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ANNUAL REPORT
AND ACCOUNTS 2023
creating sustainable
building solutions
Eurocell plc Annual Report and Accounts 2023
welcome
Revenue
£364.5m
4.4%
(2022: £381.2m)
Gross Margin
47.7%
70bps
(2022: 48.4%)
Profit Before Tax
£11.7m
£14.5m
(2022: £26.2m)
Adjusted Profit
Before Tax
2
£15.2m
£13.5m
(2022: £28.7m)
Adjusted Basic
Earnings Per Share
2
11.0 p
10.4p
(2022: 21.4p)
Basic Earnings
Per Share
8.6p
11.0p
(2022: 19.6p)
Adjusted Operating Profit
2
£18.4m
41%
(2022: £31.3m)
Pre-IFRS 16
Net Cash
£0.4m
£14.8m
(2022: Net Debt £14.4m)
2023 HIGHLIGHTS
We have a clear
strategy to drive
organic growth
and improved
operating margins.”
Darren Waters
Chief Executive
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Eurocell plc Annual Report and Accounts 2023 01
CONTENTS
Strategic Report
Our Business at a Glance ........................................................ 02
What We Do ........................................................................... 04
Chair’s Report ......................................................................... 06
Market Overview ...................................................................... 08
Chief Executive’s Q&A ............................................................. 10
Chief Executive’s Report ......................................................... 14
Our Strategy ........................................................................... 18
Social Values and ESG Committee Report .............................. 30
Sustainability Report ................................................................ 32
Task Force On Climate-related Financial Disclosures ................ 50
Chief Financial Officer’s Report ............................................... 62
Risk Management ................................................................... 66
Principal Risks and Uncertainties ............................................ 68
Viability Statement .................................................................. 73
Corporate Governance
Board of Directors ................................................................... 74
Executive Committee .............................................................. 76
Letter from the Chair ............................................................... 77
Corporate Governance Statement .......................................... 79
Nomination Committee Report ............................................... 87
Audit and Risk Committee Report ........................................... 92
Directors’ Remuneration Report ............................................. 98
Directors’ Report .................................................................. 116
Statement of Directors’ Responsibilities ................................ 120
Independent Auditors’ Report ................................................ 122
Financial Statements
Consolidated Statement of Comprehensive Income .............. 130
Consolidated Statement of Financial Position ....................... 131
Consolidated Cash Flow Statement ....................................... 132
Consolidated Statement of Changes in Equity ...................... 133
Notes to the Consolidated Financial Statements ................... 134
Company Statement of Financial Position ............................. 168
Company Statement of Changes in Equity ............................ 169
Notes to the Company Financial Statements ........................ 170
Company Information ........................................................... 177
View the latest results online at
investors.eurocell.co.uk
Net Debt
£58.2m
£19.9m
(20 22: £78.1m)
1 All figures, including comparatives, exclude
discontinued operations.
2 Adjusted measures are stated before non-underlying
items and the related tax effect (see page 62). We use
alternative performance measures to assess business
performance and they are provided here in addition
to statutory measures to help describe the underlying
results of the Group.
Eurocell plc Annual Report and Accounts 202302 Eurocell plc Annual Report and Accounts 202302
OUR BUSINESS
AT A GLANCE
We are the market-leading UK manufacturer,
distributor and recycler of innovative
window, door and roofline PVC products.
Manufacturing
expertise
We manufacture rigid and foam PVC products in our well
invested, centrally located facilities. Our manufacturing process
uses raw materials including PVC resin and recycled material
produced at our own plants.
In addition, we have specialist manufacturing sites for
secondary operations, including foiling, conservatoryroofs,
composite/PVC entrance doors and injection moulding
products, along with a dedicated technical centre, focused
onproduct development andinnovation.
Through our vertically
integrated business model
and differentiated customer
proposition for fabricators,
installers, small and
independent builders and
housebuilders, we offer:
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Recycling
We are the leading UK-based recycler of PVC windows with
two recycling facilities located in Selby and Ilkeston, from which
recycled material is used to generate brand new extruded
plastic products.
We recycle factory offcuts (‘post-industrial waste’) and old
windows that have been replaced with new (‘post-consumer
waste’) into reusable raw materials for our manufacturing
process, putting recycling at the heart ofouroperation.
32%
Proportion of recycled
material used in extrusion
Nationwide
distribution
We distribute our manufactured foam products and entrance
doors, along with a range of third-party products, via our
nationwide network of 214 branches. In addition, we sell windows
made by our fabricator partners using our manufacturedprofile.
Our sales and distribution strategy is implemented through our
cross-functional sales and business development teams, which
target the key decision makers in the supply chain, including
fabricators, installers, developers, architects, local authorities
and planning departments.
Our distribution activity is supported by our state-of-the-art central
warehouse, with cantilever racking and mobile platform picking,
and a fleet of c.250 road vans.
214
Number of branches
at 31 December 2023
Eurocell plc Annual Report and Accounts 202304 Eurocell plc Annual Report and Accounts 202304
10%
10%
80%
Window profile Doors Roofs
Rigid PVC profiles are sold to third-party
fabricators, who produce windows, trims,
cavity closer systems, patio doors and
conservatories for their customers.
There are broadly four types of fabricator:
• Trade frame – supply finished products
to tradesmen or small retail outlets
• New build – supply and install the
products they make for housebuilders
• Commercial – supply and install
products used in applications such as
office spaces and education facilities
• Retail – make products for sale via
their own retail operation, which may
be a large national business, or a small
company servicing the local community.
We are not particularly exposed
toretailfabricators.
Fabricators have production facilities which
are customised to the window or door
system they make. As a result, fabricators
predominately buy profiles from a single
supplier, which in turn creates a stable
andloyal customer base.
Foam PVC products are used for roofline
and are supplied to customers through our
nationwide branch network in the Building
Plastics division (see overleaf). Allof our
manufacturing margin is recorded within
the Profiles division, which therefore
also benefits from expansion of the
branchnetwork.
WHAT WE DO
We operate our
business through
two divisions that
reflect the principal
routes to market
forour products.
The Profiles division also includes:
• Vista Doors – manufacturer of
composite and PVC entrancedoors
• S&S Plastics – manufacturer of plastic
injection moulded products/services
• Eurocell Recycle (Midlands and
North) – recycler of PVCwindows.
Profiles Division
The Profiles division manufactures extruded rigid PVC profiles
and foam PVC products. We make rigid and foam products
using virgin PVC compound, the largest component of
which isresin. Our rigid products also include recycled PVC
compound, produced at our market-leading recycling facilities.
Product range
Profiles division – product
mix (%)
Window and
Door Profile
Cavity Closers
Patio Doors
Bi-fold Doors
Composite
Doors
products
Market-leading
Conservatory
Roofs
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30%
45%
Manufactured products
Traded goods
Made-to-order
25%
Distribution is through our national network
of 214 branches to installers, small and
independent builders, housebuilders and
nationwide maintenance companies.
Thebranches also sell roofline products
toindependent wholesalers.
Building Plastics Division
(Branch Network)
Our Branch Network distributes a range of Eurocell
manufactured and branded foam PVC roofline products
and Vista doors, alongside third-party manufactured ancillary
products. These include sealants, tools and rainwater products,
as well aswindows made by our fabrications partners using
our manufactured profile products.
Branch Network division –
product mix (%)
Manufactured products
Roofline
& Trims
Fascias
&Soffits
Fencing
Rainwater
&Drainage
Sealants
&Cleaners
Composite
Decking
Cladding
Made-to-order
Traded goods
Windows Conservatories
Composite Doors
Garden Rooms Extensions
Conservatory
Roofs
06
CHAIR’S REPORT
The last twelve months have
seen major changes and
significant challenges for the
Group and in our markets.
The progress we made during
2023 is testament to the
commitment, hard work and
dedication of our teams in
every part of the Company,
so I start this year’s report
by offering, on behalf of
shareholders and of the Board,
my sincere thanks to them all.”
Financial and operating performance
Against a difficult backdrop, including
a weak repair, maintenance and
improvement (RMI) market and a severe
decline in new build housing, we delivered
some resilience in the Group’s sales
performance. Revenues for the year were
£364.5 million, down 4% against a strong
2022 comparative period.
Adjusted profit before tax from continuing
operations was down 47% at £15.2 million
(2022: £28.7 million), reflecting the impact
of lower volumes and margin pressure.
In response, the business took decisive
action on costs, including a restructuring
programme completed in Q2, and
continued to focus on efficient working
capital management, to drive a good cash
flow performance and maintain a strong
balance sheet and liquidity.
Reported profit before tax, also on a
continuing basis, was down 55% at
£11.7million (2022: £26.2 million),
reflecting the cost of the Q2 restructuring
programme, which will also benefit our
financial results in 2024.
Net cash generated from operations
was £52.8 million, up 50% on 2022,
including an inflow from working capital
of£13.4 million. As a result, net cash at
31December 2023 on a pre-IFRS 16
basis stood at £0.4 million (31 December
2022: net debt of £14.4 million).
Earnings per share and dividends
Adjusted basic earnings per share for the
year were 11.0 pence (2022: 21.4 pence).
Reported basic earnings per share were
8.6 pence (2022: 19.6 pence).
We paid an interim dividend of 2.0 pence
per share in October 2023. The Board
proposes a final dividend of 3.5 pence
pershare which results in total dividends
for the year of 5.5pence per share
(2022:10.7pence per share).
Capital allocation
The Board is focused on enhancing
shareholder returns and recognises the
importance of our ordinary dividend. We
will periodically consider supplementary
distributions, whilst always seeking to
maintain a strong financial position.
Taking into account expected organic
investment requirements and our
successful cash flow management in
2023, we launched a £5 million share
buyback programme in January 2024.
Derek Mapp
Chair
Eurocell plc Annual Report and Accounts 2023
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Eurocell plc Annual Report and Accounts 2023 07
The headlines from our work on strategy
are summarised in the Chief Executive’s
Report on pages 14 to 17, with the full
detail set out in the Strategic Report on
pages 18 to 29.
Board changes and governance
Following our AGM in May, Darren Waters
assumed the position of Chief Executive
and Mark Kelly retired. In addition,
MartynCoffey stood down from the Board
and Will Truman was appointed as an
independent Non-executive Director and
member of the Audit and Risk, Nomination
and ESG and Social Values Committees.
We were also pleased to announce the
appointment of Angela Rushforth as an
independent Non-executive Director and
member of the Nomination and ESG and
Social Values Committees in January 2024.
Looking ahead, after nine years of service,
Frank Nelson intends to step down
from the Board at the 2024 AGM and
Iwould like to thank him for his significant
contribution to the Group. Alison Littley
will be appointed Senior Independent
Non-executive Director when Frank leaves.
Following the Board’s decision that
employee incentivisations by equity should
be through shares acquired rather than
issued, the first 642,000 shares repurchased
under the buyback programme will be held
in treasury and used to satisfy employee
share options over the next two years. All
other shares repurchased will be cancelled.
As of 15 March 2024, we had purchased
2.0 million shares at a cash cost of
£2.5million under the programme.
Strategy
Following the arrival of Darren Waters
asChief Executive, the Board conducted
a review of the Group’s strategy,
including the optimisation and expansion
of the Branch Network, an enhanced
customer proposition and simplified
businessstructures.
With this review now complete, we have
reset our ambition for the business and
identified a clear strategy for organic
growth and improved operating margins,
which has the potential to create
significant shareholder value.
Whilst this has been a period of significant
change for the Board, our new appointments
bring extensive experience and knowledge
of the UK building materials and fenestration
sectors, as well as valuable commercial
insight, and I am very pleased that we
have been able to attract such high-calibre
individuals into the Company.
In accordance with the UK Corporate
Governance Code (‘the Code’), an external
evaluation ofthe Board’s performance was
conducted towards the end of 2023. The
review concluded that the composition of
the Board, and its committees, provides an
appropriate balance of skills, experience,
independence and knowledge to allow
the Board to discharge its responsibilities
effectively. Full details of the review are
setouton page 81.
Finally, I can confirm that we aim to comply
with the Code and that, as a Board, we
are committed to the highest standards
of corporate governance and ensuring
effective communication with shareholders.
Derek Mapp
Chair
Eurocell plc Annual Report and Accounts 202308 Eurocell plc Annual Report and Accounts 202308
GDP growth
1
Bank of England base rates (at 31 December)
1
MARKET OVERVIEW
Well-positioned
for when markets
Whilst current market
conditions are challenging,
we believe we have good
potential to outperform market
forecasts over the medium
term, capitalising on our strong
market position and clear new
strategy to drive organic growth
through the transformation of
the Branch Network and other
commercial initiatives.
5%
10%
85%
Eurocell market by revenue %
recover
CPA Construction Industry
Forecasts (2023-25)
The market growth estimates of the
Construction Products Association (‘CPA’),
provide informative baseline indicators of
the markets we operate in. The data and
graphs on the following pages summarise
the CPA forecasts published in January
2024 for our key markets, together with
a summary of the current drivers in these
markets and our response.
2021
2019
6%
0%
1%
10%
8%
6%
4%
2%
0%
2%
3%
4%
5%
2020 2021 2022 2023E 2024F 2025F
8.7%
0.75%
0.10%
0.25%
3.50%
5.25%
4.75%
4.25%
4.3%
0.5%
0.6%
1.7%
2022 2023E 2024F 2025F
The level of UK economic activity,
in particular the state of the repair,
maintenance and improvement (‘RMI’)
and new-build housing markets, are
important drivers of our performance.
UK economic forecasts
GDP and interest rate trends are expected to be slightly positive over the next
two years.
RMI
New build
Commercial (new build & RMI)
1 Source: CPA Construction Industry Forecasts
(central scenario – published January 2024).
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Eurocell plc Annual Report and Accounts 2023 09
2019 2020 2021 2022 2023E 2024F 2025F
1%
26%
13%
3%
-11% -11%
-4%
Private RMI
c.85%
Proportion of Eurocell revenue
CPA market growth projections
and their rationale
Private housing RMI output is now
forecast to fall by 4% in 2024 after the
double-digit fall last year. This is a revision
downwards as some of the anticipated
fall in property transactions, which leads
to lower RMI activity within 6-9 months, is
expected to now feed through in H1 2024.
In2025, with lower interest rates, stronger
economic growth and a growing housing
market, growth of 3% is expected.
• Focus on the home
Although moderated from post-pandemic
highs, the focus on improving living
spaces, and developing home offices,
drives demand for conservatories,
garden rooms and simple extensions
• Ageing population
The desire for maintenance-free
properties, coupled with tradesman
availability, influences the demand for
uPVC, rather than wood, products.
Our response
• Optimise our branch network through
a programme of estate transformation,
including new branches and
relocations, supported by enhanced
site-selectionmethodology
• Develop our customer offering for the
Branch Network, including increased
sales of windows and doors
Market drivers
• Improve vs move
Property prices, housing supply
and moving costs affect whether
homeowners improve their homes rather
than move. The UK’s ageing housing
stock should also drive RMI demand
• Disposable income
Inflation, real wage growth and mortgage
interest rates affect disposable income
for repairs and maintenance
• Consumer confidence
Macroeconomic factors, including
unemployment levels, influence
consumers’ appetite for large
discretionary spend
• Become the homeowner’s choice for
extended living spaces through products
such as garden rooms, extensions and
roof lanterns, supported by our Select
installer scheme
• Leverage our new website, plus
increased investment in digital
technology to drive incremental
e-commerce sales, generate
homeowner leads, attract new trade
accounts and drive traffic to our
branchnetwork
• Protect our Profiles trade fabricator
business and maintain our value-added
service propositions that support
ourcustomers
• Customer-centric approach to new
product development
• Build a reputation within the industry
that creates loyal trade fabricator
partneradvocates.
Private RMI growth
1
-20%
-10%
0%
10%
20%
30%
40%
New Build
c.10%
Proportion of Eurocell revenue
CPA market growth projections
and their rationale
The forecast for private housing in 2024 has
been revised downwards slightly as house
builders adjust to the short-term decline in
housing demand that appears to have now
hit its nadir. After a recovery in mortgage
approvals, property transactions and house
price growth during 2025, both starts and
completions are likely to recover but the rate
of recovery will heavily depend on not only
mortgage rates but also policymaker stimulus.
Market drivers
• Housing supply
Structural deficit in new house building,
compared to government targets
• Government incentives
Ongoing shortage of housing may
attract government intervention or
incentives, especially with a UK
general election due in 2024
• Housebuilders’ plots
Housebuilders have a strong pipeline
of plot builds but uncertainty exists
regarding starts/completions/targets
• Homeowner demand
Although suppressed by increased
mortgage rates, rising rental costs and
the enduring desire to own your own
home drive home ownership
• Buyer incentives
‘Share ownership’ schemes, although
subject to eligibility, and ‘Right to Buy’
schemes in the public sector, make
home ownership more affordable
andaccessible.
Our response
• Protect our Profiles new build fabricator
business and maintain the value-added
service propositions that support our
customers
• Leverage our strong proposition with
national housebuilders in the regional
new build market
• Provide a fit-for-purpose solution to address
the Future Homes Standard regulations
• Continue proactive engagement with our
customer base regarding sustainable
product development
• Provide a sector-leading technical
supportservice
• Leverage our ESG credentials, including
our market-leading recycling operations.
2019 2020 2021 2022 2023E 2024F 2025F
5%
16%
11%
4%
-19% -19%
-4%
-30%
-20%
-10%
0%
10%
20%
30%
New Build growth
1
Taking us to the
10
CHIEF EXECUTIVE’S
Q&A
with Darren Waters,
Chief Executive
Q&A
Darren Waters joined Eurocell
as Chief Executive designate in
April 2023 and was appointed
Chief Executive on 11 May 2023,
following Mark Kelly’s retirement
at the 2023 AGM. He was
formerly Chief Operating Officer
for Ibstock plc and has extensive
experience and knowledge
of the building products and
fenestration sectors in the UK.
In this Q&A, we ask Darren to
share what it was that attracted
him to Eurocell, what his initial
observations have been and how
he sees the future for Eurocell.
What attracted you to the role
of Eurocell CEO?
Eurocell is a business that I knew
well from my time as CEO of Tyman
UK & Ireland. From the outside looking
in, it felt like a business with a strong
foundation, based on a market-leading
position in PVC door and window profiles,
plus an established national network of
trade counters. From an ESG perspective,
I also admired what it was doing on
recycling. What struck me though was
the potential to take the business to the
next level, and I felt that I could really draw
on my recent experience with Ibstock
and Tyman to make that happen. The
opportunity to work with our Chairman,
Derek Mapp, given his reputation and
track record, was also compelling.
Eurocell plc Annual Report and Accounts 2023
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Eurocell plc Annual Report and Accounts 2023 11
You joined Eurocell in April
2023. What are your first
observations, and is it what
youexpected?
Derek gave me a good overview of
the business before I joined so there
weren’t many surprises. The business had
been through quite a lot of change, with
the warehouse move and cyber-attack.
When I arrived, I knew we were facing
headwinds due to the depressed housing
market and also grappling with rising
input costs, but it was also clear that the
business had underestimated the scale
ofthe market downturn. We therefore had
to act quickly to reduce the cost base,
eliminating around a hundred roles at
thehalf year.
On a more positive note, I’ve inherited a
strong team with some great people, who
are very engaged with the business and
hungry for change. We’ve got a lot of work
to do to develop a more cohesive culture,
but we are moving at pace on that.
What changes, if any, have
you made to the business
sofar?
Safety is now the first agenda
item in every leadership meeting
and has had more airtime, so it’s been
pleasing to see a 50% improvement
inourperformance.
Our Commercial MD is now 100% focused
on the Branch Network, with fabricator
sales now reporting to me. I felt we needed
to give more attention to the branches,
because there is so much opportunity
togo after.
We have been improving our door and
window proposition through the branches,
because I felt that we weren’t punching
our weight in these core big ticket product
categories. The work we have done since
is very exciting, and now one of the key
building blocks in our new strategy.
I also kicked off a review of our strategy,
as we didn’t have an overarching plan
that set out where we were going, or how
we were going to get there. The early
feedback I got from investors was that
they didn’t really understand our strategy
either. By November, we had put the
finishing touches on a high-quality piece
of work, that clearly articulates our future
vision for the business, and sets out
the initiatives that will drive the business
forward. The feedback from our key
stakeholders so far has been positive,
so we’ve now got to get on and deliver it!
We can’t do that without our fantastic
employees, so we’ve recently welcomed
a new People Director into the business,
who has some great experience with
the likes of Halfords, Costa and Pets
at Home, and is a great addition to our
Executiveteam.
You have set out a new
purpose and values.
What can you tell us about those?
Everyone knows that purpose-driven
organisations perform better. A great
purpose should act as a ‘call to arms’
and energise employees. To put it bluntly,
our former purpose did not set the pulse
racing, but its replacement is bold and
inspiring. Given that culture is an untapped
opportunity, we’ve also created a new
set of values that define our personality
and set the tone for the organisation.
I’mreally pleased with the outcome of
this work, as the language we have used
(e.g.Gritty, Decent) will really resonate
with our employees. Having landed these,
we are now starting to cascade them
throughout the organisation, alongside our
new strategy. I know from experience that
it takes a long time to embed new ways
of working, but changing the culture will
really help us to mobilise and sustain our
ambitious strategic agenda.
You have now completed
areview of your strategy.
What are the headlines from that?
The headlines are that we believe
we have a clear growth strategy,
built around four pillars: Customer
Growth, Business Effectiveness, People
First and ESG Leadership. Through this,
wehave a pathway to building a £500m
revenue business generating a 10%
operating margin within the next five
years. It’s an ambitious vision, but when
you aggregate the growth opportunities,
applying a degree of sensitivity, it is an
achievabletarget.
Eurocell plc Annual Report and Accounts 202312 Eurocell plc Annual Report and Accounts 202312
Tell us about these strategic
pillars, starting with
Customer Growth?
Customer growth is predicated on
us becoming the trade customer’s
preferred choice, in all markets and
segments where we operate. The largest
element of this is our Branch Network,
where we are aiming to sell more doors,
windows, and conservatory roofs to
become the number one destination for
professional tradespeople.
After a two-year hiatus, we are planning
to open more branches from H2 onwards
and we see an opportunity to add 30 new
sites over the next three to four years.
We then have our extended living spaces
range (garden rooms and extensions),
where we are gaining a strong reputation
for the quality of product and professional
installation service. All of this is
underpinned by our investment in digital,
to raise awareness of our products and
home improvement solutions, to acquire
new customers.
What kind of initiatives
will underpin Business
Effectiveness?
We want to make Eurocell a
lean and efficient business, so
we are upgrading our business systems
to streamline processes and make us
easier to do business with. By selling
more doors and windows, we will
utilise spare capacity that we have in
our composite door business and rigid
extrusion manufacturing operations,
thereby making us moreefficient.
We are also embedding a continuous
improvement (‘CI’) philosophy, which
is already highlighting significant
opportunities, particularly in our
manufacturing and recycling operations.
Can you expand on what
People First means?
People First is all about making
Eurocell a great place to work,
through a relentless focus on health
and safety, an enhanced employee
value proposition, improved levels of
employee engagement and effective
talent management. Many of our people
really love their jobs, but we want them
to love Eurocell too. We have pockets of
excellence, but we are just not consistent
across all our sites. I’m passionate about
this initiative, as I’ve seen the impact of
getting this right and I know how it can
positively affect performance.
CHIEF EXECUTIVE’S Q&A CONTINUED
ESG Leadership is not
straight forward for a
business that uses PVC –
whatareyou planning here?
Eurocell is already a leader in PVCu
recycling, which is preventing
thousands of windows being sent to
landfill. But that’s just one aspect of ESG
and, looking ahead, we aim to excel in
all areas. We are now working with a
specialist ESG consultancy to develop our
Net Zero strategy and improve the way we
capture and record data, through our own
business and the rest of our supply chain.
What are the biggest risks
and challenges you face to
deliver the strategy successfully?
One of the biggest challenges
we face is bandwidth, as there
is a lot to do, plus there are a lot of
interdependencies between the various
elements of our strategy. As an example,
we cannot deliver on the potential upside
in the branches without upgrading our
trading system. Furthermore, to grow our
extended living spaces range, we must
execute on our digital strategy. We also
have some gaps in capability that we are
addressing, but not at additional cost.
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Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 13
Looking shorter term,
howdo you assess your
core marketstoday?
It’s very hard to predict given the
instability caused by events in the
Middle East, but our forecast assumes
flat vs H2 2023. Private housing (10% of
revenues) is starting to pick up a little, after
the drop in interest rates, but remains well
down on the levels we saw in 2022. RMI
(85% of revenues) has been more resilient
but is still challenging. We are therefore
not anticipating any improvement in the
market this year, but if inflation continues
its downward trend and interest rates drop
further, then H2 could turn out to be a little
better, which would be a bonus.
Read about our new
strategy on pages 18 to 29
What are you going to focus
on this year?
Our focus for this year is all about
accelerating the branch network
transformation (including the new trading
system), embedding the new culture,
delivering on our CI projects and raising
our game on ESG. There is an expectation
that the market in 2025 will be much
better, and we want to be ready to take
advantage of that.
Any final thoughts?
Towards the end of 2023, I really
felt that we were beginning to build
momentum on several fronts, which we’ve
carried into the new year. We are also
starting to see more consistency in our
performance, which is generating belief
inour ability to deliver an improvement
in the quality of our earnings over the
medium term, something that we are
committed to achieving. If we maintain this
trajectory, then we will be well placed to
benefit from an uptick in the market, when
that comes.
I am loving the job, relishing the opportunities
that we are uncovering, and confident that
we can make Eurocell a great business.
Eurocell plc Annual Report and Accounts 202314 Eurocell plc Annual Report and Accounts 202314
Introduction
With demand softening towards the end
of 2022, we completed a restructuring
programme in Q4 of that year and entered
2023 prepared for tougher markets.
However, conditions in the first half of
2023 were more challenging than we had
anticipated, with repair, maintenance and
improvement (‘RMI’) activity impacted
by low consumer confidence and higher
costs of living. In addition, a steep decline
in new build activity followed successive
interest rate rises and falling house prices,
with housebuilders reducing build rates
in anticipation of falling sales. Thereafter,
these trends continued for the remainder
of 2023, with some further modest
weakening in our key markets in H2.
Input cost inflation also continued
through the first half, particularly for
labour, electricity and recycling feedstock
prices, which we offset with selling price
increases where possible. As expected,
we experienced some easing of input
cost pricing in H2.
In response to lower sales volumes,
wetook further decisive action on costs,
with a second restructuring programme
implemented in Q2 2023. We also
continued to focus on efficient cash and
working capital management to drive a
good cash flow performance for the year.
As reported in September, we have been
reviewing our strategy. Through this work,
we have identified a route to organic
growth and a healthy improvement in
operating margins over a five-year period.
The headlines are summarised as follows,
with full details set out in the Strategic
Report on pages 18 to 29.
Financial results
Against the challenging market backdrop,
we have delivered some resilience in the
Group’s sales performance. Revenues for
the year were £364.5 million, down 4%
on 2022, with volumes 6% lower against
a strong 2022 comparative period.
As expected, adjusted profit before
tax from continuing operations was
£15.2million, down £13.5 million on 2022,
with the reduction driven by lower sales
volumes, input cost inflation and margin
pressure in the branches, partially offset
by selling price increases, operational
improvements and cost reduction.
Reported profit before tax was
£11.7million (2022: £26.2 million), after
non-underlying costs totalling £3.5million
(2022: £2.5million), reflecting the impact
of a restructuring programme and
cloud-based computingexpenses.
Reflecting our focus on cash management,
we delivered improved net cash generated
from operations of £52.8 million, up
50% on 2022, including an inflow from
working capital of£13.4million, compared
to an outflow of£13.1 million in the
previousyear.
Detailed information on our Group financial
performance is set out in the Chief Financial
Officer’s Report. A summary of divisional
financial performance is included below.
Operational performance
Production
Overall Equipment Effectiveness (‘OEE’,
a measure which takes into account
machine availability, performance and
yield) was 78% in 2023, a significant
improvement on the 71% reported
for 2022, and ahead of our target of
75%, reflecting the benefit of improving
manufacturing efficiencies and a tighter
conformance to production planning. As
a result, having built inventories to mitigate
the impact of supply chain disruption
in 2021/22, we delivered a reduction of
c.£13 million in 2023, including the benefit
of lower input costs.
Recycling
We are the leading UK-based recycler of
PVC windows, now saving the equivalent
of c.3 million window frames from landfill
each year. We have made further progress
in 2023, with usage increasing to 32%
of materials consumed in production,
compared to 29% in 2022, driving lower
carbon emissions and cost savings
compared to the use of virgin material.
A weaker RMI market and fewer window
replacements restricted feedstock
availability for our recycling business,
resulting in a significant increase in
purchase prices (21%) compared to 2022.
However, the impact was most significant
in the first half of the year and we are
making good progress securing additional
sources of feedstock, which, alongside
reduced demand and lower virgin resin
prices, sawprices beginning to ease inH2.
Furthermore, we are finding more ways
of using all the waste product generated
by our plants and expect to progressively
reduce waste sent to landfill.
Health and safety
The safety and well-being of our
employees, contractors and branch
customers is our number one priority, and
we have delivered a significantly improved
safety performance in 2023. Our Lost Time
Injury Frequency Rate
1
(‘LTIFR’) was 5.7
in 2023, compared to 10.0 in 2022. Our
RIDDOR (Reporting of Injuries, Diseases
and Dangerous Occurrences Regulations
2013) performance remains better than
the industry average. There were no major
injuries and 11 minor accidents recorded
under RIDDOR in the year (2022: no major
injuries and 23 minor injuries).
Health and safety is now the first agenda
item for key internal meetings. Wehave
enhanced the reporting of near misses and
unsafe acts and conditions, as part of a
proactive approach to risk management,
with the aim of reducing the likelihood
of future workplace injuries. This,when
combined with the effective and timely
implementation of corrective and
preventive action, supports our
positive and improving safety culture.
CHIEF EXECUTIVE’S
REPORT
1 Injuries per 1 million hours worked.
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Eurocell plc Annual Report and Accounts 2023 15
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 15
Profiles third-party revenue for the year
was £154.9 million, 4% lower than
2022, with reduced RMI activity and a
significantly weaker new build market
partially offset by market share gains,
leaving volumes 7% below 2022.
Cost of living pressures, successive
interest rate increases and falling house
prices have all had a significant adverse
impact on demand for our products.
Third-party revenues in the Branch
Network were £209.6 million, 4% lower
than 2022, with volume down 5%.
RMI volumes in the branches were subdued
throughout the year, as homeowners have
pulled back on discretionary expenditure,
most likely in response to higher costs
ofliving and interest rates.
However, we still see reasonable volumes
of high-value project work (such as our
roof lanterns, conservatory roofs, windows
and bi-fold doors) and sales in our outdoor
living range (fencing, decking and garden
rooms)of £11.6 million remain broadly
consistent with 2022.
Divisional performance – Profiles
Profiles
2023
£m
2022
£m
Change
%
Third-party revenue 154.9 161.7 (4)%
Inter-segmental revenue 64.9 72.3 (10)%
Total revenue 219.8 234.0 (6)%
Adjusted
1
operating profit 11.9 20.2 (41)%
Operating profit 10.1 19.3 (48)%
1 Adjusted performance measures are stated before non-underlying items.
Further information on non-underlying items is included in the Chief Financial Officer’s Report. A summary of our strategy
forProfilesisset out overleaf.
Divisional performance – Building Plastics (Branch Network)
Building Plastics
2023
£m
2022
£m
Change
%
Third-party revenue 209.6 219.5 (4)%
Inter-segmental revenue 0.4 0.3 33%
Total revenue 210.0 219.8 (4)%
Adjusted
1
operating profit 8.9 12.2 (27)%
Operating profit 8.2 10.9 (25)%
1 Adjusted performance measures are stated before non-underlying items.
Further information on non-underlying items is included in the Chief Financial Officer’s Report. A summary of our strategy
fortheBranch Network isset out overleaf.
However, we have continued to acquire
new fabricator accounts, supported by
a reduction in UK capacity following the
closure of the Duraflex extrusion business
in September. In addition, some of our
existing fabricators have benefited from
an increase in volume following the
administration of Safestyle inOctober.
Profiles adjusted operating profit for
2023 of £11.9 million was 41% below
the previous year (2022: £20.2 million),
reflecting lower sales volumes and input
cost inflation (particularly labour, recycling
feedstock and electricity), partially offset
by selling price increases, operational
improvements and cost reduction.
Reported operating profit is stated after
non-underlying restructuring costs totalling
£1.8 million (2022: £0.9 million).
Branch Network adjusted operating profit
for 2023 was £8.9 million, 27% below
the previous year (2022: £12.2million),
reflecting lower sales volumes and
pressure on margins as a result of
increased competition for limited demand,
partially offset by selling price increases
and cost reduction.
Reported operating profit is stated after
non-underlying restructuring costs totalling
£0.7 million (2022: £1.3 million).
Eurocell plc Annual Report and Accounts 202316 Eurocell plc Annual Report and Accounts 202316
Strategy
We began a review of our strategy in the
summer. The review is now complete, with
the headlines summarised below and full
detail set out in the Strategic Report on
pages 18 to 29.
By way of context, since Eurocell listed
on the London Stock Exchange in 2015,
sales have more than doubled, through
a mixture of branch expansion, market
share gains and acquisitions. We have also
significantly increased our use of recycled
PVC in primary manufacturing operations.
Whilst the business has done well growing
the top line, operating margins fell steadily
down to 8% in 2022. This has been driven
by operational issues, now fixed with
investment, and our ability to recover the
full margin impact of input cost increases
with selling prices. Margins were lower
again in 2023, driven by higher input costs
and the operational gearing impact of
declining volumes.
With this strategic review, we are resetting
the ambition for the business. Our new
strategy identifies a pathway to building
a £500m revenue business, generating
a 10% operating margin over a five-year
period. This is an ambitious vision, but
we believe it is an achievable target.
Our strategy is built around four strategic
pillars: Customer Growth, Business
Effectiveness, People First and ESG
Leadership. The following paragraphs
describe these pillars and the initiatives
which support them.
Customer Growth
Our aim is to become the trade customer’s
preferred choice, in all markets and
segments where we operate. We believe
the biggest opportunity for growth will
come from expansion of the branch
network, including the sale of windows
and doors, plus our extended living
spaces range of garden rooms and
extensions. This is all underpinned by an
increased investment in digital, to raise
awareness of our products and home
improvement solutions and thereby
acquire new customers.
Branch Network
We have concluded that the optimum
branch network size is up to c.250
branches. Therefore, after a two-year
break, we are planning to recommence
opening new branches from Spring 2024
and expect to add c.30 new branches
over the next three to four years.
Wewill supplement this with a number
of branch relocations, to optimise our
existingfootprint.
We are aiming to sell more doors,
windows and conservatory roofs through
the branches. Following an improvement
in our window and door proposition, we
ran a trial across six branches in Q4 and
the results exceeded our expectations.
We plan to add a further 24 branches
progressively into the trial in 2024,
and if successful, we will complete the
roll-out across the remaining network
through2025.
Extended living spaces
Extended living spaces comprises garden
rooms and extensions. With our strong
customer proposition, experienced sales
professionals and efficient end-to-end
processes, we believe there is a good
opportunity to gain market share and
drive growth through this product range.
For example, since launching our garden
room range three years ago, we have
steadily built a strong market presence,
competing well with the established
marketparticipants.
With our extensions range, we are using
modern methods of construction that
piece together in an innovative kit form,
thereby creating a cost-effective, energy-
efficient building solution for homeowners
who are looking to convert and extend
their properties, with installation times
ofweeks not months.
Profiles
In Profiles, following a period of strong
growth, we believe we are now the leading
supplier of rigid PVC profile to the UK
market. With markets currently weak,
we believe targeting further significant
share gains would lead to price erosion,
which would have a detrimental effect
onourbusiness.
Our strategy for Profiles is therefore to
protect our existing business and maintain
our value-added service propositions that
support our customers. We will continue
to leverage our leading position with
housebuilders and commercial developers
to ensure we maintain specifications to
support a robust pipeline of work for our
fabricator customers. We are recognised
across the industry as the leading
technical systems house, and we will
continue to leverage this advantage too.
The planned growth in window sales
through our branch network provides
incremental growth opportunities for
our fabricator partners, and we are
proactively working with them to
secure additionalcapacity.
Business Effectiveness
Our objective is to make Eurocell a
lean and efficient business, therefore
we are upgrading our business
systems and streamlining processes
toincrease efficiencies and improve
thecustomerexperience.
As previously announced, we are in
the process of replacing our Enterprise
Resource Planning (‘ERP’) system. The
first stage of this process is to implement
a new trade counter system in the branch
network. Having now selected anew
system, we plan to transition at the
beginning of 2025. This will transform
theway we interact and transact with
ourcustomers in the branches.
The second stage is to select and implement
an ERP system to support all other functions
of the business, including manufacturing,
recycling, warehousing, distribution and
finance. For ERP, weexpect to select a
system later in 2024, with transition to
be completed around mid-2026.
We are also embedding a continuous
improvement philosophy, which is already
highlighting significant opportunities
for efficiencies, particularly in our
manufacturing and recycling operations.
Our initiative to sell more doors and
windows through our branches will utilise
spare capacity that we have in our rigid
extrusion manufacturing operations and
composite door business, thereby making
us more efficient.
CHIEF EXECUTIVE’S REPORT CONTINUED
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 17
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 17
People First
The objective of our People First strategic
pillar is to make Eurocell a great place to
work, through a relentless focus on health
and safety, an enhanced employee value
proposition, improved levels of engagement
and effective talent management.
For health and safety, we are focused
on improving relevant leadership
skills and providing appropriate safety
education. Interms of our employee
value proposition, we are developing a
wellbeing framework, recognition schemes
and better induction and onboarding
programmes. Key priorities for employee
engagement include a new internal
communications framework, colleague
forums and stepping up community
and charity work. Finally, effective talent
management includes talent development,
succession planning and an increasing use
ofapprenticeships.
ESG Leadership
We want to earn a reputation for being
a truly responsible company. Eurocell is
already a leader in PVC recycling, which
is preventing millions of windows being
sent to landfill. But that is just one aspect
ofESG and, looking ahead, we aim
toexcel in all areas.
We are now working with CEN-ESG,
aspecialist ESG consultancy, to support
the development of our ESG strategy and
improve our ESG data and disclosures.
Theresults of our work so far are set out
in full in the Sustainability Report on pages
32 to 49 and in our Task Force on Climate-
related Financial Disclosures (‘TCFD’)
Report on pages 50 to 61. It includes:
• A materiality assessment, which helped
us determine the most important
sustainability topics to the business.
With this analysis we have surveyed
a selection of employees, suppliers,
customers, banks and shareholders
• A baseline carbon footprint for the
business (Scope 1, 2 and 3), identifying
key decarbonisation levers.
We have used the outputs from this work
to define ESG objectives and targets
and develop a sustainability strategy,
supported by appropriate governance
and internal controls. Looking forward,
akey focus for our work in 2024 will be
to determine a path to reach Net Zero
byour target date of 2045, albeit this
will be heavily dependent on reduced
emissions in our raw material supply chain.
Summary and outlook
The trends reported at our half year results
in September continued for the remainder of
2023, with some further modest weakening
in our key markets. Against this challenging
backdrop, we are pleased to report profits
for the year in line with expectations and
strong cash flow generation.
We took early and decisive action on
costs in response to lower volumes and
have continued to focus on efficient
working capital management, driving a
good cash flow performance. Whilst the
near-term outlook for our markets remains
challenging, these actions leave us well
placed to benefit from a market recovery
when it comes.
Our review of strategy is now complete
and I am very pleased with the outcome.
Looking ahead, we have identified a clear
pathway to building a £500m revenue
business, generating a 10% operating
margin over a five-year period, built
around four pillars; Customer Growth,
Business Effectiveness, People First and
ESG Leadership. This is an ambitious
vision, but when we aggregate the growth
opportunities, and apply a degree of
sensitivity, we believe it is an achievable
target, with the potential to create
significant shareholder value.
Darren Waters
Chief Executive
Eurocell plc Annual Report and Accounts 202318 Eurocell plc Annual Report and Accounts 202318
OUR STRATEGY
Delivering
value
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 19
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 19
Introduction
Following the arrival of Darren Waters
as Chief Executive in the Spring of 2023,
we commenced a review of ourstrategy.
By way of context, Eurocell was listed on
the UK stock exchange in March 2015,
when annual revenues were £176 million.
Since then, sales have more than doubled,
through a mixture of branch expansion,
market share gains and acquisitions.
Wehave also significantly increased
our use of recycled PVC in primary
manufacturing operations.
• Number of branches increased from
141in 2015 to 214 in 2023
• New customer accounts in the Profiles
division have supported strong market
share gains
• Acquisitions include: S&S Plastics
(2015, a specialist injection moulder),
Vista Panels (2016, a composite doors
and panel door manufacturer), and
Ecoplas (2018, now Eurocell Recycle
North, a PVC window recycler)
• Use of recycled PVC in manufacturing
increased from 9% in 2015 to 32%
in2023
• In 2021, the business relocated its main
warehousing operation and Head Office
to a new facility near Alfreton.
Whilst the business has done well growing
the top line, the quality of earnings has
declined, with operating margins falling from
12% in 2015 to 8% in 2022. This has been
driven by operational issues, now fixed with
investment, and our ability to recover the
full margin impact of input cost increases
with selling prices. Margins were lower
again in 2023, driven by the operational
gearing impact of decliningvolumes.
Our ambition
With this strategic review, we are resetting
the ambition for the business, via:
• The delivery of significant organic growth
through the transformation of the branch
network and other commercial initiatives
• Continual operational improvements and
footprint consolidation
• Simplification and digitalisation
ofbusiness processes
• The creation of a strong, cohesive
culture, where people are our priority.
Our new strategy identifies a pathway
to building a £500m revenue business,
generating a 10% operating margin over
a five-year period. This is an ambitious
vision, but when we aggregate the growth
opportunities, and apply a degree of
sensitivity, we believe it is an achievable
target, with the potential to create
significant shareholder value.
An operating margin of 10% is
broadly equivalent to the margin of 12%
achieved at the time of our IPO, when
factoring in subsequent mix changes,
including the faster growth of the branch
network (which sells bought-in goods as
well as our own manufactured products)
and some of the natural dilution from
higher raw material costs.
Our new purpose and core values
underpin our strategy, which is built around
four strategic pillars: Customer Growth,
Business Effectiveness, People First and
ESG Leadership. The following paragraphs
describe what we mean by these pillars
and the initiatives which support them.
Our purpose
Creating sustainable building
solutions for the trade of today, the homes
of tomorrow and the environment of the future
Strategic pillars
Our ambition
£500m
Sales
£50m
Operating profit
10%
Operating margin
1.
Customer growth
Be the trade customer’s
preferred choice, in all
markets and segments in
which we decide to compete
Pages 20 to 25
2.
Business effectiveness
Be a lean and efficient
business that enables agility
and enhances our profitability
Pages 26 to 27
3.
People first
Be a great place to
work, and a great brand
to invest in
Page 28
4.
ESG leadership
Earn a reputation
for being a truly
responsible company
Page 29
Our core values
Agile Gritty Proud Decent
Eurocell plc Annual Report and Accounts 202320 Eurocell plc Annual Report and Accounts 202320
OUR STRATEGY CONTINUED
We believe the biggest opportunity for
growth will come from expansion of
the branch network, including sales of
windows and doors, plus our extended
living spaces range of garden rooms
andextensions.
Branch Network – new branches
and existing estate
We have concluded that the optimum
branch network is up to c.250 sites. This
work included consideration of existing
branch/competitor locations, customer
demographics and recruitment challenges,
to identify areas of low coverage with
good potential. Therefore, after a two-year
break, we are planning to recommence
opening new branches from Spring 2024,
with c.30 new sites over the next three
to four years. This programme includes
strengthening our coverage in Greater
London on a cost-effective basis.
The new branches we open will be a
blend of formats, to support our current
and future branch proposition. It will
include a good proportion of larger format
stores (c.5,000 sq ft), to accommodate
our new door and window proposition
and extended living space range (see
overleaf). As a result, we expect to have
at least 25 large format branches in three
to four years time, providing coverage
within 40minutes’ drive time from the
main UKconurbations, for customers
and installers who want to visit a branch
to view big ticket items.
growt h
Customer
1
Customer growth is predicated on us becoming the trade
customer’s preferred choice in all markets and segments
where we operate.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 21
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 21
At maturity, we would expect 30 new
branches to deliver sales of around
£30million at an operating profit margin
inline with our target.
In terms of the existing estate, we
expect to complete a number of branch
relocations (when leases come up for
renewal) to optimise our existing footprint
and ensure that we are located in the most
appropriate places. This work has already
started with new sites in Sheffield and
Wembley. We will also continue our branch
welfare improvement programme, to make
sure our sites are great places to work
forour colleagues and great places to
visit for our customers.
Looking at branch operations, we intend
to create centres of excellence throughout
the network, to support the induction of
new colleagues and drive all branches
towards operational excellence. We plan
to have at least one centre of excellence
per region in place by the end of 2024.
Our People First strategic pillar is all about
making Eurocell a great place to work
and this is covered in detail in the relevant
sections which follow. For the Branch
Network, this includes development of
an industry-leading reward scheme,
embedding an enhanced induction
programme, plus improved leadership
development and training.
We are also working on a medium-term
organisational-design project, which
includes a plan to enhance the role and
responsibilities of our branch managers,
thereby increasing their autonomy and
accountability for decision making and
branch performance.
Branch Network –
windows anddoors
We currently sell an estimated 1,000
window frames perweek through the
branch network, which delivered revenues
of c.£24 million in 2023.
Our research indicates there is a significant
opportunity to sell more of these big ticket
items in our branches, so we have been
working to improve our door and window
proposition. Our target customers are
mostly professional window installers,
although we estimate that around a
quarter of the sales will come from
builders and DIYers. We ran a trial across
six branches in Q4 2023, and the results
exceeded our expectations. We plan to
add a further 24 branches progressively
into the trial in 2024, which will take
us close to the capacity of our existing
fabricator supply chain.
The size of our branches dictates our
capacity to drive increased window and
door sales, which we estimate averages
around 30 frames per week. If we fill 50%
of the available capacity in our branch
network over a five-year period, this would
equate to incremental annual sales of
around £35 million, at operating margins
inline with our target.
Success is dependent on establishing a
supply chain for the whole network and
that is a key focus for 2024. With this
resolved, our intent will be a roll-out into
the remaining network through 2025. We
are already in discussions with a number
of our key fabricators to partner with us
on this project. They stand to benefit from
a large uplift in incremental sales, utilising
spare capacity, thereby making them
moreefficient.
Training our branch and central processing
teams in the various aspects of this project
and the successful implementation of our
new branch trading system (see Business
Effectiveness) are also key to the success
of this initiative.
Eurocell plc Annual Report and Accounts 202322 Eurocell plc Annual Report and Accounts 202322
OUR STRATEGY CONTINUED
Extended living spaces
Garden rooms and extensions
We classify extended living spaces as
garden rooms and extensions.
Since launching our garden room range
threeyears ago, we have steadily built
a strong market presence, completing
around 800 builds and competing well
with the established market participants.
Garden room sales in 2023 were
c.£4million. Our business model is based
on an exceptional customer journey,
with clear communication throughout,
and a close working relationship with
our fabrication partners, as a significant
proportion of our own manufactured
products are used on every building.
With our strong customer proposition,
experienced sales professionals and
efficient end-to-end process, we believe
there is a good opportunity to gain market
share and deliver incremental annual
garden room sales of around £20 million
ina five-year period.
The extensions market is vast; we
estimate it to be c.£6 billion per annum.
Extensions are often complex projects,
typically involving builders and architects,
with extended build times and disruption
for the homeowner. We believe there is a
gap in this market to provide an alternative
solution for consumers, utilising the
technology and skills from our existing
fabricator and installer base, alongside
our own technical expertise and customer
journey management.
With our extensions range, we are
using modern methods of construction
(e.g.structural insulated panels) that piece
together in an innovative kit form, thereby
creating a cost-effective, energy-efficient
building solution for homeowners who
are looking to convert and extend their
properties, with installation times of weeks
not months. Based on a very encouraging
launch for these products in 2023,
weestimate annual sales could reach
around £10 million within a five-year period.
Similar to windows and doors, we believe
sales of garden rooms and extensions
will generate operating profit margins in
line with our target, after taking account
of additional branch overheads, central
processing team costs and marketing-
related spend required to support
theseinitiatives.
Roof lantern range
Our lantern range is key to the success
ofour extended living spaces proposition.
For example, a large proportion of the
extensions market utilises flat roofs with
lanterns. There is also an opportunity
to support the top-end garden room
models we intend to launch in 2024.
Weintroduced our Luma flat roof lantern
successfully in 2023 and have plans to
launch a new aluminium lantern in 2024.
This new roof incorporates innovative
design features that make it easier and
quicker to install.
Select installer scheme
Our Select installer scheme drives
customer demand for our product
range through a national network of
skilled installers who become advocates
for Eurocell. Because our business is
substantially trade focused, Select is our
route to pull through consumer demand
and is therefore also integral to the success
of our entry into new markets such as
garden rooms and extensions, as well as
our plans to sell more windows and doors
through the Branch Network.
Our Garden Room Range Proposition
Our Extensions Range Proposition
Kyube
Horizontal Coastline
Vertical Cladding
Kyube Korner
Horizontal Coastline
Vertical Cladding
Kyube Deluxe
Side Pergola/
Decking Option
High End Model
Conservatory
Conversion
New Build
Warm Rooms
Single Storey Extensions
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 23
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 23
New website – digital growth
Following the launch of our new website
in 2023, we now have a stable future-
proofed platform to build a competitive
advantage in the online space. The
website incorporates an integrated
product information management system
and an e-commerce platform. It is our
brand shop window and has the potential
to drive strong incremental growth at
goodmargins.
The product information management
system provides the capability to ensure
we present our products, their features and
benefits as comprehensively as possible.
The e-commerce platform drives an
improved customer experience, including
anintuitive account registration process and
a mobile platform, as well as automated and
personalised productrecommendations.
To exploit the benefits of the new website,
we have an ambitious digital strategy, to
grow e-commerce sales, drive homeowner
leads to buy big ticket items such as
garden rooms, extensions, conservatories,
windows and doors, and attract new trade
accounts to our branches. This includes
strengthening our web search strategy
and extending key word targeting to
drive more relevant traffic to our website.
We will increase our pay-per-click (PPC)
investment and leverage AI automation to
increase contact and prospect targeting
with product recommendations.
Our intent is to build homeowner brand
awareness and become known for our
extended living spaces range, where
we currently pay more for leads as we
compete for in-market customers. We plan
to position Eurocell as the place to come
for these products, such that customers
consider us more during their research
phase and come to us directly when they
are ready to buy.
Profiles – protect and maintain
existing business
Following a period of strong growth and
market share gains, we believe we are
now the leading supplier of rigid PVC
profiles to the UK market.
The demand created by our specification
and marketing teams has supported
growth for our existing fabricator
customers. We have also created a
compelling case for trade fabricators to
switch to Eurocell, including a strong
product range, continued product
development and increasing opportunities
to supply our branches. Expanding our
share of the new build market has also
been a key driver of historic growth,
driven by sales of cavity closers, where
we are the clear market leader. We
have strong relationships with large and
medium-sized housebuilders, maintained
by our specification and technical teams.
Finally, our significant investment since
2018 in new manufacturing, recycling
and warehousing capacity to drive
improving and reliable service has proved
attractive to existing and prospective
fabricatoraccounts.
With markets currently weak, we believe
targeting further significant share gains
could lead to price erosion, which would
have a detrimental effect on our business.
Our strategy for Profiles is, therefore,
toprotect our existing business and
maintain our value-added service
propositions that support our customers.
We will continue to facilitate relationships
between our direct partners (e.g. fabricators)
and indirect partners (e.g. glass, hardware,
machinery, software providers), and leverage
our leading position with housebuilders
and commercial developers, thus ensuring
we maintain specifications to support a
robust pipeline of work for our fabricator
customers. We are recognised across the
industry as the leading technical systems
house, and we will continue to leverage
thisadvantage.
Eurocell plc Annual Report and Accounts 202324 Eurocell plc Annual Report and Accounts 202324
OUR STRATEGY CONTINUED
Sector-led approach
We have a sector-led approach, with initiatives focused primarily on the trade and new build sectors, which together represent
c.90% of Profiles sales (c.55% for trade and c.35% for new build). Wealso operate in the commercial sector, which represents
10%of Profiles sales.
Our overall strategic objectives by sector are summarised as follows:
In each sector, we look at strategy through three filters: customer, product and brand.
Trade sector
Our customer, product and brand priorities for the trade sector are as follows:
Profiles
sales
2024
Priorities
Protect Maintain Grow Technical expertise
Our
ambition
“To become the number 1 sustainable choice for fabricators across the UK”
Trade/Retail
55% of Sales
“Be recognised as the
number 1 choice for
the Trade/Retail fabricator”
Sector-led
approach
B
r
a
n
d
C
u
s
t
o
m
e
r
P
r
o
d
u
c
t
Customer priorities
• Developing strategic fabricator
partners to support windows
through branches initiative
• Investing added value services
for customers
• Ensuring small fabricators that
cease manufacturing use Eurocell
trade fabricators for supply.
Product priorities
• Leading a customer-centric
approach to new product
development that considers
homeowner aesthetics and security
• Increasing the volume of recycled
material used in our products.
Brand priorities
• Building a reputation within the
industry that creates loyal trade
partner advocates
• Reliability of operation underpins
our approach.
New Build
35% of Sales
“Maintain our number 1
position in the New Build market”
Commercial
10% of Sales
“Establish ourselves as a
credible solution for the
Commercial market”
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Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 25
With the consultation paper on the Future Homes and Building Standard now published, we are proactively working with
housebuilders to develop solutions, which include our Modus triple glazed window.
New build sector
Building regulations for windows are becoming increasingly complex and our technical teams are working with our larger new build
customers, enabling them to conform to the new standards, including development of new product applications to meet changing
requirements. In addition, with a focus on sustainability, we believe our use of recycled material will become increasingly attractive
to housebuilders. Our customer, product and brand priorities for the new build sector are as follows:
Other commercial initiatives
Aluminium
The number of aluminium fabricators
increased by more than 10% between
2014 and 2023, whereas the number of
PVC fabricators fell by more than 20%
over the same period (Source: AMA
Research), indicating a growing trend
towards aluminium fabrication for
windows and doors.
Our StudioGlide residential door product is
currently our only aluminium offering, with
annual sales of c.£1.0m per annum. Whilst
the use of aluminium within our existing
fabricator base is limited, we believe there
is an opportunity to grow our footprint in
the aluminium market.
In the short term, we intend to fulfil demand
through partnerships with existing Eurocell
fabricators to offer a limited aluminium
window and door range. Inthe longer term,
we have the option to expand our range
by partnering with an aluminium systems
house to offer a full suite ofproducts.
New product development
Our most recent product innovations
have been covered earlier in this Strategic
Report, including garden rooms,
extensions and roof lanterns.
Looking ahead we will continue to seek
opportunities to improve and augment
ourproduct portfolio.
We are committed to maintaining market
leadership by offering the very latest
in product improvement, both through
development of existing products and the
introduction of new ones. We work closely
with our customers and technical advisers
on development tomaintain our product
pipeline.
We believe opportunities will be provided
by the continually evolving building
standards and regulations, which are
becoming more complex, and some
of which, such as the Future Homes
Standard, remain subject to clarification.
These changes play well to Eurocell’s
technical expertise and we are working
with the housebuilders and our customers
to design fit-for-purpose solutions.
We are also focused on process innovation
within our manufacturing facilities. Areas
such as automated packaging and
digital inkjet printing in place of foiling
for profiles have the potential to reduce
costsignificantly.
Other initiatives
Other commercial initiatives which form
part of our five-year plan include building on
recent success to increase market share in
new build for our composite doors business
and bringing in-house the manufacture
of certain injection moulding products
wecurrently purchase from thirdparties.
c.90%
of Profiles sales represented
by the trade/retail and
new build sectors
c.10%
of Profiles sales represented
by the commercial sector
Customer priorities
• Leveraging our proposition within
the regional new build market
• Connecting all aspects of the
industry around legislative and
regulatory changes
• Identifying future new build
fabricator partners.
Product priorities
• Providing a fit-for-purpose solution
for Future Homes
• Proactively engaging with our
customer base for product
development, including sustainable
product solutions
• Providing a world-class technical
support service.
Brand priorities
• Repositioning ourselves as the
leading brand for both national
and regional housebuilders
• Leading the sustainability agenda
• Being the knowledge-based
experts for regulation, legislation
and compliance.
Eurocell plc Annual Report and Accounts 202326 Eurocell plc Annual Report and Accounts 202326
OUR STRATEGY CONTINUED
We are also embedding a continuous
improvement philosophy, which is already
highlighting significant opportunities,
particularly in our manufacturing and
recycling operations.
System replacement
Our systems should be an enabler to
our strategic ambition, and improve
the supplier, customer and employee
experience.
Following a full review in 2022, we
concluded that the age profile of our
principal operating system had become
a limiting factor in the development of our
business. This conclusion recognised that
our current SAP system was implemented
in 2004, when the Group was primarily
a manufacturer of PVC profiles, with
no recycling operation and only a small
Branch Network.
In 2023, we started a project to upgrade
or replace SAP. The key components of
our proposed new architecture are:
• A front-end trading system to support
the branch network
• A back-end ERP System to support
all other functions of the business,
including manufacturing, recycling,
warehousing, distribution and finance.
effectiveness
Business
2
Our second strategic pillar reflects our ambition to make
Eurocell a lean and efficient company. As previously
reported, we are upgrading our business systems
and streamlining processes, thereby making us easier
todobusiness with.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 27
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 27
As described in the following paragraphs,
we expect the new systems will drive
major improvements in our customers’
experience and significantly increase
theefficiency of our operations. In total,
weanticipate implementation to be a
two-to-three-year process, and we
estimate the total costs of the project
will be in the region of £8-10million.
Trading system
Following a comprehensive process,
whichconcluded towards the end of 2023,
we selected Intact IQ to provide a new
customer-centric trading solution for the
branch network. This system will provide:
• Customer quotation management,
including pipeline visibility, version
control and order conversion
• Simplification of transactions and
processes for branch colleagues,
including exception visibility, electronic
point-of-sale functionality, cash drawer
controls and handheld apps for stock
and picking transactions
• Delivery management and transport
planning, including customer notification
• Customer loyalty programmes and
rebateoptions
• Instant information to aid decision
making, including performance
metrics and mobile availability
for field salespersonnel.
We are now planning the implementation
of the trading system, which will take place
during 2024, and we expect to go live in
the first half of 2025.
ERP system
Our objective with a new ERP platform
is to streamline operations and improve
efficiency, through the automation and
integration of business processes and
reduction in manual data entry. We expect
our new system to come with built-in data
analytics and reporting tools to support
analysis of historical data, prediction of
trends, and the ability to make data-driven
decisions for continuous improvement.
As well as delivering the core activities
described above (i.e. manufacturing,
recycling etc.), we intend to select a
solution which will support the integration
of various other functions which operate
on standalone systems today, including
customer relationship management,
quality, plant maintenance and
assetmanagement.
For ERP, our objectives for 2024 are
to select a system and commence the
implementation process later in H2,
withgo-live around mid-2026.
