusonusingourimproved
data to take more meaningful action in line with
theframeworkprovidedbyournewwaterpolicy.
Continuing to build a long-term renewable
electricity plan
Our procurement teams have probably faced some of
our strongest external headwinds this year – but they
havedoneanoutstandingjobatcontinuingtosource
renewable electricity supplies in the face of a growing
energycrisisandourchangingbusinessfootprint.
Once again they helped us achieve our 2030
targettobuy80%ofourelectricityfromrenewable
sources – this far exceeds our short-term 2022
objectiveof50%.Wealsocontinuedtomakegood
progress in our plans to introduce more power
purchaseagreements(PPAs).Thiswillhelpussecure
renewableenergyatmorepredictablepricesoverthe
longerterm.Forexample,wecompletedaprojectto
set out our PPA strategy for the coming years and
startedaEurope-widePPAproject.
Building on our successes to realise our
Vision 2030 ambitions
There is no doubt that we still have plenty of work
todo.Aswecontinuetointegrateournewsites
andteamswewillcontinuetoensurethatsafety,
healthandenvironmentremainourfirstpriority.And
wewillneedtofindnewtechnologiesandmaterials
tohelpuslowerouroperationalfootprint.
Nevertheless, the work we’ve done since launching
Vision 2030 two years ago is gaining real momentum,
andtheupdateswe’vemadethisyearreflectour
increasingconfidenceinoursustainabilityagenda.
It demonstrates that we have the products, people
and desire to keep driving sustainability into
everythingwedo.Ilookforwardtoworkingwith
mycolleaguestomakethoseambitionsareality.
The UN’s Sustainable Development Goals (SDGs)
mostrelevant to our Vision 2030 roadmap
Our targets are underpinned by a series of
short-termobjectivesandarealignedwith
the UN’s SDGs that are most material
toourbusiness.
Synthomer and sustainability
42 Synthomer plc Annual Report 2022
Synthomer and sustainability
Vision 2030 roadmap – a snapshot
of our progress in 2022
Our Vision 2030 roadmap includes targets
fortheareaswherewecanhavethemost
material impact in this critical decade for the
world.Whenwefirstlaunchedtheroadmap
in2020weknewthatsomeofthosetargets
were deliberately stretching, while others were
focusedonimmediatepracticalprogress.
Withmoreconfidenceandagrowingtrack
record, we have taken steps to update some
of our targets to become more precise and
aspirational,whileremainingpractical.This
year we have:
MadeourScope1,2and3emissions
targets more challenging and will now
report on absolute emissions instead of
intensity, meaning they are aligned with
theScience-BasedTargetsinitiative(SBTi).
Revised our gender diversity target to
build on our success over the past two
years.Wearenowaimingfor40%senior
managementgenderdiversityby2030.
Refinedouremployeeengagementtarget
withtheaimofachievingupperquartile
engagement scores against external
benchmarks.
Having expanded our adhesive business
throughouracquisitionfromEastman,we
haveresetour2019baselineforourScope1,
2 and 3 Vision 2030 targets and used
thatGroup-widebaselinetosetournew
science-basedtargets.
TohelpusmakeprogresstowardsVision2030,
wealsodefinedaseriesofshort-term2022
objectives,whichwehavenowrenewedfor
2025:wereportontheseintherelevant
section.Wehavealsosetournewshort-term
objectivesagainstanew2022baselinefor
energy,waterandwaste.
Unless otherwise noted, we report this year’s
progressagainstourVision2030targetsasa
Group,includingouradhesiveresinsacquisition.
Later in this section we report our progress against
ourshort-termobjectivesaslegacySynthomer
(excludingouradhesiveresinsacquisition).
Products For more information on our Vision 2030 progress in 2022, see our Products section on pages46to52
Sustainable products
At least 60% of new products with enhanced
sustainability benefits
2022:
50%
2030 target 60%
Sustainable procurement
80% procurement spend with a sustainability rating
2022:
37
*
%
2030 target 80%
*ExcludingadhesiveresinsbusinessacquiredinApril2022
Operations For more information on our Vision 2030 progress in 2022, see our Operations section on pages53to62
Health and safety
Recordable injury case rate (RCR)
(per100,000hoursforemployeesandcontractors)
2022:
0.34
2030 target 0.200.50
Process safety event rate (PSER)
(per100,000hoursforemployeesandcontractors)
0.50
2022: 0.22
2030 target 0.10
Environment
Reduce Scope 1 and 2 absolute emissions by 47%
2022:
36%
2030 target 47%
Reduce Scope 3 absolute emissions by 28%
2022:
18%
2030 target 28%
Electricity from renewable sources plus improving
energyefficiency in all our operations
2022:
80%
2030 target 80%
Manage and minimise water consumption at all locations.
Introduce water management plans in water-stressed areas
and highest consumption sites
People For more information on our Vision 2030 progress in 2022, see our People section on pages 63 to 72
Our employees
40% senior management gender diversity
(the percentage of women in senior management roles)
2022:
25.4%
2030 target 40%
Achieve upper quartile engagement scores against
externalbenchmarks
Our communities
Provide volunteer support and financial contributions in
excess of £1 million a year to advance education, public
health, diversity and environmental stewardship
2022:
£1.25m
2030 target £1m+
STRATEGIC REPORT – Synthomer andsustainability GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
43Synthomer plc Annual Report 2022
Our approach to sustainability
Our approach to sustainability is informed by the issues that matter
mosttoourstakeholdersandourparticipationinindustryassociations.
Independent assurance helps us benchmark our sustainability practices
andperformance,andhighlightopportunitiestoimprove.
Our materiality assessment
We carried out our most recent
materialityassessmentin2021and
continue to use it to help us prioritise
the topics that matter most to our
stakeholders.
This year, we have particularly focused
on the following areas:
Health and safety, which remains
our highest priority, particularly as
we continue our work to integrate
newlyacquiredsites.
Ethics and compliance, to ensure
that our expectations and standards
are clear and consistently embedded
across the enlarged Group and
extendedproductportfolio.
Energy management, which has
increased in importance as a result
oftheglobalenergycrisis.
Reducing Scope 3 emissions
remains an important topic and
ourprocurementandinnovation
teams are working together to
identify and evaluate lower-carbon
andalternativerawmaterials.
Ournewlyacquiredadhesive
resinsbusinessoffersusgreater
opportunities to contribute to the
circulareconomy.Asaresult,this
topic has grown in importance
thisyear.
We will carry out our next materiality
assessment in 2023 to refresh our
understanding of the issues that are
uppermostinstakeholders’minds.
Products
1
Sustainableprocurement page50
2
Technology and innovation page 24
3
Manufacturingexcellence page53
4
Product safety page 49
5
Customer satisfaction
and engagement page 49
6
Circular economy page 48
Operations
7
Occupationalhealthandsafety pages54and55
8
Processsafety pages55and56
9
Energymanagementandreduction pages59and60
10
Waterstewardship page61
11
Greenhousegasemissionsreduction pages58to60
12
Waste generation and minimisation page 62
People
13
Ethics and integrity pages 69 and 70
14
Communication and training pages 66 and 69
15
Employee conditions page 68
16
Diversity and inclusion page 66
17
Talent development page 69
18
Communityengagement pages71and72
Strategy and governance
19
Sustainable growth pages 34 to 38
20
Risk management pages 74 to 83
21
Digitalisation pages51and69
22
Responsible and involved
management frompage92to145
23
Stakeholder involvement
and engagement page 90
24
Compliance pages92to145
VERY IMPORTANT
Importance to stakeholders
IMPORTANT
IMPORTANT
Importance to Company
VERY IMPORTANT
Synthomer and sustainability
44 Synthomer plc Annual Report 2022
Understanding our climate-related
risks and opportunities
In 2022, we continued to deepen our
understanding of our climate-related
risks and opportunities in line with the
Task Force on Climate-related Financial
Disclosures (TCFD) through our ongoing
scenarioanalysiswork.Thisnowcovers
our three key chemistries, three main
regions,morethan50%ofourproducts
by volume and all the potential physical
riskstowhichwemaybeexposed.See
our TCFD report on pages 84 to 89.
Having embedded climate-related issues
intoourprincipalrisksin2021,weare
continuing to develop our approach to
ensure our risk management framework
addresses the relevant TCFD
requirements.SeeourRiskreporton
pages 73 to 83formoreinformation.
External benchmarking
andaccreditation
We obtain independent assurance of our
sustainability practices and performance
and benchmark ourselves against our
peers so we can better understand
ourprogressandopportunitiesfor
improvement.Wedothisthrough
voluntary participation in several
externalprogrammes(suchasCDP
andEcovadis)andbyreviewingour
ratings on several recognised indices
suchasISSESGandMSCI.Thisyear
MSCI upgraded us from an ‘A’ to a ‘AA’
rating,puttingusinthetopquartileof
sustainability performance for the
SpecialtyChemicalssector.In2021,we
received an LSE Green Economy mark,
which is awarded to companies that
earnmorethan50%oftheirrevenue
from products that contribute to
environmentalobjectives.
https://www.synthomer.com/
sustainability/ratings-and-resources/
Membership of industry
associations
We work closely with the main sector
groups in our industry, including the
Chemical Industries Association (CIA) in
the UK, CEFIC and the European Polymer
Dispersion and Latex Association
(EPDLA) in the EU, the American
Chemistry Council (ACC) in the USA, and
the Malaysian Rubber Glove Manufacturers
Association (MARGMA) and Malaysian
Rubber Products Manufacturers
Association(MRPMA)inMalaysia.In
many cases, this work includes taking
aseatonthesustainabilitycommittees
andactivelyparticipatinginsustainability
workshops.Wehavealsojoinedthepeer
networkTogetherforSustainability.
Our approach to reporting
andassurance
This Annual Report, together with
associated downloads, meets the
requirementsoftheGlobalReporting
Initiative(GRI).Wehavepreparedthem
tocomplywithGRI’s‘core’option,and
the topics we cover are those we and our
stakeholdershaveidentifiedasthemost
material.ThedetailsofspecificGRI
disclosurescanbefoundintheannex
onpages216to218.
STRATEGIC REPORT – Synthomer andsustainability GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
45Synthomer plc Annual Report 2022
Products
Our success relies on ensuring that our products meet the
expectations of our customers and deliver differentiated value
tothemarketstheyserve.Increasingly,thatmeansdesigning
themtoprovidemoresustainablesolutions.Wearealso
committed to sourcing the raw materials we need to make
those products from more sustainable sources and in ways
thatrespecthumanrights.
This section is divided into two related
parts, since procurement and innovation
play complementary roles to ensure the
sustainabilityofourproducts.
Innovating sustainable products – page 47
Sustainable procurement – page50
Synthomer and sustainability
46 Synthomer plc Annual Report 2022
Innovating sustainable products
For decades, Synthomer has been a leading supplier of
water-based polymers that avoid the use of solvents and
keep harmful volatile organic compounds (VOCs) out of the
atmosphere. Now, with our new adhesive resins sites, we are
integrating our solvent-free adhesive solutions business and
positioning ourselves for growth.
Our highly creative innovation team is committed to adapting
our existing product portfolio and designing new products with
performance and sustainability benefits. It is why innovation
and sustainability are at the heart of our refreshed strategy.
Our performance in 2022
This has been a good year for our innovation
programme,with50%oftheproductswe
introduced featuring one or more sustainability
benefit.Andwecanseeastrongsetofproduct
developmentswithdefinedsustainabilitybenefits
comingthroughourinnovationpipeline.
Wealsoachievedourshort-term2022objective
toadvancebyadvancingthedevelopmentofnew
productplatformswithatleast20%bio-content.
Wewillnowmovethetechnicallyfeasiblenew
proprietary polymer compositions that are based
onrenewablefeedstocksintothenextstageof
screening, in an array of potential applications
inourcoremarkets.
This year’s progress is particularly notable given
thelingeringimpactofCOVID-19andsupplychain
disruptions on our ability to commercialise new products
in2021.Whilethosechallengescontinuedtoaffectus
at the start of 2022, we saw increasing momentum in
the second half of the year as more customers were
abletotestandvalidateournewproducts.
Thiswasourfirstfullyearusingournewproduct
sustainability scorecard to help us prioritise innovation
projectsagainstspecificcriteria.TheChemical
Industries Association shared our scorecard with its
membersasanexampleofgoodpracticeinassessing
andtrackingsustainabilityinoperationalissues.
We continued to embed sustainability into everything
wedo,viaoursustainabilitydeliveryboard.This
group of representatives from across our divisions
and functions work together in cross-functional
workstreams to deliver our sustainability agenda and
propose new targets, goals and recommendations
totheSustainabilitySteeringCommittee.
Our Vision 2030 target:
sustainable products
At least 60% of new products with enhanced
sustainability benefits
Target 60%
2022
50%
2021
*
43%
Our target demonstrates our aim to create an increasingly
sustainableportfolioofchemicalproductsforourcustomers.Italso
reflectsthefactthatdesigning,developingandcommercialising
newproductstakestime.Someoftheproductsweselltodayspent
several years in research and development before they were ready
forcommerciallaunch.
Our short-term objective
*
2022 Technology platform to develop products
that contain a minimum of 20% raw materials
that come from low-carbon sources.
Wehavenowrenewedourobjectivesfor2025asfollows:
Atleast55%ofnewproductswithsustainability
benefitsby2025.
More detailed information on our progress against our target
andobjectivescanbefoundthroughoutthissection.
*ExcludesadhesiveresinsbusinessacquiredinApril2022
STRATEGIC REPORT – Synthomer andsustainability GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
47Synthomer plc Annual Report 2022
Products continued
Using our innovation skills to
address Scope 3 emissions
Tackling our Scope 3 emissions is one
ofourbiggestsustainabilitychallenges.
There are several ways in which we can
do that, such as actively working with
suppliers who have lower emissions
orarelocatedclosertoourplants,
identifying raw materials that include
recycled content, introducing new
bio-based raw materials and designing
newproductchemistries.Itislikelythat
thefirsttwooftheseoptionswillhelpus
make an impact on Scope 3 emissions
intheshortterm,whilewecontinueour
work to identify new raw materials and
designnewchemistries.
At the same time, we want to establish
aplatformfromwhichwecanaccelerate
the rate we switch to non-fossil fuel-
basedandmoresustainablefeedstocks.
Tohelpusdothat,weareinthefinal
stages of certifying ourselves at a
GrouplevelundertheInternational
SustainabilityandCarbonCertification
for Biomass and Bioenergy’s ISCC PLUS
programme.Thiscertificationmeanswe
can use lower-carbon raw materials, such
as bio-based or circular materials, and
report using a ‘mass balance’ approach,
reducingtheneedforcapitalinvestment.
Meanwhile, innovation teams within our
businessesmadesignificantprogress
developing and introducing new products
offeringsustainabilitybenefits.Aswellas
working with our central research team on
bio-based polymers, we have introduced
new products that eliminate ingredients of
concern, provide an alternative to more
hazardousmaterials,andimprovecircularity.
For example, our Adhesive Technologies
divisionintroducedAerafin230,anew
high-heatamorphouspolyolefinfor
useinhotmeltlaminatingadhesives
within automotive interior applications
(as described on page 26).
Our Functional Solutions division
hasmadegreatprogressreplacing
alkyphenol ethoxylate surfactants in
ourproductsforfibrebonding.These
substances are restricted under
European REACH regulation, although
stillallowedinotherpartsoftheworld.
However, we are now proactively
replacingthemoutsideEurope.
As we continue to integrate our new
adhesive resins sites, we will look for
waystoshareknowledgetosupportour
refreshedstrategy.Forexample,we
arenowevaluatingoptionstouseraw
materials derived from waste plastic to
support a more circular economy and
reduceoverallcarbonemissions.
SyNovus
™
Plus
SyNovus™ Plus provides the same high-performance
barrier protection as conventional nitrile latex
butwith several new sustainability benefits. This
means the product scores highly on our product
sustainability scorecard.
We have eliminated the use of rubber accelerators,
which can leave residues that cause allergic
reactions. This means that gloves made with
SyNovus™ Plus can be used by more professionals
and consumers in our customers’ markets.
And because SyNovus™ Plus requires less heat
tocure, customers benefit from energy savings
ofmore than 10%, making it a significantly more
sustainable material than conventional latex.
Thiswas demonstrated through an independent
lifecycle assessment conducted according to ISO
14040, 14044 and 14071.
Gloves made with SyNovus™ Plus can also be
recycled into new rubber products. As well as
saving thousands of tonnes of waste to landfill
and low-efficiency incineration, it will help establish
a truly circular economy for nitrile gloves.
Synthomer and sustainability
48 Synthomer plc Annual Report 2022
We also took important steps to develop
our in-house lifecycle assessment (LCA)
capabilities and improve the way we
measure and monitor the environmental
impactofourproducts.
For example, our LCA team has received
training on industry standard software
specificallydesignedtohelpcalculateLCAs
accordingtoISO14040/14044.Sinceour
customers and the market expect us to
calculate and address our Scope 3
emissions, our immediate focus is on
analysingproductcarbonfootprint(PCF).
We are now able to provide customers with
meaningfulPCFcalculationsinourmajor
product lines using both primary data
from our sites and secondary data via
databases.
This year, our procurement team also
began engaging our most carbon-
intensive suppliers so that we can work
with them to increase the amount of
primarydatawehaveaccessto.This
will help improve the accuracy of our
Scope3measurements.Seepage51
formoreinformationonthiswork,and
page 60forourScope3emissionsdata.
Meanwhile, we continued to develop our
TCFD scenario analysis work, which now
includesmorethan50%ofourproducts
byvolume.Formoreinformation,seeour
TCFD report on pages 84 to 89.
Innovating more efficient plants
Todriveenergyefficiency,weare
developing a process technology plan to
help our sites decarbonise in the short,
mediumandlongterm.Wearealso
actively working to maximise production
efficiencywhileminimisingour
emissionsandwasteproduction.
As part of those decarbonisation plans
we will look to implement good industry
practices, as well as identifying ways to
reuse and store heat generated by our
productionprocesses.Wealsowantto
developnew,moreefficientprocess
technologies and are looking for ways to
replace natural gas with renewable fuel
andsteam.Ultimately,our
decarbonisation plans will be designed to
helpusdomorewithlessenergy.
Energyefficiencyisalsoakey
consideration in all our capital
investment proposals, and we are now
using our new carbon price to assess
capitalprojectsofmorethan£1million
(see page58 in Operations for more
detailonsettingourcarbonprice).
Maintaining our strong focus
onproduct safety
Themajorityofourproductsarenot
classifiedashazardous,inaccordance
with the Globally Harmonised System
ofClassificationandLabelling.
Nevertheless, a small proportion of what
wesellcontainshazardousingredients.
We provide customers with up-to-date,
legally compliant safety data sheets for
all products in all the markets where we
operate.In2022,wehadnoreported
incidents of non-compliance regarding
our product safety information, labelling
ormarketing.
Lessthan2%ofourproductscontain
substances of very high concern (SVHC)
ataconcentrationhigherthan0.1%.
Wherever possible, we look for ways to
avoidusingthematall.EliminatingSVHCs
is one of the criteria on our product
innovation sustainability scorecard and we
have accelerated our voluntary elimination
of certain substances, such as alkylphenol
ethoxylatessurfactants,outsideEurope.
This year, we also established a working
grouptoincreaseourfocusinthisarea.
Our SVHCs statement can be found at
https://www.synthomer.com/
media/5evlcajt/synthomer_svhc-
statement.pdf.
Continuing to track customer
satisfaction
Our innovation and manufacturing
technology teams and sales teams work
closely with our customers to understand
the challenges they face in their own
manufacturingprocesses.Thishelps
uskeepimprovingtheproductswe
makeforthem.
We track customer complaints as a
measure of our reputation and success
inthemarket.Ourglobalcomplaintrate
thisyearwas4.6per1,000deliveries
(versus4.1in2021)
*
.Whileourabsolute
number of complaints fell in 2022, the
number of deliveries we made fell by a
largerproportion.Crucially,99.5%ofall
our shipments are made without any
complaints.
Meanwhile,our‘right-first-time’ratethis
yearwas98.0%(versus97.4%in2021).
This represents the percentage of
products that are made to their correct
specificationinthefirstinstance.
We are continuously working to
strengthen the effectiveness of our
processes and identify and address the
rootcausesofprocessqualityissues.
We continued to make progress
in our innovation programme this
year,with50%oftheproductswe
introduced featuring one or more
sustainabilitybenefits.
Marshall Moore
ChiefTechnologyOfficerandPresident,Americas
* Excludes Laminates, Films and Coated Fabrics
STRATEGIC REPORT – Synthomer andsustainability GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
49Synthomer plc Annual Report 2022
Products continued
Sustainable procurement
We work in a complex, global supply chain, relying on our
suppliers to deliver the raw materials, goods and services
weneed to operate successfully. For example, we buy raw
materials, such as chemical monomers and additives, to make
our products, transport services to deliver those materials and
products, and energy and utilities, such as electrical power,
gas and steam, as well as equipment to run our plants. Wealso
rely on other corporate and site services, such as travel, IT,
temporary labour and contractors, and waste management.
Our performance in 2022
Our specialist procurement teams work with
thousands of suppliers around the world, and
in2022wespentapproximately£2billionwith
thirdparties.
We are particularly pleased to see the percentage of
total procurement spend with a sustainability rating
riseto37%,whilemanagingunprecedentedsupply
chaindisruption,inflationandmarketvolatility.
COVID-19continuedtodisruptoursupplychain,
particularly in China, where lockdowns remained
aregularoccurrenceformuchoftheyear.We
havealsofacedrisingcosts,includinginenergy.
Meanwhile, our procurement teams have
successfully navigated market uncertainty and
fluctuatingdemandtoensureourplantshave
appropriatequantitiesofrawmaterialsby
proactively anticipating change, opportunities
andissues.
Despite the challenges, we have continued to drive
our sustainability agenda forward – working with
our innovation team to identify and evaluate
lower-carbon and alternative raw materials, and with
energy suppliers to secure sources of renewable
electricity.Asaresult,wepurchased80%ofour
electricity from renewable sources this year, once
again achieving our 2030 target and far exceeding
ourshort-term2022objectiveof50%.Formore
information on our progress against this target and
objectiveseepage58inourOperationssection.
ThiswasalsoourfirstfullyearusingtheEcoVadis
sustainabilityratingsplatform.Thistoolgivesusa
standardised way to assess our suppliers against
theirsustainabilityperformance.Thisyear,we
assessed104suppliersthroughtheplatform.We
use a risk-based approach to decide which suppliers
weprioritise.
Our Vision 2030 target:
sustainable procurement
80% procurement spend
withasustainability rating
Target 80%
2022
*
37%
2021 26%
Ourtargetreflectsourintentiontounderstandthesustainability
ratingsofoursuppliersusingastandardassessment.Wewill
need to do more work with more suppliers between now and 2030 to
reachoursustainableprocurementtarget.Sothisyearwerefreshed
our approach with a new set of KPIs (available in our Sustainable
Procurement policy) and timelines to help us drive and demonstrate
continuousimprovement.
Our short-term objectives
*
2022 Audit five key suppliers’ sites
Ensure that all our highest-risk suppliers
agree to our Supplier Code of Conduct
—
or equivalent standards
20% of procurement spend covered by
a sustainability rating and improvement plan
Wehavenowdefinedourobjectivesfor2025asfollows:
50%procurementspendcoveredbyasustainabilityrating
and improvement plan
Audit eight key suppliers’ sites
Ensure that all our highest-risk suppliers agree to our
SupplierCodeofConductorequivalentstandards
More detailed information on our progress against our target and
objectivescanbefoundthroughoutthissection.
*ExcludestheadhesiveresinsbusinessacquiredinApril2022
Synthomer and sustainability
50 Synthomer plc Annual Report 2022
Sourcing renewable electricity
We buy our renewable electricity via
acombinationofrenewablesupply
contracts, renewable energy attribute
certificates(EACs),andon-andoff-site
powerpurchaseagreements(PPAs).
As a traded commodity, the price and
availability of EACs will change over
time.Whiletheyremainimportantfor
ourshort-tomedium-termplans,it
means we do expect the percentage of
renewableelectricitywebuytofluctuate
forafewyears.
In the coming years, we will also increase
thenumberofPPAswehaveinplace.
Aswellasprovidingarouteforusto
maintain our 2030 renewable electricity
target, these long-term contracts will
protect us from energy price market
volatility.Theywillalsodirectlysupport
investment in renewable generation assets
andthedecarbonisationofpowergrids.
Some of our sites already use PPAs,
including onsite solar power in Asua,
Spain,andourrecentlyacquired
JeffersonsiteintheUSA.Wearealso
lookingforopportunitiesataGrouplevel.
This year, our Group procurement team
completedaprojecttosetoutourPPA
strategy for the coming years and started
aEurope-widePPAproject.Theteamwill
continuethisworkthrough2023.
Working with suppliers to address
Scope 3 emissions
Around85%ofouremissionscomefromour
upstream supply chain, and we need to work
withoursupplierstolowerthoseemissions.
This year, we began mapping our Scope
3 emissions in more detail to identify our
largestcontributingsuppliers.Weare
collaborating with these key suppliers
toimproveourunderstandingoftheir
carbon footprint and begin identifying
opportunitiesfornewlow-carbonoptions.
What is clear from these conversations
is that many businesses face similar
challenges in collecting and analysing
Scope 3 data, particularly at a product
orservicelevel.Itwilltaketimebefore
we have comprehensive data sets and
standards in place in order to run our
own analysis and choose the suppliers
who can help us hit our Vision 2030
emissionstargets.
Our Pathway business transformation
programme will play an increasingly
important role in helping us track and
reportonourownprogress.Newdigital
tools are reshaping the way we manage
procurement, giving us more information
and insight on everything from tonnages,
logistics and stock levels through to
futurecarbonperformance.
Butthisisjustafirststep.Wecontinueto
look for ways to work with our suppliers,
peers and other organisations to improve
Scope 3 emissions reporting and develop
aroadmaptowardsour2030target.For
example, this year we worked with a
European university to improve our
knowledge about how we might do
thisaswellasthetoolsthatareavailable
onthemarket.
Wehavealsojoinedthepeernetwork,
TogetherforSustainability.Thisisa
members-driven procurement initiative
that aims to raise sustainability
standards, develop industry standards
and share good practices across the
wholechemicalindustry.
Organisations like this – and our
participation in them – are important
because no one company can solve
theseissuesonitsown.Sowewant
toworkinpartnershiptohelpraise
standardsacrossourindustry.Andwe
know it creates competitive advantage,
since our customers are looking for
suppliers who are as committed to
sustainabilityastheyare.
As more companies set themselves
sustainability targets, we expect to see
more demand – and competition – for
suppliers and products that offer the
bestlow-carbonsolutions.Successwill
rely on our procurement teams being
able to speak a common language with
eachother,oursuppliersandcustomers.
As part of our work with the university,
we developed new workshops to help
strengthen our procurement teams’
understanding of key sustainability
terminology.ThesebeganinDecember
2022andcontinuedintothefirstquarter
of2023,witharound100procurement
specialiststakingpart.
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51Synthomer plc Annual Report 2022
Products continued
What we expect from our suppliers
We seek only to work with suppliers who
act in accordance with our Supplier Code
of Conduct or who have their own codes
andpolicieswithequivalentstandards.
Our suppliers must also make sure that
their subsidiaries and subcontractors
dothesame.
This year, we proactively sent our Code
out to our highest-risk, priority suppliers
and asked them to sign it or demonstrate
tousthattheyhaveequivalentstandards
inplace.Thisprocesstakestimeas
itoftenrequiresacomparisonbetween
our Code of Conduct and that of our
suppliers.Sowhilewehavemadegood
progressagainstour2022objective,we
will continue this process during 2023
tocovertherestofourhighest-risk
suppliers.Andwenowexpectanynew
supplier to follow our Code of Conduct as
partofourstandardonboardingprocess.
Read our full Supplier Code of Conduct
online at: https://www.synthomer.com/
investor-relations/corporate-governance/
code-of-conduct/
We also expect suppliers to meet our
expectations on sustainability issues,
such as safety, environment and diversity
and inclusion, as set out in our sustainable
procurementpolicy.
Read our full sustainable
procurementpolicy online at
https://www.synthomer.com/media/
kpwpodpt/sustainable_procurement_
policy_and_strategy.pdf.
Thisyear,wecompletedfivesupplier
siteaudits,andcommunicatedwhere
compliancegapswerefound.Weare
trackingtheirresultingremediationplans.
Reassessing raw material risks
While our risks have not changed
substantially in our legacy businesses,
we do face new raw materials risks as
aresultofouradhesiveresinsacquisition.
Many of the materials used to make
adhesives are by-products of other
manufacturingprocesses.Thatmeans
the availability of our raw materials
depends on the state of the market
forthoseprimaryproducts.
See our Risk report on pages 73 to 83
formoredetailonourmaterialsupply
chainrisksandhowwemanagethem.
Addressing modern slavery in our
supply chain
We respect and recognise human rights
for all as described by the Universal
Declaration of Human Rights and are
committed to the UN Guiding Principles
onBusinessandHumanRights.
Although we work in parts of the world
and certain sectors at higher risk of
human rights abuses, we do not tolerate
those abuses, modern slavery or human
traffickinganywhereinourbusinessor
supplychain.Thisisenshrinedinour
ModernSlaverystatement.Readour
statement online at https://
www.synthomer.com/media/2r1bghwe/
modernslaverystatement2021.pdf.
We expect our suppliers to comply with
alldomesticemploymentlegislation.
They should also follow the International
LabourOrganization(ILO)conventions
and protocols and the United Nations’
UniversalDeclarationofHumanRights.
This year, we set up a new human rights
working group to manage this risk across
our different functions, such as operations,
procurementandlegal.TheGroupis
designing a global awareness programme
and ensuring the appropriate whistle-
blowing channels and processes are in
placetomanageconcerns.
We have also now added human rights as
an additional lens to our procurement risk
assessmentprocess.Thiswillhelpus
identify suppliers who are more likely to
beatriskofbreachingourCodeofConduct.
We continued to deploy our new supplier
onboarding platform, which is now active
inallourregions.Weplantoaddournew
adhesive resins sites to the platform
withinthenexttwoyears.
Committed to avoiding
conflictminerals
Ourconflictmineralspolicycommitsusto
avoidingtheuseofconflictmineralsinall
ouractivities.Wealsocontinuallyassess
our use of 3TG minerals (gold, tin, tantalum
and tungsten), which can be mined in parts
oftheworldwherearmedconflictand
human rights abuses are known to take
place.Ourpolicyalsooutlinesour
expectations of suppliers, which includes
conducting their own due diligence to verify
the origin of their materials and provide
certificationunderrecognisedinitiatives.
Readourfullconflictmineralspolicy
online at https://www.synthomer.com/
media/c5pjjpum/synthomer_conflict-
minerals-policy_dec_2021.pdf.
Our procurement teams did
anoutstandingjobofhelping
tokeepoursustainabilityagenda
moving forward, despite market
uncertaintyandsignificant
disruptioninoursupplychain.
Dr Stephen R Blackburn
Vice President Group Procurement
Synthomer and sustainability
52 Synthomer plc Annual Report 2022
Operations
Our refreshed strategy and structure are underpinned by our
ongoingcommitmenttosafety,healthandenvironment(SHE).
OurSHEvalue,whichstates‘wealwayshavetimetoworksafely’,
sitsattheheartofourfivevalues(seepage 11).Itmeansstriving
towardsourultimategoalofzeroaccidentsandnoadverseimpact
onhumanhealth.Atthesametime,wecontinuetolookforwaysto
lowertheenvironmentalimpactofouroperations.OurVision2030
roadmaphelpsguideourSHEactivities.
This section is divided into two parts:
Health and safety – page54
Environment – page58
Maintaining standards in our SHE
Management System
Our SHE Management System (SHEMS) is our most
important tool in helping us work towards our SHE
goals.Itincludes22standards,andeachstandardhas
anaccompanyingmandatoryrequirement.Thesystem
alsocontainsmorethan200guidancedocuments.
We expect sites to carry out an internal audit
againstthesestandardsatleastonceeverythree
years.Sitesmustauditthemselveseveryyear
againstareasthatweconsidertobeofhigher
priorityintermsofmajoraccidentprevention.
Inaddition,sitesmustcarryoutannualinternal
compliance audits of our permits to work
andmanagementofchangestandards.
Our central SHE team audits all our manufacturing
facilitieseverythreetofiveyears,dependingon
performanceandresidualhazardprioritisation.
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53Synthomer plc Annual Report 2022
Operations continued
Health and safety
Everyone at Synthomer is accountable for their own safety and
for the safety of those around them – regardless of seniority.
As we welcome new colleagues and integrate our newly acquired
sites, our SHE teams have a central role to play in creating
aninclusive working environment, where everyone knows
howto use our processes and systems and demonstrates
theright behaviours.
Health and safety – good progress in our
overall journey
Like many companies in our sector, we take a
longer-term view of our health and safety progress
using lagging indicators, which ‘smooths out’ minor
deviationsinperformance.Italsoallowsustofocus
on longer-term improvement trends, especially as
wetakeonnewlyacquiredbusinesses.
We have been tracking the occupational health
andprocesssafetyperformanceofourlegacy
Synthomer sites for several years now, and recently
addedformerOMNOVAsitesintoouroverallpicture.
Inboth,wehaveseensignificantoverall
improvementinourrecordableinjurycaserates
(RCR), where longer-term, reliable data exists for
bothbusinesses.Infact,20ofoursiteshaveworked
injuryfreeformorethanthreeyearsorover500,000
workinghours.
Process safety event rates (PSER) data at former
OMNOVA sites does not go back as far as RCR, due
to a historically different reporting regime, meaning
itwilltakealittlelongerforustoassesstrends.
Nevertheless, our legacy Synthomer sites continue
toimproveoverawidertimeframe(PSERat0.12
over last four years) against the ICCA standard
definitionsetin2015.Furthermore,26ofour
manufacturingfacilitieshadzeroPSERsin2022.
We have always been clear that we aim to align our
new sites with our standards over a three-year cycle
and this is the current focus for our former OMNOVA
andnewlyacquiredadhesiveresinssites.
Our Vision 2030 target:
health and safety
Recordable injury case rate (RCR) target
*
Target 0.20
2022
0.34
2021
**
0.31
Process safety event rate (PSER)target
*
Target 0.10
2022
0.22
2021
**
0.16
Ourtargetsreflectourambitiontobeinthetopquartilefor
healthandsafety.Weareworkingtointegrateournew
businessesandensuretheymeetourminimumSHEstandards
withinathree-yeartimeframe.
*Per100,000hoursforemployeesandcontractors
Our short-term objectives
**
2022 RCR of 0.30
PSER of 0.14
WesetRCRandPSERobjectiveseveryyear.For2023,those
objectivesare:
RCRof0.29
PSERof0.19
More detailed information on our progress against our target and
objectivescanbefoundthroughoutthissection.
**ExcludesadhesiveresinsbusinessacquiredinApril2022
2013/14
2
015/17
2
018/20
2
021/22
0.76
0.31
0.98
0.21
0.74
0.20
0.54
Legacy Synthomer Former OMNOVA
RCR three-year average
Synthomer and sustainability
54 Synthomer plc Annual Report 2022
A mixed picture in our 2022
performance
While we have made good progress in
some areas, our overall health and safety
performancethisyear–asmeasuredby
two key industry lagging indicators – has
notbeenasstrongaswewouldlike.This
wassignificantlyaffectedbyareduced
number of worked hours as a result of
fluctuatingdemand,sinceourtotalnumber
ofeventsremainedsimilarto2021.It
alsoreflectstheongoingintegrationof
OMNOVA and our new adhesive resins
business, both of which have historically
lower health and safety performance than
legacySynthomer.Andwehave
welcomednewemployeesatsomesites.
Thehealthandsafetyofouremployees–
alongsideourimpactontheenvironment–
remainsourhighestpriority.Andweknow
wehavemoretodoonsafetyinparticular.
The headline numbers on their own do
notshowthefullpicture,however.The
businessesandsitesthathavebenefited
from our SHE programme over many
yearscontinuetoperformwell.Safety
atsomeofourlegacysitesisworldclass.
Thisyearweinvested£21millionto
continue integrating our health and safety
standardsacrossourbusiness,includingon
improvementprojectsandSHEcompliance
issues in addition to £34 million in plant
sustenancecapitalexpenditure.We
havealsofocusedonkeyareassuchas
competency assurance and behavioural
safetytraining.
Our occupational health performance
Recordableinjurycaserate–accidentsper
100,000hoursofemployeesandcontractors
Synthomer Group
*
2022 0.34
Legacy Synthomer
**
2022
0.34
2021
0.31
2020
0.36
2019
0.20
2018
0.23
Wetrackandrecordourrecordableinjurycaserate(RCR)
forinjuriesthatneedmorethanfirst-aidtreatment.
See ‘Staying focused as we integrate’ on
page56 for more information on some of
thespecificstepswehavetakenthisyear
todriveuphealthandsafetystandards.
Our occupational safety
performance in 2022
To ensure our employees and contractors
understand our SHE principles and rules,
we expect them to attend inductions and
refreshersessionsonour10SHEprinciples
andGoldenRules.
In2022,ourRCRwas0.34,meaning
wedidnotmeetourannualobjective.
Thiswasaffectedbyperformanceat
asmallnumberofsiteswhereweplan
toimplementourSHEtransformation
processin2023.Thisshort-term,targeted
improvement plan helps sites focus on
key safety priorities to bring performance
backinlinewithourexpectations.
TheoverallRCRratealsoreflectsthe
factthatwehaveexperiencedsignificant
employeeturnoveratsomesitesthisyear.
This has caused a spike in the number of
lowseverity,preventableinjuries,suchas
slipsandtrips.Inall,50%ofthoseinjuries
happened to employees who have been
withSynthomerforlessthanoneyear.
Nevertheless, our long-term health
andsafetytrendismovingintheright
direction.Thiscanbeseenatsitesthat
have been part of Synthomer for more than
three years, where our RCR rate in 2022
was0.17,closetoarecordperformance.
Our approach includes holding a Group-
wide call for all operational leaders after
any high-severity, actual or potential
incident.Duringthecall,leadersagree
corrective action that all sites are then
expectedtoimplement.
Our RCR numbers include employees
and contractors working at our sites,
along with short-stay visitors like truck
drivers.Ourmetricsremainbroadly
inlinewiththeUSAOSHAstandard.
However, for historical reasons linked to
UK HSE reporting metrics we continue to
reportourRCRper100,000workinghours.
During the year, we reported no cases of
disease caused by occupational factors
and there were no accidents resulting
infatalityorpermanentdisability.
Our process safety
performancein2022
Good process safety relies on effective
layers of protection and controls to keep
equipmentworkingefficiently,andensuring
teams understand their role in helping to
prevent unexpected releases, including
ofhazardouschemicals.Wecarryout
routine inspections and maintenance to
address issues before they become a
problem, and site teams perform safety-
criticalstepstoensuretheyarecompliant.
Our process safety performance
Processsafetyevent–eventsper100,000hours
of employees and contractors
Synthomer Group
*
2022 0.22
Legacy Synthomer
**
2022
0.18
2021
0.16
2020
0.10
2019
0.11
2018
0.14
We record, rate and track our PSEs using a four-tier scoring
system.Tiers1and2(withtier1beingmoresevere)meetthe
International Council of Chemical Associations’ (ICCA)
definitionofa‘reportablePSE’.
*Allourbusinessesincludingninemonthsofdatafromournewadhesivesbusiness. **Excludesournewadhesivesbusiness.
STRATEGIC REPORT – Synthomer andsustainability GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
55Synthomer plc Annual Report 2022
Operations continued
This year, our process safety event rate
(PSER) at legacy Synthomer sites was
0.18,whichmeantwedidnotachieveour
2022objective.Thiswasaffectedbypoor
performanceatasmallnumberofsites.
PSERperformanceatournewlyacquired
adhesives sites was also higher than
expected.In2023,wewillworkwithall
affectedsitestoimproveperformance.
ThemajorityofourPSERsthisyearhave
had limited impact and were managed
locally at source, with no effect on
people,environmentorproperty.Two
thirdswereincident-freein2022.We
experiencedonemajorincidentatour
FilagositeinItaly,whereafiredamaged
plantandequipment.However,noone
wasinjured.
We use a range of measures to ensure
theongoingintegrityofourequipment.
These include identifying critical process
safety steps, such as monitoring and
investigatingreactormischarges.We
thenconfirmthatsitesaretakingthose
steps through simple checklist engagement
discussionstoensurecompliance.
This year, we focused on near misses and
weak signals, since they are important
early warning signs that a bigger,
preventable incident might occur if no
actionistaken.Wereviewweaksignals
duringourquarterlyprocesssafety
networkmeetings.Thisallowsusto
share lessons learned across sites to
helppreventnearmisses.
Forexample,thisprocessidentified
common issues with the way we control
gaskets, which had led to higher-than-
average loss of containment issues and
mischargesatcertainsites.Asaresult,
sites have taken steps to strengthen their
control processes, such as introducing
critical-jointchecks.Atonesite,thiswork
hasroughlyhalveditslosses.
We also carried out gap analysis via our
majoraccidenthazardproject.Inparticular,
we focused on losses of containment that
leadto,orarecausedby,potentialfires,
explosionsorrunawayreactions.Sites
now have action plans in place to address
gapsoverthenext12months.
A structured approach to
investigatingspills
Preventing and managing the loss of any
material(hazardousorotherwise)isan
importantpartofourSHEapproach.
We monitor, report and investigate all
spills, ranking any loss against the
associatedhazardofthematerialin
question,alongwithquantityspilled,
locationandimpact.Weinvestigatethe
root causes, such as human factors and
mechanicalfailure,andusethefindings
todrawuprelevantactionplans.Our
process safety network routinely reviews
thesetypesofeventsduringitsmeetings.
In 2022, we recorded 26 events in our
toptwotiers(coveringreportablePSERs,
high-scoring loss of containment and
reportableenvironmentallosses).Thevast
majorityhadlittleenvironmentalimpact
otherthanlocalisedeffectandcleanup.
Audit programme resumes
post-pandemic
This year, our Group SHE team carried
outindependentauditsat10ofoursites
inEuropeandtheUSA.Werecordand
tracksignificantfindingsandreport
onthemtotheExecutiveTeamand
widerorganisationonaquarterlybasis.
Todate,17ofthe21‘significantnon-
conformances’ that the team found have
been addressed, with the remaining four
ontrackforcompletionin2023.While
ongoingCOVID-19travelrestrictions
meant we could not conduct in-person
audits at our sites in Asia, we did use local
specialistcontractorstoauditoursites.
Maintaining our focus as weintegrate
Integrating a new business is a complex,
multi-layeredprocess.Asaresult,we
expecttoseeshort-termfluctuations
inourSHEperformance.Itisoneofthe
reasons why we allow three years for
newsitestomeetourstandards.
We are taking a series of tried-and-tested
steps to address key issues as we integrate
ouracquiredadhesiveresinsbusinesses.
A differentiated approach
Weplacenewsitesinto‘supportedstatus’.
Thismeansourhealthandsafetysubject
matter experts provide the site team with
additional support to help meet our
minimum standards in areas such as
processsafetyandassetintegrity.
Sites ‘graduate’ out of supported status
oncetheyreachthosestandards.Ifany
site – new or otherwise – drops below those
minimum standards, it can be moved back
intosupportedstatus.Insomeinstances,
wemayalsorunaSHEtransformation.
Synthomer and sustainability
56 Synthomer plc Annual Report 2022
Tackling the basics to drive up standards
We have worked with our operational
teams to instil key safety behaviours
andaddressthesignificantnumber
ofpreventableinjuriesamongnewer
employees.Forexample,weactively
encourage all our sites to use 60-second
‘stop and think’ checks to identify and
managehazardsbeforeworkbegins.
Our process safety network has worked
with our Group SHE team to identify gaps
and trends to provide targeted areas for
improvementatspecificsites.Wealso
share lessons learnt and examples of good
practiceacrossthenetwork.Asaresult,
wehaveseenareductioninouroverall
lossesofcontainmentandmischarges.
Wekeepaformalrecordofsignificant
process safety events (PSEs) and
lessons learnt – known as our ‘Black
Book’ – which now includes PSEs that
have occurred at our former OMNOVA
sites and will be updated for the adhesive
resinsbusinessesin2023.Allsitesare
requiredtoperiodicallyreviewthese
PSEsandconfirmthattheyhavethe
correct measures and controls in place
tominimisethechanceofthemoccurring.
We also review published analysis of
significantprocesssafetyeventsfrom
similarandrelevantindustries.
This year, we piloted a new leadership
culture programme, the Zero Harm
project,ateightFunctionalSolutions
sites to create an environment in which
thinkingaboutindividualsafety–and
thatofothers–becomesahabitfor
everyemployee.Itwillhelpusmove
fromadependent,‘complianceculture’
toamorecommitment-based,
interdependentone.
Sharing tools and processes to
achieveour goals
As part of our focus on health and safety
basics this year, we worked with most of
our sites to share and develop a process
knownas‘bowtieanalysis’.Thisisa
commonly used illustrative tool to
helpteamsbetterunderstandthekey
preventive barriers that need to be in
place to stop an initiating cause leading
toaspecificunwantedevent,suchasa
mischarge of raw materials leading to a
runawayreaction.Wearerollingoutthis
bowtie analysis as part of our wider
majoraccidenthazardproject.
We also held three regional SHE
conferencesforthefirsttimesince
thestartoftheCOVID-19pandemic.
Participants discussed key issues such
as our management systems, leadership
andbehaviours,andreflectedonSHE
cultureatindividualsites.OurGroup
SHEpolicyisavailableonlineathttps://
www.synthomer.com/media/yyle3ahe/
safety-health-environment-group-policy-
november-2021.pdf.
The long-term trend in our health and
safety metrics remains positive, despite
specificchallengesin2022,including
fluctuatingdemand,talentshortages
andongoingbusinessintegration.
John Hamnett
Vice President Operations C&C,
Group Global SHE and Engineering Lead
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57Synthomer plc Annual Report 2022
Operations continued
Environment
Our water-based polymers and solvent-free
adhesive solutions help keep volatile organic
compounds and other harmful emissions out of
the atmosphere. But to achieve our sustainability
goals and reach net zero by 2050, we must make
them in ways that minimise their effect on the
planet. This means lowering our own emissions
and reducing water consumption and waste.
Important milestones in a challenging year
We took some important steps to advance our
environmentalagendathisyear.Onewasrealising
our commitment to set science-based greenhouse
gas(GHG)emissionsreductiontargets.Our2030
reductiontargetforScopes1and2isnow47%
(upfrom40%)andourScope3targetis28%
(upfrom10%),againstthenewGroup2019baseline.
These are absolute emission reduction targets
instead of our previous intensity targets
(emissionspertonneofsalesproduction).
We have submitted our new targets for validation by
theScienceBasedTargetsinitiative.Eventhoughthese
targetsareasignificantchallenge,externalvalidation
willgiveusconfidencethatourworktoaddressnet
zeroisnowalignedwiththe2015ParisAgreement.
Settinganewinternalcarbonpriceof£85pertonne
ofcarbondioxideequivalentwasanothersignificant
milestone.Wechosethispriceafterathorough
market and peer review, as well as sensitivity
analysisagainstsomeofourcapitalgrowthplans.
We use the carbon price as part of our assessment
ofanysustainability-relatedprojectaswellas
capitalprojectsworthmorethan£1million.For
example, we used it to assess the payback case for
installing solar panels at our site in Spain, improving
theinternalpaybacktimeoftheprojectbyaround
35%.Wewillexpandouruseofthecarbonpriceto
lower-valueprojectsovertime.
Strong external factors have slowed progress
insomeofourplans.Fluctuatingdemandhas
seensomeplantsoperatinglessefficiently.High
employee turnover at some sites, plus integrating
our new adhesive resins business, has meant
concentrating on bringing new colleagues up
tospeedwithourstandardsandexpectations,
andhelpingthemtogetthebasicsright.
Our Vision 2030 target:
emissions and energy
Reduce Scope 1 and 2 absolute
emissions by 47%
Target 47%
2022
36%
Reduce Scope 3 absolute emissions by 28%
Target 28%
2022
18%
80% of electricity from renewable sources
Target 80%
2022
80%
2021
*
90%
*LegacySynthomer.
Ourenvironmentaltargetsaredesignedtohelpusreachnetzero
by2050.Wemadegoodprogressthisyear,exceedingour2022
objectivetoreduceScope1and2intensityby20%(see‘Scope1
and 2 emissions’ on page59formoreinformation).
This year we have introduced science-based greenhouse gas (GHG)
absoluteemissionsreductiontargets.See‘Importantmilestonesin
achallengingyear’formoredetailonthesenewtargets.
Ourrenewableelectricitytargetremainsthesame.
Our short-term objectives
**
2022 Reduce Scope 1 and 2 intensity by 20%
At least 50% of total electricity
consumption from renewable sources
Improve specific energy efficiency by 5%
Evaluate Scope 3 emissions from three
suppliers of our four main raw materials
—
Define medium- and long-term plan
to reduce Scope 1 and 2 emissions
Wehavenowrenewedourobjectivesfor2025asfollows:
30%absolutereductionofScope1and2emissions(versus2019).
5%energyreductiononintensity(versus2022).
Seta2025quantitativereductiontargetbyend2023based
onourupdatedwaterwithdrawalandconsumptionbaseline.
5%totalwastereductiononintensity(versus2022).
More detailed information on our progress against our targets
andobjectivescanbefoundthroughoutthissection.
** Legacy Synthomer
Synthomer and sustainability
58 Synthomer plc Annual Report 2022
Wehavealsogonethroughsignificant
internal change: a reorganisation to create
a more focused and specialised business,
and changes in our product mix as a
resultofouradhesiveresinsacquisition.
While our new adhesives technologies
have the important environmental
benefitsofusinglesswaterandavoiding
harmfulsolvents,theyrequiresignificant
amountsofenergytomake.
Nevertheless, we have made good
progress against our emissions and
water targets this year, exceeding our
short-term2022objectivetoreduce
Scope1and2emissionsby20%and
developing more accurate water balance
models that will help us work towards a
quantitativewaterobjectivefor2025.
Our energy use and carbon footprint
WhileourGroupabsolutereductionof36%
versus2019ispartlyduetolowerproduction
volume,the2.5%improvementinScope1
emissionsintensity(10%forlegacy
Synthomerin2022vs2021)reflectsthefact
thatwemovedawayfromcoaltogas-fired
poweratourplantinSokolov,Czech
Republic.Wecouldhavemadefurther
improvements had sharply escalating gas
prices not meant we needed to make a
short-term switch to importing steam from
a local coal-powered station to manage
costs.However,weremaincommittedto
our long-term energy goals, including a
permanentmoveawayfromcoal.
We rely on energy to run our manufacturing
plants, make our products and transport
themaroundtheworld.However,around
85%ofourtotalemissionscomefrom
our supply chain, particularly carbon
associated with extracting and processing
ourmainrawmaterials.Wemustaddress
all these areas if we are to realise our net
zeroambition.
Scope 1 and 2 emissions
Excludingournewlyacquiredadhesive
resinssites,ourScope1and2emissions
intensityroseby4%in2022,compared
with2021,althoughisstill31%better
than2019–wellaheadofourobjective
toreduceScope1and2emissions
intensityby20%.
AbsoluteScope1and2emissionswere
14%lowerthan2021,despiteaslight
increaseinScope2emissions.
We maintained a high level of renewable
electricity coverage across the business,
hitting our 2030 target for the second
year running, and far exceeding our 2022
objectivetosource50%ofourpower
fromrenewables.Ournewlyacquired
adhesiveresinssiteinJefferson,USA,
has a contract with a solar farm that
covers,onaverage,25%ofitsoverall
powerrequirements.
See page51 in our Products section for
more information on how our procurement
team has helped Synthomer source
renewableelectricitythisyear.
Thisyear,weidentifiedourtop10sites
intermsofScope1and2emissionsand
ran workshops with three of them to
developdecarbonisationroadmaps.
I am delighted that we
realisedourcommitmentto
set science-based greenhouse
gas emissions targets this
year.Thisisanimportantstep
inourVision2030journey.
Guy Scudder
Sustainability Manager, Group Operations
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59Synthomer plc Annual Report 2022
These workshops highlighted a range of
different energy conservation measures
andpotentialprojectsthatsitescould
deploy.Forexample,improvingefficiency
and ongoing decarbonisation of power over
the short-to-medium term, and introducing
alternative fuels and less energy intensive
processesinthelongerterm.
Thesitesarenowrefiningtheseroadmaps
todevelopmoredetaileddeploymentplans.
We intend to roll out the process to our other
topsevensitesbytheendofQ12024.
Wehavesetourselvesanobjectiveto
reduceourScope1and2absolute
emissionsby30%by2025(versus2019).
To achieve this at normal production
volumes,weexpecttoseethefullbenefit
of ending our use of coal, as well as
introducingnewenergyefficiency
projectsandthepowerpurchase
agreements (PPAs) that will be
includedinsitedecarbonisationplans.
Scope 3 emissions
In 2022 our total Scope 3 emissions were
18%lowerthanournew2019baseline.This
was driven by the most material category
for Synthomer, purchased goods and
services, which was has also decreased
by18%in2022ascomparedwith2019.
Thisconsistsofa37%reductionin
emissions from primary monomers,
offsetbya35%increaseinemissions
fromotherprocurementactivities.
The37%reductioninemissionsfrom
primarymonomersisdrivenbya33%
reductioninvolumepurchased.The
additional difference is driven by changes
in energy emissions within the LCA (Life
CycleAssessment).
Emissions from other procurement
activities were calculated based on
spend using the EEIO (Extended
Environmental Input and Output) model
andmakeup35%ofthetotalfootprint.
