DS Smith Plc Annual Report 2022
## Redefining
## Packaging for
## a Changing World
## Annual Report 2022
## 2021/22 Highlights
## Financial Non-financial
## +5.4% £7,241m 313m
2

| Corrugated box volumes | Revenue |  | units of plastic replaced since 2020 |
| --- | --- | --- | --- |
|  |  | 3 | (target of one billion units of plastic |
| (2021: +3.5%) | (2021: £5,976m) (2022: +26% | ) |  |

replaced by 2025)

| 8.5% |  | £378m |  | 29% |  |
| --- | --- | --- | --- | --- | --- |
|  | 1 |  | 2 |  |  |
| Return on sales |  | Profit before tax |  | CO | e per tonne reduction since 2015 |

2
3 (5% CO e per tonne reduction vs 2021)
(2021: 8.4%) (2022: +10bps) (2021: £231m) (2022: +71% ) 2
3
## +29% 15.0p 100%
1
Adjusted operating profit Dividend per share reusable or recyclable packaging
(2021: £502m) (2022: £616m) (2021: 12.1p) (2022: +24%) (target achieved)
## £1,484m £519m 6%
1
Net debt Free cash flow reduction in accident frequency
(2021: £1,795m) (2021: £486m) (2022: +7%) rate vs 2021
(2022: improvement of £311m)
1. Based upon continuing operations, before adjusting items and amortisation.
These are all non-GAAP performance measures – see note 32 to the consolidated financial statements.
2. From continuing operations.
3. Based on constant currency.
## Contents
47 Risk management Financial Statements
Strategic Report

|  |  | 49 | Viability statement |  |  |
| --- | --- | --- | --- | --- | --- |
| 1 | Introduction from the Leadership team |  |  | 115 | Independent Auditor’s report |
|  |  | 52 | Principal risks |  |  |
| 2 | Our business – at a glance |  |  | 125 | Consolidated income statement |
|  |  | 56 | Task Force on Climate-related Financial |  |  |
| 4 | Our investment case |  |  | 126 | Consolidated statement of |

Disclosures (TCFD)
comprehensive income

| 5 | Our Purpose framework |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  | 61 | EU Taxonomy |  |  |
|  |  |  |  | 127 | Consolidated statement of |
| 6 | Now and Next Sustainability Strategy |  |  |  |  |
|  |  | 62 | Non-financial information statement |  | financial position |
| 8 | Our Purpose-led approach |  |  |  |  |
|  |  |  |  | 128 | Consolidated statement of |
| 12 | Chair’s statement | Governance |  |  |  |

changes in equity

| 13 | Section 172 statement | 66 | Board of Directors |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  |  | 129 | Consolidated statement of cash flows |
| 14 | Our business model | 68 | Chair’s introduction to governance |  |  |
|  |  |  |  | 130 | Notes to the consolidated |
| 16 | Group Chief Executive’s review | 70 | Division of responsibilities |  | financial statements |
| 18 | Stakeholder engagement | 73 | Board leadership and Company Purpose | 187 | Parent Company statement of |
|  |  | 75 | Composition, succession and evaluation |  | financial position |
| 20 | Our strategy – customers |  |  |  |  |
|  |  | 76 | Nomination Committee Report | 188 | Parent Company statement of |
| 24 | Our strategy – people |  |  |  |  |

changes in equity

| 30 | Our strategy – sustainability | 79 | Audit, risk and internal control |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  |  | 189 | Notes to the parent Company |
| 34 | Our strategy – financial | 82 | Audit Committee Report |  |  |

financial statements

| 36 | Operating review | 88 | Remuneration Committee Report |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  |  | 196 | Five-year financial summary |
| 40 | Financial review | 112 | Additional information |  |  |

Shareholder information
STRATEGIC REPORT
## Leading the change for
## the circular economy
### “Our circular business “I am proud of the way “Strong financial performance
### model positions us the Group has performed and cash generation have
### well to be the leading in the year, supporting driven a significant reduction
### supplier of sustainable our customers, improving in our leverage during the
### packaging solutions.” our profits and investing year, positioning us well for
### for growth. ” the future.”
Geoff Drabble Miles Roberts Adrian Marsh
Chair Group Chief Executive Group Finance Director
Annual Report 2022 dssmith.com 1
OUR BUSINESS
## At a glance
### DS Smith is a leading provider of sustainable fibre-based packaging across Europe and the US which is
### supported by recycling and papermaking operations. It plays a central role in the value chain across
### sectors including e-commerce, fast moving consumer goods and industrials. We have created a circular
### business focused on sustainable packaging.
Packaging Paper Recycling
We are a leading international sustainable We are a leading international manufacturer of We provide a full recycling and
packaging company, delivering innovative corrugated case material (CCM), which is the waste management service. We are
corrugated products with a high quality paper used for conversion into corrugated board. Europe’s largest cardboard and
service across Europe and North America. We also manufacture some specialist paper paper recycler and are also one of
We are fully fibre-based and our product grades such as plasterboard liner. DS Smith is the leading full service recycling and
portfolio includes packaging for consumer overall ‘short paper’, meaning we are a net buyer waste management companies in
products, e-commerce, promotion, transit of paper for our packaging requirements. We Europe. We collect quality paper and
and industrial packaging. operate a paper sourcing platform that ensures cardboard for recycling from a range
we procure the paper that is right for our of sectors, including retailers,
We partner with customers to provide
customers’ packaging. We determine whether we manufacturers, local authorities,
innovative packaging solutions. We use our
make or buy our required paper, and then we sell and other recycling and waste
Circular Design Principles to improve the
some of our paper output. Paper is readily management companies. The used
sustainability of our solutions. We
transportable and is traded globally, so in some paper and board we collect provides
complement our product range with
cases it is more efficient to sell our paper and buy cost efficient raw material for the
consultancy services on supply chain
in other regions, depending on local pricing. Group’s recycled paper making
optimisation and creative design.
processes. We also sell used fibre to
We operate 13 CCM paper mills, 11 in Europe
Our packaging is fully sustainable and made third parties globally.
and two in the US. Of those, two are kraftliner
from largely recycled and/or recyclable
mills (virgin paper – one in the US, one in Europe) c. 1,000 employees
material, which means the packaging we
and the remainder are principally dedicated
produce helps our customers to achieve c. 6.2 million tonnes fibre
to the production of recycled CCM (testliner).
their own sustainability targets. Our managed in 2021/22
We also have two small mills in Europe producing
corrugated packaging is typically produced
specialist paper grades. Fibre for our testliner
within c. 200km of its destination due to
is principally sourced from our own
the requirements for just-in-time delivery
recycling operations.
and the increased focus on sustainability.
c. 4,000 employees
c. 25,000 employees
2 c. 4.5 million tonnes CCM produced
c. 9.3 billion m corrugated
in 2021/22
board sold in 2021/22
## Our business model overview
Delivering more circular solutions for customers and wider society:
What we do The value we create
I n
t n
h o
• Provide sustainable solutions g v • Satisfied customers
i a
s t
• Replace problem plastics n i o • Packaging that is sustainable
I
n
• Take carbon out of supply chains • Returns to our capital providers
• Employ Circular Design Principles • Safety and opportunities for
• Provide innovative recycling our people
M
solutions a • Leadership in sustainability
n
u
• Work with resilient fast moving f • Community involvement
a n
c g
consumer goods (FMCG) customers t i • An inclusive workplace
u s
r i e
n g D
Find out more on page 14
2
STRATEGIC REPORT
## Where we operate
Our business operates in four geographic segments with three in Europe
and one in North America.

| Northern Europe | Southern Europe | 2021/22 Revenue 2021/22 Employees |
| --- | --- | --- |
| Belgium, Denmark, Finland, | France, Italy, Portugal |  |
| Germany, Netherlands, | andSpain |  |

Norway, Sweden, Switzerland
£597m
and United Kingdom c. 2,000
£1,118m
c. 11,000
c. 8,000
Eastern Europe North America £2,790m
Austria, Bosnia-Herzegovina, United States
Bulgaria, Croatia, Czechia,
Estonia, Greece, Hungary, £2,736m
Latvia, Lithuania, North c. 9,000
Macedonia, Poland, Romania,
Serbia, Slovakia, Slovenia
and Türkiye
## Our strategy
Our strategy is based on balancing the requirements of our core stakeholders:

| To delight our |  | To realise the potential |  | To lead the way in |  |  | To double our size |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | customers |  | of our people |  | sustainability |  | and profitability |  |
| How we engage with |  |  | How we engage |  | How we engage |  | How we engage with |  |
|  | customers |  | with our people |  |  | with society |  | our investors |
| See more on page 20 |  |  | See more on page 24 | See more on page 30 |  |  | See more on page 34 |  |

Annual Report 2022 dssmith.com 3
OUR INVESTMENT CASE
## Why invest in DS Smith?
### We are a sector-leading, innovative business, aligned with powerful growth drivers.
### Our scale, innovation, sustainability credentials and strong purpose set us apart.
## We are an industry leader
• We are a leading supplier of innovative, sustainable packaging solutions
employing around 30,000 people in more than 30 countries mostly in the
developed world.
• Well-invested asset base and footprint to deliver for multinational
customers spanning 400+ sites in Europe, and in North America, where we are
expanding rapidly.
• Strong commitment to investment in our asset base, research and
development (R&D) and innovation.
## We are a sustainability leader
• We are the only solely fibre-based major packaging company in Europe and
Europe’s largest cardboard and paper recycler.
• We are driving the transition to the circular economy with a fully circular
business model, operating a ’short paper’ model to drive long-term, consistent
return on capital.
• We have a leading sustainability strategy which includes ambitious targets in
plastic replacement and carbon reduction, resulting in excellent environmental,
social and governance (ESG) ratings.
## Strong customer base
• We have ever-deeper relationships with our predominant customer base of
blue-chip, resilient FMCG and e-commerce brands.
• Customer driven growth through investment in innovation, sustainability,
digital enablement and packaging capacity to gain further market share.
• Consolidation of suppliers – Our scope, scale and reach will further strengthen
our position with some of the world’s leading consumer goods companies as they
reduce the number of suppliers they work with.
## Strong market drivers
• Rapid growth in e-commerce – Our sustainable, omni-channel packaging is
revolutionising packaging for the entire retail sector, both bricks and mortar
and online.
• Increasing importance of sustainability – We are helping our customers
respond by designing out waste, keeping valuable materials in use and making
it easier for consumers to reuse and recycle packaging.
• Plastic replacement – We have already replaced over 300 million items of
single-use plastic from our customers’ supply chains with fibre alternatives.
## Proven track record and strong
## balance sheet
• Strong corrugated box volume growth of 5.4 per cent.
1
• Adjusted operating profit growth +29 per cent .
• Strong free cash flow and leverage reduced to 1.6 times net debt/EBITDA.
• Investment grade credit rating.
1. Based on constant currency.
4
STRATEGIC REPORTOUR PURPOSE FRAMEWORK
## Redefining Packaging for a Changing World
## Our Purpose
‘Redefining Packaging for a Changing World’
Our Purpose is ’Redefining Packaging for changes influence shopping patterns, Our Purpose feeds all parts of our
a Changing World’. It is our reason for such as switches from stores to home organisation, including people, policies,
being. It sets out why we exist and the shopping, and will impact on the research and development (R&D), design
value we bring to our customers and all environment and how packaging plays and customer interactions. We are
stakeholder groups. its part in a more sustainable redefining packaging through our four
experience for all. strategic goals: delighting our customers,
Our Purpose focuses our DS Smith team
realising the potential of our people,
on the rapidly changing world around us Our Purpose sharpens our instincts
leading the way in sustainability and
as consumers’ lives and shopping habits and encourages us to tackle some of the
doubling our size and profitability.
are changing due to the acceleration of world’s biggest challenges, such as
We believe that if we deliver in this
the digital world. It encourages us to look replacing problem plastics.
way, we will meet our vision to be
outside of the confines of the packaging
the leading supplier of sustainable
industry and forward to see how these
packaging solutions.
## We deliver our Purpose through our strategic goals...
To delight our customers: To realise the potential of To lead the way in To double our size and
by delivering outstanding our people: by creating a sustainability: by bringing profitability: by driving
results to them as we safe environment where our customers into the operational and commercial
increase their sales, reduce every colleague can develop circular economy using excellence, growing our
their costs, manage their risk their skills and ideas recyclable materials market share and expanding
and become circular ready responsibly in our into new markets
circular business
## ...which help us to deliver our vision
To be the leading supplier of sustainable packaging solutions
## Underpinned by our values
Be caring Be challenging Be responsive
We take pride in what we do We are not afraid to We seek new ideas and
and we care about our constructively challenge each understanding and are quick to
customers, our people and the other and ourselves to find a react to opportunities
world around us better way forward
Be trusted Be tenacious
We can always be trusted We get things done
to deliver on our promises
Annual Report 2022 dssmith.com 5
NOW AND NEXT
## Now and Next Sustainability Strategy
### Now and Next is our sustainability strategy that sets out how we will tackle the sustainability
### challenges we are facing today, as well as those that will impact future generations.
## NOW
## Now and Next strategy We work with customers to design circular
packaging solutions that achieve more from less,
delivering for rapidly changing consumer
Our focus is on: lifestyles with minimum impact on the world
around us.
By 2023, manufacture 100 per cent
reusable or recyclable packaging
By 2025, optimise fibre use for

| Closing the loop |  | Protecting natural |  | Reducing waste |  | Equipping people to |  | individual supply chains in 100 per cent |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| through better |  |  | resources by | and pollution |  | lead the transition |  | of our new packaging solutions |
|  | design | making the most of |  | through circular |  |  | to a circular |  |
|  |  |  | every fibre |  | solutions |  | economy |  |

By 2025, take one billion pieces of
problem plastics off supermarket
shelves and work with partners to find
We will continue to:
solutions for ‘hard to recycle’ packaging
Drive carbon reduction
Care for forests and their biodiversity
By 2025, engage 100 per cent of our

| By 2025, measure and | By 2030, reduce Scope 1, 2 | people on the circular economy |
| --- | --- | --- |
| improve biodiversity | and 3 GHG emissions by 46 |  |
| in our own forests | per cent compared to 2019 |  |

and reach Net Zero
emissions by 2050
## NEXT
We will work together with partners to
develop fully circular strategies, from
design to production and supply to
How we contribute to the UN Sustainable Development Goals (SDGs) recycling, creating positive impact
packaging for our changing world.
Responsible Consumption and Climate Action: We reduce our
Production: We keep materials in emissions to combat climate
By 2030, aim for all of our packaging to
use for longer, reduce waste and change and its impacts.
be recycled or reused and pilot 20 new
pollution and protect
business models for improving
natural resources.
post-consumer waste quality

| Life on Land: We minimise | Decent Work and Economic Growth: | and recycling rates |
| --- | --- | --- |
| our use of sustainably sourced | We commit to being a responsible |  |
| fibre, protecting and restoring | employer, with high ethical, labour | By 2030, aim to optimise every fibre |
| ecosystems. | and employment standards. | for every supply chain |

By 2030, aim to use packaging and
recycling to enable the circular
economy by replacing problem plastics,
Alignment with international frameworks
reducing value chain emissions and
We support several international frameworks including United Nations Global Compact (UNGC),
eliminating consumer packaging waste
United Nations Declaration of Human Rights and the Convention on the Rights of the Child,
International Labour Organization (ILO) Eight Fundamental Conventions and Organisation for
By 2030, engage five million people
Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises.
on the circular economy and
circular lifestyles
People are the foundation of our success and we prioritise their health,
safety and wellbeing and contribution to our communities
6
STRATEGIC REPORT
Progress against our Now and Next sustainability targets
In 2021/22, we continued to deliver strong progress against our Now and Next sustainability targets. Turn to pages 30-33 to learn more
and see the DS Smith Sustainability Report 2022 for a complete progress review.
Now and Next sustainability target 2020/21 2021/22 Status
1
Closing the loop By 2023, manufacture 100% recyclable or reusable packaging 99% 100% Achieved
through better design
By 2030, aim for all our packaging to be recycled or reused Ongoing Ongoing On track
By 2030, pilot twenty new business models for improving Ongoing Ongoing On track
post-consumer waste quality and recycling rates
Reducing waste and By 2025, take 1 billion pieces of problem plastics off 313 Ahead
2
pollution supermarket shelves million
By 2025, work with partners to find solutions for ‘hard Ongoing Ongoing On track
to recycle’ packaging

| Protecting natural | By 2025, optimise fibre for individual supply chains in 100% |  | 23% |  | 26% | On track |
| --- | --- | --- | --- | --- | --- | --- |
| resources | of new packaging solutions |  |  |  |  |  |
|  | By 2030, aim to optimise every fibre for every supply chain | Ongoing |  | Ongoing |  | On track |
|  | Maintain FSC® certification at 100% of our sites |  | 100% |  | 100% | Achieved |
|  | Maintain forest management certification at 100% of our forests |  | 100% |  | 100% | Achieved |
| Driving carbon | By 2030, reduce Scope 1, 2 and 3 GHG emissions | Ongoing |  | Ongoing |  | On track |
| reduction | by 46% compared to 2019 |  |  |  |  |  |
|  | By 2050, reach Net Zero GHG emissions | Ongoing |  | Ongoing |  | On track |
|  | Maintain 100% of our energy consumption is ISO 50001 certified |  | 100% |  | 100% | Achieved |
| Measuring and | By 2025, measure and improve biodiversity in our own forests | Ongoing |  | Ongoing |  | On track |

improving biodiversity
By 2025, launch 100 biodiversity projects across 57 100 Achieved
Europe and North America
By 2025, run a biodiversity programme in the local 3 12 Ahead
communities of our mills
Managing water By 2025, achieve zero non-conformances with consents 21 10 On track
3

| responsibly | to discharge |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  |  |  | 3 |  | 3 |  |
|  | By 2030, reduce water withdrawal by 1% per tonne of | 8.10m |  | 8.08m |  | Ahead |

production per year at mills in areas at risk of
water stress compared to 2019
Maintain a water stress mitigation plan at 100% of our sites 100% 100% Achieved
in areas at risk of water stress

| Sending zero waste to |  | By 2030, send zero waste to landfill | 258,225 |  | 255,920 |  | On track |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | 3 |  | tonnes |  |  |  |  |
| landfill |  |  |  |  | tonnes |  |  |
| Equipping people to |  | By 2025, engage 100% of our people on the circular economy |  | 9% |  | 50% | Ahead |

lead the transition to
By 2030, engage five million people on the circular economy 519,000 2.3 million Ahead
the circular economy
and circular lifestyles
Respecting and By 2022, conduct a human rights risk assessment Ongoing Delivered Achieved
promoting human rights

| Contributing to our | Maintain 100% of sites engage in community | 100% | 100% | Achieved |
| --- | --- | --- | --- | --- |
| communities | activities each year |  |  |  |
| Sourcing sustainably | By 2025, ensure 100% of suppliers comply with | 45% | 78% | Ahead |

our sustainability standards
Maintain that 100% of the papers we use are recycled or 100% 100% Achieved
chain of custody certified
1. We now consider this target ‘achieved’ because greater than 99.5% of our packaging volume meets this standard, enabling recyclability in practice and at scale.
For the remaining less than 0.5% volume that is presently not either recyclable in practice or at scale, such as some barrier coatings and foam, we continue to push
for circular alternatives.
2. Cumulative total of plastic units replaced with recyclable alternatives during 2020/21 and 2021/22.
3. Our environmental metrics were previously reported on a calendar year reporting period. All of our metrics are now reported on a financial year reporting period,
and therefore historic environmental metrics have been restated.
Annual Report 2022 dssmith.com 7
OUR PURPOSE-LED APPROACH
## Redefining
## Packaging
## for a Changing World
NEW
DESIGNS
l d
r
o CIRCULAR
NEW
W
g READY APPLICATIONS
n
i
g
n
a
S
h E-COMMERCE
C A NEW
a E
PROCESSES
r R
o A
f
CONSUMER
g H
n PACKAGING
i T
g NEW
### W Designers &
a
k MATERIALS
O
### c Innovators
R CHANNEL
a
P G
AGILITY
g
n i
n NEW
i
f TECHNOLOGIES
e
d
e SMART
R
PACKAGING
NEW
BUSINESS MODELS
From our packaging to our processes, our designers and innovators
## Inventing, re-imagining
are relentlessly pursuing every new opportunity to create circular
## and redefining to deliver the solutions designed to eliminate waste and pollution, re-use or
recycle products and materials, and regenerate nature.
## circular economy
Many of our customers are multinational industry-leading brands
who require a global, consistent approach to their packaging; and
they are increasingly looking for closer partnerships to grow and
The events of the past year have impacted our customers all over
innovate with them.
the world, but through our global scale and innovative, customer-
led approach we are well positioned to respond. As part of our five-year commitment to invest £100 million in
research and development (R&D), we have opened a state-of-the-
We must continue to lead, to predict and show our customers the
art laboratory at Kemsley Mill, the second largest paper mill in
way to tackle the huge challenges of new retail channels such as
Europe, to advance our research into alternative fibre sources for
e-commerce and providing more sustainable, circular solutions at
paper and packaging products.
scale wherever they operate.
We have also announced a new flagship innovation centre for
This is why we are leading the way with innovative new thinking
ideation, design, testing, piloting and collaboration near
that will accelerate the transition to the circular economy.
Birmingham, UK. This facility will allow us to install and test pilot
product and service lines to enable customers to visualise the
value that we can bring to them.
8
STRATEGIC REPORT
DS Smith is applying science to fibre
We are exploring a range of new materials through our
£100 million R&D programme, but more than this, we are
partnering with our customers to help them realise the
significant benefits of the circular economy. We are
embedding circularity into all of our products which is felt
throughout the whole life cycle.
See more online dssmith.com
Fibre harvested from the ocean floor
Beyond optimising traditional paper fibres, this year in an
industry first, we conducted initial trials exploring how
seaweed fibres may be used as a raw material in a range
of packaging solutions.
In particular, it could play a significant role in removing
problem plastics by acting as a barrier coating to protect
items like foodstuffs.
### “Seaweed has exciting applications
### that could become the next generation
### of sustainable packaging solutions. Our
## £100m
### research into alternative fibre sources
investing in innovation for the
### has the potential to lessen pressure on
next five years
### forests, protecting natural resources.”
Thomas Ferge, Paper and Board Development Director
at DS Smith
Packaging innovation is the lifeblood of our organisation and is A crucial part of making sure our packaging meets the evolving
vital in keeping global supply chains running as they become more demands of the supply chain is ensuring that circularity is built in at
integrated, demanding and focused on sustainability. the start.
We have embedded our pioneering Circular Design Metrics across
all our packaging sites to ensure that we can measure the
environmental impact of all our design solutions. An industry first,
our metrics enable us to quantify the sustainability performance
### “70 per cent of waste is determined at the
of each of our packaging designs across eight key different
### product’s design stage. That means indicators: carbon footprint, design for reuse, supply chain
### innovative design, and the materials and optimisation, recyclability, planet safety, material utilisation,
renewable sourcing and recycled content.
### processes we use, is at the heart of the
We are committed to ensuring that the performance of our
### transition to the circular economy.”
packaging matches these needs and our industry-first science-
based optimisation programme PACE™ (Performance, Assurance,
Consistency & Environmental excellence) enables us to guarantee
Alan Potts, Design & Innovation Director
our boxes deliver the right specification, efficiency, carbon savings
and cost for our customers.
Annual Report 2022 dssmith.com 9
OUR PURPOSE-LED APPROACH CONTINUED
## Redefining Packaging
## for a
## Changing World
l d
r
o
W
g
n
i
### g M
### S
### n RESPONDING A
### a R
### TO RETAIL R
### h O
C SCALE CHANNEL
### K
### T CHANGES
a
### E
### r A
### o I T
f Investing
### T
### g D
to respond E-COMMERCE
### n N INNOVATION
### i R
### E to change
### g I
### a R V
k
### c E E
SUSTAINABILITY
### a F R
P AND CIRCULAR SUSTAINABILITY
### F S
### I ECONOMY
g
### n D
i
n i
f
e
d
e
R
## Every change brings innovation
### “Small steps made now can have the biggest
## and with it significant opportunities
### impact. Our customers like to play their part
### and by offering to bring used packaging
### The past 12 months have seen the environment in which we directly back to us to then recycle into new
operate continue to evolve at pace. Large scale events including
### packaging with DS Smith again and again is a
Covid-19, climate change and macroeconomic factors have
### significant step towards a circular economy.”
been a catalyst for consumers to consider the way they relate
to packaging.
This changing landscape has resulted in consumers becoming Jacquie Silvester, Head of Sustainability and
increasingly aware of the world around them and their role
Improvement at Cotswold Co.
within it. They see their purchasing choices as a way to have
influence and will actively seek out companies offering more
sustainable solutions.
10
STRATEGIC REPORT
Collaborating with our customers to replace
problem plastics
Globally, our design teams have been innovating to find
solutions to our customers’ single-use and hard to recycle
packaging, with more than 1,000 recyclable, fibre-based
solutions developed for products from wine boxes and
ready meal trays to shrink wrap and fruit punnets.
See more online dssmith.com
Asda
As part of Asda’s accelerated target to reduce own brand
plastic by 15 per cent by the end of 2021, the retailer
worked to make in-store displays more sustainable,
cutting down on plastic and non-recyclable materials.
We helped Asda find a sustainable alternative for shelf
edge label holders that will replace one million pieces
of unnecessary plastic from its displays this year.

| 64% | 78% |  |
| --- | --- | --- |
| of consumers actively reduced | of people are more likely to | “Removing unnecessary plastic is at the |
| their use of plastic packaging | purchase a product that is | top of our minds and is very important to |
| last year (Euromonitor) | clearly labelled as |  |

### our customers. This project with DS Smith
environmentally friendly
### has enabled us to remove the plastic shelf
### edge label holder, making it easier for
### our shipper units to flow through our
## 85%
### cardboard recycling stream.”
agree that they ‘want to buy
products which use as little Lisa Walker, Packaging and Print Specialist at Asda
packaging as possible’
With global e-commerce predicted to account for 21 per cent of We are at the forefront of this effort having already helped to
total sales in 2022 and 24.5 per cent by 2025, there is mounting remove 313 million pieces of problem plastic from supermarkets
pressure on retailers and brands to live up to consumers’ and online retailers globally since 2020. To achieve this, we have
sustainability expectations, with consumers more likely to choose created more than 1,000 wholly recyclable fibre-based packaging
a clearly marked sustainable alternative and 64 per cent of solutions for both traditional and e-commerce retailers.
consumers willing to pay more for sustainable packaging.
Not only are sustainable packaging and services impacting
Sustainable packaging has also risen up the agenda for consumer preferences, how and where consumers choose their
governments, with many implementing legislative changes, products have also been impacted by the changing world around
including introducing taxes, aimed at curbing the use of plastics us. Covid-19 accelerated developing consumer preferences for
and plastic packaging. Such legislation is driving innovation with a buying their products through a range of different channels,
sizeable opportunity at stake. leading to increased growth of e-commerce shipments.
Our research has demonstrated that 1.5 million tonnes of single- The customer ‘unboxing experience’ must not be forgotten and is a
use plastic, or 70 billion units, could be removed from supermarket key driver for brands as they look to truly differentiate their
shelves across Europe each year and replaced with alternative engagement with consumers.
renewable and recyclable materials.
As the world continues to evolve and consumer preferences shift,
we will remain agile, helping our customers to respond to these
trends while meeting our shared sustainability ambitions.
Annual Report 2022 dssmith.com 11
CHAIR’S STATEMENT
## Chair’s statement
“Our Purpose of ‘Redefining Packaging for a Changing World’ has never
been more relevant for our business and society at large. A number of the
structural growth drivers have been accelerated by the pandemic and our
assets, strategy and people position us well to benefit. As a fully fibre-based
company, our circular model supports our vision to be the leading supplier
of sustainable packaging solutions.”
Geoff Drabble,
Chair
A year of momentum 1.6 times EBITDA versus our medium-term employees together with serving our
target of 2.0 times, and have made good customers in these challenging times.
2021/22 has been a year of strong
progress in our return on sales and in
momentum in the business despite Our people have responded magnificently,
particular return on average capital
continuing to operate within a Covid-19 despite the ongoing impact of Covid-19,
employed during the year.
environment for much of the year and more adapting ways of working where needed,
recently the uncertainty caused by the Investing in our business enabling us to continue to serve our
Russian invasion of Ukraine and the impact customers in a safe operating environment.
We have consistently invested to benefit
on the macroeconomic environment. Despite the many challenges we have
from long-term growth drivers of a
faced, this is the 13th consecutive year we
I am pleased with our performance, with changing retail environment and
have seen an improvement in our health
record volume growth translating to 29 per sustainable solutions in anticipation of the
and safety KPIs.

| cent profit growth through managing our | growth which is now playing out, with |  |
| --- | --- | --- |
| supply chain and cost base and increasing | e-commerce in particular accelerated by | Sustainability |
| packaging prices to recover the | Covid-19. That investment has taken the |  |

Sustainability is at the heart of our
significantly increasing input costs. We saw form of designers, technicians and
business, both in how we operate our own
good growth across all our customer base, equipment, resulting in a range of
business, but also how we help our
with volumes from our bedrock of fast innovative and sustainable solutions via
customers solve their sustainability
moving consumer goods customers our Circular Design Principles and
challenges. In the year, we announced our
growing particularly well. e-commerce products and services, so that
commitment to a science-based target in
our packaging adds value, helping our
We have seen particularly strong line with the 1.5°C trajectory which
customers in the transition to a more
performances from regions where we have equates to a 46 per cent absolute
circular economy and achieve their own
invested significantly recently, with the reduction in CO 2 by 2030 versus 2019 and
sustainability targets.

| North America and Southern Europe |  | are committed to Net Zero carbon |
| --- | --- | --- |
| regions delivering the highest margins of | We have also invested in additional | emissions by 2050. We saw a greater |
| the Group. In the US, we are seeing the | capacity with two new packaging sites in | acceleration in our customers’ aspirations |
| benefit of the Indiana site contributing to | Italy and Poland. Our site in Italy is now | for plastic replacement and we continue to |
| exceptional volume growth in the region, | operational, with the site in Poland | take a leadership position in the debate |
| and in the Southern region, Europac has | currently being commissioned ready for | with our presence at COP26 and our |
| delivered a very strong operational and | production to commence in the next few | collaboration with the Ellen MacArthur |
| financial performance. | weeks, all in line with customer driven | Foundation. Our engagement with |
|  | demand for ever more sustainable | stakeholders on the topic of ESG has |

We are driving the transition to the circular
packaging and we are confident in the increased significantly as the interests and
economy with a fully circular business
returns these sites will deliver. requirements of customers, investors and
model which has delivered during the
consumers continue to grow.
period, with excellent cash generation, Health and safety
despite increasing our investment in the The Board
Our values and priorities remain
business and an inflationary environment.
unchanged. The primary areas of focus for In January 2022 Rupert Soames informed
We have reduced our leverage down to
the Board and management team are for the Company that he planned to retire from
the safety, health and wellbeing of our the Board at the conclusion of the Annual
12
STRATEGIC REPORT
General Meeting on 6 September 2022. Dividend We have seen real progress in the business
Rupert handed over his Senior during the year and our customer driven
The Board considers the dividend to be a
Independent Director duties to David investment into research and
very important component of shareholder
Robbie from 28 February 2022. On behalf development, people and new sites
returns and it is integral to our capital
of the Board and the Company, I would like positions us well to continue that
allocation policy of delivering a return to
to thank Rupert for his great contribution momentum into the future.
shareholders while maintaining a robust
and commitment to the Board and the
balance sheet with the flexibility for The new financial year has started well,
Company and wish him continued success
reinvestment in projects expected to building on the momentum from the
in the future. His tireless work in
deliver returns in our return on capital previous year. Whilst there remains
completion of the recent Chair succession
range, in the medium term. We have a considerable uncertainty about the overall
process and his subsequent assistance
longstanding capital allocation and economic environment, our expectations
in my integration into the role have
dividend policy of paying a dividend with remain unchanged. Strong customer
been invaluable.

|  | cover of 2.0 – 2.5 times to adjusted EPS. In | demand reinforces our confidence to |
| --- | --- | --- |
| I am also pleased to welcome David’s | respect of 2021/22, we paid an interim | invest in the business, with capital |
| appointment as Senior Independent | dividend of 4.8 pence and propose a final | expenditure expected to further increase |
| Director, a role in which I am sure he will | dividend of 10.2 pence, together 15.0 | in the current year. We currently expect to |
| excel given his already considerable | pence, representing cover of 2.0 times, in | see 2-4 per cent growth in our volumes, |
| contribution as Audit Committee Chair. | line with our policy. | aided by our focus on resilient end markets, |

a strong performance in the US and the
I am delighted that Alan Johnson has been Outlook
opening of new sites in regions where
appointed to the Board as a Non-Executive
On behalf of the Board, I would like to demand is buoyant. This growth, combined
Director. He also joins the Audit,
welcome colleagues who have joined with the benefits of ongoing pricing
Nomination and Remuneration
DS Smith during the year and to thank momentum and careful management of
Committees of the Board. Alan has a strong
everyone for their commitment our cost base gives us confidence for the
financial background in consumer goods
and hard work. year ahead and is expected to result in
and retail, having held a number of senior
a further substantial improvement in
finance positions at Unilever during a
our performance.
30-year career, including Chief Audit
Executive and Chief Financial Officer of the
Global Foods Division.
## Engaging with stakeholders: Section 172 statement
The Board aims to promote the success of the Company for the benefit of its shareholders as a whole, taking into account the long-term consequences
of its decisions and looking at those decisions through a variety of lenses. This involves the Board and management considering in detail and discussing
the interests of the Company’s stakeholders including our customers, our people, our investors, our suppliers, local communities and non-governmental
organisations; the importance of maintaining our reputation for high standards of business conduct; and the environment. More information about our
stakeholders is set out on page 18 and 19. More information about the Board balancing stakeholder interests is set out on page 69. Examples of what
that has looked like in practice over the past year are summarised below. Engagement with all our stakeholders is led by our executive teams, who in
turn regularly update Board members, via presentations and briefings. In the governance section of this Annual Report we use to highlight the
s172
examples referred to below:
Stakeholder Strategic Report Governance
Our customers Pages 10 and 11 (collaboration), 18 Page 74 (engagement with our customers via updates from sales,
(engagement) marketing and innovation functions)
Our people Pages 18 and 25 (engagement and feedback), 25 Pages 73 (engagement with our workforce), 73 (EWC meetings), 73 (EWC
(decisions made in consultation with employees), representative attending Remuneration Committee meeting and
26 (engagement on health and safety), 28 Remuneration Committee Chair attending EWC Executive meetings)
(global recognition programme)
Our investors Page 18 (engagement) Pages 73 (engagement with our shareholders)
Our suppliers Page 19 (engagement and supplier standards) Page74 (engagement with our suppliers via updates from Group
procurement)
The environment and O
Pages 19 (engagement with stakeholders on Pages 73 (discussion of commitment to align to a 1.5 C scenario), 74
communities
environmental matters and charitable giving), 32 (engagement with other stakeholders including briefing on community
(engagement with ESG rating agencies) engagement)
Governments Page 19 (engagement) Page 73 (engagement with other stakeholders including briefing on
and non-
COP26)
governmental
organisations
This statement is made in conformity with the requirement to explain how directors fulfil section 172 of the Companies Act 2006.
Annual Report 2022 dssmith.com 13
OUR BUSINESS MODEL
## To be the leader in
## sustainable packaging solutions
## Our relationships
## and resources

| Our people and values |  |  |  |  |  |  | b | u | s | i n |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  | r |  |  |  |  | e | s |  |  |  |  |
|  |  |  |  |  | l a |  |  |  |  |  |  | s |  |  |  |  |
|  |  |  |  | u |  |  |  |  |  |  |  |  | m |  |  |  |
| We employ around 30,000 people |  |  |  | c |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  | i r |  |  |  |  |  |  |  |  |  |  | o |  |  |
| globally and invest in and develop |  |  | c |  |  |  |  |  |  |  |  |  |  |  | d |  |
|  |  | r |  |  |  |  |  |  |  |  |  |  |  |  | e |  |
| them so they can realise their |  | u |  |  |  |  |  |  |  |  |  |  |  |  |  | l |
| potential. Our values and | O |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

management standards guide how
Paper
we operate.
manufacturing
### Manufacturing and other 4 1
physical assets
We have an extensive network of
packaging manufacturing sites,
paper mills, recycling depots and
innovation centres, supported by
the infrastructure of the countries
## DS Smith
in which we operate.
Recycling Corrugated
## operations
Our relationships packaging
We interact in a way consistent
with our corporate values to build
and maintain trusted relationships
with our customers, suppliers
and communities.
### 3 2
Intellectual capital Customers
We have substantial customer Retailers
understanding, innovation and Consumers
patented designs.
Data and digital
Integration of data and digital will
help increase manufacturing
capacity, service levels, and deliver
best in class customer experience.
1 32 4
Financial capital
CCM Boxes Used OCC and
We are funded by a combination of
Paper is converted Packaging is used by packaging recovered fibre
shareholder equity, debt and
into corrugated our customers,
Used packaging is OCC and recovered
reinvested cash flow. board and then retailers and
collected and brought fibre are converted
into packaging consumers
to our recycling into paper again
Natural capital
facilities
We operate a circular model
through the recycling of natural
material, in particular wood fibre.
CCM: corrugated case material, the paper used to form corrugated board
OCC: old corrugated cases, i.e. used corrugated board, a feedstock for recycled paper
14
STRATEGIC REPORT
## How we create value The value we
## create

|  |  |  |  |  |  |  |  | 1. Insight | 3. Design |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | b | u | s | i n |  |  | Our strong relationships with our | All of our designers use our Circular |  |
|  | r |  |  |  |  | e |  |  |  | Satisfied customers |
| l a |  |  |  |  |  |  | s |  |  |  |

## s
## u m customers in fast moving consumer Design Principles to improve the
## c
## r We develop packaging that helps
## i o
## c goods (FMCG), retail and industrial sustainability of packaging. Through our
## d
## r our customers sell more, reduce
## e sectors help us gain insights in network of designers and PackRight
## u l costs, manage risks and become
## O changing consumer, retail and Centres, we create packaging that fulfils
circular-ready.
regulatory trends and how they impact our customers’ requirements for all
use of packaging. We use this stages of the primary product’s journey, Packaging that is
knowledge to inform our innovation. whether replacing plastic, improving sustainable
protection in transit, ease of
2. Innovation Our packaging is usually fully
identification in the supply cycle, or
recyclable and made from largely
Innovation is at the heart of our presenting the primary product to
recycled material. We recycle more
business. We have a five-year, £100 maximise sales.
packaging than we produce.
million investment programme in
4. Manufacturing
research and development to accelerate
Replacing plastic
our work in the circular economy and Our paper mills manufacture CCM and
We have replaced 313 million units
plastic replacement. our corrugated plants convert CCM into
of plastic with alternative fibre-
corrugated board, then print, cut and
We collaborate with our customers to based solutions since 2020.
pre-glue the boxes, which are then
create sustainable packaging solutions
shipped flat on pallets, ready for Returns to our capital
in our impact centres and are able to
assembly and filling at our customers’ providers
test and pilot designs and then share
factories. We maximise the efficiency of
best practice across all regions. Investors benefit from strong
our manufacturing, for example, using
operational and financial
We are also innovators in the use of
light-weight papers where possible to
performance.
light-weight corrugated board. Our
reduce the cost and carbon impact of
proprietary technology to test the Safety and opportunity for
the packaging produced.
strength of corrugated board as it is
our people
manufactured means we can use the
We aim to create equality of
optimum paper weight required.
opportunity for people to grow and
develop throughout their career in a
safe working environment.
Leadership in sustainability
We are leading the transition on
## Our differentiators Market drivers
packaging sustainability through
Responding to retail our engagement with major
Scale
organisations such as the Ellen
channel changes
MacArthur Foundation.
Innovation E-commerce
Community involvement
We have an active programme of
Sustainability and
Sustainability community involvement in addition
circular economy
to satisfying a societal need for
See more on page 10 recyclable packaging.
Annual Report 2022 dssmith.com 15
GROUP CHIEF EXECUTIVE’S REVIEW
## Q&A: Leading the transition to the
## circular economy
### “Leading the transition to a circular economy is embedded at the
### very heart of how we operate and drives many of our innovative
### products and services from plastic replacement and closed loop
### solutions to our industry-first Circular Design Metrics.”
Miles Roberts,
Group Chief Executive
At the time of writing this passage, we are of course trying to help We are now approaching two years since we implemented our
where we can to support those affected by the Russian invasion of updated sustainability vision and strategy, which maps out
Ukraine. We have colleagues in the region and our thoughts are ambitious commitments and goals for the next decade. Over the
with them and their loved ones. This terrible shock to our society, past year, we furthered our ambitions, committing to a 1.5°C
along with the new world of living with Covid-19, reinforces to me science-based target, as well as committing to reach Net Zero
more than ever the need to be a purposeful Company and for all of greenhouse gas (GHG) emissions by 2050.
us at DS Smith to think about how we can be a positive force.
We also recognise that this changing world has placed increased
In these uncertain times, our long-term vision allows us to remain demands on our employees and as well as a focus on wellbeing and
dynamic in response to these challenges, while driving us to realise diversity and inclusion, our ‘development for all’ programme aims
the growth opportunity within the changing world inwhich we to give everyone the chance to grow their skills and enjoy a career
operate. We partner with our customers and stakeholders to meet in our world leading, sustainable business. Importantly, our safety
these challenges, to ensure security of supply and to keep statistics have again improved, for the 13thyear in a row.
delivering innovative, sustainable solutions.
We are well positioned to respond to continued macroeconomic
To realise growth, we are increasing our investment in innovation, and geopolitical challenges and the structural growth in demand
developing value generating digital platforms and developing new for our products and services is stronger than ever. We have
products and services to meet the new packaging needs of our strategically positioned the business well to capture these drivers
resilient FMCG and e-commerce customers. – from the surge in e-commerce to plastic replacement – while
continuing to maintain our security of supply.
We announced in 2021 a doubling of our R&D investment to £100
million by 2025 to explore new materials, design and innovation. Ultimately, we are very proud of how we have responded over the
We have added an additional 4 per cent capacity through new past year to a number of different challenges. We continued to
greenfield packaging sites in Italy and Poland. Our site in Italy is drive the way our customers see value in packaging; and when
now operational, with the site in Poland currently being they expected more from us, we partnered with them to enable
commissioned ready for production to commence in the next few the transition to a more circular economy. Through this,
weeks, all in line with customer driven demand for ever more we are delivering on our Purpose to Redefine Packaging for
sustainable packaging. We have also launched our Digital & Data a Changing World.
Hub, allowing us to accelerate value creation and transform the
way we work.
Miles Roberts
Group Chief Executive
16
STRATEGIC REPORT
How are you supporting employees through debate on reuse and recycling, and the continuing evolution of
Q
extended producer responsibility for packaging in all our markets.
the challenges of the past year?
All of these industry efforts will be built on by our own DS Smith
I am extremely proud of the commitment, professionalism and
engagement with regulators, politicians and consumers to help
flexibility of our employees in this extraordinary time. We invested
people understand the special position of the fibre packaging
significantly to ensure that we had the right procedures in place to
supply chain in the circularity agenda.
ensure the wellbeing and safety of every one of our employees.
We always aim to delight our customers and that cannot be Do you expect the momentum in the
Q
achieved without having the best people in our industry. We have US to continue?
a strong Purpose and values to underpin our culture and we aim to
We are extremely pleased to see the continued strong
give every one of our colleagues the platform to realise their
performance in the US, reflecting the improved volumes across our
potential. We do this through a number of programmes including
packaging plants, the improved paper and packaging market
our Diversity & Inclusion initiatives and networks, development for
pricing and the US export paper price. Packaging volumes in the
all activities and wellbeing support.
region have seen significant increases within the Group, on the
The wider macroeconomic environment back of continued excellent customer traction as well as growth in
Q
a number of packaging sites as we continue to see excellent
has been particularly challenging – how
momentum in our new box plant in Indiana.
are you delivering security of supply and
The recovery in the past year is testament to the support and
value to customers?
confidence of many existing and new customers to our new
It is vital that we have, and continue to, manage the inflationary
products, production capacity and ways of working. It also
cost pressures experienced in the market through long-term paper
reinforces the strategic rationale and allows us to serve our
and other supplier relationships, significant risk management and
multinational customers in both the US and Europe.
hedging and the excellent work that is happening within the
procurement team. What do you see the coming year bringing for
Q
As a result of this security of supply, alongside the excellent service, DS Smith?
quality, and innovative, sustainable solutions we provide to our
Through the global pandemic, we have continued to grow our
customers, we have been able to continue to deliver real value to
business, building on our existing customer relationships as well as
our customers. This has meant we continue to grow volumes with
winning new customers with a focus on the resilient FMCG and
our customers and further strengthen our long-term partnerships.
e-commerce markets. By leveraging our scale, our deep customer
relationships and innovative solutions, we have a strong platform to
As you approach the two-year anniversary of
Q grow our market share over the next year. The pandemic has
Now and Next, what progress has been made?
accelerated our key growth drivers – changing retail channels
Our Now and Next Sustainability Strategy positions DS Smith at including e-commerce, and demand for sustainability – and we are
the forefront of the packaging industry and sets a clear roadmap to ideally placed to capitalise on this opportunity. As a business, we are
address immediate challenges, while also working to meet the focused on delivering for all our stakeholders including employees,
needs of the next generation. Leading the transition to a circular customers, suppliers and shareholders to deliver real value for all.
economy is embedded in our operating model and drives many of
our innovative solutions including plastic replacement, recyclable
closed-loop solutions and our Circular Design Metrics.
## Our strategy
We have delivered excellent progress on our Now and Next
Sustainability Strategy: achieving our targets to manufacture 100 Our strategy is based on balancing the requirements of our
per cent recyclable or reusable packaging and to fund 100 core stakeholders and delivering on our Purpose:
biodiversity projects across Europe and North America. We have
To delight our customers
also increased our ambition on CO 2 emissions, setting a 1.5°C
science-based target, as set out in the Paris Climate Agreement How we engage with customers
and committing to reach Net Zero GHG emissions by 2050. Our
See more on pages 20 to 23
target is to reduce our Scope 1, 2 and 3 GHG emissions 46% by
2030 compared to 2019. We are already seeing progress in To realise the potential of our people
improvements across five major ESG ratings – for CDP achieving an
How we engage with our people
A- in climate change.
See more on pages 24 to 29
How are you working to influence the wider
Q
To lead the way in sustainability
sustainability agenda for your industry?
How we engage with society
DS Smith will be taking the lead in positively influencing all our
See more on pages 30 to 33
stakeholders and society – we are doing this through our Now and
Next Sustainability Strategy. We are taking leadership positions in
To double our size and profitability
the major trade associations at European and national level to
How we engage with our investors
drive advocacy on all the major issues that affect our business –
critical areas such as decarbonisation of our supply chain, the See more on pages 34 and 35
Annual Report 2022 dssmith.com 17
STAKEHOLDER ENGAGEMENT
## Our stakeholders
### Our strategic goals are aligned with the requirements of all our stakeholders,
### so that we are delivering for all.
### Our customers Our people Our investors

| Why this stakeholder is | Why this stakeholder is | Why this stakeholder is |
| --- | --- | --- |
| important to us | important to us | important to us |
| Our customers are largely fast moving consumer | We are around 30,000 people across 34 | Our shares are listed on the London Stock |
| goods (FMCG) companies that produce goods | countries worldwide, speaking 26 languages. | Exchange, and we raise our debt from banks and |
| typically sold in supermarkets and increasingly | We are inspired by our Purpose and are diverse in | through listed bonds. Our equity and bonds are |
| via e-commerce channels. We make corrugated | our thinking. | owned by a wide range of investors in the UK, |
| packaging for some of the largest global food |  | Europe, the US and beyond. |
| brands, online retailers and industrial customers | Their concerns |  |
| and sell paper and recycling to third parties. |  | Their concerns |

Our people are interested in a company they can
be proud of and a strong supportive culture in Our investors are concerned about financial and
Their concerns
which they feel safe, recognised, included operational performance, sustainability strategy
Customers are increasingly concerned about and fairly rewarded and in which they can fulfil and ESG scores, compliance with laws and
sustainability, both in terms of recyclable their potential. industrial relations.
packaging materials and reducing overall
lifecycle impact, including optimisation in the Our response Our response
supply chain. They are interested in transparency By giving everyone a voice, we provide a We engage with equity investors and analysts
in the supply chain, compliance with laws and meritocracy with development opportunities for through regular meetings and conferences, and
regulation and competitive pricing. They are also all and recognition of personal achievement, similarly engage with our banking syndicate,
focused on the quality of the product and regardless of gender, ethnicity, age or religion. fixed income investors and ratings agencies
security of the supply chain and meeting their We encourage feedback and have mechanisms periodically. We aim to provide long-term
own sustainability targets. through our employee works councils including shareholder value creation.
the European Works Council, biennial employee
Our response
survey and more regular pulse surveys,
Our customers require an innovative and flexible which inform local action plans and sharing
partner with reliable world-class supply chains of best practice.
and scale. We continue to innovate with new
We are committed to ensuring our employees
sustainable solutions and provide more ways to
work in a safe, fair and productive environment
work with customers than ever before. Our
and invest in their development. We base our
packaging is fully sustainable which means it
approach to, and expectation of, our employees
helps our customers achieve their own
on our five DS Smith values (see page 5).
sustainability targets.
Our customers Our people
Read more on pages 20 to 23 Read more on pages 24 to 29
18
STRATEGIC REPORT

| Our suppliers | The environment | Governments and non- |
| --- | --- | --- |
|  | and communities | governmental organisations |
| Why this stakeholder is | Why this stakeholder is | Why this stakeholder is |
| important to us | important to us | important to us |
| We have approximately 40,000 suppliers, | Leading in sustainability and care for the | We engage in detailed consultations with |
| ranging from small suppliers of goods and | environment is core to our Purpose and is one of | governments on the topics of recycling and |
| services to large paper manufacturers, from | our four strategic goals. | reuse, extended producer responsibility and the |
| whom we source substantial volumes of paper |  | decarbonisation of heat. We participate in |
|  | Their concerns | industry organisations across the UK, EU and |

for our corrugated board.
Reducing GHG (greenhouse gas) emissions, North America to combine our influence.
Their concerns water consumption and waste to landfill are
Their concerns
Our suppliers are also concerned with compliance priorities as well as education on the importance
with laws, competitive pricing and sustainability. of the circular economy and how everyone can The circular economy, reducing CO₂ and energy
help care for the environment and our usage, water usage and waste and landfill and
Our response communities. focus on sustainability.
We engage with suppliers to enforce our
Our response Our response
established supplier standards and supplier Code

| of Conduct, which set out our ways of working, | In January 2022, we announced our ambitious | We take a leadership role with relevant |
| --- | --- | --- |
| including for example, in relation to our | commitment to align our global operations to a | non-governmental organisations, such as our |
| obligations under anti-modern slavery laws. | 1.5°C scenario as set out in the Paris Climate | global partnership with the Ellen MacArthur |
|  | Agreement, by committing to reduce our Scope | Foundation. We are engaging with leading ESG |
|  | 1, 2 and 3 Green House Gas (GHG) emissions 46 | organisations such as the Science Based Targets |
|  | per cent by 2030, compared to 2019 and to reach | initiative to set meaningful and ambitious goals |
|  | Net Zero GHG emissions by 2050. | around our carbon emissions |

Our Purpose also guides our community
programmes and charitable foundation which
supports local and larger initiatives, from
sponsoring local educational projects to
donations to environmental and education-
focused charities, such as the Arkwright
Foundation. Our DS Smith Charitable Foundation
has donated over £350,000 to causes aligned
with our Purpose in 2021/22.
The environment
and communities
Read more on pages 30 to 33
Annual Report 2022 dssmith.com 19
OUR STRATEGY
We do this by:
## To delight • Delivering on our commitments for quality
and service
• Providing value-adding packaging solutions
## our customers
• Driving innovation
In 2021/22 we:
• Supported our customers throughout the pandemic
by maintaining our continuity of service
• Strengthened our value proposition and helped
customers better position themselves for a more
circular economy
• Accelerated innovation programmes, including
plastic replacement
• Flexibility and agility in our co-operation with
customers
In 2022/23 we will:
• Drive circularity and continue to deliver market
leading sustainable solutions
• Accelerate our leadership on e-commerce
• Continue to scale up innovations
• Drive improvement of service levels
Our KPI
## On-time, in-full deliveries
## (OTIF)
Definition
The proportion of our orders that are delivered
on time, in full across our businesses.
Why this is a KPI
Packaging is an essential part of an efficient
supply chain. Delivering as promised is a critical
component to ensuring we remain a trusted
partner to our customers.
2021/22 performance
In the year 2021/22, our overall OTIF was 94 per
cent. This is below our target of 97 per cent due
to disruption caused to supply chains by
### “People are becoming more
Covid-19 and the Russian invasion of Ukraine.
### conscious of their impact We continue to strive for higher service
levels and have seen improvements in our
### on the world. We help our
underlying operations.
### customers by designing
### sustainable packaging
### solutions, to help achieve
### their sustainability goals
94%
### and meet growing
### demand for sustainable 95%
### packaging solutions.”
95%
Marc Chiron,
0 100 2022 Target: 97%
2022 Sales, Marketing and Innovation
Director, Packaging
2021
20
2020
STRATEGIC REPORT
We work with many of the world’s biggest In the changing global landscape, our FMCG
and most iconic brands. We add value by customers demand security of supply of
Case study: Switch from
enhancing their consumers’ experience, packaging. We continue to support our
polystyrene to fibre to
ensuring they are available when shoppers customers by investing in our existing
reduce emissions and cost

| look for them online or in-store and helping | capability and in new sites to build capacity |  |
| --- | --- | --- |
| to create value recognition and maintain | as their demand for our products and | We partnered with Fresco y del Mar, |
| price-points. In addition, we focus on | services grows. We are tracking well | a Galician company selling fish and |
| transforming the design of point-of-sale | with the construction of our two new | seafood from the region, to switch |
| packaging and displays, to minimise | sites in Italy and Poland in line with | from expanded polystyrene to |
| supply chain complexities and enable | customer driven demand for ever | fibre-based packaging. |
| speed to market. | more sustainable packaging. | The cardboard solution aligns to |
| Our end-to-end approach is adopted by | While consumers’ relationships with | Fresco y del Mar’s commitment to |
| many of our multinational customers and | packaging have undeniably changed, so | respecting nature, marine |
| has been a real source of value growth in | too have the needs of our customers and | environments and fair fishing. It |
| these relationships. By working in close | the challenges they have faced. We have | keeps the product fresh while also |
| partnership, we gain insight that allows us | responded with tailor-made solutions that | reducing logistics emissions and |
| to develop packaging that supports the | helped our customers respond to trends | cost, as 410 empty corrugated |
| delivery of increased sales, lower costs, | such as increased e-commerce demand or | boxes can be transported per |
| manages risks and allows for a circular | the need for more sustainable packaging. | pallet, compared to 36 expanded |
| ready approach. | We continue to help new and existing | polystyrene boxes of the |
|  | customers navigate this period of | same volume. |

Our packaging customers
uncertainty through security of supply, “It is motivating to work with a
We have a globally diverse customer base, quality and innovation.
company sharing the same
with over 80 per cent of our customers
Through our ePack online platform, we challenges constructively to find the
being fast moving consumer goods (FMCG)
have helped both small and large best way forward to a more
and other consumer products. FMCG
customers, and it has continued its sustainable future. We share
customers require high-quality, innovative,
expansion across Europe to operate in circularity in our DNA.”
value-adding packaging. We invest in the
markets including Spain and Italy. The Pablo Sueiro,
insights and innovation needed to meet
platform offers 100 per cent eco-friendly Fresco y del Mar
this demand; and deliver this on a
packaging to support e-retailers build on
multinational scale.
the transformations happening across
Our exposure to this market makes us more e-commerce and boost growth in sectors
resilient and less cyclical as demand for like apparel and online groceries, while also
these products remains consistent. Our offering plastic-free alternatives such as
multinational customers require a partner paper mailing bags or fully recyclable
that has a geographic footprint which insulated fibre-based boxes for delivery.
matches their own. DS Smith is exceptional Value proposition for customers
We have worked hard to continue
in having the scale, expertise and
More sales
innovating with our customers to respond
innovative approaches to support our
We help our customers
to these trends, transforming our
customers around the world. Over the past generate more sales with the
sustainability and innovation workshops
year, we have seen real growth in our US right packaging
through new digital platforms.
operations as we continue to partner with
Lower cost
global customers and expand our
We help our customers
operations at our Indiana site.
eliminate unnecessary cost
Risk managed
We help our customers
address risk throughout the
supply chain
Circular ready
We help our customers with
circular packaging solutions
Annual Report 2022 dssmith.com 21
TO DELIGHT OUR CUSTOMERS CONTINUED
Circular Design Principles
As more than 70 per cent of a product’s As companies and retailers embrace the
Following the launch of ourCircular Design
environmental impact is determined at the transition to more sustainable packaging,
Principles, we have developed Circular
design stage, data from the Circular Design there is an opportunity to make significant
Design Metrics for packaging. With this
Metrics enables brands and retailers to progress against their environmental and
pioneering tool we can give a clear
compare different design solutions, social responsibilities while also responding
identification of a packaging design’s
helping them to reduce waste and pollution to changing consumer behaviours.
sustainability performance.
and keep materials and products in use
We have embedded our Circular Design Our paper customers
for longer.
Metrics across all our packaging sites, Supplying customers across the globe, we
Through our Circular Design Principles,
training over 700 designers to support are a leading manufacturer of sustainable
brands can keep materials in use, design
the transition to the circular economy packaging and speciality papers made from
out waste so that it is easier for consumers
and help customers achieve their 100 per cent recycled or chain of custody
to reuse and recycle packaging, and
sustainability goals. certified fibre sources. Our mills in Europe
regenerate natural systems.
and the US produce around 4.5 million
In an industry first, we can now measure
Moreover, we have been working to reduce tonnes of corrugated case materials and
and quantify the sustainability
plastic packaging by innovating in sectors specialist industrial products annually.
performance of each of our packaging
where sustainable fibre-based packaging
designs across eight key different The high performing packaging papers we
can make a big difference in reducing
indicators: carbon footprint, design for produce, such as recycled corrugated case
plastic use. Through innovations, such as
reuse, supply chain optimised, recyclable, materials and kraftliners, are integral in
Ecobowl, we have extended our ability to
planet safe, material utilisation, renewable allowing the Group’s packaging division to
tackle ‘hard to recycle’ plastics and we’ve
source, and recycled content. produce sustainable paper-based
developed over 1,000 designs focused
packaging solutions. Our customers for
We are the only packaging producer to
specifically on plastic replacement – with
speciality papers, such as plasterboard
offer this unique tool which gives its
over 300 million units of plastic replaced
liners, come from a variety of industries
customers across a wide range of sectors
since 2020.
including construction, printing, food
such as FMCG, industrial, retail and
manufacturing, stationery supplies
e-commerce a clear view of their packaging
and education.
designs’ circularity performance.
Combining our expertise of 15 mills across
Europe and North America, which are
strategically located near raw material
sources and our customers, with forward-
Examples of fibre-based solutions to replace
common sources of problem plastics thinking research and development
focus, enables us to provide customers
with the high performing quality
papers they need for their onward
manufacturing operations.
Through our stringent quality
measurement systems and ability to track
fibre through the complete papermaking
process, we ensure delivery of high-quality
finished papers to all our customers. Our
commitment is to create sustainable, high
performing papers, that deliver the
packaging solutions needed in an ever-
changing world.
22
STRATEGIC REPORT
Through our digitalisation of recycling
systems, we are working with customers to
## DS Smith has a higher proportion of FMCG create impactful data-led solutions for our
customers to make the right decisions
## customers than the market average
relating to their recycling.
We are currently workingwith IBMto
Our corrugated packaging
explore the use of image recognition to
customers by volume
17% better identify contaminates in recycling
that can hinder the recycling process. We
are also harnessingNear Infra-Red (NIR)
scannersto tackle plastic contamination in
83%
recycling. First trialled in our mills in the UK
and Italy, NIR scanners are now being rolled
out across our European mill network and
can identify quantities of plastic in paper

| European industry average |  | and cardboard collected for recycling even |
| --- | --- | --- |
| corrugated packaging by volume |  | before the paper is unloaded at our mills. |
|  | 26% | This technology allows us to work with our |

customers to improve the quality of
material they collect for recycling.
74%
Case study: Contributing to
Lidl Sustainability Vision
FMCG and other consumer goods Industrial
We are helping Lidl in France close
the loop on its cardboard recycling
Source: DS Smith analysis
and deliver on its commitments to
recovering valuable resources and
reducing its impact on the
environment.
By partnering with DS Smith, Lidl is
Our recycling customers The paper and cardboard we collect for able to close the loop on its on-shelf
recycling serves our own paper mills as part packaging and, within a six month
We provide recycling and waste
of our closed loop recycling business period, Lidl France recycled more
management services to companies of all
model, while also being sold into our global than 95,000 tonnes of cardboard,
sizes across a diverse range of sectors in
network of third-party paper mills. including 22,621 tonnes of
both Europe and North America. From
cardboard using our closed-
municipalities and waste management With a full recycling and waste
loop model.
companies, to printers, manufacturers, management service, we work with our
wholesalers, and some of the best-known customers to reduce waste and recycle “At Lidl, we are convinced that the
brands and retailers the world over, our more. By innovating around collection best waste is the one that is not
customers benefit from our recycling infrastructures and working with produced. But we are also realistic as
expertise. We partner with organisations customers to build recyclability into their we know that every act of
large and small to keep significant amounts supply chains, we are helping to provide production and consumption
of paper and cardboard out of landfill and solutions for our customers’ and wider involves waste. It is therefore our
incineration every year. society’s biggest recycling challenges. responsibility to manage it by first
limiting it as much as possible, then
by recycling it.“
Camille Fossano,
Logistics Environment
Manager, Lidl France
Annual Report 2022 dssmith.com 23
OUR STRATEGY
We do this by:
## To realise the • Ensuring the health, safety and wellbeing of all our
employees and creating a working environment
where they feel proud, engaged, included and
## potential of our people developed to perform at their best
In 2021/22 we:
• Conducted a global engagement survey to
understand what is working and areas to improve; to
listen, respond and act
• Continued celebrating the contribution and success
of employees with our second Smithies awards
event held virtually
• Provided managers with a set of tools to drive high
levels of health and safety and wellbeing
engagement
• Continued to develop our leadership pipeline from
early talent through to mid and senior leadership
• Provided more opportunities for employees to
develop by offering new ways of accessing learning
• Accelerated our diversity and inclusion ambition by
increasing diverse senior leadership hires,
continuing to raise awareness and activating
employee resource groups
• Implemented functional talent meetings with
### “To realise our Purpose of ‘Redefining
diversity data to support career coaching and
### Packaging for a Changing World’ we need a
accelerated development of diverse talents
### modern, diverse, motivated and engaged
In 2022/23 we will:
### workforce where everyone has the
• Run listening groups to drive action as part of our
### opportunity to realise their potential. We are engagement evolution with regular pulse surveys
### passionate about working together and and feedback
• Continue to recognise the contribution of our
### exploring new ways to innovate and delight
employees through the Smithies recognition
### our customers; it is fundamental to our
programme
### business success. Our priority has been the • Consolidate our employee feedback to develop a
### health and wellbeing of our employees, compelling proposition that describes how people
can thrive at DS Smith
### continuing to serve our customers and to
• Embed the health and safety and wellbeing culture
### support our local communities. At the same
through our local site networks
### time, we have not lost focus or momentum • Continue to invest in the capability of our managers
and leaders to support our employees
### on building an inclusive, engaging workplace,
• Provide consistent training to develop our technical
### recognising employees and providing
and operational capability using new immersive
### development opportunities. learning technology
• Review the ongoing success of widening
opportunities for employees to access development
### As we look forward, we are building on the
• Focus on embedding diversity and inclusion by
### learnings from the Covid-19 pandemic to
expanding employee resource groups, local
### shape new sustainable ways of working. We networks and roundtables
### are developing a compelling proposition to • Continue to scale functional and cross-divisional
talent meetings and support the development of
### attract and retain employees where they can
diverse talents through our leadership programmes
### thrive, and grow and sustain our business in
### a changing world by developing strategic
### capabilities (innovation, data & digital,
### sustainability and capital projects).”
Jacky Wearn,
Group Human Resources Director
24
STRATEGIC REPORT
Engaging our employees
Our KPI
Employees increasingly want to work for
organisations that align with their own
## values and bring meaning to their everyday Accident frequency rate (AFR)
lives. By engaging employees, we enable
them to identify and feel ownership of our
Definition 2021/22 performance
Purpose, which in turn drives productivity,
The number of lost time accidents (LTAs) The effect of the Covid-19 pandemic
innovation, retention and performance.
per million hours worked. has been felt throughout the
Ensuring we fully understand what
organisation creating significant
matters to employees, how we help them Why this is a KPI
absenteeism challenges. Despite this,
thrive and where we need to improve,
We believe all employees contribute to a we have improved our health and safety
continue to be fundamental to our
safe working environment and culture performance, which is a significant
engagement strategy.
and our focus is on individual ownership. achievement.
Our global engagement survey enables us
to monitor the engagement of our
2021/20

| employees with our business, culture and | Health and safety key |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Purpose. As well as traditional themes such | performance indicators |  | 2021/22 |  | Reported Pro forma | 3 | Variance vs. pro forma |
| as management practices, communication |  | 1 |  |  |  |  |  |
|  | Total LTAs |  |  | 96 102 101 -5% |  |  |  |

and personal development, our latest
2
AFR 1.91 2.06 2.04 -6%
survey was designed to help us better
understand areas that we did not ask about 1. LTA: number of accidents resulting in lost time of one shift or more.
previously, such as ethics and inclusion. 2. AFR: number of LTAs per million hours worked.
The survey enables us to understand how 3. Pro forma data adjusted for acquisitions and disposals.
the different issues that drive positive
engagement have changed as the
world changes.
We continue to discuss the themes of the
Alongside engagement, we measure and
survey findings with employees through
European Works Council
track employee enablement, which is the
listening groups and our European Works
creation of a working environment in A further opportunity for us to listen
Council (see case study opposite) and will
which everyone can do their best work to and learn from the views of
evolve our listening approach to ensure
and where their skills and abilities are employees comes from the
continuous feedback conversations
fully utilised. When employees feel both important partnership with our
happen and timely local action is taken. As
engaged and enabled, we see higher European Works Council (EWC).
well as challenges around development,
levels of productivity. The EWC brings together employee
we know the attraction and retention of
representatives from across
Our 2021 survey results also show that the employees will be critical to our future
Europe, engaging them through
topics that are the core of our strategic success. In 2022/23 we will also
an effective information and
ambition, such as health and safety, consolidate our employee feedback to
consultation process.

| sustainability, diversity and inclusion and | progress our plans and develop a |  |
| --- | --- | --- |
| customer focus, are also shared by our | compelling proposition that describes how | The full council of up to 50 |
| employees, being the highest-ranking | people can thrive. | representatives meets with the |
| items in the survey. This survey highlighted |  | management team twice a year to |
| increasing demand from employees for |  | share feedback, exchange views and |
| additional learning and development. In |  | discuss opportunities to improve; an |
| 2022/23 we will continue to focus on these |  | event which is interpreted live to |
| areas with our learning and development |  | ensure everyone is included and |
| offers, line manager capability |  | can participate. |

development and The Smithies
In addition the EWC Executive holds
recognition awards.
monthly meetings with their
Regional representatives in order to
ensure we have a regular two-way
dialogue on employee matters
across Europe.
Annual Report 2022 dssmith.com 25
TO REALISE THE POTENTIAL OF OUR PEOPLE CONTINUED
Ensuring the health, safety and Health and safety engagement
### “This is an important
wellbeing of all Engaged employees who work proactively
### example of how technology
The Covid-19 pandemic continued to affect in identifying and eliminating risks are
### can help us to better protect
many aspects of our daily life but, despite driving a resilient and interdependent
### these challenges, we progressed towards health and safety culture. We consistently workers and employees
our Vision Zero ambition, developing our see that when employee engagement
### in our dynamic work
four strategic goals and providing a increases, the number of accidents
### environment. Our
working environment where engaging in decreases. Equally, when the workplace
### health and safety activities is integral to feels ‘safe’ to employees, we see their commitment in seeking
our business success. engagement and commitment increasing.
### new smart solutions is
The health and safety engagement index
### Health and safety leadership an essential element
measures the participation rate of
### Leadership behaviours are critical to drive employees in risk identification and to achieve our health
engagement; when our leaders engage in elimination activities. This index has
### and safety vision.”
health and safety, we see a positive impact increased by 50 per cent this year.
on our health and safety employee
Key figures (rounded): Luigi Marini, MD Italy
engagement index. This is the central
• Safety observations and near miss
theme of our health and safety onboarding
reporting: 360,000
programme, which continued this year and
trains all new and promoted site managers Engagement with robust health and safety Health and safety culture
on the behaviours and mindsets required processes is essential to ensure safe
Our focus on leadership, engagement and
as health and safety leaders. To further working environments. In 2022/23 we will
processes is designed to develop and drive
develop our safety culture, we introduced continue working through our local site
an interdependent safety culture in which
leadership focused safety programmes networks to further increase health and
every person in the organisation feels
which helped create health and safety role safety engagement.
responsible for safety and acts proactively
models, whilst encouraging and
to identify and eliminate risks.
Health and safety processes
recognising safe behaviours and their
value, raising awareness and placing The easing of the travel restrictions Key figures:
health and safety at the centre of worldwide allowed us to return to on-site
• Recycling: 83 per cent LTA reduction
everyday activities. health and safety auditing which aims to
year-on-year
drive continuous improvements and
Key figures (rounded): • Paper: 43 per cent LTA reduction
accelerate the implementation of our
year-on-year
• Leadership delivered safety talks: global health and safety standards such as
• EU packaging: six per cent increase
32,000 workplace transport (see case study),
year-on-year
• Verification of critical controls performed machine guarding or working at heights.
• North America packaging: 25 per cent
by leadership: 36,000
LTA reduction year-on-year
• Safety observation tours performed by
Workplace transport health • Sites with zero accidents: 266
leadership: 85,000
and safety standards

| • Leadership lead risk assessments: |  | We firmly believe that our drive towards |
| --- | --- | --- |
| 133,000 | The health and safety standards for | Vision Zero has been key in having a safe |
|  | workplace transport (forklifts) | and healthy working environment. Despite |

We have seen a 25 per cent increase in
includes risk assessments, training multiple external challenges, not only do
leadership led health and safety activities
and certification of drivers, and we celebrate significant improvements
and an increase in employee engagement.
physical barriers where possible or across all divisions, but the overall number
In 2022/23 we will continue embedding
well-marked pedestrian routes and of employee accidents and accident
the health and safety leadership
aids. To provide pedestrians with frequency rate have reduced by 27 per
behaviours through our local site networks.

| further safety, we have introduced | cent year on year to a record low. In |
| --- | --- |
| proximity technology which detects | 2022/23 we will continue striving towards |
| nearby pedestrians and automatically | our Vision Zero ambition and ensure the |
| slows down forklifts. After a | health and safety culture is adopted across |
| successful pilot in Italy, the | our site network. |

implementation has been accelerated
and is now being introduced across
Europe and North America
in 2022/23.
26
STRATEGIC REPORT
employee accidents Supporting wellbeing Kemsley Mill development
8.4%
through massage in the for all
120
Netherlands The management team at Kemsley
100% As an outcome of listening to the Mill have fully supported
96%
100 development for all opening
feedback from employees at our site
in Eerbeek, a pilot wellbeing a new learning centre and flexing
programme was launched in May shift patterns to ensure everyone
80
70%

|  |  | 2021. Given the physical and mental | could attend launch sessions |
| --- | --- | --- | --- |
|  |  | strain that work can cause, all | where they explore opportunities |
| 60 |  |  | for their professional and |
|  | 51% | employees can have a regular |  |
|  |  | massage on a bi-weekly basis. | personal development. |
| 40 |  |  | “During the launch week, March |

“In addition to an ergonomic
workspace, the bi-weekly massage 2022, one third of employees
is a very welcome and helpful attended sessions, many
20

|  |  | moment for me to relax. This | downloaded the learning app to |
| --- | --- | --- | --- |
|  |  | reduces the tension, is well- | their mobiles, completed learning |
| 0 |  |  | modules and enquired about |
|  | 18/19 19/20 20/21 21/22 | appreciated and improves my focus.” |  |

qualifications on offer.”
Team Manager Maintenance,
Eerbeek Steve Maxwell,
Health and wellbeing
HR Business Partner
The health and wellbeing of our employees
has long been our top priority and recently
more so than ever. With the
DS Smith learning Leadership development
unprecedented scale of the pandemic, it

| has caused increased pressures and | The number of employees accessing online | We continue to invest in leadership |
| --- | --- | --- |
| demands on our employees’ physical and | learning continued to increase this year. | development to grow a strong, robust and |
| mental wellbeing. We have developed and | We invested in adding new earning paths | diverse pipeline of talent. Partnering with |
| promoted a broad set of tools and resource | including Sales, Marketing and Innovation, | Oxford Saïd Business School (OSBS) this |
| through our local site network as well as | Finance, Diversity and Inclusion, | year we have relaunched our two Group- |
| external partners to support employee | Sustainability, Legal and Compliance. | wide programmes; Global Leadership |
| health and wellbeing (see case study). | Extending access and the successful | Programme (GLP) which is our senior |
| These include toolkits, such as wellbeing | delivery of engaging and innovative | leadership offer, with 24 places; and Aspire |
| ideas for remote employees, anxiety | learning content has made employees | which targets high performing and high |
| management and resilience hints and tips. | more curious about what learning | potential future leaders, with 50 places. |
|  | is available. | Both programmes have evolved to reflect |

This year, we built on the Health and
our organic growth ambition, the changing
Wellbeing framework and launched Development for all
context in which we operate and the world
initiatives across the business to build
Our commitment to development for all of business. In addition, we have added a
positive, healthy working environments,
continues to explore and test options new Continuous Professional Development
including a variety of wellbeing
which provide ease of access for webinar series led by thought leading
Consistent reduction in programmes to address the needs across
employees who are not connected to our Oxford faculty.
the organisation. Leadership role modelling
systems (see case study). We have done so
has encouraged and inspired employees to The Fundamentals of First Line
by directing learning to specific employee
care for their own wellbeing across the Management programme implementation
groups, installing learning kiosks on sites
organisation. This year we also introduced continues to cascade across the
and providing learning applications which
bitesize training building resilience and organisation and several new 90-minute
can be used on mobile devices. This offers
wellbeing eLearning such as mindfulness, virtual bitesize training sessions have been
personal, professional and technical
physical and digital workspace, resilience added this year. This provides an expanded
related development, encouraging our
and remote working. In 2022/23 we will learning resource which has seen 1,567
employees to embrace lifelong learning.

| continue working with our local site | participants this year across 13 subjects |
| --- | --- |
| networks encouraging employees to | and we will continue enhancing line |
| access the resources available to strive | manager capability in 2022/23. |

towards a consistent approach to health
and wellbeing.
Annual Report 2022 dssmith.com 27
TO REALISE THE POTENTIAL OF OUR PEOPLE CONTINUED
Developing diverse
Visible leadership
leadership talent Developing an inclusive
This year, we launched our targeted Leadership lead by example culture through reverse
development offer called Accelerate for mentoring
Active networks
high-potential, mid-level female talent who
After the inclusive leadership
have the potential to progress to senior Engaging with our people in a different
workshop, several leaders, including
leadership positions. It is aimed at those way to build a sense of inclusion and to
some senior leaders, were paired
transitioning into leadership roles, drive action
with reverse mentors of different
considering their next role and those
backgrounds. Reverse mentoring is
consolidating their career decisions. As at People and processes
an opportunity to connect with our
April 2022, 30 women have completed the
diversity and inclusion agenda on a
Policies and procedures that create an
programme and recommended it as an
personal level and drive action to
environment where people can do their
impactful investment in their development.
create cultural transformation.
best work
In 2022/23 we will continue Accelerate and
It builds a bridge between
have additional cohorts planned.
different backgrounds, benefiting
Visible leadership
To support diverse talents deeper in the both parties.
Every employee has an important role to
organisation, this year we are launching an
• “It provided a great opportunity to
play in creating a diverse and inclusive
inclusive development centre approach to
have a trusted conversation about
workplace culture. By role modelling
inspire individuals who are not currently in
the diversity and inclusion
inclusive behaviours, leaders can help
management roles to self-nominate, explore
agenda. We focused on how we
create a workplace where all employees
their strengths and create development
can improve awareness and
can realise their potential. We launched our
plans which will guide their future growth.
challenged what I can do as a
inclusive leadership workshop to help
Linking directly with our innovation agenda
leader to be more inclusive.”
leaders take ownership and drive action
we create a space for participants to
Socky Angel, North Sales
(see case study). We have over 200 leaders
consider how they can directly influence the
Director (UK), Reverse Mentor.
who are part of a global, diverse alumni
creation of new ideas, ways of working and
network supporting each other. In 2022/23 • “We talked about areas we can
product development.
we will embed the inclusive leadership improve and will explore these in
Creating a modern, inclusive and workshops throughout the organisation. future conversations.”
diverse culture Adam Platts, Sales Director
In October 2021 we launched our Diverse
(UK), Mentee.
A diverse workforce better reflects the Voices campaign where everyone can
communities we operate in and customers share their perspective and experience to
we serve, improving our response to local help raise awareness of events across the
Active networks
contexts and diverse customer needs. Our year, e.g., men’s mental health awareness,
Everyone has a role to play to make the
engagement survey feedback tells us that Black History Month, and International
organisation a more diverse and inclusive
employees are more productive and more Women’s Day. These stories help raise
environment. We recognise that real
likely to succeed when they are part of an awareness of cultural differences,
change comes from employees by treating
inclusive workplace, where everyone is celebrating diversity, and highlighting
others fairly with respect. We continue
valued, respected, engaged and feels safe important issues faced by different groups.
making good progress through our Global
to be themselves at work. This can lead to
Diversity and Inclusion Forum, where
improved business performance, giving
individuals are committing to driving action
room for more creativity and innovation.
personally in 2022/23. Our partnership
Creating an inclusive culture where
with the European Works Council Diversity
employees thrive is core to our Purpose
and Inclusion Committee is driving
and is key to our continued success. This
significant opportunities to help embed our
year, we launched our diversity and
ambition locally through our site networks.
inclusion strategy with three pillars.
In the first year of this strategy, we are To raise awareness, build a sense of
on a journey to embed our approach inclusion and drive action, we mobilised
across the business. and engaged employees through active
networks. This year, we launched our first
Employee Resource Groups (ERGs),
LGBTQ+ and Allies Network, an Ethnic and
As part of a healthy diet programme, baskets Cultural Diversity Network and set up local
of fruit are available for employees in the site networks e.g., Kemsley Mill’s diversity
Belgium office. and inclusion network.
28
STRATEGIC REPORT

| As a result of active networks, inclusion | Committees: Group Operating Committee, | representation of women in leadership |
| --- | --- | --- |
| events have taken place such as our | Group Strategy Committee, Group Health, | programmes, with 32 female participants |
| diversity and inclusion roundtables with | Safety, Environment and Sustainability | across cohorts. This year, we have |
| external speakers, helping employees raise | Committee and the Group M&A Committee. | implemented function talent meetings |
| awareness, engage and hear how they can | For more information about these | using gender diversity analytics to |
| drive action. In 2022/23 we will continue | Committees, please see page 71. The 2021 | understand the diversity profile at every |
| exploring additional ERGs and run local | report was published in January 2022 and | level of the talent pipeline, driving action to |
| roundtables across the business. | represents our position as of 31 October | ensure transparent conversations and |
|  | 2021: | career coaching take place. In 2022/23 we |

People processes
will continue to scale the function and
Overall FTSE ranking 41

| We recognise that policies turn the open |  |  |  | across division talent meetings and support |
| --- | --- | --- | --- | --- |
| conversations in our active networks into |  |  | 1 |  |
|  | Women on DS Smith Plc | 37.5% |  | the development of female talents through |
| meaningful action to provide opportunities | Board |  |  | the leadership programmes. |

to address inequalities and create an
2
Female Executive 32.9% For gender pay gap reporting we choose to
environment where employees can thrive.
Committee and direct report not only on the UK legal entities
This year, we made progress to build
reports where headcount is above 250, but on the
awareness and embed in the business
UK total figures to provide a
practices of our global Equal Opportunities 1. Compared to FTSE 100 average of 39.1%.
comprehensive view. This year, the mean
and Anti-Discrimination Policy. We also 2. Compared to FTSE 100 average of 32.5%.
gender pay gap improved to 2.2 per cent
ensured that business language is
We acknowledge diversity is broader than (3.5 per cent in 2020). We are working hard
non-discriminatory throughout the
gender and we are making progress to deepen our leadership pipeline, with 32
organisation. In 2022/23, we are working
through our employee resource groups and per cent of our global senior management
to ensure the policy and training are
recruitment searches. We recognise it positions occupied by women. We know
embedded throughout our site network
continues to be a challenge to attract that gaining exposure to strategy
supported by employee groups such as the
women into manufacturing, however we development is key for executive
European Works Council.

|  | are making progress. Targeted recruitment | succession and three of our female |
| --- | --- | --- |
| To attract diverse talents, we refreshed | actions resulted in increasing diverse | leadership talents now sit on four of the |
| our career site and showcase diverse | senior leadership hires, with 38 per cent | Group Executive Committees. For more |
| career journeys. We set targets for gender | female hire ratio at the senior level and we | information search ‘gender pay gap report’ |
| diverse pipelines in professional roles, | exceeded gender parity of graduate offers | on dssmith.com. However, the UK only |
| senior search and our graduate | for the second year in a row. We continue | represents a small proportion of our total |
| programme. We track metrics throughout | to support the acceleration of our female | workforce and our policies and practices |
| the hiring process which helps address | leadership pipeline with mentoring and | are applied globally. |
| under representation resulting in an | executive coaching support, and ensuring |  |

improvement in female hiring for
professional roles. We launched the Career
Transition Partnership for veterans and in
2022/23 we will explore opportunities to
support inclusive employability initiatives. 1
Gender diversity
Diversity of our Executive team
In November 2021, the Department for
Business, Energy & Industrial Strategy
35
announced government support for a new
five-year independent review, the FTSE
2
Senior management – Total: 88 / 31.8%
Women Leaders Review. The purpose is to
monitor the representation of women 60 28
among leaders of FTSE 350 companies,
focusing on both board membership (with
All employees – Total: 29,584 / 22.5%
a voluntary target increase to 40 per cent Male
Board of Directors – Total: 8 / 37.5% by 2025) and senior leadership roles. 22,935 6,649
Female
We voluntarily take part and have adopted
the review’s definition of senior leadership 1. As at 30 April 2022.
to provide a consistent measure of 2. Definition of senior management: our four Group Executive Committees and their direct reports.
progress year on year, which includes
direct reports of our four Executive
Annual Report 2022 dssmith.com 29
OUR STRATEGY

# To lead the way in sustainability

# Q&A with Wouter van Tol

Head of Sustainability,

Government and Community Affairs

Q How can the circular economy help the world to tackle climate change?

The circular economy notifies how we all都是唯一的 and run our business in developing a future. Our first 2000 years many times over the age of growth and growth, and our business has been established by involving from a three to one to a circular system that is in a few waste and pollution, waste products and water on a new and regenerated, natural process.

Q How significant is the commitment to a 1.5°C science-based target?

![img-0.jpeg](img-0.jpeg)

Our business has a relatively growth plan over the coming years as we lead the transition to a circular economy. Delivering our commitment will reduce existing emissions as we grow through investment in next-generation and overing solutions, self-generated renewable energy sources and lower purchasing agreements to replace grid electricity, which are significant steps to take in an energy intensive industry.

Q What were your highlights from being at COP26?

Arguably COP26 was the most significant global climate change conference since the Paris Agreement in 2013. Being surrounded by world leaders and other businesses reinforced the importance to take serious action in this crucial decade in 2030. By building a common agenda together, business is the key asset of the solution. This is why we joined the UK logo to 2009 and the Get Nature Positive campaigns as collect no elements that increase change towards a low carbon and circular economy, protecting the natural world that we depend on.

30

# We do this by:

O bring the way through better design
- Reducing waste and pollution through circular solutions
- Equipping people to lead the transition to a circular economy
- Protecting natural resources by making the need of every day

# In 2021/22 we:

- Set out 1.5°C science-based target to reduce Scope 1.2 and 1.5°C emissions by 40 per cent by 2030 compared to 2019 and reach Net Zero emissions by 2030
- Delivered progress on our New and Next Sustainability Strategy as they log our progress, manufacture 100 per cent recyclable or reusable packaging and to fund 100 supplementary projects across Europe and North America ahead of our plans
- Premium the prestigious ALOT for COP Water Security increased our COP "Waste Change soon to A" and earned Locked to Platinum rating
- Reposition our at COP26, with small smaller packaging installation in the Glen MacArthur Foundation within the New York Times Domain Hub, where we launched our Circular Economy Lesson 1 to expand our goal to engage five million people on the circular economy and circular lifestyles by 2030

# In 2022/23 we will:

- Drive our circular design and innovation agenda to maintain that all of our packaging or reusable or recyclable, replace problem plastics and optional solutions to ensure that we can be more natural resources than necessary
- Deliver further progress on our New and Next Sustainability Strategy

See DS Smith Sustainability Report 2022 for more information about how we are leading the way in sustainability with our New and Next Sustainability Strategy.