Project risk management
We recognise that projects of this scale
typically carry significant risk. With that in
mind, we have established a Board-led,
cross-functional steering group to provide
oversight of the process and an escalation
point to address issues and concerns.
Our IT Director is highly experienced, with
several system implementations delivered,
including a multi-year, multi-company
rollout across another building materials
plc. We expect to implement an out-of-
the-box solution to remove complexity
from the project.
We have enjoyed early and extensive
engagement with business functional
areas through requirements workshops,
demos and vendor briefings, and will
continue to benefit from third party expert
support and guidance throughout all
aspects of the project. Finally, in building
our implementation team, we plan to
utilise specialist third party resource.
As a result, we are confident that we will
have the people and processes in place
throughout the project to ensure that risk
is appropriately managed.
Continuous improvement
As noted above, we are embedding
acontinuous improvement philosophy,
particularly within our manufacturing,
recycling and warehousing operations,
where we delivered significant cost savings
through operational efficiencies in 2023.
In our 2022/23 restructuring programmes,
we identified savings from the
consolidation of our extrusion activities
from three sites onto two, and we
believe there are further opportunities
toreducecost.
We are also now successfully using
artificial intelligence to optimise our
inventory levels, which has supported
areduction of c.£19 million over the last
18months (this includes the benefit of
lower input costs). We see scope to further
deploy this technology in other areas of
the business and support our ongoing
work on inventory reduction, through
tighter control of safety stocks and closer
matching of the manufacturing plan
toanticipated sales.
Looking forward, our most important
continuous improvement activities
willbefocused on:
• Process innovation in manufacturing
and recycling
• Material efficiency and yield
improvements
• Scrap reduction and lower cost
ofpoorquality
• Rapid tooling change-over
• Lost time analysis, including reducing
unplanned stoppages, performance
losses and labour shortages.
In addition, building on the successful
execution of our customer growth
initiatives, such as selling more doors and
windows, we will utilise spare operating
capacity that we have in our rigid extrusion
manufacturing operations and composite
door business, thereby making the
business more efficient.
Finally, we are reviewing our organisational
design across the whole business,
toensure that we have the right structures
to deliver our strategic initiatives in the
most efficient way possible. This may lead
to further cost savings in due course.
Eurocell plc Annual Report and Accounts 202328 Eurocell plc Annual Report and Accounts 202328
OUR STRATEGY CONTINUED
Full details for each of our strategy and these areas
of focus are set out the People First section of the
Sustainability Report which follows on pages 38 to 41.
first
People
3
The objective of our
strategic pillar is to make
Eurocell a great place to
work, through a relentless
focus on health and safety,
an enhanced employee
value proposition,
improved levels of
engagement and effective
talent management.
“Our ambition is to have talented, engaged and motivated colleagues
whoworkpassionatelytoachieve clear business and personal goals”
Eurocell will be a great place to work, where our culture make colleagues feel...
OUR
AMBITION
OUR
STRATEGY
KEY
PRIORITIES
SUCCESS
MEASURES
“I feel part of the Eurocell team
and I’m passionate about
myrolewithin thisteam”
HEALTH AND SAFETY
Develop health and safety
leadership skills
Develop health and
safetyeducation
EMPLOYEE VALUE
PROPOSITION
Wellbeing framework
Recognition scheme
Induction and onboarding
programme
ENGAGEMENT
Internal communications
framework
Colleague forum
Community and
charityengagement
GROWING TALENT
Talent management and
succession planning
Talent development
Maximising use of
apprenticeships
“I know how to contribute to the
success of my business”
“I know what’s going on...
Ifeel connected to the wider
business – I’ma valued as
ateammember”
“I know how I can progress
within Eurocell, I’m clear about
my development”
IFR/LTIR/Severity Rate/
RIDDOR Rate
Attrition and Retention % % of Internal Promotions
Apprenticeships
Participation/Use of Levy
Culture Survey Feedback
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 29
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 29
We are now working with CEN-ESG,
aspecialist ESG consultancy, to support
the development of our ESG strategy and
improve our ESG data and disclosures.
Full details of our strategy and the
results of our work so far with CEN-ESG
are set out in the Sustainability Report
which follows on pages 32 to 49 and
in our Task Force on Climate-related
Financial Disclosures (TCFD) Report
onpages50to61.
leadership
ESG
4
We want to earn a
reputation for being
a truly responsible
company. Eurocell
is already a leader
in PVCrecycling,
which is preventing
millions of windows
being sent to landfill.
But that’s just one
aspect of ESGand,
looking ahead,
weaim to excel
inall areas.
Eurocell plc Annual Report and Accounts 202330 Eurocell plc Annual Report and Accounts 202330
Dear Shareholder,
I am pleased to report to you on the
main activities of the Committee
and how it has performed its duties
during2023.
This is a new Committee, formed at the
end of 2022. Its purpose is to provide
formal and transparent oversight of
the Group’s Environmental, Social and
Governance (‘ESG’) programme and
value-led agenda. This includes, but is not
limited to, sustainability, employee welfare
and responsible business practices,
as well as the Company’s contribution
to the societies in which it operates.
1 Appointed 1 February 2024.
2 Appointed 2 January 2024.
Committee composition
Kate Allum Iraj Amiri Will Truman
Angela
Rushforth
1
Darren
Waters
Michael
Scott
Colin Hales Cat
Hambleton-
Gray
2
Jon Lawrence
SOCIAL VALUES AND ESG
COMMITTEE REPORT
As a result, the Committee has the
following objectives to:
• Emphasise the importance of
environmental measures, sustainability
goals and performance, at all levels
ofthebusiness
• Provide best practice on the structure,
policies and regulations that impact
thebusiness
• Increase the understanding and
awareness of corporate governance and
social aspects that impact the business
andindustry
• Monitor and develop all aspects of
employee welfare throughout the business
• Implement and promote common
and workable standards of corporate
governance for the business
• Provide advice on ESG matters to
management and the Board
• Review and approve/recommend the
Group’s ESG initiatives, objectives,
strategies and targets
• Advise on the reporting and disclosures
on ESG matters in compliance with laws
and regulations.
Social Values and
ESG Committee members
The Committee includes Non-executive
Directors, Executive Directors and
members of the senior management team.
During 2023, the Committee comprised:
Chair:
Alison Littley
Committee members:
Non-executive Directors:
Kate Allum
Iraj Amiri
Will Truman (from 15 May 2023)
Executive Directors:
Darren Waters
Michael Scott
Senior management team:
Colin Hales (Chief Operating Officer)
Jon Lawrence (Head of Safety,
Health andEnvironment)
Bruce Stephen (HR Director,
to31December 2023)
Subsequently, Cat Hambleton-Gray
(People Director) joined the Committee
on 2 January 2024 and Angela Rushforth
(Non-executive Director) joined on
1 February 2024.
All members of the Committee served
throughout the year, unless otherwise stated.
Only members of the Committee have the
right to attend Committee meetings, but
the other members of the Board and, when
appropriate, other members of the senior
management team, are also invited to
attend Committee meetings.
Role and responsibilities:
The principal duties of the Committee
areto:
• Drive the social value and responsible
business agenda onbehalf of the
Company
• Ensure that the Company conducts its
business in a commercially responsible
way to achieve maximum positive
impact on the people, communities
and the environment in which it works
• Monitor progress against key
performance indicators and external
ESG index results
• Benefit the customers, staff and
shareholders of the EurocellGroup.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 31
Summary of activities during
theyear
A significant amount of work has been
done on ESG, which was brought together
in a first formal meeting of the Committee
in October, with attendance shown
onpage 82.
Initially, the Committee focused on
collating, assessing and prioritising the
various ESG-related workstreams and
initiatives, which were already progressing
within the business, in order to develop a
baseline understanding of the status quo.
Thereafter, our first major goal was
toestablish a clear ambition for ESG
in the Group, which we agreed is to:
• Be the leader in sustainability in the
fenestration sector
• Create a great place to work
• Operate with the highest standards
ofgovernance.
Non-financial and Sustainability Information Statement
The Group has complied with the requirements of sections 414CA and 414CB of the Companies Act 2006 by including certain
non-financial information within the Strategic Report.
The following table summarises where you can find further information on each of the key areas of disclosure required by section
414CA and 414CB of the Companies Act. The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations
2022 amend these sections of the Companies Act 2006, placing requirements on the Group to incorporate climate disclosures in
the annual report. We believe these have been addressed within this year’s climate-related disclosures on pages 50 to 61 and as
such wehave referenced the location of these within our statement on TCFD on page 51.
Relevant Group Policies and Guidance Relevant Principal Risks Relevant Information from our annual report
Environmental
matters
• Safety, Health and Environment Policy
• Sustainable Procurement Policy
• Corporate Social Responsibility Policy.
• Sustainability and
climate change.
• Environmental Leadership:
pages 42 to 45
• Sustainable Products:
pages46 to 47.
Employees • Employee Handbook
• Managing Performance Policy
• Equality, Diversity & Inclusion Policy.
• Health and safety. • Health and Safety:
pages36to 37
• People First:
pages 38 to 41.
Social matters • Corporate Social Responsibility Policy
• Privacy policy
• Anti-Bullying, Harassment & Victimisation Policy
• Whistleblowing Policy
• Safety, Health and Environment Policy
• Recruitment Policy
• Various Information Security Policies
• Sustainable Procurement Policy.
• Cyber security
• Managing change.
• Ethics and Compliance:
pages 48 to 49.
Human rights • Anti-Slavery and Human Trafficking Policy
• Whistleblowing Policy
• Modern Slavery Statement.
• Ethics and Compliance:
pages 48 to 49.
Anti-bribery
and corruption
• Anti-bribery policy. • Ethics and Compliance:
pages 48 to 49.
The Committee recognises the challenges
of developing and delivering an effective
and transparent ESG strategy for a
business of our size, consistent with
our ambition and strategic intent.
Consequently, an ESG Leadership pillar
forms an integral part of the new strategy,
recently approved by the Board.
As a result, the Committee recommended
to management the benefits of third-party
expertise to provide specialist advice
and support in this area. Therefore, after
benchmarking with four other providers,
the Committee approved a two-year
agreement with CEN-ESG, specialists in
corporate sustainability and ESG-related
areas, with the scope of services including:
• Determination of the material
sustainability topics to the business,
definition of ESG objectives and the
development of a sustainability strategy,
along with the embedding of ESG
governance and internal controls
• Development of a full baseline carbon
footprint for the business (Scope 1, 2
and 3), identifying key decarbonisation
levers and setting net zero targets
• Management of external ESG
reporting, including the Sustainability
section of the Annual Report, focusing
on data collection and updated
TCFDdisclosures
• Ad hoc ESG support, when required.
Full details of our work to date with
CEN-ESG and the development of our
ESG strategy and related matters are set
out in the Sustainability Report on pages
32 to 49 and the Task Force on Climate-
related Financial Disclosures Report
onpages 50 to 61.
Finally, I would like to thank my fellow
Committee members who served during
the year for their valuable contribution
andsupport.
Alison Littley
Chair of the Social Values
andESGCommittee
19 March 2024
Eurocell plc Annual Report and Accounts 202332 Eurocell plc Annual Report and Accounts 202332
SUSTAINABILITY
REPORT
Why sustainability matters
Eurocell is committed to operating a
sustainable business and earning a
reputation for being a truly responsible
company. We also aim to lead the
fenestration sector in sustainability.
We are focused on reducing our carbon
footprint, valuing and supporting the
wellbeing of our people, and improving
the environment in which we operate.
Our Group’s purpose is to create
sustainable building solutions for the trade
of today, the homes of tomorrow and
the environment of the future. Circular
economy principles lie at the heart of our
strategy, as we recycle old PVC window
profiles into new products. In addition, we
aim to reduce our environmental impact
via energy saving initiatives and waste
management schemes. We also generate
savings for our customers through
products that limit heat loss and lower
energy bills. We endeavour to provide
an excellent, safe workplace for our
colleagues and ensure they feel supported
and valued. We are also committed to
playing an active role in our communities
and being agoodneighbour.
In developing our sustainability strategy,
we have recognised that our customers,
staff, other stakeholders and the
communities in which we work, are placing
increasing importance on environmental,
social and governance (ESG) issues.
In 2024, we will improve our data
collection to help us set challenging
targets for the business as we develop
a pathway to Net Zero. We will focus
specifically on developing our climate
transition plan and on carbon emission
reduction targets. Wewill also aim to make
a positive impact and difference to our
customers, employees and communities.
leadership
ESG
The leader in sustainability in the fenestration sector
• Integrity is the cornerstone
ofourbusiness
• Fully transparent in the way that
weoperate and report
• Receptive and responsive
to challenge and scrutiny
bykeystakeholders
• Constantly evaluating and mitigating
risks to protect the business
• Always with one eye on the future,
so that we comply with new
legislation and deploy best practice.
A great place to work
With the highest standards of governance
• Driven by our purpose, we will
live and breathe our values
without compromise
• Employee safety and welfare is
always front of mind
• A diverse business, where people
can be their true authentic selves
• Excel at developing people,
bynurturing talent and always
seeking to promote from within
• Fair in the way that we reward
andmanage our people.
• Maximise recycled content
inmanufactured products
• Ethically source raw materials
and products
• Progressively reduce carbon
footprint on a path to Net Zero
by 2045
• Be a responsible neighbour,
wherever we operate
• Minimise waste and usage
ofplastic packaging.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 33
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 33
Achievements since our last
AnnualReportinclude:
• Developing our ESG Strategy and
KPIs. We have consulted with our
stakeholders to better understand our
ESG risks and opportunities, through
an externally conducted materiality
assessment. The results of this
assessment are enabling us to work
towards setting new, ambitious KPIs
and targets to monitor our progress
and to focus our sustainability strategy
• Measuring our Scope 1, 2 and 3
emissions. In addition to our Scope
1 and 2 emissions, we have now
developed our end-to-end carbon
footprint methodology, which includes
for the first time a full Scope3 analysis
for 2022 and 2023
• Setting a Net Zero target. We have
set a target of achieving Net Zero by
2045. We will sign a commitment letter
to join the Science Based Targets
initiative (SBTi) indicating that we will
work to set a science-based emission
reduction target aligned with the SBTi’s
target-setting criteria in 2024
• Increasing the percentage of
recycled PVC in our products. In
2023 we achieved 32% and have now
set an ambitious new target to increase
this to 40% by 2030. This is a significant
opportunity as we work towards our
NetZero target
• Continuing to invest in carbon
reduction initiatives to minimise
our environmental impact. We have
continued to reduce our Scope 1 and
2 emissions. Mobile plant at our main
distribution centre has now transitioned
from gas to 100% electric. In addition,
the vast majority of our electricity usage
isnow on renewable contracts
• Embedding our ESG strategy across
Eurocell. The work of our Social Values
and ESG Committee has commenced.
The Committee will meet a minimum of
three times per annum, helping to drive
the social value and responsible business
agenda on behalf of the Company
• Recruiting a new People Director,
who is developing our People First
Strategy. The key priorities of this
work are focused on health and safety,
enhancing our employee value proposition,
improved levels of engagement and
effective talent development
• Improving our reporting of the
recommendations of the Task
Force on Climate-related Financial
Disclosures (TCFD). This work
builds on our disclosures from 2022
and expands on our risks and
opportunities identified.
Looking forward, our priorities are to:
• Embed our ESG strategy across the
organisation, monitor our ESG KPIs and
develop our ESG targets as we progress
• File our Net Zero targets with SBTi and
develop our Net Zero transition plan
aligned to the Transition Plan Taskforce
(TPT) draft standards. We will also
continue to deliver on the underpinning
initiatives that drive carbon reduction
across our business
• Focus on sustainability as part of our
new product development programmes,
looking to increase the development of
low carbon products to meet consumer
demands
• Deliver the programme of initiatives we
are undertaking across our business
tosupport staff and their communities
• Roll out a new wellbeing strategy for
allemployees.
Materiality assessment
Our process
Working with an external consultant,
we considered issues of internal
importance as well as incorporating
external issues shaping our current
strategy…
Step 1
We created a double materiality
matrix to help identify and prioritise
issues that matter most to us and
ourstakeholders…
Step 4
We held a workshop with our
Senior Leadership Team to prioritise
these issues based on their relative
importance to the businesses…
Step 2
We surveyed a wide range of
internal and external stakeholders
toincorporate their views…
Step 3
In 2023 we engaged with key stakeholders,
including investors, our lenders, customers,
suppliers and employees and completed
our firstdouble materialityassessment. This
identifies the most significant sustainability
issues to our stakeholders which have
strategic relevance to the Company.
Materiality results
Our analysis identified 17 of the most
material topics to our stakeholders. Whilst
all the topics are important, we have
prioritised them by the impact they have
on the business and the level of influence
they have on our stakeholders. The most
material issues for Eurocell are in the top
right of the materiality matrix chart overleaf.
We concluded the five most important
issues were:
• Health and safety: ensuring workforce
wellness and safety
• Labour and human rights: ensuring fair
working practices for our employees
including human rights
• Climate change and emissions:
minimising our carbon emissions and
our contribution to climate change
• Waste management: waste generated
by our operations needs to be dealt with
responsibly, including hazardous waste
• Product quality: selling products that are
safe to use and of high quality.
All of these areas are under active
management and monitoring. We will use
the results of the materiality assessment
to further refine our ESG strategy in
2024 and help develop KPIs and targets
whereappropriate.
Eurocell plc Annual Report and Accounts 202334 Eurocell plc Annual Report and Accounts 202334
SUSTAINABILITY REPORT CONTINUED
Sustainable business goals
We have a suite of ESG KPIs and targets
which we continue to measure and track
our progress against. We have also
assessed which of the 17 United Nations
Sustainable Development Goals (SDGs)
these KPIs link with.
Central to our environmental targets,
whichcover both the circular economy
and emissions and energy management,
isreducing the carbon footprint of the
business and our products. Our unique
recycling operation and focus on increasing
our use of recycled PVC compound in the
manufacture of co-extruded rigid profiles
has been, and will continue to be, at the
heart of carbon reduction for Eurocell.
Our social objectives are broad and cover
areas such as health and safety, diversity
andeducation.
Most of these targets were set in 2021.
Asnoted across, we have committed to a
Net Zero target for 2045 and during 2024
willbe developing a pathway, aligned to
the SBTi framework for our operational
emissions, tosupport us in achieving
thataim.
The pathway will provide ambitious near-
term targets, including updated objectives
for some of the environmental KPIs in the
table opposite in line with our overall Net
Zero goal. We will submit our targets to the
SBTi for verification in 2024 and publish
a Transition Plan once our targets have
been approved. Our social targets will also
be updated as part of our ESG leadership
strategy work.
Materiality matrix
Stakeholder ranking
0
Eurocell ranking
1 2 3 4 5
1
2
3
4
5
Key: Environmental Social Governance Financial materiality: Size of bubble
Communities
& partnerships
Biodiversity
Innovative
and efficient
products
Labour
& human
rights
Talent &
workforce
development
Water use
Diversity
& inclusion
Waste
management
Ethical conduct
& integrity
Health
& safety
Product
quality
Climate change
& emissions
Energy
management
Cyber & data
security
Effective use
of raw materials
Supply Chain
Management
Pollution
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 35
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 35
KPIs and targets
KPI 2023 2022 Target
Link to
UN SDGs
Environmental – Circular economy and waste management
Waste to landfill % landfill 9% 12% No more than 5% waste to landfill
by2025 and 1% by 2030
Waste recycled % recycled 76% 82% Increase of 2% per annum in waste
recycled (to 88% by 2025), then
increase of 1% per annum thereafter
(to 93% by 2030) vs 2020 baseline
Recycled material
used in production
% used 32% 29% 40% by 2030
CO
2
saved by
recycling operation
Tonnes saved 47kt 47kt Year-on-year increase
Recycled material
yield
% generated 63% 59% 72% by 2030
Environmental – Emissions, energy management and pollution
Scope 1, 2 and
3 emissions
(Market based)
Absolute Scope 1,
2 and 3 emissions
(Market based)
188,199 tCO
2
e 210,704 tCO
2
e Net zero by 2045
Renewable electricity % renewable electricity
used
94% total
electricity
72% total
electricity
More than 90% by 2025
Social
Health & Safety Lost-time injury rate 5.7 per
1m hours
10.0 per
1m hours
4.9 per 1m hours by 2025
Employee
engagement
and recruitment
Labour turnover 27% 32% Year-on-year reduction
Employee satisfaction Annual survey response
rate and overall
satisfaction level
73% and 75% 69% and 77% Year-on-year increase
Diversity Female employees 16.3% 15.3% Year-on-year increase
Remuneration National Living Wage
(NLW)
All employees
at or above
NLW
All employees
at or above
NLW
All employees above NLW by 2023
Education Apprenticeships/
Kickstarters
61 69 20% increase on 2020 base
of32by2025
Note: KPI performance data for 2022 and 2023 included in the table above is based on management estimates.
Eurocell plc Annual Report and Accounts 202336 Eurocell plc Annual Report and Accounts 202336
SUSTAINABILITY REPORT CONTINUED
Health and safety was identified as
Eurocell’s most material issue by our
stakeholders and the health, safety and
wellbeing of our employees is our number
one priority. We have a groupwide Safety,
Health and Environmental (SHE) Policy,
which is available on our website and
which is reviewed and updated regularly.
We firmly believe that effective health
and safety management is critical to the
delivery of good business performance.
We work constantly with our employees
to identify improvement opportunities and
eliminate unsafe acts.
SHE strategy
In 2023 our SHE strategy included the
rollout of 13 initiatives, with the most
significant highlighted in Safety First as
follows. We will continue this work in
2024, with several additional initiatives
centred around changing behaviours.
We believe that our SHE strategy helped
drive a significant improvement in safety
performance in2023.
safety
Health and
An example of one of these initiatives
from 2023 is the implementation of our
Cardinal Rules. Each rule revolves around
a different topic which, if not complied
with, could place our people at risk of
serious injury, such as fire safety. Our
workforce are trained on our expectations
through a series of Toolbox Talks, and
their understanding is checked through
a multiple choice test. Those who do not
meet the minimum threshold are required
to retake the session. Following successful
deployment of the Cardinal Rules in 2023,
our focus for 2024 is on their enforcement
and refresher training.
Safety first
Our Chief Executive, Darren Waters,
has overall responsibility for health and
safety. Oversight is provided through
our Chief Operating Officer, who is
informed on performance and initiatives
by our Head of SHE and supported by
senior management from different areas
ofthebusiness.
Following improvements made in 2023,
webelieve we now have a culture of
continual improvement in safety standards.
We are committed to ensuring that all of
our employees and contractors are aware
of hazards in the workplace, the risks they
present, and have the necessary tools to
manage them. Throughout the year, we
rolled out a number of initiatives, including
the following:
• IOSH and NEBOSH training – over
300 employees attended the IOSH
Working Safety and IOSH Managing
Safely courses, which were delivered in
partnership with our insurance brokers
and insurer. This greatly improved safety
awareness and knowledge and ensured
that employees understood their roles
and responsibilities
Safety
First
IOSHH Training
Complete for operations and management
levels within branch network
Cardinal Rules
Enforcement of
cardinal rules
Leading KPIs
Audit scores, RA/SOPs,
Reviewed SHE training hours
Annual Safety Day (SHE pledge)
Safety stand-downs on return
to work after breaks
Safety Campaigns
Two per year, based on
accident cause and injury type
SHE Platform
Develop central database
and software programme to
manage SHE
Behavioural Based
Safety Programme
In-house training
Recognition Schemes
Individual and collective recognition
for good practices, behaviour and
milestone achievements
ISO Standards
Work towards certification
for all sites
Visual SHE
Standard signage and floor markings
and install SHE focus areas
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 37
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 37
Strategic Report
• Volunteer Safety Reps within Operations
and SHE Champions for the offices
were appointed and trained to function
as a conduit between employees and
the management team to drive continual
improvement in safety standards
• Revised health surveillance programmes
were introduced throughout Operations
and the Branch Network to ensure
employees’ ongoing fitness to undertake
their work safely and in goodhealth
• Our Cardinal Rules (critical to life safety)
were trained out, displayed throughout
the sites and their compliance monitored
• Standard operating procedures and risk
assessments were reviewed to ensure
their adequacy and relevant Cardinal
Rules incorporated within them
• Regular observation walks and visible-
felt leadership tours took place to
engage with employees and monitor
safety compliance and standards.
We are confident that our 2024 Safety
Strategy will continue to deliver improved
safety performance and will again focus
on changing behaviours and improving
our safety culture.
We have a dedicated capital expenditure
plan to support improvements in
our safety performance. In 2024 this
includes the introduction of an electronic
near-miss reporting system to improve
our understanding of where incidents
arehappening.
Certification to ISO 45001 was maintained
for our four main manufacturing sites in
Alfreton and Liverpool (representing 50%
of our operational facilities), with only minor
non-conformances and opportunities
for improvement identified. ISO 45001
gap analysis was conducted at three of
our other operational facilities, which all
achieved compliance scores ranging from
83%to 85%.
We aim to achieve certification to
the standard across all eight Eurocell
operational facilities by the end of 2025.
There were several visits by the Health
and Safety Executive during the year
toour recycling facilities, resulting in two
Improvement Notices regarding dust
and machine guarding. The latter was
addressed immediately, and significant
investment has since been made
toimprove dust control and management
to the satisfaction of the HSE.
Safety targets
As an overall ambition, we are targeting
the elimination of RIDDOR (Reporting
of Injuries, Diseases and Dangerous
Occurrences Regulations 2013) injuries
bythe end of 2027. To assist with tracking
our progress we have set interim targets,
and for 2024 we are aiming to achieve a
15% improvement in our injury frequency
rate (IFR), lost time injury frequency rate
(LTIFR), severity rate and RIDDOR rate
compared to 2023.
Safety performance
During 2023, supported by the rollout of
our SHE strategy, we delivered a significant
improvement in safety performance,
reducing our LTIFR by 43%compared
to2022 and our RIDDOR rate by 52%.
The IFR increased during 2023 by 21%.
However, this was as a direct result of
increased employee awareness of the
need to report even the most minor
injuries, reflecting the investment we
made in training our colleagues to IOSH
and NEBOSH standards. We have further
improved the reporting of near misses and
unsafe acts and conditions and monitor
their reporting and closure very closely.
In 2024 we will also focus on leading
performance indicators.
2023 2022 2021 2020 2019
Lost time injuries 27 48 36 24 36
Lost time injury frequency rate (LTIFR)
1
5.7 10.0 7.6 7.4 8.9
RIDDOR 11 23 28 19 17
Near misses 146 102 29 n/a n/a
Number of employee fatalities – – – – –
Number of contractor fatalities – – – – –
Number of cases of silicosis – – – – –
Number of staff trained on health and
safety standards
322 – – – –
Number of health and safety training hours 3,456 – – – –
1 Injuries per 1 million hours worked.
Case study
IOSH training
During the year, we were pleased
to partner with our insurance
broker, Gallaghers, to deliver IOSH
Managing Safely training to 127
managers, and Working Safely
training to 195 operatives.
Gallagher partnered with
Eurocell to deliver IOSH
Working Safely and Managing
Safety courses to over 300
employees. This training
significantly improved their
safety knowledge, including
awareness of the risks faced
at work, how to identify
hazards and how to take
the correct action to avoid
potential injuries and make the
working environment safer.’’
Subsequently, we have seen
a reduction in workplace
injury insurance claims.
Eurocell’s insurers were
pleased to see the raised
safety profile, increased
awareness and reduced
claims, and were happy to
contribute towards the cost
of this training.”
Eurocell plc Annual Report and Accounts 202338 Eurocell plc Annual Report and Accounts 202338
SUSTAINABILITY REPORT CONTINUED
Our strategy and business model are
underpinned by the commitment and
efforts of all our employees. It is our
ambition to have talented, engaged
and motivated colleagues who work
passionately to achieve clear business and
personal goals. The objective of our People
First strategic pillar is to ensure Eurocell is
a great place to work, through a focus on
health and safety (covered in the previous
section), improved levels of engagement,
an enhanced employee value proposition,
and effective talent development.
Engagement
We recognise the impact we have on our
employees, communities and beyond, and
are committed to ensuring that we engage
appropriately with all our key stakeholders.
Employee engagement
Engaging all our employees and
galvanising their efforts in line with our
purpose and values will set us on a
successful path to achieving all our
business objectives. We engage with
employees through a variety of methods, to
ensure all have the opportunity to be heard.
first
People
Board engagement
We continue to run colleague focus
groups, led by our designated Non-
executive Director Alison Littley, to
ensure employees’ views are heard and
understood by the Board. These sessions
have received a very positive response.
Pulse survey
In 2023 we conducted our third annual
Pulse survey to provide employees with
the opportunity to tell us how they feel
and take a temperature test on overall
employee satisfaction. Key questions
remained unchanged from the 2022
survey, to provide a good basis for
comparison, although items specifically
relating to health and safety were added,
reflecting our increasing focus in this area.
KPI 2023 2022 Change
Response
rate
73% 69% 4ppts
Employee
satisfaction
75% 77% -2ppts
We are encouraged by the increased
response rate, but we recognise there
is further room for improvement.
Although there has been a decline in the
overall employee satisfaction rate, the
feedback we received has been used to
develop our People First strategy and
build actions plans. Satisfaction relating
to health and safety was strong, whereas
topics relating to job security, mental
health and wellbeing received weaker
scores by comparison. Our response
and plans are described further in the
paragraphs which follow.
We intend to perform a more in-depth
culture survey once our new purpose,
values and strategy are embedded
inthebusiness.
“Our ambition is to have talented, engaged and motivated colleagues
whoworkpassionatelytoachieve clear business and personal goals”
Eurocell will be a great place to work, where our culture make colleagues feel...
OUR
AMBITION
OUR
STRATEGY
KEY
PRIORITIES
SUCCESS
MEASURES
“I feel part of the Eurocell team
and I’m passionate about
myrolewithin thisteam”
HEALTH AND SAFETY
Develop health and safety
leadership skills
Develop health and
safetyeducation
EMPLOYEE VALUE
PROPOSITION
Wellbeing framework
Recognition scheme
Induction and onboarding
programme
ENGAGEMENT
Internal communications
framework
Colleague forum
Community and
charityengagement
GROWING TALENT
Talent management and
succession planning
Talent development
Maximising use of
apprenticeships
“I know how to contribute to
the success of my business”
“I know what’s going on... Ifeel
connected to the wider business –
I’ma valued as ateammember”
“I know how I can progress
within Eurocell, I’m clear
about my development”
IFR/LTIR/Severity Rate/
RIDDOR Rate
Attrition and Retention % % of Internal Promotions
Apprenticeships
Participation/Use of Levy
Culture Survey Feedback
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 39
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 39
Internal communications framework
EPiC (Eurocell People in Communication)
is our internal communications platform,
which engages and informs colleagues
on topics such as business performance,
new initiatives and people successes. It
takes the form of monthly e-newsletters,
which include a CEO vlog, and a triannual
printedmagazine.
We recently completed the appointment
of an Internal Communications
Manager (a new position). As a result,
in 2024 we expect to make further
progress with our plans to develop an
internal communications framework,
improve our cascading of important
company information and measure
colleagueengagement.
Colleague engagement forum
In 2024, we intend to launch an
employee engagement forum, to drive
colleague engagement through two-way
communication channels. The forum will
provide a platform for representatives
from across the Group to meet quarterly
with senior leaders, receive company
updates and share questions, feedback
and ideas from the wider workforce. We
expect that the forum will develop trust
with management teams and facilitate
the creation of action plans for issues
andimprovements.
Community partnerships
We are increasingly aware of the benefits
of connecting with local communities
within the areas we work, for example,
from a networking, social impact and
good neighbour perspective.
In 2023, our charitable efforts focused
on Maggies, which provides emotional
support and care for cancer patients and
their families. They are a fantastic charity,
with centres in 24 locations across the UK.
We raised £22,500 for Maggies in 2023,
through several events including car boot
sales, bungee jumps, bike rides and family
hikes. We also hosted a supplier and
customer golf event, and a ‘GO Orange’
day across our business in October.
Weintend on keeping the positive
momentum into 2024, and reflecting our
own 50-year anniversary, have a target
toraise £50,000.
Employee value proposition
Our employee value proposition captures
the various topics which together aim to
ensure our employees feel valued and
supported as members of the Eurocell
team. Importantly, this includes reward and
recognition and our wellbeing framework.
Fair working practices
We are committed to providing a fair
working environment for all our employees,
including a fair salary, terms and conditions
of employment and statutory benefits.
Our policy is to comply, at the very
least, with minimum wage legislation
for all employees and we seek to be as
competitive as possible with all our roles.
Employee turnover
We are pleased to report that our labour
turnover decreased from 32% in 2022 to
27% in 2023, although it remains above
our 2020 baseline of 21%. We believe that
the biggest drivers of turnover have been
complex systems and processes, facilities
that require improvement, the need for
more training and competitive pay. We
are addressing these concerns, including
a significant investment now in progress
to upgrade and simplify our systems,
ongoing improvements in site welfare
facilities and increased training budgets.
We have also benchmarked our pay and
reward in key areas of the business and
made changes accordingly. As a result, we
expect to make further progress in 2024.
Reward and recognition
Each year we ensure that all employees
are paid at or above the National Living
Wage (NLW), and can confirm that we
remained in line with this ambition again
in 2023.
Following a detailed review of the levels
of pay and reward in our branch-based,
manufacturing and warehousing teams,
new and improved pay structures were
launched in 2022, which have supported a
reduction in labour turnover and improved
retention since implementation.
Our total reward strategy ensures that
all employees are eligible for a range of
benefits and incentives that include a
defined-contribution pension scheme, life
insurance, Save As You Earn (‘Sharesave’)
schemes, and access to a range of
savings and special offers through our
Eurxtras platform.
Eurxtras is a savings portal, which also
provides employees with information on
health and wellbeing, and a platform for
managers and employees to recognise
the good work of their colleagues.
On recognition, we are introducing a
quarterly reward scheme, based on
nominations from colleagues, to highlight
fantastic efforts from our people which
contribute to the values and strategy of
the business, with their stories shared
in company-wide communications.
Eurocell plc Annual Report and Accounts 202340 Eurocell plc Annual Report and Accounts 202340
SUSTAINABILITY REPORT CONTINUED
Wellbeing framework
We provide tools to help our colleagues
reduce stress and we are committed to
supporting their wellbeing. All employees
can access support and advice through
our Employee Assistance Programme,
promoted through EpiC and other
employee communications.
In 2023, we improved our occupational
health provision with targeted health
surveillance and launched our Health
Shield cash plan for all employees, which
supports colleagues with everyday health
concerns, providing easy and accessible
help in areas such as GP appointments.
Italso provides access to mental health
and wellbeing support.
However, we have more to do in this area
and are currently working on a plan to
offer in 2024 a wellbeing platform that
can provide individual assessments and
actionplans.
Diversity and inclusion
The overriding policy in any new
appointments we make continues to
be one of selecting candidates with an
appropriate mix of skills, capabilities
and market knowledge, to ensure the
continued success of the business.
However, we recognise fully the benefits of
encouraging diversity and inclusivity across
the business and believe that progress in
these areas will contribute strongly to our
continued success.
We have recently reviewed and updated
our Equality, Diversity & Inclusion Policy
and our Anti-Bullying, Harassment
& Victimisation Policy, as we aim to
continually improve our processes.
We are committed to providing a working
environment that embraces opportunities
for everyone. We treat all employees
and job applicants equally, without bias
or discrimination. Our recruitment policy
ensures that full and fair consideration is
given to all applicants based purely on
their aptitude and that all appointments
are made based on merit and measured
against specific objective criteria, including
the skills and experience needed for
the position. We seek to ensure that
discriminatory practices are removed
from all of our employment decisions,
and from working conditions.
We are committed to non-discriminatory
practices against candidates and
employees alike on the basis of any
characteristic, including gender, race
or ethnic origin, age, religion, sexual
orientation, pregnancy or maternity,
gender identity, disability, marriage or
civil partnership, social background,
nationality, and political opinion.
We continue to promote flexible solutions
tailored to, and supportive of, individual
needs. Our internal processes support
all employees who may require help and
support, including employees who are
disabled or become disabled during their
employment, to fulfil their day-to-day work
activities through our occupational health
provision. We provide tailored support for
specific groups and individuals throughout
our business, including the provision
of free English and maths tuition for
non-English speakers.
Whilst we operate in an industry in
which, historically, women have been
underrepresented, we are very committed
to increasing the participation of women
throughout the Group. Our historic target
has been to deliver year-on-year increases
in the proportion of female employees in
the Group. This was achieved in 2023,
with female employees increasing to 16%
(2022: 15%). See below for development
of future targets for diversity in 2024.
All Board and senior management
appointments are made on merit, in line
with the approach adopted throughout the
Group’s workforce. However, theBoard
also recognises and embraces the benefits
of diversity and, in particular, the value
that different perspectives and experience
bring to the quality of debate and decision
making. The Board is committed to
consider diversity, including gender,
asakey element in senior appointments
and atBoard level.
Gender diversity statistics
2023 gender analysis
Male
No. %
Female
No. %
Total
No.
Directors 6 75% 2 25% 8
Executive Committee 3 75% 1 25% 4
Other senior management 37 69% 17 31% 54
Senior management 46 70% 20 30% 66
Other employees 1,712 84% 323 16% 2,035
Total 1,758 84% 343 16% 2,101
2022 gender analysis
Male
No. %
Female
No. %
Total
No.
Directors 6 75% 2 25% 8
Executive Committee 5 83% 1 17% 6
Other senior management 27 69% 12 31% 39
Senior management 38 72% 15 28% 53
Other employees 1,868 85% 329 15% 2,197
Total 1,906 85% 344 15% 2,250
Note: both years exclude Security Hardware which was sold on 2 December 2022.
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Eurocell plc Annual Report and Accounts 2023 41
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 41
The relatively small size of the Board
and the pre-existing Directors’ service
contracts have inevitably limited the pace
of change. Nevertheless, as set out in
the Nomination Committee Report on
page89, over the last 18 months we
have made significant progress towards
compliance with the Financial Conduct
Authority’s board diversity targets and
now expect to be substantially compliant
following our 2024 AGM.
In addition, following changes in 2024,
female membership of the Executive
Committee has now increased to 33%.
More generally, following implementation
of our new HR information system in 2023
(see below), we intend to report ethnicity
data. However, we acknowledge that our
people have no legal obligation to provide
this information and therefore our reporting
will be limited to those employees who do.
Looking forward, as part of our People
First strategic pillar, we are reviewing
our opportunities with a view to setting
appropriately challenging diversity and
inclusion targets for the future and will
report our conclusions in 2024.
Growing talent
New HR information system
The core modules of our new HR
information system (People XD) went live
in 2023, with further modules to follow in
2024. The new system is fully integrated
and covers payroll, people administration,
learning management, onboarding, talent
management, recruitment and time and
attendance. It also provides a platform
to set objectives and complete regular
performance reviews.
Looking forward, once embedded,
the system will allow us to better track
and report our people-related metrics,
including training data, and therefore
support the key activities that will drive
our People First strategic pillar.
Resourcing and recruitment
We are now sourcing talent using the new
HR information system, which provides
a digital platform to help attract, select,
and recruit the best people for our vacant
roles, delivering reduced time-to-hire and
recruitment cost savings.
Induction and retention
Our People XD system also provides
a platform to give new starters a more
effective and engaging onboarding
experience.We implemented several
initiatives in 2023 to help new colleagues
feel connected to Eurocell as they begin
their career with us. These include
enhanced welcome packs, eLearning
compliance and mandatory training
pathways, a Eurocell Handbook, all
supported by follow-up calls from our
onboarding and training teams. We have
also continued to embed our Network
Essentials guide and Branch Network
SharePoint site to help new colleagues
understand how we work within our
branches and trade with our customers.
Employee development
Our Managing Performance policy outlines
our intent for all employees to have
development objectives which are regularly
discussed and formally assessed in mid-
year and end-of-year reviews. We are
developing a simple, holistic one-to-one
Performance, Personal Development and
Talent Review (PDTR) process, supported
by our new HR information system.
We are committed to providing training
to help with the development of our
colleagues. Through the PDTR process,
training, learning and development will be
prioritised and succession planning will be
routinely considered.
More recently, we have focused on
developing our colleagues’ managerial
skills. Our Manager’s Toolkit is available
to all managers across the business and
provides a one-stop shop of information
to help them complete everyday people
management activities. During 2023,
99 of our managers took part in training
workshops covering the followingthemes:
• Managing investigations
• Coaching for one-to-ones
• Managing absence
• Managing underperformance
• Coaching through observation
and feedback
• Time management
• Effective meetings
• Effective presentations.
Leadership development
We have widened the participation in
our third-party facilitated Leadership
Development Programme, following its
success in the Branch Network over the
last two years.
Other development programmes
Grow programme for first-line
leaders/team leaders
We introduced the Grow Programme
for team leaders in 2022, with a total
of 31 colleagues now enrolled, from
manufacturing, secondary operations
and warehousing. It is a 12-24 month
programme built around the Chartered
Management Institute (CMI) and Institute of
Apprenticeships Level 3 Standard, leading
to a recognised management qualification.
Aspire2b supply chain warehouse
operativeprogramme
The Aspire2b programme also
commenced towards the end of 2022 and
provides structured training in a variety of
warehouse activities, as well as a refresher
on English and maths and results in a
Level 2 qualification.
Apprenticeships
We continue to make use of the
apprenticeship levy through developing
our in-house capabilities in disciplines such
as accounting, engineering and supply
chain operations.
Eurocell plc Annual Report and Accounts 202342 Eurocell plc Annual Report and Accounts 202342
SUSTAINABILITY REPORT CONTINUED
leadership
Environmental
Managing environmental
performance
We are committed to conducting our
business in a safe and responsible manner,
including protecting and minimising
the impact of our operations on the
environment.
We recognise that our operations result
in emissions and waste and, as such,
we have a designated Safety, Health &
Environment (SHE) policy, which covers
all sites, outlining key environmental
measures asfollows:
• Prevent pollution and protect the
environment by minimising waste and
emissions and finding ways to reuse,
reclaim and recycle materials and use
sustainably sourced materials where
possible
• Investigate environmental incidents
to extract key learnings and prevent
recurrence
• Ensure senior management regularly
reviews performance against
agreedtargets
• Promote environmental awareness
amongst all of our employees and
provide the necessary training and
information to safeguard our employees
and minimise the impact of our activities
on the environment
• Commit to control, recover, and reuse
PVC waste where possible
• Conduct our operations in compliance
with all relevant environmental legislation
linked to our business
• Maintain emergency procedures in
areas where significant health, safety
or environmental hazards may exist
• Assess our environmental objectives,
policies and procedures regularly to
ensure that we are meeting the required
standards and continually improving.
The environmental management systems
implemented at our two main extrusion
plants, secondary operations (foiling)
facility, door manufacturing facility and
northern recycling plant are all accredited
to ISO 14001:2015, which represents 63%
of our operations sites. All accreditations
were successfully maintained in 2023. No
environmental fines or penalties have been
recorded in 2023 or 2022.
Energy consumption and emissions data
In addition to our Scope 1 and 2 emissions, we have now developed our end-to-end carbon footprint methodology, which includes
for the first time a full Scope 3 analysis for 2022 and 2023 as set out in the table.
Scope
2023
ktCO
2
e
2022
ktCO
2
e
Movement
ktCO
2
e %
Scope 1 9.6 10.3 (0.7) (7)%
Scope 2 (Location based ) 11.0 10.5 0.5 5%
Scope 2 (Market based) 1.3 5.6 (4.3) (77)%
Scope 1 and 2 (Location based) 20.6 20.8 (0.2) (1)%
Scope 1 and 2 (Market based) 10.9 15.9 (5.0) (31)%
Scope 3 177. 3 194.9 (17.6 ) (9)%
Purchased Goods and Services 152.5 163.9 (11.4) (7)%
Capital Goods 2.2 3.6 (1.4) (37)%
Fuel and Energy related activities 3.2 4.9 (1.7) (34)%
Upstream Transportation 8.2 10.5 (2.3) (21)%
Waste 0.3 0.4 ( 0.1) (6)%
Energy and greenhouse
gas emissions
Central to our sustainability strategy
is reducing the carbon footprint of our
business and the impact our operations
have on climate change. This includes
reducing energy consumption and
greenhouse gas emissions across all
of our operations and minimising waste.
We have made good progress in recent
years. The natural replacement cycle of
our extrusion fleet leads to the substitution
of old machines with newer lines that are
more efficient and use less energy. Other
examples of more recent initiatives include
projects which have reduced idle, standby
and shutdown times and improved
temperature optimisation on our extrusion
lines and chillers.
In addition, incandescent and fluorescent
lighting has been swapped to LEDs at
most of our operational sites and new,
more efficient, air conditioning units have
been installed across most of our estate,
driving significant energy savings.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 43
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 43
Scope
2023
ktCO
2
e
2022
ktCO
2
e
Movement
ktCO
2
e %
Business Travel 0.8 0.9 (0.1) (8)%
Employee Commuting 1.8 1.9 (0.1) (7)%
Upstream Leased Assets Not Applicable
Downstream Transportation – – (–) (67)%
Processing of Sold Products 5.4 5.8 (0.4) (7)%
Use of Sold Products Not Applicable
End of Life Treatment 2.9 3.0 (0.1) (5)%
Downstream Leased Assets Not Applicable
Franchises Not Applicable
Investments Not Applicable
Total Scope 1, 2 and 3 (Location based) 197.9 215.7 (17. 8 ) (8)%
Total Scope 1, 2 and 3 (Market based) 188.2 210.8 (22.6) (11)%
Intensity ratio (tCO
2
e per £m of revenue) – Location based 543 566 (23) (4)%
Intensity ratio (tCO
2
e per £m of revenue) – Market based 516 553 (37) (7)%
Energy
FY23
MWh
FY22
MWh
Movement
MWh %
Total non-renewable fuels consumption 38,418 40,877 (2,459) (6)%
Total renewable fuels consumption – – – 0%
Total renewable electricity consumption 49,756 39,230 10,526 27%
Total non-renewable electricity consumption 3,430 15,228 (11,798 ) (77)%
Total renewable energy consumption 49,756 39,230 10,526 27%
Total non-renewable energy consumption 41,848 56 ,10 5 (14,257) (25)%
Total energy consumption 91,604 95,335 (3,731) (4)%
Notes to table:
• We operate only within the United Kingdom and so values are for UK operations only
• 2022 has been re-stated to reflect the change in the reporting period.
Notes to calculations:
• Emissions and energy data presented for 2022 and 2023 is based on management estimates
• To calculate our emissions and energy usage data, we have followed the 2019 UK Government environmental reporting guidance. We have used the GHG Protocol
Corporate Accounting and Reporting Standard (revised edition). The Greenhouse Gas Protocol standard covers the accounting and reporting of seven greenhouse
gases covered by the Kyoto Protocol. We are reporting our Scope 3 emissions for the first time this year, with guidance from the GHG Protocol Corporate Value Chain
(Scope 3) Accounting and Reporting Standard and the GHG Protocol Technical Guidance for Calculating Scope 3 Emissions, as required
• We have reported on all of the material emission sources from within the operational boundaries of the Group, as required under the Companies Act 2006
(StrategicReport and Directors’ Reports) Regulations 2013 and under the UK’s Streamlined Energy and Carbon Reporting (‘SECR’) requirements
• The Group has defined its organisational boundary using an operational control approach. Our reporting of Scope 1 and 2 emissions and energy data covers 100%
ofour global operations. Furthermore, our reporting of Scope 3 emissions covers 100% of our upstream and downstream value chain
• The emission factors from the UK Government’s GHG Conversion Factors for Company Reporting 2023 (the Department for Environment, Food and Rural Affairs
(‘DEFRA’) factors) have been used for all Scope 1 and 2 categories and the majority of Scope 3 categories. For spend-based calculations, the UK Environmentally-
Extended Input-Output (EEIO) model factors were used. For weight-based calculations, EcoInvent and Idemat factors were used
• In line with the Greenhouse Gas Protocol, we continue to review our reporting in light of any changes in business structure, calculation methodology and the accuracy
or availability of data. As a result, we have restated 2022 emissions data to reflect a change in the reporting period from 1 October to 30 September to 1 January
to31December to align to Eurocell’s financial reporting period.
Eurocell plc Annual Report and Accounts 202344 Eurocell plc Annual Report and Accounts 202344
SUSTAINABILITY REPORT CONTINUED
Energy consumption and
emissions performance
Our Scope 1 emissions reduced by 7%
in 2023 to 9.6ktCO
2
e, primarily reflecting
lower levels of sales and production,
and therefore distribution and transport
activity in the business in 2023 compared
to 2022. However, despite lower
electricity consumption, location-based
Scope 2 emissions increased by 5% to
11.0ktCO
2
e, driven by an increase in
the year-on-year emissions factor for
UKelectricity. Together therefore, Scope1
and2 emissions of 20.6ktCO
2
e were
down 1% compared to 2022.
Market-based Scope 1 and 2 emissions
of10.9 ktCO
2
e were down 31% compared
to 2022, which reflects an increase in our
purchases of renewable electricity from
72% in 2022 to 94% in 2023.
We have calculated our Scope 3
emissions for 2023 to be 177.3 ktCO
2
e,
compared to 194.9ktCO
2
e in 2022, a
decrease of 9%. This mainly reflects lower
emissions from purchased goods and
services, down 11.4ktCO
2
e, or 7%.
More than 80% of our Scope 3 emissions
are from purchased goods and services,
including virgin PVC resin. This reduction
is also driven by lower levels of production
in our primary extrusion operations in 2023
compared to 2022.
Reflecting these factors, total location-
based emissions (Scope 1, 2 and 3) of
197.9 ktCO
2
e were down 8% compared
to 2022, with the corresponding emissions
intensity ratio of 543 tCO
2
e per £1m sales
down 4%. Market-based emissions of
188.2 ktCO
2
e were down 11% compared
to 2022, with the corresponding emissions
intensity ratio of 516 tCO
2
e per £1m
salesdown 7%.
Total energy consumption in 2023 of
91,604MWh was down 4% compared
to 2022, with renewable consumption
up27% and non-renewable down 25%.
On a net basis, this primarily reflects lower
production volumes in 2023 compared
to2022.
Energy consumption and
emissions targets
As set out in the TCFD Report on pages
50 to 61, we have committed to a Net Zero
target for 2045 and during 2024 will be
developing a pathway, aligned to the SBTi
framework for our operational emissions,
to support us in achieving that aim. The
pathway will provide ambitious near-term
targets, including updated objectives for
energy use and emissions in line with our
overall Net Zero goal. We will submit our
targets to the SBTi for verification in 2024
and publish a Transition Plan once our
targets have been approved.
Key components of our transition plan
will be moving away from fossil fuel usage
and sourcing/generating renewable
energy. In the near term, our key initiatives
designed to reduce emissions include:
• Increase our purchases of renewable
electricity (94% in 2023)
• Complete the project to install solar
panels at our main extrusion plant, which
will produce an estimated 0.8MWh of
renewable energy per annum
• Continue to upgrade our material
handling fleet to electric alternatives
• Explore the option of switching company
vehicles to electric and continue to instal
charging points at our branches and
operational facilities
• Investigate non-diesel options for our light
commercial fleet and engage with our
third-party logistics provider to examine
ways to reduce the environmental impact
of our distribution operation
• Training operational staff in methods
to improve operational efficiency and
reduce emissions
• Ongoing replacement of PVC extruder
fleet with modern, more efficient plant
and equipment.
In addition, we are working with suppliers
to better understand and improve
Scope 3 emissions. Critical to our Net
Zero transition plan will be finding viable
alternatives to allow a reduction in the
use of virgin PVC resin. This will most
likely come from increasing the use of
recycled PVC in our primary manufacturing
operations, plus finding another viable low
carbon alternative e.g. bio-attributable
PVC resin.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 45
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 45
Water consumption
Our main use of water is in the cooling
process for extrusion, but it is also used
to wash scrap PVC and remove impurities
in our recycling operations and for
employee welfare.
We have a closed loop water recycling
system in extrusion, where the water
is filtered, purified, and neutralised to
maintain its quality. Water supply bills are
scrutinised for abnormalities that would
indicate a leak, following which the water
provider would be contacted for repair.
The system significantly reduces the
environmental impact of our processes,
by conserving local water resources and
reducing the amount of contaminated
or unfiltered water entering back into the
local environment. Minimising consumption
and therefore reducing disposal costs also
has a financial benefit to our business.
We use only potable water, supplied directly
by the water provider, which is suitable for
drinking. We do not abstract any ground or
surface water. None of our sites are located
in high flood-risk areas and all sites are
provided with adequate welfare facilities,
inaccordance with governing legislation.
Our Chief Operating Officer has overall
responsibility and oversight of the SHE
policy, which encompasses water-related
matters. The management team of each
operational site has direct responsibility
for ensuring our SHE policy is followed.
Water usage was identified as a key issue
for our stakeholders in our ESG materiality
assessment. Over the last few years, we
have strengthened our material recovery,
including improved water circularity. We
will continue the work to improve our water
usage data collection and thereafter to
define targets to increase water efficiency
in our operations. This is dependent
on investment and process changes to
improve our existing closed-water loop
cooling systems.
Waste management
Our business and operations result in
waste and we are committed to controlling,
recovering and reusing waste wherever
possible. Our Executive Committee has
overall responsibility and oversight for waste
management. We promote the efficient
use of resources and materials that are
used in our facilities to help reduce waste.
We have a sustainable procurement policy
and we actively seek to source sustainable
products from suppliers that are made
from recycled material where possible.
Total waste (kt) 2023 2022
To landfill 2.3 2.9
Recycled 19.3 20.0
Diverted from landfill 3.7 1.4
Total 25.3 24.3
Packaging accounts for c.5% of the waste
we generate. We aim to reduce this by using
thinner materials and packaging with more
recycled content both for our own products
and in the delivery of raw material to our sites.
Hazardous materials
We do not use significant amounts of
hazardous materials. In our extrusion
business, we do not use phthalates, cadmium
or lead-based stabilisers. In our recycling
operation we monitor the cadmium and lead
contamination levels within feedstock, to
ensure compliance with governing legislation.
Very small quantities of other hazardous
materials are currently used as additives
within our product mix, butthese
are rendered non-bioavailable when
encapsulated by the polymer structure.
Inaddition, we have a specific requirement
within our new product introduction process
to reduce any use of hazardous materials.
For example, we are investigating replacing
the solvent-based glue used in our foiling
process with awater-based alternative.
During 2023, we continued our work towards
a zero to landfill aspiration. In 2023 76% of
our waste was recycled (2022: 82%), the
fall in waste recycled reflects a change in
process from our main third-party supplier
part way through the year, which we will
review in 2024. We have a target to increase
waste recycled by 2% per annum by 2025 vs
our 2020 baseline (resulting in 88% by 2025),
and 1% per annum thereafter (resulting in
93% by 2030). We have also committed
to amaximum of 5% of waste tolandfill
by2025 and 1% by 2030.
To support delivery of these targets,
we have a new waste management
plan for 2024, focused on improving
the processing of by-products from our
recycling process (metal, rubber, wood).
At third-party sites, which act as collection
and delivery hubs for old windows which
have been replaced, we are implementing
processes that allow for cleaner waste
streams. We will also continue to develop
partnerships with waste services providers,
to optimise end-to-end material recovery.
Eurocell plc Annual Report and Accounts 202346 Eurocell plc Annual Report and Accounts 202346
SUSTAINABILITY REPORT CONTINUED
product s
Sustainable
Innovative low carbon products
We are committed to minimising the
environmental impact of our products
throughout their lifecycle. Our use of
recycled PVC provides low embodied
carbon products for customers and
prevents PVC waste from going to landfill.
We also focus on developing thermally
efficient products that help our customers
minimise heat loss.
Recycling operation
We are proud to be the leading UK-based
recycler of PVC windows. Our extensive
recycling capacity sits at the heart of our
operations, our sustainability strategy, and
will be critical to our Net Zero ambitions.
Our recycling operations convert
customer factory offcuts (post-industrial
waste) and old windows that have been
replaced (post-consumer waste) to brand
new extruded products. Our advanced
co-extrusion process delivers recycled
material to the profile core, with external
surfaces protected using virgin PVC
compound, providing a high-quality,
resilient finish. The key benefits of our
recycling operation are set out below.
Commercial
We can leverage the sustainability aspects
of our recycling operation with our
customer base, consumers, and other
stakeholders. Many of our customers,
including large developers and house
builders, are increasingly looking for
sustainable, low carbon products that can
support their own net zero ambitions. For
example, most of the large house builders
aiming to achieve ‘zero carbon homes’
classify products within the houses they
sell as ‘sustainable’ if they help customers
save energy whilst running their homes
and/or because they are made with
lower carbon processes or raw materials.
This labelling could be a key competitive
advantage for Eurocell.
Economic
Recycling also increases our profits,
because the cost of recycled compound is
typically lower through the cycle than the
price of virgin material, and it reduces our
exposure to volatile commodity prices.
Carbon savings
An independent study by the University
of Manchester found that displacing
one tonne of virgin PVC with one tonne
of recycled window PVC results in a
reduction of approximately 1.7 tonnes
of CO
2
emissions. This calculation
compares the full life cycle carbon
emissions associated with the production
of virgin PVC with emissions from the
window recycling process. As a result,
our recycling operation saves substantial
amounts of carbon compared to the use
of virgin PVC, and we therefore consider
our products produced with recycled
content to be low carbon.
In 2023, our two sites recycled 38.7k
tonnes (equivalent to more than three
million window frames) of post-consumer
waste, which would have otherwise
been sent to landfill, and 8.1k tonnes of
post-industrial waste. Together, the two
sites used this waste to produce 27.7k
tonnes of recycled material. As much of
the remaining by-product is scrap metal,
which is sold to metal recyclers, with very
little sent to landfill.
Of the recycled material produced,
17.5k tonnes was used alongside virgin
resin in the manufacture of many of
our rigid PVC profiles. The remaining
10.2k tonnes of recycled material
produced is used either in products which
are manufactured from 100% recycled
material, including thermal inserts and
cavity closer systems (which are almost
exclusively derived from post-industrial
waste), or sold to a range of trade
extruders. Recycled PVC represented
32% of total raw material consumption
in2023, up from 29% in 2022.
We therefore estimate that, in total, our
recycling operation saved approximately
47k tonnes of carbon in 2023 compared
to the use of virgin PVC.
We have now set ourselves a more
ambitious target to reach 40% recycled
content across our product range by
2030. Achieving this target will be a critical
component of our Net Zero transition plan,
but also dependent on several factors,
some of which may remain beyond our
control. These include:
• Supply of recycled feedstock –
we estimate that we currently take
approximately one-third of the total
recycled PVC available in the UK
market. In order to reach our recycled
content target of 40%, we will need
to increase significantly our feedstock
supply at acceptable purchase prices.
This will require that we maintain and
develop strong relationships with
existing and potential new suppliers.
Improving the yield at our recycling
plants will also help increase supply of
material for use in our manufacturing
operations
• Legislative limitations – other than
the current requirement for any rigid
PVC profile that is externally exposed
to have a virgin PVC exterior, recycled
content of our products is not restricted
by regulations. We will need to monitor
any future changes in legislation and
understand the potential impact on our
targets (although we are not currently
aware of any such planned changes)
• Operational capacity – increased
recycled content requires further
investment in co-extrusion capacity and
tooling, although this is included in our
ongoing investment plans
• Technological limitations – it is not
currently commercially viable to use
large quantities of recycled PVC in foam
profile products, which represented
31% (by weight) of our extrusion output
in2023.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 47
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 47
Strategic Report
Thermally efficient products
Our window and door-related products
are designed to deliver enhanced thermal
efficiency via low thermal conductivity.