Thesignificantincreaseinpricesin2022
comparedto2019resultedinanincrease
of35%inotherprocurementemissions.
Our full Scope 3 emissions report is
available on: https://www.synthomer.com/
sustainability/ratings-and-resources/.
Giventhecomplexityofthistopic–the
most material for us – we have developed
a strategic approach to our suppliers and
customerstohelpidentifyalternatives.
This year, we reached out to suppliers
who provide our main monomers to
requestprimaryScope3data.Whilewe
received a limited response, suppliers
understandtheneedtodefinethecarbon
footprintoftheirproducts.Thisprocess
has been helpful in starting a more
in-depth conversation with them about
productcarbonfootprintmetrics.
For more information on our work to
address our Scope 3 emissions this
year,seeourProductssectionon
pages48and51.
Tackling energy efficiency as we grow
Our absolute energy consumption
was6.78millionGJin2022.Legacy
Scope 1 and 2 emissions (hybrid approach)
Tonnes CO2equivalentreleasedpersales
production tonne (includes CO2 from energy
generation and use), and refrigerant losses
2022 0.210
Synthomer Group
*
2022 0.159
Legacy Synthomer
**
2021 0.153
2020
0.216
2019
0.232
2018
0.195
Scope1and2–location-basedandmarket-based–GHG
emissionshavebeenverifiedbyathirdparty.
See page215forinformationonourreportingmethodology.
Total metered energy use
Gigajoules(GJ)persales
production tonne
2022 4.21
Synthomer Group
*
2022 3.29
Legacy Synthomer
**
2021 3.16
2020
3.09
2019
3.08
2018
2.47
See annex on pages212to215forourUK-specificenergy
usedata.
Synthomeraccountedfor4.88millionGJ
(14%lowerthan2021).However,intensity
roseby4%,to3.29GJ/tonne.
Wedidnotachieveour2022objectiveto
improveenergyefficiencyby5%(versus
2019).Ourenergyintensityin2022was
7%higherthan2019.Oneofthemain
reasonsforthiswaslowerproductionlevels.
Addressingenergyefficiencyremainsone
of our biggest challenges, particularly as
ourenergyintensityhasrisen28%because
ofournewlyacquiredadhesiveresinssites.
We continue to explore our options in this
area.Thisyear,wesetupanetworkof
innovation experts called the Advanced
Process Innovation (API) team, which will
formprojectteamstolookatalternative
energy options for energy-intensive
operations that would be suitable for
sitetrials.
Inthemeantime,werolledoutfive
high-levelequipmentbenchmarking
guides at the end of 2022, setting out
simple principles and approaches to help
teams assess the performance of key
equipment,suchassteamboilers.We
expect sites to use these guides in 2023
tohelpfocusonoperationaldisciplineto
improveefficiencyandtoprioritise
capitalexpenditure.
Our business divisions are also carrying
outenergydiagnosticworkatkeysites.
This involves assessing the theoretical
energy demand of our processes against
actual use to identify areas for
improvement.Itwillalsohelpuslookat
benchmarking against sites with similar
processes.Aspartofthiswork,we
intend to review opportunities for better
heat integration and have developed new
guidance to help sites assess whether
heat pumps are a viable alternative both
technicallyandfinancially.
Theseinitiativesandprojects,alongside
our site decarbonisation plans, are
expected to deliver our renewed short-
termobjectivetoimproveenergy
efficiencyby5%by2025versus2022.
For more information on the work our
innovation teams are doing to address
energyefficiency,seepage 49 in our
Productssection.
Operations continued
*Allourbusinesses,includingafullyearofdatafromournewadhesivesbusiness. **Excludesournewadhesivesbusiness.
Synthomer and sustainability
60 Synthomer plc Annual Report 2022
Water
We need water to make some of our polymers and to run
manufacturing processes that require steam and cooling,
andare committed to ensuring that we manage our water
consumption carefully.
We took important steps this year to improve the way we
collectandreportourwaterdata.Wesharedahigh-levelsite
waterbalancemodelwithallsitestoassessandconfirmthat
theyhaveidentified,andarereportingagainst,alltheirwater
inputsandoutputs.Wealsoaskedthemtoconfirmtheplans
theyhaveinplacetoaddressanygaps.
Meanwhile, we rolled out our new water policy across all sites,
setting out our expectations in key areas such as management
plansforsitesinwater-stressedareas.Thisgivesusa
consistent framework for effective, sustainable water
managementacrossthebusiness.Ourfullwaterpolicy
isavailableonlineathttps://www.synthomer.com/media/
m0yjy4y5/water_management.pdf.
We are now focusing on water stewardship
andreductionpilotprojects.Forexample,our
Langelsheim site in Germany will work with a third
party to assess its approach to water stewardship
withaviewtoapplyingforcertificationagainstthe
AllianceforWaterStewardshipstandard.Whatwe
learnwillinformourfutureplansforothersites.
Thesitewillalsocarryoutbasicengineeringwork
toenabletheassessmentoptionstoeliminate
‘oncethrough’cooling,aprojectwiththepotential
toreduceGroupwaterwithdrawalby5-10%.
This work will establish the foundations for our
waterreductionprogramme,andourfirstmilestone
willbesettinga2025objective.
Our water performance in 2022
Wesawa15%increaseintotalwaterwithdrawal
andestimatea14%increaseinwaterconsumption
intensityatourlegacySynthomersitesin2022.
Thisincreasereflectsacorrectioninourmethod
ofdeterminingconsumption,asoutlinedin
GRIdefinitions,aswellastheimpactoflower
production; absolute water withdrawal for legacy
Synthomerimprovedby4%onour2021figures.
Waterandsteamleakreductionprojectsatseveral
sitesreducedby2%absolutewaterwithdrawal
acrosstheGroup.Forexample,ourRibecourt,
France and Sant Albano, Italy sites achieved
double-digit improvements in their withdrawal
intensitythroughsuchprojects.
Some sites did increase overall production in 2022,
butwereabletopartiallyoffsettheresulting
increase in water consumption, for example
throughoptimisationofsitecoolingsystems.
Wewillremainfocusedonminimising
withdrawalthroughleakmanagementand
processoptimisation,and,byassociation,
non-product-relatedconsumption.
Our Vision 2030 target: water
Manage and minimise water consumption at
all locations. Introduce water management
plansin water-stressed areas andhighest
consumption sites.
Wehavesetourselvesaqualitativewatertargettoreflectthefact
thatwemustfirststrengthenthewaywemeasure,monitorand
reportonwaterconsumption.
We continue to make progress in this area, and this year have
included water from imported steam in our water withdrawal
figuresatallsites.Wealsoincludeestimatedrainwaterwhereit
leavesasiteaseffluent.Indischargedwater,wenowcollectdata
onalleffluentdischarges,condensatereturnstothirdpartiesand
‘oncethrough’coolingwaterreturns.
Giventherefinementswehavemadetoourmeasurement
methodologyandthelargevariationversustheoriginal2019
baseline,wehaveremovedourshort-term2022objective.
Our short-term objective
2022 Maintain water consumption at 2019 levels
Carry out gap analysis of water and
effluentmonitoring abilities at key sites
Wehavesetanewobjectivefor2023asfollows:
Using our refreshed water withdrawal and consumption
baseline,seta2025quantitativetargetbyend2023
More detailed information on our progress against our target and
objectivescanbefoundthroughoutthissection.
Total water withdrawal
m
3
per sales production tonne
2022 5.07
Synthomer Group
*
2022 5.03
Legacy Synthomer
**
2021 4.39
2020
4.13
2019
4.04
2018
3.90
*Allourbusinesses,includingafullyearofdatafromournewadhesivesbusiness.
**Excludesournewadhesivesbusiness.
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61Synthomer plc Annual Report 2022
Waste
We have a responsibility to dispose of our waste carefully, and we
look for ways to reduce it at source. We manage several different
types of waste, such as filtered solids from reactor and tank
cleaning and waste packaging. We also have one-off waste streams
associated with construction and demolition. Some speciality sites
manage specific waste streams that are not saleable and require
treatment and disposal. Our new adhesives plants manage a
relatively high level of hazardous waste that must be incinerated.
This has been a challenging year for our waste metrics, with
aspikeinourfiguresrelatedtoalargenumberofperiodic
plannedactivitieswhichhelpkeepourplantsrunningefficiently
butwhichdonottakeplaceannually,andone-offevents.
Thismeantwedidnotmeetour2022short-termobjective
forreducingwastetolandfillintensityby12%.
Tohelpsmoothourwastetrendprofilewewillstarttracking
anaveragethree-yearwasteprofile–matchingthetypical
turnaroundfrequencyforsomeofthesekeyactivities.
We will also focus on understanding the sources and potential
improvement opportunities at our new adhesive resins sites,
sincethesehaveincreasedourreportedhazardouswasteby
around60%onintensity.
Our waste performance in 2022
OurGrouptotalwastein2022was65.1kilotonnesandforlegacy
Synthomerwas42.6kilotonnes,similarto2021.Inthelatter,we
sawaslightfallinabsolutewastegeneration,comprisingan11%
reductioninhazardouswaste,butanoverallincreaseofwaste
tolandfillof8.5%,largelyduetotheperiodicwastedisposals
Our short-term objectives: waste
2022 12% reduction of waste to landfill
per produced tonne
A number of one-off events in 2022 meant that we did not meet
ourobjectivesthisyear,asdescribedbelow.
Wehavenowrenewedourobjectivesfor2025asfollows:
5%reductionintotalwastepertonneversus2022
mentionedabove.Onanintensitybasis,
thecombinationofreducedproductionandthe
periodicdisposalsskewedthefiguressignificantly,
witha20%increaseinwastegeneratedto28.7kg
pertonneofproduct.
Asaresult,ourwastetolandfillintensitywas
alsohigherthan2021andthe2019baseline.
A one-off event that contributed to this swing
included remediation work on historical ground
contamination at our site in Saudi Arabia, where
morethan500tonnesofwasteaccountedfor
around6%ofthetotalsenttolandfill.
Overall these events contributed an estimated
22%ofthelandfilltotaland29%ofthetotalwaste
reportedthisyear,comparedwith5%and26%
respectivelyin2021.
We did see some successes in 2022, including at
ourCzechRepublicsite,whereclosingthecoal-fired
boiler has eliminated the associated coal ash waste
stream.Sludgedryingimprovementshavealso
reducednon-hazardouswastewithaconsiderable
intensitysaving.
While we continue to look at ways to improve process
efficiencytoreducewastetolandfill,wearealso
continuing to assess ways we might reduce and treat
ourmosthazardouswastestreams.Forexample,we
areconsideringtechnologiessuchasbioremediation.
Alongside work to reduce solid waste generated by
our waste treatment plants, we continue to focus on
productquality,rightfirsttimeproductionandstock
managementtohelpdriveunderlyingimprovements.
Wehaveseta2025objectivetoreducetotalwaste
by5%.Wewillalsoconsiderathree-yearbaseline
between2020-22toaccountforthefluctuations
describedabove.
Total waste¹
kg per sales production tonne
2022 40.4
Synthomer Group
*
2022 28.7
Legacy Synthomer
**
2021 23.9
2020
23.7
2019
28.8
2018
22.1
Waste disposal to landfill
kg per sales production tonne
2022 11.53
Synthomer Group
*
2022 8.22
Legacy Synthomer
**
2021 6.28
2020
5.96
2019
7.58
2018
5.08
Operations continued
1
Wehaveamendedourfiguresfor2019,2020and2021asaresultofapreviouslyunreportedwastestream.
*Allbusinesses,includingafullyearofdatafromournewadhesivesbusiness. **Excludesournewadhesivesbusiness.
Synthomer and sustainability
62 Synthomer plc Annual Report 2022
People
Our employees are our greatest strength; successfully executing
ournewstrategywillrelyontheirtalentanddedication.Whileour
strategy and structure may have evolved, our commitment to
building a diverse, inclusive organisation based on our core values
remainsfirm.Andweareputtingthetoolsandincentivesinplace
tohelpouremployeesfullycontributeto–andbenefitfrom–
Synthomer’ssuccess.Wealsowantourlocalcommunitiesto
seeusasagoodneighbour,andwesupportarangeofactivities
inkeyareas,suchaseducationandenvironment.
This section is divided into two parts to
reflectourcommitmenttobothemployees
andthecommunitieswhereweoperate.
Our employees – page 64
Our communities – page71
25.4%
gender diversity in
senior management
+25%increase
year on year
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63Synthomer plc Annual Report 2022
People continued
Our employees
This has been another challenging year for our employees,
andthey have shown great tenacity in the face of rising
inflation, fluctuating demand and the reorganisation of our
divisions. We know change can be unsettling and thank
ourteams around the world for their ongoing commitment.
A refreshed approach for a specialist,
innovative business
Diversity,equity,inclusionandholisticemployee
development together form one of the pillars of
Synthomer’s refreshed strategy, and we have
continued to evolve our employee agenda and
culture this year to support our new strategic goals
and help employees see Synthomer as a place to
buildalong-termcareer.
We want to continue building on our existing
strengths, such as strong leadership and individual
accountability,whilecreatingacultureofinnovation.
This means helping employees adopt behaviours
that support greater collaboration and shared
responsibilityinpursuitofexcellence.Tosupport
this process, we have refreshed our four strategic
employee priorities:
Promote holistic employee development
We see everyone as talented, with individual
developmentpaths.Wefocusonbringingout
thebestinouremployees.Wewanttogrowour
talent pipeline through targeted employee
developmentandselectiveexternalrecruitment.
Strengthen leadership capability
We want to develop empowered, agile leaders who
act as role models, coaching and developing their
teams, and who are prepared to lead change to
successfullydriveourbusinessstrategy.
Embrace Synthomer excellence
Westriveforexcellenceineverythingwedo.That
includesprocessesthatsupportouremployee
agenda and organisational structure to help the
businessdrivevalue.
Establish an innovative workplace culture
We aim to establish a culture of collaboration and
engagement, guided by a shared purpose and
underpinned by mutual trust and open feedback,
andbasedonourcorevalues.Wewanttobuildon
our strengths and grow innovation skills to help
Synthomersucceed.
We have also introduced internal talent performance
indicators, such as completion rates for performance
and development conversations, and succession
planning coverage ratios for critical roles, to help
alignouremployeeplanwiththeseobjectives,as
wellastrackandmeasureourimpact.
Our employees at a glance
5,200
employees
8.5%
turnover
15.8%
new hires (excludes former Eastman employees)
65%
under collective bargaining agreements
Synthomer and sustainability
64 Synthomer plc Annual Report 202264 Synthomer plc Annual Report 2022
Diversity and inclusion at the heart
ofourstrategy
We are seeing real momentum in our diversity and
inclusion programme, with improving results, more
ambitiousVision2030targets,andagrowing
numberofemployeeresourcegroups.
As part of our campaign to keep that momentum
going, we ran a series of virtual awareness
sessionsreachingouttomorethan500leaders,led
by members of our global diversity and inclusion
leadershipteam.Thesessionscoveredkeytopics,
such as our diversity and inclusion vision, priorities,
governancestructureandobjectives,andprovided
an open forum for participants to share their own
experiencesandaskquestions.Itwasalsoachance
for our leaders to share what they thought we are
doingwellandwherewecoulddomoretoembed
diversityandinclusionacrossSynthomer.
We also set up a network of diversity and inclusion
ambassadorsinAsia,with16ambassadorssofar.
Ambassadors act as trusted advisers, working with
our regional diversity and inclusion teams to help
shareandreinforceourkeymessages.Theyalso
share local feedback with our regional and global
diversity and inclusion leadership teams and attend
train-the-trainer workshops so that they can help
uscontinuetorolloutourdiversityandinclusion
awarenesssessions.During2022,ourambassadors
inAsiaran21awarenesssessionsforover600
people.Wewillcontinuetorollouttheambassador
networkintheUSAandEuropein2023.
Our Board and Executive Committee members
continue to support our diversity and inclusion
programme.Forexample,theyprovidegovernance
via our Diversity and Inclusion Steering Committee
and attend events held by our employee
resourcegroups.
Our Vision 2030 target:
gender diversity
40% senior management gender diversity
Target 40%
2022
25.4%
2021
*
20%
* Legacy Synthomer
Creating a more diverse and inclusive company takes time; our
originaltargettoreach50%genderdiversityinnewhiresinleadership,
managementandprofessionalroleswasjustastartingpoint.
Now we have set a new, more focused gender diversity target of
40%seniormanagementby2030.Thiswillhelpusembedgreater
diversityatthehighestlevelsoftheCompany.
Our short-term objective
2022 25% female senior leaders
Our2025objectivesremainthesame:
33%femaleseniorleaders
20%seniorleadersfromethnicallydiversebackgrounds
More detailed information on our progress against our target and
objectivescanbefoundthroughoutthissection.
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65Synthomer plc Annual Report 2022
People continued
Our diversity and inclusion
performance in 2022
We saw good improvements in our
diversity and inclusion performance
thisyear,withwomenrepresenting
21.4%ofourworkforce.Thepercentage
of women in senior management roles
increasedto25.4%–upfrom20%in
2021,andfrom9%justthreeyearsago.
This meant we achieved our 2022
short-termobjective.
WeofficiallywelcomedLilyLiuas
ChiefFinancialOfficerinJuly2022,
which means women continue to
makeup33%ofourBoard.Thisyear,we
exceededtheexpectationslaidoutinthe
Parker Report on ethnic diversity, with
two Board members from ethnically
diversebackgrounds.
We are seeing a shift in our Executive
Committee’s gender, ethnicity and age
profileaswell,withtheappointmentofAlice
HeezenasournewChiefHumanResources
OfficerandAnantPrakashasournewChief
CounselandCompanySecretary.
Gender diversity
All employees
Female 1,114
Male 4,092
Notdeclared1
Total 5,207
21.4%
Board
Female 3
Male 6
Total 9
33%
Senior management
Female 15
Male 44
Total 59
25.4%
We are also making excellent progress
attheotherendofthecareerspectrum,
withwomenrepresenting56%ofour
newgraduatesoverthepastfouryears.
Wecontinuetoworktowardsour2025
objectiveof20%seniorleadersfrom
ethnicallydiversebackgrounds.
A growing network of employee
resource groups
We have established two new employee
resource groups – our LGBTQ+ group,
THRIVE, and EMPOWER, our cultural
diversitygroup.
THRIVEcelebratedPridemonthinJune
2022 by raising awareness of the history
of Pride and running a live ‘Taking Pride
in Diversity’ event hosted at our London
officeandbroadcastvirtuallyacrossthe
Group.Theeventfeaturedaninterview
with Leng Montgomery, an experienced
diversity,equityandinclusionleaderand
former TEDx speaker, and explored the
importance of allyship and supporting
eachother.Inall,morethan100people
participatedindifferentPridemonth
activitiesacrossSynthomer.
EMPOWER was endorsed by our global
Diversity and Inclusion leadership team
attheendof2022andwillformallybe
launchedin2023.
Meanwhile, our well-established women’s
group,ENGENDER,continuestogrow.As
part of the Group’s activities this year, our
ChiefFinancialOfficer,LilyLiu,hosteda
sessiononourfinancialresults.Aswell
as the business update, Lily shared her
personalexperiencesinleadership.
In 2023, we will explore ways to better
supportpeoplewithdisabilities.
New training to support
inclusiverecruitment
To keep building a more diverse Synthomer
we have introduced inclusive recruitment
e-trainingonissueslikeunconsciousbias.
The e-modules are available in English
and Chinese, and we intend to add other
languagesintime.Todate,55%of
invitedhiringmanagershavealready
completedthetraining.
Beyond inclusive recruitment, we will
also focus on inclusive leadership in
2023, with plans to develop a dedicated
curriculum for our leaders, covering
elements such as communication,
building trust, collaboration, cultural
competence and achieving
transformation.
Our ongoing efforts to create a more
diverse and inclusive Synthomer,
combined with an increased focus
onequity,arepavingthewayfor
asuccessfulfuture.
Ana Perroni Laloe
President, Coatings & Construction Solutions and
DiversityEquityandInclusionExecutiveSponsor
Synthomer and sustainability
66 Synthomer plc Annual Report 2022
what our employees tell us, as well as sharing key
messages to help them feel more connected to the
business.Tohelpustakeamorestrategicapproachto
our employee communications programme, we carried
out an internal communications review in 2022 and
used what we learned to create an action plan, which
was then discussed and agreed with the Executive
Committee.Aspartofthis,werecruitedaninternal
communicationsmanagerin2023.
Communication is an important leadership skill too,
and this year we put measures in place to help our
senior leaders take greater responsibility for sharing
keystrategicmessages.Forexample,ourCEO,
MichaelWillome,setupaformalGlobalLeadership
Team(GLT),comprisingthetop75seniorleaders.
An important goal of the GLT is to promote greater
collaboration between our businesses, functions
andregionstosharegoodpracticeandsupportour
worktocreateacultureofinnovation.Thisgroup
hasalreadyplayedanessentialroleinhelpingto
share our new strategy across Synthomer, with a
seriesofengagementsessionswiththeirteams.
OurHRteamalsoworkedwiththeGLTtohelp
strengthen their communications skills and tell a
compelling story about Synthomer’s new strategy
andstructure.Wealsodevelopedastructured
employee communication and engagement plan to
provide regular, transparent updates on the changes
wearemakingandtosupportemployeewellbeing.
We also carried out targeted communications activities
thisyearataregional,functionalandsitelevel.
Thisincludedtownhalls,CEOvideosandmessages,
newsletters,sitevisitsandlunchandtalksessions.
Continuing to develop Board engagement
withemployees
In order to hear from employees directly across all
regions, our Board uses a mix of in-person meetings
andvirtualtechnology.In2022,weagreedtermsof
referenceandheldregularbriefingsataBoardlevel.
Our Non-Executive Directors Alexander Catto and
Holly Van Deursen lead our Board engagement
programme.In2022,theyhosted14virtualand
in-person Employee Voice sessions across all our
regions,involvingmorethan170employees.Our
Chair,CarolineJohnstone,joinedHollyformeetingsat
threesitesinSouthCarolina,USA.Wealsoheldvirtual
sessions with employees in Germany and France in
2022, plus virtual sessions in 2023 with our site in
Italy and with former Eastman employees at our
Netherlandssite.Laterintheyearweintendtovisit,
andholdBoardmeetings,atoursitesinMalaysia.
In addition, Board members met with employees
during visits to our site at Harlow in the UK, as well
asfiveUSAsites(includingoneofthesiteswe
Our Vision 2030 target:
employee engagement
Achieve upper quartile engagement scores
against external benchmarks
Our original Vision 2030 engagement target was designed to measure
employee response rates and to demonstrate that we have the tools
inplacetohearwhatemployeesthink.
This year, we have focused on turning the feedback we heard in our
2021YourVoicesurveyintomeaningfulaction.Wehavealsomade
our target more ambitious and will switch from measuring response
rates to engagement scores and benchmark our progress against
similarmanufacturingorganisations.And,in2023,wewillintroduce
internal performance indicators, such as the number of initiatives and
action completion rates, to monitor progress in our action plans to
addressareasforimprovement.
More detailed information on our progress this year can be found
throughoutthissection.
Addressing feedback from our employees
What our employees think about Synthomer matters – their
feedbackshowsuswhatisworkingwellandwherewecanimprove.
OurYourVoicesurveyisourglobalemployeeengagementtool.
Weranourlastsurveyin2021,whichwascompletedby73%of
employees.Aswellasstrengths,suchasourcommitmentto
safetyandunderstandingourCodeofConduct,thesurvey
highlighted three key areas for improvement: communication,
collaborationandwellbeing.
Asaresultofour2021survey,weidentifiedmorethan270local
or Group initiatives across the Company to address feedback from
ouremployees.Morethan70%ofthoseinitiativesareeithernow
inprogressorhavebeencompleted.OurExecutiveCommittee
andBoardregularlyreviewprogressandconfirmactionisbeing
takenwhenvisitingsites,orhostingtownhallsandfocusgroups.
Many of these initiatives are designed to strengthen
collaborationacrossthebusiness.Forexample,around100
employees participated in four cross-functional team-building
eventsatourAsianheadquartersinMalaysia.Wealsoheld
cross-functional ‘lunch and talk’ sessions at our European hub
in Germany, and several sites around the world ran knowledge
sharinginitiativesduringtheyear.
We have decided to wait until 2024 to run our next Your Voice
survey.Thiswillgiveusmoretimetointegrateournewadhesive
resinsbusiness.Afterthat,thesurveywillreturntoitstwo-yearly
schedule.Inthemeantime,weintendtolaunchashorter
annual‘pulse’surveyin2023.Thisdualapproachwillgiveus
time to turn Your Voice results into meaningful action while
checkingourprogressonanannualbasis.
Strengthening our approach to employeecommunications
Good communication is an important part of employee
engagement.Ithelpsusdemonstratethatweareactingon
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67Synthomer plc Annual Report 2022
People continued
acquiredfromEastman).Theyalso
visitedourdevelopmentcentreandoffice
inOhio,USA,whichweacquiredwith
OMNOVAin2020.
During these discussions we usually ask
employees to share their views on a
handfuloftopics.Forexample,in2022,
typical areas included what employees like
best about working for Synthomer, and
what changes they would like to see – with
particular focus on topics highlighted in
localemployeesurveys.Wealsocontinue
to explore how well we live our values
(particularly safety), while allowing plenty
oftimetohearwhat’sonpeople’sminds.
During the year, we heard many consistent
and positive messages, including that safety
isalwaysourfirstpriorityandstrongest
value.Employeestoldusthattheyfeel
respected and have the opportunity to
influencethewaywework.Wealsohearda
lot of enthusiasm for potential future growth,
personal development and our ability to
createfurthervalueforcustomers.Many
employeestoldusthattheyfindour
focusonsustainabilityandbeinga
goodcorporatecitizenverymotivating.
They also shared thoughts on areas
forimprovement–withaconsistent
message that we will need to make the
most of our resources as we mature and
grow.Withthatinmind,wewillcontinue
to focus on collaboration in line with
ourcorevalueofTeamwork,aswell
asaddressingotherissuesraisedby
employees such as mental health and
wellbeing, communication, prioritisation
andsimplification,changemanagement,
andinvestmentandmaintenanceplans.
This feedback is invaluable for our Board
and management team who use what
theyheartotakeaction.Forexample,
in2022,ourleadershipteamledawork
simplificationprogramme.Wealso
assessed the value of a more proactive
maintenance programme and reviewed
the central service function provided to
ourEuropeansites.
Continuing to support
employeewellbeing
One of the clearest messages we have
heard from employees over the past
couple of years is that they would like
ustodomoretosupporttheirwellbeing.
In response, we will broaden our
Employee Assistance Programme across
more geographies to provide support to
our employees who are facing personally
challenging situations, including those
fromahealth,financial,professionalor
workrelatedperspective.Thissupplements,
inaconfidentialway,thesupportthe
Company offers in situations that are
particularlychallengingforemployees.
InOctober2022,werananawareness
campaign to mark World Mental Health
Day, which included sharing useful
materials,suchasfactsandfigures
aroundmentalhealthissuesandtipsfor
stayingvigilantandsupportingeachother.
We will also establish a new wellbeing
committee, which will run regular
activities to promote and discuss
wellbeing and resilience issues, such
aspsychologicalsafety,management
ofprioritiesandresilience.
Supporting employees through cost-of-
living challenges
The Board and Executive Team have been
verymindfuloffinancialpressuresfacing
our colleagues across the business –
highinflationhasdrivenupthecostof
food and energy in many regions where
weoperate.Ourapproachhasbeen
guidedbybalancingthefinancial
pressures facing the business with those
ofouremployees.Wehaveworkedwith
ourpeopletodevelopequitable,bespoke
and tailored approaches for each of the
geographiesweoperatein.Wemade
one-off payments to some groups of
employees in 2022; elsewhere we paid
localincreases.Otherinitiativesto
support employees in 2022 included
one-off payments, food vouchers, and
discountedandsubsidisedshopping.
Wearedevelopingcountry-specificsalary
proposals for 2023 – for example, an
averagemeritincreaseof3.8%UK
Goodcommunicationissuchanimportant
part of employee engagement – it helps
our employees feel more connected to
thebusiness.
Alice Heezen
ChiefHumanResourcesOfficer
Synthomer and sustainability
68 Synthomer plc Annual Report 2022
Our short-term objectives:
ethics and compliance
Wesetourselvesaseriesofethicsandcomplianceobjectivesfor
2022 to continue strengthening our processes and training in this
importantarea.
2022 Deliver a plan to continuously improve
our compliance framework
Enhance our risk assessment processes
Review our Code of Conduct
for 2023 relaunch
Further enhance our compliance training
Wehavesetourselvesaseriesofethicsandcomplianceobjectives
for 2023, which can be found on page 83inourRiskreport.
More detailed information on our progress against our 2022
objectivescanbefoundthroughoutthissection.
managementandaverageof5%forthosebelow
managementlevels.Wehavealsoextensivelytailored
ouremployeebenefitsschemesineachgeography
tofocusonwhatmattersmosttolocalpeople.The
Board had regular oversight of the measures taken
in2022andthosewearetakingin2023.
Helping employees build their career at
Synthomer
What was already a competitive recruitment market
has become even more challenging in recent years
asaresultofthepandemicandtalentshortages,
particularlyintheUSA.Ifwearetocontinueattracting
the very best people, it is more important than ever
that we have the tools and policies to help people
seeSynthomerasaplacetobuildtheircareer.
As well as launching a new careers website,
complete with employee testimonial videos, we
rolled out new training to help strengthen our hiring
managers’recruitmentskills.
We also introduced a new performance management
framework designed to encourage continuous
performance conversations between employees
andmanagers.Theframeworkincludesadedicated
development conversation, to help employees build
ontheirexistingstrengthsandidentifygapsand
opportunitiestodevelopnewskills.Meanwhile,
employees and line managers can now use our
digitalHRtooltoshare,orrequest,specificfeedback.
Driving professional training and development
Our functional excellence teams continued to
makeprogressinsettingoutclearcareerpathways
andexpectedskillslevelsthisyear.Forexample,
Commercial Excellence designed a maturity
framework to identify the capabilities we need
toexecuteourstrategy.Asaresult,theteamhas
developed a new sales training initiative that will
help our commercial teams strengthen the way
theysupportcustomerneedsandstrivefor
commercialexcellence.
Meanwhile,ourlatestcohortof15employeesfrom
Europe and the USA completed their Manufacturing
ExcellenceAcademytraining.Thisprogramme
includes around 20 modules on topics such as
occupational safety, reliability and asset integrity,
andprojectexcellence.Theseven-month
programme also focuses on identifying ways in which
participants can apply what they have learned back
on-site.Inaddition,ourInnovationExcellenceteam
has developed a career development framework,
whichwewillrolloutin2023.Wearenowcarrying
outasimilarinitiativeinProcurementExcellence.
To support these initiatives, we have also continued implementing
our new Global Learning Management System, which we are
rollingoutacrossourlocationsinstages.Thesystemhasbeen
instrumentalindeliveringsomeofourmajorglobaltraining
initiatives this year, including in compliance and ethics and our
Pathwaybusinesstransformationprogramme.Pathwayis
helping us implement our new ERP system and contains around
100differentlearningmodules,whichhavebeencompletedby
morethan900peopleacrossSynthomerthisyear.
Ethics and compliance
We expect everyone who works with and for Synthomer to act with
integrityandrespect–asenshrinedinourvalues.Wehavedone
alotofworkinrecentyearstoimprovecomplianceawareness
acrosstheGroupandhelpemployeesdotherightthing.That
work includes a dedicated, Company-wide compliance portal,
aregularcomplianceblogandglobalcomplianceroadshows.
This year we continued our ongoing review of our compliance
framework.ThisinvolveddetaileddiscussionsbetweenourGroup
Compliance Manager and members of our business divisions and
functions to better understand their activities and related risks,
aswellasworkingcloselywithourGroupInternalAuditteam.
A plan for short-, medium- and long-term improvements will be
presentedtoourAuditCommitteeinMay2023.
We also carried out a detailed bribery and corruption risk
assessment to track the current controls we have in place to
manage risk and identify further areas of improvement in our
existingcomplianceframework.Weareaddressingthoseareasby
introducingrevisedcontrolsinourhigher-riskcomplianceactivities.
As part of a complex global value chain, we prioritise and
understand the level of bribery and corruption risk when working
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69Synthomer plc Annual Report 2022
People continued
withthirdparties.Toaddressthis,wehave
invested in a third-party due diligence system
to centrally manage our global due diligence
processes,including‘in-life’monitoring.This
will help us to strengthen the way we assess
each third party and ensure that appropriate
and proportionate risk-based levels of due
diligencearecarriedoutperiodically.
We expanded the scope of our Ethics
Helpline so that any third party working
withSynthomercanraiseaconcern.
Inaddition,weinvestedinanew
compliance branding initiative to raise
awareness of the externally hosted
helpline.Wealsoranourfirstcompliance
roadshow in 2022 in Asia, followed by
eventsinEMEAandUSAinearly2023.
We also began reviewing our Code of Conduct
toprepareforarelaunchin2023.Tosupport
ourrefreshedCode,wewillintroduceanew
set of standalone policies setting out our
expectedcontrolsandprocedures.
In 2022, we successfully completed
compliance integration of our newly
acquiredadhesiveresinsbusiness.
See our Risk report on pages 73 to 83
formoreinformationonhowwemanage
ourrisks.
Responding to the European
Commission investigation into styrene
monomer purchasing practices
Following its investigation into styrene
monomer purchasing practices between
2012and2018,theEuropeanCommission
(EC)issuedSynthomera€43.0millionfine.
This is a matter we have taken very seriously
andhavefullycooperatedwiththeEC.
AttherequestofourBoard,ourLegaland
Compliance team carried out a detailed
review of our procurement function and
purchasing activities to ensure continued
compliancewithapplicablecompetitionlaws.
While we have had a compliance framework
in place for many years, including a robust
training programme that covered
competition law compliance, we carried out
further work following the Commission’s
inspection.Thishashelpedtofurther
enhance our existing framework and the
complianceculturewithinSynthomer.
For example, we appointed a dedicated
Global Compliance Manager, improved
our‘SpeakUp’processwiththeexpansion
of our Ethics Helpline, enhanced our
competition law compliance toolbox,
which employees can access online,
enhanced our training, and introduced
‘Legal Business Partnering’ for more
bespoke engagements between our Legal
andComplianceteamandthebusiness.
This helps promote a better understanding
ofriskareasandindividualtrainingneeds.
We have also refreshed our competition
law e-learning training (alongside our
other compliance training) over the past
fewyears.Wehaverolledthattraining
out alongside face-to-face workshops for
relevant employees whose work is more
affectedbycompetitionlawissues.
In 2022, our Legal and Compliance
teamranaworkshopwithourExecutive
Sustainability Steering Committee about
compliance issues when working with
competitors and peers on sustainability-
focusedinitiatives.Theteamalso
launched a new face-to-face competition
law workshop, which aims to use relevant
scenarios to bring compliance to life, and
addressing competition law risks involved
inbothsalesandpurchasingactivities.And
itheldspecificsessionsfocusingonthe
outcome of the EC investigation with
relevantemployeesacrossthebusiness.
OurBoardalsorequestedareviewofour
compliance framework as it relates to
competitionlawcompliance.Thiswas
carriedoutbyourInternalAuditteam.
The review noted strong governance and
robustcontrols,subjecttoafewareas
forfurtherimprovement.
New training to strengthen our
compliance skills
We launched several ethics and compliance
training initiatives this year, including new
e-modules on data protection and our
CodeofConduct.
Training on our Code is mandatory for
allemployeesandissomethingwe
closelymonitor.
To read our Code of Conduct in full, visit
https://www.synthomer.com/investor-
relations/corporate-governance/
code-of-conduct/.
We also continued to run our anti-bribery
and corruption, and anti-competition
e-learning modules this year, with strong
participationinbothmodules.
Raising awareness of modern slavery
WeplantolaunchourfirstModern
Slaverytrainingbytheendof2023.We
are also working to develop a Group-wide
campaign highlighting modern slavery
awarenessinsupplychains.Thiswillbe
ledbyourHumanRightsWorkingGroup.
For more information on how we are
addressing modern slavery issues in our
supply chain, please see page52 in our
Productssection.
Synthomer and sustainability
70 Synthomer plc Annual Report 2022
Our communities
We want the communities who live near our sites to thrive,
andencourage our employees to get involved in local
volunteering opportunities.
Community support bounces back
This has been a good year for our Synthomer Cares
community and volunteering programme, with
activitiesclosetopre-COVID-19levels.Oursites
continuedtosupportprojectsfocusedoneducation,
environmentandsocialsupport.Forexample:
Italy – provided funding to support scholarships
forstudentsstudyingchemistryattwolocal
technicalinstitutes.
Czech Republic – created a programme with local
schools that includes a recruitment fair to promote
chemistryasanattractivefieldofstudyandwork,a
youngchemistcompetitionandProject‘Chemistry
Elixir’–atrainingcentreforchemistryteachers.
Portugal – supported a back-to-school programme
with‘TerradosSonhos’(whichmeansdreamland).
Inall,10volunteershelpedorphanedchildrenon
theirfirstdayofschool,byprovidingschool
materialsandpersonalsupport.
Malaysia – supported a range of sustainability and
education initiatives, including a beach clean-up day,
planting vegetable gardens at a charity home and
donatingcomputersandprinterstoalocalschool.
China – to support the health and safety of local
communitiesinthefaceofhighCOVID-19cases,
employees volunteered to distribute food, antigen
testsandmedicine.
USA – activities this year included employees at our
Jeffersonsitevolunteeringtoplantflowerbedsin
the local community, and employees in Cuyahoga
helping out at the urban farm of the Boys & Girls
Clubs of Northeast Ohio, Cleveland with weeding,
rubbishcollectionandgeneralchores.See‘Strong
performance from the Synthomer Foundation’ on
page 72 for more examples of our community
activitiesintheUSA.
Whileweaimtoprioritiseprojectsthatsupport
certain issues, we saw a rise in general charitable
givingthisyear.Thisisbecausemanycolleagues
werekeentosupportpeopleaffectedbythewar
inUkraine.Forexample,oursitesintheCzech
Republic,GermanyandPortugalcollectedfinancial
donations and essential goods, such as clothes and
hygieneproducts.Contributionsweregathered
bylocalmunicipalitiesandnon-governmental
organisationsandthensenttoUkraine.AtGroup
level,Synthomeralsodonated£100,000tothe
RedCross/RedCrescentUkraineCrisisAppeal.
Our Vision 2030 target:
our communities
Provide volunteer support and financial
contributions in excess of£1 million a year
to advance education, public health,
diversity and environmental stewardship
Target £1m
2022
£1.25m
2021 £0.93m
OurVision2030targetreflectsourdesiretotakeamorestrategic,
long-termapproachtocommunitysupport.Asignificantproportion
of our funding target will come via the Synthomer Foundation for
communityprojectsintheUSA.Thisyear,theFoundation
contributed£1.11million(upfrom£930,000in2021).
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71Synthomer plc Annual Report 2022
People continued
Participation rises in
Synthomer Cares week
In May 2022, we ran our second annual Synthomer
Cares week. Employees around the world helped
raise funds, support local communities and
connect with one another through a range of
activities. Our biggest event was our global charity
run, involving more than 500 employees – 10% of
our workforce – across 16 countries. Together,
they clocked up 29,000 kilometres, raising more
than £12,000 for eight not-for-profit organisations
across three regions.
Our Sokolov site, in the Czech Republic, held a
‘155 Line Day’ event for primary schools, helping
more than 200 children learn more about the work
done by the Karlovy Vary Region Rescue Service.
The event included a first-aid simulation and an
opportunity for children to hear about the sort of
rescue work the team carries out. Children could
see an ambulance vehicle provided by the Karlovy
Vary Region Rescue Service and a fire truck
exhibited and provided by the Karlovy Vary Fire
Rescue Service.
In Marl, Germany, our employees took part in an
environmental clean-up event held around our
offices. As a result, coffee-to-go cups, bottles,
cans, food packaging, camping equipment,
clothing and disposable masks were all collected
and disposed of properly.
Strong performance from the
Synthomer Foundation
This year was a particularly good one for
the Synthomer Foundation, contributing
£1.11milliontocommunityactivities.Of
that, the Foundation’s largest contribution
wenttoNortheastOhioUnitedWay.
Other USA-based activities included
Northeast Ohio employees buying
‘candygrams’ to send to co-workers,
withproceedsgoingtoUnitedWay,
andcollectinganddistributinggiftsto
familiesinneedduringtheholidayseason.
Employees at our Akron Technical Center
also decorated a ‘Chemis-tree’ with
periodic table elements, glitter test tubes
and3D-printedmoleculeornaments.
ThetreewasthendonatedtoAkron
Children’s Hospital as part of its annual
Christmas Tree Festival, during which
community members bid on different
trees to raise money for patient care
programmes,educationandresearch.
Consolidating our approach to
community support
Our new global volunteering network,
formedin2021,hashelpeddrive
consistency into our community
programmethisyear.
Corporate and social responsibility (CSR)
representatives from each site propose
and present initiatives to their regional
coordinatoronaregularbasis.Those
regional representatives then meet with
ourcentralteamonaquarterlybasisto
discussprojectproposalsandshare
volunteeringideas.Theyalsotrack
high-level metrics, such as the number
ofvolunteersandhoursvolunteered.
Thenetworkisactivelysupportedby
anexecutivesponsorandHRnetwork.
We want to encourage more employees
to get involved in community activities
and have now made our matched-funding
programmeavailabletoeveryone.
Previously this opportunity was only
opentoUKemployees.
We also continued to develop a ‘working
with the community’ component to
ourtalentdevelopmentandgraduate
programmesinallourkeyregions.
Next year, we want to support more
environmentalcommunityprojects.
Wehavesetournewcohortofsix
graduates a volunteering challenge to
raise awareness among site colleagues
about the growing importance of water
andbiodiversity.Thiswillalsogiveus
pilot studies that we can eventually
replicateandadaptforothersites.
Synthomer and sustainability
72 Synthomer plc Annual Report 2022
Our extensive portfolio of high-solids
styrene-butadiene rubber lattices has
been developed to provide high-end
insoleperformance within a range of
flexibility and comfort parameters.
Risk and other
disclosures
74 Managing risk
78 Principal risks and uncertainties
84 Task Force on Climate-related Financial
Disclosures (TCFD) report
90 Viability statement
90 Non-financialands.172disclosures
STRATEGIC REPORT – Risk and other disclosures GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
73Synthomer plc Annual Report 2022 73Synthomer plc Annual Report 2022
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE REPORTSTRATEGIC REPORT – Risk and other disclosures
Managing risk
We continue to adapt our approach to risk to keep pace with our
changingbusinessandthebroaderenvironmentweoperatein.
The expansion of Synthomer to include our new adhesive resins business, and our refreshed
strategic focus and divisional structure, has meant evolution across the business – including
inthewayweapproachrisk.Whiletheprinciplesunderpinningourapproachremainthesame,
wehavemadeprogressonourriskgovernance,wehavecomprehensivelyrefreshedourprincipal
risks – which we discuss in more detail in this report – and we have continued to adapt our risk
managementframeworktoensureourbusinessisprotectedwhilewepursueourstrategicobjectives.
Impact
Likelihood
Principal risk
Page
Strategic risks
Delivery of our strategic
initiatives
78
Demand uncertainty and
competitive dynamics in
the nitrile gloves market
79
Demand reduction 79
Technology and
innovation
80
Operational risks
Process safety 80
Disruption in supply to
our customers
81
IT and cyber security 81
Energy security and
price risk in Europe
82
Compliance risks
Ethics and compliance 83
Financial risks
Financial markets
andbalancesheet
83
This heatmap illustrates the relative positioning of our principal risks based
onthethreedimensionsweusetoassessourrisks:thelikelihoodoftherisk
materialising, its potential impact and its velocity – the time between the
riskcrystallisingandtheimpactbeingfelt.
This is based on the residual (net) ratings after considering any mitigating
controls.Pages 78 to 83 provide more detail on our principal risks and
ourmitigationactivitiesin2022andthoseplannedfor2023.
Given many of these principal risks are new, or consolidated, we have not presented
detailsoftheirmovementsandtrendscomparedwiththeprioryearintheheatmap.
Highervelocity
Newrisk
Risk
74 Synthomer plc Annual Report 2022
Risk
How we manage risk
We use leading risk management
techniques to help us make good
decisions about business opportunities
while protecting our sites, systems,
employees and other key stakeholders.
Risk governance and oversight
Our Board
The Board is responsible overall for
ensuring that risk is effectively managed
across the Group and for creating the
framework for our risk management to
operateeffectively.TheBoardcontinues
to set our risk culture and the risk
appetite it is prepared to accept to
achievetheGroup’sobjectives.Italso
continues to set our wider risk tolerance,
within which it gives the Executive Team
authoritytomanagethebusiness.
Risk appetite statements for our
principalrisksareembeddedinourrisk
management framework and, following
our recent principal risk review, we will
update them as part of our standard
governance processes to make sure
theyreflectstrategicchanges.
Audit Committee
On the Board’s behalf, the Audit Committee
reviews and assesses the effectiveness of
the Group’s risk management and internal
control processes and monitors our
riskexposure.
In 2022, the Audit Committee continued
itsprogrammeofriskdeepdives.This
gave management the opportunity to
explain directly to the Committee the
assessed risks, the associated controls
in place and any other mitigating actions
theyhadplanned.TheCommitteecarries
out regular deep dive risk reviews for
each of the Group’s divisions, as well as
specialist functional risk reviews into
plant control systems, strategic sourcing,
insuranceandpensions.TheCommittee
also reviewed summaries of the work
done by the Internal Audit team, which
operatesarisk-basedauditplan.
Together, our risk management system,
the Audit Committee’s deep dives and
our associated assurance work are
designed to make sure risk is managed
within our risk appetite, rather than to
eliminateriskcompletely.
Executive Team
The Executive Team is responsible for
identifying and managing our strategic,
operational,complianceandfinancial
risks using the risk management
framework.Italsomakessureourrisk
management policy is implemented and
embeddedinthebusiness.
Executive Risk Committee
Our new Executive Risk Committee (ERC),
introduced in 2022 and chaired by the
ChiefFinancialOfficer,isresponsiblefor:
Conducting top-down risk
assessments and reviews
Maintaining an overview of the key
risksidentifiedacrosstheGroupand
howadequateourriskresponsesare
Assessing and reporting on principal
and emerging risks to the Audit
CommitteeandBoard.
Division and function risk owners
We have a structured risk management
framework that operates at division and
Groupfunctionlevel.Weuseastandard
methodologytoquantifyrisk,witharisk
assessment matrix to make sure risks
areassessedconsistently.Therisk
matrix looks at three risk dimensions:
The likelihood of the risk
materialising
Its potential impact
The velocity – the time between the risk
crystallisinganditsimpactbeingfelt.
Our divisions and functions conduct their
own bottom-up risk assessments and
record them in a risk register using the
Group’s standard risk management
methodology.Theyassessrisksatboth
an inherent (gross) level and a residual
(net) level, considering the mitigating
controlsthatareinplace.Riskowners
also identify any additional activities that
could mitigate the risk in line with our risk
appetite, accepting that some level of
risk-takingisnecessary.
Three lines of defence
We operate a ‘three lines of defence’
assurancemodel.
Line 1
Our operational management and employees
formourfirstlineofdefence,responsible
for managing day-to-day risk in their own
areas.TheyareguidedbyGrouppolicies,
proceduresandcontrolframeworks.
Line 2
Our second line of defence includes our
Group Risk function, which develops and
manages the risk management framework
and engages with management to identify,
agreeandupdateriskinformation.This
linealsoincludesothercomplianceand
assurance functions – for example, Group
safety, health and environment (SHE),
Regulatory Affairs, Compliance and ISO
audits – which review how effective the
mitigatingactionsandcontrolsare.
Line 3
Our Internal Audit team provides our third line
ofdefence.Itprovidesindependentassurance
on internal controls and risk management
processes.Ourstatutoryauditorsprovide
externalassuranceonthefinancial
statements, while an external specialist
providesassurancearoundISOstandards.
STRATEGIC REPORT – Risk and other disclosures GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
75Synthomer plc Annual Report 2022
Managing risk continued
Assessing our principal risks
Risksaffectusinmanyways.Across
ourbusiness,weidentifythelikelihood,
potential impact and velocity of risks through
our formal twice-yearly risk assessment
submissions by divisions and Group
functions, which have regard to the challenges
and also risk mitigation opportunities
provided by the relatively short customer
order-to-fulfilmentcycleinmostofour
businesses.Managementisalsoempowered
and encouraged to manage and react to
risks as part of normal day-to-day decision
making.WeusetheGroup’sriskmethodology
toassesstherisksinvolvedinsignificant
projects,includingchangeprogrammes
and the integration of businesses we have
acquired.Thesereviews,togetherwithour
three lines of defence, enable us to establish
effectivecontrolstomanageourrisks.
In 2022, as part of our integrated risk
management framework, the ERC
conducted a robust assessment of our
principalrisksanduncertainties.
Although this review process is routinely
embedded in our governance processes,
it was particularly relevant in 2022 given
our refreshed strategy, changes in market
conditions, and the macroeconomic and
geopoliticalenvironment.
Our key risks
We categorise our risks – and consider
how effective our mitigating actions and
controls are – in four areas:
Strategic risks that could prevent us
achievingourstrategicobjectives
Operational risks that, if not
successfully managed, would
threaten our viability – these
relatetoourabilitytooperatea
sustainableandsafebusiness
Compliance risks, where a breach
ofregulationsorlawscouldlead
tofinesfromregulatorsorto
reputational harm, which may
disproportionately affect our
standing in the investor and
widercommunity
Financial risks relating to the
Group’sfundingandfiscalsecurity.
In its review, the ERC concluded that these
key risk categories remain relevant –
andweoutlinetheseinthenexttable.
Inparallel,theERCcomprehensively
refreshed our principal risks to make sure
they were aligned to our new strategy and
the business environment, and to remain
agileinhowwemanagerisk.These
changesarealsooutlinedinthenexttable.
The principal risks and uncertainties
onpages 78 to 83 provide more detail
aboutthese10revisedprincipalrisks.
Our Board and management feel these
risks pose the greatest threats to our
business.Theyfallintocategoriesthat
relatecloselytoourstrategicobjectives
andbusinessmodel.Theriskslistedare
not in any priority order, nor are all the
riskswefacelisted.
The nature of risk changes over time, with
new risks emerging and the effect of others
changing.Ourriskmanagementand
assurance programme can only provide
reasonable, not absolute, assurance that key
risksaremanagedtoanacceptablelevel.
This is why we cannot provide absolute
assuranceagainstmisstatementorloss.
Emerging risks
As well as known risks, we identify and
analyse emerging risks – and the need to
mitigate them – as part of our existing risk
managementprocesses.Emergingrisks
areeventsthatpresentuncertainty.They
may affect us in the longer term, but we do
notcurrentlyhavesufficientinformationto
understand and assess the likely scale,
impactorvelocityoftherisk–ortodefine
anappropriateriskresponse.
Managing risk at a glance
Bottom-up
Risk assessment
Divisional and
functional
Top-down
Risk assessment
Establishes the
riskmanagement
framework
Aggregates risk
information and helps
management to identify
principal risks
Provides guidance
and challenge to
divisional andfunctional
risk owners
Board of Directors
Setstheriskcultureandriskappetite.Hasoverallresponsibilityforreviewing
andapprovingourprincipalrisks.
Audit Committee
SupportstheBoardtomonitorriskexposure.Reviewsprincipalandemerging
risksandtheeffectivenessofriskmanagementandinternalcontrolprocesses.
ProvideschallengetoExecutivemanagementwhereappropriate.
Executive Team/Executive Risk Committee
ReportsonprincipalandemergingriskstotheAuditCommitteeandBoard.
Conductstop-downriskidentificationandreview.Ensuresriskmanagement
policy is implemented and embedded in the business and appropriate
responsesaretakentomanagerisks.
Divisional and function risk owners
Responsibleforriskidentification,managementandcontrolswithintheir
divisionandfunction.Identifyandassessrisks,determineandmonitorrisk
responses, and ensure operating effectiveness of key controls and progress
ofactionstomanagerisk.
Risk and Assurance
Risk
76 Synthomer plc Annual Report 2022
Through the ERC, Audit Committee
andBoard,wecontinuetoembedand
discuss emerging risks as part of our
riskprogramme,tomakesuretheyare
appropriatelyconsideredandmonitored.
In some cases, emerging risks are
superseded by other risks or stop being
relevant as the environment we operate
inchanges.Wecontinuetoreviewand
identify new emerging risk trends to
evaluate the effect they would have,
includingonourprincipalrisks.
Climate change
We have assessed climate change as
anemergingriskbecauseitcontinues
toevolve–soitremainsintegraltoour
riskmanagementprocesses.Having
thoroughly reviewed climate change
risksandopportunitieswithinputfrom
scenario analysis, and in line with our
approach last year, we believe climate
change risk is best managed within our
principal risks rather than separately,
asastandaloneprincipalrisk.
So, as part of our risk review, we have
integrated climate-related risks into our
principal risks, including physical risks
– primarily the potential impact of
droughts,flooding,risesinsealeveland
extreme temperatures on business
operations – and transitional risks –
primarily the potential impacts of carbon
taxes, market changes and environmental
policychanges.Indoingso,werecognise
the heightened ability of climate change
to affect our:
Delivery of our strategic initiatives
Technology and innovation
Disruption in supply to our customers
Energy security and price risk
inEurope
Ethicsandcompliance.
Throughout 2023 we will keep developing
our approach to climate change risk
reporting, to make sure our risk
management framework continues
toaddressalltherelevantrequirements
oftheTaskForceonClimate-related
FinancialDisclosures(TCFD).Ifwefail
toeffectivelyrespondtothisrisk,wemay
compromise our reputation and strategy
for growth, which is why we are closely
monitoring it and will continue to evaluate
whether it should be considered a
principalriskinthefuture.