Additional non-financial metrics can be found in DS Smith ESG Databack 2022.
STRATEGIC REPORT
Protecting natural resources delivering steam and electricity to the Mill
## Highlights of 2021/22
with a c. 7 per cent energy efficiency
In 2021/22, we optimised fibre use for
## Now and Next progress improvement compared to its predecessor,
individual supply chains in 26 per cent
decreasing overall emissions. Further
(2020/21: 23 per cent) of new solutions,
Closing the loop through steam supply to the Mill from the
ensuring that fibre use is minimised as far
better design neighbouring K3 waste-to-energy plant
as practicable by tailoring specifications to
made c. 30,000 tonnes of saving compared
In 2021/22, 99.6 per cent (2020/21: 99.2 our customers’ unique supply chain
to the natural gas powered solution it
per cent) of packaging manufactured met conditions and performance requirements.
replaced. At Contoire-Hamel Mill, the
our 100 per cent reusable or recyclable As we aim to optimise fibre for individual
biogas from the anaerobic wastewater
standard. Our community of over 700 supply chains in 100 per cent of our new
treatment plant began delivery, removing

| designers continues to apply our Circular | packaging solutions by 2025, we continue |  |  |
| --- | --- | --- | --- |
|  |  | c. 1,300 tonnes CO | 2 e. Our €7.5 million |
| Design Principles to ensure that new | to find ways to deliver more for our |  |  |

expansion of the anaerobic waste water
packaging solutions are fit for the circular customers but using fewer natural
treatment facility at Rouen Mill has
economy and recyclable by design. We now resources. This includes reducing fibre use,
boosted biogas production to deliver green
consider this target ‘achieved’ because which in turn decreases energy and water
electricity with an expected c. 2,600

| greater than 99.5 per cent of our packaging | consumption during manufacture, whilst |  |  |
| --- | --- | --- | --- |
|  |  | tonnes CO | 2 e saving annually. At Alcolea |
| volume meets this standard, enabling | reducing greenhouse gas (GHG) emissions |  |  |

Mill, stationary steam siphons are
recyclability in practice and at scale. For the in the supply chain. It has been challenging
beginning to deliver thermal improvements
remaining less than 0.5 per cent volume to increase fibre optimisation over the past
of around 10 per cent and a vacuum system
that is presently not either recyclable in year as supply chains have necessarily had
upgrade at Kemsley Mill is expected to save

| practice or at scale, such as some barrier | to flex to meet changing customer needs in |  |  |
| --- | --- | --- | --- |
|  |  | c. 4,800 tonnes CO | 2 e annually. Projects to |
| coatings and foam, we continue to push for | response to Covid-19. However, we |  |  |

increase energy efficiency through
circular alternatives. These hard-to-recycle continue to analyse our customers’ supply
measures such as equipment upgrades
materials are being targeted with action chain data with our performance prediction
were implemented at Dueñas Mill, Lucca
plans through research and development tool to optimise circular solutions for
Mill and Viana Mill. Our LED lighting rollout
efforts and our Group-wide Recyclability storage, transit and operational conditions.
continued, with 37,587 lamps installed at
Forum. These are significant steps on the
Driving carbon reduction 101 sites delivering over c. 14,000 tonne
journey for all our packaging to be recycled
In 2021/22, the Group GHG emissions CO 2 e saving per annum. A power
or reused by 2030.
intensity was 194 kg CO e per tonne of net purchasing agreement (PPA) was
2

| Reducing waste and pollution | saleable production (2020/21: 205 kg |  | introduced to cover a portion of our |  |
| --- | --- | --- | --- | --- |
|  | CO | e/t nsp), a reduction of 5 per cent | electrical energy demand in Iberia, saving c. |  |
| Our progress to replace one billion pieces |  | 2 |  |  |
|  | compared to last year and 29 per cent |  | 17,000 tonnes CO | 2 e annually. At our |

of problem plastic by 2025 continued

|  | compared to 2015 (274 kg CO | e/t nsp), the | Packaging plants, we are continuing to |
| --- | --- | --- | --- |
| strongly, with 313 million units replaced |  | 2 |  |
|  | base year for our old carbon target. |  | review opportunities for wind and solar, |

with corrugated alternatives by the end of
including electrical supply to charging
2021/22. This equates to on average more
This year, we undertook a strategic
stations for electric vehicles. We
than 3 million units per week, boosting
assessment to achieve Net Zero by 2050,
maintained ISO 50001:2018 certification at
recyclability and reducing waste and
defining a series of scenarios with best
100 per cent of our in-scope sites, which
pollution, since May 2020 when this target
cost estimates, optimising for the lowest
drives our Group-wide energy
was set. We continue to work tirelessly to
cost to reach the most ambitious science-
management programme.
find solutions for our customers’ single-use
based target. This informed our decision to
and hard-to-recycle packaging, with more
commit to a 1.5°C target, which aims to Measuring and improving
than 1,000 recyclable fibre-based
reduce Scope 1, 2 and 3 GHG emissions 46 biodiversity
solutions developed for hundreds of
per cent by 2030 compared to 2019 and to
In 2021/22, we began a project with the
thousands of products, from wine boxes to
reach Net Zero GHG emissions by 2050. We
the University of Georgia to baseline the
ready-meal trays to shrink wrap and fresh
will encourage 100 per cent of our strategic
biodiversity in our forests in Georgia, North
fruit punnets. With our Circular Design
suppliers to adopt science-based targets
America. This included developing an
Metrics, our customers are able to compare
by 2027. The target has been validated by
inventory of potential species through a
the performance of different solutions to
the Science Based Targets initiative (SBTi).
Geographic Information System (GIS)
make more sustainable choices, for
As this is an ‘absolute’ reduction target,
review of all properties, field surveys and
example switching from a plastic to
from next year we will begin reporting
laboratory, computer and literature
fibre-based punnet for cherry tomatoes,
carbon reduction progress in ‘absolute’
research. The findings will form the basis of
substituting plastic for corrugated material
tonnes of CO 2 e, across all three scopes.
our plans to measure and improve the
that is recyclable and planet safe.
During the year, Kemsley K4 Combined biodiversity of the forest. We achieved our
Heat and Power (CHP) plant started up, target to launch 100 (2020/21: 57)
Annual Report 2022 dssmith.com 31
TO LEAD THE WAY IN SUSTAINABILITY CONTINUED

| biodiversity projects in our local | of landfill waste will be diverted annually | We maintained our standard that 100 per |
| --- | --- | --- |
| communities ahead of our 2025 deadline, | through the K3 waste-to-energy facility, | cent of papers purchased are recycled or |
| improving local environments for plants | producing steam for the mill in the process. | chain of custody certified. |
| and animals, protecting natural habitats | At Alcolea Mill and Belisce Mill, landspread |  |

Equipping people to lead the
and enhancing species diversity in the and sludge opportunities are set to divert c.
transition to the circular

| areas in which we operate. Alongside these | 9,000 tonnes per year and at Dueñas Mill, |  |
| --- | --- | --- |
| projects, 12 (2020/21: three) of our mills | an alternative use has been identified for c. | economy |
| have launched longer-term biodiversity | 11,000 tonnes annually. At our Packaging | We continued to immerse our people in |
| programmes. For example, at | plants, we maintained a recycling rate of | circular economy learning and |
| Aschaffenburg Mill, wildflower meadows, | 99 per cent and Aschaffenburg Mill, | development opportunities, engaging 50 |
| native plants and shrubs and a landscaped | Coullons Mill, Kaysersberg Mill and | per cent (2020/21: nine per cent) of our |
| area for lizards have been introduced. | Witzenhausen Mill sent zero waste to | people with targeted circular economy |
| Aschaffenburg is the only paper mill to | landfill in the period. | engagement campaigns. We rolled out |
| receive the ‘Blossoming Company Award’ |  | bespoke circular economy eLearning |

Sourcing sustainably
from the German Ministry for the modules and building on the success of last
Environment and Consumer Protection. Throughout the year, we continued to roll
year, another cohort attended the Ellen
At Alcolea Mill, work has begun to protect out our Global Supplier Standard (GSS) to
MacArthur Foundation Circular Economy
the white stork, a local endangered our suppliers. In 2021/22, 78 per cent
Masterclass. We are further embedding
species, with nesting poles, native tree (2020/21: 45 per cent) of our suppliers
circular economy into our brand and
planting and bat boxes. overall agreed to our GSS, reflecting
Purpose campaign so that it remains
progress towards our target of 100 per
front-and-centre of everything we do.
Managing water responsibly
cent of suppliers agreeing by 2025. We
Beyond our own people, we are reaching
Throughout 2021/22, we maintained continued our engagement programme
our industry, communities and the next
water stress mitigation plans at 100 per with our strategic suppliers, encouraging
generation to promote the circular
cent of sites at current or future risk of suppliers to complete sustainability
economy and circular lifestyles. In 2021/22,
water stress, building water stress risk into assessments and share best practice and
we engaged over 2.3 million (2020/21:
business continuity planning. Given that in learning, including on the circular economy.
519,000) people from all over the world
the long-term, competition for finite water
resources could increase in the river basins
from which we withdraw water, we set a
ESG ratings
new Now and Next sustainability target to

| decrease water withdrawal by 1 per cent |  |  | We are delighted that over the past |
| --- | --- | --- | --- |
| per year, every year to 2030, compared to |  |  | year, our leading ESG and |
| 2019 at our paper mills located in regions at |  |  | sustainability performance was |
| high or extremely high risk of water stress. |  |  | recognised by our ESG ratings, with |
| This was achieved for 2021/22, operating |  |  | improvements in CDP, DJSI (S&P Global |
|  | 3 | 3 |  |
| at 8.08m | /t nsp (2020/21: 8.10 m | /t nsp) | Corporate Sustainability Assessment), |
| and therefore lessening pressure on |  |  | EcoVadis, MSCI and Sustainalytics. |

natural water systems through water
• CDP – ‘A List’ (Water Security), A-
reduction, reuse and recycle opportunities.
(Climate Change), B (Forests)
Finally, we received notification of
• DJSI (S&P Global CSA) – 67
non-conformance with water discharge
• EcoVadis – Platinum
consents 10 times in 2021/22 (2020/21:
21), delivering progress on our journey to • MSCI – AA
zero by 2025. • Sustainalytics – ‘Low ESG Risk’
• Circulytics – A-
Sending zero waste to landfill
• FTSE4Good – Included since 2012
From glass to metals, we are collaborating
• ISS – ‘Prime’ B-
with others to identify innovative circular
• Support the Goals – 4 of 5 stars
solutions for the non-fibre waste that
enters our circular business. In 2021/22, • UN Global Compact – Member
255,920 tonnes of waste was sent to since 2013
landfill (2020/21: 258,225 tonnes), a less
than anticipated reduction owing to delays
to a number of key landfill diversion
projects. At Kemsley Mill, c. 8,000 tonnes
32
STRATEGIC REPORT

| across various platforms. At COP26, we | engagement focused on (but not limited | rights high-level risk and gap analysis, |
| --- | --- | --- |
| launched our circular economy lesson plan | to) our Community Programme themes of | identifying potential human rights risks. |
| as a free resource for young people and | circular economy education and | This involved country and sector risk |
| their teachers to educate them about the | biodiversity. From engaging young people | analysis, in addition to stakeholder |
| circular economy and how we can all play a | on the International Day of Education to | interviews and engagement to highlight |
| part in protecting our planet’s natural | improving local environments on World | improvement opportunities. The findings |
| resources. Outside of the classroom, we | Cleanup day, our people contributed | set out areas of strong performance as well |
| continue to reach the general public | hundreds of hours to support community | as opportunities to develop our roadmap to |
| through engaging circular economy | initiatives throughout the year. | strengthen due diligence on human rights. |
| content, social media and video posts. |  | As next steps, we developed a Human |

Respecting and promoting
Rights policy and established a multi-
Contributing to our communities human rights
disciplinary Modern Slavery and Human

| In our local communities, 100 per cent of | We achieved our Now and Next | Rights Committee, which reports to our |
| --- | --- | --- |
| our in-scope sites contributed to their | sustainability target to undertake a human | Group Operating Committee, thereby |
| communities throughout 2021/22, with |  | strengthening the governance of human |

rights due diligence.
## Group greenhouse gas (GHG) emissions
2019/20 Compared Compared
Metric Unit (base year) 2020/21 2021/22 to last year to base year
*

| Direct (Scope 1) GHG emissions tonnes CO |  |  | 2 e 2,181,890 2,047,265 2,023,278 |  | -1% -7% |
| --- | --- | --- | --- | --- | --- |
|  | 1 |  |  | * |  |
| Indirect (Scope 2) GHG emissions |  | tonnes CO | 2 e 792,275 763,727 759,257 |  | -1% -4% |
| Indirect (Scope 3) GHG emissions tonnes CO |  |  | 2 e 5,671,258 5,562,318 5,468,167 -2% -4% |  |  |
| Total GHG emissions tonnes CO |  |  | 2 e 8,645,693 8,373,310 8,250,702 -1% -5% |  |  |

*

| GHG emissions from energy export tonnes CO |  |  |  | 2 e 791,810 666,283 647,258 |  | -3% -18% |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | 2 |  |  | * |  |
| Total GHG emissions (net) |  |  | tonnes CO | 2 e 2,182,355 2,144,709 2,135,278 |  | 0% -2% |
|  | 3 |  |  |  | * |  |
| Energy consumption |  |  | MWh 15,707,667 15,446,255 15,324,120 |  |  | -1% -2% |

*
Energy exported MWh 1,977,616 1,739,114 1,774,539 2% -10%
*

| Total production tonnes 10,222,065 10,445,145 11,014,256 |  |  |  |  |  | 5% 8% |
| --- | --- | --- | --- | --- | --- | --- |
|  |  |  | 4 |  | * |  |
| GHG emissions per tonne production kg CO | 2 e / t nsp |  |  | 213 205 194 |  | -5% -9% |
| Out of scope GHG emissions tonnes CO |  | 2 e 37,850 36,762 33,517 -5% -9% |  |  |  |  |

1. Calculated using the market-based approach. Both market-based and location-based figures are provided in DS Smith ESG Databook 2022.
2. Calculated as (‘Scope 1’ + ‘Scope 2 (market-based)‘) – ‘GHG emissions from energy exports’. 19 per cent generated by UK-based operations in 2021/22.
3. 14 per cent of energy consumption by UK-based operations in 2021/22.
4. t nsp – metric tonnes net saleable production.
* Independent Assurance has been obtained for these metrics – see assurance statement below.
Methodology
Greenhouse gas emissions are reported in accordance with the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard
(Revised) under a financial control boundary. All figures are reported on a like-for-like basis, including in the base year, to provide a
meaningful comparison over time. See DS Smith ESG Databook 2022, which can be downloaded from the DS Smith ESG Reporting Hub,
which contains the basis of preparation, including definitions and methodology notes.
Additional non-financial metrics can be found in DS Smith Sustainability Report 2022.
Independent Assurance Statement
Deloitte have provided independent third-party limited assurance in accordance with the International Standard for Assurance
Engagements 3000 (ISAE 3000) and Assurance Engagements on Greenhouse Gas Statements (ISAE 3410) issued by the International
Auditing and Assurance Standards Board (IAASB) over the 2021/22 selected information, identified with * in the above table, and other
selected information relating to carbon, energy, water, waste and production identified with * within DS Smith Annual Report 2022 and
DS Smith Sustainability Report 2022. Deloitte’s full unqualified assurance opinion, which includes details of the selected information
assured, can be found on our website at https://www.dssmith.com/sustainability/reporting-hub.
Independent verification to a limited level of assurance for the 2019/20 base year was provided by Bureau Veritas.
Annual Report 2022 dssmith.com 33
OUR STRATEGY

# To double our size and profitability

## Q&A with Adrian Marsh

Group Finance Director

### How have you performed against your financial KPIs?

We have made good progress in the year against our medium term target metrics. We saw recent corrugated box volume growth during the year in the first half of the year, with growth slowing in the second half as we hit stronger comparators. Despite the growth, we were behind our GDP +1 per cent target, reflecting the large fluctuations in GDP as the economy bounced back very strongly after a period of decline during the pandemic. This has meant the comparison to GDP +1 per cent has been hard to achieve (following input) performance at 5 per cent in our last financial years. While behind our KPIs for the year, we grew both milder in both sales and return on average capital employed (ROAEL) compared to the prior year and during the period and we exit the year, with ROAEL for the six month period in the second half in our medium-term target range.

Cash flow has been a theory and focus for the business and we are delighted to have delivered another strong cash flow comparison in line with our target and significant decrease in our net debt ratio (net debt: EBITDA), down to 1.6 times from 2.2 times a year ago, principally due to strong free cash flow generation of EBITisation.

34

### We do this by:

- Bring well positioned in developed markets
- Work with major global FMCS brands
- Driving market share gains
- Investing behind fundamental growth drivers

### In 2021/22 we:

- 5.4 per cent like-for-like corrugated box volume growth
- 29 per cent growth in adjusted EBITDA
- 7 per cent growth in free cash flow, with net debt: EBITDA at 1.6 times

### In 2022/23 we will:

- Continue to drive volume growth of 2.4 per cent
- Continue to manage costs in an inflationary environment
- Invest in growth, innovation and environmental efficiency

## Our KPIs

### Like-for-like corrugated box volume growth

#### Definition

Like-for-like volume of corrugated box products sold (excluding the effect of acquisitions), measured by area.

#### Why this is a KPI

We target volume growth of at least GDP +1 per cent because we expect to win market share by delivering value to our customers across their supply chain on a multinational basis.

#### 2022 Performance

Corrugated box volumes grew strongly by a record 5.4 per cent. Despite the growth, it is behind our target of GDP +1 per cent of +9.0 per cent, which was particularly volatile due to Covid-19 with major declines seen in the comparative period and hence a stronger bounce back post pandemic. Over the two-year period the average of GDP +1 per cent was 1.6 per cent and our compound average box volume growth over the same period was 4 per cent.

![img-1.jpeg](img-1.jpeg)

Further information on the calculation of financial KPIs and other non-GAAP performance measures is given in note 32 to the consolidated financial statements.
STRATEGIC REPORT

| Return on sales | Net debt/EBITDA |
| --- | --- |
| Definition | Definition |
| Earnings before interest, tax, amortisation and adjusting items as | Net debt (calculated at average FX rates and after deducting |
| a percentage of revenue. | IFRS 16 lease liabilities) over earnings before interest, |

tax,depreciation, amortisation, and adjusting items for the
Why this is a KPI
preceding 12 month period (adjusted for acquisitions and
The margin we achieve reflects the value we deliver to our disposals made during the financial year, and to remove the
customers and our ability to charge for that value. It is also driven income effect of IFRS 16 Leases ). This definition is in accordance
by our scale. A higher return on sales makes the profit more with the Group’s covenants.
resilient to adverse effects.
Why this is a KPI
2022 Performance
Net debt/EBITDA is a key measure of balance sheet strength and
Return on sales (RoS) grew 10 basis points to 8.5 per cent due to financial stability.
the 23 per cent improvement in adjusted operating profit more
2022 Performance
than offsetting the dilutive impact on RoS of the significant cost
inflation pricing. Net debt as at 30 April 2022 was £1,484 million and 1.6 times
EBITDA with the reduction principally due to excellent cash
management.
8.5%
1.6x
8.4%
2.2x
10.9%
2.1x
2022 Target: 10% - 12%
2022 Target: 2.0x
Cash conversion Adjusted return on average capital employed
Definition Definition
Free cash flow before tax, net interest, growth capex, pension Earnings before interest, tax, amortisation and adjusting items as
payments and adjusting items as a percentage of earnings before a percentage of average capital employed, including goodwill, over
interest, tax, amortisation and adjusting items. Free cash flow is the prior 12 month period.
thenet movement on debt before cash outflow for adjusting
Why this is a KPI
items, dividends paid, acquisition and disposal of subsidiary
businesses (including borrowings acquired) and proceeds from Our target ROACE to be delivered throughout the economic cycle is
issue of share capital. above our cost of capital. ROACE is a key measure of financial
success and sustainability of returns and reflects the returns
Why this is a KPI
available for investment in the business and for the servicing of
We focus on cash conversion as part of our wider focus on capital debt and equity. All investments and acquisitions are assessed
management and maintaining a prudent balance sheet. Working with reference to this target.
capital is a key focus within the business in order that all capital is
2022 Performance
employed where it can best deliver returns for the business.
Adjusted ROACE progressed significantly during the year, by 260
2022 Performance
basis points to 10.8 per cent , reflecting the improvement in
Cash conversion was 142 per cent, in line with our target, driven by adjusted operating profit. The improving trend in profitability
higher cash inflows from operating activities. combined with the improving returns from recent acquisitions and
investments means ROACE was 12.1 per cent for the second six
months of the year.

|  |  |  | 142% |  |  |  | 10.8% |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  | 150% |  | 8.2% |  |
|  | 103% |  |  |  |  |  | 10.6% |
| 2022 Target: |  | 100% |  |  | 2022 Target: 12% - 15% |  |  |

2022 2022 2022 2022
2021 2021 2021 2021
Annual Report 2022 dssmith.com 35
2020 2020 2020 2020
> <
# Operating review

## A year of growth and momentum

Organic corrugated box volumes have shown record growth of 5.4 per cent across the year, reflecting continued growth in the resilient fast moving consumer goods (FMCG) and other consumer related sectors, which represent over 80 per cent of our volumes, together with a recovery in the industrial sector following the impact of the pandemic in the prior year. In a challenging supply chain environment, our large scale, security of supply and high service levels have driven ongoing gains with our customers including large multinational companies. Regionally, we have seen particularly good performances in the US, Southern and Eastern Europe.

The structural market drivers of plastic replacement, consumer and retail channel evolution and e-commerce continue to help accelerate growth. We have continued to invest in innovation and have embedded our pioneering Circular Design Metrics across all our packaging sites. We are the only packaging producer to offer this unique tool, which gives our customers across a wider range of sectors such as FMCG, industrial, retail and e-commerce a clear view of their packaging design/circularity performance and helps them achieve their sustainability goals.

Looking forward, customer demand remains strong and we expect to see continued volume growth of 2-4 per cent in the current financial year.

For the full year, revenue grew by £1.5 billion (26 per cent) on a constant currency basis and 21 per cent on a reported basis, driven by corrugated box volume growth (£203 million) and higher selling prices (£1,279 million) across the Group. External paper, recycling, and other packaging revenues increased (£23 million) as higher pricing more than offset reduced volumes sold externally as the organic growth of our packaging volumes meant we utilised a greater proportion of our paper production internally.

Raw material, energy and transportation input costs all rose significantly over the comparative period. However, these were mitigated by effective supplier arrangements, long-term hedging positions and rising packaging selling prices.

Volume growth combined with increased packaging selling prices, partly offset by the increased input costs, resulted in adjusted operating profit growing by 29 per cent on a constant currency basis and 23 per cent on a reported basis to £516 million. Corrugated box volume growth contributed £65 million and the effect of an increase in the average sales price and mix was £1,279 million versus the comparable period. £714 million of this increase was due to an increase in packaging prices with the remainder of £565 million due to increases in price of external sales of paper, recycling material and energy. These increases reflect the recovery through increased sales pricing (with a lag) of the significant increases in input costs during 2021 and 2022. Compared to the comparative period, input costs increased by £1,207 million with rises in raw material costs of £720 million, energy costs of £297 million and other costs of £190 million. The net energy cost increase, after the price benefit of energy sales, was £174 million. The energy impact, while significant, was

mitigated by the Group's three-year rolling hedging programme. Group return on sales grew during the year to 0.5 per cent (2020/21: 8.4 per cent) with the second half at 8.8 per cent, reflecting the significant growth in profitability more than offsetting the dilutive effect of higher cost and selling prices.

Adjusted basic earnings per share from continuing operations grew 35 per cent on a constant currency basis to 30.7 pence (2020/21: 24.2 pence). Basic earnings per share of 20.4 pence grew by 61 per cent compared to the prior year on a constant currency basis (2020/21: 13.3 pence), reflecting the growth in operating profit.

Cash generation during the year was strong, with £519 million of free cash flow (2021: £486 million) driving a reduction in net debt to £1,484 million (2021: £1,795 million). The free cash flow was driven by increased profitability and a positive working capital inflow of £215 million, more than offsetting the increased capital expenditure. £109 million of working capital inflow relates to margin calls to manage our energy hedging counter-party risk and this is expected to reverse in the financial year 2022/23.

The continued reduction in net debt, together with the increasing profitability, improved our leverage ratio of net debt/EBITDA to 1.6 times, compared to 2.2 times as at 30 April 2021, and within our medium-term target of at or less than 2 times.

The increased profitability of the Group, together with tight capital management, drove a 260 basis point increase in return on average capital employed (ROACE) to 10.8 per cent, with excellent momentum throughout the year, reflected in a ROACE in the second half of the year of 12.1 per cent, within our medium-term target range.

## Investing for growth

Within our financial metric priorities of maintaining our investment grade credit rating and a net debt/EBITDA ratio of below 2 times, our capital allocation priorities remain focused on disciplined investment to support growth with our customers and drive shareholder returns.

With strong structural market drivers and growth with our customers, we continue to see attractive opportunities to invest organically in our business via focused innovation, expansion of current and new sites and improving efficiency.

Our new site in Italy is now operational, with the site in Poland currently being commissioned ready for production to commence in the next few weeks, all in line with customer driven demand for ever more sustainable packaging. Together they represent approximately an additional 3 to 4 per cent packaging capacity at full utilisation and are 80 per cent pre-sold. These are expected to make a 15 to 20 per cent return on capital once operating at full capacity, which is anticipated to be in the third year of operation.

While the Board recognises the current macroeconomic uncertainties, strong customer pull underpins our confidence in the organic growth opportunities and accordingly capital expenditure for 2022/23 is expected to increase by approximately 20 per cent to around £500 million. This will be allocated across

36
STRATEGIC REPORT

three main areas: investing for growth by systematically enhancing the capability and efficiency at existing packaging plants; further aligning our paper capacity with our packaging customers; and replacing assets with more environmentally efficient options as part of the usual capital replacement cycle. All the growth projects undertaken have estimated returns on capital in excess of the Group target ROACE range of 12 to 15 per cent.

#### Innovation

Many of our customers are multinational industry-leading brands who require a pan-continental, consistent approach to their packaging, and they are increasingly looking for closer partnerships to grow and innovate with them.

As part of the commitment we announced in 2021 to invest £100 million in research and development (R&D) over five years, we have opened a state-of-the-art laboratory at Kemsley Mill, one of the largest paper mills in Europe, to advance our research into alternative fibre sources for paper and packaging products.

We have also announced a new flagship innovation centre for ideation, design, testing, piloting and collaboration near Birmingham, UK. This facility will allow us to install and test pilot product and service lines to enable customers to visualise the value that we can bring to them.

Packaging innovation is the lifeblood of our organisation and is vital in keeping global supply chains running as they become more integrated, demanding and focused on sustainability.

#### Leading the way in sustainability

Sustainability has been at the heart of our business for many years as we have developed and grown into a solely fibre-based corrugated packaging business. We continue to work actively with our customers to help them address their sustainability challenges. Our Circular Design Principles combined with our carbon reduction programme and focus on plastic replacement are allowing us to meet our customers' increasing sustainability requirements. Momentum in plastic replacement is accelerating and we have replaced 313 million units of plastic since 2020.

We continue to make good progress in delivering against our sustainability targets. We have reduced our CO$_{2}$ per tonne of production by 29 per cent from 2015, achieved a 5 per cent reduction in water abstraction within paper mills in areas at risk of water stress, achieved our target of 100 per cent reusable or recyclable packaging and launched 100 biodiversity projects.

We are delighted that this progress has been recognised with an improvement in rating by a number of external indices including MSCI AChEI Index, Dow Jones Sustainability Index, EcoVadis, Sustainalytics and CDP.

Looking forward, we have the most ambitious carbon reduction targets in our industry with a Science Based Targets initiative approved CO$_{2}$ reduction target of 46 per cent from 2019 to 2030 and a commitment to achieving net zero carbon emissions by 2050.

#### Dividend

The Board considers the dividend to be a very important component of shareholder returns. Our policy is that dividends will be progressive and that, in the medium term, dividend cover should be on average 2.0 to 2.5 times (relative to adjusted earnings per share), through the cycle. Accordingly, and reflecting the strong growth in the business and our confidence in the outlook, we are announcing a final dividend for this year of 10.2 pence, taking the total dividend for the year to 15.0 pence per share (2020/21: 12.1 pence), in line with our policy and an increase of 24 per cent over the prior period.

Subject to approval of shareholders at the AGM to be held on 6 September 2022, the final dividend will be paid on 1 November 2022 to shareholders on the register at the close of business on 7 October 2022.

#### Our medium-term targets and key performance indicators

We measure our performance according to both our financial and non-financial medium-term targets and key performance indicators. We have seen an improvement in our performance for all measures.

As set out above, like-for-like corrugated box volumes grew by a record 5.4 per cent driven by growth with our FMCG and consumer-focused customers. Although volume growth was behind our target of GDP +1 per cent, GDP has been particularly impacted by Covid-19 with major declines seen in the comparative period in the prior year, when we exceeded our target by 9.0 per cent, followed by a strong recovery in the financial year 2021/22. Over the two-year period the average of GDP +1 per cent was 1.6 per cent and our compound average box volume growth over the same period was 4.0 per cent.

Return on sales grew 10 basis points to 8.5 per cent. Despite the 29 per cent improvement in adjusted operating profit, the dilutive impact of the significant cost and selling price inflation limited the annual improvement in return on sales, which was below our target range of 10 to 12 per cent. The margin progressively improved during the period, with the margin in the second half being 8.8 per cent, underpinning our confidence in achieving our medium-term target.

Adjusted ROACE grew 260 basis points 10.8 per cent (2020/21: 8.2 per cent), reflecting the significant growth in adjusted operating profit. The improving trend in profitability through the year combined with the improving returns from recent acquisitions and investments means ROACE was within our medium-term target range of 12 to 15 per cent at 12.1 per cent for the second half of the year.

Annual Report 2022 dssmith.com 37
OPERATING REVIEW CONTINUED
Net debt as at 30 April 2022 was £1,484 million (30 April 2021: Operating review
£1,795 million), with the reduction principally due to free cash flow
Unless otherwise stated, any commentary and comparable
of £519 million. Working capital performance was extremely good
analysis in the operating review is based on constant
with both a strong focus in the business and the benefit of rising
currency performance.
input costs such as paper and OCC on our payables. It also
benefitted from £109 million of working capital inflow which Group
relates to margin calls to manage our energy hedging counterparty
Change –
risk which is expected to reverse in the financial year 2022/23. Year ended Year ended Change – constant
£m 30 April 2022 30 April 2021 reported currency
Cash generated from operations before adjusting cash items of
Revenue £7,241m £5,976m +21% +26%
£1,092 million was used to invest in net capex of £415 million,
which increased by 28 per cent on the prior year, principally Adjusted
1
reflecting the investment in two new packaging plants in Italy and operating profit £616m £502m +23% +29%
Poland. Net debt/EBITDA (calculated in accordance with our Operating profit £443m £311m +42% +49%
banking covenant requirements) is 1.6 times (2020/21: 2.2 times),
1. Operating profit before amortisation and adjusting items (refer to note 4 of
substantially below our banking covenant of 3.75 times.
the financial statements).
The Group remains fully committed to maintaining its
Revenue grew 26 per cent driven by packaging volume growth and
investment grade credit rating.
higher selling prices across the Group. Operating profit grew 29 per
During the year, the Group generated free cash flow of
cent with growth in corrugated box volume and increased sales
£519 million (2020/21: £486 million), reflecting increased
price partly offset by increased input costs.
profitability and strong cash and working capital management.

| Cash conversion, as defined in our financial KPIs (note 32), | Northern Europe |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
| was 142 per cent, well ahead of our target of being at or above |  |  |  |  | Change – |
| 100 per cent. |  | Year ended | Year ended | Change – | constant |
|  | £m | 30 April 2022 | 30 April 2021 | reported | currency |

DS Smith is committed to providing all employees with a safe and
Revenue £2,790m £2,370m +18% +21%
productive working environment. We are pleased, once again, to
Adjusted
report improvements in our safety record, with our accident 1
operating profit £139m £138m +1% +5%
frequency rate (defined as the number of lost time accidents per
1
Return on sales 5.0% 5.8% (80bps) (80bps)
million hours worked) reducing by a further 6 per cent to 1.9,
reflecting our ongoing commitment to best practice in health and 1. Operating profit before amortisation and adjusting items (refer to note 4 of
safety. We are proud that 266 out of a total of 325 reporting sites the financial statements).
achieved our target of zero accidents this year and we continue to
The Northern Europe division has seen good corrugated box
strive for zero accidents for the Group as a whole.
volume growth in Germany and Benelux offset by declines in the
The Group has an industry leading target for customer service of UK where there was a particularly strong comparator following the
97 per cent on-time, in-full deliveries. In the year we achieved a exceptional e-commerce related growth during the pandemic.
good performance at 94 per cent, despite the impact on supply
Revenues have increased by 21 per cent in the region due to a
chains of the pandemic and latterly the Russian invasion of
combination of the increases in corrugated box volumes and
Ukraine. Management remains fully committed to the target and
pricing and the increased sales prices for externally sold paper,
the highest standards of service, quality and innovation to all our
recycled fibre and energy. Adjusted operating profit grew 5 per
customers and we will continue to strive to meet the demanding
cent, reflecting the increased pricing in packaging, recycling and
standards our customers expect. Other markers of quality such as
external paper sales more than offsetting increased input costs,
our defects rate (measured in parts-per-million) have improved
principally OCC and energy. Return on sales reduced by 80 basis
significantly, having reduced 13 per cent.
points, reflecting the greater impact of lower margin external
recycled fibre sales, together with greater cost inflation than
other regions.
38
STRATEGIC REPORT

| Southern Europe |  |  |  |  |  |  | North America |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  | Change – |  |  |  |  |  |  |  | Change – |
|  |  |  | Year ended | Year ended | Change – | constant |  |  |  | Year ended |  | Year ended | Change – | constant |
| £m |  |  | 30 April 2022 | 30 April 2021 | reported | currency | £m |  |  | 30 April 2022 |  | 30 April 2021 | reported | currency |
| Revenue £2,736m £2,156m +27% +33% |  |  |  |  |  |  | Revenue £597m £541m +10% +14% |  |  |  |  |  |  |  |
| Adjusted |  |  |  |  |  |  | Adjusted |  |  |  |  |  |  |  |
|  |  | 1 |  |  |  |  |  |  | 1 |  |  |  |  |  |
| operating profit |  |  | £324m £223m +45% +53% |  |  |  | operating profit |  |  |  | £80m £63m +27% +31% |  |  |  |
|  |  | 1 |  |  |  |  |  |  | 1 |  |  |  |  |  |
| Return on sales |  |  | 11.8% 10.3% +150bps +150bps |  |  |  | Return on sales |  |  |  | 13.4% 11.6% +180bps +180bps |  |  |  |
| 1. Operating profit before amortisation and adjusting items (refer to note 4 of |  |  |  |  |  |  | 1. Operating profit before amortisation and adjusting items (refer to note 4 of |  |  |  |  |  |  |  |
|  | the financial statements). |  |  |  |  |  |  | the financial statements). |  |  |  |  |  |  |
| Southern Europe saw very strong growth in volumes driven by |  |  |  |  |  |  | Packaging volumes in the region have continued to see the |  |  |  |  |  |  |  |
| Iberia in particular, which had been significantly impacted by |  |  |  |  |  |  | strongest increases within the Group, reflecting continued |  |  |  |  |  |  |  |
| reduced tourism in the financial year 2020/21. |  |  |  |  |  |  | excellent customer traction with growth across a number of |  |  |  |  |  |  |  |

packaging sites and the increasing utilisation of the box plant in
Revenue grew by 33 per cent, due to the impact of higher box
Indiana. Full utilisation is expected to be completed on plan in the
volumes and increases in both box and paper pricing. Adjusted
financial year 2022/23.
operating profit grew by 53 per cent compared to the prior period,
with the packaging operations benefitting from the pass through Revenues increased by 14 per cent, principally reflecting the
of higher paper prices, together with a very positive impact from packaging volume and pricing growth and the increase in export
paper sold externally. Return on sales improved by 150 basis paper prices more than offsetting reduced volumes in external
points reflecting the strong improvement in operating profit. paper sales as we utilised, as planned, more of our paper
production. Adjusted operating profit grew by 31 per cent,
Since the acquisition of Europac in 2019, the region has grown its
reflecting the improvement in paper and packaging pricing,
profitability significantly, with Europac contributing not only to the
resulting in a 180 basis point increase in return on sales to 13.4 per
improved profit and margin growth in the region but also the
cent, the highest region within the Group.
overall strength of the Group’s security of supply of paper. In
2021/22, the return on invested capital from the acquisition was Outlook
12 per cent, in line with our target of being in our ROACE target
The new financial year has started well, building on the momentum
range of 12 to 15 per cent in the third full year of ownership.
from the previous year. Whilst there remains considerable
Eastern Europe uncertainty about the overall economic environment, our
expectations remain unchanged. Strong customer demand
Change –
Year ended Year ended Change – constant reinforces our confidence to invest in the business, with capital
£m 30 April 2022 30 April 2021 reported currency expenditure expected to further increase in the current year. We
Revenue £1,118m £909m +23% +30% currently expect to see 2-4 per cent growth in our volumes, aided by

| Adjusted |  |  | our focus on resilient end markets, a strong performance in the US |
| --- | --- | --- | --- |
|  | 1 |  | and the opening of new sites in regions where demand is buoyant. |
| operating profit |  | £73m £78m (6%) 0% |  |
|  | 1 |  | This growth, combined with the benefits of ongoing pricing |
| Return on sales |  | 6.5% 8.6% (210bps) (200bps) |  |

momentum and careful management of our cost base gives us
1. Operating profit before amortisation and adjusting items (refer to note 4 of confidence for the year ahead and is expected to result in a further
the financial statements).
substantial improvement in our performance.
Organic corrugated box volumes in Eastern Europe have grown the
fastest within Europe and well across the whole region, reflecting
the business mix and comparative performance in the prior year.
Revenues grew 30 per cent, principally reflecting increases in
corrugated box volumes and pricing. Adjusted operating profits were
flat, reflecting the timing lag in the recovery of higher paper prices
through increased packaging pricing. The region has the lowest
proportion of paper capacity relative to packaging production within
the regions in the Group, which impacts margin in the short term via
the increased paper costs.
Annual Report 2022 dssmith.com 39
FINANCIAL REVIEW

# Pricing power in a highly volatile environment

![img-2.jpeg](img-2.jpeg)

"Significantly improved profitability and returns, good volume growth and robust cash performance were delivered through our agile business model, which responded to a fast changing and highly volatile market environment while continuing to meet our customers evolving needs through our supply of sustainable, innovative fibre-based packaging solutions."

Adrian Marsh,
Group Finance Director

# Overview

2021/22 has seen the Group continue to demonstrate the strength of its business model in the face of significant macroeconomic volatility as the global economy emerged from the impact of Covid-19. The benefits of the rising demand for fibre based packaging in general and the security of supply that DS Smith offers its customers in particular have more than offset sharply rising prices of key raw materials and energy prices. This environment has been further hardened by the current conflict in the Ukraine.

Box volume growth, year-on-year, of 5.4 per cent was again extremely good and recognised the Covid-specific dynamics of the various markets we operate in. The growth drivers of the business particularly around single-use plastic replacement have continued to gather momentum and the opportunity to grow further in the US, with the greenfield plant in Lebanon, Indiana, remaining extremely positive. Customers are clearly recognising the strength and scale of DS Smith and with security of supply, quality and service major issues for them, it has been pleasing to see this reflected in the Group's strong volume growth.

The business has experienced unprecedented rises in its input costs, with our net energy and recyclate costs increasing year-on-year by 81 per cent and 49 per cent respectively on a constant currency basis. These increases have been mitigated through the size, scale, and expertise of our procurement operations, long-term buying relationships for both recyclate and paper, and our long-running three year rolling energy hedging programme which we believe has been a real competitive advantage during this highly volatile period.

The second half of the year saw the Group continue to improve its profitability and cash performance, consolidating the good performance of the first half, with further box prices has reflecting the level of inflation in the markets we serve. During the first half of the year, the Group disposed of its non-core Dutch paper mill operations, consistent with the Group's paper strategy and track record of recycling capital from non-core operations to higher returning packaging assets.

During this significant period of macroeconomic uncertainty, the Group remains committed to achieving its medium-term financial measures and key performance indicators, as established by the Board, together with maintaining its investment grade credit rating. The principal measure of return on average capital employed (ROACE) for the year was 10.8 per cent (2020/21: 8.2 per cent), with the second half year at approximately 12.1 per cent, which was within the target of 12 to 15 per cent. The results are described below:

- Organic corrugated box volume growth of 5.4 per cent (2020/21: 3.5 per cent)
- Revenue increased 26 per cent on a constant currency and 21 per cent on a reported basis to £7,241 million (2020/21: £5,976 million)
- Adjusted operating profit of £616 million, an increase of 29 per cent on a constant currency basis and 23 per cent on a reported basis (2020/21: £502 million)
- 42 per cent increase in operating profit to £443 million on a reported basis; 49 per cent increase on a constant currency basis (2020/21: £311 million)

40
STRATEGIC REPORT

• 71 per cent increase in statutory profit before tax to £378 million on a constant currency basis and 64 per cent increase on a reported basis (2020/21: £231 million)
• Adjusted return on sales at 8.5 per cent (2020/21: 8.4 per cent)
• Adjusted return on average capital employed of 10.8 per cent (2020/21: 8.2 per cent)
• Net debt to EBITDA ratio of 1.6 times (2020/21: 2.2 times)
• Cash conversion 142 per cent (2020/21: 150 per cent).

Unless otherwise stated, the commentary below references the continuing operations of the Group.

# Non-GAAP performance measures

The Group presents non-GAAP measures alongside reported measures, in order to provide a balanced and comparable view of the Group's overall performance and position. Non-GAAP performance measures eliminate amortisation and unusual or non-operational items that may obscure understanding of the key trends and performance. These measures are used both internally and externally to evaluate business performance, as a key constituent of the Group's planning process, they are applied in the Group's financial and debt covenants, as well as comprising targets against which compensation is determined. Amortisation relates primarily to customer contracts and relationships arising from business combinations. Unusual or non-operational items include business disposals, restructuring, acquisition related and integration costs and impairments, and are referred to as adjusting items.

Reporting of non-GAAP measures alongside statutory measures is considered useful by investors to understand how management evaluates performance and value creation, enabling them to track the Group's performance and the key business drivers which underpin it and the basis on which to anticipate future prospects.

Note 32 explains further the use of non-GAAP performance measures and provides reconciliations as appropriate to information derived directly from the financial statements. Where a non-GAAP measure is referred to in the review, the equivalent measure stemming directly from the financial statements (if available and appropriate) is also referred to.

# Trading results

Revenue increased by 21 per cent on a reported basis to £7,241 million (2020/21: £5,976 million). Strong demand throughout the year saw volume growth of 5.4 per cent and this was coupled with higher selling prices of packaging, paper and recyclate to mitigate the unprecedented price rises of raw materials and key input costs. Volumes rose in all European regions and were noticeably higher in North America as a result of the continued growth at the greenfield packaging site at Lebanon, Indiana.

Reported revenues are subject to foreign currency translation effects. In the year, the euro accounted for 61 per cent of Group revenue. As such, the movements of the euro against sterling during the year constituted the majority of the £240 million of

negative foreign exchange translation impact. On a constant currency basis, revenues increased by 26 per cent.

Corrugated box volume growth of 5.4 per cent (2020/21: 3.5 per cent growth) reflects the momentum seen in the Group's core markets and segments, with both new and existing customers.

The Group's current year volume growth should be set against a backdrop of exceptionally distorted Covid related GDP data. As a Group, c. 83 per cent of corrugated box volumes are sold to consumer goods customers, substantially ahead of the industry average, an indicator that our continued development of tailored and innovative packaging solutions is regarded as a differentiated offering in the market. Annualised growth over the past two years is estimated at 4.0 per cent, compared to a GDP + 1 figure of 1.6 per cent.

Adjusted operating profit of £616 million on a reported basis is an increase of 23 per cent (2020/21: £502 million). This is largely attributable to volume growth of (£65 million) consolidated by price rises of £1,279 million exceeding input cost increases of £1,207 million and FX and other impacts (£23 million).

Operating profit at £443 million, is an increase of 49 per cent on a constant currency and 42 per cent on a reported basis (2020/21: £311 million). The Group benefitted from a strong performance across its whole business responding to a fast changing economic environment. Costs are proactively managed, of which the largest, energy, is predominantly managed and hedged on a 3 year rolling basis. As at the year end the Group has £714 million of net "in the money" commodity derivatives recognised as assets on the balance sheet, the benefits of which will flow through in future accounting periods.

On a reported basis, depreciation declined to £290 million (2020/21: £304 million) as the underlying increase was offset by the effects of exchange and the disposal of the non-core De Hoop paper mill in the Netherlands. Amortisation decreased marginally to £138 million.

The key measure of return on average capital employed (ROACE) improved to 10.8 per cent (2020/21: 8.2 per cent). This performance, as expected, was below the Group's medium-term target of 12 to 15 per cent for the year. However, the strong momentum in the second half of the year delivered an estimated return within this target range and the Board is confident this will be repeated for the full year 2022/23.

The Group has continued to focus on margin recovery through commercial disciplines and ongoing cost management and efficiency programmes. Adjusted return on sales increased by 10 basis points to 8.5 per cent (2020/21: 8.4 per cent) - whilst this is still below the medium term target of 10 to 12 per cent, the Board remains confident that target will progressively be achieved over the next couple of years.

Annual Report 2022 dssmith.com

41
FINANCIAL REVIEW CONTINUED
Income statement – from continuing operations 2021/22 2020/21 On 12 October 2021 the Group sold its non-core Dutch paper mill
(unless otherwise stated) £m £m operations. Cash consideration, net of cash and cash equivalents
Revenue 7,241 5,976 and transaction costs, was £35 million and net assets divested
1 were £28 million, resulting in a net gain of £7 million. In addition,
Adjusted operating profit 616 502
there were £4 million of other site disposal costs.
Operating profit 443 311

|  | 1 |  |  | Non-acquisition and disposal adjusting items in 2022/23 are |
| --- | --- | --- | --- | --- |
| Adjusted return on sales |  |  | 8.5% 8.4% |  |
|  |  | 1 |  | expected to be £nil. |
| Adjusted net financing costs |  |  | (70) (78) |  |
| Share of profit of equity-accounted |  |  |  | Interest, tax and earnings per share |

investments, net of tax 7 5
Net finance costs were £72 million (2020/21: £85 million). The
Profit before income tax 378 231 decrease of £13 million on last year is primarily a result of lower
1

| Adjusted profit before income tax |  |  | 553 429 | levels of debt throughout the year. The employment benefit net |
| --- | --- | --- | --- | --- |
|  |  | 1 |  | finance expense of £3 million has remained at a similar level to the |
| Adjusted income tax expense |  |  | (131) (97) |  |
|  | 1 |  |  | prior year. |
| Adjusted earnings |  |  | 422 332 |  |
| Profit from discontinued operations, |  |  |  | Adjusting financing costs of £2 million (2020/21: £7 million) relate |
| net of tax – 12 |  |  |  | to the final unwind of the Interstate Resources put option. |

1
Adjusted basic earnings per share 30.7p 24.2p The share of profits of equity-accounted investments was £7
Profit for the year attributable to million (2020/21: £5 million).
owners of the parent (including
Profit before tax increased by 64 per cent on a reported basis to
discontinued operations) 280 194
£378 million (2020/21: £231 million), driven by the increase in
Basic earnings per share from continuing operating profit and a reduction in financing costs. Adjusted profit
and discontinued operations 20.4p 14.2p before tax of £553 million (2020/21: £429 million) increased by 29
Basic earnings per share from continuing per cent on a reported basis, again due to the increase in the
operations 20.4p 13.3p underlying adjusted operating profit.
1. Adjusted to exclude amortisation and adjusting items (see note 4). The tax charge of £98 million (2020/21: £49 million) reflects the
impact of higher profits. The Group’s effective tax rate on adjusted
Adjusting items
profit, excluding amortisation, adjusting items and associates, was
Adjusting items before tax and financing costs were £35 million 24.0 per cent (2020/21: 23.0 per cent). The tax credit through
(2020/21: £49 million) which includes £29 million in relation to an adjusting items was £2 million (2020/21: £16 million).
investment in an associate in Ukraine. Without the impairment
Reported profit after tax, amortisation and adjusting items for
linked to the catastrophic Russian invasion of Ukraine, adjusting
continuing and discontinued operations was £280 million
items would have been £6 million (2020/21: £49 million), in line
(2020/21: £194 million). The increase in operating profit led to an
with guidance.
increase of 53 per cent in basic earnings per share from continuing
The £29 million consisted of the full impairment of the Group’s operations on a reported basis to 20.4 pence (2020/21: 13.3
49.6 per cent investment in the Ukrainian associate, RKTK. The pence), with adjusted earnings per share from continuing
Group has provided support to RKTK and its employees following operations 27 per cent higher at 30.7 pence (2020/21: 24.2 pence)
the invasion of Ukraine by Russia. However, the invasion has on a reported basis, 35 per cent higher on a constant
caused significant damage to the assets of RKTK and impacted its currency basis.
ability to trade. Accordingly, an impairment of the entire
Acquisitions and disposals
investment has been recognised, together with amounts in
connection with the trading activities conducted by the Group with In recent years, the Group’s strategy has focused on organic
the associate. There was no cash impact from this impairment. growth in order to support growth with our major customers.
Within restructuring costs, £8 million (2020/21: £27 million) During 2019/20, the Group agreed to the purchase of a further 10
principally relates to the completion of the major restructuring per cent holding in Interstate Resources for £106 million, following
programme in Germany and the structured review of the the exercise of part of the pre-existing put option by the former
underlying, indirect cost base of the European Packaging business. owners of that business. A cash settlement of £82 million was
made in June 2020 with the balance paid in October 2021. The final
Merger and acquisition-related costs of £1 million (2020/21: £2
10 per cent stake remains subject to the put option conditions,
million) were incurred, being predominantly professional advisory
which will crystalise in the 2022/23 financial year.
fees and purchase of minority interests.
In the first half of 2021/22, the Group disposed of its non-core
Dutch paper mill operations for a consideration net of transaction
costs of £35 million.
42
STRATEGIC REPORT

### Cash flow

Reported net debt of £1,484 million (30 April 2021: £1,795 million) has decreased from the prior year, driven by higher cash inflows from operating activities. There is an EBITDA from the strong business performance was combined with a net working capital inflow of £215 million, partly due to the ongoing focus on cash management, in particular cash collection and inventory management but also in no small part from higher commodity prices, most notably paper and energy, leading to increases in trade payables at the year-end compared to the prior year. The Group's energy and carbon hedges increased significantly in value during the year and in order to manage our counterparty risk there were margin calls made, of which £109 million relating to positions maturing after the year end. This £109 million is reflected within the cash flow statement as a working capital inflow which will reverse in 2022/23 and should, therefore, not be considered as an underlying working capital improvement.

Trade receivables, factoring is £26 million lower than April 2021 at £381 million. Going forward the Group expects to continue to sell high credit quality receivables under this programme within the range £350-400 million outstanding at any one time. This is a reduction of some 30 per cent from the peak balance of £559 million in 2018.

Net capital expenditure increased by £92 million to £415 million in the year. The Group continued to focus on growth and efficiency capital projects, which represented 56 per cent of the reported spend in the year. Major investments in greenfield packaging plants in Italy and Poland were a significant portion of this, with operations in Italy starting up at the very end of the year and meaningful production at both sites expected during 2022/23. Proceeds from the disposal of property, plant and equipment were £16 million (2020/21: £8 million).

Tax paid of £96 million is £30 million higher than the prior year, which benefitted from tax receipts of £20 million in North America.

Net interest payments of £62 million decreased by £6 million over the prior year driven by the maturity of debt bearing higher interest rates and a lower net debt position throughout the year. The remainder of interest principally comprises interest on the Euro medium-term notes and US private placements, with amortisation of debt issuance and other finance costs accounting for the majority of the difference between cash interest paid and finance costs reported in the income statement.

Cash outflows associated with adjusting items decreased by £35 million to £13 million, and include restructuring and integration costs. The current year reduction is driven by a further decrease in merger and acquisition costs incurred in prior years. The impairment of the investment in RKTK had no cash flow effect.

Acquisitions and disposals of £13 million in the year (including leases divested of £1 million) include the settlement of £23 million of payments relating primarily to the October 2021 payment to the former owners of Interstate Resources and £35 million of inflows relating to the disposal of businesses, predominantly the Group's non-core Dutch paper mill.

Cash generated from operations before adjusting cash items increased by £149 million to £1,092 million. Net cash inflow was £333 million, a £33 million decrease on the prior year, following the resumption of the dividend payments (£166 million in 2021/22, nil in 2020/21).

|  Cash flow | 2021/22 £m | 2020/21 £m  |
| --- | --- | --- |
|  Cash generated from operations before adjusting cash items | 1,092 | 943  |
|  Capital expenditure (net of disposal of fixed assets) | (415) | (323)  |
|  Tax paid | (96) | (66)  |
|  Net interest paid | (62) | (68)  |
|  **Free cash flow** | **519** | **486**  |
|  Cash outflow for adjusting items | (13) | (40)  |
|  Dividends | (166) | -  |
|  Acquisitions and disposals of businesses, net of cash and cash equivalents | 12 | (74)  |
|  Other | (19) | 2  |
|  **Net cash flow** | **333** | **366**  |
|  Issue of share capital | 7 | 3  |
|  Loans, borrowings and finance leases divested | 1 | 3  |
|  Foreign exchange, fair value and other movements | (30) | (56)  |
|  **Net debt movement - continuing operations** | **311** | **316**  |
|  Net debt movement - discontinued operations | - | (10)  |
|  Opening net debt | (1,795) | (2,101)  |
|  **Closing net debt** | **(1,484)** | **(1,795)**  |

Annual Report 2022 dssmith.com 43
FINANCIAL REVIEW CONTINUED

# Statement of financial position

At 30 April 2022, shareholder funds increased to £4,232 million, from £3,533 million in the prior year. Profit attributable to shareholders of £200 million contributed to the increase (2020/21: £194 million), together with a net increase in the cash flow hedge reserve of £712 million (2020/21: £112 million gain), and an actuarial gain on employee benefits of £68 million (2020/21: £5 million loss) offset by foreign currency translation losses of £40 million (2020/21: loss of £55 million). Dividends paid in the year were £166 million (2020/21: nil). Equity attributable to non-controlling interests was £2 million (2020/21: £2 million).

The Group's bank and private placement debt covenants stipulate the methodology upon which the net debt to adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) ratio is to be calculated. The effects of IFRS16 Leases adopted since 1 May 2019, are excluded by the banks from the ratio's determination. The ratio has reduced to 1.6 times, with an increase in adjusted EBITDA and a reduction in adjusted net debt. This represents an improvement from the H1 position of 1.9 times. The ratio remains compliant with the covenant requirements, which across all banking debt is 3.75 times. We retain a 3.25 times level in the remaining US Private Placement loan notes ($268 million) which will mature during the 2022/23 financial year. As the exercise of the second tranche of the Interstate Resources put option is still outstanding at 30 April 2022, this has not been factored in to the calculated ratio. If the exercise of the remaining 10 per cent stake subject to the put option was included, the ratio would increase to c. 1.7 times. The Group's publicly traded euro and sterling bonds are not subject to any financial covenants. The bonds are, however, subject to a coupon step up of 125 basis points for any period the Group falls below an investment grade credit rating.

The Group is also compliant with a second financial covenant in the remaining US Private Placement loan notes, requiring an adjusted EBITDA to net interest payable ratio of not less than 4.50 times. The covenant will fall away when the US Private Placement loan notes mature in August 2022.

The covenant calculations also exclude income statement items identified as adjusting by the Group and any interest arising from the defined benefit pension schemes. At 30 April 2022, the Group has substantial headroom under its covenants, with the future outlook assessed as part of the annual going concern review. The Group's investment grade credit rating from Standard and Poor's remains stable at 888 – which takes into account all the items excluded from covenant calculations and working capital.

|  Statement of financial position | 30 April 2022 £m | 30 April 2021 £m  |
| --- | --- | --- |
|  Intangible assets | 2,906 | 2,995  |
|  Property, plant and equipment | 3,128 | 3,050  |
|  Right-of-use assets | 199 | 226  |
|  Inventories | 703 | 537  |
|  Trade and other receivables | 1,229 | 819  |
|  Cash and cash equivalents | 819 | 813  |
|  Derivative financial instruments | 811 | 115  |
|  Other | 91 | 145  |
|  Total assets | 9,886 | 8,700  |
|  Bank overdrafts | (73) | (94)  |
|  Borrowings | (2,072) | (2,301)  |
|  Trade and other payables | (2,540) | (1,849)  |
|  Provisions | (55) | (56)  |
|  Employee benefits | (86) | (175)  |
|  Lease liabilities | (203) | (230)  |
|  Derivative financial instruments | (84) | (56)  |
|  Other | (539) | (404)  |
|  Total liabilities | (5,652) | (5,165)  |
|  Net assets | 4,234 | 3,535  |
|  Net debt | 1,484 | 1,795  |
|  Net debt to EBITDA ratio | 1.6x | 2.2x  |

# Energy costs

Production facilities, in particular paper mills, are energy intensive which results in energy being a significant cost for the Group. In 2021/22, costs for gas, electricity and other fuels, net of periodic local incentives, were £609 million (2020/21: £325 million). The year saw significant increases from the first to the second half, in addition to the previous year increases, with energy costs for the first half year of £240 million increasing to £369 million in the second half year (2020/21: H1 £146 million, H2 £179 million). The net impact on the Group was mitigated by an increase in energy sales revenue of £119 million. The energy impact was also mitigated by the Group's three-year rolling hedging programme and the benefits of free allowances following the introduction of phase 4 of the EU Emissions Trading Scheme. The Group's energy and carbon hedges increased significantly in value during the year and in order to manage our counterparty risk there were margin calls made, of which £109 million relates to derivatives that mature after the year end. There was no impact on income from these margin calls. The Group continues to invest in energy efficiency projects and limits the exposure to volatile energy pricing by hedging energy costs with suppliers and financial institutions, managed by the Group's Energy Procurement team.

44
STRATEGIC REPORT
Capital structure and treasury management The Group continues to sell trade receivables without recourse, a
process by which the trade receivables balance sold is de-
In addition to its trading cash flow, the Group finances its
recognised, with proceeds then presented within operating cash
operations using a combination of borrowings, property and
flows. Such arrangements enable the Group to optimise its
equipment leases, shareholders’ equity and, where appropriate,
working capital position and reduces the quantum of early
disposals of non-core businesses. The Group’s funding strategy is
payment discounts given. The balance of trade receivables sold as
to achieve a capital structure that provides an appropriate cost of
part of the factoring programme decreased by £26 million to £381
capital whilst providing the desired flexibility in short and medium-
million at 30 April 2022 (30 April 2021: £407 million).
term funding to enable the execution of material investments or
acquisitions, as required. In November 2019, the Group established a €1 billion Euro
Commercial Paper Programme. At 30 April 2022, the programme
The Group aims to maintain a strong balance sheet enabling
was undrawn due to the positive cash position in the Group.
significant headroom within the financial covenants and to ensure

| continuity of funding by having a range of maturities from a |  | Maturity |  |  | £m |
| --- | --- | --- | --- | --- | --- |
| variety of sources. The Group has an investment grade rating from | Facilities Currency |  | Date | equivalent |  |
| Standard and Poor’s of BBB–, with a stable outlook. | Syndicated RCF 2018 Various 2024-25 1,400 |  |  |  |  |

Euro medium-term notes EUR 2022-26 1,552
The Group’s overarching treasury objective is to ensure sufficient
funds are available for the Group to execute its strategy and to Euro RCF 2020 EUR 2024 50
manage the financial risks to which the Group is exposed. Sterling bond medium-term
note GBP 2029 250
In November 2018, the Group signed a £1.4 billion five-year
committed syndicated revolving credit facility (RCF) with its core US dollar private placement USD 2022 213
banks. The second extension option was exercised in November Euro term loan EUR 2025 23
2020. £1.1 billion of the facility now matures in 2025 with the
Committed facilities at
remaining £0.3 billion maturing in 2024.
30 April 2022 3,488
Available cash and debt facilities are reviewed regularly to ensure
Impairment
sufficient funds are available to support the Group’s activities. At
30 April 2022, the Group’s committed facilities totalled £3.5 billion, The net book value of goodwill and other intangibles at 30 April
of which £1.5 billion remained undrawn and £2.8 billion matures 2022 was £2,906 million (30 April 2021: £2,995 million).
beyond one year or more. Undrawn committed borrowing facilities
IAS 36 Impairment of Assets requires annual testing of goodwill
are maintained to provide protection against refinancing risk.
and other intangible assets, as well as an assessment of any other
At 30 April 2022, the committed borrowing facilities had a assets for which there may be indicators of impairment. As part of
weighted average maturity of 3.0 years (30 April 2021: 3.9 years). this testing, the Group compares the carrying amount of the assets
Additional detail on these facilities is provided below. Total gross subject to testing with the higher of their net realisable value and
borrowings at 30 April 2022 were £2,072 million (30 April 2021: value-in-use to identify whether any impairment exists. The asset
£2,301 million). The committed borrowing facilities described do or group of assets, value-in-use is determined by discounting the
not include the £420 million of three-year committed factoring future cash flows they expect to generate from the basis of the
facilities, which allow the sale of receivables without recourse. Group’s weighted average cost of capital (WACC) of 9.5 per cent
Given the three-year committed nature of these facilities, they (2020/21: 9.5 per cent), plus a blended country risk premium for
fully protect the Group from any short-term liquidity risks which each group of assets. Asset values were tested as at 30 April 2022,
may arise from volatility in financial markets. with no impairment identified as a result of the testing performed.
Presented within the adjusting items summary is the outcome
of the decision to impair the investment in our Ukrainian
associate, RKTK.
Annual Report 2022 dssmith.com 45
FINANCIAL REVIEW CONTINUED
Pensions The net deficit has decreased versus prior year driven by
significant increase in discount rate assumptions at 30 April 2022
The Group’s primary funded defined benefit pension scheme,
and a less than corresponding fall in the asset valuations.
based in the UK, is closed to future accrual. There are a variety of
other post-retirement and employee benefit schemes operated The 2019 triennial valuation of the main UK scheme incorporated
locally for overseas operations, and an additional unfunded updates to underlying scheme assumptions, including
scheme in the UK relating to three former directors which is demographic and life expectancy rates, which, along with updates
secured against assets of the UK business. In accordance with IAS surrounding mortality and proportion married assumptions and
19 Employee Benefits (Revised 2011) , the Group is required to future improvements, resulted in a net c. 1 per cent increase in the
make assumptions surrounding rates of inflation, discount rates valuation of the scheme liabilities. No changes were made to the
and current and future life expectancies, amongst others, which previously approved funding plan following the triennial valuation.
could materially impact the value of any scheme surplus or liability.
Total cash contributions paid into the Group pension schemes,
A material revaluation of the relevant assets and liabilities could
reported within cash generated from operations in the cash flow,
result in a change to the cost to fund the scheme liabilities.
were £21 million in 2021/22 (2020/21: £32 million), which

| The assumptions applied are subject to periodic review. A |  |  |  |  | primarily constitute the agreed contributions under the UK |
| --- | --- | --- | --- | --- | --- |
| summary of the balance sheet position as at 30 April is as follows: |  |  |  |  | defined benefit scheme deficit recovery plan. |
|  | 30 April |  | 30 April |  |  |
|  |  | 2022 |  | 2021 |  |
|  |  | £m |  | £m |  |

Aggregate gross assets of schemes 1,113 1,178
Aggregate gross liabilities of schemes (1,199) (1,353)
Gross balance sheet deficit (86) (175)
Deferred tax assets 21 40
Net balance sheet deficit (65) (135)
46
STRATEGIC REPORTRISK MANAGEMENT
## Turning risk into resilience
Our Group risk policy Report on our principal risks
Our Group risk policy provides the framework to ensure there is a Like many businesses we are subject to general external risks and
common understanding of risk management practices across all the impact of macro factors such as changes in social, political,
parts of the Group and is fully integrated with our annual corporate financial, regulatory and legislative environments, which can play
planning process. We use these practices to evaluate and accept alongside and/or amplify internal risks in operational and strategic
those risks that we believe we have the capacity, know-how and categories for example. Our principal risks and uncertainties are
experience to manage, or to understand and tolerate those risks those that may have the greatest impact on our key priorities when
that we cannot influence, in order to realise the potential considering our current controls and mitigation plans on a net risk
opportunities for growth and development. basis within a three-year horizon. These risks have been discussed at
Audit Committee meetings during 2021/22. They are summarised
Risk activities in 2021/22
with details of our key mitigating activities on pages 52 to 55.
We recognise that risks are evolving rapidly in our changing world
Risks identified and assessed
and that requires new ways of thinking and working to identify,
assess, manage and take risks effectively. We continue to build on The 12 principal risks disclosed in our 2021 Annual Report remain
the solid foundation that we have already established and which the most relevant to the Group according to our latest assessment,
has proven effective to maintain resilience during events such as including risks across strategic, market, operational, financial,
the Covid-19 pandemic, supply chain shocks and geopolitical geopolitical and technological risk categories. The same top three
turmoil from the Russian invasion of Ukraine. Our aim is to risks are considered to be the most disruptive to our plans. These
continuously review and improve the risk process to obtain better have been placed in the highest priority category:
quality output from the corporate planning process and year-end
• Eurozone and macroeconomic impacts continue to have an
risk assessments. Areas of focus during the past year include:
increasingly negative outlook, especially when considering
• Updating and maturing our business continuity plans across the trends such as cost inflation, energy prices, supply chain
business to adhere to our Group policy, whilst providing the shortages and logistics challenges, many of which are amplified
training and tools and raising awareness of the importance of by the war in Ukraine, with the Group potentially left vulnerable
preparedness amongst our people given the international nature of our supply chain, the
• Energy management, where our dynamic hedging strategy has competitiveness of our markets, and the performance of major
minimised short-term pricing risk economies impacting the level of consumer spend and demand
for our packaging products.
• Supply chain management, such as identifying critical supplies
to our operations with single source suppliers and/or with • Paper/fibre price volatility continues to put pressure on our
connections to Ukraine and Russia integrated paper and packaging business model and our ability
to ensure packaging prices appropriately reflect this volatility.
• Updating and enhancing scenario analysis specifically on cyber
and climate risks. • Cyber attacks targeting businesses’ informational and
operational technologies are seemingly becoming increasingly
Risk governance
common and sophisticated, requiring significant investment in
Our governance framework remains robust and largely unchanged technological and human defences to keep pace.
in the past year. In summary:
The risk of our sustainability commitments not meeting the
• The Board sets out the Group’s risk appetite annually, expectations placed on the Group, both in terms of speed and scale
based on the level of risk it is willing to accept in pursuit of change, has been assessed to have reduced in severity since the
of corporate targets 2021 Annual Report and so is no longer in the highest priority
• The risk strategy and setting of objectives is executed by the category. This reflects the positive performance against our
Group Operations Committee (GOC) with oversight from the current sustainability targets and the setting of our new 1.5°C
Audit Committee and Board science-based target for carbon reduction and Net Zero emissions
commitment by 2050.
• Our GOC, management committees and specialist Group
functions provide guidance to the businesses on how to better
Covid-19
integrate risk management processes into day-to-day activities.
The evolving impacts arising from the ongoing Covid-19 pandemic
The Group’s risk policy sets out how this governance framework continued to be considered in our assessment of each of the
translates into the annual risk reporting cycle (see page 81), which principal risks. Whilst the associated impacts from the Covid-19
links with our Internal Audit cycle, and informs our management disease are reducing, our assessments recognise that new or
and governance processes specifically for climate-related risks repeating waves may still arise. We continue to learn to live with
(see pages 56-60). pandemic risks and to build operational resilience and adapt our
ways of working.
Annual Report 2022 dssmith.com 47
RISK MANAGEMENT CONTINUED
Prioritising our risk management efforts Emerging risks
Mitigating and/or preventing the effect of risk on our Corporate Our risk management programme includes a formal review of
Plan remains a cornerstone of our Executive and operational emerging risks. We define emerging risks as those which are not
management team efforts. Our risk heat map provides a summary meaningfully impacting the Group today but are highly uncertain
of how we assess and evaluate the relationship between the because their evolution is rapid, indirect or both, and have the
likelihood and severity of our principal risks and uncertainties, potential for significant impact. These risks will typically have
taking into account the effectiveness of current mitigations, longer-term impacts which may fall outside of our Corporate Plan
andinforms where the Group should prioritise investments to horizon but warrant attention now to avoid the worst effects.
managethem.
Emerging risks require regular monitoring of external trends and
insights, which, when combined with our existing knowledge and
Net (mitigated) risk heat map results
expertise, identifies the risks that could become relevant to the
Group in the future. Collating information from both internal and
external sources builds our list of key emerging risks to watch or
act upon, which is formally reviewed at least twice per year with
the GOC alongside our principal risks. In 2021/22, we completed
3 1 our first internal emerging risk surveys with sample employee
populations to support the assessment.
2
Of the emerging risks identified and assessed, three risks were
considered to have the highest impact on the Group and detailed in
the table below. The assessment concluded that there is no single
6 5
11 emerging risk identified where there is disproportionate impact to
4
8 7 the Group’s plans considering the mitigation/investments.
Emerging risks Summary mitigations
New information security risks Our Operational Technology
(cyber-physical convergence): Steering Committee operates to
10
9
The risk that a mass integration of improve operational technology
previously unconnected physical security and facilitate digital
devices/assets with the internet initiative preparedness and
increases the Group’s vulnerability effective change management to
12
to current and new forms of cyber drive performance and reliability
Risk likelihood (with mitigation)
attacks, especially if security improvements across operations.
Risk severity (with mitigation) procedures for Internet of Things
(IoT) devices, smart buildings and
List of risks
other operational technologies
1 Eurozone and macroeconomic impacts lag behind.
2 Inflationary pressures: The risk The Group is deploying a multitude
Paper/fibre price volatility
that significantly increased prices of of tools to mitigate or offset
3 Cyber attacks goods and services over a prolonged inflation, including:
period of time will raise the cost of
• Focused hedging strategy on
4 Regulation and governance doing business and/or reduce
energy-traded commodities
customer/consumer buying power.
5 Sustainability commitments • Continuous cost improvement
throughout our operations
6 Security of paper/fibre supply
• Major programmes with suppliers
and customers on value/price
7 Packaging capacity limits to growth
parameters.

| 8 | Organisation capability |  |  |
| --- | --- | --- | --- |
|  |  | Reusable packaging regulation: | • Our dedicated Government |
|  |  | The risk of an introduction of | Affairs team tracks/monitors |
| 9 | Disruptive market players |  |  |
|  |  | stricter EU legislation on the | relevant legislation with the |
| 10 | Substitution of fibre packaging | sustainability of products (e.g. | Group actively involved in trade |
|  |  | reusability vs recyclability) or | associations to build the |
| 11 | Digital enablement | consumer sentiment turning |  |

reputation of fibre-based
against single-use packaging
materials
12 Shopping habits of any form.
• Increased level and focused
Bubble colour reflects risk relative priority (red highest investments in innovative
risk, amber second level, green third level priority) packaging solutions to drive
and support the circular
economy agenda.
48
STRATEGIC REPORT
Viability Statement Assessment of longer-term viability
Context In accordance with the UK Corporate Governance Code, the
Directors have assessed the viability of the Group over a three-
The Group’s strategy and key differentiators are detailed on page
year period to 30 April 2025, which is a longer period than the
5 and pages 8 to 11, and our risk management framework is
12-month outlook required in adopting the going concern basis of
described on pages 79 to 81. Understanding of our business
accounting. This assessment period remains appropriate given the
model, our strategy and our principal risks is a key element in the
timescale of the Group’s planning and investment cycle.
assessment of the Group’s prospects, as well as the formal
consideration of viability. The Directors confirm that they have performed a robust
assessment of the principal risks facing the Group as detailed on
The Group’s Corporate Plan cycle is the primary annual strategic
page 47, including those that will threaten its business model,
and financial planning activity through which the Board assesses
future performance and solvency or liquidity.
the prospects of the Group, extending for the three successive
financial years that follow beyond the year ending after the The assessment of the Group’s viability considers a pessimistic but
assessment date. The planning process involves modelling under a plausible scenario aligned to the principal risks and uncertainties
series of assumptions surrounding both internal and external set out on pages 53 to 55 where the realisation of these risks is
parameters, with key assumptions including economic growth considered remote, considering the effectiveness of the Group’s
projections, input pricing (including paper, fibre, energy and risk management and control systems and current risk appetite.
labour), foreign exchange rates and packaging volume growth; The degree of severity applied in this scenario was based on
combined with the effects of major capital initiatives. The robust management’s experience and knowledge of the industry to
Corporate Plan process is led by the Group Chief Executive, the determine plausible movements in assumptions. The Directors
Group Finance Director and the Group Head of Strategy, in note that the Group enjoyed a large degree of resilience
conjunction with divisional management. The Board undertakes to the consequential downturns from the Covid-19 pandemic
a detailed review of the Corporate Plan during its December and through the increased economic volatility in the post-
Board meeting. pandemic period.
The most recent Corporate Plan process was undertaken against The Group has significant financial resources including committed
the backdrop of the return to pre-Covid-19 levels of activity/ and uncommitted banking and debt facilities, detailed in note 20.
profitability in 2022/23. The budget process for 2022/23, In assessing the Group’s viability, the Directors have assumed that
conducted subsequent to the Corporate Planning process, the existing banking and debt facilities will remain in place or
reflected different dynamics, particularly with regard to fibre, mature as intended.
energy and paper prices, but validated the overall Group
The Directors have also considered mitigating actions available to
profitability as set out in the Corporate Plan in the first financial
the Group to respond to the stress scenarios such as restrictions
year. Similarly, the going concern exercise which builds on the
on capital investment, further cost reduction opportunities, and
budget validated the overall Group profitability as set out in the
dividend suspension or restriction on dividend levels. The Directors
Corporate Plan for the second year. On that basis, the Directors are
have assumed that these mitigating actions can be applied on a
satisfied that the Corporate Plan provides a suitable basis for the
timely basis and at insignificant or no cost.
viability assessment.
Confirmation of viability
Although the Directors have no reason to believe that the Group
Based on the analysis, the Directors have a reasonable expectation
will not be viable over a longer period, the three-year period was
that the Group will be able to continue in operation and meet
chosen for this assessment, having considered the speed and
its liabilities as they fall due over the three-year period of
degree of change possible in the key assumptions influencing the
their assessment.
Group, as well as the speed of evolution in the footprint of the
Group, which limits the Directors’ ability to predict beyond this
period reliably. Indeed, given the pace of change in the primary
sectors in which the Group operates, particularly FMCG and
e-commerce, as illustrated by the recent moves away from plastic
packaging and the acceleration into e-commerce driven by the
Covid-19 pandemic, the Directors believe that three years
represents the most realistic and appropriate timescale over which
to assess the Group’s viability.
Annual Report 2022 dssmith.com 49
RISK MANAGEMENT CONTINUED

### Going concern

The Board has reviewed a detailed consideration of going concern, based on the Group's recent trading and forecasts, and including scenario analysis. This takes into account reasonably foreseeable changes in trading performance, including the continued uncertainty of the long-term impacts on the economic landscape presented by an inflationary economic environment and the ongoing war in Ukraine. More detail of the assessment performed is included in note 1 to the financial statements.

At 30 April 2022 there was significant headroom on the Group's committed debt facilities at a level of c. £1.9 billion. The going concern assessment covered a forecast period of 12 months from the date of approval of this financial report. Based on the resilience of the Group's operations to both Covid-19 and the high-cost environment experienced throughout the financial year, as well as the current and forecast liquidity available, the Board believes that the Group is well placed to manage its business risks successfully despite the uncertainties inherent in the current economic outlook, and to operate within its current debt facilities.

The Group's current committed bank facility headroom, its forecast liquidity headroom over the going concern period of assessment and potential mitigating activities available to management have been considered by the Directors in forming their view that it is appropriate to conclude that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the going concern basis has been adopted in preparing the financial statements.

The financial statements have been prepared on the going concern basis with no material uncertainty identified, after a detailed assessment, this year.

Further details, including the analysis performed and conclusion reached, are set out below.

### Liquidity and financing position

The total drawn debt facilities at 30 April 2022 were £2.0 billion, of which, £1.8 billion is publicly listed debt with no attached covenants and £0.2 billion carries a covenant of net debt EBITDA of less than 3.25 times. In addition, the Group has access to c. £1.5 billion committed bank facilities, which were undrawn at 30 April 2022, which provide liquidity to the Group and carry the same covenant of net debt EBITDA of less than 3.75 times. The Group is not forecast to increase net debt in the going concern analysis. There is significant liquidity/financing headroom across the going concern forecast period. For this reason, the going concern review has focused more on forecast covenant compliance.

### Overview

In determining the going concern basis for preparing the financial statements, the Directors consider the Company's objectives and strategy, its principal risks and uncertainties in achieving its objectives and its review of business performance and financial position. The economic environment reflected in this Going Concern assessment is based on the 2022/23 budget which anticipates robust organic box volume growth across each of our regions, consistent with the prevailing rates of growth in 2021/22 recognising the inflationary pressures in the Group's raw materials, energy and overhead cost bases. In preparing the financial statements, the Group has modelled two scenarios in its assessment of going concern. These are:

- The base case is derived from the 2022/23 full year budget. The key inputs and assumptions include: Packaging volume growth at moderate levels across the future periods considered by the modelling, driven by continued FMCG and e-commerce demand, together with a conservative recovery in industrial volumes. Both paper sales price and input fibre price are consistent with those anticipated in the budget.
- The downside case assumes European packaging volumes largely stagnating at 2021/22 levels, reflecting no future growth and a continued spike in energy prices not mitigated by a commensurate increase in paper prices. With a significant portion of the Group's packaging contracts being either directly linked/referenced to a paper index this would result in higher input costs for the Group that are more difficult to pass through to end customers. A significant cash outflow from working capital is incorporated into 2023/24, providing an additional headwind to the Group's net debt and covenant ratios.

50
STRATEGIC REPORT
Mitigating actions
The outturns of the above scenario modelling, combined with the
strong performance operating throughout 2021/22, provide the
Group a level of comfort that no significant cost/cash flow
mitigations need to be built in to the going concern modelling.
However, a range of options remain at the Group’s disposal should
they be required which provide the opportunity to support
EBITDA, cash flow and net debt, including:
• Action in respect of variable and controllable costs such as
discretionary bonuses, pay rises, recruitment freezes
and wider labour force actions in response to higher levels
of volume reductions
• Limiting capital expenditure to minimum maintenance levels by
pausing growth spend (including greenfield sites and other
expansionary spend)
• Satisfaction of the outstanding Interstate put option for shares
instead of cash
• Strategic actions in respect of the Group’s asset base could be
considered in respect of disposals, mothballing and closures
• A reduction or temporary suspension of the Group’s dividend
The Group could also consider actions to assist covenant
compliance, such as increased utilisation of debt factoring facilities
and optimising working capital by negotiating longer payment
terms whilst continuing to pay suppliers in full and in line with
contractual terms.
At a high level, it is estimated that the Group EBITA would have to
fall by about 45 per cent from 2021/22 levels for a breach of the
net debt:EBITDA covenant to occur.
Going concern basis
Based on the forecast and the scenarios modelled, together with
the performance of the Group in the current year, the Directors
consider that the Group has significant covenant and liquidity
headroom in its borrowing facilities to continue in operational
existence for the foreseeable future. Accordingly, at the June 2022
Board meeting, the Directors concluded from this analysis it was
appropriate to continue to adopt the going concern basis in
preparing the financial statements.
Annual Report 2022 dssmith.com 51
RISK MANAGEMENT CONTINUED
Risk priority 1 1 1 2 2 2
classification

| Risk | 1. Eurozone and | 2. Paper/fibre price | 3. Cyber attacks | 4. Regulation and governance | 5. Sustainability commitments | 6. Security of paper/fibre |
| --- | --- | --- | --- | --- | --- | --- |
|  | macroeconomic impacts | volatility | A major cyber incident on our information or | Our governance model fails to support the way we | Our efforts to decarbonise and transition our | supply |
|  |  |  | operational technology (e.g. ransomware) | are organised and our geographical spread, | supply chain to a circular, low carbon economy are |  |
|  | Multiple political/economic factors from | Volatile commodity pricing for recovered |  |  |  | Large fluctuations in the availability of |
|  |  |  | and/or a failure to stop/identify | resulting in unauthorised, illegal, unethical or | not enough or are too slow against the growing |  |
|  | Brexit, foreign exchange/interest rates, | paper (including old corrugated cases |  |  |  | recovered paper (including OCC) and |
|  |  |  | sophisticated malicious cyber intruders on | inappropriate actions (including breach of | expectations of the Group to play a positive role |  |
|  | to weakening major economies | (OCC)) and containerboard grades can |  |  |  | containerboard could adversely affect our |
|  |  |  | our IT infrastructure (i.e. phishing attacks) | anti-bribery, data privacy, etc.). | in society and address global climate change |  |
|  | significantly impact the level of | create significant short-term challenges |  |  |  | performance, as the Group remains a net |
|  |  |  | resulting in short-term trading impacts, |  | and related environmental, social and |  |
|  | consumer spend and customer demand | to capture appropriate returns by |  |  |  | purchaser of specific grades of paper and faces |
|  |  |  | financial losses and reputational harm – |  | business challenges. |  |
|  | for our packaging products. | aligning raw material costs to packaging |  |  |  | recycling collection/segregation challenges. |

impacting us, our suppliers and customers.
sales revenues.
Inherent risk
expected change
Key mitigating • A robust corporate planning process • Maximise our commercial credentials, • Regular awareness training and testing • The Group continues to maintain detailed and • Focused on deploying our roadmap of carbon • Our Paper Sourcing division’s capability
actions where macroeconomic trends are services and contract management to to better equip our employees with the extensive arrangements for the management reduction investments towards Net Zero, (knowledge, experience and buying
evaluated alongside investments to build up box prices and sell the added knowledge to identify potential of standards, domestic and international focused on energy efficiency, plant upgrades strength) to optimise the make, buy, sell
improve production cost base, value of our products, services, phishing/other social engineering compliance rules and new regulations, with and switching to alternative energy sources, decision across the Group, ensuring the
efficiency and deliver other initiatives innovations, sustainability techniques, led by our Chief Information regular business unit legal compliance and whilst monitoring and adapting to regulatory Group sources key paper grades from
such as sustainable growth priorities credentials, and customer brand Security Officer and expanding internal control reviews including health, safety, changes such as in carbon taxes and resource external suppliers to deliver and flex to
to strengthen resilience benefits IT resourcing as well as external partner environment, supply chain and product extraction paper volume needs
• Focus remains on supplying • Focus on providing sufficient paper support integrity/safety • Ensuring we meet the growing consumer, • A clearly defined fibre strategy based on
packaging to fast moving consumer from internal manufacturing • Investments in IT security controls to • Training employees on a variety of compliance customer and investor demand for sustainable performance packaging, and a ‘best fit’
goods (FMCG) customers with a operations to support our Packaging improve our capability to detect, respond modules including antitrust, anti-bribery and packaging, through a focus on packaging and footprint alignment between internal paper
constant focus on quality, service and division, whilst determining the to and prevent malicious cyber activity, corruption, and modern slavery to ensure full related supply chain designed for a circular production, quality fibre sourcing and the
volume growth, as these customers optimal integration level, to ensure including network segregation between/ understanding of the applicable laws and high economy capacity needs of our Packaging division
tend to show greatest resilience that we balance the external effects within IT and operational technology standards expected • Regular reviews of, and governance and • The Group has the skills and experience to
against GDP volatility of paper availability over the environments • The Group operates a workplace malpractice reporting on, our sustainability priorities to mitigate short-term paper scarcities, such as
• Our dynamic energy hedging strategy long term • Regular improvements in, and testing of, helpline (‘Speak Up!’), providing a confidential ensure they align with the expectations of through using different papers, improved
over two to five-year horizons • Initiatives to implement productivity IT disaster recovery planning, policies route for employees to report perceived stakeholders, wider society and scientific stock management, and better forecasting
smooths pricing volatility, and other improvements, demand forecasting and procedures, including penetration/ malpractice of any type. climate projections, as well as implementing and communication with customers and
developments in our procurement improvements and the development vulnerability testing, to inform and TCFD recommendations and submission to ESG across divisions.
and logistics flows (e.g. due to Brexit) of skills and tools in our sales and ensure the Group’s ability to progress ratings, such as CDP.
are helping to evolve our operating paper sourcing teams. towards cyber resilience.
model and maintain resilience.
Net risk expected
change
Key Risk Indicator Eurozone GDP growth rate Paper/recovered fibre market price and IT security training effectiveness and Group and divisional compliance training and Reduction of CO 2 e per tonne of production Paper/recovered fibre supply volumes
box selling price phishing campaign statistics reviews
Risk tolerance to
Corporate Plan
priorities
Opportunity Ability to reposition our business model Accelerate improvements in commercial Accelerated investments to strengthen our Ability to demonstrate a standard of ethics and Capitalise on efficiencies in energy upgrade Our closed loop model and paper sourcing
examples outside of our traditional geographic awareness and expertise of pricing technology infrastructure and operational behaviours beyond the standards requested of us projects and meet the growing societal demand for strategy offer significant customer
markets and sources of supply. fluctuations and strengthen the resilience to prevent losses and enhance and potentially influence how the regulatory sustainable products in a circular economy. opportunities and ability to generate a ‘best fit’
effectiveness of fibre and efficiency business continuity credentials. landscape changes. cost and quality solution.
programmes.
Alignment with To double our size and profitability To double our size and profitability To double our size and profitability To delight our customers To lead the way in sustainability To double our size and profitability
strategic priority
Governance Group Chief Executive and Group The Group Chief Executive and Group Cyber security assessment reports, IT Results of internal control reports and internal The Board receives regular updates on the Group’s Paper sourcing opportunities are discussed
oversight Finance Director present reviews and Finance Director present regular network management and external corporate governance, ethics and compliance sustainability performance and strategy. with the Board, with specific focus on
forecasts on the impact of the updates on paper and OCC prices to advisory guidance are reviewed by the updates are regularly reviewed by the Audit critical papers.
macroeconomic environment at each the Board. Executive Directors and Audit Committee. Committee and Board.
Board meeting.
52
STRATEGIC REPORT
Net risk tolerance key Risk change key
Unacceptable Re-assess Acceptable Increasing Stable Decreasing
Risk priority 1 1 1 2 2 2
classification

| Risk | 1. Eurozone and | 2. Paper/fibre price | 3. Cyber attacks | 4. Regulation and governance | 5. Sustainability commitments | 6. Security of paper/fibre |
| --- | --- | --- | --- | --- | --- | --- |
|  | macroeconomic impacts | volatility | A major cyber incident on our information or | Our governance model fails to support the way we | Our efforts to decarbonise and transition our | supply |
|  |  |  | operational technology (e.g. ransomware) | are organised and our geographical spread, | supply chain to a circular, low carbon economy are |  |
|  | Multiple political/economic factors from | Volatile commodity pricing for recovered |  |  |  | Large fluctuations in the availability of |
|  |  |  | and/or a failure to stop/identify | resulting in unauthorised, illegal, unethical or | not enough or are too slow against the growing |  |
|  | Brexit, foreign exchange/interest rates, | paper (including old corrugated cases |  |  |  | recovered paper (including OCC) and |
|  |  |  | sophisticated malicious cyber intruders on | inappropriate actions (including breach of | expectations of the Group to play a positive role |  |
|  | to weakening major economies | (OCC)) and containerboard grades can |  |  |  | containerboard could adversely affect our |
|  |  |  | our IT infrastructure (i.e. phishing attacks) | anti-bribery, data privacy, etc.). | in society and address global climate change |  |
|  | significantly impact the level of | create significant short-term challenges |  |  |  | performance, as the Group remains a net |
|  |  |  | resulting in short-term trading impacts, |  | and related environmental, social and |  |
|  | consumer spend and customer demand | to capture appropriate returns by |  |  |  | purchaser of specific grades of paper and faces |
|  |  |  | financial losses and reputational harm – |  | business challenges. |  |
|  | for our packaging products. | aligning raw material costs to packaging |  |  |  | recycling collection/segregation challenges. |

impacting us, our suppliers and customers.
sales revenues.
Inherent risk
expected change
Key mitigating • A robust corporate planning process • Maximise our commercial credentials, • Regular awareness training and testing • The Group continues to maintain detailed and • Focused on deploying our roadmap of carbon • Our Paper Sourcing division’s capability
actions where macroeconomic trends are services and contract management to to better equip our employees with the extensive arrangements for the management reduction investments towards Net Zero, (knowledge, experience and buying
evaluated alongside investments to build up box prices and sell the added knowledge to identify potential of standards, domestic and international focused on energy efficiency, plant upgrades strength) to optimise the make, buy, sell
improve production cost base, value of our products, services, phishing/other social engineering compliance rules and new regulations, with and switching to alternative energy sources, decision across the Group, ensuring the
efficiency and deliver other initiatives innovations, sustainability techniques, led by our Chief Information regular business unit legal compliance and whilst monitoring and adapting to regulatory Group sources key paper grades from
such as sustainable growth priorities credentials, and customer brand Security Officer and expanding internal control reviews including health, safety, changes such as in carbon taxes and resource external suppliers to deliver and flex to
to strengthen resilience benefits IT resourcing as well as external partner environment, supply chain and product extraction paper volume needs
• Focus remains on supplying • Focus on providing sufficient paper support integrity/safety • Ensuring we meet the growing consumer, • A clearly defined fibre strategy based on
packaging to fast moving consumer from internal manufacturing • Investments in IT security controls to • Training employees on a variety of compliance customer and investor demand for sustainable performance packaging, and a ‘best fit’
goods (FMCG) customers with a operations to support our Packaging improve our capability to detect, respond modules including antitrust, anti-bribery and packaging, through a focus on packaging and footprint alignment between internal paper
constant focus on quality, service and division, whilst determining the to and prevent malicious cyber activity, corruption, and modern slavery to ensure full related supply chain designed for a circular production, quality fibre sourcing and the
volume growth, as these customers optimal integration level, to ensure including network segregation between/ understanding of the applicable laws and high economy capacity needs of our Packaging division
tend to show greatest resilience that we balance the external effects within IT and operational technology standards expected • Regular reviews of, and governance and • The Group has the skills and experience to
against GDP volatility of paper availability over the environments • The Group operates a workplace malpractice reporting on, our sustainability priorities to mitigate short-term paper scarcities, such as
• Our dynamic energy hedging strategy long term • Regular improvements in, and testing of, helpline (‘Speak Up!’), providing a confidential ensure they align with the expectations of through using different papers, improved
over two to five-year horizons • Initiatives to implement productivity IT disaster recovery planning, policies route for employees to report perceived stakeholders, wider society and scientific stock management, and better forecasting
smooths pricing volatility, and other improvements, demand forecasting and procedures, including penetration/ malpractice of any type. climate projections, as well as implementing and communication with customers and
developments in our procurement improvements and the development vulnerability testing, to inform and TCFD recommendations and submission to ESG across divisions.
and logistics flows (e.g. due to Brexit) of skills and tools in our sales and ensure the Group’s ability to progress ratings, such as CDP.
are helping to evolve our operating paper sourcing teams. towards cyber resilience.
model and maintain resilience.
Net risk expected
change
Key Risk Indicator Eurozone GDP growth rate Paper/recovered fibre market price and IT security training effectiveness and Group and divisional compliance training and Reduction of CO 2 e per tonne of production Paper/recovered fibre supply volumes
box selling price phishing campaign statistics reviews
Risk tolerance to
Corporate Plan
priorities
Opportunity Ability to reposition our business model Accelerate improvements in commercial Accelerated investments to strengthen our Ability to demonstrate a standard of ethics and Capitalise on efficiencies in energy upgrade Our closed loop model and paper sourcing
examples outside of our traditional geographic awareness and expertise of pricing technology infrastructure and operational behaviours beyond the standards requested of us projects and meet the growing societal demand for strategy offer significant customer
markets and sources of supply. fluctuations and strengthen the resilience to prevent losses and enhance and potentially influence how the regulatory sustainable products in a circular economy. opportunities and ability to generate a ‘best fit’
effectiveness of fibre and efficiency business continuity credentials. landscape changes. cost and quality solution.
programmes.
Alignment with To double our size and profitability To double our size and profitability To double our size and profitability To delight our customers To lead the way in sustainability To double our size and profitability
strategic priority
Governance Group Chief Executive and Group The Group Chief Executive and Group Cyber security assessment reports, IT Results of internal control reports and internal The Board receives regular updates on the Group’s Paper sourcing opportunities are discussed
oversight Finance Director present reviews and Finance Director present regular network management and external corporate governance, ethics and compliance sustainability performance and strategy. with the Board, with specific focus on
forecasts on the impact of the updates on paper and OCC prices to advisory guidance are reviewed by the updates are regularly reviewed by the Audit critical papers.
macroeconomic environment at each the Board. Executive Directors and Audit Committee. Committee and Board.
Board meeting.
Annual Report 2022 dssmith.com 53
RISK MANAGEMENT CONTINUED
Risk priority 2 2 3 3 3 3
classification

| Risk | 7. Packaging capacity limits | 8. Organisation capability | 9. Disruptive market players | 10. Substitution of fibre | 11. Digital enablement | 12. Shopping habits |
| --- | --- | --- | --- | --- | --- | --- |
|  | to growth | Our management approach to our people | Disruptive behaviours in our key markets, | packaging | Digital transformation initiatives, from | We fail to match or adapt our offer to the pace and |
|  |  | and assets, including succession and | should significant suppliers or competitors |  | point-of-sale through to manufacture and | direction of change in consumer spending across |
|  | Our performance and volume growth |  |  | Fibre-based packaging loses its credentials as a |  |  |
|  |  | workforce planning, talent retention and | combine, reduce our capability to |  | delivery to customers, are too slow or the | the full retail FMCG spectrum, from the mega- |
|  | expectations, and an increasing demand |  |  | sustainable product of choice against |  |  |
|  |  | development, hybrid working models, and | purchase paper or restrict our ability to |  | investments required too high to adequately | large brands, micro-brands and omni-channel |
|  | for packaging, is limited by our |  |  | developments in plastic packaging or other |  |  |
|  |  | strategy for ageing assets, fails to identify | compete more effectively, and these |  | adapt our ways of working or we miss the | distribution networks of the big box superstores |
|  | production capacity and ability to grow |  |  | materials that can be reused and recycled, |  |  |
|  |  | and resource for future capability needs, | larger combined groups could also dispose |  | opportunity to meet the demand for smart | and discounters, to the rise in e-commerce and |
|  | organically at the pace required. |  |  | resulting in our products being substituted and/ |  |  |
|  |  | resulting in critical gaps in skills, knowledge | of assets leading to new market entrants, |  | products, including customer ease of access to | importance of consumers’ values. |

or replaced by competitor products.
and equipment, limiting productivity gains increasing competition and causing loss in our products and services.
across key business areas. market share.
Inherent risk
expected change