This is measured through U-values, which
determine how much heat is lost through
the fabric of the building (surface heat loss
through walls, ceilings, floors, windows
and doors). The lower the U-value the
more thermally efficient the product.
All of our mainstream PVC fenestration
products currently have U-values which meet
the expected Future Homes Standard level
of 1.2 W/m
2
K. In many cases, our products
perform even better than this, which can allow
house builders more flexibility in their choice
of material elsewhere in their builds. Our PVC
profiles also deliver better U-values relative to
alternatives such as wood and aluminium.
End of life
It is our aim to continue to recycle as much
PVC as possible, moving where possible
towards closed-loop recycling, whereby
windows and other PVC profiles are
continually recycled into new products.
Our PVC profiles can be recycled up to
ten times and have a life span of around
100 years.
Responsible sourcing
Our main raw materials are sourced from
manufacturers across the UK, Europe
and the US, and traded goods are
directly sourced in the UK from suppliers
manufacturing around the world. We have
a loyal supplier base, of which a significant
majority have been suppliers to Eurocell
for many years. We are committed to
the continuous development of supplier
relationships that support our ethical
and sustainability expectations, and
deliver a responsible value chain.
To support this we have established
supplier pre-appointment checks. All
supply and tender agreements include
the following statement:
“The supplier advocates the principles
of Corporate Social Responsibility
and requires a serious approach to
sustainability (including economic, social
and environmental considerations)
issuesfrom its value chain and partners.”
In addition, all our suppliers are required
to confirm their commitment to:
• Protecting the environment as it relates to
these activities at a global and local level,
including aspects such as energy, water
and resource use, and emissions of
greenhouse gases and other pollutants
• Respect for fundamental human rights,
including safe working conditions,
fair compensation at least in line with
minimum wage, and fair working hours
• Enforce ethical and legal trading
rules with regards to anti-bribery
andcorruption
• A system of internal and external
reporting which matches espoused
values
• A proactive approach to the innovation
of sustainable practices andproducts
• Recognition that all businesses have a
responsibility to be a good neighbour
and accept their active role within the
communities inwhich they operate
• An ethical approach to managing and
maintaining all purchasing activities.
We subsequently review our suppliers
periodically to assess ongoing compliance
with these commitments. We also ensure
that all relevant raw material suppliers
are compliant with current regulatory and
industrial standards and that they meet
our quality and environmental standards.
Failure to comply will result in the
termination of the business relationship.
We are also committed to paying our
suppliers on time in accordance with
agreed terms of business.
Our Head of Procurement is tasked
with overseeing and managing supplier
relationships and a value chain that
delivers shared value, in an ethical and
sustainable manner.
Product quality and safety
Achieving the highest standards of
productand service quality and safety
is essential to our continuing success.
Our quality aim is simple: to totally satisfy
our customers. Our vision for quality is to
create an operation in which we get things
right first time, every time.
In terms of product safety, we focus on
providing products that comply with
all relevant housing and building safety
standards, with fire safety being the largest
consideration. All our products are tested to
ensure that they meet safety requirements,
and information about safe use and
disposal of our products is provided
through warning labels, manuals and other
documentation where appropriate.
We work continually to improve our
performance and ensure compliance with
ISO9001 and the other quality standards
to which we are accredited.
We operate clearly defined systems and
procedures and work closely with our
customers to address concerns and
resolve complaints. We also provide the
necessary training and support to our
colleagues so they are able to play their
part in delivering high standards of product
and service quality.
Case study
Modus windows
and Luma
rooflights
Our Modus windows include
a triple-seal option to achieve
strong thermal, air tightness and
noise reduction performance. Its
unique 75mm six-chamber profile
system delivers optimum energy
efficiency performance and is
capable of achieving a U-value as
low as 0.8 W/m
2
K from a standard
system using standard triple-
glazed units.
Our new LUMA flat rooflight is
available in both double and triple
glazed options, offering excellent
thermal efficiency and sound
reduction. Double glazed units
achieve a centre pane U-value of
1.3 W/m
2
K and triple gazed units
achieve0.9 W/m
2
K.
Eurocell plc Annual Report and Accounts 202348 Eurocell plc Annual Report and Accounts 202348
compliance
SUSTAINABILITY REPORT CONTINUED
Ethics and
Modern slavery
We have zero-tolerance for any form of
modern slavery or human trafficking, and
are absolutely committed to preventing
modern slavery and human trafficking in
our business activities and supply chains.
We support the aims of the UK’s Modern
Slavery Act and publish our Anti-Slavery
and Human Trafficking Statement, which
is approved by the Board annually, on our
website at investors.eurocell.co.uk .
As described above, we also conduct
an ongoing reviews of our suppliers to
identify any potential risks. In addition,
our employee induction process includes
mandatory training on our Modern Slavery
and Human Trafficking policy.
Whistleblowing
We are committed to the highest
standards of openness, honesty, integrity
and accountability. The Group has a
Whistleblowing policy, and we take active
steps to raise employees’ awareness of
our whistleblowing platform.
This policy makes all employees aware that
they should report any serious concerns
or suspicions about any wrongdoing or
malpractice on the part of any employee
of the Group, without fear of criticism,
discrimination or reprisal, as well as the
procedure for raising such concerns.
Examples include fraud, breakdown in
internal controls, misleading customers,
bribery, modern slavery, dishonesty,
corruption and breaches of data protection
or health and safety. All whistleblowers
are protected under the Public Interest
Disclosure Act.
Our independent whistleblowing
hotline, which supports confidential and
anonymous reporting, is available to all
employees, 24/7, 365 days a year. Each
case is investigated confidentially by
the business with appropriate response
measures taken. Whistleblowing cases are
reported to the Audit and Risk Committee
and ultimately to the Board.
In 2023 there were no reports received
through the whistleblowing process
(2022:0, 2021:5), and therefore no
significant trends were identified.
Anti-bribery and corruption (ABC)
We are committed to acting fairly and
with integrity, and take a zero tolerance
approach to bribery, corruption or
any other unethical or illegal business
practices. Applying to all employees and
suppliers, we explicitly prohibit any form
ofbribery or corruption, including:
• Money laundering
• Facilitation payments, which are typically
unofficial payments made to secure or
expedite a routine government action by
a government official
• Kickbacks
• Political contributions
• Sponsorships.
In addition, we are committed to
minimising any conflicts of interest,
whereby an individual’s personal interests
may compromise their judgement in the
workplace, that may arise.
We will take disciplinary and/or legal action
as appropriate in all cases of actual or
attempted fraud across all operations. We
will not obstruct any formal investigations
or legal proceedings relating to any
incident of corruption at Eurocell.
All staff complete training on our Anti-
Bribery Policy as part of their induction,
and are subsequently required to complete
refresher training each year. In 2023, there
were no incidents of employees being
disciplined or dismissed due to non-
compliance with our Anti-Bribery Policy
(2022:0, 2021:0).
The Audit and Risk Committee, ultimately
reporting to the Board, is responsible for
reviewing the policies and procedures in
place to prevent bribery, and for ensuring
compliance across the Group. The
Committee is satisfied that the Group’s
procedures with respect to these matters
are adequate.
Human rights
We do not consider human rights issues to
be a material risk for the Group due to the
existing regulatory frameworks in the UK,
within which our operations are confined.
We do, however, acknowledge there is
greater risk in our supply chain, and are
therefore committed to conducting due
diligence across our supply chain, in line
with the Modern Slavery Act as described
above. In addition, employees and other
relevant internal and external stakeholders
can report any concerns relating to human
rights across Eurocell’s direct operations
or supply chain through our confidential
Whistleblowing channel. No violations on
human rights have been reported in 2023
or in the previous two years.
Information systems
and technology (IS&T)
At Eurocell we respect the privacy of
employees, customers, suppliers and all
other parties with which we interact. We
seek to minimise the amount of personal
data we collect, and to ensure the robust
and sufficiently segregated storage of any
data that is held.
Information security and cyber threats are
increasing risks. In 2022 we experienced
a cyber incident which caused disruption
to our operations and compromised the
security of some employee personal
data. Cyber security continues to receive
considerable management attention,
as well as focus from the Audit and
Risk Committee and the Board. This is
also reflected in the results of our ESG
materiality assessment, which placed
cyber and data security amongst the
most material issues facing the business.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 49
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 49
Since the incident in 2022, we have:
• Rolled out an extensive programme
ofmandatory cyber security training
to all colleagues in a series of monthly
short videos and quizzes covering
arange of security threats and ways
tomitigate therisks
• Strengthened our cyber risk detection
tools, including vulnerability analysis
penetration testing
• Strengthened our incident response
measures through implementing
managed detection and response
(MDR), security instant event monitoring
(SIEM), privileged access management
(PAM) and firewall hardening
• Reviewed the performance of our
business continuity plans and made
appropriate adjustments in response to
the incident to identify gaps and areas
for improvement.
Tax transparency
We recognise the responsibility we have
to our stakeholders and communities to
set the highest standards of corporate
conduct, and paying the right amount
of tax in the right place is fundamental
to this. Across our entire operations,
weare committed to compliance with
taxlaw and practice, and are committed
to compliance with the spirit as well as
the letter of the law.
We commit to not use jurisdictions
considered to be tax havens for the
purpose of avoiding tax, nor will we
seek to take advantage of the secrecy
afforded to transactions recorded in these
jurisdictions. We prohibit the avoidance
oftax through transfer pricing, and do
not exploit any such mechanisms.
Our Tax Strategy is reviewed, discussed
and approved by the Board annually.
TheAudit Committee periodically
reviews the Group’s tax affairs and risks.
We have held the Fair Tax Mark
accreditation since 2019. Fair Tax Mark
is an independent certification, which
recognises organisations that demonstrate
they are paying the right amount of
corporation tax in the right place, at the
right time.
As we are entirely based in the UK, we
do not reside in any countries considered
partially compliant or non-compliant
according to the OECD tax transparency
report and/or blacklisted or grey listed by
EU in February 2023.
Eurocell plc Annual Report and Accounts 202350 Eurocell plc Annual Report and Accounts 202350
TCFD
We are committed to retaining our
status as sustainability leader in
the fenestration sector. Our unique
recycling operation and focus on
increasing the use of recycled PVC
compound in the manufacture of
co-extruded rigid profiles is at the
heart of our climate strategy.
This year we have significantly enhanced our management of climate change through
developing our ESG governance structures and expanding our ESG strategy. We
have for the first time reported our full carbon footprint (including Scope 3 emissions
using the GHG protocol) for 2022 and 2023. We have committed to a Net Zero target
for 2045 and during 2024 will be developing a pathway, aligned to the Science Based
Targets initiative (SBTi) framework for our operational emissions, to support us in
achieving that aim. The pathway will provide ambitious near-term targets, including
updated objectives for some of our ESG KPIs (e.g. greenhouse gas emissions and
energy use) in line with our overall Net Zero goal.
However, to reach Net Zero, we continue to be dependent on viable low carbon
alternatives to virgin PVC.
Task Force on
Climate-related
Financial Disclosures
We will submit our targets to the SBTi for
verification in 2024. We will also further
enhance our KPIs, environmental data
collection and reporting, enabling us to
publish a Transition Plan once our targets
have been approved.
We recognise that climate change poses
significant risks and opportunities to our
business and stakeholders. Our TCFD
report demonstrates we incorporate
climate-related risks and opportunities into
the Group’s risk management, strategic
planning and decision-making processes,
aligned to our Net Zero ambition.
This year we have enhanced the analysis
of transition risks, and for our physical
risks we have performed a detailed
bottom-up site analysis using a geospatial
climate hazard mapping tool. We expect
to enhance our analysis with quantification
of risks and opportunities in 2024, after the
publication of our Transition plan.
The directors consider that the climate-
related risks and opportunities of the
company are integrated with those of
Eurocell group, and that any climate-
related impact on the company itself would
originate in the operating businesses of the
group. The assessment of the impact of
climate change on the value of the Group
is carried out at least annually, or when a
triggering event occurs, and no impairment
charge has resulted to date. The interests
of the company’s stakeholders within and
outside the group are also considered as
part of this assessment, when appropriate.
The Board has noted the requirement for
mandatory climate-related disclosures
arising from the Companies (Strategic
Report) (Climate-related Financial
Disclosure) Regulations 2022, as well as
FCA Listing Rule 9.8.6R(8). Below we
have set out our climate-related financial
disclosures, cross references in the table
opposite, fully consistent and compliant
with all of the 11 TCFD recommendations
and recommended disclosures as detailed
in ‘Recommendations of the Task Force
on Climate-related Financial Disclosures’,
2017, with additional guidance from
‘Implementing the Recommendations
of the Task Force on Climate-Related
Financial Disclosures’, 2021.
Following third party and internal analyses
of the Group’s climate-related risks and
opportunities, which are detailed in the
Strategy section of this TCFD Report,
our current view is that significant
financial planning or budgetary change
as a result of climate change is not likely
toberequired.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 51
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 51
Detail on the 11 recommended disclosures can be found on the following pages:
Recommendation Recommended disclosures Reference CA 414CB
1
Governance
Disclose the organisation’s
governance around climate-related
risks and opportunities.
a) Describe the Board’s oversight of climate-related risks
andopportunities
Page 51 CA s414CB(a)
b) Describe management’s role in assessing and
managing climate-related risks and opportunities
Page 52 CA s414CB(a)
Strategy
Disclose the actual and potential
impacts of climate-related risks and
opportunities on the organisation’s
businesses, strategy, and financial
planning where such information is
material.
a) Describe the climate-related risks and opportunities
the organisation has identified over the short, medium,
and long term
Pages
54 to 60
CA s414CB(d)
b) Describe the impact of climate-related risks and
opportunities onthe organisation’s businesses, strategy,
and financial planning
Pages
54 to 60
CA s414CB(e)
c) Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios, including a 2°Corlower scenario
Pages
54 to 60
CA s414CB(f)
Risk Management
Disclose how the organisation
identifies, assesses, and
manages climate-related risks.
a) Describe the organisation’s processes for identifying
and assessingclimate-related risks
Page 53 CA s414CB(b)
b) Describe the organisation’s processes for managing
climaterelated risks
Page 53 CA s414CB(b)
c) Describe how processes for identifying, assessing, and
managing climate-related risks are integrated into the
organisation’s overall risk management
Page 53 CA s414CB(c)
Metrics and Targets
Disclose the metrics and targets
used to assess and manage relevant
climate-related risks and opportunities
where such information is material.
a) Disclose the metrics used by the organisation to assess
climaterelated risks and opportunities in line with its
strategy andrisk management process
Pages
60 to 61
CA s414CB(h)
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related risks
Pages
42 to 43
–
c) Describe the targets used by the organisation to manage
climate-related risks and opportunities and performance
against targets
Page 61 CA s414CB(g)
1 Companies Act 2006, s414CB(2a)-(2h).
Governance
Board oversight of climate-related
risks and opportunities
At Eurocell, the Board reviews and is
ultimately accountable for all ESG matters,
including climate-related issues and
progress against climate related targets.
Board expertise on climate change, and
ESG more broadly, is provided by Alison
Littley (Non-executive Director), Chair of
the Social Values and ESG Committee.
The Committee was set up in late 2022 to
provide formal and transparent oversight of
the Group’s ESG programme, specifically
including climate change and responsibility
for ensuring progress against climate-
related targets.
The Committee includes four independent
Non-executive Directors, including Alison
Littley (Chair). The Chief Executive, Chief
Financial Officer, Chief Operating Officer,
Head of Safety, Health and Environment
and our new People Director, are also
members. It meets three times per annum.
Alison Littley updates the Board on the
activities of the Committee at Board
meetings which typically follow within
one day of the Committee meeting.
The Committee accesses specialist advice
on carbon footprinting and other ESG
matters which enables the sharing of best
practice and ideas across the Group.
During 2023, the Committee oversaw
the appointment of external sustainability
consultants to support the development of
our climate change strategy. In 2024, the
Committee will oversee the introduction of
a training schedule for Board members on
climate-related issues.
Climate change will see further focus
in 2024, as our Net Zero targets are
established and pathways are identified.
The Board, through the Social Values
and ESG Committee, will oversee this
process and subsequently monitor,
and be accountable for, progress
against the targets.
The Committee will in turn receive regular
updates from Executive Committee
members on the performance and
progress against climate-related
objectives.
The Board is also responsible for risk
management, supported by the Audit
and Risk Committee and informed by
the Executive Committee. The Board
defines risk appetite and monitors the
management of significant risks, now
including climate-related risks and
opportunities. Climate-related risks are
included in the Group risk register, which
is reviewed and subsequently presented
to the Audit and Risk Committee by
Executive Management biannually.
Responsibility for each risk on the Group
risk register is allocated to a member of
Executive management, with responsibility
for sustainability and climate change
risk allocated to Darren Waters, our
ChiefExecutive.
Eurocell plc Annual Report and Accounts 202352 Eurocell plc Annual Report and Accounts 202352
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES
CONTINUED
Management’s role in assessing
and managing climate-related
risks and opportunities
The Executive Committee, led by our
Chief Executive, is responsible for the
implementation of our climate change
strategy. This includes management of
our carbon emissions and improving
the climate credentials of our products,
particularly with our focus on the use
of recycled material in manufacturing
processes. Additionally, initiatives such
as R&D and efficiency improvements
are closely monitored.
Our Chief Operating Officer is primarily
responsible for the delivery of our
climate change objectives and now
reports progress to the Social Values
andESGCommittee.
Once our targets have been approved
by the SBTi, our intention is that the
Executive Committee will cascade
the Net Zero transition plans to each
division, thus ensuring that there is
accountability throughout the organisation.
The Committee will review the carbon
reduction plans to deliver revised
emissions targets in each business
unit and monitor progress against
keymilestones.
Climate-related governance framework
Board
Ultimately accountable for climate-related issues:
Social Values and
ESG Committee Members:
Formal oversight of climate change and responsible
for climate-related targets
Audit and Risk
Committee:
Supports the Board with responsibilities
for risk management
Executive Committee
Responsible for operationalising the climate change multi-year plan
Day-to-day responsibility to assess, monitor and manage climate-related risks and opportunities
Profiles Division (respective leads below)
Consolidate, monitor and manage climate-related risks
atsubdivisional level shown below
Building Plastics Division (Commercial Managing Director)
Consolidate, monitor and manage climate-related risks
atdivisional level
Operations
(Chief Operating
Officer)
Sales
(Sales Director)
Vista
(Managing
Director)
Local and regional
branch leads
Identify, report and monitor site-level climate-related risks Identify, report and monitor branch-level climate-related risks
The Executive Committee has day-to-day
responsibility for identifying, assessing,
monitoring and managing risks. The
Committee meets monthly, with risk
management now introduced as a standing
agenda item to facilitate the discussion
and management of any emerging and
increasing risks, including climate-related
risks (both physical risks at site level, and
transitional risks). Our Chief Operating
Officer, as well as the commercial leaders
in each division, now consider any
climate-related risks within their respective
business units through their discussions
with site managers and local and regional
branch managers. As noted above, the
Executive Committee consolidates these
discussions with a full risk register review
every sixmonths, with the results reported
to theAudit and Risk Committee.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 53
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 53
Risk management
Our processes to identify, assess
and monitor climate-related risks
Climate change and associated regulatory
response risks are now included as part
of our overall risk management framework
and are considered as part of our Group
risk management processes. Our risk
assessment considers existing and
emerging risks and all risk categories
outlined in the TCFD recommendations
in relation to our operations. Climate-
related risk identification is performed both
bottom-up, through a detailed assessment
at operational site level, as well as top-
down, through an assessment of strategic
and market risks.
Site-level environmental risks, including
climate-related risks, are identified as part
of our operational risk assessments. Our
Head of Estates & Facilities Management
is responsible for identifying and assessing
the environmental risks of existing and
potential sites. Any risks identified will
be escalated to the relevant Executive
Committee member, who consolidates
risks within their own area of responsibility
and reports to the monthly Executive
Committee meeting. In most cases, the
relevant Executive Committee member is
either the Commercial Managing Director
(for the branch network) or the Chief
Operating Officer (for all other sites).
Identifying and assessing environmental
risks at our branch sites is largely via
environmental surveys. Our branches
are typically leased on individual ten-year
contracts, with five-year break clauses
that can be exercised if a risk becomes
unacceptable.
Environmental risks at our operational sites
are managed through the local business
continuity plans, held by our operational
managers for extrusion, warehousing and
secondary operations sites respectively.
The business continuity plans are tested
periodically and updated for any
identified improvements. This year, we
have enhanced our site-level assessment
of physical climate-related risks using
a physical risk analysis software tool,
which has provided greater depth to
our riskanalysis.
Sustainability and Climate Change is
deemed a principal risk for the Group
and is therefore included on the strategic
riskregister.
Climate-related risks are assessed and
prioritised in a similar way to all other
risks on the Group’s strategic risk register.
Risksare assessed on a five-point scale
for both the probability and impact of
the risk occurring, providing an overall
risk rating calculated by multiplying the
probability by the impact.
The probability ranges from A (Almost
Certain) to E (Rare), whilst we assess
the impact on a scale of 1 (Very High)
to 5 (Very Low). The impact rating is
financial, measured in absolute terms or
as a percentage of EBITDA per annum.
However, for certain risks, the impact
rating may also reflect the impact on the
Group’s reputation or on the environment,
or whether the effect is localised or
widespread. The resulting overall risk rating
categories are: Negligible, Low, Medium,
High or Critical.
It is important to note that our climate
risks are currently assessed on a gross
basis. However, once we have had our
Net Zero targets approved and finalised for
our transition plan, we expect to quantify
our risks and mitigations to reflect their
expected net impact on the business.
Risks on our strategic risk register are
generally assessed on a three-year
business planning cycle. Recognising
the longer time horizon of many climate-
related risks, however, the following
timescales are applied:
Scale Criteria
Short
term
1 year (aligned to budgeting
cycle)
Medium
term
5 years (aligned to strategic
planning cycle)
Long
term
Over 5 years (aligned to
our Net Zero target, the
useful life of our facilities and
encompassing long-term policy
and industry trends)
This year, with the help of external
sustainability consultants, we have
conducted a comprehensive assessment
of climate-related risks and opportunities
across the Group, through a combination
of interviews with key stakeholders,
including several internal functions, and
desktop research including analysis
of industry trends and peers. The
identification and assessment of climate-
related risks and opportunities will be
reviewed each year in preparation for
our TCFD reporting requirements.
Managing and integrating climate
into wider risk management
As described above, risk management,
including climate change, is now a
standing agenda for the monthly meetings
of the Executive Committee. This includes
consideration of divisional level risks and
the status of ongoing mitigating actions,
as well as a review of any emerging or
increasing risks. Every six months, each
division will conduct a review of its risks
with the Group Risk Management team
in advance of the Executive Committee’s
in-depth risk register review.
The Audit and Risk Committee assists
the Board in assessing and monitoring
risk management across the Group. As
a result, the relative materiality and the
prioritisation of climate-related risks is
considered alongside other Group risks
within the existing Group risk management
framework.
Eurocell plc Annual Report and Accounts 202354 Eurocell plc Annual Report and Accounts 202354
Strategy
Our approach to climate
scenario analysis
In 2023, we undertook a substantial
qualitative analysis of the resilience of our
business model and strategy under the
guidance of an independent third-party
consultant, CEN-ESG. Physical risks
were analysed using four scenarios from
the Intergovernmental Panel on Climate
Change (‘IPCC’) embedded in the Munich
Re software platform used to analyse
physical risks of climate change:
• RCP 2.6
1
: a climate-positive pathway,
likely to keep global temperature rise
below 2°C by 2100. CO
2
emissions
start declining by 2020 and get to zero
by 2100
• RCP 4.5: an intermediate and probably
baseline scenario more likely than not to
result in global temperature rise between
2°C and 3°C by 2100 with a mean sea
level rise 35% higher than that of RCP
2.6. Many plant and animal species will
be unable to adapt to the effects of RCP
4.5 and higher RCPs. Emissions peak
around 2040, then decline
• RCP 7.0: a baseline outcome rather
than a mitigation target and represents
the medium-to-high end of the range of
future emissions and warming resulting
from no additional climate policy
• RCP 8.5: a bad case scenario where
global temperatures rise between
4.1and 4.8°C by 2100. This scenario
is included for its extreme impacts
on physical climate risks as the
global response to mitigating climate
changeislimited.
For the transition risks and opportunities,
we have used the following climate-related
scenarios from the International Energy
Agency, which are far more descriptive
and useful for modelling more positive
climate outcomes. The scenarios have
been considered at a high level, whereby
transition risks are generally greater
(more likely and with greater impacts)
in the lower carbon scenario compared
to the higher carbon scenario.
• Net Zero 2050 (NZE)
2
: an ambitious
scenario which sets out a narrow but
achievable pathway for the global
energy sector to achieve net zero CO
2
emissions by 2050. This meets the
TCFD requirement of using a ‘below
2°C’ scenario and is included as it
informs the decarbonisation pathways
used by the Science Based Targets
initiative (SBTi), which validates
corporate net zero targets and ambition
1 IPCC (2014), Climate Change 2014: AR 5 Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the
Intergovernmental Panel on Climate Change.
2 IEA (2022), Global Energy and Climate Model, IEA, Paris iea.blob.core.windows.net/assets/3a51c827-2b4a-4251-87da-7f28d9c9549b/
GlobalEnergyandClimateModel2022Documentation.pdf.
Key risks
Six transitional and one physical climate-related risks have been identified.
Operational exposure to carbon pricing mechanisms TCFD Category: Transition (Policy and Legal)
Own operations
Higher costs associated
with energy
Medium term
Gross risk rating: High
Scope 1 and 2 emissions
Risk
Increased operational costs as a result of exposure to carbon pricing mechanisms.
Description
The implementation of operational carbon pricing is one of the levers used by regulators to achieve
decarbonisation of energy and industrial production, either through higher energy costs or direct
carbon taxes applied to our gas and electricity used (Scope 1 and 2 emissions). We expect significant
but gradual price increases in the medium term, with greater forecast price rises in the NZE Scenario.
Mitigation
The impact of the risk is expected to be moderated through our efforts to reduce Scope 1 and 2
emissions to minimal levels, as part of our 2045 Net Zero target. Key near-term actions consist
of improvements in the energy efficiency of the extrusion lines, recycling and other manufacturing
processes, such as the use of more efficient heat pumps, sub metering and closer monitoring of
downtimes. These measures will contribute to the reduction of energy consumption and Scope 1
and 2 emissions.
• Stated Policies Scenario (STEPS)
2
:
a scenario which represents the roll
forward of already announced policy
measures. This scenario outlines a
combination of physical and transitions
risk impacts as temperatures rise
by around 2.5°C by 2100 from pre-
industrial levels, with a 50% probability.
This scenario is included as it represents
a base case pathway with a trajectory
implied by today’s policy settings.
Climate-related risks and
opportunities
Seven climate-related risks and five
climate-related opportunities that could
have a material impact on the Group
have been identified. These are discussed
in greater detail below. Currently, the
magnitude of our identified risks and
opportunities are assessed on a gross
basis; however, mitigation strategies are
also identified. A more detailed analysis
and quantification will be undertaken
once our Net Zero target has been
approved and our transition plan has been
published, for inclusion in subsequent
TCFD reports.
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Eurocell plc Annual Report and Accounts 2023 55
Carbon pricing in the value chain TCFD Category: Transition (Policy and Legal)
Upstream
Increased cost of
purchased goods and
inbound transportation
Medium term
Gross risk rating: Critical
Scope 3 emissions
(Category 1)
Risk
Increased costs throughout the supply chain due to carbon pricing pressure.
Description
Our ability to continue to reduce emissions, in line with our 2045 Net Zero target, will be influenced
by some factors beyond our control, such as the decarbonisation of electricity grids, increased costs
of raw materials as suppliers meet decarbonisation targets, and the development of zero emissions
transportation. Investment in lower carbon processing, equipment and facilities impacts the cost of
raw materials. New, lower emission processing methods and alternatives to oil derived hydrocarbon
feedstock, such as new products like bio-attributable PVC resin, are still being developed for
commercial use. The development of a low embodied carbon alternative to virgin resin at a
commercial price is the most significant of these supply chain risks, and could lead to increased costs
for Eurocell. The fossil fuel industry is exposed to global regulatory and policy decisions in the drive to
reduce emissions, and these changing policies may also impact the reliability of our supply chain and
the price of our key raw materials.
Mitigation
We engage closely with our major suppliers of virgin PVC to avoid unplanned fluctuations in price and
supply. Where possible, our supply contracts are longer term to increase visibility. We closely monitor
the availability, pricing, quality and carbon footprint of products that produce PVC from alternatives
to fossil fuels, such as bio-based raw materials. We have an ongoing R&D programme to investigate
lower carbon supply chain options, working closely with our key suppliers to identify opportunities.
Failure to achieve our recycling targets TCFD Category: Transition (Market, Reputation)
Own operations and
upstream
Higher costs, lower
revenue
Long term
Gross risk rating: Critical
Scope 3 emissions; %
of recycled PVC used
in production
Risk
Failure to reduce carbon emissions through inability to increase the proportion of recycled PVC used
in production up to our target level.
Description
The percentage of recycled PVC used in our production process has increased steadily in recent
years up to 32% in 2023. Our new target is to increase this to 40% by 2030. The biggest risk to
achieving our target is a failure to source sufficient feedstock at acceptable prices. We also require
building standards and regulations to continue to support the use of recycled PVC.
Mitigation
Our supply chain includes the collection and processing of post-consumer (waste windows) and
post-industrial (factory offcuts) scrap PVC. We estimate we currently collect approximately one-third
of the relevant PVC (post-consumer and industrial) waste available in the UK, and achieve a63% yield
on production in our recycling plants.
To source sufficient material, we will engage with existing and potential new suppliers, housing
associations and fabricators to maintain and increase our supply of waste PVC, using longer-term
contracts with larger suppliers where possible. We will continue to invest in research and development
and tooling to increase the yield in our recycling plants. We will also engage with governmental and
industry bodies to shape product and building standards to support increased use of recycled PVC
in our products.
Eurocell plc Annual Report and Accounts 202356 Eurocell plc Annual Report and Accounts 202356
Cost of capital and investor interest linked to sustainability
criteria TCFD Category: Transition (Market, Reputation)
Own operations
Higher cost of capital
Medium term
Gross risk rating: Medium
Scope 1, 2 and 3
emissions; UK interest
rates
Risk
Increased cost of capital and/or decreased access to funding through failure to meet performance
and disclosure requirements.
Description
Increased investor and lender expectations in relation to sustainability performance and disclosure,
with providers of capital (investors and banks) incorporating sustainability into their assessments,
creates risks on the availability and cost of capital. With an existing revolving credit facility of £75m
extending to 2027, the funding risk is minimal in the short term. However, over the medium term,
investors and banks are expected to be more stringent and withdraw funding or apply punitive
charges if ongoing targets on emission reduction are not aligned to their own NetZero targets.
Mitigation
We remain in continued dialogue with lenders, rating agencies, investors and sustainability experts
to ensure our climate change disclosure is in line with the latest regulatory requirements. We have
completed a materiality assessment to ensure we focus on priority ESG topics. We are measuring
Scope 3 emissions and will in 2024 publish an SBTi-aligned Net Zero target, which will help to
mitigate this risk.
Customer and consumer pressure TCFD Category: Transition (Market, Reputation)
Downstream
Lost revenue
Long term
Gross risk rating: High
Scope 3 emissions;
thermal efficiency of
products (U-value)
Risk
Loss of customers and revenue through failure to meet customer standards and consumer preferences.
Description
Driven by industry standards and government regulation, large house builders require suppliers to be
at the forefront of embodied carbon reduction and in the reduction of energy when their products are
in use. If we do not meet the disclosure or regulatory requirements (typically disclosure of our own
Net Zero plan and embodied carbon in the products we supply), we could over time lose customers
and market share. In addition, consumer awareness of their own carbon footprint is continuing to
increase and a growing desire for sustainable living is resulting in changes to demand patterns, with
an increased preference for lower embedded carbon products. There is a medium-term risk that some
product lines will no longer be of interest to customers aligning with Net Zero.
Mitigation
We engage with customers to ensure new products are designed to meet their changing
requirements, and that our targets are aligned with theirs and meet internal and external environmental
requirements. For example, we focus on energy efficient windows and improved insulation to enable
housebuilders to achieve desired EPC ratings on their builds and meet the technical specifications
they require for zero carbon homes. Our disclosure of Scope 3 emissions now enables us to calculate
the embodied carbon in PVC profile.
Key risks continued
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Existing and emerging government standards and regulation TCFD Category Transition (Policy and Legal)
Own operations
Higher costs/disruption
of production
Medium term
Gross risk rating: Medium
R&D expenditure to meet
regulatory standards
Risk
Increased costs of production and associated R&D to ensure products meet increasing government
standards. Possible disruption to production as standards are implemented.
Description
The Group may be adversely affected by changes in government and other regulations (including
changes to building regulations) relating to the manufacture and use of materials and resources;
particularly energy use in homes and carbon commitments, as well as the use of plastics and
polymers in our manufacturing process. This includes the risk that the government could limit the
use of compounds which contain lead (in line with EU REACH regulation), which could restrict the
use of recycled materials. The Future Homes Standard (FHS) regulation requires a 75-80% reduction
in carbon emissions from new homes by 2025. These specifications must be adhered to when
constructing, extending or renovating UK homes. The FHS introduces new standards for ventilation,
minimum energy efficiency performance targets for buildings, airtightness requirements and improved
minimum insulation standards. If Eurocell products do not align to these new standards, we will lose
market share and suffer reputational damage.
Mitigation
We engage and consult regularly with regulators and participate in the Future Homes Hub to
support the Future Homes Delivery Plan – a sector-wide plan to embed key environmental issues
into housebuilding. We engage with customers and suppliers to meet future regulations. We have
established an R&D programme and several of our products already meet these regulations. We are
working on our Net Zero target and transition plan to prepare our business forregulatorychanges.
Flood risk TCFD Category: Physical (Chronic) – material under the RCP 8.5 scenario
Own operations
Higher costs/disruption
of production
Short, medium
and long term
Gross risk rating:
Negligible
Number of flooding
incidents; costs of
flood incidents
Risk
Cost of damages, lost revenue (loss of sales and disruption to operations), and increased insurance
premiums resulting from increasing flood events across operational and branch sites.
Description
Changing weather patterns and an increase in the number and severity of extreme weather events
have caused issues relating to flooding across the United Kingdom. The Munich Re Location Risk
Intelligence Tool was used to assess physical climate risk and we considered a cross section of
branches and all the manufacturing and recycling plants. Of the 29 sites assessed, no material
flood risks were identified. However, given the diverse location of the branches, the short lease terms
(five to ten years) and the current flooding issues in the UK, we consider flood risk to be the most
significant (though low) physical risk to the Group.
Mitigation
All divisions have business continuity and recovery plans which monitor risks to staff and premises
from metrological events. Additionally, all sites have flood damage insurance cover with limits that
reflect the magnitude of risk. The diversified locations, as well as flood risk assessment prior to lease
contracts being signed, mean it is unlikely that more than several sites would flood at any given time,
and hence the financial impact would be minimal.
Eurocell plc Annual Report and Accounts 202358 Eurocell plc Annual Report and Accounts 202358
Key opportunities
Five opportunities have been identified that could have an impact on our business, either through enhanced revenues
or decreased costs and emissions. These opportunities will be an important contributor to the development of our
NetZero target and transition plan.
Increased recycling, process innovation and material efficiency TCFD Category: Resource Efficiency
Own operations/
downstream
Decreased costs
Medium/long term
Rating: Medium
Scope 3 emissions;
revenues from energy
efficient products
Opportunity
Cost and emissions reductions through increased recycling, and production and material efficiency.
Description
The use of recycled PVC pellets typically has an embodied carbon footprint c.50% lower than virgin PVC
pellets. The cost of producing recycled material is usually lower than the purchase cost of virgin material.
Therefore, products manufactured through efficient processes with increased recycled material content
can significantly lower our cost of production and reduce carbon emissions, and will be an important
part of our transition to Net Zero.
Strategy to realise opportunity
In 2023 we used 32% recycled material in the manufacture of our products. We have a target to increase
this to 40% by 2030 and will make plans to develop the feedstock supply chain to support this. The
replacement cycle for our extrusion fleet allows us to capture production efficiency gains through use of
the latest technology (we use an innovative dual material extrusion process to ensure fast, efficient use
of PVC waste in manufacturing). We continue to invest to improve the efficiency of our existing extrusion
and recycling plants and increase their production yield.
Product design – resource and thermal efficient products TCFD Category: Product and services, Market
Own operations/
downstream
Increased sales
Medium term
Rating: Medium
Scope 3 emissions;
revenues from energy
efficient products
Opportunity
A growing market for thermally efficient products leading to increased revenue.
Description
Products which are thermally efficient will reduce consumer energy use, as well as help housebuilders
achieve zero carbon homes and meet the Future Homes Standard (FHS). Consumer awareness of
home improvement as a means of reducing heating bills is driving demand for earlier replacement of old
windows and other products such as conservatory roofs. Innovative product design is key to continued
revenue growth and also helps to maintain competitive positioning. We focus on improving airtightness,
insulation and energy efficiency and expect the demand for these products to increase with the adoption
of the FHS in 2025.
Strategy to realise opportunity
To maximise this opportunity, we will target R&D and marketing spend on low carbon products and
collaborate with key customers to develop and sell best-in-class, resource and thermally efficient
products. We have a dedicated technical centre focused on product enhancement and development of
innovative new products is a key objective. For example, the Modus triple glazed window has aUvalue
of 0.8 W/m
2
K (compared to the 2025 FHS requirement of 1.2 W/m
2
K), significantly reducing heat loss
in houses due to its superior insulation. It also includes more than 50% recycled PVC. In addition, our
flat rooflight (Luma) was launched in 2022, with strong thermal insulation characteristics. We expect
products such as these to grow strongly as consumers and housebuilders focus on zero carbon homes.
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Water and waste savings TCFD Category: Resource Efficiency
Own operations
Decreased costs
Medium term
Rating: Low
Water and waste costs
per annum; Scope 1
and 2 emissions
Opportunity
Operational cost savings through water and waste reduction.
Water savings
Description
Various opportunities and initiatives exist to reduce water usage across the Group. Our main use of water
is in the extrusion cooling process and in washing of scrap PVC to remove impurities before recycling.
Strategy to realise opportunity
Various initiatives are underway aimed at reusing factory water, including improvements to our closed
loop recycling system, where the water is filtered, purified and neutralised to maintain its quality. This
system significantly reduces the environmental impact of extrusion processes, by conserving water
resources and reducing levels of contaminated water released into the environment, and also minimises
consumption and disposal costs.
Waste savings
Description
We aim to reduce and recycle general waste products and packaging wherever possible. Packaging
accounts for c.5% of waste generated by Eurocell and there is potential to reduce it. There is also an
opportunity to improve the processing of by-products from our recycling process (metal, rubber, wood)
to enable greater recycling. We have a target to increase waste recycled by 2% per annum from our
2020 base level (resulting in88% by 2025), and 1% per annum thereafter (resulting in 93% by 2030).
In 2023, 76% of our waste was recycled (2022: 82%) We have also committed to a maximum of 5%
ofwaste to landfill by 2025 and1%by 2030.
Strategy to realise opportunity
To support achieving these targets we have a new waste management improvement plan for 2024.
At third party sites, which act as a collection and delivery hub for post-consumer waste windows,
we are implementing processes that allow for cleaner waste streams. We will continue to develop
partnerships with waste services providers, to optimise end-to-end material recovery. We aim to reduce
the environmental impact of our packaging through lowering the amount of packaging used, including
thinner packaging, using packaging with more recycled content and eliminating packaging made from
single use plastics.
Decreasing the amount of energy used and
increasing the amount ofrenewableenergy used TCFD Category: Energy Source
Own operations
Reducing emissions
Medium term
Rating: Low
Energy consumption;
Scope 1 and 2
emissions
Opportunity
Operational cost savings through reduced energy consumption and reduced emissions through using
more renewable energy.
Decreasing the amount of energy used
Description
The Group’s near-term decarbonisation profile includes opportunities for energy efficiency and electricity
savings. With our extrusion, foiling and recycling plants all currently running on electricity, our electricity
consumption accounts for most of our energy use.
Strategy to realise opportunity
We continue to drive operational efficiencies, including reducing idle time and optimising temperatures
on extrusion lines and chillers. We have also reviewed the usage of compressed air and smart energy
metering, leading to actionable outcomes to reduce electricity usage. In addition, we are researching
potential methods to reduce the energy intensive foiling process e.g. using a form of 3D digital printing.
Although this requires additional capex, it does not use heat, and has the potential to significantly reduce
emissions over the medium term. We have also appointed site champions, to drive reduced energy
consumption at a local level.
Increasing the amount of renewable energy used
Description
There is also an opportunity to further reduce emissions by transitioning to renewable energy contracts
and reduce reliance on the grid through in-house renewable generation.
Strategy to realise opportunity
In 2023, 94% of the Group’s electricity was purchased on renewable contracts. We are installing solar
panels at one of our manufacturing plants to provide our own on-site renewable energy capacity.
Eurocell plc Annual Report and Accounts 202360 Eurocell plc Annual Report and Accounts 202360
Transportation TCFD Category: Resource Efficiency
Own operations/
upstream/downstream
Decreased costs
Long term
Rating: Low
Scope 1 and 3
emissions (Upstream
and Downstream
Transportation and
Distribution)
Opportunity
Cost savings, decreased carbon emissions and decreased exposure to carbon prices through
decarbonisation of fleet vehicles.
Description
Decarbonisation of our third-party distribution fleet and company vehicles is a significant opportunity
toreduce emissions. This may require additional capex over the medium term to transition and upgrade
these vehicles. Additionally, further technological development is required for zero emissions heavy
goods vehicles to become viable, e.g. either via electric vehicles or the potential use of hydrogen
asanalternative fuel source.
Strategy to realise opportunity
Company vehicles
In 2024 we will continue to upgrade our warehouse material handling plant with electric alternatives,
asexisting plant lease agreements expire. In addition, we expect to instal a telemetric system in our
branch network vehicles to improve the efficiency of route planning and load maximisation, thereby
reducing associated emissions. We will continue to explore options to progressively convert other
company vehicles to electric.
Third-party distribution
We will work with our third-party logistic supplier to use software to improve route efficiency. We will also
engage with them to better understand the potential for decarbonisation of our commercial distribution
fleet. Whilst this would further reduce our Scope 3 upstream and downstream transportation and
distribution emissions, the bulk of this reduction would likely only take place in the medium term.
Key opportunities continued
Our view currently is that significant
financial planning or budgetary change
as a result of climate change is not likely
to be required. However, the transition
to Net Zero will be incorporated into the
Group’s strategic planning with respect
to operational and capital costs in 2024
and we will update our assessment
once this work is done. We will also
continue to develop our analysis as new
data becomes available, both internally
and externally, and we will continue
to monitor our climate exposures and
action plans through the Group’s risk
managementframework.
Metrics and targets
During 2023, we conducted a full carbon
footprinting exercise for 2022 and 2023
with the help of external sustainability
consultants. This has allowed us to report
our emissions in line with our financial
year end and has expanded our Scope 3
reporting against all applicable categories.
We now report our full carbon footprint
covering Scope 1, 2 and 3 greenhouse gas
emissions. However, this work is based on
anumber of management estimates and
weexpect more variation in the coming years
as we continue to refine our methodology.
Most of our emissions are represented
by Scope 3 (94% of our market-based
footprint for 2023). Of these 2023
Scope 3 emissions, 86% are from
purchased goods and services, including
virgin PVC resin, and 5% are from
upstreamtransportations.
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Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 61
Additional environmental metrics we monitor include recycled materials used in production and emissions saved as a result,
emissions intensity, energy and renewable energy use, and waste generation, as reported on page 35. Against our identified risks,
wemonitor each of the following metrics:
Risk Metrics
Operational exposure to carbon pricing
mechanisms
• Scope 1 and 2 emissions.
Carbon pricing in the value chain • Scope 3 emissions (Category 1 – Purchased Goods & Services).
Failure to achieve our recycling targets • % recycled PVC used in production
• Scope 3 emissions (Category 1 – Purchased Goods & Services).
Cost of capital and investor interest linked
to sustainability criteria
• Scope 1, 2 and 3 emissions
• UK interest rates.
Customer and consumer pressure • Scope 3 emissions
• Thermal efficiency of products (U-value).
Existing and emerging government
standards and regulation
• R&D expenditure to meet regulatory standards.
Flood risk • Number of flooding incidents
• Costs associated with flooding incidents.
Opportunity Metrics
Process innovation and material efficiency • Scope 3 emissions
• Revenue from energy efficient products.
Product design – resource and thermal
efficient products
• Scope 3 emissions
• Revenue from energy efficient products.
Water and waste savings • Annual water costs
• Annual waste costs
• Scope 1 and 2 emissions.
Decreasing the amount of energy used • Total energy consumption
• Scope 1 and 2 emissions.
Transportation • Scope 1 emissions
• Scope 3 emissions (Category 4 – Upstream Transportation & Distribution & Category
9 – Downstream Transportation & Distribution).
Climate-related targets
We are committed to being a responsible
business and working to minimise our
contribution to climate change. Over
2023 we have continued working towards
reducing our Scope 1 and 2 greenhouse
gas emissions, and currently source a
high proportion of our electricity through
renewable contracts (94% in 2023). By
continuing to source renewable electricity,
through the ongoing replacement cycle of
our PVC extruder fleet and upgrading our
mobile equipment to electric power, we are
reducing our greenhouse gasemissions.
We also focus on increasing the proportion
of recycled material used in our production
processes. In 2023 this was up to 32%
and we now have a target to increase
to 40% by 2030, in order to reduce our
Scope 3 emissions and save costs.
Having conducted a full carbon footprint
for 2022 and 2023, we now have
committed to achieve Net Zero on our
emissions by 2045. We will work in 2024
to submit our targets to the SBTi, including
updated objectives for some of our ESG
KPIs such as greenhouse gas emissions
and energy use intensity ratios, which
will ensure we are aligned with the UK
Government’s Net Zero Strategy. Once
approved, we will develop and publish a
Net Zero Transition Plan outlining how the
targets will be met, and any critical factors
we are dependent on to achieve this, such
as commercial low carbon alternatives to
virgin PVC resin and new technologies.
Our current and future emissions and
energy reduction targets have been
adopted as the most relevant to our
climate-related risk, particularly relating
to carbon pricing risks, and in order
to directly manage our contribution to
global climate change. Progress against
these targets will be monitored through
our annual carbon footprint results and
will be collated and presented to the
Board through the governance structures
described earlier in this TCFD report.
Eurocell plc Annual Report and Accounts 202362 Eurocell plc Annual Report and Accounts 202362
CHIEF FINANCIAL
OFFICER’S REPORT
Group
2023
£m
2022
£m
Revenue 364.5 381.2
Gross profit 173.8 184.5
Gross margin % 47.7% 48.4%
Overheads (131.1) (130.4)
Other income
3
0.4 1.1
Adjusted
2
EBITDA 43.1 55.2
Depreciation and amortisation (24.7) (23.9)
Adjusted
2
operating profit 18.4 31.3
Finance costs (3.2) (2.6)
Adjusted
2
profit before tax 15.2 28.7
Taxation (2.9) (4.7)
Adjusted
2
profit after tax 12.3 24.0
Adjusted
2
basic EPS (pence) 11.0 21.4
Non-underlying overheads (3.5) (2.2)
Non-underlying finance costs — (0.3)
Tax on non-underlying items 0.8 0.5
Reported operating profit 14.9 29.1
Reported profit before tax 11.7 26.2
Reported profit after tax 9.6 22.0
Loss after tax from discontinued operations — (2.3)
Profit for the year 9.6 19.7
Reported basic earnings per share (pence) 8.6 19.6
1 Results are stated on a continuing basis i.e. before discontinued operations (see below).
2 See alternative performance measures.
3 Other income is amounts received under the Group’s cyber insurance policy, net of excess paid, in respect of business interruption to the Group’s continuing trading
activities as a result of a cyber incident in July and August 2022.
In response to lower sales volumes, we
acted quickly to reduce our cost base,
securing savings of £7 million for the year.
We also continued to focus on efficient
inventory management to drive good cash
flow performance.
We believe that these actions leave us well
placed to progress the strategic initiatives
described in the Chief Executive’s Report,
as well as benefit from a market recovery
when it comes.
Revenue
Revenue for 2023 was £364.5 million,
4% lower than 2022 (£381.2 million),
with volumes down 6% against a strong
2022 comparative period, reflecting weak
market conditions.
Gross margin
Gross margin for the year was 47.7%,
down from 48.4% in 2022. Input cost
inflation continued in the first half of 2023,
particularly for labour, recycling feedstock
and electricity (where we operate a rolling
12-month forward hedging policy, so were
paying rates locked in during H1 2022,
when wholesale energy prices peaked).
We offset these higher costs with selling
price increases where possible. We also
experienced some progressive easing of
input cost pricing throughout the second
half of the year and continued to deliver
operational improvements. As a result,
gross margin increased to 49.5% in H2,
compared to 46.0% for H1.
Introduction
Market conditions deteriorated
progressively through the first half of the
year, driven by ongoing cost inflation,
successive base rate increases and falling
real wages, all of which put unprecedented
pressure on household budgets, resulting in
lower levels of activity in the private housing
RMI market and reduced demand for new
build housing. These trends continued
in the second half of the year, with some
further weakening in our key markets.
However, we also experienced some easing
in input cost pricing in H2.
As expected, profits were down compared
to 2022, reflecting lower sales volumes,
input cost inflation and margin pressure
in the branches, partially offset by selling
price increases, operational improvements
and cost reduction.
Strategic Report Financial StatementsCorporate Governance
Michael Scott
Chief Financial Officer
Distribution costs and
administrative expenses
(overheads) and other income
Underlying overheads were together
£131.1million, up 1% on 2022 (£130.4
million). We experienced general overhead
and wage inflation in 2023, but this was
also recovered via selling prices increases
where possible, and further mitigated by
operational improvements and our cost
reduction initiatives.
We completed a restructuring programme
in Q4 2022, which reduced operating
costs by £5 million per annum from the
start of 2023. With end markets continuing
to weaken in the first half of 2023, and
given the more challenging outlook for
the remainder of the year, we completed
a further headcount reduction in June,
which reduced operating costs by c.£2
million in H2 and by c.£4 million per annum
thereafter. Costs associated with this
restructuring have been presented as
non-underlying items (see overleaf).
Other income is amounts received under our
cyber insurance policy in compensation for
business interruption (lost sales) suffered due
to the cyber incident in July and August 2022.
Depreciation and amortisation
Depreciation and amortisation was £24.7
million compared to £23.9 million in 2022.
Alternative performance measures
Alternative performance measures are
used alongside statutory measures to
facilitate a better understanding of financial
performance and comparison with prior
periods, and in order to provide audited
financial information against which the
Group’s bank covenants, which are
all measured on a pre-IFRS 16 basis,
canbeassessed.
Adjusted EBITDA, adjusted operating profit
and adjusted profit before tax all exclude non-
underlying items. Adjusted profit after tax and
adjusted earnings per share exclude non-
underlying items and the related tax effect.
Pre-IFRS 16 EBITDA is stated inclusive
of operating lease rentals under IAS 17
Leases. Pre-IFRS 16 net debt is defined
as total borrowings and lease liabilities less
cash and cash equivalents, excluding the
impact ofIFRS 16 Leases.
We classify some material items of income
and expense as non-underlying when the
nature of the circumstances merit separate
presentation. Alongside statutory measures,
this facilitates a better understanding of
financial performance and comparison
withprior periods.
Despite a difficult trading year,
netcash generated from operating
activities was £52.8 million
(2022:£35.1 million), reflecting
ourfocus on efficient working
capital management.”
63Eurocell plc Annual Report and Accounts 2023
Eurocell plc Annual Report and Accounts 202364 Eurocell plc Annual Report and Accounts 202364
CHIEF FINANCIAL OFFICER’S REPORT CONTINUED
Non-underlying items
Non-underlying items for 2023 of
£3.5million included restructuring costs
of £2.7 million, comprising redundancy
payments and related employee benefit
termination costs. Also included are
£0.8million of cloud computing costs
incurred on strategic IT projects involving
‘Software as a Service’ arrangements,
which are expensed as incurred rather
than being capitalised as intangible assets.
Such items are considered to be non-
underlying in nature because they relate to
multi-year programmes to deliver strategic
IT implementations which are material
in size, with overall spend estimated to
be in the region of £8-10million over the
next three years. Our strategic IT projects
comprise a new customer-facing website,
an employee management system
and, most significantly, the replacement
of our Enterprise Resource Planning
(‘ERP’)system. We expect these projects
will drive major improvements in our
customers’ experience and significantly
increase the efficiency ofouroperations.
Non-underlying items of £2.5 million
in 2022 include restructuring costs of
£2.2million (redundancy payments of
£1.6 million and tangible and right-of-use
asset impairment charges of £0.6 million)
and £0.3 million of costs relating to the
refinancing of the Group’s £75 million
Revolving Credit Facility.
Finance costs and taxation
Underlying finance costs for 2023 were
£3.2 million, compared to £2.6 million
in 2022. Total finance costs in 2022
of £2.9million included £0.3 million of
unamortised borrowing costs expensed
to the Consolidated Income Statement
following the refinancing of the Group’s
Revolving Credit Facility, which was
classified as a non-underlying item.
The underlying tax charge for 2023 was
£2.9 million (2022: £4.7 million). The total
tax charge for 2023 was £2.1million
(2022: £4.2 million). The effective tax
rate on underlying profit before tax for
2023 of18.8% is lower than the standard
rate of corporation tax of 23.5% due to
PatentBox relief.
We were pleased to retain the Fair Tax
Mark accreditation in 2023, reflecting our
commitment to paying the right amount
oftax at the right time.
Profit before tax and earnings
pershare
Adjusted profit before tax for the
year was £15.2 million compared to
£28.7 million in 2022, down £13.5 million,
reflecting lower sales volumes, input
cost inflation and margin pressure in the
branches, partially offset by selling price
increases, operational improvements and
costreduction.
Reported profit before tax in 2023 was
£11.7 million (2022: £26.2 million),
reflecting the above, and £3.5 million of
non-underlying items (2022: £2.5 million).
Adjusted basic earnings per share for the
year were 11.0 pence (2022: 21.4 pence).
Adjusted diluted earnings per share for the
year were 11.0 pence (2022: 21.3 pence).
Total basic and diluted earnings per share
were both 8.6 pence (2022: 19.6 pence
and 19.5 pence respectively).
Dividends and share buyback
programme
We paid an interim dividend of 2.0pence
per share in October 2023 (£2.2million).
The Board proposes a final dividend of
3.5 pence per share which results in
total dividends for the year of 5.5 pence
per share, or £6.0 million, down 49%
(2022:10.7pence or £12.0 million). The
dividend will be paid on 22May 2024
to Shareholders registered at the close
of business on 26April 2024. The
ex-dividend date will be 25April 2024.
The retained earnings of Eurocell plc as
at 31 December 2023 were £25.0 million
(2022: £31.4million). The Company takes
steps to ensure distributable reserves are
maintained at an appropriate level through
intra-Group dividend flows.
The Board is focused on enhancing
shareholder returns and recognises the
importance of our ordinary dividend.
We will also periodically consider
supplementary distributions, whilst always
seeking to maintain a strong financial
position. Taking into account expected
organic investment requirements and
our successful cash flow management
in 2023 (see below), we launched a
£5 million share buyback programme in
January 2024. As of 15 March 2024, we
had purchased 2.0 million shares at a cash
cost of £2.5 million under the programme.
Capital expenditure
Capital expenditure for 2023 was
£8.9million (2022: £12.3 million).
2023 includes £1.5million for site
refurbishments and improved staff
welfare facilities across the branch
network. Other capital expenditure in
the period is largely maintenance capex.
Cash flow
Net cash generated from operating
activities was £52.8 million (2022:
£35.1million), reflecting our focus on
efficient working capital management.
Thisincludes a net inflow from working
capital for 2023 of £13.4 million,
comprised of a decrease in inventories
(£13.2 million), and decreases in trade
and other receivables (£6.0 million) and
trade and other payables (£5.8 million).
This compares to a net outflow from
working capital of £13.1million in 2022,
which included a significant inflationary
component (c.£8million).
The significant reduction in inventories
arose as a result of an optimisation
programme, commenced in H2 2022,
andincludes c.£5 million as a result of
lower raw material prices. The decreases
in receivables and payables since
December 2022 are primarily a result
oflower sales and production volumes.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 65
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 65
Other items include payments for capital
investments of £9.1 million (2022:
£12.4million), including payments to capital
creditors of £0.2 million, net proceeds from
the disposal in December 2022 of Security
Hardware of £0.8 million and financing costs
paid of £1.4 million (2022:£1.2million).
Taxpaid in the year was £1.4 million
(2022: £3.6million). Dividends paid in the
year were £10.3million (2022: £11.1million).
The principal elements of lease payments
of £13.8 million (2022: £13.3 million) are
presented within cash flows arising from
financing activities. The finance elements
of lease payments were £1.8 million
(2022:£1.4 million).
Net cash/debt
Net cash on a pre-IFRS 16 basis at
31December 2023 was £0.4 million
(31December 2022: net debt of
£14.4million).
Lease liabilities decreased by £5.1million.
Reported net debt at 31December2023
was £58.2 million (31December2022:
£78.1 million).
2023
£m
2022
£m
Change
£m
Cash 0.4 5.1 (4.7)
Deferred
consideration
— 0.8 (0.8)
Borrowings — (20.3) 20.3
Net cash/
(debt)
(pre-IFRS 16)
0.4 (14.4) 14.8
Lease liabilities (58.6) (63.7) 5.1
Net debt
(reported)
(58.2) (78.1) 19.9
Bank facility
In May, we completed a one-year extension
to our £75 million unsecured, sustainable
Revolving Credit Facility, which now
matures in 2027. The facility is provided
by Barclays, NatWest and Bank of Ireland,
and is competitively priced with the key
terms remaining unchanged. In terms
of sustainability, modest adjustments
to the margin are applied based on our
achievement against annual targets for
usage of recycled material in our products,
waste recycled and carbon emissions.
We operate comfortably within the terms
of the facility and in compliance with our
financial covenants, which are measured
on a pre-IFRS 16 basis.
Michael Scott
Chief Financial Officer
Eurocell plc Annual Report and Accounts 202366 Eurocell plc Annual Report and Accounts 202366
RISK MANAGEMENT
Approach to risk management
The Board is responsible for setting the
risk appetite, establishing a culture of
effective risk management and for ensuring
that effective systems and controls are in
place and maintained.
Senior managers take ownership of
specific risks and implement policies
and procedures to mitigate exposure
to those risks.
Risk management process
The risk management process, alongside
effective internal controls, provides
assurance to the Board that risks are being
appropriately identified and managed.