Principal risk and category
Strategic risks
Delivery of our
strategic initiatives
Anewprincipalriskthatreflectsourrefreshedstrategy.Itreplacesthreepreviousprincipalrisks:Peopleand
talentretention,Mergersandacquisitions,andChangeprogrammes.
Demand uncertainty
and competitive
dynamics in nitrile
gloves market
AnewprincipalriskthatreflectsthedestockingintheNBR(andnitrileglove)marketfollowingthepandemic.
Demand reduction
A new principal risk that focuses on demand reduction as a result of the challenging market conditions
ofthepastyear.ThisriskreplacesthepreviousprincipalriskofVolatilityandcompetition.
Technology and
innovation
AminorrefreshofourpreviousprincipalriskofInnovationandintellectualproperty,reflectingthecriticalrole
technologyplaysinourabilitytoinnovate.
Operational risks
Process safety
ThisrefocusesthepreviousSafety,HealthandEnvironmentprincipalrisktoreflecttheheightened
importanceofprocesssafety,giventheinherentlyhazardouschemicalmanufacturingindustryweoperatein.
Disruption in supply to
our customers
A new principal risk consolidating the two previous principal risks of Loss or failure of a Synthomer
siteandSecurityofsupplyofrawmaterials,goodsandservices.Itreflectsourfocusonoperational
andcommercialexcellence.
IT and cyber security
AminoramendmenttothepreviousprincipalriskofITsecurity,toreflectthecriticalimportance
ofcyberrisk.ThisprincipalrisknowalsoincludeselementsofthepreviousChangeprogrammesrisk,
becausewerecognisethatITisakeyenabler.
Energy security and
price risk in Europe
Anewprincipalrisktoreflecttheeffectrecentgeopoliticaleventshavehadonenergysupply
andpricinginEurope.
Compliance risks
Ethics and compliance Thisprincipalriskremainsthesameaslastyear.
Financial risks
Financial markets
and balance sheet
ArefreshoftheprincipalriskpreviouslycalledFinancialrisks.Itreflectstheincreasedfinancialmarket
volatilitygivenmacroeconomicandgeopoliticaluncertainties.
Newrisk
STRATEGIC REPORT – Risk and other disclosures GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
77Synthomer plc Annual Report 2022
Principal risks and uncertainties
Thesepagesshowthemostsignificantriskstoourbusiness.Thereareother,
lower-level risks that can affect the Group’s performance: these are also actively
managedthroughourriskmanagementframework.
Strategic risks
Delivery of our strategic initiatives
Risk owners: Jan Chalmovsky, President Strategy and M&A, Alice Heezen,ChiefHumanResourcesOfficer
Link to strategy
Description
Aftertwolargeacquisitionsin2020and2022,
wehavedevelopedanewstrategytoreshapethe
Group and become a speciality solutions platform
for the coatings and construction, adhesives, and
healthandprotectionmarketsegments.
Goinginto2023,wecontinuetofacesignificant
macroeconomic uncertainties, unprecedented
energypricecostsandfluctuations,andastretched
balancesheet.Ifwedonotmanagethesefactors
effectively, they may pose a risk to delivering our
strategicinitiatives.
In this context, our employees are our greatest
assetindeliveringourstrategysuccessfully.Our
expandedsize,newstrategyandnewdivisional
structure will mean change for many parts of
theorganisation.
If we are unable to attract, retain and develop
thepeopleandtalentweneed,wemayface
difficultiesdeliveringandexecutingourstrategy
andtransformingthebusiness.Thisisparticularly
relevant given that talent markets are becoming
increasinglychallenging.
2022 response
We have started to implement this strategy,
including the divestment of our Laminates,
FilmsandCoatedFabricsbusinessestoSurteco
NorthAmericaInc.
In October 2022 we announced a new divisional
organisation structure to support this strategy
and reduce complexity, while staying focused on
ourendmarketsandgeographies.
We have set clear priorities in line with our
strategic initiatives, including differentiated
steeringinhowweallocatecapitalandtalent.
We have continued to evolve our people agenda
and culture this year to support our new strategic
goals and to help employees see Synthomer as a
placetobuildalong-termcareer.
To support this, we have:
– Established the Global Leadership Team (GLT),
a diverse group of leaders representing all
market segments, business units, functions
and regions, which provides clear direction on
strategic initiatives, focus and prioritisation
– Strengthened our internal communications
toemployeesandundertakenemployee
engagement activities to respond to
resultsofthe2021YourVoiceemployee
engagementsurvey
– Progressed our DE&I agenda through
leadership engagement sessions, new
Employee Resource Groups, e-modules on
inclusive recruiting, and the start of a D&I
AmbassadorNetwork.
2023 plans
We will continue to assess our strategic position
in terms of divesting our non-core businesses to
rationalise our portfolio, reduce complexity and
increase our focus on our end-market
orientation.
In line with our differentiated steering pillar, we
will continue to review and allocate capital and
talenttosupportourstrategicpriorities.
We will continue to strengthen our internal
communications function to help us take a more
strategic approach to employee
communications.
We will continue to develop and implement
training programmes to make sure all employees
have the necessary tools and support available
tothem.Theseprogrammesinclude:
– Resilience and wellbeing awareness
– Inclusive leadership
– Agenda and resource planning
– Prioritymanagementandsimplification.
We will strengthen our focus on leadership
capabilities and continue to develop empowered,
agile leaders who act as role models, coaching
and developing their teams, and who are
prepared to lead change to successfully drive
ourbusinessstrategy.
Wewillcontinuetoequipourleaderswith
effectivetoolsandtechniquestomaximiseour
change-management capability and to provide
continuityaswedeliverourstrategicinitiatives.
We will continue to check our progress around
employee engagement across the Group by
launchingashorterannual‘pulse’surveyin2023.
Link to strategy (see page 12)
Organicgrowthinattractive
end markets
Rigorousandconsistentportfolio
management to build focused,
leadingpositions
Operationalandcommercial
excellenceinhowwerunourbusiness
Differentiatedsteeringinhow
we allocate capital and talent
Diversity,equityandinclusion,
and holistic people development
Criticalenabler
Risk
78 Synthomer plc Annual Report 2022
Strategic risks continued
Demand uncertainty and competitive dynamics in the nitrile gloves market
Risk owners: Rob Tupker, President, Health & Protection, Performance Materials and Asia
Link to strategy
Description
Demandfornitrileglovesdependsonmanyfactors.
Although underlying demand for gloves remains
robust and is growing, short- and medium-term
factors can have a material effect on demand
forNBR.
Some of the main risk factors that contribute to
uncertainty include substantial glove destocking
following overstocking during the pandemic; more
gloves being manufactured outside Southeast Asia,
notably in China; and government incentive
programmes, particularly in the USA, for localised
PPEproduction,includinggloves.
2022 response
We delayed our NBR capacity expansion
investments in Malaysia in the short term, given
thecurrentmarketweakness,post-pandemic.
We delivered short- and medium-term
cost-effectiveness programmes, which included
headcountadjustmentsinoperationsand
engineering.
We collaborated with customers to forecast and
manage short-term demand, given end-market
supplychaindynamicsinkeygeographies.
2023 plans
We will continue to:
– Collaborate with customers to make the nitrile
glove supply chain in Southeast Asia more
competitive, with a key role for local innovation
at our Asia Innovation Centre in Malaysia
– Work with customers, distributors and
end-market users to increase demand
visibilityacrossthenitrilesvaluechain
– Pursue a share of demand growth with a
specificfocusonunderservedcustomers.
We will strategically evaluate global glove
andNBRcompetitivedynamics,andthe
consequencesforourNBRmanufacturing
footprint,inlinewithourmedium-termoutlook.
Demand reduction
Risk owners: Divisional presidents
Link to strategy
Description
The performance of the markets we operate in is
fundamentaltoourgrowth.Wehaveseen
challengingconditions,includinghighinflation,over
the past year as a result of global geopolitical and
macroeconomicevents.Thishasledtoweaker
overall demand in our end markets, especially in
segmentsfordurableend-useproducts.
This may be exacerbated by increased
competition,withcapacityexpandinginChina
andAsia.Thiscouldseeareductionindemand
inourendmarkets,decreasedmarginsand/or
lossofcustomers.
2022 response
We reviewed our commercial approach to
addressinflationarycostsandenergyincreases
asfarascompetitivedynamicsallowed.
We delayed our NBR capacity expansion
investmentsinMalaysia.
InAdhesiveSolutions,wedeployedourfirst
processresponsetoreducegasusage.Wedid
this in the form of re-piping, to burn co-products
asfuelononeunit.Wealsostayedcompetitive,
despiteadversegascosts.
We announced a programme to deliver
£150–£200millionincashsavingsbytheendof
2023.Theprogrammeconsistsofsuspending
the dividend, reducing working capital and
capitalexpenditure,andmakingcostsavings.
2023 plans
We will continue to put more cost-improvement
initiatives in place in our operations, including
product/plant footprint assessments and energy
improvements.
We will deliver innovation programmes focused
on process and product improvements, leading
tocostbenefitsthatwillberealisedbyboththe
Groupandourcustomers.
We will pursue a share-of-demand
growthstrategywithaspecificfocus
onunderservedcustomers.
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79Synthomer plc Annual Report 2022
Operational risks
Process safety
Risk owner: John Hamnett, Group Global SHE & Engineering Lead
Link to strategy
Description
The chemical manufacturing industry is inherently
dangerous.Itinvolvestransporting,storingand
processinghazardouschemicals,whichleadsto
wide-rangingexposuretoprocesssafetyrisks.
Theacquisitionoftheadhesiveresinssitesin2022
sawourriskprofileincreasefortworeasons:the
high temperatures and pressures these units
operate at, and core technology that is outside our
previousexpertise.
Asignificantprocesssafetyincidentcouldaffect
thesafetyofourpeopleand/orlocalcommunities.
Thiscouldresultinsignificantoperationaldisruption,
regulatoryfinesand/orreputationaldamage.
2022 response
Our management programmes reduced
flammablemateriallossofcontainment(LOC)
–akeylaggingindicator–by40%yearonyear.
Wehavedelivereda33%reductioninourkey
leading process safety KPI, which measures
potential near-miss events, since its introduction
in2021.
We updated and reissued our ‘Black Book’ – our
corporate memory or lessons learnt – in 2022,
soitnowincludeslegacyOMNOVAincidents.
Wecompleted98%ofourhighestprioritySHE
improvementactions(redflag)in2022.
We now have a specialist process safety
resourceinourUSregiontosupportsites.
2023 plans
We will continue driving our existing
managementprogrammesatalloursites.
Wewillextendourprocesshazardanalysis
studies to cover hot-oil utility facilities, following
thefireinFilago(seepage57).
We will continue to develop our Black Book
toincludeanyhistoricprocesssafetyevents
intheadhesiveresinsbusinessesweacquired.
We will extend our process safety networks to
includetheadhesiveresinssites.
Principal risks and uncertainties continued
Strategic risks continued
Technology and innovation
Risk owner: Marshall Moore,ChiefTechnologyOfficerandPresident,Americas
Link to strategy
Description
Innovation is a critical enabler for our growth
strategy.Inadditiontodifferentiatedperformance,
our customers and end users are looking for
improvements in our sustainability – like a
low-carbonfootprintandcircularity.
If we fail to effectively identify opportunities and
execute innovation programmes, we could fail to
realise growth opportunities and potentially lose
marketshare.
When we innovate successfully, failure to protect
our intellectual property (IP) could see us lose
competitive advantage and value from our
investments.
2022 response
Thiswasthefirstfullyearofourenhanced
innovation management processes, including a
rigorousyetagileprojectmanagementstructure,
and a new Group-wide process to manage our
innovationportfolio.Theseimprovedprocesses
increase our likelihood of success, and so
mitigatetheoverallriskoffailingtoinnovate.
Tofindopportunitiesforinnovation,our
Group-wide ideation platform has also been
expanded.Itencouragesourpeopletosubmit
clearlydefinedopportunitiesandto
communicatetheseacrossourbusinesses.
TheSustainabilityBenefitAssessment
Scorecardimplementedin2021wasenhanced
in 2022 to place an increased and more balanced
emphasis on downstream sustainability
benefits.Thismeanswewilldelivervaluefrom
sustainabilitytocustomersandendusers.
We continued to implement a new trade secret
policy.WealsointegratedtheIPportfoliocovering
theadhesivesproductsweacquiredin2022.
We have developed and delivered multimedia
training programmes to make sure all employees
involved in innovation are fully aware and compliant
withtheirresponsibilitiesforIPproduction.
Wemadesignificantprogressinournewlyformed
Technology Platforms group on developing new
chemistries for the long term – technologies that
offer differentiated performance and enhanced
sustainability.Thispipelinebolstersthe
market-driven innovation programmes under
wayinourbusinessdivisions.
2023 plans
We will embed more improvement opportunities
as we integrate innovation management systems
withfinancialreporting,forecastingandcustomer
relationshipmanagementsystems.Thiswillhelp
to streamline how we commercialise products
and let us have sight of that process
automatically.Inturn,thisshouldincrease
ourrateofsuccessandspeedtomarket.
Through our Innovation Excellence framework,
we have increased our focus on skills
development, on implementing advanced
experimental design and modelling and on
artificialintelligencemethods.Wewillcontinue
toexpandonthisin2023.
We intend to contribute to our plan to transition
toanetzeroeconomybyresearchingnon-fossil
raw materials and developing more resource-
efficientindustrialprocesses.
Risk
80 Synthomer plc Annual Report 2022
Operational risks continued
Disruption in supply to our customers
Risk owners: Divisional presidents
Link to strategy
Description
Security of energy and raw material supplies,
andplantavailabilityandreliability,arecriticalto
maintainingsuppliestoourcustomers.
These may be affected by external factors, such as
market shortages, short- and/or long-term physical
climate-related disruption (including weather
events and natural disasters), pandemics, global
macroeconomic and geopolitical events, or an
internal event that affects plant availability,
reliabilityorsafeoperations.
All these factors could lead to a disruption in supply
toourcustomers,whichmaysubsequentlyhavean
adverse effect on our reputation – especially in light
of our strategic commitment to operational and
commercialexcellence.
2022 response
We implemented our holistic procurement risk
assessment, addressing a broad range of risks,
includingESGrisks.
We responded to the challenges presented by
the high volatility and supply chain disruption
triggered by the war in Ukraine with no material
impactonsecurityofsupply.We:
– Used our proactive risk assessment to
securealternativesourcesandcreatea
diverse supply base
– Are increasingly focused on sourcing raw
materials locally or regionally to reduce risk
– Agreed medium-term targets for our supplier
auditsanddeliveredagainstthesein2022.
Each division has robust programmes in place
around plant reliability improvements and safety,
health and environment (SHE) risk, as well as
associated SHE and sustenance capital
expenditurerequirementstodrivereliabilityand
minimisedisruptioninoursupplytocustomers.
2023 plans
We will continue to address the risks
associatedwithsingle-sourcedrawmaterials.
We will continue to evaluate and ensure each
division has appropriate engineering resources
to help sites manage their capital expenditure
andassetintegrityandreliabilityprogrammes.
Key in 2023 will be fully incorporating the
acquiredadhesiveresinssitesintoour
operational and commercial excellence
initiatives.OurManufacturingExcellence
programme, as part of these initiatives, will
belaunchedacrossthesenewsitestotrack
productivityandefficiencyimprovements,and
driveimprovedplantreliabilityandcontinuity
inoursupplytocustomers.
IT and cyber security
Risk owner: Lily Liu,ChiefFinancialOfficer
Link to strategy
Description
An IT security breach or data-centre outage that
has an adverse effect on our systems – including
Enterprise Resource Planning (ERP), SHE databases,
communications and industrial control systems –
mayaffectourongoingoperations.Itmayseeus
loseintellectualpropertyorfaceregulatoryfines,
which might undermine our competitive position
andcausereputationaldamage.
Any unforeseen changes or system faults that
occurwhenmajorchangeprogrammesare
implemented may disrupt our operations,
potentially increase costs, and/or affect our
abilitytodelivercustomerrequirements.
2022 response
We continued to enhance our security defences
with more security investment and through our
work to implement the Group Cyber Security
Plan.Ouractivitiesincluded:
– More enhancements to privileged
accountmanagement
– A training programme to increase awareness
of the upgraded Group Acceptable Use Policy
– Risk reviews and reporting against IT security
key risk indicators
– Planning to simulate and test crisis
responseplans
– Rolling out our Domain-based Message
Authentication, Reporting and Conformance
(DMARC) anti-fraud email tool to authenticate
emailtraffic.
Ourdata-centrehostingactivitiesareISO27001
certifiedandsubjecttocomprehensive
continuityrequirements,includingregular
backups,whicharestoredinaseparatelocation.
We continued to implement our Pathway
businesstransformationprogramme.This
included upgrades to our latest global template
ERP systems – using effective governance,
extensive system testing and business readiness
tools–withnosignificantbusinessdisruption.
2023 plans
We will continue to enhance our security
defences through our work implementing
theGroupCyberSecurityPlan.Ourplanned
activities include:
– Ongoing investigation of new potential
securityissuesandrisks
– Additional simulation and testing
ofcrisisresponseplanscenarios
– Independent security risk audits
– Continuing to roll out our DMARC anti-fraud
emailtooltoauthenticateemailtraffic
– Evaluatingourdata-centreredundancystrategy.
We will also continue to use effective
governance, as well as engagement, system
andbusinessreadinesstools,atkeystages
ofthePathwaydeploymentlifecycle.
STRATEGIC REPORT – Risk and other disclosures GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
81Synthomer plc Annual Report 2022
Principal risks and uncertainties continued
Operational risks continued
Energy security and price risk in Europe
Risk owner: Stephen Blackburn, Vice President, Group Procurement
Link to strategy
Description
The war in Ukraine led to sanctions on Russian
energy exports and a reduced gas pipeline
supplytoEuropein2022.Whilevolumescanbe
compensatedforthroughliquidnaturalgas
imports,thisissubjecttoglobalpricing,and
depends on the availability of infrastructure, levels
of gas storage and demand, which is primarily
drivenbyweatherconditions.
Significantpricerisescouldreducethe
competitiveness of our European businesses,
because of increased production costs and our
inability to pass on these costs to customers,
givenincreasedcompetitionfromotherregions.
2022 response
We avoided the worst of the volatility and price
peaks seen in the European market in 2022
because of our long-term electric power and gas
procurement strategy, which is focused on
forwardbudgetcostprotection.Wealso
completed a full review of this strategy, given the
unprecedentedmarketrises,andrefineditby
business area to consider the energy intensity of
sitesandproducts.
We established new supplier agreements where
wehadseensupplierfinancialinstabilityor
marketdisruption.
We have reduced our gas demand through the
use of alternative fuels either directly or working
with our site utility service suppliers where
possible,andcontinuetolookatopportunities.
We improved our transparency and
understanding of energy as part of our full
productioncostanalysis.
We completed an opportunity assessment for
power purchase agreements (PPA) in Europe
andprogressedaPPAopportunityintheUSA.
2023 plans
Wewillcontinuetomonitorthefinancialstability
of suppliers, to identify potential exposure and
takeappropriateaction.
We will increase monitoring and transparency
oftheresilience,measuresandplansforoursite
utilityserviceproviders.
As the European market outlook stabilises, we
aimtoincreaseoursupplycontracthorizonto
return to our long-term strategy to deliver price
andcoststability.
WewillprogressPPAprojectsforEuropeandthe
USA, to provide long-term renewable electric power
supply for most of our demand at stable pricing,
which will also enable us to minimise the impact
ofpotentialcarbontaxes.
We will undertake business scenario planning for
potentiallylong-termhighenergypricesinEurope.
We will continue to reduce demand through
site-focusedenergy-efficiencyand
decarbonisation investments – for example,
flexibilityinfuelsourcesandlocaldirectPPA
projectsinsolarandmicro-wind,toreducecost
and business CO2emissions.
Risk
82 Synthomer plc Annual Report 2022
Compliance risks
Ethics and compliance
Risk owner: Anant Prakash, Chief Counsel and Company Secretary
Link to strategy
Description
If we fail to comply with relevant legislation and
regulatoryguidance,wemayfacesignificant
financialpenalties,lossofmaterialassets,
unquantifiablereputationaldamageandincreased
regulatoryscrutiny.Theseissuesmaycausedelays
in business operations and adversely affect the
Group’sabilitytopursueitsstrategy.
If we fail to proactively address sustainability, ethics
and compliance goals, mandates and regulations,
we may face future penalties, loss of
competitivenessandreducedshareholdervalue.
2022 response
We continued to enhance our ethics
andcomplianceby:
– Completing a comprehensive anti-bribery
andcomplianceriskassessmenttoidentify
risks within the Group
– Reviewing existing third-party risk
management processes and investing in an
external platform to optimally manage the
riskassociatedwiththethird-partylifecycle
– Rolling out our new e-learning Code of
Conduct training to all employees globally,
andoure-learningdataprotectiontraining
torelevantemployees
– Increasing awareness of our externally hosted
reporting helpline, where individuals and
external third parties can raise concerns
– Investing in our new compliance brand
campaign (Syntegrity), with periodic blogs
andaroadshowtohighlightcompliance
risksandtoengagethebusiness.
We created new sustainability and innovation roles
withinourneworganisationalstructuretosupport
ourVision2030sustainabilityprogramme.
We continued to report against
TCFDanddevelopedscience-based
emissions-reductiontargets.
2023 plans
We will design and implement controls across
theGrouptomanagetherisksidentifiedinthe
anti-briberyriskassessment.
We will implement random spot checks
onkeycomplianceareasincluding:
– Recording gifts and hospitality
– Declaringconflictsofinterest
– Completingbackgroundchecks.
We will introduce compliance approval
requirementsforhigher-riskactivities.
We will integrate the new due diligence process
for onboarding and managing third parties,
following a successful soft launch of our
externalriskplatform.
We will review and relaunch our Code of
Conduct, supported by standalone compliance
policiesandguidance,whererelevant.
We will continue to deliver our compliance
roadshowglobally,toraiseawareness.
We will develop a global, synchronised training
matrix, launch a new modern slavery e-learning
moduleanddeliverourcompetitionlawworkshops.
We aim to validate our new science-based
emissions-reduction targets and continue to
monitor and comply with emerging regulatory
requirementsrelatedtoclimatechange,such
aslimitsonemissions.
Financial risks
Financial markets and balance sheet
Risk owner: Lily Liu,ChiefFinancialOfficer
Link to strategy
Description
Thefinancialmarketsarevolatilegiven
macroeconomic and geopolitical uncertainties
andinflationarypressures,andthishasdriven
asignificantriseininterestratesintheGroup’s
majormarkets.
GiventheGroup’scurrentfinancialleverage,and
thematurityprofileofitsfinancialliabilities,this
financialmarketvolatilitycouldaffectthe
quantumand/orcostoftheGroup’sfuture
refinancingactivities.
2022 response
We successfully disposed of our Laminates,
Films and Coated Fabrics businesses to
SurtecoNorthAmericaInc.,withthe
proceedsbeingusedtopaydowndebt.
Wesecuredafive-year,£450millionUKExport
Finance (UKEF) package with a competitive
interestrate.
We maintained strong relationships
withourcorebankinggroup.
Wecloselymonitoredmarketconditions.
We announced a programme to deliver
£150-£200millionincashsavingsbytheendof
2023.Theprogrammeconsistsofsuspending
the dividend, reducing working capital and
capitalexpenditure,andmakingcostsavings.
2023 plans
InMarch2023wesignedanew,$480million
revolving credit facility and will continue to
monitor market conditions closely to keep our
otherfinancingarrangementsunderreview.
We will continue our portfolio management
approach and look at opportunities to
optimisethevalueofourassets,including
thenon-coreportfolio.
We will continue to optimise cash
performancetosupportthereturn
toourtarget1–2xleverage.
STRATEGIC REPORT – Risk and other disclosures GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
83Synthomer plc Annual Report 2022
TCFD report
The urgency of tackling climate change grows every year, and 2022
wasnoexception.Climatechangeanditsassociatedenvironmental
impacts pose risks for all of us, but, as a speciality chemicals
business,italsobringsopportunitiesforSynthomer.Oneofourkey
benchmarksfornewproductsistheirsustainabilitybenefits,andwe
are seeing growing demand among our customers for more
sustainable,climate-friendlyproducts.
In summary
Good progress in developing our
understanding of climate risk
andopportunity
The work we have done this year in
continuing to deepen our understanding
of the risks and opportunities presented
by climate change, in line with the
TaskForce on Climate-related Financial
Disclosures (TCFD), has played an
important part in our strategic
development. Alongside our Group-wide
Vision 2030 plan, sustainability is now
one of the three critical enablers of our
new strategy, while climate-related
issues have been embedded into our
principal risks. We have also integrated
sustainability into our innovation process
so that our focus is firmly on developing
the products that support a pathway to
decarbonising our entire value chain.
Our ‘deep dive’ scenario analysis work
this year expanded our understanding
ofthepotentialrisksandopportunities
presented by three climate scenarios
underthreetimehorizonstoa
representativesampleofourbusiness.
The work has now covered all three of
our key chemistries (acrylic emulsions,
synthetic elastomer emulsions and
hydrocarbon resins); our three main
regions (Europe, Asia, USA); more than
50%ofourproductsbyvolume;andthe
mostsignificantpotentialphysicalrisks
of climate change to which we may be
exposed.Giventheextentofthiswork,
we therefore have a high degree of
confidencethatgeneralisingtheseresults
will give us a reasonable understanding
of the impacts of climate change on
thebusinessasawhole,andwecan
thereforeproceedwithconfidence
withourtransitionplanning.
Thisyear’sanalysisconfirmedwhatwe
learnt from last year’s, namely that in
theshortterm(to2025),aroundthree
quartersofthefinancialimpactof
therisksfromclimatechangeforour
business will come from transitioning to
a low-carbon, circular economy (mainly
highercosts),witharoundaquarter
coming from physical risks (more
extreme weather events affecting our or
oursuppliers’operations)undera1.5ºC
temperaturerisescenario.Underthis
scenario, we also see the greatest
potential for growth in demand from our
customers and their consumers, for those
of our products that offer lower-carbon or
circularitybenefits.Lookingbeyond2025,
ourscenarioanalysesconfirmthat
transitioning to a low-carbon economy
wouldremainourmostsignificant
financialrisk;by2030and2050thesplit
between transition and physical risks will
becomehigher(approximately90:10vs
approximately75:25in2025).
Looking at physical risks, 2022 has
shown that more extreme weather
eventssuchasfloods,droughtsandhigh
temperaturesareincreasinginfrequency.
In the medium term, these could have a
negative impact on our operations and
our suppliers, while in the longer term,
rising sea levels could threaten our sites
in coastal areas, such as Pasir Gudang,
Malaysia.Overall,thephysicalrisksof
climate change are only likely to worsen;
in this context, we expect governments
to accelerate the introduction of policies
tomitigateclimatechange,including
tighteningregulationandtaxingemissions.
This is why our transition planning
focuses on reducing our own emissions
through our site decarbonisation plans
(whichconcentrateonenergyefficiency
improvements,electrificationand
renewable energy), and the emissions
produced in our supply chain; and it is
why we have set more ambitious targets
for those emissions, aligned with the Paris
Agreement.And,tosupportourcarbon
reductionprojects,thisyearweintroduced
aninternalcarbonpriceof£85pertonne
ofcarbondioxideequivalentinthe
financialprojectionsforeverypotential
capitalinvestmentabove£1million.
TCFD
84 Synthomer plc Annual Report 2022
TCFD
Clearly, understanding and managing the
risks and opportunities of climate change
is an ongoing process, which must adapt
as the impacts of climate change are felt
and the regulatory and policy landscape
evolves.Inthecomingyear,wewill
develop a more detailed transition plan,
linked to our updated scenario analysis,
including identifying new metrics and
tools to calculate the carbon footprint
ofourproducts.Thiswillinvolveworking
with key suppliers to maximise our
reduction in Scope 3 emissions, and
looking at alternative, lower-carbon
feedstocks.Withbettermetrics,we
willalsobeinapositiontoanalyse
morefullythefinancialimpactof
climatechangeonourbusiness,track
progressagainsttargets,andsupport
ourcustomersindoingthesame.
Increasing our alignment with TCFD
Overall this year, we have continued to
enhanceourreportinginlinewiththe11
recommendationsofTCFD.Assummarised
in the table below and described in the rest
of this section, we have now provided
comprehensive detail on six of the
recommendations compared with four in
2021,andhaveenhancedourdisclosures
regarding climate scenarios and our
processesforidentifyingandassessingrisk.
TCFD recommendation Consistency
Governance see page 86
a) Describe the Board’s oversight of climate-related risks
andopportunities.
Full
b) Describe management’s role in assessing and managing
climate-related risks and opportunities.
Full
Strategy see page 86 to 88
a) Describe the climate-related risks and opportunities the organisation
has identified over the short, medium and long term.
Full
b) Describe the impact of climate-related risks and opportunities on the
Company’s businesses, strategy, and financial planning.
Partial – we have completed our analysis of
risksand opportunities under the 1.5°C and
2°Cscenarios, but have further work to do to
determine the full impact on our strategy and
financial planning
c) Describe the resilience of the Company’s strategy, taking into
consideration different climate-related scenarios, including a 2°C
orlower scenario.
Partial – we have completed our analysis of
risksand opportunities under the 1.5°C and
2°Cscenarios, but have further work to do to
determine the full impact on our strategy and
financial planning
Risk management see page 89
a) Describe the Company’s processes for identifying and assessing
climate-related risks.
Full
b) Describe the Company’s processes for managing climate-related risks. Full
c) Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the Company’s overall risk
management.
Full
Metrics and targets see page 89
a) Disclose the metrics used by the Company to assess climate-related risks
and opportunities in line with its strategy and risk management processes.
Partial – we are developing further climate-
related metrics to determine progress against
risks andopportunities
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope3, greenhouse
gas (GHG) emissions, and the related risks.
Partial – we are working to enhance our
Scope3reporting
11 Describe the targets used by the Company to manage climate-related
risks and opportunities and performance against targets.
Partial – we have sustainability targets that
include some that are climate-related, but have yet
to determine targets for our risks and opportunities
STRATEGIC REPORT – Risk and other disclosures GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
85Synthomer plc Annual Report 2022
TCFD report continued
Climate change is the responsibility
ofour Board given its importance
tothebusiness, with our CEO
takingresponsibility for delivery on
theBoard’s behalf. Climate change
andrelated environmental, social and
governance (ESG) issues areregular
Board agenda items, and are
considerations in all key decisions
made by the Board. For example, in
considering the recent acquisition of
ournew adhesive resins business, the
Board looked not only at its alignment
with our overall strategy but also at
whether the acquisition would affect
our existing climate commitments.
In terms of day-to-day management,
lastyearwecreatedanExecutive
Sustainability Steering Committee,
chaired by the CEO, and attended by the
full Executive Committee and the Group
SustainabilityDirector.Itmeetsquarterly
and has two roles:
To ensure that our plans for
climatechangearealignedacross
Synthomer, and are properly
resourced and coordinated
To ensure that our climate-related
metrics and targets are managed
effectively.
Each of our Vision 2030 roadmap
sustainability goals is sponsored by a
member of the Executive Committee who
is responsible for ensuring we have the
right plans in place to deliver within the
timeframe.Seepage 43 for the Vision
2030roadmap.
This year, we strengthened our governance
ofclimate-relatedissues.Webegan
reporting climate-related KPIs (assured
byInternalAudit)quarterlytotheBoard.
At the Executive level, our Chief
TechnologyOfficercombines
responsibility for innovation with
responsibility for sustainability, and is
leadingourworktoembedsustainability
morefullyintoourinnovationprocess.
This dual responsibility for the linked
areas of innovation and sustainability
hasalsobeenextendedthroughout
theorganisation,withasinglesenior
appointee responsible for both in each
ofournewdivisions.Tosupportinnovation
across the business, we have recruited
asustainabilityanalystatGrouplevel
todevelopmetricsforembedding
sustainabilityintoourinnovationprocess.
We are also increasing understanding
ofclimate-relatedissuesacrossthe
business by offering at least biannual
training on sustainability-related topics,
in particular for our R&D teams and those
who work directly with suppliers and
customers.Oursustainabilityteams
areexpandingtheirexpertisebytaking
various academic courses, and taking
partinconferences.
For more on governance, see our
Governance report, pages91to152.
Including climate-related targets
inremuneration
We continue to link progress on
climate-relatedtargetstotheoverall
remuneration of Executive Committee
members,with10%ofexecutives’annual
Performance Share Plan award based on
reducingScope1andScope2carbon
emissions.
As climate change and the world’s efforts
to transition to a low-carbon economy have
intensified, demand for more sustainable
products has increased markedly. The
insights we have gained from our work
to identify the risks and opportunities
from climate change, in line with the
recommendations of TCFD, also helped
inform the work we did to refresh our
strategy this year, which now highlights
sustainability as one of three critical
enablers. As noted elsewhere,
sustainability is also a key consideration
in all our innovation processes, given the
increasing focus byour customers and
end users of our products on mitigating
the impacts of climate change.
For more on our business strategy,
seepages12and13.
Scenario analysis methodology
In2021,weretainedaspecialistexternal
advisertoconductourfirstclimate
scenario analysis and determine risks
and opportunities for Synthomer, in line
withtherecommendationsofTCFD.Our
teams worked with the adviser to carry
out an analysis of the effects of three
different climate scenarios – average
globaltemperaturerisesof1.5°C,2°Cand
3°C above pre-industrial levels – over
short-(to2025),medium-(to2035)and
long-term(to2050)horizons.
Eachscenarioidentifiedbothphysical
and transition risks and opportunities,
although the combination and potential
impactvariedbyscenario.Indetermining
the materiality of the risks and opportunities
identified,welookedatacombinationof
likelihoodandimpact–thelikelihoodofthe
risk or opportunity occurring and the nature
andmagnitudeofitsimpactonthebusiness.
In2021,weconducteda‘deepdive’analysis
of the impact of these three temperature
pathways on one product line: styrene
acrylic water-based emulsion, a Functional
Solutions product made in our plant in
Worms,Germany.Wechosethisproduct
line as a starting point since it included a
significantnumberofvariables,meaning
Sustainability is
oneof the three
critical enablers
ofour strategy.
Governance Strategy
TCFD
86 Synthomer plc Annual Report 2022
Scope of climate scenario analysis
Three
product lines
Styrene acrylic
water-based
emulsion
Nitrile
butadiene
rubber
C5
hydrocarbon
resin
Our three
main regions
Europe
(Worms,
Germany)
Asia
(Pasir Gudang,
Malaysia)
USA
(Jefferson,
Pennsylvania)
Three of our
key chemistries
Acrylic
emulsions
Synthetic
elastomer
emulsions
Hydrocarbon
resins
Most significant potential physical
risks of climatechange to:
Sea
Sea level rise
Rivers
Flood/drought
Land
Extreme
temperatures
>50%
of our products
by volume
that,forasingleproductline,itwasas
representative as possible of a broader
rangeofproducts.In2022,weextended
this work to cover two additional product
lines, nitrile butadiene rubber produced at
our Pasir Gudang facility in Malaysia, and
hydrocarbonresinC5series,producedat
ourplantinJefferson,Pennsylvania,USA.
Together these three product lines give
ussufficientcoverageforageneral
understandingoftheidentifiedclimate
risks and opportunities facing the Group as
awhole.Takentogether,theproductlines
cover all three of our key chemistries (acrylic
emulsions, synthetic elastomer emulsions
and hydrocarbon resins), our three main
regions(USA,Europe,Asia),morethan50%
ofourproducts,andthemostsignificant
potential physical risks of climate change to
sea,riversandland.Thecomprehensiveness
of this coverage completes our assessment
ofclimate-relatedrisks,andwewillnow
focus on strengthening our plans to
manage the risks and opportunities
wehaveidentified,andtheireffecton
ourfinancialpositionandstrategy.
Summary of potential risks
The analysis we carried out this year
confirmedwhatwelearntinour2021
analysis, namely that our products and sites
are primarily exposed to the following risks:
Physical risks including more
frequentextremeweatherevents
suchasfloods,droughts,arisein
thesealevelandhightemperatures.
These could affect our plants’ ability
tooperateefficiently,andcould
increasecostsfromoursupplychain.
Transition risks: these include
potential carbon taxes, and market
andenvironmentalpolicychanges.
Both types of risk were present in all
temperature pathways and under all
timeframes, but their relative severity
andimpact,andourresiliencetothem,
wouldvarybetweentimeframes.
Summary of potential opportunities
Ouranalysisthisyearagainconfirmed,
in general terms, the opportunities we
determined last year under all climate
scenarios, which were:
Growth in demand for products
andservices that will service a
low-carbon or circular economy
invariousmarketsandregions.
Cost savings and market growth
through the early adoption of low-
carbon technologies, for example
using renewable energy or switching to
renewable raw materials, although this
depends on the speed at which such
technologies or materials become
cost-effectiveandwidelyavailable.
Competitive advantage from our
network of sites across the world:
since we can service customers
from a variety of plants, our network
makes us a more reliable supplier,
meaning we are more resilient to
physicaloperationalrisks.
Risks and opportunities by
climatescenario, and how
weareresponding
Insummary,thefindingsofthe2022
analysis reinforced the conclusion of
2021,whichwasthatinboththe1.5°C
and 2°C scenarios, the biggest risks
come from the carbon price expected
tobeappliedtodrivethetransitiontoa
low-carbon,circulareconomy.However,
our strategy to decarbonise our operations
will mitigate at least a portion of that risk,
and could ultimately present opportunities
for our more cost-competitive products
versus those who are less prepared, and
mustthereforepayahighercarbonprice.
The transition to a low-carbon economy
also offers a much greater opportunity,
intermsofgrowingmarketshare
andincreasingrevenuefromour
development of more sustainable
products as a point of differentiation
fromsomeofourcompetitors.
Under a 3°C scenario, while the
opportunities remain, albeit at a lower
level, the physical risks are much more
severe.Differentplantsareexposed
todifferenttypesanddegreesofrisk
depending on their location, but overall,
our studies show that the primary
impacts will come from drought,
flooding,ariseinthesealevel,and
hightemperatures.Managingthese
willrequireinvestmenttoincrease
theresilienceofoursites.
STRATEGIC REPORT – Risk and other disclosures GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
87Synthomer plc Annual Report 2022
TCFD report continued
Scenario 1 – 1.5°C: highest transition
risk, but greatest opportunity
This scenario, which corresponds to the
RCP1.9/SSPIscenariopublishedbythe
Intergovernmental Panel on Climate
Change (IPCC), assumes that prompt
policy action, including globally
coordinated carbon pricing, reduces
emissionssufficientlytokeepglobal
warmingtobelow1.5°C.Doingsowould
minimise the physical impacts of climate
change, but at the cost of relatively high
taxationoncarbonemissions.Underthis
scenario, then, in the short term, around
25%oftheriskimpactwouldcomefrom
physicalrisks,butaround75%from
transition risks – hence the importance
ofourworktodecarboniseouroperations.
While the transition risks are highest for
us under this scenario, so too are our
opportunities.Thisisbecausethe
scenario envisages the cost of high-
carbon feedstocks rising in response
toincreasingcarbonprices,making
low-carbon, sustainable feedstocks
farmorecostcompetitiveovertime
(assuming there is no change in
customers’ preference for products with
loweremissions).Forexample,ourstudy
atourJefferson,Pennsylvaniasiteinthe
USA looked at the potential for using a
lower-carbon resin as a circular
feedstock, while the study at Pasir
Gudang, Malaysia looked at the potential
for developing more sustainable nitrile
butadienerubber.Currently,thelow-
carbon alternative feedstocks are three
times the price of the feedstock in use
inbothplants,butunderScenario1,
ouralternativeJeffersonproductcould
become commercially viable by 2038,
andourPasirGudangproductby2041.
In both cases, we are seeing increasing
interest from key customers in the
development of low-carbon solutions
that would reduce their Scope 3 GHG
emissionsfootprint.
Scenario 2 – 2°C: lower transition risk,
but greater volatility
This scenario, which corresponds to the
IPCC’sRCP2.6/SSP2scenario,assumes
that there is little in the way of the
coordinated global action on carbon
emissions and carbon pricing that would
benecessarytoachievea1.5°Cfuture.
While transition risk in the form of carbon
pricing would therefore be far less likely,
we could face different operating costs
in different markets, for example, higher
carbon costs in Europe and some USA
states,andlowercostselsewhere.This
scenario assumes that the lack of
coordination would increase market
volatility and result in erratic changes
incostsinthesupplychain.Allofour
operational sites would be more
vulnerable to the physical risks of climate
change under this scenario, while more
sustainable products are likely to be less
competitive because the price of carbon
could remain too low and distort regional
supplychains.Nonetheless,ourglobal
network of manufacturing sites mitigates
the risk of a lack of global coordination
by enabling us to optimise production in
therightlocationforregionalmarkets.
Scenario 3 – 3+°C: highest physical
risk; fewer competitive opportunities
This scenario, which corresponds to the
IPCC’sRCP8.5/SSP3scenario,envisages
a failure of international cooperation on
climate change, leading to countries
seeking competitive advantage by avoiding
the globally coordinated carbon pricing
necessary to reduce emissions across the
board.Whiletransitioncostswouldbevery
low, the physical impacts of a 3+°C rise
would be much more costly, while more
sustainable products are likely to be even
lesscompetitivethanunderthe2°Cscenario.
Due to the greater physical risks, our
river-basedsitescouldfloodregularly;
some sites could be affected by extreme
temperatures and drought; and our
coastal locations in Asia and USA could
beaffectedbystormsurges.Itcould
thereforebemoredifficulttofind
alternativesgiventhatasignificant
number of sites are likely to be affected
simultaneously.Overall,marketscould
become severely unstable given the
likelihood of social and economic
upheaval resulting from widespread,
severe weather events, with a
corresponding impact on our customers,
oursupplychainandourcosts.However,
our longer-term investment plans include
upgrading our physical defences at our
sites to help mitigate the physical risks
they are exposed to, while our network of
sites, even in this more extreme physical
risk scenario, should give us some
measure of resilience in terms of
minimisingdisruptiontoourcustomers.
Next steps
Having completed the scenario analysis
forthreesites,andidentifiedthefivekey
priorities for us as a business to respond
to climate change, we are now looking
athowtoputtheseintopracticeacross
Synthomer.Akeystepwillbedeveloping
detailed decarbonisation plans for all our
plants: this is already under way at those
plants where we can realise the greatest
benefits.Wewilladaptthisanalysisfor
our other sites, taking into account their
differing physical risk exposures and
inputs, as the basis for developing their
decarbonisationplans.
We are also working through how we
linktheoutputsfromourscenario
analysistoourfinancialreporting
andbusinessplanning.
Responding to climate change
– our five priorities
Through our analysis work, we have
identifiedfiveprimaryresponsesto
reducetherisksandtakeadvantageofthe
opportunities related to climate change,
whichever climate scenario ultimately plays
out.Theseare,inorderofpriority,to:
Work with selected suppliers to encourage
themtoimproveenergyefficiency
andreducetheirownemissions,thus
maximising reductions in our own Scope 3
emissions,andfindingsupplierswhocan
provide lower-carbon feedstocks from bio
orcircularsources.
Reduce our Scope 1 emissions by
decarbonising our operations through, for
example, installing heat pumps and solar
power,andusinghydrogenwherepossible.
Reduce our Scope 2 emissions from
ourelectricityandheatsuppliers,
byenteringintoorexpandingpower
purchaseagreementslinkedto
clean-energygeneration.
Innovate to decarbonise our products,
answering demand from our customers
formoresustainablealternatives.
Enhance our physical resilience to
climate-related risks, for example by
buildingflooddefences.
TCFD
88 Synthomer plc Annual Report 2022
By expanding our scenario analysis this
year, we have also been able to build a
more comprehensive picture of the
climateriskswefaceasabusiness.Our
principal risks that include the impact of
climate change are:
Delivery of our strategic initiatives
Technology and innovation
Disruption in supply to customers
Energy security and price risk
inEurope
Ethicsandcompliance.
Given the pervasive nature of climate
risk, we have decided to integrate it into
ourwiderriskmanagementframework.
Itwillthereforebemanageddowntothe
business line level and assessed and
reported as part of our regular risk
reporting.Wehaveaddedariseinthe
sea level to our key risks for coastal sites,
since this could have a material impact;
anddroughtandfloodingforkey
Synthomerandsupplychainsites.We
have also added extreme temperatures
to our risk framework; while we expect
these to have less of an impact, there
may be adaptation costs depending on
theextentofthetemperatureincrease.
For more on risk management see our
Risk report on pages75to77.
The metrics we use to assess climate-
related targets are:
The proportion of new products
wemakethathavesustainability
benefits(seepage 47)
The proportion of raw material
procurement spend covered by a
sustainability rating and
improvement plan (see page50)
Energy consumption and usage of
renewable energy (see page59)
GHGemissions,includingScopes1
and 2 (see page59); for Scope 3
emissions, (see page 60)
Water usage (see page61).
In October, we updated our Vision 2030
targetsfollowingtheacquisitionofour
newadhesiveresinsbusiness.We
remaincommittedtoreachnet-zero
emissionsby2050,butwehave
increased our intermediate targets to:
ReduceScopes1and2emissions
by47%inabsolutetermsby2030
comparedwith2019,upfromthe
previoustargetofa40%reduction
inemissionsintensity
ReduceScope3emissionsby28%
inabsolutetermsby2030,against
our2019baseline,replacingour
previous10%intensitytarget.
We continue to target:
Atleast60%ofnewproductswith
enhancedsustainabilitybenefits
(seepage 47)
80%procurementspendwithsuppliers
with a sustainability rating (see page50)
80%ofelectricityfromrenewable
sources, plus improving energy
efficiencyinallouroperations
(seepage58)
Managing and minimising water
consumption, with water
management plans in water-stressed
areas and at the sites where we use
most water (see page 89).
It is important to stress that our previous
emissions targets were intensity-based,
measuredbyunitofproduction.Ournew
absolute targets commit us to reducing
emissions regardless of the future growth
oftheCompany.InMarch2023,we
updatedourScope1,2and3climate
targets and await their validation from the
Science Based Targets initiative (SBTi) as
being aligned with the goals of the Paris
Agreement.Specifically,theScope1and
2 targets are aligned with a temperature
riseofnomorethan1.5°C,andthe
Scope3targetwithwellbelow2°C.
In 2022, we introduced a shadow
carbonprice,setat£85pertonneof
carbondioxideequivalent.Everycapital
investmentdecisionabove£1million
willincorporatethatcarbonpriceinits
financialprojections.Thiswillensurethat
our engineers always consider how they
can optimise the energy and climate
impactsoftheirproposedprojects.
For more on our sustainability metrics
and targets, including performance,
seetheSustainabilitysectiononpages
40 to 72.
Next steps
We are currently developing tools to
enable us to calculate the potential
carbon footprints of our products,
usingprimarydatafromoursitesand
secondarydataforrawmaterials.To
increase the accuracy of our calculations,
the next step will be to use primary data
fromoursuppliers.Tothatend,overthe
nextthreetofiveyears,wewillbe
building a system to track, monitor and
assess the GHG emissions associated
with our feedstocks, thereby improving
the reliability of our Scope 3 emissions
calculations as well as enhancing the
abilityofourcustomerstodothesame.
We are also looking at how to develop
and carry out lifecycle assessments for
ourproducts.
Risk
management
Metrics
andtargets
STRATEGIC REPORT – Risk and other disclosures GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
89Synthomer plc Annual Report 2022
Viability statement
Non-financial information statement
Thetablebelowsummariseswherekeyelementsofourgovernancereporting(includingnon-financialmattersasrequiredby
theNon-FinancialReportingDirective)canbefound,someofwhichareintegratedintoothersectionsofourAnnualReport.
InaccordancewiththerequirementsoftheUK
Corporate Governance Code, the Directors have
assessedtheviabilityoftheGroupoverafive-year
period to December 2027, being the period
coveredbytheGroup’sapprovedstrategicplan.
This plan is updated annually, in a process led by
the Executive Committee with input from the
respectivebusinessesandfunctions.Itincludes
analysisofproductandprofitperformance,cash
flow,investmentprogrammesandreturnsto
shareholders.TheplanispresentedtotheBoard
eachyearasapartofitsannualstrategicreview.
TheDirectorsconsiderfiveyearstobean
appropriatetimehorizonforthestrategicplan,
being the period over which the Group actively
focuses on its long-term product development
andcapitalexpenditureinvestments.Aperiod
abovefiveyearsisconsideredbytheDirectorsto
be too long, given the uncertainties that exist
beyondthistimeframe.
In making their assessment, the Directors have
considered the diverse activities and product
offering of the Group in terms of geographies,
chemistryandendmarkets.TheDirectorshavealso
consideredtheGroup’scurrentfinancialposition,
includingtherecentlyrefinancedandfuture
committedfinancingfacilities,whichhavebeen
assumedtoberefinancedatmaturityasrequired.
A sensitivity analysis has been undertaken,
focusing on the impact of the principal risks
(detailed above on pages 74 to 83)overthefive
year period, and the availability and likely
effectivenessofmitigatingactions.Therisks
have been assessed for their potential impact on
the Group’s business model, future trading and
fundingstructure.Thesensitivityanalysishas
considered a number of severe but plausible
scenarios, linked to the risks considered to have
themostsignificantfinancialimpact.Inall
cases, the impact was considered on both
liquidityandtheborrowingcovenant.
The scenarios included:
Trading downturns as a result of
increased competition or lack of demand;
Delayed re-stocking and economic
recovery in end markets;
Failure to successfully commercialise new
productsandbenefitfrominnovation;
PriceinflationfortheGroup’skeyraw
materials; and
Significantforeignexchangerate
appreciationagainststerling.
Variousmitigatingactionshavebeenidentifiedso
that, should any of these scenarios crystallise, the
Groupcouldtakeactionquicklytosignificantly
reducecostsandcashoutflows,asdemonstrated
duringthecourseoftheCOVID-19pandemicin
2020.Whilethissensitivityanalysisdidnot
consider all of the risks that the Group may face,
the Directors consider that it is reasonable in the
circumstancesoftheinherentuncertaintyinvolved.
None of these scenarios individually, or when
combined, threaten the Group or its ability to take
appropriate mitigations to address them, and the
combined impact of these scenarios has been
evaluatedasthemostseverestressscenario.
Given its status as an emerging risk, the Directors
also considered the possible impact of climate
changeonfuturecashflows,inparticularcarbon
pricing.Intheeventofglobalcoordinationof
carbon pricing, the Directors consider it likely that
we would be able to pass such costs on to our
customersifmaterial.Thesensitivityanalysis
has therefore not been amended to include
reducedprofitsfromcarbonpricing.
Based on the analysis, the Directors have a
reasonable expectation that the Group will be
able to continue in operation and meet its
liabilitiesastheyfalldueoverthefive-year
periodoftheirassessment.
Section 172(1) statement and stakeholder engagement
We value our engagement with all our stakeholders, including our key stakeholders: customers, employees,
communities,suppliers,shareholders,andgovernmentsandauthorities.Oursection172(1)statementison
pages105to107.ItdescribeshowtheDirectorshavehadregardtostakeholders’interestsandother
matterswhendischargingDirectors’dutiessetoutinsection172oftheCompaniesAct2006.Itincludes
examplesofhowstakeholders’interestswereconsideredduringprincipaldecisionstakenduringtheyear.
The Strategic report was
approvedbyorderoftheBoard.
Anant Prakash
Company Secretary
28 March 2023
Reporting requirement Relevant policies and standards that govern our approach Where to read more in this report
Environmental matters Code of Conduct
Group SHE Policy
Sustainable Procurement Policy and Strategy
Task Force on Climate-related Financial Disclosures (TCFD)
Managing risk pages 74 to 83
Health and safety pages 54 to 57
Sustainable procurement page 50
TCFD report pages 84 to 89
Employees Our values
Code of Conduct
Group SHE Policy
Our values page 11
Gender pay gap page 125
Section 172 pages 90 and 105 to 107
Health and safety pages 54 to 57
Social matters Responsible Care Principles
Synthomer Cares
Group SHE policy page 57
Our communities page 71
Respect for human rights Code of Conduct
Modern Slavery Act Statement
Conflict Minerals Policy Statement
Sustainable Procurement Policy and Strategy
People page 70
Sustainable procurement page 52
Anti-corruption and anti-bribery Code of Conduct
Ethics Helpline
Core values
Ethics and compliance pages 69
Our business model page 11
Our business model How it links to strategy and delivers value to stakeholders
Our business model page 11
Principal risks and uncertainties Risk assessment
Managing risk pages 74 to 83
Non-financial KPIs Relevant key performance indicators
Key performance indicators page 23
90
Synthomer plc Annual Report 2022
Viabilitystatement,non-financialdisclosuresandsection172statement
Gloves manufactured from
Synthomer’s speciality NBR latex
ensure a combination of high
tensile strength, good elongation
and relaxation, meeting demand
for medical, examination, clean
room, food handling, medical
drug handling and chemical
laboratory applications.
Governance report
92 Our Board of Directors
96 Our Executive Committee
98 Introduction from the Chair
99 Our governance structure
101 The Board’s year
105 Stakeholder engagement
(s.172compliance)
108 Audit Committee report
116 Nomination Committee report
120 Compliance with the Code
Directors’ remuneration report
123 – Introduction from the Chair
126 – Remuneration at a glance
128 – Proposed new remuneration policy
138 – Annual report on remuneration
149 Directors’ report
152 Statement of Directors’
responsibilities
91Synthomer plc Annual Report 2022
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE REPORTSTRATEGIC REPORT
Our Board of Directors
Caroline A Johnstone
Chair
Nationality: British
Position and date of appointment
Chair of the Board, and of the Nomination
andtheDisclosureCommittees.Caroline
joinedtheBoardinMarch2015andwas
appointed Chair in December 2020, having
previously been chair of the Audit Committee
and a member of the Nomination and the
RemunerationCommittees.