| Key mitigating | • Targeted organic growth in our | • People performance, potential and |  | • A strong corporate planning ethos | • Collaboration between our Paper and | • A new Group-wide focus to identify/leverage | • A Corporate Plan focused on growing |
| --- | --- | --- | --- | --- | --- | --- | --- |
| actions | existing key markets from strategic |  | succession management is formally | focused on growth and reputation in | Packaging divisions, innovation and research | digital revenue opportunities as part of a key | e-commerce, packaging volumes and through |
|  | investments in new greenfield |  | reviewed and subject to calibration by | order to be a market leader, and an | and development teams to deliver innovative | priority in the Corporate Plan, supported by | incremental and breakthrough innovations |
|  | packaging manufacturing sites, |  | senior management, and core skills gaps | evolving approach by introducing | papers and corrugated products, and develop | developing a clearly defined digital operating | (including new materials, partnerships and |
|  | including our new builds in Poland and |  | are identified to inform clear action plans | concepts such as agility, adaptability, | new materials with our suppliers and partners | model and governance framework to enable | business models) with our FMCG customers and |
|  | Italy coming online in 2022 |  | and address key talent retention or | and responsiveness to emerging | for barrier/lamination concepts and plastic | faster decision-making and strong delivery | continuing to explore business opportunities |
|  | • Further expansions/developments of |  | attraction risks, including an increasing | threats in the key areas of innovation, | replacements | • Delivering digital customer experiences, such | such as plastic replacements, point-of-sale |
|  | our current packaging and paper sites |  | focus on diversity and inclusion actions | sustainability and digitalisation | • Our Recycling division uses commercial | as customer and investor online events, and | packaging and end-to-end services |
|  | through multi-year capital plans, | • Annual senior talent reviews address |  | • Continuous improvement of our | insights and works to create pan-European | the continued expansion of the DS Smith | • Applying a differentiated service offering to |
|  | enhancing equipment utilisation and |  | strategic workforce questions, and | procurement and supply chain | alignment in our services, including providing | ePack webshop model to provide online | different customer categories, including the |
|  | efficiency, whilst improving the |  | evaluate the capability profile of the | processes for all paper grades and | our key packaging customers with closed loop | ordering to meet small and medium sized | digitalisation of our customer experience, our |
|  | customer-production footprint |  | senior leadership population and the | critical raw materials, including | opportunities | business’s packaging needs | Impact Centres, and through training our |
|  | alignment |  | talent bench strength | enhanced contingency plans if critical | • Our Government Affairs team tracks | • Investments to digitalise and optimise our | designers and sales teams on circularity |
|  | • Developing clusters of production | • Our HR and operational leaders |  | suppliers were to be disrupted | proposed government legislation, the | manufacturing assets and supply chain | principles |
|  | sites to improve capacity loading, |  | collaborate to prioritise key business | • Focused on strong, long-standing | potential impact on DS Smith, and sets/drives | management, such as advancements in | • Trend and insights teams working on |
|  | implementing new shift patterns and |  | transformation activities aimed at new | relationships with all of our existing | focused and proactive communication | operational technology and logistics | understanding customer and consumer habits, |
|  | sales and operational performance |  | and foreseeable work realities, run | customers, across large FMCG, regional | strategies, including involvement in related | management, with a focus on digital security. | needs and behavioural changes to inform |
|  | programmes to optimise a full system |  | in-house learning academies to build the | and local customers, whilst incubating | industry trade associations to maintain and |  | research and development options and |
|  | of supply/demand loading, inventory |  | necessary skills and reduce reliance on | areas of potential breakthrough | build the reputation of fibre-based materials |  | operational capabilities. |
|  | and logistics planning. |  | external labour markets, and review | innovations to stand out from | in terms of recyclability, circularity, quality |  |  |
|  |  |  | operating models to improve | competitors and attract new business. | standards and innovation potential. |  |  |

organisation flexibility and productivity.
Net risk expected
change
Key Risk Indicator Packaging demand and production Employee turnover including external/ Proportion of market share Fibre packaging volume and market share Customer satisfaction surveys and website Revenue and production growth for FMCG sector
volume metrics internal hiring ratios and diversity and growth and level of legislative protection visitor traffic
inclusion metrics
Risk tolerance to
Corporate Plan
priorities
Opportunity Develop and grow our own business in Our HR and operational priorities focused Strengthen our differentiation and Accelerated research, development and Capitalise on digital investments which build our Changes in consumer needs and behaviours lead
examples line with our customers’ growth, on improving processes, productivity and reputation, and capture additional market investment into new and enhanced fibre-based reputation as an easy and accessible business to to new opportunities to actively engage
working together to serve the changing ways of working to capture and enhance share during times of disruption amongst products to serve the sustainable packaging work with and buy from. customers on cardboard packaging solutions.
consumer demand, whilst maintaining people and equipment capabilities. key competitors. demand and grow our reputation.
high quality and service offering.
Alignment with To delight our customers To realise the potential of our people To double our size and profitability To lead the way in sustainability To delight our customers To double our size and profitability
strategic priority
Governance Demand and production metrics are The Nomination Committee regularly The Group Finance Director provides the The GOC and Board receive regular product The GOC and Board are provided with updates Trading, customer and consumer trends and the
oversight reported through monthly divisional reviews Board succession planning and Board with regular updates on the market. innovation and government affairs updates. on digital initiatives and customer experience. innovation pipeline are regularly discussed with
trading update meetings, and multi-year receives updates on senior talent the Board.
demand forecasts reviewed by the management programmes.
Group Strategy Committee.
54
STRATEGIC REPORT
Net risk tolerance key Risk change key
Unacceptable Re-assess Acceptable Increasing Stable Decreasing
Risk priority 2 2 3 3 3 3
classification

| Risk | 7. Packaging capacity limits | 8. Organisation capability | 9. Disruptive market players | 10. Substitution of fibre | 11. Digital enablement | 12. Shopping habits |
| --- | --- | --- | --- | --- | --- | --- |
|  | to growth | Our management approach to our people | Disruptive behaviours in our key markets, | packaging | Digital transformation initiatives, from | We fail to match or adapt our offer to the pace and |
|  |  | and assets, including succession and | should significant suppliers or competitors |  | point-of-sale through to manufacture and | direction of change in consumer spending across |
|  | Our performance and volume growth |  |  | Fibre-based packaging loses its credentials as a |  |  |
|  |  | workforce planning, talent retention and | combine, reduce our capability to |  | delivery to customers, are too slow or the | the full retail FMCG spectrum, from the mega- |
|  | expectations, and an increasing demand |  |  | sustainable product of choice against |  |  |
|  |  | development, hybrid working models, and | purchase paper or restrict our ability to |  | investments required too high to adequately | large brands, micro-brands and omni-channel |
|  | for packaging, is limited by our |  |  | developments in plastic packaging or other |  |  |
|  |  | strategy for ageing assets, fails to identify | compete more effectively, and these |  | adapt our ways of working or we miss the | distribution networks of the big box superstores |
|  | production capacity and ability to grow |  |  | materials that can be reused and recycled, |  |  |
|  |  | and resource for future capability needs, | larger combined groups could also dispose |  | opportunity to meet the demand for smart | and discounters, to the rise in e-commerce and |
|  | organically at the pace required. |  |  | resulting in our products being substituted and/ |  |  |
|  |  | resulting in critical gaps in skills, knowledge | of assets leading to new market entrants, |  | products, including customer ease of access to | importance of consumers’ values. |

or replaced by competitor products.
and equipment, limiting productivity gains increasing competition and causing loss in our products and services.
across key business areas. market share.
Inherent risk
expected change

| Key mitigating | • Targeted organic growth in our | • People performance, potential and | • A strong corporate planning ethos | • Collaboration between our Paper and | • A new Group-wide focus to identify/leverage | • A Corporate Plan focused on growing |
| --- | --- | --- | --- | --- | --- | --- |
| actions | existing key markets from strategic | succession management is formally | focused on growth and reputation in | Packaging divisions, innovation and research | digital revenue opportunities as part of a key | e-commerce, packaging volumes and through |
|  | investments in new greenfield | reviewed and subject to calibration by | order to be a market leader, and an | and development teams to deliver innovative | priority in the Corporate Plan, supported by | incremental and breakthrough innovations |
|  | packaging manufacturing sites, | senior management, and core skills gaps | evolving approach by introducing | papers and corrugated products, and develop | developing a clearly defined digital operating | (including new materials, partnerships and |
|  | including our new builds in Poland and | are identified to inform clear action plans | concepts such as agility, adaptability, | new materials with our suppliers and partners | model and governance framework to enable | business models) with our FMCG customers and |
|  | Italy coming online in 2022 | and address key talent retention or | and responsiveness to emerging | for barrier/lamination concepts and plastic | faster decision-making and strong delivery | continuing to explore business opportunities |
|  | • Further expansions/developments of | attraction risks, including an increasing | threats in the key areas of innovation, | replacements | • Delivering digital customer experiences, such | such as plastic replacements, point-of-sale |
|  | our current packaging and paper sites | focus on diversity and inclusion actions | sustainability and digitalisation | • Our Recycling division uses commercial | as customer and investor online events, and | packaging and end-to-end services |
|  | through multi-year capital plans, | • Annual senior talent reviews address | • Continuous improvement of our | insights and works to create pan-European | the continued expansion of the DS Smith | • Applying a differentiated service offering to |
|  | enhancing equipment utilisation and | strategic workforce questions, and | procurement and supply chain | alignment in our services, including providing | ePack webshop model to provide online | different customer categories, including the |
|  | efficiency, whilst improving the | evaluate the capability profile of the | processes for all paper grades and | our key packaging customers with closed loop | ordering to meet small and medium sized | digitalisation of our customer experience, our |
|  | customer-production footprint | senior leadership population and the | critical raw materials, including | opportunities | business’s packaging needs | Impact Centres, and through training our |
|  | alignment | talent bench strength | enhanced contingency plans if critical | • Our Government Affairs team tracks | • Investments to digitalise and optimise our | designers and sales teams on circularity |
|  | • Developing clusters of production | • Our HR and operational leaders | suppliers were to be disrupted | proposed government legislation, the | manufacturing assets and supply chain | principles |
|  | sites to improve capacity loading, | collaborate to prioritise key business | • Focused on strong, long-standing | potential impact on DS Smith, and sets/drives | management, such as advancements in | • Trend and insights teams working on |
|  | implementing new shift patterns and | transformation activities aimed at new | relationships with all of our existing | focused and proactive communication | operational technology and logistics | understanding customer and consumer habits, |
|  | sales and operational performance | and foreseeable work realities, run | customers, across large FMCG, regional | strategies, including involvement in related | management, with a focus on digital security. | needs and behavioural changes to inform |
|  | programmes to optimise a full system | in-house learning academies to build the | and local customers, whilst incubating | industry trade associations to maintain and |  | research and development options and |
|  | of supply/demand loading, inventory | necessary skills and reduce reliance on | areas of potential breakthrough | build the reputation of fibre-based materials |  | operational capabilities. |
|  | and logistics planning. | external labour markets, and review | innovations to stand out from | in terms of recyclability, circularity, quality |  |  |
|  |  | operating models to improve | competitors and attract new business. | standards and innovation potential. |  |  |

organisation flexibility and productivity.
Net risk expected
change
Key Risk Indicator Packaging demand and production Employee turnover including external/ Proportion of market share Fibre packaging volume and market share Customer satisfaction surveys and website Revenue and production growth for FMCG sector
volume metrics internal hiring ratios and diversity and growth and level of legislative protection visitor traffic
inclusion metrics
Risk tolerance to
Corporate Plan
priorities
Opportunity Develop and grow our own business in Our HR and operational priorities focused Strengthen our differentiation and Accelerated research, development and Capitalise on digital investments which build our Changes in consumer needs and behaviours lead
examples line with our customers’ growth, on improving processes, productivity and reputation, and capture additional market investment into new and enhanced fibre-based reputation as an easy and accessible business to to new opportunities to actively engage
working together to serve the changing ways of working to capture and enhance share during times of disruption amongst products to serve the sustainable packaging work with and buy from. customers on cardboard packaging solutions.
consumer demand, whilst maintaining people and equipment capabilities. key competitors. demand and grow our reputation.
high quality and service offering.
Alignment with To delight our customers To realise the potential of our people To double our size and profitability To lead the way in sustainability To delight our customers To double our size and profitability
strategic priority
Governance Demand and production metrics are The Nomination Committee regularly The Group Finance Director provides the The GOC and Board receive regular product The GOC and Board are provided with updates Trading, customer and consumer trends and the
oversight reported through monthly divisional reviews Board succession planning and Board with regular updates on the market. innovation and government affairs updates. on digital initiatives and customer experience. innovation pipeline are regularly discussed with
trading update meetings, and multi-year receives updates on senior talent the Board.
demand forecasts reviewed by the management programmes.
Group Strategy Committee.
Annual Report 2022 dssmith.com 55
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD)
## Adapting to a changing climate
In our circular business, materials are kept in use for longer as There is divisional and functional leadership responsibility
we turn waste into recyclable paper-based packaging solutions. and a Sustainability Network, supported by specialist networks
Although this reduces pressure on natural systems, including and project teams which cascade ESG and sustainability, including
forests, and prevents waste from entering landfills and oceans, climate-related matters, throughout the business.
we use energy-intensive processes to transform materials as they
move through our circular system, which generates greenhouse
Board
gas (GHG) emissions, contributing to climate change.
Our greatest opportunity is to harness the benefits of operating
Health, Safety, Environment and Sustainability (HSES) Committee
a circular business, whilst adopting resource efficiency measures
(A management commitee chaired by the Group Chief Executive)
and renewable technologies to reduce the GHG emissions that
contribute to climate change. We are committed to decarbonising
Group Sustainability,
Sustainability
our circular business by achieving our 1.5°C science-based target, to Government and Group ESG Reporting
Leadership Team
Community Affairs Team Team (Finance)
reduce Scope 1, 2 and 3 GHG emissions 46 per cent by 2030 (SUS LT)
(Corporate Affairs)
compared to 2019, and to reach Net Zero GHG emissions by 2050.
Compliance statement
Divisional and Functional Leadership
DS Smith Plc has complied with the requirements of Listing Rule
9.8.6R(8) by including climate-related financial disclosures
consistent with the TCFD recommendations in this Annual Report. Sustainability
SitesProject Teams
Network
Scope 1, 2 and 3 greenhouse gas emission information can be found
on page 33. DS Smith ESG Databook 2022, which can be downloaded
from the DS Smith ESG Reporting Hub, contains the basis of Strategy
preparation, including definitions and methodology notes.
Climate-related risks and opportunities could impact the Group’s
Governance business, strategy and financial planning over the short term
(0-3 years), medium term (3-10 years) and long term (10+ years).
Members of the Board and Audit Committee maintain oversight
The Board, Group Operating Committee and its management
of climate-related risks and opportunities. The Board and Audit
commitees consider climate-related issues when reviewing and
Committee receive regular updates on risk assessments,
setting strategy, developing policies and for financial planning.
mitigation methods and progress, and are involved in significant
strategic decisions, for example, the adoption of a science-based In the short term, using fossil fuels to power our circular business
target. The Board and related committees, members of whom generates GHG emissions, bringing exposure to policy and legal
have relevant ESG and sustainability experience, receive frequent transition risks related to increasing the cost of emissions,
updates on goals and targets for addressing climate-related issues e.g. carbon taxes. In a transition scenario, as renewable energy
alongside wider ESG and sustainability performance, including the sources and new technologies become readily available at the
delivery of our Now and Next Sustainability Strategy. scale needed to meet our energy demands, we have an
opportunity to decrease our reliance on fossil fuels.
Members of the Health, Safety, Environment and Sustainability
(HSES) Committee, chaired by the Group Chief Executive, assess Our decarbonisation investments will fundamentally reduce our
and manage climate-related risks and opportunities. This group fossil fuels dependence, providing clean energy as initiatives are
met 12 times during 2021/22. Climate-related risks are monitored delivered. Implementing this plan will reduce our exposure to
as part of our standard operating processes to ensure that future fossil fuel price increases and regulatory or other costs
appropriate mitigations are in place and are regularly reviewed by designed to reduce GHG emissions. It will reduce the carbon
management. Management is supported by the Sustainability footprint of our packaging solutions, responding to customer
Leadership Team (SUS LT) when developing strategies and pressure to decrease their supply chain emissions and exploit
policies. These committees draw on specialist insight from Group consumer preference for sustainable packaging.
Risk and Insurance, Group Strategy, Group Sustainability, Group
In a business-as-usual scenario, where society fails to transition to
Finance and external expertise. They report to executive
a low emissions economy, there could be greater risk of increased
management on an ongoing basis, providing updates on the
raw material costs or threat to supply (e.g. pulp, recyclate or
delivery of plans. Performance on climate-related issues, such as
starch), which could be linked either directly or indirectly to climate
energy and water, is reviewed at least monthly by management
change. In the medium to long term, it is possible that without
teams. Within-year and longer-term progress against our targets,
climate action, greater disruptive physical risks such as water
challenges, trends and opportunities for addressing climate issues
stress could take hold, within our operations and supply chain.
are discussed by senior management on a monthly basis and
This invites opportunities to reduce reliance on key resources
monitored by the HSES Committee quarterly and long-term
through resource efficiency and technological measures that
progress is presented to the Board annually.
decrease operating costs and increase supply chain resilience
and our ability to operate under various conditions.
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STRATEGIC REPORT
In summary, short-term climate-related risks include increasing We combined quantitative and qualitative analysis, alongside
spend on carbon taxes (policy and legal transition risk) and medium knowledge of our business and operating environment, which
to long-term risks include increasing cost of raw materials or threat enhances the scenario evaluations. Financial implications are
to supply (market transition and acute or chronic physical risk) calculated as illustrative estimates, given within the context set
and increased likelihood of water stress (physical risk). Short-term out by each scenario. Some of these evaluations changed
climate-related opportunities include growth in demand for compared to last year because of the application of the new Net
sustainable packaging (products and services), increasing resource Zero Emissions by 2050 scenario or adjustments to the
efficiency (resource efficiency) and use of emerging renewable parameters of our model to reflect our business more closely.
technologies (energy source). The following sections describe the Therefore, where illustrative estimates are incomparable to those
approach taken to climate scenario analysis and conclude with previously reported, no comparison figure is given. The estimated
summary comments on the resiliency of our strategy. impacts should be considered in the context of 2021/22
performance and the future implications will vary according to
Climate scenario analysis
prevailing future costs and pricing. There are ways that we can
Building on our climate scenario analysis conducted last year, increase the sophistication of our climate scenario analysis. For
in 2021/22, we have: example, we have not considered the financial implications of
secondary impacts, such as reputational damage that may occur
• Utilised scenario analysis as part of our strategic assessment to
under some of the scenarios. As new high-quality data becomes
achieve Net Zero by 2050, modelling multiple trajectories to
available (for example, long-term projections of future raw
compare investment requirements and define our roadmap
material supply under various conditions), we will continue to use
• Extended our scenario analysis to include the new IEA
climate scenario analysis to assess the effects climate change may
(International Energy Agency) Pulp and Paper Net Zero Scenario
have on our business and ensure we have appropriate mitigations
(November 2021), updated our analysis with our latest data to
in place to remain competitive in the future environment in which
better reflect the business we have today and enhanced our
we will operate.
methodologies to increase the quality of the analysis
• Continued to use forecasts relating to climate issues to inform Quantifying our climate risks
planning, from carbon market analysis and projections to
Increasing spend on carbon taxes
exposure to water stress risk over a range of time horizons.
Our European paper mills must purchase allowances to
Methodology cover their emissions under the EU Emissions Trading
We selected the reference scenarios recommended by the TCFD System (EU ETS) and in the United Kingdom, the UK Emissions
guidance that are most relevant to our business to evaluate the Trading System (UK ETS). In 2021/22, we paid c. £26 million
potential effect of various future conditions. The scenarios reflect (2020/21: £33 million) to these schemes. Under EU ETS, the
a range of trajectories, based on different assumptions, that lead free-issued allowances are reducing as the price of additional
to worlds in which the increase in global temperature varies from allowances is increasing, therefore increasing our operating costs.
1.5°C to 6°C by 2100 compared to pre-industrial levels. In each If, for example, by 2030 the cost increased to €110 per tonne of
scenario, we assumed that we have the same activities as today. carbon (based on reputable analyst views), the estimated
additional annual cost could be c. €122 million, depending on the
future allocation of free allowances. It is possible that the scheme
IEA Sustainable Development Scenario (SDS) 1.5°C Pulp
could be extended, or new carbon taxes could be introduced in
& Paper: In this scenario, growth in production and energy
other parts of the world. For example, the IEA ETP 2°C scenario
consumption are decoupled to achieve decarbonisation to
describes the introduction of a North American carbon tax rising to
the extent required to be on track with the Sustainable
$210 per tonne by 2050. Although this tax does not exist today, if
Development Scenario by 2030.
this tax were applied to all of our projected future emissions in
IEA Net Zero Emissions by 2050 Pulp & Paper: In this North America, this could result in a new cost of c. £15 million in
scenario, annual production expands, necessitating greater 2030. Delivering our GHG reduction roadmap will reduce emissions
recycling. Using a higher share of bioenergy is important to and therefore costs associated with them. For example, this cost
align with the Net Zero Emissions by 2050 trajectory. reduces to c. £12.8 million if identified projects within our roadmap
were implemented at one of our North American sites, including
IEA ETP SDS 2°C: In this scenario, mitigation measures are
switching from natural gas to biomethane. This would increase
applied to carbon intensive industries, alongside technological
renewable energy consumption of that asset by c. one third,
advancements to the extent required to limit global warming
reducing exposure to the cost of carbon, although costs would be
to within 2°C by 2100 versus pre-industrial levels.
incurred to achieve this transition. We continue to factor the cost
IPCC RCP 8.5 6°C: In this scenario, a ‘business as usual’ state of carbon into our roadmap analysis and optimisation, alongside
of no policy changes leads to growth in emissions, causing the availability of biofuels and future growth and strategy.
some of the physical effects of climate change to be felt
with greater severity.
Annual Report 2022 dssmith.com 57
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) CONTINUED
Increasing cost of raw materials or Quantifying our climate opportunities
threat to supply
Growth in demand for sustainable packaging
Raw materials (e.g. pulp, recyclate or starch) could
As society transitions to a low emissions economy, we see
become more expensive or difficult to acquire because of extreme
an opportunity for circular packaging to play a powerful
weather events related to climate change. This could be due to
role in helping brands and consumers reduce their carbon footprint
chronic physical reasons (e.g. extreme variability in weather
and replace plastic with recyclable fibre-based packaging. There is
patterns leading to crop failure), regulatory change (e.g. caps on
an opportunity to grow market share and value by demonstrating
resource extraction) or market disincentives (e.g. licences for
the benefits of widely recycled packaging and as part of our
extraction). Aspects of climate change are likely to affect forest
packaging value proposition that can help our customers to reduce
growth and productivity, impacting the virgin fibre market.
cost, whilst driving circular economy principles into our customers’
Although our exposure to this market is limited as our packaging
business models. In the IEA Net Zero Emissions by 2050 scenario,
is primarily manufactured from recycled fibres (c. 80 per cent of
annual paper production is described as growing by 1.5 per cent
the papers used by our Packaging division are from 100 per cent
annually over the decade to 2030, with greater need for packaging
recycled content), potential future yield losses could drive up the
and paper as a result of population and economic growth,
price of virgin fibre and changing input prices may be passed on to
necessitating greater recycling. This could be estimated as a growth
us by suppliers and have a subsequent impact on papers for
opportunity which, within the context of the reference scenario,
recycling. Using data from the Global Forest Products Model to
could be valued at c. £25 million increase in EBITDA by 2030
assume, for example, that average virgin paper price increases by
compared to 2021. We are driving the replacement of plastic with
five per cent by 2030 owing to climate-related challenges, this
widely recycled fibre-based alternatives, having set a Now and
could result in an additional cost which would likely have to be
Next sustainability target to remove 1 billion pieces of problem
recovered through increased pricing to our end customers. Paper
plastics from supermarket shelves by 2025. We have replaced 313
and fibre price volatility and security of supply are considered
million plastic units with our recyclable fibre-based alternatives to
principal risks for the Group and are balanced over the long term by
the end of 2021/22, helping our customers meet consumer demand
optimising the best fit between paper production, fibre sourcing
for recyclable packaging. Our designers have already created over
and packaging demand.
1,000 designs for millions of products geared towards reducing the
Increasing likelihood of water stress use of problem plastic and even small changes, such as replacing
plastic sealing tape with self-locking flaps or plastic labels with print
In the long term, competition for finite water resources
direct onto cardboard, can help capitalise on the growth in demand
could increase in the river basins from which we
for sustainable packaging.
withdraw water. Refreshing our annual analysis using the WRI
Aqueduct tool, we identified 26 sites (2020/21: 25 sites) at risk Increasing resource efficiency
of future water stress, based on the latest datasets obtained from
There are multiple ways at various stages of the circular
the WRI. In the IPCC RCP 8.5 6°C scenario, the worst-case scenario
product lifecycle in which we can achieve greater
suggests that c. 31 per cent (2020/21: c. 36 per cent) of the
efficiency of the resources we use. In our packaging, the efficient
Group’s total water withdrawal is in regions that could be at high or
use of materials that are regenerative and recyclable and the
extremely high risk of water stress by 2030. This has decreased
avoidance of over-specification helps remove unnecessary waste
compared to last year having removed our non-core Dutch paper
and save natural resources. This not only results in a leaner finished
mill from the analysis, following its disposal. In our most pessimistic
product but also less impact overall, as transporting fewer fibres
scenario, were our highest value site identified as at risk of water
through the production process requires less water and energy use.
stress to suffer business interruption due to water use limitations
In 2021/22, we optimised the fibre used in 26 per cent (2020/21: 23
for 14 days, this could present a business interruption incident
per cent) of new packaging solutions for unique supply chains,
valued at c. £3.3 million in 2030. As a mitigation, we continue to
progressing closer to our Now and Next sustainability target to
maintain water stress mitigation plans at 100 per cent of sites
optimise fibre use for individual supply chains in 100 per cent of our
identified as at current or future risk. This involves an annual check
new packaging solutions by 2025. Minimising fibre consumption
on business continuity planning, regular contact with relevant
also decreases use of natural resources throughout the value chain.
stakeholders (e.g. the water authority and local community) and
In 2021/22 we set a new Now and Next sustainability target to
monthly performance management review, which is reported to
decrease water withdrawal by 1 per cent per year, every year, to
the Group Operating Committee (GOC).
2030 compared to 2019 at our paper mills located in regions at high
or extremely high risk of water stress by 2030. This was achieved
3

| for 2021/22, operating at 8.08m |  | per tonne of net saleable |  |
| --- | --- | --- | --- |
|  | 3 |  | 3 |
| production (2020/21: 8.10 m | /t nsp) compared to 8.48m |  | /t nsp in |

the base year (2019/20). Our actions have lowered pressure on
natural water systems through water reduction, reuse and recycle
opportunities, which reduce operating costs. For example at Lucca
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STRATEGIC REPORT

Mill, in a circular water system withdrawn water is recirculated before it is returned to the natural environment.

Once the packaging is used and ready to be collected for recycling, we can achieve greater resource efficiency by encouraging markets to invest in improved recycling infrastructure, including increasing waste segregation to create raw material streams that are cleaner and require less processing. Access to high quality waste paper for recycling means less processing and less volume of recyclate needed overall, which reduces water and energy consumption, generating cost savings for our papermaking operations. We continue to advocate for separate collection of recyclables to improve quality of material by reducing contamination, increasing recycling rates, lowering environmental impact and cost for local authorities as part of our engagement with policymakers to contribute to realising this opportunity, as well as engaging with our customers on integrated closed-loop solutions and appropriately specified performance packaging for individual supply chains.

#### Use of emerging renewable technologies

In order to avoid the most catastrophic consequences of climate change, the global energy system must radically transform, with the rapid deployment of low carbon fuel sources to displace fossil fuels. The recycled paper production process predominantly utilises natural gas as a fuel source. Therefore, delivering our commitment to Net Zero emissions by 2050 will require our operations to transition from fossil fuels to renewable fuels, such as biomass, biomethane and hydrogen. As energy systems and technologies evolve, there is an opportunity to be at the forefront of adoption of increased efficiency measures, alongside new technologies. As an example, in the IEA SDS 1.5°C scenario, energy use in the Pulp and Paper sector is assumed to decline by 0.6 per cent per year to be on track with the Sustainable Development Scenario (SDS) by 2030. This reduction in energy consumption in our operations would result in a lower cost, an opportunity estimated in our analysis that could be valued at c. £12 million in 2030 compared to 2021, although costs would be incurred in realising these benefits. In the IEA Net Zero Emissions scenario, a 0.5 per cent increase per year to 2030 is assumed as strong paper production growth necessitates greater recycling and a resulting increased energy cost of c. £10 million in 2030 compared to 2021. This emphasises the opportunity to grow without generating additional GHG emissions if growth in new production is powered by renewable fuels. Our carbon reduction roadmap sets out initiatives that allow our business to grow whilst realising the benefits of harnessing emerging renewable technologies. Energy performance is managed using our Group-wide ISO 50001:2018 energy management system, driven by our Now and Next target to maintain certification at 100 per cent of relevant sites. Our objective is to maintain continuous improvement in energy performance, cost and therefore greenhouse gas emissions.

#### Summary of our scenario analysis

The climate scenario analysis suggests that our strategies are resilient to climate-related risks and opportunities. There is low financial risk by 2030, predominantly due to increased costs which would need to be managed. We would not have to make fundamental changes to our business model. By committing to a 1.5°C science-based target for 2030, we are responding to climate-related risks and opportunities in accordance with the latest climate science. As we decarbonise alongside the entire industry, we see opportunities to be at the forefront of leading the transition to a circular economy, which, compared to the linear economy, is a better system for tackling climate change, pollution and biodiversity loss.

#### Risk management

We undertake regular materiality analysis to ensure our sustainability priorities remain aligned to those of our stakeholders. In our latest analysis, we consulted stakeholders on a range of climate issues, asking them about their perception of each issue as a risk or opportunity to our sustainability strategy. This assessment, combined with a range of other credible sources (such as CDP, CEPI and the TCFD recommendations), is used to grade these risks using the likelihood of the risk occurring and an estimate of the severity of resulting financial or strategic impact over various time horizons. Based on this risk grading, the highest graded risks are evaluated in greater depth, considering our operations, supply chain, stakeholder expectations and regulation. Transition risks are assessed by Group strategy and Group sustainability teams, working across functions to develop responses to the financial and strategic implications. Physical risks are assessed by each division, supported by the Group Risk and Insurance team, drawing on expertise from specialist organisations.

Whether to avoid, transfer, mitigate or accept a risk is influenced by a range of factors, such as site location, investment needed and projected volume demand. Our risk management processes require that our principal business risks, including climate risks, are graded on a scale from negligible to critical using specific impact criteria such as a financial value range. By way of example, a financial impact between 2.5 per cent and 10 per cent of operating income or net profit is graded of moderate strategic or financial risk.

Climate risks are evaluated using the Group's common risk language and are integrated into our principal risk assessments where such risks could significantly affect the business during our Corporate Plan time horizon. All divisions and Group functions produce formal principal risk assessment reports twice per year, and undertake frequent risk reviews, considering the grading trends and controls. The most critical climate risks and opportunities are selected for climate scenario analysis, prioritising those for which high-quality data is available.

Annual Report 2022 dssmith.com 59
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) CONTINUED
Metrics and targets Climate-related remuneration
We use a range of metrics and targets to assess and manage Our Now and Next Sustainability Strategy, including our
climate-related risks and opportunities in line with our Now and commitment to reach Net Zero GHG emissions by 2050, helps us to
Next Sustainability Strategy and risk management process. A differentiate as a circular economy leader. This drives ongoing
range of targets in our Now and Next Sustainability Strategy relate profitability and cash flow, which are the current performance
to climate risks and opportunities, and the most relevant ones are measures for our incentive plans. The underlying importance of
presented below. We report progress to external audiences ESG and sustainability, including our response to climate change,
annually and review performance internally on a monthly basis. continues to be emphasised by the use of a variety of ESG
Scope 1, 2 and 3 greenhouse gas emission information can be considerations as an underpin to the annual bonus. In 2021/22, the
found on page 33. DS Smith ESG Databook 2022 contains the basis three elements of the ESG underpin were met, including the
of preparation, which includes methodology notes. Independent commitment to carbon reduction in the business, based on
assurance is obtained for selected metrics relating to carbon, science-based targets. For 2022/23, the Remuneration Committee
energy, waste, water and production, indicated in the table below will continue to take into account and report on, amongst other
with asterisks. ESG factors, the development of initial plans to achieve the
longer-term science-based targets for carbon reduction in the
business. For more information, see page 102.
Summary of metrics and targets
The following table summarises the metrics and targets used to assess and manage relevant climate-related risks and opportunities.
Climate-related risk or opportunity – metrics and targets Unit 2019/20 2020/21 2021/22 Trend
Risk: Increasing spend on carbon taxes

|  |  |  | * | Ô |
| --- | --- | --- | --- | --- |
| Gross global Scope 1 emissions | tonnes CO | 2 e 2,181,890 2,047,265 2,023,278 |  |  |
| Percentage covered under emissions-limiting regulations |  | % 81 80 79 |  | Ô |

Target: Reduce Scope 1, 2 and 3 GHG emissions by 46% by 2030 compared to 2019 and reach Net Zero GHG emissions by 2050
Risk: Increasing cost of raw material or threat to supply
Percentage of fibre use optimised for individual supply chains % – 23 26 Ó
Target: Optimise fibre use for individual supply chains in 100% of new packaging solutions by 2025
Risk: Increasing likelihood of water stress

|  | 3 |  | * | Ô |
| --- | --- | --- | --- | --- |
| Total water withdrawn | m | 57,451,994 55,237,583 54,644,995 |  |  |
|  | 3 |  | * | Ô |
| Total water consumed | m | 12,908,260 14,150,530 13,604,030 |  |  |
| Percentage of water withdrawn from areas at risk of water stress | % 36 36 31 |  |  | Ô |
| Percentage of sites with water stress mitigation plan in place | % 70 100 100 |  |  | Ò |

Target: Maintain water stress mitigation plans at 100% of our sites in current or future water stressed areas
Opportunity: Growth in demand for sustainable packaging
st
Number of pieces of problem plastics replaced million units – 313 since 1
May 2020
Target: Replace 1 billion pieces of problem plastics by 2025
Opportunity: Use of renewable energy technologies

|  |  |  | * | Ô |
| --- | --- | --- | --- | --- |
| Total energy consumption | MWh 15,707,667 15,446,255 15,324,120 |  |  |  |
| Percentage of energy consumption from renewable sources % |  | 17 17 21 |  | Ó |

Opportunity: Increasing resource efficiency
3 1 Ô
Water withdrawal at mills in areas at risk of water stress m /t nsp 8.48 8.10 8.08
Target: Decrease water withdrawal by 1% per year to 2030 compared to 2019 at our paper mills in current or future water stressed
areas
* Independent Assurance has been obtained for these metrics – see assurance statement on page 33.
Independent verification to a limited level of assurance for the 2019/20 base year was provided by Bureau Veritas.
1. tnsp – metric tonne net saleable production
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STRATEGIC REPORT
## EU Taxonomy
The EU Taxonomy is a classification system that identifies certain Based on our mapping of our activities to the EU Taxonomy-
economic activities as ‘environmentally sustainable’. It aims to eligible business activities, we have identified turnover, capital
meet the objectives of the European green deal by scaling up expenditure and operating expenditure relating to EU taxonomy-
sustainable investment. It introduces mandatory disclosure eligible activities. In 2021/22, c. four per cent of turnover, c. two
obligations on certain companies, requiring disclosure of the per cent of capital expenditure and c. one per cent of operating
proportion of EU Taxonomy-aligned activities. An economic expenditure related to taxonomy-eligible activities.
activity qualifies as ‘environmentally sustainable’ if:
As the delegated acts continue to be approved by the European
• It contributes substantially to one or more environmental Commission, we expect that more of our economic activities
objectives or is an enabling activity, will be classified as environmentally sustainable. Given our
• It does not significantly harm any environmental objectives, position as a leading provider of sustainable packaging solutions,
operating a circular business model focused on recycled cardboard
• It is carried out in compliance with minimum safeguards, and
and with 100 per cent of our papers either recycled or chain of
• It complies with technical screening criteria.
custody certified, we expect to be well-positioned for the
The EU Taxonomy Regulation requires disclosure of turnover vast majority of our economic activities to be considered
derived from products or services associated with economic environmentally sustainable.
activities that qualify as environmentally sustainable and capital
We will monitor the development of this emerging legislation
expenditure and operational expenditure related to assets or
and evolve our disclosure accordingly.
processes associated with economic activities that qualify as
environmentally sustainable.
Although our industry is not presently identified within the scope
of EU Taxonomy Regulation, we acknowledge the proposals made
and have identified that some of our activities are taxonomy-
eligible environmentally sustainable activities, predominantly the
economic activities associated with our Recycling operations.
Annual Report 2022 dssmith.com 61
## Non-financial information statement
The table below sets out where stakeholders can find information in our Strategic Report that relates to non-financial matters as
required under the Non-Financial Reporting Directive requirements:
Where to read more in this report about our impact,
Reporting requirements Some of the relevant policies including the principal risks relating to these matters Page(s)
1

| Environmental | • Group Sustainability policy | • Our sustainability approach, strategy, focus and targets | 6 |
| --- | --- | --- | --- |
| matters |  | • Our sustainability performance | 30 |
|  |  | • Our differentiators | 10 |
|  |  | • Risk – sustainability | 53 |

2
Employees • Code of Conduct • What we create for our people 24
2
• Speak Up! • Diversity and Inclusion 28
1
• Group Health and Safety policy • To realise the potential of our people – performance 24
• Equal Opportunities and Anti- • Health, safety and wellbeing 26
2
Discrimination policy • Risk – organisation capability 54
1
• Personal Data Protection policy • Gender pay gap reporting 29
1
• Document Retention policy • Our Purpose 5
1
• Confidential Information policy
1
• Conflicts of Interest policy
2
Human rights • Code of Conduct • Sustainable governance 53
2
• Anti-Slavery and Human Trafficking policy • Risk – governance 53
2
Social matters • Code of Conduct • Contributing to our communities 33
2
• Gifts and Hospitality policy
Compliance • Corporate Criminal Offence (Anti- • Risk – governance 53
1
Facilitation of Tax Evasion) policy
2
• Anti-Bribery and Corruption policy
1
• Competition Law Compliance policy
1
• Commercial Agents policy
1
• Conflicts of Interest policy
Business model • Our business model 14

| Non-financial KPIs • Employees: accident frequency rate |  |  | 25 |
| --- | --- | --- | --- |
|  | • Sustainability: CO | 2 equivalent emissions | 33 |
|  | • Customers: on-time in-full deliveries |  | 20 |

1. Available to all employees through the DS Smith intranet. Not published externally.
2. Available both on our website www.dssmith.com and to employees through the DS Smith intranet.
Our policies
A combination of online and in person training on all the key policies is carried out across the Group and there is also a system of bi-annual
certification for senior managers, certifying that they have read and understood the policies, have cascaded down to their direct reports
and that they are not aware of any breach of such policies. All employees, contractors and third parties are encouraged to report any
circumstances where there is a suspected or actual breach of any of the DS Smith policies, applicable laws, or the high standards as set
out in the Code of Conduct, either through their managers, the confidential ‘Speak Up!’ helpline or directly to the Group General Counsel
and Company Secretary. All reported incidences of actual or suspected breach of any of the policies are promptly and thoroughly
investigated. The Compliance Committee and the Audit Committee also consider any high-risk areas identified by the Internal Audit
function, the legal team or the divisional compliance teams.
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STRATEGIC REPORT
Policy Description
Code of Conduct DS Smith Plc (DS Smith), its subsidiaries and affiliates (Group) are committed to the highest ethical standards in the way in which
we engage with each other, our customers, employees, shareholders, suppliers, contractors and other stakeholders. Our Code
of Conduct sets out what these commitments mean and the behaviours which are expected of all our employees, consultants
and officers. This includes our expectations on health and safety, business practice, human rights, compliance, prevention of tax
evasion, and employee relations among other key areas for the business. Alongside the Code of Conduct we have an Employee
Charter drawn up in partnership with the European Works Council which builds on our Code of Conduct and reinforces our
standing commitment to comply with applicable legislation and regulatory requirements. We also have other key Group policies
outlined below, which serve to further expand upon the provisions in the Code of Conduct.
Community DS Smith has an ambitious, Group-wide community programme which supports our Group Sustainability Strategy ‘Now and
Next’. Now and Next includes engagement in community programmes at all of our sites (with 50 or more full time employees)
engagement and
each year. We believe that as a responsible and sustainable business, investing in the communities where we operate and can
charitable make a positive difference is the right approach. We have developed parts of this policy in line with both the B4SI Framework
donations policy (global standard in measuring and managing a company’s social impact) and DS Smith Anti-Bribery and Corruption policy. This
policy outlines the importance of community engagement, the focus of our community programme, allocation of funds, and
processes for community engagement and charitable donations.
Conflicts of Conflicts of interest, whether actual, potential or perceived, may impair our ability to act in accordance with our ethical standards
and values. It is therefore important for all of us to be aware of, and adhere to, the policies and procedures that we have in place
Interest policy
to manage such conflicts. This policy outlines the requirements and processes in respect of conflicts of interest and advises
employees of their obligations. It also includes a self-assessment tool to assist in determining whether there may be a conflict.
Confidential DS Smith keeps certain types of information confidential for important business reasons, including to comply with legal
requirements (such as data protection and competition law), and to maintain a competitive edge. Confidential Information is
Information
information that is not generally known or publicly available and is only available to employees or workers as a result of their
policy employment/engagement with DS Smith. It is information that may harm DS Smith if disclosed and, as such, it must be
protected. This policy sets out how Confidential Information should be handled and outlines the procedures that safeguard it.
Anti-Bribery and DS Smith has zero tolerance for any form of bribery or corruption and is committed to complying with all applicable anti-bribery
and corruption laws. In addition to ensuring that our employees and contractors are compliant with the Group’s Anti-Bribery and
Corruption policy
Corruption policy, we require that all third parties engaging with any DS Smith entity comply with these policies in order to
ensure compliance with applicable anti-bribery and corruption laws and preserve our own and our customers’ reputations.
Anti-Slavery and DS Smith does not tolerate any form of modern slavery both within the Group and within its supply chain. DS Smith respects
fundamental human rights and is committed to the principles set out in the United Nations Universal Declaration of Human
Human
Rights and this is documented in our Code of Conduct, Employee Charter and Anti-Slavery and Human Trafficking policy. Our
Trafficking policy progress in the area of modern slavery is set out in our annual Modern Slavery statement. The ultimate responsibility for
prevention of modern slavery rests with the Group’s leadership with the Board of Directors having overall responsibility for
ensuring this policy is implemented across the Group.
Commercial It is important to our ongoing success that DS Smith avoids damage to its reputation due to an act carried out by an agent in our
name. The Commercial Agents policy outlines the rules that we expect to be followed across the Group when engaging and
Agents policy
monitoring our relationships with agents. This policy also offers guidance to our agents on what is expected of them as an agent
of DS Smith. Such guidance is supplemented by additional e-learning compliance training where appropriate. This ensures that
agents are properly vetted and monitored.
Competition Law DS Smith is committed to ensuring that its activities within the European Union (EU) and outside the EU are conducted in
compliance with the principles of the EU competition rules as well as all applicable national rules that apply to the Group. This
Compliance policy
policy provides guidance on competition laws, information exchanges, SWAPS, trade associations and dawn raids. Additional
e-learning training is available to support this policy.
Corporate DS Smith’s Corporate Criminal Offence (CCO) (Anti-Facilitation of Tax Evasion) policy must be communicated to all suppliers and
customers and is part of due diligence when considering new acquisitions. Training on this policy takes place virtually and where
Criminal Offence
possible face to face with relevant personnel across the Group encompassing all new acquisitions as well as all new joiners.
(Anti-Facilitation
of Tax Evasion)
policy
Document In the course of carrying out its various business activities, DS Smith collects information from individuals and external
organisations and generates a wide range of data and information which is recorded and stored. DS Smith is therefore
Retention policy
committed to ensuring that it continues to ensure the accuracy of any data stored and ensuring that data (especially personal
data) is only retained for as long as is necessary.
Annual Report 2022 dssmith.com 63
NON-FINANCIAL INFORMATION STATEMENT CONTINUED
Policy Description
Equal DS Smith is committed to promoting equal opportunities in employment. Job applicants, employees and contingent workers will
receive equal treatment regardless of age, disability, race, religion or belief, sex, sexual orientation, gender reassignment,
Opportunities
marriage and civil partnership, pregnancy and maternity or any other characteristic protected by applicable law. For DS Smith it is
and Anti- imperative to provide a respectful work environment and we have a zero tolerance approach to discrimination. All parties are
Discrimination encouraged to raise concerns if they find conduct within DS Smith that is offensive or a violation of this policy, through their line
manager, local human resources (HR) or use of the ‘Speak Up!’ process so the Group can investigate and take appropriate
policy
remedial measures to end any conduct that violates this policy. The Group Operations Committee (GOC) has overall responsibility
for the effective operation of this policy and for ensuring compliance with anti-discrimination laws. The HR team has
responsibility for implementation, management and ensuring compliance. All managers must set an appropriate standard of
behaviour, lead by example and promote the Company’s policies and standards on this matter.
Gifts and We recognise that the act of giving and accepting gifts and hospitality can be part of building normal business relationships.
However, our Gifts and Hospitality policy aims to ensure that our employees and contractors never accept gifts or hospitality
Hospitality policy
which could break the law, compromise their judgement, conflict with their duty to DS Smith or our customers, or which could
appear to others that their business judgement has been improperly influenced. Equally, our employees and contractors must
never offer a gift or hospitality which could have this effect on the recipient. In order to monitor compliance with these
principles, each division is required to maintain a gifts and hospitality register in accordance with the policy.
Group Health and Health and safety is the top priority and DS Smith actively strives for the continuous improvement of health and safety in the
workplace. We aim to provide a healthy and safe working environment for all our employees and to ensure the safety of our
Safety policy
contractors, site visitors, the public and all others affected by our operations. The ultimate responsibility for health and safety
rests with the Group Chief Executive, the Board members and the executive management team. This responsibility is cascaded
through the organisation via divisional/regional Chief Executive Officers and their leadership teams, enabling us to comply with
local health and safety laws and regulations in addition to our own standards and guidelines.
Group Our sustainability strategy is supported by policies which align the management of sustainability issues across our organisation.
Risks arising from sustainability issues are considered as being among the key risks to the Group’s operations. To manage and
Sustainability
mitigate such risks we have policies for existing and emerging sustainability issues. Our policies include Conflict Minerals, Carbon
policy and Energy Efficiency, Community Engagement, Global Supplier Standards, Water Stewardship, Zero Waste to Landfill and
Sustainable Forest Management and Fibre Sourcing. These policies are periodically reviewed and updated, with action plans
communicated to the heads of each business unit. The Board receives regular reports on performance and the Group Chief
Executive is responsible for addressing sustainability-related issues. The Health, Safety, Environment and Sustainability
Committee meets monthly and the Sustainability Steering Group oversees the process for addressing sustainability-related
issues and sets and monitors internal targets and strategies to ensure sustainability-related risks and opportunities are
appropriately managed.
Personal Data DS Smith takes the issue of the protection of individuals’ personal data very seriously. Compliance with data protection laws is
critical to the success of our business. Compliance with statutory data protection is the basis of the relationship with our
Protection policy
employees, customers, suppliers and business partners. The management of the relevant DS Smith company is responsible for
cascading this policy and each site is responsible for confirming compliance with this policy. The Divisional Heads of Privacy will
send an annual confirmation form to check that each site is compliant with these policies.
‘Speak Up!’ policy All DS Smith employees, those providing services to DS Smith (contingent workers), shareholders, and Non-Executive Directors
are expected to conduct Company business in a legal and ethical manner as detailed in our Code of Conduct. They have a
responsibility not only to be aware of the Code of Conduct but to bring to the attention of management any activity which may
be in violation of Company policy, local law or does not meet the standards set out in the Code of Conduct. Employees are
encouraged in the first instance to report any concerns to their line manager, local HR or employee representative. If not
comfortable to do so, then there are three ‘Speak Up!’ options available, where a report can be made through a dedicated free
phone line or a website (both maintained by an independent third party that is under a duty of confidentiality). The phone and
website support a majority of languages spoken across DS Smith. Alternatively the Group General Counsel and Company
Secretary can be contacted via email or letter. All options are available 24 hours a day seven days a week. All ‘Speak Up!’ reports
are treated in the strictest confidence and are investigated. Findings from the investigations may include corrective actions and
lessons to be learned. Twice a year, a summary of reports made and findings from the investigations is shared with the Audit
Committee and the EWC Executive. It is DS Smith’s policy to build a climate of support if concerns are raised, including suspected
breach of our Code of Conduct, and where there is an avenue to report concerns which will be confidentially investigated.
64
STRATEGIC REPORT
Statement of approval
This Strategic Report, including pages 1 to 65, was approved by the Board of Directors on 20 June 2022 and is signed on its behalf by
Miles Roberts
Group Chief Executive
Annual Report 2022 dssmith.com 65
BOARD OF DIRECTORS
## Board of Directors
N R N RNA RNA
Geoff Drabble Miles Roberts Adrian Marsh Celia Baxter Alan Johnson
Chair Group Chief Executive Group Finance Director Non-Executive Director Non-Executive Director
Key strengths Key strengths Key strengths Key strengths Key strengths
• Wealth of industrial and • Clear strategic mindset • Strong financial and risk • Extensive HR experience • Strong financial
international experience • Strong leadership skills management expertise and ESG knowledge and background in the FMCG
• Extensive experience of within an international experience sector
External appointment
chairing boards context • Board experience in • Extensive international
• None
• Wealth of finance non-UK listed companies experience
External appointments

|  | Miles was appointed to the | experience in large listed |  |  |
| --- | --- | --- | --- | --- |
| • Geoff is non-executive |  |  | External appointment | External appointments |
|  | Board on 4 May 2010 as | multinationals |  |  |
| chair of Ferguson plc and |  |  | • Celia is the Senior | • Alan is a non-executive |

Group Chief Executive.
a non-executive director External appointment Independent Director and director of Imperial
Following his engineering
of Howden Joinery Group • Adrian is a non-executive the remuneration Brands plc and William
degree he became a
Plc director and audit committee chair at Senior Grant & Sons Holdings
chartered accountant and

|  |  | committee chair at John | plc | Limited |
| --- | --- | --- | --- | --- |
| Geoff was appointed to the | brings to the Board extensive |  |  |  |
|  |  | Wood Group PLC |  | • He is President and Chair |
| Board on 1 September 2020 | financial and operational |  | Celia was appointed to the |  |

of the Board of the

| as a Non-Executive Director | experience. He was | Adrian was appointed to the | Board as a Non-Executive |  |
| --- | --- | --- | --- | --- |
|  | previously Chief Executive of |  |  | International Federation |
| and became the Chair of the |  | Board on 24 September | Director and Chair of the |  |
|  | McBride plc, having originally |  |  | of Accountants and chairs |
| Board and the Nomination |  | 2013 as Group Finance | Remuneration Committee |  |
|  | joined as its Group Finance |  |  | the audit committee of |
| Committee on 3 January |  | Director. | on 9 October 2019. |  |
|  | Director. He was Senior |  |  | the International |

2021. Geoff served for 12

|  | Independent Director of | As the former head of Tax, | Most recently Celia was | Valuation Standards |
| --- | --- | --- | --- | --- |
| years as Chief Executive of | Poundland Group plc until |  |  |  |
|  |  | Treasury and Corporate | Director of Group HR and | Council |
| Ashtead Group plc, the FTSE | September 2016 and |  |  |  |
|  |  | Finance at Tesco PLC, | responsible for all ESG |  |

Alan was appointed to the
100 industrial equipment non-executive director of
Adrian has helped DS Smith activities at Bunzl plc for 13
Board as a Non-Executive

| rental company. He was | Aggreko plc until August |  |  |  |
| --- | --- | --- | --- | --- |
|  |  | to significantly build the | years. Her early executive |  |
|  | 2021. |  |  | Director on 1 June 2022. |

previously an executive
finance function and deliver career was with Ford Motor
Alan held a number of senior
director of The Laird Group As Group Chief Executive
strong financial results. As a Company and KPMG. She
finance positions at Unilever
plc and held a number of Miles leads the executive
qualified accountant, and has held HR positions with
during a 30-year career,
senior management management of the Group
coming from a FTSE Hays plc, Enterprise Oil Plc
and is responsible for DS including Chief Audit
positions at Black & Decker.
background, he has held and Tate & Lyle Plc. As a
Smith’s overall ESG Executive and Chief
Geoff’s wealth of industrial divisional CFO positions at non-executive director she
performance and its clear Financial Officer of the
and international objectives at the centre of our both AstraZeneca plc and was on the board of NV
Global Foods Division. He
experience, combined with business model, taking into Pilkington plc. Bekaert SA until May 2020
was previously Chief

| his experience of chairing | account the Board’s risk |  | and on the board of RHI |  |
| --- | --- | --- | --- | --- |
|  |  | Adrian’s depth of |  | Financial Officer and then a |
| boards of listed companies | appetite. He chairs the |  | Magnesita N.V. until |  |
|  |  | experience in a range of |  | non-executive director at |
|  | Group’s Health, Safety, |  | June 2021. |  |

and his awareness of both
financial roles in large listed food retailer Jerónimo
Environment and
the non-executive and chief
multinationals means that Celia’s background of Martins, SGPS, SA until
Sustainability Committee that
executive perspective,
monitors the establishment his skills and experience working in a range of April 2016.
means that his skills and
of goals, management of risks contribute to the Board’s sectors means that, as well
Alan’s extensive financial
experience contribute to and opportunities, reporting
understanding of all aspects as her experience as a
and international
the Board’s practical and related governance
of the financial implications, remuneration committee
experience working within
understanding of good procedures in that area.
whether risks to be chair and her understanding
the consumer goods and
governance in action,
Miles’ strong leadership skills assessed and managed, or of employee dynamics and
retail sectors and his
balancing stakeholders’
combined with his clear opportunities to be ESG issues, she brings
experience of chairing
interests across the range strategic mindset, rooted in
identified and realised, of extensive and practical
international accountancy
of issues considered by the the practicality of his
both the day to day and business knowledge to the
bodies, will bring a range of
Board, including engineering and accountancy
project aspects of the Board.
training, means that his skills important different
environmental, social and
Group’s business and
and experience, and ability to perspectives to contribute
governance (ESG) matters.
operations.
identify material risks and to the Board’s discussions.
sustainable growth
opportunities for the Group’s
business, contribute to the
Board’s clear strategic vision.
66
GOVERNANCE
Principal Board Audit Nomination Remuneration Chair
A N R
Committee Committee Committee
Committees key:
RNARNA RNA RNA
Alina Kessel David Robbie Louise Smalley Rupert Soames OBE Iain Simm
Non-Executive Director Senior Independent Non-Executive Director Non-Executive Director Group General Counsel
Director and Company Secretary
Key strengths Key strengths Key strengths
• Broad and wide-ranging Key strengths • Strong HR experience • Wealth of international Key strengths
marketing experience • Strong financial, risk • Extensive knowledge of operational experience • Legal expertise
• International outlook management and people management, • Extensive understanding • Wealth of experience in
corporate finance rewards and of UK plc environment as assisting boards with
External appointment
experience remuneration schemes a serving CEO legal and governance
• Alina is a Global Client
• International and matters
Leader at WPP, a leading External appointment External appointment
strategic mindset
international marketing • Louise is a non-executive • Rupert is Group Chief External appointment
communications External appointment director and Executive Officer at Serco • None
company • David is a non-executive remuneration committee Group plc
Iain was appointed Group

|  | director of easyJet plc | chair of Informa PLC |  |  |
| --- | --- | --- | --- | --- |
| Alina was appointed to the |  |  | Rupert was appointed to | General Counsel and |
| Board on 1 May 2020 as a | David was appointed to the | Louise was appointed to the | the Board on 1 March 2019 |  |

Company Secretary on 6
Non-Executive Director. Board as a Non-Executive
Board on 23 June 2014 as a as a Non-Executive Director June 2016.
Director on 11 April 2019

| She has over 25 years of |  | Non-Executive Director. | and became Senior |  |
| --- | --- | --- | --- | --- |
|  | and became Chair of the |  |  | He has previously held |
| experience building global |  |  | Independent Director on |  |
|  | Audit Committee at the | She was Group Human |  | General Counsel and |
| brands for large |  |  | 3 September 2019. He |  |
|  | conclusion of the 2019 AGM. | Resources Director of |  | Company Secretary roles |

multinational clients,
handed over his Senior
He was appointed Senior Whitbread PLC and for nine with Signature Aviation plc
helping them grow their

|  | Independent Director on |  | Independent Director duties |  |
| --- | --- | --- | --- | --- |
| business through |  | years until August 2021 an |  | and P&O Ports Ltd. He |
|  | 28 February 2022. |  | to David Robbie on 28 |  |
| communications, |  | executive director of |  | undertook his legal training |

February 2022, following

| experience, commerce and | David was the Senior | Whitbread PLC, where she |  | with Slaughter and May and |
| --- | --- | --- | --- | --- |
| technology. Her current role |  |  | his decision to retire from |  |
|  | Independent Director and | held several key |  | worked for a number of |
| with WPP includes working | chair of the audit committee |  | the Board at the conclusion |  |
|  |  | transformation and HR |  | years in their corporate and |
| with global clients on their | at FirstGroup plc until June |  | of the 2022 AGM. |  |
|  |  | roles. She previously |  | commercial department. |
| sustainability agenda. | 2021. He was previously |  |  |  |
|  |  | worked as a HR professional | He was previously Chief |  |
| Originally from Ukraine and | Finance Director of Rexam |  |  |  |
|  |  | in the oil industry, with BP | Executive at Aggreko plc |  |
| a US national, Alina has lived | PLC. Prior to his role at |  |  |  |
|  |  | and Esso Petroleum. Louise | and Chief Executive of Misys |  |
| and worked in the UK, US, | Rexam, David served in |  |  |  |
| Australia and Germany. |  | is an alumna of the | plc Banking and Securities |  |

senior finance roles at BTR
plc before becoming Group Cambridge Institute for Division. Until July 2016
Alina’s experience of living,
Finance Director at CMG plc Sustainability Leadership Rupert was also Senior
as well as working, in a
in 2000 and then Chief and has experience of Independent Director of
number of different
Financial Officer at Royal leading timely evolutions of Electrocomponents plc and
countries, including the US,
P&O Nedloyd N.V. in 2004.
combined with her sustainability strategies. a member of its
He served as a non-

| expertise in marketing and |  |  | remuneration, nomination |
| --- | --- | --- | --- |
|  | executive director of the | Louise’s recent experience |  |
| communications means that |  |  | and audit committees. |
|  | BBC between 2006 and | as a serving listed company |  |

her skills and experience
2010 and as chair of their executive director, Rupert’s hands on
contribute an additional
audit committee. David combined with her experience of the UK plc
perspective to the Board’s
qualified as a chartered
discussions, particularly extensive knowledge of environment as a serving
accountant at KPMG.

| when considering the |  | progressive people | CEO, balancing the |
| --- | --- | --- | --- |
| interests of employees | David’s strong financial, risk | management practices in | management of risk and |
| (based in over 30 countries) | management and corporate |  |  |
|  |  | multi-site large scale | reward, combined with the |
| and our global customers | finance experience |  |  |
|  |  | businesses, means that her | wealth of his international |
| and discussing how to | combined with his |  |  |
|  |  | skill and experience | operational experience |
| communicate key | international and strategic |  |  |
|  |  | contribute to the Board’s | means that his skills and |
| non-financial aspects of | mindset and practical |  |  |
|  |  | focus on the importance of | experience contribute to |
| our business. | governance experience |  |  |
|  |  | enabling everyone who | the Board’s international |

with over 20 years serving
as a director on FTSE boards works for the Group, outlook, embedded in a
means that his skills and whatever their background, clear-sighted view of
experience add depth to to realise their potential. operational realities in
the Board’s discussions in today’s world.
these areas.
Annual Report 2022 dssmith.com 67
CHAIR’S INTRODUCTION TO GOVERNANCE
## Chair’s introduction to Governance
### “I have been impressed with the Group’s performance, despite
### the challenges of the Covid-19 pandemic and more recently the
### implications of the war in Ukraine and economic volatility, in
### continuing to deliver both financial results and on the Group’s
### ambitious ESG agenda.”
Geoff Drabble,
Chair
Introduction Division of responsibilities
This section of the Annual Report focuses on corporate My role as Chair is to lead the Board and be responsible for its
governance. Having a structured corporate governance overall effectiveness in directing the Company. It is important that
framework, bringing the right information before the right people each member of the Board is clear about their responsibilities and
at the right time to make informed decisions, supports good also that each member of the Board is able to contribute fully to all
decision making and the delivery of the Group’s strategy. aspects of the discussions we have as a Board.
The past 12 months have continued to present us all with The approval of certain Group policies (including some of those
challenges in all aspects of our lives and as a Board and as a Group listed in the non-financial information statement on pages 63 and
we continue to remain watchful and nimble in our decision making. 64) is one of the matters reserved to the Board and is one of the
I have been impressed with the Group’s performance, despite the ways as a Board we have oversight of longer-term aspects of the
challenges of the Covid-19 pandemic and more recently the Group’s operations, including our leadership on sustainability
implications of the war in Ukraine and economic volatility, in matters and our progress in addressing climate-related issues.
continuing to deliver both financial results and on the Group’s
Board composition, succession planning and
ambitious ESG agenda.
evaluation
UK Corporate Governance Code
As at 1 May 2022 our eight member Board was made up of three
Your Board understands that good corporate governance is an women and five men. Alan Johnson joined the Board with effect
essential element in helping to build a successful business in a from 1 June 2022 and Rupert Soames will retire from the Board
sustainable manner. There are five sections to the UK’s Corporate after the conclusion of the Annual General Meeting on 6
Governance Code (Code) and the governance section of our Annual September 2022.
Report follows the same order as the Code.
For each Board appointment made we follow a similar process (as
Board leadership and Company Purpose summarised on page 77) as the Board seeks to appoint an
outstanding candidate, with a different range of experience, to
The Code provides that a board should establish a company’s
maximise Board effectiveness. When we think about diversity we
purpose and values as well as its strategy and that its directors
recognise that diversity can take many forms, including diversity
should lead by example and promote the desired culture.
of gender, social and ethnic backgrounds, and of cognitive and
More information about how we engage with our stakeholders as
personal strengths, and that diversity at Board level and
part of our Board activities is set out on pages 73 and 74 and how
throughout the Company is a valuable strength. We also recognise
we do so as a Group is summarised on pages 18 and 19.
that the mix of skills needed by Board members will change as the
landscape in which the Group operates changes. Therefore, as we
consider each new Board appointment, the role specification is not
a direct replication of the role of a retiring Board member.
Information about the external evaluation of the Board and its
Committees and how they have contributed to the overall
effectiveness of the Group is set out on page 75.
68
GOVERNANCE

### Balancing stakeholders' interests

Each Board pack for Board meetings includes on the agenda a reminder of each Director's duties under section 172 of the Companies Act 2006, framing our deliberations at meetings in the context of a reminder that every Director must act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, while thinking about 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, and the need to act fairly as between the members of the Company.

The principal decisions that the Board takes can be divided into two categories: there are decisions taken relating to matters considered each year (such as approving the Corporate Plan, the budget and the Annual Report or considering the level of dividend payment to propose) and there are decisions that relate to a new project or an identified inflection point, when a new direction is to be taken.

The Board's approval of the Group's commitment to a 1.5°C science-based target, validated by the Science Based Targets initiative was a significant strategic decision, which will impact all our stakeholders, including our suppliers, our customers and the wider community, as well as the environment. Delivering progress on our science-based targets will play a powerful role in helping brands and consumers reduce their own carbon footprint. Given that our greenhouse gas emissions are our customers' Scope 3 emissions, the commitment we have made to carbon reduction has a positive impact on reducing Scope 3 emissions for our customers, many of whom are already making progress towards their own science-based targets and expect the same of their packaging supplier.

Alongside our commitment to science-based targets, we have also committed to encourage our strategic suppliers to adopt science-based targets by 2027. This follows feedback from stakeholders who are seeking to work with like-minded businesses, committed

to science-based targets and net zero, alongside a commitment to the circular economy.

The Group's commitment to a science-based target means we will work closely with partners, suppliers, customers and policymakers collectively to tackle climate change through the circular economy in line with our ambitious goals.

The Board takes a close interest in our progress in realising our strategic goal of leading the way in sustainability. Our progress to date is summarised on pages 30 to 33 of this report, with more details being available in our Sustainability Report.

As your Chair I look forward to both supporting and challenging the executive team to adapt and evolve to the long-term benefit of all our stakeholders as we realise our Purpose of 'Redefining Packaging for a Changing World'.

**Geoff Drabble**
Chair

20 June 2022

The regulatory requirement is to include in the Strategic Report a statement about the Directors' compliance with section 172 of the Companies Act 2006 concerning taking into account the interests of a variety of stakeholders. This is on page 13. Examples that illustrate aspects of that statement are set out in this part of the report, which also links to the topics covered in section 1 of the Code (board leadership and company purpose). Here we also explain how we have applied aspects of Code principles A to E and how we have put the related provisions of the Code into practice.

We use boxes like this throughout the governance section of the Annual Report to highlight why we are telling you the information. We hope that this will help you both find what you are looking for in our report and understand the way we have structured our disclosures to be both compliant with regulation and, we hope, readable.

We use this symbol throughout the governance section of the Annual Report to highlight examples referred to in the section 172 statement on page 13.

The governance section of the Annual Report opens by summarising what each Board member contributes to the governance of the Company and its long-term success. The Chair's introduction to governance puts DS Smith's approach to matters of corporate governance into our DS Smith context. This year, after the summary of division of responsibilities there follows a brief summary of our approach to each of the five sections of the Code.

Annual Report 2022 dssmith.com 69
## Division of responsibilities
## Division of responsibilities of the Board and its principal Committees
The Board Chair Group Chief Executive
The Board is collectively responsible for • Primarily responsible for overall • Responsible for executive
the long-term success of the Group and operation, leadership and management of the Group as
for ensuring leadership within a governance of the Board a whole
framework of effective controls. The • Leads the Board, sets the agenda • Delivers strategic and commercial
key roles of the Board are: and promotes a culture of open objectives within the Board’s stated
debate between Executive and risk appetite
• Setting the strategic direction of the
Non-Executive Directors • Builds positive relationships with all
Group
• Regularly meets with the Group the Group’s stakeholders.
• Overseeing implementation of the
Chief Executive and other senior
strategy by ensuring that the Group
management to stay informed
is suitably resourced to achieve its
• Ensures effective communication
strategic aspirations
with our shareholders.
• Providing entrepreneurial leadership
within a framework of prudent and
effective controls which enables risk
to be assessed and managed
• Ensuring that the necessary financial Senior Independent Non-Executive Directors
and human resources are in place for Director • Constructively challenge and help
the Group to meet its objectives develop proposals on strategy
• Provides a sounding board to the
• Setting the Group’s values. • Scrutinise the performance
Chair and appraises their
performance of management
• Acts as intermediary for other • Monitor the reporting of
Directors, if needed performance.
• Available to respond to shareholder
concerns if contact through the
normal channels is inappropriate.
Board and Board Committee meetings attendance
Nomination Audit Remuneration
Board Committee Committee Committee
Total number of meetings in
2021/22 8 4 5 6 Section 2 of the Code (division of
responsibilities) sets out matters
Executive Directors
relating to independence of Directors
Miles Roberts 8/8 4/4 n/a n/a
and the structure of the Board and its
Adrian Marsh 8/8 n/a n/a n/a
Committees. We cover these items

| Non-Executive Directors | (including the application of aspects |
| --- | --- |
| Geoff Drabble 8/8 4/4 n/a 6/6 | of Code principles F to I) in this part of |
| Celia Baxter 8/8 4/4 5/5 6/6 | the report and in the Nomination |

Committee Report, where we also
Alina Kessel 8/8 4/4 5/5 6/6
have more information about the
David Robbie 8/8 4/4 5/5 6/6
independence of Directors.
Louise Smalley 8/8 4/4 5/5 6/6
Rupert Soames 7/8 4/4 5/5 5/6
The Chair also holds meetings with the Non-Executive Directors without the Executive Directors present.
70
GOVERNANCE
## Board’s principal Committees
Audit Committee Nomination Committee Remuneration Committee
• Monitors the integrity of the Group’s • Reviews the structure, size and • Recommends the policy for the
reporting process and financial composition of the Board and its remuneration of the Chair, the
management, its accounting processes Committees Executive Directors, the Company
and audits (internal and external) • Identifies and recommends suitable Secretary and senior executives, in
• Ensures that risks are carefully candidates to be appointed to the alignment with the Group’s
identified and assessed and that sound Board and reviews the wider senior reward principles
systems of risk management and management talent pool • Reviews workforce remuneration
internal control are in place • Considers wider elements of and related policies and alignment
• Oversees fraud prevention succession planning below Board level, of incentives and rewards with
arrangements and reports received including diversity. culture, to help inform setting of
under the ‘Speak Up!’ policy. remuneration policy
For more information see page 76
• Considers the business strategy of the
For more information see page 82
Group and how the remuneration policy
reflects and supports that strategy.
For more information see page 88
## Board standing sub-committees
In addition to the three principal Committees of the Board there are four further standing sub-committees of the Board.
Disclosure US Sub General Purposes Share Schemes
Committee Committee Committee Committee
which oversees the which oversees the strategic which facilitates efficient which facilitates
Company’s compliance with direction of business in the operational management administrative matters in
its disclosure obligations. US, together with any decision-making in relation relation to the Group’s
associated risks or to day-to-day financing and share schemes.
opportunities in administrative matters.
the business.
## Management committees
Four management committees, chaired by the Group Chief Executive, and the Group Compliance Committee also support the work of
the Board and its principal Committees.
Group Health, Safety, Group Operating Group Strategy Group Compliance Committee
Environment and Committee Committee
Meets quarterly
Sustainability
Meets monthly Meets once every two
Oversees compliance with all legal,
Committee
months regulatory and organisational
Considers Group-wide
Meets monthly initiatives and priorities. requirements including the effective
Plans the business strategy
Reviews the interface between the financial, legal, risk
Oversees the management implementation as approved
implementation of and internal audit functions, reporting
processes, targets and by the Board and set out by
operational plans. Reviews back to both the Group Operating
strategies designed to the annual Corporate Plan
changes to policies and Committee and the Audit Committee.
manage health and safety process. The Corporate Plan
procedures and facilitates is used to develop the
and environmental and
the discussion of the Group’s strategy, based on
sustainability risks and
development of the set strategic direction.
opportunities, including
new projects. The Corporate Plan’s focus is
reviewing performance on Group M&A Committee
climate-related issues and primarily on strategic
actions, supported by high Meets once every two months
the Group’s health and
safety and environmental level financial information. It
Considers potential acquisitions and
and sustainability covers a three-year time
disposals and other related aspects that
responsibilities and horizon and is reviewed
may impact the realisation of the
commitments. annually by the Board.
Corporate Plan.
Annual Report 2022 dssmith.com 71
## Corporate Governance in context
Corporate Governance in action
The 2018 UK Corporate Governance Code (Code) published by the The governance section of the Annual Report outlines how we
Financial Reporting Council (FRC) and available at www.frc.org.uk have applied the Code’s main principles. All relevant provisions
asks companies to focus on the application of the principles of of the Code have been complied with, other than provision 38,
good governance in their specific context. In the introduction to where our approach (summarised in the box below) differs from
the Code the FRC recognises that high-quality reporting on the the Code’s.
provisions of the Code may include an explanation of how the spirit
The FRC and investors agree that, as long as ample, transparent
of the principles has been applied, which, in some cases, may be by
explanation is given, it may be appropriate for a company to
a different route from that suggested in the Code’s provisions.
choose to depart from a provision of the Code.
Our compliance with the UK Corporate Governance Code’s five sections
1 Board leadership and Company Purpose
Your Board rigorously challenges strategy, assesses
5 Remuneration
performance and balances the interests of all our stakeholders
Our remuneration policy, which was approved at the 2020 AGM,
to ensure that every decision we make is of the highest quality.
is designed to support our long-term strategy and to promote
From page 73
long-term sustainable success. It was developed taking into
account wider circumstances as your Board currently
2 Division of responsibilities
understands them and setting those in the context of the
Your Board and its Directors, both executive and non-executive, longer-term future of DS Smith in this ever changing world.
operate within a clear framework of roles and responsibilities. Each element of remuneration is looked at, both individually
One of the roles of Non-Executive Directors is to broaden the and cumulatively.
diversity of viewpoints shared in the boardroom discussion,
As described on page 91 in the Remuneration Report, the
drawing on the full range of their experience in other industries
pension contribution rates for Executive Directors are not, at
and other countries, while considering a range of other
the date of this report, fully aligned to that available to the
stakeholders’ perspectives.
workforce, although they will be so aligned by 31 December
From page 70
2022. (The Group Chief Executive’s pension contribution
reduced by 10 per cent in 2020 and by a further 5 per cent on
3 Composition, succession and evaluation
1 August 2021 to 15 per cent of annual salary. The Group
Your Board scrutinises the effectiveness of its performance in Finance Director’s pension contribution was reduced by 5 per
an annual Board evaluation and evaluates the balance of skills, cent in 2020 and a further 5 per cent on 1 August 2021 to 10 per
experience, knowledge and independence of the Directors. cent of annual salary.)
That then informs the succession planning process, which also
Our remuneration policy is aligned to our Purpose of ‘Redefining
takes into account the contribution made by having a diversity
Packaging for a Changing World’. Each year we look afresh at our
of backgrounds (whether of gender, of social or ethnic
reward principles and test that they continue to support our
backgrounds, or of the less immediately visible cognitive
values as a Group.
differences). All new Directors receive a tailored induction
From page 88
programme, which builds on their personal experience and
ensures that appointments can be made from a wider pool of
talent than one limited to only those with previous experience
of holding a directorship with a UK listed company.
From page 75
4 Audit, risk and internal control
All your Board’s decisions are discussed within the context of
the risks involved. Effective risk management, set in the
context of a well-structured internal control framework, is
central to achieving our strategic objectives, particularly
as we balance the sometimes conflicting interests of
our stakeholders.
From page 79
72
GOVERNANCE

# Board leadership and Company Purpose

## Board leadership in action

As the 2021/22 financial year drew to a close the war in Ukraine dominated the headlines. The Board has been inspired by the numerous examples of humanitarian support offered by our colleagues in eastern Europe to refugees from Ukraine and has noted the heightened understanding of the importance of the Group's cyber awareness. The Board receives regular updates on matters such as the financial hedging of energy costs and the measures to enhance security of commodity supply put in place by our Procurement team.

**AOP** The Board was pleased that the Group was, after much work, able to make public its commitment to align its global operations to a 1.5°C scenario as set out in the Paris Climate Agreement and to achieve validation from the Science Based Targets initiative (SBTi), committing to reduce Scope 1, 2 and 3 greenhouse gas emissions 46 per cent by 2030 compared to 2019 and to reach net zero emissions by 2050. This (as further described on page 69) was a significant strategic decision, taking into account the interests stakeholders.

Health and safety is always a priority item on the Board's agenda. Setting the example from the top down is critically important and the Board was pleased to hear that the Group-wide lost time accident frequency rate has fallen again to a new low of 1.91.

The Code highlights the importance of effective engagement with shareholders and other stakeholders. The Group's key stakeholders and their differing perspectives are identified and taken into account, not only as part of the Board's annual strategy and corporate planning discussions, but also in our project assessments and in other Board conversations. The Board understands that the Group has a role as an employer and as a taxpayer as well as a member of the wider communities in which our sites are based and as a key link in the supply chains through which so many goods pass, and that these roles are broader than the more traditional single role of a corporate entity reporting on its financial results to its shareholders. The balancing of the differing perspectives of all our key stakeholders is a recurrent theme in our Board's conversations.

All discussions, assessments and conversations focus not only on delivering increased value for shareholders, but also assess the impacts of our decisions and strategies on the Group's wider stakeholders. (The concerns of, and our response to, our stakeholders are summarised on page 18 and 19.) The Board recognises the importance of regular, open and constructive dialogue with shareholders and other stakeholders and this has long been a key aspect of our culture and of our decision-making.

## Engagement with our shareholders

Dialogue with investors continues throughout the year, not only ahead of the AGM.

The Group's Investor Relations team coordinates ongoing communication with shareholders and analysts, and the Board receives regular updates on the views of the Group's shareholders from our internal team and also from the Company's

brokers, so all Board members have a clear understanding of the views of the shareholders. Celia Baxter, as Chair of the Remuneration Committee, leads the engagement with shareholders when we have remuneration matters to discuss.

Each year shareholders (and other interested bodies) issue materials concerning their expectations of companies. These are summarised for, and considered by, the Board, which also informs the comments that Board members make on the working drafts of the Annual Report that they review, prior to its final approval and publication.

## Engagement with our workforce

Our engagement with our workforce makes good use of the well-established European Works Council (EWC) structure.

EWC representatives meet regularly with our Group Chief Executive and Group HR Director to discuss a wide range of topics. While health and safety, Group performance and sustainable employment are always on the agenda for these discussions, this year topics have also included providing input into the updated Group Code of Conduct document, comparing the Group-wide engagement survey results to the pledges set out in our Employee Charter, and giving guidance on the industrial relations landscape across Europe.

Members of management continued to attend EWC meetings throughout the year, held virtually on a platform that enables live interpretation. Again this year an EWC representative joined a meeting of the Remuneration Committee to support and inform discussions about Sharesave and employee wellbeing programmes and to brief the Committee about some of the topics discussed at recent meetings of the EWC. Celia Baxter, the Chair of our Remuneration Committee, has also met with the EWC Executive twice in 2022, building further on the dialogue started in 2020.

The regular schedule of reporting to the Board includes, in relation to our workforce, such matters as reviewing the outcomes from the topic-based, pulse employee engagement surveys that are one of the ways in which the Board assesses and monitors culture. The regular schedule of reporting to the Nomination Committee includes the review of employee talent, development and succession plans as well as insight into the progress made on diversity, equity and inclusion. All these activities ensure that the voice of our workforce is heard regularly in the boardroom and provides richer context for the Board's decision-making. The Board plans to review the insight from the recent Group-wide engagement survey and the action plans that have arisen from the listening groups held across the organisation.

## Engagement with our suppliers, customers and other stakeholders

The business relationships with our suppliers, customers and other stakeholders, such as regulators and non-governmental organisations, are matters which the Group Chief Executive covers in his regular reports to the Board. His report to the Board in December 2021 highlighted that, while COP26 focused heavily on carbon reduction, it also provided a number of platforms for the

Annual Report 2022 dssmith.com 73
BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED

Group to debate the importance of recycling/reusing of resources. As Group Chief Executive, Miles Roberts is responsible for the Group's overall ESG performance and its clear objectives at the centre of our business model. The Board recognises the crucial importance of delivering on our sustainability ambitions, helping reduce waste and protect natural resources as our designers realise the opportunities within the circular economy by applying our Circular Design Principles.

**Q27** The Board receives regular updates from the Group procurement function which has first-line responsibility for relationships with suppliers. In the past year the Board has discussed the supply of energy and raw materials (such as starch), inflation in the cost of such supplies and logistics shortages.

**Q28** The most recent update to the Board on sales, marketing and innovation highlighted the range of customers we serve, our focus on recovery of cost inflation and the importance of leveraging our circular ready proposition, as well as how much our customers have appreciated our responsive support through the past challenging 18 months.

Complementing the regular briefings from operational and functional management about Group-specific matters (such as reports from our Corporate Affairs Director on progress made during the year on both sustainability and our programme of wider engagement in the community and the report to each Board meeting on health and safety), the Board also has a programme of briefings from the Group's external advisers on a range of topics. This enables current and future plans to be set in the wider context of the broader environment. This covers not just topics that are currently visible, but emerging areas of interest and concern across a diverse range of fields.

Our engagement with the local communities of which our sites and employees are a part has been a developing area of focus in recent years. A key target in our Now and Next Sustainability Strategy is to engage in community programmes at all our sites that have more than 50 employees, which we have again achieved in 2021/22. These programmes are guided by our Purpose and focus on supporting the improvement and protection of the environment and inspiring and educating. In 2021/22, we achieved our Now and Next Sustainability Strategy target to fund 100 biodiversity projects in our local communities. These projects improve local environments for plants and animals, protecting natural habitats and enhancing species diversity in the areas in which we operate. Alongside these projects, 12 of our paper mills have launched longer-term biodiversity programmes.

**Q29** An illustrative example of improving local communities that the Board was briefed on in October was the involvement of over 300 employees based at more than 35 sites in 17 countries in World Cleanup Day in September 2021. Sadly the war in Ukraine has provided the opportunity for our colleagues in eastern Europe to rally round, offering humanitarian support to the Ukrainian people through many locally and regionally coordinated charitable initiatives, including organising food and other donations and taking refugees into their homes.

### Board engagement through site visits

Board site visits are an important way in which Board members can engage with our employees, assess and monitor culture, and understand more about our customers and suppliers, but the ongoing impact of the Covid-19 pandemic in much of 2021/22 has limited the possibilities for in-person visits. The Board plans to go to Madrid for its October 2022 meetings to assess the integration of Europac and see first hand the strengths and culture of that business and the qualities our employees there bring to the overall Group. It is also hoped that during 2022/23 it will be possible for Non-Executive Directors to be able to visit sites as individuals.

At each Board meeting health and safety is reported on, including the total number of near misses and safety observations and the number per employee. These are seen as indicators of employee engagement in observing and reporting positive behaviour and identifying health and safety risks. The level of engagement is seen as a reflection of the culture and health and safety leadership at a site and in 2021/22 the number of safety observations per employee (the health and safety engagement index) was 11.5, the highest figure since the Group started tracking it in 2017.

**Q27**

### Statement about the Company's engagement with the wider UK workforce

More detail about how we realise the potential of our people by engaging with our wider workforce (a term that is wider than the term employees, who are those employed directly by the Group under contracts of services) whenever they are based (not just those based in the UK) is set out on pages 24 to 29 of the Strategic Report.

### Statement about the Company's engagement with suppliers and customers

More detail about how we engage with our customers and the importance of sustainability throughout our supply chain is set out on pages 20 to 29 and 30 to 33 of the Strategic Report.

Throughout the uncertain times of Covid-19 the safety and wellbeing of our people has been our first priority, while recognising our responsibility to support our customers as they keep essential goods such as food and pharmaceuticals moving. All our decisions have been taken in that context.

**Q28**

In addition to the regulatory requirement to include a statement about section 172 of the Companies Act 2006 in the Strategic Report, there is also a requirement to make a statement about the Company's engagement with the wider UK workforce and with suppliers and customers. The methods of engagement in the UK and across the wider workforce are broadly the same, so we have cross-referenced, not repeated, our disclosures on these matters.

74
GOVERNANCE
## Composition, succession and evaluation
Board evaluation in practice Succession and composition
Board evaluation is an iterative process. After each evaluation More details about succession planning are set out in the
(whether internal or external and including evaluations of Nomination Committee Report, later in this Report and details
Committees and Directors) the Board sets itself objectives. The about the current composition of the Board are set out in the
Board set itself a number of objectives for 2021 including looking biographies of the Directors on pages 66 and 67. Alan Johnson
at insights around global, societal and consumer trends (including joined the Board on 1 June 2022, but all the other Directors held
those outside the immediate categories in which the Company office throughout the year under review. Rupert Soames informed
operates) and ensuring appropriate frequency of Board the Company that he planned to retire from the Board at the
discussions of briefings on topics such as relationships with conclusion of its Annual General Meeting on 6 September 2022
customers, suppliers and the businesses’ efforts and involvement and he handed over his Senior Independent Director duties to
in the many and diverse communities in which we operate. The David Robbie on 28 February 2022.
Board found realising these objectives helped keep a wider lens on
the Board’s discussions.
In 2022 the Board and its Committees completed a formal
external evaluation with Claire Chalmers Limited (which has no
other involvement with the Group or with any of the Directors).
The process started in October 2021 when an independent
external evaluator was able to attend in-person meetings of
the Board and its Committees, which gave the opportunity for
richer insight and more valuable feedback than would have been
possible earlier (or later) in the financial year when meetings
were via video technologies.
The formal evaluation report was presented by the evaluator at
the January Board meeting when Board members discussed the
findings with the evaluator and how, for example, the evaluator
had seen collective board training operate to best effect in other
organisations. At the March and April Board meetings the Directors
considered what further changes to suggest to the rolling
schedules of periodic agenda items that are maintained as a
framework for the Board and each of its main Committees, to
ensure that those documents continue to be aligned with the
focus areas of the Corporate Plan. At that time David Robbie, as
Senior Independent Director, met with all the Directors
individually, to appraise the Chair’s performance and subsequently
discussed this with him. The Directors also considered and adopted
Board objectives for 2022, taking forward from the external
evaluation a focus on a structured approach to succession
planning with improved oversight of talent and development
programmes. After the pandemic’s disruption of physical site visits
and the limited opportunities for virtual site visits, the Board is
particularly keen to set itself an objective of arranging additional
physical or virtual visits to sites in 2022 and 2023, choosing
locations by reference to the strategic priorities of the business.
As with every high performing board, the Directors will continue to
watch for areas of improvement, not just when Board evaluation is
a formal agenda item at a Board meeting.
In this report we sometimes report on ‘employees’ and
sometimes on ‘workforce’. This is because sometimes the
regulatory requirements specifically ask us to report on
This section and the Nomination Committee Report that matters relating to ‘employees’ (those who are employed
follows explain how we have applied aspects of Code directly by the Group under contracts of service). When we
principles J to L in section 3 (composition, succession and use the term ‘workforce’ we are including all those who work
evaluation) and how we have put the provisions of that for the Group, including those sub-contracted to work for
section of the Code into practice. the Group.
Annual Report 2022 dssmith.com 75
# Nomination Committee Report

![img-3.jpeg](img-3.jpeg)

"As a Committee we continue to focus on senior executive succession planning, as well as Board composition, as we progress towards a greater range of diversity of experiences across the Group's senior leadership team and welcome Alan Johnson to the Board."

Geoff Drabble,

Chair of Nomination Committee

## Dear shareholders

The Nomination Committee supports the Board in executive and non-executive succession planning. Our principal objective as a Nomination Committee is to make sure the Board has individuals with the necessary range of skills and knowledge and diversity of experiences to lead the Company. As a Committee we continue to focus on senior executive succession planning, as well as Board composition, as we progress towards a greater range of diversity of experiences across the Group's senior leadership team and welcome Alan Johnson to the Board.

### Our key responsibilities

As a Committee we have delegated authority from the Board to focus on Board and Committee composition and succession planning. In discharging those key responsibilities in relation to succession planning we also consider ways to:

- Improve diversity in the pipeline for senior management roles
- Further strengthen the senior management team.

As Chair of this Committee, I report to the Board on the outcome of our meetings.

### Board changes

Rupert Soames handed over his Senior Independent Director duties to David Robbie on 28 February 2022 and is retiring from the Board at the conclusion of the Annual General Meeting on 6 September 2022.

Alan Johnson joined the Board with effect from 1 June 2022.

### Our priorities over the year were:

- To keep under review succession planning at the Executive Director level and support succession planning at senior management levels
- To improve the diversity on the Board and in the pipeline for senior management
- To monitor the Group's progress towards increasing the relative number of women in senior management positions
- To keep under review our leadership needs, both executive and non-executive, with a view to ensuring the continued ability of DS Smith to compete effectively in the marketplace.

Membership and operation of the Committee

|  Member | Since  |
| --- | --- |
|  Geoff Drabble (Chair) | 2020  |
|  Celia Baxter | 2019  |
|  Alina Kessel | 2020  |
|  Miles Roberts | 2010  |
|  David Robbie | 2019  |
|  Louise Smalley | 2014  |
|  Rupert Soames | 2019  |

Alan Johnson joined the Board and its Committees on 1 June 2022.

During the year, the Committee held four formal meetings and there were updates between formal meetings and a number of ad hoc briefings. Details of individual Directors' attendance can be found on page 70. The Group General Counsel and Company Secretary acts as Secretary to the Committee.