How we manage risk
Risk is managed across the Group in the
following ways:
• The Board meets annually to review
strategy and set the risk appetite
• Risks faced by the Group are identified
during the formulation of the annual
business planning and budgeting
process, which sets objectives and
agrees initiatives to achieve the Group’s
goals, taking account of the risk appetite
set by the Board
• Senior management and risk owners
consider the root cause of each risk
and assess the impact and likelihood
of it materialising. The analysis is
documented in a risk register, which
identifies the level of severity, probability,
ownership, and mitigation measures,
as well as any further actions (and
timescale for completion) for each
significant risk
• The Group’s Executive Committee is
also the Risk Management Committee.
This Committee meets on a regular
basis (usually monthly). The status of the
most significant risks and mitigations are
reviewed at each meeting, with other
risks reviewed at least annually
• The Executive Directors also meet
with senior managers on a regular
basis throughout the year. This allows
the Executive Directors to ensure that
they maintain visibility over the material
aspects of strategic, financial and
other risks
• The Group’s Audit and Risk Committee
assists the Board in assessing and
monitoring risk management across
the Group. The role of the Committee
includes ensuring the timely identification
and robust management of inherent
and emerging risks, by reviewing the
suitability and effectiveness of risk
management processes and controls.
The Committee also reviews the risk
register to ensure net risk and proposed
further actions are consistent with the
risk appetite set by the Board.
Internal control
The Group has a robust process of
financial planning and monitoring,
which incorporates Board approval
of operating and capital expenditure
budgets. Performance against the budget
is subsequently monitored and reported
to the Board monthly. The Board also
monitors overall performance against
operating, safety and other targets set
atthe start of the year.
Performance is reported formally to
shareholders through the publication
of results both annually and half-yearly.
Operational management regularly reports
on performance to the Executive Directors.
Day-to-day operations are supported
by a clear schedule of authority limits
that define processes and procedures
for approving material decisions. This
ensures that projects and transactions
are approved at the appropriate level of
management, with the largest and most
complex projects being approved by the
Board. The schedule of authority limits
is reviewed on a regular basis so that
it matches the needs of the business.
Risk management is the responsibility of the Board and is
a key factor in delivering the Group’s strategic objectives.
Identify risks
Quantify net risk
Identify any further
action required
Assess gross risk
Identify existing mitigation
Monitor
and control
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 67
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Eurocell plc Annual Report and Accounts 2023 67
The Group also has processes in place
for ensuring business continuity and
emergency planning.
In order to further enhance the internal
control and risk management processes,
KPMG provides an outsourced internal
audit service to the Group. KPMG work
closely with the Risk Management
Committee in delivering the Group’s
internal audit programme. Other third
party experts are also engaged to provide
internal audit reviews where appropriate
e.g. cyber security.
Strategic risk register
The Group maintains a risk register that
identifies key and emerging risks, the
probability of those risks occurring and the
impact they would have on the Group if
unmitigated. Against each gross risk, the
controls that exist to manage and, where
possible, minimise or eliminate those risks
are also listed, and an assessment of
net risk is provided. The risk register also
identifies any further actions required such
that net residual risk is consistent with the
risk appetite set by the Board. The register
is regularly updated to reflect changes
incircumstances.
01
Macroeconomic and market conditions
02
Cyber security
03
Health & Safety
04
Supply chain risk
05
Sustainability and climate change
06
Managing change
07
ERP systems implementation
08
Operational and regulatory compliance risk
Principal risks
Low
Medium High
Probability
Low Medium High
Impact
01 02
03 04 05
06 07
08
Eurocell plc Annual Report and Accounts 202368 Eurocell plc Annual Report and Accounts 202368
PRINCIPAL RISKS
AND UNCERTAINTIES
The Group is subject to a wide variety of risks and it is not practical to list out all risks that the Board is actively managing here.
Principal risks are those risks which are identified as having a potentially material impact on the Group’s operations, achievement of
its strategic objectives, or viability to continue as a going concern. The actions taken to mitigate these risks cannot provide absolute
assurance that they will not materialise, but will either mitigate the impact or reduce the likelihood to a level aligned to the Board’s risk
appetite. See details below for each of the principal risks, a description of the risk and how it may impact the Group, as well as the
mitigations currently in place and any movement in the risk in the year.
Macroeconomic and market conditions Movement: Strategic priorities:
Our products are used in the residential and commercial building and construction markets, both within the RMI sector, for new
residential housing developments and for new construction projects.
Our private RMI business is strongly correlated to the level of household disposable incomes. Our new build business is particularly
influenced by the level of activity in the house building industry. Government economic and social policy can also have a significant
impact on our business.
A weakening in macro or market conditions could have a significant impact on the short-term financial performance of the business.
The UK has been impacted by persistent inflation, driven by significant increases in the cost of essentials such as gas and electricity
and food. The UK base interest rate increased significantly throughout 2023, rising from 3.5% to 5.25%. Rates are expected to
begin to fall from the middle of 2024 but are likely to stabilise at a level higher than those experienced in the preceding decade.
The CPA now forecasts the private housing RMI and new build markets to both contract by 4% in 2024, after declines of 11% and
19% respectively in 2023, before beginning to recover in 2025.
Specific market conditions can also impact upon the demand of our products, for example a competitor seeking additional market
share through short-term price reductions.
Mitigation
• Notwithstanding macro conditions, we expect our new strategy and self-help initiatives to support sales and profit growth and
drive good cash conversion
• Initiatives include the optimisation and expansion of the branch network, an enhanced customer proposition and simplified
business structures
• We operate comfortably within the terms of our bank facility and related financial covenants.
Cyber security Movement: Strategic priorities:
A breach of IT security (externally or internally) could result in an inability to operate systems effectively (e.g. viruses) or the release
of inappropriate information (e.g. hackers). Sophisticated phishing attacks are increasing in both frequency and complexity.
A breach of cyber security could have a significant impact on the reputation of the business as well as the resulting fines impacting
the financial performance.
The Group experienced a cyber incident in July 2022, causing significant disruption to our operations. The Group has subsequently
strengthened further its cyber defences, but this remains a fast-evolving threat and continues to receive considerable management
attention.
Mitigation
• Ongoing investment in cyber risk detection and prevention tools, accelerated significantly since the cyber incident in July 2022
• These measures include managed detection and response (‘MDR’), security instant event monitoring (‘SIEM’), privileged access
management (‘PAM’) and firewall hardening
• Physical security of servers at third-party off-site data centre, with full disaster recovery capability
• Password and safe-use policies in place, internet usage monitored and anti-malware used
• External cyber review and internal audit reviews conducted periodically, resulting in significant enhancements in defences
• Cyber awareness/IT security campaign active for all employees
• Financial crime protection and cyber liability insurance in place.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 69
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 69
Health & Safety Movement: Strategic priorities:
The Group’s production, manufacturing and distribution operations are carried out under potentially hazardous conditions. It is
essential that safe environments are created and maintained for all employees and other stakeholders that access our facilities,
andthat the Group complies with all relevant laws and regulations.
A deterioration in our health and safety performance statistics, including increased or more serious injuries, or a breach of health
andsafety regulations could lead to significant financial and reputational damage to the business.
Mitigation
• Procedures and policies in place to support compliance with all relevant regulations
• Regular communication and training on policy compliance
• Monitoring procedures in place, including near miss and potential hazard reporting for health & safety matters
• A three-year health and safety strategy was launched in 2022, with implementation progressing well and an improvement
in performance delivered in 2023
• Internal and third-party site audits to assess compliance with our policies.
Supply chain risk Movement: Strategic priorities:
Our manufacturing and recycling operations rely on the supply of several core raw materials, and our branch network relies on the
supply of third-party products.
In terms of supply, there are only a limited number of PVC resin and certain other raw material suppliers, impacting both the supply
and price of these materials. Further, we have a limited capacity to store such materials at our sites. Failure to procure raw materials
on a timely basis could impact on our ability to manufacture products and meet customer demand.
On pricing, several raw materials are priced in US Dollars and Euros, and therefore although we pay in Sterling, we are impacted by
international currency markets.
Availability of recycling feedstock is limited, and dependent upon the level of RMI activity in the UK. The level of RMI activity can
therefore significantly impact both the price and availability of recycling feedstock.
Finally, many of our key raw materials and third-party products are transported to the UK from the EU, and, to a lesser extent,
theUS and the Far East, therefore the capacity of global shipping can also impact both the availability and price of key materials.
Increasing costs could have a negative impact on the financial performance of the business. An inability to source the required
materials could also impact financially, as well as upon the reputation of the business if we are unable to meet future demand.
Mitigation
• Initiatives to improve supply chain resilience, including sourcing alternative/more local sources of key raw materials and
third-party products
• Procurement strategy in place to secure new supply lines for recycling feedstock (i.e. post-consumer and post-industrial waste)
• Where possible we agree fixed price contracts with key suppliers to mitigate the risk of input cost increases
• Although we do not hedge currency, where possible we agree pricing in GBP to mitigate exchange rate volatility
• All new suppliers are now required to complete a cyber risk questionnaire, and regular reviews are conducted to test the financial
stability of key suppliers.
Movement key: Increase No change Decrease
Strategic priorities key:
Customer growth Business effectiveness People first ESG leadership
Eurocell plc Annual Report and Accounts 202370 Eurocell plc Annual Report and Accounts 202370
Sustainability and climate change Movement: Strategic priorities:
Demonstrating improving business sustainability is becoming increasingly important to all stakeholders.
Failure to improve in all material aspects of ESG (environmental, social, governance) could lead to regulatory and other challenges
e.g. employee recruitment and retention.
If we do not deliver on our environmental targets and establish a credible pathway to carbon neutrality and net zero, investors
and lenders may show a preference to allocate capital to businesses with better understood climate impacts and a clear plan
toimprove.
There are physical risks associated with climate change. The Group operates from over 200 locations, and with a changing climate
there is an elevated risk that elements of our operations could be impacted by fire, flooding or other environmental issues.
Mitigation
• Strong underlying position on sustainability underpinned by window recycling operation, which drives significant carbon savings
compared to the use of virgin PVC resin
• We conduct regular environmental risk assessments at existing and potential sites. Risks are managed through local business
continuity plans. In 2023 we enhanced our risk assessments using a physical risk analysis software tool, providing a greater
depth of information for each site
• The Group established a new ESG and Social Values Board Committee towards the end of 2022
• In 2023 we appointed CEN-ESG, a specialist ESG consultancy, to support the development of our ESG strategy and improve
our ESG data and disclosures. This work includes the following:
– Materiality assessment completed in 2023 to help us determine the most important sustainability topics to the business
Withthis analysis we surveyed a selection of employees, suppliers, customers, banks and shareholders
– Development of a baseline carbon footprint for the business (Scope 1, 2 and 3), identifying key decarbonisation levers
– Using the above outputs to define ESG objectives and develop a sustainability strategy, supported by appropriate
governance and internal controls
– This includes an ambition to achieve Net Zero on our emissions by 2045 (which is highly dependent on reducing emissions
in the PVC resin supply chain). We will now work to submit our targets to the Science Based Targets initiative in 2024,
whichwill ensure we are aligned with the UK Government’s Net Zero Strategy. Once approved, we will develop and publish
aNetZero Transition Plan outlining how the targets will be met.
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 71
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 71
Managing change Movement: Strategic priorities:
The Group has been through a period of significant organisational change over the past 18 months. At Board level, this includes
the appointment of a new Chairman and five new Non-executive Directors, largely to replace retiring non-executives. In addition,
DarrenWaters joined the business as Chief Executive, following the retirement of Mark Kelly in May 2023.
Following Darren’s appointment, the Board conducted a review of the Group’s strategy, including the optimisation and expansion of
the branch network, an enhanced customer proposition and simplified business structures. With this review now complete, we have
reset our ambition for the business and identified a clear strategy for organic growth and improved operating margins, which has the
potential to create significant shareholder value.
Furthermore, as detailed below, we have embarked upon a significant and complex multi-year project to replace our Enterprise
Resource Planning (‘ERP’) system.
Embracing and effectively managing change is fundamental to the Group’s future success. There is a risk that the pace and extent
of change puts the resources and bandwidth of the organisation under strain, leading either to a failure to effectively deliver the new
strategy or implement the new ERP system, which could have significant financial and operational implications.
Component risks include the ability to attract, retain and recruit the right calibre of senior managers with the required skills and
experience, in particular the technical ability to execute a complex IT implementation, and the risk that our various stakeholders do
not respond positively to our new strategy.
Mitigation
• The Group has an experienced Board with significant, relevant experience in delivering effective change programmes
• We are in the process of communicating our new strategy to all stakeholders so that they each understand the part they can play
in delivering our ambition
• We have an experienced Director of IT and an effective internal team in place with good experience of complex IT
implementations
• We have strong relationships with our major customers and suppliers
• The ‘People First’ strategic pillar was launched with the aim of making Eurocell a great place to work, through a focus on health
and safety, an enhanced employee value proposition, improved levels of engagement and effective talent management
• Developing a successful track record and clear strategic direction provides an attractive backdrop to joining the senior team
at Eurocell
• We have market rate compensation for all personnel including equity-based long-term incentive plans in place for the senior team.
Movement key: Increase No change Decrease
Strategic priorities key:
Customer growth Business effectiveness People first ESG leadership
Eurocell plc Annual Report and Accounts 202372 Eurocell plc Annual Report and Accounts 202372
ERP systems implementation Movement: Strategic priorities:
The Group relies on its SAP Enterprise Resource Planning (‘ERP’) system for all aspects of its operations.
However, we have concluded that the age profile of our SAP system has become a limiting factor in the development of the
business. In addition, the current system becomes unsupported in 2027.
We have therefore begun a major project to upgrade or replace SAP, the major components of which are:
• A front-end trading system to support the branch network
• A back-end ERP System to support all other functions of the business, including manufacturing, recycling, warehousing,
distribution and finance.
In total, we anticipate implementation to be a two-to-three-year process, and we estimate the total costs of the project will be in the
region of£8-10million.
Implementation of the new trading system for the branch network (Intact IQ) is already underway, with transition expected early
in2025. We expect to select an ERP system in H1 2024, with transition by mid-2026.
The successful implementation of the new system is critical to the long-term prospects of the business. We expect the new systems
will drive major improvements in our customers’ experience and significantly increase the efficiency of our operations. However,
itislikely to be a complex process, which will absorb significant time and resource.
Mitigation
• Experienced Director of IT and internal team in place with good experience of complex IT implementations
• Significant incremental resource now assigned to the project, with further recruitment planned for the ERP implementation
• Third party expert consulting firm in place to oversee and advise on the project
• Board-led Steering Group in place to monitor progress
• Intact IQ is our selected partner for the new branch trading system. Intact has a strong reputation within our sector, with a
specialism in delivering electronic point-of-sale solutions to multi-site building product distributors
• Twoleading ERP system providers are being assessed against key requirements for the business.
Operational and regulatory compliance risk Movement: Strategic priorities:
The business is dependent on the continued and uninterrupted performance of our production facilities.
Each of the facilities is subject to operating risks, such as: industrial accidents (including fire); extended power outages; lack of
access to power; withdrawal of permits and licences (e.g. the regulated operation of the recycling facility); breakdowns in machinery;
equipment or information systems; prolonged maintenance activity; strikes or other extended workforce absences; natural disasters;
and other unforeseen events.
We may be adversely affected by the crystallisation of unexpected corporate or regulatory risks, for example future REACH
(registration, evaluation, authorisation and restriction of chemicals).
Failure to comply with relevant laws and regulations could result in significant fines and reputational damage, whereas inability
tomanufacture or deliver goods would have a significant financial and reputational impact.
Mitigation
• Regular planned maintenance to reduce the risk of plant failure, including maintenance capital investment of >£5 million per
annum across the Group
• Business continuity plans in place for all major sites and the branch network, which are tested periodically
• Procedures and policies in place to support compliance with all relevant regulations
• Regular communication and training on policy compliance.
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Movement key: Increase No change Decrease
Strategic priorities key:
Customer growth Business effectiveness People first ESG leadership
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 73
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 73
As required by section 4 of the UK Corporate Governance Code,
the Directors have taken into account forecasts to assess the
future funding requirements of the Group, and compared them
with the level of committed available borrowing facilities.
VIABILITY STATEMENT
A period of three years has been adopted
as this is the time frame used by the
Boardas our strategic and planning horizon.
Theassessment of viability has been
made with reference to the Group’s current
position and long-term future prospects,
our strategy, management of principal
risks, and also the Board’s assessment
of the outlook in the marketplace, all of
which are covered indetail within the
StrategicReport.
The Board considers its strategy and risks
on strategy away-days, and revisits these
annually when considering the next year’s
budget. The three-year plan considers
revenue and earnings growth and how
this impacts on cash flows and key ratios.
Operational plans and financing options
are considered as part of this process.
In preparing the plan, we adopt a prudent
forecast in respect of organic sales growth,
but assume other initiatives, in line with the
published strategy.
The plan is stress tested by applying
the following severe but plausible
downsidescenarios:
Scenario 1
Macroeconomic conditions or a
period of operational disruption
due to external factors, such
as a cyber incident, or internal
factors such as disruption due to
the implementation of a new ERP
system, lead to a decline in sales
Decreases in revenues have been applied
over the three-year plan period.
Scenario 2
Commodity prices and/or exchange
rates or raw material shortages
lead to a significant and sustained
increase in resin prices that cannot
be mitigated through selling
priceincreases
Increases in resin costs have been applied
over the three-year plan period.
Scenario 3
Scenario 1 and 2 combined
There is a possibility that both of the above
scenarios could materialise at the same
time; therefore, we have assessed the
combined impact through the three-year
plan period.
The Board considers these tests to be
sufficient to test the viability of the Group
given our size and the markets we operate
within. Asdescribed in Principal Risks and
Uncertainties above, we have measures in
place to help mitigate the impact of these
events should they occur.
The Group has a £75 million Revolving
Credit Facility. Monthly cash flow
projections show significant headroom
throughout the period to December 2026.
The facility includes standard covenants
for leverage and interest cover, which are
measured twice per annum at June and
December. The projections also show
good headroom on the covenants at each
measurement date to December 2026.
The Directors confirm that we have a
reasonable expectation that the Company
and the Group will continue in operation
and meet our liabilities as they fall due
inthe next three years.
Going concern
The Directors have reviewed the
Company’s and the Group’s forecast
and projections, which demonstrate
that the Company and the Group will
have sufficient headroom on our bank
facilities for the foreseeable future, for
the avoidance of doubt being a period
of more than 12 months from the date
of signing this Strategic Report, and that
the likelihood of breaching the related
covenants in this period is remote.
Seepage 134 for further details.
Accordingly, the Directors continue to adopt
the going concern basis in preparing the
Annual Financial Statements.
This Strategic Report was approved
bytheBoard on 19 March 2024 and
signed onits behalf by:
Darren Waters
Chief Executive
Michael Scott
Chief Financial Officer
Eurocell plc Annual Report and Accounts 202374
Derek Mapp
Non-executive
Chair
N
Date of
appointment:
16 May 2022
(Chair from 1July 2022)
Darren Waters
Chief Executive
S
Date of
appointment:
11 April 2023 (Chief
Executive from 11 May 2023)
Michael Scott
Chief Financial Officer
S
Date of
appointment:
1 September 2016
Frank Nelson
Senior Independent
Non-executive Director
RNA
Date of
appointment:
4 February 2015
Experience:
Derek is an experienced chair
and has a wealth of commercial
and operational knowledge.
Previously, he was Chair of
Informa plc from March 2008
until his retirement in June
2021 and was also Chair of
Huntsworth plc from December
2014 to March 2019. Prior to
that, Derek was Chief Executive
Officer of Tom Cobleigh plc,
Executive Chair of Leapfrog
Day Nurseries Limited, Chair
of East Midlands Development
Agency and Sport England
and also served on a number
of Government agencies
andboards.
Experience:
Darren joined the Group in
April 2023 as Chief Executive
Designate and was appointed as
Chief Executive on 11May2023.
He was formerly Chief Operating
Officer for Ibstock plc and
has extensive experience and
knowledge of the building
products and fenestration sectors
in the UK. Prior to this, Darren
was the Chief Executive for
Tyman plc (UK and Ireland) for 9
years and previously held senior
management roles at Kenda
Capital BV, Anglo American plc
and RMCGroupplc.
Experience:
Michael joined the Group
as Chief Financial Officer
inSeptember 2016.
He previously worked for Drax
Group plc, where he held senior
financial positions including
Group Financial Controller and
Head of Corporate Finance
& Investor Relations. Prior
to Drax, Michael worked for
MT International and Arthur
Andersen. He is a member
of the Institute of Chartered
Accountants in England
andWales.
Experience:
Frank is a qualified accountant
with over 30 years’ experience in
the housebuilding, infrastructure
and energy sectors.
He was previously a Non-
Executive Director for HICL
Infrastructure plc, McCarthy &
Stone plc and Telford Homes Plc.
Prior to this, Frank was Finance
Director for Galliford Try plc for
12 years and Finance Director
for Try Group plc. He is a fellow
of the Chartered Institute of
Management Accountants.
External appointments:
• Chair of Mitie Group plc
(FTSE 250)
• Director of several private
companies which relate to
his other business interests.
External appointments:
• None.
External appointments:
• None.
External appointments:
• Chair of Van Elle Holdings plc
(FTSE AIM)
• Chair of DSM SFG Group
Holdings Ltd (Private Equity).
BOARD OF DIRECTORS
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 75
Experience:
Kate has extensive
experience at board
level, holding a variety
of senior executive and
non-executive roles in
the commercial sector
in a wide variety of
companies, cultures
and countries.
Previously, she was Chair
of Anpario plc and a
Non-executive Director
of Cranswick plc, SIG plc,
Stock Spirits Group plc
and Origin Enterprises plc
and was Chief Executive
Officer of First Milk Limited
and CeDo Limited, and
the Head of European
supply chain at
McDonalds.
Experience:
Alison has substantial
experience within
international blue-
chip organisations,
including multinational
manufacturing, supply
chain operations and
marketingservices.
Previously, she was a
Non-executive Director
of musicMagpie plc,
Headlam Group plc and
James Hardie Industries
plc and held a variety
of senior management
positions at Diageo plc
and Mars Inc, and was
Chief Executive Officer
of Buying Solutions, an
agency to HMTreasury.
Experience:
Iraj was a partner with
Deloitte for 20 years,
leading its national
internal audit group
and serving clients in
the financial, retail and
public sectors, and was a
recognised global expert
and authority on internal
audit and assurance
functions. During this
time, he was also Global
Head of Internal Audit
for Schroders plc, on a
secondment basis, for
over 10 years.
Previously, Iraj was a
member of the FCA’s
Regulatory Decisions
Committee and a
trustee of the National
Employment Savings
Trust (NEST). He is a
fellow of the Institute of
Chartered Accountants
in England and Wales.
Experience:
Will is commercially
focused and results-
driven with significant
Board experience, in
both management and
advisory capacities,
and brings expertise in
stakeholder management
and M&A activities.
He held a Non-executive
advisory role at
Imagesound Ltd up to
December 2023, having
previously been Chief
Executive Officer for c.9
years up to April 2023,
and after having served
as Chief Financial Officer
for c.7 years prior to that.
Previously, Will was an
Associate Director within
Transaction Services
at KPMG LLP and is a
Fellow of the Institute of
Chartered Accountants
in England and Wales.
Experience:
Angela is a seasoned
business leader in the
building materials sector,
with significant branch
network experience and
insights from both multi-
site retail and merchanting.
She has held senior roles
across the various parts
of the Travis Perkins group
since 2015 and has been
a member of its leadership
team since 2020. Prior
to her current role at
Toolstation (see below),
Angela was Managing
Director of BSS. Before
joining Travis Perkins, she
was Managing Director
of Ridgeons Group,
one of the UK’s largest
independent builders’
merchants.
Kate Allum
Independent
Non-executive
Director
N SR
Date of
appointment:
1 July 2022
Alison Littley
Independent
Non-executive
Director
A RN S
Date of
appointment:
1 July 2022
Iraj Amiri
Independent
Non-executive
Director
SRNA
Date of
appointment:
7 November 2022
Will Truman
Independent
Non-executive
Director
SNA
Date of
appointment:
11 May 2023
Angela
Rushforth
Independent
Non-executive
Director
SRN
Date of
appointment:
1 February 2024
Committee key:
Member of the
Audit and Risk
Committee
Member of the
Remuneration
Committee
Member of the
Nomination
Committee
Member of the
Social Values and
ESG Committee
Denotes
Committee Chair
External
appointments:
• Non-executive Director
of Co-op Group
(Private co-operative)
• Chair of the Court at
the University of the
West of Scotland
(Private)
• Non-executive Director
of Edward Billington
and Son Ltd (Private).
External
appointments:
• Non-executive
Director of Xaar plc
(FTSE All-Share)
• Non-executive Director
of Norcros plc
(FTSE All-Share).
External
appointments:
• Non-executive Director
of Coventry Building
Society (Private)
• Non-executive Director
of Development
Bank ofWalesplc
(Government-owned)
• Non-executive Director
of Aon UK Ltd (Private).
External
appointments:
• Non-executive Director
of Figura Analytics Ltd
(Private).
External
appointments:
• Managing Director of
Toolstation Ltd (Private).
Eurocell plc Annual Report and Accounts 202376
Beth Boulton
Marketing Director
Beth joined Eurocell in November 2021.
She previously worked for Magnet
Kitchens where she was Head of
Marketing and Digital. Prior to that role,
Beth was Marketing Director at Utopia
Bathrooms and has also held positions
at Topps Tiles and Jewson.
Catherine (Cat) Hambleton-Gray
People Director
Cat joined Eurocell in January 2024. She
is a highly experienced HR practitioner,
having previously been HR Director
at Home Instead, a national specialist
provider of home help. Prior to that, she
held senior leadership roles with Halfords,
Pets at Home, Medivet and Costa Coffee.
Andy McDonnell
Commercial Managing Director
Andy joined Eurocell in May 2018, initially
as Managing Director for the Building
Plastics division, and more recently has
stepped up to the role of Commercial
Managing Director, with responsibility for
the majority of commercial activities in
both our major divisions. He previously
held senior leadership positions in retail
and trade at B&Q, TradePoint and Oak
Furniture Land.
Mike McKay
Group IT Director
Mike joined Eurocell in March 2020. He
previously worked for Polypipe Group
(now Genuit Group) where he was Group
Information Services Director for 15 years.
Immediately prior to this, Mike was Head
of Information Services for William Grant &
Sons and he has also held positions with
Ascent Technology and APV Baker.
Colin Hales
Chief Operating Officer
Colin joined Eurocell in May 2022. He
previously worked for Envases where
he was Managing Director and has
extensive experience across multi-site
operations where he has led and managed
functions incorporating manufacturing,
distribution and supply chain planning.
Previously, Colin held roles at Kingspan
Insulation Boards and also at Kongsberg
Automotive where, most recently, he was
Vice President of Business Area Interior
Systems.
Executive Committee
(in addition to Darren Waters and Michael Scott)
EXECUTIVE COMMITTEE
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 77
Dear Shareholder,
At Eurocell, we recognise the importance
ofeffective corporate governance
in delivering long-term success and
sustainability for the Group.
On behalf of the
Board, I am pleased
tointroduce
Eurocell’s Corporate
Governance Report
for the year.”
This report sets out the corporate
governance framework and explains how
it underpins and supports the Executive
Committee and senior management in
delivering the Group’s strategy.
2023 has continued to be a period of
transition for the Board, as we welcomed
Darren Waters as Chief Executive
in April, along with Will Truman and
Angela Rushforth as new Non-executive
Directors in May 2023 and February 2024
respectively, biographies for whom can be
found on pages 74 and 75.
We have a culture of open communication
and mutual trust, and these principles,
which are essential to good governance,
have underpinned our Board discussions.
In the face of significant macroeconomic
and market challenges, the Board has
continued to provide oversight of, and
support for, the Executive Committee.
With the on-going impact of significant
cost inflation, an uncertain macroeconomic
outlook and weaker markets, this has
included early and decisive action on costs
in response to lower volumes, and a focus
on cash and working capital management,
which have positioned the business well
for when markets recover.
Following Darren’s arrival, we have taken
the opportunity to review the Group’s
strategy, including the optimisation and
expansion of the branch network, an
enhanced customer proposition and
simplified business structures. Through
this work, which was completed in Q4,
we have identified new opportunities
for growth and efficiencies, which we
believe will, over the medium-term, drive
sustainable growth in shareholder value.
Further details of the new strategy, which
includes our purpose and values, are set
out on pages 18 to 29.
Environmental, Social and Governance
(‘ESG’) considerations are an increasing
focus for our stakeholders. The recently
established Social Values and ESG
Committee began its work in 2023, with
a focus on sustainability, employee welfare
and responsible business practices, as
well as our contribution to the societies
we operate in. Towards the end of
the year, we appointed ‘CEN-ESG’ to
support the development of our ESG
strategy, including a path to net zero, as
well as enhance our ESG reporting and
disclosures. Details of our work in this area
are set out in the Sustainability Report on
pages 32 to 49.
I am very grateful for the continued strong
shareholder support that we receive,
which enables us to build a platform for
long-term sustainable growth, and I hope
to see that continuing into the future.
Throughout the year, we have continued
to apply the principles and provisions of
the UK Corporate Governance Code (the
‘Code’), under which this report has been
prepared, and the following reports provide
details of the Board’s activities during the
year, including how it, and its Committees,
have discharged their governance duties.
Derek Mapp
Chair
19 March 2024
LETTER FROM THE CHAIR
Eurocell plc Annual Report and Accounts 202378
Role of the Board
The Board currently comprises a
Non-executive Chair, six Non-executive
Directors and two Executive Directors,
who are equally and collectively
responsible for the proper stewardship
and leadership of the Company. Their
biographical details are set out on pages
74 and 75.
In accordance with the Code, at least
half the Board, excluding the Chair,
should be Non-executive Directors,
who are determined by the Board
to be independent in character and
judgement and free from relationships
or circumstances which may affect, or
could appear to affect, this judgement.
The Company regards Frank Nelson, Kate
Allum, Alison Littley, Iraj Amiri, Will Truman
and Angela Rushforth as ‘independent’
Non-executive Directors within the
meaning of the Code and therefore is
considered to be compliant in this area.
The Board also considers diversity and
inclusion throughout the Group and details
of the extent to which the Board has met
the FCA’s targets, in this regard, are set
out on page 89.
The formal schedule of matters reserved
for the Board’s consideration includes
thefollowing:
• Approval of the Group’s strategy,
long-term objectives, annual operating
budgets and capital expenditure plans
• Approving transactions of significant
value or major strategic importance,
including acquisitions
• Approving significant changes to
the Group’s capital, corporate or
management structure
• Monitoring and assessing the overall
effectiveness of the Group’s risk
management processes and internal
control systems, including those related
to health and safety, financial controls
and anti-bribery policies andprocedures
• Approving the Annual and Half-Year
Reports, including Financial Statements
• Approving other corporate
communications related to matters
decided by the Board
• Board appointments and succession
planning and setting terms of reference
for Board Committees
• Remuneration matters, including the
general framework for remuneration
and share and incentive schemes.
Subject to those matters reserved for
its decision, the Board has delegated
to its Audit and Risk, Nomination,
Remuneration and Social Values and ESG
Committees certain authorities. There
are written terms of reference for each
of these Committees which are available
on the Group’s corporate website at
www.investors.eurocell.co.uk. Separate
reports for each Committee are included in
this Annual Report on pages 30 to 31 and
pages 87 to 115.
Details of how opportunities and risks to the
future success of the business have been
considered and addressed can be found in
the Strategic Report on pages 8 to 9, 50 to
61 and 66 to 72. Details of the sustainability
of our business model can be found in
the Strategic Report on pages 32 to49.
Our governance framework underpins
the delivery of strategy and can be found
on page 79. An overview of the Group’s
strategy can be found in the Strategic
Report on pages 18 to 29.
The Directors are ultimately responsible
for preparing the annual report and
accounts and the Board confirms it
considers them, taken as a whole, to be
fair, balanced and understandable, and
provides the information necessary for
shareholders to assess the company’s
position, performance, business model
and strategy.
LETTER FROM THE CHAIR CONTINUED
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 79
Governance Framework
The Board meets regularly to discuss key
business issues and prescribe actions as
appropriate. The Group’s reporting structure
below Board level is designed so that all
decisions are made by those most qualified
to do so in a timely manner. Day-to-day
management and the implementation
of strategies agreed by the Board are
delegated to the Executive Directors.
Key to this delegation is the Executive
Committee, which meets eachmonth.
This structure enables the Board to
make informed decisions on a range of
key issues including strategy and risk
management.
All the Directors have the right to have
their opposition to, or concerns over,
the operations of the Board and/or the
management of the Company, noted
intheminutes.
During the year, no such opposition or
concerns were noted.
The Chair and the Non-executive Directors
met during the year without the Executive
Directors present.
Role of the Chair
The Board has concluded that the Chair
has met the independence criteria of the
Code on appointment.
There is a clear division of responsibilities
between the Chair and the
ChiefExecutive.
The Chair is responsible for ensuring
that the Board functions effectively. He
sets the agenda for Board meetings and
ensures that adequate time is devoted to
discussion of all agenda items, particularly
strategic issues, facilitating the effective
contribution of all Directors and ensuring
that the Board as a whole is involved in
the decision-making process.
Role of the Chief Executive
The Chief Executive has principal
responsibility for all operational activities
and the day-to-day management of
the business, in accordance with the
strategies and policies approved by the
Board. The Chief Executive also has
responsibility for communicating to the
Group’s employees the expectations of
the Board in relation to culture, values
andbehaviours.
Role of the Senior Independent
Director and Non-executive
Directors
The Senior Independent Director has an
important role on the Board, providing a
sounding board for the Chair, leading on
corporate governance issues and serving
as an intermediary for the other Directors.
He is available to shareholders if they
have concerns which contact through
the normal channels of the Chair, Chief
Executive or other Executive Directors has
failed to resolve, or for which such contact
is not appropriate.
Frank Nelson has served as Senior
Independent Non-executive Director
throughout the year.
All Non-executive Directors are required to
allocate sufficient time to the Company to
discharge their responsibilities effectively.
The Non-executive Directors act in a way
they consider will promote the long-term
sustainable success of the Group for the
benefit of, and with regard to the interests
of, its stakeholders.
Eurocell plc Board Members:
•Independent Non-executive Chair •6 Independent Non-executive Directors •2 Executive Directors
Audit and Risk
Committee Members:
• 4 Independent
Non-executive Directors
Remuneration
Committee Members:
• 5 Independent
Non-executive Directors
Nomination Committee
Members:
• Independent
Non-executive Chair
• 6 Independent
Non-executive Directors
Social Values and ESG
Committee Members:
• 5 Independent
Non-executive Directors
• 2 Executive Directors and
3 senior managers
The Audit and Risk
Committee’s role is to
assist the Board with
the discharge of its
responsibilities in relation
to financial reporting,
internal controls, risk
management, compliance
and audit.
The Remuneration
Committee recommends
the Group’s policy on
executive remuneration
and determines the
levels of remuneration for
Executive Directors, the
Chair of the Board and
senior management.
The Nomination
Committee assists
the Board in reviewing
the structure, size and
composition of the Board
and succession planning
for senior management.
The Social Values and
ESG Committee’s role
is to provide formal and
transparent oversight
of the Group’s ‘ESG’
programme and value-led
agenda.
See Committee
reporton
pages 92 to 97
See Committee
reporton
pages 98 to 115
See Committee
reporton
pages 87 to 91
See Committee
reporton
pages 30 to 31
Executive Committee
The Executive Committee comprises senior managers, including the 2 Executive Directors who act as a bridge between the
Board and this Committee. Management teams report to members of the Executive Committee. The Board receives regular
updates from the Executive Committee in relation to business issues and developments.
See page 76
CORPORATE GOVERNANCE STATEMENT
Eurocell plc Annual Report and Accounts 202380
Length of service 0-2 years 3-7 years 8-9 years
2023
6
2
4
2
2
2022
Gender Male Female
2023
6
2
2022
6
2
Ethnicity White British Other ethnic group
7
1
2023
7
1
2022
Age
2023
1
3
2
2
2
2
4
2022
40-49 50-59 60-69 70-79
Summaries of the Board members’ length of service, ethnicity, gender and age
(at31December each year) is set out in the charts below:
Board composition, commitment
and election of Directors
The Nomination Committee leads
the process for Board appointments
and makes recommendations to the
Board. Prior to appointment, Board
members, in particular the Chair and
the Non-executive Directors, disclose
their other commitments and agree to
allocate sufficient time to the Company
to discharge their duties effectively and
ensure that these other commitments do
not affect their contribution.
The Executive Directors may accept an
outside appointment provided that such
appointment does not in any way prejudice
their ability to perform their duties as
Executive Directors of the Company.
Darren Waters and Michael Scott do not
currently hold any outside appointments.
The Non-executive Directors’ appointment
letters anticipate a minimum time
commitment of 20 days per annum,
recognising that there is always
the possibility of an additional time
commitment and ad hoc matters arising
from time to time, particularly when
the Company is undergoing a period
of increased activity. The average time
commitment inevitably increases where a
Non-executive Director assumes additional
responsibilities such as being appointed to
a Board Committee.
All new Non-executive Directors undergo
an induction programme and as such
spend considerably more than the
minimum commitment during the course
of a year. All Non-executive Directors
are required to inform the Chair before
accepting another position in order to
ensure the Director has sufficient time
to fulfil their duties. The current Board
commitments of all Directors are shown
on pages 74 and 75 and their terms of
appointment are reported on page 105.
CORPORATE GOVERNANCE STATEMENT CONTINUED
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 81
The Company’s Articles of Association
contain powers of removal, appointment,
election and re-election of Directors and
provide that all of the Directors must retire
and may offer themselves for re-election
at each Annual General Meeting (‘AGM’).
At the upcoming AGM, all the current
Directors intend to offer themselves for
election/re-election, with the exception
of Frank Nelson who will step-down
after nine years of service, in accordance
with the Code. Following the conclusion
of the Board evaluation process, the
Board considers all the Directors to be
effective, committed to their roles and to
have sufficient time available to perform
theirduties.
The Board has a process in place to
assess the current and future skills and
experience needed by the Non-executive
Directors against a matrix of requirements,
through which it has determined that the
Non-executive Directors are independent
and that the Board, as a whole, has
appropriate and complementary skills
andexperience.
Board evaluation and effectiveness
In accordance with the Code, a formal
evaluation of the Board’s performance,
along with its committees, Chair and
individual Directors was conducted during
the year, with the results presented and
discussed at the March 2024 Board
meeting.
The external evaluation was performed by
Emma Haddleton, of Haddleton Knight,
who had no connection with the Company
or any individual Director.
In addition to observing the December
2023 Board and Committee meetings,
individual interviews were conducted
with each Board member and the Group
Company Secretary, all of whom fully
engaged with the process and provided
their qualitative feedback. The anonymity
of respondents was ensured to promote
an open and frank exchange of views.
The timing and methodology of the Board
evaluation was primarily influenced by the
continued changes to the Board during the
year. During 2023, Iraj Amiri succeeded
Frank Nelson as Chair of the Audit and
Risk Committee, and Will Truman was
appointed as a Non-executive Director,
who represents the Board on the steering
group in place to advise on new systems
implementation.
In addition, towards the end of the year, a
search for a further Non-executive Director
was commenced, to bring expertise
to support the strategy of refocussing
growth ambitions to the branch estate,
which resulted in Angela Rushforth being
appointed in February 2024.
The executive management team also
experienced significant change in the
year with Darren Waters taking over the
role of Chief Executive in May 2023 and
the more recent appointment of Cat
Hambleton-Gray as the new People
Officer in January2024.
Furthermore, in November 2023, the
Board undertook a thorough review of
the Group’s strategy, led by the executive
management team, at which opportunities
for growth in turnover, margin and profit
were reviewed, along with the effective
management of cash flow, as key parts
of the overall strategy. This strategy
was a core point of reflection during the
evaluation process as all Board members,
within this context, identified how they
could contribute to achieving this plan.
The evaluation identified several areas of
strength and some areas for enhancement
and, overall, concluded that:
• The Board operates in an effective and
professional manner and has developed
considerably over the last 12-18 months
• Governance processes are transparent
and well run
• Risks are openly discussed with greater
focus on health and safety
• There is scope, and a desire, from the
Board to develop further.
In addition, the evaluation highlighted:
• Given the significant change in members
over the last 18 months, the Board
was continuing to gain familiarity with
each other, which was seen as work in
progress with still more to achieve, and
had not yet settled into being a team
of players that all apply their individual
skills fully
• The Board had successfully transitioned
to more strategic, and proportionately
less operational, updates at meetings
and this would continue to improve the
quality of the Board’s debate. Focus
on cash management and overseeing
the investment in support systems and
other capital requirements was now a
focus for the Board
• ESG, culture and people engagement
had been given increased board focus
in 2023, including the creation of a new
Social Values and ESG Committee.
Directors’ engagement with the
workforce had continued with organised
briefings that encouraged constructive
feedback, for which all Non-executive
Directors were scheduled to participate
in 2024
• Greater Board visibility and interaction
with the leadership team was to be
encouraged and developed further.
Taking all the above into account, the Board
is satisfied that the current composition
of the Board, and its committees,
provides an appropriate balance of skills,
experience, independence and knowledge
to allow the Board and its Committees to
discharge their duties and responsibilities
effectively and in line with the Code.
Conflicts of interest
The duties to avoid potential conflicts
and to disclose such situations for
authorisation by the Board are the
personal responsibility of each Director.
AllDirectors are required to ensure that
they keep these duties under review and
to inform the Group Company Secretary
ofany change in their respective positions.
The Company’s conflict of interest
procedures are reflected in its Articles
of Association (‘Articles’). In line with
the Companies Act 2006, the Articles
allow the Directors to authorise conflicts
and potential conflicts of interest, where
appropriate. The decision to authorise
a conflict can only be made by non-
conflicted Directors.
The Board, and its Committees, considers
conflicts or potential conflicts at each
meeting and, where such instances are
identified, takes appropriate action, usually
by excluding the conflicted party from any
related discussions/decisions.
The Articles require the Company to
indemnify its officers, including officers
of wholly-owned subsidiaries, against
liabilities arising from the conduct of the
Group’s business, to the extent permitted
by law. The Group carries Directors’ and
Officers’ liability insurance.
Eurocell plc Annual Report and Accounts 202382
Number of meetings
attended/eligible toattend Board
Audit
and Risk
Committee
Remuneration
Committee
Nomination
Committee
Social
Values
and ESG
Committee
Derek Mapp
6/6
— —
2/2
—
Frank Nelson
6/6 4/4 3/3 2/2
—
Martyn Coffey
(stepped-down 11 May 2023)
1/1
—
1/1 1/1
—
Kate Allum
6/6
—
3/3 2/2 1/1
Alison Littley
6/6 4/4 2/2 2/2 1/1
Iraj Amiri
6/6 4/4 2/2 2/2 1/1
Will Truman
(appointed 11 May 2023)
5/5 2/2
—
1/1 1/1
Mark Kelly
(retired 11 May 2023)
1/1
— — — —
Darren Waters
(appointed 11 April 2023)
5/5
— — —
1/1
Michael Scott
6/6
— — —
1/1
Board meetings and attendance
There were six full Board meetings held
during 2023, four meetings of the Audit
and Risk Committee, three meetings of the
Remuneration Committee, two meetings
of the Nomination Committee and one
meeting of the Social Values and ESG
Committee. All of these meetings were
held in-person and were attended in full.
In addition, three virtual Board update
meetings were held during 2023, in
order to keep the Board fully updated on
financial and operational matters. There
was full attendance for all of these update
meetings, with the exception of one
director at one virtual meeting (due to a
pre-existing engagement), which helped
maintain a high level of Board awareness
and support good governance.
Irrespective of their Committee
membership, all members of the Board,
including the Chair of the Board, Chief
Executive and Chief Financial Officer, are
invited to attend all Committee meetings,
but are never involved in discussions
and decisions regarding their own
remuneration or appointment/replacement.
In addition, the Audit and Risk Committee
also meets with the external auditors
without any Executive Directors
beingpresent.
The Group Company Secretary is
also Secretary to the Audit and Risk,
Remuneration, Nomination and Social
Values and ESG Committees, and attends
all meetings for this purpose.
Board induction, development
andsupport
Following appointment, a new Director
undergoes an induction programme,
which includes a teach-in from Executive
Committee members on key aspects of
the business, including the background to
our industry and markets, as well as the
Company’s strategy, commercial approach,
manufacturing and logistics operations,
administrative functions andculture.
Summary of induction programme:
Understand the business
• Meet, on a one-to-one basis, the
Chair, Executive Directors and other
Non-executive Directors
• Receive teach-in presentations from
all key functions within the Group,
including Commercial, Operations,
Human Resources, Finance,
Marketing and IT
• Meet with external stakeholders
where appropriate e.g. customers,
suppliers, advisers, and in some
cases, major shareholders
• Review previous Board and
Committee papers, Committee terms
of reference, investor presentations
and staff surveyresults.
Meet our colleagues
• Meet with the Executive Committee
and senior management teams
• Visit all major operational sites,
including factories, the main
warehouse, a selection of branches
and the main offices, including an
opportunity to meet with colleagues
from these areas.
Individual development and training needs
are identified through the Board evaluation
process and through individual reviews
between the Directors and the Chair.
Risk management
and internal control
The Board acknowledges its responsibility
for determining the nature and extent of
the significant risks it is willing to take in
achieving its strategic objectives, and for
the Group’s system of internal control.
The Board has carried out a review of
the effectiveness of the Group’s risk
management and internal control systems.
This included a review of current and
emerging risks, along with a review of
financial, operational and compliance
controls, for the period covered by this
Annual Report.
Board packs are distributed in the week
prior to each meeting to provide sufficient
time for Directors to review their papers in
advance. If Directors are unable to attend
a Board meeting for any reason, they
nonetheless receive the relevant papers
and are consulted prior to the meeting
and their views are made known to the
otherDirectors.
The Group Company Secretary
All the Directors have access to the advice
and services of the Group Company
Secretary. The Group Company Secretary
has responsibility for ensuring that all
Board procedures are followed and for
advising the Board, through the Chair,
on all governance matters. The Group
Company Secretary provides updates to
the Board on regulatory and corporate
governance issues, new legislation, and
Directors’ duties and obligations. The
appointment and removal of the Group
Company Secretary is one of the matters
reserved for the Board.
Paul Walker has served as Group
Company Secretary throughout the year.
Whenever necessary, Directors may take
independent professional advice at the
Company’s expense. Board Committees
are provided with sufficient resources to
undertake their duties, including the option
to appoint external advisers when they
deem it appropriate.
CORPORATE GOVERNANCE STATEMENT CONTINUED
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 83
The Strategic Report comments in detail
(pages 68 to 72) on the nature of the
principal risks and uncertainties facing
the Group; in particular those that would
threaten our business model, future
performance, solvency or liquidity and
the measures in place to mitigate them.
In conducting its review, the Board
has included a robust assessment
ofthese risks and the effectiveness
ofmitigatingcontrols.
The Audit and Risk Committee Report
on pages 92 to 97 describes the internal
control system and how it is managed
and monitored. As described in last year’s
report, the cyber incident in 2022 was
not the result of a breakdown in internal
controls. Our investments over the last
several years in cyber security played
a major role in identifying the incident,
enabling core systems to be restored
quickly and mitigating the overall impact
on the Group. Throughout 2023, we have
continued to invest in enhancing our
cyber security to provide further resilience
inthisarea.
The Board confirms that no significant
failings or weaknesses were identified
in relation to the review. The Board
also acknowledges that such systems
are designed to manage, rather than
eliminate, the risk of failure to achieve
business objectives and can only provide
reasonable and not absolute assurance
against material misstatement or loss.
Stakeholder engagement
and Section 172(1) statement
Engagement with our shareholders and
wider stakeholder groups plays a vital
role across the Group, including at Board
level. One of the primary areas of focus
for the Board at any time is the impact
its decisions or actions may have on key
stakeholder groups represented within
the Board’s duty under s172 of the
Companies Act 2006.
The Board is mindful of the levels of
engagement with key stakeholder groups
and how their respective views may be
incorporated into relevant decision making.
Board discussions therefore seek to
appropriately consider the impact of its
decisions and views of key stakeholder
groups thereon, whilst always ensuring
the need to promote the success of the
Company for the benefit of its members
asa whole.
In doing so, s172 requires the Directors
to have regard (amongst other matters) to:
• The likely consequences of any decision
in the long term
• The interests of the Company’s
employees
• The need to foster the Company’s
business relationships with suppliers,
customers and others
• The impact of the Company’s operations
on the community and the environment
• The desirability of the Company
maintaining a reputation for high
standards of business conduct
• The need to act fairly as between
members of the Company.
The Board considers information from
across the organisation to help understand
the impact of its operations and decisions,
and the interests and views of our key
stakeholders. This includes reviews
of strategy, financial and operational
performance, as well as information
covering areas such as key risks,
andlegaland regulatory compliance.
This information is provided to the
Board, and its Committees, through
reports sent in advance of each meeting,
and through in-person presentations,
where appropriate. As a result of these
activities, the Board has developed a good
understanding of the interests and views of
all stakeholders, and other relevant factors,
which enables the Directors to comply
with the requirements of section 172
of the Companies Act 2006.
The table overleaf sets out the Board’s
approach to stakeholder engagement,
why stakeholders matter and some key
decisions made during 2023. The Board
will sometimes engage directly with certain
stakeholders on certain issues, but the
size and distribution of our stakeholders
and of the Eurocell Group dictate that
stakeholder engagement often takes place
at an operational level.
To give greater understanding to this,
wehave provided clear cross-referencing
to where more detailed information can
be found in this Annual Report and
FinancialStatements.
Customers
Why they matter
The Board recognises the dependence of
our growth plans on building strong and
lasting relationships with our customers.
Inter alia, this requires that we continuously
improve product ranges, quality, availability
and service to become the supplier of choice.
How we engage
Regular contact takes place between senior
management and key customers, with our
sales teams ensuring we engage properly
across the full range ofcustomers.
Customer reviews discuss our operational
performance, including service levels and
other relevant matters.
We perform customer insight surveys on
a regular basis to assess satisfaction and
understand ‘Net Promoter Scores’.
In addition, quarterly forums are held with
customer groups to discuss product design
and innovation.
Regular monitoring of social media
platforms for relevant comments/issues,
coupled with Trustpilot customer reviews/
ratings and direct comments received from
customers visiting our branches, provide
valuable customer insight.
How the Board complements
engagementefforts
Throughout 2023, the Board received
regular updates on our performance against
customer and service-related KPIs, compared
to historical and industry/sector benchmarks.
How their interests were considered
during2023
In completing the strategic review in Q4,
the Board approved the introduction
of ‘Customer Growth’ and Business
Effectiveness’ strategic pillars, which
include continued progression of initiatives
to enhance our customers’ experience.
During 2023, a new website and e-commerce
platform, was launched, with the aim of
significantly improving the customer journey.
Further to this, the Board has approved
expenditure to enhance our digital marketing
to strengthen our online presence and
therefore engage more effectively with both
new and existing customers.
In addition, the Board has approved
investment in supply agreements with
new and existing fabricator customers. In
exchange for exclusive supply arrangements,
these investments support the commercial
and operational development of our
fabricators and their growth.
With the Board’s oversight, our technical
teams continue to work with our larger
customers to enable them to conform to
changing building regulations, including
development of new product applications.
For more details see Chief Executive’s
Report onpages14 to 17
Eurocell plc Annual Report and Accounts 202384
Shareholders
Why they matter
The Board recognises the importance of
engaging with all shareholders and prioritises
effective dialogue to ensure that we capture
and embrace feedback relating to areas of
interest and of concern, and to ensure that
our obligations are met.
How we engage
The Group runs a comprehensive investor
relations programme that results in regular
dialogue with the investment community.
This includes formal presentations made
to institutional shareholders and analysts,
following the announcement of the Group’s
half-year and full-year results, covering a
range of key topics affecting the Group’s
strategy, financial and operating performance.
Ad hoc meetings are also held following
trading updates and otherwise throughout
the year.
The Chair, the Senior Independent Director
and the other Directors are available to
engage in dialogue with major shareholders
as appropriate.
Shareholders have the opportunity to meet
members of the Board and the senior
management team at the Annual General
Meeting and to ask any questions they
may have.
How the Board complements
engagementefforts
During 2023, the Chair met with some of our
largest shareholders without the Executive
Directors being present.
The Board also received regular updates
on shareholder engagement and investor
feedback, analyst reports and share price
developments from the Chief FinancialOfficer.
How their interests were considered
during2023
Investor relations is covered at all Board
meetings andupdates.
The Board completed a review of the
strategy in Q4, including the optimisation
and expansion of the branch network,
an enhanced customer proposition and
simplified business structures. Through
this work we identified new opportunities
for growth and efficiencies, with initiatives
grouped under four strategic pillars:
Customer Growth, Business Effectiveness,
People Firstand ESG Leadership.
We believe our strategy will, over the
medium-term, drive sustainable growth
in shareholder value.
In addition, recognising the macroeconomic
and market challenges in 2023, the Board
took the following actions to position the
business well for when markets recover:
• Cost management – approved further
defensive measures in Q2, including a
cost saving programme and restructuring
• Cash management – efficient working capital
utilisation, including stock reduction, to drive
strong cash flow performance
• Share buybacks via our EBT, to satisfy
employee awards and prevent shareholder
dilution.
For more details see Chief Financial
Officer’s Report onpages 62 to 65
Employees
Why they matter
The Board understands that our colleagues
underpin the performance and success of
our business and, therefore, the importance
of providing a safe working environment that
promotes inclusion and diversity, as well as
ensuring they have the opportunity to realise
their potential and progress in their careers.
How we engage
The Group conducts periodic staff surveys. In
2023 this included the annual ‘Pulse’ survey,
combined with subsequent listening groups,
to source the views of colleagues directly
on several important topics and develop
appropriate action plans. All results are
analysed, shared with colleagues and used to
drive appropriate change and improvement.
During 2023, we launched the EPiC
staff magazine (‘Eurocell People in
Communication’) which covers all aspects
and activities of the Group on a regular basis,
with an emphasis on colleague engagement
and information-sharing.
Regular team-briefings on operational and
financial performance, coupled with the
publishing of internal bulletins (‘In the Know’),
help to keep our colleagues well informed.
Management regularly ‘walk the floor’ to
understand first-hand the experiences of
our colleagues and also undertake visits
to operating sites and branches to ensure
all parts of the Group are understood and
taken into account in formulating plans.
All whistleblowing reports and grievances
are investigated and appropriate changes
implemented to help prevent recurrence.
How the Board complements
engagementefforts
During 2023, the Board received updates on
the progress of our colleague engagement
initiatives and, in particular, considered the
results of the staff surveys and the proposed
action plan to address matters arising.
Board members were also able to share
their own experiences and ideas to address
the retention and recruitment challenges
that continued through the year.
The Chief Executive provided regular
updates to the Board on health and
safety matters and the steps taken to
ensure appropriate safety and wellbeing
arrangements were in place.
How their interests were considered
during2023
In completing the strategic review in Q4, the
Board approved management’s proposals
to update to the Group’s purpose and values,
and introduce a ‘People First’ strategic pillar
based on:
• Health and safety
• Employee value proposition
• Colleague engagement
• Growing talent.
In addition, the Board approved the
continued investment in a staff welfare
refurbishment programme, to improve
facilities in branches, factories and
warehouses.
These actions support our ambition to have
talented, engaged and motivated colleagues
who work passionately to achieve clear
business and personal goals.
For more details see People First
on pages 38 to 41
CORPORATE GOVERNANCE STATEMENT CONTINUED
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 85
Suppliers
Why they matter
The Board appreciates that to operate
effectively we must ensure secure supplies
of good quality sustainable materials at a
fair price from suppliers with high ethical
standards, and monitor supplier performance
against appropriate metrics.
How we engage
Our objective is to build and maintain strong
and lasting working relationships with our
supplier base.
Regular review meetings are held between
senior management and key suppliers to
discuss relevant topics, such as pricing,
supply continuity and service levels.
Formal tender processes are undertaken
for large and/or high value supplies, which
helps develop relationships and creates a
better understanding for all parties of the
key issues involved.
How the Board complements
engagementefforts
During 2023, cost inflation continued to
be discussed at all Board meetings and
updates. Board members have shared
their ideas and experiences on supplier
relationships and engagement, in the
light of current risks and challenges.
How their interests were considered
during2023
The Board continued to work with and advise
management on their approach, including:
• To accept supplier cost increases, where
appropriate, to provide security of supply,
particularly with regards to recycling
feedstock
• To pass a fair proportion of such increases
on to our own customers through selling
price increases and potentially reversible
surcharges.
For more details see Sustainable
Products on pages 46 to 47
Communities and environment
Why they matter
The Board understands the role all organisations
have to play in protecting the environment and
in mitigating the impact of climate change.
The Board also recognises the need to
support the local communities in which our
larger facilities are located.
How we engage
We believe sustainability sits right at the heart
of our business.
We are the leading UK-based recycler of PVC
windows, through our two recycling sites in Selby
and Ilkeston, which drive a very large carbon
saving compared to the use of virgin materials.
Our major sites engage with and support
their local communities on an ongoing basis.
We seek to recruit locally, retain a skilled
local workforce, build relationships with
local community organisations and support
charitable initiatives where possible.
How the Board complements
engagementefforts
The Board is actively engaged with the
development and implementation of the
Group’s ESG strategy and, in late 2022,
approved the formation of a ‘Social values
and ESG’ committee.
Through this Committee, the Board receives
updates on sustainability issues, including
the performance of the two recycling sites.
How their interests were considered
during2023
In completing the strategic review in Q4, the
Board approved the introduction of an ‘ESG
Leadership’ strategic pillar. Towards the
end of the year, we appointed CEN-ESG to
support the development of our ESG strategy,
including a path to net zero, as well as
enhance our ESG reporting and disclosures.
With the Board’s oversight, work in this area has
to date focused on four key themes as follows:
• Carbon, energy and water – defining our
pathway to carbon neutrality and net zero
• Waste minimisation and circularity – further
strengthening materials recovery and
process optimisation
• People and places – becoming a regional
employer of choice and stepping up
community engagement
• Governance – reporting progress against
published ESG targets and aligning with
sustainability indices.
During 2023, we selected Maggies as our
corporate charity, through various initiatives
and events, we have made donations
of£22,500.
In addition, the Board approved an extension
to the existing £75 million sustainable Revolving
Credit Facility which contains annual recycling,
emissions and waste reduction targets.
For more details see Environmental
Leadership on pages 42 to 45
Government and regulatory/
industrybodies
Why they matter
The Board recognises the critical importance
of ensuring the highest standards of
corporate governance, including compliance
with the rules for listed companies and other
relevant regulations (e.g. health & safety,
taxation), which together give us our licence
to operate.
How we engage
The Company applies the principles and
provisions of the UK Corporate Governance
Code and operates structures and policies
to ensure ongoing compliance.
We also operate clear and effective policies
to help prevent wrongdoing, including
whistleblowing, bribery and corruption,
fraud, financial crime and modern slavery,
with training provided where appropriate.
Regular meetings are held with tax
advisers to discuss tax compliance,
HMRC correspondence and other
relevant issues pertinent to the Group’s
finances and tax position.
The Company is a member of both the
Windows and Recycling groups of the
British Plastics Federation and the British
Fenestration Rating Council, which provide
a forum to understand changes in relevant
legislation and building standards.
How the Board complements
engagementefforts
The Audit and Risk Committee receives
regular reports on governance, regulatory
and compliance matters from management
and from external and internal auditors.