Key appointments
Caroline is a Non-Executive Director
andChairoftheemployeeengagement
committee of Spirax-Sarco Engineering
plc, and a Non-Executive Director and
Chair of the audit committee of Shepherd
Building Group Limited, a private company
thatownsPortakabinLimited.Shehas
anhonoraryroleontheboardofthe
UniversityofManchester.
Skills and experience
Caroline has more than 40 years’
experience of working with large global
organisations in the chemicals sector
andotherindustries.Herexperience
includes delivering value from M&A,
turnaround, culture change and cost
optimisation.Shewasapartnerin
andsatontheboardoftheassurance
practice of PricewaterhouseCoopers
(PwC) with responsibility for all people
matters.Carolineisacharteredaccountant
and a member of the Institute of Chartered
AccountantsofScotland.
Michael Willome
ChiefExecutiveOfficer
Nationality: Swiss
Position and date of appointment
ChiefExecutiveOfficersinceNovember
2021;memberoftheDisclosureCommittee.
Key appointments
Michael is a Non-Executive Director of
GlastonOyj(NasdaqHelsinki)andsitson
subsidiaryboardsoftheIndutradeGroup.
Skills and experience
Michael is an established public market CEO
with a track record of driving performance
through strong operational management
andstrategicactions,includingM&A.He
waspreviouslyCEOofConzzetaAG(now
Bystronic AG) in Zurich, a global industrial
companylistedontheSIXSwissexchange.
BeforeConzzeta,Michaelspent18years
with Clariant, leading its global industrial and
consumerspecialitiesdivisionfrom2010to
2015.Thisfollowed13yearsinleadership
rolesinAsia-Pacific,basedinHongKong,
andinCanadaandTurkey.
Lily Liu
ChiefFinancialOfficer
Nationality: British, Australian
Position and date of appointment
ChiefFinancialOfficersinceJuly2022;
memberoftheDisclosureCommittee.
Key appointments
Lily is a Non-Executive Director and
member of the audit committee of DCC
plc,aFTSE100listedinternationalsales,
marketingandsupportservicesbusiness.
Skills and experience
LilyisahighlyexperiencedCFO.She
hasworkedinthemanufacturingand
engineering sectors for more than
20years,andjoinedSynthomerfrom
Essentraplc,aFTSE250components
and solutions business, where she was
CFO.LilywaspreviouslyCFOatXaarplc,
aUK-listedinkjettechnologydeveloper,
and Smiths Detection business, a division
ofSmithsGroupplc.
92 Synthomer plc Annual Report 2022
Governance report
The Hon. Alexander G Catto
Non-Executive Director
Nationality: British
Position and date of appointment
Non-ExecutiveDirectorsince1981;
member of the Nomination Committee;
designated Non-Executive Director to
leadworkforceengagement.
Key appointments
Alexander is Managing Director of
CairnSea Investments Limited, a private
investmentcompany.Healsomanages
the family’s grant-giving charity and
otherinterests.
Skills and experience
Before CairnSea was established,
Alexander was a director of Morgan Grenfell
&CoandthenLazardBrothers&Co.
Brendan WD Connolly
Senior Independent Director
Nationality: British
Position and date of appointment
Independent Non-Executive Director
sinceJanuary2014;Chairofthe
Remuneration Committee; member
oftheAudit,theDisclosureandthe
Nomination Committees; Senior
IndependentDirectorsinceApril2015.
Key appointments
Brendan is a Non-Executive Director of
Victrex PLC, Pepco Group NV, Applus
andoneprivate-equity-backedcompany.
Skills and experience
Brendan has more than 30 years’ experience
intheoilandgasindustry.UntilJune2013,
he was a senior executive at Intertek Group
plc and had previously been chief executive
officerofMoodyInternational,whichwas
acquiredbyIntertekin2011.BeforeMoody,
Brendan was Managing Director of Atos
OriginUKandspentmorethan25years
with Schlumberger in senior international
rolesonthreecontinents.Hehasprevious
experience as chair of the remuneration
committeeofaUK-listedcompany.
Roberto Gualdoni
Independent Non-Executive Director
Nationality: German, Italian
Position and date of appointment
Independent Non-Executive Director
sinceJuly2021;memberoftheAudit,
theRemunerationandtheNomination
Committees.
Key appointments
Roberto is Chair of CABB Group
(Germany) and a member of the
boardsofAerogelCorporation(USA)
andClariant(Switzerland).
Skills and experience
Robertohasmorethan35years’chemical
sector experience in both commodity and
speciality segments, mostly at BASF,
where he held senior operational roles
covering international sales, marketing
andprocurementandservedonanumber
ofjoint-ventureboards.Hisfinalroleat
BASF was as president of its styrenics
business, which was carved out as part
oftheStyrolutionjointventure,andwhich
Roberto led as chief executive for three
yearsuntil2014.Robertohasprevious
board-level experience in Saudi Arabia,
FinlandandBelgium.
Board committee key
AuditCommittee
RemunerationCommittee
NominationCommittee
DisclosureCommittee
CommitteeChair
Other Board members in 2022
Stephen G Bennett stood down
from the Board and as Chief
FinancialOfficerinJuly2022.
Cynthia S Dubin resigned from
theBoardandasChairoftheAudit
CommitteeinNovember2022.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
93Synthomer plc Annual Report 2022
Our Board of Directors continued
Dato’ Lee Hau Hian
Non-Executive Director
Nationality: Malaysian
Position and date of appointment
Non-ExecutiveDirectorsince2002;first
joinedtheBoardin1993andstooddown
in 2000 to become an Alternate Director;
memberoftheNominationCommittee.
Key appointments
Hau Hian is the Managing Director
ofBatuKawanBhd,alistedMalaysian
investment holding company, and a
Non-Executive Director of Kuala Lumpur
KepongBhd.
Batu Kawan Bhd is the largest
shareholder,witha47%stake,of
KualaLumpurKepongBhd,which
isSynthomer’slargestshareholder.
Skills and experience
Hau Hian has experience in organisational
transformations,acquisitions,chemical
and manufacturing operations and
sustainabilitymatters.
Ian Tyler
Independent Non-Executive Director
Nationality: British
Position and date of appointment
Non-ExecutiveDirectorsinceJune2022;
Chair of the Audit Committee; member
oftheNominationandtheRemuneration
Committees.
Key appointments
Ian is a Non-Executive Director of Anglo
American plc, and a Non-Executive
DirectorandChairofAffinityWater
Limited.Previously,heservedonthe
boards of BAE Systems, Vistry Group
(formerly Bovis Homes Group),
CairnEnergy,MediclinicInternational,
VTGroup,Cable&WirelessandAmeyplc.
Skills and experience
Ian has extensive board experience as a
former chief executive and as a non-
executive for several international
industrialorganisations.Heservesas
chair of the remuneration committee at
Anglo American plc, where he is also the
SeniorIndependentDirector.Ian’ssenior
executive career was at Balfour Beatty plc,
a global infrastructure business, which he
joinedasfinancedirectorin1996and
where he served as chief executive
from2005to2013.
Holly A Van Deursen
Independent Non-Executive Director
Nationality: American
Position and date of appointment
Independent Non-Executive Director
sinceSeptember2018;memberof
theAudit,theNominationandthe
RemunerationCommittees.
Key appointments
Holly is a Non-Executive Director of Kimball
Electronics Inc, where she chairs the talent,
cultureandcompensationcommittee.She
serves as a Non-Executive Director of
Albermarle Corporation, where she is a
member of the executive compensation
andthecapitalinvestmentcommittees.
Skills and experience
Until2005,Hollywasgroupvicepresident,
petrochemicalsatBP.Shehasworked
intheglobalchemicalindustryformore
than25yearsandheldseniorpositions
acrossNorthAmerica,EuropeandAsia.
Inaddition,since2016Hollyhasheld
non-executive director roles for global
companiesheadquarteredintheUSA
andspent12yearsontheboardof
aNorwegian-listedcompany.
Board Committee key
AuditCommittee
RemunerationCommittee
NominationCommittee
DisclosureCommittee
CommitteeChair
Governance report
94 Synthomer plc Annual Report 2022
Anant Prakash
Chief Counsel and
Company Secretary
Nationality: British
Position and date of appointment
Chief Counsel and Company Secretary
sinceDecember2022.
Key appointments
Anant is a Non-Executive Council
MemberatCity,UniversityofLondon.
Other executive responsibilities
Member of the Executive Sustainability
Steering Committee and the Executive
RiskCommittee.
Skills and experience
AnantjoinedSynthomerhavingspentfive
years at defence and security company
Ultra Electronics Group, latterly as
generalcounsel,EuropeandAsiaPacific.
Before moving into industry, he worked at
internationallawfirmSlaughterandMay,
where he developed a broad corporate,
commercial and M&A practice, including
experienceworkinginHongKongandSpain.
Individual Directors’ skills
Speciality chemicals 6
Chemicals
5
Broader industrial
7
Customer, end market
5
CEO and senior management
7
Finance, audit
6
R&D, innovation
4
Corporate finance, M&A
7
Culture, people, talent
7
UK corporate governance
5
Sustainability and ESG
5
Digitisation
4
Sales and marketing
5
Strategy
8
WeaskedeachofournineDirectorstoratethemselves1–3oneachskill.Wehavedividedeachtotalbythreetopresent
anapproximatetotalnumberofDirectorswiththoseskills.
Our two non-independent Board members
The Board recognises the unusual nature of having two non-independent
members.Thisisavoluntaryarrangementthathasbeeninplacefor40years
andreflectsthemajorshareholdingsintheCompanythattheyrepresent.
Dato’ Lee Hau Hian is the Board’s representative for our largest shareholder,
KualaLumpurKepongBhd(26.87%),whichprovidedfinancialsupportfor
ourrecentacquisitions,throughshareplacingandarightsissue.Hisextensive
leadership experience in chemical manufacturing and experience of organisational
transformationsandacquisitionsmeansheofferstheBoardandExecutive
Committeeinvaluableinsightswhenmakingbusinessdecisions.Healsooffersan
importantperspectiveontheMalaysianandSoutheastAsianbusinesslandscape.
TheHon.AlexanderGCattoisamemberofSynthomer’sfoundingfamily.Today,
theCattofamilyownsa5%shareholding.WebelieveAlexanderprovidesdeep
knowledgeofSynthomer’shistoryandauniquelong-termshareholderperspective.
His background in investment banking and time on other boards also give him
extensivebusiness,finance,investorengagementandgovernanceexperience.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
95Synthomer plc Annual Report 2022
Our Executive Committee
Alice Heezen
ChiefHumanResourcesOfficer
Nationality: Dutch
Position and date of appointment
ChiefHumanResourcesOfficer
sinceJune2022.
Other Executive responsibilities
Member of the Diversity and Inclusion
Steering Committee and a member of
theExecutiveSustainabilitySteering
Committee.
Skills and experience
Alice was previously senior vice president,
chiefhumanresourcesofficeratTrinseo
and a member of its executive leadership
team.Beforethatsheservedasheadof
human resources for ADAMA Agricultural
SolutionsEurope.Alicehasheldsenior
HR leadership roles at Fiberweb Plc, a
speciality global industrial and construction
materials business listed in London, oil and
gas company BG Group, global consumer
packaging company REXAM Plc and
EnerTel/EnergisN.V.,anindependentdata
trafficandtelecomservicesprovider.She
began her career at Andersen Consulting
asachangemanagementconsultant.
Alice holds a Master of Arts in social
andorganisationalpsychologyfrom
theUniversityofLeiden.
Jan Chalmovsky
President, Strategy and M&A
Nationality: German
Position and date of appointment
President, Strategy and M&A
sinceSeptember2022.
Other Executive responsibilities
Member of the Executive Sustainability
SteeringCommittee.
Skills and experience
Janhasmorethan15years’experience
instrategyandmergersandacquisitions,
most recently as head of strategy and M&A
atConzzetaAG(nowBystronicAG)in
Zurich, a global industrial company listed
ontheSIXSwissexchange.Beforethathe
spent nine years at McKinsey & Company,
including as an associate partner,
focusing on strategy, corporate
transformationsandcorporatefinance
and serving clients in chemicals, medicine
andindustrialtechnologyglobally.He
began his career at Lehman Brothers in
LondoninM&A.JanholdsanMBAfrom
INSEAD, an MSc in management from
London School of Economics and a BA
fromtheUniversityofStGallen.
Marshall Moore
ChiefTechnologyOfficer
and President, Americas
Nationality: American
Position and date of appointment
ChiefTechnologyOfficerandPresident,
AmericassinceApril2020.
Other Executive responsibilities
Chair of the Synthomer Foundation
Board of Trustees and a member of the
Executive Committee Sustainability
SteeringGroup.
Skills and experience
Marshall was previously chief technology
officerandseniorvicepresidentof
operationswithOMNOVASolutions.He
has35years’experienceinpolymersand
speciality chemicals, working with Borden
Chemicals, GE Plastics and Chemtura
beforejoiningOMNOVAin2015.Hehas
held leadership positions in technology
andinnovation,qualityassuranceand
process excellence, operations,
government affairs and advocacy,
marketingandinformationtechnology.
Heholdsadegreeinchemistryandis
acertifiedSixSigmaBlackBelt.
Biographies for
Michael Willome,
Lily Liu and Anant
Prakash can be
found on pages
92and95.
Other Executive Committee members in 2022
Richard Atkinson retired as Chief Counsel and Company Secretary and was replaced by
AnantPrakashinDecember2022.
StephenBennettstooddownasChiefFinancialOfficerandwasreplacedbyLilyLiuinJuly2022.
TimHughesretiredasPresident,CorporateDevelopmentinMarch2023.
NeilWhitleyretiredasPresident,PerformanceElastomersandAsiainDecember2022.
PhilipWrigleyleftasPresident,OperationsandSHEinApril2022.
Governance report
96 Synthomer plc Annual Report 2022
Governance report
Ana Perroni Laloe
President, Coatings & Construction
Solutions and EMEA
Nationality:Brazilian
Position and date of appointment
President, Coatings & Construction
SolutionsandEMEAsinceJanuary2023.
President, Functional Solutions and
EuropesinceOctober2022.
Other Executive responsibilities
Ana co-founded and leads our
ENGENDERwomen’snetwork.
ExecutivesponsoroftheDiversity
andInclusionSteeringCommittee
andamemberoftheExecutive
SustainabilitySteeringCommittee.
Skills and experience
Anahasmorethan17years’global
salesandmarketingexperience,with
astrongtrackrecordofsuccessfully
commercialising solutions for end-
markets.ShestartedhercareeratCiba
SpecialtyChemicalsinBrazil,followed
byinternationalassignmentsintheUK
andSwitzerland.Electedpresidentof
RadTech South America for two
consecutive terms, Ana is one of the
pioneers of introducing UV curing
technologyintheregion.Anaholdsa
BSc in chemical engineering from Escola
deEngenhariaMauá(IMT)inSãoPaulo.
Toby Heppenstall
President, Adhesive Solutions
Nationality: British
Position and date of appointment
President, Adhesive Solutions since
January2023.President,Adhesive
TechnologiesApril2022-January2023.
Other Executive responsibilities
Delivering the transitional service agreement
exitandsynergyplanforouracquisition
ofEastman’sAdhesiveResinsbusiness.
Member of the Executive Committee
Sustainability Steering Group, with the
briefforrenewablepower.
Skills and experience
Toby has 24 years’ experience in
commercial management roles at ICI,
Ineos,AxcentiveandMitsubishiChemicals.
HejoinedSynthomerin2016andwas
responsible for a portfolio of speciality
chemicalbusinesses.Throughtheseroles,
he has created a strong track record of
improvingprofitsandtop-linegrowth.Toby
holds a master’s degree in chemistry
from the University of Leeds and an
MBAfromtheUniversityofBath.
Rob Tupker
President, Health & Protection,
Performance Materials and Asia
Nationality: Dutch
Position and date of appointment
President, Health & Protection and
Performance Materials and Asia
sinceJanuary2023.
Other Executive responsibilities
Executive sponsor of the Diversity and
Inclusion Leadership Committee, and
amemberoftheExecutiveCommittee
Sustainability Steering Group and
thesteeringcommitteeforour
Pathwayprogramme.
Skills and experience
Rob was previously with Honeywell where
he held a variety of senior leadership
positions in its performance materials
and home and building technologies
divisions.Beforethatheworkedwith
Süd-Chemie (now Clariant) and Unilever/
ICI’s(nowGivaudan’s)flavourand
fragrancedivision.Robworkedandlived
forsevenyearsinAsia-Pacific,fiveyears
intheUSAand20yearsacrossEurope.
He has a degree in chemical engineering
from Eindhoven Technical University, an
MScfromMITandanMBAfromINSEAD.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
97Synthomer plc Annual Report 2022
Introduction from the Chair
Good governance is never more
important than during turbulent
times.Against this year’s backdrop
ofsignificant external headwinds for
Synthomer and an internal programme
of strategic evolution and restructure,
the Board has been focused on
overseeing, supporting and – where
necessary – challenging the direction
of the business.
Resilient governance in
challengingtimes
I can report that our governance
arrangements have stood the test of this
challengingyear.Throughout,wehave
been mindful of balancing the need for
short-term action to address immediate
headwinds while positioning the business
todeliversustainablevalueinthelongterm.
Providing detailed oversight of
short-term actions and developing
long-term strategy
As we describe on page101, we provided
critical oversight of the business as it took
action to address short-term balance
sheet challenges, while also overseeing
and scrutinising important long-term
decisions.Theseincludetheintegration
ofournewadhesiveresinsbusinessand
the development of a refreshed strategy,
which includes Synthomer’s decision
toreorganiseintothreemarket-focused
divisions, as described on page14.
Ensuring skills and experience to
deliver the strategy and address
current challenges
We also continued our work on succession
planning, welcoming several new faces
to the Executive Team – as described on
pages116and117.I’mconfidentthatour
Executive and Board position us well to
deliveronSynthomer’sstrategyandpurpose.
Retaining responsibility forESG,
including sustainability
Sustainability is at the heart of our
refreshedstrategy.ThisisaBoard
priority.Throughouttheyear,we
considered environmental, social and
governance (ESG) issues as a matter
reservedtotheBoard.Wecontinuedto
engage with shareholders, employees
andotherstakeholders.OnESG,we
continued to oversee Synthomer’s
progresstowardsnetzeroandother
criticalESGobjectives,andensure
thatthebusinessmaintainsmomentum
as it builds a more diverse, inclusive
workplace (see pages65and66).
Greater engagement with
employees and shareholders
One of the positive elements of this past
year has been the chance to meet and
engage with employees and shareholders
in ways that had to be halted at the peak of
theCOVID-19pandemic.Formyselfand
many Board members, this has meant
more detailed discussions with employees,
especially those in the USA who have
joinedtheGrouprelativelyrecently
(seepage 67 and 68).Ihavealso
hadrewardingconversationswith
stakeholders, including at our shareholder
meetings.Ithankthemfortheircontinued
support, and welcome them to our
Governancereport.
Caroline Johnstone
Chair
28 March 2023
We’ve been mindful of balancing
the need for short-term action to
address immediate headwinds with
positioning the business to deliver
long-termsustainablevalue.
Governance report
98 Synthomer plc Annual Report 2022
Governance report
Our governance structure
The governance structure is designed to ensure that the Board’s 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 strategy
Ensures appropriate controls and provides oversight in identifying, balancing and managing risk
Responsible for corporate governance and monitoring performance of the Group
Audit Committee Nomination Committee Remuneration Committee Disclosure Committee
Monitorsintegrityoffinancial
statements – advises the
Boardonfinancial
judgementsandwhetherthe
Group’s Annual Report and
Accounts are fair, balanced
and understandable, and
provides the information
necessary for shareholders
to assess the Group’s
position and performance,
business model and strategy
Reviews the Group’s internal
financialcontrolsandits
systems for internal control
and risk management
Monitors and reviews the
independence,objectivityand
effectiveness of the external
auditor and the Internal Audit
function, and reviews and
recommends to the Board the
reappointment, remuneration
and terms of engagement of
the external auditor
Develops and implements
the Group’s policy on the
engagement of the external
auditor to supply non-audit
services
Monitors the composition
and balance of the Board to
ensuretheappropriatesize,
skills, diversity, knowledge
and experience
Leads progressive
refreshing of the Board,
Committees and
leadershipteam
Oversees recruitment
ofDirectorsandsenior
management
Oversees development
ofaBoardandsenior
management succession
pipeline
Keeps non-executive
andexecutiveleadership
development needs
underreview
Ensures annual Board
andindividualDirector
evaluation processes
arecarriedout
Sets, reviews and
recommends remuneration
policy for the Chair,
Executive Directors and
Executive Committee
Ensures the remuneration
policy is properly
implemented
Reviews the design
andapprovestargets
ofperformance-related
payschemes
Reviews workforce
remuneration and
relatedpolices
Monitors compliance with
disclosure controls and
procedures for material
information
Responsible for identifying
inside information
Read more on page108 Read more on page116 Read more on page123
Executive Committee
Chief Executive Officer
Chief Financial
Officer
Chief Human
Resources
Officer
President,
Strategy and
M&A
Chief
Technology
Officerand
President,
Americas
President,
Coatings &
Construction
Solutions and
EMEA
President,
Adhesive
Solutions
President,
Health &
Protection and
Performance
Materials and
Asia
Chief Counsel
and Company
Secretary
Atthestartof2022,SynthomerformedanExecutiveSustainabilitySteeringCommittee.ThisCommitteeischairedbytheCEOand,
sinceJanuary2022,meetsquarterly.ItisattendedbythefullExecutiveCommittee.EachofourVision2030sustainabilitygoalsis
owned and sponsored by an executive member who is responsible for ensuring we have the right plans in place to deliver within the
timeframe.Attheendof2022,theCompanyalsoformedanExecutiveRiskCommittee,whichwediscussinmoredetailonpage75.
See page 39formoreinformationonourapproachtosustainability.
See page120,CompliancewiththeCode,formoreinformationonthedivisionofresponsibilities.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
99Synthomer plc Annual Report 2022
Our governance structure continued
Board and Committee meeting attendance
ThetablebelowoutlinesallBoardandCommitteemeetingattendance.WhenaDirectorisunabletoattend,theirviewsare
soughtinadvanceandincorporatedintodiscussions.
Non-ExecutiveDirectorsmustdisclosetotheBoardothersignificantcommitmentsbeforetheirappointment.Anyproposednew
significantcommitmentsrequireBoardapprovalbeforetheyareaccepted.
Board Nomination Audit Remuneration Disclosure
Total number of scheduled meetings 12 6 6 6 7
Members Attended Attended Attended Attended Attended
Caroline Johnstone 12 6 7
Michael Willome 12 7
Lily Liu –joinedSynthomerinJuly2022 7 (7) 4 (4)
Brendan Connolly 11 6 5 6 7
Lee Hau Hian 12 6
Alexander Catto 12 6
Holly Van Deursen 12 6 6 6
Cynthia Dubin – resigned in November 2022 8 (8) 4 (6) 6 (6) 5 (5)
Roberto Gualdoni 12 6 4 6
Ian Tyler –joinedSynthomerinJune2022 6 (8) 3 (3) 4 (4)
ForDirectorswhoonlyservedforpartoftheyear,thenumbersinbracketsindicatehowmanymeetingstheywereeligibletoattend.
Governance report
100 Synthomer plc Annual Report 2022
The Board’s year
Weheld12Boardmeetingsduring2022,
eight of which were scheduled, and four
of which were held at short notice to
discussspecificmatters,includingthe
disposal of our Laminates, Films and
Coated Fabrics businesses, announced
inDecember2022.
TheendofCOVID-19restrictionsinmany
parts of the world meant we were able to
resume in-person Board meetings, make
sitevisitsandholdourfirstopenAGM
since2019.
Welcoming new faces to our
Executive Team and Board
Following an extensive recruitment
process last year for our CEO and CFO,
this year saw our CEO Michael Willome
put his new Executive Team in place, with
theBoard’ssupport.
The Board is pleased to report that,
together, these appointments have
created a positive shift in our Executive
Team’sgender,ethnicityandageprofile.
See page 66 in our Sustainability report
for more information on the progress
we’ve made in our diversity and inclusion
agendathisyear.
At Board level, we appointed Ian Tyler as
ournewNon-ExecutiveDirectorinJune.
We describe changes to the Executive
Team and Board, and our recruitment and
induction processes, in the Nomination
Committee report from page116.
Applying scrutiny and rigour
through difficult times
The business has faced challenging
headwinds this year and at times has had
tomakedifficultdecisions.TheBoardhas
been closely involved throughout, ensuring
that we consider the expectations of
stakeholders and the long-term
sustainabilityofthebusiness.
As Synthomer reported in our 2022
interim statement, demand for our nitrile
butadiene latex (NBR) – which was
exceptionallyhighin2021–hasnot
yetreturnedtopre-pandemiclevels,as
severedestockingcontinues.TheBoard
therefore considered and approved the
decision to pause investment in new
nitrile capacity until demand returns
togrowth.Atthesametime,macro-
economic conditions contributed to
aslowdownindemandinmanyofour
otherbusinesses.Theseheadwinds
came at a time when Synthomer was
integrating our new adhesive resins
business, creating pressure on our
balancesheet.
The Group responded by focusing on
deleveraging and cash generation, and
bytakingoperationalactionstoaddress
capital expenditure, working capital and
costs.InOctober,theBoardapprovedthe
decision to suspend dividend payments
until the end of 2023, and oversaw the
agreement with our banking syndicates to
widen the debt covenant, giving Synthomer
increased headroom, as described in the
Financial review on pages 28 to 33.
We know these decisions affect all our
stakeholders, and they were not taken
lightly.TheBoardconsultedwidelybefore
each decision and drew on a wholesale
review of options and information to help
guide the business on a path we believe
willleadusbacktosustainablegrowth.
For more detail on how we considered
stakeholders, see page107.
To make sure our costs and capital
expenditurereductionprojectswere
balanced,theBoardprovidedspecific
challenge to management around issues
such as health and safety and
maintainingthereliabilityofourplants.
Overseeing Synthomer’s
refreshedstrategy
The Board was closely involved in the
development of Synthomer’s refreshed
strategy, with its focus on attractive end
markets, innovation and sustainability,
and we held detailed discussions with
theExecutiveTeamthroughout.Wehave
also carefully considered and approved
Synthomer’s new divisional structure,
which was developed during 2022 to
align with the strategy and focus on the
Group’s most important addressable
markets, creating three new divisions:
Coatings & Construction Solutions,
Adhesive Solutions, and Health & Protection
andPerformanceMaterials.Thisstructure
waslaunchedinJanuary2023.
The Board was closely involved as Synthomer
navigatedayearofchangeandchallenge.
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101Synthomer plc Annual Report 2022
The Board’s year continued
As part of the process of developing the
strategy, individual Board members met
with McKinsey – appointed to facilitate
the process – to share their feedback
ontheproposedscopeoftheworkand
strategicconsiderations.McKinseythen
facilitated a workshop with the Board and
Executive Team in April and management
providedprogressupdatesatsubsequent
Boardmeetings.TheBoardheldaspecial
strategic workshop and signed off the
refreshedstrategyinJune2022,aheadof
its launch to stakeholders at Synthomer’s
CapitalMarketsDayinOctober2022.
During the process, the Board asked the
team to ensure that both a speciality and
a base focus were considered, and we
challenged the assumptions used in
evaluating the various business units
andinidentifyingcoreandnon-core
businesses.Therewasmeaningful
debate around capital allocation
betweencoreandnon-core
businesses,toensurebestvalue.
Weareconfidentthatthisstrategic
approach is the right one – it reduces
thecomplexityofthebusinesstoallow
Synthomer to focus on what it does best,
in areas where we see real opportunities
tocreatevalueforourstakeholders.The
end-market focus is already proving
importantinprioritisinginvestment.
Thestrategyisdescribedonpages12to15.
Divesting Laminates, Films and
Coated Fabrics
Synthomer’s refreshed strategy
recognises the importance of portfolio
management to increase the speciality
weighting of our portfolio and focus on
higher-value, higher-growth markets, and
identifiescoreandnon-corebusinesses
withintheGroup.Thisallowsfordisposal
of non-core businesses when the
opportunitysupportsourstrategy.
The Board oversaw and approved the sale of
the Laminates, Films and Coated Fabrics
businesses, announced in December, and
received regular reports on the disposal
processoversomesixmonths.Thiswasa
very full and extensive sale process, which
deliveredapositivefinancialreturndespite
thechallengingeconomicenvironment.We
considered the sale’s potential impacts on all
ourstakeholders.Thedisposalisanearly
step in our strategy and also allowed us to
reduce debt and focus resources, which we
considered was in the best interests of our
shareholdersandtheremainingemployees.
We also concluded that the owner will be
a better home for the development of the
disposed businesses and therefore in the
interests of those employees and other
stakeholders.TheBoarddebatedanumber
of offers, their various attributes and risks,
and approved and accepted the preferred
offer.Theresolutiontoapprovethesalewas
passed unconditionally at Synthomer’s
GeneralMeetingon11January2023.
Approving new sustainability targets
Sustainability is a critical enabler of our
refreshed strategy, a recognition of its
importance to Synthomer as a value driver,
as well as of our commitment to being
aresponsiblebusiness.Sustainability
and ESG matters are considered at
mostregularBoardmeetingsandare
reservedmattersfortheBoard.
TheBoardplayedanactiverolein2021
in developing Synthomer’s Vision 2030
programme, and this year we continued
to review Synthomer’s ESG targets and
challenge the Executive Team to ensure
theyremainasstretchingaspossible.
In2022,thisincludedmoreambitious
commitments to science-based targets
aspartofourpathwaytonetzero,witha
focus on absolute targets, as well as more
detailedclimate-changescenarioanalyses.
We also challenged the team to set goals
around our employee engagement, and
move beyond a simple measure of
responseratestoemployeesurveys.
We agreed the next steps in our TCFD
reporting – continuing to work with
Deloitte on climate-change reporting –
and approved an internal carbon price
of£85pertonneofcarbondioxide
equivalent.TheCompanychosethis
price after a thorough market and peer
review, as well as a sensitivity analysis
againstsomeofourcapitalgrowthplans.
For more information see Synthomer and
sustainability, pages 40 to 72.
Governance report
102 Synthomer plc Annual Report 2022
Governance report
This year we continued to review
Synthomer’s ESG targets and
challenge the Executive Team to
ensure they remain as stretching
aspossible.
Maintaining a wide view of internal
and external trends
We began monitoring the effects of the
warinUkraineatitsoutsetinFebruary
2022.Sincethen,wehavefocused
particularly on European energy supply
security and costs – and this has been
astandingitemontheBoard’sagenda
sinceApril2022.Ourfocuscontinues
tobeonsecurityofsupplyandhedging
whereappropriate.
Receiving reports on cyber security is
now a regular part of the Board’s agenda,
withreviewstwiceayear.Althoughthere
were no breaches in the year, Synthomer
runs a cyber security programme to help
lower the impact and likelihood of
potentialcyberrisks.Thisworkwill
continue in 2023, with plans to further
developandtestourmajorsecurity
incidentresponseplan.Earlyin2023,we
additionally retained an expert third party
toassistintheeventofanycyberattack.
We also reviewed the Company’s main
advisers and agreed with management’s
recommendations for appointing new
jointbrokersandanewdebtadviser.
We received reports on the Business
Excellenceprojectinitiatedinearly2022,
which focuses on commercial and
operations.TheBoardchallengedthe
projectscope,targetsandresourcesand
also contributed experience of similar
projectsinotherbusinesses.
Integrating our new adhesives
business
In April 2022, Synthomer completed the
acquisitionofEastman’sAdhesiveResins
business to form our new Adhesive
Technologies division, restructured as
ofJanuary2023tobecomeAdhesive
Solutions.Sincethen,theBoardhas
continued to monitor its integration into
the Group, its performance and its delivery
ofsynergybenefits.Wereceivedregular
reports at each Board meeting on progress
from the management team and also
monitored our exit from transitional service
agreements.TheBoardhasparticularly
challengedtheresourcesrequiredto
deliver a complex operational and supply
chain integration against a challenging
economicbackdrop.
Board engagement: strengthening
connections
OurChairmetwithmajorshareholders
and reported to the Board on this
engagementworkinApril.Shareholders
reflectedonthedeterioratingeconomic
conditions and the unprecedented
downturninthenitrilesmarket.They
were interested to understand the
refreshedstrategy,andweweresatisfied
with the response to our Capital Markets
Day, which indicated strong support for
the strategy and the progress made by
ourCEOintheyear.Nevertheless,weare
in no doubt that they expect us to focus
on reducing debt and strengthening our
balancesheet.
Meanwhile, Non-Executive Directors
Alexander Catto and Holly Van Deursen
hosted face-to-face and virtual Employee
Voicesessionsacrossallourregions.
This process ensures that the Board
hearsdirectlyfromouremployees.This
year, topics included mental health and
wellbeing, communication, change
management, and investment and
maintenanceplans.
WithCOVID-19restrictionseased,theBoard
was able to meet the workforce in person
again.ThisincludedvisitingourHarlowsite
andseveralofourUSAsites.Formore
detail, see People on pages 67 and 68.
We also received two reports in the year
on follow-up actions from the Your Voice
2021employeesurvey.Eachregionis
workingtodefineandimplementactions
related to their people, with the top areas
identifiedforimprovementbeing
communication,collaborationandwellbeing.
EC styrene investigation
In November, the European Commission
published its decision following its
investigation into Styrene Monomer
purchasingpracticesbetween2012
and2018.Synthomerfirstdisclosedthis
investigationtothemarketinJune2018.
Thedecisionresultedinafineof
€43.6million(£38.5million),modestly
belowthe£40.1millionadjusted
provision that Synthomer announced
atitsinterimresultsinAugust2022.
TheBoardhasreflectedseriouslyonthis
decision.Synthomerisbuiltonitsreputation,
and the Board is focused on doing business
intherightwayatalltimes.In2018,the
Board instigated a root and branch review
of procurement across all of Synthomer’s
purchasing activities and instructed a
bottom-up review of all aspects of our
compliance culture, including training and
supportforstaff.In2022,werevisitedthis
workandreflectedagainonourcompliance
culturewiththerefreshedExecutiveTeam.
Aftermuchworkandreflection,weare
satisfiedthatwehavefurtherstrengthened
Synthomer’s compliance culture, which
very clearly prohibits any engagement in
anti-competitivepractices.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
103Synthomer plc Annual Report 2022
The Board’s year continued
Risk management and
internalcontrol
The Board of Directors has ultimate
responsibility for the Group’s systems
ofriskmanagementandinternalcontrol
andforreviewingtheireffectiveness.It
also sets appropriate policies to ensure
thattheCoderequirementsaremet.
The Group’s internal controls over the
financialreportingandconsolidation
processes are designed under the
supervisionoftheChiefFinancialOfficer.
Their aim is to provide reasonable
assurance regarding the reliability of
financialreportingandthepreparationand
fair presentation of the Group’s published
financialstatementsforexternalreporting
purposesinaccordancewithIFRS.
The Group risk management framework
is set out on pages 74 to 83.Risks
associated with safety, health and the
environment are, by the nature of the
Group’s business, always of the utmost
concern – the Sustainability report on
pages 40 to 62 reviews the Group’s 2022
SHEperformance.
TheBoardconfirmsthatarobust
assessment of the emerging and
principal risks facing the Group has been
carried out and that it has monitored and
reviewed the effectiveness of the Group’s
risk management and internal control
systemsin2022.
Alongside this work we have continued to
support Synthomer’s evolving approach
to risk and the continuing development
ofourriskmanagementframework.
The enhanced risk review process
adoptedthroughtheyearreflectsworkat
both the Board and the Audit Committee,
where we have encouraged the team to
consider velocity – the speed of a risk
affectingthebusiness.And,whilethis
addedalevelofcomplexity,thebusiness
managers’ feedback is that it has
improvedthequalityanddepthof
discussions and helped ownership
ofriskacrossthebusiness.
The new Executive Risk Committee is
also an important development (see
page75), ensuring a top-down as well as
bottom-upassessmentofrisk.
We ran a series of deep dive Board sessions
this year with the Executive Directors and
senior managers to explore operational
performance in the divisions – for instance,
in the NBR market, we considered demand,
customers, plant utilisation rates, and
outlookandforecasting.
Thismirroredspecificriskdeepdive
sessionsattheAuditCommittee.Deep
dives have become an important part of
the Board’s agenda in the past couple of
years, because they help the Board delve
intospecificareasofstrategicimportance,
suchasprogressoninnovation.
Ongoing commitment to Board
training and development
Each year, our Remuneration Committee
asks an external specialist to provide updates
on market practice, remuneration trends
and corporate governance developments
atitsAugustmeeting.In2022,Deloitte
shared a detailed update on current and
future areas of reporting interest for
stakeholders, such as the current
cost-of-living crisis, sustainability metrics
inincentiveplansandethnicityreporting.
PwC also presented to the Board on the
latest issues from the UK’s Department
for Business, Energy and Industrial
Strategy (BEIS) consultation on Restoring
Public Trust in Audit and Corporate
Governance.EYalsoprovidedanannual
Board training workshop, including
corporategovernance,inFebruary2023.
PwC provided a synopsis of its technical
programmes in November 2022, and this
fed into a discussion at the Board of
prioritiesfor2023.
Governance report
104 Synthomer plc Annual Report 2022
Stakeholder engagement (s.172compliance)
Understanding the issues that are important to our stakeholders
is essential to the way in which we develop and execute our
businessstrategy.Itisalsocriticaltoourlong-termsuccess.
Our approach to Section 172
OurSection172statementdescribesthe
ways in which the Board has carried out
its responsibility to promote the success
of the Company, recognising that the
keydecisionsitmakestodaywillaffect
long-termperformance.Thestatement
considers paragraphs (a) to (f) of Section
172(1)oftheCompaniesAct2006and
includes details on how the Board has
consideredandengagedwithstakeholders.
When making decisions, the Board
considers the needs of our different
stakeholder groups as well as the likely
consequencesthatanyactiontakenmight
haveforSynthomer’sreputation.Tohelp,
the Board receives papers that include a
tablesettingoutSection172information.
It uses this information to inform strategic
discussions, including any implications
for the resilience of our business and the
potential impact on our community and
environment.ItistheChair’sresponsibility
to ensure that the Board considers
Section172whenmakingitsdecisions.
This process includes the Board and its
Committees considering the interests of
ouremployees.Weprimarilyengagewith
employees through Alexander Catto, our
designated Non-Executive Director for
workforceengagement.In2022
Alexander was supported by Holly Van
Deursen, and by other Board members,
when hosting employee meetings during
sitevisitsintheUSA.Moreinformation
about how we engage with employees
can be found in the People section of our
Sustainability report on pages 67 and 68.
Board members make themselves available
toinvestors.In2022,ourChairCaroline
Johnstonerananengagementprogramme
withourmajorinstitutionalinvestorsand
reported to the Board on the feedback she
received.BrendanConnollyconsulted
directlywithmorethan10ofourlargest
shareholders and several proxy agencies
about our new remuneration policy, which
he describes in more detail on page123.
Throughout the year, the Board received
reports from management about their
engagement with customers, including
glovemanufacturersandwithutility
suppliers and site hosts at chemical
parks.Thesereportswereevenmore
importantthisyear,giventheissues
around NBR demand and concerns
aroundenergysecurityofsupply.
We recognise that it is not always possible
to provide a positive outcome for all
stakeholders and that sometimes the
Board has to make decisions based on
competingpriorities.TheBoardregularly
assessestheoutcomesofitsdecisions
andisavailabletotalktostakeholderswhen
needed.ThisengagementhelpstheBoard
better understand what matters most to
our stakeholders and supports discussion
onrelevantissues.ItalsohelpstheBoard
choose the course of action that best leads
to high standards of business conduct and
successforSynthomerinthelongterm.
Stakeholder engagement in 2022
There were no changes to the Board’s
identifiedkeystakeholders,aslistedin
the table on page107.Incarryingoutits
duties, the Board continued to ensure it
understands, and considers, the issues
that matter most to these stakeholder
groups, particularly when making
materialdecisions.
By early 2022, the pandemic no longer
had an impact on the Board’s engagement
with stakeholders, and we resumed
sitevisitsandphysicalmeetingswith
employees.Havingcompletedour
biannualmaterialityassessmentin2021,
when we appraise what sustainability
issuesmattermosttoourstakeholders,
wewillengageonthisagainin2023.For
moredetails,seepage 44 of the
Strategicreport.
Meanwhile, after two years of closed
meetings, we were pleased to return to
holding an open Annual General Meeting
inApril2022.Wekeptinplacetheoption
forshareholderstosubmitquestionsin
advance of the meeting, however, which
weintroducedduringthepandemic.We
also have regular correspondence with
shareholders, responding to suggestions
andqueries.
Principal decisions in 2022
This was another busy year for the Board,
andoneinwhichanumberofdifficult
decisions had to be taken – see The
Board’s year on page101.Belowwesetout
three examples of principal decisions the
Board took in 2022 and how it considered
Section172mattersintheprocess.
Approving a refreshed strategy
In 2022 the Board approved a refreshed
strategy, with a focus on attractive end
markets,innovationandsustainability.
Itwaspresentedtoinvestors,employees
andotherstakeholdersinOctober.
How the Board made its decision
In The Board’s year, we describe the
strategic review undertaken during 2022,
the rigorous process followed over an
extended period and the Board’s close
oversightandinvolvement.AstheBoard
reflectedonthepotentialstrategic
options, it considered all stakeholder
groups – for example, the impact on
employees in non-core businesses of
pursing a focus on either base or
speciality chemicals and on the value
potentialforshareholders.
The Board considered that strategic
alignment to end markets would enable
the Group to better serve its customers
and to focus its innovation and capital
allocation – and so deliver greater
businessvalueforshareholders.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
105Synthomer plc Annual Report 2022
Governance report
Stakeholder engagement (s.172compliance)continued
Wealsoreflectedonthepotential
disruptionofabusinessreorganisation.
We concluded that this was a necessary
step to align everyone in the business
with the new strategy and that it would
provide greater opportunities for
employeedevelopment.
Selling our Laminates, Films and
CoatedFabrics businesses
In December 2022, the Board approved
thisdisposaland,inJanuary2023,we
puttheproposedsaletoavoteata
GeneralMeeting.Itreceived99.98%
approval.Weappreciatedthesupport
frominvestors,includingKualaLumpur
KepongBhd.
How the Board made its decision
As part of the strategic review of the
Group, management undertook an
extensive analysis of our portfolio of
23businesses.Thisinvolveddetailed
market analyses – with challenge from
an external strategic adviser – as well as
an assessment of the Group’s market
position and current and future potential,
alongsidelikelycapitalrequirements.
Management proposed that a number of
businessesdidnotnaturallyfitwiththe
refreshed strategy and that those would
have better prospects and opportunity to
developunderdifferentownership.The
Laminates, Films and Coated Fabrics
businesseswereidentifiedasnon-core
businesses.
Alongside developing the refreshed
strategy, management undertook a
verydetailedperiodofmarketingof
thebusinesses,supportedbyexternal
corporatefinanceadvisers.Anumberof
parties expressed interest and a period
oflimitedaccessandduediligencewas
undertaken, following which a number of
partiesconfirmedoffersforthebusinesses.
The Board considered the forecasts for
the businesses and took external advice
onthevalueoftheoffersreceived.We
concluded that the potential proceeds
wouldbeasignificantstepintheGroup’s
plan to reduce borrowings and leverage,
that the offers represented good value
for the businesses and that they were
also an important step in delivering the
refreshedstrategyfortheGroup.
The Board therefore considered that it
was in the best interests of investors,
employees and other stakeholders that
we progress delivering our strategy and
ourleveragegoal.TheBoardalso
reflectedontheimpactonemployees,
customers and suppliers in the businesses
being disposed, concluding that the
opportunities for investment and
development would be greater under
differentownership.
We were also mindful of the additional
work that the transaction would place on
existing employees providing transition
services to the new buyer – but were
confidentthatmanagementwould
monitor the level of resource throughout
thetransactionandadjustasrequired.
Refinancing, covenant waiver and reset,
and dividend suspension
In September 2022, management
reported to the Board the expected
prolonged downturn in the Performance
Elastomers business, as well as the
headwinds across the European
businessthatwerereducingdemand.
ItalsoreportedthattheGroup’sleverage
would increase as demand fell in a
numberofmarkets.
The Board asked management to update
business forecasts, secure additional
banking facilities and renegotiate the
bankingleveragecovenants.Wealso
asked management to update its plan to
reduce leverage over the medium term to
theGroup’sstatedaimof1–2times
EBITDA.Thecircumstancesandplans
developed are described in The Board’s
year on page101, the CFO’s report on
page 29 and the Chair’s introduction to
the Strategic report on page5.
The plan put forward to the Board for
approval included:
A programme of working capital,
capital expenditure and cost reduction
Sale of non-core businesses (in line
with the refreshed strategy) if
appropriate value could be delivered
Negotiating a covenant reset from its
banking group
Pursuing additional facilities
Waiving any dividend payment to
shareholdersuntiltheendof2023.
InJanuary2023,theBoardreviewed
andconsideredupdatedbusiness
forecastsandbudgets.Itagreedthat
managementshouldrefinancetoensure
that the business had medium-term
facilities and leverage covenants, with
appropriateheadroomtoenablethe
business to operate through a period
ofchallengingeconomicheadwinds.
Therefinancingwascompletedin
March2023–seepage201 for
moredetail.
How the Board made its decision
Theseweredifficultdecisionsforthe
Board, balancing the interests of
shareholdersandotherstakeholders.
Ourguidingprinciplewasinprotecting
value in the business and providing
headroom, while integrating and
supporting the Adhesive
Solutionsbusiness.
The Board recognised that investors
would be very disappointed by any
dividendwaiver.However,having
considered forecasts and options in
detail, the Board concluded that the
proposals were in the best interests
ofstakeholdersoverallandwouldbest
protect and deliver value in the
mediumterm.
Governance report
106 Synthomer plc Annual Report 2022
Stakeholder groups How the Board engaged in 2022
Customers
We work with more than 6,000 customers
worldwide, providing the products they need to
address technical and sustainability challenges
in their own manufacturing processes.
The Executive Committee attended all
scheduled Board meetings, and divisional
presidents provided additional customer-
relatedintelligenceandfeedback.
The Board discussed the exceptional
shortfall in demand from our nitrile glove
customers, and the implications for
managing supply and pricing, and decided
to postpone the next phase of our nitrile
capacityexpansion.
The Board approved a refreshed strategy that
focuses on getting closer to our customers
andongrowinginattractiveendmarkets.
Given that all areas of our business have
seen weakened demand, the Board kept up
to date with operational issues, including
plant capacity, shift planning and headcount
reduction to match production to demand
andreducecosts.
The Board received reports on the Business
Excellenceprojectinitiatedinearly2022,
which focuses on commercial and
operationalexcellence.
Employees
Our success relies on the talent of our
employees. We want them to feel part of a
culture that values diversity and inclusion,
fairness and transparency.
The Board restarted physical meetings
fortheEmployeeVoiceontheBoard
programme, holding an extensive series of
in-person sessions at sites in the USA as
partofthevisitthereinJune.
The Board received and considered two
reports on follow-up actions from the results
oftheYourVoice2021employeesurvey.
Communities
We want the communities who live near our
sites to see us as a good neighbour.
The Board now receives regular reports
about the progress of Vision 2030 and our
communitytargets.
Suppliers
Our suppliers deliver the raw materials and
services we need to make our products. We look
for ways to work in partnership with suppliers to
create a more sustainable supply chain.
The Board received reports on
management’s work to ensure the
Group’ssupplychaincompliedwith
the new sanction regime put in place
asaresultofRussia’swarinUkraine.
European energy security and cost was a
keytopicfortheBoardthroughout2022.
Management kept the Board informed on
how it was engaging with utility suppliers
and site hosts as it worked to reduce
operationalrisks.
Shareholders
As a public company listed on the London
Stock Exchange and part of the FTSE 250 Index,
we have a responsibility to deliver value for
ourshareholders.
The CEO and CFO provide the Board with
updates from their meetings with investors,
and our Vice President of Investor Relations
shares investor relations developments at
everyBoardmeeting.
Our Chair ran an engagement programme
withmajorshareholdersandreportedtothe
BoardonherfindingsinApril.
The Chair of the Remuneration Committee
initiated a consultation process with the
Group’s top 20 shareholders – holding
directconsultationswith10–attheend
of2022ontheproposednewDirectors’
remunerationpolicy.
Before each meeting, the Board receives
analysts’ forecasts and consensus for
financialperformance,andasummaryof
the externally prepared shareholder analysis
report.Thissummaryshowsourtop20
shareholders and their movements,
alongsidetopbuyersandsellers.
Analysts’ reports and notes are shared
withtheBoardastheyareissued.
Governments and authorities
As a member of the chemical industry and
scientific community, it is important we
engageon issues such as policy, compliance
and collaboration.
We cooperated fully with the European
Commission’s investigation into styrene
purchasingpractices.
Through the Company’s broker, the Board
engaged with the FCA about preparing
theClass1circularforthesaleofour
Laminates, Films and Coated Fabrics
businessesforshareholderapproval.
The Board received reports on the
changing regulatory landscape, including
the BEIS consultation, TCFD reporting and
corporategovernance.
The Board receives a report twice a year on
legal compliance with operational laws and
regulationsatoursites.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
107Synthomer plc Annual Report 2022
Audit Committee report:
introduction from the Chair
This has been a dynamic year in which
the Audit Committee adapted its work
programme to manage shifting
challenges and priorities. While the
Committee supported the Board in
addressing the significant headwinds
facing the business, it also made real
progress in strengthening Synthomer’s
risk management and internal audit
processes. My predecessor, Cynthia
Dubin, did a great job guiding that
progress over the past two years. It
means I have inherited a strong audit
agenda – one that I look forward to
building on with the help of my fellow
Committee members.
Navigating a challenging year
Like other businesses, Synthomer has
navigateddifficulteconomicconditions
in the past year, but it also faced a very
particular challenge in the Performance
Elastomersdivision.Aftertwoextraordinary
years of high performance – largely driven
byCOVID-19demandforglovesmade
with our nitrile butadiene latex (NBR) –
destockinghasledtosignificantlyreduced
NBR production volumes and delayed a
returntopre-pandemicNBRgrowth.This,
coupledwiththeacquisitionofournew
adhesive resins business and weakened
European demand, meant we increased
ourleverage.Asaresult,theCommittee
put more emphasis on internal control
and deep dive reviews to protect the
integrityofthebalancesheet.Wealso
supported the Board’s detailed analysis
ofSynthomer’spositionandportfolio.
See The Board’s year on pages101-103
formoreinformationonthisprocess.
Continuing to strengthen our
riskframework
Despite these challenges, the Committee
made good progress this year upgrading
our risk management framework, which
now embeds a clear set of risk appetite
statementsforourprincipalrisks.Following
a recent review of our principal risks, and
as part of our standard governance
processes,theBoardwillregularlyreview
and update those statements to ensure
theyreflectrecentstrategicchanges.
While all our divisions have incorporated
velocity into their risk analysis over the
past year – alongside probability and
impact – our Industrial Solutions division
wasthefirsttoincludeitinitsrisk‘deep
dive’sessionwiththeCommittee.
Velocity is an increasingly important
factor in risk analysis, helping a company
to understand the time it takes between
ariskemerginganditsimpactbeingfelt.
The more a business understands that
velocity, the more it can ensure it has
therightcontrolsandmitigationplans
inplace.Forexample,thespeedat
whichdemandfellinourPerformance
Elastomers business was unprecedented,
andwewillreflectonthiswhendeveloping
our market information, controls and
mitigation plans in the coming year and
beyond.TheCommitteefeltthatoursite
business recovery plans – tested at the
timeoftheFilagofirein2022,andfound
to be robust – could inform these market
responseplans.
Towards the end of 2022, Synthomer
established a new Executive Risk
Committee(ERC).Itspurposeisto
oversee principal and emerging risks and
carry out deep dives on any mitigating
actionthatmightbeneeded.TheAudit
Committee had encouraged the CEO to
consider such a committee, so is pleased
to already have a more focused top-down
and outward-looking risk review – one
that also complements the bottom-up
riskreviewundertakenatdivisionallevel.
The Committee will work closely with the
ERC to provide assurance to the Board
onriskmanagement.
See our Risk report on pages 74-83 for
more detailed information on how we
manageourrisks.
Governance report
108 Synthomer plc Annual Report 2022
Governance report
Deepening the Committee’s
understanding of key issues
Audit Committee members carried out
divisional deep dive risk reviews, as well
as specialist functional risk reviews into
plant control systems, strategic sourcing,
insuranceandpensions.Onpensions
generally, careful stewardship by our
pension trustees meant that our
exposuretotheUKgiltcrisisin
September2022wasminimal.
The Committee also reviewed
summaries of the work done by the
Internal Audit team, which operates
arisk-basedauditplan.
Keeping up to date
TheCommitteereceivedseveralbriefings
from PwC on key governance issues,
including on the UK’s Department for
Business, Energy and Industrial Strategy
(BEIS) consultation on Restoring Public
TrustinAuditandCorporateGovernance.
This is crucial in helping members ask
therightquestionsandstayaheadof
disclosurerequirements.
Committee members also received and
discussed Financial Reporting Council
(FRC) thematic reviews on governance
issues such as sustainability and
earningspershare.