76
GOVERNANCE
Succession planning and recruitment Louise Smalley took on the role of non-executive director at
Informa PLC shortly after she had retired from her full-time
The process for the appointment of Alan Johnson as a new
executive role at Whitbread PLC and so the Board was confident
Non-Executive Director began with inviting a number of
that the new appointment would not adversely impact the time
recruitment firms to participate in a selection process in order to
she committed to her DS Smith role. As part of the process of
identify the appropriate consultants to support our search. Inzito
appointing Alan Johnson to the Board, the Board noted the value
were selected in that process.
that the variety of his current roles will bring to the Group.
A role specification was agreed and provided to Inzito, who then
The experience gained in external roles held by our Board
put forward a shortlist of candidates for review by the Committee.
members broadens and deepens the knowledge and experience of
The shortlisted candidates were interviewed by a number of the
the Directors, which in turn benefits the Company.
Executive and Non-Executive Directors and the Committee made a
recommendation to the Board. When making decisions on new Diversity
appointments, Board members consider the skills, experience and
DS Smith acknowledges the importance of diversity of thought,
knowledge already represented on the Board and the benefits of
skills and experience in the effective functioning of the Board and
diversity, in all its forms, including of gender, ethnicity and life
the wider organisation. This diversity may arise from any number
experience. A similar process will be followed for the recruitment
of sources, including differences in age, gender, ethnicity,
of future Non-Executive Directors to the Board.
disability, sexual orientation, cultural background and religious
Apart from assisting with recruitment, Inzito has no other belief. Our Directors have experience of a wide range of industries
connection to the Company. Inzito has no connection with any and backgrounds, as well as of complex organisations with a
individual Directors. global reach.
The Committee keeps under regular review succession planning at The Board diversity and inclusion policy is a policy which
the Executive Director level and supports succession planning at acknowledges the importance of diversity and includes an explicit
senior management levels. The Committee’s annual rolling requirement to take into account diversity when considering
schedule of periodic agenda items includes a deep dive into senior appointments to the Board. The Board recognises that some
talent management and succession planning, informed by a challenges in achieving diversity arise from social contexts with
presentation given by the Group HR Director. impacts not limited to the DS Smith Group, but the Board remains
committed to ensuring that all have an equal chance of developing
Induction, training and development programmes
their careers within our business. At its meeting in September
Upon appointment to the Board, Directors undertake an induction 2021 the Committee discussed with the Group HR Director and the
programme, receiving a broad range of information about the Group Head of Talent that the initial actions to improve the
Group tailored to their previous experience. This includes diversity mix in the Group have focused on gender, but that as
information on the operational and sustainability performance and networks are built and the local priorities are better understood,
business of the Group and details of Group strategy, corporate this will extend to other under-represented groups. Regular
governance and Board procedures. updates on the progress will be given to the Committee. Currently
Assisted by the Group Company Secretary, I have responsibility for the Group’s leadership populations are internationally diverse but
Directors’ induction programmes, and also for the Board’s training the Group is aware that more needs to be done to improve the
and professional development. Directors have been given training gender and ethnic mix and address the ageing demographic in the
and presentations during the course of the year to keep their leadership population. (See pages 27 to 29 for more about our
knowledge current and enhance their experience. This has programmes to develop diverse leadership talent, from whom
included topics such as cyber security and developments in might be drawn a future generation of non-executive directors,
corporate governance (in particular on stakeholders’ expectations and to improve the gender balance of those in senior management
on remuneration reporting and on Task-Force on Climate-related and their direct reports.)
Financial Disclosures reporting).
Directors will continue to receive regular training updates from
appropriate internal and external specialists on governance issues,
financial and reporting standards, digital development, cyber
security and sustainability. In addition, Directors are fully aware of
their own responsibility for identifying and satisfying their own
specific training requirements.
Time commitments
Under the Code the reasons for the Board permitting its members
to enter into significant new external appointments should be
explained in the Annual Report.
Annual Report 2022 dssmith.com 77
NOMINATION COMMITTEE REPORT CONTINUED
As at 1 May 2022 our eight member Board was made up of three Looking forward
women and five men. With 37.5 per cent of the Board being
As well as the regular cycle of matters that the Committee
women, we exceeded the Hampton-Alexander Review’s target of
schedules for consideration each year, we are planning over the
one-third of Board members being women, but we note the
next 12 months to:
recommendations of the FTSE Women Leaders Review, including
that boards should have a minimum of 40 per cent women by the • Oversee the increase in capabilities and bench strength of our
end of 2025. With the appointment of Alan Johnson on 1 June 2022 core employee base in order to properly support our growth in
the Board now meets the Parker Review recommendation that areas such as innovation and digital enablement
each FTSE 100 board should have at least one director from an • Encourage the spotlight on talent rising up through the
ethnic minority background. organisation, enabled by the focus on training and development
for all
Our most recently published UK gender pay gap report is available
• Improve the Nomination Committee‘s understanding of the
on our website. We know that we have a relative lack of women in
challenges and benefits of improving our reporting on diversity.
senior management positions and year by year the percentage of
women in the roles that are defined as senior management roles Geoff Drabble
will fluctuate (see page 29 for details), but the trend in recent Chair of the Nomination Committee
years has been towards a better gender balance.
20 June 2022
Independence and re-election of Directors
Biographical details of each Director, including their other
directorships, their skills and experience, can be found on pages
66 and 67.
The Nomination Committee makes an assessment each year of the
criteria set out in the Code concerning independence and the
Committee also reviews the time commitment of Non-Executive
Directors to assess whether each has sufficient time to discharge
their duties. The Committee confirms that all the Non-Executive
Directors are independent and each has sufficient time to
discharge their duties. The Committee also considered Geoff
Drabble to be independent on his appointment to the Board.
The Nomination Committee this year considered the then current
term of appointment to the Board of Rupert Soames, Celia Baxter,
David Robbie and Louise Smalley. Rupert informed the Board that
he planned to retire from the Board at the conclusion of the Annual
General Meeting on 6 September 2022 and therefore the expiry
date of his then current term of appointment was extended to the
conclusion of the Annual General Meeting on 6 September 2022.
All other current Directors are standing for re-election or, in the
case of Alan Johnson, election, at that AGM.
Board members reviewed the commitment and contribution to the
Board and its Committees of Celia, David and Louise, as well as the
balance of their skills, knowledge and experience with those of the
other Directors and it was agreed that Celia’s and David’s term
should be renewed for a further three years and Louise’s should be
renewed for a further year. (Directors do not participate in any
debate or decision about their own re-appointment.) The expiry
date of the current term of each of the Non-Executive Directors is
set out on page 106.
Information about this year’s external evaluation of the Board and
its Committees can be found on page 75.
78
GOVERNANCE
## Audit, risk and internal control
Risk management and internal control The Audit Committee has kept up to date with risk developments
throughout the year with in-depth discussion of the Group’s
Along with overall responsibility for establishing and maintaining
principal risks and mitigation efforts and has noted the way in
the Group’s systems of risk management and internal control
which our divisions and Group functions have continued to
(including financial, operational and compliance controls), the
demonstrate resilience and revise risk mitigation remedies in their
Board also retains ultimate accountability for the effectiveness of
plans where appropriate. Our businesses have also been updating/
the systems and processes implemented. The Board confirms it
enhancing their business continuity plans in light of the Covid-19
has conducted an annual review of the overall effectiveness of the
pandemic and other business challenges, in line with the Group’s
Group’s system of internal controls and risk management
business continuity planning policy.
procedures implemented during the year and up to the date of
approval of this Annual Report, as well as a robust assessment of The Group Compliance Committee has continued to meet regularly
the Group’s emerging and principal risks, summarised on pages 47 and to expand its oversight of the business. Recent topics have
and 48 and pages 52 to 55. included reviews of the Corporate Criminal Offence risk
assessment, updates from Group functions and/or divisions on key
The systems and processes implemented are designed to identify,
compliance risk areas such as GDPR, developments in the IT
manage and, where appropriate, avoid or eliminate significant
security programme and proposed changes to financial control
risks that might affect delivery of the Group’s business objectives;
procedures, as well as more detailed risk reviews undertaken by
and to provide reasonable, but not absolute, assurance against
selected Group functions. The Board remains encouraged by the
material misstatement or loss. There is an established and ongoing
work undertaken across the Group with investment being made in
process for identifying, evaluating and managing the significant
financial, operational and reputational risk management to ensure
risks and uncertainties faced by the Group. This includes a process
effort is well directed and with the right level of intensity, enabling
of self-certification by senior divisional management, confirming
the Group to remain in a strong position to respond rapidly to those
that their divisions have complied with Group policies and
risks that do emerge.
procedures and reporting any significant control weaknesses
identified during the past year. In addition, it includes reviewing Further details on the Group’s risk management and mitigation
the results of the work of the Group’s Internal Audit function and approach for each principal risk, including its emerging risks
Group Governance team and the adherence to the risk reporting, are set out in the risk management section on pages 47
identification and management processes identified above. These to 55, which also includes the Group’s viability statement on page
procedures have continued to be in place throughout the year and 49. Our Task Force on Climate-related Financial Disclosures are set
up to the date of approval of this Annual Report. out on pages 56 to 60. Emerging risks are reported on as part of
the risk management reviews. Integrating them into the reporting
The Board also has procedures in place to ensure that its powers to
processes supports the Board in maintaining a clear overview,
authorise and manage conflicts are operated effectively. These
taking account of the experiences gained from Covid-19, the
procedures were followed throughout the year and up to the date
increasing disclosure requirements in relation to ESG risks and the
of approval of this Annual Report.
effect of macroeconomic uncertainty.
Risk management
Our risk management framework and processes remained robust
during the year despite the ongoing and fluctuating impacts of the
Covid-19 pandemic and the volatility of the external economic
environment. Management and employees have continued to
manage the day-to-day risks that the Group faces and have been
able to adapt and respond to changing situations. Our risk reviews,
embedded within our strategic planning processes, support
effective management of the Group’s principal risks and
uncertainties and inform the regular updates on specific risk
areas that are brought for discussion and review at the
Audit Committee.
The Board discusses regularly the Group’s cyber security
programme, as well as benefitting from presentations from
external cyber advisers. Cyber security is also discussed by senior
executive management at the Group Operating Committee
meetings, along with other aspects of IT infrastructure and
security controls.
Annual Report 2022 dssmith.com 79
AUDIT, RISK AND INTERNAL CONTROL CONTINUED
Internal control The Group Governance team is a centrally-led function, as opposed
to being regionally and divisionally based, that maintains and
The Board determines the objectives and broad policies of the
develops the internal control framework, provides support and
Group and has a set schedule of matters which are required to be
training to the business in complying with that framework and
brought to it for decision. Overall management of the Group’s risk
provides management with assurance about compliance with the
appetite, its tolerance of risk and discussion of key aspects of
framework through a site and risk-based work programme. An
execution of the Group’s strategy remain the responsibility of the
important part of this function’s role is to support the business in
Board. The Board has delegated to the Audit Committee the
development of remediation plans and corrective actions for
responsibility for establishing a system of internal controls
control weaknesses identified through the governance and
appropriate to the business environments in which the Group
compliance work programme, or through Group Internal Audit’s
operates. Key elements of this system include:
activities. The Governance team has commenced a readiness
• A clearly defined divisional organisation structure for monitoring assessment in relation to the currently expected direction of the
the conduct and operations of individual business units UK Government’s proposals for reform of audit and corporate
• Clear delegation of authority throughout the Group, starting reporting and has implemented a number of ‘no regrets’ actions
with the matters reserved for the Board identified in the first phase of that assessment to develop further
• A formal process for ensuring that key risks affecting operations the controls framework in preparation for the implementation of
across the Group are identified and assessed on a regular basis, those proposals.
together with the controls in place to mitigate those risks. Risk
The framework of internal control has continued to operate
consideration is embedded in decision-making processes at all
throughout the Covid-19 pandemic.
levels and the most significant risks are periodically reviewed by
the Board. The risk process is reviewed by the Audit Committee Internal Audit
• Control policies and procedures in functions including finance, The Internal Audit function moved in-house with effect from
tax, IT, HR, procurement and legal, are reviewed and updated as 1 May 2021 after previously being outsourced to KPMG. An Internal
appropriate and supplemented by mandatory training Audit charter was drawn up and approved by the Audit Committee,
• Assurance processes over the internal financial control to set out the purpose, scope and authority of the function, and a
environment such as annual controls self-assessment and team was established to deliver the Internal Audit plan.
ongoing divisional control review programmes
The Internal Audit function’s remit is to undertake regular reviews
• The preparation and review of comprehensive annual divisional of the operations of Group sites, service centres, functions,
and Group budgets; and an annual review and approval by the projects and processes in accordance with a previously agreed
Board of the three-year Corporate Plan plan, including an assessment of implemented systems of internal
• The monthly reporting of actual results using the Group control. The Internal Auditor then makes recommendations on
consolidation system and their review against budget, forecasts potential control process improvements and conducts
and the previous year, with explanations obtained for all supplementary reviews to ensure that management implements
significant variances the recommendations made. During the year, Internal Audit’s
• The Operating Framework which outlines key control activities were supported and complemented by management’s
procedures and policies to apply throughout the Group. This Group Governance team.
includes clearly defined policies and escalating authorisation
The Internal Audit plan is designed each year to align to key risks
levels for capital expenditure and investment, with larger capital
faced by the Group, as well as provide rotational assurance. The
projects, acquisitions and disposals requiring Board approval.
annual Internal Audit plan, and any revisions required to respond
This framework is kept under periodic review
to emerging risks or areas of concern, are approved by the Audit
• Regular formal meetings between the Group Chief Executive, Committee. The Internal Audit plan considers the scope and
the Group Finance Director and divisional management to effectiveness of the management assurance programme
discuss strategic, operational and financial issues undertaken by the Group Governance team in determining
• Communicating key corporate values through our Code of rotational coverage of financial controls audit activities, as
Conduct and associated policies to all employees to ensure well as providing assurance over the management assurance
relevant staff are properly equipped to exercise management programme itself.
oversight and control.
80
GOVERNANCE
The Internal Audit team needed to adapt to fluctuating Covid-19
protocols, with a large proportion of the audit plan delivered
remotely. As new ways of working become more embedded, and
as some countries open up as the Covid-19 pandemic abates, the
Internal Audit team has taken the best of remote and hybrid
working to widen reach and efficiency, as well as taking advantage
of opportunities to reintroduce in-person or hybrid approaches
where in-depth, in-person discussion is safe and worthwhile.
Findings from the Internal Audit and Group Governance teams are
reported to Group and divisional business management as well as
to the Audit Committee to give a holistic assurance picture.
Annual risk reporting cycle
May – Jul Aug – Oct Nov – Jan Feb – Apr
Group Compliance Divisions and Group Internal Audit updates review Group functions, divisions
Committee reviews a selection functions update risk of Internal Audit programme and regions produce year-end
of Group function and/or assessments and integrate into and key control risks review of principal and key
divisional risks including ‘deep their corporate plans business risks and reconsider
Audit Committee further
dive’ risk discussion effectiveness of risk
Group Compliance updates and approves
management actions
Internal Audit reviews their Committee reviews a selection completed Internal Audit
implemented

| programme and key control | of Group function and/or | reports and ongoing Internal |  |
| --- | --- | --- | --- |
| risks | divisional risks including, in | Audit work | Group Strategy Committee |
|  | 2021, data protection and |  | undertakes an assessment of |
| Audit Committee reviews |  | Group Risk provides feedback |  |
|  | information security |  | the Group’s principal and |
| Group risks, viability and risk |  | to divisions and Group functions |  |

emerging risks
management effectiveness Group Strategy Committee on risk assessments
including go forward actions to undertakes an assessment of Internal Audit undertakes the
Board reviews principal risks
implement the Group’s principal and year-end assessment of
and uncertainties, risk appetite
emerging risks Internal Audit needs and
Group Risk provides feedback and tolerance, and business
presents a plan for the year
and guidance to divisions and Internal Audit considers viability as part of Corporate
ahead
Group functions on risk response to emerging risks Plan discussions
assessments in preparation for Group Compliance
Audit Committee reviews the Group Compliance
the Corporate Plan process Committee reviews a selection
progress of risk management in Committee reviews a
of Group function and/or
relation to the Corporate Plan, selection of Group function
divisional risks including in 2022
and reviews and approves and/or divisional risks
the Corporate Criminal Offence
completed Internal Audit
risk assessment, GDPR, IT
reports and reviews status of
security and procurement
programme – this included in

| 2021 an in-depth discussion of | Audit Committee reviews |
| --- | --- |
| IT system controls of our | Group and divisional risk |
| principal risks | reports, annual Internal Audit |

needs assessment, including
audit plans and
recommendations
This section explains how we have applied aspects of the full Board and secondly through the detailed work of the
Code principles M, N and O in section 4 (audit, risk and internal Audit Committee which is reported on in the Audit Committee
control) of the Code and how we have put the provisions of that Report that follows.
section into practice, firstly through matters that come before
Annual Report 2022 dssmith.com 81
## Audit Committee Report
### “As members of the Audit Committee, we continue to challenge
### ourselves to ensure our scrutiny and oversight of the Group’s
### risk management and control environment keeps pace with the
### dynamic nature of change, both within the Group and in the
### external economic and regulatory environments.”
David Robbie,
Chair of Audit Committee
Looking forward
## Dear shareholders
As well as the regular cycle of matters that the Committee
I am pleased to present the Audit Committee Report, which
schedules for consideration each year, we are planning over the
provides an overview of the Audit Committee’s role supporting the
next 12 months to:
Board in its oversight of the control framework across the Group.
Details of the Board’s procedures and processes in relation to that • Expand scrutiny, both by the Committee and Internal Audit, over
oversight of risk management and internal control are set out on sustainability, climate and broader ESG reporting
pages 79 to 81. • Monitor the transition to the new external Auditor, Ernst &
Our principal objectives as an Audit Committee are: Young LLP
• Continue to monitor emerging risks for the Group
• To monitor the integrity of the Group’s reporting process and
• Continue to monitor legislative and regulatory changes that may
adherence to the Group’s accounting policies and procedures
impact the work of the Committee, particularly the development
• To ensure that risks are carefully identified and assessed; and
of the requirements from the UK Government’s restoring trust in
that sound systems of risk management and internal control
audit and corporate governance initiative, both in terms of UK
are implemented.
SOx and more widely.
Our role as a Committee is pivotal in ensuring the robustness of the
As Chair of the Audit Committee I make myself available at the
Group’s risk management activities and internal control
Company’s AGM to answer any shareholder questions on the
environment, thereby ensuring the integrity of the financial
Committee’s remit.
reporting process. During the year under review, the Group’s
procedures and systems to identify, mitigate and manage risks David Robbie
adapted to allow the internal control and financial reporting Chair of Audit Committee
processes to continue uninterrupted, despite the continuing
restrictions presented by Covid-19. 20 June 2022
Deloitte has now completed their final audit as the Group’s
external Auditor and I thank them for their continued rigour and
robust challenge throughout the year and during their tenure. I
look forward to engaging with our new external Auditor, Ernst &
Young LLP, whose first task will, subject to the approval at the
annual general meeting (AGM) of their appointment, be reviewing
the financial results for the six months to 31 October 2022.
As a Committee we continue to monitor the level of adjusting
items and I am pleased to note that their level is low. The
Committee always takes a close interest in the regular review
of the Group’s gearing levels and the security of its balance
sheet, particularly taking into account the risks in the
trading environment.
82
GOVERNANCE
## Audit Committee meetings’ key topics
## 2021 2022
June 2021 April 2022

| • Review of the 2020/21 Annual Report and | • Update on full year forecast results and |
| --- | --- |
| announcement, including a review to ensure | trading outlook and emerging year-end |
| the report was fair, balanced and | accounting issues and matters of judgement |
| understandable | • Interim going concern assessment and |
| • Going concern and viability statement | consideration of significant accounting |
| • Impairment assessment review | policies and judgements |
| • Effectiveness of internal control framework | • Annual impairment review |
| update | • Effectiveness of internal controls review |
| • Review of adjusting items | • Ethics and compliance report review |
| • Review of risk appetite and tolerance | • Update on external Auditor plan and fees |
| statement, risk heat maps and | • Review of emerging risks and risk update |

assurance matrix
• Review and approval of Internal Audit plan for

| • Internal Audit report | 2022/23 including confirmation of non- |
| --- | --- |
| • External Auditor report | financial areas to be targeted |
| • Review of external Auditor effectiveness | • Update on UK SOx preparation activities |

paper and recommendation to the Board to
re-appoint Deloitte for 2021/22
• Review of external audit tender paper and
recommendation of appointment of Ernst & June 2022
Young LLP with effect from 2022/23
• Review of the 2021/22 Annual Report and
October 2021
announcement, including a review to ensure
the report was fair, balanced and
• Review of adjusting items
understandable
• Impairment assessment review
• Going concern and viability statement
• 2021/22 external Auditor plan for the half year
• Impairment assessment review
• Review of letter to management from external
• Effectiveness of internal control framework
Auditor on 2020/21 audit
update
• Internal Audit report
• Review of adjusting items
• Ethics and compliance report review
• Review of risk appetite and tolerance
• Consideration of UK SOx likely developments
statement
• Discussion on governance of sustainability
• Internal Audit report
• Risk update
• External Auditor report
• Review of external Auditor effectiveness
December 2021 paper
• Review of Internal Audit effectiveness
• Update on half year forecast results
• Audit transition
• Going concern
• Review of announcement of half year results
• External Auditor half year report, including
confirmation of independence and objectivity
• Internal Audit report
• Non-audit fees review
• Review of Governance report, including
discussion of initial ‘no regrets’ actions to
prepare for UK SOx
Other matters particularly focused on by the Audit Committee in its discussions with management include:
• Oversight of external audit tender and transition processes • Pensions
• Risk management, internal control and compliance • Taxation matters, including review of strategy and risks
enhancements • Internal Audit and in-house governance, compliance and
• Quality of earnings corporate governance activities updates
• Financial commitments and liabilities • Climate and sustainability risks and disclosures
Annual Report 2022 dssmith.com 83
AUDIT COMMITTEE REPORT CONTINUED
Membership and operation of the Committee A key element of the Committee’s oversight role is to challenge
Member Since management and test the validity of any critical assumptions and
matters of significant judgement. Areas debated include cyber
David Robbie (Chair) 2019
risks and the response to increased exposures during the
Celia Baxter 2019
pandemic, as well as probing IT controls in relation to key
Alina Kessel 2020 applications more specifically. The Committee has continued to
focus on the pandemic and the treatment of systemic risk,
Louise Smalley 2014
enhancing the work in relation to identifying and assessing
Rupert Soames 2019
emerging risks, and the level of engagement at all levels of the
Group within the risk management process. The Board received an
Alan Johnson joined the Board and its Committees on 1 June 2022.
update from the IT security team during the year and is satisfied
The Audit Committee met on five occasions during the year, with
that the approach to cyber security risks is robust.
meetings scheduled to align with the Group’s external financial
ESG has had an ever increasing focus on the Committee’s and the
reporting obligations. Details of the attendance of individual
Board’s agenda, both as the Group’s strategy evolves to lead the
Directors can be found on page 70. As and when required, the
way in the circular economy and as external stakeholders’
Audit Committee members were joined by the Group Chief
changing expectations have accelerated. The Committee has
Executive, the Group Finance Director, the Group Financial
challenged management on their governance of key ESG data,
Controller, the Group Risk Officer and representatives from the
considered disclosure under the Task Force on Climate-related
external Auditor, Internal Audit and Governance teams for parts of
Financial Disclosures (TCFD) and Streamlined Energy and Carbon
these meetings, by invitation. The external Auditor was not
Reporting (SECR) requirements and reviewed the climate-related
present at meetings where their performance and/or
risk management activities.
remuneration was discussed. The Audit Committee also met
privately with the external Auditor as appropriate. The Committee approved the Group’s annual Internal Audit plan,
which was primarily risk-based, focusing on the assurance of core
The Group General Counsel and Company Secretary acts as
processes and projects, as well as overseeing internal
Secretary to the Committee.
management compliance activities. During the year, the
The Board is satisfied that the Chair of the Committee and other
Committee received regular reports summarising findings from
members of the Audit Committee have both current and relevant
the Internal Audit reviews performed, action plans to address any
financial experience (as set out on pages 66 and 67) and that the
areas highlighted for improvement and additional activity review
Audit Committee, as a whole, has competence relevant to the
summaries from internal compliance teams. The Committee
sector (namely manufacturing) in which the Company operates.
reviewed the effectiveness and performance of the Internal Audit
In addition to the scheduled Committee meetings, the Chair of the function, focusing on the content and delivery of the regularly
Audit Committee held separate individual meetings during the received reviews, action plans and activity summaries, and noting
year with the Group Finance Director and his team, the Group the assurance provided in relation to the internal control
Risk Officer, representatives from Internal Audit and the framework. This annual review enabled the Committee to remain
external Auditor. satisfied that the performance of the function was effective
and that its quality, experience and expertise is appropriate for
The Audit Committee received sufficient, reliable and
the business.
timely information from management to enable it to fulfil
its responsibilities. Fraud risk
Risk management, internal control and Internal Audit The Group takes steps to protect itself from the consequences of
fraud, be that misappropriation of assets, financial misstatement,
In fulfilling the Committee’s oversight of the risk management
or bribery and corruption. The Group’s internal financial control
and control environment, a number of key activities are
framework provides the first line of defence against
undertaken during the year, including regular meetings with
misappropriation and misstatement. This is complemented with
senior management.
Group-wide training and the confidential ‘Speak Up!’ reporting
The Audit Committee considered the Group’s risk management structure together with a comprehensive fraud response policy
activities during the year (with specific discussions of such topics and guidance. Training and the confidential ‘Speak Up!’ reporting
as sustainability, cyber security, packaging capacity, security of programme also support the policy framework that protects
paper/fibre supply, disruptive market forces, changes in shopping against bribery and corruption. All instances of alleged and actual
habits and emerging risks). The Audit Committee continued its fraud are investigated fully and lessons learnt incorporated, as
regular review of risk reporting to ensure that the balance appropriate, into the frameworks and training. The Internal Audit
between risk and opportunity was in keeping with the Group’s risk function takes the lead on these investigations and the Audit
appetite and tolerance. The Audit Committee is satisfied that the Committee is informed fully on these activities. The Committee is
Group’s executive compensation arrangements do not prejudice satisfied that the Group’s overall framework to mitigate the risk of
robust controls and good stewardship. fraud is appropriate and proportionate.
84
GOVERNANCE
Confidential reporting
Twice a year the Committee receives separate reports on matters raised through ‘Speak Up!’, the Group’s confidential reporting channel,
and any related investigations. The Code specifies that reports arising from such confidential reporting channels should either be
reviewed by the Board or an explanation given. All Board members attend that part of the Audit Committee meeting when ‘Speak Up!’
and any related investigations are reported on. This means that representatives from both Internal Audit and the external Auditor (who
attend the Audit Committee meetings but not Board meetings) can contribute their perspectives, which is a valuable part of the review
process. Internal Audit are also able to provide specialist support where such assurance is considered necessary.
Financial reporting
The Code requires the Board to confirm that the Annual Report presents a fair, balanced and understandable assessment of the Group’s
performance, business model and strategy. This is an important area of focus for the Committee. At the request of the Board, the
Committee undertook procedures to advise the Board on this. Committee members gave input at various stages during the planning and
drafting process, as well as taking the opportunity to review the Annual Report as a whole and discuss, prior to the June Audit Committee
meeting, any areas requiring additional clarity or better balance in the messaging.
Significant matters considered in relation to the financial statements
Issue Review and conclusion
Classifications The Committee considered the application of the Group’s accounting policies, principles and disclosures in the
and financial statements that relate to critical accounting estimates and judgements, and challenged the underlying
presentation of assumptions applied in areas including provisions (such as litigation and restructuring) and adjusting items.
adjusting items
Continued scrutiny over the appropriateness and application of the adjusting items policy was applied during the
year. Such items include acquisition costs, integration costs, impairments and gains or losses on business disposals,
which are classified as adjusting items because of their nature, incidence or size. The Directors have considered the
ongoing regulator focus on Alternative Performance Measures but believe that identification and separate
classification of these items assists in enhancing the understanding of the trading and financial results of the Group.
The Audit Committee has reviewed the appropriateness of the income and costs both included in and excluded from
adjusting items by challenging and seeking explanations from management. The Committee reviewed reports on
the items provided by management and the external Auditor. This item is a recurring agenda item in all Audit
Committee meetings.
The Audit Committee is satisfied that the resulting presentation and disclosure of all accounting policies and
principles is appropriate.
Taxation Taxation remains a key area of focus for the Committee, due to the continued level of fiscal authority activity,
ongoing tax enquiries and disputes, and the Group’s M&A activity. The Group is exposed to differing tax regimes and
risks which affect both the carrying values of tax balances (including deferred tax) and the resultant income
statement charges. The Audit Committee reviewed the tax charge for the half year and the full year, including the
underlying tax charge, the appropriateness of and movement in tax provisions recognised and the risks associated
with them. The Audit Committee is satisfied that the amounts recognised and the disclosure provided
are appropriate.
ESG reporting
The ESG reporting environment has been an area of significant regulatory development recently, and this is set to continue and the pace
of change increase in the short to medium term. Guidance on reporting (particularly in the environmental area) has been issued in the
past by a number of bodies. Recent events, in particular at COP26 with the announcement of the creation of the ISSB (International
Sustainability Standards Board) which consolidated the VRF (Value Reporting Foundation) and the CDSB (Climate Disclosure
Standards Board) under the umbrella of the IFRS Foundation, to develop a single set of sustainability standards, will create further
focus on this area.
The Group continues to strengthen its ESG-related disclosures, reporting under the requirements of the TCFD (Task Force on Climate-
related Financial Disclosures) on pages 56 to 60 and in alignment with the GHG (Greenhouse Gas) protocol on page 33. Our internal ESG
reporting function has been integrated within the Group finance and governance functions. The Audit Committee has received briefings
during the year covering the evolving reporting, disclosures and standard setting body changes, recognising the increasing link between
ESG-related measures and the presentation of financial information and associated business commitments.
Annual Report 2022 dssmith.com 85
AUDIT COMMITTEE REPORT CONTINUED
Our key responsibilities • Monitoring the adequacy and effectiveness of the internal
control environment
As a Committee we have delegated authority from the Board to
• Challenging the plans and effectiveness of the Internal
focus on the following key responsibilities:
Audit function, which is independent from the Group’s
• Ensuring the integrity of financial reporting and associated
external Auditor
external announcements
• Overseeing the Group’s risk management processes and
• Reviewing and challenging the application of the
performance
accounting policies and principles reflected in the Group’s
• Reviewing the effectiveness of established fraud prevention
financial statements
arrangements and reports made through the confidential
• Assessing the basis on which the viability statement and
‘Speak Up!’ policy process
going concern statement are being made and challenging the
• Assessing the Group’s compliance with the 2018 UK
assumptions underlying them
Corporate Governance Code (Code)
• Managing the appointment, independence, effectiveness
• Providing advice to the Board on whether the Annual Report
and remuneration of the Group’s external Auditor, including
and financial statements, when taken as a whole, are fair,
the policy on the supply of non-audit services
balanced and understandable and provide all the necessary
• Initiating and conducting the audit tender process for the
information for shareholders to assess the Group’s position,
external audit
performance, business model and strategy.
During the year under review and following the conclusion of the The Group has a well-established internal financial controls
former provider’s engagement (Bureau Veritas), the Group framework and has begun addressing these provisional guidelines
undertook a tender process for the provision of independent through a set of ‘no regret’ actions, as a further evolution of this
assurance services, including assurance over the environmental framework. It has also engaged external advisers to support the
indicators presented in the Annual Report. The outcome of the development of a roadmap that will enable the Group to be
tender was the appointment of Deloitte LLP as the independent prepared to meet the final requirements. The Committee is
assurance provider providing assurance for the financial year satisfied that, following the May 2022 response, management’s
2021/22. The Audit Committee is satisfied that the appointment proposal to continue its ‘no regret’ approach is appropriate.
meets the requirements for maintaining the independence of the
The ongoing developments in this area will continue to be
financial audit provider.
reviewed by the Audit Committee.
Other activities of the Committee
Financial Reporting Council (FRC) correspondence
Preparation for ‘UK SOx’
As part of their thematic review of IAS 37, Provisions, Contingent
On 18 March 2021, the Department for Business, Energy and Liabilities and Contingent Assets , the FRC reviewed the Group’s
Industrial Strategy (BEIS) released its consultation paper 2021 Annual Report. No questions or queries arose from this
‘Restoring trust in audit and corporate governance’ outlining its review, although some disclosure improvements were
proposals for strengthening the UK’s framework for major recommended which the Group has responded to in the current
companies and the way that they are audited. year’s financial statements.
The reforms in the BEIS consultation paper address the findings of Committee’s continued development
the previous Kingman, CMA and Brydon reports and include
In order to help the Committee continue to meet its
proposed new measures in relation to directors, auditors,
responsibilities, Committee meetings include regular corporate
shareholders and the audit regulator. On 31 May 2022, the UK
governance updates and briefings from external advisers or from
Government published its response to the consultation, setting
members of senior management.
out its plans for action which will be implemented through a
variety of mechanisms, including audit development and work by The Committee’s effectiveness was reviewed as part of the wider
the professional bodies, primary and secondary legislation, and Board’s external evaluation and review of effectiveness, as
changes by the regulator. The response set out how and to what described on page 75.
extent the proposals in the consultation would be carried forward.
External Auditor
The measures include proposals for strengthening the UK’s
Effectiveness
approach to internal controls over financial reporting, including
more disclosure and attestation requirements, so called ‘UK SOx’. In addition to the external Auditor confirming their independence
The May 2022 response envisages a strengthening of the Code in and objectivity, the Audit Committee also evaluates and monitors
this area as opposed to legislation. their effectiveness through a review of the qualifications,
expertise and resources of the engagement team.
86
GOVERNANCE

This is conducted through direct assessment and recurring activities. As part of the current assessment of effectiveness, the Audit Committee has taken into consideration the guidance issued by the FRC. Based on evidence from management, the external Auditor and, as appropriate, external sources together with its own experience, the Audit Committee assessed the mindset and culture, skills, character and knowledge, quality control and judgement of the Auditor. The assessment considered the degree of challenge to management, the issues identified and the quality of explanations. The Audit Committee recognises that the quality of an audit is paramount. The Committee is satisfied with the effectiveness of the Auditor and that the current year audit was one of high quality.

Separate from the meetings of the Audit Committee, the Chair of the Committee meets regularly with the external Auditor's lead engagement partner, as do other individual members of the Committee.

#### Independence and objectivity

In order to ensure the independence and objectivity of the external Auditor, the Audit Committee maintains and regularly reviews the Auditor Independence policy which covers non-audit services which may be provided by the external Auditor, and permitted fees.

The Group has a policy on the supply of non-audit services by the external Auditor, which was most recently updated in April 2020. The policy prohibits certain categories of work in accordance with guidance such as the FRC Ethical Standard. It specifies that the Group should not employ the external Auditor to provide non-audit services where either the nature of the work or the extent of such services might impair their independence or objectivity. The external Auditor is permitted to undertake some non-audit services under the Group's policy, providing it has the skill, competence, integrity and appropriate independence safeguards in place to carry out the work in the best interests of the Group, for example, permissible reporting accountant work associated with significant acquisitions. All proposed permitted non-audit services are subject to the prior approval of the Audit Committee.

Non-audit services and fees are reported to the Audit Committee twice each year. During 2021/22, total non-audit fees paid to the external Auditor of £0.5 million were 10 per cent of the annual Group audit fee (2020/21: £0.4 million: 9 per cent); see note 3 to the consolidated financial statements. In addition, £7.7 million was paid to other accounting firms for non-audit work, including £0.4 million for specific work projects allocated by the internal Audit team.

The EU Audit Regulation (Retained Legislation) and the FRC's revised Ethical Standard mean that, with effect from the Group's 2020/21 year, a cap on the ratio of non-audit fees to audit fees paid to the external Auditor of 70 per cent applies, which places a further constraint on the non-audit services permitted.

Annually, the Audit Committee receives written confirmation from the external Auditor of the following:

- Whether they have identified any relationships that might have a bearing on their independence
- Whether they consider themselves independent within the meaning of the UK regulatory and professional requirements
- The continued suitability of their quality control processes and ethical standards.

The external Auditor also confirms that no non-audit services prohibited by the FRC's Revised Ethical Standard were provided to the Group or parent Company.

On the basis of the Committee's own review, approval requirements in the non-audit services policy, and the external Auditor's confirmations, the Audit Committee is satisfied with the external Auditor's effectiveness and independence.

#### External Audit fee, appointment, tender and transition process

External audit fee negotiations are approved by the Audit Committee each year. There are no contractual restrictions on the Group in regard to the current external Auditor's appointment.

Deloitte LLP were first appointed as external Auditor to the Group in 2006. Nicola Mitchell became the lead audit partner for the 2018/19 year-end.

Pursuant to the terms of the Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Process and Audit Committee Responsibilities) Order 2014 (Competition & Markets Authority Order), which is now in force, the Audit Committee is solely responsible for negotiating and agreeing the external Auditor's fee, the scope of the statutory audit and initiating and supervising any competitive tender process for the external audit. When a tender is undertaken, the Committee is responsible for making recommendations to the Board as to the external Auditor's appointment. The Committee's policy is that the role of external Auditor will be put out to tender at least every ten years in line with the applicable rules. At its June 2021 meeting the Committee recommended to the Board that Ernst & Young LLP (EY) be appointed external Auditor with effect from the 2022/23 audit. The Group has commenced engagement and planning actions through its audit transition project team and EY audit leads, with an initial focus on maintaining independence in advance of the appointment date.

The Committee has been overseeing this proposed external Auditor transition process. To assist in this oversight, the Committee has been provided with reports by EY on their transition process, validated EY's independence, and ensured shadowing and meeting attendance has taken place when appropriate.

The Audit Committee confirms that the Company has complied with the provisions of the Competition & Markets Authority Order with regards to external audit tendering and audit responsibilities throughout its financial year ended 30 April 2022.

Annual Report 2022 dssmith.com 87
REMUNERATION COMMITTEE REPORT

# Remuneration Committee Report

![img-4.jpeg](img-4.jpeg)

"The Group's strong financial performance is underpinned by its continuing progress on ESG and this is reflected in the structure of our incentives."

Celia Baxter,
Chair of Remuneration Committee

## Dear shareholders

### Introduction

On behalf of the Board, I am pleased to present the Directors' Remuneration Report for the year ended 30 April 2022, which sets out our implementation of the remuneration policy that was approved by shareholders at the annual general meeting (AGM) in September 2020.

As usual, my letter on pages 88 to 90, the summary on pages 91 and 92 and the Annual Report on Remuneration on pages 98 to 111 will also be presented for approval by an advisory vote at our AGM in September 2022.

Our purpose as a Remuneration Committee is to develop a reward package that supports our vision and strategy as a Group and to ensure the rewards are performance-based and encourage long-term shareholder value creation. Our Purpose as a Group is 'Redefining Packaging for a Changing World'. Examples of how we put our purpose-led approach into practice as a Group are set out on pages 8 to 11 of this year's Annual Report.

### Our achievements and variable pay outcome

Our Purpose informs the Group's approach to strategy, which in turn has led, not only to the financial and non-financial results highlighted on the inside front cover, but also to even further improved scores among the environmental, social and governance (ESG) ratings published by MSCI (AA) and EcoFadis (Platinum) as well as those issued by Sustainability, the Dow Jones Sustainability Index (QSI) and CDP.

You can read about the achievements of our business during 2021/22 in more detail in the Strategic Report starting on page 1. Highlights for the 2021/22 financial year include:

- Adjusted operating profit of £616 million
- 6 per cent reduction in accident frequency rate
- Commitment to a 1.5°C science-based target
- Achievement of 'A List' for CDP Water Security

In respect of the variable pay elements linked to the 2021/22 financial year, the financial targets for the performance share plan (PSP) award made in 2019 were set in 2019 in the context of the expectation of a stable economy and were not adjusted to reflect the negative impact of the pandemic on the 2019/20, 2020/21 and 2021/22 results. Unfortunately, that PSP award made in 2019, which had performance conditions based on the three year average earnings per share (EPS) and return on average capital employed (ROACE) performance and the three year cumulative relative total shareholder return (TSR) performance between 2019/20 and 2021/22, did not meet the threshold targets for the two financial measures and fell below median for the relative TSR measure.

The Group's performance against the bonus measures of adjusted earnings before tax and amortisation (EBTA) and free cash flow represents uplifts of 37 per cent and 14 per cent respectively year-on-year. The formulaic outcome of the bonus was 100 per cent of the maximum bonus opportunity. The details of the 2021/22 annual bonus performance are set out on pages 100 and 101. In considering whether to apply discretion to override the annual bonus formulaic outcome, an ESG underpin is used. The Committee took into account three ESG factors: commitment to using longer-term science-based targets for carbon reduction in the business; maintenance of high health and safety standards; and continued work with our communities. The Committee reviewed the evidence of performance against these factors (see summary on page 101) and concluded this was satisfactory and that no discretion needed to be applied. The Committee has therefore decided that the Executive Directors will receive 100 per cent of the maximum annual bonus opportunity.

When deciding the level of these variable pay elements, the Committee also considered the experience of a wide range of the Group's key stakeholders during the 2021/22 financial year.

In the 2021/22 financial year all regions in which the Group operates continued to be affected by the Covid-19 pandemic, but all our sites continued to remain operational as essential suppliers to critical supply chains. We continued to deliver to our customers and to develop new and improved ways of meeting their needs. For example, we have further developed, ePack, our new web-

88
GOVERNANCE

based business, and we have opened our first virtual innovation hub in Lisbon, supporting our customers with a virtual/digital customer innovation collaboration option. Most importantly for our customers, and for their customers, the impact of the steps we took during 2020/21 mean that production has been maintained in 2021/22, enabling volume growth and supporting our agile responsiveness to changes in customers' needs. The proportion of orders that are delivered on time, in full has been 94 per cent across our businesses, despite the circumstances of the past 12 months.

Group-wide we have kept a strong focus on employee health and wellbeing. The Group's connection with the local communities where our sites are based has continued to strengthen, supported by increased engagement in community programmes.

Our commitment to carbon reduction has continued, with validation by the Science Based Targets initiative of our target to reduce Scope 1, 2 and 3 emissions 46 per cent by 2030, when compared to 2019 levels. This builds on our prior commitment to reach net zero greenhouse gas emissions by 2050, as a member of the UK's Race to Zero initiative. More information about the targets we have set as part of our Now and Next Sustainability Strategy are set out on page 7 and pages 30 to 33 and in our latest Sustainability Report. Each of these targets helps differentiate DS Smith not only as a leader in sustainable fibre-based packaging, but also as a circular economy leader. All these factors drive the Group's ongoing profitability and cash flow, impacting the performance measures of our incentive plans. The underlying importance of these factors continues to be emphasised by the use of a variety of these ESG considerations as an underpin to the annual bonus.

In respect of the 2021/22 financial year, an interim dividend has been paid and a final dividend has been recommended, subject to the approval of shareholders at the forthcoming AGM.

Set in the context of the wider experience of our key stakeholders, the Committee concluded that the total variable pay outcome (both the annual bonus and PSP) in respect of 2021/22 appropriately reflected the Company's performance in the period and was commensurate with the broader stakeholder experience in the period. It was therefore not felt necessary to apply any discretion to amend the outcome. The Committee also concluded that the remuneration policy has operated as intended, both in terms of appropriately incentivising corporate performance and in respect of quantum.

# Our year under review

The key discussions and decisions taken since 1 May 2021 were:

- Considering the impact of Covid-19 on the business when deciding on the appropriate approach for bonus and PSP for determining vesting levels and the grant size and selecting performance measures and targets. Making sure that such decisions take into account the evolving economic context, including inflationary pressures, that impacts the wider workforce and the expectations of other stakeholders, such as our investors, suppliers and customers. Ensuring at the same

time that an appropriate balance is achieved with the business need for meaningful incentivisation for management and recognition for leading through the protracted challenges of the ongoing turbulent times

Reviewing the salaries of the Group Chief Executive and Group Finance Director and the next layer of management
Reviewing further the timeline for alignment of the Executive Directors' pension contributions with that available to the workforce in the UK and agreeing that they would be aligned by 31 December 2022
Setting the targets for the annual bonus and PSP awards made in 2021/22 and the performance measures and weighting for the 2022/23 awards. The Committee considered whether to include specific ESG measures in the bonus and PSP awards, instead of the current ESG underpin in the bonus. Sustainability is one of the key values of DS Smith and our progress and our leading position in promoting the circular economy have been achieved without the need to directly incentivise ESG. Accordingly, the Committee decided to maintain the current ESG underpin to the annual bonus, but will continue to review this matter.

# Our conversation with our workforce

The diagram on page 93 sets out the approach the Group is taking to collate ideas and hear any concerns from the workforce around reward. One of the consequences of the continuing restrictions on travel due to Covid-19 has been a further delay to our planned expansion of this programme of engagement at site level. While there are many things that can be done through the medium of electronic meetings, focus sessions at site level are most valuable and insightful when held in person.

A European Works Council (EWC) representative joined a Committee meeting this year to support and inform discussions about Sharesave and employee wellbeing programmes and to brief the Committee about some of the topics discussed at recent meetings of the EWC.

In addition, I once again attended meetings of the EWC Executive to engage and consult with them on executive remuneration and wider employee remuneration issues. We continued in our meetings in March and May 2022 the ongoing discussion on Sharesave, covering the take-up of the 2022 grant, and received feedback on the communications programme prior to launch and on how to encourage greater take-up of Sharesave across the Group. Further topics discussed were the effectiveness and coverage of employee wellbeing programmes (in general and in light of the Covid-19 pandemic) and in support of DS Smith's sustainability objectives, the current provision of sustainable benefits. Representatives were also keen to share their views on other aspects of the remuneration of the wider workforce, including the provision of healthcare and pension provision and education and they suggested the Group raise the profile and broaden the scope of the current health and wellbeing benefits. These meetings are a regular feature of the annual timetable as both I and the EWC Executive value the opportunity they provide to understand more about matters relating to the Executive.

Annual Report 2022 dssmith.com

89
REMUNERATION COMMITTEE REPORT CONTINUED
Directors’ remuneration and its alignment with that of the Our conversation with our shareholders
wider workforce.
Shareholder views, whether directly or indirectly expressed,
Looking forward together with relevant guidance and emerging trends, are
carefully considered when reviewing reward design and
As well as the regular annual cycle of matters that the Committee
outcomes. At the AGM in September 2022, shareholders will be
schedules for consideration, we are planning over the next 12
asked to vote on the Remuneration Report. I hope that the
months to:
Committee will have your support.
• Undertake the triennial review of our remuneration policy
As Committee Chair, I continue to be available to engage with
and consult our shareholders on any material changes proposed
shareholders, as they so wish, on remuneration matters.
• Regularly review any changes to remuneration practices to
ensure that employees continue to be appropriately rewarded in Celia Baxter
line with the performance of the business Chair of Remuneration Committee
• Consider further steps to consult employees more widely
20 June 2022
on remuneration issues, as this becomes more achievable
post Covid.
Due to the current geopolitical situation, target setting for
incentive plans continues to be challenging. In addition the
Committee continues to monitor the fluctuations in share price,
both since the 2021 PSP grant and in relation to the proposed
2022 PSP grant. The Committee recognises that it may need to
exercise discretion on any vesting of the respective plans in
forthcoming years.
The Committee has been impressed with the progress in relation
to sustainability matters that DS Smith continues to make. This has
been driven by the Group’s values, not by having ESG targets in
either the annual bonus or the long-term incentive plans (although
an ESG underpin is used to determine the final outcome of the
annual bonus). The Committee will continue to monitor further
developments in this area and will take those into account in
considering whether a different approach to using ESG in
remuneration might be appropriate in the future.
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GOVERNANCE
## Remuneration at a glance
Single total figure of remuneration for 2021/22 (£’000s) (Audited)
£962 £1,618 £[xx] Fixed pay (salary,
benefits and pension)
Annual bonus
£584 £763 £[xx]

|  | Total single remuneration figure |  |  |  | Increase |  | 2019/20 PSP vesting in |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  | £’000 |  | (decrease) | Vesting as a % of maximum 2021/22 annual bonus |  | 2022/23 |
| 2021/22 2020/21 |  |  |  |  |  | Miles Roberts 100% 0% |  |  |
| Miles Roberts |  | 2,580 |  | 2,525 2% |  | Adrian Marsh 100% 0% |  |  |
| Adrian Marsh |  | 1,347 |  | 1,319 2% |  |  |  |  |

For more information on how this is calculated see page 98.
Salary Pension of base salary to 15% with effect from 1
August 2020 and further reduced to 10%
Salary increases with effect from 1 August The contribution rates for incumbent
with effect from 1 August 2021. The
2022 are set out below and on page 99. Executive Directors have been reduced.
pension allowance of both Miles Roberts
Miles Roberts receives an annual pension
and Adrian Marsh will be reduced further so
allowance which was reduced from 30% of
that their pension benefit will be aligned
base salary to 20% with effect from 1
with that available to the workforce in the
August 2020 and further reduced to 15%
UK (being the country where they are
with effect from 1 August 2021. Adrian
based for employment purposes) with
Marsh receives an annual pension
effect from 31 December 2022.
allowance which was reduced from 20%
2022/23 application
The table below sets out a summary of how the remuneration policy for 2020-23 will apply during 2022/23.
Remuneration element Application of the remuneration policy
Base salary • Salaries will be increased by 4% (in line with the average increase of 4% for the UK workforce as a whole) as
follows:
• Group Chief Executive £846,600; and
• Group Finance Director £532,000.
Annual bonus • No changes to maximum award levels of:
• Group Chief Executive 200%; and
• Group Finance Director 150%.
• Bonus paid half in cash and half in deferred shares, under the deferred share bonus plan (DSBP), with the shares
vesting after three years.
• The performance measures for 2022/23 remain as adjusted EBTA and free cash flow with equal weighting.
(Details of the ESG underpin are set out on page 102.)
Performance • No change to maximum award level for Group Chief Executive of 225% and for Group Finance Director of 200%.
share plan (PSP) • The performance measures for 2022/23 will remain as adjusted EPS, adjusted ROACE and relative TSR with
equal weighting.
• Any shares that vest under this award must be retained for a further two years before they can be sold and they
are also subject to a post-employment holding condition.
Pension • Contribution or cash alternative rate for Group Chief Executive is 15% and for Group Finance Director is 10%,
until 31 December 2022, when it will be aligned with that available to the UK workforce.
Shareholding • Shareholding target remains at 225% of salary for the Group Chief Executive and at 200% of salary for the
guidelines Group Finance Director.
• Actual holding (valued at 30 April 2022 share price) was 912% and 243% respectively.
Any shares that vest under the PSP awards granted in 2020/21 or subsequent years will be held in a nominee
Miles Roberts arrangement for the appropriate period, because they are also subject to a post-employment holding condition (in
addition to the two-year post-vesting holding condition).
Annual Report 2022 dssmith.com 91
Adrian Marsh
REMUNERATION AT A GLANCE CONTINUED
Illustration of the application in 2022/23 of the remuneration policy
The balance between fixed and variable ‘at risk’ elements of remuneration changes with performance. Our remuneration policy results
in a significant proportion of remuneration received by Executive Directors being dependent on performance. The total remuneration of
the Executive Directors for maximum, target and minimum performance in 2022/23 is presented in the charts below. (The basis of the
calculation of the share price appreciation is that the share price embedded in the calculation for the PSP awards in the maximum bar
chart is assumed to increase by 50% across the performance period.) These figures are indicative as future share prices and future
dividends are not known at present and, within fixed pay, pension contributions have been prorated pre and post 31 December 2022
using the existing executive pension contribution and the current UK workforce pension contribution rates respectively.
Adrian Marsh
Maximum (fixed remuneration plus maximum annual bonus opportunity plus 100% vesting of performance shares) and share price
appreciation of 50%: £’000s
£961 £1,677 £5,385£2,747 £591 £790 £1,535 £2,916
Fixed pay: 18% Bonus: 31% PSP: 51% Fixed pay: 20% Bonus: 27% PSP: 53%
Maximum (fixed remuneration plus maximum annual bonus opportunity plus 100% vesting of performance shares) £’000s
£961 £1,677 £4,470£1,832 £591 £790 £2,404£1,023
Fixed pay: 22% Bonus: 37% PSP: 41% Fixed pay: 25% Bonus: 33% PSP: 42%
Target (fixed remuneration plus half of maximum annual bonus opportunity plus 25% vesting at threshold of performance
shares) £’000s
£961 £839 £458 £2,258 £591 £395 £256 £1,242
Fixed pay: 43% Bonus: 37% PSP: 20% Fixed pay: 48% Bonus: 32% PSP: 20%
Minimum (fixed remuneration only, i.e. latest known salary, benefits and pension) £’000s
£961 £591
Fixed pay: 100% Fixed pay: 100%
## Key attributes to consider in reviewing remuneration matters

| Under the 2018 Corporate Governance | principles incentive levels are to be | The decisions made in relation to |
| --- | --- | --- |
| Code (the Code) the Remuneration | proportionate and designed in a way | remuneration matters are taken in |
| Committee is asked to describe with | to minimise any behavioural risks. | alignment with these over-arching |
| examples how it has considered six | All the criteria for each element of an | reward principles that apply to all |
| specific factors. | individual’s remuneration are explained, | executive management. |

Miles Roberts
so that each individual has a clear and
In 2021 the Committee reviewed the Later in 2022/23 the Committee will begin
predictable line of sight as to what
reward principles (set out on page 93) its review of the remuneration policy to be
actions will impact their remuneration
These principles are periodically reviewed put before the 2023 AGM and will, as it did
outcomes, so that all remuneration is
by management and considered by the in its review of the current remuneration
appropriately earned for genuine
Remuneration Committee. The Committee policy, take the importance of all six factors
business performance aligned to
noted that these principles are clear and into account in that review.
Company strategy.
expressed simply. Under our reward
The remuneration sections of this report explain how we have applied aspects of principles P, Q and R in section 5 (remuneration)
of the Code and how we have put the provisions of that section into practice, as well as how we have complied with the Companies
Act 2006 and other regulatory requirements in relation to remuneration matters. After the introductory letter from the Chair of
the Remuneration Committee, we summarise the remuneration of the Executive Directors in our ‘at a glance’ section. More
detailed sections follow about how the implementation of the remuneration policy has operated in practice in 2021/22, the year
under review, and how the remuneration policy will operate in 2022/23. Finally there are some other required disclosures.
92
GOVERNANCE
## DS Smith reward principles
As part of good practice for any reputable company we apply the following baseline principles when setting reward across
the organisation:
• Meets legal and regulatory requirements
• Simple and clear to understand
• Affordable and sustainable
• Is competitive in the market on a total reward basis to enable DS Smith to attract and retain the right level of talent.
However, to differentiate our employee value proposition and ensure that our approach to reward aligns to our culture, we have
developed the following DS Smith reward principles:
• We support a culture of meritocracy where our people are encouraged to reach their potential and are clear on what they need
to do to succeed. For salaried employees, reward should be differentiated using our Group salary and incentive ranges for entry,
established and high performers. Where pay is determined through collective bargaining and there is less scope to differentiate
by individual, the highest performers should be rewarded through development, promotion and other recognition opportunities.
• We strive to have consistent policies and practices at a local level and transparency in our benefits offering and policies.
• Incentives are designed to reward collective rather than individual effort, to support our one DS Smith culture. For senior
managers, this is Group financial performance but for middle managers and frontline employees, performance measures can be
the key value drivers that the individuals are able to influence directly such as cost, quality and service.
• All employees should have the opportunity to share in the success of the Group.
• Share ownership is fundamental at senior levels and desirable across the Group.
• The Group respects the need for employees to make their own choices around what they value, although there are
certain reward components linked to health and wellbeing where the Group may decide it is appropriate to set a minimum
Group standard.
• Our pension offering should be competitive with the local market where this is a benefit valued by employees.
• When determining rewards, demonstration of an individual’s behaviours in line with the Group’s values (be caring,
be challenging, be trusted, be responsive and be tenacious) are considered alongside the results achieved.
• In managed exits people should be treated fairly, in line with the Group’s values and with dignity, but failure should
not be rewarded.
• Safeguards are applied to ensure that incentive levels are proportionate, appropriately earned for genuine business
performance aligned to Company strategy and designed in a way to minimise any behavioural risks.
Employee voice in the boardroom
Include a reward session at the
Any reward-related
Other sources
regular meetings with the EWC
feedback also shared
of feedback on
Use of existing Executive led by the Group HR Information
with Remuneration
the total employee
European Works Director and the Group Head flow
Committee
experience
Council (EWC) of Reward
structure Invite EWC representative to speak
regularly atRemuneration
Committeemeetings
Information flow Remuneration
Board
Committee
Sessions led by GroupReward
Run reward
Particular focus on regions not
focus sessions
covered by the EWC
at site level
Annual Report 2022 dssmith.com 93
REMUNERATION POLICY
## Remuneration policy
(approved in 2020)
Set out below are the key elements of our Directors’ remuneration policy applicable from 8 September 2020 when the policy was
approved by our shareholders. The full policy can be found in the Annual Report 2020 on our website at https://www.dssmith.com/
investors/annual-reports/archive. Since the policy was approved at the 2020 AGM, the Committee has in 2022 undertaken a further
review of the timeline for alignment of the Executive Directors’ pension contributions with that available to the workforce in the UK
(being the country where they are based for employment purposes) and agreed that the maximum pension contribution for the
Executive Directors will be aligned with that available to the workforce in the UK by 31 December 2022.
Element, purpose and link
tostrategy Operation and performance metrics Maximum opportunity
Basic salary Normally reviewed by the Committee annually and fixed for the Salaries will normally be increased in line with
12 months commencing 1 August. increases for the workforce in general, unless
To help recruit and retain
there has been an increase in the scope,
key senior executives. The Committee takes into account:
responsibility or complexity of the role, when
• role, competence and performance; increases may be higher. Phased higher
To provide a competitive
• average change in broader workforce salary; and increases may also be awarded to new Executive
salary relative to
comparable companies, in • total organisational salary budgets. Directors who were hired at a discount to the
market level to bring salary to the desired
terms of size and When external benchmarking is used, the comparator groups are
mid-market positioning, subject to individual
complexity. chosen having regard to:
performance.
• size: market capitalisation, turnover, profits and the number
The aim is to position salaries around the
of employees;
mid-market level, although higher salaries may
• diversity and complexity of the business;
be paid, if necessary, in cases of external
• geographical spread of the business; and
recruitment or retention.
• domicile of the Executive Director.
Annual bonus Targets are set annually. The performance measures, targets Maximum bonus potential of 200% of base
and weightings may vary from year to year in order to align with salary, with target bonus being one half of
To incentivise executives to
the Company’s strategy and goals during the year to which the the maximum.
achieve or exceed specific,
bonus relates.
Bonus starts to be earned at the threshold level
predetermined objectives
Performance measures can include some or all of the following: (below which 0% is payable).
during a one-year period.
financial measures, strategic measures and ESG measures.
Current maximum potential for each Executive
To reward ongoing delivery
Bonus payouts are determined by the Committee after the year Director is set out in the Annual Report on
and contribution to
end, based on performance against predetermined objectives, at Remuneration.
strategic initiatives.
least the majority of which will be financial.
Deferred proportion of
Up to half of the bonus is paid in cash and the balance is deferred
bonus, awarded in shares,
into shares.
provides a retention
element and additional The deferred bonus shares vest after three years. Dividend
equivalents arising over the period between the grant date and
alignment of interests with
the vesting date are paid in cash or shares in respect of the
shareholders.
shares which vest.
The annual bonus plans are not contractual and bonuses under
the plans are not eligible for inclusion in the calculation of the
participating executives’ pension plan arrangements.
Malus and clawback provisions apply to the annual bonus plan
and the deferred bonus shares so that individuals are liable to
repay/forfeit some or all of their bonus if there is a material
misstatement of results, error in calculation, gross misconduct,
payments based on erroneous or misleading data, significant
reputational damage or corporate failure. The Committee will act
reasonably in the application of malus and clawback.
94
GOVERNANCE
Element, purpose and link
tostrategy Operation and performance metrics Maximum opportunity
Performance Awards of nil-cost options are made annually with vesting The maximum annual award under the PSP that
share plan (PSP) dependent on the achievement of performance conditions over may be granted to an individual in any financial
the three subsequent years. year is 225% of salary in normal circumstances
To incentivise Executive
and 400% of salary in exceptional
Awards will vest, subject to performance, on the third
Directors and other senior
circumstances, which is limited to buy-out
anniversary of grant and will be subject to an additional two-year
executives to achieve
awards under recruitment.
holding period post-vesting, during which time awarded shares
returns for shareholders
may not be sold (other than for tax purposes). Actual award levels to Executive Directors are set
over a longer time frame.
out in the Annual Report on Remuneration.
The Committee reviews the quantum of awards annually to
To help retain executives
ensure that they are in line with market levels and appropriate, 25% of the relevant part of the award will vest
and align their interests
given the performance of the individual and the Company. for achieving threshold performance (which for a
with shareholders through
relative TSR performance measure would be
building a shareholding in Performance measures can include some or all of the following:
median performance), increasing to full vesting
the Company. financial measures, strategic measures, ESG measures and
for the achievement of maximum performance.
relative TSR.
Dividend equivalents arising over the period between the grant
date and the vesting date are paid in cash or shares in respect of
the shares which vest.
Malus and clawback provisions apply to the PSP so that
individuals are liable to repay/forfeit some or all of their shares if
there is a material misstatement of results, error in calculation,
gross misconduct, vesting based on erroneous or misleading
data, significant reputational damage or corporate failure. The
Committee will act reasonably in the application of malus
and clawback.
Share ownership During employment Not applicable
guidelines
Executive Directors are expected to build and maintain a
To further align the shareholding in the Company’s shares as a multiple of their base
interests of executives with salary within five years of appointment as an Executive Director
1
(Group Chief Executive 225%, Group Finance Director 175% ).
those of shareholders.
1. Since the policy was approved at the 2020 AGM the Committee
has in 2021 decided to increase the expected shareholding
requirement of the Group Finance Director from 175% to 200%.
To achieve this, Executive Directors are expected to retain at
least 50% of shares (net of tax) which vest under the Company’s
share plans until the share ownership guidelines are met. Nil cost
options which have vested but that the Executive Director has
yet to exercise and unvested nil cost options awarded under the
DSBP (if they are only subject to a time-based condition) are
considered to count towards the shareholding on a notional
post-tax basis.
Non-Executive Directors are expected to build and maintain a
shareholding that is equivalent to 50% of their annual fee from
the Company within two years of their date of appointment.
Post-employment
In respect of share plan awards granted from 2020 onwards,
Executive Directors will be required to retain, for two years after
leaving the Company, a holding of shares at a level equal to the
lower of the shareholding requirement they were subject to
during employment and their actual shareholding on departure
(excluding shares purchased with own funds and any shares
from share plan awards made before 2020).
Annual Report 2022 dssmith.com 95
REMUNERATION POLICY CONTINUED
Element, purpose and link
tostrategy Operation and performance metrics Maximum opportunity
All employee share plan Executive Directors have the opportunity to participate in the UK or Up to £500 per month (or local currency
international sharesave plans on the same terms as other eligible equivalent).
Encourages long-term
employees (which is currently an opportunity to save up to £250, or local
shareholding in the
currency equivalent, per month). There are no performance conditions
Company.
applicable to awards.
Pension Executive Directors can elect to: Maximum: 20% (for Group Chief Executive)
and 15% (for Group Finance Director) of base
To remain competitive in • participate in the Group’s registered defined contribution plan (DC
salary from 1 August 2020 (combined cash
Plan); or
the marketplace and
supplement and DC Plan contribution).
• receive a salary supplement; or
provide income in
• a combination of the above. On 1 August 2021 the maximum pension
retirement.
contribution was reduced to 15% (for Group
Chief Executive) and 10% (for Group Finance
Director) of base salary.
A further review of the level of pension
1
contribution will take place in 2022 .
1. Since the policy was approved at the
2020 AGM, the Committee has in 2022
undertaken a further review of the timeline
for alignment of the Executive Directors’
pension contributions with that available
to the workforce in the UK (being the
country where they are based for
employment purposes) and agreed that
the maximum pension contribution for
the Executive Directors will be aligned
with that available to the workforce in the
UK by 31 December 2022.
Future appointments to the Board or any
Board member changing roles would be given
a pension benefit aligned with that available
to the workforce in the country where they
are based for employment purposes.
Benefits Directors, along with other UK senior executives, receive a car allowance Benefit levels may be increased in line with
or company car equivalent, income protection insurance, four times life market levels to ensure they remain
To help retain employees
cover, family medical insurance and subsidised gym membership. competitive and valued by the recipient.
and remain competitive in
Additional benefits (including a relocation allowance) may be provided However, as the cost of the provision of
the marketplace.
from time to time, where they are in line with market practice. benefits can vary without any change in the
level of provisions, no maximum is
Any reasonable business related expenses may be reimbursed (including
predetermined.
tax thereon, if deemed to be a taxable benefit).
Non-Executive Reviewed annually by the Board (after recommendation by the No prescribed maximum annual increase.
Directors and Chair Committee in respect of the Chair).
Details of current fees are set out in the
Attract and retain high Fee increases, if applicable, are normally effective from annual report on remuneration.
1 August. The Board and, where appropriate, the Committee, considers
performing individuals. Aggregate annual fees limited to £1,000,000
pay data at comparable companies of similar scale.
by Articles of Association.
The Senior Independent Director and the Chairs of the Audit and
Remuneration Committees receive additional fees.
No eligibility for participation in bonuses, retirement plans or share plans
but limited benefits may be delivered in relation to the permanency of
their duties as a Director (e.g. hospitality, provision of a mobile phone,
tablet/laptop and travel-related expenses). Tax may be reimbursed if
these benefits are deemed to be a taxable benefit.
If there is a temporary yet material increase in the time commitments for
Non-Executive Directors, the Board may pay extra fees on a pro-rata
basis to recognise the additional workload.
96
GOVERNANCE
Discretions and judgements The Committee has the discretion to override formulaic outcomes
to the bonus and the PSP or DSBP in order to ensure that outcomes
The Committee will operate the annual bonus plan and long-term
reflect true underlying business performance or to reduce awards
plans according to the rules of each respective plan, their
if the business has suffered an exceptional negative event in order
respective ancillary documents and the UK Financial Conduct
to ensure that outcomes reflect overall corporate performance.
Authority’s Listing Rules, which, consistent with market practice,
include discretion in a number of respects in relation to the The Committee can use its discretion to waive the post-
operation of each plan. Discretions include: employment shareholding requirement in the event of ill health
or death.
• Who participates in the plan
• Determining the timing of grants of awards and/or payments Any historic share awards (other than those granted in 2020) that
were granted before 8 September 2020 (when the revised policy
• Determining the quantum of an award and/or payment
came into force) and still remain outstanding will remain eligible to
• Determining the extent of vesting
vest or be exercised or sold based on their original award terms
• How to deal with a change of control or restructuring
and the remuneration policy that was in force when those awards
of the Group
were granted.
• Whether an Executive Director or a senior manager is a good/
bad leaver for incentive plan purposes and whether the
proportion of awards that vest do so at the time of leaving or at
the normal vesting date(s)
• How and whether an award may be adjusted in certain
## In summary: key objectives
circumstances (e.g. for a rights issue, a corporate restructuring
## or for special dividends) ofour remuneration policy
• What the weighting, measures and targets should be for the
The purpose of our remuneration policy is to deliver a
annual bonus plan and PSP awards from year to year
remuneration package that:
• The Committee also retains the ability, within the policy, if
• Attracts and retains high calibre Executive Directors and
events occur that cause it to determine that the conditions set
senior managers in a challenging and competitive
in relation to an annual bonus plan or a granted PSP award are
business environment
unable to fulfil their original intended purpose, to adjust targets
• Reduces complexity, delivering an appropriate balance
and/or set different measures or weightings for the applicable
between fixed and variable pay for each Executive
annual bonus plan and PSP awards.
Director and the senior management team
The Committee can use its judgement to make adjustments to
• Encourages long-term performance by setting
published outturns for significant events or changes in the
challenging targets linked to sustainable growth
Company’s asset base that were not envisaged when the targets
• Is strongly aligned to the achievement of the Group’s
were originally set or for changes to accounting standards,
objectives and to the delivery of sustainable value to
to ensure that the performance conditions achieve their
shareholders and other key stakeholders
original purpose.
• Seeks to avoid creating excessive risks in the
The Committee also has the discretion to reduce or apply other
achievement of performance targets
restrictions to an award if, after taking into account all
• Is consistent with the Group’s Purpose and values
circumstances known to the Committee, it determines that the
• Is commensurate with pay conditions across the Group
amount which a participant would otherwise receive pursuant to
• Is aligned to the DS Smith reward principles (as set out on
an incentive award in accordance with its terms would result in the
page 93)
participant receiving an amount which the Committee considers
cannot be justified or which the Committee considers to be an • Takes into account overall corporate performance as well
unfair or undeserved benefit to the participant. as business performance.
All our decisions as a Remuneration Committee are taken in
this context.
Annual Report 2022 dssmith.com 97
ANNUAL REPORT ON REMUNERATION
## Annual report on remuneration
The tables below show how we have applied the remuneration policy during 2021/22. They disclose all the elements of remuneration
earned by the Directors during the year. Full details of the policy that was voted on in 2020 are included in the 2020 Annual Report and is
available on our website.
Deloitte LLP has audited, as required by the applicable regulations, those tables labelled as audited.
Single total figure of remuneration for each Director (audited)

|  |  |  |  |  |  |  |  |  |  |  |  | Long-term |  |  | Total single |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | Salary | Benefits | 1 | Pensions |  | 2 | Total fixed | Annual bonus |  | 3 | incentives |  | Total variable | remuneration |  |
| Executive Directors |  | £’000 | £’000 |  |  | £’000 |  | remuneration |  | £’000 |  |  | £’000 | remuneration |  | figure |
| Miles Roberts | 2020/21 786 21 177 984 1,541 0 1,541 2,525 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Group Chief Executive | 2021/22 809 22 131 962 1,618 0 1,618 2,580 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Adrian Marsh | 2020/21 494 19 80 593 726 0 726 1,319 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Group Finance Director | 2021/22 508 19 57 584 763 0 763 1,347 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

1. Taxable benefits in 2020/21 and 2021/22 principally include a car allowance of £20,000 for Miles Roberts and £17,500 for Adrian Marsh. Both Directors also
receive income protection, life and health cover.
2. In lieu of membership of the defined contribution scheme Miles Roberts receives an annual pension allowance which was reduced from 30% with effect from 1
August 2020 to 20% of base salary and was further reduced to 15% with effect from 1 August 2021 and Adrian Marsh receives an annual pension allowance
which was reduced from 20% with effect from 1 August 2020 to 15% of base salary and was further reduced to 10% with effect from 1 August 2021. The annual
pension allowances are not pensionable and are not considered to be salary for the purpose of calculating any bonus payment or long-term incentive. More details
about the further planned reductions in pension benefits to be aligned with that of the workforce in the UK by 31 December 2022 are set out on page 96.
3. The annual bonus, when paid, is paid 50% in cash and 50% in deferred shares as described in the policy table on page 94.
Fees 4 4
Total Total
£’000
2021/22 2020/21
£’000 £’0002021/22 2020/21
Non-Executive Directors
1
Geoff Drabble 330 128 330 128
Celia Baxter 77 76 77 76
Alina Kessel 62 61 62 61
2
David Robbie 78 76 78 76
Louise Smalley 62 61 62 61
3
Rupert Soames 70 71 70 71
Total 679 473 679 473
1. Geoff Drabble joined the Board with effect from 1 September 2020 and became Chair with effect from 3 January 2021, when his fee increased to £330,000 per
annum (fixed for three years).
2. David Robbie became Senior Independent Director with effect from 28 February 2022.
3. Rupert Soames stepped down from the role of Senior Independent Director with effect from 28 February 2022.
4. Non-Executive Directors received no taxable benefits, annual bonus, long-term incentives or pension payments during 2020/21 or 2021/22.
Alan Johnson joined the Board on 1 June 2022.
98
GOVERNANCE

## Fixed pay

### Basic salary (audited)

#### Salaries for Executive Directors (audited)

|   | Salaries effective from |   |   |   | Earned in 2021/22 (E)  |
| --- | --- | --- | --- | --- | --- |
|   |  1 August 2020 (E) | 1 January 2021 (E) | 1 August 2021 (E) | 1 August 2022 (E)  |   |
|  Miles Roberts | 782,300 | 794,000 | 814,000 | 846,600 | **809,000**  |
|  Adrian Marsh | 491,600 | 499,000 | 511,500 | 532,000 | **508,375**  |

When reviewing salaries the Committee takes account of a number of factors, with particular focus on the general level of salary increases awarded to employees throughout the Group. Where relevant, the Committee also considers external market data on salary and total remuneration. When initially considering the Executive Directors' salary increase for 2022, the Committee also looked at the data for the peer group of FTSE 51-150 companies (excluding Financial Services companies). It chose that comparator group as one that (in line with the remuneration policy) reflected a similar size and complexity of business and of geographical spread as well as the domicile of the Executive Directors. The Committee applies judgement when considering such data.

The usual review of executive remuneration was held in June 2022 and it was agreed that a pay increase of 4% (in line with the average increase for the UK workforce as a whole) would be implemented on 1 August 2022.

#### Fees for Non-Executive Directors and the Chair (audited)

In addition to a base fee of £62,000, the Chair of the Audit Committee and the Chair of the Remuneration Committee each receive a fee of £15,000 per annum and the Senior Independent Director receives a fee of £10,000 per annum. The fee for the Chair with effect from 3 January 2021 was set taking into account market rates for comparable positions and is fixed for three years. It was agreed that an increase of 4% (in line with the average increase for the UK workforce as a whole) would be implemented in respect of the base fee for Non-Executive Directors with effect from 1 August 2022.

|   | Base fee effective from |   |   | Earned in 2021/22 (E)  |
| --- | --- | --- | --- | --- |
|   |  1 August 2020 (E) | 1 August 2021 (E) | 1 August 2022 (E)  |   |
|  Geoff Drabble^{1} | - | 330,000 | 330,000 | **330,000**  |
|  Celia Baxter | 60,500 | 62,000 | 64,500 | **76,625**  |
|  Alina Kessel | 60,500 | 62,000 | 64,500 | **61,625**  |
|  David Robbie^{2} | 60,500 | 62,000 | 64,500 | **78,330**  |
|  Louise Smalley | 60,500 | 62,000 | 64,500 | **61,625**  |
|  Rupert Soames^{3} | 60,500 | 62,000 | 64,500 | **69,920**  |

1. Geoff Drabble joined the Board with effect from 1 September 2020 and became Chair with effect from 3 January 2021. His fee as a Non-Executive Director was £60,500 per annum. His total fee as Non-Executive Chair is £330,000 per annum, which will not be reviewed for three years from his appointment.

2. David Robbie became Senior Independent Director with effect from 28 February 2022.

3. Rupert Soames stepped down from the role of Senior Independent Director with effect from 28 February 2022.

Alan Johnson joined the Board on 1 June 2022.

Annual Report 2022 dssmith.com 99
ANNUAL REPORT ON REMUNERATION CONTINUED
## Variable pay
The Committee believes it is important that a significant portion of the Executive Directors’ package is performance-related and that the
performance conditions support the delivery of the Group’s strategy and its long-term sustainable success. The remuneration policy
encourages long-term performance by setting challenging targets linked to sustainable growth for the variable pay, which consists of
the annual bonus and the longer-term PSP. The Remuneration Committee has discretion to adjust retrospectively the targets, for
example after a substantial restructuring, and would normally discuss this with its larger shareholders. Alternatively adjustments to
published outturns may be appropriate for significant events or changes in the asset base that were not envisaged when the targets
were originally set, to ensure that the performance conditions achieve their original purpose. Full disclosure of this would be given in the
Remuneration Report. The Remuneration Committee has the discretion to override formulaic outcomes in order to ensure that outcomes
reflect true underlying business performance. When considering that discretion in relation to the annual bonus for 2021/22 the
Committee took, and in relation to the annual bonus for 2022/23 the Committee will take, into account various ESG matters (as described
on pages 101 and 102).
Performance measures
An explanation of the performance measures for the annual bonus (assessed on a constant currency basis) and PSP (assessed on an
actual currency basis without adjustments for exchange rate movements) is set out below. The strategic rationale for the choice of these
performance measures is to focus on the key financial measures both over the longer performance period for the PSP of three years and
the shorter performance period for the annual bonus of one year.
Adjusted earnings per share (EPS) applicable to the PSP
Adjusted EPS is disclosed in the Annual Report and is the portion of the Group’s adjusted after tax profit allocated to each outstanding
share. Adjusted EPS is an indicator of the underlying performance of the Group.
Adjusted return on average capital employed (ROACE) applicable to the PSP
ROACE is disclosed in the Annual Report. It is defined as earnings before interest, tax, amortisation and adjusting items as a percentage
of average capital employed, including goodwill. This is a measure of the efficiency and profitability of the assets and investments.
Total shareholder return (TSR) applicable to the PSP
TSR is the increase (or decrease) in the value of a notional investment in a share in the Company and each of the companies in the
Industrial Goods and Services Supersector within the FTSE 350 Index over the three-year PSP performance period, taking account of
share price movement and the value of dividends (which are deemed to be re-invested) over that period. This is a measure that takes
into account the experience of shareholders over the applicable period.
Adjusted earnings before tax and amortisation (EBTA) applicable to annual bonus
EBTA is adjusted earnings before taxation, amortisation and income from associates. This measure gives a snapshot of the performance
of the Group in the short term of a single financial year.
Free cash flow applicable to annual bonus
Free cash flow is the net movement on debt before cash outflow for adjusting items, dividends paid, acquisition and disposal of
subsidiary businesses (including borrowings acquired), and proceeds from issue of share capital, adjusted for the effects of changes in
factoring balances. This measure focuses on liquidity, a key area in an uncertain economic environment.
Annual bonus
Bonus in 2021/22
The Executive Directors’ targets for the 2021/22 bonus were based on the financial targets set out in the tables on the next page, with
annual bonus payments determined by reference to performance over the financial year ended 30 April 2022. Achievement is calculated
on a straight-line basis between threshold and target and between target and maximum. Adjusted EBTA and free cash flow have equal
weighting as annual bonus performance measures.
100
GOVERNANCE

# **Targets and outcomes (audited)**

|  Financial measure | Threshold 5% of maximum | Target 50% of maximum | Maximum | Achieved  |
| --- | --- | --- | --- | --- |
|  Adjusted EBTA | £504m | £524m | £544m | £585m  |
|  Free cash flow | £202m | £217m | £232m | £558m  |

# **ESG underpin**

ESG underpin element

Assessment of performance in 2021/22

|  Commitment to using longer-term science-based targets for carbon reduction in the business | Announced our commitment to reach net zero emissions by 2050 and to science-based targets which require at least a 40% reduction of CO_{2} emissions per tonne of product by 2030, compared with 2019 levels. Since 30 April 2022, our target to reduce Scope 1, 2 and 3 emissions 46 per cent by 2030, when compared to 2019 levels, has been validated by the Science Based Targets initiative. For more information see page 31.  |
| --- | --- |
|  Maintenance of high health and safety standards | Group-wide lost time accident performance is 5% better than 2020/21. Group-wide H&S engagement index has increased in each of the last five years, further evolving our safety culture and contributing to the reduction in the total number of accidents by 27% year-over-year. For more information see pages 25 to 27.  |
|  Continued work with our communities | The Group has completed the planned community programme activity in all 161 targeted sites.  |

# **Outcomes (audited)**

|   | Miles Roberts | Adrian Marsh  |
| --- | --- | --- |
|  Adjusted EBTA (as a proportion of the maximum opportunity) | 50/50 | 50/50  |
|  Free cash flow (as a proportion of the maximum opportunity) | 50/50 | 50/50  |
|  Total (as a proportion of the maximum opportunity) | 100/100 | 100/100  |
|  Maximum bonus opportunity as a % of salary | 200% | 150%  |
|  Value of bonus paid in cash | £809,000 | £381,281  |
|  Value of bonus deferred into shares | £809,000 | £381,281  |
|  Overall award level | £1,618,000 | £762,562  |

Performance is assessed on a constant currency basis and therefore the actual published results are restated for bonus purposes using budgeted exchange rates.

Bonus awards are measured against the achievement of the Group's objectives. Maximum bonus opportunity for 2021/22 for Miles Roberts was 200% of salary and for Adrian Marsh was 150% and was between 50% and 110% for the other most senior executives.

When deciding the level of variable pay, including the annual bonus, the Committee considered the experience of the Group's stakeholders during the 2021/22 financial year (as summarised on pages 88 and 89). The Committee concluded that the outcome of the annual bonus in respect of 2021/22 appropriately reflected the Company's performance in 2021/22 and was commensurate with the broader stakeholder experience in that period; and that appropriate progress and actions have continued to be made to realise our ESG agenda. It was therefore not felt necessary to apply any discretion to amend the outcome of the overall award level.

# **Implementation for 2022/23**

The annual bonus for 2022/23 will remain in line with the remuneration policy and with a maximum opportunity of 200% of salary for the Group Chief Executive and 150% for the Group Finance Director.

For 2022/23 it will be based on EBTA and free cash flow, each with equal weighting. In the event of an unbudgeted acquisition or disposal in the year, the Committee will assess how the financial performance of the acquired or disposed of company should be treated.

In the opinion of the Committee, the annual bonus targets for 2022/23 are commercially sensitive and accordingly are not disclosed prospectively. These will be disclosed next year in the Directors' remuneration report, so that achievement against those targets will be visible, in retrospect.

Annual Report 2022 dssmith.com 101
ANNUAL REPORT ON REMUNERATION CONTINUED

When considering the application of discretion to override the formulaic outcome for the 2022/23 annual bonus, the Committee will take into account the following factors:

- The development of initial plans to achieve the longer-term science-based targets for carbon reduction in the business
- The continuing maintenance of high health and safety standards
- The continued work with our communities.

The Committee will report on its assessment of the Group's performance in those areas in the Annual Report 2023 (following a similar format to its assessment for 2022 on page 101).

Having an ESG underpin in this way acknowledges the importance of ESG which is integral to the DS Smith strategy, and in particular our strategic goal to lead the way in sustainability.

# Performance Share Plan (PSP)

# Overview of the Performance Share Plan

The PSP operates as a long-term incentive plan for senior managers in the Group, with awards vesting after three years, and held for a further two years by the Executive Directors.

The awards have three performance measures: adjusted EPS, adjusted ROACE and relative TSR. These have equal weighting.

The Committee's policy is that no adjustments for exchange rate movements are made to EPS and ROACE over the three-year performance period as these are of a long-term nature and fluctuations are more likely to average out over the period.

The relative TSR vesting scale is median to upper quartile performance, with no vesting below median performance. 25% of the award vests for achieving threshold performance, increasing on a straight-line basis to full vesting for maximum performance.

The TSR comparator group for the 2019/20, 2020/21 and 2021/22 awards is the FTSE 350 Industrial Goods and Services Supersector.

# 2019/20 awards vesting in 2022/23 based on performance in the three-year period to 2021/22

Unfortunately, the performance share plan (PSP) award made in 2019, which had performance conditions based on the three year average earnings per share (EPS) and return on average capital employed (ROACE) performance and the three year cumulative relative total shareholder return (TSR) performance between 2019/20 and 2021/22, did not meet the threshold targets for the two financial measures and fell below median for the relative TSR measure. The financial targets were set in 2019 in the context of the expectation of a stable economy and were not adjusted to reflect the negative impact of the pandemic on the 2019/20, 2020/21 and 2021/22 results.

# EPS, ROACE and TSR performance targets for 2019/20 awards based on performance in the three-year period to 2021-22 (audited)

|   | Weighting | Proposed (25% vests) | Maximum (100% vests) | Outcome  |
| --- | --- | --- | --- | --- |
|  Three-year average adjusted EPS | One third | 37.4p | 42.0p | 29.3p  |
|  Three-year average adjusted ROACE | One third | 12.4% | 13.6% | 9.8%  |
|  Relative TSR^{1} | One third | Median | Upper quartile | Below median  |

1. Measured against the FTSE 350 Industrial Goods and Services Supersector.

25% of the PSP award vests for achieving threshold performance, increasing on a straight-line basis to full vesting for maximum performance.

# Deferred share bonus plan (DSBP) awards vesting in 2022

The DSBP award vesting in 2022 relates to the deferral into shares of half of the bonus paid in June 2019 in relation to the financial year 2018/19. The number of shares vesting in 2022 under the DSBP award granted on 15 July 2019 is 157,055 for Miles Roberts and 74,015 for Adrian Marsh. Details of those awards and the single total figure of remuneration that included them were set out in the remuneration report for 2019/20. Dividend equivalents for the DSBP award also accrued during the three-year vesting period. Those dividend equivalents will be paid in shares (11,889 for Miles Roberts and 5,602 for Adrian Marsh) shortly after the award vests on 15 July 2022, the third anniversary of grant of the award.

102
GOVERNANCE

### PSP and DSBP awards granted in 2021 vesting in 2024/25 and DSBP awards in 2021 (audited)

The PSP awards made in 2021 in respect of 2021/22 were in line with the current remuneration policy and, as reported in last year's remuneration report, were:

- 225% of salary for the Group Chief Executive and 200% of salary for the Group Finance Director
- Any shares that vest under the PSP awards granted in 2021/22 must be retained for a further two years before they can be sold (a total of five years from original grant) and they are also subject to a post-employment holding condition, meaning that any shares that vest will be held in a nominee arrangement for the appropriate period. For any PSP awards which vest following departure that have been granted good leaver treatment, the Committee will reduce the two-year post-vesting holding period so that it does not extend beyond the second anniversary of departure, provided that the three-year vesting period has been completed
- The PSP awards were granted as nil-cost options and are subject to three performance measures: adjusted EPS, adjusted ROACE and relative TSR, with equal weighting on each element.

The DSBP awards made in 2021 relate to the deferral into shares of half of the bonus paid in July 2021 in relation to the bonus award included in the single total figure of remuneration for 2020/21. They were granted as nil-cost options and are not subject to performance conditions, but are subject to continued employment.

|  Executive Director | Award | Number of options granted under award on 8 July 2021 | Face value of award at time of grant (£)  |
| --- | --- | --- | --- |
|  Miles Roberts | PSP | 411,635 | 1,786,496  |
|   |  DSBP | 177,529 | 770,476  |
|  Adrian Marsh | PSP | 229,953 | 997,996  |
|   |  DSBP | 83,672 | 363,136  |

The awards were made on 8 July 2021. The face value in the above table is calculated using 434.0p which was the average price of a DS Smith share for the three trading days preceding the grant of the award and the price used in the calculation of the number of options awarded. 25% of the PSP award vests for achieving threshold performance, increasing on a straight-line basis to full vesting for maximum performance. The applicable performance period for these PSP awards ends on 30 April 2024.

The targets for the 2021/22 PSP award are set out below:

|  % vesting as a proportion | Adjusted EPS One third | Adjusted ROACE One third | Relative TSR One third  |
| --- | --- | --- | --- |
|  100% | 40.0p | 13.1% | Upper quartile  |
|  Between 25% and 100% | 35.2-40.0p | 11.2-13.1% | Between median and upper quartile  |
|  25% | 35.2p | 11.2% | Median  |

Awards vest on a straight-line basis between threshold and maximum performance. The performance measurement period for the adjusted EPS and adjusted ROACE targets is the 2023/24 financial year and for the relative TSR target is the three years to 30 April 2024.

1. The 2020/21 baseline results are 24.2p for adjusted EPS and 8.2% for adjusted ROACE.
2. The comparator group for measurement of relative TSR is the FTSE 350 Industrial Goods and Services Supersector, as it was in 2019/20 and 2020/21.

### PSP awards to be granted in 2022 vesting in 2025/26

The PSP awards to be made in 2022 in respect of 2022/23 will remain in line with the remuneration policy, with grants being made of up to 225% of salary for the Group Chief Executive and 200% of salary for the Group Finance Director. As a matter of best practice, before finalising the PSP award levels, the Committee considered the movements in the share price since the 2021 PSP grant and will monitor performance against the targets to consider whether discretion should be applied to the formulaic outturn when determining the vesting outturn.

The performance measures and their weighting for the award will remain the same as in 2021/22. The targets for the 2022/23 PSP award will be:

|  % vesting as a proportion | Adjusted EPS One third | Adjusted ROACE One third | Relative TSR One third  |
| --- | --- | --- | --- |
|  100% | 42p | 13.8% | Upper quartile  |
|  Between 25% and 100% | 36-42p | 12 - 13.8% | Between median and upper quartile  |
|  25% | 36p | 12% | Median  |

Awards vest on a straight-line basis between threshold and maximum performance. The performance measurement period for the adjusted EPS and adjusted ROACE targets is the 2024/25 financial year and for the relative TSR target is the three years to 30 April 2025.

1. The comparator group for measurement of relative TSR will be the FTSE 350 Industrial Goods and Services Supersector, as it was in 2021/22, 2020/21 and 2019/20.