The internal audit programme is designed
to provide assurance in this area.
In addition, the Board receives updates on
matters such as developments in building
regulations and our associated new product
development initiatives.
How their interests were considered
during2023
The Board supported management’s
ongoing initiative to engage and collaborate
with industry bodies, house builders,
energy consultants and glass/hardware
manufacturers to develop new products
to meet the Government’s ‘Future Homes
Standard’ for the new build sector.
For more details see Ethics and
Compliance on pages 48 to 49
Eurocell plc Annual Report and Accounts 202386
Engagement with the workforce
As described in Stakeholder engagement
on pages 83 to 85, we recognise that
our colleagues underpin the performance
and success of our business and active
engagement has never been more
important in the current social,
economic and political environment.
The Group organises a number of
colleague engagement initiatives to
complement the existing team briefings,
continuous improvement workshops
and health and safety forums currently
in place, including:
• The newly launched EPiC staff magazine
(‘Eurocell People in Communication’)
which regularly covers all aspects
and activities of the Group with an
emphasis on colleague engagement
and information-sharing
• Regular colleague focus groups with
the designated Non-executive Director,
Alison Littley, to ensure workforce views
are heard by the Board
• Departmental listening groups to allow
colleagues to give direct feedback
from which appropriate action plans
can be formulated
• Group-wide ‘Pulse’ staff surveys, to
provide invaluable insight into how
our colleagues feel
• Review of retention and recruitment
challenges, to identify areas for
improvement and ensure we remain
competitive in the labour market
• Enhancement of the induction process
for new colleagues, to help address
short-term staff turnover
• More flexible approaches to working,
including hybrid working where
appropriate
• Enhancement of colleague facilities and
rest-room arrangements, as part of
overall staff welfare improvements
• Continued opportunity for all colleagues
to become shareholders via the Save
As You Earn scheme, to share in the
Group’s success.
In addition, the Board assesses and
monitors culture through:
• Reviews of staff survey results and
response rates
• Reviews of staff turnover rates
• Reviews of health and safety data,
including near misses
• Reviews of employee whistleblowing
cases
• Interaction with senior management
and workforce
• Observation of attitudes towards
regulators such as HMRC and HSE,
as well as internal and external auditors.
Executive remuneration has been,
and continues to be, aligned with the
wider company pay policy through the
implementation of consistent annual salary
reviews, annual bonus target-setting and
benefit entitlement. As a result, it has not
been considered necessary to engage
with employees on this matter.
The Board is satisfied the above practices
and behaviours throughout the Group
are developing well to support improved
employee engagement. In addition, as set
out in ‘People First’ on pages 38 to 41, we
have a number of in-progress and planned
initiatives to improve our employee value
proposition and retention rates, and drive
down labour turnover.
Statement of compliance with
theCode
This Corporate Governance Statement,
together with the Nomination Committee
Report, the Audit and Risk Committee
Report and the Remuneration Committee
Report, provide a description of how the
principles and provisions of the Code have
been applied during 2023.
It is the Board’s view that, during 2023,
Eurocell plc was in compliance with the
relevant provisions set out in the Code in
all material respects except for Provision
38 for the period up to Mark Kelly’s
retirement on 11 May 2023.
Provision 38 provides that Executive
Director pension contribution rates
(or payments in lieu) should be in line with
those available to the workforce. For the
period from 1 January 2023 up to his
retirement at the AGM on 11May 2023,
Mark Kelly’s pension contribution rates
did not match the wider workforce during
that period.
However, from 11 May 2023 onwards,
all pension contributions for the Executive
Directors were in line with those available
to the workforce and therefore were
compliant with the Code and in line with
the Investment Association’s guidance.
Further details regarding the Executive
Directors’ pension contributions are
set out on page 108 of the Directors’
Remuneration Report.
This statement complies with sub-
sections 2.1, 2.2(1), 2.3(1), 2.5, 2.7 and
2.10 of Rule 7 of the Disclosure Rules
and Transparency Rules of the Financial
Conduct Authority. The information
required to be disclosed by sub-section
2.60 of Rule 7 is shown on pages 116
to 119.
Annual General Meeting
Our AGM will be held at our Head Office
(see Company Information on page 177
for details) on 16 May 2024.
The notice of our AGM, together with
the Directors’ voting recommendations
on the resolutions to be proposed,
is included on a separate circular to
shareholders and will be dispatched at
least 21clear days before the meeting.
The notice will be available to view at
investors.eurocell.co.uk.
All Directors intend to attend the AGM,
including the Chairs of the Audit and Risk,
Remuneration, Nomination and Social
Values and ESG Committees, who are
available to answer questions. The Board
welcomes questions from shareholders
who have an opportunity to raise issues
informally or formally before or during
themeeting.
For each proposed resolution, the proxy
appointment forms provide shareholders
with the option to direct their proxy vote
either for or against the resolution or to
withhold their vote. The proxy form and
any announcement of the results of a
vote make it clear that a ‘vote withheld’ is
not a vote in law and will not be counted
in the calculation of the proportion of the
votes for and against the resolution.
All valid proxy appointments are properly
recorded and counted by Equiniti, the
Company Registrars. Information on the
number of shares represented by proxy,
the proxy votes for and against each
resolution, and the number of shares in
respect of which the vote was withheld
for each resolution, together with the
proxy voting result, are given at the AGM.
The total votes cast, including those at
the AGM are published on our website
(investors.eurocell.co.uk) immediately
after the meeting.
Derek Mapp
Chair
19 March 2024
CORPORATE GOVERNANCE STATEMENT CONTINUED
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 87
Dear Shareholder,
I am pleased to report to you on the
main activities of the Committee
and how it has performed its duties
during2023.
2023 has continued to be a period
of transition for the Board and senior
management. The changes in leadership
are described in this report, and I am
pleased that we have been able to attract
such high calibre individuals into the
Company.
A key responsibility of the Committee is to
ensure orderly Board succession and this
has remained the Committee’s main focus
during 2023.
Following a successful search process in
2022, Darren Waters joined the Board as
Chief Executive Designate in April 2023
and subsequently took over as Chief
Executive in May 2023, following Mark
Kelly’s retirement at the 2023 AGM.
Martyn Coffey also stepped-down from
the Board at the 2023 AGM.
On the recommendation of the Committee,
Will Truman was appointed as a new
independent Non-executive Director
immediately following the AGM and brings
strong commercial expertise, as well as
a wealth of experience in stakeholder
management and M&A.
The Committee also continues to consider
succession planning for the Board in the
medium-term and, mindful that Frank
Nelson intends to step-down from the
Board at the 2024 AGM after nine years
of service, Alison Littley will take over the
role of Senior Independent Non-executive
Director at that date. Furthermore, the
search process for a replacement Board
member commenced in 2023, with
diversity and ethnicity considerations noted
as important priorities. As a result, and on
the recommendation of the Committee,
Angela Rushforth was appointed as a
new independent Non-executive Director
in February 2024 and brings significant
branch network experience and insights
from both multi-site retail and merchanting.
In addition, the Committee has continued
to oversee the ongoing development and
evolution of the Executive Committee.
Bruce Stephen (Group Human Resources
Director) left the business at the end of
2023 and goes with our best wishes.
Catherine (Cat) Hambleton-Gray joined as
People Director in January 2024 and is a
highly experienced HR practitioner, having
previously held senior leadership roles
with (inter alia) Halfords and Costa Coffee.
Finally, I would like to thank my fellow
Board and Committee members who
have served throughout the year, for
their valuable contribution and support.
Derek Mapp
Chair of the Nomination Committee
19 March 2024
* Appointed on 1 February 2024.
NOMINATION COMMITTEE REPORT
Committee composition
Will Truman Alison Littley Frank Nelson
Kate Allum Iraj Amiri Angela
Rushforth*
I am pleased that we have been able
toattract such high calibre individuals
intotheCompany.”
Eurocell plc Annual Report and Accounts 202388
Role and responsibilities:
The principal duties of the
Nomination Committee are to:
• Regularly review the structure,
size and composition of the
Board (including its skills,
knowledge, experience, length of
service and diversity) and make
recommendations to the Board
with regard to any changes
• Identify and nominate, for approval
by the Board, candidates to fill
Board vacancies
• Review the time commitments
required from Non-executive
Directors, along with the number
of external directorships held,
to ensure all duties are being
fulfilled
• Maintain an effective succession
plan for the Board and senior
management considering the
challenges and opportunities
facing the Company, along with
the skills and expertise needed
in the future, while promoting
diversity of ethnicity, gender,
background and skills.
Summary of activities during
theyear
The Nomination Committee met two
times during the year and attendance
at the meetings is shown on page 82.
The main activities of the Committee
included:
• The introduction of Darren Waters
as Chief Executive Designate and
subsequently as Chief Executive,
ensuring a smooth handover of
responsibilities
• The search, selection and recruitment
of Will Truman and Angela Rushforth as
Non-executive Directors, taking account
of the required skill sets and experience
for the Board’s composition
• Continued succession planning for the
Board, given Frank Nelson’s intention
to step-down at the 2024 AGM
(in accordance with the Code)
• Overseeing the ongoing development
of the Executive Committee and
recruitment of Cat Hambleton-Gray
as People Director
• Considering the results of the external
evaluation of the Committee’s
effectiveness (see page 81 for
further details)
• A review of Directors’ time
commitments and independence
• Consideration of the re-election of
Directors at the Annual General
Meeting
• Approving updates to the
Committee’s terms of reference.
Nomination Committee members
During 2023, the Nomination Committee
comprised:
Chair:
Derek Mapp
Committee members:
Frank Nelson
Martyn Coffey (to 11 May 2023)
Kate Allum
Alison Littley
Iraj Amiri
Will Truman (from 15 May 2023)
All members of the Committee served
throughout the year, unless otherwise
stated.
The Code recommends that a majority
of the Nomination Committee be Non-
executive Directors, independent in
character and judgement and free from
any relationship or circumstance which
may, could or would be likely to, or appear
to, affect their judgement. The Board
considers that the Company complies
with the Code in this respect.
Only members of the Committee have the
right to attend Committee meetings, but
the Committee may invite others, including
the Group Human Resources Director and
external advisers, to attend all or part of
any meeting if it thinks it is appropriate,
necessary, or pursuant to the terms of
any agreement with shareholders.
The Nomination Committee will meet
as often as it deems necessary but, in
accordance with its terms of reference,
atleast twice a year.
NOMINATION COMMITTEE REPORT CONTINUED
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 89
FCA target At 31 December 2023
At the date of approval
ofthis report
At the conclusion of the
forthcoming 2024 AGM
% of women on the Board At least 40% 25%
1
33%
1
38%
1
Number of senior Board positions
3
heldbywomen At least 1 —
1
—
1
1
2
Number of Board members from
an ethnic minority background At least 1 1
2
1
2
1
2
1 FCA target not met.
2 FCA target met.
3 Senior board positions are Chair, Chief Executive, Senior Independent Director or Chief Financial Officer.
Diversity and inclusion
All Board and senior management
appointments are made on merit, in line
with the approach adopted throughout the
Group’s workforce. The Board recognises
and embraces the benefits of diversity
and, in particular, the value that different
perspectives and experience bring to the
quality of debate and decision making.
The Board recognises the Group operates
in a historically male-dominated industry
but is committed to consider diversity as
a key element in senior appointments.
The table below summarises the progress
made, and that we expect to make in the
near future, against each of the FCA’s
board diversity targets:
At 31 December 2023, being the chosen
reference date, the Group met one of
the three FCA diversity targets. Following
the appointment of Angela Rushforth, on
1February 2024, the proportion of women
on the Board increased from 25% to 33%.
At the conclusion of the 2024 AGM in May
2024, following Frank Nelson’s retirement
and Alison Littley becoming Senior
Independent Non-executive Director, the
Group will have met two of the targets and
will be very close to meeting the remaining
other one.
The relatively small size of the Board and
the pre-existing Directors’ service contracts
have inevitably limited the pace of change
but, nevertheless, as vacancies arise, the
Board will continue to move towards the
FCA’s targets whereverpossible.
However, the overriding policy in any new
appointments will continue to be one of
selecting candidates with an appropriate
mix of skills, capabilities and market
knowledge, to ensure the continued
success of the business.
Eurocell plc Annual Report and Accounts 202390
Gender representation
The above data was collected on the basis of self-reporting by the individuals concerned who were asked to select their gender/
ethnicity from a list of options derived from the FCA’s template.
During the year, Paul Walker stepped down from the Executive Committee in order to focus on his Group company secretarial and
other responsibilities and Bruce Stephen (Group Human Resources Director) left the business at the end of 2023. Cat Hambleton-
Gray joined as People Director and member of the Executive Committee in January 2024 and Angela Rushforth was appointed to
theBoard as a Non-executive Director in February 2024.
The gender balance of those in the senior management and their direct reports is included within the Sustainability Report onpage40.
Details of the Board and Executive Committee’s gender/ethnicity is as follows:
At the date of approval ofthis report
Number of
Board members % of the Board
Number of senior
positions on the Board
(CEO, CFO, SID and Chair)
Number in executive
management
% of executive
management
Men 6 67% 4 3 60%
Women 3 33% — 2 40%
Total 9 100% 4 5 100%
At the date of approval ofthis report
Number of
Board members % of the Board
Number of senior
positions on the Board
(CEO, CFO, SID and Chair)
Number in executive
management
% of executive
management
White British or other White
(including minority-white groups) 8 89% 4 5 100%
Other ethnic group, including Arab 1 11% — — —
Total 9 100% 4 5 100%
At 31 December 2023
Number of
Boardmembers % of the Board
Number of senior
positions on the Board
(CEO, CFO, SID and Chair)
Number in executive
management
% of executive
management
Men 6 75% 4 3 75%
Women 2 25% — 1 25%
Total 8 100% 4 4 100%
At 31 December 2023
Number of
Boardmembers % of the Board
Number of senior
positions on the Board
(CEO, CFO, SID and Chair)
Number in executive
management
% of executive
management
White British or other White
(including minority-white groups) 7 88% 4 4 100%
Other ethnic group, including Arab 1 12% — — —
Total 8 100% 4 4 100%
At 31 December 2022
Number of
Boardmembers % of the Board
Number of senior
positions on the Board
(CEO, CFO, SID and Chair)
Number in executive
management
% of executive
management
Men 6 75% 4 5 83%
Women 2 25% — 1 17%
Total 8 100% 4 6 100%
At 31 December 2022
Number of
Boardmembers % of the Board
Number of senior
positions on the Board
(CEO, CFO, SID and Chair)
Number in executive
management
% of executive
management
White British or other White
(including minority-white groups) 7 88% 4 6 100%
Other ethnic group, including Arab 1 12% — — —
Total 8 100% 4 6 100%
Ethnicity representation
NOMINATION COMMITTEE REPORT CONTINUED
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 91
Succession planning
In 2023, the Committee continued its proactive work on succession planning for the
Board and senior management.
As part of this process, a detailed review of the composition, skills and experience of
the Board, and each of its Committees, has been undertaken to develop desired role
profiles and identify the preferred attributes to be sought in future appointments.
All appointments to the Board are subject to a formal, rigorous and transparent
appointment process, and are made based on merit and objective criteria.
Theprocess for these appointments is typically as follows:
As part of the development of the
Executive Committee, the Nomination
Committee has continued to consider
succession planning for senior
management, in order to maintain an
appropriate balance of skills, experience
and diversity within the Company in line
with our strategy. This ongoing planning
process includes an analysis of any
succession gaps or risks identified and
includes contingency plans for the sudden
or unexpected departure of Executive
Directors or other senior managers.
The benefits of this proactive approach
are illustrated by the ongoing evolution
ofthe Executive Committee, ensuring
the Company is well placed, with the
best people and the right balance of
skills to secure future success. During
2023, the successful recruitment of Cat
Hambleton-Gray as People Director
supports our People First strategic pillar
and reflects our commitment to gender
diversity whereverpossible.
In summary, we are confident that the
Board has a good understanding of
succession planning across the Group
and the range of measures being used to
continue to develop and recruit talented
senior employees.
Derek Mapp
Chair of the Nomination Committee
19 March 2024
Candidate
requirements
A detailed
candidate
profile setting
out required
capabilities and
experience is
agreed and
passed to and
independent
search firm to
facilitate the
process
Search
Independent
search firm
prepares an
initial longlist
of candidates
and conducts
the first round
of interviews
to assess the
candidates’
fit with the
role and key
competencies
Interviews
The Committee
then considers
a shortlist of
candidates and
interviews are
held with all
Board members
Board
approval and
announcement
The Committee
makes a
recommendation
to the Board for
its consideration.
Following Board
approval, the
appointments are
announced to the
market
Eurocell plc Annual Report and Accounts 202392
Dear Shareholder,
I am pleased to report to you on the
Audit and Risk Committee’s objectives,
responsibilities and activities during 2023,
being my first report since taking over as
Committee chair in May 2023.
A major part of the Committee’s work has been to review
theGroup’s approach to risk management and internal
controls,and to develop recommendations to further
improve their effectiveness.”
The Committee recognises the important
work being undertaken by the Financial
Reporting Council (FRC) on UK audit and
corporate governance reform. With this
in mind, a major part of the Committee’s
work in 2023 has been to review the
Group’s approach to risk management
and internal controls, and to develop
recommendations to further improve their
effectiveness. Implementation of these
changes has begun and will continue
into 2024, as the regulations develop.
In terms of risk management, following
the cyber attack we experienced in 2022,
cyber security has remained a very high
priority for the Group. The Committee has
provided close oversight and monitoring
for the programme of IT infrastructure
and training improvements, which have
been progressed to enhance resilience
and security. This has been supplemented
by an externally-facilitated cyber security
audit by Mazars LLP, the conclusions from
which have provided further assurance to
the Committee that all reasonable steps
are being undertaken to mitigate the risks
in this area, and an action plan for further
improvements in 2024.
In addition to the cyber audit, the Internal
Audit programme for 2023 included a
review of six further business areas, details
of which are included on page 96. These
reviews did not highlight any high-risk
issues and demonstrated solid foundations
upon which further developments and
improvements can be based.
In reviewing the 2023 Annual Report, in
addition to considering the key areas of
accounting estimates and judgements
noted on page 94, the Committee
reviewed the classification as a non-
underlying item of certain cloud-based
computing and restructuring costs
incurred in the year, and concluded that
itwas appropriate.
Collectively, this work has provided the
necessary assurance to the Committee
that internal controls and governance are
both adequate and working effectively.
Asummary of our activities, including the
key accounting estimates and judgements
made, is set out in this report.
Finally, I would like to thank my fellow
Committee members, and both the
internal and external auditors, for their
valuable contribution and support
duringyear.
Iraj Amiri
Chair of the Audit and
RiskCommittee
19 March 2024
AUDIT AND RISK COMMITTEE REPORT
Committee composition
Frank Nelson Alison Littley Will Truman
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 93
Role and responsibilities:
The key responsibilities of the Committee are to:
• Review the Annual Report, Half-Year Report and any other formal
announcements relating to the Group’s financial performance, giving due
consideration to significant accounting issues and judgements contained
therein, as well as compliance with accounting standards and other legal and
regulatory requirements
• Review the Annual Report and Financial Statements to advise the Board on
whether they give a fair, balanced and understandable explanation of the
Group’s business and performance over the relevant period
• Review the effectiveness of the Group’s financial reporting systems and procedures
• Consider the Group’s internal controls and risk management systems and advise
the Board whether they are adequate, by receiving reports on their effectiveness
from the Chief Financial Officer and Chief Executive, together with reports from
the Group’s outsourced internal auditors and from the external auditor
• Review updates to the Group’s risk register presented by management
• Oversee the Group’s procedures to ensure compliance with the provisions
ofthe Bribery Act 2010 and the Group’s Whistleblowing Policy
• Consider the external auditors’ independence and objectivity, audit and
non-audit fees and make recommendations regarding audit tender and
the appointment and remuneration of the auditors, together with the terms
oftheirengagement
• Review the annual audit plan and monitor the effectiveness of the external
audit process
• Monitor and review the effectiveness of the outsourced internal audit function,
including a review of the internal audit plan, all internal audit reports, and
management’s responses to the findings and recommendations of the internal
audit function
• Consider the adequacy of the Group’s finance function
• Review the Group’s Tax Strategy
• Review the Committee terms of reference.
Summary of activities during
theyear
The Audit and Risk Committee met
formally four times during the year and
attendance at the meetings is shown
onpage 82.
The areas of particular focus for the
Committee in 2023, and up to the date
ofthis Annual Report, were as follows:
• Continued oversight of the investments
in, and improvements to, the Company’s
IT infrastructure to continually strengthen
the cyber defences and further develop
resilience and security (including
consideration of the conclusions from
the cyber audit – see below)
• Reviewed the overall approach of
the risk management function and
developed recommendations regarding
the effectiveness, formalisation and
documentation of both new and
existing policies and processes
• Considered reports by management
related to the effectiveness of the
Group’s systems of risk management
and internal control
• Reviewed the Group’s risk register,
including principal and emerging risks
• Considered reports prepared by
the Group’s outsourced internal
auditfunction
• Considered the results of the internal
assessment of the Committee’s
effectiveness
• Approved updates to the Committee’s
terms of reference.
The Committee was also kept up to date
with changes to accounting standards
and developments in financial reporting,
company law and other regulatory matters
through presentations from the external
auditors, Chief Financial Officer and the
Company’s finance function.
The role of the Audit and Risk Committee
is to oversee financial reporting, review
the ongoing effectiveness of the Group’s
internal controls and provide assurance on
the Group’s risk management processes.
The Committee also assesses information
received from the external and internal
audit functions.
Following the 2023 year end, at the
March2024 meeting, the Committee
reviewed and recommended for approval
by the Board, the financial results for the
year ended 31 December 2023, including
areview of the full-year external audit.
As part of that process, the members of the
Committee reviewed the Annual Report,
including the adequacy of the disclosure
with respect to going concern and viability
reporting. The Committee considered
the appropriateness of preparing the
accounts on a going concern basis,
including consideration of forecast plans,
and supporting assumptions, as well as
sensitivity analysis and concluded that the
Company’s financial position was such that
it continued to be appropriate for accounts
to be prepared on a going concern basis.
This additional review by the Audit and
Risk Committee, supplemented by advice
received from external advisers during
the drafting process, assisted the Board
in determining that the report was fair,
balanced and understandable at the time
that it was approved.
• Considered the appropriate accounting
treatment, reporting and presentation
of cloud-based computing costs in light
of the material levels of expenditure
planned for a new ERP system
implementation
• Considered the appropriate accounting
treatment, reporting and presentation of
restructuring costs incurred in Q2
• Reviewed documentation prepared to
support the viability statement and going
concern assumption set out on page 73
• Reviewed the external auditors’ plan
for their audit for the year ended
31December 2023
• Reviewed reports from the external
auditors setting out their findings as
a result of their audits for the years
ended 31 December 2022 and 2023,
as well as their review of the 2023
Half-YearReport
• Considered the impact of any new
accounting standards and financial
reporting requirements, including
guidance issued by the Financial
Reporting Council (‘FRC’)
Eurocell plc Annual Report and Accounts 202394
Audit and Risk Committee members
During 2023, the Audit and Risk
Committee comprised:
Chair:
Iraj Amiri (Chair from 11May 2023)
Committee members:
Frank Nelson (Chair to11May 2023)
Alison Littley
Will Truman (from 15 May 2023)
All members of the Committee served
throughout the year, unless otherwisestated.
The Governance Code recommends
that all members of the Audit and Risk
Committee are Non-executive Directors,
independent in character and judgement
and free from any relationship or
circumstance which may, could or would
be likely to, or appear to, affect their
judgement and that one such member has
recent and relevant financial experience.
The Board considers that the Company
complies with the requirements of the
Governance Code in this respect and that,
by virtue of their extensive experience,
details of which are set out on pages 74
and 75, Iraj Amiri, a Fellow of the Institute
of Chartered Accountants in England
and Wales, Frank Nelson, a Fellow of
the Chartered Institute of Management
Accountants, and Will Truman, a Fellow
of the Institute of Chartered Accountants
in England and Wales, all have recent and
relevant financial experience. Furthermore,
all Committee members have extensive
relevant commercial and operational
experience, including in building/
construction and industrial organisations,
which both benefit the Committee and
collectively illustrate its competence
relevant to the sector in which the
Groupoperates.
Only members of the Committee have
the right to attend Committee meetings,
but both the internal and external auditors
were invited to attend all meetings during
the year, as a matter of course. The Chair
of the Board, the Chief Executive, the
Chief Financial Officer and other members
of the Board were also invited to attend all
the Committee meetings during the year.
In addition, the external and internal
auditors met regularly with the Committee
without executive management being
present and met separately with each of
the Audit and Risk Committee Chair and
the Chief Financial Officer.
The Audit and Risk Committee will meet
as often as it deems necessary but, in
accordance with its terms of reference,
atleast three times a year.
Key accounting estimates and judgements
As described above, the Committee reviewed the key estimates and judgements used in the preparation of the Group’s 2023
Financial Statements (including a review of PricewaterhouseCoopers LLP’s report and a discussion of their observations and findings
in this area) as follows:
Area Estimate/judgement Management’s approach Committee’s review
Inventory
valuation
Absorption of labour
and overhead costs
into stock
Review of raw material price variances
(vs historic standard cost) and overhead
absorption included in stock valuation.
Standard costs updated costs to reflect
latest raw material and other input cost prices
Critically reviewed the carrying value
of the Group’s inventory, the approach
taken by management and assessed
the reasonableness of the underlying
assumptions and financial forecasts used
Provisions for
slow-moving items
and discontinued
productlines
Assessment of the appropriate level
of provisioning against obsolescence,
undertaken in the context of current
trading and the forecast for the next
financial year and beyond
Accounts
receivable
recoverability
Provisions for bad
and doubtful debts
Application of IFRS 9’s expected credit
loss approach to the impairment of
receivables (which requires the use of
forward-looking statistical modelling
to determine the appropriate level of
provision), plus overlays to take into
account other material factors affecting
recoverability, including creditinsurance
Critically evaluated the methodology with
respect to setting provisions for potential
badand doubtful debts, including
management’s assessment of macro
uncertainty, as well as the absolute level
ofprovisions held
1
1 The Committee’s review also considered the specific nature and characteristics of customers in the Group’s two major divisions.
AUDIT AND RISK COMMITTEE REPORT CONTINUED
Risk management
The Group’s risk management processes
are set out in detail on pages 66 and 67.
In the light of the Financial Reporting
Council’s (FRC) work on UK audit and
corporate governance reform, the Group has
reviewed its approach to risk management
and internal controls, and developed a
plan to further improve their effectiveness.
Implementation of these changes has
begun and will continue into 2024, as the
regulations develop.
A formal Risk Appetite Statement has
been developed and approved by the
Board, with work on frameworks for risk
management, assurance strategy, and
policy management in progress, along
with the implementation of enhanced
risk assessment tools to support the risk
management approach.
These tools include the preparation of a
risk canvas, the completion of checklists
from the FCA’s Systems and Controls
Sourcebook and Corporate Governance
code, and arisk materiality assessment.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 95
The Group’s Risk Management Committee
is chaired by the Chief Financial Officer.
This Committee reviews significant risks
and the status of related mitigatingactions.
The Audit and Risk Committee reviews
the risk register twice per year to ensure
the timely identification and robust
management of inherent and emerging
risks is taking place. To the extent that any
failings or weaknesses are identified during
the review process, appropriate measures
are taken to remedy these.
Information relating to the management of
risks and any changes to the assessment
of key risks is reported by the Audit and
Risk Committee to the Board.
Internal controls
The Board is responsible for the overall
system of internal controls for the Group
and for reviewing its effectiveness. The
Board receives assurance on internal
control effectiveness at least annually,
covering all key controls including financial,
operational and compliance controls and
risk management systems.
In particular, the Board discharges its
duties in this area by:
• Holding regular Board meetings to
consider the matters reserved for its
consideration
• Receiving regular management reports
which provide an assessment of key
risks and mitigating actions
• Scheduling annual Board reviews of
strategy including consideration of the
material risks and uncertainties facing
the business
• Ensuring there is a clear organisational
structure with defined responsibilities
and levels of authority which are
regularly reviewed
• Scheduling regular Board reviews of
performance against financial budgets
and forecasts.
In reviewing the effectiveness of the
system of internal controls, the Audit
and Risk Committee:
• Reviews the risk register compiled and
maintained by senior managers within
the Group, at least bi-annually, receives
reports on near misses, errors and
inaccuracies
• Receives management assurance on
the effectiveness of the systems of
financial and accounting controls
• Regularly reviews the internal audits
performed and the progress against
previously raised recommendations.
The Group has several operating policies
and controls in place covering a range
of issues including financial reporting,
capital expenditure, business continuity
and information technology, including
cyber security, and appropriate employee
policies. These policies are designed
to ensure the accuracy and reliability
of financial reporting and govern the
preparation of financial statements.
In respect of the Group’s financial reporting,
the Finance function is responsible for
preparing the Group financial statements
using a well-established process and for
ensuring that accounting policies are in
accordance with International Financial
ReportingStandards.
Consolidated accounts are prepared
directly within the Group’s SAP system.
All business units report on SAP, with no
adjustments processed outside of the
system, other than the accounting entries
to reflect IFRS 16 (Leases), which are
produced by a specialist lease accounting
software package. Full balance sheet
reconciliations are prepared every month
and independently reviewed by senior
finance staff. The Chief Financial Officer
reviews consolidated and business
unit financial statements with the Chief
Executive every month. All financial
information published by the Group is
subject to the approval of the Audit and
Risk Committee.
Following the cyber incident in 2022, we
have continued to invest in infrastructure
to improve resilience and security in this
area. The Group’s IT team have remained
vigilant to cyber risks and have rolled-out
enhanced regular cyber training for all staff.
Other than as described above, there
have been no changes in the Company’s
internal control systems during the
financial year under review that have
materially affected, or are reasonably likely
to materially affect, the Company’s control
over financial reporting.
In addition, as noted above, management
continue to consider the impacts of
the various reforms and proposed
developments for UK audit and
corporate governance and have provided
recommendations to the Committee
on the potential changes required for
compliance. The business is in a good
position to meet the new requirements
as and when they become applicable.
The Board, with advice from the Audit
and Risk Committee, is satisfied that an
effective system of internal controls and
risk management is in place which enables
the Company to identify, evaluate and
manage key and emerging risks and which
accords with the guidance published by
the FRC.
These processes have been in place since
the start of the financial year and up to the
date of approval of the accounts. Further
details of specific material risks and
uncertainties facing the business can
be found on pages 68 to 72.
Eurocell plc Annual Report and Accounts 202396
Internal audit
KPMG LLP provide an outsourced Internal
Audit function which complements the
internal finance-based checks performed
on the branch network operations.
AUDIT AND RISK COMMITTEE REPORT CONTINUED
The Committee, working in conjunction
with KPMG LLP, approved a full
programme for 2023 which was compiled
based on the following specific categories:
• Risk: internal audit reviews specifically
linked to Eurocell’s key financial and
operational risks
• Routine: internal audit reviews covering
financial, regulatory, compliance and
IT operations which require cyclical
assurance coverage
• Request: internal audit reviews that
have been specifically included at
the request of either management
ortheAudit Committee.
A summary of the 2023 programme is as follows:
Internal audit programme Summary of findings
Branch Audit
Programme
• Good progress since last audit, including development of risk assessments to identify high risk sites,
enhanced reviews of audit content/coverage, and the development of process documentation
• Areas for improvement mainly around formalisation of the audit process, including branch selection
methodology and documentation for recording audit results.
Supply Chain Ethics
and Resilience
• Good practice via regular pricing reviews undertaken with key suppliers (top 80% spend) to ensure
value for money amongst suppliers, particularly in markets where prices fluctuated regularly
• Further formalisation required to ensure all main processes are defined and documented, to enhance
clarity and accountability across the end-to-end supplier relationship management process.
Anti-bribery and
corruption (‘ABC’)
• Low inherent risk of bribery and corruption, with business ethics related policies recently refreshed and
dedicated training modules launched
• Ongoing work to fully embed all ABC controls (via the new HR system) and formalise some processes.
General Ledger (‘GL’) • Adequate control environment in place with set processes in place for managing GL activities
• Some areas of improvement relating to the absence of an overarching GL policy and system limitations
for approval of manual journals (although compensating preventative controls in place).
Follow up • Management demonstrated commitment to tracking and implementing agreed internal audit actions,
supported by documentary evidence to verify the completion status of the actions considered
• 10 of the 13 medium/high rated actions were confirmed as implemented, with the remainder either
superseded or risk-accepted. No action marked as implemented was found to be incomplete
orinprogress.
Cyber (performed
by Mazars LLP)
• Key gaps have been mitigated by the significant investment in cyber projects across the estate
toconstantly monitor infrastructure and endpoints for potential threats
• Areas for further improvement include:
– Technical recommendations in relation to data loss prevention (DLP) and improving the
effectiveness of detection capabilities
– Technical recommendations relating to insecure protocols and misconfigured endpoints,
which have already been resolved
– Formalisation of the cyber risk management strategy and related documentation.
The Committee also formally reviews the Group’s progress in implementing the improvement recommendations raised through the
internal audit process in conjunction with the Executive Committee members, and overall progress remains satisfactory.
Whistleblowing, bribery
and business ethics
The Group is committed to the highest
standards of openness, honesty, integrity
and accountability.
The Group maintains a suite of policies
which support our commitment to strong
business ethics and for which we take a
strict approach to non-compliance.
This includes policies related to:
• Financial crime
• Conflicts of interest
• Gifts and hospitality
• Share dealing.
During the year, the Group refreshed and
re-issued all business ethics related policies
and developed a new business ethics
training module for all staff tocomplete.
Management believe this refresh, coupled
with our Whistleblowing Policy (see below),
which was updated and relaunched in
2022, has been successful in improving staff
awareness and understanding in this area.
The Whistleblowing policy makes
employees aware that they should report
any serious concerns or suspicions about
any wrongdoing or malpractice on the part
of any employee of the Group, without
fear of criticism, discrimination or reprisal,
as well as the procedure for raising
suchconcerns.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 97
During the year, there were no reports
received through the whistleblowing
process (2022: nil), and therefore no
significant trends were identified.
The Committee also takes responsibility
for reviewing the policies and procedures
adopted by the Group to prevent
bribery and corruption and the Group is
committed to a zero-tolerance position in
this respect. The Committee is satisfied
that the Group’s procedures with respect
to these matters are adequate.
In accordance with the obligations under
the Reporting on Payment Practices
and Performance Regulations 2017,
theCompany has submitted its bi-annual
reports in line with the legislation during
the year.
The Group’s Modern Slavery Statement,
which sets out details of the policies in
relation to slavery and human trafficking,
as well as its due diligence processes with
its partners, has been published on the
Group’s website at www.eurocell.co.uk.
The Group has also updated its Tax
Strategy Statement, again published
on our website, in compliance with the
Finance Act 2016, which sets out details
of the Group’s attitude to tax planning
and tax risk. In addition, the Group
continues to be certified as an accredited
Fair Tax Mark business, recognising our
responsibility to pay the right amount of
tax, in the right place, at the right time.
External audit and auditors’
independence
The Audit and Risk Committee has
primary responsibility for making a
recommendation to the Board on the
appointment, reappointment, removal
and remuneration of the external auditors.
It keeps under review the scope and
results of the audit, its cost-effectiveness
and the independence and objectivity
oftheauditors.
The external auditors are required
periodically to assess whether, in their
professional opinion, they are independent
and those views are shared with the
Auditand Risk Committee.
The Committee has authority to take
independent advice as it deems
appropriate in order to resolve issues on
auditor independence. No such advice
has been required to date. There are
no contractual obligations in place that
restrict the choice of statutory auditors.
The Group’s current auditors,
PricewaterhouseCoopers LLP were
appointed at the Audit and Risk
Committee meeting on 29 April 2015,
following the Company’s IPO in March 2015.
As a result, PricewaterhouseCoopers LLP
may remain as external auditors without
re-tender for ten years from that date, until
the completion of the 2024 annual audit.
The Committee considers the need to
tender the audit on an annual basis and
a detailed review will be undertaken, in
due course, in light of the approaching
deadline notedabove.
In accordance with best ethical standards,
PricewaterhouseCoopers LLP has
processes in place designed to maintain
independence, including the rotation of the
audit engagement partner at least every
five years. As a result of these processes,
the current audit engagement partner,
Chris Hibbs, assumed full responsibility
since the 2020audit.
The Committee has also adopted policies
to safeguard the independence of its
external auditors which are underpinned
by principles that ensure that the external
auditors do not:
• Audit their own work
• Make management decisions for
theGroup
• Create a conflict of interest
• Find themselves in the role of advocate
for the Group.
Any work awarded to the external auditors
with a value of more than £5,000 in
aggregate in any financial year, other than
an audit, requires the specific approval
of the Committee. Where the Committee
perceives that the independence of the
auditors could be compromised, the
work will not be awarded to the auditors.
Details of amounts paid to
PricewaterhouseCoopers LLP for audit
and audit-related assurance services
in 2023 are set out on page 144. The
audit-related assurance services provided
during the year were in relation to the
Half-Year Report (£41,500) and the
sustainability targets included in the
Company’s banking facility (£28,000).
Prior to recommending the appointment
of PricewaterhouseCoopers LLP at the
forthcoming AGM to the Board, the
Committee reviewed the audit process,
the performance of the auditors and
their ongoing independence, taking into
consideration:
• An assessment of the lead audit
partner and the audit team, including
their responses to questions from
theCommittee
• A review of the audit approach, scope,
determination of significant risk areas
and materiality
• The execution of the audit, including the
increased use of technology, and the
audit findings reported
• Input from, and interaction with,
management and communication with,
and support to, the Committee
• The quality of any recommendation
points; and a review of independence,
objectivity, scepticism and their ability
tochallenge.
Based on this review, the Committee
concluded that the external audit
process had been run efficiently and that
PricewaterhouseCoopers LLP has been
effective in their role as external auditors.
The Committee is satisfied that the
independence of the external auditors
isnot impaired and the level of fees paid
for non-audit services, details of which
are set out in Note 5 to the Financial
Statements, does not jeopardise their
independence. Inconclusion, the
Committee has assessed the performance
and independence of the external auditors
and recommended to the Board the
reappointment of PricewaterhouseCoopers
LLP as auditors until the AGM in 2025.
Iraj Amiri
Chair of the Audit
and Risk Committee
19 March 2024
Eurocell plc Annual Report and Accounts 202398
* Appointed on 1 February 2024.
Dear Shareholder,
I am pleased to introduce the Directors’
Remuneration Report for 2023, being my
first report since taking over as Committee
chair in May 2023.
Sales and profits were well below
the targets we set ourselves at the
beginning of the year. However, the
team’s focus on efficient working capital
management resulted in a strong cash
flowperformance.”
As described elsewhere in this Annual
Report, the business faced a very
challenging market backdrop in 2023.
Repair, maintenance and improvement
(RMI) activity was adversely impacted by
low consumer confidence and higher costs
of living, and a steep decline in new build
activity reflected successive interest
rate rises and falling house prices.
As a result, whilst we took early and
decisive action on cost in response to
lower volumes, sales and profits were
well below the targets we set ourselves
at the beginning of the year. However,
the team’s focus on efficient working
capital management resulted in a strong
cash flow performance, and we continue
to maintain a strong balance sheet with
goodliquidity.
It is in this context that the Committee has
assessed 2023 variable compensation
outcomes, and approved new basic salary
levels, awards and targets.
We were very appreciative of the
strong level of support received from
shareholders at the 2023 AGM, where
the Annual Report on Remuneration was
approved with 100% of votes in favour.
As no changes are proposed to the
existing policy, there will again only be one
remuneration resolution tabled at the 2024
AGM i.e. the advisory shareholder vote on
the Annual Report on Remuneration.
I would like to thank my fellow committee
members for their valuable contributions
during the year.
Kate Allum
Chair of the Remuneration
Committee
19 March 2024
DIRECTORS’ REMUNERATION REPORT
Committee composition
Frank Nelson Alison Littley Iraj Amiri
Angela
Rushforth*
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 99
Role and responsibilities:
The Committee’s principal
responsibilities are to:
• Recommend to the Board the
remuneration strategy and
framework for the Chair, Executive
Directors and senior managers
• Determine, within that framework,
the individual remuneration
arrangements for the Executive
Directors and senior managers
• Oversee any major changes
inemployee benefit structures
throughout the Group.
Outcome for 2023
Annual Bonus Plan
On a continuing basis, sales for the year
were £364.5 million, down 4% compared
to 2022, and adjusted profit before
tax was down 47% at £15.2 million
(2022:£28.7million).
Adjusted cash generated from operations
for the year was up 42% at £57.4 million
compared with £40.3 million in 2022.
As a result of this performance, an overall
pay-out of 30% of salary is being awarded
to the Executive Directors in respect of
2023, further details of which can be
found on page 109 of this report.
Vesting of PSP awards granted
in2021
On a continuing basis, adjusted basic
earnings per share for the year was
11.0pence (2022: 21.4 pence).
Return on capital employed (ROCE) at
31December 2023 was 12.6%.
As a result of this performance, none
of the PSP awards originally granted in
2021 are expected to vest in 2024, further
details of which can be found on page 109
of this report.
As in previous years, annual PSP awards
were made during the year, with targets
based on earnings per share and return
on capital employed, and further details
can be found on page 110.
Implementation of the
Remuneration Policy for 2024
The Remuneration Committee consider
the Remuneration Policy has operated as
intended in 2023 and therefore propose
it should continue to operate in 2024,
on a consistent basis, with no changes
to the structure of the annual bonus and
long-term incentives. Further details are
included within Part B: The Annual Report
on Remuneration on page 115.
The Committee will continue to ensure
that salary levels are positioned to
reflect performance, experience and
responsibility and therefore may be
increased at arate above the rate of
increase for the wider workforce, where
itis consideredappropriate.
The Committee believes its approach
takes due account of market and best
practice and, importantly, also reflects and
supports Eurocell’s strategy and promotes
the Company’s long-term success.
Summary of activities during
theyear
The Remuneration Committee met formally
3 times during the year and attendance at
the meetings is shown on page 82.
The main Committee activities during the
year (full details of which are set out in the
relevant sections of this report) included:
• Agreeing the performance against the
targets and pay-out for the 2022 annual
bonus awards
• Agreeing Executive Director and
senior management base salaries from
1April2023
• Setting the performance targets for the
2023 annual bonus
• Agreeing the award levels and
appropriate targets for the 2023
Performance Share Plan (‘PSP’) awards
• Reviewing the pay and benefits structure
of the wider workforce to ensure
alignment with Executive Directors and
senior management
• Reviewing the outcome of the gender
pay reporting
• Overseeing the operation of the Group’s
Save as You Earn scheme
• Reviewing the Committee terms
ofreference.
In addition, the Committee met in March
2024 and agreed the performance against
the targets and pay-out for the 2023
annual bonus awards.
Given the Annual Report on Remuneration
at the 2023 AGM was approved with
100% of the votes in favour, and no
changes have been made/proposed to
the existing Remuneration Policy since its
approval at the 2022 AGM, the Committee
did not consider it necessary to consult
with shareholders on remuneration matters
during the year.
Remuneration Policy links
tostrategy
The Group’s new strategy has four key
pillars, as set out on pages 18 to 29,
based on customer growth, business
effectiveness, ‘People first’ and ESG
leadership. These were established to
deliver sustainable growth in shareholder
value by increasing sales and profits at
above market level growth rates through
leadership in products, operations, sales,
marketing and distribution, while also
focussing on employee well-being and
ESG considerations.
Reflecting the strategic emphasis
on customer growth and business
effectiveness to drive profitability, short-
term performance is incentivised with an
annual bonus scheme which is based on
the key Company financial objectives of
profit before tax and operating cash flow.
Together, these performance conditions
ensure that the Executive Directors are
focused on driving increased profitable
growth but not at the expense of its
quality and sustainability.
The importance of health and safety
in operations is also reflected by the
associated underpin that can reduce the
bonus pay-out, demonstrating the Group’s
commitment to employee wellbeing, as
part of ‘People First’, and the need to
ensure that growth and profitability are
not achieved in a way that is detrimental
to the employees nor in a way that
promotes short-term, high-risk behaviour.
Long-term performance is incentivised
with a performance share plan (‘PSP’),
which is based on the achievement
of demanding earnings per share and
return on capital employed targets.
These performance conditions ensure
that the Executive Directors are focused
on driving increased profitable growth,
as noted above, as well as ensuring that
capital is appropriately invested to provide
sustainable returns to shareholders over
the longer-term.
Eurocell plc Annual Report and Accounts 2023100
DIRECTORS’ REMUNERATION REPORT CONTINUED
Explanatory foreword
This report contains the material
required to be set out as the Directors’
Remuneration Report for the purposes
of Part 4 of The Large and Medium-sized
Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013.
Notwithstanding the fact that:
• We will not be seeking shareholder
approval for any changes to our
Remuneration Policy at the 2024
AGM
• The relevant Regulations do not require
us to reproduce our Remuneration
Policy in this report.
The report is split into two parts as follows:
Part A: The Directors’ Remuneration
Policy – which sets out for ease of
reference, a summary of our Directors’
Remuneration Policy for which shareholder
approval was given at the 2022 AGM. The
full Directors’ Remuneration Policy was
disclosed in the 2021 Annual Report and
is available on the Company’s website.
Part B: The Annual Report on
Remuneration – which sets out
payments and awards made to the
Directors and details the link between
Company performance and remuneration
for 2023 and how the policy will be
operated for 2024, in respect of which
we will be holding an advisory vote at
the forthcoming AGM.
The auditors have reported on
certain parts of the Annual Report on
Remuneration and stated whether, in
their opinion, those parts have been
properly prepared in accordance with the
Companies Act 2006. Those parts which
have been subject to audit are clearly
indicated.
PART A:
DIRECTORS’ REMUNERATIONPOLICY
Policy scope
The Policy applies to the Chair of the Board, Executive Directors and
Non-executive Directors.
Policy duration
The Directors’ Remuneration Policy was put to a binding shareholder vote
at the 2022 AGM and applies from the date of approval for a maximum of
three years.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 101
Executive Directors
The following table summarises the key aspects of the Directors’ Remuneration Policy:
Element and purpose Policy and operation Maximum Performance measures
Base salary
This is the core
element of pay
and reflects the
individual’s role
and position within
the Group with
some adjustment
to reflecttheir
capabilityand
contribution.
Base salaries will be reviewed each year
by the Committee.
The Committee does not strictly follow
data, but uses the median position
(as against appropriate size and/or sector
peers) as a reference point in considering,
in its judgement, the appropriate level
of salary having regard to other relevant
factors including corporate and individual
performance and any changes in an
individual’s role and responsibilities.
Base salary is normally paid monthly in cash.
It is anticipated that salary
increases will generally be in line
with those awarded to salaried
employees. However, in certain
circumstances (including,
but not limited to, changes
in role and responsibilities,
market levels, individual and
Company performance), the
Committee may make larger
salary increases to ensure they
are market competitive. The
rationale for any such increase
will be disclosed in the relevant
Annual Report on Remuneration.
n/a
Benefits
To provide
benefitsvalued
byrecipients.
The Executive Directors can receive a car
allowance or Company car (and fuel), private
family medical cover, permanent health
insurance andlifeassurance.
The Committee reserves discretion to
introduce new benefits where it concludes
that it is appropriate to do so, having regard
to the particular circumstances and to
marketpractice.
Where appropriate, the Company will meet
certain costs relating to Executive Director
relocations.
It is not possible to prescribe
the likely change in the cost
of insured benefits or the cost
of some of the other reported
benefits year-to-year, but
the provision of benefits will
operate within an annual limit
of £100,000 (plus a further
100% of base salary in the
case of relocations).
The Committee will monitor
the costs of benefits in practice
and will ensure that the overall
costs do not increase by more
than the Committee considers
appropriate in the circumstances.
n/a
Pension
To provide
retirement benefits.
Executive Directors can receive pension
contributions to personal pension
arrangementsor, if a Director is impacted
by annual or lifetime limits on contribution
levels to qualifying pension plans, the
balance can bepaid as a cash supplement.
The maximum employer’s
contribution (or cash
supplement)is 10%
of base salary.
The contribution levels for
the Chief Executive and the
Chief Financial Officer are
aligned to the wider workforce,
currently5%.
Pension contributions for new
Executive Director appointments
will also be aligned with the
pension benefits available to
the widerworkforce.
n/a
Eurocell plc Annual Report and Accounts 2023102
Element and purpose Policy and operation Maximum Performance measures
Annual Bonus Plan
To motivate
executives and
incentivise delivery
of performance
over a one-year
operating cycle,
focusing on the
short-to-medium-
term elements of
ourstrategic aims.
Annual Bonus Plan levels and the
appropriateness of measures are reviewed
annually at the commencement of each
financial year to ensure they continue to
support our strategy.
Once set, performance measures and targets
will generally remain unchanged for the year,
except to reflect events such as corporate
acquisitions or other significant events where
the Committee considers it to be necessary
in its opinion to make appropriate
adjustments.
Any annual bonus award above 75% of salary
will be compulsorily deferred into Eurocell
shares, under the Company’s Deferred Share
Plan (‘DSP’), for three years from grant.
The number of shares subject to vested DSP
awards may be increased to reflect the value
of dividends that would have been paid in
respect of any ex-dividend dates falling
between the grant of awards and the expiry
of the vesting period.
Malus and clawback provisions apply to the
Annual Bonus Plan and DSP, as explained in
more detail below.
The maximum level of Annual
Bonus Plan outcomes is 100%
of base salary per annum for
the duration of this policy.
The performance measures
applied may be financial
or non-financial and
corporate, divisional or
individual and in such
proportions as the
Committee considers
appropriate.
Attaining the threshold level
of performance for any
measure will not produce
a pay-out of more than
20% of the maximum
portion of overall annual
bonus attributable to that
measure.
However, the Annual
Bonus Plan remains a
discretionary arrangement
and the Committee retains
a standard power to
apply its judgement to
adjust the outcome of the
Annual Bonus Plan for
any performance measure
(fromzero to any cap)
should it consider that
to be appropriate.
Long-term
incentives
To motivate and
incentivise delivery
of sustained
performance over
the long term,
and to promote
alignment with
shareholders’
interests, the
Company
operates PSP.
Awards under the PSP take the form of
nil-cost options which vest to the extent
performance conditions are satisfied over
a period of at least three years.
The number of shares subject to vested PSP
awards may be increased to reflect the value
of dividends that would have been paid
in respect of any ex-dividend dates falling
between the grant of awards and the expiry of
the vesting period (or at the end of any holding
period in respect of unexercised awards).
A two-year post-vesting holding period applies
to PSP awards granted to Executive Directors
after the 2019 AGM.
Malus and clawback provisions apply to PSP
awards, as explained in more detail in the
2021 Annual Report.
The PSP allows for awards
over shares with a maximum
value of 150% of base salary
per financialyear.
The Committee expressly
reserves discretion to make
such awards as it considers
appropriate within these limits.
The Committee may
set such performance
conditions on PSP awards
as it considers appropriate
(whether financial or
non-financial and whether
corporate, divisional or
individual).
Performance periods may
be over such periods as the
Committee selects at grant,
which will not normally
be less than (but may be
longer than) threeyears.
No more than 25% of
awards vest for attaining
the threshold level of
performance conditions.
The Committee also has
standard power to apply
its judgement to adjust the
outcome of the PSP for
any performance measure
(from zero to any cap)
should it consider that
to be appropriate.
DIRECTORS’ REMUNERATION REPORT CONTINUED
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 103
Element and purpose Policy and operation Maximum Performance measures
Share ownership
guidelines
To further align the
interests of Executive
Directors with those
ofshareholders.
Executive Directors are required to retain at
least 50% of the net of tax shares which vest
under the PSP and DSP awards until the
guideline (being 200% of base salary) is met.
Any PSP performance vested shares subject
to a holding period and any shares awarded
in connection with annual bonus deferral will
be credited for the purpose of the guidelines
(discounted for anticipated taxliabilities).
From the 2022 AGM, Executive Directors are
required to maintain a shareholding in the
Company for a one-year period after stepping
down from that position, being 100% of salary
or the Executive Directors’ actual relevant
shareholding at leaving this position, if lower.
The Executive Directors’ actual relevant
shareholding will include shares vesting under
any of the Company’s discretionary share
incentive arrangements (including any deferred
bonus shares) from awards granted after the
date the Policy was adopted but excludes
shares acquired through purchase and the
release of shares under share incentive plans
where the grant occurred prior to the adoption
of the Policy.
n/a n/a
All-employee
shareplans
To encourage
share ownership by
employees, thereby
allowing them to
share in the long-
term success of the
Group and align their
interests with those
of the shareholders.
These are all-employee share plans
established under HMRC tax-advantaged
regimes and follow the usual form for
suchplans.
Executive Directors will be able to participate
in all-employee share plans on the same
terms as other Group employees.
The maximum participation
levels for all-employee share
plans will be the limits for such
plans set by HMRC from time
to time.
Consistent with normal
practice, such awards
will not be subject to
performance conditions.
Chair/
Non-executive
Director fees
To enable the
Company to recruit
and retain Chairs
and Non-executive
Directors of the
highest calibre, at
the appropriate cost.
The fees paid to the Chair and Non-executive
Directors aim to be competitive with other
fully listed companies of equivalent size and
complexity.
The fees payable to the Non-executive
Directors are determined by the Board,
with the Chair’s fees determined by the
Remuneration Committee. Fees are paid
monthly in cash.
The Chair and Non-executive Directors
will not participate in any cash or share
incentive arrangements.
The Company reserves the right to provide
benefits (including travel and office support) to
the Chair and Non-executive Directors where
appropriate. Should any assessment to tax be
made on such reimbursement, the Company
reserves the ability to settle such liability on
behalf of the Non-executive Director.
The aggregate fees (and any
benefits) of the Chair and
Non-executive Directors will not
exceed the limit from time to time
prescribed within the Company’s
Articles of Association.
If the Chair and/or Non-executive
Directors devote special
attention to the business of the
Company, or otherwise perform
services which in the opinion
of the Directors are outside the
scope of the ordinary duties of
a Director, they may be paid
such additional remuneration as
the Directors or any Committee
authorised by the Directors
maydetermine.
n/a
Eurocell plc Annual Report and Accounts 2023104
DIRECTORS’ REMUNERATION REPORT CONTINUED
Other elements of our policy include:
Recruitment remuneration policy
The Company’s recruitment remuneration policy aims to give the Committee sufficient flexibility to secure the appointment and
promotion of high-calibre executives to strengthen the management team and secure the skill sets to deliver our strategic aims.
In terms of the principles for setting a package for a new
Executive Director, the starting point for the Committee will
be to apply the general Policy for Executive Directors as set
out above and structure a package in accordance with that
policy. Any caps contained within the policy for fixed pay do
not apply to new recruits, although the Committee would not
envisage exceeding these caps in practice.
The Annual Bonus Plan, DSP and PSP will operate (including
the maximum award levels) as detailed in the general Policy
in relation to any newly appointed Executive Director. For an
internal appointment, any variable pay element awarded in
respect of the prior role may either continue on its original
terms or be adjusted to reflect the new appointment as
appropriate.
For external and internal appointments, the Committee may
agree that the Company will meet certain relocation expenses
as it considers appropriate.
For external candidates, it may be necessary to make
additional awards in connection with the recruitment to
buy-out awards forfeited by the individual on leaving a
previous employer.
For the avoidance of doubt, buy-out awards are not subject
to a formal cap. Any recruitment-related awards which are
not buy-outs will be subject to the limits for Annual Bonus
Plan and PSP as stated in the general policy. Details of any
recruitment-related awards will be appropriately disclosed.
For any buy-outs the Company will not pay more than is, in
the view of the Committee, necessary and will in all cases
seek, in the first instance, to deliver any such awards under
the terms of the existing Annual Bonus Plan, DSP or PSP. It
may, however, be necessary in some cases to make buy-out
awards on terms that are more bespoke than the existing
Annual Bonus Plan, DSP or PSP.
All buy-outs, whether under the Annual Bonus Plan, DSP,
PSP or otherwise, will take due account of the service
obligations and performance requirements for any
remuneration relinquished by the individual when leaving
a previous employer. The Committee will seek (where it is
practicable to do so) to make buy-outs subject to what are, in
its opinion, comparable requirements in respect of service and
performance. However, the Committee may choose to relax
this requirement in certain cases (such as where the service
and/or performance requirements are materially completed,
or where such factors are, in the view of the Committee,
reflected in some other way, such as a significant discount
to the face value of the awards forfeited) and where the
Committee considers it to be in the interests of shareholders.
A new Chair/Non-executive Director would be recruited on the terms explained above in respect of the main policy for such Directors.
Service contracts
Executive Directors
The Committee’s policy is that each Executive Director’s service agreement should be of indefinite duration, subject to termination
upon no more than twelve months’ notice by either party. The service agreements of both Executive Directors comply with that policy.
Contracts contain provisions allowing the Company to make payments in lieu of notice (albeit not including bonus or benefits) but do
not contain change of control provisions.
The Committee reserves flexibility to alter these principles, if necessary, to secure the recruitment of an appropriate candidate
including, if appropriate, a longer initial notice period (of up to two years) reducing over time.
The date of each current Executive Director’s contract is:
Darren Waters 11 April 2023
Michael Scott 1 September 2016
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 105
Chair/Non-executive Directors
The Chair and each Non-executive Director is engaged for an initial period of three years. These appointments can be renewed
following the initial three-year term. These engagements can be terminated by either party on twelve months’ notice.
Neither the Chair nor any Non-executive Directors can participate in the Company’s incentive plans, are not entitled to any pension
benefits and are not entitled to any payment in compensation for early termination of their appointment beyond the twelve months’
notice referred to above.
Name Date of original appointment Date of latest appointment Term
Derek Mapp 16 May 2022 16 May 2022 3 years
Frank Nelson 4 February 2015 2 February 2024 c.3.5 months*
Kate Allum 1 July 2022 1 July 2022 3 years
Alison Littley 1 July 2022 1 July 2022 3 years
Iraj Amiri 7 November 2022 7 November 2022 3 years
Will Truman 11 May 2023 11 May 2023 3 years
Angela Rushforth 1 February 2024 1 February 2024 3 years
* Frank Nelson will step-down at the 2024 AGM on 16 May 2024 after nine years of service.
The Directors’ service agreements and letters of appointment are available for shareholders to view from the Group Company
Secretary onrequest.
Termination/change of control policy summary
It is appropriate for the Committee to consider treatments on a termination having regard to all of the relevant facts and circumstances
available at that time. This policy applies both to any negotiations linked to notice periods on a termination and any treatments that
the Committee may choose to apply under the discretions available to it under the terms of the Annual Bonus Plan, DSP and PSP.
The potential treatments on termination under these plans are summarised in the table below:
Incentives
If a leaver is deemed to be a ‘good leaver’;
for example, leaving through injury, ill-health,
disability, retirement, redundancy, sale of business
or otherwise at the discretion of the Committee
If a leaver is not
a ‘good leaver’ Change in control
Annual bonus Committee has discretion to determine an
annual bonus which may be limited to the
period actually worked.
Annual bonus not
generally paid.
Committee has discretion
to determine annual bonus.
DSP Awards normally vest either on cessation or
the normal vesting date. The Committee can
pro-rate awards if considered appropriate.
All awards will
normally lapse.
Awards vest on a pro rata
basis, unless the Committee
determines not to pro-rate.