Continuing to review
environmentalreporting
Sustainability remains a key issue for the
Committee, and we continue to develop
andrefineourenvironmentalreporting
methodology.OnbehalfoftheCommittee,
ourGroupInternalAuditandRisk
Director conducted an internal
reviewofthewaywehavedesigned
thecontrolsandprocessesweuseto
ensurethereliabilityandaccuracyofour
environmentalperformancedata.Asa
result, she awarded our methodology
a‘substantial’levelofassurance.
This year too, the FRC noted how we
explained climate change as a principal
riskinourlastRiskreport–page71of
our2021AnnualReport.Itsharedour
explanationasgoodpracticeinitsJuly
thematic review of TCFD disclosures and
climateinthefinancialstatements.This
is recognition for Synthomer and a sign
that our environmental reporting is
growinginstrength.
Responding to the BEIS
consultation
TheCommitteereflectedontheBEIS
consultation and likely timeframe for
recommendationsandimplementation.
Executive management has previously
initiatedanumberofprojects–inlinewith
the likely outcomes of the consultation,
andeachwithaprojectlead/owner–
toleveragetheexperienceofinternal
control environments we gained from
the2020acquisitionofOMNOVA,aUS
Sarbanes-Oxley-compliantcompany.
As the Company waits for more certainty
onthetimelinesforthemajorproposals,
in 2023, we will continue to develop our
plans for addressing the key elements
oftheconsultationResponseStatement,
usingin-houseandexternalresources.
Welcoming our new CFO
InJuly2022,LilyLiujoinedSynthomer
asournewCFO,succeedingStephen
Bennett, who retired from the Company
aftersevenyears’service.Iwouldlike
tothankStephenforhiscontributionto
thebusiness.EachoftheCommittee
members spent time with Lily during her
induction, and I am very pleased that Lily
hasimmersedherselfquicklyintothe
business, leading the Finance function
duringaparticularlychallengingtime.
Providing support and challenge
forSynthomer
This year has been about balancing
immediate priorities with long-term
goals.Wecontinuetooperateundervery
challenging market conditions – but we
areconfidentthatdemandwillreturnto
our end markets, and that Synthomer’s
refreshed strategy and divisional
structurewillpositionuswell.Helping
the business navigate those challenges
while supporting the Executive Team’s
work to execute our refreshed strategy
will be central to the Committee’s work
overthenextyear.Ourkeyprioritiesin
2023 include:
Supporting the Board as the
business navigates a period of
financialpressureandfocuses
ondeleveraging
Financial reporting and internal
controls around integrating our
newadhesivesbusiness.
I look forward to working with my new
Committeecolleaguestoprovidethe
support and challenge necessary to
drivethegrowthIamconfidentthat
Synthomeriscapableofachieving.
Ian Tyler
Chair
28 March 2023
We continue to operate under
challenging market conditions –
butareconfidentthatSynthomer’s
refreshed strategy and divisional
structurepositionuswell.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
109Synthomer plc Annual Report 2022
Audit Committee report continued
Audit Committee role
We assist the Board to oversee our
financialsystemsandreporting,and
theadequacyandeffectivenessofour
internalcontrolsandriskmanagement.
We also lead the oversight of both
externalandinternalaudit.Ourfull
termsofreference,reviewedand
updatedduringtheyear,areavailableat
www.synthomer.com.
Committee members
The Committee comprised four members
duringtheyear.Afterourfinalmeetingof
2022, then Chair, Cynthia Dubin, resigned
and Non-Executive Director Ian Tyler was
appointedtoreplaceher.
The Board considers that each member
isindependentwithinthedefinitionof
theCode.ThecurrentCommitteeChair,
Ian,hasrecentandrelevantfinancial
experience in line with Provision 24
oftheCode.Hehasextensiveboard
experience, including in the roles of CEO
andchairofFTSE250companies,and
has been a Non-Executive Director
forseveralinternationalindustrial
organisations, including in the role
ofFTSE100auditcommitteechair.
Together, Committee members have
awiderangeoffinancial,operational
andcommercialexperienceacrossthe
chemicalsandengineeringsectors.
The skills and experience of Committee
members are set out on page95.
Committee meetings and operation
Other Board members have a standing
invitation to attend our meetings, unless
notifiedotherwise.Weareverypleased
that our CEO and CFO attend our
Committee meetings, often with the rest of
theBoard.Ourprogrammeofriskreviews
and updates has also allowed us to invite
high-potential and diverse members of the
managementteamtoattend.Theseinclude
seniorGroupfinanceteammembers,the
Group Internal Audit and Risk Director and
PwC,ledbyauditpartnerDavidBeer.
The Committee meets regularly with PwC
and with the Group Internal Audit and Risk
Directorwithoutmanagementpresent.
The Chair also liaises with Brendan
Connolly, the Senior Independent
Non-Executive Director and Chair of the
Remuneration Committee, to discuss
matters such as setting Executive
Directorcompensationtargets.
Outside formal meetings, the Chair
meets regularly on a one-to-one basis
withtheCEO,CFO,Groupfinanceteam
members, Group Internal Audit and
RiskDirectorandPwC,todevelopthe
Committee’sprogrammeofworkandto
review progress on actions we have
agreed.Thisenablesustoexploreand
understand key issues as they arise
andtoensurewehaveappropriate
informationpreparedfor,andsufficient
time to address, key issues in
Committeemeetings.
Correspondence with the FRC
InJuly2022theFRCadvisedthatithad
selected Synthomer to be included in its
thematic review of TCFD and climate
disclosures in the Annual Report and
Accountsfortheyearended31December
2021.Synthomer’sexplanationof
including climate change within existing
principal risks was given as an example
ofbestpractice.
Subsequently,inNovember2022,the
FRC asked the Company to explain the
level of external assurance provided
aroundemissionsverification,toprovide
morespecificdetailonTCFD-related
governance activities, and to outline
anyimpactofclimate-relatedrisks
onintangibleassetsandgoodwill.
TheCommitteeconsideredthese
recommendations and made
amendmentsforthisAnnualReport.
The FRC’s letter provides no assurance
that the Annual Report and Accounts are
correct in all material respects; the FRC's
role is not to verify the information
provided but to consider compliance
withreportingrequirements.
Governance report
110 Synthomer plc Annual Report 2022
Activities during the year
To address our core remit in 2022, we:
Integrity of corporate andfinancial
reporting, significant judgements
andestimates
ReviewedandapprovedtheGroup’sannualandinterimfinancialstatements,includingpreliminaryresults
announcement
Reviewedandapprovedsignificantaccountingpolicies,estimatesandjudgementsandreported
alternative performance measures
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
theGroup
Reviewed the FRC guidance for 2022 covering interim reporting, annual accounts and corporate
governance reporting, along with a summary of the management’s approach to implementation
Assessed the processes for assuring the Board that the 2022 Annual Report and Accounts, when taken
together, is fair, balanced and understandable
Regularly reviewed the Group’s material litigation and concluded, in the March 2023 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 2022, discussed the experience and expertise of the key members of
the engagement team, and approved the audit fee
Carriedoutareviewoftheauditor’sreports,includingPwC’sviewsonsignificantaccountingjudgements,
estimates and the internal control environment
Reviewed compliance with the FRC’s Ethical Standard for auditors and the restrictions on auditors in
providingnon-auditservices.Approvedtheprovisionofcertainpermissiblenon-auditservicesbyPwC
(see page115)
ConsideredandconfirmedPwC’sindependence(seepage115).MonitoredPwC’sworkasreporting
accountants,providingassuranceonhistoricandproformafinancialinformationforthedisposalofthe
Laminates,FilmsandCoatedFabricsbusinesses,andtheirsubsequentyear-endaudit,toensurethere
was no impact on its independence
Reviewed and assessed the performance of PwC and our lead audit partner
Reviewedthelogofaccountingfirmworktoassistwithindependencerequirementsandconsiderations
intheeventofafutureaudittender
Consideredtheneedtoputtheexternalauditouttotender.Afterdiscussionandchallenge,we
recommendedPwC’sreappointment
Internal audit, risk management
andinternalcontrols
Reviewed risk processes across the business to identify and mitigate risks
Oversaw the roll-out across the Group of changes to our risk management framework, in particular adding
the speed at which 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.AlongsideourreviewsofPerformanceElastomersandFunctionalSolutions,wealso
considered the Group’s Industrial Automation and Control Systems (IACS), global procurement,
commercial insurance and pensions with senior members of the management team
Reviewed and approved the Group’s Internal Audit Charter
Reviewed the results of the World Economic Forum (WEF) Global Risk Report 2022, to help identify any
gaps in the Group’s risk reviews
Received updates at each meeting on ongoing and completed internal audits and actions arising
Reviewedandapprovedthe2023internalauditplanandensuredthereissufficientresourcetodeliverit
Governance
Reviewed the corporate governance reporting and whether, as part of the Annual Report, it was fair,
balancedandunderstandable
Oversaw the creation of the Executive Risk Committee, to assist the Audit Committee to oversee the
effectiveness of Synthomer’s risk management arrangements
Received and reviewed FRC thematic reviews on earnings per share and deferred tax assets
Met with Group Internal Audit and Risk Director and the external auditor without management on
severaloccasions.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
111Synthomer plc Annual Report 2022
Audit Committee report continued
Going concern and viability
statements
To enable the Board and Committee
toassessgoingconcernandviability,
management sets out its assumptions
and the potential risks to the business
and possible mitigations, together with
economicandbusinessscenarios.
During the year, there was a particular
focus on the impact of:
The disposal of the Group’s
Laminates, Films and Coated
Fabricsbusinesses
The reduction in Performance
Elastomers’2022profitability,
givendestockinginthenitrile
glovesmarket
Recessionary pressures in Europe
affectinganumberofdivisions.
The process – which management
conducted and the Committee
reviewedtosupporttheBoard’s
statement – included:
Reviewing the Group’s sources of
funding and, in particular, testing the
leveragecovenantinourfinancing
arrangements and assessing
available headroom, in light of the
refinancingdescribedonpage201
Reviewing the short-, medium- and
long-termcashflowforecastsin
various severe but plausible
scenarios, as well as reverse
stress-testing forecasts
Assessing the Group’s current and
forecast activities and factors likely
to affect its future performance and
financialposition.
The Committee discussed the going
concern and viability statements at the
February and March 2023 Committee
meetings and recommended that the
Board provide the statements on pages
151and90,respectively.
Fair, balanced and understandable
The work undertaken by management
– and reviewed by the Committee – to
support the Board’s statement on our
Annual Report being ‘fair, balanced and
understandable’ includes:
Establishing a working group of
appropriatelyqualifiedpeopleat
Group level to oversee the drafting
oftheAnnualReportandAccounts.
This group met regularly to ensure
that disclosures were appropriate
forallstakeholdersandthatdrafting
was progressing well
Engaging a corporate
communications and reporting
adviser to assist in drafting, editing
and proofreading the Annual Report
Ensuring that the FRC’s October
2022 guidance, along with other
relevant guidance, was considered
TheCEOandCFOconfirmingthat,in
their opinion, the Annual Report was
fair, balanced and understandable
Requestingthatcertainkey
contributors, for example, Presidents
and Finance Directors of our global
divisions, sign a declaration
confirmingtheaccuracyoftheir
information
Arranging for our remuneration
consultants to review the Directors’
remuneration report
The Vice President, Group Finance
completing an audit trail for material
dataunderpinningnon-financial
information in the Annual Report
Circulating drafts of the Annual
Report to PwC, the Audit Committee
and the Board for review
Discussing material disclosures
atourFebruary2022
Committeemeeting.
The Committee discussed the fair,
balanced and understandable statement
at our February and March Committee
meetings and, in light of the above,
recommended that the Board provided
the statement on page152.
Governance report
112 Synthomer plc Annual Report 2022
Significant areas of judgement and estimate
Goingconcernwasidentifiedasasignificantareaofjudgement,inthelightofprofitsfor2022beinglowerthanexpected.
TheCommittee’sresponseandconclusionwereoutlinedonpage112.Inaddition,theareasinthistablewereidentified.
Significant areas of judgement and estimate The Committee’s review, challenge and conclusion
Impairment of goodwill and intangible assets
Potential indicators of a higher risk of impairment are that
Synthomer’s market capitalisation is below the net asset value
of the Group, and a lower-than-expected trading performance.
Management presented a summary of the impairment of
goodwill and intangible assets for the cash generating units of
the Group, represented by the five reportable segments. The
Committee reviewed the key assumptions, including discount
and growth rates and potential sensitivities, and concluded
that there was no impairment for four of the fivesegments.
For the Adhesive Technologies segment, management
presented a paper that indicated an impairment of goodwill
of £133.7 million, caused by reliability and supply chain
issues, demand weakness in key adhesives markets and
lower-than-expected delivered capacity. The Committee
challenged the key assumptions supporting the impairment,
including growth rates and delivered capacity, and made
more enquiries with the external auditor, PwC. The Committee
concluded that the impairment was appropriate.
Fair value accounting for adhesive resins acquisition
The accounting for the acquisition of Eastman’s Adhesive Resins
business is shown in note 30 to the accounts. The assets and
liabilities of the business have been included at fair value, with
the balance of consideration shown as goodwill. The assumptions
involved in valuing the assets require significant judgement.
KPMG LLP was engaged to advise on the fair value of the
property, plant and equipment, intangible assets and inventory.
The deferred tax assets and liabilities were assessed by our
in-house tax team.
Management presented a summary of the acquired assets
and liabilities, and the valuation methodologies used for
eachcategory. PwC, as external auditors, reviewed the work
undertaken by KPMG LLP and our tax team. The Committee
reviewed the methodologies, along with their conclusions,
and discussed them with the external auditor. We challenged
the valuation of customer relationships and other intangibles
and the appropriateness of the periods ofamortisation.
Other areas of judgement
Alternative performance measures – Special Items
The Group discloses Special Items separately, to provide a
clearer indication of underlying performance. Special Items
are either irregular – so including them in the assessment of a
segment’s performance would distort trends – or are technical
adjustments that ensure the Group’s financial statements
comply with IFRS but do not reflect the year’s operating
performance, or both.
An example of the latter is the amortisation 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 excluding
theamortisation charge on acquired intangibles from
Underlying performance avoids the potential double-counting
ofsuch costs, so we exclude it as a Special Item from
Underlying performance.
For more detail, see note 4 to the Consolidated financial
statements on page 171.
The Committee regularly challenges management on what
are considered Special Items. It reviews in detail every item
that is excluded or separated from reported Underlying profit
and considers guidance from the FRC and the external auditors.
The Committee is satisfied that it is helpful to a reader of the
financial statements to report Underlying profit, together with
IFRS profit, without Special Items – and that all Special Items
reported met with the Group’s definition of such items.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
113Synthomer plc Annual Report 2022
Audit Committee report continued
Risk management and internal
control environment
Eachyear,theBoardisrequiredto
conduct a review of the effectiveness of
the Group’s systems of risk management
andinternalcontrol.TheBoard’s
statement relating to this review is on
page103.AtitsFebruary2023meeting,
the Committee reviewed management’s
assessment of the key elements of these
systemsandconfirmedtheiroverall
effectiveness.
Our conclusion drew on the following:
The internal audit programme
completed during 2022 and progress
in implementing its resulting actions
Our programme of risk reviews and
discussions with senior managers
and other staff across the Group
throughout the year
Ongoingmanagementassurance–
via Committee papers, Board and
Committee presentations and
discussions – to review the Group’s
keyfinancialcontrolstoensurethey
support our continued growth
Thekeycontrolsquestionnaire,which
is completed and signed by each
Groupoperatinguniteachquarter
Representations to the CFO from the
divisions’financialandcommercial
managementthatthefinancial
information reported to the Group
has been prepared according to our
accounting policies and that all
relevant information has been
provided to prepare the Group’s
AnnualReportandAccounts.These
representations are made twice a
year in line with our external
reportingtimetable.
Internal audit and risk
managementfunction
The Group Internal Audit and Risk
Director has a direct reporting line to
theAuditCommitteeChair,andprovides
an independent assessment of the
effectiveness of our internal control and
risk management processes, highlights
key issues, makes recommendations,
and monitors the implementation of
mitigationsandrecommendations.
Wehaveadedicatedin-houseInternal
Audit function, which draws on
specialistresourcesasrequired.
This year our Group Internal Audit and
Risk Director and her team refreshed and
expanded the methodology Synthomer
usestoselectsitesforaudit.The
methodology now includes more
quantitativeoperationalmetricsthat
arekeytotheeffectivemanagementof
oursites.Thishelpsusbetterprioritise
audit activity using a risk-based approach
that now considers a wide range of
strategic,financial,operationaland
compliancecriteria.
At each meeting, the Committee
reviewed progress against the Internal
Audit annual plan and explored areas
identifiedforaction.Wealsoreviewed
completed audit reports, focusing on
recurringthemes–whichmightrequire
Group actions – and areas where there
wasdivergencefromself-assessments.
External audit and assessment
ofaudit quality
We reappointed PwC as our external
auditorin2016,followingafullre-tender
process.ThefirmhasbeentheGroup’s
auditorsince2012.
The Committee discussed the 2022 audit
process at its November 2022 and February
andMarch2023meetings,atwhichthe
topics in the next table, relevant to the
externalauditprocess,werediscussed.
November 2022 Outcome/action taken by the Committee
PwC’s audit risk assessment
(pages 154 to 160)
PwC undertook a detailed risk assessment, setting out its view of the significance
of key risks and the potential risk of material misstatement. As in the prior year, the
Committee agreed with PwC that climate change, while not an area of significant
risk, should be considered in the overall context of their audit opinion.
Materiality level for the audit
(page 157)
PwC proposed an audit materiality level of £11.7 million, based on 5% of the average
Underlying profit before tax for the past three years. This is consistent with the approach
adopted for the 2021 audit. After discussing this with PwC and management, the
Committee agreed it remained an appropriate methodology for 2022.
PwC’s audit plan
We reviewed the audit coverage and agreed scope (page 154 to 160) in detail and
agreed they were appropriate. 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 its audit partners in our key overseas territories.
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 £2.4 million, compared to
£1.7 million in 2021.
Governance report
114 Synthomer plc Annual Report 2022
February and March 2023 Outcome/action taken by the Committee
Confirmation of PwC’s audit plan PwC confirmed no material changes to the agreed plan.
Audit findings, significant issues and
other accounting judgements
(pages154 to 156)
These were discussed with PwC and management – the work of the Committee is
described earlier in this report.
Management representation letter The Committee reviewed and approved this.
PwC’s independence, objectivity and
quality control procedures
The Committee evaluated and confirmed PwC’s independence, objectivity and
quality control procedures.
Duringtheyear,theCommitteeChairwasinregulardiscussionwithPwC’sleadauditpartnertodiscusstheprogressoftheaudit.The
CommitteemetPwCwithoutmanagementbeingpresentaftertheFebruary2023Committeemeeting.Nosignificantissueswereraised.
The Committee evaluated the performance and effectiveness of the external auditor in the following ways:
Audit quality – how we reviewed PwC’s performance
External evidence The Committee reviewed the FRC’s 2021-22 Audit Quality Inspection Report
covering its conclusions from a review of a selection of PwC audits. This
demonstrated continuous improvement to audit quality and culture year on year.
David Beer, our audit partner, 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 involved in working on the year-end financial statements with PwC teams.
The feedback was positive for all questions asked, and indicated that PwC had
performed its audit well, with highest ratings for planning and quality of reporting.
Audit Committee evidence
David Beer attended all Committee meetings during the year. In assessing the
quality of the audit, the Committee noted the high level of coverage provided by
audit procedures over revenue and underlying operating profit (see page 154).
Italso noted the challenges to management’s assumptions around judgemental
items, such as goodwill impairment, pension liabilities and fair value accounting
(see pages 155-156), including the use of independent valuation specialists where
appropriate.
Auditor independence and
objectivity, and auditor-provided
non-audit services
The Committee has a clear policy on the
provision of non-audit services by the
externalauditorandhasdefinedthevery
limitednon-auditservicestheycanprovide.
Services can only be provided if approved
bytheCommittee,andtheyaresubjecttoa
capof70%oftheaverageofauditfeesfor
theprecedingthreeyears.TheCommittee
must pre-approve all engagements for
non-audit services with an external audit
firmtomakesurethatasmanyfirmsas
possible would be independent in an audit
tender.Detailsofauditandnon-auditfees
paid to the auditor in 2022 are set out in
note 7, page175.
PwC produced a report setting out how
itassesseditselfasindependent.This
included certain Reporting Accountant
activities undertaken as part of the
announced disposal of the Laminates,
FilmsandCoatedFabricsbusinesses.
PwCconfirmedthatitremained
independentinrespectofthe2022audit.
The Committee concluded that PwC’s
independenceandobjectivitywerenot
compromised by providing these services
and that, because of its knowledge of the
Groupanditsfinancialstatements,itwas
inSynthomer’sintereststoengagePwC.
Having considered the steps taken by
PwC to preserve its independence and
the approach to non-audit services
described above, the Committee
concluded that PwC continues to
demonstrate appropriate independence
andobjectivity.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
115Synthomer plc Annual Report 2022
Nomination Committee report:
introduction from the Chair
In 2022, the Nomination Committee
focused on the leadership and oversight
Synthomer needs to deliver its refreshed
strategy – now, and in the future. This
has included overseeing succession and
development of the Executive Team,
which Michael Willome built in 2022.
An Executive Team to deliver
ourstrategy
We welcomed Lily Liu as our new CFO
inJuly,asannouncedin2021–andwe
described the process of her recruitment
inlastyear’sannualreport.
Following that extensive recruitment
process – for our CEO and CFO – this
year saw Michael put his new Executive
Team in place, with the Committee and
Board’ssupport.Overtheyear,
Synthomer appointed:
Ana Perroni Laloe as President,
Industrial Specialties (now President,
Coatings & Construction Solutions)
Toby Heppenstall as President,
Adhesive Solutions
AliceHeezenasChiefHuman
ResourcesOfficer(CHRO)
JanChalmovskyasPresident,
StrategyandM&A.
We also welcomed our new
ChiefCounselandCompanySecretary,
AnantPrakash,inDecember.Hesucceeds
Richard Atkinson, who retired at the end
of February 2023 following a handover
periodwithAnant.
Our new divisional structure, announced
in October 2022, saw the appointment
ofnewdivisionalpresidents.The
Committee was closely involved with
these appointments, and in planning
appropriateinductions.
Details of the full Executive Team can
befoundonpages 96 and 97.
The Committee held regular meetings
with Michael as he considered the
composition, skills and experience
needed to support and implement the
refreshedstrategy.CommitteeandBoard
members listened to and challenged
Michael on the overall composition
ofhisteam,andmetwithcandidates
toprovideperspectiveandguidance.
Alongside the Executive Team, the
Company created a Global Leadership
Team(GLT)ofaround75leaders,which
heldaninauguralmeetinginOctober.
Webelievethisnewteamwillhelp
ensurewiderownership,accountability
and alignment for the Company’s
development plans, and align with the
Committee’s focus on diversity, inclusion
and succession planning – which
Idiscussinmoredetailonpage118.
AtMichael’sinvitation,IspoketotheGLT
and had the opportunity to meet many
oftheattendeestoreinforcetheBoard’s
support for the refreshed strategy and to
Governance report
116 Synthomer plc Annual Report 2022
Governance report
set out our goals, priorities and
challenges.Ireflectedontheenergy,
drive and focus in this team, coming
togetherforthefirsttimeafterthe
pandemicandfollowingtwosignificant
acquisitions.
Board composition and changes
At Board level, Brendan Connolly came
totheendofhistenureinJanuary2023,
announcing his retirement as Non-Executive
Director, Senior Independent Director and
Remuneration Committee Chair from
May2023.InNovember,CynthiaDubin
resigned as Non-Executive Director and
ChairoftheAuditCommittee.
IanTyler,whojoinedtheBoardasa
Non-ExecutiveDirectorinJune2022
with deep non-executive experience
andfollowingadistinguishedexecutive
career, has succeeded Cynthia as Chair
oftheAuditCommittee.Ianwillalso
become Senior Independent Director
when Brendan retires, and I set out the
process we followed for this important
appointmentbelow.HollyVanDeursen,
who has been a Non-Executive Director
and member of the Remuneration
CommitteesinceSeptember2018,
willsucceedBrendanasChairofthe
RemunerationCommittee.Hollyhas
experience as a chair of large
organisations and of remuneration and
compensation committees, so is well
placedtosucceedBrendan.
I would like to thank Brendan and Cynthia
fortheirvaluableservice.Wedescribe
theprocessofreplacingthembelow.
Welcoming and inducting new
Board and Executive Team members
Our induction programme is an essential
partofanewDirector’sfirstmonthsat
Synthomer, ensuring they receive the
information and support they need to take
ontheirnewrolequicklyandconfidently.
The Committee oversaw an induction
forLilythatincluded:
A four-week handover from her
predecessor as CFO, covering
keyactivities
Meetings with the Executive
Committeeforin-depthbriefings
ontheirbusinessesandfunctions
Meetings with external advisers and
our top institutional shareholders to
heartheirviewsonSynthomer.
Ian Tyler’s induction included:
ExtensivebriefingsonSynthomer’s
markets and products
Meetings with each member
ofseniormanagementandthe
external auditors
Aprogrammeofsitevisits.
The process for appointing Ian Tyler in 2022
Setting role
requirements
To prepare for Brendan Connolly’s retirement from the Board at the 2023 Annual General Meeting, following the end of
his nine-year tenure, the Nomination Committee, the Board and our Company Secretary worked with MWM Consulting
to develop a clear role and person specification for our new Non-Executive Director. Committee members debated
this specification – and one of the things we agreed was to focus on candidates with previous experience as
committee chairs of UK plcs.
Identifying candidates MWM Consulting developed several long and short lists of potential Non-Executive Director candidates. In doing
so, they considered the broadest definition of diversity.
Process MWM Consulting considered a pool of 500 profiles, held exploratory discussions with 52 potential candidates,
interviewed and assessed 10 candidates, and then the Chair met with four candidates. The most suitable
candidates were then presented to the other members of the Board. Having reviewed the process and evaluated
the candidates, the Nomination Committee unanimously agreed to recommend Ian Tyler.
Recruitment Ian Tyler joined the Board in June 2022 and is now Chair of the Audit Committee and a member of the
Remuneration and the Nomination Committees.
The process for appointing our new Senior Independent Director
Setting role
requirements
Alongside our Non-Executive Director recruitment, the Committee started planning early in 2022 for succession to the
Senior Independent Director role, given Brendan steps down in May 2023. Egon Zehnder was appointed to assist the
Committee to identify potential internal candidates and benchmark them to the external market. Egon Zehnder helped
us to develop a template of experience, attributes and skills required in our next Senior Independent Director.
Identifying candidates We considered a number of existing Board members and discussed the merits of these candidates alongside
potential external recruits with Egon Zehnder. We were conscious of both the short- and long-term challenges and
aspirations of the business.
Process The Chair met with each member of the Committee, and with the CEO and CFO, to discuss the experience,
attributes and skills required, the potential internal candidates and the option of recruiting externally. We concluded
that we had a number of Board candidates with prior chair and senior independent director experience, who were well
qualified for the role.
Appointment The Committee met, without internal candidates present, and, after debate and consideration, unanimously agreed
to recommend the appointment of Ian Tyler. His appointment takes effect from the 2023 AGM.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
117Synthomer plc Annual Report 2022
Nomination Committee report continued
Board diversity and tenure at a glance
Gender
Female Male
1/3
Representation of women
on the Synthomer Board
We have overseen change
in our Executive Team this
year, as our CEO put his
leadershipteaminplace.
Diversity,equityand
inclusion have been
important in bringing
together a team to
deliverourstrategy
anddrivevalue.
Ethnicity
White 7
Asian 2
Nationality
British 4
Swiss 1
Malaysian 1
American 1
German/Italian
*
1
British/Australian
**
1
Board tenure
0–5years 5
5–10years 2
>10years 2
*RobertoGualdoniholdsdualGermanandItaliancitizenship **LilyLiuholdsdualBritishandAustraliancitizenship
Supporting Synthomer’s strategic
focus on diversity and inclusion
Diversityandinclusionisoneofthefive
pillars of Synthomer’s refreshed strategy,
aclearacknowledgementthatreflecting
the society in which we operate is both
therightthingtodoandgoodforbusiness.
The Committee was pleased to see more
improvements in diversity and inclusion
thisyear.Thepercentageofwomenin
senior management roles increased to
25.4%–upfrom20%in2021.Thisis
clear progress towards our new target,
set this year as part of our Vision 2030
programme,ofachieving40%senior
managementgenderdiversityby2030.
On our Executive Committee, recent
appointmentshaveseenasignificant
shiftingender,ethnicityandprofile.On
ourBoard,33%ofpositionsareheldby
women, and two members are from
ethnically diverse backgrounds, in line
with the Hampton-Alexander and Parker
reviewsrespectively.ThenewerFTSE
Women Leaders Review sets a target of
40%femaleboardrepresentationby
2025.TheFinancialConductAuthority’s
new Listing Rule, which will apply to
listedcompaniesforfinancialaccounting
periodsstartingfrom1April2022,also
setsa40%target;thiswillbeafocusof
our Non-Executive Director recruitment
in2023.Wealreadycomplywiththe
Listing Rule’s target that at least one
senior board position should be held by
awoman(wehaveafemaleChairand
female CFO), and at least one board
member should be from an ethnic
minority background (our Board has
averyrichinternationaldiversity,with
morethan50%non-Britishmembers).
The Board continues to support our diversity
and inclusion programme through our
Diversity and Inclusion Steering Committee,
and supports our employee resource
groups.Diversityisalwaysconsideredin
Nomination Committee discussions around
succession planning and, as a Committee,
we have consistently challenged the
Executive Committee – where Michael
has shown dynamic leadership on the
issue.Oursuccessionplanningprocesses
havedevelopedsignificantlyinrecent
years and our new CHRO has plans for
moredevelopmentin2023.Seepage 66
in the Strategic report for more information
on Synthomer’s diversity and inclusion
performance.
Developing our succession plans
and reviewing our skillsets
Now that the Executive Team is complete
and delivering on Synthomer’s strategy,
the Committee’s role is refocusing on
making sure we have a strong pipeline of
talent for the future – and contingencies
inplacetodealwithunexpectedchange.
That means thinking in the long term
about the skills, experience and mindset
needed for the future, as well as having
emergency succession plans in place for
keyroles.Forexample,theCommittee
discussed and agreed emergency
succession plans for our CEO and CFO
positionsthisyear.Wehaveaclearplan
in place to regularly review succession
planning and development processes
atandbelowtheExecutiveTeamlevel.
In November 2022, we updated our Board
skills matrix against UK corporate
governance best practice, with support
fromEgonZehnder.Wealsoupdatedour
own, more detailed assessment across
arangeofoperationalandstrategic
skills.Thisprovidedasoundbasisfora
discussion about the critical skills the Board
needs to remain competitive in the future,
and to consider skills we might look for
inoursearchforanewNon-Executive
Directorin2023.Thisisalsowhenwewill
looktoachieveacomplementof10Board
membersandmaintainamajorityof
independent Board members, after Brendan
stepsdowninMay2023.Wearefocusing
our search on board candidates with a
breadth of experience, ideally in innovation-
to-commercialisationprocesses.
Governance report
118 Synthomer plc Annual Report 2022
Major actions from our 2021 Board evaluation
Topic Suggestion for improvement Action
Lessons learnt Ensure Board maintains
culture of learning lessons
The Company Secretary led a follow-up review as the European Commission
styrene investigation concluded. This updated work, undertaken in 2018 and 2019,
and we reflected on the culture and values of the business with the new Executive
Team.
Strategy Clarify Board and
ExecutiveTeam roles in
developing strategy
We developed a plan for the strategy review, with input from the Board at each
stage of the process and several key Board/Executive workshops to debate
options and recommendations.
Employee engagement Reinstate site visits and
extend programme of
employee engagement
This was a year of increased activity, as set out in People on pages 67 and 68.
Performance reviews
As Chair, I conducted annual performance
reviews with each Board member this year,
reviewing their contribution and agreeing
specificareasforeachtocontributeinthe
comingyear.Ialsoundertook360-degree
feedback and discussed this with Michael,
whichwashelpfulforhiminreflectingonhis
firstyearinrole.Weagreedclearobjectives
forthecomingyear.Brendan,inhisroleas
Senior Independent Director, also completed
areviewofmyperformanceasChair.
Board evaluation
We continued our process of Board
evaluations in 2022, as well as acting
onourevaluationfrom2021(seetable
below).Wewillcommissionanexternally
led Board evaluation in 2023, in line with
best practice to have an externally led
processeverythreeyears.
Our 2022 Board evaluation was undertaken
late in 2022 when Board and Executive
Team members completed a survey
(coordinatedforusbyEgonZehnder).We
usedlargelythesamequestionsasin2021
to allow us to check progress and highlight
areasformorework.
In general, Board members concluded that
the Board processes had been robust
through the various challenges of 2022, and
had provided rigorous governance of the
strategicreviewandfinancingdecisions.
The Board believes that the transparency
and open discussions between the
ExecutiveTeamandtheBoardisastrength.
AfteracquiringEastman’sAdhesive
Resins business, we asked Ian Tyler to
undertakeareviewofboardprocesses.
The Board then held a working session
toreflectonthegeneralfindings.
Other actions arising from the 2022
Board evaluation included:
Continuing to improve competitor
and industry intelligence
Focusing on our continuous
lessons-learnt culture
Undertakingahorizon-scanning
riskworkshopin2023.
Our Committee priorities for 2023
In 2023, the Committee will focus on:
Ensuring that the business has
embedded succession planning and
developed processes to extend
diversity,equityandinclusion
Recruiting a new Board member,
asnotedearlier
Continuing oversight of the Executive
Team development, individually and
as a team
Addressing the actions from the
2022Boardevaluation,aslistedabove.
A year of progress
This has been a challenging year for the
businessasawhole,butIamconfident
that the work we’ve done as a Committee
will support the delivery of Synthomer’s
strategy, which in turn will drive our
successinthefuture.Thereismore
todo,butthisisnowamorediverse,
inclusive business, which is continually
evolvingtheskillsetsweneed.Our
culture, too, is increasingly open and
transparent – allowing us to have the
rigorous conversations that will underpin
our growth as an end-market-focused
specialitychemicalscompany.
Board and Executive departures
As we welcome new members to the
Board and Executive Team, we thank
those leaving for their contributions to
thebusinessandwishthemwell.Iwant
tofinishwithtwonotabledepartures.
Brendan Connolly comes to the end of
his tenure on the Board and steps down
as Remuneration Committee Chair and
SenorIndependentDirectorinMay.
Brendan’s experience, challenge and
expertise have been invaluable to
theBoard,anddeliveredinacalm,
pragmaticandsupportiveway.
Iappreciatedhissupportandcounselas
ItookontheChairrole.Itistohiscredit
that we have had a smooth handover
toHollyinthepastfewmonths.
As noted earlier, Richard Atkinson
retired from his role as Chief
CounselandCompanySecretary
on1December2022andleftthe
Company at the end of February 2023,
after a comprehensive handover with
hissuccessorAnantPrakash.Richard
hasbeenwiththebusinessfor25
years and has advised and supported
a number of Chairs, CEOs, Board
membersandExecutiveteams.He
has made a huge contribution to the
business and its development, and is
the epitome of the Synthomer culture:
dedicated, caring and hard-working,
with a focus on the Company’s purpose
and supporting his colleagues and our
stakeholders.Hewillbemissed.
Caroline Johnstone
Chair of the Nomination Committee
28 March 2023
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
119Synthomer plc Annual Report 2022
Compliance with the Code
Fortheyearended31December2022,weappliedtheprinciplesandcompliedwiththeprovisionsofthe2018UKCorporate
GovernanceCode(Code).TheCodeisavailableinfullontheFRC’swebsiteatwww.frc.org.uk.
1 Board leadership and Company purpose
A Board’s role
The Board is responsible for providing overall leadership for the Group. It sets the Company’s purpose,
values and standards, approves the overall strategy 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 has established the corporate governance framework under which the Company operates –
this guides the Board to ensure it focuses on strategy and monitoring the performance of the Group, as
well as risk and control matters.
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. This year we added the discussion of ESG issues as a matter reserved to the Board.
For more details, see The Board’s year from page 101.
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.
In 2022, as part of our Vision 2030 work, we committed to science-based targets, increasing our greenhouse
gas reduction targets in Scopes 1, 2 and 3 and reporting on absolute emissions rather than intensity. Similarly
stretching is our new target of 40% gender diversity across our entire senior leadership team by 2030.
We have now embedded our five core values into how we work, a process the Board has monitored and
assessed. Synthomer’s values and purpose are central to the Company’s refreshed strategy, developed
over 2022 with significant Board engagement, and launched in October 2022. Diversity, equity, inclusion
and holistic people development form one of the strategy’s five pillars. Sustainability is a critical enabler
of the strategy.
C Resources and controls
The Board considers and monitors strategic projects and priorities at each meeting and, as part of that process,
members receive and consider reports about developments and progress against plans and resourcing.
Financial and operational performance against budget and KPIs is also 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 also chair of the Executive Committee, which meets once a month. This committee includes
the CFO, the Chief Counsel and Company Secretary, and operational and functional Group presidents.
The CEO and CFO share monthly management reports with all the Directors, which contain business,
financial, health, safety and environmental, and human resources reviews.
D Stakeholder
engagement
The Board fully considers shareholders’ and wider stakeholders’ views when making strategic decisions.
More information can be found on pages 105 to 107.
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 Non-Executive Directors. This year they hosted
face-to-face and virtual Employee Voice sessions across all our regions; topics included mental health
and wellbeing, communication, change management, and investment and maintenance plans. Other
workforce engagement is undertaken directly by the Board, such as through our Engender women’s
network. With COVID-19 restrictions eased, the Board was able to meet the workforce in person. This
included visiting our former OMNOVA USA headquarters for the first time since the pandemic began.
Governance report
120 Synthomer plc Annual Report 2022
Governance report
2 Division of responsibilities
F Role of the Chair
We document the role of the Chair on page 122.
G Composition of the
Board
The composition of the Board is set out in the section Our Board of Directors on pages 92 to 94. Half the
Board, excluding the Chair, comprises independent Non-Executive Directors, 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 on page 122. We have a clear
division of responsibilities between the Board and Executive leadership, with a list of matters reserved
for the Board.
H Role of the Non-
Executive Directors
The main responsibilities of our Non-Executive Directors 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
provide feedback on the Chair’s performance, and provides constructive challenge, strategic guidance
and specialist advice.
When a candidate is appointed, we assess whether they have sufficient time to be a Non-Executive
Director. Any proposed significant external appointment needs 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. This ensures the Board 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, for making
recommendations for new appointments and for 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 to execute its strategy.
For more details, see our Nomination Committee report on page 116.
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.
In November 2022, we updated our Board skills matrix, with support from Egon Zehnder. This built on the
independent skills review we conducted in 2020 and 2021, which identified critical skills the Board needs to
remain competitive in the future, including marketing, digitisation and sustainability.
L Board evaluation
Our last external Board evaluation, facilitated by Egon Zehnder, was undertaken during 2020. We
conducted an internal review in 2022, supported by Egon Zehnder. See page 119 for details of our
decisions and actions.
An externally facilitated Board evaluation will be carried out in 2023.
4 Audit, risk and internal control
M Internal and
externalaudit
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 2022 the Committee considered PwC's reporting accountant activities as part of the announced
disposal of the Laminates, Films and Coated Fabrics businesses. For more detail, see page 115.
N Fair, balanced and
understandable
The Board considers that this 2022 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 through a dedicated working group overseeing its drafting, by ensuring FRC guidance
was observed, by requiring key contributors to confirm the accuracy of their information, and by
circulating drafts to PwC, Committee chairs and the Board for review.
O Risk management
andinternal 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.
In 2022, as part of our integrated risk management framework, the Committee supported the new
Executive Risk Committee’s robust assessment of principal risks and uncertainties.
A description of the principal risks facing the Company is set out on pages 78 to 83.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
121Synthomer plc Annual Report 2022
Compliance with the Code continued
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. A new
policy will be put forward for shareholder approval at our 2023 Annual General Meeting.
The proposed new remuneration policy can be found on pages 128-134.
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 123-149.
Division of responsibilities and Board balance
The composition of the Board, including the names, responsibilities and other details of each of the Board Directors, is set out on pages 92-94.
The Board believes the current balance of Executive and Independent Non-Executive Directors remains appropriate, given the size and nature
of the business, and ensures that the Board’s decision making is not dominated by any single individual or small group.
In addition, the combination of the experience, diverse backgrounds, length of service and calibre of the Non-Executive Directors further
enhances this balance and our ability to deliver the Group’s strategy, while mitigating against the risk of group think.
The responsibilities and roles of Board members are clearly defined and set out here.
Position Responsibilities include
Chair
Leading an effective Board
Shaping and promoting a culture of openness and debate
Setting the Board programme and agenda and ensuring the Board receives timely, accurate and clear
information
Facilitating effective contribution from all Board members and constructive relationships with
Executive Directors
Coordinating annual performance review of and feedback to Board members
Holding meetings with Non-Executive Directors without Executive Directors present
Ensuring effective communication with shareholders and other stakeholders
Chief Executive Officer
Developing and implementing Group strategy to create long-term value, reflecting the needs of other
stakeholders
Day-to-day operational leadership, performance and management of the Group, in line with the agreed
strategy
Chairing the Executive Committee
Overseeing corporate relationships with investors and other stakeholders
Setting the tone on Group culture and values
Senior Independent Director
Being a sounding board to the Chair and, if necessary, to other Directors
Being available to investors and other stakeholders, when required, to listen to views
Leading an at least annual process to evaluate and provide feedback on the Chair’s performance and
leading the process for the Chair’s succession
Non-Executive Directors
Providing constructive challenge, independent perspective, strategic guidance and other specialist advice
Scrutinising and holding to account performance of management and individual Executive Directors
against agreed performance objectives
Monitoring the implementation of the Group’s strategy, providing oversight of its risk and control
environment, and ensuring the integrity of its financial reporting
Ensuring recruitment and succession planning is appropriate for delivery of the strategy
Employee engagement and ensuring the needs of stakeholders generally are appropriately considered
Chief Counsel and
CompanySecretary
Advising and updating the Board on all governance and compliance matters
Supporting and advising on induction, training and evaluation of the Board and its Committees
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
Maintaining records of all matters discussed and approved at Board and Committee meetings
Governance report
122 Synthomer plc Annual Report 2022
Directors’ remuneration report:
introduction from the Chair
It has been a year of transition for
Synthomer, with an updated strategy,
organisational change and new measures
to navigate a difficult financial and
macroeconomic landscape. For the
Remuneration Committee, our most
important task has been updating our
remuneration policy to adapt to three
main focus areas: repairing the balance
sheet by reducing debt, implementing the
new strategy and growing the shareprice.
Updates to our remuneration policy
Following a thorough review of our current
policy,theCommitteeremainssatisfied
that our overall framework – an annual
bonus and performance share plan (PSP)
–remainstherightapproachforSynthomer.
Nevertheless, with the arrival of the new
Executive Directors against a backdrop
ofchallengingmarketconditions,rising
inflationandthefocusonrebuildingour
balance sheet, the Committee considered
it important to motivate and reward share
pricegrowth.
So, we have agreed to introduce an
additionalannualawardof50%ofbase
salaryunderourPSP.ThisadditionalPSP
award will be based wholly on more
challenging relative total shareholder
return(TSR)targets.Theawardwillonly
starttovestforachievingupperquartile
performance, with maximum vesting only
achievedatupperdecile.Thisistomake
sure the Executive Directors are aligned
with our shareholders’ expectations and
experience, and that they are focused on
delivering the new strategy to build the
shareprice.Thisadditionalawardwill
alsobesubjecttotheCommittee’s
normal discretionary assessment, malus
and clawback, and a two-year holding
period – which ensures that all long-term
paycoversaperiodoffiveyears.
As a result of this additional award, the
aggregate PSP opportunity of the two
awardsisnow250%ofbasesalaryfor
ourCEOand200%forourCFO.The
Committee considers that the overall
reward opportunity for the Executive
Directors is fair given the complexity and
geographical reach of our organisation –
whichmeansthesizeandscopeofour
Executive Director roles are greater than for
othercompaniesofasimilarfinancialsize.
Weverifiedthiswithtwomarketstudies,
whichconfirmthatthisiswellwithin
expectationsforthechemicalindustry.
To accommodate the proposed increased
maximum under the PSP, we will also be
putting an amended version of the Plan rules
to shareholders for approval at the 2023
AnnualGeneralMeeting.Theonlychange
to these rules will be to increase headroom
fortheExecutiveDirectors’awards.
Wehaveprovidedmoreflexibilityunder
the policy in relation to performance
measures under the PSP, so that at least
70%oftheprimaryawardunderthePSP
isbasedonfinancialmeasuresandthe
remaining30%onsustainabilityand/or
strategicmeasures(currentlyatleast80%
isbasedonfinancialmeasuresand20%
onESGand/orstrategicmeasures).This
change is to align with the current bonus
wording and potentially allows for other
ESGmeasuresifrequiredinthefuture.
However, at this time, we do not intend to
changefromourcurrentapproachof80%
of the primary PSP being based on
financialperformanceand20%on
strategic/ESG performance measures,
with the additional award being based fully
onTSRperformance,asoutlinedabove.
As part of the policy review, we have also
formalised the deferral of one-third of the
annual bonus into a restricted share plan,
(which,forExecutiveDirectorsjoining
after the date that the policy comes into
effect,wouldbeforfeitedforbadleavers).
During our policy consultation process we
spoke with, or responded to, a number of our
largest shareholders and several proxy
agencies, from which we received valuable
andclearfeedbackontheproposals.Asa
result of feedback received, we removed
ourinitialproposaltoincludeflexibility
within the policy to increase the bonus by
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123Synthomer plc Annual Report 2022
Directors’ remuneration report: introduction from the Chair continued
25%ofsalary,andalsolinkedtheadditional
50%ofsalaryunderthePSPtovery
challengingrelativeTSRtargets.
Some common themes emerged from the
feedback: restraining salary increases for our
ExecutiveDirectorsbelowinflationandno
higher than workforce levels, explaining what
we have done to help our employees navigate
these tough times and explaining what we
aredoingtomanageagainstwindfallgains.
Respondents also wanted assurance that
we would signal any non-compliance with
best practice and explain our rationale
forourdecisionswhereappropriate.
We encountered a divergence of views on
sustainability goals, with advice ranging
from not including any goals within
incentives at all to ensuring that those we
dosetarequantitativeandchallenging.
Following this mixed feedback, the
Committee felt that continuing with
theCompany’scurrentapproachto
sustainability goals remained appropriate
–thatis,includingaquantifiableCO2
reduction measure in the primary PSP
award.Wewerealsochallengedonour
decision not to increase the shareholding
requirementsbeyond220%and200%
respectivelyfortheCEOandCFO.
WhilethisissomethingtheCommittee
discussed, we determined it a premature
change given that the Executive Directors
hadjustjoinedSynthomer.Itis,however,
something that the Committee will
reviewduringthenextpolicyperiod.
The Committee has responded to the
challenges of the changing organisation
by ensuring we were well advised by our
consultants and took account of input
from shareholders, proxy agencies and
institutionalshareholderbodies.Thishelped
ensure we were well informed and could take
decisions in a fast, decisive manner with the
appropriate challenge, so that different views
couldbesharedbeforereachingconsensus.
2022 incentive outcomes
TheCEOandCFOachieved10%of
maximumbonusoutcomesin2022.The
profitbeforetax(PBT)andsafety,health
and environment (SHE) metrics were not
met despite the SHE outcome being very
close(+0.04)totheoriginaltargets.The
10%wasawardedforpersonaland
strategic targets relating to the strategy
review, integration of Eastman’s Adhesive
Resins business and capital investment for
theCEO;and,fortheCFO,liquidity,gearing
andcashmanagement.TheCommitteefelt
these were fully achieved, as described on
pages140-141.Aspartofthetermsofthe
CFO’s appointment, it was agreed that any
2022 bonus payment would not be time
pro-rated.
TheCommitteeconsideredthefinal
outcome in the context of performance
in the year and if discretion should be
applied.TheCommitteelookedat
performance in the round, while also
noting the need to ensure our newly
appointed Directors are appropriately
incentivised to deliver the Group’s
ambitiousobjectives,includingthe
refreshedstrategicplan.
Given the strong start in their role and the
challenging environment the Directors
are operating in, along with the excellent
progress made in important strategic
objectivesincludingcashmanagement
and implementing synergies, it was felt
theformulaicoutcomewasappropriate.
Therefore,nodiscretionwasapplied.
The former CFO, SG Bennett, was
awardeda10%bonusforachievinghis
objectivesduringtheyear,whichwas
pro-rated to 4 November 2022, the date
heceasedemploymentwiththe
Company.Thiswasinlinewiththe
termsagreedwithhimregarding
his2022remuneration.Wealsotreated
him as a “good leaver” for the purpose
ofhisremainingshareawards.These
awards will vest at the normal time and
willbepro-ratedto4November2022.
The wider workforce received similar
outcomes under the Group-wide bonus
plans, with some local SHE bonus targets
beingmet.TheCommitteedetermined
thatnodiscretionwouldbeapplied.
For the PSP, our performance measures,
relative TSR and earnings per share
(EPS) growth, we gave no payout, given
the fall in Synthomer’s share price and
financialperformance.Thecost
efficienciesasaresultofcostsynergies
withtheOMNOVAacquisitionweremet
infull(30%oftheaward)asthefinal
outcomes exceeded the maximum target
set.Themaximumtargetforthe10%of
the award based on reducing our CO2
emissionsby15%wasexceeded,so40%
(30%and10%)ofthemaximumvested.
Given both our current Executive
Directors were appointed more recently,
neither was eligible for vesting under the
2020award.TheCommitteedetermined
that SG Bennett would be treated as
agoodleaverforthepurposeofhis
unvested awards under the PSP (see
pages142and145formoredetail).The
Committee was pleased at the progress
made against the targets for synergies
deliveredfromtheOMNOVAacquisition
andtheoveralloutcomeof$42.4million
represented a very strong result,
especiallyinthecontextofadifficult
externaleconomicperiod.TheCompany
also performed very well against
challenging carbon targets, an important
step towards our Vision 2030 and net
zeroby2050goals.Becauseofthis
performance,theCommitteefeltthefinal
outcome to be fair and no discretion was
applied.
Additionally, because the share price
iscurrentlylowerthanthatofthe2020
grant, the Committee considered that
therewasnowindfallgain.
For more information on our work to
reduce our CO2 emissions, see our
Sustainability section on pages 39-72.
In terms of the European Commission’s
investigation into styrene monomer
purchasing practices, the Remuneration
Committeeagreednottoreflectthe
impactofthefineontheremuneration
fortheformerDirectors.Giventhefine
relates to historic practices, it was also
decided that this will not affect our
currentCEOandCFO’sremuneration
packages.Formoreinformationon
theinvestigation,seeTheBoard’syear
onpage103.
Performance measures for variable
executive pay in 2023
Annual bonus
For 2023, we are adding a new cash-
based measure, which, together with
PBT,willrepresent80%ofbonus
weightings.Thisreflectsthefactthat
loweringdebtisatopfinancialpriority.
Governance report
124 Synthomer plc Annual Report 2022
Governance report
With this new focus, our measures will
besplitasfollows:
Underlyingprofitbeforetax–60%
Groupcash–20%
SHEtargets–10%
Strategicpersonaltargets–10%.
PSP
For the primary PSP award, we have
introduced a measure linked to reduction
in leverage aligned to this critical
businesspriorityforthenextthreeyears.
So, performance measures for the
primary PSP award are:
20%–relativeTSR(medianto
upperquartiletargetrange)
30%–EPSgrowth
30%–leverage
20%–strategic,whichwillbesplit
50:50betweenaVitalityIndextarget
andsustainabilitymeasures(a30%
CO2reductiontarget).
As noted above, the additional PSP
awardof50%ofbasesalarywillbe
based solely on relative TSR (upper
quartiletoupperdeciletargetrange).
This year we returned to our standard EPS
performance metric as planned, having
rebased it for one year for awards
grantedin2022.Thistemporarystep
helped remove the impact of record
margins in our nitrile latex business
causedbytheCOVID-19pandemic.
Given the recent fall in share price, the
Committee considered the share price
ahead of the 2023 PSP grants and the
potentialforwindfallgains.TheCEOand
CFOwerebothrecruitedduringlate2021
and 2022, and the Committee believes
itiscriticaltoensurethattheyare
appropriately incentivised to deliver
theGroup’sambitiousobjectives–
including the refreshed strategic plan,
strengthening the balance sheet and
growing the share price – especially
inthecontextofchallengingmarket
conditions.That’swhytheCommittee
has determined that it is not appropriate
toreducetheirawardatthisstage.
However, the Committee will carefully
review the value of award at vesting and
would look to scale back at that point if
itconsideredthatmanagementhad
benefitedfromawindfallgain.
Executive salary rises in line with
our workforce
When setting salaries this year, the
Committeeconsideredthefinancial
pressures facing both the business and our
employees.Asaresult,itagreedonasalary
increaseof3.8%fortheExecutiveDirectors–
in line with the average merit increase
awarded in the UK at management levels,
and below the average merit increase
awarded in the UK below management
levels.Otherinitiativestosupport
employees in 2022 included one-off
payments, food vouchers, and discounted
andsubsidisedshopping.Meanwhile,our
Non- Executive Directors, including our
Chair,willnotreceiveasalaryrisein2023.
Sinceacquiringtheadhesiveresins
business, we have ensured that bonus
and salary structures are aligned with
ourremunerationframeworksand
processes.Inlinewithcommonpractice
for other levels, we also conducted
abenchmarkingreviewforsenior
managementsalariesduringtheyear.