Annual Report 2022 dssmith.com 103
ANNUAL REPORT ON REMUNERATION CONTINUED
The Committee’s aim, as always, has been to set robust targets with a strong degree of stretch. In setting the target ranges the
Committee took into account a number of factors which included our medium term growth targets. Our desire continues to be to set
targets which balance stretch with the ability to at least achieve the threshold level so that awards remain motivating and meaningful to
the c.150 plan participants. The Committee will, as a matter of good practice, take a step back when determining the vesting outturn in
three years’ time to consider whether any discretion should be applied to the formulaic outturn.
DSBP awards in 2022
As set out on page 94, half of the value of the bonus to be paid in 2022 in respect of the performance over the financial year
ended 30 April 2022, will be deferred into shares, which will not vest until 2025.
Outstanding PSP and DSBP share awards during 2021/22 and as at 30 April 2022 (audited)
The table below sets out details of Executive Directors’ outstanding share awards, both under the PSP and the DSBP, during the year
under review. Unvested awards will vest in future years subject to performance and/or continued service. Vested awards will expire if
not exercised before the relevant expiry date.
Vesting date
(if any
performance

|  | Awards held |  |  |  |  |  | Grant price |  | Market price |  |  | conditions |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | at 30 April |  | Dividend | Exercised/ |  | Lapsed/ | for award |  | on date of |  | Awards held | applicable |
| Award date |  | 2021 Granted | equivalents |  | vested | forfeited |  | (p) 1 | exercise (p) | at 30 April 2022 |  | are met) Expiry date |

Miles Roberts
PSP 1 Jul 16 256,822 – – 256,822 – 379.80 457.30 0 1 Jul 19 1 Jul 26
PSP 18 Jul 17 139,690 – – 139,690 – 484.70 457.30 0 18 Jul 20 18 Jul 27
PSP 22 Jun 18 341,748 – – – 341,748 523.47 – 0 22 Jun 21 22 Jun 28
PSP 15 Jul 19 481,039 – – – – 357.00 – 481,039 15 Jul 22 15 Jul 29
PSP 14 Jul 20 647,123 – – – – 272.00 – 647,123 14 Jul 23 14 Jul 30
PSP 8 Jul 21 – 411,635 – – – 434.00 – 411,635 8 Jul 24 8 Jul 31
DSBP 1 Jul 16 156,676 – – 156,676 – 379.80 457.30 0 1 Jul 19 1 Jul 26
DSBP 18 Jul 17 79,368 – – 79,368 – 484.70 457.30 0 18 Jul 20 18 Jul 27
DSBP 22 Jun 18 132,849 – 10,588 143,437 – 523.47 457.30 0 22 Jun 21 22 Jun 28
DSBP 15 Jul 19 157,055 – – – – 357.00 – 157,055 15 Jul 22 15 Jul 29
DSBP 8 Jul 21 – 177,529 – – – 434.00 – 177,529 8 Jul 24 8 Jul 31
1,874,381
Adrian Marsh
PSP 22 Jun 18 167,015 – – – 167,015 523.47 – 0 22 Jun 21 22 Jun 28
PSP 15 Jul 19 235,098 – – – – 357.00 – 235,098 15 Jul 22 15 Jul 29
PSP 14 Jul 20 316,286 – – – – 272.00 – 316,286 14 Jul 23 14 Jul 30
PSP 8 July 21 – 229,953 – – – 434.00 – 229,953 8 Jul 24 8 Jul 31
DSBP 22 Jun 18 62,603 – 4,989 67,592 – 523.47 444.50 0 22 Jun 21 22 Jun 28
DSBP 15 Jul 19 74,015 – – – – 357.00 – 74,015 15 Jul 22 15 Jul 29
DSBP 8 Jul 21 – 83,672 – – – 434.00 – 83,672 8 Jul 24 8 Jul 31
– 939,024
1. The figure in this column is the average price of a DS Smith share for the three trading days preceding the award and is the price used in the calculation of the
number of options originally awarded. The number of options originally awarded in 2016 and 2017 was subsequently adjusted for the rights issue in 2018 as
described in the Annual Report for 2019.
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The target ranges for the 2019/20 PSP awards are set out on page 102. The target ranges for the 2021/22 awards are set out on page
103. The relative TSR target for the 2020/21 award is the same as it was for the 2019/20 award. For the 2020/21 awards the target
ranges for EPS and ROACE are set out in the audited table below.
PSP plan EPS range ROACE range
2020/21 34.2p-36.5p 11.0%-12.5%
It is currently intended that any ordinary shares required to fulfil entitlements under the DSBP will be provided by Computershare
Trustees (Jersey) Limited in its capacity as trustee of the employee benefit trust (the Trust), which buys shares to do so. The Trust
may also be used to fulfil certain entitlements under the PSP and the employee sharesave plans or those may be fulfilled by newly-
issued shares.
Sharesave – employee share plans (audited)
Our sharesave (SAYE) plans align our employees’ interests with those of our long-term shareholders. Our commitment is to deliver an
opportunity for our employees to be engaged with the strategic direction of DS Smith and to share in its financial success. Executive
Directors are eligible to participate in the SAYE on the same terms as all other UK-based employees of the Company and participating
subsidiaries of the Group. Options are granted under the SAYE, which, in the UK, is an HMRC tax-advantaged plan. Participants contract
to save up to the equivalent of £250 per month over a period of three years (two years in the US). The current maximum permitted
monthly saving of the equivalent of £250 is set by the Company. Under the applicable plan rules (and the remuneration policy) the
monthly maximum could be increased in the future to up to the equivalent of £500 per month. The option price is discounted by up to
20% (15% in the US) of the average closing mid-market price of the Company’s shares on the three dealing days prior to invitation
(20-day average to the day before grant in France and the higher of the mid-market average price on the day before invitation and the
mid-market average on the day before grant in the US). In common with most plans of this type, there are no performance conditions
applicable to options granted under the SAYE.

|  |  | Options |  | Options |  | Options |  | Market price on |  |  |  |  |  | Date |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | held at | granted during |  |  | exercised | Options lapsed | date of exercise |  | Options held at | Exercise price |  | from which |  |
| Name of Director | 30 April 2021 |  |  | the year | during the year |  | during the year |  | (p) | 30 April 2022 |  | (p) | exercisable Expiry date |  |

Miles Roberts 2,769 – – – – 2,769 325.00 1 Apr 24 30 Sep 24
Adrian Marsh 2,769 – – – – 2,769 325.00 1 Apr 24 30 Sep 24
Share ownership guidelines
Executive Directors are required to build a significant shareholding in the Company within five years from the date of their appointment.
Executive Directors’ shareholdings (including those of their connected persons) are summarised in the following audited table.

|  |  |  | Total |  |  | Total |  | Unvested only |  |  | Shareholding |  | Shareholding at |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | shareholding as at |  |  | shareholding as at |  |  | subject to continued |  |  | Vested awards |  | required | 30 April 2022 |  |  | Requirement |  |
| Name of Director |  | 30 April 2021 |  |  | 30 April 2022 |  |  | employment | 1 | (not exercised) |  | (% salary) |  | (% salary) | 2 |  | met |

Executive Directors
Miles Roberts 1,989,927 2,063,831 179,300 0 225% 912% Yes
Adrian Marsh 577,889 291,021 84,502 0 200% 243% Yes
1. Includes the awards of deferred bonus shares granted in 2019 and 2021. A reduction to the gross award levels of 48.25% has been applied for the expected level
of tax and social security deductions that will ultimately be due on these shares.
2. Based on the salary as at 30 April 2022 and a share price of 330.9p (being the closing price on 29 April 2022, the last trading day of the financial year) multiplied by
the current year shareholding and interests in shares which count towards the shareholding requirement.
The PSP awards granted in 2020 and 2021 are unvested and remain subject to performance conditions so are not included in the
above table as they do not count towards the shareholding requirement. Nil-cost options which have vested but have yet to be
exercised are considered to count towards the shareholding requirement, other than any such shares that correspond to the estimated
tax and national insurance contributions. Miles Roberts and Adrian Marsh as at 30 April 2022 did not hold any such vested but
unexercised awards.
Failure to meet the minimum shareholding requirement is taken into account when determining eligibility for share-based incentive
awards for Executive Directors. There have been no changes to the shareholdings set out above between the financial year-end and the
date of this report.
Annual Report 2022 dssmith.com 105
ANNUAL REPORT ON REMUNERATION CONTINUED
Non-Executive Directors are required to build up a holding of 50% of their fees in shares within two years of their date of appointment.
Non-Executive Directors’ shareholdings (including those of their connected persons) are summarised in the following audited table:

|  |  |  | Total |  |  | Total | Shareholding |  | Shareholding at |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | shareholding as at |  |  | shareholding as at |  |  |  | required | 30 April 2022 |  |  | Requirement |  |
| Name of Director |  | 30 April 2021 |  |  | 30 April 2022 |  |  | (% fee) |  | (% fee) | 1 |  | met |

Non-Executive Directors
2 2
Geoff Drabble 60,000 60,000 50% 60% Yes
Celia Baxter 10,993 10,993 50% 47% No
Alina Kessel 7,000 12,000 50% 64% Yes
David Robbie 20,000 20,000 50% 86% Yes
Louise Smalley 18,600 18,600 50% 99% Yes
Rupert Soames 28,800 28,800 50% 110% Yes
1. Based on the fee as at 30 April 2022 and a share price of 330.9p (being the closing price on 29 April 2022, the last trading day of the financial year) multiplied by
the current year shareholding and interests in shares which count towards the shareholding requirement.
2. Geoff Drabble joined the Board with effect from 1 September 2020 and became Chair with effect from 3 January 2021. He has not yet been on the Board for
two years.
Alan Johnson joined the Board on 1 June 2022.
External appointments
The Board supports Executive Directors taking up appointments outside the Company to broaden their knowledge and experience.
Each Executive Director is permitted to accept one non-executive appointment (or in exceptional circumstances two appointments)
from which they may retain any fee. Any external appointment must not conflict with a Director’s duties and commitments to DS Smith.
Miles Roberts was a non-executive director of Aggreko plc until August 2021 and retained fees of £37,225 for the year ended 30 April
2022 (£61,000 for the year ended 30 April 2021). Adrian Marsh is a non-executive director of John Wood Group PLC and retained fees of
£67,450 for the year ended 30 April 2022 (£61,975 for the year ended 30 April 2021).
Directors’ contracts and notice periods
Date of contract/date of Expiry date of current term
initial appointment to the Board for Non-Executive Directors
Geoff Drabble Chair 1 September 2020 31 August 2023
Miles Roberts Group Chief Executive 4 May 2010 not applicable
Adrian Marsh Group Finance Director 24 September 2013 not applicable
Celia Baxter Chair of Remuneration Committee 9 October 2019 8 October 2025
Alan Johnson 1 June 2022 30 May 2025
Alina Kessel 1 May 2020 30 April 2023
David Robbie Chair of Audit Committee and Senior Independent Director 11 April 2019 10 April 2025
Louise Smalley 23 June 2014 22 June 2023
Rupert Soames 1 March 2019 6 September 2022
Miles Roberts and Adrian Marsh each have a notice period of 12 months exercisable by either the Company or the individual. Non-
Executive Directors have letters of appointment for an initial term of three years whereupon they are normally renewed. The current
terms of the Non-Executive Directors are set out in the table above. The notice period is one month exercisable by either the Company
or the Non-Executive Director. Non-Executive Directors are not eligible for payments on termination. In line with the UK Corporate
Governance Code, all Directors (including Non-Executive Directors) are subject to annual re-election by shareholders at the AGM. Their
letters of appointment detail the time commitment expected of each Non-Executive Director. Both these and the Executive Directors’
service contracts are available for inspection at the registered office during normal business hours and at each AGM.
Payments to past Directors or for loss of office (audited)
No payments were made to past Executive Directors during the year ended 30 April 2022 (2020/21: Nil). No payments were made
in respect of loss of office during the year ended 30 April 2022 (2020/21: Nil).
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## Relative importance of spend on pay

The table below shows the expenditure and percentage change in overall spend on employee remuneration and dividends.

|   | 2021/22 £m | 2020/21 £m | Percentage change  |
| --- | --- | --- | --- |
|  Overall expenditure on employee pay^{1} | **1,381** | 1,363 | 1.3%  |
|  Dividend paid during the year | **166** | 0 | n/a  |

1. Total remuneration reflects overall employee costs and includes some exchange rate fluctuation. See consolidated financial statements note 6 for further information.

## Remuneration of the Group Chief Executive

The table below shows the total remuneration figure for the Group Chief Executive for each of the last ten financial years. The total remuneration figure includes the annual bonus and long-term incentive awards which vested, based on performance in those years. The annual bonus and long-term incentive awards percentages show the payout for each year as a percentage of the maximum available for the financial year.

|   | 2012/13 | 2013/14 | 2014/15 | 2015/16 | 2016/17 | 2017/18 | 2018/19 | 2019/20 | 2020/21 | 2021/22  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  Total remuneration (£'000) | 6,057 | 3,696 | 5,527 | 4,447 | 4,861 | 4,220 | 3,065 | 1,422 | 2,525 | **2,580**  |
|  Annual bonus payout | 82% | 85% | 88% | 79% | 45% | 88% | 74% | 0% | 98% | **100%**  |
|  Long-term incentive vesting | 100% | 98% | 92% | 94% | 100% | 93% | 52% | 35% | 0% | **0%**  |

## Total shareholder return

**+184%**

![img-5.jpeg](img-5.jpeg)

## Review of past performance – total shareholder return graph

The graph above illustrates the Company's TSR performance since 1 May 2012 (the period required by the applicable regulations), relative to the FTSE 100 Index as well as the FTSE 250 Index. In December 2017 the Company joined the FTSE 100 Index from the FTSE 250 Index. Therefore, both indices are considered appropriate comparator indices for the Company. As at 30 April 2022 DS Smith ranked 91 by market capitalisation. This graph looks at the value, over the ten years to 30 April 2022, of an initial investment of £100 in DS Smith shares compared with that of £100 invested in both the FTSE 100 and FTSE 250 Index. The other points plotted are the values at intervening financial year ends.

Annual Report 2022 dssmith.com 107
ANNUAL REPORT ON REMUNERATION CONTINUED

# **Group Chief Executive pay ratio disclosures (audited)**

|   | Method | 25th percentile Total pay ratio | Median Total pay ratio | 75th percentile Total pay ratio  |
| --- | --- | --- | --- | --- |
|  2018/19 | B | 100:1 | 91:1 | 72:1  |
|  2019/20 | B | 52:1 | 44:1 | 35:1  |
|  2020/21 | B | 90:1 | 71:1 | 60:1  |
|  **2021/22** | **B** | **81:1** | **60:1** | **56:1**  |

The table above sets out how the single total figure of remuneration (STFR) for the Group Chief Executive compares to the STFR of the UK employees at the 25th percentile, median and 75th percentile. All STFRs for the 2021/22 financial year have been based on full-time equivalent values and annualised where necessary. The table below sets out the split between total remuneration (fixed and variable pay and benefits) and the salary component of that total for UK employees used in the above total pay ratio calculations. DS Smith has chosen to use methodology B (as defined in the applicable regulations) to calculate the figures in the tables above and below.

# **Remuneration used to calculate the Group Chief Executive pay ratio disclosures**

|   | 25th percentile pay ratio |   | Median pay ratio |   | 75th percentile pay ratio  |   |
| --- | --- | --- | --- | --- | --- | --- |
|   | Total remuneration (£) | Base salary (£) | Total remuneration (£) | Base salary (£) | Total remuneration (£) | Base salary (£)  |
|  2018/19 | 30,744 | 26,608 | 33,804 | 32,051 | 42,277 | 31,622  |
|  2019/20 | 27,244 | 26,647 | 32,342 | 31,479 | 40,349 | 36,202  |
|  2020/21 | 28,042 | 25,729 | 35,384 | 33,566 | 42,142 | 39,756  |
|  **2021/22** | **31,877** | **28,282** | **42,645** | **37,647** | **46,215** | **42,210**  |

As DS Smith uses methodology B, the 2021 UK gender pay gap data has been used to identify the relevant comparator employee falling at the relevant percentile and to calculate the annual total remuneration relating to 2021/22 for the three identified employees on the same basis as the Group Chief Executive's annual total remuneration for the same period in the single figure table. In 2021/22, there were multiple bonus plans in place across the UK which are not payable in some cases in advance of the Directors' remuneration report being approved by the Board. It was therefore not practical to collate the bonus amounts relating to performance during 2021/22 for every UK employee in advance of the report being approved. We are confident that the three employee STFR figures (which include applicable bonus) used in the pay ratio reporting are as representative of the respective percentiles as would have been the case if the 2021/22 STFR had been calculated for all UK employees. (The data reference date was 18 May 2022.)

The decrease in the ratio since last year is the result of the combination of a number of factors, including the reduction in the Group Chief Executive's pension contribution. As a result of the large proportion of variable pay in the Group Chief Executive's total reward, the ratio can be subject to a high degree of volatility from one year to the next.

We will continue to report on trends in those figures, which are expected to fluctuate as variable pay outcomes fluctuate for the Group Chief Executive. The Company does believe that the median pay ratio for 2021/22 is consistent with the pay, reward and progression policies for UK employees taken as a whole.

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GOVERNANCE

### Annual percentage change in remuneration of Executive and Non-Executive Directors and employees

The table below shows the percentage change in three aspects of remuneration (salary or fee, benefits and bonus) for the Group Chief Executive, the Group Finance Director and the Non-Executive Directors who were Directors at 30 April 2022 compared to full-time equivalent employees of the Company. (The format of the table is prescribed by regulation. Benefits and bonus are not applicable to Non-Executive Directors. The increase in fees for certain Non-Executive Directors relates to their change of role in the applicable period, as noted below.) The column headed '% change 2021/22' sets out the change from financial year 2020/21 to financial year 2021/22. The normal date for any implementation of a pay review is 1 August, not the start of the financial year. However, as explained on page 95 of the 2021 Annual Report, for Directors (unlike employees in the wider Group) there was not a pay or fee increase in August 2020, but there was a pay increase with effect from 1 January 2021 for Executive Directors and Company employees. (Other explanatory notes concerning the figures for the prior year were set out in the 2021 Annual Report.)

|   | Salary/Fee % change 2021/22 | Benefits % change 2021/22 | Bonus % change 2021/22 | Salary/Fee % change 2020/21 | Benefits % change 2020/21 | Bonus % change 2020/21  |
| --- | --- | --- | --- | --- | --- | --- |
|  Miles Roberts | 2.9 | 2.8^{a} | 5.0 | 1.1 | (1.2) | n/a  |
|  Adrian Marsh | 2.9 | 1.2^{a} | 5.1 | 1.1 | (2.3) | n/a  |
|  Geoff Drabble^{1} | 0 | n/a | n/a | n/a | n/a | n/a  |
|  Celia Baxter^{2} | 1.5 | n/a | n/a | 0 | n/a | n/a  |
|  Alina Kessel^{3} | 1.9 | n/a | n/a | n/a | n/a | n/a  |
|  David Robbie^{4} | 3.7 | n/a | n/a | 8.1 | n/a | n/a  |
|  Rupert Soames^{5} | (0.8) | n/a | n/a | 5.9 | n/a | n/a  |
|  Louise Smalley | 1.9 | n/a | n/a | 0.6 | n/a | n/a  |
|  Company employees | 4.1 | 11.2^{a} | 8.3 | 2.0 | 1.3 | n/a  |

1. Geoff Drabble joined the Board on 1 September 2020 and became Chair with effect from 3 January 2021, and Alina Kessel joined the Board on 1 May 2020 as in 2020/21 they had no prior year to compare 2020/21 with.

2. Celia Baxter joined the Board on 9 October 2019 (part way through 2019/20), so to provide a meaningful comparison her fees received for 2019/20 have been annualised.

3. Rupert Soames stepped down from his role as Senior Independent Director and David Robbie became Senior Independent Director on 28 February 2022 (part way through 2021/22), hence the change in their fees due to the change in their respective roles, part way through 2021/22.

4. Changes in health cover premiums and restarting gym membership accounted for the change in taxable benefits.

Alan Johnson joined the Board on 1 June 2022.

### Voting on the remuneration policy at the 2020 AGM and on the remuneration report at the 2021 AGM

At the AGM held in 2021, votes cast by proxy and at the meeting in respect of the Directors' remuneration report were 911,292,156 (87.33%) voting in favour and 132,264,013 voting against (12.67%) with 3,616,456 votes withheld, being votes that are not recognised as a vote in law.

At the AGM held in 2020, votes cast by proxy and at the meeting in respect of the remuneration policy were 916,656,836 (93.13%) voting in favour and 67,569,543 voting against (6.87%) with 24,228,039 votes withheld, being votes that are not recognised as a vote in law.

Annual Report 2022 dssmith.com 109
ANNUAL REPORT ON REMUNERATION CONTINUED
Remuneration Committee governance
The Board is ultimately accountable for executive remuneration and delegates this responsibility to the Remuneration Committee.
The Committee’s principal function is to support the Group’s strategy by ensuring that its delivery is underpinned by the Company’s
overall remuneration policy, as described earlier in this report. It also determines the specific remuneration package, including service
contracts and pension arrangements, for each Executive Director and our most senior executives, as well as the fees paid to the Chair.
The Remuneration Committee’s Terms of Reference can be found at www.dssmith.com/investors/corporate-governance/committees/
Members Since
Celia Baxter (Chair since October 2019) 2019
## Key responsibilities of the
Geoff Drabble 2020
## Remuneration Committee
Alina Kessel 2020
• Designing the remuneration policy
David Robbie 2019
• Implementing the remuneration policy
Louise Smalley 2014
• Ensuring the competitiveness of reward, within an
Rupert Soames 2019
appropriate governance framework
• Designing the incentive plans Alan Johnson joined the Board and its Committees on 1 June 2022.
• Setting incentive targets and determining award levels
Details of individual Directors’ attendance can be found on page
• Overseeing all share awards across the Group. 70. The Group General Counsel and Company Secretary acts as
Secretary to the Committee.
Each of these responsibilities impacts the other.
The Committee is very conscious of the importance
of the wider context in which it operates in discharging
these responsibilities.
All members of the Committee are independent Non-Executive Directors. This is fundamental to ensuring Executive Directors’ and
senior executives’ remuneration is set by people who are independent and have no personal financial interest, other than as
shareholders, in the matters discussed. There are no potential conflicts of interest arising from cross-directorships and there is no
day-to-day involvement in running the business. The Committee consults with the Group Chief Executive, who may attend meetings of
the Committee, although he is not involved in deciding his own remuneration. The Committee is assisted by the Group Head of Reward,
the Deputy Company Secretary, the Group General Counsel and Company Secretary and the Group Human Resources Director. No-one
is allowed to participate in any matter directly concerning the details of their own remuneration or conditions of service.
As described earlier in the report, the Company has discussed with the EWC Executive matters relating to Executive Directors’
remuneration. When considering matters relating to the remuneration of the Executive Directors, the Committee takes into account
the overall approach to reward for, and the pay and employment conditions of, other employees in the Group.
To differentiate our employee value proposition and reinforce our strong DS Smith culture, the Group has developed the DS Smith
reward principles (set out on page 93) which are endorsed by the Committee and were last reviewed by the Committee in 2021.
Current policies and future decision making are matched against these to drive continuous improvement in this area.
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GOVERNANCE
## Topics considered as part of regular annual decision-making cycle of
## Remuneration Committee
• How the business has performed against financial targets and ESG expectations
• Forecasts for the year to come
• Feedback from both the employee survey and pulse surveys on how employees feel about the quality of the Group’s leadership.
This includes whether the leadership team continues to demonstrate living our values, how we measure employee performance
and whether employees believe we have the right approach to reward
• Review of guidance from the government and investor bodies
• Holistic view of market practices
• Assessing whether our remuneration framework is appropriately aligned with our culture and continues to motivate our leaders
to achieve the Group’s strategic objectives and does not inadvertently motivate inappropriate behaviour giving rise to ESG or
other risks
• Consideration of remuneration and related policies across the Group
• Discussion of the relevant aspects of this year’s Board effectiveness review.
In January 2021, following a thorough tender process, Korn Ferry were appointed as the Committee’s advisers. During the financial year
of 2021/22 the Committee was advised by Korn Ferry in relation to various aspects of the remuneration of Executive Directors for which
they were paid £28,811, partly on a fixed fee basis and partly on a time and materials basis. Korn Ferry in the financial year 2021/22 has
also provided executive search and talent assessment services to the Group. The teams providing this advice are separate from the
Remuneration Committee advisers and there was no conflict of interest. The Committee is satisfied that the advice it receives from its
advisers is objective and independent. Korn Ferry is a member of the Remuneration Consultants Group and adheres to the Code of
Conduct for Remuneration Consultants (which can be found at www.remunerationconsultantsgroup.com).
This report has been prepared in accordance with applicable legislation and regulatory requirements, including those of the Large and
Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (Regulations). The Regulations require
the Auditor to report to shareholders on the audited information within this report and to state whether, in their opinion, the relevant
sections have been prepared in accordance with the Companies Act 2006. The Auditor’s opinion is set out in the Independent Auditor’s
report and we have clearly marked the audited sections of this annual report on remuneration.
On behalf of the Board
Celia Baxter
Chair of the Remuneration Committee
20 June 2022
Annual Report 2022 dssmith.com 111
# Additional information

## Acquisitions and disposals

Acquisitions and disposals in the year ended 30 April 2022 are described in note 30 to the consolidated financial statements.

## Events after the reporting date

There are no subsequent events after the reporting date which require disclosure.

## Share capital

Details of the issued share capital and the rights and restrictions attached to the shares, together with details of movements in the Company's issued share capital during the year, are shown in note 24 to the consolidated financial statements. Pursuant to the Company's employee share option schemes 2,694,364 ordinary shares of 10 pence each were issued during the year. Between 1 May and 20 June 2022 inclusive, 325,431 shares were issued pursuant to the Company's employee share option schemes. The Company has not utilised its authority to make market purchases of 137,344,296 shares granted to it at the 2021 annual general meeting (AGM) but, in line with market practice, will be seeking to renew such authority at this year's AGM.

The trustee of the employee benefit trust, which is used to purchase shares on behalf of the Company as described in note 24 to the consolidated financial statements, has the power to vote or not vote, at its absolute discretion, in respect of any shares in the Company held unallocated in that trust. However, in accordance with good practice, the trustee adopts a policy of not voting in respect of such shares. The trustee has a dividend waiver in place in respect of shares which are the beneficial property of the trust.

## Dividends

An interim dividend for 2021/22 of 4.8 pence per ordinary share was paid on 3 May 2022 and the Directors recommend a final dividend of 10.2 pence per ordinary share, which together with the interim dividend, increases the total dividend for the year to 15.0 pence per ordinary share (2020/21: 12.1 pence). Subject to approval of shareholders at the AGM to be held on 6 September 2022, the final dividend will be paid on 1 November 2022 to shareholders on the register at the close of business on 7 October 2022.

## Political donations

No political donations were made during the year ended 30 April 2022 (2020/21: nil). DS Smith has a policy of not making donations to political organisations or independent election candidates or incurring political expenditure, as defined in the Political Parties, Elections and Referendums Act 2000, anywhere in the world.

## Directors' and officers' liability insurance

The Company has purchased and maintains appropriate insurance cover in respect of Directors' and officers' liabilities. The Company has also entered into qualifying third-party indemnity arrangements for the benefit of all its Directors and qualifying third-party indemnity arrangements have been entered into by a subsidiary of the Company for the benefit of certain directors of companies within the Group, all in a form and scope which comply with the requirements of the Companies Act 2006 (the Act). These indemnities were in force throughout the year and up to the date of this Annual Report.

## Additional employee disclosures

In our Strategic Report on pages 24 to 29 we set out some of the ways in which we realise the potential of our people, including how we engage with our workforce. As part of creating a modern, diverse and inclusive culture all companies within the Group strive to operate fairly at all times and this includes not permitting discrimination against any employee, applicant for employment or contingent worker on the basis of race, religion or belief, colour, gender, disability, national origin, age, military service, veteran status, sexual orientation, gender reassignment, marital status or any other characteristic protected by local law. This also includes giving full and fair consideration to suitable applications for employment from disabled persons, making reasonable adjustments in the hiring process to ensure fairness and equity in the selection process. For existing employees who develop a disability we will make all reasonable adjustments to support their continued employment, in their same job or, if this is not practicable, making every effort to find suitable alternative employment and to provide relevant training and career development opportunity.

Through the Group's engagement survey, via our European Works Council which brings together employee representatives from the different European countries where we operate, as well as through site and team meetings and briefing newsletters, the Group provides employees with various opportunities to obtain information on matters of concern to them, to improve their awareness of the financial and economic factors that affect the performance of the Group and to provide their feedback.

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GOVERNANCE

### Substantial shareholdings

Information provided to the Company pursuant to the Financial Conduct Authority's Disclosure Guidance and Transparency Rules (DTRs) is published on a Regulatory Information Service and on the Company's website. The following information has been received, in accordance with DTR 5, from holders of notifiable interests in the Company's issued share capital.

|   | As at 30 April 2022 | As at 20 June 2022 | Nature of holding  |
| --- | --- | --- | --- |
|  Aviva plc and its subsidiaries | 6.79% | 6.79% | Direct & indirect  |
|  BlackRock, Inc. | 5.18% | Below 5% | Indirect  |
|  abrdn plc | Below 5% | Below 5% | Indirect  |
|  Ameriprise Financial, Inc. and its group | 4.981% | 4.981% | Direct & indirect  |
|  Black Creek Investment Management Inc. | 4.034428% | 4.034428% | Direct & indirect  |
|  Norges Bank | 3.862390% | 3.862390% | Direct  |
|  Sarasin & Partners LLP | 3.01% | 3.01% | Indirect  |
|  Merpas (UK) Limited | 2.985% | 2.985% | Direct & indirect  |

### Auditor

Each of the persons who is a Director at the date of the approval of this Annual Report confirms that:

- so far as the Director is aware, there is no relevant audit information of which the Company's Auditor is unaware; and
- the Director has taken all the steps he/she ought to have taken as a Director in order to make him/herself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of section 410 of the Companies Act 2006.

A resolution to appoint Ernst & Young LLP as Auditor will be proposed at the forthcoming AGM.

### Other disclosures

Certain information is included in our Strategic Report (pages 1 to 65) or financial statements that would otherwise be required to be disclosed in this section of the report. This is as follows:

|  Subject matter | Page  |
| --- | --- |
|  Likely future developments in the business | 8 to 11  |
|  Research and development | 14 and 15  |
|  Use of financial instruments | 45  |
|  Greenhouse gas emissions | 33  |

As is customary, our principal financing facilities incorporate market standard change of control clauses.

A complete list of the Group's subsidiaries is set out in note 33 to the consolidated financial statements to comply with s409 of the Act. Companies within the Group have branches in Norway, Poland and Slovakia.

The information that fulfils the requirements of the corporate governance statement for the purposes of DTR 7 can be found on pages 66 to 87, and that governance report also forms part of the Directors' report.

The Strategic Report on pages 1 to 65 and the governance report and Directors' Remuneration Report on pages 66 to 113 together represent the management report for the purpose of compliance with DTR 4.1.8R.

The Directors' report was approved by the Board of Directors on 20 June 2022 and is signed on its behalf by:

**Iain Simm**
Group General Counsel and Company Secretary

20 June 2022

Annual Report 2022 dssmith.com 113
## Directors’ responsibilities
The Directors are responsible for preparing the Annual Report The Directors are responsible for keeping adequate accounting
and the financial statements in accordance with applicable law records that are sufficient to show and explain the Company’s
and regulations. transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
Company law requires the Directors to prepare such financial
the financial statements comply with the Companies Act 2006.
statements for each financial year. Under that law the Directors
They are also responsible for safeguarding the assets of the
are required to prepare the Group financial statements in
Company and hence for taking reasonable steps for the prevention
conformity with the requirements of the Companies Act 2006 and
and detection of fraud and other irregularities.
UK-adopted international accounting standards. The Group
financial statements also comply with International Financial The Directors are responsible for the maintenance and integrity of
Reporting Standards as issued by the International Accounting the corporate and financial information included on the Company’s
Standards Board (IASB). The Directors have also chosen to prepare website. Legislation in the UK governing the preparation and
the parent Company financial statements in accordance with dissemination of financial statements may differ from legislation
Financial Reporting Standard 101 Reduced Disclosure Framework. in other jurisdictions.
Under company law the Directors must not approve the financial
Directors’ responsibility statement
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss We confirm that to the best of our knowledge:
of the Company for that period.
• the financial statements, prepared in accordance with the
In preparing the parent Company financial statements, the relevant financial reporting framework, give a true and fair view
Directors are required to: of the assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation
• select suitable accounting policies and then apply them
taken as a whole;
consistently;
• the Strategic Report includes a fair review of the development
• make judgements and accounting estimates that are reasonable
and performance of the business and the position of the
and prudent;
Company and the undertakings included in the consolidation
• state whether Financial Reporting Standard 101 Reduced
taken as a whole, together with a description of the principal
Disclosure Framework has been followed, subject to any
risks and uncertainties that they face; and
material departures disclosed and explained in the financial
• the Annual Report and financial statements, taken as a whole,
statements; and
are fair, balanced and understandable and provide the
• prepare the financial statements on the going concern basis
information necessary for shareholders to assess the Company’s
unless it is inappropriate to presume that the Company will
position, performance, business model and strategy.
continue in business.
This responsibility statement was approved by the Board of
In preparing the Group financial statements, International
Directors on 20 June 2022 and is signed on its behalf by:
Accounting Standard 1 requires that Directors:
Miles Roberts Adrian Marsh
• properly select and apply accounting policies; Group Chief Executive Group Finance Director
• present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable 20 June 2022 20 June 2022
information;
• provide additional disclosures when compliance with the
specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial
performance; and
• make an assessment of the Company’s ability to continue as a
going concern.
114
FINANCIAL STATEMENTS
## Independent Auditor’s report to the members of DS Smith Plc
### Report on the audit of the financial statements
1. Opinion
In our opinion:
• the financial statements of DS Smith Plc (the 'parent Company') and its subsidiaries (the 'group') give a true and fair view of the state of the
group's and of the parent Company's affairs as at 30 April 2022 and of the group's profit for the year then ended;
• the group financial statements have been properly prepared in accordance with United Kingdom adopted international accounting
standards and International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB);
• the parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, including Financial Reporting Standard 101 "Reduced Disclosure Framework"; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise :
• the consolidated income statement;
• the consolidated statement of comprehensive income;
• the consolidated and parent Company balance sheets;
• the consolidated and parent Company statements of changes in equity;
• the consolidated cash flow statement;
• the related notes 1 to 34 to the consolidated financial statements; and
• the related notes 1 to 17 to the parent Company financial statements.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law, international
accounting standards in conformity with the requirements of the Companies Act 2006 and IFRSs as adopted by the United Kingdom and
IFRSs as issued by the International Accounting Standards Board (IASB). The financial reporting framework that has been applied in the
preparation of the parent Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101
Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to the
group and parent Company for the year are disclosed in note 3 to the financial statements. We confirm that the non-audit services prohibited
by the FRC’s Ethical Standard were not provided to the group or the parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Annual Report 2022 dssmith.com 115
Annual Report 2022 dssmith.com 115
FINANCIAL STATEMENTS
## Independent Auditor’s report to the members of DS Smith Plc (continued)
3. Summary of our audit approach
Key audit The key audit matters that we identified in the current year were:
matters
• Classification and presentation of adjusting items; and
• Valuation of uncertain tax position provisions
These key audit matters have a similar level of risk to the prior year and were presented as key audit matters in our
2021 audit report.
Materialit The materiality that we used for the group financial statements was £23m (2021: £20m) which was determined on
the basis of c. 6% of statutory profit before tax (2021: 0.33% of revenue).
As a listed entity we typically seek to apply a profit based measure as the primary basis for materiality. The revision to
our approach to determining materiality from the prior year is due to the more stable performance across the group’s
operations in FY22 following a year of volatility in profit in the year to 30 April 2021 from the impact of the Covid-19
pandemic on the group’s operations and consumer demand in the markets in which the group operates.
Scoping Our full scope audits and specified audit procedures resulted in coverage of 86% (2021: 83%) of the group’s profit
before tax before adjusting items and 73% (2021: 73%) of the group’s revenue.
Significant In determining our materiality we have reverted to using a profit-based benchmark, our preferred approach for
changes in determining materiality for listed entities, following the volatility in this measure in 2021 financial year due to the
our approach impact of Covid-19.
Our key audit matters remain consistent with those identified in the prior year.
116
y
116
FINANCIAL STATEMENTS

### 4. Conclusions relating to going concern

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.

Our evaluation of the directors' assessment of the group's and parent Company's ability to continue to adopt the going concern basis of accounting included:

- assessing the group's financing facilities including the nature of facilities, repayment terms, covenants and available undrawn committed facilities;
- considering the reasonableness of the projections and the appropriateness of the sensitivities performed by management;
- evaluating the key assumptions used in the forecasts;
- recalculating the amount of headroom in the forecasts (liquidity and covenants);
- assessing the linkage to the group's business model and identified principal risks;
- performing additional sensitivity scenario analysis;
- assessing the historical accuracy of forecasts prepared by management;
- assessing the mathematical accuracy of the model itself; and
- assessing the disclosures relating to going concern.

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 parent 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 relation to the reporting on how the group has 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.

### 5. Key audit matters

Key audit matters are these matters that, in our professional judgement, were of most significance in our 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) that we identified. These matters included 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 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.

### 5.1. Classification and presentation of adjusting items

Key audit matter description

The classification and presentation of costs and income within adjusting items in the income statement is a key determinant in assessing the quality of the group's earnings and also presents the opportunity for management bias in the presentation of results. Management judgement is required in determining the accounting policy for identifying if an item is adjusting based on the size, nature and incidence of the item. Additionally, this is an area that attracts greater scrutiny from the financial reporting regulator.

For the year ended 30 April 2022, the group recognised net adjusting items before taxation in continuing operations of £37m (2021: £56m). Such items include business disposals, restructuring, acquisition and integration costs, and impairments.

Refer to note 4 for details of adjusting items in the year and note 1(x) for management's policy for identifying adjusting items and note 1(aa) where adjusting items are identified as a critical accounting judgement. The classification and presentation of adjusting items is also considered to be a significant matter for the Audit Committee (page 85).

Annual Report 2022 dssmith.com

117
FINANCIAL STATEMENTS
## Independent Auditor’s report to the members of DS Smith Plc (continued)
How the scope As a response to the identified key audit matter, we performed the following audit procedures:
of our audit
• We obtained an understanding of relevant controls in respect of the classification and presentation of
responded to
adjusting items;
the key audit
matter • We considered and challenged the appropriateness and classification of the items which are included within
adjusting items by testing a sample and agreeing them back to relevant supporting documentation;
• We tested and considered items within underlying results which may be adjusting by nature but not
separately identified;
• We assessed the appropriateness of the adjusting items recorded in accordance with management’s policy and the
latest guidance from the FRC including the latest thematic review on this topic; and
• We assessed the related disclosure in the group financial statements for consistency with the prior period and
current market best practice.
Key We are satisfied that the amounts classified as adjusting items are in accordance with the group’s accounting policy
observations and the related disclosure of these items in the financial statements is appropriate.
5.2. Valuation of uncertain tax position provisions
Key audit The value of the tax provisions against a number of uncertain tax positions requires judgement in relation to the likely
matter outcome of negotiations with various tax authorities. Areas of particular focus included transfer pricing provisioning
description and other uncertain tax positions in the UK and overseas. The total tax risk provision (including interest thereon) held
by the Group is £117.8m (2021: £115.6m).
Refer to note 1(w) for management’s process for estimating and recording tax provisions and note 1(z) for further
detail in respect of the range of possible outcomes with regards to those uncertain tax positions. Taxation is also
identified in note 1(z) as a key source of estimation uncertainty and to be a significant matter for the Audit Committee.
How the scope As a response to the identified key audit matter, we performed the following audit procedures:
of our audit
• We obtained an understanding of relevant controls in respect of the provisioning for uncertain tax positions;
responded to
the key audit • We involved our tax specialists, including those in local jurisdictions as required, to challenge the estimates and
matter judgements made by management when calculating the income tax payable in each territory and the associated
provisions held in relation to tax exposures. This included consideration of tax exposures relating to transfer pricing
and consideration of specific provisions made in relation to UK and overseas tax risks;
• Specifically, we have reviewed and assessed the correspondence with the taxation authorities in significant
locations and the supporting evidence or opinions received from external counsel or other advisors where
management has utilised such opinions to estimate the likely outcome of technical tax treatments in order to
assess the reasonableness of the provisions made and
• We assessed the mathematical accuracy and appropriateness of the underlying source data used to calculate UK
and overseas taxation provisions.
Key We are satisfied that the estimates and judgements made by management used in the recording and valuation of the
observations uncertain tax provisions are reasonable.
118
118
FINANCIAL STATEMENTS
6. Our application of materiality
## Independent Auditor’s report to the members of DS Smith Plc (continued)
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in
As a response to the identified key audit matter, we performed thefollowing audit procedures: evaluating the results of our work.
How the scope
of our audit
• We obtained an understanding of relevant controls in respect of the classification and presentation of Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
responded to
adjusting items;
the key audit Group financial statements Parent Company financial statements
matter • We considered and challenged the appropriateness and classification of the items which are included within
adjusting items by testing a sample and agreeing them back to relevant supporting documentation; Materialit £23m (2021: £20m) £11.5m (2021: £10m)
• We tested and considered items within underlying results which may be adjusting by nature but not
Basis for We have used statutory profit before tax as the primary Parent Company materiality equates to less than 1%
separately identified;
determining benchmark in determining materiality and the materiality (2021: less than 1%) of net assets, and is capped at
• We assessed the appropriateness of the adjusting items recorded in accordance with management’s policy and the
materiality equates to 6.0% of statutory profit before tax. 50% (2021: 50%) of group materiality.
latest guidance from the FRC including the latest thematic review on this topic; and
In the prior year, we used revenue as the benchmark in
• We assessed the related disclosure in the group financial statements for consistency with the prior period and
determining materiality and this equates to 0.33% of revenue
current market bestpractice.
and approximately 7% of statutory profit before tax.
Key We are satisfied that the amounts classified as adjusting items are in accordance with the group’s accounting policy
Rationale for In determining our materiality we have reverted to using a profi - Net assets is typically considered an appropriate
observations and the related disclosure of these items in the financial statements is appropriate.
the benchmark based benchmark, our preferred approach for determining benchmark for materiality as the parent Company is
applied materiality for listed entities following the volatility in this the holding Company, but given the quantum of net
5.2. Valuation of uncertain tax position provisions measure in 2021 financial year due to the impact of Covid-19. assets on the parent Company balance sheet, we
have limited materiality to 50% of group materiality.
Profit before tax is a key metric for users of the financial
Key audit The value of the tax provisions against a number of uncertain tax positions requires judgement in relation to the likely
statements and is consistent with the group’s internal and
matter outcome of negotiations with various tax authorities. Areas of particular focus included transfer pricing provisioning
description external reporting.
and other uncertain tax positions in theUK and overseas. The total tax risk provision (including interest thereon) held
by the Group is £117.8m (2021: £115.6m).
Refer to note 1(w) for management’s process for estimating and recording taxprovisions and note 1(z) for further
detail in respectof therange of possible outcomes with regards to those uncertain tax positions.Taxationis also
identified in note 1(z) as a key source of estimation uncertainty andto be a significant matter for theAudit Committee.
Materiality £23mStatutory profit
How the scope As a response to the identified key audit matter, we performed thefollowing audit procedures: before tax £378m
of our audit
• We obtainedan understanding of relevant controlsin respect of the provisioning for uncertain tax positions;
responded to
the key audit • We involved our tax specialists, including those in local jurisdictions as required, to challenge the estimates and
matter Statutory profit before tax
judgements made by management when calculating the income tax payable in each territory and the associated
provisions held in relation to tax exposures. This included consideration of tax exposures relating to transfer pricing Materiality Audit Committee
and consideration of specific provisions made in relation to UKand overseas tax risks; reporting threshold £1m
• Specifically, we have reviewed and assessed the correspondencewith the taxation authorities in significant
locations and the supporting evidence or opinions received from external counsel or other advisors where
management has utilisedsuch opinions toestimate thelikely outcome of technical tax treatments in order to 6.2. Performance materiality
assess the reasonableness of the provisions made and We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected
• We assessed the mathematical accuracy and appropriateness of the underlying source data used to calculate UK misstatements exceed the materiality for the financial statements as a whole.
and overseas taxation provisions.
Group financial statements Parent Company financial statements

| Key | We are satisfied that the estimates and judgements made by management used in the recording and valuation of the |  |  |  |
| --- | --- | --- | --- | --- |
|  |  | Performance | 70% (2021: 65%) of group materialit | 70% (2021: 65%) of parent Company materialit |
| observations | uncertain tax provisions are reasonable. |  |  |  |

materialit
Basis and On the basis of our risk assessment, our assessment of the group’s control environment, the number and quantum of
rationale for misstatement identified and management’s willingness to correct misstatements that may be identified, we set
determining performance materiality for the group and parent Company as 70% (2021: 65%) of group materiality. The increase on
performance the prior year audit reflects the group’s recovery against the impact of the pandemic and its underlying performance
this year.
materiality
Accordingly, we set performance materiality for the group at £16.1m (2021: £13.0m) and parent Company at £8.0m
(2021: £6.5m).
Annual Report 2022 dssmith.com 119
y y y y t
118 Annual Report 2022 dssmith.com 119
FINANCIAL STATEMENTS

## Independent Auditor's report to the members of DS Smith Plc (continued)

### 6.3. Error reporting threshold

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1m (2021: £1m), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

### 7. An overview of the scope of our audit

#### 7.1. Identification and scoping of components

Our group audit was scoped by obtaining an understanding of the group and its environment, including group-wide controls, and assessing the risks of material misstatement at the group level.

The group operates in four geographic segments, three in Europe (Northern Europe, Eastern Europe and Southern Europe) and another in North America.

Based on that assessment, we focused our group audit scope primarily on the audit work at seventeen components (2021: sixteen) located across the United Kingdom, Spain, Portugal, France, Germany, North America, Italy, Hungary, Poland, Denmark, Netherlands and Sweden. These seventeen components represent the principal business units within the group's key reportable segments and accordingly provide an appropriate basis for undertaking audit work to address the risks of material misstatement. Component materiality was capped at £8.0m (2021: £6.5m) in total, these components accounted for 73% (2021: 73%) of revenue and 86% (2021: 83%) of profit before tax and adjusting items.

The group audit team takes an active part in the conduct of the audits at these components. For each component, we included the component audit teams in our team briefings; held over video conference call facilities to discuss the group risk assessment and audit instructions, to confirm their understanding of the business, and to discuss their local risk assessment. Throughout the audit, we maintained regular contact in order to support, challenge and direct their audit approach. We also attended local audit close meetings with local management, performed reviews of their working papers of significant and material components, and reviewed their reporting to us of the findings from their work.

At the head office level, we also tested the consolidation process and carried out analytical procedures to verify our conclusion that there were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject to audit.

#### Revenue

![img-6.jpeg](img-6.jpeg)

#### Profit before tax and adjusting items

![img-7.jpeg](img-7.jpeg)

#### 7.2. Our consideration of the control environment

Our approach to controls testing across the group reflects the geographical spread of the group, its decentralised nature and the complex systems landscape. We do not take a centralised approach to controls testing and controls reliance across the group. A number of component audit teams took a controls reliance approach in respect of some business process cycles (e.g. revenue) whilst other components do not. The ability to take controls reliance is impacted by the effectiveness of IT controls in place. We involved IT specialists in performing tests related to IT controls.

No significant deficiencies have been noted in respect of the controls testing performed across the group.

120
FINANCIAL STATEMENTS

### 7.3 Our consideration of climate-related risks

As highlighted in management's TCFD report on pages 56 to 60 and the principal risks on pages 47 to 55 the group is exposed to the impacts of climate change on its business and operations. In considering the scope of our audit procedures we have obtained management's assessment on the impact of climate change on their financial statements and built this into our risk assessment through consideration of the risks in climate change. The key areas in the group financial statement considered for FY22 were the statements used in the goodwill impairment review and in the directors' assessment of the adoption of the going concern basis and long-term viability alongside consideration across all financial statement account balances. The group continues to develop its assessment of the potential impacts of climate change and identified the extensive climate related strategic goals, climate commitments, scenario evaluation, risk management processes and the link through the group's governance processes all of which are articulated in the Annual Report.

We performed our own qualitative risk assessment of the potential impact of climate change on the group's account balances and classes of transaction and did not identify any reasonably possible risks of material misstatement. We also involved climate change and sustainability specialists for assessment of the Task Force on Climate-Related Financial Disclosures reporting and considering whether it is materially consistent with the financial statements and our knowledge obtained in the audit.

### 8. Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the Annual Report.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

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 course of the audit, or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. 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 in this regard.

### 9. Responsibilities of Directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors 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 parent 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 parent Company or to cease operations, or have no realistic alternative but to do so.

### 10. Auditor's 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 auditor's report that includes our opinion. Reasonable assurances are 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.

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/auditor/responsibilities. This description forms part of our auditor's report.

### 11. Extent to which the audit was considered capable of detecting irregularities, including fraud

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.

Annual Report 2022 dssmith.com

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FINANCIAL STATEMENTS
## Independent Auditor’s report to the members of DS Smith Plc (continued)
11.1 Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including the design of the group's remuneration
policies, key drivers for directors' remuneration, bonus levels and performance targets;
• results of our enquiries of management, which this year also included a fraud brainstorming session held with key members of
management, together with further enquiries of internal audit, and the audit committee about their own identification and assessment of
the risks of irregularities;
• any matters we identified having obtained and reviewed the group's documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
• the matters discussed among the audit engagement team including significant component audit teams and relevant internal specialists,
including tax, valuations, pensions, financial instruments and IT specialists regarding how and where fraud might occur in the financial
statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified
the greatest potential for fraud related to the classification and presentation of adjusting items. In common with all audits under ISAs (UK), we
are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the group operates in, focusing on provisions of those laws
and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws
and regulations we considered in this context included the UK Companies Act, Listing Rules, pensions legislation and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance
with which may be fundamental to the group's ability to operate or to avoid a material penalty. These included the regulatory solvency
requirements and environmental regulations.
11.2 Audit response to risks identified
As a result of performing the above, we identified classification and presentation of adjusting items as a key audit matter. The key audit
matters section of our report explains the matter in more detail and also describes the specific procedures we performed in response to that
key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant
laws and regulations described as having a direct effect on the financial statements;
• enquiring of management, the audit committee and in-house legal counsel concerning actual and potential litigation and claims.
Where relevant we also met directly with external advisers and legal counsel;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due
to fraud;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence
with HMRC;
• understanding safeguards management have in place, such as whistleblower hotlines, and making enquiries of internal audit as to the
nature of matters reported; and
• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the
business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal
specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
122
122
FINANCIAL STATEMENTS

# Report on other legal and regulatory requirements

# 12. Opinions on other matters prescribed by the Companies Act 2006

In our opinion the part of the directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the group and the parent Company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors' report.

# 13. Corporate Governance Statement

The Listing Rules require us to review the directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the group's compliance with the provisions of the UK Corporate Governance Code specified for our review.

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 with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on pages 50 and 51;
the directors' explanation as to its assessment of the group's prospects, the period this assessment covers and why the period is appropriate set out on page 49;
the directors' statement on fair, balanced and understandable set out on page 114;
the board's confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 79;
the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on pages 79 to 81; and
the section describing the work of the audit committee set out on page 82 to 87.

# 14. Matters on which we are required to report by exception

# 14.1. Adequacy of explanations received and accounting records

Under the Companies Act 2006 we are required to report to you if, in our opinion:

we have not received all the information and explanations we require for our audit; or
- adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent Company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

# 14.2. Directors' remuneration

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors' remuneration have not been made or the part of the directors' remuneration report to be audited is not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

Annual Report 2022 dssmith.com

123
FINANCIAL STATEMENTS

# Independent Auditor's report to the members of DS Smith Plc (continued)

## 15. Other matters which we are required to address

### 15.1. Auditor tenure

Following the recommendation of the audit committee, we were appointed by the shareholders on 13 October 2006 to audit the financial statements for the year ended 30 April 2007 and subsequent financial periods. Following a competitive tender process, we were reappointed as auditor for the year ended 30 April 2014 and subsequent financial years. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 16 years, covering the years ended 30 April 2007 to 30 April 2022. The year to 30 April 2022 will be our final year as auditor of DS Smith Plc.

### 15.2. Consistency of the audit report with the additional report to the audit committee

Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with ISAs (UK).

## 16. Use of our report

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members these matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.114R, these financial statements form part of the European Single Electronic Format (ESEF) prepared Annual Financial Report filed on the National Storage Mechanism of the UK FCA in accordance with the ESEF Regulatory Technical Standard (ESEF RTS). This auditor's report provides no assurance over whether the annual financial report has been prepared using the single electronic format specified in the ESEF RTS.

### Nicola Mitchell

(Senior Statutory Auditor)

For and on behalf of Deloitte LLP

Statutory Auditor

London, United Kingdom

20 June 2022

124
FINANCIAL STATEMENTS
## Consolidated income statement
Year ended 30 April 2022
Before Adjusting After Before Adjusting After
adjusting items adjusting adjusting items adjusting
## Independent Auditor’s report to the members of DS Smith Plc (continued)

|  |  | items | 2022 | items | items | 2021 | items |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | 2022 | (note 4) | 2022 | 2021 | (note 4) | 2021 |
| Continuing operations | Note | £m | £m | £m | £m | £m | £m |

Revenue 2 7,241 – 7,241 5,976 – 5,976
Operating costs 3,4 (6, 625) (37) (6,662) (5,474) (44) (5,518)
15. Other matters which we are required to address
Operating profit before amortisation,

| 15.1. Auditor tenure | acquisitions and divestments |  | 2 616 (37) 579 502 (44) 458 |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Following the recommendation of the audit committee,we were appointed by the shareholders on 13 October2006 to audit the financial | Amortisation of intangible assets; |  |  |  |  |  |  |  |  |
| statements for the year ended30 April 2007 and subsequentfinancial periods. Following a competitive tenderprocess, we were reappointed | acquisitions and divestments | 10, 4 (138) 2 (136) (142) (5) (147) |  |  |  |  |  |  |  |
| as auditor for the year ended 30 April 2014 and subsequent financial years. The period of total uninterrupted engagement includingprevious | Operating profit 4 478 360 (49) 311 |  |  |  | (35) |  | 443 |  |  |
| renewals and reappointments of thefirm is 16 years, covering the years ended 30 April 2007 to 30 April 2022. The year to 30 April 2022 will | Finance income 5 |  |  | 1 |  |  |  |  | 1 – 1 |
|  |  |  |  |  |  | – |  | 1 |  |
| be ourfinal year as auditor of DS Smith Plc. | Finance costs 5, 4 (68) (2) (70) (76) (7) (83) |  |  |  |  |  |  |  |  |

Employment benefit net finance expense 25 (3) – (3) (3) – (3)
15.2. Consistency of the audit report with the additional report to the audit committee
Net financing costs (70) (2) (72) (78) (7) (85)
Our audit opinion isconsistent with the additional report to the audit committee we are required to provide in accordance with ISAs (UK).
Profit after financing costs 408 282 (56) 226 (37) 371
16. Use of our report
Share of profit of equity accounted investments,
net of tax 13 7 – 7 5 – 5
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s Profit before income tax 415 (37) 3 78 287 (56) 231
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Income tax (expense)/credi 7, 4 (100) 2 (98) (65) 16 (49)
Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Profit for the year from continuing operations 315 (3 5) 28 0 222 (4 0) 182
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule(DTR) 4.1.14R, these financial statements Discontinued operations
form part of the European Single Electronic Format (ESEF) prepared Annual Financial Report filed on the National Storage Mechanism of the Profit for the year from discontinued operations,
UK FCA in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report provides no assurance overwhether the net of tax 30(b) – – – – 12 12
annual financial report has been prepared using the single electronic format specified in theESEF RTS. Profit for the year 315 (35) 280 222 (28) 194
Profit for the year attributable to:
Nicola Mitchell Owners of the paren 315 (35) 280 222 (28) 1 94
(Senior Statutory Auditor) Non-controlling interests –––– – –
For and on behalf of Deloitte LLP
Statutory Auditor Earnings per share
London, United Kingdom
Earnings per share from continuing and discontinued operations
20 June 2022
Basic 8 20.4p 14.2p
Diluted 8 20.3p 14.1p
Earnings per share from continuing operations
Basic 8 20.4p 13.3p
Diluted 8 20.3p 13.2p
Adjusted earnings per share from continuing operations
Basic 8, 33 30. 7p 24.2p
Diluted 8 30.5p 24.1p
Annual Report 2022 dssmith.com 125
t t
124 Annual Report 2022 dssmith.com 125
FINANCIAL STATEMENTS
## Consolidated statement of comprehensive income
Year ended 30 April 2022
2022 2021
Note £m £m
Profit for the year 280 1 94
Items which will not be reclassified subsequently to profit or loss
Actuarial gain/(loss) on employee benefits 25 68 (5)
Equity interest at FVTOCI – net change in fair value – (3)
Income tax on items which will not be reclassified subsequently to profit or loss 7 (14) (5)
Items which may be reclassified subsequently to profit or loss
Foreign currency translation differences (40) (95)
Reclassification from translation reserve to income statement arising on divestment (3) –
Cash flow hedges fair value changes 1,069 103
Reclassification from cash flow hedge reserve to income statemen (357) 9
Movement in net investment hedge 28 (2)
Income tax on items which may be reclassified subsequently to profit or loss 7 (162) (21)
Other comprehensive income/(expense) for the year, net of tax 589 (19)

| Total | comprehensive income for the year |  | 869 175 |
| --- | --- | --- | --- |
| Total | comprehensive income attributable to: |  |  |
| Owners of the paren |  | 869 175 |  |

Non-controlling interests – –
126
t t
126
FINANCIAL STATEMENTS
## Consolidated statement of financial position
At 30 April 2022
2022 2021
Note £m £m
## Consolidated statement of comprehensive income
Assets
Year ended 30 April 2022
Non-current assets

|  |  |  | Intangible assets | 10 2,906 2,995 |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  | Biological assets |  | 10 9 |
|  | 2022 | 2021 |  |  |  |
| Note | £m | £m | Property, plant and equipmen | 11 3,128 3,050 |  |
|  |  |  | Right-of-use assets | 12 199 226 |  |

Profit for the year 280 194
Equity accounted investments 13 17 38
Items which will not be reclassified subsequently to profit or loss
Other investments 14 16 13
Actuarial gain/(loss) on employee benefits 25 68 (5)
Deferred tax assets 22 7 37
Equity interest at FVTOCI – net change in fair value – (3) Other receivables
16 – 1

| Income tax on items which will not be reclassified subsequently to profit or loss 7 (14) (5) | Derivative financial instruments | 21 495 35 |  |
| --- | --- | --- | --- |
| Items which may be reclassified subsequently to profit or loss | Total non-current assets |  | 6,778 6,404 |
| Foreign currency translation differences (40) (95) | Current assets |  |  |
|  | Inventories | 15 703 537 |  |

Reclassificationfrom translation reserve to income statement arising on divestment (3) –
Biological assets 7 6
Cash flow hedges fair value changes 1,069 103

|  |  | Income tax receivable |  | 34 41 |
| --- | --- | --- | --- | --- |
| Reclassificationfrom cash flow hedge reserve to income statemen | (357) 9 |  |  |  |
|  |  | Trade and other receivables | 16 1,229 818 |  |
| Movement in netinvestment hedge 28 (2) |  | Cash and cash equivalents | 19 819 813 |  |
| Income tax on items which may be reclassified subsequently toprofit orloss 7 (162) (21) |  | Derivative financial instruments | 21 316 80 |  |
|  |  | Assets classified as held for sale |  | – 1 |

Other comprehensive income/(expense) for the year, net of tax 589 (19)

|  |  | Total current assets | 3,108 2,296 |
| --- | --- | --- | --- |
|  |  | Total assets | 9,886 8,700 |
| Total comprehensive income for the year | 869 175 |  |  |

Liabilities
Non-current liabilities
Total comprehensive income attributable to:

|  |  | Borrowings | 20 | 1,391 |  | 2,066 |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Owners of the paren | 869 175 | Employee benefits | 25 |  | 86 |  | 175 |
| Non-controlling interests – – |  | Other payables | 17 |  | 37 |  | 15 |
|  |  | Provisions | 23 |  | 7 |  | 8 |
|  |  | Lease liabilities | 12 |  | 140 |  | 159 |
|  |  | Deferred tax liabilities | 22 |  | 396 |  | 271 |
|  |  | Derivative financial instruments | 21 |  | 28 |  | 15 |
|  |  | Total non-current liabilities |  | 2,085 |  | 2,709 |  |

Current liabilities

| Bank overdrafts | 19 |  | 73 |  | 94 |
| --- | --- | --- | --- | --- | --- |
| Borrowings | 20 |  | 681 |  | 235 |
| Trade and other payables | 17 | 2,503 |  | 1,834 |  |
| Income tax liabilities |  |  | 143 |  | 133 |
| Provisions | 23 |  | 48 |  | 48 |
| Lease liabilities | 12 |  | 63 |  | 71 |
| Derivative financial instruments | 21 |  | 56 |  | 41 |
| Total current liabilities |  | 3,567 |  | 2,456 |  |
| Total liabilities |  | 5,652 |  | 5,165 |  |
| Net assets |  | 4,234 3,535 |  |  |  |
| E uit |  |  |  |  |  |
| Issued capital | 24 137 137 |  |  |  |  |
| Share premium |  | 2,248 2,241 |  |  |  |
| Reserves | 24 1,847 1,155 |  |  |  |  |
| Total equity attributable to owners of the paren |  | 4,232 3,533 |  |  |  |
| Non-controlling interests |  |  | 2 2 |  |  |
| Total equity |  | 4,234 3,535 |  |  |  |

Approved by the Board of Directors of DS Smith Plc on 20 June 2022 and signed on its behalf by:
M W Roberts A R T Marsh
Director Director
The accompanying notes are an integral part of these consolidated financial statements.
Annual Report 2022 dssmith.com 127
t t ( ) ( ( ) ( ( ( ( ( ( ( ( ( ) ( ) ( ( ( ( ( ( ) ( ) ( ( ( ) ( ( ( ( ( ( ) ( ( ) ( ( ) ( q ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) y ) ) ) ) ) ) t t
126 Annual Report 2022 dssmith.com 127
FINANCIAL STATEMENTS
## Consolidated statement of changes in equity
Year ended 30 April 2022
Total equit
attributable

|  |  |  |  |  |  |  |  |  |  |  |  | to owners |  |  | Non- |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Share |  | Share | Hedging |  | Translation |  |  | Own | Retained |  |  | of the | controlling |  | Total |
|  | capital | premium |  | reserve |  |  | reserve |  | shares | earnings | 1 |  | parent | interests |  | equity |
| Note | £m |  | £m |  | £m |  |  | £m | £m |  | £m |  | £m |  | £m | £m |

At 1 May 2020 137 2,238 (39) 14 (3) 1,003 3,350 1 3,351
Profit for the yea – – – – – 194 194 – 194
Actuarial loss on employee benefits 25 – – – – – (5) (5) – (5)
Equity interest at FVTOCI – change in
fair value – – – – – (3) (3) – (3)
Foreign currency translation differences – – – (95) – – (95) – (95)
Cash flow hedges fair value changes – – 103 – – – 103 – 103
Reclassification from cash flow hedge
reserve to income statement 21(c) – – 9 – – – 9 – 9
Movement in net investment hedge – – – (2) – – (2) – (2)
Income tax on other comprehensive income – – (20) (1) – (5) (26) – (26)
Total comprehensive income/(expense) – – 92 (9 8) – 181 17 5 – 17 5
Issue of share capital – 3 – – – – 3 – 3
Employee share trus – – – – – (2) (2) – (2)
Share-based payment expense
(net of tax) – – – – – 10 10 – 10
Transactions with non-controlling interests – – – – – (3) (3) 1 (2)
Other changes in equity in the year – 3 – – – 5 8 1 9
At 30 April 2021 137 2,241 53 (84) (3) 1,189 3,533 2 3,535
Profit for the yea – – – – – 280 280 – 280
Actuarial gain on employee benefits 25 – – – – – 68 68 – 68
Foreign currency translation differences – – – (4 0) – – (40) – (4 0)
Reclassification from translation reserve
to income statement arising on
divestment – – – (3) – – (3) – (3)
Cash flow hedges fair value changes – – 1,069 – – – 1,069 – 1,069
Reclassification from cash flow hedge
reserve to income statement 21(c) – – (357) – – – (357) – (357)
Movement in net investment hedge – – – 28 – – 28 – 28
Income tax on other comprehensive income – – (163) 1 – (14) (176) – (176)
Total comprehensive income/(expense) – – 549 (14) – 334 869 – 86 9
Issue of share capital – 7 – – – – 7 – 7
Employee share trus – – – – (6) (15) (21) – (21)
Share-based payment expense
(net of tax) – – – – – 10 10 – 1 0
Dividends paid 9 – – – – – (166) (166) – (166)
Reclassification – – 7 (7) – – – – –
Other changes in equity in the year – 7 7 (7) (6) (1 71) (17 0) – (1 70)
At 30 April 2022 137 2, 248 6 09 (105) (9) 1,352 4,23 2 2 4,234
1. Retained earnings include a reserve related to merger relief (note 24).
128
y r r t t
128
FINANCIAL STATEMENTS
## Consolidated statement of cash flows
Year ended 30 April 2022
2022 2021
Continuing operations Note £m £m
## Consolidated statement of changes in equity
Operating activities
Year ended 30 April 2022
Cash generated from operations 27 1,07 9 895
Interest received 1 1
Total equit Interest paid (63) (69)
attributable

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | to owners |  |  | Non- |  | Tax paid (96) (66) |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  | Share |  | Share | Hedging |  | Translation |  |  | Own | Retained |  |  | of the | controlling |  | Total |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1 |  |  |  |  |  | Cash flows from operating activities 921 761 |  |
|  |  |  |  | capital | premium |  | reserve |  |  | reserve |  | shares | earnings |  |  | parent | interests |  | equity |  |  |
|  |  | Note |  | £m |  | £m |  | £m |  |  | £m | £m |  | £m |  | £m |  | £m | £m | Investing activities |  |
| At 1 May 2020 137 2,238 (39) 14 (3) 1,003 3,350 1 3,351 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Acquisition of subsidiary businesses, net of cash and cash equivalents 30 (23) (90) |  |
| Profit for the yea | – – – – – 194 194 – 194 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Divestment of subsidiary businesses, net of cash and cash equivalents 30 35 16 |  |
| Actuarial loss on employee benefits 25 – – – – – (5) (5) – (5) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Capital expenditure (431) (331) |  |
| Equity interest at FVTOCI – change in |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Proceeds from sale of property, plant and equipment and intangible assets 16 8 |  |
| fair value |  |  | – – – – – (3) (3) – (3) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Cash (outflows)/ inflows from res | ricted cash and other deposits (2) 4 |

Foreign currency translation differences – – – (95) – – (95) – (95)
Othe investing activities 2 2
Cash flow hedges fair value changes – – 103 – – – 103 – 103
Cash flows used in investing activities (403) (391)
Reclassification from cash flow hedge
Financing activities
reserve to income statement 21(c) – – 9 – – – 9 – 9
Proceeds from issue of share capital 7 3
Movement in net investment hedge – – – (2) – – (2) – (2)
Repayment of borrowings (529) (1,213)
Income tax on other comprehensive income – – (20) (1) – (5) (26) – (26)
Proceeds from borrowings 334 1, 157
Total comprehensive income/(expense) – – 92 (98) – 181 175 – 175
Payments in respect of derivative financial instruments (35) (16)
Issue of share capital – 3 – – – – 3 – 3
Repayment of principal on lease liabilities (73) (73)
Employee share trus – – – – – (2) (2) – (2)
Dividends paid to Group shareholders 9 (166) –
Share-based payment expense
Othe (21) –
(net of tax) – – – – – 10 10 – 10
Cash flows used in financing activities (483) (142)
Transactions with non-controlling interests – – – – – (3) (3) 1 (2)
Increase in cash and cash equivalents from continuing operations 35 228
Other changes in equity in the year – 3 – – – 5 8 1 9
Discontinued operation
At 30 April 2021 137 2,241 53 (84) (3) 1,189 3,533 2 3,535
Cash flows used in discontinued operation 30(b) – (10)
Profit for the yea – – – – – 280 280 – 280
Increase in cash and cash equivalents 35 218
Actuarial gain on employee benefits 25 – – – – – 68 68 – 68
Net cash and cash equivalents at beginning of the yea 719 505
Foreign currency translation differences – – – (40) – – (40) – (40)
Exchange losses on cash and cash equivalents (8) (4)
Reclassification from translation reserve
to income statement arising on Net cash and cash equivalents at end of the year 19 746 719
divestment – – – (3) – – (3) – (3)
Cash flow hedges fair value changes – – 1,069 – – – 1,069 – 1,069
Reclassification from cash flow hedge
reserve to income statement 21(c) – – (357) – – – (357) – (357)
Movement in net investment hedge – – – 28 – – 28 – 28
Income tax on other comprehensive income – – (163) 1 – (14) (176) – (176)
Total comprehensive income/(expense) – – 549 (14) – 334 869 – 869
Issue of share capital – 7 – – – – 7 – 7
Employee share trus – – – – (6) (15) (21) – (21)
Share-based payment expense
(net of tax) – – – – – 10 10 – 10
Dividends paid 9 – – – – – (166) (166) – (166)
Reclassification – – 7 (7) – – – – –
Other changes in equity in the year – 7 7 (7) (6) (171) (170) – (170)
At 30 April 2022 137 2,248 609 (105) (9) 1,352 4,232 2 4,234
1. Retained earnings include a reserve related to merger relief (note 24).
Annual Report 2022 dssmith.com 129
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128 Annual Report 2022 dssmith.com 129
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements
1. Significant accounting policies The criteria for held for sale classification is regarded as met only
when the sale is highly probable and the asset or disposal group is
(a) Basis of preparation
available for immediate sale in its present condition. Actions required
(i) Consolidated financial statements to complete the sale should indicate that it is unlikely that significant
changes to the sale will be made or that the decision to sell will be
These financial statements are the consolidated financial statements
withdrawn. Management must be committed to the plan to sell the
for the Group consisting of DS Smith Plc, a company registered in
asset and the sale is expected to be completed within one year from
England and Wales, and all its subsidiaries. The consolidated financial
the date of the classification.
statements have been prepared and approved by the Directors in
accordance with international accounting standards in conformity Assets and liabilities classified as held for sale are presented
with the requirements of the Companies Act 2006 and International separately as current items in the statement of financial position.
Financial Reporting Standards as issued by the International
Discontinued operations are excluded from the results of continuing
Accounting Standards Board (IASB).
operations and are presented as a single amount as profit or loss after
On 31 December 2020 EU-adopted IFRS was brought into UK law and tax from discontinued operations in the income statement. Cash
became UK adopted international accounting standards, with future flows generated from discontinued operations are presented as a
changes to IFRS being subject to endorsement by the UK single item in the statement of cash flows.
Endorsement Board. This transition constitutes a change in
All other notes to the financial statements include amounts for
accounting framework. The Group transitioned to UK-adopted
continuing operations.
International Accounting Standards in its consolidated financial
statements on 1 May 2021. However, there is no change in relation to (iii) New accounting standards adopted
recognition, measurement or disclosures, as well as no changes in the The following new accounting standards, amendments or
accounting policies from the transition. The principal accounting interpretations have been adopted by the Group as of 1 May 2021:
policies adopted are set out below in this note and were applied
• Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9,
consistently throughout the current and preceding year.
IAS 39, IFRS 7, IFRS 4 and IFRS 16); and
The consolidated financial statements are prepared on the historical
• Covid 19 Related Rent Concessions – amendments to IFRS 16
cost basis with the exception of biological assets, other investments,
assets and liabilities of certain financial instruments and employee The adoption of new accounting standards, amendments and
benefit plans that are stated at their fair value and share-based interpretations have not had a material effect on the results for the
payments that are stated at their grant date fair value. year or the financial position at the year end.
The consolidated financial statements have been prepared on a going The accounting policies set out above have been applied consistently
concern basis as set out on pages 50-51 of the Directors’ report. The in all periods presented in these consolidated financial statements.
Directors consider that adequate resources exist for the Company to The accounting policies have been applied consistently by all
continue in operational existence for the foreseeable future. Group entities.
The preparation of consolidated financial statements requires (iv) Changes to accounting standards not yet adopted
management to make judgements, estimates and assumptions
These standards are currently not expected to have a material impact
that affect whether and how policies are applied, and the reported
on the consolidated financial statements of the Group.
amounts of assets and liabilities, income and expenses. Estimates
with a significant risk of material adjustment and the critical
accounting judgement are discussed in accounting policies 1(z)
and 1(aa).
(ii) Discontinued operations
The Group classifies non-current assets and disposal groups as held
for sale if their carrying amounts will be recovered principally through
a sale transaction rather than through continuing use. Non-current
assets and disposal groups classified as held for sale are measured
at the lower of their carrying amount and fair value less costs to sell.
Costs to sell are the incremental costs directly attributable to the
disposal of an asset or disposal group, excluding finance costs and
income tax expense.
130
130
FINANCIAL STATEMENTS
1. Significant accounting policies continued (c) Revenue
## Notes to the consolidated financial statements
The Group is in the business of providing sustainable packaging
(b) Basis of consolidation
solutions, sustainable paper products, recycling and waste
(i) Subsidiaries management services. The Group has concluded that it is the principal
The financial statements of subsidiaries are included in the in its revenue arrangements.
1. Significant accounting policies The criteria for held for sale classification is regarded as met only
consolidated financial statements from the date that control
when the sale is highly probable and the asset or disposal group is Revenue comprises the fair value of the sale of goods and services,
(a) Basis of preparation commences until the date that control ceases. Control is achieved
available for immediate sale in its present condition. Actions required net of value added tax and other sales taxes, rebates and discounts
when the Group is exposed to, or has rights to, variable returns from
to complete the sale should indicate that it is unlikely that significant and after eliminating sales within the Group. Revenue from contracts
(i) Consolidated financial statements
its involvement with the entity and has the ability to affect those
changes to the sale will be made or that the decision to sell will be with customers is recognised when control of the goods or services
These financial statements are the consolidated financial statements returns through its power over the entity. Intra-group balances and
withdrawn. Management must be committed to the plan to sell the is transferred to the customer at an amount that reflects the
for the Group consisting of DS Smith Plc, a company registered in any unrealised gains and losses or income and expenses arising from
asset and the sale is expected to be completed within one year from consideration to which the Group expects to be entitled in exchange for
England and Wales, and all its subsidiaries. The consolidated financial intra-group transactions are eliminated in preparing the consolidated
the date of the classification. those goods or services and the fulfilment of the related performance
statements have been prepared and approved by the Directors in financial statements.
obligations. Generally this occurs when the goods are loaded into the
accordance with international accounting standards in conformity Assets and liabilities classified as held for sale are presented
(ii) Interests in equity accounted investments collection vehicle if the buyer is collecting them, or when the goods are
with the requirements of the Companies Act 2006 and International separately as current items in the statement of financial position.
unloaded at the delivery address if the Group is responsible for delivery.
Financial Reporting Standards as issued by the International The Group’s interests in equity accounted investments comprise
Discontinued operations are excluded from the results of continuing
Accounting Standards Board (IASB). interests in associates and joint ventures. An associate is an entity The transaction price is the contractual price with the customer
operations and are presented as a single amount as profit or loss after
over which the Group has significant influence, but not control or joint adjusted for rebates and discounts. Rebates and discounts are
On 31 December 2020 EU-adopted IFRS was brought into UK law and tax from discontinued operations in the income statement. Cash
control, over the financial and operating policy decisions of the estimated using historical data and experiences with the customers.
became UK adopted international accounting standards, with future flows generated from discontinued operations are presented as a
investment. A joint venture is an entity in which the Group has joint Revenue is recognised to the extent that it is highly probable that
changes to IFRS being subject to endorsement by the UK single item in the statement of cash flows.
control, whereby the Group has rights to the net assets of the entity, a significant reversal will not occur. Returns from customers are
Endorsement Board. This transition constitutes a change in
All other notes to the financial statements include amounts for negligible. No element of financing is deemed present as typical
rather than rights to its assets and obligations for its liabilities.
accounting framework. The Group transitioned to UK-adopted
continuing operations. sales contracts with customers are usually shorter than 12 months.
International Accounting Standards in its consolidated financial Interests in associates and joint ventures are accounted for using the
statements on 1 May 2021. However, there is no change in relation to (iii) New accounting standards adopted equity method. They are recognised initially at cost, which includes A receivable is recognised when the goods are delivered or services
recognition, measurement or disclosures, as well as no changes in the transaction costs. Subsequent to initial recognition the consolidated provided at a point in time that consideration is unconditional because
The following new accounting standards, amendments or
accounting policies from the transition. The principal accounting financial statements include the Group’s share of the profit or loss only the passage of time is required before the payment is due.
interpretations have been adopted by the Group as of 1 May 2021:
policies adopted are set out below in this note and were applied and other comprehensive income of equity accounted investments,
Revenue by function is not provided in the Group’s disclosures as
• Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9,
consistently throughout the current and preceding year. until the date on which significant influence or joint control ceases.
the year-on-year variability in the degree of integration would be
IAS 39, IFRS 7, IFRS 4 and IFRS 16); and
The consolidated financial statements are prepared on the historical misrepresentative of the level of activity.
(iii) Non-controlling interests
• Covid 19 Related Rent Concessions – amendments to IFRS 16
cost basis with the exception of biological assets, other investments,
Non-controlling interests are shown as a component of equity in the (d) Supplier rebates
assets and liabilities of certain financial instruments and employee The adoption of new accounting standards, amendments and
consolidated statement of financial position net of the value of
The Group receives income from its suppliers, mainly in the form
benefit plans that are stated at their fair value and share-based interpretations have not had a material effect on the results for the
options over interests held by non-controlling interests in the
of volume based rebates and early settlement discounts. These are
payments that are stated at their grant date fair value. year or the financial position at the year end.
Group’s subsidiaries.
recognised as a reduction in operating costs in the year to which they
The consolidated financial statements have been prepared on a going The accounting policies set out above have been applied consistently
(iv) Business combinations relate. At the period end, where appropriate, the Group estimates
concern basis as set out on pages 50-51 of the Directors’ report. The in all periods presented in these consolidated financial statements.
supplier income due from annual agreements for volume rebates.
The accounting policies have been applied consistently by all The acquisition method is used to account for the acquisition of
Directors consider that adequate resources exist for the Company to
Group entities. subsidiaries. Identifiable net assets acquired (including intangibles) (e) Government grants
continue in operational existence for the foreseeable future.
in a business combination are measured initially at their fair values
Government grants are recognised in the statement of financial
The preparation of consolidated financial statements requires (iv) Changes to accounting standards not yet adopted
at the acquisition date.
position initially as deferred income when there is reasonable
management to make judgements, estimates and assumptions
These standards are currently not expected to have a material impact
Where the measurement of the fair value of identifiable net assets assurance that they will be received and that the Group will comply
that affect whether and how policies are applied, and the reported
on the consolidated financial statements of the Group.
acquired is incomplete at the end of the reporting period in which the with the conditions attached to them. Grants that compensate the
amounts of assets and liabilities, income and expenses. Estimates
combination occurs, the Group will report provisional fair values. Group for expenses incurred are offset against the expenses in the
with a significant risk of material adjustment and the critical
Final fair values are determined within a year of the acquisition date same periods in which the expenses are incurred. Grants relating to
accounting judgement are discussed in accounting policies 1(z)
and applied retrospectively. assets are released to the income statement over the expected
and 1(aa).
useful life of the asset to which they relate on a basis consistent
The excess of the consideration transferred and the amount of any
(ii) Discontinued operations with the depreciation policy. Depreciation is provided on the full
non-controlling interest over the fair value of the identifiable assets
The Group classifies non-current assets and disposal groups as held cost of the assets before deducting grants.
(including intangibles), liabilities and contingent liabilities acquired is
for sale if their carrying amounts will be recovered principally through
recorded as goodwill. (f) Dividends
a sale transaction rather than through continuing use. Non-current
The consideration transferred is measured as the fair value of Dividends attributable to the equity holders of the Company paid
assets and disposal groups classified as held for sale are measured
the assets given, equity instruments issued (if any), and liabilities during the year are recognised directly in equity.
at the lower of their carrying amount and fair value less costs to sell.
assumed or incurred at the date of acquisition.
Costs to sell are the incremental costs directly attributable to the
disposal of an asset or disposal group, excluding finance costs and Acquisition related costs are expensed as incurred.
income tax expense.
The results of the subsidiaries acquired are included in the
consolidated financial statements from the acquisition date.
Annual Report 2022 dssmith.com 131
130 Annual Report 2022 dssmith.com 131
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
1. Significant accounting policies continued (iv) Customer related
Customer relationships, acquired as part of a business combination,
(g) Foreign currency translation
are capitalised separately from goodwill and are carried at cost less
The consolidated financial statements are presented in sterling,
accumulated amortisation and impairment.
which is the Group’s presentational currency. Transactions in foreign
currencies are translated into the respective functional currencies of (v) Other intangible assets
Group companies at the foreign exchange rates ruling at the dates
Other intangible assets that are acquired by the Group are carried at
of the transactions. Monetary assets and liabilities denominated
cost less accumulated amortisation and impairment.
in foreign currencies at the reporting date are translated into the
functional currency at the foreign exchange rates ruling at that date. (vi) Amortisation
Foreign exchange differences arising on translation of monetary Amortisation of intangible assets (excluding goodwill) is charged to
assets and liabilities are recognised in the consolidated income the income statement on a straight-line basis over the estimated
statement. Non-monetary assets and liabilities that are measured useful lives of intangible assets, unless such lives are indefinite.
at historical cost in a foreign currency are translated using the Intangible assets (other than goodwill) are amortised from the
exchange rates at the dates of the transactions. date they are available for use.
The assets and liabilities of all the Group entities that have a The estimated useful lives are as follows:
functional currency other than sterling are translated at the closing
Intellectual propert Up to 20 years
exchange rate at the reporting date. Income and expenses for each
Computer sof ware 3–5 years
income statement are translated at average exchange rates (unless
Customer relationships 5–15 years
this average is not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction dates, in which case
(i) Property, plant and equipment
income and expenses are translated at the date of the transactions).
Property, plant and equipment is stated at cost less accumulated
On consolidation, exchange differences arising from the translation
depreciation and impairment.
of the net investment in foreign entities, borrowings, and other
Depreciation is charged to the income statement on a straight-line
financial instruments designated as hedges of such investments,
basis over the estimated useful lives of each item of property,
are recognised in the translation reserve. On the disposal of foreign
plant and equipment, and major components that are accounted
currency entities, the cumulative exchange difference recorded in the
for separately (or in the case of leased assets, the lease period,
translation reserve is taken to the consolidated income statement as
if shorter). Land is not depreciated.
part of the gain or loss on disposal.
The estimated useful lives are as follows:
(h) Intangible assets
Freehold and long leasehold properties 10–50 years
(i) Goodwill
Plant and equipmen – motor vehicles 3–5 years
The recognition of business combinations requires the excess of the
Plant and equipmen – othe , fixtures and fittings 2–30 years
purchase price of acquisitions over the net book value of identifiable
(including IT hardware)
assets acquired to be allocated to the assets and liabilities of the
acquired entity. The Group makes judgements and estimates in Gains or losses arising on the sale of surplus property assets are
relation to the fair value allocation of the purchase price. recorded through operating profit before adjusting items.
Goodwill is stated at cost less accumulated impairment losses. The useful
life of goodwill is considered to be indefinite. Goodwill is allocated to the
cash generating units (CGUs), or groups of CGUs, that are expected to
benefit from the synergies of the combination and is tested annually for
impairment, or more frequently if an impairment is indicated.
On disposal of a subsidiary or a jointly controlled entity, the attributable
amount of goodwill is included in the determination of the profit or
loss recognised in the consolidated income statement.
(ii) Intellectual property
Intellectual property is stated at cost less accumulated amortisation
and impairment.
(iii) Computer software
Computer software that is integral to a related item of hardware is
included within property, plant and equipment. All other computer
software is treated as an intangible asset.
132
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132
FINANCIAL STATEMENTS
1. Significant accounting policies continued (iii) Reversals of impairment
## Notes to the consolidated financial statements (continued)
Impairment losses in respect of goodwill are not reversed. In respect
(j) Other investments
of other assets, an impairment loss is reversed if there has been a
Other investments primarily consist of investments in unquoted
change in the estimates used to determine the recoverable amount.
equity securities and restricted cash. Equity securities are measured
An impairment loss is reversed only to the extent that the asset’s
1. Significant accounting policies continued (iv) Customer related at fair value. On initial recognition, the Group makes an irrevocable
carrying amount does not exceed the carrying amount that would
election (on an instrument-by-instrument basis) to designate
Customer relationships, acquired as part of a business combination, have been determined, net of depreciation or amortisation, if no
(g) Foreign currency translation
investments in equity instruments as at fair value through other
are capitalised separately from goodwill and are carried at cost less impairment loss had been recognised.
The consolidated financial statements are presented in sterling, comprehensive income (FVTOCI). Designation at FVTOCI is not
accumulated amortisation and impairment.
which is the Group’s presentational currency. Transactions in foreign permitted if the equity investment is held for trading or if it is (l) Derivative financial instruments
currencies are translated into the respective functional currencies of (v) Other intangible assets contingent consideration recognised by an acquirer in a business
The Group uses derivative financial instruments, primarily currency
Group companies at the foreign exchange rates ruling at the dates combination. Investment in equity instruments at FVTOCI are initially
Other intangible assets that are acquired by the Group are carried at and commodity swaps, to manage currency and commodity risks
of the transactions. Monetary assets and liabilities denominated measured at fair value plus transaction costs. Subsequently, they are
cost less accumulated amortisation and impairment. associated with the Group’s underlying business activities and the
in foreign currencies at the reporting date are translated into the measured at fair value with gains and losses arising from changes in
financing of these activities. The Group has a policy not to, and does
functional currency at the foreign exchange rates ruling at that date. (vi) Amortisation
fair value recognised in other comprehensive income and accumulated
not, undertake any speculative activity in these instruments.
Foreign exchange differences arising on translation of monetary Amortisation of intangible assets (excluding goodwill) is charged to in the investment revaluation reserve. The cumulative gain or loss
assets and liabilities are recognised in the consolidated income Such derivative financial instruments are initially recognised at fair
the income statement on a straight-line basis over the estimated is not reclassified to profit or loss on divestment of the equity
statement. Non-monetary assets and liabilities that are measured value on the date on which a derivative contract is entered into and
useful lives of intangible assets, unless such lives are indefinite. investments; instead, it is transferred to retained earnings. The Group
at historical cost in a foreign currency are translated using the are subsequently remeasured at fair value. Derivatives are carried as
Intangible assets (other than goodwill) are amortised from the has designated all investments in equity that are not held for trading
exchange rates at the dates of the transactions. assets when the fair value is positive and as liabilities when the fair
date they are available for use. as at FVTOCI.
value is negative.
The assets and liabilities of all the Group entities that have a The estimated useful lives are as follows: Restricted cash is carried at amortised cost.
functional currency other than sterling are translated at the closing The Group has elected to continue to apply the hedge accounting
Intellectual propert Up to 20 years (k) Impairment
exchange rate at the reporting date. Income and expenses for each requirements of IAS 39, as allowed under IFRS 9.
Computer sof ware 3–5 years
income statement are translated at average exchange rates (unless The carrying amounts of the Group’s assets, including tangible
Derivative financial instruments are accounted for as hedges when
Customer relationships 5–15 years
this average is not a reasonable approximation of the cumulative and intangible non-current assets, are reviewed at each reporting
designated as hedges at the inception of the contract and when
effect of the rates prevailing on the transaction dates, in which case date to determine whether there are any indicators of impairment.
(i) Property, plant and equipment the financial instruments provide an effective hedge of the
income and expenses are translated at the date of the transactions). If any such indicators exist, the asset’s recoverable amount is
underlying risk.
Property, plant and equipment is stated at cost less accumulated
estimated. Goodwill is tested for impairment annually at the same
On consolidation, exchange differences arising from the translation For the purpose of hedge accounting, hedges are classified as:
depreciation and impairment.
time, regardless of the presence of an impairment indicator.
of the net investment in foreign entities, borrowings, and other
Depreciation is charged to the income statement on a straight-line An impairment loss is recognised whenever the carrying amount • cash flow hedges when hedging exposure to variability in cash
financial instruments designated as hedges of such investments,
basis over the estimated useful lives of each item of property, of an asset, collection of assets or its CGU exceeds its recoverable flows that is attributable to a particular risk associated with either a
are recognised in the translation reserve. On the disposal of foreign
plant and equipment, and major components that are accounted amount. Impairment losses are recognised in the consolidated statement of financial position item or a highly probable forecast
currency entities, the cumulative exchange difference recorded in the
for separately (or in the case of leased assets, the lease period, income statement. transaction; or
translation reserve is taken to the consolidated income statement as
if shorter). Land is not depreciated. • hedges of the net investment in a foreign entity.
part of the gain or loss on disposal. (i) Cash generating units
The estimated useful lives are as follows:
(h) Intangible assets For the purposes of property, plant and equipment and other The treatment of gains and losses arising from revaluing derivatives
Freehold and long leasehold properties 10–50 years intangibles impairment testing, each operating segment, split by designated as hedging instruments depends on the nature of the
(i) Goodwill
process (e.g. Packaging, Paper, Recycling), is a separate individual hedging relationship as follows:
Plant and equipmen – motor vehicles 3–5 years
The recognition of business combinations requires the excess of the CGU. Goodwill impairment testing is carried out based on regional
Plant and equipmen – othe , fixtures and fittings 2–30 years Cash flow hedges: the effective portion of the gain or loss on
purchase price of acquisitions over the net book value of identifiable groupings of CGUs as set out in note 10, as this is the lowest level at
(including IT hardware)
the hedging instrument is recognised directly in equity, while the
assets acquired to be allocated to the assets and liabilities of the which goodwill is monitored for internal management purposes.
ineffective portion is recognised in the income statement. Amounts
acquired entity. The Group makes judgements and estimates in Gains or losses arising on the sale of surplus property assets are
(ii) Calculation of recoverable amount taken to equity are transferred to the income statement in the same
relation to the fair value allocation of the purchase price. recorded through operating profit before adjusting items.
period during which the hedged transaction affects profit or loss,
The recoverable amount of the Group’s assets is calculated as the
Goodwill is stated at cost less accumulated impairment losses. The useful such as when a forecast sale or purchase occurs. Where the hedged
value-in-use of the CGU to which the assets are attributed or the
life of goodwill is considered to be indefinite. Goodwill is allocated to the item is the cost of a non-financial asset or liability, the amounts taken
net selling price, if greater. Value-in-use is calculated by discounting
cash generating units (CGUs), or groups of CGUs, that are expected to to equity are transferred to the initial carrying amount of the non-
the cash flows expected to be generated by the CGU/group of CGUs
benefit from the synergies of the combination and is tested annually for financial asset or liability.
being tested for evidence of impairment. This is done using a pre-tax
impairment, or more frequently if an impairment is indicated.
discount rate that reflects the current assessment of the time value If the hedging instrument expires or is sold, terminated or exercised
On disposal of a subsidiary or a jointly controlled entity, the attributable of money, and the country-specific risks for which the cash flows without replacement or roll-over, the hedged transaction ceases
amount of goodwill is included in the determination of the profit or have not been adjusted. For an asset that does not generate largely to be highly probable, or if its designation as a hedge is revoked,
loss recognised in the consolidated income statement. independent cash flows, the recoverable amount is determined for amounts previously recognised in equity remain in equity until
the CGU to which the asset belongs. the forecast transaction occurs and are transferred to the income
(ii) Intellectual property
statement or to the initial carrying amount of a non-financial asset
Intellectual property is stated at cost less accumulated amortisation
or liability as above. If a forecast transaction is no longer expected
and impairment.
to occur, amounts previously recognised in equity are transferred
to the income statement.
(iii) Computer software
Computer software that is integral to a related item of hardware is
included within property, plant and equipment. All other computer
software is treated as an intangible asset. Annual Report 2022 dssmith.com 133
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132 Annual Report 2022 dssmith.com 133
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
1. Significant accounting policies continued (r) Borrowings
Borrowings are recognised initially at fair value, less attributable
(l) Derivative financial instruments continued
transaction costs. Subsequent to initial recognition, interest-bearing
Hedges of net investment in a foreign entity represent the effective
borrowings are stated at amortised cost unless designated in a fair
portion of the gain or loss on the hedging instrument is recognised
value hedge relationship, with borrowing costs being accounted for
directly in equity, while the ineffective portion is recognised in the
on an accruals basis in the income statement using the effective
income statement. Amounts taken to equity are transferred to the
interest method.
income statement when the foreign entity is sold.
At the reporting date, interest payable is recorded separately from
Any gains or losses arising from changes in the fair value of all other
the associated borrowings, within trade and other payables.
derivatives are taken to the income statement. These may arise from
derivatives for which hedge accounting is not applied because they (s) Employee benefits
are not effective as hedging instruments.
(i) Defined contribution schemes
The net present value of the expected future payments under
Contributions to defined contribution pension schemes are
options over interests held by non-controlling interests in the Group’s
recognised as an employee benefit expense within personnel
subsidiaries is shown as a financial liability. At the end of each period,
expenses in the income statement, as incurred.
the valuation of the liability is reassessed with any changes
recognised in profit or loss for the period. (ii) Defined benefit schemes
The Group’s net obligation in respect of defined benefit pension
(m) Treasury shares
schemes is calculated separately for each scheme by estimating
When share capital recognised as equity is repurchased, the amount
the amount of future benefit that employees have earned in return
of the consideration paid, including directly attributable costs, is
for their service in the current and prior periods; that benefit is
recognised as a change in equity. Repurchased shares are classified
discounted to its present value amount and recognised in the income
as treasury shares and are presented as a deduction from total equity.
statement within personnel expenses; a corresponding liability for all
(n) Trade and other receivables future benefits is established on the statement of financial position
and the fair value of any scheme assets is deducted.
Trade and other receivables are recognised initially at fair value less
expected credit loss allowance and subsequently held at amortised The discount rate is the yield at the reporting date on AA credit
cost. The Group utilises the simplified approach to provide for losses rated bonds that have maturity dates approximating to the duration
on receivables under IFRS 9. of the schemes’ obligations. The calculation is performed by a
qualified actuary using the projected unit method. Actuarial gains
(o) Inventories
and losses are recognised immediately in the statement of other
Inventories are stated at the lower of cost and net realisable value. comprehensive income.
Net realisable value is the estimated selling price in the ordinary
(iii) Share-based payment transactions
course of business, less the estimated costs of completion and selling
expenses. The cost of inventories is based on a weighted average The Group operates equity-settled share-based compensation plans.
cost and includes expenditure incurred in acquiring the inventories The fair value of the employee services received in exchange for the
and bringing them to their existing location and condition. In the case grant of the options is recognised within personnel expenses, with a
of manufactured inventories and work in progress, cost includes an corresponding increase in equity, over the period that the employees
appropriate share of overheads based on normal operating capacity. unconditionally become entitled to the awards. The fair value of the
options granted is measured using a stochastic model, taking into
(p) Biological assets
account the terms and conditions upon which the options were
Biological assets consist of standing timber, measured at fair granted. The total amount to be expensed over the vesting period
value less cost to sell. Any change in fair value resulting from both is determined by reference to the fair value of the options granted,
net growth and change in the market value of standing timber is excluding the impact of any non-market vesting conditions.
presented in the income statement. The revenue from the sale
At each reporting date, the entity revises its estimates of the number
of standing timber is presented within revenue.
of options that are expected to become exercisable. It recognises the
(q) Cash and cash equivalents and restricted cash impact of the revision of original estimates, if any, in the income
statement, and a corresponding adjustment to equity.
Cash and cash equivalents comprise cash balances and call deposits.
Bank overdrafts that are repayable on demand and form an integral
(t) Provisions
part of the Group’s cash management are included as a component
A provision is recognised in the statement of financial position when
of cash and cash equivalents for the purpose of the statement of
the Group has a present legal or constructive obligation as a result
cash flows. Cash and cash equivalents are stated at amortised cost.
of a past event, a reliable estimate can be made of the amount of the
Cash subject to contractual restrictions on use by the Group is obligation and it is probable that an outflow of economic benefits will
excluded from cash and cash equivalents in the consolidated be required to settle the obligation. Provisions are discounted to
financial statements and is presented within other investments present value where the effect is material.
in the consolidated statement of financial position. Restricted cash is
stated at amortised cost.
134
134
FINANCIAL STATEMENTS
1. Significant accounting policies continued statement and the consolidated statement of financial position.
Notes to the consolidated financial statements (continued) Where the final outcome of such matters differs from the amount
(u) Trade and other payables
recorded, any differences may impact the income tax and deferred
Trade and other payables are initially measured at fair value, tax provisions in the period in which the final determination is made.
net of directly attributable transaction costs and are subsequently
Deferred tax is provided for using the balance sheet liability method,
1. Significant accounting policies continued (r) Borrowings measured at amortised cost using the effective interest method.
providing for temporary differences between the carrying amounts
Borrowings are recognised initially at fair value, less attributable (v) Leases of assets and liabilities for financial reporting purposes and the
(l) Derivative financial instruments continued
transaction costs. Subsequent to initial recognition, interest-bearing amounts used for taxation purposes. The tax effect of certain
Hedges of net investment in a foreign entity represent the effective The Group recognises a right-of-use asset and a lease liability at the
borrowings are stated at amortised cost unless designated in a fair temporary differences is not recognised, principally with respect to
portion of the gain or loss on the hedging instrument is recognised lease commencement date.
value hedge relationship, with borrowing costs being accounted for goodwill; temporary differences arising on the initial recognition
directly in equity, while the ineffective portion is recognised in the
on an accruals basis in the income statement using the effective The right-of-use asset is initially measured at cost, being the initial of assets or liabilities (other than those arising in a business
income statement. Amounts taken to equity are transferred to the
interest method. amount of the lease liability adjusted for any lease payments made at combination or in a manner that initially impacts accounting or
income statement when the foreign entity is sold.
or before commencement date, plus any initial direct costs incurred taxable profit); and temporary differences relating to investment in
At the reporting date, interest payable is recorded separately from
Any gains or losses arising from changes in the fair value of all other and an estimate of end of lease dismantling or restoration costs, subsidiaries and equity accounted investees to the extent that they
the associated borrowings, within trade and other payables.
derivatives are taken to the income statement. These may arise from less any incentives received and related provisions. will probably not reverse in the foreseeable future and the Group
derivatives for which hedge accounting is not applied because they (s) Employee benefits is able to control the reversal of such temporary differences. The
Lease liabilities are recorded at the present value of lease payments,
are not effective as hedging instruments. amount of deferred tax provided is based on the expected manner
(i) Defined contribution schemes which include:
of realisation or settlement of the carrying amount of assets and
The net present value of the expected future payments under
Contributions to defined contribution pension schemes are • Fixed lease payments;
liabilities, using tax rates enacted or substantively enacted at the
options over interests held by non-controlling interests in the Group’s
recognised as an employee benefit expense within personnel • Variable payments that depend on an index or rate, initially
reporting date.
subsidiaries is shown as a financial liability. At the end of each period,
expenses in the income statement, as incurred. measured using the commencement date index or rate;
the valuation of the liability is reassessed with any changes A deferred tax asset is recognised only to the extent that it is probable
recognised in profit or loss for the period. (ii) Defined benefit schemes • Any amounts expected to be payable under residual value
that future taxable profits will be available against which the asset
guarantees; and
The Group’s net obligation in respect of defined benefit pension can be utilised. Deferred tax assets are reduced to the extent that it is
(m) Treasury shares
schemes is calculated separately for each scheme by estimating • The exercise price of purchase options, if it is reasonably certain no longer probable that the related tax benefit will be realised.
When share capital recognised as equity is repurchased, the amount
the amount of future benefit that employees have earned in return they will be exercised.
of the consideration paid, including directly attributable costs, is (x) Adjusting items
for their service in the current and prior periods; that benefit is
recognised as a change in equity. Repurchased shares are classified The interest rate implicit in the lease is used to discount lease
Items of income or expenditure that are significant by their nature,
discounted to its present value amount and recognised in the income
as treasury shares and are presented as a deduction from total equity. payments, or, if that rate cannot be determined, the Group’s
size or incidence, and for which separate presentation would assist
statement within personnel expenses; a corresponding liability for all
incremental borrowing rate is used, being the rate that the Group
in the understanding of the trading and financial results of the Group,
(n) Trade and other receivables future benefits is established on the statement of financial position
would have to pay to borrow the funds necessary to obtain an asset
are classified and disclosed as adjusting items.
and the fair value of any scheme assets is deducted.
Trade and other receivables are recognised initially at fair value less of similar value in a similar economic environment with similar terms
Such items include business disposals, restructuring and acquisition
expected credit loss allowance and subsequently held at amortised The discount rate is the yield at the reporting date on AA credit and conditions.
related and integration costs, and impairments.
cost. The Group utilises the simplified approach to provide for losses rated bonds that have maturity dates approximating to the duration
Right-of-use assets are depreciated on a straight-line basis over the
on receivables under IFRS 9. of the schemes’ obligations. The calculation is performed by a
(y) Non-GAAP performance measures
lease term, or the useful life if shorter.
qualified actuary using the projected unit method. Actuarial gains
(o) Inventories In the reporting of financial information, the Group has adopted
and losses are recognised immediately in the statement of other Interest is recognised on the lease liability, resulting in a higher
certain non-GAAP measures of historical or future financial
Inventories are stated at the lower of cost and net realisable value. comprehensive income. finance cost in the earlier years of the lease term.
performance, position or cash flows other than those defined or
Net realisable value is the estimated selling price in the ordinary
Lease payments relating to low value assets or to short-term leases
(iii) Share-based payment transactions specified under International Financial Reporting Standards (IFRSs).
course of business, less the estimated costs of completion and selling
are recognised as an expense on a straight-line basis over the lease
expenses. The cost of inventories is based on a weighted average The Group operates equity-settled share-based compensation plans. Non-GAAP measures are either not defined by IFRS or are adjusted
term. Short-term leases are those with 12 or less months duration.
cost and includes expenditure incurred in acquiring the inventories The fair value of the employee services received in exchange for the IFRS figures, and therefore may not be directly comparable with other
and bringing them to their existing location and condition. In the case grant of the options is recognised within personnel expenses, with a (w) Taxation companies’ reported non-GAAP measures, including those in the
of manufactured inventories and work in progress, cost includes an corresponding increase in equity, over the period that the employees Group’s industry.
Income tax on the profit or loss for the year comprises current and
appropriate share of overheads based on normal operating capacity. unconditionally become entitled to the awards. The fair value of the
deferred tax. Income tax is recognised in profit or loss except to the
Non-GAAP measures should be considered in addition to, and are not
options granted is measured using a stochastic model, taking into
(p) Biological assets extent that it relates to items recognised directly in equity or in other
intended to be a substitute for, or superior to, IFRS measures.
account the terms and conditions upon which the options were
comprehensive income.
Biological assets consist of standing timber, measured at fair granted. The total amount to be expensed over the vesting period Details of the Group’s non-GAAP performance measures, including
value less cost to sell. Any change in fair value resulting from both Current tax is the expected tax payable on the taxable income for
is determined by reference to the fair value of the options granted, reasons for their use and reconciliations to IFRS figures are included
net growth and change in the market value of standing timber is the year, using tax rates enacted in each jurisdiction at the reporting
excluding the impact of any non-market vesting conditions. as appropriate in note 32.
presented in the income statement. The revenue from the sale date, and any adjustment to tax payable in respect of previous years.
At each reporting date, the entity revises its estimates of the number
of standing timber is presented within revenue.
The Group is subject to corporate taxes in a number of different
of options that are expected to become exercisable. It recognises the
jurisdictions and judgement is required in determining the
(q) Cash and cash equivalents and restricted cash impact of the revision of original estimates, if any, in the income
appropriate provision for transactions where the ultimate tax
statement, and a corresponding adjustment to equity.
Cash and cash equivalents comprise cash balances and call deposits.
determination is uncertain. In such circumstances, the Group
Bank overdrafts that are repayable on demand and form an integral
(t) Provisions recognises liabilities for anticipated taxes based on the best
part of the Group’s cash management are included as a component
A provision is recognised in the statement of financial position when information available and where the anticipated liability is both
of cash and cash equivalents for the purpose of the statement of
the Group has a present legal or constructive obligation as a result probable and can be estimated. Any interest and penalties accrued
cash flows. Cash and cash equivalents are stated at amortised cost.
of a past event, a reliable estimate can be made of the amount of the are included in income taxes in both the consolidated income
Cash subject to contractual restrictions on use by the Group is obligation and it is probable that an outflow of economic benefits will
excluded from cash and cash equivalents in the consolidated be required to settle the obligation. Provisions are discounted to
Annual Report 2022 dssmith.com 135
financial statements and is presented within other investments present value where the effect is material.
in the consolidated statement of financial position. Restricted cash is
stated at amortised cost.
134 Annual Report 2022 dssmith.com 135
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
1. Significant accounting policies continued (ab) IFRS standards and interpretations endorsed but not
yet effective
(z) Key sources of estimation uncertainty
The International Accounting Standards Board (IASB) and
The application of the Group’s accounting policies requires
International Financial Reporting Interpretations Committee (IFRIC)
management to make estimates and assumptions. These estimates
have issued new standards and interpretations with an effective date
and assumptions affect the reported assets and liabilities and
after the date of these financial statements.
financial results of the Group. Actual outcomes could differ from
the estimates and assumptions used. Effective date –
financial year
International Financial Reporting Standards (IFRS/IAS) ending
The Group’s key sources of estimation uncertainty are as
detailed below: Amendments to IAS 16 ( Property, Plant and
Equipment — Proceeds before Intended Use ) 30 April 2023
(i) Taxation
Amendments to IFRS 3 (Reference to the Conceptual
The Group’s tax payable on profits is determined based on tax laws Framework) 30 April 2023
and regulations that apply in each of the numerous jurisdictions Amendments to IAS 37 (Onerous Contracts –
in which the Group operates. The Group is required to exercise Cost of Fulfilling a Contract) 30 April 2023
judgement in estimating income tax provisions, along with the IAS 41 Agriculture 30 April 2023
recognition of deferred tax assets/liabilities. While the Group Amendments to IAS 1 and IFRS Practice
aims to ensure that estimates recorded are accurate, the actual Statement(Disclosure of Accounting Policies) 30 April 2024
amounts could be different from those expected. See note 7 for
Amendments to IAS 12 (Deferred tax related to
additional information. Assets and Liabilities arising from a single transaction) 30 April 2024
Amendments to IAS 8 (Definition of
(ii) Employee benefits
accounting estimates) 30 April 2024
IAS 19 Employee Benefits requires the Group to make assumptions
IFRS 17 Insurance Contracts 30 April 2024
including, but not limited to, rates of inflation, discount rates and life
expectancies. The use of different assumptions, in any of the above The Group does not anticipate that the adoption of the standards and
calculations, could have a material effect on the accounting values interpretations that are effective for the year ending 30 April 2023
of the relevant statement of financial position assets and liabilities and beyond will have a material effect on its financial statements.
which could also result in a change to the cost of such liabilities
(ac) IFRS standards that have been issued but are not yet
as recognised in profit or loss over time. These assumptions are
endorsed are as follows:
subject to periodic review. See note 25 for additional information.
• Amendments to IAS 1 (Classification of liabilities as current
(aa) Critical accounting judgement
or non-current)
(i) Adjusting items
• Amendments to IFRS 4 (Extension of the Temporary Exemption
The Group is required to exercise judgement in applying the adjusting
from applying IFRS 9)
items accounting policy to items of income and expenditure, taking
account of their origination, as well as considering similar items in The Group does not anticipate that the adoption of these accounting
prior years to ensure consistency and appropriate presentation. standards will have a material effect on its financial statements.
See note 4 for additional information.
136
136
FINANCIAL STATEMENTS
2. Segment reporting
## Notes to the consolidated financial statements (continued)
Operating segments
IFRS 8 Operating Segments requires operating segments to be identified on the same basis as is used internally for the review of performance
and allocation of resources by the Group Chief Executive (who is the Chief Operating Decision Maker as defined by IFRS 8).
1. Significant accounting policies continued (ab) IFRS standards and interpretations endorsed but not
The Group’s continuing operations are organised into segments which cover geographical regions with integrated packaging and paper
yet effective
(z) Key sources of estimation uncertainty businesses. These comprise the Group’s reportable segments and their results are regularly reviewed by the Group Chief Executive.
The International Accounting Standards Board (IASB) and The measure of profitability reported to the Group Chief Executive for the purposes of resource allocation and assessment of performance is
The application of the Group’s accounting policies requires
International Financial Reporting Interpretations Committee (IFRIC) adjusted operating profit, which is a non-GAAP performance measure, about which further information is provided in note 32.
management to make estimates and assumptions. These estimates
have issued new standards and interpretations with an effective date
and assumptions affect the reported assets and liabilities and Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Central
after the date of these financial statements.
financial results of the Group. Actual outcomes could differ from administration costs are allocated to the individual segments on a consistent basis year-on-year. All assets and liabilities have been analysed by
the estimates and assumptions used. Effective date – segment, except for items of a financing nature, taxation balances, employee benefit liabilities and current and non-current asset investments.
financial year
Debt and associated interest are managed at a Group level and therefore have not been allocated across the segments.
International Financial Reporting Standards (IFRS/IAS) ending
The Group’s key sources of estimation uncertainty are as
Amendments to IAS 16 ( Property, Plant and Total
detailed below:

|  |  |  |  |  |  | Northern |  | Southern |  | Eastern |  | North | continuing |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Equipment — Proceeds before Intended Use ) | 30 April 2023 |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  | Europe |  | Europe |  | Europe |  | America | operations |  |
| (i) Taxation |  |  | Year ended 30 April 2022 |  |  |  |  |  |  |  |  |  |  |  |
|  | Amendments to IFRS 3 (Reference to the Conceptual |  |  |  | Note |  | £m |  | £m |  | £m | £m |  | £m |
| The Group’s tax payable on profits is determined based on tax laws | Framework) 30 April 2023 |  | External revenue 2,790 2,736 1,118 597 7,241 |  |  |  |  |  |  |  |  |  |  |  |
| and regulations that apply in each of the numerous jurisdictions |  |  |  | 1 |  |  |  |  |  |  |  |  |  |  |
|  | Amendments to IAS 37 (Onerous Contracts – |  | Adjusted EBITDA | 250 432 116 108 906 |  |  |  |  |  |  |  |  |  |  |
| in which the Group operates. The Group is required to exercise | Cost of Fulfilling a Contract) 30 April 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |

Depreciation (111) (108) (43) (28) (290)
judgement in estimating income tax provisions, along with the IAS 41 Agriculture 30 April 2023 1
Adjusted operating profit 139 324 73 80 616
recognition of deferred tax assets/liabilities. While the Group Amendments to IAS 1 and IFRS Practice
Unallocated items:
aims to ensure that estimates recorded are accurate, the actual Statement(Disclosure of Accounting Policies) 30 April 2024
Amortisation 10 (138)
amounts could be different from those expected. See note 7 for
Amendments to IAS 12 (Deferred tax related to
Adjusting items in operating profit 4 (35)
additional information. Assets and Liabilities arising from a single transaction) 30 April 2024
Total operating profit (continuing operations) 443
Amendments to IAS 8 (Definition of
(ii) Employee benefits
30 April 2024 Unallocated items:
accounting estimates)
IAS 19 Employee Benefits requires the Group to make assumptions Net financing costs (72)
IFRS 17 Insurance Contracts 30 April 2024
including, but not limited to, rates of inflation, discount rates and life
Share of profit of equity accounted investments, net of ta
expectancies. The use of different assumptions, in any of the above The Group does not anticipate that the adoption of the standards and
Profit before income tax 378
calculations, could have a material effect on the accounting values interpretations that are effective for the year ending 30 April 2023
Income tax expense (98)
of the relevant statement of financial position assets and liabilities and beyond will have a material effect on its financial statements.
Profit for the year (continuing operations) 280
which could also result in a change to the cost of such liabilities
(ac) IFRS standards that have been issued but are not yet
as recognised in profit or loss over time. These assumptions are 7
endorsed are as follows:
subject to periodic review. See note 25 for additional information.
Analysis of total assets and total liabilities
• Amendments to IAS 1 (Classification of liabilities as current
(aa) Critical accounting judgement Segment assets 2,127 3,597 1,128 1,330 8,182
or non-current)
Unallocated items:
(i) Adjusting items
• Amendments to IFRS 4 (Extension of the Temporary Exemption Equity accounted investments and other investments 33
The Group is required to exercise judgement in applying the adjusting
from applying IFRS 9) Derivative financial instruments 811
items accounting policy to items of income and expenditure, taking
Cash and cash equivalents 819
account of their origination, as well as considering similar items in The Group does not anticipate that the adoption of these accounting
Ta 41
prior years to ensure consistency and appropriate presentation. standards will have a material effect on its financial statements.
Total assets 9,886
See note 4 for additional information.
Segment liabilities (1,330) (1,044) (272) (129) (2,775)
Unallocated items:
Borrowings, overdrafts and interest payable (2,168)
Derivative financial instruments (84)
Ta (539)
Employee benefits (86)
Total liabilities (5,652)
Capital expenditure 102 200 101 28 431
1. Adjusted to exclude amortisation and adjusting items as presented in the income statement.
Annual Report 2022 dssmith.com 137
x x x
136 Annual Report 2022 dssmith.com 137
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
2. Segment reporting continued
Total

|  |  | Northern |  | Southern |  | Eastern |  | North | continuing |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | Europe |  | Europe |  | Europe |  | America | operations |  |
| Year ended 30 April 2021 | Note |  | £m |  | £m |  | £m | £m |  | £m |

External revenue 2,370 2,156 909 541 5,976
1
Adjusted EBITDA 257 333 119 97 806
Depreciation (119) (110) (41) (34) (304)
1
Adjusted operating profit 138 223 78 63 502
Unallocated items:
Amortisation 10 (142)
Adjusting items in operating profit 4 (49)
Total operating profit (continuing operations) 311
Unallocated items:
Net financing costs (85)
Share of profit of equity accounted investment, net of ta 5
Profit before income tax 231
Income tax expense (49)
Profit for the year (continuing operations) 182
Analysis of total assets and total liabilities
Segment assets 2,079 3,344 1,015 1,204 7,642
Unallocated items:
Equity accounted investment and other investments 51
Derivative financial instruments 115
Cash and cash equivalents 813
Ta 78
Assets classified as held for sale
Total assets 8,700
Segment liabilities (1,028) (743) (223) (117) (2,111)
Unallocated items:
1
Borrowings, overdrafts and interest payable (2,419)
Derivative financial instruments (56)
Ta (404)
Employee benefits (175)
Total liabilities (5,165)
Capital expenditure 93 147 56 35 331
1. Adjusted to exclude amortisation and adjusting items as presented in the income statement.
138
x x x
138
FINANCIAL STATEMENTS
2. Segment reporting continued
## Notes to the consolidated financial statements (continued)
Geographical areas
In presenting information by geographical area, external revenue is based on the geographical location of customers. Non-current assets are
based on the geographical location of assets and exclude investments, deferred tax assets, derivative financial instruments and intangible

| 2. Segment reporting continued |  |  |  |  |  |  |  |  |  |  | assets (which are monitored at the operating segment level, not at a country level). |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  | Total |  |  | External revenue Non-current assets Capital expenditure |  |  |  |  |  |  |
|  |  | Northern |  | Southern |  | Eastern |  | North | continuing |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
|  |  | Europe |  | Europe |  | Europe |  | America | operations |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  | Continuing operations |  |  | £m | £m | £m | £m | £m | £m |
| Year ended 30 April 2021 | Note |  | £m |  | £m |  | £m | £m |  | £m |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  | U | 1,113 947 460 467 42 26 |  |  |  |  |  |  |  |

External revenue 2,370 2,156 909 541 5,976
1 France 1,067 897 430 438 52 55
Adjusted EBITDA 257 333 119 97 806
Iberia 841 654 613 610 73 57
Depreciation (119) (110) (41) (34) (304)

|  | 1 |  | German |  | 708 599 390 402 36 32 |
| --- | --- | --- | --- | --- | --- |
| Adjusted operating profit |  | 138 223 78 63 502 |  |  |  |
|  |  |  | Ital | 822 599 333 289 75 35 |  |

Unallocated items:
USA 606 551 379 338 28 35
Amortisation 10 (142)
Rest of the World 2,084 1,729 732 742 125 91
Adjusting items in operating profit 4 (49)
7,241 5,976 3,337 3,286 431 331
Total operating profit (continuing operations) 311

| Unallocated items: |  | 3. Operating profit |  |  |
| --- | --- | --- | --- | --- |
| Net financing costs (85) |  |  | 2022 | 2021 |
|  |  | Continuing operations | £m | £m |
| Share of profit of equity accounted investment, net of ta | 5 |  |  |  |

Operating costs
Profit before income tax 231
Cost of sales 3,914 2,816
Income tax expense (49)
Other production costs 1,211 1,190
Profit for the year (continuing operations) 182
Distribution 530 482
Administrative expenses 1,007 1,030
Analysis of total assets and total liabilities
6,662 5,518
Segment assets 2,079 3,344 1,015 1,204 7,642
During the year, the Group received Nil (2020/21:£5.1m) of government support linked to the Covid-19 pandemic. Nil (2020/21: £2.4m) was
Unallocated items:
repaid to the UK government in the year. In the current year there was no resulting income from Covid-19 related support programmes
Equity accounted investment and other investments 51
(2020/21: £2.7m) which has been netted off in operating costs . There are no unfulfilled conditions or contingencies attached to these grants.
Derivative financial instruments 115
Details of adjusting items included in operating profit are set out in note 4.
Cash and cash equivalents 813

| Ta | 78 | Operating profit is stated after charging/(crediting) the following: |  |  |
| --- | --- | --- | --- | --- |
| Assets classified as held for sale 1 |  |  | 2022 | 2021 |
|  |  | Continuing operations | £m | £m |

Total assets 8,700
Depreciation of owned assets 220 230
Depreciation of righ -of-use assets 70 74
Segment liabilities (1,028) (743) (223) (117) (2,111)
Amortisation of intangible assets 138 142
Unallocated items:
(Profit)/loss on sale of non-current assets (1) 2
Borrowings, overdrafts and interest payable (2,419)
Research and developmen 8 8
Derivative financial instruments (56)
Ta (404)
Employee benefits (175)
Total liabilities (5,165)
Capital expenditure 93 147 56 35 331
1. Adjusted to exclude amortisation and adjusting items as presented in the income statement.
Annual Report 2022 dssmith.com 139
x x x K y y t t
138 Annual Report 2022 dssmith.com 139
FINANCIAL STATEMENTS

# Notes to the consolidated financial statements (continued)

# 3. Operating profit continued

|  Auditor's remuneration | 2022 |   |   | 2021  |   |   |
| --- | --- | --- | --- | --- | --- | --- |
|   |  UK £m | Overseas £m | Total £m | UK £m | Overseas £m | Total £m  |
|  Fees payable for audit of the Company's annual financial statements | 0.5 | - | 0.5 | 0.3 | - | 0.3  |
|  Fees payable for audit of the Company's subsidiaries, pursuant to legislation | 1.1 | 2.9 | 4.0 | 0.9 | 2.9 | 3.8  |
|  Total audit fees | 1.6 | 2.9 | 4.5 | 1.2 | 2.9 | 4.1  |
|  Fees payable to the Company's Auditor and their associates for other services: |  |  |  |  |  |   |
|  Corporate finance services | 0.1 | - | 0.1 | 0.1 | - | 0.1  |
|  Audit related assurance services | 0.3 | 0.1 | 0.4 | 0.2 | 0.1 | 0.3  |
|  Total non-audit fees | 0.4 | 0.1 | 0.5 | 0.3 | 0.1 | 0.4  |
|  **Total Auditor's remuneration** | **2.0** | **3.0** | **5.0** | **1.5** | **3.0** | **4.5**  |

Non-audit fees in 2021/22 and 2020/21 primarily include reporting and accounting services in respect of the Euro medium-term note ('EMTN') issues in the year and audit-related fees for the review of the interim results.

A description of the work of the Audit Committee is set out in the governance section and includes an explanation of how the external Auditor's objectivity and independence are safeguarded when non-audit services are provided by the external Auditor.

# 4. Adjusting items

Items are presented as adjusting in the financial statements where they are significant items of financial performance that the Directors consider should be separately disclosed to assist in the understanding of the trading and financial results of the Group. Such items include business disposals, restructuring and acquisition related and integration costs, and impairments.

|  Continuing operations | 2022 £m | 2021 £m  |
| --- | --- | --- |
|  Acquisition related costs | (1) | (2)  |
|  Gain/(loss) on acquisitions and divestments | 3 | (3)  |
|  Net gain/(loss) on acquisitions and divestments | 2 | (5)  |
|  Integration costs | - | (17)  |
|  Other restructuring costs | (8) | (27)  |
|  Impairment of associate | (29) | -  |
|  **Total pre-tax adjusting items (recognised in operating profit)** | **(35)** | **(49)**  |
|  Finance costs adjusting items | (2) | (7)  |
|  Adjusting tax items | - | 5  |
|  Current tax credit on adjusting items | 2 | 11  |
|  **Total post-tax adjusting items** | **(35)** | **(40)**  |

140
FINANCIAL STATEMENTS

#### 4. Adjusting items continued

##### 2021/22

On 12 October 2021 the Group sold the De Hoop paper mill in the Netherlands. Cash consideration, net of cash and cash equivalents and transaction costs, was £35m and the net assets divested were £28m, resulting in a net gain of £7m. In addition, there were £4m of other site disposal costs.

Other restructuring costs of £8m primarily comprise a reorganisation and restructuring project across the Packaging business (£8m), focusing predominantly on reduction of indirect costs.

Finance costs in adjusting items related to the unwind of the discount on the redemption liability related to the purchase of Interstate Resources.

The impairment of associate of £29m relates to the Group's investment in an associate RKTK in Ukraine. The invasion of Ukraine by Russia has resulted in significant damage to the assets of the Group's associate and has fundamentally compromised the ability to realise the interest held. Accordingly, an impairment of the entire interest has been recognised, together with amounts in connection with the trading activities conducted with the associate.

The current tax credit on adjusting items of £2m for the year ended 30 April 2022 is the tax effect at the local applicable tax rate of adjusting items that are subject to tax. This excludes non-tax-deductible deal related advisory fees in relation to acquisitions and divestments. It also excludes the non-tax-deductible impairment of associates and the non-taxable gain from the sale of the paper mill in the Netherlands.

##### 2020/21

Acquisition related costs of £2m were incurred predominantly relating to professional advisory, legal and consultancy fees and contractual deferred consideration payments on prior year acquisitions.

The loss on divestment of £3m primarily relates to the disposal of a small sheet plant in North America.

Integration costs relate to integration projects underway, primarily to achieve cost synergies from the major acquisitions made in the previous financial years (of which £14m relates to Europac and £3m relates to Interstate Resources). They include redundancies, professional fees, IT costs and those directly attributable internal salary costs which would otherwise not be incurred. Integration cost activity in respect of Europac and Interstate Resources has ceased with effect from 30 April 2021.

Within other restructuring costs of £27m, £23m relates to a material restructuring in Germany and a structured review of the underlying indirect cost base of the European Packaging business, focusing predominantly on reduction of these indirect costs.

Finance costs adjusting items of £7m relate to the unwind of the discount on the redemption liability related to the purchase of Interstate Resources.

The current tax credit on adjusting items of £11m in the year ended 30 April 2021 is the tax effect at the local applicable tax rate of adjusting items that are subject to tax. This excludes non-tax-deductible deal related advisory fees in relation to acquisitions and divestments.

The adjusting tax item of £5m includes a net decrease in the State Aid provision of £2m primarily in relation to the estimate of interest on overdue tax following agreement reached with HM Revenue & Customs ("HMRC") (see note 7) and the release of a US tax provision of £3m relating to the Plastics business that is no longer due.

Annual Report 2022 dssmith.com

141
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
5. Finance income and costs
2022 2021
Continuing operations £m £m
Interest income from financial assets (1) (1)
Finance income (1) (1)
Interest on bor owings and overdrafts 47 55
Interest on lease liabilities 11 12
Othe 10 9
Finance costs before adjusting items 68 76
Finance costs adjusting items (note 4) 2 7
Finance costs 70 83
6. Staff costs

|  |  | 2022 | 2021 |
| --- | --- | --- | --- |
| Continuing operations |  | £m | £m |
| Wages and sala | ies 1,101 1,085 |  |  |

Social security costs 214 213
Contributions to defined contribution pension plans 51 51
Service costs for defined benefit schemes (note 25) 5 5
Share-based payment expense (note 26) 10 9
Staff costs 1,381 1,363
2022 2021
Average number of employees Number Number
Northern Europe 10,905 10,995
Southern Europe 8,889 8,923
Eastern Europe 7,677 7,366
North America 1,787 1,847
Rest of the World 598 178
Average number of employees 29,856 29,309
7. Income tax expense
2022 2021
£m £m
Current tax expense
Current yea (128) (61)
Adjustment in respect of prior years 4 (3)
(124) (64)
Deferred tax (charge)/ credit
Origination and reversal of temporary differences (2) (28)
Change in tax rates 12 –
Recognition of previously unrecognised deferred tax assets 5 18
Adjustment in respect of prior years 9 9
24 (1)
Total income tax expense before adjusting items (100) (65)
Adjusting tax items (note 4) – 5
Current tax credit on adjusting items (note 4) 2 11
Total income tax expense in the income statement from continuing operations (98) (49)
Total income tax expense in the income statement from discontinued operations (note 30(b)) – 9
Total income tax expense in the income statement – total Group (98) (40)
The tax credit on amortisation was £31m (2020/21: £32m).
142
r r r r
142
FINANCIAL STATEMENTS
7. Income tax expense continued
## Notes to the consolidated financial statements (continued)
The reconciliation of the actual tax charge to the domestic corporation tax rate is as follows:
2022 2021
£m £m
Profit before income tax on continuing operations 378 231
5. Finance income and costs
Profit before income tax on discontinued operations (note 30(b)) – 3

|  | 2022 | 2021 |  |  |
| --- | --- | --- | --- | --- |
| Continuing operations | £m | £m | Share of profit of equity accounted investments, net of ta | (7) (5) |
| Interest income from financial assets (1) (1) |  |  | Profit before tax and share of profit of equity accounted investments, net of ta | 371 229 |

Finance income (1) (1)
Income tax at the domestic corporation tax rate of 19% (2020/21: 19%) (71) (44)
Interest on bor owings and overdrafts 47 55
Effect of additional taxes and tax rates in overseas jurisdictions (40) (23)
Interest on lease liabilities 11 12
Additional items deductible for tax purposes 5 16
Othe 10 9
Non-deductible expenses (20) (22)
Finance costs before adjusting items 68 76
Non-taxable gain on disposal of business 2 –
Finance costs adjusting items (note 4) 2 7
Recognition of previously unrecognised deferred tax assets 5 27
Finance costs 70 83
Deferred tax not recognised (4) (5)

| 6. Staff costs |  |  |  | 1 |
| --- | --- | --- | --- | --- |
|  |  |  | Adjustment in respect of prior years | 13 11 |
|  | 2022 | 2021 | Effect of change in corporation tax rates 12 – |  |
| Continuing operations | £m | £m |  |  |

Income tax expense – total Group (98) (40)
Wages and sala ies 1,101 1,085
1. Included within the adjustments in respect of prior years is £5m which relates to adjusting items in the prior year.
Social security costs 214 213
Contributions to defined contribution pension plans 51 51 The Group’s effective tax rate, excluding amortisation, adjusting items and share of result from equity accounted investments, was 24%
Service costs for defined benefit schemes (note 25) 5 5 (2020/21: 23%).
Share-based payment expense (note 26) 10 9
The Finance Act 2021 included a 6% increase in the main UK corporation tax rate to 25% from 1 April 2023, which was substantially enacted

| Staff costs 1,381 1,363 |  |  | on 10 June 2021. Accordingly, the Group’s deferred tax balances have been remeasured in the current year. |
| --- | --- | --- | --- |
|  | 2022 | 2021 | Uncertain tax positions |
| Average number of employees | Number | Number |  |

The Group operates in a complex multinational tax environment and is subject to uncertain tax positions and changes in legislation in the
Northern Europe 10,905 10,995
jurisdictions in which it operates. The Group’s uncertain tax positions principally relate to pricing of cross-border transactions and a limited
Southern Europe 8,889 8,923
number of specific transaction related tax risks.
Eastern Europe 7,677 7,366
The assessment of uncertain tax positions is based on management’s expectation of the likely outcome of settlements with tax authorities or
North America 1,787 1,847
litigation. The quantification of the risks at any one point in time, especially with respect to transfer pricing, requires a degree of judgement and
Rest of the World 598 178
estimation by management.
Average number of employees 29,856 29,309
Within the consolidated balance sheet at 30 April 2022 are current tax liabilities of £143m (30 April 2021: £133m) which include a provision of
7. Income tax expense £118m (30 April 2021: £116m) relating to uncertain tax positions. It is possible that amounts paid will be different from the amounts provided
2022 2021 and the Group estimates the range of reasonably possible outcomes relating to uncertain tax positions to be from £33m to £200m.
£m £m
There are tax audits being conducted by the tax authorities in a number of countries. Whilst there is inherent uncertainty regarding the timing
Current tax expense
of the resolution of these tax audits and the final tax liabilities to be assessed, the Group does not expect there to be a material change in the
Current yea (128) (61)
provision for uncertain tax positions in the next 12 months.
Adjustment in respect of prior years 4 (3)
Following the EU Commission’s decision in April 2019, which concluded that up until 31 December 2018, the UK Controlled Foreign Company
(124) (64)
legislation partially represented State Aid, the Group recognised a provision in the year ended 30 April 2019 through adjusting items for
Deferred tax (charge)/ credit
the maximum potential exposure of £33m. During the prior year, the Group received a charging notice from HMRC under The Taxation
Origination and reversal of temporary differences (2) (28)
(Post Transition Period) Bill for the full exposure. After the offset of deferred tax assets the cash tax liability was reduced to £18m
Change in tax rates 12 –
(including interest), which was paid in May 2021.
Recognition of previously unrecognised deferred tax assets 5 18
The Group also filed an application with the General Court of the European Court of Justice for the EU Commission’s decision to be annulled.
Adjustment in respect of prior years 9 9
th
The Group’s application was stayed behind the UK lead cases and on 8 June 2022, the General Court released its judgement which dismissed
24 (1)
these appeals . The Group will continue to monitor any future developments in this regard.
Total income tax expense before adjusting items (100) (65)
Included within the current tax liabilities is an amount of £15m (30 April 2021: £9m) relating to interest and penalties on uncertain
Adjusting tax items (note 4) – 5
tax positions.
Current tax credit on adjusting items (note 4) 2 11
Total income tax expense in the income statement from continuing operations (98) (49)
Total income tax expense in the income statement from discontinued operations (note 30(b)) – 9
Total income tax expense in the income statement – total Group (98) (40)
The tax credit on amortisation was £31m (2020/21: £32m).
Annual Report 2022 dssmith.com 143
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142 Annual Report 2022 dssmith.com 143
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
7. Income tax expense continued
Tax on other comprehensive income and equity

|  | Tax credit/ |  |  |  | Tax credit/ |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Gross | (charge) |  | Net | Gross | (charge) |  | Net |
| 2022 |  | 2022 | 2022 | 2021 |  | 2021 | 2021 |
| £m |  | £m | £m | £m |  | £m | £m |

Actuarial gain/(loss) on employee benefits 68 (14) 54 (5) (5) (10)
Equity interest at FVTOCI – change in fair value –––(3) – (3)
Foreign currency translation differences (40) – (40) (95) – (95)
Reclassification from translation reserve to
income statement arising on divestment (3) – (3) – – –
Movements in cash flow hedges 712 (163) 549 112 (20) 92
Movement in net investment hedge 28 1 29 (2) (1) (3)
Other comprehensive income/(expense) for the yea 765 (176) 589 7 (26) (19)
Issue of share capital 7 –73 – 3
Employee share trus (21) – (21) (2) – (2)
Share-based payment expense 10 – 10 9 1 10
Dividends paid to Group shareholders (166) – (166) – – –
Transactions with non-controlling interests –––(2) – (2)
Other comprehensive income /(expense) and
changes in equity 595 (176) 419 15 (25) (10)
The realisation of underlying reserves is conducted in such a way to ensure there is no material tax consequence.
8. Earnings per share
Basic earnings per share from continuing operations
2022 2021
Profit from continuing operations attributable to ordinary shareholders £280m £182m
Weighted average number of ordinary shares 1,374m 1,371m
Basic earnings per share 20.4p 13.3p
Diluted earnings per share from continuing operations
2022 2021
Profit from continuing operations attributable to ordinary shareholders £280m £182m
Weighted average number of ordinary shares 1,374m 1,371m
Potentially dilutive shares issuable under share-based payment arrangements 8m 6m
Weighted average number of ordinary shares (diluted) 1,382m 1,377m
Diluted earnings per share 20.3p 13.2p
The number of shares excludes the weighted average number of the Company’s own shares held as treasury shares during the year of 2m
(2020/21: 1m).
2022 2021
Basic Diluted Basic Diluted
pence per pence per pence per pence per
share share share share
Earnings per share from continuing operations 20.4p 20.3p 13.3p 13.2p
Earnings per share from discontinued ope ations (note 30(b)) – – 0.9p 0.9p
Earnings per share from continuing and discontinued operations 20.4p 20.3p 14.2p 14.1p
144
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144
FINANCIAL STATEMENTS
8. Earnings per share continued
## Notes to the consolidated financial statements (continued)
Adjusted earnings per share from continuing operations
Adjusted earnings per share is a key performance measure for management long-term remuneration and is widely used by the Group’s
shareholders. Adjusted earnings is calculated by adding back the post-tax effects of both amortisation and adjusting items.
7. Income tax expense continued
Further detail about the use of non-GAAP performance measures, including details of why amortisation is excluded, is given in note 32.
Tax on other comprehensive income and equity
A reconciliation of basic to adjusted earnings per share is as follows:
Tax credit/ Tax credit/
2022 2021

| Gross | (charge) |  | Net | Gross | (charge) |  | Net |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2022 |  | 2022 | 2022 | 2021 |  | 2021 | 2021 |  |  | Basic | Diluted |  |  | Basic | Diluted |
| £m |  | £m | £m | £m |  | £m | £m |  |  | pence | pence |  |  | pence | pence |
|  |  |  |  |  |  |  |  | £m | per share |  | per share | £m | per share |  | per share |

Actuarial gain/(loss) on employee benefits 68 (14) 54 (5) (5) (10)
Basic earnings 280 20.4p 20.3p 182 13.3p 13.2p
Equity interest at FVTOCI – change in fair value –––(3) – (3)
Add back:
Foreign currency translation differences (40) – (40) (95) – (95)
Amortisation of intangible assets 138 10.0p 9.9p 142 10.3p 10.3p
Reclassification from translation reserve to
Tax credit on amortisation (31) (2.3p) (2.3p) (32) (2.3p) (2.3p)
income statement arising on divestment (3) – (3) – – –
Adjusting items, before ta 37 2.7p 2.7p 56 4.1p 4.1p
Movements in cash flow hedges 712 (163) 549 112 (20) 92
Tax on adjusting items and adjusting tax items (2) (0.1p) (0.1p) (16) (1.2p) (1.2p)
Movement in net investment hedge 28 1 29 (2) (1) (3)
Adjusted earnings 422 30.7p 30.5p 332 24.2p 24.1p

| Other comprehensive income/(expense) for the yea |  | 765 (176) 589 7 (26) (19) |  |
| --- | --- | --- | --- |
| Issue of share capital 7 –73 – 3 |  |  | 9. Dividends proposed and paid |
| Employee share trus | (21) – (21) (2) – (2) |  |  |

2022 2021
Share-based payment expense 10 – 10 9 1 10 Pence Pence
per share £m per share £m
Dividends paid to Group shareholders (166) – (166) – – –
2020/21 interim dividend – proposed and paid – – 4.0p 55
Transactions with non-controlling interests –––(2) – (2)
2020/21 final dividend – proposed and paid – – 8.1p 111
Other comprehensive income /(expense) and
2021/22 interim dividend – proposed and paid 4.8p 66 ––
changes in equity 595 (176) 419 15 (25) (10)
2021/22 final dividend – proposed 10.2p 140 ––
The realisation of underlying reserves is conducted in such a way to ensure there is no material tax consequence.
2022 2021
8. Earnings per share

|  |  |  |  | £m | £m |
| --- | --- | --- | --- | --- | --- |
| Basic earnings per share from continuing operations |  | Paid during the yea | 166 – |  |  |
|  | 2022 2021 | The 2021/22 interim dividend was paid on 3 May 2022 after the year end. |  |  |  |

Profit from continuing operations attributable to ordinary shareholders £280m £182m
The 2020/21 interim dividend of 4.0p per share and the final 20/21 dividend of 8.1p per share were paid during the year.
Weighted average number of ordinary shares 1,374m 1,371m
Basic earnings per share 20.4p 13.3p
Diluted earnings per share from continuing operations
2022 2021
Profit from continuing operations attributable to ordinary shareholders £280m £182m
Weighted average number of ordinary shares 1,374m 1,371m
Potentially dilutive shares issuable under share-based payment arrangements 8m 6m
Weighted average number of ordinary shares (diluted) 1,382m 1,377m
Diluted earnings per share 20.3p 13.2p
The number of shares excludes the weighted average number of the Company’s own shares held as treasury shares during the year of 2m
(2020/21: 1m).
2022 2021
Basic Diluted Basic Diluted
pence per pence per pence per pence per
share share share share
Earnings per share from continuing operations 20.4p 20.3p 13.3p 13.2p
Earnings per share from discontinued ope ations (note 30(b)) – – 0.9p 0.9p
Earnings per share from continuing and discontinued operations 20.4p 20.3p 14.2p 14.1p
Annual Report 2022 dssmith.com 145
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144 Annual Report 2022 dssmith.com 145
FINANCIAL STATEMENTS

# Notes to the consolidated financial statements (continued)

# 10. Intangible assets

|   | Goodwill £m | Software £m | Intellectual property £m | Customer related £m | Other £m | Total £m  |
| --- | --- | --- | --- | --- | --- | --- |
|  **Cost** |  |  |  |  |  |   |
|  At 1 May 2021 | 2,199 | 180 | 19 | 1,310 | 31 | 3,739  |
|  Divestments | - | (5) | - | - | - | (5)  |
|  Additions | - | 3 | 2 | - | 27 | 32  |
|  Disposals | - | (4) | - | - | (10) | (14)  |
|  Reclassification | - | 1 | 1 | - | 17 | 19  |
|  Transfers | - | 10 | - | - | (10) | -  |
|  Currency translation | 11 | (3) | (1) | (9) | - | (2)  |
|  **At 30 April 2022** | **2,210** | **182** | **21** | **1,301** | **55** | **3,769**  |
|  **Amortisation and impairment** |  |  |  |  |  |   |
|  At 1 May 2021 | (17) | (102) | (12) | (599) | (14) | (744)  |
|  Divestments | - | 5 | - | - | - | 5  |
|  Amortisation | - | (16) | (1) | (110) | (11) | (138)  |
|  Disposals | - | 4 | - | - | - | 4  |
|  Reclassification | - | 1 | - | - | - | 1  |
|  Currency translation | - | 2 | 1 | 6 | - | 9  |
|  **At 30 April 2022** | **(17)** | **(106)** | **(12)** | **(703)** | **(25)** | **(863)**  |
|  **Carrying amount** |  |  |  |  |  |   |
|  At 1 May 2021 | 2,182 | 78 | 7 | 711 | 17 | 2,995  |
|  **At 30 April 2022** | **2,193** | **76** | **9** | **598** | **30** | **2,906**  |

|   | Goodwill £m | Software £m | Intellectual property £m | Customer related £m | Other £m | Total £m  |
| --- | --- | --- | --- | --- | --- | --- |
|  **Cost** |  |  |  |  |  |   |
|  At 1 May 2020 | 2,263 | 169 | 20 | 1,338 | 37 | 3,827  |
|  Divestments | - | (1) | - | - | - | (1)  |
|  Additions | - | 9 | 1 | - | 5 | 15  |
|  Disposals | - | (12) | (2) | - | (2) | (16)  |
|  Transfers | - | 9 | - | - | (9) | -  |
|  Reclassification | - | 6 | - | - | - | 6  |
|  Currency translation | (64) | - | - | (28) | - | (92)  |
|  **At 30 April 2021** | **2,199** | **180** | **19** | **1,310** | **31** | **3,739**  |
|  **Amortisation and impairment** |  |  |  |  |  |   |
|  At 1 May 2020 | (17) | (92) | (12) | (495) | (14) | (630)  |
|  Divestments | - | 1 | - | - | - | 1  |
|  Amortisation | - | (23) | (2) | (115) | (2) | (142)  |
|  Disposals | - | 12 | 2 | - | 2 | 16  |
|  Currency translation | - | - | - | 11 | - | 11  |
|  **At 30 April 2021** | **(17)** | **(102)** | **(12)** | **(599)** | **(14)** | **(744)**  |
|  **Carrying amount** |  |  |  |  |  |   |
|  At 1 May 2020 | 2,246 | 77 | 8 | 843 | 23 | 3,197  |
|  **At 30 April 2021** | **2,182** | **78** | **7** | **711** | **17** | **2,995**  |

Included within customer related intangibles at 30 April 2022 are amounts purchased as part of the acquisitions of Europac (carrying amount £361m, remaining amortisation period 12 years) and Interstate Resources (carrying amount £147m, remaining amortisation period five years).

146
FINANCIAL STATEMENTS
10. Intangible assets continued
## Notes to the consolidated financial statements (continued)
Goodwill
The CGUs identified below represent the lowest level at which goodwill is monitored for impairment indicators and internal management

|  |  |  |  |  |  |  |  |  |  |  | purposes, and are not larger than the operating segments determined in accordance with IFRS 8 | Operating Segments | . The carrying values of |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 10. Intangible assets |  |  |  |  |  |  |  |  |  |  | goodwill are split between the CGU groups as follows: |  |  |  |  |
|  |  |  |  |  | Intellectual |  | Customer |  |  |  |  |  |  | 2022 | 2021 |
|  | Goodwill |  | Software |  | property |  | related |  | Other | Total |  |  |  | £m | £m |
|  |  | £m |  | £m |  | £m |  | £m | £m | £m |  |  |  |  |  |

Northern Europe 394 402
Cost
Southern Europe 1,017 1,053
At 1 May 2021 2,199 180 19 1,310 31 3,739
Eastern Europe 154 159
Divestments – (5) – – – (5)
North America 628 568
Additions – 3 2 – 27 32
Total goodwill 2,193 2,182
Disposals – (4) – – (10) (14)
Reclassification – 1 1 – 17 19 Goodwill impairment tests – key assumptions and methodology
Transfers – 10 – – (10) – The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill may be impaired. The recoverable
Currency translation 11 (3) (1) (9) – (2) amounts of the CGUs are determined from value-in-use calculations.
At 30 April 2022 2,210 182 21 1,301 55 3,769
Impairment tests were conducted over the segmental structures, with no indicators of impairment noted in the year ended 30 April 2022, as the
Amortisation and impairment recoverable amount of the groups of CGUs, based upon value-in-use calculations, exceeded the carrying amounts.
At 1 May 2021 (17) (102) (12) (599) (14) (744)
The calculations of value-in-use are inherently judgemental and require management to make a series of estimates and assumptions. The key
Divestments – 5 – – – 5
assumptions in the value-in-use calculations are:
Amortisation – (16) (1) (110) (11) (138)
• the cash flow forecasts have been derived from the most recent budget presented to the Board for the year ending 30 April 2023. The cash
Disposals – 4 – – – 4
flows utilised are based upon forecast sales volumes and product mix, anticipated movements in paper prices and input costs and known
Reclassification – 1 – – – 1
changes and expectations of current market conditions, taking into account the cyclical nature of the business;
Currency translation – 2 1 6 – 9
• the sales volume and price assumptions underlying the cash flow forecasts are the Directors’ estimates of likely future changes based upon
At 30 April 2022 (17) (106) (12) (703) (25) (863)
historic performance and the current economic outlooks for the economies in which the Group operates. These are viewed as the key
Carrying amount
operating assumptions as they determine the Directors’ approach to margin and cost maintenance;
At 1 May 2021 2,182 78 7 711 17 2,995
• the cash flow forecasts for capital expenditure are based upon past experience and include the replacement capital expenditure required to
At 30 April 2022 2,193 76 9 598 30 2,906
generate the terminal cash flows;
• cash flows beyond the year ending 30 April 2023 reflect the long-term growth rate specific to each of the CGUs. Where a CGU consists of
Intellectual Customer
multiple countries, country-specific rates are incorporated into a weighted average rate for that region. The rates applied are based upon
Goodwill Software property related Other Total
£m £m £m £m £m £m external sources such as the International Monetary Fund’s World Economic Outlook Database; and
Cos
• the pre-tax adjusted discount rate is derived from the basis of the Group’s weighted average cost of capital (‘WACC’) of 9.5% (2020/21:
At 1 May 2020 2,263 169 20 1,338 37 3,827 9.5%) plus a blended country risk premium for each CGU. The discount rate is a function of the cost of debt and equity. The cost of equity is
Divestments – (1) – – – (1) largely based upon the risk-free rate for 10-year government bond yields for the European countries in which the Group operates (79%
Additions – 9 1 – 5 15 weighting), 30-year UK gilts (10% weighting) and 30-year US treasury yields (11%), adjusted for the relevant country market risk premium,
Disposals – (12) (2) – (2) (16) ranging from 4.9% to 16.8%, which reflects the increased risk of investing in country specific equities and the relative volatilities of the
Transfers – 9 – – (9) – equity of the Group compared to the market. This Group rate has been adjusted for the risks inherent in the countries in which the CGUs
operate that are not reflected in the cash flow projections.
Reclassification – 6 – – – 6
Currency translation (64) – – (28) – (92)
At 30 April 2021 2,199 180 19 1,310 31 3,739
Amortisation and impairment
At 1 May 2020 (17) (92) (12) (495) (14) (630)
Divestments – 1 – – – 1
Amortisation – (23) (2) (115) (2) (142)
Disposals – 12 2 – 2 16
Currency translation – – – 11 – 11
At 30 April 2021 (17) (102) (12) (599) (14) (744)
Carrying amoun
At 1 May 2020 2,246 77 8 843 23 3,197
At 30 April 2021 2,182 78 7 711 17 2,995
Included within customer related intangibles at 30 April 2022 are amounts purchased as part of the acquisitions of Europac (carrying amount
£361m, remaining amortisation period 12 years) and Interstate Resources (carrying amount £147m, remaining amortisation period five years).
Annual Report 2022 dssmith.com 147
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146 Annual Report 2022 dssmith.com 147
FINANCIAL STATEMENTS

# Notes to the consolidated financial statements (continued)

# **10. Intangible assets continued**

|  Key assumptions by CGU | Northern Europe | Southern Europe | Eastern Europe | North America  |
| --- | --- | --- | --- | --- |
|  **Long-term growth rate at 30 April 2022** | **1.5%** | **1.5%** | **3.2%** | **2.3%**  |
|  Long-term growth rate at 30 April 2021 | 1.4% | 1.2% | 2.9% | 2.0%  |
|  **Discount rate at 30 April 2022** | **10.1%** | **11.7%** | **12.3%** | **10.0%**  |
|  Discount rate at 30 April 2021 | 8.6% | 10.3% | 10.4% | 8.7%  |

# **Goodwill impairment tests - sensitivities**

The value-in-use is based upon anticipated discounted future cash flows. At 30 April 2022, the impairment tests concluded that there was headroom across all CGUs. Whilst the Directors believe the assumptions used are realistic, it is possible that a reduction in the headroom would occur if any of the above key assumptions were adversely changed. Factors which could cause an impairment are:

- significant and prolonged underperformance relative to the forecast; and

To support their assertions, the Directors have conducted sensitivity analysis to determine the impact that would result from the above situations. Key sensitivities tested included reduction or delays in future growth and increased discount rates. In these cases, if future estimates of economic improvements were delayed, or if the estimated discount rates applied to the cash flows were increased by 0.5%, there would still be adequate headroom to support the carrying value of the assets. Based on this analysis, the Directors believe that a reasonably possible change in any of the key assumptions detailed above would not cause the carrying value of CGUs to exceed their recoverable amounts, although the headroom would decrease. Therefore, at 30 April 2022, no impairment charge is required against the carrying value of goodwill.

# **11. Property, plant and equipment**

|   | Land and buildings £m | Plant and equipment £m | Fixtures and fittings £m | Under construction £m | Total £m  |
| --- | --- | --- | --- | --- | --- |
|  **Cost** |  |  |  |  |   |
|  At 1 May 2021 | 1,066 | 3,337 | 95 | 201 | 4,699  |
|  Divestments | (19) | (138) | (3) | - | (160)  |
|  Additions | 23 | 69 | 2 | 300 | 394  |
|  Disposals | (10) | (100) | (4) | - | (114)  |
|  Reclassification | 1 | 12 | - | (9) | 4  |
|  Transfers | 18 | 163 | 9 | (190) | -  |
|  Currency translation | (36) | (83) | (6) | (5) | (130)  |
|  **At 30 April 2022** | **1,043** | **3,260** | **93** | **297** | **4,693**  |
|  **Depreciation and impairment** |  |  |  |  |   |
|  At 1 May 2021 | (222) | (1,383) | (44) | - | (1,649)  |
|  Divestments | 16 | 105 | 2 | - | 123  |
|  Depreciation charge | (35) | (176) | (9) | - | (220)  |
|  Disposals | 6 | 94 | 3 | - | 103  |
|  Currency translation | 17 | 56 | 5 | - | 78  |
|  **At 30 April 2022** | **(218)** | **(1,304)** | **(43)** | **-** | **(1,565)**  |
|  **Carrying amount** |  |  |  |  |   |
|  At 1 May 2021 | 844 | 1,954 | 51 | 201 | 3,050  |
|  **At 30 April 2022** | **825** | **1,956** | **50** | **297** | **3,128**  |

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FINANCIAL STATEMENTS

# 11. Property, plant and equipment continued

|   | Land and buildings km | Plant and equipment km | Fixtures and fittings km | Under construction km | Total km  |
| --- | --- | --- | --- | --- | --- |
|  Cost  |   |   |   |   |   |
|  At 1 May 2020 | 1,055 | 3,278 | 87 | 190 | 4,610  |
|  Divestments | (3) | (29) | (2) | - | (34)  |
|  Additions | 10 | 67 | 4 | 209 | 290  |
|  Disposals | (7) | (77) | (3) | - | (87)  |
|  Transfers | 23 | 159 | 7 | (189) | -  |
|  Reclassification | (2) | 7 | 3 | (5) | 3  |
|  Transfer from assets held for sale | - | 3 | - | - | 3  |
|  Currency translation | (10) | (71) | (1) | (4) | (86)  |
|  At 30 April 2021 | 1,066 | 3,337 | 95 | 201 | 4,699  |
|  Depreciation and impairment  |   |   |   |   |   |
|  At 1 May 2020 | (200) | (1,331) | (37) | - | (1,568)  |
|  Divestments | 2 | 20 | 1 | - | 23  |
|  Depreciation charge | (32) | (189) | (9) | - | (230)  |
|  Transfers | (1) | 3 | (2) | - | -  |
|  Disposals | 3 | 72 | 3 | - | 78  |
|  Reclassification | 1 | 1 | - | - | 2  |
|  Currency translation | 5 | 41 | - | - | 46  |
|  At 30 April 2021 | (222) | (1,383) | (44) | - | (1,649)  |
|  Carrying amount  |   |   |   |   |   |
|  At 1 May 2020 | 855 | 1,947 | 50 | 190 | 3,042  |
|  At 30 April 2021 | 844 | 1,954 | 51 | 201 | 3,050  |

Assets under construction mainly relate to production machines and site improvements being constructed, the most significant of these being at the greenfield sites in Italy and Poland.

Annual Report 2022 dssmith.com

149
FINANCIAL STATEMENTS

# Notes to the consolidated financial statements (continued)

# **12. Right-of-use assets and lease liabilities**

# **Right-of-use assets**

|   | Land and buildings £m | Plant and equipment £m | Fixtures and fittings £m | Total £m  |
| --- | --- | --- | --- | --- |
|  **Cost** |  |  |  |   |
|  At 1 May 2021 | 177 | 187 | 1 | 365  |
|  Divestments | - | (1) | - | (1)  |
|  Additions | 17 | 34 | - | 51  |
|  Disposals | (9) | (22) | - | (31)  |
|  Reclassification | - | (4) | - | (4)  |
|  Currency translation | 1 | (5) | - | (4)  |
|  **At 30 April 2022** | **186** | **189** | **1** | **376**  |
|  **Depreciation and impairment** |  |  |  |   |
|  At 1 May 2021 | (52) | (87) | - | (139)  |
|  Depreciation charge | (30) | (40) | - | (70)  |
|  Disposals | 9 | 19 | - | 20  |
|  Reclassification | - | 1 | - | 1  |
|  Currency translation | 1 | 2 | - | 3  |
|  **At 30 April 2022** | **(72)** | **(105)** |  | **(127)**  |

# **Carrying amount**

|  At 1 May 2021 | 125 | 100 | 1 | 226  |
| --- | --- | --- | --- | --- |
|  **At 30 April 2022** | **114** | **84** | **1** | **199**  |

|   | Land and buildings £m | Plant and equipment £m | Fixtures and fittings £m | Total £m  |
| --- | --- | --- | --- | --- |
|  **Cost** |  |  |  |   |
|  At 1 May 2020 | 174 | 169 | 2 | 345  |
|  Divestments | (3) | - | - | (3)  |
|  Additions | 17 | 34 | - | 51  |
|  Disposals | (6) | (16) | - | (22)  |
|  Reclassification | - | - | (1) | (1)  |
|  Currency translation | (5) | - | - | (5)  |
|  **At 30 April 2021** | **177** | **187** | **1** | **365**  |
|  **Depreciation and impairment** |  |  |  |   |
|  At 1 May 2020 | (28) | (61) | - | (89)  |
|  Depreciation charge | (31) | (43) | - | (74)  |
|  Disposals | 6 | 16 | - | 22  |
|  Reclassification | - | 1 | - | 1  |
|  Currency translation | 1 | - | - | 1  |
|  **At 30 April 2021** | **(52)** | **(87)** |  | **(139)**  |

# **Carrying amount**

|  At 1 May 2020 | 146 | 108 | 2 | 256  |
| --- | --- | --- | --- | --- |
|  **At 30 April 2021** | **125** | **100** | **1** | **226**  |

150
FINANCIAL STATEMENTS
12. Right-of-use assets and lease liabilities continued
## Notes to the consolidated financial statements (continued)
Lease liabilities
The carrying amounts of lease liabilities and the movements during the year are as follows:

|  |  |  |  |  |  | 2022 | 2021 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 12. Right-of-use assets and lease liabilities |  |  |  |  |  | £m | £m |
|  | At be | innin | of the | ea | 230 255 |  |  |

Right-of-use assets
Divestments (1) (3)
Land and Plant and Fixtures
Additions 51 51

|  | buildings |  | equipment |  | and fittings |  | Total |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | £m |  | £m |  | £m | £m | Accretion of interes |  | 11 12 |
| Cost |  |  |  |  |  |  |  | Payments (84) (85) |  |  |
| At 1 May 2021 177 187 1 365 |  |  |  |  |  |  |  | Early termination (3) 1 |  |  |
| Divestments – (1) – (1) |  |  |  |  |  |  |  | Currency translation (1) (1) |  |  |
| Additions 17 34 – 51 |  |  |  |  |  |  |  | At end of the | ea | 203 230 |

Disposals (9) (22) – (31)

| Reclassification – (4) – (4) |  | Curren | 63 71 |  |
| --- | --- | --- | --- | --- |
| Currency translation 1 (5) – (4) |  | Non-cu | ren | 140 159 |
| At 30 A | ril 2022 186 189 1 376 | 203 230 |  |  |

Depreciation and impairment
The Group has maintained full operational status throughout the Covid-19 pandemic and as a result of this there has been no requirement for
At 1 May 2021 (52) (87) – (139)
the Group to enter into any alternative relationships with regard to its lease population.
Depreciation charge (30) (40) – (70)
The maturity analysis of lease liabilities is presented in note 20.
Disposals 9 19 – 28
Reclassification – 1 – 1
13. Equity accounted investments
Currency translation 1 2 – 3

|  |  |  |  |  |  |  |  | 2022 |  | 2021 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| At 30 A | ril 2022 | 72 | 105 | – | 177 |  |  |  | £m | £m |
|  |  |  |  |  |  | At beginning of the yea | 38 35 |  |  |  |
| Carrying amount |  |  |  |  |  | Dividends (1) (1) |  |  |  |  |
| At 1 May 2021 125 100 1 226 |  |  |  |  |  | Share of profit of equity accounted investments, net of ta |  |  | 7 5 |  |
| At 30 April 2022 114 84 1 199 |  |  |  |  |  | Currency translation 2 (1) |  |  |  |  |

Impairment of associate (note 4) (29) –

| Land and |  | Plant and |  | Fixtures |  |  | At end of the year 17 38 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| buildings |  | equipment |  | and fittings |  | Total |  |
|  | £m |  | £m |  | £m | £m |  |

Principal equity accounted investments
Cos
Principal country Ownership interest
At 1 May 2020 174 169 2 345
Nature of business 2022 2021 of operation
Divestments (3) – – (3)
PrJSC ‘Rubezhnoye Cardboard and Package Mill’ Paper and packaging Ukraine 49.6% 49.6%
Additions 17 34 – 51
Philcorr LLC Packaging USA 40.0% 40.0%
Disposals (6) (16) – (22)
Philcorr Vineland LLC Packaging USA 40.0% 40.0%
Reclassification – – (1) (1)
Cartonajes Santander, S.L. Packaging Spain 39.6% 39.6%
Currency translation (5) – – (5)
Cartonajes Cantabria S.L. Packaging Spain 39.6% 39.6%
At 30 A ril 2021 177 187 1 365
Euskocarton, S.L. Packaging Spain 39.6% 39.6%
Depreciation and impairmen
At 1 May 2020 (28) (61) – (89) Industria Cartonera Asturiana S.L. Packaging Spain 39.6% 39.6%
Depreciation charge (31) (43) – (74)
The Group’s investment in an associate RKTK in Ukraine has been fully impaired during the year. The invasion of Ukraine by Russia has resulted
Disposals 6 16 – 22
in significant damage to the assets of the Group’s associate and has fundamentally compromised the ability to realise the interest held.
Reclassification – 1 – 1
Accordingly, an impairment of the entire interest has been recognised, together with amounts in connection with the trading activities
Currency translation 1 – – 1
conducted with the associate.
At 30 A ril 2021 52 87 – 139
All the above associates are accounted for using the equity method because the Group has the ability to exercise significant influence over the
Carrying amount investments due to the Group’s equity holdings and board representation.
At 1 May 2020 146 108 2 256
At 30 April 2021 125 100 1 226
Annual Report 2022 dssmith.com 151
t p p p p t ( ( ) ) ( ( ) ) ( ( ) ) r g t t g y y r t r r x
150 Annual Report 2022 dssmith.com 151
FINANCIAL STATEMENTS

# Notes to the consolidated financial statements (continued)

# **13. Equity accounted investments continued**

# **Summary of financial information of associates**

The financial information below is for the Group's associates on a 100% basis for the year ended 30 April.

|   | 2022 £m | 2021 £m  |
| --- | --- | --- |
|  Current assets | 15 | 52  |
|  Non-current assets | 13 | 79  |
|  Current liabilities | (10) | (19)  |
|  Non-current liabilities | (6) | (11)  |
|  Revenue | 77 | 174  |
|  Profit after tax | 12 | 20  |
|  Other comprehensive income | - | 16  |

# **14. Other investments**

|   | 2022 £m | 2021 £m  |
| --- | --- | --- |
|  Other investments | 13 | 10  |
|  Restricted cash | 3 | 3  |
|   | 16 | 13  |

# **15. Inventories**

|   | 2022 £m | 2021 £m  |
| --- | --- | --- |
|  Raw materials and consumables | 419 | 325  |
|  Work in progress | 27 | 22  |
|  Finished goods | 257 | 190  |
|   | 703 | 537  |

Inventory provisions at 30 April 2022 were £51m (30 April 2021: £50m)

Inventories of £3,102m were recognised as an expense during the year ended 30 April 2022 (2020/21: £2,307m) and included within cost of sales.

# **16. Trade and other receivables**

|   | 2022 |   | 2021  |   |
| --- | --- | --- | --- | --- |
|   |  Non-current £m | Current £m | Non-current £m | Current £m  |
|  Trade receivables | - | 1,023 | - | 677  |
|  Loss allowance | - | (30) | - | (31)  |
|  Prepayments and accrued income | - | 82 | - | 65  |
|  Other deposits | - | 30 | - | 29  |
|  Other receivables | - | 124 | 1 | 78  |
|   | - | 1,229 | 1 | 818  |

Other receivables comprise various items including indirect tax receivable, employee advances and interest receivable.

The Group has sold without recourse certain trade receivables and on realisation the receivable is de-recognised and proceeds are presented within operating cash flows. Other deposits relate to these arrangements. Sold trade receivables under these arrangements amounted to £381m (2020/21: £407m).

152
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
16. Trade and other receivables continued
Of which past due
Current 1 month 1–3 3–6 6–12 More than
Total (not past due) or less months months months 12 months
13. Equity accounted investments continued
£m £m £m £m £m £m £m
At 30 April 2022
Summary of financial information of associates
Gross trade receivables 1,023 967 16 11 3 3 23
The financial information below is for the Group’s associates on a 100% basis for the year ended 30 April.
Weighted average loss rate 2.9% 0.4% 6.3% 9.1% 33% 33% 96%
2022 2021
£m £m Loss allowance (30) (4) (1) (1) (1) (1) (22)
Current assets 15 52
At 30 April 2021
Non-current assets 13 79
Gross trade receivables 677 629 8 8 2 2 28
Current liabilities (10) (19)
Weighted average loss rate – 0.6% 13% – – 50% 89%
Non-current liabilities (6) (11)
Loss allowance (31) (4) (1) – – (1) (25)
Revenue 77 174

| Profit after ta | 12 20 | Movement in loss allowance |  |  |
| --- | --- | --- | --- | --- |
| Other comprehensive income – 16 |  |  | 2022 | 2021 |
|  |  |  | £m | £m |

14. Other investments
At beginning of the yea (31) (36)
2022 2021
Amounts written off – 8
£m £m
Net remeasurement of loss allowance – (3)
Other investments 13 10
Currency translation 1 –
Restricted cash 3 3
At end of the year (30) (31)
16 13
Concentrations of credit risk with respect to trade receivables are limited due to the Group’s customer base being large and diverse.
15. Inventories
The majority of customers are credit insured and the Group has a history of low levels of losses in respect of trade receivables.
2022 2021
£m £m The loss allowance represents the Group’s expected credit losses on trade receivables as defined under IFRS 9 Financial Instruments .
Raw materials and consumables 419 325 The expected credit losses are estimated using a provision matrix by grouping trade receivables based on shared credit risk characteristics
Work in progress 27 22 and the days past due. Expected loss rates are calculated by reference to past default experience of the debtor and an analysis of the debtor’s
Finished goods 257 190 current financial position, adjusted for factors that are specific to the debtors, general economic conditions (including the impact of Covid-19)
703 537 and an assessment of both the current as well as the forecast direction of conditions at the reporting date. The accounting impact of credit
insurance is not considered integral to the consideration of the carrying value of the trade receivables.
Inventory provisions at 30 April 2022 were £51m (30 April 2021: £50m).
17. Trade and other payables
Inventories of £3,102m were recognised as an expense during the year ended 30 April 2022 (2020/ 21: £2,307m) and included within cost of sales.
2022 2021

| 16. Trade and other receivables |  |  |  |  |  |  |  |  |  | Non- |  |  | Non- |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  | current | Current |  | current | Current |  |
|  |  |  | 2022 2021 |  |  |  |  |  |  | £m |  | £m | £m |  | £m |
|  |  | Non- |  |  |  | Non- |  |  | Trade payables – 1,922 – 1,273 |  |  |  |  |  |  |
|  |  | current |  | Current |  | current | Current |  |  |  |  |  |  |  |  |
|  |  |  | £m |  | £m | £m |  | £m | Interest payable – 23 – 24 |  |  |  |  |  |  |
| Trade receivables – 1,023 – 677 |  |  |  |  |  |  |  |  | Other non-trade payables and accrued expenses 37 558 15 537 |  |  |  |  |  |  |
| Loss allowance – (30) – (31) |  |  |  |  |  |  |  |  | 37 2,503 15 1,834 |  |  |  |  |  |  |
| Prepayments and acc | ued income – 82 – 65 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

In accordance with government initiatives to allow suppliers to receive payments earlier than contractual payment terms, the Group has
Other deposits – 30 – 29
set up supply chain finance programmes through third parties, all of which are established and well capitalised financial institutions. The
Other receivables – 124 1 78
objectives for the scheme are to support smaller suppliers, if they choose, on an invoice by invoice basis, an earlier payment from the financial
– 1,229 1 818 institution whilst the group continue to pay the financial institution to the suppliers contractual terms giving them earlier access to funding,
and to manage the Group’s working capital. These schemes allow suppliers to receive, if they choose, on an invoice by invoice basis, an earlier
Other receivables comprise various items including indirect tax receivable, employee advances and interest receivable.
payment whilst the Group continues to pay to the suppliers’ contractual terms. Suppliers are at liberty to use them or not and these
The Group has sold without recourse certain trade receivables and on realisation the receivable is de-recognised and proceeds are presented arrangements have no cost to the Group and have no effect on trade payable balances or operating cash flows. The Group does not participate
within operating cash flows. Other deposits relate to these arrangements. Sold trade receivables under these arrangements amounted to in any rebates, does not receive any fees from the providers nor does it provide any discounts or incentives for the suppliers to utilise these
£381m (2020/21:£407m). facilities. Additionally, they are not used to create payment terms which are abnormal, atypical or extend statutory payment terms in the
countries the Group operates in and no adjustments are made by Standard and Poor’s in their assessment of Group adjusted net debt.
The Group assesses the supply chain finance programmes to ascertain whether liabilities to suppliers who have chosen to access an earlier
payment under the scheme continue to meet the definition of trade payables, or should be reclassified as borrowings. The Group has
concluded that the Group’s liability to the supplier remains unchanged for all such programmes and, as such, these balances remain in trade
payables and the cash flows associated with these programmes remain within operating cash flows.
Annual Report 2022 dssmith.com 153
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152
Annual Report 2022 dssmith.com 153
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
17. Trade and other payables continued
Within non-trade payables and accrued expenses is the redemption liability of £99m at 30 April 2022 (30 April 2021: £105m) arising on the
acquisition of Interstate Resources and relating to a put option held by the seller, as detailed further in note 30(a).
The liability for the final stake at 30 April 2022 is recorded at the discounted fair value of the estimated redemption amount, applying a
discount rate of 9%, based on the multiple based formula using the forecast results of the Interstate Resources business, as specified in the
contract, with a floor of the original purchase price.
18. Net debt
The components of net debt and movement during the year is as follows:
Foreign
exchange, fair

|  |  |  | Continuing |  | Acquisitions |  | value and |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | At 30 April |  | operations |  |  | and | non-cash |  | At 30 April |  |
|  |  | 2021 | cash flow |  | divestments |  | movements |  |  | 2022 |
| Note |  | £m |  | £m |  | £m |  | £m |  | £m |

Cash and cash equivalents 813 15 – (9) 819
Overdrafts (94) 20 – 1 (73)
Net cash and cash equivalents 19 719 35 – (8) 746
Other investments – restricted cash 14 3 – – – 3
Other deposits 29 2 – (1) 30
Borrowings – after one yea (2,066) 3 – 672 (1,391)
Borrowings – within one yea (235) 192 – (638) (681)
Lease liabilities 12 (230) 73 1 (47) (203)
Derivative financial instruments
Assets – (4) – 16 12
Liabilities (15) 39 – (24) –
(2,514) 305 1 (22) (2,230)
Net debt – reported basis (1,795) 340 1 (30) (1,484)
IFRS 16 lease liabilities 227 201
Net debt excluding IFRS 16 liabilities (1,568) (1,283)
Net debt is a non-GAAP measure not defined by IFRS. While the Group has included lease liabilities after transition to IFRS 16 Leases within
total lease liabilities (in addition to arrangements previously classified as finance leases under IAS 17), IFRS 16 liabilities are currently excluded
from the definition of net debt as set out in the Group’s banking covenant requirements.
Further detail on the use of non-GAAP measures and a reconciliation showing the calculation of adjusted net debt, as defined in the Group’s
banking covenants, is included in note 32.
Derivative financial instruments above relate to forward foreign exchange contracts and cross-currency swaps used to hedge the Group’s
borrowings and the net assets of foreign operations. The difference between the amounts shown above and the total derivative financial
instrument assets and liabilities in the consolidated statement of financial position relates to derivative financial instruments that hedge
forecast foreign currency transactions and the Group’s purchases of energy.
Non-cash movements relate to amortisation of fees incurred on debt issuance and new leases.
Other deposits are included, as these short-term receivables have the characteristics of net debt.
19. Cash and cash equivalents
2022 2021
£m £m
Bank balances 469 378
Shor -term deposits 350 435
Cash and cash equivalents (consolidated statement of financial position) 819 813
Bank overdrafts (73) (94)
Net cash and cash equivalents (consolidated statement of cash flows) 746 719
154
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154
FINANCIAL STATEMENTS
20. Borrowings
## Notes to the consolidated financial statements (continued)
2022 2021
Non-
Current current Total Current Non-current Total
£m £m £m £m £m £m
1
Bank and other loans (4) (2) (6) (32) – (32)
17. Trade and other payables continued
Commercial pape (37) – (37) (43) – (43)
Within non-trade payables and accrued expenses is the redemption liability of £99m at 30 April 2022 (30 April 2021: £105m) arising on the
Medium-term notes and other fixed-term deb
acquisition of Interstate Resources and relating to a put option held by the seller, as detailed further in note 30(a).
€150m term loan 0.6% coupon July 2021 – – – (130) – (130)
The liability for the final stake at 30 April 2022 is recorded at the discounted fair value of the estimated redemption amount, applying a $268m USD private placement 4.65% weighted average coupon August
2
discount rate of 9%, based on the multiple based formula using the forecast results of the Interstate Resources business, as specified in the 2021-2022 (213) – (213) (22) (193) (215)
contract, with a floor of the original purchase price. €500m medium-term note 2.25% coupon September 2022 (420) – (420) – (433) (433)
18. Net debt €750m medium-term note 1.38% coupon July 2024 – (625) (625) – (650) (650)
€27.6m term loan 1.4% coupon September 2025 (7) (16) (23) (8) (27) (35)
The components of net debt and movement during the year is as follows:
€600m medium-term note 0.85% coupon September 2026 – (499) (499) – (515) (515)
Foreign
exchange, fair £250m medium-term note 2.88% coupon July 2029 – (249) (249) – (248) (248)
Continuing Acquisitions value and
(681) (1,391) (2,072) (235) (2,066) (2,301)
At 30 April operations and non-cash At 30 April
2021 cash flow divestments movements 2022
1. Drawings under bank loans.
Note £m £m £m £m £m
2. Swapped to fixed rate £103m and fixed rate €120m using cross-currency swaps.
Cash and cash equivalents 813 15 – (9) 819
Overdrafts (94) 20 – 1 (73) Borrowings are unsecured and measured at amortised cost. There have been no breaches of covenants during the year ended 30 April 2022 in
Net cash and cash equivalents 19 719 35 – (8) 746 relation to the above borrowings.
Other investments – restricted cash 14 3 – – – 3 Of the total borrowing facilities available to the Group, the undrawn committed facilities available at 30 April were as follows:
Other deposits 29 2 – (1) 30

|  |  |  | 2022 | 2021 |
| --- | --- | --- | --- | --- |
| Borrowings – after one yea | (2,066) 3 – 672 (1,391) |  | £m | £m |
| Borrowings – within one yea | (235) 192 – (638) (681) | Expiring between two and five years 1,450 1,452 |  |  |
| Lease liabilities 12 (230) 73 1 (47) (203) |  | Expiring after five years – – |  |  |
| Derivative financial instruments |  | 1,450 1,452 |  |  |

Assets – (4) – 16 12
The £1,450m of undrawn facilities consist of the revolving credit facilities.
Liabilities (15) 39 – (24) –
The repayment profile of the Group’s borrowings, after taking into account the effect of cross-currency swaps and forward foreign exchange
(2,514) 305 1 (22) (2,230)
contracts, is as follows:
Net debt – reported basis (1,795) 340 1 (30) (1,484)
2022
IFRS 16 lease liabilities 227 201

|  |  |  |  | 1 year | 1–2 | 2–5 | More than |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net debt excluding IFRS 16 liabilities (1,568) (1,283) |  |  |  | or less | years | years |  | 5 years |  | Total |
|  |  |  |  | £m | £m | £m |  |  | £m | £m |
| Net debt is a non-GAAP measure not defined by IFRS. While the Group has included lease liabilities after transition to IFRS 16 | Leases | within | Borrowings |  |  |  |  |  |  |  |
| total lease liabilities (in addition to arrangements previously classified as finance leases under IAS 17), IFRS 16 liabilities are currently excluded |  |  | Fixed rate (680) (7) (1,136) (248) (2,071) |  |  |  |  |  |  |  |

from the definition of net debt as set out in the Group’s banking covenant requirements.
Floating rate (1) – – – (1)
Further detail on the use of non-GAAP measures and a reconciliation showing the calculation of adjusted net debt, as defined in the Group’s Total borrowings (681) (7) (1,136) (248) (2,072)
banking covenants, is included in note 32.
2021
Derivative financial instruments above relate to forward foreign exchange contracts and cross-currency swaps used to hedge the Group’s 1 year 1–2 2–5 More than
or less years years 5 years Total
borrowings and the net assets of foreign operations. The difference between the amounts shown above and the total derivative financial
£m £m £m £m £m
instrument assets and liabilities in the consolidated statement of financial position relates to derivative financial instruments that hedge
Borrowings
forecast foreign currency transactions and the Group’s purchases of energy.
Fixed rate (204) (631) (664) (770) (2,269)
Non-cash movements relate to amortisation of fees incurred on debt issuance and new leases. Floating rate (31) (1) – – (32)
Other deposits are included, as these short-term receivables have the characteristics of net debt. Total borrowings (235) (632) (664) (770) (2,301)
19. Cash and cash equivalents
2022 2021
£m £m
Bank balances 469 378
Shor -term deposits 350 435
Cash and cash equivalents (consolidated statement of financial position) 819 813
Bank overdrafts (73) (94)
Net cash and cash equivalents (consolidated statement of cash flows) 746 719
Annual Report 2022 dssmith.com 155
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154 Annual Report 2022 dssmith.com 155
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
20. Borrowings continued
The Group’s borrowings, after taking into account the effect of cross-currency swaps and forward foreign exchange contracts are
denominated in the following currencies:
2022
Sterling Euro US dollar Other Total
£m £m £m £m £m
Borrowings
Fixed rate (200) (1,643) (227) (1) (2,071)
Floating rate – (1) – – (1)
(200) (1,644) (227) (1) (2,072)
Net cash and cash equivalents (including bank overdrafts)
Floating rate 90 474 56 126 746
Net borrowings at 30 April 2022 (110) (1,170) (171) 125 (1,326)
2021
Sterling Euro US dollar Other Total
£m £m £m £m £m
Borrowings
Fixed rate (353) (1,694) (222) – (2,269)
Floating rate – (32) – – (32)
(353) (1,726) (222) – (2,301)
Net cash and cash equivalents (including bank overdrafts)
Floating rate 288 315 20 96 719
Net borrowings at 30 April 2021 (65) (1,411) (202) 96 (1,582)
At 30 April 2022, 79% of the Group’s borrowings, after taking into account the effect of cross-currency swaps and forward foreign exchange
contracts, were denominated in euros in order to hedge the underlying assets of the Group’s European operations (30 April 2021: 75%).
Interest rates on floating rate borrowings are based on EURIBOR or, where applicable local currency base rates.
Maturity of lease liabilities

| 1 year | 1–2 | 2–5 | More than |  |  |
| --- | --- | --- | --- | --- | --- |
| or less | years | years | 5 years |  | Total |
| £m | £m | £m |  | £m | £m |

At 30 April 2021 (71) (51) (73) (35) (230)
At 30 April 2022 (63) (46) (61) (33) (203)
Denomination of lease liabilities
Sterling Euro US dollar Other Total
£m £m £m £m £m
At 30 April 2021 (49) (114) (36) (31) (230)
At 30 April 2022 (42) (101) (38) (22) (203)
156
156
FINANCIAL STATEMENTS
20. Borrowings continued
## Notes to the consolidated financial statements (continued)
Changes in liabilities arising from financing activities
Acquisitions

|  |  |  |  | At 1 May |  | Financing |  |  | and |  |  | Movements |  |  | At 30 Apr |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  | 2021 | cash flows |  | divestments |  | New leases |  | in fair value |  | Other |  | 2022 |
| 20. Borrowings continued |  |  |  |  | £m |  | £m |  | £m |  | £m |  | £m | £m |  | £m |
|  | Ban | and other loans, including commercial pape | (75) 36 – – – (4) (43) |  |  |  |  |  |  |  |  |  |  |  |  |  |

The Group’s borrowings, after taking into account the effect of cross-currency swaps and forward foreign exchange contracts are
Medium-term notes and other fixed-term deb (2,226) 159 – – – 38 (2,029)
denominated in the following currencies:
Lease liabilities (230) 73 1 (51) – 4 (203)
2022
Derivative financial instruments related to hedging of

|  | Sterling |  | Euro | US dollar |  | Other | Total |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | £m | £m |  | £m | £m | £m | financial liabilities (note 18) |
| Borrowings |  |  |  |  |  |  |  | Assets – (4) – – 16 – 12 |
| Fixed rate (200) (1,643) (227) (1) (2,071) |  |  |  |  |  |  |  | Liabilities (15) 39 – – (24) – – |
| Floating rate – (1) – – (1) |  |  |  |  |  |  |  | Total liabilities from financing activities (2,546) 303 1 (51) (8) 38 (2,263) |

(200) (1,644) (227) (1) (2,072)
Net cash and cash equivalents (including bank overdrafts) Acquisitions
At 1 May Financing and Movements in At 30 Apr
Floating rate 90 474 56 126 746

|  |  |  |  | 2020 | cash flows |  | divestments |  | New leases |  | fair value |  | Other | 2021 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net borrowings at 30 April 2022 (110) (1,170) (171) 125 (1,326) |  |  |  | £m |  | £m |  | £m |  | £m |  | £m | £m | £m |
|  | Ban | and other loans, including commercial pape | (35) (42) – – – 2 (75) |  |  |  |  |  |  |  |  |  |  |  |

2021

|  |  |  |  |  |  |  |  | Medium-term notes and other fixed-term deb | (2,363) 98 – – – 39 (2,226) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Sterling |  | Euro | US dollar |  | Other | Total |  |  |
|  |  | £m | £m |  | £m | £m | £m | Lease liabilities (255) 73 3 (51) – – (230) |  |
| Borrowings |  |  |  |  |  |  |  | Derivative financial instruments related to hedging of |  |
| Fixed rate (353) (1,694) (222) – (2,269) |  |  |  |  |  |  |  | financial liabilities (note 18) |  |
| Floating rate – (32) – – (32) |  |  |  |  |  |  |  | Assets 13 (8) – – (5) – – |  |
| (353) (1,726) (222) – (2,301) |  |  |  |  |  |  |  | Liabilities (2) 24 – – (37) – (15) |  |
| Net cash and cash equivalents (including bank overdrafts) |  |  |  |  |  |  |  | Total liabilities from financing activities (2,642) 145 3 (51) (42) 41 (2,546) |  |

Floating rate 288 315 20 96 719
Other changes include foreign exchange movements and amortisation of capitalised borrowing costs.
Net borrowings at 30 April 2021 (65) (1,411) (202) 96 (1,582)
Financing cash flows consist of the net amount of proceeds from borrowings, repayment of borrowings, repayment of lease obligations and
At 30 April 2022, 79% of the Group’s borrowings, after taking into account the effect of cross-currency swaps and forward foreign exchange proceeds from settlement of derivative financial instruments in the consolidated statement of cash flows. Payments in respect of, and
contracts, were denominated in euros in order to hedge the underlying assets of the Group’s European operations (30 April 2021: 75%). proceeds from settlement of derivative financial instruments in the consolidated statement of cash flows relate solely to derivative financial
Interest rates on floating rate borrowings are based on EURIBOR or, where applicable local currency base rates. instruments used to hedge the Group’s borrowings and net assets of foreign operations. Operating cash flows include settlement of
commodity derivatives.
Maturity of lease liabilities

| 1 year | 1–2 | 2–5 | More than |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
| or less | years | years |  | 5 years |  | Total |
| £m | £m | £m |  |  | £m | £m |

At 30 April 2021 (71) (51) (73) (35) (230)
At 30 April 2022 (63) (46) (61) (33) (203)
Denomination of lease liabilities
Sterling Euro US dollar Other Total
£m £m £m £m £m
At 30 April 2021 (49) (114) (36) (31) (230)
At 30 April 2022 (42) (101) (38) (22) (203)
Annual Report 2022 dssmith.com 157
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156 Annual Report 2022 dssmith.com 157
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
21. Financial instruments
The Group’s activities expose the Group to a number of key risks which have the potential to affect its ability to achieve its business objectives.
A summary of the Group’s key financial risks and the policies and objectives in place to manage these risks is set out in the financial review and
principal risk sections of the Strategic Report.
The derivative financial instruments set out in this note have been entered into in line with the Group’s risk management objectives.
The Group’s treasury policy prohibits entering into speculative transactions.
(a) Carrying amounts and fair values of financial assets and liabilities
Set out below is the accounting classification of the carrying amounts and fair values of all of the Group’s financial assets and liabilities:
2022 2021
Carrying Carrying
amount Fair value amount Fair value
Category £m £m £m £m
Financial assets
Cash and cash equivalents Amor ised cos 819 819 813 813
Restricted cash Amortised cos 3 3 33
Other investments Fair value through other comprehensive income 13 13 10 10
Trade and other receivables Amortised cos 1,229 1,229 819 819
Derivative financial instruments Fair value – hedging instruments 811 811 115 115
Total financial assets 2,875 2,875 1,760 1,760
Financial liabilities

| Trade and other payables Amortised cost, excep |  | as detailed below (2,540) (2,540) (1,849) (1,849) |  |
| --- | --- | --- | --- |
| Bank and other loans Amortised cos |  |  | (6) (6) (32) (32) |
| Commercial pape | Amortised cos |  | (37) (37) (43) (43) |

Medium-term notes and other

| fixed-term debt | Amortised cost (2,029) (2,015) (2,226) (2,323) |  |
| --- | --- | --- |
| Lease liabilities Amortised cos |  | (203) (203) (230) (230) |
| Bank overdrafts Amortised cos |  | (73) (73) (94) (94) |