PSP Will receive a pro-rated award subject to the
application of the performance conditions at
the end of the normal performance period.
Committee retains standard discretions to either
vary/disapply time pro-rating or to accelerate
vesting to the earlier date of cessation (determining
the performance conditions at that time).
All awards will
normally lapse.
Will receive a pro-rated award
subject to the application of the
performance conditions at the
date of the event, unless the
Committee determines not to
pro-rate.
On death, the Annual Bonus Plan, DSP and PSP awards typically vest in full (with pro-rating also potentially applying).
The Company has the power to enter into settlement agreements with Directors and to pay compensation to settle potential legal
claims. Inaddition, and consistent with market practice, in the event of the termination of an Executive Director, the Company
may make a contribution towards that individual’s legal fees and fees for outplacement services as part of a negotiated settlement.
Any such fees will be disclosed as part of the detail of termination arrangements. For the avoidance of doubt, the policy does not
include an explicit cap on the cost of terminationpayments.
Eurocell plc Annual Report and Accounts 2023106
Share price growth
PSP
Annual bonus
Fixed pay
£465k
£838k
£1,531k
£1,851k
2000
1800
1600
140 0
1200
1000
800
600
400
200
0
£000
CEO CFO
20%
100% 55%
25%
30%
28%
42%
25%
23%
35%
17%
£341k
£610k
£1,111k
£1,342k
100% 56%
25%
19%
31%
28%
41%
25%
23%
35%
17%
Minimum Target Maximum Maximum
with share
price growth
Minimum Target Maximum Maximum
with share
price growth
Other policy matters
The 2021 Annual Report also set out formal details of our approach to:
• Performance targets
• Malus and clawback
• Stating maximum amounts for the Remuneration Policy
• Travel and hospitality
• Differences between the policy on remuneration for Directors and remuneration of other employees
• Committee discretions
• External appointments
• Statement of consideration of employment conditions elsewhere in the Group
• Statement of consideration of shareholder views.
Illustrations of application of Remuneration Policy
The charts below aim to show how the Remuneration Policy for Executive Directors will be applied in 2024 using the assumptions
inthe tablebelow.
Minimum • Consists of base salary, benefits and pension
• Base salary is the salary to be paid with effect from 1 April 2024
• Estimated value of a full year’s benefits, including car (and fuel) or car allowance, private family
medicalcover, permanent health insurance and travel insurance
• Pension measured as the cash allowance in lieu of Company contributions at 5% of salary.
Base salary Benefits Pension Total fixed
Darren Waters £426,400 £17,075 £21,320 £464,795
Michael Scott £308,082 £17,399 £15,404 £340,885
Target • Annual bonus: consists of an assumed payment of 50% of maximum opportunity
• Long-term incentives: consists of the threshold level of vesting (25% vesting) under the PSP.
Maximum Based on the maximum remuneration receivable (excluding share price appreciation and dividends):
• Annual bonus: consists of maximum bonus of 100% of base salary
• Long-term incentives: consists of the maximum level of vesting under the PSP.
Maximum with
share price growth
• As per the maximum but with a 50% share price growth assumption for the PSP awards.
DIRECTORS’ REMUNERATION REPORT CONTINUED
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 107
PART B:
THE ANNUAL REPORT ON REMUNERATION
The Committee (unaudited)
Remuneration Committee members
During 2023, the Remuneration Committee comprised:
Chair:
Kate Allum (from 11 May 2023)
Martyn Coffey (to 11 May 2023)
Committee members:
Frank Nelson
Alison Littley (from 15 May 2023)
Iraj Amiri (from 15 May 2023)
All members of the Committee served throughout the year, unless otherwise stated.
The Chief Executive and Chief Financial Officer are invited to attend meetings of the Committee, except when their own remuneration
is being discussed, and other Executives and Non-executive Directors attend meetings as required.
The Committee has formal terms of reference which can be viewed on the Company’s website at www.investors.eurocell.co.uk.
During the year, the Committee considered its obligations under the Code and concluded that:
• The Directors’ Remuneration Policy supports the Company’s strategy (including in the performance measures chosen)
• Remuneration for our Directors remains appropriate.
In addition, the Committee has ensured that the Directors’ Remuneration Policy and practices are consistent with
the sixfactors set out in Provision 40 of the Corporate Governance Code:
Clarity – Our Directors’ Remuneration Policy is well understood by our senior executive team and has been clearly articulated
to our shareholders and representative bodies (both on an ongoing basis and during a consultation when changes are
being proposed).
Simplicity – The Committee is mindful of the need to avoid overly complex remuneration structures which can be misunderstood
and deliver unintended outcomes. Therefore, a key objective of the Committee is to ensure that our Directors’ Remuneration
Policy and practices are straightforward to communicate and operate.
Risk – Our Directors’ Remuneration Policy has been designed to ensure that inappropriate risk-taking is discouraged and will not
be rewarded via (i) the balanced use of both annual incentives and long-term incentives which employ a blend of targets, (ii) the
significant role played by shares in our incentive plans (together with bonus deferral and shareholding guidelines) and (iii) malus/
clawback provisions within all our incentive plans.
Predictability – Our incentive plans are subject to individual caps, with our share plans also subject to standard dilution limits.
The use of shares within our incentive plans results in the actual pay received being highly aligned to the experience of our
shareholders.
Proportionality – There is a clear link between individual awards, delivery of strategy and our long-term performance. In addition,
the significant role played by variable pay, together with the composition of the Executive Directors’ service contracts, ensures that
poor performance is not rewarded.
Alignment to culture – Our executive pay policies are fully aligned to the Company’s culture through the use of metrics in both
the annual bonus and PSP that measure how we perform against key aspects of our strategy, which has the objective of delivering
sustainable growth in revenue, profit and cash flow.
FIT Remuneration Consultants LLP (‘FIT’), signatories to the Remuneration Consultants Group’s Code of Conduct, are appointed
by the Committee and provide advice to the Committee on all matters relating to remuneration, including best practice. FIT have no
connection with the Group or any individual Director and provided no other services to the Group and therefore the Committee was
satisfied that the advice provided by FIT was objective and independent. FIT’s fees in respect of 2023 were £14,455 (excluding VAT).
FIT’s fees were charged on the basis of the firm’s standard terms of business for advice provided.
Eurocell plc Annual Report and Accounts 2023108
Audited information
Single total figure table (audited)
The remuneration for the Chair, Executive and Non-executive Directors of the Company who performed qualifying services during the
relevant financial year is detailed below. The Chair and Non-executive Directors received no remuneration other than their annual fee.
For the year ended 31 December 2023:
Name
Salary/fees
£000
Taxable
benefits
1
£000
Pension
£000
Total fixed
remuneration
£000
Bonus
2
£000
Long-term
incentives
£000
Total variable
remuneration
£000
Total
remuneration
£000
Darren Waters
4
296 12 15 323 89 — 89 412
Michael Scott 291 17 15 323 89 — 89 412
Mark Kelly
5
174 9 16 199 47 — 47 246
Derek Mapp 150 — — 150 — — — 150
Frank Nelson
7
62 — — 62 — — — 62
Kate Allum
8
56 — — 56 — — — 56
Alison Littley 59 — — 59 — — — 59
Iraj Amiri
10
56 — — 56 — — — 56
Will Truman
11
32 — — 32 — — — 32
Martyn Coffey
12
21 — — 21 — — — 21
For the year ended 31 December 2022:
Name
Salary/fees
£000
Taxable
benefits
1
£000
Pension
£000
Total fixed
remuneration
£000
Bonus
2
£000
Long-term
incentives
3
£000
Total variable
remuneration
£000
Total
remuneration
£000
Mark Kelly 426 9 47 482 99 265 364 846
Michael Scott 272 17 30 319 63 169 232 551
Derek Mapp
6
94 — — 94 — — — 94
Frank Nelson 60 — — 60 — — — 60
Martyn Coffey 53 — — 53 — — — 53
Kate Allum
8
24 — — 24 — — — 24
Alison Littley
9
24 — — 24 — — — 24
Iraj Amiri
10
7 — — 7 — — — 7
Robert Lawson
13
65 — — 65 — — — 65
Sucheta Govil
14
26 — — 26 — — — 26
Notes:
1 Taxable benefits comprise Company car (and fuel) or car allowance, private family medical cover, permanent health insurance and travel insurance.
2 Bonuses are calculated on the salary in operation at the end of the financial year.
3 Value of long-term incentives is based on the market value on the actual vesting date (28 November 2023).
4 Darren Waters was appointed to the Board on 11 April 2023 and Chief Executive from 11 May 2023.
5 Mark Kelly stepped-down from the Board on 11 May 2023.
6 Derek Mapp was appointed to the Board on 16 May 2022 and became Non-executive Chair from 1 July 2022.
7 Frank Nelson stepped down as Chair of the Audit and Risk Committee on 11 May 2023.
8 Kate Allum was appointed to the Board on 1 July 2022 and Chair of the Remuneration Committee from 11 May 2023.
9 Alison Littley was appointed to the Board on 1 July 2022 and Chair of the Social Values and ESG Committee from 15 December 2022.
10 Iraj Amiri was appointed to the Board on 7 November 2022 and Chair of the Audit and Risk Committee from 11 May 2023.
11 Will Truman was appointed to the Board on 11 May 2023.
12 Martyn Coffey stepped-down from the Board on 11 May 2023.
13 Robert Lawson stepped-down from the Board on 1 July 2022.
14 Sucheta Govil stepped-down from the Board on 31 July 2022.
The aggregate emoluments (being salary/fees, bonuses, benefits and pension allowances) of all Directors for 2023 was £1,506,000
(2022: £1,750,000 (restated for actual value at vesting
3
)).
DIRECTORS’ REMUNERATION REPORT CONTINUED
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 109
Further information on the 2023 annual bonus (audited)
In 2023, the annual bonus metrics were a blend of targets relating to profit before tax (70% of the bonus opportunity) and cash flow
(30% of the bonus opportunity). In addition, a health and safety adjustment underpin is applied which, if not achieved, could reduce
the bonus pay-out.
The profit before tax and cash flow bonus targets and achievements were as follows:
£m Threshold Target Maximum Actual
Achievement
(%of max)
Adjusted profit before tax 22.3 23.5 25.3 15.2 0%
Adjusted cash generated from operations 44.5 46.8 50.3 57.4
1
100%
1 Cash generated from operations of £54.2m plus cash paid in respect of non-underlying items of £3.2m (see Note 7 to the Consolidated Financial Statements).
In order to reflect the level of stretch within the targets, the Committee determined that a pay-out of 75% of base salary would be
appropriate for an on-target performance for 2023.
Performance against the profit before tax element of the bonus resulted in an achievement of 0% of that element. Performance
against the cash flow element of the bonus resulted in an achievement of 100% of that element. After the appropriate weightings are
applied, this provides an overall pay-out of 30% of salary being awarded to the Executive Directors in respect of 2023, which is to be
paid in cash. The bonus payable to Mark Kelly is pro-rated for the period of the 2023 financial year in post.
The health and safety underpin was also considered satisfied and no discretion has been applied to the formulaic outcome
bytheCommittee.
PSP awards vesting in respect of 2023 (audited)
The PSP values included under long-term incentives in the single figure table above relate to awards granted in 2021 which vest
in2024, dependent on EPS and ROCE performance measured over the three-year period ended 31 December 2023, as described
inthe tables below.
Under the EPS performance target (two-thirds of awards) which uses a sliding scale, 25% of this part of an award vests where
adjusted earnings per share of 18.6p is achieved for the year ended 31 December 2023, increasing pro rata to full vesting where
adjusted earnings per share of 20.2p is achieved.
Performance target Threshold Maximum Actual
Achievement
(% of max)
Adjusted basic EPS 18.6p 20.2p 11.0 p 0%
Under the Group ROCE target (one-third of awards), which uses a sliding scale, 25% of this part of an award vests where Group
ROCE of 20.4% is achieved for the year ended 31 December 2023, increasing pro rata to full vesting where Group ROCE of 25.5%
isachieved.
Performance target Threshold Maximum Actual
Vesting
%
Group ROCE
2
20.4% 25.5% 12.6% 0%
2 Adjusted operating profit for the year ended 31 December 2023, divided by average totals of opening and closing assets less trade and other payables, all measured
on a pre-IFRS 16 basis.
As a result of performance against the adjusted earnings per share element and the Group ROCE element, no PSP awards are
expected to vest in 2024. No discretion to the formulaic outcome has been applied by the Committee.
Eurocell plc Annual Report and Accounts 2023110
Statement of Directors’ shareholding and share interests (audited)
The table below details for each Director, the total number of Directors’ interests in shares at 31 December 2023 and 31 December 2022:
Number of shares
Director
Beneficially
owned
31 December
2022
Beneficially
owned
31 December
2023
1
Vested but
unexercised
awards
Unvested
DSP
Unvested
PSP
2
Unvested
SAYE
Shareholding
guideline
(% of salary)
3
Shareholding
guideline
met?
3
Darren Waters — 42 ,161 — 410,447 461,365 — 200 No
Michael Scott 72,862 179,157 — 28,589 6 67,3 9 8 16,245 200 No
Mark Kelly 234,020 234,020 — 4 4,749 314,843 — — n/a
Derek Mapp 91,000 571,910 — — — — — n/a
Frank Nelson 49,090 90,973 — — — — — n/a
Kate Allum — 4,417 — — — — — n/a
Alison Littley — 4,282 — — — — — n/a
Iraj Amiri — 4,928 — — — — — n/a
Will Truman — 862 — — — — — n/a
Martyn Coffey 16,428 16,428 — — — — — n/a
1 The beneficial shareholdings set out above include those held by Directors and their respective connected persons as at 31 December 2023 or at the date of stepping
down from the Board if earlier (Mark Kelly and Martyn Coffey stepped-down from the Board on 11 May 2023).
2 Performance-based share awards.
3 Shareholding guidelines for Executive Directors are 200% of salary. Executive Directors will be required to retain at least 50% of the net of tax shares which vest under
the PSP and DSP until the guideline is met.
4 As previously announced, a number of the Non-executive Directors, including the Chair of the Board, entered into a share purchase plan for 12 months from
1February 2023, which was subsequently extended for a further 12 months from 1 February 2024. Each participating Director has irrevocably instructed the Company
to direct one quarter of their net monthly fees to an appointed broker to automatically make market purchases of ordinary shares.
As a result, the number of shares beneficially owned since 31 December 2023 has changed due to planned purchases that took place on 9 February 2024 for
Non-executive Directors. The revised figures are as follows: Derek Mapp – 575,977 shares, Frank Nelson - 92,590 shares, Kate Allum – 5,812 shares, Alison Littley –
5,582 shares, Iraj Amiri – 6,545 shares, Will Truman – 2,068 shares.
PSP awards granted in 2023 (audited)
The following awards were made under the PSP in 2023:
Director Date of grant
Basis of award
(% salary) Share price
1
Number of
shares
Face value
of award
2
Vesting period
Darren Waters 11 April 2023 150% 133.3p 461,365 £615,000 April 2026 to April 2027
Michael Scott 11 April 2023 150% 133.3p 333,345 £444,350 April 2026 to April 2027
1 Rounded to one decimal place for the purposes of presentation in this report.
2 Calculated using the average share price over the 3 business days immediately prior to the date of grant.
The performance conditions applying to the awards made in April 2023 relate to: (i) adjusted Earnings per Share for two-thirds of the
award; and (ii) Group Return on Capital Employed for one-third of the award.
More specifically:
Adjusted basic EPS
1
for the year ended 31 December 2025 Portion of award vesting
Above 18.9p 100%
Between 17.3p and 18.9p Pro rata on straight-line between 25% and 100%
17.3p 25%
Below 17.3p 0%
Group ROCE
2
for the year ended 31 December 2024 Portion of award vesting
Above 23.5% 100%
Between 18.5% and 23.5% Pro rata on straight-line between 25% and 100%
18.5% 25%
Below 18.5% 0%
1 Defined as adjusted basic earnings per share as shown in the consolidated audited accounts of the Company, excluding non-underlying items, for the third financial
year of the performance period.
2 Defined as Group adjusted operating profit divided by average totals of opening and closing assets less trade and other payables (all on a pre-IFRS 16 basis), for the
third financial year of the performance period.
DIRECTORS’ REMUNERATION REPORT CONTINUED
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 111
DSP awards granted in 2023 (audited)
No awards were made under the DSP in 2023 in respect to the 2022 annual bonus.
As part of his recruitment package to provide compensation for share awards granted by his former employer that would be forfeited
on leaving, Darren Waters, on joining the Company, was awarded £550,000 worth of shares under the DSP (in compliance with the
Directors’ Remuneration Policy and based on the share price as at the date of grant of the award), which will vest upon the expiry
ofatwo-year deferral period subject to continued employment (with standard ‘good leaver’ provisions).
Director Date of grant Share price
1
Number
of shares
Face value
of award
2
Vesting period
Darren Waters 11 April 2023 134.0p 410,447 £550,000 April 2025 to April 2026
1 Rounded to one decimal place for the purposes of presentation in this report.
2 Calculated using the average share price over the 5 business days immediately prior to the date of grant.
Outstanding share plan awards (audited)
Details of all outstanding share awards made to Executive Directors are set out below:
Executive
Award
type
Exercise
price
(p) Grant date
Number of shares
Exercise period Notes
Interest at
1 January
2023
Awards
granted
in the year
Awards
lapsed
in the year
Awards
exercised
in the year
Interest at
31 December
2023
Darren Waters PSP 0 11/04/23 — 461,365 — — 461,365 Apr 26 – Apr 27 4
DSP 0 11/04/23 — 410,447 — — 410,447 Apr 25 – Apr 26 5
Michael Scott PSP 0 17/11/20 197,149 — (73,891) (123,258) — Nov 23 – Nov 24 1
PSP 0 22/04/21 149,731 — — — 149,731 Apr 24 – Apr 25 2
PSP 0 13/04/22 184,322 — — — 184,322 Apr 25 – Apr 26 3
PSP 0 11/04/23 — 333,345 — — 333,345 Apr 26 – Apr 27 4
DSP 0 13/04/22 28,589 — — — 28,589 Apr 25 – Apr 26 3
SAYE 172.0 09/04/20 10,465 — (10,465) — — Jun 23 – Nov 23 6
SAYE 110.8 17/04/23 — 16,245 — — 16,245 Jun 26 – Nov 26 7
Mark Kelly PSP 0 17/11/20 308,582 — (115,656) (192,926) — Nov 23 – Nov 24 1
PSP 0 22/04/21 234,362 — (50,083) — 184,279 Apr 24 – Apr 25 2, 8
PSP 0 13/04/22 288,505 — (157,941) — 130,564 Apr 25 – Apr 26 3, 8
DSP 0 13/04/22 44,749 — — — 44,749 Apr 25 – Apr 26 3
SAYE 172.0 09/04/20 10,465 — (10,465) — — Jun 23 – Nov 23 6
All figures above exclude dividend equivalent shares, where applicable.
Notes:
1 See ‘PSP Awards Vesting in Respect of 2022’ section in the 2022 Directors’ Remuneration Report.
2 See ‘PSP Awards Vesting in Respect of 2023’ section above.
3 As disclosed in the 2022 Directors’ Remuneration Report.
4 See ‘PSP Awards Granted in 2023 section above.
5 See ‘DSP Awards Granted in 2023’ section above.
6 Awards granted under the Eurocell plc Save As You Earn Scheme in 2020. Awards are based on a three-year savings contract with an exercise price of 172.0p.
7 Awards granted under the Eurocell plc Save As You Earn Scheme in 2023. Awards are based on a three-year savings contract with an exercise price of 110.8p.
8 Following Mark Kelly’s stepping-down from the Board, the awards granted in 2021 and 2022 were time pro-rated dependent on the proportion of the relevant
performance period worked.
During the year ended 31 December 2023, the highest mid-market price of the Company’s shares was 165.5p and the lowest
mid-market price was 106.0p. At 31 December 2023 the share price was 131.0p.
The aggregate gains by all Directors during 2023 was £434,654 (2022: £nil).
Eurocell plc Annual Report and Accounts 2023112
DIRECTORS’ REMUNERATION REPORT CONTINUED
Retirement of Mark Kelly
Mark Kelly retired and left the Group following the AGM on 11 May 2023. The Committee determined the following treatment
withinthe terms of the Company’s approved remuneration policy:
• Salary, benefits and pension allowance were paid as usual until the leaving date
• No payment in lieu of notice was made
• Pro-rated annual cash bonus for the 2023 financial year would be calculated and paid, in the usual manner, in April 2024
subject toperformance over this period and as determined by the Committee in accordance with the rules of the bonus plan
• Any deferred shares outstanding at the leaving date, which were awarded under the DSP in relation to the 2021 annual bonus,
would vest infullinApril 2025
• No grants or awards under the PSP would be made in 2023
• In line with the terms of the awards, any grants and awards outstanding at the leaving date, which were made under the PSP,
would vest on the normal vesting date subject to (i) satisfaction of the existing performance conditions and (ii) awards being
pro-rated, and therefore reduced, based on time served within the relevant three-year performance period up to the date of
leaving. The holding period would continue to apply, with the exception of any shares sold to meet any income tax and other
withholdingobligations.
Payments to past Directors (audited)
No other payments to past Directors were made during the year.
Payments for loss of office (audited)
No payments for loss of office were made during the year.
Performance graph and CEO remuneration table (unaudited)
The following graph shows the Total Shareholder Return (‘TSR’) performance of an investment of £100 in Eurocell plc’s shares
from its listing in March 2015 to 31 December 2023, compared with a £100 investment in the FTSE SmallCap Index over the
same period. The FTSE SmallCap Index was chosen as a comparator because it represents a broad equity market index of
similar-sized companies.
Total Shareholder Return Index (unaudited)
Eurocell FTSE SmallCap Source: Datastream (a LSEG product)
210
200
190
180
170
160
150
140
130
120
110
100
31 Dec
2015
31 Mar
2015
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2019
31 Dec
2020
31 Dec
2021
31 Dec
2022
31 Dec
2023
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 113
The table below details certain elements of the CEO’s remuneration over the same period as presented in the TSR Index graph:
Year CEO
Single figure of
totalremuneration
Annual bonus pay-out
against maximum %
Long-term incentive
vesting rates against
maximum
Year-on-year change in
CEO remuneration %
Year-on-year change in
employee remuneration
%
2023 Darren Waters
Mark Kelly
£411,794
£245,612
30%
30%
n/a
0%
(23)% 6%
2022 Mark Kelly £857,090 23% 63% (3)% (1)%
2021 Mark Kelly £879,271 100% 0% 89% 10%
2020 Mark Kelly £465,945 0% 0% (31)% 2%
2019 Mark Kelly £673,262 49% 0% 47% 2%
2018 Mark Kelly £459,294 0% 0% (50)% 2%
2017 Mark Kelly £916,442 40% n/a 8% 2%
2016 Mark Kelly
Patrick Bateman
£560,558
£284,457
80%
33%
n/a
n/a
33%
—
2%
—
2015 Patrick Bateman £637,098 87% n/a n/a n/a
As the Company listed in March 2015, part of the 2015 remuneration relates to when Eurocell was a privately owned Company.
Note: Based on all Group employees in order to provide a more meaningful comparison (Eurocell plc employees comprise the Executive and Non-executive
Directorsonly).
Annual change in remuneration of each Director compared to employees (unaudited)
The table below presents the year-on-year percentage change in remuneration for each Director and for all Group employees:
% change from 2022 to 2023 % change from 2021 to 2022 % change from 2020 to 2021
Salary/fee
increase/
(decrease)
%
Annual
bonus
increase/
decrease
%
Taxable
benefits
increase
%
Salary/fee
increase
%
Annual bonus
decrease
%
Taxable
benefits
increase
%
Salary/fee
increase
1
%
Annual bonus
increase
%
Taxable
benefits
increase/
(decrease)
%
Darren Waters
4
n/a n/a n/a n/a n/a n/a n/a n/a n/a
Mark Kelly
5
(59)% (53)% 0% 6% (75)% 14% 5% n/a
2
(73)%
Michael Scott 7% 41% 0% 6% (76)% 25% 5% n/a
2
2%
Derek Mapp
3
60% n/a n/a n/a n/a n/a n/a n/a n/a
Frank Nelson 3% n/a n/a 25% n/a n/a 3% n/a n/a
Martyn Coffey
5
(60)% n/a n/a 18% n/a n/a 3% n/a n/a
Kate Allum
3
133% n/a n/a n/a n/a n/a n/a n/a n/a
Alison Littley
3
146% n/a n/a n/a n/a n/a n/a n/a n/a
Iraj Amiri
3
700% n/a n/a n/a n/a n/a n/a n/a n/a
Will Truman
4
n/a n/a n/a n/a n/a n/a n/a n/a n/a
All employees 5% 36% 2% 4% (76)% 2% 6% 232% 0%
1 All the Directors took a 20% reduction in salary/fees, for two months, during the first lockdown period in 2020.
2 Percentage increase is not available due to 2020 bonuses being £nil.
3 Directors appointed to the Board during 2022.
4 Directors appointed to the Board during 2023.
5 Mark Kelly and Martyn Coffey stepped-down from the Board during 2023.
Eurocell plc Annual Report and Accounts 2023114
DIRECTORS’ REMUNERATION REPORT CONTINUED
CEO to employee pay ratio (unaudited)
The table below shows the CEO to employee pay ratio.
Year Method 25th percentile pay ratio Median pay ratio 75th percentile pay ratio
2023 Option B 25 : 1 22 : 1 18 : 1
2022 Option B 37 : 1 31 : 1 24 : 1
2021 Option B 42 : 1 33 : 1 27 : 1
2020 Option B 23 : 1 19 : 1 15 : 1
2019 Option B 34 : 1 27 : 1 21 : 1
Notes to the CEO to employee pay ratio:
1 Option B (based on the gender pay gap reporting disclosures) was preferred as this data was already prepared on a Group basis.
2 In line with the gender pay gap reporting regulations, pay for the 25th percentile, median and 75th percentile employees was calculated with reference to 5 April
foreach financial year.
3 The ratios shown are representative of the FTE 25th percentile, median and 75th percentile pay for employees within the Group at the gender pay gap reference date
of 5April 2023.
4 FTE equivalent pay has been calculated using the gender pay gap reporting methodology.
5 The total of salary, benefits, pension, bonus and long-term incentives, being the single figure of total remuneration, for both Chief Executives who served during the
year combined, has been used.
The CEO pay ratio figures for 2023 have decreased this year (when compared to 2022) primarily due to a decrease in the aggregate
CEO’s single figure remuneration, as a result of the nil vesting of the PSP awards in respect of 2023.
The total pay and benefits and the salary component of total pay and benefits for the employee at each of the 25th percentile,
themedian and the 75th percentile are shown below:
Salary
£000
Total pay and benefits
£000
25th percentile Median 75th percentile 25th percentile Median 75th percentile
2023 25 30 36 26 30 37
Based on the salary profile of the Group’s UK employees, the median pay ratio is consistent with the pay, reward and progression
policies of the Group as a whole.
Relative importance of spend on pay (unaudited)
The table below details the change in total employee pay between 2022 and 2023 as detailed in Note 8 of the Financial Statements,
compared with distributions to shareholders by way of dividend, share buybacks or any other significant distributions or payments.
% change
2023
£m
2022
£m
Total gross employee pay 0.4% 85.2 84.9
Dividends/share buybacks (7)% 10.3 11.1
The average number of employees during the year was 2,101 (2022: 2,250).
Statement of voting at the Annual General Meeting (unaudited)
The following table shows the results of the binding Remuneration Policy vote at the 12 May 2022 AGM and the advisory Directors’
Remuneration Report vote at the 11May 2023 AGM.
(Binding Vote – 12 May 2022)
Approval of the Directors’ Remuneration Policy
(Advisory Vote – 11 May 2023)
Annual Report on Remuneration
Total number of votes % of votes cast Total number of votes % of votes cast
For (including discretionary) 97,411,403 100% 10 0,148 ,321 100%
Against — 0% 1,956 0%
Votes withheld — — — —
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 115
Implementation of policy for 2024 (unaudited)
Base salaries
Current base salaries are as follows: £410,000 p.a. for Darren Waters and £296,233 p.a. for Michael Scott. With effect from 1 April
2024, these salaries will be increased by 4% to £426,400 and £308,082 respectively. The salary increase is in-line with that of the
wider workforce and the resulting salaries remain below the median for similar sized companies.
Pensions
A defined contribution/salary supplement of 5% of salary, which is aligned to the wider workforce, is offered to Darren Waters
andMichael Scott.
Benefits
Details of the benefits received by Executive Directors are set out in Note 1 to the Single Total Figure Table on page 108.
There is nointention to introduce additional benefits in 2024.
Annual bonus
The annual bonus opportunity for 2024 has been structured in a similar manner to 2023. The maximum bonus will be 100% of salary
and will be payable based on performance against a blend of adjusted profit before tax (70% of the bonus opportunity) and operating
cash flow (30% of the bonus opportunity) targets.
These targets have been set in light of internal and external forecasts and will require outperformance to generate higher levels
ofpay-out. In addition, a health and safety adjustment underpin will apply which, if not achieved, could reduce the bonus pay-out.
Anybonus earned above 75% of salary will be deferred into shares for three years.
Given the competitive nature of the Company’s sector, the specific performance targets for 2024 are considered to be commercially
sensitive and, accordingly, are not disclosed at this time, although the targets will be disclosed in next year’s report in relation to the
2024 bonus outturn.
Long-term incentives
PSP awards are expected to be made in April 2024 to Michael Scott and Darren Waters at 150% of salary.
Performance targets will be based on earnings per share (two-thirds of the award) and return on capital employed improvement
(one-third) in the third year of the performance period. Full details of these targets will be disclosed in next year’s report, with these
targets no less challenging in relative terms than the targets applied to the 2023 PSP awards.
Chair and Non-executive Directors’ fees
In-line with the wider workforce, the fee for the Chair will be increased by 4% from £150,000 p.a. to £156,000 p.a. and the base
fees for Non-executive Directors will be increased by 4% from £50,000 p.a. to £52,000 p.a. with effect from 1 April 2024.
Similarly, additional fees for the Committee Chairs, where applicable, and the Senior Independent Director will be increased by 4%
from £10,000 p.a. to £10,400 p.a. with effect from 1 April 2024.
On behalf of the Board
Kate Allum
Chair of the Remuneration Committee
19 March 2024
Eurocell plc Annual Report and Accounts 2023116
The Directors present their audited consolidated financial statements for the year ended 31 December 2023. Eurocell plc
(‘theCompany’) is a company incorporated and domiciled in the UK, with registration number 08654028, and is the holding company
ofthe Eurocell Group of companies (‘the Group’). All of the Group’s activities are within the United Kingdom, with the exception of
twooverseas branches in the Republic of Ireland.
The shares of the Company have been traded on the main market of the London Stock Exchange throughout the year ended
31December 2023.
The Directors’ Report includes the Corporate Governance Statement set out on pages 79 to 86.
The Directors’ Report and Strategic Report comprise the ‘Management Report’ for the purpose of the Financial Conduct Authority’s
Disclosure Guidance and Transparency Rules (DTR 4.1.8R).
The Directors of the Company, and their biographical details, are listed on pages 74 and 75 and were all in place on the date this
Directors’ Report was approved. Changes to the Directors during the year, and up to the date of this report, are set out below:
Director Position Service in the year and up to date of report approval
Current directors:
Derek Mapp Chair Served throughout
Darren Waters Chief Executive Appointed 11 April 2023
Michael Scott Chief Financial Officer Served throughout
Frank Nelson Senior Independent Non-executive Director Served throughout
Kate Allum Independent Non-executive Director Served throughout
Alison Littley Independent Non-executive Director Served throughout
Iraj Amiri Independent Non-executive Director Served throughout
Will Truman Independent Non-executive Director Appointed 11 May 2023
Angela Rushforth Independent Non-executive Director Appointed 1 February 2024
Former directors:
Mark Kelly Chief Executive Served up to 11 May 2023
Martyn Coffey Independent Non-executive Director Served up to 11 May 2023
Strategic Report
As permitted by section 414C of the
Companies Act 2006, certain information
required to be included in the Directors’
Report has been included in the Strategic
Report, which is set out on pages 1 to73.
Specifically, this relates to information on
the Group’s strategy, business model,
likely future developments and risk
management.
UK Corporate Governance Code
Matters related to corporate governance
and our compliance with the Code are
set out in the Corporate Governance
Statement on pages 79 to 86, which is
incorporated herein by reference.
Results
Our Financial Statements for the year ended
31 December 2023 are set out on pages
130 to 176. The Financial Statements
should be read in conjunction with the Chief
Executive’s Report, Divisional Reviews and
the Chief Financial Officer’sReport.
Dividends
The Board is recommending a final
dividend of 3.5 pence (2022: 7.2 pence)
per share for 2023 which, together with
the interim dividend of 2.0 pence (2022:
3.5 pence) per share, makes a combined
dividend of 5.5 pence (2022: 10.7pence)
per share.
Payment of the final dividend, if approved
at the Annual General Meeting (‘AGM’), will
be made on 22 May 2024 to shareholders
registered at the close of business on
26April 2024. The ex-dividend date
will be 25 April 2024.
Dividends paid in the year to 31 December
2023 and disclosed in the Consolidated
Cash Flow Statement of £10.3 million
(2022: £11.1 million), is comprised of the
2022 final dividend of 7.2 pence pershare,
which was paid in May 2023, and the
2023 interim dividend of 2.0 pence per
share which was paid in October 2023.
Tax governance
Our tax policy is set out below. It is
determined by the Board and overseen
by the Audit and Risk Committee.
The Board reviews the policy, and our
compliance with it, on an annual basis.
Operational responsibility for the execution
of the Group’s tax policy rests with the
Chief Financial Officer, who reports the
Group’s tax position to the Audit and Risk
Committee on a regular basis.
Tax policy
We are committed to compliance with tax
law and practice in the UK. Compliance
for us means paying the amount of tax
we are legally obliged to pay and doing
so in the right place, at the right time.
Itinvolves disclosing all relevant facts and
circumstances to the UK tax authorities
in ways that reflect the economic reality
of the transactions we undertake, and
claiming appropriate reliefs and incentives
where available.
DIRECTORS’ REPORT
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 117
Risk management of tax affairs
The level of risk that we accept in relation
to UK tax is consistent with our overall
objective of achieving certainty in the
Group’s tax affairs. At all times, we seek
to comply fully with our regulatory and
other obligations, and to act in a way that
upholds our core values and reputation as
a responsible corporate citizen. We see
compliance with tax legislation as key to
managing tax risk, and understand the
importance of tax in the wider context of
business decisions.
Processes have been put in place to
ensure tax is considered as part of our
overall decision-making processes, with tax
risks managed by local finance teams and
escalated through to appropriate levels of
management and, ultimately, to the Board
when necessary.
Tax planning
In structuring our commercial activities,
we will always consider – among other
factors – the relevant tax laws. We believe
that it is fair to mitigate tax using generally
available reliefs in the spirit in which they
are intended. However, any tax planning
that we undertake will have commercial
and economic substance and we will not
use aggressive tax planning or enter into
complicated tax avoidance schemes.
Although for commercial reasons we
may trade with customers and suppliers
genuinely located in countries considered
to be tax havens, we will not use such
jurisdictions for the purpose of avoiding
tax, nor will we seek to take advantage
of the secrecy afforded to transactions
recorded in these jurisdictions.
Engaging with HMRC
We aim to have a good working
relationship with HMRC. We will engage
with honesty and integrity, and in a spirit
of cooperative compliance. We will make
all returns and pay tax on a timely basis,
across all types of tax.
Share capital
Details of our capital structure, including
movements in issued share capital during
the year, are shown in Note 26 to the
Financial Statements. We have one class
of ordinary shares, which carries no fixed
income. Each share carries the right to one
vote at our general meetings. The ordinary
shares are listed on the Official List and
traded on the London Stock Exchange.
As at 31 December 2023, there were
112,095,184 (2022: 112,095,184) ordinary
shares of 0.1 pence each in nominal value
in issue (the ‘issued share capital’). Details
of the shares issued in the year are shown
in Note 26 to the Consolidated Financial
Statements.
Holders of ordinary shares are entitled
to receive dividends when declared, to
receive the Company’s Annual Report, to
attend and speak at general meetings of
the Company, to appoint proxies and to
exercise voting rights.
Whilst the Board has the power under
the Articles of Association to refuse to
register a transfer of shares, there are no
such restrictions on the transfer of shares
inplace.
Under the Company’s Articles of
Association, the Directors have the power
to suspend voting rights and the right to
receive dividends in respect of shares in
circumstances where the holder of those
shares fails to comply with a notice issued
under section 793 of the Companies Act
2006. The Company is not aware of any
agreements between shareholders that
may result in restrictions on the transfer
of securities or voting rights.
Share schemes
The Company operates a number of
share schemes.
Long-Term Incentive Plans payable to
executives and senior managers are
operated under our Performance Share
Plan (‘PSP’). Executive Directors may have
a proportion of their annual bonus deferred
for up to three years under our Deferred
Share Plan (‘DSP’). The Company
also operates Save As You Earn (or
‘Sharesave’) schemes, which are available
to all employees.
All shares issued under these plans carry
the same rights as those already in issue.
Related party transactions
Other than in respect of arrangements set
out in Note 31 to the Financial Statements
and in relation to the employment of
Directors, details of which are provided
in the Remuneration Committee Report
on pages 98 to 115, there is no material
indebtedness owed to or by us to any
employee or any other person or entity
considered to be a related party.
Substantial shareholders
The Company’s major shareholders, with a shareholding above 3%, as at 31 December 2023 and subsequent changes up
to15March 2024
1
, were as follows:
Shareholder
At 31 December 2023 Changes since 31 December 20232
No. of Shares % of voting rights No. of Shares % of voting rights
Aberforth Partners 23,892,457 21.3% – –
Soros Fund Management 17, 86 0, 218 15.9% 16,248,234 14.6%
JO Hambro Capital Management 11,092,556 9.9% – –
Alantra Asset Management 9,993,036 8.9% – –
Huntington Management 7,750,775 6.9% – –
Chelverton Asset Management 5,000,000 4.5% – –
ACR Alpine Capital Research 4,850,660 4.3% – –
Allianz Global Investors 4,108,178 3.7% – –
Royal London Asset Management 3,549,000 3.2% – –
1 Being the latest practicable date prior to the date of this report.
2 Changes notified to the Company pursuant to Chapter 5 of the Disclosure Guidance and Transparency Rules between 31 December 2023 and 18 March 2024
1
.
Eurocell plc Annual Report and Accounts 2023118
The Takeover Directive
The rights and obligations attached to
the issued share capital are set out in
the Articles of Association (see below).
There are no agreements in place
between the Company, its employees
or Directors for compensation for loss
of office or employment that trigger
as a result of a takeover bid.
Articles of Association
The Company’s Articles of Association
can only be amended by special
resolution of the shareholders. Our current
articles are available on our website at
www.investors.eurocell.co.uk.
The Company’s Articles of Association
give powers to the Board to appoint
Directors. All Board members are
required to retire and submit themselves
for re-election by shareholders at each
Annual GeneralMeeting.
The Board of Directors may exercise all
the powers of the Company, subject to
the provisions of relevant legislation, the
Company’s Articles of Association and
any directions given by the Company
in general meetings. The powers of the
Directors include those in relation to
the issue and buyback of shares.
Directors’ retirement by rotation
In accordance with above and in line
with the Code, all Directors in office will
retire and offer themselves for election/
re-election at the 2024 AGM, with the
exception of Frank Nelson, who will
step-down after nine years of service,
in accordance with the UK Corporate
Governance Code.
The Articles of Association provide that a
Director may be appointed by an ordinary
resolution of shareholders or by existing
Directors, either to fill a vacancy or as an
additional Director.
The Executive Directors serve under
contracts that are terminable with twelve
months’ notice from the Company and
twelve months’ notice from the Executive
Director. The Non-executive Directors
serve under letters of appointment and
do not have service contracts with the
Company.
Copies of the service contracts of the
Executive Directors and the letters
of appointment of the Non-executive
Directors are available for inspection at the
Company’s registered office during normal
business hours and will be available for
inspection at the Company’sAGM.
There are no specific Company rules in
relation to the appointment/replacement
of Directors and all such matters are
managed by the Board in accordance with
the Articles of Association, the Companies
Act 2006 and any directions given by
special resolution.
Directors’ interests
Details of Directors’ remuneration, interests
in the share capital (or derivatives or other
financial instruments relating to those
shares) of the Company and of their share-
based payment awards are contained
in the Remuneration Committee Report
on pages 98 to 115. No change in the
interests of the Directors has been notified
between 31 December 2023 and the date
of this report.
Directors’ indemnities
Pursuant to the Articles of Association,
the Company has executed a deed
poll of indemnity for the benefit of the
Directors of the Company, and persons
who were Directors of the Company,
in respect of costs of defending claims
against them and third-party liabilities.
These provisions, deemed to be qualifying
third-party indemnity provisions pursuant
to section 234 of the Companies Act
2006, were in force during the year ended
31 December 2023 and remain in force.
The indemnity provision in the Company’s
Articles of Association also extends to
provide a limited indemnity in respect of
liabilities incurred as a director, secretary
or officer of an associated company of
theCompany.
A copy of the deed poll of indemnity is
available for inspection at the Company’s
registered office during normal business
hours and will be available for inspection
atthe Company’s AGM.
DIRECTORS’ REPORT CONTINUED
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 119
Conflicts of interest
Under the Companies Act 2006, Directors
must avoid situations where they have, or
could have, a direct or indirect interest that
conflicts or possibly may conflict with the
Company’s interests. As permitted by the
Act, the Company’s Articles of Association
enable Directors to authorise actual or
potential conflicts of interest.
Legal and regulatory compliance
The executive team is responsible for
identifying and carrying out assessments
of those areas of the business where
material legal and regulatory risks may
be present. Where issues are identified,
mitigating actions are built into an
action plan involving the drafting and
communication of policies and the delivery
of training where appropriate, or are
approached by way of a revision to key
contractual terms. The Board receives
regular reports on material litigation
and the legal action taken to support
ourstrategy.
Health and safety
We are committed to providing a safe
place for employees to work. Our policies
are reviewed on an ongoing basis to
ensure that the approach to training, risk
assessment, safe systems of working
and accident management is appropriate.
As part of this process, a rolling audit
programme is in place to ensure that
health, safety, environmental and security
risks are assessed stringently and that
robust control measures are in place to
limit or mitigate risk as appropriate.
Events after the balance sheet date
On 1 February 2024, Angela Rushforth
was appointed as a Director of the
Company.
Other matters
Employee disclosure (including
equality, diversity and disabled
employees)
See Sustainability Report on pages 32
to49.
Employee engagement statement
See Corporate Governance Statement
on pages 79 to 86.
Statement on engagement with
suppliers, customers and others
in a business relationship with
theCompany
See Corporate Governance Statement
onpages 79 to 86.
Financial risk management
See Note 3 of the Financial Statements.
Research and development
The Group undertakes research and
development work in support of its
objectives. Further details of our research
and development activities can be found
in the Strategic Report on pages 1 to 73.
Payments to suppliers
It is Group policy to abide by the payment
terms agreed with suppliers, provided that
the supplier has performed its obligations
under the contract.
Political donations
In accordance with the Group’s policy,
no political donations were made and no
political expenditure was incurred during
2023 (2022: £nil).
Greenhouse gas emissions and
energy use
See Sustainability Report onpages 32
and49.
Disclosure of information to
auditors
See the Directors’ confirmations on
page120.
Disclosures required by Listing
Rule 9.8.4R
There were no waivers of dividends during
the year which were greater than 1% of
the total value of the dividend paid. There
are no other disclosures to be made under
the above listing rule.
By Order of the Board
Paul Walker
Group Company Secretary
19 March 2024
Eurocell plc Annual Report and Accounts 2023120
The Directors are responsible for preparing
the Annual Report and Accounts 2023 and
the Financial Statements in accordance
with applicable law and regulation.
Company law requires the Directors
to prepare Financial Statements for
each financial year. Under that law the
Directors have prepared the Group
Financial Statements in accordance with
UK-adopted international accounting
standards and the Company Financial
Statements in accordance with United
Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting
Standards, comprising FRS101
‘Reduced Disclosure Framework’,
andapplicablelaw).
Under company law, Directors must not
approve the financial statements unless
they are satisfied that they give a true and
fair view of the state of affairs of the Group
and Company and of the profit or loss of
the Group for that period. In preparing the
Financial Statements, the Directors are
required to:
• Select suitable accounting policies and
then apply them consistently
• State whether applicable UK-adopted
international accounting standards have
been followed for the Group Financial
Statements and United Kingdom
Accounting Standards, comprising
FRS 101 have been followed for the
Company Financial Statements, subject
to any material departures disclosed and
explained in the Financial Statements
• Make judgements and accounting
estimates that are reasonable and
prudent
• Prepare the Financial Statements on
the going concern basis unless it is
inappropriate to presume that the Group
and Company will continue in business.
The Directors are responsible for
safeguarding the assets of the Group and
Company and hence for taking reasonable
steps for the prevention and detection of
fraud and other irregularities.
The Directors are also responsible for
keeping adequate accounting records
that are sufficient to show and explain the
Group’s and Company’s transactions and
disclose with reasonable accuracy at any
time the financial position of the Group
and Company and enable them to ensure
that the Financial Statements and the
Directors’ Remuneration Report comply
with the Companies Act 2006.
The Directors are responsible for the
maintenance and integrity of the Company’s
website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the
AnnualReport and Accounts for 2023,
taken as a whole, are fair, balanced
and understandable and provide the
information necessary for shareholders
to assess the Group’s and Company’s
position and performance, business
modeland strategy.
Each of the Directors, whose names
and functions are listed in the Directors’
Report confirm that, to the best of
theirknowledge:
• The Group Financial Statements, which
have been prepared in accordance with
UK-adopted international accounting
standards, give a true and fair view of
the assets, liabilities, financial position
and profit of the Group
• The Company Financial Statements,
which have been prepared in
accordance with United Kingdom
Accounting Standards, comprising
FRS101, give a true and fair view of the
assets, liabilities and financial position
ofthe Company
• The Strategic Report includes a
fair review of the development and
performance of the business and the
position of the Group and Company,
together with a description of the
principal risks and uncertainties
thatitfaces.
In the case of each Director in office at the
date the Directors’ Report isapproved:
• So far as the Director is aware, there is
no relevant audit information of which
the Group’s and Company’s auditors
are unaware
• They have taken all the steps that they
ought to have taken as a Director in
order to make themselves aware of any
relevant audit information and to establish
that the Group’s and Company’s auditors
are aware of that information.
The Directors’ Responsibility Statement
was approved by the Board on
19March2024.
Darren Waters
Chief Executive
Michael Scott
Chief Financial Officer
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 121
Eurocell plc Annual Report and Accounts 2023122
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EUROCELL PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
OPINION
In our opinion:
• Eurocell plc’s group financial statements and company financial
statements (the “financial statements”) give a true and fair view
of the state of the group’s and of the company’s affairs as at
31 December 2023 and of the group’s profit and the group’s
cash flows for the year then ended;
• the group financial statements have been properly prepared
in accordance with UK-adopted international accounting
standards as applied in accordance with the provisions of the
Companies Act 2006;
• the company financial statements have been properly prepared
in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
including FRS 101 “Reduced Disclosure Framework”, and
applicable law); and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the
Annual Report and Accounts 2023 (the “Annual Report”), which
comprise: the Consolidated Statement of Financial Position and
the Company Statement of Financial Position as at 31 December
2023; the Consolidated Statement of Comprehensive Income,
the Consolidated Cash Flow Statement, the Consolidated
Statement of Changes in Equity and the Company Statement
of Changes in Equity for the year then ended; and the notes to
the financial statements, comprising material accounting policy
information and other explanatory information.
Our opinion is consistent with our reporting to the Audit and Risk
Committee.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We remained independent of the group in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard,
as applicable to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard
were notprovided.
Other than those disclosed in note 5, we have provided no
non-audit services to the company or its controlled undertakings
in the period under audit.
OUR AUDIT APPROACH
Overview
Audit scope
• A component was considered to be a company or division
where discrete financial data was prepared. Financially
significant components were determined to be those which
contributed more than 15% of the underlying profit before tax
(measured on an absolute basis) in either the current or prior
year. For components that were not financially significant,
consideration was made over whether in our judgement any
components would be tested as full scope despite being below
15% of the absolute underlying profit before tax. Following
this assessment two components were identified as financially
significant and one component was identified as requiring a full
scope audit.
• Audit work was then performed over specific Financial
Statement Line Items (“FSLI’s”) if they contributed more
than 15% of the consolidated FSLI and were above group
performance materiality. For balances which were below 15%
of the consolidated FSLI and multiple times performance
materiality we have considered whether the risk of material
misstatement has been reduced to an acceptably low level and
whether any additional balances would be brought into scope.
This assessment resulted in FSLIs in 3 other components being
in scope for large balance testing. Combined coverage (of in
scope components and large balances) represented 99% of the
reporting consolidated revenues and 73% of the consolidated
underlying profit before taxation on an absolute basis. For all
other balances/components, disaggregated analytical review
procedures were performed to group materiality.
• Work on the consolidation was considered separately to the
component scoping exercise and performed to group materiality.
• All work was performed by the group audit team.
Key audit matters
• Trade receivables provisions (group).
• Inventory provisioning (group).
• Inventory labour and overhead absorption (group).
• Impairment of intercompany investments and intercompany
receivables (parent).
Materiality
• Overall group materiality: £760,000 (2022: £1,400,000) based
on 5% of underlying profit before taxation.
• Overall company materiality: £481,000 (2022: £751,000) based
on 1% of total assets.
• Performance materiality: £570,000 (2022: £1,050,000) (group)
and £360,000 (2022: £563,000) (company).
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 123
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results
of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Inventory labour and overhead absorption is a new key audit matter this year. Valuation of inventory, which was a key audit matter last
year, is no longer included because of this matter being made more specific through our detailed risk assessment to be relating to the
amount of labour and overhead absorbed into inventory. Otherwise, the key audit matters below are consistent with last year.
Key audit matter How our audit addressed the key audit matter
Trade receivables provisions (group)
Refer to pages 66 to 72 (Risk management and Principal risks
and uncertainties), pages 92 to 97 (Audit and Risk Committee
report), Note 1 (Accounting Policies), Note 2 (Critical
Accounting Estimates and Judgements) and Note 20 (Trade
and other receivables). The Group had gross trade receivables
of £38.6 million at 31 December 2023 (2022: £43.5 million)
against which provisions of £1.2 million (2022: £1.8 million)
were held in accordance with IFRS 9. We focused on this area,
and specifically the valuation assertion, because the Directors’
assessment of the provisions required in respect of trade
receivables included subjective estimates. These estimates,
such as the appropriate level of provisions to apply to aged
debt, remain a heightened risk in the current year due to the
uncertain market conditions ongoing into FY24.
We understood the Directors’ methodology for calculating trade
receivables provisions across the Group and considered if these
complied with IFRS 9. Audit procedures performed included:
• We evaluated the design and implementation of controls around
the trade receivables provisioning process;
• We reviewed the accuracy of past management estimates via
look-back tests and movements in the provisions year on year;
• We confirmed that the amounts included in the IFRS 9 model
agreed back to the underlying ledgers as at 31 December 2023;
• We tested the accuracy of the calculations in the model;
• We tested the ageing of amounts due at the balance sheet date
to verify the data had been analysed correctly, and recalculated
actual debtors days for transactions cleared against debtor
balances in the year; and
• We considered the results of our other audit procedures over
trade receivables (for example review of post year end payments
made by customers) for inconsistencies with the IFRS 9 models.
We identified no material exceptions from the procedures noted
above. Based on the results of our audit work we concluded that
the provisions recorded were materially accurate, calculated in line
with the requirements of IFRS 9.
Eurocell plc Annual Report and Accounts 2023124
INDEPENDENT AUDITORS’ REPORT
CONTINUED
Key audit matter How our audit addressed the key audit matter
Inventory provisioning (group)
Refer to pages 66 to 72 (Risk management and Principal
risks and uncertainties), pages 92 to 97 (Audit and Risk
Committee report), Note 1 (Accounting Policies), Note 2
(Critical Accounting Estimates and Judgements) and
Note 19 (Inventories). Inventory totalled £46.7 million as at
31 December 2023 (2022: £59.9 million) after provisions of
£3.5 million (2022: £3.5 million). We focused on this area
because the Directors’ assessment of the recoverability of
inventory involved subjective judgements. Specifically, the
determination of inventory provisions for slow moving, obsolete
and discontinued line items, reflecting the level of inventory
held across the branch network and manufactured goods
at the year end, requires the exercise of estimation.
Our audit procedures over the impairment of inventory consistedof:
• We evaluated the design and implementation of controls around
the inventory provisioning process;
• We understood the Directors’ methodology for calculating
inventory provisions;
• We reviewed the accuracy of past management estimates via
look-back tests and movements in the provisions year on year;
• Where inventory provisions were based upon historical sales
data, we tested the underlying report to validate the data on
which management’s calculations were based;
• We evaluated the Directors’ assumptions over usage and
validated historic usage which is then used to forecast future
sales rates;
• We attended physical inventory counts, conducted by
management, to highlight any increased areas of concern,
regarding excess / unused stock held at either the branches
wevisited or the manufacturing sites;
• We performed sensitivity analysis on key variables within the
obsolete inventory provision to assess reliance of the model
ona particular variable; and
• Where specific impairments were made, outside of the standard
impairment reviews, we challenged management of the
completeness and appropriateness of these additionalamounts.
Based on the results of our audit work, we concluded that
provisions recorded were materially accurate and calculated in line
with the requirements of IAS 2.
Inventory labour and overhead absorption (group)
Refer to pages 66 to 72 (Risk management and Principal
risks and uncertainties), pages 92 to 97 (Audit and Risk
Committee report), Note 1 (Accounting Policies), Note 2
(Critical Accounting Estimates and Judgements) and
Note 19 (Inventories). Inventory totalled £46.7 million as
at 31 December 2023 (2022: £59.9 million). We focused
on this area because the Directors’ assessment of the
absorption of labour and overhead costs intoinventory
involved subjective judgements.
Our audit procedures over the labour and overhead costs absorbed
into inventory comprised:
• We evaluated the design and implementation of labour and
overhead inventory cost absorption controls;
• We understood the nature of the costs that the Directors’
absorbed into inventory and determined their appropriateness
in line with IAS 2 ‘Inventories’ (“IAS 2”);
• We understood the approach taken to implement updated
standard costing and determined that the assumptions and
methods utilised were appropriate;
• We recalculated inventory days to determine the level of labour
and overheads absorbed into the finished goods products was
appropriate; and
• We tested, on a non-statistical sampling basis, the valuation and
calculation of labour and overhead costs absorbed into inventory,
agreeing cost categories to relevant support such
as production volumes, plant energy rates and payslips.
Based on the results of our audit work, we concluded that the amount
of labour and overheads absorbed into inventory was materially
accurate and calculated in line with the requirements of IAS 2.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 125
Key audit matter How our audit addressed the key audit matter
Impairment of intercompany investments and intercompany
receivables (parent)
Refer to Note 35 (Accounting Policies), Note 38 (Investments)
and Note 39 (Trade and other receivables). The company
has investments in subsidiary companies of £17.8 million
(2022: £17.8 million) and intercompany receivables of
£29.2 million (2022: £56.3 million). Material impairment
to these could result inimplications for future dividends.
We obtained management’s impairment assessment regarding the
investment’s carrying value and management’s IFRS 9 expected
credit loss model in respect of the intercompany receivables. The
recoverability of the investment’s carrying value was based upon
the same underlying data noted in other group calculations such
as the going concern assessment and goodwill impairment model.
We also noted that the market capitalisation of the group was
c.£147 million as at 31 December 2023 which is significantly
in excess of the parent company’s total assets. We considered
the IFRS 9 model and noted that a significant change in the
key assumption (being the expected loss rate of 0.1%) would
be required prior to a material impairment being noted. The
amounts owed to the company were ultimately due from profitable
subsidiaries, with sufficient net assets. We tested the integrity of the
models and the validity of the key data inputs. No exceptions were
noted in the performance of the above procedures. We therefore
concluded that the investments and intercompany receivables
were accounted for in line with IFRS 9 and IAS 36, with appropriate
disclosures being made.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
group and the company, the accounting processes and controls,
and the industry in which they operate.
Eurocell operates in the market of the extrusion of UPVC
(unplasticised polyvinyl chloride) window and building products to
the new and replacement window market and the sale of building
plastics materials. The Group has sites throughout the UK with its
headquarters in Alfreton.
The business is managed as two primary divisions:
• Eurocell Building Plastics, focusing on sales and distribution
across over 200 branches within the UK and 2 in Ireland to
generally smaller scale customers; and
• Eurocell Profiles, focusing on manufacture and distribution
to large-scale customers. This division includes the trading
subsidiaries Eurocell Profiles Limited, Vista Panels Limited,
andEcoplas Limited.
Other than Vista Panels Limited, which has its own finance team,
all finance and operational management functions are located at
the Alfreton headquarters. Therefore all audit work, including work
on components, was completed by a single Group auditteam.
For the purposes of our audit of the group we considered
components to be operations where there was discrete financial
data maintained by management, including a separate trial
balance. For the consolidated audit of Eurocell plc this related
to the individual subsidiary companies; Eurocell Building Plastics
Limited, with Eurocell Profiles Limited the statutory entity, being
seen as two components (as S&S Plastics is now a division within
Eurocell Profiles Limited but this component is out of scope).
A component was included within our full scope audit
procedures, and considered to be a financially significant
component, if it represented 15% or more of the reported
underlying profit before taxation, measured on an absolute basis
(as some entities act as cost centres, all results of components
were added together and then if a component represented
15% or more of this total it was deemed a financially significant
component) in either the current or prior year. There were two
financially significant components (Eurocell Profiles Limited,
excluding the S&S plastics division and Eurocell Building Plastics
Limited). We then considered the entities which did not meet the
financial significance criteria and in our judgement designated
Eurocell plc company as a component where we would perform
a full scope audit.
We then considered the remaining eight components to ascertain
if further procedures would be required. Where these had an
individual Financial Statement Line Item (“FSLI”) that represented
more than 15% of the consolidated FSLI and was individually
above group planning materiality we included that specific FSLI
within our scope of testing and performed audit procedures
over this FSLI to group materiality. We then considered individual
FSLIs where they represented less than 15% but were multiple
times materiality. We used our judgement as to whether these
balances would be in full audit scope. This resulted in FSLIs
for three of the remaining components being in scope for large
balance testing and a final combined coverage of 99% of the
reporting consolidated revenues and 73% of the reported
consolidated underlying profit before taxation on an absolute
basis. For all other balances and/or components not considered
for detailed testing, analytical review procedures were performed,
to groupmateriality.
There were no specific components or areas included within our
group audit scope due to specific risk factors.
Work was performed over the consolidation adjustments
separately to the above scoping of components, due to the
relative simplicity of the group and the nature of the consolidation
(performed by the head office finance function with mainly UK
operations). This was performed using group materiality.
Eurocell plc Annual Report and Accounts 2023126
INDEPENDENT AUDITORS’ REPORT
CONTINUED
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements,
both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – group Financial statements – company
Overall materiality £760,000 (2022: £1,400,000) £481,000 (2022: £751,000)
How we determined it 5% of underlying profit before taxation 1% of total assets
Rationale for benchmark applied We believe that underlying profit before
tax is the key measure used by the
shareholders in assessing the performance
of the group, and is a generally accepted
auditing benchmark. In 2023 underlying
profit before tax is £3.5m higher than
reported profit before tax.