A rise in our gender pay gap
Our2021genderpaygapreportshowed
both our mean and median gender pay
gaps increased, due, in part, to a rise in
the number of women employed at the
twolowest-paidlevelsofthebusiness.
While the number of women at the two
highest-paid levels grew, it was not
enoughtoalterthegap.Representation
of women at mid-senior levels of the
business remained the same as the
previousyear.
Our 2022 report shows our mean gender
pay gap again increased, due, in part, to
another rise in the number of women
employed at the lowest-paid level of the
business, while the median gender pay
gap decreased because upper and
middlequartilepayimprovedfromthe
previousyear.Representationofwomen
at senior levels of the business increased
from the previous year and will continue
toimprovethesemetrics.
Read our full gender pay gap reports at
www.synthomer.com/investor-relations/
corporate-governance/group-policies/
Staying up to date with
stakeholderissues
Once again, our remuneration adviser
provided training for Committee members,
including a detailed update on current
and future areas of reporting interest for
stakeholders.Theseareasincludedthe
current cost-of-living crisis, sustainability
metrics in incentive plans and ethnicity
reporting.Wealsoheldasessionto
discuss new guidance from investors, the
InvestmentAssociationandproxyagencies.
Stepping down as Committee Chair
and Senior Independent Director
The remuneration landscape has changed
enormously during my nine years with
Synthomer.So,too,hasthiscompany.
Throughout, my colleagues and I have
always strived to follow the best available
remuneration practices and I am
particularly proud of the fact that we
havealwayscompliedwithourtimelines.
It has been a pleasure to work with my
fellow Committee members in the past
nine years, and I thank them for their
dedication.HollyVanDeursenwill
succeed me at the next Annual General
Meeting.Hollyhasbeenamemberof
theCommitteeforthepastfouryears,
soiswellacquaintedwiththedirection,
processes and discussions we have been
havingovertheyears.Sheservesonseveral
boards and has plenty of experience as
aremunerationcommitteechair
elsewhere.Iwishherwell.
I also thank all our stakeholders and
shareholders for their time, input and
guidance, and ask for their continuing
support for our new remuneration policy,
including the revised PSP award, at our
upcomingAnnualGeneralMeeting.
Brendan Connolly
Chair of the Remuneration Committee
28 March 2023
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125Synthomer plc Annual Report 2022
Remuneration at a glance
This section highlights the
performance and remuneration
outcomes for the year ended
31 December 2022. More detail is
provided in the Annual Report on
Remuneration from page 138.
Policy for Executive Directors
The table on this page summarises the
policy approved by our shareholders at the
AnnualGeneralMeetingon29April2020.
This is valid until a new policy is approved
atthe2023AnnualGeneralMeeting.We
outline our proposed new remuneration
policy for Executive Directors – including
the key elements of reward and the
performance measures to be used –
onpages128-137.
In setting Executive Director
remuneration, the Committee takes
account of pay and conditions
throughout the Group to ensure that
arrangements are appropriate in the
contextofinternalpayratios.
Base salary
Generally reviewed each year. Salary increases of 3.8% were awarded with effect from
1 January 2023, in line with the average merit increase awarded in the UK at management
levels, and below the average merit increase awarded in the UK below management levels.
Executive Director salaries are:
CEO £674,700 CFO £456,720
Benefits
Includes private health insurance, life insurance, car allowance and costs related to
business moves (relocation) or international assignments. The CEO will also receive a
housing allowance for a four-year period.
Pension
Cash allowance of 7% of base salary for the CEO and CFO, which is aligned with that of the
UK workforce.
Annual bonus
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%
of maximum
for threshold
50%
of maximum for
targetperformance
100%
of maximum for
out-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.
Vesting based on performance of three years, with at least 80% based on financial
measures and up to 20% on performance measures linked to delivering 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.
Maximum of 25% for each element will vest for threshold performance.
Shareholding requirements
CEO 220% and CFO 200% of base salary.
Requirements to be built up over five years.
Remuneration type
Base salary
Benefits
Pension
Annual bonus
Performance share plan (PSP)
Shareholdingrequirements
Governance report
126 Synthomer plc Annual Report 2022
2022 performance
Annual bonus
Actual performance against the three elements of the annual bonus are set out below.
Weighting Threshold Target Maximum Actual
Underlying PBT 80%
Threshold £181.4m
Target £201.6m
Maximum £221.8m
£121.4m
SHE
(recordableinjuries)
5% 0.30 or less 0.34
SHE
(process safety)
5% 0.14 or less 0.18
Individual strategic
and operational goals
10% 10%
Total outcome 100% 10%
Performance share plan (PSP) – 2020 award
Actual performance against the four elements of the PSP are set out below.
Weighting Threshold Target Actual
Relative TSR 30%
Median quartile
Upper quartile
13th percentile
EPS growth 30%
29.0p
33.8p
20.6p
OMNOVA
acquisition
synergies
30%
$25.0m
$29.6m
$42.2m
Carbon reduction 10%
See page 142 10%
Total outcome 100% 40%
Our key principles for Executive
Directors’ remuneration
At Synthomer, our key principles for
Executive Directors’ remuneration are
that it:
Should be clear and simple with
maximum award levels being
clearlydefined
Issufficienttoattractandretain
Executive Directors of the ability and
expertise necessary to achieve the
strategic goals of the Company
Incentivises Executive Directors by
rewarding performance and driving
the right behaviours while ensuring
appropriate safeguards are in place
to mitigate risk
Aligns Executive Director reward with
theexperienceofshareholders.
In setting Executive Directors’
remuneration, the Committee takes
account of pay and conditions
throughout the Group to ensure that the
arrangements are appropriate in the
contextofinternalpayratios.The
Committee also considers corporate
governancerequirementsandbest
practice in terms of remuneration
structures and the process of setting
executiveremuneration.
The Committee reviews performance
targets regularly to ensure that they do
not encourage or motivate inappropriate
risk-taking.Whenassessing
performance, the Committee will also,
when necessary, consider any
environmental, social and governance
(ESG) events and the Audit Committee’s
reviews of the effectiveness of internal
controlsandriskmanagement.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
127Synthomer plc Annual Report 2022
Proposed new remuneration policy
Summary of proposed new policy
In the next table we outline our proposed new remuneration policy for Executive
Directors – including the key elements of reward and the performance measures
tobeused–whichwillbeputtoshareholdersatthe2023AGM.
Element
Summary of proposed
arrangementsunder the 2023 policy
Changes from
previous policy
Rationale
for change
Salary The Committee generally reviews
salary levels once a year. It considers
factors such as performance,
responsibilities, pay elsewhere in the
Group and the Company’s complexity.
No change.
Salary increases will normally be in
line with the increases awarded to
other employees in the UK.
n/a
Pension and
benefits
Pension for the CEO and CFO is 7% of
salary, aligned with that of the UK
workforce.
Benefits include private health
insurance, life insurance and car
allowance, but we may introduce other
benefits if we think it is appropriate to
do so.
No change.
Pensions for the CEO and CFO
arealigned with the wider workforce
and the benefits provision will stay
the same.
n/a
Annual bonus Overall maximum opportunity of 150%.
One-third of the bonus earned is
deferred for two years.
At least 70% of awards are subject to
financial measures and 30% of
awards to strategic and operational
measures, including personal
objectives.
No change.
Deferral and approach to
performance measures will stay the
same.
We have, however, formalised the
deferral of one-third of the annual
bonus into a restricted share plan.
n/a
Performance
share plan
(PSP)
Maximum opportunity of 250% and
200% of salary for the CEO and CFO
respectively.
Additional 50% of salary is based
100% on relative TSR against the
FTSE250 (ex. investment trusts and
financial services companies).
Three-year performance period and
two-year holding period.
At least 70% of the PSP is based on
financial measures and 30% on ESG
and/or strategic measures.
Maximum opportunity increased by
50% of salary for the CEO and CFO.
No change to performance period or
holding period.
For the primary award, change from
at least 80% being based on financial
measures and 20% on delivering the
business strategy, to a 70:30 split of
financial and ESG and/or strategic
measures. The additional award of
50% of salary will have threshold
vesting beginning at upper quartile
performance and maximum vesting
at upper decile.
Ensures focus on strategy delivery
and building the share price.
Shareholding
guidelines
The CEO and the CFO will be expected
to build interests in shares of at least
220% and 200% of salary respectively
within five years of appointment.
No change. n/a
P o s t -
employment
shareholding
guideline
100% of in-employment guideline to
be held for the first year after
employment, and then 50% for the
second year.
No change to post-employment
shareholding guideline.
n/a
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128 Synthomer plc Annual Report 2022
Governance report
Clarity The Committee welcomes open and frequent dialogue with shareholders and other stakeholders on our approach to
remuneration. As part of the review of policy during 2022 and 2023, shareholders and proxy agencies were
consulted to understand their views on proposed changes.
The remuneration policy for our Executive Directors has been designed in line with the remuneration philosophy and
principles that underpin remuneration across the Group (see page 127 for our remuneration principles). The details
of our approach to executive remuneration is transparent for all employees. The Committee Chair consulted with
employees on Executive Director remuneration at the end of 2021.
Simplicity
Our remuneration arrangements throughout the Group are simple in nature and well understood by both participants
and shareholders. Although quantum and participation will vary, the policies and practices applying to Executive
Directors are the same as for the wider workforce in most instances.
The objective of each element of our policy is explained and the amount paid in respect of each element of pay is
clearly set out.
Risk
Our approach aims to promote sound and effective risk management while supporting our long-term success. The
Committee considers that the structures of incentive arrangements do not encourage inappropriate risk-taking.
The partial deferral of a portion of the annual bonus payment, the PSP holding period and our shareholding
requirement (including the post-cessation shareholding requirement) provide a clear link to the ongoing
performance of the business and the experience of our shareholders.
Malus and clawback provisions apply to both the annual bonus plan and PSP.
Predictability
Our policy contains details of threshold, target and maximum opportunity levels under our annual bonus plan and
PSP, with actual outcomes depending on performance achieved against predetermined measures and target ranges.
Proportionality
The annual bonus plan rewards achievement of our annual operating and SHE targets and the PSP rewards
achievement of long-term financial and shareholder value creation targets and ESG goals. The Committee’s ability to
apply discretion to reduce formulaic outcomes under both plans ensures appropriate outcomes in the context of
underlying Company and individual performance.
Alignment to
culture
The design of our annual bonus plan and PSP ensures they drive behaviour consistent with our purpose, values and
culture and do not pay out or can be claimed back in the event of inconsistent behaviour.
Alignment with the UK Corporate Governance Code
When determining our new Directors’ remuneration policy, the Committee reviewed
ouralignmentwiththeprovisionsofthe2018UKCorporateGovernanceCode.The
table below details how the Committee addressed the principles set out in the Code
inrespectoftheDirectors’remunerationpolicy.
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129Synthomer plc Annual Report 2022
Proposed new remuneration policy continued
Setting out our proposed new policy
Here we set out our proposed new
Directors’remunerationpolicy(Policy).
The new Policy, which is intended to
replace the policy approved by
shareholdersatthe2020AGM,issubject
to a binding vote by shareholders at the
AGMon16May2023.Ifapproved,itwill
comeintoeffectfromthatdate.The
Chair of the Remuneration Committee
gives the background to and explains the
key changes from the current policy in
his introduction on pages123to124.
To accommodate the proposed
increased maximum under the PSP, we
will also be putting an amended version
of the Plan rules to shareholders for
approval at the 2023 Annual General
Meeting.Theonlychangetotheserules
will be to increase headroom for the
ExecutiveDirectors’awards.
In determining the new Policy, the
Committee followed a robust process,
which included discussions about the
content of the Policy at Remuneration
Committeemeetingsduringtheyear.
TheCommitteeconsideredtheinput
frommanagementandourindependent
advisers, as well as considering best
practiceandguidancefrommajor
shareholders, proxy agencies and
institutionalinvestorrepresentativebodies.
We have consulted extensively with our
majorshareholdersonourproposed
policyandwehaveadjusteditbasedon
their feedback, as outlined in the Chair’s
introduction.Whilewedidnotconsult
specificallywithemployeesonthisnew
policy for executive remuneration, we
considered general feedback provided
through our designated employee
Non-ExecutiveDirector.
The Policy includes two changes from the
previous policy approved by shareholders
at the 2020 Annual General Meeting:
Under this policy, the annual PSP
awards will be increased by an
additionalawardof50%ofbase
salary.TheCEO’sawardwillbe
increasedfrom200%to250%of
salary.TheCFO’sawardwillbe
increasedfrom150%to200%of
salary.Theadditionalawardwillbe
based wholly on challenging relative
TSR targets, with threshold vesting
of25%beginningatupperquartile
performance, with maximum vesting
at upper decile performance
The wording around performance
measures relating to the PSP will be
amended so that it includes the
flexibilitythatatleast70%ofthe
primary PSP award will be based on
financialmeasuresand30%onESG
and/or strategic measures (currently
atleast80%isbasedonfinancial
measuresand20%onESGand/or
strategicmeasures).Thischangeis
toalignwiththeflexibilitycurrently
provided in relation to the annual
bonus and potentially allow for other
ESGmeasuresifrequiredinthe
future.Atthistime,wedonot
intended to change from our current
approachof80%oftheprimaryPSP
beingbasedonfinancialperformance
and20%onstrategic/ESG
performancemeasures.
Our proposed new policy in detail
Element
Purpose and link
to strategy Operation
Maximum
opportunity
Performance
measures
Base salary Supports the
recruitment and
retention of
ExecutiveDirectors.
Reflects the individual’s
skills, experience,
performance and role
within the Company.
The Committee
generally reviews salary
levels each year.
When reviewing salary
levels, the Committee
considers:
The individual’s skills,
experience and
performance
The size and scope
ofthe individual’s
responsibilities
Pay and conditions
elsewhere in
theGroup
Pay at companies
ofsimilar size
The complexity and
international scope
ofthe Group.
There is no overall maximum for salary
opportunity or increases. Salary
increases willnormally be in line with
the increases awarded to other
employees within the Group.
Larger increases may bemade under
certain circumstances, including, but
not limited to:
An increase in thescope and/or
responsibility of the individual’s role
The development of the individual
within the role
Alignment to market levels
Corporate events suchas
asignificant acquisition orGroup
restructuring that affects the scope
of the role
Other exceptional circumstances.
For 2023, Executive Director
salariesare:
M Willome: £674,700, an increase
of 3.8% on his2022 salary of
£650,000
L Liu: £456,720, an increase of 3.8%
onher 2022 salary of £440,000.
None, although
individual and Company
performance are
considered when looking
at salary increases.
Governance report
130 Synthomer plc Annual Report 2022
Element
Purpose and link
tostrategy Operation
Maximum
opportunity
Performance
measures
Benefits Provided to support
the retention and
recruitment of
Executive
Directors.
Benefits to Executive Directors may include
private health insurance, life insurance and afully
expensed car or car allowance. From time to
time, the Committee has the discretion to review
the benefits provided. The Committee may remove
benefits that Executive Directors receive or
introduce other benefits if it considers it is
appropriate to do so. Any other benefits will
normally be proportionate with the current benefits
provided, and will be set considering the benefits
provided to other employees in the Group.
Where Executive Directors are required to
relocate or complete an international
assignment, the Committee may offer additional
benefits – either on a one-off or ongoing basis
– or vary benefits according to local practice.
Executive Directors may participate in any
all-employee share schemes or other
benefitarrangements on the same basis
asotheremployees.
There is no overall
maximum for
benefits, because
the cost of
insurance benefits
may vary from year
to year depending
on individual
circumstances, and
the level of any
relocation benefits,
allowances and
expenses will
depend on
thespecific
circumstances.
None.
Pension Provide a
competitive level of
retirement benefits
to support the
retention and
recruitment of
Executive
Directors.
Executive Directors are eligible to participate in
the Group personal pension plan.
Executive Directors may receive payments as
acash allowance, which they may use either in
conjunction with that plan and/or to enable
themto make their own arrangements.
A maximum
percentage of base
salary aligned to the
pension contribution
rate available for
the majority of the
workforce (currently
7% of base salary).
None.
Annual
bonus
Incentivises the
delivery of
financial, strategic
and operational
objectives selected
to support our
business strategy
within the year.
The Committee will determine performance targets
each year and assess performance against these
targets following the end of the performance period.
The Committee may, at its discretion, adjust annual
bonus payments, if it considers that the outcome is
not appropriate or does not reflect the underlying
financial or non-financial performance of the
participant or the Group in the relevant period – or,
that such a payout level is not appropriate in the
context of circumstances that were unexpected or
unforeseen when the targets were set. When
deciding this, the Committee may consider other
factors it feels are relevant.
The Committee may reduce or defer the level
ofpayment of an award to reflect exceptional
business circumstances, if there are
circumstances giving rise to material reputational
damage to the Group, if an Executive Director has
committed an act of serious misconduct or in the
event of corporate failure.
A proportion of any bonus earned is deferred for
two years. For current Executive Directors this is:
M Willome: one-third of any bonus
L Liu: one-third of any bonus.
The Committee may claw back awards up to three
years after payment if the Group’s accounts have
been materially misstated, there has been an error
in the calculation of any performance conditions
that results in overpayment, if there are
circumstances giving rise to material reputational
damage to the Group, if an Executive Director has
committed an act of serious misconduct or in the
event of corporate failure.
The maximum
opportunity is up
to150% of salary.
Opportunities for
current Executive
Directors are:
M Willome:
150%of salary
L Liu:
150% of salary.
A minimum of 70% of
awards are subject to
financial measures, such
as Underlying profit
before tax and other
relevant financial metrics.
A maximum of 30% of
awards are subject to
strategic and operational
measures, including
personal objectives.
For 2023 awards,
performance measures
will be 60% Underlying
profit before tax,
20%Group cash flow,
10% SHE objectives, and
10% personal strategic
and operational
objectives.
The award for threshold
performance is normally
20% of maximum.
The award for target
performance for the
financial measures
isnormally
50%ofmaximum.
Normally for strategic,
personal and SHE
targets, the threshold and
maximum are the same.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
131Synthomer plc Annual Report 2022
Proposed new remuneration policy continued
Element
Purpose and link
tostrategy Operation
Maximum
opportunity
Performance
measures
Performance
share plan
Incentivises
Executive Directors
to deliver sustained
performance and
sustainable returns
for shareholders
over the longer term.
The vesting of awards is conditional on the
Group’s performance against long-term
targets over a performance period of at
least three years.
The Committee may, at its discretion,
adjustthe level of vesting of an award,
ifitconsiders that the outcome is not
appropriate or does not reflect the
underlying financial or non-financial
performance of the participant or the Group
over the relevant period – or, that such a
payout level is not appropriate in the context
of circumstances that were unexpected or
unforeseen when the targets were set.
When deciding this, the Committee may
consider other factors it feels are relevant.
The Committee may reduce or defer the
level of vesting of an award where an event
has occurred, such as a material SHE
incident or which otherwise gives rise to
material reputational damage to the Group
or if an Executive Director has committed
an act of serious misconduct or in the event
of corporate failure.
The Committee may claw back awards up to
three years after vesting if the Group’s
accounts have been materially misstated,
there has been an error in the calculation of
any performance conditions that results in
overpayment, if there are circumstances
giving rise to material reputational damage
to the Group, or if an Executive Director has
committed an act of serious misconduct or
in the event of corporate failure.
Vested awards are subject to a holding
period post-vesting of an additional
twoyears.
Under the plan
rulesthat will be put
to shareholders, the
value of shares
awarded to an
individual in respect
of any one year may
not normally exceed
250% of salary.
For 2023, annual
awards to current
Executive Directors
are:
M Willome:
250%of salary,
comprising a
primary award of
200% of salary
and a secondary
award of 50% of
salary
L Liu:
200% of salary,
comprising a
primary award
of150% of salary
and a secondary
award of 50%
ofsalary.
For the primary PSP
award, at least 70%
based on financial
measures. This may
include TSR, EPS,
Returnon Invested
Capital (ROIC) or any
other measure the
Committee considers
appropriate. Any
changeto the financial
measures used would
normally be subject to
prior shareholder
consultation.
Up to 30% based
onstrategic and
sustainability
performance measures.
Usually, no single
measure will constitute
more than 50% of an
annual award.
The additional PSP of
50% of base salary will
be entirely based on
relative TSR, with
threshold vesting
beginning at upper
quartile performance
and maximum vesting
atupper decile.
For 2023 awards, the
performance measures for
the primary award will be
30% EPS, 30% reduction in
leverage, 20% relative TSR
and 20% ESG and/or
strategic measures.
A maximum of 25% of each
element will vest for
threshold performance.
Shareholding
guidelines
during
andpost-
employment
The Company operates shareholding guidelines for Executive Directors to strengthen the alignment between their interests
and those of our shareholders. The CEO and CFO will be expected to build interests in shares of at least 220% and 200% of
salary respectively within five years of appointment.
Executive Directors who step down from their role will normally be expected to maintain their minimum shareholding (or
actual shareholding, if lower) for the first 12 months after leaving the Board, and 50% of their minimum shareholding (or
actual shareholding, if lower) for the next 12 months. The Committee has the discretion to waive this guideline if it is not
considered appropriate in the specific circumstances.
Provisionstowithholdorrecoversumspaidunderincentivesaredetailedinthetableabove.Nootherelementsof
remunerationaresubjecttorecoveryprovisions.
Governance report
132 Synthomer plc Annual Report 2022
The Committee reserves the right to make
any remuneration payments and/or
paymentsforlossofoffice(including
exercising any discretions available to it
in connection with such payments)
notwithstanding that they are not in line
with the Policy set out in the previous
table where the terms of the payment
were agreed (i) before the Policy came
into effect, provided that the terms of the
payment were consistent with any
applicable shareholder-approved Directors’
remuneration policy in force at the time
they were agreed or were otherwise
approved by shareholders; or (ii) at a time
when the relevant individual was not a
Director of the Company (or other persons
to whom the Policy applies) and, in the
opinion of the Committee, the payment
was not in consideration for the individual
becoming a Director of the Company or
suchotherperson.Forthesepurposes,
‘payments’ includes the Committee
satisfying awards of variable remuneration
and, in relation to an award over shares,
the terms of the payment are ‘agreed’ no
laterthanthetimetheawardisgranted.
ThisPolicyappliesequallytoanyindividual
whoisrequiredtobetreatedasaDirector
undertheapplicableregulations.
The Committee may make minor
adjustmentstothePolicy(forregulatory,
exchange control, tax or administrative
purposes or to take account of a change
in legislation) without obtaining
shareholderapprovalforthatamendment.
Awards granted under the PSP may:
a Be granted as conditional share awards
or nil-cost options or in such other form
that the Committee determines has the
same economic effect
b Have any performance conditions
applicable to them amended or
substituted by the Committee if
aneventoccursthatcausesthe
Committee to determine that an
amended or substituted performance
condition would be fair, reasonable
andnotbemateriallylessdifficult
tosatisfy
c Incorporate the right to receive an
amountequaltothevalueofdividends
that would have been paid on the
shares under an award that vests up
tothetimeofvesting–or,wherethe
awardissubjecttoaholdingperiod,
release.Thisamountmaybecalculated
assuming that the dividends have been
reinvested in the Company’s shares on
a cumulative basis
d Be settled in cash at the
Committee’sdiscretion.For
Executive Directors, this provision
will only be used in exceptional
circumstances, such as where for
regulatory reasons it is not possible
to settle awards in shares
e Beadjustedintheeventofanyvariation
of the Company’s share capital or any
demerger, delisting, special dividend
or other event that may materially
affecttheCompany’sshareprice.
Deferred bonus shares may be structured
as conditional share awards, nil-cost
options,thedeliveryofsharessubjectto
sale restrictions or in such other form that
the Committee determines has the same
economiceffect.Ineachcase,the
parameters of the PSP will apply where
applicable,savethatsharessubjectto
sales restrictions will receive dividends
ratherthandividendequivalents.
Performance measures and targets
Annual bonus
The annual bonus performance measures
are chosen to provide an appropriate balance
between incentivising Executive Directors
tomeetfinancialtargetsfortheyearandto
deliverspecificstrategicandoperational
goals.ThebalanceallowstheCommittee
to effectively reward performance against
keyelementsofourstrategy.
The Committee sets the bonus targets each
year to ensure that Executive Directors are
appropriatelyfocusedonthekeyobjectives
forthenext12months.Targetsaresetby
referencetotheCompany’sbusinessplan.
Performance Share Plan
The performance measures under the
PSP are set to align with the long-term
strategy of the Company and long-term
valuecreationforshareholders.
Measures for 2023 awards include:
EPSgrowth–reflectingthe
financialperformanceofthe
Company.TheCommitteesets
targets to be appropriately
stretching, with regard to a number
of internal and external reference
points generally using previous
years’ EPS as a base for growth
Reduction in leverage, which
addresses a current primary concern
for shareholders
Relative TSR (total shareholder
return)–reflectingtheCompany’s
ultimate delivery of value to
shareholders.TheCommittee
considers that this promotes
alignment between the interests
ofExecutiveDirectorsandthe
shareholderexperience.RelativeTSR
will be in two bands: threshold to
maximum payouts being median to
upperquartilefortheprimaryaward,
andupperquartiletoupperdecilefor
the additional PSP granted in 2023
ESG and/or strategic measures
directly incentivising management
todelivertheCompany’skeyESG
andstrategicpriorities.
The Committee considers that this
performance framework represents an
appropriate and balanced basis on which to
measuretheperformanceoftheCompany.
Difference in policy for Executive
Directors and other employees
The remuneration policy for our
Executive Directors is designed
according to the same principles that
underpin remuneration for the wider
employee population, and this was taken
into account when designing the
proposedpolicy.Thewideremployee
group also participates in performance-
basedincentives.ThroughouttheGroup,
basesalaryandbenefitslevelsareset
according to the prevailing market
conditions.Differencesbetween
Executive Director pay policy and other
employeepayreflecttheseniorityofthe
individuals, the prevailing market
conditions and the corporate governance
practices for Executive Director
remuneration.Thekeydifferencein
policy is that, for Executive Directors, a
greater proportion of total remuneration
isbasedonincentives.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
133Synthomer plc Annual Report 2022
Proposed new remuneration policy continued
Non-Executive Directors’ fees
Non-Executive
Directors’ fees
The Board reviews Non-Executive Director fees each year. When reviewing fee levels, the Board may consider the scope
and time commitment of the role, the skills and experience of the individual, and fee levels at other companies.
Non-Executive Directors do not participate in determining their own fees.
Non-Executive Directors are paid differential fee levels based on their membership of Board Committees, chairing of
Board Committees or role as Senior Independent Director and the time commitment required from them. Additional
fees may be paid to reflect additional Board or Committee responsibilities or time commitment as appropriate.
Expenses incurred in performing Non-Executive Director duties for the Company may be reimbursed or paid for directly
by the Company, as appropriate, including any tax due on the expenses.
Non-Executive Directors do not participate in incentive arrangements or receive pension or benefits. Non-significant
additional benefits may be introduced if considered appropriate.
Chair's fees The Committee reviews Chair fees annually. When reviewing fee levels, they may consider the scope and time
commitment of the role, the skills and experience of the individual and the fee levels at other companies. The Chair
does not participate in determining the fee level.
Expenses incurred in performing duties for the Company may be reimbursed or paid for directly by the Company, as
appropriate, including any tax due on the expenses.
The Chair does not participate in incentive arrangements or receive pension or benefits. Non-significant additional
benefits may be introduced if considered appropriate.
TotalfeestoNon-ExecutiveDirectors,includingtheChair,operatewithinthecapdefinedintheArticlesofAssociation,whichis
currently£750,000perannum.
How we would apply the Policy
The following charts illustrate the different elements of the Executive Directors’ remuneration under three different
performancescenarios:minimum,inlinewithexpectations,maximum.Theassumptionsusedareprovidedbelowthe
charts.Theillustrationsarebasedonannualbonusawardsfor2023andPSPawardstobemadein2023.
Group Chief Executive – Michael Willome Chief Financial Officer – Lily Liu
Minimum
Total £916,242Fixed pay
100%
Total £504,391Fixed pay
100%
In line with
expectations
PSPAnnual Bonus
Total £2,096,967Fixed pay
32%24%44%
Annual Bonus
Total £1,189,471Fixed pay
29%29%42%
PSP
Maximum
Annual Bonus PSP
Total £3,615,042Fixed pay
47%28%25%
Annual Bonus
Total £2,102,911Fixed pay
43%33%24%
PSP
Maximum + 50%
share price growth
Annual Bonus
Total £4,458,417Fixed pay
57%23%21%
PSP
Annual Bonus
Total £2,559,631Fixed pay
54%27%20%
PSP
Governance report
134 Synthomer plc Annual Report 2022
Recruitment policy
Executive Directors
The Committee considers the following
principles when agreeing the
components of a remuneration package
for a new Executive Director:
Base salary will be set considering
the principles set out in the table
above and may be set at a higher
orlowerlevelthantheprevious
incumbent.Pensionarrangements
for any external recruit as an
Executive Director will be as set out
inthesametable.Otherbenefitswill
be provided in line with the policy for
existing Executive Directors
The Committee may, on appointing
an Executive Director, need to ‘buy
out’ remuneration arrangements
forfeited on leaving a previous
employer.Anybuyoutwillconsider
the terms of the arrangements –
forexample,formofaward,
performance conditions and
timeframe – being forfeited in the
previouspackage.Theformofany
award would be determined at the
time and the Committee may, if
necessary,makeuseofLR9.4.2of
the Listing Rules (for the purpose of
buyoutawardsonly).Theoverriding
principle will be that any replacement
buyout awards will, in the
Committee’s opinion, be no more
valuable than the entitlement that
has been forfeited
Annual bonus opportunity will be no
more than the maximum set out in
thepolicytable.TheCommitteemay
determinethatforthefirstyearof
appointment the annual bonus
awardwillbesubjecttosuch
conditions as it may determine
PSP opportunity will be no more
thantheplanrulesmaximumset
outinthepolicytable
The maximum variable pay
opportunity on recruitment
(excludingbuyouts)is400%
ofsalary,consistentwiththe
maximums in the policy
tableabove.
Other
For interim positions, a cash supplement
may be paid rather than salary – for example,
a Non-Executive Director taking on an
executivefunctiononashort-termbasis.
Where an executive is appointed from
within the Company, the normal policy
oftheCompanyisthatanylegacy
arrangements would be honoured in line
with the original terms and conditions,
and that they would be appointed on a
newservicecontract.Similarly,ifan
Executive Director is appointed following
theacquisitionormergerwithanother
company, legacy terms and conditions
wouldbehonoured.
Non-Executive Directors and Chairs
When appointing a new Non-Executive
Director or Chair, remuneration
arrangements will be in line with the
principles detailed in the relevant
tableabove.
Component Minimum In line with expectations Maximum
Maximum
+ 50% share price growth
Fixed
Base salary
2023
M Willome: £674,700
L Liu: £456,720
Pension
2023
1
M Willome: £47,229
L Liu: £31,970
Benefits
2022
2
M Willome: £194,313
L Liu: £15,701
Variable
Annual bonus 0% of maximum 50% of maximum M Willome: 150% of salary Same as maximum
L Liu: 150% of salary
PSP
3
0% vesting 40% vesting
4
38% vesting
4
M Willome: 250% of salary
5
Maximum plus 50%
shareprice growth
L Liu: 200% of salary
5
Note:
1. Valueofcashsupplementfor2023.
2. Taxablevalueforannualbenefitsprovidedin2022.
3. ThevalueforthePSPisbasedonthefacevalueofannualawardsunderthePolicyandbasesalariesfor2023.Thecalculationexcludessharepricegrowthordividendsduringthe
performanceperiodotherthanwherestated.
4. Being50%oftheprimaryawardand0%oftheadditionalaward.
5. Comprisingaprimaryawardof200%ofsalaryandasecondaryawardof50%ofsalaryfortheCEO,and150%and50%fortheCFO.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
135Synthomer plc Annual Report 2022
Proposed new remuneration policy continued
Service contracts
The current contracts in place for
Executive Directors are:
Director Date of contract
M Willome 22June2021
L Liu 25November2021
There is no unexpired term because the
Executive Directors’ contracts are on a
rollingbasis.Saveincircumstances
justifyingsummarytermination,the
notice period for each of the above
contractsisoneyear.Servicecontracts
for new Executive Directors will be
limitedto12months’notice.The
Company may, at the Committee’s
discretion, make a payment in lieu of
noticeequaltothesalary,pension
contributionsandcontractualbenefits
that would have been paid during the
noticeperiod.Thispaymentmaybe
made at the Committee’s discretion as a
lump sum or monthly instalments, and
maybesubjecttomitigationifthe
Directorfindsanalternativeposition
duringthenoticeperiod.
The Executive Directors are also entitled
to25workingdays’holiday,pluspublic
holidayseachcalendaryear.
All Non-Executive Directors are
appointedinwriting.Lettersof
appointment do not include entitlement
to participate in the Company’s share
incentive plans or any other of its
employeebenefits,anddonotcurrently
haveanoticeperiod.TheCompanymay
add a notice period of no more than three
months.TheNon-ExecutiveDirectorsare
subjecttoannualre-election.Thereisno
righttocompensationforlossofofficeif
they are not re-elected or if the Company
terminates the appointment because the
Non-Executive Director has accepted a
position with another company without
prior Board approval and that the Board
reasonably considers likely to give rise to
amaterialconflict.
Directors’ service contracts and letters of
appointment are available for inspection
attheCompany’sregisteredofficeduring
normal business hours and will be
availableattheAnnualGeneralMeeting.
Policy on payment for loss of office
The Committee considers a number
offactorswhendeterminingleaving
arrangementsforanExecutiveDirector.
Where either party gives notice
oftheterminationofanExecutive
Director’s employment, the
Committee may make a payment
inlieuofnoticefortheoutstanding
period.Otherthanthisprovision,
theobligationtopayaccruedbut
untaken holiday and, as outlined in
the table below regarding bonus and
the PSP, service contracts make no
provisionforpre-defined
compensationontermination.
The Committee reserves the right
tomakeanyotherpaymentsin
connection with a Director’s
cessationofofficeoremployment
where the payments are made in
good faith in discharge of an existing
legal obligations, or by way of
Plan ‘Good leaver’ categories Treatment for ‘good leavers’ Treatment for ‘other leavers’
Performance
SharePlan
Death
Injury, ill health or
disability
Transfer of
employing company
or business outside
the Group
Retirement with
agreement of the
Committee
Redundancy
Any other reason as
determined by the
Committee
Awards will vest subject to achieving performance
conditions and – unless the Committee determines
otherwise – will be time pro-rated to reflect the
proportion of the vesting period that has passed at
the time of leaving.
The vesting date for such awards will normally be
the original vesting date, although the Committee
may determine that awards can vest when
employment ceases, subject to the assessment of
any performance condition. Where unvested awards
are subject to an additional holding period, the
Committee will determine the extent to which the
holding period applies following cessation.
Awards in the form of options that vest early due to
cessation of employment may be exercisable until
the earlier of (i) 12 months from the date of vesting,
and (ii) the normal expiry of the exercise period.
Following this date, unexercised awards will lapse.
If the participant ceases employment after the
normal vesting date, options may be exercisable
until the earlier of 12 months from the date of
cessation, or the normal expiry of the exercise period.
Following this date, unexercised awards will lapse.
Unvested awards lapse in full.
Governance report
136 Synthomer plc Annual Report 2022
damages for breach of such an
obligation, or by way of a
compromise or settlement of any
claim arising in connection with the
cessationoftheDirector’sofficeor
employment.Anysuchpaymentmay
include, but is not limited to, paying
any fees for outplacement
assistance and/or the Director’s legal
or professional advice fees in
connection with their cession of
officeoremployment.
The Committee may award an
annual bonus for leavers by
considering the circumstances of
departure.Anybonuswould
normallybesubjecttoperformance
and time pro-rating and would not be
made in circumstances of poor
performance.Anysuchbonuswould
be in such proportions of cash and
sharesandsubjecttosuchdeferral
arrangements as the Committee
considers appropriate in the
circumstances.
On ceasing employment, the
Executive Director will retain any
deferred bonus shares and the
deferred period will normally
continuetotheoriginalreleasedate.
For Executive Directors who are
appointed to the Board after the date
that the policy comes into effect, any
deferred shares would be forfeited
for‘badleavers’.‘Goodleavers’(as
definedunderthePSPasoutlinedin
the previous table) would be entitled
to retain their deferred shares, which
would vest on the normal date, unless
theCommitteedeterminesotherwise.
The treatment of outstanding
PSPawardsisgovernedbythe
Performance Share Plan rules,
underwhichExecutiveDirectorsmay
currently hold awards in the form of
share options or conditional rights to
receiveshares.Ifanindividualleaves
holding vested PSP awards that are
stillsubjecttoaholdingperiod,the
underlying shares will either be
released at the end of the original
holding period, or at an earlier date
determinedbytheCommittee.
Where an award is made for the purpose
of recruitment – for example, a buyout
award – then the leaver provisions would
be determined at the time of award,
having regard to the circumstances of
the recruitment, the terms of awards
being bought out and the principles
forleaversinthecurrentpolicy.
In the event of a change of control of
theCompany,unvestedPSPawardswill
normally vest early and deferred bonus
shareswillnormallybereleased.The
extent to which unvested PSP awards
vestwillbesubjecttoachievingthe
performance conditions (as determined
by the Committee) at the time of the
change of control and, unless the
Committee determines otherwise, will be
timepro-ratedtoreflecttheproportion
ofthevestingperiodthathaselapsed
atthattime.Intheeventofaninternal
reorganisation, the Committee may
determine that awards are automatically
surrendered for a new award that the
Committeedeterminesisequivalentto
the surrendered award (including as to
any performance condition), except that
itshallbeoversharesintheacquiring
companyorsomeothercompany.
In the event of a demerger, special
dividend or other similar event that, in the
Committee’s opinion, would materially
affect the market price of shares, the
Committee may allow PSP awards to
vest or deferred bonus shares to release
on the same basis as for a change
ofcontrol.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
137Synthomer plc Annual Report 2022
Annual report on remuneration
Single figure of remuneration for Executive Directors (audited)
Year
Base salary
£
Benefits
£
Other
£
Pension
£
Total fixed
remuneration
£
Annual bonus
£
Long-term
incentives
1,2
£
Total variable
remuneration
£
Total
£
Executive Directors
M Willome
3
2022 650,000 194,313 – 45,500 889,813 97,500 – 97,500 987,313
2021 108,333 31,692 100,000 7,583 247,608 – – – 247,608
L Liu
4
2022 220,000 7,861 – 15,400 243,261 66,000 – 66,000 309,261
2021 – – – – – – – – –
SG Bennett
5
2022 194,697 6,675 – 28,479 229,851 29,204 106,443 135,647 365,498
2021 378,052 13,349 – 75,610 467,011 538,724 236,084 774,808 1,241,819
Notes:
1 For2022thevaluesrelatetoawardsgrantedunderthePSPin2020,whichveston28Marchand6May2023.Moreinformationaboutthelevelofvestingisprovidedinthisreport.Giventheseawards
havenotyetvested,theyhavebeenvaluedbasedontheaveragesharepricefortheperiod1October2022to31December2022of124.3p,alongwithaccrueddividendsfromthedateofgrantof41.6p
pershare.TherewasnosharepriceappreciationthataffectedthevalueoftheawardsandsotheRemunerationCommitteedidnotexercisediscretioninrespectofthesharepricechanges.MWillome
andLLiujoinedtheBoardin2021and2022respectivelyanddidnotparticipateinthe2020LTIP.
2 2019PSPawardsvestedon11March2022.Forthe2021singlefigure,theseawardswerevaluedbasedontheaveragesharepricefortheperiod1October2021to31December2021of
466.3p.Theseawardshavebeenrevaluedbasedonthesharepriceonthedateofvestingof275.8p.Thevaluedisclosedinthe2021singlefigureforSGBennettwas£381,851.Theshare
priceusedtovaluetheawardsonthedateofgrantof11March2019was377.0p.ThesharepriceusedtovaluethePSPforsinglefigurepurposesof275.8prepresentsadecreaseof101.2p
pershare.TheRemunerationCommitteedidnotexercisediscretioninrespectofthesharepricechanges.
3 MWillomejoinedSynthomerasCEOon1November2021.In2021hereceivedaone-offpaymentof£100,000incompensationforthelossofpension-relatedpayfromhispreviousemployer,
whichisincludedintheOthercolumn.Thisisnogreaterthantheamounthewouldhavereceivedhadheservedouthisfullnoticeperiod.MWillomealsoreceived£52,500forservicespriorto
hisappointmentasaDirector.
4 LLiujoinedasCFOon1July2022.Aspartofthetermsofherrecruitment,itwasagreed(i)any2022bonuspaymentwouldnotbetimepro-ratedand(ii)shewouldbecompensatedinthe
futureforanLTIPawardthatlapsedwhensheleftherformeremployerEssentra.Theextentofthatcompensation,whichwillbesettledincash,willdependontheextenttowhichthe
lapsedawardwouldhavevestedandwillbedeterminedattheendoftheperformanceperiodin2024.
5 SGBennettsteppeddownasaDirectoron1July2022.Hisremunerationdisclosedherehasbeenpro-ratedtoreflectthisperiod.
Additional information for single figure remuneration (audited)
Benefits
Relocation expenses
£
Car expenses/benefit
£
Others
£
Total
£
M Willome
1
180,703 13,200 410 194,313
L Liu – 7,500 361 7,861
SG Bennett – 6,250 425 6,675
Note:
1 SinceMWillomehasmovedfromSwitzerlandtotheUK,hewillreceiveamonthlyrelocationallowanceforaperiodoffouryears.Thisallowanceis£7,800permonthforthefirsttwoyears
then£5,000permonthforthefollowingtwoyears,andwillbegrossedupfortax.
Annual bonus
2022 award
For2022theCompanyoperatedacashbonusplanfortheExecutiveDirectorsrelatedtotheachievementofUnderlyingprofit
beforetaxtargets,SHEtargets,andindividualstrategicandoperationalgoals.
TheachievementoftheUnderlyingprofitbeforetaxtargetrepresentedupto80%ofthemaximumbonusopportunityachievable
of150%ofannualbasicsalaryforMWillome,LLiuandSGBennett.
TheSHEtargetsweregivena10%weightingofthemaximumachievable,withthebalanceof10%relatingtoindividualstrategic
andoperationalgoals.
Bonus for the year ended 31 December 2022
Executive Directors
Maximum bonus
as a % of salary
Total bonus
as a % of maximum
Total bonus
£
M Willome 150% 10% 97,500
L Liu 150% 10% 66,000
SG Bennett 150% 10% 29,204
ForMWillomeandLLiu,one-thirdofthebonushasbeendeferredintosharesfortwoyears.ThebonusforSGBennetthasbeen
paidincashaccordingtohisleavingarrangements.
2022sawperformancethatwassubstantiallybehindfinancialtargets;however,therewasmeaningfulprogressand
achievementagainstindividualstrategicandoperationalgoals.TheSHEtargetswerenarrowlymissed.
This2022bonusoutcomeof10%ofmaximumisreflectedacrossthewiderorganisation,withsomelocalSHEbonustargetsbeingmet.
Governance report
138 Synthomer plc Annual Report 2022
More information about the three elements of the bonus follows:
1. Underlying profit before tax (80%)
TheUnderlyingprofitbeforetaxtargetssetandtheirachievementaresetoutbelow:
Threshold Target Maximum Achieved
2
Level of award (% of element) 0% 50% 100% 0%
Underlying profit before tax
1
£181.4m £201.6m £221.8m £121.4m
Notes:
1 TargetsaresetbyreferencetotheBoard-approvedinternalbudgetfortheGroupandmeasuredonaconstantcurrencybasis.
2 ForthepurposesofcalculatingachievedUnderlyingprofitbeforetax,adjustmentsweremadeforcurrency.
2. SHE (10%)
Targetswithanaggregateweightingof10%relatedtoimprovementsinrecordableinjuryandprocesssafety.
Recordable injury (measured as injury rate) Process safety (measured as process safety event rate)
Target 0.30 or less 0.14 or less
Level of award 0% for a rate greater than 0.30
5% for a rate less than 0.30
0% for a rate greater than 0.14
5% for a rate less than 0.14
Rate achieved 0.34 0.18
Award outcome 0% 0%
Moredetailsaboutthedefinitionandmeasurementoftherecordableinjuryrateandtheprocesssafetyeventratearegivenonpages54
and55.
3. Individual strategic and operational goals (10%)
TheRemunerationCommitteeconsideredindividualgoalsandachievementsagainstthemwithanaggregateweightingof10%,
including:
Chief Executive Officer Chief Financial Officer
Target 1 Undertake a full review of Synthomer, its
underlying businesses, markets, people, assets
and investors and deliver a strategic review for
discussion with the Board
2 Ensure a smooth integration of adhesive resins
business, delivering synergies to plan
3 Progress the planned nitriles investment projects
1 Become familiar with the businesses and
thefinance team resources around the Group
andconsider immediate resource gaps to
supportthe business
2 Undertake a review of Group liquidity and
covenant headroom, in light of deteriorating
economic conditions, and ensure appropriate
funding is in place to support the Group’s
refreshed strategy
3 Ensure appropriate cash management
processesare in place to support delivering
areduction in leverage
Level of award Up to 10% Up to 10%
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
139Synthomer plc Annual Report 2022
Annual report on remuneration continued
Chief Executive Officer Chief Financial Officer
Performance against targets 1 Undertake a full review of Synthomer, its
underlying businesses, markets, people, assets
and investors and deliver a strategic review for
discussion with the Board
The CEO engaged his Executive Team as well as a
wider group of managers in a detailed and inclusive
business and strategic review, which ran from
January to July 2022 supported by external advisers.
He engaged the Board throughout the process in
developing the scope and approach, in considering
options and in challenging the recommendations
as they emerged. This involved two dedicated
Board and Executive Team workshops to debate
and finally approve the strategy.
Despite economic headwinds and challenges in the
Group, he ensured that the refreshed strategy was
launched to all stakeholders – with a Capital
Markets Day, a GLT event and a full communication
process with employees across the business. The
feedback has been very positive: that it is a clear
and compelling vision and strategy – with
customers, innovation, sustainability, and inclusion
and diversity at its heart – for delivering value in
the medium term.
2 Ensure a smooth integration of the adhesive
resinsbusiness, delivering synergies to plan
Clear plans were in place for the first months
ofowning the adhesive resins business, including
operational priorities and synergy capture, which
are both in line with the business case, and
stakeholder communications. As headwinds
developed in the last quarter of 2022, the CEO
tookaction to strengthen resources, including
procurement and operational excellence
expertise.This will be a key objective in 2023.
3 Progress the planned nitriles investment projects
Early in 2022 the CEO started to re-evaluate the
speed of and focus on these projects. As the
strategic thinking progressed – and recognising
the subdued outlook, with no significant recovery
expected in 2022 or into 2023 – he recommended
to the Board that such projects be postponed and
realigned his objectives to focus on portfolio review.
In May 2022 the CEO also launched a working
capital and capital expenditure review across the
business. This was accelerated and extended in
September 2022, as the extent of the downturn
inthe Performance Elastomers business and the
likelihood of recessionary pressures developed. The
business has committed to generate £150 million in
cash by end of 2023 from these measures.
1 Become familiar with the businesses and
thefinance team resources around the Group
andconsider immediate resource gaps to
supportthe business
The CFO undertook a four-week business
introduction with other business leaders, members
of her team and the former CFO. Having assessed
the environment, she appointed an interim head of
Treasury and made some team changes to better
align with emerging priorities. She spent time with
her deputy agreeing priorities and actions.
2 Undertake a review of Group liquidity and
covenant headroom, in light of deteriorating
economic conditions, and ensure appropriate
funding is in place to support the Group’s
refreshed strategy
The CFO assessed the level of liquidity and
covenant headroom required in the changing
economic environment. After discussion with the
Board, she explored various options, including the
funding subsequently agreed with UKEF, as well as
debt receivables funding. She was clear and
focused on developing relationships with the key
providers of finance and presenting them with the
necessary information. She was flexible in adapting
the process and in having clear requirements of her
team to deliver to the timescales required.
3 Ensure appropriate cash management
processesare in place to support delivering
areduction in leverage
The CFO focused on building and accelerating the
processes already started to manage cash, reduce
working capital and capital expenditure, and review
costs. She added a level of toughness and bite to
the discussions across the business and started to
drive improved processes across the business,
which will continue into 2023.
Award outcome 10% 10%
TheCommitteeconsideredthefinaloutcomeinthecontextofperformanceintheyearandifdiscretionshouldbeapplied.TheCommittee
looked at performance in the round, while also noting the need to ensure our newly appointed Directors are appropriately incentivised to deliver
theGroup’sambitiousobjectives,includingthenewstrategicplan.
Given the strong start in their role and the challenging environment the Directors are operating in, along with the excellent progress made in
importantstrategicobjectivesincludingcashmanagementandimplementingsynergies,itwasfelttheformulaicoutcomewasappropriate.
Therefore,nodiscretionwasapplied.
Governance report
140 Synthomer plc Annual Report 2022
Governance report
Additional information for single figure remuneration (audited)
Long-term incentives – PSP
Theawardsmadeon12March2020forCGMacLeanandSGBennettunderthePSPweresubjecttoarelativetotalshareholder
return (TSR) performance condition, an absolute Underlying earnings per share performance condition and a strategic measures
condition, as follows:
Relative TSR condition
(30% weighting)
EPS condition¹
(30% weighting)
Synergies delivered from the OMNOVA acquisition
(30% weighting) Performance achieved
Company-relative TSR
performance against
theFTSE 250 Index
(excluding investment
trustsand financial
servicescompanies) over
thethree-year period ended
31 December 2022
EPS for the 2022
financialyear
Synergy delivery run rate
by31 December 2022
Percentage of award
thatwill vest
Upper quartile 33.8p or more $29.6m or more 30% EPS of 20.6p gives nil
vesting of the award.
TSR performance at the
13th percentile gives nil
vesting of the award.
Synergy delivery of
$42.4m, which exceeded
maximum performance,
resulting in 30% vesting
ofthe award.
Between median and
upperquartile
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%
Note:
1 ThetargetswereadjustedtotakeaccountoftheadditionalOMNOVAearningsfrom1April2020.
Another10%oftheawardwassubjecttoastrategicmeasurerelatingtoa10%reductionofcarbondioxideequivalentemissions
overtheperformanceperiod,excludingadditionalemissionsfromtheacquiredOMNOVAbusiness.
Carbon dioxide equivalent reduction Percentage of this part of an award that vests Percentage achieved
Less than 10% 0%
31% achieved,
whichexceeded
maximumperformance,
resulting in vesting
of 10% of award.
Between 10% and 15% On a straight-line basis between 25% and 100%
15% or more 100%
Inaggregate,40.0%ofthe2020awardvested,andtheCommitteedidnotexerciseanydiscretionwiththelevelofvesting.
GivenbothourcurrentExecutiveDirectorswereappointedmorerecently,neitherwaseligibleforvestingunderthe2020award.The
CommitteewaspleasedattheprogressmadeagainstthetargetsforsynergiesdeliveredfromtheOMNOVAacquisition,andthe
overalloutcomeof$42.4millionrepresentedaverystrongresult,especiallyinthecontextofadifficultexternaleconomicperiod.
TheCompanyalsoperformedverywellagainstchallengingcarbontargets,animportantsteptowardsourVision2030andnetzero
by2050goals.Becauseofthisperformance,theCommitteefeltthefinaloutcometobefairandnodiscretionwasapplied.
Additionally, because the share price is currently lower than that of the 2020 grant, the Committee considered that there was no
windfallgain.
The 2020 awards will vest for CG MacLean and SG Bennett in March 2023 and May 2023 as follows:
No. of shares in
original award
No. of shares
that lapse
1,2
No. of shares
that vest
Estimated value of
shares that vest
3
CG MacLean March 321,524 244,006 77,518 128,632
May 49,780 38,778 11,002 18,256
SG Bennett March 163,500 105,686 57,814 95,936
May 18,985 12,653 6,332 10,507
Notes:
1 CGMacLeanleftSynthomeron13January2022andwastreatedasagoodleaver,triggeringatime-apportionedlapseof150,005shares.
2 SGBennettleftSynthomeron4November2022andwastreatedasagoodleaver,triggeringatime-apportionedlapseof22,120shares.
3 Giventheseawardshavenotyetvested,theyhavebeenvaluedbasedontheaveragesharepricefortheperiod1October2022to31December2022of124.3p,alongwithaccrued
dividendsfromthedateofgrantof41.6ppershare.
Overall, the Committee considers that the remuneration policy has operated as it intended during 2022 and that the pay
outcomesarealignedwiththeexperienceofshareholdersandotherstakeholders.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
141Synthomer plc Annual Report 2022
Annual report on remuneration continued
Pension entitlements (audited)
BothcurrentExecutiveDirectorsreceiveacashallowanceinlieuofpensioncontributionsof7%ofbasesalaryinlinewiththe
pensionprovisionforthewiderworkforce.