Derivative financial instruments Fair value – hedging instruments (84) (84) (56) (56)
Total financial liabilities (4,972) (4,958) (4,530) (4,627)
The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. For financial instruments carried at fair value, market prices or rates are used to determine fair value
where an active market exists. The Group uses forward prices for valuing forward foreign exchange and commodity contracts and uses
valuation models with present value calculations based on market yield curves to value fixed rate borrowings and cross-currency swaps.
All derivative financial instruments are shown at fair value in the consolidated statement of financial position.
The Group’s medium-term notes and other fixed-term debt are in effective cash flow and net investment hedges. The fair values of financial
assets and liabilities which bear floating rates of interest or are short-term in nature are estimated to be equivalent to their carrying amounts.
The Group’s financial assets and financial liabilities are categorised within the fair value hierarchy that reflects the significance of the inputs
used in making the assessments. The majority of the Group’s financial instruments are Level 2 financial instruments in accordance with the fair
value hierarchy, meaning although the instruments are not traded in an active market, inputs to fair value are observable for the asset and
liability, either directly (i.e. quoted market prices) or indirectly (i.e. derived from prices). The Group’s medium-term notes are Level 1 financial
instruments, as the notes are listed on the Luxembourg Stock Exchange. Other investments and the redemption liability arising on the
acquisition of Interstate Resources (within trade and other payables) are Level 3 financial instruments. The fair value of other investments is
derived from fair value calculations based on their cash flows, and details of the valuation of the redemption liability are provided in note 17.
158
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158
FINANCIAL STATEMENTS
21. Financial instruments continued
## Notes to the consolidated financial statements (continued)
(b) Derivative financial instruments
The Group enters into derivative financial instruments, primarily foreign exchange and commodity contracts, to manage the risks associated
with the Group’s underlying business activities and the financing of these activities. Derivatives designated as effective hedging instruments
21. Financial instruments are carried at their fair value.
The Group’s activities expose the Group to a number of key risks which have the potential to affect its ability to achieve its business objectives. The assets and liabilities of the Group at 30 April in respect of derivative financial instruments are as follows:
A summary of the Group’s key financial risks and the policies and objectives in place to manage these risks is set out in the financial review and
Assets Liabilities Net
principal risk sections of the Strategic Report. 2022 2021 2022 2021 2022 2021
£m £m £m £m £m £m
The derivative financial instruments set out in this note have been entered into in line with the Group’s risk management objectives.
Derivatives held to:
The Group’s treasury policy prohibits entering into speculative transactions.
Manage the currency exposures on business activities, borrowings
(a) Carrying amounts and fair values of financial assets and liabilities and net investments 12 – – (15) 12 (15)
Set out below is the accounting classification of the carrying amounts and fair values of all of the Group’s financial assets and liabilities: Derivative financial instruments included in net debt 12 – – (15) 12 (15)
Derivatives held to hedge future transactions:
2022 2021
Carrying Carrying Forward foreign exchange contracts 1 – – – 1 –
amount Fair value amount Fair value
Energy and carbon certificate costs 798 115 (84) (41) 714 74
Category £m £m £m £m
Total derivative financial instruments 811 115 (84) (56) 727 59
Financial assets

| Cash and cash equivalents Amor | ised cos | 819 819 813 813 |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  | Curren | 316 80 (56) (41) 260 39 |  |
| Restricted cash Amortised cos |  |  | 3 3 33 |  |  |  |
|  |  |  |  | Non-curren |  | 495 35 (28) (15) 467 20 |

Other investments Fair value through other comprehensive income 13 13 10 10
Trade and other receivables Amortised cos 1,229 1,229 819 819 811 115 (84) (56) 727 59
Derivative financial instruments Fair value – hedging instruments 811 811 115 115
(c) Cash flow and net investment hedges
Total financial assets 2,875 2,875 1,760 1,760
(i) Hedge reserves
Financial liabilities

| Trade and other payables Amortised cost, excep |  | as detailed below (2,540) (2,540) (1,849) (1,849) |  | Set out below is the reconciliation of each component in the hedging reserve: |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Bank and other loans Amortised cos |  |  | (6) (6) (32) (32) |  |  |  | Foreign exchange |  |  |
|  |  |  |  |  | Commodity risk |  |  | risk | Total |
| Commercial pape | Amortised cos |  | (37) (37) (43) (43) |  |  |  |  |  |  |
|  |  |  |  |  |  | £m |  | £m | £m |

Medium-term notes and other
Balance at 1 May 2020 (26) (13) (39)
fixed-term debt Amortised cost (2,029) (2,015) (2,226) (2,323)
Gain/(loss) on designated cash flow hedges:
Lease liabilities Amortised cos (203) (203) (230) (230)
Cross-currency swaps – (20) (20)
Bank overdrafts Amortised cos (73) (73) (94) (94)
Commodity contracts 123 – 123
Derivative financial instruments Fair value – hedging instruments (84) (84) (56) (56)
Loss/(gain) reclassified from equity to the income statement:
Total financial liabilities (4,972) (4,958) (4,530) (4,627)
Cross-currency swaps – 27 27
The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market Commodity contracts (18) – (18)
participants at the measurement date. For financial instruments carried at fair value, market prices or rates are used to determine fair value Deferred ta (20) – (20)
where an active market exists. The Group uses forward prices for valuing forward foreign exchange and commodity contracts and uses At 30 April 2021 59 (6) 53
valuation models with present value calculations based on market yield curves to value fixed rate borrowings and cross-currency swaps.
Gain/(loss) on designated cash flow hedges:
All derivative financial instruments are shown at fair value in the consolidated statement of financial position.
Cross-currency swaps – 20 20
The Group’s medium-term notes and other fixed-term debt are in effective cash flow and net investment hedges. The fair values of financial Commodity contracts 1,049 – 1,049
assets and liabilities which bear floating rates of interest or are short-term in nature are estimated to be equivalent to their carrying amounts. Loss/(gain) reclassified from equity to the income statement:
The Group’s financial assets and financial liabilities are categorised within the fair value hierarchy that reflects the significance of the inputs Cross-currency swaps – (20) (20)
used in making the assessments. The majority of the Group’s financial instruments are Level 2 financial instruments in accordance with the fair Commodity contracts (337) – (337)
value hierarchy, meaning although the instruments are not traded in an active market, inputs to fair value are observable for the asset and Reclassification between reserves – 7 7
liability, either directly (i.e. quoted market prices) or indirectly (i.e. derived from prices). The Group’s medium-term notes are Level 1 financial Deferred ta (162) (1) (163)
instruments, as the notes are listed on the Luxembourg Stock Exchange. Other investments and the redemption liability arising on the At 30 April 2022 609 – 609
acquisition of Interstate Resources (within trade and other payables) are Level 3 financial instruments. The fair value of other investments is
derived from fair value calculations based on their cash flows, and details of the valuation of the redemption liability are provided in note 17.
Annual Report 2022 dssmith.com 159
r t t t t t t t t t t t x x
158 Annual Report 2022 dssmith.com 159
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
21. Financial instruments continued
(c) Cash flow and net investment hedges continued
(i) Hedge reserves continued
The amounts reclassified to the income statement from the cash flow hedging reserve during the year are reflected in the following items in
the income statement:
2022 2021
£m £m
Operating costs (337) (18)
Finance costs (20) 27
Total pre-tax loss/(gain) reclassified from equity to the income statement during the year (357) 9
There was £nil recognised ineffectiveness during the year ended 30 April 2022 (2020/21: £nil) in relation to the cross-currency swaps.
(ii) Hedges of net investments in foreign operations
The Group utilises foreign currency borrowings, cross-currency swaps and forward foreign exchange contracts as hedges of long-term
investments in foreign subsidiaries. The pre-tax gain on the hedges recognised in equity during the year was £28m (2020/21: loss of £2m).
This £28m is matched by a similar gain in equity on the retranslation of the hedged foreign subsidiary net assets resulting in a net gain of £nil
(2020/21: net gain of £nil) treated as hedge ineffectiveness in the income statement.
(d) Risk identification and risk management
(i) Capital management
The Group defines its managed capital as the sum of equity, as presented in the consolidated statement of financial position, and net debt
(note 18).

|  |  |  | 2022 | 2021 |
| --- | --- | --- | --- | --- |
|  |  |  | £m | £m |
| Net deb | 1,484 1,795 |  |  |  |
| Total equit |  | 4,234 3,535 |  |  |

Managed capital 5,718 5,330
There were no significant events leading to the change in managed capital levels during the year. The changes in the Group’s funding were the
repayment of private placement borrowings of €30m in August 2021, repayment of a €150m term loan in July 2021 and a €12m part-repayment of
a term loan according to a quarterly payment schedule.
Managed capital is different from capital employed (defined as property, plant and equipment, right-of-use assets, goodwill and intangible
assets, working capital, capital debtors/creditors, provisions, biological assets and assets/liabilities held for sale). Managed capital relates to
our sources of funding, whereas adjusted return on average capital employed is our measure of the level of return being generated by the
asset base.
The Group funds its operations from the following sources of capital: operating cash flow, borrowings, shareholders’ equity and, where
appropriate, divestments of non-core businesses. The Group’s objective is to achieve a capital structure that results in an appropriate cost of
capital whilst providing flexibility in short and medium-term funding so as to accommodate significant investments or acquisitions. The Group
also aims to maintain a strong balance sheet and to provide continuity of financing by having borrowings with a range of maturities and from
a variety of sources.
The Group’s overall treasury objectives are to ensure sufficient funds are available for the Group to carry out its strategy and to manage certain
financial risks to which the Group is exposed, as described elsewhere in this note. The Group’s treasury strategy is controlled through the
Balance Sheet Committee which meets every two months and includes the Group Finance Director, the Group General Counsel and Company
Secretary, the Group Financial Controller and the Corporate Finance Director. The Group Treasury function operates in accordance with policies
and procedures approved by the Board and is controlled by the Corporate Finance Director. The function arranges funding for the Group,
provides a service to operations and implements strategies for financial risk management.
(ii) Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument fluctuate because of a change in market prices. The Group
is exposed to changes in interest rates, foreign currency exchange rates and commodity prices.
Interest rate risk
The Group is exposed to interest rate risk as borrowings are arranged at fixed interest rates, exposing it to fair value risk, and at floating
interest rates, exposing it to future cash flow risk. The risk is managed by maintaining a mix of fixed and floating rate borrowings. The Group’s
exposure to interest rates on financial assets and financial liabilities is detailed in the liquidity risk management section of this note.
160
t y
160
FINANCIAL STATEMENTS
21. Financial instruments continued
## Notes to the consolidated financial statements (continued)
(d) Risk identification and risk management continued
(ii) Market risk continued
Interest rate sensitivity
21. Financial instruments continued
At 30 April 2022, 100% of the Group’s borrowings were at fixed rates of interest (30 April 2021: 99%). The sensitivity analysis below shows
(c) Cash flow and net investment hedges continued the impact on profit of a 100 basis points rise in market interest rates (representing management’s assessment of the reasonably possible
change in interest rates) in all currencies in which the Group had variable-rate borrowings at 30 April 2022.
(i) Hedge reserves continued
To calculate the impact on the income statement for the year, the interest rates on all variable-rate external borrowings and cash deposits
The amounts reclassified to the income statement from the cash flow hedging reserve during the year are reflected in the following items in
have been increased by 100 basis points, and the resulting increase in the net interest charge has been adjusted for the effect of the Group’s
the income statement:
interest rate derivatives. The impact on equity is equal to the impact on profit.

|  | 2022 | 2021 |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | £m | £m | The results are presented before non-controlling interests and tax. |  |  |
| Operating costs (337) (18) |  |  |  | 2022 | 2021 |
|  |  |  |  | £m | £m |

Finance costs (20) 27
Impact on profit of increase in market interest rates of 100 basis points – –
Total pre-tax loss/(gain) reclassified from equity to the income statement during the year (357) 9
There was £nil recognised ineffectiveness during the year ended 30 April 2022 (2020/21: £nil) in relation to the cross-currency swaps. Foreign exchange risk
The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in sterling, was as follows:
(ii) Hedges of net investments in foreign operations
2022 2021
The Group utilises foreign currency borrowings, cross-currency swaps and forward foreign exchange contracts as hedges of long-term EUR USD EUR USD
£m £m £m £m
investments in foreign subsidiaries. The pre-tax gain on the hedges recognised in equity during the year was £28m (2020/21: loss of £2m).
This £28m is matched by a similar gain in equity on the retranslation of the hedged foreign subsidiary net assets resulting in a net gain of £nil Trade receivables 782 71 504 54
(2020/21: net gain of £nil) treated as hedge ineffectiveness in the income statement. Trade payables (1,614) (179) (1,177) (174)
1
Net borrowings (1,171) (170) (1,411) (202)
(d) Risk identification and risk management
1. After taking into account the effect of cross-currency swaps and forward foreign exchange contracts.
(i) Capital management
Foreign exchange risk on investments
The Group defines its managed capital as the sum of equity, as presented in the consolidated statement of financial position, and net debt
The Group is exposed to foreign exchange risk arising from net investments in Group entities, the functional currencies of which differ from the
(note 18).
Group’s presentational currency, sterling. The Group partly hedges this exposure through borrowings denominated in foreign currencies and
2022 2021
through cross-currency swaps and forward foreign exchange contracts.

|  |  |  | £m | £m |  |
| --- | --- | --- | --- | --- | --- |
| Net deb | 1,484 1,795 |  |  |  | Gains and losses arising from hedges of net investments are recognised in equity. |
| Total equit |  | 4,234 3,535 |  |  | Foreign exchange risk on borrowings |
| Managed capital 5,718 5,330 |  |  |  |  | The Group is exposed to foreign exchange risk on borrowings denominated in foreign currencies. The Group hedges some of this exposure |

through cross-currency swaps designated as cash flow hedges.
There were no significant events leading to the change in managed capital levels during the year. The changes in the Group’s funding were the
repayment of private placement borrowings of €30m in August 2021, repayment of a €150m term loan in July 2021 and a €12m part-repayment of Foreign exchange risk on transactions
a term loan according to a quarterly payment schedule. Foreign currency transaction risk arises where a business unit makes product sales or purchases in a currency other than its functional
currency. Part of this risk is hedged using forward foreign exchange contracts which are designated as cash flow hedges.
Managed capital is different from capital employed (defined as property, plant and equipment, right-of-use assets, goodwill and intangible
assets, working capital, capital debtors/creditors, provisions, biological assets and assets/liabilities held for sale). Managed capital relates to The Group only designates the forward rate of foreign currency forwards in hedge relationships.
our sources of funding, whereas adjusted return on average capital employed is our measure of the level of return being generated by the
For the hedges of highly probable forecast sales and purchases, as the critical terms (i.e. the notional amount, life and underlying terms) of
asset base.
the foreign exchange forward contracts and their corresponding hedged items are the same, the Group performs a qualitative assessment of
The Group funds its operations from the following sources of capital: operating cash flow, borrowings, shareholders’ equity and, where effectiveness and it is expected that the value of the forward contracts and the value of the corresponding hedged items will systematically
appropriate, divestments of non-core businesses. The Group’s objective is to achieve a capital structure that results in an appropriate cost of change in opposite directions in response to movements in the underlying exchange rates.
capital whilst providing flexibility in short and medium-term funding so as to accommodate significant investments or acquisitions. The Group
The Group’s main currency exposures are to the euro and US dollar. The following significant exchange rates applied during the year:
also aims to maintain a strong balance sheet and to provide continuity of financing by having borrowings with a range of maturities and from
2022 2021
a variety of sources.
Average Closing Average Closing
The Group’s overall treasury objectives are to ensure sufficient funds are available for the Group to carry out its strategy and to manage certain Euro 1.179 1.192 1.122 1.151
financial risks to which the Group is exposed, as described elsewhere in this note. The Group’s treasury strategy is controlled through the US dolla 1.359 1.256 1.320 1.391
Balance Sheet Committee which meets every two months and includes the Group Finance Director, the Group General Counsel and Company
Secretary, the Group Financial Controller and the Corporate Finance Director. The Group Treasury function operates in accordance with policies
and procedures approved by the Board and is controlled by the Corporate Finance Director. The function arranges funding for the Group,
provides a service to operations and implements strategies for financial risk management.
(ii) Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument fluctuate because of a change in market prices. The Group
is exposed to changes in interest rates, foreign currency exchange rates and commodity prices.
Interest rate risk
The Group is exposed to interest rate risk as borrowings are arranged at fixed interest rates, exposing it to fair value risk, and at floating Annual Report 2022 dssmith.com 161
interest rates, exposing it to future cash flow risk. The risk is managed by maintaining a mix of fixed and floating rate borrowings. The Group’s
exposure to interest rates on financial assets and financial liabilities is detailed in the liquidity risk management section of this note.
t y r
160 Annual Report 2022 dssmith.com 161
FINANCIAL STATEMENTS

# Notes to the consolidated financial statements (continued)

## 21. Financial instruments continued

### (d) Risk identification and risk management continued

#### (ii) Market risk continued

##### Foreign exchange risk on transactions continued

The following sensitivity analysis shows the impact on the Group's results of a 10% strengthening and weakening in the sterling exchange rate against all other currencies representing management's assessment of the reasonably possible change in foreign exchange rates. The analysis is restricted to financial instruments denominated in a foreign currency and excludes the impact of financial instruments designated as net investment hedges.

Net investment hedges are excluded as the impact of the foreign exchange movements on these are offset by equal and opposite movements in the hedged items.

The results are presented before non-controlling interests and tax.

|   | 2022 |   | 2021  |   |
| --- | --- | --- | --- | --- |
|   | Impact on profit £m | Impact on total equity £m | Impact on profit £m | Impact on total equity £m  |
|  10% strengthening of sterling | - | 62 | - | 42  |
|  10% weakening of sterling | - | (76) | - | (51)  |

##### Commodity risk

The Group's main commodity exposures are to changes in gas and electricity prices. The Group also hedges its exposure to fluctuations in the cost of carbon emission certificates. This commodity price risk is managed by a combination of physical supply agreements and derivative instruments. At 30 April 2022, gains of £600m net of tax (2020/21; gains of £50m) are deferred in equity in respect of cash flow hedges in accordance with IAS 39. Any gains or losses deferred in equity will be reclassified to the income statement in the period in which the hedged item also affects the income statement, which will occur within three years.

The following table details the Group's sensitivity to a 10% increase in these prices, which is management's assessment of the reasonably possible change, on average, over any given year. A decrease of 10% in these prices would produce an opposite effect on equity. As all of the Group's commodity financial instruments achieve hedge accounting under IAS 39, there is no impact on profit for either year.

The results are presented before non-controlling interests and tax.

|   | 2022 |   | 2021  |   |
| --- | --- | --- | --- | --- |
|   | Impact on profit £m | Impact on total equity £m | Impact on profit £m | Impact on total equity £m  |
|  10% increase in electricity prices | - | 4 | - | 3  |
|  10% increase in gas prices | - | 103 | - | 22  |
|  10% increase in carbon certificate prices | - | 8 | - | 7  |

#### (iii) Credit risk

Credit risk is the risk that a customer or counterparty to a financial instrument will fail to perform or fail to pay amounts due, causing financial loss to the Group. In the current economic environment, the Group has placed increased emphasis on the management of credit risk. The carrying amount of financial assets at 30 April 2022 was £2,875m and is analysed in note 21(a). This represents the maximum credit risk exposure.

Credit risk on financial instruments held with financial institutions is assessed and managed by reference to the long-term credit ratings assigned to that counterparty by Standard & Poor's and Moody's credit rating agencies. The short-term deposits are placed with seven financial institutions with a minimum Standard & Poor's credit rating of BBB. Amounts deposited with counterparties are subject to limits based on their credit ratings. There are no significant concentrations of credit risk.

See note 16 for information on credit risk with respect to trade receivables.

162
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
21. Financial instruments continued
(d) Risk identification and risk management continued
(iv) Liquidity risk
21. Financial instruments continued
Liquidity risk is the risk that the Group, although solvent, will have difficulty in meeting its obligations associated with its financial liabilities as
(d) Risk identification and risk management continued
they fall due.
(ii) Market risk continued
The Group manages its liquidity risk by maintaining a sufficient level of undrawn committed borrowing facilities. At 30 April 2022, the Group
Foreign exchange risk on transactions continued had £1,450m of undrawn committed borrowing facilities (30 April 2021: £1,452m), which comprises the revolving credit facilities. The Group
The following sensitivity analysis shows the impact on the Group’s results of a 10% strengthening and weakening in the sterling exchange mitigates its refinancing risk by raising its debt requirements from a number of different sources with a range of maturities.
rate against all other currencies representing management’s assessment of the reasonably possible change in foreign exchange rates. The
The following table is an analysis of the undiscounted contractual maturities of non-derivative financial liabilities.
analysis is restricted to financial instruments denominated in a foreign currency and excludes the impact of financial instruments designated
Contractual repayments
as net investment hedges.

|  |  |  | 1 year |  | 1–5 | More than |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Net investment hedges are excluded as the impact of the foreign exchange movements on these are offset by equal and opposite movements |  | Total | or less |  | years | 5 years |  |
|  | At 30 April 2022 | £m |  | £m | £m |  | £m |

in the hedged items.
Non-derivative financial liabilities
The results are presented before non-controlling interests and tax.

|  |  |  |  |  |  |  |  |  |  | Trade and o | her payables 2,540 2,503 37 – |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  | 2022 2021 |  |  |  |  |  |  | Bank and other loans 6 4 2 – |  |  |  |
|  | Impact on |  |  | Impact on |  | Impact on |  | Impact on |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | Commercial pape |  | 37 37 – – |  |
|  |  | profit |  | total equity |  |  | profit | total equity |  |  |  |  |  |
|  |  |  | £m |  | £m |  | £m |  | £m | Medium-term notes and other fixed-term deb |  |  | 2,039 640 1,149 250 |
| 10% strengthening of sterling – 62 – 42 |  |  |  |  |  |  |  |  |  | Lease liabilities 241 66 122 53 |  |  |  |
| 10% weakening of sterling – (76) – (51) |  |  |  |  |  |  |  |  |  | Bank overdrafts 73 73 – – |  |  |  |

Interest payments on borrowings 121 35 64 22
Commodity risk
Total non-derivative financial liabilities 5,057 3,358 1,374 325
The Group’s main commodity exposures are to changes in gas and electricity prices. The Group also hedges its exposure to fluctuations in the
cost of carbon emission certificates. This commodity price risk is managed by a combination of physical supply agreements and derivative
instruments. At 30 April 2022, gains of £609m net of tax (2020/21: gains of £59m) are deferred in equity in respect of cash flow hedges in Contractual repayments
accordance with IAS 39. Any gains or losses deferred in equity will be reclassified to the income statement in the period in which the hedged 1 year 1–5 More than
Total or less years 5 years
item also affects the income statement, which will occur within three years. At 30 April 2021
£m £m £m £m
The following table details the Group’s sensitivity to a 10% increase in these prices, which is management’s assessment of the reasonably Non-derivative financial liabilities
possible change, on average, over any given year. A decrease of 10% in these prices would produce an opposite effect on equity. As all of Trade and other payables 1,849 1,834 15 –
the Group’s commodity financial instruments achieve hedge accounting under IAS 39, there is no impact on profit for either year. Bank and other loans 36 32 4 –
Commercial pape 43 43 – –
The results are presented before non-controlling interests and tax.
Medium-term notes and other fixed-term deb 2,236 160 1,305 771
2022 2021
Impact on Impact on Impact on Impact on Lease liabilities 276 74 144 58
profit total equity profit total equity
Bank overdrafts 94 94 – –
£m £m £m £m
Interest payments on borrowings 157 39 85 33
10% increase in electricity prices – 4 –3
Total non-derivative financial liabilities 4,691 2,276 1,553 862
10% increase in gas prices – 103 – 22
10% increase in carbon certificate prices – 8 –7 Refer to note 29 for a summary of the Group’s capital commitments.
(iii) Credit risk
Credit risk is the risk that a customer or counterparty to a financial instrument will fail to perform or fail to pay amounts due, causing financial
loss to the Group. In the current economic environment, the Group has placed increased emphasis on the management of credit risk. The carrying
amount of financial assets at 30 April 2022 was £2,875m and is analysed in note 21(a). This represents the maximum credit risk exposure.
Credit risk on financial instruments held with financial institutions is assessed and managed by reference to the long-term credit ratings
assigned to that counterparty by Standard & Poor’s and Moody’s credit rating agencies. The short-term deposits are placed with seven financial
institutions with a minimum Standard & Poor’s credit rating of BBB. Amounts deposited with counterparties are subject to limits based on their
credit ratings. There are no significant concentrations of credit risk.
See note 16 for information on credit risk with respect to trade receivables.
Annual Report 2022 dssmith.com 163
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FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
21. Financial instruments continued
(d) Risk identification and risk management continued
(iv) Liquidity risk continued
The following table is an analysis of the undiscounted contractual maturities of derivative financial liabilities. Where the payable and receivable
legs of these derivatives are denominated in foreign currencies, the contractual payments or receipts have been calculated based on exchange
rates prevailing at the respective year ends. The disclosure shows net cash flow amounts for derivatives that are net cash-settled and gross
cash inflow and outflow amounts for derivatives that have simultaneous gross cash settlement.
Where applicable, interest and foreign exchange rates prevailing at the reporting date are assumed to remain constant over the future
contractual maturities.
Contractual payments/(receipts)

|  |  | 1 year | 1–5 | More than |  |
| --- | --- | --- | --- | --- | --- |
|  | Total | or less | years | 5 years |  |
| At 30 April 2022 | £m | £m | £m |  | £m |

Derivative financial liabilities
Energy derivatives 84 56 28 –
Cross-currency swaps and forward foreign exchange contracts:
Payments 22 22 – –
Receipts (22) (22) – –
Total derivative financial liabilities 84 56 28 –
Contractual payments/(receipts)

|  |  | 1 year | 1–5 | More than |  |
| --- | --- | --- | --- | --- | --- |
|  | Total | or less | years | 5 years |  |
| At 30 April 2021 | £m | £m | £m |  | £m |

Derivative financial liabilities
Energy derivatives 41 39 2 –
Cross-currency swaps and forward foreign exchange contracts:
Payments 583 269 314 –
Receipts (573) (269) (304) –
Total derivative financial liabilities 51 39 12 –
164
164
FINANCIAL STATEMENTS
22. Deferred tax assets and liabilities
## Notes to the consolidated financial statements (continued)
Analysis of movements in recognised deferred tax assets and liabilities during the year
Property, plant and

|  |  |  | equipment and |  |  | Employee benefits |  |  |  | Tax |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  | intangible assets |  |  | including pensions |  |  |  | losses Other |  |  | 1 Total |  |  |  |
| 21. Financial instruments continued |  |  | 2022 |  | 2021 |  | 2022 | 2021 | 2022 |  | 2021 | 2022 |  | 2021 | 2022 | 2021 |
|  |  |  |  | £m | £m |  | £m | £m | £m |  | £m | £m |  | £m | £m | £m |
| (d) Risk identification and risk management continued | At beginning of the yea | (331) (352) 45 50 62 65 (10) 9 (234) (228) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

Credit/(charge) for the year:
(iv) Liquidity risk continued
– continuing 30 11 (3) (1) (4) (12) 1 1 24 (1)
The following table is an analysis of the undiscounted contractual maturities of derivative financial liabilities. Where the payable and receivable
– discontinued – – – – – 9 – – – 9
legs of these derivatives are denominated in foreign currencies, the contractual payments or receipts have been calculated based on exchange
Recognised directly in equit – – (14) (4) – – (163) (20) (177) (24)
rates prevailing at the respective year ends. The disclosure shows net cash flow amounts for derivatives that are net cash-settled and gross
cash inflow and outflow amounts for derivatives that have simultaneous gross cash settlement. Currency translation (1) 10 (1) – – – – – (2) 10
At end of the year (302) (331) 27 45 58 62 (172) (10) (389) (234)
Where applicable, interest and foreign exchange rates prevailing at the reporting date are assumed to remain constant over the future

| contractual maturities. |  |  |  |  |  |  |  | 1. Includes deferred tax liabilities on derivative financial instruments of £174m (30 April 2021: £11m). |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | Contractual payments/(receipts) |  |  |  |  |  | At 30 April 2022, deferred tax assets and liabilities were recognised for all taxable temporary differences: |
|  |  |  | 1 year |  | 1–5 | More than |  |  |
|  | Total |  | or less |  | years | 5 years |  | • except where the deferred tax liability arises on goodwill; |
| At 30 April 2022 |  | £m |  | £m | £m |  | £m |  |

• except on initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction,
Derivative financial liabilities
affects neither the accounting profit nor the taxable profit or loss; and
Energy derivatives 84 56 28 –
• in respect of taxable temporary differences associated with investments in subsidiaries and associates, except where the timing of the
Cross-currency swaps and forward foreign exchange contracts:
reversal of temporary differences can be controlled by the Group and it is probable that temporary differences will not reverse in the
Payments 22 22 – –
foreseeable future.
Receipts (22) (22) – –
At 30 April 2022, no deferred tax liability has been recognised in respect of temporary differences relating to unremitted earnings of
Total derivative financial liabilities 84 56 28 –
subsidiaries and associates because the Group is in a position to control the timing of the reversal of the temporary differences and it is
probable that such differences will not reverse in the foreseeable future. The amount of the associated temporary differences at 30 April 2022
Contractual payments/(receipts)
was £2,031m (30 April 2021: £1,927m).

|  |  | 1 year | 1–5 | More than |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Total | or less | years | 5 years |  | As commented in note 7, Finance Act 2021 included a 6% increase in the main UK corporation tax rate to 25% from 1 April 2023, which was |
| At 30 April 2021 | £m | £m | £m |  | £m |  |

substantially enacted on 10 June 2021. Accordingly, the rate applied to UK deferred tax assets and liabilities expected to reverse after 1 April
Derivative financial liabilities
2023 is 25% (2020: 19%).
Energy derivatives 41 39 2 –

| Cross-currency swaps and forward foreign exchange contracts: | Recognised deferred tax assets and liabilities |  |  |
| --- | --- | --- | --- |
| Payments 583 269 314 – | Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so. The following is the analysis of the |  |  |
| Receipts (573) (269) (304) – | deferred tax balances (after offset) for financial reporting purposes: |  |  |
| Total derivative financial liabilities 51 39 12 – |  | 2022 | 2021 |
|  |  | £m | £m |

Deferred tax liabilities (396) (271)
Deferred tax assets 7 37
Net deferred tax (389) (234)
The deferred tax asset in respect of tax losses at 30 April 2022 includes an asset in the UK of £24m (30 April 2021: £19m). The asset has been
recognised based on the Group’s forecast of net interest income that will arise in the UK from the financing of previous acquisitions. The asset
is expected to be fully recovered over the foreseeable future.
The deferred tax asset in respect of tax losses at 30 April 2022 includes an asset in France of £10m (30 April 2021: £14m). The asset in France
is expected to be fully recovered over the next few years.
The deferred tax asset of £11m at 30 April 2021 in respect of tax losses in Luxembourg has fully reversed in the year since the tax losses have
been used to offset taxable interest income.
In addition to the tax losses above, the Group has tax losses at 30 April 2022 of £42m (30 April 2021: £49m). for which no deferred tax assets
have been recognised. These losses include £24m (30 April 2021:£8m) which do not expire and £18m (30 April 2021: £20m) which expire
between 2027 and 2029 under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not
probable that future taxable profit will be available against which the Group can utilise these benefits.
Annual Report 2022 dssmith.com 165
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FINANCIAL STATEMENTS

# Notes to the consolidated financial statements (continued)

## 23. Provisions

|   | Restructuring £m | Other £m | Total £m  |
| --- | --- | --- | --- |
|  At 1 May 2021 | 7 | 49 | 56  |
|  Divestments | - | (2) | (2)  |
|  Charged to income | 11 | 29 | 40  |
|  Credited to income | - | (21) | (21)  |
|  Utilised | (11) | (7) | (18)  |
|  **At 30 April 2022** | **7** | **48** | **55**  |
|  Non-current | - | 7 | 7  |
|  Current | 7 | 41 | 48  |
|  **At 30 April 2022** | **7** | **48** | **55**  |

The restructuring provision includes amounts associated with the site closures and restructuring costs described in note 4.

The Group was one of a number of companies operating in the paper packaging industry that was subject to a decision (currently the subject of appeal) by the Italian Competition Authority concerning anti-competitive behaviour in Italy (the 'Decision'). Given its position as leniency applicant, the Group was not fined. The Group is subject to a number of claims (both actual and threatened) for compensation in respect of the Decision, which the Group intends to defend robustly. Given the early stage of these claims, the ongoing appeal process, the Group's intention to defend all claims robustly and having applied the tests in IAS37, no provision has been recognised and instead this item has been disclosed as a contingent liability.

Other provisions relate to environmental and restoration liabilities, carbon emission obligations, indemnities and estimated liabilities arising from actual and potential litigation and disputes. The timing of the utilisation of these provisions is uncertain, except where the associated costs are contractual, in which case the provision is utilised over the time period specified in the contract.

## 24. Capital and reserves

### Share capital

|   | Number of shares |   | 2022 £m | 2021 £m  |
| --- | --- | --- | --- | --- |
|   |  2022 millions | 2021 millions  |   |   |
|  Ordinary equity shares of 10 pence each: Issued, allotted, called up and fully paid | **1,376** | 1,373 | **137** | 137  |

During the year ended 30 April 2022 2,594,364 of ordinary shares were issued as a result of exercises of employee share options.

The net movements in share capital and share premium are disclosed in the consolidated statement of changes in equity.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

### Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations and the translation of liabilities that hedge the Company's net investment in a foreign subsidiary.

### Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.

### Share premium

The share premium account represents the difference between the issue price and the nominal value of shares issued.

### Own shares

The reserve for the Company's own shares comprises the cost of the Company's shares held by the Group. The Group operates a General Employee Benefit Trust, which acquires shares in the Company that can be used to satisfy the requirements of the Performance Share Plans. At 30 April 2022, the Trust held 2.4m shares (30 April 2021: 1.2m shares). The market value of the shares at 30 April 2022 was £7.8m (30 April 2021: £5.2m). Dividends receivable on the shares owned by the Trust have been waived.

166
FINANCIAL STATEMENTS
24. Capital and reserves continued
## Notes to the consolidated financial statements (continued)
Non-controlling interests
The Group has a put option in relation to a subsidiary with a non-controlling interest. The Group records a liability at the net present value of the
expected future payments, with a corresponding entry against non-controlling interests in respect of the non-controlling shareholders’ put
23. Provisions option, measured at fair value. At the end of each period, the valuation of the liability is reassessed with any changes recorded within finance
Restructuring Other Total costs through the income statement and then transferred out of retained earnings into non-controlling interests.
£m £m £m
Retained earnings
At 1 May 2021 7 49 56
Divestments – (2) (2) Retained earnings includes a merger relief reserve related to the shares issued in consideration to the sellers of EcoPack/EcoPaper in 2017/18.
The closing balance of this reserve is £32m.
Charged to income 11 29 40

| Credited to income – (21) (21) | 25. Employee benefits |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Utilised (11) (7) (18) |  |  | Total UK Overseas |  |  |  |  |  |
| At 30 April 2022 7 48 55 |  | 2022 |  | 2021 | 2022 | 2021 | 2022 | 2021 |
|  | Balance sheet |  | £m | £m | £m | £m | £m | £m |

Present value of post-retirement obligations (1,189) (1,345) (1,056) (1,189) (133) (156)
Non-curren – 7 7
Curren 7 41 48
Fair value of plan assets
At 30 April 2022 7 48 55
Equities/multi-strateg 100 14 85 – 15 14
The restructuring provision includes amounts associated with the site closures and restructuring costs described in note 4. Debt instruments 612 553 587 526 25 27
Derivatives 315 465 315 465 – –
The Group was one of a number of companies operating in the paper packaging industry that was subject to a decision (currently the subject of
Real estate 1 1 – – 1 1
appeal) by the Italian Competition Authority concerning anti-competitive behaviour in Italy (the “Decision”). Given its position as leniency
applicant, the Group was not fined. The Group is subject to a number of claims (both actual and threatened) for compensation in respect of the Cash and cash equivalents 17 7 17 7 – –
Decision, which the Group intends to defend robustly. Given the early stage of these claims, the ongoing appeal process, the Group’s intention Othe 68 138 53 122 15 16
to defend all claims robustly and having applied the tests in IAS37, no provision has been recognised and instead this item has been disclosed 1,113 1,178 1,057 1,120 56 58
as a contingent liability. Net post-retirement plan (deficit)/surplus (76) (167) 1 (69) (77) (98)
Other provisions relate to environmental and restoration liabilities, carbon emission obligations, indemnities and estimated liabilities arising Other employee benefit liabilities (10) (8) – – (10) (8)
from actual and potential litigation and disputes. The timing of the utilisation of these provisions is uncertain, except where the associated Total employee benefit (deficit)/surplus (86) (175) 1 (69) (87) (106)
costs are contractual, in which case the provision is utilised over the time period specified in the contract. Related deferred tax asse 21 40 – 13 21 27
Net employee benefit (deficit)/surplus (65) (135) 1 (56) (66) (79)
24. Capital and reserves

| Share capital |  |  |  |  | Employee benefit schemes |
| --- | --- | --- | --- | --- | --- |
|  | Number of shares |  |  |  | At 30 April 2022, the Group operated a number of employee benefit arrangements for the benefit of its employees throughout the world. The |
|  | 2022 | 2021 | 2022 | 2021 | plans are provided through both defined benefit and defined contribution arrangements and their legal status and control vary depending on |
|  | millions | millions | £m | £m |  |

the conditions and practices in the countries concerned.
Ordinary equity shares of 10 pence each:
Pension scheme trustees and representatives of the Group work with those managing the employee benefit arrangements to monitor the
Issued, allotted, called up and fully paid 1,376 1,373 137 137
effects on the arrangements of changes in financial markets and the impact of uncertainty in assumptions, and to develop strategies that
During the year ended 30 April 2022 2,694,364 of ordinary shares were issued as a result of exercises of employee share options. could mitigate the risks to which these employee benefit schemes expose the Group.
The net movements in share capital and share premium are disclosed in the consolidated statement of changes in equity.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
meetings of the Company.
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign
operations and the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to
hedged transactions that have not yet occurred.
Share premium
The share premium account represents the difference between the issue price and the nominal value of shares issued.
Own shares
The reserve for the Company’s own shares comprises the cost of the Company’s shares held by the Group. The Group operates a General
Employee Benefit Trust, which acquires shares in the Company that can be used to satisfy the requirements of the Performance Share Plans.
At 30 April 2022, the Trust held 2.4m shares (30 April 2021: 1.2m shares). The market value of the shares at 30 April 2022 was £7.8m (30 April
2021: £5.2m). Dividends receivable on the shares owned by the Trust have been waived.
Annual Report 2022 dssmith.com 167
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166 Annual Report 2022 dssmith.com 167
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
25. Employee benefits continued
UK schemes
The DS Smith Group Pension Scheme (the ‘Group Scheme’) is a UK funded final salary defined benefit scheme providing pensions and lump sum
benefits to members and dependants. The Group Scheme closed to future accrual from 30 April 2011 with pensions calculated based on
pensionable salaries up to the point of closure (or the date of leaving the Group Scheme, if earlier). The Group Scheme has a normal retirement
age of 65 although some members are able to take their benefits earlier than this. Increases to pensions are affected by changes in the rate of
inflation for the majority of members.
The Group Scheme is governed by a Trustee Company (DS Smith Pension Trustees Limited), which is comprised of a Board of Trustee Directors
(the ‘Trustee Board’) and is independent of the Group. The Trustee Board is responsible for managing the operation, funding and investment
strategy of the Group Scheme.
UK legislation requires the Trustee Board to carry out actuarial funding valuations at least every three years and to target full funding over
an appropriate period of time, taking into account the current circumstances of the Group Scheme and the Group on a basis that prudently
reflects the risks to which the Group Scheme is exposed (the ‘Technical Provisions’ basis). The most recent funding valuation was carried out as
at 30 April 2019, following which a deficit recovery plan was agreed with the Trustee Board on 14 April 2020. The Group has agreed to
maintain the previous Schedule of Contributions. The contribution for the year ended 30 April 2022 under the plan was £20m. The recovery
plan is expected to be completed on or around September 2025.
The Trustee Board and the Group have in place a secondary Long-Term Funding Target (the ‘LTFT’), in addition to the statutory funding
requirement, the purpose of which is to achieve material additional security for the Group Scheme’s members. The objective of the LTFT is
for the Group Scheme to be funded by 30 April 2035 to a level that does not expect to rely on future contributions from the Group. The LTFT
comprises actuarial assumptions to assess whether any additional contributions above the deficit recovery contributions are required, and
an investment strategy approach to be followed for de-risking the scheme’s assets. In recent valuations, the secondary funding assessment
has concluded that the deficit recovery plan contributions are sufficient and no additional contributions from the Group under the LTFT
are required.
In order to manage risk, the Group Scheme’s investment strategy is designed to closely align movements in the Group Scheme’s assets to
that of its liabilities, whilst maintaining an appropriate level of expected return. To help the Trustee Board to monitor, review and assess
investment matters, the Investment and Funding Committee (the ‘IFC’), which consists of representatives from the Trustee Board and
the Group, meets on a quarterly basis throughout the year.
The Group Scheme exposes the Group to risks, such as longevity risk, currency risk, inflation risk, interest rate risk and investment risk. As the
Group Scheme’s obligation is to provide lifetime pension benefits to members upon retirement, increases in life expectancy will result in an
increase in the Group Scheme’s liabilities. Other assumptions used to value the defined benefit obligation are also uncertain.
The Group Scheme deficit recovery plan agreed with the Trustee Board is considered a minimum funding requirement as described in IFRIC 14
IAS 19 – the Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction . The Group has an unconditional right to a
return of any surplus in a run-off scenario scenario and has therefore recognised the IAS 19 accounting surplus on the Group’s balance sheet at
30 April 2022.
The assets in the Group Scheme (apart from the cash held) are nearly all Level 2 instruments under the fair value hierarchy. All Level 2 assets
are held in daily traded pooled funds for which daily bid prices are available, and the valuation process for these assets involves minimal
judgement and is agreed by reference to independent third parties. The Group Scheme does not hold any investment in DS Smith securities.
The largest defined contribution arrangement operated by the Group is in the UK. The UK defined contribution scheme is a trust-based
arrangement offering members a range of investments. All assets are held independently from the Group. The Group also operates a small
unfunded arrangement in the UK.
168
168
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
25. Employee benefits continued
Overseas schemes
The countries where the Group operates the most significant defined benefit post-retirement arrangements are:
25. Employee benefits continued
• France – various mandatory retirement indemnities, post-retirement medical plans and jubilee arrangements (benefits paid to
UK schemes
employees after completion of a certain number of years of service), the majority of which are determined by the applicable Collective
The DS Smith Group Pension Scheme (the ‘Group Scheme’) is a UK funded final salary defined benefit scheme providing pensions and lump sum Bargaining Agreement;
benefits to members and dependants. The Group Scheme closed to future accrual from 30 April 2011 with pensions calculated based on
• Belgium – liabilities with respect to non-contributory defined benefit and cash balance retirement plans, as well as unfunded jubilee
pensionable salaries up to the point of closure (or the date of leaving the Group Scheme, if earlier). The Group Scheme has a normal retirement
arrangements. The defined benefit plan is closed to new employees, although active members continue to accrue benefits;
age of 65 although some members are able to take their benefits earlier than this. Increases to pensions are affected by changes in the rate of
• Switzerland – a contributory defined benefit pension scheme providing pensions and lump sum benefits to members and dependants;
inflation for the majority of members.
• Italy – mandatory end-of-service lump sum benefits in respect of pre-2007 service;
The Group Scheme is governed by a Trustee Company (DS Smith Pension Trustees Limited), which is comprised of a Board of Trustee Directors
• Portugal – defined benefit pensions plan with a fund that guarantees a payment of a pension supplement to all retired employees and
(the ‘Trustee Board’) and is independent of the Group. The Trustee Board is responsible for managing the operation, funding and investment
pensioners who were receiving pension benefit from the fund on 13 July 2007; and
strategy of the Group Scheme.
• Germany – jubilee arrangements and non-contributory defined benefit pension schemes.
UK legislation requires the Trustee Board to carry out actuarial funding valuations at least every three years and to target full funding over
an appropriate period of time, taking into account the current circumstances of the Group Scheme and the Group on a basis that prudently In general, local trustees or similar bodies manage the post-retirement and medical plans in accordance with local regulations.
reflects the risks to which the Group Scheme is exposed (the ‘Technical Provisions’ basis). The most recent funding valuation was carried out as
Overseas schemes expose the Group to risks such as longevity risk, currency risk, inflation risk, interest rate risk, investment risk, life
at 30 April 2019, following which a deficit recovery plan was agreed with the Trustee Board on 14 April 2020. The Group has agreed to
expectancy risk and healthcare cost risk. Actions taken by the local regulator, or changes to legislation, could result in stronger local funding
maintain the previous Schedule of Contributions. The contribution for the year ended 30 April 2022 under the plan was £20m. The recovery
requirements for pension schemes, which could affect the Group’s future cash flow.
plan is expected to be completed on or around September 2025.
Movements in the liability for employee benefit plans’ obligations recognised in the consolidated statement of
The Trustee Board and the Group have in place a secondary Long-Term Funding Target (the ‘LTFT’), in addition to the statutory funding
requirement, the purpose of which is to achieve material additional security for the Group Scheme’s members. The objective of the LTFT is financial position
for the Group Scheme to be funded by 30 April 2035 to a level that does not expect to rely on future contributions from the Group. The LTFT 2022 2021
£m £m
comprises actuarial assumptions to assess whether any additional contributions above the deficit recovery contributions are required, and
Schemes’ liabilities at beginning of the yea (1,353) (1,363)
an investment strategy approach to be followed for de-risking the scheme’s assets. In recent valuations, the secondary funding assessment

| has concluded that the deficit recovery plan contributions are sufficient and no additional contributions from the Group under the LTFT | Divestments 1 – |  |  |
| --- | --- | --- | --- |
| are required. | Interest cos | (26) (20) |  |
|  | Service cost recognised in the consolidated income statemen |  | (5) (5) |

In order to manage risk, the Group Scheme’s investment strategy is designed to closely align movements in the Group Scheme’s assets to
Member contributions (1) (1)
that of its liabilities, whilst maintaining an appropriate level of expected return. To help the Trustee Board to monitor, review and assess
Settlement/curtailmen – 13
investment matters, the Investment and Funding Committee (the ‘IFC’), which consists of representatives from the Trustee Board and
the Group, meets on a quarterly basis throughout the year. Pension payments 50 50
Unfunded benefits paid 6 10
The Group Scheme exposes the Group to risks, such as longevity risk, currency risk, inflation risk, interest rate risk and investment risk. As the
Actuarial gain/(losses) – financial assumptions 121 (47)
Group Scheme’s obligation is to provide lifetime pension benefits to members upon retirement, increases in life expectancy will result in an
Actua ial gains – experience 6 13
increase in the Group Scheme’s liabilities. Other assumptions used to value the defined benefit obligation are also uncertain.
Actuarial losses – demographic (2) (5)
The Group Scheme deficit recovery plan agreed with the Trustee Board is considered a minimum funding requirement as described in IFRIC 14
Currency translation 4 2
IAS 19 – the Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction . The Group has an unconditional right to a
Schemes’ liabilities at end of the year (1,199) (1,353)
return of any surplus in a run-off scenario scenario and has therefore recognised the IAS 19 accounting surplus on the Group’s balance sheet at
30 April 2022.
The assets in the Group Scheme (apart from the cash held) are nearly all Level 2 instruments under the fair value hierarchy. All Level 2 assets
are held in daily traded pooled funds for which daily bid prices are available, and the valuation process for these assets involves minimal
judgement and is agreed by reference to independent third parties. The Group Scheme does not hold any investment in DS Smith securities.
The largest defined contribution arrangement operated by the Group is in the UK. The UK defined contribution scheme is a trust-based
arrangement offering members a range of investments. All assets are held independently from the Group. The Group also operates a small
unfunded arrangement in the UK.
Annual Report 2022 dssmith.com 169
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FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
25. Employee benefits continued
Movements in the fair value of employee benefit plans’ assets recognised in the consolidated statement of
financial position

|  |  | 2022 | 2021 |
| --- | --- | --- | --- |
|  |  | £m | £m |
| Schemes’ assets at beginning of the yea | 1,178 1,164 |  |  |

Employer contributions 21 20
Member contributions 1 1
Interest income 23 18
Actuarial (losses) gains (57) 34
Pension payments (51) (50)
Currency translation (2) (1)
Assets utilised in scheme settlement/curtailmen – (8)
Schemes’ assets at end of the year 1,113 1,178
Durations and expected payment profile
The following table provides information on the distribution of the timing of expected benefit payments for the Group Scheme:

|  | Within 5 |  | 6 to 10 |  | 11 to 20 |  | 21 to 30 |  | 31 to 40 |  | 41 to 50 |  | Over 50 |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | years | years |  |  | years |  | years |  | years |  | years | years |  |
| At 30 April 2022 |  | £m |  | £m |  | £m |  | £m |  | £m |  | £m |  | £m |

Projected benefit payments 219 245 468 340 189 64 11
The weighted average duration for the Group Scheme is 14 years.
The Group made agreed contributions of £20m to fund the UK Group Scheme in 2021/22 (2020/21: £19m). The Group’s current best estimate
of contributions expected to be made to the Group Scheme in the year ending 30 April 2023 will be approximately £20m. A charge over four
UK Packaging properties has been made as security for the unfunded arrangement in the UK, the liability for which totals £6m.
Significant actuarial assumptions
Principal actuarial assumptions for the Group Scheme are as follows:
2022 2021
Discount rate for scheme liabilities 3.1% 2.0%
Inflation 3.2% 2.7%
Pre-retirement pension increases 2.5% 2.2%
Future pension increases for pre 30 April 2005 service 3.1% 2.7%
Future pension increases for post 30 April 2005 service 2.2% 2.0%
For overseas arrangements, the weighted average actuarial assumptions are at an average discount rate of 2.0% (30 April 2021: 1.0%) and an
inflation rate of 2.9% (30 April 2021: 1.7%).
170
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170
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued) 25. Employee benefits continued
During the prior year, the UKSA’s publication on the future of the RPI assumption base had the effect of lowering the RPI assumption by 1%
per annum in the short term and the post-2030 assumption is that the RPI/CPI gap falls to zero. Assumptions regarding future mortality
experience are set based on actuarial advice and in accordance with the relevant standard mortality tables in each country. For the Group
25. Employee benefits continued Scheme at 30 April, the mortality base table used is SAPS 3 (year of birth), with CMI 2019 projections with a 1.25% per annum long-term rate of
improvement used for future longevity improvement. At 30 April 2021 the mortality base table used was SAPS 3 (year of birth), with CMI 2019
Movements in the fair value of employee benefit plans’ assets recognised in the consolidated statement of
projections with a 1.25% per annum long-term rate of improvement used for future longevity improvement. As part of the UK Group Scheme
financial position
actuarial valuation exercise the projected life expectancies were as follows:
2022 2021
£m £m 2022 2021
Male Female Male Female
Schemes’ assets at beginning of the yea 1,178 1,164
Life expectancy at age 65
Employer contributions 21 20
Member currently aged 65 21.3 23.5 21.2 23.4
Member contributions 1 1
Member currently aged 45 22.3 25.1 22.2 25.0
Interest income 23 18
Actuarial (losses) gains (57) 34
Sensitivity analysis
Pension payments (51) (50)
The sensitivity of the liabilities in the Group Scheme to each significant actuarial assumption is summarised in the following table, showing
Currency translation (2) (1)
the impact on the defined benefit obligation if each assumption is altered by the amount specified in isolation, whilst assuming that all other
Assets utilised in scheme settlement/curtailmen – (8)
variables remain the same. In practice, this approach is not necessarily realistic since some assumptions are related. This sensitivity analysis
Schemes’ assets at end of the year 1,113 1,178 applies to the defined benefit obligation only and not to the net defined benefit pension liability, the measurement of which depends on a
number of factors including the fair value of plan assets.
Durations and expected payment profile
Increase in
The following table provides information on the distribution of the timing of expected benefit payments for the Group Scheme: pension liability
£m

|  | Within 5 |  | 6 to 10 |  | 11 to 20 |  | 21 to 30 |  | 31 to 40 |  | 41 to 50 |  | Over 50 |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | years | years |  |  | years | years |  | years |  |  | years | years |  | 0.5% decrease in discount rate (79) |
| At 30 April 2022 |  | £m |  | £m |  | £m |  | £m |  | £m |  | £m |  | £m |  |

0.5% increase in inflation (59)
Projected benefit payments 219 245 468 340 189 64 11
Pre-retirement pension increases (21)
The weighted average duration for the Group Scheme is 14 years. 0.5% CPI 5% on pre 30 April 2005 service (41)
0.5% CPI 2.5% on post 30 April 2005 service (4)
The Group made agreed contributions of £20m to fund the UK Group Scheme in 2021/22 (2020/21: £19m). The Group’s current best estimate
1 year increase in life expectanc (40)
of contributions expected to be made to the Group Scheme in the year ending 30 April 2023 will be approximately £20m. A charge over four
UK Packaging properties has been made as security for the unfunded arrangement in the UK, the liability for which totals £6m.
Expense recognised in the consolidated income statement

| Significant actuarial assumptions |  |  |  |  | Total |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  | 2022 | 2021 |
| Principal actuarial assumptions for the Group Scheme are as follows: |  |  |  |  |  | £m | £m |
|  | 2022 2021 | Post-retirement benefits current service cos |  | (5) (5) |  |  |  |
| Discount rate for scheme liabilities 3.1% 2.0% |  | Total service cost (5) (5) |  |  |  |  |  |
| Inflation 3.2% 2.7% |  | Net interest cost on net pension liability (2) (2) |  |  |  |  |  |
| Pre-retirement pension increases 2.5% 2.2% |  | Pension Protection Fund lev | (1) (1) |  |  |  |  |
| Future pension increases for pre 30 April 2005 service 3.1% 2.7% |  | Employment benefit net finance expense (3) (3) |  |  |  |  |  |
| Future pension increases for post 30 April 2005 service 2.2% 2.0% |  | Total expense recognised in the consolidated income statement (8) (8) |  |  |  |  |  |

For overseas arrangements, the weighted average actuarial assumptions are at an average discount rate of 2.0% (30 April 2021: 1.0%) and an
Items recognised in other comprehensive income
inflation rate of 2.9% (30 April 2021: 1.7%).
Remeasurement of defined benefit obligation 125 (39)
Return on plan assets excluding amounts included in employment benefit net finance expense (57) 34
Total gains/(losses) recognised in other comprehensive income 68 (5)
Annual Report 2022 dssmith.com 171
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170 Annual Report 2022 dssmith.com 171
FINANCIAL STATEMENTS

# Notes to the consolidated financial statements (continued)

# 26. Share-based payment expense

The Group's share-based payment arrangements are as follows:

(i) A Performance Share Plan (PSP). Awards under the PSP normally become exercisable after three years subject to remaining in service and the satisfaction of performance conditions measured over the three financial years commencing with the year of grant. Awards have been made under the PSP annually since 2000, originally based on the following performance measures, in the proportions shown below:

i. the Company's total shareholder return (TSR) compared to the constituents of the Industrial Goods and Services Supersector within the FTSE 250;
ii. average adjusted earnings per share (EPS); and
iii. average adjusted return on average capital employed (ROACE).

Awards made in 2016 are subject to three performance measures:

i. 33.3% of each award based on a TSR component;
ii. 33.3% of each award based on average adjusted EPS; and
iii. 33.3% of each award based on average adjusted ROACE.

Awards made from 2017 are subject to either two performance measures or to three performance measures:

(a) Two performance measures:

i. 50% of each award based on average adjusted EPS; and
ii. 50% of each award based on average adjusted ROACE.

(b) Three performance measures:

i. 33.3% of each award based on a TSR component;
ii. 33.3% of each award based on average adjusted EPS; and
iii. 33.3% of each award based on average adjusted ROACE.

The awards granted in 2016 and 2017 have vested but have not yet been fully exercised.

(ii) A Deferred Share Bonus Plan (DSBP) is operated for Executive Directors and, from 2012/13, for senior executives. Shares awarded under the Plan will vest automatically if the Director or senior executive is still employed by the Company three years after the grant of the award.
(iii) An international Shareease Plan was introduced in January 2014 with further invitations being made in subsequent years. All employees of the Company and participating subsidiaries were eligible to participate in this Plan or an HMRC approved UK Shareease Plan. Options are granted to participants who have contracted to save up to a maximum of €250 (or local currency equivalent) across all open invitations per month over a period of three years, at a discount of up to 20% to the average closing mid-market price of a US Smith-Pic ordinary share on the three dealing days prior to invitation. Options cannot normally be exercised until a minimum of three years has elapsed. In common with most plans of this type there are no performance conditions applicable to options granted under this Plan. The provisions of this Plan are subject to minor country specific variances. In France, the option price is discounted by up to 20% of the 20-day average up to the day before grant date. A standard US Stock Purchase Plan, was introduced in January 2014 with further invitations in subsequent years. US employees of the Group are eligible to participate in this Plan. Options are granted to participants who have contracted to save up to the local currency equivalent of €250 per month over a period of two years at a discount of up to 15% to the higher of the mid-market average price on the day before invitation and the mid-market average on the day before grant of a US Smith-Pic ordinary share. Options cannot normally be exercised until a minimum of two years has elapsed.

172
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued) 26. Share-based payment expense continued
Further details of the awards described in (i), (ii), and (iii) are set out in the Remuneration Committee report.
Options outstanding and exercisable under share arrangements at 30 April 2022 were:
26. Share-based payment expense Options outstanding Options exercisable
Weighted
The Group’s share-based payment arrangements are as follows: average Weighted Weighted
remaining average average
(i) A Performance Share Plan (PSP). Awards under the PSP normally become exercisable after three years subject to remaining in service Number Option price contract life exercise Number exercise
of shares range (p) (years) price (p) exercisable price (p)
and the satisfaction of performance conditions measured over the three financial years commencing with the year of grant. Awards have
been made under the PSP annually since 2008, originally based on the following performance measures, in the proportions shown below: Performance Share Plan 8,965,026 Nil 1.4 Nil 79,306 Nil
Deferred Share Bonus Plan 1,346,196 Nil 1.1 Nil 86,221 Nil
i. the Company’s total shareholder return (TSR) compared to the constituents of the Industrial Goods and Services Supersector within
Sharesave Plan 12,964,878 269.0 – 412.0 1.1 308.8 5,320,903 290.0
the FTSE 250;
ii. average adjusted earnings per share (EPS); and The effect on earnings per share of potentially dilutive shares issuable under share-based payment arrangements is shown in note 8.
iii. average adjusted return on average capital employed (ROACE). Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
Performance Deferred Share Sharesave
Awards made in 2016 are subject to three performance measures:

|  |  | Share Plan |  |  | Bonus Plan |  |  | plan |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| i. 33.3% of each award based on a TSR component; | Weighted |  |  | Weighted |  |  | Weighted |  |  |
|  | average |  |  | average |  |  | average |  |  |
|  | exercise |  | Options | exercise |  | Options | exercise |  | Options |

ii. 33.3% of each award based on average adjusted EPS; and
2022 price (p) (‘000s) price (p) (‘000s) price (p) (‘000s)
iii. 33.3% of each award based on average adjusted ROACE. At 1 May 2021 Nil 8,878 Nil 4,669 317.4 15,538
Granted Nil 2,849 Nil 645 316.0 2,756
Awards made from 2017 are subject to either two performance measures or to three performance measures:
Exercised Nil (537) Nil (3,641) 370.5 (808)
(a) Two performance measures:
Lapsed Nil (2,225) Nil (327) 331.7 (4,521)
i. 50% of each award based on average adjusted EPS; and
At 30 April 2022 Nil 8,965 Nil 1,346 308.8 12,965
ii. 50% of each award based on average adjusted ROACE. Exercisable at 30 April 2022 Nil 79 Nil 86 290.0 5,321
(b) Three performance measures:
Performance Deferred Share Sharesave
Share Plan Bonus plan plan
i. 33.3% of each award based on a TSR component;

|  |  | Weighted |  | Weighted |  | Weighted |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| ii. 33.3% of each award based on average adjusted EPS; and |  | average |  | average |  | average |  |
|  |  | exercise | Options | exercise | Options | exercise | Options |
|  | 2021 | price (p) | (‘000s) | price (p) | (‘000s) | price (p) | (‘000s) |

iii. 33.3% of each award based on average adjusted ROACE.
At 1 May 2020 Nil 7,634 Nil 1,790 313.8 10,593
The awards granted in 2016 and 2017 have vested but have not yet been fully exercised.
Granted Nil 3,757 Nil 3,267 325.0 4,972
(ii) A Deferred Share Bonus Plan (DSBP) is operated for Executive Directors and, from 2012/13, for senior executives. Shares awarded under Exercised Nil (525) Nil (151) 370.5 (808)
the Plan will vest automatically if the Director or senior executive is still employed by the Company three years after the grant of the award.
Lapsed Nil (2,040) Nil (243) 331.8 (4,490)
(iii) An international Sharesave Plan was introduced in January 2014 with further invitations being made in subsequent years. All employees of At 30 April 2021 Nil 8,826 Nil 4,663 306.9 10,267
the Company and participating subsidiaries were eligible to participate in this Plan or an HMRC approved UK Sharesave Plan. Options are Exercisable at 30 April 2021 Nil 610 Nil 303 411.6 878
granted to participants who have contracted to save up to a maximum of £250 (or local currency equivalent) across all open invitations per
The average share price of the Company during the financial year was 390.9 pence (2020/21: 337.7 pence).
month over a period of three years, at a discount of up to 20% to the average closing mid-market price of a DS Smith Plc ordinary share on
the three dealing days prior to invitation. Options cannot normally be exercised until a minimum of three years has elapsed. In common with The fair value of awards granted in the period relates to the PSP and DSBP schemes.
most plans of this type there are no performance conditions applicable to options granted under this Plan. The provisions of this Plan are
The fair value of the PSP award granted during the year, determined using the stochastic (Monte Carlo) valuation model, was £11m. The
subject to minor country specific variances. In France, the option price is discounted by up to 20% of the 20-day average up to the day
significant inputs into the model were: a share price of 409.6p for the PSP at the grant date; the exercise prices shown above; an expected
before grant date. A standard US Stock Purchase Plan, was introduced in January 2014 with further invitations in subsequent years.
volatility of the share price of 35.4%; the scheme life disclosed above; a risk-free interest rate of -0.15% and an expected dividend yield of
US employees of the Group are eligible to participate in this Plan. Options are granted to participants who have contracted to save up to the
0.94%. The volatility of share price returns is calculated over the period of time commensurate with the remainder of the performance period
local currency equivalent of £250 per month over a period of two years at a discount of up to 15% to the higher of the mid-market average
immediately prior to the date of grant.
price on the day before invitation and the mid-market average on the day before grant of a DS Smith Plc ordinary share. Options cannot
normally be exercised until a minimum of two years has elapsed. The total charge for the year relating to share-based payments recognised as personnel expenses was £10m (2020/21: £9m).
Annual Report 2022 dssmith.com 173
172 Annual Report 2022 dssmith.com 173
FINANCIAL STATEMENTS

# Notes to the consolidated financial statements (continued)

# **27. Cash generated from operations**

|  Continuing operations | 2022 £m | 2021 £m  |
| --- | --- | --- |
|  Profit for the year | **280** | 182  |
|  Adjustments for: |  |   |
|  Pre-tax integration costs and other adjusting items | **37** | 44  |
|  Amortisation of intangible assets, acquisitions and divestments | **136** | 147  |
|  Cash outflow for adjusting items | **(13)** | (40)  |
|  Depreciation | **290** | 304  |
|  (Profit)/loss on sale of non-current assets | **(1)** | 2  |
|  Share of profit of equity accounted investments, net of tax | **(7)** | (5)  |
|  Employment benefit net finance expense | **3** | 3  |
|  Share-based payment expense | **10** | 9  |
|  Finance income | **(1)** | (1)  |
|  Finance costs | **70** | 83  |
|  Other non-cash items | **(17)** | (6)  |
|  Income tax expense | **98** | 49  |
|  Change in provisions | **-** | (9)  |
|  Change in employee benefits | **(21)** | (32)  |
|  **Cash generation before working capital movement** | **864** | 722  |
|  Changes in: |  |   |
|  Inventories | **(200)** | (20)  |
|  Trade and other receivables | **(449)** | (75)  |
|  Trade and other payables | **864** | 276  |
|  **Working capital movement** | **215** | 173  |
|  **Cash generated from continuing operations** | **1,079** | 895  |

174
FINANCIAL STATEMENTS

| Notes to the consolidated financial statements (continued) | 28. Reconciliation of net cash flow to movement in net debt |  |  |
| --- | --- | --- | --- |
|  |  | 2022 | 2021 |
|  |  | £m | £m |

Profit for the year 280 182

| 27. Cash generated from operations |  |  | Income tax expense 98 49 |  |
| --- | --- | --- | --- | --- |
|  |  |  | Share of profit of equity accounted investments, net of ta | (7) (5) |
|  | 2022 | 2021 |  |  |
| Continuing operations | £m | £m |  |  |

Net financing costs 72 85
Profit for the year 280 182 Amortisation of intangible assets; acquisitions and divestments 136 147
Adjustments for:
Pre-tax integration costs and other adjusting items 37 44
Pre-tax integration costs and other adjusting items 37 44
Adjusted operating profit 616 502
Amortisation of intangible assets; acquisitions and divestments 136 147
Depreciation 290 304
Cash outflow for adjusting items (13) (48)
Adjusted EBITDA 906 806
Depreciation 290 304
Working capital movemen 215 173
(Profit)/loss on sale of non-current assets (1) 2
Change in provisions – (9)
Share of profit of equity accounted investments, net of ta (7) (5)
Change in employee benefits (21) (32)
Employment benefit net finance expense 3 3
Othe (8) 5
Share-based payment expense 10 9
Cash generated from operations before adjusting cash items 1,092 943
Finance income (1) (1)
Capital expenditure (431) (331)
Finance cos s 70 83
Proceeds from sale of property, plant and equipment and other investments 16 8
Other non-cash items (17) (6)
Tax paid (96) (66)
Income tax expense 98 49
Net interest paid (62) (68)
Change in provisions – (9)
Free cash flow 519 486
Change in employee benefits (21) (32)
Cash outflow for adjusting items (13) (48)
Cash generation before working capital movement 864 722
Dividends paid (166) –
Changes in:
Acquisition of subsidiary businesses, net of cash and cash equivalents (23) (90)
Inventories (200) (28)
Divestment of subsidiary businesses, net of cash and cash equivalents 35 16
Trade and other receivables (449) (75)
Othe (19) 2
Trade and other payables 864 276
Net cash flow 333 366
Working capital movement 215 173
Proceeds from issue of share capital 7 3
Cash generated from continuing operations 1,079 895
Borrowings and lease liabilities divested 1 3
Net movement on debt 341 372
Foreign exchange, fair value and other non-cash movements (note 18) (30) (56)
Net debt movement – continuing operations 311 316
Net debt movement – discontinued operation (note 30(b)) – (10)
Opening net debt (1,795) (2,101)
Closing net debt – reported basis (1,484) (1,795)
Adjusted operating profit, adjusted EBITDA, free cash flow, and net debt are non-GAAP measures not defined by IFRS. Further detail on the use
of non-GAAP measures is included in note 32.
Annual Report 2022 dssmith.com 175
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FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
29. Capital commitments and contingencies
At 30 April 2022, the Group had committed to incur capital expenditure of £186m (30 April 2021 £61m) relating primarily to the new Greenfield
sites in Italy and Poland.
The Group is not subject to material litigation, but has a number of contingent liabilities that arise in the ordinary course of business on
behalf of trading subsidiaries including, inter alia, intellectual property disputes and regulatory enquiries in areas such as health and safety,
environmental, and anti-trust. No losses are anticipated to arise on these contingent liabilities.
30. Acquisitions and divestments
(a) 2021/22
In total, during the year ended 30 April 2022, cash consideration for acquisition of subsidiary businesses, net of cash and cash equivalents,
was £23m. This included £19m for the remainder of the consideration for the purchase of a further 10% stake in Interstate Resources on
26 June 2020 after the exercise of a portion of the put option held by the sellers. Remaining acquisitions are not material to the Group
individually or in aggregate.
On 12 October 2021 the Group sold the De Hoop paper mill in the Netherlands. Cash consideration, net of cash and cash equivalents and
transaction costs, was £35m and net assets divested were £28m, resulting in a net gain of £7m. In addition, there was also £4m of site
disposal costs.
2020/21
On 26 June 2020, the purchase of a further 10% stake in Interstate Resources was completed after the exercise of a portion of the put option
held by the sellers. Of the £106m consideration, £82m was paid in cash, with, by agreement, the remainder deferred to October 2022.
The final 10% stake remains subject to the put option. As a substantial shareholder of the Group, the seller met the definition of a related
party (note 17).
In total, during the year ended 30 April 2021, cash consideration for acquisition of subsidiary businesses, net of cash and cash equivalents,
was £90m, and borrowings acquired, including deposits, were £nil. Apart from the acquisition of the 10% stake in Interstate Resources,
the remaining acquisitions are not material to the Group individually or in aggregate.
On 11 December 2020, the Group sold the New England sheets business in North America. Cash consideration, net of cash and cash
equivalents, was £16m, and leases divested were £3m.
A deferred tax asset of £9m arose in respect of tax losses on the disposal of the Plastics business and was recognised in
discontinued operations.
(b) Plastics division
On 27 February 2020, the sale of the Group’s Plastics division to Olympus Partners and its affiliate Liqui-Box Holdings was completed.
Plastics principally comprised flexible packaging and dispensing solutions, extruded and injection moulded products and foam products.
The Plastics segment has been classified as a discontinued operation as disclosed in note 1(a)(ii). The consolidated income statement presents the
Plastics segment as a discontinued operation with a single line amount of profit from discontinued operation, net of tax. The consolidated
statement of cash flows presents a single amount of net cash flow from discontinued operations.
Consolidated income statement – discontinued operations

| Year ended |  | Year ended |  |
| --- | --- | --- | --- |
| 30 April 2022 |  | 30 April 2021 |  |
|  | £m |  | £m |

Revenue – –
Ope ating costs – –
Operating profit before amortisation and adjusting items – –
Amortisation of intangible assets – –
Profit on disposal before ta – 3
Other pre-tax adjusting items – –
Net finance cos – –
Profit before income tax – 3
Income tax credit/(expense) – 9
Profit for the year from discontinued operations – 12
In 2020/21 a deferred tax asset of £9m in respect of tax losses arising on the disposal of the Plastics business and £9m was recognised in
discontinued operations.
176
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176
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued) 30. Acquisitions and divestments continued
Basic earnings per share from discontinued operations
2022 2021
Profit from discontinued operations attributable to ordinary shareholders – £12m
29. Capital commitments and contingencies
Weighted average number of ordinary shares 1,374m 1,371m
At 30 April 2022, the Group had committed to incur capital expenditure of £186m (30 April 2021 £61m) relating primarily to the new Greenfield
Basic earnings per share – 0.9p
sites in Italy and Poland.
The Group is not subject to material litigation, but has a number of contingent liabilities that arise in the ordinary course of business on Diluted earnings per share from discontinued operations
behalf of trading subsidiaries including, inter alia, intellectual property disputes and regulatory enquiries in areas such as health and safety, 2022 2021
environmental, and anti-trust. No losses are anticipated to arise on these contingent liabilities. Profit from discontinued operations attributable to ordinary shareholders – £12m
Weighted average number of ordinary shares 1,374m 1,371m
30. Acquisitions and divestments
Potentially dilutive shares issuable under share-based payment arrangemen 8m 6m
(a) 2021/22
Weighted average number of ordinary shares (diluted) 1,382m 1,377m
In total, during the year ended 30 April 2022, cash consideration for acquisition of subsidiary businesses, net of cash and cash equivalents, Diluted earnings per share – 0.9p
was £23m. This included £19m for the remainder of the consideration for the purchase of a further 10% stake in Interstate Resources on
The number of shares excludes the weighted average number of the Company’s own shares held as treasury shares during the year of 2m (2020/21: 1m).
26 June 2020 after the exercise of a portion of the put option held by the sellers. Remaining acquisitions are not material to the Group
individually or in aggregate.
Adjusted earnings per share from discontinued operations
On 12 October 2021 the Group sold the De Hoop paper mill in the Netherlands. Cash consideration, net of cash and cash equivalents and Further detail about the use of non-GAAP performance measures is given in note 32.
transaction costs, was £35m and net assets divested were £28m, resulting in a net gain of £7m. In addition, there was also £4m of site
A reconciliation of basic to adjusted earnings per share from discontinued operations is as follows:
disposal costs.
2022 2021

| 2020/21 |  | Basic – | Diluted – |  | Basic – | Diluted – |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | pence | pence |  | pence | pence |
| On 26 June 2020, the purchase of a further 10% stake in Interstate Resources was completed after the exercise of a portion of the put option | £m | per share | per share | £m | per share | per share |

held by the sellers. Of the £106m consideration, £82m was paid in cash, with, by agreement, the remainder deferred to October 2022.
Basic earnings from discontinued operations –– – 12 0.9p 0.9p
The final 10% stake remains subject to the put option. As a substantial shareholder of the Group, the seller met the definition of a related
Add back:
party (note 17).
Adjusting items, before ta –––(3) (0.2p) (0.2p)
In total, during the year ended 30 April 2021, cash consideration for acquisition of subsidiary businesses, net of cash and cash equivalents, Tax on adjusting items and adjusting tax items –––(9) (0.7p) (0.7p)
was £90m, and borrowings acquired, including deposits, were £nil. Apart from the acquisition of the 10% stake in Interstate Resources,
Adjusted earnings from discontinued operations – – – – – –
the remaining acquisitions are not material to the Group individually or in aggregate.
Cash flows used in discontinued operations
On 11 December 2020, the Group sold the New England sheets business in North America. Cash consideration, net of cash and cash
Year ended Year ended
equivalents, was £16m, and leases divested were £3m.
30 April 2022 30 April 2021
£m £m
A deferred tax asset of £9m arose in respect of tax losses on the disposal of the Plastics business and was recognised in
Net cash used in investing activities – (10)
discontinued operations.
Net cash flows for the year – (10)
(b) Plastics division
On 27 February 2020, the sale of the Group’s Plastics division to Olympus Partners and its affiliate Liqui-Box Holdings was completed. (c) Other 2021/22 acquisitions and divestments
The Group incurred acquisition related costs of £1m (2020/21: £2m), primarily related to professional advisory, legal and consultancy fees and
Plastics principally comprised flexible packaging and dispensing solutions, extruded and injection moulded products and foam products.
contractual deferred consideration payments on prior year acquisitions.
The Plastics segment has been classified as a discontinued operation as disclosed in note 1(a)(ii). The consolidated income statement presents the
Plastics segment as a discontinued operation with a single line amount of profit from discontinued operation, net of tax. The consolidated
statement of cash flows presents a single amount of net cash flow from discontinued operations.
Consolidated income statement – discontinued operations

| Year ended |  | Year ended |  |
| --- | --- | --- | --- |
| 30 April 2022 |  | 30 April 2021 |  |
|  | £m |  | £m |

Revenue – –
Ope ating costs – –
Operating profit before amortisation and adjusting items – –
Amortisation of intangible assets – –
Profit on disposal before ta – 3
Other pre-tax adjusting items – –
Net finance cos – –
Profit before income tax – 3
Income tax credit/(expense) – 9
Profit for the year from discontinued operations – 12
In 2020/21 a deferred tax asset of £9m in respect of tax losses arising on the disposal of the Plastics business and £9m was recognised in
Annual Report 2022 dssmith.com 177
discontinued operations.
r t x x t
176 Annual Report 2022 dssmith.com 177
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
31. Related parties
Identity of related parties
In the normal course of business, the Group undertakes a wide variety of transactions between its subsidiaries and equity accounted investments.
The key management personnel of the Company comprise the Chair, Executive Directors and Non-Executive Directors. The compensation of
key management personnel can be found in the single total figure remuneration table in the Remuneration Committee report. Certain key
management personnel also participate in the Group’s share-based incentive programme (note 26). Included within the share-based payment
expense, and detailed in the Remuneration Committee report, is a charge of £1m (2020/21: £1m) relating to key management personnel.
Transactions with pension trustees are disclosed in note 25.
Other related party transactions
2022 2021
£m £m
Sales to equity accounted investees 21 16
Sales to other investees – 6
Purchases f om equity accounted investees 25 18
Purchases from other investees – 5
32. Non-GAAP performance measures
The Group presents reported and adjusted financial information in order to provide shareholders with additional information to further
understand the Group’s operational performance and financial position.
The principal adjustments to financial information are made to exclude the effects of adjusting items (refer to note 4) and amortisation.
Total reported financial information represents the Group’s overall performance and financial position, but can contain significant unusual
or non-operational items that may obscure understanding of the key trends and position. These unusual or non-operational items include
business disposals, restructuring and project costs, acquisition-related and integration costs, and impairments. Restructuring items treated as
adjusting items are major programmes usually spanning more than one year, with uneven impact on the profit and loss for those years
affected. Other adjusting items, such as business disposals, impairments, integration and acquisition costs, are by nature either highly variable
or can also have a similar distorting effect. Therefore, the Directors consider that presenting non-GAAP measures which exclude adjusting
items enables comparability of the recurring core business, complementing the IFRS measures presented.
Amortisation relates primarily to customer contracts and relationships and infrastructure optimisation projects arising from or as a result of
business combinations. Significant costs are incurred in maintaining, developing and increasing the value of such intangibles, costs which are
charged in determining adjusted profit. Exclusion of amortisation remedies this double count as well as, in the case of customer contracts and
relationships, providing comparability over the accounting treatment of customer contracts and relationships arising from the acquisition of
businesses and those generated internally.
The Group’s key non-GAAP measures are used both internally and externally to evaluate business performance against the Group’s KPIs
and banking and debt covenants, as a key constituent of the Group’s planning process, as well as comprising targets against which
compensation is determined.
Certain non-GAAP performance measures can be, and are, reconciled to information presented in the financial statements. Other financial
key performance measures are calculated using information which is not presented in the financial statements and is based on, for example,
average 12-month balances or average exchange rates.
Unlike other of the Group’s non-GAAP performance measures, net debt and net debt/EBITDA remain calculated under the previous standard,
IAS 17 Leases , because they are calculated in accordance with the Group’s banking covenant requirements which remain on the previous GAAP
basis. As such, for net debt and net debt/EBITDA, the reconciliation for the non-GAAP performance measure below has been expanded
to show the calculation to return the non-GAAP performance measure to the IAS 17 basis.
178
r
178
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued) 32. Non-GAAP performance measures continued
Key non-GAAP performance measures
The key non-GAAP performance measures used by the Group and their calculation methods are as follows:
31. Related parties
Adjusted operating profit
Identity of related parties Adjusted operating profit is operating profit excluding the pre-tax effects of both amortisation and adjusting items. Adjusting items include
business divestment gains and losses, restructuring and acquisition related and integration costs and impairments.
In the normal course of business, the Group undertakes a wide variety of transactions between its subsidiaries and equity accounted investments.
A reconciliation between reported and adjusted operating profit is set out on the face of the consolidated income statement.
The key management personnel of the Company comprise the Chair, Executive Directors and Non-Executive Directors. The compensation of
key management personnel can be found in the single total figure remuneration table in the Remuneration Committee report. Certain key
Operating profit before adjusting items
management personnel also participate in the Group’s share-based incentive programme (note 26). Included within the share-based payment
A reconciliation between operating profit and operating profit before adjusting items is set out on the face of the consolidated
expense, and detailed in the Remuneration Committee report, is a charge of £1m (2020/21: £1m) relating to key management personnel.
income statement.
Transactions with pension trustees are disclosed in note 25.
Other similar profit measures before adjusting items are quoted, such as profit before income tax and adjusting items, and are directly derived
Other related party transactions from the consolidated income statement, from which they can be directly reconciled.

|  |  | 2022 | 2021 |  |
| --- | --- | --- | --- | --- |
|  |  | £m | £m | Adjusted EBITDA |
| Sales to equity accounted investees 21 16 |  |  |  | Earnings before interest, tax, depreciation and amortisation (Adjusted EBITDA) is adjusted operating profit excluding depreciation. A reconciliation |
| Sales to other investees – 6 |  |  |  | from adjusted operating profit to adjusted EBITDA is provided in note 28. |
| Purchases f | om equity accounted investees 25 18 |  |  |  |

Adjusted earnings per share
Purchases from other investees – 5
Adjusted earnings per share is basic earnings per share adjusted to exclude the post-tax effects of adjusting items and amortisation. Adjusted
32. Non-GAAP performance measures earnings per share is a key performance measure for management long-term remuneration and is widely used by the Group’s shareholders.
The Group presents reported and adjusted financial information in order to provide shareholders with additional information to further A reconciliation between basic and adjusted earnings per share is provided in note 8.
understand the Group’s operational performance and financial position.
Return on sales
The principal adjustments to financial information are made to exclude the effects of adjusting items (refer to note 4) and amortisation.
Return on sales is adjusted operating profit measured as a percentage of revenue. Return on sales is used to measure the value we deliver to
Total reported financial information represents the Group’s overall performance and financial position, but can contain significant unusual customers and the Group’s ability to charge for that value.
or non-operational items that may obscure understanding of the key trends and position. These unusual or non-operational items include
2022 2021
business disposals, restructuring and project costs, acquisition-related and integration costs, and impairments. Restructuring items treated as £m £m
adjusting items are major programmes usually spanning more than one year, with uneven impact on the profit and loss for those years Adjusted operating profi 616 502
affected. Other adjusting items, such as business disposals, impairments, integration and acquisition costs, are by nature either highly variable Revenue 7,241 5,976
or can also have a similar distorting effect. Therefore, the Directors consider that presenting non-GAAP measures which exclude adjusting Return on sales 8.5% 8.4%
items enables comparability of the recurring core business, complementing the IFRS measures presented.
Adjusted return on average capital employed (ROACE)
Amortisation relates primarily to customer contracts and relationships and infrastructure optimisation projects arising from or as a result of
business combinations. Significant costs are incurred in maintaining, developing and increasing the value of such intangibles, costs which are ROACE is the last 12 months’ adjusted operating profit as a percentage of the average monthly capital employed over the previous 12 month
charged in determining adjusted profit. Exclusion of amortisation remedies this double count as well as, in the case of customer contracts and period. Capital employed is the sum of property, plant and equipment, right-of-use assets, goodwill and intangible assets, working capital,
relationships, providing comparability over the accounting treatment of customer contracts and relationships arising from the acquisition of capital debtors/creditors, provisions, biological assets and assets/liabilities held for sale. Assets and liabilities relating to discontinued
businesses and those generated internally. operations are excluded.
2022 2021
The Group’s key non-GAAP measures are used both internally and externally to evaluate business performance against the Group’s KPIs
£m £m
and banking and debt covenants, as a key constituent of the Group’s planning process, as well as comprising targets against which
Capital employed at 30 April 5,578 5,728
compensation is determined.
Currenc inte -month and acquisition/divestment movements 113 394
Certain non-GAAP performance measures can be, and are, reconciled to information presented in the financial statements. Other financial Last 12 months’ average capital employed 5,691 6,122
key performance measures are calculated using information which is not presented in the financial statements and is based on, for example,
Last 12 months’ adjusted operating profi 616 502
average 12-month balances or average exchange rates.
Adjusted return on average capital employed 10.8% 8.2%
Unlike other of the Group’s non-GAAP performance measures, net debt and net debt/EBITDA remain calculated under the previous standard,
IAS 17 Leases , because they are calculated in accordance with the Group’s banking covenant requirements which remain on the previous GAAP
basis. As such, for net debt and net debt/EBITDA, the reconciliation for the non-GAAP performance measure below has been expanded
to show the calculation to return the non-GAAP performance measure to the IAS 17 basis.
Annual Report 2022 dssmith.com 179
r y r t t
178 Annual Report 2022 dssmith.com 179
FINANCIAL STATEMENTS

# Notes to the consolidated financial statements (continued)

# 32. Non-GAAP performance measures continued

# Net debt and net debt/EBITDA

Net debt is the measure by which the Group assesses its level of overall indebtedness within its financial position. The components of net debt as they reconcile to the primary financial statements and notes to the accounts are disclosed in note 18.

Net debt/EBITDA is the ratio of net debt to adjusted EBITDA, calculated in accordance with the Group's banking covenant requirements.

Net debt/EBITDA is considered a key measure of balance sheet strength and financial stability by which the Group assesses its financial position.

The Group's banking covenant requirements currently exclude IFRS 16 liabilities from the definition of net debt, as well as requiring that EBITDA is calculated before the effects of IFRS 16, so an adjustment to the previous IAS 17 basis is made in the calculation.

In calculating the ratio, net debt is stated at average rates as opposed to closing rates, and adjusted EBITDA is adjusted operating profit before depreciation from the previous 12 month period adjusted for the full year effect of acquisitions and divestments in the period, and to adjust to an IAS 17 basis.

|   | 2022 £m | 2021 £m  |
| --- | --- | --- |
|  Net debt - reported basis (see note 18) | 1,484 | 1,795  |
|  IFRS 16 lease liabilities (see note 18) | (201) | (227)  |
|  Adjustment to average rate | 13 | 38  |
|  Net debt - adjusted basis | 1,296 | 1,606  |
|  Adjusted EBITDA - last 12 months' reported basis (continuing operations) | 906 | 806  |
|  Adjust to IAS 17 basis | (78) | (82)  |
|  Acquisition and divestment effects | (7) | 2  |
|  Adjusted EBITDA - banking covenant basis | 821 | 726  |
|  Net debt/EBITDA | 1.6x | 2.2x  |

# Free cash flow

Free cash flows the net movement on debt before cash outflow for adjusting items, dividends paid, acquisition and divestment of subsidiary businesses (including borrowings acquired), and proceeds from issue of share capital.

A reconciliation from Adjusted EBITDA to free cash flow is set out in note 28.