We believe that total assets is the primary
measure used by the shareholders in assessing
the financial position of the entity, and is a
generally accepted auditing benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality.
Therange of materiality allocated across components was between £408,000 and £712,500. Certain components were audited
toalocal statutory audit materiality that was also less than our overall group materiality.
For the Eurocell plc company audit the only material transactions
and balances related to the intercompany investments (including
amounts owed by subsidiary companies), the debt held by the
Company, the related operating expenses and tax charges, and
the share based payment charge. These were all included in the
scope of our audit and tested using the company materiality by
the group audit team.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to
understand the process management adopted to assess the
extent of the potential impact of climate risk on the Group’s
financial statements and support the disclosures made within
the Task Force on Climate-related Financial Disclosures (‘TCFD’)
on page 50 to 61.
In addition to enquiries with management, we also:
• Read the governance processes in place to assess climate
risk; and
• Read additional reporting made by the entity on climate
including its sustainability section of the financial statements.
Management has made commitments to reduce the emissions
and energy use and a target to be net zero by 2045 with a
pathway to be developed and announced in 2024. Management
are currently working to develop a Net Zero transition plan and
align these targets to the ‘Science Based Targets initiative’
framework. These commitments do not directly impact any
financial results at this stage as the impact of the net zero plan
is expected to be in the medium to longer term. Management
will formally model the impact once the pathway is developed.
The key areas of the financial statements where management
evaluated that climate risk has a potentially significant impact
are the disclosures and assessments relating to intangible assets
and impairment particularly of goodwill. Using our knowledge
of the business we evaluated management’s risk assessment,
its estimates and resulting disclosures where significant.
To respond to the audit risks identified in these areas we tailored
our audit approach. In particular, we:
• Challenged management on how the impact of climate
commitments made by the Group would impact the
assumptions within the discounted cash flows prepared by
management that are used in the Group’s impairment analysis,
• Challenged whether the impact of climate risk in the
Directors’ assessments and disclosures of going concern and
viability were consistent with management’s climate impact
assessment, and;
• Where appropriate, performed independent sensitivity analysis
to determine to what extent reasonably possible changes in
these assumptions could result in material changes to the
impairment headroom and assessed the appropriateness of
the associated disclosures.
We also considered the consistency of the disclosures in relation
to climate change (including the disclosures in the Task Force on
Climate-related Financial Disclosures (TCFD) section) within the
Annual Report with the financial statements and our knowledge
obtained from our audit.
Our procedures did not identify any material impact in the context
of our audit of the financial statements as a whole, or our key
audit matters for the year ended 31 December 2023.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 127
We use performance materiality to reduce to an appropriately
low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality.
Specifically, we use performance materiality in determining
the scope of our audit and the nature and extent of our testing
of account balances, classes of transactions and disclosures,
for example in determining sample sizes. Our performance
materiality was 75% (2022: 75%) of overall materiality,
amounting to £570,000 (2022: £1,050,000) for the group
financial statements and £360,000 (2022: £563,000) for the
company financial statements.
In determining the performance materiality, we considered
a number of factors – the history of misstatements, risk
assessment and aggregation risk and the effectiveness of
controls – and concluded that an amount at the upper end
of our normal range was appropriate.
We agreed with the Audit and Risk Committee that we
would report to them misstatements identified during our audit
above £38,000 (group audit) (2022: £70,000) and £24,000
(company audit) (2022: £37,500) as well as misstatements
below those amounts that, in our view, warranted reporting
for qualitative reasons.
CONCLUSIONS RELATING TO GOING CONCERN
Our evaluation of the directors’ assessment of the group’s and
the company’s ability to continue to adopt the going concern
basis of accounting included:
• Discussions with management and those charged with
governance regarding the future plans and cash flow
projections for the group. This included discussions around
the forecast cash requirements and sufficiency of available
facilities to deal with a severe but plausible downside to
theseprojections;
• We obtained management’s analysis and cash flow model.
Wechecked the integrity of the model, that the base
projections agreed to the approved budgets and were
consistent with our work in other areas, for example the
projections used in the impairment reviews;
• We considered the accuracy of management’s forecasting
in prior years by comparing actual to forecast cash flows
in the past five years (i.e the period for which the senior
management team has remained materially unchanged);
• We recalculated management’s assessment of the impact
of three downside scenarios (reduction in sales, increase
in resin prices and a combination of these factors) on the
forecast compliance with financial covenants and sufficiency
of facilities/available cash;
• We considered the reported headroom on facilities at each
month end for the review period;
• We have performed our own sensitivities to ascertain the
levels of underperformance in each scenario required to
breach the covenant facilities;
• We reviewed the debt facilities to ascertain if management
had correctly factored in financial covenants to their model,
including whether covenants were appropriately calculated
at each measurement point and expected to be met during
the assessment period (i.e. until 31 December 2026);
• We confirmed management’s calculations of compliance
with the covenants during 2023;
• We critically assessed the disclosures in relation to going
concern compared to the evidence obtained above, our
understanding of the group and the various requirements
detailed within Company Law, the Listing Rules and accounting
standards; and
• For the Eurocell plc company going concern assessment
we reviewed management’s analysis of the company cash
flows, checked for consistency with the consolidated model
(including the mathematical accuracy of the model), reviewed
the committed cash outflows compared to the available funds
(being cash reserves and forecast dividend receipts from
subsidiaries), considered the sufficiency of management’s
assessment of head room and critically assessed the
disclosures in note 35.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
group’s and the company’s ability to continue as a going concern
for a period of at least twelve months from when the financial
statements are authorised for issue.
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the group’s
and the company’s ability to continue as a going concern.
In relation to the directors’ 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 directors’ statement in
the financial statements about whether the directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections
of this report.
REPORTING ON OTHER INFORMATION
The other information comprises all of the information in the
Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the
other information. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in
the audit, or otherwise appears to be materially misstated.
If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report based on
these responsibilities.
Eurocell plc Annual Report and Accounts 2023128
INDEPENDENT AUDITORS’ REPORT
CONTINUED
With respect to the Strategic report and Directors’ Report, we
also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions
and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic report and Directors’
Report for the year ended 31 December 2023 is consistent with
the financial statements and has been prepared in accordance
with applicable legal requirements.
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
Strategic report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the directors’ 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 Governance
Code specified for our review. Our additional responsibilities
with respect to the corporate governance statement as other
information are described in the Reporting on other information
section of this report.
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 the financial
statements and our knowledge obtained during the audit, and we
have nothing material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a 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;
• The directors’ statement in the financial statements about
whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their
identification of any material uncertainties to the group’s and
company’s ability to continue to do so over a period of at
least twelve months from the date of approval of the financial
statements;
• The directors’ 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 directors’ 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 disclosures drawing
attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term
viability of the group and company was substantially less in
scope than an audit and only consisted of making inquiries and
considering the directors’ 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 financial statements
and our knowledge and understanding of the group and company
and their environment obtained in the course of theaudit.
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 the
financial statements and our knowledge obtained during theaudit:
• The directors’ 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 of
effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the
Audit and Risk Committee.
We have nothing to report in respect of our responsibility to
report when the directors’ statement relating to the company’s
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified under the Listing
Rules for review by the auditors.
RESPONSIBILITIES FOR THE FINANCIAL
STATEMENTS AND THE AUDIT
Responsibilities of the directors for the financial
statements
As explained more fully in the Statement of Directors’
Responsibilities, the directors are responsible for the preparation
of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair
view. The directors are also responsible for such internal control
as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
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 directors either intend to liquidate the
group or the company or to cease operations, or have no realistic
alternative but to do so.
Auditors’ responsibilities for the audit of the
financialstatements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 129
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud, is detailed below.
Based on our understanding of the group and industry, we
identified that the principal risks of non-compliance with laws
and regulations related to UK employment laws and regulations,
and we considered the extent to which non-compliance
might have a material effect on the financial statements. We
also considered those laws and regulations that have a direct
impact on the financial statements such as UK tax legislation
and the Companies Act 2006. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the
financial statements (including the risk of override of controls),
and determined that the principal risks were related to posting
inappropriate journal entries to revenue, expenses or cash and
management bias in accounting estimates and judgemental
areas of the financial statements.
Audit procedures performed by the engagement team included:
• Enquiry of management and those charged with governance
around actual and potential frauds, litigations or claims against
or by the company;
• Reviewing financial statement disclosures and testing
supporting documentation to assess compliance with
applicable laws and regulations;
• Auditing the risk of management override of controls, through
testing journal entries (using our data analysis tools to confirm
completeness of data) by adopting a risk based approach based
on a detailed fraud assessment, testing significant accounting
estimates (as defined in the notes to the financial statements)
because of the risk of potential management bias, and evaluating
the business rationale and accounting for any significant or
unusual transactions outside the normal course of business;
• Auditing the risk of fraud in revenue recognition by using our
data analysis tools to identify unusual credits to revenue for
further investigation;
• Performing unpredictable audit procedures, which are changed
year on year;
• Understanding of management’s internal controls designed to
prevent and detect irregularities; and
• Reviewing minutes of meetings of the Board of Directors.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related
to events and transactions reflected in the financial statements.
Also, the risk of not detecting a material 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, or through collusion.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number
of items for testing, rather than testing complete populations.
We will often seek to target particular items for testing based on
their size or risk characteristics. In other cases, we will use audit
sampling to enable us to draw a conclusion about the population
from which the sample is selected.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and
only for the company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
OTHER REQUIRED REPORTING
COMPANIES ACT 2006 EXCEPTION REPORTING
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
• we have not obtained all the information and explanations we
require for our audit; or
• adequate accounting records have not been kept by the
company, or returns adequate for our audit have not been
received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law
are not made; or
• the company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with
the accounting records and returns.
We have no exceptions to report arising from this responsibility.
APPOINTMENT
Following the recommendation of the Audit and Risk Committee,
we were appointed by the directors on 29 April 2015 to audit the
financial statements for the year ended 31 December 2015 and
subsequent financial periods. The period of total uninterrupted
engagement is 9 years, covering the years ended 31 December
2015 to 31 December 2023.
OTHER MATTER
In due course, as required by the Financial Conduct Authority
Disclosure Guidance and Transparency Rule 4.1.14R, these
financial statements will form part of the ESEF-prepared annual
financial report filed on the National Storage Mechanism of
the Financial Conduct Authority in accordance with the ESEF
Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report
provides no assurance over whether the annual financial report
will be prepared using the single electronic format specified in the
ESEF RTS.
Christopher Hibbs (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
19 March 2024
Eurocell plc Annual Report and Accounts 2023130
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2023
Year ended 31 December 2023
Year ended 31 December 2022
UnderlyingNon-underlyingTotal Underlying Non-underlyingTotal
Note£m£m£m£m£m£m
Revenue
4,9
364. 5
—
364.5
3 81. 2
—
3 81. 2
Cost of sales
(19 0 .7)
—
(19 0.7)
(19 6 .7)
—
(19 6 .7)
Gross profit
173 . 8
—
173 . 8
18 4 . 5
—
18 4. 5
Distribution costs
(2 5. 3)
(0 .1)
(25 .4)
(23.9)
(0.4)
(24 . 3)
Administrative expenses
(13 0. 5)
(3.4)
(13 3 .9)
(13 0 .4)
(1. 8)
(13 2. 2)
Other income
0.4
—
0.4
1 .1
—
1 .1
Operating profit
9
18 . 4
(3.5)
14 . 9
3 1. 3
(2. 2)
2 9 .1
Finance expense
10
(3. 2)
—
(3. 2)
(2.6)
(0. 3)
(2. 9)
Profit before tax from
continuing operations
9
15 . 2
(3.5)
11 . 7
2 8 .7
(2 .5)
26.2
Taxation
11
(2 .9)
0.8
(2 .1)
(4.7)
0.5
(4 . 2)
Profit after tax from
continuing operations
12 . 3
(2 .7)
9.6
24 . 0
(2. 0)
2 2. 0
Discontinued operations
Loss after tax from
discontinued operations
12
—
(2. 3)
Profit for the year and total
comprehensive income
9.6
19 .7
Basic earnings per share
from continuing operations
13
11 . 0p
8 .6p
2 1. 4p
19. 6p
Diluted earnings per share
from continuing operations
13
11 . 0p
8 .6p
2 1. 3p
19. 5p
1
1
2
1 Non-underlying items are detailed in Note 7. The Group’s policy regarding the recognition of non-underlying items is outlined on page 135.
2 Other income is amounts received under the Group’s Cyber Insurance Policy, net of excess paid, in respect of business interruption to the Group’s continuing trading
activities as a result of a cyber incident in July and August 2022.
The Notes on pages 134 to 167 are an integral part of these Consolidated Financial Statements.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 131
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2023
20232022
Note£m£m
Assets
Non-current assets
Property, plant and equipment
15
59.9
6 1. 7
Right-of-use assets
16
5 5 .1
5 9 .7
Intangible assets
17
15 . 8
16 . 9
Total non-current assets
13 0 . 8
1 38.3
Current assets
Inventories
19
4 6 .7
5 9.9
Trade and other receivables
20
4 5.3
50.0
Corporation tax
0.6
0.2
Deferred consideration
12
—
0.8
Cash and cash equivalents
0.4
5 .1
Total current assets
93.0
116 . 0
Total assets
223.8
254 .3
Liabilities
Current liabilities
Trade and other payables
22
(41 . 6)
(4 7. 4)
Lease liabilities
23
(12 . 9)
(13 . 0)
Provisions
24
(0.2)
(0. 2)
Total current liabilities
(5 4 .7)
(6 0.6)
Non-current liabilities
Borrowings
21
—
(20.3)
Lease liabilities
23
(4 5 .7)
(5 0.7)
Provisions
24
(1 .1)
(1. 0)
Deferred tax
25
(8 .0)
(6.8)
Total non-current liabilities
(54. 8)
(78 .8)
Total liabilities
(10 9 . 5)
(13 9 . 4)
Net assets
114 . 3
114 . 9
Equity attributable to equity holders of the parent
Share capital
26
0 .1
0 .1
Share premium account
26
22.2
2 2. 2
Treasury shares
26
(0 .1)
—
Share-based payment reserve
27
0.9
0.9
Retained earnings
91. 2
9 1. 7
Total equity
114 . 3
114 . 9
The Financial Statements on pages 130 to 167 were approved and authorised for issue by the Board of Directors on 19 March 2024
and were signed on its behalf by:
Darren Waters Michael Scott
Chief Executive Chief Financial Officer
Eurocell plc Annual Report and Accounts 2023132
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2023
Year endedYear ended
31 December31 December
20232022
Note£m£m
Cash generated from operations
32
54. 2
3 8 .7
Income taxes paid
(1. 4)
(3.6)
Net cash generated from operating activities
52.8
3 5 .1
Investing activities
Purchase of property, plant and equipment
(9.0)
(11. 9)
Purchase of intangible assets
(0 .1)
(0.5)
Net cash flow arising on sale of business
12
0. 8
0.3
Net cash used in investing activities
(8.3)
(12 .1)
Financing activities
Proceeds from new share capital issued
26
—
0.2
Purchase of own shares held as treasury shares
26
(0 .7)
—
Repayment of bank and other borrowings
(2 1. 0)
(2 2.0)
Proceeds from bank borrowings
—
3 1. 0
Bank borrowings arrangement costs
(0. 2)
(0.8)
Principal elements of lease payments
(13 . 8)
(1 3.3)
Finance elements of lease payments
(1. 8)
(1. 4)
Finance expense paid
(1. 4)
(1. 2)
Dividends paid to equity Shareholders
14
(10 . 3)
(11 .1)
Net cash used in financing activities
(49 . 2)
(18 .6)
Net (decrease)/increase in cash and cash equivalents
(4 .7)
4.4
Cash and cash equivalents
1
at beginning of year
33
5 .1
0 .7
Cash and cash equivalents
1
at end of year
33
0.4
5 .1
1
1 Cash and cash equivalents includes bank overdrafts.
2 Cash flows arising on discontinued operations from prior year are outlined in Note 12.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 133
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023
ShareShare-based
SharepremiumTreasury paymentRetainedTotal
capitalaccountsharesreserveearningsequity
Note£m£m£m£m£m£m
Balance at 1 January 2023
0 .1
22. 2
—
0.9
91.7
114 . 9
Comprehensive income forthe year
Profit for the year
—
—
—
—
9.6
9. 6
Total comprehensive incomeforthe year
—
—
—
—
9.6
9.6
Contributions by and distributions
to owners
Exercise of share options
26, 27
—
—
0.6
(0.8)
0.2
—
Share-based payments
27
—
—
—
0. 8
—
0.8
Purchase of own shares
26
—
—
(0 .7)
—
—
(0 .7)
Dividends paid
14
—
—
—
—
(10 . 3)
(10 . 3)
Total transactions with owners
recognised directlyin equity
—
—
(0 .1)
—
(1 0 .1)
(10. 2)
Balance at 31 December 2023
0 .1
22.2
(0 .1)
0. 9
91. 2
114 . 3
ShareShare-based
SharepremiumTreasury paymentRetainedTotal
capitalaccountsharesreserveearningsequity
Note£m£m£m£m£m£m
Balance at 1 January 2022
0 .1
2 1. 9
—
1 .1
8 3 .1
10 6. 2
Comprehensive income forthe year
Profit for the year
—
—
—
—
19 .7
19 .7
Total comprehensive income for the year
—
—
—
—
19. 7
19 . 7
Contributions by and distributions to owners
Exercise of share options
27
—
0. 3
—
—
—
0.3
Share-based payments
27
—
—
—
(0 . 2)
—
(0. 2)
Dividends paid
14
—
—
—
—
(11.1)
(11.1)
Total transactions with owners recognised
directlyin equity
—
0.3
—
(0. 2)
(11.1)
(11 . 0)
Balance at 31 December 2022
0 .1
22. 2
—
0.9
9 1. 7
11 4 . 9
Eurocell plc Annual Report and Accounts 2023134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2023
1 ACCOUNTING POLICIES (GROUP)
Corporate information
Eurocell plc (the ‘Company’) and its subsidiaries (together the ‘Group’) is a publicly listed company incorporated and domiciled in
England, United Kingdom. The registered office is located in England at the following address: Eurocell Head Office and Distribution
Centre, High View Road, South Normanton, Alfreton, Derbyshire, DE55 2DT .
The Group is principally engaged in the extrusion and supply of PVC window and building products to the new and replacement
window market and the sale of building materials across the UK.
Basis of preparation
The principal accounting policies adopted in the preparation of the Financial Statements are set out below. The policies have been
consistently applied to all years presented, unless otherwise stated.
The Group has adequate resources to continue in operational existence for the foreseeable future and, as a result of this, the going
concern basis has been adopted in preparing the Financial Statements (see below).
The Group Financial Statements have been prepared in accordance with UK-adopted International Accounting Standards and with
the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.
The Financial Statements have been prepared under the historical cost convention, as modified by fair values in respect of acquisition
accounting. The functional currency is Sterling, and the Financial Statements are presented in millions, unless otherwise stated.
The preparation of the Group Financial Statements requires the use of certain critical accounting estimates. It also requires management
to exercise judgement in applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the Financial Statements, are disclosed in Note 2.
Basis of consolidation
The Consolidated Financial Statements comprise the Financial Statements of the Company and its subsidiaries at 31 December 2023
and present the results as if they formed a single entity. Where the Company has power, either directly or indirectly, to govern the
financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary.
Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtained control, and continue to be
consolidated until the date when such control ceases. Intercompany transactions and balances, unrealised gains and losses resulting
from intra-Group transactions and dividends are eliminated in full.
The Group’s functional currency is Sterling. The vast majority of the Group’s revenues are denominated in Sterling, and as a result the
consolidation of non-UK revenues has minimal foreign exchange impact.
The Consolidated Financial Statements incorporate the results of business combinations using the purchase method. In the Consolidated
Statement of Financial Position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair
values at the acquisition date.
All dormant subsidiaries prepare and file financial statements in accordance with Section 480 of the Companies Act 2006, which are
filed with the registrar at Companies House.
Going concern
The Group funds its activities through a £75 million Revolving Credit Facility, provided by Barclays, NatWest and Bank of Ireland,
which matures in May 2027, following a one year extension that was completed in May 2023. The facility includes two key financial
covenants, which are tested at 30 June and 31 December each year on a pre-IFRS 16 basis. These are that net debt should not
exceed three times adjusted EBITDA (Leverage), and that adjusted EBITDA should be at least four times the interest charge on the
debt (Interest Cover). Adjusted EBITDA is defined as operating profit before depreciation, amortisation and non-underlying items.
See alternative performance measures on page 140.
No covenants were breached during the year ended 31 December 2023. For the next measurement period, being 30 June 2024,
and going forward, the Group expects to comply with its covenants.
In assessing going concern, the Directors have considered financial projections for the period to December 2025, which is consistent
with the Board’s strategic planning horizon and reflects a period of at least 12 months from the date of approval of these Financial
Statements. These forecasts have been compiled based on the best estimates of the Group’s commercial and operational teams.
This includes a severe but plausible ’Downside’ scenario, which reflects demand for the Group’s products being severely weakened.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 135
In all scenarios tested, including sensitivities reducing sales forecasts to 10% below management’s estimates for the period 2024-25,
key raw material prices increasing by 33% over that period and both scenarios combined. The Group operates with significant
headroom on its RCF facility and remains compliant with its original covenants.
After reviewing the Group’s projected financial performance and financing arrangements, the Directors consider that the Group
has adequate resources to continue operating and that it is therefore appropriate to continue to adopt the going concern basis in
preparing these Financial Statements.
Changes in accounting policies and disclosures applicable to the Company and the Group
The Group has applied the following amendments for the first time for the financial reporting period commencing 1 January 2023,
with no material impact:
• IFRS 17 ‘Insurance Contracts’
• Amendments to IFRS 17 Insurance Contracts (Amendments to IFRS 17 and IFRS 4)
• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
• Definition of Accounting Estimates (Amendments to IAS 8)
• International Tax Reform—Pillar Two Model Rules (Amendments to IAS 12).
The following new accounting standards, amendments to accounting standards and interpretations have been published that are
not mandatory for 31 December 2023 reporting periods and have not been early adopted by the Group:
• Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
• Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
• Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
• Non-current Liabilities with Covenants (Amendments to IAS 1)
• Lack of Exchangeability (Amendments to IAS 21).
These standards, amendments or interpretations are not expected to have a material impact on the Group in the current or future
reporting periods and on foreseeable future transactions.
Revenue
The Group manufactures and distributes a range of building plastic materials, along with associated ancillary products, via direct
sales to its fabricator customers and through its branch network. Revenue is recognised when control of the products has
transferred. Control is considered to have transferred once the customer has taken delivery of the products, or has collected them
from the branch, has full discretion over the future use of those products, and where there is no unfulfilled obligation that could affect
the customer’s acceptance of the products.
Revenue is recognised when the goods are dispatched to, or collected by, the customer. Revenue is based upon the price specified
on the customer’s invoice, which is determined with reference to a price list specific to each customer or category of customers.
A receivable is recognised on the transfer of the products, as this is the point at which consideration is deemed to be unconditional.
There are no variable elements to the consideration received that require estimation. No significant element of financing is present as
sales are made with a credit term of 30 days end of month, which is consistent with market practice.
Where costs are incurred by the Group in securing a contract to supply products, those costs, (subject to a de-minimis limit), are
recognised as customer contract assets (within trade and other receivables) in the Consolidated Statement of Financial Position.
The balance is amortised over the period in which revenue pertaining to those costs is recognised, which in the vast majority of
cases is four years. Reviews are performed to assess expected credit losses and balances adjusted if necessary.
Due to the fact that the Group’s customers typically collect or take delivery of products for immediate use in their intended purpose,
the likelihood of items being returned is small. Therefore, it is highly probable that a significant reversal of revenue will not occur.
The Group’s obligations to repair or replace faulty manufactured products under the standard warranty terms is recognised as a
provision, see Note 24.
Non-underlying items
The Group presents some material items of income and expense as non-underlying items. This is done when, in the opinion of the
Directors, the nature of the circumstances merit separate presentation in the Financial Statements. This includes, but is not limited
to, costs incurred in the act of securing debt or equity funding, non-recurring costs arising from business restructuring and expensed
software-as-a-service costs incurred in the process of developing strategic IT systems (see Software on page 136).
This treatment allows users of the Financial Statements to better understand the elements of financial performance in the year,
it facilitates comparison with prior periods, and it helps in understanding trends in financial performance. Further details are provided
in Note 7.
Eurocell plc Annual Report and Accounts 2023136
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
1 ACCOUNTING POLICIES (GROUP) CONTINUED
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of acquisition is measured as the aggregate of the
fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer,
in exchange for control of the acquiree. Direct costs of acquisition are recognised immediately as an expense.
Goodwill is initially measured at cost, being the excess of the cost of a business combination over the fair value of the identifiable assets,
liabilities and contingent liabilities acquired at the acquisition date. Goodwill is capitalised as an intangible asset with any impairment
in carrying value being charged to the Consolidated Statement of Comprehensive Income. Where the fair value of identifiable assets,
liabilities and contingent liabilities exceeds the fair value of consideration paid, the excess is credited in full to the Consolidated
Statement of Comprehensive Income on the acquisition date.
Discontinued operations
A discontinued operation is a component of the Group that has either been disposed of, or is classified as held for sale, and:
• Represents a separate major line of business or geographical area of operations;
• Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
• Is a subsidiary acquired exclusively with a view to resale.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss
after tax from discontinued operations in the statement of profit or loss. Additional disclosures are provided in Note 12. All other notes
to the Financial Statements include amounts for continuing operations, unless indicated otherwise.
Consideration received for the sale of a business is comprised of cash received upon completion plus deferred consideration.
Deferred consideration is recognised as a receivable on completion of the sale when there are no performance criteria and the buyer
is legally obliged to pay, therefore the cash is virtually certain to be received. Cash flows in relation to deferred consideration are
classified as a cash flow from investing activities.
The sale of the Security Hardware business in 2022 met the criteria above as it was a separate major line of business of the Group
as it is material and was an operating segment (part of the Building Plastics reported segment) and is therefore classified as a
discontinued operation in the prior year.
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their
useful economic lives.
Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other
contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques. Useful
economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:
Intangible asset
Useful economic life
Valuation method
Software
5 to 10 years
Cost to acquire
Technology-based
10 to 17 years
Cost to acquire
Customer-related
5 to 10 years
Cost to acquire
Marketing-related
10 to 15 years
Cost to acquire
The amortisation charge for the year is included within administration costs within the Consolidated Statement of Comprehensive Income.
Software
Costs associated with maintaining computer software programs are recognised as an expense in the underlying income statement
as they are incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software
products that are controlled by the Company are recognised as intangible assets, and amortised on a straight-line basis over their
estimated useful lives. Any development costs that directly relate to software-as-a-service (‘SaaS’) arrangements are expensed as
incurred unless the Company has control of the underlying SaaS software. Where expensed SaaS costs are incurred in the process
of developing strategic IT systems, which for the avoidance of doubt comprises the Group’s new Enterprise Resource Planning and
HR Information Systems, such costs are classified as non-underlying items as they are material in size and not part of the normal
costs of operating the business.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 137
Impairment of tangible assets, intangible assets, right-of-use assets and investments
Impairment tests on non-current assets are undertaken annually at the financial year end or at any other time when an indication of
impairment arises. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value
less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest
group of assets to which it belongs for which there are separately identifiable cash flows – its cash-generating unit (‘CGU’). Goodwill
is allocated on initial recognition to each of the Group’s CGUs that are expected to benefit from the synergies of the combination
giving rise to the goodwill.
Individual right-of-use lease property assets relating to the Group’s branch network are also tested for impairment when an indication
of impairment arises, such as a branch becoming loss-making. In considering individual branch performance, central overheads are
allocated to each branch in proportion to sales.
Where it is considered probable that climate change will have a measurable and materially adverse impact on the future cash flows
of a CGU or non-current asset, estimated cash flows and/or useful economic lives are reduced accordingly.
Impairment charges are included in the Consolidated Statement of Comprehensive Income, except to the extent they reverse gains
previously recognised in Other Comprehensive Income. An impairment loss recognised for goodwill is not reversed.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable
costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability
is recognised within provisions.
Freehold land is not depreciated. Assets in the course of construction are not depreciated until they are in a condition that would
allow them to be deployed in their intended use without further changes to their condition. Depreciation is provided on all other
items of property, plant and equipment so as to write off their cost less residual value over their expected useful economic lives.
It is provided at the following rates:
Asset class
Depreciation policy
Freehold property
2.5% per annum straight-line
Leasehold improvements
Equal instalments over the period of the lease
Plant and machinery
Mixing plant
Between 20% and 25% per annum on cost
Extruders
13 years based on production usage
Stillages and tooling
5 to 10 years based on production usage
Other
Between 10% and 25% per annum on cost
Motor vehicles
Between 20% and 25% per annum on cost
Office equipment and fixtures
Between 20% and 25% per annum on cost
Right-of-use lease assets
Right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and
impairment losses. Discount rates are based on our external financing rate and then a lease specific adjustment is applied.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers
ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option,
the related right-of-use asset is depreciated over the useful life of the underlying asset. Depreciation starts at the commencement
date of the lease. Leases are assessed for impairment based on value in use and impaired where this is below book value. Reversals
of impairments can occur where assets are subsequently found to have further value in use.
Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of
purchase and conversion and other costs incurred in bringing the inventories to their present location and condition. In determining
the cost of raw materials, consumables and goods purchased for resale, the weighted average purchase price is used. For work in
progress and finished goods, cost is taken as production cost, which includes a proportion of attributable overheads.
Net realisable value is based on estimated normal selling price, less further costs expected to be incurred up to completion and
disposal. Provision is made for obsolete, slow-moving or defective items where appropriate.
Eurocell plc Annual Report and Accounts 2023138
1 ACCOUNTING POLICIES (GROUP) CONTINUED
Financial assets
The Group records all of its financial assets at amortised cost and has not classified any of its financial assets at fair value through
profit and loss or other comprehensive income. The Group’s financial assets comprise trade and other receivables and cash and
cash equivalents in the balance sheet. These are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They arise principally through the provision of goods and services to customers, but also incorporate
other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable
to their acquisition or issue and are subsequently carried at amortised cost using the effective interest rate method, less provision for
impairment. Customer rebates are offset against receivable amounts in line with the terms of the customer agreements.
The Group applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for
trade receivables.
Expected loss rates are derived based upon the payment profile of sales over the three-year period up to the reporting date, and
the corresponding credit losses experienced. These rates are then adjusted to reflect current and forward-looking information on
macroeconomic factors affecting the ability of customers to settle receivables, including GDP, the rate of unemployment, new housing
starts, interest rates and household disposable income. Insured balances are excluded to the extent that no loss would arise in the
event of default by the customer.
Where the adjusted loss rates are different from the original estimate, there is an impact on the carrying value of trade receivables and
the amount credited or charged on a net basis to operating expenses within the Consolidated Statement of Comprehensive Income.
Whilst cash and cash equivalents and contract assets are also subject to the impairment requirements of IFRS 9, the identified
impairment loss was immaterial.
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with
original maturities of three months or less from inception, and – for the purpose of the statement of cash flows – bank overdrafts.
Bank overdrafts are shown within current liabilities in the balance sheet.
Financial liabilities
The Group classifies its financial liabilities as financial liabilities measured at amortised cost which include the following items:
• Bank borrowings which are initially recognised at fair value net of any transaction costs directly attributable to the issue of the
instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method,
which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in
the balance sheet
• Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.
Taxation
Tax on the profit for both the current and prior periods comprises both current and deferred tax and is recognised in the Consolidated
Statement of Comprehensive Income, except to the extent that it relates to items recognised directly in equity.
Current tax is the expected tax payable on taxable income for the year, using tax rates that have been enacted at the balance sheet
date, and any adjustment to tax payable in respect of prior years.
The Group recognises a current tax asset in respect of relief claimed under the Patent Box when the inflow of economic benefits
arising from that asset is virtually certain, deemed to be the submission of a claim to HM Revenue and Customs.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its
tax base, except for differences arising on:
• The initial recognition of goodwill
• The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction
affects neither accounting nor taxable profit
• Investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the
difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that future taxable profits will arise against
which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting
date and are expected to apply when the deferred tax liabilities/assets are settled/recovered.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 139
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities
and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
• The same taxable Group company
• Different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and
settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected
to be settled or recovered.
Lease liabilities
The Group leases certain properties, vehicles and material handling equipment. The Group has no leases previously classified as
finance leases. Liabilities for leases previously classified as operating leases have been measured in accordance with IFRS 16 using
the modified retrospective approach.
In applying IFRS 16, the Group has taken advantage of a number of practical expedients permitted by the standard:
• The application of a single discount rate to a portfolio of leases with reasonably similar characteristics
• Reliance on previous assessments as to whether leases are onerous
• Accounting for leases with a remaining term of less than 12 months as short-term leases
• The exclusion of initial direct costs in measuring the right-of-use asset at the date of initial application.
Leases with a remaining term of less than 12 months have been accounted for as short-term leases. Leased assets with a value of
less than £5,000 are omitted on the basis of materiality.
The Group assesses whether a contract is or contains a lease, at inception of a contract. The Group recognises a right-of-use asset
and a corresponding lease liability with respect to all lease agreements in which it is the lessee except for short-term leases (defined
as leases with a lease term of 12 months or less) and leases of low-value assets (defined as leases with a value of less than £5,000).
For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the
lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset
are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing
rate. The incremental borrowing rate is calculated based upon a combination of the risk-free rate, financing and asset-specific credit
spreads, adjusted for the term of each lease.
Lease payments included in the measurement of the lease liability comprise fixed lease payments, less any lease incentives. The lease
liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the lease payments made.
The principal and finance elements of lease payments are presented separately on the face of the Consolidated Cash Flow Statement
within financing activities.
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past
event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions
are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and, when appropriate, the risks specific to the liability.
The Group has recognised provisions for liabilities of uncertain timing or amount in respect of leasehold dilapidations and warranty
claims. The provision is measured at the best estimate of the expenditure required to settle the obligation at the reporting date,
discounted at a pre-tax rate as described above.
Dilapidations provisions are recognised in two ways. Firstly, known specific obligations relating to repairs required or structural changes
made to a building are recognised as soon as the timing and amount of the liability can be reliably estimated. Secondly, wear and tear
provisions relating to the Group’s branches are accrued at a standard rate over the life of each lease, reflecting the cost of returning
each branch to its prior condition at the end of the lease.
Share capital
The Group’s ordinary shares are classified as equity instruments.
Treasury shares
Treasury shares are held by the Company’s Employee Benefit Trust for the purpose of satisfying awards under the Group’s various
share-based payment schemes.
Shares in relation to the Employee Benefit Trust are acquired from the market and are held in treasury until such time as they are
issued to share scheme participants. Any shares not yet issued to employees at the end of the reporting period are shown as treasury
shares in the financial statements. Shares issued to employees are recognised on a first-in-first-out basis. Under the terms of the trust
deed, the Group is required to provide the Trust with the necessary funding for the acquisition of the shares.
Eurocell plc Annual Report and Accounts 2023140
1 ACCOUNTING POLICIES (GROUP) CONTINUED
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when
paid. In the case of final dividends, this is when approved by the Shareholders at the Annual General Meeting.
Retirement benefits: defined contribution scheme
The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in
an independently administered fund. The amount charged to the Consolidated Statement of Comprehensive Income represents the
contributions payable to the scheme in respect of the accounting period. The Group has no obligation to pay future pension benefits.
Foreign currency
The Group’s Financial Statements are presented in Sterling. For each entity, the Group determines the functional currency, and items
included in the Financial Statements of each entity are measured using that functional currency.
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they
operate (their ‘functional currency’) are recorded at the prevailing rate when the transactions occur. Foreign currency monetary assets
and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled
monetary assets and liabilities are recognised immediately in the Consolidated Statement of Comprehensive Income.
Share-based payment transactions
The Group has applied the requirements of IFRS 2 Share-based Payment.
Equity-settled share-based payments are measured at fair value at the date of grant. The fair value is determined at the grant
date using the Black-Scholes valuation model and equity-settled share-based payments are expensed on a straight-line basis
over the vesting period, based upon the Company’s estimate of the shares that will eventually vest and adjusted for the effect of
non-market-based vesting conditions.
Fair value is measured based on the value of options over shares on the date of grant and the likelihood of all or part of the
option vesting.
Alternative performance measures
The Group uses alternative performance measures alongside statutory measures to facilitate a better understanding of financial
performance and comparison with prior periods, and in order to provide audited financial information against which the Group’s bank
covenants, which are all measured on a pre-IFRS 16 basis, can be assessed.
EBITDA is defined as operating profit before depreciation and amortisation charges. Pre-IFRS 16 EBITDA is stated inclusive
of operating lease rentals under IAS 17 Leases.
Adjusted EBITDA, profits and earnings per share exclude non-underlying items. Adjusted profit measures allow users of the Financial
Statements to better understand financial performance in the year by removing certain material items of income and expense that are
unusual due to their nature or infrequency, thus facilitating better comparison with prior periods.
Covenants are assessed on a pre-IFRS 16 adjusted EBITDA, continuing basis.
2023 2022
£m £m
Operating profit
14.9
29.1
Depreciation and amortisation
24.7
23.9
EBITDA
39.6
53.0
Non-underlying items
3.5
2.2
Adjusted EBITDA
43.1
55.2
Operating lease rentals under IAS 17
(15.2)
(14.4)
Pre-IFRS 16 adjusted EBITDA
27.9
40.8
Pre-IFRS 16 total net (cash)/debt is defined as total borrowings and lease liabilities less cash and cash equivalents and deferred
consideration, excluding the impact of leases recognised under IFRS 16 Leases.
2023 2022
£m £m
Total net debt
58.2
78 .1
Lease liabilities
(58.6)
(63.7)
Pre-IFRS 16 net (cash)/debt
(0.4)
14.4
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 141
2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group makes certain estimates and judgements regarding the future. Estimates and judgements are continually evaluated based
on historical experience and other factors, including expectations of future events, that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from these estimates and judgements.
Critical estimates and judgements
The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
Recoverability of trade receivables
The Group applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for
trade receivables. Expected loss rates are derived based upon the payment profile of sales over the three-year period up to the
reporting date, and the corresponding credit losses experienced. These rates are then adjusted to reflect current and forward-looking
information on macroeconomic factors affecting the ability of customers to settle receivables, including GDP, the rate of unemployment,
new housing starts, interest rates and household disposable income.
Where the adjusted loss rates are different from the original estimate, there is an impact on the carrying value of trade receivables and
the amount credited or charged on a net basis to operating expenses within the Consolidated Statement of Comprehensive Income.
The key judgement is the extent to which macroeconomic factors impact upon the recoverability of trade receivables. The key estimate
is the adjusted loss rate applied to each age category.
If loss rates for current receivables were, on average, 600 basis points higher than current estimates, the provision for impairment
would increase by approximately £770,000. Further disclosures relating to trade receivables are provided in Note 20.
3 FINANCIAL INSTRUMENTS – RISK MANAGEMENT
The Group is exposed through its operations to the following financial risks:
• Credit risk
• Market risk
• Foreign exchange risk
• Liquidity risk.
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. The Group does
not consider there to be any significant concentration of risk. This note describes the Group’s objectives, policies and processes for
managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented
throughout these Financial Statements. There have been no substantive changes in the Group’s exposure to financial instrument
risks, its objectives, policies and processes for managing those risks, or the methods used to measure them from previous periods
unless otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
• Trade and other receivables
• Cash and cash equivalents
• Deferred consideration
• Trade and other payables
• Bank overdrafts
• Floating-rate bank loans
• Lease liabilities.
The Group finances its activities using cash generated from operations and its Revolving Credit Facility. It does not use invoice
discounting or any other financing facilities. The fair value for cash and cash equivalents is approximate to its book value.
Eurocell plc Annual Report and Accounts 2023142
3 FINANCIAL INSTRUMENTS – RISK MANAGEMENT CONTINUED
Principal financial instruments continued
A summary of the financial instruments held by category is provided below:
2023 2022
Financial assets £m £m
Cash and cash equivalents
0.4
5.1
Deferred consideration
—
0.8
Trade and other receivables
35.1
40.2
Total financial assets
35.5
46 .1
2023 2022
Financial liabilities £m £m
Trade and other payables
39.6
45.0
Lease liabilities
58.6
63.7
Borrowings
—
21.0
Total financial liabilities
98.2
129.7
The analysis above does not correspond to the values reported in the Consolidated Statement of Financial Position as excluded
from the analysis above are assets and liabilities from which no future cash flows are expected to arise, including rent-free periods
on leased properties, and unamortised arrangement costs relating to the Group’s borrowings.
Impairment of financial assets
Impairments of trade receivables are outlined in Note 20. No further impairments to financial assets are considered necessary.
The Group applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance
for trade receivables.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the Group’s finance function.
The Board receives monthly reports from the Chief Financial Officer through which it reviews the effectiveness of the processes
put in place and the appropriateness of the objectives and policies it sets. These are then discussed at regular Board meetings.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s
competitiveness and flexibility. Further details regarding these policies are set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The Group is mainly exposed to credit risk through its trade receivables arising from its normal commercial activities.
It is Group policy, implemented locally, to assess the credit risk of new customers before entering into contracts.
Existing credit risks associated with trade receivables are managed in line with Group policies as discussed in the financial assets
section of accounting policies. Credit risk also arises from cash and cash equivalents and deposits with banks and financial
institutions. This risk is mitigated by ensuring that deposits are only made with banks and financial institutions with a good rating
issued by an industry-recognised independent third party (e.g. Standard and Poor’s).
Further disclosures regarding financial assets are provided in Note 20.
Market risk
The Group is exposed to market risk from bank borrowings which incur variable interest rate charges linked to base rate plus
a margin. The Group’s objective is to manage the interest cost of the Group within the constraints of its financial covenants and
forecasts. It does this through regular reporting and monitoring of operating cash flows, effective working capital management
and close controls over the authorisation of capital expenditure.
If variable interest rates were 175 basis points higher/lower, the Group’s finance expense would increase/decrease by £250,000.
During 2023 and 2022, the Group’s borrowings at variable rate were denominated in Sterling. Further disclosures relating to bank
borrowings are provided in Note 21.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 143
Foreign exchange risk
Foreign exchange risk is the risk that the fair value of a financial instrument or future cash flow will fluctuate because of changes in
foreign exchange rates. The Group’s exposure to foreign exchange risk arises when individual Group entities enter into transactions
denominated in a currency other than their functional currency. The Group manages its exposure to fluctuations in currency rates by
wherever possible negotiating both purchases and sales to be denominated in Sterling. The profit or loss arising from likely changes
in foreign exchange is not significant.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.
To achieve this aim, cash flow forecasts are prepared and updated on a regular basis to ensure that the Group has adequate
headroom in its facilities. The Board receives monthly updates on the Group’s liquidity position and any issues are reported
by exception.
At the end of the financial year, the most recent cash flow projections indicated that the Group expected to have sufficient liquid
resources to meet its obligations under all reasonably foreseeable circumstances.
The following table sets out the contractual maturities (representing undiscounted contractual cash flows) of financial liabilities:
Between Between Between
Up to 3 3 and 12 1 and 2 2 and 5 Over
months months years years 5 years
At 31 December 2023
Total
£m £m £m £m £m
Trade and other payables
39.6
39.6
—
—
—
—
Lease liabilities
64.2
4.6
9.8
8.4
25.8
15.6
Borrowings
—
—
—
—
—
—
Total
103.8
44.2
9.8
8.4
25.8
15.6
Between Between Between
Up to 3 3 and 12 1 and 2 2 and 5 Over
months months years years 5 years
At 31 December 2022
Total
£m £m £m £m £m
Trade and other payables
45.0
45.0
—
—
—
—
Lease liabilities
69.6
3.6
10.7
13.1
23.0
19.2
Borrowings
21.0
—
—
—
21.0
—
Total
135.6
48.6
10.7
13 .1
44.0
19.2
Excluded from the analysis above are assets and liabilities from which no future cash flows are expected to arise.
Capital management
The Group’s objective when managing capital, which is deemed to be total equity plus total debt and which was £172.9 million
(2022: £198.9 million) at the balance sheet date, is to safeguard the Group’s ability to continue as a going concern, through the
optimisation of the debt and equity balance, and to maintain good headroom on its debt facilities and financial covenants. The Group
manages its capital structure and makes appropriate decisions in the light of current economic conditions and its strategic objectives.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and sustain the
future development of the business.
The funding requirements of the Group are met by the utilisation of external borrowings together with available cash.
A key objective of the Group’s capital management is to maintain comfortable headroom over the covenants set out in its existing
facility agreements.
The financial covenants which are in place, all measured on a pre-IFRS 16 basis, are as follows:
• Leverage: the ratio of total net debt to consolidated adjusted EBITDA of any relevant period of not more than 3:1
• Interest cover: the ratio of adjusted EBITDA to net interest payable in respect of any relevant period of not less than 4:1.
Covenants are measured at half year and year end on a rolling 12-month basis. As at 31 December 2023, Leverage and Interest
Cover were 0.0:1 and 20:1 respectively (2022: 0.4:1 and 25:1). The Group operated well within the terms of its covenants throughout
the current and prior periods. The Group anticipates that it will comfortably meet all future covenant obligations.
Eurocell plc Annual Report and Accounts 2023144
3 FINANCIAL INSTRUMENTS – RISK MANAGEMENT CONTINUED
Capital management continued
The following table sets out the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date:
As at 31 December 2023
GBP EUR USD Total
£m £m £m £m
Trade and other receivables
35.0
0.1
—
35.1
Cash and cash equivalents
0.4
—
—
0.4
Lease liabilities
(58.2)
(0.4)
—
(58.6)
Trade and other payables
(39.0)
(0.6)
—
(39.6)
(61.8)
(0.9)
—
(62.7)
As at 31 December 2022
GBP EUR USD Total
£m £m £m £m
Trade and other receivables
40.0
0.2
—
40.2
Cash and cash equivalents
4.8
0.3
—
5.1
Deferred consideration
0.8
—
—
0.8
Lease liabilities
(63.5)
(0.2)
—
(63.7)
Other interest-bearing borrowings
(21.0)
—
—
(21.0)
Trade and other payables
(44.7)
(0.3)
—
(45.0)
(83.6)
—
—
(83.6)
4 REVENUE
Revenue arises from:
2023 2022
£m £m
Sale of goods
364.5
381.2
External revenue by destination:
2023 2022
£m £m
United Kingdom
359.3
376.6
European Union
4.1
4.0
Rest of World
1.1
0.6
364.5
381.2
There are no customers with sales in excess of 10% of total Group revenues.
Revenue is disclosed net of contract asset amortisation and related expenses in the year of £1.5 million (2022: £1.3 million).
Further details are provided in Note 20.
5 AUDITORS’ REMUNERATION
Total amounts payable to the Group’s auditors were as follows:
2023 2022
£000 £000
Audit of these Financial Statements
100
100
Amounts receivable by auditors and their associates in respect of:
Audit of Financial Statements of subsidiaries pursuant to legislation
238
232
Audit-related assurance services
70
65
408
397
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 145
6 EXPENSES BY NATURE
2023 2022
£m £m
Depreciation of property, plant and equipment (Note 15)
9.3
8.8
Depreciation of right-of-use assets (Note 16)
13.7
13.3
Amortisation of intangible assets (Note 17)
1.7
1.8
Impairment of property, plant and equipment and right-of-use assets
0.3
0.6
Other non-underlying operating expenses
3.2
1.6
Cost of inventories
169.5
181.8
Other variable costs
21.2
14.9
Employee benefits expense (Note 8)
85.2
84.9
Short-term lease rentals
2.0
2.2
Other expenses
43.9
43.3
Total cost of sales, distribution costs and administration expenses
350.0
353.2
7 NON-UNDERLYING ITEMS
Amounts included in the Consolidated Statement of Comprehensive Income are as follows:
2023 2022
£m £m
Restructuring costs
2.7
1.6
Asset impairment charges
—
0.6
Cloud computing expenses
0.8
—
Non-underlying operating expenses
3.5
2.2
Finance expense
—
0.3
Total non-underlying expenses
3.5
2.5
Taxation
(0.8)
(0.5)
Impact on profit after tax
2.7
2.0
Restructuring costs
Restructuring costs relate to redundancy payments and related employee benefit termination costs, with 119 roles impacted (2022: 63)
at a one-off cost of £2.7 million (2022: £1.6 million). These costs are classified as non-underlying as they relate to roles that no longer
exist within the organisation and therefore would not re-occur in future reporting periods. Included is a credit of £0.2 million in respect
of the release of a provision relating to a restructuring exercise announced in 2022 and completed in early 2023.
Asset impairment charges
The 2022 charges of £0.6 million relate to the closure of five branches in early 2023, which had been announced as at
31 December 2022.
Cloud computing expenses
Cloud computing expenses relate to costs incurred on strategic IT projects involving ‘Software as a Service’ arrangements which
are expensed as incurred rather than being capitalised as intangible assets (see Note 1).
Such items are considered to be non-underlying in nature because they relate to multi-year programmes to deliver strategic
IT implementations which are material in size. Our strategic IT projects comprise a new customer-facing website, an employee
management system and, most significantly, the replacement of the Group’s Enterprise Resource Planning (ERP) system, with
overall spend estimated to be in the region of £8-10 million over the next three years.
Finance expense
The 2022 charges relate to the Group having refinanced its Revolving Credit Facility in May 2022. Unamortised arrangement fees
relating to the previous facility, which had been due to expire in December 2023, were expensed to the Consolidated Income
Statement, and have been presented as non-underlying as the facility to which they relate no longer exists.
Impact on cash flow
Of the £3.5 million non-underlying expenses recognised, £3.2 million was settled in cash at 31 December 2023. The remaining
£0.3 million relates to non-cash asset impairment charges.
Of the £2.5 million non-underlying expenses recognised in 2022, £1.4 million had been settled in cash at 31 December 2023, and
£0.2 million had been credited to the income statement. The remaining £0.9 million relates to non-cash asset impairment charges.
Eurocell plc Annual Report and Accounts 2023146
8 EMPLOYEE BENEFITS EXPENSE
2023 2022
£m £m
Staff costs (including Directors) comprise:
Wages and salaries
73.7
74. 2
Share-based payments
0.8
(0.2)
Social security costs
8.0
8.2
Other pension costs
2.7
2.7
85.2
84.9
The average monthly number of employees, including Directors, during the year was as follows:
2023 2022
No. No.
Production
767
789
Office and administration
426
459
Distribution
908
1,002
2,101
2,250
Key management personnel compensation and Directors’ remuneration
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the Group, which is considered to be the Directors of the Company.
2023 2022
£m £m
Emoluments
1.4
1.7
Share-based payments
0.5
( 0.1)
Pension and other post-employment benefit costs
0.1
0.1
2.0
1.7
Directors’ remuneration is set out in the Remuneration Report on pages 98 to 115. As stated, Mark Kelly retired and was replaced
as Chief Executive by Darren Waters in May 2023. The highest paid Director received remuneration of £412,000 (2022: £857,000).
During the year, retirement benefits were accruing to three Directors in respect of defined contribution pension schemes (2022: two).
The value of contributions paid to a defined contribution pension scheme in respect of the highest paid Director amounted to £15,000
(2022: £47,000).
During the current year, 316,184 share options were exercised by Directors of the Group (2022: nil). No options were exercised by the
highest paid Director (2022: nil).
During the year, no long-term benefits were issued, nor any termination payments made.
The Group’s policy for consulting with, sharing information with, and encouraging the involvement of employees is discussed on
pages 77 to 86.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 147
9 SEGMENTAL INFORMATION
The Group organises itself into a number of operating segments that offer different products and services. They are managed
separately because each business requires different technology and marketing strategies. Internal reporting provided to the
chief operating decision-maker, which has been identified as the executive management team including the Chief Executive
and the Chief Financial Officer, reflects this structure.
The Group has aggregated its operating segments into three reported segments, as these business units have similar products,
production processes, types of customer, methods of distribution, regulatory environments, and economic characteristics:
• Profiles – extrusion and sale of PVC window and building products to the new and replacement window market across the UK.
This segment includes Vista Panels, S&S Plastics and Eurocell Recycle North
• Building Plastics – sale of building plastic materials across the UK
• Corporate – represents costs relating to the ultimate Parent company and includes the assets and related amortisation in respect
of acquired intangible assets.
Inter-segmental sales, which are eliminated on consolidation, are transacted on an arms’ length basis and relate to manufactured
products distributed by the Building Plastics division.
Building
Profiles Plastics Corporate Total
2023 2023 2023 2023
£m £m £m £m
Revenue
Total revenue
219.8
210.0
—
429.8
Inter-segmental revenue
(64.9)
(0.4)
—
(65.3)
Total revenue from external customers
154.9
209.6
—
364.5
Adjusted EBITDA
25.5
17.4
0.2
43.1
Amortisation of intangible assets
—
—
(1.7)
(1.7)
Depreciation of property, plant and equipment
(7.3)
(1.2)
(0.8)
(9.3)
Depreciation of right-of-use assets
(6.3)
(7. 3)
(0.1)
(13.7)
Adjusted operating profit/(loss)
11.9
8.9
(2.4)
18.4
Non-underlying operating expenses
(1.8)
(0.7)
(1.0)
(3.5)
Operating profit/(loss)
10.1
8.2
(3.4)
14.9
Finance expense
(3.2)
Profit before tax from continuing operations
11.7
Building
Profiles Plastics Corporate Total
2022 2022 2022 2022
£m £m £m £m
Revenue
Total revenue
234.0
219.8
—
453.8
Inter-segmental revenue
(72.3)
(0.3)
—
(72.6)
Total revenue from external customers
161.7
219.5
—
381.2
Adjusted EBITDA
32.7
21.0
1.5
55.2
Amortisation of intangible assets
—
—
(1.8)
(1.8)
Depreciation of property, plant and equipment
( 7. 0 )
(1.1)
(0.7)
(8.8)
Depreciation of right-of-use assets
(5.5)
(7.7)
(0 .1)
(13.3)
Adjusted operating profit/(loss)
20.2
12.2
(1.1)
31.3
Non-underlying operating expenses
(0.9)
(1.3)
—
(2.2)
Operating profit/(loss)
19.3
10.9
(1.1)
29.1
Finance expense
(2.9)
Profit before tax from continuing operations
26.2
Eurocell plc Annual Report and Accounts 2023148
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
9 SEGMENTAL INFORMATION CONTINUED
Building
Profiles Plastics Corporate Total
2023 2023 2023 2023
£m £m £m £m
Additions to plant, property, equipment and intangible assets
6.9
1.5
0.5
8.9
Segment assets
126.9
78.5
18.4
223.8
Segment liabilities
(53.3)
(43.7)
(4.5)
(101.5)
Borrowings
—
Deferred tax liability
(8.0)
Total liabilities
(109.5)
Total net assets
114.3
Building
Profiles Plastics Corporate Total
2022 2022 2022 2022
£m £m £m £m
Additions to plant, property, equipment and intangible assets
7.6
1.4
3.3
12.3
Segment assets
14 5.1
89.4
19.8
254.3
Segment liabilities
(61.3)
(43.2)
( 7. 8 )
(112. 3)
Borrowings
(20.3)
Deferred tax liability
(6.8)
Total liabilities
(139.4)
Total net assets
114.9
Geographical information
Non-current Non-current
Revenue assets Revenue assets
2023 2023 2022 2022
£m £m £m £m
United Kingdom
362.5
130.8
379.3
138.3
Republic of Ireland*
2.0
—
1.9
—
Total
364.5
130.8
381.2
138.3
* The net book value of non-current assets in the Republic of Ireland was less than £50,000 in both years.
10 FINANCE EXPENSE
2023 2022
£m £m
Finance expense
Bank borrowings
1.4
1.2
Interest on lease liabilities
1.8
1.4
Underlying finance expense
3.2
2.6
Non-underlying finance expense (Note 7)
—
0.3
Total finance expense
3.2
2.9
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 149
11 TAXATION
2023 2022
£m £m
Current tax expense
Current tax on profits for the year
2.0
3.2
Adjustments in respect of prior years
(1.1)
0.3
Total current tax
0.9
3.5
Deferred tax expense
Origination and reversal of temporary differences
0.4
0.7
Adjustment in respect of change in rates
—
0.2
Adjustment in respect of prior years
0.8
(0.7)
Total deferred tax
1.2
0.2
Total tax expense
2 .1
3.7
2023 2022
£m £m
Continuing operations
2.1
4.2
Discontinued operations
—
(0.5)
Total tax expense
2 .1
3.7
The reasons for the difference between the actual current tax charge for the year and the standard rate of corporation tax in the
United Kingdom applied to profits for the year are as follows:
2023 2022
£m £m
Profit before tax from continuing operations
11.7
26.2
Loss before tax from discontinued operations
—
(2.8)
Profit before tax
11.7
23.4
Expected tax charge based on the standard rate of corporation tax in the UK of 23.5% (2022: 19.0%)
2.7
4.4
Taxation effect of:
Expenses not deductible for tax purposes
0.4
0.4
Capital allowance super-deduction utilised
—
(0.3)
Patent Box claims
(0.5)
(0.4)
Deferred tax impact of share-based payments
0.1
—
Adjustment in respect of prior years
(1.1)
0.3
Tax effect of accelerated capital allowances
(0.7)
(0.9)
Current tax expense
0.9
3.5
Eurocell plc Annual Report and Accounts 2023150
11 TAXATION CONTINUED
The reasons for the difference between the total tax charge for the year and the standard rate of corporation tax in the United
Kingdom applied to profits for the year are as follows:
2023 2022
£m £m
Profit before tax from continuing operations
11.7
26.2
Loss before tax from discontinued operations
—
(2.8)
Profit before tax
11.7
23.4
Expected tax charge based on the standard rate of corporation tax in the UK of 23.5% (2022: 19.0%)
2.7
4.4
Taxation effect of:
Expenses not deductible for tax purposes
0.2
0.2
Capital allowance super-deduction utilised
—
(0.3)
Patent Box claims
(0.5)
(0.4)
Adjustments in respect of prior years
(0.3)
(0.4)
Adjustment in respect of change in rates
—
0.2
Total tax expense
2 .1
3.7
Changes in tax rates and factors affecting the future tax charge
An increase in the mainstream rate of UK corporation tax from 19% to 25% from April 2023 was enacted during 2021. This gave rise
to a blended standard rate of 23.5% in 2023.
There are no material uncertain tax provisions.
Tax included in Other Comprehensive Income
The tax charge arising on share-based payments within Other Comprehensive Income is £nil (2022: £nil).
Based on the current investment plans of the Group, and assuming the rates of capital allowances on capital expenditure continue
into the future, the vast majority of the deferred tax liability is expected to unwind over a period of greater than one year.
Tax residency
Eurocell plc and its subsidiaries are all registered in the United Kingdom and are resident in the UK for tax purposes, except as
described below.