Single figure of remuneration for Non-Executive Directors (audited)
Non- Executive Directors Base fee Committee membership fee Committee Chair fee Total
CA Johnstone 2022 235,000 – – 235,000
2021 189,500 – – 189,500
The Hon. AG Catto 2022 44,805 – – 44,805
2021 43,500 – – 43,500
BWD Connolly
1
2022 54,805 15,000 5,000 74,805
2021 48,500 15,000 5,000 68,500
CS Dubin
2
2022 41,072 13,750 4,583 59,405
2021 43,500 15,000 5,000 63,500
RC Gualdoni³ 2022 44,805 15,000 – 59,805
2021 20,815 7,177 – 27,992
Dato’ Lee Hau Hian 2022 44,805 – – 44,805
2021 43,500 – – 43,500
HA Van Deursen 2022 44,805 15,000 – 59,805
2021 43,500 15,000 – 58,500
I Tyler
4
2022 23,747 7,950 – 31,697
2021 – – – –
Notes:
1 Basefeeincludesanamountof£5,000perannumforroleasSeniorIndependentDirectorin2021,and£10,000in2022.
2 Resignedon29November2022.
3 AppointedtotheBoardon8July2021.
4 AppointedtotheBoardon21June2022.
Directors’ shareholding and share interests (audited)
Directors
Interests in
Company
shares
31 December
2022
Vested
unexercised
performance-
related options
31 December
2022
Total unfettered
interests
in shares and
vested options
31 December
2022
Unvested
performance-
related options
31 December
2022
1
Share
options
exercised
during
2022
Share
ownership
requirements
(% of salary)
2
Interest in
shares at
31 December
2022
(% of salary)
M Willome 100,000 – 100,000 694,629 – 220 22
L Liu 12,000 – 12,000 339,611 – 200 4
SG Bennett
3
280,800 – 280,800 291,672 76,503 n/a n/a
CA Johnstone 47,931
The Hon. AG Catto 1,699,239
3,710,347
*
BWD Connolly 19,579
RC Gualdoni 66,853
Dato’ Lee Hau Hian 467,453
HA Van Deursen 20,000
I Tyler –
CS Dubin
4
–
Notes:
*Non-beneficialinterest.
1 Unvestedperformance-relatedoptionscomprisetheawardsmadeunderthePSPin2020,2021and2022.Detailsoftheperformanceconditionsattachedtothe2020awardsaresetout
on page141,andto2021and2022awardsbelow.
2 Untilthisrequirementismet,nosalesofsharesthatvestunderlong-termincentiveplansarepermittedotherthantosatisfytaxliabilitiesthatariseontheexerciseofshareawardsunder
suchplans.TheCommitteeconsidersthatunfetteredunexercisedvestednil-costawardsareeconomicallyequivalenttosharesand,assuch,thattheyshouldcount(onanet-of-taxbasis)
towardscompliancewiththeshareownershipguidelines.
3 ThefiguresforSGBennettreflecthisshareholdingandtimepro-ratedshareinterestson1July2022,thedatethathesteppeddownasaDirector.
4 ThefigureforCSDubinreflectshershareholdingon29November2022,thedatethatsheresignedasaDirector.
TherehavebeennochangesintheinterestsoftheDirectorsinsharesbetween31December2022andatsuchtimeasthis
reportwassignedon28March2023.
Governance report
142 Synthomer plc Annual Report 2022
2021 award (audited)
Theawardsmadeon11March2021toCGMacLeanandSGBennett,andon8November2021toMWillome,wereasfollows:
Scheme Basis of award Number of shares Face value
Percentage
vesting at
threshold
performance
Performance
period end date
M Willome
1
PSP – nil-cost options 200% of salary 198,295 £1,011,106 25% 31/12/2023
CG MacLean
2
PSP – nil-cost options 200% of salary 261,039 £1,189,476 25% 31/12/2023
SG Bennett
3
PSP – nil-cost options 150% of salary 124,446 £567,063 25% 31/12/2023
Notes:
1 MWillome’sawardwastimeapportionedfromhisstartingdateof1November2021.
2 CGMacLeanleftSynthomeron13January2022andwastreatedasagoodleaver,triggeringatime-apportionedlapseof190,539sharesandleavingabalanceof70,500shares.
3 SGBennettleftSynthomeron4November2022andwastreatedasagoodleaver,triggeringatime-apportionedlapseof55,865sharesandleavingabalanceof68,581shares.
ThefacevalueoftheawardsforCGMacLeanandSGBennettwascalculatedusingasharepriceof455.67ppershare.Theface
valueoftheawardforMWillomewascalculatedusingasharepriceof509.9ppershare.Inallcasesthefacevaluewas
calculatedusingtheaveragesharepriceoverthefivedealingdayspriortothedateofgrant.
The2021awardsunderthePSParesubjecttothefollowingperformanceconditions:
Relative TSR condition (40% weighting) EPS condition (40% weighting)
Company-relative TSR performance against
the FTSE 250 Index (excluding investment
trusts and financial services companies) over
the three-year period ending 31 December 2023
EPS for the 2023 financial year Percentage of award that will vest
Upper quartile 38.5p or more 40%
Between median and upper quartile Between 33.0p and 38.5p On a straight-line basis between 10% and 40%
Median 33.0p 10%
Below median Less than 33.0p 0%
Another20%oftheawardissubjecttostrategicmeasurescomprisinga15%reductionofcarbondioxideequivalentemissions
comparedtothe2019baseline,andgreaterthan15%of2023salesvolumecomingfromnewproductslaunchedinthefive
yearstoDecember2023.
2022 awards (audited)
Theawardsmadeon10March2022toMWillomeandSGBennettwereasfollows:
Scheme Basis of award Number of shares Face value
Percentage
vesting at
threshold
performance
Performance
period end date
M Willome PSP – nil-cost options 200% of salary 496,334 £1,300.000 25% 31/12/2024
SG Bennett
1
PSP – nil-cost options 150% of salary 223,0031 £584,089 25% 31/12/2024
Note:
1 SGBennettleftSynthomeron4November2022andwastreatedasagoodleaver,triggeringatime-apportionedlapseof174,374sharesandleavingabalanceof48,629shares.
Thefacevalueoftheawardswascalculatedusingasharepriceof261.92ppershare,theaveragesharepriceonthefivedealing
dayspriortothedateofgrant.
The award made on 9 August 2022 to L Liu was as follows:
Scheme Basis of award Number of shares Face value
Percentage
vesting at
threshold
performance
Performance
period end date
L Liu PSP – nil-cost options 150% 339,611 £660.000 25% 31/12/2024
Thefacevalueoftheawardswascalculatedusingasharepriceof194.34ppershare,theaveragesharepriceonthefivedealing
dayspriortothedateofgrant.AspartofthetermsofLLiu’sappointment,itwasagreedthather2022PSPawardwouldnotbe
timepro-rated.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
143Synthomer plc Annual Report 2022
Annual report on remuneration continued
The2022awardsunderthePSParesubjecttothefollowingperformanceconditions:
Relative TSR condition (30% weighting) EPS condition (30% weighting)
Synergies delivered from the Eastman Adhesive Resins acquisition
(20% weighting)
Company-relative TSR performance
against theFTSE 250 Index (excluding
investment trustsand financial
servicescompanies) over the three-year
period ending 31 December 2024
EPS for the 2024
financialyear
Percentage of award
thatwill vest
Synergy delivery runrate
by 31 December 2024
Percentage of award
that will vest
Upper quartile 54.4p or more 30% $23.2m or more 20%
Between median
and upper quartile
Between 46.7p
and 54.4p
On a straight-line basis
between 7.5% and 30%
Between $20m and
$23.2m
On a straight-line basis
between 5% and 20%
Median 46.7p 7.5% $20m 5%
Below median Less than 46.7p 0% Less than $20m 0%
Another20%oftheawardissubjecttostrategicmeasurescomprisinga30%reductionofcarbondioxideequivalentemissions
comparedtothe2019baseline,andgreaterthan15%of2024salesvolumecomingfromnewproductslaunchedinthefiveyears
toDecember2024.
Operation of the Executive Director remuneration policy for 2023
Thecurrentpolicyhasbeeninforcesince29April2020.SubjecttoapprovalofthenewpolicybyshareholdersattheAGMon
16May2023,thespecificremunerationarrangementsfor2023aredescribedbelow.
Base salary A salary increase was awarded with effect from 1 January 2023 of 3.8% for the CEO and CFO in line with the average
merit increase awarded in the UK at management levels, and below the average merit increase awarded in the UK
below management levels.
2023 salaries are:
M Willome: £674,700 L Liu: £456,720.
Pension and
benefits
Pension contributions for Executive Directors are aligned with that of the UK workforce. Executive Directors 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 a four-year period. This allowance
is £7,800 per month for the first two years then £5,000 per month for the following two years, and will be grossed up for tax.
2023 cash allowances in lieu of pension contributions are:
M Willome: 7% of salary L Liu: 7% of salary.
Annual bonus For 2023, performance under the annual bonus will be measured on the following basis:
60% subject to performance against Underlying profit before tax targets
20% Group cash flow
10% subject to performance measures against key SHE targets
10% subject to performance against individual strategic and operational goals
Targets and objectives for 2023 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.
2023 maximum award opportunity:
M Willome: 150% of salary L Liu: 150% of salary.
Performance
share plan
For primary awards to be made in 2023, performance will be measured as follows:
20% 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% will vest 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
30% based on a reduction in leverage, which by its financial nature is considered by the Board to be unsuitable for
disclosure in advance. However, the Committee will provide information on the target retrospectively.
20% based on strategic targets, of which half will be a sustainability measure linked to a reduction in carbon dioxide
emissions of up to 30% from the 2019 baseline, and half linked to greater than 14% of 2025 sales volume coming from
new and protected products launched or sold in the five years to December 2025.
Governance report
144 Synthomer plc Annual Report 2022
Performance
share plan
continued
For the secondary additional awards, the sole performance measure will be TSR performance versus FTSE 250
(excluding investment trusts and financial services companies):
25% of this element will vest for upper quartile performance
100% will vest for upper decile performance
Vesting on a straight-line basis between these points.
2023 maximum award opportunity:
M Willome: 250% of salary (200% primary award and50% secondary additional award)
L Liu: 200% of salary (150% primary award and 50% secondary additional award).
Given the recent fall in share price, the Committee has considered the 2023 PSP grants and the potential for windfall gains.
The CEO and CFO started in late 2021 and mid-2022 respectively, and the Committee believes it is critical to ensure
that they are appropriately incentivised in the context of challenging market conditions.
The Committee has determined therefore that it is not appropriate to reduce their award at this stage, but will review at vesting.
Shareholding
guidelines during
employment
The CEO and CFO are expected to build interests in shares of at least 220% and 200% of salary respectively.
Chair and Non-
Executive Directors
The fees to be paid in 2023 to the Chair and the Non-Executive Directors will be unchanged from those paid in 2022.
Leaving arrangements for former CFO
WhileSGBennettsteppeddownasCFOatthestartofJuly2022,heremainedemployeduntil4November2022,supportingwith
thetransitionofthenewCFO.Hewastreatedasagoodleaver,meaninghewasentitledtoapro-ratedannualbonusfor2022until
heceasedemployment.Thebonuspaymentwillbepaidentirelyincashonthenormalbonuspaymentdate,andwillbesubjectto
theRemunerationCommittee’srightundertheRulestoapplymalusandclawbackprovisions.Hewillnotbeeligibletoreceiveany
bonusinrespectofthefinancialyearending31December2023.Thetotalbonuspaidfortheperiodto30June2022was£29,204,
andfrom1Julyto4November,whenhesteppeddownasDirectorbutremainedemployedbytheCompany,was£9,735.
The Remuneration Committee determined that SG Bennett would be treated as a ‘good leaver’ for the purpose of his unvested awards
underthePSP.Inlinewiththeapprovedpolicy,theawardswillbereducedonatime-apportionedbasis,whichwillbecalculatedto
4November2022.Awardswillbesubjecttotherelevantperformanceconditions,whichwillbemeasuredatthenormaltime.
Award date Number of shares
Pro-rated maximum number
of shares that could vest Vesting date
2020 163,500 144,536 28 March 2023
2020 18,985 15,829 28 March 2023
2021 124,446 68,581 11 March 2024
2022 223,003 62,726 26 March 2024
Anydividendequivalentsaccruedinrespectoftheseawardswouldbepaidincashfollowingvestingandwillbepro-ratedinline
withthelevelofvestingoftherelevantPSPaward.Anysharesacquiredontheexerciseoftheawardswillbesubjecttothe
RemunerationCommittee’srightunderthePSPtoapplyclawbackprovisions.
Details of the vesting of the award made to SG Bennett in 2020, together with all other remuneration paid to him in 2022, are
containedinthisreport.
TheSynthomerpost-employmentshareholdingguidelines,whichcameintoeffectinApril2021,havenotbeenappliedbecause
SGBennettjoinedtheCompanybeforetheywereintroduced.Heis,however,contractuallyboundtoholdSynthomer’sshares
post-employment as follows:
Shares Earliest date shares can be sold
14,843 shares from vesting of 2018 PSP award in March 2021 12 March 2023
20,327 shares deferred from 2020 bonus paid in March 2021 6 May 2023
40,546 shares from vesting of 2019 PSP award in March 2022 11 March 2024
31,809 shares deferred from 2021 bonus paid in March 2022 26 March 2024
Payments to past directors (audited)
CGMacLean,whosteppeddownasCEOatthestartofNovember2021,wasentitledtothevestingofthePSPawardmadeto
himin2020asdetailedinthisreport.Hedidnotreceiveanyotherremunerationin2022.Asidefromthearrangementsforthe
formerCFO,nootherpaymentsweremadeintheyear.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
145Synthomer plc Annual Report 2022
Annual report on remuneration continued
Payments for loss of office (audited)
AsidefromthearrangementsfortheformerCFO,nopaymentsforlossofofficeweremadeduringtheyear.
Performance graph and table
ThegraphandtablebelowallowcomparisonoftheTSRoftheCompanyandtheCEOremunerationoutcomesoverthepast10years.
TSR chart
0
50
100
150
200
250
300
350
December
2012
December
2013
December
2014
December
2015
December
2016
December
2017
December
2018
December
2019
December
2020
December
2021
December
2022
Synthomer FTSE 250 (ex. investment trusts)
ThechartabovecomparestheTSRperformanceoftheCompanywiththatoftheFTSE250(excludinginvestmenttrusts).This
is considered to be the most appropriate index against which to make a comparison and was chosen because it represents a
broadequitymarketindexofwhichtheCompanyisaconstituent.
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
CEO AM Whitfield AM Whitfield CG MacLean CG MacLean CG MacLean CG MacLean CG MacLean CG MacLean
CG MacLean/
M Willome M Willome
CEO total single figure
remuneration (£’000) 923 967 1,246 1,218 2,516 1,807 890 1,805 2,279 987
Bonus (% of
maximum awarded) 0.0 5 7.3 69.7 100.0 100.0 76.5 20.0 100.0 95.0 10
PSP (% of
maximumvesting) 50.0 0.0 n/a n/a 96.3 86.2 10.0 31.8 64.0 n/a
TheCEOtotalsinglefigureofremunerationincludessalary,benefitsandpensioncontributionspaidintheyear,togetherwith
bonusesandlong-termincentiveawardsthatvestedbasedonperformanceintheyear.
The2021singlefigurecomprisesthefigureforCGMacLean,whichcoverstheperiodto31October2021,andthefigurefor
MWillome,whichcoverstheperiodfrom1Novemberto31December2021.
CEO-to-all-employee pay ratio
ThefollowingtableprovidespayratiodatainrespectoftheCEO’stotalremunerationcomparedtothe25th,medianand75th
percentileemployee.
Financial year Method 25th percentile pay ratio Median pay ratio 75th percentile pay ratio
2022 Option B 24:1 21:1 16:1
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
Theemployeesusedforthepurposesofcompilingthetableabovewereidentifiedonafull-timeequivalentbasisatthepayperiodduring
which5April2022fell.OptionB,whichinvolvesidentifyingtheemployeesatthe25th,50thand75thpercentilefromourgenderpaygap
report,waschosenasthecalculationmethodology.Underthismethodology,theemployeeswereidentifiedbasedonthefull-timeequivalent
basisatthepayperiodduringwhich5Aprilfell.Theselectedemployees’payandbenefitsforthecalendaryearwerethencalculatedusing
eachelementofemployeeremunerationconsistentwiththeCEOandnoelementofpayhasbeenomitted.Employeesforthepurposeof
thegenderpaygapareemployeesofSynthomer(UK)Limited(463relevantemployeesasatthesnapshotdateof5April2022).
Governance report
146 Synthomer plc Annual Report 2022
OptionBisconsideredtobethesimplestandmostaccuratewayofidentifyingtherelevantemployees.Usingthismethodology,
wewereabletoidentifyspecificemployeestomaketherequiredcomparisons.
Theratiohasdecreasedfor2022,chieflyduetothefallinvariableremunerationoutcomesfortheCEO.
Thedefinitionofpayusedincluded:
Annual salary
Car allowances
All other cash allowances
All bonuses and incentive scheme payments for services delivered in the year
Privatemedicalinsurancevalue.
Thefollowingtableprovidessalaryandtotalremunerationinformationinrespectoftheemployeesateachquartile:
Financial year Element of pay 25th percentile employee Median employee 75th percentile employee
2022 Salary 37,670 43,791 60,243
Total remuneration 40,400 46,029 63,683
OurCEOpayismadeupofahigherproportionofincentivepaythanthatofthemajorityofouremployees.Thisislikelyto
introducemorevariabilityintheCEOtotalcompensation.
TheBoardhasconfirmedthattheratiosareconsistentwiththeCompany’swiderpoliciesonemployeepay,rewardandprogression.
Percentage change in remuneration of the Directors and employees
Thetablebelowsetsouttheincreaseinsalary,benefitsandannualbonusoftheDirectorscomparedwithaselectedgroupof
employees.Theparentcompany,Synthomerplc,doesnothaveanydirectemployeessoacomparatorgroupofemployeesof
theGroup’smainUKtradingsubsidiaryhasbeenused,comprising463employees.TheDirectorsconsiderthatthisemployee
populationisthemostrelevantforcomparisonpurposes,consideringgeographicallocationandremunerationstructure.
2022 2021 2020
Salary and
fee %
increase
Benefits %
increase/
(decrease)
Annual
bonus %
increase
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 n/a n/a n/a
L Liu² n/a n/a n/a n/a n/a n/a n/a n/a n/a
SG Bennett³ n/a n/a n/a 2.5 (1.3) 1.1 1.3 (24.1) 560.7
CA Johnstone 24.0 n/a n/a 2.5 n/a n/a n/a n/a n/a
The Hon. AG Catto 3.0 n/a n/a 5.6 n/a n/a 0.9 n/a n/a
BDW Connolly 9.2 n/a n/a 5.4 n/a n/a 1.1 n/a n/a
CS Dubin³ n/a n/a n/a 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 n/a n/a n/a
Dato’ Lee Hau Hian 3.0 n/a n/a 2.8 n/a n/a 1.6 n/a n/a
HA Van Deursen 2.2 n/a n/a 3.6 n/a n/a 1.3 n/a n/a
I Tyler² n/a n/a n/a n/a n/a n/a n/a n/a n/a
Average change for employees 2.1 19.6 (73.2) 2.6 3.2 36.5 1.4 n/a n/a
Notes:
1 MWillomeandRCGualdoniwereappointedtotheBoardin2021.
2 LLiuandITylerwereappointedtotheBoardin2022.
3 SGBennettandCSDubinlefttheBoardin2022.
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
shareholdersbywayofdividends.
2022
£m
2021
£m % change
Dividends paid 99.5 73.5 35.37
Total employee remuneration 266.4 243.7 9.31
Dividendsarethedividendspaidintheyear.The2022interimpaymentwascancelled.Totalemploymentremunerationisthe
consolidatedsalaryandbonuscostforallGroupemployees.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
147Synthomer plc Annual Report 2022
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
adverseimpactontheirroleanddutiestotheCompany.Anyfeesarisingfromsuchappointmentsmayberetainedbythe
ExecutiveDirectorswheretheappointmentisunrelatedtotheGroup’sbusiness.
MWillomehasbeenanon-executivedirectorofGlastonOyj(NasdaqHelsinki)sinceMay2020andreceivedaBoard
membershipfeeofEUR40,000in2022.MWillomehassatonEuropeansubsidiaryboardsofIndutradeABsince2013and
receivedaboardmembershipfeeofCHF45,000in2022.
LLiuhasbeenanon-executivedirectorofDCCplcsince2021andreceivedaboardmembershipfeeofEUR84,330in2022.
Remuneration Committee
RemunerationCommitteemembershipsince1January2022:
Brendan Connolly (Chair)
Roberto Gualdoni
Holly A Van Deursen
I Tyler (since 21 June 2022)
CS Dubin (to 29 November 2022)
Attendance at Committee meetings is set out on page100.
Key duties of the Committee
During 2022 the Committee was responsible for determining, in agreement with the Board, the Company’s policy on executive
remunerationandthespecificremunerationfortheChairandeachoftheExecutiveDirectors,includingpensionrights,within
thetermsoftheagreedpolicy.TheCommitteewasalsoresponsibleforthespecificremunerationoftheExecutiveCommittee
and for reviewing remuneration elsewhere in the Group, including reviewing workforce remuneration and related policies to
ensurethatincentivesandrewardarealignedwithculture.
Advisers
The CEO, Company Secretary and CHRO are invited to attend Committee meetings to contribute to the Committee in its
deliberations.However,noindividualisinvolvedindiscussions,orispartofanydecisions,relatingtotheirownremuneration.
The Committee received independent advice from Deloitte LLP (Deloitte), which it appointed as its independent remuneration
adviserinApril2013,followingatenderprocess.
During the year, Deloitte provided advice on governance and market trends and other remuneration matters that materially
assistedtheCommittee.ThefeespaidtoDeloitteinrespectofthisworkwerechargedonatimeandexpensesbasisand
totalled£39,300foradvicein2022.TheCommitteeiscomfortablethattheDeloitteengagementteamthatprovides
remuneration advice to the Committee does not have connections with the Company or its Directors that may impair their
independence.TheCommitteereviewedthepotentialforconflictsofinterestandjudgedthattherewereappropriatesafeguards
againstsuchconflicts.DeloittealsoprovidedtaxservicestopartoftheGroupandadviceaboutimplementingTCFDtothe
Boardintheyear.TheCommitteewassatisfiedthatthisdidnotcompromisetheindependenceoftheadvicereceived.
DeloitteisafoundingmemberoftheRemunerationConsultantsGroupandadherestoitsCodeofConduct.Deloittewas
appointeddirectlybytheCommittee,andtheCommitteeissatisfiedthattheadvicereceivedwasobjectiveandindependent.
Statement of voting at the Annual General Meeting
The table below sets out the results of the votes on the Directors’ remuneration at the 2022 Annual General Meeting (Annual
ReportonRemuneration)andthe2020AnnualGeneralMeeting(Directors’RemunerationPolicy).
Votes for Votes against Votes withheld
Number % of vote Number % of vote Number
2022 Annual Report on Remuneration 392,874,580 97.39 10,540,812 2.61 21,401
2020 Directors’ Remuneration Policy 332,152,827 91.98 28,090,122 8.02 28,501
By order of the Board
A Prakash
Company Secretary
28 March 2023
Governance report
148 Synthomer plc Annual Report 2022
Directors’ report
The Directors submit their Annual
Report and the audited consolidated
financial statements for the year ended
31 December 2022. None of the matters
required to be disclosed by Listing Rule
9.8.4R applies to the Company, except
for the following:
The amount of capitalised interest
–seenote2tothefinancial
statements
Details of long-term incentive
programmes – see Directors’
remuneration report on pages
123to148.
Shareholder waiver of dividends
– see note 33 to the Financial
statements.
The Directors’ report is covered on
pages149to151 as well as in the
following sections of the Annual Report:
Item
Location in
Annual Report
Statement of Directors’
responsibilities
Page 152
Financial risk management
Financial
statements
– note 22
Present Board membership
Pages 92 to 94
Governance report
Pages 91 to 152
Strategic report (including
principal activities)
Inside front cover
to page 90
Management of risk and
viability statement
Pages 73 to 90
Employee engagement
Pages 63-70
Directors’ remuneration report
Pages 123 to 148
Share capital
Financial
statements
– note 27
Greenhouse gas emissions
Pages 58 to 60
Sustainability report
Pages 39 to 72
Results and dividends
The loss attributable to shareholders
was£32.5million.Asannouncedon
12October2022theDirectorshave
resolved to suspend dividend payments
untiltheendof2023.Accordingly,no
interimdividendwaspaid.Thetotal
dividend paid for the year was
£99.5million.TheDirectorsarenot
recommendingafinalordinarydividend.
Acquisitions and disposals
On1April2022theCompanycompleted
theacquisitionofEastman’sAdhesive
Resinsbusiness.On13December2022
the Company agreed to sell its Laminates,
Films and Coated Fabrics businesses and
completedthesaleon28February2023.
Directors
All the Directors will seek election
orretireandseekre-electionat
theforthcomingAGM,except
BrendanConnolly.
None of the Directors seeking
re-election has a service contract
exceptMichaelWillomeandLilyLiu,
whobothhaveservicecontractsthat
containa12-monthnoticeperiod.
Director indemnity provisions
Under the Company’s Articles of
Association, the Directors of the
Companyhavethebenefitofaqualifying
third-partyindemnityprovision.This
meanstheCompanyindemnifiesthem
against certain liabilities, as permitted by
Sections 232 and 234 of the Companies
Act 2006, and against costs incurred by
them in relation to any liability for which
theyareindemnified.TheCompanyhas
purchased and maintains insurance
againstDirectors’andofficers’liabilities
inrelationtotheCompany.
UK pension funds
The trustees have reviewed the
independent investment management
oftheassetsoftheCompany’sUK
pension schemes and assured
themselves of the security and controls
inplace.Inparticular,itisthetrustees’
policy not to invest in Synthomer plc
sharesnorlendmoneytotheCompany.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
149Synthomer plc Annual Report 2022
Share capital and control
During 2022 no shares were issued or
repurchased.Atotalof351,725shares
were purchased on the open market
on behalf of the shareholders who
elected to participate in the dividend
reinvestmentplan.
The Company’s Articles of Association
set out the rights and obligations
attached to the Company’s ordinary
shares, being the only class of issued
share capital, alongside the powers of
theCompany’sDirectors.Copiescan
beobtainedfromCompaniesHouse
ordownloadedfromtheCompany’s
website(www.synthomer.com).There
arenorestrictionsonthevotingrights
attached to the Company’s ordinary
shares or on the transfer of securities in
theCompany.Nopersonholdssecurities
in the Company that carry special rights
with regard to the control of the
Company.TheCompanyisnotaware
ofanyagreementsbetweenholdersof
securities that may result in restrictions
on the transfer of securities or on voting
rights.Unlessexpresslyspecifiedtothe
contrary in the Company’s Articles of
Association, those Articles of
Association may be amended by special
resolutionoftheCompany’sshareholders.
Other than in relation to its borrowings,
which become repayable on a takeover
unlesscertainconditionsaresatisfied,
the Company is not party to any
significantagreementsthatwouldcome
into effect, alter or terminate on a change
ofcontrolpromptedbyatakeoverbid.
The Company does not have agreements
with any Director or employee that would
providecompensationforlossofoffice
oremploymentresultingfromatakeover.
All the Company’s share programmes
contain provisions relating to a change of
control.Outstandingoptionsandawards
would normally vest and become
exercisable on a change of control,
subjecttothesatisfactionofany
performanceconditionsatthattime.
Employment policies and
employeeinvolvement
The Group gives every consideration to
jobapplicationsfromdisabledpeople.
Employees who become disabled are
given every opportunity to continue
working for Synthomer under normal
terms and conditions with appropriate
training, career development and
promotionwhereverpossible.TheGroup
seekstoachieveequalopportunitiesin
employment through recruitment and
trainingpolicies.
The Group encourages employee
involvementinitsaffairs.TheCompany
regularly engages with employees to
makethemawareofthefinancialand
economic factors affecting Group
performance.Performance-relatedbonus
programmes operate throughout the
Group.AlexanderCattoisthedesignated
Non-Executive Director responsible for
gatheringtheviewsoftheworkforce.
More information on the Board’s
workforce engagement methods can be
found on pages 63 to 72.TheGroup’s
approach to diversity and inclusion is
explained on pages65to66.
Authority to purchase own shares
The Company has a general authority to
make market purchases of not more than
46,733,604 of the Company’s ordinary
shares, in accordance with the terms of
the special resolution passed at the 2022
AnnualGeneralMeeting.Thisexpiresat
the conclusion of the 2023 Annual General
Meeting.Aresolutionwillbetabledatthe
2023 Annual General Meeting to renew
this authority for an amount representing
approximately10%oftheCompany’s
issuedsharecapitalasat28March2023.
Subsidiaries
AlltheGroup’ssubsidiaries,joint
ventures and related undertakings are
listed on pages209to210.
Statement as to disclosure of
information to auditors
EachDirectoroftheCompanyconfirms
that, to the best of their knowledge, the
Company’s auditors are aware of all
relevantauditinformation.EachDirector
alsoconfirmsthatheorshehastaken
allnecessarystepsasaDirectortomake
themselves aware of any relevant audit
information and to establish that the
information has been shared with the
Company’sauditors.Forthesepurposes,
relevant audit information means
information needed by the Company’s
auditors in connection with preparing
itsreportonpages154to160.This
confirmationisgivenandshouldbe
interpreted in accordance with Section
418oftheCompaniesAct2006.
Directors’ report continued
Major shareholdings
Other than the shareholdings disclosed as Directors’ interests in the Directors’
remunerationreportasat28March2023,theCompanyhadbeennotifiedunder
Section5oftheDisclosureandTransparencyRulesofthefollowingsignificant
holdings of voting rights in its ordinary shares:
Ordinary shares
(number)
Percentage of ordinary
shares in issue Nature of holding
Kuala Lumpur Kepong Berhad Group 125,589,510 26.87 Direct interest
Greater Manchester Pension Fund 23,410,509 5.01 Direct interest
Governance report
150 Synthomer plc Annual Report 2022
Governance report
Going concern
The Directors have acknowledged
thelatestguidanceongoingconcern
andinreachingtheirconclusionshave
considered factors that include:
Thenew$480-millionrevolving
credit facility, which was put in place
in March 2023 and matures on
31May2025
The UK Export Finance facilities of
€288millionand$230million,which
were put in place in October 2022
and mature in October 2027
Thefive-year€520-million3.875%
senior loan notes, which are due in
June2025.
Aftermakingenquiriesandconsidering
reasonably possible changes in trading
performance,theDirectorsaresatisfied
that, at the time of approving the
financialstatements,itisappropriate
toadoptthegoingconcernbasisin
preparingthefinancialstatementsof
boththeGroupandtheCompany.
Political donations
No political donations were made in the year
(2021:nil).
Cautionary statement
The purpose of this report is to provide
informationtothemembersoftheCompany.
It contains certain forward-looking
statements with respect to the operations,
performanceandfinancialconditionofthe
Group.Bytheirnature,thesestatements
involve uncertainty, since future events
and circumstances can cause results and
developments to differ materially from those
anticipated.Theforward-lookingstatements
reflectknowledgeandinformationavailable
at the date of preparation of this report and
the Company is under no obligation to
updatetheseforward-lookingstatements.
Nothing in this report should be construed
asaprofitforecast.
Independent auditors
A resolution to appoint
PricewaterhouseCoopers LLP as the
Company’s auditors will be proposed at
thenextAnnualGeneralMeeting.
Annual General Meeting
The Annual General Meeting will be held
attheofficesoftheCompanyat45Pall
Mall,LondonSW1Y5JGon16May2023
at11.00am.
By order of the Board
Anant Prakash
Company Secretary
28 March 2023
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
151Synthomer plc Annual Report 2022
Statement of Directors’ responsibilities
The Directors are responsible for
preparing the Annual Report and the
financial statements in accordance
with applicable law and regulation.
CompanylawrequirestheDirectors
topreparefinancialstatementsfor
eachfinancialyear.Underthatlaw
theDirectorshavepreparedtheGroup
financialstatementsinaccordancewith
UK-adopted international accounting
standardsandtheCompanyfinancial
statements in accordance with UK
Generally Accepted Accounting Practice
(UK Accounting Standards, comprising
FRS101ReducedDisclosureFramework,
andapplicablelaw).
Under company law the Directors must
notapprovethefinancialstatements
unlesstheyaresatisfiedthattheygivea
true and fair view of the state of affairs of
theGroupandCompanyandoftheprofit
or loss of the Group and Company for
thatperiod.Inpreparingthefinancial
statements,theDirectorsarerequiredto:
Select suitable accounting policies
and then apply them consistently
State whether applicable UK-adopted
IFRSs have been followed for the
Groupfinancialstatements,and
whether UK accounting standards,
comprisingFRS101,havebeen
followedfortheCompanyfinancial
statements,subjecttoanymaterial
departures disclosed and explained
inthefinancialstatements
Makejudgementsandaccounting
estimates that are reasonable and
prudent, and
Preparethefinancialstatementson
the going concern basis unless it is
inappropriate to presume that the
Group and Company will continue
inbusiness.
The Directors are responsible for
safeguarding the assets of the Group
andCompanyandhencefortaking
reasonable steps for the prevention and
detectionoffraudandotherirregularities.
The Directors are also responsible for
keepingadequateaccountingrecords
thataresufficienttoshowandexplain
the Group and Company’s transactions
and disclose with reasonable accuracy
atanytimethefinancialpositionofthe
Group and Company and enable them
toensurethatthefinancialstatements
and the Directors’ remuneration report
complywiththeCompaniesAct2006.
The Directors are responsible for the
maintenance and integrity of the Company’s
website (www.synthomer.com).
Legislation in the UK governing the
preparation and dissemination of
financialstatementsmaydifferfrom
legislationinotherjurisdictions.
Directors’ confirmations
The Directors consider that the Annual
Report and Accounts, taken as a whole,
is fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Group and
Company’s position and performance,
businessmodelandstrategy.
EachoftheDirectorsconfirmsthat,to
the best of their knowledge:
TheGroupfinancialstatements,
which have been prepared in
accordance with UK-adopted
international accounting
standards,and
TheCompanyfinancialstatements,
which have been prepared in
accordance with UK accounting
standards,comprisingFRS101,give
a true and fair view of the assets,
liabilitiesandfinancialpositionof
theCompany,and
The Directors’ report includes a
fairreviewofthedevelopmentand
performance of the business and the
position of the Group and Company,
together with a description of the
principal risks and uncertainties
thatitfaces.
By order of the Board
M Willome
ChiefExecutiveOfficer
L Liu
ChiefFinancialOfficer
Governance report
152 Synthomer plc Annual Report 2022
Governance report
Our Lipolan™ TERRA brand helps
reduce the carbon footprint typically
associated with making latex foam,
often used in mattresses, through
process efficiencies, reduced cleaning,
and lower transport costs.
Financial statements
Group financial statements
154 Independent auditors’ report
161 Consolidated income statement
162 Consolidated statement
ofcomprehensiveincome
162 Consolidated statement
ofchangesinequity
163 Consolidated balance sheet
164 Consolidatedcashflowstatement
164 Reconciliationofnetcashflowfrom
operating activities to movement
innetdebt
165 Notes to the consolidated
financialstatements
Company financial statements
203 Company statement
offinancialposition
204 Company statement
ofchangesinequity
205 Notes to the Company
financialstatements
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
153Synthomer plc Annual Report 2022
Independent auditors’ report
to the members of Synthomer plc
Report on the audit of the
financialstatements
Opinion
In our opinion:
• Synthomerplc’sgroupfinancialstatementsandcompany
financialstatements(the“financialstatements”)giveatrue
and fair view of the state of the group’s and of the company’s
affairsasat31December2022andofthegroup’slossand
thegroup’scashflowsfortheyearthenended;
• thegroupfinancialstatementshavebeenproperlyprepared
inaccordancewithUK-adoptedinternationalaccounting
standards as applied in accordance with the provisions of
theCompaniesAct2006;
• thecompanyfinancialstatementshavebeenproperly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting
Standards,includingFRS101“ReducedDisclosure
Framework”, and applicable law); and
• thefinancialstatementshavebeenpreparedinaccordance
withtherequirementsoftheCompaniesAct2006.
Wehaveauditedthefinancialstatements,includedwithinthe
Annual Report 2022 (the “Annual Report”), which comprise:
theConsolidatedbalancesheetandtheCompanystatement
offinancialpositionasat31December2022;theConsolidated
income statement, the Consolidated statement of
comprehensive income, the Consolidated and Company
statementsofchangesinequity,theConsolidatedcashflow
statementandtheReconciliationofnetcashflowfrom
operating activities to movement in net debt for the year then
ended;andthenotestothefinancialstatements,which
includeadescriptionofthesignificantaccountingpolicies.
Our opinion is consistent with our reporting to the
AuditCommittee.
Basis for opinion
We conducted our audit in accordance with International
StandardsonAuditing(UK)(“ISAs(UK)”)andapplicablelaw.
Our responsibilities under ISAs (UK) are further described
intheAuditors’responsibilitiesfortheauditofthefinancial
statementssectionofourreport.Webelievethattheaudit
evidencewehaveobtainedissufficientandappropriateto
provideabasisforouropinion.
Independence
We remained independent of the group in accordance with
theethicalrequirementsthatarerelevanttoourauditofthe
financialstatementsintheUK,whichincludestheFRC’sEthical
Standard, as applicable to listed public interest entities, and we
havefulfilledourotherethicalresponsibilitiesinaccordance
withtheserequirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard
werenotprovided.
Other than those disclosed in note 7 to the consolidated
financialstatements,wehaveprovidednonon-auditservices
tothecompanyintheperiodunderaudit.
Our audit approach
Overview
Audit scope
• Auditproceduresprovidecoverageof79%ofrevenueand75%
ofunderlyingoperatingprofit.
• Audit scope covers eight countries, performing procedures
over13components.
• FinanciallysignificantcomponentsintheUSAandGermany.
Key audit matters
• Impairment of goodwill and intangible assets (group)
• Valuationofdefinedbenefitpensionliabilitiesandlevel3
assets (group)
• Presentation of Special Items (group)
• Fair value accounting associated with the Adhesive
Technologiesacquisition(group)
• Recoverability of investment in, and amounts owed by,
groupundertakings(parent)
Materiality
• Overallgroupmateriality:£11,743,000(2021:£11,605,000)
basedonapproximately5%ofthreeyearweightedaverageof
underlyingprofitbeforetaxation(2021:threeyearweighted
averageofunderlyingprofitbeforetaxation).
• Overallcompanymateriality:£10,568,000(2021:£10,444,500)
basedon1%oftotalassetscappedat90%ofGroup
materiality.
• Performancemateriality:£8,807,000(2021:£8,703,000)
(group)and£7,926,000(2021:£7,830,000)(company).
The scope of our audit
As part of designing our audit, we determined materiality and
assessedtherisksofmaterialmisstatementinthefinancial
statements.
Key audit matters
Key audit matters are those matters that, in the auditors’
professionaljudgement,wereofmostsignificanceintheaudit
ofthefinancialstatementsofthecurrentperiodandincludethe
mostsignificantassessedrisksofmaterialmisstatement
(whetherornotduetofraud)identifiedbytheauditors,including
those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing
theeffortsoftheengagementteam.Thesematters,andany
comments we make on the results of our procedures thereon,
wereaddressedinthecontextofourauditofthefinancial
statements as a whole, and in forming our opinion thereon,
andwedonotprovideaseparateopiniononthesematters.
Thisisnotacompletelistofallrisksidentifiedbyouraudit.
Impairment of goodwill and intangible assets and fair value
accounting associated with the Adhesive Technologies
acquisitionarenewkeyauditmattersthisyear.Uncertaintax
provisions, which was a key audit matter last year, is no longer
includedbecauseofnosignificantchangestothe
methodologiesortaxprovisionsintheyear.Otherwise,thekey
auditmattersbelowareconsistentwithlastyear.
154 Synthomer plc Annual Report 2022
Groupfinancialstatements
Key audit matter How our audit addressed the key audit matter
Impairment of goodwill and intangible assets (group)
Assetoutinnote14,thegrouphadgoodwillof£480.8m
(2021:£487.0m)at31December2022,afteran
impairmentof(£133.7m)(2021:£nil).Assetoutinnote15,
thegrouphadacquiredintangibleassetsof£523.6m
(2021:£297.6m)at31December2022.AssetoutinNote
16,thegrouphadotherintangibleassetsof£60.9m(2021:
£46.4m)at31December2022.Thesearesignificantinthe
contextoftheoverallbalancesheetofthegroup.We
consider this to be a key audit matter because the
estimates underlying the recoverability of goodwill and
intangibleassetsaresubjecttohighestimation
uncertainty, particularly in a year where an impairment has
beenidentified.Asfairvaluelesscosttosellresultina
lower amount, we focused our audit effort on the “value-in-
use” calculations supporting the valuation of goodwill and
otherintangibleassets.Management’sassessmentofthe
“value in use" of the group's cash generating units involves
judgementsaboutthefutureresultsofthebusinesses,
particularly assumptions around growth rates and the
discountratesappliedtofuturecashflowforecasts,
wherethereisahigherdegreeofsensitivity.
Procedures performed included:
• Understanding business processes and controls related to the
assessment of the carrying value of goodwill and other intangible assets
forimpairment.
• Assessing the reasonableness of the impairment model and
understandingmanagement'sprocessandjudgementsutilisedfor
developingestimatesandassumptions.Thisincludedtestingofthe
underlying“value-in-use”calculations.
• Performing a retrospective review of the prior period estimates by
comparingthistoactualresultsinthecurrentperiod.
• Engaging our internal valuation specialists to assess the reasonableness
of the weighted average cost of capital and growth rate assumptions
usedbymanagement.
• Assessingcorroboratingorcontradictoryevidencerelatingtosignificant
assumptionsinthecashflowprojections.
• Performingsensitivityanalysesbasedonreasonablypossibleoutcomes.
• Checkingthemathematicalaccuracyofthecalculations.
• Assessing management’s calculation of fair value less cost to sell using
forecastcashflowsandthemarketmultipleusedbySynthomerintheir
originalvaluation,notingthatthiswaslowerthanthecalculatedvalueinuse.
• Assessing management’s impairment assessment on assets other than
goodwill, because of the goodwill impairment recognised, to determine
whetheranyoftheseassetsshouldbeimpairedaswell.
• Assessing the impact of climate change included in management’s
cashflowforecast.
• Reviewingthedisclosuresinthefinancialstatementsinrespectofthe
carryingvalueofgoodwillandotherintangibleassets.Basedonthe
procedures performed, we noted no material issues from our work other
thantheimpairmentrecognised.
Valuation of defined benefit pension liabilities
and level 3 assets (group)
Assetoutinnote26,thegrouphad£73.4m(2021:
£122.4m)netliabilitiesasat31December2022inrelation
todefinedbenefitpensionschemes.Theseprimarily
representtheYuleCattogroupretirementbenefitsscheme
intheUKwithanetassetpositionof£5.9m(2021:net
liabilitiesof£4.6m),theOMNOVASolutionsConsolidated
PensionPlanintheUSwithnetliabilitiesof£10.6m(2021:
netliabilitiesof£27.7m)andanunfundedschemein
Germanywithnetliabilitiesof£57.7m(2021:netliabilities
of74.7m).Thegroupusesthirdpartyactuariestocalculate
pensionliabilities.Thevaluationoftheseliabilitiesisbased
on a number of assumptions and the calculation is highly
sensitivetosmallchangesintheassumptions.For
instance,changesininflation,mortalitytablesand
discountratecanhaveasignificantimpactonthe
valuationoftheliabilityrecorded.TheUKpensionscheme
endedupinanetassetpositionforthefirsttime,the
recognitionofsuchassetsisjudgemental.Thepension
asset also contains level 3 and other complex assets
(complex PIVs where assets are not traded on Recognised
Investment Exchanges (RIE)) totalling £39m as at
31December2022(31December2021:£266m),whichare
complex in nature to value and therefore we deem there to
beariskwithrespecttothevaluationoftheseassets.
Inordertoassesstheidentifiedriskswe:
• 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
anexternalactuarialreportfortheUSscheme.
• We (and PwC US) held discussions with the external actuaries and were
satisfiedthatthescopeoftheirworkwassuchthatwecouldusethiswork
toprovideevidenceforthepurposeofouraudit.
• Weassessedthecompetencyandobjectivityoftheexternalactuariesto
perform the year end calculations by considering their technical expertise
andindependencefromthegroup.
• 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
expectationsforsimilarschemesasattheyearend.
• Wereviewedsection14.8of“Constitutionalrules”oftheUKpensionscheme
andconcludedthatthenetassetoftheUKschemecouldberecognised.
• 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 control reports of
the service provider responsible for the valuation of the fund, including
obtaining bridging letters where the control report does not cover the
currentfinancialperiodofSynthomerplc;obtainedfundtransactionsclose
totheyearend(whereavailable),andobtainedthirdpartyconfirmationfrom
theinvestmentmanagers.
• We also considered the appropriateness of the disclosures within the
financialstatements.Wenotednomaterialissuesfromtheaboveprocedures.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS – Group financial statements OTHER INFORMATION
155Synthomer plc Annual Report 2022
Independent auditors’ report continued
to the members of Synthomer plc
Key audit matter How our audit addressed the key audit matter
Presentation of Special Items (group)
The group presents two measures of performance in the
income statement; statutory and underlying, the latter after
adjustingforcertainitemsofincomeorexpenses,as
management believes these measures provide additional
useful information on the underlying trends, performance
andpositionofthegroup.Thedeterminationofwhich
itemsofincomeorexpenseareclassifiedasSpecialitems
issubjecttojudgementandthereforeusersofthefinancial
statementscouldbemisledifamountsarenotclassified
orcalculatedappropriately.Descriptionoftheamounts
presented as Special items are included in note 4 to the
financialstatements.
WeconsideredtheappropriatenessofamountsclassifiedasSpecial
items.Todothisweconsidered:
• The group's accounting policy on special items and Pronouncements by
theFinancialReportingCouncilonthismatter.
• Weassessedtheincomeandexpensesclassifiedasspecialitems
againstthegroup'saccountingpolicies.
• Wechallengedmanagementontheappropriatenessoftheclassification
ofsuchSpecialitems,beingmindfulthatclassificationshouldbe
even-handedbetweengainsandlosses,thebasisoftheclassification
should be clearly disclosed and a clear reconciliation to statutory
measuresprovidedandappliedconsistentlyoneyeartothenext.
• WechallengedmanagementonthequantumoftheSpecialitems,and
theestimatesunderpinningthem.Havingconsideredthenatureand
quantumoftheseitems,overallwearesatisfiedthatthepresentationof
specialitemsinthefinancialstatementsfortheyearended
31December2022ismateriallyappropriate.
Fair value accounting associated with the Adhesive
Technologies acquisition (group)
Assetoutinnote30,thegroupcompletedtheacquisition
ofEastman'sAdhesiveResinsbusinesson1April2022for
atotalconsiderationof£779.1m.Managementengaged
experts to perform a purchase price allocation (“PPA”)
exerciseinrelationtointangibles,plantandequipment
andinventory.Theallocationofthepurchasepricetothe
acquiredassetsandliabilitiesisconsideredtobeakey
auditmatterastheidentificationoftheacquiredassets
andliabilities,andtheirsubsequentvaluation,recognition
and measurement, is based to a large extent on estimates
andassumptionsinvolvingahighdegreeofjudgement.
Our procedures included the following:
• Assessing the business processes and controls related to the purchase
priceallocation.
• Reviewing the purchase agreement with a focus on unusual terms and
conditionsandmorecomplexformsofconsideration.
• Comparingtheidentifiedassetsandliabilitieswithothersourcesof
information, such as Board presentations, that might suggest omitted
items.
• Obtaining the report prepared by management's expert used to value
certainoftheacquiredassetsandutilisingourownspecialiststoassess
thevaluationtechniques,assumptionsandsourcedata,usedto
determinethesefairvalues.
• Evaluating the allocation of the purchase price to the relative fair values
oftheassetsandliabilitiesacquired.
• Consideringtheappropriatenessofthedisclosureswithinthefinancial
statements.Basedontheproceduresperformed,wenotednomaterial
issuesfromourwork.
Recoverability of investment in, and amounts owed
by, group undertakings (parent)
As disclosed in notes 3 and 6 of the parent company's
financialstatements,thecompanyheldaninvestmentin
subsidiariesof£733.4m(2021:£537.6m)andamounts
owedbygroupundertakingsof£1,987.3m(2021:
£1,275.0m)at31December2022.Theassessmentofthe
recoverabilityoftheseassetsrequiredtheapplicationof
managementjudgement,particularlyindetermining
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
andamountsowedbygroupundertakingsarerecoverable.
Aschangestothesejudgementsandestimatescouldhave
amaterialimpactonthecompany'sfinancialstatements,
weconsiderthistobeakeyauditmatter.
Our procedures included the following:
• Assessing the recoverable value by reference to the net assets of the
underlying subsidiaries and amounts owed by group undertakings with
reference to the director’s intentions for the settlement of group-wide
intercompanybalances.
• Assessing the impact of climate change included in management’s
cashflowforecast.
• Verifying that the recoverable values of the investment was consistent
with the recoverable value of the CGUs tested for goodwill impairment
purposes, leveraging the audit work undertaken as part of the group
audit.Basedontheproceduresperformed,wenotednomaterialissues
fromourwork.
Groupfinancialstatements
156 Synthomer plc Annual Report 2022
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enoughworktobeabletogiveanopiniononthefinancial
statements as a whole, taking into account the structure of
thegroupandthecompany,theaccountingprocessesand
controls,andtheindustryinwhichtheyoperate.
Assetoutinnote5'Segmentalanalysis',thegroupreportsits
resultsasfivesegments:'PerformanceElastomers','Functional
Solutions', 'Industrial Specialities', 'Adhesive Technologies' and
'AcrylateMonomers'.Thegroup'sfinancialstatementsarea
consolidation of reporting units, being holding companies,
intermediate holding companies and operating companies,
across24countries.Twocountries,beingtheUSAand
Germany,accountforasignificantportionofthegroup's
results.Weaccordinglyfocusedourworkontwoofthe
reportingunitsinthesecountries,whichweresubjecttoaudits
oftheircompletefinancialinformation.Inaddition,toincrease
ourcoverageofthegroup'srevenueandunderlyingprofit
before tax we performed full scope audit procedures at an
additional eleven reporting units located in the UK, Italy,
Germany,Malaysia,theCzechRepublic,AustriaandFrance.
Thesecomponentsaccountedfor79%ofthegroup'srevenue,
75%ofthegroup'sunderlyingoperatingprofit.
Where work was performed by component auditors, we
determined the level of involvement we needed to have in the
audit work at those reporting units to be able to conclude
whethersufficientappropriateauditevidencehadbeen
obtainedasabasisforouropiniononthegroup'sfinancial
statementsasawhole.Duringtheaudit,seniormembersofthe
group team held a number of meetings with the audit teams
from key reporting units in the UK, Germany, Malaysia and the
USA, and reviewed the work performed by these teams over
thoseareasofhigherauditrisk.Thegroupauditpartneralso
visitedMalaysiaaspartoftheauditplanningprocess.
The impact of climate risk on our audit
Aspartofourauditwemadeenquiriesofmanagementto
understand the process management has adopted to assess
the extent of the potential impact of climate risk on the group’s
financialstatementsandsupportthedisclosuresmadewithin
theTCFDreport.Inadditiontoenquirieswithmanagement,we
also read the governance processes in place to assess climate
risk.Wechallengedthecompletenessofmanagement’s
climateriskassessmentbyreadingthegroup’swebsite/
communicationsfordetailsofclimaterelatedimpacts.
Managementhavemadecommitmentstoachievenetzero
carbonemissionsby2050,andwithVision2030theyare
workingontheirpathwaytowardsthis.Managementconsiders
the impact of climate risk does not give rise to a potential
materialfinancialstatementimpact.Usingourknowledgeof
the business we evaluated management’s risk assessment and
itsestimatesassetoutinnote2ofthefinancialstatements
andresultingdisclosureswheresignificant.Weconsidered
impairment of non-current assets, specially impairment of
goodwill and intangible assets, as the area to potentially be
materiallyimpactedbyclimateriskandconsequentlywe
focusedourauditworkinthisarea.Torespondtotheaudit
risksidentifiedinthisareawetailoredourauditapproachto
address these, in particular, we challenged management on
how the impact of climate commitments made by the group
would impact the assumptions within the discounted cash
flowspreparedbymanagementthatareusedinthegroup’s
impairmentanalysis.Wealsoconsideredtheconsistencyof
thedisclosuresinrelationtoclimatechange(includingthe
disclosures in the Task Force on Climate-related Financial
Disclosures (TCFD) section) within the Annual Report with
thefinancialstatementsandourknowledgeobtainedfromour
audit.Ourproceduresdidnotidentifyanymaterialimpactinthe
contextofourauditofthefinancialstatementsasawhole,or
ourkeyauditmattersfortheyearended31December2022.
Materiality
Thescopeofourauditwasinfluencedbyourapplicationof
materiality.Wesetcertainquantitativethresholdsfor
materiality.These,togetherwithqualitativeconsiderations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financialstatementlineitemsanddisclosuresandinevaluating
the effect of misstatements, both individually and in aggregate
onthefinancialstatementsasawhole.
Basedonourprofessionaljudgement,wedetermined
materialityforthefinancialstatementsasawholeasfollows:
Financial statements – group Financial statements – company
Overall materiality £11,743,000(2021:£11,605,000) £10,568,000(2021:£10,444,500)
How we
determinedit
approximately5%ofthreeyearweightedaverageof
underlyingprofitbeforetaxation(2021:threeyear
weightedaverageofunderlyingprofitbeforetaxation)
1%oftotalassetscappedat90%ofGroup
materiality
Rationale for
benchmark applied
Webelievethatunderlyingprofitbeforetaxation,
beingprofitbeforetaxadjustedforspecialitems,isa
key metric for investors and is used by the Board in
measuringtheGroup'sfinancialperformance.
We believe that total assets is the primary measure
used by the shareholders in assessing the performance
of the company, and is a generally accepted
benchmark.Thevalueiscappedforthepurposeof
theGroupauditwithreferencetoGroupmateriality.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS – Group financial statements OTHER INFORMATION
157Synthomer plc Annual Report 2022
Independent auditors’ report continued
to the members of Synthomer plc
For each component in the scope of our group audit, we
allocated a materiality that is less than our overall group
materiality.Therangeofmaterialityallocatedacross
componentswasbetween£1,300,000to£8,000,000.Certain
components were audited to a local statutory audit materiality
thatwasalsolessthanouroverallgroupmateriality.