# Cash conversion

Cash conversion is free cash flow, as defined above, adjusted to exclude tax, net interest, growth capital expenditure and pension payments as a percentage of adjusted operating profit and can be derived directly from note 28, other than growth capital expenditure, which is capital expenditure necessary for the development or expansion of the business as follows:

|   | 2022 £m | 2021 £m  |
| --- | --- | --- |
|  Growth capital expenditure | 176 | 100  |
|  Non-growth capital expenditure | 255 | 231  |
|  Total capital expenditure (note 28) | 431 | 331  |
|  Free cash flow (note 28) | 519 | 486  |
|  Tax paid (note 28) | 96 | 66  |
|  Net interest paid (note 28) | 62 | 68  |
|  Growth capital expenditure | 176 | 100  |
|  Change in employee benefits (note 28) | 21 | 32  |
|  Adjusted free cash flow | 874 | 752  |
|  Adjusted operating profit | 616 | 502  |
|  Cash conversion | 142% | 150%  |

100
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued) 32. Non-GAAP performance measures continued
Average working capital to sales
Average working capital to sales measures the level of investment the Group makes in working capital to conduct its operations. It is measured
32. Non-GAAP performance measures continued by comparing the monthly working capital balances for the previous 12 months as a percentage of revenue over the same period. Working
capital is the sum of inventories, trade and other receivables, and trade and other payables, excluding capital and acquisition and divestment
Net debt and net debt/EBITDA
related debtors and creditors.
Net debt is the measure by which the Group assesses its level of overall indebtedness within its financial position. The components of net debt 2022 2021
as they reconcile to the primary financial statements and notes to the accounts are disclosed in note 18. £m £m
Inventories (note 15) 703 537
Net debt/EBITDA is the ratio of net debt to adjusted EBITDA, calculated in accordance with the Group’s banking covenant requirements.
Trade and other receivables 1,189 786
Net debt/EBITDA is considered a key measure of balance sheet strength and financial stability by which the Group assesses its
Trade and other payables (2,372) (1,669)
financial position.
Inte -month movements and exclusion of capital and acquisition and divestment related items 241 236
The Group’s banking covenant requirements currently exclude IFRS 16 liabilities from the definition of net debt, as well as requiring that Last 12 months’ average working capital (239) (110)
EBITDA is calculated before the effects of IFRS 16, so an adjustment to the previous IAS 17 basis is made in the calculation.
Last 12 months’ revenue 7,241 5,976
In calculating the ratio, net debt is stated at average rates as opposed to closing rates, and adjusted EBITDA is adjusted operating profit before Average working capital to sales (3.3%) (1.8%)
depreciation from the previous 12 month period adjusted for the full year effect of acquisitions and divestments in the period, and to adjust to
Constant currency and organic growth
an IAS 17 basis.
2022 2021 The Group presents commentary on both reported and constant currency revenue and adjusted operating profit comparatives in order
£m £m to explain the impact of exchange rates on the Group’s key income statement items. Constant currency comparatives recalculate the prior year
Net debt – reported basis (see note 18) 1,484 1,795 revenue and adjusted operating profit as if they had been generated using the current year exchange rates. In addition, the Group then
IFRS 16 lease liabilities (see note 18) (201) (227) separates the incremental effects of acquisitions and disposals made in the current year, and the incremental effects of acquisitions and
Adjustment to average rate 13 38 disposals made in the previous year, to determine underlying organic growth. The table below shows the calculations:
Net debt – adjusted basis 1,296 1,606 Adjusted
operating
Adjusted EBITDA – last 12 months’ reported basis (continuing operations) 906 806 Revenue profit
£m £m
Adjust to IAS 17 basis (78) (82)
Reported basis – comparative year ended 30 April 2021 5,976 502
Acquisition and divestment effects (7) 2
Currency effects (240) (23)
Adjusted EBITDA – banking covenant basis 821 726
Constant currency basis – comparative year ended 30 April 2021 5,736 479

| Net debt/EBITDA 1.6 | 2.2 |  |
| --- | --- | --- |
| Free cash flow |  | Organic growth 1,505 137 |
| Free cash flow is the net movement on debt before cash outflow for adjusting items, dividends paid, acquisition and divestment of subsidiary |  | Reported basis – year ended 30 April 2022 7,241 616 |

businesses (including borrowings acquired), and proceeds from issue of share capital.
Dividend cover
A reconciliation from Adjusted EBITDA to free cash flow is set out in note 28.
Dividend cover is adjusted earnings per share divided by the total dividend for the year.
Cash conversion
2022 2021
Cash conversion is free cash flow, as defined above, adjusted to exclude tax, net interest, growth capital expenditure and pension payments as Adjusted earnings per share 30.7p 24.2p
a percentage of adjusted operating profit and can be derived directly from note 28, other than growth capital expenditure, which is capital Total dividend 15.0p 12.1p
expenditure necessary for the development or expansion of the business as follows:

|  |  | Dividend cover 2.0 | 2.0 |
| --- | --- | --- | --- |
| 2022 | 2021 |  |  |
| £m | £m |  |  |

Growth capital expenditure 176 100
Non-growth capital expenditure 255 231
Total capital expenditure (note 28) 431 331
Free cash flow (note 28) 519 486
Tax paid (note 28) 96 66
Net interest paid (note 28) 62 68
Growth capital expenditure 176 100
Change in employee benefits (note 28) 21 32
Adjusted free cash flow 874 752
Adjusted operating profit 616 502
Cash conversion 142% 150%
Annual Report 2022 dssmith.com 181
x x x x r
180 Annual Report 2022 dssmith.com 181
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
33. DS Smith Group companies
The Group’s ultimate parent Company is DS Smith Plc.
Group companies are grouped by the countries in which they are incorporated or registered. Unless otherwise noted, the undertakings below
are wholly-owned and consolidated by DS Smith and the share capital held comprises ordinary or common shares which are held by Group
subsidiaries. Principal companies are identified in orange.

| Fully owned subsidiaries |  |  |  | Notes |  |  | Notes |  | Notes |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Argentina |  |  |  |  | Finland |  |  | DS Smith Paper Deutschland GmbH DE7 |  |
| Total Marketing Support Argentina S |  |  | AR1 |  | DS Smith Packaging Baltic Holding Oy FI1 |  |  | DS Smith Recycling Deutschland GmbH DE4 |  |
| Australia |  |  |  |  | DS Smith Packaging Finland Oy FI1 |  |  | DS Smith Stange B.V. & Co. KG DE8 |  |
| Total Marketing Support Pacific Pty Ltd AU1 |  |  |  |  | DS Smith Packaging Pakkausjaloste Oy FI2 |  |  | DS Smith Transport Services GmbH DE7 |  |
| Austria |  |  |  |  | Eastpac Oy FI1 |  |  | Greece |  |
| DS Smith Austria Holdings GmbH AT1 |  |  |  |  | France |  |  | DS Smith Cretan Hellas S.A. GR1 |  |
| DS Smith Packaging Austria |  |  |  | AT1 | DS Smith France FR1 |  |  | DS SmithHellas S.A. GR2 |  |
| Beteiligungsverwaltungs GmbH |  |  |  |  | DS Smith Hêtre Blanc FR2 |  |  | Guatemala |  |
| DS Smith Packaging Austria GmbH AT2 |  |  |  |  | DS Smith Packaging Ales FR3 |  |  | TMS Global Guatemala, Sociedad Anonima GT1 |  |
| DS Smith Packaging South East GmbH AT1 |  |  |  |  | DS Smith Packaging Anjou FR2 |  |  | Honduras |  |
| Belgium |  |  |  |  | DS Smith Packaging Atlantique FR2 |  |  | Total Marketing Support Honduras, S.A. HN1 |  |
| DS Smith Packaging Belgium N.V. BE1 |  |  |  |  | DS Smith Packaging Bretagne FR4 |  |  | Hong Kong |  |
| DS Smith Packaging Marketing N.V. BE2 |  |  |  |  | DS Smith Packaging C.E.R.A. FR5 |  |  | The Less Packaging Company (Asia) Limited HK1 |  |
| Bolivia |  |  |  |  | DS Smith Packaging Consumer FR2 |  |  | Hungary |  |
| Total MarketingSupport Bolivia S.A. BO1 |  |  |  |  | DS Smith Packaging Contoire-Hamel FR6 |  |  | DS Smith Packaging Hungary Kft. HU2 |  |
| Bosnia & Herzegovina |  |  |  |  | DS Smith Packaging Display and Services FR2 |  |  | Merpas Hungary Kft. i, HU1 |  |
| DS Smith Packaging BH d.o.o. Sarajevo BA1 |  |  |  |  | DS Smith Packaging DPF FR7 |  |  | India |  |
| DS Smith Recycling Bosnia d.o.o. BA2 |  |  |  |  | DS Smith Packaging Durtal FR8 |  |  | The Less Packaging Company (India) | IN1 |
| Brazil |  |  |  |  | DS Smith Packaging Fegersheim FR9 |  |  | Private Limited |  |
| Total Marketing Support Brazil Ltda BR1 |  |  |  |  | DS Smith Packaging France FR2 |  |  | Total Marketing Support India Private | IN2 |
| Bulgaria |  |  |  |  | DS Smith Packaging Kaypac FR10 |  |  | Limited |  |
| DS Smith Bulgaria S.A. BG1 |  |  |  |  | DS Smith Packaging Larousse FR11 |  |  | Indonesia |  |
| Canada |  |  |  |  | DS Smith Pac | aging Mehun-CIM FR12 |  | PT Total Marketing Support Indonesia ID1 |  |
| TMS | anada 360 Inc. CA1 |  |  |  | DS Smith Packaging Nord Es |  | FR1 | Ireland |  |
| Chile |  |  |  |  | DS Smith Packaging Premium FR13 |  |  | DS Smith Ireland Treasury Designated | IR1 |
| Total Marketing Support Chile Sp |  | CL1 |  |  |  |  |  | Activity Company |  |

DS Smith Packaging Savoie FR14
China DS Smith ecycling Ireland Limited IR2
DS Smith Packaging Seine Normandie FR15

| DS Smith Shanghai Trading Ltd CN1 |  |  | Italy |  |
| --- | --- | --- | --- | --- |
|  | DS Smith Packaging Sud Es | FR16 |  |  |
| TMS Shanghai Trading Ltd CN2 |  |  | DS Smith Holding Italia Sp | IT3 |
|  | DS Smith Packaging Sud Oues | FR13 |  |  |
| Colombia |  |  | DS Smith Packaging Italia SpA IT3 |  |

DS Smith Packaging Systems FR17
Total Marketing Support Colombia S A S CO1 DS Smith Paper Italia Srl IT3
DS Smith Packaging Velin FR18
Croatia DS Smith Recycling Italia Srl IT2
DS Smith Packaging Vervins FR2
Bilokalni -IPA d.d. e, HR1 Toscana Ondulati SpA IT1
DS Smith Paper Coullons FR19
DS Smith Belišće Croa ia d.o.o. HR2 apan
DS Smith Paper Kaysersberg FR20
DS Smith Unijapapir Croatia d.o.o. HR3 Total Marketing Support Japan Ltd P1
DS Smith Paper Rouen FR15
Czech Republic Kazakhstan
DS Smith Recycling France FR21
DS Smith Packaging Czech Republic CZ1 Total Marketing Support KazakhstanL.L.P. KZ1
Rowlandson France FR1
s.r.o. Latvia
Tecnicartón France FR22
DS Smith Triss s.r.o. CZ2 SIA DS Smith Packaging Latvia LV1
Germany
Denmar Lithuania
Bretschneider Verpackungen GmbH h, DE2
DS Smith Packaging Denmark A/S DK1 UAB DS Smith Packaging Lithuania LT1
Delta Packaging Services GmbH DE6

| Ecuado |  |  |  | Luxembourg |  |
| --- | --- | --- | --- | --- | --- |
|  |  | DS Smith Packaging Arenshausen | DE3 |  |  |
| Total Marketing Support Ecuador TM-EC C.L. EC1 |  | Mivepa GmbH |  | DS Smith (Luxembourg) S.à r.l. LU1 |  |
| Egyp |  | DS Smith Packaging Arnstadt GmbH DE1 |  | DS Smith Perch Luxembourg S.à r.l. LU1 |  |
| TMS Egypt LL | EG1 | DS Smith Packaging Beteiligungen GmbH DE8 |  | DS Smith Re S.A. LU1 |  |
| Estonia |  | DS Smith Packaging Deutschland Stiftung DE5 |  | Malaysia |  |
| DS Smith Packaging Estonia AS EE1 |  | DS Smith Packaging Deutschland Stiftung & | DE8 | Total Marketing Support (360) Malaysia | MY1 |
|  |  | Co KG |  | Sdn. Bhd. |  |

182
J J R C t r k k k C t A t t t A A
182
FINANCIAL STATEMENTS

| Notes to the consolidated financial statements (continued) | 33. DS Smith Group companies continued |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Fully owned subsidiaries continued |  | Notes |  | Notes |  | Notes |
|  | Mexico |  |  | Romania |  | Corrugated Products Limited E |  |
|  | Total Marketing Support 360 Mexico S.A de C. | MX1 |  | DS Smith Packaging Ghimbav S.R.L. c, RO1 |  | David S. Smith Nominees Limited E |  |
| 33. DS Smith Group companies | Morocco |  |  |  |  |  |  |
|  |  |  |  | DS Smith Packaging Romania S.R.L. RO3 |  | D.W. Plastics (UK) Limited E |  |
| The Group’s ultimate parent Company is DS Smith Plc. | Tecnicartón Tánger S.a.r.l. AU MA1 |  |  | DS Smith Paper Zarnesti. S.R.L. b, RO2 |  | DS Smith (UK) Limited E |  |
|  | Netherland |  |  | Russia |  | DS Smith America (UK) LLP E |  |

Group companies are grouped by the countries in which they are incorporated or registered. Unless otherwise noted, the undertakings below
David S. Smith (Netherlands) B.V. N 2 Total Marketing Support Mosco RU1 DS Smith Business Services Limited E
are wholly-owned and consolidated by DS Smith and the share capital held comprises ordinary or common shares which are held by Group
DS Smith (Holdings) B.V. E Serbia The DS Smith Charitable Foundation E
subsidiaries. Principal companies are identified in orange.

|  |  |  |  |  |  |  |  |  |  | DS Smith Baars B.V. DE8 |  | DS Smi | h Inos Papir Servis d.o.o. RS1 | DS Smith Corrugated |  | E |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Fully owned subsidiaries |  |  |  | Notes |  |  | Notes |  | Notes | DS Smith De Hoop Holding B.V. N | 2 | DS Smith Packaging d.o.o. Kruševac RS2 |  | Packaging Limited |  |  |
| Argentina |  |  |  |  | Finland |  |  | DS Smith Paper Deutschland GmbH DE7 |  | DS Smith Finance B.V. N | 2 | Papir Servis DP d.o.o. RS4 |  | DS Smith Display Holding Limited E |  |  |
| Total Marketing Support Argentina S |  |  | AR1 |  | DS Smith Packaging Baltic Holding Oy FI1 |  |  | DS Smith Recycling Deutschland GmbH DE4 |  | DS Smith Hellas Netherlands B.V. N | 2 | Slovakia |  | DS Smith Dormant Five Limited E |  |  |
| Australia |  |  |  |  | DS Smith Packaging Finland Oy FI1 |  |  | DS Smith Stange B.V. & Co. KG DE8 |  | DS Smith Italy B.V. E |  | DS Smith Packaging Slovakia s.r.o. SK1 |  | DS Smith Euro Finance Limited E |  |  |
| Total Marketing Support Pacific Pty Ltd AU1 |  |  |  |  | DS Smith Packaging Pakkausjaloste Oy FI2 |  |  | DS Smith Transport Services GmbH DE7 |  | DS Smith Packaging Almelo B.V. NL1 |  | DS Smith Turpak Obaly a.s. d, SK2 |  | DS Smith Europe Limited E |  |  |
| Austria |  |  |  |  | Eastpac Oy FI1 |  |  | Greece |  | DS Smith Packaging Barneveld B.V. N | 3 | Slovenia |  | DS Smith Finco Limited a, E |  |  |
| DS Smith Austria Holdings GmbH AT1 |  |  |  |  | France |  |  | DS Smith Cretan Hellas S.A. GR1 |  | DS Smith Packaging Belita B.V. N | 2 | DS Smith Slovenija d.o.o. SI1 |  | DS Smith Haddo | Limited E |  |
| DS Smith Packaging Austria |  |  |  | AT1 | DS Smith France FR1 |  |  | DS SmithHellas S.A. GR2 |  | DS Smith Packaging Holding B.V. N | 2 | South Africa |  | DS Smith Holdings Limited a, E |  |  |
| Beteiligungsverwaltungs GmbH |  |  |  |  | DS Smith Hêtre Blanc FR2 |  |  | Guatemala |  | DS Smith Packaging International B.V. N | 2 | TMS 360 SA (PTY) Ltd ZA1 |  | DS Smith International Limited E |  |  |
| DS Smith Packaging Austria GmbH AT2 |  |  |  |  | DS Smith Packaging Ales FR3 |  |  | TMS Global Guatemala, Sociedad Anonima GT1 |  | DS Smith Packaging Netherlands B.V. NL2 |  | Spain |  | DS Smith Italy Limited E |  |  |
| DS Smith Packaging South East GmbH AT1 |  |  |  |  | DS Smith Packaging Anjou FR2 |  |  | Honduras |  | DS Smith Packaging Tilburg B.V. N | 5 | Bertako S.L.U. ES1 |  | DS Smith Logistics Limited E |  |  |
| Belgium |  |  |  |  | DS Smith Packaging Atlantique FR2 |  |  | Total Marketing Support Honduras, S.A. HN1 |  | DS Smith Recycling Benelux B.V. NL2 |  | DS Smith Andorra S.A. ES3 |  | DS Smith Packaging Limited E |  |  |
| DS Smith Packaging Belgium N.V. BE1 |  |  |  |  | DS Smith Packaging Bretagne FR4 |  |  | Hong Kong |  | DS Smith Recycling Holding B.V. NL2 |  | DS Smith Business Services S.L.U. ES3 |  | DS Smith Paper Limited E |  |  |
| DS Smith Packaging Marketing N.V. BE2 |  |  |  |  | DS Smith Packaging C.E.R.A. FR5 |  |  | The Less Packaging Company (Asia) Limited HK1 |  | DS Smith Salm B.V. N | 2 | DS Smith Packaging Cartogal S.A. ES10 |  | DS Smith Pension Trustees Limited E |  |  |
| Bolivia |  |  |  |  | DS Smith Packaging Consumer FR2 |  |  | Hungary |  | DS Smith Toppositie B.V. N | 2 | DS Smith Packaging Dicesa S.A. g, ES5 |  | DS Smith Perch Limited E |  |  |
| Total MarketingSupport Bolivia S.A. BO1 |  |  |  |  | DS Smith Packaging Contoire-Hamel FR6 |  |  | DS Smith Packaging Hungary Kft. HU2 |  | Nicaragua |  | DS Smith Packaging Galicia S.A. ES11 |  | DS Smith Recycling UK Limited E |  |  |
| Bosnia & Herzegovina |  |  |  |  | DS Smith Packaging Display and Services FR2 |  |  | Merpas Hungary Kft. i, HU1 |  | Total Marketing Support Nicaragua, Sociedad | NI1 | DS Smith Packaging Holding S.L.U. ES3 |  | DS Smith Roma Limited E |  |  |
| DS Smith Packaging BH d.o.o. Sarajevo BA1 |  |  |  |  | DS Smith Packaging DPF FR7 |  |  | India |  | Anonima |  | DS Smith Packaging Lucena, S.L. ES7 |  | DS Smith Sudbrook Limited E |  |  |
| DS Smith Recycling Bosnia d.o.o. BA2 |  |  |  |  | DS Smith Packaging Durtal FR8 |  |  | The Less Packaging Company (India) | IN1 | Nigeria |  | DS Smith Packaging Madrid S.L. ES3 |  | DS Smith Supplementary Life Cover |  | E |
| Brazil |  |  |  |  | DS Smith Packaging Fegersheim FR9 |  |  | Private Limited |  | Total Marketing Support 360 Nigeria Limited NG1 |  | DS Smith Packaging Penedes S.A.U. ES5 |  | Scheme Limited |  |  |
| Total Marketing Support Brazil Ltda BR1 |  |  |  |  | DS Smith Packaging France FR2 |  |  | Total Marketing Support India Private | IN2 | North Macedonia |  | DS Smith Recycling Spain S.A. ES2 |  | DS Smith Ukraine Limited E |  |  |
| Bulgaria |  |  |  |  | DS Smith Packaging Kaypac FR10 |  |  | Limited |  | DS Smith AD Skopje f, MK1 |  | DS Smith Spain, S.A. ES4 |  | DSS Eastern Europe Limited E |  |  |
| DS Smith Bulgaria S.A. BG1 |  |  |  |  | DS Smith Packaging Larousse FR11 |  |  | Indonesia |  | Pakistan |  | Industria Cartonera Asturiana, S.A. ES12 |  | DSS Poznan Limited E |  |  |
| Canada |  |  |  |  | DS Smith Pac | aging Mehun-CIM FR12 |  | PT Total Marketing Support Indonesia ID1 |  | TMS Pakistan (Private) Limited PK1 |  | Tecnicartón, S.L. ES8 |  | DSSH No. 1 Limited E |  |  |
| TMS | anada 360 Inc. CA1 |  |  |  | DS Smith Packaging Nord Es |  | FR1 | Ireland |  | Philippines |  | Sweden |  | Grovehurst Energy Limited E |  |  |
| Chile |  |  |  |  | DS Smith Packaging Premium FR13 |  |  | DS Smith Ireland Treasury Designated | IR1 | Total Marketing Support Philippines, Inc PH1 |  | DS Smith Packaging Sweden AB SE1 |  | DS Holding E |  |  |
| Total Marketing Support Chile Sp |  | CL1 |  |  |  |  |  | Activity Company |  | Poland |  | DS Smith Packaging Sweden Holding AB SE1 |  | Miljoint Limited E |  |  |

DS Smith Packaging Savoie FR14
China DS Smith ecycling Ireland Limited IR2 DS Smith Packaging sp. z o.o. PL1 Switzerland Multigraphics Holdings Limited E
DS Smith Packaging Seine Normandie FR15

| DS Smith Shanghai Trading Ltd CN1 |  |  | Italy |  | DS Smith Polska sp. z o.o. PL1 | DS Smith Packaging Switzerland AG CH1 | Multigraphics Limited E |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | DS Smith Packaging Sud Es | FR16 |  |  |  |  |  |
| TMS Shanghai Trading Ltd CN2 |  |  | DS Smith Holding Italia Sp | IT3 | Portugal | Turkey | Multigraphics Services Limited E |
|  | DS Smith Packaging Sud Oues | FR13 |  |  |  |  |  |
| Colombia |  |  | DS Smith Packaging Italia SpA IT3 |  | DS Smith Displays P&I, S.A. PT3 | DS Smith Ambalaj A.Ş. TR1 | Priory Packaging Limited E |

DS Smith Packaging Systems FR17
Total Marketing Support Colombia S A S CO1 DS Smith Paper Italia Srl IT3 DS Smith Energia Viana, S.A. PT8 Total Marketing Support Turkey Baskı Reed & Smith Limited E
DS Smith Packaging Velin FR18
Croatia DS Smith Recycling Italia Srl IT2 DS Smith Packaging Portugal, S.A. PT4 Yönetimi Hizmetleri A.Ş. TR2 St. Regis International Limited E
DS Smith Packaging Vervins FR2
Bilokalni -IPA d.d. e, HR1 Toscana Ondulati SpA IT1 DS Smith Paper Viana, S.A. PT8 Ukraine St. Regis Kemsley Limited E
DS Smith Paper Coullons FR19
DS Smith Belišće Croa ia d.o.o. HR2 apan DS Smith Portugal, SGPS, S.A. PT8 Total Marketing Support Ukraine UA1 St. Regis Paper Company Limited E
DS Smith Paper Kaysersberg FR20
DS Smith Unijapapir Croatia d.o.o. HR3 Total Marketing Support Japan Ltd P1 DS Smith Recycling Portugal, S.A. PT9 United Arab Emirates The Brand Compliance Company Limited E
DS Smith Paper Rouen FR15
Czech Republic Kazakhstan Lepe – Empresa Portuguesa de Embalagens, PT2 Total Marketing Support Middle East DMCC AE1 The Less Packaging Company Limited E
DS Smith Recycling France FR21
DS Smith Packaging Czech Republic CZ1 Total Marketing Support KazakhstanL.L.P. KZ1 S.A. UK TheBannerPeople.Com Limited E
Rowlandson France FR1
s.r.o. Latvia Nova DS Smith Embalagem, S.A. P 7 Abbey Corrugated Limited E TMS Global UK Limited E
Tecnicartón France FR22
DS Smith Triss s.r.o. CZ2 SIA DS Smith Packaging Latvia LV1 Tecnicartón Portugal Unipessoal Lda PT1 Ashton Corrugated E Total Marketing Support Global Limited E
Germany
Denmar Lithuania Ashton Corrugated (Southern) Limited E Total Mar eting Support Limited E
Bretschneider Verpackungen GmbH h, DE2
DS Smith Packaging Denmark A/S DK1 UAB DS Smith Packaging Lithuania LT1 Avonbank Paper Disposal Limited E Treforest Mill plc E
Delta Packaging Services GmbH DE6

| Ecuado |  |  |  | Luxembourg |  | Biber Paper Converting Limited E | TRM Packaging Limited E |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | DS Smith Packaging Arenshausen | DE3 |  |  |  |  |
| Total Marketing Support Ecuador TM-EC C.L. EC1 |  | Mivepa GmbH |  | DS Smith (Luxembourg) S.à r.l. LU1 |  | Calara Holding Limited E | United Shopper Marketing Limited E |
| Egyp |  | DS Smith Packaging Arnstadt GmbH DE1 |  | DS Smith Perch Luxembourg S.à r.l. LU1 |  | Conew Limited E | W. Rowlandson & Company Limited E |
| TMS Egypt LL | EG1 | DS Smith Packaging Beteiligungen GmbH DE8 |  | DS Smith Re S.A. LU1 |  |  | Waddington & Duval Limited E |
| Estonia |  | DS Smith Packaging Deutschland Stiftung DE5 |  | Malaysia |  |  |  |
| DS Smith Packaging Estonia AS EE1 |  | DS Smith Packaging Deutschland Stiftung & | DE8 | Total Marketing Support (360) Malaysia | MY1 |  |  |
|  |  | Co KG |  | Sdn. Bhd. |  |  |  |

Annual Report 2022 dssmith.com 183
C t k r k C t A A k t t t J R A J R J R R R L L L L R R R R R R R R R R R R R R R R L R R R R R R R R R R R R R L R L L L L L T R R R R R R R R R R R R R R R R R R R R R R R R R R R t k s x w V
182 Annual Report 2022 dssmith.com 183
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
33. DS Smith Group companies continued

| Fully owned subsidiaries continued |  |  |  | Notes | Associate entities | Notes |  | Ownership interest at 30 April 2022 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| USA |  |  |  |  | Austria |  |  | a Directly held by DS Smith Plc |
| Carolina Graphic Services LL |  |  | US1 |  | ARO Holding GmbH t,AT3 |  |  | b 99.927% ownership interest |
| Cedarpak LL | US3 |  |  |  | Croatia |  |  | c 99.285% ownership interes |
| CEMT Holdings Group LL |  | US4 |  |  | Hrvatski Radio Vapovština d.o.o. q,H |  | 4 | d 98.89% ownership interes |
| Corrugated Container Corporation US13 |  |  |  |  | Denmar |  |  | e 97.39% ownership interest |
| Corrugated Container Corporation of |  |  |  | US14 | Farusa Emballage AS s,D |  | 2 | f 81.39% ownership interest |
| Shenandoah Valley |  |  |  |  | Italy |  |  | g 80% ownership interest |
| Corrugated Container Corporation of |  |  |  | US15 | Bertolin Imballaggi S.r.l. o,IT4 |  |  | h 51% ownership interes |

Tennessee

|  |  | Netherland |  | i 50% ownership interes |  |
| --- | --- | --- | --- | --- | --- |
| Corrugated Supply, LL | US4 |  |  |  |  |
|  |  | Stort Doonweg B.V. i, N | 4 |  | 49.597% ownership interes |

Corrugated Supply, L.P. US4
Portugal 40% ownership interes
DS Smith Creative Solutions Inc. US16
Companhia Termica Do Serrado A.c.e. m, PT5 l 39.58% ownership interes
DS Smith Holdings, Inc. US3
Iberian Forest Fund - Fundo Especial de l,PT6 m 30% ownership interest
DS Smith Management Resources, Inc. g,US3 Investimento Imobiliario Florestal Fechado
n 18% ownership interes
DS Smith North America Recycling, LL US3 Cartocer -Fabrica de Caixas de Cartao das n,PT10
o 13.58% ownership interes
DS Smith North America Shared US3 Lezirias, Lda
p 12.2% ownership interes
Services,LLC Floresta Atlantica - Sociedade Gestora de r,PT6
q 12% ownership interes
DS Smith Packaging-Holly Springs, LL US18 Fundos de Investimento Imobiliario, S.A.
r 11.89% ownership interest
DS Smith Packaging-Lebanon, LL US17 Serbia
s 10% ownership interes
DS Smith Packaging-Stream, LL US3 Papir Pet d.o.o. i, RS3
6.69% ownership interes

| Evergreen Community Power LL |  |  |  |  | US3 | Spain |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Interstate Container Columbia LL |  |  |  |  | US6 | Cartonajes Cantabria, S.L. l, ES6 |  |  |
| Interstate Container New Castle LL |  |  |  |  | US7 | Cartonajes Santander, S.L. l, ES6 |  |  |
| Interstate Container Reading LL |  |  |  |  | US8 | Euskocarton, S.L. l, ES6 |  |  |
| Interstate Corrpack LL |  |  | US5 |  |  | Cartonajes Mimo, S.L. q, ES9 |  |  |
| Interstate Holding, Inc. US3 |  |  |  |  |  | Logistica Integral de Packaging Zaragoza, |  | p,ES13 |
| Interstate Mechanical Packaging LL |  |  |  |  | US6 | S.A. |  |  |
| Interstate Paper LL |  |  | US9 |  |  | Ukraine |  |  |
| Interstate Realty Hialeah LL |  |  |  | US3 |  | Private | oint Stock Company “Rubizhanskiy | , UA2 |
| Interstate Resources, Inc. US3 |  |  |  |  |  | Kartonno-Tarniy Kombinat” |  |  |
| Interstate Southern Packaging LL |  |  |  |  | US10 | USA |  |  |
| Newport Timber LL |  |  | US9 |  |  | Philcorr LL |  | , US2 |
| Phoenix Technology Holdings USA, Inc. US3 |  |  |  |  |  | PhilCorr Vineland LLC |  | , US2 |
| RB Lumber Company LL |  |  | US9 |  |  |  |  |  |
| RFC Container LL |  | US4 |  |  |  |  |  |  |
| SouthCorr | . . | . US11 |  |  |  |  |  |  |

St. George Timberland Holdings, Inc. US3

| TMS America LL | US19 |  |
| --- | --- | --- |
| United Corrstack LL |  | US12 |
| U uguay |  |  |

Kozery S.A. UY1
184
k t L C j J j k k t K R r L C C k C t C L C C C s C C C t t C t t t t t C C t t C t C t C C C C C C C C
184
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued) 33. DS Smith Group companies continued
Registered offices

|  | E 350 Euston Road, London, NW1 3AX, U |  | FR20 77 Route de Lapoutroie, 68240, Kaysersberg, France |
| --- | --- | --- | --- |
|  | AR1 Avenida Eduardo Madero 1020, 5th floor, Office “B”, The City of Buenos Aires, |  | FR21 2 Rue Paul Cezanne, 93360, Neuilly Plaisance, France |
| 33. DS Smith Group companies continued |  | Argentina |  |

FR22 27 Rue du Tennis, 25110, Baume les Dames, France

| Fully owned subsidiaries continued |  |  |  | Notes | Associate entities | Notes |  | Ownership interest at 30 April 2022 |  | AU1 Vistra Australia Pty Ltd, Suite 902 Level 9, 146 Arthur Street, North Sydney |  | DE1 Bierweg 11, 99310 Arnstadt, Germany |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| USA |  |  |  |  |  |  |  |  |  |  | NSW 2060, Australia | DE2 Bretschneiderstr. 5, D-08309 Eibenstock, Germany |  |
|  |  |  |  |  | Austria |  |  | a Directly held by DS Smith Plc |  |  |  |  |  |
| Carolina Graphic Services LL |  |  | US1 |  |  |  |  |  |  | AT1 Friedrichstraße 10, 1010, Wien, Austria |  | DE3 Hauptstrasse 80, 37318 Arenshausen, Germany |  |
|  |  |  |  |  | ARO Holding GmbH t,AT3 |  |  | b 99.927% ownership interest |  |  |  |  |  |
| Cedarpak LL | US3 |  |  |  |  |  |  |  |  | AT2 Heidestrasse 15, 2433 Margarethen am Moos, Austria |  | DE4 Kufsteiner Strasse 27, 83064 Raubling, Germany |  |
|  |  |  |  |  | Croatia |  |  | c 99.285% ownership interes |  |  |  |  |  |
| CEMT Holdings Group LL |  | US4 |  |  |  |  |  |  |  | AT3 Brucknerstrasse 8, 1041 Wien, Austria |  | DE5 Rollnerstrasse 14, D-90408 Nürnberg, Germany |  |
|  |  |  |  |  | Hrvatski Radio Vapovština d.o.o. q,H |  | 4 | d 98.89% ownership interes |  |  |  |  |  |
| Corrugated Container Corporation US13 |  |  |  |  |  |  |  |  |  | BE1 New Orleansstraat 100, 9000 Gent, Belgium |  | DE6 Siemensstrasse 8, 50259 Pulheim, Germany |  |
|  |  |  |  |  | Denmar |  |  | e 97.39% ownership interest |  |  |  |  |  |
| Corrugated Container Corporation of |  |  |  | US14 |  |  |  |  |  | BE2 Leonardo da Vincilaan 2, Corporate Village – Gebouw Gent 1831 Machelen- |  | DE7 Weichertstrasse 7, D-63741 Aschaffenburg, Germany |  |
|  |  |  |  |  | Farusa Emballage AS s,D |  | 2 | f 81.39% ownership interest |  |  |  |  |  |
| Shenandoah Valley |  |  |  |  |  |  |  |  |  |  | Diegem, Belgium |  |  |
|  |  |  |  |  | Italy |  |  | g 80% ownership interest |  |  |  | DE8 Zum Fliegerhorst 1312 –1318, 63526 Erlensee, Germany |  |
| Corrugated Container Corporation of |  |  |  | US15 |  |  |  |  |  | BO1 Santa Cruz de la Sierra – Calle Dr. Mariano Zambrana No 700 UV: S/N MZNO: |  |  |  |
|  |  |  |  |  | Bertolin Imballaggi S.r.l. o,IT4 |  |  | h 51% ownership interes |  |  |  | GR1 PO Box 90, GR-72200 Ierapetra, Kriti, Greece |  |
| Tennessee |  |  |  |  |  |  |  |  |  |  | S/N Zona: Oeste, Bolivia |  |  |
|  |  |  |  |  | Netherland |  |  | i 50% ownership interes |  |  |  | GR2 PO Box 1010, 57022 Sindos Industrial Area, Thessaloniki, Greece |  |
| Corrugated Supply, LL |  | US4 |  |  |  |  |  |  |  | BA1 Igmanska bb, Sarajevo, Vogošća, Bosnia and Herzegovina |  |  |  |
|  |  |  |  |  | Stort Doonweg B.V. i, N |  | 4 |  | 49.597% ownership interes |  |  | GT1 15 Calle 1-04 Zona 10, Centrica Plaza, Torre I, Oficina 301, Guatemala, |  |
| Corrugated Supply, L.P. US4 |  |  |  |  |  |  |  |  |  | BA2 | ovana Dučića br 25 A, Banja Luka, Bosnia and Herzegovina |  |  |
|  |  |  |  |  | Portugal |  |  |  | 40% ownership interes |  |  |  | 01010, Guatemala |
| DS Smith Creative Solutions Inc. US16 |  |  |  |  |  |  |  |  |  | BR1 Avenida Paulista no. 807, conjunto 810, Bela Vista, Cidade de Sao Paulo, |  |  |  |
|  |  |  |  |  | Companhia Termica Do Serrado A.c.e. m, PT5 |  |  | l 39.58% ownership interes |  |  |  | HN1 Avenida La Paz, No. 2702, Tegucigalpa, M.D.C., PO Box 2735, Honduras |  |

Estado de Sao Paulo, CEP 01311-100, Brazil
DS Smith Holdings, Inc. US3 HK1 Units 1607-8, 16th Floor, Citicorp Centre, 18 Whitfield Road,
Iberian Forest Fund - Fundo Especial de l,PT6 m 30% ownership interest
BG1 Glavinitsa, 4400 Pazardzhik, Bulgaria
DS Smith Management Resources, Inc. g,US3 Investimento Imobiliario Florestal Fechado Causeway Bay, Hong Kong
n 18% ownership interes
CA1 215-1673 Carling Avenue, Ottowa ON K2A 1C4, Canada
DS Smith North America Recycling, LL US3 HU1 Váci út 1-3., “A” Tower, 6th floor, 1062 Budapest, Hungary
Cartocer -Fabrica de Caixas de Cartao das n,PT10 o 13.58% ownership interes
CL1 Santa Beatriz, 111. Of 1104. Providencia, Santiago de Chile, Chile
DS Smith North America Shared US3 Lezirias, Lda HU2 Záhony u. 7, HU-1031 Budapest, Hungary
p 12.2% ownership interes
Services,LLC CN1 Room 05C, 3/F, No. 2 Building, Hongqiao Vanke Center, 988 Shenchang
Floresta Atlantica - Sociedade Gestora de r,PT6 IN1 -5/30, Basement, Behind Oriental Bank of Commerce, Paschim Vihar, New
q 12% ownership interes
Road, Minhang district, 201107, Shanghai, China
DS Smith Packaging-Holly Springs, LL US18 Fundos de Investimento Imobiliario, S.A. Delhi, 110063 , India
r 11.89% ownership interest
CN2 R919, 9/F, No. 1788 West Nan Jin Rd, Jing An District, Shanghai,
DS Smith Packaging-Lebanon, LL US17 Serbia IN2 G-56 Green Park (main), New Delhi – 110016, India
s 10% ownership interes
200040, China
DS Smith Packaging-Stream, LL US3 Papir Pet d.o.o. i, RS3 ID1 Tempo Scan Tower Lantai 32, Jalan H.r. Rasuna Said Kav 3-4, Kel. Kuningan
6.69% ownership interes
CO1 Calle 72 , 10-07 Oficina 401, Edificio Liberty Seguros, Bogotá, Colombia
Evergreen Community Power LL US3 Spain Timur, Kec.Setiabudi, Kota Adm. Jakarta Selatan, Prov. DKI Jakarta, Indonesia
HR1 Dravska ulica 19, Koprivnica (Grad Koprivnica), Croatia
Interstate Container Columbia LL US6 Cartonajes Cantabria, S.L. l, ES6 IR1 10 Ely Place, Dublin 2, D02 HR98, Ireland
HR2 Vijenac Salamona Henricha Gutmanna 30, Belišće, Croatia
Interstate Container New Castle LL US7 Cartonajes Santander, S.L. l, ES6 IR2 25/28 North Wall Quay, Dublin 1, Ireland
HR3 Lastovska 5, Zagreb, Croatia
Interstate Container Reading LL US8 Euskocarton, S.L. l, ES6 IT1 Capannori (Lu) Via del Fanuccio, 126 Cap, 55014 Frazione Marlia, Italy
HR4 Kralja Petra Krešimira IV br. 1., Valpovo, Croatia
Interstate Corrpack LL US5 Cartonajes Mimo, S.L. q, ES9 IT2 Strada Lanzo 237, cap 10148, Torino (TO), Italy
CZ1 Teplická 109, Martiněves, 405 02 Jílové , Czech Republic
Interstate Holding, Inc. US3 Logistica Integral de Packaging Zaragoza, p,ES13 IT3 Via Torri Bianche, n. 24, 20871 Vimercate (MB), Italy
CZ2 Zirovnicka 3124, 10600 Praha 10, Czech Republic

| Interstate Mechanical Packaging LL |  |  |  |  |  | US6 | S.A. |  |  |  |  | I 4 Via Puisle 37, CAP 38051 Borgo Valsugana (TN), Italy |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  | D 1 Åstrupvej 30, 8500 Grenaa, Denmar |  |  |  |  |
| Interstate Paper LL |  |  |  | US9 |  |  | Ukraine |  |  |  |  | P1 Oak Minami-Azabu Building 2F, 3-19-23 Minami-Azabu, Minato-ku, Tokyo, |  |  |
|  |  |  |  |  |  |  |  |  |  | D 2 Bygmarken 14, 3520 Farum, Denmar |  |  | 106-0047, Japan |  |
| Interstate Realty Hialeah LL |  |  |  |  | US3 |  | Private | oint Stock Company “Rubizhanskiy | , UA2 |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | EC1 Av. Republica de El Salvador N36-140, Edif. Mansion Blanca, Quito, |  | KZ1 Abay Ave. 52, 8 floor, 802-6 office “Innova Tower” BC, 050008, |  |  |
| Interstate Resources, Inc. US3 |  |  |  |  |  |  | Kartonno-Tarniy Kombinat” |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  | PBX:4007828, Ecuador |  | Almaty, Kazakhstan |  |
| Interstate Southern Packaging LL |  |  |  |  |  | US10 | USA |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | EG1 Nile City Towers, North Tower, 22nd Floor, Cornish EI Nil, Cairo, 11624, Egyp |  | LV1 Hospitāļu iela 23-102, Rīga LV-1013, Latvia |  |  |
| Newport Timber LL |  |  | US9 |  |  |  | Philcorr LL |  | , US2 |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | EE1 Pae 24, 11415 Tallinn, Estonia |  | LT1 Savanoriu ave. 183, 02300 Vilnius, Lithuania |  |  |
| Phoenix Technology Holdings USA, Inc. US3 |  |  |  |  |  |  | PhilCorr Vineland LLC |  | , US2 |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | FI1 PL 426, 33101 Tampere, Finland |  | LU1 8-10 Avenue de la Gare, |  | -1610 Luxembourg |
| RB Lumber Company LL |  |  |  | US9 |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | FI2 Virranniementie 3, 70420 Kuopio, Finland |  | MY1 Unit C-12-4, Level 12, Block C, Megan Avenue II, No. 12 Jalan Yap Kwan Seng, |  |  |
| RFC Container LL |  |  | US4 |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | FR1 11 route Industrielle, F-68320, Kunheim, France |  |  | 50450 Kuala Lumpur, Wilayah Persekutuan, Malaysia |  |
| SouthCorr | . . | . US11 |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | FR2 1 Terrasse Bellini, 92800, Puteaux, France |  | MX1 AV. Presidente Masarik, 29 Interior 14, OF 1O, Polanco V Section, Miguel |  |  |

St. George Timberland Holdings, Inc. US3

|  |  |  | FR3 345 Impasse de Saint-Alban Avenue de Croupillac, 30100 Ales, France |  | Hidalgo, 11560, Mexico |  |
| --- | --- | --- | --- | --- | --- | --- |
| TMS America LL | US19 |  |  |  |  |  |
|  |  |  | FR4 Zone Industrielle de Kevoasdoue, 29270, Carhaix, France | MA1 Tanger, Zone Franche d’Exportation, ILot 11, Lot 5, Morocco |  |  |
| United Corrstack LL |  | US12 |  |  |  |  |
|  |  |  | FR5 6-8 Boulevard Monge, 69330, Meyzieu, Lyon, France | NL1 Bedrijvenpark Twente 90, N |  | -7602 KD Almelo, Netherlands |
| U uguay |  |  |  |  |  |  |
|  |  |  | FR6 570 Rue Nationale Contoire Hamel, 80500 Trois- Rivieres, France | NL2 Coldenhovenseweg 130, 6961 EH, Eerbeek, Netherlands |  |  |

Kozery S.A. UY1
FR7 350 Zone Artisanale des Trois Fontaines, 38140 Rives, France N 3 Hermesweg 2, 3771 ND, Barneveld, Netherlands
FR8 Z.a Lafontaine, 49430 Durtal, France N 4 Kanaalweg 8 A, 6961 LW, Eerbeek, Netherlands
FR9 146 Route de Lyon, 67640, Fegersheim, France N 5 Wegastraat 2, 5015 BS, Tilburg, Netherlands
FR10 Zone Industrielle, Voiveselles Croisette, 88800, B.P. 37, Vittel, France NI1 Car Building, 3rd Floor, Highway to Masaya, Managua, Nicaragua
FR11 Rue de la Deviniere, B.P. 7, 45510 FR, Tigy, France NG1 3, Ijora – Causeway, Ijora, Lagos, Nigeria
FR12 Route de Marmagne, 18500, Mehun sur Yevre, France MK1 Str. 1632 no. 1, Skopje 1000, North Macedonia
FR13 Zone Industrielle de Châteaubernard, 16100, Cognac, France PK1 H. No. 193, SQ Margalla Road, SCHS, E-11/2. Islamabad Capital Territory (I.C.T.)
FR14 Avenue Robert Franck, 73110, La Rochette, France 44000. Pakistan
FR15 Rue Desire Granet, 76800 St. Etienne du Rouvray, France PH1 24/F Philam Life Tower, 8767 Paseo de Roxas Avenue, Bel-Air, City of Makati,
FR16 Zone Industrielle du Pré de la Barre, 38440, S - ean de Bournay, France Fourth District, NCR, 1226, Philippines
FR17 12 rue Gay Lussac ZI Dijon Chenove, 21300, Chenove, France
FR18 Zone Industrielle de la Plaine, 88510 Eloyes, France
FR19 Usine de La Fosse, B.P. No 8, 45720, Coullons, France
Annual Report 2022 dssmith.com 185
r L L C C C C C C C C C C C C C C C C C C C C C C C J k C s j k k R L K j k t t t t t t t t t t t t t t A J J J T L K L R K L L L t k k K t
184 Annual Report 2022 dssmith.com 185
FINANCIAL STATEMENTS
## Notes to the consolidated financial statements (continued)
33. DS Smith Group companies continued
Registered offices continued
PL1 Komitetu Obrony Robotników 45D, 02-146 Warsaw, Poland ES9 Calle Pitagoras no 2., Polgono Industrial San Marcos, Getafe (Madrid), Spain
PT1 Águeda (Aveiro), Raso de Paredes 3754-209, Portugal ES10 Polígono Industrial A Tomada, parcela 28-33, A Pobra do Caramiñal , 15949 A
PT2 Av. Jose Gregorio 114, 2430-275 Marinha Grande, Portugal Coruña, Spain
PT3 Edificio Opcao Actual, Parque Industrial de Oliveirinha, 3430-414 Carregal do ES11 Polígono Industrial O Pousadoiro 4, Parcela 1, 36617 Vilagarcía de Arousa,
Sal, Portugal Pontevedra (Galicia), Spain
PT4 Rua Mestra Cecília do Simão, n.º 378 , 3885-593 Esmoriz, Ovar, Portugal ES12 Poligono Industrial San Claudio, 33191, Oviedo, Spain
PT5 Lugar do Espido, Via Norte, Distrito: Porto Concelho: Maia Freguesia: Cidade da ES13 Barrio de la Cartuja Baja , -68. Pol. Empresariu, m. Calle Ajedrea 8., Zaragoza
Maia, 4470 177 MAIA, Portugal (50720), Spain
PT6 Rua Abranches Ferrao, n.o 10, 7o G, 1600-001, Lisboa, Portugal SE1 Box 504, 331 25 Varnamo, Sweden
P 7 Rua do Monte Grande, n. o3,, 4485-255 Guilhabreu, Portugal CH1 Industriestrasse 11, 4665 Oftringen, Switzerland
PT8 Estrada 23 de Fevereiro, 372, 4905-261, Deocriste, Portugal TR1 Araptepe Selimpaşa Mah. 5007. Sk. No. 4 Silivri, Istanbul, Turkey
PT9 Rua Pedro Jose Ferreira, 329/335, 4420-612, Gondomar, Portugal TR2 Goztepe Merdivenkoy Mah. Bora Sk. No.1 Nida Kule Is Merkezi, Kat 7, Kadikoy,
PT10 Lezirias, Sao Lourenco do Bairro, 3780 Anadia, Portugal Istanbul, 34732, Turkey
RO1 No. 46 Fagarasului Street, Ghimbav, Brasov County, Romania UA1 4-5 Floors, 25B,Sagaydachnogo str., Kiev, 04070, Ukraine
RO2 No. 18, 13 Decembrie Street, Zarnesti, Brasov County, Romania UA2 67 Mendeleev str., Rubizhne, Lugansk Region, 93006, Ukraine
RO3 Calea Torontalului, DN6 kM. 7, Timisoara, Romania AE1 Unit No: I5-PF-39, Detached Retail I5, Plot No: JLT-PH1-RET-I5,
Jumeirah Lakes Towers, Dubai, United Arab Emirates
RU1 Building 2, Floor 7, Room 21 , Skakovaya st. 17, 125040, Moscow,
Russian Federation US1 4328 Federal Drive, STE 105, Greensboro, NC 27410, United States
RS1 11000 Beograd, Milorada Jovanovića 14, Serbia US2 2317 Almond Road, Route 55 Industrial Park, Vineland, NJ 08360,
United States
RS2 Kruševac, Balkanska 72, Serbia
US3 600 Peachtree Street , Suite 4200, Atlanta GA 30308, United States
RS3 44 Bulevar Vojvode Stepe, Novi Sad, Serbia
US4 2066 South East Avenue, Vineland, NJ 08360, United States
RS4 37000 Krusevac, Balkanska 72, Serbia
US5 903 Woods Road, Cambridge, MD 21613, United States
SK1 Námestie baníkov 8/31, 048 01 Roznava, Slovakia
US6 128 Crews Drive, Columbia, SC 29210, United States
SK2 Robotnícka 1, Martin, 036 80, Slovakia
US7 792 Commerce Avenue, New Castle, PA 16101, United States
SI1 Cesta prvih borcev 51, 8280 Brestanica, Slovenia
US8 100 Grace Street, Reading, PA 19611, United States
ZA1 Central Office Park No 4, 257 Jean Avenue, Centurion, Gauteng,
0157, South Africa US9 2366 Interstate Paper Road, Riceboro, GA 31323, United States
ES1 Polígono Industrial Areta nº 1, parcela 348, calle Altzutzate, nº 46, 31620 US10 120 T Elmer Cox Road Greeneville, TN 37743, United States
Huarte, Navarra, Spain US11 3021 Taylor Drive, Asheboro, NC 27203, United States
ES2 Avenida el Norte de Castilla, 20, 47008 Valladolid (Valladolid), Spain US12 720 Laurel Street, Reading PA 19602, United States
ES3 Avd. Del Sol 13, Torrejón de Ardoz, 28850 – Madrid, Spain US13 6405 Commonwealth Drive SW, Roanoke, Virginia, 24018, United States
ES4 Carretera -62, Burgos a Portugal, 34210, Duenas (Palencia), Spain US14 100 Development Ln., Winchester VA 22602, United States
ES5 Carretera B.P. 2151 confluencia carretera C15, Sant Pere de Riudevitlles, US15 128 Corrugated Ln, Piney Flats TN 37686, United States
08776, Barcelona, Spain US16 70 Outwater Ln., Floor 4, Garfield, NJ 07026, United States
ES6 Poligono Industrial Heras, 239-242, 39792, Medio Cudeyo, Spain US17 800 Edwards Drive, Lebanon IN 46052, United States
ES7 Carretera Nacional 331 (Carretera de Malaga), Km.66,28, 14900, Lucena US18 301 Thomas Mill Road, Holly Springs NC 27540, United States
(Cordoba), Spain US19 340 W. Butterfield Road, Suite 2A, Elmhurst IL 60126, United States
ES8 Parque Industrial Juan Carlos I, C/ Canal Crespo, 13 Almussafes 46440 UY1 Plaza Independencia 811 PB, Montevideo, Uruguay
(Valencia), Spain
34. Subsequent events
There are no other subsequent events after the reporting date which require disclosure.
186
T A A
186
FINANCIAL STATEMENTS
## Parent Company statement of financial position
At 30 April 2022

| Notes to the consolidated financial statements (continued) |  |  |  | 2021 |  |
| --- | --- | --- | --- | --- | --- |
|  |  | 2022 | Restated |  | 1 |
|  | Note | £m |  | £m |  |

Assets
Non-current assets
33. DS Smith Group companies continued
Intangible assets 3 41 34
Registered offices continued Property, plant and equipmen and righ -of-use assets 4 7 7
PL1 Komitetu Obrony Robotników 45D, 02-146 Warsaw, Poland ES9 Calle Pitagoras no 2., Polgono Industrial San Marcos, Getafe (Madrid), Spain Investments in subsidiaries 5 4,625 4,577
PT1 Águeda (Aveiro), Raso de Paredes 3754-209, Portugal ES10 Polígono Industrial A Tomada, parcela 28-33, A Pobra do Caramiñal , 15949 A Deferred tax assets 10 – 30
PT2 Av. Jose Gregorio 114, 2430-275 Marinha Grande, Portugal Coruña, Spain Other eceivables 6 5,466 5,194
PT3 Edificio Opcao Actual, Parque Industrial de Oliveirinha, 3430-414 Carregal do ES11 Polígono Industrial O Pousadoiro 4, Parcela 1, 36617 Vilagarcía de Arousa,
Derivative financial instruments 12 483 35
Sal, Portugal Pontevedra (Galicia), Spain
Total non-current assets 10,622 9,877
PT4 Rua Mestra Cecília do Simão, n.º 378 , 3885-593 Esmoriz, Ovar, Portugal ES12 Poligono Industrial San Claudio, 33191, Oviedo, Spain
Current assets
PT5 Lugar do Espido, Via Norte, Distrito: Porto Concelho: Maia Freguesia: Cidade da ES13 Barrio de la Cartuja Baja , -68. Pol. Empresariu, m. Calle Ajedrea 8., Zaragoza
Maia, 4470 177 MAIA, Portugal (50720), Spain Trade and other receivables 6 72 189
PT6 Rua Abranches Ferrao, n.o 10, 7o G, 1600-001, Lisboa, Portugal SE1 Box 504, 331 25 Varnamo, Sweden Cash and cash equivalents 7 414 437
P 7 Rua do Monte Grande, n. o3,, 4485-255 Guilhabreu, Portugal CH1 Industriestrasse 11, 4665 Oftringen, Switzerland Derivative financial instruments 12 316 80
PT8 Estrada 23 de Fevereiro, 372, 4905-261, Deocriste, Portugal TR1 Araptepe Selimpaşa Mah. 5007. Sk. No. 4 Silivri, Istanbul, Turkey
Total current assets 802 706
PT9 Rua Pedro Jose Ferreira, 329/335, 4420-612, Gondomar, Portugal TR2 Goztepe Merdivenkoy Mah. Bora Sk. No.1 Nida Kule Is Merkezi, Kat 7, Kadikoy,
Total assets 11,424 10,583
PT10 Lezirias, Sao Lourenco do Bairro, 3780 Anadia, Portugal Istanbul, 34732, Turkey
Liabilities
RO1 No. 46 Fagarasului Street, Ghimbav, Brasov County, Romania UA1 4-5 Floors, 25B,Sagaydachnogo str., Kiev, 04070, Ukraine
UA2 67 Mendeleev str., Rubizhne, Lugansk Region, 93006, Ukraine Non-current liabilities
RO2 No. 18, 13 Decembrie Street, Zarnesti, Brasov County, Romania
AE1 Unit No: I5-PF-39, Detached Retail I5, Plot No: JLT-PH1-RET-I5, Borrowings 9 (1,389) (2,062)
RO3 Calea Torontalului, DN6 kM. 7, Timisoara, Romania
Jumeirah Lakes Towers, Dubai, United Arab Emirates Employee benefits 13 (3) (30)
RU1 Building 2, Floor 7, Room 21 , Skakovaya st. 17, 125040, Moscow,
Russian Federation US1 4328 Federal Drive, STE 105, Greensboro, NC 27410, United States Deferred tax liabilities 10 (133) –
RS1 11000 Beograd, Milorada Jovanovića 14, Serbia US2 2317 Almond Road, Route 55 Industrial Park, Vineland, NJ 08360,
Other payables 8 (26) (18)
United States
RS2 Kruševac, Balkanska 72, Serbia
Lease liabilities 11 (3) (4)
US3 600 Peachtree Street , Suite 4200, Atlanta GA 30308, United States
RS3 44 Bulevar Vojvode Stepe, Novi Sad, Serbia
Provisions (1) (5)
US4 2066 South East Avenue, Vineland, NJ 08360, United States
RS4 37000 Krusevac, Balkanska 72, Serbia
Derivative financial instruments 12 (28) (15)
US5 903 Woods Road, Cambridge, MD 21613, United States
SK1 Námestie baníkov 8/31, 048 01 Roznava, Slovakia
US6 128 Crews Drive, Columbia, SC 29210, United States Total non-current liabilities (1,583) (2,134)
SK2 Robotnícka 1, Martin, 036 80, Slovakia
US7 792 Commerce Avenue, New Castle, PA 16101, United States Current liabilities
SI1 Cesta prvih borcev 51, 8280 Brestanica, Slovenia
US8 100 Grace Street, Reading, PA 19611, United States Borrowings 9 (687) (65)
ZA1 Central Office Park No 4, 257 Jean Avenue, Centurion, Gauteng,
0157, South Africa US9 2366 Interstate Paper Road, Riceboro, GA 31323, United States
Trade and other payables 8 (4,584) (4,244)
ES1 Polígono Industrial Areta nº 1, parcela 348, calle Altzutzate, nº 46, 31620 US10 120 T Elmer Cox Road Greeneville, TN 37743, United States
Income tax liabilities (1) –
Huarte, Navarra, Spain US11 3021 Taylor Drive, Asheboro, NC 27203, United States
Lease liabilities 11 (1) (1)
ES2 Avenida el Norte de Castilla, 20, 47008 Valladolid (Valladolid), Spain US12 720 Laurel Street, Reading PA 19602, United States
Derivative financial instruments 12 (57) (41)
ES3 Avd. Del Sol 13, Torrejón de Ardoz, 28850 – Madrid, Spain US13 6405 Commonwealth Drive SW, Roanoke, Virginia, 24018, United States
Total current liabilities (5,330) (4,351)
ES4 Carretera -62, Burgos a Portugal, 34210, Duenas (Palencia), Spain US14 100 Development Ln., Winchester VA 22602, United States
ES5 Carretera B.P. 2151 confluencia carretera C15, Sant Pere de Riudevitlles, US15 128 Corrugated Ln, Piney Flats TN 37686, United States Total liabilities (6,913) (6,485)
08776, Barcelona, Spain US16 70 Outwater Ln., Floor 4, Garfield, NJ 07026, United States Net assets 4,511 4,098
ES6 Poligono Industrial Heras, 239-242, 39792, Medio Cudeyo, Spain US17 800 Edwards Drive, Lebanon IN 46052, United States
ES7 Carretera Nacional 331 (Carretera de Malaga), Km.66,28, 14900, Lucena US18 301 Thomas Mill Road, Holly Springs NC 27540, United States Equity
(Cordoba), Spain US19 340 W. Butterfield Road, Suite 2A, Elmhurst IL 60126, United States
Issued capital 14 137 137
ES8 Parque Industrial Juan Carlos I, C/ Canal Crespo, 13 Almussafes 46440 UY1 Plaza Independencia 811 PB, Montevideo, Uruguay
Share premium accoun 14 2,248 2,241
(Valencia), Spain
Reserves 14 2,126 1,720
34. Subsequent events Shareholders’ equity 4,511 4,098
There are no other subsequent events after the reporting date which require disclosure. 1. Certain amounts due to and receivable from subsidiaries have been restated in the prior year to reflect current year treatment. Consequently, some balances
receivable from or owed to subsidiaries that were previously reported net are now reported gross.
The Company made a profit for the year of £16m (2020/21: profit of £258m including the recognition of intra-group dividends).
Approved by the Board of Directors of DS Smith Plc (company registered number 1377658) on 20 June 2022 and signed on its behalf by:
M W Roberts A R T Marsh
Director Director
The accompanying notes are an integral part of these financial statements.
Annual Report 2022 dssmith.com 187
T A A r t t t
186 Annual Report 2022 dssmith.com 187
FINANCIAL STATEMENTS

# Parent Company statement of changes in equity

At 30 April 2022

|   | Share capital £m | Share premium £m | Hedging reserve £m | Own shares £m | Merger relief reserve £m | Retained earnings £m | Total equity £m  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  **At 1 May 2020** | **137** | **2,238** | **(39)** | **(3)** | **32** | **1,378** | **3,743**  |
|  Profit for the year | - | - | - | - | - | - | 258  |
|  Actual/loss on employee benefits | - | - | - | - | - | (6) | (6)  |
|  Cash flow hedges fair value changes | - | - | 103 | - | - | - | 103  |
|  Reclassification from cash flow hedge reserve to income statement | - | - | 9 | - | - | - | 9  |
|  Income tax on other comprehensive income | - | - | (20) | - | - | - | (20)  |
|  **Total comprehensive income** | **-** | **-** | **92** | **-** | **-** | **252** | **344**  |
|  Issue of share capital | - | 3 | - | - | - | - | 3  |
|  Employee share trust | - | - | - | - | - | (2) | (2)  |
|  Share-based payment expense (net of tax) | - | - | - | - | - | 10 | 10  |
|  **Other changes in equity in the year** | **-** | **3** | **-** | **-** | **-** | **8** | **11**  |
|  **At 30 April 2021** | **137** | **2,241** | **53** | **(3)** | **32** | **1,638** | **4,098**  |
|  Profit for the year | - | - | - | - | - | - | 16  |
|  Actual/gain on employee benefits | - | - | - | - | - | 20 | 20  |
|  Cash flow hedges fair value changes | - | - | 1,070 | - | - | - | 1,070  |
|  Reclassification from cash flow hedge reserve to income statement | - | - | (357) | - | - | - | (357)  |
|  Income tax on other comprehensive income | - | - | (163) | - | - | (3) | (166)  |
|  **Total comprehensive income** | **-** | **-** | **550** | **-** | **-** | **33** | **583**  |
|  Issue of share capital | - | 7 | - | - | - | - | 7  |
|  Employee share trust | - | - | - | (6) | - | (15) | (21)  |
|  Share-based payment expense (net of tax) | - | - | - | - | - | 10 | 10  |
|  Dividends paid | - | - | - | - | - | (166) | (166)  |
|  **Other changes in equity in the year** | **-** | **7** | **-** | **(6)** | **-** | **(171)** | **(170)**  |
|  **At 30 April 2022** | **137** | **2,248** | **603** | **(9)** | **32** | **1,500** | **4,511**  |

188
FINANCIAL STATEMENTS
## Notes to the parent Company financial statements
## Parent Company statement of changes in equity 1. Principal accounting policies (b) Foreign currencies
At 30 April 2022 The Company’s financial statements are presented in sterling, which
(a) Basis of preparation
is the Company’s functional currency and presentation currency.
These financial statements of DS Smith Plc (the ‘Company’) have
Monetary assets and liabilities denominated in foreign currencies are
Merger been prepared on the going concern basis and in accordance with
translated into sterling at the rates of exchange at the date of the

| Share |  | Share | Hedging |  | Own | relief | Retained |  | Total |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  | Financial Reporting Standard 101 | Reduced Disclosure Framework |  |
| capital | premium |  | reserve |  | shares | reserve | earnings |  | equity |  |  | transaction, and retranslated at the rate of exchange ruling at the |
| £m |  | £m |  | £m | £m | £m |  | £m | £m | (FRS 101) and the UK Companies Act. |  |  |

balance sheet date. Exchange differences arising on translation are
At 1 May 2020 137 2,238 (39) (3) 32 1,378 3,743
The accounts are prepared under the historical cost convention with taken to the income statement.
Profit for the yea ––––– 258258 the exception of certain financial instruments and employee benefit
(c) Intangible assets
Actuarial loss on employee benefits – – – – – (6) (6) plans that are stated at their fair value and share-based payments
Cash flow hedges fair value changes – – 103 – – – 103 that are stated at their grant date fair value. Intangible assets are stated at cost less accumulated amortisation
and impairment losses. Amortisation is charged to the income
Reclassification from cash flow hedge
Under section 408 of the Companies Act 2006 the Company is
reserve to income statement – – 9 – – – 9 statement on a straight-line basis over the estimated useful lives
exempt from the requirement to present its own income statement
of each item, which range between three and five years.
Income tax on other comprehensive income – – (20) – – – (20)
or statement of comprehensive income.
Total comprehensive income – – 92 – – 252 344 (d) Property, plant and equipment
In these financial statements, the Company has applied the
Issue of share capital – 3 – – – – 3
exemptions available under FRS 101 in respect of the Property, plant and equipment is stated at cost less accumulated
Employee share trus – – – – – (2) (2)
following disclosures: depreciation and impairment losses. Depreciation is charged to the
Share-based payment expense (net of tax) – – – – – 10 10 income statement on a straight-line basis over the estimated useful
• statement of cash flows and related notes;
Other changes in equity in the year – 3 ––– 8 11 lives of each item of property, plant and equipment. Estimated useful
• a comparative period reconciliation for share capital; lives of plant and equipment are between two and 30 years, and for
At 30 April 2021 137 2,241 53 (3) 32 1,638 4,098
• disclosures in respect of transactions with wholly-owned leasehold improvements are over the period of the lease.
Profit for the yea ––––– 1616
subsidiaries;
Actuarial gain on employee benefits – – – – – 20 20 (e) Leases
Cash flow hedges fair value changes – – 1,070 – – – 1,070 • comparative period reconciliations for tangible fixed assets and
The Company recognises a right-of-use asset and a lease liability at
Reclassification from cash flow hedge reserve to income intangible assets;
the lease commencement date.
statement – – (357) – – – (357) • disclosures in respect of capital management;
The right-of-use asset is initially measured at cost, being the initial
Income tax on other comprehensive income – – (163) – – (3) (166)
• the effects of new but not yet effective IFRSs; and
amount of the lease liability adjusted for any lease payments made at
Total comprehensive income – – 550 – – 33 583
• disclosures in respect of Key Management Personnel. or before commencement date, plus any initial direct costs incurred
Issue of share capital – 7 – – – – 7
and an estimate of end of lease dismantling or restoration costs,
Employee share trus – – – (6) – (15) (21) As the Group financial statements include the equivalent disclosures,
less any incentives received and related provisions.
Share-based payment expense (net of tax) – – – – – 10 10 the Company has also taken advantage of the exemptions under FRS
101 available in respect of the following disclosures: Lease liabilities are recorded at the present value of lease payments.
Dividends paid – – – – – (166) (166)
Other changes in equity in the year – 7 – (6) – (171) (170) • IAS 24 Related Party Disclosure in respect of transactions entered The interest rate implicit in the lease is used to discount lease
with wholly-owned subsidiaries; payments, or, if that rate cannot be determined, the Group’s
At 30 April 2022 137 2,248 603 (9) 32 1,500 4,511
incremental borrowing rate is used, being the rate that the Group
• IFRS 2 Share - based Payment in respect of Group settled share-
would have to pay to borrow the funds necessary to obtain an asset
based payments; and
of similar value in a similar economic environment with similar terms
• IFRS 13 Fair Value Measurement and the disclosures required by
and conditions.
IFRS 7 Financial Instruments.
Right-of-use assets are depreciated on a straight-line basis over the
The Company adopted the following new accounting standards, lease term, or the useful life if shorter.
amendments or interpretations as of 1 May 2021:
Interest is recognised on the lease liability, resulting in a higher
• Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9, finance cost in the earlier years of the lease term.
IAS 39, IFRS 7, IFRS 4 and IFRS 16); and
Lease payments relating to low value assets or to short-term leases
• Covid 19 Related Rent Concessions – amendments to IFRS 16
are recognised as an expense on a straight-line basis over the lease
term. Short-term leases are those with 12 months or less duration.
The adoption of the standards, interpretations and amendments has
not had a material effect on the results for the year. When the Company enters into a back-to-back lease arrangement
on behalf of a subsidiary, corresponding lease receivables
The accounting policies set out below have, unless otherwise
are recognised.
stated, been applied consistently to all periods presented in
these financial statements.
Annual Report 2022 dssmith.com 189
r r t t
188 Annual Report 2022 dssmith.com 189
FINANCIAL STATEMENTS
## Notes to the parent Company financial statements (continued)
1. Principal accounting policies continued At each reporting date, the Company revises its estimate of
the number of options that are expected to become exercisable.
(f) Investments in subsidiaries
It recognises the impact of the revision of original estimates, if any,
Investments in subsidiaries are valued at cost less provisions in the income statement, and a corresponding adjustment to equity.
for impairment. Where applicable, the fair value of employee services received by
subsidiary undertakings within the DS Smith Plc Group in exchange
Impairment testing is performed annually for investment in
for options granted by the Company is recognised as an expense in
subsidiaries by comparing the carrying amount of each investment
the financial statements of the subsidiary by means of a recharge
with the relevant subsidiary’s consolidated balance sheet. Where the
from the Company.
net assets are lower than the investment value, a discounted cash
flow is utilised to calculate the present value of the investment to (i) Shares held by employee share trust
confirm whether any impairment is required.
The cost of shares held in the employee share trust is deducted from
(g) Deferred taxation equity. All differences between the purchase price of the shares held
to satisfy options granted and the proceeds received for the shares,
Deferred tax is provided for using the balance sheet liability method,
whether on exercise or lapse, are charged to retained earnings.
providing for temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the (j) Financial instruments
amounts used for taxation purposes. The amount of deferred
The Company uses derivative financial instruments, primarily
tax provided is based on the expected manner of realisation or
currency and commodity swaps, to manage interest rate, currency
settlement of the carrying amount of assets and liabilities, using
and commodity risks associated with the Group’s underlying business
tax rates enacted or substantively enacted at the reporting date.
activities and the financing of these activities. The Group has a policy
A deferred tax asset is recognised only to the extent that it is not to, and does not, undertake any speculative activity in these
probable that future taxable profits will be available against which instruments. Such derivative financial instruments are initially
the asset can be utilised. Deferred tax assets are reduced to the recognised at fair value on the date on which a derivative contract
extent that it is no longer probable that the related tax benefit is entered into and are subsequently remeasured at fair value.
will be realised. Derivatives are carried as assets when the fair value is positive
and as liabilities when the fair value is negative.
(h) Employee benefits
Derivative financial instruments are accounted for as hedges when
(i) Defined benefit schemes
designated as hedges at the inception of the contract and when the
The Company is the sponsoring employer for a UK funded, financial instruments provide an effective hedge of the underlying
defined benefit scheme, the DS Smith Group Pension scheme risk. Any gains or losses arising from the hedging instruments are
(the ‘Group Scheme’). offset against the hedged items.
The Group has in place a stated policy for allocating the net For the purpose of hedge accounting, hedges are classified as cash
defined benefit cost relating to the Group Scheme to participating flow hedges due to hedging exposure to variability in cash flows that
Group entities. is either attributable to a particular risk associated with a recognised
asset or liability or a highly probable forecast transaction.
Accordingly, both the Company’s statement of financial position and
income statement reflect the Company’s share of the net defined (k) Dividend income
benefit liability and net defined benefit cost in respect of the Group
Dividend income from subsidiary undertakings is recognised in the
scheme, allocated per the stated policy. Actuarial gains and losses are
income statement when paid.
recognised immediately in the statement of comprehensive income.
(l) Accounting judgements and key sources of
(ii) Share-based payment transactions
estimation uncertainty
The Company operates an equity-settled, share-based
compensation plan. The fair value of the employee services received Employee benefits
in exchange for the grant of the options is recognised as an expense. IAS 19 Employee Benefits requires the Company to make
The fair value of the options granted is measured using a stochastic assumptions including, but not limited to, rates of inflation,
model, taking into account the terms and conditions upon which the discount rates and life expectancies. The use of different
options were granted. The total amount to be expensed over the assumptions, in any of the above calculations, could have a material
vesting period is determined by reference to the fair value of the effect on the accounting values of the relevant statement of
options granted, excluding the impact of any non-market vesting financial position assets and liabilities which could also result in a
conditions. Non-market vesting conditions are included in change to the cost of such liabilities as recognised in profit or loss
assumptions about the number of options that are expected to over time. These assumptions are subject to periodic review.
become exercisable. See note 25 of the Group’s accounts for additional information.
190
190
FINANCIAL STATEMENTS
## Notes to the parent Company financial statements (continued)
2. Employee information
The average number of employees employed by the Company during the year was 344 (2020/21: 278).

|  |  | 2022 | 2021 |
| --- | --- | --- | --- |
|  |  | £m | £m |
| 1. Principal accounting policies continued | At each reporting date, the Company revises its estimate of |  |  |

Wages and salaries 36 31
the number of options that are expected to become exercisable.
Social security costs 4 3
(f) Investments in subsidiaries
It recognises the impact of the revision of original estimates, if any,
Pension costs 2 2
Investments in subsidiaries are valued at cost less provisions in the income statement, and a corresponding adjustment to equity.
Total 42 36
for impairment. Where applicable, the fair value of employee services received by
subsidiary undertakings within the DS Smith Plc Group in exchange
Impairment testing is performed annually for investment in Note 26 to the consolidated financial statements sets out the disclosure information required for the Company’s share-based payments.
for options granted by the Company is recognised as an expense in
subsidiaries by comparing the carrying amount of each investment
the financial statements of the subsidiary by means of a recharge 3. Intangible assets
with the relevant subsidiary’s consolidated balance sheet. Where the
from the Company. Intangible
net assets are lower than the investment value, a discounted cash
Other Carbon assets under
flow is utilised to calculate the present value of the investment to Software intangibles Credits construction Total
(i) Shares held by employee share trust
£m £m £m £m £m
confirm whether any impairment is required.
The cost of shares held in the employee share trust is deducted from Cost
(g) Deferred taxation equity. All differences between the purchase price of the shares held
At 1 May 2021 72 7 – 6 85
to satisfy options granted and the proceeds received for the shares,
Deferred tax is provided for using the balance sheet liability method, Additions – – 14 7 21
whether on exercise or lapse, are charged to retained earnings.
providing for temporary differences between the carrying amounts Reclassifications 3 2 – (5) –
of assets and liabilities for financial reporting purposes and the (j) Financial instruments At 30 April 2022 75 9 14 8 106
amounts used for taxation purposes. The amount of deferred
The Company uses derivative financial instruments, primarily
tax provided is based on the expected manner of realisation or
currency and commodity swaps, to manage interest rate, currency Amortisation
settlement of the carrying amount of assets and liabilities, using
and commodity risks associated with the Group’s underlying business At 1 May 2021 (51) – – – (51)
tax rates enacted or substantively enacted at the reporting date.
activities and the financing of these activities. The Group has a policy Amortisation charge (14) – – – (14)
A deferred tax asset is recognised only to the extent that it is not to, and does not, undertake any speculative activity in these
At 30 April 2022 (65) – – – (65)
probable that future taxable profits will be available against which instruments. Such derivative financial instruments are initially
the asset can be utilised. Deferred tax assets are reduced to the recognised at fair value on the date on which a derivative contract
Carrying amount
extent that it is no longer probable that the related tax benefit is entered into and are subsequently remeasured at fair value.
At 1 May 2021 21 7 – 6 34
will be realised. Derivatives are carried as assets when the fair value is positive
and as liabilities when the fair value is negative. At 30 April 2022 10 9 14 8 41
(h) Employee benefits
Derivative financial instruments are accounted for as hedges when 4. Property, plant and equipment and right-of-use assets
(i) Defined benefit schemes
designated as hedges at the inception of the contract and when the Total
The Company is the sponsoring employer for a UK funded, financial instruments provide an effective hedge of the underlying property,
Right-of-use Leasehold Plant and Assets under plant and
defined benefit scheme, the DS Smith Group Pension scheme risk. Any gains or losses arising from the hedging instruments are
assets improvements equipment construction equipment
(the ‘Group Scheme’). offset against the hedged items. £m £m £m £m £m
Cost
The Group has in place a stated policy for allocating the net For the purpose of hedge accounting, hedges are classified as cash
At 1 May 2021 6 3 2 1 12
defined benefit cost relating to the Group Scheme to participating flow hedges due to hedging exposure to variability in cash flows that
Group entities. Additions – – – 1 1
is either attributable to a particular risk associated with a recognised
asset or liability or a highly probable forecast transaction. Reclassification – – 1 (1) –
Accordingly, both the Company’s statement of financial position and
At 30 April 2022 6 3 3 1 13
income statement reflect the Company’s share of the net defined (k) Dividend income
benefit liability and net defined benefit cost in respect of the Group
Dividend income from subsidiary undertakings is recognised in the
scheme, allocated per the stated policy. Actuarial gains and losses are Depreciation
income statement when paid.
recognised immediately in the statement of comprehensive income. At 1 May 2021 (2) (1) (2) – (5)
(l) Accounting judgements and key sources of Depreciation charge – (1) – – (1)
(ii) Share-based payment transactions
estimation uncertainty At 30 April 2022 (2) (2) (2) – (6)
The Company operates an equity-settled, share-based
compensation plan. The fair value of the employee services received Employee benefits
Carrying amount
in exchange for the grant of the options is recognised as an expense. IAS 19 Employee Benefits requires the Company to make
At 1 May 2021 4 2 – 1 7
The fair value of the options granted is measured using a stochastic assumptions including, but not limited to, rates of inflation,
model, taking into account the terms and conditions upon which the At 30 April 2022 4 1 1 1 7
discount rates and life expectancies. The use of different
options were granted. The total amount to be expensed over the assumptions, in any of the above calculations, could have a material
Right-of-use assets relate to land and buildings.
vesting period is determined by reference to the fair value of the effect on the accounting values of the relevant statement of
options granted, excluding the impact of any non-market vesting financial position assets and liabilities which could also result in a
conditions. Non-market vesting conditions are included in change to the cost of such liabilities as recognised in profit or loss
assumptions about the number of options that are expected to over time. These assumptions are subject to periodic review.
become exercisable. See note 25 of the Group’s accounts for additional information.
Annual Report 2022 dssmith.com 191
Annual Report 2022 dssmith.com 191
190
FINANCIAL STATEMENTS
## Notes to the parent Company financial statements (continued)
5. Investments in subsidiaries
Shares in Group
undertakings
£m
At 1 May 2021 4,577
Additions 48
At 30 April 2022 4,625
The Company’s principal trading subsidiary undertakings at 30 April 2022 are shown in note 33 to the consolidated financial statements.
6. Trade and other receivables
2022 2021 – Restated
Non- Non-
current Current current Current
£m £m £m £m
Amounts owed by subsidiary undertakings 5,466 44 5,194 176
Other receivables – 9 –1
Prepayments and accrued income – 19 – 12
5,466 72 5,194 189
Following an analysis of the terms of the intercompany agreements, prior year amounts owed by subsidiaries have been restated, with £530m
reclassified from current to non-current receivables as there was no expectation that the assets would be realised within 12 months.
Furthermore, current amounts owed by subsidiaries has been increased by £169m, being amounts that were previously offset against
amounts owed to subsidiaries.
When measuring the potential impairment of receivables from subsidiary undertakings, forward looking information based on assumptions for
the future movement of different economic drivers are considered.
7. Cash and cash equivalents
2022 2021
£m £m
Bank balances 67 8
Shor -term deposits 347 429
414 437
8. Trade and other payables
2022 2021 – Restated
Non- Non-
current Current current Current
£m £m £m £m
Trade payables – 10 – 15
Amounts owed to subsidiary undertakings 26 4,490 18 4,185
Other tax and social security payables – 11 – 10
Non-trade payables, accruals and deferred income – 73 – 34
26 4,584 18 4,244
Following an analysis of the terms of the intercompany agreements, prior year amounts owed to subsidiary undertakings have been restated,
with £3,852m reclassified from non-current to current payables as there was no legal right to defer repayment by 12 months. Furthermore,
current amounts owed to subsidiaries has been increased by £169m, being amounts that were previously offset against amounts owed
by subsidiaries.
Non-current amounts owed to subsidiaries are subject to interest at rates based on EURIBOR or where applicable, forward looking base rates
and are repayable between 2023 and 2026.
192
t
192
FINANCIAL STATEMENTS
## Notes to the parent Company financial statements (continued) 9. Borrowings
2022 2021
Non- Non-
current Current current Current
£m £m £m £m
5. Investments in subsidiaries
Bank loans and overdrafts – 47 – 35
Shares in Group Medium-term notes and other fixed-term deb 1,389 640 2,062 30
undertakings
£m 1,389 687 2,062 65
At 1 May 2021 4,577
Disclosures in respect of the Group’s borrowings are provided in note 20 to the consolidated financial statements.
Additions 48
At 30 April 2022 4,625

| The Company’s principal trading subsidiary undertakings at 30 April 2022 are shown in note 33 to the consolidated financial statements. |  |  |  |  |  |  |  | 10. Deferred tax assets and liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 6. Trade and other receivables |  |  |  |  |  |  |  | Analysis of movements in recognised deferred tax assets and liabilities during the year |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | 2022 2021 – Restated |  |  |  |  |  |  | Property, plant and |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Non- |  |  |  | Non- |  |  |  |  | equipment and |  | Employee benefits |  |  |  | Tax |  | Derivative financial |  |  |  |  |
|  | current |  | Current |  | current | Current |  |  | intangible assets |  |  | including pensions |  |  |  | losses |  |  | instruments Total |  |  |  |
|  |  | £m |  | £m | £m |  | £m |  |  | 2022 | 2021 |  | 2022 | 2021 | 2022 |  | 2021 |  | 2022 | 2021 | 2022 | 2021 |
|  |  |  |  |  |  |  |  |  |  | £m | £m |  | £m | £m | £m |  | £m |  | £m | £m | £m | £m |

Amounts owed by subsidiary undertakings 5,466 44 5,194 176
At beginning of the yea 6 4 12 11 23 26 (11) 9 30 50
Other receivables – 9 –1
Credit/(charge) for the yea 4 2 (2) 1 1 (3) – – 3 –
Prepayments and accrued income – 19 – 12
Recognised di ectly in equit – – (3) – – – (163) (20) (166) (20)
5,466 72 5,194 189
At end of the year 10 6 7 12 24 23 (174) (11) (133) 30
Following an analysis of the terms of the intercompany agreements, prior year amounts owed by subsidiaries have been restated, with £530m
reclassified from current to non-current receivables as there was no expectation that the assets would be realised within 12 months.
Furthermore, current amounts owed by subsidiaries has been increased by £169m, being amounts that were previously offset against
amounts owed to subsidiaries.
When measuring the potential impairment of receivables from subsidiary undertakings, forward looking information based on assumptions for
the future movement of different economic drivers are considered.
7. Cash and cash equivalents
2022 2021
£m £m
Bank balances 67 8
Shor -term deposits 347 429
414 437
8. Trade and other payables
2022 2021 – Restated
Non- Non-
current Current current Current
£m £m £m £m
Trade payables – 10 – 15
Amounts owed to subsidiary undertakings 26 4,490 18 4,185
Other tax and social security payables – 11 – 10
Non-trade payables, accruals and deferred income – 73 – 34
26 4,584 18 4,244
Following an analysis of the terms of the intercompany agreements, prior year amounts owed to subsidiary undertakings have been restated,
with £3,852m reclassified from non-current to current payables as there was no legal right to defer repayment by 12 months. Furthermore,
current amounts owed to subsidiaries has been increased by £169m, being amounts that were previously offset against amounts owed
by subsidiaries.
Non-current amounts owed to subsidiaries are subject to interest at rates based on EURIBOR or where applicable, forward looking base rates
and are repayable between 2023 and 2026.
Annual Report 2022 dssmith.com 193
t t y r r r
192 Annual Report 2022 dssmith.com 193
FINANCIAL STATEMENTS
## Notes to the parent Company financial statements (continued)
11. Lease liabilities
The carrying amounts of lease liabilities and the movements during the year are as follows:
2022 2021
£m £m
Cost
At beginning of the yea 5 18
Disposals – (12)
Payments (1) (1)
At end of the ear 4 5
Current 1 1
Non-current 3 4
4 5
Maturity of lease liabilities

| 1 year | 1–2 | 2–5 | More than |  |  |
| --- | --- | --- | --- | --- | --- |
| or less | years | years | 5 years |  | Total |
| £m | £m | £m |  | £m | £m |

At 30 April 2021 (1) (1) (2) (1) (5)
At 30 April 2022 (1) (1) (1) (1) (4)
12. Derivative financial instruments
The assets and liabilities of the Company at 30 April in respect of derivative financial instruments are as follows:
Assets Liabilities Net
2022 2021 2022 2021 2022 2021
£m £m £m £m £m £m
Derivatives held to:
Manage the currency exposures on business activities, borrowings
and net investments 12 – – (15) 12 (15)
Derivative financial instruments included in net debt 12 – – (15) 12 (15)
Derivatives held to hedge future transactions:
Forward foreign exchange contracts 1 – – – 1 –
Energy and carbon certificate costs 786 115 (85) (41) 701 74
Total derivative financial instruments 799 115 (85) (56) 714 59
Curren 316 80 (57) (41) 259 39
Non-curren 483 35 (28) (15) 455 20
799 115 (85) (56) 714 59
Disclosures in respect of the Group’s derivative financial instruments are provided in note 21 to the consolidated financial statements.
194
t t y r
194
FINANCIAL STATEMENTS
## Notes to the parent Company financial statements (continued) 13. Employee benefits
The Company participates in all of the Group’s UK pension schemes. The accounting valuation is consistent with the Group valuation, as
described in note 25 to the consolidated financial statements, where full disclosures relating to these schemes are given.

|  |  | 2022 | 2021 |
| --- | --- | --- | --- |
| 11. Lease liabilities |  | £m | £m |
| The carrying amounts of lease liabilities and the movements during the year are as follows: | Present value of funded obligations (1,050) (1,182) |  |  |

Present value of unfunded obligations (6) (7)

|  |  | 2022 | 2021 |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  | £m | £m | Fair value of scheme assets 1,057 1,120 |  |
| Cost |  |  |  | Total IAS 19 surplus, ne | 1 (69) |
| At beginning of the yea | 5 18 |  |  |  |  |

Allocated to other participating employers (4) 39
Disposals – (12)
Company’s share of IAS 19 deficit, net (3) (30)
Payments (1) (1)
At end of the ear 4 5 14. Share capital and reserves
Details of the Company’s share capital and merger relief reserve are provided in note 24 to the consolidated financial statements. Movements
Current 1 1
in shareholders’ equity are shown in the parent Company statement of changes in equity.
Non-current 3 4
The closing merger relief reserve of £32m relates to the shares issued in consideration to the sellers of EcoPack/EcoPaper.
4 5
The reserve for the Company’s own shares comprises the cost of the Company’s shares held by the Group. The Group operates a General
Maturity of lease liabilities
Employee Benefit Trust, which acquires shares in the Company that can be used to satisfy the requirements of the Performance Share Plan.
1 year 1–2 2–5 More than
At 30 April 2022, the Trust held 2.4m shares (30 April 2021: 1.2m shares). The market value of the shares at 30 April 2022 was £7.8m
or less years years 5 years Total
£m £m £m £m £m (30 April 2021 £5.2m). Dividends receivable on the shares owned by the Trust have been waived.
At 30 April 2021 (1) (1) (2) (1) (5)
As at 30 April 2022, the Company had distributable reserves of £1,491m (30 April 2021: £1,688m).
At 30 April 2022 (1) (1) (1) (1) (4)
15. Contingent liabilities
12. Derivative financial instruments
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within the Group, the
The assets and liabilities of the Company at 30 April in respect of derivative financial instruments are as follows: Company considers these to be insurance arrangements and accounts for them as such. In this respect, the Company treats the guarantee
Assets Liabilities Net contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the
2022 2021 2022 2021 2022 2021 guarantee. At 30 April 2022, these guarantees amounted to £4.9m (30 April 2021: £5.5m).
£m £m £m £m £m £m
Derivatives held to: 16. Related party disclosure
Manage the currency exposures on business activities, borrowings The Company has identified the Directors of the Company, its key management personnel and the UK pension scheme as related parties.
and net investments 12 – – (15) 12 (15) Details of the relevant relationships with these related parties are disclosed in the Remuneration Committee report, and note 31 to the
Derivative financial instruments included in net debt 12 – – (15) 12 (15) consolidated financial statements respectively.
17. Auditor’s remuneration
Derivatives held to hedge future transactions:
Auditor’s remuneration in respect of the Company is detailed in note 3 to the consolidated financial statements.
Forward foreign exchange contracts 1 – – – 1 –
Energy and carbon certificate costs 786 115 (85) (41) 701 74
Total derivative financial instruments 799 115 (85) (56) 714 59
Curren 316 80 (57) (41) 259 39
Non-curren 483 35 (28) (15) 455 20
799 115 (85) (56) 714 59
Disclosures in respect of the Group’s derivative financial instruments are provided in note 21 to the consolidated financial statements.
Annual Report 2022 dssmith.com 195
t t y r t
194 Annual Report 2022 dssmith.com 195
FINANCIAL STATEMENTS

# Five-year financial summary

Unaudited

|  Continuing operations | 2018 £m | 2019 £m | 2020 £m | 2021 £m | 2022 £m  |
| --- | --- | --- | --- | --- | --- |
|  **Revenue** | 5,518 | 6,171 | 6,043 | 5,976 | **7,241**  |
|  **Operating profit^{1}** | 492 | 631 | 660 | 502 | **616**  |
|  Amortisation | (90) | (114) | (143) | (142) | **(138)**  |
|  Share of profit of equity-accounted investments before adjusting items, net of tax | 5 | 9 | 7 | 5 | **7**  |
|  Net financing costs before adjusting items | (62) | (71) | (87) | (78) | **(70)**  |
|  **Profit before taxation and adjusting items** | 345 | 455 | 437 | 287 | **415**  |
|  Acquisitions and divestments | (28) | (32) | (4) | (5) | **2**  |
|  Other adjusting items | (57) | (73) | (65) | (51) | **(39)**  |
|  **Profit before income tax** | 260 | 350 | 368 | 231 | **378**  |
|  **Adjusted earnings per share^{1}** | 30.7p | 33.3p | 33.2p | 24.2p | **30.7p**  |
|  **Dividends per share** | 14.4p | 16.2p | n/a | 12.1p | **15.0p**  |
|  Return on sales^{2} | 8.9% | 10.2% | 10.9% | 8.4% | **8.5%**  |
|  Adjusted return on average capital employed^{2,3} | 13.7% | 13.6% | 10.6% | 8.2% | **10.8%**  |

1. Before amortisation and adjusting items.

2. Adjusted return on average capital employed is defined as operating profit before amortisation and adjusting items divided by average capital employed.

3. Average capital employed is the average monthly capital employed for the last 12 months. Capital employed is made up of property, plant and equipment, right-of-use assets, goodwill and intangible assets, working capital, capital debtors/creditors, provisions, biological assets and assets/liabilities held for sale. Assets and liabilities relating to discontinued operations are excluded. The definition of capital employed is different from the definition of managed capital as defined in note 21 to the consolidated financial statements, which consists of equity as presented in the consolidated statement of financial position, plus net debt.

196
## Shareholder information

| Financial diary | Registered office and advisers |  |
| --- | --- | --- |
| 6 September 2022 Annual General Meeting | Secretary and | Stockbroker |
|  | Registered Office | Citigroup |

8 December 2022* Announcement of half-year results for
the six months ended 31 October 2022 Iain Simm
Citigroup Centre
DS Smith Plc
22 June 2023* Announcement of full-year results for 33 Canada Square
350 Euston Road
the year ended 30 April 2023 Canary Wharf
London NW1 3AX
London E14 5LB
* Provisional date Registered in England No:
J.P. Morgan Cazenove
1377658
Company website
25 Bank Street
Auditor
The Company’s website at www.dssmith.com contains the latest Canary Wharf
information for shareholders, including press releases and an Deloitte LLP
London E14 5JP
updated financial diary. Email alerts of the latest news, press
2 New Street Square
Registrar
releases and financial reports about the Company may be obtained
London EC4A 3BZ
by registering for the email news alert service on the website. Equiniti
Solicitor
Share price information Aspect House
Slaughter and May
Spencer Road
The latest price of the Company’s ordinary shares is available
One Bunhill Row Lancing
on www.londonstockexchange.com. DS Smith’s ticker symbol
London EC1Y 8YY West Sussex BN99 6DA
is SMDS. It is recommended that you consult your financial
adviser and verify information obtained before making any
Other information
investment decision.
Information on how to manage your shareholdings can be found at
Registrar
https://help.shareview.co.uk. The pages at this web address
Please contact the Registrar at the above right address to advise provide answers to commonly asked questions regarding
of a change of address or for any enquiries relating to dividend shareholder registration, links to downloadable forms and
payments, lost share certificates or other share registration guidance notes. If your question is not answered by the
matters. The Registrar provides online facilities at information provided, you can send your enquiry via secure email
www.shareview.co.uk. Once you have registered you will be able from these pages. You will be asked to complete a structured form
to access information on your DS Smith Plc shareholding, update and to provide your shareholder reference, name and address.
your personal details and amend your dividend payment
You will also need to provide your email address if this is how you
instructions online without having to call or write to the Registrar.
would like to receive your response. In the UK you can telephone
Dividends 0371 384 2197. Lines are open 8.30am to 5.30pm Monday to
Friday. For call charges, please check with your provider as costs
Shareholders who wish to have their dividends paid directly into a
may vary. For overseas, telephone +44 (0) 121 415 7047.
bank or building society account should contact the Registrar. In
addition, the Registrar is now able to pay dividends to over 90 This report contains certain forward-looking statements with
different countries. This service enables the payment of your respect to the operations, performance and financial condition of
dividends directly into your bank account in your home currency. the Group. By their nature, these statements involve uncertainty
For international payments, a charge is deducted from each since future events and circumstances can cause results and
dividend payment to cover the costs involved. Please contact the developments to differ materially from those anticipated. The
Registrar to request further information. forward-looking statements reflect knowledge and information
available at the date of preparation of this report and DS Smith Plc
Share dealing services
undertakes no obligation to update these forward-looking
The Registrar offers a real-time telephone and internet dealing
statements. Nothing contained in this report should be construed
service for the UK. Further details including terms and rates can be
as a profit forecast.
obtained by logging on to the website at www.shareview.co.uk/
Pages 1 to 111 consist of a Strategic Report and Directors’ report
dealing or by calling 0345 603 7037. Lines are open between 8am
(including the Directors’ remuneration report) that have been
and 4.30pm, UK time, Monday to Friday.
drawn up and presented in accordance with and in reliance upon
applicable English company law. The liability of the Directors in
connection with such reports shall be subject to the limitation and
restrictions provided by, and shall be no greater than is required
by, applicable English company law.
DS Smith Plc Annual Report 2022
DS Smith Plc
350 Euston Road
London
NW1 3AX
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