The Group has two branches in the Republic of Ireland, with combined annual revenues of £2.0 million (2022: £1.9 million), total assets
of less than £50,000 (2022: less than £50,000) and eight full-time employees (2022: eight full-time employees). For tax purposes, these
two trading locations form a single branch within Eurocell Building Plastics Limited, and therefore any profits generated are subject to
tax in the Republic of Ireland. The tax charge in relation to the Group’s Republic of Ireland operations in 2023 is €nil (2022: €nil) and
no tax payments were made during the year (2022: €nil). This is due to utilisation of losses brought forward. No deferred tax assets
are recognised on unutilised losses due to the uncertainty of future profits in the Republic of Ireland.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 151
12 LOSS AFTER TAX FROM DISCONTINUED OPERATIONS
As part of a restructuring exercise, on 2 December 2022 the Group completed the sale of the trade and assets of its Security
Hardware business for a total consideration of £1.2 million. Security Hardware was a separate operating segment which had
previously been aggregated and presented as part of the Building Plastics reported segment.
The results of the business for the prior year are presented below:
Year ended
31 December
2022
£m
Revenue
2.9
Cost of sales
(2.2)
Gross profit
0.7
Distribution costs
(0.8)
Administrative expenses
(1.2)
Operating loss
(1.3)
Finance expense
—
Loss before tax from discontinued operations
(1.3)
Taxation
0.2
Loss after tax from discontinued operations
(1.1)
Loss on sale of trade and assets after tax
(1.2)
Loss from discontinued operation
(2.3)
The loss on sale of £1.2 million, recognised in the prior year, is comprised of the following:
2022
£m
Consideration received
Cash
0.4
Deferred consideration
0.8
Total consideration
1.2
Carrying value of net assets sold
(2.6)
Transaction costs
(0.1)
Loss on sale before tax
(1.5)
Taxation
0.3
Loss on sale after tax
(1.2)
The carrying values of assets and liabilities as at 2 December 2022 were as follows:
£m
Property, plant and equipment
0.4
Right-of-use assets
0.3
Intangible assets
0.3
Inventories
1.9
Lease liabilities
(0.3)
Carrying value of net assets sold
2.6
Eurocell plc Annual Report and Accounts 2023152
12 LOSS AFTER TAX FROM DISCONTINUED OPERATIONS CONTINUED
The net cash flows arising were as follows:
2023 2022
£m £m
Net cash outflow from operating activities
—
(0.2)
Net cash inflow from investing activities
0.8
0 .1
Net increase/(decrease) in cash generated by discontinued operation
0.8
(0.1)
Losses per share were as follows:
2022
Pence
Basic losses per share from discontinued operations
(2.0)
Diluted losses per share from discontinued operations
(2.0)
13 EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the year, excluding treasury shares. Adjusted earnings per share excludes
the impact of non-underlying items. Earnings per share from continuing operations excludes the impact of discontinued operations.
Diluted earnings per share is calculated by adjusting the earnings and number of shares for the effects of dilutive options. In the event
that a loss is recorded for the period, share options are not considered to have a dilutive effect.
2023 2022
£m £m
Profit from continuing operations attributable to ordinary shareholders
excluding non-underlying items
12.3
24.0
Profit from continuing operations attributable to ordinary shareholders
9.6
22.0
Loss from discontinued operations
—
(2.3)
Profit attributable to ordinary shareholders
9.6
19.7
2023 2022
No. No.
Weighted average number of shares – basic
111,
88
5,08
3
112,036,668
Dilutive impact of share options granted
53,451
747,137
Weighted average number of shares – diluted
111,9
38 ,534
112,783,8 0 5
2023 2022
Pence Pence
Continuing operations
Basic earnings per share
8.6
19.6
Adjusted basic earnings per share
11.0
21.4
Diluted earnings per share
8.6
19.5
Adjusted diluted earnings per share
11.0
21.3
Discontinued operations
Basic losses per share
—
(2.0)
Diluted losses per share
—
(2.0)
Total
Basic earnings per share
8.6
17. 6
Diluted earnings per share
8.6
17. 5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 153
14 DIVIDENDS
2023 2022
£m £m
Dividends paid during the year
Interim dividend for 2023 of 2.0p per share (2022: 3.5p per share)
2.2
3.9
Final dividend for 2022 of 7.2p per share (2021: 6.4p per share)
8.1
7. 2
10.3
11.1
Dividends proposed
Final dividend for 2023 of 3.5p per share
3.8
—
Final dividend for 2022 of 7.2p per share
—
8.1
3.8
8.1
15 PROPERTY, PLANT AND EQUIPMENT
Office
Freehold Leasehold Plant and Motor equipment Assets under
property improvements machinery vehicles and fixtures construction Total
£m £m £m £m £m £m £m
Cost
Balance at 1 January 2022
9.0
0.1
54.8
0.4
—
12.2
76.5
Additions
—
—
2.0
—
—
10.0
12.0
Disposals
(0.1)
—
(1.6)
—
—
—
(1.7)
Disposal of business
—
—
(0.3)
(0.1)
( 0.1)
( 0.1)
(0.6)
Transfers
0.1
(0 .1)
14.2
0.8
0.1
(16.1)
(1.0)
Balance at 31 December 2022
9.0
—
69.1
1.1
—
6.0
85.2
Additions
—
—
1.7
0.3
—
6.8
8.8
Disposals
—
—
(2.2)
(0.2)
—
(0.4)
(2.8)
Transfers
—
—
4.5
—
—
(5.4)
(0.9)
Balance at 31 December 2023
9.0
—
73.1
1.2
—
7.0
90.3
Accumulated depreciation and impairment
Balance at 1 January 2022
1.7
—
15.5
0.1
—
—
17. 3
Charge for the year
0.3
—
8.4
0.1
—
—
8.8
Impairment charges
—
—
0.2
—
—
—
0.2
Disposals
(0.1)
—
(1.6)
—
—
—
(1.7)
Disposal of business
—
—
( 0.1)
( 0.1)
—
—
(0.2)
Transfers
(0.1)
—
(1.6)
0.8
—
—
(0.9)
Balance at 31 December 2022
1.8
—
20.8
0.9
—
—
23.5
Charge for the year
0.3
—
8.9
0.1
—
—
9.3
Impairment charges
—
—
0.2
—
—
—
0.2
Disposals
—
—
(2.2)
(0.2)
—
—
(2.4)
Transfers
—
—
(0.2)
—
—
—
(0.2)
Balance at 31 December 2023
2 .1
—
27.5
0.8
—
—
30.4
Net book value
At 31 December 2023
6.9
—
45.6
0.4
—
7.0
59.9
At 31 December 2022
7. 2
—
48.3
0.2
—
6.0
61.7
Included within freehold property is non-depreciable land of £2.3 million (31 December 2022: £2.3 million).
There is no restriction of title, nor equipment pledged as security for liabilities included with Property, Plant and Equipment.
Eurocell plc Annual Report and Accounts 2023154
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
16 RIGHT-OF-USE ASSETS
Office
Leasehold Motor equipment
improvements vehicles and fixtures Total
£m £m £m £m
Cost
Balance at 1 January 2022
62.6
22.0
0.1
84.7
Additions
13.2
5.7
—
18.9
Disposals
(5.7)
(3.2)
—
(8.9)
Disposal of business
(0.7)
—
—
(0.7)
Reclassification
(1.0)
(0.1)
(0 .1)
(1.2)
Balance at 31 December 2022
68.4
24.4
—
92.8
Additions
4.6
4.7
0.3
9.6
Disposals
(2.7)
(4.1)
—
(6.8)
Balance at 31 December 2023
70.3
25.0
0.3
95.6
Accumulated depreciation and impairment
Balance at 1 January 2022
19.6
10.3
—
29.9
Charge for the year
8.2
5.1
—
13.3
Impairment charges
0.2
0.2
—
0.4
Disposals
(5.7)
(3.2)
—
(8.9)
Disposal of business
(0.4)
—
—
(0.4)
Reclassification
(0.2)
(1.0)
—
(1.2)
Balance at 31 December 2022
21.7
11.4
—
33.1
Charge for the year
8.7
4.9
0.1
13.7
Impairment charges
—
0.1
—
0.1
Disposals
(2.8)
(3.6)
—
(6.4)
Balance at 31 December 2023
27.6
12.8
0.1
40.5
Net book value
At 31 December 2023
42.7
12.2
0.2
5 5.1
At 31 December 2022
46.7
13.0
—
59.7
See Note 23 for details of lease liabilities.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 155
17 INTANGIBLE ASSETS
Software Technology-based Customer-related Marketing-related Goodwill Total
£m £m £m £m £m £m
Cost
Balance at 1 January 2022
3.5
1.6
7. 5
6.3
16.8
35.7
Additions
0.3
—
—
—
—
0.3
Transfers
(0.1)
—
—
0.2
—
0.1
Disposal of business
—
—
(0.5)
—
(0.2)
(0.7)
Balance at 31 December 2022
3.7
1.6
7.0
6.5
16.6
35.4
Additions
0.1
—
—
—
—
0.1
Transfers
0.7
—
—
—
—
0.7
Disposals
(1.0)
(0.1)
—
(0.2)
—
(1.3)
Balance at 31 December 2023
3.5
1.5
7.0
6.3
16.6
34.9
Accumulated amortisation
Balance at 1 January 2022
1.7
0.8
5.8
3.0
5.8
17.1
Charge for the year
0.4
0.1
0.8
0.5
—
1.8
Disposal of business
—
—
(0.4)
—
—
(0.4)
Transfers
(0.1)
—
(0.1)
0.2
—
—
Balance at 31 December 2022
2.0
0.9
6.1
3.7
5.8
18.5
Charge for the year
0.4
0.1
0.7
0.5
—
1.7
Disposals
(0.8)
(0.1)
—
(0.2)
—
(1.1)
Balance at 31 December 2023
1.6
0.9
6.8
4.0
5.8
19.1
Net book value
At 31 December 2023
1.9
0.6
0.2
2.3
10.8
15.8
At 31 December 2022
1.7
0.7
0.9
2.8
10.8
16.9
The 2022 disposal of business is in relation to the disposal of the Security Hardware goodwill and customer-related intangible assets
with a net book value of £0.3m.
Included within customer-related and marketing-related intangible assets are the acquired intangibles in relation to the acquisition of
Vista Panels in 2016, which have a combined carrying value of £0.4 million (2022: £0.8 million) and a remaining amortisation period
of one year.
There are no internally-generated intangible assets.
18 IMPAIRMENT
For the purpose of impairment testing, goodwill is allocated to Cash Generating Units (‘CGUs’) as follows:
2023 2022
£m £m
Eurocell Building Plastics
5.1
5.1
Eurocell Profiles
3.3
3.3
Recycling
—
—
Vista Panels
2.2
2.2
S&S Plastics
0.2
0.2
10.8
10.8
CGUs are determined with reference to the smallest identifiable groups of assets that generate cash flows independently of
other groups of assets, with reference to the business or product sectors in which they operate and CGUs are smaller than the
disclosed segments.
Eurocell plc Annual Report and Accounts 2023156
18 IMPAIRMENT CONTINUED
In January 2023 there was a change to how CGU performance was presented to the chief operating decision-maker which reported
the recycling operations as a separate CGU. At the point this change was made there was no Goodwill held in this CGU and an
impairment test was performed and concluded that no impairment was required.
The recoverable amounts of the CGUs have been determined from ‘value-in-use’ calculations which have been predicated on
discounted pre-tax cash flow projections based on a three-year business plan approved by the Board. These projections are based
on all available information and growth rates do not exceed growth rates achieved in prior periods.
The key assumptions in preparing these forecasts are in line with the Group’s published strategy, which includes continuing to open
new branches, developing new products and increasing the use of recycled materials.
The cash flow forecasts take into consideration the factors in relation to climate change as discussed in the Sustainability Report
section of the Strategic Report on pages 32 to 49. Management has considered the impact of a rise in global temperatures
of 2.0 degrees Celsius. In conclusion, the Group believes the impact on cash flows would be broadly neutral, on the basis that
any negative impact of the transition to a low-carbon society would be offset by both the increased recycling of PVC windows
and Government legislation to reduce emissions through the replacement of old windows with newer windows with better thermal
qualities (such as the Future Homes Standard), both long-term drivers of growth for the business. The Group continues to replace
and upgrade its fleet of extruders and vehicles as part of its normal maintenance capex cycle, and therefore does not anticipate any
risk of asset obsolescence or significant additional costs in this scenario.
All of the Group’s CGUs operate principally in the UK Repair, Maintenance and Improvements market, and all are funded through a
combination of retained earnings and the Group’s Revolving Credit Facility. The strategic decision-making timeframe is also consistent
across all CGUs. Consequently, the key assumptions detailed below are applied consistently across each CGU:
2023
2022
Period on which management-approved forecasts are based (years)
3
3
Discount rate (pre-tax)
12%
10%
Profit growth rate in perpetuity
2%
2%
The period on which management-approved forecasts are based is consistent with the Board’s strategic planning timeframe.
The discount rate reflects an estimate of the Group’s pre-tax Weighted Average Cost of Capital, based on past experience and
sector-weighted assumptions. The profit growth rate in perpetuity is consistent with the average annual growth in UK Gross
Domestic Product between 1990 and 2019 (source: Office for National Statistics).
Goodwill is considered to have an indefinite useful life.
The Group assessed the recoverable amount in respect of goodwill for each CGU to be greater than the carrying amount and
therefore no impairment arises. No reasonably possible change in assumptions would result in an impairment for these CGUs.
Sensitivities
The following sales reduction or discount rate increase sensitivities would reduce headroom on each CGU to nil:
2023
2022
2023 Discount 2022 Discount
Sales rate Sales rate
Eurocell Building Plastics
77%
40%
90%
46%*
Eurocell Profiles
74%
37%
55%
19%
Vista Panels
84%
49%
93%
76%
S&S Plastics
31%
16%
70%
23%*
* Prior year discount rates have been re-presented.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 157
19 INVENTORIES
2023 2022
£m £m
Raw materials
7.3
7. 3
Work in progress
3.7
2.4
Finished goods and goods for resale
35.7
50.2
46.7
59.9
All inventories are carried at cost less a provision to take account of slow-moving and obsolete items. At 31 December 2023 the
inventory provision amounted to £3.5 million (2022: £3.5 million).
20 TRADE AND OTHER RECEIVABLES
2023 2022
£m £m
Trade receivables
38.6
43.5
Less: provision for impairment of trade receivables
(1.2)
(1.8)
Less: provision for rebates payable
(2.3)
(1.5)
Net trade receivables
35.1
40.2
Contract assets
1.9
0.7
Prepayments
7.9
8.6
Other receivables
0.4
0.5
Total trade and other receivables
45.3
50.0
Trade receivables are non-interest-bearing and are generally on 30 days’ credit. The fair values of trade and other receivables
classified as financial assets are not materially different to their carrying values.
Contract assets are amortised over the period in which revenue pertaining to those costs is recognised, which in the vast majority
of cases is four years. Additions of £1.8 million were recognised during the year (2022: £0.8 million), and amounts amortised against
revenue were £0.6 million (2022: £0.5 million).
The Group applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance
for all financial assets. In measuring expected credit losses for trade receivables, receivables have been grouped based on shared
characteristics and days past due. Insured balances are excluded to the extent that no loss would arise in the event of default
by the customer. Contract assets are assessed for impairment on a customer-by-customer basis following the application of the
expected credit losses to the trade receivables.
Expected loss rates are derived based upon the payment profile of sales over a three-year period before 31 December 2023, and
the corresponding credit losses experienced. These rates are then adjusted to reflect current and forward-looking information on
macroeconomic factors affecting the ability of customers to settle receivables, GDP, the rate of unemployment, new housing starts,
interest rates and household disposable income.
The closing loss allowances for trade receivables and contract assets as at 31 December reconcile to the opening loss allowances
as follows:
Trade receivables
Contract assets
2023 2022 2023 2022
£m £m £m £m
At 1 January
1.8
2.6
—
—
Charged during the year
0.5
0.3
—
—
Released during the year
(0.4)
—
—
—
Receivables written off during the year as uncollectible
(0.7)
(1.1)
—
—
At 31 December
1.2
1.8
—
—
Trade receivables and contract assets are written off where there is no reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group,
and a failure to make contractual payments for a period of greater than 120 days past due.
Eurocell plc Annual Report and Accounts 2023158
20 TRADE AND OTHER RECEIVABLES CONTINUED
Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries
of amounts previously written off are credited against the same line item.
The rate of expected loss has continued to decrease as payment patterns return to normal following the disruption of the global
pandemic and its after-effects. The rate has now returned to historical levels.
More than 30 More than 60 More than 90 More than 120
Current days past due days past due days past due days past due Total
At 31 December 2023 £m £m £m £m £m £m
Expected loss rate
1%
12%
48%
81%
74%
3%
Gross carrying amount
– trade receivables
35.7
1.6
0.4
0.1
0.8
38.6
Gross carrying amount
– contract assets
1.9
—
—
—
—
1.9
Loss allowance
0.1
0.2
0.2
0.1
0.6
1.2
More than 30 More than 60 More than 90 More than 120
Current days past due days past due days past due days past due Total
At 31 December 2022 £m £m £m £m £m £m
Expected loss rate
1%
8%
39%
74%
52%
4%
Gross carrying amount
– trade receivables
36.0
5.3
0.6
0.3
1.3
43.5
Gross carrying amount
– contract assets
0.7
—
—
—
—
0.7
Loss allowance
0.2
0.4
0.2
0.3
0.7
1.8
21 BORROWINGS
The book value and fair value of borrowings are as follows:
Book value Fair value Book value Fair value
2023 2023 2022 2022
£m £m £m £m
Non-current
Bank borrowings unsecured
—
—
20.3
20.3
Total borrowings
—
—
20.3
20.3
Borrowings of £nil were drawn down at 31 December 2023 (2022: £21.0 million). The average drawdown on the facility during the
year ended 31 December 2023 was £12.4 million (2022: £22.1 million). Total unamortised costs of £0.7 million as at 31 December
2023 have been reclassified to other receivables as no borrowings were drawn at the balance sheet date. Total unamortised costs
of £0.7 million as at 31 December 2022 are presented as a deduction to borrowings.
The bank borrowings outstanding at 31 December 2022 are classified as non-current liabilities as they relate to committed facilities
available to the Group until 2027. The book value and fair value are not considered to be materially different.
In May 2023 the Group completed a one-year extension to its £75 million multi-currency revolving unsecured credit facility, which now
matures in 2027. The key terms of the facility remain unchanged. Following the extension of the facility in 2023, £0.2 million of costs
were capitalised within borrowings and are being released to the Consolidated Statement of Comprehensive Income within finance
expense over the period of the facility.
Following the extension of our facility in 2022, £0.8 million of costs were capitalised within borrowings and are being released to
the Consolidated Statement of Comprehensive Income within finance expense over the period of the facility. The unamortised
arrangement fees in relation to the previous facility were expensed to the Consolidated Statement of Comprehensive Income in
2022 and classified as non-underlying items (see Note 7).
Interest is charged at an excess over base rate of between 1.5% and 2.5% per annum and is dependent upon the ratio of total net
debt to consolidated EBITDA (on a pre-IFRS 16 basis).
All of the Group’s borrowings are denominated in Sterling. Details of the Company’s banking covenants are given in Note 3.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 159
The analysis of repayments on the combined borrowings is as follows:
2023 2022
£m £m
Within one year or repayable on demand
—
—
Between one and two years
—
—
Between two and five years
—
21.0
—
21.0
22 TRADE AND OTHER PAYABLES
2023 2022
£m £m
Current liabilities
Trade payables
29.0
33.9
Other tax and social security
6.0
6.4
Other payables
0.8
1.1
Accruals and deferred income
5.8
6.0
Total current trade and other payables
41.6
47.4
Book values approximate to fair value at 31 December 2023 and 31 December 2022.
23 LEASE LIABILITIES
2023 2022
£m £m
Lease liabilities
Current
12.9
13.0
Non-current
45.7
50.7
Total discounted lease liabilities at 31 December
58.6
63.7
2023 2022
£m £m
Maturity analysis
— Less than one year
14.4
14.3
— One to five years
34.2
36.1
— More than five years
15.6
19.2
Total undiscounted lease liabilities at 31 December
64.2
69.6
2023 2022
£m £m
Finance expense
Interest on lease liabilities
1.8
1.4
See Note 16 for details of right-of-use assets.
Eurocell plc Annual Report and Accounts 2023160
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
24 PROVISIONS
Dilapidations and
environmental Warranty
provisions provisions Total
£m £m £m
At 1 January 2022
1.2
0.3
1.5
Charged/(credited) to Statement of Comprehensive Income
0.1
(0.3)
(0.2)
Utilised
(0.1)
—
(0 .1)
At 31 December 2022
1.2
—
1.2
Charged to Statement of Comprehensive Income
0 .1
—
0.1
Utilised
—
—
—
At 31 December 2023
1.3
—
1.3
Current
0.2
—
0.2
Non-current
1.1
—
1.1
At 31 December 2023
1.3
—
1.3
Dilapidations and environmental provisions
Under property lease agreements, the Group has obligations to maintain all properties to the standard that prevailed at the inception
of the respective leases. The provision represents the Directors’ best estimate of the costs associated with this obligation.
The timing of the utilisation of the provision is variable dependent on the lease expiry dates of the properties concerned, which vary
between one and ten years. Based on the lease expiry date, 34% of the provision would be utilised in less than one year, however
we predominately remain in existing locations with refurbishments carried out.
Warranty provisions
The Group makes provision to cover known potential warranty issues. The provision represents the Directors’ best estimate of the
costs associated with this obligation. The timing of the utilisation is variable depending on the circumstances of each individual claim
under warranty.
25 DEFERRED TAX
The movement in the net deferred tax liability is as follows:
2023 2022
£m £m
At 1 January
(6.8)
(6.6)
Charged to Statement of Comprehensive Income
(1.2)
(0.2)
At 31 December
(8.0)
(6.8)
Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax
assets where the Directors believe it is probable that these assets will be recovered. There are no unrecognised deferred tax assets.
The vast majority of the deferred tax liability is expected to unwind over a period of greater than one year.
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by
IAS 12) during the year, together with amounts recognised in the Consolidated Statement of Comprehensive Income and amounts
recognised in Other Comprehensive Income are as follows:
Statement of
Comprehensive
Asset Liability Net Income Equity
2023 2023 2023 2023 2023
£m £m £m £m £m
Accelerated capital allowances/intangible fixed assets
—
(8.5)
(8.5)
(1.1)
—
Other temporary differences
0.5
—
0.5
(0.1)
—
Net tax assets/(liabilities)
0.5
(8.5)
(8.0)
(1.2)
—
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 161
Statement of
Comprehensive
Asset Liability Net Income Equity
2022 2022 2022 2022 2022
£m £m £m £m £m
Accelerated capital allowances/intangible fixed assets
—
( 7.4)
( 7.4)
(0.2)
—
Other temporary differences
0.6
—
0.6
—
—
Net tax assets/(liabilities)
0.6
( 7. 4)
(6.8)
(0.2)
—
Amounts within other comprehensive income due to be settled in greater than one year are not material and therefore no further
disclosure has been provided. Other temporary differences relate to the tax impact of share-based payment transactions and tax
losses deemed to be recoverable in future periods.
26 SHARE CAPITAL, SHARE PREMIUM ACCOUNT AND TREASURY SHARES
Allotted, called up and fully paid
2023 2022
Number Number
Ordinary shares of £0.001 each
112 ,095,184
112,0
9 5,184
2023 2022
£m £m
Ordinary shares of £0.001 each
0.1
0.1
Share premium account
22.2
22.2
As at 31 December 2023, there were 186,825,184 shares authorised for issue. The ordinary shares carry the rights to attend and
vote at general meetings, the right to receive payment in respect of dividends declared and the right to participate in the distribution
of capital. The ordinary shares are not redeemable.
Treasury shares
Number of
shares
£m
Balance at 1 January 2022 and 1 January 2023
—
—
Acquisition of shares by the Employee Benefit Trust
(650,000)
(0.7)
Deferred shares issued under the DSP scheme
229,901
0.2
Shares issued under the PSP scheme
367,0 0 5
0.4
Balance at 31 December 2023
(53,094)
(0.1)
Where any group company purchases the Company’s equity instruments, the consideration paid, including any directly attributable
incremental costs (net of income taxes), is deducted from equity as treasury shares until the shares are cancelled or reissued.
Where shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs
and the related income tax effects, is included in equity.
The Group issued no new shares (2022: 101,838 new shares) in respect of its Save As You Earn sharesave scheme, in the process
receiving consideration from employees of £nil (2022: £0.2 million). The consideration received above the nominal value of the shares
issued has been recorded as share premium.
During the year, no new shares (2022: nil) were issued in respect of share-based payment transactions for Directors and none
(2022: 20,000) were issued in respect of share-based payment transactions for other key management personnel.
The 2023 shares issued in respect of share-based payment transactions were all issued from treasury shares.
Eurocell plc Annual Report and Accounts 2023162
27 SHARE-BASED PAYMENTS
The Group enters into equity-settled payment transactions with its employees. For the year ended 31 December 2023, the charge
was £0.8 million (2022: credit of £0.2 million). A corresponding credit/charge to equity is recognised in the share-based payment
reserve. On exercise of options, balances are removed from the share-based payment reserve with corresponding entries made
to share premium, retained earnings and cash. The balance on the share-based payment reserve at 31 December 2023 was
£0.9 million (2022: £0.9 million).
27(a) Employee Save As You Earn Scheme
Each year all employees have the right to participate in a Save As You Earn (‘SAYE’) scheme. Employees may make monthly
contributions of up to £500, the proceeds being aggregated and then used to purchase ordinary shares at the end of the three year
vesting period. The cost to the participants is set at the inception of the scheme, with the balance being funded by the Company.
Typically, participants are offered a discount on the share price at the date of issuance.
Set out below are summaries of options granted under the plan:
2023
2022
Average Average
exercise price per Number exercise price Number
share option of options per share option of options
£ No. £ No.
As at 1 January
1.758
1,890,102
1.817
2,005,503
Granted during the year
1.103
2,151,517
1.720
8 57, 4 9 0
Exercised during the year
—
—
1.920
(101,838)
Forfeited during the year
1.576
(1,443,093)
1.836
(871,053)
As at 31 December
1.317
2,598,526
1.758
1, 89 0,102
Vested and exercisable at 31 December
—
—
There were no options exercised during the year ended 31 December 2023.
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Exercise 31 December 31 December
price 2023 2022
Expiry date £ No. No.
1 June 2020
1 June 2023
1.720
297,220
459,795
1 June 2021
1 June 2024
1.832
264,704
649,413
1 June 2022
1 June 2025
1.720
292,261
780,894
1 June 2023
1 June 2026
1.10 8
1,744,341
—
As at 31 December
2,598,526
1,8
9
0
,10 2
Weighted average contractual life of options outstanding at end of year
1.82 years
1.59 years
Fair value of options granted
The assessed fair value at grant date of options granted during the year ended 31 December 2023 was £0.21 per option.
The fair value at the grant date is determined using a form of the Black-Scholes model.
The model inputs for options granted during the year ended 31 December 2023 included:
2023
Options are granted for the consideration set at the inception of the scheme
Exercise price
1.108
Grant date
14 April 2023
Expiry date
31 May 2026
Share price at grant date
1.325
Expected price volatility of the Company’s shares
20.0%
Expected dividend yield
4.0%
Risk-free interest rate
1.0%
The expected price volatility is based on the historical volatility (based on the remaining life of the options), adjusted for any expected
changes to future volatility due to publicly available information.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 163
27(b) Deferred Share Plan
Annual Bonus Plan outcomes can be paid in a mix of cash and deferred shares granted under the Company’s Deferred Share Plan
(‘DSP’), following the determination of achievement against performance measures and targets. Performance measures applied
may be financial or non-financial and corporate, divisional or individual and in such proportions as the Remuneration Committee
considers appropriate. The maximum level of Annual Bonus Plan outcomes is 100% of base salary per annum for the duration of this
policy. Awards under the DSP are deferred for such a period as the Remuneration Committee selects at grant, which will normally be
less than (but may be longer than) three years and are subject to continued employment. The options vest in full, provided that the
scheme participants are deemed to be good leavers, and are settled through the issuance of treasury shares.
The following table shows the deferred shares granted and outstanding at the beginning and end of the reporting period:
2023 2022
No. No.
As at 1 January
355,765
325,282
Granted during the year
1,254,655
73,338
Exercised during the year
(204,769)
(20,000)
Forfeited during the year
(161,710)
(22,855)
As at 31 December
1,243,941
355,765
Vested and exercisable at 31 December
—
—
The weighted average share price at the date of exercise of options exercised during the year ended 31 December 2023 was £1.09.
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Exercise 31 December 31 December
price 2023 2022
Expiry date £ No. No.
30 June 2020
30 June 2023
0.001
—
208,612
30 June 2020
30 September 2023
0.001
—
—
30 June 2021
30 June 2024
0.001
—
73,815
30 June 2022
30 June 2025
0.001
73,338
73,338
3 April 2023
3 April 2025
0.001
15,681
—
3 April 2023
3 April 2026
0.001
668,572
—
11 April 2023
11 April 2025
0.001
410,447
—
11 April 2023
11 April 2026
0.001
8,227
—
14 September 2023
5 September 2025
0.001
33,838
—
14 September 2023
1 January 2026
0.001
33,838
—
As at 31 December
1,243,941
355,765
Weighted average contractual life of options outstanding at end of year
1.84 years
0.87 years
Fair value of options granted
The fair value at the grant date is determined using a form of the Black-Scholes model in line with inputs detailed in the above table.
DSP options totalling 1,254,655 were granted in 2023 (2022: 73,338) with 84,052 subsequently lapsing before the end of the year.
The assessed fair value at grant date of the rights granted during the year ended 31 December 2023 was £1.21 per option.
Eurocell plc Annual Report and Accounts 2023164
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
27 SHARE-BASED PAYMENTS CONTINUED
27(c) Long Term Incentive Plan (‘PSP’)
Awards under the PSP take the form of nil-cost options which vest to the extent performance conditions are satisfied over a period of
three years. The share award is based on a percentage of salary, a proportion of the maximum will vest based on performance targets
of which Earnings per Share equates to two-thirds of the award and (for options granted before 2021) cash flow one-third of the
award. For options granted in 2021 and thereafter, the cash flow target has been replaced with Return on Capital Employed.
Vested awards are settled through the issuance of treasury shares, and the PSP allows for awards over shares with a maximum
value of 150% of base salary per financial year.
The following table shows the share options granted and outstanding at the beginning and end of the reporting period:
2023 2022
No. No.
As at 1 January
2,509,646
2,073,060
Granted during the year
794,710
1,213,781
Exercised during the year
(316,184)
—
Forfeited during the year
(725,715)
(777,195)
As at 31 December
2,262,457
2,509,646
Vested and exercisable at 31 December
—
—
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Exercise 31 December 31 December
price 2023 2022
Expiry date £ No. No.
2 December 2020
1 December 2023
0.000
—
505,731
22 April 2021
21 April 2024
0.000
610,900
770,091
21 October 2021
11 October 2024
0.000
7,78
2
51,847
13 April 2022
13 April 2025
0.000
711,476
1,044,388
11 October 2022
11 October 2025
0.000
137,5 89
137, 5 8 9
11 April 2023
11 April 2026
0.000
794,710
—
As at 31 December
2,262,457
2,509,646
Weighted average contractual life of options outstanding at end of year
1.4 years
1.73 years
Fair value of options granted
The fair value at the grant date is determined using a form of the Black-Scholes model.
The model inputs for options granted during the year ended 31 December 2023 included:
2023
Options are granted for the consideration set at the inception of the scheme
Exercise price
0.001
Grant date
11 April 2023
Expiry date
11 April 2026
Share price at grant date
1.325
Expected price volatility of the Company’s shares
20.0%
Expected dividend yield
4.0%
Risk-free interest rate
1.0%
The expected price volatility is based on the historical volatility (based on the remaining life of the options), adjusted for any
expected changes to future volatility due to publicly available information.
The assessed fair value at grant date of the rights granted during the year ended 31 December 2023 was £1.17 per option,
a weighted average of £1.17 (2022: £1.90). The closing share price on the 31 December 2023 was £1.31.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 165
27(d) Expenses arising from share-based payment transactions
The total charge/(credit) arising from share-based payment transactions recognised during the period as part of employee benefit
expense was as follows:
2023 2022
£m £m
Options issued under SAYE scheme
0.2
—
Deferred shares issued under the DSP scheme
0.3
0.2
Shares issued under the PSP scheme
0.3
(0.4)
0.8
(0.2)
28 CONTINGENT ASSETS AND LIABILITIES
The Group has entered into a cross-guarantee arrangement to cover the bank borrowings of all other Group companies in the
event of default. As at 31 December 2023 the bank borrowings were £nil (2022: £21.0 million).
The Group had no other material contingent assets or liabilities (31 December 2022: £nil).
29 CAPITAL COMMITMENTS
The Group had capital commitments relating to Property, Plant and Equipment of £1.9 million at the balance sheet date
(2022: £3.8 million).
30 RETIREMENT BENEFITS
The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group
in an independently administered fund. The pension cost represents contributions payable by the Group to the fund and amounted
to £2.7 million (2022: £2.7 million). Contributions of £0.4 million were due to the scheme at 31 December 2023 (2022: £0.4 million).
31 RELATED PARTY TRANSACTIONS
The Group’s subsidiary undertakings are detailed in Note 38. The Group has taken advantage of the exemption from disclosing
transactions with wholly owned subsidiaries.
Transactions with key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the Company, which is considered to be the Directors of the Company. The remuneration of key management personnel of the
Group is disclosed on pages 98 to 115.
Other related party transactions
Kellmann Recruitment Limited is controlled by T Kelly, a close family member of M Kelly who was a Director of Eurocell plc until
11 May 2023. The fees paid to Kellmann Recruitment Limited relate to recruitment services, and are agreed on an arms’ length basis,
at rates that are consistent with other similar suppliers of recruitment services to the Group.
The following amounts were paid to Kellmann Recruitment Limited for services provided during the periods below, up to 11 May 2023:
2023 2022
£000 £000
Kellmann Recruitment Limited – recruitment services
103
211
The following balances are outstanding at 31 December 2023:
2023 2022
£000 £000
Kellmann Recruitment Limited – recruitment services
—
—
Eurocell plc Annual Report and Accounts 2023166
32 RECONCILIATION OF PROFIT AFTER TAX TO CASH GENERATED FROM OPERATIONS
2023 2022
£m £m
Profit after tax from continuing operations
9.6
22.0
Loss after tax from discontinued operations
—
(2.3)
Profit after tax
9.6
19.7
Taxation (Note 11)
2.1
3.7
Finance expense (Note 10)
3.2
2.9
Operating profit
14.9
26.3
Adjustments for:
Depreciation of property, plant and equipment (Note 15)
9.3
8.8
Depreciation of right-of-use assets (Note 16)
13.7
13.3
Amortisation of intangible assets (Note 17)
1.7
1.8
Impairment of tangible and right-of-use assets
0.3
0.6
Loss on disposal of business
—
1.5
Share-based payments
0.8
(0.2)
Decrease/(increase) in inventories
13.2
(5.7)
Decrease/(increase) in trade and other receivables
6.0
(5.6)
Decrease in trade and other payables
(5.8)
(1.8)
Increase/(decrease) in provisions
0.1
(0.3)
Cash generated from operations
54.2
38.7
1
1 Profit after tax from continuing operations includes other income in relation to amounts received under the Group’s cyber insurance policy, net of excess paid of
£0.4 million (2022: £1.1 million), in respect of the business interruption to the Group’s continuing trading activities as a result of a cyber incident in July and August 2022.
33 RECONCILIATION OF NET DEBT
1 January Non-cash 31 December
2023 Cash flows New leases movements* 2023
£m £m £m £m £m
Cash and cash equivalents
5.1
(4.7)
—
—
0.4
Deferred consideration
0.8
(0.8)
—
—
—
Bank overdrafts
—
—
—
—
—
Lease liabilities
(63.7)
15.6
(9.6)
(0.9)
(58.6)
Borrowings
(20.3)
21.0
—
(0.7)
—
Total
(78.1)
31.1
(9.6)
(1.6)
(58.2)
1 January Non-cash 31 December
2022 Cash flows New leases movements* 2022
£m £m £m £m £m
Cash and cash equivalents
6.6
(1.5)
—
—
5.1
Deferred consideration
—
—
—
0.8
0.8
Bank overdrafts
(5.9)
5.9
—
—
—
Lease liabilities
(58.7)
14.7
(18.9)
(0.8)
(63.7)
Borrowings
(11.7)
(8.2)
—
(0.4)
(20.3)
Total
(69.7)
10.9
(18.9)
(0.4)
( 78 .1)
* Non-cash movements relate to the amortisation of arrangement fees in respect of the Group’s borrowings and finance charges accrued on leases.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 167
Current Current Non-current
assets liabilities liabilities Total
31 December 2023 £m £m £m £m
Cash and cash equivalents
0.4
—
—
0.4
Lease liabilities
—
(12.9)
(45.7)
(58.6)
Total
0.4
(12.9)
(45.7)
(58.2)
Current Current Non-current
assets liabilities liabilities Total
31 December 2022 £m £m £m £m
Cash and cash equivalents
5.1
—
—
5.1
Deferred consideration
0.8
—
—
0.8
Lease liabilities
—
(13.0)
(50.7)
(63.7)
Borrowings
—
—
(20.3)
(20.3)
Total
5.9
(13.0)
(71.0)
( 78 .1)
34 EVENTS AFTER THE BALANCE SHEET DATE
In January 2024 the Group launched a £5 million share buyback programme. As of 15 March 2024, 2.0 million shares had been
purchased at a cash cost of £2.5 million under the programme.
Eurocell plc Annual Report and Accounts 2023168
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 December 2023
Note
2023
£m
2022
£m
Assets
Non-current assets
Investments 38 18.0 17. 8
Total non-current assets 18.0 17. 8
Current assets
Trade and other receivables 39 30.1 56.8
Deferred tax 40 0.2 0.3
Cash and cash equivalents 0.1 0.2
Total current assets 30.4 57. 3
Total assets 48.4 75.1
Liabilities
Current liabilities
Trade and other payables 41 (0.1) (0.2)
Total current liabilities (0.1) (0.2)
Non-current liabilities
Borrowings 42 — (20.3)
Total non-current liabilities — (20.3)
Total liabilities (0.1) (20.5)
Net assets 48.3 54.6
Issued capital and reserves attributable to owners of the Company
Share capital 26 0.1 0.1
Share premium account 22.2 22.2
Treasury shares (0.1) —
Share-based payment reserve 1.1 0.9
Retained earnings 25.0 31.4
Total equity 48.3 54.6
A separate Statement of Comprehensive Income for the Company is not presented, in accordance with Section 408 of the Companies
Act 2006. The Company recognised a profit of £3.7 million in the year (2022: profit of £17.3 million), including dividend income
received from Group companies of £5.3 million (2022: £18.0 million).
The Financial Statements on pages 168 to 176 were approved and authorised for issue by the Board of Directors on 19 March 2024
and were signed on its behalf by:
Darren Waters Michael Scott
Chief Executive Chief Financial Officer
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 169
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023
Share
capital
£m
Share
premium
account
£m
Treasury
shares
£m
Share-based
payment
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 1 January 2023 0.1 22.2 — 0.9 31.4 54.6
Comprehensive income
for the year
Profit for the year — — — — 3.7 3.7
Total comprehensive income
for the year — — — — 3.7 3.7
Contributions by and
distributions to owners
Exercise of share options — — 0.6 (0.8) 0.2 —
Share-based payments — — — 1.0 — 1.0
Purchase of own shares — — (0.7) — — (0.7)
Dividends paid — — — — (10.3) (10.3)
Total transactions with owners
recognised directly in equity — — (0.1) 0.2 (10.1) (10.0)
Balance at 31 December 2023 0.1 22.2 (0.1) 1.1 25.0 48.3
Share
capital
£m
Share
premium
account
£m
Treasury
shares
£m
Share-based
payment
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 1 January 2022 0.1 21.9 — 1.1 25.2 48.3
Comprehensive income
for the year
Profit for the year — — — — 17. 3 17. 3
Total comprehensive income
for the year — — — — 17. 3 17.3
Contributions by and
distributions to owners
Share capital issued — — — — — —
Exercise of share options — 0.3 — — — 0.3
Share-based payments — — — (0.2) — (0.2)
Dividends paid — — — — (11.1) (11.1)
Total transactions with owners
recognised directly in equity — 0.3 — (0.2) (11.1) (11.0 )
Balance at 31 December 2022 0.1 22.2 — 0.9 31.4 54.6
Eurocell plc Annual Report and Accounts 2023170
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2023
35 ACCOUNTING POLICIES (COMPANY)
Corporate information
Eurocell plc (the ‘Company’) is a publicly listed company limited by shares and is incorporated and domiciled in England,
UnitedKingdom. The registered office is located in England, at the following address: Eurocell Head Office and Distribution Centre,
HighViewRoad, South Normanton, Alfreton, DE55 2DT.
The Company is principally engaged as a holding company for itssubsidiaries which are engaged in the extrusion of PVC window
and building products to the new and replacement window market and the sale of building materials across the UK.
Basis of preparation
The principal accounting policies adopted in the preparation ofthe Financial Statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise stated.
The Company has adequate resources to continue in operational existence for the foreseeable future and, as a result of this,
thegoing concern basis has been adopted in preparing the Financial Statements (see below).
These Financial Statements have been prepared in accordance with Financial Reporting Standard 101, Reduced Disclosure Framework in
conformity with the requirements of the Companies Act 2006 (‘FRS 101’) and the applicable legal requirements of the Companies Act 2006.
These Financial Statements have been prepared under the historical cost convention in accordance with FRS101 and the Companies
Act 2006.
Going concern
The position of the Company mirrors that of the Eurocell Group. The Eurocell Group funds its activities through a £75 million Revolving
Credit Facility, provided by Barclays, NatWest and Bank of Ireland, which matures in May 2027. The facility includes two key financial
covenants, which are tested at 30 June and 31December each year on a pre-IFRS 16 basis. These are that net debt should not
exceed three times adjusted EBITDA (Leverage), and that adjusted EBITDA should be at least four times the interest charge on the
debt (Interest Cover). Adjusted EBITDA is defined as operating profit before depreciation, amortisation and non-underlying items.
Seealternative performance measures (seepage 140).
No covenants were breached during the year ended 31 December 2023. For the next measurement period, being 30 June 2024,
andgoing forward, the Group expects to comply with its covenants.
In assessing going concern, the Directors have considered financial projections for the period to December 2025, which is consistent
with the Board’s strategic planning horizons. These forecasts have been compiled based on the best estimates of the Group’s
commercial and operational teams. This includes a severe but plausible ’Downside’ scenario, which reflects demand for the Group’s
products being severely weakened.
In all scenarios tested, including sensitivities reducing sales forecasts to 10% below management’s estimates for the period 2024-25,
key raw material prices increasing by 33% over that period and both scenarios combined. The Group operates with significant
headroom on its RCF facility and remains compliant with its original covenants.
After reviewing the Group’s projected financial performance and financing arrangements, the Directors consider that the Group
has adequate resources to continue operating and that it is therefore appropriate to continue to adopt the going concern basis
inpreparing these Financial Statements.
The going concern assessment performed is intrinsically linked to the Group’s financing arrangements and therefore letters of support
have been provided from Eurocell plc to a number of Group companies, providing support over that individual Company’s future cash
flows in the period. This letter covers theperiod up to 31 December 2025.
Changes in accounting policies and disclosures applicable to the Company
The Company adopted no new accounting standards in the year. See Note 1 for more details.
Investments in subsidiary undertakings
Investments in subsidiaries are stated at cost less provision for impairment. Eurocell plc provides letters of Group support to its
subsidiary entities where required.
Financial assets
The Company’s financial assets comprise trade and other receivables and cash and cash equivalents in the balance sheet.
TheCompany records all of its financial assets at amortised cost and has not classified any of its financial assets at fair value through
profit and loss or other comprehensive income.
Financial assets are non-derivative assets with fixed or determinable payments that are not quoted in an active market. They arise
principally through the provision of funding to Group companies, but also incorporate other types of contractual monetary asset.
They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are
subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 171
The Company applies the simplified approach to measuring expected credit losses, if the risk is deemed material, which uses
a lifetime expected loss allowance for intra-group receivables.
Expected loss rates are derived based upon the payment profile of Group companies over a three-year period up to the reporting
date, and the corresponding credit losses experienced. These rates are then adjusted to reflect current and forward-looking
information on macroeconomic factors affecting the ability of Group companies to settle receivables, including GDP, the rate of
unemployment, new housing starts, interest rates and household disposable income. Where the adjusted loss rates are different
from the original estimate, there is an impact on the carrying value of amounts owed by Group undertakings and the amount credited
orcharged on a net basis to operating expenses within the Statement of Comprehensive Income.
Whilst cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss
wasimmaterial.
Financial liabilities
The Company classifies its financial liabilities as other financial liabilities which include the following items:
• Bank borrowings which are initially recognised at fair value net of any transaction costs directly attributable to the issue of the
instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method,
which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in
the balance sheet. Further information isprovided in Note 3
• Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from
its tax base, except for differences arising on:
• The initial recognition of goodwill
• The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction
affects neither accounting nor taxable profit
• Investments in subsidiaries and jointly controlled entities where the Company is able to control the timing of the reversal of the
difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against
which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting
date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax assets and liabilities are offset when the Company has a legally enforceable right to offset current tax assets and liabilities
and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
• The same taxable Group company
• Different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and
settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected
to be settled or recovered.
Share capital
The Company’s ordinary shares are classified as equity instruments.
Treasury shares
Treasury shares are held by the Company’s Employee Benefit Trust for the purpose of satisfying awards under the Group’s various
share-based payment schemes.
The Employee Benefit Trust transactions are incorporated in accordance with Note 1. Shares are acquired from the market and are
held in treasury until such time as they are issued to share scheme participants. Any shares not yet issued to employees at the end
of the reporting period are shown as treasury shares in the financial statements. Shares issued to employees are recognised on a
first-in-first-out basis. Under the terms of the trust deed, the Group is required to provide the Trust with the necessary funding for the
acquisition of the shares.
Dividends
Dividends are recognised when they become legally payable. Inthe case of interim dividends to equity shareholders, this is when
paid. In the case of final dividends, this is when approved by the shareholders at the Annual General Meeting.
Further information regarding dividends is provided in Note 14.
Eurocell plc Annual Report and Accounts 2023172
35 ACCOUNTING POLICIES (COMPANY) CONTINUED
FRS 101 exemptions
The following exemptions from the requirements of IFRS have been applied in the preparation of the Company Financial Statements,
in accordance with FRS 101:
Paragraphs 45(b) and 46 to 52 of IFRS 2, Share-based Payment (details of the number and weighted-average exercise prices
ofshare options, and how the fair value of goods or services received was determined).
• Paragraph 38 of IAS 1, Presentation of Financial Statements, comparative information requirements in respect of paragraph 79(a)
(iv) of IAS 1;
• Paragraph 73(e) of IAS 16 Property, Plant and Equipment; and
• Paragraph 118(e) of IAS 38 Intangible Assets (reconciliations between the carrying amount at the beginning and end of theperiod).
The following paragraphs of IAS 1, Presentation of Financial Statements:
• 10(d), (statement of cash flows);
• 10(f) (a statement of financial position as at the beginning of the preceding period when an entity applies an accounting policy
retrospectively or makes a retrospective restatement of items in its Financial Statements, or when it reclassifies items in its Financial
Statements);
• 16 (statement of compliance with all IFRS);
• 38A (requirement for minimum of two primary statements, including cash flow statements);
• 38B-D (additional comparative information);
• 40A-D (requirements for a third statement of financial position);
• 111 (cash flow statement information); and
• 134-136 (capital management disclosures).
Paragraph 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (requirement for the disclosure
ofinformation when an entity has not applied a new IFRS that has been issued but is not yet effective).
Paragraph 17 and 18A of IAS 24, Related Party Disclosures (keymanagement compensation).
The requirements in IFRS 7 Financial Instruments: Disclosures.
The requirements in IAS 24, Related Party Disclosures to disclose related party transactions entered into between two or more
members of a group.
36 CRITICAL ACCOUNTING ESTIMATES ANDJUDGEMENTS
The Company makes certain estimates and judgements regarding the future. Estimates and judgements are continually evaluated
based on historical experience and other factors, including expectations of future events, that are believed to be reasonable under
thecircumstances. In the future, actual experience may differ from these estimates and judgements. There are no estimates and
judgements that are considered to have a significant risk of causing material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 173
37 EMPLOYEE BENEFITS EXPENSE
2023
£m
2022
£m
Staff costs (including Directors) comprise:
Wages and salaries 0.4 0.4
Social security costs 0.1 —
0.5 0.4
The average number of monthly employees was six (2022: five), all of whom are Directors of the Company.
Key management personnel compensation and Directors’ remuneration
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the Company, which is considered to be the Directors of the Company.
2023
£m
2022
£m
Emoluments 1.4 1.7
Share-based payments 0.5 ( 0.1)
Pension and other post-employment benefit costs 0.1 0.1
2.0 1.7
The emoluments are paid by Eurocell Group Limited. Directors’ remuneration is set out in the Remuneration Report on pages 98
to115. As stated, Mark Kelly retired and was replaced as Chief Executive by Darren Waters in May 2023.
The highest paid Director received remuneration of £412,000 (2022: £857,000).
During the year, retirement benefits were accruing to three Directors in respect of defined contribution pension schemes (2022:two).
The value of contributions paid to a defined contribution pension scheme in respect of the highest paid Director amounted
to£15,000(2022: £47,000).
During the current year, 316,184 share options were exercised by Directors of the Company (2022: nil). No options were exercised
bythe highest paid Director (2022: nil). No other shares were issued to Directors of the Company in either period.
Eurocell plc Annual Report and Accounts 2023174
38 INVESTMENTS
Cost
Investments
insubsidiary
undertakings
£m
Capital
contribution
to subsidiary
companies
£m
Total
£m
At 31 December 2022 17. 8 – 17. 8
Addition – 0.2 0.2
At 31 December 2023 17.8 0.2 18.0
Capital contribution to subsidiary companies reflects the fair value movement of share-based payments issued by the Company to
employees who have provided services to subsidiary undertakings.
The subsidiaries of Eurocell plc, all of which have been incorporated in the United Kingdom, are included in these Consolidated
Financial Statements, as follows:
Holding (and voting rights)
Name Principal activity 2023 2022
Eurocell Holdings Limited* Holding company 100% 100%
Eurocell Group Limited Holding company 100% 100%
Eurocell Building Plastics Limited Sale of building plastic materials 100% 100%
Eurocell Profiles Limited Manufacture and sale of building plastic materials 100% 100%
Vista Panels Limited Manufacture and sale of doors 100% 100%
Ecoplas Limited** Recycler of PVC windows 95% 95%
Security Hardware Limited*** Dormant 100% 100%
Kent Building Plastics Limited Dormant 100% 100%
Trimseal Limited Dormant 100% 100%
S&S Plastics Limited Dormant 100% 100%
Fairbrook Group Limited Dormant 100% 100%
Fairbrook Limited Dormant 100% 100%
Fairbrook Holdings Limited Dormant 100% 100%
Eurocell Window Systems Limited Dormant 100% 100%
Eurocell Plastics Limited Dormant 100% 100%
Cavalok Building Products Limited Dormant 100% 100%
Merritt Plastics Limited Dormant 100% 100%
Merritt Engineering Limited Dormant 100% 100%
Deeplas Limited Dormant 100% 100%
Deeplas Building Plastics Limited Dormant 100% 100%
Ampco 113 Limited Dormant 100% 100%
* Directly held by Eurocell plc.
** Ecoplas Limited is treated as a wholly-owned subsidiary for the purposes of consolidating the financial statements due to the fact that the remaining 5% shareholding
is held under a put and call option which expires in 2024.
*** The trade and assets of Security Hardware Limited were sold on 2 December 2022.
All of the above have a registered address of Eurocell Head Office and Distribution Centre, High View Road, South Normanton,
Alfreton, Derbyshire, DE55 2DT.
The Company assesses that the recoverable amounts of these investments are supportable. Recoverable amounts have been
determined from ‘value-in-use’ calculations which have been predicated on discounted pre-tax cash flow projections based on a
three-year business plan approved by the Board. These projections are based on all available information and growth rates do not
exceed growth rates achieved in prior periods.
All of the Company’s CGUs operate principally in the UK Repair, Maintenance and Improvements market, and all are funded through a
combination of retained earnings and the Group’s Revolving Credit Facility. The strategic decision-making timeframe is also consistent
across all CGUs. Consequently, the key assumptions detailed below are applied consistently across the Group’s entities:
2023 2022
Period on which management-approved forecasts are based (years) 3 3
Discount rate (pre-tax) 12% 10%
Profit growth rate in perpetuity 2% 2%
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
Strategic Report Corporate Governance Financial Statements
Eurocell plc Annual Report and Accounts 2023 175
39 TRADE AND OTHER RECEIVABLES
2023
£m
2022
£m
Prepayments and other debtors 0.9 0.5
Amounts owed by Group undertakings 29.2 56.3
Total trade and other receivables 30.1 56.8
Amounts owed by Group undertakings attract interest of 6.08% (2022: 2.75%) and are repayable on demand. The Company applies
the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all financial assets.
In measuring expected credit losses, receivables have been grouped based on shared characteristics and days past due.
The Directors have assessed the risk of impairment of its amounts owed by Group undertakings as at 31 December 2023.
Afterconsidering the projected future cash flows expected to arise in its subsidiary entities, the Directors believe that any provision
over the amounts owed by Group undertakings are trivial.
40 DEFERRED TAX
2023
£m
2022
£m
At 1 January 0.3 0.3
Credited to the Statement of Comprehensive Income (0.1) —
At 31 December 0.2 0.3
Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax
assets where the Directors believe it is probable that these assets will be recovered.
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by
IAS12) during the year, together with amounts recognised in the Statement of Comprehensive Income and amounts recognised in
Other Comprehensive Income are as follows:
Asset
2023
£m
Liability
2023
£m
Net
2023
£m
Statement of
Comprehensive
Income
2023
£m
Equity
2023
£m
Other temporary differences 0.2 — 0.2 (0.1) —
Net tax assets 0.2 — 0.2 (0.1) —
Asset
2022
£m
Liability
2022
£m
Net
2022
£m
Statement of
Comprehensive
Income
2022
£m
Equity
2022
£m
Other temporary differences 0.3 — 0.3 — —
Net tax assets 0.3 — 0.3 — —
Amounts within other comprehensive income due to be settled in greater than one year are not material and therefore no further
disclosure has been provided.
41 TRADE AND OTHER PAYABLES
2023
£m
2022
£m
Trade and other payables 0.1 0.2
Total current liabilities 0.1 0.2
Book values approximate to fair value at 31 December 2023 and 31 December 2022. Trade payables are non-interest-bearing and
are generally settled on 30-60 day terms.
Eurocell plc Annual Report and Accounts 2023176
42 BORROWINGS
The book value and fair value of borrowings are as follows:
Book value
2023
£m
Fair value
2023
£m
Book value
2022
£m
Fair value
2022
£m
Non-current
Bank borrowings unsecured — — 20.3 20.3
Total borrowings — — 20.3 20.3
Borrowings of £nil were drawn down at 31 December 2023 (2022: £21.0 million). The average drawdown on the facility during the
year ended 31 December 2023 was £12.4 million (2022: £22.1 million). Total unamortised costs of £0.7 million as at 31 December
2023 have been reclassified to other receivables as no borrowings were drawn at the balance sheet date. Total unamortised costs
of£0.7 million as at 31 December 2022 are presented as a deduction to borrowings.
The bank borrowings outstanding at 31 December 2022 are classified as non-current liabilities as they relate to committed facilities
available to the Group until 2027. The book value and fair value are not considered to be materially different.
In May 2023, the Group completed a one-year extension to its £75 million multi-currency revolving unsecured credit facility, which
now matures in 2027. The key terms of the facility remain unchanged. Following the extension of the facility in 2023, £0.2 million of
costs were capitalised within borrowings and are being released to the Consolidated Statement of Comprehensive Income within
finance expense over the period of the facility.
Following the extension of our facility in 2022, £0.8 million of costs were capitalised within borrowings and are being released
tothe Consolidated Statement of Comprehensive Income within finance expense over the period of the facility. The unamortised
arrangement fees in relation to the previous facility were expensed to the Consolidated Statement of Comprehensive Income in
2022 and classified as non-underlying items (see Note 7).
Interest is charged at an excess over base rate of between 1.5% and 2.5% per annum and is dependent upon the ratio of total
netdebt to consolidated EBITDA (on a pre-IFRS 16 basis).
All borrowings are denominated in Sterling.
Details of the Company’s banking covenants are given in Note 3.
43 RELATED PARTY TRANSACTIONS
Transactions with key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the Group, which is considered to be the Directors of the Company and the Directors of the Group’s subsidiary companies.
The remuneration for key management personnel is disclosed on pages 98 to 115. The Group has taken advantage of the exemption
from disclosing transactions with wholly owned subsidiaries.
Other related party transactions
Kellmann Recruitment Limited is controlled by T Kelly, a close family member of M Kelly who was a Director of Eurocell plc until
11May 2023. The fees paid to Kellmann Recruitment Limited relate to recruitment services, and are agreed on an arms’ length basis,
atrates that are consistent with other similar suppliers of recruitment services to the Group.
The following amounts were paid to Kellmann Recruitment Limited for services provided during the periods below, up to 11 May 2023:
2023
£m
2022
£m
Kellmann Recruitment Limited – recruitment services 103 211
The following balances are outstanding at 31 December 2023.
2023
£m
2022
£m
Kellmann Recruitment Limited – recruitment services — —
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
177Eurocell plc Annual Report and Accounts 2023
Financial StatementsCorporate GovernanceStrategic Report
COMPANY INFORMATION
For the year ended 31 December 2023
Directors Derek Mapp
Frank Nelson
Alison Littley
Kate Allum
Will Truman
Iraj Amiri
Darren Waters
Michael Scott
Angela Rushforth (appointed 1 February 2024)
Registered Number 08654028
Registered Office Eurocell Head Office and Distribution Centre
High View Road
South Normanton
Alfreton
DE55 2DT
Independent Auditors PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
One Chamberlain Square
Birmingham
B3 3AX
Bankers Barclays Bank plc
1 Churchill Place
London
E14 5HP
National Westminster Bank plc
2 St Phillips Place
Birmingham
B3 2RB
Bank of Ireland
26 Cross Street
Manchester
M2 7AF
For more investor information
visit www.eurocell.co.uk/investors
Eurocell Head Office and Distribution Centre
High View Road
South Normanton
Alfreton
DE55 2DT
Printed by a CarbonNeutral
®
Company certified to ISO 14001 environmental management system.
Printed on material from well-managed, FSC
®
certified forests and other controlled sources.
100% of the inks used are HP Indigo ElectroInk which complies with RoHS legislation and meets
the chemical requirements of the Nordic Ecolabel (Nordic Swan) for printing companies, 95% of
press chemicals are recycled for further use and, on average 99% of any waste associated with
this production will be recycled and the remaining 1% used to generate energy.
The paper is Carbon Balanced with World Land Trust, an international conservation charity, who
offset carbon emissions through the purchase and preservation of high conservation value land.
Through protecting standing forests, under threat of clearance, carbon is locked-in, that would
otherwise be released.
CBP00019082504183028
creating sustainable
building solutions
Eurocell plc Annual Report and Accounts 2023
Eurocell plc
High View Road
Alfreton
Derbyshire
DE55 2DT
www.eurocell.co.uk