We use performance materiality to reduce to an appropriately
low level the probability that the aggregate of uncorrected and
undetectedmisstatementsexceedsoverallmateriality.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
samplesizes.Ourperformancematerialitywas75%(2021:75%)of
overallmateriality,amountingto£8,807,000(2021:£8,703,000)for
thegroupfinancialstatementsand£7,926,000(2021:£7,830,000)
forthecompanyfinancialstatements.
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
ournormalrangewasappropriate.
We agreed with the Audit Committee that we would report to
themmisstatementsidentifiedduringourauditabove£587,000
(groupaudit)(2021:£380,000)and£528,000(companyaudit)
(2021:£522,000)aswellasmisstatementsbelowthoseamounts
that,inourview,warrantedreportingforqualitativereasons.
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
concernassumption.Wediscussedwithmanagementthe
assumptions applied in the going concern review so we could
understand and challenge the rationale for those assumptions,
usingourknowledgeofthebusiness.Wetestedthemodel’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
thedateofapprovalofthefinancialstatements.
• We reviewed management’s sensitivity scenarios including
theirseverebutplausibledownside.Weconsideredpotential
mitigating actions available to the group that are achievable
andwithinmanagement’scontrol.Wethenassessedthe
availabilityofliquidresourcesunderthedifferentscenarios
and the associated covenant tests applicable; and
• We also assessed additional downside sensitivities and
consideredtheimpactoncovenantsandliquidityheadroom.
Basedontheworkwehaveperformed,wehavenotidentified
any material uncertainties relating to events or conditions that,
individuallyorcollectively,maycastsignificantdoubtonthe
group's and the company’s ability to continue as a going
concern for a period of at least twelve months from when the
financialstatementsareauthorisedforissue.
Inauditingthefinancialstatements,wehaveconcludedthatthe
members’ use of the going concern basis of accounting in the
preparationofthefinancialstatementsisappropriate.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the group's
andthecompany'sabilitytocontinueasagoingconcern.
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’
statementinthefinancialstatementsaboutwhetherthe
members considered it appropriate to adopt the going concern
basisofaccounting.
Our responsibilities and the responsibilities of the members
with respect to going concern are described in the relevant
sectionsofthisreport.
Reporting on other information
The other information comprises all of the information in the
AnnualReportotherthanthefinancialstatementsandour
auditors’reportthereon.Themembersareresponsibleforthe
other information, which includes reporting based on the Task
Force on Climate-related Financial Disclosures (TCFD)
recommendations.Ouropiniononthefinancialstatements
does not cover the other information and, accordingly, we do
not express an audit opinion or, except to the extent otherwise
explicitlystatedinthisreport,anyformofassurancethereon.
Inconnectionwithourauditofthefinancialstatements,our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially
inconsistentwiththefinancialstatementsorourknowledge
obtained in the audit, or otherwise appears to be materially
misstated.Ifweidentifyanapparentmaterialinconsistencyor
materialmisstatement,wearerequiredtoperformprocedures
to conclude whether there is a material misstatement of the
financialstatementsoramaterialmisstatementoftheother
information.If,basedontheworkwehaveperformed,we
conclude that there is a material misstatement of this other
information,wearerequiredtoreportthatfact.Wehavenothing
toreportbasedontheseresponsibilities.
With respect to the Strategic report and Directors' report, we
alsoconsideredwhetherthedisclosuresrequiredbytheUK
CompaniesAct2006havebeenincluded.
Based on our work undertaken in the course of the audit, the
CompaniesAct2006requiresusalsotoreportcertainopinions
andmattersasdescribedbelow.
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'reportfortheyearended31December2022is
consistentwiththefinancialstatementsandhasbeenprepared
inaccordancewithapplicablelegalrequirements.
In light of the knowledge and understanding of the group and
company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the
StrategicreportandDirectors'report.
Directors’ Remuneration
In our opinion, the part of the Annual report on remuneration to
be audited has been properly prepared in accordance with the
CompaniesAct2006.
Groupfinancialstatements
158 Synthomer plc Annual Report 2022
Corporate governance statement
TheListingRulesrequireustoreviewthemembers’statements
in relation to going concern, longer-term viability and that part
of the corporate governance statement relating to the
company’s compliance with the provisions of the UK Corporate
GovernanceCodespecifiedforourreview.Ouradditional
responsibilities with respect to the corporate governance
statement as other information are described in the Reporting
onotherinformationsectionofthisreport.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement, included within the Governance report
ismateriallyconsistentwiththefinancialstatementsandour
knowledge obtained during the audit, and we have nothing
material to add or draw attention to in relation to:
• Themembers’confirmationthattheyhavecarriedouta
robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being
managed or mitigated;
• Themembers’statementinthefinancialstatementsabout
whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their
identificationofanymaterialuncertaintiestothegroup’s
andcompany’sabilitytocontinuetodosooveraperiod
ofatleasttwelvemonthsfromthedateofapprovalofthe
financialstatements;
• The members’ explanation as to their assessment of the
group's and company’s prospects, the period this assessment
covers and why the period is appropriate; and
• The members’ statement as to whether they have a
reasonable expectation that the company will be able to
continue in operation and meet its liabilities as they fall due
over the period of its assessment, including any related
disclosuresdrawingattentiontoanynecessaryqualifications
orassumptions.
Our review of the members’ statement regarding the longer-
term viability of the group and company was substantially less
inscopethananauditandonlyconsistedofmakinginquiries
and considering the members’ process supporting their
statement; checking that the statement is in alignment with the
relevant provisions of the UK Corporate Governance Code; and
considering whether the statement is consistent with the
financialstatementsandourknowledgeandunderstandingof
the group and company and their environment obtained in the
courseoftheaudit.
In addition, based on the work undertaken as part of our audit,
we have concluded that each of the following elements of the
corporate governance statement is materially consistent with
thefinancialstatementsandourknowledgeobtainedduring
theaudit:
• The members’ statement that they consider the Annual
Report, taken as a whole, is fair, balanced and understandable,
and provides the information necessary for the members to
assess the group’s and company's position, performance,
business model and strategy;
• The section of the Annual Report that describes the review
ofeffectivenessofriskmanagementandinternalcontrol
systems; and
• The section of the Annual Report describing the work of the
AuditCommittee.
We have nothing to report in respect of our responsibility to
report when the members’ statement relating to the company’s
compliance with the Code does not properly disclose a
departurefromarelevantprovisionoftheCodespecifiedunder
theListingRulesforreviewbytheauditors.
Responsibilities for the financial statements and
theaudit
Responsibilities of the members for the financial statements
As explained more fully in the Statement of Directors'
responsibilities, the members are responsible for the
preparationofthefinancialstatementsinaccordancewiththe
applicableframeworkandforbeingsatisfiedthattheygivea
trueandfairview.Themembersarealsoresponsibleforsuch
internal control as they determine is necessary to enable the
preparationoffinancialstatementsthatarefreefrommaterial
misstatement,whetherduetofraudorerror.
Inpreparingthefinancialstatements,themembersare
responsible for assessing the group’s and the company’s ability
to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the members either intend to
liquidatethegrouporthecompanyortoceaseoperations,
orhavenorealisticalternativebuttodoso.
Auditors’ responsibilities for the audit of the financial
statements
Ourobjectivesaretoobtainreasonableassuranceabout
whetherthefinancialstatementsasawholearefreefrom
material misstatement, whether due to fraud or error, and to
issueanauditors’reportthatincludesouropinion.Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will
alwaysdetectamaterialmisstatementwhenitexists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonablybeexpectedtoinfluencetheeconomicdecisions
ofuserstakenonthebasisofthesefinancialstatements.
Irregularities, including fraud, are instances of non-compliance
withlawsandregulations.Wedesignproceduresinlinewith
our responsibilities, outlined above, to detect material
misstatementsinrespectofirregularities,includingfraud.
Theextenttowhichourproceduresarecapableofdetecting
irregularities,includingfraud,isdetailedbelow.
Based on our understanding of the group and industry, we
identifiedthattheprincipalrisksofnon-compliancewithlaws
and regulations related to breaches of environmental, health
and safety and competition regulations, and we considered the
extent to which non-compliance might have a material effect on
thefinancialstatements.Wealsoconsideredthoselawsand
regulationsthathaveadirectimpactonthefinancial
statements such as the Companies Act 2006, UK tax legislation
andequivalentlocallawsandregulationsapplicabletomaterial
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS – Group financial statements OTHER INFORMATION
159Synthomer plc Annual Report 2022
Independent auditors’ report continued
to the members of Synthomer plc
componentteams.Weevaluatedmanagement’sincentives
andopportunitiesforfraudulentmanipulationofthefinancial
statements (including the risk of override of controls), and
determined that the principal risks were related to posting
inappropriatejournalentriestoincreaserevenueand
managementbiasinaccountingestimates.Thegroup
engagement team shared this risk assessment with the
component auditors so that they could include appropriate
auditproceduresinresponsetosuchrisksintheirwork.Audit
procedures performed by the group engagement team and/or
component auditors included:
• Discussions with management and internal audit, including
consideration of known or suspected instances of non-
compliance with laws and regulations and fraud;
• Evaluation of management's controls designed to prevent
anddetectirregularities;
• Challengingassumptionsandjudgementsmadeby
managementintheirsignificantaccountingestimates,in
particular in relation to impairment of goodwill, going concern
andviabilityandthevaluationofdefinedbenefitscheme
liabilities.Whereweconsideredappropriate,weheld
discussions with the Group’s legal advisors;
• Identifyingandtestingjournalentries,inparticularanyjournal
entries posted with unusual account combinations (for
example credit to revenue with a debit entry to an unexpected
account)orjournalspostedbyseniormanagement.
There are inherent limitations in the audit procedures described
above.Wearelesslikelytobecomeawareofinstancesof
non-compliance with laws and regulations that are not closely
relatedtoeventsandtransactionsreflectedinthefinancial
statements.Also,theriskofnotdetectingamaterial
misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional
misrepresentations,orthroughcollusion.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques.However,ittypicallyinvolvesselectingalimited
number of items for testing, rather than testing complete
populations.Wewilloftenseektotargetparticularitemsfor
testingbasedontheirsizeorriskcharacteristics.Inothercases,
we will use audit sampling to enable us to draw a conclusion
aboutthepopulationfromwhichthesampleisselected.
A further description of our responsibilities for the audit of the
financialstatementsislocatedontheFRC’swebsiteat:
www.frc.org.uk/auditorsresponsibilities.Thisdescriptionforms
partofourauditors’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
Chapter3ofPart16oftheCompaniesAct2006andfornoother
purpose.Wedonot,ingivingtheseopinions,acceptorassume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come
savewhereexpresslyagreedbyourpriorconsentinwriting.
Otherrequiredreporting
Companies Act 2006 exception reporting
UndertheCompaniesAct2006wearerequiredtoreporttoyou
if, in our opinion:
• we have not obtained all the information and explanations we
requireforouraudit;or
• adequateaccountingrecordshavenotbeenkeptbythe
company,orreturnsadequateforouraudithavenotbeen
received from branches not visited by us; or
• certaindisclosuresofmembers’remunerationspecifiedby
law are not made; or
• thecompanyfinancialstatementsandthepartoftheAnnual
report on remuneration to be audited are not in agreement
withtheaccountingrecordsandreturns.
Wehavenoexceptionstoreportarisingfromthisresponsibility.
Appointment
Following the recommendation of the Audit Committee, we
wereappointedbythememberson12July2012toauditthe
financialstatementsfortheyearended31December2012and
subsequentfinancialperiods.Theperiodoftotaluninterrupted
engagementis11years,coveringtheyearsended31December
2012to31December2022.
Other matter
AsrequiredbytheFinancialConductAuthorityDisclosure
GuidanceandTransparencyRule4.1.14R,thesefinancial
statementsformpartoftheESEF-preparedannualfinancial
reportfiledontheNationalStorageMechanismoftheFinancial
Conduct Authority in accordance with the ESEF Regulatory
TechnicalStandard(‘ESEFRTS’).Thisauditors’reportprovides
noassuranceoverwhethertheannualfinancialreporthasbeen
preparedusingthesingleelectronicformatspecifiedinthe
ESEFRTS.
David Beer (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Watford
28 March 2023
Groupfinancialstatements
160 Synthomer plc Annual Report 2022
Consolidated income statement
for the year ended 31 December 2022
2022 2021
Note
Underlying
performance
£m
Special items
£m
IFRS
£m
Underlying
performance
£m
Special items
£m
IFRS
£m
Continuing operations
Revenue 5 2 , 3 8 3 .9 – 2 , 3 8 3 .9 2 ,14 4 . 2 – 2 ,14 4 . 2
Company and subsidiaries operating profit before Special Items 16 0. 8 – 16 0 . 8 4 30. 2 – 4 30. 2
Amortisation of acquired intangibles 4 – (4 4 .8 ) (4 4 . 8 ) – (3 0 .1 ) (3 0 .1 )
Restructuring and site closure costs 4 – (19. 2 ) (19. 2 ) – (2 9.7 ) (2 9.7 )
Acquisition costs and related gains 4 – (6.5 ) (6. 5 ) – (11 .9 ) (11 .9 )
Sale of business 4 – (0. 3 ) (0. 3 ) – (7. 4 ) (7. 4 )
Regulatory Fine 4 – 21. 5 21. 5 – (5 7. 2 ) (5 7. 2 )
Impairment charge 4 – (13 3 .7 ) (13 3 .7 ) – – –
Company and subsidiaries operating profit 16 0. 8 (18 3 .0 ) (2 2 . 2 ) 43 0.2 (13 6 . 3 ) 2 9 3 .9
Share of joint ventures 1.7 – 1.7 2.6 – 2.6
Operating profit/(loss) 6 16 2 . 5 (18 3. 0 ) (2 0. 5 ) 4 32 .8 (13 6 . 3 ) 296.5
Interest payable 9 (4 4. 8 ) – (4 4 . 8 ) (2 7. 9 ) – (2 7. 9 )
Interest receivable 9 1.6 – 1.6 1. 0 – 1. 0
Fair value gain on unhedged interest derivatives 4 – 25. 1 25. 1 – 6. 2 6 .2
Net interest expense on defined benefit obligations 9 (1. 2 ) – (1.2 ) (2 .0 ) – (2 .0 )
Interest element of lease payments 9 (1. 4 ) – (1. 4 ) (1.5 ) – (1. 5 )
Finance costs (4 5 .8 ) 25. 1 (2 0.7 ) (30.4 ) 6 .2 (24 .2 )
Profit/(loss) before taxation 116 . 7 (1 5 7. 9 ) (41. 2 ) 4 02 .4 (1 3 0 .1 ) 272.3
Taxation 10 (2 7. 6 ) 4 2 .9 15 . 3 (9 3. 6 ) 20. 3 (7 3. 3 )
Profit/(loss) for the year from continuing operations 8 9 .1 (11 5 . 0 ) (25. 9 ) 308 .8 (10 9 .8 ) 19 9 . 0
Profit/(loss) for the year from discontinuing
operationsattributable to equity holders of the parent 31 7. 8 (14 .9 ) (7. 1 ) 16 . 8 (5. 8 ) 11 . 0
Profit/(loss) for the year 9 6.9 (12 9.9 ) (33 .0 ) 3 25.6 (115 . 6 ) 2 10 .0
Profit attributable to non-controlling interests 0.5 (1. 0 ) (0.5 ) 0.4 0 .9 1. 3
Profit/(loss) attributable to equity holders of the parent 96.4 (1 28.9 ) (32 .5 ) 325.2 (116 . 5 ) 2 0 8 .7
Earnings per share
– Basic from continuing operations 13 19. 0 p (24 .4 )p (5.4 )p 7 1. 3 p (25 .6 )p 4 5 .7 p
– Diluted from continuing operations 13 18 .9 p (24 .3 )p (5.4 )p 7 1 .1 p (2 5.5 )p 4 5.6 p
– Basic 13 2 0.6 p (2 7. 6 )p (7. 0 )p 75.2 p (2 6 .9 )p 4 8.3 p
– Diluted 13 2 0.6 p (2 7. 6 )p (7. 0 )p 74 .9 p (26. 8 )p 4 8 .1 p
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS – Group financial statements OTHER INFORMATION
161Synthomer plc Annual Report 2022
Note
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Hedging &
translation
reserve
£m
Retained
earnings
£m
Total equity
holdings of
the parent
£m
Non-controlling
interests
£m
Total Equity
£m
At 1 January 2022 4 6.7 620.0 0 .9 (3 2 .1 ) 383.8 1 , 019 . 3 13 . 7 1, 0 33 . 0
Loss for the year – – – – (3 2 .5 ) (3 2 .5 ) (0.5 ) (3 3.0 )
Other comprehensive
income for the year – – – 10 8 . 0 22 .5 13 0 . 5 0.8 131. 3
Total comprehensive
income for the year – – – 10 8 .0 (10 . 0 ) 98.0 0.3 98.3
Dividends 12 – – – – (9 9. 5 ) (9 9. 5 ) – (9 9.5 )
Share-based payments – – – – (0 .8 ) (0. 8 ) – (0.8 )
At 31 December 2022 4 6.7 620.0 0 .9 75 .9 273.5 1 , 0 1 7. 0 14 .0 1, 0 31. 0
Note
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Hedging &
translation
reserve
£m
Retained
earnings
£m
Total equity
holdings of
the parent
£m
Non-controlling
interests
£m
Total Equity
£m
At 1 January 2021 42 .5 4 2 1 .1 0 .9 (41.9 ) 19 2 . 4 6 15 . 0 1 3 .1 6 2 8 .1
Profit for the year – – – – 2 0 8 .7 2 0 8 .7 1. 3 210 . 0
Other comprehensive
income for the year – – – 9.8 5 5.0 6 4.8 (0 .2 ) 6 4.6
Total comprehensive
income for the year – – – 9.8 2 6 3.7 27 3.5 1 .1 2 74 . 6
Dividends 12 – – – – (73.5 ) (73 .5 ) (0 .5 ) (74 . 0 )
Issue of shares 27 4.2 19 8 .9 – – – 2 0 3 .1 – 2 0 3 .1
Share-based payments – – – – 1. 2 1. 2 – 1. 2
At 31 December 2021 4 6 .7 620.0 0 .9 (3 2 .1 ) 3 83.8 1 , 0 19. 3 13 .7 1 ,033.0
Consolidated statement of comprehensive income
for the year ended 31 December 2022
Consolidated statement of changes in equity
for the year ended 31 December 2022
2022 2021
Note
Equity holders
of the parent
£m
Non-controlling
interests
£m
Total
£m
Equity holders
of the parent
£m
Non-controlling
interests
£m
Total
£m
(Loss)/profit for the year (32 .5 ) (0 .5 ) (3 3.0 ) 20 8 .7 1. 3 2 10. 0
Actuarial gains 26 3 4 .1 – 3 4 .1 66. 8 – 6 6.8
Tax relating to components of other
comprehensiveincome 10 (11 . 6 ) – (11 . 6 ) (11. 8 ) – (11 . 8 )
Total items that will not be reclassified to profit or loss 2 2.5 – 2 2.5 5 5.0 – 55 .0
Exchange differences on translation of foreign operations 9 5.9 0.8 9 6.7 2 .8 (0. 2 ) 2.6
Exchange differences recycled on sale of business – – – 0.3 – 0. 3
Fair value gain on hedged interest derivatives 9.7 – 9.7 3. 4 – 3.4
Gains on net investment hedges taken to equity 2 .4 – 2 .4 3 .3 – 3.3
Total items that may be reclassified subsequently
to profit or loss 10 8 .0 0.8 10 8. 8 9.8 (0 .2 ) 9. 6
Other comprehensive income/(expense) for the year 13 0 . 5 0.8 131. 3 64 .8 (0. 2 ) 6 4.6
Total comprehensive income for the year 98.0 0.3 98. 3 27 3.5 1 .1 2 74 . 6
Groupfinancialstatements
162 Synthomer plc Annual Report 2022
Consolidated balance sheet
as at 31 December 2022
Note
2022
£m
2021
£m
Non-current assets
Goodwill 14 4 80.8 4 8 7. 0
Acquired intangible assets 15 52 3.6 2 9 7. 6
Other intangible assets 16 60 .9 46 .4
Property, plant and equipment 17 753 .6 508.3
Deferred tax assets 11 50.3 2 9. 2
Defined benefit asset 26 5 .9 –
Investment in joint ventures 18 8 .1 7. 4
Total non-current assets 1,8 8 3 . 2 1, 3 75 .9
Current assets
Inventories 19 4 0 7. 9 253.7
Trade and other receivables 20 271.6 3 12 . 8
Current tax assets 10 34. 3 –
Cash and cash equivalents 21 2 2 7. 7 5 05.3
Derivative financial instruments 22 26 .7 3.2
Assets classified as held for sale 31 19 6 . 2 –
Total current assets 1,1 6 4 . 4 1, 0 75 . 0
Total assets 3,047 .6 2 , 4 5 0 .9
Current liabilities
Borrowings 21 (18 . 5 ) –
Trade and other payables 24 (4 6 0 . 8 ) (414 . 2 )
Lease liabilities 23 (10 .6 ) (8 .8 )
Current tax liabilities 10 (3 3 .6 ) (4 5 . 2 )
Provisions for other liabilities and charges 25 (13 .7 ) (8 5 .2 )
Derivative financial instruments 22 – (1 0 .1 )
Liabilities classified as held for sale 31 (4 5. 5 ) –
Total current liabilities (5 82 .7 ) (5 63 .5 )
Non-current liabilities
Borrowings 21 (1 , 2 3 4 .1 ) (619 . 5 )
Trade and other payables 24 (0 .4 ) (2. 3 )
Lease liabilities 23 (3 4.9 ) (34. 7 )
Deferred tax liabilities 11 (4 4 .9 ) (5 7. 5 )
Retirement benefit obligations 26 (79. 3 ) (12 2 . 4 )
Provisions for other liabilities and charges 25 (4 0 . 3 ) (18 . 0 )
Total non-current liabilities (1, 4 3 3 .9 ) (8 5 4. 4 )
Total liabilities (2 , 016 . 6 ) (1 , 4 1 7. 9 )
Net assets 1, 0 31. 0 1 ,033.0
Equity
Share capital 27 4 6.7 4 6.7
Share premium 27 620.0 620.0
Capital redemption reserve 0.9 0 .9
Hedging and translation reserve 27 75 .9 (3 2 .1 )
Retained earnings 27 2 73.5 383.8
Equity attributable to equity holders of the parent 1 , 0 1 7. 0 1, 0 19 . 3
Non-controlling interests 14 . 0 13 .7
Total equity 1, 0 31. 0 1 ,033.0
Thefinancialstatementsonpages161to202wereapprovedbytheBoardofDirectorsandauthorisedforissueon28March2023.
They are signed on its behalf by:
M Willome L Liu
Director Director
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS – Group financial statements OTHER INFORMATION
163Synthomer plc Annual Report 2022
Consolidated cash flow statement
for the year ended 31 December 2022
Reconciliation of net cash flow from operating activities to movement
innetdebt
for the year ended 31 December 2022
Note
2022 2021
£m £m £m £m
Operating
Cash generated from operations 28 2 3 7. 7 3 8 7. 5
– Interest received 1.6 1. 0
– Interest paid (38 .4 ) (2 7.1 )
– Interest element of lease payments (1. 4 ) (1.5 )
Net interest paid (3 8. 2 ) (2 7. 6 )
– UK corporation tax paid – –
– Overseas corporate tax paid (6 5. 6 ) (8 6.4 )
Total tax paid (6 5.6 ) (86 .4 )
Net cash inflow from operating activities 133 .9 273 .5
Investing
Dividends received from joint ventures 18 1.9 1.9
Purchase of property, plant and equipment and other intangible assets 16,17 (9 0 .8 ) (8 2. 2 )
Purchase of business 30 (7 59.6 ) –
Proceeds from sale of business 0.3 1.7
Net cash outflow from investing activities (8 4 8. 2 ) (78 .6 )
Financing
Dividends paid 12 (9 9.5 ) (73 .5 )
Dividends paid to non-controlling interests – (0.5 )
Proceeds on issue of shares 27 – 2 0 3 .1
Settlement of equity-settled share-based payments (1. 5 ) (0 .9 )
Repayment of principal portion of lease liabilities (10.1 ) (9.7 )
Repayment of borrowings (2 0 7. 6 ) –
Proceeds of borrowings 733 .2 –
Net cash inflow from financing activities 414 . 5 11 8 . 5
(Decrease)/increase in cash, cash equivalents and bank overdrafts during the year (2 99. 8 ) 3 13 . 4
Cash and cash equivalents and bank overdrafts at 1 January 21 50 5.3 1 91.3
Foreign exchange 21 3.7 0.6
Cash and cash equivalents and bank overdrafts at 31 December 21 2 0 9.2 50 5.3
See note 31 for further details of cash flows from discontinued operations.
Note
2022
£m
2021
£m
Net cash inflow from operating activities 13 3 .9 2 73.5
Add back: dividends received from joint ventures 18 1.9 1.9
Less: net capital expenditure (9 0. 8 ) (8 2 .2 )
Less: purchase of businesses (75 9.6 ) -
Add back: proceeds from sale of business 0.3 1.7
(7 14 . 3 ) 19 4 .9
Ordinary dividends paid 12 (9 9.5 ) (73.5 )
Issue of shares 27 – 2 0 3 .1
Dividends paid to non-controlling interests – (0.5 )
Settlement of equity-settled share-based payments (1. 5 ) (0 .9 )
Repayment for principal portion of lease liabilities (10.1 ) (9.7 )
Foreign exchange and other movements 21 (8 5. 3 ) 3 4.6
(Increase)/decrease in net debt (910 .7 ) 3 4 8.0
Groupfinancialstatements
164 Synthomer plc Annual Report 2022
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165Synthomer plc Annual Report 2022
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184 Synthomer plc Annual Report 2022
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186 Synthomer plc Annual Report 2022
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190 Synthomer plc Annual Report 2022
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198 Synthomer plc Annual Report 2022
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200 Synthomer plc Annual Report 2022
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201Synthomer plc Annual Report 2022
202 Synthomer plc Annual Report 2022
as at 31 December 2022
Note
2022
£m
2021
£m
Property, plant and equipment 4 3.7 4.4
Other intangible assets 55.7 41.5
3 733.4 537.9
Other debtors: amounts falling due after more than one year 6 –
Deferred tax assets 0.4 1.8
585.6
Other debtors: amounts falling due within one year 6 40.5 1,279.7
Cash and cash equivalents 77.7 248.9
26.1 3.0
144.3 1,531.6
Borrowings 9 (10.4)
Other payables 7 (180.8)
Provisions – (5 7.2)
– (9.1)
Lease liabilities (0.7)
(258.2)
1,273.4
1,859.0
Borrowings 9 (619.5)
Lease liabilities (1.7)
(621.2)
1,237.8
Share capital 46.7 46.7
Share premium 620.0 620.0
Revaluation reserve 0.8 0.8
Capital redemption reserve 0.9 0.9
Retained earnings 608.5 569.4
1,237.8
The notes on
They are signed on its behalf by:
Director Director
STRATEGIC REPORT GOVERNANCE REPORT OTHER INFORMATION
203Synthomer plc Annual Report 2022
as at 31 December 2022
£m
£m
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Total
£m
46.7 620.0 0.8 0.9 569.4
– – – – 129.7 129.7
– – – – 129.7 129.7
Dividends – – – –
Share-based payments – – – –
Fair value gain on hedged interest rate derivatives – – – – 9.7 9.7
46.7 620.0 0.8 0.9 608.5
42.5 421.1 0.8 0.9 526.2 991.5
– – – – 112.1 112.1
– – – – 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
As at 31 December 2021 46.7 620.0 0.8 0.9 569.4 1,237.8
204
Synthomer plc Annual Report 2022
31 December 2022
The basis of accounting and the principal accounting policies adopted are the same as those set out in note 2 to the
from subsidiaries, forward-looking information based on assumptions for the future movement of different economic drivers
2022 2021
£m
£m
£m
Subsidiaries
£m
ventures
£m
Total
£m
Cost
537.6 0.5 538.1 370.5 0.5 371.0
Additions 234.7 – 234.7 167.1 – 167.1
Return of Capital – – – –
Impairment – – – –
733.1 0.5 733.6 5 37.6 0.5 538.1
– – (0.2) (0.2)
733.1 0.3 733.4 537.6 0.3 537.9
STRATEGIC REPORT GOVERNANCE REPORT OTHER INFORMATION
205Synthomer plc Annual Report 2022
continued
31 December 2022
2022 2021
£m
£m
£m
£m
Right of use
buildings
£m
Freehold land
and buildings
£m
Plant and
equipment
£m
Total
£m
Cost
4.1 3.0 0.1 7.2 4.1 3.0 0.6 7.7
Additions – – – – – – 0.1 0.1
Transfers to other intangible assets – – – – – – (0.6) (0.6)
4.1 3.0 0.1 7.2 4.1 3.0 0.1 7.2
1.9 0.9 – 2.8 1.2 0.9 – 2.1
Charge for the year 0.6 0.1 – 0.7 0.7 – – 0.7
2.5 1.0 – 3.5 1.9 0.9 – 2.8
1.6 2.0 0.1 3.7 2.2 2.1 0.1 4.4
2022
£m
2021
£m
Cost
43.6 –
Additions 19.4 2.1
Transfers from Group undertakings – 40.9
Transfers from PPE – 0.6
63.0 43.6
2.1 –
Charge for the year 5.2 2.1
7.3 2.1
55.7 41.5
206 Synthomer plc Annual Report 2022
2022
£m
2021
£m
Amounts owed by Group undertakings: amounts falling due within one year 36.1 1,275.0
Amounts owed by Group undertakings: amounts falling due after more than one year –
Other receivables 0.1 0.6
Prepayments and accrued income 4.3 4.1
1,279.7
2022
£m
2021
£m
Amounts owed to Group undertakings 292.3 142.5
Other creditors 42.3 3.5
Accruals and deferred income 23.4 34.8
358.0 180.8
2022
£m
2021
£m
Overdrafts 18.1 10.4
18.1 10.4
Bank Loans 777.7 187.9
456.4 431.6
619.5
STRATEGIC REPORT GOVERNANCE REPORT OTHER INFORMATION
207Synthomer plc Annual Report 2022
continued
31 December 2022
2022 2021
1
£m
£m
£m
Carrying
amount
£m
Carrying
amount
within scope
of IFRS 7
£m
Fair value
£m
Other receivables AC 1,279.7 1,275.6 1.275.6
Cash and cash equivalents AC 77.7 77.7 77.7 248.9 248.9 248.9
Derivatives – no hedge accounting FVTPL 16.7 16.7 16.7 3.0 3.0 3.0
1,531.6 1,527.5 1,527.5
Borrowings AC (629.9) (629.9) (639.8)
Trade and other payables AC (180.8) (180.6) (180.6)
Derivatives – no hedge accounting FVTPL – – – (9.1) (9.1) (9.1)
(819.8) (819.6) (829.5)
statements on
208 Synthomer plc Annual Report 2022
Country of incorporation and registered address Principal activity Ownership %
Dimex Limited Holding Company 100
Ecatto Limited Holding Company 100
3
Harlow Chemical Company Limited Holding Company 100
2
OMNOVA Performance Chemicals Limited Dormant 100
OMNOVA UK Holding Limited Dormant 100
PolymerLatex Limited Holding Company 100
Revertex Limited Dormant 100
3
Super Sky Limited Holding Company
1,3
Synthomer Adhesive Technology Limited Trading 100
Synthomer (UK) Limited Trading 100
Synthomer Holdings Limited Holding Company 100
3
Synthomer Overseas Limited Holding Company 100
3
Temple Fields 514 Limited Holding Company 100
3
Temple Fields 515 Limited Holding Company 100
Temple Fields 522 Limited Holding Company 100
3
Temple Fields 523 Limited Holding Company 100
3
Temple Fields 530 Limited Holding Company 100
William Blythe Limited Trading 100
Synthomer Trading Limited Trading 100
Dormant 100
3
Synthomer Austria GmbH Trading 100
Shanghai Synthomer Chemicals Co Ltd Trading 100
OMNOVA Performance Chemicals
Trading (Shanghai) Co Ltd Trading 100
OMNOVA Shanghai Co Ltd Trading 100
OMNOVA Ningbo Co Ltd Trading 100
Eliokem Trading (Shanghai) Co Ltd Trading 100
Trading
1
Country of incorporation and registered address Principal activity Ownership %
Synthomer AS Trading 100
Synthomer Holdings (CZE) SRO Non-Trading 100
Synthomer SAE Trading
Synthomer Finland Oy Non-Trading 100
OMNOVA Solutions France Holding SAS Holding Company 100
OMNOVA Solutions International SAS Holding Company 100
OMNOVA Solutions SAS Holding Company 100
Synthomer France SAS Trading 100
Non-Trading 100
Synthomer Deutschland GmbH Trading 100
Temple Fields GmbH Non-Trading 100
Holding Company 100
OMNOVA India Trading LLP Trading 100
Synthomer S.r.l. Trading 100
Synthomer Specialty Resins S.r.l. Trading 100
Desa Baiduri Sdn Bhd Property Letting
Kind Action (M) Sdn Bhd Trading
PolymerLatex Sdn Bhd Trading 100
Quality Polymer Sdn Bhd Trading
Revertex (Malaysia) Sdn Bhd Trading
Rexplas Sdn Bhd Dormant
Synthomer Sdn Bhd Trading 100
Terra Simfoni Sdn Bhd Holding Company 100
STRATEGIC REPORT GOVERNANCE REPORT OTHER INFORMATION
209Synthomer plc Annual Report 2022
continued
31 December 2022
Country of incorporation and registered address Principal activity Ownership %
Holding Company 100
OMNOVA Holding Limited Holding Company 100
Synthomer Mexico, S.A. de C.V. Trading 100
Synthomer BV Trading 100
Non-Trading 100
Holding Company 100
Eastman Chemical Middelburg B.V. Trading 100
OMNOVA Solutions Portugal SA Trading 100
Lyon28 – Imobiliario SA Non-Trading 100
Synthomer Middle East Company Ltd Trading
1
OMNOVA Performance Chemicals
Singapore Pte Ltd Trading 100
Synthomer Asua SL Trading 100
Non-Trading 100
Country of incorporation and registered address Principal activity Ownership %
Synthomer Speciality Additives AB Trading 100
OMNOVA Engineered Surfaces
(Thailand) Co Ltd Trading 100
UAE
Synthomer Functional Solutions FZCO Trading
1
Synthomer FZCO Trading
1
USA
Synthomer LLC Trading 100
Holding Company 100
Synthomer USA LLC Trading 100
Decorative Products Thailand Inc
OMNOVA Overseas Inc Non-Trading 100
OMNOVA Solutions Inc Trading 100
OMNOVA Wallcovering (USA) Inc Holding Company 100
Synthomer Adhesive Technologies LLC Trading 100
Trading 100
Synthomer NBR Solutions LLC Dormant 100
Synthomer Vietnam Co Ltd Trading
Notes
2 Harlow Chemical Company Limited is
incorporated in UK but is resident in Netherlands
3 Shares directly held by Synthomer plc
continued
210 Synthomer plc Annual Report 2022
high-performance characteristics
including pile holding, water
resistance, low ageing, fast drying
specially developed to meet the
international sporting associations.
Other information
212 Environmental performance
summary
216 Global Reporting Initiative (GRI)
219 Glossary of terms
220
221 Advisers
211Synthomer plc Annual Report 2022
OTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE REPORTSTRATEGIC REPORT
2022 2021 2020 2019 2022 vs 2021
7, 8
2022 vs 2020
7, 8
2022 vs 2019
7, 8
1
Enlarged Group
Legacy Synthomer 5,664,011 5,410,255 5,466,905 -13.79% -9.75% -10.68%
UK only 339,579 340,477 329,741 -5.46% -5.71% -2.64%
Enlarged Group
Legacy Synthomer 2,574,415 2,422,543 2,479,253 -6.29% -0.42% -2.70%
Enlarged Group
Legacy Synthomer 26,384 26,364 30,354 86.61% 86.75% 62.21%
Enlarged Group
Legacy Synthomer 892,030 838,485 933,895 -2.35% 3.89% -6.73%
Enlarged Group
Legacy Synthomer 1,420,734 1,426,718 1,420,687 -10.61% -10.99% -10.61%
Enlarged Group
Legacy Synthomer 750,448 696,145 602,716 -62.65% -59.74% -53.50%
Enlarged Group 4.21
Legacy Synthomer 3.29 3.16 3.09 3.08 4.04% 6.50% 6.83%
UK only 5.05 4.31 3.95 4.22 17.26% 27.81% 19.76%
Total refrigerant releases (ton)
Enlarged Group
Legacy Synthomer 1,805 1,687 2,581 32.19% 41.46% -7.57%
Enlarged Group 282,092 -14.18%
Legacy Synthomer 211,190 200,856 198,786 -25.44% -21.61% -20.79%
UK only 12,721 12,867 12,429 -5.96% -7.0 2% -3.75%
Enlarged Group 249,467 -61.35%
Legacy Synthomer 63,584 178,017 213,258 24.39% -55.57% -62.91%
UK only 5,893 6,266 5,308 -1.32% -7.20% 9.55%
Enlarged Group
Legacy Synthomer 70,155 182,701 227,400 26.63% -51.37% -60.93%
UK only 5,893 6,266 5,308 -1.32% -7.20% 9.55%
Enlarged Group
Legacy Synthomer 211,281 222,317 225,542 -6.14% -10.80% -12.08%
UK only 7, 826 8,785 8,367 -3.59% -14.12% -9.82%
Enlarged Group 531,559 -36.32%
Legacy Synthomer 274,774 378,873 412,044 -13.91% -37.57% -42.59%
UK only 18,613 19,133 17,737 -4.49% -7.08% 0.23%
Other information
212 Synthomer plc Annual Report 2022
2022 2021 2020 2019 2022 vs 2021
7, 8
2022 vs 2020
7, 8
2022 vs 2019
7, 8
continued
Enlarged Group 0.210
Legacy Synthomer 0.159 0.153 0.216 0.232 3.70% -26.50% -31.50%
UK only 0.280 0.237 0.222 0.227 18.26% 26.10% 23.44%
3
Enlarged Group
Legacy Synthomer 269,752 373,984 403,570 -14.54% -38.36% -42.87%
From refrigerant releases
Enlarged Group
Legacy Synthomer 5,021 4,887 8,474 19.63% 22.89% -29.13%
Enlarged Group 44.652
Legacy Synthomer 44.038 122.202 132.312 126.322 -63.96% -66.72% - 65.14%
Enlarged Group 0.028
Legacy Synthomer 0.030 0.068 0.076 0.071 -56.04% -60.29% - 57.84%
6
Enlarged Group 173.230
Legacy Synthomer 112.900 239.822 236.186 207.396 -52.92% -52.20% -45.56%
Enlarged Group 0.107
Legacy Synthomer 0.076 0.134 0.135 0.117 -43.25% -43.64% -34.95%
Enlarged Group 773.680
Legacy Synthomer 651.186 595.286 504.932 515.008 9.39% 28.96% 26.44%
Enlarged Group 0.480
Legacy Synthomer 0.439 0.332 0.288 0.290 32.06% 52.27% 51.31%
Enlarged Group 2,992,405 -18.41%
Legacy Synthomer 2,318,828 n/a 2,567,630 - 6.17% -15.26%
UK only
Enlarged Group 1.489 1.552 -2.44%
Legacy Synthomer 1.465 1.295 n/a 1.446 13.14% 1.29%
UK only 1.614
3
Enlarged Group
Legacy Synthomer 7,862, 459 7,241,228 7,177,835 -4.95% 3.21% 4.12%
3
Enlarged Group
Legacy Synthomer 1,712,967 1,683,337 1,811,592 -6.74% -5.10% -11.82%
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
213Synthomer plc Annual Report 2022
continued
2022 2021 2020 2019 2022 vs 2021
7, 8
2022 vs 2020
7, 8
2022 vs 2019
7, 8
3
continued
Enlarged Group
Legacy Synthomer 3,357,138 2,978,227 2,791,844 -3.80% 8.44% 15.68%
Enlarged Group
Legacy Synthomer 1,358,196 1,172,020 1,200,902 -21.84% -9.42% -11.60%
Enlarged Group
Legacy Synthomer 115,771 106,553 107,642 -28.60% -22.42% -23.20%
Enlarged Group
Legacy Synthomer 1,318,387 1,301,091 1,265,856 13.92% 15.43% 18.56%
3
Enlarged Group 5.07
Legacy Synthomer 5.03 4.39 4.13 4.04 14.56% 21.66% 24.39%
3
10
Enlarged Group
Legacy Synthomer
3
Enlarged Group 1.57
Legacy Synthomer 1.53
Enlarged Group
Legacy Synthomer 24,110 22,116 23,909 -11.45% -3.47% -10.71%
Enlarged Group
Legacy Synthomer 2,931 3,244 3,777 -10.87% -19.49% -30.84%
Enlarged Group
Legacy Synthomer 5,065 6,418 5,959 7.47% -15.20% -8.66%
Enlarged Group
Legacy Synthomer 2,738 1,611 1,430 -49.31% -13.85% -2.9%
Enlarged Group
Legacy Synthomer 3,235 2,276 1,643 -14.78% 21.14% 67.80%
Other
Enlarged Group
Legacy Synthomer 10,141 8,567 11,100 -9.78% 6.80% -17.58%
Enlarged Group 22.85
Legacy Synthomer 14.38 13.46 12.63 13.47 6.78% 13.85% 6.73%
Enlarged Group
Legacy Synthomer 18,650 19,317 27,225 14.02% 10.08% -21.89%
Other information
214 Synthomer plc Annual Report 2022
2022 2021 2020 2019 2022 vs 2021
7, 8
2022 vs 2020
7, 8
2022 vs 2019
7, 8
Enlarged Group
Legacy Synthomer 4,278 4,475 8,176 -10.43% -14.37% - 53.13%
Enlarged Group
Legacy Synthomer 2,836 2,377 2,275 9.06% 30.14% 35.96%
Enlarged Group 124.00
Legacy Synthomer 123.00 22.31 17.0 3 186.00 451.4% 622.3% -33.87%
Enlarged Group
Legacy Synthomer 8,011 8,170 11,808 17.92% 15.62% -20.00%
Enlarged Group
Legacy Synthomer 3,503 4,278 4,780 36.19% 11.52% - 0.19%
Enlarged Group 17.52
Legacy Synthomer 14.32 10.41 11.03 15.34 37.50% 29.83% -6.63%
Enlarged Group
Legacy Synthomer 42,760 41,433 51,134 -0.34% 2.85% -16.66%
Enlarged Group 40.37
Legacy Synthomer 28.70 23.88 23.66 28.81 20.18% 21.30% -0.38%
Enlarged Group
Legacy Synthomer 11,246 10,445 13,451 8.51% 16.83% -9.28%
Enlarged Group 11.53
Legacy Synthomer 8.22 6.28 5.96 7.58 30.85% 37.78% 8.44%
Enlarged Group 1,928,088 -16.37%
Legacy Synthomer 1,790,719 1,751,406 1,775,092 -17.07% -15.21% -16.34%
UK only 78,612 86,170 78,196 -19.12% -26.21% -18.69%
Footnote:
3 CO and N
4 All direct energy production from fossil fuels has been aggregated on a Group-wide basis and converted to CO
Emissions
e using emissions factors provided by suppliers
6 NO
x
from the
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
215Synthomer plc Annual Report 2022
GENERAL DISCLOSURES
GRI 102–1 Name of the organization 165
GRI 102–2 Activities, brands, products, and services 10-20
GRI 102–3 Location of headquarters back cover
GRI 102–4 Location of operations 2; 14-15
GRI 102–5 Ownership and legal form 150-151
GRI 102–6 Markets served 10 -11
GRI 102–7 Scale of the organization 2
GRI 102–8 Information on employees and other workers online data pack
GRI 102–9 Supply chain 51-52
GRI 102–10 30; 36
GRI 102–11 Precautionary principle or approach 74-90
GRI 102–12 External initiatives 44-45; 51; 54
GRI 102–13 Membership of associations 45; 51
GRI 102–14 Statement from senior decision-maker 4-9
GRI 102–16 Values, principles, standards, and norms of behaviour 11; 63-64; 120
GRI 102–18 Governance structure 86; 92-97
GRI 102–40 List of stakeholder groups 105-107
GRI 102–41 Collective bargaining agreements 64
GRI 102–42 Identifying and selecting stakeholders 44; 105-107
GRI 102–43 Approach to stakeholder engagement 44
GRI 102–44 Key topics and concerns raised 44
GRI 102–45 152; 215
GRI 102–46 152; 215
GRI 102–47 List of material topics 44
GRI 102–48 Restatements of information 61; 62; 215
GRI 102–49 Changes in reporting 61; 62; 215
GRI 102–50 Reporting period 45
GRI 102–51 Date of most recent report 45
GRI 102–52 Reporting cycle 45
GRI 102–53 Contact point for questions regarding the report 220
GRI 102–54 Claims of reporting in accordance with the GRI Standards 45
GRI 102–55 GRI content index 216-218
GRI 102–56 External assurance 45
SPECIFIC DISCLOSURES
GRI 103–1 Explanation of the material topic and its Boundary 44-45
GRI 103–2 The management approach and its components 44-45
GRI 103–3 Evaluation of the management approach 44-45
Other information
216 Synthomer plc Annual Report 2022
GRI 102–15 Key impacts, risks, and opportunities 45; 73-89
GRI 103–1 Explanation of the material topic and its Boundary 40-45; 90; 98
GRI 103–2 The management approach and its components 40-45; 90; 98
GRI 103–3 Evaluation of the management approach 45
GRI 102–20 Executive-level responsibility for economic, environmental, and social topics 86
GRI 102–21 Consulting stakeholders on economic, environmental, and social topics 44; 90
GRI 205–2 Communication and training about anti-corruption policies and procedures 69-70
GRI 102–17 Mechanisms for advice and concerns about ethics 70
People
GRI 103–1 Explanation of the material topic and its Boundary 63-73
GRI 103–2 The management approach and its components 63-73
GRI 103–3 Evaluation of the management approach 63-73
GRI 401–1 New employee hires and employee turnover 64
GRI 405–1 Diversity of governance bodies and employees 65-66
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
GRI 413–1 Operations with local community engagement, impact assessments, and development programs 71-72
GRI 103–1 Explanation of the material topic and its Boundary 54-56
GRI 103–2 The management approach and its components 56-57
GRI 103–3 Evaluation of the management approach 55
GRI 403–1 Occupational health and safety management system 53
GRI 403–2 54-57
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 54-57
GRI 403–6 Promotion of worker health 54
GRI 403–8 Workers covered by an occupational health and safety management system 54
GRI 403–9 55
GRI 403–10 Work-related ill health 55
GRI 103–1 Explanation of the material topic and its Boundary 43; 58-59
GRI 103–2 The management approach and its components 58-61
GRI 103–3 Evaluation of the management approach 58-61
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
217Synthomer plc Annual Report 2022
continued
GRI 302–1 Energy consumption within the organization 212
GRI 302–3 Energy intensity 60; 212
GRI 302–4 Reduction of energy consumption 59-60; 212
GRI 303–3 Water withdrawal 61; 213-214
GRI 303–5 Water consumption 60; 214
GRI 305–1 Direct (Scope 1) GHG emissions 212
GRI 305–2 Energy indirect (Scope 2) GHG emissions 212
GRI 305–3 Other indirect (Scope 3) GHG emissions 213
GRI 305–4 GHG emissions intensity 60; 213
GRI 305–5 Reduction of GHG emissions 43; 58-59; 212-213
GRI 3 05–7 Nitrogen oxides (NO
), sulphur oxides (SO
213
GRI 306–2 Waste by type and disposal method 62; 214
GRI 103–1 Explanation of the material topic and its Boundary 50
GRI 103–2 The management approach and its components 50-52
GRI 103–3 Evaluation of the management approach 50
Procurement
GRI 308–1 New suppliers that were screened using environmental criteria 50-52
GRI 414–1 New suppliers that were screened using social criteria 50-52
GRI 416–1 Assessment of the health and safety impacts of product and service categories 49
GRI 416–2 Incidents of non-compliance concerning the health and safety impacts of products and services 49
GRI 417–1 Requirements for product and service information and labelling 49
GRI 417–2 Incidents of non-compliance concerning product and service information and labelling 49
GRI 417–3 Incidents of non-compliance concerning marketing communications 49
Other information
218 Synthomer plc Annual Report 2022
AC Amortised Cost
ACC American Chemical Council
AGM Annual General Meeting
AIMS Accident and Incident Management System
AM Acrylate Monomers
APMs Alternative Performance Measures
AS Adhesive Solutions
Black, Asian and Minority Ethnic
Construction and Coatings
Net assets excluding third-party net debt
CASE Coatings, Adhesives, Sealants and Elastomers
CCS Coatings & Construction Solutions
CDP
CGU Cash Generating Unit
CH4 Methane
CHP Combined Heat and Power
CIA Chemical Industries Association
CO Carbon Dioxide
COe Carbon Dioxide equivalent
currency
translated at the prior year’s average exchange rates,
and includes the impact of acquisitions
CRM Customer Relationship Management system
CSR Corporate Social Responsibility
DEFRA Department for Environment, Food and Rural Affairs
depreciation, amortisation and Special Items
EGM Extraordinary General Meeting
EPDLA European Polymer Dispersion and Latex Association
EPS Earnings Per Share
ERP Enterprise Resource Planning
ESG Environmental, Social and Governance
EUUS Europe, Middle East, Africa and Americas
FEED Front End Engineering Design
FP Functional Polymers
FRC Financial Reporting Council
Flow
foreign exchange and the cash impact of Special Items,
asset disposals and business combinations
FRS Financial Reporting Standard
FS Functional Solutions
FVTOCI Fair Value Through Other Comprehensive Income
FVTPL
GDP Gross Domestic Product
GDPR General Data Protection Regulation
GHGs Greenhouse Gases
GRI Global Reporting Initiative
GTI Global Technology and Innovation
GWP Global Warming Potential
Health & Protection
HPPS Health & Protection and Performance Materials
Inter-Bank Offered Rates
ICCA International Council of Chemical Associations
IFRS International Financial Reporting Standards
IS Industrial Specialities
ISA International Standards of Auditing
Key Performance Indicators
Kilotonne or 1,000 tonnes (metric)
London Inter-Bank Offer Rates
LMS Learning Management System
LTA Lost Time Accident
LTIP Long-Term Incentive Plan
Mergers and Acquisitions
Manufacturing Excellence
MCO Movement Control Order
MOC Management of Change
Malaysian Ringgits
N
2
O Nitrous Oxide
Nitrile Butadiene Rubber
NED Non-Executive Director
Cash and cash equivalents together with short- and
long-term borrowings
NO
Nitrogen Oxides
OEM Original Equipment Manufacturer
PE Performance Elastomers
PHA Process Hazard Assessment
PPE Property, Plant and Equipment
PSA Pressure Sensitive Adhesive
PSE Process Safety Events
PSP Performance Share Plan
PTW Permit to Work
PVC Polyvinyl Chloride
Research and Development
RC Responsible Care
ROIC Return on Invested Capital is calculated as Group
capital employed
Styrene Butadiene Rubber
SD Sustainable Development
SDG Sustainable Development Goals
SEC
SHE Safety, Health and Environment
SHEMS Safety, Health and Environment Management System
SOFR Secured Overnight Financing Rate
SONIA Sterling Overnight Index Average
STEM Science, Technology, Engineering and Mathematics
TCFD Task Force on Climate-related Financial Disclosures
The UK Corporate Governance Code
TSR Total Shareholder Return
Underlying performance represents the statutory
performance of the Group under IFRS, excluding
VOCs Volatile Organic Compounds
STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS OTHER INFORMATION
219Synthomer plc Annual Report 2022
2022
£m
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
Revenue 2,329.5 1,644.2 1, 459.1 1,618.9 1,480.2
(a)
EBITDA (b) 265.1 522.2 259.4 177.9 181.0 176.2
171.2 450.9 189.6 125.8 142.1 139.0
Finance costs (30.8) (29.6) (9.6) (7.0) (9.0)
125.0 420.1 160.0 116.2 135.1 130.0
Basic earnings per share (f) 20.6p 75.2p 28.9p 25.3p 30.7p 28.7p
Dividends per share (f) (g) – 30.0p 11.6p 4.0p 12.2p 11.4p
Dividend cover – 2.5 2.5 6.3 2.5 2.5
IFRS
308.5 58.4 110.6 128.7 95.4
Finance costs (24.6) (38.1) (10.1) (8.4) (9.0)
283.9 20.3 100.5 120.3 86.4
Basic earnings per share (f) (g) 48.3p 0.7p 21.5p 27.4p 20.3p
Dividends per share (f) (g) – 30.0p 11.6p 4.0p 12.2p 11.4p
Dividend cover – 1.6 0.1 5.4 2.2 1.8
Net debt (d) (114.2) (462.2) 20.7 (214.0) (180.5)
Capital expenditure (e) 90.8 82.2 53.8 69.1 75.7 60.3
Other information
220 Synthomer plc Annual Report 2022
Synthomer plc
Anant Prakash
Citibank
HSBC Bank plc
Santander
Goldman Sachs
Computershare Investor Services plc
Lochside House
7 Lochside Avenue
Edinburgh Park
Edinburgh
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors London
Printed sustainably in the UK by Pureprint,
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221Synthomer plc Annual Report 2022
Synthomer plc
London
United Kingdom